EXHIBIT 10.6
AMENDED AND RESTATED MARKETING AGREEMENT
THIS AGREEMENT, is made and entered into effective as of June 1, 2003 by
and between ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, a Delaware corporation with principal offices
and place of business at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("Cargill"), THE ANDERSONS, INC., an Ohio corporation with principal offices and
place of business at ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
("TAI") and The Andersons Agriculture Group, L.P., an Ohio limited partnership
with principal offices and place of business at ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇ ("TAAG," or "TAI" with respect to all time periods after May 1, 2000)
..
WHEREAS, Cargill and TAI entered into that certain Marketing Agreement
dated June 1, 1998;
WHEREAS, the Marketing Agreement was assigned by TAI to TAAG, without
releasing TAI of its rights, obligations and responsibilities, and to which
Cargill gave its consent, effective as of May 1, 2000;
WHEREAS, the Initial Term of the Marketing Agreement has transpired, and
the parties wish to extend such Marketing Agreement for another five (5) year
term with certain amendments to apply to such subsequent term, and any future
subsequent terms, if any, as set forth in this Amended and Restated Marketing
Agreement;
WHEREAS, Cargill has leased its two grain handling facilities located in
Toledo and Maumee, Ohio (the "Leased Facilities") to TAI by lease agreement
dated June 1, 1998, and extended by Letter Agreement dated May 30, 2003 and by
electronic mail dated July 2, 2003 (the "Lease Agreement");
WHEREAS, TAI intends to use TAI's existing two grain handling facilities
at Toledo and Maumee, Ohio (the "TAI Facilities") and the Leased Facilities
(collectively, the "Facilities") for the primary purpose of originating grain in
the Toledo and Maumee, Ohio area (the "Toledo Grain"); and
WHEREAS, TAI intends to sell the Toledo Grain to Cargill, and Cargill
intends to purchase from TAI and merchandise the Toledo Grain;
NOW, THEREFORE, in consideration of the foregoing and the mutual terms
and conditions hereinafter set forth, Cargill and TAI mutually agree as follows:
ARTICLE I
TERM AND TERMINATION
1.1 TERM. The initial term of this Agreement shall commence on June 1,
1998 (the "Effective Date") and shall continue through May 31, 2003 (the
"Initial Term"), subject to the termination provisions below. The second term of
this Agreement shall commence on June 1, 2003, and shall continue through May
31, 2008 (the "Second Term"), subject to the termination provisions below. This
Agreement shall automatically renew for consecutive five (5) year periods unless
either party provides notice to the other party at least six (6) months prior to
the expiration of the then current term of such party's intent to terminate or
modify this Agreement. If a party provides such notice of its intent to modify
the Agreement for purposes of renewal, and the other party has not provided
notice of termination pursuant to this Section 1.1, then the parties shall
negotiate in good faith a renewal of this Agreement. In the event that the
parties are unable to negotiate a mutually agreeable renewal prior to the
expiration of
the Initial Term, Second Term or the then current term, as applicable, this
Agreement shall terminate without further notice at the expiration of such term.
1.2 TERMINATION.
(a) If the Lease Agreement is terminated for any reason, the Initial
Term, Second Term or the then current term of this Agreement, as applicable,
shall automatically terminate without notice. The Lease Agreement, which is
incorporated herein by this reference, is attached hereto as Exhibit A.
(b) Either party may terminate this Agreement prior to the expiration
of the Initial Term, Second Term or renewal term, if any, following any
material breach of this Agreement by the other party if the breaching party
fails to remedy such breach within thirty (30) days after receiving from the
non-breaching party written notice of the breach specifying the basis on which
such breach is claimed.
(c) This Agreement shall terminate upon written notice by either party
to the other in the event that the notified party shall file a voluntary
petition in bankruptcy, or shall be adjudicated as a bankrupt pursuant to an
involuntary petition, or shall suffer appointment of a temporary or permanent
receiver, custodian, or trustee for its business or for all or substantially
all of its assets, or shall make an assignment for the benefit of creditors.
(d) In the event that one or more third parties purchases TAI's stock
in an amount sufficient to significantly affect or change control of TAI, or
one or more third parties takes any action that does significantly affect the
control of TAI, Cargill may in its sole discretion either continue or terminate
this Agreement. For purposes of this Agreement, "control" shall mean (a) the
direct or indirect ownership of more than fifty percent (50%) of the total
voting securities of every class or other voting evidences of ownership
interest of TAI, or (b) the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of TAI. If Cargill
elects to terminate this Agreement under this provision, Cargill must provide
written notice to TAI of its election to terminate not more than fifteen (15)
days after public announcement or after TAI has provided written notice to
Cargill of any public filing with the Securities Exchange Commission. TAI shall
have no right to terminate this Agreement under this Section 1.2 (d) herein.
(e) Termination of this Agreement shall not affect any obligation of
either party accrued prior to the effective date of such termination.
1.3 CONTINUING OBLIGATIONS. Upon the expiration or termination of this
Agreement, for a period of two (2) years from the date of such expiration or
termination, Cargill shall have both a right of first refusal and a right of
last refusal to purchase from TAI at a mutually agreed market price, 50% of the
grain put through the TAI Facilities for the first year of the two year period,
and 25% of the grain put through the TAI Facilities for the second year of the
two year period; provided, however, that this provision shall not apply to grain
sold to those customers with whom TAI maintains direct trading relationships
during the term of this Agreement. If the parties cannot mutually agree to the
market price, the market price shall be determined by an independent third
party, mutually agreeable to both parties.
