TACOMA EXPORT MARKETING COMPANY
PARTNERSHIP AGREEMENT
BETWEEN
CONTINENTAL GRAIN COMPANY
AND
HARVEST STATES COOPERATIVES
DATED AS OF SEPTEMBER 28, 1992
THIS PARTNERSHIP AGREEMENT made as of this 28th day of September, 1992,
between HARVEST STATES COOPERATIVES, a Minnesota corporation ("Harvest States")
and CONTINENTAL GRAIN COMPANY, a Delaware corporation ("Continental").
WITNESSETH:
WHEREAS, the Partners desire to form a general partnership for the
purpose of engaging in the buying, selling, storing and handling of certain
feedgrains and oilseeds for export from the Pacific Northwest, United States
primarily through Continental's presently leased facility at Tacoma, Washington
(the "Tacoma Facility") and such other business activities as are related
thereto, and
WHEREAS, the partnership formed hereby desires to sublease the Tacoma
Facility from Continental and Continental desires to sublease the Tacoma
Facility to the partnership.
NOW, THEREFORE, in consideration of the premises and covenants and
agreements hereinafter set forth, the Partners hereby agree as follows:
ARTICLE I
DEFINITIONS
Definitions. The following terms wherever used in this
Agreement shall have the meanings hereinafter assigned to them:
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with such Person.
"Agreement" means this Partnership Agreement as in effect on
the date hereof and as the same may be modified or amended by action of the
Partners as provided herein.
"Control" (including "controlling", "controlled by" and "under
common control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person by
ownership of more than 50% of the voting securities of a corporation or by
contract or otherwise.
"Controlling Affiliate" means, with respect to any Person, any
Affiliate of such Person that Controls such Person.
"Encumbrance" means and includes any mortgage, pledge, lien,
charge, encumbrance, lease, sublease, security interest or trust interest; and
to "Encumber" an asset is to create an Encumbrance thereon.
"Feedqrains" means the corn and sorghum as provided in Section
7.1.
"Fundamental Issues" means those issues which require the vote
of both of the Partners or the approval of the Management Committee, as provided
in Section 5.3.
"Management Committee" means the Management Committee
constituted as provided in Section 5.2.
"Net Income" and "Net Loss" shall mean the income and losses
of the Partnership, determined on an accrual basis in accordance with generally
accepted accounting principles consistently applied, after all expenses of the
Partnership have been taken into account (including allowances for depreciation
or amortization of Partnership assets) and shall include gain or loss realized
by the Partnership on the sale or the disposition of assets in connection with a
dissolution of the Partnership pursuant to Article XI.
"Oilseeds" means soybeans as provided in Section 7.1.
"Partner" or "Partners" means Continental or Harvest States or
both Continental or Harvest States, as the case may be, and their permitted
successors and assigns.
"Partner Account" means, with respect to each Partner, the
account maintained for such Partner in accordance with Section 10.10.
"Partner Interest" means the interest of a Partner in the
Partnership.
"Partnership Law" means the Washington Uniform Partnership
Act, Ch. 25.04 RCW as amended from time to time.
"Person" means any natural person, firm, trust, partnership,
joint venture, unincorporated association, corporation, government or
governmental agency.
"Prime Rate" means the prime or base rate announced from time
to time by the Chase Manhattan Bank, N.A. The Prime Rate shall be adjusted on a
[daily] basis.
"Secretary" means the Secretary of the Partnership as provided
in Section 6.2.
"Share", when used with respect to either Partner means fifty
percent (50%) unless and until such percentage shall be changed by a vote of the
Partners.
"Treasurer" means the Treasurer of the Partnership as provided
in Section 6.3.
ARTICLE II
2.1 The Partnership. The Partners hereby form and constitute a
partnership as a general partnership (the "Partnership") under the Partnership
Law of the State of Washington upon the terms and conditions set forth in this
Agreement. Except as otherwise provided in this Agreement, the rights and
liabilities of the Partners shall be governed by the Partnership Law.
2.2 Name. The Partnership shall operate under the name of Tacoma Export
Marketing Company ("TEMCO").
2.3 Principal Office. The principal office of the Partnership shall be
located at 222 SW Columbia Street, Koin Tower, Suite 1100, Portland, Oregon
97201 or at such other place as may be designated by the Management Committee as
hereinafter defined.
2.4 Duration. The Partnership shall commence on September 15, 1992 and
shall continue through the close of business on September 14, 1997, unless
sooner terminated as provided herein. The term of the Partnership shall be
extended automatically for successive five (5) year periods unless either
Partner delivers written notice to the other Partner not less than 120 days
prior to the expiration of the then current term that it elects not to renew or
extend the term of the Partnership. In no event, however, shall the term of the
Partnership continue beyond 2012 without the written agreement of both Partners.
2.5 Purpose. The purpose of the Partnership is to engage in the
business of buying, trading, selling, handling and transporting for export and
exporting Feedgrains and Oilseeds, as defined in Section 7.1, primarily from the
Pacific Northwest, United States through the Tacoma Facility to Pacific Basin
destinations and engaging in such other activities and business as may be
incidental or related thereto or necessary or desirable in furtherance of such
purpose. The Partnership shall establish or cause to be established such
business organizations and shall own, directly or indirectly, such assets as the
Partners shall agree are appropriate to achieve the purpose of the Partnership.
2.6 Scope. The Partnership is and shall be a partnership only for the
purposes specified in this Agreement and nothing contained in this Agreement
shall be deemed to create a general partnership between the Partners with
respect to any activities whatsoever other than activities within the proper
business purposes of the Partnership. Neither of the Partners shall have the
power to bind the other Partner or the Partnership except as specifically
provided in this Agreement. Neither of the Partners or the Partnership shall be
responsible or liable for any indebtedness, liability or obligation of the other
Partner incurred either before or after the execution of this Agreement except
for indebtedness, liabilities, and obligations incurred after the execution of
this Agreement in connection with authorized activities within the proper
business purposes of the Partnership. Each Partner, respectively, hereby
indemnifies and agrees to hold the other Partner, and its Affiliates and
directors and officers, and the Partnership harmless from and against all such
indebtedness, liabilities and obligations incurred by it which are not
authorized and within the proper business purposes of the Partnership.
