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EXHIBIT 10(v)
MARKETING AND MANAGEMENT AGREEMENT
THIS MARKETING AND MANAGEMENT AGREEMENT (this "Agreement") is made and
entered into as of this 2nd day of November, 1994, by and among Michigan
Livestock Exchange, a Michigan non-profit corporation ("Michigan"), Indiana
Livestock Exchange, an Indiana corporation which is a wholly owned subsidiary
of Michigan ("Indiana") and Thorn Apple Valley, Inc., a Michigan corporation
("TAV").
R E C I T A L S:
A. Michigan and Indiana (collectively, "MLE") have substantial
expertise in managing livestock buying operations and presently operate a
number of hog buying stations (the "MLE Stations");
B. TAV is a slaughterer of hogs and a producer of related
products, and presently operates a number of hog buying stations (the "TAV
Stations"), which it believes that MLE could more efficiently operate and
manage;
C. TAV and MLE desire MLE to operate and manage the TAV Stations
for TAV;
D. TAV desires to purchase from MLE hogs obtained by MLE through
any of the MLE Stations;
E. MLE desires that TAV purchase preferred stock from Michigan
Livestock Credit Corporation ("MLCC"), a subsidiary of MLE, in order to permit
MLCC to continue to assist producers in the region to produce more and higher
quality hogs; and
F. The parties desire to enter into this Agreement to provide for
the foregoing and to confirm and evidence their agreements with respect
thereto.
NOW THEREFORE, MLE and TAV hereby agree as follows:
1. Term of Agreement. This Agreement shall be effective as of
December 1, 1994 (the "Effective Date") and shall continue thereafter for a
period of ten years, or through November 30, 2004. Upon the expiration of such
term, this Agreement shall be automatically renewed for an additional ten year
term unless either party has given the other party written notice of its
decision not to renew this Agreement at least two years prior to the date of
expiration of the original term.
2. Operation of MLE's Buying Stations. By signing this
Agreement, MLE agrees to convert the operations of all of the MLE Stations in
accordance with the procedures described in Section 3. TAV, in consideration
of that agreement, agrees to pay MLE a conversion fee of $500,000 on or before
the Effective Date, which fee shall be deemed fully earned and non-refundable
upon payment.
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3. Management of Hog Buying Stations.
(a) During the term of this Agreement, MLE shall operate and
manage both the MLE Stations and the TAV Stations, a current list of which is
set forth as Exhibit 3(a). All assets and rights relating to the MLE Stations
shall remain MLE's. All assets and rights relating to the TAV Stations shall
remain TAVs. All employees of both the MLE Stations and the TAV Stations shall
be MLE's employees. MLE's operation of those hog buying stations and MLE's
selection, management and retention of those employees shall be in accordance
the remaining subsections of this Section 3.
(b) The management and operational services to be performed by MLE
pursuant to this Agreement shall include all services required for the
operation of the MLE Stations and the TAV Stations, including, but not limited
to the following: (i) purchase of hogs on a daily basis, with days and hours of
operation consistent with those presently employed by MLE; (ii) hiring of
employees to staff each hog buying station; (iii) collection of receivables,
payment of payables and maintenance of all supporting records; and (iv)
preparation of monthly and annual financial statements and of other management
reports and conduct of related management information activities.
(c) Management decisions in the operation of the MLE Stations and
the TAV Stations shall be made in accordance with the following:
(i) Except as provided below, MLE shall make all day-to-
day management decisions;
(ii) While MLE will, as part of its day-to-day management,
supervise all employees of the MLE Stations and the TAV Stations, all
hirings and firings of such employees will be based upon the mutual
determination of MLE and TAV. If MLE and TAV disagree regarding a
particular hiring or firing, then the following shall apply:
(A) If a disagreement regarding staffing arises
between the Effective Date and November 30, 1996, then MLE
shall have the final authority regarding that staffing
decision;
(B) If a disagreement regarding staffing arises
from and after December 1, 1996, then TAV shall have the final
authority regarding that staffing decision;
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(iii) Any decisions regarding the sale or closing of any MLE Station
or TAV Station shall require the mutual agreement of MLE and TAV; provided,
however, that:
(A) MLE shall have the right, after notice to and
discussion with TAV, to close one or more MLE Stations if, but only
if, MLE reasonably determines that the closing of the MLE Station
will not adversely affect MLE's procurement of the hogs required by
TAV for its production operations and during the 12 month period
preceding the proposed closing date, the MLE Station to be closed
ranked in the lowest 10% of all MLE Stations on the basis of hog sales
volume. If MLE at the time of such closure or thereafter determines to
sell that MLE Station, then TAV shall have the right of first refusal
to purchase that MLE Station upon the terms stated in Section 13.
(B) TAV shall have the right, after notice to and
discussion with MLE, to close one or more of the TAV Stations if, but
only if, TAV commits to MLE that if and for so long as TAV continues
to own that TAV Station during the remainder of the term of this
Agreement TAV will not operate, or permit any other party to operate,
that TAV Station is a hog buying station. If TAV at the time of such
closure or thereafter determines to sell that TAV Station, then MLE
shall have the right of first refusal to purchase that TAV Station
upon the terms stated in Section 13.
