January 28, 1988
STATEMENT OF UNDERSTANDING
REGARDING PET FOOD JOINT VENTURE
1. Parties. The parties to this Agreement are Xxxxxxx Pet Foods, a
division of Hereford Bi-Products, Inc., Highway 60 and FM 0000, Xxxxxxxx, Xxxxx
00000, a Texas corporation ("Xxxxxxx"), and Xxxxxxx Milling Company, P.O. Box
8500, 000 Xxxxx Xxxxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxx 00000, x Xxxxxxxxx
corporation ("Xxxxxxx").
2. Supplements. This document summarizes the result of discussions between
the parties. The parties anticipate that this Agreement may be modified and
supplemented in the future. In particular, it is contemplated that the
Management Committee, as hereinafter defined, will periodically review and make
recommendations to the parties with respect to provisions relating to the amount
of reimbursable expenses and the price of products sold. Such changes and
additions if mutually acceptable will be in writing and will be prepared and
executed as supplements to this Statement of Understanding.
3. Representations. Each party to this Agreement represents and warrants
to the other that it is authorized to enter into this Agreement. Xxxxxxx and
Xxxxxxx will at all times provide the other with all information relevant to the
venture contemplated hereby. Each party to this Agreement also represents and
warrants to the other that there are no suits or proceedings pending or
threatened against it, other than litigation that is immaterial to the
respective parties and the venture contemplated hereby and that such party has
all permits, licenses and authorizations, governmental or otherwise, necessary
to enter into this Agreement and to carry out the transactions contemplated by
it.
4. Businesses of Hereford Bi-Products and Xxxxxxx. HBP is an agribusiness
company with, among other facilities, production plants that process dead beef
stock, produce feed ingredients and manufacture pet food for the pet food and
greyhound industry. Its primary production plant and headquarters are located
along Highway 60 and FM 2943 in Hereford, Texas. Xxxxxxx is also an agribusiness
company with, among other things, interests in the manufacturing, marketing and
production of pet food at various plants located in the United States.
5. Formation of Joint Venture; Purpose; Other Activities. Xxxxxxx and
Xxxxxxx hereby agree to form a joint venture (the "Venture") for the purpose of
engaging in the manufacturing, marketing and production of pet food at a
facility (the "Facility") owned by Xxxxxxx and located along Highway 60 and FM
2943 in Hereford, Texas. The Facility as used herein refers to the recently
built extrusion portion of Xxxxxxx'x operation and does not include any portion
of Xxxxxxx'x operations presently used for meat processing for the pet food
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industry. It is agreed that Xxxxxxx shall be principally responsible for
purchasing ingredients, manufacturing pet food products pursuant to Xxxxxxx'x
formulations and specifications and warehousing inventories of ingredients,
packaging and finished product. Xxxxxxx shall be principally responsible for
sales and marketing, customer contacts, purchasing packaging and specialty
ingredients and pet food formulations. Additional products and activities may be
added as may be agreed from time to time between Xxxxxxx and Xxxxxxx. It is
recognized that both Xxxxxxx and Xxxxxxx have separate businesses which are
intended to co-exist with the Venture. Some of these separate businesses have
and will compete with the activity of the Venture. Orders for existing customers
being serviced from the Hereford plant can not be transferred to other Xxxxxxx
plants without approval of the Management Committee. Orders for new customers
within a 500 mile radius of Hereford will be serviced from the Hereford or
Xxxxxxx plants based on economic analysis of the Management Committee.
6. Management Committee. The parties agree that policy and management
decisions relating to the Venture shall be made by a committee (the "Management
Committee") consisting of one representative of each of Xxxxxxx and Xxxxxxx.
Each party will designate a representative who will serve on the Management
Committee and one alternate who shall act in the absence of such representation.
Until further notice, these representatives will be Xxxxx Xxxxxxx with Xxx
Xxxxxxx as alternate, for Xxxxxxx, and Xxxx Xxxxxxxxxx with Xxxxxxx Xxxxxxxx as
alternate, for Xxxxxxx. Each party may, by written notice to the other,
designate a substitute representative or alternate.