ARTICLE III
3.1 Initial Capital Contributions. The initial capital of the
Partnership shall consist of $100.00 cash, contributed by the Partners in
proportion to their Shares. Each Partner shall make its initial capital
contribution contemporaneous with the execution of this Agreement.
3.2 Additional Capital Contributions.
(a) The Partners agree that the Partnership shall meet its
capital needs through the borrowing of funds as provided in Section 10.3 and
that unless specifically agreed to by the Partners and except as set forth in
this Section 3.2, the Partners shall not be obligated to make any additional
capital contributions to the Partnership. If the Partners agree to make
additional capital contributions, the contributions shall be made at such times,
in such amounts and under such conditions as shall be determined by the Partners
in accordance with the provisions of this Agreement.
(b) No interest shall accrue on any Partner's Partner Account.
A Partner shall not be entitled to withdraw any part of its capital in the
Partnership or to receive any capital distribution from the Partnership except
as part of a distribution of capital agreed to by the Management Committee as
hereinafter defined or as provided in Article XI.
(c) All capital contributions and other payments required or
permitted to be made by a Partner under this Agreement shall be either in cash
or, at the request of any Partner and if agreed to by the Management Committee,
on such conditions and for such fair value as the Management Committee as
hereinafter defined shall so determine, in kind.
(d) If a Partner (a "Delinquent Partner") shall fail to make
when due a contribution required pursuant to this Agreement, the other Partner
(the "Contributing Partner") may, in its sole discretion, advance all or part of
that amount to the Partnership. Such advance shall be deemed to be a demand loan
by the Contributing Partner to the Delinquent Partner at an interest rate equal
to 2% in excess of the Prime Rate for the period during which the advance is
outstanding. This loan shall be repaid, together with such interest, by the
Delinquent Partner promptly upon demand from any funds of the Delinquent
Partner, including, without limitation, any distribution from the Partnership
which would otherwise be payable to the Delinquent Partner. Unless and until the
Delinquent Partner makes such repayment, the Partnership shall make no cash
distribution to such Partner (except that a cash distribution shall be applied
to make such repayment and the balance then made to the formerly Delinquent
Partner). The Contributing Partner to which such debt is due (or to which a debt
pursuant to Article VIII is due) shall have a security interest in the Partner
Interest of the Delinquent Partner to secure such amounts owed to it, and such
security interest is hereby granted by each Partner. To the extent that the
principal amount of the delinquency is repaid, the principal amount of such
repayment (excluding any interest) shall be deemed a contribution to the capital
of the Partnership by the Delinquent Partner and shall be reflected as such in
the Partner Account of the Delinquent Partner.
ARTICLE IV
4.1 Allocation of Profits and Losses. Except as otherwise specifically
provided in Section 10.10; all items of Net Income and Net Loss shall be
allocated to the Partners in accordance with their respective Shares.
ARTICLE V
5.1 Voting and Meeting of the Partners. Each Partner shall have an
equal vote in the management of the Partnership. Meetings of the Partners may be
called by either Partner on ten (10) Business Days prior notice to discuss any
matter including, without limitation, any matter related to the finances,
operations, management, policies, or personnel of the Partnership. Notice of
meetings may be waived by the Partner entitled to such notice.
5.2 Management Committee.
(a) The conduct of the business and affairs of the Partnership
shall be managed by a standing Management Committee consisting of four (4)
members, with each Partner appointing two (2) regular members and such alternate
members as such Partner deems advisable. Each of the Partners may initially
appoint or replace any or all of its members or alternate members of the
Management Committee by written notice to the Partnership and the other Partner.
Each of the Partners shall at all times maintain in effect the appointment of at
least one (1) member of the Management Committee. Each member of the Management
Committee shall serve for indefinite terms at the pleasure of the appointing
Partner.
(b) The Management Committee shall meet not less than
quarterly at such times and places as it may determine. Meetings of the
Management Committee may be called by one (1) member of the Management
Committee. The General Manager shall have the right to attend all meetings of
the Management Committee but shall not be entitled to participate in the voting
on any decision or other matter before the Management Committee. Notice of each
meeting of the Management Committee shall be telexed, telecopied, sent by mail
or delivered personally, or by telephone, to each regular and alternate member
not later than ten (10) Business Days before the date on which the meeting is to
be held. Notice of meetings may be waived by the member or members entitled to
such notice.
(c) The attendance of one (1) member from each Partner shall
constitute a quorum for the transaction of business of the Management Committee.
Each member at the meeting shall be entitled to one vote for each matter to be
voted upon by the Management Committee. Any decision or approval before the
Management Committee shall be taken by majority vote of those of the Management
Committee present or participating in a meeting at which a quorum is present;
provided, however, no action shall be authorized unless at least one (1) member
appointed by each Partner votes affirmatively on such action. The failure of the
Management Committee to authorize action with respect to any matter pursuant to
the foregoing sentence shall constitute a Deadlocked Matter pursuant to Section
5.4.
(d) Any decision or approval of the Management Committee may
be made without a meeting if either (i) such decision is first approved in
writing by one of the members or alternates of each of the Partners or (ii) such
meeting is held by means of a conference telephone or similar communications
equipment allowing all Persons participating in the meeting to hear each other
at the same time.
(e) The regular members of the Management Committee shall
alternately act as chairman of meetings of the Management Committee. Minutes of
all meeting shall be prepared by the Secretary and shall be distributed to all
regular members (and alternate members if present at a meeting) within thirty
(30) days following any meeting.
