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JOINT VENTURE AGREEMENT
between
J.R. SIMPLOT COMPANY
and
XXXXXXX MILLING COMPANY
Dated as of July 28, 1993
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TABLE OF CONTENTS
1. Formation of Joint Venture ........................................... 1
2. Property, Plant, and Equipment ....................................... 1
(a) Initial Property, Plant and Equipment ......................... 1
(b) Additional Property, Plant and Equipment ...................... 2
(c) Ownership of Facility ......................................... 2
3. Trade Secrets ........................................................ 2
4. Trademarks, Etc. ..................................................... 2
5. Working Capital ...................................................... 3
(a) Generally ..................................................... 3
(b) Methods Established by Management Committee ................... 3
(c) Absence of Methods Established by Management Committee ........ 3
6. Direct Expenses ...................................................... 3
(a) Reimbursement of Direct Expenses .............................. 3
(b) Description of Direct Expenses ................................ 4
(c) Administrative Services Fee ................................... 4
7. Transactions with the Venture ........................................ 4
(a) Purchases of Pet Food from the Venture by Simplot ............. 4
(b) Purchases of Pet Food from the Venture by Xxxxxxx ............. 4
(c) Sales of Pet Food to the Venture .............................. 5
8. Management and Operation; Personnel; Ancillary Services .............. 5
(a) Management Committee .......................................... 5
(b) Day-to-Day Operations ......................................... 5
(c) Quality of Pet Food ........................................... 6
(d) Storage of Ingredients and Finished Products .................. 6
(e) Customer Service .............................................. 6
(f) Customer Orders ............................................... 7
(g) Limitations Upon Authority of Parties ......................... 7
(h) Personnel ..................................................... 7
(i) Management Personnel .......................................... 7
(j) Employment Matters ............................................ 7
(k) Ancillary Services ............................................ 8
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9. Accounting Matters ................................................... 8
(a) Tax Status .................................................... 8
(b) Books of Account .............................................. 8
(c) Bank Accounts ................................................. 9
(d) Settlement of Intercompany Accounts ........................... 9
10. Distribution of Net Income ........................................... 9
11. Other Business Operations of Parties ................................. 9
(a) Simplot ....................................................... 9
(b) Xxxxxxx ....................................................... 9
12. Insurance ............................................................ 9
13. Representations and Warranties ....................................... 10
(a) Generally ..................................................... 10
(b) Additional Representations and Warranties of Simplot .......... 11
14. Initial Term and Renewal Terms ....................................... 11
15. Early Termination .................................................... 11
16. Disposition of Assets Following Termination .......................... 12
(a) Generally ..................................................... 12
(b) Option to Lease Facility ...................................... 12
(c) Option to Purchase Additional Equipment ....................... 12
(d) Disposition of Assets ......................................... 13
(e) Application of Cash ........................................... 13
17. Option of Simplot to Participate with Xxxxxxx in Ownership
and Operation of New Facility ........................................ 14
18. Assignment ........................................................... 14
19. Successors and Assign ................................................ 15
20. Further Assurances ................................................... 15
21. Waivers and Amendments ............................................... 15
22. Arbitration .......................................................... 15
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23. Indemnification, Etc . ............................................... 15
(a) By Simplot .................................................... 15
(b) By Xxxxxxx .................................................... 16
(c) By the Venture ................................................ 16
24. Liability of Parties ................................................. 16
25. Governing Law ........................................................ 17
26. Notices .............................................................. 17
27. Entire Agreement ..................................................... 17
28. Headings ............................................................. 17
29. Counterparts ......................................................... 17
EXHIBITS
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A Description of Facility
B Additional Equipment
C Description of Direct Expenses
D Administrative Services
E Form of Financial Statements
F Terms of Lease
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JOINT VENTURE AGREEMENT
Joint Venture Agreement, dated July 28, 1993, by and between J.R.
SIMPLOT COMPANY, DIVERSIFIED PRODUCTS GROUP, a Nevada corporation ("Simplot"),
and XXXXXXX MILLING COMPANY, a Minnesota corporation ("Xxxxxxx").
RECITALS
Simplot owns a fish food manufacturing facility in Caldwell, Idaho, more
fully described in Exhibit A hereto (the Facility") suitable for conversion to a
pet food and manufacturing facility.
Xxxxxxx is engaged in the pet food business throughout the United States
and, in connection therewith, has developed substantial expertise in the pet
food business and has implemented an extensive sales, marketing and distribution
network for pet food products.
Simplot and Xxxxxxx now desire to form a joint venture for the
manufacture of pet food at the Facility and the sale, marketing and
distribution of pet food in connection therewith.
NOW, THEREFORE, in consideration of the foregoing recitals and the
agreements herein contained, Simplot and Xxxxxxx agree as follows:
1. Formation of Joint Venture. Simplot and Xxxxxxx hereby form a joint
venture (the "Venture") for the manufacture of pet food at the Facility and the
sale, marketing and distribution of pet food in connection therewith. The
Venture shall constitute a special purpose general partnership governed by the
Uniform Partnership Act, as adopted in the State of Idaho. The name of the
Venture shall be: Simplot/Xxxxxxx Pet Food Venture. For purpose of this
Agreement, the term "pet food" shall mean manufactured food products prepared
for ingestion by domestic companion animals, including primarily dogs and cats.
2. Property, Plant, and Equipment.
(a) Initial Property, Plant and Equipment. Simplot will make the
Facility available to the Venture on a rent-free basis during the
term of this Agreement. The parties recognize that substantial
additional equipment will be required to commence operations by
the Venture at the Facility and that additional warehouse space
and/or loading facilities may be required at the Facility.
Attached hereto as Exhibit B is a preliminary list of the
additional equipment and a budget reflecting the projected cost
of such equipment. The final budget, together with plans and
specifications for the additional equipment and installation
thereof, shall be prepared jointly and mutually agreed to by the
parties as soon as practical following the execution hereof to
facilitate the earliest possible plant start-up. Simplot and
Xxxxxxx shall each contribute an amount equal to fifty percent
(50%) of the costs of acquiring and installing the additional
equipment, when and as such costs are payable by the Venture.