7. Services to be Provided by Xxxxxxx.
(a) Start up Facility; Purchase of Additional Equipment. The Facility
owned by Xxxxxxx is a start-up facility that needs certain work to be completed
and improvements necessary to manufacture Xxxxxxx pet food products. In
connection therewith, Xxxxxxx will, at its sole expense, provide the following:
(i) A liquid flavor application system along with provisions for feeding
this system from barrels;
(ii) Installation and start-up of small bag packaging equipment which has
already been ordered by Xxxxxxx;
(iii) Additional warehouse space as needed by the Venture (this space can
be rented, alternative warehouse space presently owned by Xxxxxxx or
a new warehouse to be built, but in all cases the warehouse space
provided must meet Xxxxxxx'x quality specifications and all costs of
providing such warehouse space, whether rented or built will be
borne by Xxxxxxx and not chargeable to the Venture as a
manufacturing expense); and
(iv) A dry flavor application system to apply such items as gravy dust,
milk coating, dry digest, etc.
Such additions will be the property of Xxxxxxx. Other acquisitions of
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equipment by or for the use of the Venture shall be made in accordance with
paragraph 13.
(b) Purchasing of Packaging and Ingredients. Xxxxxxx shall be responsible
for purchasing directly from ingredient suppliers approved by Xxxxxxx quality
ingredients meeting Xxxxxxx'x specifications. Notwithstanding the preceding
sentence, Xxxxxxx shall have the right to specify sources of ingredients,
including premixes, that are used solely and specifically in Xxxxxxx'x branded
label products; provided, however, that to the extent separate storage is
required, the use of these specific ingredients for Xxxxxxx'x products shall not
limit, impair or in any manner effect the Venture's efficient use of all
ingredients necessary for the balance of the product line as interpreted by the
Management Committee. Xxxxxxx will maintain all title and interest in the
ingredients until the finished product is sold by the Venture. Notwithstanding
the foregoing, Xxxxxxx agrees to use its purchasing power to buy ingredients if
Xxxxxxx can purchase such ingredients at a lower cost than Xxxxxxx; provided,
however, that in any such event, invoices shall, if acceptable to the vendor, be
sent directly to Xxxxxxx and paid by Xxxxxxx when due, or if such arrangement is
not acceptable to the vendor, Xxxxxxx will promptly repurchase such ingredients
from Xxxxxxx at Xxxxxxx'x cost within 15 days after receipt of invoice, Xxxxxxx
will also pay for when due, or repurchase from Hubbard, F.0.B. Hereford, Texas,
15 days after receipt of an invoice from Xxxxxxx, at Xxxxxxx'x cost, as the
case may be, all packaging and specialty ingredients purchased by Xxxxxxx for
the Venture pursuant to paragraph 8(c) and will maintain all title and interest
in such packaging and specialty ingredients purchased from Xxxxxxx until the
finished product is sold by the Venture.
(c) Manufacturing of Pet Food. Xxxxxxx will manufacture quality pet food
products for the Venture pursuant to Xxxxxxx'x formulations and specifications
and will use its best efforts to control its cost of manufacturing consistent
with Xxxxxxx'x standard of quality. In connection therewith, Xxxxxxx will make
available the use of all equipment owned by Xxxxxxx necessary for the production
of dry extruded pet food, the use of Xxxxxxx'x employees engaged in the
production of dry extruded pet food and of other employees engaged in support
and management services as necessary for the Venture's production of dry
extruded pet food. Xxxxxxx shall be entitled to be reimbursed by the Venture for
all actual expenses related to the cost of manufacturing, provided, however,
that such expenses shall not include depreciation or insurance costs (other than
product liability and worker's compensation insurance as provided in paragraph
17). The aggregate amount of all manufacturing expenses shall not exceed $30.00
per sellable ton of pet food for a period of two years (subject to periodic
adjustment for inflation as determined by the Management Committee) after the
effective date hereof, after which actual costs will be used. In addition to
reimbursable manufacturing expenses, Xxxxxxx shall be entitled to be reimbursed
by the Venture for general and administrative expenses as approved by the
Management Committee.
