SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From _________ to ____________
Commission File Number 33-89714
Red Oak Hereford Farms, Inc.
(Exact name of small business issuer as specified in its
charter)
NEVADA 84-1120614
(State or other jurisdiction (IRS Employer Identification
of incorporation or No.)
organization)
2010 Commerce Drive, Red Oak, Iowa 51566
(Address of principal executive offices)
(Issuer's Telephone Number) (712) 623-9224
Wild Wings, Inc., 899 South Artistic Circle, Springville,
Utah 84663
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No
At May 12, 1997, there were 11,505,494 shares of common
stock of the registrant outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No x
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INDEX
Page No.
PART I - FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Item 2. Management's Discussion
and Analysis 10
PART II - OTHER INFORMATION 13
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 4. Submission of Matters to
a Vote of Security Holders 13
Item 5. Other Information 14
Item 6. Exhibits and Reports
on Form 8-K 14
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
RED OAK HEREFORD FARMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 1997
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,290
Accounts receivable 1,049,126
Inventory 1,257,492
Prepaid expenses 35,346
_________
Total Current Assets 2,346,254
_________
PROPERTY AND EQUIPMENT, At cost
Leasehold improvements 65,345
Office equipment 122,107
_________
187,452
Less: Accumulated depreciation 58,936
_________
128,516
_________
OTHER ASSETS 61,414
_________
TOTAL ASSETS $2,536,184
_________
See Note to Condensed Consolidated Financial Statement
3
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 105,424
Accounts payable - related parties 19,075
Accrued expenses 79,126
Note payable - Bank 454,322
Note payable - Related party 125,000
Current maturities of long-term debt 1,013,685
_________
Total Current Liabilities 1,796,632
_________
LONG-TERM DEBT 477,647
DEFERRED INCOME 300,000
_________
TOTAL LIABILITIES 2,574,279
_________
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.001 par value; authorized
50,000,000shares, issued and outstanding
11,234,430 shares 11,234
Additional paid-in capital 186,968
Retained earnings (deficit) (236,297)
_________
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (38,095)
_________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,536,184
_________
4
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RED OAK HEREFORD FARMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
1997 1996
NET SALES $ 8,464,897 $13,256,570
COST OF GOODS SOLD 8,917,106 13,790,622
____________ ___________
GROSS PROFIT (LOSS) (452,209) (534,052)
OPERATING EXPENSES 253,959 235,852
____________ ___________
LOSS FROM OPERATIONS (706,168) (769,904)
OTHER EXPENSE - Interest expense 48,674 30,751
____________ ___________
NET LOSS $ (754,842) $ (800,655)
____________ ___________
EARNINGS (LOSS) PER SHARE $(.07) $(.07)
____________ ___________
WEIGHTED AVERAGE SHARES OUTSTANDING 10,974,541 10,960,000
____________ ___________
See Note to Condensed Consolidated Financial Statement
5
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RED OAK HEREFORD FARMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
1997 1996
____________ _____________
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (754,842) $ (800,655)
Items not requiring cash:
Depreciation and amortization 18,570 10,585
Changes in:
Accounts receivable 1,170,505 1,763,714
Inventories (309,400) 351,463
Prepaid expenses (8,758) (20,753)
Accounts payable and
accrued expenses (276,242) (551,920)
Other assets (2,428)
____________ _____________
Net cash provided by
(used in) operating activities (162,595) 752,434
____________ _____________
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (2,912) (21,965)
____________ _____________
Net cash used in
investing activities (2,912) (21,965)
____________ _____________
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions 150,000
Proceeds from issuance of note
payable 125,000
Net repayment on line of credit (655,567) (798,049)
Net proceeds from stock offering
and exercise of options 704,742
Payments on long-term debt (4,378)
____________ _____________
Net cash provided by
(used in) financing activities 169,797 (648,049)
____________ _____________
INCREASE IN CASH 4,290 82,420
CASH, BEGINNING OF PERIOD 0 0
____________ _____________
CASH, END OF PERIOD $ 4,290 $ 82,420
____________ _____________
See Note to Condensed Consolidated Financial Statement
6
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RED OAK HEREFORD FARMS, INC. AND PREDECESSOR
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 1997
Red Oak Hereford Farms, Inc. (the Company) is a Nevada
corporation (previously named Wild Wings, Inc.) that is
engaged through its wholly-owned subsidiary, Red Oak Farms,
Inc. (Red Oak) in the business of selling premium, branded,
fresh beef to retail and food service markets and extends
unsecured credit to customers predominantly located in the
southwest and midwest United States.
In February 1997, Red Oak Farms, Inc. was formed with the
members of Mid-Ag, Inc., an LLC, contributing the assets and
liabilities of Mid-Ag to Red Oak in exchange for all of the
outstanding stock of Red Oak. On March 14, all of the
outstanding stock of Red Oak was issued to the Company in
exchange for 10,000,000 restricted common shares of the
Company plus options to purchase an additional 3,000,000
shares of the Company. As a result of this transaction, Red
Oak became a wholly-owned subsidiary of the Company. For
accounting purposes, Red Oak is deemed to be the acquiring
corporation and, therefore, the transaction is being
accounted for as a reverse acquisition of the Company by Red
Oak. Prior to March 14, 1997, the Company operated a
hunting club and had insignificant operations. The
condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary, Red
Oak Farms, Inc. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Earnings per share are calculated using the weighted average
shares outstanding and as if the shares of the Company at
March 15, 1997 had been outstanding for all periods
presented.
The condensed consolidated financial statements do not
include all footnotes and certain financial information
normally presented annually under generally accepted
accounting principles and, therefore, should be read in
conjunction with the Company's December 31, 1996 year-end
financials found in the Company's Form 8-K (File No. 033-
89714) dated March 14, 1997. Accounting measurements at
interim dates inherently involve greater reliance on
estimates than at year-end. The results of operations for
the three months ended March 31, 1997 are not necessarily
indicative of results that can be expected for the full
year.
The condensed consolidated financial statements included
herein are unaudited; however, they contain all adjustments
(consisting of normal accruals) which, in the opinion of the
Company, are necessary to present fairly its consolidated
financial position at March 31, 1997, and its consolidated
results of operations and cash flows for the three months
ended March 31, 1997 and 1996.
The Company entered into a revised agreement on March 21,
1997, with the American Hereford Association (the "AHA") for
the exclusive license and right to process, distribute and
sell Certified Hereford Beef ("CHB") under the CHB
Trademark. The agreement expires December 31, 2000. The
agreement automatically renews for a three-year period
beginning January 1 of each calendar year commencing on
January 1, 2000, providing the terms of the agreement are
met. The revised agreement also includes various operating
standards and requirements of the Company as well as minimum
royalty fees of $500,000, $725,000 and $850,000 for 1997,
1998 and 1999, respectively.
7
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RED OAK HEREFORD FARMS, INC. AND PREDECESSOR
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
MARCH 31, 1997
The Company plans to issue up to 1,500,000 units comprising
1,500,000 common shares and 1,500,000 common stock purchase
warrants for $3.00 per unit. The common stock purchase
warrants are callable at $.001 per share on 30 days notice
and grant the holder the right to purchase common stock at
$5.00 per share. As of March 31, 1997, 160,000 units have
been sold.
The Company is also authorized to issue up to $5,000,000
worth of preferred stock.
The Company has granted options to purchase 3,000,000
shares of stock between March 17, 1997 and March 17, 2002.
The shares are exercisable as follows:
Shares Price Per Share
1,000,000 $ 8.00
1,000,000 $10.00
1,000,000 $12.00
The Company has three series of warrants outstanding as
follows:
Series Shares Price Per Share
A 960,000 $4.00
B 960,000 $4.50
C 960,000 $5.00
The Company currently has allocated and issued options for
400,000 shares of the Company's common stock, exercisable at
$3.00 per share, pursuant to the 1995 Stock Option Plan. Of
these options, 114,430 have been exercised as of March 31,
1997.
The Company has also adopted the 1997 Stock Option Plan and
has allocated 1,000,000 shares of common stock to the Plan.
To date, options for 656,000 shares of common stock of the
Company, exercisable at $5.00 per share, have been granted
under the 1997 Stock Option Plan, none of which have been
exercised.
At the time of the conversion of Mid-Ag to Red Oak, total
liabilities exceeded total assets by $517,500. This deficit
was recorded as excess of par value over contributed assets.
As capital has been raised during the quarter ended March
31, 1997, the amount of capital in excess of par value was
credited to this deficit account with the remaining amount
being credited to additional paid-in capital.
8
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RED OAK HEREFORD FARMS, INC. AND PREDECESSOR
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
MARCH 31, 1997
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles,
which contemplate continuation of the Company as a going
concern. However, the Company has incurred losses and
deficit cash flows since its inception as Mid-Ag due to its
start-up nature in establishing a premium branded Hereford
beef product. The Company has not yet been successful in
establishing profitable operations and has negative
stockholders' equity. These factors raise substantial doubt
about the ability of the Company to continue as a going
concern. In this regard, management is proposing to raise
additional funds through loans and/or through raising
additional capital with a private placement offering, and
increase product awareness through marketing efforts to
attain a positive gross profit. There is no assurance that
the Company will be successful in raising this additional
capital or achieving profitable operations. The financial
statements do not include any adjustments that might result
from the outcome of these uncertainties.
9
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Item 2. Management's Discussion and Analysis
The matters discussed in this Form 10-QSB contain forward-
looking statements that involve risks and uncertainties
including risk of changing market conditions with regard to
livestock supplies and demand for products of Red Oak
Hereford Farms, Inc. (the "Company"), domestic and
international regulatory risks, competitive and other risks
over which the Company has little or no control.
Consequently, future results may differ from management's
expectations. Moreover, past financial performance should
not be considered a reliable indicator of future
performance.
Reorganization
On March 14, 1997, the Company entered into a Plan of
Reorganization (the "Reorganization") whereby the Company
acquired all of the issued and outstanding common stock of
Red Oak Farms, Inc., ("Red Oak Farms") and changed its name
to Red Oak Hereford Farms, Inc., ("Red Oak"). Pursuant to
the Reorganization, Red Oak Farm's shareholders received
10,000,000 shares of the Company's common stock and options
to purchase an additional 3,000,000 shares of the Company's
common stock. The Company, through its wholly owned
subsidiary, Red Oak Farms, is in the business of
identifying, certifying, processing, slaughtering and
marketing Certified Hereford Beef. Red Oak Farms was
originally organized in August, 1994 as Mid-Ag L.C., an Iowa
limited liability company and was reorganized as Red Oak
Farms, Inc., an Iowa corporation in February 1997. Red Oak
Farms has a two year operating history as Mid-Ag, L.C.
Prior to the Reorganization, the Company was in the
business of operating a hunting and sporting clays club and
had no significant revenues or expenses. As of the date of
the Reorganization, the Company has ceased all hunting and
sporting clays business and has focused on the certified
beef industry. Therefore, unless otherwise indicated, all
financial information for accounting periods prior to the
Reorganization set forth herein refer to the business and
operations of the Company's subsidiary, Red Oak Farms, f/k/a
Mid-Ag L.C.
Results of Operations
Comparison for the three months ended March 31, 1997 and
the three months ended March 31, 1996.
The Company is under contract with the American Hereford
Association and has exclusive license to market Certified
Hereford Beef ("CHB"). Because the Company failed to meet
its quota under its contract with the American Hereford
Association (the "AHA") in 1996, the Company's exclusive
license to market its products under the Certified Hereford
Beef trademark became revocable. The Company subsequently
renegotiated this agreement, effective March 21, 1997. The
agreement imposes performance standards on the Company and
requires Red Oak to process a certain number of CHB cattle
per year and to pay the American Hereford Association
minimum royalty fees. In order to comply with this
agreement, the Company purchases only CHB from various beef
producers.
In turn, the Company then has the CHB processed and
packaged for shipment to customers. To meet processing
requirements the Company entered a contract with Beef
America for slaughter and fabrication of CHB. Under this
agreement, the Company must provide a certain number of
cattle per week for Beef America processing. As of this
reporting period, the Company has not met the quota required
by Beef America, however, Beef America has not terminated
the agreement and is willing to work with the Company as the
CHB market develops. Further, should Beef America terminate
the contract, numerous processing and packing plant
facilities are available to the Company and should the need
arise, the Company can establish a new relationship without
serious consequence to production of CHB.
At the present time, for each head of beef slaughtered,
approximately 20% to 25% is sold as CHB with the remainder
being sold as "commodity" beef at a lower price than the
CHB. Even though a greater percentage could be sold as CHB,
the market has not yet developed to support a larger portion
of each head of beef being sold as CHB. As the Company
broadens product mix and increases customer base, a greater
percentage of each head of beef slaughtered will be sold at
the premium CHB price. The Company anticipates that through
its strategic marketing efforts, the customer base for CHB
will increase sufficiently so that a greater percentage of
the CHB processed will be sold at the premium price and the
Company will meet the minimum number of cattle requirements
of Beef America and the American Hereford Association.
10
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For the three months ended March 31, 1997, the Company
continued to realize losses from operations in the amount of
$754,842, compared to $800,655 in net loss for the same
period in 1996. These losses as a percentage of net sales
measured 8.9% in 1997 versus 6.0% in the first quarter of
1996. The Company attributes the net loss to its inability
to recover all costs with only partial premium sales of CHB
to total beef sales from processing operations. Total costs
continued to be unrecoverable with the product mix of
premium "branded" CHB sales and unprofitable "commodity", as
discussed above. New customers for CHB in the first quarter
of 1997 were insufficient to greatly improve product mix,
generate higher average sales and improve profitability.
Continued production at less than break-even is necessary
to meet current customer needs because only a small
percentage of each head of cattle is sold as CHB, while the
Company continues its business development strategies to
improve customer mix, premium "branded" CHB sales and
profitability. Additionally, the Company is experiencing
normal front end or start up overhead costs as a new
business which will require time and volume to reduce to
levels more standard to the industry. Further, the Company
must continue to pay premiums for live cattle, its raw
material source, to prevent jeopardizing long term supply of
market ready, fed cattle eligible for slaughter as CHB, in
spite of continued losses from operations.
During 1997, net sales to three major customers
approximated 35% of the Company's net sales. Resulting
primarily from the reduction of purchases by one of the
Company's major customers, sales for the first quarter of
1997 decreased 36.2%, from $13,256,570 in 1996 to $8,464,897
in 1997. The Company has since added three new CHB
distributors and is in various stages of development with
several potential customers.
Reduced sales resulted in reduced inventory and production
needs. As a consequence, the cost of goods sold decreased
from $13,790,622 in 1996 to $8,917,106 in 1997, a decrease
of 35.3% in the first quarter of 1997 as compared to the
first quarter of 1996.
During the first quarter of 1997, selling, general and
administrative expense for the first quarter of 1997 was
$253,959 compared to $235,852 for the same period in the
1996. This is a 7.7% increase from the first quarter of
1996 and is a result of increase in personnel, salary
expense and interest expense.
To increase market exposure, the Company entered an
agreement with MediaComm Marketing International, Inc.
("MediaComm"), a financial public relations firm that
specializes in the dissemination of information about
publicly traded companies. Under this agreement, MediaComm
will conduct an active marketing campaign, using print,
radio, video and television as well as develop, design and
implement an Internet World Wide Web Site for the Company.
During the first quarter of 1997, the Company acquired
three new distributors for CHB. The distributors, in turn,
are focusing sales of CHB to food service customers
including hotels, restaurants and catering services. The
Company is also in various stages of business development
with several new retail prospects and the Company
anticipates that a number of retail customers will
participate in the CHB program.
In the third and fourth quarters of 1996, the Company
initiated sales of CHB to Korea. During the first quarter
of 1997, the Company realized $55,013 in sales to Korea and
a significant increase in the second quarter. Because no
Korean sales were made in the first quarter of 1996, there
is no similar comparison for the period ended March 31,
1996. The Company is also actively pursuing CHB export
opportunities in China and Japan.
