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As filed with the Securities and Exchange Commission on March 8, 2006
Registration No. 333-131484
 
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
DARLING INTERNATIONAL INC.
(Exact Name of Registrant as Specified in its Charter)
 
         
Delaware   2070   36-2495346
(State or Other Jurisdiction
of Incorporation or Organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)
 
251 O’Connor Ridge Blvd., Suite 300
Irving, Texas 75038
(972) 717-0300
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant’s Principal Executive Offices)
 
Joseph R. Weaver, Jr.
General Counsel and Secretary
Darling International Inc.
251 O’Connor Ridge Blvd., Suite 300
Irving, Texas 75038
(972) 717-0300
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
 
Copies to:
     
Mary R. Korby
Weil, Gotshal & Manges LLP
200 Crescent Court, Suite 300
Dallas, Texas 75201
(214) 746-7700
  G.R. “Rick” Neumann
Nyemaster Goode West Hansell
& O’Brien PC
700 Walnut Street, Suite 1600
Des Moines, Iowa 50309
(515) 283-3100
 
      Approximate date of commencement of proposed sale to the public: At the effective time of the acquisition referred to herein.
      If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.     o
      If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o
      If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o
      The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
 
 


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Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This joint proxy statement/ prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under securities laws of such State.
(DARLING INTERNATIONAL LOGO)
ASSET ACQUISITION PROPOSED — YOUR VOTE IS VERY IMPORTANT
      As we previously announced, the board of directors of Darling International Inc. and the board of managers of National By-Products, LLC have each unanimously approved a transaction whereby Darling will purchase substantially all of the assets of National By-Products.
      In the acquisition, Darling will pay National By-Products $70.5 million in cash and an amount of Darling common stock equal to 20% of the outstanding shares of Darling common stock calculated on a fully diluted basis. Darling’s stock is listed on the American Stock Exchange, which we refer to as the AMEX. On March 7, 2006, the closing sales price of Darling’s common stock, which trades on the AMEX under the symbol “DAR,” was $4.40 per share.
      For a discussion of the risks relating to the acquisition, see “Risk Factors” beginning on page 18 of the joint proxy statement/ prospectus.
      A special meeting of Darling stockholders is being held to approve the asset purchase agreement and the issuance of the shares of Darling common stock that will be issued in accordance with the asset purchase agreement, dated as of December 19, 2005, by and among Darling, National By-Products, and a wholly-owned subsidiary of Darling, as a portion of the consideration to be paid at the closing of the acquisition and that may be issued as contingent consideration for the acquisition. A special meeting of National By-Products unitholders is being held to approve the acquisition contemplated by the asset purchase agreement. Information about these meetings and the acquisition is contained in this joint proxy statement/ prospectus. We encourage you to read this entire joint proxy statement/ prospectus carefully, as well as the annexes and information incorporated by reference herein.
      We cordially invite the National By-Products unitholders to attend National By-Products’ special meeting of unitholders at which the National By-Products unitholders will be asked to vote to approve the acquisition. The National By-Products board unanimously recommends that the National By-Products unitholders vote “FOR” the acquisition at the special meeting.
      We cordially invite the Darling stockholders to attend Darling’s special meeting of stockholders at which the Darling stockholders will be asked to vote to approve the asset purchase agreement and the issuance of shares of Darling common stock as a portion of the consideration in the acquisition. The Darling board unanimously recommends that the Darling stockholders vote “FOR” the asset purchase agreement and the issuance of shares of Darling common stock at the special meeting.
     
LOGO
  LOGO
Randall C. Stuewe
  Mark A. Myers
Chairman and Chief Executive Officer
  President
Darling International Inc. 
  National By-Products, LLC
      Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the acquisition described in this joint proxy statement/ prospectus or the securities to be issued pursuant to the acquisition or determined that this joint proxy statement/ prospectus is accurate or complete. Any representation to the contrary is a criminal offense.
      This joint proxy statement/ prospectus is dated [                    ], 2006 and, together with the accompanying proxy card, is being first mailed to Darling stockholders and National By-Products unitholders on or about [                    ], 2006.


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(DARLING INTERNATIONAL LOGO)
DARLING INTERNATIONAL INC.
251 O’Connor Ridge Blvd., Suite 300
Irving, Texas 75038
Telephone: (972) 717-0300
 
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 20, 2006
Dear Darling Stockholder:
      A special meeting of stockholders of Darling International Inc., a Delaware corporation, will be held on Thursday, April 20, 2006, at 10:00 a.m., Central Time, at the Omni Mandalay, 221 E. Las Colinas Blvd., Irving, Texas 75039.
      At the special meeting, you will be asked to:
        1. approve and adopt the asset purchase agreement, dated as of December 19, 2005, by and among Darling, National By-Products, LLC and a wholly-owned subsidiary of Darling, and the transactions contemplated by the asset purchase agreement, including the issuance of shares of Darling common stock in accordance with the asset purchase agreement; and
 
        2. consider and vote upon a proposal to approve one or more adjournments of the special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the above proposal.
      The accompanying joint proxy statement/ prospectus describes the asset purchase agreement and the proposed acquisition in detail. We urge you to review the joint proxy statement/ prospectus carefully.
      The board of directors has set the close of business on March 10, 2006, as the record date for determining stockholders entitled to receive notice of the special meeting and to vote at the special meeting and any adjournments or postponements thereof.
      We will admit to the special meeting (1) all stockholders of record at the close of business on March 10, 2006, (2) persons holding proof of beneficial ownership as of that date, such as a letter or account statement from the person’s broker, (3) persons who have been granted valid proxies and (4) the other persons that we, in our sole discretion, may elect to admit. All persons wishing to be admitted must present photo identification. If you plan to attend the special meeting, please check the appropriate box on your proxy card or register your intention when voting by using the telephone or voting on the Internet, according to the instructions provided on the enclosed proxy card.
  By order of the board of directors,
 
  Joseph Weaver Signature
  Joseph R. Weaver, Jr.
  Secretary
[                    ], 2006
YOUR VOTE IS IMPORTANT
Please return your proxy as soon as possible, whether or not you expect to attend the special meeting in person.
You may submit your proxy by using the telephone, by the Internet or by completing, dating and signing the enclosed proxy card and returning it in the enclosed postage prepaid envelope.
You may revoke your proxy at any time before the special meeting. If you attend the special meeting and vote in person, your proxy vote will not be used.


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NATIONAL BY-PRODUCTS, LLC
907 Walnut St., Suite 400
Des Moines, Iowa 50309
Telephone: (515) 288-2166
 
NOTICE OF SPECIAL MEETING OF UNITHOLDERS
TO BE HELD APRIL 20, 2006
Dear National By-Products Unitholder:
      A special meeting of unitholders of National By-Products, LLC, an Iowa limited liability company, will be held on Thursday, April 20, 2006, at 10:00 a.m., Central Time, at First Floor, Federal Home Loan Bank Building, 907 Walnut Street, Des Moines, Iowa 50309.
      At the special meeting, you will be asked to:
        1. approve and adopt the asset purchase agreement, dated as of December 19, 2005, by and among Darling International Inc., National By-Products and a wholly-owned subsidiary of Darling, and the transactions contemplated by the asset purchase agreement, including an amendment to the articles of organization of National By-Products to change its name to West-end Liquidation, LLC effective upon closing of the acquisition; and
 
        2. consider and vote upon a proposal to approve one or more adjournments of the special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the above proposal.
      The accompanying joint proxy statement/ prospectus describes the asset purchase agreement and the proposed acquisition in detail. We urge you to review the joint proxy statement/ prospectus carefully.
      The date of the mailing of this notice is the record date for determining unitholders entitled to receive notice of the special meeting and to vote at the special meeting and any adjournments or postponements thereof.
      Under Iowa law and the operating agreement of National By-Products, unitholders of record who deliver to National By-Products, before the vote referred to in this joint proxy statement/ prospectus is taken, written notice of the unitholder’s intent to demand payment if the acquisition is consummated and who do not vote in favor of the acquisition are entitled to appraisal rights in connection with the acquisition if the acquisition is completed. In order to exercise your appraisal rights you must comply with the applicable provisions of Division XIII of the Iowa Business Corporation Act (a copy of which can be found in Annex D of this joint proxy statement/ prospectus).
      We will admit to the special meeting (1) all unitholders of record on the date of the mailing of this notice, (2) persons who have been granted valid proxies and (3) the other persons that we, in our sole discretion, may elect to admit.
  By order of the board of managers,
 
  LOGO
  Carlton T. King
  Secretary
[                    ], 2006
YOUR VOTE IS IMPORTANT
Please return your proxy as soon as possible, whether or not you expect to attend the special meeting in person.
You may submit your proxy by completing, dating and signing the enclosed proxy card and returning it in the enclosed postage prepaid envelope.
You may revoke your proxy at any time before the special meeting. If you attend the special meeting and vote in person, your proxy vote will not be used.


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THIS JOINT PROXY STATEMENT/ PROSPECTUS INCORPORATES
ADDITIONAL INFORMATION
      This joint proxy statement/ prospectus incorporates business and financial information about Darling from other documents filed with the Securities and Exchange Commission, which we refer to as the SEC, that are not included in or delivered with this joint proxy statement/ prospectus. For a listing of the documents incorporated by reference into this joint proxy statement/ prospectus, see “Where You Can Find More Information” beginning on page 116.
      You may obtain documents incorporated by reference into this joint proxy statement/ prospectus, without charge, by requesting them in writing or by telephone from Darling at the following address and telephone number:
Darling International Inc.
251 O’Connor Ridge Blvd., Suite 300
Irving, Texas 75038
Attn: Brad Phillips, Treasurer
Telephone: (972) 717-0300
e-mail: BPhillips@darlingii.com
      To receive timely delivery of the documents before your special meeting, you must request them no later than April 13, 2006 to receive them before your special meeting.


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 Opinion and Consent of Weil, Gotshal & Manges LLP
 Consent of KPMG LLP
 Consent of Deloitte & Touche LLP
 Cosent of Harris Nesbitt Corp
 Consent of Philip Schneider & Associates, Inc

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QUESTIONS AND ANSWERS ABOUT THE ACQUISITION
Q1:  What is the proposed transaction for which I am being asked to vote?
 
A1:  If you are a Darling stockholder you are being asked to vote to approve an asset purchase agreement entered into by and among Darling International Inc., National By-Products, LLC and a wholly-owned subsidiary of Darling, and the transactions contemplated by the asset purchase agreement, including the issuance of shares of Darling common stock in accordance with the asset purchase agreement. If you are a National By-Products unitholder you are being asked to vote to approve the asset purchase agreement by and among Darling, National By-Products and a wholly-owned subsidiary of Darling, and the transactions contemplated by the asset purchase agreement, including an amendment to the articles of organization of National By-Products to change its name to West-end Liquidation, LLC effective upon closing of the acquisition. The asset purchase agreement contemplates the purchase of substantially all of the assets of National By-Products by a newly formed and wholly-owned subsidiary of Darling. When the acquisition occurs, National By-Products will receive the acquisition consideration and distribute the acquisition consideration, less certain amounts, to its unitholders. See “The Asset Purchase Agreement — Consideration” beginning on page 62.
 
Q2:  Why did the companies enter into the asset purchase agreement?
 
A2:  Darling and National By-Products entered into the asset purchase agreement with the expectation that the acquisition will result in mutual benefits including, among other things, increasing revenue, diversifying raw material supplies and creating a larger platform to grow the restaurant services segment.
 
Q3:  What vote is required for approval of the proposals under consideration at the special meetings?
 
A3:  The asset purchase agreement and the issuance of shares of Darling common stock in the acquisition must be approved by a majority of the outstanding shares of Darling common stock, and the asset purchase agreement must be approved by a majority of the outstanding National By-Products membership units. Therefore, if you abstain or fail to vote, the effect will be the same as voting against the applicable proposal. You are entitled to vote on the applicable proposal if you held Darling common stock at the close of business on the Darling record date, which is March 10, 2006, or National By-Products membership units on the National By-Products record date, which is the date of the mailing of the notice of special meeting. On those dates, [                    ] shares of Darling common stock and 1,206,313 National By-Products membership units, respectively, were outstanding and entitled to vote. The adjournment proposal for each of the Darling stockholders and the National By-Products unitholders must be approved by the affirmative vote of a majority of the shares of Darling common stock or National By-Products membership units, as applicable, present in person or by proxy at the applicable special meeting, without regard to abstentions, even if there is no quorum at that meeting.
 
Q4:  What do I need to do now?
 
A4:  After carefully reading and considering the information contained in this joint proxy statement/ prospectus, please vote your shares or units, as applicable, as soon as possible so that your shares or units, as applicable, will be represented at your company’s special meeting. Please follow the instructions set forth on the proxy card or on the voting instruction form provided by the record holder if your shares or units, as applicable, are held in the name of your broker or other nominee.
 
Q5:  How do I vote?
 
A5:  If you are a Darling stockholder, you may vote before your special meeting in one of the following ways:
  •  use the toll-free number shown on your proxy card;
 
  •  visit the website shown on your proxy card to vote via the Internet; or

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  •  complete, sign, date and return the enclosed proxy card in the enclosed postage prepaid envelope.
  If you are a National By-Products unitholder, you may only vote before your special meeting by completing, signing, dating and returning the enclosed proxy card in the enclosed postage prepaid envelope.
Q6:  If my shares are held in “street name” by my broker or other nominee, will my broker or nominee vote my shares for me? 
 
A6:  Your broker will vote your shares only if you provide instructions to your broker on how to vote. You should instruct your broker to vote your shares by following the directions provided to you by your broker. Without instructions, your broker will not vote any of your shares held in “street name” and the effect will be the same as a vote against the acquisition. See “The Special Meetings” beginning on page 35.
 
Q7:  What if I do not vote on the matters relating to the acquisition?
 
A7:  If you are a Darling stockholder and you fail to respond with a vote or fail to instruct your broker or other nominee how to vote on the acquisition proposal, it will have the same effect as a vote against the acquisition proposal. If you respond but do not indicate how you want to vote on the acquisition proposal, your proxy will be counted as a vote in favor of the acquisition proposal. If you respond and indicate that you abstain from voting on the acquisition proposal, your proxy will have the same effect as a vote against the acquisition proposal.
  If you are a National By-Products unitholder and you fail to respond with a vote, it will have the same effect as a vote against the acquisition proposal. If you respond but do not indicate how you want to vote on the acquisition proposal, your proxy will be counted as a vote in favor of the acquisition proposal. If you respond and indicate that you abstain from voting on the acquisition proposal, your proxy will have the same effect as a vote against the acquisition proposal.
Q8:  May I change my vote after I have delivered my proxy card?
 
A8:  Yes. You can change your vote at any time before we vote your proxy at your special meeting. You can do so in one of the following ways:
  •  by sending a notice of revocation to the corporate secretary of Darling or National By-Products, as applicable;
 
  •  by sending a completed proxy card bearing a later date than your original proxy card; or
 
  •  by attending your special meeting and voting in person.
  If you are a Darling stockholder you can also change your vote at any time before we vote your proxy at your special meeting by logging onto the Internet website specified on your proxy card in the same manner you would to submit your proxy electronically or by calling the telephone number specified on your proxy card, in each case if you are eligible to do so and by following the instructions on the proxy card.

Your attendance alone will not revoke any proxy.
 
  If you choose to change your vote using any of the methods above, other than by attending your special meeting and voting in person, you must take the described action no later than the beginning of your special meeting or no later than the time indicated on your proxy card.

If your shares are held in an account at a broker or other nominee, you should contact your broker or other nominee to change your vote.

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Q9:  If I hold National By-Products membership units, should I send them in order to receive the acquisition consideration?
 
A9:  No. You do not need to turn in your membership units or take other action to receive the acquisition consideration. The acquisition consideration will be sent to you by National By-Products subject to retention of such amounts by National By-Products as determined by its board of managers to be appropriate for purposes of satisfying obligations of National By-Products.
Q10:  Why am I receiving this document?
 
A10:  We are delivering this document to you as both a joint proxy statement of Darling and National By-Products and a prospectus of Darling. It is a joint proxy statement because each of Darling’s board of directors and National By-Products’ board of managers is soliciting proxies from its stockholders and unitholders, respectively. It is a prospectus because Darling will issue shares of its stock to National By-Products in the acquisition.
 
Q11:  Who should I call if I have additional questions or need additional copies of the joint proxy documents?
 
A11:  If you are a Darling stockholder and you would like additional copies of this joint proxy statement/ prospectus or a new proxy card or if you have questions about the acquisition, you should contact Brad Phillips at (972) 717-0300.
If you are a National By-Products unitholder and you would like additional copies of this joint proxy statement/ prospectus or a new proxy card or if you have questions about the acquisition, you should contact David Pace at (515) 288-2166.

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SUMMARY
      THE FOLLOWING SUMMARY IS INTENDED ONLY TO HIGHLIGHT INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/ PROSPECTUS. THIS SUMMARY IS NOT INTENDED TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/ PROSPECTUS, THE ANNEXES HERETO AND THE DOCUMENTS OTHERWISE REFERRED TO IN THIS JOINT PROXY STATEMENT/ PROSPECTUS. YOU ARE URGED TO REVIEW THIS ENTIRE JOINT PROXY STATEMENT/ PROSPECTUS CAREFULLY, INCLUDING THE ANNEXES HERETO AND THE OTHER REFERENCED DOCUMENTS.
The Companies
Darling International Inc.
251 O’Connor Ridge Blvd.
Irving, Texas 75038
(972) 717-0300
      Darling is a leading provider of rendering, recycling and recovery solutions to the nation’s food industry. Darling collects and recycles animal by-products and used cooking oil from food service establishments and provides grease trap cleaning services to many of the same establishments. Darling processes these raw materials at 24 facilities located throughout the United States into finished products such as protein (primarily meat and bone meal), tallow (primarily bleachable fancy tallow) and yellow grease. Darling sells these products nationally and internationally, primarily to producers of oleo-chemicals, soaps, pet foods, and livestock feed, for use as ingredients in their products or for further processing. Darling’s operations are organized into two segments: Rendering and Restaurant Services.
Darling National LLC
251 O’Connor Ridge Blvd.
Irving, Texas 75038
(972) 717-0300
      Darling National is a Delaware limited liability company and a wholly-owned subsidiary of Darling. Darling National was organized on December 16, 2005 solely for the purpose of effecting the acquisition of substantially all of the assets of National By-Products. Darling National has not carried on any activities other than in connection with the asset purchase agreement.
National By-Products, LLC
907 Walnut St., Suite 400
Des Moines, Iowa 50309
(515) 288-2166
      Founded in 1933, National By-Products is one of the nation’s leading independent renderers. National By-Products collects and recycles animal by-products and used cooking oil from livestock producers, meat packers, grocery stores and restaurants and sells its products nationally and internationally to manufacturers of chemicals, soap, cosmetics, plastics, lubricants, livestock and poultry feeds, pet foods and leather goods.
The Acquisition (see page 40)
      A copy of the asset purchase agreement, dated as of December 19, 2005, by and among Darling, Darling National and National By-Products is attached to this joint proxy statement/prospectus as Annex A. Please read the asset purchase agreement in its entirety because it is the principal document governing the acquisition.

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Consideration to be paid to National By-Products in the acquisition (see page 62)
      The asset purchase agreement provides that the aggregate consideration for the purchased assets will be (i)(A) $70.5 million in cash, less all of National By-Products’ indebtedness related to its credit facilities outstanding immediately prior to the closing date of the acquisition, plus (B) 20% of the outstanding shares of Darling common stock as of 8 a.m. Central Time on the date of closing calculated on a fully-diluted basis, referred to below as the “Closing Issued Shares,” and (ii) the assumption of certain of National By-Products’ liabilities. The cash consideration will be subject to adjustment based on the working capital of National By-Products as of the closing date of the acquisition. In addition, a portion of the consideration will be placed in escrow to meet certain National By-Products obligations.
      In addition to the purchase price paid to National By-Products on the closing date of the acquisition, Darling may pay additional consideration in the form of Darling common stock, depending on the average market price, referred to as the “true-up market price,” of Darling’s common stock for the 90 days prior to the last day of the 13th full consecutive month after closing, which we refer to as the “true-up date.” If the average share price for the 90 days prior to the true-up date causes the value of the Closing Issued Shares (including the escrowed shares) to be less than $70.5 million, then Darling will issue additional common stock to National By-Products (or if National By-Products has distributed shares to its unitholders, to those unitholders who continue to hold, directly or as shares that remain in escrow, their Closing Issued Shares), assuming that none of the National By-Products unitholders have transferred any of their Closing Issued Shares (except transfers by gift or into trust). For clarity, only those Closing Issued Shares that have not been transferred (except by gift or into trust) as of the true-up date will be eligible for the stock true-up consideration. In addition, if the true-up market price is less than $3.60, then $3.60 will be used in place of the true-up market price for purposes of calculating the number of shares issued in the stock true-up. Assuming that the true-up market price is at least $3.60 and all of the Closing Issued Shares are retained by the National By-Products unitholders, then the shares National By-Products receives on the closing date, plus the shares National By-Products (or its unitholders) receives on the true-up date, will be valued at $70.5 million in the aggregate on the true-up date in accordance with the asset purchase agreement.
Darling’s Dividend Policy Differs from National By-Products (see page 111)
      Darling has not declared or paid cash dividends on its common stock since January 3, 1989. The payment of any dividends by Darling on its common stock in the future will be at the discretion of Darling’s board of directors and will depend upon, among other things, future earnings, operations, capital requirements, Darling’s general financial condition, the general financial condition of Darling’s subsidiaries, limitations in its senior and subordinated credit facilities, and general business conditions.
      Distributions to National By-Products unitholders are determined by its board of managers. National By-Products is required to distribute cash to its members on or before April 15 of each year in at least the amount National By-Products reasonably estimates (assuming maximum federal and state tax rates) will equal the federal and state income tax payable by the members as a consequence of allocation of the income of National By-Products to the members for the immediately preceding calendar year. National By-Products’ board of managers considers the payment of a special distribution to its unitholders at its annual meeting held each May. Such distribution, if any, is based on the prior fiscal year’s results after taking into account the outlook for the current fiscal year, tax distributions already made, capital spending plans, the potential for acquisitions, the capital structure, and other business needs. There is no guarantee that a special distribution will be paid each year. Special distributions, if paid, are expected to vary in amount from year to year.
Market Price and Share Information of Darling Common Stock (see page 17)
      Shares of Darling common stock are listed on the American Stock Exchange, referred to as the AMEX, under the trading symbol “DAR.” National By-Products membership units are not publicly

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traded. On December 19, 2005, the last trading day before the public announcement of the acquisition, the last sales price of Darling common stock was $3.53 per share.
      On March 7, 2006, the most recent practicable date before the printing of this joint proxy statement/ prospectus, the last sales price as reported on the AMEX for Darling common stock was $4.40 per share. We urge you to obtain current market quotations.
Risks of the Acquisition (see page 18)
      All Darling stockholders and National By-Products unitholders should consider carefully all of the information in this joint proxy statement/ prospectus and evaluate the specific factors set forth under “Risk Factors” before considering whether to approve the asset purchase agreement or the issuance of shares in accordance with the asset purchase agreement, as applicable.
      The risk factors regarding Darling should be carefully considered by all National By-Products unitholders who are to receive Darling common stock in connection with the acquisition.
Recommendation of the Board of Directors of Darling (see page 43)
      The Darling board of directors unanimously recommends that the asset purchase agreement and the issuance of shares of Darling common stock in accordance with the asset purchase agreement and the other matters described herein be approved by the Darling stockholders and that the Darling stockholders vote “FOR” the approval of the asset purchase agreement and the issuance of shares of Darling common stock and such other matters.
Recommendation of the Board of Managers of National By-Products (see page 50)
      The National By-Products board of managers unanimously recommends that the acquisition, the asset purchase agreement, the amendment to the articles of organization and the other matters described herein be approved by the National By-Products unitholders and that the National By-Products unitholders vote “FOR” the approval of the acquisition, the asset purchase agreement, the amendment to the articles of organization and such other matters.
Harris Nesbitt Corp. Fairness Opinion Provided to the Board of Directors of Darling (see page 44)
      In deciding to approve the acquisition, the Darling board of directors received an opinion from Harris Nesbitt Corp. that, as of December 16, 2005 and subject to the limitations and assumptions set forth in its written opinion, the acquisition consideration pursuant to the asset purchase agreement is fair from a financial point of view to Darling. In its analysis, Harris Nesbitt made numerous assumptions with respect to Darling, National By-Products and the acquisition. The assumptions and estimates contained in Harris Nesbitt’s analyses, and the valuation ranges resulting from the particular analyses, are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. The opinion of Harris Nesbitt is dated as of December 16, 2005 and opines as to the fairness as of that date only. Harris Nesbitt is not obligated to update its December 16, 2005 opinion. As of the date of this joint proxy statement/ prospectus, Darling does not intend to request an updated fairness opinion. In the aggregate, Harris Nesbitt will receive fees of approximately $1,842,500 if the acquisition is completed. A copy of the fairness opinion is attached as Annex B to this joint proxy statement/ prospectus. Darling stockholders should read the opinion carefully and in its entirety.
Philip Schneider & Associates, Inc. Fairness Opinion Provided to the Board of Managers of National By-Products (see page 51)
      In deciding to approve the acquisition, the National By-Products board of managers received an opinion from Philip Schneider & Associates, Inc. that, as of December 16, 2005 and subject to the limitations and assumptions set forth in its written opinion, the acquisition consideration to be paid to

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National By-Products in the proposed transaction is fair, from a financial point of view, to National By-Products and its unitholders. In its analysis, Philip Schneider & Associates made numerous assumptions with respect to National By-Products, Darling and the acquisition. The assumptions and estimates contained in Philip Schneider & Associates’ analyses, and the valuation ranges resulting from the particular analyses, are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. The opinion of Philip Schneider & Associates is dated as of December 16, 2005 and opines as to the fairness as of that date only. Philip Schneider & Associates is not obligated to update its December 16, 2005 opinion. As of the date of this joint proxy statement/ prospectus, National By-Products does not intend to request an updated fairness opinion. In the aggregate, Philip Schneider & Associates will receive fees of approximately $20,000 regardless of whether the acquisition is completed. A copy of the fairness opinion is attached as Annex C to this joint proxy statement/ prospectus. National By-Products unitholders should read the opinion carefully and in its entirety.
Differences Exist between Rights of Darling Stockholders and National By-Products Unitholders (see page 107)
      After the acquisition, National By-Products unitholders will become Darling stockholders and their rights as stockholders will be governed by the certificate of incorporation and bylaws of Darling and the Delaware General Corporation Law. There are a number of differences between Darling’s certificate of incorporation and bylaws and National By-Products, articles of organization and operating agreement and bylaws, respectively, and there are a number of differences between the Delaware General Corporation Law and the Iowa Limited Liability Company Act. The material differences are summarized in this joint proxy statement/ prospectus under “Comparative Rights of Darling Stockholders and National By-Products Unitholders” beginning on page 107.
Interests of Certain Persons in the Acquisition (see page 53)
      In considering the recommendation of the National By-Products board of managers with respect to the acquisition and the asset purchase agreement, National By-Products unitholders should be aware that executive officers of National By-Products and managers of National By-Products have interests in the acquisition that are or may be different from, or in addition to, your interests. These interests include:
  •  the designation of certain officers of National By-Products as officers of Darling upon completion of the acquisition and the entry of certain National By-Products officers into employment agreements with Darling on the closing date;
 
  •  the appointment of Dean Carlson, Chairman of the board of managers of National By-Products, and another National By-Products nominee to the board of directors of Darling upon completion of the acquisition;
 
  •  the receipt of change of control payments under National By-Products’ Long-Term Incentive Plan; and
 
  •  the receipt of a stock award 13 months after the closing of the acquisition depending on an average price of Darling common stock prior to the end of the 13th month.
      In considering the recommendation of the Darling board of directors with respect to the asset purchase agreement, Darling stockholders should be aware that executive officers of Darling have interests in the acquisition that are or may be different from, or in addition to, your interests. These interests include:
  •  the receipt of a cash payment promptly following the closing of the acquisition; and
 
  •  the receipt of a stock award 13 months after the closing of the acquisition depending on an average price of Darling common stock prior to the end of the 13th month.

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Conditions to Completion of the Acquisition (see page 71)
      The obligations of Darling and National By-Products to complete the acquisition are conditioned upon the following:
  •  no order by a governmental body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by the asset purchase agreement will have been entered;
 
  •  the SEC will have declared the Form S-4 effective;
 
  •  National By-Products unitholders and Darling stockholders will have approved the acquisition; and
 
  •  the AMEX will have approved for listing the shares of Darling common stock deliverable to National By-Products unitholders.
      National By-Products will not be obligated to complete the acquisition unless a number of conditions have been satisfied, including, without limitation:
  •  the representations and warranties of Darling and Darling National set forth in the asset purchase agreement qualified as to materiality will be true and correct, and those not so qualified will be true and correct in all material respects, as of the date of the asset purchase agreement and as of the closing of the acquisition as though made at and as of the closing of the acquisition, except to the extent the representations and warranties expressly relate to an earlier date (in which case the representations and warranties qualified as to materiality will be true and correct, and those not so qualified will be true and correct in all material respects, on and as of the earlier date); provided, however, in the event of any breach of a representation or warranty of Darling or Darling National set forth in the asset purchase agreement, the condition will be deemed satisfied unless the effect of all the breaches of representations and warranties taken together could reasonably be expected to have a material adverse effect on Darling;
 
  •  Darling and Darling National will have performed and complied in all material respects with all obligations and agreements required by the asset purchase agreement;
 
  •  no event, change, occurrence or circumstance will have occurred that, individually or in the aggregate with any other events, changes, occurrences or circumstances, has had or could reasonably be expected to have a material adverse effect on Darling;
 
  •  Darling will have delivered evidence of delivery of the cash consideration to National By-Products; and
 
  •  Philip Schneider & Associates, Inc. will not have withdrawn or materially modified the opinion it delivered to National By-Products’ board of managers on December 16, 2005 due solely to a material adverse effect on Darling.
      Darling will not be obligated to complete the acquisition unless a number of conditions have been satisfied, including, without limitation:
  •  the representations and warranties of National By-Products set forth in the asset purchase agreement qualified as to materiality will be true and correct, and those not so qualified will be true and correct in all material respects, as of the date of the asset purchase agreement and as of the closing of the acquisition as though made at and as of the closing of the acquisition, except to the extent the representations and warranties expressly relate to an earlier date (in which case the representations and warranties qualified as to materiality will be true and correct, and those not so qualified will be true and correct in all material respects, on and as of such earlier date); provided, however, in the event of any breach of a representation or warranty of National By-Products set forth in the asset purchase agreement, the condition will be deemed satisfied unless the effect of all the breaches of representations and warranties taken together could reasonably be expected to have a material adverse effect on National By-Products;

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  •  National By-Products will have performed and complied in all material respects with all obligations and agreements required by the asset purchase agreement;
 
  •  no event, change, occurrence or circumstance will have occurred that, individually or in the aggregate with any other events, changes, occurrences or circumstances, has had or could reasonably be expected to have a material adverse effect on National By-Products;
 
  •  Darling will have received a binding commitment from a title company to issue a policy of title insurance on National By-Products’ owned property;
 
  •  National By-Products will have obtained any required governmental consents as well as any required consents under all antitrust laws;
 
  •  National By-Products will have provided Darling with an affidavit of non-foreign status;
 
  •  Darling National will have obtained financing proceeds sufficient to consummate the acquisition;
 
  •  Darling will have received the appropriate consents under its senior credit facility and subordinated debt facility;
 
  •  National By-Products will have delivered duly executed general warranty deeds for each of its owned real properties and, if requested by Darling National, separate assignments for National By-Products’ real property leases except that National By-Products may deliver special warranty deeds for certain owned real property if title insurance has been obtained;
 
  •  National By-Products will have obtained the issuance, reissuance or transfer of all permits for Darling to conduct the operations of National By-Products’ business as of the closing date, and National By-Products will have satisfied all property transfer requirements arising under law;
 
  •  National By-Products will have delivered all instruments and documents necessary to release all liens, other than certain permitted exceptions, on purchased assets;
 
  •  National By-Products will have received appropriate payoff letters relating to its senior indebtedness; and
 
  •  Harris Nesbitt Corp. will not have withdrawn or materially modified the opinion it delivered to Darling’s board of directors on December 16, 2005 due solely to a material adverse effect on National By-Products.
Timing of the Acquisition (see page 76)
      The acquisition is expected to be completed in the first half of 2006, subject to the receipt of necessary regulatory approvals and the satisfaction or waiver of other closing conditions.
Termination of the Asset Purchase Agreement (see page 74)
      The asset purchase agreement may be terminated by Darling or National By-Products before completion of the acquisition in certain circumstances. In addition, the asset purchase agreement provides that each of Darling and National By-Products may be required to pay a termination fee to the other in an amount of $4.23 million plus fees and expenses up to $1 million if the asset purchase agreement is terminated in the circumstances described generally below:
  •  if Darling terminates the asset purchase agreement because National By-Products’ board of managers has approved or recommended any proposal or offer of acquisition, merger, or other similar business transaction from someone other than Darling, then National By-Products will be required to pay Darling;
 
  •  if Darling terminates the asset purchase agreement because National By-Products’ board of managers has not rejected any proposal or offer of acquisition, merger, or other similar business

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  transaction from someone other than Darling within fifteen business days of the proposal or offer, then National By-Products will be required to pay Darling;
 
  •  if Darling terminates the asset purchase agreement because National By-Products’ board of managers has not publicly reconfirmed its recommendation that the unitholders approve the asset purchase agreement within fifteen business days after Darling requests a confirmation after being notified of any proposal or offer of acquisition, merger, or other similar business transaction from someone other than Darling, then National By-Products will be required to pay Darling; or
 
  •  if National By-Products terminates the asset purchase agreement because Darling’s board of directors withdraws or modifies its recommendation to the stockholders of Darling to vote in favor of the asset purchase agreement and the issuance of shares in accordance with the asset purchase agreement due to any reason other than a reason or reasons arising from a material adverse effect on National By-Products, then Darling will be required to pay National By-Products.
      National By-Products’ obligations to pay the termination fee may discourage a third party from pursuing a competing acquisition proposal that could result in greater value to National By-Products unitholders. Although the payment of the termination fee could have an adverse effect on the financial condition of the company making the payment, neither Darling nor National By-Products believes that the effect would be material. The board of directors of Darling and the board of managers of National By-Products determined, based in part on advice from their legal advisors, that the amount of the termination fee and the circumstances in which it would become payable were generally typical for a transaction of the magnitude of this acquisition.
Matters to Be Considered at the Special Meetings
Darling (see page 35)
      Darling stockholders will be asked to vote on the following proposals:
  •  approve and adopt the asset purchase agreement, dated as of December 19, 2005, by and among Darling, National By-Products and a wholly-owned subsidiary of Darling, and the transactions contemplated by the asset purchase agreement, including the issuance of shares of Darling common stock in accordance with the asset purchase agreement; and
 
  •  consider and vote upon a proposal to approve one or more adjournments of the special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the above proposal.
National By-Products (see page 38)
      National By-Products unitholders will be asked to vote on the following proposals:
  •  approve and adopt the asset purchase agreement, dated as of December 19, 2005, by and among Darling, National By-Products and a wholly-owned subsidiary of Darling, and the transactions contemplated by the asset purchase agreement, including an amendment to the articles of organization of National By-Products to change its name to West-end Liquidation, LLC effective upon closing of the acquisition; and
 
  •  consider and vote upon a proposal to approve one or more adjournments of the special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the above proposal.
Voting by Darling and National By-Products Directors/ Managers and Executive Officers
      On the Darling record date, directors and executive officers of Darling owned and were entitled to vote [                    ] shares of Darling capital stock, or approximately [          ]% and [          ]%, respectively, of the total voting power of the shares of Darling common stock on that date. On the National By-Products

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record date, managers and executive officers of National By-Products owned and were entitled to vote [                    ] National By-Products membership units, or approximately [          ]% and [          ]%, respectively, of the total voting power of the National By-Products membership units on that date.
Dissenting National By-Products Unitholders Have Appraisal Rights (see page 59)
      Under Iowa law and the operating agreement of National By-Products, unitholders of record who deliver to National By-Products, before the vote referred to in this joint proxy statement/ prospectus is taken, written notice of the unitholder’s intent to demand payment if the acquisition is consummated and who do not vote in favor of the acquisition are entitled to appraisal rights in connection with the acquisition if the acquisition is completed. In order for a National By-Products unitholder to exercise his, hers or its appraisal rights, he, she or it must comply with the applicable provisions of Division XIII of the Iowa Business Corporation Act (a copy of which can be found in Annex D of this joint proxy statement/ prospectus).
Material U.S. Federal Income Tax Consequences of the Acquisition to National By-Products Unitholders (see page 56).
      The purchase of substantially all of the assets of National By-Products by Darling in exchange for cash, Darling common stock and the assumption of certain National By-Products liabilities will be a taxable disposition for federal income tax purposes, resulting in the realization of gain or loss to National By-Products. National By-Products is classified as a partnership for federal income tax purposes and is not itself subject to U.S. federal income taxation. Therefore, each unitholder will be required to report on its federal income tax return, and will be subject to tax in respect of, its distributive share of the gain or loss realized by National By-Products on the sale of its assets. Promptly following the closing of the acquisition, National By-Products will distribute, as the first in a series of liquidating distributions, cash (less cash escrow of $3.5 million, less the amount of the then outstanding National By-Products credit facilities and plus or minus the amount of the working capital adjustment, less appropriate reserves to pay other National By-Products debts and obligations) and Darling common stock (less escrow of shares valued at $6.5 million) to its unitholders pro rata in proportion to their membership units. A unitholder will not recognize gain or loss on the initial distribution, or any future distributions, except to the extent the sum of the cash and the fair market value of the Darling common stock exceeds such unitholder’s adjusted tax basis in his, her or its membership interest. Any loss realized on such distributions will not be recognized.

