The Andersons, Inc. 10-Q/Qtr End 6-30-2003

[ü] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

(Exact name of registrant as specified in its charter)

(Former name, former address and former fiscal year,
if changed since last report.)

Indicate by check ü 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 [ü] No [ ]

Indicate by check ü whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ü] No [ ]

The registrant had 7.1 million common shares outstanding, no par value, at August 1, 2003.

The Andersons, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)(In thousands)

The Andersons, Inc.
Condensed Consolidated Balance Sheets (continued)
(Unaudited)(In thousands)

The Andersons, Inc.
Condensed Consolidated Statements of Income
(Unaudited)(In thousands, except Per Share Data)

The Andersons, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)(In thousands)

The Andersons, Inc.
Condensed Consolidated Statements of Shareholders’ Equity
(Unaudited) (In thousands)

Note A	–	Restatement of Previously Issued Financial Statements

		In connection with a review of our periodic filings by the staff of the Division of Corporation Finance of the U.S. Securities and Exchange Commission, we concluded that it is appropriate to modify our accounting related to a specific agreement with a third party.

		As previously disclosed, certain of the Company’s agriculture facilities are subject to a five-year marketing agreement with a third-party that provides for a base level of income and equal sharing of profits earned over the base level. The Company’s share of profits is calculated annually under the marketing agreement based on a formula that contemplates cumulative profits over the contract period to-date. The Company recognizes the base level income as revenue on a pro-rata basis over the term of the agreement. The Company measures its share of the profits earned in excess of the base-level at the end of each contract year and recognizes such income on a pro-rata basis over the remaining term of the agreement.

		Upon further review and consideration, we have determined that the method of recognizing the Company’s share of profits earned in excess of the base level of income does not comply with Emerging Issues Task Force Topic D-96, Accounting for Management Fees Based on a Formula (“EITF Topic D-96”), and specifically with the provisions of Method 2 described therein, which stipulates that revenues recorded under such arrangements should be the amount that would be due under the formula at any point in time as if the contract was terminated at that date.

		Upon review of the impact of the adjustments necessary to comply with the requirements of EITF Topic D-96, which became effective for the Company as of January 1, 2002, we concluded that restating our financial statements for the affected prior periods was appropriate. The transition provisions of EITF Topic D-96 require the impact of the change in accounting to be presented as a cumulative effect of a change in accounting principle. The following tables present the impact of the restatement adjustments on the Company’s previously reported cost of sales and merchandising revenues, gross profit, income before income taxes and cumulative effect of accounting change, income tax provision, cumulative effect of change in accounting principle, net of income tax provision, and net income for the quarter and year-to-date periods ended June 30, 2002.

(a)

Periods presented “As Previously Reported” include reclassifications made to conform to the June 30, 2003 presentation. These reclassifications related to the adoption of EITF 02-16, Accounting by a Reseller for Cash Consideration Received from a Vendor, and had no impact on net income or shareholders’ equity.

The following tables present a summary of the effects of the restatement on our unaudited condensed Consolidated Balance Sheets as of December 31, 2002 and June 30, 2002:

		We will file Amendment No. 1 to our Annual Report on Form 10-K/A for the year ended December 31, 2002, and to our Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2003 as soon as practicable.

Note B	–	In the opinion of management, all adjustments necessary for a fair presentation of the results of operations for the periods indicated, have been made. Such adjustments include the effect of the restatement discussed in Note A as well as normal recurring adjustments.

		The year-end condensed consolidated balance sheet data was derived from audited consolidated financial statements, but does not include all disclosures required by generally accepted accounting principles. A condensed consolidated balance sheet as of June 30, 2002 was included as the Company operates in several seasonal industries.

		The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in The Andersons, Inc. Annual Report on Form 10-K for the year ended December 31, 2002.

		Certain amounts in the balance sheet as of June 30, 2002 have been reclassified to conform to the June 30, 2003 presentation. These reclassifications had no effect on net income or shareholders’ equity as previously presented. These reclassifications were initially recorded for the 2002 annual report to shareholders and are now being reflected in these quarterly condensed consolidated financial statements.

Note C	–	In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities.” FIN No. 46 provides guidance on identification of a variable interest entity (“VIE”) and on determination of whether the VIE should be consolidated in an enterprise’s financial statements. In general, an enterprise deemed to be the primary beneficiary of a VIE is required to consolidate the VIE. FIN No. 46 is effective immediately for any new VIE established after January 31, 2003 and must be adopted for any pre-existing VIEs at the beginning of the Company’s third quarter.

		Management is in the process of evaluating its lease agreements, equity investments and other arrangements to determine whether any of these arrangements involve a VIE or, if a VIE exists, whether the Company is the primary beneficiary of the VIE. Based on the results of our review to-date, we do not believe that there will be any impact of this statement on the consolidated financial statements.

		In January 2003, the Emerging Issues Task Force of the FASB (“EITF”) published Issue Number 00-21, “Revenue Arrangements with Multiple Deliverables”. This Issue addresses certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities. This Issue is effective for revenue arrangements entered into in the Company’s 2003 third quarter and future periods. Management does not expect the impact of the statement to be material to its consolidated financial statements.

Note D	–	In accordance with our accounting policy for stock-based compensation, we have not recognized any expense relating to our stock options. If we had used the fair value method of accounting, the alternative policy set out in FASB Statement No. 123, “Accounting for Stock-Based Compensation,” the additional after-tax expense relating to stock options would have been less than $0.1 million in the second quarters of both 2003 and 2002. The following table presents pro forma stock compensation expense, net of tax, net income and earnings per share as if we had included expense related to the fair value of stock options. The stock compensation expense included in our reported earnings was incurred in connection with our restricted stock award plan and was less than $0.1 million in both periods.

Note E

–

Basic earnings per share is equal to net income divided by weighted average shares outstanding. Diluted earnings per share is equal to basic earnings per share plus the incremental per share effect of dilutive options and restricted shares.

Diluted earnings per common share excludes the impact of 1 thousand and 163 thousand employee stock options for the quarter and six months ended June 30, 2002, respectively, as such options were antidilutive. There were no antidilutive options outstanding for the quarter and year ended June 30, 2003.

(a)		The Other category of interest expense includes net interest income at the Company level, representing the rate differential between the interest allocated to the operating segments and the actual rate at which borrowings were made.

(b)		Restated – See below and Note A

(a)

Periods presented “As Previously Reported” include reclassifications made to conform to the June 30, 2003 presentation. These reclassifications had no impact on net income or shareholders’ equity, were initially recorded for the 2002 annual report to shareholders and are now being reflected in these quarterly condensed consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

In connection with a review of our periodic filings by the staff of the Division of Corporation Finance of the U.S. Securities and Exchange Commission, we concluded that it is appropriate to modify our accounting related to a specific agreement with a third party.

As previously disclosed, certain of the Company’s agriculture facilities are subject to a five-year marketing agreement with a third-party that provides for a base level of income and equal sharing of profits earned over the base level. The Company’s share of profits is calculated annually under the marketing agreement based on a formula that contemplates cumulative profits over the contract period to-date. The Company recognizes the base level income as revenue on a pro-rata basis over the term of the agreement. The Company measures its share of the profits earned in excess of the base-level at the end of each contract year and recognizes such income on a pro-rata basis over the remaining term of the agreement.

Upon further review and consideration, we have determined that the method of recognizing the Company’s share of profits earned in excess of the base level of income does not comply with Emerging Issues Task Force Topic D-96, Accounting for Management Fees Based on a Formula (“EITF Topic D-96”), and specifically with the provisions of Method 2 described therein, which stipulates that revenues recorded under such arrangements should be the amount that would be due under the formula at any point in time as if the contract was terminated at that date.

Upon review of the impact of the adjustments necessary to comply with the requirements of EITF Topic D-96, which became effective for the Company as of January 1, 2002, we concluded that restating our financial statements for the affected prior periods was appropriate. The transition provisions of EITF Topic D-96 require the impact of the change in accounting to be presented as a cumulative effect of a change in accounting principle. The following tables present the impact of the restatement adjustments on the Company’s previously reported cost of sales and merchandising revenues, gross profit, income before income taxes and cumulative effect of accounting change, income tax provision, cumulative effect of change in accounting principle, net of income tax provision, and net income for the quarter and year-to-date periods ended June 30, 2002.

(b)

The following tables present a summary of the effects of the restatement on our unaudited condensed Consolidated Balance Sheets as of December 31, 2002 and June 30, 2002:

		We will file Amendment No. 1 to our Annual Report on Form 10-K/A for the year ended December 31, 2002, and to our Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2003 as soon as practicable.

		Comparison of the three months ended June 30, 2003 with the three months ended June 30, 2002, as restated:

		Sales and merchandising revenues for the three months ended June 30, 2003 totaled $311.9 million, an increase of $10.8 million, or 4%, from the second quarter of 2002. Sales in the Agriculture Group were up $1.0 million, or less than 1%. Grain sales make up 70-80% of the total sales in the Agriculture Group. Approximately 50% of grain bushels purchased are done so using forward contracts. On the sell-side, approximately 90% of grain bushels sold are done so under forward contracts. Grain sales were down $1.9 million, or 2%, due to a 22% decrease in volume partially offset by a 25% increase in the average price per bushel sold. This volume decrease occurred because increased demand for grain after last fall’s poor harvest caused the Company to sell and ship grain in the fourth quarter that it would normally have shipped in 2003. This increased demand has lowered the overall grain stocks worldwide and created the higher prices that prompted producers to increase plantings in 2003. Sales of fertilizer in the plant nutrient division were up $2.9 million, or 4%, due to a 10% increase in the weighted average price per ton sold partially offset by a 6% decrease in volume. A portion of the price increase relates to increases in natural gas prices, a basic raw material in the manufacture of nitrogen and urea which are key products used by the plant nutrient division. Generally, this increase can be passed through to customers, although price increases may also drive decreases in volume.

		Merchandising revenues in the Agriculture Group were down $2.7 million, or 35%, almost solely due to decreases in space income (before interest charges) in the grain

		division. Space income is income earned on grain held for our account or for our customers and includes storage fees earned and appreciation / depreciation in the value of grain owned. Grain inventories on hand at June 30, 2003 were 32.5 million bushels, of which 6.9 million bushels were stored for others. This compares to 35.0 million bushels on hand at June 30, 2002, of which 11.0 million bushels were stored for others.

		The reduction in grain space income is expected to continue at least until completion of this fall’s harvest in the fourth quarter. Bushels received from the wheat harvest (which occurs in the month of July) have doubled that of last year. With a good harvest of corn and soybeans this fall in the Company’s primary markets, the Company would expect to end the year with a higher volume of grain in storage and / or moved through the Company’s facilities. This could lead to higher storage income. The Company cautions, however, that poor weather in its primary markets in August can significantly affect yields and negatively impact the quantity and quality of grain stored and handled.

		The Company completed negotiations of a new marketing agreement with Cargill, Inc. which covers the Company’s Maumee and Toledo, Ohio facilities and two nearby leased Cargill facilities. This new five-year agreement, effective June 1, 2003, provides for income sharing with Cargill over a certain threshold. The lease for the two facilities was also renewed for five additional years. As discussed above, our previously issued financial statements have been restated for a change in accounting for profit recognition during a portion of the initial term. Grain sales to Cargill totaled $154 million in the Company’s 2002 calendar year. There were no sales to any other customer in excess of 10% of consolidated net sales.

		On July 31, 2003, the Company announced its intent to purchase the outstanding shares of Agrico Canada Ltd/Lte. Agrico Canada is a privately-held Canadian company that markets and distributes plant nutrients to independent dealers across Canada as well as marketing to growers through its wholly owned and joint venture farm centers. The transaction is subject to due diligence and finalization of a definitive purchase agreement and is expected to be completed in the third quarter.

		The Processing Group had a $4.9 million, or 15%, increase in sales resulting primarily from a 20% increase in the average price per ton sold in the lawn businesses partially offset by a 5% decrease in volume. In the professional lawn business, serving the golf course and lawn care operator markets, volume was up 12% and sales up 13% in the second quarter of 2003 as compared to 2002 due primarily to increased market share. In the consumer and industrial lawn businesses, where we serve as contract manufacturer for several large “brand” companies, a private label manufacturer and also manufacture our own brands sales were up 19% in spite of volume being down 15%. The cob-based businesses, a much smaller component of the Processing Group, had a 23% increase in sales primarily due to a 16% increase in volume.

		The Rail Group had an $8.6 million, or 213%, increase in sales. Sales of railcars made up $8.0 million of this increase and revenue from the leased fleet was up $0.3 million. There were no significant sales of railcars during the second quarter of 2002. The

		remainder of the increase was from sales of railcar components (primarily gates) manufactured in the fabrication shop, some of which are being installed by the railcar repair shop. A significant order for railcar components should keep both shops busy through the remainder of 2003. Railcars under management at June 30, 2003 were 5,984 compared to 5,497 under management at June 30, 2002. The railcar utilization rate (railcars under management in lease service) increased from 84% to 86% over that same period. The Company also increased its locomotives under management from 51 at June 30, 2002 to 74 at June 30, 2003. The Company continues to believe that this Group is well-positioned for future growth.

		The Company is continuing to evaluate an opportunity it announced on March 11, 2003 whereby it would manage approximately 11,000 railcars for a new entity in which the Company would hold a minority interest. Finalization of the transaction is dependent on due diligence, financing and completion of the definitive purchase agreement .

		The Retail Group had a $1.0 million, or 2%, decrease in same-store sales in the second quarter of 2003 when compared to the second quarter of 2002. Results were mixed with half the stores showing slight increases. We are competing against significant new competitors in the Toledo market and there is still softness in the retail economy.

		A positive development has been increased sales growth in the specialty food and wine departments that are adjacent to the third party meat markets we have in three of our six stores. We expect to add this third party meat market to a fourth store in the fourth quarter.

		Gross profit for the second quarter of 2003 totaled $47.8 million for the Company, a decrease of $1.1 million, or 2%, from the second quarter of 2002. The Agriculture Group had a $2.4 million, or 9%, decrease in gross profit, resulting primarily from the decrease in merchandising revenues mentioned previously and a slight reduction in gross profit on grain sales, partially offset by a $1.2 million increase in gross profit on sales in our plant nutrient division. Even though overall fertilizer volume is down, the plant nutrient division’s expansion into specialty and industrial products (which earn higher margins than traditional fertilizers) have helped to improve the overall gross profit per ton sold by 14%.

		Gross profit for the Processing Group decreased $0.1 million, or 2%. Although lawn business gross profit was essentially flat, the cob-based businesses gross profit decreased 15%. The decreased volume in the lawn businesses was offset by increased gross profit per ton sold. A portion of this increase relates to a new line of products that we began manufacturing for a major marketer.

		Gross profit in the Rail Group increased $1.6 million, or 94%. This increase was due equally to the significant increase in gross profit on the sale of railcars and gross profit on manufacturing and installation of railcar components in the fabrication and rail repair shops. The net lease fleet income declined somewhat as cars that are coming off long-term leases are renewing at current rates that are lower in most cases than the previous

		lease rates. The multi-year low lease rate environment has continued in the rail industry, although certain car types have recently seen improvement in lease rates.

		Gross profit in the Retail Group decreased $0.2 million, or 1%, from the second quarter of 2002. This was due to the decrease in sales discussed previously, partially offset by a modest increase in margins, as a result of changes in the product mix.

		Operating, administrative and general expenses for the second quarter of 2003 totaled $34.9 million, a $0.4 million, or 1%, decrease from the second quarter of 2002. Full-time employees decreased 3% from the second quarter of 2002. Expense related to performance incentives and bonuses decreased by $0.3 million due primarily to lower performance in certain operating units.

		Interest expense for the second quarter of 2003 was $2.2 million, a $0.4 million, or 14%, decrease from 2002. Average 2003 daily short-term borrowings were 46% higher than the second quarter of 2002 but the average short-term interest rate decreased from 3.12% for the second quarter of 2002 to 1.99% for the second quarter of 2003.

		As a result of the above, the pretax income of $11.8 million for the second quarter of 2003 was 1% lower than the pretax income of $12.0 million recognized in the second quarter of 2002. Income tax expense of $4.0 million was provided at an expected effective annual rate of 34.0%. In the second quarter of 2002, income tax expense was provided at 30.4%. The Company’s actual 2002 full-year effective tax rate was 32.7%. The current 2003 effective tax rate of 34.0% anticipates lower tax benefits from extraterritorial income exclusions and a somewhat higher state and local income tax rate.

		As a result of the above, the second quarter 2003 net income was $0.5 million lower than the second quarter 2002 restated net income of $8.3 million. The basic and diluted income per share of $1.09 and $1.07, respectively, for the second quarter of 2003 compares to a basic and diluted restated income per share of $1.14 and $1.11, respectively, in the second quarter of 2002.

		Comparison of the six months ended June 30, 2003 with the six months ended June 30, 2002, as restated:

		Sales and merchandising revenues for the six months ended June 30, 2003 totaled $549.8 million, an increase of $33.9 million, or 7%, from the first half of 2002. Sales in the Agriculture Group were up $18.2 million, or 6%. Grain sales were up $11.5 million, or 5%, due to a 29% increase in average price per bushel sold, partially offset by an 18% decrease in volume. This volume decrease occurred because increased demand for grain after last fall’s poor harvest caused the Company to sell and ship grain in the fourth quarter that it would normally have shipped in 2003. This increased demand has lowered the overall grain stocks worldwide and increased our average price per bushel sold. Sales of fertilizer in the plant nutrient division were up $6.7 million, or 6%, due to an 8% increase in the average price per ton sold partially offset by a decrease in volume. A portion of the price increase relates to increases in natural gas prices, a basic raw material

		in the manufacture of nitrogen and urea which are key products used by the plant nutrient division. Generally, this increase can be passed through to customers, although the price increase may also drive the decrease in volume.

		Merchandising revenues in the Agriculture Group were down $5.5 million, or 33%, almost solely due to decreases in space income (before interest charges) in the grain division. Space income is income earned on grain held for our account or for our customers and includes storage fees earned and appreciation in the value of grain owned.

		The Processing Group had a $16.3 million, or 22%, increase in sales resulting primarily from a 3% increase in the average price per ton sold and an 11% increase in volume. In the professional lawn business, serving the golf course and lawn care operator markets, volume was up 19% and sales up 18% in the first half of 2003 as compared to 2002 due primarily to increased market share. In the consumer and industrial lawn businesses, where we serve as contract manufacturer for several large “brand” companies, a private label manufacturer and also manufacture our own brands, volume was up 7% and sales up 30%. A portion of this increase relates to a new line of products that we began manufacturing for a major marketer. The cob-based businesses, a much smaller component of the Processing Group, had a 7% increase in sales primarily due to a 7% increase in volume.

		The Rail Group had an $8.8 million, or 108%, increase in sales. Sales of railcars made up $8.0 million of this increase and the remainder of the increase evenly split between increased revenue from the leased fleet and increased activity in the repair and fabrication shops. There were no significant sales of railcars during the first half of 2002.

		The Retail Group had a $3.9 million, or 4%, decrease in same-store sales in the first half of 2003 when compared to the first half of 2002. All markets showed decreases. We are competing against significant new competitors in the Toledo market and there is still softness in the retail economy.

		Gross profit for the first half of 2003 totaled $80.7 million for the Company, a decrease of $3.2 million, or 4%, from the first half of 2002. The Agriculture Group had a $4.7 million, or 11%, decrease in gross profit, resulting primarily from the decrease in merchandising revenues mentioned previously and a slight reduction in gross profit on grain sales, partially offset by a $2.2 million increase in gross profit on sales in our plant nutrient division. The fertilizer gross profit increase resulted from a 13% increase in gross profit per ton sold.

		Gross profit for the Processing Group increased $0.6 million, or 4%. This increase was experienced in the consumer and industrial lawn businesses. A portion of this increase relates to a new line of products that we began manufacturing for a major marketer. The professional lawn business had a gross profit decrease in spite of increased volume as a higher percentage of sales were to lawn-care operators rather than the higher margin products sold to golf courses. The cob-based business experienced a $0.2 million, or 14%, decrease in gross profit.

		Gross profit in the Rail Group increased $1.7 million, or 45%. This increase was due primarily to the gross profit on installation of railcar components in the fabrication and rail repair shops and, to a lesser extent, gross profit on the sale of railcars. The lease fleet income declined somewhat as cars that are coming off long-term leases are renewing at current rates that are lower in most cases than the previous lease rates. The multi-year low lease rate environment has continued in the rail industry, although certain car types have recently seen improvement in lease rates.

		Gross profit in the Retail Group decreased $0.8 million, or 3%, from the first six months of 2002. This was due to the decrease in sales discussed previously, partially offset by a modest increase in margins, as a result of changes in the mix of products sold.

		Operating, administrative and general expenses for the first half of 2003 totaled $67.3 million, equal to first six months of 2002. Expense related to performance incentives and bonuses decreased by $0.3 million due primarily to lower performance in certain operating units. There were increased production costs in the Company’s manufacturing businesses (Processing and the Rail shops), however they were absorbed into cost of sales and inventory.

		Interest expense for the first half of 2003 was $4.5 million, a $0.8 million, or 15%, decrease from 2002. Average 2003 daily short-term borrowings were 10% higher than the first half of 2002 but the average short-term interest rate decreased from 3.19% for the first half of 2002 to 2.25% for the first half of 2003.