Liquidity and Capital Resources
As of March 31, 1997, the Company had $4,290 cash on hand.
On March 27, 1997, the Company commenced a private offering
relying upon Section 4(2) of the Securities Act of 1933 and
Rule 506 promulgated thereunder. The offering is for
1,500,000 Units ($4,500,000 value) consisting of one share
of the Company's common stock and a warrant to purchase one
share of the Company's common stock. The Units are offered
at $3.00 per Unit. As of March 31, 1997, the Company has
raised gross proceeds of approximately $480,000 from the
private offering. The Company anticipates additional sales
from the private offering before year end.
11
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For the period ending March 31, 1997, 114,430 stock options
issued pursuant to the Company's 1995 Stock Option Plan were
exercised at a price of $3.00 per share and the Company
recognized $343,290 in gross proceeds. There are 285,570
stock options issued pursuant to the 1995 Stock Option
outstanding and the Company believes some of these options
will be exercised before year end.
Prior to 1997, the Company received a long term loan in the
amount of $491,000 from the Iowa Department of Economic
Development and is currently paying interest and principal
of approximately $15,000 on a quarterly basis. The final
payment is due July 15, 2015.
The Company also has an outstanding installment note with
MoorMan's, Inc., a feed supplier. Under the terms of this
agreement, the Company is required, among other things, to
purchase cattle exclusively from feedlots which have fed to
such cattle, MoorMan's products for a minimum period of 100
days. The loan amount of $1,000,000 is due October 2001
with interest only payable monthly at approximately $8,000
per month.
In conjunction with the American Hereford Association, the
Company pays a royalty fee of $5.00 for each head of CHB
processed. The Company is obligated to pay a minimum of
$500,000 in royalty fees to the American Hereford
Association. Should the Company fail to meet the minimum
requirement by year end, the Company is required to pay a
lump sum to meet the remainder of the $500,000 obligation.
Currently, the Company pays the royalty fee as each head is
processed and does not anticipate problems in meeting the
minimum requirement.
As of March 31, 1997, the Company also had a note payable
to Cimarron Properties, a related party, in the amount of
$125,000. Subsequent to the date of this report, the
Company paid this obligation in April 1997.
The Company has a revolving line of credit that provides
for borrowings up to $4 million. This line of credit bears
a floating rate of interest equal to 2% above the lender's
prime rate of interest (10.50% as of March 31, 1997). The
Company pays the lender a fee of .25% of the unused credit
line, payable quarterly. This line of credit expires June
30, 1997. The Company will renegotiate the revolving line
of credit at expiration and does not anticipate any problems
re-establishing the line of credit.
Cash flows from financing activities increased from usage
of ($648,049) in the first quarter of 1996 to cash provided
of $169,797 in the first quarter of 1997. The majority of
the increase is due to stock purchases from the private
offering and exercise of stock options.
Cash used for investing activities reduced from ($21,965)
during the first quarter of 1996 to ($2,912) in the first
quarter of 1997. During the first quarter of 1997, the
Company made no major purchases of equipment and made no
capital improvements, while during the first quarter of
1996, the Company completed furnishing its office space with
furniture, computing system and telephone system.
The Company believes that through its marketing strategy
and customer acquisition plan it will recognize a growth in
the customer base, increased CHB sales and a broader CHB
product mix. With increased sales of CHB, along with
proceeds from the private offering and the availability of
credit, the Company believes there will be adequate funds to
meet the Company's obligations.
Capital Expenditures
The Company has no commitments for any significant capital
expenditures in the immediate future.
Inflation
The Company does not believe that inflation has had a
material effect on its results of operations. However, there
can be no assurance that the Company's business will not be
affected by inflation in the future.
12
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PART II_OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company may be involved in
litigation relating to claims arising out of its operations
in the normal course of business. As of the date of this
report, the Company is not a party to any litigation.
Item 2. Changes in Securities
In reliance upon Section 4(2) of the Securities Act of
1933 and Rule 506 promulgated thereunder, the Company
offered 1,500,000 Units of which 160,000 Units at $3.00 per
Unit were sold during the period ended March 31, 1997. Each
Unit consisted of one share of the Company's common stock
and a warrant to purchase one share of the Company's common
stock. This offering was made exclusively to persons who
met the suitability standards established by the Company.
The Company engaged the services of Clark Burns to act as
its finder for this private offering. Under the Finder's
Agreement, Mr. Burns may receive a fee equal to 5% of the
purchase price of the securities sold for those transactions
in which he was the finder.
Item 4. Submission of Matters to a Vote of Security
Holders
On March 14, 1997, a special meeting of the Company's
shareholders was held to (a) approve the Reorganization, (b)
approve the change of the Company's name, (c) elect
directors to serve until the Company's next annual meeting
of shareholders, (d) approve the sale of all of the
Company's assets to Wild Wings Hunting & Sporting Clays
Club, Inc., and (e) approve the adoption of the Company's
1997 Stock Option Plan. The following table sets forth the
voting results as to each of these matters and each nominee
for office.
Number of Number of
Votes For Votes Against Abstentions
Matter Number of Number of and Broker
or Withheld Non-Votes
Approval of Reorganization 12,415,500 0 0
Approval of Change
of Company's Name 12,415,500 0 0
Election of Directors
Gordon Reisinger 12,415,500 0 0
John Derner 12,415,500 0 0
Charles Kolbe 12,415,500 0 0
Leo M. DeSpain 12,415,500 0 0
Approval of Sale of
Assets of Company 12,415,500 0 0
Approval of 1997
Stock Option Plan 12,415,500 0 0
Subsequent to period ending March 31, 1997, the Company
held its annual meeting of shareholders on April 25, 1997
for the purpose of electing directors to serve until the
next annual meeting of shareholders. The following table
sets forth the voting results as to each nominee for office.
13
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Nominee Number of Number of Number of
Votes For Votes Abstentio
Against ns and
or Broker
Withheld Non-Votes
Gordon Reisinger 10,199,600 0 0
John Derner 10,199,600 0 0
Gene Wiese 10,199,600 0 0
Charles Kolbe 10,199,600 0 0
Jimmy Powell 10,199,600 0 0
Leo M. DeSpain 10,199,600 0 0
Mike Roller 10,199,600 0 0
Item 5. Other Information.
Pursuant to the approval of the shareholders referred to
in Item 4 hereof, the name of the Company was changed to
"Red Oak Hereford Farms, Inc." on March 17, 1997. The
Company then changed its NASD OTC Bulletin Board trading
symbol from "WILG" to "HERF".
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits or financial statement
schedules are filed as part of this report (exhibits
identified in parentheses below, on file with the United
States Securities and Exchange Commission, are incorporated
herein by reference as exhibits hereto).
Exhibit No. Description
2.01 Agreement and Plan of Reorganization,
dated as of March 14, 1997, by and
between Wild Wings, Inc. and Red Oak
Farms, Inc. (Exhibit 2.1 to Current
Report under Form 8-K, dated March 14,
1997, File No. 033-89714)
3.01 Certificate of Amended Articles of
Incorporation filed with the Nevada
Secretary of State on March 17, 1997
(Exhibit 28.1 to Current Report under
Form 8-K, dated March 14, 1997, File No.
033-89714)
10.01 Business Sale Agreement, dated March 14,
1997, by and between Wild Wings Hunting
and Sporting Clays Club, Inc. and Wild
Wings, Inc. (Exhibit 2.2 to Current
Report under Form 8-K, dated March 14,
1997, File No. 033-89714)
10.02 Agreement, dated March 21, 1997, by and
between the Red Oak Hereford Farms, Inc.
and American Hereford Association
10.03 Custom Slaughter and Fabrication
Agreement, dated February 19, 1997, by
and between Beef America and Red Oak
Hereford Farms, Inc., and Amendment
thereto, dated April 9, 1997
10.04 Client Service Agreement, dated March
11, 1997, by and between MediaComm
Marketing International and Red Oak
Hereford Farms, Inc.
14
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10.05 Commercial Lease, dated April 1, 1997,
by and between Gordon and Barbara
Reisinger and Red Oak Hereford Farms,
Inc.
27.01 Financial Data Schedule
99.01 1997 Stock Option Plan
99.02 Certificate of Articles of Exchange
filed with the Nevada Secretary of State
on March 17, 1997 (Exhibit 28.2 to
Current Report under Form 8-K, dated
March 14, 1997, File No. 033-89714).
(b) The Company filed the following reports on Form 8-
K during the first quarter of 1997:
(1) Current Report on Form 8-K, dated March
4, 1997, reporting change of control of Company.
(2) Current Report on Form 8-K, dated March
14, 1997, reporting (A) changes of control of
Company, (B) acquisition and disposition of
assets, (C) changes in Company's certifying
accountant, (D) change of Company's trading symbol
on the NASD OTC Bulletin Board and (E) audited
financial statements of the Company for the fiscal
years ended December 31, 1996 and 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
May 20, 1997
RED OAK HEREFORD FARMS, INC.
By: /S/Gordon Reisinger
________________________________________
Gordon Reisinger, President
By: /S/Gordon Reisinger
________________________________________
Gordon Reisinger, Chief AccountingOfficer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FINANCIAL DATA SCHEDULE AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
(Columnar Dollars in Thousands Except Per Share Data)
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FIRST QUARTER 1997 FORM 10-QSB OF RED OAK HEREFORD FARMS, INC., AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FINANCIAL STATEMENTS CONTAINED
THEREIN.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,290
<SECURITIES> 0
<RECEIVABLES> 1,049,126
<ALLOWANCES> 0
<INVENTORY> 1,257,492
<CURRENT-ASSETS> 2,346,254
<PP&E> 187,452
<DEPRECIATION> (58,936)
<TOTAL-ASSETS> 2,536,184
<CURRENT-LIABILITIES> 1,796,632
<BONDS> 777,647
0
0
<COMMON> 11,234
<OTHER-SE> (49,329)
<TOTAL-LIABILITY-AND-EQUITY> 2,536,184
<SALES> 8,464,897
<TOTAL-REVENUES> 8,464,897
<CGS> (8,917,106)
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (253,959)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (48,674)
<INCOME-PRETAX> (754,842)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (754,842)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
AGREEMENT
BETWEEN
AMERICAN HEREFORD ASSOCIATION
AND
RED OAK FARMS, INC.
March l4 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I1
DEFINITIONS
Section 1.1 Definitions
Section 1.2 Other Definitional Provisions
ARTICLE 1A
EFFECTIVE DATE
ARTICLE II
RESPONSIBILITIES OF RED OAK
Section 2.1 Program Specifications
Section 2.2 Cooperation with Association
Section 2.3 Protection of Trade Secrets and Exclusive
Proprietary Information
Section 2.4 Indemnification
Section 2.5 Unauthorized Use of Trademark
ARTICLE III
RESPONSIBILITIES OF ASSOCIATION
Section 3.1 Granting Licenses
Section 3.2 Development of CHB Market
Section 3.3 Assistance with Licensed Users
Section 3.4 Promotional Activities
Section 3.5 Unauthorized Use of Trademark
Section 3.6 Cooperation with Red Oak
Section 3.7 Indemnification
ARTICLE IV
ROYALTY FEES
Section 4.1 Payment of Royalty Fee
Section 4.2 Amount of Fee
Section 4.3 Payment of Fees
Section 4.4 Adjustment of the Fee
Section 4.5 Maintenance of Records; Inspection
ARTICLE V
LICENSE GRANTED
Section 5.1 Exclusive License
Section 5.2 Monitoring of Sublicensee Trademark Use
Section 5.3 Ownership of Rights
<PAGE>
ARTICLE VI
USE OF TRADEMARK
Section 6.1 Trademark Use
Section 6.2 Scope of License
Section 6.3 Notices
Section 6.4 Copyright
Section 6.5 Acknowledgment of Ownership
Section 6.6 Monitoring of Trademark Use
ARTICLE VII
COVENANTS OF RED OAK
Section 7.1 Use of Program Information
Section 7.2 Sales of Surplus CHB
Section 7.3 Compliance by Affiliates
ARTICLE VIII
QUALITY CONTROL
Section 8.1 Processing
Section 8.2 Review
Section 8.3 Promotional Materials
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
Section 9.1 Representations and Warranties of Red Oak
Section 9.2 Representations and Warranties of Association
ARTICLE X
DEVELOPMENTS
Section 1O.1 Changes to USDA Specifications
Section 10.2 Right to Develop
ARTICLE XI
INFRINGEMENT
Section 11.1 Notice of Infringement
Section 11.2 Infringement Claim Against Red Oak
ARTICLE XII
GOVERNMENTAL APPROVALS
Section 12.1 Obtaining Government Certifications
Section 12.2 Filing Governmental Reports
Section 12.3 Payment of Compliance Expenses
<PAGE>
ARTICLE XIII
TERMINATION OF EXCLUSIVE LICENSE
Section 13.1 Performance Standards
Section 13.2 Renegotiation of Performance Standards
Section 13.3 Termination of Exclusive License
Section 13.4 Termination by Red Oak
Section 13.5 Termination of the Non-Exclusive License
Section 13.6 Agreement and Non-Exclusive License
Section 13.7 Sublicenses
ARTICLE XIV
DURATION AND TERMINATION
Section 14.1 Duration
Section 14.2 Renewal of Agreement
Section 14.3 Termination
Section 14.4 Consequences of Termination
ARTICLE XV
NONCOMPETITION
Section 15.1 Noncompetition Agreement
Section 15.2 Judicial Determination
ARTICLE XVI
MISCELLANEOUS
Section 16.1 Injunctive Relief
Section 16.2 Entire Agreement
Section 16.3 Assignment
Section 16.4 Waiver
Section 16.5 Independent Contractor
Section 16.6 Headings
Section 16.7 Severability
Section 16.8 Governing Law
Section 16.9 Counterparts
Section 16.10 Notices
Section 16.11 Force Majeure
EXHIBIT I - Certified Hereford Beef Trademark
EXHIBIT 2 - Guaranty
EXHIBIT 3 - Guaranty
<PAGE>
AGREEMENT
THIS AGREEMENT is entered into as of March 14, 1997,
between American Hereford Association and Red Oak Farms,
Inc.
RECITALS
A. Association is the owner of United States
Trademark Reg. No. 1,971,889, Registered April 30,1996 for
the mark CERTIFIED HEREFORD BEEF plus Design, and desires to
protect and control the quality of the CERTIFIED HEREFORD
BEEF program and the use of such trademark.
B. Association currently licenses, and intends to
continue to license, retailers, food service outlets, or
other similar persons or entities to advertise, promote, and
sell certified Hereford beef under the aforementioned
trademark.
C. Red Oak intends to be engaged in the procurement,
feeding, processing, and distribution of beef, as a
successor to the business previously conducted by Mid-Ag,
L.C.
D. Red Oak desires to enter into agreement with
Association to arrange to provide certified Hereford beef as
contemplated in Association's certified Hereford beef
program.
In consideration of the foregoing and the mutual
covenants and promises contained herein, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement the
following terms shall have the following meanings:
"Affiliate" shall mesa any person that directly, or
indirectly through one or more intermediaries, controls or
is controlled by, or is under common control with, Red Oak.
"Agreement" shall mean this Agreement, as renewed or
modified from time to time.
"Association" shall mean American Hereford Association,
an Arizona corporation, with its principal place of business
at 1501 Wyandotte, Kansas City, Missouri 64108.
<PAGE>
"CHB" shall mean beef in whatever form processed from
Hereford or Hereford-cross cattle that is certified to be
"Certified Hereford Beef" pursuant to the rules and
regulations of the USDA.
"Effective Date" shall mean the date determined in
accordance with Article IA hereof.
"Exclusive License" shall have the meaning given to
such term in Section 5.1 hereof.