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SELECTED HISTORICAL FINANCIAL DATA OF DARLING
      Darling and National By-Products are providing the following information to aid you in your analysis of the financial aspects of the acquisition.
      The following selected historical consolidated financial information as of January 1, 2005 and January 3, 2004 and for the years ended January 1, 2005, January 3, 2004, and December 28, 2002 has been derived from Darling’s audited financial statements, which have been incorporated by reference in this joint proxy statement/ prospectus. The information as of October 1, 2005, and for the nine-month periods ended October 1, 2005 and October 2, 2004, has been derived from Darling’s unaudited financial statements, which have been incorporated by reference in this joint proxy statement/ prospectus and which have been prepared on the same basis as the audited financial statements and, in the opinion of management of Darling, include all adjustments, consisting only of normal recurring adjustments and accruals, necessary for a fair presentation of the financial condition at such date and the results of operations for such periods. Historical results are not necessarily indicative of the results to be obtained in the future.
      The selected consolidated statements of operations data for the years ended December 29, 2001 and December 30, 2000, and the selected consolidated balance sheet data as of December 28, 2002, December 29, 2001, and December 3, 2000, have been derived from Darling’s audited consolidated financial statements, and should be read in conjunction with those statements, which are not included nor incorporated by reference in this joint proxy statement/ prospectus.
      The selected historical financial data should be read in conjunction with the respective audited and unaudited consolidated financial statements of Darling, including the notes thereto, incorporated herein by reference. See “Where You Can Find More Information” on page 116.

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Selected Historical Financial Data of Darling
                                                             
        Fiscal 2004   Fiscal 2003   Fiscal 2002   Fiscal 2001   Fiscal 2000
    Nine Months Ended                    
    (Unaudited)   52 Weeks   53 Weeks   52 Weeks   52 Weeks   52 Weeks
        Ended   Ended   Ended   Ended   Ended
    October 1,   October 2,   January 1,   January 3,   Dec. 28,   Dec. 29,   Dec. 30,
    2005   2004   2005   2004   2002   2001   2000
                             
    (Dollars in thousands, except ratios and per share data)
Statements of Operations Data:
                                                       
 
Net sales
  $ 231,959     $ 248,845     $ 320,229     $ 323,267     $ 261,059     $ 241,350     $ 227,811  
                                           
   
Cost of sales and operating expenses(a)
    182,014       183,124       237,925       245,175       193,632       184,230       176,612  
   
Selling, general and administrative expenses
    26,158       27,301       36,509       35,808       30,169       28,212       26,217  
   
Depreciation and amortization
    11,390       11,301       15,224       15,124       16,415       24,859       26,787  
                                           
   
Operating income/(loss)
    12,397       27,119       30,571       27,160       20,843       4,049       (1,805 )
   
Interest expense
    4,707       5,224       6,759       2,363       6,408       14,160       13,971  
   
Other (income)/expense, net (b)
    (891 )     391       299       (3,914 )     (2,006 )     1,608       1,359  
                                           
   
Income/(loss) from continuing operations before income taxes
    8,581       21,504       23,513       28,711       16,441       (11,719 )     (17,135 )
   
Income tax expense/(benefit)
    3,002       8,575       9,245       10,632       7,151              
                                           
   
Income/(loss) from continuing operations
  $ 5,579     $ 12,929     $ 14,268     $ 18,079     $ 9,290     $ (11,719 )   $ (17,135 )
                                           
   
Basic income/(loss) from continuing operations per share
  $ 0.09     $ 0.20     $ 0.22     $ 0.29     $ 0.18     $ (0.75 )   $ (1.10 )
   
Diluted income/(loss) from continuing operations per common share
  $ 0.09     $ 0.20     $ 0.22     $ 0.29     $ 0.18     $ (0.75 )   $ (1.10 )
   
Weighted average shares outstanding
    63,922       63,821       63,840       62,588       45,003       15,568       15,568  
   
Diluted weighted average shares outstanding
    64,528       64,419       64,463       63,188       45,577       15,568       15,568  
 
                                                   
    As of   As of
    October 1,    
    2005   January 1,   January 3,   Dec. 28,   Dec. 29,   Dec. 30,
    (Unaudited)   2005   2004   2002   2001   2000
                         
    (Dollars in thousands, except ratios and per share data)
Balance Sheet Data:
                                               
 
Working capital/(deficiency)
  $ 35,418     $ 39,602     $ 31,189     $ 13,797     $ (116,718 )   $ (106,809 )
 
Total assets
    184,797       182,809       174,649       162,912       159,079       174,505  
 
Current portion of long-term debt
    5,026       5,030       7,489       8,372       120,053       109,528  
 
Total long-term debt less current portion
    45,759       49,528       48,188       60,055              
 
Stockholders’ equity (deficit)
    73,523       67,235       55,282       35,914       (9,654 )     2,724  
 
(a)  Included in cost of sales and operating expenses is a settlement with certain past insurers of approximately $2.8 million recorded in Fiscal 2004 and in the nine months ended October 2, 2004 as a credit (recovery) of claims expense and previous insurance premiums.
 
(b)  Included in other (income)/expense is a gain on early retirement of debt of $1.3 million in Fiscal 2004 and in the nine months ended October 2, 2004, $4.7 million in Fiscal 2003, and $0.8 million in Fiscal 2002. Also included in other (income)/expense is loss on redemption of preferred stock of approximately $1.7 million in Fiscal 2004 and in the nine months ended October 2, 2004.

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SELECTED HISTORICAL FINANCIAL DATA OF NATIONAL BY-PRODUCTS
      The following selected historical financial information as of January 1, 2005 and January 3, 2004 and for the years ended January 1, 2005, January 3, 2004, and December 28, 2002 has been derived from National By-Products’ audited financial statements, which have been included in this joint proxy statement/ prospectus. The selected historical financial information as of December 28, 2002, December 29, 2001 and December 30, 2000 and for the years ended December 29, 2001 and December 20, 2000 has been derived from National By-Products’ audited financial statements, which are not included in this joint proxy statement/ prospectus. The information as of October 1, 2005, and for the nine-month periods ended October 1, 2005 and October 2, 2004, has been derived from National By-Products’ unaudited financial statements, which have been included in this joint proxy statement/ prospectus and which have been prepared on the same basis as the audited financial statements and, in the opinion of management of National By-Products, include all adjustments, consisting only of normal recurring adjustments and accruals, necessary for a fair presentation of the financial condition at such date and the results of operations for such periods. Historical results are not necessarily indicative of the results to be obtained in the future.

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Selected Historical Financial Data of National By-Products
                                                           
            Fiscal 2004   Fiscal 2003   Fiscal 2002   Fiscal 2001   Fiscal 2000
                         
    Nine Months Ended   52 Weeks   53 Weeks   52 Weeks   52 Weeks   52 Weeks
        Ended   Ended   Ended   Ended   Ended
    October 1,   October 2,   January 1,   January 3,   Dec. 28,   Dec. 29,   Dec. 30,
    2005   2004   2005   2004(a)   2002(b)   2001   2000
                             
    (Dollars in thousands, except per unit/per share data)
Statements of Operations Data:
                                                       
 
Net revenues
  $ 141,798     $ 155,740     $ 198,326     $ 201,485     $ 179,591     $ 171,534     $ 165,257  
                                           
 
Cost of sales
    115,086       125,264       160,813       165,923       146,279       143,741       140,325  
 
Selling, general and administrative expenses
    6,514       6,398       9,364       9,383       8,751       9,507       9,551  
 
Depreciation and amortization
    4,553       5,307       6,973       7,585       8,085       10,183       9,676  
 
(Gain)/ Loss on disposals of property and equipment and other
    289       (363 )     (41 )     196       695       133       (44 )
                                           
 
Operating income
    15,356       19,134       21,217       18,398       15,781       7,970       5,749  
 
Interest expense
    108       140       165       905       1,313       2,045       2,660  
 
Other (income)/expense, net
    (27 )     (17 )     (21 )     (10 )     (19 )     46       170  
                                           
 
Income before income taxes
    15,275       19,011       21,073       17,503       14,487       5,879       2,919  
 
Income tax expense/(benefit)(b)
                            (8,591 )     1,764       876  
                                           
 
Net income
  $ 15,275     $ 19,011     $ 21,073     $ 17,503     $ 23,078     $ 4,115     $ 2,043  
                                           
Per Unit/Share Data:
                                                       
 
Basic and diluted distributions/dividends per unit/share
  $ 17.00     $ 13.55     $ 16.00     $ 10.20     $ 10.75     $ 0.45     $ 1.00  
 
Basic and diluted income from continuing operations per unit/share
  $ 12.67     $ 15.76     $ 17.47     $ 14.51     $ 19.14     $ 3.40     $ 1.69  
 
Basic and diluted book value per unit/share
  $ 35.73     $     $ 40.07     $ 38.70     $ 33.88     $ 27.29     $ 23.94  
 
Basic and diluted average units/shares outstanding
    1,206       1,206       1,206       1,206       1,206       1,211       1,209  
Distribution Data:
                                                       
 
Cash tax distribution(b)
  $ 6,031     $ 5,489     $ 8,441     $ 6,876     $ 10,555     $ 0     $ 0  
 
Cash special distribution/dividend
    14,476       10,857       10,857       5,428       2,413       545       1,209  
                                           
 
Total cash distributions/dividends
  $ 20,507     $ 16,346     $ 19,298     $ 12,304     $ 12,968     $ 545     $ 1,209  
 
                                                   
        As of
    As of    
    October 1,   January 1,   January 3,   Dec. 28,   Dec. 29,   Dec. 30,
    2005   2005   2004   2002   2001   2000
                         
    (Dollars in thousands, except per unit/per share data)
Balance Sheet Data:
                                               
 
Working Capital, excluding current portion of long-term debt
  $ 8,993     $ 8,928     $ 10,543     $ 10,100     $ 7,940     $ 11,737  
 
Total Assets
    61,054       62,168       69,436       77,723       76,234       79,641  
 
Total Long-Term Debt
    2,600             6,400       14,150       24,630       32,484  
 
Members’ Equity
    43,095       48,327       46,677       40,863       33,043       28,948  
 
(a)  Fiscal 2003 had a reduction of approximately $2.5 million in operating income due to the discovery of a cow with Bovine Spongiform Encephalopathy on December 23, 2003. The export markets closed their borders causing a $1.8 million reduction in sales, in anticipation of sales returns, and $0.7 million increase in cost of sales as the value of meat and bone meal inventory declined.
 
(b)  Effective January 11, 2002, National By-Products was reorganized as a limited liability company, resulting in a taxable event for both the company and its shareholders. Taxable income arising after the effective date flows through to the members of the company. The current taxable income of National By-Products flows through to, and is reportable by, the members of National By-Products. National By-Products attempts to disburse funds in the form of a tax distribution to members to satisfy the tax obligations incurred from the taxable income.

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL DATA OF DARLING AND NATIONAL BY-PRODUCTS
      The acquisition will be accounted for using the purchase method of accounting in accordance with accounting principles generally accepted in the United States of America. The tangible and intangible assets and liabilities of National By-Products assumed by Darling will be recorded as of the closing date of the acquisition, at their respective fair values, and added to those of Darling. For a more detailed description of purchase accounting, see “The Acquisition — Accounting Treatment” on page 56.
      Darling has presented below summary unaudited pro forma combined financial information that reflects the purchase method of accounting and is intended to provide you with a better picture of what the businesses might have looked like had they actually been combined. The combined financial information may have been different had the companies actually been combined. The selected unaudited pro forma combined financial information does not reflect the effect of asset dispositions, if any, or cost savings, if any, that may result from the acquisition. You should not rely on the summary unaudited pro forma combined financial information as being indicative of the historical results that would have occurred had the companies been combined or the future results that may be achieved after the acquisition.
      This unaudited pro forma condensed combined financial data has been prepared based on preliminary estimates of fair values. The actual amounts recorded as of the completion of the acquisition may differ materially from the information presented in this unaudited pro forma condensed combined consolidated financial data. In addition, the impact of ongoing integration activities, the timing of completion of the acquisition and other changes in National By-Product’s net tangible and intangible assets that occur prior to completion of the acquisition could cause material differences in the information presented.
      The following summary unaudited pro forma combined financial information (i) has been derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial statements and related notes included in this joint proxy statement/ prospectus beginning on page 77 and (ii) should be read in conjunction with the consolidated financial statements of Darling and National By-Products and other information included in this joint proxy statement/ prospectus or previously filed by Darling with the SEC. See “Where You Can Find More Information” on page 116.
                 
    Nine Months   Fiscal Year
    Ended   Ended
    October 1,   January 1,
    2005   2005
         
    (In millions except per share
    data)
Statements of Operations Data:
               
Net sales
  $ 373.8     $ 518.6  
Operating income
    25.0       48.2  
Income from continuing operations
    12.1       23.5  
Income from continuing operations per share of common stock
               
Basic
    0.15       0.29  
Diluted
    0.15       0.29  
         
    At October 1,
    2005
     
    (In millions)
Balance Sheet Data:
       
Working capital
  $ 13.0  
Total assets
    315.9  
Long-term obligations
    100.0  
Stockholders’ equity
    140.8  

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HISTORICAL PRICES OF DARLING COMMON STOCK
      Darling’s common stock is listed on the AMEX under the symbol “DAR.” The table below sets forth, for each of the calendar quarters indicated, the high and low sales prices per share of Darling common stock.
                                 
    Fiscal Quarter
     
    1st   2nd   3rd   4th
                 
Stock prices:
                               
2006 High
  $ 4.60 (1)                        
Low
    3.79 (1)                        
2005 High
    4.55       4.08       3.98     $ 4.33  
Low
    3.48       3.39       3.31       3.20  
2004 High
    3.79       4.50       4.89       4.50  
Low
    2.54       3.14       3.70       3.48  
2003 High
    2.45       2.45       3.15       3.10  
Low
    1.60       1.64       2.15       2.25  
2002 High
    1.30       0.90       1.50       1.90  
Low
    0.30       0.55       0.67       0.85  
 
(1)  Through March 3, 2006.

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RISK FACTORS
      In addition to the other information contained in this joint proxy statement/ prospectus, National By-Products, LLC unitholders who will receive Darling International Inc. common stock in connection with the acquisition and Darling stockholders should carefully consider the following risks in evaluating the proposals to be voted on at your special meeting. If any of the events described below occurs, Darling’s and/or National By-Products’ business, financial condition or results of operations could be materially adversely affected. The risks below should be considered along with the other risks described in the Darling annual reports incorporated by reference into this joint proxy statement/ prospectus. See “Where You Can Find More Information” beginning on page 116 of this joint proxy statement/ prospectus for the location of information incorporated by reference into this joint proxy statement/ prospectus.
Risk Factors Relating to the Acquisition
Darling may be unable to successfully integrate National By-Products and achieve the benefits expected to result from the acquisition.
      Darling and National By-Products entered into the asset purchase agreement with the expectation that the acquisition will result in mutual benefits including, among other things, growing revenue, diversifying raw material supplies and creating a larger platform to grow the restaurant services segment. Achieving the benefits of the acquisition will depend in part on the integration of Darling’s and National By-Products’ operations and personnel in a timely and efficient manner so as to minimize the risk that the acquisition will result in the loss of market opportunity or key employees or the diversion of the attention of management. Factors that could affect Darling’s ability to achieve these benefits include:
  •  Difficulties in integrating and managing personnel, financial reporting and other systems used by National By-Products into Darling;
 
  •  The failure of National By-Products’ operations to perform in accordance with Darling’s expectations;
 
  •  Any future goodwill impairment charges that Darling may incur with respect to the assets of National By-Products;
 
  •  Failure to achieve anticipated synergies between Darling’s business units and the business units of National By-Products;
 
  •  The loss of National By-Products’ customers; and
 
  •  The loss of any of the key employees of National By-Products.
      If National By-Products’ operations do not operate as Darling anticipates, it could materially harm Darling’s business, financial condition and results of operations.
Darling will succeed to substantially all of National By-Products’ liabilities.
      In addition, as a result of the acquisition, Darling will succeed to substantially all of National By-Products’ liabilities. Darling may learn additional information about National By-Products’ business that adversely affects Darling, such as unknown or contingent liabilities, issues relating to internal controls over financial reporting and issues relating to compliance with the Sarbanes-Oxley Act or other applicable laws. As a result, there can be no assurance that the acquisition will be successful or will not, in fact, harm Darling’s business. Although $3.5 million of the cash consideration and $6.5 million of the stock consideration to be paid in the acquisition will be placed in an escrow fund at closing to satisfy, at least in part, any indemnification claims made by Darling against National By-Products with respect to certain liabilities, if National By-Products’ liabilities are greater than projected, or if there are obligations of National By-Products of which Darling is not aware at the time of completion of the acquisition and these liabilities and obligations cannot be covered by the escrow fund, Darling’s business could be materially adversely affected and its stock price could decline.

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Darling may be unable to realize the expected cost savings from the acquisition.
      Even if Darling is able to integrate the operations of National By-Products successfully, Darling cannot assure you that this integration will result in the realization of the full benefits of the cost savings or revenue enhancements that Darling expects to result from this integration or that these benefits will be achieved within the timeframe that Darling expects. The cost savings from the acquisition may be offset by costs incurred in integrating National By-Products’ operations, as well as by increases in other expenses, by operating losses or by problems with Darling’s or National By-Products’ businesses unrelated to the acquisition.
Failure to complete the acquisition could negatively impact the stock price of Darling common stock and the future business and financial results of Darling and National By-Products because of, among other things, the market disruption that would occur as a result of uncertainties relating to a failure to complete the acquisition.
      Although Darling and National By-Products have agreed to make an effort to obtain stockholder and unitholder approval, respectively, of the proposals relating to the acquisition, there is no assurance that these proposals will be approved, and there is no assurance that Darling and National By-Products will receive the necessary regulatory approvals or satisfy the other conditions to the completion of the acquisition. If the acquisition is not completed for any reason, Darling and National By-Products will be subject to several risks, including the following:
  •  being required to pay the other company a termination fee of $4.23 million, which each company is required to do in certain circumstances relating to termination of the asset purchase agreement. See “The Asset Purchase Agreement — Termination” beginning on page 74; and
 
  •  having had the focus of management of each of the companies directed toward the acquisition and integration planning instead of on each company’s core business and other opportunities that could have been beneficial to the companies.
In addition, each company would not realize any of the expected benefits of having completed the acquisition.
      If the acquisition is not completed, the price of Darling common stock and/or the overall value of National By-Products may decline to the extent that the current market price of Darling common stock or the current market value of National By-Products reflects a market assumption that the acquisition will be completed and that the related benefits and synergies will be realized, or as a result of the market’s perceptions that the acquisition was not consummated due to an adverse change in Darling’s or National By-Products’ business. In addition, Darling’s business and National By-Products’ business may be harmed, and the price of Darling’s stock and the overall value of National By-Products may decline as a result, to the extent that customers, suppliers and others believe that the companies cannot compete in the marketplace as effectively without the acquisition or otherwise remain uncertain about the companies’ future prospects in the absence of the acquisition. For example, customers may delay, redirect or defer purchasing decisions, which could negatively affect the business and results of operations of Darling and National By-Products, regardless of whether the acquisition is ultimately completed. Similarly, current and prospective employees of Darling and National By-Products may experience uncertainty about their future roles with the resulting company and choose to pursue other opportunities that could adversely affect Darling or National By-Products, as applicable, if the acquisition is not completed. This may adversely affect the ability of Darling and National By-Products to attract and retain key management and marketing and technical personnel, which could harm the companies’ businesses and results.
      In addition, if the acquisition is not completed and the Darling board of directors or National By-Products board of managers determines to seek another acquisition or business combination, there can be no assurance that a transaction creating stockholder or unitholder value comparable to the value perceived to be created by this acquisition will be available to either Darling or National By-Products.

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      If the acquisition is not completed, Darling and National By-Products cannot assure their stockholders and unitholders, respectively, that these risks will not materialize or materially adversely affect the business, financial results, financial condition and stock price of Darling or overall value of National By-Products.
The asset purchase agreement limits National By-Products’ ability to pursue an alternative proposal to the acquisition and requires National By-Products to pay a termination fee of $4.23 million if it does.
      The asset purchase agreement prohibits National By-Products from soliciting, initiating, encouraging or facilitating certain alternative acquisition proposals with any third party, subject to exceptions set forth in the asset purchase agreement. See “The Asset Purchase Agreement — Covenants” beginning on page 68. The asset purchase agreement also provides for the payment by National By-Products of a termination fee of $4.23 million if the asset purchase agreement is terminated in certain additional circumstances. See “The Asset Purchase Agreement — Termination” beginning on page 74.
      These provisions limit National By-Products’ ability to pursue offers from third parties that could result in greater value to National By-Products’ unitholders. The obligation to make the termination fee payment also may discourage a third party from pursuing an alternative acquisition proposal.
Darling may be required to pay a termination fee of $4.23 million if its board of directors withdraws or modifies its recommendation to the Darling stockholders.
      The asset purchase agreement requires Darling to pay a termination fee of $4.23 million if its board of directors withdraws or modifies its recommendation to the stockholders of Darling to vote in favor of the asset purchase agreement due to any reason other than a reason or reasons arising from a material adverse effect on National By-Products. The payment of this termination fee could have an adverse effect on the financial condition of Darling.
Darling expects substantial transaction, consolidation and integration costs related to the acquisition.
      If the acquisition is consummated, Darling and National By-Products will have incurred substantial expenses, including investment banking, legal, accounting and printing fees. It is expected that Darling will also incur significant consolidation and integration expenses that cannot be accurately estimated at this time. Actual transaction costs may substantially exceed estimates and, when combined with the expenses incurred in connection with the consolidation and integration of the companies, could have an adverse effect on the consolidated business, financial condition and operating results of Darling.
  The additional consideration to be received by the National By-Products unitholders pursuant to the “stock true-up” is capped.
      In addition to the purchase price paid to National By-Products on the closing date of the acquisition, Darling may pay additional consideration in the form of Darling common stock pursuant to a “stock true-up” in accordance with the asset purchase agreement. The stock true-up requires Darling to pay additional consideration in the form of Darling common stock if the average share price of Darling common stock for the 90 days prior to the last day of the 13th full consecutive month after the closing of the acquisition (referred to herein as the “true-up market price”) causes the value of the shares issued at the closing (including the escrowed shares) to be less than $70.5 million. However, if the true-up market price is less than $3.60, $3.60 will be used in place of the actual true-up market price for purposes of calculating the number of shares to be issued in the stock true-up. If the true-up market price is less than $3.60, the shares National By-Products receives on the closing date (including the escrowed shares), plus the shares National By-Products (or its unitholders) receives in the stock true-up, will be valued at less than $70.5 million in the aggregate as of the date the stock true-up is calculated. For a more detailed description and an illustration of the discussion above please see “The Asset Purchase Agreement — Stock True Up” beginning on page 63.

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National By-Products’ ability to distribute the consideration to be paid in the acquisition to its unitholders may be limited.
      National By-Products’ ability to distribute the cash or stock consideration to be paid in the acquisition to its unitholders will be subject to applicable provisions of state law and National By-Products’ operating agreement. Under Iowa law, no distribution may be declared and paid if, after the distribution is made (i) National By-Products would not be able to pay its debts as they come due in the usual course of business or (ii) National By-Products’ total assets would be less than the sum of its total liabilities, plus the amount that would be needed (if any), if National By-Products were to be dissolved at the time of the distribution, to satisfy preferential rights upon dissolution of members whose preferential rights are superior to the rights of members receiving the distribution. In addition to (i) and (ii) above, under National By-Products’ operating agreement, no distribution may be declared if the payment of the distribution would be a default by National By-Products under any agreement for borrowed money by National By-Products, whether after notice, lapse of time or otherwise.
Former National By-Products unitholders who become Darling stockholders in connection with the acquisition will have limited ability to influence Darling’s actions and decisions following the acquisition.
      Immediately following the acquisition, former National By-Products unitholders will hold approximately 20% of the outstanding shares of Darling common stock. As a result, former National By-Products unitholders will have only limited ability to influence Darling’s business. Former National By-Products unitholders will not have separate approval rights with respect to any actions or decisions of Darling or have representation on Darling’s board of directors dedicated to their interests.
Some individuals have unique interests in the consummation of the acquisition.
      When considering the recommendation of the National By-Products board of managers with respect to the acquisition proposals, National By-Products unitholders should be aware that some directors and executive officers of National By-Products have interests in the acquisition that are different from, or are in addition to, the interests of the unitholders of National By-Products. These interests include their designations as Darling directors or executive officers upon completion of the proposed acquisition and/or the receipt of certain change of control payments under National By-Products’ Long-Term Incentive Plan and/or the possible receipt of a stock award following the acquisition. National By-Products unitholders should consider these interests in conjunction with the recommendation of the board of managers of National By-Products of approval of the asset purchase agreement and the acquisition.
      When considering the recommendation of the Darling board of directors with respect to the acquisition proposals, Darling stockholders should be aware that some executive officers of Darling have interests in the acquisition that are different from, or are in addition to, the interests of the stockholders of Darling. These interests include the receipt of a cash payment upon closing of the acquisition and/or the possible receipt of a stock award following the acquisition. Darling stockholders should consider these interests in conjunction with the recommendation of the board of directors of Darling of approval of the asset purchase agreement and the issuance of shares of Darling common stock in accordance with the asset purchase agreement.

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Shares of Darling common stock issued in connection with the acquisition will be subject to all of the risks associated with Darling as combined with National By-Products.
      National By-Products unitholders receiving shares of Darling common stock in connection with the acquisition will be making an investment in Darling and will be subject to all of the risks associated with an investment in shares of Darling common stock, which will include National By-Products upon consummation of the acquisition.
Risk Factors Relating to Darling Following Completion of the Acquisition
The pro forma financial data included in this joint proxy statement/ prospectus is preliminary and the combined company’s actual financial position and results of operations may differ significantly and adversely from the pro forma amounts included in this joint proxy statement/ prospectus.
      Because of the proximity of this joint proxy statement/ prospectus to the date of the announcement of the proposed acquisition, the process of valuing National By-Products’ tangible and intangible assets and liabilities, as well as evaluating National By-Products’ accounting policies for consistency with Darling’s accounting policies, is still in the very preliminary stages. Material revisions to current estimates could be necessary as the valuation process and accounting policy review are finalized.
      The unaudited pro forma operating data contained in this joint proxy statement/ prospectus is not necessarily indicative of the results that actually would have been achieved had the proposed acquisition been completed at the beginning of the period indicated or that may be achieved in the future. We can provide no assurances as to how the operations and assets of both companies would have performed if they had been combined during the period indicated, or how they will perform in the future, which, together with other factors, could have a significant adverse effect on the results of operations and financial position of the combined company.
Darling’s results of operations and cash flow may be reduced by decreases in the market price of its products.
      Darling’s and National By-Products’ finished products are commodities, the prices of which are quoted on established commodity markets. Accordingly, Darling’s consolidated results of operations after the acquisition is consummated will be affected by fluctuations in the prevailing market prices of the finished products. A significant decrease in the market price of Darling’s products would have a material adverse effect on Darling’s results of operations and cash flow.
The most competitive aspect of Darling’s business is the procurement of raw materials.
      Darling’s management believes that the most competitive aspect of Darling’s business is the procurement of raw materials rather than the sale of finished products. During the last ten years, pronounced consolidation within the meat packing industry has resulted in bigger and more efficient slaughtering operations, the majority of which utilize “captive” processors. Simultaneously, the number of small meat packers, which have historically been a dependable source of supply for non-captive processors, such as Darling, has decreased significantly. Although the total amount of slaughtering may be flat or only moderately increasing, the availability, quantity and quality of raw materials available to the independent processors from these sources have all decreased. A significant decrease in raw materials available could materially and adversely affect Darling’s business and results of operations.
      The rendering and restaurant services industry is highly fragmented and very competitive. Darling competes with other rendering and restaurant services businesses and alternative methods of disposal of animal processing by-products and used restaurant cooking oil provided by trash haulers and waste management companies, as well as the alternative of illegal disposal. Darling charges a collection fee to offset a portion of the cost incurred in collecting raw material. To the extent suppliers of raw materials look to alternate methods of disposal, whether as a result of Darling’s collection fees being deemed too expensive or otherwise, Darling’s raw material supply will decrease and Darling’s collection fee revenues will decrease, which could materially and adversely affect Darling’s business and results of operations.

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Darling may incur material costs and liabilities in complying with government regulations.
      Darling is subject to the rules and regulations of various federal, state and local governmental agencies. Material rules and regulations and the applicable agencies are:
  •  the Food and Drug Administration (FDA), which regulates food and feed safety;
 
  •  the United States Department of Agriculture (USDA), including its agencies Animal and Plant Health Inspection Service (APHIS) and Food Safety and Inspection Service (FSIS), which regulates collection and production methods;
 
  •  the Environmental Protection Agency (EPA), which regulates air and water discharge requirements, as well as local and state agencies governing air and water discharge;
 
  •  State Departments of Agriculture, which regulate animal by-product collection and transportation procedures and animal feed quality;
 
  •  the United States Department of Transportation (USDOT), as well as local and state transportation agencies, which regulate the operation of Darling’s commercial vehicles; and
 
  •  the Securities and Exchange Commission (SEC), which regulates securities and information required in annual and quarterly reports filed by publicly traded companies.
      Such rules and regulations may influence Darling’s operating results at one or more facilities. There can be no assurance that Darling will not incur material costs and liabilities in connection with the regulations.
Darling is highly dependent on natural gas and diesel fuel.
      Darling’s operations are highly dependent on the use of natural gas and diesel fuel. Energy prices for natural gas and diesel fuel are expected to remain high throughout 2006. Darling consumes significant volumes of natural gas to operate boilers in its plants to generate steam to heat raw material. High natural gas prices represent a significant cost of factory operation included in cost of sales. Darling also consumes significant volumes of diesel fuel to operate its fleet of tractors and trucks used to collect raw material. High diesel fuel prices represent a significant component of cost of collection expenses included in cost of sales. Though Darling will continue to manage these costs and attempt to minimize these expenses, prices remain relatively high in 2006 and represent an ongoing challenge to Darling’s operating results for future periods. A material increase in energy prices for natural gas and diesel fuel over a sustained period of time could materially adversely affect Darling’s business, financial condition and results of operations.
Darling’s business may be negatively impacted by a significant outbreak of avian influenza (Bird Flu) in the U.S.
      Avian influenza, or Bird Flu, a highly contagious disease that affects chickens and other poultry species, has recently spread throughout Asia to Europe at an unprecedented rate. Bird Flu is not a new disease, and while it does not currently exist in the U.S., it has occurred in this country twice within the past 25 years. The USDA has developed safeguards to protect the U.S. poultry industry from Bird Flu. Such safeguards are based on import restrictions, disease surveillance and a response plan for isolating and depopulating infected flocks if the disease is detected. Any significant outbreak of Bird Flu in the U.S. could have a negative impact on Darling’s business by reducing demand for meat and bone meal (MBM).
Darling’s business may be affected by FDA regulations relating to Bovine Spongiform Encephalopathy or “BSE.”
      Effective August 1997, the FDA promulgated a rule prohibiting the use of mammalian proteins, with some exceptions, in feeds for cattle, sheep and other ruminant animals (21 CFR 580.2000, referred to

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herein as the “BSE Feed Rule”). The intent of this rule is to prevent the spread of BSE, commonly referred to as “mad cow disease.”
      The following is a background to BSE in the U.S. and the regulations issued by the U.S. government in response thereto:
  •  On December 23, 2003, a cow originally imported from Canada to the state of Washington was diagnosed to have BSE. The U.S. government subsequently banned downer animals and specified risk materials (SRM) from food and cosmetics. Cattle that are tested for BSE are also prohibited from entering the food or feed chains until the animals are verified to be negative for the disease. On January 26, 2004, the FDA announced intentions to modify its BSE Feed Rule. Subsequently, on July 14, 2004, the FDA and USDA jointly requested public comment on possible actions to further mitigate the risk of BSE. On September 30, 2004, the FDA published a guidance document indicating that, pursuant to Section 402(a)(5) of the Federal Food, Drug, and Cosmetic Act, animal feed and feed ingredients containing material from a BSE-positive animal will be considered adulterated and may not be fed to animals.
 
  •  On June 24, 2005, a 12-year-old U.S.-born cow was diagnosed to have BSE. The animal was born more than four years before the FDA implemented the BSE Feed Rule in 1997. The cow was originally sampled at a pet food plant on November 18, 2004. Rapid screening tests for BSE were inconclusive and the carcass was incinerated so it did not enter the feed chain. Confirmation tests subsequently conducted by the USDA using immunohistochemistry (IHC) indicated the animal was negative for BSE. However, following an audit of the USDA’s enhanced BSE surveillance program by the Inspector General for USDA, the sample was retested on June 18, 2005 for BSE using the Western Blot technique, another internationally accepted confirmation test. The sample was positive for BSE using the Western Blot test. Because of the conflicting results obtained from the two test methods, the sample was sent to The Veterinary Laboratories Agency in Weybridge, England, where on June 24, 2005 it was confirmed to be positive for BSE. During the subsequent USDA investigation, 67 animals from the index herd were sacrificed, tested and found to be negative for BSE. In addition, the FDA investigation found the infected animal was fed in compliance to the BSE Feed Rule and did not receive MBM of ruminant animal origin after 1997, when the rule banning such practices went into effect. The FDA concluded the animal was most likely exposed to BSE before the BSE Feed Rule was promulgated.
 
  •  A few major beef packing companies have begun selling SRM-free MBM for a premium to specific customers, primarily pet food manufacturers.
 
  •  As a result of the first BSE case, many foreign countries banned imports of U.S.-produced beef and beef products, including MBM. Tallow exports were briefly banned, but this initial ban was relaxed to permit imports of U.S.-produced tallow with less than 0.15% impurities. As of January 11, 2006, many foreign markets were closed to U.S. beef following the discovery of the first U.S. case of BSE, had been reopened, although some, such as Hong Kong, permit only boneless beef from U.S. cattle less than 30 months of age to be imported. Steps towards regaining the major former export markets of Japan, the largest, and South Korea, the second largest, had also been made. On December 12, 2005, Japan eased its ban by permitting meat from U.S. cattle less than 21 months of age to be imported. Two days later, South Korea’s agriculture ministry concluded that U.S. beef was not a health concern, which may be an important step towards lifting that country’s ban. On January 20, 2006, however, Japan suspended imports of U.S. beef because one shipment contained vertebral column, in violation of the terms of the agreement between the U.S. and Japan. The USDA immediately implemented protocols to prevent such violations in the future and began negotiations with Japan to lift the suspension. Except for Indonesia, export markets for MBM containing beef material produced in the U.S. have generally remained closed. Indonesia reopened its border to pork-free MBM in March 2005, but re-initiated its ban on U.S. MBM following the announcement that a second case of BSE had been found in the U.S.

