SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 12 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): May 19,
1997
RED OAK HEREFORD FARMS, INC.
(Exact Name of Registrant as Specified in its Charter)
NEVADA 33-89714 84-1120614
(State or Other (Commission (Employer
Jurisdiction) File Number) Identification Number
2010 Commerce Drive, Red Oak, Iowa 51566
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (712)623-9224
<PAGE>
ITEM 2. ACQUISITION AND DISPOSITION OF ASSETS
On May 19, 1997, the board of directors of the Company
approved an Agreement to Exchange Stock pursuant to which
the Company issued 1,538,462 restricted common shares of the
Company in exchange for all of the issued and outstanding
shares of Midland Cattle Company, Inc., an Iowa corporation
("Midland").
Started in 1987, Midland Cattle Company, as an Iowa
joint venture, Midland reorganized on May 19, 1997 as a
corporation formed under the laws of the state of Iowa.
Midland has three shareholders, Gordon Reisinger, Charles
Kolbe and John Derner. The three Midland shareholders are
also directors of the Company. Prior to the exchange of
stock, the Company contracted with Midland for beef supply
and brokerage services.
Midland is in the cattle brokerage business, supplying
area feedlots with feeder cattle and actively marketing fed
cattle. Midland's operations include acting as a broker
for individuals and organizations looking to buy or sell
cattle and Midland may purchase cattle short or long to
cover customer requirements. Consequently, some of the
cattle are owned by Midland and carried as inventory until a
buyer is found.
Midland currently leases a feedlot in Red Oak, Iowa and
owns the buildings, equipment and vehicles located on the
feedlot. Including leasehold improvements, Midland's
net tangible assets are approximately $878,959 as of
March 31, 1997.
The Company intends that Midland's current operations
shall continue.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
The audited financial statements of Midland Cattle
Company, Inc., for year ended December 31, 1996.
The unaudited balance sheet and income statements
for the period January 1, 1997 through March 31,
1997 shall be filed by amendment to this Form 8-K
no later than 60 days after May 28, 1997.
(b) Pro Forma Financial Information
As of the date of filing of this Current Report on
Form 8-K, it is impracticable for the Registrant
to provide the pro forma financial information
required by this Item 7(b). In accordance with
Item 7(b) of Form 8-K, such financial statements
shall be filed by amendment to this Form 8-K no
later than 60 days after May 28, 1997.
<PAGE>
(c) Exhibits
No. Description
2.1 Agreement to Exchange Stock
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this
Report to be signed on its behalf by the undersigned
hereunto duly authorized.
RED OAK HEREFORD FARMS,
INC.
Date: May 19, 1997
By: /s/ Gordon Reisinger
Gordon Reisinger
President and Chief Accounting Officer
<PAGE>
Midland Cattle Company
Accountants' Report and
Financial Statements
December 31, 1996, 1995 and 1994
BAIRD, KURTZ & DOBSON
<PAGE>
MIDLAND CATTLE COMPANY
DECEMBER 31, 1996, 1995 AND 1994
CONTENTS
Page
INDEPENDENT ACCOUNTANTS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations 3
Statements of Changes in Partners' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6
<PAGE>
BAIRD KURTZ & DOBSON
CITY CENTER SQUARE
1100 MAIN
KANSAS CITY, MISSOURI 64105
Independent Accountants' Report
Partners
Midland Cattle Company
Red Oak, Iowa
We have audited the accompanying balance sheets of
MIDLAND CATTLE COMPANY (a Partnership) as of December 31,
1996 and 1995, and the related statements of operations,
changes in partners' equity and cash flows for each of
the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the
Partnership's management. Our responsibility is to
express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of MIDLAND CATTLE COMPANY as of
December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years
in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
BAIRD, KURTZ & DOBSON
/S/BAIRD, KURTZ & DOBSON
Kansas City, Missouri
February 7, 1997, except for Note 10 as to