"Fee" shall have the meaning given to such term in
Section 4.1 hereof.
"Licensed User" shall mean any retailer, food service
outlet, or other similar retail level person or entity (or
wholesaler designated by Red Oak) that has agreed to
participate in the Program and has been granted a license to
use the Trademark by Association in selling CHB pursuant to
Section 3.1 hereof.
"Non-Exclusive License" shall have the meaning given to
such term in Section 13.3 hereof.
"Program" shall mean Association's Certified Hereford
Beef Program.
"Program Information" shall mean all non-public
information related to the Program, the Trademark, and any
and all other information pertaining to the Program or to
CHB.
"Red Oak" shall mean Red Oak Farms, Inc., an Iowa
corporation wholly owned by Red Oak Hereford Farms, Inc. (a
Nevada publicly traded corporation), with its principal
place of business at 2010 Commerce Drive, Red Oak, Iowa
51566.
"Surplus CHB" shall mean the amount of CHB processed by
Red Oak that exceeds the amount of CHB sold to Licensed
Users.
"Territory" shall mean (i) the United States of
America; (ii) North America (including the United States of
America, Canada and the United Mexican States); and (iii)
the remainder of the world.
"Trademark" shall mean the trademark CERTIFIED HEREFORD
BEEF, a form of which is registered in the United States
Patent and Trademark Office, Reg. No. 1,971,889, attached
as Exhibit 1 hereto.
"USDA" shall mean the United States Department of
Agriculture.
"USDA Specifications" shall mean the specifications and
guidelines approved and used by the USDA in approving beef
as CHB.
Section 1.2 Other Definitional Provisions.
(a) The words "hereof," "herein," and "hereunder" and
words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular
provision of this Agreement, and section, subsection,
schedule, and exhibit references are to this Agreement
unless otherwise specified.
(b) Words of the singular number shall be deemed to
<PAGE>
include the plural number, and vice versa, where applicable.
ARTICLE IA
EFFECTIVE DATE
The date upon which the provisions of this Agreement
shall become effective (the "Effective Date") shall be the
date upon which (i) the reorganization of Mid-Ag into Red
Oak, as contemplated in that certain letter agreement, dated
March 4, 1997, between Wild Wings, Inc. and Mid-Ag and (ii)
the transfer of all assets of Mid-Ag to, and the assumption
of all liabilities of Mid-Ag by, Red Oak are completed.
ARTICLE II
RESPONSIBILITIES OF RED OAK
Section 2.1 Program Specifications. Red Oak agrees to
use its best efforts to meet the demand for CHB of
Licensed Users. In this regard, Red Oak agrees that it
shall, without cost or liability to association:
(a) Use its best efforts to arrange for the
procurement and processing of cattle that meet Program
specifications;
(b) Use its best efforts to identify, evaluate, and
enter into processing contracts with beef packers and
processors;
(c) Affix, or cause or ensure the affixation of, the
Trademark as shown in Reg. No. 1,971,889 to all CHB
processed to Program specifications for Red Oak;
(d) Use its best efforts to distribute, market and
sell (or cause to be distributed, marketed and sold)
CHB to Licensed Users in accordance with Program
specifications. Red Oak shall maintain complete and
accurate records of the amount of CHB sold and
distributed to Licensed Users, including the identity
of all such Licensed Users, and shall make such records
available for Association's inspection from time to
time at the request of Association;
(e) Use its best efforts to arrange for the
procurement, processing, distribution, and sale on a
timely basis of the quantity of CHB required by
Licensed Users; and
(f) Use its best efforts to be ready to provide CHB to
Licensed Users no later than March , 1997.
Section 2.2 Cooperation with Association. In carrying
out its responsibilities, Red Oak shall cooperate fully with
Association in all phases of its production, distribution,
and sale of CHB.
Section 2.3 Protection of Trade Secrets and Exclusive
Proprietary Information. Red Oak recognizes that the
Trademark, Program, Program Information, Program
specifications, and any and all information, material, and
<PAGE>
documents related thereto constitute trade secrets and
exclusive proprietary information of Association. Except as
necessary to fulfill its obligations hereunder, Red Oak
shall not without the express written consent of Association
directly or indirectly disclose to any other person
whatsoever such trade secrets and exclusive proprietary
information of Association.
Section 2.4 Indemnification. Red Oak hereby agrees to
indemnify and hold harmless Association, its officers,
directors, employees, successors, and assigns against any
and all losses, damages, liabilities, or expenses of
whatever form or nature, including attorneys' fees and other
costs of legal defense, whether direct or indirect, that
they, or any one of them, may sustain or incur as a result
or arising out of any acts or omissions of Red Oak including
but not limited to: (1) breach of any provision of this
Agreement; (2) negligence or other tortious conduct; (3)
actions taken in fulfillment of Red Oak's responsibilities
under Article II hereof, (4) representations, statements or
acts not specifically authorized by Association herein or
otherwise in writing; (5) actions beyond the scope of the
license granted hereunder; (6) violation by Red Oak, or
actions causing Association to be in violation of, any
applicable law, regulation, or order in the Territory; and
(7) any claim in respect of CHB sold by Red Oak.
Section 2.5 Unauthorized Use of Trademark. Red Oak
agrees to notify Association of any unauthorized use of the
Trademark or Program Information that comes to its attention
and acknowledges that Association has the sole right and
power to take action to terminate such unauthorized use and
to prevent other unauthorized uses.
ARTICLE III
RESPONSIBILITIES OF ASSOCIATION
Section 3.1 Granting Licenses. Association agrees that
once a retailer, food service outlet, or other similar
person or entity desires to be granted a license for the
Trademark, and the granting of a license to such proposed
license holder is consistent with Association's Program,
Association will (i) make contact with the proposed license
holder to determine suitability for participation in the
Program; (ii) advise Red Oak of the identity of any proposed
license holder which Association has identified for
participation in the Program; (iii) provide Red Oak the
opportunity to enter into a sales arrangement for CHB with
the proposed license holder (including a review of the
proposed license holder's creditworthiness); and (iv) grant
a license to use the Trademark to such proposed license
holder at the same time the proposed license holder agrees
to purchase CHB from Red Oak, it being understood that
Association retains sole discretion over the granting of a
license to use the Trademark to any person.
Section 3.2 Development of CHB Market. Association
shall continue to identify and develop the market for CHB in
accordance with the guidelines of the Program.
Section 3.3 Assistance with Licensed Users.
Association shall assist Red Oak in coordinating CHB
delivery schedules and CHB supply demands with Licensed
Users.
Section 3.4 Promotional Activities. Association shall
provide information and material on CHB and the Program as
Association deems necessary to assist Red Oak. Association
<PAGE>
undertakes to review its promotional materials and
information and its assistance to Red Oak as the market for
CHB grows.
Section 3.5 Unauthorized Use of Trademark.
Association shall monitor the use of the Trademark and act
to prevent any unauthorized use of the Trademark or Program
Information.
Section 3.6 Cooperation with Red Oak. Association may
in its sole discretion make Association staff and employees
available to Red Oak to identify cattle for procurement, to
assist in the procurement of identified cattle, and to
distribute CHB to Licensed Users.
Section 3.7 Indemnification. Association hereby
agrees to indemnify and hold harmless Red Oak, its members,
directors, employees, successors and assigns against any and
all losses, damages, liabilities or expenses of whatever
form or nature, including attorneys' fees and
other costs of legal defense, whether direct or indirect,
that they, or any one of them, may sustain or incur as a
result of (1) a breach of any provision of this Agreement by
Association, (2) any claim by a third party with regard to
any action or inaction of Association under Section 3.1
hereof, and (3) any representation and warranty made by
Association herein proving to have been inaccurate, false,
or misleading.
ARTICLE IV
ROYALTY FEES
Section 4.1 Payment of Royalty Fee. Red Oak shall pay
to Association a per-head royalty fee (the "Fee") on the
number of cattle processed as CHB pursuant to this
Agreement. The Fee shall accrue to Association on the date
the processed beef is certified as CHB pursuant to USDA
specifications.
Section 4.2 Amount of Fee. The Fee shall be $5.00 per
head for each head of cattle processed as CHB during
calendar year 1997, shall be $6.00 per head for the first
100,000 head of cattle processed as CHB and $5.00 per head
for each additional head of cattle processed as CHB during
calendar year 1998 (subject to adjustment as provided in
Section 4.4 hereof), and shall be negotiated for each
subsequent calendar year as provided in Section 4.4. hereof,
provided, however, if the number of head of cattle actually
processed as CHB during calendar years 1997, 1998 and 1999
do not produce Fees payable by Red Oak to Association of at
least $500,000, $725,000 and $850,000 for 1997, 1998 and
1999, respectively, then the amount of Fees that Red Oak
shall nonetheless be required to pay to Association for such
years shall be (i) $500,000 for calendar year 1997, (ii)
$725,000 for calendar year 1998, and (iii) $850,000 for
calendar year 1999. The amount of Fees paid by Red Oak to
Association for calendar year 1997 shall be deemed to
include Fees paid by Mid-Ag, L.C. to Association for
calendar year 1997.
Section 4.3 Payment of Fees. Red Oak shall pay
Association the Fees due under this Article IV on a monthly
basis. Red Oak shall pay the Fees accrued for the previous
month no later than the 15th day of the next succeeding
month; provided, however, that: (i) for calendar year 1997,
Red Oak shall pay to Association Fees of at least $500,000
by December 31, 1997, of which at least $300,000 shall be
paid by August 31, 1997; (ii) for calendar year 1998, Red
<PAGE>
Oak shall pay to Association Fees of at least $725,000 by
December 31, 1998, of which at least $425,000 shall be paid
by August 31, 1998; and (iii) for calendar year 1999, Red
Oak shall pay to Association Fees of at least $850,000 by
December 31, 1999, of which at least $450,000 shall be paid
by August 31, 1999. Fees due but not paid shall bear
interest at an annual rate of five percent (5%) over the
prime interest rate quoted by Association's bank on the date
such Fees become due and computed from the date such Fees
become due until the date of payment.
Section 4.4 Adjustment of the Fee.
(a) Association and Red Oak shall renegotiate the Fee
on an annual basis with a view to making any adjustments
thereto that may be deemed necessary by the parties. The
first renegotiation shall take place during calendar year
1997 to take effect in calendar year 1998. Renegotiation of
the Fee shall commence on or before November 1 and shall be
concluded on or before December 15 of each year in which the
parties renegotiate the Fee.
(b) The parties agree that the Fee applicable to
calendar year 1998 will not be increased or decreased more
than ten percent (1O%) from the Fee set forth for such year
in Section 4.2 hereof and the Fee applicable to each
calendar year thereafter will not be increased or decreased
more than ten percent (10%) from the Fee in effect for the
calendar year in which the Fee renegotiations are taking
place. However, if the parties cannot agree to a
renegotiated fee for the following calendar year by December
15 of any calendar year, (1) if the calendar year next
succeeding the calendar year in which the Fee renegotiations
are taking place is an even-numbered year, then the Fee
shall be increased from the Fee set forth in Section 4.2
hereof for calendar year 1998, if the Fee renegotiations are
taking place in 1997, or from the Fee in effect for the
calendar year in which the Fee renegotiations are taking
place, if such renegotiations are taking place in any year
subsequent to 1997, by the greater of (a) five percent (5%)
or (b) the annual rate of inflation for the full calendar
year in which the Fee schedule renegotiations are taking
place as reported by the United States Federal Reserve Bank
in Kansas City on December 31 of such year, or (2) if the
calendar year next succeeding the calendar year in which the
Fee renegotiations are taking place is an odd-numbered year,
then the Fee shall remain the same as the Fee in effect for
the calendar year in which the Fee renegotiations are taking
place.
Section 4.5 Maintenance of Records; Inspection. Red
Oak shall maintain complete and accurate records of the
number of head of cattle processed as CHB under this
Agreement and shall make such records available for
Association's inspection at Association's request.
ARTICLE V
LICENSE GRANTED
Section 5.1 Exclusive License.
(a) Subject to the terms and conditions of this
Agreement, Association hereby grants Red Oak the exclusive
license and right to process, distribute, and sell CHB under
the Trademark in the Territory (the "Exclusive License"),
and to use Program Information in connection therewith,
which Exclusive License may not be assigned or transferred
to others in whole or in part, except as provided herein;
however, such Exclusive License does not extend to the sale
of CHB on a retail basis.
(b) Subject to the terms and conditions of this
<PAGE>
Agreement, Association hereby grants Red Oak the exclusive
right to use and affix the Trademark on all CHB processed,
distributed, and sold by or on behalf of or as arranged by
Red Oak in the Territory and upon all descriptive,
contractual, billing and other material referring thereto,
unless such use or affixation is prohibited by Association.
This right to use and affix the Trademark may not be
assigned or transferred to others in whole or in part,
except as provided herein, and exists only so long as CHB is
procured, processed, distributed, and sold in accordance
with the Program.
(c) Red Oak may sublicense to third parties the rights
granted under the Exclusive License if necessary to fulfill
Red Oak's obligations hereunder; provided, however, that
Association gives prior approval to any such sublicensing
arrangement, which approval shall not be unreasonably
withheld. Any sublicense agreement shall allow Association
the right to review the use of the Trademark by the
sublicensee to determine whether the Trademark is being used
by the sublicensee in conformity with this Agreement and the
Program and shall bind the sublicensee to the terms and
conditions of this Agreement (as applicable).
Section 5.2 Monitoring of Sublicensee Trademark Use.
Red Oak recognizes Association's right to maintain control
of the nature and quality of the goods and services provided
under the Trademark and the manner and use of the Trademark.
Red Oak shall review from time-to-time any sublicensee's use
of the Trademark to determine whether the Trademark is being
used in conformity with this Agreement and the Program. Red
Oak shall notify Association and such sublicensee of any
discrepancies in the use of the Trademark, and Red Oak shall
promptly act to correct any discrepancies to Association's
satisfaction.
Section 5.3 Ownership of Rights. Neither this
Agreement nor any operation hereunder or interpretation
hereof shall, at any time, be construed to transfer to, or
confer upon, Red Oak ownership of the Program Information,
the Program, or the Trademark, or to transfer to Red Oak the
right to register any of the same in its name as owner
thereof.
ARTICLE VI
USE OF TRADEMARK
Section 6.1 Trademark Use. Other than the use of its
own name, Red Oak shall not use any other names or marks
other than the Trademark on CHB processed, distributed
and/or sold by or on behalf of Red Oak.
Section 6.2 Scope of License. Except as provided
herein, Red Oak agrees not to use, during the term of the
Agreement or at any time thereafter, any of the Trademark,
any other trademark, service mark or trade or business name
of Association, or any trademarks, service marks, names or
designations deceptively or confusingly similar to the
foregoing, as a trade or business name or part thereof, of
Red Oak.
Section 6.3 Notices. Red Oak agrees to include in its
labeling of all CHB processed or sold by it or on its behalf
under this Agreement appropriate trademark and trade name
notices respecting the Trademark. Such notices must be in a
form approved in advance by Association. Such notice must
also include a legend indicating that the CHB is processed
and sold under license.
Section 6.4 Copyright. Red Oak recognizes that any and
<PAGE>
all written material or software relating to the Program and
the Program Information are protected, or are protectable,
by copyright in the name of Association. Red Oak agrees not
to take any action that would violate or cause the violation
of any Association copyright relating to CHB or jeopardize
the ability of Association to protect the Program and
Program Information by copyright in the United States of
America or any foreign country.
Section 6.5 Acknowledgment of Ownership. Red Oak
acknowledges the proprietary rights of Association in the
Trademark and the Program Information and admits the
validity of the Trademark and further agrees that it will
not contest, directly or indirectly, such proprietary rights
or the validity of the Trademark, nor aid others in doing
so.
Section 6.6 Monitoring of Trademark Use. Red Oak
recognizes Association's right to maintain control of the
nature and quality of the goods and services provided under
the Trademark and the manner and use of the Trademark.