(C) TAV shall have the right, pursuant to Section 10(b),
to withdraw (and thereafter sell, close or otherwise operate) all, but
not less than all, of the TAV Stations.
(iv) Any decisions regarding the addition (by acquisition or
otherwise) of any new MLE Station or any new TAV Station shall be subject to
the following:
(A) Except as otherwise provided in Section 3(c)(iv)(B),
the addition of any new hog
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buying stations shall require the mutual agreement of MLE and
TAV, which agreement shall not be unreasonably withheld.
In granting or withholding agreement, the potential effect of
the new MLE Station or TAV Station on any existing MLE Station
or TAV Station will be considered. In reaching such
agreement, ancillary agreement will be reached regarding any
adjustment to the level of reimbursement limitations in
Section 4(b) and the level of reimbursement advances in
Section 4(e).
(B) If a party (the "Non-Renewing Party") delivers
notice to the other party (the "Other Party") pursuant to
Section 1 of its decision not to renew this Agreement, then
the Other Party shall have the right at any time thereafter
during the remainder of the term of this Agreement
to add one or more hog buying stations for administration
under the terms of this Agreement; provided, however, that the
Non-Renewing Party, by written notice delivered not later than
20 days after the Other Party's delivery of the notice of
addition, may elect that one or more of the additional hog
buying stations not be administered under the terms of this
Agreement, in which event the Other Party, directly or
indirectly, shall operate such additional hog buying
station(s) for its own account.
(v) Any extraordinary decisions regarding any MLE Station
or any TAV Station including, for example, any material change in
hours of operation, any material change in methods of operation, any
material expansion or modification of the physical facilities, shall
be based upon the mutual agreement of MLE and TAV.
(d) Hog buying operations at the MLE Stations and the TAV Stations
shall be conducted in accordance with the following:
(i) The primary and highest priority function in hog
purchasing shall be to purchase for resale to TAV hogs satisfying
TAV's quality, price and quantity specifications. The objective
of that primary function shall be to fulfill TAV's production
requirements. The secondary and lower priority function of the hog
purchasing operations shall be to purchase for resale to third parties
hogs not meeting TAV's quality specifications. The objective of this
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secondary function shall be to utilize excess purchase/resale capacity
to generate net revenue to offset operating expenses and, to the
extent compatible with the primary purchasing function, to provide an
outlet for sales by cooperative members of MLE for hogs not meeting
TAV's quality specifications.
(ii) Hog purchases for resale to TAV shall be made on the
following basis:
(A) TAV, from time to time, will stipulate the
quality specifications for hogs to be resold to TAV. TAV will
have the right to revise those quality specifications at any
time and from time to time. All hogs purchased by MLE for
resale to TAV will conform with TAV's quality specifications
at the time of resale. Unless with TAV's prior approval, MLE
will not purchase for resale to third parties any hogs which
meet TAV's quality specifications.
(B) TAV, on a daily basis, will stipulate quantity
and price specifications for hogs purchased for resale to TAV.
TAV will have the right to revise those quantity and price
specifications at any time and from time to time. MLE
will use its best efforts in its daily hog purchasing
operations to meet TAV's quantity specifications with
purchases at or below TAV's price specifications. Unless with
the prior approval of TAV, MLE will not purchase hogs for
resale to TAV at prices in excess of TAV's price
specifications.
(C) MLE, on a daily basis, will invoice TAV for
hogs to be sold by MLE to TAV. The price invoiced will
equal the price paid by MLE in its purchase of those hogs
plus, if and as applicable, any feeding costs and
transportation costs incurred by MLE in delivering the hogs
to the TAV facilities. (Any feeding costs for the resold hogs
will be included in the daily invoice for those hogs. Any
transportation costs for those hogs, if known at the time of
daily invoicing, will be included in the daily invoice for
those hogs. If not known at the time of daily invoicing, the
transportation costs will be
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included in a later invoice which specifically identifies the
hog deliveries to which the transportation costs relate.)
Each invoice will be paid in full by TAV on or before the next
day after the day that the invoice is issued.
(iii) Hogs purchased by MLE for resale to third parties
shall be purchased and sold by MLE for its own account, with any net
revenue realized by MLE from such sales applied to fund
operating expenses which would otherwise be reimbursable by TAV
pursuant to Section 4.
(e) MLE's operation and management of the MLE Stations and the
TAV Stations shall be overseen by a four person board, referred to herein as
the "Management Board". Two of the members of the Management Board shall be
appointed and removed by MLE, and two of the members of the Management Board
shall be appointed and removed by TAV. One of the two members appointed by TAV
shall be designated by it as the Chairman of the Management Board. The
Management Board shall hold meetings monthly, or at such other intervals as are
agreed to by TAV and MLE, at times specified by the Chairman of the Management
Board. At all meetings of the Management Board, two members shall constitute a
quorum, provided that at least one of such members shall have been appointed by
each of MLE and TAV. A member present at a meeting of the Management Board may
exercise the voting right of any member not present if authorized by a written
proxy.