Simplot will make available to the
Venture adequate warehouse space and loading dock(s) necessary
for the conduct of the business of the Venture, either by making
available existing warehouse space at the Facility or by
constructing additional warehouse space, and by constructing
appropriate truck height loading dock(s). Simplot shall bear the
costs of construction of any additional warehouse space and
loading dock(s), and shall not be reimbursed therefore by the
Venture.
(b) Additional Property, Plant and Equipment. If the Management
Committee (as defined in Section 8(a) hereof) shall determine
after the date hereof that any additional property, plant and
equipment is required for the Venture, other than that specified
in Section 2(a) above, each of Simplot and Xxxxxxx shall
contribute to the capital of the Venture an amount equal to 50%
of the costs thereof, when and as such costs are payable by the
Venture.
(c) Ownership of Facility. The Facility, as initially made available
to the Venture pursuant to Section 2(a) hereof, together with the
warehouse and loading dock(s) contemplated by Section 2(a)
hereof, shall constitute property of Simplot and title thereto
shall be in the name of Simplot. Any additional property, plant
and equipment acquired from time to time pursuant to Section 2(a)
or (b) hereof shall constitute property of the Venture and title
thereto shall be in the name of the Venture.
3. Trade Secrets. Proprietary manufacturing processes, customer lists
and other similar confidential information relating to the manufacture, sale,
marketing and distribution of pet food products (collectively, "Trade Secrets")
constituting the property of a party hereto prior to the date hereof shall not
constitute property of the Venture notwithstanding disclosure to the other party
in connection with the Venture. Any such Trade Secrets may be used by the
Venture but shall not be used by the other party, disclosed to others, or any
other advantage taken thereof by such party in its own separate business
activities (unless such Trade Secrets become part of the public domain through
no action of such party, or are subsequently independently developed by such
party). Trade Secrets developed by the Venture shall be and become the property
and Trade Secrets of the Venture, but may be used by either party in its own
separate business activities.
4. Trademarks. Etc. The Venture will employ the trademark(s), patent(s),
copyright(s), license(s) and other intellectual property rights presently being
used by Simplot and Xxxxxxx in connection with their respective pet food
businesses, other than the brand names used by Xxxxxxx and Simplot in connection
with the sale by Xxxxxxx and Simplot of products purchased from the Venture
pursuant to Sections 7(a) and (b) hereof. All of such trademarks, patents,
copyrights and other intellectual property rights are hereby made available on a
non-exclusive basis to the Venture. Such trademarks, patients, copyrights and
other intellectual property rights shall remain the property of Simplot or
Xxxxxxx, as the case may be, and shall not constitute property of the Venture.
Each of Simplot and Xxxxxxx shall establish quality control standards for all
products sold using its trademarks, and shall specify policies and programs to
monitor compliance with such standards.
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5. Working Capital.
(a) Generally. Each of Simplot and Xxxxxxx shall provide 50% of the working
capital from time to time required for operation of the Venture;
provided, however, that the cost of property, plant and equipment
required for the Venture shall be funded in accordance with Section 2(a)
and 2(b) hereof.
(b) Methods Established by Management Committee. The Management Committee
may from time to time establish such methods as it deems appropriate for
the working capital requirements of the Venture to be satisfied in
accordance with Section 5(a) hereof.
(c) Absence of Methods Established by Management Committee. Absent
establishment of other methods by the Management Committee in accordance
with Section 5(b) hereof, the working capital requirements of the
Venture shall be satisfied as set forth in this Section 5(c).
(i) Advances. To the extent the cash proceeds of sales and
collections on, accounts receivable by the Venture from time to
time do not fund current working capital requirements, including
without limitation payments to Simplot and Xxxxxxx for direct
expenses incurred in connection with the Venture and required to
be paid by the Venture in accordance with Section 6 hereof and
periodic distributions of Distributable Net Income (as defined in
Section 10 hereof), each of Simplot and Xxxxxxx agrees to advance
50% of such additional working capital to the Venture from time
to time pursuant to this Section 5(c).
(ii) Repayment of Advances. To the extent cash proceeds of sales and
collections on accounts receivable by the Venture from time to
time exceed its current working capital requirements, such excess
will be applied to repayment of advances made by Simplot and
Xxxxxxx pursuant to this Section 5(c), pro rata.
(iii) Character of Advances to the Venture. Advances to the Venture
pursuant to this Section 5(c) shall constitute non-interest
bearing advances.
6. Direct Expenses.
(a) Reimbursement of Direct Expenses. Each of Simplot and Xxxxxxx shall from
time to time prepare and submit to the Management Committee a written
statement, the detail of which shall be determined by the Management
Committee, for the actual direct expenses incurred by it in connection
with the Venture. The Venture shall credit the intercompany account of
Simplot or Xxxxxxx, as the case may be, for such expenses promptly upon
receipt of any such statement. In connection with the submission of
written statements for direct expenses to the
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Management Committee, each of Simplot and Xxxxxxx shall identify any
material variances in such expenses from the projected expenses reflected
in any operating budget for such period prepared by the Management
Committee.
(b) Description of Direct Expenses. Direct expenses for which Simplot and
Xxxxxxx shall be reimbursed pursuant to Section 6(a) hereof shall
include the expenses described in Exhibit C hereto, together with such
other expenses from time to time approved by the Management Committee.
General corporate overhead and corporate administrative expense,
interest, depreciation or other indirect expenses shall not constitute
direct expenses for purpose of this Section 6.
(c) Administrative Services Fee. In consideration of the accounting,
bookkeeping, computer and other administrative services to be provided to
the Venture by Simplot or Xxxxxxx, the Venture shall pay to Simplot or
Xxxxxxx , as the case may be, an administrative services fee, the amount
of which shall be established from time to time by the Management
Committee. The Venture shall pay such amounts by crediting the
intercompany account of Simplot or Xxxxxxx, as the case may be. The
amount of such administrative services fee shall be the amount,
reasonably determined by the Management Committee, necessary to reimburse
Simplot and/or Xxxxxxx for the cost of providing such services directly
related to the Venture. The initial administrative services to be
provided by either Simplot or Xxxxxxx to the Venture are set forth on
Exhibit D hereto.