Association shall have the right from time to time to review
Red Oak's procurement, processing, and distribution
techniques and those of its sublicensees, solely to
determine whether the Trademark is being used in conformity
with this Agreement and the Program. Association shall
advise Red Oak of any discrepancies in its or any
sublicensee's use of the Trademark; and Red Oak shall, upon
receipt of such advice, promptly correct, or cause a
sublicensee to correct, any discrepancies to Association's
satisfaction.
ARTICLE VII
COVENANTS OF RED OAK
Section 7.1 Use of Program Information. Red Oak agrees
that it will not directly or indirectly use the Program
Information furnished to it hereunder for its own use or in
the processing or sale of any products used or sold by Red
Oak, except in connection with the processing or sale of CHB
in accordance with this Agreement.
Section 7.2 Sales of Surplus CHB. Red Oak may sell
Surplus CHB to any person or entity as long as Red Oak
maintains complete and accurate records of the amount of
Surplus CHB sold and to whom such Surplus CHB was sold and
makes such records available for Association's inspection at
Association's request.
Section 7.3 Compliance by Affiliates. Red Oak shall
ensure that any and all of its agents, representatives,
employees, and Affiliates that become involved in any way in
the fulfillment of Red Oak's obligations hereunder abide by
and comply with the undertakings and covenants of Red Oak
made herein.
ARTICLE VIII
QUALITY CONTROL
Section 8.1 Processing. Red Oak shall process or have
processed on its behalf CHB at packing or processing plants
that meet Program specifications and have been approved by
Association for CHB processing. Association agrees to pre-
approve packing or processing plants at the request of Red
Oak if such plants satisfy Program specifications. Red Oak
shall process or have processed on its behalf CHB in strict
<PAGE>
conformity with the Program specifications. Association's
right to establish the standards and specifications for CHB
production shall include the right to designate, approve, or
disapprove the quality of any and all processes, material,
and techniques used for the production of CHB. Association
may withdraw its approval of a packing or processing plant
only with the consent of Red Oak; provided, however, that in
the event of a material deviation from the Program
specifications not approved by Association by any packing or
processing plant, Red Oak shall have thirty (30) days to
correct, or cause the correction of, such deviation; and if
not so corrected, Association may terminate such packing or
processing plant's participation in the Program without Red
Oak's prior written approval, with such termination to be
effective not earlier than ninety (90) days after the end of
the thirty (30) day period for correcting.
Section 8.2 Review. Association shall have the right
from time to time to review Red Oaks procurement,
processing, and distribution techniques and those of its
suppliers and sublicensees, and, where practical, to receive
samples of CHB produced by Red Oak hereunder, so as to
determine whether such CHB is being produced in conformity
with the Program specifications. Association shall advise
Red Oak in writing of any discrepancies in quality or
adherence to the Program specifications. Red Oak shall,
upon receipt of such advice, promptly correct, or cause the
correction of, any discrepancies to Association's reasonable
satisfaction.
Section 8.3 Promotional Materials. All packaging and
other material on which the Trademark appears shall be in
accordance with the Program specifications. At the request
of Association, Red Oak shall submit samples of such
materials to Association for approval. Red Oak agrees to
terminate immediately any such use of the Trademark that
Association reasonably believes not to be in accord with
Program specifications or to be materially inconsistent with
preserving and protecting the Trademark.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
Section 9.1 Representations and Warranties of Red Oak.
Red Oak hereby makes the following representations and
warranties, upon each of which Red Oak acknowledges and
agrees that Association is entitled to rely and has relied:
(a) Red Oak is a corporation duly organized, validly
existing, and in good standing under the laws of the State
of Iowa and has the power and right to enter into this
Agreement and to perform its obligations hereunder.
(b) Red Oak's principals have been extensively engaged
in the business of procuring, raising, feeding, and bringing
to market cattle and the distribution of beef, and Red Oak
has no reason to believe that it will not be able to meet
the demands for CHB by Licensed Users.
(c) This Agreement has been duly authorized, executed,
and delivered by Red Oak and constitutes a legal, valid, and
binding obligation of Red Oak enforceable against Red Oak in
accordance with its terms.
(d) Neither the execution and delivery of this
Agreement nor the consummation of the transactions
contemplated hereby violates the laws of the State of Iowa
or of the United States or any court or governmental agency
<PAGE>
order binding on Red Oak or requires the consent or approval
of, or the giving of notice by any person to or the taking
of any other action in respect of any governmental agency or
authority or any person not a party to this Agreement.
(e) Red Oak will be duly qualified to transact
business as a foreign corporation and in good standing in
each other jurisdiction in which Red Oak is required to be
registered to fulfill its responsibilities under this
Agreement prior to transacting business in such
jurisdiction.
(f) Neither Red Oak nor any of its Affiliates are
parties to litigation that could have a material adverse
effect on the ability of Red Oak to fulfill its
responsibilities hereunder if such litigation is decided
against Red Oak or such Affiliate.
(g) The Agreement, dated February 19, 1997, with
respect to the slaughter of Red Oak cattle, a copy of which
has been provided to Association, has been entered into by
Red Oak Hereford Farms, Inc. and Beef America and is in full
force and effect.
Section 9.2 Representations and Warranties of
Association. Association hereby makes the following
representations and warranties, upon each of which
Association acknowledges and agrees that Red Oak is entitled
to rely and has relied:
(a) Association is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Arizona and has the power and the right to enter
into this Agreement and to perform its obligations
hereunder.
(b) Agreement has been duly authorized, executed, and
delivered by Association and constitutes a legal, valid, and
binding obligation of Association enforceable against
Association in accordance with its terms.
(c) Association is the owner of the Trademark, which
is registered with the United States Patent and Trademark
Office as Reg. No. 1,971,589. To its knowledge, Association
is not and will not be subject to any claims that the
Trademark infringes or violates the trademark or other
proprietary rights of any other person in the United States
of America.
ARTICLE X
DEVELOPMENTS
Section 10.1 Changes to USDA Specifications.
Association shall consult with Red Oak, and keep Red Oak
regularly and fully informed, about changes in or additions
to the Program, Program Information, and the Trademark, and
any other developments relating to CHB. No change or
addition to the USDA Specifications or to the Program that
materially adversely affects the Exclusive License granted
to Red Oak hereunder and the use of the Trademark or Red
Oak's right under the Exclusive License pursuant to this
Agreement shall be implemented by Association without the
prior written approval of Red Oak.
Section 10.2 Right to Develop. Except as provided
herein, nothing in this Agreement shall limit in any way
Association's right in its sole discretion to develop,
change, or add to the Program, Program Information, and the
Trademark. Red Oak may suggest changes to the Program,
Program Information, or the Trademark, but Association
retains sole power to change the same.
<PAGE>
ARTICLE XI
INFRINGEMENT
Section 11.1 Notice of Infringement. Each party
hereto shall give notice to the other of any infringement or
threatened infringement of the Trademark which at any time
comes to its knowledge. Association has the sole power and
right to institute legal proceedings against the purported
infringer. If Association institutes such proceedings, it
shall be responsible for the payment of all costs and
expenses thereof, including attorneys' fees, and any money
judgment recovered from such action shall become the
exclusive property of Association. Association and Red Oak
agree to cooperate in the prosecution of any such action.
Section 11.2 Infringement Claim Against Red Oak. In
the event Red Oak is charged with infringement of any
trademark or other intellectual property right owned by a
third party as a result of the use of the Trademark, Red Oak
shall promptly advise Association of such charge, and
Association shall make such investigation as Association
deems appropriate and advise Red Oak of Association's
conclusions regarding the merits of such charge.
Association may take such action as Association in its sole
discretion deems appropriate to abate any such charge of
infringement. Except as aforesaid, Association shall have
no responsibility to protect, indemnify, or hold Red Oak
harmless against charges of infringement, and Red Oak shall
bear Red Oaks own expense in any resulting litigation.
Association may, however, at its option and at its own
expense join in any such suit and assume fall responsibility
and control thereof.
ARTICLE XII
GOVERNMENTAL APPROVALS
Section 12.1 Obtaining Government Certifications. It
shall be the responsibility of Red Oak to obtain at its sole
cost and expense any governmental approval or other
certification that may be necessary or appropriate for it to
perform its obligations hereunder, including without
limitation approvals of this Agreement and any approvals
with respect to CHB processed hereunder from the USDA.
Section 12.2 Filing Governmental Reports. Red Oak
shall produce and file at its sole cost and expense all
reports required by any governmental agencies that may be
necessary or appropriate for it to perform its obligations
hereunder.
Section 12.3 Payment of Compliance Expenses.
Association and Red Oak acknowledge that under procedures
established with the USDA, Red Oaks predecessor in the
business proposed to be conducted by Red Oak obtained
certification through monitoring and auditing processes
administered by Association. Pursuant to this Agreement, if
the costs of such monitoring and auditing increase after the
date of this Agreement, then Red Oak shall pay the
additional amount of such costs, within 30 days of the date
of invoice therefor, as long as such procedures are in
place.
<PAGE>
ARTICLE XIII
TERMINATION OF EXCLUSIVE LICENSE
Section 13.1 Performance Standards. During calendar
year 2000, Red Oak shall be required to arrange for
processing as CHB at least 165,000 head of cattle.
Section 13.2 Renegotiation of Performance Standards.
(a) If this Agreement is renewed pursuant to Section
14.2 hereof, then the parties shall negotiate in good faith
during the first six months of the year 2000 and each
calendar year thereafter to establish performance standards
for the next calendar year. Subject to Section 13.2(b)
hereof, in such negotiation of new performance standards for
calendar year 2001 and beyond, (1) Association may require
that the new performance standards represent an amount not
less than the greater of (a) the number of head of cattle
actually processed as CHB in the calendar year immediately
preceding the calendar year in which the negotiations are
taking place, and (b) the number of head of cattle actually
processed as CHB in the full calendar year in which the
negotiations are taking place, or (2) notwithstanding any
other provision of this Section 13.2, Red Oak may require
that the new performance standards represent an amount not
more dm one hundred ten percent (110%) of the number of head
of cattle required under this Agreement in the calendar year
in which the negotiations are taking place.
(b) Notwithstanding Section 13.2(a) hereof, in the
event the number of head of cattle actually processed as CHB
by Red Oak in any calendar year equals 500,000 or more,
performance standards shall be negotiated according to the
provisions of this Section 13.2(b). In the calendar year
following the calendar year in which Red Oak actually
processed 500,000 or more head of cattle as CHB pursuant to
this Agreement, the parties shall negotiate in good faith
during the first six months of such calendar year to
establish performance standards for the immediately
succeeding calendar year. In such negotiations of a new
performance standard, (1) Association may require that the
new performance standard shall represent an amount not less
than the average of (i) the number of head of cattle
actually processed as CHB in the calendar year immediately
preceding the calendar year in which the negotiations are
taking place, and (ii) the number of head of cattle actually
processed as CHB in the calendar year immediately preceding
the calendar year referred to in clause (a) of this
sentence, or (2) notwithstanding any other provision of this
Section 13.2, Red Oak may require that the new performance
standard represents an amount not more than one hundred ten
percent (110%) of the number of head of cattle required to
be processed by Red Oak in the calendar year in which the
negotiations are taking place pursuant to Section 13.2(a)
hereof. If the average number of head of cattle referred to
in clause (1) of the preceding sentence equals less than
500,000, then Section 13.2(a) shall apply in renegotiating
the performance standard for the calendar year next
succeeding the calendar year in which such average was
considered in negotiating the performance standard.
(c) The Exclusive License shall terminate at the end
of the calendar year during which the parties fail to agree
on performance standards for the next succeeding calendar
year and the provisions of Section 13.3(b) shall apply.
Section 13.3 Termination of Exclusive License.
(a) If Red Oak does not meet the performance standard
established pursuant to Section 13.1 or 13.2 hereof for a
specific calendar year, then Association may at its sole
discretion terminate Red Oak's Exclusive License granted
<PAGE>
under this Agreement and grant Red Oak a non-exclusive
license and right to process, distribute, and sell CHB under
the Trademark in the Territory, and to use Program
Information in connection therewith (the "Non-Exclusive
License"). Any termination of the Exclusive License and the
granting of the Non-Exclusive License pursuant to this
Section 13.3(a) shall be effective on June 30 of the
calendar year immediately following the calendar year in
which Red Oak did not meet the required performance
standard.
(b) In the event the Exclusive License is terminated
pursuant to Section 13.2 hereof, Association shall grant a
Non-Exclusive License to Red Oak.
(c) If Association terminates the Exclusive License
and grants the Non-Exclusive License pursuant to this Section
13.3, then Red Oak shall continue to supply CHB to Licensed
Users that Red Oak was supplying with CHB at the time
of such termination for the remaining term of this Agreement
on terms no less favorable to the Licensed Users than those
that were in effect at any time during the year as to which
the termination relates. Under the Non-Exclusive License,
Red Oak shall not supply CHB to any Licensed User that Red
Oak was not supplying with CHB at the time of the
termination of the Exclusive License.
Section 13.4 Termination by Red Oak. If Red Oak does
not meet the performance standard established pursuant to
Section 13.1 or 13.2 hereof for any calendar year, then Red
Oak may notify Association that it wishes to terminate the
Agreement at the end of the then existing term. Such notice
must be given to Association prior to December 15 of any
calendar year. Upon receipt of such notice by Association,
the Exclusive License granted 'pursuant to Article V hereof
shall be deemed terminated and the Non-Exclusive License
shall be granted to Red Oak. Red Oak's rights and
responsibilities under such Non-Exclusive License shall be
the same as described in Section 13.3 hereof.
Section 13.5 Termination of the Non-Exclusive License.
In the event a Non-Exclusive License is granted by
Association pursuant to Section 13.3 or 13.4 hereof, this
Agreement shall not automatically renew as provided in
Section 14.2 hereof but shall terminate as provided in this
Section 13.5. This Agreement and any Non-Exclusive License
shall terminate upon the earlier to occur of: (1) the
expiration of the then existing term of the Agreement, and
(2) any termination of this Agreement pursuant to Section
14.3 hereof.
Section 13.6 Agreement and Non-Exclusive License. In
the event that Association grants a Non-Exclusive License to
Red Oak pursuant to this Article XIII, the provisions of
this Agreement (to the extent applicable) shall remain in
full force and effect with respect to Red Oak's obligations
under such Non-Exclusive License, including, but not limited
to, Red Oaks obligation to pay Fees to Association.
Section 13.7 Sublicenses. In the event that Red Oaks
Exclusive License becomes a Non-Exclusive License pursuant
to this Article XIII, all sublicenses granted by Red Oak
pursuant to Section 5.1(c) hereof shall be subject to the
terms and conditions upon which Association granted such Non-
Exclusive License. All sublicenses shall terminate at the
same time the Non-Exclusive License terminates hereunder.
<PAGE>
ARTICLE XIV
DURATION AND TERMINATION
Section 14.1 Duration. Unless terminated earlier as
provided hereinafter, this Agreement shall be effective on
the Effective Date and remain in force through and including
December 31, 2000.
Section 14.2 Renewal of Agreement. This Agreement
shall automatically renew for a three year period beginning
January 1 of each calendar year, commencing on January 1,
2000, unless the Exclusive License has been terminated and a
Non-Exclusive License granted pursuant to Article XIII
hereof or unless the Agreement is terminated pursuant to
Section 14.3 hereof.
Section 14.3 Termination. This Agreement may be terminated:
(a) immediately by mutual consent of the parties at
any time;
(b) subject to Section 16.3 hereof, immediately by
Association upon written notice to Red Oak in the event of
the sale of all or substantially all of Red Oaks properties
and business to a third party, the merger of Red Oak with
another person or entity, a change in control of either Red
Oak or Red Oak Hereford Farms, Inc., or dissolution of Red
Oak.