4. Payment by TAV of Operating Expenses.
(a) Subject to the limitations in Section 4(b), TAV shall
reimburse MLE for all direct expenses incurred by MLE in operating and managing
the TAV Stations and the MLE Stations and all indirect expenses incurred by MLE
in operating and managing the MLE Stations. For such purposes:
(i) The "direct expenses" will include all operating
expenses incurred by MLE which, in accordance with generally accepted
accounting principles, are allocable to the operation and management
of the TAV Stations and the MLE Stations, excluding
transportation and feed costs incurred for delivered hogs to the
extent invoiced to the purchaser as part of the selling price
for the hogs. The "direct expenses" will include, in addition to those
operating expenses incurred at the TAV Stations and the MLE Stations,
operating expenses
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incurred at administrative facilities of MLE to the extent properly
allocable to the operation and management of the TAV Stations and the
MLE Stations (as distinguished from operating expenses properly
allocable to the general overhead of MLE or to other activities of
MLE). Without limiting the forgoing, the "direct expenses" will
include depreciation with respect to the MLE Stations and interest and
other financing charges incurred by MLE for indebtedness which
finances the cost of purchasing hogs.
(ii) The "indirect expenses" will include all other
expenses incurred by MLE which, in accordance with generally accepted
accounting principles, are allocable to the operation and management
of MLE Stations.
Any dispute regarding the allocation of any expenses to the operation and
management of the MLE Stations and the TAV Stations, and any dispute as to
whether such expenses are "direct expenses" or "indirect expenses", to the
extent not resolved by MLE and TAV, will be resolved pursuant to the
arbitration procedure described in Section 12.
(b) MLE shall endeavor over the first 15 months of this Agreement
to reduce its annualized costs of operating and managing the MLE Stations by
$1,500,000, and MLE shall be obligated over the first 12 months of this
Agreement to reduce its annualized costs of operating and managing the MLE
Stations by $1,029,706. During the year ended December 31, 1993, MLE's
approximate costs to operate and manage the MLE Stations were $5,812,705.
Subject to the adjustments prescribed in Section 4(c), during the first 13
months of the term of this Agreement (from December 1, 1994 through December
31, 1995), MLE's cost to operate and manage the MLE Stations shall not exceed
$5,739,354 ($5,812,705, less the $1,029,706 required to occur ratably over the
first 12 months of that 13 month period). Thereafter, subject to the
adjustments stated in Section 4(c), during each successive 12 month period of
the term of this Agreement (from January 1st through the next December 31st),
MLE's cost to operate and manage the MLE Stations shall not exceed $4,782,999
($5,812,705 less $1,029,706) and during the last 11 month period of the term of
this Agreement (from January 1, 2004 through November 30, 2004), MLE's cost to
operate and manage the MLE Stations shall not exceed $4,384,413. TAV shall
have no obligation to reimburse MLE for the cost of operating and managing the
MLE Stations in excess of $5,739,354 during the first 13 months of the term of
this Agreement, or in excess of $4,782,999 during each 12
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month period ending on a December 31st thereafter or in excess of $4,384,413
during the last 11 month period ending on November 30, 2004. In determining the
cost of operating and managing the MLE Stations, the allocation of expenses
between the MLE Stations and the TAV Stations will be made in accordance with
generally accepted accounting principles; provided, however, that in allocating
the costs from MLE's central administrative facilities, only those costs which
are incrementally incurred as a result of the administration of the TAV
Stations shall be allocated to the TAV Stations and costs which otherwise would
have been incurred in administering the MLE Stations shall continue to be
allocated to the MLE Stations.
(c) The reimbursement limitations in Section 4(b) shall be subject
to the following adjustments:
(i) The reimbursement limitation for each of the
accounting periods specified in Section 4(b) are based upon an annual
interest cost of $344,000 for financing required to "carry" the cost
for the hogs purchased for resale at the MLE Stations. The actual
interest cost incurred by MLE for such purposes during each of the
accounting periods specified in Section 4(b) will be greater or less
than that amount, depending upon both the volume of purchases at the
MLE Stations and the fluctuations in the applicable rate of interest.
As a consequence, the reimbursement limitation for each accounting
period specified in Section 4(b) shall be adjusted to account for any
differential between the actual interest costs incurred by MLE during
such period and the above stated interest cost upon which that
reimbursement limitation was based.
(ii) If additional MLE Stations are opened or if existing
MLE Stations are closed, then TAV and MLE shall negotiate in good
faith toward an adjustment of the limitations on reimbursement, taking
into account the historical operating costs of the closed MLE Stations
and the proposed operating costs of any new MLE Stations.