7. Transactions with the Venture.
(a) Purchases of Pet Food from the Venture by Simplot. It is anticipated that
the Facility may be able to manufacture certain pet food and fish food
products marketed by Simplot under the Simplot brand name. Simplot agrees
that during the term of this Agreement it will purchase from the Venture,
to the extent available from the Venture, the entirety of its
requirements for pet food and fish food products. The price to be charged
Simplot for such products purchased from the Venture shall be established
by the Management Committee so as to yield to the Venture a per ton
profit substantially equivalent to the per ton profit then being realized
by the Venture on sales of products to others. The Venture shall invoice
Simplot for all products sold to Simplot, and debit the intercompany
account of Simplot for the amount of such invoices.
(b) Purchases of Pet Food from the Venture by Xxxxxxx. It is anticipated that
the Facility may be able to manufacture certain pet food products
currently marketed by Xxxxxxx under the Supreme, Proclaim and Country
Prime brand names. In the event Xxxxxxx determines to purchase such
products from the Venture, the price to be charged Xxxxxxx for such
products shall be established by the Management Committee so as to yield
to the Venture a per ton profit substantially equivalent to the per ton
profit then being realized by the Venture on sales of products to others.
The Venture shall invoice Xxxxxxx for all products sold to
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Xxxxxxx, and debit the intercompany account of Xxxxxxx for the amount of
such invoices.
(c) Sales of Pet Food to the Venture. In order to supplement the product line
of the Venture, Xxxxxxx and/or Simplot will sell to the Venture pet food
products from time to time manufactured by Xxxxxxx or Simplot but not
manufactured by the Venture ("Supplemental Products"). The price to be
charged to the Venture by Xxxxxxx or Simplot for Supplemental Products
shall be subject to the approval of the Management Committee, and shall
yield to the Venture a per ton profit substantially equivalent to the
average per ton profit of other pet food products manufactured by the
Venture. Xxxxxxx and Simplot shall invoice the Venture for all
Supplemental Products sold to the Venture, and the Venture shall credit
the intercompany account of Xxxxxxx or Simplot, as the case may be, for
the amount of such invoices.
8. Management and Operation; Personnel; Ancillary Services.
(a) Management Committee. Management of the Venture shall be vested in
committee (the "Management Committee") consisting of one representative
of Simplot and one representative of Xxxxxxx. Each party will designate
a representative who will serve on the Management Committee and one
alternative who shall act in the absence of such representative. Simplot
has designated Xxx Xxxxxxx as its representative and Xxxxx X'Xxxxxxxx as
its alternate. Xxxxxxx has designated Xxx Violet as its representative
and Xxxx Xxxxxxxx as its alternate. Each party may from time to time, by
written notice to the other, designate a new representative or
alternate.
(b) Day-to-Day Operations. Responsibility for the day-to-day operations of
the Venture shall be divided between Simplot and Xxxxxxx as provided in
this Section 8(b), subject to the overall management authority of the
Management Committee and such changes in the respective responsibilities
of Simplot and Xxxxxxx as to the Management Committee shall from time to
time determine.
(i) Simplot. Simplot shall be primarily responsible for the
day-to-day operation of the Facility, including the purchase of
common ingredients on behalf of the Venture; the purchase of
specialty ingredients, including premixes, and packaging used
solely in Simplot's branded label products; the manufacture of
pet food products on behalf of the Venture at the Facility
pursuant to Xxxxxxx'x formulations and specifications; and
warehousing inventories of ingredients, packaging and finished
product at the Facility.
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(ii) Xxxxxxx. Xxxxxxx shall be primarily responsible for purchase of
packaging and specialty ingredients on behalf of the Venture
(except as otherwise provided in subparagraph (i) above); the
development of pet food formulations; the marketing and sales of
pet food products manufactured or distributed by the Venture; and
the collection of accounts receivable arising from the sale of
pet food products on behalf of the Venture.
(iii) Alternate Arrangements. if the Management Committee shall from
time to time determine that a party can purchase goods on behalf
of the Venture at a price or on terms materially more favorable
to the Venture than the party responsible for the purchase of
such goods under subparagraph (i) or (ii) above, then
notwithstanding the provisions of such subparagraphs, such other
party shall purchase such goods on behalf of the Venture.
(c) Quality of Pet Food. Simplot will use its best efforts to operate the
Facility on behalf of the Venture to manufacture pet food products
pursuant to Section 8(b) hereof which are of consistently high quality in
accordance with Xxxxxxx'x formulations and specifications and will use
its best efforts to control the cost of manufacturing consistent with
Xxxxxxx'x standard of quality. Xxxxxxx will provide a quality assurance
program in connection with the production of pet food by the Venture to
be implemented by Simplot. This program will be monitored by Xxxxxxx'x
Quality Assurance Department for compliance. Simplot 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 at 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.
Simplot 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).
(d) Storage of Ingredients and Finished Products. Simplot will maintain and
store at the Facility on behalf of the Venture an inventory of packaging
and ingredients and an inventory of finished products adequate to satisfy
purchase orders obtained by Xxxxxxx from customers.
(e) Customer Service. Simplot 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, the
Venture shall maintain an adequate supply of Xxxxxxx pet food products
which are not manufactured at the Facility sufficient to satisfy
anticipated customer demands, including treats, canned pet foods,
semi-moist products, biscuits and other pet food products.
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(f) Customer Orders. Xxxxxxx agrees that, during the term of this Agreement,
it will use reasonable efforts to produce orders from customers for pet
food for production at the Facility so long as such pet food can be
produced 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. Simplot
acknowledges, however, that decisions as to which orders will be assigned
by Xxxxxxx to the Facility are within the discretion and control of
Xxxxxxx, to be reasonably exercised. 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 Simplot and
resold by Xxxxxxx or Simplot. All customer orders will be called into the
Xxxxxxx order desk in Mankato, Minnesota, including Simplot's orders for
Simplot brand products. Orders will be transmitted daily to the Facility
via computer terminals.