(c) immediately by Association upon written notice to
Red Oak in the event that one or both of the following
contingencies have not occurred within 120 days after the
date of this Agreement:
(i) Red Oak shall hire a new chief executive
officer who is given authority to manage Red Oak; and
(ii) Red Oak Hereford Farms, Inc. shall enter into
a binding contract to acquire 100 percent of the
outstanding capital stock of Midland Cattle Company;
(d) immediately upon written notice to Red Oak in the
event that Red Oak Hereford Farms, Inc. does not acquire 100
percent of the outstanding capital stock of Midland Cattle
Company by June 30, 1998;
(e) immediately by Association upon written notice to
Red Oak in the event that the Board of Directors of Red Oak
does not include two directors who each have at least five
years' experience in the production of Hereford cattle.
(f) immediately by Association upon written notice to
Red Oak in the event Red Oak fails to pay when due any Fees
and fails to cure such non-payment within thirty (30) days
from the date of such notice;
(g) immediately by Association upon written notice to
Red Oak in the event that Red Oak Hereford Farms, Inc. does
not execute and deliver to Association Guaranties in the
forms attached hereto as Exhibits 2 and 3 on or before the
earlier to occur of: (i) the date which is three (3) days
after Red Oak becomes a wholly-owned subsidiary of Red Oak
Hereford Farms, Inc. or (ii) seven (7) days after the date
of this Agreement; and
(h) immediately by either party upon written notice to
the other party in the event that such other party shall be
in default in the performance of its material obligations
hereunder and such default is not remedied within sixty (60)
<PAGE>
days after notice thereof by the nondefaulting party;
provided, however, that if the defaulting party is working
in good faith and with its best efforts to cure such default
but that such default cannot be cured despite such efforts
within the said sixty (60) day period, the defaulting party
shall have a final period of an additional forty-five (45)
days to cure the default.
Section 14.4 Consequences of Termination.
(a) No termination of this Agreement pursuant to any
cause whatsoever shall release Red Oak from liability to
Association with respect to any payment of Fees already
accrued, any liabilities arising out of the provisions for
indemnification, or the maintenance of Program Information
on a confidential and secret basis pursuant to this
Agreement, nor shall such termination affect any of the
provisions of Sections 3.7, 6.2, 6.4, 6.5, 7.3, 11.2, 14.4,
15.1, 15.2 or 16.1 hereof.
(b) Upon termination of this Agreement, pursuant to
any cause whatsoever (other than a termination pursuant to
paragraph (a) or (c) of Section 14.3 hereof), during
calendar year 1997, 1998 or 1999, all Fees required to be
paid to Association by Red Oak for the calendar year in
which such termination occurs pursuant to Section 4.2 of
this Agreement and not theretofore paid shall become
immediately due and payable to Association.
(c) Upon termination of this Agreement, pursuant to
any cause whatsoever, Red Oak shall immediately pay to
Association all Fees due and shall deliver to Association at
its principal offices all documents and materials pertaining
to the Trademark, Program, Program Information, and any
other information pertaining to CHB supplied by Association
to Red Oak pursuant to this Agreement, all of which shall
thereafter remain the sole and exclusive property of
Association.
(d) Upon any termination of this Agreement, pursuant
to any cause whatsoever, all licenses, sublicenses,
authorities, rights and privileges granted hereunder shall
terminate and Red Oak and any sublicensee of Red Oak shall
cease to use the Trademark, Program, Program Information,
and any other information pertaining to CHB supplied by
Association to Red Oak pursuant to this Agreement.
ARTICLE XV
NONCOMPETITION
Section 15.1 Noncompetition Agreement. During the term
of this Agreement and for a period of 18 months after the
date this Agreement terminates or is terminated as provided
in Section 13.5 or Article XIV hereof, Red Oak agrees that
it will not, directly or indirectly:
(a) create or assist in the creation of any program,
plan, or project pertaining to Hereford beef designed to
compete with Association's Program;
(b) divert or attempt to divert Licensed Users or
potential Licensed Users from buying CHB or participating in
the Program; and
(c) entice or induce or in any manner influence any
person who is or shall be in the employ or service of
Association to leave such employ or service for the purpose
of engaging in a business that may be in competition with
the Association's Program.
<PAGE>
Section 15.2 Judicial Determination. If a final
judicial determination or administrative order is made that
the terms of Section 15.1 hereof constitute an unreasonable
or otherwise unenforceable restriction against Red Oak, Red
Oak and Association agree that such provision shall be void
only to the extent that such judicial determination or
administrative order finds such provision to be unreasonable
or otherwise unenforceable.
ARTICLE XVI
MISCELLANEOUS
Section 16.1 Injunctive Relief. Red Oak acknowledges
that the Trademark, Program, Program Information, and all
other information pertaining to CHB comprises valuable
property of Association and that any unauthorized use or
disclosure of the same would cause irreparable injury to
Association that would not be fully compensable in monetary
damages. Accordingly, the provisions of this Agreement may
be enforced by specific or injunctive relief in a court of
competent jurisdiction without the necessity of posting bond
or proving special damages or lack of an adequate remedy at
law.
Section 16.2 Entire Agreement. This Agreement,
including the Schedules and Exhibit hereto, represents the
entire Agreement between the parties on the subject matter
hereof and supersedes all prior discussions, agreements, and
understandings of every kind and nature between them. There
are no conditions to this Agreement not expressed herein.
No modification of this Agreement shall be effective unless
in writing and signed by both parties.
Section 16.3 Assignment. This Agreement may be
assigned, in whole or in part, voluntarily or by operation
of law, or otherwise transferred by either party only with
the written consent of the other, which consent will not be
unreasonably withheld.
Section 16.4 Waiver. The failure of either party to
require performance by the other party of any provision
hereof, or to enforce any remedies it may have against the
other party, shall in no way affect the right thereafter to
enforce this Agreement and require full performance by the
other party. The waiver by either party of any breach of
any provision of this Agreement shall not constitute a
waiver of any succeeding breach of that provision or any
other provision.
Section 16.5 Independent Contractor. The parties agree
that Red Oak and Association are independent contractors.
Under no circumstances shall either party hold itself out as
or be considered an agent, employee, partner, or
representative of the other or otherwise attempt to bind the
other.
Section 16.6 Headings. Any headings used herein are
for convenience of reference only and are not part of this
Agreement, nor shall they in any way affect the
interpretation hereof.
Section 16.7 Severability. Except as expressly
provided herein, and except with respect to Red Oak's
obligation to make payments of Fees to Association as
provided herein, if any provision of this Agreement shall be
adjudicated to be invalid or unenforceable in any action or
proceeding, whether in its entirety or in any portion, then
<PAGE>
such part shall be deemed amended, if possible, or deleted,
as the case may be, from the Agreement in order to render
the remainder of the Agreement and any provision thereof
both valid and enforceable.
Section 16.8 Governing Law. This Agreement shall be
construed, enforced, and performed in accordance with the
laws of the State of Missouri, without reference to the
principles of conflicts of laws.
Section 16.9 Counterparts. This Agreement may be
executed in counterparts, each of which shall be an
original, and all of which, taken together, shall constitute
a single instrument.
Section 16.10 Notices. Any notice required or
permitted hereunder shall be in writing and shall be deemed
to have been duly given if (a) sent by registered or
certified mail, postage prepaid, return receipt requested,
(b) hand delivered or sent by private courier or messenger
service, or (c) sent by facsimile transmission with a
confirmation copy as provided in (a) or (b) above, to the
parties at their respective addresses or facsimile numbers
set forth below, or such other address or facsimile number
as either party shall notify the other in writing:
If to Association: American Hereford Association
1501 Wyandotte
Kansas City, MO 64108-1222
Facsimile No.: 816-842-6931
Attn: H. H. Dickenson
with a copy to: Richard N. Nixon
Stinson, Mag & Fizzell, P.C.
1201 Walnut Street
P.O. Box 419251
Kansas City, MO 64141-6251
Facsimile No.: 816-691-3495
If to Red Oak: Red Oak Farms, Inc.
_________________
_________________
_________________
Attn:____________
with a copy to: _________________
_________________
_________________
<PAGE>
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 again with full force and
effect. In any situation in which either party claims an
excuse for nonperformance under this Section 16.1 1, 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 this
Agreement to be duly executed as of the date first written
above.
AMERICAN HEREFORD ASSOCIATION
By:_________________________
Name: H. H. Dickenson
Title: Executive Vice President
RED OAK FARMS, INC.
By:_________________________
Name:
Title:
<PAGE>
CUSTOM SLAUGHTER AND FABRICATION AGREEMENT
THIS AMENDMENT TO CUSTOM SLAUGHTER AND FABRICATION
AGREEMENT (the "Amendment") is executed as of the 9th day of
April, 1997, by BEEF AMERICA (`'Beef America"), RED OAK
HEREFORD FARMS, INC. ("Hereford'') and RED OAK FARMS, INC.
('`Red Oak Farms, Inc ")
WITNESSETH:
WHEREAS, Beef America and Hereford are parties to that
certain Custom Slaughter and Fabrication Agreement (the
"Agreement") dated February 19, 1997; and
WHEREAS, because Red Oak Farms, Inc., rather than
Hereford, purchases and sells beef, the parties, intended
That Red Oak Farms, Inc., rather than Hereford, would be a
party to the Agreement and have therefore agreed to execute
this Amendment for the purpose of substituting Red Oak
Farms, Inc. for Hereford thereunder.
NOW, THEREFORE, for good and valuable consideration,
the parties hereby amend the Agreement as follows:
1. Substitution of Red Oak Farms, Inc. The parties
hereby acknowledge and agree that Red Oak Farms, Inc. shall
be substituted for Hereford under the Agreement. All
references in the Agreement to Hereford shall hereafter be
deemed to refer to Red Oak Farms, Inc., rather than to
Hereford. Red Oak Farms, Inc. hereby agrees to assume and
be bound by and timely perform, observe, discharge and
otherwise comply with all terms, covenants, conditions and
obligations of Hereford under the Agreement as though Red
Oak Farms, Inc, was the original signatory thereto. Beef
America hereby agrees to look to Red Oak Farms, Inc. for the
performance of such duties and obligations.
2. Interpretation. If there is a conflict between the
terms of this Amendment and the terms of the Agreement, the
terms of this Amendment control. Except as expressly amended
hereby, the Agreement remains in full force and effect as
between Beef America and Red Oak Farms, Inc.
3. Miscellaneous. This Amendment may be executed in
counterparts and constitutes the parties' entire
understanding concerning the subject matter hereof. No prior
or contemporaneous representations, promises or agreements
relating to the subject matter hereof and not embodied in
this Amendment are of any force or effect. This Amendment
shall not be modified except in a writing signed by all
parties hereto. If any provision of this Amendment is held
to be invalid or unenforceable, the remaining provisions
shall not be affected. This Amendment shall be binding upon
and shall inure to the benefit of the parties hereto and
their respective heirs, representatives, successors and
assigns.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
AMENDMENT TO CUSTOM SLAUGHTER AND FABRICATION AGREEMENT as
of the day and year first above written.
BEEF AMERICA
By:__________________________________
Its:__________________________________
RED OAK HEREFORD FARMS,INC.
By:___________________________________
Its:___________________________________
RED OAK FARMS, INC.
By:__________________________________
Its:___________________________________
<PAGE>
CUSTOM SLAUGHTER AND FABRICATION AGREEMENT
BETWEEN BEEF AMERICA
AND
RED OAK HEREFORD FARMS, INC.
THIS AGREEMENT is made and entered into this 19th day
of February, 1997 by and between Beef America, 14748 W.
Center Rd., Omaha, NE and Red Oak Hereford Farms, Inc., Red
Oak, IA 51566.
WHEREAS, Beef America is engaged in the business of
slaughtering and fabricating beef and owns and operates a
plant to do so in Norfolk, NE which is subject to United
States Department of Agriculture (USDA) inspection. Beef
America desires to provide fee-based slaughter and
fabrication services to Red Oak Hereford Farms, Inc. as well
as to purchase designated offal and by-products.
WHEREAS, Red Oak Hereford Farms, Inc. is engaged in the
business of purchasing live beef animals and marketing and
selling fabricated beef. Red Oak Hereford Farms, Inc.
desires to solicit slaughter and fabrication services for
beef animals meeting Certified Hereford Beef certification.
Red Oak Hereford Farms, Inc. desires to sell to Beef America
certain offal and by-product items of which Red Oak Hereford
Farms, Inc. does not market and sell. Red Oak Hereford
Farms, Inc. also desires to sell to Beef America certain
carcasses that do not meet the USDA certification for
Certified Hereford Beef.
NOW, THEREFORE, in consideration of the promises and
mutual covenants set forth in the AGREEMENT, the parties
agree as follows:
1. Beef America will slaughter and fabricate 800 to 4,000
Certified Hereford Beef carcasses per week. If cattle
numbers fall outside this range for more than one week, Beef
America has the option to terminate this agreement and a new
agreement between Beef America and Red Oak Hereford Farms,
Inc. will be reached.
1A. Red Oak Hereford Farms will make available to
Beef America 20,000 shares of stock in Red Oak
Hereford Farms, Inc.
2. Beef America will purchase all carcasses that do not
meet USDA specifications for Certified Hereford Beef
according to a formula pricing mechanism whereas the base
price is the average USDA reported Nebraska "flat in the
beef' price for the week of slaughter. This base price is
then adjusted to a Choice, Yield Grade 3 price weekly
according to Beef America's average grading. Premiums will
be offered to cattle grading USDA Prime and USDA Yield Grade
I and 2 within the USDA Prime and Choice grade. Discounts
from the USDA Choice, Yield Grade 3 cost will be applied to
<PAGE>
cattle grading USDA Select or lower, USDA Yield Grade 4 or
greater, carcasses weighing less than 550 pounds, and
carcasses weighing more than 950 pounds. Beef America
reserves the right to adjust these premiums and discounts
weekly as needed to adjust to current grading. All carcasses
that can not be fabricated by Beef America (Dark Cutters,
Measled Beef, Blood Spots) will be purchased by Beef America
at the FOB value that Beef America receives. Beef America
will supply to Red Oak Hereford Farms, Inc. all current
pricing, premium and discount schedules.
3. Beef America will purchase from Red Oak Hereford Farms,
inc. all offal items (which are routinely processed by Beef
America) from slaughtered cattle under this agreement. The
purchase price will be Beef America's closing inventory
price of these items determined the week prior to slaughter.
Beef America will provide to Red Oak Hereford Farms, Inc.
documentation of all offal prices, weights and yields for
the time period representing the slaughter of Certified
Hereford Beef Red Oak Hereford Farms, Inc. has the option to
market any offal items.
4. Beef America will purchase from Red Oak Hereford Farms,
Inc. all hides from slaughtered cattle under this agreement.
The purchase price will be determined by the previous week's
average of the Chicago Daily Hide and Tallow Market Quotes.
All hides will be graded, weighed and processed separately
and a weekly production report will be sent to Red Oak
Hereford Farms, Inc.
5. Beef America will provide to Red Oak Hereford Farms,
Inc. the fabrication yield information on the Certified
Hereford Beef that is processed. Beef America may purchase
fabricated beef items from Red Oak Hereford Farms, Inc. but
is under no obligation to do so.
6. Beef America's payment to Red Oak Hereford Farms, Inc.
will be a net payment (payment for non-certified cattle,
plus offal, plus hides, minus the slaughter and fabrication
fee) closed out weekly with a check issued to Red Oak
Hereford Farms, Inc. within 7 days of slaughter.
7. Red Oak Hereford Farms, Inc. will pay Beef America a
sum of $40.00 for every carcass slaughtered but not
fabricated (non-certified cattle). Red Oak Hereford Farms,
Inc. will pay Beef America according to the following scale
for every carcass fabricated.