(d) Storage of Ingredients and Finished Products. Xxxxxxx will maintain
and store at its expense an inventory of packaging and ingredients and an
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inventory of finished products adequate to satisfy purchase orders obtained by
Xxxxxxx from customers.
(e) Customer Service. Xxxxxxx shall make every effort to satisfy customer
requests as to delivery, customer pick-up and other related courtesies required
to satisfy the needs of customers. In connection therewith, Xxxxxxx shall
maintain an adequate supply of Xxxxxxx pet food products which are not
manufactured at the Facility sufficient to satisfy anticipated customer demands,
including without limitation, treats, canned pet foods, semi-moist products and
other dry pet food products. Such products will be sold by Xxxxxxx to Xxxxxxx,
F.O.B. Hereford, Texas, at a price of $25.00 per ton under the Venture's selling
price (subject to periodic adjustments for inflation as determined by the
Management Committee) and resold by Xxxxxxx as needed by the Venture (or at such
time as such Products become outdated, if later) to the Venture at Xxxxxxx'x
cost (i.e. the price paid by Xxxxxxx to Xxxxxxx). Such products shall be paid
for within 60 days after receipt of an invoice from Xxxxxxx. Upon payment,
Xxxxxxx will maintain all title and interest in such products until sold to the
Venture.
(f) Quality Assurance. Xxxxxxx shall be responsible for performing the
following activities in accordance with quality control standards established by
Xxxxxxx: (i) purchasing proper ingredients; (ii) maintaining quality standards
on the Facility and on products manufactured at the Facility, including
implementing sanitation policies and programs; and (iii) taking samples,
inventory control and maintaining plant production records necessary for quality
control. Xxxxxxx shall be entitled to charge the Venture for quality assurance
services that are normally performed during the manufacturing of pet foods (i.e.
technician work); provided, however, that such expenses shall constitute
manufacturing expenses for purposes of paragraph 7(c).
(g) Purchase of Products. Xxxxxxx will purchase all its dry extruded
branded label products exclusively from the Venture. The Venture will charge
Xxxxxxx $25.00 per ton over its cost for such products based on extruder output
(subject to periodic adjustments for inflation as determined by the Management
Committee). Xxxxxxx shall bear all costs related to the sales and marketing of
all Xxxxxxx branded label products. The Management Committee will review new
products marketed by either Xxxxxxx or Xxxxxxx that will be produced by the
Venture to determine that they do not cause a negative economic impact on the
Venture.
8. Services to be Provided by Xxxxxxx.
(a) Sales and Marketing. Xxxxxxx agrees that, while this Agreement remains
in effect, it will use reasonable efforts to produce orders from customers for
pet food for production at the Facility (along with Xxxxxxx products that
Xxxxxxx agrees to sell through the Venture), so long as such pet food can be
produced most economically at the Facility, is of a quality satisfactory to
Xxxxxxx and can be produced consistent with Xxxxxxx'x requirements for delivery,
customer pick-up and other related customer courtesies. Attached as Exhibit I
hereto is a schedule of projected sales by the Venture for 1988
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and 1989 developed by the parties. Said Exhibit is attached hereto for
informational purposes only and the parties acknowledge that the figures in
Exhibit 1 and any projections hereafter developed are projections only and in no
way represent any commitment by either Xxxxxxx or Xxxxxxx that the sales of the
Venture will meet such projections. All first orders from customers of the
Venture shall be subject to credit approval by the Management Committee of the
Venture. Any bad debt on products sold by the Venture to customers approved by
the Management Committee will be charged against the Venture. The parties
further acknowledge that the Venture shall not be liable for any bad debt on
products sold to Xxxxxxx or Xxxxxxx and resold by Xxxxxxx or Xxxxxxx.