ARTICLE II
GRAIN ORIGINATION AND MERCHANDISING
2.1 OBLIGATION OF BOTH PARTIES. Both parties have the obligation to maximize
net income of the Facilities. As a means to this, Cargill will maintain control
of the grain merchandising function, while TAI will maintain control of the
grain origination and facility operation functions. Communications between the
parties regarding such obligation of both parties shall be conducted in
accordance with the Guidelines as defined in Section 8.1 herein.
2.2 ORIGINATION. TAI shall use its best efforts throughout the duration of
the Initial Term, Second Term, and all subsequent renewal terms, if any, to
maximize origination of the Toledo Grain. TAI shall use the Facilities for the
primary purpose of originating the Toledo Grain. Any other intended use by TAI
of the Facilities to generate income shall be promptly communicated to Cargill
and shall be subject to Cargill's approval, which shall not be unreasonably
withheld. For purposes of this Section 2.2, it shall not be unreasonable for
Cargill to withhold approval if TAI's intended use may cause a default in the
IRB Lease as defined in the Lease Agreement. TAI shall have sole discretion to
establish the price at which TAI purchases the Toledo Grain in connection with
TAI's origination activities.
2.3 SALE/PURCHASE OF THE TOLEDO GRAIN. Subject to the terms and conditions
set forth in this Agreement, TAI agrees to sell to Cargill and Cargill agrees to
purchase from TAI the Toledo Grain for the duration of the Initial Term and all
subsequent renewal terms, if any. Cargill shall have sole discretion to
determine when Cargill shall purchase and at what price Cargill shall purchase
the Toledo Grain from TAI. These decisions shall be made with full consideration
of origination, logistic and grain quality factors as represented in good faith
by TAI. During the term of this Agreement, TAI will not sell the Toledo Grain to
any person or entity other than Cargill pursuant to the terms of this Agreement.
Cargill and TAI shall execute Cargill's standard purchase contract ("Purchase
Contract") to effectuate each respective sale of the Toledo Grain. The terms and
conditions on the front and back sides of the Purchase Contract shall govern the
transaction to the extent that such terms and conditions do not conflict with
the terms of this Agreement in which case this Agreement shall govern. A copy of
the Purchase Contract is attached hereto as Exhibit B.
2.4 TOLEDO GRAIN EXCEPTIONS. TAI will remain fully active in the NS rail
markets as such markets relate to facilities other than the Facilities which are
the subject of this Agreement, and no NS rail sales will be offered by TAI for
the Toledo Grain. Should an opportunity arise wherein TAI desires to purchase
certain amounts of Toledo Grain, TAI may contact Cargill's merchandising contact
for this Agreement with a bid. Further, TAI may direct trading relationships
with certain customers as mutually agreed by the parties.
2.5 GRAIN MERCHANDISING. Cargill shall use its best efforts throughout the
duration of the Initial Term, Second Term, and all subsequent renewal terms, if
any, to promote the sale of and to merchandise the Toledo Grain. Except as
otherwise provided herein, Cargill shall have sole authority to merchandise the
Toledo Grain into both export and domestic markets, and accordingly TAI shall
not communicate with any of Cargill's customers regarding the sale of the Toledo
Grain except as provided herein, or as mutually agreed by the parties.
ARTICLE III
OPEN CONTRACTS
3.1 Cargill agrees to assign, deliver, and transfer to TAI on the Effective
Date, and TAI agrees to accept from Cargill, on the Effective Date, all right,
title, and interest of Cargill in and to all executory contracts for the
purchase of grain (the "Open Contracts") by Cargill from various sellers, which
Open Contracts are in existence on the Effective Date. TAI shall purchase the
Open Contracts at the TAI truck bid on the Effective Date. If the parties cannot
mutually agree to the TAI truck bid, the price shall be determined by an
independent third party, mutually agreeable to both parties. Cargill shall
indemnify and hold harmless TAI against all claims, damages, liabilities, costs,
suits, obligations or penalties (including attorneys' fees) arising from
Cargill's breach of or negligent administration or handling of any open
hedge-to-arrive grain contracts which are assigned from Cargill to TAI ("HTA
Contracts"), or arising from any questions of legality of such HTA Contracts to
the extent that such questions of legality do not arise from TAI's breach of or
negligent administration or handling of the HTA Contracts. TAI shall indemnify
and hold harmless Cargill against all claims, damages, liabilities,
costs, suits, obligations, or penalties (including attorneys' fees) arising from
TAI's breach of or negligent administration or handling of the HTA Contracts.
ARTICLE IV
DISPOSITION OF THIRD PARTY GRAIN
4.1 ASSIGNMENT. On the Effective Date, Cargill anticipates having in storage
at the Leased Facilities certain quantities of grain belonging to third parties
(the "Cargill Third Party Grain"). The Cargill Third Party Grain is stored in
the Leased Facilities under warehouse receipts, storage receipts or scale
tickets ("Cargill Receipt Obligations"). On the Effective Date, Cargill shall
assign to TAI the Cargill Receipt Obligations and warrants that sufficient
quantity and quality of grain will remain in the Leased Facilities over and
above the Cargill Inventory (as defined in Section 5.1 herein) on the Effective
Date to satisfy the Cargill Receipt Obligations.
4.2 PRORATION. Cargill and TAI agree that storage charges due under the
Cargill Receipt Obligations shall be apportioned between them, Cargill to
receive all storage charges accrued up to the Effective Date, TAI to receive all
charges accruing thereafter, which charges shall be included on the P&L as
defined in Section 6.3 herein. Any prepaid storage or other charges shall be
prorated between Cargill and TAI as of the Effective Date. If TAI should receive
payment for storage charges to which Cargill is entitled, TAI shall promptly
forward such amounts to Cargill. Should it be necessary for either party to
execute an assignment to the other to collect such charges, it shall do so.