which the date is February 13, 1997
<PAGE>
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
1996 1995
CURRENT ASSETS __________ ___________
Acounts receivable - trade (less
allowance for doubtful accounts
of $10,000) $1,802,300 $1,232,292
Accounts receivable - affiliates 496,075 235,967
Inventories 104,939 43,003
Prepaid expenses 8,301 8,301
Other assets 40,966 25,697
__________ ___________
Total Current Assets 2,452,581 1,545,260
PROPERTY AND EQUIPMENT, At cost
Land and building 16,000 16,000
Equipment 57,920 57,920
Leasehold improvements 200,500 200,500
__________ __________
274,420 274,420
Less accumulated depreciation 111,758 90,437
__________ ___________
162,662 183,983
__________ ___________
$2,615,243 $1,729,243
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Checks outstanding in excess of bank
balance $ 582,032
Note payable, bank 707,226 $ 523,625
Accounts payable 271,473 221,417
Due to affiliates 160,923 12,738
Accrued expenses 14,851 17,156
__________ ___________
Total Current Liabilities 1,736,505 774,936
PARTNERS' EQUITY 878,738 954,307
__________ ___________
$2,615,243 $1,729,243
__________ ___________
See Notes to Financial Statements
2
<PAGE>
MIDLAND CATTLE COMPANY
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
____________ __________ ___________
(Restated-
Note 9)
NET SALES $64,500,079 $71,715,388 $80,560,974
COST OF GOODS SOLD 63,836,380 70,725,724 79,947,827
____________ ___________ ___________
GROSS PROFIT 663,699 989,664 613,147
ENROLLMENT AND MARKETING
FEE INCOME 578,601 236,487
____________ ___________ ___________
1,242,300 1,226,151 613,147
OPERATING EXPENSES 1,150,633 1,184,573 1,021,458
____________ ___________ ___________
INCOME (LOSS) FROM OPERATIONS 91,667 41,578 (408,311)
____________ ___________ ___________
OTHER INCOME (EXPENSE)
Interest expense (164,736) (132,659) (119,702)
Interest income 3,574
____________ ___________ ___________
(164,736) (129,085) (119,702)
____________ ___________ ___________
NET LOSS $ (73,069) $ (87,507) $ (528,013
____________ ___________ ___________
See Notes to Financial Statements
3
<PAGE>
MIDLAND CATTLE COMPANY
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
____________ __________ ___________
(Restated-
Note 9)
BALANCE, BEGINNING OF YEAR $ 954,307 $ 566,814 $ 844,827
CAPITAL CONTRIBUTIONS 47,500 575,000 250,000
CAPITAL DISTRIBUTIONS (50,000) (100,000)
NET LOSS (73,069) (87,507) (528,013)
___________ _________ __________
BALANCE, END OF YEAR $ 878,738 $ 954,307 $ 566,814
____________ __________ ___________
See Notes to Financial Statements
4
<PAGE>
MIDLAND CATTLE COMPANY
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
____________ __________ ___________
(Restated-
Note 9)
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $ (73,069) $ (87,507) $ (528,013)
Item not requiring cash:
Depreciation 21,321 25,225 28,915
Changes in:
Accounts receivable (830,116) 278,012 (645,990)
Inventories (61,936) 975,177 (395,474)
Prepaids (8,301)
Accounts payable and
accrued liabilities 195,936 33,675 (227,707)
Other assets (15,269) 19,115 (23,675)
Net cash provided by (used in) ____________ __________ ___________
operating activities (763,133) 1,235,396 (1,791,944)
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of property and
equipment (28,000)
___________
Net cash used in investting
activities (28,000)
CASH FLOWS FROM FINANCING
ACTIVITIES
Capital contributions 47,500 375,000 250,000
Capital distributions (50,000) (100,000)
Net borrowings (payments)
on note payable - other (1,250,000) 665,000
Net borrowings (payments)
on line of credit 183,601 (260,396) 784,021
Increase in checks outstanding in
excess of bank balance 582,032
____________ __________ ___________
Net cash provided by (used in)
financing activities 763,133 (1,235,396) 1,699,021
____________ __________ ___________
DECREASE IN CASH 0 0 (120,923)
CASH, BEGINNING OF YEAR 0 0 120,923
____________ __________ ___________
CASH, END OF YEAR $ 0 $ 0 $ 0
____________ __________ ___________
See Notes to Financial Statements
5
<PAGE>
MIDLAND CATTLE COMPANY
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature of Operations
The Partnership was formed November 9, 1987 as a joint venture.