		As a result of the above, the pretax income of $11.1 million for the first half of 2003 was 14% lower than the restated pretax income of $12.9 million recognized in the first half of 2002. Income tax expense of $3.8 million was provided at an expected effective annual rate of 34.0%. In the first half of 2002, income tax expense was provided at 30.4%. The Company’s actual 2002 full-year effective tax rate was 32.7%. The current 2003 effective tax rate of 34.0% anticipates lower tax benefits from extraterritorial income exclusions and a somewhat higher state and local income tax rate.

		As a result of the above, the first half 2003 net income was $1.7 million lower than the first half 2002 net income before cumulative effect of accounting change of $9.0 million. As discussed in Note A, the Company has restated the 2002 results for a change in accounting principle. The impact of that change is recognized in the first half of 2002 and amounted to $3.5 million of increased income. The basic and diluted income of $1.02 and $1.00, respectively, for the first half of 2003 compares to a basic and diluted income per share (before the impact of the cumulative effect of change, as restated) of $1.24 and $1.21, respectively, in the first half of 2002. The cumulative effect of a change in accounting principle added $0.47 to each of the earnings per share measures in 2002. See also Note A for details of the restatement to the 2002 income statement.

		The Company’s operations provided cash of $35.0 million in the first half of 2003, a decrease of $14.1 million from the same period in 2002. During this same period, short-term borrowings used to fund these operations decreased $30.8 million. Net working capital at June 30, 2003 was $84.4 million, a $2.6 million increase from December 31, 2002 and a $9.5 million increase from the June 30, 2002 restated working capital.

		The Company has significant short-term lines of credit available to finance working capital, primarily inventories and accounts receivable. Effective on November 1, 2002, the Company entered into a borrowing arrangement with a syndicate of banks, which provides the Company with $150 million in short-term lines of credit and an additional $50 million in a three-year line of credit. Prior to the syndication agreement, the Company managed several separate short-term lines of credit. The Company had drawn $60.0 million on its short-term line of credit at June 30, 2003. Peak short-term borrowing for the first half was $127.2 million on February 27, 2003. Typically, the Company’s highest borrowing occurs in the spring due to seasonal inventory requirements in the fertilizer and retail businesses, credit sales of fertilizer and a customary reduction in grain payables due to the cash needs and market strategies of grain customers.

		The Company utilizes interest rate contracts to manage a portion of its interest rate risk on both its short and long-term debt and lease commitments. At June 30, 2003, the fair value of these derivative financial instruments (primarily interest rate swaps and interest rate caps) was $0.2 million and was recorded in the consolidated balance sheet.

		A quarterly cash dividend of $0.07 per common share was paid January 22 and April 22, 2003. Cash dividends of $0.065 per common share were paid quarterly in 2002. A cash dividend of $0.07 per common share was declared on July 1, 2003 and was paid on July 22, 2003. The Company made income tax payments of $3.4 million in the first half of 2003 and expects to make payments totaling approximately $1.7 million for the remainder of 2003. During the first half of 2003, the Company issued approximately 52 thousand shares to employees and directors under its share compensation plans and purchased 95 thousand shares in open-market transactions.

		Total capital spending for 2003 on property, plant and equipment is expected to approximate $32.8 million and is expected to include $1.0 million for improvements and additions to Agriculture Group facilities, $0.5 million for information systems, $19.3 million for acquisitions and investments in the Agriculture and Rail Groups (some of which will be non-cash), $0.3 million for manufacturing improvements in the Rail Group, $0.3 million for retail store improvements and $0.4 million for improvements to administrative offices. The remaining amount of $11.0 million will be spent on numerous assets and projects; no single such project is expected to cost more than $0.3 million. The Company also expects to spend $23.5 million in 2003 for the purchase of additional railcars and capitalized modifications on railcars that may then be sold, financed off-balance sheet or owned by the Company for lease to customers.

		Certain of the Company’s long-term borrowings include provisions that impose minimum levels of working capital and equity, impose limitations on additional debt and require that grain inventory positions be substantially hedged. The Company was in compliance with all of these provisions at June 30, 2003. In addition, certain of the long-term borrowings are secured by first mortgages on various facilities or are collateralized by railcar assets.

		The marketability of the Company’s grain inventories and the availability of short-term lines of credit enhance the Company’s liquidity. In the opinion of management, the Company’s liquidity is adequate to meet its short-term and long-term needs.

Future payments due under debt and lease obligations as of June 30, 2003 are as follows:

		Included in long-term debt are acquisition liabilities that include minimum payments. There are additional contingent sales-based payments to the seller that have not triggered to date and would not be material to the Company if they trigger in the future. The contingency period ends in May 2005.

		The Company had standby letters of credit outstanding of $15.2 million at June 30, 2003, of which $8.5 million is a credit enhancement for industrial revenue bonds included in the contractual obligations table above.

		The Company’s grain inventories include the value of forward purchase contracts to buy grain. These contracts are marked to the market price and require performance in future periods. The terms of these contracts are consistent with industry standards.

		Approximately 69% of the operating lease commitments above relate to 1,752 railcars and 30 locomotives that the Company leases from financial intermediaries. See the following section on Off-Balance Sheet Transactions.

		The Company is subject to various loan covenants as highlighted previously. Although the Company is and has been in compliance with its covenants, noncompliance could

result in default and acceleration of long-term debt payments. The Company does not anticipate noncompliance with its covenants.

The Company’s Rail Group utilizes leasing arrangements that provide off-balance sheet financing for its activities. The Company leases railcars from financial intermediaries through sale-leaseback transactions, the majority of which involve operating leasebacks. Railcars owned by the Company, or leased by the Company from a financial intermediary, are generally leased to a customer under an operating lease. The Company also arranges non-recourse lease transactions under which it sells railcars or locomotives to a financial intermediary, and assigns the related operating lease to the financial intermediary on a non-recourse basis. In such arrangements, the Company generally provides ongoing railcar maintenance and management services for the financial intermediary, and receives a fee for such services. On most of the railcars and locomotives, the Company holds an option to purchase these assets at the end of the lease. Finally, the Company has contracted with railcar users directly to manage their railcars for a fee.

The following table describes the railcar and locomotive positions at June 30, 2003.

Additionally, the Company manages 1,268 railcars for a third party customer for which it receives a fee.

The Company has future lease payment commitments aggregating $26.0 million for the railcars leased by the Company from financial intermediaries under various operating leases. Remaining lease terms vary with none exceeding 10 years. The majority of these railcars have been leased to customers at June 30, 2003 over similar terms. The segment manages risk by match funding (which means matching terms between the lease to the customer and the funding arrangement with the financial intermediary), where possible, and ongoing evaluation of lessee credit worthiness. In addition, the Company prefers non-recourse lease transactions, whenever possible, in order to minimize its credit risk.

The process of preparing financial statements requires management to make estimates and judgments that affect the carrying values of the Company’s assets and liabilities as well as the recognition of revenues and expenses. These estimates and judgments are based on the Company’s historical experience and management’s knowledge and understanding of current facts and circumstances. Certain of the Company’s accounting policies are considered critical, as these policies are important to the depiction of the Company’s financial statements and require significant or complex judgment by management. Following are the accounting policies management considers critical to the Company’s financial statements.

Grain Inventories The Company marks all grain inventory, forward purchase and sale contracts for grain, and exchange-traded futures and options contracts to the market. Changes in market value are recorded as merchandising revenues in the statement of income. Because the Company marks inventories and sales commitments to the market, gross profit on a grain sale transaction is recognized when a contract for sale of the grain is executed. The related revenue is recognized upon shipment of the grain, at which time title transfers and customer acceptance occurs.

Marketing Agreement The Company has negotiated a marketing agreement that covers certain of its grain facilities (certain of which are leased from Cargill). Under this five-year amended and restated agreement (which began in June 2003 and expires in May 2008), the Company sells grain from these facilities to Cargill at market prices. Income earned from operating the facilities (including buying, storing and selling grain and providing grain marketing services to its producer customers) is shared 50/50 with Cargill once it exceeds a threshold amount. Measurement of this threshold is made on a cumulative basis and cash is paid to Cargill at each contract year end. The Company recognizes its pro-rata share of income to date at each month-end and accrues for any payment to Cargill in accordance with Emerging Issues Task Force Topic D-96, Accounting for Management Fees Based on a Formula.

Derivatives – Commodity Contracts The Company utilizes regulated commodity futures and options contracts to hedge its market price exposure on the grain it owns and related forward purchase and sale contracts. These contracts are included in the balance sheet in inventory at their current market value. Realized and unrealized gains and losses in the market value of these futures and option contracts are included in the income statement as a component of sales and merchandising revenues. While the Company considers all of its commodity contracts to be effective economic hedges, the Company does not designate its commodity futures and options contracts as hedges. Therefore the Company does not defer gains and losses on these same contracts as would occur for designated hedges under FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities.” Both the underlying inventory and forward purchase and sale contracts and the related futures and options contracts are marked to market on a daily basis.

Impairment of Long-Lived Assets The Company’s various business segments are each highly capital intensive and require significant investment in facilities and / or rolling stock. In addition, the Company has a limited amount of intangible assets and goodwill (described more fully in Note 1 to the Company’s annual consolidated financial statements) that it acquired in various business combinations. Whenever changing conditions warrant, we review the fair value of the tangible and intangible assets that may be impacted. We also annually review the balance of goodwill for impairment in the fourth quarter. These reviews for impairment take into account estimates of future cash flows. Our estimates of future cash flows are based upon a number of assumptions including lease rates, lease term, operating costs, life of the assets, potential disposition proceeds, budgets and long-range plans. While we believe the assumptions we use to estimate future cash flows are reasonable, there can be no assurance that the expected future cash flows will be realized. If management used different estimates and assumptions in its evaluation of these cash flows, the Company could recognize different amounts of expense in future periods.

Employee Benefit Plans The Company provides substantially all full-time employees with pension benefits and all full-time employees hired prior to January 1, 2003 with postretirement health care benefits. In order to measure the expense and funded status of these employee benefit plans, management makes several estimates and assumptions, including interest rates used to discount certain liabilities, rates of return on assets set aside to fund these plans, rates of compensation increases, employee turnover rates, anticipated mortality rates and anticipated future healthcare cost trends. These estimates and assumptions are based on the Company’s historical experience combined with management’s knowledge and understanding of current facts and circumstances. The Company uses third-party specialists to assist management in measuring the expense and funded status of these employee benefit plans. If management used different estimates and assumptions regarding these plans, the funded status of the plans could vary significantly and then the Company could recognize different amounts of expense over future periods.

Revenue Recognition The Company recognizes revenue for the sales of its products at the time of shipment. Gross profit on sales of grain is recognized when sales contracts are entered into as the Company marks its contracts to the market on a daily basis. Revenues from other merchandising activities are recognized as open grain contracts are marked-to-market or as related services are provided. Sales returns and allowances, if required, are provided for at the time sales are recorded. Shipping and handling costs are included in cost of sales.

The Company sells railcars to financial intermediaries and other customers. Proceeds from railcar sales, including railcars sold in non-recourse transactions, are recognized as revenue at the time of sale if there is no leaseback or the operating lease is assigned to the buyer, non-recourse to the Company. Revenue on operating leases (where the Company is the lessor) and on servicing and maintenance contracts in non-recourse transactions is recognized over the term of the lease or service contract.

Leasing activities The Company accounts for its leasing activity in accordance with FASB Statement No. 13, as amended, and related pronouncements. The Company’s Rail segment leases and manages railcars for third parties and leases railcars for internal use. Most leases to Rail segment customers are structured as operating leases. Railcars leased by the Company to its customers are either owned by the Company, leased from financial intermediaries under operating leases or leased from financial intermediaries under capital leases. The leases from financial intermediaries are generally structured as sale-leaseback transactions. Lease income and lease expense are recognized on a straight-line basis over the term of the lease.

The Company also has a limited number of direct financing leases with its customers that qualify for capital lease treatment. The net investment in the direct financing lease, consisting of lease receivables and the estimated residual value of the equipment at lease termination and net of unearned income, is included as an asset in the balance sheet.

The Company has financed some of its railcars through a capital lease with a financial intermediary. The terms of this lease required the Company to capitalize the assets and record the net present value of the lease obligation on its balance sheet as a long-term borrowing. There was no gain or loss on this financing transaction. This obligation is included with the Company’s long-term debt as described in Note 7 to the consolidated annual financial statements. The railcars under this lease are being depreciated to their residual value over the term of the lease.

The Company also arranges non-recourse lease transactions under which it sells railcars or locomotives to financial intermediaries and assigns the related operating lease on a non-recourse basis. The Company generally provides ongoing railcar maintenance and management services for the financial intermediaries, and receives a fee for such services when earned. On the date of sale, the Company recognizes the proceeds from sales of railcars in non-recourse lease transactions as revenue. Management and service fees are recognized as revenue, which is generally spread evenly over the lease term.

The market risk inherent in the Company’s market risk-sensitive instruments and positions is the potential loss arising from adverse changes in commodity prices and interest rates as discussed below.

The availability and price of agricultural commodities are subject to wide fluctuations due to unpredictable factors such as weather, plantings, government (domestic and foreign) farm programs and policies, changes in global demand created by population growth and higher standards of living, and global production of similar and competitive crops. To reduce price risk caused by market fluctuations, the Company follows a policy of hedging its inventories and related purchase and sale contracts. The instruments used are exchange-traded futures and options contracts that function as hedges. The market

value of exchange-traded futures and options used for hedging has a high, but not perfect correlation, to the underlying market value of grain inventories and related purchase and sale contracts. The less correlated portion of inventory and purchase and sale contract market value (known as basis) is much less volatile than the overall market value of exchange-traded futures and tends to follow historical patterns. The Company manages this less volatile risk using its daily grain position report to constantly monitor its position relative to the price changes in the market. The Company’s accounting policy for its futures and options hedges, as well as the underlying inventory positions and purchase and sale contracts, is to mark them to the market price daily and include gains and losses in the statement of income in sales and merchandising revenues.

A sensitivity analysis has been prepared to estimate the Company’s exposure to market risk of its commodity position (exclusive of basis risk). The Company’s daily net commodity position consists of inventories, related purchase and sale contracts and exchange-traded contracts. The fair value of the position is a summation of the fair values calculated for each commodity by valuing each net position at quoted futures market prices. Market risk is estimated as the potential loss in fair value resulting from a hypothetical 10% adverse change in such prices. The result of this analysis, which may differ from actual results, is as follows:

The fair value of the Company’s long-term debt is estimated using quoted market prices or discounted future cash flows based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. In addition, the Company has derivative interest rate contracts recorded in its balance sheet at their fair values. The fair value of these contracts is estimated based on quoted market termination values. Market risk, which is estimated as the potential increase in fair value resulting from a hypothetical one-half percent decrease in interest rates, is summarized below:

The preceding Management’s Discussion and Analysis contains various “forward-looking statements” which reflect the Company’s current views with respect to future events and financial performance. These forward-looking statements are subject to

certain risks and uncertainties, including but not limited to those identified below, which could cause actual results to differ materially from historical results or those anticipated. The words “believe,” “expect,” “anticipate,” “will” and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The following factors could cause actual results to differ materially from historical results or those anticipated: weather; supply and demand of commodities including grains, fertilizer and other basic raw materials; market prices for grains and the potential for increased margin requirements; environmental and governmental policies; competition; economic conditions; risks associated with acquisitions; interest rates; and income taxes. The Company is subject to various loan covenants as highlighted previously. Although the Company is and has been in compliance with its covenants, noncompliance could result in default and acceleration of long-term debt payments. The Company does not anticipate noncompliance with its covenants.

The President and Chief Executive Officer; Vice President, Controller and CIO; and Vice President, Finance and Treasurer (the “Certifying Officers”) have evaluated our disclosure controls and procedures as defined in the rules of the SEC, as of the end of the second quarter and have determined that such controls and procedures are effective in providing reasonable assurance that material information relating to the Company and its consolidated subsidiaries was made known to them during the period covered by this report.

Our Certifying Officers are responsible for the accuracy of the financial information that is presented in this report. To meet their responsibility for financial reporting, they have established internal control procedures which they believe are adequate to provide reasonable assurance that the Company’s financial statements are reliable and prepared in accordance with generally accepted accounting principles and that the Company’s assets are protected from loss. These procedures are reviewed by the Company’s internal auditors in order to monitor compliance and by our independent auditors to support their audit work. In addition, our Board’s Audit Committee, which is composed entirely of independent directors, meets regularly with management, internal auditors and the independent auditors to review accounting, auditing and financial matters. This Committee and the independent auditors have free access to each other, with or without management being present.

In the second quarter, we commenced a review of our internal control documentation in preparation for the management report on internal control over financial reporting and the accompanying independent auditors’ attestation report that will be a part of our annual report of Form 10-K for the fiscal year ended December 31, 2004.

There were no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of the Certifying Officers most recent evaluation.

The annual meeting of the shareholders of The Andersons, Inc. was held on May 1, 2003 to elect ten directors and to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent auditors. Results of the voting follow:

			10.4 Marketing Agreement between The Andersons, Inc. and Cargill dated June 1, 1998 (portions of this exhibit have been omitted pursuant to a request for confidential treatment)

			10.5 Lease and Sublease between Cargill, Incorporated and The Andersons, Inc. dated June 1, 1998 (portions of this exhibit have been omitted pursuant to a request for confidential treatment)

			10.6 Amended and Restated Marketing Agreement between The Andersons, Inc.; The Andersons Agriculture Group LP; and Cargill dated June 1, 2003 (portions of this exhibit have been omitted pursuant to a request for confidential treatment)

			10.7 Amendment to Lease and Sublease between Cargill, Incorporated; The Andersons Agriculture Group LP; and The Andersons, Inc. dated July 10, 2003 (portions of this exhibit have been omitted pursuant to a request for confidential treatment)

			31.1 Certification of the President and Chief Executive Officer under Rule 13(a)-14(a)/15d-14(a)

			31.2 Certification of the Vice President, Controller and CIO under Rule 13(a)-14(a)/15d-14(a)

			31.3 Certification of the Vice President, Finance and Treasurer under Rule 13(a)-14(a)/15d-14(a)

			32.1 Section 1350 Certifications

(b)

Reports on Form 8-K. A report on Form 8-K was filed on April 29, 2003. The Company issued a press release announcing earnings results for the quarter ended March 31, 2003.

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.