4.3 TAI THIRD PARTY GRAIN. On the Effective Date, TAI anticipates having in
storage at the TAI Facilities certain quantities of grain belonging to third
parties (the "TAI Third Party Grain"). The TAI Third Party Grain is stored in
the TAI Facilities under warehouse receipts, storage receipts or scale tickets
("TAI Receipt Obligations"). All storage charges due under the TAI Receipt
Obligations accrued on or after the Effective Date shall be included in the P&L.
Any prepaid storage or other charges shall be prorated accordingly as of the
Effective Date.
ARTICLE V
INVENTORY
5.1 LEASED FACILITIES. On the Effective Date, Cargill will have in storage
at the Leased Facilities inventories of grain (the "Cargill Inventory"). TAI
will purchase the Cargill Inventory at the FOB Toledo value less * on the
Effective Date (the "Inventory Price"). Prior to or on the Effective Date,
representatives of Cargill and TAI shall determine by weigh-up/measurement the
quantity and quality of the Cargill Inventory (and thereby the Cargill Third
Party Grain). Quality of grain will be at market scale of discount. The cost of
said weigh-up/measurement and grading shall be borne equally by Cargill and TAI.
Should the representatives of Cargill and TAI be unable to agree on the quantity
or quality of the Cargill Inventory or any portion thereof or the Third Party
Grain, the matter shall be resolved in accordance with Article XIV of this
Agreement. If the parties cannot mutually agree to the FOB Toledo value less *
such value shall be determined by an independent third party, mutually agreeable
to both parties.
*CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SEC
5.2 TAI FACILITIES. On the Effective Date, TAI will have in storage at the
TAI Facilities inventories of grain (the "TAI Inventory"). The parties shall
mutually agree to a FOB Toledo value less * of the TAI Inventory as of the
Effective Date, which amount shall be included on the P&L as defined in Section
6.3 herein. Prior to or on the Effective Date, representatives of Cargill and
TAI shall determine by weigh-up/measurement the quantity and quality of the TAI
Inventory. Quality of grain will be at market scale of discount. The cost of
said weigh-up/measurement and grading shall be borne equally by Cargill and TAI,
of which TAI's respective cost shall not be included on the P&L. Should the
representatives of Cargill and TAI be unable to agree on the quantity or quality
of the TAI Inventory or any portion thereof, the matter shall be resolved in
accordance with Article XIV of this Agreement. If the parties cannot mutually
agree to the FOB Toledo value less * , such value shall be determined by an
independent third party, mutually agreeable to both parties .
ARTICLE VI
FINANCIAL MATTERS
6.1 EARNINGS THRESHOLD. -
(a) INITIAL TERM. With respect to the Initial Term, the parties hereby
establish a five-year cumulative earnings before long-term interest and income
tax ("EBIT") threshold of * * ( * ) (the "Threshold"). In the event that the
actual five-year cumulative EBIT of the Facilities is greater than the
Threshold, the amount over the Threshold shall be distributed equally between
the parties. If the actual five-year cumulative EBIT is below the Threshold,
Cargill shall pay TAI the difference between the Threshold and the actual
five-year cumulative EBIT, less all absorbed losses as described herein. TAI
shall absorb fifty percent (50%) of each individual year's loss where the EBIT
for the individual year is less than zero. In no event shall the sum of TAI's
absorbed losses exceed the total actual five-year cumulative EBIT shortfall
from the Threshold. If this Agreement is terminated before the expiration of
the Initial Term, or before the expiration of the then current term, the
Threshold shall be adjusted on a prorated basis. By way of example, if this
Agreement is terminated 3 years 3 months into the Initial Term, the Threshold
would be adjusted from * to * .
(b) SECOND TERM. With respect to the Second Term, and any subsequent
renewal terms, except as otherwise agreed in writing by the parties, the
parties hereby establish a five-year cumulative EBIT threshold of * ( * ) (the
"Second Term Threshold"). In the event that the actual five-year cumulative
EBIT of the Facilities is greater than the Second Term Threshold, the amount
over the Second Term Threshold shall be distributed equally between the
parties. Unlike Section 6.1(a) above, Cargill shall not be obligated to pay TAI
any difference between the Second Term Threshold and the actual five-year
cumulative EBIT If the actual five-year cumulative EBIT is below the Second
Term Threshold; provided, however, that at the end of the Second Term, Cargill
will pay TAI 50% of any shortfall between the five-year cumulative EBIT and * ,
if any, up to a total of * ; by way of example, if the cumulative EBIT at the
end of the Second Term is * , and consequently there is a * shortfall ( * minus
* ), Cargill would pay 50% of the * shortfall up to a total of * , which would
be * in this example. If this Agreement is terminated before the expiration of
the Second Term, or before the expiration of the then current term, the Second
Term Threshold shall be adjusted on a prorated basis. By way of example, if
this Agreement is terminated 3 years 3 months into the Second Term, the Second
Term Threshold would be adjusted from * to * .
*CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SEC
6.2 SETTLEMENT. In order to reconcile the distributions to which each party
is entitled pursuant to Section 6.1 herein, the parties shall conduct interim
tentative settlements on an annual basis as of May 31. Such settlements shall be
based on interim annual thresholds of (a) * , * , * , * , and * for years one
through five of this Agreement (i.e., the Initial Term), respectively, and (b) *
, * , * , * , and * for years six through ten of this Agreement (i.e., the
Second Term), respectively. Annual settlement payments shall be treated as a
purchase price adjustment to all grain sold and purchased pursuant to Section
2.3 of this Agreement.
By way of example, settlement would occur in the following manner:
Example One (applying the provisions of 6.1(a) relating to the Initial Term)
YEAR ONE: P&L states a profit of * . The interim threshold for year one is *
.. The parties split equally the excess over the interim threshold, which excess
is * in this example; therefore, TAI pays Cargill * . Accordingly, at end of
year one, TAI's account is * , and Cargill's account is * .