5.3 Fundamental Issues. No action may be taken or decision made which
binds the Partnership by the General Manager, any Partner on behalf of the
Partnership, or the Partnership, with regard to any of the Fundamental Issues
without the vote (or written consent) of the Management Committee in accordance
with Section 5.2(c). Fundamental Issues shall include decisions and actions on
the following matters, and such other matters as may be deemed Fundamental
Issues, from time to time, by the Management Committee:
(a) calls for additional capital or guarantees hereunder;
(b) the issuance of any notes, bonds, debentures or other
obligations by the Partnership, or the incurrence of or assumption of any
indebtedness if, after giving effect thereto, the aggregate principal amount of
all such indebtedness of the Partnership, other than indebtedness previously
approved by the Management Committee (including, without limitation, the
utilization by the Partnership of lines of credit previously approved by the
Management Committee for the purpose of financing the business of the
Partnership in the ordinary course), would either (i) exceed the amounts
specifically provided therefor and sufficiently identified in the Partnership's
current annual budgets referred to in Sections 5.3(p) and 10.1, or (ii) result
in direct or indirect liability on either or both of the Partners for repayment
of such indebtedness;
(c) any acquisition, disposition, sale, conveyance, lease,
sublease, exchange or other disposition of any interest in the Tacoma Facility
other than the sublease contemplated by Section 7.2 hereof;
(d) the acquisition, disposition, sale, conveyance, lease,
sublease, exchange or other disposition of real property having a value greater
than a threshold amount to be determined by the Management Committee;
(e) the acquisition, disposition, sale, conveyance, lease,
sublease, exchange or other disposition of personal property, other than
agricultural commodities traded in the ordinary course of business, with a value
greater than a threshold amount to be determined by the Management Committee;
(f) investing in any Person;
(g) the establishment of trading position limits for
agricultural commodities traded by the Partnership;
(h) the making of loans or provision of guaranties, or the
extension or pledge of credit to others, except endorsements and extensions of
credit in the ordinary course of business;
(i) the sale of any equity interests (or operation, warrant,
conversion in similar rights with respect thereto) in the Partnership;
(j) the selection, appointment, remuneration, removal and
determination of the terms and conditions of employment agreements of officers,
executives and key employees of the Partnership;
(k) the payment of bonuses and perquisites to officers,
executives and key employees of the Partnership;
(l) the confession of any judgment against the Partnership or
the creation, assumption, incurrence, or suffering to be created, assumed or
incurred or to exist of, any encumbrance upon any of the assets or property of
the Partnership, or the acquisition or holding or agreement to acquire or hold
such property or assets subject to any encumbrance other than (i) liens for
taxes not yet due or which are being contested in good faith by appropriate
proceedings, and (ii) other minor encumbrances incidental to the conduct of the
business of the Partnership or the ownership of its property and assets which
are not incurred in connection with the borrowing of money or the obtaining of
advances or credit, and which do not in the aggregate materially detract from
the value of such property or assets or materially impair the use thereof in the
operation of the business of the Partnership;
(m) the compromise or submission to arbitration (other than
contract specifically providing for arbitration) or litigation of any claim due,
or any dispute or controversy involving the Partnership for any claim, dispute
or controversy in excess of any amount to be determined by the Management
Committee;
(n) the entering into of any contract or commitment (other
than those contracts made in the ordinary course of business) involving
aggregate expenditures in excess of an amount to be determined by the Management
Committee;
(o) the entering into any contract or commitment (other than
those commodity, sales and purchase contracts made in the ordinary course of the
Partnership's grain merchandising business) involving either Partner, or any of
their affiliates;
(p) the approval of the annual business operating budget,
capital expenditure budget and business plan and the amount of cash for
distribution and adoption of other major financial policies of the Partnership;
(q) the approval of the opening financial statements of the
Partnership as referred to in Section 10.7;
(r) the appointment and removal of the independent accountants
for the Partnership;
(s) the appointment and removal of the Liquidator of the
Partnership pursuant to Section 11.2;
(t) any material changes in the purposes of the Partnership
beyond that expressly contemplated by this Agreement as provided in Section 2.5;
(u) the voluntary dissolution and winding-up of the
Partnership, provided, however, that this provision shall in no way limit the
rights of the Partners under Article XI.
(v) any changes in the scope or method of operations or
business policies of the Partnership which is likely to materially increase the
working capital or cash requirements of the Partnership.
(w) approval of the credit policy applicable to export sales
and any material deviation therefrom.
5.4 Deadlock.
(a) In the event that the Partners or the Management Committee
cannot agree on any Fundamental Issue considered by the Management Committee (or
otherwise by the Partners) within 45 days following the Management Committee
meeting at which a decision on such Fundamental Issue was sought (a "Deadlocked
Matter"), either Partner may elect to dissolve the Partnership in accordance
with Article XI by notice in writing to the other Partner ("Notice of
Dissolution"). The Partners shall attempt within such 45 days period to resolve
any Deadlocked Matter in good faith.
5.5 Subcommittees. The Management Committee shall appoint an operating
committee which shall consist of four members, two persons appointed from
Harvest States and two Persons appointed from Continental (the "operating
Committee"). The Operating Committee shall meet regularly to assure that the
proper implementation of the operations objectives of the Partnership, the
adequate coordination of supporting services, such as accounting and
administration provided by the Partners to the Partnership and the adequacy of
communication between the Partnership and the Partners. The Operating Committee
shall report to the Management Committee. The Management Committee shall appoint
such other subcommittees as it deems advisable, each with an equal number of
representatives from each Partner.
ARTICLE VI
OFFICERS AND EMPLOYEES
6.1 The General Manager.
(a) The General Manager of the Partnership shall be appointed
by the Management Committee and shall serve for a term of one (1) year unless
extended by action of the Management Committee. The General Manager is hereby
vested with such executive and financial authority as to enable him to direct
the business and affairs of the Partnership, subject to the directions of the
Management Committee and in accordance with this Agreement. The General Manager
shall be authorized to execute documents within the scope of his authority on
behalf of the Partnership which will bind the Partnership without the necessity
of obtaining the signature of either of the Partners. The General Manager shall
be responsible for the implementation of the various decisions of the Management
Committee and for the day-to-day management and operation of the Partnership.
The General Manager shall regularly inform the Management Committee of the
Partnership's on-going activities. The General Manager shall report to and take
direction from the Management Committee. The General Manager shall enter into
transactions on behalf of the Partnership except that the General Manager is not
authorized to take any action on a Fundamental Issue unless such action shall
have been approved by the Partners of the Management Committee under Section
5.2.