(b) Production Assistance; Pet Food Formulations. Xxxxxxx will provide
Xxxxxxx with Xxxxxxx'x production assistance as required by the Management
Committee and with all formulations for pet food products manufactured at the
Facility.
(c) Purchase of Packaging and Specialty Ingredients. Xxxxxxx shall be
responsible for purchasing or arranging for the purchase by Xxxxxxx of all
packaging and specialty ingredients for pet food products manufactured by the
Venture, except for (i) packaging and specialty ingredients where it is
determined by the Management Committee that such packaging and specialty
ingredients can be purchased at a lower cost by Xxxxxxx or the Venture, or (ii)
packaging and ingredients, including premixes, that are used solely and
specifically in Xxxxxxx'x branded label products. Xxxxxxx shall be responsible
for payment when due of all invoices for packaging and specialty ingredients
sent directly by vendors to Xxxxxxx and shall reimburse Xxxxxxx for packaging
and ingredients purchased from Xxxxxxx in accordance with paragraph 7(b). In the
case of ingredients manufactured by Xxxxxxx, Xxxxxxx shall charge the Venture a
total cost factor which will include freight to Hereford, Texas.
(d) Quality Assurance. Xxxxxxx will provide a quality assurance program in
connection with the production of pet food by the Venture to be implemented by
Xxxxxxx'x Quality Assurance Division (Ag Analysis). This program will be
monitored by Xxxxxxx'x Quality Assurance Department for compliance. The
Management Committee will arrange for laboratory work to be performed by Xxxxxxx
or Xxxxxxx based on economics.
(e) Quality Assurance Manager. In order to enhance Xxxxxxx'x
responsibility for formulation and quality control, Xxxxxxx will provide an
onsight employee of Xxxxxxx that will be responsible for reviewing all
production and quality of pet food products (the "Quality Assurance Manager").
The Quality Assurance Manager shall, in general, be available at the Facility
for consultation in connection with Xxxxxxx'x production of pet food for the
Venture. In particular, the Quality Assurance Manager will be responsible for
consulting with Xxxxxxx regarding technical aspects of the production of pet
food by the Venture. The Quality Assurance Manager will not be full time at the
Facility, but will devote such time to the Venture as the Management Committee
deems appropriate in light of the scope and activities of the Venture.
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(f) Payment for Ingredients and Packaging Costs. Xxxxxxx will reimburse
Xxxxxxx for the "Cost of Ingredients", as hereafter defined, and packaging used
in finished product sold by the Venture within 15 days after receipt of a proper
invoice from Xxxxxxx. Xxxxxxx shall invoice Xxxxxxx based on the formula of the
product manufactured and the ingredients used therein as ingredients and
packaging are converted into finished product and sold by the Venture. For
purposes hereof, the ingredients used shall be multiplied times the Cost of
Ingredients, as hereafter defined, plus a shrink factor to be determined and
agreed upon where appropriate. Until an exact factor can be determined, Xxxxxxx
and Xxxxxxx agree to use an ingredient shrink factor of 4% and a packaging
shrink factor of 1%. This total dollar amount will be invoiced to Xxxxxxx on a
weekly basis and Xxxxxxx will be billed with sufficient detail to justify
charges. The "Cost of Ingredients" will be established on a monthly basis and
shall be the market price of an ingredient, F.O.B. Hereford, Texas, on the
Wednesday of the previous month that falls between the 11th and 17th of that
month, unless otherwise agreed upon. Market price of an ingredient shall be the
actual lowest cost that an ingredient can be purchased for at the time of the
monthly pricing.
(g) Customer Orders, Accounts Receivable. All customer orders will be
called into the Xxxxxxx order desk in Mankato, Minnesota, including Xxxxxxx'x
orders for Xxxxxxx branded label products. Orders will be transmitted daily to
the Facility via computer terminals. Xxxxxxx will process all customer invoices,
collect accounts receivable and carry such receivables until collected or
written off by the Venture as uncollectable.