YEAR TWO: P&L states a loss of * . The interim threshold for year two is * .
Because of the * loss, TAI's account is at * , and consequently requires an
additional * * to match the interim threshold. However, because TAI and Cargill
absorb the * loss on an equal basis, Cargill pays TAI * . Accordingly, at end of
year two, TAI's account is * , and Cargill's account is negative * .
YEAR THREE: P&L states a profit of * . The interim threshold for year three
is $ * * . TAI's account is now at * , while Cargill's account is at negative *
.. In order to reconcile the accounts to the interim threshold, TAI pays Cargill
* . Accordingly, at end of year three, TAI's account is * , and Cargill's
account is * .
YEAR FOUR: P&L states a loss of * . The interim threshold is * . Because of
the * * loss, TAI's account is now at * , and consequently requires an
additional * to match the interim threshold. However, because TAI and Cargill
absorb the cumulative losses on an equal basis, Cargill pays TAI * ( * ) less *
in cumulative losses). Accordingly, at end of year four, TAI's account is * ,
and Cargill's account is negative * .
YEAR FIVE: P&L states a profit of * . The final threshold is * . TAI's
account is now at * , while Cargill's account is at negative * . In order to
reconcile the accounts to the final threshold, TAI pays Cargill * . Accordingly,
at end of year five, TAI's account is * , and Cargill's account is negative * .
*CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SEC
Example Two (applying the provisions of 6.1(a) relating to the Initial Term)
(All dollar figures are in millions)
YEAR ACTUAL INTERMIN PAYMENT ▇▇▇▇▇▇▇ ▇▇▇
---- EARNINGS THRESHOLD TO/(FROM) CUMULATIVE CUMULATIVE
-------- --------- CARGILL ACCOUNT ACCOUNT
------- ------- -------
1 * * * * *
2 * * * * *
3 * * * * *
4 * * * * *
5 * * * * *
6.3 PROFIT AND LOSS STATEMENT. TAI shall include the Leased Facilities in
TAI's profit and loss statement currently dedicated by TAI to the TAI Facilities
(the "P&L").
The P&L SHALL INCLUDE the following items:
(a) Rent paid by TAI pursuant to the Lease Agreement for the Leased
Facilities;
(b) TAI's purchases of the Toledo Grain;
(c) Sales of the Toledo Grain by TAI to Cargill;
(d) Certain allocated administrative and general operating costs
mutually agreeable to the parties, including identified and
quantified costs that relate specifically to the parties'
origination, operation, and merchandising functions under this
Agreement, including without limitation an annual fee in the amount
of * to be paid to Cargill for each year during the Second Term;
(e) Storage and other charges for Cargill Third Party Grain and TAI
Third Party Grain pursuant to Article IV herein accrued on or after
the Effective Date;
(f) The market value of the TAI Inventory as of the Effective Date;
(g) Depreciation of capital improvements made in accordance with Section
6.4 of this Agreement; and
(h) Such other items as may be mutually agreed by the parties.
*CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SEC
The P&L SHALL NOT INCLUDE the following items:
(a) Claims, damages, liabilities, costs, expenses, suits, obligations or
penalties (including attorneys' fees and costs of defense) of any
and every nature whatsoever arising out of or in any manner
connected with any grossly negligent act or omission by TAI or
Cargill, including without limitation TAI's grossly negligent
operation of the Facilities;
(b) Claims, damages, liabilities, costs, expenses, suits, obligations or
penalties (including attorneys' fees and costs of defense) of any
and every nature whatsoever arising out of or in any manner
connected with TAI's or Cargill's failure or alleged failure to
comply with all applicable laws, rules, regulations, orders and
decrees of the United States and the State of Ohio;
(c) Claims, damages, liabilities, costs, expenses, suits, obligations or
penalties (including attorneys' fees and costs of defense) of any
and every nature whatsoever arising out of or in any manner
connected with TAI's or Cargill's failure or alleged failure to
comply materially with its contractual obligations;
(d) Claims, damages, liabilities, costs, expenses, suits, obligations or
penalties (including attorneys' fees and costs of defense) of any
and every nature whatsoever arising out of or in any manner
connected with any environmental condition at the Facilities to the
extent that such environmental condition arises from, relates to or
results from (i) the use, operation or ownership of the Facilities
and the conduct of business therein, thereon, thereabout or with
regard thereto at all times prior to the Effective Date, (ii) any
deviation by TAI from standard business practices, or (iii) any
violation of the law.
(e) Claims, damages, liabilities, costs, expenses, suits, obligations or
penalties (including attorneys' fees and costs of defense) of any
and every nature whatsoever arising out of or in any manner
connected with TAI's or Cargill's deviations from grain industry
standards;
(f) Such other items as may be mutually agreed by the parties.
6.4 CAPITAL IMPROVEMENTS.
(a) Each party is entering into this Agreement with a solid trust in the
respective condition of the other's facilities, as well as the past operating
standards that each party employed in the operation of each party's respective
facilities. The Lease Agreement represents a strong vote of confidence by
Cargill in TAI's ability to operate the Cargill facilities in conformance with
high standards for safety, maintenance and recapitalization.
In defining the guidelines for capital spending and depreciation
recovery, neither party should benefit at the expense of the other party. While
each party retains absolute accountability for its asset investment, Cargill is
entrusting TAI with oversight responsibility as the Lessee, to manage the
Cargill assets with the same degree of vigilance as extended to their own
assets, and in accordance with the Lease Agreement.
TAI will annually assemble a Capital Spending Plan for each of the
Facilities. The Capital Spending Plan ("Plan") shall be submitted to Cargill for
review in advance of the June-July fiscal year. Review and approval by each
party is required. This will establish the basic framework for capital spending
against which each party can measure and decide on appropriate deviations from
the Plan.