(b) The General Manager shall provide the following reports to
the Management Committee:
(i) daily position reports;
(ii) a weekly management report;
(iii) a monthly report on the financial condition and the
business prospects of the Partnership;
(iv) a monthly report summarizing all claims made and suits
filed against the Partnership, all potential claims and suits, and the final
settlement or other resolution of claims and suits; and
(v) other reports requested by the Management Committee or
one of the Partners.
6.2 Secretary. The Secretary shall be appointed by the Management
Committee and shall report to the General Manager. The Secretary shall act as
Secretary of all meetings of the Management Committee, shall keep the minutes
thereof in the proper book or books to be provided for that purpose, shall see
that all notices required to be given by the Partnership are duly given and
served, shall have charge of the books, records and papers of the Partnership
relating to its organization and management as a Partnership, and shall see that
the reports, statements and other documents required by law are properly kept
and filed; and shall, in general, perform all the duties incident to the office
of Secretary and such other duties as from time to time may be assigned to him
by the Management Committee and the General Manager.
6.3 Treasurer. The Treasurer shall be appointed by the Management
Committee. The Treasurer shall report to the Management Committee. The Treasurer
shall perform all the duties assigned to him by this Agreement including,
without limitation, (a) arranging for the Partnership to borrow funds pursuant
to Section 10.3; (b) submission to each Partner of quarterly comparisons
pursuant to Section 10.1(b), current cash estimates pursuant to Section 10.2,
and statements relating to Emergency Needs pursuant to Section 10.2(b); (c)
determination of the amount of Cash for Distribution and the distribution of
such Cash for Distribution pursuant to Section 10.4; (d) causing to be prepared
and given to each Partner unaudited financial statements pursuant to Section
10.8(b); (e) having charge of, and being responsible for, all funds, securities
and notes of the Partnership; (f) receiving and giving receipts for moneys due
and payable to the Partnership from any sources whatsoever; (g) depositing all
such moneys in the name of the Partnership in such banks, trust companies or
other depositories as shall be selected by the Management Committee; (h) against
proper vouchers, causing such funds to be disbursed by checks or drafts on the
authorized depositories of the Partnership, and being responsible for accuracy
of the amounts of all moneys so disbursed; (i) regularly entering or causing to
be entered into books to be kept by him or under his discretion full and
adequate account of all moneys received or paid by him for the account of the
Partnership; (j) having the right to require, from time to time, reports or
statements giving such information as he may desire with respect to any and all
financial transactions of the Partnership from the officers or agents
transacting the same; and, (k) in general, all the duties incident to the office
of Treasurer and such other duties as from time to time may be assigned to him
by the Management Committee or the General Manager.
6.4 Other Persons. The Management Committee may appoint such other
executive and management employees, including Persons employed by Continental or
Harvest States, as it shall from time to time deem appropriate, and may approve
a plan for hiring of other salaried employees including employees from
Continental and Harvest states.
6.5 Appointment and Removal of Officers and Employees. The appointment
and removal of officers and employees of the Partnership shall be made by the
Management Committee. Either Partner may request the removal of any officer or
employee.
6.6 Affiliations. The officers, executives and other employees of the
Partnership may also be employees of the Partners or their Affiliates, and shall
not be required (except as may be determined by the Management Committee) to be
full-time employees of the Partnership. The Management Committee and the
Partners will agree on the designation of employees of the respective Partners
to be made available by the respective Partners for the purpose of providing
marketing, transportation, logistics, export administration, grain settlements,
accounting and other services, for and on behalf of the Partnership. Such
designated employees shall at all times remain employees of the respective
Partners. The duties performed by such designated employees for and on behalf of
the Partnership in conducting and performing Partnership business shall be
Partnership business activities. In consideration of each of the Partner's
making such employees available to the Partnership, the Partnership shall pay to
each of the Partners the charges for services by and other expenses incurred by
such designated employees in performing Partnership business and agreed by the
Management Committee as reflected in the operating budget. The Partnership shall
have the right to direct the action of such designated employees in performance
of their duties for and on behalf of the Partnership. If the Partnership does
not desire to maintain the services of any such designated employee, the
Partnership may so advise the respective Partner employing such designated
employee and such Partner shall cause the designated employee to cease
performing such services for and on behalf of the Partnership. Each Partner
retains the right to fire its employees even if designated to the Partnership or
to transfer any such employee to other duties within the business of such
Partner; provided, however, that such Partner will cooperate with the
Partnership to provide a suitable replacement so that the services, of like kind
provided by such dismissed or transferred employee will continue to be provided
to the Partnership.
6.7 Exculpation. Any regular or alternate member of the Management
Committee, the officers, executives and employees of the Partnership which are
employed by either Partner or its Affiliate shall not be liable to the
Partnership or to the Partners for any action taken or omitted to be taken by
him with respect to the Partnership, except to the extent any such act or
omission was attributable to the willful misconduct, gross negligence or bad
faith of such member of the Management Committee, officer, executive or
employee.
ARTICLE VII
7.1 The Partnership business shall be limited to corn and sorghum
("Feedgrains") and soybeans ("Oilseeds") destined primarily for export from the
Pacific Northwest, United States. The Partnership intends to source Feedgrains
and Oilseeds from its Partners and its Partners intend to supply Feedgrains and
Oilseeds on market terms from their grain originating facilities and, in the
case of Harvest States, its affiliated cooperatives from which it purchases such
Feedgrains and Oilseeds, customarily tributory to the Pacific Northwest export
market.
7.2 In order to facilitate the ability of the Partnership to transport
and handle the Feedgrains and Oilseeds which it intends to market into export
channels, the Partnership desires to utilize the Tacoma Facility and
concurrently with the execution of this Agreement, the Partnership has executed
the five-year Sublease Agreement between Continental Grain Company and the
Partnership providing annual rental of $2.5 million payable to Continental by
the Partnership with provision for one five-year renewal option at $3 million
rental annually (the "Sublease"). The Sublease shall terminate on the
termination, expiration or dissolution of the Partnership.