32 EX-10.4 3 l01943bexv10w4.txt EX-10.4 EXHIBIT 10.4 MARKETING AGREEMENT THIS AGREEMENT, is made and entered into effective as of June 1, 1998 by and between CARGILL, INCORPORATED, a Delaware corporation with principal offices and place of business at 15407 McGinty Road West, Wayzata, Minnesota 55391 ("Cargill"), and THE ANDERSONS, INC., an Ohio corporation with principal offices and place of business at 480 W. Dussel Drive, P.O. Box 119, Maumee, Ohio 43537 ("TAI"). WHEREAS, Cargill has leased its two grain handling facilities located in Toledo and Maumee, Ohio (the "Leased Facilities") to TAI by lease agreement dated June 1, 1998 (the "Lease Agreement"); WHEREAS, TAI intends to use TAI's existing two grain handling facilities at Toledo and Maumee, Ohio (the "TAI Facilities") and the Leased Facilities (collectively, the "Facilities") for the primary purpose of originating grain in the Toledo and Maumee, Ohio area (the "Toledo Grain"); and WHEREAS, TAI intends to sell the Toledo Grain to Cargill, and Cargill intends to purchase from TAI and merchandise the Toledo Grain; NOW, THEREFORE, in consideration of the foregoing and the mutual terms and conditions hereinafter set forth, Cargill and TAI mutually agree as follows: ARTICLE I TERM AND TERMINATION 1.1 TERM. The initial term of this Agreement shall commence on June 1, 1998 (the "Effective Date") and shall continue through May 31, 2003 (the "Initial Term"), subject to the termination provisions below. This Agreement shall automatically renew for consecutive five (5) year periods unless either party provides notice to the other party at least six (6) months prior to the expiration of the then current term of such party's intent to terminate or modify this Agreement. If a party provides such notice of its intent to modify the Agreement for purposes of renewal, the parties shall negotiate in good faith a renewal of this Agreement. In the event that the parties are unable to negotiate a mutually agreeable renewal prior to the expiration of the Initial Term or the then current term, this Agreement shall terminate without further notice at the expiration of such term. 1.2 TERMINATION. (a) If the Lease Agreement is terminated for any reason, the Initial Term of this Agreement or renewal term, if any, shall automatically terminate without notice. The Lease Agreement, which is incorporated herein by this reference, is attached hereto as Exhibit A. (b) Either party may terminate this Agreement prior to the expiration of the Initial Term or renewal term, if any, following any material breach of this Agreement by the other party if the breaching party fails to remedy such breach within thirty (30) days after receiving from the non-breaching party written notice of the breach specifying the basis on which such breach is claimed. (c) This Agreement shall terminate upon written notice by either party to the other in the event that the notified party shall file a voluntary petition in bankruptcy, or shall be adjudicated as a bankrupt pursuant to an involuntary petition, or shall suffer appointment of a temporary or permanent receiver, custodian, or trustee for its business or for all or substantially all of its assets, or shall make an assignment for the benefit of creditors. (d) In the event that one or more third parties purchases TAI's stock in an amount sufficient to significantly affect or change control of TAI, or one or more third parties takes any action that does significantly affect the control of TAI, Cargill may in its sole discretion either continue or terminate this Agreement. For purposes of this Agreement, "control" shall mean (a) the direct or indirect ownership of more than fifty percent (50%) of the total voting securities of every class or other voting evidences of ownership interest of TAI, or (b) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of TAI. If Cargill elects to terminate this Agreement under this provision, Cargill must provide written notice to TAI of its election to terminate not more than fifteen (15) days after public announcement or after TAI has provided written notice to Cargill of any public filing with the Securities Exchange Commission. TAI shall have no right to terminate this Agreement under this Section 1.2 (d) herein. (e) Termination of this Agreement shall not affect any obligation of either party accrued prior to the effective date of such termination. 1.3 CONTINUING OBLIGATIONS. Upon the expiration or termination of this Agreement, for a period of two (2) years from the date of such expiration or termination, Cargill shall have both a right of first refusal and a right of last refusal to purchase from TAI at a mutually agreed market price, 50% of the grain put through the TAI Facilities for the first year of the two year period, and 25% of the grain put through the TAI Facilities for the second year of the two year period; provided, however, that this provision shall not apply to grain sold to those customers with whom TAI maintains direct trading relationships during the term of this Agreement. If the parties cannot mutually agree to the market price, the market price shall be determined by an independent third party, mutually agreeable to both parties. ARTICLE II GRAIN ORIGINATION AND MERCHANDISING 2.1 OBLIGATION OF BOTH PARTIES. Both parties have the obligation to maximize net income of the Facilities. As a means to this, Cargill will maintain control of the grain merchandising function, while TAI will maintain control of the grain origination and facility operation functions. Communications between the parties regarding such obligation of both parties shall be conducted in accordance with the Guidelines as defined in Section 8.1 herein. 2.2 ORIGINATION. TAI shall use its best efforts throughout the duration of the Initial Term and all subsequent renewal terms, if any, to maximize origination of the Toledo Grain. TAI shall use the Facilities for the primary purpose of originating the Toledo Grain. Any other intended use by TAI of the Facilities to generate income shall be promptly communicated to Cargill and shall be subject to Cargill's approval, which shall not be unreasonably withheld. For purposes of this Section 2.2, it shall not be unreasonable for Cargill to withhold approval if TAI's intended use may cause a default in the IRB Lease as defined in the Lease Agreement. TAI shall have sole discretion to establish the price at which TAI purchases the Toledo Grain in connection with TAI's origination activities. 2.3 SALE/PURCHASE OF THE TOLEDO GRAIN. Subject to the terms and conditions set forth in this Agreement, TAI agrees to sell to Cargill and Cargill agrees to purchase from TAI the Toledo Grain for the duration of the Initial Term and all subsequent renewal terms, if any. Cargill shall have sole discretion to determine when Cargill shall purchase and at what price Cargill shall purchase the Toledo Grain from TAI. These decisions shall be made with full consideration of origination, logistic and grain quality factors as represented in good faith by TAI. During the term of this Agreement, TAI will not sell the Toledo Grain to any person or entity other than Cargill pursuant to the terms of this Agreement. Cargill and TAI shall execute Cargill's standard purchase contract ("Purchase Contract") to effectuate each respective sale of the Toledo Grain. The terms and conditions on the front and back sides of the Purchase Contract shall govern the transaction to the extent that such terms and conditions do not conflict with the terms of this Agreement in which case this Agreement shall govern. A copy of the Purchase Contract is attached hereto as Exhibit B. 2.4 TOLEDO GRAIN EXCEPTIONS. TAI will remain fully active in the NS rail markets as such markets relate to facilities other than the Facilities which are the subject of this Agreement, and no NS rail sales will be offered by TAI for the Toledo Grain. Should an opportunity arise wherein TAI desires to purchase certain amounts of Toledo Grain, TAI may contact Cargill's merchandising contact for this Agreement with a bid. Further, TAI may direct trading relationships with certain customers as mutually agreed by the parties. 2.5 GRAIN MERCHANDISING. Cargill shall use its best efforts throughout the duration of the Initial Term and all subsequent renewal terms, if any, to promote the sale of and to merchandise the Toledo Grain. Except as otherwise provided herein, Cargill shall have sole authority to merchandise the Toledo Grain into both export and domestic markets, and accordingly TAI shall not communicate with any of Cargill's customers regarding the sale of the Toledo Grain except as provided herein, or as mutually agreed by the parties. ARTICLE III OPEN CONTRACTS 3.1 Cargill agrees to assign, deliver, and transfer to TAI on the Effective Date, and TAI agrees to accept from Cargill, on the Effective Date, all right, title, and interest of Cargill in and to all executory contracts for the purchase of grain (the "Open Contracts") by Cargill from various sellers, which Open Contracts are in existence on the Effective Date. TAI shall purchase the Open Contracts at the TAI truck bid on the Effective Date. If the parties cannot mutually agree to the TAI truck bid, the price shall be determined by an independent third party, mutually agreeable to both parties. Cargill shall indemnify and hold harmless TAI against all claims, damages, liabilities, costs, suits, obligations or penalties (including attorneys' fees) arising from Cargill's breach of or negligent administration or handling of any open hedge-to-arrive grain contracts which are assigned from Cargill to TAI ("HTA Contracts"), or arising from any questions of legality of such HTA Contracts to the extent that such questions of legality do not arise from TAI's breach of or negligent administration or handling of the HTA Contracts. TAI shall indemnify and hold harmless Cargill against all claims, damages, liabilities, costs, suits, obligations, or penalties (including attorneys' fees) arising from TAI's breach of or negligent administration or handling of the HTA Contracts. ARTICLE IV DISPOSITION OF THIRD PARTY GRAIN 4.1 ASSIGNMENT. On the Effective Date, Cargill anticipates having in storage at the Leased Facilities certain quantities of grain belonging to third parties (the "Cargill Third Party Grain"). The Cargill Third Party Grain is stored in the Leased Facilities under warehouse receipts, storage receipts or scale tickets ("Cargill Receipt Obligations"). On the Effective Date, Cargill shall assign to TAI the Cargill Receipt Obligations and warrants that sufficient quantity and quality of grain will remain in the Leased Facilities over and above the Cargill Inventory (as defined in Section 5.1 herein) on the Effective Date to satisfy the Cargill Receipt Obligations. 4.2 PRORATION. Cargill and TAI agree that storage charges due under the Cargill Receipt Obligations shall be apportioned between them, Cargill to receive all storage charges accrued up to the Effective Date, TAI to receive all charges accruing thereafter, which charges shall be included on the P&L as defined in Section 6.3 herein. Any prepaid storage or other charges shall be prorated between Cargill and TAI as of the Effective Date. If TAI should receive payment for storage charges to which Cargill is entitled, TAI shall promptly forward such amounts to Cargill. Should it be necessary for either party to execute an assignment to the other to collect such charges, it shall do so. 4.3 TAI THIRD PARTY GRAIN. On the Effective Date, TAI anticipates having in storage at the TAI Facilities certain quantities of grain belonging to third parties (the "TAI Third Party Grain"). The TAI Third Party Grain is stored in the TAI Facilities under warehouse receipts, storage receipts or scale tickets ("TAI Receipt Obligations"). All storage charges due under the TAI Receipt Obligations accrued on or after the Effective Date shall be included in the P&L. Any prepaid storage or other charges shall be prorated accordingly as of the Effective Date. ARTICLE V INVENTORY 5.1 LEASED FACILITIES. On the Effective Date, Cargill will have in storage at the Leased Facilities inventories of grain (the "Cargill Inventory"). TAI will purchase the Cargill Inventory at the FOB Toledo value LESS * on the Effective Date (the "Inventory Price"). Prior to or on the Effective Date, representatives of Cargill and TAI shall determine by weigh-up/measurement the quantity and quality of the Cargill Inventory (and thereby the Cargill Third Party Grain). Quality of grain will be at market scale of discount. The cost of said weigh-up/measurement and grading shall be borne equally by Cargill and TAI. Should the representatives of Cargill and TAI be unable to agree on the quantity or quality of the Cargill Inventory or any portion thereof or the Third Party Grain, the matter shall be resolved in accordance with Article XIV of this Agreement. If the parties cannot mutually agree to the FOB Toledo value less * such value shall be determined by an independent third party, mutually agreeable to both parties. 5.2 TAI FACILITIES. On the Effective Date, TAI will have in storage at the TAI Facilities inventories of grain (the "TAI Inventory"). The parties shall mutually agree to a FOB Toledo value less * of the TAI Inventory as of the Effective Date, which amount shall be included on the P&L as defined in Section 6.3 herein. Prior to or on the Effective Date, representatives of Cargill and TAI shall determine by weigh-up/measurement the quantity and quality of the TAI Inventory. Quality of *CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SEC grain will be at market scale of discount. The cost of said weigh-up/measurement and grading shall be borne equally by Cargill and TAI, of which TAI's respective cost shall not be included on the P&L. Should the representatives of Cargill and TAI be unable to agree on the quantity or quality of the TAI Inventory or any portion thereof, the matter shall be resolved in accordance with Article XIV of this Agreement. If the parties cannot mutually agree to the FOB Toledo value less * , such value shall be determined by an independent third party, mutually agreeable to both parties. ARTICLE VI FINANCIAL MATTERS 6.1 EARNINGS THRESHOLD. The parties hereby establish a five-year cumulative earnings before long-term interest and income tax ("EBIT") threshold * (the "Threshold"). In the event that the actual five-year cumulative EBIT of the Facilities is greater than the Threshold, the amount over the Threshold shall be distributed equally between the parties. If the actual five-year cumulative EBIT is below the Threshold, Cargill shall pay TAI the difference between the Threshold and the actual five-year cumulative EBIT, less all absorbed losses as described herein. TAI shall absorb fifty percent (50%) of each individual year's loss where the EBIT for the individual year is less than zero. In no event shall the sum of TAI's absorbed losses exceed the total actual five-year cumulative EBIT shortfall from the Threshold. If this Agreement is terminated before the expiration of the Initial Term, or before the expiration of the then current term, the Threshold shall be adjusted on a prorated basis. By way of example, if this Agreement is terminated 3 years 3 months into the Initial Term, the Threshold would be adjusted from * to * . 6.2 SETTLEMENT. In order to reconcile the distributions to which each party is entitled pursuant to Section 6.1 herein, the parties shall conduct interim tentative settlements on an annual basis as of May 31. Such settlements shall be based on interim annual thresholds of * , and * for years one through five of this Agreement, respectively. Annual settlement payments shall be treated as a purchase price adjustment to all grain sold and purchased pursuant to Section 2.3 of this Agreement. By way of example, settlement would occur in the following manner: Example One Year One: P&L states a profit of * . The interim threshold for year one is * . The parties split equally the excess over the interim threshold, which excess is * in this example; therefore, TAI pays Cargill * . Accordingly, at end of year one, TAI's account is * , and Cargill's account is * . *CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SEC Year Two: P&L states a loss of * . The interim threshold for year two is * . Because of the * loss, TAI's account is at * , and consequently requires an additional * to match the interim threshold. However, because TAI and Cargill absorb the * loss on an equal basis, Cargill pays TAI * . Accordingly, at end of year two, TAI's account is * , and Cargill's account is negative * . Year Three: P&L states a profit of * . The interim threshold for year three is * . TAI's account is now at * , while Cargill's account is at negative * . In order to reconcile the accounts to the interim threshold, TAI pays Cargill * . Accordingly, at end of year three, TAI's account is * , and Cargill's account is * . Year Four: P&L states a loss of * . The interim threshold is * . Because of the * loss, TAI's account is now at * , and consequently requires an additional * to match the interim threshold. However, because TAI and Cargill absorb the cumulative losses on an equal basis, Cargill pays TAI * less * in cumulative losses). Accordingly, at end of year four, TAI's account is * , and Cargill's account is negative * . Year Five: P&L states a profit of * . The final threshold is * . TAI's account is now at * , while Cargill's account is at negative * . In order to reconcile the accounts to the final threshold, TAI pays Cargill * . Accordingly, at end of year five, TAI's account is * , and Cargill's account is negative * . Example Two (All dollar figures are in millions)

