EXHIBIT 10.6
"***" - Confidential portions of this Agreement have been omitted and
filed separately with the Securities and Exchange Commission under a
Confidential Treatment Request, pursuant to Rule 406 of the
Securities Act of 1933, as amended
LIVE CATTLE SUPPLY AGREEMENT
This Live Cattle Supply Agreement ("Agreement") is made this 19th day
of September, 2002, by and between SWIFT BEEF COMPANY, a Delaware corporation
(the "Company") and XXXXXXX FINANCE COMPANY, INC., a Colorado corporation (the
"Supplier").
RECITALS:
(a) The Company and the Supplier desire to develop a purchase and
supply relationship whereby the Company will purchase Cattle
(as defined in Section 1) from the Supplier for processing at
plants owned by the Company;
(b) The Company desires to assure a continuing supply of the
Cattle and the Supplier desires to supply the Company with the
Cattle;
(c) It is in both parties best interests to keep the Facilities
(as defined in Section 1) as full as economically feasible
which, consistent with past practices, has been approximately
90% to 95% of capacity; and
(d) The Supplier is willing to dedicate the production of Cattle
from the Facilities for sale hereunder to the Company, and the
Company desires to purchase all of the Cattle produced at the
Facilities.
AGREEMENT:
In consideration of the foregoing premises and of the mutual promises
set forth herein, the parties hereto agree to the following:
1. CERTAIN DEFINITIONS.
1.1 "Cattle" means fed cattle ready for xxxxxxxxx.
1.2 "Cattle Price" means the price for the Cattle as determined in
accordance with the calculations set forth on SCHEDULE 1.2.
1.3 "Contract Year" means each whole calendar year during the Term of
this Agreement; provided, however, that the First Contract Year shall be the
period of time from the Commencement Date until December 31, 2002.
1.4 "Discounts" means a decrease to the Cattle Price as determined by
mutual agreement of the parties in accordance with past practice.
1.5 "Facility" or "Facilities" means any one or all (as appropriate) of
the feedyards identified on SCHEDULE 1.5, owned by the Supplier.
1.6 "Person" means an individual, a corporation, a partnership, an
association, a governmental entity, a trust or other entity or organization.
1.7 "Plant" means the xxxxxxxxx plants identified on SCHEDULE 1.7 owned
by the Company.
1.8 "Premiums" means an amount in addition to the Cattle Price as
determined by mutual agreement of the parties in accordance with past practice.
1.9 "Quality Grading" means the final classification of the Cattle
carcass pursuant to USDA quality grades.
1.10 "Quarter" means the four periods falling in each Contract Year,
each such period being three months in duration, with the first such period in
any Contract Year ending March 31, the second ending June 30, the third ending
September 30 and the fourth ending December 31.
1.11 "Term" shall have the meaning set forth in Section 4 hereof.
1.12 "Yield Grading" means the final classification of the Cattle
carcass pursuant to USDA yield grades.
2. SUPPLY.
During the Term hereof, the Supplier shall sell to the Company, and the
Company shall purchase from the Supplier, the total production of Cattle from
the Facilities. Supplier agrees to use its reasonable commercial efforts to
place Cattle in the Facilities in a manner consistent with past practice,
subject to the provisions of the cattle feeding risk management policy of
ConAgra Foods, Inc. ("CAGCO") and the provisions of its Risk Management
Agreement with CAGCO ("RISK MANAGEMENT AGREEMENT") (copies of which have been
provided to the Company).
3. PURCHASE AND SALE OF CATTLE.
3.1 The term of this Agreement shall commence on September 19, 2002,
or such other date as is mutually agreed upon in writing by the parties (the
"COMMENCEMENT DATE").
3.2 Shipment of Cattle from each Facility shall occur on mutually
scheduled days from Monday through Saturday as coordinated between the Company
and the Supplier. The Company and the Supplier shall jointly establish efficient
shipping and transporting procedures so as to minimize the time that Cattle are:
(a) waiting to be loaded at a Facility, (b) standing on a truck, (c) waiting to
be unloaded at the Plant, and (d) waiting to be slaughtered.
3.3 Title to and risk of loss of Cattle shall pass to the Company as
the Cattle are unloaded at the Plant.
2
3.4 The Company, at its sole cost and expense, shall provide trucks,
labor for loading Cattle onto trucks and drivers for transport of Cattle from
Facility to Plant. The Supplier, at its sole cost and expense, shall gather the
Cattle for loading and weigh the Cattle on certified scales at each Facility.
3.5 Each shipment of Cattle will be accompanied by an invoice
containing number of head and a scale ticket and such other information
consistent with past practice as the Company may reasonably request. The Company
shall pay the Cattle Price to Supplier for each shipment pursuant to the payment
requirements set forth in The Packers and Stockyards Act. All such payments are
to be made by wire transfer to an account or accounts designated by Supplier.