ARTICLE VIII
NATURE OF OBLIGATIONS; INDEMNITIES; CHARGES
8.1 Obligations. As between the Partner, no Partner shall be liable or
bear responsibility for more than its Share of each and all of the costs,
expenses, liabilities and charges incurred or accrued by the Partnership. If any
Partner shall pay or be required to pay, discharge or otherwise bear
responsibility for any amount in excess of its share of the costs, expenses,
liabilities and charges incurred or accrued by the Partnership, (i) such payment
shall be deemed a demand loan by the advancing Partner to the other Partner, and
shall be treated in the same manner as a loan pursuant to Section 3.2(d), and
(ii) the other Partner covenants and agrees to indemnify, hold harmless and
reimburse such Partner against and for the amount of such excess.
8.2 Indemnities. Each Partner covenants and agrees to indemnify and
hold harmless the Partnership and the other Partner from and against any and all
damage, losses and expenses caused by or arising out of any and all of the
following: (i) any failure to perform any obligation required to be performed by
such Partner hereunder and (ii) any wrongful or negligent act or omission by
such Partner in connection with the Partnership's property or the ownership or
operation thereof.
8.3 Charges. Upon the request of the General Manager or the Management
Committee, either Partner, without charge, shall provide to the Partnership
basic management and administrative advice and consultation of the kind
generally provided by corporate staff to operating line functions and, including
but not limited to, legal services, loss prevention and safety counselling,
transportation and human resources counselling, and insurance counselling (but
excluding management information services), so long as that Partner is providing
those services to its other business segments.
ARTICLE IX
TRANSFER OF INTERESTS
9.1 No Transfer of Interest. Except as hereinafter otherwise provided
in this Article IX, during the term of this Agreement, no Partner (or any
successor) shall, directly or indirectly in any manner, sell, transfer, assign,
encumber or otherwise dispose of any interest in the Partnership, nor shall any
such interest be subject, in whole or in part, directly or indirectly, to sale,
transfer, assignment, encumbrance or other disposition by operation of law or
agreement, without the prior written consent of the other Partner, and any
attempt so to do shall be void.
9.2 Transfer to Affiliates. Notwithstanding anything in Section 9.1 to
the contrary, any Partner may sell, transfer or otherwise dispose of its Partner
Interest to any entity which is an Affiliate of such Partner or of the ultimate
Controlling Affiliate of such Partner, subject, however, to the conditions that
(i) in the opinion of counsel to the Partnership, such sale, transfer or other
disposition would not (a) constitute a default under any material agreement to
which the Partnership is a party or (b) result in the termination of the
Partnership for Federal income tax purposes, (ii) the transferee may not be a
debtor subject to any proceeding under Title 7 or 11 of the United States
Bankruptcy Code or any successor legislation or similar state legislation
(unless otherwise consented to in writing by the other Partner), and (iii) the
transferor and its Affiliates shall not be released from any of its or their
obligations under this Agreement or the Sublease.
9.3 Reasonableness of Restrictions. Each Partner acknowledges and
agrees that the restrictions on the transfer of interests herein are reasonable
in view of the purpose and intent of the Partners.
9.4 Certain Encumbrances Permitted. Anything in this Agreement to the
contrary notwithstanding, any Partner (and the Affiliates of any Partner) may
encumber all or part of such Partner's Partner Interest to the extent and in the
manner which may be required pursuant to financing agreements contemplated by
Section 10.3.
ARTICLE X
FINANCIAL MATTERS
10.1 Programs and Budgets.
(a) The General Manager shall, not later than one (1) month prior
to the commencement of the next succeeding fiscal year of the Partnership,
prepare and submit to the Management Committee for its review and approval a
business operating budget and a capital expenditure budget for such fiscal year.
(b) Not later than the 25th calendar day after the close of each
fiscal quarter, the Controller shall submit to each Partner a comparison, for
the immediately preceding quarter and for the year-to-date, of the results of
operations of the Partnership with the applicable fiscal year budget.
10.2 Estimates on Cash Needs.
(a) Based on the budgets referred to in Section 10.1 (a), and the
quarterly comparisons referred to in Section 10.1 (b), the Treasurer will, at
such time and for such periods as requested by the Management Committee, submit
to the Management Committee a current cash estimate showing: (i) the estimated
cash disbursements which the Partnership will be required to make during the
next succeeding calendar period for operating costs; (ii) estimated receipts;
(iii) amounts needed for additional working capital; and (iv) the amount of
funds ("Cash Needs") that will be required to cover the amount, if any, by which
estimated cash disbursements and amounts needed for additional working capital
exceed estimated receipts available to cover such cash disbursements and
additional working capital. The current cash estimate shall also specify the
dates on which the Partnership must receive the necessary funds.
(b) In the event an emergency requires cash payments ("Emergency
Needs") not provided for by such current cash estimates, the General Manager or
the Treasurer, may at any time furnish a statement thereof to the Management
Committee, giving the maximum period of notice for any such additional cash
payments as is practicable in the circumstances, specifying in detail the
reasons for such emergency cash payment and the amount thereof. Upon receipt of
such emergency cash statement, the Management Committee shall promptly decide,
taking into account the circumstances, how the Emergency Needs shall be met.
(c) Unless otherwise agreed by the Management Committee, the Cash
Needs and the Emergency Needs shall be made through borrowings of the
Partnership in accordance with Section 10.3.
10.3 Partnership Borrowings and Partner Loans. In the event that the
Management Committee decides at any time during the term of this Agreement that
it is desirable for the Partnership to borrow funds to acquire significant
inventories or to meet the Cash Needs, Emergency Needs or other requirements of
the Partnership, the Treasurer shall, within the limits of his authority as
defined by the Management Committee, negotiate on behalf of the Partnership to
borrow such funds from financial institutions. The Management Committee may
approve, reject, or modify the terms negotiated by the Treasurer and may
negotiate or authorize others to negotiate borrowings on behalf of the
Partnership in order to find terms more beneficial to the Partnership. The
Partnership may, upon approval of the Management Committee, also borrow from the
Partners, based on their respective Shares, on terms to be separately agreed.