(iii) The reimbursement limitations specified in Section
4(b) for the accounting period beginning January 1, 1996 and for each
accounting period thereafter are based upon the assumption that, for
each such period, MLE's cost for the salaries, wages and benefits to
employees of the MLE Stations (the "Payroll Expenses") will equal
$2,497,456 and does not account for any "cost of living" adjustments.
As of January 1, 1996, and as of each January 1st thereafter, the
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reimbursement limitation for the accounting period beginning on that
date shall be adjusted by reference to the Consumer Price Index for
All Items, as published by the United States Bureau of Labor
Statistics (the "CPI") in accordance with the following formula:
Current Index - Base Index x $2,497,456 = Adjustment
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Base Index
PROVIDED, HOWEVER, that the Adjustment for each accounting period
shall not, under any circumstances, be more than 4% of the actual
Payroll Expense for the 12-month period ending on the December 31st
immediately prior to that accounting period. For such purposes, the
"Current Index" will be the CPI published for the September
immediately preceding the adjustment date and the Base Index will be
the CPI published for September of 1994.
(d) For the 12 month period beginning January 1, 1996, and for
each accounting period thereafter beginning on January 1st during the term of
this Agreement, TAV shall pay to MLE, on an annual basis (within ten days
following the date that TAV receives a certified annual statement for that
accounting period), 50% of the amount by which MLE's annual costs to operate
and manage the MLE Stations are below the reimbursement limitation applicable
to that accounting period as determined under the provisions of Section 4(b)
and 4(c).
(e) TAV shall reimburse MLE for its expenses in operating and
managing the MLE Stations and the TAV Stations as follows:
(i) On the first day of each month during the 13 month
period beginning December 1, 1994, TAV shall pay MLE an advance
against operating expenses in the amount of $494,089 (which represents
an advance of $441,489 per month with respect to the MLE Stations and
an advance of $52,600 per month with respect to the TAV Stations).
As of January 1, 1996, and as of each January 1st thereafter during
the remainder of the term of this Agreement, the monthly advance
payable by TAV to MLE shall be adjusted to equal the average monthly
reimbursement made by TAV to MLE for the 12 month period ending on the
December 31st immediately preceding that adjustment date.
(ii) Within 30 days after the end of each quarterly period
during the term of this Agreement (i.e., the three month periods
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ending on the last days of March, June, September and December), MLE
shall provide TAV with a statement, reviewed and verified by an
officer of MLE, setting forth in reasonable detail the management and
operating costs of MLE (as described in Section 4(a)) for such
quarter. (By such verification, the MLE officer will attest that, to
such officer's knowledge, the statement fairly represents the results
of operations for the period reported, in accordance with generally
accepted accounting principles, subject to year-end adjustments based
upon a review and audit of the records of MLE). If, on the basis of
that statement, the advances paid by TAV to MLE for the reported
quarter exceed MLE's reimbursable operating and management expenses
for that quarter, then MLE shall include with such statement a check
to TAV for the amount of such excess. If, on the basis of that
statement, the advances paid by TAV to MLE for the reported quarter
are less than MLE's reimbursable operating and management expenses for
that quarter, then TAV shall remit to MLE a check for that deficiency
within ten (10) days after TAV's receipt of that statement.
(iii) Within 75 days after the end of each 12 month period
ending on December 31st during the term of this Agreement, MLE shall
provide TAV with a statement, reviewed and certified by an independent
public accounting firm retained by MLE, setting forth in reasonable
detail the management and operating costs of MLE (as described in
Section 4(a)) for such 12-month period. If, based upon that annual
statement, the net advances (i.e., the advances made pursuant to
Section 4(e)(i) plus, or minus, the reconciling payments made pursuant
to Section 4(e)(ii)) paid by TAV to MLE for the reported 12-month
period exceed MLE's reimbursable operating and management expenses for
that period, MLE shall include with such statement a remittance of
the amount of any such excess advances. If, based upon that annual
statement, the net advances (as above) paid by TAV to MLE with respect
to such 12-month period are less than MLE's reimbursable operating and
management expenses for that period, TAV shall, within ten days after
receipt of such statement, remit to MLE the amount of any deficiency.
(f) TAV shall have the right to examine and make copies of the
books and records of MLE (including any computer or data base information) to
the extent such records relate to this Agreement. Each such examination shall
be made upon
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reasonable notice at MLE's usual place of business, and shall be
conducted on TAV's behalf and at TAV's expense; provided, that if
any examination reveals a discrepancy in reimbursable expenses of 10%
or more for any quarter examination, MLE shall reimburse TAV for the
costs of such audit.
5. Management Fee. During the term of this Agreement, TAV shall
pay MLE, in addition to the commitment fee specified in Section 2 and the cost
reimbursements specified in Section 4, a monthly facilities use and management
fee equal to the following:
(a) For the month of December, 1994 and for each of the 35
months thereafter to and including November of 1997, TAV shall pay to
MLE a fee of $69,444; and
(b) For the month of December, 1997, and for each of the
next 83 months thereafter to and including November, 2004, TAV shall
pay to MLE a fee of $83,333.