6.3 PROFIT AND LOSS STATEMENT. TAI shall include the Leased Facilities in TAI's profit and loss statement currently dedicated by TAI to the TAI Facilities (the "P&L"). The P&L SHALL INCLUDE the following items: (a) Rent paid by TAI pursuant to the Lease Agreement for the Leased Facilities; (b) TAI's purchases of the Toledo Grain; *CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SEC (c) Sales of the Toledo Grain by TAI to Cargill; (d) Certain allocated administrative and general operating costs mutually agreeable to the parties, including identified and quantified costs that relate specifically to the parties' origination, operation, and merchandising functions under this Agreement; (e) Storage and other charges for Cargill Third Party Grain and TAI Third Party Grain pursuant to Article IV herein accrued on or after the Effective Date; (f) The market value of the TAI Inventory as of the Effective Date; (g) Such other items as may be mutually agreed by the parties. The P&L SHALL NOT INCLUDE the following items: (a) Claims, damages, liabilities, costs, expenses, suits, obligations or penalties (including attorneys' fees and costs of defense) of any and every nature whatsoever arising out of or in any manner connected with any grossly negligent act or omission by TAI or Cargill, including without limitation TAI's grossly negligent operation of the Facilities; (b) Claims, damages, liabilities, costs, expenses, suits, obligations or penalties (including attorneys' fees and costs of defense) of any and every nature whatsoever arising out of or in any manner connected with TAI's or Cargill's failure or alleged failure to comply with all applicable laws, rules, regulations, orders and decrees of the United States and the State of Ohio; (c) Claims, damages, liabilities, costs, expenses, suits, obligations or penalties (including attorneys' fees and costs of defense) of any and every nature whatsoever arising out of or in any manner connected with TAI's or Cargill's failure or alleged failure to comply materially with its contractual obligations; (d) Claims, damages, liabilities, costs, expenses, suits, obligations or penalties (including attorneys' fees and costs of defense) of any and every nature whatsoever arising out of or in any manner connected with any environmental condition at the Facilities to the extent that such environmental condition arises from, relates to or results from (i) the use, operation or ownership of the Facilities and the conduct of business therein, thereon, thereabout or with regard thereto at all times prior to the Effective Date, (ii) any deviation by TAI from standard business practices, or (iii) any violation of the law. (e) Claims, damages, liabilities, costs, expenses, suits, obligations or penalties (including attorneys' fees and costs of defense) of any and every nature whatsoever arising out of or in any manner connected with TAI's or Cargill's deviations from grain industry standards; (f) Such other items as may be mutually agreed by the parties. 6.4 CAPITAL IMPROVEMENTS. (a) Each party is entering into this business venture agreement with a solid trust in the respective condition of the other's facilities, as well as the past operating standards that each party employed in the operation of each party's respective facilities. The Lease Agreement represents a strong vote of confidence by Cargill in TAI's ability to operate the Cargill facilities in conformance with high standards for safety, maintenance and recapitalization. In defining the guidelines for capital spending and depreciation recovery, neither party should benefit at the expense of the other party. While each party retains absolute accountability for its asset investment, Cargill is entrusting TAI with oversight responsibility as the Lessee, to manage the Cargill assets with the same degree of vigilance as extended to their own assets, and in accordance with the Lease Agreement. TAI will annually assemble a Capital Spending Plan for each of the Facilities. The Capital Spending Plan ("Plan") shall be submitted to Cargill for review in advance of the June-July fiscal year. Review and approval by each party is required. This will establish the basic framework for capital spending against which each party can measure and decide on appropriate deviations from the Plan. (b) MINOR CAPITAL SPENDING: "Minor Capital Spending" is defined as any project with a total project cost of less than * but greater than * and considered an acceptable and appropriate expenditure to be capitalized under the Internal Revenue Tax Code. "Profit Maintaining Minor Capital Spending" is defined as any capital expenditures necessary to maintain the continued operating standards and serviceability of the Facilities. "Profit Adding Minor Capital Spending" is defined as any capital expenditures that add minor amounts of revenue and profit to the P&L. Minor Capital Spending may also include expenditures for safety and/or environmental facility upgrades in order to comply with state and federal regulations and/or best operating standards and practices. (c) MAJOR CAPITAL SPENDING: "Major Capital Spending" is defined as any project with a total cost equal to or greater than * . *CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SEC "Profit Maintaining Major Capital Spending" is defined as any capital expenditure equal to or in excess of * that serves to return the facility to its original operating level of serviceability and does not increase revenues and operating net income by a marked degree. Profit Maintaining Major Capital Spending may also include expenditures on Safety and Environmental projects required by State or Federal law or best operating practices. "Profit Adding Major Capital Spending" is defined as any capital expenditure equal to or in excess of * that will increase operating revenues, net income and EBIT by a marked degree. (d) RULES AND GUIDELINES: (i) TAI shall be required to pay for all Capital Spending related to or affecting the Facilities. (ii) Depreciation is for the account of the business venture. (iii) TAI has authority to approve all Minor Capital Spending in the Plan less than * per project, so long as such expenditures are consistent with the Plan. (iv) Proposed expenditures of * per project or more related to or affecting the Cargill Facilities will be submitted to Cargill for prior approval, including all expenditures within the Plan. (v) TAI's capital spending approval procedures will govern TAI's decision-making process for Minor Capital Spending. (vi) Substitutions within the framework of the Plan will be allowed for expenditures less than * . Substituted expenditures of amounts greater than * will require the approval of the owner of the affected Facility. (vii) All Major Capital Spending in excess of * per project will require prior approval by both parties regardless of the affected Facility. (viii) All capital spending in excess of or outside of the Plan will require prior approval by both parties. (ix) Upon termination of the Lease Agreement, Cargill shall purchase from TAI, and TAI shall sell to Cargill, all alterations, additions and improvements to the Cargill Facilities at the then current book value of such alterations, additions and improvements, consistent with Section 7(b) of the Lease Agreement. *CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SEC 6.5 RIGHT TO AUDIT DOCUMENTS. Both parties shall have the right at any time and upon reasonable notice to the other party to audit the other party's financial records relating to and generated pursuant to this Agreement. Such review shall be subject, however, to the Guidelines (as defined in Section 8.1 herein) provided to the parties by joint legal counsel. 6.6 EFFECT OF DEFICIENCY ON THRESHOLD. In the event that TAI's capability to maximize origination pursuant to this Agreement is materially restricted, limited or in any way deficient in any respect as a result of a force majeure, any grossly negligent act or omission by TAI, or by any significant event that substantially interferes with all or part of the normal business activities of the Facilities, which event could not reasonably be foreseen by the parties (including by way of example, but not limited to, an explosion, a shutdown of the Great Lakes market, or a facility-related weather disaster), the Threshold shall be renegotiated to reflect such deficiency. The parties shall assign a percentage to the loss in capability, and the Threshold shall be reduced accordingly by such percentage for the duration of the deficiency. If the parties are unable to agree on a percentage loss in capability, the matter will be resolved pursuant to Article XIV herein. ARTICLE VII RELATIONSHIP BETWEEN THE PARTIES 7.1 TAI shall conduct its business under this Agreement in the purchase and sale to Cargill of the Toledo Grain as a principal for its own account and at its own expense and risk, subject to the terms and conditions of this Agreement. Cargill shall conduct its business under this Agreement in the purchase from TAI and the merchandising of the Toledo Grain as a principal for its own account and at its own expense and risk, subject to the terms and conditions of this Agreement 7.2 TAI shall have no power to make, and shall not make, any representations on behalf of Cargill. TAI warrants that it will not act or attempt to act as agent for or representative of Cargill, and will not create or attempt to create any obligation binding upon Cargill, or assert or compromise or attempt to assert or compromise any right of Cargill. Cargill shall have no power to make, and shall not make, any representations on behalf of TAI. Cargill warrants that it will not act or attempt to act as agent for or representative of TAI, and will not create or attempt to create any obligation binding upon TAI, or assert or compromise or attempt to assert or compromise any right of TAI. ARTICLE VIII COMMUNICATION 8.1 GENERAL. Prior to the Effective Date, joint legal counsel for the parties shall furnish the parties with specific guidelines relating to future communications between the parties and each party's right to audit the other party's financial records pursuant to Section 6.5 herein (the "Guidelines"). The parties shall strictly follow the Guidelines in all future communications between the parties and in conducting all audits pursuant to Section 6.5 herein. 8.2 ADVISORY PANEL. An advisory panel consisting of approximately three (3) representatives, unless the parties otherwise mutually agree, from each party (the "Panel") shall be established as soon as reasonably practicable after commencement of the Initial Term. The Panel shall meet on a quarterly basis, unless otherwise agreed, to address issues relating to the origination and merchandising of the Toledo Grain; provided, however, that the parties shall strictly follow the Guidelines in all communications between representatives of the Panel. ARTICLE IX CONFIDENTIAL INFORMATION 9.1 Cargill and TAI hereby agree that they each will keep the terms and conditions of this Agreement confidential and proprietary, will only disclose the contents of this Agreement with those of their employees and others who are on a need-to-know basis, and will ensure that reasonable procedures are implemented to maintain the confidential nature of this Agreement with care equal to that given to confidential information of its own respective business, but in no event less than a reasonable degree of care. Cargill and TAI assume liability for any breach of this Article by it or any of its employees, agents or representatives. The obligations set forth in this Article shall survive any termination of this Agreement. 9.2 TAI shall keep confidential any Cargill information (whether business marketing, technical or other data) known to it to be, or designated by Cargill as being, confidential ("Confidential Information"), and shall use such care as TAI would use in maintaining the confidentiality of its own confidential information. TAI shall use such information only to the extent needed and for the purpose of performing its obligations under this Agreement. TAI's obligations under this Section 9.02 shall survive any termination of this Agreement, except that the obligation of confidentiality under this Section 9.02 shall not apply: (a) to information known to TAI, as evidenced by TAI, at the time of TAI's receipt thereof from Cargill; or (b) to information received by TAI from a third party under no obligation of confidentiality to Cargill. 9.3 Cargill shall keep confidential any TAI information (whether business marketing, technical or other data) known to it to be, or designated by TAI as being, confidential ("Confidential Information"), and shall use such care as Cargill would use in maintaining the confidentiality of its own confidential information. Cargill shall use such information only to the extent needed and for the purpose of performing its obligations under this Agreement. Cargill's obligations under this Section 9.03 shall survive any termination of this Agreement, except that the obligation of confidentiality under this Section 9.03 shall not apply: (a) to information known to Cargill, as evidenced by Cargill, at the time of Cargill's receipt thereof from TAI; or (b) to information received by Cargill from a third party under no obligation of confidentiality to TAI. ARTICLE X EMPLOYMENT MATTERS 10.1 Any persons who are employed by Cargill at the Leased Facilities immediately prior to the Effective Date and who are terminated in anticipation of this Agreement shall be considered for employment by TAI. It is mutually understood and agreed, however, that TAI is under no obligation to hire and provide employment for any such employees. 10.2 Cargill has terminated any employment relationship it previously had with certain of its employees at the Leased Facilities. Cargill shall have no further supervisory function whatsoever with respect to any of such former employees at the Leased Facilities. TAI has sole authority to operate the Leased Facilities for the purposes of the relationship contemplated in this Agreement. Accordingly, TAI shall be solely responsible for the direction of its agents, servants and employees, including all former employees of Cargill hired by TAI. In particular and without limitation, TAI shall be solely responsible for its employees' selection, hiring, firing, supervision, wages and benefits, hours, performance standards, training and discipline. TAI shall also be solely responsible for compliance with all applicable local, state and federal laws and regulatory requirements relating to its employees. 10.3 Notwithstanding the foregoing, if TAI hires any Cargill employees, TAI shall recognize past service of such employees for vacation and sick pay eligibility purposes only. TAI will also waive the one year waiting period for participation in its RSIP (401K Plan). Further, such employees shall be subject to the applicable vesting schedules under the pension benefit plans, based on the employment date of such employees with TAI. Health insurance coverage will commence on the date of hire of such employees as TAI employees, and there will be no exclusions for pre-existing conditions. Such former employees' participation in Cargill's employee welfare, pension, fringe benefit and profit sharing plans shall terminate on the Effective Date. ARTICLE XI REPRESENTATIONS AND WARRANTIES 11.1 REPRESENTATIONS AND WARRANTIES OF CARGILL. Cargill represents and warrants as follows to TAI, such representations and warranties to be true and correct on the Effective Date, that: (a) ORGANIZATION, QUALIFICATION AND GOOD STANDING. Cargill is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is registered to do business in and is in good standing under the laws of the State of Ohio. All corporate proceedings required to be taken by Cargill to authorize the execution, delivery and consummation of this Agreement have been duly and validly taken and will be in full force and effect on the Effective Date. (b) AUTHORITY; BINDING EFFECT. Cargill has full power and authority to execute and perform this Agreement, and this Agreement constitutes a legal, valid and binding obligation of Cargill enforceable against Cargill in accordance with its terms, subject to applicable bankruptcy or insolvency laws. (c) COMPLIANCE WITH OTHER INSTRUMENTS. Cargill is neither a party to, nor otherwise subject to, any agreement or other instrument which would prevent or prohibit Cargill from or require any consent to, the execution or consummation hereof. 11.2 SURVIVAL OF WARRANTIES AND INDEMNIFICATION. All the warranties and representations given by Cargill in Section 11.1 herein or elsewhere in this Agreement, all of which are relied upon by the TAI, shall survive the Effective Date hereof. Cargill agrees to indemnify and hold TAI harmless from and against any loss, damage, claim, liability, cost, expense or penalty (including reasonable attorneys' fees) which TAI may incur or sustain after the Effective Date resulting from or arising out of any breach of any of said representations and warranties. 11.3 REPRESENTATIONS AND WARRANTIES OF TAI. TAI represents and warrants as follows to Cargill, such representations and warranties to be true and correct on the Effective Date, that: (a) ORGANIZATION, QUALIFICATION AND GOOD STANDING. TAI is a corporation duly organized, validly existing and in good standing under the laws of the State of Ohio and is registered to do business in and is in good standing under the laws of the State of Ohio. All corporate proceedings required to be taken by TAI to authorize the execution, delivery and consummation of this Agreement have been duly and validly taken and will be in full force and effect on the Effective Date. (b) AUTHORITY; BINDING EFFECT. TAI has full power and authority to execute and perform this Agreement, and this Agreement constitutes a legal, valid and binding obligation of TAI enforceable against TAI in accordance with its terms, subject to applicable bankruptcy or insolvency laws. (c) COMPLIANCE WITH OTHER INSTRUMENTS. TAI is neither a party to, nor otherwise subject to, any agreement or other instrument which would prevent or prohibit TAI from or require any consent to, the execution or consummation hereof. (d) CORPORATE DOCUMENTS. TAI has provided Cargill with all corporate documents evidencing the provisions that TAI has in place which limit potential changes in control of TAI. 11.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATION. All the warranties and representations given by TAI in Section 11.3 herein or elsewhere in this Agreement, all of which are relied upon by the Cargill, shall survive the Effective Date hereof. TAI agrees to indemnify and hold Cargill harmless from and against any loss, damage, claim, liability, cost, expense or penalty (including reasonable attorneys' fees) which Cargill may incur or sustain after the Effective Date resulting from or arising out of any breach of any of said representations and warranties. ARTICLE XII INDEMNIFICATION 12.1 INDEMNIFICATION BY CARGILL. Cargill shall defend, exonerate, indemnify and hold harmless TAI, its officers, directors, employees and agents from and against all claims, damages, liabilities, costs, and expenses, suits, obligations or penalties (including attorneys' fees and costs of defense) of any and every nature whatsoever arising out of or in any manner connected with (a) any breach of this Agreement by Cargill; and (b) the operation or ownership of the Leased Facilities and the conduct of its business therein, thereon, thereabout or with regard thereto at all times prior to the Effective Date, including without limiting the generality of the foregoing all environmental liabilities. 12.2 INDEMNIFICATION BY TAI. TAI shall defend, exonerate, indemnify and hold harmless Cargill, its officers, directors, employees and agents from and against all claims, damages, liabilities, costs, expenses, suits, obligations or penalties (including attorneys' fees and costs of defense) of any and every nature whatsoever arising out of or in any manner connected with (a) any breach of this Agreement by TAI; (b) the operation or ownership of the TAI Facilities and the conduct of business therein, thereon, thereabout or with regard thereto at all times prior to the Effective Date, including without limiting the generality of the foregoing all environmental liabilities; (c) the grossly negligent operation or ownership of the TAI Facilities and the grossly negligent conduct of business therein, thereon, thereabout or with regard thereto at all times on and after the Effective Date, including without limiting the generality of the foregoing all environmental liabilities; (d) the grossly negligent use, operation or occupancy of the Leased Facilities and the grossly negligent conduct of business therein, thereon, thereabout or with regard thereto at all times on and after the Effective Date, including without limiting the generality of the foregoing all environmental liabilities; and (e) any grossly negligent act or omission or willful misconduct by TAI. Notwithstanding the foregoing or anything to the contrary in the Lease Agreement, the parties intend that the P&L shall include all customary items, except as otherwise provided by Section 6.3 of this Agreement. TAI's failure to follow, use, adopt, implement or recognize standard business practices, including, without limitation, standard business practices of a grain handling business, may be a factor in determining whether TAI is grossly negligent for purposes of this Agreement; provided, however, that the mere fact that TAI is found liable for negligence against a third party shall not be determinative in and of itself as to whether TAI is grossly negligent for purposes of this Agreement for the same conduct giving rise to TAI's negligence against such third party. 12.3 NOTICE. Each party agrees to promptly give the other party notice of any claim or indemnification arising under this Section. 12.4 SURVIVAL. The obligations of each party under the foregoing indemnification provisions shall survive the termination of this Agreement. ARTICLE XIII FORCE MAJEURE 13.1 The obligations of each party under this Agreement may be delayed or suspended in the event of Act of God, war, riot, fire, explosion, accident, flood, sabotage, inability to obtain fuel, power, raw material, labor, containers or transportation, facilities, governmental laws, regulations, order or action, breakage or failure of machinery or apparatus, national defense requirements or any other event beyond the reasonable control of such party or in the event of labor trouble, strike, lockout or injunction (whether or not such labor event is within the reasonable control of such party), any of which events prevents the sale, purchase or merchandising of the Toledo Grain. For purposes of this Section 13.1, ordinary variations in weather conditions, including without limitation prolonged periods of dryness or wetness, shall not be considered an event of force majeure. If, because of any such event, either party is unable to meet its obligations in part or in whole under this Agreement, the obligations of the affected party shall be abated during the period in which its performance is prevented by the event of force majeure upon giving prompt notice of such event to the other party. The other party's performance shall likewise be abated during such period, but this Agreement shall otherwise remain unaffected. ARTICLE XIV DISPUTE RESOLUTION 14.1 In the event a dispute arises under this Agreement that cannot be resolved by those with direct responsibility for the matter in dispute, such dispute shall be resolved by way of the following process: (a) The Panel shall meet to discuss the basis for the dispute and shall use its best efforts to reach a reasonable resolution to the dispute. (b) If the Panel fails to resolve the dispute within 10 days of its receipt of written notice of the dispute, the matter in dispute shall be brought to the attention of senior management at Cargill and TAI. Said management shall meet in person to negotiate a good faith resolution to the dispute within 20 days of their receipt of written notice of the dispute. (c) If such negotiations are unsuccessful, the matter may promptly be submitted by either party to an individual or organization recognized in the field of alternate dispute resolution as may be agreed upon by the parties (collectively referred to as the "Mediator"). The Mediator shall, within thirty (30) days after its receipt of a party's request for assistance, recommend to the parties, in writing, a procedure for non-binding mediation ("Mediation") for resolving such matter. The Mediator's recommendation shall also set forth rules for the recommended process including without limitation: (i) a schedule for the exchange of documents and short narrative statements summarizing each party's position on the matter; (ii) if appropriate in the Mediator's view, an expedited discovery schedule; (iii) the format and location of the Mediation; and (iv) the time period in which the Mediation is to be completed. The Mediator shall conduct the Mediation. (d) At the conclusion of the Mediation, the representatives shall meet and attempt to resolve the matter. If the matter cannot be resolved within such period as the Mediator deems reasonable (but not later than ninety (90) days after the Mediator has issued its procedural recommendation for the Mediation), the Mediator shall (upon request of either party) certify to the parties that the matter is incapable of resolution through the Mediation process and the matter shall, thereafter, promptly be submitted to and settled by arbitration in accordance with the Commercial Arbitration Rules, then in effect, of the American Arbitration Association ("AAA"), except to the extent modified herein. The arbitration shall be held in Ohio. Judgment on the award rendered may be entered in any court having jurisdiction thereof. (e) Each party shall within thirty (30) days of receipt of notice that the matter has been referred to arbitration, appoint one arbitrator and, within thirty (30) days of the appointment of the last of such two arbitrators, the two arbitrators shall appoint a third arbitrator. If either party or the two arbitrators fail to timely appoint an arbitrator, the said arbitrator shall be appointed by AAA. The arbitrators shall not be empowered to award punitive or exemplary damages. (f) Unless otherwise determined by the arbitration panel, the parties shall bear their respective costs incurred in connection with the procedures described in this Section, except that the parties shall share equally the fees and expenses of any Mediation or arbitration. (g) Notwithstanding any other provision of this Agreement, each party shall still be entitled to access the courts to obtain appropriate injunctive relief. (h) During the pendency of any dispute resolution procedure pursuant to this Section, the effectiveness of any notice of termination given pursuant to this Agreement shall be suspended. ARTICLE XV MISCELLANEOUS PROVISIONS 15.1 ASSIGNMENT. Neither Cargill nor TAI may assign this Agreement without the prior written consent of the other party. 15.2 WAIVER. Failure by either party at any time to require performance by the other party or to claim a breach of any provision of this Agreement will not be construed as a waiver of any right accruing hereunder, nor will it affect any subsequent breach or the effectiveness of this Agreement or any part hereof, or prejudice either party as regards any subsequent action. A waiver of any right accruing to either party pursuant to this Agreement shall not be effective unless given in writing. 15.3 NOTICES. Whenever notice is required by the terms hereof, it shall be given in writing by delivery in person, by recognized overnight delivery service, or by certified or registered mail addressed to the other party at the following address or such other address as a party shall designate by appropriate notice: If to Cargill: Cargill, Incorporated 15407 McGinty Road West Wayzata, MN 55391 Attn: Daniel P. Dye With a copy to: Cargill, Incorporated 15407 McGinty Road West Wayzata, MN 55391 Attn: CGD Attorney If to TAI: The Andersons, Inc. 480 W. Dussel Drive P.O. Box 119 ` Maumee, OH 43537 Attn: Hal Reed With a copy to: The Andersons, Inc. 480 W. Dussel Drive P.O. Box 119 ` Maumee, OH 43537 Attn: Beverly McBride If notice is given by mail, it shall be effective three (3) days after mailing. 15.4 CONSTRUCTION OF TERMS OF AGREEMENT; MODIFICATION. The language in all parts of this Agreement shall be constructed as a whole according to its fair meaning and not strictly for or against any party hereto. Headings in this Agreement are for convenience only and are not construed as a part of this Agreement or in any defining, limiting or amplifying the provisions hereof. This Agreement contains the entire agreement, and supersedes and replaces any prior agreements (either written or oral), between the parties with respect to the subject matter hereof and shall not be modified in any manner except by an instrument in writing executed by the parties hereto. In the event any term, covenant or condition herein contained is held to be invalid or void by any court of competent jurisdiction, the invalidity of any such term, covenant or condition shall in no way affect any other term, covenant or condition herein contained. 15.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the successors and assigns of each of the parties hereto; provided, however, that this Agreement shall not be assigned, transferred or sold by either party without the prior written consent. 15.6 COMPLIANCE WITH LAWS. Cargill and TAI each agrees to perform its obligations under this Agreement in material compliance with all applicable laws, rules, regulations, orders and decrees of the United States and the State of Ohio. 15.7 NO THIRD PARTY BENEFICIARY. No person or entity shall be deemed to be a third party beneficiary of this Agreement and nothing expressed or implied in this Agreement shall be deemed to confer upon any person or entity, or any heir, successor, assign or legal representative thereof, any rights or remedies of any nature or kind whatsoever, including without limitation any right to contract or any right to employment or continued employment. 