(g) Limitations Upon Authority of Parties. Neither party, without the consent
of the other, shall (i) borrow money for or in the name of the Venture or
utilize any party of the Venture as collateral for any such borrowing;
(ii) as a partner in the Venture, make, execute or deliver any assignment
for the benefit of creditors, confession of judgement, chattel mortgage,
deed, guarantee, indemnity bond or surety bond; (iii) buy, sell, encumber
or lease any property of the Venture, or any interest therein, other than
in the ordinary course of business; or (iv) undertake or authorize any
construction of any kind or nature other than necessary or appropriate
repairs in the ordinary course of business.
(h) Personnel. Subject to such changes as from time to time approved by the
Management Committee, all employees at the Facility will be employed by
Simplot. The Venture shall reimburse Simplot in accordance with Section 6
hereof as a direct expense of the Venture for compensation and benefits
to such employees.
(i) Management Personnel. Each of Simplot and Xxxxxxx shall devote the
attention of their management personnel to the Venture from time to time
as appropriate, but except as expressly provided in Section 6(c) hereof
with respect to administrative service fees, neither Simplot nor Xxxxxxx
shall charge a management fee to the Venture or allocate to the Venture
as a direct expense any portion of the compensation and benefits paid to
its management personnel.
(j) Employment Matters. Employees of Simplot or Xxxxxxx who perform services
for the Venture shall remain employees of their respective employer,
which shall remain solely responsible for establishing the terms and
conditions of their employment, including hiring, discipline and
discharge. Neither Simplot nor Xxxxxxx (or any of their respective
employees) shall have any responsibility for
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the development or approval of personnel policies with respect to the
employees of the other party performing services for the Venture. Subject
to the right of reimbursement as a direct expenses as previously provided
hereinabove, Simplot and Xxxxxxx shall remain solely liable for the
payment of compensation and 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. No
party to this Agreement shall be liable for workers' compensation or
employment-related damages or actions relating to the employees of the
other party to this Agreement. Neither the Venture nor Xxxxxxx shall be
considered a successor employer of any employees of Simplot, and neither
the Venture nor Simplot shall be considered a successor employer of any
employees of Xxxxxxx.
(k) Ancillary Services. If the Management Committee shall from time to time
determine that ancillary services required for operation of the Venture
(e.g., lab analysis) can be provided to the Venture more efficiently or
more economically by Simplot or Xxxxxxx than by having such services
provided by personnel regularly engaged in operation of the Venture or by
a third party contractor, then Simplot or Xxxxxxx, as the case may be,
agrees to provide such ancillary services to the Venture on such terms as
may be agreed by such party and the Management Committee; provided,
however, that neither Simplot nor Xxxxxxx shall have any obligation to
provide such ancillary services to the Venture if, in the reasonable
judgment of such party, to do so would materially interfere with its
other business operations or is not otherwise practicable under the
circumstances.
9. Accounting Matters.
(a) Tax Status. The Venture will function as a partnership for tax purposes.
The fiscal year of the Venture shall end on April 30, or such other year
as shall be approved by the Management Committee.
(b) Books of Account. Xxxxxxx shall be responsible for maintaining books of
account for the Venture. In connection therewith, Xxxxxxx shall prepare
and distribute to the parties on or prior to the 15th day of each month
an income statement and balance sheet for the venture for the preceding
month substantially in the form of Exhibit E hereto, with such changes in
form as may from time to time be approved by the Management Committee.
Xxxxxxx and Simplot shall cause to be performed periodic independent
audits of the books of account as from time to time determined by the
Management Committee. The parties and their agents shall have full access
to the books and records of the Venture at all reasonable times and shall
have the right to make copies of extracts from such books and records.
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(c) Bank Accounts. Xxxxxxx shall keep all funds of the Venture in one or more
bank accounts in Xxxxxxx'x name. Such funds may be commingled with other
funds of Xxxxxxx, but Xxxxxxx shall separately account for such funds and
interest on such funds shall accrue to the benefit of the Venture.
(d) Settlement of Intercompany Accounts. The intercompany account of each
party shall be settled on a monthly basis or on such other schedule
approved by the Management Committee. Each party shall remit to the
Venture the amount of any net charges to its account, or the Venture
shall remit to the party the amount of any net credits to its account.
10. Distribution of Net Income. An amount equal to 50% of the
Distributable Net Income (as hereinafter defined) shall be distributed to each
party from time to time, as determined by the Management Committee.
"Distributable Net Income" for any period shall mean the excess, if any, of (i)
the net income (computed without regard to any deduction for depreciation of
Venture assets) for such period over (ii) the aggregate net losses for all prior
periods to the extent not offset against net income for prior periods in
computing "Distributable Net Income" for such prior periods.
11. Other Business Operations of Parties.
(a) Simplot. Simplot engages in the pet food business at other
locations throughout the Pacific Northwest, which other
operations do not constitute part of the Venture.
(b) Xxxxxxx. Xxxxxxx engages in the pet food business at other
locations throughout the United States, which other operations do
not constitute part of the Venture. Simplot recognizes that such
other operations of Xxxxxxx may compete with the Venture.
12. Insurance. The following insurance coverages shall be obtained
regarding the operations and assets of the Venture:
(i) Simplot shall obtain property and casualty insurance with
respect to the Facility, and the Venture shall obtain
property and casualty insurance with respect to any
additional property, plant and equipment acquired by the
Venture pursuant to Section 2(b), in each case written on
an all risks replacement cost basis. All losses payable
thereunder that relate to (x) the Facility shall be
payable solely to Simplot and (y) the property, plant and
equipment acquired by the Venture pursuant to Section 2(b)
shall be payable solely to the Venture; provided, however,
that such proceeds shall be applied to repair, restoration
or replacement of the damaged property.
