MASTER
PROCUREMENT AGREEMENT
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Master Procurement Agreement, dated as of March 12, 1998
(this "Agreement"), between Nutrition Supply and Trading, a
division of ▇▇▇▇ Agriculture Company (hereinafter "S&T"), with
offices at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇,
and Purina ▇▇▇▇▇, Inc., (hereinafter "Purina"), with offices at
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
WHEREAS, S&T and Purina wish to enter into an agreement
under which S&T shall supply Purina with all of Purina's
requirements for feed ingredients and feed additives
(collectively hereinafter referred to as "Feed Ingredients") and
feed packaging materials (collectively hereinafter referred to as
"Packaging") meeting specifications to be determined by Purina
and S&T.
NOW THEREFORE, in consideration of the mutual agreements
contained herein and the performance of the obligations called
for herein, the parties agree as follows:
ARTICLE I
PROCUREMENT TERMS
1.1 Sale and Purchase of Commodities. Unless pursuant to S&T's prior
written consent, during the term of this Agreement, subject to
the terms and conditions set forth herein and subject to the
terms and conditions of the Confirmation Contracts (as
hereinafter defined), S&T shall procure for Purina and Purina
shall purchase from S&T all of Purina's requirements for Feed
Ingredients to be used at all of Purina's feed milling
facilities.
1.2 Confirmation Contracts. Subsequent to the execution of this
Agreement, S&T and Purina shall enter into various contracts
for the purchase of Feed Ingredients on such terms as set
forth on S&T's Purchase and Sale Confirmation (hereinafter
"Confirmation Contracts").
1.3 Quality Standards. The Confirmation Contracts shall set forth the
agreement between S&T and Purina as to the quality and
condition specifications of the Feed Ingredients to be
delivered to Purina pursuant to this Agreement and the
Confirmation Contracts.
1.4 Pricing Terms. The price of (i) Packaging delivered pursuant to
this Agreement, and (ii) Feed Ingredients delivered pursuant
to this Agreement and any Confirmation Contract, in each case
shall be computed in accordance with the following terms:
(a) The price of all Packaging shall be equivalent to S&T's
cost. S&T's cost shall include, but not be limited to,
S&T's out-of-pocket costs to purchase the products and
transportation costs.
(b) For the first year of this Agreement, commencing on the
Commencement Date (as defined paragraph 1.6(a)), S&T
shall sell all Feed Ingredients to Purina at Market
Value, as defined and limited below, less Three Dollars
and Fifty Cents ($3.50) per ton (the "Discount"). On or
before the conclusion of the first year of this
Agreement, the parties shall negotiate (i) the Discount,
which may be more than, less than or equal to the
Discount applicable during first year of this Agreement,
and (ii) the time period for which the new Discount will
be applicable, which time period may or may not be one
year. The parties agree to negotiate the new Discount and
time period as contemplated by the preceding sentence in
good faith.
(c) For the purposes of paragraph 1.4(b), "Market Value" shall
mean the price at which parties who are dealing at arm's
length and purchasing or selling common quantities of the
commodity would buy or sell the commodity in the spot
market. The parties anticipate that approximately 50% of
the Feed Ingredients purchased by Purina will consist of
corn, wheat middlings and soybean meal (the "Enumerated
Commodities"). The parties agree that Market Value for
the Enumerated Commodities (other than agreements to
purchase and sell an Enumerated Commodity pursuant to an
agreement with a term exceeding thirty (30) days), during
any semi-annual period, shall not exceed the average of
price quotations during the respective period for each
Enumerated Commodity for each Referenced Market as
published in Feedstuffs, pursuant to the table below:
Commodity Feedstuffs Referenced Markets
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Corn Atlanta, Boston, Chicago, Fort Worth, Kansas City,
Los Angeles, Minneapolis/St. ▇▇▇▇
▇▇▇▇▇
Middlings Atlanta, Buffalo, Fort Worth, Kansas City,
Los Angeles
Soybean Meal Atlanta, Buffalo, Chicago, Fort Worth, Kansas City,
Los Angeles
In the event the price for one or more of the Referenced
Markets is not published by Feedstuffs, the parties shall
agree upon a Reference Market that shall be a substitute
for the Reference Market not so published. In the event
there are no price quotations or an insufficient number of
Reference Markets to serve as substitute Reference Markets
for a particular Enumerated Commodity, the parties shall
negotiate a methodology for determining the maximum Market
Value for such Enumerated Commodity.
(d) For the purposes of computing average quotations of the
Referenced Markets, the first semi-annual period referred
to in paragraph 1.4(c) shall be a partial period
beginning on the Commencement Date and concluding on June
30, 1998. Full semi-annual periods shall thereafter begin
on July 1, 1998 and on each January 1 and July 1
thereafter during the term of this Agreement; provided,
however, that the final semi-annual period of this
Agreement may also be a partial period and, in any event,
shall conclude on the date of the termination of this
Agreement.
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(e) In the event that, at the end of any semi-annual period,
it is determined that the price charged for an Enumerated
Commodity (without giving effect to the Discount) is
greater than the Market Value of such Enumerated
Commodity for such semi-annual period, S&T shall, within
twenty (20) days of the close of such semi-annual period,
reimburse Purina for such excess amount.
