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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended June 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from
Commission File Number 0-29258
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AQUAPRO CORPORATION
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(Name of small business issuer in its charter)
Tennessee 62-1598919
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
105 Bonnabrook Drive Suite 202, Hermitage, Tennessee 37076
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(Address of Principal executive offices) (Zip Code)
Issuer's telephone number (615) 889-0804
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Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
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None None
Securities registered under Section 12 (g) of the Exchange Act:
Common Stock, no par value
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(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
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Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year $5,041,463
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The aggregate market value of the voting stock held by nonaffiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock as of September 8, 1998 was $4,518,226, based
on the last sale price of $1.00 as reported by the NASD Over the Counter
Bulletin Board.
As of September 8, 1998, Registrant had outstanding 4,818,354 shares of
common stock, its only class of common equity outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
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TABLE OF CONTENTS
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PAGE
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PART I ..............................................................................................................-1-
Item 1. Description of Business.....................................................................-1-
Item 2. Description of Property....................................................................-17-
Item 3. Legal Proceedings..........................................................................-18-
Item 4. Submission of Matters to a Vote of Security Holders........................................-18-
PART II .............................................................................................................-19-
Item 5. Market for Common Equity and Related Stockholder Matters...................................-19-
Item 6. Management's Discussion and Analysis or Plan of Operation..................................-21-
Item 7. Financial Statements.......................................................................-29-
Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.......-29-
PART III .............................................................................................................-30-
Item 9. Directors, Executive Officers, Promoters and Control Persons, Compliance with Section 16(a) of
the Exchange Act....................................................................................-30-
Item 10. Executive Compensation..............................................................................-32-
Item 11. Security Ownership of Certain Beneficial Owners and Management......................................-34-
Item 12. Certain Relationships and Related Transactions......................................................-35-
Item 13. Exhibits and Reports on Form 8-K....................................................................-37-
LIST OF EXHIBITS.............................................................................................-38-
FINANCIAL STATEMENTS.........................................................................................-40-
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
THE COMPANY. AquaPro Corporation ("Registrant," "AquaPro" or the
"Company") was incorporated on March 20, 1995. The Company engages in the
business of owning and managing catfish aquaculture farms ("Aquaculture")
directly and through its two wholly-owned subsidiaries, American Fisheries
Corporation, a Mississippi Corporation ("American") and Circle Creek
Aquaculture, Inc., a Tennessee Corporation ("Circle Creek"). The Company
currently owns 1,843 water acres of aquaculture ponds. All of the Company's
catfish farming activities are conducted in the State of Mississippi and are
conducted through Circle Creek and American.
Mr. Hastings, the Company's Chairman and Chief Executive Officer caused
Circle Creek to be incorporated in 1983 under the name of Hastings & Company,
Inc. It changed to its current name in March 1995. Until 1996, the business of
Circle Creek was primarily the sponsorship and operation of catfish farming
investment limited partnerships. Through 1996, Circle Creek sponsored eight such
limited partnerships which engaged in catfish farming (the "Circle Creek
Partnerships"), Circle Creek Aquaculture, L.P. ("CCA I"), Circle Creek
Aquaculture II, L.P. ("CCA II"), Circle Creek Aquaculture III, L.P. ("CCA III"),
Circle Creek Aquaculture IV, L.P. ("CCA IV"), Circle Creek Aquaculture V, L.P.
("CCA V"), Circle Creek Aquaculture VI, L.P. ("CCA VI"), Circle Creek
Aquaculture VII, L.P. ("CCA VII"), and Circle Creek Aquaculture VIII, L.P. ("CCA
VIII"), (collectively, the "Circle Creek Partnerships"). Each of the Circle
Creek Partnerships was organized under the laws of the State of Tennessee.
Mr. Hastings acquired all of the outstanding stock of American in
February 1994. American had been formed in 1988 by unrelated persons to manage
catfish farming operations. At the time it was acquired by Mr. Hastings,
American served as manager for each of the six Circle Creek Partnerships then
existing. In 1995, Mr. Hastings and Ms. Hastings transferred all of their
interest in the stock of American and Circle Creek to the Company. Effective on
December 31, 1995, the Company acquired all of the assets and assumed all of the
liabilities of CCA I, CCA II, CCA III and CCA IV, pursuant to certain merger
transactions (the "Prior Consolidation"). Effective June 30, 1997, the Company
acquired all of the assets and assumed all of the liabilities of CCA V, CCA VI,
CCA VII, and CCA VIII (the "Recent Consolidation"). See Part III, Item 12,
"Certain Relationships and Related Transactions."
Mr. Hastings sponsored and acted as sole general partner for the first
six Circle Creek Partnerships which were formed between 1989 and 1994. In 1995
and 1996, Mr. Hastings and the Company co-sponsored, and acted as co-general
partners of, CCA VII and CCA VIII. Effective December 31, 1995, Mr. Hastings
assigned all of his economic interest as general partner of each of the eight
Circle Creek Partnerships to the Company. These interests consisted of a one
percent (1%) interest in Partnership capital, profits and losses and a
promotional contingent interest of twenty-five percent (25%) of Partnership
distributions following a minimum cumulative return to the limited partners. The
general partner did not receive any distributions pursuant to this contingent
promotional interest in any of the Circle Creek Partnerships.
The Company changed its fiscal year to June 30 commencing with the
period ended June 30, 1997. Management believes the change in fiscal year
allowed its accounting period to better reflect operations
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during the normal catfish Aquaculture business cycle and thus more accurately
reflect the Company's performance in its business segment.
The Company moved its corporate offices in May 1998 to 105 Bonnabrook
Drive Suite 202, Hermitage, Tennessee 37076. A 44 percent reduction in monthly
base rent was realized by making the move. The Company's catfish farms are
located in the north central area of Mississippi in the region known as the
"Mississippi Delta" or the "Delta." The address of the Company's farm management
offices is 1100 Highway 3, Sunflower, MS 38778.
THE CATFISH FARMING INDUSTRY
The Company grows channel catfish for ultimate sale and processing.
Channel catfish account for substantially all of the commercial catfish
production within the United States. The channel catfish has many qualities
making it a superior candidate for commercial production over other species of
catfish. These qualities include ease of spawning, easily controlled
reproduction, relatively simple dietary needs, a relatively hardy constitution,
the ability to survive over a wide range of temperatures and the ability to
adapt well to commonly used culture systems.
According to the National Fisheries Institute, farm-raised catfish now
ranks as the fifth most popular seafood in America, with a per capita annual
consumption of one pound. The National Agricultural Statistic Service ("NASS")
of the Agricultural Statistic Board, U.S. Department of Agriculture, has
released its annual survey data for the catfish farming industry for 1996. NASS
reports that catfish growers in the fifteen (15) major producing states had
total sales of $525 million during 1997, an increase of 11.6% over 1996. NASS
also reports that on January 1, 1998, water acres used for catfish Aquaculture
totaled 173,000 acres.
The Food and Drug Administration ("FDA") funded a study in 1991, which
showed farm-raised catfish to be the fourth most popular seafood in the U.S. The
average prices paid by major processors per pound for farm-raised catfish during
the past fifteen years, according to the U.S. Department of Agriculture, are as
follows:
HISTORIC AVERAGE PROCESSOR PRICE FOR CATFISH
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Calendar
Year Average Price Per Pound
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1984 69.2(cent)
1985 72.6
1986 66.8
1987 61.8
1988 76.4
1989 71.5
1990 77.3
1991 63.1
1992 60.0
1993 71.0
1994 78.9
1995 78.8
1996 77.0
1997 71.2
1998 (through 7/31) 76.0
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There are two major channels of distribution for farm-raised catfish:
retail grocery store outlets and the food service sector. Each accounts for
approximately half of total catfish sales. Catfish farmers can access these
markets directly only if they process their own production. The vast majority of
farmers, including the Company, do not have processing capability and thus must
sell their products to either cooperatively owned or independent processors. The
Company sells its catfish to a limited number of cooperative and independent
catfish processors. The terms of sale generally permit payment within 4 weeks of
delivery and do not require collateral for payment. For the year ended June
30, 1998, three processors represented 52%, 31%, and 10%, respectively, of the
Company's net sales. For the six-month period ended June 30, 1997, one processor
represented 90% of net sales. Three processors represented 55%, 25% and 11%,
respectively, of the Company's net sales for the year ended December 31, 1996.
These cooperatives sell processed catfish both to retail groceries and to the
food service industry.
THE COMPANY'S CATFISH FARMING OPERATIONS
CATFISH AQUACULTURE. Channel catfish are grown in outdoor ponds in
which the water is about four to five feet deep. The Company's operations are
conducted in ponds ranging from 10 to 20 water acres in size. Each pond is
separated by levees that must be large and strong enough to support a semi-truck
and trailer hauling up to 40,000 pounds of catfish. The levee system provides
access to the ponds for feeding, oxygen checking (oxygen level regulation),
aeration and other maintenance chores. Ponds are supplied with water from
underground sources (wells). The water does not flow back and forth between the
ponds because of the higher, heavy clay levees. The ponds have relatively flat,
regular sides and bottoms, since this shape facilitates harvesting. Individual
ponds average 13 land acres and 4 to 5 feet in depth from the bottom of the pond
to the top of the levee.
Successful catfish farming requires stocking the ponds and feeding the
fish at the highest rate possible, while still maintaining a healthy living
environment. In prior years, Management believed that 5,000 stocker fish and
8,000 to 10,000 5" to 6" fingerlings per acre for the initial stocking, and
7,000 to 10,000 5" to 6" fingerlings each year thereafter, is the optimum number
of fish to maintain maximum production levels. During the year ended June 30,
1998, new farm management has lowered these levels to 5,000 stocker fish and
6,000 to 8,000 5" to 6" fingerlings per acre for the initial stocking, and 6,000
to 8,000 5" to 6" fingerlings each year thereafter. Furthermore, Management now
believes only stocking rates greater than 6,000 head per acre are cost-effective
on a long-term basis in the present industry environment compared to 7,000 head
per acre in the prior year. Current stocking rates in the industry range from
approximately 3,000 head to more than 10,000 head per acre. Once fully stocked,
a well-managed catfish farm can produce 6,500 pounds of catfish per water acre
per year, although the industry average is less. Catfish farms in the
Mississippi Delta average 4,000 to 5,000 pounds of catfish production per acre
per year.
The time period required for a catfish to progress from fingerling to
its optimum weight of 1 to 1-1/2 pounds is 8 to 12 growing months, depending on
the feeding, health, density of population and other factors, many of which,
including climatic conditions, will be outside the control of Management. There
are normally seven growing months during a calendar year (April through October)
so fish are generally in the water over a two calendar year period.
Historically, most catfish were harvested and processed in the months of June
through October. However, as a result of an active marketing campaign by the
catfish industry and consistent year-round production, consumer demand for
catfish has become more year-round in recent years.
Channel catfish grow fastest and healthiest under certain environmental
conditions. The optimal temperature for channel catfish growth is about
85(degree). Because the growing of catfish in outdoor ponds is by far the most
economical (cultivation in tanks or heated water is much more expensive and is
commercially
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feasible only when some unique circumstance exists, such as the opportunity to
sell fish at an exceptional price), catfish are most easily grown in a location
where average daily water temperatures are above 70(degree) for at least 180
days a year, with at least 120 days above 80(degree). Thus, climate is one
reason for choosing the Mississippi Delta region to grow the fish. When the
water approaches 50(degree) Fahrenheit, feeding activity slows, almost stopping
as temperature drops further. In the Mississippi Delta region, the heaviest
feeding times are spring, summer, and fall. (Channel catfish can survive,
however, for long periods of time at water temperatures ranging from just above
freezing to about 104(degree)).
The Company cultures its fingerlings until they reach marketable size
(or weight). Within the catfish farming industry, three sizes of food-size fish
are recognized. Large food-size catfish are 3 pounds and above. Medium food-size
catfish are 1-1/2 to 3 pounds, and small food-size catfish are 3/4 to 1-1/2
pounds. While catfish of 3/4 of a pound or more are considered market weight,
Management intends to market the Company's catfish at a weight of 1 to 1-1/2
pounds. In Management's experience, this is the optimum size for marketing
because it yields the best fillet when processed. The highest demand for catfish
production is for fillet cuts. Accordingly, the catfish will be fed and
maintained until they weigh 1 to 1-1/2 pounds before any will be ready to
harvest and sell to a processor. As catfish are sold, additional fingerlings
will be purchased periodically to restock the ponds. Generally, the Company
would replace inventory with 5" to 6" fingerlings. This is because, for
production during a full growing season, it is generally more efficient to
purchase 5" to 6" fingerlings than to devote one or more of the Company's ponds
to catfish spawning. The price paid for fingerlings ranges between .75(cent) and
1.50(cent) per inch. Management anticipates that this price range will remain
fairly constant. However, fry are much less costly than larger stock-size fish,
and where ponds are newly refurbished or reworked they are sterile and ideal for
growing fry-size fish.
NECESSARY RESOURCES AND MATERIALS. As discussed in further detail
below, the raw materials necessary for the Company's agriculture operations
consist primarily of stock fish, feed, electricity and gasoline. The Company
also requires equipment and general supplies to maintain its operations. The
Company purchases its feed principally through cooperatives. The price of feed
closely reflects the costs of the raw materials used in the synthesis thereof,
including soybean, corn and other agricultural products. Accordingly, the price
of feed fluctuates in response to the prices of these commodities on the world
markets. The Company uses significant amounts of electricity and fuel in
operating is aerators, particularly during the warmer months (principally spring
and summer) during which fish activity and thus, oxygen consumption is greatest.
Thus, the Company is subject to price fluctuations in electricity and gasoline
prices. The Company uses both unspecialized equipment, such as tractors, trucks,
etc., and specialized equipment, aerators, seining equipment, etc., in its
operations. New and used equipment in the past has been available at competitive
prices and terms to the Company, primarily because of the concentration of
catfish farming in the Delta area and as a result of the historic high rate of
turnover of catfish farming operators. The Company anticipates this trend will
continue and anticipates that both new and used equipment will continue to be
readily available to the Company as needed. Another major expense of the
Company's business is labor. The Company currently employs a non-organized labor
field staff. Most of the Company's field staff requires low level skills and
training and thus, the Company believes that competent labor at competitive
prices will continue to be available to the Company in the area of its
operations.
FEED. Catfish are fed a diet of "puffed" high protein, floating food
pellets which are a mixture of soybean, corn, wheat, vitamins, minerals and fish
meal, produced by fish mills. The food is scientifically formulated, not only to
provide an optimal level of nutrition to the individual fish but also to produce
a meat of a mild, sweet flavor and the absence of any "fishy" odor during
cooking. One of the advantages of catfish Aquaculture is the higher
feed/conversion ratio of this meat source. Laboratory studies have shown
conversion ratios for channel catfish as high as 1.75 pounds of feed per one
pound of fish produced.
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However, based on its experience, Management believes the "real life" conversion
rate for catfish grown under commercial conditions, including mortality, is
closer to 2.5:1 and management uses this rate in its inventory control and
monitoring procedures. By comparison, chicken has a conversion ratio of
approximately 3:1; pork has a conversion ratio of approximately 4:1; and beef
has a conversion ratio of approximately 8:1.
Feed prices can vary greatly from year to year. In 1995, feed prices
averaged $235 per ton. Increases in soybean, corn and wheat prices in 1996 and
early 1997 pushed feed prices to $287 per ton in early 1997. Higher feed prices
directly resulted in increased costs of products sold. The price of feed is
subject to crop yields, which cannot be predicted with certainty. In order to
help control its feed costs, the Company owns shares in Indi-Bell Feed Mill
Cooperative ("Delta Western"). As a member of this Cooperative, the Company has
the opportunity to buy feed at wholesale prices and to purchase feed on an "as
needed" basis on two days' prior notice. Thus, the Company can avoid having to
purchase and store large amounts of catfish feed in order to lock in current
prices. Delta Western has over 250 members. This cooperative hedges against
price fluctuations for its members through the purchase of futures option
contracts on the Chicago Board of Trade Futures Exchange. The Company contracted
to purchase at a price of $239 per ton for approximately 90% of its budgeted
feed consumption for calendar 1998. This feed has been used as of September 1998
and the Company is currently paying approximately $200 per ton for its feed.
Management expects to contract for its 1999 feed needs at approximately $200
per ton, although it has not yet done so as of the end of September 1998.
OXYGEN LEVELS. Catfish are sensitive to water oxygen levels which
fluctuate on a more or less predictable cycle during a 24-hour period. Oxygen
levels are supplemented by algae growth during the daylight hours, and are
depleted during the dark hours as algae are dormant. Because the fish remain
active during both daylight and dark hours, the ponds must be constantly
monitored and aerated as necessary in order to maintain acceptable oxygen
levels.
DISEASE. Diseases affecting catfish are a constant risk. A vaccine is
presently available to treat enteric septicemia, which is currently the leading
cause of mortality among catfish (approximately 40% of all catfish disease is a
form of enteric septicemia). The most efficient safeguard against this disease
is constant monitoring and the purchase of fingerlings which have been fed the
oral vaccine. Once the disease is detected, medicated feed may be provided to
the infected fish to prevent a serious outbreak. Those diseases which cannot be
successfully treated can often be contained in the infected pond, since the Farm
ponds, as is typical with catfish ponds, are separated by levees, and water from
one pond does not normally cross over into another pond. Frequent monitoring is
also necessary in order to maintain proper water chemistry.
HARVESTING AND RESTOCKING. When Management determines that the catfish
of a particular pond are ready for market, the pond is seined using a net of
appropriate size, which will allow the smaller catfish to escape while trapping
the larger catfish in the net. The catfish will then be loaded live on trucks
and transported to the processor where the fish are cleaned, processed, and
chilled or frozen in less than three minutes. The processing plants pay an
agreed upon price per pound for the delivered fish. The Company owns shares in
the Delta Pride Catfish, Inc. ("Delta Pride") processing cooperative where most
of its catfish are sold for processing. The Company primarily contracts with
unaffiliated firms for the harvesting and transportation of its fish production.
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The Company seeks to restock its ponds annually in order to maintain
the optimum population within each pond. At any time, each pond will have fish
at various stages of growth. The cycle from fingerling to ideal processing size
(1.0 lbs. to 1.5 lbs.) generally takes 18 months.
INVENTORY CONTROL PROCEDURES. Husbandry of its live fish inventories is
probably the most important aspect of the Company's Aquaculture business.
Ongoing knowledge of live fish inventories is critical to management's ability
to make accurate and timely decisions regarding their feeding, care and
harvesting. For instance, accurate estimates of the number of fish and their
respective size are used in determining the amount and timing of feedings and
necessary aeration, restocking and harvesting.
The following provides additional information and background of the
Company's method of accounting for live fish inventories. Mississippi State
University - Extension Service ("MSUES"), formerly Cooperative Extension Service
- - Mississippi State University, and the Mississippi Agriculture and Forestry
Experiment Station - Mississippi State University ("MAFES") have published
conversion rates as determined by aquaculture research performed at Mississippi
State University and other research facilities. MSUES is funded by the United
States Department of Agriculture, the State of Mississippi, and the Counties
within Mississippi. MAFES is funded by the United States Department of
Agriculture and the State of Mississippi. The Company has not performed
procedures to specifically substantiate the conversion rates published by MSUES
or MAFES because management believes actual grow-out conditions on the farms are
not as favorable as in the research facilities. Thus, the Company uses lower
feed conversion rates than the published rates based on its actual experience
and the experience of other growers that management participates with in Catfish
Farmers of America and Catfish Farmers of Mississippi, both of which are
industry trade associations, and Delta Pride Catfish, Inc., a farmer-owned
catfish processor.
The Company maintains a perpetual record of live fish inventories for
each of the Company's 140 production ponds. The perpetual live fish inventory
records are used to account for the pounds of fish fingerlings purchased,
grow-out based on feed fed, observed mortality and sales. Management believes
this is consistent with the methodology used by other growers in the industry in
maintaining perpetual live fish inventory records.
The Company's actual feed conversion is determined by monitoring the
feed fed daily to each of the ponds, observing the live fish feeding and
monitoring mortality in each of the ponds by personnel with substantial
experience in aquaculture. Catfish feed is pelletized and is blown onto the
surface of the water using calibrated feed trucks or trailers to ensure the
appropriate amount of feed is fed to fish based on their body weight and to
ensure that excess feed is not fed. The pelletized feed floats, therefore the
fish can be observed feeding. Under normal conditions, the fish are generally
fed daily, during the feeding season from April through October, as much feed as
they will consume without adversely affecting water quality (oxygen, pH,
ammonia, etc.). A fish's feed consumption is directly related to its body
weight, thus certain fish will not consume a disproportionate amount of feed.
Published industry data from MSUES and MAFES provide the percentage of their
body weight catfish eat at each feeding depending on the size of fish. The
feeding may also be affected by water temperature, water quality, disease, and
frequency of feeding. Based on the factors described above, the pounds of live
fish in a pond can be determined by the quantity of feed the fish consume.
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Management assesses the accuracy of the perpetual inventory records by
analyzing the trend of pounds of feed fed to each pond relative to the pounds of
fish in the pond (i.e. feed consumption increases in quantity as the fish
increase in size, but decreases as a percentage of the fish's body weight) and
observing the feeding of the fish in each pond monthly to estimate the pounds of
live fish. To analyze the trend of feed fed relative to the pounds of catfish in
each pond per the perpetual inventory records, management compares feed
consumption as a percentage of body weight with published industry data from
MSUES and MAFES. Management also considers its prior experience in analyzing
such trends. Management's observation of the actual feeding of the fish not only
includes consideration of the amount of feed fed relative to the body weight of
the fish in a pond but management also considers other factors which affect
feeding rates including size of fish, water temperature, water quality, disease,
and frequency of feeding. Management also utilizes the perpetual inventory
records and observation of the actual feeding of the fish to determine which
ponds are ready to be harvested.
The perpetual inventory records are updated daily by pond for the
pounds of feed fed to each pond and is converted to live weight by the feed
conversion and is reduced by any observed mortality. Mortality tends to be
higher during periods of severe winter weather, which may not be completely
observed until the feeding resumes in the spring. Revisions are made to the
perpetual inventory records, on a pond by pond basis, when observations of the
actual feeding or seinings of the fish indicate the quantity of fish in a pond
differ from the perpetual inventory record.
Actual harvests of fish are also utilized in assessing the accuracy of
the perpetual inventory records. Although only fish which have reached a
marketable weight are harvested, management observes the initial seining of fish
prior to the pond being harvested and compares such observations with the
perpetual inventory records. Because such seining includes substantially all of
the fish in a pond except for the small "fingerling" fish, (the "fingerlings" do
not represent a significant portion of the total fish weight in a production
pond), management can estimate the total fish weight in a pond. The holding
nets, which are of a size to retain the fish which have reached a marketable
weight and release the smaller fish, are then used to harvest the fish to be
taken to the processor.
Individual ponds are closed approximately every 8 to 10 years by
seining substantially all the fish in the pond being closed. Ponds are closed in
connection with refurbishing of the pond levees and removing the buildup of silt
from the bottom of the ponds. After a pond is closed, the Company compares its
perpetual inventory records to the results of seining such closed pond, and any
revisions necessary are made to the perpetual inventory records.
EMPLOYEES. The Company currently employs 35 full-time persons and one
part-time person.
RECENT DEVELOPMENTS
COMMUNITY BANK CREDIT LINE. Effective May 14, 1998, the Company
obtained a revolving credit line in the amount of $1,000,000 from Community
Bank, Indianola. The sole purpose and availability of the credit line is to
provide financing for catfish feed purchases from Delta Western. Borrowings
under the credit line bear interest at the rate of prime plus 165 basis points
(1.65%). The credit line matures on March 15, 1999. The Company paid a
commitment fee of 1% ($10,000). Under the credit line, the Company has an
operating deposit account at the bank into which the Company must deposit
proceeds from all inventory sales and accounts receivable. Approximately 55
percent (40 cents per pound of fish sold) of amounts collected are applied to
repayment of the credit line balance and the remaining balance is then available
to the Company. The credit line is represented by the Company's promissory note
which is collateralized
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by a first lien on all inventory, accounts receivable, certain stock in
processing cooperatives owned by the Company and two of the Company's farming
properties (see Item 2). Mr. George S. Hastings has personally guaranteed
repayment of the credit line.
ASSESSMENTS BY DELTA PRIDE COOPERATIVE. Delta Pride has assessed the
Company and its other members on a 'per pound' basis for fish processed by Delta
Pride pursuant to each member's delivery rights during the year ended June 30,
1998. The current assessment is approximately 5.9 cents ($0.059) per pound
processed, and payable in installments of $0.01 per pound each month
(approximately $35,000 each month) during the months of October 1998 through
February 1999 with a final payment due in March 1999 of $0.009 (approximately
$31,500). The assessment is necessary to cover operating and other financial
losses (totaling $0.079 per pound) incurred by Delta Pride during the year ended
June 30, 1998. The Company's share of Delta Pride's losses of $260,112 ($0.079
per pound of fish sold to Delta Pride) has been recorded as a charge to earnings
during the year ended June 30, 1998 and reflected as a reduction in the
Company's investment in Delta Pride stock as of June 30, 1998 in the Company's
balance sheet. Delta Pride is the largest catfish processor in the United
States. The Company is among the ten largest member shareholders of Delta Pride
and Delta Pride is the Company's largest customer. Mr. Hastings is a member of
the Board of Directors of Delta Pride.
The members' obligations to pay these installments are non-recourse,
but, until the installments are paid, the Company cannot deliver fish under its
delivery rights to Delta Pride. Payment of the Delta Pride assessments will
materially reduce the Company's cash flow for the year ending June 30, 1999
while the charges increased its net loss for the year ended June 30, 1998.
RESIGNATION OF OFFICERS. Mr. Eric P. Braschwitz, the Company's Chief
Financial Officer and Secretary resigned effective September 18, 1998. The
Company expects to hire a new accounting officer and Mr. Braschwitz has
committed to assisting in the transition on an as needed basis at reasonable
times when he is not required to be at his new job.
Ms. Patricia G. Hastings resigned her positions of Executive Vice
President, Legal Counsel, Secretary, and Director effective January 19, 1998 for
personal reasons. Ms. Hastings was the wife of Mr. Hastings. The Company
announced on Form 8-K filed January 26, 1998 that Mr. and Ms. Hastings planned
to divorce and this became final in August 1998. The duties and responsibilities
of Ms. Hastings were assumed by Mr. Hastings and Mr. Braschwitz. Ms. Hastings
transferred ownership to Mr. Hastings all of her shares of AquaPro Common Stock,
except for 7,952 shares which she has retained.
RELOCATION OF OFFICERS. Mr. George S. Hastings, Jr, the Company's
President and Chief Executive Officer, has relocated his personal residence from
Nashville, Tennessee to Indianola, Mississippi to be closer to the Company's
catfish farming activities.
ADJUSTMENT OF EXECUTIVE COMPENSATION. As of July 1997, Mr. and Mrs.
Hastings were being paid a combined annual salary on a biweekly basis of
$225,000 under their respective employment contracts, which they agreed to
divide equally between themselves. In addition, Mr. Hastings received $12,000
annually as a car allowance. In August 1997, Mr. Hastings agreed to reduce his
salary to $1 annually until the Company's performance improved. During the
months of August 1997 through January 1998 (a period of six months), Mr. and
Mrs. Hastings were paid biweekly on an annual basis of $87,000 which they split
50/50. It was also agreed to by the Board's compensation committee that Mr.
Hastings would be issued options to buy the Company's stock not to exceed
200,000 shares annually. These options would be issued quarterly at the rate of
50,000 options and would be priced at the same price the preferred stock of the
Company converts to
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<PAGE> 11
common stock in 1998. On May 27, 1998, the Company's Preferred Stock converted
to common stock at the price of $2.837 per share. Accordingly, Mr. Hastings was
issued 7 year options to purchase 100,000 shares at $2.837 for his six month
period of reduced salary.
In connection with their divorce, Ms. Hastings resigned her positions
as an Officer and Director of the Company in January 1998. Also, Mr. Hastings
received all of the stock grants and options previously issued to her. The Board
agreed to continue to pay $87,000 in salary to Mr. Hastings. Additionally, Mr.
Hastings was granted by the compensation committee additional options to be
issued quarterly. The first quarter ended on May 15, 1998 and Mr. Hastings was
issued 7 year options to buy 84,000 shares at the closing market price of $3.125
on that date. This arrangement superseded the 50,000 shares per quarter that was
in effect August 1997 through January 1998.
The Company has outstanding 7 year options to purchase stock at $6.25
per share that were issued 1995 to 1997 (171,000 shares). On August 18, 1998,
the compensation committee recommended and the Board approved that all of the
options previously issued at $6.25 per share be repriced at $2.00 per share.
RISK FACTORS
The Company and its securities are subject to a number of risks. Set
forth below is a description of the risks that the Company considers to be of a
significant nature.
RISKS ASSOCIATED WITH THE AQUACULTURE BUSINESS
General Risks of Catfish Farming. The Company faces three
general types of risk in connection with its catfish farming business.
- Risks involving the price and availability of equipment and
supplies,
- Climatic, environmental and biological risks such as weather,
natural catastrophes and disease, and
- Market risks regarding the price and strength of the consumer
market for the Company's catfish production.
The risk exposure in each of these categories is amplified by
competition between the Company and other catfish producers, particularly those
located within the Mississippi Delta. If the Company is unable to maintain its
operating costs at levels which allow it to realize a profit in its catfish
sales, the Company will not be profitable and, if this condition persists, it
would fail and the shareholders would lose some or all of their investment.
Certain risks, such as adverse climatic conditions, natural disasters,
disease, consumer demand and competition, are outside Management's control
and, to a varying extent, cannot be planned for or avoided. The occurrence of
one or more of these events could deplete the Company's operating reserves and
resources and thereby result in the need for additional capital.
Availability and Price of Stock Fish and Supplies. The price
of stock fish, supplies such as feed, and labor is subject to fluctuations due
to availability and varying demands. Increased competition for
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<PAGE> 12
supplies and services within the catfish farming industry in general, and the
Mississippi Delta in particular, could cause temporary or prolonged price
increases for feed, labor or other items necessary to the Company's farming
operations. While Management will attempt to obtain lower supply and labor costs
through cooperative purchasing, there is no assurance that it will be able to do
so or that future price increases will not occur. Prolonged increases in one or
more of these categories would negatively affect the Company's profitability and
ability to remain in business.
Consumer Demand. The Company's profitability will depend
substantially on the price at which it can sell its catfish. In the past years,
prices have fluctuated substantially and will likely continue to do so in the
future. Prices are dependent upon the demand for catfish by consumers and the
supply of catfish available at any given time. While catfish consumption is in
general increasing, there continues to be substantial consumer reluctance to eat
catfish. Also, catfish continues to incur substantial competition from other
seafood, beef, pork and chicken. While foreign-produced catfish currently
accounts for less than one percent of the total catfish consumed in the United
States, increased foreign competition could negatively impact the price at which
the Company can sell its catfish production. Any continued depression of the
price the Company can receive for its catfish will negatively affect the
Company's profitability and its ability to remain in business.
Loss Due to Disease. The single highest cause of loss in
catfish farming is disease. Disease has accounted for more than sixty percent of
catfish loss each year since 1990. The Company will attempt to control the more
common catfish diseases through the purchase of disease resistant or vaccinated
fingerlings, and will monitor its fish for disease so that a diseased pond can
be quickly quarantined. Nevertheless, catfish are susceptible to a number of
viral and bacterial diseases, many of which cannot be effectively treated, even
if diagnosed early. A number of these diseases cannot be prevented. Also, it is
possible that new diseases may occur in the future for which effective treatment
does not exist. There is no assurance that the Company will be able to limit
disease. A loss of a substantial amount of the Company's inventory due to
disease will negatively affect its profitability and its ability to remain in
business.
Water Oxygenation. Catfish survival is dependent upon the
maintenance of adequate oxygen levels in the catfish ponds on a 24-hour basis.
Typically, oxygen levels will fluctuate throughout a 24-hour period. Oxygen
levels are enhanced by photo synthetic bacteria during the daylight hours and
depleted during the nighttime hours by catfish activity. In order to maintain
adequate oxygen levels, catfish ponds must be aerated mechanically during times
of low oxygen levels. If oxygen levels are not monitored regularly or if low
levels are not discovered in time, the catfish will be lost. The Company will
maintain a regular oxygen monitoring schedule and will have on its premises
sufficient electric aerators to maintain pond oxygen levels under anticipated
conditions. Nevertheless, unanticipated conditions such as prolonged loss of
electric power may render unavailable the electric aerating equipment. A
substantial loss of the Company catfish inventory due to a failure to maintain
oxygen levels would negatively impact the Company's profitability and its
ability to remain in business.
Price of Catfish Feed. Catfish feed, which is the greatest
single production cost in catfish farming operations, is subject to large
fluctuations. Industry groups report in recent years, fluctuation between $180
and $300 per ton. Currently, catfish feed is produced by a small number of
producers, some of which are cooperatives. The Company owns shares in Delta
Western, a cooperative catfish food producer, which allows the Company a limited
preferential right to purchase feed. These shares, however, do not assure the
availability of feed or the price at which feed can be purchased. While the
Company attempts to budget for anticipated feed costs in its operations, such
costs are not predictable with certainty and the Company has no control over the
market price of feed. However, the Company has contracted to purchase
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<PAGE> 13
at a price of $239 per ton for approximately 90% of its budgeted feed
consumption for calendar 1998. There is no assurance that the Company will be
able to purchase feed in the future as needed at a cost that will allow it to
operate profitably or remain in business.
Climatic Conditions. While channel catfish are tolerant to a
wide range of climatic and temperature conditions, these catfish become immobile
below 32(degree) Fahrenheit. Catfish ponds cannot economically be heated.
Accordingly, prolonged cold weather conditions could lower pond temperatures to
below 32(degree) and result in a substantial loss of the Company's catfish
inventory, thereby negatively impacting its profitability and its ability to
remain in business.
Water Contamination. Non-catfish farming operations in the
Mississippi Delta have in the past used and continue to use chemical fertilizers
and pesticides in their crop production. Even small concentrations of certain
chemicals and pesticides can significantly affect catfish production and can
result in loss of the entire catfish population in the pond affected. While
Management has from time to time tested the Partnerships' ponds and found no
dangerous levels of any chemical or pesticide present, there is no assurance
that contamination from these chemicals may not occur in the future, either
through penetration of ground water or surface application. Management will
continue to monitor and test the ponds for possible contamination. Additionally,
in order to reduce the risk of contamination, the Company has adopted a policy
whereby it will not purchase land where certain crops have been grown.
Natural Hazards. Excessive amounts of aquatic weeds reduce
catfish production. The only method of aquatic weed control is chemical control,
which can result in oxygen depletion and accompanying loss of catfish in the
treated pond. Further, the chemicals used to destroy weeds are expensive to
purchase and are not always completely effective. Catfish population loss can
also occur as a result of predators, including naturally occurring birds, snakes
and turtles. The occurrence of such predators is common in the Mississippi Delta
area and Management will limit the damage caused by such predators by continuing
its policy of early detection and removal.
Water Availability. Catfish production requires large,
reliable sources of water. In general, the Mississippi Delta is supplied by a
large and readily accessible ground water source. The Partnerships' farms are
served by wells, capable of producing sufficient water to meet the anticipated
needs of the Company's catfish farming operations. Nevertheless, the water
available to the Company may be limited by natural courses or by chemical or
fertilizer contamination as described above. Further, there is no assurance that
the State of Mississippi, the U.S. Army Corps of Engineers or other governmental
authority will not in the future place limitations on the amount of water which
may be withdrawn by well. Nonavailability of sufficient water would
substantially and negatively impact the Company's profitability and ability to
remain in business.
Quality of Catfish. Management intends to follow farming
procedures which have been shown to result in the palatable, clean tasting,
"non-fishy" catfish demanded by the consumer market. Nevertheless, for reasons
which usually cannot be controlled before they are discovered, catfish in any
particular pond may acquire an "off-flavor" taste. A number of factors, many of
which often work together, may cause this result. A common cause is certain
types of algae which are difficult to control in catfish ponds, particularly in
late summer and early fall. Fortunately, a catfish pond will become "off-flavor"
only for a limited period of time, even if no affirmative corrective action is
taken. However, there may be several months during which one or more of the
Company's ponds may be "off-flavor," thereby preventing the Company from selling
catfish from that pond but requiring the Company to continue to incur expenses
in
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<PAGE> 14
feeding and maintaining the catfish population. Catfish industry groups are
currently conducting studies to determine the cause and treatment of
"off-flavor" conditions.