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(ii) The Venture shall obtain property and casualty insurance
with respect to the inventory, packaging and supplies of
the Venture in such amounts and with such deductibles as
shall be determined by the Management Committee.
(iii) The Venture shall obtain comprehensive general and
products liability insurance with respect to the Venture.
All such policies shall name each party and the Venture as
insured thereunder.
(iv) Each party shall obtain appropriate workers' compensation
insurance with respect to such party's employees.
(v) The Venture shall obtain such other insurance coverage as
the Management Committee shall deem appropriate in
connection with the activities of the Venture.
The premiums of any such insurance shall constitute a direct expense of
the Venture for purposes of Section 6 hereof.
13. Representations and Warranties.
(a) Generally. Each of Simplot and Xxxxxxx represents and warrants
to the other that:
(i) it is a corporation duly organized and in good standing
under the laws of the state of its incorporation;
(ii) it is duly qualified to do business in the State of Idaho;
(iii) it has obtained all necessary corporate approval to
execute, deliver and perform this Agreement and to engage
in operation of the Venture as contemplated hereby;
(iv) the execution, delivery and performance of this Agreement
and operation of the Venture as contemplated hereby does
not violate the terms of any agreement to which it is a
party or by which it is bound;
(v) there are no suits or proceedings pending or, to its
knowledge, threatened against it which, if decided
adversely to such party, would adversely affect its
authority to execute, deliver and perform this Agreement
or to engage in operation of the Venture in accordance
herewith; and
(vi) it has all necessary licenses, permits and authorizations,
governmental or otherwise, necessary to execute, deliver
and perform this Agreement and to engage in operation of
the Venture as contemplated hereby.
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(b) Additional Representations and Warranties of Simplot. To the best
of Simplot's knowledge, Simplot has not discharged at the
Facility or permitted or suffered the discharge at the Facility
of any hazardous substances the release or disposal of which is
regulated by any law, regulation, ordinance or code, and to the
knowledge of Simplot no such hazardous substances exist in, on or
under the Facility. Except as disclosed in writing to Xxxxxxx by
Simplot, no storage tanks for petroleum, petroleum by-products or
other hazardous substances are present in, on or under the
Facility.
14. Initial Term and Renewal Terms. The Venture shall have a term
commencing on the date hereof and continuing to and including April 30, 2018.
Thereafter, the term of the Venture shall be automatically extended for
successive two-year renewal terms unless either party elects by written notice
to the other party given not less than twelve (12) months prior to expiration of
the initial term or any renewal term, to terminate the Venture upon expiration
of the initial term or renewal term, as the case may be.
15. Early Termination. The Venture shall terminate prior to the initial
term or any renewed term, as follows:
(a) by the mutual written agreement of Simplot and Xxxxxxx;
(b) by either party upon not less than twelve (12) months written
notice of its election to terminate the Venture; provided that
the Venture cannot be terminated prior to April 30, 1998,
pursuant to this clause (b);
(c) by Simplot upon not less than thirty (30) days written notice of
its election to terminate the Venture if Xxxxxxx shall fall to
produce orders for production and/or sales of pet food (including
orders for products described in Sections 7(a), (b) and (c)
hereof) at least equal to (i) 8,000 tons per year for each of the
first two years of the Venture, and (ii) 12,000 tons per year for
each year thereafter; provided, however, that the Venture shall
not terminate if within such thirty (30) day period Xxxxxxx shall
elect to pay to Simplot an amount equal to 50% of the Venture's
average per ton profit on all sales for such year, times the
number of tons in the shortfall for such year;
(d) by either party upon not less than thirty (30) days written
notice of its election to terminate the Venture if during the
first five (5) years of the Venture the Venture (i) sustains a
net loss (before any deduction for depreciation of Venture
property) in each of twelve (12) consecutive months, or (ii)
sustains a net loss (before any deduction for depreciation of
Venture property) during any period of twelve (12) consecutive
months ending as of the end of the month immediately preceding
the month in which such party gives notice hereunder in excess of
$300,000;
(e) by either party upon written notice of its election to terminate
the Venture following the institution of any bankruptcy or
insolvency proceedings by or
-11-
against the other party (whether voluntary or involuntary, and
whether under federal or state law), the dissolution, liquidation
or winding up of the other party or the assignment by the other
party of any significant portion of its property or assets for
the benefit of creditors or claimants;
(f) by either party upon written notice of its election to terminate
the Venture 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 sixty (60) days after written notice of such breach;
or
(g) upon one hundred eighty (180) days prior written notice by the
remaining party or the permitted assignee of the other party
following the assignment by the other party of its interest in
the Venture in accordance with Section 17 hereof; provided,
however, that such notice of termination may not be given more
than ninety (90) days after the effective date of such assignment
or transfer.
Nothing contained in this Section 15 shall affect or impair any rights
or obligations arising prior to or at the time of the termination of the
Venture, or which may arise by an event causing the termination of the Venture.
16. Disposition of Assets Following Termination.
(a) Generally. Upon termination of the Venture, Simplot and Xxxxxxx
shall proceed to wind up the affairs of the Venture in accordance
with this Section 16.
(b) Option to Lease Facility. In the event Simplot gives notice of
termination pursuant to clause (b) of Section 15 hereof, or in
the event Xxxxxxx gives notice of termination pursuant to clause
(e) or (f) of Section 15 hereof, then Xxxxxxx shall have an
option, exercisable by written notice by Xxxxxxx to Simplot at
any time on or prior to the effective date of such termination,
to lease the Facility (including any equipment purchased by
Simplot pursuant to clause (c) of this Section 16) for a period
of up to two (2) years commencing on the date of termination of
the Venture on the terms set forth on Exhibit F hereto.