Number of Head Fabricated Fee/head
1st 2000 $100.00
Next 1000 $ 95.00
Next 1000 $ 90.00
7A. Cost revised annually for actual cost increases.
8. Red Oak Hereford Farms, Inc. will deliver the cattle
for weekly slaughter to the plant either the evening before
or the morning of the slaughter to be scheduled with Beef
America cattle buyers.
9. Red Oak Hereford Farms, Inc. will notify the Omaha
corporate office (Paul Bergston) as to the number of cattle
to be delivered each week. This needs to be accomplished by
10:00 A.M. Tuesday.
10. Red Oak Hereford Farms, inc. will be responsible to
order, deliver and pay for all custom boxes for Certified
Hereford Beef Red Oak Hereford Farms, inc. will own the
<PAGE>
inventory of custom boxes. Each weekly close-out will
include a credit back to Red Oak Hereford Farms, inc. for
Beef America's regular cost of boxes.
11. Red Oak Hereford Farms, inc. will communicate with
Norfolk Fabrication (Dennis Sydow) as to fabrication
instructions or changes by 10:00 A.M. Tuesday of each week.
If Beef America purchases any product, this information must
be part of the fabrication order ("make sheet"). Red Oak
Hereford Farms, inc. needs to inform Beef America of the
outcome of partial boxes (i.e., shipped, sold to Beef
America?).
12. Red Oak Hereford Farms, Inc. will provide Beef America
with boxed beef shipping orders and truck schedules for the
entire weekly fabrication production (if the carcasses are
fabricated on Saturday, then orders and schedules must be in
by Friday at noon). Beef America's boxed beef inventory
space is limited which requires an "in and out" scheduling
of Certified Hereford Beef to eliminate potential problems.
13. Red Oak Hereford Farms, inc. will have a representative
present at the plant the day of slaughter and also the day
of fabrication.
TERM. This AGREEMENT commences on the day that this
agreement is executed and shall terminate March 1, 2000
unless terminated sooner by a) mutual consent of both
parties; b) if either party becomes insolvent or bankrupt;
c) violation of the terms of this agreement (with a 30 day
continuation period); or d) by either party for any reason
after 120 day written notification. Section c) is not
applicable to paragraph 2.
AMENDMENTS. This agreement may be amended at any time by
mutual consent.
BINDING EFFECT. This agreement shall be binding on the
parties hereto and their respective heirs, executors,
successors, and/ assigns.
Signed Date Signed Date
____________________________ ____________________________
President, President,
Beef America Red Oak Hereford Farms, Inc.
<PAGE>
CLIENT SERVICE AGREEMENT
THIS AGREEMENT is made and entered into this eleventh day of
March, 1997 by and between MEDIACOMM MARKETING
INTERNATIONAL, located at 200 Union Boulevard, Suite 440,
Denver, Colorado 80228, hereinafter sometimes referred to as
(MMI) and RED OAK HEREFORD FARMS INC. located at 2010
Commerce Drive, Red Oak, Iowa 51566, hereinafter sometimes
referred to as ("HERF") or the ("Company").
WITNESSETH:
WHEREAS, MMI is a financial public relations and direct
marketing advertising firm specializing in the dissemination
of information about publicly traded companies, and;
WHEREAS, HERF, represents a publicly held or soon to be
publicly held company with its common stock trading on one
or more stock exchanges and/or Over The Counter, NASDAQ or
the Vancouver Stock Exchange, and;
WHEREAS, HERF, desires to publicize its representative with
the intention of making its name and business better known
to its shareholders, investors, and brokerage houses, and;
WHEREAS, MMI is willing to accept the Company, on a best
efforts basis, as a client.
NOW THEREFORE, in consideration of the mutual covenants
herein contained, it is agreed:
1. INFORMATION PACKAGE: The Company shall furnish an
Information Package to MMI including disclosure and filing
materials, financial statements, business plans, promotional
materials, annual reports and press releases. MMI may rely
on, and assume the accuracy of the Information Package.
2. MARKETING PROGRAM: Based on the information
Package, MMI will initiate and complete all service set
forth proposal dated March 11, 1997 with adjustments for
later starting date and/or holiday consideration.
3. TIME OF PERFORMANCE: Services to be performed
under this Agreement shall commence March 17, 1997 and shall
continue until completion, which generally is expected to
occur within three months.
4. COMPENSATION AND EXPENSES: In consideration of the
services to be performed by MMI, the Company agrees to pay
compensation to MMI of $90,000.00 U.S. in cash as set forth
below, time being of the essence.
5. PAYMENT: MMI shall be entitled to receive from the
Company installments, upon the following terms and
conditions:
(A) $30,000.00 (cash) Due March 17, 1997.
(B) $30,000.00 (cash) Due April 14, 1997.
(C) $30,000.00 (cash) Due May 12, 1997.
6. ENTIRETY OF AGREEMENT: This writing contains the
entire agreement of the parties and excludes any verbal
guarantees, assurances or representations. Proper venue and
jurisdiction shall be in the District Court in Denver
County, Colorado.
<PAGE>
Executed as a sealed instrument as of the day and year first
above written.
MEDIACOMM MARKETING INTERNATIONAL, INC.
BY:____________________________DATE: 3/11/97
Don Montague - President
RED OAK HEREFORD FARMS INC.
BY:___________________________ DATE: 3/1/97
Gordon Reisinger- President
<PAGE>
COMMERCIAL LEASE
THIS LEASE is made on the 1 day of March, 1997.
The Landlord hereby agrees to lease to the Tenant, and the
Tenant hereby agrees to hire and take from the Landlord, the
Leased Premises described below pursuant to the terms and
conditions specified herein:
LANDLORD: Gordon & Barbara Reisinger TENANT(S): Red Oak
Farms, Inc.
Address: R.R. 3 Address: 2010 Commerce Drive
Red Oak, IA 51566 Red Oak, IA 51566
1. Leased Premises. The Leased Premises are those
premises described as:
Office space located at 2010 Commerce Drive
2. Term. The term of the Lease shall be for a period of
____ year(s) commencing on the 1 day of March , 1997
ending on the ____ day of ________, 19__ unless sooner
terminated as hereinafter provided. If Tenant remains in
possession of the Leased Premises with the written consent
of the Landlord after the lease expiration date stated
above, this Lease will be converted to a month-to-month
Lease and each party shall have the right to terminate tile
Lease by giving at least one month's prior written notice to
the other party.
3. Rent. Tenant agrees to pay the ANNUAL RENT of Thirty
Thousand Dollars ($30,000) payable in equal installments
$2,500 in advance on the first day of each and every
calendar month during the full term of this Lease.
4. Rent Adjustment. If in any tax year commencing with
the fiscal year , the real estate taxes on the land
and buildings, of which the Leased Premises are a part, are
in excess of the amount of the real estate taxes thereon for
the fiscal year (hereinafter called the "Base Year"), Tenant
will pay to Landlord as additional rent hereunder, when and
as designated by notice in writing by Landlord,
per cent of such excess that may occur in each year
of the term of this Lease or any extension or renewal
thereof and proportionately for any part of a fiscal year.
5. Security Deposit. The sum of $ 0 Dollars ($ 0 )
is deposited by the Tenant with the Landlord as security for
the faithful performance of all the covenants and conditions
of the lease by the said Tenant. If the Tenant faithfully
performs all the covenants and conditions on his part to be
performed, then the sum deposited shall be returned to the
Tenant.
6. Delivery of Possession. If for any reason the Landlord
cannot deliver possession of the leased property to the
Tenant when the lease term commences, this Lease shall not
be void or voidable, nor shall the Landlord be liable to the
Tenant for any loss or damage resulting therefrom. However,
there shall be an abatement of rent for the period between
the commencement of the lease term and the time when the
Landlord delivers possession.
7. Use of Leased Premises. The Leased Premises may be
used only for the following purpose(s):
8. Utilities. Except as specified below, the Tenant shall
be responsible for all utilities and services that are
furnished to the Leased Premises. The application for and
connecting of utilities, as well as all services, shall be
made by and only in the name of the Tenant: (List
exceptions, if any)
9. Condition of Leased Premise; Maintenance and Repair.
The Tenant acknowledges that the Leased Premises are in good
order and repair. The Tenant agrees to take good care of
and maintain the Leased Premises in good condition
throughout the term of the Lease.
The Tenant, at his expense, shall make all necessary repairs
and replacements to the Leased Premises, including the
repair and replacement of pipes, electrical wiring, heating
and plumbing systems, fixtures and all other systems and
appliances and their appurtenances. The quality and class of
all repairs and replacements shall be equal to or greater
than the original worth. If Tenant defaults in making such
repairs or replacements, Landlord may make them for Tenant's
account, and such expenses will be considered additional
rent.
10. Compliance with Laws and Regulations. Tenant, at its
expense, shall promptly comply with all federal, state, and
municipal laws, orders, and regulations, and with all lawful
directives of public officers, which impose any duty upon it
or Landlord with respect to the Leased Premises. The Tenant
at its expense, shall obtain all required licenses or
permits for the conduct of its business within the terms of
this lease, or for the making of repairs, alterations,
improvements, or additions. Landlord, when necessary, will
join with the Tenant in applying for all such permits or
licenses.
11. Alterations and Improvements. Tenant shall not make
any alterations, additions, or improvements to, or install
any fixtures on, the Leased Premises without Landlord's
prior written consent. If such consent is given, all
alterations, additions, and improvements made, and fixtures
installed by Tenant shall become Landlord's property at the
<PAGE>
end of the Lease/term. Landlord may, however, require
Tenant to remove such fixtures, at Tenant's expense, at the
end of the Lease term.
12. Assignment/Subletting Restrictions. Tenant may not
assign this agreement or sublet the Leased Premises without
the prior written consent of the Landlord. Any assignment,
sublease or other purported license to use the Leased
Premises by Tenant without the Landlord's consent shall be
void and shall (at Landlord's option) terminate this Lease.
13. Insurance.
(i) By Landlord. Landlord shall at all times during the
term of this Lease, at its expense, insure and keep in
effect on the building in which the Leased Premises are
located fire insurance with extended coverage. The Tenant
shall not permit any use of the Leased Premises which will
make voidable any insurance on the property of which the
Leased Premises are a part, or on the contents of said
property or which shall be contrary to any law or regulation
from time to time established by the applicable fire
insurance rating association. Tenant shall on demand
reimburse the Landlord, and all other tenants, the full
amount of any increase in insurance premiums caused by the
Tenant's use of the premises.
(ii) By Tenant. Tenant shall, at its expense, during
the term hereof, maintain and deliver to Landlord public
liability and property damage and plate glass insurance
policies with respect to the Leased Premises. Such policies
shall name the Landlord and Tenant as insureds, and have
limits of at least $ for injury or death to any
one person and $ for any one accident, and $
with respect to damage to property and with full coverage
for plate glass. Such policies shall be in whatever form
and with such insurance companies as are reasonably
satisfactory to Landlord, shall name the Landlord as
additional insured, and shall provide for at least ten days'
prior notice to Landlord of cancellation.
14. Indemnification of Landlord. Tenant shall defend,
indemnify, and hold Landlord harmless from and against any
claim, loss, expense or damage to any person or property in
or upon the Leased Premises, arising out of Tenant's use or
occupancy of the Leased Premises, or arising out of any act
or neglect of Tenant or its servants, employees, agents, or
invitees.
15. Condemnation. If all or any part of the Leased Premises
is taken by eminent domain, this Lease shall expire on the
date of such taking, and the rent shall be apportioned as of
that date. No part of any such award shall belong to Tenant.
16. Destruction of Premises. If the building in which the
Leased Premises is located is damaged by fire or other
casualty, without Tenant's fault, and the damage is so
extensive as to effectively constitute a total destruction
of the property or building, this Lease shall terminate and
the rent shall be apportioned to the time of the damage. In
all other cases of damage without Tenant's fault, Landlord
shall repair the damage with reasonable dispatch, and if the
damage has rendered the Leased Premises wholly or partially
untenantable, the rent shall be apportioned until the damage
is repaired. In determining what constitutes reasonable
dispatch, consideration shall be given to delays caused by
strikes, adjustment of insurance, and other causes beyond
the Landlord's control.
17. Landlord's Rights upon Default. In the event of any
breach of this lease by the Tenant, which shall not have
been cured within TEN (1O) DAYS, then the Landlord, besides
other rights or remedies it may have, shall have the
immediate right of reentry and may remove all persons and
property from the Leased Premises; such property may be
removed and stored in a public warehouse or elsewhere at the
cost of, and for the account of, the Tenant. If the Landlord
elects to reenter as herein provided, or should it take
possession pursuant to any notice provided for by law, it
may either terminate this Lease or may, from time to time,
without terminating this lease, relet the Leased Premises or
any part thereof, for such tern or terms and at such rental,
or rentals and upon such other terms and conditions as the
Landlord in Landlord's own discretion may deem advisable.
Should rentals received from such reletting during any month
be less than that agreed to be paid during the month by the
Tenant hereunder, the Tenant shall pay such deficiency to
the Landlord monthly. The Tenant shall also pay to the
Landlord, as soon as ascertained, the cost and expenses
incurred by the Landlord, including reasonable attorneys
fees, relating to such reletting.
18. Quiet Enjoyment. The Landlord agrees that if the Tenant
shall pay the rent as aforesaid and perform the covenants
and agreements herein contained on its part to be performed,
the Tenant shall peaceably hold and enjoy the said rented
premises without hindrance or interruption by the Landlord
or by any other person or persons acting under or through
the Landlord.
19. Landlord's Right to Enter. Landlord may, at reasonable
times, enter the Leased Premises to inspect it, to make
repairs or alterations, and to show it to potential buyers,
lenders or tenants.
20. Surrender upon Termination. At the end of the lease
term the Tenant shall surrender the leased property in as
good condition as it was in at the beginning of the term,
reasonable use and wear excepted.
21. Subordination. This lease, and the Tenant's leasehold
interest, is and shall be subordinate, subject and inferior
to any and all liens and encumbrances now and thereafter
placed on the Leased Premises by Landlord, any and all
extensions of such liens and encumbrances and all advances
paid under such liens and encumbrances.
22. Additional Provisions:
<PAGE>
23. Miscellaneous Terms.
(i) Notices. Any notice, statement, demand or other
communication by one party to the other, shall be given by
personal delivery or by mailing the same, postage prepaid,
addressed to the Tenant at the premises, or to the Landlord
at the address set forth above.
(ii) Severability. If any clause or provision herein
shall be adjudged invalid or unenforceable by a court of
competent jurisdiction or by operation of any applicable
law, it shall not affect the validity of any other clause or
provision, which shall remain in full force and effect.
(iii) Waiver. The failure of either party to enforce
any of the provisions of this lease shall not be considered
a waiver of that provision or the right of the party to
thereafter enforce the provision.
(iv) Complete Agreement. This Lease constitutes the
entire understanding of the parties with respect to the
subject matter hereof and may not be modified except by an
instrument in writing and signed by the parties.
(v) Successors. This Lease is binding on all parties
who lawfully succeed to the rights or take the place of the
Landlord or Tenant.
IN WITNESS WHEREOF the parties have set their hands and seal
on this 1 day of April, 1997.
_______________________________________ __________________
Landlord or Landlord's Authorized Agent Tenant
Read the instructions and other important information
on the package. When using this form you will be acting as
your own attorney since Rediform, its advisors and retailers
do not render legal advice or services. Rediform, its
advisors and retailers assume no liability for loss or
damage resulting from the use of this form.
<PAGE>
WILD WINGS, INC.
1997 Stock Option Plan
Section 1. Purpose; Definitions.
1.1 Purpose. The purpose of Wild Wings, Inc. (the
"Company") 1997 Stock Option Plan (the "Plan") is to enable
the Company to offer to its key employees, officers,
directors, consultants and sales representatives whose past,
present and/or potential contributions to the Company and
its Subsidiaries have been, are or will be important to the
success of the Company, an opportunity to acquire a
proprietary interest in the Company. The various types of
long-term incentive awards which may be provided under the
Plan will enable the Company to respond to changes in
compensation practices, tax laws, accounting regulations and
the size and diversity of its business.