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  •  In May 2003, the USDA closed the border to live cattle and beef from Canada after a cow with BSE was discovered there. Boneless beef derived from Canadian cattle under 30 months of age was later approved for importation into the U.S. Canadian officials found two additional cases of BSE in December 2004 and January 2005. On January 4, 2005, the USDA published a Final Rule establishing criteria for classifying geographic regions as presenting minimal-risk of introducing BSE into the U.S. This same rulemaking placed Canada into the minimal-risk category based on an extensive investigation by USDA veterinarians. Based on this classification, USDA announced its intent to reopen the Canadian border to live cattle under 30 months of age and beef from such cattle beginning March 7, 2005. Imports of SRM-free beef from cattle over 30 months of age were also to be allowed, but this action was tabled by the Secretary of Agriculture on February 9, 2005 to allow time for further study. The Ranchers — Cattlemen Action Legal Fund — United Stock Growers of America (R-CALF) sued the USDA and, on March 2, 2005, was granted a temporary injunction by the U.S. District Court for the District of Montana, which prevented implementation of the Minimal Risk Rule and kept the border closed to Canadian cattle. On July 14, 2005, the U.S. Ninth Circuit Court of Appeals agreed with the USDA and overturned the lower court’s temporary injunction, reopening the Canadian border to cattle less than 30 months of age. The first Canadian cattle were imported into the U.S. on July 18, 2005. The importation of SRM-free beef from Canadian cattle over 30 months of age continues to be banned.
      The following are recent developments with respect to the above regulatory history:
  •  On October 6, 2005, the FDA proposed to amend the agency’s regulations to prohibit certain cattle origin materials in the food or feed of all animals, which we refer to as the “Proposed Rule.” The materials that are proposed to be banned include: (1) the brain and spinal cord from cattle 30 months and older that are inspected and passed for human consumption; (2) the brain and spinal cord from cattle of any age not inspected and passed for human consumption; and (3) the entire carcass of cattle not inspected and passed for human consumption if the brains and spinal cords have not been removed. In addition, the Proposed Rule provides that tallow containing more than 0.15% insoluble impurities also be banned from all animal food and feed if such tallow is derived from the proposed prohibited materials. Proposed rules are not regulations and are not enforceable. Such proposals are published to obtain public comment on actions that the agency is considering. The 75-day public comment period for the Proposed Rule closed December 20, 2005. The FDA is currently reviewing the comments submitted and has not taken any further action. Darling’s management will continue to monitor this and other regulatory issues.
 
  •  Effective October 7, 2005, the FDA amended its July 14, 2004 interim final rule, which prohibited the use of SRM for human food and required that tallow intended for use in human food and cosmetics contain less than 0.15% impurities. The FDA amended its original interim final rule to remain consistent with rulemaking by the Food Safety Inspection Service of the USDA regarding SRM, which was also effective on October 7, 2005. In the amended final rule, the FDA permits the use of beef small intestine for human food, provided the last 80 inches (distal ileum) of small intestine is removed and the small intestine is derived from cattle that have been inspected and passed for human consumption. The FDA also amended its list of acceptable methods for measuring insoluble impurity levels in tallow to include the methods commonly used by the tallow industry. The impurities limit does not apply to tallow used to make tallow-derivatives (fatty acids).
 
  •  As of January 19, 2006, only one sample had tested positive for BSE out of more than 589,000 samples collected since June 1, 2004. Samples were collected from the highest risk cattle population, which includes non-ambulatory animals, dead cattle and healthy cattle.
      The occurrence of BSE in the U.S. may result in additional U.S. government regulations, finished product export restrictions by foreign governments, market price fluctuations for Darling’s finished products, reduced demand for beef and beef products by consumers, or increase Darling’s operating costs.

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Certain of Darling’s 24 operating facilities are highly dependent upon a few suppliers.
      Certain of Darling’s rendering facilities are highly dependent on one or a few suppliers. Should any of these suppliers choose alternate methods of disposal, cease their operations, have their operations interrupted by casualty, or otherwise cease using Darling’s collection services, the operating facilities may be materially and adversely affected.
Darling’s success following consummation of the proposed acquisition will be dependent on Darling’s and National By-Products’ key personnel.
      Darling’s success depends to a significant extent upon a number of key employees, including members of senior management. Likewise, Darling’s success following the proposed acquisition will depend to a significant extent upon a number of key employees of National By-Products, as well, including members of National By-Products’ senior management. The loss of the services of one or more of the key employees mentioned above could have a material adverse effect on Darling’s results of operations and prospects. Darling believes that its future success will depend in part on its ability to attract, motivate and retain skilled technical, managerial, marketing and sales personnel. Competition for personnel is intense and there can be no assurance that Darling will be successful in attracting, motivating and retaining key personnel. The failure to hire and retain such personnel could materially adversely affect Darling’s business and results of operations.
In certain markets Darling is highly dependent upon the continued and uninterrupted operation of a single operating facility.
      In the majority of Darling’s markets, in the event of a casualty or condemnation involving a facility located in such market, Darling would utilize a nearby operating facility to continue to serve its customers in such market. In certain markets, however, Darling does not have alternate operating facilities. In the event of a casualty or condemnation, or an unscheduled shutdown, Darling may experience an interruption in its ability to service its customers and to procure raw materials. This may materially and adversely affect Darling’s business and results of operations in such markets. In addition, after an operating facility affected by a casualty or condemnation is restored, there could be no assurance that customers who in the interim choose to use alternative disposal services would return to use Darling’s services.
Darling has a history of net losses and Darling may incur net losses in the future that could adversely affect Darling’s ability to service its indebtedness.
      Darling has a recent history of net losses but has been profitable in each of the past three years. For the years ended December 29, 2001 and December 30, 2000, Darling’s net losses were approximately $11.8 million and $19.2 million, respectively. Following the recapitalization of Darling completed in May 2002, Darling reported a net profit for the years ended January 1, 2005, January 3, 2004, and December 28, 2002, of approximately $13.9 million, $18.2 million and $9.0 million, respectively. If, however, Darling incurs net losses in the future, its ability to pay principal and interest on its indebtedness could be adversely affected.
      In order to establish consistent profitability, Darling must achieve the following:
  •  maintain adequate levels of raw material volumes;
 
  •  maintain its collection fees at levels sufficient to recover an adequate portion of collection costs;
 
  •  increase gross margins to the extent of cost increases;
 
  •  maintain its distribution capability;
 
  •  maintain competitiveness in pricing; and
 
  •  continue to manage its operating expenses, which includes the energy costs associated with natural gas and diesel fuel.

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      There can be no assurance that Darling will achieve these objectives or attain consistent profitability.
Darling’s ability to pay any dividends on its common stock may be limited.
      Darling has not declared or paid cash dividends on its common stock since January 3, 1989. The payment of any dividends by Darling on its common stock in the future will be at the discretion of Darling’s board of directors and will depend upon, among other things, future earnings, operations, capital requirements, Darling’s general financial condition, the general financial condition of Darling’s subsidiaries, limitations in its senior and subordinated credit facilities, and general business conditions. Furthermore, unitholders of National By-Products should not expect to receive cash dividends on shares of Darling common stock consistent with the distributions which they have received on their National By-Products membership units in the past.
      Darling’s ability to pay any cash or non-cash dividends on its common stock is subject to applicable provisions of state law and to the terms of its credit agreements. Darling’s credit agreements permit Darling to pay cash dividends on Darling’s common stock pursuant with the terms and conditions of those credit agreements. Moreover, under Delaware law, Darling is permitted to pay cash or accumulated dividends on Darling’s capital stock, including Darling’s common stock, only out of surplus, or if there is no surplus, out of Darling’s net profits for the fiscal year in which a dividend is declared or for the immediately preceding fiscal year. Surplus is defined as the excess of a company’s total assets over the sum of its total liabilities plus the par value of its outstanding capital stock. In order to pay dividends, Darling must have surplus or net profits equal to the full amount of the dividends at the time the dividend is declared. In determining Darling’s ability to pay dividends, Delaware law permits Darling’s board of directors to revalue Darling’s assets and liabilities from time to time to their fair market values in order to establish the amount of surplus. Darling cannot predict what the value of Darling’s assets or the amount of Darling’s liabilities will be in the future and, accordingly, Darling cannot assure the holders of Darling’s common stock that Darling will be able to pay dividends on Darling’s common stock.
The market price of Darling’s common stock could be volatile.
      The market price of Darling’s common stock has been subject to volatility and, in the future, the market price of Darling’s common stock could fluctuate widely in response to numerous factors, many of which are beyond Darling’s control. These factors include, among other things, actual or anticipated variations in Darling’s operating results, earnings releases by Darling, changes in financial estimates by securities analysts, sales of substantial amounts of Darling’s common stock, market conditions in the industry and the general state of the securities markets, governmental legislation or regulation, currency and exchange rate fluctuations, as well as general economic and market conditions, such as recessions.
Darling may issue additional common stock or preferred stock, which could dilute your interests.
      Darling’s certificate of incorporation, as amended, does not limit the issuance of additional common stock or additional series of preferred stock. As of March 3, 2006, Darling has available for issuance 35,535,040 authorized but unissued shares of common stock, of which approximately 16,381,917 will be issued at closing of the proposed acquisition, based on 64,464,960 shares of common stock outstanding at March 3, 2006, and 1,000,000 authorized but unissued shares of preferred stock that may be issued in additional series.
As a result of the recapitalization, Darling’s ability to apply federal income tax net operating loss carryforwards will be limited.
      As a result of its May 2002 recapitalization, Darling’s ability to use federal income tax net operating loss carryforwards to offset future taxable income that may be generated is limited. In particular, Darling has undergone a change in ownership under Section 382 of the Internal Revenue Code, which we refer to as the “Code,” as a result of the recapitalization. By virtue of such a change in ownership, an annual limitation (generally equal to the pre-change value of Darling’s stock multiplied by the adjusted federal

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tax-exempt rate, which is set monthly by the Internal Revenue Service, which we refer to as the “IRS,” based on prevailing interest rates and equal to 5.01% for May 2002) will be applied to the use of those net operating loss carryforwards against future taxable income.
Darling has debt and interest payment requirements that could adversely affect its ability to operate its business.
      Darling has indebtedness that could have important consequences to the holders of Darling’s securities including the risks that:
  •  if the acquisition is consummated, Darling will be required to use approximately $8.9 million of its cash flow from operations in Fiscal 2006 to pay its indebtedness, thereby reducing the availability of its cash flow to fund the implementation of Darling’s business strategy, working capital, capital expenditures, product development efforts and other general corporate purposes;
 
  •  Darling’s interest expense could increase if interest rates in general increase because a portion of Darling’s debt will bear interest based on market rates;
 
  •  Darling’s level of indebtedness will increase its vulnerability to general adverse economic and industry conditions;
 
  •  Darling’s debt service obligations could limit Darling’s flexibility in planning for, or reacting to, changes in Darling’s business;
 
  •  Darling’s level of indebtedness may place it at a competitive disadvantage compared to its competitors that have less debt; and
 
  •  a failure by Darling to comply with financial and other restrictive covenants in the agreements governing Darling’s indebtedness could result in an event of default and could have a material adverse effect on Darling.
      As of January 24, 2006, Darling had outstanding senior subordinated debt of $35 million and senior bank secured term loans of $13.25 million and had no senior secured revolving loans outstanding under Darling’s credit agreements. As of such date, five letters of credit in the face amounts of $7.2 million, $4.1 million, $2.5 million, $0.8 million and $0.3 million, a total of $14.9 million in letters of credit, were issued and outstanding under the senior credit facility. As of January 24, 2006, Darling is able to incur additional indebtedness in the future, including approximately $35.1 million of additional debt available under Darling’s revolving credit facility. Additional indebtedness will increase the risks described above. All borrowings under Darling’s credit agreement are secured and senior to Darling’s securities.
      If the acquisition is consummated, Darling expects to have outstanding senior bank debt of $100 million. Furthermore, Darling expects to have letters of credit of $20 million in the aggregate issued and outstanding under its senior credit facility. Darling will be able to incur additional indebtedness following the closing, including approximately $55 million of additional debt under this facility.
Darling may pursue other strategic alliances and acquisitions that could disrupt its operations or fail to result in the benefits that it anticipated.
      Darling may continue to make strategic acquisitions of companies, products or technologies or enter into strategic alliances as necessary to implement its business strategy. If Darling is unable to fully integrate acquired businesses, products or technologies with its operations, it may not receive the intended benefits of these acquisitions. The success of Darling’s existing and future joint ventures and strategic alliances depends in part on the ability of the other parties to these transactions to fulfill their obligations. These acquisitions and joint ventures, and others that Darling may pursue, may subject Darling to unanticipated risks or liabilities or disrupt its operations and divert management’s attention from day-to-day operations.

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Risk Factors Relating to National By-Products
National By-Products’ results of operations and cash flow may be reduced by decreases in the market price of its products.
      National By-Products’ finished products are commodities, the prices of which are quoted on established commodity markets. Accordingly, National By-Products’ results of operations will be affected by fluctuations in the prevailing market prices of such finished products. A significant decrease in the market price of National By-Products’ products would have a material adverse effect on National By-Products’ results of operations and cash flow.
The most competitive aspect of National By-Products’ business is the procurement of raw materials.
      National By-Products’ management believes that the most competitive aspect of National By-Products’ business is the procurement of raw materials rather than the sale of finished products. During the last ten plus years, pronounced consolidation within the meat packing industry has resulted in bigger and more efficient slaughtering operations, the majority of which utilize “captive” processors. Simultaneously, the number of small meat packers, which have historically been a dependable source of supply for non-captive processors, such as National By-Products, has decreased significantly. Although the total amount of slaughtering may be flat or only moderately increasing, the availability, quantity and quality of raw materials available to the independent processors from these sources have all decreased. Major competitors include: Darling International, Sanimax and Griffin Industries. Each of these businesses compete in both the Rendering and Restaurant Service segments. A significant decrease in raw materials available could materially and adversely affect National By-Products’ business and results of operations.
      The rendering and restaurant services industry is highly fragmented and very competitive. National By-Products competes with other rendering and restaurant services businesses and alternative methods of disposal of animal processing by-products and used restaurant cooking oil provided by trash haulers and waste management companies, as well as the alternative of illegal disposal. National By-Products charges a collection fee to offset a portion of the cost incurred in collecting raw material. To the extent suppliers of raw materials look to alternate methods of disposal, whether as a result of National By-Products’ collection fees being deemed too expensive or otherwise, National By-Products’ raw material supply will decrease and National By-Products’ collection fee revenues will decrease, which could materially and adversely affect National By-Products’ business and results of operations.
National By-Products may incur material costs and liabilities in complying with government regulations.
      National By-Products is subject to the rules and regulations of various federal, state and local governmental agencies. Material rules and regulations and the applicable agencies are:
  •  the FDA, which regulates food and feed safety;
 
  •  the USDA, including its agencies APHIS and FSIS, which regulates collection and production methods;
 
  •  the EPA, which regulates air and water discharge requirements, as well as local and state agencies governing air and water discharge;
 
  •  State Departments of Agriculture, which regulate animal by-product collection and transportation procedures and animal feed quality; and
 
  •  the USDOT, as well as local and state agencies, which regulate the operation of National By-Products’ commercial vehicles.
      Such rules and regulations may influence National By-Products’ operating results at one or more facilities. There can be no assurance that National By-Products will not incur material costs and liabilities in connection with such regulations.

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National By-Products is highly dependent on natural gas.
      National By-Products’ operations are highly dependent on the use of natural gas. A material increase in natural gas prices over a sustained period of time could materially adversely affect National By-Products’ business, financial condition and results of operations. See “National By-Products Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 86 for a recent history of the effects on National By-Products of natural gas pricing.
National By-Products’ business may be affected by FDA regulations relating to BSE.
      Effective August, 1997, the FDA promulgated a rule prohibiting the use of mammalian proteins, with some exceptions, in feeds for cattle, sheep and other ruminant animals. The intent of this rule is to prevent the spread of BSE, commonly referred to as “mad cow disease.” National By-Products’ management believes that National By-Products is in compliance with the provisions of the rule.
      A case of BSE was diagnosed in a cow in the State of Washington on December 23, 2003. Within days of the media reports of the case of BSE, many countries moved to ban imports of U.S.-produced beef and beef products, including meat and bone meal and initially tallow, though this initial ban on tallow was relaxed to permit imports of U.S.-produced tallow with less than 0.15% impurities. The U.S. government issued regulations in response to the case of BSE which include:
  •  On December 30, 2003, the Secretary of Agriculture announced new beef slaughter/meat processing regulations to assure of the safety of the meat supply. The regulations prohibit non-ambulatory animals from entering the food chain, require removal of SRM at slaughter and prohibit carcasses from cattle tested for BSE from entering the food chain until the animals are shown negative for BSE.
 
  •  On January 26, 2004, the FDA announced intentions to modify its feed rule (21 CFR 589.2000) by removing the exemptions for certain products, including blood and blood products, and requiring dedicated processing lines for handling and processing restricted use and exempted proteins. On July 14, 2004, the FDA requested public comment on their intended modifications to the feed rule as well as regulations that would: 1) prohibit material derived from SRM and dead or non-ambulatory cattle in animal feed; 2) prohibit all animal proteins in feed for ruminant animals; and/or 3) require that only BFT either derived from SRM-free material or containing less than 0.15% impurities be allowed in animal feed. Only questions were posed in this announcement of proposed rulemaking, to which National By-Products, among others, responded in comments submitted to the FDA. No new regulations affecting animal feed or modifying the feed rule have been issued to date. This situation will likely continue to be fluid into Fiscal 2006.
 
  •  On January 26, 2004, the FDA announced its intent to ban the use of certain animal tissue derived materials in food and supplements. Subsequently, on July 14, 2004, the FDA published regulations prohibiting: 1) SRM from human food and cosmetics; and 2) SRM and non-ambulatory or dead cattle from cosmetics. BFT that is either derived from SRM-free raw materials or contains less than 0.15% hexane insoluble impurities will be permitted in human food, supplements and cosmetics. Derivatives of BFT (glycerin and fatty acids) are exempt from these regulations. On September 30, 2004, the FDA issued Guidance Document #174 , which cited the agency’s statutory authority to consider animal feed and feed ingredients derived from a BSE-positive animal to be adulterated and prohibit the use of adulterated material in animal feed.
      The occurrence of BSE in the United States may result in additional U.S. government regulations, finished product export restrictions by foreign governments, market price fluctuations for National By-Products’ finished products, reduced demand for beef and beef products by consumers, or increase National By-Products’ operating costs. The impact of the occurrence of the case of BSE is not fully known at this time, but may positively or negatively impact National By-Products’ results of operations in the future.

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National By-Products’ success is dependent on National By-Products’ key personnel.
      National By-Products’ success depends to a significant extent upon a number of key employees, including members of senior management. The loss of the services of one or more of these key employees could have a material adverse effect on National By-Products’ results of operations and prospects. National By-Products believes that its future success will depend in part on its ability to attract, motivate and retain skilled technical, managerial, marketing and sales personnel. Competition for such personnel is intense and there can be no assurance that National By-Products will be successful in attracting, motivating and retaining key personnel. The failure to hire and retain such personnel could materially adversely affect National By-Products’ business and results of operations.
In certain markets National By-Products is highly dependent upon the continued and uninterrupted operation of a single operating facility.
      In the majority of National By-Products’ markets, in the event of a casualty or condemnation involving a facility located in such market, National By-Products would utilize a nearby operating facility to continue to serve its customers in such market. In certain markets, however, National By-Products does not have alternate operating facilities. In the event of a casualty or condemnation, or an unscheduled shutdown, National By-Products may experience an interruption in its ability to service its customers and to procure raw materials. This may materially and adversely affect National By-Products’ business and results of operations in such markets. In addition, after an operating facility affected by a casualty or condemnation is restored, there could be no assurance that customers who in the interim choose to use alternative disposal services would return to use National By-Products’ services.
Restrictions imposed by National By-Products’ credit agreements and future debt agreements may limit its ability to finance future operations or capital needs or engage in other business activities that may be in National By-Products’ interest.
      National By-Products’ credit agreements currently, and future debt agreements may, restrict its ability to:
  •  incur additional indebtedness;
 
  •  pay distributions and make other distributions;
 
  •  make restricted payments;
 
  •  create liens;
 
  •  merge, consolidate or acquire other businesses;
 
  •  sell and otherwise dispose of assets;
 
  •  enter into transactions with affiliates;
 
  •  make investments, loans and advances;
 
  •  guarantee indebtedness or other obligations;
 
  •  enter into sale-leaseback, synthetic leases, or similar transactions;
 
  •  enter into hedge agreements;
 
  •  make changes to its corporate name, fiscal year, capital structure and constituent documents; and
 
  •  engage in new lines of business unrelated to National By-Products’ current businesses.
      These terms may impose restrictions on National By-Products’ ability to finance future operations, implement its business strategy, fund its capital needs or engage in other business activities that may be in its interest. In addition, National By-Products’ credit agreements require, and future indebtedness may require, National By-Products to maintain compliance with specified financial ratios. Although National By-Products is currently in compliance with the financial ratios and does not plan on engaging in

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transactions that may cause National By-Products not to be in compliance with the ratios, its ability to comply with these ratios may be affected by events beyond its control, including the risks described in the other risk factors and elsewhere in this report.
      A breach of any of these restrictive covenants or National By-Products’ inability to comply with the required financial ratios could result in a default under the credit agreements. In the event of a default under the credit agreements, the lenders under the credit agreements may elect to declare all borrowings outstanding, together with accrued and unpaid interest and other fees, to be immediately due and payable. The lenders will also have the right in these circumstances to terminate any commitments they have to provide further financing, including under the revolving credit facility.
      If National By-Products is unable to repay these borrowings when due, the lenders under the credit agreements also will have the right to proceed against the collateral, which consists of substantially all of National By-Products’ assets, including real property and cash. If the indebtedness under the credit agreements were to be accelerated, National By-Products’ assets may be insufficient to repay this indebtedness in full under those circumstances. Any future credit agreements or other agreement relating to National By-Products’ indebtedness to which National By-Products may become a party may include the covenants described above and other restrictive covenants.
      In order to establish consistent profitability, National By-Products must achieve the following:
  •  maintain adequate levels of raw material volumes;
 
  •  maintain its collection fees at levels sufficient to recover an adequate portion of collection costs;
 
  •  increase gross margins to the extent of cost increases;
 
  •  maintain its distribution capability;
 
  •  maintain competitiveness in pricing; and
 
  •  continue to manage its operating expenses.
      There can be no assurance that National By-Products will achieve these objectives or attain consistent profitability.
National By-Products’ ability to pay any distributions may be limited.
      Effective January 11, 2002, National By-Products was reorganized as a limited liability company pursuant to Section 301 of the Iowa Limited Liability Company Act. The current taxable income of National By-Products flows through to and is reportable by the members of National By-Products. National By-Products intends to disburse funds in the form of a tax distribution to members to satisfy the tax obligations incurred from the taxable income passed through to and reportable by the members of National By-Products. In addition, National By-Products has declared and paid special distributions in Fiscal 2005, Fiscal 2004 and Fiscal 2003.
      The payment of any distributions by National By-Products to its members in the future will be at the discretion of National By-Products’ board of managers and will depend upon, among other things, future earnings, operations, capital requirements, National By-Products’ general financial condition, potential acquisitions and other business needs.
      National By-Products’ ability to pay any cash or noncash distributions to its members is subject to applicable provisions of state law and to the terms of its credit agreements. National By-Products’ credit agreements permit National By-Products to pay cash distributions to its members pursuant with the terms and conditions of National By-Products’ credit agreements that limit the distributions to National By-Products’ excess cash flow for the fiscal year in which a dividend is declared or for the immediately preceding fiscal year.
      National By-Products cannot predict what the cash flow of National By-Products will be in the future and, accordingly, National By-Products cannot assure the holders of National By-Products’ membership

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units that National By-Products will be able to pay distributions in an amount needed to pay the tax obligations passed through to and reportable by the members of National By-Products.
The trading of National By-Products’ membership units is restricted and market value could fluctuate widely.
      There is no trading market for National By-Products’ membership units. The units are prohibited from transfer on an established securities market or secondary market by National By-Products’ articles of organization, operating agreement and bylaws. Accordingly, transfers of the units have been limited. National By-Products retains a broker to act as matchmaker for buyers and sellers. Due to limited buyers and sellers and the restrictions on transfer, the opportunity to buy or sell National By-Products’ membership units is severely limited. The market price of National By-Products’ membership units could fluctuate widely in response to numerous factors, many of which are beyond National By-Products’ control. These factors include, among other things, restrictions on transfer, willing buyer or seller, actual or anticipated variations in National By-Products’ operating results, sales of substantial amounts of National By-Products’ membership units, market conditions in the industry and the general state of the securities markets, governmental legislation or regulation, currency and exchange rate fluctuations, as well as general economic and market conditions, such as recessions.
National By-Products may issue additional membership units, which could dilute your interests.
      National By-Products’ articles of organization, operating agreement and bylaws, do not limit the issuance of additional membership units. As of October 1, 2005, National By-Products has authorized 10,000,000 common units and 5,000,000 series preferred units and has available for issuance 8,793,687 authorized but unissued units of common units and 5,000,000 authorized but unissued units of series preferred units that may be issued in additional series.
National By-Products has limited borrowing capacity that could adversely affect its ability to operate its business.
      National By-Products has limited borrowing capacity which could have important consequences to the holders of National By-Products’ membership units including the risks that:
  •  National By-Products’ limited borrowing capacity could limit National By-Products’ flexibility in planning for, or reacting to, changes in National By-Products’ business;
 
  •  a failure by National By-Products to comply with financial and other restrictive covenants in the agreements governing National By-Products’ indebtedness, which could result in an event of default and could have a material adverse effect on National By-Products; and
 
  •  National By-Products may need to pursue additional financing to fund the implementation of National By-Products’ business strategy, working capital, capital expenditures, product development efforts and other general corporate purposes.
      As of October 1, 2005, National By-Products had no outstanding term debt and $2.6 million of revolving loans outstanding under National By-Products’ credit agreements. As of such date, two letters of credit in the face amounts of $1.0 million and $0.8 million, for a total of $1.8 million in letters of credit, were issued and outstanding under the senior credit facility. As of October 1, 2005, National By-Products is able to incur additional indebtedness in the future, including approximately $16.6 million of additional debt available under National By-Products’ revolving credit facility. Additional indebtedness will increase the risks described above. All borrowings under National By-Products’ credit agreement are secured and senior to National By-Products’ membership units. For risks associated with the restrictive covenants in National By-Products’ debt instruments, see the risk factor entitled “Restrictions imposed by National By-Products’ credit agreements and future debt agreements may limit its ability to finance future operations or capital needs or engage in other business activities that may be in National By-Products’ interest” beginning on page 31.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
      We make forward-looking statements in this joint proxy statement/ prospectus and in the documents that are incorporated by reference into this joint proxy statement/ prospectus. These forward-looking statements relate to Darling’s or National By-Products’ outlook or expectations for earnings, revenues, expenses, asset quality or other future financial or business performance, strategies or expectations, or the impact of legal, regulatory or supervisory matters on Darling’s or National By-Products’ business, results of operations or financial condition. Specifically, forward looking statements may include:
  •  statements relating to the benefits of the acquisition, including anticipated synergies and cost savings estimated to result from the acquisition;
 
  •  statements relating to future business prospects, revenue, income and financial condition of Darling, National By-Products and the resulting company;
 
  •  statements relating to revenues, number of customers and points of distribution of the resulting company after the acquisition; and
 
  •  statements preceded by, followed by or that include the words “estimate,” “may,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions.
      These statements reflect Darling’s and National By-Products’ management’s judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.
      In addition to those factors discussed under the heading “Risk Factors” above, and in Darling’s other public filings with the SEC, important factors that could cause actual results to differ materially from Darling’s expectations include:
  •  the company’s continued ability to obtain sources of supply for its rendering operations;
 
  •  general economic conditions in the American, European and Asian markets;
 
  •  prices in the competing commodity markets which are volatile and are beyond Darling’s control;
 
  •  BSE and its impact on finished product prices, export markets, and government regulations that are still evolving and are beyond either of Darling’s or National By-Products’ control;
 
  •  expected cost savings from the acquisition, that may not be fully realized within the expected time frames or at all; and
 
  •  energy price volatility.
      Among other things, future profitability may be affected by Darling’s ability to grow the combined business, which faces competition from companies that may have substantially greater resources than Darling.
      You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this joint proxy statement/ prospectus, or in the case of a document incorporated by reference, as of the date of that document. Except as required by law, neither Darling nor National By-Products undertakes any obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date of this joint proxy statement/ prospectus or to reflect the occurrence of unanticipated events. See “Where You Can Find More Information” beginning on page 116 for a list of the documents incorporated by reference into this joint proxy statement/ prospectus.

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THE SPECIAL MEETINGS
Darling Special Meeting
General; Date; Time and Place
      This joint proxy statement/ prospectus is being provided by, and the enclosed proxy is solicited by and on behalf of, Darling’s board of directors for use at a special meeting of Darling stockholders.
      A special meeting of stockholders of Darling International Inc., a Delaware corporation, will be held on Thursday, April 20, 2006, at 10.00 a.m., Central Time, at the Omni Mandalay, 221 E. Las Colinas Blvd., Irving, Texas 75039.
Purpose of the Special Meeting
      The purpose of the special meeting is to consider and vote upon the approval of the asset purchase agreement, dated as of December 19, 2005, by and among Darling, National By-Products and a wholly-owned subsidiary of Darling, and the transactions contemplated by the asset purchase agreement, including the issuance of shares of Darling common stock in accordance with the asset purchase agreement.
Board Recommendation
      The Darling board of directors unanimously recommends that the asset purchase agreement and the issuance of shares of Darling common stock in accordance with the asset purchase agreement and the other matters described herein be approved by the Darling stockholders and that the Darling stockholders vote “FOR” the approval of the asset purchase agreement and the issuance of shares of Darling common stock and such other matters.
Record Date; Voting Power
      Only holders of shares of Darling common stock as of the close of business on March 10, 2006, which is the record date for the Darling special meeting, will be entitled to receive notice of and to vote at the Darling special meeting and any adjournments or postponements thereof. Each share of Darling common stock is entitled to one vote at the Darling special meeting.
Required Vote; Quorum
      The affirmative vote of a majority of the outstanding shares of Darling common stock as of the record date is required to approve the asset purchase agreement and the issuance of shares of Darling common stock that will be issued in accordance with the asset purchase agreement, as partial consideration to be paid at the closing of the acquisition of substantially all of the assets of National By-Products and that may be issued as contingent consideration. As of the record date, there were [                    ] shares of Darling common stock outstanding.
      Because the required vote of the Darling stockholders with respect to the asset purchase agreement and the issuance of shares in accordance with the asset purchase agreement is based upon the total number of outstanding shares of Darling common stock, the failure to submit a proxy card (or to vote in person at the Darling special meeting) or the abstention from voting by a stockholder will have the same effect as a vote against the asset purchase agreement and the issuance of Darling common stock in accordance with the asset purchase agreement. Brokers holding shares of Darling common stock as nominees will not have discretionary authority to vote shares in the absence of instructions from the beneficial owners thereof, so the failure to provide voting instructions to your broker will also have the same effect as a vote against the asset purchase agreement and the issuance of Darling common stock in accordance with the asset purchase agreement.
      The holders of a majority of the shares of the Darling common stock outstanding on the record date must be present, either in person or by proxy, at the Darling special meeting to constitute a quorum. In

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general, abstentions and broker non-votes are counted as present or represented at the special meeting for the purpose of determining a quorum for the Darling special meeting.
      The obligation of Darling and National By-Products to consummate the acquisition is subject to, among other things, the condition that the Darling stockholders approve the asset purchase agreement and the issuance of Darling common stock in accordance with the asset purchase agreement. If Darling’s stockholders fail to approve the asset purchase agreement and the issuance of shares in accordance with the asset purchase agreement by May 15, 2006, Darling may have the right to terminate the asset purchase agreement subject to certain conditions and National By-Products will have the right to terminate the asset purchase agreement. See “The Asset Purchase Agreement — Termination” beginning on page 74.
How to Vote
      A Darling stockholder may vote in person at the Darling special meeting or by proxy without attending the Darling special meeting. To vote by proxy, a Darling stockholder must either:
  •  submit a proxy by telephone;
 
  •  submit a proxy on the Internet; or
 
  •  complete the enclosed proxy card, sign and date it and return it in the enclosed postage prepaid envelope.
      The enclosed proxy card sets forth instructions for submitting a proxy by the telephone and the Internet.
      A proxy card is enclosed for use by Darling stockholders. The board of directors of Darling requests that Darling stockholders sign and return the proxy card in the accompanying envelope. No postage is required if mailed within the United States. If you have questions or requests for assistance in completing and submitting proxy cards, please contact Brad Phillips at (972)717-0300.
Revocation of Proxy
      All properly executed proxies that are not revoked will be voted at the Darling special meeting as instructed on those proxies. Proxies containing no instructions will be voted in favor of the asset purchase agreement and the issuance of shares in accordance with the asset purchase agreement. A Darling stockholder who executes and returns a proxy may revoke it at any time before it is voted. A proxy may be revoked by either:
  •  giving written notice of revocation;
 
  •  executing and returning a new proxy bearing a later date;
 
  •  submitting a proxy by telephone or the Internet at a later date; or
 
  •  attending the Darling special meeting and voting in person.
      Revocation of a proxy by written notice or execution of a new proxy bearing a later date should be submitted to Joseph R. Weaver, Jr., Secretary, Darling International Inc., 251 O’Connor Ridge Blvd., Suite 300, Irving, Texas 75038. You can also revoke a proxy by attending the Darling special meeting and voting in person or submitting a new proxy by telephone or the Internet at a later date.

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Expenses of Solicitation
      Darling will bear the costs of soliciting proxies from its stockholders. However, each of Darling and National By-Products has agreed to bear its own expenses incurred in connection with filing, printing and mailing this joint proxy statements/prospectus. In addition to soliciting proxies by mail, directors, officers and employees of Darling, without receiving additional compensation therefor, may solicit proxies by telephone, by facsimile or in person. Arrangements may also be made with brokerage firms and other custodians, nominees and fiduciaries to forward solicitation materials to the beneficial owners of shares held of record by such persons, and Darling will reimburse the brokerage firms, custodians, nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them in connection therewith. In addition, The Altman Group has been retained by Darling to assist in the solicitation of proxies. The Altman Group may contact holders of shares of Darling common stock by mail, telephone, facsimile, telegraph and personal interviews and may request brokers, dealers and other nominee stockholders to forward materials to beneficial owners of shares of Darling common stock. The Altman Group will receive reasonable and customary compensation for its services (estimated at $6,000) and will be reimbursed for certain reasonable out-of-pocket expenses.