Quality Grading, Yield Grading, Premiums and Discounts shall all be determined
in a manner consistent with how such matters are determined by the Company for
third party suppliers of cattle to the Company.
4. TERM.
The term of this Agreement shall begin on the Commencement Date and end
concurrently with the termination of that certain Credit Agreement of even date
herewith among the Supplier, CAGCO and Swift Cattle Holdco, Inc., provided that
this Agreement may be extended for a one (1) year period in connection with the
sale of Supplier or any Facility.
5. FORECASTS.
The parties will meet periodically, but in all events no less
frequently than every 90 days, to determine quantities of Cattle to be supplied
hereunder.
6. CATTLE PRODUCTION AND INSPECTION.
6.1 The Cattle shall be produced in accordance with USDA regulations
and general industry standard animal husbandry practices (the "CATTLE PRODUCTION
STANDARDS"). If the Company requests that the Supplier add or remove an input,
which would have the effect of increasing the cost of production of Cattle
(whether such cost is due to the cost of additional inputs or a net increase in
the cost of production due to the elimination of certain inputs), the Company
shall bear the net cost of such change. The Supplier shall favorably consider
such requests of the Company subject to process feasibility, availability of
processing labor and equipment and commercial availability of raw materials.
6.2 The Company personnel and other representatives shall, during
normal business hours and with minimal disruption of business, have reasonable
access to (a) the Facilities, and (b) all operational and medical records
(including computer or other electronically encoded records) relating to the
Cattle (collectively "SUPPLIER RECORDS"). The Supplier shall cooperate fully
with the Company during all inspections and shall, upon request, promptly
provide to the Company copies of any Supplier Records as are reasonably
necessary. If deficiencies are identified relative to current Cattle Production
Standards during such inspections, the Company
3
shall promptly advise the Supplier and the Supplier shall promptly take
appropriate corrective actions.
6.3 The Supplier personnel and other representatives shall, during
normal business hours and with minimal disruption of business, have reasonable
access to (a) the Plant, and (b) all operational, financial and other records
(including computer or other electronically encoded records) relating to the
Cattle, the Quality Grading and Yield Grading of the Cattle and the calculation
of Premiums and Discounts with respect to the Cattle (including data included or
necessary to compute such Premiums and Discounts but excluding any records
relating to cattle not delivered by Supplier, the sale of beef or other products
or financial or operational records of the Company except to the extent needed
to compute Cattle Price, Premiums and Discounts) (collectively, "COMPANY
RECORDS"). The Company shall cooperate fully with the Supplier during all
inspections and shall, upon request, promptly provide to the Supplier copies of
any Company Records as are reasonably necessary.
7. COVENANTS.
7.1 The Supplier covenants that, during the Term of this Agreement, it
shall:
(a) operate the Facilities substantially in compliance with all
applicable laws and regulations;
(b) use its reasonable best efforts, consistent with industry
practices in the production of the Cattle and recordkeeping
relative to medication and withdrawals; and
(c) obtain and maintain such regulatory and/or governmental
permits as Supplier reasonably determines are necessary or
appropriate to feed cattle at each of the Facilities. Supplier
shall bear the responsibility for filing any reports relating
to the Cattle prior to delivery to Company which are required
by applicable government authorities.
7.2 The Company covenants that, during the Term of this Agreement, it
shall:
(a) operate the Plant substantially in compliance with all
applicable laws and regulations;
(b) use its reasonable best efforts, consistent with industry
practices in the xxxxxxxxx and processing of the Cattle; and
(c) obtain and maintain such regulatory and/or governmental
permits as the Company reasonably determines are necessary or
appropriate to xxxxxxxxx and process beef at the Plant. The
Company shall bear the responsibility for filing any reports
relating to the Cattle subsequent to delivery to Company which
are required by applicable government authorities.
4
8. FORCE MAJEURE.
Neither the Supplier nor the Company shall be liable for, or deemed to
be in default hereunder or subject to any remedies of the other party as a
result of, delays or performance failures due to power failures, fire, acts of
God, acts of civil or military authority, embargoes, epidemics, terrorism,
strikes, riots or similar causes beyond such party's reasonable control, and
without the fault or negligence of the Company or the Supplier. Should any force
majeure condition occur which prevents Supplier from performing its obligations
pursuant to this Agreement from one of the Facilities, Supplier shall, at
Company's request, use reasonable best efforts to supply the Cattle to be
provided hereunder from Cattle at Supplier's other Facilities. Should any force
majeure condition occur which prevents the Company from performing its
obligations pursuant to this Agreement at the Plant, the Company shall, at the
Supplier's request, use reasonable best efforts to accept the Cattle to be
provided hereunder at the Company's other Plants and Supplier shall have the
right to sell to third parties any Cattle not purchased by the Company during
such period of force majeure. Each party shall use reasonable best efforts to
minimize the impact of any force majeure condition it experiences on the other
party to this Agreement and to otherwise keep the other party timely advised as
to minimization and removal of such condition.