Uninsured Losses. Management maintains liability and casualty
coverage for its farms and its major equipment in amounts it deems appropriate.
However, certain losses from significant risks, such as disease, chemical
contamination, climatic conditions or natural disasters, such as ice storms,
floods, droughts or hurricanes, are either uninsurable or are not economically
feasible to insure. Should the Company incur a loss from such an uninsured
event, the Company could sustain a loss of its catfish farming business. In such
event, the Shareholders would lose all or substantially all of their investment
in the Company.
Ability to Sell its Fish Production. The Company does not have
the capability to process its own fish. The Company sells its catfish to two
cooperative processors of which it is a member. The Company also has an
agreement with a third processor (the Company is not a member of this processor)
to sell 2.5 million pounds of fish annually. Members of cooperative processors
are allocated fish delivery rights or sale allocations requiring the cooperative
to purchase an amount of fish in proportion to the number of shares owned. The
price received depends on the price paid by the processor at the time of
delivery. Cooperatives are managed by boards of directors elected by their
members. To the extent the cooperative processors operate profitably, the
members are benefitted through price concessions, rebates and/or distributions.
To the extent cooperatives operate unprofitably, members are subject to
assessments to fund such losses. The failure to pay assessments generally
results in a loss of delivery rights and sometimes in the loss of membership
interests. Accordingly, the Company's ability to market its catfish in volumes
and at prices necessary for profitable operations substantially depends on the
ability of management of the cooperative processors of which the Company is a
member to operate their processors in an efficient manner. Moreover, fish the
Company cannot sell to its cooperative processors must be sold to other
processors on a negotiated basis in competition with other catfish producers.
While there are a number of processors located in the Mississippi Delta,
management does not believe there is sufficient competition among processors to
provide any substantial leverage to the catfish producers in negotiating prices.
These circumstances do not allow the Company to depend on stable catfish prices
for its future production. Thus, there is no assurance that the Company will be
able to sell its catfish production at a price which will allow it to realize a
profit.
Assessments By Delta Pride. The Company's principal catfish
processing cooperative, Delta Pride Catfish, Inc. has assessed its member
stockholders, including the Company, approximately $.079 per pound (of which
$0.059 per pound will have to be paid with cash) of catfish processed to cover
operating and other losses sustained by Delta Pride during their year ended June
30, 1998. As a member of this cooperative, the Company must pay this assessment
in order to retain its member catfish delivery rights. During the year ended
June 30, 1998, the six month period ended June 30, 1997, and the year ended
December 31, 1996, the Company sold 52%, 90%, and 55%, respectively, of its
total catfish production to Delta Pride. The total assessment was recorded as a
$260,112 charge to earnings during the year ended June 30, 1998 and is expected
to require payments of totaling approximately $208,000 during the months October
1998 through March 1999. Accordingly, this will significantly reduce the cash
flow of the Company during the next year.
The assessment totaled $272,000 ($0.079 per pound) for the six month
period ended June 30, 1997, of which $191,376 ($0.05) was paid in cash during
the year ended June 30, 1998.
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<PAGE> 15
Moreover, although Delta Pride has instituted significant measures,
including a change in executive management in 1997, to end future operating
losses, it has been unsuccessful and there is no assurance it will be able to
operate at a break even level or profit in the future. Should Delta Pride
continue to operate at a loss, its members, including the Company, can
anticipate additional assessments in the future.
Should Delta Pride continue to sustain significant losses and/or should
a significant number of its members fail to pay their assessments as due, Delta
Pride's ability to continue to operate as a fish processing concern could be
suspended or terminated. In this event, the Company would be unable to market a
substantial percentage of its catfish unless it established alternative
processing arrangements. Also, in such event, the Company's investment in Delta
Pride cooperative stock would be significantly impaired or possibly rendered
valueless. Mr. Hastings is a member of the Board of Directors of Delta Pride.
Availability and Price of Stock Fish and Supplies. The price
of stock fish, supplies such as feed, and labor is subject to fluctuations due
to availability and varying demands. Increased competition for supplies and
services within the catfish farming industry in general, and the Mississippi
Delta in particular, could cause temporary or prolonged price increases for
feed, labor or other items necessary to the Company's farming operations. While
management will attempt to obtain lower supply and labor costs through
cooperative purchasing, there is no assurance that it will be able to do so or
that future price increases will not occur. Prolonged increases in one or more
of these categories would negatively affect the Company's profitability and
ability to remain in business.
Effect of Competition. The catfish farming industry is
intensely competitive, particularly in terms of costs of production and price,
and to a lesser extent in terms of quality and marketing. Many of the Company's
competitors are better established, have substantially greater financial,
marketing and other resources than the Company, and some may have more
efficiencies in cost of production. The existence of any of these facts could
give such competitors an advantage over the Company. Moreover, one or more
competitors may develop and successfully commercialize catfish farming
techniques or procedures that provide them with an advantage over the Company in
terms of costs of production, price and quality of catfish production. As a
consequence, such competition may result in the Company's inability to compete
with such farming operations on a continuing basis.
Impact of Environmental Laws and Regulations. As a food,
catfish is subject to federal and state laws and regulations regulating the
cultivating and growing of edible products and the content of regulated or
restricted substances therein. For example, various herbicides, algaecides,
fungicides and other mineral and chemical supplements and treatments which the
Company may otherwise in controlling algae, fungi and other pests, are
restricted or prohibited under prevailing federal and state laws and
regulations. The chemical content of catfish is subject to federal standards and
the Company is susceptible to inclusions of restricted or prohibited substances
in its catfish through means beyond its control. For instance, such substances
may be included by feed or ground water utilized by the Company in cultivating
its catfish. In the event restricted or prohibited substances or chemicals are
discovered to be present in the Company's ponds or catfish in amounts exceeding
permissible levels, the Company could be prohibited from selling all or a
significant portion of its catfish for an extended period of time, and may be
required to destroy all or a substantial portion of its then-current catfish
production. Also, under certain circumstances, the Company could be required to
pay monetary damages and/or take remedial measures to remove or prevent
occurrence contamination by the restricted or prohibited substance or chemical.
In July 1997, the FDA advised the catfish industry that excessive levels of
dioxin had been detected. Dioxin is a toxic industrial byproduct thought to
affect the human immune system and to cause human reproductive disorders and
cancer. The FDA proposed to immediately
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<PAGE> 16
ban all further shipments of catfish, eggs and poultry on a nationwide basis
that may have been contaminated by the trace levels of dioxin. The catfish
industry was able to delay FDA action until catfish producers had an opportunity
to test their catfish for dioxin levels. The Company, among other catfish
producers, had sufficient time to receive negative test results for dioxin
levels in their catfish production and avoid delaying shipment and sales of
their catfish after the ban implementation date. However, had the FDA not
delayed imposition of the ban, the Company and other catfish producers would
have experienced a delay in the sale and shipment of their catfish production
until such time as they could produce negative test results.
Also, under various federal, state and local laws, ordinances and
regulations, the owner of real estate generally is liable for the costs of
removal or amelioration of certain hazardous or toxic substances located on or
in, or emanating from, such property, as well as related costs of investigation
and property damage. Such laws often impose such liability without regard to
whether the owner knew of, or was responsible for, the presence of such
hazardous or toxic substances. Further, the presence of such substances, or the
failure to properly ameliorate such substances, may adversely affect the
Company's ability to operate or sell or rent a property or its catfish, or to
borrow funds using the property as collateral. Noncompliance with environmental,
health or safety requirements may result in the need to cease or alter the
Company's operations. Also, certain environmental laws impose liability on a
previous owner of property to the extent that hazardous or toxic substances were
present during the prior ownership period. Transfer of the property will not
relieve a prior owner of this liability. Thus, the Company could have liability
with respect to a property after it is sold.
The Company will not obtain its own environmental inspection of the
Company's properties. Based on management's previous inspections, general
familiarity with the Company's properties and its knowledge of the area,
management believes that the properties are in compliance in all material
respects with all applicable federal, state and local ordinances and regulations
regarding hazardous or toxic substances. Nevertheless, there is no assurance or
guarantee that hazardous or toxic substances will not later be found on a
property or that a property will not subsequently be found in violation of any
federal, state or local environmental law or regulation.
The Company may find it difficult or impossible to sell a property
prior to or following any such cleanup. If such substances are discovered after
the Company sells a property, the Company could be liable to the purchaser
thereof if the Company knew or had reason to know that such substances or
sources existed. In such case, the Company could also be subject to the costs
described above.
RISKS ASSOCIATED WITH THE COMPANY AND THE SECURITIES
Ability to Achieve Profitable Operations. The Company has not
been profitable since its inception and reported a net loss for the year ended
June 30, 1998 of $1,536,161. The Company had an accumulated deficit of
$7,353,886 as of June 30, 1998. Also, none of the individual Circle Creek
Partnerships whose farming operations the Company has acquired had achieved
profitable operations. Based on current and historical industry data, management
believes the Company's ability to achieve profitable operations will require it
to maximize production on its farms and to achieve more efficient and
cost-effective farming operations so that its costs of production as a
percentage of gross revenues are minimized. Management believes this strategy is
necessary to meet the demands of the farm grown catfish industry where profit
margins are expected to narrow because wholesale fish prices are expected to
remain flat and inventory costs, particularly feed and fuel costs, are expected
to continue to fluctuate and competition is expected to intensify. However,
there is no assurance that Management will be able to implement this
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<PAGE> 17
strategy, or if implemented that it will prove successful; and there is no
assurance that the Company will be able to operate at a profit in the future.
No Assurance of Proposed or Future Acquisitions. Effective,
June 30, 1997, the Company acquired the farming operations of its four
affiliated limited partnerships in consideration for the issuance of its equity
and debt securities (the "Recent Consolidation"). The Company believed the
acquisition of these additional properties was necessary for it to achieve
efficiencies of scale of operations and facilitate its ability to achieve
profitable operations. However, this has not yet occurred since the Company
reported a net loss of $1,536,161 for the year ended June 30, 1998. See Part
III, Item 12 "Certain Relationships and Related Transactions." The Company's
inability to acquire additional properties and/or to expand its operations could
adversely affect the Company's ability to achieve necessary economies of scale
of operations.
Adequacy of Capital. There is no assurance that the Company
has capital resources sufficient to meet its operating expenses and general and
administrative expenses in the future if anticipated revenues from fish
inventory sales are not realized. During the next twelve months, the Company
anticipates that it will incur substantial costs in its restocking and
rehabilitation of certain farms as it endeavors to maximize production on those
farms. In the event anticipated operating revenues realized during this period,
when added to current cash reserves, are not sufficient to pay these costs, the
Company may need to defer some or all of these expenditures. In such event, it
is unlikely such additional farms can be operated profitably. Even if the
Company, in the future, realizes a positive cash flow from its operations, as to
which there can be no assurance, it may still require substantial capital to
acquire additional farming properties and further expand its farming operations.
Such additional capital may not be available when needed or on terms acceptable
to the Company. The Company anticipates seeking additional capital through
public or private sales of its securities, including equity securities. Future
financings may result in the issuance of equity securities and dilution to
current shareholders. There are no assurances that any additional debt or equity
capital will be available to the Company, or that, if such additional debt or
capital is available, that the terms would be favorable or acceptable to the
Company. Insufficient funds may require the Company to delay, reduce or
eliminate certain or all of its operations and development activities.
Dependence on Management. The feasibility and profitability of
the Company will depend significantly upon the continued participation of Mr.
Hastings. He is expected to continue in his position with the Company.
However, Mr. Hastings may in the future be unable or unwilling to continue with
the Company. The unavailability of Mr. Hastings would likely have a significant
adverse effect on the Company and its business. The success of the Company's
future operations depends in large part on the Company's ability to recruit and
retain qualified personnel over time, and there can be no assurance that the
Company will be able to retain its existing personnel or attract additional
qualified employees in the future.
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Effect of Anti-Takeover Measures. The Company's Restated
Certificate of Incorporation includes certain notice and meeting procedures and
super-majority voting rights of stockholders regarding approval of certain
merger, consolidation and other business combination transactions. These
provisions could have the effect of making it more difficult for a third party
to acquire, or of discouraging a third party from attempting to acquire, control
of the Company by deferring certain mergers, tender offers or future takeover
attempts. Also, such provisions could limit the price that certain investors
might be willing to pay in the future for the Company's securities. Certain of
such provisions allow the Board of Directors to impose various procedural and
other requirements that could make it more difficult for stockholders to effect
certain corporate actions.
No Dividends on Common Stock. The Company has adopted a policy
of reinvesting its cash flow, if any, to expand its catfish farming operations
and expects to follow this policy in the future. Accordingly, shareholders
should anticipate not receiving regular dividends or distributions with respect
to their Shares.
Risks of Leverage. The use of leverage to purchase property
and/or operate a business involves substantial risks. While the effects of
leveraging are to increase the number of properties purchased or number or
amount of operations conducted by the Company, thereby increasing the potential
for gain to the Company's Shareholders, the financial risk to the Company and
thus the Shareholder's investment is substantially increased. One reason for
this is because the Company will be required to pay fixed payments to retire the
debt, irrespective of the success of its operations. To the extent that the
Company does not have funds available to repay its debt, holders of the debt may
call a default and, if the debt is secured by the assets of the Company, such
debt holders may foreclose on such assets. Nonsecured debt holders may seek
repayment from the Company's assets through legal process. In any event, a
default on its debt could result in the Company's loss of all or a material
portion of its assets which could, in turn, result in the loss of all or a
substantial portion of the Shareholder's investment in the Company.
The Company has used significant financing to acquire its farming
properties and assets in the Consolidation and may incur additional financing to
expand its operations and/or to acquire additional farming properties. The use
of such financing ("leveraging") will allow the Company to expand its operations
and acquire additional property with a smaller cash investment by the
Shareholders, and thereby provides the Shareholders with the opportunity of
participating in correspondingly greater proceeds from the operations. However,
leveraging will also expose the Company (and thus the Shareholders) to
correspondingly larger potential losses. In the event a farm is operated at a
loss or sold for an amount less than the principal amount of such financing,
plus accrued interest payable thereon, a Shareholder could lose all or part of
his or her investment.
The Company has substantial obligations with respect to its 10.35%
Notes due 2002 and its institutional credit agreements. Leverage has significant
consequences including the following: (i) dedication of a portion of the
Company's cash flow from operations to the payment of interest in respect of its
debt obligations, which reduces the funds available to the Company for its
operations and future business opportunities; (ii) potential impairment of the
Company's ability to obtain additional financing in the future; and (iii)
potential vulnerability of the Company to a downturn in its business or the
United States economy generally. A high degree of leverage would also make it
difficult for the Company to generate sufficient working capital which could
adversely affect the Company's ability to fund its continuing operations at
necessary levels.
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Risks of Balloon Payments. Generally, the Company's debt
obligations require balloon payments at the end of their term. The Company's
credit line with Community Bank is due in March 1999 and its other significant
debt is due between 1999 and 2002. In the event the Company is unable to
refinance these obligations or is otherwise unable to raise funds sufficient to
repay these obligations as scheduled, the Company would be in default of these
obligations. The Company's ability to repay these obligations when they mature
will be dependent upon its ability to obtain adequate refinancing or to
negotiate an extension. The Company's ability to obtain replacement financing
for these obligations will be dependent on, among other things, its financial
condition at the time and the economic conditions in general. Accordingly, there
is no assurance that, if necessary, AquaPro will be able to obtain replacement
financing for any of these obligations upon their maturity.
ITEM 2. DESCRIPTION OF PROPERTY
REAL PROPERTY. The Company owns eight non-contiguous farms having a
total of 140 ponds comprising 1,844 water acres situated on a total of 2,417
land acres. The farms are located in the Mississippi Delta area of Mississippi.
The table below sets forth information regarding these properties.
INFORMATION REGARDING THE COMPANY'S REAL PROPERTY
<TABLE>
<CAPTION>
NAME UNPAID BALANCE OF
(LOCATION OF TOTAL ACRES NUMBER MORTGAGE LOAN AT
PROPERTY) (WATER ACRES) OF PONDS JUNE 30, 1998
--------- ------------- -------- -------------
<S> <C> <C> <C>
Circle Creek 275 (210) 15 Pledged under the Feed
(Sunflower County, MS) Line of Credit(1)
Panther Run 278 (211) 15 Pledged under the Feed
(LeFlore County, MS) Line of Credit(1)
Balmoral 318 (270) 21 Pledged under the Farm
(Sunflower County, MS) Bank of Texas loan(2)
Cypress Lake 254 (193) 13 Pledged under the Farm
(LeFlore County, MS) Bank of Texas Loan(2)
Hidden Lakes 668 (443) 41 $1,033,654(3)
(Bolivar County, MS)
Stillwater 170 (140) 8 Pledged under the Farm
(Sunflower County, MS) Bank of Texas Loan(2)
Crystal Waters 212 (189) 11 Pledged under the Farm
(Bolivar County, MS) Bank of Texas Loan(2)
Niagara 242 (188) 16 Pledged under the Farm
(Bolivar County, MS) Bank of Texas Loan(2)
</TABLE>
- ---------------------------------
(1) Note payable to a bank under a $1,000,000 revolving line of credit used
solely to fund purchases of feed; outstanding balance of $586,459 at
June 30, 1998. Interest accrues at the prime rate plus 1.65% and the
arrangement expires March 15, 1999. Interest is paid monthly and
principal is paid with approximately 55 percent (40 cents per pound of
fish sold) of all collections of accounts receivable.
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(2) Note payable to Farm Credit Bank of Texas ($1,422,000 at June 30,
1998) with annual principal and interest payments of approximately
$186,000 due beginning April 1, 1999 through 2003 and $149,000
April 1, 2004 through 2018; interest accrues at a variable rate (8.35%
at June 30, 1998).
(3) Note payable to a bank with monthly principal and interest payments of
$11,754 through March 2000 and a final payment of approximately
$979,000 due April 2000 with interest at prime plus 2 1/2% (11% at June
30, 1998).
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The Mississippi Delta is an approximately 10,000 square mile area lying
predominately on the east side of the Mississippi River, beginning in the
vicinity of Memphis, Tennessee and extending into Mississippi. The portion of
the Delta where the Partnership's farms are located is approximately 44 feet
above sea level and is located approximately 5-1/2 hours by car from the Gulf of
Mexico and 1-1/2 hours by car from the Mississippi River. Accordingly, the farms
are not likely to be susceptible to flooding. The farms are located within
approximately 45 minutes of each other.
EQUIPMENT. The Company owns certain equipment; including tractors,
implements (including portable aerator attachments), utility trucks and electric
aerators. It also owns various lesser pieces of equipment, including electric
pumps and power units, and miscellaneous equipment.
COOPERATIVE MEMBERSHIPS. The Company belongs to the following
cooperatives.
Processing Cooperatives. AquaPro is a member of and owns
stock in the catfish cooperatives Delta Pride and Fishco, Inc. ("Fishco").
Membership in these cooperatives provides the Company with delivery rights for
its catfish in amounts proportionate to its share ownership. Prices paid by the
cooperatives are not fixed in advance and are determined at the time of
delivery.
Feed Mill Cooperative. The Company is a member of and owns
stock in Indi-Bell (Delta Western) Feed Mill Cooperative. The Delta Western
Cooperative is one of the oldest and largest feed mill cooperatives with over
250 members. As a member of this cooperative, the Company is able to buy feed at
prices lower than are generally available from feed retailers. Also, for a
nominal charge, the Company is able to reserve or "lock-in" specified amounts
and at set prices. This cooperative hedges against price fluctuations for its
members through the purchase of futures option contracts on the Chicago Board of
Trade Futures Exchange. As a member of this cooperative, the Company can
purchase feed on an "as needed" basis on two days' prior notice. It is thus not
necessary for the Company to purchase and store large amounts of catfish feed.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently a party to any legal proceeding, the
adverse outcome of which, individually or in the aggregate, management believes
would have a material adverse effect on the financial position or results of
operations of the Company. Additionally, the Company was not a party to any
material legal proceeding during the period covered by this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended June 30, 1998.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET FOR THE COMPANY'S COMMON EQUITY: The Company's Common Stock
began trading on the Nasdaq Over the Counter Bulletin Board on February 24,
1998. The high and low sales prices for the Common Stock, as reported on the
Bulletin Board were $5.13 and $1.88 during the period from February 24, 1998
through March 31, 1998 and $3.25 and $2.00 for the period from April 1, 1998
through June 30, 1998.
STOCKHOLDERS: As of September 7, 1998, there were approximately 1,700
stockholders of record of the 4,818,354 outstanding shares of Common Stock. The
Company believes there are approximately 1,500 beneficial owners of the
Company's Common Stock.
DIVIDENDS: The Company has not paid any cash dividends to holders of
its Common Stock since its inception and does not plan to pay cash dividends in
the foreseeable future. The Company currently intends to retain earnings, if
any, to finance the growth of the Company. In addition, the Company's bank
agreements prohibit the payment of dividends without prior bank approval.
RECENT SALES OF UNREGISTERED SECURITIES: Set forth below is information
for all securities that the Company has sold in the past three (3) years without
registering said securities under the Securities Act of 1933 (the "1933 Act").
Share numbers and prices have not been adjusted to reflect the September 18,
1996 stock dividend.
Between December 31, 1995 and June 15, 1996, Registrant issued the
following securities in connection with its acquisition of four (4) affiliated
partnerships. See Part III, Item 12 below.
The Company issued 404,764 units of its equity securities, and $149,098
in principal amount of its 10.35% Notes, to approximately 240 limited partners
of the four partnerships acquired in the Prior Consolidation. The units were
issued at a price of $10.00 per unit. The notes were issued at par. The units
and notes were issued for net assets valued at $4,199,210 for the purposes of
the transaction.
The Company issued 167,876 units to approximately 25 persons who were
holders of certain debt obligations of the Partnerships acquired in the Prior
Consolidation. These units were issued at the rate of $10.00 per unit in unpaid
balance of debt obligation exchanged. A total of $1,678,762 in principal amount
of the notes were exchanged.
The Company issued 362,704 shares of its common stock upon the exercise
of stock rights issued as part of the units in the Prior Consolidation. The
exercise price of the stock rights was $7.25. Net cash proceeds in the amount
of $2,137,928 were received from the Rights Offering. The Company paid
commissions of 5% of the exercise price of the stock rights exercised to
broker-dealers who provided solicitation services in the exercise of the stock
rights. As additional compensation to these persons, the Company issued
five-year options to purchase a total of 39,117 shares at a price of $9.38.
The Company issued 2,994 units at $10.00 per unit and 18,864 shares at
a price of $7.25 per share to Mr. Hastings in consideration of the cancellation
a total of $166,704 of indebtedness.
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<PAGE> 22
Each unit issued in the Prior Consolidation was comprised of one Common
Share; one stock right entitling the holder to purchase one Common Share at
$7.25; one warrant entitling the holder to purchase one Common Share for $8.25
within twelve (12) months following the Closing Date; and one warrant entitling
the holder to purchase one Common Share for $10.50 within twenty-four (24)
months following the closing date, which warrant, if not exercised prior to
expiration, is converted into three-tenths (0.3) Common Shares.
The 10.35% Notes in the Prior Consolidation are due December 31, 2002
and bear interest at the rate of 10.35% per annum for the period from and
including the date of original issuance. The 10.35% Notes are convertible into
common stock at a price of $10.42 per share.
In issuing its securities in the Prior Consolidation the Company relied
on the exemptions set forth in Section 3(a)(10) of the 1933 Act by reason of a
fairness hearing duly noticed and held by the California Commissioner of
Corporations pursuant to Section 25142 of the California Corporate Securities
Law of 1968, as canceled.
During the year ended June 30, 1998, the six month period ended June
30, 1997, and the year ended December 31, 1996, the Company issued seven year
stock options to officers for 241,000, 51,000 and 54,000 shares, respectively,
and 12,000 shares each period, respectively, to directors. The options were
issued as compensation to the Company's Officers and Board of Directors. Also,
during the year ended June 30, 1998, the six month period ended June 30, 1997,
and the year ended December 31, 1996, the Company issued a total of 20,000,
22,500, and 21,000 restricted common shares, respectively, to officers. In
issuing the foregoing shares and options, the Company relied on the exemptions
under Section 4(2) of the 1933 Act and Rule 701, promulgated thereunder. Each
transaction effected in reliance upon the exemption under Section 4(2) shares or
options were issued either to an officer or director of the Company. In the case
of directors and executive officers, as control persons, and their familiarity
with the Company, the Company felt determined that their level of sophistication
was sufficient to support the exemption. With respect to the three issuances to
lower level executive personnel, the Company relies on the exemption under Rule
701.
Over the past three years, the Company issued options which, when
exercisable, will entitle the holders thereof to purchase a total of 1,476
shares at a price of $9.38 as additional underwriting compensation to
broker-dealer firms which placed L.P. Units and/or Investor Notes in CCA V, CCA
VII and CCA VIII. These options were issued upon reliance on the exemption under
Section 4(2) of the 1933 Act.
Pursuant to the September 18, 1996 Dividend, the Company issued 218,994
shares as a one-for-five stock dividend to shareholders of record on September
18, 1996.
Commencing on September 10, 1996 through June 30, 1997, Company sold a
total of 235,507 Preferred Units, each Unit consisted of one share of the
Company's Series A Preferred Stock and one, $7.50 Common Stock Purchase Warrant,
which expires on December 31, 1998 and is converted into 0.3 share of common
stock if it expires unexercised. Units were sold at $10 per Unit to a total of
90 accredited persons and not more than 35 non-accredited persons within the
meaning of Rule 506 of the 1933 Act. The Company offered and sold the Series A
Preferred Stock and $7.50 Common Stock Purchase Warrants in reliance upon the
exemption set forth in Rule 506 of Regulation D promulgated under the 1933 Act.
Pursuant to this exemption, sales were made only to accredited persons or
non-accredited persons who either alone or together with their purchaser
representatives, were sophisticated for the purposes of Rule 506.
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<PAGE> 23
On June 30, 1997, the Company issued a total of 708,926 Units of its
Common Stock and stock rights and $68,582 of its 7.15% Notes to the
approximately 340 Limited Partners of CCA V, CCA VI, CCA VII and CCA VIII in the
Recent Consolidation. The issuances were on the terms and conditions described
under Part III, Item 12. In issuing these securities the Company relied upon the
exemption from registration under Section 3(a)10 of the 1933 Act pursuant to a
fairness hearing duly noticed and held by the California Commissioner of
Corporations on March 31, 1997.
During the year ended June 30, 1998, the Company realized net proceeds
of $1,763,286 from the sale of 227,194 shares of Series A Preferred Stock
through its Preferred Stock Rights Offering.
During the quarter ended September 30, 1998, the holders of the 10.35%
convertible notes payable due in 1999 and 2000 were offered 1.3 shares of the
Company's Series A Preferred Stock for each $10 of principal in an exchange
offer (see notes 4 and 7 to the financial statements below). In the aggregate,
approximately $984,014 of these notes were exchanged for 127,922 shares of
preferred stock.
On May 29, 1998, all of the Company's preferred stock was, under its
terms, converted to common stock under a mandatory exchange provision at a value
equal to its liquidation preference plus declared and unpaid dividends (see
note 9 to the financial statements below). The conversion ratio was the
average closing price of the Company's common stock during its first 65 days of
trading (which commenced February 24, 1998). The average closing price of the
Company's stock during this period was $2.837. Accordingly, 3.52485 shares of
common stock were issued for each share of $10 Series A Preferred Stock
outstanding or a total of 2,065,438 common shares in exchange for 590,623
preferred shares. Additionally, the Company paid the Series A Preferred Stock
dividends for the period from January 1, 1998 through May 28, 1998 with shares
of common stock. The same exchange ratio used in the mandatory conversion
discussed above was used to determine the number of common shares issued as
payment of the dividend. Accordingly, a total of 58,886 shares was issued as
payment of $167,061 in Series A Preferred Stock dividends.
During the year ended June 30, 1998, a holder of the Company's 7.15%
convertible notes converted a note to 7,930 shares of common stock.
During August and September 1998, four individual investors loaned the
Company a total of $165,000 to purchase catfish feed. The Company issued
$200,000 in short-term notes to these investors. Interest accrues on these notes
at an annual rate of 12% and is payable monthly. Principal is payable in full on
April 1, 1999. At the noteholders' option, principal and/or interest may be paid
in Common Stock of the Company at a price of $2.00 per share.
The Company relied on the exemption from registration under Section
4(a) of the 1933 Act in making these sales.
ITEM 6. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
projected in the forward-looking statements as a result of certain factors
including those set forth in this Item 6 and elsewhere in, or incorporated by
reference into, this report. The Registrant has attempted to identify
forward-looking statements in this report by placing an asterisk (*) following
each sentence containing such statements.
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<PAGE> 24
AquaPro Corporation consists of the combination of American Fisheries
Corporation (the farm management company), Circle Creek AquaCulture, Inc. (the
syndication company for the catfish farming investment partnerships) and eight
catfish farms, four of which farms were separate limited partnerships before the
Prior Consolidation effective on December 31, 1995 (Circle Creek I-IV) and four
of which farms were separate limited partnerships before the Recent
Consolidation effective on June 30, 1997. CCA I, CCA II, CCA III and CCA IV were
consolidated with AquaPro as of December 31, 1995 and CCA V, CCA VI, CCA VII and
CCA VIII were consolidated as of June 30, 1997 under a carryover basis of
accounting because of common control. Prior to its consolidation, each limited
partnership pursued short-term goals of pass-through tax benefits and maximum
cash distributions rather than focusing on longer-term plans and goals. AquaPro
owns and manages catfish aquaculture farms with the purpose of raising and
selling catfish to food processors.
In 1996, AquaPro began the implementation of plans that could not be
accomplished as individual partnerships before the respective consolidations:
- Cost reduction through economies of scale
- Improved risk management through spreading the risks inherent
in catfish aquaculture over more geographical areas, farms and
ponds.
- Improved production capacity through investment in farm
capital improvement projects.
- Long-term increases in sales volume on existing farms through
increased stocking levels of fry and fingerlings and intensified
management practices.
- Reduced interest costs from retirement of debt.
- Growth in market share and further efficiencies from acquisition
of other catfish farms.
None of the eight limited partnerships had operated at a profit as an
individual entity. Also, the financial statements show that AquaPro, including
the consolidations, has not been profitable since inception and expects to incur
additional losses. This discussion should be read in conjunction with "Item 1,
Business", the Financial Statements, and the Notes to the Financial Statements
included elsewhere in this report on Form 10-KSB.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements based on the Company's
current expectations. The actual performance of the Company could differ
materially from that indicated by the forward-looking statements because of
various risks and uncertainties including, without limitation, cost and
availability of feed, market price received for the Company's fish, mortality of
fish from disease or low oxygen levels, inability to acquire fry and fingerlings
at reasonable costs, changes in consumer demand for catfish, difficult climatic
conditions, the extent to which the number of "off flavor" fish occur and delay
fish sales to processors, the availability of adequate financing for the Company
and its terms as well as the impact that credit limitations would have on
competitors to force them to sell fish at or below market or cost, inability to
acquire more farms at competitive prices, the catfish industry's ability to gain
increased market acceptance for its existing product lines, the ability for the
Company to scale up its production and reduce costs per pound, the potential of
quarterly variations in demand, production and sales, the impact of new and
changes in government regulations on food products and general economic
conditions. These risks and uncertainties cannot be controlled by the Company.
When used in this report, the words "believe", "estimate", "plans", "goals",
"expects", "should", "outlook", "anticipates", and similar expressions as they
relate to the Company or its management are intended to identify forward-looking
statements.
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<PAGE> 25
RESULTS OF OPERATIONS YEAR ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED
JUNE 30, 1997
The periods discussed below are not comparable due to the change in the
Company's year end to June 30 effective June 30, 1997. Accordingly, the
discussion does not focus on the reasons for dollar trends. However, other
information, meaningful comparisons and trends are discussed as appropriate.
REVENUE. Net sales during the year ended June 30, 1998 totaled
$5,041,463 compared to $1,212,468 for the six month period ended June 30, 1997.
Volume increased 5,288,000 pounds to 6,926,000 pounds of fish sold during the
year ended June 30, 1998 compared to 1,638,000 pounds sold during the six month
period ended June 30, 1997. The average price of fish sold was 72.8 cents per
pound during the year ended June 30, 1998 compared to 74 cents per pound
during the six month period ended June 30, 1997. This decrease in average price
resulted from lower prices received by the Company's major customers from food
distributors, restaurants, and grocers due to an increase in competitive pricing
policies as processors attempted to increase their market share. The Company's
major customers in turn passed on the lower prices to the catfish farmers,
including the Company. The trend of these lower prices continued until late in
February 1998 when prices rose to 74 to 75 cents per pound. In March and April
1998, prices reached 80 cents per pound but then began declining in late May.
Currently, fish prices are 73 to 75 cents per pound. The Company cannot predict
the future trend of fish prices.*
Sales for the first fiscal quarter ending September 30, 1998 are
expected to total approximately 2,000,000 pounds which compares to 1,772,000
pounds sold during the quarter ended September 30, 1997.* Management expects to
sell slightly more than 7 million pounds of fish during the year ending June 30,
1999 which would exceed the 6,926,000 pounds sold during the year ended June 30,
1998.*
COST OF PRODUCTS SOLD AND MARGIN. Cost of Products Sold was $4,316,032
for the year ended June 30, 1998 compared to $1,188,159 for the six month period
ended June 30, 1997. Margin from fish sales was 14.4% during the year ended June
30, 1998 compared to 2.0% for the six month period ended June 30, 1997. During
the six month period ended June 30, 1997, the Company recorded $244,000 of
additional reserves for mortality. These reserves were deemed necessary as
spring weather approached and inventory was physically observed, indicating that
winter kill of catfish was higher than previously estimated. Had this reserve
not been required, margin from fish sales would have been 22.0% for the six
month period ended June 30, 1997. Cost of Products sold is largely dependent on
the Company's cost structure in the previous year due to the 12 to 18 month grow
out period required for fish to mature. While feed prices were lower in the
summer of 1997 compared to 1996, the Company experienced a poor feeding season
during the summer of 1997 which adversely affected the cost of growing fish.
Management believes that the reserve and mortality adjustments were unusual and
of a nonrecurring nature but cannot predict with certainty due to risks beyond
its control that such adjustments will not be necessary in the future.*
Management expects that margins will improve and Cost of Products Sold will
decrease as a percentage of Net Revenues during the year ending June 30, 1999
due to lower feed costs and higher fish turnover.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, General and
Administrative expenses during the year ended June 30, 1998 were $1,652,570
compared to $1,055,540 during the six months ended June 30, 1997. During the six
month period ended June 30, 1997, the Company had high legal and accounting fees
to facilitate the acquisition of the four remaining catfish farming limited
partnerships by the Company. This acquisition was accomplished effective June
30, 1997. Additionally, legal and accounting fees were incurred in the six month
period ended June 30, 1997, as the Company prepared to become a public company
registered with the Securities and Exchange Commission.
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<PAGE> 26
DELTA PRIDE ASSESSMENT. During the year ended June 30, 1998, the
Company recorded a net charge of $260,112 for its share of Delta Pride's losses.
This compared to $272,000 for the six month period ended June 30, 1997. About
April 15, 1997, Delta Pride disclosed that it was experiencing significant
operating losses and that, since it operates as a cooperative, shareholders
are required to fund these operating losses. These losses have continued and
have adversely affected the Company's operations for the year ended June 30,
1998. Management of Delta Pride has indicated they are taking steps to reduce
the operating losses in the future. For the year ending June 30, 1999, the
Company cannot predict with certainty what its share of Delta Price's losses
will be, and, unless major changes occur at Delta Pride, the charge could be
substantial.* The Company is taking steps to reduce its dependency on Delta
Pride as a major customer but, because of the limited number of catfish
processors, there can be no assurance that it will be able to do so.*
INTEREST EXPENSE. Interest expense was $460,393 for the year ended June
30, 1998 compared to $212,685 for the six month period ended June 30, 1997.
Long-term debt levels were slightly lower during the year ended June 30, 1998
but this was more than offset by higher average borrowings on the Company's feed
line of credit during the year ended June 30, 1998 compared to the six month
period ended June 30, 1997. Management anticipates slightly higher levels of
debt and interest expense during the year ending June 30, 1999 due to higher
than anticipated borrowings for catfish feed and the refinancing of five of the
mortgages on the Company's farms (see Liquidity and Capital Resources discussion
below).*
INCOME TAXES AS OF JUNE 30, 1998. The Company had net operating loss
carry-forwards of approximately $5,100,000 available to reduce taxable income
through the year 2013.