The parties agree to use their best efforts to obtain Partnership borrowings
from financing institutions who will agree to limit recourse to each Partner to
50% of any sums financed.
10.4 Cash for Distribution. The Treasurer shall determine, at such
times as requested by the Management Committee, the amount of cash for
distribution and shall distribute such cash for distribution, if any, to the
Partners, in accordance with their Shares; provided, however, that (a) if any
Partner has advanced loans to a Delinquent Partner, the distributions otherwise
payable to the Delinquent Partner shall be made to the other Partner up to an
amount sufficient to repay such loans in full with interest, and (b) if any
Partner is in default or delinquent in respect of an obligation to the
Partnership, no distribution shall be made to such Partner until such default is
cured or such delinquent obligation is paid.
10.5 Deposits and Investments. The funds of the Partnership shall be
deposited in the name of the Partnership in accounts designated by the
Management Committee in banks or banking institutions to be selected by the
Management Committee or invested in such manner as shall be authorized by the
Management Committee. The Management Committee shall prescribe such procedures
as it shall deem necessary with respect to making such investments.
10.6 Fiscal Year. The fiscal year of the Partnership shall end on March
31 in each year.
10.7 Books of Account.
(a) The Management Committee shall approve the opening financial
statements for the Partnership as of the date hereof.
(b) Accurate books of account of the Partnership shall be
maintained in accordance with generally accepted accounting principles
consistently applied. In those instances in which more than one generally
accepted accounting principle can be applied, the Management Committee shall
determine, in consultation with the Partnership's independent accountants, which
principle will be adopted by the Partnership. Such books shall at any reasonable
time be available for examination by either Partner or Persons acting on its
behalf at the sole expense of such Partner.
10.8 Financial Statements.
(a) Within ninety (90) days after the close of each fiscal year of
the Partnership there shall be prepared and submitted to each Partner the
following financial statements, accompanied by the report thereon of the
independent accountants for the Partnership:
(1) a balance sheet of the Partnership as at the end
of such fiscal year;
(2) a statement of profit and loss for such fiscal
year;
(3) a statement of changes in financial position; and
(4) a statement of the respective Partner Accounts
and changes therein for such fiscal year.
(b) Within twenty (2) Business Days after the close of each fiscal
month the Treasurer will cause to be prepared and given to each Partner
unaudited financial statements comparable to those referred to in Section
10.8(a)(1) and (2).
10.9 Tax Matters.
(a) The Partners hereby agree that the Partnership shall be
treated as a partnership for purposes of United States, Federal, state and local
income tax or other taxes, and further agree not to take any position or make
any election, in a tax return or otherwise, inconsistent therewith.
(b) The Management Committee shall cause all required United
States Federal, state and local partnership income, franchise, property or other
tax returns, including information returns, to be filed with the appropriate
office of the Internal Revenue Service or any other relevant taxing
jurisdiction, as the case may be. As promptly as practicable, and in any event
in sufficient time to permit timely preparation and filing by each Partner of
its respective state and Federal tax returns, the Partnership shall deliver to
each Partner a copy of each state and Federal tax return or tax report filed by
the Partnership.
(c) All elections for Federal income tax purposes, except as
stated in Section 10.9(a), required or permitted to be made by the Partnership,
and all material decisions with respect to the calculation of its income or loss
for tax purposes, shall be made in such manner as the Management Committee shall
determine.
10.10 Partner Accounts.
(a) An individual partner account ("Partner Account") shall be
maintained for each Partner and shall be adjusted as set forth herein.
(b) The Partner Account maintained for each Partner (x) shall be
credited with the sum of (a) the fair market value at the time of contribution
of all capital contributions made by such Partner to the Partnership and the
amount of all Net Income credited to the Partner account of such Partner
pursuant to Section 4 and decreased by the sum of (i) the amount of all
distributions made to such Partner and (ii) the amount of Net Loss charged to
the Partner Account of such Partner pursuant to Section 4.1;
(c) Partnership income, gains, losses and deductions shall, solely
for income tax purposes, be allocated among the Partners in accordance with
Section 704(c) of the Internal Revenue Code of 1986, as amended.
ARTICLE XI
DISSOLUTION AND WINDING UP
11.1 Dissolution Events. The Partnership shall be dissolved in case any
of the following events shall occur:
(a) The term of the Partnership shall expire pursuant to Section
2.4 of this Agreement.
(b) Either Partner shall deliver the Notice of Dissolution
following a Deadlocked Matter pursuant to Section 5.4.
(c) The sale, abandonment or disposal by the Partnership of all or
substantially all of its assets not in the ordinary course of business.
(d) The Partnership or either Partner shall (i) file a petition in
bankruptcy, (ii) petition or apply to any tribunal for the appointment of a
receiver or any trustee for it or a substantial part of its assets, (iii)
commence any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statue of any
jurisdiction, whether now or hereafter in effect, or (iv) make an assignment for
the benefit of creditors or take any other similar action for the protection or
benefit of creditors; or if there shall have been filed any such petition or
application, or any such petition shall have been commenced against it, in which
an order for relief is entered or which remains undismissed for a period of
forty-five (45) days or more; or the Partnership or either Partner by any act or
omission shall indicate its consent to, approval of or acquiescence in any such
petition, application or proceeding or order for relief or the appointment of a
receiver or any trustee for it or any substantial part of any of its properties,
or shall suffer any such receivership or trusteeship to continue undischarged
for a period of forty-five (45) days or more.
No Partner shall have the right to dissolve or terminate the
Partnership for any reason other than as set forth above or to withdraw from the
Partnership other than as set forth in Article IX, and each Partner hereby
waives any other right it may have with respect thereto.
11.2 Winding Up. Upon dissolution of the Partnership pursuant to
Section 11.1, the Partnership shall be wound up and liquidated in accordance
with law and the following provisions:
(a) Each Partner shall pay to the Partnership all amounts owing by
it to the Partnership.
(b) The Partnership shall continue with the business necessary to
complete and perform existing contracts until the distribution of the
Partnership's assets as hereinafter provided. No new business or contracts shall
be undertaken except as necessary to wind up and liquidate the Partnership.