(f) For the limited purpose of computing Market Value, S&T
shall not be deemed to be an arm's length purchaser of
commodities and Market Value shall, therefore, not be
deemed to be S&T's cost.
1.5 Packaging Materials. During the term of this Agreement, S&T shall
procure for Purina and Purina shall purchase from S&T all of
Purina's requirements for Packaging to be used at all of
Purina's feed milling facilities. Purina shall deliver to S&T
a purchase order for the Packaging, specifying the types of
Packaging being ordered. The purchase order shall also state
the expected delivery date of the Packaging.
1.6 Term and Termination.
(a) Term. The primary term of this Agreement shall be five
(5) years, commencing on May 1, 1998 (the "Commencement
Date"), and shall automatically renew for additional one
(1) year terms thereafter, unless either party delivers
notice to the other party of its intent to terminate this
Agreement at least thirty (30) days prior to the close of
the primary or any subsequent term.
(b) Termination By Either Party. Notwithstanding the
provisions of paragraph 1.6(a), either party may terminate
this contract upon the occurrence of the following events:
1. If at any time (i) all or substantially all of the assets
of the Company are sold, leased or transferred in one
or a series of transactions to any person or group
(within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended), other
than to ▇▇▇▇ Industries, Inc. or any one or more of
its subsidiaries or affiliates (hereinafter referred
to as "KII and Related Parties"), (ii) there occurs
the acquisition of beneficial ownership by any person
or group (within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended)
(other than by any of, or by any group comprised of,
KII and Related Parties) of more than 50% of the
voting power of all of the outstanding common stock of
Purina, or (iii) there occurs the consummation of any
transaction or series of transactions the result of
which is that any person or group (within the meaning
of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended), other than KII and Related Parties,
beneficially owns more of the voting power of the
outstanding common stock of Purina than is
beneficially owned, in the aggregate, by KII and
Related Parties.
2. If the parties are unable to negotiate the Discount and
applicable time period pursuant to the terms set forth
in paragraph 1.4(b).
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(c) Termination by S&T. Notwithstanding the provisions of
1.6(a), if for any reason, Purina fails to pay, prepay or
repay any amount due pursuant to the terms of this
Agreement and/or any of the Confirmation Contracts, S&T
may terminate this Agreement, provided S&T delivers
notice to Purina at least thirty (30) days prior to
termination and Purina does not cure such default within
such thirty (30) day period.
(d) Termination by Purina. Notwithstanding the provisions of
paragraph 1.6(a), if S&T breaches its obligations to
deliver Feed Ingredients and Packaging to Purina pursuant
to the terms of this Agreement, Purina may terminate this
Agreement, provided Purina. delivers notice to S&T at
least thirty (30) days prior to termination and S&T does
not cure such default within such thirty (30) day period.
(e) Purina's Right to Hire Employees. In the event this
Agreement is terminated for any reason during the initial
5 year period set forth in paragraph 1.6(a), Purina may
initiate discussions with S&T's employees regarding
employment with Purina and S&T shall not object to the
discussions or any subsequent employment by Purina of
S&T's employees.
1.7 Provisions of Confirmation Contracts. The terms and conditions of
each Confirmation Contract entered into pursuant to this
Agreement shall be in the form as set forth on Exhibit "A"
attached hereto.
ARTICLE II
MISCELLANEOUS TERMS
2.0 Entire Agreement. This Agreement constitutes the entire agreement
between the parties concerning procurement of Feed Ingredients
and Packaging except as contemplated herein with respect to
the execution of Confirmation Contracts. Either party hereto
may waive any rights to which it is entitled under this
Agreement at any time, but such waiver shall be in writing and
be strictly limited to the part waived.
2.1 Conflict in Terms. In the event there is a conflict between the
written terms of a Confirmation Contract and of this
Agreement, except where the pricing of the Feed Ingredient
materially varies from the formula set forth in paragraph 1.4,
the terms of the Confirmation Contract shall control.
2.2 Status of Parties. S&T and Purina acknowledge and agree that this
Agreement constitutes a procurement agreement only, that the
parties are independent contractors, and that the relationship
of the parties is not that of master/servant, principal/agent,
partnership/joint venturers or joint enterprisers.
2.3 Assignment. Except as otherwise provided herein, the rights and
duties of either party under this Agreement may not be
assigned without the prior written consent of the other party.
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Notwithstanding the foregoing restriction, S&T may assign it
rights and obligations under this contract to KII and Related
Parties without the consent of Purina.
2.4 Choice of Law. Kansas law, both procedural and substantive, but
without regard to its choice of law provisions, shall govern
the interpretation, construction and performance of this
Agreement.
2.5 Descriptive Headings. The headings of the paragraphs and
subparagraphs of this Agreement are inserted for convenience
only and shall not constitute a part hereof.
2.6 Severability. Each portion of this Agreement is intended to be
severable. If any term or provision hereof is illegal or
invalid for any reason whatsoever, such illegality or
invalidity shall not affect the validity of the remainder of
this Agreement.
IN WITNESS WHEREOF S&T and Purina have entered into this
Agreement as of the day and year above written
PURINA ▇▇▇▇▇, INC. NUTRITION SUPPLY AND TRADING,
a division of ▇▇▇▇ Agriculture Company
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇.▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇.▇. ▇▇▇▇▇▇
Title: President & C.E.O. Title: Vice President
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