SEASONALITY OF OPERATING RESULTS. In prior years, the revenues of
AquaPro have fluctuated from quarter to quarter depending on stocking levels and
results of feeding. Also, prices for live fish have tended to rise during the
first part of the year and drift downward during the summer, only to rise again
in September and October and fall in November and December before beginning the
annual price cycle again. Accordingly, quarterly operating results of the
Company may vary from quarter to quarter and year to year and cannot be
predicted with certainty.
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<PAGE> 27
RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO YEAR ENDED
DECEMBER 31, 1996
The periods discussed below are not comparable due to the change in the
Company's year end to June 30 effective June 30, 1997. Accordingly, the
discussion does not focus on the reasons for dollar trends. However, other
information, meaningful comparisons and trends are discussed as appropriate.
REVENUE. Net sales during the six months ended June 30, 1997 totaled
$1,212,468 compared to $3,924,954 for the year ended December 31, 1996. Volume
decreased 3,361,000 pounds to 1,638,000 pounds of fish sold during the six
months ended June 30, 1997 compared to 4,999,000 pounds sold during the year
ended December 31, 1996. The average price of fish sold was 74 cents per pound
during the six months ended June 30, 1997 compared to 78.5 cents per pound
during the year ended December 31, 1996. This decrease in average price resulted
from lower prices received by the Company's major customers from food
distributors, restaurants, and grocers due to an increase in competitive pricing
policies as processors attempted to increase their market share. The Company's
major customers in turn passed on the lower prices to the catfish farmers,
including the Company.
COST OF PRODUCTS SOLD AND MARGIN. Cost of Products Sold was $1,188,159
for the six months ended June 30, 1997 compared to $3,525,405 for the year ended
December 31, 1996. Margin from fish sales was 2.0% during the six months ended
June 30, 1997 compared to 10.2% for the year ended December 31, 1996. During the
six month period ended June 30, 1997, the Company recorded $244,000 of
additional reserves for mortality. These reserves were deemed necessary as
spring weather approached and inventory was physically observed, indicating that
winter kill of catfish was higher than previously estimated. Had this reserve
not been required, margin from fish sales would have been 22.0% for the six
month period ended June 30, 1997. During the year ended December 31, 1996,
certain ponds were emptied for refurbishing and mortality adjustments of
approximately $438,000 were recorded in Cost of Products Sold. Had these
mortality adjustments not occurred, margin from fish sales would have been 21%.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, General and
Administrative expenses during the six months ended June 30, 1997 were
$1,055,540 compared to $1,349,499 during year ended December 31, 1996. During
the six month period ended June 30, 1997, the Company had high legal and
accounting fees to facilitate the acquisition of the four remaining catfish
farming limited partnerships by the Company. This acquisition was accomplished
effective June 30, 1997. Additionally, legal and accounting fees were incurred
in the six month period ended June 30, 1997, as the Company prepared to become a
public company registered with the Securities and Exchange Commission.
DELTA PRIDE ASSESSMENT. During the six months ended June 30, 1997, the
Company was required to record a net charge of $272,000 for its share of Delta
Pride's losses. This compared to $109,969 for the year ended December 31, 1996.
About April 15, 1997, Delta Pride disclosed that it was experiencing significant
operating losses and that, since it operates as a cooperative, shareholders are
required to fund these operating losses. These losses adversely affected the
Company's operations for the six months ended June 30, 1997.
INTEREST EXPENSE. Interest expense was $212,685 for the six months
ended June 30, 1997 compared to $555,974 for the year ended December 31, 1996.
Long-term debt levels and average borrowings for feed were lower during the six
months ended June 30, 1997 than in the year ended December 31, 1996.
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<PAGE> 28
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1998, the Company had a current ratio of 4.8 to 1, as
compared to 3.4 to 1 at June 30, 1997. Current assets exceeded current
liabilities by $4,776,156 compared to $4,289,944 in June 1997. Cash and cash
equivalents decreased during the year ended June 30, 1998 by $90,263.
Cash and cash equivalents were used primarily to fund operating losses.
Cash used in operating activities totaled $1,254,140 for the year ended June 30,
1998 which compares to $1,168,012 and $1,415,414 for the six month period ended
June 30, 1997 and the year ended December 31, 1996, respectively. The Company's
net losses totaled $1,536,161, $1,487,525, and $2,506,855 for the year ended
June 30, 1998, the six month period ended June 30, 1997, and the year ended
December 31, 1996, respectively. The Company has funded these losses and uses of
cash for operating activities through the sale of Common and Preferred Stock.
The Company realized net proceeds of $1,763,286, $1,089,239, and $2,886,097 from
the sale of Common and Preferred Stock during the year ended June 30, 1998, the
six month period ended June 30, 1997, and the year ended December 31, 1996,
respectively.
During the year ended June 30, 1998, the six month period ended June
30, 1997, and the year ended December 31, 1996, the Company purchased
approximately $1,052,597, $530,422, and $591,474 in property and equipment.
These expenditures for property and equipment were primarily funded by the net
proceeds from Common and Preferred Stock sales discussed above and long-term
debt. During the year ended June 30, 1998, certain major pond reworking programs
were completed to increase production capacity at a cost of approximately
$300,000 and aeration equipment was acquired to provide double aeration for the
refurbished ponds for a total of $280,000. Management believes that in order to
maintain productive catfish farming operations over the long-term, 10 percent of
ponds will need to be reworked each year and that capital will be required to
maintain high levels of production. Also, in August 1997, the Company moved its
administrative offices in Mississippi to one of its farms from an office
facility it had previously shared with another catfish farming operation. This
move required the purchase and installation of double wide mobile trailer homes
on the Company's farm land in Sunflower, Mississippi. The total cost of this
move was approximately $190,000, including the trailers, utility hook-ups, well
construction, and ground preparation. The remaining $283,000 in capital
expenditures was primarily for trucks and other farm related equipment.
During the year ending June 30, 1999, the Company anticipates it will
need to spend approximately $300,000 to refurbish its Hidden Lakes and Crystal
Waters farms. Additionally, other capital expenditures may be required to
replace older equipment on an as needed basis. The Company is currently seeking
funding resources for these capital projects.
The Company intends to fund its operations primarily through fish
sales, cash reserves, and its $1,000,000 feed credit line with a bank. On May
14, 1998, a $1,000,000 credit line was established with a bank in Mississippi as
a revolving line of credit solely for catfish feed purchases. Borrowings are
secured by shares of the Company's cooperative processing stock, accounts
receivable, live fish inventories and two of the Company's farming properties
(see Item 2). Interest is paid monthly and principal is paid with approximately
55 percent (40 cents per pound of fish sold) of all collections of accounts
receivable. Interest accrues at the prime rate plus 165 basis points and the
commitment expires March 15, 1999 with no prepayment penalty.
On June 9, 1998, the Company refinanced the mortgages on five of its
eight farms through a transaction with the Farm Credit Bank of Texas and the
Federal Land Bank Association of North Mississippi. The new mortgage loan
proceeds were $1,422,000 which paid off the five mortgages with an aggregate
principal and accrued interest balance of approximately $1,173,000. The new loan
required the purchase of
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<PAGE> 29
stock in the Federal Land Bank Association for $42,660. Net of these and other
loan closing costs, the Company received approximately $187,000 in cash from the
refinancing.
In addition to the refinancing described above, the Company financed
capital improvements of approximately $531,000 through long-term debt borrowings
and paid off approximately $296,000 in other long-term debt. Cash dividends on
Preferred Stock totaled $165,904.
The Company had several non-cash financing transactions during the year
ended June 30, 1998 that affected its balance sheet. In late May 1998, all of
the Company's Preferred Stock outstanding was converted to Common Stock under a
mandatory conversion transaction. Under its terms, the Preferred Stock was
converted at its liquidation preference plus declared and unpaid dividends
through May 27, 1998. A total of 2,124,324 shares of Common Stock were issued
with a dollar value of $4,751,769 in this exchange.
During the year ended June 30, 1998, the Company commenced and
completed an exchange offer to certain holders of its 10.35% investor notes
payable. Each holder was offered 1.3 shares of Series A Preferred Stock for each
$10 of notes held. The offer was made for a total of $1,147,513 of notes. In the
aggregate, $984,014 of notes were exchanged for 127,922 shares of Series A
Preferred Stock. This Preferred Stock was subsequently converted to Common Stock
in the mandatory conversion discussed above.
Also, during the year ended June 30, 1998, the Company converted all of
its officers' accrued compensation and notes payable to long-term notes with
five year amortization schedules and monthly payments.
As of the middle of September 1998, the Company is experiencing its
seasonal cash flow shortage. The Company is current on all of its debt, payroll,
and tax obligations. However, unsecured vendor accounts payable of approximately
$200,000 relating to purchases in July and August 1998 is past due. As discussed
above, the Company's feed line of credit requires that approximately 55 percent
of all collections of accounts receivable be applied to the outstanding balance
until it is paid; accordingly, the Company has access to only 45 percent of
collections to pay other obligations. This is especially onerous on the
Company's cash flow during the summer months when feeding is at its peak.
Moreover, the Company reached its limit for borrowing on the feed line in late
August 1998 due to higher than anticipated feeding opportunities due to
unseasonably hot weather this year. The Company has been able to feed
approximately $350,000 more in feed through August 1998 than through the same
period in 1997. The Company anticipates it will require approximately three to
four months to become current with its unsecured vendors. The Company borrowed
approximately $165,000 from four individual investors in August and September to
purchase additional feed. As the feeding season ends in October, the
requirements for cash decreases during the winter months. Sales of catfish are
traditionally the highest during the March quarter. Furthermore, when the feed
line of credit is paid off, the Company will have access to all of its accounts
receivable.
Based upon management's projected sales volume at current sales prices
for the period July 1, 1998 through March 31, 1999, management anticipates the
Company's fish sales would be sufficient to repay borrowings under the revolving
line of credit prior its maturity on March 15, 1999, to bring its unsecured
obligations current and to fund operating expenses through March 31, 1999.
Management's projected fish sales from April 1, 1999 through June 30, 1999 would
not be sufficient to fund operating expenses with the feed requirements during
that period. Based upon the anticipated repayment of the revolving line of
credit and the collateral which would be available to secure additional
borrowings, management believes that the Company will be able to renew the
present revolving line of credit for the same amount or obtain a credit
agreement with similar terms. The revolving line of credit is collateralized by
accounts receivable (book value of $349,148 at June 30, 1998), live fish
inventories (book value of $5,533,276 at June 30, 1998), investment in certain
cooperative stock (book value of $776,654 at June 30, 1998), and certain
property and buildings (book value of $865,534 at June 30, 1998). The Company
has obtained an advanced commitment letter from a feed vendor to provide a
revolving line of credit for feed purchases for a minimum of $500,000 beginning
April 2, 1999 under terms similar to its existing line of credit. The commitment
for the line of credit is contingent upon the repayment of the existing line on
or before the due date and the pledge of collateral similar to the collateral
pledged on the existing line. Management projects that the availability of this
line of credit is necessary for the Company to meet its operating cash needs
through June 30, 1999 in the normal course of business. Management projects this
advanced commitment would only partially meet the Company's needs to finance
feed purchases through the end of the 1999 feeding season.
Notwithstanding the above, Management believes that additional capital
will be necessary to support the Company's growth and on going operations.
Management believes that current cash combined with cash proceeds from sales of
fish will be adequate to fund its planned existing operations through June 30,
1999. However, additional capital will be needed to finance any future capital
expenditures. Moreover, the Company may require additional capital, which it may
seek through equity or debt financing, collaborative arrangements with corporate
partners, equipment lease financing or funds from other sources. No assurance
can be given that these funds will be available to the Company on acceptable
terms, if at all. In addition, because of the Company's possible need for funds
to support future operations, it may seek to obtain funds when conditions are
favorable, even if it does not have an immediate need for additional capital at
such time.
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<PAGE> 30
YEAR 2000. The year 2000 Issue refers to potential problems with
computer systems or any equipment with computer chips or software that use dates
where the date has been stored as just two digits (e.g., 98) versus four digits
(e.g., 1998). On January 1, 2000, any clock or date recording mechanism
incorporating date sensitive software which uses only two digits to represent
the year may recognize a date using 00 as the year 1900 rather than 2000. This
could result in a system failure or miscalculations causing disruption of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar business activities.
The Company has internally conducted a review of its internal
information systems to determine the extent of any Year 2000 problem. Such
review included specific inquiries about the Year 2000 Issue posed to the
vendors of its software programs. Based on such review, the Company does not
currently believe that it has material exposure to the Year 2000 Issue with
respect to its own information systems, since its principal information systems
correctly define the year 2000. Although there exists the possibility that Year
2000 issues will be identified, based on such review to date, the Company does
not currently expect that any such problems will have a material adverse effect
on the Company's future operating results or financial condition.
The Company replaced its accounting system in fiscal 1997 with a system
that is Year 2000 compliant at a cost of approximately $70,000. The old system
was replaced based on the Company's system needs. The Company expects to incur
no additional costs associated with the Year 2000 Issue.
The Company has discussed this potential problem with some of its major
suppliers and customers and is in the process of contacting others in an effort
to determine the extent to which the Company may be vulnerable to those parties'
failure to timely correct their own Year 2000 problems. To date, the Company is
unaware of any situations of noncompliance that would materially adversely
affect its operations or financial condition.
The Company has not developed a Year 2000 contingency plan as a June
30, 1998. The Company is dependent upon feed vendors to supply feed during the
feeding season from April to October each year, and is also dependent upon local
utility companies to provide electricity to operate aeration equipment. Because
live catfish are dormant during the winter months, any year 2000 problems that
the feed vendors or utility companies may have would not affect the Company,
unless these problems were not corrected by March or April 2000.
The inability of the Company's customers to effectively deal with their
year 2000 issues, if any, could potentially delay sales to the customers which
could have a significant adverse affect on the Company's cash flows. The Company
has attempted to diversify its customer base to limit its exposure if one or
more of its customers does not effectively deal with their 2000 Issues.
There can be no assurance, however, that instances of noncompliance
which could have a material adverse affect on the Company's operations or
financial condition will be identified; that the systems of other companies with
which the Company transacts business will be corrected on a timely basis; or
that a failure by such entities to correct a Year 2000 problem or a correction
which is incompatible with the Company's information systems would not have a
material adverse effect on the Company's operations or financial condition.
OFFAL RECOVERY ALLIANCE.* On June 24, 1998, AquaPro announced the
formation of a strategic alliance to scientifically engineer and reclaim high
quality minced fish protein, for the global market, by employing advanced
techniques recently developed by the Alaskan fishing industry. Flohr Metal
Fabricators Inc., Teknotherm Inc., Ocean's Edge Inc., and the Company have
combined their respective talents to form the Strategic Alliance.
The Alliance offers catfish processors the ability to reclaim a
significant portion of the catfish offal, currently being sold to rendering
plants at two cents per pound ($.02/lb.), and convert it into high quality
blocked minced fish protein with a global market supporting forty to seventy
cents per pound ($.40-.70/lb.) The Alliance offers to processors a 100% financed
turnkey system to design, install, coordinate operations, and market offal
recovery products within 90 to 120 days of the agreement.
The Alliance intends to offer its services first to the catfish
industry which produces approximately 265 million pounds of offal per year. The
process has the ability to recover premium meat from what machines now leave on
the fish's frame and other trimmings. Potentially 60 million pounds of high
quality minced product can be recovered for the catfish industry. Processors
will be invited to enter into a profit sharing agreement with the Company in
which the processor provides the offal and AquaPro's alliance provides the
expertise to capture the minced product for sale.*
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<PAGE> 31
As of the middle of September 1998, discussions are underway with two
processors. No assurances can be given that any processors will agree to a
profit sharing agreement, or that the venture would be profitable. Management
knows of no processor that currently has a commercially available flow of minced
product for sale.
Flohr Metal Fabricators, Inc., is a 57-year-old company in Seattle,
Washington. It pioneered the involvement of U.S. design and building of Surimi
processing in the mid 1980's. Highly experienced in fish processing, it has
completed more than 25 shore bases and on vessel Surimi processing lines, some
with finished product capacity of over 440,000 pounds per day. Flohr's
experience with minced product includes the largest pollock plants in Alaska,
factory trawlers for pollock and cod, shore salmon plants in Alaska and Russia
as well as Russian factory trawlers. It prides itself on its ability to
customize technology to the processing facilities and other applications. Flohr
also built the probe that found the Titanic.
Teknotherm Inc. in Seattle is a subsidiary of Teknotherm A/S, a
Norwegian company founded in 1926. Today the company designs and manufactures
refrigeration systems for the Fishing, Marine, and Industrial refrigeration
market. Since early 1980, Teknotherm has been one of the major suppliers of
plate freezer systems for the Fishing industry in Alaska, Norway, Ireland, and
Scotland.
Ocean's Edge, Inc., formed in 1993, is headquartered in South
Dartmouth, Massachusetts. In the mid 1980's its principals were among the first
companies to use American technology to produce imitation crab, using a pollock
surimi as the base. They have conducted extensive research into the application
of fish protein into other types of food applications. On the marketing side,
they were instrumental in reintroducing Korean hair crab back into the Japanese
market. Ocean's Edge is in the process of developing a marketing agreement
between AquaPro and the end users of the minced product, including the leader in
private label seafood sales with more than 65% of the U.S. market.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements are attached hereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-29-
<PAGE> 32
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Set forth below are the Directors and Executive Officers of AquaPro and
their ages, positions held and length of service.
<TABLE>
<CAPTION>
An Officer of the
Company (or a Director of the
Predecessor of the Company (or
Name and Age Position Company) Since Predecessor) Since
------------ -------- -------------- ------------------
<S> <C> <C> <C>
George S. Hastings, Jr. Chairman of the Board 1983 1983
Age 51 Chief Executive Officer
President
Kenneth Ostebo Director -- 1998
Age 41*
Roger Daley* Director -- 1996
Age 75
Joseph Duncan, Sr.* Director -- 1995
Age 71
</TABLE>
* Independent director, i.e. director who is not an officer or employee of
the Company.
- ----------------------
None of the persons named are directors of any Reporting Companies.
"Reporting Companies" include companies with a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), or subject to the requirements of Section 15(d) of the 1934 Act, or
any company registered as an investment company under the Investment Company Act
of 1940, as amended (the "1940 Act").
Set forth below is a description of the business and employment
background of the Company's Directors and Executive Officers.
George S. Hastings, Jr. has been involved in the catfish
Aquaculture industry since 1986. Mr. Hastings has sponsored eight catfish
farming programs, including the Partnerships. Mr. Hastings has substantial
experience in all levels of catfish farm management. Mr. Hastings serves as an
officer and director of the Company's wholly-owned subsidiaries, American and
Circle Creek, the predecessor of which he co-founded in 1983. From 1976 through
1983, Mr. Hastings worked in various capacities for Advanced Financial Planning
Corporation in Nashville, Tennessee, a financial planning firm emphasizing the
formation
-30-
<PAGE> 33
and sale of real estate investment programs. From 1983 to 1995 Mr. Hastings
owned 50% of and operated the Hastings/Huntingdon Companies which provided
financial planning, advisory and brokerage services to private individuals and
organizations. Mr. Hastings received his B.S. Degree in Finance with a minor in
accounting from the University of Tennessee and holds a J.D. Degree from the
University of Tennessee College of Law. Mr. Hastings has been a member of the
State Bar of Tennessee and the U.S. Tax Court since 1976.
Kenneth Ostebo was appointed a Director of the Company
effective May 4, 1998. From 1994 to the present, Mr. Ostebo has been Chief
Executive Officer for Ocean's Edge, Inc. a commercial fishing and marketing
company. Mr. Ostebo has 21 years experience in the seafood industry and has
developed expertise in introducing lesser known products into the marketplace.
In 1982, he established new markets for secondary seafood items and brought them
to a national level. Mr. Ostebo then started a company using the same processing
principles and product development and spent two years on research and
development of a new seafood product which ultimately gained national
acceptance. Mr. Ostebo has expertise in taking a new product from its inception
to target markets to consumer awareness and selling these products on both
domestic and international levels.
Roger A. Daley served as a Director of the Company effective
September 16, 1996. Prior to his retirement in 1986, Mr. Daley served as General
Manager and President of the Knoxville News Sentinel, which he first joined as
an advertising sales representative in 1946. During his service with the News
Sentinel, the newspaper expanded five times and became agent for the Knoxville
Journal. Mr. Daley has also served as a guest consultant on business and
marketing for Taiwan and West Germany. He served as a charter member of and is
past president of the Knoxville Sales Executives Club and the Greater Knoxville
Advertising Club. He received the Printer Ink "Man of the Year" award and is a
charter member and served on the Board of the Better Business Bureau. Mr. Daley
has also served as a member of the American Newspaper Publishers Association and
of the Southern Newspaper Publishers Association, for which he served on several
committees and served three years on that Board. In addition, he has served in
various capacities for numerous charitable and civic organizations, including
service on the Executive Council of the United Fund as a past president of the
Tourist Bureau and as vice president of the Chamber of Commerce.
Joseph Duncan, Sr. has been elected and has served as a
Director since December 30, 1995. Mr. Duncan previously served as Chairman of
the Board of Security Alarms & Services Inc. ("SAS") until it was acquired by
National Guardian Services Corporation. Prior to that time, SAS was the largest
independently-owned, full-line security company in the Central South United
States, specializing in burglar and fire alarm systems, access control and
security guard services. Mr. Duncan is past president of the National Burglar &
Fire Alarm Association, and served as a member of the board of directors of that
trade association for fourteen years. In addition, Mr. Duncan served as a board
member or advisor to a number of national and regional trade associations
including the National Council of Investigation & Security Services, the Central
Station Alarm Association, and the Tennessee Burglar & First Alarm Association.
Mr. Duncan became a shareholder of the Company pursuant to the Prior
Consolidation.
Based upon a review on the Forms 3 furnished to the Company with
respect to its most recent fiscal year, each of the Company's Directors,
Executive Officers, Promoters and Control Persons failed to timely file his or
her initial Form 3 under Section 16(a) of the Securities and Exchange Act of
1934. Each person filed his or her report on September 29, 1997.
-31-
<PAGE> 34
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth remuneration to be paid by the Company
and/or its subsidiaries to its Chief Executive Officer and to its other highly
compensated executive officers of which there are none whose annual salary and
bonus exceeds $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
VALUE OF SECURITIES
NAME AND RESTRICTED UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS STOCK(2) OPTIONS(3)
------------------ ---- -------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
George S. Hastings, Jr. 1998 $ 70,558 $15,616 $19,500 223,000
Chief Executive Officer 1997(1) 59,250 7,798 46,875 51,000
1996 118,500 28,000 46,875 51,000
</TABLE>
- ---------------------------------
(1) A transitional six-month period.
(2) Shares issuable on April 1, but subject to 2-year vesting whereby
shares will be lost if employee voluntarily terminates employment or is
terminated for cause before the vesting period ends. Shares were valued
at $3.13 per Share, which is 50% of the value of $6.25 for 1997 and
1996; shares valued at $1.63 which is 50% of the April 1, 1998 value of
$3.25.
(3) Options are exercisable for a 7-year period commencing on the date of
issuance of April 1 in 1997 and 1996 at a price of $6.25 per Common
Share. Effective August 18, 1998, all options issued prior to 1998 were
repriced by the Compensation Committee of the Board of Directors at
$2.00 per Common Share, of which Mr. Hastings holds for a total of
153,000 shares. The options issued in 1998 are exercisable for 7-year
periods commencing on April 1, 1998 at $3.25 per Common Share (39,000
shares), May 15, 1998 at $3.13 per Common Share (84,000 shares), and
May 27, 1998 at $2.84 per Common Share (100,000 shares). See discussion
below.
- ---------------------------------
The following table sets forth certain information regarding stock
options and warrants granted to each named Executive Officer by reason of their
employment during the Company's 1998 fiscal year.
OPTION/WARRANT GRANTS IN 1998(A)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
NUMBER OF SECURITIES % OF TOTAL OPTIONS/WARRANTS
UNDERLYING GRANTS TO EMPLOYEES EXERCISE OR BASE EXPIRATION
NAME OPTIONS/WARRANTS GRANTED IN FISCAL YEAR PRICE ($/SHARE) DATE
---- ------------------------ --------------- --------------- ----
<S> <C> <C> <C> <C>
George S. Hastings, Jr. 223,000 89.2% $2.84 to $3.25 5/26/2005
</TABLE>
The following table sets forth the value of all unexercised employee
stock options and Director Options held by the Named Executive Officers as of
June 30, 1998.
AGGREGATED OPTION AND WARRANT VALUE TABLE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
------------------------------ -------------------------
NAME EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE
---- ---------------------------- -------------------------
<S> <C> <C>
George S. Hastings, Jr. 376,000/None None/None(1)
</TABLE>
- -------------------------------
(1) No Options are in-the-money based on the value of the Company's
Common Stock which, as of September 9, 1998, is $1.00 per Common Share
based on the closing price reported on the NASD Bulletin Board.
- --------------------------------
-32-
<PAGE> 35
EMPLOYMENT CONTRACTS. The Company has a written employment agreement
with Mr. George Hastings. Pursuant to this agreement, he receives a base salary
of $150,000 per annum. In addition, Mr. Hastings is entitled to awards of
restricted stock, stock options, medical insurance coverage and to such annual
bonus compensation as determined by the Board of Directors. The award of any
bonus compensation, however, is dependent on the achievement of certain
performance levels by the Company, including growth in funds from operations
and/or water acres under management. The stock options awarded pursuant to such
employment contract is exercisable for a term of seven years at an exercise
price equal to the fair market value on such date and are exercisable upon
issuance. The employment agreement has an initial three-year term and is
automatically extended for an additional year at the end of each year of the
agreement, subject to the right of the Company to terminate the contract for
cause upon notice or voluntarily by giving at least three months' prior written
notice and the payment of severance payment equal to three years of
compensation.
ADJUSTMENT OF EXECUTIVE COMPENSATION. As of July 1997, Mr. and Mrs.
Hastings were being paid a combined annual salary on a biweekly basis of
$225,000 under their respective employment contracts, which they agreed to
divide equally between themselves. Mr. Hastings in addition received $12,000 as
a car allowance. In August 1997, Mr. Hastings agreed to reduce his salary to $1
annually until the Company's performance improved. During the months of August
1997 through January 1998 (a period of six months), Mr. and Mrs. Hastings were
paid biweekly on an annual basis of $87,000 which they split 50/50. It was also
agreed to by the Board's compensation committee that Mr. Hastings would be
issued options to buy the Company's stock not to exceed 200,000 shares annually.
These options would be issued quarterly at the rate of 50,000 options and would
be priced at the same price the preferred stock of the Company converts to
common stock in 1998. On May 27, 1998, the Company's Preferred Stock converted
to common stock at the price of $2.837 per share. Accordingly, Mr. Hastings was
issued 7 year options to purchase 100,000 shares at $2.837 for this six month
period of reduced salary.
In connection with their divorce, Ms. Hastings resigned her positions
as an Officer and Director of the Company in January 1998. Also, Mr. Hastings
received all of the stock grants and options previously issued to her. The Board
agreed to continue to pay $87,000 in salary to Mr. Hastings. Additionally, Mr.
Hastings was granted by the compensation committee additional options to be
issued quarterly. The first quarter ended on May 15, 1998 and Mr. Hastings was
issued 7 year options to buy 84,000 shares at the closing market price of $3.125
on that date. This arrangement superceded the 50,000 shares per quarter that was
in effect August 1997 through January 1998.
The Company has outstanding 7 year options to purchase stock at $6.25
per share that were issued 1995 to 1997 (174,000 shares). On August 18, 1998,
the compensation committee recommended and the Board approved that all of the
options previously issued at $6.25 per share be repriced at $2.00 per share.
EXPLANATION OF LONG-TERM COMPENSATION. Under Mr. Hastings employment
contract, he is entitled to receive issuances of Restricted Stock in the amounts
stated. Total stock of up to approximately 3% of the total outstanding may be
issued each year. Also, under his employment contract, Mr. Hastings is awarded
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<PAGE> 36
stock options in the amount stated entitling the holder to purchase shares at a
price of $6.25 per share. These options are for a term of seven years.
COMPENSATION OF DIRECTORS. The Company pays its outside Directors an
annual retainer of $1,000 each September; $500 for each meeting attended in
person and $250 for each telephonic meeting. The Company also reimburses each
outside Director for his or her out-of-pocket expenses incurred in connection
with attending meetings. In addition, the Company annually awards each Director
(including Directors who are officers of the Company) options for the purchase
of 3,000 Common Shares (the "Director Options"). The Director Options have a
term of seven years and are exercisable at a price equal to the fair market
value of the Common Shares on the date of issuance. These options have a term of
seven years.
STOCK OPTION PLAN. The shareholders have approved and authorized a
stock option plan for officers, directors, employees and consultants to the
Company. The Plan is designed to comply with Rule 16b-3 under the 1934 Act. The
purpose of the stock option plan is to encourage stock ownership by current and
future officers, directors, employees and consultants to the Company, and
certain other persons judged by the committee who would administer the plan to
be instrumental to the success of the Company, and to give such persons a
greater personal interest in the Company achieving continued growth and success.
The stock option plan would be administered by persons who are "disinterested
persons" within the meaning of paragraph (c)(2) of Rule 16b-3. The Plan has not
yet been approved by the Board and has not yet been implemented.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of September 9,
1998, by each person or entity who is known to the Company to be the beneficial
owner of more than 5% of the Company's Common Stock, the beneficial ownership by
each Officer, Director, and the beneficial ownership of all Directors and
Officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME & POSITION BENEFICIAL OWNERSHIP
OFFICERS AND DIRECTORS NUMBER OF COMMON SHARES(%)(1)
---------------------- -----------------------------
<S> <C> <C>
George S. Hastings, Jr. 596,822(2)(3) (11.43%)
President, Chief Executive Officer and Chairman of the Board
Kenneth Ostebo 0 (0.00%)
Director
Roger Daley 64,373(3) (1.23%)
Director
Joseph F. Duncan, Sr. 35,933(4) (0.69%)
Director
All officers and directors as a group (four persons) 697,128 (13.35%)
</TABLE>
- ---------------------------------------------
(1) In accordance with Rule 13d-3 promulgated under the Securities Exchange
Act of 1934 (the "Exchange Act"), Common Shares which are not
outstanding but which are subject to vested options, warrants, rights
or conversion privileges have been deemed to be outstanding for the
purpose of computing the percentage of outstanding Common Shares owned
by the
-34-
<PAGE> 37
individual having such right, but have not been deemed outstanding for
the purpose of computing the percentage for any other person.
The number of Common Shares owned by each person equals the Common
Shares outstanding beneficially owned plus Common Shares issuable to
the beneficial holder upon the exercise of the rights, warrants and/or
options deemed to be outstanding.
The total number of Common Shares outstanding is 4,818,354 as of June
9, 1998. The total number of options outstanding is 403,000 as of such
date. Accordingly, the total number of outstanding Common Shares
considered outstanding for purposes of computing the above percentages
is 5,221,354.
(2) Includes the following Common Shares, warrants and options held of
record by Mr. Hastings: 220,822 Common Shares and 376,000 Common Shares
issuable upon the exercise of 364,000 Compensatory Options and 12,000
Director Options.
(3) Includes 55,373 Common Shares held of record and 9,000 Common Shares
issuable upon the exercise of Director Options.
(4) Includes 23,993 Common Shares held of record and 12,000 Common Shares
issuable upon the exercise of Director Options.
- ---------------------------
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FORMATION OF REGISTRANT
At December 31, 1995, the Company became sole owner of American and
Circle Creek. Mr. Hastings and Ms. Hastings were the sole owners of American and
Circle Creek (formerly Hastings and Company, Inc.) at the time of their
acquisition. Mr. Hastings and Ms. Hastings received 105,334 shares of Common
Stock of the Company in connection with the Company's acquisition of American
and Circle Creek. In connection with the Company's acquisition of American and
Circle Creek, Mr. Hastings and Ms. Hastings assigned all of their right and
title to the economic interest of the general partner in each of the Circle
Creek Partnerships to the Company.
Pursuant to the Prior Consolidation, the Company acquired all of the
assets and liabilities of CCA I, CCA II, CCA III, and CCA IV. Pursuant to such
transaction, Mr. Hastings and Ms. Hastings received 4,584 units of Common Stock
and Common Stock purchase rights from the Company in exchange for their limited
partnership interest in these partnerships on the same basis as the other
limited partners. In addition, Mr. Hastings and Ms. Hastings received 2,994
units at $10.00 per unit and purchased 18,864 shares at $7.25 per share in
cancellation of $166,704 of debt owing to them by these partnerships.
As of June 30, 1997 (the "Closing Date"), each of CCA V, CCA VI, CCA
VII and CCA VIII was merged into the Company under the laws of the state of
Tennessee. As a result thereof, the Company assumed all of the assets and
liabilities of the merged Partnership and the Company's Units and Notes, as
described below, were distributed to the limited partners of the merged
Partnerships in accordance with their elections.
The Company and the partners of each Participating Partnership approved
the Consolidation on April 16, 1997 and June 30, 1997, respectively. The
Company's Shareholders approved the Consolidation by a greater than 85% vote.
More than 98% of the Limited Partners of each Partnership approved the
Consolidation by written consent. No Shareholder of the Company elected to
exercise his or her dissenter's rights with respect to the Consolidation as may
have been provided under Tennessee corporate law.
-35-
<PAGE> 38
In the Consolidation, AquaPro (i) acquired by merger all of the assets
and assumed all of the liabilities of the four Participating Partnerships in
consideration for the issuance of its Units and its 7.15% Notes, (ii) offered
the holders of the Investor Notes the opportunity to exchange their investor
Notes for shares of the Preferred Stock, and (iii) is offering the Preferred
Stock upon exercise of the Stock Rights in the subject Offering.
In the Consolidation the Company acquired the assets and liabilities of
each Participating Partnership by statutory merger under the laws of the state
of Tennessee. Pursuant thereto, the limited partners of each Partnership elected
to receive either Units or 7.15% Notes in consideration for their Partnership
interests. As a result of the Consolidation, the Company issued its Units and
7.15% Notes to the limited partners of the Partnerships as follows:
<TABLE>
<CAPTION>
PARTNERSHIP NUMBER OF UNITS 7.15% NOTES
---------------------------------------------------------------
<S> <C> <C>
CCA V 340,662 $37,056
CCA VI 152,773 23,379
CCA VII 109,518 None
CCA VIII 105,973 8,147
------- -------
Total 708,926 $68,582
</TABLE>
Each Unit was comprised of One (1) Share; One (1) Stock Right; One (1)
$7.50 Warrant entitling the holder to purchase one share for $7.50 within twelve
(12) months following the Closing Date; and One (1) $9.50 Warrant entitling the
holder to purchase one share for $9.50 within twenty-four (24) months following
the Closing Date. Each of the $7.50 Warrants and the $9.50 Warrants is converted
into three-tenths (3/10) Share if not exercised before they expire and upon
exercise, the holder will receive a credit against the exercise price equal to
the greater of 30% of the Exercise Price or 30% of the then market value of the
common shares, as defined. The 7.15% Notes issued in the Consolidation are due
December 31, 2003 and bear interest at the rate of 7.15% per annum for the
period from and including the date of original issuance. The Notes are
convertible at a price of $10.50 per share.
Both of the $7.50 Warrants and the $9.50 Warrants were called
immediately upon issuance. As a result, each Unit as issued was composed of 1.6
common shares and one $9.50 Stock Right.
The Notes will bear interest at the rate of 7.15% per annum
for the period from and including the date of original issuance (expected to be
the Closing Date). The Notes are convertible into common shares at any time at
the election of the holder at a price of $10.00 per share. The Notes are
redeemable at any time, or from time to time, by AquaPro for a Redemption Price
equal to their unpaid principal balance plus accrued interest to the date called
for prepayment. The extent to which the Company issues Notes in place of Units
in the Recent Consolidation will depend upon elections of the Dissenting
Partners whose elections to receive Notes will be honored in full prior to
elections for Notes by other Participating Limited Partners. The issuance of the
Notes, however, is limited by the Note Restriction which prohibits the issuance
of Notes to any Participating Partnership if, as a result of such issuance, the
aggregate principal amount of Notes issued to such Participating Partnership in
the Recent Consolidation would exceed 20.0% of the Partnership's estimated Net
Exchange Value, as described below, on the Closing Date. Also, Dissenting
Partners, if any, will have the first election to receive Notes.
-36-
<PAGE> 39
The Series A Preferred Stock (the"Preferred Stock") which underlie the
$9.50 Stock Rights are part of a series of up to 2,000,000 shares of Preferred
Stock the Company is authorized to issue. As of September 1, 1997, there were
352,000 shares of Preferred Stock outstanding. The Preferred Stock pays
cumulative dividends at the annual rate of $.70.