The joint venture will continue until December 31, 2007, unless
terminated earlier by amendment or agreement of all partners. The
Partnership's operations consist of buying and selling feeder cattle
in wholesale markets. Feeder cattle are sold and unsecured credit is
extended primarily to feedlots in the Midwest and southwest United
States.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Inventory Pricing
Cattle inventory is priced using market value less costs of
disposition. Contract deposits are included in inventory adjusted
for all material gains or losses on purchase and sale contracts.
Feed inventory is stated at the lower of cost or market determined
using the FIFO (first-in, first-out) method.
Property and Equipment
Property and equipment are depreciated over the estimated useful
life of each asset. Leasehold improvements are depreciated over the
shorter of the lease term or the estimated useful lives of the
improvements. Annual depreciation is primarily computed using
accelerated methods.
Income Taxes
For income tax purposes, the joint venture is taxed as a
partnership and, accordingly, its net income or loss is reportable in
the individual tax returns of the partners.
Enrollment and Marketing Fee Income
If cattle enrolling in the Certified Hereford program are not sold
to feedlots directly by the Partnership, enrollment fees are
collected from feedlots. If the Partnership sold the cattle directly
to the feedlot, then no enrollment fee is collected. The
Partnership's affiliate, Red Oak Hereford Farms, Inc., has an
exclusive agreement with the American Hereford Association to
process, distribute and sell Certified Hereford Beef. When cattle in
the Certified Hereford program are sold for slaughter, a marketing
fee is collected. The Partnership recognizes the income from these
non-refundable fees immediately upon receipt.
6
<PAGE>
MIDLAND CATTLE COMPANY
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 2: INVENTORIES
Inventories at December 31, 1996 and 1995 consisted of the
following:
1996 1995
Cattle $ 99,239 $33,763
Feed 5,700 9,240
_________ ________
$104,939 $43,003
_________ ________
NOTE 3: NOTE PAYABLE, BANK
At December 31, 1995, the Partnership had a revolving line of
credit which provided for borrowing up to $3,000,000 and was reduced
to $2,500,000 in August of 1996. The loan is limited by levels of
collateral ($870,000 at December 31, 1996), and is collateralized by
substantially all of the Partnership's assets and personal guarantees
of the majority partners. The revolving loan, which matures June 30,
1997 bears interest at the bank's prime rate plus 1 1/2% (9.75% as of
December 31, 1996).
NOTE 4: OPERATING LEASES
The Partnership leases farm and pasture land under a noncancellable
operating lease expiring in 2006 and containing renewal options for
two additional five year terms. The Partnership also leases office
space on a month-to-month basis from a related party.
Future minimum lease payments at December 31, 1996 are as follows:
1997 $ 39,600
1998 39,600
1999 39,600
2000 39,600
2001 39,600
Thereafter 181,500
_________
Future minimum lease payments $379,500
_________
Rental expense for all operating leases consisted of $63,872,
$63,695 and $65,708 for the years ended December 31, 1996, 1995 and
1994, respectively.
7
<PAGE>
MIDLAND CATTLE COMPANY
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 5: ADDITIONAL CASH FLOWS INFORMATION
Additional Cash Payment 1996 1995 1994
Information ________ ________ _______
Interest paid $164,736 $132,659 $150,701
Non-Cash Transactions
Subordinated debt
converted to partners'
capital 200,000
NOTE 6: SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Generally accepted accounting principles require disclosure of
certain significant estimates and current vulnerabilities due to
certain concentrations. Those matters include the following:
Concentration of Revenue
Sales of feeder cattle comprised virtually all of the Partnership's
sales during 1996, 1995 and 1994.