(c) The property and business of the Partnership shall be wound up
and liquidated under the direction of the Management Committee or a Person duly
appointed by the Management Committee (in any such case, the "Liquidator"). Upon
the dissolution of the Partnership, the Liquidator shall cause a statement
setting forth the assets and liabilities of the Partnership as of the date of
dissolution of the Partnership (the "Dissolution Date") (including the fair
market value of all of the assets of the Partnership) to be prepared promptly
and furnished to each of the Partners, or upon the written request of either
Partner, by the independent auditors of the Partnership. In preparing such a
statement, the Liquidator may retain such independent appraisers or other
advisors as the Liquidator deems advisable. All fees, costs, and expenses
incurred in connection therewith shall be borne by the Partnership.
(d) following the preparation and distribution of such statement,
the Liquidator shall distribute all the assets and assign all the liabilities of
the Partnership to the Partners in the ratio of the Partner Account balances of
the Partners after adjustment of the Partner Accounts for any profit or loss in
the year of liquidation, any profit or loss realized or to be realized on any
property sold or disposed of as part of the liquidation, and any profit which
would be realized if any property distributed in kind had been sold at its fair
market value by the Partnership.
ARTICLE XII
DISPUTES; ARBITRATION
12.1 Resolution of Controversies. Any dispute, controversy or claim
between the Partners arising from this Agreement or the performance thereof
shall be settled solely by arbitration in accordance with the provisions of
Section 12.2.
12.2 Method of Arbitration. The arbitration shall be effected by
arbitrators selected as hereinafter provided and shall be conducted by the
American Arbitration Association in Chicago, Illinois applying the Commercial
Arbitration Rules in effect on the date thereof. The dispute shall be submitted
to three arbitrators, each of who shall have had at least five (5) years'
experience in connection with the business of the Partnership, one arbitrator
being selected by the Partner submitting the controversy or dispute to
arbitration, the second arbitrator being selected by the other Partner and the
third arbitrator being selected by the two arbitrators so selected. Conditions
of any such arbitration shall include (a) that the arbitrators shall not have
the authority to modify, amend or supplement the terms of this Agreement and
shall interpret this Agreement strictly in accordance with its terms; and (b)
that the Partner submitting such controversy or dispute to arbitration shall
appoint its arbitrator within fifteen (15) Business Days after the date of such
submission. The failure of the Partner requesting arbitration to timely appoint
such arbitrator shall void the effectiveness of the notice of submission of the
matter to arbitration. The second arbitrator to be selected by the other Partner
as hereinbefore provided shall be selected within fifteen (15) Business Days
after receipt of notice by such Partner of the selection of the submitting
arbitrator and, if the second arbitrator is not so selected, the determination
of the single arbitrator selected by the submitting Partner shall be binding and
conclusive. If the non-submitting Partner shall have timely selected the second
arbitrator, then the two selected arbitrators shall select the third arbitrator
within five (5) Business Days following the selection of the second arbitrator.
The meetings of the arbitrators shall be held at such place or places as may be
agreed upon by the arbitrators, and each Partner shall bear the cost of the fees
and expenses of the arbitrator selected by or for it, with the fees and expenses
of the third arbitrator to be borne equally. Upon making any order or award,
which order may include an order to dissolve the Partnership pursuant to the
provisions of Article X, the arbitrators shall retain jurisdiction to determine
any subsequent claim that a defaulting Partner has failed to comply with terms
of any such order or award. The arbitrators shall have no authority to impose a
fine or penalty.
ARTICLE XIII
CONFIDENTIAL INFORMATION
13.1 Confidential Information. During the continuance of the
Partnership and for a period of three (3) years after its termination, no
Partner or its Affiliates or any officer or employee thereof shall divulge to
any Person (except an Affiliate of such Person which shall undertake to be bound
to the provisions of this Article XIII) any trade secret, or secret process,
method or means or any other confidential information concerning the business or
properties of the Partnership, the Partners or their Affiliates, or the
manufacture, sale or licensing of products, processes and designs made or owned
by the Partnership, the Partners, or their Affiliates, that come to the
knowledge of such Partner, Affiliate, officer or employee by reason of the
relationship of such Partner, Affiliate, officer or employee with the
Partnership. The obligations under this Article XIII shall not apply to any
information to the extent that (a) such information is or shall become part of
the public domain, by publication or otherwise, through no fault of the Partner
seeking to use or disclose such information, or (b) the receiving Partner,
Affiliate, officer or employee shall be able to show such information to have
been in its or his possession prior to the receipt thereof from the Partnership
or other Partner or Affiliate or to have been received from a third party which
shall not itself have received such information on a confidential basis from the
Partnership or any Partner or Affiliate of a Partner.
ARTICLE XIV
SECURITY INTEREST
14.1 Security for Indemnity. To secure their respective indemnity
obligations hereunder, each Partner hereby grants to the Partnership and to the
other Partner, pursuant to Article I of the Uniform Commercial Code, a security
interest in their respective right, title and interest in and to the
Partnership, and under the Partnership Agreement, including all present and
future rights to any profits, payments, distributions, or other rights to
payment arising under or in connection with the Partnership Agreement (the
"Collateral"); provided, however, that for so long as a Partner is not in
default of any of its indemnity obligations hereunder, that Partner may receive
all payments or distributions to which its is entitled as Partner of the
Partnership. In the event a Partner is in default under its indemnity
obligation, to the extent such default may be cured by the payment of money, the
Partnership may, at the request of the non-defaulting Partner make such payment
and pay to the non-defaulting Partner the next available funds which would
otherwise have been distributed to the defaulting Partner, up to an amount which
will make the non-defaulting Partner whole, together with interest thereon from
the date paid by the Partnership until reimbursed to the other Partner at the
rate of 2% in excess of the Prime Rate.
Alternatively, if such loss is incurred by the other Partner, such
other Partner shall be entitled to receive all subsequent distributions
otherwise payable to the defaulting Partner until the non-defaulting Partner has
recovered the full amount of its loss together with interest at the rate of 2%
in excess of the Prime Rate.