(b) MINOR CAPITAL SPENDING:
"Minor Capital Spending" is defined as any project with a total
project cost of less than * but greater than * and considered an acceptable and
appropriate expenditure to be capitalized under the Internal Revenue Tax Code.
"Profit Maintaining Minor Capital Spending" is defined as any capital
expenditures necessary to maintain the continued operating standards and
serviceability of the Facilities.
"Profit Adding Minor Capital Spending" is defined as any capital
expenditures that add minor amounts of revenue and profit to the P&L.
Minor Capital Spending may also include expenditures for safety and/or
environmental facility upgrades in order to comply with state and federal
regulations and/or best operating standards and practices.
(c) MAJOR CAPITAL SPENDING:
"Major Capital Spending" is defined as any project with a total cost
equal to or greater than * .
"Profit Maintaining Major Capital Spending" is defined as any capital
expenditure equal to or in excess of * that serves to return the facility to its
original operating level of serviceability and does not increase revenues and
operating net income by a marked degree. Profit Maintaining Major Capital
Spending may also include expenditures on Safety and Environmental projects
required by State or Federal law or best operating practices.
"Profit Adding Major Capital Spending" is defined as any capital
expenditure equal to or in excess of * that will increase operating revenues,
net income and EBIT by a marked degree.
(d) RULES AND GUIDELINES:
(i) TAI shall be required to pay for all Capital Spending related
to or affecting the Facilities.
(ii) TAI has authority to approve all Minor Capital Spending in the
Plan less than * per project, so long as such expenditures are
consistent with the Plan.
(iii) Proposed expenditures of * per project or more related to or
affecting the Cargill Facilities will be submitted to Cargill
for prior approval, including all expenditures within the
Plan.
(iv) TAI's capital spending approval procedures will govern TAI's
decision-making process for Minor Capital Spending.
*CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SEC
(v) Substitutions within the framework of the Plan will be
allowed for expenditures less than * . Substituted
expenditures of amounts greater than * will require the
approval of the owner of the affected Facility.
(vi) All Major Capital Spending in excess of * per project will
require prior approval by both parties regardless of the
affected Facility.
(vii) All capital spending in excess of or outside of the Plan will
require prior approval by both parties.
(viii) Upon termination of the Lease Agreement, Cargill shall
purchase from TAI, and TAI shall sell to Cargill, all
alterations, additions and improvements to the Cargill
Facilities at the then current book value of such
alterations, additions and improvements, consistent with
Section 7(b) of the Lease Agreement.
6.5 RIGHT TO AUDIT DOCUMENTS. Both parties shall have the right at any time
and upon reasonable notice to the other party to audit the other party's
financial records relating to and generated pursuant to this Agreement. Such
review shall be subject, however, to the Guidelines (as defined in Section 8.1
herein) provided to the parties by joint legal counsel.
6.6 EFFECT OF DEFICIENCY ON THRESHOLD. In the event that TAI's capability to
maximize origination pursuant to this Agreement is materially restricted,
limited or in any way deficient in any respect as a result of a force majeure,
any grossly negligent act or omission by TAI, or by any significant event that
substantially interferes with all or part of the normal business activities of
the Facilities, which event could not reasonably be foreseen by the parties
(including by way of example, but not limited to, an explosion, a shutdown of
the Great Lakes market, or a facility-related weather disaster), the Threshold
shall be renegotiated to reflect such deficiency. The parties shall assign a
percentage to the loss in capability, and the Threshold shall be reduced
accordingly by such percentage for the duration of the deficiency. If the
parties are unable to agree on a percentage loss in capability, the matter will
be resolved pursuant to Article XIV herein.
ARTICLE VII
RELATIONSHIP BETWEEN THE PARTIES
7.1 TAI shall conduct its business under this Agreement in the purchase and
sale to Cargill of the Toledo Grain as a principal for its own account and at
its own expense and risk, subject to the terms and conditions of this Agreement.
Cargill shall conduct its business under this Agreement in the purchase from TAI
and the merchandising of the Toledo Grain as a principal for its own account and
at its own expense and risk, subject to the terms and conditions of this
Agreement
7.2 TAI shall have no power to make, and shall not make, any representations
on behalf of Cargill. TAI warrants that it will not act or attempt to act as
agent for or representative of Cargill, and will not create or attempt to create
any obligation binding upon Cargill, or assert or compromise or attempt to
assert or compromise any right of Cargill. Cargill shall have no power to make,
and shall not make, any representations on behalf of TAI. Cargill warrants that
it will not act or attempt to act as agent for or representative of TAI, and
will not create or attempt to create any obligation binding upon TAI, or assert
or compromise or attempt to assert or compromise any right of TAI.
*CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SEC
ARTICLE VIII
COMMUNICATION
8.1 GENERAL. Prior to the Effective Date, joint legal counsel for the
parties shall furnish the parties with specific guidelines relating to future
communications between the parties and each party's right to audit the other
party's financial records pursuant to Section 6.5 herein (the "Guidelines"). The
parties shall strictly follow the Guidelines in all future communications
between the parties and in conducting all audits pursuant to Section 6.5 herein.
The parties acknowledge that the communication guidelines currently in effect
are entitled 'Cargill and The Andersons Communication Guidelines for the
Business Alliance at Toledo/Maumee, Ohio,' which were distributed to the parties
by their respective legal counsel in April 15, 2002.
8.2 ADVISORY PANEL. An advisory panel consisting of approximately three (3)
representatives, unless the parties otherwise mutually agree, from each party
(the "Panel") shall be established as soon as reasonably practicable after
commencement of the Initial Term. The Panel shall meet on a quarterly basis,
unless otherwise agreed, to address issues relating to the origination and
merchandising of the Toledo Grain; provided, however, that the parties shall
strictly follow the Guidelines in all communications between representatives of
the Panel.