Neither the General Partner nor the Company received Shares or Notes in
connection with the General Partner interest in the Participating Partnerships.
The General Partner will receive no other compensation in connection with the
Recent Consolidation other than Units in exchange for the L.P. Units owned by
Affiliates. Ms. Patricia Hastings holds 314 L.P. Units in CCA VI. The General
Partner and his Affiliates own no other L.P. Units in the Partnerships.
The transactions constituting the Consolidation were approved by the
shareholders of the Company at their annual meeting on April 16, 1997. Under the
Corporations Law of the state of Tennessee, shareholders who either vote against
certain mergers or abstain from voting have the right to elect by written notice
to dissent and receive cash payment for their shares ("Dissenters' Rights"). The
holders of approximately 155,000 shares of the Company's common stock voted
against or abstained from voting on the transactions. The Company gave notice to
these shareholders of their possible Dissenters' Rights; no shareholders have
delivered notice of their election of such Dissenters' Rights.
Pursuant to the Consolidation, the Company assumed a total of
$1,147,513 of collateralized notes of the Partnerships (the "Investor Notes").
The Investor Notes were convertible into Partnership interests, and by reason of
the Consolidation, into Units of the common stock of the Company at prices
ranging from $10.56 to $12.26 per share. The Investor Notes bear interest at a
rate of 10.35% per annum and are payable interest only on a quarterly basis
until maturity, when they are due and payable in full. Maturities of the
Investor Notes occur in 1999 and 2000. Payment of the Investor Notes is secured
by liens on the catfish inventories of the issuing Partnership.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
A List of Exhibits is included with this Report and is attached hereto.
No Reports on Form 8-K were filed by the Company during the last
quarter covered by this Report.
-37-
<PAGE> 40
Report of Independent Auditors
The Board of Directors and Stockholders
AquaPro Corporation
We have audited the accompanying consolidated balance sheets of AquaPro
Corporation and subsidiaries as of June 30, 1998 and 1997 and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the year ended June 30, 1998, the six months ended June 30, 1997 and
the year ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of AquaPro
Corporation and subsidiaries at June 30, 1998 and 1997, and the consolidated
results of their operations and their cash flows for the year ended June 30,
1998, the six months ended June 30, 1997 and the year ended December 31, 1996,
in conformity with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, the Company's recurring
losses from operations raise substantial doubt about its ability to continue as
a going concern. Management's plans as to these matters are also described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Jackson, Mississippi /s/ Ernst & Young LLP
August 28, 1998
F-1
<PAGE> 41
AquaPro Corporation
Consolidated Balance Sheets
<TABLE>
<CAPTION>
JUNE 30
1998 1997
------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 112,631 $ 202,894
Trade accounts receivable (Note 5) 349,148 108,009
Receivable from affiliate 27,998 27,998
Live fish inventories (Note 5) 5,533,276 5,740,124
Prepaid expenses 21,303 10,516
------------------------------------
Total current assets 6,044,356 6,089,541
Property, buildings and equipment (Note 5):
Land 1,783,425 1,781,078
Ponds and improvements 3,263,405 3,014,785
Buildings 458,014 346,416
Machinery and equipment 2,901,160 2,364,743
------------------------------------
8,406,004 7,507,022
Accumulated depreciation 2,402,841 1,867,269
------------------------------------
6,003,163 5,639,753
Investments in cooperatives (Notes 4 and 5) 833,894 883,518
Other assets 166,779 104,161
------------------------------------
Total assets $ 13,048,192 $ 12,716,973
====================================
</TABLE>
F-2
<PAGE> 42
<TABLE>
<CAPTION>
JUNE 30
1998 1997
------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable (Note 5):
Bank $ 586,459 $ 497,571
Officer and director -- 161,254
Others 13,505 30,637
Accounts payable 195,318 523,255
Accrued salaries 17,883 239,994
Accrued interest and other 28,461 74,628
Current maturities of long-term debt 426,574 272,258
------------------------------------
Total current liabilities 1,268,200 1,799,597
Long-term debt, less current maturities (Note 5) 3,829,981 4,102,980
Stockholders' equity:
Series A Preferred Stock, no par value - authorized 900,000 shares,
cumulative, convertible, issued and outstanding 235,507 at
June 30, 1997 (Note 9) -- 1,837,408
Preferred stock, par value to be determined by the
Board of Directors - authorized 100,000 shares, none issued -- --
Common stock, no par value - authorized 100,000,000
shares, issued and outstanding 4,818,354 and 2,670,667
shares at June 30, 1998 and 1997 (Note 6) 15,405,803 10,588,311
Unearned compensation (101,906) (126,563)
Retained earnings (deficit) (7,353,886) (5,484,760)
------------------------------------
Total stockholders' equity 7,950,011 6,814,396
====================================
Total liabilities and stockholders' equity $ 13,048,192 $ 12,716,973
====================================
</TABLE>
See accompanying notes.
F-3
<PAGE> 43
AquaPro Corporation
Consolidated Statements of Operations
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED YEAR ENDED
JUNE 30 JUNE 30 DECEMBER 31
1998 1997 1996
------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 5,041,463 $ 1,212,468 $ 3,924,954
Cost of products sold 4,316,032 1,188,159 3,525,405
------------------------------------------------------
Gross profit 725,431 24,309 399,549
Selling, general and administrative (Note 6) 1,652,570 1,055,540 1,349,499
Impairment loss on long-lived assets -- -- 1,019,000
------------------------------------------------------
Operating loss (927,139) (1,031,231) (1,968,950)
Other income (expense):
Equity in losses on investments in cooperatives (260,112) (272,000) (109,969)
Interest expense (460,393) (212,685) (555,974)
Patronage dividend 130,724 10,218 105,451
Other, net (19,241) 18,173 22,587
------------------------------------------------------
(609,022) (456,294) (537,905)
------------------------------------------------------
Net loss $(1,536,161) $(1,487,525) $(2,506,855)
======================================================
Net loss attributable to common stockholders $(1,869,126) $(1,552,952) $(2,512,080)
======================================================
Basic and diluted net loss per common share $ (.65) $ (.58) $ (1.04)
======================================================
Weighted average basic and diluted
common shares outstanding 2,870,743 2,677,534 2,426,920
======================================================
</TABLE>
See accompanying notes.
F-4
<PAGE> 44
AquaPro Corporation
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
AquaPro Corporation
-----------------------------
General Limited
Partners' Partners' Common Stock
Capital Capital Shares Amount
-------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1996 $ 10,851 $ 92,139 1,664,381 $ 6,495,174
Net loss for the year ended December 31, 1996
Cash distributions (10,851) (97,665)
Retirement of limited partnership units
Sale of limited partnership units 5,526
Common stock issued to employees for future services 20,000 150,000
Amortization of unearned compensation
Conversion of debt to stock (Note 5) 186,740 1,717,305
Sale of common stock (Note 6) 362,704 2,137,928
Sale of preferred stock (Note 9)
One-for-five common stock split 218,994
Cash dividend on preferred stock
-------------------------------------------------------
Balance at December 31, 1996 -- -- 2,452,819 10,500,407
Net loss for the six months ended June 30, 1997
Common stock issued to employees for services 22,500 140,625
Cancellation of common stock granted to
former employees (9,000) (56,250)
Amortization of unearned compensation
Conversion of warrants to common stock 203,834
Sale of common stock (Note 6) 514 3,529
Sale of preferred stock (Note 9)
Cash dividend on preferred stock
-------------------------------------------------------
Balance at June 30, 1997 -- -- 2,670,667 10,588,311
Net loss for the year ended June 30, 1998
Common stock issued to employees for future services 21,000 68,250
Cancellation of common stock granted to
former employees (5,567) (42,188)
Amortization of unearned compensation
Conversion of debt to common stock 7,930 39,661
Conversion of long-term debt to preferred stock (Note 3)
Sale of preferred stock (Note 9)
Cash dividend on preferred stock
Conversion of preferred stock to common stock (Note 9) 2,065,438 4,584,708
Common stock issued as payment of preferred dividends 58,886 167,061
=======================================================
Balance at June 30, 1998 $ -- $ -- 4,818,354 $15,405,803
=======================================================
</TABLE>
F-5
<PAGE> 45
<TABLE>
<CAPTION>
AquaPro Corporation
- ---------------------------------------------------------------------------
Additional Retained Total
Preferred Stock Paid-In Unearned Earnings Stockholders'
Shares Amount Capital Compensation (Deficit) Equity
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-- $ -- $ 26,749 $ (93,750) $(1,419,728) $ 5,111,435
(2,506,855) (2,506,855)
(108,516)
(26,749) (26,749)
5,526
(150,000) --
131,250 131,250
1,717,305
2,137,928
104,534 748,169 748,169
--
(5,225) (5,225)
- -------------------------------------------------------------------------------------------
104,534 748,169 -- (112,500) (3,931,808) 7,204,268
(1,487,525) (1,487,525)
(131,250) 9,375
56,250 --
60,937 60,937
--
3,529
130,973 1,089,239 1,089,239
(65,427) (65,427)
- -------------------------------------------------------------------------------------------
235,507 1,837,408 (126,563) (5,484,760) 6,814,396
(1,536,161) (1,536,161)
(68,250) --
42,188 --
50,719 50,719
39,661
127,922 984,014 984,014
227,194 1,763,286 1,763,286
(165,904) (165,904)
(590,623) (4,584,708) --
(167,061) --
===========================================================================================
-- $ -- $ -- $(101,906) $(7,353,886) $ 7,950,011
===========================================================================================
</TABLE>
See accompanying notes.
F-6
<PAGE> 46
AquaPro Corporation
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30 JUNE 30 DECEMBER 31
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $(1,536,161) $(1,487,525) $(2,506,855)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 700,341 400,706 692,351
Impairment loss on long-lived assets -- -- 1,019,000
Equity in losses on investments in cooperatives 260,112 272,000 109,969
Loss on sale of equipment 41,835
Payments of loss allocations on investments in cooperative (191,376) -- (79,969)
Changes in operating assets and liabilities:
(Increase) decrease in trade accounts receivable (240,483) 533,298 (366,935)
(Increase) decrease in live fish inventories 206,192 (1,190,596) (276,659)
Increase in prepaid expenses and other assets (130,379) (14,263) (17,969)
Increase (decrease) in accounts payable and accrued expenses (366,221) 318,368 11,653
-----------------------------------------------
Net cash used in operating activities (1,256,140) (1,168,012) (1,415,414)
INVESTING ACTIVITIES
Purchases of property and equipment (1,052,597) (530,422) (591,474)
Proceeds on sale of equipment 35,592
Purchases of investments in cooperatives -- -- (62,000)
-----------------------------------------------
Net cash used in investing activities (1,017,005) (530,422) (653,474)
FINANCING ACTIVITIES
Net increase (decrease) in notes payable 60,706 (48,084) (743,758)
Principal payments on long-term borrowings (1,428,667) (149,708) (741,152)
Proceeds from long-term borrowings 1,953,461 312,722 503,178
Proceeds from exercise of common stock purchase rights -- -- 2,137,928
Proceeds from issuance of preferred stock 1,763,286 1,089,239 748,169
Proceeds from exercise of common stock warrants -- 3,529 --
Proceeds from sale of limited partnership units -- -- 5,525
Cash distributions to partners -- -- (108,516)
Retirement of limited partnership units -- -- (26,749)
Payments of preferred stock dividends (165,904) (65,427) (5,225)
-----------------------------------------------
Net cash provided by financing activities 2,182,882 1,142,271 1,769,400
-----------------------------------------------
Net decrease in cash and cash equivalents (90,263) (556,163) (299,488)
Cash and cash equivalents at beginning of period 202,894 759,057 1,058,545
-----------------------------------------------
Cash and cash equivalents at end of period $ 112,631 $ 202,894 $ 759,057
===============================================
SUPPLEMENTAL CASH FLOW INFORMATION-
Interest paid $ 503,047 $ 238,394 $ 501,960
===============================================
NON-CASH FINANCING ACTIVITIES
Conversion of notes payable and long-term debt to common stock $ 39,661 $ -- $ 1,717,305
===============================================
Common stock issued to employees for future services $ 68,250 $ 140,625 $ 150,000
===============================================
Conversion of long-term debt to 10.35% convertible notes payable $ -- $ -- $ 214,495
===============================================
Conversion of limited partnership units to notes payable $ -- $ 68,582 $ --
===============================================
Conversion of long-term debt to preferred stock $ 984,014 $ -- $ --
===============================================
Conversion of accrued salaries and note payable to officers to
long-term debt $ 380,198 $ -- $ --
===============================================
Conversion of preferred stock to common stock $ 4,584,708 $ -- $ --
===============================================
Common stock issued as payment of preferred dividends $ 167,061 $ -- $ --
===============================================
</TABLE>
See accompanying notes.
F-7
<PAGE> 47
AquaPro Corporation
Notes to Consolidated Financial Statements
June 30, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND BUSINESS
AquaPro Corporation (the "Company") and its wholly owned subsidiaries American
Fisheries Corporation ("American") and Circle Creek Aquaculture, Inc. ("Circle
Creek") own and operate eight catfish farms located in the delta area of the
State of Mississippi. The Company acquired the catfish farms by merger with
eight affiliated limited partnerships (see Note 2). These mergers have been
accounted for in a manner similar to a pooling of interests because of common
control. The accompanying consolidated financial statements as of and for the
six months ended June 30, 1997 and for the year ended December 31, 1996 have
been restated to give effect to the mergers described above and in Note 2. All
material intercompany transactions and balances have been eliminated in
consolidation.
Effective January 1, 1997, the Company changed its fiscal year end to June 30
from December 31.
The Company conducts catfish farming activities on 1,843 water acres within the
State of Mississippi. Catfish farming is concentrated in a few southern states,
principally Mississippi, Louisiana, Alabama and Arkansas. Catfish are sold
principally to retail grocery stores and restaurants by catfish processors. The
Company's sales are to a limited number of processors and collateral is
generally not required. Three processors represented 52%, 31%, and 10% of the
Company's net sales for the year ended June 30, 1998; one processor represented
90% of the Company's net sales for the six months ended June 30, 1997; and,
three processors represented 55%, 25% and 11%, of the Company's net sales for
the year ended December 31, 1996.
Fish prices are affected by changes in market demand and supply and may
fluctuate significantly from period to period.
USE OF ESTIMATES
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
F-8
<PAGE> 48
AquaPro Corporation
Notes to Consolidated Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
LIVE FISH INVENTORIES
Live fish inventories are stated at the lower of average cost or market. Market
value is determined as estimated selling price less estimated costs to sell.
Revenue is recognized when catfish are delivered live to the processor.
Live fish inventories are purchased as "fingerlings" (generally, 5 to 6 inches
in length) and are grown to a marketable size over 9 to 18 months. Because the
production cycle generally exceeds one year, management anticipates certain live
fish inventories on hand at June 30, 1998 may not be sold during the year ending
June 30, 1999. Live fish inventories are classified as a current asset in the
accompanying balance sheets consistent with industry practice. The quantities of
live fish inventories are determined based upon estimated growth from feed fed
and are reduced for the actual quantities sold and observed mortality. The
Company estimates fish grow-out based upon 2.5 pounds of feed fed per one pound
of live fish growth. The estimated fish grow-out, which includes estimated
mortality based on the Company's experience, is based upon published industry
data and actual experience of the Company. In addition to the estimated
mortality, reductions in inventories for observed mortality are recorded as
observed. Management assesses the accuracy of the perpetual inventory records by
periodic comparisons with observations of the catfish feeding in each pond and
analysis of the trend of pounds of feed fed relative to the pounds of catfish
reflected in the perpetual inventory records by pond. Costs associated with live
fish production are accumulated during the growing period and consist
principally of feed, labor and overhead required to grow the live fish to a
marketable size. Each pond is closed approximately every 8 to 10 years and the
perpetual inventory records are adjusted to the actual harvest. Live catfish are
highly susceptible to disease, oxygen depletion and extreme temperatures which
could result in mortality higher than the Company's estimated mortality.
F-9
<PAGE> 49
AquaPro Corporation
Notes to Consolidated Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LIVE FISH INVENTORIES (CONTINUED)
Management monitors each pond and takes appropriate actions to minimize the risk
of loss from mortality. Given the nature of the live fish inventories, it is
reasonably possible that the Company's actual mortality will vary significantly
from estimates. The cost of producing fish for harvest is subject to the cost of
grains which is susceptible to significant fluctuations in the commodity
markets. The Company establishes prices for a portion of its anticipated feed
purchases over specified periods of time through various feed purchase
agreements.
PROPERTY, BUILDINGS AND EQUIPMENT
Property, buildings and equipment are stated at cost. Depreciation is provided
by the straight-line method over the assets' estimated useful lives (15 years
for ponds and improvements, 15 years for buildings, and 3 to 7 years for
machinery and equipment).
INVESTMENTS IN COOPERATIVES
Investments in cooperatives are stated at original cost adjusted for allocation
of earnings or losses, net of distributions.
INCOME TAXES
Income taxes are accounted for by the Company using the liability method in
accordance with FASB Statement No. 109, Accounting for Income Taxes. Deferred
income taxes relate to temporary differences between assets and liabilities
recognized differently for financial reporting and income tax purposes.
STOCK BASED COMPENSATION
The Company grants stock options for a fixed number of shares to employees with
an exercise price equal to estimated fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees", and, generally,
recognizes no compensation expenses for the stock option grants.
F-10
<PAGE> 50
AquaPro Corporation
Notes to Consolidated Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIC AND DILUTED NET LOSS PER COMMON SHARE
In fiscal 1998, the Company adopted the provisions of FASB Statement No. 128,
Earnings per Share. Statement 128 replaced the calculation of primary and fully
diluted earnings per common share. Unlike primary earnings per common share,
basic earnings per common share excludes any dilutive effects of options,
warrants, and convertible securities. Diluted earnings per common share is very
similar to the previously reported earnings per common share. All earnings
(loss) per common share amounts for all periods have been presented to conform
to the Statement 128 requirements.
Basic net loss per common share is computed by dividing net loss applicable to
common stock (net loss less dividend requirements for preferred stock of
$332,965 in the fiscal year ended June 30, 1998, $65,427 in the six months ended
June 30, 1997 and $5,225 in the year ended December 31, 1996) by the weighted
average number of common shares outstanding. Common equivalent shares (stock
options and warrants) outstanding have not been included in the computation of
diluted net loss per common share due to their antidilutive effects for the
periods presented.
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with FASB statement No. 121, Accounting for The Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, the Company
continually reevaluates the carrying value of its long-lived assets for events
or changes in circumstances which indicate that the carrying value may not be
recoverable. As part of this reevaluation, the Company estimates the future cash
flows expected to result from the use of the asset and its eventual disposal. If
the sum of the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the asset, an impairment loss is
recognized through a charge to operations when the carrying value exceeds the
fair value of the asset.
The adoption by the Company of Statement 121 during the year ended December 31,
1996 resulted in a non-cash charge of $1,019,000 from the write-down of land,
ponds and improvements, buildings and goodwill to their estimated fair values.
The charge represented the adjustment required to remeasure long-lived assets at
the lower of the carrying amount or fair value based upon 1996 appraisals
obtained from an independent appraiser in connection with the merger as
described in Note 3.
F-11
<PAGE> 51
AquaPro Corporation
Notes to Consolidated Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Effective in fiscal 1999, FASB Statement No. 130, Reporting Comprehensive
Income, requires that items required to be recognized as components of
comprehensive income be reported in a financial statement displayed with the
same prominence as other financial statements. Management does not expect FASB
No. 130 to have a significant impact on the Company in fiscal 1999.
Also, effective for fiscal 1999 is FASB Statement No. 131, Disclosures about
Segments of an Enterprise and Related Information which requires companies to
report financial and descriptive information about their reportable operating
segments. Management does not expect FASB No. 131 to have a significant impact
on the Company.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to fiscal 1998 presentation.
2. GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. During the year ended June 30,
1998, the six months ended June 30, 1997 and the year ended December 31, 1996,
the Company incurred net losses of $1,536,161, $1,487,525 and $2,506,855,
respectively, and had deficient cash flow from operating activities of
$1,256,140, $1,168,012 and $1,415,414 for those same periods. These factors may
indicate that the Company will be unable to continue as a going concern for a
reasonable period of time.
The financial statements do not include any adjustments that might be necessary
should the Company be unable to continue as a going concern. The Company's
continuation as a going concern is dependent upon its ability to generate
sufficient cash flow to meet its obligations on a timely basis, to obtain
additional financing or refinancing as may be required, and ultimately attain
profitability.
Subsequent to June 30, 1998, the Company reached the limit on borrowings
available under the $1,000,000 revolving line of credit used solely to fund
purchases of feed. Management attributed these additional borrowings to the
increase in catfish production, as compared to the prior year, along with the
end of the growing season approaching. Management also borrowed $165,000 from
third parties to fund feed purchases in excess of the amount funded by the
revolving line of credit. The growing season, or months in which catfish are
fed, generally is from April through October. As described in Note 5, the
required principal payments on borrowings under the revolving line of credit
consist of approximately 55% of collections on accounts receivable.
Based upon management's projected sales volume at current sales prices for the
period July 1, 1998 through March 31, 1999, management anticipates the Company's
fish sales would be sufficient to repay borrowings under the revolving line of
credit prior its maturity on March 15, 1999, to bring its unsecured obligations
current and to fund operating expenses through March 31, 1999. Management's
projected fish sales from April 1, 1999 through June 30, 1999 would not be
sufficient to fund operating expenses including the feed requirements during
that period. Based upon the anticipated repayment of the revolving line of
credit and the collateral which would be available to secure additional
borrowings, management believes that the Company will be able to renew the
present revolving line of credit for the same amount or obtain a credit
agreement with similar terms. The revolving line of credit is collateralized by
accounts receivable (book value of $349,148 at June 30, 1998), live fish
inventories (book value of $5,533,276 at June 30, 1998), investment in certain
cooperative stock (book value of $776,654 at June 30, 1998), and certain
property and buildings (book value of $865,534 at June 30, 1998). The Company
has obtained an advanced commitment letter from a feed vendor to provide a
revolving line of credit for feed purchases for a minimum of $500,000 beginning
April 2, 1999 under terms similar to its existing line of credit. The commitment
for the line of credit is contingent upon the repayment of the existing line on
or before the due date and the pledge of collateral similar to the collateral
pledged on the existing line. Management projects that the availability of a
line of credit under this commitment is necessary for the Company to meet its
operating cash needs through June 30, 1999 in the normal course of business.
Management projects this advanced commitment would only partially meet the
Company's needs to finance feed purchases through the end of the 1999 feeding
season.
3. MERGERS
Effective June 30, 1997, the Company acquired the assets and assumed the
liabilities of Circle Creek Aquaculture V, L.P., Circle Creek Aquaculture VI,
L.P., Circle Creek Aquaculture VII, L.P., and Circle Creek Aquaculture VIII,
L.P., ("Circle Creek V-VIII"). Circle Creek V-VIII were engaged in catfish
farming in the State of Mississippi and were previously managed by the Company
pursuant to management agreements. The mergers are accounted for as a
reorganization of the entities under common control into the Company.
Accordingly, the transactions are accounted for on the historical cost basis of
Circle Creek V-VIII. The carrying amounts for the general and limited partners'
capital of Circle Creek V-VIII were transferred to the Company's common stock as
of January 1, 1995.
F-12
<PAGE> 52
AquaPro Corporation
Notes to Consolidated Financial Statements (continued)
3. MERGERS (CONTINUED)
In consideration for the assets and liabilities of Circle Creek V-VIII, the
Company issued 708,926 "Units" and $68,582 of 7.15% Convertible Notes based upon
the relative fair value of the net assets of the Company and Circle Creek
V-VIII. A Unit consisted of 1.6 shares of common stock and one 90-day right to
purchase one share of the Company's 7.0% Series A Preferred Stock for $9.50 (the
"Preferred Stock Rights"). Also, as part of the merger, the Company offered its
Series A Preferred Stock in exchange for $1,147,513 in principal amount of
certain 10.35% notes of Circle Creek V-VIII (the "Investor Notes"). This
exchange offer commenced subsequent to June 30, 1997 and was completed by
September 30, 1997. Each holder of Investor Notes was offered 1.3 shares of
Series A Preferred Stock for each $10 of Investor Notes. In the aggregate,
$984,014 of Investor Notes were exchanged for 127,922 shares of Series A
Preferred Stock.
Separate revenues and net loss of the merged entities are presented in the
following table.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30 DECEMBER 31
1997 1996
----------------------------
<S> <C> <C>
Revenues:
AquaPro Corporation $ 604,805 $ 2,837,274
Circle Creek V-VIII 1,129,114 1,667,751
Elimination of intercompany
Transactions (521,451) (580,071)
----------------------------
Total $ 1,212,468 $ 3,924,954
============================
Net loss:
AquaPro Corporation $ (972,102) $ (886,786)
Circle Creek V-VIII (482,522) (1,592,813)
Elimination of intercompany
Transactions (32,901) (27,256)
----------------------------
Net loss, as reported $(1,487,525) $(2,506,855)
============================
</TABLE>
In connection with the mergers, approximately $213,000 of merger costs and
expenses were incurred and have been included in selling, general and
administrative expenses in the accompanying consolidated statements of
operations for the six months ended June 30, 1997. The merger costs and expenses
consisted principally of legal and consulting fees.
F-13
<PAGE> 53
AquaPro Corporation
Notes to Consolidated Financial Statements (continued)
4. INVESTMENTS IN COOPERATIVES
Investments in cooperatives consist of the following:
<TABLE>
<CAPTION>
JUNE 30
1998 1997
--------------------------------
<S> <C> <C>
Delta Pride Catfish, Inc. $664,654 $714,278
Fishco, Inc. 112,000 112,000
Indi-Bell, Inc. 57,240 57,240
--------------------------------
$833,894 $883,518
================================
</TABLE>
The ownership of Delta Pride Catfish, Inc. ("Delta Pride") and Fishco, Inc.
("Fishco") stock provides the Company the right to sell live catfish to Delta
Pride and Fishco. Delta Pride is the Company's most significant customer.
Substantially all of the Company's catfish feed purchases are from Indi-Bell,
Inc.
5. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable-bank consists of borrowings under a $1,000,000 revolving line of
credit used solely to fund purchases of feed. Interest accrues at the prime rate
plus 1.65% and the line of credit expires March 15, 1999. Interest is paid
monthly and principal is paid with approximately 55 percent (40 cents per pound
of fish sold) of all collections of accounts receivable.
The notes payable-officer and director outstanding at June 30, 1997 and accrued
officers' salaries of $230,000 were converted to five year unsecured notes
during January 1998 and April 1998.
F-14
<PAGE> 54
AquaPro Corporation
Notes to Consolidated Financial Statements (continued)
5. NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30
1998 1997
--------------------------
<S> <C> <C>
Note payable to Farm Credit Bank of Texas with annual principal and interest
payments of approximately $186,000 due beginning April 1, 1999 through 2003 and
$149,000 April 1, 2004 through 2018; interest accrues at a variable rate
(8.35% at June 30, 1998) $1,422,000 $ --
Note payable to a bank with monthly principal and interest payments of $11,754
through March 2000 and a final payment of approximately $979,000 due April 2000
with interest at prime plus 2 1/2% (11% at June 30, 1998) 1,033,654 1,055,244
Convertible notes payable with interest due quarterly at 10.35% and
principal due December 1999 ($63,500) and December 2000 ($100,000) 163,500 1,147,513
Convertible notes payable with interest due quarterly at 10.35% and
principal due December 2002 363,593 363,593
Note payable to a bank with annual principal payments of $43,610 due beginning
May 1, 1999 through 2003; interest accrues at prime rate plus one percent
(9.5% at June 30, 1998) and is payable semi-annually 218,048 --
Convertible notes payable with interest due quarterly at 7.15% and
principal due December 2003 28,921 68,582
Notes payable to an insurance company with interest at 7.7% to 9.5% -- 651,200
Notes payable to the Federal Land Bank with interest at variable rates
(9.05% at June 30, 1997) -- 512,095
Notes payable to a finance company with annual payments aggregating
approximately $104,000 including interest at rates ranging from 6% to 10.65%,
maturing at various dates from July 1998 through April 2003 242,806 200,603
</TABLE>
F-15
<PAGE> 55
AquaPro Corporation
Notes to Consolidated Financial Statements (continued)
5. NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
<TABLE>
<S> <C> <C>
Capital lease obligations to Farm Credit Leasing Services Corporation with
quarterly payments aggregating $12,185 including interest at an
effective rate of 8.5% through June 2002 146,430 180,300
Note payable to an officer and director of the Company with monthly payments of
$3,810 including interest at 8.75%, maturing April 2003 179,635 --
Note payable to a former officer and director of the Company with monthly
payments of $4,000 including interest at 8.75%, maturing January 2003 182,515 --
Notes payable to various finance companies with monthly payments aggregating
$9,200 including interest at rates ranging from 4.92% to
11.77%, maturing at various dates through April 2001 230,006 141,931
Note payable to a bank with monthly payments of $1,156 including interest at
prime plus 1.65% (10.15% at June 30, 1998) through June 2002 45,447 54,177
--------------------------
4,256,555 4,375,238
Less current maturities 426,574 272,258
--------------------------
$3,829,981 $4,102,980
==========================
</TABLE>
The 10.35% convertible notes payable due in 2002 are convertible into shares of
the Company's common stock at a price of $10.42 per share at the noteholders'
option at any time prior to maturity. The 7.15% convertible notes are
convertible into shares of the Company's stock at a price of $10 per share at
the noteholders' option at any time prior to maturity. The convertible notes may
be paid by the Company at any time without penalty.
During 1996, certain holders of the unsecured and convertible (prime plus 3%)
notes payable converted notes with a principal balance of $1,678,762 into
167,876 units. Also in 1996, certain holders of the unsecured notes payable and
convertible notes payable (prime plus 3%) converted notes with a principal
balance of $214,495 into the 10.35% convertible notes payable.
During 1996, the Company issued 18,864 shares of its common stock to certain
officers and directors for the cancellation of $136,764 in notes payable to
officers and directors.
F-16
<PAGE> 56
AquaPro Corporation
Notes to Consolidated Financial Statements (continued)
5. NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
During the quarter ended September 30, 1997, the holders of the 10.35%
convertible notes payable due in 1999 and 2000 were offered 1.3 shares of the
Company's Series A Preferred Stock for each $10 of principal in an exchange
offer (see Note 3). In the aggregate, approximately $984,014 of these notes were
exchanged for 127,922 shares of preferred stock. Convertible notes not converted
pursuant to this offer are convertible into shares of the Company's common stock
at the noteholders' option any time prior to maturity at a price of $6.56 to
$8.08 per share.
Substantially all trade accounts receivable, live fish inventories, property,
buildings and equipment and cooperative stock are pledged as collateral to the
note payable to bank and long-term debt. The Company is required, by certain
provisions of the loan agreements, to maintain minimum net worth, current and
debt service coverage ratios beginning in fiscal year 1999.
The aggregate annual maturities of long-term debt at June 30, 1998 are as
follows:
<TABLE>
<S> <C>
1999 $ 426,574
2000 1,462,641
2001 434,083
2002 269,909
2003 575,419
Thereafter 1,087,929
------------------
$4,256,555
==================
</TABLE>
6. COMMON STOCK
The Company had stock purchase warrants with an expiration date of December 31,
1997 that allowed the holder to purchase 1.2 shares of the Company's common
stock for $8.75. On June 30, 1997, the Company exercised its option to convert
the stock purchase warrants into 203,834 shares of the Company's common stock.
F-17
<PAGE> 57
AquaPro Corporation
Notes to Consolidated Financial Statements (continued)
6. COMMON STOCK (CONTINUED)
During 1996, the Company received $2,137,928, net of related expenses pertaining
to broker-dealer commissions, legal, printing, travel and other, from the sale
of 429,865 shares of common stock at $7.25 per share pursuant to the exercise of
$7.25 stock purchase rights and 5,380 shares of common stock at $8.25 per share
pursuant to the exercise of $8.25 stock purchase warrants. In connection with
the exercise of the $7.25 stock purchase rights, the Company granted
broker-dealers options to purchase 39,117 shares of the Company's common stock
at $9.38 per share. The options are exercisable at any time through June 2001.
There are also 235,507 $7.50 stock purchase warrants outstanding at June 30,
1998 pertaining to preferred stock issued in 1997 and 1996 (see Note 9). None of
the options have been exercised as of June 30, 1998. No other stock purchase
rights or warrants are outstanding at June 30, 1998.
During the fiscal year ended June 30, 1998 and six months ended June 30, 1997,
the Company granted to key employees 21,000 shares of common stock at $3.25 per
share and 22,500 shares of common stock at $6.25 per share, respectively. The
Company also granted 24,000 shares of common stock at $6.25 per share to key
employees during the year ended December 31, 1996. The shares generally vest
after a two-year period. Unearned compensation expense is amortized to selling,
general and administrative expenses in the accompanying consolidated statements
of operations over the vesting period. Common shares totaling 5,567 and 9,000
previously granted were canceled during the fiscal year ended June 30, 1998 and
six-month period ended June 30, 1997, respectively.
F-18
<PAGE> 58
AquaPro Corporation
Notes to Consolidated Financial Statements (continued)
7. EMPLOYEE STOCK OPTIONS
The Company granted directors and certain key employees options to purchase
shares of common stock at $2.84 to $3.25 per share during the fiscal year ended
June 30, 1998 and $6.25 per share during the six months ended June 30, 1997 and
year ended December 31, 1996 as follows:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
----------------------------------------
<S> <C> <C>
Outstanding at January 1, 1997 129,000 6.25
Granted 63,000 6.25
Forfeited (12,000) 6.25
-------------------
Outstanding at June 30, 1997 180,000 6.25
Granted 253,000 3.01
Forfeited (9,000) 6.25
-------------------
Outstanding at June 30, 1998 424,000 4.32
===================
</TABLE>
The options were granted for a seven-year period and, are exercisable at anytime
prior to their expiration at various dates from March 31, 2002 to May 27, 2005.
Pro forma information regarding net income and earnings per share is required by
FASB Statement No. 123, Accounting for Stock-Based Compensation, and has been
determined as if the Company had accounted for its employee stock options under
the fair value method of the Statement. The fair value was estimated at the date
of the grant using a Black-Scholes option pricing model with the following
weighted-average assumptions: volatility factor of 1.076 for the year ended June
30, 1998 and .01 for the six months ended June 30, 1997 and the year ended
December 31, 1996; weighted-average expected life of options of 3 years;
risk-free interest rate of 6%; and no dividend yield.
F-19
<PAGE> 59
AquaPro Corporation
Notes to Consolidated Financial Statements (continued)
7. EMPLOYEE STOCK OPTIONS (CONTINUED)
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
granted for the fiscal year ended June 30, 1998 and the six months ended June
30, 1997, and the year ended December 31, 1996 is amortized to expense over the
vesting period. The Company's pro forma net losses were $2,078,258, $1,538,525,
and $2,572,855 for the fiscal year ended June 30, 1998 and the six months ended
June 30, 1997 and the year ended December 31, 1996, respectively, and the
Company's pro forma basic and diluted loss per common share was $(.84) $(.60)
and $(1.06), respectively, for those same periods. The weighted average fair
value of options granted during the fiscal year ended June 30, 1998 was $2.14.
The weighted average fair value of options granted during the six months ended
June 30, 1997 and the year ended December 31, 1996 was $1.00.
8. PROFIT-SHARING PLAN
Effective January 1, 1997, the Company established a profit sharing plan for
substantially all employees. This plan provides for monthly contributions based
on employee deferrals. The Company made contributions of approximately $6,300
and $9,100 to the plan for the year ended June 30, 1998 and the six month period
ended June 30, 1997, respectively.
9. PREFERRED STOCK
During the year ended June 30, 1998, the Company realized net proceeds of
$1,763,286 from the sale of 227,194 shares of Series A Preferred Stock.
F-20
<PAGE> 60
AquaPro Corporation
Notes to Consolidated Financial Statements (continued)
9. PREFERRED STOCK (CONTINUED)
During the six months ended June 30, 1997, the Company received $1,089,239, net
of related expenses pertaining to broker-dealer commissions, legal, printing,
travel and other, from the sale of 130,973 "Preferred Units." In 1996, the
Company received $748,169, net of related expenses pertaining to
broker-dealer commissions, legal, printing, travel and other, from the sale of
104,534 "Preferred Units". A Preferred Unit consists of one share of the
Company's Series A Preferred Stock and one $7.50 common stock purchase warrant.