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National By-Products Special Meeting
General; Date; Time and Place
      This joint proxy statement/ prospectus is being provided by, and the enclosed proxy is solicited by and on behalf of, National By-Products’ board of managers for use at a special meeting of National By-Products unitholders.
      A special meeting of unitholders of National By-Products, LLC, an Iowa limited liability company, will be held on Thursday, April 20, 2006, at 10:00 a.m., Central Time, at First Floor, Federal Home Loan Bank Building, 907 Walnut Street, Des Moines, Iowa 50309.
Purpose of the Special Meeting
      The purpose of the National By-Products special meeting is to consider and vote upon the approval of the asset purchase agreement, dated as of December 19, 2005, by and among Darling, National By-Products and a wholly-owned subsidiary of Darling, and the transactions contemplated by the asset purchase agreement, including the acquisition of substantially all of the assets of National By-Products by Darling and the approval of an amendment to the articles of organization of National By-Products to change its name to West-end Liquidation, LLC effective upon closing of the acquisition.
Board Recommendation
      The National By-Products board of managers unanimously recommends that the acquisition, the asset purchase agreement, the amendment to the articles of organization, and the other matters described herein be approved by the National By-Products unitholders and that the National By-Products unitholders vote “FOR” the approval of the acquisition, the asset purchase agreement, the amendment to the articles of organization, and such other matters.
Record Date; Voting Power
      Only holders of National By-Products membership units as of the date of the mailing of the notice of special meeting, which is the record date for the special meeting, will be entitled to receive notice of and to vote at the National By-Products special meeting and any adjournments or postponements thereof. Each National By-Products membership unit is entitled to one vote at the National By-Products special meeting.
Required Vote; Quorum
      The affirmative vote of a majority of the outstanding National By-Products units as of the record date is required to approve the asset purchase agreement and the transactions contemplated by the asset purchase agreement including an amendment to the articles of organization of National By-Products to change its name to West-end Liquidation, LLC effective upon closing of the acquisition. As of the record date, there were 1,206,313 National By-Products membership units outstanding.
      Because the required vote of the National By-Products unitholders with respect to the asset purchase agreement and the amendment to the articles of organization is based upon the total number of outstanding units of National By-Products, the failure to submit a proxy card (or to vote in person at the National By-Products special meeting) or the abstention from voting by a National By-Products unitholder will have the same effect as a vote against approval of the asset purchase agreement and the amendment to the articles of organization.
      The holders of a majority of the outstanding National By-Products membership units on the record date must be present, either in person or by proxy, at the National By-Products special meeting to constitute a quorum. In general, abstentions are counted as present or represented at the National By-Products special meeting for the purpose of determining a quorum for the National By-Products special meeting.

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      The obligation of Darling and National By-Products to consummate the acquisition is subject to, among other things, the condition that the National By-Products unitholders approve the asset purchase agreement. If National By-Products’ unitholders fail to approve the asset purchase agreement by May 15, 2006, National By-Products may have the right to terminate the asset purchase agreement subject to certain conditions and Darling will have the right to terminate the asset purchase agreement. See “The Asset Purchase Agreement — Termination” beginning on page 74.
How to Vote
      A National By-Products unitholder may vote in person at the National By-Products special meeting or by proxy without attending the National By-Products special meeting. To vote by proxy, a National By-Products unitholder must complete the enclosed proxy card, sign and date it and return it in the enclosed postage prepaid envelope.
      A proxy card is enclosed for use by National By-Products unitholders. The board of managers of National By-Products requests that National By-Products unitholders sign and return the proxy card in the accompanying envelope. No postage is required if mailed within the United States. If you have questions or requests for assistance in completing and submitting proxy cards, please contact David Pace at (515) 288-2166.
Revocation of Proxy
      All properly executed proxies that are not revoked will be voted at the National By-Products special meeting as instructed on those proxies. Proxies containing no instructions will be voted in favor of the asset purchase agreement and the acquisition. A National By-Products unitholder who executes and returns a proxy may revoke it at any time before it is voted. A proxy may be revoked by either:
  •  giving written notice of revocation;
 
  •  executing and returning a new proxy bearing a later date; or
 
  •  attending the National By-Products special meeting and voting in person.
      Revocation of a proxy by written notice or execution of a new proxy bearing a later date should be submitted to Carlton T. King, Secretary, National By-Products, LLC, 907 Walnut St., Suite 400, Des Moines, Iowa 50309. You may also revoke a proxy by attending the National By-Products special meeting and voting in person.

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THE ACQUISITION
General
      The asset purchase agreement contemplates the purchase of substantially all of the assets of National By-Products, LLC by a newly formed and wholly-owned subsidiary of Darling International Inc. The asset purchase agreement provides that the aggregate consideration for the purchased assets will be (i) (A) $70.5 million in cash, less all of National By-Products’ indebtedness related to its credit facilities outstanding immediately prior to the closing date of the acquisition, plus (B) 20% of the outstanding shares of Darling common stock as of 8 a.m. Central Time on the date of closing calculated on a fully-diluted basis, referred to below as the “Closing Issued Shares,” and (ii) the assumption of certain of National By-Products’ liabilities. The cash consideration will be subject to adjustment based on the working capital of National By-Products as of the closing date of the acquisition. In addition, a portion of the consideration will be placed in escrow to meet certain National By-Products obligations.
      In addition to the purchase price paid to National By-Products on the closing date of the acquisition, Darling may pay additional consideration in the form of Darling common stock, depending on the average market price, referred to as the “true-up market price,” of Darling’s common stock for the 90 days prior to the last day of the 13th full consecutive month after closing, which we refer to as the “true-up date.” If the average share price for the 90 days prior to the true-up date causes the value of the Closing Issued Shares (including the escrowed shares) to be less than $70.5 million, then Darling will issue additional common stock to National By-Products (or if National By-Products has distributed shares to its unitholders, to those unitholders who continue to hold, directly or as shares that remain in escrow, their Closing Issued Shares), assuming that none of the National By-Products unitholders have transferred any of their Closing Issued Shares (except transfers by gift or into trust). For clarity, only those Closing Issued Shares that have not been transferred (except by gift or into trust) as of the true-up date will be eligible for the stock true-up consideration. In addition, if the true-up market price is less than $3.60, then $3.60 will be used in place of the true-up market price for purposes of calculating the number of shares issued in the stock true-up. Assuming that the true-up market price is at least $3.60 and all of the Closing Issued Shares are retained by the National By-Products unitholders, then the shares National By-Products receives on the closing date plus the shares National By-Products (or its unitholders) receives on the true-up date, will be valued at $70.5 million in the aggregate on the true-up date in accordance with the asset purchase agreement.
      For a more complete discussion on the cash and stock consideration and the stock true-up, please see “The Asset Purchase Agreement — Consideration” on page 62.
Background of the Acquisition
      As part of the continuous evaluation of its business, Darling regularly explores a range of strategic alternatives to identify ways to enhance stockholder value. Such alternatives include the evaluation of potential mergers and acquisitions. At a meeting of Darling’s board of directors held in Dallas, Texas on March 26, 2004, it was decided that, given business and market conditions, Darling should consider exploring potential acquisition targets. Mr. Randall Stuewe, Chief Executive Officer of Darling, discussed with Darling’s board of directors the possibility of Darling approaching National By-Products regarding a possible acquisition.
      On April 5, 2004, Mr. Stuewe and Mr. John Muse, Darling’s Executive Vice President, Administration and Finance, met with Mr. Charles Adair, a Managing Director of Harris Nesbitt Corp., Darling’s outside financial adviser, in Chicago, Illinois to discuss a potential acquisition of National By-Products.
      On May 18, 2004, Mr. Adair made a presentation to the Darling board of directors regarding the possible acquisition of National By-Products. The board asked Mr. Adair to contact Mr. Dean Carlson, Chairman of the board of managers of National By-Products to initiate discussions.

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      On June 15, 2004, Mr. Adair met with Mr. Carlson and Mr. Mark Myers, President and Chief Executive Officer of National By-Products, to discuss a potential acquisition of National By-Products by Darling.
      After Darling and National By-Products entered into a mutual confidentiality agreement on June 23, 2004, the parties began exchanging certain financial information. On July 9, 2004, Messrs. Stuewe, Muse, and Adair met with Messrs. Carlson and Myers in Denver, Colorado to discuss a potential transaction.
      On September 21, 2004, Darling submitted an initial proposal to acquire substantially all of the assets of National By-Products for a purchase price in the range of $110 million to $113 million. The purchase price consideration would be composed of 90% in Darling common stock and 10% in cash. After considering Darling’s initial proposal, Mr. Carlson called Mr. Stuewe in November 2004 to suggest a merger rather than an asset acquisition. Soon thereafter, discussions between Darling and National By-Products stalled.
      In the spring of 2005, talks between Darling and National By-Products resumed. On May 10, 2005, Darling revised its offer to $121.4 million, comprising 50% Darling common stock and 50% cash, plus a contingent consideration component, for substantially all of the assets of National By-Products.
      On May 23, 2005, Messrs. Stuewe, Muse and Adair met with Messrs. Carlson, Myers, Carlton T. King and James S. Cownie, members of the board of managers of National By-Products, in Des Moines, Iowa to discuss an acquisition, at which time the representatives of National By-Products made a counter-offer to Darling of $145 million in purchase price consideration comprising 50% Darling common stock and 50% cash.
      On June 30, 2005, Mr. Adair contacted Mr. Carlson to communicate Darling’s revised offer of $126 million in purchase price consideration, consisting of 50% Darling common stock and 50% cash, plus contingent consideration of approximately $7 million in Darling common stock.
      At its regular quarterly meeting on July 29, 2005, Messrs. Carlson and Myers discussed with the National By-Products board of managers the status of their discussions with Darling. The consensus of the managers was that the current proposal by Darling was unacceptable, but that preliminary discussions should continue.
      After several discussions between the parties, Darling revised its offer on August 18, 2005 at a meeting in Des Moines attended by Messrs. Stuewe, Muse, Myers, Carlson, King and William Goodwin, a unitholder of National By-Products, by proposing a purchase price of $70.5 million in cash and a number of shares of Darling common stock equal to 20% of Darling’s outstanding common stock on the closing date of the proposed transaction.
      At a special meeting of the National By-Products board of managers on August 25, 2005, Messrs. Carlson and Myers summarized the current proposal from Darling and the board authorized Messrs. Carlson and Myers to continue their negotiations. Mr. Goodwin also participated in the meeting at the invitation of the board and offered his personal views on various issues pertaining to the proposal. Mr. Goodwin was asked to contact Mr. Adair following that meeting.
      On September 23, 2005, Mr. Stuewe, on behalf of Darling, offered to bolster the purchase price consideration that he offered on August 18, 2005 by adding an additional contingent purchase price component to be paid 13 months following the closing date in the event that the Darling common stock issued to National By-Products on the closing date had an aggregate value less than $70.5 million.
      At a special informational meeting of the National By-Products board of managers on September 26, 2005, the board received an update from Messrs. Carlson, Myers and Goodwin regarding discussions with Darling, but no board action was taken at that time.
      On October 5, 2005, Darling’s board of directors convened in Chicago, Illinois and, although many details of the transaction remained to be negotiated, the board approved an outline of the basic terms of the transaction, which were memorialized in a non-binding term sheet. The non-binding term sheet, which

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was presented to National By-Products on October 10, 2005, was signed by Mr. Myers on October 11, 2005. The parties then began to negotiate the asset purchase agreement.
      On December 6, 2005, members of Darling’s board of directors received working drafts of the asset purchase agreement and other ancillary agreements to review.
      On December 9, 2005, Darling’s board of directors held a regularly scheduled meeting in Teaneck, New Jersey, Mr. Stuewe provided the board with an update on the status of the negotiations between the parties, and indicated that a number of key items remained to be negotiated.
      On the evening of December 15, 2005, Darling’s outside directors met in Dallas, Texas to discuss the terms of the asset purchase agreement.
      On the morning of December 16, 2005, the board of directors convened a meeting at Darling’s corporate headquarters in Dallas. Representatives of Harris Nesbitt and Darling’s outside counsel, Weil, Gotshal & Manges LLP, attended the meeting. A representative of Weil Gotshal discussed the terms of the asset purchase agreement with the board. Thereafter, representatives of Harris Nesbitt reviewed with the board certain financial analyses and rendered its oral opinion, subsequently confirmed in writing, that, as of that date and based upon and subject to the various considerations set forth in the Harris Nesbitt written opinion, the proposed purchase price of $70.5 million in cash and that number of shares of Darling common stock equal to 20% of Darling’s outstanding common stock on the closing date on a fully diluted basis, plus the contingent consideration to be paid in shares of Darling common stock 13 months following closing, was fair, from a financial point of view, to Darling. The board asked that certain of the terms contained in the asset purchase agreement be revised, and asked that Mr. Stuewe speak with Messrs. Carlson and Myers regarding their request.
      On December 16, 2005, the National By-Products board of managers also considered the terms and conditions of the acquisition at a meeting at National By-Products’ principal offices in Des Moines, Iowa. Board members participated in person or by conference telephone. Prior to the meeting, packages were circulated to the managers for their review containing the current draft of the asset purchase agreement and exhibits, the non-binding term sheet dated October 10, 2005, the most recent SEC reports for Darling and the current draft of a report by Philip Schneider & Associates, Inc., outside financial advisor to National By-Products. Members of National By-Products’ management, Mr. Goodwin and representatives of Nyemaster, Goode, West, Hansell & O’Brien, P.C., outside counsel to National By-Products, and Philip Schneider & Associates also participated in the meeting. Mr. Myers summarized the status of discussions with Darling. Mr. David Pace, Chief Financial Officer of National By-Products, reviewed the current financial results of National By-Products and the results of the due diligence investigation of Darling. Representatives of Philip Schneider & Associates reviewed with the board its financial analysis, responded to questions and rendered its opinion that, as of that date and based upon and subject to the various considerations set forth in the written materials presented to and reviewed by the board, that the consideration to be paid to National By-Products and its unitholders in the proposed acquisition was fair, from a financial point of view, to National By-Products and its unitholders. A representative of Nyemaster, Goode, West, Hansell & O’Brien, P.C. discussed the terms of the asset purchase agreement with the board. The board unanimously determined that the asset purchase agreement was in the best interests of National By-Products and its unitholders and contingently approved the asset purchase agreement and the transactions contemplated by the asset purchase agreement. National By-Products board’s approval of the asset purchase agreement and the transactions contemplated by the asset purchase agreement was conditioned upon Darling entering into employment agreements with Messrs. Myers and Pace and Mr. Larry Angotti, Regional Manager (Des Moines, Iowa), to be effective upon consummation of the acquisition, and the addition of a covenant to the asset purchase agreement requiring Darling to take actions reasonably necessary to elect Dean Carlson and one other nominee of National By-Products to Darling’s board of directors.
      After the Darling board meeting was adjourned, representatives of National By-Products called Messrs. Stuewe and Muse to address open issues raised by both boards. The parties continued to negotiate the final terms of the asset purchase agreement over the weekend of December 17-18.

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      On Monday, December 19, 2005, the board of directors of Darling held a telephonic meeting, which was attended by representatives of Weil Gotshal. Mr. Stuewe updated the board on the negotiations that had occurred over the weekend. The board then, with the benefit of the advisors’ presentations at the previous meeting and advice, having deliberated regarding the terms of the proposed transaction, including the terms and conditions of the asset purchase agreement, unanimously determined that the asset purchase agreement and the transactions contemplated by the asset purchase agreement are advisable and in the best interests of Darling and unanimously approved the asset purchase agreement and the transactions contemplated by the asset purchase agreement. The board meeting was adjourned later that morning.
      Darling, Darling National and National By-Products executed and delivered the asset purchase agreement late the evening of Monday, December 19, 2005. On Tuesday morning, December 20, 2005, before the opening of the U.S. financial markets, Darling issued a press release announcing the signing of the asset purchase agreement.
Recommendation of the Board of Directors of Darling; Reasons for the Acquisition
      The Darling board of directors has approved the asset purchase agreement, dated as of December 19, 2005, by and among Darling, National By-Products and a wholly-owned subsidiary of Darling, has determined that the asset purchase agreement, the acquisition and the issuance of shares of Darling common stock in accordance with the asset purchase agreement, are advisable to the holders of Darling common stock, and recommends that Darling stockholders vote “FOR” approval of the asset purchase agreement and the issuance of shares in accordance with the asset purchase agreement.
      In connection with the foregoing actions, the Darling board of directors consulted with Darling’s management team, as well as Harris Nesbitt, Darling’s financial advisor, and Weil, Gotshal & Manges, Darling’s outside legal counsel, and considered various material factors, which are listed below. In view of the wide variety of factors considered in connection with the acquisition, the board of directors did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific material factors it considered in reaching its decision.
      (a) Consideration to Be Paid by Darling. The Darling board of directors considered the amount of consideration to be paid by Darling pursuant to the asset purchase agreement.
      (b) Darling’s Business, Condition and Prospects. The Darling board of directors considered information with respect to the financial condition, results of operations and business of Darling, on both a historical and prospective basis, and current industry, economic and market conditions. In particular, the board of directors considered Darling’s growth opportunities if Darling continued in its current state of operations compared with the growth opportunities available with the acquisition of substantially all of the assets of National By-Products.
      (c) National By-Products’ Business, Condition and Prospects. The Darling board of directors considered information with respect to the financial condition, results of operations and business of National By-Products, including the due diligence review of Darling’s management and financial and legal advisors regarding National By-Products’ financial condition and prospects. In particular, Darling considered National By-Products’ sound business reputation and strong operating results over recent years.
      (d) Advice of Darling Senior Management. The Darling board of directors considered the judgment, advice and analyses of Darling’s senior management, including their favorable recommendation of the acquisition based, in part, on their consideration of current conditions and trends in the rendering industry and their evaluation of the alternative strategic options available to Darling.
      (e) Appreciation of Price of Darling Common Stock. The Darling board of directors considered the recent and historical trading prices of Darling common stock and the potential for appreciation in the value of Darling common stock following the acquisition.
      (f) Opinion of Harris Nesbitt. The Darling board of directors considered the opinion delivered orally on December 16, 2005, and subsequently confirmed in writing on that date, of Harris Nesbitt, Darling’s

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financial advisor, to the effect that, as of the date of the opinion and subject to the limitations and assumptions set forth in its opinion, the acquisition consideration pursuant to the asset purchase agreement was fair from a financial point of view to Darling. The board of directors also considered the financial analyses performed by Harris Nesbitt in connection with its opinion. See “— Opinion of Harris Nesbitt Corp.” beginning on page 44.
      (g) Terms of the Acquisition. The Darling board of directors considered the terms and provisions of the asset purchase agreement and related agreements, including the form and amount of consideration and the representations, warranties, covenants, conditions to closing and termination rights contained in those agreements.
      (h) Termination Fee. The Darling board of directors considered the termination fee payable in specified circumstances, including the effect the termination fee may have on the ability of other parties to make competing business combination proposals with respect to National By-Products.
      (i) The Likelihood of Completion of the Acquisition. The Darling board of directors considered the likelihood of completion of the acquisition, such as the terms and conditions of the asset purchase agreement and the conditions to the completion of the acquisition, including the likelihood of obtaining regulatory approvals.
      (j) Certain Long-Term Interests. The Darling board of directors considered the long-term interests of Darling and its stockholders, as well as the interests of Darling employees, customers, creditors, suppliers and the communities in which Darling operates.
      (k) Ownership Interests. The Darling board of directors considered the relative ownership interests of Darling stockholders and National By-Products unitholders in Darling following the acquisition, based on the shares of Darling common stock outstanding at approximately the time the asset purchase agreement was executed and based on the potential number of shares of Darling common stock that may be issued as a result of the acquisition.
      The Darling board of directors also considered potentially negative factors in its deliberations concerning the acquisition, including, without limitation, the following:
      (a) the possibility that the acquisition would not be completed following the execution of the asset purchase agreement and the risks to the business of Darling if that were to occur, including the potential loss of customers and/or employees;
      (b) the assumption by Darling of substantially all of National By-Products’ liabilities, including certain unknown and contingent liabilities;
      (c) the possible disruption of Darling’s business pending completion of the acquisition, including the risk of losing customers and key employees; and
      (d) the risk of whether the potential benefits sought in the acquisition will be fully realized and the risks associated with the integration of the assets of National By-Products by Darling.
      The Darling board of directors concluded that the benefit of the acquisition to Darling and its stockholders outweighed the risks associated with the foregoing factors.
Opinion of Harris Nesbitt Corp.
      On December 16, 2005, Harris Nesbitt delivered its oral opinion, subsequently confirmed in writing, to the board of directors of Darling that, as of such date and based upon and subject to the assumptions, conditions and limitations stated in its opinion, the purchase price to be paid to National By-Products is fair, from a financial point of view, to Darling. For purposes of its analysis, Harris Nesbitt assumed, with the permission of the board of directors of Darling, a maximum aggregate purchase price equal to $141.0 million.

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      The full text of the written opinion of Harris Nesbitt, dated December 16, 2005, which sets forth, among other things, the assumptions made, the matters considered and the limitations on the review undertaken by Harris Nesbitt in connection with the opinion, is included as Annex B to this joint proxy statement/ prospectus and is incorporated by reference into this joint proxy statement/ prospectus. The following summary of Harris Nesbitt’s opinion is qualified in its entirety by reference to the full text of the opinion. The opinion expressed by Harris Nesbitt was provided for the information and assistance of the board of directors of Darling in connection with its consideration of the transactions contemplated by the asset purchase agreement, and such opinion does not constitute a recommendation as to any action the board of directors of Darling or any stockholder of Darling should take in connection with the transactions contemplated by the asset purchase agreement or any aspect thereof and is not a recommendation to any person on how that person should vote with respect to the transactions contemplated by the asset purchase agreement. You are urged to read the opinion carefully and in its entirety.
      In connection with its opinion, Harris Nesbitt reviewed, among other things:
  •  a draft of the asset purchase agreement dated December 14, 2005;
 
  •  audited financial statements of National By-Products for fiscal years 2001 through 2004;
 
  •  internal financial statements of National By-Products for fiscal years 2001 through 2004 and for the interim periods ended October 1, 2004 and September 30, 2005;
 
  •  projected financial statements of National By-Products for the fiscal years 2005 through 2010 prepared by Darling’s management;
 
  •  certain publicly available SEC filings of Darling including, but not limited to, the Form 10-K for the fiscal year ended January 1, 2005 and the Form 10-Q for the quarterly period ended October 1, 2005;
 
  •  projected financial statements of Darling for the fiscal years ended 2005 and 2006 prepared by management of Darling;
 
  •  a draft financial due diligence report dated November 10, 2005 provided by Darling and prepared by its financial due diligence advisor;
 
  •  independent third party research and estimates; and
 
  •  certain other information provided by National By-Products and Darling’s management.
      Harris Nesbitt also held discussions with members of the management of each of Darling and National By-Products regarding past and current business operations, financial condition and future prospects of Darling and National By-Products, respectively, and the pro forma impact on Darling of the transactions contemplated by the asset purchase agreement.
      In addition, Harris Nesbitt:
  •  reviewed certain financial and stock market information for selected publicly traded companies that it deemed to be relevant;
 
  •  reviewed the financial terms, to the extent publicly available, of selected recent acquisitions of companies in Darling’s industry that it deemed to be relevant; and
 
  •  performed such other studies and analyses, and conducted such discussions, as it considered appropriate.
      In rendering its opinion, Harris Nesbitt assumed and relied upon the accuracy and completeness of all information supplied or otherwise made available to it by Darling or its representatives or other advisors or National By-Products or its representatives or advisors or obtained by Harris Nesbitt from other sources. Harris Nesbitt did not independently verify that information, did not undertake an independent appraisal of the assets or liabilities (contingent or otherwise) of Darling or of National By-Products, and was not

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furnished with any appraisals. Harris Nesbitt did not evaluate the solvency or fair value of Darling or National By-Products or their respective subsidiaries under any state or federal laws relating to bankruptcy, insolvency or similar matters. In addition, Harris Nesbitt did not assume any obligation to conduct, and did not conduct, any due diligence or any physical inspection of the properties or facilities of Darling, National By-Products or their respective subsidiaries. With respect to financial forecasts (including the assumed future prices for finished products) for Darling and for National By-Products, Harris Nesbitt relied on the forecasts provided by the management of Darling, and was advised by Darling, as applicable, and Harris Nesbitt assumed, without independent investigation, that such forecasts were reasonably prepared and reflected the best then available estimates and judgment of Darling’s management as to the expected future financial performance of Darling and National By-Products. Harris Nesbitt also assumed, with Darling’s permission, that the assets to be purchased by Darling pursuant to the asset purchase agreement constitute substantially all of the assets of National By-Products used to generate its historical financial results and to project its future financial performance.
      Harris Nesbitt’s opinion relates solely to the fairness, from a financial point of view, of the purchase price to Darling as of the date of the opinion. Harris Nesbitt’s opinion did not express any opinion as to the relative merits of the transactions contemplated by the asset purchase agreement and any other transactions or business strategies discussed by the board of directors of Darling as alternatives to the transactions contemplated by the asset purchase agreement or the decision of the board of directors of Darling to proceed with the transactions contemplated by the asset purchase agreement, nor did it express any opinion on the structure, terms or effect of any other aspect of the transactions contemplated by the asset purchase agreement. Harris Nesbitt is not an expert in, and its opinion does not address, any of the legal, tax or accounting aspects of the proposed acquisition. Harris Nesbitt relied, as to such matters, on Darling’s legal, tax and accounting advisors.
      Harris Nesbitt’s opinion was necessarily based upon financial, economic, market and other conditions as they existed, and the information made available to Harris Nesbitt, as of the date of the opinion. Harris Nesbitt does not have any obligation to advise any person of any change in any fact or matter affecting its opinion which may come or be brought to Harris Nesbitt’s attention after the date of the opinion.
      The following is a summary of the material financial analyses performed by Harris Nesbitt in connection with providing its opinion to the board of directors of Darling. Some of the summaries of financial analyses include information presented in tabular format. In order to fully understand the financial analyses performed by Harris Nesbitt, the tables must be read together with the accompanying text of each summary.
Selected Comparable Company Analysis
      Using publicly available information, Harris Nesbitt reviewed the market values and trading multiples of the following selected publicly traded companies in the rendering, protein and agribusiness industries:
  •  Rendering Companies
  •  Darling International Inc.
 
  •  Omega Protein Corp.
  •  Protein Companies
  •  Tyson Foods Inc.
 
  •  Smithfield Foods, Inc.
 
  •  Pilgrim’s Pride Corp.
 
  •  Gold Kist Inc.
 
  •  Sanderson Farms, Inc.

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  •  Agribusiness Companies
  •  Archer-Daniels-Midland Co.
 
  •  Bunge Ltd.
 
  •  Corn Products International Inc.
      The multiples were calculated by Harris Nesbitt using the closing price for each of the selected companies on December 14, 2005 (other than for Omega Protein Corp. which was as of December 7, 2005) and each company’s latest publicly available quarterly or annual filings. Estimated financial data for the selected companies was based on publicly available research analysts’ estimates.
      Harris Nesbitt calculated the following multiples for the selected comparable companies:
  •  Enterprise Value/ Latest Twelve Months (referred to as “LTM”) Earnings before Interest, Taxes, Depreciation and Amortization (referred to as “EBITDA”)
 
  •  Enterprise Value/ Current Fiscal Year (referred to as “CFY”) Estimated EBITDA
 
  •  Enterprise Value/ Next Fiscal Year (referred to as “NFY”) Estimated EBITDA
 
  •  Enterprise Value/ Average EBITDA for the latest three full fiscal years (referred to as “3-year Avg. EBITDA”)
      Harris Nesbitt then applied a range of selected multiples derived from the selected companies to corresponding financial data for National By-Products. The applicable financial data for National By-Products was taken from its audited financial reports for fiscal years 2002 through 2004, nine-month interim financials dated September 30, 2005, and Darling management prepared projections for the fiscal years ending 2005 and 2006.
      The results of these analyses are summarized as follows:
                                                 
                Implied
                Enterprise Value
                National-By
        Products
Selected Comparable Company Multiple   Applied Range   (Millions)
         
Enterprise Value/ LTM EBITDA
    5.5x       to       8.5x     $ 141       to     $ 218  
Enterprise Value/ CFY EBITDA
    5.3x       to       7.6x     $ 138       to     $ 198  
Enterprise Value/ NFY EBITDA
    4.9x       to       5.2x     $ 116       to     $ 123  
Enterprise Value/ 3-year Avg. EBITDA
    6.5x       to       6.9x     $ 171       to     $ 181  
      None of the selected comparable companies is identical to National By-Products. Accordingly, any analysis of the selected publicly traded comparable companies necessarily involved complex considerations and judgments concerning the differences in financial and operating characteristics and other factors that could affect the public trading values and financial information of the selected comparable companies.

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Selected Precedent Transaction Analysis
      Using publicly available information, Harris Nesbitt reviewed the following ten selected transactions in the protein and agribusiness industries that were completed from January 1, 2001 to December 14, 2005. The following table lists the transactions analyzed by Harris Nesbitt:
     
Target   Acquirer
     
Rica Foods Inc. 
 
Avicola Campesinos Inc.
Farmland Foods Inc. 
 
Smithfield Foods Inc.
ConAgra Foods Inc. Chicken Division
 
Pilgrims Pride Corp.
ConAgra Foods Inc. Fresh Beef and Pork Business
 
Investor Group led by Hicks, Muse, Tate & Furst Incorporated
Purina Mills Inc. 
 
Land O’Lakes Inc.
Smithfield Cos. Inc. 
 
Smithfield Foods Inc.
Jerome Foods Inc. 
 
Hormel Foods Corp.
Agribrands International Inc. 
 
Cargill Inc.
IBP Inc. 
 
Tyson Foods Inc.
WLR Foods Inc. 
 
Pilgrims Pride Corp.
      Harris Nesbitt reviewed the purchase prices and implied enterprise value multiples for each of the selected transactions. The purchase prices used by Harris Nesbitt for purposes of these analyses were the publicly disclosed purchase prices paid in the selected transactions as of the applicable closing date.
      Harris Nesbitt calculated the following enterprise value multiples of the target company for each of the selected transactions:
  •  Enterprise Value/ LTM EBITDA
 
  •  Enterprise Value/ 3-year Avg. EBITDA
 
  •  Enterprise Value/ LTM Earnings before Interest and Taxes (referred to as “EBIT”)
 
  •  Enterprise Value/ Average EBIT for the latest three full fiscal years (referred to as “3-year Avg. EBIT”)
      The multiples were calculated using the target companies’ latest publicly available quarterly or annual filings, prior to the date of closing of the relevant transaction.
      Harris Nesbitt then applied a range of selected multiples derived from the selected transactions to corresponding financial data for National By-Products. The applicable financial data for National By-Products was taken from its audited financial reports for fiscal years 2002 through 2004, and nine-month interim financials dated September 30, 2005.
      The results of these analyses are summarized as follows:
                                                 
                Implied
                Enterprise Value
        National-By
Selected Comparable Company Multiple   Applied Range   Products
         
                (Millions)
Enterprise Value/ LTM EBITDA
    7.0 x     to       9.0 x   $ 180       to     $ 231  
Enterprise Value/ 3-year Avg. EBITDA
    6.0 x     to       8.0 x   $ 158       to     $ 210  
Enterprise Value/ LTM EBIT
    10.5 x     to       12.5 x   $ 203       to     $ 241  
Enterprise Value/ 3-year Avg. EBIT
    10.5 x     to       12.5 x   $ 197       to     $ 234  
      None of the selected transactions is identical to Darling’s proposed acquisition of substantially all of the assets of National By-Products. Accordingly, any analysis of the selected transactions necessarily

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involved complex considerations and judgments concerning the differences in financial and operating characteristics, parties involved and terms of their transactions and other factors that would necessarily affect the prices paid and other financial information in the selected transactions.
Discounted Cash Flow Analysis
      Using a discounted cash flow analysis, Harris Nesbitt calculated the present value of the estimated free cash flows of National By-Products for the fiscal years 2006 to 2010 and a residual value at 2010 based upon projections prepared by Darling’s management. Harris Nesbitt calculated terminal values using two methods. The first method applied a range of EBITDA terminal value multiples of 5.25x to 7.25x to the fiscal year 2010 projected EBITDA. The second method calculated terminal values using a growth in perpetuity of 1.0% to 3.0% of the 2010 projected free cash flow. The present value of the cash flows and terminal values were calculated using discount rates ranging from 9.0% to 12.0%. This analysis indicated an implied reference range for the enterprise value of National By-Products of approximately $130 million to $161 million.
General
      This summary is not a complete description of the analyses performed by Harris Nesbitt but contains the material elements of the analyses. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Harris Nesbitt believes that selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, would create an incomplete view of the processes underlying Harris Nesbitt’s analyses and opinion. In arriving at its fairness determination, Harris Nesbitt considered the results of all such analyses as a whole and did not attribute any particular weight to any analysis or factor considered by it. No company or transaction used in the above analyses as a comparison is directly comparable to National By-Products or the transactions contemplated by the asset purchase agreement.
      The analyses were prepared for purposes of providing an opinion to the board of directors of Darling and do not purport to be appraisals or necessarily reflect the prices at which businesses or securities actually may be sold. In performing its analyses, Harris Nesbitt made numerous assumptions with respect to industry performance, general business and economic conditions and other matters. The analyses performed by Harris Nesbitt are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by the described analyses. Because our analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Darling, Harris Nesbitt or any other person assumes responsibility if future results are materially different from those forecast.
      Harris Nesbitt’s opinion to the board of directors of Darling was one of many factors taken into consideration by the board of directors of Darling in making its determination to approve the transactions contemplated by the asset purchase agreement.
      Harris Nesbitt, as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. Harris Nesbitt may have in the past provided certain investment banking services to Darling or National By-Products or their respective affiliates. An affiliate of Harris Nesbitt has a current lending relationship with Darling and may provide additional loans to Darling in connection with the transactions contemplated under the asset purchase agreement, for which the affiliate will receive customary fees. In addition to the foregoing, certain of Harris Nesbitt’s affiliates may have provided corporate banking services to Darling or National By-Products or their respective affiliates from time to time, and Harris Nesbitt or its affiliates may provide investment and corporate banking services to Darling or National By-Products and their respective affiliates in the future, including in connection with the financing contemplated under the asset purchase agreement, for which Harris Nesbitt may have received or will receive customary fees. Harris Nesbitt provides a full range of financial advisory

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and securities services and, in the course of its normal trading activities, may from time to time effect transactions and hold securities, including derivative securities, of Darling for its own account and for the accounts of customers.
      Pursuant to a letter agreement dated May 10, 2005, Darling engaged Harris Nesbitt to act as its exclusive financial advisor in connection with the possible acquisition of National By-Products. Pursuant to a letter agreement dated December 12, 2005, Darling engaged Harris Nesbitt to render an opinion regarding the fairness, from a financial point of view, of the consideration to be paid by Darling in connection with its acquisition of the stock or assets of National By-Products. The board of directors of Darling selected Harris Nesbitt based on its qualifications and expertise in providing financial advice to companies and its reputation as a recognized investment banking firm. Pursuant to the terms of the letter agreements, Harris Nesbitt was paid a monthly work fee of $40,000 for each of the first four months following its engagement as financial advisor. Harris Nesbitt was paid an additional $200,000 upon the delivery of its opinion described above. In addition, under the terms of the letter agreements, upon the consummation of the transactions contemplated by the asset purchase agreement, Harris Nesbitt will be entitled to receive a fee of $1,562,500 (less 50% of the monthly work fees paid as described above). Darling also has agreed to reimburse Harris Nesbitt for its out-of-pocket expenses, including counsel fees, and to indemnify Harris Nesbitt against certain liabilities, including certain liabilities under the federal securities laws.
Recommendation of the Board of Managers of National By-Products; Reasons for the Acquisition
      The National By-Products board of managers has approved the asset purchase agreement, dated as of December 19, 2005, by and among Darling, National By-Products and a wholly-owned subsidiary of Darling, has determined that the asset purchase agreement and the acquisition in the manner contemplated by the asset purchase agreement, are advisable to the holders of National By-Products membership units, and recommends that National By-Products unitholders vote “FOR” approval of the asset purchase agreement, the amendment to the articles of organization and the acquisition.
      In connection with the foregoing actions, the National By-Products board of managers consulted with National By-Products’ management team, as well as Philip Schneider & Associates, Inc., National By-Products’ financial advisor, and Nyemaster Goode West Hansell & O’Brien PC, National By-Products’ outside legal counsel, and considered various material factors, which are listed below. In view of the wide variety of factors considered in connection with the acquisition, the board of managers did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific material factors it considered in reaching its decision.
      (a) Consideration to Be Paid by Darling. The National By-Products board of managers considered the financial terms of the sale, including the price and the mix of cash and Darling stock available to the unitholders and the opportunity of unitholders of National By-Products to become stockholders of a large combined rendering business with liquidity in its common stock.
      (b) Value to Be Received by National By-Products Unitholders. The National By-Products board of managers considered the value to be received by the unitholders of National By-Products in the acquisition in relation to the historical valuations of National By-Products and its equity interests.
      (c) Darling’s and National By-Products, Business, Condition and Prospects. The National By-Products board of managers considered information concerning the business, financial condition, results of operations and prospects of National By-Products and Darling.
      (d) Opinion of Philip J. Schneider & Associates, Inc. The National By-Products board of managers considered the financial advice and opinion rendered by Philip J. Schneider & Associates as National By-Products’ financial advisor that, as of the date of the opinion, the consideration to be paid to National By-Products unitholders in the proposed acquisition was fair, from a financial point of view, to the unitholders.

