MEMORANDUM OF AGREEMENT
This Memorandum of Agreement, dated as of May 21, 1997, sets forth
the undertakings and commitments of ▇▇▇▇▇ ▇▇▇▇ Pet Food Company, Inc. ("▇▇▇▇▇
▇▇▇▇"), ▇▇▇▇▇ ▇▇▇▇ Pet Food Acquisition Co. ("Subsidiary") and Feed-Rite (US)
Animal Feeds, Inc. ("Feed-Rite") which have been made to facilitate the closing
of the transactions contemplated by the Asset Purchase Agreement, dated April
25, 1997, among ▇▇▇▇▇ ▇▇▇▇, Subsidiary and Feed-Rite (the "Agreement").
For good and valuable consideration, ▇▇▇▇▇ ▇▇▇▇ and Feed-Rite agree
as follows:
1. California Sales Tax. Based on the parties' mutual determinations
that the purchase by Feed-Rite of the assets of ▇▇▇▇▇ ▇▇▇▇'▇ Stockton,
California animal feed facility (the "Assets") may be exempt from the imposition
of California sales tax by reason of the "occasional sale" exemption set forth
in the California Sales Tax Act, Feed-Rite and ▇▇▇▇▇ ▇▇▇▇ do not intend to file
a Sales Tax Report with the State of California relative to the sale of the
Assets. If it is subsequently determined that the sale of the Assets to
Feed-Rite is subject, in whole or in part, to sales tax imposed by the State of
California, or any subdivision thereof, ▇▇▇▇▇ ▇▇▇▇ and Feed-Rite will each pay
one-half of any such sales tax liability. This commitment shall continue in full
force and effect until such time as the collection of sales taxes is precluded
by the applicable statute of limitations and shall not be subject to any
indemnification limitations imposed by Article 11 of the Agreement.
2. Ohio Transportation Equipment. ▇▇▇▇▇ ▇▇▇▇ represents to Feed-Rite
that (i) the motor vehicles and other transportation equipment listed on the
attached exhibit are owned by PBH Transportation, Inc., a Minnesota corporation
("PBH"), (ii) all of the outstanding shares of capital stock of PBH are owned by
▇▇▇▇▇▇▇ Milling Company; (iii) no options, warrants or other rights to acquire
any equity interests in PBH are outstanding, and (iv) PBH has no liabilities or
other obligations of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no condition, situation or
set of circumstances which could reasonably be expected to result in such a
liability, other than liabilities that would be Assumed Liabilities, as defined
in the Agreement. At the Closing, ▇▇▇▇▇ ▇▇▇▇ will assign and transfer to
Feed-Rite all of the outstanding shares of capital stock of PBH and such shares
shall constitute Transferred Assets for all purposes of the Agreement.
▇▇▇▇▇ ▇▇▇▇ shall indemnify Feed-Rite and its successors and assigns,
against any Damages incurred by Feed-Rite which are caused by or arise out of
any breach of any representation or warranty of ▇▇▇▇▇ ▇▇▇▇ set forth in this
Section 2. This indemnification commitment shall not be subject to any
indemnification limitations imposed by Article 11 of the Agreement.
For purposes of this Section 2, the terms "Damages" and
"Liabilities" shall have the meanings ascribed to them in the Agreement.
3. Alexandria, Minnesota Leased Facilities. Feed-Rite hereby waives
its right under Section 8.4 of the Agreement to require ▇▇▇▇▇ ▇▇▇▇ to deliver to
Feed-Rite, prior to the Closing Date, assignments of (and Landlord's Consents
to) the two separate real estate leases (the "Leases") with the Soo Line
Railroad (the "Railroad") which constitute Material Contracts under the
Agreement, subject to the following terms and conditions:
(a) ▇▇▇▇▇ ▇▇▇▇ will make the properties and facilities subject to
the Leases (the "Properties") available to Feed-Rite for use in the operation of
the Business subsequent to the Closing Date without any lease payments (other
than reimbursement of lease payments owing by ▇▇▇▇▇ ▇▇▇▇ to the Railroad).