(h) Reimbursement. Xxxxxxx'x and Xxxxxxx'x obligation to provide services
to the Venture is conditioned on the Venture reimbursing Xxxxxxx and Xxxxxxx for
all its actual expenses related to pet foods manufactured by the Venture at the
Facility including but not necessarily limited to the following: computer link
ups, the cost of goods sold, all marketing and sales expenses, all other
directly related expenses (including all expenses relating to quality assurance,
salary and benefits of the Quality Assurance Manager, all credits, travel
expenses to and from the Facility, and all other similar expenses) and general
and administrative expenses as approved by the Management Committee.
Notwithstanding the foregoing, the parties agree that the Venture will only be
charged a flat fee of $5.00 per ton for direct salesperson expenses for travel,
meals, lodging, etc. for a period of two years, after which the actual cost will
be charged to the Venture.
(i) Other Services. The nature and extent of any other services to be
provided by Xxxxxxx will be determined mutually by the Management Committee in
light of, among other things, the scope and activities of the Venture.
9. Trademarks, Etc. The Venture will operate under the name(s),
trademark(s), patent(s), copyright(s), license(s) and other registrations
presently being used by both Xxxxxxx and Xxxxxxx and made available to the
Venture by Xxxxxxx or Xxxxxxx, and such names, trademarks, patents, copyrights,
licenses and other registrations as may be agreed upon and acquired from time to
time. Xxxxxxx and Xxxxxxx agree to protect and to cause the Venture to
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protect such trademarks, patents, copyrights, licenses and other registrations
from the misuse thereof. Such names, trademarks, patents, copyrights, and
licenses shall remain the property of the respective partner and neither the
Venture nor Xxxxxxx or Xxxxxxx shall have any right, title or interest of the
other partner therein by reason hereof.
10. Trade Secrets, Etc. Trade secrets, customer lists and other similar
knowledge which is the property of one of the parties hereto prior to the date
hereof, shall remain the property and trade secret of such party notwithstanding
disclosure to the Venture. Any such trade secrets may be used by the Venture
but shall not be used by the other party hereto or any other advantage taken
thereof by such party in its separate business activities at any time except by
specific written agreement of the parties. Trade secrets and other similar
knowledge which is developed by the Venture shall be the property of the
Venture, but may be used by either party in its own separate business
activities.
11. Employees. The parties acknowledge and agree that any of Xxxxxxx'x
employees who perform services for the Venture shall remain employees of Xxxxxxx
and Xxxxxxx shall remain solely responsible for establishing the terms and
conditions of their employment, including hiring, discipline and discharge.
Neither Xxxxxxx nor any of its employees (including, without limitation, the
Quality Assurance Manager) shall have any responsibility for the development or
approval of personnel policies with respect to Xxxxxxx'x employees performing
services for the Venture. Xxxxxxx and Xxxxxxx shall remain solely liable for the
payment of compensation or any employment benefits to their respective employees
and for the payment of any taxes, charges or assessments payable with respect to
their respective employees, including without limitation any such payments made
to governmental agencies or bodies. Neither the Venture nor Xxxxxxx shall be
considered a successor employer of Xxxxxxx'x employees, and neither the Venture
nor Xxxxxxx shall be considered a successor employer of Xxxxxxx'x employees.
12. Profits and Losses; Distributions. Each of Xxxxxxx and Xxxxxxx shall,
as a member of the Venture, have a fifty percent (50%) interest in and to the
Venture. The net profits or net losses of the Venture shall be credited or
charged, as the case may be, equally to each of them. The earnings and profits
of the Venture for the purpose of determining the share therein of each of
Xxxxxxx and Xxxxxxx shall be determined in accordance with generally accepted
accounting principles. A separate income account shall be maintained for each of
Xxxxxxx and Xxxxxxx to which shall be credited or debited, as the case may be,
their respective shares of the net profits or net losses of the Venture. Net
profits and net losses shall be credited or debited, as the case may be, to the
separate income accounts of Xxxxxxx and Xxxxxxx as soon as practicable after the
end of each month during the term of the Venture. Cash distributions will be
made in the discretion of the Management Committee.