ARTICLE IX
CONFIDENTIAL INFORMATION
9.1 Cargill and TAI hereby agree that they each will keep the terms and
conditions of this Agreement confidential and proprietary, will only disclose
the contents of this Agreement with those of their employees and others who are
on a need-to-know basis, and will ensure that reasonable procedures are
implemented to maintain the confidential nature of this Agreement with care
equal to that given to confidential information of its own respective business,
but in no event less than a reasonable degree of care. Cargill and TAI assume
liability for any breach of this Article by it or any of its employees, agents
or representatives. The obligations set forth in this Article shall survive any
termination of this Agreement.
9.2 TAI shall keep confidential any Cargill information (whether business
marketing, technical or other data) known to it to be, or designated by Cargill
as being, confidential ("Confidential Information"), and shall use such care as
TAI would use in maintaining the confidentiality of its own confidential
information. TAI shall use such information only to the extent needed and for
the purpose of performing its obligations under this Agreement. TAI's
obligations under this Section 9.02 shall survive any termination of this
Agreement, except that the obligation of confidentiality under this Section 9.02
shall not apply:
(a) to information known to TAI, as evidenced by TAI, at the time of
TAI's receipt thereof from Cargill; or
(b) to information received by TAI from a third party under no
obligation of confidentiality to Cargill.
9.3 Cargill shall keep confidential any TAI information (whether business
marketing, technical or other data) known to it to be, or designated by TAI as
being, confidential ("Confidential Information"), and shall use such care as
Cargill would use in maintaining the confidentiality of its own confidential
information. Cargill shall use such information only to the extent needed and
for the purpose of performing its obligations under this Agreement. Cargill's
obligations under this Section 9.03 shall survive any termination of this
Agreement, except that the obligation of confidentiality under this Section 9.03
shall not apply:
(a) to information known to Cargill, as evidenced by Cargill, at the
time of Cargill's receipt thereof from TAI; or
(b) to information received by Cargill from a third party under no
obligation of confidentiality to TAI.
ARTICLE X
EMPLOYMENT MATTERS
10.1 Any persons who are employed by Cargill at the Leased Facilities
immediately prior to the Effective Date and who are terminated in anticipation
of this Agreement shall be considered for employment by TAI. It is mutually
understood and agreed, however, that TAI is under no obligation to hire and
provide employment for any such employees.
10.2 Cargill has terminated any employment relationship it previously had
with certain of its employees at the Leased Facilities. Cargill shall have no
further supervisory function whatsoever with respect to any of such former
employees at the Leased Facilities. TAI has sole authority to operate the Leased
Facilities for the purposes of the relationship contemplated in this Agreement.
Accordingly, TAI shall be solely responsible for the direction of its agents,
servants and employees, including all former employees of Cargill hired by TAI.
In particular and without limitation, TAI shall be solely responsible for its
employees' selection, hiring, firing, supervision, wages and benefits, hours,
performance standards, training and discipline. TAI shall also be solely
responsible for compliance with all applicable local, state and federal laws and
regulatory requirements relating to its employees.
10.3 Notwithstanding the foregoing, if TAI hires any Cargill employees, TAI
shall recognize past service of such employees for vacation and sick pay
eligibility purposes only. TAI will also waive the one year waiting period for
participation in its RSIP (401K Plan). Further, such employees shall be subject
to the applicable vesting schedules under the pension benefit plans, based on
the employment date of such employees with TAI. Health insurance coverage will
commence on the date of hire of such employees as TAI employees, and there will
be no exclusions for pre-existing conditions. Such former employees'
participation in Cargill's employee welfare, pension, fringe benefit and profit
sharing plans shall terminate on the Effective Date.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
11.1 REPRESENTATIONS AND WARRANTIES OF CARGILL. Cargill represents and
warrants as follows to TAI, such representations and warranties to be true and
correct on the Effective Date, that:
(a) ORGANIZATION, QUALIFICATION AND GOOD STANDING. Cargill is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is registered to do business in and is in good
standing under the laws of the State of Ohio. All corporate proceedings required
to be taken by Cargill to authorize the execution, delivery and consummation of
this Agreement have been duly and validly taken and will be in full force and
effect on the Effective Date.
(b) AUTHORITY; BINDING EFFECT. Cargill has full power and authority to
execute and perform this Agreement, and this Agreement constitutes a legal,
valid and binding obligation of Cargill enforceable against Cargill in
accordance with its terms, subject to applicable bankruptcy or insolvency laws.
(c) COMPLIANCE WITH OTHER INSTRUMENTS. Cargill is neither a party to,
nor otherwise subject to, any agreement or other instrument which would prevent
or prohibit Cargill from or require any consent to, the execution or
consummation hereof.
11.2 SURVIVAL OF WARRANTIES AND INDEMNIFICATION. All the warranties and
representations given by Cargill in Section 11.1 herein or elsewhere in this
Agreement, all of which are relied upon by the TAI, shall survive the Effective
Date hereof. Cargill agrees to indemnify and hold TAI harmless from and against
any loss, damage, claim, liability, cost, expense or penalty (including
reasonable attorneys' fees) which TAI may incur or sustain after the Effective
Date resulting from or arising out of any breach of any of said representations
and warranties.
11.3 REPRESENTATIONS AND WARRANTIES OF TAI. TAI represents and warrants as
follows to Cargill, such representations and warranties to be true and correct
on the Effective Date, that:
(a) ORGANIZATION, QUALIFICATION AND GOOD STANDING. TAI is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Ohio and is registered to do business in and is in good standing under
the laws of the State of Ohio. All corporate proceedings required to be taken by
TAI to authorize the execution, delivery and consummation of this Agreement have
been duly and validly taken and will be in full force and effect on the
Effective Date.