Neither Partner will transfer or assign, grant a security interest in
or otherwise dispose of its respective interests as debtor in and to the
Collateral and will maintain the Collateral free and clear of all other liens,
claims and security interests whatsoever. Provided that a Partner has discharged
its respective obligations under and it not otherwise in default of its
obligations hereunder, and is not the subject of any bankruptcy or insolvency
proceeding, this security interest shall terminate only upon the settlement of
all debts and claims outstanding with respect to the dissolution of the
Partnership. Each Partner shall furnish to the Partnership and the other
Partner, upon request, duly executed UCC-1 financing statements covering the
Collateral and such other documents, certifications and instruments as requested
by the Partnership or the other Partner, to evidence, grant, perfect and
prioritize the security interest granted in the Collateral.
ARTICLE XV
GOVERNING LAW
15.1 Governing Law. The Partnership is formed pursuant to and shall be
governed by and construed in accordance with the Partnership Law and laws of the
State of Washington, exclusive of Washington's conflict of laws rules.
ARTICLE XVI
16.1 Amendments. The terms of this Agreement cannot be modified, varied
or amended orally but only by a written instrument executed by all the Partners.
ARTICLE XVII
NOTICES
17.1 Notices.
(a) All notices, consents, demands, requests, reports and other
documents authorized or required to be given pursuant to this Agreement shall be
given in writing and either personally served as an officer or a member of the
Management Committee of the Partner to whom it is given or mailed by registered
or certified first class mail, postage prepaid, or sent by facsimile or
telegram, addressed as follows:
If to Continental:
CONTINENTAL GRAIN COMPANY
222 South Riverside Plaza
Suite 2600
Chicago, IL 60606
Attention: Mr. John T. Zick
Senior Vice President,
North American Grain Division
Facsimile No.: (312) 207-5236
With a copy to:
CONTINENTAL GRAIN COMPANY
277 Park Avenue
New York, NY 10172
Attention: David G. Friedman
Deputy General Counsel
Facsimile No.: (212) 207-2980
If to Harvest-States:
HARVEST STATES COOPERATIVES
1667 Snelling Avenue North
St. Paul, Minnesota 55184
Attention: Legal Department
Facsimile No.: (612) 641-6832
(b) Any Partner may change the address to which notices and other
communications to it shall be sent by giving to the other Partner written notice
of such change, in which case notices and other communications to the Partner
giving the notice of the change of address shall not be deemed to have been
sufficiently given or delivered unless addressed to it at the new address as
stated in said notice. Notices shall be deemed to have been given (except as
otherwise expressly set forth in this Agreement) (i) when delivered, if given by
personal delivery or actual delivery during normal business hours, (ii) three
(3) Business Days after posting, if given by registered or certified mail,
return receipt requested, (iii) two (2) Business Days after dispatch if given by
telegram, or (iv) upon receipt, if given by facsimile.
ARTICLE XVIII
SUCCESSORS AND ASSIGNS
18.1 Successors and Assigns. Subject to the provisions of Article IX,
this Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of the respective parties hereto in all respects as if
they were mentioned throughout by words of proper designation.
ARTICLE XIX
MISCELLANEOUS
19.1 Entire Agreement. This Agreement sets forth the entire agreement
and understanding of the Partners with respect to the formation and operation of
the Partnership and related transactions contemplated by this Agreement, and
supersedes all prior agreements and understandings, written or oral, between the
Partners with respect thereto.
19.2 Severability. The unenforceability, invalidity, or illegality of
any provision of this Agreement shall not affect or impair any other provision
hereof or render it unenforceable, invalid or illegal.
19.3 Interpretation. Wherever used in this Agreement, unless the
context clearly indicates otherwise, the use of the singular includes the
plural, and vice versa; and the use of any gender is applicable to any other
gender.
19.4 Captions. Captions contained in this Agreement are inserted only
as a matter of convenience and in no way define, limit, extend or describe the
scope of this Agreement or the intent of any provision hereof.
19.5 Partition Waived. The Partners agree that the Partnership's
interest, properties and investments are not and will not be suitable for
partition. Accordingly, each of the Partners hereby irrevocable waives any and
all rights that it may have to maintain any action for partition of any of such
interest, properties or investments.
19.6 Waiver and Consent. No consent or waiver, express or implied, by
any Partner to or of any breach or default by any other Partner in the
performance by such other Partner of its obligations hereunder shall be deemed
or construed to be a consent or waiver to or of any other breach or default in
the performance by such other Partner of the same or any other obligations of
such Partner hereunder. Failure on the part of any Partner to complain of any
act or failure to act of the other Partner or to declare such other Partner in
default, irrespective of how long such failure continues, shall not constitute a
waiver by such Partner of its right hereunder.
19.7 Commercial Efficacy. The Partners shall take all reasonable
actions to give commercial efficacy to the terms and conditions of this
Agreement and to promote the business of the Partnership, including, but not
limited to, taking or causing the members of the Management Committee appointed
by them to take all necessary actions in a timely fashion, in order for the
Partnership to pursue the business contemplated by this Agreement, entering into
all the agreements contemplated hereby and any additional agreements or
instruments of further assurance, as on advice from legal counsel, the Partners
shall reasonably deem necessary, and seeking all necessary governmental
approvals.
19.8 Counterparts. This Agreement may be executed in any number of
counterpart copies, each of which shall constitute an original and all of which
shall constitute one agreement.
19.9 GAAP Basis. In the event the auditors of the Partnership are
required hereunder to determine the values, accounts, give opinions or make any
other valuation of any nature, the auditors shall employ generally accepted
accounting principles consistently applied unless the context otherwise requires
the application of the principles of tax accounting (or differing regulatory
rules).
IN WITNESS WHEREOF, the Partners have executed this Agreement as of the
date first above written.
CONTINENTAL GRAIN COMPANY
By /s/ Stephen Morganstern
Name: Stephen Morganstern
Title: Senior VP Finance and
Administration
Commodity Marketing Sector
HARVEST STATES COOPERATIVE
By /s/ Michael H. Bergeland
Name: Michael H. Bergeland
Title: Group V.P.