13. Additional Capital Expenditures; Working Capital.
(a) The cost of all capital expenditures to repair or replace equipment
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presently owned by Xxxxxxx or acquired by Xxxxxxx pursuant to paragraph 7(a)
(including upgrades of items which have depreciated due to time or use) shall be
borne by Xxxxxxx and any replacement equipment so acquired shall be owned by
Xxxxxxx.
(b) Except as otherwise provided in this Agreement, the cost of all
capital expenditures for additional equipment, other than equipment presently
owned by Xxxxxxx or acquired by Xxxxxxx pursuant to paragraph 7(a), needed to
improve the efficiency or process for manufacturing of pet food products and all
depreciation and other tax benefits on such equipment shall be shared equally by
Xxxxxxx and Xxxxxxx. All capital expenditures for such equipment shall be
approved by the Management Committee. The Management Committee shall, for the
purposes of this Agreement, determine which expenditures are "capital"
expenditures for additional equipment. All equipment so acquired shall be owned
by Xxxxxxx and Xxxxxxx as tenants in common and shall be available to the
Venture for its operations.
(c) Routine maintenance which does not constitute a capital expenditure
shall be Xxxxxxx'x responsibility and shall constitute a manufacturing expense
for purposes of paragraph 7(c).
(d) Any advances to the Venture for working capital approved by the
Management Committee shall be shared equally by Xxxxxxx and Xxxxxxx.
14. Allocations of Expenses.
(a) Except as otherwise specifically provided in this Agreement, Xxxxxxx
and Xxxxxxx shall be reimbursed by the Venture for expenses incurred only as
approved by the Management Committee.
(b) The Quality Assurance Manager and Xxxxxxx'x production manager shall
have joint authority to approve all routine expenses of $500 or less. Individual
expenses of an amount greater than $500 must have approval of the Management
Committee.
15. Reputations of Parties. Xxxxxxx and Xxxxxxx both cherish their
reputations in the world at large and internally. The Venture will use every
reasonable means to respect and enhance those reputations.
16. Tax Status; Accounting. The Venture will function as a partnership for
tax purposes. Its fiscal and tax year will be the calendar year or such other
year as shall be approved by the Management Committee. Such certified public
accountant as is selected by the Management Committee will be asked to prepare
an annual certified audit and do such other work for the Venture as may be
agreed upon from time to time. Xxxxxxx shall be responsible for maintaining
books of account of the Venture and shall prepare and distribute monthly
unaudited operating statements in a format similar to that attached hereto as
Exhibit 2. Xxxxxxx shall maintain separate accounting for all funds of the
Venture and shall be responsible for making disbursements of such funds for
expenses of the Venture. Each party shall have the right to review and audit
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such books and records relating to the Venture maintained by the other party as
such party may request; provided, however, that if the review of such books and
records would, in the judgment of the party keeping such books and records,
result in the disclosure of confidential information not related to the Venture,
such party may require that such review be by a mutually satisfactory third
party bound to keep such information confidential.
17. Other Activities; Insurance. Neither Xxxxxxx nor Xxxxxxx shall, by
virtue of this Agreement, be deemed to have assumed any liability of any kind or
nature whatsoever arising with respect to activities or products of the other
not undertaken as part of the Venture. No party to this Agreement (or the
Venture) shall be liable for worker's compensation or employment-related damages
or action relating to the employees of the other party to this Agreement. The
Venture will obtain and maintain at least such minimum amount of insurance
coverage in connection with the activities of the Venture as is deemed adequate
by each of the parties hereto, including, subject to availability, at least
$1,000,000 of product liability insurance which Xxxxxxx shall secure. The cost
of such product liability insurance shall be reimbursed by the Venture.