(b) AUTHORITY; BINDING EFFECT. TAI has full power and authority to
execute and perform this Agreement, and this Agreement constitutes a legal,
valid and binding obligation of TAI enforceable against TAI in accordance with
its terms, subject to applicable bankruptcy or insolvency laws.
(c) COMPLIANCE WITH OTHER INSTRUMENTS. TAI is neither a party to, nor
otherwise subject to, any agreement or other instrument which would prevent or
prohibit TAI from or require any consent to, the execution or consummation
hereof.
(d) CORPORATE DOCUMENTS. TAI has provided Cargill with all corporate
documents evidencing the provisions that TAI has in place which limit potential
changes in control of TAI.
11.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATION. All the warranties and
representations given by TAI in Section 11.3 herein or elsewhere in this
Agreement, all of which are relied upon by the Cargill, shall survive the
Effective Date hereof. TAI agrees to indemnify and hold Cargill harmless from
and against any loss, damage, claim, liability, cost, expense or penalty
(including reasonable attorneys' fees) which Cargill may incur or sustain after
the Effective Date resulting from or arising out of any breach of any of said
representations and warranties.
ARTICLE XII
INDEMNIFICATION
12.1 INDEMNIFICATION BY CARGILL. Cargill shall defend, exonerate, indemnify
and hold harmless TAI, its officers, directors, employees and agents from and
against all claims, damages, liabilities, costs, and expenses, suits,
obligations or penalties (including attorneys' fees and costs of defense) of any
and every nature whatsoever arising out of or in any manner connected with (a)
any breach of this Agreement by Cargill; and (b) the operation or ownership of
the Leased Facilities and the conduct of its business therein, thereon,
thereabout or with regard thereto at all times prior to the Effective Date,
including without limiting the generality of the foregoing all environmental
liabilities.
12.2 INDEMNIFICATION BY TAI. TAI shall defend, exonerate, indemnify and hold
harmless Cargill, its officers, directors, employees and agents from and against
all claims, damages, liabilities, costs, expenses, suits, obligations or
penalties (including attorneys' fees and costs of defense) of any and
every nature whatsoever arising out of or in any manner connected with (a) any
breach of this Agreement by TAI; (b) the operation or ownership of the TAI
Facilities and the conduct of business therein, thereon, thereabout or with
regard thereto at all times prior to the Effective Date, including without
limiting the generality of the foregoing all environmental liabilities; (c) the
grossly negligent operation or ownership of the TAI Facilities and the grossly
negligent conduct of business therein, thereon, thereabout or with regard
thereto at all times on and after the Effective Date, including without limiting
the generality of the foregoing all environmental liabilities; (d) the grossly
negligent use, operation or occupancy of the Leased Facilities and the grossly
negligent conduct of business therein, thereon, thereabout or with regard
thereto at all times on and after the Effective Date, including without limiting
the generality of the foregoing all environmental liabilities; and (e) any
grossly negligent act or omission or willful misconduct by TAI.
Notwithstanding the foregoing or anything to the contrary in the Lease
Agreement, the parties intend that the P&L shall include all customary items,
except as otherwise provided by Section 6.3 of this Agreement. TAI's failure to
follow, use, adopt, implement or recognize standard business practices,
including, without limitation, standard business practices of a grain handling
business, may be a factor in determining whether TAI is grossly negligent for
purposes of this Agreement; provided, however, that the mere fact that TAI is
found liable for negligence against a third party shall not be determinative in
and of itself as to whether TAI is grossly negligent for purposes of this
Agreement for the same conduct giving rise to TAI's negligence against such
third party.
12.3 NOTICE. Each party agrees to promptly give the other party notice of
any claim or indemnification arising under this Section.
12.4 SURVIVAL. The obligations of each party under the foregoing
indemnification provisions shall survive the termination of this Agreement.
ARTICLE XIII
FORCE MAJEURE
13.1 The obligations of each party under this Agreement may be delayed or
suspended in the event of Act of God, war, riot, fire, explosion, accident,
flood, sabotage, inability to obtain fuel, power, raw material, labor,
containers or transportation, facilities, governmental laws, regulations, order
or action, breakage or failure of machinery or apparatus, national defense
requirements or any other event beyond the reasonable control of such party or
in the event of labor trouble, strike, lockout or injunction (whether or not
such labor event is within the reasonable control of such party), any of which
events prevents the sale, purchase or merchandising of the Toledo Grain. For
purposes of this Section 13.1, ordinary variations in weather conditions,
including without limitation prolonged periods of dryness or wetness, shall not
be considered an event of force majeure. If, because of any such event, either
party is unable to meet its obligations in part or in whole under this
Agreement, the obligations of the affected party shall be abated during the
period in which its performance is prevented by the event of force majeure upon
giving prompt notice of such event to the other party. The other party's
performance shall likewise be abated during such period, but this Agreement
shall otherwise remain unaffected.
ARTICLE XIV
DISPUTE RESOLUTION
14.1 In the event a dispute arises under this Agreement that cannot be
resolved by those with direct responsibility for the matter in dispute, such
dispute shall be resolved by way of the following process:
(a) The Panel shall meet to discuss the basis for the dispute and shall
use its best efforts to reach a reasonable resolution to the dispute.
(b) If the Panel fails to resolve the dispute within 10 days of its
receipt of written notice of the dispute, the matter in dispute shall be brought
to the attention of senior management at Cargill and TAI. Said management shall
meet in person to negotiate a good faith resolution to the dispute within 20
days of their receipt of written notice of the dispute.