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      (e) Terms of the Acquisition. The National By-Products board of managers considered all of the terms and conditions of the asset purchase agreement and the related exhibits as reviewed with National By-Products’ legal and financial advisors and senior executive officers.
      (f) Anticipated Benefits. The National By-Products board of managers considered the anticipated benefits to the employees, suppliers, customers, and creditors of National By-Products and the communities in which National By-Products operates as a result of the acquisition due to the financial condition, operating history and prospects of Darling and National By-Products.
      (g) The Likelihood of Completion of the Acquisition. The National By-Products board of managers considered, with due consideration for the HSR Act filing, the absence of any apparent regulatory or other impediments to the proposed acquisition and an assessment of the likelihood that the proposed acquisition would be consummated.
      (h) The Timing of the Acquisition. The National By-Products board of managers considered the timing of the acquisition, including the current rendering business cycle, the competitive environment for National By-Products’ products and general economic and financial market conditions.
      (i) Strategic Alternatives. The National By-Products board of managers considered strategic alternatives for National By-Products, including remaining independent with internal growth or growth through acquisitions and possible alternative partners.
Opinion of Philip Schneider & Associates, Inc.
      Pursuant to an engagement letter dated November 21, 2005, National By-Products retained Philip Schneider & Associates, Inc., West Des Moines, Iowa, referred to as “Schneider,” to deliver a fairness opinion in connection with the proposed acquisition. At the meeting of the National By-Products board of managers on December 16, 2005, Schneider rendered its oral and written opinion to the National By-Products board of managers that, as of such date, the consideration to be paid to National By-Products and its unitholders in the proposed acquisition is fair, from a financial point of view, to National By-Products and its unitholders. No limitations were imposed by the National By-Products board of managers upon Schneider with respect to the investigations made or procedures followed by it in rendering its opinion.
      The full text of the written opinion of Schneider dated December 16, 2005, which sets forth the assumptions made, matters considered and limits on the review undertaken is attached as Annex C to this joint proxy statement/ prospectus and is incorporated herein by reference. The unitholders of National By-Products are urged to read the opinion in its entirety. Schneider’s written opinion is addressed to the National By-Products board of managers, is directed only to the consideration to be paid in the acquisition and does not constitute a recommendation to any unitholder of National By-Products as to how the unitholder should vote at the National By-Products special meeting. The summary of the opinion of Schneider set forth in this joint proxy statement/ prospectus describes the material aspects of the Schneider opinion and is qualified in its entirety by reference to the full text of the opinion.
      In arriving at its opinion, Schneider reviewed, among other things:
  •  a draft of the asset purchase agreement;
 
  •  certain information concerning the business of National By-Products;
 
  •  information concerning the business of certain other companies engaged in businesses comparable to those of National By-Products;
 
  •  current and historical market prices of the membership units of National By-Products and the common stock of Darling;
 
  •  recent audited financial statements of National By-Products and Darling for the year ended January 1, 2005;

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  •  the unaudited financial statements of National By-Products for the period ended October 28, 2005; and
 
  •  the unaudited financial statements of Darling for the period ended October 1, 2005.
      Schneider also held discussions with certain members of the management of National By-Products with respect to certain aspects of the acquisition, the past and current business operations of National By-Products and Darling, the financial condition and future prospects and operations of National By-Products and Darling and certain other matters Schneider believed necessary or appropriate to its inquiry.
      Schneider relied upon and assumed, without independent verification, the accuracy and completeness of all information that was publicly available or was furnished to it by National By-Products or otherwise reviewed by Schneider, and Schneider has not assumed any responsibility or liability therefor. Schneider did not conduct any valuation or appraisal of any assets or liabilities, nor were any valuations or appraisals provided to Schneider.
      Schneider’s opinion is based on economic, market and other conditions as in effect on, and the information made available to it as of, the date of the opinion. Subsequent developments may affect the opinion, and Schneider does not have any obligation to update, revise or reaffirm such opinion. Schneider expressed no opinion as to the price at which the National By-Products membership units or Darling common stock will trade at any future time.
      Schneider will receive a fixed fee of $20,000 plus its out-of-pocket expenses from National By-Products for its services, which is payable regardless of the consummation of the acquisition. National By-Products agreed to indemnify Schneider against certain liabilities in connection with the performance of its services. Schneider has previously provided annual valuation services for National By-Products commencing with the conversion of National By-Products from a corporation to a limited liability company in 2001. Schneider has been conducting business valuations under a variety of circumstances since 1976. Schneider was selected to deliver an opinion with respect to the acquisition based on its valuation experience and its familiarity with National By-Products.
      Schneider did not determine the amount of the consideration to be paid in the acquisition. The consideration to be paid in the acquisition was determined through arm’s-length negotiations between Darling and National By-Products and was approved by National By-Products’ board of managers.
      Schneider employed generally accepted valuation methods in reaching its opinion. Schneider’s analysis and conclusion are not necessarily indicative of actual values or actual future results that might be achieved, which may be higher or lower than those indicated. The following is a summary of the material financial analysis utilized by Schneider in connection with providing its opinion and is qualified in its entirety by reference to the full text of a report by Schneider dated December 16, 2005 containing its financial analysis. The report supplements Schneider’s opinion attached hereto as Annex C and will be made available for inspection and copying at the principal executive offices of National By-Products during its regular business hours by any interested unitholder of National By-Products or representative of such unitholder who has been so designated in writing. A copy of the report will also be transmitted by National By-Products at the expense of National By-Products to any interested unitholder of National By-Products or representative of the unitholder, who has been so designated in writing, upon written request.
Asset-Based Approach
      Under the asset-based approach, an appraiser adjusts a company’s assets to fair market value. Liabilities are then deducted to determine the fair market value of owners’ equity. Because National By-Products has a considerable amount of goodwill, Schneider determined that the asset-based approach would not provide a reliable indication of value. Therefore, Schneider did not rely on the asset-based approach in its valuation analysis for National By-Products.

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Income Approach
      Under the income approach, a company’s value is determined by discounting or capitalizing the company’s expected future earnings. Using the income approach and assuming net cash flow of $21,904,000, a capitalization rate of 22.2% and a 10% marketability discount, Schneider determined that the value of National By-Products’ owners’ equity was approximately $88.8 million.
Market Approach
      Under the market approach, a company’s value is based on the market prices of comparable investments. Schneider determined that the price of Darling’s common stock on the AMEX could be used to determine the value of National By-Products. Using Darling as a guideline company and a price to EBITDA (earnings before interest, taxes depreciation and amortization) multiple of 5.62 and a 10% marketability discount, Schneider determined that the value of National By-Products’ owners’ equity was approximately $131.4 million.
Summary of Valuation Methods
      After considering the asset-based approach, the income approach and the market approach, Schneider concluded that the fair value of National By-Products’ owners’ equity was between $88.8 million and $131.4 million.
Value to Be Received by National By-Products Unitholders
      Schneider valued the components of the consideration to be received in the acquisition as follows:
        1) Cash. Cash of $70.5 million will be paid by Darling to National By-Products less an estimated $1.9 million (determined as of December 16, 2005) to repay borrowed debt for a net cash payment of $68.6 million. Borrowed debt at closing may be more or less than this amount.
 
        2) Working Capital. Working capital was assumed by Schneider to be $5 million which will be paid by Darling to National By-Products. Working capital at closing may be more or less than this amount.
 
        3) Darling Stock. Schneider assumed 16,222,750 shares of Darling common stock would be issued to National By-Products with an assumed market value of $3.50 per share less a 5% marketability discount due to restrictions on the sale of Darling common stock by National By-Products unitholders. The result was a value of $53,940,644.
 
        4) True-up Provision. Additional shares of Darling common stock will be issued in the acquisition if the future value of Darling common stock is less than a specified target price, assumed to be $4.346 per share. Using the Black-Scholes option pricing model, Schneider determined the true-up provision had a value of approximately $6,231,417.
      Based on the sum of the value of these components, Schneider determined that the proposed acquisition would provide consideration worth approximately $133.8 million. Because the consideration to be received by National By-Products and its unitholders was at the high end of the range of fair values for National By-Products as determined by Schneider, Schneider concluded that the consideration to be paid in the proposed acquisition was fair, from a financial point of view, to National By-Products and its unitholders as of December 16, 2005.
Interests of Certain Persons in the Acquisition
      Certain executive officers and members of the board of managers of National By-Products and certain executive officers of Darling have interests in the asset purchase agreement and the acquisition that are different from or in addition to your interests as a stockholder or unitholder, as applicable. These interests exist based on the asset purchase agreement and ancillary agreements that were entered into by these individuals before or in connection with the asset purchase agreement and the acquisition. The board of

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directors of Darling and the board of managers of National By-Products were aware of and considered these interests when they considered and approved the asset purchase agreement and the acquisition.
Employment Agreements Effective upon the Acquisition
      Mark Myers, David Pace and Larry Angotti, each an executive officer of National By-Products, have executed employment agreements with Darling, which will become effective upon the date of closing. Under these agreements, the term of each of their employment with Darling will commence on the date of closing and continue until December 31, 2007.
      Under his employment agreement with Darling, Mark Myers, National By-Products’ President and Chief Executive Officer, will be given the title Executive Vice President, Chief Operating Officer, Midwest Region and will be entitled to a base salary of $427,215 per year and an annual bonus of up to 35% of his base salary as compared to a base salary of $400,268 in 2005 and $427,215 in 2006 and a bonus of $125,000 in 2005 under his current employment agreement with National By-Products. Under his employment agreement with Darling, David Pace, National By-Products’ Chief Financial Officer, Treasurer and Assistant Secretary, will be given the title Controller — Operations and will be entitled to a base salary of $184,062 per year and an annual bonus of up to 25% of his base salary as compared to a base salary of $172,338 in 2005 and $184,062 in 2006 and a bonus of $55,000 in 2005 under his current employment agreement with National By-Products. Under his employment agreement with Darling, Larry Angotti, National By-Products’ Regional Manager (Des Moines, Iowa), will be given the title Regional Vice President — Midwest Region and will be entitled to a base salary of $194,316 per year and an annual bonus of up to 30% of his base salary as compared to a base salary of $182,245 in 2005 and $194,316 in 2006 and a bonus of $55,000 in 2005 under his current employment agreement with National By-Products.
Non-Disclosure, Non-Solicitation and Non-Competition Agreement
      As a condition to the asset purchase agreement, Dean Carlson, Chairman of National By-Products’ board of managers and holder of equity interests in National By-Products, will execute a non-disclosure, non-solicitation and non-competition agreement with Darling. Under the agreement, Mr. Carlson will agree, for a period of five years, not to own, manage, operate, control or participate in the ownership, management, operation or control of any business that is competitive with Darling. In addition, Mr. Carlson will agree, for a period of five years, not to solicit, induce or encourage any employee of National By-Products or Darling to leave the employment, and not to hire, employ or engage any employee of National By-Products. Mr. Carlson also agreed, for a period of five years, not to induce or encourage any actual or prospective material client, customer, supplier, licensor or any other person in a business relationship with National By-Products or Darling to terminate or modify its current business relationship with National By-Products or Darling. Under the agreement, Mr. Carlson is restricted from disclosing confidential business information.
Appointment to the Darling Board of Directors
      Pursuant to the asset purchase agreement, Darling covenants to take actions reasonably necessary to elect Dean Carlson and one other nominee of National By-Products to Darling’s board of directors.
Change of Control Payments under National By-Products’ Long-Term Incentive Plan
      Each of Mark Myers, David Pace and Larry Angotti, executive officers of National By-Products, will receive a change of control payment under National By-Products’ Long-Term Incentive Plan following the closing of the acquisition. Mark Myers will receive $308,590, David Pace will receive $154,295 and Larry Angotti will receive $154,295.

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Payments under the Darling 2004 Omnibus Incentive Plan and the Integration Success Incentive Award Plan
      After the execution of the asset purchase agreement, the compensation committee of the Darling board of directors determined that the employees of Darling listed below will receive, promptly following the closing of the acquisition, the cash payment listed to the right of his or her name, provided the employee’s employment with Darling has not terminated, voluntarily or involuntarily, prior to the closing:
         
Employee   Cash Payment
     
Randy Stuewe
  $ 250,000  
John Muse
    150,000  
Neil Katchen
    50,000  
Robert Hinerman
    25,000  
Bill McMurtry
    25,000  
Mike Molini
    25,000  
Brad Phillips
    25,000  
Brenda Snell
    25,000  
Joe Weaver
    25,000  
      In addition, the compensation committee of the Darling board of directors determined that, if the average of the per share closing price of Darling common stock on AMEX (as adjusted for any stock split, stock dividend, combination or recapitalization) for each of the trading days included in the 90 prior consecutive calendar days ending with the calendar day immediately preceding the last day of the 13th full consecutive month following the closing of the acquisition (referred to herein as the “true-up market price”) is equal to or greater than approximately $4.303, each employee of Darling listed in the table below will be entitled to receive the number of shares of Darling common stock listed to the right of his or her name, provided the employee’s employment with Darling has not terminated, voluntarily or involuntarily, prior to the determination of the true-up market price:
         
Employee   Stock Payment
     
Randy Stuewe
    100,000  
John Muse
    66,500  
Neil Katchen
    25,000  
Robert Hinerman
    10,000  
Mitch Kilanowski
    10,000  
Mike Molini
    10,000  
Brad Phillips
    10,000  
Bob Seemann
    10,000  
Brenda Snell
    10,000  
      Further, if any of Mark Myers, Larry Angotti and David Pace become an employee of Darling or Darling National at closing and remain an employee at the date of determination of the true-up market price and the true-up market price is equal to or greater than approximately $4.303, he will receive a stock payment in Darling common stock in the following amounts: Mark Myers, 25,000 shares; Larry Angotti, 10,000 shares; and David Pace, 10,000 shares.
Resale of Darling Common Stock
      The shares of Darling common stock issued to National By-Products and distributed to the National By-Products unitholders in connection with the acquisition will have been registered under the Securities Act. These shares may be freely traded without restriction by those National By-Products unitholders who are not deemed to be “affiliates,” as that term is defined under the Securities Act, of National By-Products prior to the acquisition. The shares of Darling common stock received by National By-Products unitholders who are deemed to be affiliates of National By-Products may be resold as permitted by Rule 145 under the Securities Act or as otherwise permitted under the Securities Act.

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Persons who are affiliates of National By-Products generally include individuals or entities that control, are controlled by, or are under common control with, National By-Products and may include certain officers and directors of National By-Products as well as principal unitholders of National By-Products. Pursuant to the terms of the asset purchase agreement, National By-Products is required to use its commercially reasonable efforts to cause each person who it believes to be an affiliate of National By-Products to deliver to Darling, at or prior to the closing date of the acquisition, a written agreement to the effect that these affiliates will not offer or sell or otherwise dispose of any of the shares of Darling common stock issued to him, her or it in connection with the acquisition in violation of the Securities Act or the rules and regulations promulgated by the SEC under the Securities Act.
      Although the shares of Darling common stock issued in connection with the acquisition may be freely traded by those National By-Products unitholders who are not deemed to be affiliates, only those shares that are issued upon closing of the acquisition that have not been transferred (except by gift or into trust) as of the true-up date will be eligible for the stock true-up consideration. For further discussion on the holding period required to be eligible for the stock true-up consideration please see “Asset Purchase Agreement — Consideration” beginning on page 62.
Accounting Treatment
      The acquisition will be accounted for as a purchase by Darling under accounting principles generally accepted in the United States of America. Under the purchase method of accounting, the assets and liabilities of National By-Products will be recorded, as of completion of the acquisition, at their respective fair values and added to those of Darling. Reported financial condition and results of operations of Darling issued after completion of the acquisition will reflect National By-Products balances and results after completion of the acquisition, but will not be restated retroactively to reflect the historical financial position or results of operation of National By-Products. Following the completion of the acquisition, the earnings of Darling will reflect purchase accounting adjustments, including increased depreciation and amortization expense for acquired tangible and intangible assets. The excess of purchase price over the fair value of the identifiable tangible assets acquired and liabilities assumed will be recorded as goodwill and other intangibles. The other intangibles will be amortized on a straight-line basis over periods currently estimated to range from four to twenty years. The results of operations of Darling following the acquisition will not include National By-Products’ results prior to the acquisition. See “Unaudited Pro Forma Condensed Combined Financial Statements of Darling and National By-Products” beginning on page 77.
Material U.S. Federal Income Tax Consequences of the Acquisition to National By-Products Unitholders
      The following discussion is a general summary of certain U.S. federal income tax consequences of the acquisition to National By-Products and its unitholders. It is based upon the Code, the U.S. Treasury Regulations, promulgated thereunder, referred to herein as “Treasury Regulations,” published rulings, court decisions and other applicable authorities, all as in effect on the date hereof and all of which are subject to change or differing interpretations (possibly with retroactive effect). This summary does not purport to deal with all of the U.S. federal income tax consequences applicable to National By-Products and its unitholders, some of whom may be subject to special rules (including, without limitation, foreign taxpayers, dealers in securities or currencies, financial institutions or “financial services entities,” life insurance companies, tax-exempt organizations, unitholders of interests held as part of a “straddle,” “hedge,” “constructive sale” or “conversion transaction” with other investments, U.S. persons whose “functional currency” is not the U.S. dollar, persons who have elected “mark to market” accounting, persons who have not acquired their membership interests upon original issuance, persons who hold their interest through a partnership or other entity which is a pass-through entity for U.S. federal income tax purposes, or persons for whom an interest is not a capital asset). The tax consequences of the acquisition to unitholders will vary depending upon each unitholder’s individual circumstances and the U.S. federal tax principles applicable thereto. No advance rulings have been or will be sought from the IRS regarding any matter discussed in this joint proxy statement/ prospectus.

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      In view of the foregoing, each unitholder should consult his, her or its own tax advisor regarding all U.S. federal, state, local and foreign income and other tax consequences of the acquisition, with specific reference to such unitholder’s own particular tax situation and recent changes in applicable law.
Partnership Status
      Under current Treasury Regulations, a domestic eligible entity that has two or more members and that is not organized as a corporation under U.S. federal or state law will generally be classified as a partnership for U.S. federal income tax purposes, unless it elects to be treated as a corporation. National By-Products has not elected to be treated as a corporation for U.S. federal income tax purposes. The discussion below assumes that National By-Products has been since its inception and will continue to be treated as a partnership for U.S. federal income tax purposes. However, no application has been or is contemplated to be made to the IRS for a ruling on the classification of National By-Products for tax purposes.
Consequences of the Acquisition to National By-Products
      The purchase of substantially all of the assets of National By-Products by a newly formed and wholly-owned subsidiary of Darling in exchange for cash, Darling common stock and the assumption of certain National By-Products liabilities will be a taxable disposition for federal income tax purposes, resulting in the realization of gain or loss to National By-Products. The amount of gain or loss realized by National By-Products will generally be equal to the difference between (i) the sum of the amount of cash and the aggregate fair market value of Darling common stock received (including any shares of Darling common stock received as part of the stock true-up) and the amount of liabilities assumed (as determined for federal income tax purposes) and (ii) National By-Products’ adjusted tax basis in the assets sold, determined on an asset-by-asset basis. The character of such gain or loss as ordinary gain or loss or capital gain or loss will be determined by reference to the character of each asset in the hands of National By-Products. National By-Products may defer recognition of a portion of any such gain attributable to the escrow funds and the stock true-up pursuant to the “installment method” until the time the escrow is released and the stock true-up consideration is issued, respectively, unless National By-Products “elects out” of the installment method. The installment method is not applicable with respect to certain categories of income or gain or to losses.
      If National By-Products does not elect out of the installment method, the stock true-up will cause the acquisition to be subject to Treasury Regulations governing contingent payment sales. In general, these Treasury Regulations will have an effect on the allocation of National By-Products’ adjusted tax basis in the assets to the various components of the consideration received, and as a result will delay basis recovery. In addition, a portion of the escrow funds and the stock true-up would also be recharacterized as interest income. Furthermore, a unitholder would be subject to the special interest charge rules imposed by Section 453A of the Code to the extent a unitholder holds at the close of the year of the acquisition certain installment obligations, including the unitholder’s proportionate share of National By-Products’ installment obligation, with aggregate face amounts in excess of $5 million. As of the date hereof, no decision has been made by National By-Products as to whether it will elect out of the installment method.
      An entity classified as a partnership for federal income tax purposes generally is not itself subject to U.S. federal income taxation. Rather, any taxable gain or loss realized by the partnership will flow through to its equity holders and be allocated among such holders in proportion to their membership units in the partnership. Therefore, National By-Products will not be taxed on any gain or loss realized as a result of the sale of its assets. Instead, each unitholder will be required to report on his, her or its federal income tax return, and will be subject to tax in respect of, his, her or its distributive share of such gain or loss. Such distributive share will include a unitholder’s share of the gain or loss realized by National By-Products upon receipt of the stock true-up consideration even though a unitholder may not be eligible to receive any such stock true-up consideration because the unitholder has disposed of his, her or its Darling common stock.

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Consequences of the Acquisition to National By-Products Unitholders
      As noted above, each National By-Products unitholder will be required to report on his, her or its federal income tax return, and will be subject to tax in respect of, his, her or its distributive share of the gain or loss realized by National By-Products on the sale of its assets. This distributive share of gain or loss will increase or decrease, respectively, the unitholder’s “adjusted basis” (as defined below) in his, her or its membership interest. In addition, a unitholder may also be subject to tax upon the receipt of distributions from National By-Products. Promptly following the closing of the acquisition, National By-Products will distribute, as the first in a series of liquidating distributions, cash (less cash escrow of $3.5 million, less the amount of the then outstanding National By-Products credit facilities and plus or minus the amount of the working capital adjustment, less appropriate reserves to pay other National By-Products debts and obligations) and Darling common stock (less escrow of shares valued at $6.5 million) to its unitholders pro rata in proportion to their membership units. The Darling common stock will constitute marketable securities under Section 731 of the Code for purposes of determining gain upon the distribution. A unitholder will not recognize gain on the initial distribution, or future distributions, except to the extent the sum of the cash and the fair market value of the Darling common stock exceeds such unitholder’s adjusted tax basis in his, her or its membership interest. Gain will be deferred until such unitholder’s entire adjusted tax basis in his, her or its membership interest is recovered. Such gain will be treated as gain from the sale or exchange of such unitholder’s membership interest in National By-Products. Generally, if such unitholder has held his, her or its membership interest for more than one year, any such gain will likely be long-term capital gain. Any loss realized on the distributions will not be recognized.
      Prior to any liquidating distributions, a unitholder’s adjusted basis in his, her or its membership interest generally will be equal to such unitholder’s initial tax basis, increased by the sum of (i) any additional capital contributions such unitholder made to National By-Products, (ii) the unitholder’s allocable share of the income of National By-Products, including any gain realized on the sale of its assets and (iii) increases in the unitholder’s allocable share of the indebtedness of National By-Products, and reduced, but not below zero, by the sum of (iv) the unitholder’s allocable share of the loss of National By-Products, including any loss realized on the sale of its assets and (v) the amount of money or the adjusted tax basis of property distributed to such unitholder, including constructive distributions of money resulting from reductions in such unitholder’s allocable share of indebtedness of National By-Products.
      A unitholder’s basis in any Darling common stock received will be equal to the unitholder’s adjusted basis in his, her or its membership interest, determined after taking into account the adjustments described in the preceding paragraph, increased by any gain recognized by reason of the distribution of the Darling common stock and decreased by any distribution of cash. This will generally result in a basis in the Darling common stock equal to the fair market value of such common stock upon its receipt by National By-Products immediately prior to the distribution, increased by any nonrecognized loss realized by the unitholder on the distribution. The holding period of the Darling common stock will start upon the receipt of such stock by National By-Products.
      Certain unitholders may be subject to the U.S. alternative minimum tax (AMT) and should consider the tax consequences of the acquisition in view of their AMT position, taking into account the special rules that apply in computing the AMT, including the adjustments to depreciation deductions, the special limitations on the use of net operating losses and in the case of individual taxpayers, the complete disallowance of miscellaneous itemized deductions and deductions for state and local taxes.
      In addition to the U.S. federal income tax consequences described above, unitholders should consider the potential state and local tax consequences of the acquisition. State and local tax laws often differ from U.S. federal tax laws with respect to, among other things, the treatment of specific items of income, gain, loss, deduction and credit. National By-Products, as well as its unitholders, may be subject to various state and local taxes. In addition to being taxed in his, her or its own state or locality of residence, a unitholder may be subject to return filing obligations and income, franchise and other taxes in jurisdictions in which

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National By-Products operates. Each unitholder is urged to consult with his, her or its own tax advisor regarding the state and local tax consequences to such unitholder of the acquisition.
      Tax-exempt investors should consult with their own tax advisors regarding the extent to which the gain or loss realized by National By-Products on the sale of its assets would be considered “unrelated business taxable income.”
Appraisal Rights
      Under Section 490A.711 of the Iowa Limited Liability Company Act, an operating agreement may provide contractual appraisal rights with respect to the membership interest in an Iowa limited liability company. National By-Products’ operating agreement provides that the members of National By-Products have the same dissenters’ appraisal rights as shareholders of an Iowa corporation. Therefore, under the Iowa Business Corporation Act, or the “IBCA,” National By-Products unitholders are entitled to appraisal rights and to obtain payment of the fair value of their units in connection with the acquisition so long as the unitholders perfect their appraisal rights as directed under the IBCA. “Fair value” with respect to the units generally takes into account the value of the units immediately before the acquisition, using customary and current valuation concepts, without discounting for lack of marketability or minority status. Because National By-Products’ unitholders derive their rights under the IBCA, the IBCA controls the process with which they must comply.
      Unitholders wishing to exercise their appraisal rights must carefully comply with the applicable provisions of Division XIII of the IBCA. The following summary of the provisions of Division XIII of the IBCA is not a complete statement of the provisions of those sections and is qualified in its entirety by reference to the full text of the sections contained in Division XIII of the IBCA, a copy of which is attached to this joint proxy statement/ prospectus as Annex D and is incorporated into this summary by reference. All required notices to National By-Products should be mailed or delivered to: Carlton T. King, Secretary, National By-Products, 907 Walnut Street, Suite 400, Des Moines, Iowa 50309.
      When the acquisition proposal is submitted to a vote by the unitholders at a special meeting, a unitholder wishing to assert appraisal rights with respect to his, her or its units must:
  •  deliver to National By-Products, before the vote is taken on the proposed acquisition, written notice of the unitholder’s intent to demand payment if the proposed acquisition is completed; and
 
  •  not vote, or cause or permit to be voted, any of his, her or its units in favor of the proposed acquisition.
      A unitholder who does not satisfy the above requirements is not entitled to assert appraisal rights with respect to the proposed acquisition.
      No later than ten days after the acquisition is consummated, National By-Products must deliver a written appraisal notice, which we refer to as the “appraisal notice,” to all unitholders who properly deliver written notice of their intent to assert their appraisal rights and who also either abstain from voting or vote against the acquisition. In the appraisal notice, National By-Products must:
  •  provide a form, which we refer to as the “appraisal form,” that specifies the date of the first announcement to unitholders of the principal terms of the acquisition and requires the unitholder asserting appraisal rights to certify whether or not beneficial ownership of those units for which appraisal rights are asserted was acquired before that date, and that the unitholder did not vote for the acquisition;
 
  •  include the address where National By-Products will receive completed appraisal forms and where unit certificates will be deposited;
 
  •  include the date by which National By-Products must receive the appraisal form and the deposit of any certificates of its units, which cannot be less than 40 days nor more than 60 days after the delivery of the appraisal notice by National By-Products and state that the unitholder will have

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  waived the right to demand appraisal with respect to his, her or its units unless the appraisal form is received by National By-Products by the specified due date;
 
  •  state National By-Products’ estimate of the fair value of the units;
 
  •  inform unitholders that if they make such a request in writing, National By-Products will provide to the unitholder, within ten days following the date the appraisal form is due, the number of unitholders who returned the appraisal form by the specified date and the total number of units owned by them;
 
  •  state the date by which notice to withdraw from the appraisal process must be received; and
 
  •  include a copy of Division XIII of the IBCA.
      Within thirty days after the appraisal form is due, National By-Products is required to deliver payment in cash to those unitholders who complied with Division XIII of the IBCA, in the amount National By-Products’ estimates to be the fair value, plus interest, accompanied by the following:
  •  National By-Products’ financial statements, consisting of a balance sheet as of the end of fiscal year not more than sixteen months before the date of payment, an income statement for that year, a statement of changes in unitholders’ equity for that year, and the latest available interim financial statements, if any;
 
  •  a statement of National By-Products’ estimate of the fair value of the units, which estimate must equal or exceed National By-Products’ estimate given in the appraisal notice; and
 
  •  a statement that the unitholders who complied with the process set forth in Division XIII of the IBCA have the right to demand further payment (as described below) and that if any such unitholder does not do so within the time period specified in this notice, such unitholder will be deemed to have accepted the payment to the unitholder in full satisfaction of National By-Products’ obligation under Division XIII of the IBCA.
      National By-Products may elect to withhold payments to any unitholder who did not certify on the appraisal form that he, she or it was a beneficial owner of all of the National By-Products units for which he, she or it is asserting appraisal rights. If National By-Products elects to withhold payment, National By-Products will notify applicable unitholders within thirty days. Thereafter, those unitholders may accept National By-Products’ estimate of the fair value, plus interest, in full satisfaction of their demands, or demand appraisal, as discussed below. Unitholders must accept National By-Products offer of fair value within thirty days in order to receive payment in cash, which will be paid by National By-Products within ten days of receiving acceptance of National By-Products’ offer.
      Unitholders dissatisfied with National By-Products estimate of fair value must reject the offer in writing and demand payment of the unitholder’s estimate of fair value within thirty days after receiving National By-Products payment or offer of payment. Unitholders who fail to notify National By-Products with a written demand of their own estimate of fair value within the thirty day time period will be entitled only to the payment previously made or offered.
      If a unitholder makes demands for payment under the IBCA that remain unsettled within 60 days after National By-Products receipt of the payment demand, National By-Products must commence a proceeding in the Iowa District Court for Polk County and petition the court to determine the fair value of the units and accrued interest. If such a proceeding is not commenced within the 60 day period, National By-Products must pay in cash to each unitholder whose demand remains unsettled, the amount demanded plus interest. National By-Products must name as parties to the proceeding all unitholders whose demands remain unsettled and must serve each with a copy of the petition. The court may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. Each unitholder made a party to the proceeding is entitled to judgment for either:
  •  the amount, if any, by which the court finds the fair value of the unitholder’s units, plus interest, exceeds the amount paid by National By-Products to the unitholder for such units; or

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  •  the fair value, plus interest, of the unitholder’s units for which National By-Products elected to withhold payment.
      In an appraisal proceeding, the court will determine all costs of the proceeding and assess these costs against National By-Products unless the court determines that the unitholders acted arbitrarily, vexatiously, or not in good faith in making their demand in which case, the court may assess costs against all or some of the unitholders in an amount the court finds fair. The court may also assess fees and expenses of counsel and experts for the parties against National By-Products if the court finds that National By-Products did not substantially comply with the requirements of Division XIII or against any party if the court finds that the party acted arbitrarily, vexatiously, or not in good faith. Division XIII also provides that compensation of counsel for any unitholder in an appraisal proceeding whose services benefited other similarly situated unitholders may be paid out of amounts awarded to unitholders who benefited if such compensation is not assessed against National By-Products.

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THE ASSET PURCHASE AGREEMENT
      The following is a summary of the material provisions of the asset purchase agreement. This summary is qualified in its entirety by reference to the asset purchase agreement, which is incorporated by reference in its entirety and attached to this joint proxy statement/ prospectus as Annex A. We urge you to read the asset purchase agreement in its entirety.
General
      The asset purchase agreement contemplates the purchase of substantially all of the assets of National By-Products, LLC by a newly formed and wholly-owned subsidiary of Darling International Inc.
Consideration
      The asset purchase agreement provides that the aggregate consideration for the purchased assets will be (i)(A) $70.5 million in cash, less all of National By-Products’ indebtedness related to its credit facilities outstanding immediately prior to the closing date of the acquisition, plus (B) 20% of the outstanding shares of Darling common stock as of 8 a.m. Central Time on the date of closing calculated on a fully-diluted basis, referred to below as the “Closing Issued Shares,” and (ii) the assumption of certain of National By-Products’ liabilities. The cash consideration, which we refer to as the “Closing Cash Payment,” will be subject to adjustment based on the working capital of National By-Products as of the closing date of the acquisition.
Cash Consideration
      On the closing date of the acquisition, Darling will pay to National By-Products the Closing Cash Payment less $3.5 million dollars, which will be placed in escrow to satisfy any working capital adjustment or indemnification claims made by Darling against National By-Products pursuant to the asset purchase agreement and the escrow agreement between Darling and National By-Products (for more discussion on the escrow fund, please see “— Indemnification and Escrow Fund” on page 75 below). National By-Products will use the cash consideration, less the escrowed amount, to pay all amounts owed under a unit appreciation agreement (estimated at $212,000), National By-Products’ Long-Term Incentive Plan (estimated at $1,620,000) and certain other liabilities of National By-Products, estimated to be $1,000,000. The remainder will be distributed to the National By-Products unitholders pro rata in accordance with their membership interests.
Stock Consideration
      As soon as reasonably practicable after the closing date of the acquisition, Darling will deliver to National By-Products certificates representing the Closing Issued Shares less that number of shares of Darling common stock having a value of $6.5 million on the closing date. The shares having a value of $6.5 million will be placed in escrow to satisfy any working capital adjustment or indemnification claims made by Darling against National By-Products pursuant to the asset purchase agreement and the escrow agreement between Darling and National By-Products (for more discussion on the escrow fund, please see “— Indemnification and Escrow Fund” on page 75 below).
Distribution of the Cash and Stock Consideration to the National By-Products Unitholders
      Subject to the limitations on distributions set forth in the applicable provisions of Iowa law and the National By-Products operating agreement as more fully discussed in “— Illustration of the Potential Distributions to National By-Products Unitholders” on page 64 below, promptly following receipt of the applicable consideration and payment of all of its debt and other liabilities, National By-Products will distribute the remaining cash and stock consideration to its unitholders in proportion to their respective membership interests; provided, however, that no fractional shares of Darling common stock will be issued; and, provided further that the total number of shares of Darling common stock distributed to each National By-Products unitholder will be rounded to the nearest whole number.