15.8 GOVERNING LAW. This Agreement is to be governed by, and construed in accordance with, the laws of the State of Ohio, without reference to its conflicts of law rules. 15.9 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, Cargill, Incorporated and The Andersons, Inc. have executed this Agreement effective the day and year first above written. CARGILL, INCORPORATED THE ANDERSONS, INC. By: /s/Daniel P. Dye By: /s/Joseph L. Braker ----------------------------------- ---------------------------- Its: Vice President, Grain Division Its: President, Agriculture Group ----------------------------------- ---------------------------- EX-10.5 4 l01943bexv10w5.txt EX-10.5 Exhibit 10.5 LEASE AND SUBLEASE THIS LEASE, made and entered into effective as of June 1, 1998 by and between CARGILL, INCORPORATED, a Delaware corporation, with principal offices and place of business at 15407 McGinty Road West, Wayzata, Minnesota 55391 ("Landlord"), and THE ANDERSONS, INC., an Ohio corporation with principal offices and place of business at 480 W. Dussel Drive, P. O. Box 119, Maumee, OH 43537 ("Tenant"). WITNESSETH: WHEREAS, Landlord is the owner of that certain real property described in the attached Exhibit A, together with a grain facility and other buildings, fixtures, improvements, machinery, equipment, rolling stock, and trackage in the City of Maumee, Lucas County, Ohio (hereinafter referred to as the "Maumee Facility"); and WHEREAS, Landlord owns a leasehold interest in the real estate described in the attached Exhibit B, together with a grain facility and other buildings, fixtures, improvements, machinery, equipment, rolling stock, located thereon, located in the City of Toledo, Lucas County, Ohio (hereinafter referred to as the "Toledo Facility") (the Maumee Facility and the Toledo Facility shall collectively be referred to as the "Facilities") under the terms of a certain Lease dated April 1, 1978 by and between Cargill, Incorporated, as lessee, and the Toledo-Lucas County Port Authority, as lessor, as supplemented by a Supplemental Lease dated March 1, 1982, by a Second Supplemental Lease dated as of June 1, 1983, by a Third Supplemental of Lease dated as of April 1, 1992 and by a Fourth Supplemental Lease dated as of May 15, 1993 (hereinafter collectively referred to as the "IRB Lease") as assigned to National City Bank, Northwest as Trustee, (successor to Ohio Citizens Bank which was formerly known as The Ohio Citizens Trust Company) (the "IRB Lease Trustee"); and WHEREAS, Landlord leases certain real property located adjacent to the Toledo Facility, consisting of approximately 3.08 acres, as shown on the site plan attached hereto as Exhibit C (hereinafter referred to as the "Toledo Railroad Property"), under the terms of that certain lease dated May 1, 1979, Property No. 52168, by and between the Norfolk and Western Railway Company, as lessor, and Cargill, Incorporated, as lessee (hereinafter referred to as the "Toledo Railroad Lease"); and WHEREAS, Landlord desires to lease to Tenant and Tenant desires to lease from Landlord, the Maumee Facility on the terms, covenants and conditions hereinafter set forth; and WHEREAS, Landlord desires to sublease to Tenant and Tenant desires to sublease from Landlord the Toledo Facility and the Railroad Property, on the terms, covenants and conditions hereinafter set forth; and WHEREAS, Landlord and Tenant have entered into a Marketing Agreement dated June 1, 1998 (the "Marketing Agreement"), under which Tenant shall use the Facilities for the primary purpose of originating grain in the Toledo and Maumee, Ohio area; NOW, THEREFORE, in consideration of the mutual covenants, terms and conditions hereinafter set forth, the parties agree as follows: 1. DEMISE (a) Lease of the Maumee Facility. Landlord hereby leases the Maumee Facility (which includes the real estate described in Exhibits A) and the buildings, fixtures, improvements, machinery, equipment, rolling stock, and trackage located thereon, including, but not limited to, the personal property listed on Exhibit D attached hereto, (the "Maumee Personal Property") and Landlord hereby subleases to Tenant the personal property, described on the attached Exhibit D, which is subject to the IRB Lease (the "Maumee IRB Personal Property") and is located on that certain real property in Maumee, Ohio described on the attached Exhibit A as Parcel I and Parcel II, to Tenant, and Tenant hereby leases and subleases, respectively, the same from Landlord, subject however, to: (i) Any state of facts an accurate survey may show. (ii) Covenants, restrictions, easements, agreements and reservations listed in Exhibit E, whether or not of record (the "Maumee Permitted Exceptions"), and the standard exceptions contained in a standard title policy; (iii) Building, platting and zoning ordinances, State and Federal regulations; (iv) Minerals and mineral rights reserved to the State of Ohio or other parties; (v) Taxes and installments of special assessments not delinquent provided the same shall be paid as hereinafter provided; and (vi) Permitted encumbrances hereinafter described, to be used primarily for the purpose of grain handling, and related activities, and for no other purpose, without the express prior written consent of Landlord. (b) Assiqnment of Maumee Aqreements. During the term hereof, Landlord hereby assigns to Tenant, its rights, title and interest to those certain railroad agreements, copies of which are attached hereto as Exhibit F (the "Maumee Railroad Agreements"), relating to the use, operation and maintenance of railroad tracks servicing the Maumee Facility. Tenant hereby accepts and assumes the Maumee Railroad Agreements and agrees to carry out, perform and complete all obligations and liabilities created or arising under the Maumee Railroad Agreements during the term of this Lease including, but not limited to, all charges and rent due under the Maumee Railroad Agreements. (c) Sublease of the Toledo Facility. Landlord hereby subleases the Toledo Facility (which includes the real estate described in Exhibit B) including the buildings, fixtures, improvements, machinery, equipment and rolling stock located thereon, and Landlord hereby leases to Tenant the personal property listed on Exhibit D (which is not subject to the IRB Lease) (the "Toledo Personal Property"), and Tenant hereby subleases and leases, respectively, the same from Landlord, subject, however, to: (i) Any state of facts an accurate survey may show. (ii) Covenants, restrictions, easements, agreements and reservations listed in Exhibit E, whether or not of record (the "Toledo Permitted Exceptions"), and the standard exceptions contained in a standard title policy; (iii) Building, platting and zoning ordinances, State and Federal regulations; (iv) Minerals and mineral rights reserved to the State of Ohio or other parties; (v) Taxes and installments of special assessments not delinquent provided the same shall be paid as hereinafter provided; and (vi) Permitted encumbrances hereinafter described, to be used primarily for the purpose of grain handling, and related activities, and for no other purpose, without the express prior written consent of Landlord. The Maumee Personal Property, the Maumee IRB Personal Property and the Toledo Personal Property shall be collectively referred to as the "Personal Property". (d) Sublease of the Railroad Lease. Landlord hereby subleases the Railroad Property to Tenant, and Tenant agrees to sublease the Railroad Property from Landlord. Tenant hereby acknowledges that the terms and conditions of the Railroad Lease are hereby incorporated into this Agreement as Exhibit G. Tenant hereby covenants and agrees: (i) to perform all covenants and obligations of "Lessee" as set forth in the Railroad Lease, and (ii) that in the event of a conflict between the terms and conditions of this Agreement and the terms and conditions of the Railroad Lease, the terms and conditions of the Railroad Lease shall govern and control. Landlord represents that it has obtained oral consent from the Railroad for the sublease of the Railroad Lease, and Landlord shall use best efforts to obtain such consent in writing. (e) Assignment of Toledo Aqreements. During the term hereof, Landlord hereby assigns to Tenant, its rights, title and interest to those certain agreements copies of which are attached hereto as Exhibit F (the "Toledo Railroad Agreements"), relating to the use, operation and maintenance of railroad tracks servicing the Toledo Facility. Tenant hereby accepts and assumes the Toledo Railroad Agreements and agrees to carry out, perform and complete all obligations and liabilities created or arising under the Agreements during the term of this Lease including, but not limited to, all charges and rent due under the Toledo Railroad Agreements. 2. TERM. (a) The term of this Lease shall be for a period of five (5) years, commencing on the 1st day of June, 1998, ("Commencement Date") and expiring on the 31st day of May, 2003 ("Expiration Date"); provided, however, in the event the Marketing Agreement is terminated prior to the Expiration Date hereof, then this Lease shall be coterminous with the termination of the Marketing Agreement without further action by either party. Further, in the event that the Marketing Agreement is not executed by both parties within five (5) business days of execution of this Lease, this Lease shall terminate without further action by either party. (b) In the event either party desires to extend or renew the Marketing Agreement beyond the Expiration Date of this Lease, such party shall give the other party written notice of its intent to extend or renew this Lease at least ninety (90) days prior to the expiration of this Lease, and the parties hereby agree to negotiate in good faith the terms of the extension or renewal of this Lease. 3. RENT. (a) Tenant agrees to pay to Landlord as and for rent for the Facilities the sum of * ( * ) per annum which sum shall be payable on a semi-annual basis and which shall be due upon the first day of the term hereof and thereafter upon the first day of each semi-annual period of the term of this Lease. Said rent shall be payable in cash or by wire transfer at Landlord's address given hereinbelow or at such other place as Landlord may, from time to time, designate in writing. In the event Tenant shall fail to pay Landlord any part of the aforesaid rental or any other sum required herein to be paid to Landlord, within five (5) days of the due date thereof, Tenant shall pay to Landlord a delinquent payment charge from the expiration of such five (5) day period until the rental or other required sums are fully paid at the rate of 10% per month or at the highest lawful contract rate allowed by the State of Ohio, whichever is lower. (b) In addition to the annual fixed rent set forth in (a) above, Tenant shall pay Landlord as additional rent for the Facilities, upon thirty (30) days after receipt of the tax bill from Landlord, all real estate taxes (including any tax in lieu of ad valorem tax), personal property taxes, assessments, use and occupancy taxes, levies, license and permit fees and other charges, general and special, of any kind and nature whatsoever which shall or may be, during the term of this Lease, assessed or levied against the Facilities and which shall accrue during the term of the Lease. All such taxes assessed or levied against the Facilities accruing during the initial year and final year of the lease shall be prorated between Tenant and Landlord, as of the commencement and expiration date of the Lease for the initial and final years, respectively. Landlord may submit a tax bill to Tenant for such prorated amounts at the earliest time that the Landlord is able to determine such prorated amount. (c) Tenant shall pay all sales or use taxes imposed upon all payments made pursuant to the Lease or otherwise imposed by any tax authority. *CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SEC (d) Rebates. All rebates on account of any such taxes, rates, levies, charges, or assessments required to be paid and paid by Tenant under the provisions hereof shall belong to Tenant, and Landlord will, on the request of Tenant, execute any receipts, assignments, or other acquittances that may be necessary in order to secure the recovery of any such rebates, and will pay promptly over to Tenant any such rebates that may be received by Landlord. (e) Personal Property Taxes. Tenant shall bear the burden for any Imposition levied against the personal property belonging to Tenant, including the Personal Property, stored, kept or maintained in or upon the Facilities. (f) Nothing contained herein shall require Tenant to satisfy the bonds which are the subject of the IRB Lease or to pay any income tax or any taxes in lieu thereof of Landlord, or the Rent (as defined in the IRB Lease) due under the IRB Lease. As hereinafter used, the term "rent" shall collectively mean the fixed rent and additional rent. 4. UTILITIES. Tenant shall initiate, contract for, and obtain, in its name, all utility or other services it desires for the Facilities, and Tenant shall pay all such charges for such utility services as they become due. 5. USE OF FACILITIES (a) Use of the Toledo Facility. Tenant shall not do, permit or suffer any event or omission as a result of which there could occur a default of the IRB lease or an acceleration of the payments thereunder or which could cause the interest on the bonds issued in connection with the IRB Lease to become taxable. Specifically, Tenant shall abide by, perform on behalf of Landlord or be subject to the IRB Lease. Specifically, Tenant shall comply with the following sections of the IRB Lease: 1.0 (Definitions) 2.2 (Purposes) 4.5 (Installation of Own Personal Property) 6.1 (Maintenance and Modifications of Leased Premises) 6.2 (Removal of Portions of the Project) 6.3 (Removal of Company's Own Personal Property) 6.4 (Documents to be Provided) 6.5 (Taxes, Other Governmental Charges and Utility Charges) 6.6 (Property Insurance) 6.7 (Additional Provisions Respecting Insurance) 6.8 (Public Liability Insurance) 6.9 (Workers' Compensation Coverage) 7.1 (Damage Destruction and Condemnation) 7.2 (Eminent Domain) 8.1 (Mechanics' and Other Liens) 9.9 (Right of Access) 9.10 (Indemnification) 9.11 (Company Not to Adversely Affect Tax Exempt Status of Bonds' Interest) 11.1 (Assignment and Subleasing by Company) and to the following section of the Second Supplemental Lease: 4. Representation Covenant as to 1983 Addition. Tenant shall not use the Toledo Facility in any manner which would materially impair the fulfillment of the purposes of the Act (as that term is defined under the IRB Lease) to be accomplished by operation of the Toledo Facility. Hereinafter any breach of the above is collectively referred to as an "IRB Default" Tenant shall keep all information and documentation relative to this Lease confidential and shall not disclose any information to any third party without the prior written consent of Landlord. Notwithstanding the foregoing, Tenant may provide a copy of this Lease to any grain licensing agency or office, or to any insurance company, to the extent that Tenant is required to do so by such grain licensing agency or office or insurance company; provided, however, that Tenant shall redact all such copies of this Lease to the extent that the redacted information is not required by the grain licensing agency or office or insurance company. Tenant also may file a memorandum of lease with any appropriate court or governmental agency or office. (b) Use: General. No use shall be made of the Facilities which is a violation of any applicable law, regulation or ordinance or the restrictions contained in the deeds to the Facilities, and no use shall be made which causes a cancellation of any insurance covering the Facilities. Tenant shall use the Facilities in a careful, safe and proper manner. Landlord has terminated any employment relationship it previously had with each of its employees at the Facilities. Landlord shall have no further supervisory function whatsoever with respect to any of its former employees at the Facilities. Tenant has sole authority to operate the Facilities for the purposes of the relationship contemplated by the Marketing Agreement entered into by the Landlord and Tenant. Accordingly, Tenant shall be solely responsible for the direction of its agents, servants and employees, including all former employees of Landlord hired by Tenant. In particular and without limitation, Tenant shall be solely responsible for its employees' selection, hiring, firing, supervision, wages and benefits, hours, performance standards, training and discipline. Tenant shall also be solely responsible for compliance with all applicable local, state and federal laws and regulatory requirements relating to its employees. 6. MAINTENANCE AND REPAIRS During the term of this Lease, Tenant shall, at its own cost and expense, keep and maintain the Facilities and any improvements thereon in good order and condition, and will make all necessary repairs, structural or nonstructural, to the Facilities and improvements, to the end that the Facilities and improvements shall at all times be kept in good and tenantable condition for the purposes for which the Facilities are being used. Tenant will not do or suffer any waste or damage or injury to the Facilities or any improvement thereon, or any part thereof. All repairs made by Tenant shall be equal in quality and class to the original work. Tenant hereby assumes the full and sole responsibility for the condition, operation, repair, replacement, maintenance and management of the Facilities and any improvements thereon. In addition to the foregoing, Tenant shall also keep sidewalks and parking areas free and clear of snow, ice or other obstructions to travel and shall maintain lawn and parking areas in a clear and sightly condition, free of debris and waste. Landlord shall not have any responsibility for the maintenance or repair of the Facilities. Upon the expiration or termination of this Lease, Tenant shall surrender the Premises to Landlord in as good condition as of the Commencement Date, loss by fire or other casualty covered by insurance, ordinary wear and tear, and obsolescence excepted. 7. ALTERATIONS, ADDITIONS AND IMPROVEMENTS (a) During the term of this Lease, Tenant may, at its own expense, make alterations, additions or improvements to the Facilities with the prior written consent of Landlord, provided that such alterations or additions to the Toledo Facility will not result in an IRB Default. Tenant shall procure all applicable permits and authorizations. All work shall be done in a good and workmanlike manner and in compliance with all laws. (b) Except as otherwise provided by the IRB Lease, all alterations, additions and improvements to the Facilities shall immediately, upon completion thereof, be and become the property of Tenant for the duration of this Lease; provided, however, that upon termination of this Lease, Tenant shall sell to Landlord and Landlord shall purchase from Tenant all such alterations, additions and improvements at the then current book value of such alterations, additions and improvements. (c) Tenant shall keep the Facilities free of liens and covenants and agrees to hold harmless and indemnify Landlord from and against any costs, expenses and liabilities from any mechanic's, laborers' or materialmen's or other liens, of whatsoever nature, which may be filed against the Facilities during the term of this Lease. Tenant shall discharge any such liens within thirty (30) days of the filing thereof. However, Tenant shall have the right to contest in the name of Landlord, any such liens as Tenant may deem necessary; provided that all expenses incurred by reason thereof shall be paid by Tenant, Tenant provides written notice to Landlord of its intent to contest such lien within three (3) days after the filing of such lien and Tenant, at Landlord's request, gives reasonable security to insure payment thereof and to prevent any sale, foreclosure or forfeiture of the Premises by reason of such nonpayment. (d) Compliance With Laws. Tenant agrees to comply with all governmental laws and regulations relative to the use and operation of the Facilities including without limiting the generality of the foregoing any OSHA, EPA or other safety or environmental laws and regulations. Tenant agrees to obtain and comply with all operating permits that are required for operating the Facilities in accordance with the terms of this Lease and the Marketing Agreement. Tenant shall not store hazardous materials or hazardous substances on the Facilities. Tenant shall store all material on the Facilities according to prudent and standard industry practice and label instructions, if any, even if such are more restrictive than the aforesaid governmental laws and regulations. The Tenant warrants that at all times during the course of this Lease the Tenant will be fully responsible for compliance with the Public Accommodation/ Commercial Facilities disability access rules and regulations under the American with Disabilities Act and with The Clean Air Act Amendments of 1990 (hereinafter the "Acts") and shall indemnify and hold Landlord harmless from and against any and all claims, demands, damages, liabilities, costs and expenses arising out of said Acts as amended from time to time and their corresponding regulations; provided, however, that Landlord shall reimburse Tenant for all costs and expenses required to bring the Facilities into compliance with the Acts to the extent the Facilities are not in compliance as of the Commencement Date of this Lease. 8. INSURANCE. (a) Tenant shall, at no cost or expense to Landlord but for the mutual benefit of Landlord and Tenant, maintain Commercial General Liability (including contractual liability) and auto liability with combined single limits of liability of * per occurrence. (b) Tenant, at its sole cost and expense, but for the mutual benefit of Landlord and Tenant, shall insure against all risks of loss or damage to the Facilities in an amount equal to the full replacement cost of the Facilities. (c) Tenant shall, at no cost or expense to Landlord, but for the mutual benefit of Landlord and Tenant, maintain boiler and machinery insurance on all boilers, air conditioning equipment, and other pressure vessels and systems located in, on or about the Facilities. (d) Tenant shall, at no cost or expense to Landlord, maintain Workers' Compensation, Employer's Liability Insurance and any other legally required employer's insurance in accordance with and meeting all statutory requirements. (e) Property policies shall be so written or endorsed as to make losses, if any, in excess of * per occurrence, payable directly to the IRB Lease Trustee to the extent required by the IRB Lease. Property policies shall be on an occurrence rather than claims-made basis and shall provide that they will not be canceled without thirty (30) days prior written notice to all persons named as insured or additional insured. Tenant's policies shall be primary without right of contribution from Landlord or Landlord's insurance policies. Landlord shall be named as an additional insured for the Maumee Facility, and Landlord, and the Toledo-Lucas County Port Authority shall be named as additional insureds as their interest may appear for the Toledo facility. The IRB Lease Trustee shall also be named as an additional insured pursuant to a standard mortgagee clause, as its interests may appear, regarding the Toledo Facility. Tenant's insurance policies shall contain a waiver of subrogation against Landlord. Certificates of insurance evidencing such coverage for the respective Facilities shall be sent to Landlord, the Toledo-Lucas County Port Authority and the IRB Lease Trustee on the Commencement Date and any renewals thereof at least thirty (30) days prior to the expiration thereof. *CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SEC 9. INDEMNITY. (a) Tenant shall hold Landlord harmless and indemnify Landlord from and against all liabilities, injuries, losses, claims, expenses (including, without limitation, attorneys' fees) or damages directly or indirectly arising out of (i) Tenant's, its employees', agents', licensees', invitees', contractors' or customers' use, presence, operation and occupancy of the Facilities; (ii) any events on the Facilities; (iii) any breach of this Lease by Tenant; (iv) any act or omission of Tenant or any of the foregoing parties on the Facilities taking place in, on or about the Facilities or on public land or waters adjoining the same; (v) any failure of Tenant, its employees, agents, licensees, invitees, contractors or customers to comply and conform with all federal, state and local laws, statutes, regulations, rules and ordinances, or any directive, rule, regulation or request of Landlord; or (vi) any environmental liabilities and any landfill; provided, however, that the same shall have occurred on the Facilities after the date of this Lease, except to the extent such liabilities, injuries, losses, claims, expenses or damages are the result of the negligent or otherwise wrongful acts or omissions of the Landlord, its employees, agents, licensees, invitees, contractors or customers. (b) Tenant specifically agrees to indemnify, defend and hold harmless Landlord from and against all claims, actions, damages, liabilities and expenses (including attorneys' fees) arising out of or in connection with any IRB Default caused by Tenant. (c) Landlord shall hold Tenant harmless and indemnify Tenant from and against all liabilities, injuries, losses, claims, expenses (including, without limitation, attorneys' fees and any pending litigation) or damages directly or indirectly arising out of or in any manner connected with the operation or ownership of the Facilities and the conduct of business therein, thereabout, thereon or with regard thereto, including any landfill that has occurred on the Facilities, prior to the Commencement Date, including, without limiting the generality of the foregoing, environmental and patent infringement claims, suits, cases or charges. (d) Landlord agrees to indemnify, defend and hold harmless Tenant from and against all claims, actions, damages, liabilities and expenses (including attorneys' fees) arising out of or in connection with Landlord's failure to perform under the IRB Lease, provided that Tenant is not in breach of any term of this Lease, which breach has contributed to Landlord's default under the IRB Lease. 10. DAMAGE OR DESTRUCTION. (a) Tenant agrees that in the event of damage to or destruction of the Facilities, or any part thereof, by fire or other casualty, Tenant shall immediately notify Landlord. Tenant agrees that in the event of damage to or destruction of the Toledo Facility, or any part thereof, by fire or other casualty, Tenant shall immediately notify Landlord, the Toledo-Lucas County Port Authority and the IRB Lease Trustee. (b) Tenant shall effect the prompt repair and restoration of the Facilities to a condition at least equal to the condition immediately prior to such damage or destruction. (c) In the event of damage or destruction to the Toledo Facility, all insurance money paid on account of such damage or destruction shall be applied to the repair, rebuilding or restoration of the Premises by the Tenant. If the insurance money is insufficient to pay all costs of restoration, Tenant shall pay the deficiency and proceed to complete the restoration and pay the cost thereof. Any balance of the insurance proceeds remaining over and above the cost of the restoration shall be paid into the Bond Fund (as such term is defined in the IRB Lease) pursuant to the IRB Lease. (d) Tenant's obligation to make payment of the rent and all other covenants to be performed by Tenant shall not be affected by any such damage or destruction. Tenant hereby waives the provisions of any statute now or hereafter in effect contrary to such obligation or which releases Tenant therefrom. Notwithstanding the foregoing, in the event that the Threshold (as defined in the Marketing Agreement) is renegotiated or adjusted pursuant to Section 6.6 of the Marketing Agreement, Tenant's obligation to make payment of rent shall be reduced by the same percentage as applied to the Threshold under Section 6.6 of the Marketing Agreement. 11. CONDEMNATION. In the event that one or both of the Facilities in its entirety shall be taken in condemnation proceedings or by the exercise of any right of eminent domain or by agreement between Landlord, Tenant and those authorized to exercise such right ("Condemnation"), then this Lease shall terminate and neither party shall have any obligation to the other except that Landlord shall pay to Tenant a prorated refund of unearned, prepaid rentals, if any. Tenant hereby waives any right to any condemnation awards. In the event that any part of either Facility shall become subject to Condemnation, Landlord and Tenant shall renegotiate in good faith the rent for the Facilities and shall continue this Lease to the extent that such continuance is not inconsistent with Section 7.2 of the IRB Lease. 12. ENTRY AND INSPECTION OF THE FACILITY. Tenant, at any time during the term of this Lease Agreement, shall permit reasonable inspection of the Facilities during reasonable hours by Landlord. Landlord shall give notice at least 48 hours in advance of its inspection. In addition, Tenant, at any time during the term of this Lease Agreement, shall permit reasonable inspection of the Toledo Facility during reasonable hours by the Toledo-Lucas County Port Authority, the IRB Lease Trustee, and by their respective agents or representatives. 