(c) If such negotiations are unsuccessful, the matter may promptly be
submitted by either party to an individual or organization recognized in the
field of alternate dispute resolution as may be agreed upon by the parties
(collectively referred to as the "Mediator"). The Mediator shall, within thirty
(30) days after its receipt of a party's request for assistance, recommend to
the parties, in writing, a procedure for non-binding mediation ("Mediation") for
resolving such matter. The Mediator's recommendation shall also set forth rules
for the recommended process including without limitation: (i) a schedule for the
exchange of documents and short narrative statements summarizing each party's
position on the matter; (ii) if appropriate in the Mediator's view, an expedited
discovery schedule; (iii) the format and location of the Mediation; and (iv) the
time period in which the Mediation is to be completed. The Mediator shall
conduct the Mediation.
(d) At the conclusion of the Mediation, the representatives shall meet
and attempt to resolve the matter. If the matter cannot be resolved within such
period as the Mediator deems reasonable (but not later than ninety (90) days
after the Mediator has issued its procedural recommendation for the Mediation),
the Mediator shall (upon request of either party) certify to the parties that
the matter is incapable of resolution through the Mediation process and the
matter shall, thereafter, promptly be submitted to and settled by arbitration in
accordance with the Commercial Arbitration Rules, then in effect, of the
American Arbitration Association ("AAA"), except to the extent modified herein.
The arbitration shall be held in Ohio. Judgment on the award rendered may be
entered in any court having jurisdiction thereof.
(e) Each party shall within thirty (30) days of receipt of notice that
the matter has been referred to arbitration, appoint one arbitrator and, within
thirty (30) days of the appointment of the last of such two arbitrators, the two
arbitrators shall appoint a third arbitrator. If either party or the two
arbitrators fail to timely appoint an arbitrator, the said arbitrator shall be
appointed by AAA. The arbitrators shall not be empowered to award punitive or
exemplary damages.
(f) Unless otherwise determined by the arbitration panel, the parties
shall bear their respective costs incurred in connection with the procedures
described in this Section, except that the parties shall share equally the fees
and expenses of any Mediation or arbitration.
(g) Notwithstanding any other provision of this Agreement, each party
shall still be entitled to access the courts to obtain appropriate injunctive
relief.
(h) During the pendency of any dispute resolution procedure pursuant to
this Section, the effectiveness of any notice of termination given pursuant to
this Agreement shall be suspended.
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.1 ASSIGNMENT. Neither Cargill nor TAI may assign this Agreement without
the prior written consent of the other party.
15.2 WAIVER. Failure by either party at any time to require performance by
the other party or to claim a breach of any provision of this Agreement will not
be construed as a waiver of any right accruing hereunder, nor will it affect any
subsequent breach or the effectiveness of this Agreement or any part hereof, or
prejudice either party as regards any subsequent action. A waiver of any right
accruing to either party pursuant to this Agreement shall not be effective
unless given in writing.
15.3 NOTICES. Whenever notice is required by the terms hereof, it shall be
given in writing by delivery in person, by recognized overnight delivery
service, or by certified or registered mail addressed to the other party at the
following address or such other address as a party shall designate by
appropriate notice:
If to Cargill: ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇
With a copy to: ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: AgHorizons Attorney
If to TAI or TAAG: The Andersons, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇
With a copy to: The Andersons, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
If notice is given by mail, it shall be effective three (3) days after mailing.
15.4 CONSTRUCTION OF TERMS OF AGREEMENT; MODIFICATION. The language in all
parts of this Agreement shall be constructed as a whole according to its fair
meaning and not strictly for or against any party hereto. Headings in this
Agreement are for convenience only and are not construed as a part of this
Agreement or in any defining, limiting or amplifying the provisions hereof. This
Agreement contains the entire agreement, and supersedes and replaces any prior
agreements (either written or oral), between the parties with respect to the
subject matter hereof and shall not be modified in any manner except by an
instrument in writing executed by the parties hereto. In the event any term,
covenant or condition herein contained is held to be invalid or void by any
court of competent jurisdiction, the invalidity of any such term, covenant or
condition shall in no way affect any other term, covenant or condition herein
contained.
15.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
successors and assigns of each of the parties hereto; provided, however, that
this Agreement shall not be assigned, transferred or sold by either party
without the prior written consent.
15.6 COMPLIANCE WITH LAWS. Cargill and TAI each agrees to perform its
obligations under this Agreement in material compliance with all applicable
laws, rules, regulations, orders and decrees of the United States and the State
of Ohio.
15.7 NO THIRD PARTY BENEFICIARY. No person or entity shall be deemed to be a
third party beneficiary of this Agreement and nothing expressed or implied in
this Agreement shall be deemed to confer upon any person or entity, or any heir,
successor, assign or legal representative thereof, any rights or remedies of any
nature or kind whatsoever, including without limitation any right to contract or
any right to employment or continued employment.
15.8 GOVERNING LAW. This Agreement is to be governed by, and construed in
accordance with, the laws of the State of Ohio, without reference to its
conflicts of law rules.
15.9 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ and The Andersons, Inc. have
executed this Agreement effective the day and year first above written.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ THE ANDERSONS, INC.
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇ By: /s/▇▇▇ ▇▇▇▇
-------------------------------- ------------------------------------
Printed Name: ▇▇▇▇▇▇ ▇. ▇▇▇ Printed Name: ▇▇▇ ▇▇▇▇
-------------------------- ----------------------
Its: President, Cargill AgHorizons Its: President, Grain Division
----------------------------- ---------------------------
THE ANDERSONS AGRICULTURE GROUP, L.P.
BY: THE ANDERSONS, INC., ITS SOLE GENERAL PARTNER
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Printed Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Its: President and CEO
-----------------------------------