The $7.50 stock purchase warrants (235,507 warrants outstanding at June 30,
1998) allow the holder to purchase one share of the Company's common stock for
$7.50 prior to the expiration date of December 31, 1998. The warrants will be
automatically converted into three-tenths of a share of the Company's common
stock if not exercised by that date.
The Series A Preferred Stock had cumulative annual dividends of $0.70 per share,
payable quarterly. On May 29, 1998, all of the Company's preferred stock was
converted to common stock under a mandatory exchange provision. The conversion
ratio was the average closing price of the Company's common stock during its
first 65 days of trading (which commenced February 24, 1998). The average
closing price of the Company's stock during this period was $2.837. Accordingly,
3.52485 shares of common stock were issued for each share of $10 Series A
Preferred Stock outstanding or a total of 2,065,438 common shares in exchange
for 590,623 preferred shares. Additionally, the Company paid the Series A
Preferred Stock dividends for the period from January 1, 1998 through May 28,
1998 with shares of common stock. The same exchange ratio used in the mandatory
conversion discussed above was used to determine the number of common shares
issued as payment of the dividend. Accordingly, a total of 58,886 shares was
issued as payment of $167,061 in Series A Preferred Stock dividends.
10. INCOME TAXES
For the year ended December 31, 1996 and the six months ended June 30, 1997,
taxable income and losses of Circle Creek V-VIII were reported on the tax
returns of the partners. Accordingly, income taxes have not been provided in the
accompanying consolidated financial statements applicable to losses of Circle
Creek V-VIII for 1996 and for the six months ended June 30, 1997 . The merger
described in Note 3 was treated as a taxable transaction by the partners with
the excess of the fair value of the related assets and liabilities over the tax
basis reported as taxable income to the partners.
F-21
<PAGE> 61
AquaPro Corporation
Notes to Consolidated Financial Statements (continued)
10. INCOME TAXES (CONTINUED)
The Company had net operating loss carryovers of approximately $5,100,000 at
June 30, 1998, to reduce future taxable income through 2013.
Components of the Company's deferred tax assets consisted of the following:
<TABLE>
<CAPTION>
JUNE 30
1998 1997
-------------------------------------
<S> <C> <C>
Deferred tax assets - noncurrent:
Goodwill for income tax purposes $ 2,283,000 $ 2,440,000
Net operating loss carryforward 1,900,000 960,000
Other 42,000 206,000
-------------------------------------
4,225,000 3,606,000
Valuation allowance for deferred tax assets (4,225,000) (3,606,000)
-------------------------------------
Net deferred tax assets $ -- $ --
=====================================
</TABLE>
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts for cash and cash equivalents approximate their fair values
at June 30, 1998 and 1997. The carrying amount for investments in cooperatives
approximates their fair value at June 30, 1998 and 1997 based upon estimates of
recent sales of stock of the cooperative obtained by management.
Notes payable to banks and officers and directors were at variable rates which
approximated fair value at June 30, 1998 and 1997. The fair value of notes
payable-other and long-term debt, which was estimated using discounted cash flow
analysis based upon the Company's incremental borrowing rates for similar
borrowings arrangements, approximated their carrying amounts at June 30, 1998
and 1997.
F-22
<PAGE> 62
LIST OF EXHIBITS
AQUAPRO CORPORATION
<TABLE>
<CAPTION>
EXHIBIT
ITEM NO.
<S> <C>
AquaPro's Charter (1) 3.1
AquaPro's Amended and Restated Charter (1) 3.2
AquaPro's Articles of Correction to Charter (1) 3.3
AquaPro's Articles of Amendment to Charter (1) 3.4
AquaPro's First Amended and Restated Bylaws (1) 3.5
Plan and Agreement of Consolidation for CCA I - IV (1) 3.6
Plan and Agreement of Consolidation for CCA V - VIII (1) 3.7
Articles of Merger of CCA I - IV and AquaPro Corporation (1) 3.8
Amended Plan and Agreement of Merger of CCA V - VIII and
AquaPro Corporation (2) 3.9
Articles of Merger of CCA V - VIII and AquaPro Corporation (2) 3.10
Form of Common Stock Certificate (1) 4.1
Form of $10.50 Common Stock Warrant (1) 4.2
Form of $10.50 Warrant Agreement (1) 4.3
Form of 10.35% Debenture (1) 4.4
Form of 10.35% Loan Note Agreement (1) 4.5
Form of Series A Preferred Stock Certificate (1) 4.6
Form of $7.50 Common Stock Warrant (1) 4.7
Form of $9.50 Stock Right (2) 4.8
Form of $9.50 Stock Rights Agreement (2) 4.9
Exchange Form for Investor Notes (2) 4.10
</TABLE>
<PAGE> 63
<TABLE>
<CAPTION>
<S> <C>
Form of 10.35% Collateralized Convertible Note (2) 4.11
Form of Agency Agreement 10.35% Collateralized
Convertible Notes (2) 4.12
Form of Security Agreement 10.35% Collateralized
Convertible Notes (2) 4.13
Marketing Agreement with Delta Pride (1) 10.1
Agreements with Delta Western ("Indi Bell") (1) 10.2
Security Agreement, Guaranty, Note with Community Bank (1) 10.3
Note, Deed of Trust, Security Agreement with Met Life (Balmoral) (1) 10.4
Note and Deed of Trust with Met Life (Cypress Lake) (1) 10.5
Employment Agreement with George S. Hastings, Jr. (1) 10.6
Employment Agreement with Patricia G. Hastings (1) 10.7
Note and Deed of Trust with Sunburst Bank (CCA V) (2) 10.8
Note, Deed of Trust, Loan Agreements, and Finance Charge
Agreement with Metropolitan Life (CCA VI) (2) 10.9
Deed of Trust, Assumption Agreements, Modification and Loan
Agreements and other communications with Federal Land Bank
(CCA VII and VIII) (2) 10.10
Four Agreements with Delta Western (Indi-Bell) (3) 10.11
Commitment Letter, Guaranty, Note Agreement, Security Agreement
with Community Bank Dated May 14, 1998 10.12
Promissory Note, Interest Rate Disclosure, Settlement Statements,
Deed of Trust and Security Agreement with Farm Credit Bank
of Texas Dated June 9, 1998 10.13
</TABLE>
Financial Data Schedule 27.1
- --------------------------------------------------------------------------------
(1) Incorporated by reference to the corresponding Exhibit previously filed as
an Exhibit to Registrant's Form 10-SB (File # 000-29258).
(2) Incorporated by reference to the corresponding Exhibit previously filed as
an Exhibit to Registrant's Form 10-KSB filed September 29, 1997 (File
# 000-29258).
(3) Incorporated by reference to the corresponding Exhibit previously filed as
an Exhibit to Registrant's Form 10-QSB filed May 15, 1998 (File # 000-29258).
<PAGE> 64
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in Hermitage,
Tennessee on September 25, 1998.
AQUAPRO CORPORATION
Dated: September 25, 1998 By: /s/ George S. Hastings, Jr.
--------------------------------------
George S. Hastings, Jr.
Chief Executive Officer, President and
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated below and on the date indicated.
By: /s/ George S. Hastings, Jr. September 25, 1998
- --------------------------------
George S. Hastings, Jr., Chief Executive Officer, President
(Principal Executive Officer and Principal Accounting
Officer) and Chairman of the Board
By: /s/ Roger Daley September 25, 1998
- -------------------
Roger Daley, Director
By: /s/ Joseph F. Duncan September 25, 1998
- ------------------------
Joseph F. Duncan, Sr., Director
By: /s/ Ken Ostebo September 25, 1998
- ------------------
Ken Ostebo, Director
<PAGE> 1
EXHIBIT 10.12
COMMUNITY
BANK
INDIANOLA
May 6, 1998
George S. Hastings
President
Aquapro Corporation
4307 Central Pike
Hermitage, TN 37076
Dear George,
Community Bank, Indianola is pleased to commit to Aquapro Corporation a
revolving line of credit in the amount of $1,000,000.00 for the purpose of
financing catfish feed purchased from Delta Western. This commitment is
contingent on the following terms and conditions:
1) The note will be established as a revolving line of credit for the
specific and expressed purpose of financing catfish feed purchased from Delta
Western to be used to feed Aquapro Corporation.
2) It is understood between Aquapro Corporation, hereinafter referred
to as borrower, and Community Bank, Indianola, hereinafter referred to as
lender, that borrower may not enter into any other catfish operations involving
the production and sale of catfish without prior written consent of the lender.
It is further understood that borrower may not pledge any assets described in
the security agreement between borrower and lender dated 5/6/98 without prior
written consent of the lender.
3) The security on the loan will be a perfected first lien position on
all Delta Pride and FishCo stock owned. Minimum number of shares pledged will be
1968 shares of Delta Pride and 448 shares of FishCo. A first lien position on
inventory including fingerlings, food fish and stockers and accounts receivable
will also be granted by Aquapro. A first lien position will also be taken on
approximately 553 acres of land located in Sunflower County and Leflore County
known as Circle Creek and Panther Run.
4) The interest rate charged on the loan will be equal to New York
Consensus Prime plus 165 basis points and will be subject to daily adjustments.
5) This line of credit will mature on March 15, 1999.
6) An operating deposit account will be maintained at Community Bank,
Indianola by Aquapro. All proceeds from pledged inventory sales and account
receivable collection will be deposited into the account with 40 cents of every
pound of fish sold, to be applied, first to
- -------------------------------------------------------------------------------
- P.O. BOX 28 - INDIANOLA, MISSISSIPPI 38751 - PHONE: (601) 887-4513
<PAGE> 2
interest and secondly to principal. The remaining balance will then be available
to Aquapro via check, ACH or wire transfer. Maximum principal balances below
will apply:
November 15, 1998 $800,000
December 15, 1998 $600,000
January 15, 1999 $400,000
February 15, 1999 $200,000
March 15, 1999 -0-
Non-compliance with the above dates will result in 100% of all fish sales being
applied to the LOC until the stated compliance is achieved.
7) By acceptance of this commitment letter, the borrower agrees to
comply with all terms and conditions herein and to a 1% ($10,000.00) commitment
fee. Fee payable to Community Bank, Indianola at the time the commitment letter
is accepted and delivered. This commitment letter must be accepted and delivered
to Community Bank, Indianola by May 8, 1998 or it is null and void. Loan closing
must take place prior to May 15, 1998 or this commitment is null and void.
8) The personal guarantee of George S. Hastings on the line of credit
is required.
9) Monthly financial statements will be required to be submitted to
Community Bank, Indianola by the borrower within three weeks after the close of
the accounting period.
Community Bank, Indianola appreciates the opportunity to provide Aquapro
Corporation with this credit facility and I am looking forward to working with
you during this exciting time.
Sincerely,
/s/ Joseph J. Ricotta E.V.P.
- -----------------------------------------
Joseph J. Ricotta
Executive Vice President
Acceptance
Intending to be legally bound, the undersigned hereby accepts the
foregoing loan commitment.
Executed this 14th day of May, 1998.
/s/ George S. Hastings Jr, President
- -----------------------------------------
George S. Hastings
President
Aquapro Corporation
<PAGE> 3
CONTINUING GUARANTY
In Consideration of COMMUNITY BANK, INDIANOLA, MISSISSIPPI, giving or extending
credit to
AQUAPRO CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
hereinafter called "debtor", I hereby give this continuing guaranty to COMMUNITY
BANK, INDIANOLA, MISSISSIPPI, hereinafter called "Bank", its transferees or
assigns, for the payment in full, together with all interest, attorney fees,
other fees, and charges of whatsoever nature and kind, of any indebtedness,
direct or contingent whether secured or unsecured, of said debtor to said Bank
up to the amount of
ONE MILLION AND NO/100 ------------------------------- ($1,000,000.00) Dollars,
- -----------------------------------------------------------------------
whether due or to become due, and whether now existing or hereafter arising. The
Bank may, one or more times, in its judgement, grant extensions, take and
surrender securities, accept compositions, release or discharge indorsers,
guarantor's or other parties, grant releases and discharges generally, make
changes of any sort whatever in the terms of its contract or manner of doing
business with the debtor and with other parties in relation thereto without
notice to the undersigned, such notice being hereby specifically waived. The
Bank, may, without any notice to or consent to the undersigned, also supply all
moneys received from the debtor and others, or from securities, as it may think
best, without in any way being required to marshal securities or assets, and any
such application of moneys shall not in any way alter, affect, limit or lessen
the liability of the undersigned under this Guaranty. The Bank shall not be
bound to exhaust its recourse against the debtor or other persons or upon the
securities it may hold before being entitled to payment from the undersigned of
the amount hereby guaranteed. I do furthermore bind and obligate myself, my
heirs, and assigns, jointly and severally with said debtor, for payment of the
said indebtedness precisely as if the same had been contracted and was due or
owing by me in person, hereby agreeing to and binding myself, my heirs and
assigns, by all terms and conditions contained in any note or notes signed or
to be signed by said debtor, making myself a party thereto; hereby waiving all
notice including notice of any such indebtedness and of demand presentment,
protest or notice of demand or non-payment and of notice of any act to establish
the liability of any party on any commercial or other paper, indebtedness or
obligation covered by this guaranty; I do further waive all notice and all pleas
of discussion and division and I agree upon demand at any time, to pay to said
Bank, its transferees or assigns, the full amount of said indebtedness up to the
amount of this guaranty, together with interest, fees and charges, as above set
forth, becoming subrogated in the event of payment in full by me to the claim of
said Bank, its transferees or assigns, together with whatever security it or
they may hold against said indebtedness.
In the event this Continuing Guaranty is executed by more than one
individual, it is understood and agreed that each individual shall be bound by
all of the provisions of this continuing guaranty and for the payment in full of
the entire amount stated above, in the same manner as if each individual were
the only person executing this continuing guaranty. It is also understood and
agreed that this continuing guaranty does not supersede nor cancel any
pre-existing guaranty or guaranties given by any of the undersigned on behalf of
the borrower named above but to the contrary shall be in addition thereto.
It is expressly agreed that this continuing guaranty is absolute and
complete, and that acceptance and notice of acceptance thereof by the Bank are
therefore unnecessary and they are hereby expressly waived, and the same shall
continue in force until written notice of its discontinuance shall be delivered
to one of the executive officers of the said Bank, but such discontinuance shall
not affect my liability on any debts and/or obligations of the debtor then
existing nor the liability of any other party in the premises.
Witness signature on this 6th day of May, 19 98.
----------- ---- ----- ------ ---
WITNESS: Leigh Ann Vance /s/ George S. Hastings Jr,
-------------------- ---------------------------------
GEORGE S. HASTINGS
---------------------------------
Special provision as to
guaranty of corporate ---------------------------------
indebtedness on reverse
side hereof. ---------------------------------
<PAGE> 4
<TABLE>
- --------------------------------------------------------------------------------------------
<S> <C> <C>
AQUAPRO CORPORATION
4307 CENTRAL PIKE COMMUNITY BANK, INDIANOLA Loan Number 4240594
---------------
HERITAGE TN 37076 P.O. BOX 28 Date 5/06/98
----------------------
INDIANOLA, MS 38751 Maturity Date 3/15/99
--------------
Loan Amount $1,000,000.00
---------------
Renewal Of
----------------
BORROWER'S NAME AND ADDRESS LENDER'S NAME AND ADDRESS 077/LAV
"I" includes each borrower above, "You" means the lender, its
jointly and severally. successors and assigns.
- --------------------------------------------------------------------------------------------
</TABLE>
For value received, I promise to pay to you, or your order, at your address
listed above the PRINCIPAL sum of ONE MILLION AND NO/100 Dollars $1,000,000.00
---------------------- -------------
[ ] SINGLE ADVANCE: I will receive all of this principal sum on .
---------------
No additional advances are contemplated under this note.
[X] MULTIPLE ADVANCE: The principal sum shown above is the maximum amount of
principal I can borrow under this note. On 5/06/98 I will receive the amount
-------
of $ and future principal advances are contemplated.
------------------------
CONDITIONS: The conditions for future advances are UPON CUSTOMER REQUEST AND
-------------------------
AT BANK'S DISCRETION
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
[X] OPEN END CREDIT: You and I agree that I may borrow up to the maximum
principal sum more than one time. This feature is subject to all other
conditions and expires on 3/15/99.
-------------
[ ] CLOSED END CREDIT: You and I agree that I may borrow (subject to all
other conditions) up to the maximum principal sum only one time.
INTEREST: I agree to pay interest on the outstanding principal balance from
5/06/98 at the rate of 10.150% per year until INDEX RATE CHANGES.
------- ------ ------------------
[X} VARIABLE RATE: This rate may then change as stated below.
[X] INDEX RATE: The future rate will be 1.650% ABOVE the following index
------------
rate: NEW YORK CONSENSUS PRIME RATE AS PUBLISHED IN THE WALL STREET JOURNAL
-----------------------------------------------------------------------
----------------------------------------------------------------------------
[ ] NO INDEX: The future rate will not be subject to any internal or
external index. It will be entirely in your control.
[X] FREQUENCY AND TIMING: The rate on this note may change as often as
DAILY .
------------------------------
A change in the interest rate will take effect DAILY .
---------------------
[ ] LIMITATIONS: During the term of this loan, the applicable annual
interest rate will not be more than % or less than %.
---------- ---------
The rate may not change more than % each .
---------- ----------
EFFECT OF VARIABLE RATE: A change in the interest rate will have the
following effect on the payments:
[ ] The amount of each scheduled payment will change. [X] The amount of
the final payment will change.
[ ] .
---------------------------------------------------------------------
ACCRUAL METHOD: Interest will be calculated on a ACTUAL/365 basis.
----------
POST MATURITY RATE: I agree to pay interest on the unpaid balance of this note
owing after maturity, and until paid in full, as stated below:
[X] on the same fixed or variable rate basis in effect before maturity
(as indicated above).
[ ] at a rate equal to .
--------------------------------------------------
[ ] LATE CHARGE: If a payment is made more than days after it is due, I agree
---
to pay a late charge of .
--------------------------------------------------
[X] ADDITIONAL CHARGES: In addition to interest, I agree to pay the following
charges which [X] are [ ] are not included in the principal amount
above:
153.00 FILING FEES 587.00 ATTORNEY FEE .
--------------------------------------------------------------------------
PAYMENTS: I agree to pay this note as follows:
[X] INTEREST: I agree to pay accrued interest WITH THE PRINCIPAL
--------------------------------
--------------------------------------------------------------------------
[X] PRINCIPAL: I agree to pay the principal AT MATURITY
-----------------------------------
- ------------------------------------------------------------------------------
[ ] INSTALLMENTS: I agree to pay this note in payments. The first
----------
payment will be in the amount of $ will be due .
----------- ----------------
A payment of $ will be due thereafter.
---------- -----------------------------
The final payment of the entire unpaid balance of principal and interest will
be due .
-------------------------------------
PURPOSE: The purpose of this loan is RLOC FOR CATFISH FEED .
-----------------------------------------
ADDITIONAL TERMS:
AGREEMENT BETWEEN AQUAPRO/CIRCLE CREEK, L.P.'S & COMMUNITY BANK, INDIANOLA
& DELTA PRIDE/FISHCO/CONFISH THAT 40 CENTS OF EVERY POUND OF FISH SOLD
WILL BE APPLIED DIRECTLY TO LINE OF CREDIT AND NONCOMPLIANCE OF THE
PAYMENT SCHEDULE ESTABLISHED IN THE LETTER OF AGREEMENT WILL RESULT IN
100% OF ALL FISH SALES BEING APPLIED TO THE LINE OF CREDIT UNTIL STATED
COMPLIANCE IS ACHIEVED.
(page 1 of 3)
<PAGE> 5
SECURITY
SECURITY INTEREST: I give you a security interest in all of the Property
described below that I now own and that I may own in the future (including, but
not limited to, all parts, accessories, repairs, improvements, and accessions to
the Property), wherever the Property is or may be located, and all proceeds and
products from the Property.
[X] INVENTORY: All inventory which I hold for ultimate sale or lease, or which
has been or will be supplied under contracts of service, or which are raw
materials, work in process, or materials used or consumed in my business.
[ ] EQUIPMENT: All equipment including, but not limited to, all machinery,
vehicles, furniture, fixtures, manufacturing equipment, farm machinery and
equipment, shop equipment, office and recordkeeping equipment, and parts and
tools. All equipment described in a list or schedule which I give to you
will also be included in the secured property, but such a list is not
necessary for a valid security interest in my equipment.
[ ] FARM PRODUCTS: All farm products including, but not limited to:
(a) all poultry and livestock and their young, along with their products,
produce and replacements;
(b) all crops, annual or perennial, and all products of the crops; and
(c) all feed, seed, fertilizer, medicines, and other supplies used or
produced in my farming operations.
[X] ACCOUNTS, INSTRUMENTS, DOCUMENTS, CHATTEL PAPER AND OTHER RIGHTS TO PAYMENT:
All rights I have now and that I may have in the future to the payment of
money including, but not limited to:
(a) payment for goods and other property sold or leased or for services
rendered, whether or not I have earned such payment by performance; and
(b) rights to payment arising out of all present and future debt
instruments, chattel paper and loans and obligations receivable. The above
include any rights and interests (including all liens and security
interests) which I may have by law or agreement against any account debtor
or obligor of mine.
[X] GENERAL INTANGIBLES: All general intangibles including, but not limited to,
tax refunds, applications for patents, patents, copyrights, trademarks,
trade secrets, good will, trade names, customer lists, permits and
franchises, and the right to use my name.
[ ] GOVERNMENT PAYMENTS AND PROGRAMS: All payments, accounts, general
intangibles, or other benefits (including, but not limited to, payments in
kind, deficiency payments, letters of entitlement, warehouse receipts,
storage payments, emergency assistance payments, diversion payments, and
conservation reserve payments) in which I now have and in the future may
have any rights or interest and which arise under or as a result of any
preexisting, current or future Federal or state governmental program
(including, but not limited to, all programs administered by the Commodity
Credit Corporation and the ASCS).
[X] The secured property includes, but is not limited by, the following:
RLOC; 1ST D/T DATED 5/6/98 COVERING 276.933 ACRES LOCATED IN ALL OF LOTS
2,3,4,5,& 6 AND PART OF LOTS 1,7,8,11 & 12 S21,T19N,R3W, SUNFLOWER COUNTY,
MS. 1ST D/T 5/6/98 COVERING 277.71 ACRES LOCATED S5,6,7,& 8, T18N, R2W,
LEFLORE COUNTY, MISSISSIPPI. S/A DATED 5/6/98 COVERING ALL CATFISH/FISH
INVENTORY INCLUDING BUT NOT LIMITED TO FINGERLINGS, STOCKERS AND FOOD FISH
AND PROCEEDS AND REBATES FROM THE SALE OF CATFISH/FISH. ASSN OF 448 SHARES
OF FISCHO INC STOCK CERT, #556 AND ASSN OF 1968 SHARES OF DELTA PRIDE INC.
STOCK CERT. #1282, #1224, #1223, #1225, #1222, #1216 AND #1217 ALL IN THE
NAME OF AQUA PRO CORPORATION.
[ ] If checked, file this agreement on the real estate records. Record owner
(if not me)
----------------------------------------------------------------
- -------------------------------------------------------------------------------
The Property will be used for a [ ] personal [ ] business [X] agricultural
[ ] purpose.
-----------------
ADDITIONAL TERMS OF THE SECURITY AGREEMENT
GENERALLY - This agreement secures this note and any other debt I have with you,
now or later. However, it will not secure other debts if you fail with respect
to such other debts, to make any required disclosure about this security
agreement or if you fail to give any required notice of the right of rescission.
If property described in this agreement is located in another state, this
agreement may also, in some circumstances, be governed by the law of the state
in which the Property is located.
OWNERSHIP AND DUTIES TOWARD PROPERTY - I represent that I own all of the
Property, or to the extent this is a purchase money security interest I will
acquire ownership of the Property with the proceeds of the loan. I will defend
it against any other claim. Your claim to the Property is ahead of the claims of
any other creditor. I agree to do whatever you require to protect your security
interest and to keep your claim in the Property ahead of the claims of other
creditors. I will not do anything to harm your position.
I will keep books, records and accounts about the Property and my business
in general. I will let you examine these records at any reasonable time. I will
prepare any report or accounting you request, which deals with the Property.
I will keep the Property in my possession and will keep it in good repair
and use it only for the purpose(s) described on page 1 of this agreement. I will
not change this specified use without your express written permission. I
represent that I am the original owner of the Property and, if I am not, that I
have provided you with a list of prior owners of the Property.
I will keep the Property at my address listed on page 1 of this agreement,
unless we agree I may keep it at another location. If the Property is to be used
in another state, I will give you a list of those states. I will not try to sell
the Property unless it is inventory or I receive your written permission to do
so. If I sell the Property I will have the payment made payable to the order of
you and me.
You may demand immediate payment of the debt(s) if the debtor is not a
natural person and without your prior written consent; (1) a beneficial interest
in the debtor is sold or transferred, or (2) there is a change in either the
identity or number of members of a partnership, or (3) there is a change in
ownership of more than 25 percent of the voting stock of a corporation.
I will pay all taxes and charges on the Property as they become due. You
have the right of reasonable access in order to inspect the Property. I will
immediately inform you of any loss or damage to the Property.
If I fail to perform any of my duties under this security agreement, or
any mortgage, deed of trust, lien or other security interest, you may without
notice to me perform the duties or cause them to be performed. Your right to
perform for me shall not create an obligation to perform and your failure to
perform will not preclude you from exercising any of your other rights under the
law or this security agreement.
PURCHASE MONEY SECURITY INTEREST - For the sole purpose of determining the
extent of a purchase money security interest arising under this security
agreement: (a) payments on any nonpurchase money ban also secured by this
agreement will not be deemed to apply to the Purchase Money Loan, and (b)
payments on the Purchase Money Loan will be deemed to apply first to the
nonpurchase money portion of the ban, if any, and then to the purchase money
obligations in the order which the items of collateral were acquired or if
acquired at the same time, in the order selected by you. No security interest
will be terminated by application of this formula. "Purchase Money Loan" means
any loan the proceeds of which, in whole or in part, are used to acquire any
collateral securing the loan and all extensions, renewals, consolidations and
refinancing of such loan.
PAYMENTS BY LENDER - You are authorized to pay, on my behalf, charges I am or
may become obligated to pay to preserve or protect the secured property (such
as property insurance premiums). You may treat those payments as advances and
add them to the unpaid principal under the note secured by this agreement or you
may demand immediate payment of the amount advanced.
INSURANCE - I agree to buy insurance on the Property against the risks and for
the amounts you require and to furnish you continuing proof of coverage. I will
have the insurance company name you as loss payee on any such policy. You may
require added security if you agree that insurance proceeds may be used to
repair or replace the Property. I will buy insurance from a firm licensed to do
business in the state where you are located. The firm will be reasonably
acceptable to you. The insurance will last until the Property is released from
this agreement. If I fail to buy or maintain the insurance (or fail to name you
as loss payee) you may purchase it yourself.
WARRANTIES AND REPRESENTATIONS - If this agreement includes accounts, I will not
settle any account for less than its full value without your written permission.
I will collect all accounts until you tell me otherwise. I will keep the
proceeds from all the accounts and any goods which are returned to me or which
I take back in trust for you. I will not mix them with any other property of
mine. I will deliver them to you at your request. If you ask me to pay you the
full price on any returned items or items retaken by myself, I will do so.
If this agreement covers inventory, I will not dispose of it except in my
ordinary course of business at the fair market value for the Property, or at a
minimum price established between you and me.
If this agreement covers farm products I will provide you, at your request,
a written list of the buyers, commission merchants or selling agents to or
through whom I may sell my farm products. In addition to those parties named on
this written list, I authorize you to notify at your sole discretion any
additional parties regarding your security interest in my farm products. I
remain subject to all applicable penalties for selling my farm products in
violation of my agreement with you and the Food Security Act. In this paragraph
the terms farm products, buyers, commission merchants and selling agents have
the meanings given to them in the Federal Food Security Act of 1985.
REMEDIES - I will be in default on this security agreement if I am in default on
any note this agreement secures or if I fail to keep any promise contained in
the terms of this agreement. If I default, you have all of the rights and
remedies provided in the note and under the Uniform Commercial Code. You may
require me to make the secured property available to you at a place which is
reasonably convenient. You may take possession of the secured property and sell
it as provided by law. The proceeds will be applied first to your expenses and
then to the debt. I agree that 10 days written notice sent to my last known
address by first class mail will be reasonable notice under the Uniform
Commercial Code. My current address is on page 1. I agree to inform you in
writing of any change of my address.
FILING - A carbon, photographic or other reproduction of this security agreement
or the financing statement covering the Property described in this agreement may
be used as a financing statement where allowed by law. Where permitted by law,
you may file a financing statement which does not contain my signature, covering
the Property secured by this agreement.
- --------------------------------------------------------------------------------
Any person who signs within this box does so to give you a security interest
in the Property described on this page. This person does not promise to pay the
note. "I" as used in this security agreement will include the borrower and any
person who signs within this box.
Date
---------------------------------------
Signed
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(page 2 of 3)
<PAGE> 6
ADDITIONAL TERMS OF THE NOTE
DEFINITIONS - As used on pages 1 and 2, "[X]" means the terms that apply to this
loan. "I," "me" or "my" means each Borrower who signs this note and each other
person or legal entity (including guarantors, endorsers, and sureties) who
agrees to pay this note (together referred to as "us"). "You" or "your" means
the Lender and its successors and assigns.
APPLICABLE LAW - The law of the state in which you are located will govern this
agreement. Any term of this agreement which is contrary to applicable law will
not be effective, unless the law permits you and me to agree to such a
variation. If any provision of this agreement cannot be enforced according to
its terms, this fact will not affect the enforceability of the remainder of this
agreement. No modification of this agreement may be made without your express
written consent. Time is of the essence in this agreement.
PAYMENTS - Each payment I make on this note will first reduce the amount I owe
you for charges which are neither interest nor principal. The remainder of each
payment will then reduce accrued unpaid interest, and then unpaid principal. If
you and I agree to a different application of payments, we will describe our
agreement on this note. I may prepay a part of, or the entire balance of this
loan without penalty, unless we specify to the contrary on this note. Any
partial prepayment will not excuse or reduce any later scheduled payment until
this note is paid in full (unless, when I make the prepayment, you and I agree
in writing to the contrary).
INTEREST - Interest accrues on the principal remaining unpaid from time to time,
until paid in full. If I receive the principal in more than one advance, each
advance will start to earn interest only when I receive the advance. The
interest rate in effect on this note at any given time will apply to the entire
principal sum outstanding at that time. Notwithstanding anything to the
contrary, I do not agree to pay and you do not intend to charge any rate of
interest that is higher than the maximum rate of interest you could charge under
applicable law for the extension of credit that is agreed to in this note
(either before or after maturity). If any notice of interest accrual is sent and
is in error, we mutually agree to correct it, and if you actually collect more
interest than allowed by law and this agreement, you agree to refund it to me.
INDEX RATE - The index will serve only as a device for setting the interest rate
on this note. You do not guarantee by selecting this index, or the margin, that
the interest rate on this note will be the same rate you charge on any other
loans or class of loans you make to me or other borrowers.
POST MATURITY RATE - For purposes of deciding when the "Post Maturity Rate"
(shown on page 1) applies, the term "maturity" means the date of the last
scheduled payment indicated on page 1 of this note or the date you accelerate
payment on the note, whichever is earlier.
SINGLE ADVANCE LOANS - If this is a single advance loan, you and I expect that
you will make only one advance of principal. However, you may add other amounts
to the principal if you make any payments described in the "PAYMENTS BY LENDER"
paragraph on page 2.
MULTIPLE ADVANCE LOANS - If this is a multiple advance loan, you and I expect
that you will make more than one advance of principal. If this is closed end
credit, repaying a part of the principal will not entitle me to additional
credit.
SET-OFF - I agree that you may set off any amount due and payable under this
note against any right I have to receive money from you.
"Right to receive money from you" means:
(1) any deposit account balance I have with you;
(2) any money owed to me on an item presented to you or in your possession
for collection or exchange; and
(3) any repurchase agreement or other nondeposit obligation.
"Any amount due and payable under this note" means the total amount of
which you are entitled to demand payment under the terms of this note at the
time you set off. This total includes any balance the due date for which you
properly accelerate under this note.
If my right to receive money from you is also owned by someone who has not
agreed to pay this note, your right of set-off will apply to my interest in the
obligation and to any other amounts I could withdraw on my sole request or
endorsement. Your right of set-off does not apply to an account or other
obligation where my rights are only as a representative. It also does not apply
to any Individual Retirement Account or other tax-deferred retirement account.
You will not be liable for the dishonor of any check when the dishonor
occurs because you set off this debt against any of my accounts. I agree to hold
you harmless from any such claims arising as a result of your exercise of your
right to set-off.
DEFAULT - I will be in default if any one or more of the following occur: (1) I
fail to make a payment on time or in the amount due; (2) I fail to keep the
Property insured, if required; (3) I fail to pay, or keep any promise, on any
debt or agreement I have with you; (4) any other creditor of mine attempts to
collect any debt I owe him through court proceedings; (5) I die, am declared
incompetent, make an assignment for the benefit of creditors, or become
insolvent (either because my liabilities exceed my assets or I am unable to pay
my debts as they become due); (6) I make any written statement or provide any
financial information that is untrue or inaccurate at the time it was provided;
(7) I do or fail to do something which causes you to believe you will have
difficulty collecting the amount I owe you; (8) any collateral securing this
note is used in a manner or for a purpose which threatens confiscation by a
legal authority; (9) I change my name or assume an additional name without first
notifying you before making such a change; (10) I fail to plant, cultivate
and harvest crops in due season; (11) any loan proceeds are used for a purpose
that will contribute to excessive erosion of highly erodible land or to the
conversion of wetlands to produce an agricultural commodity, as further
explained in 7 C.F.R. Part 1940, Subpart G, Exhibit M.
REMEDIES - If I am in default on this note you have, but are not limited to, the
following remedies:
(1) You may demand immediate payment of all I owe you under this note
(principal, accrued unpaid interest and other accrued unpaid charges).
(2) You may set off this debt against any right I have to the payment of
money from you, subject to the terms of the "SET-OFF" paragraph herein.
(3) You may demand security, additional security, or additional parties
to be obligated to pay this note as a condition for not using any other
remedy.
(4) You may refuse to make advances to me or allow purchases on credit by
me.
(5) You may use any remedy you have under state or federal law.
(6) You may make use of any remedy given to you in any agreement securing
this note.
By selecting any one or more of these remedies you do not give up your
right to use later any other remedy. By waiving your right to declare an event
to be a default, you do not waive your right to consider later the event a
default if it continues or happens again.
COLLECTION COSTS AND ATTORNEY'S FEES - I agree to pay all costs of collection,
replevin or any other or similar type of cost if I am in default. In addition,
if you hire an attorney to collect this note, I also agree to pay any fee you
incur with such attorney plus court costs (except where prohibited by law). To
the extent permitted by the United States Bankruptcy Code, I also agree to pay
the reasonable attorney's fees and costs you incur to collect this debt as
awarded by any court exercising jurisdiction under the Bankruptcy Code.
WAIVER - I give up my rights to require you to do certain things. I will not
require you to:
(1) demand payment of amounts due (presentment);
(2) obtain official certification of nonpayment (protest); or
(3) give notice that amounts due have not been paid (notice of dishonor).
I waive any defenses I have based on suretyship or impairment of
collateral.
OBLIGATIONS INDEPENDENT - I understand that I must pay this note even if someone
else has also agreed to pay it (by, for example, signing this form or a separate
guarantee or endorsement). You may sue me alone, or anyone else who is obligated
on this note, or any number of us together, to collect this note. You may
without notice release any party to this agreement without releasing any other
party. If you give up any of your rights, with or without notice, it will not
affect my duty to pay this note. Any extension of new credit to any of us, or
renewal of this note by all or less than all of us will not release me from my
duty to pay it. (Of course, you are entitled to only one payment in full.) I
agree that you may at your option extend this note or the debt represented by
this note, or any portion of the note or debt, from time to time without limit
or notice and for any term without affecting my liability for payment of the
note. I will not assign my obligation under this agreement without your prior
written approval.
CREDIT INFORMATION - I agree and authorize you to obtain credit information
about me from time to time (for example, by requesting a credit report) and to
report to others your credit experience with me (such as a credit reporting
agency). I agree to provide you, upon request, any financial statement or
information you may deem necessary. I warrant that the financial statements and
information I provide to you are or will be accurate, correct and complete.