13. ASSIGNMENT, MORTGAGING AND SUBLETTING. This Lease shall not be assigned by either party without the prior written consent of the other party. Neither party shall mortgage or otherwise encumber this Lease or the Facilities without the prior written consent of the other party. Tenant shall not sublet the whole or any part of the Facilities without Landlord's prior written consent. Neither party shall unreasonably withhold its consent. In the event that one or more third parties purchases Tenant's stock in an amount sufficient to significantly affect or change control of Tenant, or one or more third parties takes any action that does significantly affect the control of Tenant, Landlord may in its sole discretion either continue or terminate this Lease. For purposes of this Agreement, "control" shall mean (a) the direct or indirect ownership of more than fifty percent (50%) of the total voting securities of every class or other voting evidences of ownership interest of Tenant, or (b) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of Tenant. If Landlord elects to terminate this Lease, Landlord must provide written notice to Tenant of its election to terminate not more than fifteen (15) days after public announcement or after Tenant has provided written notice to Cargill of any public filing with the Securities Exchange Commission. Tenant shall have no right to terminate this Agreement under this Section 13. 14. TENANT'S DEFAULT. (a) The following shall constitute events of default by Tenant: (i) Tenant shall fail to pay the rent or other charges on or before the same become due and payable and the same continues for fifteen (15) days after receipt of Landlord's written notice by Tenant; (ii) Tenant shall fail to perform or observe any other term or condition contained in this Lease and Tenant shall not cure or commence to cure such failure within thirty (30) days after receipt of Landlord's written notice by Tenant; (iii) Tenant shall do, permit or suffer any action, event or omission which would cause an IRB Default, if Tenant shall fail to cure or commence to cure such default (to the extent that such cure may be made under the IRB Lease) within thirty (30) days after written notice from Landlord (provided, however, that Tenant shall provide Landlord with prompt notice of any IRB Default of Tenant when Tenant becomes aware of such default); (iv) Tenant shall permit this Lease or any estate of Tenant hereunder to be sold under any attachment or execution. (v) Tenant shall file or have filed against it, voluntarily or involuntarily a petition in bankruptcy or shall be adjudicated a bankrupt or insolvent, or shall take the benefit of any relevant legislation that may be in force for bankrupt or insolvent debtors or shall file or have filed against it, voluntarily or involuntarily, any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief for itself under any present or future federal, state or other statute, law or regulation, or if Tenant shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of Tenant or of any substantial part of its properties, or shall make any general assignment for the benefit of creditors. (b) In the event any one or more of the above shall occur, Landlord shall have the right to terminate this Lease upon the expiration of fifteen (15) days after receipt of Landlord's written notice by Tenant. (c) Should Landlord at any time terminate this Lease for any breach, Landlord shall still have such remedies as are available at law. 15. LANDLORD'S DEFAULT. (a) The following shall constitute events of default by Landlord: (i) Landlord default under the IRB Lease, if Landlord shall fail to cure or commence to cure such default (to the extent that such cure may be made under the IRB Lease) within thirty (30) days after written notice from Tenant (provided, however, that Landlord shall provide Tenant with prompt notice of any IRB default of Landlord when Landlord becomes aware of such default); (ii) Landlord shall file or have filed against it, voluntarily or involuntarily, a petition in bankruptcy or shall be adjudicated a bankrupt or insolvent, or shall take the benefit of any relevant legislation that may be in force for bankrupt or insolvent debtors or shall file or have filed against it, voluntarily or involuntarily, any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief for itself under any present or future federal, state or other statute, law or regulation, or if Landlord shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of Landlord or of any substantial part of its properties, or shall make any general assignment for the benefit of creditors. (iii) Landlord shall fail to perform or observe any other term or condition contained in this Lease and Landlord shall not cure or commence to cure such failure within thirty (30) days after receipt of Landlord's written notice by Tenant. (b) In the event any one or more of the above shall occur, Tenant shall have the right to terminate this Lease upon the expiration of fifteen (15) days after receipt of Tenant's written notice by Landlord. (c) Should Tenant at any time terminate this Lease for any breach, Tenant shall still have such remedies as are available at law. 16. LANDLORD MAY PERFORM TENANT'S OBLIGATIONS. If Tenant shall fail to keep or perform any of its obligations as provided hereunder, Landlord may (but shall not be obligated to do so), without waiving or releasing Tenant from any obligation, as an additional but not exclusive remedy, make any such payment or perform any such obligation, and all sums so paid by Landlord plus all necessary and incidental costs and expenses incurred by Landlord shall be deemed additional rent and shall be paid to Landlord on demand and if not so paid by Tenant, Landlord shall have the same rights and remedies as in the case of default by Tenant. 17. SURRENDER. (a) Title to Improvements/Surrender. Except as otherwise required by the IRB Lease, Landlord and Tenant agree that title to and ownership of the buildings, structures, equipment, machinery and appurtenances presently located on the Facilities and all repairs, replacements, additions and reconstructions thereof made by Tenant (hereinafter collectively "Improvements"), shall, upon the termination of this Lease, whether pursuant to the expiration of the term hereof or pursuant to the exercise of any right of termination herein contained or otherwise, vest immediately in Landlord, without further instrument of conveyance whatsoever subject to the provisions set forth in Section 7(b) herein. Tenant shall, upon the termination of this Lease, peacefully and quietly surrender and deliver the Facilities to Landlord. (b) Right to Remove. Notwithstanding the terms of Section 17(a) above, any and all trade fixtures and personal property, which are or have been built, supplied or used by Tenant in the conduct of its business may be removed by Tenant at any time prior to or upon the termination of the Lease; provided, however, that Tenant shall have discharged any encumbrance suffered or permitted by Tenant against the Facilities. Tenant shall have a period of thirty (30) days after termination within which to remove all trade fixtures and personal property and shall, within such period, restore the Facilities to a sightly and attractive condition. Tenant shall pay any and all costs of removal and restoration. (c) Any holding over by Tenant after the expiration or termination of this Lease shall be treated as a daily tenancy at sufferance at a rate equal to twice the fixed rent plus all other charges, prorated on a daily basis, and shall otherwise be on the terms and conditions set forth in this Lease as far as applicable. Tenant's exercise of its right to remove trade fixtures and personal property under Section 17(b) herein shall not be considered "holding over" for purposes of this Section 17(c). 18. DISCLAIMER OF WARRANTIES. The Facilities are leased on an "AS IS, WHERE IS" and "WITH ALL FAULTS" basis. Tenant acknowledges that Landlord SPECIFICALLY DISCLAIMS ALL WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR INTENDED OR PARTICULAR PURPOSE, ANY WARRANTY AS TO THE DESIGN OR CONDITION OF THE PROPERTY, QUALITY OR CAPACITY OF THE FACILITIES, OR ANY WARRANTY WITH RESPECT TO PATENT INFRINGEMENT OR THE ABSENCE OF ANY LATENT DEFECT. In making this Lease, Tenant has not been induced by and has not relied upon representations, warranties or statements, whether express or implied, made by Landlord or any broker or any other person representing or purporting to represent Landlord, except such representations, warranties or statements which are included herein. Landlord and Tenant acknowledge that the parties have inspected the Facilities for the purpose of denoting the then current condition of the Facilities including but not limited to the roof, plumbing, lighting, air-conditioning, heating, loading and personal doors, scales and electrical services and sprinkler system. 19. ENVIRONMENTAL MATTERS. Landlord and Tenant shall jointly perform an internal environmental inspection and audit of the Facilities prior to the term of this Lease to establish the current environmental condition of the Facilities. Subject to the other parties' consent, which shall not be unreasonably withheld, if either party desires to have a Phase II environmental assessment prepared, then an independent environmental consultant shall be chosen and directed mutually by both Landlord and Tenant. The scope, timing and sequence of the Phase II assessment are to be mutually determined by Landlord and Tenant, with the costs of the Phase II assessment to be shared equally between the parties. All inspections and auditing activities shall not unreasonably interfere with Landlord's operations at the Facilities. 20. LANDLORD'S REPRESENTATIONS AND WARRANTIES Landlord represents and warrants as follows to Tenant, such representations and warranties to be true and correct on the Commencement Date, that: (a) Landlord is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and is registered to do business and in good standing under the laws of the State of Ohio. (b) Landlord has full power and authority, corporate and otherwise, to execute and perform this Lease Agreement and to consummate and perform the transactions contemplated hereby. This Lease Agreement, when executed, will be a legal, binding and valid obligation of Landlord enforceable against it in accordance with its terms. Execution of this Lease Agreement shall not constitute a default of the IRB Lease. Landlord will provide Tenant with documentation confirming that Landlord is in good standing under the IRB Lease as of the effective date of this Lease Agreement. (c) The execution, delivery and performance of this Lease Agreement and compliance with the provisions hereof by Landlord will not conflict with or result in the breach or violation of any term or provision of its Certificate of Incorporation or By-laws. (d) Landlord's execution, delivery and performance of this Lease Agreement will not constitute a default under the IRB Lease, or any other loan document. (e) Landlord owns good and marketable title to the leasehold estate described in Exhibit B free and clear of all liens and encumbrances, except those set forth in Exhibit E. (f) Landlord owns good and marketable fee title to the real estate described in Exhibit A free and clear of all liens and encumbrances, except those set forth in Exhibit E. (g) Landlord has delivered to Tenant true and complete copies of the following documents relating to the IRB Lease: Lease between Toledo-Lucas County Port Authority and Cargill, Incorporated dated April 1, 1978 and Assignment of Lease to Ohio Citizens Trust Company dated April 1, 1978. Supplemental Lease between Toledo-Lucas County Port Authority and Cargill, Incorporated dated March 1, 1982 and Assignment of Supplemental Lease to Ohio Citizens Bank dated March 1, 1982. Second Supplemental Lease between Toledo-Lucas County Port Authority and Cargill, Incorporated dated June 1, 1983 and Assignment of Second Supplemental Lease to Ohio Citizens Bank dated June 1, 1983. Third Supplemental Lease between Toledo-Lucas County Port Authority and Cargill, Incorporated dated April 1, 1992 and Assignment of Third Supplemental Lease to Ohio Citizens Bank dated April 1, 1992. Fourth Supplemental Lease between Toledo-Lucas County Port Authority and Cargill, Incorporated dated May 15, 1993 and Assignment of Fourth Supplemental Lease to Ohio Citizens Bank dated May 15, 1993. 21. TENANT'S REPRESENTATIONS AND WARRANTIES. Tenant represents and warrants as follows to Landlord, such representations and warranties to be true and correct on the Commencement Date, that: (a) Tenant is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Ohio, and is registered to do business and in good standing under the laws of the State of Ohio. (b) Tenant has full power and authority, corporate and otherwise, to execute and perform this Lease and to consummate and perform the transactions contemplated hereby. This Lease, when executed, will be a legal, binding and valid obligation of Tenant enforceable against it in accordance with its terms. (c) The execution, delivery and performance of this Lease and compliance with the provisions hereof by Tenant will not conflict with or result in the breach or violation of any term or provision of its Certificate of Incorporation or By-laws or any agreements or contracts to which Tenant is a party. (d) No consent or approval of any governmental agency or commission or other public authority is necessary for the due execution, delivery, performance or enforceability of this Lease and no consent of any other party is required to be obtained by Tenant to permit the consummation of the transactions contemplated hereby. (e) Tenant has received from Landlord copies of the following documents relating to the IRB Lease: Lease between Toledo-Lucas County Port Authority and Cargill, Incorporated dated April 1, 1978 and Assignment of Lease to Ohio Citizens Trust Company dated April 1, 1978. Supplemental Lease between Toledo-Lucas County Port Authority and Cargill, Incorporated dated March 1, 1982 and Assignment of Supplemental Lease to Ohio Citizens Bank dated March 1, 1982. Second Supplemental Lease between Toledo-Lucas County Port Authority and Cargill, Incorporated dated June 1, 1983 and Assignment of Second Supplemental Lease to Ohio Citizens Bank dated June 1, 1983. Third Supplemental Lease between Toledo-Lucas County Port Authority and Cargill, Incorporated dated April 1, 1992 and Assignment of Third Supplemental Lease to Ohio Citizens Bank dated April 1, 1992. Fourth Supplemental Lease between Toledo-Lucas County Port Authority and Cargill, Incorporated dated May 15, 1993 and Assignment of Fourth Supplemental Lease to Ohio Citizens Bank dated May 15, 1993. (f) Tenant shall not do, permit or suffer any event or omission which could cause an IRB Default. All of these representations and warranties shall survive the Commencement Date. 22. SUBORDINATION. This Lease is expressly subject to the IRB Lease, as more specifically enumerated in Section 5(a) hereof. It is not the intention of Landlord and Tenant to obligate Tenant to satisfy the bonds which are the subject of the IRB Lease. 23. QUIET ENJOYMENT. Landlord covenants that Tenant, upon paying the rent and performing the covenants herein, shall peaceably and quietly have, hold and enjoy the Facilities during the term of the Lease. 24. ARBITRATION OF DISPUTES. In the event a dispute arises under this Agreement, such dispute shall be resolved by a board of three arbitrators, one selected by each party, and the third selected by the two so appointed. Each party may invoke this provision by written notice to the other party and, upon receipt of such notice, both parties agree to proceed diligently to complete such arbitration and to be bound by the decision of the arbitrators. Any such arbitration shall be conducted in accordance with the Uniform Arbitration Act, and the Rules of the American Arbitration Association shall govern. Judgment upon the award rendered may be entered in any court having jurisdiction thereof. 25. NOTICES. Any notice required or permitted under this Lease shall be in writing and sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to Landlord: Cargill, Incorporated 15407 McGinty Road West P. O. 5602 Wayzata, Minnesota 55391-2399 Attn: Daniel P. Dye With copy to: CGD Attorney If to Tenant: The Andersons, Inc. 480 W. Dussel Drive P. O. Box 119 Maumee, Ohio 43537 Attn: Hal Reed With copy to: Beverly McBride If to IRB Lease Trustee National City Bank Corporate Trust Department Locator 3116 629 Euclid Avenue Cleveland, Ohio 44114-3484 Attn: Holly Pattison If to Toledo-Lucas Toledo-Lucas County Port Authority County Port One Maritime Plaza Authority Toledo, Ohio 43604 Attn: Jerry Arkebauer or to such other address as any of the above may hereafter furnish in writing to the others. 26. MAUMEE, OHIO PARKING LEASE. The parties have entered into that certain lease dated June 30, 1987 (the "Truck Staging Lease"), for the purposes of allowing Landlord to use Tenant's land for the purpose of a truck staging area and for such other purposes incidental thereto. The parties hereto agree that said Truck Staging Lease shall be terminated as of the date of this Lease and Landlord shall receive from Tenant a refund of any unearned paid rent pursuant to the terms of the Truck Staging Lease. 27. MISCELLANEOUS PROVISIONS. (a) Entire Agreement. This Lease and Exhibits attached hereto contain the entire understanding and agreement of the parties hereto and shall not be modified in any manner except by an instrument in writing executed by both parties. In the event any term, covenant or condition herein contained is held invalid or void by any court of competent jurisdiction, the invalidity of any such term, covenant or condition shall in no way affect any other term, covenant or condition herein contained. Notwithstanding the foregoing, this Lease and Exhibits attached hereto shall be read and construed together and consistently with the Marketing Agreement. (b) Successors and Assigns. All the terms, covenants, and conditions of this Lease shall be binding upon, and inure to the benefit of and be enforceable by the parties hereto and their respective successors, heirs, executors and assigns. (c) Governing Law. This Lease shall be governed, construed, and interpreted in accordance with the laws of the State of Ohio. (d) Headings. The headings contained in this Lease are for reference purposes only and shall not affect the meaning or interpretations of this Lease. (e) Incorporation by Reference. Exhibits A through G attached hereto are hereby incorporated by reference and made a part hereof. (f) Waivers and Amendments. This Lease and the other instruments to be executed pursuant hereto may be amended, superseded, canceled, renewed or extended, and their terms or covenants hereof may be waived, only by a written instrument executed by the parties hereto or in the case of a waiver, by the party waiving compliance. The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect its right at a later time to enforce the same. No waiver by any party of the breach of any term or covenant contained in this Lease or in any other such instrument, whether by conduct or otherwise, in anyone or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any breach, or a waiver of the breach of any other term or covenant contained herein. The parties reserve the right by mutual written consent to amend, modify, supersede and cancel this Lease, or waive the terms or conditions hereof, without the consent of any third person (natural or otherwise). (g) Cooperation. Tenant shall cooperate with Landlord, at Landlord's expense, in the performance of any requirements under the IRB Lease regarding the furnishing of information. (h) No Third Party Beneficiary. No person or entity shall be deemed to be a third party beneficiary of the Agreement and nothing expressed or implied in this Agreement shall be deemed to confer upon any person or entity or any heir, successor, assign or legal representative thereof any rights or remedies, of any nature or kind whatsoever, including without limitation, any right to contract or any right to employment or continued employment. IN WITNESS WHEREOF, the parties have executed this Lease Agreement effective on the day and year first above written. CARGILL, INCORPORATED By: /s/Daniel P. Dye ------------------------------------ Its: Vice President - Grain Division ------------------------------------ THE ANDERSONS, INC. By /s/Joseph L. Braker ------------------------------------ Its: President, Agriculture Group ------------------------------------ EXHIBIT A Legal Description of the Maumee. OH Real Property PARCEL I That part of Fractional Section 36, Town 2, U. S. R. of 12 miles square at the foot of the rapids of Miami of Lake Erie in the City of Maumee, Lucas County, Ohio, described as follows: BEGINNING at a point on the center line of Conant Street, said point being 1900 feet northwesterly of a concrete monument at the intersection of the center line of Indiana Avenue approaching Conant Street from the northeast and the center line of Conant Street; thence north 22 degrees, 30 minutes west along the center line of Conant Street, a distance of 590.82 feet to a point; thence south 67 degrees 30 minutes west, a distance of 293.76 feet to a point; thence north 22 degrees, 26 minutes west, a distance of 403.36 feet to a point; thence south 67 degrees, 34 minutes west, a distance of 32.5 feet to a point; thence south 22 degrees 17 minutes east, a distance of 454.5 feet to a point; thence south 67 degrees, 59 minutes west, a distance of 24 feet to a point; thence south 22 degrees, 28 minutes east, a distance of 118.16 feet to a point; thence south 67 degrees, 32 minutes west, a distance of 36 feet to a point; thence south 22 degrees, 28 minutes east, a distance of 417.8 feet to a point; thence north 67 degrees, 32 minutes east, a distance of 11.52 feet to a point; thence south 22 degrees, 13 minutes east, a distance of 358.7 feet to a point; thence north 67 degrees, 42 minutes east, a distance of 176.46 feet to a point; thence north 22 degrees, 35 minutes west, a distance of 354.98 feet to a point; thence north 67 degrees, 25 minutes east, a distance of 202.27 feet to the point of beginning. Also that part of said Section 36 lying between the southerly line of the above described property and a line 30 feet westerly of the most westerly rail of spur tracks serving the above property and a line 30 feet easterly of the most easterly rail of said tracks and extending to the Wabash Railroad right-of-way. PARCEL II That part of Fractional Section thirty-six (36), Town two (2), United States Reserve, of twelve (12) miles square at the foot of the rapids of Miami of Lake Erie in the City of Maumee, Lucas County, Ohio; described as follows: Starting at a concrete monument at the intersection of the center line of Conant Street and the center line of Indiana Avenue approaching from the northeast; thence north twenty-two degrees (22 degrees) thirty minutes (30') west along the center line of Conant Street a distance of nineteen hundred and no tenths (1900.0) feet; thence south sixty-seven degrees (67 degrees) twenty-five minutes (25') west a distance of one hundred two and twenty-seven hundredths (102.27) feet to the point of beginning of the herein described parcel; thence continuing south sixty-seven degrees (67 degrees) twenty-five minutes (25') west a distance of one hundred and no tenths (100.0) feet; thence south twenty-two degrees (22 degrees) thirty-five minutes (35') east a distance of three hundred fifty-four and ninety-eight hundredths (354.98) feet; thence north sixty-seven degrees (67 degrees) forty-two minutes (42') east a distance of one hundred and no tenths (100.0) feet; thence north twenty-two degrees (22 degrees) thirty-five minutes (35') west a distance of three hundred fifty-five and forty-eight hundredths (355.48) feet to the point of beginning. PARCEL III That part of Fractional Section thirty-six (36), Town Two (2), United States Reserve of twelve miles square at the foot of the rapids of Miami of Lake Erie in the City of Maumee, Lucas County, Ohio; described as follows: Starting at a concrete monument at the intersection of the center line of Conant Street and the center line of Indiana Avenue approaching from the northeast; thence north twenty-two degrees (22 degrees) thirty minutes (30') west along the center line of Conant Street a distance of fifteen hundred forty-four and two hundredths (1544.02) feet; thence south sixty-seven degrees (67 degrees) forty-two minutes (42') west a distance of three hundred seventy-eight and twenty-two hundredths (378.22) feet to the point of beginning of the herein described parcel; thence north twenty-two degrees (22 degrees) thirteen minutes (13') west a distance of three hundred fifty-eight and seven tenths (358.7) feet; thence south sixty-seven degrees (67 degrees) thirty-two minutes (32') west a distance of eleven and fifty-two hundredths (11.52) feet; thence north twenty-two degrees (22 degrees) twenty-eight minutes (28') west a distance of four hundred seventeen and eight tenths (417.8) feet; thence north sixty-seven degrees (67 degrees) thirty-two minutes (32') east a distance of thirty-six and no tenths (36.0) feet; thence north twenty-two degrees (22 degrees) twenty-eight minutes (28') west a distance of one hundred eighteen and sixteen hundredths (118.16) feet; thence south sixty-seven degrees (67 degrees) fifty-nine minutes (59') west a distance of one hundred ninety-seven and no tenths (197.0) feet; thence south twenty-two degrees (22 degrees) twenty-eight minutes (28') east a distance of eight hundred ninety-four and sixteen hundredths (894.16) feet; thence north sixty-seven degrees (67(Degree)) forty-two minutes (42') east a distance of one hundred seventy and ninety-six hundredths (170.96) feet to the point of beginning. PARCEL IV The northerly 40 feet of the following described property: That part of Fractional Section 36, Town 2 of the United States Reserve of 12 miles square at the foot of the Rapids of the Miami of Lake Erie, in the CITY of MAUMEE, LUCAS COUNTY, OHIO, bounded and described as follows: Beginning at a point on the centerline of Conant Street that is 1353.58 feet southeasterly from a brass plate set in a concrete monument at the intersection of the centerline of the Perrysburg-Holland Road and said Conant Street, said brass plate being 1081.83 feet southeasterly of the intersection of the centerline of Reynolds Road with the centerline of the Perrysburg-Holland Road; thence south 22 degrees 30 minutes east along the centerline of said Conant Street a distance of 200.0 feet; thence south 67 degrees 30 minutes west a distance of 293.49 feet; thence north 22 degrees 26 minutes west a distance of 169.16 feet; thence south 67 degrees 34 minutes west a distance of 26.55 feet; thence north 22 degrees 30 minutes west and parallel with the centerline of said Conant Street a distance of 37.84 feet; thence north 67 degrees 30 minutes east a distance of 30.0 feet; thence south 22 degrees 30 minutes east and parallel with the centerline of said Conant Street a distance of 7.0 feet; thence north 67 degrees 30 minutes east a distance of 290.0 feet to the place of beginning. Subject to a perpetual easement for highway purposes granted to the State of Ohio by instrument recorded in Volume 1863 of Deeds, page 609. Subject to a perpetual easement and right of way for public highway and roadway purposes to the State of Ohio of the following described property: Being a parcel of land lying on the Right side of the centerline of a survey, made by the Department of Highways, and recorded in Book ___, Page ____, of the records of Lucas County and being located within the following described points in the boundary thereof; All that part of lots 41, 42 and 43 of the Assessor's Plat (as recorded in Volume 2A of Plats, Page 46) of fractional Section 36, Town 2, U.S. Reserve, City of Maumee, Lucas County, Ohio, bounded and described as follows: Commencing at the point of intersection of the centerline of Conant Street with the east and west centerline of fractional Section 36, Town 2, U.S. Reserve, City of Maumee, Lucas County, Ohio, said east and west centerline of fractional Section 36 also being the South line of lot 43 of the said Assessor's Plat, said point of intersection being Station 960 plus 07.09 in the centerline of a survey made in 1962, by the Ohio Department of Highways of U.S. 20, Section 17.25 in Lucas County, also known as Conant Street, thence North 25(Degree) 11' 15": West along the centerline of Conant Street, a distance of 740.36 feet to the grantors northwest property line, said point being Station 952 plus 66.73 in said centerline of survey of U.S. 20 and being the true point of beginning of the herein described parcel; thence South 25(Degree) 11' 15" East along the centerline of Conant Street, a distance of 590.68 feet to a point on grantors southeast property line, said point being Station 958 plus 57.41 in said centerline of survey of U.S. 20; thence South 64(Degree) 43' 45" West along said property line and passing through the existing southwest Right-of-Way line of Conant Street, a distance of 45.00 feet to a point 45.00 feet right of Station 958 plus 57.48 in said centerline of survey of U.S. 20; thence North 25(Degree) 11' 15" West a distance of 590.75 feet to a point on the grantors northwest property line, said point being 45.00 feet right of Station 952 plus 66.73 in said center line of survey of U.S. 20; thence North 64(Degree) 48' 45" East along said property line and passing through the existing southwest Right-of-Way line of Conant Street, a distance of 45.00 feet to the true point of beginning. EXHIBIT B Legal Description of the Toledo. OH Real Property That part of River Tract No.7, and its extension, and part of the Lower Island (so called) in the Maumee River (also known as Grassy Point, Baldwin's Point and Middle Ground ), in Town 3, United States Reserve, CITY OF TOLEDO, LUCAS COUNTY, OHIO, bounded and described as follows, bearings being based on and derived from those on the maps of Toledo Harbor, Ohio Established Harbor Lines by the U.S. Corps of Engineers: Commencing at the intersection of the centerline of Sumner Street with the North line of said River Tract No.7 extended (also the centerline of original South Avenue); then South 89 degrees 48 minutes 27 seconds East 1099.41 feet, on said north line of River Tract No.7, and its extension, to the point of beginning at an intersection with a line that is parallel to and a perpendicular distance of 80.00 feet southeastward from the southeasterly line of the Norfolk and Western Railroad right-of-way; then continuing South 89 degrees 48 minutes 27 seconds East 306.66 feet on said river tract line, which line along said 306.66 feet thereof is also the southerly line of Edwin Drive, a public street; then South 9 degrees 44 minutes 08 seconds East 1206.71 feet to intersect the northerly harbor line of the Maumee River as established by the U.S. Corps of Engineers and approved by the Assistant Secretary of War on April 17, 1917, said intersection being South 80 degrees 15 minutes 52 seconds West 1047.40 feet, along said harbor line, from Harbor Line Point F-2; then South 80 degrees 15 minutes 52 seconds West 868.12 feet, on said harbor line, to the east limited-access right-of-way line of Interstate Route 75; then North 0 degrees 35 minutes 56 seconds West 1131.94 feet, on said Limited Access Right-of-Way line, to intersect said line that is parallel to and a perpendicular distance of 80.00 feet southeastward from the southeasterly line of the Norfolk and Western Railroad Right-of-way; then North 60 degrees 04 minutes 59 seconds East 411.59 feet, parallel to said railroad right-of-way, to the point of beginning; containing 21.398 acres of land, more or less. EXHIBIT C TOLEDO RAILROAD PROPERTY EXHIBIT D PERSONAL PROPERTY Maumee Personal Property Five Thousand Three Hundred Ninety (5,390) feet of track, being the portions of Track Nos. 3706, 3707, 4101 and 4105, on Plan No. D-1277, dated Revised February 18, 1983, excluding the crossing diamonds located at Station 3+29 on Track No. 5713 and Station r+66 on Track No. 5713. (A copy is attached hereto as Exhibit D-1). Maumee IRB Personal Property a. 130 foot diameter steel grain storage tank with 72 foot straight sidewall height and a capacity of 877,000 bushels. The 1983 Addition is designated tank #603 and is located between tanks #601 and #602. b. 36 inch enclosed belt drawoff conveyor from #603 that feeds the #601 drawoff conveyor. c. 42 inch enclosed belt feed conveyor into #603 that is fed from the#602 feed conveyor. d. Various other structures and machinery and electrical systems pertaining to tank #603. Toledo Personal Property 7,299 feet of track shown in yellow in print dated March 15, 1979. (A copy is attached hereto as Exhibit D-2.) EXHIBIT D-2 Toledo Personal Property EXHIBIT E Permitted Exceptions MAUMEE PERMITTED EXCEPTIONS PARCEL I 1. Legal highways 2. Taxes now due and payable or hereafter to become due and payable 3. Zoning ordinances, restrictions of record and public utility or other easements now in use or of record. PARCEL II PARCEL III Zoning ordinances, restrictions of record and public utilities or other easements now in use or of record, and the rights of the Wabash Railroad Company under Agreements set forth in the deed recorded in Volume 1430 of Deeds, page 125. PARCEL IV Subject to legal highways. 