18. Mailing Address. The mailing address for the Venture will be:
Xxxxxxx Pet Foods
P.O. Box 2257
Highway 60 and FM 2943
Hereford, Texas 79045
19. Xxxxxxx'x and Xxxxxxx'x Other Operations. Both parties recognize that
Xxxxxxx and Xxxxxxx will have no involvement in any other operations of the
other party that are not directly related to the Venture. All items purchased
for, and maintenance and other costs related to, any other operations of either
party not directly related to the Venture have nothing to do with the Venture
and shall not be charged to the Venture.
20. Non-competition Agreement. Xxxxxxx agrees that it will not, prior to
termination of the Venture, purchase dry extruded pet food products except from
the Venture or from Xxxxxxx. Xxxxxxx or Xxxxxxx will not directly or indirectly
engage in any competition with the Venture with the exception of its Xxxxxxx or
Xxxxxxx branded labels within a 500 mile radius of the Hereford plant.
21. Termination. Unless sooner terminated pursuant to paragraph 22, this
Agreement shall continue for a term of 25 years from the effective date of the
Venture.
22. Termination. This Agreement and the Venture shall terminate as
follows:
(a) by the mutual written consent of Xxxxxxx and Xxxxxxx;
(b) at the option of Xxxxxxx at any time after May 31, 1989, provided
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Xxxxxxx has given Xxxxxxx at least 12 months written notice of its intention to
terminate this Agreement;
(c) upon written notice by either party of the desire to terminate the
Venture following the institution of any bankruptcy or insolvency proceedings
against the Venture or the other party (whether voluntary or involuntary, and
whether under federal or state law), the dissolution, liquidation or winding up
of either party or the assignment by either party of any significant portion of
its property or assets for the benefit of creditors or claimants;
(d) upon written notice by either party if there is a willful breach by
the other party of a material term of this Agreement and such breach has not
been cured within 60 days after written notice of such breach; or
(e) in the event the Facility is destroyed by fire, tornado, flood or
other natural destruction, unless Xxxxxxx notifies Xxxxxxx of its intent to
rebuild an essentially equivalent or better Facility and promptly, within
reason, commences rebuilding the Facility.
Nothing contained in this paragraph 22 shall affect or impair any rights or
obligations arising prior to or at the time of the termination of this
Agreement, or which may arise by an event causing the termination of this
Agreement and the Venture. In the event this Agreement terminates pursuant to
paragraph 22(e), but only pursuant to paragraph 22(e), Xxxxxxx acknowledges that
Xxxxxxx shall, notwithstanding any other provision herein and without
consideration, have all right, title and interest in and to the surviving books
and records, customer lists, reports, goodwill and general intangibles of the
Venture or of Xxxxxxx as they relate to the Venture.
23. Licenses. Nothing herein shall constitute a license by Xxxxxxx for
Xxxxxxx to use, or a license by Xxxxxxx for Xxxxxxx to use, the names,
trademarks, patents, copyrights, licenses and other registrations and
specifications made available to the Venture by such party.
24. Liquidation and Dissolution. Upon termination of the Venture, Xxxxxxx
and Xxxxxxx shall proceed to wind up and liquidate the affairs and assets of the
Venture. The proceeds of such liquidation shall be applied and distributed in
the following order of priority:
(i) to the payment of debts and liabilities of the Venture and expenses of
liquidation;
(ii) to the setting up of any reserves which the Management Committee
shall deem reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Venture arising out of or in connection with the Venture;
said reserves shall be paid over by Xxxxxxx and Xxxxxxx to a mutually designated
party, as escrow agent, to be held for the purpose of disbursing such reserves
in payment of any of the aforementioned contingencies; at the expiration of such
period of time as Xxxxxxx and Xxxxxxx shall xxxx mutually advisable, said
escrow agent shall distribute the balance thereof remaining in
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the manner set forth in subparagraph (iii) hereof; and
(iii) any balance remaining after the application of subparagraphs (i) and
(ii), equally to Xxxxxxx and Xxxxxxx.