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Stock True-Up
      In addition to the purchase price paid to National By-Products on the closing date of the acquisition, Darling may pay additional consideration in the form of Darling common stock, depending on the average market price, referred to as the “true-up market price,” of Darling’s common stock for the 90 days prior to the last day of the 13th full consecutive month after closing, which we refer to as the “true-up date.” If the average share price for the 90 days prior to the true-up date causes the Closing Issued Shares (including the escrowed shares) to be less than $70.5 million, then Darling will issue additional common stock to National By-Products (or if National By-Products has distributed shares to its unitholders, to those unitholders who continue to hold, directly or as shares that remain in escrow, their Closing Issued Shares), so that the shares that National By-Products receives in the aggregate will be valued at $70.5 million at the true-up date, assuming that none of the National By-Products unitholders have transferred any of their Closing Issued Shares (except transfers by gift or into trust). For clarity, only those Closing Issued Shares that have not been transferred (except by gift or into trust) as of the true-up date will be eligible for the stock true-up consideration. In addition, if the true-up market price is less than $3.60, then $3.60 will be used in place of the true-up market price for purposes of calculating the number of shares issued in the stock true-up. Assuming that the true-up market price is at least $3.60 and all of the Closing Issued Shares are retained by the National By-Products unitholders, then the shares National By-Products receives on the closing date, plus the shares National By-Products (or its unitholders) receives on the true-up date, will be valued at $70.5 million in the aggregate on the true-up date in accordance with the asset purchase agreement.
      The following table shows the number of shares that will be issued in the stock true-up and the value of the stock consideration at closing and following the stock true-up at various hypothetical true-up market prices, as will be adjusted in all respects for any stock split, stock dividend, combination or recapitalization:
                                                                 
                                Value of the
    Closing   Value of the   Target   True-Up   Remaining           Shares After
Closing Share   Issued   Shares at   Share   Market   Issued   Value   True-Up   the Stock
Price(1)   Shares(2)   Closing(3)   Price(4)   Price(5)   Shares(6)   Gap(7)   Shares(8)   True-Up
                                 
$4.40
    16,381,917     $ 72,080,435     $ 4.303     $ 4.25       16,381,917     $ 876,853       206,318     $ 70,500,000  
$4.40
    16,381,917     $ 72,080,435     $ 4.303     $ 3.60       16,381,917     $ 11,525,099       3,201,416     $ 70,500,000  
$4.40
    16,381,917     $ 72,080,435     $ 4.303     $ 3.40       16,381,917     $ 11,525,099       3,201,416     $ 66,583,332  
$4.40
    16,381,917     $ 72,080,435     $ 4.303     $ 4.30       16,381,917     $ 0       0     $ 70,500,000  
Assuming a Target Share Price of $4.3034 and 16,381,9172 shares issued at closing, the maximum number of true-up shares issuable is 3,201,416 shares.
 
(1)  The Closing Share Price will be an amount equal to the per share closing price of Darling common stock on the AMEX (as reported by The Wall Street Journal, Eastern Edition, or if not reported thereby, any other authoritative source) for the trading day immediately preceding the closing date of the acquisition. The Closing Share Price cannot be determined until the closing of the acquisition. For purposes of this illustration, we used the per share closing price of Darling common stock on March 3, 2006.
 
(2)  The number of Closing Issued Shares cannot be determined until the closing of the acquisition. For purposes of this illustration, we used 20% of the outstanding shares of Darling common stock on March 3, 2006, calculated on a fully-diluted basis, assuming the issuance of the Closing Issued Shares.
 
(3)  The Value of the Shares at Closing is calculated by multiplying the Closing Share Price by the Closing Issued Shares. This number represents the aggregate value of the stock consideration issued to National By- Products immediately following the closing of the acquisition, and includes the $6.5 million in value of escrowed shares.
 
(4)  The Target Share Price is the per share price of Darling common stock that would cause the value of the stock consideration issued to National By-Products at closing to be $70.5 million. This number is generated by dividing $70.5 million by the number of Closing Issued Shares. The Target Share Price in this example is $4.30352565.

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(5)  These per share prices represent various reference prices for the true-up market price.
 
(6)  This illustration assumes that none of the National By-Products unitholders have transferred any of their Closing Issued Shares (except transfers by gift or into trust) and that no escrowed shares are released to Darling in accordance with the escrow agreement.
 
(7)  The Value Gap is calculated by multiplying (A) the Remaining Issued Shares by (B) the difference between (x) the Target Share Price and (y) the higher of the True-Up Market Price or $3.60; provided that the difference in (B) is a positive number, if not, then the Value Gap will be zero.
 
(8)  The number of True-Up Shares is determined by dividing (A) the Value Gap by (B) the higher of (x) the True-Up Market Price and (y) $3.60, rounded to the nearest whole number.
Distribution of the Stock True-Up to the Eligible National By-Products Unitholders
      Shares of Darling common stock issued in the stock true-up will be delivered by Darling to National By-Products no later than the twentieth business day following the true-up date and allocated among the eligible National By-Products unitholders in accordance with their respective percentage of Remaining Issued Shares held by them immediately prior to the true-up date; provided, however, that no fractional shares of Darling common stock will be issued; and, provided further that the total number of shares of Darling common stock issued in the stock true-up to any eligible National By-Products unitholders will be rounded to the nearest whole number.
Illustration of the Potential Distributions to National By-Products Unitholders
      The following table sets forth the expected triggering events for distributions to National By-Products unitholders, subject to the terms of the asset purchase agreement and escrow agreement:
     
Triggering Event   Amount of Distributions to Unitholders
     
Closing cash payment   $70.5 million less cash escrow of $3.5 million, less the amount of the then outstanding National By-Products credit facilities and plus or minus the amount of the working capital adjustment, less appropriate reserves to pay other National By-Products debts and obligations
 
Closing stock issuance   20% of the outstanding shares of common stock of Darling on the closing date on a fully diluted basis (16,381,917 shares as of March 3, 2006) less escrow of shares valued at $6.5 million
 
First release of cash escrow 90 days after closing, assuming no indemnity claims   $1,050,000, less appropriate reserves
 
First release of share escrow 90 days after closing, assuming no indemnity claims   Escrowed shares valued at $1,950,000
 
Second release of cash escrow 180 days after closing, assuming no indemnity claims   $1,050,000, less appropriate reserves
 
Second release of share escrow 180 days after closing, assuming no indemnity claims   Escrowed shares valued at $1,950,000
 
Final release of cash escrow thirteen months after closing, assuming no indemnity claims   $1,400,000, less appropriate reserves
 
Final release of share escrow thirteen months after closing, assuming no indemnity claims   Remaining escrowed shares
 
Twentieth business day following the true-up date   The number of shares issued in the stock true-up, if any

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      National By-Products will change its name as of the closing, but will remain in existence at least through the later to occur of the date that is fifteen months following the closing and the date upon which all unresolved claims have been resolved in accordance with the escrow agreement. National By-Products unitholders will remain unitholders of the ongoing entity until it is dissolved and will continue to be allocated their pro rata share of National By-Products taxable income, subject to transfer of their units as provided in the operating agreement of National By-Products. It is anticipated that there will be ongoing expenses associated with the wind-up of National By-Products, including, but not limited to, expenses related to the acquisition, legal, tax and accounting fees, director fees, compensation to employees and agents, and satisfaction of any remaining liabilities. The board of managers of National By-Products will determine from time to time the appropriate amount of reserves to be retained to satisfy such ongoing expenses.
      Impact of the Exercise of Appraisal Rights on the Distributions to National By-Products Unitholders
      If any National By-Products unitholder effectively exercises his, her or its appraisal rights and is successful in obtaining a higher per unit value for his, her or its units than a non-dissenting unitholder would otherwise receive for each of his, her or its units pursuant to the acquisition, then the non-dissenting unitholders would receive less for each of his, her or its shares than he, she or it would have if no unitholders effectively exercised their appraisal rights or if the dissenting shareholders, if any, are unsuccessful in obtaining a higher per unit value. Likewise, if any National By-Products unitholder effectively exercises his, her or its appraisal rights and is required to accept as consideration a fair value per unit that is lower than the consideration that a non-dissenting unitholder would otherwise receive for each of his, her or its units pursuant to the acquisition, then the non-dissenting unitholders would receive more for each of his, her or its shares.
Purchased Assets and Assumed Liabilities
      In the proposed acquisition, Darling National LLC, a newly formed and wholly-owned subsidiary of Darling, will purchase from National By-Products all of the business, assets, properties, contractual rights, goodwill, going concern value, rights and claims of National By-Products related its the business on the date of closing. Darling National will not purchase certain excluded assets as discussed below.
      Darling National will assume the following liabilities from National By-Products:
  •  all liabilities under purchased contracts;
 
  •  all accounts payable incurred in the ordinary course of business;
 
  •  liabilities arising in connection with certain indebtedness; and
 
  •  liabilities reflected on National By-Products’ balance sheet at closing.
      Darling National will not assume certain excluded liabilities as discussed below.
Excluded Assets and Liabilities
      Darling National will not purchase certain of National By-Products’ assets. Those excluded assets include:
  •  certain excluded contracts;
 
  •  shares of capital stock or equity National By-Products holds in other entities;
 
  •  the closed Pepcol inedible rendering plant located in Denver, Colorado and referred to by National By-Products as the “closed Pepcol Plant”;
 
  •  a limited partnership interest in the Marriott Hotel located in downtown Des Moines, Iowa; and
 
  •  all ownership interests in International By Products, S. de R.L. de C.V.

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      Darling National will not assume certain of National By-Products’ liabilities. Those excluded liabilities include:
  •  liabilities in respect of products sold and/or services performed by National By-Products on or before the date of closing;
 
  •  certain liabilities arising out of or relating to the employment of any individual on or before the date of closing;
 
  •  liabilities arising out of or in connection with any excluded contracts;
 
  •  liabilities relating to certain taxes;
 
  •  certain liabilities in respect of pending or threatened legal proceedings;
 
  •  liabilities arising out of disputes with customers existing as of the date of closing or arising out of events prior to the date of closing; and
 
  •  all liabilities relating to the business operations, assets or liabilities of any former or current National By-Products subsidiary arising out of events prior to the date of closing.
Representations and Warranties
      The asset purchase agreement contains various customary representations and warranties by National By-Products relating to, among other things:
  •  organization, valid existence, good standing and similar corporate matters;
 
  •  authorization, execution, delivery, performance and enforceability of the asset purchase agreement;
 
  •  vote of the National By-Products’ unitholders necessary to adopt and approve the asset purchase agreement;
 
  •  the absence of any conflict with National By-Products’ operating agreement or by-laws, with any contract or permit to which National By-Products is a party, with any order applicable to National By-Products or with any applicable law;
 
  •  the absence of any consent, waiver, approval, permit or authorization of any person or governmental body;
 
  •  the delivery of certain of National By-Products’ financial statements and the accuracy, in all material respects, of information contained in these statements in addition to their conformity with generally accepted accounting principles;
 
  •  the accuracy of the books and records of National By-Products;
 
  •  maintenance of internal financial controls;
 
  •  the absence of undisclosed liabilities;
 
  •  good title to each of the assets to be purchased in the acquisition and the sufficiency of these assets to conduct its business;
 
  •  conduct of the business in the ordinary course and absence of certain events expected to have a material adverse affect on National By-Products;
 
  •  tax matters;
 
  •  real property interests;
 
  •  personal property interests;
 
  •  ownership and validity of intellectual property rights;
 
  •  material contracts;

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  •  labor matters and employee benefit plans;
 
  •  the absence of pending or threatened litigation;
 
  •  compliance with all applicable foreign, federal, state and local laws;
 
  •  possession of all material permits required for the operation of the business;
 
  •  environmental matters;
 
  •  insurance;
 
  •  inventories;
 
  •  accounts and notes receivable and payable;
 
  •  absence of related party transactions;
 
  •  customers and suppliers;
 
  •  product warranty and products liability;
 
  •  banks in which National By-Products has accounts or safe deposit boxes;
 
  •  absence of misleading or untrue statements of a material fact;
 
  •  finder’s and broker’s fees related to the transaction;
 
  •  absence of payments to obtain favorable treatment for the business;
 
  •  the accuracy of information supplied by National By-Products and included in this joint proxy statement/ prospectus; and
 
  •  its financial condition.
      The asset purchase agreement also contains various representations and warranties of Darling and Darling National relating to, among other things:
  •  the organization, valid existence, good standing and similar corporate matters of each;
 
  •  authorization, execution, delivery, performance and enforceability of the asset purchase agreement;
 
  •  Darling’s capital structure;
 
  •  the absence of any conflict with Darling or Darling National’s certificate of incorporation and by-laws (or similar organizational documents), with any contract or permit to which Darling or Darling National is a party, with any order applicable to Darling or Darling National or with any applicable law;
 
  •  the absence of any consent, waiver, approval, permit or authorization of any person or governmental body;
 
  •  the absence of pending or threatened litigation;
 
  •  finder’s and broker’s fees related to the transaction;
 
  •  vote of Darling’s stockholders necessary to approve the issuance of shares of Darling common stock in accordance with the asset purchase agreement;
 
  •  Darling’s SEC filings;
 
  •  the accuracy of information supplied by Darling or Darling National and included in this joint proxy statement/ prospectus;
 
  •  environmental matters;

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  •  the financing necessary to consummate the acquisition; and
 
  •  absence of misleading or untrue statements of a material fact.
Covenants
Mutual Covenants
      Darling and National By-Products mutually agree to do the following:
  •  notify the other of any circumstance or events likely to cause any of its representations or warranties in the asset purchase agreement to be untrue or inaccurate;
 
  •  notify the other of material failures to comply with or satisfy a covenant, condition or agreement;
 
  •  notify the other of the institution or threat of institution of legal proceedings;
 
  •  prepare and file with the SEC this joint proxy statement/ prospectus;
 
  •  use commercially reasonable efforts to prepare and file materials under the HSR Act and cooperate in all respects with each other in connection with any filing or submission with a governmental entity;
 
  •  use commercially reasonable efforts to resolve any objections that may be asserted by a governmental entity or other person with respect to the asset purchase agreement; and
 
  •  use commercially reasonable efforts to take or cause to be taken all actions necessary or appropriate to fulfill their respective obligations under the asset purchase agreement.
      Darling, Darling National and National By-Products also agree to cooperate on publicity matters.
National By-Products Covenants
      Between the date of the asset purchase agreement and the closing of the acquisition, National By-Products has generally agreed not to, without the consent of Darling:
  •  increase the salary or other compensation of any director or employee of National By-Products except for normal year-end increases in the ordinary course of business;
 
  •  incur any indebtedness;
 
  •  subject to any lien or otherwise encumber any assets;
 
  •  acquire any material property;
 
  •  enter into or agree to enter into any merger or consolidation with any person or entity;
 
  •  cancel any debt or claim, or waive or release any material right;
 
  •  enter into, modify or terminate any labor or collective bargaining agreements;
 
  •  introduce any material change in operations of the business other than in the ordinary course of business;
 
  •  enter into any transactions or contracts or modify or renew any contract not in the ordinary course of business;
 
  •  enter into any contract that restricts the ability of the National By-Products’ business, or the ability of Darling or Darling National, to compete with or conduct any business in any geographic area or solicit the employment of any person;
 
  •  terminate, amend, restate, supplement or waive any rights under any material contract, real property lease, personal property lease or intellectual property license, other than in the ordinary course or business;

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  •  settle or compromise any pending or threatened legal proceeding expected to be greater than $25,000;
 
  •  change or modify its credit, collection or payment policies procedures or practices;
 
  •  take any action that would adversely affect the ability of the parties to consummate the transaction;
 
  •  amend the operating agreement or bylaws of National By-Products; and
 
  •  do anything that would make the representations and warranties of National By-Products untrue or incorrect in any material respect or that could result in any condition of closing not being satisfied or that could reasonably be expected to have a material adverse effect on National By-Products.
      Between the date of the asset purchase agreement and the closing of the acquisition, except with the consent of Darling, National By-Products has generally agreed to:
  •  conduct its business in the ordinary course of business;
 
  •  use commercially reasonable efforts to preserve its present business operations and relationships;
 
  •  maintain all assets consistent with past practice and maintain insurance for all assets;
 
  •  maintain the books, accounts and records of National By-Products in the ordinary course of business, continue to collect accounts receivable and pay accounts payable, and comply with all contractual obligations;
 
  •  comply with National By-Products’ 2005 capital expenditure plan;
 
  •  comply in all material respects with all applicable laws;
 
  •  renew all permits in a timely manner prior to their lapse; and
 
  •  pay all maintenance and similar fees to prevent the abandonment, loss or impairment of all intellectual property.
      In addition, National By-Products has agreed pursuant to the asset purchase agreement to do the following:
  •  obtain required consents, waivers, approval and notices from certain third parties;
 
  •  not to own, manage, operate, control or participate in the ownership, management, operation or control of any business engaged in the rendering business or that otherwise competes with the rendering business for a period of five years following the closing;
 
  •  not to (i) solicit any employees of National By-Products to leave the employment or hire any employees of National By-Products or (ii) encourage any actual or prospective client, customer, supplier or licensor of National By-Products or Darling to terminate or modify any actual or prospective relationship, for a period of five years following closing;
 
  •  not to disclose any confidential information from and after the date of the asset purchase agreement;
 
  •  grant Darling the use of the name “National By-Products” and any service mark, trade names, d/b/a names, fictitious names, identifying symbols, logos, emblems or signs containing or comprising the name National By-Products;
 
  •  permit Darling and its environmental consultant to conduct investigations of the environmental conditions of any real property owned, operated or leased by or for National By-Products;
 
  •  provide assistance and cooperate with Darling in connection with obtaining the necessary financing to consummate the acquisition;
 
  •  file all materials required by environmental laws;

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  •  hold a special meeting of its unitholders solely for the purpose of obtaining their approval of the asset purchase agreement and the transactions contemplated by the asset purchase agreement;
 
  •  provide Darling with monthly financial statements for each calendar month from December 19, 2005 to closing;
 
  •  subject to certain exceptions, make all cash dividends prior to closing, if any, in the ordinary course of business;
 
  •  terminate the National By-Products’ rights agreement dated as of January 1, 1999 immediately prior to closing;
 
  •  not to dissolve or otherwise terminate its limited liability company existence and to withhold sufficient funds to meet its obligations under the asset purchase agreement, until the later to occur of the date that is fifteen months following the closing date of the acquisition and the date on which all unresolved indemnification claims asserted by Darling against National By-Products have been resolved in accordance with the asset purchase agreement and the escrow agreement between Darling and National By-Products;
 
  •  deliver to Darling National certificates of title to the assets to be transferred to Darling National;
 
  •  deliver to Darling a list identifying all persons who it believes may be deemed to be “affiliates” of National By-Products as the term is used in Rule 145 of the Securities Act;
 
  •  update and amend the National By-Products’ disclosure schedules to reflect any events or circumstances occurring before closing that would have required listing on the schedules if the event or condition had existed prior to the signing of the asset purchase agreement; and
 
  •  use its insurance company’s actuary to value its liabilities related to potential workers’ compensation claims for the fiscal year ended 2005 at its own expense.
      No Solicitation: National By-Products and its representatives are required to cease discussions or negotiations immediately with respect to a takeover proposal. National By-Products and its representatives are also prohibited from (i) soliciting proposals likely to lead to a takeover proposal, (ii) participating in discussions or negotiations with any third party regarding any takeover proposal, or (iii) entering into any agreement related to a takeover proposal. However, if the board of managers of National By-Products receives an unsolicited, bona fide written takeover proposal after the date of signing the asset purchase agreement, and National By-Products’ board reasonably believes that the takeover proposal is reasonably likely to lead to a superior proposal, then National By-Products may furnish information to the person or entity submitting the takeover proposal in order to comply with its board’s fiduciary duties. Furthermore, National By-Products must provide Darling not less than two business days written notice of its intent to furnish the information to the person or entity submitting the takeover proposal and its intent to participate in discussions and negotiations regarding the takeover proposal and furnish the same information to Darling. Additionally, National By-Products is required to promptly advise Darling orally (and in writing within 24 hours of the oral notice) of any offer received, any information sought, or any discussions or negotiations sought to be initiated with National By-Products in respect of any takeover proposal. National By-Products must reveal the identity of the person or entity making an offer and the terms and conditions of any proposal. National By-Products must keep Darling fully informed of material developments with respect to any takeover proposal.
      National By-Products’ Board Recommendation: National By-Products’ board may not withdraw or modify its board recommendation in a manner adverse to Darling or Darling National or approve or recommend any takeover proposal or enter into any agreement related to a takeover proposal. National By-Products’ board may however, after the fifth business day following Darling’s receipt of written notice, withdraw or modify its recommendation or recommend a takeover proposal, if National By-Products’ board determines in good faith that the proposal is a superior proposal. The notice to Darling must include the terms and conditions of the superior proposal.

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      Access to Information. National By-Products will afford to Darling and its representatives, during normal business hours throughout the period prior to the closing of the acquisition, reasonable access to National By-Products’ financial information, books, contracts, commitments and records and will furnish to Darling information concerning its businesses, properties and personnel.
Darling and Darling National Covenants
      In the covenants contained in the asset purchase agreement Darling and Darling National have agreed to do the following things:
  •  preserve and keep records relating to National By-Products’ business for a period equal to the time it would keep its own records and to make the records available to National By-Products;
 
  •  permit National By-Products and its environmental consultant to conduct investigations of the environmental conditions of any real property owned, operated or leased by or for Darling International;
 
  •  take actions reasonably necessary to elect Dean Carlson and one other nominee of National By-Products to Darling’s board of directors;
 
  •  hold a special meeting of its stockholders solely for the purpose of obtaining their approval of the issuance of shares of Darling common stock in accordance with the asset purchase agreement; and
 
  •  engage a reputable third-party actuary to value National By-Products liability with respect to workers’ compensation claims for fiscal year ending 2005.
Employees and Employee Benefits
      Darling National will assume all liabilities arising out of the labor contracts with the labor unions or associations representing National By-Products’ employees and the employees covered by the labor contracts will become employees of Darling National after closing. Darling National will provide National By-Products’ non-union employees an offer of employment with the same overall level of benefits in effect on the date of closing on an “at will” basis. Subject to applicable laws and the labor contracts, Darling National will have the right to dismiss any or all employees at any time, with or without cause, and to change the terms and conditions of their employment.
Conditions to the Asset Purchase Agreement
Mutual Conditions
      The obligations of Darling, Darling National and National By-Products to consummate the transactions contemplated by the asset purchase agreement is subject to the fulfillment, on or prior to the closing date, of each the following conditions (any or all of which may be waived by Darling, Darling National or National By-Products to the extent permitted under applicable law):
  •  no order by a governmental body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by the asset purchase agreement will have been entered;
 
  •  the SEC will have declared the Form S-4 effective;
 
  •  National By-Products unitholders and Darling stockholders will have approved the acquisition; and
 
  •  the AMEX will have approved for listing the shares of Darling common stock deliverable to National By-Products unitholders.
National By-Products Conditions
      The obligations of National By-Products to consummate the transactions contemplated by the asset purchase agreement is subject to the fulfillment, on or prior to the closing date, of each of the following

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conditions (any or all of which may be waived by National By-Products to the extent permitted under applicable law):
  •  the representations and warranties of Darling and Darling National set forth in the asset purchase agreement qualified as to materiality will be true and correct, and those not so qualified will be true and correct in all material respects, as of the date of the asset purchase agreement and as of the closing of the acquisition as though made at and as of the closing of the acquisition, except to the extent the representations and warranties expressly relate to an earlier date (in which case the representations and warranties qualified as to materiality will be true and correct, and those not so qualified will be true and correct in all material respects, on and as of such earlier date); provided, however, in the event of any breach of a representation or warranty of Darling or Darling National set forth in the asset purchase agreement, the condition will be deemed satisfied unless the effect of all the breaches of representations and warranties taken together could reasonably be expected to have a material adverse effect on Darling;
 
  •  Darling and Darling National will have performed and complied in all material respects with all obligations and agreements required by the asset purchase agreement;
 
  •  no event, change, occurrence or circumstance will have occurred that, individually or in the aggregate with any other events, changes, occurrences or circumstances, has had or which could reasonably be expected to have a material adverse effect on Darling;
 
  •  the Chief Executive Officer of Darling and Darling National will deliver to National By-Products a signed certificate certifying that the above conditions have been fulfilled;
 
  •  Darling will have obtained any required consents;
 
  •  Darling will have delivered evidence of delivery of the cash consideration to National By-Products;
 
  •  Darling National will have delivered a duly executed assignment and assumption agreement;
 
  •  Darling and Darling National will have delivered an opinion of its counsel, Weil, Gotshal & Manges LLP; and
 
  •  Philip Schneider & Associates, Inc. will not have withdrawn or materially modified the opinion it delivered to National By-Products’ board of managers on December 16, 2005 due solely to a material adverse effect on Darling.
Darling and Darling National Conditions
      The obligations of Darling and Darling National to consummate the transactions contemplated by the asset purchase agreement are subject to the fulfillment, on or prior to the closing date, of the following conditions (any or all of which may be waived by Darling and Darling National to the extent permitted under applicable law):
  •  the representations and warranties of National By-Products set forth in the asset purchase agreement qualified as to materiality will be true and correct, and those not so qualified will be true and correct in all material respects, as of the date of the asset purchase agreement and as of the closing of the acquisition as though made at and as of the closing of the acquisition, except to the extent the representations and warranties expressly relate to an earlier date (in which case the representations and warranties qualified as to materiality will be true and correct, and those not so qualified will be true and correct in all material respects, on and as of such earlier date); provided, however, in the event of any breach of a representation or warranty of National By-Products set forth in the asset purchase agreement, the condition will be deemed satisfied unless the effect of all the breaches of representations and warranties taken together could reasonably be expected to have a material adverse effect on National By-Products;
 
  •  National By-Products will have performed and complied in all material respects with all obligations and agreements required by the asset purchase agreement;

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  •  no event, change, occurrence or circumstance will have occurred that, individually or in the aggregate with any other events, changes, occurrences or circumstances, has had or could reasonably be expected to have a material adverse effect on National By-Products;
 
  •  the President of National By-Products will deliver to Darling a signed certificate certifying that the above conditions have been fulfilled;
 
  •  Darling will have received a binding commitment from a title company to issue a policy of title insurance on National By-Products’ owned property;
 
  •  Darling will have received an ALTA/ ACSM Class A Land Title Survey with respect to each of National By-Products’ owned property, which does not reveal any fact or condition that has not been previously disclosed and that is otherwise reasonably satisfactory to Darling;
 
  •  National By-Products will have delivered to Darling’s title company any certifications, gap and lien indemnities and title and survey affidavits in connection with the issuance of title insurance for Darling or its lenders, together with copies of formation documents, incumbency certificates, certificates of good standing and consents or resolutions as are requested by the title company;
 
  •  National By-Products will have obtained any required governmental consents as well as any required consents under all antitrust laws;
 
  •  National By-Products will have provided Darling with an affidavit of non-foreign status;
 
  •  Each of Mark Myers, David Pace, and Larry Angotti will have entered into employment agreements on terms satisfactory to Darling;
 
  •  Dean Carlson will have executed and delivered a noncompetition and nonsolicitation agreement;
 
  •  Darling National will have obtained financing proceeds sufficient to consummate the acquisition;
 
  •  Darling will have received the appropriate consents under its senior credit facility and subordinated debt facility;
 
  •  National By-Products will have delivered a bill of sale and other documents and instruments of transfer reasonably requested by Darling or its title company;
 
  •  National By-Products will have delivered duly executed general warranty deeds for each of its owned real properties and, if requested by Darling International, separate assignments for National By-Products’ real property leases, except that National By-Products may deliver special warranty deeds for certain real property if title insurance has been obtained;
 
  •  National By-Products will have obtained the issuance, reissuance or transfer of all permits for Darling to conduct the operations of National By-Products’ business as of the closing date, and National By- Products will have satisfied all property transfer requirements arising under law;
 
  •  National By-Products will have delivered a duly executed assignment and assumption agreement and duly executed assignments of the registrations and applications included in the purchased intellectual property;
 
  •  National By-Products will have delivered a duly executed power of attorney;
 
  •  National By-Products will have delivered an opinion of its counsel, Nyemaster, Goode, West, Hansell & O’Brien PC;
 
  •  National By-Products will have delivered all instruments and documents necessary to release all liens, other than certain permitted exceptions, on purchased assets;
 
  •  National By-Products will have received appropriate payoff letters relating to its senior indebtedness;

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  •  Harris Nesbitt Corp. will not have withdrawn or materially modified the opinion it delivered to Darling’s board of directors on December 16, 2005 due solely to a material adverse effect on National By- Products;
 
  •  National By-Products will have delivered the required consents; and
 
  •  National By-Products will have delivered to Darling other documents that Darling reasonably requests.
Termination
Reasons for Termination
      Darling and National By-Products have the right to terminate the asset purchase agreement prior to the completion of the acquisition for the following reasons:
  •  by either National By-Products or Darling on or after May 15, 2006 if the closing has not occurred by the close of business on that date;
 
  •  by mutual consent of National By-Products and Darling;
 
  •  by either Darling or National By-Products if an event has occurred that has had or could reasonably be expected to have a material adverse effect on the non-terminating party;
 
  •  by either Darling or National By-Products in the event of a final nonappealable order prohibiting the consummation of the acquisition, so long as the order was not caused by the terminating party’s failure to perform an obligation under the asset purchase agreement;
 
  •  by either Darling or National By-Products if the other fails to perform or breaches any of its representations, warranties, covenants or agreements set forth in the asset purchase agreement, the breach is incapable of being cured within fifteen days following receipt of notice of the breach and the aggregate of such failures and breaches would allow the non-breaching party refuse to close;
 
  •  by Darling if (i) National By-Products’ board of managers (A)withdraws or modifies, in a manner adverse to Darling or Darling National, its recommendation to approve the asset purchase agreement or its approval or declaration of advisability of the asset purchase agreement and the transactions contemplated by the asset purchase agreement or (B) approves or recommends any takeover proposal, (ii) National By-Products’ board has not rejected a takeover proposal within 15 business days of the receipt of the proposal or (iii) National By-Products’ board fails to publicly reconfirm its recommendation to approve the asset purchase agreement within 15 business days after Darling requests them to do so if the request is made following the making of any takeover proposal;
 
  •  by Darling or National By-Products (subject to certain exceptions) if the National By-Products unitholder approval is not obtained;
 
  •  by National By-Products or Darling (subject to certain exceptions) if the Darling stockholder approval is not obtained; or
 
  •  by Darling or National By-Products on or before February 28, 2006 upon an unfavorable environmental assessment or operational due diligence review by the terminating party.
Effect of Termination
      If Darling terminates the asset purchase agreement due to National By-Products’ failure to perform any of its representations, warranties, covenants or agreements set forth in the asset purchase agreement and the aggregate of such failures and breaches would allow the non-breaching party refuse to close, then National By-Products will pay to Darling all fees and expenses incurred in connection with the transactions contemplated by the asset purchase agreement.

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      If Darling terminates the asset purchase agreement because (i) National By-Products’ board of managers withdraws or modifies, in a manner adverse to Darling or Darling National, its recommendation to approve the asset purchase agreement or its approval or declaration of advisability of the asset purchase agreement and the transactions contemplated by the asset purchase agreement or (ii) National By-Products’ board of managers approves or recommends any takeover proposal, National By-Products will pay to Darling a termination fee of $4.23 million in cash, including all fees and expenses incurred in connection with the transactions contemplated by the asset purchase agreement, up to $1 million in the aggregate.
      If National By-Products terminates the asset purchase agreement due to (i) Darling’s inability to receive financing for the transactions contemplated by the asset purchase agreement or (ii) Darling’s failure to perform any of its representations, warranties, covenants or agreements set forth in the asset purchase agreement and the aggregate of such failures and breaches would allow the non-breaching party refuse to close, Darling will pay to National By-Products all fees and expenses incurred in connection with the transactions contemplated by the asset purchase agreement.
Termination Fee Payable to National By-Products
      If Darling’s board withdraws or modifies its recommendation to the stockholders of Darling to vote in favor of the asset purchase agreement due to any reason other than a reason or reasons arising from a material adverse effect on National By-Products, then Darling will pay National By-Products a termination fee of $4.23 million in cash, including all fees and expenses incurred in connection with the transactions contemplated by the asset purchase agreement, up to $1 million in the aggregate.
Indemnification and Escrow Fund
      All representations and warranties survive through and including the true-up date, except for the representations and warranties set forth in Section 5.8 (taxes) of the asset purchase agreement, which will survive until 90 days following the expiration of the applicable statute of limitations period.
      After closing, National By-Products will indemnify and hold harmless Darling and its affiliates for losses exclusively from the indemnity escrow, which will initially consist of $3,500,000 in cash and $6,500,000 in Darling common stock.
      In the event that Darling seeks to recover for a breach of National By-Products of (i) any of National By-Products representations or warranties in the asset purchase agreement prior to the true-up date and at, or prior to, that time the entire indemnity escrow has been released or reserved to cover other indemnification claims made by Darling or (ii) National By-Products representations and warranties relating to taxes following the true-up date, but prior to the expiration of the survival period of these representations and warranties, Darling will consider all alternative means of recovery.
      To the extent it is not used for a purchase price adjustment and/or indemnification claims or reserved for unresolved indemnification claims, the escrow agent will release to National By-Products $1,050,000 in cash and $1,950,000 in Darling common stock 90 days following closing, $1,050,000 in cash and $1,950,000 in Darling common stock 180 days following closing, and the remainder on the true-up date.
      Neither Darling nor National By-Products will make any indemnity payment under the asset purchase agreement until the amount of all claims exceeds $1,400,000.
Distribution of the Escrowed Cash and/or Darling Common Stock to the National By-Products Unitholders
      Subject to the limitations on distributions set forth in the applicable provisions of Iowa law and the National By-Products operating agreement as more fully discussed in “Risk Factors” on page 18 above, promptly following receipt of the escrowed cash and/or Darling common stock, if any, National By-Products will distribute this cash and stock to its unitholders in proportion to their respective membership interests; provided, however, that no fractional

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shares of Darling common stock will be issued; and, provided further that the total number of shares of Darling common stock distributed to each National By-Products unitholder will be rounded to the nearest whole number.
Risk of Loss
      National By-Products will bear the risk of loss on the purchased assets from casualty events at all times up to the closing of the acquisition. It is National By-Products’ responsibility to use reasonable commercial efforts to repair affected property to its condition prior to the loss or damage. In the event that National By-Products does not repair property required for the normal operation of National By-Products prior to closing, Darling National may elect to postpone closing until the property has been repaired or may elect to consummate the closing and accept the property in its then condition with National By-Products assigning any insurance proceeds to Darling National.
Amendment and Waiver
      Darling and National By-Products may amend, supplement, or change the asset purchase agreement and waive any provision, only by written instrument making specific reference to the asset purchase agreement signed by the party against whom enforcement of the amendment, supplement, modification or waiver is sought.
Expected Timing
      The acquisition is expected to be completed in the first half of 2006, subject to the receipt of necessary regulatory approvals and the satisfaction or waiver of other closing conditions.
      The consummation of the purchase and sale of certain assets from National By-Products and the assumption of certain liabilities will take place at 10:00 a.m. (Dallas time) on a date to be specified by the parties, which date shall be no later than the third business day after satisfaction or waiver of the conditions set forth in the asset purchase agreement (other than conditions that by their nature are to be satisfied at closing, but subject to the satisfaction or waiver of those conditions at such time), unless another time, date or place is agreed to in writing by the parties.

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS OF
DARLING AND NATIONAL BY-PRODUCTS
      The following selected unaudited pro forma condensed combined financial statements give effect to the acquisition of substantially all of the assets of National By-Products by Darling under the purchase method of accounting. The pro forma adjustments are made as if the acquisition had been completed on January 3, 2004 for the results of operations data for the year ended January 1, 2005 and for the nine months ended October 1, 2005, and as of October 1, 2005 for balance sheet purposes.
      Under the purchase method of accounting, the aggregate consideration paid is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their fair values on the transaction date. Any excess purchase price is recorded as goodwill. A preliminary valuation was conducted to assist the management of Darling in determining the fair values of a significant portion of these assets and liabilities. This preliminary valuation has been considered in management’s estimates of fair values reflected in these unaudited pro forma condensed combined financial statements. A final determination of these fair values cannot be made prior to the completion of the acquisition. The final valuation will be based on the actual net tangible and intangible assets and liabilities assumed of National By-Products that exist as of the date of the completion of the acquisition.
      These unaudited pro forma condensed combined financial statements have been prepared based on preliminary estimates of fair values. The actual amounts recorded as of the completion of the acquisition may differ materially from the information presented in these unaudited pro forma condensed combined consolidated financial statements. In addition, the impact of ongoing integration activities, the timing of completion of the acquisition and other changes in National By-Product’s net tangible and intangible assets that occur prior to completion of the acquisition could cause material differences in the information presented.
      These unaudited pro forma condensed combined financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes of Darling and the historical financial statements and accompanying notes of National By-Products included in this joint proxy statement/ prospectus. The unaudited pro forma condensed combined financial statements are not necessarily indicative of the consolidated results of operations of financial condition of the combined company that would have been reported had the acquisition been completed as of the dates presented, and are not necessarily representative of future consolidated results of operations or financial condition of the combined company.