During 1996 and 1995, approximately 40% and 25%, respectively, of
sales consisted of certified cattle. There were no sales of
certified Hereford cattle in 1994.
NOTE 7: RELATED PARTY TRANSACTIONS
The Partnership sells cattle to certain of its partners and
affiliates which have common ownership and management with the
Partnership. In addition, the Partnership utilizes trucking
companies that have common ownership and management. The activity
between the Partnership and related parties is as follows:
1996 1995 1994
___________ __________ __________
Sales $11,555,000 $13,300,000 $9,990,000
Purchases 360,000 214,000 390,000
The Partnership receives enrollment fees for selling Certified
Hereford Beef (the "Program" - see Note 1). A related company (Red
Oak Hereford Farms, Inc.), who owns the marketing rights to this
program, may later purchase these cattle. Cattle, which meet the
Program's criteria, can be enrolled into the Program when they are
sold to feedlots or when they are sold for slaughter. If the cattle
are enrolled when sold to feedlots, then the fee is collected
directly by the Partnership from the feedlots. If the cattle are not
enrolled in the Program until they are sold for slaughter, the
feedlots pay the fee to the related party, who then remits the fee to
the Partnership.
8
<PAGE>
MIDLAND CATTLE COMPANY
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 7: RELATED PARTY TRANSACTIONS (Continued)
During 1996 and 1995, the Partnership received $578,601 and
$236,487, respectively, in Certified Hereford Beef enrollment fees,
including $376,000 and $151,000 received through the related party.
In addition, approximately 40% and 25% of the Partnership's cattle
sales in 1996 and 1995, respectively, consisted of Certified Hereford
Cattle. During 1994, the Partnership had no sales of Certified
Hereford Cattle and did not receive any enrollment fees.
In certain instances, companies that are partners in the
Partnership will pay portions of accounts receivable due to the
Partnership from unrelated cattle feedlots. In this capacity, the
partners are financing the cattle purchases through contracts
directly with the cattle feedlots.
NOTE 8: COMMITMENTS AND CONTINGENCIES
The Partnership enters contracts to buy cattle in the future at a
given price in order to meet expected demands. At December 31, 1996,
contracts outstanding to purchase cattle approximated $670,000 which
approximated market value at year end.
NOTE 9: RESTATEMENT OF PRIOR YEAR FINANCIAL STATEMENTS
The statements of operations, changes in partners' equity and cash
flows for the year ended December 31, 1995 have been restated
primarily due to corrections to trading accounts and open contracts
at December 31, 1994. The effect of the restatement was to increase
1995 beginning partners' equity and increase the 1995 loss by
$22,023.
NOTE 10: SUBSEQUENT EVENTS
On February 13, 1997, the partners of Midland Cattle Company
entered into an agreement to merge with Red Oak Hereford Farms, Inc.,
a related party under common control.
9
<PAGE>
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 DERNER'S 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).
<PAGE>
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 Co.'s 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 Oak's 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.
<PAGE>
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/Gordon Reisinger By:/S/Gordon Reisinger
Its: President Its: President
Cimmaron Properties, Ltd. Wall Lake Cattle Company, Inc.
By: By:
Its: President Its: President
Derner's of Milford, Inc. Midland Cattle Company
By: By: Cimmaron Properties,
Ltd., one of its joint
Its: President venturers
By:
Its: President
<PAGE>
TERMINATION AGREEMENT
Each of the undersigned hereby agrees that the Agreement,
dated September 6, 1994, between the undersigned with respect to
the production and licensing of certified Hereford beef (the
"Agreement") shall be terminated effective upon the effectiveness
of the Agreement, dated March 14, 1997, between American Hereford
Association and Red Oak Farms, Inc. with respect to the
production and licensing of certified Hereford beef (including
the Guaranties of Red oak Hereford Farms, Inc. attached thereto);
provided, however, that the provisions of Sections 3.7, 6.2, 6.4,
6.5, 7.3, 11.2, 14.4, 15.1, 15.2 and 16.1 of the Agreement shall
survive, without limitation, such termination. Notwithstanding
the foregoing, upon such termination: (i) Mid-Ag shall deliver
to Red Oak (rather than to Association) all documents and
materials pertaining to the Trademark, Program, Program
Information, and any other information pertaining to CHB supplied
by Association to Mid-Ag pursuant to the Agreement; and (ii) any
sublicenses granted by Mid-Ag that are in effect immediately
prior to such termination shall continue and sublicensees of Mid-
Ag shall become sublicensees of Red Oak with the same rights to
use the Trademark, Program, Program Information, and any other
information pertaining to CHB supplied by Association to Mid-Ag
pursuant to the Agreement as such sublicensees possessed
immediately prior to such termination. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to such
terms in the Agreement.