The monthly installments prescribed in this Section 5 shall be due and payable
in advance by check on the first day of each month.
6. Purchase of Preferred Stock by TAV. On December 1, 1994, TAV
shall purchase from Michigan Livestock Credit Corporation ("MLCC") 100,000
shares of MLCC's Class C Preferred Stock for the sum of $2,000,000, pursuant to
the Preferred Stock Purchase Agreement attached hereto as Exhibit 6. Such
preferred stock shall pay dividends to TAV at the rate of 6% per annum. If TAV
is satisfied, in its sole discretion, that the programs instituted by MLCC are
beneficial to the improvement of hog supplies available to TAV, TAV shall
purchase an additional 50,000 shares of MLCC's Class C Preferred Stock on each
of the third, fourth and fifth anniversaries of the Effective Date, for a
purchase price of $1,000,000 in each instance. Upon the termination of this
Agreement (whether by expiration of the term stated in Section 1 or due to an
earlier termination pursuant to Section 10), MLCC shall repurchase from TAV, at
TAV's aggregate purchase price, all Class C Preferred Stock then owned by TAV,
with such purchase price, together with interest at the rate of 6% per annum,
payable in 12 equal monthly installments of principal and interest, with the
first such installment due 30 days after the effective date of termination of
this Agreement.
7. Representations and Warranties.
(a) MLE represents and warrants to TAV as follows:
(i) Organization and Standing. Each of Michigan
and Indiana is a corporation duly organized, validly existing,
and in good standing under the laws of the state of its
incorporation. Michigan
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and Indiana each has all requisite corporate power and
authority to carry on its business as now conducted and as
proposed to be conducted, and is duly qualified as a foreign
corporation and is in good standing in all other jurisdictions
in which such qualification is required.
(ii) Authorization. All corporate action on the
part of Michigan and Indiana, and of their respective
officers, directors, and shareholders, which is necessary for
the authorization, execution, delivery and performance of all
obligations of each of them under this Agreement has been
taken. This Agreement constitutes a valid and legally binding
obligation of Michigan and Indiana.
(iii) Financial Statements. Michigan has furnished
to TAV with (a) audited balance sheets of MLE as of December
31, 1991, 1992 and 1993, together with audited statements of
operations, shareholders' equity, and changes in financial
position for each of the years then ended. MLE has also
furnished TAV with unaudited statements of operations for its
hog buying station operations for the year ended December 31,
1993. Such audited and unaudited financial statements of MLE
are referred to herein collectively as the "Financial
Statements." The Financial Statements are in accordance with
the books and records of Michigan and Indiana and fairly
present the financial position of Michigan and Indiana as of
their respective dates and the results of the operations of
Michigan and Indiana for the periods then ended.
(iv) No Changes. Subject to the provisions of
Section 3(c)(iii), during the term of this Agreement, Michigan
and Indiana will maintain and operate their respective hog
buying stations in a manner consistent with the way in which
such hog buying stations have been maintained and operated
during the three year period ended December 31, 1993. During
the term of this Agreement, Michigan and Indiana will continue
to maintain and operate sufficient numbers of hog buying
stations to permit them to purchase at least as many hogs as
they purchased during the year ended December 31, 1993.
(v) Title to Tangible Property and Assets;
Liabilities. Except (a) as reflected in their Financial
Statements or in the notes thereto, (b) for liens for current
taxes not yet delinquent, (c) for liens
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imposed by law and incurred in the ordinary course of business
for obligations not yet due to carriers, warehousemen,
laborers, materialmen, and the like, (d) for liens in respect
of pledges or deposits under workers' compensation laws or
similar legislation, or (e) for minor defects in title, none
of which, individually or in the aggregate, materially
interferes with the use of such property, the Michigan and
Indiana have good and marketable title to all tangible
property owned by them or own their property free and clear of
all mortgages, liens, loans, and encumbrances. With respect
to the property they lease, Michigan and Indiana are in
compliance with such leases and hold a valid leasehold
interest free of any liens, claims, and encumbrances, subject
to clauses (b)-(e) above. Except for liabilities incurred in
the usual and ordinary course of business since the date of
the Financial Statements, neither Michigan nor Indiana has
knowledge of any liability of any kind or nature whatsoever,
which has not been timely and adequately reflected or
specifically disclosed in the Financial Statements.
(vi) Governmental Consents. To the knowledge of
Michigan and Indiana, all consents, approvals, orders, or
authorizations of, or registrations, qualifications,
designations, declarations, or filings with any federal or
state governmental authority on the part of Michigan and
Indiana required in connection with the consummation of the
transactions contemplated by this Agreement have been
obtained.