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Unaudited Pro Forma Condensed Combined Balance Sheet
As of October 1, 2005
                                           
        National   Pro Forma       Pro Forma
    Darling   By-Products   Adjustments   Notes   Combined
                     
    (In thousands)
Assets
Cash and cash equivalents
  $ 36,739     $     $ (30,000 )     (a )   $ 6,739  
Restricted cash
    2,355                           2,355  
Accounts receivables, net
    24,320       13,064                     37,384  
Inventories
    7,700       7,606                     15,306  
Prepaid expenses
    4,524                           4,524  
Deferred income taxes
    4,409                           4,409  
Other current assets
    6       759                     765  
                               
 
Total current assets
    80,053       21,429       (30,000 )             71,482  
Property, plant and equipment, net
    81,773       36,542                     118,315  
Collection routes and contracts, net
    13,105             53,540       (b )     66,645  
Goodwill
    4,429       2,560       46,314       (b )     53,303  
Deferred loan costs
    3,008             192       (c )     3,200  
Other assets
    2,429       523                     2,952  
                               
Total assets
  $ 184,797     $ 61,054     $ 70,046             $ 315,897  
                               
Liabilities and Stockholders’ Equity
Current portion of long-term debt
  $ 5,026     $     $ 1,000       (d )   $ 6,026  
Accounts payable
    9,264       7,589       (247 )     (e )     16,606  
Accrued expenses
    30,282       4,847       650       (e )     35,779  
Accrued interest
    63                           63  
                               
 
Total current liabilities
    44,635       12,436       1,403               58,474  
Long-term debt
    45,759       2,600       45,650       (d )     94,009  
Other non-current liabilities
    17,136       2,923                     20,059  
Deferred income taxes
    3,744             (1,143 )     (c )     2,601  
                               
Total liabilities
    111,274       17,959       45,910               175,143  
Stockholders’ Equity:
                                       
Common stock
    644             164       (f )     808  
Additional paid in capital
    79,364             70,336       (f )     149,700  
Treasury stock
    (172 )                         (172 )
Accumulated other comprehensive loss
    (7,134 )     (1,001 )                   (8,135 )
Retained earnings
    2,366             (2,268 )     (c ),(e)     98  
Unearned compensation
    (1,545 )                         (1,545 )
Member’s capital
          44,096       (44,096 )     (g )      
                               
 
Total stockholders’ equity
    73,523       43,095       24,136               140,754  
                               
Total Liabilities and Equity
  $ 184,797     $ 61,054     $ 70,046             $ 315,897  
                               
The accompanying notes are an integral part of these unaudited
pro forma condensed combined financial statements.

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Unaudited Pro Forma Condensed Combined Statements of Operations
For the fiscal year ended January 1, 2005
                                             
        National   Pro Forma       Pro Forma
    Darling   By-Products   Adjustments   Notes   Combined
                     
    (In thousands, except per share data)
Condensed Combined Statements of Operations Data:
                                       
Net sales
  $ 320,229     $ 198,326                   $ 518,555  
                               
Cost of sales and operating expenses
    237,925       160,813                     398,738  
Selling, general and administrative
    36,509       9,364       766       (h )     46,639  
Depreciation and amortization
    15,224       6,973       2,866       (i )     25,063  
Loss on disposals of property & equipment
          (41 )                   (41 )
                               
Total operating expenses
    289,658       177,109       3,632               470,399  
Operating Income
    30,571       21,217       (3,632 )             48,156  
Interest expense
    (6,759 )     (165 )     (2,586 )     (j )     (9,510 )
Other income/(expense), net
    (299 )     21                     (278 )
                               
 
Total other income/(expense)
    (7,058 )     (144 )     (2,586 )             (9,788 )
Income/(loss) from continuing operations before income taxes
    23,513       21,073       (6,218 )             38,368  
Income tax expense/(benefit)
    9,245             5,645       (k )     14,890  
                               
Income/(loss) from continuing operations
  $ 14,268     $ 21,073     $ (11,863 )           $ 23,478  
                               
Per share data:
                                       
 
Income from continuing operations per share:
                                       
   
Basic
  $ 0.22                             $ 0.29  
                               
   
Diluted
  $ 0.22                             $ 0.29  
                               
 
Weighted average number of shares outstanding:
                                       
   
Basic
    63,840               16,382               80,222  
   
Diluted
    64,463               16,577       (l )     81,040  
The accompanying notes are an integral part of these unaudited
pro forma condensed combined financial statements.

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Unaudited Pro Forma Condensed Combined Statements of Operations
for the nine months ended October 1, 2005
                                             
        National   Pro Forma       Pro Forma
    Darling   By-Products   Adjustments   Notes   Combined
                     
    (In thousands, except per share data)
Condensed Combined Statements of Operations Data:
                                       
Net sales
  $ 231,959     $ 141,798                   $ 373,757  
                               
Cost of sales and operating expenses
    182,014       115,086                     297,100  
Selling, general and administrative
    26,158       6,514       575       (h )     33,247  
Depreciation and amortization
    11,390       4,553       2,150       (i )     18,093  
Loss on disposals of property & equipment
          289                     289  
                               
Total operating expenses
    219,562       126,442       2,725               348,729  
Operating Income
    12,397       15,356       (2,725 )             25,028  
Interest expense
    (4,707 )     (108 )     (2,029 )     (j )     (6,844 )
Other income/(expense), net
    891       27                     918  
                               
 
Total other income/(expense)
    (3,816 )     (81 )     (2,029 )             (5,926 )
Income/(loss) from continuing operations before income taxes
    8,581       15,275       (4,754 )             19,102  
Income tax expense/(benefit)
    3,002             3,998       (k )     7,000  
                               
Income/(loss) from continuing operations
  $ 5,579     $ 15,275     $ (8,752 )           $ 12,102  
                               
Per share data:
                                       
 
Income from continuing operations per share:
                                       
   
Basic
  $ 0.09                             $ 0.15  
                               
   
Diluted
  $ 0.09                             $ 0.15  
                               
 
Weighted average number of shares outstanding:
                                       
   
Basic
    63,922               16,382               80,304  
   
Diluted
    64,528               16,555       (l )     81,083  
The accompanying notes are an integral part of these unaudited
pro forma condensed combined financial statements.

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NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
1. Basis of Presentation and New Accounting Pronouncements
      These unaudited pro forma condensed combined financial statements have been prepared based upon historical financial information of Darling and National By-Products giving effect to the acquisition and other related adjustments described in these footnotes. Certain footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted as permitted by SEC rules and regulations. These unaudited pro forma condensed combined financial statements are not necessarily indicative of the results of operations that would have been achieved had the acquisition actually taken place at the dates indicated and do not purport to be indicative of future financial position or operating results. The unaudited pro forma condensed combined financial statements should be read in conjunction with the historical financial statements.
      The acquisition will be accounted for using the purchase method of accounting, in accordance with accounting principles generally accepted in the United States, with Darling treated as the “acquiror” and National By-Products as the acquired company.
      The unaudited pro forma condensed combined statements of operations combine the historical consolidated statements of operations of Darling and National By-Products, for the nine months ended October 1, 2005 and the fiscal year ended January 1, 2005, giving effect to the acquisition and related events as if they had been consummated on January 3, 2004. The unaudited pro forma condensed combined balance sheet combines the historical consolidated balance sheet of Darling and the historical consolidated balance sheet of National By-Products, giving effect to the acquisition and related events as if they had been consummated on October 1, 2005.
      The unaudited pro forma condensed combined income statements do not reflect operational and administrative cost savings, which are referred to as synergies, that management of the combined company estimates may be achieved as a result of the acquisition, or other incremental costs that may be incurred as a direct result of the acquisition.
2. Purchase Price and Financing Considerations
Purchase Price
      For purposes of presentation in the unaudited pro forma condensed combined financial information, the preliminary estimate of the purchase price for National By-Products is assumed to be as follows:
         
    (In thousands)
Share consideration (see Financing Considerations below)
  $ 70,500  
Cash consideration
    70,500  
Working capital adjustment (additional cash consideration)
    2,550  
Estimated transaction costs
    6,200  
       
Estimated purchase price
  $ 149,750  
       
      The tangible and intangible assets and liabilities assumed of National By-Products will be recorded as of the closing date of the acquisition, at their respective fair values, and added to those of Darling. The reported financial position and results of operations of Darling after completion of the acquisition will reflect these values, but will not be restated retroactively to reflect the historical financial position or results of operations of National By-Products. The allocation is dependent upon certain valuations and other studies that have not progressed to a stage where there is sufficient information to make a definitive allocation. Accordingly, the purchase price allocation pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information.

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The final purchase price allocation, which will be determined subsequent to the closing of the acquisition, and its effect on results of operations, may differ significantly from the pro forma amounts included in this section, although these amounts represent management’s best estimate.
      For the purpose of this pro forma analysis, the above estimated purchase price has been allocated based on a preliminary estimate of the fair value of tangible and intangible assets and liabilities assumed as follows:
           
    (In thousands)
Book value of net assets acquired at October 1, 2005
  $ 44,136  
Remaining allocation:
       
 
Deferred financing costs
    3,200  
 
Identifiable intangible assets at fair value(1)
    53,540  
 
Goodwill
    48,874  
       
Estimated purchase price
  $ 149,750  
       
 
(1)  Darling estimates that substantially all of the acquired identifiable intangible assets will be attributable to the following categories:
                         
    Estimated Fair   Estimated Useful   Estimated Annual
    Value   Lives   Amortization
             
    (In thousands)       (In thousands)
Non-compete Agreements
  $ 140       5 years     $ 28  
Permits
    43,300       20 years       2,165  
Customer Relationships
    10,100       15 years       673  
      Darling recognizes that if the final valuation, which is expected to be completed within three to six months from the completion of the acquisition, derives different amounts from their estimate, Darling will adjust these expected identifiable intangible amounts to those amounts. Any adjustments could result in additional depreciation or amortization expense from that included in “pro forma” adjustments.
      In accordance with the requirements of Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), the goodwill associated with the acquisition will not be amortized.
Financing Considerations
      The unaudited pro forma condensed combined financial information included herein reflects management’s estimate of the amounts of financing at the time this unaudited pro forma condensed combined financial information was prepared. The actual amounts of financing will not be determined until shortly before the closing date of the acquisition. The unaudited pro forma condensed combined financial information presented herein assumes the following:
      Darling will issue approximately 16.4 million shares of Darling common stock (“Closing Issued Shares”) to National By-Products in the acquisition, which represents management’s estimate of 20% of the outstanding shares of Darling common stock on the date of closing on a fully diluted basis. The number of shares to be issued was computed based on the number of shares of fully diluted Darling common stock outstanding on March 3, 2006 of approximately 65.5 million.
      The asset purchase agreement contains a true-up adjustment in which additional shares (the “Contingent Shares”) may be issuable to the seller based on Darling’s stock price for an average of 90 days ending on the last day of the 13th month following the date of closing (the “True-up Market Price”). The number of Contingent Shares is determined by dividing $70.5 million by the number of Darling shares issued at closing to determine the “Target Share Price.” To the extent the True-up Market Price exceeds the Target Share Price, no Contingent Shares will be issuable. If the True-up Market Price is less than the Target Share Price, the number of Contingent Shares issuable is determined by dividing

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the “Value Gap” by the greater of $3.60 and the True-up Market Price. The Value Gap is determined by multiplying the number of shares issued at closing by the excess of (i) the Target Share Price over (ii) the greater of the True-up Market Price and $3.60. Only those Closing Issued Shares that have not been transferred (except by gift or into trust) as of the date used to calculate the True-up Market Price will be eligible for the Contingent Shares.
      The Target Share Price is estimated to be $4.303 per share by dividing $70.5 million by the estimated 16.4 million shares that will be issued at closing. Since the estimated price of Darling’s common stock at closing of $4.40 exceeds the Target Share Price of $4.303, there is no estimated Value Gap at closing. However, the Value Gap used to calculate the Contingent Shares will not be known until the True-up Market Price is determined. The $4.40 closing price is estimated based on the price of Darling’s common stock on March 3, 2006. Assuming the True-up Market Price is $4.40 per share, no Contingent Shares will be issuable.
      In accordance with EITF 97-15, “Accounting for Contingency Arrangements Based on Security Prices in a Purchase Business Combination,” the value of the share consideration will be recorded at closing at the lower of (i) $70.5 million, or (ii) the maximum number of shares issuable under the asset purchase agreement multiplied by the average closing price of Darling’s common stock on the AMEX for the period two days prior to the consummation of the acquisition and ending on the consummation of the acquisition. The value of any Contingent Shares issued will be recorded in stockholders’ equity.
3. Pro Forma Adjustments
      Adjustments included in the column under the heading “Pro Forma Adjustments” in both the unaudited pro forma combined balance sheet and statements of operations correspond with the following:
Pro Forma Balance Sheet Adjustments
      a. The adjustment represents cash paid in the acquisition of $30.0 million. As discussed above, the cash consideration of $70.5 million, the estimated working capital adjustment of $2.6 million and the estimated transaction costs of $6.2 million total $79.3 million, of which $30 million will be paid from existing cash and $49.3 million will be paid from additional bank borrowings.
      b. The adjustments represent the estimated value of identifiable intangible assets of $53.5 million and the estimated value of goodwill acquired in the acquisition of $48.9 million, including $2.6 million of goodwill included in National By-Products’ balance sheet at October 1, 2005.
      c. The adjustment represents $3.2 million of deferred financing costs incurred in the acquisition, which is offset by the write-off of $3.0 million in deferred financing costs included in Darling’s balance sheet at October 1, 2005. The $3.0 million in deferred financing costs will be written-off due to the replacement of the existing debt facility, which will result in a $1.9 million reduction in retained earnings after adjusting for a $1.1 million deferred income benefit.
      d. The adjustments represent $49.3 million of debt used to finance the cash portion of the purchase consideration, of which $1.0 million has been recorded as a current liability. The $2.6 million of National By-Products’ debt as of October 1, 2005, is not being assumed by Darling in the acquisition agreement.
      e. The board of directors has approved a bonus to management of $650,000, which is payable upon consummation of the acquisition. The bonus will result in a charge of $650,000 and a corresponding tax benefit of $247,000 at closing.
      f. The adjustments represent the issuance of 16.4 million shares, par value $0.01 per share, at an estimated value of $70.5 million, of which $70.3 million will be recorded as additional paid-in capital.
      g. The adjustment represents the elimination of National By-Products’ members’ capital.

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Pro Forma Statements of Operations Adjustments
      h. The adjustment to selling, general and administrative expense represents the amortization of unvested stock issued in conjunction with the acquisition. The board of directors has approved the issuance of 296,500 shares of Darling common stock to certain members of management upon consummation of the acquisition. Such shares will vest 100% only if Darling’s average stock price for the 90-day period ending on the last day of the thirteenth full consecutive month following the acquisition equals or exceeds the Target Share Price. The Company has estimated the value of the award to be $2.80 per share, assuming Darling’s stock price on the date of acquisition is $4.40. Accordingly, the value of the award will be amortized over the related period, resulting in pro forma adjustments of $766,000 and $575,000 for the year ended January 1, 2005, and the nine months ended October 1, 2005, respectively.
      i. The adjustment to depreciation and amortization represents amortization of certain acquired intangibles. Following the acquisition, Darling expects to amortize the estimated fair value of the identifiable intangible assets of approximately $53.5 million with finite lives on a straight-line basis over an estimated average useful life of 5-20 years. Upon finalization of the asset valuations, specific useful lives will be assigned to the acquired assets, and depreciation and amortization will be adjusted accordingly.
      j. The adjustment represents the interest from an additional $49.3 million of debt issued to finance the cash portion of the purchase price. Darling is assuming that it will replace its existing term loan, which has a balance outstanding of $15.7 million at October 1, 2005, with a new $30 million term loan (“Term Loan A”). Term Loan A is assumed to have an interest rate of LIBOR plus 250 points, which is assumed to be 7.05% for purposes of determining the interest adjustment. The adjustment also includes $35 million in borrowings, which it is assumed that Darling will borrow under a new term loan (“Term Loan B”) with an interest rate of LIBOR plus 275 basis points which is assumed to be 7.3% for purposes of determining the interest adjustment. The adjustment also includes adjusted amortization of deferred financing fees and a reduction in the interest rate on the $35 million subordinated debt facility from 10% to 8% per annum. The prior deferred fees have been replaced with $3.2 million in new fees related to the new debt agreements, which will be amortized over the lives of such facilities of 5 to 6 years. The interest rates assumed in this paragraph are based on Darling’s knowledge of and experience with current lending rates and term sheets received from prospective lenders from the acquisition.
      k. The adjustment represents the income taxes that would have been incurred had the acquisition occurred on January 3, 2004, assuming an effective tax rate of 38%.
      l. As discussed in Financing Considerations above, 16.4 million shares are estimated to be issued at closing. As a result of the unvested stock award discussed in note (h) above, an additional 0.2 million shares are included in diluted shares outstanding.
4. Cost Savings
      The unaudited pro forma condensed combined financial statements do not reflect the projected realization of annual recurring cost savings of approximately $1.0 million to $3.0 million in the first full year of operations. These savings are projected to result from, among other things, the reduction of overhead expenses, changes in corporate infrastructure and reduced freight costs. Although management expects that cost savings will result from the acquisition, there can be no assurance these cost savings will be achieved at the projected levels or at all.
5. Pro Forma Income from Continuing Operations Per Share
      Pro forma income from continuing operations per common share for the nine months ended October 1, 2005 and the fiscal year ended January 1, 2005 have been calculated based on a pro forma

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basis which reflects the issuance of 16.4 million Darling common shares to National By-Products in the acquisition as described below and 0.2 million diluted shares. (In millions, except per share data).
         
    October 1,
    2005
     
Pro forma income from continuing operations
  $ 12.1  
Basic weighted average shares
    80.3  
Diluted weighted average shares
    81.1  
Pro forma basic income from continuing operations per common share
  $ 0.15  
Pro forma diluted income from continuing operations per common share
  $ 0.15  
         
    January 1,
    2005
     
Pro forma income from continuing operations
  $ 23.5  
Basic weighted average shares
    80.2  
Diluted weighted average shares
    81.0  
Pro forma basic income from continuing operations per common share
  $ 0.29  
Pro forma diluted income from continuing operations per common share
  $ 0.29  

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NATIONAL BY-PRODUCTS MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      The following National By-Products Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the historical financial statements of National By-Products and the notes thereto.
Overview
      National By-Products is a recycler of food and animal by-products. National By-Products collects and recycles animal by-products and used cooking oil from food service establishments. National By-Products processes such raw materials at nine facilities and further processes certain products at six additional facilities into finished products such as protein (primarily MBM), animal fat (primarily yellow grease) and hides. National By-Products sells these products nationally and internationally, primarily to producers of oleo-chemicals, soaps, pet foods, livestock feed and leather for use as ingredients in their products or for further processing. All facilities are located in the Midwest United States.
Summary of Critical Issues and Known Trends Faced by National By-Products in Fiscal 2003, 2004, 2005 and Thereafter
Bovine Spongiform Encephalopathy (“BSE”)
      Effective August 1997, the FDA promulgated a rule prohibiting the use of mammalian proteins, with some exceptions, in feeds for cattle, sheep and other ruminant animals. The intent of this rule is to prevent the spread of BSE, commonly referred to as “mad cow disease.” See the risk factor entitled “National By-Products’ business may be affected by FDA regulations relating to BSE” beginning on page 30 for more information about BSE and its potential effects on National By-Products, including government regulations, finished product export restrictions by foreign governments, market price fluctuations for finished goods, reduced demand for beef and beef products by consumers, or increases in operating costs.
Other Known Trends
      See the risk factors entitled “Darling is highly dependent on natural gas and diesel fuel” and “Darling’s business may be negatively impacted by a significant outbreak of avian influenza (Bird Flu) in the U.S.” each beginning on page 23 for more information about other known trends in the rendering industry.
      The challenges referenced above indicate there can be no assurance that operating results of National By-Products achieved in the first nine months of Fiscal 2005, Fiscal 2004 or Fiscal 2003 are indicative of future operating performance of National By-Products.
First Nine Months of Fiscal 2005
      Major challenges faced by National By-Products during the first nine months of Fiscal 2005 included lower finished product prices and high relative prices for diesel fuel and natural gas. There were no new government regulations pertaining to BSE announced during the first nine months of 2005. This continued to contribute to an environment of uncertainty regarding the impact of those regulations. Export markets in some foreign countries for U.S.- produced finished beef products and other cattle by-products continued to be closed throughout the first nine months of 2005.
      Operating income decreased by $3.8 million in the first nine months of Fiscal 2005 compared to the first nine months of Fiscal 2004. The challenges faced by National By-Products indicate there can be no assurance that operating results achieved by National By-Products in the first nine months of Fiscal 2005 are indicative of future operating performance of National By-Products.

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Summary of Critical Issues Faced by National By-Products during the First Nine Months of 2005
      The average price of National By-Products’ finished products was lower during the first nine months of Fiscal 2005 compared to the same period in Fiscal 2004. National By-Products’ management believes that closure of foreign export markets to U.S.-produced beef products resulted in lower commodity prices at National By-Products’ export locations. In years prior to 2004, National By-Products received a premium to domestic commodity finished goods prices in certain of its export locations. The ban on export markets of U.S.-produced beef products resulted in the loss of that price premium during Fiscal 2004, and this continued into the first nine months of 2005. The financial impact of finished goods prices on sales revenue and raw material cost is summarized below in “Results of Operations Nine Months Ended October 1, 2005 Compared to Nine Months Ended October 2, 2004.” Comparative sales price information from the Jacobsen index, an established trading exchange publisher used by National By-Products, is listed below in “Summary of Key Indicators of First Nine Months of 2005 Performance.”
      Higher energy prices for both natural gas and diesel fuel persisted in the first nine months of 2005. National By-Products attempts to manage natural gas price risk by sometimes entering into forward purchase agreements with its natural gas suppliers that permit such contracts. National By-Products also has the ability to burn alternate fuels at various plant locations when economically favorable to do so. National By-Products has limited diesel fuel storage capabilities at its plant locations and regional suppliers have not been willing to enter into forward purchase agreements on terms acceptable to National By-Products. The financial impact of higher natural gas and diesel fuel prices is summarized below in “Results of Operations Nine Months Ended October 1, 2005 Compared to Nine Months Ended October 2, 2004.”
Results of Operations Nine Months Ended October 1, 2005 Compared to Nine Months Ended October 2, 2004
Summary of Key Factors Impacting First Nine Months 2005 Results
      Principal factors that contributed to a $3.8 million (19.9%) decrease in National By-Products’ operating income, which are discussed in greater detail in the following section, were:
  •  lower finished product prices; and
 
  •  higher natural gas and diesel fuel expenses.
      These decreases were partially offset by:
  •  higher raw material volumes;
 
  •  improved recovery of collection expenses; and
 
  •  operating cost improvements.
Summary of Key Indicators of First Nine Months 2005 Performance
      Principal indicators that National By-Products’ management routinely monitors and compares to previous periods as an indicator of problems or improvements in operating results include:
  •  finished product commodity prices (quoted on the Jacobsen index);
 
  •  raw material volume;
 
  •  production volume and related yield of finished product; and
 
  •  collection fees and collection operating expense.
      These indicators and their importance are discussed below in greater detail.
      Prices for finished product commodities that National By-Products produces are quoted each business day on the Jacobsen index, an established trading exchange price publisher. These finished products are

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MBM, BFT and YG. The prices quoted are for delivery of the finished product at a specified location. National By-Products’ actual sales prices for its finished products may vary from the Jacobsen index because National By-Products’ finished products are delivered to multiple locations in different geographic regions that utilize different price indexes. Average Jacobsen prices (at the specified delivery point) for the first nine months of Fiscal 2005 compared to average Jacobsen prices for the first nine months of Fiscal 2004 follow:
                                 
    Avg. Price First   Avg. Price First        
    Nine Months   Nine Months       %
    2005   2004   Decrease   Decrease
                 
MBM (Illinois)
  $ 174.02/ton     $ 205.76/ton     $ (31.74/ton)       (15.4)%  
BFT (Chicago)
  $ 17.51/cwt     $ 18.72/cwt     $ (1.21/cwt)       (6.5)%  
YG (Illinois)
  $ 14.31/cwt     $ 15.68/cwt     $ (1.37/cwt)       (8.7)%  
      The decreases in average price of the finished products National By-Products sells had an unfavorable impact on revenue, which was partially offset by a positive impact to National By-Products’ raw material cost, due to formula pricing arrangements that compute raw material cost, based upon the price of finished product.
      Raw material volume represents the quantity (pounds) of raw material collected from suppliers, including beef, pork, poultry and used cooking oils. Raw material volumes provide an indication of future production of finished products available for sale and are a component of potential future revenue.
      Finished product production volumes are the end result of National By-Products’ production processes, and directly impact goods available for sale, and thus become an important component of sales revenue. Yield on production is a ratio of production volume (pounds) divided by raw material volume (pounds) and provides an indication of effectiveness of National By-Products’ production process. Factors impacting yield on production include quality of raw material and warm weather during summer months, which rapidly degrades raw material.
      National By-Products charges collection fees, which are included in net sales, in order to offset a portion of the expense incurred in collecting raw material.
Net Sales
      National By-Products collects and processes animal by-products (fat, bones and offal) and used restaurant cooking oil to produce finished products of MBM, BFT and YG. Sales are significantly affected by finished goods prices, quality of raw material and volume of raw material. Net sales include the sales of produced finished goods, collection fees, grease trap services and finished goods purchased for resale.
      During the first nine months of Fiscal 2005, net sales decreased by $13.9 million (8.9%) to $141.8 million as compared to $155.7 million during the first nine months of Fiscal 2004. The decrease in net sales was primarily due to the following (in millions of dollars):
         
    Sales
     
Lower finished goods prices
  $ (6.0 )
Increased raw material volume
    3.7  
Lower production yields
    (0.4 )
Other sales increases
    0.6  
Increased collection expense recovery
    0.6  
Decreased purchase of finished product for resale
    (12.4 )
       
    $ 13.9  
      National By-Products purchases a significant amount of product for resale. Higher prices will cause both sales and cost of sales to increase while lower prices will cause both sales and cost of sales to decrease. Purchases for resale are highly dependent upon opportunities in the marketplace and fluctuate

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from year to year. The first nine months of Fiscal 2005 had purchases for resale decrease by $12.4 million from the first nine months of Fiscal 2004. This is primarily caused by the significant decline in meat and bone meal prices. In addition, National By-Products’ purchase of resale hides was down from the prior year due to the loss of a large hide supplier.
Cost of Sales
      Cost of sales includes cost of raw material, the cost of product purchased for resale and the cost to collect and process the raw material. National By-Products utilizes both fixed and formula pricing methods for the purchase of raw materials. Fixed prices are adjusted where possible for changes in competition and significant changes in finished goods market conditions, while raw materials purchased under formula prices are correlated with specific finished goods prices.
      During the first nine months of Fiscal 2005, cost of sales decreased $10.2 million (8.1%) to $115.1 million as compared to $125.3 million during the first nine months of Fiscal 2004. The decrease in cost of sales was primarily due to the following (in millions of dollars):
         
    Cost of Sales
     
Lower raw material prices
  $ (2.5 )
Increased raw material volume
    3.2  
Increased operating costs, primarily energy
    1.5  
Decreased purchase of finished product for resale
    (12.4 )
       
    $ (10.2 )
Selling, General and Administrative Expenses
      Selling, general and administrative expenses were $6.5 million during the first nine months of Fiscal 2005, which was flat with $6.4 million during the first nine months of Fiscal 2004.
Depreciation and Amortization
      Depreciation and amortization charges were $4.6 million during the first nine months of Fiscal 2005, a $0.7 million decrease (13.2%) from $5.3 million during the first nine months of Fiscal 2004. This is due to assets becoming fully depreciated.
Gain (Loss) on Disposal of Property and Equipment
      Losses on property and equipment disposals were $0.3 million during the first nine months of Fiscal 2005, a $0.7 million decrease from a gain of $0.4 million during the first nine months of Fiscal 2004.
Interest Expense
      Interest expense was $0.1 million during the first nine months of Fiscal 2005, unchanged from $0.1 million during the first nine months of Fiscal 2004.
Income Taxes
      National By-Products is a pass-through entity for tax purposes and does not record income tax expense on the books of National By-Products.
Fiscal 2004
      Major challenges faced by National By-Products during Fiscal 2004 included volatile finished goods prices and high relative prices for diesel fuel and natural gas. During Fiscal 2004, anticipated new government regulations pertaining to BSE were never implemented, which contributed to an environment of uncertainty regarding the impact of those anticipated regulations. Export markets in foreign countries

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for U.S.-produced finished beef products and other cattle by-products were closed throughout Fiscal 2004. The effects of these challenges during Fiscal 2004 are summarized in the sections which follow.
      While operating income increased by $2.8 million in Fiscal 2004 compared to Fiscal 2003, these challenges indicate there can be no assurance that operating results achieved by National By-Products in Fiscal 2004 are indicative of future operating performance of National By-Products.
Summary of Critical Issues Faced by National By-Products during Fiscal 2004
      The average price of National By-Products’ MBM prices started the year low as a result of the discovery of a case of BSE in the State of Washington. Primarily due to a strong soy based commodity market, prices recovered and were actually higher during the second and third quarters of Fiscal 2004 compared to the same periods in Fiscal 2003. Finished goods prices began to decline in the third quarter and continued to decline during the fourth quarter of Fiscal 2004 as a result of a large corn and soybean crop. The average sales price of National By-Products’ finished goods for the full year in Fiscal 2004 was slightly higher compared to the full year in Fiscal 2003. National By-Products’ management believes that closure of foreign export markets to U.S.-produced beef products resulted in lower commodity price premiums and increased domestic supply of those finished products, primarily MBM, and forced National By-Products to find new domestic markets for its finished products. In prior years, National By-Products received a premium to domestic commodity finished goods prices by exporting the product. The ban on export markets of U.S.-produced beef products resulted in the loss of that price premium during Fiscal 2004. The financial impact of finished goods prices on sales revenue and raw material cost is summarized below in “Results of Operations in Fiscal 2004.” Comparative sales price information from the Jacobsen index, an established trading exchange publisher used by National By-Products, is listed below in “Summary of Key Indicators of Fiscal 2004 Performance.”
      High energy prices for both natural gas and diesel fuel persisted throughout Fiscal 2004. National By-Products’ management believes that high prices were due in part to fears of potential natural gas shortages resulting from feared supply and demand imbalances and from fears of potential crude oil shortages resulting from war in Iraq and ongoing strife in the Middle East. National By-Products attempts to manage natural gas price risk by entering into forward purchase agreements with all of its natural gas suppliers that permit such contracts and by burning alternate fuels at various plant locations when economically favorable to do so. National By-Products has limited diesel fuel storage capabilities at its plant locations and regional suppliers have not been willing to enter into forward purchase agreements on terms acceptable to National By-Products. The financial impact of higher natural gas and diesel fuel prices is summarized below in “Results of Operations Fiscal 2004 Compared to Fiscal 2003.”
Results of Operations Fiscal 2004 Compared to Fiscal 2003
Summary of Key Factors Impacting Fiscal 2004 Results
      Principal factors which contributed to a $2.8 million (15.3%) increase in operating income, which are discussed in greater detail in the following section, were:
  •  higher overall finished goods prices, driven primarily by yellow grease; and
 
  •  improved efficiency of collection and factory operations.
      These favorable increases to operating income were partially offset by:
  •  higher diesel fuel and natural gas expense; and
 
  •  lower hide and meat and bone meal blending margins.

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Summary of Key Indicators of Fiscal 2004 Performance
      Principal indicators that National By-Products’ management monitored and compared to previous periods as an indicator of problems or improvements in operating results include:
  •  finished product commodity prices quoted on the Jacobsen index;
 
  •  raw material volume;
 
  •  production volume and related yield of finished product;
 
  •  natural gas prices quoted on the NYMEX index;
 
  •  collection fees and collection operating expense; and
 
  •  factory operating expenses.
      These indicators and their importance are discussed below in greater detail.
      Average Jacobsen prices (at the specified delivery point) for Fiscal 2004, compared to average Jacobsen prices for Fiscal 2003 follow:
                                 
    Avg. Price   Avg. Price   Increase/   %
    Fiscal 2004   Fiscal 2003   (Decrease)   Change
                 
MBM (Illinois)
  $ 190.36/ton     $ 194.01/ton     $ (3.65)/ton       (1.9 )%
BFT (Chicago)
  $ 17.95/cwt     $ 18.26/cwt     $ (0.31)/cwt       (1.7 )%
YG (Illinois)
  $ 15.12/cwt     $ 13.39/cwt     $ 1.73/cwt       12.9 %
      Increases in the average prices of the finished products National By-Products sells have a favorable impact on revenue, which is partially offset by a negative impact to National By-Products’ raw material cost, due to formula pricing arrangements that compute raw material cost based upon the price of finished product. Decreases in the average prices of the finished products National By-Products sells have a negative impact on revenue, which is partially offset by a positive impact to National By-Products’ raw material cost due to formula pricing.
      Raw material volume represents the quantity (pounds) of raw material collected from suppliers, including beef, pork, poultry and used cooking oils. Raw material volumes provide an indication of future production of finished products available for sale and are a component of potential future revenue.
      Finished product production volumes are the end result of National By-Products’ production processes, and directly impact goods available for sale, and thus become an important component of sales revenue. Yield on production is a ratio of production volume (pounds) divided by raw material volume (pounds) and provides an indication of effectiveness of National By-Products’ production process. Factors impacting yield on production include quality of raw material and warm weather during summer months, which rapidly degrades raw material.
      Natural gas commodity prices are quoted each day on the NYMEX exchange for future months of delivery of natural gas. The prices are important to National By-Products because natural gas is a major component of factory operating cost and natural gas prices are an indicator of achievement of National By-Products’ business plan. Average NYMEX pricing for natural gas for fiscal years 2004 and 2003 are set forth below.
                                 
    Avg. Price   Avg. Price       %
    Fiscal 2004   Fiscal 2003   Increase   Increase
                 
Natural gas
  $ 6.14/mmbtu     $ 5.39/mmbtu     $ 0.75/mmbtu       13.9 %
      National By-Products charges collection fees, which are included in net sales, in order to offset a portion of the expense incurred in collecting raw material. Collection expense is included in cost of sales.
      National By-Products incurs factory operating expenses that are included in cost of sales.

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Net Sales
      In Fiscal Year 2004, NBP’s sales were significantly affected by finished goods prices, quality of raw material and volume of raw material. Net sales include the sales of produced finished goods, collection fees, service fees and finished goods purchased for resale.
      During Fiscal 2004, net sales decreased by $3.2 million (1.6%) to $198.3 million as compared to $201.5 million during Fiscal 2003. The decrease in net sales was primarily due to the following increases/(decreases) (in millions of dollars):
         
    Sales
     
Higher finished goods prices
  $ 2.6  
Increased raw material volume
    1.5  
Lower production yields
    (0.2 )
Other sales decreases
    (1.2 )
Decreased collection expense recovery
    (0.1 )
Decreased purchase of finished product for resale
    (5.8 )
       
    $ (3.2 )
      National By-Products purchases a significant amount of product for resale. Higher prices will cause both sales and cost of sales to increase while lower prices will cause both sales and cost of sales to decrease. Purchases for resale are highly dependent upon opportunities in the marketplace and fluctuate from year to year. Fiscal 2004 had purchases for resale decrease by $5.8 million over Fiscal 2003. This was primarily caused by the reduced activity in blending MBM and this also explains the decrease in other sales. Due to the ban on MBM exports, National By-Products’ MBM was marketed domestically, using a marketing plan that called for less outside blending product than previously.
Cost of Sales
      During Fiscal 2004, cost of sales decreased $5.1 million (3.1%) to $160.8 million as compared to $165.9 million during Fiscal 2003. The decrease in cost of sales was primarily due to the following (in millions of dollars):
         
    Cost of Sales
     
Higher raw material prices
  $ 0.9  
Increased raw material volume
    1.2  
Decreased operating costs, net of increased energy costs
    (1.4 )
Decreased purchase of finished product for resale
    (5.8 )
       
    $ (5.1 )
Selling, General and Administrative Expenses
      Selling, general and administrative expenses were $9.4 million during Fiscal 2004, unchanged from $9.4 million during Fiscal 2003.
Depreciation and Amortization
      Depreciation and amortization charges decreased $0.6 million (8.1%) to $7.0 million during Fiscal 2004 as compared to $7.6 million during Fiscal 2003. This was due to assets becoming fully depreciated.
Interest Expense
      Interest expense was $0.2 million during Fiscal 2004 compared to $0.9 million during Fiscal 2003, a decrease of $0.7 million (77.8%). This was due to lower debt.