Dated: March 14, 1997.
AMERICAN HEREFORD ASSOCIATION
By: /s/ H.H. Dickenson
Name: H.H. Dickenson
Title: Executive Vice President
MID-AG, L.C.
By: /s/ Gordon Reisinger
Name: Gordon Reisinger
Title: Manager
<PAGE>
with a copy to: ___________________
___________________
___________________
Section 16.11 Force Majeure. Each party shall, either
wholly or partially be relieved of its obligations hereunder
during any period of time when performance of this Agreement
becomes commercially impossible for reasons beyond its control
involving strike, war, riot, casualty, final governmental
regulations or intervention and/or acts of God (each a "Force
Majeure Event"). If Red Oak fails to meet a performance standard
established pursuant to Section 13.1 or 13.2 hereof for a
particular calendar year because of a Force Majeure Event, Red
Oak shall, nonetheless, be deemed to have satisfied such
performance standard if (i) Red Oak would have satisfied the
performance standard by processing cattle as CHB during the
period affected by the Force Majeure Event at the average rate at
which it processed cattle as CHB during the portions of such
calendar year not affected by the Force Majeure Event and (ii)
the proportionate decrease in the rate at which Red Oak processed
cattle as CHB during the period affected by the Force Majeure
Event as compared with such rate during the periods of such
calendar year not affected by the Force Majeure Event is no
greater than the proportionate decrease in the processing of
Hereford beef by the cattle industry in the United States of
America as a whole during the same period of time, as documented
by either the USDA or the National Cattlemen's Association. Once
performance becomes commercially possible the responsibilities
and obligations of the parties shall resume with full force and
effect. In any situation in which either party claims an excuse
for nonperformance under this Section 16.11, it must give prompt
telephonic notice, promptly confirmed by written notice, of the
occurrence and estimated duration of the Force Majeure Event to
the other party and shall give prompt written notice when the
Force Majeure Event has been remedied or has ended and
performance can recommence hereunder.
IN WITNESS WHEREOF, the parties have caused the Agreement to
be duly executed as of the date first written above.
AMERICAN HEREFORD ASSOCIATION
By: /s/ H.H. Dickenson
Name: H.H. Dickenson
Title: Executive Vice President
RED OAK FARMS, INC.
By: /s/ Gordon Reisinger
Name: Gordon Reisinger
Title: President
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION OF MIDLAND CATTLE COMPANY,
A PARTNERSHIP, WHICH HAS BEEN EXTRACTED FROM THIER DECEMBER 31, 1996
AUDITED FINANCIAL STATEMENTS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE AUDITED FINANCIAL STATEMENTS.
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 1,812 1,242
<ALLOWANCES> 10 10
<INVENTORY> 105 43
<CURRENT-ASSETS> 2,453 1,545
<PP&E> 274 274
<DEPRECIATION> 112 90
<TOTAL-ASSETS> 2,615 1,729
<CURRENT-LIABILITIES> 1,736 775
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 879 954
<TOTAL-LIABILITY-AND-EQUITY> 2,615 1,729
<SALES> 64,500 71,715
<TOTAL-REVENUES> 65,079 71,951
<CGS> 63,836 70,725
<TOTAL-COSTS> 63,836 70,725
<OTHER-EXPENSES> 1,151 1,185
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 165 133
<INCOME-PRETAX> (73) (87)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (73) (87)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (73) (87)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