(vii) Compliance with Other Instruments. Neither
Michigan nor Indiana is in violation of any provisions of its
Articles of Incorporation or Bylaws as amended and in effect
on and as of the closing, or of any provision of any mortgage,
indenture, agreement, instrument or contract to which it is a
party, or, to the best of their knowledge, of any provision of
any federal or state judgment, writ, decree, order, statute,
rule, or governmental regulation applicable to them. The
execution, delivery, and performance of this Agreement will
not result in any such violation or conflict with or
constitute a default under any such provision.
(viii) Insurance. Each of Michigan and Indiana has
fire and casualty insurance policies, with extended coverage,
sufficient in amount (subject to reasonable deductibles) to
allow it to replace any
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of its properties that might be damaged or destroyed.
(b) TAV represents and warrants to MLE as follows:
(i) Organization and Standing. TAV is a corporation duly
organized, validly existing, and in good standing under the laws of
the State of Michigan, has all requisite corporate power and authority
to carry on its business as presently conducted, and is duly qualified
as a foreign corporation and is in good standing in all other
jurisdictions in which such qualification is required.
(ii) Authorization. All corporate action on the part of
TAV and its officers, directors, and shareholders necessary for the
authorization, execution, delivery, and performance of all obligations
of TAV under this Agreement has been taken. This Agreement, when
executed and delivered, shall constitute a valid and legally binding
obligation of TAV.
(iii) Financial Statements. TAV has furnished to MLE
audited balance sheets of TAV as of December 31, 1991, 1992 and 1993,
together with audited statements of operations, shareholders equity
and changes in financial positions for each of the years then ended
(the "TAV Financial Statements"). The TAV Financial Statements are in
accordance with the books and records of TAV and fairly present the
financial position of TAV as of their respective dates and results of
the operations of TAV for the periods then ended.
(iv) Governmental Consents. To the knowledge of TAV, all
consents, approvals, orders, or authorizations of, or registrations,
qualifications, designations, declarations, or filings with any
federal or state governmental authority on the part of TAV required in
connection with the consummation of the transactions contemplated by
this Agreement have been obtained.
(v) Compliance with Other Instruments. TAV is not in
violation of any provisions of its Articles of Incorporation or Bylaws
as amended and in effect on and as of the closing, or of any provision
of any mortgage, indenture, agreement, instrument or contract to which
it is a party, or, to the best of TAV's knowledge, of any provision of
any federal or state judgment, writ, decree, order, statute,
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rule, or governmental regulation applicable to TAV. The
execution, delivery, and performance of this Agreement will not
result in any such violation or conflict with or constitute a
default under any such provision.
(vi) Insurance. TAV has fire and casualty insurance
policies, with extended coverage, sufficient in amount (subject
to reasonable deductibles) to allow it to replace any of its
properties that might be damaged or destroyed.
8. Independent Status of the Parties. It is understood and
agreed that each of MLE and TAV is an independent contractor and is not, and
shall not hold itself out to be, a partner, co-venturer, agent or employee of
the other party. Neither TAV nor MLE shall have the authority to bind the
other in the course of their performance of this Agreement.
9. Indemnification.
(a) MLE shall indemnify and hold harmless TAV and its
shareholders, directors, officers, employees and agents from and
against any and all claims, liabilities, obligations, costs or
expenses (including attorneys' fees) arising by reason of or
associated with any breach by MLE of any of its obligations under this
Agreement or as a result of the negligent or wilful misconduct of MLE,
or its employees or agents, in the performance by MLE of its duties
pursuant to this Agreement.
(b) TAV shall indemnify and hold harmless MLE and its
shareholders, directors, officers, employees and agents from and
against any and all claims, liabilities, obligations, costs or
expenses (including attorneys' fees) arising by reason of or
associated with any breach by TAV of any of its obligations under this
Agreement or as a result of the negligent or wilful misconduct of TAV,
or its employees or agents, in the performance by TAV of its duties
pursuant to this Agreement.
(c) The obligations under Sections 9(a) and 9(b) shall be
continuing and shall survive termination of this Agreement.
10. Termination.
(a) A party (the "Non-Defaulting Party") shall be
entitled to terminate this Agreement in the event of a material
default by the other (the "Defaulting Party").
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For such purposes, a material default shall include and be limited to
the following:
(i) The failure or refusal of the Defaulting
Party to pay any amount due to the Non-Defaulting Party within
three (3) days after delivery by the Non-Defaulting Party to
the Defaulting Party of written demand for payment; or
(ii) The failure or refusal of the Defaulting
Party to perform any material obligation under this Agreement
(other than the obligation for payment which is governed by
the provisions of Section 10(a)(i)) which is not remedied
within 30 days after the date that the Non-Defaulting Party
delivers written notice to the Defaulting Party identifying
and demanding performance of such obligation.
In either such instance, the Non-Defaulting Party may, at any time after the
expiration of the applicable remedial period, terminate this Agreement by
written notice to the Defaulting Party, with such termination effective
immediately upon the delivery of such notice of termination.
(b) TAV may terminate MLE's management and operation of
all (but not less than all) of the TAV Stations (and TAV's obligation
under Section 4 to reimburse MLE for such management and operation) at
any time during the term hereof, upon 30 days prior written notice.