(c) Option to Purchase Additional Equipment. In the event the Venture
is terminated for any reason, Simplot shall have the option,
exercisable by written notice by Simplot to Xxxxxxx at any time
on or prior to the effective date of such termination, to
purchase the equipment of the Venture at a mutually agreed upon
price, or if the parties cannot agree, at a price equal to the
then current book value, net of accumulated depreciation. In the
event Simplot shall not exercise its option to purchase the
equipment of the Venture pursuant to this clause (c), then
Xxxxxxx shall have the option, exercisable by written notice by
Xxxxxxx to Simplot within 30 days following the effective date of
termination, to purchase the equipment of the Venture at a
mutually agreed upon price, or if the parties
-12-
cannot agree, at a price equal to the then current book value, net of
accumulated depreciation.
(d) Disposition of Assets.
(i) Upon termination of the Venture, subject to the option of Simplot
and Xxxxxxx to purchase the equipment owned by the Venture
pursuant to clause (c) of this Section 16, the assets of the
Venture shall be sold in an orderly fashion in such manner as the
Management Committee shall determine.
(ii) absent a lease of the Facility by Xxxxxxx under clause (b) of
this Section 16, upon termination of the Venture exclusive
possession of the Facility, free and clear of any rights of the
Venture or Xxxxxxx, shall revert to Simplot.
(iii) upon termination of the Venture, each party's right to use Trade
Secrets of the other party shall cease and each party shall
return to the other party any and all materials in such party's
possession or control which contain or relate to Trade Secrets of
the other party.
(e) Application of Cash. Any cash of the Venture, including without
limitation the proceeds of assets sold pursuant to clauses (c) and (d)
of this Section 16, shall be applied and distributed in the following
order of priority:
(i) to the payment of debts and liabilities of the Venture (other
than outstanding advances pursuant to Section 5 hereof) and
expenses of liquidation;
(ii) to the setting up of any reserves that 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, which reserves shall be paid over by
Simplot 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; provided,
however, that at the expiration of such period of time as Simplot
and Xxxxxxx shall xxxx mutually advisable, said escrow agent
shall distribute the balance thereof remaining in the manner set
forth in subparagraph (iv) hereof;
(iii) to outstanding advances pursuant to Section 5 hereof; and
(iv) any balance remaining after the application in accordance with
the foregoing subparagraph, equally to Simplot and Xxxxxxx.
-13-
17. Option of Simplot to Participate with Xxxxxxx in Ownership and
Operation of New Facility.
(a) In the event during the term of the Venture Xxxxxxx commences
construction of a new dry pet food manufacturing facility in the
state of Washington, Oregon or Idaho to which substantially all
of the business of the Facility is or will be transferred (a
"Replacement Facility"), then upon or prior to the commencement
of construction Xxxxxxx shall submit to Simplot a written offer
to participate with Xxxxxxx as a 50% owner of the Replacement
Facility and a 50% participant in the operation of the
Replacement Facility (a "Joint Ownership Offer?") in accordance
with this Section 17.
(b) The Joint Ownership Offer shall provide for the Replacement
Facility to be owned by Xxxxxxx and Simplot as tenants in common
or, alternatively, provide for the Replacement Facility to be
owned by a joint venture in which Xxxxxxx and Simplot each hold a
50% interest, and shall provide for Xxxxxxx and Simplot directly,
or through a joint venture, to share equally in the cost of
operating the Replacement Facility and share equally in the
profits or losses derived from operation of the Replacement
Facility. To the extent practicable, Xxxxxxx shall endeavor in
good faith to structure the Joint Ownership Option in a manner
consistent with the structure of the Venture established pursuant
to this Agreement, except that Simplot directly, or through such
joint venture, would purchase a 50% ownership interest in the
Replacement Facility, and the employees operating the Replacement
Facility may be employees of Xxxxxxx or the joint venture, rather
than employees of Simplot.
(c) Simplot shall have a period of sixty (60) days after receipt of
the Joint Ownership Offer to accept the Joint Ownership Option by
written notice of acceptance to Xxxxxxx. Following timely notice
of acceptance, Xxxxxxx agrees to negotiate in good faith the
definitive documentation for the joint ownership and operation of
the Replacement Facility by Xxxxxxx and Simplot. If Xxxxxxx shall
have so negotiated in good faith with Simplot, but within a
period of sixty (60) days after notice of acceptance, the parties
shall not have executed and delivered definitive documents for
joint operation and ownership of the Replacement Facility, then
the rights of Simplot to participate in the ownership and
operation of the Replacement facility shall cease and be of no
further force or effect.
18. Assignment. Except as expressly permitted by this Section 18,
neither party shall assign or encumber its interest in the Venture and Simplot
shall not transfer or encumber the Facility. A party may assign its interest in
the Venture and Simplot may transfer the Facility to another entity in either
case in connection with the sale of substantially all of the assets of a
division or component of its business to another entity provided that (i) such
party remains liable for observance and performance of its obligations under
this Agreement; (ii) the financial condition of the transferee is reasonably
satisfactory to the other party; and (iii) the transferee
-14-
specifically agrees to be bound by the terms of this Agreement. Each and every
provision in this Agreement shall survive such assignment or transfer and remain
in full force and effect.
19. Successors and Assign. This Agreement shall bind and inure to the
benefit of the parties hereto, there successors and permitted assigns.
20. Further Assurances. The parties agree that they will perform such
other acts and execute and deliver such other documents as may be necessary or
appropriate from time to time to carry out the intent and purpose of this
Agreement. The parties recognize that issues may arise in connection with the
Venture which are not provided for in this Agreement and cannot be resolved by
the Management Committee. Subject to the early termination provisions of Section
15 hereof, the parties agree to negotiate in good faith the resolution of such
issues by amendment or modification of this Agreement in accordance with Section
21 hereof.
21. Waivers and Amendments. This Agreement may be amended or modified,
and the terms hereof may be waived, only by a written instrument executed by the
parties hereto or in the case of a waiver, by the party waiving compliance. The
failure of either party at any time or tunes to require performance of any
provision hereof shall in no manner affect its right at a later time to enforce
the same. No waiver by either party of the breach of any term or covenant
contained in this Agreement, or m any other such instrument, whether by conduct
or otherwise, in any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any breach, or a waiver of the breach of
any other term or covenant contained herein.