(b) Feed-Rite shall use commercially reasonable efforts to enter
into new lease agreements with the Railroad for the Properties prior to July 30,
1997, on substantially the same terms and conditions as are set forth in the
Leases. ▇▇▇▇▇ ▇▇▇▇ will cooperate with Feed-Rite in its efforts to obtain new
lease agreements for the Properties.
(c) In the event that (i) Feed-Rite is not able to enter into new
lease agreements for the Properties that are consistent with the Leases, and
(ii) the Railroad terminates the Leases and forces Feed-Rite to discontinue its
Business operations on the Properties, ▇▇▇▇▇ ▇▇▇▇ shall reimburse Feed-Rite for
the costs incurred by Feed-Rite in dismantling and moving the personal
properties used in the operation of the Business on the Properties to another
location and installing them at the new location.
4. ConAgra Feed Agreement. ▇▇▇▇▇ ▇▇▇▇ acknowledges that it has not
obtained and delivered to Feed-Rite (i) an assignment of its rights under a Feed
Agreement, dated March 28, 1994 (the "Feed Agreement") between ConAgra, Inc.
("ConAgra") and ▇▇▇▇▇▇▇ Milling Company (the "Assignment"), or (ii) the consent
of ConAgra to such an assignment (the "Consent"). Feed-Rite hereby waives its
right under Section 8.4 of the Agreement to receive the Assignment and the
Consent from ▇▇▇▇▇ ▇▇▇▇ prior to the Closing, subject to the following terms and
conditions:
(a) Subsequent to the Closing, Feed-Rite shall use reasonable
efforts to attempt to secure the Consent from ConAgra, but shall not be required
to incur any out-of-pocket expenses in making such efforts.
(b) If Feed-Rite is successful in obtaining the Consent, ▇▇▇▇▇ ▇▇▇▇
shall execute and deliver the Assignment to Feed-Rite.
(c) Pending receipt of the Consent and as contemplated by Section
3.3 of the Agreement, ▇▇▇▇▇ ▇▇▇▇ shall implement such arrangements for the
benefit of Feed-Rite as shall provide for Feed-Rite the benefits that would
otherwise be available to Feed-Rite under the Feed Agreement, and Feed-Rite
shall cooperate with ▇▇▇▇▇ ▇▇▇▇ in implementing such arrangements and in
otherwise enabling ▇▇▇▇▇ ▇▇▇▇ to satisfy its obligations under the Feed
Agreement.
- 2 -
5. Shipshewana Storm Damage. ▇▇▇▇▇ ▇▇▇▇ and Feed-Rite acknowledge
that the Shipshewana, Indiana animal feed plant suffered storm damage to its
office and production facilities on May 18, 1997, and that the extent of that
damage and the costs of necessary repairs and replacement have not yet been
determined. To enable the parties to proceed with the closing on a timely basis,
Feed-Rite shall withhold $100,000 of the aggregate purchase price of the
Transferred Assets and shall make payment of such withheld amount to ▇▇▇▇▇ ▇▇▇▇
after all repairs to the facility and/or replacement of damaged assets has been
completed. It is the intention of ▇▇▇▇▇ ▇▇▇▇ and Feed-Rite that the Shipshewana
facilities will be restored to the conditions they were in prior to suffering
such storm damage without cost to Feed-Rite and that any insurance claim
proceeds not used in repairing and/or replacing such facilities shall be
retained by ▇▇▇▇▇ ▇▇▇▇. Feed-Rite and ▇▇▇▇▇ ▇▇▇▇ will cooperate in effecting the
repairs to such facilities and replacement of any damaged assets.
IN WITNESS WHEREOF, this Memorandum of Agreement has been executed
by ▇▇▇▇▇ ▇▇▇▇, Feed-Rite and Subsidiary as of the date set forth in the first
paragraph.
▇▇▇▇▇ ▇▇▇▇ PET FOOD COMPANY, INC.
By /s/ ▇▇▇ ▇▇▇▇▇
----------------------------------------
Name: ▇▇▇ ▇▇▇▇▇
Title: Executive Vice President
▇▇▇▇▇ ▇▇▇▇ PET FOOD ACQUISITION CO.
By /s/ ▇▇▇ ▇▇▇▇▇
----------------------------------------
Name: ▇▇▇ ▇▇▇▇▇
Title: Executive Vice President
FEED-RITE (US) ANIMAL FEEDS, INC.