Except as provided below, such termination shall not, however, affect
the provisions of this Agreement relating to the management and
operation of the MLE Stations or the obligations of TAV to reimburse
MLE for the cost of managing and operating the MLE Stations or the
obligation of TAV to pay to MLE the fee specified in Section 5. If
TAV, pursuant to this Section 10(b), terminates MLE's management and
operation of the TAV Stations, then MLE shall have the right,
exercisable by written notice delivered to TAV on or after the date
that TAV delivers written notice of such termination, to terminate
this Agreement with respect to its management and operation of the MLE
Stations, with such termination effective as of the date specified in
such notice.
(c) Except as provided in Sections 10(a) and 10(b), this
Agreement shall remain in full force and effect until the expiration
of the term on January 31, 2005.
11. Confidentiality. Each party (the "Recipient Party") shall
treat all non-public information (the "Confidential Information") with respect
to the products, business, customers or methods of operation of the other party
(the "Disclosing Party") furnished to the Recipient Party
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orally or in writing by the Disclosing Party or by any of its representatives
as confidential, shall hold all Confidential Information in strictest
confidence and shall not disclose to any third party any Confidential
Information except (a) to its directors, officers, employees and
representatives (including outside attorneys, accountants and consultants) who
need to know such Confidential Information for the purposes of this Agreement,
who agree to keep such Confidential Information confidential and who are
provided with a copy of this Section 11 of this Agreement and agree to be bound
by its terms (and the Recipient Party shall inform such persons of the
confidential nature of the Confidential Information and shall take reasonable
measures to enforce confidentiality and to prevent unauthorized use or
disclosure of the Confidential Information, (b) with the prior written consent
of the Disclosing Party, and (c) as may be required by law in the reasonable
judgment of legal counsel to the Recipient Party. In any event, each party
shall be responsible for any breach of this Section 11 of this Agreement by it
or by any of its representatives.
12. Arbitration. In the event of a dispute between the parties
hereto as to the calculation of any sum required to be paid by either party
under this Agreement, the undisputed portion of any such sum shall be paid as
provided in this Agreement and the balance, as determined by an arbitrator (who
shall be a member of one of the "Big Six" national accounting firms, excluding
the firms engage by MLE and TAV, as mutually agreed upon by MLE and TAV), shall
be paid within 10 days after such arbitrator's decision or otherwise treated in
accordance with such decision. In the event that MLE and TAV are unable to
agree on an arbitrator, MLE's and TAV's independent public accountants shall
select an arbitrator who satisfies the requirements of this Section. MLE and
TAV shall share equally the cost of each such arbitration. Such arbitration
shall be final and binding, and pursuant to MCLA Section 600.5001 a judgment of
any Michigan circuit court may be rendered on any such arbitration award.
13. Right of First Refusal to Purchase Stations. Pursuant to
Section 3(c)(iii), MLE has reserved the right to discontinue the management and
operation of specified and limited MLE Stations and TAV has reserved the right
to discontinue the management and operation of specified TAV Stations (each
such discontinued MLE Station or TAV Station is hereafter referred to as an
"Discontinued Station"). If, in connection with or following such
discontinuance, a party (the "Selling Party") proposes to sell a Discontinued
Station and if, following that sale, the Discontinued Station will remain
suited for use by the purchaser as a hog buying station (as distinguished from
any other use), then the other party (the "Other Party") shall have a right of
first refusal with respect to the sale of that Discontinued Station upon the
terms stated in this Section 13.
(a) The Selling Party shall not sell any such
Discontinued Station(s) unless (i) the consideration for the sale is
cash, unsecured indebtedness of a person or entity financially able
(in the judgment of the Selling Party) to satisfy such indebtedness or
a combination of cash and such unsecured indebtedness, (ii) the
Selling Party first notifies the Other Party in writing of such
proposed sale and
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attaches a copy of the terms thereof (including a copy of the offer
and all other pertinent documents) (the "Sale Note"), and (iii) the
Other Party fails to purchase such Discontinued Station(s) and the
Selling Party complies with Section 13(b). Upon receipt of a Sale
Notice, the Other Party shall have the right, exercisable by written
notice given to the Selling Party within 30 business days after the
date on which such Sale Notice was duly given, to purchase all, but
not less than all, of the Discontinued Station(s) specified in such
Sale Notice at the same price and for cash or on the same terms as are
offered by the proposed purchaser, except that the closing of any such
sale shall be governed by Section 13(c) of this Agreement.
(b) If the Other Party fails to exercise its right of
first refusal with respect to any Discontinued Station(s) described in
a Sale Notice within the time limits set forth in Section 13(a) above,
the Selling Party may sell all but only all of the Discontinued
Station(s) described in the Sale Notice to the purchaser specified in
the Sale Notice if and only if such sale is on the terms and
conditions set forth in such Sale Notice and such sale occurs within
90 business days after such Sale Notice was given to the Other Party.