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Fiscal 2003
      Major challenges faced by National By-Products during 2003 included the occurrence of a single case of BSE in the United States, a single case of BSE in Canada, high natural gas prices and increased diesel fuel costs. During 2003, high finished product commodity prices were partially offset by the negative impact of high raw material prices and high energy costs.
Summary of Critical Issues Faced by National By-Products during Fiscal 2003
  •  Higher finished product commodity prices were experienced, especially in the fourth quarter of 2003, as a result of a tightening in supplies of and demand for fats, oils and proteins worldwide. In addition, a single case of BSE in Canada in late spring of 2003 caused a dramatic price increase for U.S.-produced MBM. High finished product prices were favorable to National By-Products’ sales revenue, but this favorable result was partially offset by the negative impact on raw material cost, due to National By-Products’ formula pricing arrangements with raw material suppliers, which index raw material cost to the prices of finished products derived from the raw material. The financial impact of the increase of finished goods prices on sales revenue and raw material cost is summarized below in Results of Operations.
 
  •  High energy prices for both natural gas and diesel fuel persisted throughout Fiscal 2003. National By-Products’ management believes that high prices were due in part to fears of potential natural gas shortages resulting from severe winter weather in February and March 2003, and from fears of potential crude oil shortages resulting from war in Iraq and ongoing strife in the Middle East. National By-Products attempts to manage natural gas price risk by occasionally entering into forward purchase agreements with all of its natural gas suppliers that permit such contracts, in order to purchase natural gas for future months when prices are relatively low. National By-Products has limited diesel fuel storage capabilities at its plant locations and regional suppliers have not been willing to enter forward purchase agreements on terms acceptable to National By-Products. The financial impact of higher natural gas and diesel fuel prices is summarized below in “Results of Operations Fiscal 2003 Compared to Fiscal 2002.”
Results of Operations Fiscal 2003 Compared to Fiscal 2002
Summary of Key Factors Impacting Fiscal 2003 Results
      Principal factors which contributed to a $2.6 million (16.5%) increase in operating income, which are discussed in greater detail in the following section, were:
  •  higher finished goods prices;
 
  •  improved efficiency of collection and factory operations; and
 
  •  higher diesel fuel and natural gas expense.
Summary of Key Indicators of Fiscal 2003 Performance
      Principal indicators that National By-Products’ routinely monitors and compares to previous periods as an indicator of problems or improvements in operating results were the same in Fiscal 2003 as they were in Fiscal 2002.
      Average Jacobsen prices (at the specified delivery point) for Fiscal 2003, compared to average Jacobsen prices for Fiscal 2002 follow:
                                 
    Avg. Price   Avg. Price       %
    Fiscal 2003   Fiscal 2002   Increase   Increase
                 
MBM (Illinois)
  $ 194.01/ton     $ 165.65/ton     $ 28.36/ton       17.20%  
BFT (Chicago)
  $ 18.26/cwt     $ 13.47/cwt     $ 4.79/cwt       35.60%  
YG (Illinois)
  $ 13.39/cwt     $ 9.31/cwt     $ 4.08/cwt       43.90%  

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      Average NYMEX pricing for natural gas for fiscal years 2003 and 2002 are set forth below.
                                 
    Avg. Price   Avg. Price       %
    Fiscal 2003   Fiscal 2002   Increase   Increase
                 
Natural gas
  $ 5.39/mmbtu     $ 3.22/mmbtu     $ 2.17/mmbtu       67.4 %
Net Sales
      During Fiscal 2003, net sales increased by $21.9 million (12.2%) to $201.5 million as compared to $179.6 million during Fiscal 2002. The increase in net sales was primarily due to the following increases/(decreases) (in millions of dollars):
         
    Sales
     
Higher finished goods prices
  $ 15.7  
Increased raw material volume
    (0.3 )
Lower production yields
    (2.6 )
Other sales increases
    0.2  
Decreased collection expense recovery
    (1.7 )
Increased purchase of finished product for resale
    10.6  
       
    $ 21.9  
      National By-Products purchases a significant amount of product for resale. Higher prices will cause both sales and cost of sales to increase while lower prices will cause both sales and cost of sales to decrease. Purchases for resale are highly dependent upon opportunities in the marketplace and fluctuate from year to year. Fiscal 2003 had purchases for resale increase by $10.6 million over Fiscal 2002. This is primarily caused by higher market prices of meat and bone meal, yellow grease and hides and a slightly higher volume of hides purchased for resale.
Cost of Sales
      During Fiscal 2003, cost of sales increased $19.6 million (13.4%) to $165.9 million as compared to $146.3 million during Fiscal 2002. The increase in cost of sales was primarily due to the following (in millions of dollars):
         
    Cost of Sales
     
Higher raw material prices
  $ 6.7  
Decreased raw material volume
    (0.3 )
Increased operating costs, net of increased energy costs
    2.6  
Increased purchase of finished product for resale
    10.6  
       
    $ 19.6  
Selling, General and Administrative Expenses
      Selling, general and administrative expenses increased $0.6 million (6.9%) to $9.4 million during Fiscal 2003, as compared to $8.8 million during Fiscal 2002. This is due to one additional week in Fiscal 2003 and the initial award under a new long-term incentive plan for key employees.
Depreciation and Amortization
      Depreciation and amortization charges decreased $0.5 million (6.2%) to $7.6 million during Fiscal 2003 as compared to $8.1 million during Fiscal 2002, due to assets becoming fully depreciated.

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Interest Expense
      Interest expense was $0.9 million during Fiscal 2003 compared to $1.3 million during Fiscal 2002, a decrease of $0.4 million (30.8%), due to lower debt.
Income Tax Benefit
      National By-Products is a limited liability company, which is a pass-through entity for tax purposes, and does not record income tax expense on the books of National By-Products. Upon the conversion to a limited liability company on January 11, 2002, a one-time $8.6 million benefit was recorded in Fiscal 2002 due to the write off of $3.5 million of a deferred tax liability and the recognition of a $5.1 million tax benefit generated from the final C-corp tax return.
Financing, Liquidity and Capital Resources
      On June 30, 2000, National By-Products entered into an amended and restated credit agreement that amended and restated in its entirety its previous credit agreement dated December 14, 1994, with the same lenders.
      This 2000 amended and restated credit agreement has been amended four times:
        1. Amendment #1, dated September 30, 2000 — to decrease the restrictive covenant on tangible net worth from $23.0 million to $18.0 million.
 
        2. Amendment #2, dated January 28, 2002 — to allow for the conversion of National By-Products to a limited liability company; to allow for a supplemental term loan facility of $6.0 million to be used for capital gains tax distributions and purchases of equity interests; and to eliminate the 25% prepayment requirement of free cash flow, among other changes.
 
        3. Amendment #3, dated March 31, 2003 — to allow for special distributions up to 100% of free cash flow limited to $10.0 million; to increase the tangible net worth restrictive covenant to $31.0 million; and to eliminate the liens on National By-Products’ tractors and trailers, among other changes.
 
        4. Amendment #4, dated July 2, 2004 — to eliminate the $10.0 million limitation on special distributions; to extend the term by two years to June 30, 2007; and to increase the revolving credit facility from $16.0 million to $21.0 million, among other changes.
      The principal components of National By-Products’ amended and restated credit agreement, as amended, consist of the following.
  •  Financing facilities, consisting of a $27.0 million term loan facility, a $6.0 million supplemental term loan facility, and a $21.0 million revolving facility, which includes a $5.0 million letter of credit subfacility. Proceeds of the new term loan facility were used to pay off the outstanding balance of the prior term loan facility of approximately $27.0 million.
 
  •  Term of seven years maturing on June 30, 2007.
 
  •  Scheduled amortization payments on the term loan facility of $1.0 million, due each quarter during the original five-year term of the amended and restated credit. The term loan facility was paid in full during 2003.
 
  •  Interest rate that may be based upon either prime or LIBOR or a combination of both rates, plus a margin that may be adjusted quarterly based upon the leverage ratio of National By-Products, as defined by the amended and restated credit agreement. Amounts available that are not borrowed by National By-Products incur a variable commitment fee.
 
  •  Increased availability and liquidity, an extended term, lower bank margins and more flexible capital investment limitations than the prior credit agreement dated December 14, 1994.

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  •  Restrictive covenants permit National By-Products, within limitations defined in the amended and restated credit agreement, to incur additional indebtedness; pay distributions; create liens; merge, consolidate, or acquire other businesses; sell and dispose of assets; make investments; and require the maintenance of certain minimum financial ratios.
      National By-Products’ amended and restated credit agreement, as amended, consists of the following elements at October 1, 2005; January 1, 2005; and January 3, 2004 (in thousands):
                           
Amended and Restated Credit Agreement   October 1, 2005   January 1, 2005   January 3, 2004
             
Term Loan
  $ 0     $ 0     $ 0  
                   
Revolving credit facility
                       
 
Maximum availability
  $ 21,000     $ 21,000     $ 16,000  
 
Borrowings outstanding
    2,600             6,400  
 
Letters of credit issued
    1,779       1,904       2,475  
                   
 
Availability
  $ 16,621     $ 19,096     $ 7,125  
      Substantially all assets of National By-Products are either pledged or mortgaged as collateral for borrowings under its amended and restated credit agreement. National By-Products’ amended and restated credit agreement contains certain terms and covenants, which permit the incurrence of additional indebtedness, the payment of cash distributions and capital expenditures within limitations defined by the amended and restated credit agreement, and requires the maintenance of certain minimum financial ratios, including minimum fixed charge coverage ratio, maximum leverage ratio and minimum tangible net worth, each as defined in the amended and restated credit agreement. National By-Products is currently in compliance with all of the covenants contained in its amended and restated credit agreement.
      The classification of long-term debt in each of National By-Products’ October 1, 2005, January 1, 2005 and January 3, 2004 balance sheet is based on the contractual repayment terms of the debt issued under the amended and restated credit agreement.
      National By-Products had working capital of $8.9 million, $8.9 million and $10.5 million as of October 1, 2005, January 1, 2005 and January 3, 2004, respectively. National By-Products had no cash and funds available under the revolving credit facility of $16.6 million, $19.1 million and $7.1 million as of October 1, 2005, January 1, 2005 and January 3, 2004, respectively.
      Net cash provided by operating activities was $20.6 million and $23.5 million for the nine months ended October 1, 2005 and October 2, 2004, respectively. The decline of $2.9 million was primarily caused by a decrease of $3.8 in operating income due to lower meat and bone meal prices and higher natural gas and diesel fuel prices.
      Net cash provided by operating activities was $31.1 million, $29.9 million and $24.0 million for the fiscal years ended January 1, 2005, January 3, 2004 and December 28, 2002, respectively. The net cash increase of $5.2 million of Fiscal 2003 over Fiscal 2002 includes the collection of a $4.2 million income tax receivable.
      Cash used by investing activities was $2.4 million and $2.0 million for the nine months ended October 1, 2005 and October 2, 2004, respectively. Cash used by investing activities was $4.3 million, $4.1 million and $5.0 million for the fiscal years ended January 1, 2005, January 3, 2004 and December 28, 2002, respectively. Changes in cash used by investing activities are primarily caused by changes in capital expenditures, which have been relatively stable for the nine months ended October 1, 2005 and October 2, 2004 as well as the fiscal years 2004, 2003 and 2002.
      Capital expenditures were $2.3 million and $2.6 million for the nine months ending October 1, 2005 and October 2, 2004, respectively. Capital expenditures were $4.9 million, $4.3 million and $5.4 million during Fiscal 2004, Fiscal 2003 and Fiscal 2002, respectively.

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      The current taxable income of National By-Products flows through to and is reportable by the members of National By-Products. National By-Products attempts to disburse funds in the form of a tax distribution to members to satisfy the tax obligations incurred from the taxable income. National By-Products may also pay a special distribution subject to National By-Products’ special distribution policy. Total cash distributions were $20.5 million and $16.3 million for the nine months ending October 1, 2005 and October 2, 2004, respectively. Total cash distributions were $19.3 million, $12.3 million and $13.0 million during Fiscal 2004, Fiscal 2003 and Fiscal 2002, respectively.
      Based upon the underwriters’ estimate of loss, current accruals and claims paid during the first nine months of Fiscal 2005, National By-Products has accrued approximately $1.8 million in self-insurance reserves, of which $1.0 million is expected to become due during the next twelve months. The self insurance reserve is composed of estimated liability for claims arising for workers’ compensation and for auto liability and general liability claims. The estimate may vary from year to year, due to changes in cost of health care, the pending number of claims, or other factors beyond the control of management of National By-Products or the administrator of National By-Products’ self insurance reserve. No assurance can be given that National By-Products’ funding obligations under its self insurance reserve will not increase in the future.
      Based upon current actuarial estimates, National By-Products paid approximately $0.1 million during the fourth quarter of 2005 and another $0.1 million in the first quarter of 2006 in order to meet pension funding requirements. The minimum pension funding requirements are determined annually, based upon a third party actuarial estimate. The actuarial estimate may vary from year to year, due to fluctuations in return on investments or other factors beyond the control of management of National By-Products or the administrator of National By-Products’ pension funds. No assurance can be given that the minimum pension funding requirements will not increase in the future.
      National By-Products’ management believes that cash flows from operating activities at the current rate for the first nine months of Fiscal 2005 and funds available under its amended and restated credit agreement should be sufficient to meet National By-Products’ working capital needs, capital expenditures, debt service and tax distributions for at least the next twelve months. The impact on cash flows from operations for the next twelve months of the occurrence of BSE in the U.S. or elsewhere, regulations by government agencies, the impact on export markets and the impact on market prices for National By-Products’ finished products is not known at this time. These factors, coupled with higher prices for natural gas and diesel fuel, among others, could either positively or negatively impact National By-Products’ results of operations for the next twelve months and thereafter. National By-Products cannot provide assurance that the cash flows from operating activities generated in Fiscal 2005 are indicative of the future cash flows from operating activities that will be generated by National By-Products’ operations. National By-Products reviews the appropriate use of cash regularly. Although no decision has been made as to non-ordinary course cash usages at this time, potential usages could include opportunistic capital expenditures or investments in response to governmental regulations relating to BSE, and/or acquisitions, as well as suitable cash conservation to withstand adverse commodity cycles.
      The current economic environment in National By-Products’ markets has the potential to adversely impact its liquidity in a variety of ways, including through reduced sales, potential inventory buildup, or higher operating costs.
      The principal products that National By-Products sells are commodities, the prices of which are quoted on established commodity markets and are subject to volatile changes. Although the current market prices of these commodities are favorable, a decline in these prices has the potential to adversely impact National By-Products’ liquidity. Continued disruption in international sales, a decline in commodities prices, lower raw material volume, or a rise in energy prices resulting from the recent war with Iraq and the subsequent political instability and uncertainty, has the potential to adversely impact National By-Products’ liquidity. There can be no assurance that a decline in commodities prices, a rise in energy prices, a slowdown in the U.S. or international economy, or other factors, including political instability in the Middle East or elsewhere, and the macroeconomic effects of those events, will not cause National By-Products to fail to meet management’s expectations, or otherwise result in liquidity concerns.

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Contractual Obligations and Other Commercial Commitments
      The following table summarizes National By-Products’ expected material contractual payment obligations, including both on- and off-balance sheet arrangements at October 1, 2005 (in thousands):
                                           
        Less than           More than
    Total   1 Year   1-3 Years   3-5 Years   5 Years
                     
Contractual obligations:
                                       
Long-term obligations
  $ 2,600     $     $ 2,600     $     $  
Operating lease obligations
    3,002       673       971       624       734  
Purchase commitments
    5,688       5,688                    
Pension funding obligations(a)
    207       207                    
Other long-term liabilities
    2,283       1,027       424       233       599  
 
Total
  $ 13,780     $ 7,595     $ 3,995     $ 857     $ 1,333  
 
(a)  Pension funding requirements are determined annually, based upon a third party actuarial estimate. National By-Products is not able to estimate pension funding requirements beyond the next twelve months. The accrued pension benefit liability was approximately $1.2 million at the end of Fiscal 2004.
Off-Balance Sheet Obligations and Commercial Commitments
      National By-Products’ off-balance sheet contractual obligations and commercial commitments as of October 1, 2005 relate to operating lease obligations, letters of credit and forward purchase agreements. National By-Products has excluded these items from the balance sheet in accordance with accounting principles generally accepted in the U.S.
      Based upon underlying operating lease agreements, National By-Products paid approximately $0.2 million in additional operating lease obligations during the fourth quarter of Fiscal 2005 and $0.6 million during Fiscal 2006 that are not included in liabilities on National By-Products’ balance sheet at October 1, 2005. These lease obligations are included in cost of sales or selling, general and administrative expense as the underlying lease obligation comes due, in accordance with accounting principles generally accepted in the U.S.
      National By-Products has $1,779 in standby letters of credit issued to insurance companies as of October 1, 2005. While the letters of credit act as collateral for the insurance companies to ensure National By-Products’ payment of unpaid insurance claims, which are accrued as liabilities for self-insurance reserves on the balance sheet at October 1, 2005, the letters of credit themselves are not recorded.
      Based upon underlying purchase agreements, National By-Products has commitments to purchase $5.7 million of natural gas during the next twelve months, which are not included in liabilities on National By-Products’ balance sheet at October 1, 2005. National By-Products enters into rendering raw material supply agreements but these agreements do not specify quantities or prices. National By-Products also enters into prompt month purchases for hides and meat and bone meal. National By-Products does not view these raw material contracts as being obligations quantifiable or in form to qualify as a contract obligation. These purchase agreements are entered in the normal course of National By-Products’ business and are not subject to derivative accounting. The commitments will be recorded on the balance sheet of National By-Products when delivery of these commodities occurs and ownership passes to National By-Products in accordance with accounting principles generally accepted in the U.S.
Critical Accounting Policies
      National By-Products follows certain significant accounting policies when preparing its financial statements. A complete summary of these policies is included in Note 1 to the Financial Statements of NBP included in this joint proxy statement/ prospectus.

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      Certain of the policies require National By-Products’ management to make significant and subjective estimates or assumptions that may deviate from actual results. In particular, National By-Products’ makes estimates regarding estimates of bad debt expense, valuation of inventories, estimates of useful life of long-lived assets related to depreciation and amortization expense, estimates regarding fair value of National By-Products’ assets and future cash flows with respect to assessing potential impairment of both long-lived assets and goodwill, estimates of liability with respect to medical insurance liability, self-insurance, environmental and litigation reserves, pension liability and estimates of expense related to long-term incentive plan awards. Each of these estimates is discussed in greater detail in the following discussion.
Accounts Receivable and Allowance for Doubtful Accounts
      In accordance with SFAS No. 5, Accounting for Contingencies, National By-Products maintains allowances for doubtful accounts for estimated losses resulting from customers non-payment of trade accounts receivable owed to National By-Products. These trade receivables arise in the ordinary course of business from sales of finished product or services to National By-Products’ customers. The estimate of allowance for doubtful accounts is based upon National By-Products’ bad debt experience, prevailing market conditions, aging of trade accounts receivable and interest rates, among other factors. If the financial condition of National By-Products’ customers deteriorates, resulting in the customer’s inability to pay National By-Products’ receivable as it comes due, additional allowance for doubtful accounts may be required.
Inventories
      National By-Products’ inventories are valued at the lower of cost or market. Finished product manufacturing cost is calculated using the either average cost of production or first-in, first-out method, or market, based upon National By-Products’ raw material costs, collection and factory production operating expenses, and depreciation expense on collection and factory assets.
Long-Lived Assets Depreciation and Amortization Expense and Valuation
      National By-Products’ property, plant and equipment are recorded at cost when acquired. Depreciation expense is computed on property, plant and equipment based upon a straight line method over the estimated useful life of the assets. Buildings and improvements are depreciated over a useful life of 15 to 35 years, machinery and equipment are depreciated over a useful life of 3 to 15 years, and vehicles are depreciated over a life of 3 to 10 years. These useful life estimates have been developed based upon National By-Products’ historical experience of asset life utility, and whether the asset is new or used when placed in service. The actual life and utility of the asset may vary from this estimated life. Useful lives of the assets may be modified from time to time when the future utility or life of the asset is deemed to change from that originally estimated when the asset was placed in service.
      National By-Products’ intangible assets, which consist of non-compete agreements obtained in conjunction with acquisitions, are recorded at fair value when acquired. Amortization expense is computed on these agreements based upon a straight-line method over the life of the non-compete agreement, typically five years.
      National By-Products reviews the carrying value of long-lived assets at the end of each fiscal year, for indications of impairment. Impairment is indicated whenever the carrying value of the asset is not recoverable or exceeds estimated fair value. A future reduction of earnings in National By-Products’ plants could result in an impairment charge because the estimate of fair value would be negatively impacted by a reduction of earnings.
      National By-Products has discontinued activities at various locations, but continues to maintain certain property and equipment related to those facilities. National By-Products reviews the carrying value of these assets each year in comparison to the estimated market value of these facilities, for indications of impairment.

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Goodwill Valuation
      National By-Products reviews the carrying value of goodwill at the end of each fiscal year, for indications of impairment at each plant location that has recorded goodwill as an asset. Impairment is indicated whenever the carrying value of goodwill exceeds a typical market multiple of the current cash flow derived from the acquisition that created the goodwill. The future cash flows at these locations could change if actual volumes, prices, costs or expenses vary from current levels. A future reduction of earnings at the plants with recorded goodwill could result in an impairment charge because the estimate of fair value would be negatively impacted by a reduction of earnings at those plants.
Accrued Medical Claims Liability
      National By-Products provides a self-insured group health plan to its employees, which provides medical benefits to participating employees. National By-Products has an employer’s stop loss insurance policy to cover individual claims in excess of $250,000 per employee per year. The amount charged to medical insurance expense includes claims paid during the year and includes estimates of liabilities for outstanding medical claims under the plan at the balance sheet date, based upon historical claims expense and historical claims submission information. If actual future medical claims by employees vary significantly from historical spending or if the actual timeliness of submission of those claims by medical care providers changes, the actual medical claims may vary from the estimated liability.
Self Insurance, Environmental and Legal Reserves
      National By-Products purchases its workers compensation, auto and general liability insurance on a retrospective basis. National By-Products estimates and accrues its expected ultimate costs related to claims occurring during each fiscal year and carries this accrual as a reserve until National By-Products pays such claims. Estimates of self-insurance liability are based upon the insurance underwriter’s estimate of loss, which National By-Products relies upon in calculating estimates of reported losses, and National By-Products’ management’s own estimates for unreported losses.
      National By-Products has also accrued loss reserves related to environmental and litigation matters, based upon estimated undiscounted future costs. In developing estimates of loss, National By-Products utilizes its staff, outside consultants and outside counsel as sources of information and judgment as to the expected undiscounted future costs of the claims.
      With respect to National By-Products’ self insurance, environmental and litigation reserves, estimates of reserve liability could change if future events are different than those included in the estimates of the insurance underwriter, consultants or management of National By-Products.
Pension Liability
      National By-Products has a qualified defined benefit pension plan covering substantially all hourly nonunion employees. Benefits under this plan are based on an employee’s years of service. The plan’s assets include primarily mutual funds and common stock. National By-Products’ funding policy is based on an actuarially determined cost method allowable under Internal Revenue Service regulations. National By-Products uses a December 31 measurement date to determine pension benefit obligations.
      Pension expense and pension liability recorded by National By-Products is based upon an annual actuarial estimate provided by a third party actuary. Two of the most significant assumptions used to calculate future pension obligations are the discount rate applied to pension liability and the expected rate of return on pension plan assets. These assumptions and estimates are subject to the risk of change over time, and each factor has inherent uncertainties which neither the actuary nor National By-Products is able to control, or to predict with certainty.
      The discount rate applied to National By-Products’ pension liability is the interest rate used to calculate the present value of the pension benefit obligation. The discount rate is based on the yield of

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long-term corporate bonds at the measurement date of December 31. Discount rates of 5.75% and 6.00% were used to calculate pension assets and liabilities at January 1, 2005 and January 3, 2004, respectively.
      The expected rate of return on National By-Products’ pension plan assets is the interest rate used to calculate future returns on investment of the plan assets. The expected return on plan assets is a long-term assumption whose accuracy can only be assessed over a long period of time. The expected return on pension plan assets used to calculate pension assets and liabilities was 7.00% at both January 1, 2005 and January 3, 2004, respectively.
      National By-Products is also committed to participate in a number of defined benefit multi-employer pension plans that cover substantially all union employees. National By-Products has determined subsequent to October 1, 2005 that its share of the multi-employer pension plans which had an under-funded status was approximately $2.8 million. This amount is not recorded as a liability of National By-Products.
Income Taxes
      Effective January 11, 2002, National By-Products was reorganized as a limited liability company pursuant to Section 301 of the Iowa Limited Liability Company Act. The income tax receivable and income tax refunds included in the balance sheet and statement of cash flows relate to National By-Products’ activities prior to reorganization. The current taxable income of National By-Products flows through to and is reportable by the members of National By-Products. A portion of National By-Products’ distributions are intended to satisfy the tax obligations incurred from the taxable income passed through to and reportable by the members of National By-Products.
      In conjunction with the reorganization to a limited liability corporation (LLC), deferred income tax liabilities in the net amount of $3.5 million, recorded at December 29, 2001, were written off to income tax benefit in the 2002 statement of income. Additionally, the reorganization resulted in a taxable loss on the termination of National By-Products, Inc. (the predecessor company prior to reorganization as an LLC). This loss generated an income tax benefit of $5.1 million, of which $4.2 million was an outstanding receivable at December 28, 2002.
      National By-Products accounts for and discloses potential income tax contingencies in accordance with SFAS No. 5, “Accounting for Contingencies.” The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Significant management judgment was required in determining potential tax liabilities associated with tax contingencies from prior transactions where the ultimate tax outcome is uncertain. Although National By-Products’ estimates there will be no further liability, no assurance can be given that the final tax outcome of these matters will not differ from that which was reflected in the historical income tax provisions and accrued liabilities. No estimate of the range of liability can be made given the nature of the uncertainties. Resolution of these uncertainties in a manner inconsistent with National By-Products’ expectations could have a material impact on National By-Products’ cash flows and distributions to shareholders.
Long-Term Incentive Plan
      Effective January 24, 2003, the board of managers approved the 2003 Long-Term Incentive Plan (the “Plan”). Up to 150,000 performance units (“Units”) are available under the Plan. Units awarded to employees vest over a period, not to exceed five years, as determined at the discretion of National By-Products’ board. As of October 1, 2005, there were 11,655 units outstanding to senior managers. National By-Products uses an independent appraisal to assist National By-Products’ board and management in determining their best estimate of the per unit values. National By-Products accrues a liability equal to outstanding units times the per unit value as determined by National By-Products. National By-Products’ management accrues this liability at 100% regardless of the vesting percentage. National By-Products’ management believes the estimate provides a reasonable estimate of the amount that will ultimately be paid pursuant to the Plan. National By-Products determines this award in January following each fiscal year and the expense is accrued into that preceding fiscal year.

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New Accounting Pronouncements
      In November 2004, the FASB issued Statement of Financial Accounting Standard No. 151 (“SFAS 151”), Accounting for Inventory Costs, which amends Accounting Research Bulletin No. 43, related to Inventory Pricing. SFAS 151 will require that abnormal freight, handling costs and amounts of wasted materials be treated as current period costs and will no longer permit these costs to be capitalized as inventory costs on the balance sheet. SFAS 151 will be effective for inventory costs incurred during annual periods beginning after June 15, 2005 (the first day of Fiscal 2006). Adoption of SFAS 151 is not expected to result in a material impact to National By-Products’ financial statements.
      On December 16, 2004, the FASB issued Statement No. 153, Exchanges of Non-monetary Assets, an amendment of APB Opinion No. 29. This statement was a result of an effort by the FASB and the IASB to improve financial reporting by eliminating certain narrow differences between their existing accounting standards. One such difference was the exception from fair value measurement in APB Opinion No. 29, Accounting for Non-monetary Transactions, for non-monetary exchanges of similar productive assets. Statement 153 replaces this exception with a general exception from fair value measurement for exchanges of non-monetary assets that do not have commercial substance. A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. This statement shall be applied prospectively and is effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted for non-monetary asset exchanges occurring in fiscal periods beginning after the date of issuance of this Statement. The adoption of FASB No. 153 does not have a significant impact on National By-Products’ financial position, results of operations or cash flows.
      On December 16, 2004, the FASB issued Statement No. 123 (revised 2004), Share-Based Payment (“Statement No. 123(R)”). Statement No. 123(R) requires all entities to recognize compensation expense in an amount equal to the fair value of the share-based payments (e.g., stock options and restricted stock) granted to employees or by incurring liabilities to an employee or other supplier (a) in amounts based, at least in part, on the price of the entity’s shares or other equity instruments or (b) that require or may require settlement by issuing the entity’s equity shares or other equity instruments. This Statement is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. This Statement supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. This Statement was to be effective for public entities that do not file as small business issuers as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. On April 14, 2005, the SEC announced the amendment of Rule 4-01(a) of Regulation S-X that amends the compliance dates for FASB’s Statement No. 123(R). The SEC’s new rule allows companies to implement Statement No. 123(R) at the beginning of their next fiscal year, instead of the next reporting period, that begins after June 15, 2005. National By-Products will evaluate the impact of this timing change on its financial statements for 2006.
      During March 2005, the FASB issued Financial Accounting Standard Interpretation No. 47 (“FIN 47”), Accounting for Conditional Asset Retirement Obligations, to clarify that the term “conditional asset retirement obligation” as used in FASB Statement No. 143, Accounting for Asset Retirement Obligations, refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. This Interpretation is effective no later than the end of fiscal years ending after December 15, 2005. Adoption of FIN 47 is not expected to have a material impact on National By-Products’ financial statements.
      On May 30, 2005, the FASB issued Statement 154, Change in Accounting Principle (“Statement 154”), which changes the requirements for the accounting and reporting of a change in accounting principle. Statement 154 applies to all voluntary changes in accounting principle as well as to changes required by an accounting pronouncement that does not include specific transition provisions. Statement 154 eliminates the requirement in APB Opinion No. 20, Accounting Changes, to include the cumulative effect of changes in accounting principle in the income statement in the period of changes.

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Instead, to enhance the comparability of prior period financial statements, Statement 154 requires that changes in accounting principle to be retrospectively applied. Under retrospective application, the new accounting principle is applied as of the beginning of the first period presented as if that principle had always been used. The cumulative effect of the change is reflected in the carrying value of assets and liabilities as of the first period presented and the offsetting adjustments are recorded to opening retained earnings. Each period presented is adjusted to reflect the period-specific effects of applying the changes. Statement 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Early adoption is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date the Statement was issued. The Statement does not change the transition provisions of any existing accounting pronouncements, including those that are in a transition phase as of the effective date of the Statement.
      On July 14, 2005, the FASB published an exposure draft entitled Accounting for Uncertain Tax Positions — an interpretation of FASB Statement No. 109 (“the proposed interpretation”). The proposed interpretation is intended to reduce the significant diversity in practice associated with recognition and measurement of income taxes by establishing consistent criteria for evaluating uncertain tax positions. The proposed interpretation establishes a probable recognition threshold. To recognize a benefit from a tax position, a company must conclude that the position is probable of being sustained upon audit based solely on the technical merits of the position. Once the probable recognition threshold is met, the best estimate of the amount that would be sustained on audit should be recognized. In the period in which it becomes more likely than not that a tax position would no longer be sustained upon an audit by a taxing authority, the benefit should be derecognized by recording an income tax liability or reducing a deferred tax asset. A liability arising from the difference between the position taken in the tax return and the amount booked in the financial statements pursuant to the proposed interpretation should be classified as a current liability if expected to be paid within one year. However, if the liability arises from a taxable temporary difference, it would be classified as a deferred tax liability. Companies should follow the disclosure requirements of Statement 5 for both loss and gain contingencies related to uncertain tax positions. The proposed interpretation would be effective as of the end of the first fiscal year ending after December 15, 2005. The transition adjustment resulting from the application of this interpretation would be recorded as a cumulative-effect change in the income statement as of the end of the period of adoption.
Quantitative and Qualitative Disclosures about Market Risks
      Market risks affecting National By-Products are exposures to changes in prices of the finished products National By-Products sells, interest rates on debt, availability of raw material supply and the price of natural gas used in National By-Products’ plants. Raw materials available to National By-Products are impacted by seasonal factors, such as warm weather, which can adversely affect the quality of raw material processed and finished products produced, and cold weather, which can impact the collection of raw material. Predominantly all of National By-Products’ finished products are commodities that are generally sold at prices prevailing at the time of sale. National By-Products has occasionally used interest rate swaps, natural gas futures and natural gas forward purchase agreements to manage these related risks. National By-Products is not currently party to any interest rate swap agreements or natural gas futures.
      As of October 1, 2005, National By-Products had forward purchase agreements in place for purchases of approximately $5.7 million of natural gas for the months of October 2005 through September 2006.
Interest Rate Sensitivity
      National By-Products’ obligations subject to fixed or variable interest rates are limited to borrowings against its Revolving Credit Facility. National By-Products has no fixed rate debt obligations and has $2.6 million in variable rate debt at October 31, 2005, that represents the balance outstanding under National By-Products’ amended and restated credit agreement, as amended. National By-Products’ debt fluctuates and while the variable rate debt is sensitive to fluctuations in interest rates, the total amount of interest is deemed immaterial.

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PRINCIPAL UNITHOLDERS OF NATIONAL BY-PRODUCTS
      The following table sets forth as of March 7, 2006 the number and percentage of the outstanding units of National By-Products membership units that are beneficially owned by (i) each person who is currently a manager or executive officer of National By-Products, (ii) all current managers and executive officers of National By-Products as a group, and (iii) each person who, to the knowledge of National By-Products, is the beneficial owner of more than 5% of National By-Products’ outstanding membership units. Except as otherwise noted below, the person or entity listed has sole vesting and dispositive power with respect to the units that are deemed beneficially owned by such person or entity.
                 
    Units of National   Percentage of
    By-Products   National By-Products
Name   Beneficially Owned   Units Outstanding
         
James S. Cownie, Manager
    170,561       14.1 %
Daniel M. Kelly
    123,939       10.3  
4401 Westown Parkway, Suite 202
               
West Des Moines, IA 50266
               
Farm Bureau Mutual Insurance Co.
    120,000       9.9  
Attn: LouAnn Sandburg, VP-Investments 5400 University Ave West Des Moines, IA 50266
               
C. Dean Carlson, Manager
    116,159 (1)     9.6  
Donald F. Lamberti, Manager
    29,772       2.5  
Mark A. Myers, President and
Chief Executive Officer, Manager
    16,731       1.4  
Larry J. Angotti, Regional Manager
    8,326       *  
Carlton T. King, Manager
    8,770       *  
David A. Pace, Chief Financial Officer
    6,595       *  
Richard A. Matthes, Manager
    4,419       *  
Harold Thorne, Manager
    3,809       *  
Marlyn L. Jorgensen, Manager
    1,500       *  
William J. Gannon, Manager
    1,000       *  
All managers and executive officers as a group(2)
    367,642       30.0 %