1.2 Definitions. For purposes of the Plan, the
following terms shall be defined as set forth below:
(a) "Agreement" means the agreement between the
Company and the Holder setting forth the terms and
conditions of an award under the Plan.
(b) "Board" means the Board of Directors of the
Company.
(c) "Code" means the Internal Revenue Code of
1986, as amended from time to time, and any successor
thereto and the regulations promulgated thereunder.
(d) "Committee" means the Stock Option Committee
of the Board or any other committee of the Board, which the
Board may designate to administer the Plan or any portion
thereof. If no Committee is so designated, then all
references in this Plan to "Committee" shall mean the Board.
(e) "Common Stock" means the Common Stock of the
Company, par value $.001 per share.
(f) "Company" means Wild Wings, Inc., a
corporation organized under the laws of the State of Nevada.
(g) "Deferred Stock" means Stock to be received,
under an award made pursuant to Section 9, below, at the end
of a specified deferral period.
(h) "Disability" means disability as determined
under procedures established by the Committee for purposes
of the Plan.
(i) "Effective Date" means the date set forth in
Section 13.1, below.
1
<PAGE>
(j) "Fair Market Value", unless otherwise
required by any applicable provision of the Code or any
regulations issued thereunder, means, as of any given date:
(i) if the Common Stock is listed on a national securities
exchange or quoted on the Nasdaq National Market or Nasdaq
SmallCap Market, the last sale price of the Common Stock in
the principal trading market for the Common Stock on the
last trading day preceding the date of grant of an award
hereunder, as reported by the exchange or Nasdaq, as the
case may be; (ii) if the Common Stock is not listed on a
national securities exchange or quoted on the Nasdaq
National Market or Nasdaq SmallCap Market, but is traded in
the over-the-counter market, the closing bid price for the
Common Stock on the last trading day preceding the date of
grant of an award hereunder for which such quotations are
reported by the OTC Bulletin Board or the National Quotation
Bureau, Incorporated or similar publisher of such
quotations; and (iii) if the fair market value of the Common
Stock cannot be determined pursuant to clause (i) or (ii)
above, such price as the Committee shall determine, in good
faith.
(k) "Holder" means a person who has received an
award under the Plan.
(l) "Incentive Stock Option" means any Stock
Option intended to be and designated as an "incentive stock
option" within the meaning of Section 422 of the Code.
(m) "Nonqualified Stock Option" means any Stock
Option that is not an Incentive Stock Option.
(n) "Normal Retirement" means retirement from
active employment with the Company or any Subsidiary on or
after age 65.
(o) "Other Stock-Based Award" means an award
under Section 10, below, that is valued in whole or in part
be reference to, or is otherwise based upon, Stock.
(p) "Parent" means any present or future parent
corporation of the Company, as such term is defined in
Section 424(e) of the Code.
(q) "Plan" means Wild Wings, Inc. 1997 Stock
Option Plan, as hereinafter amended from time to time.
(r) "Restricted Stock"means Stock, received under
an award made pursuant to Section 8, below, that is subject
to restrictions under said Section 8.
(s) "SAR Value" means the excess of the Fair
Market Value (on the exercise date) of the number of shares
for which the Stock Appreciation Right is exercised over the
exercise price that the participant would have otherwise had
to pay to exercise the related Stock Option and purchase the
relevant shares.
2
<PAGE>
(t) "Stock" means the Common Stock of the
Company, par value $.001 per share.
(u) "Stock Appreciation Right" means the right to
receive from the Company, on surrender of all or part of the
related Stock Option, without a cash payment to the Company,
a number of shares of Common Stock equal to the SAR Value
divided by the exercise price of the Stock Option.
(v) "Stock Option" or "Option" means any option
to purchase shares of Stock which is granted pursuant to the
Plan.
(w) "Stock Reload Option" means any option
granted under Section 6.3, below, as a result of the payment
of the exercise price of a Stock Option and/or the
withholding tax related thereto in the form of Stock owned
by the Holder or the withholding of Stock by the Company.
(x) "Subsidiary" means any present or future
subsidiary corporation of the Company, as such term is
defined in Section 424(f) of the Code.
Section 2. Administration.
2.1 Committee Membership. The Plan shall be
administered by the Board or a Committee. Committee members
shall serve for such terms as the Board may in each case
determine, and shall be subject to removal at any time by
the Board.
2.2 Powers of Committee. The Committee shall have
full authority, subject to Section 4, below, to award,
pursuant to the terms of the Plan: (i) Stock Options, (ii)
Stock Appreciation Rights, (iii) Restricted Stock, (iv)
Deferred Stock, (v) Stock Reload Options and/or (vi) Other
Stock-Based Awards. For purposes of illustration and not of
limitation, the Committee shall have the authority (subject
to the express provisions of this Plan):
(a) to select the officers, key employees,
directors, consultants and sales representatives of the
Company or any Subsidiary to whom Stock Options, Stock
Appreciation Rights, Restricted Stock, Deferred Stock,
Reload Stock Options and/or Other Stock-Based Awards may
from time to time be awarded hereunder.
(b) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award
granted hereunder (including, but not limited to, number of
shares, share price, any restrictions or limitations, and
any vesting, exchange, surrender, cancellation,
acceleration, termination, exercise or forfeiture
provisions, as the Committee shall determine);
(c) to determine any specified performance goals
or such other factors or criteria which need to be attained
for the vesting of an award granted hereunder;
3
<PAGE>
(d) to determine the terms and conditions under
which awards granted hereunder are to operate on a tandem
basis and/or in conjunction with or apart from other equity
awarded under this Plan and cash awards made by the Company
or any Subsidiary outside of this Plan;
(e) to permit a Holder to elect to defer a
payment under the Plan under such rules and procedures as
the Committee may establish, including the crediting of
interest on deferred amounts denominated is cash and of
dividend equivalents on deferred amounts denominated in
Stock;
(f) to determine the extent and circumstances
under which Stock and other amounts payable with respect to
an award hereunder shall be deferred which may be either
automatic or at the election of the Holder; and
(g) to substitute (i) new Stock Options for
previously granted Stock Options, which previously granted
Stock Options have higher option exercise prices and/or
contain other less favorable terms, and (ii) new awards of
any other type for previously granted awards of the same
type, which previously granted awards are upon less
favorable terms.
2.3 Interpretation of Plan.
(a) Committee Authority. Subject to Section 4
and 12, below, the Committee shall have the authority to
adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms
and provisions of the Plan and any award issued under the
Plan (and to determine the form and substance of all
Agreements relating thereto), to the otherwise supervise the
administration of the Plan. Subject to Section 12, below,
all decisions made by the Committee pursuant to the
provisions of the Plan shall be made in the Committee's sole
discretion and shall be final and binding upon all persons,
including the Company, its Subsidiaries and Holders.
(b) Incentive Stock Options. Anything in the
Plan to the contrary notwithstanding, no term or provision
of the Plan relating to Incentive Stock Options (including
but limited to Stock Reload Options or Stock Appreciation
rights granted in conjunction with an Incentive Stock
Option) or any Agreement providing for Incentive Stock
Options shall be interpreted, amended or altered, nor shall
any discretion or authority granted under the Plan be so
exercised, so as to disqualify the Plan under Section 422 of
the Code, or, without the consent of the Holder(s) affected,
to disqualify any Incentive Stock Option under such Section
422.
Section 3. Stock Subject to Plan.
3.1 Number of Shares. The total number of shares of
Common Stock reserved and available for distribution under
the Plan shall be 1,000,000 shares. Share of Stock under
the Plan may consist, in whole or in part, of authorized and
unissued shares or treasury shares. If any shares of Stock
4
<PAGE>
that have been granted pursuant to a Stock Option cease to
be subject to a Stock Option, or if any shares of Stock that
are subject to any Stock Appreciation Right, Restricted
Stock, Deferred Stock award, Reload Stock Option or Other
Stock-Based Award granted hereunder are forfeited or any
such award otherwise terminates without a payment being made
to the Holder in the form of Stock, such shares shall again
be available for distribution in connection with future
grants and awards under the Plan. Only net shares issued
upon a stock-for-stock exercise (including stock used for
withholding taxes) shall be counted against the number of
shares available under the Plan.
3.2 Adjustment Upon Changes in Capitalization, Etc.
In the event of any merger, reorganization, consolidation,
recapitalization, dividend (other than a cash dividend),
stock split, reverse stock split, or other change in
corporate structure affecting the Stock, such substitution
or adjustment shall be made in the aggregate number of
shares reserved for issuance under the Plan, in the number
and exercise price of shares subject to outstanding Options,
in the number of shares and Stock Appreciation Right price
relating to Stock Appreciation Rights, and in the number of
shares and Stock Appreciation Right price relating to Stock
Appreciation Rights, and in the number of shares subject to,
and in the related terms of, other outstanding awards
(including but not limited to awards of Restricted Stock,
Deferred Stock, Reload Stock Options and Other Stock-Based
Awards) granted under the Plan as may be determined to be
appropriate by the Committee in order to prevent dilution or
enlargement of rights, provided that the number of shares
subject to any award shall always be a whole number.
Section 4. Eligibility.
Awards may be made or granted to key employees,
officers, directors, consultants and sales representatives
who are deemed to have rendered or to be able to render
significant services to the Company or its Subsidiaries and
who are deemed to have contributed or to have the potential
to contribute to the success of the Company. No Incentive
Stock Option shall be granted to any person who is not an
employee of the Company or a Subsidiary at the time of
grant.
Section 5. Required Six-Month Holding Period.
Any equity security issued under this Plan may not be
sold prior to six months from the date of the grant of the
related award without the approval of the Company.
Section 6. Stock Options.
6.1 Grant and Exercise. Stock Options granted under
the Plan may be of two types: (i) Incentive Stock Options
and (ii) Nonqualified Stock Options. Any Stock Option
granted under the Plan shall contain such terms, not
inconsistent with this Plan, or with respect to Incentive
Stock Options, not inconsistent with the Code, as the
Committee may from time to time approve. The Committee
shall have the authority to grant Incentive Stock Options,
Non-Qualified Stock Options, or both types of Stock Options
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and which may be granted alone or in addition to other
awards granted under the Plan. To the extent that any Stock
Option intended to qualify as an Incentive Stock Option does
not so qualify, it shall constitute a separate Nonqualified
Stock Option. An Incentive Stock Option may be granted only
within the ten-year period commencing from the Effective
Date and may only be exercised within ten years of the date
of grant or five years in the case of an Incentive Stock
Option granted to an optionee ("10% Stockholder") who, at
the time of grant, owns Stock possessing more than 10% of
the total combined voting power of all classes of stock of
the Company.
6.2 Terms and Conditions. Stock Options granted under
the Plan shall be subject to the following terms and
conditions:
(a) Exercise Price. The exercise price per share
of Stock purchasable under a Stock Option shall be
determined by the Committee at the time of grant and may not
be less than 100% of the Fair Market Value of the Stock as
defined above; provided, however, that the exercise price of
an Incentive Stock Option granted to a 10% Stockholder shall
not be less than 110% of the Fair Market Value of the Stock.
(b) Option Term. Subject to the limitations in
Section 6.1, above, the term of each Stock Option shall be
fixed by the Committee.
(c) Exercisability. Stock Options shall be
exercisable at such time or times and subject to such terms
and conditions as shall be determined by the Committee and
as set forth in Section 11, below. If the Committee
provides, in its discretion, that any Stock Option is
exercisable only in installments, i.e., that it vests over
time, the Committee may waive such installment exercise
provisions at any time at or after the time of grant in
whole or in part, based upon such factors as the Committee
shall determine.
(d) Method of Exercise. Subject to whatever
installment, exercise and waiting period provisions are
applicable in a particular case, Stock Options may be
exercised in whole or in part at any time during the term of
the Option, by giving written notice of exercise to the
Company specifying the number of shares of Stock to be
purchased. Such notice shall be accompanied by payment in
full of the purchase price, which shall be in cash or,
unless otherwise provided in the Agreement, in shares of
Stock (including Restricted Stock and other contingent
awards under this Plan) or, partly in cash and partly in
such Stock, or such other means which the Committee
determines are consistent with the Plan's purpose and
applicable law. Cash payments shall be made by wire
transfer, certified or bank check or personal check, in each
case payable to the order of the Company; provided, however,
that the Company shall not be required to deliver
certificates for shares of Stock with respect to which an
Option is exercised until the Company has confirmed the
receipt of good and available funds in payment of the
purchase price thereof. Payments in the form of Stock shall
be valued at the Fair Market Value of a share of Stock on
the date prior to the date of exercise. Such payments shall
be made by delivery of stock certificates in negotiable form
which are effective to transfer good and valid title thereto
to the Company, free of any liens or encumbrances. Subject
to the terms of the Agreement, the Committee may, in its
sole discretion, at the request of the Holder, deliver upon
the exercise of a Nonqualified Stock Option a combination of
shares of Deferred Stock and Common Stock; provided that,
notwithstanding the provision of Section 9 of the Plan, such
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Deferred Stock shall be fully vested and not subject to
forfeiture. A Holder shall have none of the rights of a
stockholder with respect to the shares subject to the Option
until such shares shall be transferred to the Holder upon
the exercise of the Option.
(e) Transferability. No Stock Option shall be
transferable by the Holder other than by will or by the laws
of descent and distribution, and all Stock Options shall be
exercisable, during the Holder's lifetime, only by the
Holder.
(f) Termination by Reason of Death. If a
Holders' employment by the Company or a Subsidiary
terminates by reason of death, any Stock Option held by such
Holder, unless otherwise determined by the Committee at the
time of grant and set forth in the Agreement, shall be fully
vested and may thereafter be exercised by the legal
representative of the estate or by the legatee of the
Holder under the will of the Holder, for a period of one
year (or such other greater or lesser period as the
Committee may specify at grant) from the date of such death
or until the expiration of the stated term of such Stock
Option, which ever period is the shorter.
(g) Termination by Reason of Disability. If a
Holder's employment by the Company or any Subsidiary
terminates by reason of Disability, any Stock Option held by
such Holder, unless otherwise determined by the Committee at
the time of grant and set forth in the Agreement, shall be
fully vested and may thereafter be exercised by the Holder
for a period of one year (or such other greater or lesser
period as the Committee may specify at the time of grant)
from the date of such termination of employment or until the
expiration of the stated term of such Stock Option,
whichever period is the shorter.
(h) Other Termination. Subject to the provisions
of Section 14.3, below, and unless otherwise determined by
the Committee at the time of grant and set forth in the
Agreement, if a Holder is an employee of the Company or a
Subsidiary at the time of grant and if such Holder's
employment by the Company or any Subsidiary terminates for
any reason other than death or Disability, the Stock Option
shall thereupon automatically terminate, except that if the
Holder's employment is terminated by the Company or a
Subsidiary without cause or due to Normal Retirement, then
the portion of such Stock Option which has vested on the
date of termination of employment may be exercised for the
lesser of three months after termination of employment or
the balance of such Stock Option's term.
(i) Additional Incentive Stock Option Limitation.
In the case of an Incentive Stock Option, the aggregate Fair
Market Value of Stock (determined at the time of grant of
the Option) with respect to which Incentive Stock Options
become exercisable by a Holder during any calendar year
(under all such plans of the Company and its Parent and
Subsidiary) shall not exceed $100,000.
(j) Buyout and Settlement Provisions. The
Committee may at any time, in its sole discretion, offer to
buy out a Stock Option previously granted, based upon such
terms and conditions as the Committee shall establish and
communicate to the Holder at the time that such offer is
made.