25. Purchase of Xxxxxxx'x Interests in Venture Assets by Xxxxxxx. Xxxxxxx
shall, within 90 days after termination, expiration or dissolution of the
Venture, purchase from Xxxxxxx its interest in any equipment purchased by
Xxxxxxx and Xxxxxxx pursuant to paragraph 13(b) hereof, at a purchase price
equal to the book value (original cost less depreciation) of Xxxxxxx'x interest
in such equipment. The purchase price calculated as set forth above shall be
paid to Xxxxxxx in the form of a bank cashier's check. Upon payment of such
amount, Xxxxxxx shall deliver to Xxxxxxx such instruments of transfer as shall
be reasonably requested by Xxxxxxx.
26. Assignment; Successors and Assigns. Each party is given the specific
right to transfer or assign its interest in the Venture, and in the case of
Xxxxxxx, in the realty and equipment in the Facility, to another entity provided
that such party does not assign its responsibilities under this Agreement
without the express written consent of the other party; the other party is
reasonably satisfied with the financial stability of the transferee; and such
transferee specifically agrees to be bound by the terms of this Agreement. Each
and every provision in this Agreement shall survive such transfer or assignment
and remain in full force and effect. This Agreement shall inure to the benefit
of the parties hereto, their successors and assigns. Except as otherwise
provided in this paragraph 26, neither party may make any assignment of its
rights or obligations hereunder without the written consent of the other party.
27. Other Instruments, Etc. The parties agree that they will perform all
other acts and execute and deliver such other documents as may be necessary or
appropriate to carry out the intent and purpose of this Agreement. The parties
recognize that many issues will have to be resolved after the date of this
Agreement. The parties will use maximum diligence to voluntarily and
appropriately resolve all future concerns of this kind.
28. Arbitration. It is agreed nevertheless that all unresolved disputes or
controversies arising out of or in relation to this Agreement shall be
determined and settled by arbitration at a mutually convenient location in
accordance with the Commercial Rules of the American Arbitration Association in
effect at the time of said controversy, and judgment upon any award rendered by
the arbitrator(s) may be entered in any court of competent jurisdiction. The
arbitrator(s) may decide all collateral issues such as whether this paragraph 28
is applicable. The expenses of the arbitration shall be borne by the Venture,
provided that each of Xxxxxxx and Xxxxxxx shall pay for and bear the costs of
its own experts, evidence, and legal counsel. Whenever any action is required to
be taken under this Agreement within a specified period of time and the taking
of such action is materially affected by a matter submitted to arbitration, such
period shall automatically be extended for the number of days plus 10 that are
taken for the determination of that matter by the
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arbitrator(s).
29. Governing Law. This Agreement shall be interpreted in accordance with
the laws of the State of Texas and, to the extent applicable, by the Uniform
Partnership Act as adopted from time to time by the State of Texas.
30. Notices. Any notice given pursuant to this Agreement shall be in
writing and shall be deemed to have been duly given if personally served or if
by mail by depositing a copy thereof in a registered or certified envelope,
postage prepaid, addressed to the other party at its address hereinabove set
forth or at such other address as the other party shall have theretofore
designated. The date of giving such notice shall be the date received, if served
personally, or the date on which the envelope is delivered to the other party as
indicated by the return receipt.
31. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which taken
together shall be one document.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the 28
day of January, 1988. The effective date of the Venture shall be February 1,
1988.
XXXXXXX PET FOODS
By /s/ Xxxxx Xxxxxxx
----------------------
----------------------
XXXXXXX MILLING COMPANY
By /s/ Xxxx Xxxxxxxxxx
----------------------
Xxxx Xxxxxxxxxx,
Division Vice President,
Pet Food Division
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