9. INSURANCE.
The Company and Supplier shall at all times maintain (i) commercial
general liability insurance, including product liability, completed operations
and contractual liability coverage, (ii) automobile liability, (iii) workers
compensation and employer liability insurance the coverages, amounts and
deductible levels of such policies to be consistent with industry standards, in
the minimum levels set forth in SCHEDULE 9. Such policies shall be primary and
non-contributory and name the other party as additional insured with waiver of
subrogation and each party shall provide the other party with certificates of
insurance evidencing these insurance coverages providing for 30 days' advance
written notice to the other party of any material change or termination of these
coverages.
10. SUCCESSORS AND ASSIGNS.
In the event that Supplier or any Facility is sold, all reasonable
attempts will be made to assign this Agreement to the buyer of the Facility so
that, with respect to such Facility, this Agreement shall be by and between the
buyer thereof and the Company. This Agreement shall remain in place between
Supplier and the Company with respect to the remaining Facilities owned by
Supplier. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Except as provided
in the first sentence of this Section 10, this Agreement shall not be assigned
by the Company or Supplier without the prior written consent of the other party;
provided, however, that to the extent requested by the Company's senior lenders,
the parties shall execute and deliver such documents as may be necessary to
effect a collateral assignment of the rights arising hereunder.
5
11. INDEPENDENT CONTRACTOR.
This Agreement shall not constitute or give rise to a partnership
between the parties. All activities by the Supplier hereunder shall be carried
on by the Supplier as an independent contractor and not as an agent for the
Company. All activities by the Company hereunder shall be carried on by the
Company as an independent contractor and not as an agent for the Supplier.
Neither party shall have, nor represent that it has, the power to bind the other
party to this Agreement.
12. INDEMNIFICATION.
(a) Supplier shall indemnify and hold the Company harmless from
and against any and all claims, demands, actions, causes of
action, proceedings, judgments and other liabilities,
obligations, losses, damages, costs and expenses (including
reasonable attorneys' fees and costs) (collectively, "CLAIMS")
of any nature incurred by the Company which result from
Supplier's operation of its Facilities, any act or omission of
Supplier in connection herewith or any breach by Supplier of
any representation, warranty, covenant or agreement provided
herein. Provided, however, nothing in this Section 12 shall
impact, affect or relate to, or shall be deemed to impact,
affect or relate to, the parties' agreements and undertakings
under the Risk Management Agreement including, without
limitation, the agreements and undertakings set forth in
Exhibit "A" to the Risk Management Agreement.
(b) The Company shall indemnify and hold Supplier harmless from
and against any and all Claims of any nature incurred by
Supplier which result from the Company's operation of any
Plant, any act or omission of the Company in connection
herewith or any breach by the Company of any representation,
warranty, covenant or agreement provided herein.
13. NOTICES.
Any notice or other communication provided for herein or given
hereunder to a party hereto shall be in writing and shall be (i) effective upon
receipt or evidence of refusal to accept if mailed by first class registered or
certified mail, postage prepaid, (ii) effective upon receipt or evidence of
refusal to accept if delivered by a nationally recognized overnight courier
service, or (iii) effective upon transmittal by confirmed facsimile or other
confirmed electronic transmission, addressed as follows:
IF TO COMPANY: Swift Beef Company
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: President
Fax: (000) 000-0000
6
IF TO SUPPLIER: Monfort Finance Company, Inc.
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: President
Fax: (000) 000-0000
or to such other address with respect to a party as such party shall notify the
other party in writing as above provided.
14. ENTIRE AGREEMENT; AMENDMENT.
This Agreement (including exhibits) represents the entire agreement
between the parties and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the parties. Any amendment of
this Agreement shall be in writing, signed by both parties.
15. WAIVER.
A waiver by either party of any breach or default of this Agreement is
not to be construed as a waiver of any subsequent breach or default.
16. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with the
laws (excluding the law of conflicts) of the State of Delaware without giving
effect to the conflicts of law provisions thereof.