22. Arbitration. 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 the State of Idaho 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 expenses of the
arbitration shall be borne by the Venture, provided that each of Simplot 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 ten (10) days plus the number of days that are taken for the
termination of that matter by the arbitrator(s). Nothing herein contained shall
bar either party from seeking equitable remedies in a court of competent
jurisdiction.
23. Indemnification. Etc.
(a) By Simplot. Simplot shall indemnify and hold harmless Xxxxxxx and
the Venture for and against:
(i) all claims, actions, suits and proceedings asserted
against Xxxxxxx or the Venture with respect to any and
all liabilities and obligations arising from ownership of
the Facility prior to the date of commencement of the
Venture (the "Commencement Date"), operation of the
manufacturing business at the Facility by Simplot prior
to the Commencement Date, and
-15-
incidents and occurrences prior to the Commencement Date
relating to the Facility and such business;
(ii) without limiting the generality of the foregoing, any and
all product liability or similar claims in respect of
products manufactured at the Facility by Simplot prior to
the Commencement Date;
(iii) any and all loss, injury, damage or deficiency resulting
from any misrepresentation or breach of warranty on the
part of Simplot under this Agreement;
(iv) any and all loss, injury, damage or deficiency resulting
from the discharge at the Facility of any hazardous
substances the release or disposal of which is regulated
by any law, regulation, ordinance or code, whether prior
to or after the Commencement Date, or the existence of any
such hazardous substances in, on or under the Facility;
and
(v) any and all loss, injury damage or deficiency resulting
from the gross negligence or willful misconduct of
Simplot.
(b) By Xxxxxxx. Xxxxxxx shall indemnify and hold harmless Simplot
and the Venture for and against:
(i) any and all loss, injury, damage or deficiency resulting
from any misrepresentation or breach of warranty on the
part of Xxxxxxx under this Agreement; and
(ii) any and all loss, injury, damage or deficiency resulting
from the gross negligence or willful misconduct of
Xxxxxxx.
(c) By the Venture. The Venture shall indemnify and hold harmless
each of Simplot and Xxxxxxx for and against all claims, actions,
suits and proceedings asserted against such party in connection
with the Venture or any act or omission of such party in its
capacity as a party to the Venture; provided, however, that
neither Simplot nor Xxxxxxx shall be indemnified and held
harmless pursuant to this Section 23(c) for any matter with
respect to which it is required to indemnify and hold harmless
the Venture and the other party pursuant to Section 23(a) or
23(b) hereof.
24. Liability of Parties. Neither Simplot 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. Neither Simplot nor Xxxxxxx shall be liable
to the Venture or the other party for any act or omission of such party in its
capacity as a party to the Venture unless such act or omission constitutes
gross negligence or willful misconduct of such party.
-16-
25. Governing Law. This Agreement shall be interpreted in accordance
with the laws of the State of Idaho.
26. 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
transmitted by registered or certified U.S. Mail, return receipt requested and
postage prepaid, addressed to the other party at its address hereinafter set
forth or at such other address as the other party shall theretofore have
designated by notice in accordance with this Section 26:
If to Simplot: J.R. Simplot Company
X.X. Xxx 00
Xxxxx, Xxxxx 00000
Attention: Secretary
With a copy to: J. R. Simplot Company
000 Xxxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000
If to Xxxxxxx: Xxxxxxx Milling Company
000 Xxxxx Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: President
The date of giving such notice shall be the date received, if served
personally, or the date on which the notice is delivered to the other party as
indicated by the return receipt.
27. Entire Agreement. This Agreement and the Exhibits hereto set forth
the entire understanding and agreement between the parties hereto with respect
to the subject matter hereof and supersede all prior agreements, arrangements
and understandings, written or oral, relating to the subject matter hereof.
28. Headings. The headings contained in this Agreement are for
referenced purposes only and shall not affect the meaning or interpretation of
this Agreement.
29. 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.
-17-
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first-above written.
J.R. SIMPLOT COMPANY
By Xxx X. B[ILLEGIBLE]
-------------------------------
Its President D.P.G.
---------------------------
XXXXXXX MILLING COMPANY
By Xxxxxxx X. Xxxxxxx
-------------------------------
Its Vice President Pet Food
---------------------------
-18-
EXHIBIT A
DESCRIPTION OF FACILITY
Site Plan
TRUCK LOADOUT
[ ] = Fish Food Manufacturing Facility
EXISTING
FISHFOOD
PLANT
11,600 SQ.FT WAREHOUSE W/FIRESPRINKLER SYSTEM
TRUCK RECEIVING
Equipment List
1. Truck bottom dump receiving auger
2. Six 40-50 ton holding bins with elevator and transfer
conveyors
3. Xxxxx-Xxxxx 2 ton Ribbon Blender on weight load cells
4. In/Out feed conveyors and elevators
5. Xxxxxxxx Hammer Mill XLT 42336-D 150 h.p. motor capable of product
reduction to 3/64"
6. Dalamatic Air Scrubber
7. 1 ton live bottom surge bin
8. Dual Agitator Pre-conditioner capable of water, oil, slurry
and/or steam injection
9. X-175 Xxxxx Extruder with 200 h.p. motor
10. Negative Air System to transfer product from extruder to dryer
11. Wenger 960 2 stage dryer/cooler with optional product crumbler
12. Three Screen Rotex to remove "overs", "unders" and fines
13. Xxxxx-Xxxxx Fats Applicator complete with Xxxxxx Flow Rate
Indicator/Totalizer motor
14. Accurate Dry Powder Applicator for finished product
15. Two bulk load-outs bins 20 ton each capacity
16. Assorted conveyors, elevators to facilitate product flow through system
17. Xxxx Xxxxxxxxxx Packaging Scale
18. Union Special Stitcher with tape applicator
A-2
EXHIBIT B
Additional Equipment
This list comprises equipment deemed necessary for volume production and sales
of quality pet foods.