SIGNATURES: I AGREE TO THE TERMS OF THIS NOTE (INCLUDING THOSE ON PAGES 1 AND
2). I have received a copy on today's date.
AQUAPRO CORPORATION
BY: /s/ GEORGE S. HASTINGS JR, PRESIDENT
- ------------------------------------------ ---------------------------------
GEORGE S. HASTINGS
- ------------------------------------------ ----------------------------------
- ------------------------------------------ ----------------------------------
SIGNATURE FOR LENDER:
---------------------------------------------------------
(page 3 of 3)
<PAGE> 7
LEFLORE COUNTY
PROPERTY 4240594
ENVIRONMENTAL
CERTIFICATE
(RESIDENTIAL AND LAND)
Borrowers certify that they have no knowledge of solid waste, hazardous waste,
hazardous substance, toxic substances, contaminates or pollutants, including,
but not limited to petroleum products, asbestos, polychlorinated, biphenosis,
formaldehyde, or infections radioactive, biologically contaminated or
disease-causing materials (collectively "Hazardous Substances") in, on, or
about, or leaching onto or from the real property involved in this transaction,
and borrowers have not allowed or caused any Hazardous Substances to be dumped
or disposed of on the real property until this transaction has been completed.
Further, borrowers warrant that there are no actions, suits, proceedings, or
investigations pending or to their knowledge threatened against or affecting
borrowers or the real property, in law or in equity, or before any
administrative or governmental agency or bureau which may result in any material
adverse change in the real property.
Borrower will grant to the bank and its representatives authorization to enter
upon and inspect the Property and perform such tests at borrower's expense as
are necessary to determine the environmental condition of the property.
Borrower shall protect, indemnify and hold the Bank, its directors, officers,
employees, agents, and any successors to the Bank's interest in the Property
harmless from any and all loss, damages, suits, penalties, costs liability or
expenses arising out of any claim for loss or damage to property, injuries to or
death of persons, contamination of or adverse effects on the environmental laws,
ordinances, rules or regulations, caused by or resulting from any hazardous
material, substance or waste on, under or from the Property.
This indemnification and hold harmless obligations shall be in addition to any
and all remedies otherwise available to the Bank hereunder or under any of the
loan documents and shall survive the payment in full of this indebtedness.
DATED: 5/06/98
-----------------------------------
AQUAPRO CORPORATION
------------------------------------------
GEORGE S HASTINGS
/S/ GEORGE S HASTINGS
------------------------------------------
<PAGE> 8
SUNFLOWER COUNTY
PROPERTY 4240594
ENVIRONMENTAL
CERTIFICATE
(RESIDENTIAL AND LAND)
Borrowers certify that they have no knowledge of solid waste, hazardous waste,
hazardous substance, toxic substances, contaminates or pollutants, including,
but not limited to petroleum products, asbestos, polychlorinated, biphenosis,
formaldehyde, or infections radioactive, biologically contaminated or
disease-causing materials (collectively "Hazardous Substances") in, on, or
about, or leaching onto or from the real property involved in this transaction,
and borrowers have not allowed or caused any Hazardous Substances to be dumped
or disposed of on the real property until this transaction has been completed.
Further, borrowers warrant that there are no actions, suits, proceedings, or
investigations pending or to their knowledge threatened against or affecting
borrowers or the real property, in law or in equity, or before any
administrative or governmental agency or bureau which may result in any material
adverse change in the real property.
Borrower will grant to the bank and its representatives authorization to enter
upon and inspect the Property and perform such tests at borrower's expense as
are necessary to determine the environmental condition of the property.
Borrower shall protect, indemnify and hold the Bank, its directors, officers,
employees, agents, and any successors to the Bank's interest in the Property
harmless from any and all loss, damages, suits, penalties, costs liability or
expenses arising out of any claim for loss or damage to property, injuries to or
death of persons, contamination of or adverse effects on the environmental laws,
ordinances, rules or regulations, caused by or resulting from any hazardous
material, substance or waste on, under or from the Property.
This indemnification and hold harmless obligations shall be in addition to any
and all remedies otherwise available to the Bank hereunder or under any of the
loan documents and shall survive the payment in full of this indebtedness.
DATED: 5/06/98
-----------------------------------
AQUAPRO CORPORATION
------------------------------------------
GEORGE S HASTINGS
/S/ GEORGE S HASTINGS
------------------------------------------
<PAGE> 9
SECURITY AGREEMENT
DATE May 06, 1998
----------------
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
DEBTOR AQUAPRO CORPORATION SECURED
PARTY COMMUNITY BANK, INDIANOLA
- --------------------------------------------------------------------------------
BUSINESS
OR
RESIDENCE 4307 CENTRAL PIKE ADDRESS
ADDRESS P. O. BOX 28
- --------------------------------------------------------------------------------
CITY CITY
STATE & HERITAGE TN 37076 0000 STATE & INDIANOLA, MS 38751
ZIP CODE ZIP CODE
- --------------------------------------------------------------------------------
</TABLE>
1. SECURITY INTEREST AND COLLATERAL. To secure the payment and performance of
each and every debt, liability and obligation of every type and description
which Debtor may now or at any time hereafter owe to Secured Party (whether
such debt, liability or obligation now exists or is hereafter created or
incurred, and whether it is or may be direct or indirect, due or to become due,
absolute or contingent, primary or secondary, liquidated or unliquidated, or
joint, several or joint and several; all such debts, liabilities and
obligations being herein collectively referred to as the "Obligations"), Debtor
hereby grants Secured Party a security interest (herein called the "Security
Interest") in the following property (herein called the "Collateral") (check
applicable boxes and complete information):
(a) INVENTORY:
[X] All inventory of Debtor, whether now owned or hereafter acquired and
wherever located;
(b) EQUIPMENT, FARM PRODUCTS AND CONSUMER GOODS:
[ ] All equipment of Debtor, whether now owned or hereafter acquired,
including but not limited to all present and future machinery,
vehicles, furniture, fixtures, manufacturing equipment, farm machinery
and equipment, shop equipment, office and recordkeeping equipment,
parts and tools, and the goods described in any equipment schedule or
list herewith or hereafter furnished to Secured Party by Debtor (but
no such schedule or list need be furnished in order for the security
interest granted herein to be valid as to all of Debtor's equipment).
[ ] All farm products of Debtor, whether now owned or hereafter acquired,
including but not limited to (i) all poultry and livestock and their
young, products thereof and produce thereof, (ii) all crops, whether
annual or perennial, and the products thereof, and (iii) all feed,
seed, fertilizer, medicines and other supplies used or produced by
Debtor in farming operations. The real estate concerned with the above
described crops growing or to be grown is:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
and the name of the record owner is:
----------------------------------
[ ] The following goods or type of goods:
---------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
(c) ACCOUNTS AND OTHER RIGHTS TO PAYMENT:
[X] Each and every right of Debtor to the payment of money, whether such
right to payment now exists or hereafter arises, whether such right to
payment arises out of a sale, lease or other disposition of goods or
other property by Debtor, out of a rendering of services by Debtor,
out of a loan by Debtor, out of the overpayment of taxes or other
liabilities of Debtor, or otherwise arises under any contract or
agreement, whether such right to payment is or is not already earned
by performance, and howsoever such right to payment may be evidenced,
together with all other rights and interests (including all liens and
security interests) which Debtor may at any time have by law or
agreement against any account debtor or other obligor obligated to
make any such payment or against any of the property of such account
debtor or other obligor; all including but not limited to all present
and future debt instruments, chattel papers, accounts, and loans and
obligations receivable.
[ ]
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
(d) GENERAL INTANGIBLES:
[X] All general intangibles of Debtor, whether now owned or hereafter
acquired, including, but not limited to, applications for patents,
patents, copyrights, trademarks, trade secrets, good will, tradenames,
customer lists, permits and franchises, the right to use Debtor's name,
and tax refunds.
together with all substitutions and replacements for and products of any of
the foregoing property not constituting consumer goods and together with
proceeds of any and all of the foregoing property and, in the case of all
tangible Collateral, together with all accessions and, except in the case of
consumer goods, together with (i) all accessories, attachments, parts,
equipment and repairs now or hereafter attached or affixed to or used in
connection with any such goods, and (ii) all warehouse receipts, bills of
lading and other documents of title now or hereafter covering such goods.
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Debtor represents, warrants and
agrees that:
(a) Debtor is [ ] an individual, [ ] a partnership, [X] a corporation and, if
Debtor is an individual, the Debtor's residence is at the address of
Debtor shown at the beginning of this Agreement.
(b) The Collateral will be used primarily for [ ] personal, family or
household purposes; [X] farming operations; [ ] business purposes.
(c) [ ] If any part or all of the tangible Collateral will become so related
to particular real estate as to become a fixture, the real estate
concerned is:
-------------------------------------------------------------
--------------------------------------------------------------------------
and the name of the record owner is:
--------------------------------------
(d) Debtor's chief executive office is located at
----------------------------
or, if left blank, at the address of Debtor shown at the beginning of
this Agreement.
--------------------------------------------------------------------------
THIS AGREEMENT CONTAINS ADDITIONAL PROVISIONS SET FORTH ON PAGE 2 OF THIS
DOCUMENT, ALL OF WHICH ARE MADE A PART HEREOF.
COMMUNITY BANK, INDIANOLA AQUAPRO CORPORATION
- ------------------------------------- ---------------------------------------
Secured Party's Name Debtor's Name
By By /s/ G. S. Hastings Jr.
----------------------------------- -------------------------------------
Title: Title: PRESIDENT
------------------------------- ---------------------------------
By
------------------------------------
Title:
--------------------------------
(page 1 of 2)
<PAGE> 10
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------
AQUAPRO CORPORATION COMMUNITY BANK, INDIANOLA
- -------------------------- P. O. BOX 28 Date: 5/06/98
4307 CENTRAL PIKE INDIANOLA, MS 38751 ------------
- -------------------------- Loan
HERITAGE TN 37076 No.: 4240594
- -------------------------- -------------
- -------------------------- Security
- -------------------------- Agreement
DEBTOR'S NAME, ADDRESS AND Date: 5/06/98
TAXPAYER I.D. NUMBER SECURED PARTY'S NAME AND ADDRESS ------------
- -------------------------------------------------------------------------------------
</TABLE>
Debtor agrees to provide to Secured Party a written list of the buyers,
commission merchants and selling agents to or through whom Debtor may sell the
farm products described in the Security Agreement given to Secured Party and
executed by Debtor on the "Security Agreement Date" specified above. As used in
this document, the terms "farm products," "buyers," "commission merchants," and
"selling agents" have the meanings given to them by the Federal Food Security
Act of 1985.
Debtor is providing to Secured Party the following list of potential
buyers, selling agents and commission merchants to or through whom Debtor
anticipates selling the farm products described in the Security Agreement
executed by Debtor on the "Security Agreement Date" specified above. Debtor is
aware that sale of the farm product collateral to or through anyone not on this
list is illegal unless Debtor notifies the Secured Party in writing of the
identity of the buyer, selling agent, or commission merchant at least 7 days
prior to the sale or Debtor accounts to the Secured Party for the proceeds of
the sale not later than 10 days after the sale. Debtor agrees that Secured
Party may require any check or draft issued as full or partial payment for the
sale of farm products to be made payable to both Debtor and Secured Party.
Debtor agrees to keep this list current and to promptly notify Secured Party of
any changes to this list.
Debtor and Secured Party intend that the above terms and the following list
amend and become a part of the Security Agreement described above.
<TABLE>
<CAPTION>
NAME ADDRESS FARM PRODUCT TYPE
<S> <C> <C>
DELTA PRIDE P O BOX 850 INDIANOLA, MS 38751 CATFISH
CONFISH P O BOX 271 ISOLA, MS 38754 CATFISH
SOUTHFRESH FARMS, LLC P O BOX 848 INDIANOLA, MS 38751 CATFISH
FARM FRESH CATFISH P O BOX 85 HOLLANDALE, MS 38748 CATFISH
AMERICA'S CATCH P O BOX 683 ITTA BENA, MS 38941 CATFISH
FRESHWATER FARMS P O BOX 957 YAZOO CITY, MS 39194 CATFISH
HEARTLAND CATFISH 55001 HWY 82 W ITTA BENA, MS 38941 CATFISH
SOUTHERN FARM FISH PRO. RT 1 BOX 138F EUDORA, AR 71378 CATFISH
</TABLE>
[X] If checked, this list replaces any prior list provided by Debtor to Secured
Party. Debtor agrees not to sell any farm products covered by the described
Security Agreement to anyone named on any prior list unless that same person
or entity is also listed above.
SECURED PARTY: COMMUNITY BANK, INDIANOLA DEBTOR'S SIGNATURE: Debtor
acknowledges receipt of a copy of
this document on the date shown
above.
By: X /s/ George S. Hastings Jr.
-------------------------------------- -----------------------------------
GEORGE S. HASTINGS
X
-----------------------------------
X
-----------------------------------
(page 1 of 1)
<PAGE> 11
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Statement of Purpose for an Extension of Credit Secured by Margin Stock
(Federal Reserve Form U-1)
COMMUNITY BANK, INDIANOLA
--------------------------------------
Name of Bank
This report is required by law (15 U.S.C. ss.ss. 78g and 78w; 12 CFR 221).
Public reporting burden for this collection of information is estimated to
average 4.2 minutes (0.07 hours) per response, including the time for reviewing
instructions, searching existing data sources, gathering and maintaining the
data needed, and completing and reviewing the collection of information. Send
comments regarding this burden estimate, including suggestions for reducing
this burden, to Secretary, Board of Governors of the Federal Reserve System,
20th and C Streets, N.W., Washington, D.C. 20551; and to the Office of
Management and Budget, Paperwork Reduction Project (7100-0115), Washington,
D.C. 20503.
INSTRUCTIONS
1. This form must be completed when a bank extends credit in excess of $100,000
secured directly or indirectly, in whole or in part, by any margin stock.
2. The term "margin stock" is defined in Regulation U (12 CFR 221) and includes,
principally: (1) stocks that are registered on a national securities exchange
or that are on the Federal Reserve Board's List of Marginable OTC Stocks; (2)
debt securities (bonds) that are convertible into margin stocks; (3) any
over-the-counter security designated as qualified for trading in the National
Market System under a designation plan approved by the Securities and Exchange
Commission (NMS security); and (4) shares of most mutual funds, unless 95 per
cent of the assets of the fund are continuously invested in U.S. government,
agency, state, or municipal obligations.
3. Please print or type (if space is inadequate, attach separate sheet).
PART 1 To be completed by borrower(s)
1. What is the amount of the credit being extended? 1000000.00
---------------------------
2. Will any part of this credit be used to purchase or carry margin stock?
[ ] Yes [X] No
If the answer is "no," describe the specific purpose of the credit.
-----------
RLOC FOR CATFISH FEED
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
I (We) have read this form and certify that to the best of my (our) knowledge
and belief the information given is true, accurate, and complete, and that the
margin stock and any other securities collateralizing this credit are
authentic, genuine, unaltered, and not stolen, forged, or counterfeit.
Signed: Signed:
5/06/98 /s/ George S. Hastings Jr. 5/6/98
- --------------------------------- ------------------------------------------
Borrower's signature Date Borrower's signature Date
AQUAPRO CORPORATION GEORGE HASTINGS
- --------------------------------- -------------------------------------------
Print or type name Print or type name
This form should not be signed if blank.
A BORROWER WHO FALSELY CERTIFIES THE PURPOSE OF A CREDIT ON THIS FORM OR
OTHERWISE willfully or intentionally evades the
PROVISIONS OF REGULATION U WILL ALSO VIOLATE FEDERAL RESERVE REGULATION X,
"Borrowers of Securities Credit."
<PAGE> 12
PART II To be completed by bank only if the purpose of the credit is to
purchase or carry margin securities (Part 1(2) answered "yes").
1. List the margin stock securing this credit; do not include debt securities
convertible into margin stock. The maximum loan value of margin stock is 50 per
cent of its current market value under the current Supplement to Regulation U.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Date and source
No. of Issue Market price of valuation Total market
shares per share (See note below) value per issue
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
448 FISHCO INC 180.00 4/09/98 80,640.00
1968 DELTA PRIDE INC 200.00 4/09/98 393,600.00
- -----------------------------------------------------------------------------------
</TABLE>
2. List the debt securities convertible into margin stock securing this credit.
The maximum loan value of such debt securities is 50 per cent of the current
market value under the current Supplement to Regulation U.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Date and source
Principal Issue Market price of valuation Total market
amount (See note below) value per issue
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
3. List other collateral including non-margin stock securing this credit.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Date and source
Describe briefly Market price of valuation Good faith
(See note below) loan value
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
</TABLE>
Note: Bank need not complete "Date and source of valuation" if the market value
was obtained from regularly published information in a journal of general
circulation or an automated quotation system.
PART III To be signed by a bank officer in all instances.
I am a duly authorized representative of the bank and understand that this
credit secured by margin stock may be subject to the credit restrictions of
Regulation U. I have read this form and any attachments, and I have accepted
the customer's statement in Part I in good faith as required by Regulation U*;
and I certify that to the best of my knowledge and belief, all the information
given is true, accurate, and complete. I also certify that if any securities
that directly secure the credit are not or will not be registered in the name of
the borrower or its nominee, I have or will cause to have examined the
written consent of the registered owner to pledge such securities. I further
certify that any securities that have been or will be physically delivered to
the bank in connection with this credit have been or will be examined, that all
validation procedures required by bank policy and the Securities Exchange Act of
1934 (section 17(f), as amended) have been or will be performed, and that I am
satisfied to the best of my knowledge and belief that such securities are
genuine and not stolen or forged and their faces have not been altered.
Signed:
/s/ Joseph J. Ricotta E.V.P.
- ------------------------------------ ---------------------------------------
Date Bank officer's signature
EXECUTIVE VICE PRESIDENT JOSEPH J. RICOTTA
- ------------------------------------ ---------------------------------------
Title Print or type name
- ---------------
*To accept the customer's statement in good faith, the officer of the bank must
be alert to the circumstances surrounding the credit and, if in possession of
any information that would cause a prudent person not to accept the statement
without inquiry, must have investigated and be satisfied that the statement is
truthful. Among the facts which would require such investigation are receipt of
the statement through the mail or from a third party.
THIS FORM MUST BE RETAINED BY THE LENDER FOR THREE YEARS AFTER THE CREDIT
IS EXTINGUISHED.
<PAGE> 13
THIRD PARTY PLEDGE AGREEMENT
DATE May 06, 1998
-------------------
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
PLEDGOR SECURED
CIRCLE CREEK AQUACULTURE, LP V PARTY COMMUNITY BANK, INDIANOLA
- ------------------------------------------------------------------------------------
BUSINESS
OR
RESIDENCE ADDRESS P. O. BOX 28
ADDRESS
- -------------------------------------------------------------------------------------
CITY, CITY,
STATE & STATE & INDIANOLA, MS 38751
ZIP CODE ZIP CODE
- -------------------------------------------------------------------------------------
</TABLE>
1. SECURITY INTEREST AND COLLATERAL. To secure (check one):
[ ] the payment and performance of each and every debt, liability and
obligation of every type and description which
-------------------------------
---------------------------------- ("Debtor") may now or at any time
hereafter owe to Secured Party (whether such debt, liability or obligation
now exists or is hereafter created or incurred, and whether it is or may be
direct or indirect, due or to become due, absolute or contingent, primary or
secondary, liquidated or unliquidated, or joint, several or joint and
several; all such debts, liabilities and obligations being herein
collectively referred to as the "Obligations"),
[X] the debt, liability or obligation of AQUAPRO CORPORATION
------------------------------------
("Debtor") to Secured Party evidenced by or arising under the following:
#4240594 RLOC IN THE AMOUNT OF $1,000,000, and any extensions, renewals or
-----------------------------------------
replacements thereof (herein referred to as the "Obligations"),
Pledgor hereby grants Secured Party a security interest (herein called the
"Security Interest") in (check one):
[ ] all property of any kind now or at any time hereafter owned by Pledgor,
or in which Pledgor may now or hereafter have an interest, which may now be
or may at any time hereafter come into the possession or control of Secured
Party or into the possession or control of Secured Party's agents or
correspondents, whether such possession or control is given for collateral
purposes or for safekeeping, together with all proceeds of and other rights
in connection with such property (herein called the "Collateral").
[X] the property owned by Pledgor and held by Secured Party that is
described as follows: FISHCO, INC. STOCK CERTIFICATE #556, together with all
------------------------------------
rights in connection with that property (herein called the "Collateral").
2. REPRESENTATIONS, WARRANTIES AND COVENANTS. Pledgor represents, warrants and
covenants that:
(a) Pledgor will duly endorse, in blank, each and every instrument
constituting Collateral by signing on said instrument or by signing a separate
document of assignment or transfer, if required by Secured Party.
(b) Pledgor is the owner of the collateral free and clear of all liens,
encumbrances, security interests and restrictions, except the Security Interest
and any restrictive legend appearing on any instrument constituting Collateral.
(c) Pledgor will keep the Collateral free and clear of all liens,
encumbrances and security interests, except the Security Interest.
(d) Pledgor will pay, when due, all taxes and other governmental charges
levied or assessed upon or against any Collateral.
(e) At any time, upon request by Secured Party, Pledgor will deliver to
Secured Party all notices, financial statements, reports or other communications
received by Pledgor as an owner or holder of the Collateral.
(f) Pledgor will upon receipt deliver to Secured Party in pledge as
additional Collateral all securities distributed on account of the Collateral
such as stock dividends and securities resulting from stock splits,
reorganizations and recapitalizations.
3. RIGHTS OF SECURED PARTY. Pledgor agrees that Secured Party may at any time,
whether before or after the occurrence of an Event of Default and without
notice or demand of any kind, (i) notify the obligor on or issuer of any
Collateral to make payment to Secured Party of any amounts due or distributable
thereon, (ii) in Pledgor's name or Secured Party's name enforce collection of
any Collateral by suit or otherwise, or surrender, release or exchange all or
any part of it, or compromise, extend or renew for any period any obligation
evidenced by the Collateral, (iii) receive all proceeds of the Collateral, and
(iv) hold any increase or profits received from the Collateral as additional
security for the Obligations, except that any money received from the
Collateral shall, at Secured Party's option, be applied in reduction of the
Obligations, in such order of application as Secured Party may determine, or be
remitted to Debtor.
THIS AGREEMENT CONTAINS ADDITIONAL PROVISIONS SET FORTH ON PAGE 2 HEREOF,
ALL OF WHICH ARE MADE A PART HEREOF.
CIRCLE CREEK AQUACULTURE, LP V
-----------------------------------------
Pledgor's Name
By /s/ George S. Hastings Jr.
--------------------------------------
GEORGE S. HASTINGS
Title:
----------------------------------
By
----------------------------------------
Title:
-----------------------------------
(page 1 of 2)
<PAGE> 14
SECURITY AGREEMENT 4240594
(Collateral Pledge Agreement)
DATE May 06, 1998
---------------------------------
- --------------------------------------------------------------------------------
DEBTOR AQUAPRO CORPORATION SECURED COMMUNITY BANK, INDIANOLA
PARTY
- --------------------------------------------------------------------------------
BUSINESS
OR 4307 CENTRAL PIKE ADDRESS
RESIDENCE HERITAGE TN 37076 P. 0. BOX 28
ADDRESS
- --------------------------------------------------------------------------------
CITY, CITY,
STATE & STATE &
ZIP CODE ZIP CODE INDIANOLA, MS 38751
- --------------------------------------------------------------------------------
1. SECURITY INTEREST AND COLLATERAL. To secure (check one):
[X] the payment and performance of each and every debt, liability and
obligation of every type and description which Debtor may now or at any
time hereafter owe to Secured Party (whether such debt, liability or
obligation now exists or is hereafter created or incurred, and whether it
is or may be direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or joint,
several or joint and several; all such debts, liabilities and obligations
being herein collectively referred to as the "Obligations"),
[ ] the debt, liability or obligation of the Debtor to secured party
evidenced by the following:
------------------------------------------------
------------------------------, and any extensions, renewals or replacements
thereof (herein referred to as the "Obligations"),
Debtor hereby grants Secured Party a security interest (herein called the
"Security Interest") in (check one):
[X] all property of any kind now or at any time hereafter owned by Debtor, or
in which Debtor may now or hereafter have an interest, which may now be or
may at any time hereafter come into the possession or control of Secured
Party or into the possession or control of Secured Party's agents or
correspondents, whether such possession or control is given for collateral
purposes or for safekeeping, together with all rights in connection with such
property (herein called the "Collateral"),
[ ] the property owned by Debtor and held by Secured Party that is described
as follows:
----------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
together with all rights in connection with such property (herein called the
"Collateral").
2. REPRESENTATIONS, WARRANTIES AND COVENANTS. Debtor represents, warrants and
covenants that:
(a) Debtor will duly endorse, in blank, each and every instrument
constituting Collateral by signing on said instrument or by signing a separate
document of assignment or transfer, if required by Secured Party.
(b) Debtor is the owner of the Collateral free and clear of all liens,
encumbrances, security interests and restrictions, except the Security Interest
and any restrictive legend appearing on any instrument constituting Collateral.
(c) Debtor will keep the Collateral free and clear of all liens,
encumbrances and security interests, except the Security Interest.
(d) Debtor will pay, when due, all taxes and other governmental charges
levied or assessed upon or against any Collateral.
(e) At any time, upon request by Secured Party, Debtor will deliver to
Secured Party all notices, financial statements, reports or other communications
received by Debtor as an owner or holder of the Collateral.
(f) Debtor will upon receipt deliver to Secured Party in pledge as
additional Collateral all securities distributed on account of the Collateral
such as stock dividends and securities resulting from stock splits,
reorganizations and recapitalizations.
THIS AGREEMENT CONTAINS ADDITIONAL PROVISIONS SET FORTH ON PAGE 2 HEREOF,
ALL OF WHICH ARE MADE A PART HEREOF.
AQUAPRO CORPORATION
-------------------------------------------------
Debtor's Name
By /s/ GEORGE S HASTINGS JR.
----------------------------------------------
George S Hastings
Title: PRESIDENT
------------------------------------------
By
----------------------------------------------
Title:
------------------------------------------
<PAGE> 15
SECURITY AGREEMENT 4240594
(Collateral Pledge Agreement)
DATE May 06, 1998
---------------------------------
- --------------------------------------------------------------------------------
DEBTOR CIRCLE CREEK AQUACULTURE LP V SECURED COMMUNITY BANK, INDIANOLA
PARTY
- --------------------------------------------------------------------------------
BUSINESS
OR ADDRESS
RESIDENCE P. 0. BOX 28
ADDRESS
- --------------------------------------------------------------------------------
CITY, CITY,
STATE & STATE &
ZIP CODE ZIP CODE INDIANOLA, MS 38751
- --------------------------------------------------------------------------------
1. SECURITY INTEREST AND COLLATERAL. To secure (check one):
[ ] the payment and performance of each and every debt, liability and
obligation of every type and description which Debtor may now or at any
time hereafter owe to Secured Party (whether such debt, liability or
obligation now exists or is hereafter created or incurred, and whether it
is or may be direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or joint,
several or joint and several; all such debts, liabilities and obligations
being herein collectively referred to as the "Obligations"),
[X] the debt, liability or obligation of the Debtor to secured party
evidenced by the following:
------------------------------------------------
#4240594 , and any extensions, renewals or
------------------------------------------
replacements thereof (herein referred to as the "Obligations"),
Debtor hereby grants Secured Party a security interest (herein called the
"Security Interest") in (check one):
[ ] all property of any kind now or at any time hereafter owned by Debtor,
or in which Debtor may now or hereafter have an interest, which may now be or
may at any time hereafter come into the possession or control of Secured
Party or into the possession or control of Secured Party's agents or
correspondents, whether such possession or control is given for collateral
purposes or for safekeeping, together with all rights in connection with such
property (herein called the "Collateral"),
[X] the property owned by Debtor and held by Secured Party that is described
as follows:
-----------------------------------------------------------------
FISHCO, INC STOCK IN THE NAME OF CIRCLE CREEK AQUACULTURE, LP V
----------------------------------------------------------------------------
CERTIFICATE #556
----------------------------------------------------------------------------
together with all rights in connection with such property (herein called the
"Collateral").
2. REPRESENTATIONS, WARRANTIES AND COVENANTS. Debtor represents, warrants and
covenants that:
(a) Debtor will duly endorse, in blank, each and every instrument
constituting Collateral by signing on said instrument or by signing a separate
document of assignment or transfer, if required by Secured Party.
(b) Debtor is the owner of the Collateral free and clear of all liens,
encumbrances, security interests and restrictions, except the Security Interest
and any restrictive legend appearing on any instrument constituting Collateral.
(c) Debtor will keep the Collateral free and clear of all liens,
encumbrances and security interests, except the Security Interest.
(d) Debtor will pay, when due, all taxes and other governmental charges
levied or assessed upon or against any Collateral.
(e) At any time, upon request by Secured Party, Debtor will deliver to
Secured Party all notices, financial statements, reports or other communications
received by Debtor as an owner or holder of the Collateral.
(f) Debtor will upon receipt deliver to Secured Party in pledge as
additional Collateral all securities distributed on account of the Collateral
such as stock dividends and securities resulting from stock splits,
reorganizations and recapitalizations.
THIS AGREEMENT CONTAINS ADDITIONAL PROVISIONS SET FORTH ON PAGE 2 HEREOF,
ALL OF WHICH ARE MADE A PART HEREOF.
-------------------------------------------------
Debtor's Name
By /s/ GEORGE S HASTINGS, JR.
----------------------------------------------
George S. Hastings
Title:
------------------------------------------
By
----------------------------------------------
Title:
------------------------------------------
<PAGE> 16
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
4240594
FOR VALUE RECEIVED, CIRCLE CREEK AQUACULTURE LP, V
------------------------------------------------------------
hereby sell, assign and transfer unto COMMUNITY BANK, INDIANOLA
- --------------- --------------------------
- --------------------------------------------------------------------------------
( 448 ) Shares of the COMMON Capital Stock of the FISHCO, INC.
- -------- ------- ------------- ------------
standing in
- ---------------------------------------- ----------------------------
CIRCLE CREEK AQUACULTURE LP, V name on the books of said CORPORATION
- ------------------------------------ ----------------
represented by Certificate No. 556 herewith
- --------------------------- -------------
and do hereby irrevocably constitute and appoint
-------------------------------
attorney to transfer the said stock on the books of the within named Company
with full power of substitution in the premises.
Dated 5/06/98
-----------------
IN PRESENCE OF
--------------------------------------------
/S/ LEIGH ANN VANCE
- ---------------------------------
SIGNATURE GUARANTEED
- ---------------------------------
By /s/ GEORGE S HASTINGS
-----------------------------------------
GEORGE S HASTINGS AUTHORIZED SIGNATURE
By
-----------------------------------------
AUTHORIZED SIGNATURE
<PAGE> 17
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
4240594
FOR VALUE RECEIVED, AQUAPRO CORPORATION
------------------------------------------------------------
hereby sell, assign and transfer unto COMMUNITY BANK, INDIANOLA
- --------------- -------------------------
- --------------------------------------------------------------------------------
( 989 ) Shares of the COMMON Capital Stock of the
- -------- ------- ------------- ------------
DELTA PRIDE CATFISH, INC. standing in AQUAPRO CORPORATION
- ---------------------------------------- ----------------------------
name on the books of said CORPORATION
- ------------------------------------ ----------------
represented by Certificate No. 1282 herewith
- --------------------------- -------------
and do hereby irrevocably constitute and appoint
-------------------------------
attorney to transfer the said stock on the books of the within named Company
with full power of substitution in the premises.
Dated 5/06/98
-----------------
IN PRESENCE OF
--------------------------------------------
/S/ LEIGH ANN VANCE
- ---------------------------------
SIGNATURE GUARANTEED
- ---------------------------------
By /s/ GEORGE S HASTINGS
-----------------------------------------
GEORGE S HASTINGS AUTHORIZED SIGNATURE
By
-----------------------------------------
AUTHORIZED SIGNATURE
<PAGE> 18
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
4240594
FOR VALUE RECEIVED, AQUAPRO CORPORATION
------------------------------------------------------------
hereby sell, assign and transfer unto COMMUNITY BANK, INDIANOLA
- --------------- --------------------------
- --------------------------------------------------------------------------------
( 200 ) Shares of the COMMON Capital Stock of the
- -------- ------- ------------- ------------
DELTA PRIDE CATFISH INC. standing in AQUAPRO CORPORATION
- ---------------------------------------- ----------------------------
name on the books of said CORPORATION
- ------------------------------------ ----------------
represented by Certificate No. 1224 herewith
- --------------------------- -------------
and do hereby irrevocably constitute and appoint
-------------------------------
attorney to transfer the said stock on the books of the within named Company
with full power of substitution in the premises.
Dated 5/06/98
-----------------
IN PRESENCE OF
--------------------------------------------
/S/ LEIGH ANN VANCE
- ---------------------------------
SIGNATURE GUARANTEED
- ---------------------------------
By /s/ GEORGE S HASTINGS
-----------------------------------------
GEORGE S HASTINGS AUTHORIZED SIGNATURE
By
-----------------------------------------
AUTHORIZED SIGNATURE
<PAGE> 19
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
4240594
FOR VALUE RECEIVED, AQUAPRO CORPORATION
------------------------------------------------------------
hereby sell, assign and transfer unto COMMUNITY BANK, INDIANOLA
- --------------- --------------------------
- --------------------------------------------------------------------------------
( 132 ) Shares of the COMMON Capital Stock of the
- -------- ------- ------------- ------------
DELTA PRIDE CATFISH INC. standing in AQUAPRO CORPORATION
- ---------------------------------------- ----------------------------
name on the books of said CORPORATION
- ------------------------------------ ----------------
represented by Certificate No. 1223 herewith
- --------------------------- -------------
and do hereby irrevocably constitute and appoint
-------------------------------
attorney to transfer the said stock on the books of the within named Company
with full power of substitution in the premises.
Dated 5/06/98
-----------------
IN PRESENCE OF
--------------------------------------------
/S/ LEIGH ANN VANCE
- ---------------------------------
SIGNATURE GUARANTEED
- ---------------------------------
By /s/ GEORGE S HASTINGS
-----------------------------------------
GEORGE S HASTINGS AUTHORIZED SIGNATURE
By
-----------------------------------------
AUTHORIZED SIGNATURE
<PAGE> 20
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
4240594
FOR VALUE RECEIVED, AQUAPRO CORPORATION
------------------------------------------------------------
hereby sell, assign and transfer unto COMMUNITY BANK, INDIANOLA
- --------------- --------------------------
- --------------------------------------------------------------------------------
( 176 ) Shares of the COMMON Capital Stock of the
- -------- ------- ------------- ------------
DELTA PRIDE CATFISH INC. standing in AQUAPRO CORPORATION
- ---------------------------------------- ----------------------------
name on the books of said CORPORATION
- ------------------------------------ ----------------
represented by Certificate No. 1225 herewith
- --------------------------- -------------
and do hereby irrevocably constitute and appoint
-------------------------------
attorney to transfer the said stock on the books of the within named Company
with full power of substitution in the premises.
Dated 5/06/98
-----------------
IN PRESENCE OF
--------------------------------------------
/S/ LEIGH ANN VANCE
- ---------------------------------
SIGNATURE GUARANTEED
- ---------------------------------
By /s/ GEORGE S HASTINGS
-----------------------------------------
GEORGE S HASTINGS AUTHORIZED SIGNATURE
By
-----------------------------------------
AUTHORIZED SIGNATURE
<PAGE> 21
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
4240594
FOR VALUE RECEIVED, AQUAPRO CORPORATION
------------------------------------------------------------
hereby sell, assign and transfer unto COMMUNITY BANK, INDIANOLA
- --------------- --------------------------
- --------------------------------------------------------------------------------
( 150 ) Shares of the COMMON Capital Stock of the
- -------- ------- ------------- ------------
DELTA PRIDE CATFISH INC. standing in AQUAPRO CORPORATION
- ---------------------------------------- ----------------------------
name on the books of said CORPORATION
- ------------------------------------ ----------------
represented by Certificate No. 1222 herewith
- --------------------------- -------------
and do hereby irrevocably constitute and appoint
-------------------------------
attorney to transfer the said stock on the books of the within named Company
with full power of substitution in the premises.