(c) Closing of any sale pursuant to this Section 13 shall
be at the principal office of the Other Party at such date as may be
mutually agreed upon by the parties, but in no event later than the
90th business day following the date on which the Sale Notice was
given. On the closing date, the Selling Party will, upon receipt of
payment, execute and deliver to the Other Party such bills of sale,
assignments and other documents and instruments as the Other Party may
reasonably request to properly and validly effectuate or evidence such
sale. Any cash payment due on the closing date shall be paid in cash
or by certified or cashier's check and if a note (unsecured
indebtedness) is to be given as part of the consideration in
accordance with this Section 13, such note shall be substantially in
the form provided for in the Sale Notice.
14. Miscellaneous.
(a) Notices. Any and all notices, requests or other
communications hereunder shall be given in writing and delivered by overnight
mail, hand delivery, or by registered or certified mail, return receipt
requested, with first class postage prepaid. Such notices shall be addressed
as follows, unless notice of a change of address is furnished to the other
parties in the manner provided in this Section 14(a):
If to TAV: Thorn Apple Valley, Inc.
18700 West Ten Mile Road
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Southfield, Michigan 48075
Fax: (810) 552-0986
With a copy to: Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, Michigan 48226
Attn: Donald J. Kunz
If to MLE: Michigan Livestock Exchange
806 Coolidge Road
East Lansing, Michigan 48823
Fax: (517) 337-6070
With a copy to: Hooper, Hathaway, Price,
Beuche & Wallace
126 South Main Street
Ann Arbor, Michigan 48104
Attn: James R. Beuche
Any notice which is required to be made hereunder shall be deemed made
on the date such notice is received by the party to whom it is
directed.
(b) Invalid or Unenforceable Provisions. The invalidity
or unenforceability of any particular provision of this Agreement
shall not affect the other provisions hereof, and this Agreement shall
be construed in all requests as if such invalid or unenforceable
provision were omitted.
(c) Assignment. This Agreement shall not be assigned
without the consent of all parties hereto. This Agreement shall inure
to the benefit of, and shall be binding upon, the parties hereto and
their successors and permitted assigns.
(d) Amendments and Waiver. No amendment, modification,
change, supersession, or cancellation of this Agreement shall be valid
unless the same is in writing and signed by the parties hereto. No
waiver of any provision of this Agreement shall be valid unless in
writing and signed by the party against whom that waiver is sought to
be enforced. The failure of any party at any time to insist upon
strict performance of any condition, promise, agreement, or
understanding set forth herein shall not be construed as a wavier or
relinquishment of the right to insist upon strict performance of the
same or any other condition, promise, agreement, or understanding at a
future time.
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(e) Entire Agreement. This Agreement sets forth all of
the promises, agreements, conditions, understandings, warranties and
representations among the parties hereto with respect to the
transactions contemplated hereby, and supersedes all prior agreements,
arrangements and understandings among all or some of the parties
hereto, whether written, oral or otherwise. There are no promises,
agreements, conditions, understandings, warranties or representations,
oral or written, express of implied, among the parties except as set
forth herein.
(f) Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of Michigan.
(g) Counterparts. The Agreement may be executed in two
or more counterparts, each of which shall constitute an original and
together which shall constitute one instrument.
(h) Attorney's Fees. If any party commences an action
against any other party to enforce any of the terms, covenants,
conditions, or provisions of this Agreement or because of a default by
a party under this Agreement, any prevailing party in any such action
shall be entitled to recover its reasonable attorneys' fees, costs and
expenses incurred in connection with the prosecution or defense of
such action from the nonprevailing party or parties.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of this
2nd day of November, 1994.
THORN APPLE VALLEY, INC.,
a Michigan corporation
___________________________________
By: Joel Dorfman
Its: President
INDIANA LIVESTOCK EXCHANGE,
an Indiana corporation
___________________________________
By: Thomas Reed
Its: President
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MICHIGAN LIVESTOCK EXCHANGE
a Michigan corporation
___________________________________
By: Thomas Reed
Its: President
from the nonprevailing party or parties.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of this
2nd day of November, 1994.
THORN APPLE VALLEY, INC.,
a Michigan corporation
___________________________________
By: Louis Glazier
Its: Executive Vice President
INDIANA LIVESTOCK EXCHANGE,
an Indiana corporation
___________________________________
By: Thomas Reed
Its: President
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MICHIGAN LIVESTOCK EXCHANGE
a Michigan corporation
___________________________________
By: Thomas Reed
Its: President
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from the nonprevailing party or parties.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of this
2nd day of November, 1994.
THORN APPLE VALLEY, INC.,
a Michigan corporation
___________________________________
By: Ed Boan
Its: Executive Vice President
INDIANA LIVESTOCK EXCHANGE,
an Indiana corporation
___________________________________
By: Thomas Reed
Its: President
MICHIGAN LIVESTOCK EXCHANGE
a Michigan corporation
___________________________________
By: Thomas Reed
Its: President
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