Pallet racking for M-T Bag inventory $ 7,000.00
Sanitary guidelines related to pet contract 10,000.00
Easy Open Top sewing machine DoBoy 20,000.00
Upgrade Liquid Digest Application 25,000.00
Additional Forklift 15,000.00
Pallet Stretch Wrap 10,000.00
Increase "hand add" batching area 5,000.00
Technicon Analyzer 30,000.00
Conveyor from product coater to elevator 2,475.00
Elevator 4,175.00
Two finished product bins; capacity 12 ton each 16,500.00
2# to 10# Electronic bagging scale 8,668.95
Bag closing machine heat seal 5,800.00
Electronic contracting includes high-low indicators 5,400.00
Millwright services for transitions, gates, tank
installations with crane service, scaler and closing
machine installations. Labor would be $ 12,300.00
Total $177,318.95
EXHIBIT C
Description of Direct Expenses
I. PLANT G & A
Employee Benefits
Fixed Insurance Expense
Office Equipment Rent
Administrative Wages
Operating Supplies
Office Supplies
Computer Supplies
Auto Operating Expense
Entertainment & Customer Relations
Entertainment - Meals
Travel Meals
General Travel
Lodging Expense
Meetings & Conventions
Telephone Toll Charges
Postage
UPS Charges
Dues and Subscriptions
Airplane Expenses Charged
Public and Employee Relations
Miscellaneous
II. PRODUCTION EXPENSE
Non-Productive Wages
Sweepers Wages
Miscellaneous Millwright Wages
Extruder Millwright Wages
Supt and Xxxxxxx Wages
Millers and Mixers Prod Wages
Pack/Pack Large Prod Wages
Extruder Production Wages
Small Pack Production Wages
Warehouse Production Wages
Outside Labor
Project Expense
Repairs Maintenance Building and Grounds
Repairs Mixing Equipment
Repairs Packing Equipment
Repairs Receiving Equipment
Repairs Warehouse Equipment
Repairs Dryer Equipment
Repairs Extruding Equipment
Fuel
II. PRODUCTION EXPENSE (continued)
Controllable Liability
Power and Light
Water and Sewer Service
Fork Truck Gas and Oil
Fork Truck Tires
Fork Truck Repairs
Operating Supplies
Expendable Tools and Equipment
Fumigation Expense
Miscellaneous
Services Charged
Employee Benefits
Insurance Expense
All real estate tax that is incurred on the facility incurred on the
facility over the amount existing on the commencement date of the
venture.
III. SALES EXPENSE
Employee Benefits
Amortization Expense
Fixed Insurance Expense
Salesmen Wages
Entertainment and Customer Relations
Entertainment - Meals
Travel - Meals
General Travel
Lodging Expense
Meetings and Conventions
Telephone Toll Charges
Sales Material Expense
Miscellaneous Professional Charges
Package Development Freight
Postage
Dues and Subscriptions
Airplane Expense Charges
Miscellaneous
Services Charged
C-2
EXHIBIT D
Administrative Services
Purchasing
Accounting
R & D/Quality
Customer Service
Tonnage Taxes
Travel
Kennel
Outside Research
Professional Fees
Laboratory
Supplies
Postage
Computer Service
Miscellaneous
EXHIBIT E
XXXXXXX - XXXXXXX JOINT VENTURE
PET FOOD INCOME STATEMENT
________,1993
CURRENT MONTH YEAR-TO-DATE
00/00/93 00/00/93
Actual Last Year Variance Actual Last Year Variance
CUSTOMER TONS
INTER-CO. TONS
TOTAL TONS
Plant Sales
Cost of Sales
Gross Profit
Manufacturing (Xxxxxxx)
Manufacturing (Simplot)
G&A Plant (Xxxxxxx)
G&A Plant (Simplot)
G&A Non-Plant (Xxxxxxx)
G&A Non-Plant (Simplot)
Operating Expenses
OPERATING INCOME
Freight Out
Product Liability
Allowances
Brokerage
Cash Discounts
Total Discounts
Bad Debt Provision
Selling
Advertising
Total Marketing
Interest Income
Misc. Income/Expense
Provision of Income Tax
Total Other Income
VENTURE NET INCOME
SIMPLOT SHARE
XXXXXXX SHARE
EXHIBIT F
TERMS OF LEASE
Term: Up to two (2) years at the option of Xxxxxxx, commencing
on the date of termination of the Venture. Xxxxxxx to
specify term at the time notice of exercise of the option
to lease is delivered to Simplot.
Rental: Greater of (i) $5,000 per month, plus all real estate
taxes allocable to the Facility, or (ii) 20% of the net
income from the Facility, computed in a manner consistent
with the computation of net income under the Joint Venture
Agreement.
Insurance: Simplot to obtain casualty insurance for Facility.
Casualty insurance to be for full insurable value of the
Facility. Xxxxxxx to obtain commercial liability insurance
for the Facility with Simplot named as an additional
insured.
Maintenance: Xxxxxxx to be responsible for routine maintenance and
repairs of the Facility (including equipment in the
Facility) consistent with standards maintained during the
term of the Venture, other than structural repairs.
Simplot to be responsible for all structural repairs to
the Facility.
Compliance
with Laws: Xxxxxxx will be required to conduct its operations at the
Facility in accordance with all applicable laws.
Notwithstanding the foregoing, Simplot will be responsible
for, all improvements, alterations or additions to the
Facility necessary to comply with all such laws, including
the Americans with Disabilities Act.
Non-Interference: Xxxxxxx and Simplot to each take reasonable steps to
prevent conflict between Xxxxxxx'x operation of the
Facility and Simplot's operation of its adjacent
facilities.
Faegre & Xxxxxx Client No: Client: [ILLEGIBLE]
Corporate Finance Group Matter No: Matter: [ILLEGIBLE]
DOCUMENT TRACKING SHEET
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Revise
this
Document Name Doc. # Copy #1 Copy #2 Copy #3 Copy #4 Copy #5 Copy #6 Copy #7
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Joint Venture MFF09185 MFF09185 MFF09185
Agreement
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* Note document was originally copied from a Xxxxxxx disk.