1. Restrictions contained in deed from The Andersons, dated September 1, 1961 and recorded on Volume 1796 of Deeds, page 1. 2. Excepting and reserving to Mary B. Stengle, the grantor, her heirs, assigns, tenants, licensees, employees, visitors and all persons for the benefit or advantage of grantor, her heirs, assigns, tenants, licensees, employees, visitors a RIGHT OF WAY over, across and upon said premises forever. 3. Zoning ordinances, other restrictions of record, public utility or other easements of record, and taxes and assessments due and payable after the date hereof. GENERAL: 1. Siding Agreement dated August 15, 1996 between Norfolk and Western Railway Company and Cargill, Incorporated. 2. License dated January 1, 1958 between Cargill, Incorporated and Wabash Railroad Company. TOLEDO PERMITTED EXCEPTIONS A. Excepting and reserving unto Kuhlman Corporation ("Grantor"), and its successors and assigns, a non-exclusive easement over the following described property: That part of River Tract No.7, and its extension, and part of the Lower Island (so called) in the Maumee River (also known as Grassy Point, Baldwin's Point and Middle Ground), in Town 3, United States Reserve, City of Toledo, Lucas County, Ohio, bounded and described as follows, bearings being based on and derived from those on the maps of Toledo Harbor, Ohio Established Harbor lines by the U.S. Corps of Engineers; Commencing at the intersection of the centerline of Sumner Street with the North line of said River Tract No.7 (also the centerline of original South Avenue); then South 89 degrees 48' 27" East 1141.07 feet, on said north line of River Tract No.7, and its extension, to the Point of Beginning; then continuing South 89 degrees 48' 27" East 265.00 feet, on said River Tract line; then South 9 degrees 44' 08" East 22.33 feet to a line that is parallel to and a perpendicular distance of 22.00 feet southward from said River Tract line; then North 89 degrees 48' 27" West 203.85 feet, parallel to said River Tract line; then North 71 degrees 06' 31" West 68.62 feet to the Point of Beginning; containing 0.118 acres of land, more or less. The easement herein reserved is subject to the following terms and conditions: 1. The foregoing easement shall be used by the Grantor and Cargill, Incorporated ("Grantee"), their respective successors and assigns, agents, servants, employees, tenants, visitors, licensees, invitees, and all other persons for the benefit of the Grantor, the Grantee and their respective successors and assigns, to freely pass and repass on foot or in vehicles of any kind and description or with animals to and from the adjoining lands owned by the Grantor and Grantee and public streets and right-of-ways. 2. Neither the Grantor nor the Grantee, nor their respective successors and assigns, will park objects or vehicles upon said easement or otherwise obstruct or block the same. 3. The Grantor may maintain the existing railroad sidetrack on said easement. So long as said sidetrack is used for the exclusive benefit of the Grantor, the cost of the maintenance thereof shall be the sole responsibility of the Grantor, its successors and assigns. The Grantee and its successors and assigns shall, however, have the right and privilege of building spur or sidetracks extending from the sidetrack to the land of the Grantee. From and after the time that the Grantee or its successors or assigns use said sidetrack, the Grantor, the Grantee and their respective successors and assigns shall each thereafter pay their equitable portions of the costs of the maintenance thereof. 4. No one using said sidetrack will permit cars to be moved or stand on the sidetrack in such manner or for such periods of time that they will unreasonably interfere with the free use of the tracks by the others entitled to use the same. 5. The easement reserved shall inure to the benefit of and be binding upon the parties, their successors and assigns, and all others hereafter acquiring any interest or ownership in or right to use the lands of the Grantor served by such easement and the land conveyed to the Grantee. B. Agreement dated May 1, 1979 between Norfolk and Western Railway Company and Cargill for driveway and occupation of Lessee's sidetrack. C. Siding Agreement dated January 2, 1980 between Norfolk and Western Railway Company, Wabash Railroad Company and Cargill, Inc. for the use, operation and maintenance of five side tracts. D. Private Side Track Agreement dated December 26, 1961 between The New York Central Railroad Company and Cargill, Incorporated, as supplemented by that certain Supplemental Side Track Agreement dated April 11, 1963. EXHIBIT F Railroad Agreements Maumee Railroad Agreements 1. Siding Agreement dated August 15, 1996 between Norfolk and Western Railway Company and Cargill, Incorporated. 2. License dated January 1, 1958 between Cargill, Incorporated and Wabash Railroad Company. Toledo Railroad Agreements 1. Agreement dated May 1, 1979 between Norfolk and Western Railway Company and Cargill for driveway and occupation of Lessee's sidetrack. 2. Siding Agreement dated January 2, 1980 between Norfolk and Western Railway Company, Wabash Railroad Company and Cargill, Inc. for the use, operation and maintenance of five side tracts. 3. Private Side Track Agreement dated December 26, 1961 between The New York Central Railroad Company and Cargill, Incorporated, as supplemented by that certain Supplemental Side Track Agreement dated April 11, 1963 between The New York Central Railroad Company and Cargill, Incorporated. EXHIBIT G RAILROAD LEASE - TOLEDO 1. Agreement dated May 1, 1979 between Norfolk and Western Railway Company and Cargill for driveway and occupation of Lessee's sidetrack. EX-10.6 5 l01943bexv10w6.txt EX-10.6 EXHIBIT 10.6 AMENDED AND RESTATED MARKETING AGREEMENT THIS AGREEMENT, is made and entered into effective as of June 1, 2003 by and between CARGILL, INCORPORATED, a Delaware corporation with principal offices and place of business at 15407 McGinty Road West, Wayzata, Minnesota 55391 ("Cargill"), THE ANDERSONS, INC., an Ohio corporation with principal offices and place of business at 480 W. Dussel Drive, P.O. Box 119, Maumee, Ohio 43537 ("TAI") and The Andersons Agriculture Group, L.P., an Ohio limited partnership with principal offices and place of business at 480 W. Dussel Drive, Maumee, Ohio 43537 ("TAAG," or "TAI" with respect to all time periods after May 1, 2000) .. WHEREAS, Cargill and TAI entered into that certain Marketing Agreement dated June 1, 1998; WHEREAS, the Marketing Agreement was assigned by TAI to TAAG, without releasing TAI of its rights, obligations and responsibilities, and to which Cargill gave its consent, effective as of May 1, 2000; WHEREAS, the Initial Term of the Marketing Agreement has transpired, and the parties wish to extend such Marketing Agreement for another five (5) year term with certain amendments to apply to such subsequent term, and any future subsequent terms, if any, as set forth in this Amended and Restated Marketing Agreement; WHEREAS, Cargill has leased its two grain handling facilities located in Toledo and Maumee, Ohio (the "Leased Facilities") to TAI by lease agreement dated June 1, 1998, and extended by Letter Agreement dated May 30, 2003 and by electronic mail dated July 2, 2003 (the "Lease Agreement"); WHEREAS, TAI intends to use TAI's existing two grain handling facilities at Toledo and Maumee, Ohio (the "TAI Facilities") and the Leased Facilities (collectively, the "Facilities") for the primary purpose of originating grain in the Toledo and Maumee, Ohio area (the "Toledo Grain"); and WHEREAS, TAI intends to sell the Toledo Grain to Cargill, and Cargill intends to purchase from TAI and merchandise the Toledo Grain; NOW, THEREFORE, in consideration of the foregoing and the mutual terms and conditions hereinafter set forth, Cargill and TAI mutually agree as follows: ARTICLE I TERM AND TERMINATION 1.1 TERM. The initial term of this Agreement shall commence on June 1, 1998 (the "Effective Date") and shall continue through May 31, 2003 (the "Initial Term"), subject to the termination provisions below. The second term of this Agreement shall commence on June 1, 2003, and shall continue through May 31, 2008 (the "Second Term"), subject to the termination provisions below. This Agreement shall automatically renew for consecutive five (5) year periods unless either party provides notice to the other party at least six (6) months prior to the expiration of the then current term of such party's intent to terminate or modify this Agreement. If a party provides such notice of its intent to modify the Agreement for purposes of renewal, and the other party has not provided notice of termination pursuant to this Section 1.1, then the parties shall negotiate in good faith a renewal of this Agreement. In the event that the parties are unable to negotiate a mutually agreeable renewal prior to the expiration of the Initial Term, Second Term or the then current term, as applicable, this Agreement shall terminate without further notice at the expiration of such term. 1.2 TERMINATION. (a) If the Lease Agreement is terminated for any reason, the Initial Term, Second Term or the then current term of this Agreement, as applicable, shall automatically terminate without notice. The Lease Agreement, which is incorporated herein by this reference, is attached hereto as Exhibit A. (b) Either party may terminate this Agreement prior to the expiration of the Initial Term, Second Term or renewal term, if any, following any material breach of this Agreement by the other party if the breaching party fails to remedy such breach within thirty (30) days after receiving from the non-breaching party written notice of the breach specifying the basis on which such breach is claimed. (c) This Agreement shall terminate upon written notice by either party to the other in the event that the notified party shall file a voluntary petition in bankruptcy, or shall be adjudicated as a bankrupt pursuant to an involuntary petition, or shall suffer appointment of a temporary or permanent receiver, custodian, or trustee for its business or for all or substantially all of its assets, or shall make an assignment for the benefit of creditors. (d) In the event that one or more third parties purchases TAI's stock in an amount sufficient to significantly affect or change control of TAI, or one or more third parties takes any action that does significantly affect the control of TAI, Cargill may in its sole discretion either continue or terminate this Agreement. For purposes of this Agreement, "control" shall mean (a) the direct or indirect ownership of more than fifty percent (50%) of the total voting securities of every class or other voting evidences of ownership interest of TAI, or (b) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of TAI. If Cargill elects to terminate this Agreement under this provision, Cargill must provide written notice to TAI of its election to terminate not more than fifteen (15) days after public announcement or after TAI has provided written notice to Cargill of any public filing with the Securities Exchange Commission. TAI shall have no right to terminate this Agreement under this Section 1.2 (d) herein. (e) Termination of this Agreement shall not affect any obligation of either party accrued prior to the effective date of such termination. 1.3 CONTINUING OBLIGATIONS. Upon the expiration or termination of this Agreement, for a period of two (2) years from the date of such expiration or termination, Cargill shall have both a right of first refusal and a right of last refusal to purchase from TAI at a mutually agreed market price, 50% of the grain put through the TAI Facilities for the first year of the two year period, and 25% of the grain put through the TAI Facilities for the second year of the two year period; provided, however, that this provision shall not apply to grain sold to those customers with whom TAI maintains direct trading relationships during the term of this Agreement. If the parties cannot mutually agree to the market price, the market price shall be determined by an independent third party, mutually agreeable to both parties. ARTICLE II GRAIN ORIGINATION AND MERCHANDISING 2.1 OBLIGATION OF BOTH PARTIES. Both parties have the obligation to maximize net income of the Facilities. As a means to this, Cargill will maintain control of the grain merchandising function, while TAI will maintain control of the grain origination and facility operation functions. Communications between the parties regarding such obligation of both parties shall be conducted in accordance with the Guidelines as defined in Section 8.1 herein. 2.2 ORIGINATION. TAI shall use its best efforts throughout the duration of the Initial Term, Second Term, and all subsequent renewal terms, if any, to maximize origination of the Toledo Grain. TAI shall use the Facilities for the primary purpose of originating the Toledo Grain. Any other intended use by TAI of the Facilities to generate income shall be promptly communicated to Cargill and shall be subject to Cargill's approval, which shall not be unreasonably withheld. For purposes of this Section 2.2, it shall not be unreasonable for Cargill to withhold approval if TAI's intended use may cause a default in the IRB Lease as defined in the Lease Agreement. TAI shall have sole discretion to establish the price at which TAI purchases the Toledo Grain in connection with TAI's origination activities. 2.3 SALE/PURCHASE OF THE TOLEDO GRAIN. Subject to the terms and conditions set forth in this Agreement, TAI agrees to sell to Cargill and Cargill agrees to purchase from TAI the Toledo Grain for the duration of the Initial Term and all subsequent renewal terms, if any. Cargill shall have sole discretion to determine when Cargill shall purchase and at what price Cargill shall purchase the Toledo Grain from TAI. These decisions shall be made with full consideration of origination, logistic and grain quality factors as represented in good faith by TAI. During the term of this Agreement, TAI will not sell the Toledo Grain to any person or entity other than Cargill pursuant to the terms of this Agreement. Cargill and TAI shall execute Cargill's standard purchase contract ("Purchase Contract") to effectuate each respective sale of the Toledo Grain. The terms and conditions on the front and back sides of the Purchase Contract shall govern the transaction to the extent that such terms and conditions do not conflict with the terms of this Agreement in which case this Agreement shall govern. A copy of the Purchase Contract is attached hereto as Exhibit B. 2.4 TOLEDO GRAIN EXCEPTIONS. TAI will remain fully active in the NS rail markets as such markets relate to facilities other than the Facilities which are the subject of this Agreement, and no NS rail sales will be offered by TAI for the Toledo Grain. Should an opportunity arise wherein TAI desires to purchase certain amounts of Toledo Grain, TAI may contact Cargill's merchandising contact for this Agreement with a bid. Further, TAI may direct trading relationships with certain customers as mutually agreed by the parties. 2.5 GRAIN MERCHANDISING. Cargill shall use its best efforts throughout the duration of the Initial Term, Second Term, and all subsequent renewal terms, if any, to promote the sale of and to merchandise the Toledo Grain. Except as otherwise provided herein, Cargill shall have sole authority to merchandise the Toledo Grain into both export and domestic markets, and accordingly TAI shall not communicate with any of Cargill's customers regarding the sale of the Toledo Grain except as provided herein, or as mutually agreed by the parties. ARTICLE III OPEN CONTRACTS 3.1 Cargill agrees to assign, deliver, and transfer to TAI on the Effective Date, and TAI agrees to accept from Cargill, on the Effective Date, all right, title, and interest of Cargill in and to all executory contracts for the purchase of grain (the "Open Contracts") by Cargill from various sellers, which Open Contracts are in existence on the Effective Date. TAI shall purchase the Open Contracts at the TAI truck bid on the Effective Date. If the parties cannot mutually agree to the TAI truck bid, the price shall be determined by an independent third party, mutually agreeable to both parties. Cargill shall indemnify and hold harmless TAI against all claims, damages, liabilities, costs, suits, obligations or penalties (including attorneys' fees) arising from Cargill's breach of or negligent administration or handling of any open hedge-to-arrive grain contracts which are assigned from Cargill to TAI ("HTA Contracts"), or arising from any questions of legality of such HTA Contracts to the extent that such questions of legality do not arise from TAI's breach of or negligent administration or handling of the HTA Contracts. TAI shall indemnify and hold harmless Cargill against all claims, damages, liabilities, costs, suits, obligations, or penalties (including attorneys' fees) arising from TAI's breach of or negligent administration or handling of the HTA Contracts. ARTICLE IV DISPOSITION OF THIRD PARTY GRAIN 4.1 ASSIGNMENT. On the Effective Date, Cargill anticipates having in storage at the Leased Facilities certain quantities of grain belonging to third parties (the "Cargill Third Party Grain"). The Cargill Third Party Grain is stored in the Leased Facilities under warehouse receipts, storage receipts or scale tickets ("Cargill Receipt Obligations"). On the Effective Date, Cargill shall assign to TAI the Cargill Receipt Obligations and warrants that sufficient quantity and quality of grain will remain in the Leased Facilities over and above the Cargill Inventory (as defined in Section 5.1 herein) on the Effective Date to satisfy the Cargill Receipt Obligations. 4.2 PRORATION. Cargill and TAI agree that storage charges due under the Cargill Receipt Obligations shall be apportioned between them, Cargill to receive all storage charges accrued up to the Effective Date, TAI to receive all charges accruing thereafter, which charges shall be included on the P&L as defined in Section 6.3 herein. Any prepaid storage or other charges shall be prorated between Cargill and TAI as of the Effective Date. If TAI should receive payment for storage charges to which Cargill is entitled, TAI shall promptly forward such amounts to Cargill. Should it be necessary for either party to execute an assignment to the other to collect such charges, it shall do so. 4.3 TAI THIRD PARTY GRAIN. On the Effective Date, TAI anticipates having in storage at the TAI Facilities certain quantities of grain belonging to third parties (the "TAI Third Party Grain"). The TAI Third Party Grain is stored in the TAI Facilities under warehouse receipts, storage receipts or scale tickets ("TAI Receipt Obligations"). All storage charges due under the TAI Receipt Obligations accrued on or after the Effective Date shall be included in the P&L. Any prepaid storage or other charges shall be prorated accordingly as of the Effective Date. ARTICLE V INVENTORY 5.1 LEASED FACILITIES. On the Effective Date, Cargill will have in storage at the Leased Facilities inventories of grain (the "Cargill Inventory"). TAI will purchase the Cargill Inventory at the FOB Toledo value less * on the Effective Date (the "Inventory Price"). Prior to or on the Effective Date, representatives of Cargill and TAI shall determine by weigh-up/measurement the quantity and quality of the Cargill Inventory (and thereby the Cargill Third Party Grain). Quality of grain will be at market scale of discount. The cost of said weigh-up/measurement and grading shall be borne equally by Cargill and TAI. Should the representatives of Cargill and TAI be unable to agree on the quantity or quality of the Cargill Inventory or any portion thereof or the Third Party Grain, the matter shall be resolved in accordance with Article XIV of this Agreement. If the parties cannot mutually agree to the FOB Toledo value less * such value shall be determined by an independent third party, mutually agreeable to both parties. *CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SEC 5.2 TAI FACILITIES. On the Effective Date, TAI will have in storage at the TAI Facilities inventories of grain (the "TAI Inventory"). The parties shall mutually agree to a FOB Toledo value less * of the TAI Inventory as of the Effective Date, which amount shall be included on the P&L as defined in Section 6.3 herein. Prior to or on the Effective Date, representatives of Cargill and TAI shall determine by weigh-up/measurement the quantity and quality of the TAI Inventory. Quality of grain will be at market scale of discount. The cost of said weigh-up/measurement and grading shall be borne equally by Cargill and TAI, of which TAI's respective cost shall not be included on the P&L. Should the representatives of Cargill and TAI be unable to agree on the quantity or quality of the TAI Inventory or any portion thereof, the matter shall be resolved in accordance with Article XIV of this Agreement. If the parties cannot mutually agree to the FOB Toledo value less * , such value shall be determined by an independent third party, mutually agreeable to both parties . ARTICLE VI FINANCIAL MATTERS 6.1 EARNINGS THRESHOLD. - (a) INITIAL TERM. With respect to the Initial Term, the parties hereby establish a five-year cumulative earnings before long-term interest and income tax ("EBIT") threshold of * * ( * ) (the "Threshold"). In the event that the actual five-year cumulative EBIT of the Facilities is greater than the Threshold, the amount over the Threshold shall be distributed equally between the parties. If the actual five-year cumulative EBIT is below the Threshold, Cargill shall pay TAI the difference between the Threshold and the actual five-year cumulative EBIT, less all absorbed losses as described herein. TAI shall absorb fifty percent (50%) of each individual year's loss where the EBIT for the individual year is less than zero. In no event shall the sum of TAI's absorbed losses exceed the total actual five-year cumulative EBIT shortfall from the Threshold. If this Agreement is terminated before the expiration of the Initial Term, or before the expiration of the then current term, the Threshold shall be adjusted on a prorated basis. By way of example, if this Agreement is terminated 3 years 3 months into the Initial Term, the Threshold would be adjusted from * to * . (b) SECOND TERM. With respect to the Second Term, and any subsequent renewal terms, except as otherwise agreed in writing by the parties, the parties hereby establish a five-year cumulative EBIT threshold of * ( * ) (the "Second Term Threshold"). In the event that the actual five-year cumulative EBIT of the Facilities is greater than the Second Term Threshold, the amount over the Second Term Threshold shall be distributed equally between the parties. Unlike Section 6.1(a) above, Cargill shall not be obligated to pay TAI any difference between the Second Term Threshold and the actual five-year cumulative EBIT If the actual five-year cumulative EBIT is below the Second Term Threshold; provided, however, that at the end of the Second Term, Cargill will pay TAI 50% of any shortfall between the five-year cumulative EBIT and * , if any, up to a total of * ; by way of example, if the cumulative EBIT at the end of the Second Term is * , and consequently there is a * shortfall ( * minus * ), Cargill would pay 50% of the * shortfall up to a total of * , which would be * in this example. If this Agreement is terminated before the expiration of the Second Term, or before the expiration of the then current term, the Second Term Threshold shall be adjusted on a prorated basis. By way of example, if this Agreement is terminated 3 years 3 months into the Second Term, the Second Term Threshold would be adjusted from * to * . *CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SEC 6.2 SETTLEMENT. In order to reconcile the distributions to which each party is entitled pursuant to Section 6.1 herein, the parties shall conduct interim tentative settlements on an annual basis as of May 31. Such settlements shall be based on interim annual thresholds of (a) * , * , * , * , and * for years one through five of this Agreement (i.e., the Initial Term), respectively, and (b) * , * , * , * , and * for years six through ten of this Agreement (i.e., the Second Term), respectively. Annual settlement payments shall be treated as a purchase price adjustment to all grain sold and purchased pursuant to Section 2.3 of this Agreement. By way of example, settlement would occur in the following manner: Example One (applying the provisions of 6.1(a) relating to the Initial Term) YEAR ONE: P&L states a profit of * . The interim threshold for year one is * .. The parties split equally the excess over the interim threshold, which excess is * in this example; therefore, TAI pays Cargill * . Accordingly, at end of year one, TAI's account is * , and Cargill's account is * . YEAR TWO: P&L states a loss of * . The interim threshold for year two is * . Because of the * loss, TAI's account is at * , and consequently requires an additional * * to match the interim threshold. However, because TAI and Cargill absorb the * loss on an equal basis, Cargill pays TAI * . Accordingly, at end of year two, TAI's account is * , and Cargill's account is negative * . YEAR THREE: P&L states a profit of * . The interim threshold for year three is $ * * . TAI's account is now at * , while Cargill's account is at negative * .. In order to reconcile the accounts to the interim threshold, TAI pays Cargill * . Accordingly, at end of year three, TAI's account is * , and Cargill's account is * . YEAR FOUR: P&L states a loss of * . The interim threshold is * . Because of the * * loss, TAI's account is now at * , and consequently requires an additional * to match the interim threshold. However, because TAI and Cargill absorb the cumulative losses on an equal basis, Cargill pays TAI * ( * ) less * in cumulative losses). Accordingly, at end of year four, TAI's account is * , and Cargill's account is negative * . YEAR FIVE: P&L states a profit of * . The final threshold is * . TAI's account is now at * , while Cargill's account is at negative * . In order to reconcile the accounts to the final threshold, TAI pays Cargill * . Accordingly, at end of year five, TAI's account is * , and Cargill's account is negative * . *CONFIDENTIAL INFORMATION HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SEC Example Two (applying the provisions of 6.1(a) relating to the Initial Term) (All dollar figures are in millions)