Dated 5/06/98
-----------------
IN PRESENCE OF
--------------------------------------------
/S/ LEIGH ANN VANCE
- ---------------------------------
SIGNATURE GUARANTEED
- ---------------------------------
By /s/ GEORGE S HASTINGS
-----------------------------------------
GEORGE S HASTINGS AUTHORIZED SIGNATURE
By
-----------------------------------------
AUTHORIZED SIGNATURE
<PAGE> 22
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
4240594
FOR VALUE RECEIVED, AQUAPRO CORPORATION
------------------------------------------------------------
hereby sell, assign and transfer unto COMMUNITY BANK, INDIANOLA
- --------------- --------------------------
- --------------------------------------------------------------------------------
( 132 ) Shares of the COMMON Capital Stock of the
- -------- ------- ------------- ------------
DELTA PRIDE CATFISH INC. standing in AQUAPRO CORPORATION
- ---------------------------------------- ----------------------------
name on the books of said COMPANY
- ------------------------------------ ----------------
represented by Certificate No. 1216 herewith
- --------------------------- -------------
and do hereby irrevocably constitute and appoint
-------------------------------
attorney to transfer the said stock on the books of the within named Company
with full power of substitution in the premises.
Dated 5/06/98
-----------------
IN PRESENCE OF
--------------------------------------------
/S/ LEIGH ANN VANCE
- ---------------------------------
SIGNATURE GUARANTEED
- ---------------------------------
By /s/ GEORGE S HASTINGS
-----------------------------------------
GEORGE S HASTINGS AUTHORIZED SIGNATURE
By
-----------------------------------------
AUTHORIZED SIGNATURE
<PAGE> 23
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
4240594
FOR VALUE RECEIVED, AQUAPRO CORPORATION
------------------------------------------------------------
hereby sell, assign and transfer unto COMMUNITY BANK, INDIANOLA
- --------------- --------------------------
- --------------------------------------------------------------------------------
( 189 ) Shares of the COMMON Capital Stock of the
- -------- ------- ------------- ------------
DELTA PRIDE CATFISH INC. standing in AQUAPRO CORPORATION
- ---------------------------------------- ----------------------------
name on the books of said CORPORATION
- ------------------------------------ ----------------
represented by Certificate No. 1217 herewith
- --------------------------- -------------
and do hereby irrevocably constitute and appoint
-------------------------------
attorney to transfer the said stock on the books of the within named Company
with full power of substitution in the premises.
Dated 5/06/98
-----------------
IN PRESENCE OF
--------------------------------------------
/S/ LEIGH ANN VANCE
- ---------------------------------
SIGNATURE GUARANTEED
- ---------------------------------
By /s/ GEORGE S HASTINGS
-----------------------------------------
GEORGE S HASTINGS AUTHORIZED SIGNATURE
By
-----------------------------------------
AUTHORIZED SIGNATURE
<PAGE> 24
<TABLE>
<S> <C>
STATE OF MISSISSIPPI UCC-1F 4240594
FINANCING STATEMENT
UCC-01F LEFLORE CO
PART A - TO BE COMPLETED FOR PERFECTION ONLY Book & Page: Filed with:
1. DEBTORS (LAST NAME FIRST FOR INDIVIDUALS) CHANCERY CLERK
------------ --------------
AQUAPRO CORPORATION | HASTINGS, JR GEORGE S
- ------------------------------------------------------- | -------------------------------------------------------
Last Name First Name Middle Name | Last Name First Name Middle Name
|
4307 CENTRAL PIKE | 4307 CENTRAL PIKE
- -------------------------------------------------------- | --------------------------------------------------------
Mailing Address | Mailing Address
|
HERMITAGE | TN | |37076 0000 | HERMITAGE | TN | |37076
- --------------------------|------|----------|----------- | --------------------------|------|----------|-----------
City |State | Cty Cd | ZIP | City |State | Cty Cd | ZIP
| | |
62-1598919 | | ###-##-#### |
- --------------------------|----------------------------- | --------------------------|-----------------------------
Tax ID/SSN | Tax ID/SSN
|
2. SECURED PARTY (LAST NAME FIRST FOR INDIVIDUALS) | 3. ASSIGNEE (LAST NAME FIRST FOR INDIVIDUALS)
|
COMMUNITY BANK, INDIANOLA |
- ------------------------------------------------------- | -------------------------------------------------------
Business Name | Business Name
|
P.O. BOX 28 |
- -------------------------------------------------------- | --------------------------------------------------------
Mailing Address | Mailing Address
|
INDIANOLA | MS | 67 | 38751 | | | |
- --------------------------|------|----------|----------- | --------------------------|------|----------|-----------
City |State | Cty Cd | ZIP | City |State | Cty Cd | ZIP
| | |
64-0220450 | | |
- --------------------------|----------------------------- | --------------------------|-----------------------------
Tax ID/SSN | Tax ID/SSN
</TABLE>
4. THIS FINANCING STATEMENT COVERS THE FOLLOWING TYPES (OR ITEMS) OF PROPERTY:
- --------------------------------------------------------------------------------
ALL CATFISH/FISH INVENTORY INCLUDING BUT NOT LIMITED TO FINGERLINGS,
STOCKERS & FOOD FISH & PROCEEDS & REBATES FROM SALES OF CATFISH/FISH.
- --------------------------------------------------------------------------------
5. IF COLLATERAL IS CROPS - Crops are growing or to be grown on - DESCRIBE
REAL ESTATE (Indicate record owner, if not Debtor):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. CHECK IF THIS STATEMENT IS FILED WITHOUT THE DEBTOR'S SIGNATURE TO PERFECT
A SECURITY INTEREST IN COLLATERAL:
<TABLE>
<S> <C>
[ ] already subject to a security interest [ ] where the original filing has lapsed ---------------------
in another jurisdiction when it Office Use Only
was brought into this state or
when Debtor's location was changed to
this state ---------------------
[ ] which is proceeds of the original collateral [ ] acquired after a change of name, identity, or
described above in which a security interest corporate structure of the Debtor
was perfected
</TABLE>
7. CHECK IF COVERED: [X] Products of Collateral 8. NUMBER OF ADDITIONAL
SHEETS ATTACHED: [O]
/s/ George S Hastings Jr | COMMUNITY BANK, INDIANOLA
- -----------------------------------------|--------------------------------------
GEORGE S HASTINGS |
- -----------------------------------------|--------------------------------------
Signatures of Debtor(s) | Signature of Secured Party (ies)
| (Required only if filed without
debtor's signature)
PART B - COMPLETE IN ADDITION TO PART A FOR FARM PRODUCT NOTICE
<TABLE>
<S> <C> <C> <C>
8. DEBTOR #1: Name: AQUAPRO CORPORATION Tax ID/SSN 62-1598919 County Code
------------------- ---------- -----
DEBTOR #2: Name: GEORGE S HASTINGS, JR Tax ID/SSN ###-##-#### County Code
------------------- ---------- -----
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Collateral Type Name Collateral Number Code County/Produced Code Collateral Quantity Amount Crop Year
CATFISH 202 42 ALL 1998
- ------------------------- ------------------------- ------------------------- ------------------------- -----------------------
- ------------------------- ------------------------- ------------------------- ------------------------- -----------------------
</TABLE>
9. BRIEF DESCRIPTION OF COLLATERAL 10. IF COLLATERAL INVOLVES REAL PROPERTY,
(if needed to distinguish from LIVESTOCK, CROPS GROWING OR TO BE
products not subject to security GROWN, DESCRIBE PROPERTY (give name
interest): if owned by person other than
Debtor):
- ------------------------------------ ---------------------------------------
CATFISH/FISH
- ------------------------------------ ---------------------------------------
/s/ GEORGE S HASTINGS JR | COMMUNITY BANK, INDIANOLA
- -----------------------------------------|--------------------------------------
GEORGE S HASTINGS |
- -----------------------------------------|--------------------------------------
Signatures of Debtor(s) | Signature of Secured Party (ies)
<PAGE> 25
<TABLE>
<S> <C>
STATE OF MISSISSIPPI UCC-1F 4240594
FINANCING STATEMENT
UCC-01F
PART A - TO BE COMPLETED FOR PERFECTION ONLY Book & Page: Filed with: HUMPHREYS CO.
1. DEBTORS (LAST NAME FIRST FOR INDIVIDUALS) CHANCERY CLERK
------------ --------------
AQUAPRO CORPORATION | HASTINGS, JR GEORGE S
- ------------------------------------------------------- | -------------------------------------------------------
Last Name First Name Middle Name | Last Name First Name Middle Name
|
4307 CENTRAL PIKE | 4307 CENTRAL PIKE
- -------------------------------------------------------- | --------------------------------------------------------
Mailing Address | Mailing Address
|
HERMITAGE | TN | |37076 0000 | HERMITAGE | TN | |37076
- --------------------------|------|----------|----------- | --------------------------|------|----------|-----------
City |State | Cty Cd | ZIP | City |State | Cty Cd | ZIP
| | |
62-1598919 | | ###-##-#### |
- --------------------------|----------------------------- | --------------------------|-----------------------------
Tax ID/SSN | Tax ID/SSN
|
2. SECURED PARTY (LAST NAME FIRST FOR INDIVIDUALS) | 3. ASSIGNEE (LAST NAME FIRST FOR INDIVIDUALS)
|
COMMUNITY BANK, INDIANOLA |
- ------------------------------------------------------- | -------------------------------------------------------
Business Name | Business Name
|
P.O. BOX 28 |
- -------------------------------------------------------- | --------------------------------------------------------
Mailing Address | Mailing Address
|
INDIANOLA | MS | 67 | 38751 | | | |
- --------------------------|------|----------|----------- | --------------------------|------|----------|-----------
City |State | Cty Cd | ZIP | City |State | Cty Cd | ZIP
| | |
64-0220450 | | |
- --------------------------|----------------------------- | --------------------------|-----------------------------
Tax ID/SSN | Tax ID/SSN
</TABLE>
4. THIS FINANCING STATEMENT COVERS THE FOLLOWING TYPES (OR ITEMS) OF PROPERTY:
- --------------------------------------------------------------------------------
ALL CATFISH/FISH INVENTORY INCLUDING BUT NOT LIMITED TO FINGERLINGS,
STOCKERS & FOOD FISH & PROCEEDS & REBATES FROM SALES OF CATFISH/FISH.
- --------------------------------------------------------------------------------
5. IF COLLATERAL IS CROPS - Crops are growing or to be grown on - DESCRIBE
REAL ESTATE (Indicate record owner, if not Debtor):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. CHECK IF THIS STATEMENT IS FILED WITHOUT THE DEBTOR'S SIGNATURE TO PERFECT
A SECURITY INTEREST IN COLLATERAL:
<TABLE>
<S> <C>
[ ] already subject to a security interest [ ] where the original filing has lapsed ---------------------
in another jurisdiction when it Office Use Only
was brought into this state or
when Debtor's location was changed to
this state ---------------------
[ ] which is proceeds of the original collateral [ ] acquired after a change of name, identity, or
described above in which a security interest corporate structure of the Debtor
was perfected
</TABLE>
7. CHECK IF COVERED: [X] Products of Collateral 8. NUMBER OF ADDITIONAL
SHEETS ATTACHED: [O]
/s/ George S Hastings Jr | COMMUNITY BANK, INDIANOLA
- -----------------------------------------|--------------------------------------
GEORGE S HASTINGS |
- -----------------------------------------|--------------------------------------
Signatures of Debtor(s) | Signature of Secured Party (ies)
| (Required only if filed without
debtor's signature)
PART B - COMPLETE IN ADDITION TO PART A FOR FARM PRODUCT NOTICE
<TABLE>
<S> <C> <C> <C>
8. DEBTOR #1: Name: AQUAPRO CORPORATION Tax ID/SSN 62-1598919 County Code
--------------------- ----------- -----
DEBTOR #2: Name: GEORGE S HASTINGS, JR Tax ID/SSN ###-##-#### County Code
--------------------- ----------- -----
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Collateral Type Name Collateral Number Code County/Produced Code Collateral Quantity Amount Crop Year
CATFISH 202 27 ALL 1998
- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------
- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------
</TABLE>
9. BRIEF DESCRIPTION OF COLLATERAL 10. IF COLLATERAL INVOLVES REAL PROPERTY,
(if needed to distinguish from LIVESTOCK, CROPS GROWING OR TO BE
products not subject to security GROWN, DESCRIBE PROPERTY (give name
interest): if owned by person other than
Debtor):
- ------------------------------------ ---------------------------------------
CATFISH/FISH
- ------------------------------------ ---------------------------------------
/s/ GEORGE S HASTINGS JR | COMMUNITY BANK, INDIANOLA
- -----------------------------------------|--------------------------------------
GEORGE S HASTINGS |
- -----------------------------------------|--------------------------------------
Signatures of Debtor(s) | Signature of Secured Party (ies)
<PAGE> 26
<TABLE>
<S> <C>
STATE OF MISSISSIPPI UCC-1F 4240594
FINANCING STATEMENT
UCC-01F
PART A - TO BE COMPLETED FOR PERFECTION ONLY Book & Page: Filed with: 1ST JUDICIAL BOLIVAR CO
1. DEBTORS (LAST NAME FIRST FOR INDIVIDUALS) CHANCERY CLERK
------------ --------------
AQUAPRO CORPORATION | HASTINGS, JR GEORGE S
- ------------------------------------------------------- | -------------------------------------------------------
Last Name First Name Middle Name | Last Name First Name Middle Name
|
4307 CENTRAL PIKE | 4307 CENTRAL PIKE
- -------------------------------------------------------- | --------------------------------------------------------
Mailing Address | Mailing Address
|
HERMITAGE | TN | |37076 0000 | HERMITAGE | TN | |37076
- --------------------------|------|----------|----------- | --------------------------|------|----------|-----------
City |State | Cty Cd | ZIP | City |State | Cty Cd | ZIP
| | |
62-1598919 | | ###-##-#### |
- --------------------------|----------------------------- | --------------------------|-----------------------------
Tax ID/SSN | Tax ID/SSN
|
2. SECURED PARTY (LAST NAME FIRST FOR INDIVIDUALS) | 3. ASSIGNEE (LAST NAME FIRST FOR INDIVIDUALS)
|
COMMUNITY BANK, INDIANOLA |
- ------------------------------------------------------- | -------------------------------------------------------
Business Name | Business Name
|
P.O. BOX 28 |
- -------------------------------------------------------- | --------------------------------------------------------
Mailing Address | Mailing Address
|
INDIANOLA | MS | 67 | 38751 | | | |
- --------------------------|------|----------|----------- | --------------------------|------|----------|-----------
City |State | Cty Cd | ZIP | City |State | Cty Cd | ZIP
| | |
64-0220450 | | |
- --------------------------|----------------------------- | --------------------------|-----------------------------
Tax ID/SSN | Tax ID/SSN
</TABLE>
4. THIS FINANCING STATEMENT COVERS THE FOLLOWING TYPES (OR ITEMS) OF PROPERTY:
- --------------------------------------------------------------------------------
ALL CATFISH/FISH INVENTORY INCLUDING BUT NOT LIMITED TO FINGERLINGS,
STOCKERS & FOOD FISH & PROCEEDS & REBATES FROM SALES OF CATFISH/FISH.
- --------------------------------------------------------------------------------
5. IF COLLATERAL IS CROPS - Crops are growing or to be grown on - DESCRIBE
REAL ESTATE (Indicate record owner, if not Debtor):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. CHECK IF THIS STATEMENT IS FILED WITHOUT THE DEBTOR'S SIGNATURE TO PERFECT
A SECURITY INTEREST IN COLLATERAL:
<TABLE>
<S> <C>
[ ] already subject to a security interest [ ] where the original filing has lapsed ---------------------
in another jurisdiction when it Office Use Only
was brought into this state or
when Debtor's location was changed to
this state ---------------------
[ ] which is proceeds of the original collateral [ ] acquired after a change of name, identity, or
described above in which a security interest corporate structure of the Debtor
was perfected
</TABLE>
7. CHECK IF COVERED: [X] Products of Collateral 8. NUMBER OF ADDITIONAL
SHEETS ATTACHED: [O]
/s/ George S Hastings Jr | COMMUNITY BANK, INDIANOLA
- -----------------------------------------|--------------------------------------
GEORGE S HASTINGS |
- -----------------------------------------|--------------------------------------
Signatures of Debtor(s) | Signature of Secured Party (ies)
| (Required only if filed without
debtor's signature)
PART B - COMPLETE IN ADDITION TO PART A FOR FARM PRODUCT NOTICE
<TABLE>
<S> <C> <C> <C>
8. DEBTOR #1: Name: AQUAPRO CORPORATION Tax ID/SSN 62-1598919 County Code
--------------------- ----------- -----
DEBTOR #2: Name: GEORGE S HASTINGS, JR Tax ID/SSN ###-##-#### County Code
--------------------- ----------- -----
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Collateral Type Name Collateral Number Code County/Produced Code Collateral Quantity Amount Crop Year
CATFISH 202 06 ALL 1998
- ------------------------ ------------------------- ------------------------- ------------------------- -----------------------
- ------------------------ ------------------------- ------------------------- ------------------------- -----------------------
</TABLE>
9. BRIEF DESCRIPTION OF COLLATERAL 10. IF COLLATERAL INVOLVES REAL PROPERTY,
(if needed to distinguish from LIVESTOCK, CROPS GROWING OR TO BE
products not subject to security GROWN, DESCRIBE PROPERTY (give name
interest): if owned by person other than
Debtor):
- ------------------------------------ ---------------------------------------
CATFISH/FISH
- ------------------------------------ ---------------------------------------
/s/ GEORGE S HASTINGS JR | COMMUNITY BANK, INDIANOLA
- -----------------------------------------|--------------------------------------
GEORGE S HASTINGS |
- -----------------------------------------|--------------------------------------
Signatures of Debtor(s) | Signature of Secured Party (ies)
<PAGE> 27
<TABLE>
<S> <C>
STATE OF MISSISSIPPI UCC-1F 4240594
FINANCING STATEMENT
UCC-01F
PART A - TO BE COMPLETED FOR PERFECTION ONLY Book & Page: Filed with: 2ND JUDICIAL BOLIVAR CO
1. DEBTORS (LAST NAME FIRST FOR INDIVIDUALS) CHANCERY CLERK
------------ --------------
AQUAPRO CORPORATION | HASTINGS, JR GEORGE S
- ------------------------------------------------------- | -------------------------------------------------------
Last Name First Name Middle Name | Last Name First Name Middle Name
|
4307 CENTRAL PIKE | 4307 CENTRAL PIKE
- -------------------------------------------------------- | --------------------------------------------------------
Mailing Address | Mailing Address
|
HERMITAGE | TN | |37076 0000 | HERMITAGE | TN | |37076
- --------------------------|------|----------|----------- | --------------------------|------|----------|-----------
City |State | Cty Cd | ZIP | City |State | Cty Cd | ZIP
| | |
62-1598919 | | ###-##-#### |
- --------------------------|----------------------------- | --------------------------|-----------------------------
Tax ID/SSN | Tax ID/SSN
|
2. SECURED PARTY (LAST NAME FIRST FOR INDIVIDUALS) | 3. ASSIGNEE (LAST NAME FIRST FOR INDIVIDUALS)
|
COMMUNITY BANK, INDIANOLA |
- ------------------------------------------------------- | -------------------------------------------------------
Business Name | Business Name
|
P.O. BOX 28 |
- -------------------------------------------------------- | --------------------------------------------------------
Mailing Address | Mailing Address
|
INDIANOLA | MS | 67 | 38751 | | | |
- --------------------------|------|----------|----------- | --------------------------|------|----------|-----------
City |State | Cty Cd | ZIP | City |State | Cty Cd | ZIP
| | |
64-0220450 | | |
- --------------------------|----------------------------- | --------------------------|-----------------------------
Tax ID/SSN | Tax ID/SSN
</TABLE>
4. THIS FINANCING STATEMENT COVERS THE FOLLOWING TYPES (OR ITEMS) OF PROPERTY:
- --------------------------------------------------------------------------------
ALL CATFISH/FISH INVENTORY INCLUDING BUT NOT LIMITED TO FINGERLINGS,
STOCKERS & FOOD FISH & PROCEEDS & REBATES FROM SALES OF CATFISH/FISH.
- --------------------------------------------------------------------------------
5. IF COLLATERAL IS CROPS - Crops are growing or to be grown on - DESCRIBE
REAL ESTATE (Indicate record owner, if not Debtor):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. CHECK IF THIS STATEMENT IS FILED WITHOUT THE DEBTOR'S SIGNATURE TO PERFECT
A SECURITY INTEREST IN COLLATERAL:
<TABLE>
<S> <C>
[ ] already subject to a security interest [ ] where the original filing has lapsed ---------------------
in another jurisdiction when it Office Use Only
was brought into this state or
when Debtor's location was changed to
this state ---------------------
[ ] which is proceeds of the original collateral [ ] acquired after a change of name, identity, or
described above in which a security interest corporate structure of the Debtor
was perfected
</TABLE>
7. CHECK IF COVERED: [X] Products of Collateral 8. NUMBER OF ADDITIONAL
SHEETS ATTACHED: [O]
/s/ George S Hastings Jr | COMMUNITY BANK, INDIANOLA
- -----------------------------------------|--------------------------------------
GEORGE S HASTINGS |
- -----------------------------------------|--------------------------------------
Signatures of Debtor(s) | Signature of Secured Party (ies)
| (Required only if filed without
debtor's signature)
PART B - COMPLETE IN ADDITION TO PART A FOR FARM PRODUCT NOTICE
<TABLE>
<S> <C> <C> <C>
8. DEBTOR #1: Name: AQUAPRO CORPORATION Tax ID/SSN 62-1598919 County Code
--------------------- ----------- -----
DEBTOR #2: Name: GEORGE S HASTINGS, JR Tax ID/SSN ###-##-#### County Code
--------------------- ----------- -----
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Collateral Type Name Collateral Number Code County/Produced Code Collateral Quantity Amount Crop Year
CATFISH 202 06 ALL 1998
- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------
- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------
</TABLE>
9. BRIEF DESCRIPTION OF COLLATERAL 10. IF COLLATERAL INVOLVES REAL PROPERTY,
(if needed to distinguish from LIVESTOCK, CROPS GROWING OR TO BE
products not subject to security GROWN, DESCRIBE PROPERTY (give name
interest): if owned by person other than
Debtor):
- ------------------------------------ ---------------------------------------
CATFISH/FISH
- ------------------------------------ ---------------------------------------
/s/ GEORGE S HASTINGS JR | COMMUNITY BANK, INDIANOLA
- -----------------------------------------|--------------------------------------
GEORGE S HASTINGS |
- -----------------------------------------|--------------------------------------
Signatures of Debtor(s) | Signature of Secured Party (ies)
<PAGE> 28
<TABLE>
<S> <C>
STATE OF MISSISSIPPI UCC-1F 4240594
FINANCING STATEMENT
UCC-01F
PART A - TO BE COMPLETED FOR PERFECTION ONLY Book & Page: Filed with: SUNFLOWER CO.
1. DEBTORS (LAST NAME FIRST FOR INDIVIDUALS) CHANCERY CLERK
------------ --------------
AQUAPRO CORPORATION | HASTINGS, JR GEORGE S
- ------------------------------------------------------- | -------------------------------------------------------
Last Name First Name Middle Name | Last Name First Name Middle Name
|
4307 CENTRAL PIKE | 4307 CENTRAL PIKE
- -------------------------------------------------------- | --------------------------------------------------------
Mailing Address | Mailing Address
|
HERMITAGE | TN | |37076 0000 | HERMITAGE | TN | |37076
- --------------------------|------|----------|----------- | --------------------------|------|----------|-----------
City |State | Cty Cd | ZIP | City |State | Cty Cd | ZIP
| | |
62-1598919 | | ###-##-#### |
- --------------------------|----------------------------- | --------------------------|-----------------------------
Tax ID/SSN | Tax ID/SSN
|
2. SECURED PARTY (LAST NAME FIRST FOR INDIVIDUALS) | 3. ASSIGNEE (LAST NAME FIRST FOR INDIVIDUALS)
|
COMMUNITY BANK, INDIANOLA |
- ------------------------------------------------------- | -------------------------------------------------------
Business Name | Business Name
|
P.O. BOX 28 |
- -------------------------------------------------------- | --------------------------------------------------------
Mailing Address | Mailing Address
|
INDIANOLA | MS | 67 | 38751 | | | |
- --------------------------|------|----------|----------- | --------------------------|------|----------|-----------
City |State | Cty Cd | ZIP | City |State | Cty Cd | ZIP
| | |
64-0220450 | | |
- --------------------------|----------------------------- | --------------------------|-----------------------------
Tax ID/SSN | Tax ID/SSN
</TABLE>
4. THIS FINANCING STATEMENT COVERS THE FOLLOWING TYPES (OR ITEMS) OF PROPERTY:
- --------------------------------------------------------------------------------
ALL CATFISH/FISH INVENTORY INCLUDING BUT NOT LIMITED TO FINGERLINGS,
STOCKERS & FOOD FISH & PROCEEDS & REBATES FROM SALES OF CATFISH/FISH.
- --------------------------------------------------------------------------------
5. IF COLLATERAL IS CROPS - Crops are growing or to be grown on - DESCRIBE
REAL ESTATE (Indicate record owner, if not Debtor):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. CHECK IF THIS STATEMENT IS FILED WITHOUT THE DEBTOR'S SIGNATURE TO PERFECT
A SECURITY INTEREST IN COLLATERAL:
<TABLE>
<S> <C>
[ ] already subject to a security interest [ ] where the original filing has lapsed ---------------------
in another jurisdiction when it Office Use Only
was brought into this state or
when Debtor's location was changed to
this state ---------------------
[ ] which is proceeds of the original collateral [ ] acquired after a change of name, identity, or
described above in which a security interest corporate structure of the Debtor
was perfected
</TABLE>
7. CHECK IF COVERED: [X] Products of Collateral 8. NUMBER OF ADDITIONAL
SHEETS ATTACHED: [O]
/s/ George S Hastings Jr | COMMUNITY BANK, INDIANOLA
- -----------------------------------------|--------------------------------------
GEORGE S HASTINGS |
- -----------------------------------------|--------------------------------------
Signatures of Debtor(s) | Signature of Secured Party (ies)
| (Required only if filed without
debtor's signature)
PART B - COMPLETE IN ADDITION TO PART A FOR FARM PRODUCT NOTICE
<TABLE>
<S> <C> <C> <C>
8. DEBTOR #1: Name: AQUAPRO CORPORATION Tax ID/SSN 62-1598919 County Code
--------------------- ----------- -----
DEBTOR #2: Name: GEORGE S HASTINGS, JR Tax ID/SSN ###-##-#### County Code
--------------------- ----------- -----
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Collateral Type Name Collateral Number Code County/Produced Code Collateral Quantity Amount Crop Year
CATFISH 202 67 ALL 1998
- ------------------------- ------------------------- ------------------------- ------------------------- -----------------------
- ------------------------- ------------------------- ------------------------- ------------------------- -----------------------
</TABLE>
9. BRIEF DESCRIPTION OF COLLATERAL 10. IF COLLATERAL INVOLVES REAL PROPERTY,
(if needed to distinguish from LIVESTOCK, CROPS GROWING OR TO BE
products not subject to security GROWN, DESCRIBE PROPERTY (give name
interest): if owned by person other than
Debtor):
- ------------------------------------ ---------------------------------------
CATFISH/FISH
- ------------------------------------ ---------------------------------------
/s/ GEORGE S HASTINGS JR | COMMUNITY BANK, INDIANOLA
- -----------------------------------------|--------------------------------------
GEORGE S HASTINGS |
- -----------------------------------------|--------------------------------------
Signatures of Debtor(s) | Signature of Secured Party (ies)
<PAGE> 29
<TABLE>
<S> <C>
STATE OF MISSISSIPPI UCC-1F 4240594
FINANCING STATEMENT
UCC-01F
PART A - TO BE COMPLETED FOR PERFECTION ONLY Book & Page: Filed with: MISS.
1. DEBTORS (LAST NAME FIRST FOR INDIVIDUALS) SEC. OF STATE
------------ --------------
AQUAPRO CORPORATION | HASTINGS, JR GEORGE S
- ------------------------------------------------------- | -------------------------------------------------------
Last Name First Name Middle Name | Last Name First Name Middle Name
|
4307 CENTRAL PIKE | 4307 CENTRAL PIKE
- -------------------------------------------------------- | --------------------------------------------------------
Mailing Address | Mailing Address
|
HERMITAGE | TN | |37076 0000 | HERMITAGE | TN | |37076
- --------------------------|------|----------|----------- | --------------------------|------|----------|-----------
City |State | Cty Cd | ZIP | City |State | Cty Cd | ZIP
| | |
62-1598919 | | ###-##-#### |
- --------------------------|----------------------------- | --------------------------|-----------------------------
Tax ID/SSN | Tax ID/SSN
|
2. SECURED PARTY (LAST NAME FIRST FOR INDIVIDUALS) | 3. ASSIGNEE (LAST NAME FIRST FOR INDIVIDUALS)
|
COMMUNITY BANK, INDIANOLA |
- ------------------------------------------------------- | -------------------------------------------------------
Business Name | Business Name
|
P.O. BOX 28 |
- -------------------------------------------------------- | --------------------------------------------------------
Mailing Address | Mailing Address
|
INDIANOLA | MS | 67 | 38751 | | | |
- --------------------------|------|----------|----------- | --------------------------|------|----------|-----------
City |State | Cty Cd | ZIP | City |State | Cty Cd | ZIP
| | |
64-0220450 | | |
- --------------------------|----------------------------- | --------------------------|-----------------------------
Tax ID/SSN | Tax ID/SSN
</TABLE>
4. THIS FINANCING STATEMENT COVERS THE FOLLOWING TYPES (OR ITEMS) OF PROPERTY:
- --------------------------------------------------------------------------------
ALL CATFISH/FISH INVENTORY INCLUDING BUT NOT LIMITED TO FINGERLINGS,
STOCKERS & FOOD FISH & PROCEEDS & REBATES FROM SALES OF CATFISH/FISH.
- --------------------------------------------------------------------------------
5. IF COLLATERAL IS CROPS - Crops are growing or to be grown on - DESCRIBE
REAL ESTATE (Indicate record owner, if not Debtor):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. CHECK IF THIS STATEMENT IS FILED WITHOUT THE DEBTOR'S SIGNATURE TO PERFECT
A SECURITY INTEREST IN COLLATERAL:
<TABLE>
<S> <C>
[ ] already subject to a security interest [ ] where the original filing has lapsed ---------------------
in another jurisdiction when it Office Use Only
was brought into this state or
when Debtor's location was changed to
this state ---------------------
[ ] which is proceeds of the original collateral [ ] acquired after a change of name, identity, or
described above in which a security interest corporate structure of the Debtor
was perfected
</TABLE>
7. CHECK IF COVERED: [X] Products of Collateral 8. NUMBER OF ADDITIONAL
SHEETS ATTACHED: [O]
/s/ George S Hastings Jr | COMMUNITY BANK, INDIANOLA
- -----------------------------------------|--------------------------------------
GEORGE S HASTINGS |
- -----------------------------------------|--------------------------------------
Signatures of Debtor(s) | Signature of Secured Party (ies)
| (Required only if filed without
debtor's signature)
PART B - COMPLETE IN ADDITION TO PART A FOR FARM PRODUCT NOTICE
<TABLE>
<S> <C> <C> <C>
8. DEBTOR #1: Name: AQUAPRO CORPORATION Tax ID/SSN 62-1598919 County Code
--------------------- ----------- -----
DEBTOR #2: Name: GEORGE S HASTINGS, JR Tax ID/SSN ###-##-#### County Code
--------------------- ----------- -----
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Collateral Type Name Collateral Number Code County/Produced Code Collateral Quantity Amount Crop Year
CATFISH 202 ALL 1998
- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------
- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------
</TABLE>
9. BRIEF DESCRIPTION OF COLLATERAL 10. IF COLLATERAL INVOLVES REAL PROPERTY,
(if needed to distinguish from LIVESTOCK, CROPS GROWING OR TO BE
products not subject to security GROWN, DESCRIBE PROPERTY (give name
interest): if owned by person other than
Debtor):
- ------------------------------------ ---------------------------------------
CATFISH/FISH
- ------------------------------------ ---------------------------------------
/s/ GEORGE S HASTINGS JR | COMMUNITY BANK, INDIANOLA
- -----------------------------------------|--------------------------------------
GEORGE S HASTINGS |
- -----------------------------------------|--------------------------------------
Signatures of Debtor(s) | Signature of Secured Party (ies)
<PAGE> 30
<TABLE>
<S> <C>
STATE OF TENNESSEE UCC-1F 4240594
FINANCING STATEMENT
UCC-01F
PART A - TO BE COMPLETED FOR PERFECTION ONLY Book & Page: Filed with: TENN.
1. DEBTORS (LAST NAME FIRST FOR INDIVIDUALS) SEC. OF STATE
------------ --------------
AQUAPRO CORPORATION | HASTINGS, JR GEORGE S
- ------------------------------------------------------- | -------------------------------------------------------
Last Name First Name Middle Name | Last Name First Name Middle Name
|
4307 CENTRAL PIKE | 4307 CENTRAL PIKE
- -------------------------------------------------------- | --------------------------------------------------------
Mailing Address | Mailing Address
|
HERMITAGE | TN | |37076 0000 | HERMITAGE | TN | |37076
- --------------------------|------|----------|----------- | --------------------------|------|----------|-----------
City |State | Cty Cd | ZIP | City |State | Cty Cd | ZIP
| | |
62-1598919 | | ###-##-#### |
- --------------------------|----------------------------- | --------------------------|-----------------------------
Tax ID/SSN | Tax ID/SSN
|
2. SECURED PARTY (LAST NAME FIRST FOR INDIVIDUALS) | 3. ASSIGNEE (LAST NAME FIRST FOR INDIVIDUALS)
|
COMMUNITY BANK, INDIANOLA |
- ------------------------------------------------------- | -------------------------------------------------------
Business Name | Business Name
|
P.O. BOX 28 |
- -------------------------------------------------------- | --------------------------------------------------------
Mailing Address | Mailing Address
|
INDIANOLA | MS | 67 | 38751 | | | |
- --------------------------|------|----------|----------- | --------------------------|------|----------|-----------
City |State | Cty Cd | ZIP | City |State | Cty Cd | ZIP
| | |
64-0220450 | | |
- --------------------------|----------------------------- | --------------------------|-----------------------------
Tax ID/SSN | Tax ID/SSN
</TABLE>
4. THIS FINANCING STATEMENT COVERS THE FOLLOWING TYPES (OR ITEMS) OF PROPERTY:
- --------------------------------------------------------------------------------
ALL CATFISH/FISH INVENTORY INCLUDING BUT NOT LIMITED TO FINGERLINGS,
STOCKERS & FOOD FISH & PROCEEDS & REBATES FROM SALES OF CATFISH/FISH.
- --------------------------------------------------------------------------------
5. IF COLLATERAL IS CROPS - Crops are growing or to be grown on - DESCRIBE
REAL ESTATE (Indicate record owner, if not Debtor):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. CHECK IF THIS STATEMENT IS FILED WITHOUT THE DEBTOR'S SIGNATURE TO PERFECT
A SECURITY INTEREST IN COLLATERAL:
<TABLE>
<S> <C>
[ ] already subject to a security interest [ ] where the original filing has lapsed ---------------------
in another jurisdiction when it Office Use Only
was brought into this state or
when Debtor's location was changed to
this state ---------------------
[ ] which is proceeds of the original collateral [ ] acquired after a change of name, identity, or
described above in which a security interest corporate structure of the Debtor
was perfected
</TABLE>
7. CHECK IF COVERED: [X] Products of Collateral 8. NUMBER OF ADDITIONAL
SHEETS ATTACHED: [O]
/s/ George S Hastings Jr | COMMUNITY BANK, INDIANOLA
- -----------------------------------------|--------------------------------------
GEORGE S HASTINGS |
- -----------------------------------------|--------------------------------------
Signatures of Debtor(s) | Signature of Secured Party (ies)
| (Required only if filed without
debtor's signature)
PART B - COMPLETE IN ADDITION TO PART A FOR FARM PRODUCT NOTICE
<TABLE>
<S> <C> <C> <C>
8. DEBTOR #1: Name: AQUAPRO CORPORATION Tax ID/SSN 62-1598919 County Code
--------------------- ----------- -----
DEBTOR #2: Name: GEORGE S HASTINGS, JR Tax ID/SSN ###-##-#### County Code
--------------------- ----------- -----
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Collateral Type Name Collateral Number Code County/Produced Code Collateral Quantity Amount Crop Year
CATFISH 202 ALL 1998
- ------------------------- ------------------------- ------------------------- ------------------------- -----------------------
- ------------------------- ------------------------- ------------------------- ------------------------- -----------------------
</TABLE>
9. BRIEF DESCRIPTION OF COLLATERAL 10. IF COLLATERAL INVOLVES REAL PROPERTY,
(if needed to distinguish from LIVESTOCK, CROPS GROWING OR TO BE
products not subject to security GROWN, DESCRIBE PROPERTY (give name
interest): if owned by person other than
Debtor):
- ------------------------------------ ---------------------------------------
CATFISH/FISH
- ------------------------------------ ---------------------------------------
/s/ GEORGE S HASTINGS JR | COMMUNITY BANK, INDIANOLA
- -----------------------------------------|--------------------------------------
GEORGE S HASTINGS |
- -----------------------------------------|--------------------------------------
Signatures of Debtor(s) | Signature of Secured Party (ies)
THIS FILING IS FOR NOTICE PURPOSE ONLY. THE MAXIMUM PRINCIPAL INDEBTEDNESS FOR
TENNESSEE RECORDING TAX PURPOSES IS $0.00.