17. NO CONSEQUENTIAL DAMAGES.
IN NO EVENT SHALL A PARTY OR ITS AFFILIATES OR THEIR RESPECTIVE
OFFICERS, DIRECTORS, REPRESENTATIVES AND EMPLOYEES BE LIABLE TO THE OTHER PARTY
OR ITS AFFILIATES OR THEIR RESPECTIVE OFFICERS, DIRECTORS, REPRESENTATIVES AND
EMPLOYEES, WHETHER BASED IN CONTRACT, TORT, WARRANTY, OR ANY OTHER LEGAL OR
EQUITABLE GROUNDS, FOR ANY LOSS OF THE INCOME, PROFIT OR SAVINGS OR COST OF
CAPITAL OR FINANCING OF THE OTHER PARTY OR ITS AFFILIATES, FOR ANY INDIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES OR FOR ANY EXEMPLARY, SPECIAL, OR PUNITIVE
DAMAGES OF ANY KIND, RESULTING FROM OR RELATING TO THIS AGREEMENT OR THE CATTLE
DELIVERED HEREUNDER, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES.
18. CONSENT TO JURISDICTION.
THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF
ANY UNITED STATES FEDERAL OR DELAWARE STATE COURT SITTING IN WILMINGTON,
DELAWARE IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND EACH OF THE PARTIES HERETO
7
HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING SHALL BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY
WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM.
[The remainder of this page intentionally left blank.]
8
IN WITNESS WHEREOF, the parties hereto have executed this instrument as
of the date first above written.
SWIFT BEEF COMPANY, a Delaware
corporation
By: /s/ XXXXX X. XXXXX
--------------------------------------
Title: Vice President, Tax
-----------------------------------
XXXXXXX FINANCE COMPANY,
INC., a Colorado corporation
By: /s/ XXXXX X. XXXXX
--------------------------------------
Title: Vice President, Tax
-----------------------------------
9
SCHEDULE 1.2
PRICING MECHANISM
The price of cattle will be determined by a "starting price" adjusted for an
allowance to determine a base price. This base price will be adjusted depending
on local markets, yield grade factors, etc.
Starting Price Greeley and Hyrum Cattle - the higher of
Nebraska or Colorado USDA dressed weekly
weighted average cattle price Dumas Cattle -
the Texas and Oklahoma USDA weekly weighted
live cattle price divided by the Dumas plant
average yield
Plus + Allowance "***" a hundred weight for Greeley
and Hyrum and "***" a hundred weight for
Xxxxx
Equals = Base Price
Base Price Adjusted According to: Greeley and Hyrum - Grade base 55-60% prime
and choice Dumas - Grade base is plant
average week prior
MARKETS GREELEY XXXXX XXXXX
------- ------- ----- -----
Higher NE/CO Higher NE/CO
Dressed Dressed TX/OK Live
Allowance "***" CWT "***" CWT "***" CWT
Yield Grade 1 Base + "***" CWT "***" CWT "***" CWT
Yield Grade 2 Base + "***" CWT "***" CWT "***" CWT
Yield Grade 3 Base + "***" CWT "***" CWT "***" CWT
Yield Grade 4 Base + "***" CWT "***" CWT "***" CWT
Yield Grade 5 Base + "***" CWT "***" CWT "***" CWT
Standard Base + "***" CWT "***" CWT "***" CWT
Substandard ------------- Select carcass price "***" CWT -----------
Certified Angus ---------- Base + "***" CWT premium -----------
Carcass WT>1000 lbs. ---------- Base + "***" CWT ---------- ----------
Carcass WT<534 lbs. ---------- Base + "***" CWT ---------- ----------
Dark Cutters ------------- Select carcass price "***" CWT -----------
Prime Carcasses Base + "***" CWT premium
10
SCHEDULE 1.5
FACILITIES
CAPACITY
--------
1. Malta Feedlot 52,000
0000 Xxxxx 0000 Xxxx
Xxxxx, XX 00000
2. Yuma Feedlot 125,000
00000 Xxxxxx Xxxx Xxxxx
Xxxx, XX 00000
3. Friona Feedlot 85,000
0000 Xxxxxx Xxxx 00
Xxxxxx, XX 00000
4. Xxxxx Feedlot 90,000
00000 Xxxxxxx 00
Xxxxxx, XX 00000
5. Xxxxxxxx Feedlot 90,000
00000 Xxxx Xxxxxx Xxxx 00
Xx Xxxxx, XX 00000
11
SCHEDULE 1.7
PLANTS
Dumas, Texas
Grand Island, Nebraska
Greeley, Colorado
Hyrum, Utah
12
SCHEDULE 9
INSURANCE
(i) Comprehensive general liability (with minimum single limit of
$2,000,000 and endorsement for contractual liability, products liability and
completed operations);
(ii) Comprehensive automobile for all owned, non-owned and hired
vehicles (with minimum single limit of $2,000,000);
(iii) Workers' compensation insurance in compliance with the laws of
each state in which any Plant or Facility is located, together with employer's
liability coverage (with endorsements for other states, voluntary compensation
and occupational disease and minimum limits on employer's liability coverage of
$2,000,000 per occurrence); and
(iv) Excess liability insurance, written on a "following form" basis,
with minimum annual per occurrence and aggregate limits of $75,000,000.
13
