AGREEMENT TO EXCHANGE STOCK
THIS AGREEMENT TO EXCHANGE STOCK (the "Agreement") is made and entered into
effective as of the 14th day of March, 1997 (the "Effective Date"), by and
among RED OAK FARMS, INC., an Iowa corporation (the "Red Oak, Inc."), RED
OAK HERFORD FARMS, INC., a Nevada corporation ("Hereford"), MIDLAND CATTLE
COMPANY, an Iowa joint venture ("Midland"), and the respective joint
venturers of Midland, which are CIMMARON PROPERTIES, LTD., an Iowa
corporation, WALL LAKE CATTLE COMPANY, an Iowa corporation, and ▇▇▇▇▇▇'▇ OF
MILFORD, INC., an Iowa corporation (collectively, the "Prospective
Stockholders").
W I T N E S S E T H :
WHEREAS, Midland and the Prospective Stockholders desire to reorganize and
incorporate Midland as an Iowa corporation to be known as Midland Cattle
Company ("Midland Co."); and
WHEREAS, the Prospective Stockholders are currently the sole owners of
Midland, and following such reorganization and incorporation, the
Prospective Stockholders will be the owners of all of the issued and
outstanding shares of the common stock of Midland Co. (the "Stock"); and
WHEREAS, Hereford desires to acquire all of the Stock of Midland Co.
following such reorganization and incorporation; and
WHEREAS, the Prospective Stockholders have agreed to exchange such Stock
for shares of voting common stock of Hereford, on the terms and conditions
set forth below.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereby agree
as follows:
1. Reorganization/Incorporation. Midland and the Prospective
Stockholders shall, within sixty (60) days of the Effective Date, cause
Midland Co. to be duly formed and incorporated as an Iowa corporation. The
directors of Midland Co. shall be identical to the directors of Red Oak.
Upon the formation of Midland Co., the Prospective Stockholders shall
immediately transfer their entire ownership interests in Midland to Midland
Co. in exchange for shares of voting common stock in Midland Co., such
shares to be allocated among and issued to the Prospective Stockholders in
accordance with their current ownership interests in Midland.
2. Exchange of Stock; Wholly-Owned Subsidiary. On the "Exchange
Date" (as defined in Section 4 below) the Prospective Stockholders shall
deliver or cause to be delivered to Hereford, the original stock
certificates representing the Stock, duly endorsed for transfer to
Hereford. The Prospective Stockholders shall receive on the Exchange Date
in exchange for the Stock, original issue voting common stock in Hereford
(the "Hereford Stock") as follows -- the greater of: (i) one million
(1,000,000) shares of Hereford Stock; or (ii) a sufficient number of shares
of Hereford Stock so as to have a fair market of not less than ten million
dollars ($10,000,000.00). Such Hereford Stock shall be allocated among and
issued to the Prospective Stockholders in accordance with their current
ownership interests in Midland. From and after the Purchase Date, Midland
Co. shall be a wholly-owned subsidiary of Hereford.
3. Tax Free Reorganization. This transaction is intended by the parties
to constitute a tax-free reorganization within the meaning of 368(a)(1)(B)
of the Internal Revenue Code, as amended, and all terms and provisions
herein shall be interpreted and construed so as to effectuate such intent.
4. Financial Statements; The Exchange Date. Midland Co. shall prepare
and deliver, or cause to be prepared and delivered to Hereford no later
than the date on which Midland/Midland ▇▇.▇▇ 1997 audited financial
statements are completed, audited financial statements for Midland/Midland
Co. for an uninterrupted three (3) year period. The exchange of the Stock
described in Section 2 above shall occur on the first business day (the
"Exchange Date") which is at least sixty (60) days after the delivery of
such financial statements to Hereford.
5. Warranties and Representations. The Prospective Stockholders
hereby warrant and represent to Hereford with respect to the Stock, and
Hereford hereby warrants and represents to the Prospective Stockholders
with respect to the Hereford Stock, that, as of the Purchase Date: (i)
they will be the sole owners of the Stock and the Hereford Stock,
respectively; (ii) the Stock and the Hereford Stock will be free and clear
of any liens, security interests and encumbrances; (iii) the Prospective
Stockholders will have the full and unrestricted right to transfer the
Stock, and Hereford will have the full and unrestricted right to transfer
the Hereford Stock, in accordance with this Agreement; and (iv) no other
person or entity will have any right or interest in the Stock or the
Hereford Stock.
6. Operation of Business. From and after the Effective Date and
continuing until the exchange of the Stock as described in Section 2 above:
(i) Midland/Midland Co. shall continue to operate its business and maintain
its assets in a commercially prudent manner and in accordance with its
existing business practices as of the Effective Date; and (ii) any and all
profits generated by the business operations of Midland/Midland Co. shall
remain in the company and shall not be paid out or distributed to the
Prospective Stockholders in the form of a dividend or otherwise.
7. Return of Capital. The parties hereby acknowledge and agree that
the Prospective Stockholders shall be entitled to a return of capital from
Midland Co. in the aggregate amount of one million dollars ($1,000,000.00)
as provided herein. As of the Exchange Date, the parties shall enter into
an agreement specifying the precise terms under which such return of
capital will occur. Such agreement shall provide, among other things, that
the Prospective Stockholders shall receive all profits of Midland Co. from
and after the Exchange Date until they have received an aggregate of one
million dollars ($1,000,000.00).
8. Condition Precedent. Notwithstanding any provision herein to the
contrary, the parties obligations hereunder are subject to the final
consummation of the transactions contemplated in that certain Agreement and
Plan of Reorganization (the "Reorganization Agreement") by and among Red
Oak, Red Oaks shareholders and Wild Wings, Inc. In the event the
transactions contemplated in the Reorganization Agreement are not
consummated as provided therein, or in the event such transactions are
initially consummated but are subsequently, for any reason, "unwound,"
terminated or declared null and void, the parties obligations hereunder
shall terminate and this Agreement shall no longer be of any force or
effect.
9. Binding Nature; Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
heirs, representatives, successors and permitted assigns. Except as
otherwise provided herein, this Agreement shall not be assigned or
delegated, in whole or in part, by either party hereto without the prior
written consent of the other party.
10. Integrated Agreement; Severability; Waivers. This Agreement
constitutes the entire understanding between the parties concerning the
subject matter hereof and shall not be modified except in a writing signed
by all parties hereto. No prior or contemporaneous representations,
promises, or agreements between the parties relating to the subject matter
hereof and not embodied in this Agreement shall be of any force or effect.
If any provision of this Agreement shall be held to be invalid,
unenforceable, or contrary to public policy, the remaining provisions shall
not be affected. No waiver of any provision of this Agreement shall be
effective unless agreed to in writing by the party against whom such waiver
is sought to be enforced. Waiver of any default or breach hereunder shall
not constitute a waiver of any other default or breach.
11. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall together constitute one and the same
instrument and shall become effective when one or more counterparts have
been signed by each and every party hereto and delivered to the each and
every other party hereto.
IN WITNESS WHEREOF, the parties have duly executed this AGREEMENT TO
EXCHANGE STOCK effective as of the day and year first above written.
Red Oak Farms, Inc. Red Oak Hereford Farms, Inc.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Its: President Its: President
Cimmaron Properties, Ltd. Wall Lake Cattle Company,
Inc.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Its: President Its: President
▇▇▇▇▇▇'▇ of Milford, Inc. Midland Cattle Company
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇ By: Cimmaron Properties, Ltd., one
▇▇▇▇ ▇▇▇▇▇▇ of its joint venturers
Its: President
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Its: President