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(k) Stock Option Agreement. Each grant of a
Stock Option shall be confirmed by and shall be subject to
the terms of, the Agreement executed by the Company and the
Holder.
6.3 Stock Reload Option. The Committee may also grant
to the Holder (concurrently with the grant of an Incentive
Stock Option and at or after the time of grant in the case
of a Nonqualified Stock Option) a Stock Reload Option up to
the amount of shares of Stock held by the Holder for at
least six months and used to pay all or part of the exercise
price of an Option and, if any, withheld by the Company as
payment for withholding taxes. Such Stock Reload Option
shall have an exercise price equal to the Fair Market Value
as of the date of the Stock Reload Option grant. Unless the
Committee determines otherwise, a Stock Reload Option may be
exercised commencing one year after it is granted and shall
expire on the date of expiration of the Option to which the
Reload Option is related.
Section 7. Stock Appreciation Rights.
7.1 Grant and Exercise. The Committee may grant Stock
Appreciation Rights to participants who have been, or are
being granted, Options under the Plan as a means of allowing
such participants to exercise their Options without the need
to pay the exercise price in cash. In the case of a
Nonqualified Stock Option, a Stock Appreciation Right may be
granted either at or after the time of the grant of such
Nonqualified Stock Option. In the case of an Incentive
Stock Option, a Stock Appreciation Right may be granted only
at the time of the grant of such Incentive Stock Option.
7.2 Terms and Conditions. Stock Appreciation Rights
shall be subject to the following terms and conditions:
(a) Exercisability. Stock Appreciation Rights
shall be exercisable as determined by the Committee and set
forth in the Agreement, subject to the limitations, if any,
imposed by the Code, with respect to related Incentive Stock
Options.
(b) Termination. A Stock Appreciation Right
shall terminate and shall no longer be exercisable upon the
termination or exercise of the related Stock Option.
(c) Method of Exercise. Stock Appreciation
Rights shall be exercisable upon such terms and conditions
as shall be determined by the Committee and set forth in the
Agreement and by surrendering the applicable portion of the
related Stock Option. Upon such exercise and surrender, the
Holder shall be entitled to receive a number of Option
Shares equal to the SAR Value divided by the exercise price
of the Option.
(d) Shares Affected Upon Plan. The granting of a
Stock Appreciation Rights shall not affect the number of
shares of Stock available under for awards under the Plan.
The number of shares available for awards under the Plan
will, however, be reduced by the number of shares of Stock
acquirable upon exercise of the Stock Option to which such
Stock Appreciation right relates.
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Section 8. Restricted Stock.
8.1 Grant. Shares of Restricted Stock may be awarded
either alone or in addition to other awards granted under
the Plan. The Committee shall determine the eligible
persons to whom, and the time or times at which, grants of
Restricted Stock will be awarded, the number of shares to be
awarded, the price (if any) to be paid by the Holder, the
time or times within which such awards may be subject to
forfeiture (the "Restriction Period"), the vesting schedule
and rights to acceleration thereof, and all other terms and
conditions of the awards.
8.2 Terms and Conditions. Each Restricted Stock award
shall be subject to the following terms and conditions:
(a) Certificates. Restricted Stock, when issued,
will be represented by a stock certificate or certificates
registered in the name of the Holder to whom such Restricted
Stock shall have been awarded. During the Restriction
Period, certificates representing the Restricted Stock and
any securities constituting Retained Distributions (as
defined below) shall bear a legend to the effect that
ownership of the Restricted Stock (and such Retained
Distributions), and the enjoyment of all rights appurtenant
thereto, are subject to the restrictions, terms and
conditions provided in the Plan and the Agreement. Such
certificates shall be deposited by the Holder with the
Company, together with stock powers or other instruments of
assignment, each endorsed in blank, which will permit
transfer to the Company of all or any portion of the
Restricted Stock and any securities constituting Retained
Distributions that shall be forfeited or that shall not
become vested in accordance with the Plan and the Agreement.
(b) Rights of Holder. Restricted Stock shall
constitute issued and outstanding shares of Common Stock for
all corporate purposes. The Holder will have the right to
vote such Restricted Stock, to receive and retain all
regular cash dividends and other cash equivalent
distributions as the Board may in its sole discretion
designate, pay or distribute on such Restricted Stock and to
exercise all other rights, powers and privileges of a holder
of Common Stock with respect to such Restricted Stock, with
the exceptions that (i) the Holder will not be entitled to
delivery of the stock certificate or certificates
representing such Restricted Stock until the Restriction
Period shall have expired and unless all other vest
requirements with respect thereto shall have been fulfilled;
(ii) the Company will retain custody of the stock
certificate or certificates representing the Restricted
Stock during the Restriction Period; (iii) other than
regular cash dividends and other cash equivalent
distributions as the Board may in its sole discretion
designate, pay or distribute, the Company will retain
custody of all distributions ("Retained Distributions") made
or declared with respect to the Restricted Stock (and such
Retained Distributions will be subject to the same
restrictions, terms and conditions as are applicable to the
restricted Stock) until such time, if ever, as the
Restricted Stock with respect to which such Retained
Distributions shall have been made, paid or declared shall
have become vested and with respect to which the Restriction
Period shall have expired; (iv) a breach of any of the
restrictions, terms or conditions contained in this Plan or
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the Agreement or otherwise established by the Committee with
respect to any Restricted Stock or Retained Distributions
will cause a forfeiture of such Restricted Stock and any
Retained Distributions with respect thereto.
(c) Vesting; Forfeiture. Upon the expiration of
the Restriction Period with respect to each award of
Restricted Stock and the satisfaction of any other
applicable restrictions, terms and conditions (i) all or
part of such Restricted Stock shall become vested in
accordance with the terms of the Agreement, subject to
Section 11, below, and (ii) any Retained Distributions with
respect to such Restricted Stock shall become vested to the
extent that the Restricted Stock related thereto shall have
become vested, subject to Section 11, below. Any such
Restricted Stock and Retained Distributions that do not vest
shall be forfeited to the Company and the Holder shall not
thereafter have any rights with respect to such Restricted
Stock and Retained Distributions that shall have been so
forfeited.
Section 9. Deferred Stock.
9.1 Grant. Shares of Deferred Stock may be awarded
either alone or in addition to other awards granted under
the Plan. The Committee shall determine the eligible
persons to whom and the time or times at which grants of
Deferred Stock shall be awarded, the number of shares of
Deferred Stock to be awarded to any person, the duration of
the period (the "Deferral Period") during which, and the
conditions under which, receipt of the shares will be
deferred, and all the other terms and conditions of the
awards.
9.2 Terms and Conditions. Each Deferred Stock award
shall be subject to the following terms and conditions:
(a) Certificates. At the expiration of the
Deferral Period (or the Additional Deferral Period referred
to in Section 9.2 (d) below, where applicable), shares
certificates shall be issued and delivered to the Holder, or
his legal representative, representing the number equal to
the shares covered by the Deferred Stock award.
(b) Rights of Holder. A person entitled to
receive Deferred stock shall not have any rights of a
stockholder by virtue of such award until the expiration of
the applicable Deferral Period and the issuance and delivery
of the certificates representing such Stock. The shares of
Stock issuable upon expiration of the Deferral Period shall
not be deemed outstanding by the Company until the
expiration of such Deferral period and the issuance and
delivery of such Stock to the Holder.
(c) Vesting; Forfeiture. Upon the expiration of
the Deferral Period with respect to each award of Deferred
Stock and the satisfaction of any other applicable
restrictions, terms and conditions all or part of such
Deferred Stock shall become vested in accordance with the
terms of the Agreement, subject to Section 11, below. Any
such Deferred Stock that does not vest shall be forfeited to
the Company and the Holder shall not thereafter have any
rights with respect to such Deferred Stock.
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(d) Additional Deferral Period. A Holder may
request to, and the Committee may at any time, defer the
receipt of an award (or an installment of an award) for an
additional specified period or until a specified event (the
"Additional Deferral Period"). Subject to any exceptions
adopted by the Committee, such request must generally be
made at least one year prior to expiration of the Deferral
Period for such Deferred Stock awards (or such installment).
Section 10. Other Stock-Based Awards.
10.1 Grant and Exercise. Other Stock-Based Awards may
be awarded, subject to limitations under applicable law,
that are denominated or payable, in value in whole or in
part by reference to, or otherwise based on, or related to,
shares of Common Stock, as deemed by the Committee to be
consistent with the purposes of the Plan, including, without
limitation, purchase rights, shares of Common Stock awarded
which are not subject to any restrictions or conditions,
convertible or exchangeable debentures, or other rights
convertible into shares of Common Stock and awards valued by
reference to the value of securities of or the performance
of specified subsidiaries. Other Stock-Based Awards may be
awarded either alone or in addition to or in tandem with any
other awards under this Plan or any other plan of the
Company.
10.2 Eligibility for Other Stock-Based Awards. The
Committee shall determine the eligible persons to whom and
the time or times at which grants of such other stock-based
awards shall be made, the number of shares of Common Stock
to be awarded pursuant to such awards, and all other terms
and conditions of the awards.
10.3 Terms and Conditions. Each Other Stock-Based
Award shall be subject to such terms and conditions as may
be determined by the Committee and to Section 11, below.
Section 11. Accelerated Vesting and Exercisability.
If (i) any person or entity other than the Company
and/or any stockholders of the Company as of the Effective
Date acquire securities of the Company (in one or more
transactions) having 25% or more of the total voting power
of all the Company's securities then outstanding and (ii)
the Board of Directors of the Company does not authorize or
otherwise approve such acquisition, then, the vesting
periods of any and all Options and other awards granted and
outstanding under the Plan shall be accelerated and all such
Options and awards will immediately and entirely vest, and
the respective holders thereof will have the immediate right
to purchase and/or receive any and all Stock subject to such
Options and awards on the terms set forth in this Plan and
the respective agreements respecting such Options and
awards.
Section 12. Amendment and Termination.
Subject to Section 4 hereof, the Board may at any time,
and from time to time, amend, alter, suspend or discontinue
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any of the provisions of the Plan, but no amendment,
alteration, suspension or discontinuance shall be made which
would impair the rights of a Holder under any Agreement
theretofore entered into hereunder, without the Holder's
consent.
Section 13. Term of Plan.
13.1 Effective Date. The Plan shall be effective as of
the date on which the Company's stockholders approved the
Plan ("Effective Date").
13.2 Termination Date. Unless terminated by the Board,
this Plan shall continue to remain effective until such time
no further awards may be granted and all awards granted
under the Plan are no longer outstanding. Notwithstanding
the foregoing, grants of Incentive Stock Options may only be
made during the ten-year period following the Effective
Date.
Section 14. General Provisions.
14.1 Written Agreements. Each award granted under the
Plan shall be confirmed by, and shall be subject to the
terms of the Agreement executed by the Company and the
Holder. The Committee may terminate any award made under
the Plan if the Agreement relating thereto is not executed
and returned to the Company within 10 days after the
Agreement has been delivered to the Holder for his or her
execution.
14.2 Unfunded Status of Plan. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to
a Holder by the Company, nothing contained herein shall give
any such Holder any rights that are greater than those of a
general creditor of the Company.
14.3 Employees.
(a) Engaging in Competition With the Company. In
the event a Holder's employment with the Company or a
Subsidiary is terminated for any reason whatsoever, and
within one year after the date thereof such Holder accepts
employment with any competitor of, or otherwise engages in
competition with, the Company, the Committee, in its sole
discretion, may require such Holder to return to the Company
the economic value of any award which was realized or
obtained by such Holder at any time during the period
beginning on that date which is six months prior to the date
of such Holder's termination of employment with the Company.
(b) Termination for Cause. The Committee may, in
the event a Holder's employment with the company or a
Subsidiary is terminated for cause, annul any award granted
under this Plan to return to the Company the economic value
of any award which was realized or obtained by such Holder
at any time during the period beginning on that date which
is six months prior to the date of such Holder's termination
of employment with the Company.
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(c) No Right of Employment. Nothing contained in
the Plan or in any award hereunder shall be deemed to confer
upon any Holder who is an employee of the Company or any
Subsidiary any right to continued employment with the
Company or any Subsidiary, nor shall it interfere in any way
with the right of the Company or any Subsidiary to terminate
the employment of any Holder who is an employee at any time.
14.4 Investment Representations. The Committee may
require each person acquiring shares of Stock pursuant to a
Stock Option or other award under the Plan to represent to
and agree with the Company in writing that the Holder is
acquiring the shares for investment without a view to
distribution thereof.
14.5 Additional Incentive Arrangements. Nothing
contained in the Plan shall prevent the Board from adopting
such other or additional incentive arrangements as it may
deem desirable, including, but not limited to, the granting
of Stock Options and the awarding of stock and cash
otherwise than under the Plan; and such arrangements may be
either generally applicable or applicable only in specific
cases.
14.6 Withholding Taxes. Not later than the date as of
which an amount must first be included in the gross income
of the Holder for Federal income tax purposes with respect
to any option or other award under the Plan, the Holder
shall pay to the Company, or made arrangements satisfactory
to the Committee regarding the payment of, any Federal,
state and local taxes of any kind required by law to be
withheld or paid with respect to such amount. If permitted
by the Committee, tax withholding or payment obligations may
be settled with Common Stock, including Common Stock that is
part of the award that gives rise to the withholding
requirement. The obligations of the Company under the Plan
shall be conditioned upon such payment or arrangements and
the Company or the Holder's employer (if not the Company)
shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment of any kind
otherwise due to the Holder from the Company or any
Subsidiary.
14.7 Governing Law. The Plan and all awards made and
actions taken thereunder shall be governed by and construed
in accordance with the laws of the State of Nevada (without
regard to choice of law provisions).
14.8 Other Benefit Plans. Any award granted under the
Plan shall not be deemed compensation for purposes of
computing benefits under any retirement plan of the Company
or any Subsidiary and shall not affect any benefits under
any other benefit plan now or subsequently in effect under
which the availability or amount of benefits is related to
the level of compensation (unless required by specific
reference in any such other plan to awards under this Plan).
14.9 Non-Transferability. Except as otherwise
expressly provided in the Plan, no right or benefit under
the Plan may be alienated, sold, assigned, hypothecated,
pledged, exchanged, transferred, encumbranced or charged,
and any attempt to alienate, sell, assign, hypothecate,
pledge, exchange, transfer, encumber or charge the same
shall be void.
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14.10 Applicable Laws. The obligations of the
Company with respect to all Stock Options and awards under
the Plan shall be subject to (i) all applicable laws, rules
and regulations and such approvals by any governmental
agencies as may be required, including, without limitation,
the Securities Act of 1933, as amended, and (ii) the rules
and regulations of any securities exchange on which the
Stock may be listed.
14.11 Conflicts. If any of the terms or provisions
of the Plan or an Agreement (with respect to Incentive Stock
Options) conflict with the requirements of Section 422 of
the Code, then such terms or provisions shall be deemed
inoperative to the extent they so conflict with the
requirements of said Section 422 of the Code. Additionally,
if this Plan or any Agreement does not contain any provision
required to be included herein under Section 422 of the
Code, such provision shall be deemed to be incorporated
herein and therein with the same force and effect as if such
provision had been set out at length herein and therein. If
any of the terms or provision of any Agreement conflict with
any terms or provision of the Plan, then such terms or
provision shall be deemed inoperative to the extent they so
conflict with the requirements of the Plan. Additionally,
if any Agreement does not contain any provision required to
be included therein under the Plan, such provision shall be
deemed to be incorporated therein with the same force and
effect as if such provision had been set out at length
therein.
14.12 Non-Registered Stock. The shares of Stock to
be distributed under this Plan have not been, as of the
Effective Date, registered under the Securities Act of 1933,
as amended, or any applicable state or foreign securities
laws and the Company has no obligation to any Holder to
register the Stock or to assist the Holder in obtaining an
exemption from the various registration requirements, or to
list the Stock on a national securities exchange.
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