By /s/ M.E. ▇▇▇▇▇▇▇
----------------------------------------
Name: M.E. ▇▇▇▇▇▇▇
Title: President
- 3 -
SCHEDULE A
FA280 DATE 05/13/97 COMPANY 20 -- ▇▇▇▇▇▇▇ MILLING COMPANY
TIME 11:18:27 FIXED ASSET -- ASSET STATUS REPORT
PROCESS LEVEL : 20177 -- ▇▇▇▇▇▇▇ MILLING COMPANY
ASSET TYPE/SUBTYPE : AUTOS /
ASSET COMP ASSET- IN-SERV ASSET REM DEPR SALVAGE ASSET BOOK CURRENT PER YEAR TO DATE ASSET TO DATE
NUMBER NBR STATUS DATE LIFE LIFE METH VALUE COST (BASIS) VALUE DEPRECIATION DEPRECIATION DEPRECIATION
86090 -000 A QTY: 1
1986 CHEVY 3/4 TON PICKUP
*BOOK BASIS 03/02/92 48 0.0 STL 0.00 3000.00 0.00 0.00 0.00 3000.00
*** ASSET STATUS ACTIVE TOTALS
*BOOK BASIS 0.00 3000.00 0.00 0.00 0.00 3000.00
*** ASSET TYPE AUTOS TOTALS
*BOOK BASIS 0.00 3000.00 0.00 0.00 0.00 3000.00
ASSET TYPE/SUBTYPE : HNDLG /
140804 -000 A QTY: 1
#804701 1990 INTL TRACTOR
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140876 -000 A QTY: 1
#537 VAN TRAILER
*BOOK BASIS 06/01/94 72 37.0 STL 0.00 5500.00 2826.38 0.00 916.67 2673.62
140877 -000 A QTY: 1
#527 VAN TRAILER
*BOOK BASIS 06/01/94 72 37.0 STL 0.00 5500.00 2826.38 0.00 916.67 2673.62
140878 -000 A QTY: 1
#124 CONVERTIBLE ▇▇▇▇▇▇
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140887 -000 A QTY: 1
#159 1994 PACER B/B TRAILER
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140895 -000 A QTY: 1
1989 GMC 7000 YARD TRK 2 AXLE
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140910 -000 A QTY: 1
#163 1996 ▇▇▇▇▇▇ B/B TRAILER
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40035 -000 A QTY: 1
▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ VAN
*BOOK BASIS 03/02/92 48 0.0 STL 0.00 500.00 0.00 0.00 0.00 500.00
FA280 DATE 05/13/97 COMPANY 20 -- ▇▇▇▇▇▇▇ MILLING COMPANY PAGE 2
TIME 11:18:27 FIXED ASSET -- ASSET STATUS REPORT
PROCESS LEVEL : 20177 -- ▇▇▇▇▇▇▇ MILLING COMPANY
ASSET TYPE/SUBTYPE : HNDLG /
ASSET COMP ASSET- IN-SERV ASSET REM DEPR SALVAGE ASSET BOOK CURRENT PER YEAR TO DATE ASSET TO DATE
NUMBER NBR STATUS DATE LIFE LIFE METH VALUE COST (BASIS) VALUE DEPRECIATION DEPRECIATION DEPRECIATION
40039 -000 A QTY: 1
▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ TRAILER
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 9000.00 0.00 0.00 0.00 9000.00
40069 -000 A QTY: 1
UNIT 69 83 ▇▇▇▇▇▇▇▇▇ TRAILER
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40120 -000 A QTY: 1
UNIT 120 1989 ▇▇▇▇▇ VAN
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40121 -000 A QTY: 1
UNIT 120 1989 ▇▇▇▇▇ VAN
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 12000.00 0.00 0.00 0.00 12000.00
40122 -000 A QTY: 1
#122-1988 ▇▇▇▇▇▇ ▇▇▇▇▇▇ TRLR
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40123 -000 A QTY: 1
UNIT 123 1989 ▇▇▇▇▇▇ TRAILER
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40127 -000 A QTY: 1
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40128 -000 A QTY: 1