Certification of the President and Chief Executive Officer under Rule
13(a)-14(a)/15d-14(a)

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(d)) for the registrant and have:

Designed such disclosure controls and procedures , or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and;

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.


August 19, 2003

		/s/Michael J. Anderson

		Michael J. Anderson
		President and CEO
		The Andersons, Inc.

Certification of the Vice President, Controller and CIO under Rule
13(a)-14(a)/15d-14(a)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.


August 19, 2003

		/s/Richard R. George

		Richard R. George
		Vice President, Controller and CIO
		(Principal Accounting Officer)
		The Andersons, Inc.

Certification of the Vice President, Finance and Treasurer under Rule
13(a)-14(a)/15d-14(a)

1.		I have reviewed this quarterly report on Form 10-Q of The Andersons, Inc.;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(d)) for the registrant and have:

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s

auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

In connection with the Quarterly Report of The Andersons, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies pursuant to 18 W.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2003, that to such officer’s knowledge:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.


August 19, 2003
		/s/Michael J. Anderson

		Michael J. Anderson
		President and Chief Executive Officer

		/s/Richard R. George

		Richard R. George
		Vice President, Controller and CIO

		/s/Gary L. Smith

		Gary L. Smith
		Vice President, Finance and Treasurer


Part I. Financial Information
	Item 1. Financial Statements
		Condensed Consolidated Balance Sheets
		Condensed Consolidated Statements of Income
		Condensed Consolidated Statements of Cash Flows
		Condensed Consolidated Statements of Shareholders’ Equity
		Notes to Condensed Consolidated Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures about Market Risk
	Item 4. Controls and Procedures
Part II. Other Information
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 6. Exhibits and Reports on Form 8-K
Signatures
EX-10.4
EX-10.5
EX-10.6
EX-10.7
EX-31.1
EX-31.2
EX-31.3
EX-32.1


			Page No.

PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		Condensed Consolidated Balance Sheets - June 30, 2003, December 31, 2002 (Restated) and June 30, 2002 (Restated)		3
		Condensed Consolidated Statements of Income - Three months and six months ended June 30, 2003 and 2002 (Restated)		5
		Condensed Consolidated Statements of Cash Flows - Six months ended June 30, 2003 and 2002 (Restated)		6
		Condensed Consolidated Statements of Shareholders’ Equity Six months ended June 30, 2003 and year ended December 31, 2002 (Restated)		7
		Notes to Condensed Consolidated Financial Statements		8
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
	Item 3. Quantitative and Qualitative Disclosures about Market Risk			28
	Item 4. Controls and Procedures			30
PART II. OTHER INFORMATION
	Item 4. Submission of Matters to a Vote of Security Holders			31
	Item 6. Exhibits and Reports on Form 8-K			31
Signatures				32
Exhibit Index				33


			June 30		December 31		June 30
			2003		2002		2002
					(Restated)		(Restated)

Current assets:
	Cash and cash equivalents		$	14,573	$	6,095	$	7,072
	Accounts and notes receivable:
		Trade receivables (net)		62,780		59,800		58,740
		Margin deposits		—		—		8,797

				62,780		59,800		67,537
	Inventories:
		Grain		89,785		156,742		70,351
		Agricultural fertilizer and supplies		17,992		25,699		16,777
		Lawn and garden fertilizer and corncob products		28,166		42,947		28,684
		Railcar repair parts		1,969		1,455		1,082
		Retail merchandise		32,203		29,076		32,321
		Other		335		356		367

				170,450		256,275		149,582
	Railcars available for sale			1,802		550		3,978
	Deferred income taxes			4,266		2,894		3,794
	Prepaid expenses and other current assets			6,131		11,675		8,008

Total current assets				260,002		337,289		239,971
Other assets:
	Pension asset			6,131		5,828		4,793
	Other assets and notes receivable (net)			6,036		5,794		5,181
	Investments in and advances to affiliates			2,202		969		979

				14,369		12,591		10,953
Railcar assets leased to others (net)				29,695		26,399		31,577
Property, plant and equipment:
	Land			11,735		11,735		11,735
	Land improvements and leasehold improvements			29,419		29,122		28,564
	Buildings and storage facilities			96,975		95,892		95,580
	Machinery and equipment			123,108		121,911		120,521
	Software			4,971		4,771		4,043
	Construction in progress			1,924		2,369		3,547

				268,132		265,800		263,990
	Less allowances for depreciation and amortization			176,479		172,861		169,453

				91,653		92,939		94,537

			$	395,719	$	469,218	$	377,038


		June 30			December 31			June 30
		2003			2002			2002
					(Restated)			(Restated)

Current liabilities:
	Notes payable	$	60,000		$	70,000		$	41,800
	Accounts payable for grain		18,348			75,422			23,757
	Other accounts payable		57,985			60,285			57,308
	Customer prepayments and deferred income		10,817			20,448			9,697
	Accrued expenses		20,992			19,604			23,214
	Current maturities of long-term debt		7,434			9,775			9,225

Total current liabilities			175,576			255,534			165,001
Deferred income			1,171			717			105
Other long-term liabilities			480			381			288
Employee benefit plan obligations			13,253			12,198			10,944
Long-term debt, less current maturities			84,752			84,272			85,529
Deferred income taxes			9,164			10,351			8,574

Total liabilities			284,396			363,453			270,441
Shareholders’ equity:
	Common shares (25,000 shares authorized; stated value of $.01 per share; 8,430 shares issued)		84			84			84
	Additional paid-in capital		66,730			66,662			66,460
	Treasury shares (1,301, 1,258 and 1,109 shares at 6/30/03, 12/31/02 and 6/30/02, respectively; at cost)		(13,260	)		(12,558	)		(10,193	)
	Accumulated other comprehensive loss		(791	)		(815	)		(1,294	)
	Unearned compensation		(215	)		(73	)		(151	)
	Retained earnings		58,775			52,465			51,691

			111,323			105,765			106,597

		$	395,719		$	469,218		$	377,038


	Three Months ended June 30				Six Months ended June 30
	2003		2002		2003		2002
			(Restated)				(Restated)

Sales and merchandising revenues	$	311,891	$	301,098	$	549,830	$	515,929
Cost of sales and merchandising revenues		264,108		252,179		469,136		431,995

Gross profit		47,783		48,919		80,694		83,934
Operating, administrative and general expenses		34,869		35,219		67,307		67,335
Interest expense		2,213		2,573		4,516		5,286
Other income		1,114		838		2,215		1,630

Income before income taxes and cumulative effect of accounting change		11,815		11,965		11,086		12,943
Income tax expense		4,022		3,637		3,774		3,934

Income before cumulative effect of accounting change		7,793		8,328		7,312		9,009
Cumulative effect of accounting change, net of income taxes		—		—		—		3,480

Net income	$	7,793	$	8,328	$	7,312	$	12,489

Per common share:
Basic earnings per share:
Income before cumulative effect of accounting change	$	1.09	$	1.14	$	1.02	$	1.23
Cumulative effect of change in accounting principle, net of income tax benefit		—		—		—		0.48

Net income	$	1.09	$	1.14	$	1.02	$	1.71

Diluted earnings per share:
Income before cumulative effect of accounting change	$	1.07	$	1.11	$	1.00	$	1.21
Cumulative effect of change in accounting principle, net of income tax benefit		—		—		—		0.47

Net income	$	1.07	$	1.11	$	1.00	$	1.68

Dividends paid	$	0.07	$	0.065	$	0.14	$	0.130

Weighted average shares outstanding-basic		7,130		7,299		7,155		7,294

Weighted average shares outstanding-diluted		7,290		7,509		7,318		7,455

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OHIO (State of incorporation or organization)		34-1562374 (I.R.S. Employer Identification No.)


480 W. Dussel Drive, Maumee, Ohio (Address of principal executive offices)		43537 (Zip Code)


		Six months ended
		June 30
		2003			2002
					(Restated)

Operating Activities
Net income		$	7,312		$	12,489
Adjustments to reconcile net income to cash provided by operating activities:
	Cumulative effect of accounting change, net of income tax		—			(3,480	)
	Depreciation and amortization		7,760			7,041
	Gain on sale of property, plant and equipment		(288	)		(254	)
	Realized and unrealized loss on railcars		(786	)		46
	Deferred income taxes		(2,559	)		(1,778	)
	Other		277			(250	)

Cash provided by operations before changes in operating assets and liabilities			11,716			13,814
Changes in operating assets and liabilities:
	Accounts and notes receivable		(2,980	)		(12,701	)
	Inventories		85,825			88,709
	Prepaid expenses and other assets		4,778			3,937
	Accounts payable for grain		(57,074	)		(43,211	)
	Other accounts payable and accrued expenses		(7,308	)		(1,490	)

Net cash provided by operating activities			34,957			49,058
Investing Activities
Purchases of property, plant and equipment			(5,091	)		(5,467	)
Purchases of railcars			(13,407	)		(6,076	)
Proceeds from sale of railcars			8,134			7,427
Proceeds from sale of property, plant and equipment			554			373
Investment in affiliates			(1,182	)		—

Net cash used in investing activities			(10,992	)		(3,743	)
Financing Activities
Net decrease in short-term borrowings			(10,000	)		(40,800	)
Proceeds from issuance of long-term debt			2,748			19,424
Payments on long-term debt			(4,609	)		(26,272	)
Change in overdrafts			(1,745	)		4,282
Proceeds from sale of treasury shares to employees			308			504
Dividends paid			(1,009	)		(951	)
Purchase of common shares			(1,180	)		(127	)

Net cash used in financing activities			(15,487	)		(43,940	)
Increase in cash and cash equivalents			8,478			1,375
Cash and cash equivalents at beginning of period			6,095			5,697

Cash and cash equivalents at end of period		$	14,573		$	7,072


	Three Months Ended June 30, 2002
	As Previously
	Reported		Adjustments			As Restated
Income Statement Caption
Cost of sales and merchandising revenues (a)	$	251,557	$	622		$	252,179
Gross profit (a)		49,541		(622	)		48,919
Income before income taxes and cumulative effect of accounting change		12,587		(622	)		11,965
Income tax expense		3,827		(190	)		3,637
Net income	$	8,760	$	(432	)	$	8,328


	Six Months Ended June 30, 2002
	As Previously
	Reported		Adjustments			As Restated

Cost of sales and merchandising revenues (a)	$	430,039	$	1,956		$	431,995
Gross profit (a)		85,890		(1,956	)		83,934
Income before income taxes and cumulative effect of accounting change		14,899		(1,956	)		12,943
Income tax expense		4,530		(596	)		3,934
Cumulative effect of change in accounting principle, net of income taxes		—		3,480			3,480
Net income	$	10,369	$	2,120		$	12,489


	December 31, 2002
	As Previously Reported		Adjustments			As Restated
Balance Sheet Caption
Current deferred income tax asset	$	3,491	$	(597	)	$	2,894
Customer prepayments and deferred income		21,970		(1,522	)		20,448
Retained earnings		51,540		925			52,465


	June 30, 2002
	As Previously Reported		Adjustments			As Restated

Current deferred income tax asset	$	5,072	$	(1,278	)	$	3,794
Customer prepayments and deferred income		13,095		(3,398	)		9,697
Retained earnings		49,571		2,120			51,691


		Three Months Ended				Six Months Ended
		June 30				June 30
		2003		2002		2003		2002
				(Restated)				(Restated)

(in thousands, except for per share data)
Stock compensation expense, as reported		$	48	$	39	$	96	$	78
Stock compensation expense, pro forma			112		87		377		298
Net income, as reported			7,793		8,328		7,312		12,489
Net income, pro forma			7,729		8,280		7,031		12,269
Basic earnings per share
	Net income, as reported		1.09		1.14		1.02		1.71
	Net income, pro forma		1.08		1.13		0.98		1.68
Diluted earnings per share
	Net income, as reported		1.07		1.11		1.00		1.68
	Net income, pro forma		1.06		1.10		0.96		1.65


	Agriculture		Processing			Rail		Retail		Other			Total
Second Quarter 2003
Revenues from external customers	$	207,503	$	37,130		$	12,681	$	54,577	$	—		$	311,891
Inter-segment sales		1,981		409			231		—		—			2,621
Other income		433		115			35		395		136			1,114
Interest expense (credit)(a)		1,220		453			233		329		(22	)		2,213
Operating income (loss)		7,894		(33	)		1,376		4,262		(1,684	)		11,815
Identifiable assets		190,822		68,536			42,763		59,551		34,047			395,719
Second Quarter 2002
Revenues from external customers	$	209,197	$	32,283		$	4,056	$	55,562	$	—		$	301,098
Inter-segment sales		1,595		533			226		—		—			2,354
Other income		220		166			30		255		167			838
Interest expense (a)		1,116		622			263		374		198			2,573
Operating income (loss) (b)		8,900		(113	)		140		4,307		(1,269	)		11,965
Identifiable assets (b)		177,386		69,266			42,302		60,705		27,379			377,038
Six months to date, 2003
Revenues from external customers	$	356,696	$	89,550		$	17,063	$	86,521	$	—		$	549,830
Inter-segment sales		5,422		849			474		—		—			6,745
Other income		976		318			85		533		303			2,215
Interest expense (credit)(a)		2,673		1,030			466		698		(351	)		4,516
Operating income (loss)		6,862		3,706			1,680		1,639		(2,801	)		11,086
Six months to date, 2002
Revenues from external customers	$	344,037	$	73,264		$	8,216	$	90,412	$	—		$	515,929
Inter-segment sales		4,853		955			455		—		—			6,263
Other income		487		289			33		374		447			1,630
Interest expense (credit)(a)		2,709		1,317			590		776		(106	)		5,286
Operating income (loss) (b)		10,090		2,305			520		2,568		(2,540	)		12,943


	Payments Due by Period
	Less than						After 5
Contractual Obligations	1 year		1-3 years		4-5 years		years		Total
(in thousands)
Long-term debt	$	7,101	$	13,985	$	28,715	$	38,398	$	88,199
Capital lease obligations		333		711		2,943		—		3,987
Operating leases		9,185		13,153		6,683		8,868		37,889
Other		200		400		400		—		1,000

Total contractual cash obligations	$	16,819	$	28,249	$	38,741	$	47,266	$	131,075


Method of Control	Financial Statement	Number

Railcars available for sale	On balance sheet – current		323
Railcar assets leased to others	On balance sheet – non-current		2,246
Railcars leased from financial intermediaries	Off balance sheet		1,752
Railcars – non-recourse arrangements	Off balance sheet		1,663

Total Railcars			5,984

Locomotives – leased from financial intermediaries under limited recourse arrangements	Off balance sheet		30
Locomotives – non-recourse arrangements	Off balance sheet		44

Total Locomotives			74


	For		Against		Withheld		Not Voted

Director
Michael J. Anderson		6,851,143		—		18,583		336,635
Richard P. Anderson		6,850,506		—		19,219		336,635
Thomas H. Anderson		6,828,448		—		41,278		336,635
John F. Barrett		6,850,450		—		19,276		336,635
Paul M. Kraus		6,840,587		—		29,138		336,635
Donald L. Mennel		6,849,636		—		20,090		336,635
David L. Nichols		6,849,891		—		19,835		336,635
Dr. Sidney A. Ribeau		6,370,390		—		499,336		336,635
Charles A. Sullivan		6,841,823		—		27,903		336,635
Jacqueline F. Woods		6,348,673		—		521,053		336,635
Ratification of independent auditors		6,820,499		43,979		5,247		336,635


		THE ANDERSONS, INC.
		(Registrant)

Date: August 19, 2003		By /s/Michael J. Anderson Michael J. Anderson
		President and Chief Executive Officer

Date: August 19, 2003		By /s/Richard R. George Richard R. George
		Vice President, Controller and CIO
		(Principal Accounting Officer)

Date: August 19, 2003		By /s/Gary L. Smith Gary L. Smith
		Vice President, Finance and Treasurer
		(Principal Financial Officer)