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40156 -000 A QTY: 1
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40160 -000 A QTY: 1
#160 1984 ▇▇▇▇▇▇▇▇▇ TRAILER
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40162 -000 A QTY: 1
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FA280 DATE 05/13/97 COMPANY 20 -- ▇▇▇▇▇▇▇ MILLING COMPANY PAGE 3
TIME 11:18:27 FIXED ASSET -- ASSET STATUS REPORT
PROCESS LEVEL : 20177 -- ▇▇▇▇▇▇▇ MILLING COMPANY
ASSET TYPE/SUBTYPE : HNDLG /
ASSET COMP ASSET- IN-SERV ASSET REM DEPR SALVAGE ASSET BOOK CURRENT PER YEAR TO DATE ASSET TO DATE
NUMBER NBR STATUS DATE LIFE LIFE METH VALUE COST (BASIS) VALUE DEPRECIATION DEPRECIATION DEPRECIATION
40816 -000 A QTY: 1
UNIT 816 UNLOAD EQUIPMENT
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 1500.00 0.00 0.00 0.00 1500.00
40892-1 -000 A QTY: 1
#892 UNLOADING EQUIPMENT
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40949 -000 A QTY: 1
UNIT 949 UNLOAD EQUIPMENT
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40949-1 -000 A QTY: 1
1988 FREIGHTLINER TRACTOR #269
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40950 -000 A QTY: 1
UNIT 950 UNLOAD EQUIPMENT
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40951 -000 A QTY: 1
UNIT 951 UNLOAD EQUIPMENT
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 1500.00 0.00 0.00 0.00 1500.00
40951-1 -000 A QTY: 1
1988 FREIGHTLINER TRACTOR #273
*BOOK BASIS 03/16/92 36 0.0 STL* 0.00 23381.18 0.00 0.00 0.00 23381.18
40952 -000 A QTY: 1
UNIT 952 UNLOAD EQUIPMENT
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 1500.00 0.00 0.00 0.00 1500.00
40953 -000 A QTY: 1
UNIT 953 UNLOAD EQUIPMENT
*BOOK BASIS 03/02/92 48 0.0 STL* 0.00 500.00 0.00 0.00 0.00 500.00
40971 -000 A QTY: 1
1995 FREIGHTLINER TRACTOR #971
*BOOK BASIS 08/10/94 72 39.0 STL 0.00 68667.15 37194.74 0.00 11444.52 31472.32
*** ASSET STATUS ACTIVE TOTALS
*BOOK BASIS 0.00 471409.72 122947.40 0.00 50964.75 348462.32
FA280 DATE 05/13/97 COMPANY 20 -- ▇▇▇▇▇▇▇ MILLING COMPANY PAGE 4
TIME 11:18:27 FIXED ASSET -- ASSET STATUS REPORT
PROCESS LEVEL : 20177 -- ▇▇▇▇▇▇▇ MILLING COMPANY
ASSET TYPE/SUBTYPE : HNDLG /
ASSET COMP ASSET IN-SERV ASSET REM DEPR SALVAGE ASSET BOOK CURRENT PER YEAR TO DATE ASSET TO DATE
NUMBER NBR STATUS DATE LIFE LIFE METH VALUE COST (BASIS) VALUE DEPRECIATION DEPRECIATION DEPRECIATION
140310 -000 F QTY: 1
#593 79 ▇▇▇▇▇▇ VAN
*BOOK BASIS 04/01/84 B4 0.0 STL 0.00 8525.80 0.00 0.00 0.00 8525.80
*** ASSET STATUS FULLY DEPR TOTALS
*BOOK BASIS 0.0 8525.80 0.00 0.00 0.00 8525.80
*** ASSET TYPE HNDLG TOTALS
*BOOK BASIS 0.0 479935.52 122947.40 0.00 50964.75 356988.12
*** PROCESS ▇▇▇▇▇ ▇▇▇▇▇ TOTALS
*BOOK BASIS 0.0 482935.52 122947.40 0.00 50964.75 359988.12
*** COMPANY 20 TOTALS
*BOOK BASIS 0.0 482935.52 122947.40 0.00 50964.75 359988.12