<PAGE> 31
<TABLE>
<S> <C>
STATE OF TENNESSEE UCC-1F 4240594
FINANCING STATEMENT
UCC-01F
PART A - TO BE COMPLETED FOR PERFECTION ONLY Book & Page: Filed with: DAVIDSON CO.
1. DEBTORS (LAST NAME FIRST FOR INDIVIDUALS) CHANCERY CLERK
------------ --------------
AQUAPRO CORPORATION | HASTINGS, JR GEORGE S
- ------------------------------------------------------- | -------------------------------------------------------
Last Name First Name Middle Name | Last Name First Name Middle Name
|
4307 CENTRAL PIKE | 4307 CENTRAL PIKE
- -------------------------------------------------------- | --------------------------------------------------------
Mailing Address | Mailing Address
|
HERMITAGE | TN | |37076 0000 | HERMITAGE | TN | |37076
- --------------------------|------|----------|----------- | --------------------------|------|----------|-----------
City |State | Cty Cd | ZIP | City |State | Cty Cd | ZIP
| | |
62-1598919 | | ###-##-#### |
- --------------------------|----------------------------- | --------------------------|-----------------------------
Tax ID/SSN | Tax ID/SSN
|
2. SECURED PARTY (LAST NAME FIRST FOR INDIVIDUALS) | 3. ASSIGNEE (LAST NAME FIRST FOR INDIVIDUALS)
|
COMMUNITY BANK, INDIANOLA |
- ------------------------------------------------------- | -------------------------------------------------------
Business Name | Business Name
|
P.O. BOX 28 |
- -------------------------------------------------------- | --------------------------------------------------------
Mailing Address | Mailing Address
|
INDIANOLA | MS | 67 | 38751 | | | |
- --------------------------|------|----------|----------- | --------------------------|------|----------|-----------
City |State | Cty Cd | ZIP | City |State | Cty Cd | ZIP
| | |
64-0220450 | | |
- --------------------------|----------------------------- | --------------------------|-----------------------------
Tax ID/SSN | Tax ID/SSN
</TABLE>
4. THIS FINANCING STATEMENT COVERS THE FOLLOWING TYPES (OR ITEMS) OF PROPERTY:
- --------------------------------------------------------------------------------
ALL CATFISH/FISH INVENTORY INCLUDING BUT NOT LIMITED TO FINGERLINGS,
STOCKERS & FOOD FISH & PROCEEDS & REBATES FROM SALES OF CATFISH/FISH.
- --------------------------------------------------------------------------------
5. IF COLLATERAL IS CROPS - Crops are growing or to be grown on - DESCRIBE
REAL ESTATE (Indicate record owner, if not Debtor):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. CHECK IF THIS STATEMENT IS FILED WITHOUT THE DEBTOR'S SIGNATURE TO PERFECT
A SECURITY INTEREST IN COLLATERAL:
<TABLE>
<S> <C>
[ ] already subject to a security interest [ ] where the original filing has lapsed ---------------------
in another jurisdiction when it Office Use Only
was brought into this state or
when Debtor's location was changed to
this state ---------------------
[ ] which is proceeds of the original collateral [ ] acquired after a change of name, identity, or
described above in which a security interest corporate structure of the Debtor
was perfected
</TABLE>
7. CHECK IF COVERED: [X] Products of Collateral 8. NUMBER OF ADDITIONAL
SHEETS ATTACHED: [O]
/s/ George S Hastings Jr | COMMUNITY BANK, INDIANOLA
- -----------------------------------------|--------------------------------------
GEORGE S HASTINGS |
- -----------------------------------------|--------------------------------------
Signatures of Debtor(s) | Signature of Secured Party (ies)
| (Required only if filed without
debtor's signature)
PART B - COMPLETE IN ADDITION TO PART A FOR FARM PRODUCT NOTICE
<TABLE>
<S> <C> <C> <C>
8. DEBTOR #1: Name: AQUAPRO CORPORATION Tax ID/SSN 62-1598919 County Code
--------------------- ----------- -----
DEBTOR #2: Name: GEORGE S HASTINGS, JR Tax ID/SSN ###-##-#### County Code
--------------------- ----------- -----
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Collateral Type Name Collateral Number Code County/Produced Code Collateral Quantity Amount Crop Year
CATFISH 202 12 ALL 1998
- ------------------------- ------------------------- ------------------------- ------------------------- -----------------------
- ------------------------- ------------------------- ------------------------- ------------------------- -----------------------
</TABLE>
9. BRIEF DESCRIPTION OF COLLATERAL 10. IF COLLATERAL INVOLVES REAL PROPERTY,
(if needed to distinguish from LIVESTOCK, CROPS GROWING OR TO BE
products not subject to security GROWN, DESCRIBE PROPERTY (give name
interest): if owned by person other than
Debtor):
- ------------------------------------ ---------------------------------------
CATFISH/FISH
- ------------------------------------ ---------------------------------------
/s/ GEORGE S HASTINGS JR | COMMUNITY BANK, INDIANOLA
- -----------------------------------------|--------------------------------------
GEORGE S HASTINGS |
- -----------------------------------------|--------------------------------------
Signatures of Debtor(s) | Signature of Secured Party (ies)
THIS FILING IS FOR NOTICE PURPOSE ONLY. THE MAXIMUM PRINCIPAL INDEBTEDNESS FOR
TENNESSEE RECORDING TAX PURPOSES IS $0.00
<PAGE> 32
NOTICE OF SECURITY INTEREST 4240594
<TABLE>
<S> <C>
To: SOUTHERN FARM FISH PRO. Date: May 06, 1998
------------------------------------------------------ ------------------------------------------------
RT 1 BOX 138F [ ] This notice amends an earlier notice dated
------------------------------------------------------ ------
EUDORA, MS 71378
------------------------------------------------------
Re: AQUAPRO CORPORATION 62-1598919
------------------------------------------------------
(Name of Debtor and Soc. Sec. or Taxpayer I.D. Number)
-----------------------------------------------------
------------------------------------------------------ COMMUNITY BANK, INDIANOLA
(Name of Debtor and Soc. Sec. or Taxpayer I.D. Number) P. 0. BOX 28
4307 CENTRAL PIKE INDIANOLA, MS 38751
------------------------------------------------------
(Address)
HERMITAGE TN 37076 0000 Name and Address of Secured Party
------------------------------------------------------ -----------------------------------------------------
</TABLE>
The Debtor has named you as a potential buyer, commission merchant or selling
agent of farm products. You are hereby given notice pursuant to the Food
Security Act of 1985 that the Debtor has given a security interest to the
Secured Party in (1) the farm products described below and (2) any proceeds
from the sale of such farm products. This notice is effective for 1 year from
the date you receive it.
<TABLE>
<CAPTION>
AGRICULTURAL COMMODITIES:
Description Crop Year(s) Amount
----------- ------------ ------
<S> <C> <C>
CATFISH 1998 ALL
LIVESTOCK:
<CAPTION>
Description Amount
----------- ------
<S> <C>
PRODUCTS OF CROPS OR LIVESTOCK:
<CAPTION>
<S> <C> <C>
Description Crop Year(s) Amount
----------- ------------ ------
</TABLE>
If no amount is specified for the above described farm products, the security
interest covers all such farm products without limitation as to amount.
The farm products described above are or may be located on (describe property
and county or parish where farm products are or may be located):
[X] The security interest also covers the described farm products wherever
located and is not limited to those located on the above property.
PAYMENT OBLIGATIONS
You will be subject to the security interest of the Secured Party in the farm
products unless the following payment obligations are satisfied:
[X] Any check or draft issued to Debtor as full or partial payment for any sale
of such farm products must be made payable to both the Debtor and the
Secured Party, delivered to or received by Secured Party, and finally paid.
[X] If property other than checks or drafts is given as full or partial payment
for the sale of such farm products, you must deliver a written notice
describing the property in detail to the undersigned at the address stated
above within three days after such sale.
[ ]
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Satisfaction of the payment obligations will not affect the security interest of
the Secured Party in proceeds of the sale of such farm products.
-------------------------------------------------------
(Signature of Authorized Representative of Secured Party)
<PAGE> 33
NOTICE OF SECURITY INTEREST 4240594
<TABLE>
<S> <C>
To: HEARTLAND CATFISH Date: May 06, 1998
------------------------------------------------------ ------------------------------------------------
55001 HWY 82 WEST [ ] This notice amends an earlier notice dated
------------------------------------------------------ ------
ITTA BENA, MS 38941
------------------------------------------------------
Re: AQUAPRO CORPORATION 62-1598919
------------------------------------------------------
(Name of Debtor and Soc. Sec. or Taxpayer I.D. Number)
-----------------------------------------------------
------------------------------------------------------ COMMUNITY BANK, INDIANOLA
(Name of Debtor and Soc. Sec. or Taxpayer I.D. Number) P. 0. BOX 28
4307 CENTRAL PIKE INDIANOLA, MS 38751
------------------------------------------------------
(Address)
HERMITAGE TN 37076 0000 Name and Address of Secured Party
------------------------------------------------------ -----------------------------------------------------
</TABLE>
The Debtor has named you as a potential buyer, commission merchant or selling
agent of farm products. You are hereby given notice pursuant to the Food
Security Act of 1985 that the Debtor has given a security interest to the
Secured Party in (1) the farm products described below and (2) any proceeds
from the sale of such farm products. This notice is effective for 1 year from
the date you receive it.
<TABLE>
<CAPTION>
AGRICULTURAL COMMODITIES:
Description Crop Year(s) Amount
----------- ------------ ------
<S> <C> <C>
CATFISH 1998 ALL
LIVESTOCK:
<CAPTION>
Description Amount
----------- ------
<S> <C>
PRODUCTS OF CROPS OR LIVESTOCK:
<CAPTION>
<S> <C> <C>
Description Crop Year(s) Amount
----------- ------------ ------
</TABLE>
If no amount is specified for the above described farm products, the security
interest covers all such farm products without limitation as to amount.
The farm products described above are or may be located on (describe property
and county or parish where farm products are or may be located):
[X] The security interest also covers the described farm products wherever
located and is not limited to those located on the above property.
PAYMENT OBLIGATIONS
You will be subject to the security interest of the Secured Party in the farm
products unless the following payment obligations are satisfied:
[X] Any check or draft issued to Debtor as full or partial payment for any sale
of such farm products must be made payable to both the Debtor and the
Secured Party, delivered to or received by Secured Party, and finally paid.
[X] If property other than checks or drafts is given as full or partial payment
for the sale of such farm products, you must deliver a written notice
describing the property in detail to the undersigned at the address stated
above within three days after such sale.
[ ]
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Satisfaction of the payment obligations will not affect the security interest of
the Secured Party in proceeds of the sale of such farm products.
-------------------------------------------------------
(Signature of Authorized Representative of Secured Party)
<PAGE> 34
NOTICE OF SECURITY INTEREST 4240594
<TABLE>
<S> <C>
To: FRESHWATER FARMS Date: May 06, 1998
------------------------------------------------------ ------------------------------------------------
P O BOX 957 [ ] This notice amends an earlier notice dated
------------------------------------------------------ ------
YAZOO CITY, MS 39194
------------------------------------------------------
Re: AQUAPRO CORPORATION 62-1598919
------------------------------------------------------
(Name of Debtor and Soc. Sec. or Taxpayer I.D. Number)
-----------------------------------------------------
------------------------------------------------------ COMMUNITY BANK, INDIANOLA
(Name of Debtor and Soc. Sec. or Taxpayer I.D. Number) P. 0. BOX 28
4307 CENTRAL PIKE INDIANOLA, MS 38751
------------------------------------------------------
(Address)
HERMITAGE TN 37076 0000 Name and Address of Secured Party
------------------------------------------------------ -----------------------------------------------------
</TABLE>
The Debtor has named you as a potential buyer, commission merchant or selling
agent of farm products. You are hereby given notice pursuant to the Food
Security Act of 1985 that the Debtor has given a security interest to the
Secured Party in (1) the farm products described below and (2) any proceeds
from the sale of such farm products. This notice is effective for 1 year from
the date you receive it.
<TABLE>
<CAPTION>
AGRICULTURAL COMMODITIES:
Description Crop Year(s) Amount
----------- ------------ ------
<S> <C> <C>
CATFISH 1998 ALL
LIVESTOCK:
<CAPTION>
Description Amount
----------- ------
<S> <C>
PRODUCTS OF CROPS OR LIVESTOCK:
<CAPTION>
<S> <C> <C>
Description Crop Year(s) Amount
----------- ------------ ------
</TABLE>
If no amount is specified for the above described farm products, the security
interest covers all such farm products without limitation as to amount.
The farm products described above are or may be located on (describe property
and county or parish where farm products are or may be located):
[X] The security interest also covers the described farm products wherever
located and is not limited to those located on the above property.
PAYMENT OBLIGATIONS
You will be subject to the security interest of the Secured Party in the farm
products unless the following payment obligations are satisfied:
[X] Any check or draft issued to Debtor as full or partial payment for any sale
of such farm products must be made payable to both the Debtor and the
Secured Party, delivered to or received by Secured Party, and finally paid.
[X] If property other than checks or drafts is given as full or partial payment
for the sale of such farm products, you must deliver a written notice
describing the property in detail to the undersigned at the address stated
above within three days after such sale.
[ ]
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Satisfaction of the payment obligations will not affect the security interest of
the Secured Party in proceeds of the sale of such farm products.
-------------------------------------------------------
(Signature of Authorized Representative of Secured Party)
<PAGE> 35
NOTICE OF SECURITY INTEREST 4240594
<TABLE>
<S> <C>
To: AMERICA'S CATCH Date: May 06, 1998
------------------------------------------------------ ------------------------------------------------
P O BOX 683 [ ] This notice amends an earlier notice dated
------------------------------------------------------ ------
ITTA BENA, MS 38941
------------------------------------------------------
Re: AQUAPRO CORPORATION 62-1598919
------------------------------------------------------
(Name of Debtor and Soc. Sec. or Taxpayer I.D. Number)
-----------------------------------------------------
------------------------------------------------------ COMMUNITY BANK, INDIANOLA
(Name of Debtor and Soc. Sec. or Taxpayer I.D. Number) P. 0. BOX 28
4307 CENTRAL PIKE INDIANOLA, MS 38751
------------------------------------------------------
(Address)
HERMITAGE TN 37076 0000 Name and Address of Secured Party
------------------------------------------------------ -----------------------------------------------------
</TABLE>
The Debtor has named you as a potential buyer, commission merchant or selling
agent of farm products. You are hereby given notice pursuant to the Food
Security Act of 1985 that the Debtor has given a security interest to the
Secured Party in (1) the farm products described below and (2) any proceeds
from the sale of such farm products. This notice is effective for 1 year from
the date you receive it.
<TABLE>
<CAPTION>
AGRICULTURAL COMMODITIES:
Description Crop Year(s) Amount
----------- ------------ ------
<S> <C> <C>
CATFISH 1998 ALL
LIVESTOCK:
<CAPTION>
Description Amount
----------- ------
<S> <C>
PRODUCTS OF CROPS OR LIVESTOCK:
<CAPTION>
<S> <C> <C>
Description Crop Year(s) Amount
----------- ------------ ------
</TABLE>
If no amount is specified for the above described farm products, the security
interest covers all such farm products without limitation as to amount.
The farm products described above are or may be located on (describe property
and county or parish where farm products are or may be located):
[X] The security interest also covers the described farm products wherever
located and is not limited to those located on the above property.
PAYMENT OBLIGATIONS
You will be subject to the security interest of the Secured Party in the farm
products unless the following payment obligations are satisfied:
[X] Any check or draft issued to Debtor as full or partial payment for any sale
of such farm products must be made payable to both the Debtor and the
Secured Party, delivered to or received by Secured Party, and finally paid.
[X] If property other than checks or drafts is given as full or partial payment
for the sale of such farm products, you must deliver a written notice
describing the property in detail to the undersigned at the address stated
above within three days after such sale.
[ ]
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Satisfaction of the payment obligations will not affect the security interest of
the Secured Party in proceeds of the sale of such farm products.
-------------------------------------------------------
(Signature of Authorized Representative of Secured Party)
<PAGE> 36
NOTICE OF SECURITY INTEREST 4240594
<TABLE>
<S> <C>
To: FARM FRESH CATFISH Date: May 06, 1998
------------------------------------------------------ ------------------------------------------------
P O BOX 85 [ ] This notice amends an earlier notice dated
------------------------------------------------------ ------
HOLLANDALE, MS 38748
------------------------------------------------------
Re: AQUAPRO CORPORATION 62-1598919
------------------------------------------------------
(Name of Debtor and Soc. Sec. or Taxpayer I.D. Number)
-----------------------------------------------------
------------------------------------------------------ COMMUNITY BANK, INDIANOLA
(Name of Debtor and Soc. Sec. or Taxpayer I.D. Number) P. 0. BOX 28
4307 CENTRAL PIKE INDIANOLA, MS 38751
------------------------------------------------------
(Address)
HERMITAGE TN 37076 0000 Name and Address of Secured Party
------------------------------------------------------ -----------------------------------------------------
</TABLE>
The Debtor has named you as a potential buyer, commission merchant or selling
agent of farm products. You are hereby given notice pursuant to the Food
Security Act of 1985 that the Debtor has given a security interest to the
Secured Party in (1) the farm products described below and (2) any proceeds
from the sale of such farm products. This notice is effective for 1 year from
the date you receive it.
<TABLE>
<CAPTION>
AGRICULTURAL COMMODITIES:
Description Crop Year(s) Amount
----------- ------------ ------
<S> <C> <C>
CATFISH 1998 ALL
LIVESTOCK:
<CAPTION>
Description Amount
----------- ------
<S> <C>
PRODUCTS OF CROPS OR LIVESTOCK:
<CAPTION>
<S> <C> <C>
Description Crop Year(s) Amount
----------- ------------ ------
</TABLE>
If no amount is specified for the above described farm products, the security
interest covers all such farm products without limitation as to amount.
The farm products described above are or may be located on (describe property
and county or parish where farm products are or may be located):
[X] The security interest also covers the described farm products wherever
located and is not limited to those located on the above property.
PAYMENT OBLIGATIONS
You will be subject to the security interest of the Secured Party in the farm
products unless the following payment obligations are satisfied:
[X] Any check or draft issued to Debtor as full or partial payment for any sale
of such farm products must be made payable to both the Debtor and the
Secured Party, delivered to or received by Secured Party, and finally paid.
[X] If property other than checks or drafts is given as full or partial payment
for the sale of such farm products, you must deliver a written notice
describing the property in detail to the undersigned at the address stated
above within three days after such sale.
[ ]
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Satisfaction of the payment obligations will not affect the security interest of
the Secured Party in proceeds of the sale of such farm products.
-------------------------------------------------------
(Signature of Authorized Representative of Secured Party)
<PAGE> 37
NOTICE OF SECURITY INTEREST 4240594
<TABLE>
<S> <C>
To: SOUTHFRESH FARMS, LLC Date: May 06, 1998
------------------------------------------------------ ------------------------------------------------
P O BOX 848 [ ] This notice amends an earlier notice dated
------------------------------------------------------ ------
INDIANOLA, MS 38751
------------------------------------------------------
Re: AQUAPRO CORPORATION 62-1598919
------------------------------------------------------
(Name of Debtor and Soc. Sec. or Taxpayer I.D. Number)
-----------------------------------------------------
------------------------------------------------------ COMMUNITY BANK, INDIANOLA
(Name of Debtor and Soc. Sec. or Taxpayer I.D. Number) P. 0. BOX 28
4307 CENTRAL PIKE INDIANOLA, MS 38751
------------------------------------------------------
(Address)
HERMITAGE TN 37076 0000 Name and Address of Secured Party
------------------------------------------------------ -----------------------------------------------------
</TABLE>
The Debtor has named you as a potential buyer, commission merchant or selling
agent of farm products. You are hereby given notice pursuant to the Food
Security Act of 1985 that the Debtor has given a security interest to the
Secured Party in (1) the farm products described below and (2) any proceeds
from the sale of such farm products. This notice is effective for 1 year from
the date you receive it.
<TABLE>
<CAPTION>
AGRICULTURAL COMMODITIES:
Description Crop Year(s) Amount
----------- ------------ ------
<S> <C> <C>
CATFISH 1998 ALL
LIVESTOCK:
<CAPTION>
Description Amount
----------- ------
<S> <C>
PRODUCTS OF CROPS OR LIVESTOCK:
<CAPTION>
<S> <C> <C>
Description Crop Year(s) Amount
----------- ------------ ------
</TABLE>
If no amount is specified for the above described farm products, the security
interest covers all such farm products without limitation as to amount.
The farm products described above are or may be located on (describe property
and county or parish where farm products are or may be located):
[X] The security interest also covers the described farm products wherever
located and is not limited to those located on the above property.
PAYMENT OBLIGATIONS
You will be subject to the security interest of the Secured Party in the farm
products unless the following payment obligations are satisfied:
[X] Any check or draft issued to Debtor as full or partial payment for any sale
of such farm products must be made payable to both the Debtor and the
Secured Party, delivered to or received by Secured Party, and finally paid.
[X] If property other than checks or drafts is given as full or partial payment
for the sale of such farm products, you must deliver a written notice
describing the property in detail to the undersigned at the address stated
above within three days after such sale.
[ ]
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Satisfaction of the payment obligations will not affect the security interest of
the Secured Party in proceeds of the sale of such farm products.
-------------------------------------------------------
(Signature of Authorized Representative of Secured Party)
<PAGE> 38
NOTICE OF SECURITY INTEREST 4240594
<TABLE>
<S> <C>
To: DELTA PRIDE Date: May 06, 1998
------------------------------------------------------ ------------------------------------------------
P O BOX 850 [ ] This notice amends an earlier notice dated
------------------------------------------------------ ------
INDIANOLA, MS 38751
------------------------------------------------------
Re: AQUAPRO CORPORATION 62-1598919
------------------------------------------------------
(Name of Debtor and Soc. Sec. or Taxpayer I.D. Number)
-----------------------------------------------------
------------------------------------------------------ COMMUNITY BANK, INDIANOLA
(Name of Debtor and Soc. Sec. or Taxpayer I.D. Number) P. 0. BOX 28
4307 CENTRAL PIKE INDIANOLA, MS 38751
------------------------------------------------------
(Address)
HERMITAGE TN 37076 0000 Name and Address of Secured Party
------------------------------------------------------ -----------------------------------------------------
</TABLE>
The Debtor has named you as a potential buyer, commission merchant or selling
agent of farm products. You are hereby given notice pursuant to the Food
Security Act of 1985 that the Debtor has given a security interest to the
Secured Party in (1) the farm products described below and (2) any proceeds
from the sale of such farm products. This notice is effective for 1 year from
the date you receive it.
<TABLE>
<CAPTION>
AGRICULTURAL COMMODITIES:
Description Crop Year(s) Amount
----------- ------------ ------
<S> <C> <C>
CATFISH 1998 ALL
LIVESTOCK:
<CAPTION>
Description Amount
----------- ------
<S> <C>
PRODUCTS OF CROPS OR LIVESTOCK:
<CAPTION>
<S> <C> <C>
Description Crop Year(s) Amount
----------- ------------ ------
</TABLE>
If no amount is specified for the above described farm products, the security
interest covers all such farm products without limitation as to amount.
The farm products described above are or may be located on (describe property
and county or parish where farm products are or may be located):
[X] The security interest also covers the described farm products wherever
located and is not limited to those located on the above property.
PAYMENT OBLIGATIONS
You will be subject to the security interest of the Secured Party in the farm
products unless the following payment obligations are satisfied:
[X] Any check or draft issued to Debtor as full or partial payment for any sale
of such farm products must be made payable to both the Debtor and the
Secured Party, delivered to or received by Secured Party, and finally paid.
[X] If property other than checks or drafts is given as full or partial payment
for the sale of such farm products, you must deliver a written notice
describing the property in detail to the undersigned at the address stated
above within three days after such sale.
[ ]
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Satisfaction of the payment obligations will not affect the security interest of
the Secured Party in proceeds of the sale of such farm products.
-------------------------------------------------------
(Signature of Authorized Representative of Secured Party)
<PAGE> 39
NOTICE OF SECURITY INTEREST 4240594
<TABLE>
<S> <C>
To: CONFISH Date: May 06, 1998
------------------------------------------------------ ------------------------------------------------
P O BOX 271 [ ] This notice amends an earlier notice dated
------------------------------------------------------ ------
ISOLA, MS 38754
------------------------------------------------------
Re: AQUAPRO CORPORATION 62-1598919
------------------------------------------------------
(Name of Debtor and Soc. Sec. or Taxpayer I.D. Number)
-----------------------------------------------------
------------------------------------------------------ COMMUNITY BANK, INDIANOLA
(Name of Debtor and Soc. Sec. or Taxpayer I.D. Number) P. 0. BOX 28
4307 CENTRAL PIKE INDIANOLA, MS 38751
------------------------------------------------------
(Address)
HERMITAGE TN 37076 0000 Name and Address of Secured Party
------------------------------------------------------ -----------------------------------------------------
</TABLE>
The Debtor has named you as a potential buyer, commission merchant or selling
agent of farm products. You are hereby given notice pursuant to the Food
Security Act of 1985 that the Debtor has given a security interest to the
Secured Party in (1) the farm products described below and (2) any proceeds
from the sale of such farm products. This notice is effective for 1 year from
the date you receive it.
<TABLE>
<CAPTION>
AGRICULTURAL COMMODITIES:
Description Crop Year(s) Amount
----------- ------------ ------
<S> <C> <C>
CATFISH 1998 ALL
LIVESTOCK:
<CAPTION>
Description Amount
----------- ------
<S> <C>
PRODUCTS OF CROPS OR LIVESTOCK:
<CAPTION>
<S> <C> <C>
Description Crop Year(s) Amount
----------- ------------ ------
</TABLE>
If no amount is specified for the above described farm products, the security
interest covers all such farm products without limitation as to amount.
The farm products described above are or may be located on (describe property
and county or parish where farm products are or may be located):
[X] The security interest also covers the described farm products wherever
located and is not limited to those located on the above property.
PAYMENT OBLIGATIONS
You will be subject to the security interest of the Secured Party in the farm
products unless the following payment obligations are satisfied:
[X] Any check or draft issued to Debtor as full or partial payment for any sale
of such farm products must be made payable to both the Debtor and the
Secured Party, delivered to or received by Secured Party, and finally paid.
[X] If property other than checks or drafts is given as full or partial payment
for the sale of such farm products, you must deliver a written notice
describing the property in detail to the undersigned at the address stated
above within three days after such sale.
[ ]
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Satisfaction of the payment obligations will not affect the security interest of
the Secured Party in proceeds of the sale of such farm products.
-------------------------------------------------------
(Signature of Authorized Representative of Secured Party)
<PAGE> 40
This instrument was prepared by: LEIGH ANN VANCE
----------------------------------------------
COMMUNITY BANK, INDIANOLA P O BOX 28 INDIANOLA, MS 38751 887-4513 (Name,
Address and Telephone No.)
LAND DEED OF TRUST
THIS INDENTURE, made and entered into this day by and between AQUAPRO
-------------
CORPORATION
- --------------------------------------------------------------------------------
whose address is 4307 CENTRAL PIKE HERITAGE
---------------------------------------------------------------
(Street No. or RFD No. and Box) (City)
TN , as Grantor (herein designated as "Debtor"), and
- -------------------------------
(County) (State)
RICHARD G. NOBLE
- --------------------------------------------------------------------------------
as Trustee, and
- ----------------------------------------------------------------
COMMUNITY BANK, INDIANOLA
- --------------------------------------------------------------------------------
of INDIANOLA , Mississippi as Beneficiary (herein
- -------------- -------------------------
designated as "Secured Party"), WITNESSETH:
WHEREAS, Debtor is indebted to Secured Party in the full sum of
-----------
ONE MILLION AND NO/100
- --------------------------------------------------------------------------------
Dollars ($1,000,000.00) evidenced by ONE promissory note of even date herewith
------------- -----
in favor of Secured Party, bearing interest from 5/06/98 at the rate specified
---------
in the note , providing for payment of attorney's fees for collection
-----------
if not paid according to the terms thereof and being due and payable as set
forth below:
DEBTOR AGREES TO PAY $1087039.73 AT MATURITY FINAL MATURITY BEING 3/15/99
* THIS LOAN CONTAINS A VARIABLE RATE CLAUSE.
WHEREAS, Debtor desires to secure prompt payment of (a) the indebtedness
described above according to its terms and any extensions thereof, (b) any
additional and future advances with interest thereon which Secured Party may
make to Debtor as provided in Paragraph 1, (c) any other indebtedness which
Debtor may now or hereafter owe to Secured Party as provided in Paragraph 2 and
(d) any advances with interest which Secured Party may make to protect the
property herein conveyed as provided in Paragraphs 3, 4, 5 and 6 (all being
herein referred to as the "Indebtedness").
NOW THEREFORE, In consideration of the Indebtedness herein recited, Debtor
hereby conveys and warrants unto Trustee the land described below situated in
the City of County of LEFLORE State of Mississippi:
------------- ---------
SEE ATTACHED EXHIBIT "A"
<PAGE> 41
9. Debtor shall be in default under the provisions of this Deed of Trust
if Debtor (a) shall fail to comply with any of Debtor's covenants or
obligations contained herein, (b) shall fail to pay any of the indebtedness
secured hereby, or any installment thereof or interest thereon, as such
indebtedness, installment or interest shall be due by contractual agreement or
by acceleration, (c) shall become bankrupt or insolvent or be placed in
receivership, (d) shall, if a corporation, a partnership or an unincorporated
association be dissolved voluntarily or involuntarily, or (e) if Secured Party
in good faith deems itself insecure and its prospect of repayment seriously
impaired.
10. Secured Party may at any time, without giving formal notice to the
original or any successor Trustee, or to Debtor, and without regard to the
willingness or inability of any such Trustee to execute this trust, appoint
another person or succession of persons to act as Trustee, and such appointee
in the execution of this trust shall have all the powers vested in and
obligations imposed upon Trustee. Should Secured Party be a corporation or an
unincorporated association, then any officer thereof may make such appointment.
11. Each privilege, option or remedy provided in this Deed of Trust to
Secured Party is distinct from every other privilege, option or remedy
contained herein or afforded by law or equity, and may be exercised
independently, concurrently, cumulatively or successively by Secured Party or
by any other owner or holder of the indebtedness. Forebearance by Secured Party
in exercising any privilege, option or remedy after the right to do so has
accrued shall not constitute a waiver of Secured Party's right to exercise such
privilege, option or remedy in event of any subsequent accrual.
12. The words "Debtor" or "Secured Party" shall each embrace one
individual, two or more individuals, a corporation, a partnership or an
unincorporated association, depending on the recital herein of the parties to
this Deed of Trust. The covenants herein contained shall bind, and the benefits
herein provided shall inure to, the respective legal or personal
representatives, successors or assigns of the parties hereto subject to the
provisions of Paragraph 8. If there be more than one Debtor, then Debtor's
obligations shall be joint and several. Whenever in this Deed of Trust the
context so requires, the singular shall include the plural and the plural the
singular. Notices required herein from Secured Party to Debtor shall be sent to
the address of Debtor shown in this Deed of Trust.
IN WITNESS WHEREOF, Debtor has executed this Deed of Trust on the 6th
-----
day of May 1998.
-----------
CORPORATE, PARTNERSHIP OR ASSOCIATION SIGNATURE INDIVIDUAL SIGNATURES
AQUAPRO CORPORATION
- -------------------------------------------------- --------------------------
Name of Debtor
By PRESIDENT
- -------------------------------------------------- --------------------------
GEORGE S HASTINGS Title
Attest: /s/ GEORGE S HASTINGS
- -------------------------------------------------- --------------------------
Title
(Seal)
INDIVIDUAL ACKNOWLEDGEMENT
STATE OF MISSISSIPPI
COUNTY OF
---------------------------------
Personally appeared before me, the undersigned authority in and for the
said county and state, on this day of
----- ----------------------------------,
within my jurisdiction, the within named
------------------------------------
who acknowledged that
- ----------------------------------- -------------------
(he/she/they) executed the above and foregoing instrument.
- ---------
My Commission Expires
------------------------- -----------------------------
(Seal) Notary Public
CORPORATE, PARTNERSHIP OR ASSOCIATION ACKNOWLEDGEMENT
STATE OF MISSISSIPPI
COUNTY OF SUNFLOWER
---------------------------------
Personally appeared before me, the undersigned authority in and for the
said county and state, on this 6th day of MAY 1998
--- ------------------------------------,
within my jurisdiction, the within named GEORGE S HASTINGS
------------------------------------
and
- ---------------------------------- ----------------------------------------
who acknowledged that HE/SHE (he/she/they) is-are PRESIDENT
- -------- -------- -----------------
and of AQUAPRO CORPORATION a
-------------------- -------------------------------------------------
CORPORATION (corporation/partnership/unincorporated association), and that
- ----------------
for and on behalf of the said organization, and as its act and deed HE/SHE
----------
(he/she/they) executed the above and foregoing instrument, after first having
been duly authorized by said corporation so to do.
My Commission Expires
------------------------- -----------------------------
(Seal) Notary Public
<PAGE> 42
4240594
TRACT #1
TO THE CHANCERY CLERK OF LEFLORE COUNTY, MISSISSIPPI
LAND SITUATED IN THE QUARTER OF THE
QUARTER OF SECTION 5,6,7 & 8 TOWNSHIP 18 NORTH
RANGE 2 WEST LEFLORE COUNTY, MISSISSIPPI
TRACT #2
LAND SITUATED IN THE LEFLORE QUARTER OF THE
QUARTER OF SECTION 5,6,7 & 8 TOWNSHIP 18 NORTH
RANGE 2 WEST LEFLORE COUNTY, MISSISSIPPI
<PAGE> 43
EXHIBIT "A"
TRACT 1:
Commencing at a steel post marking the corner common to Sections 5, 6, 7 & 8,
Township 18 North, Range 2 West, Leflore County, Mississippi, said corner being
the POINT OF BEGINNING of the tract herein described; thence South
89degree54'14" East, 109.62 feet to the center of a public road; thence North
00degree06'27" West, along the center of said public road for 2,078.37 feet;
thence South 85degree36'54" West, 1,329.76 feet; thence South 10degree00' East,
210.00 feet; thence South 85degree18' West 82.84 feet; thence South
00degree06'27" East, 1780.14 feet; thence North 89degree13'07" East, 1,263.01
feet to the POINT OF BEGINNING, containing 63.76 acres, more or less, and being
located in Sections 5 & 6 of the aforesaid Township, Range, County & State.
TRACT 2:
Commencing at a steel post marking the corner common to Sections 5, 6, 7 & 8,
Township 18 North, Range 2 West, Leflore County, Mississippi; thence South
89degree54'14" East, 109.62 feet to the center of a public road; thence South
00degree06'27" East, along the center of said public road for 272.25 feet to the
POINT OF BEGINNING of the tract herein described; thence South 89degree54'14"
East, 824.03 feet to an iron pipe; thence North 00degree05'46" East, 272.25 feet
to an iron pipe; thence South 89degree54'14" East, 2761.92 feet to an iron pipe;
thence South 8degree37'39" East, 1,744.69 feet to an iron pipe in the center of
a drainage canal; thence South 43degreell' West, along the center of said canal
for 1,224.95 feet; thence South 89degree11'29" West, 3,005.66 feet to the center
of the aforesaid public road; thence North 00degree06'27" West, along the center
of said road for 2,394.33 feet to the POINT OF BEGINNING, containing 213.95
acres, more or less, and being located in Section 8 of the aforesaid Township,
Range, County and State.
ATTACHED TO AND FORMING PART OF THAT CERTAIN DEED OF TRUST DATED
5/6/98 IN THE NAME OF AQUAPRO CORPORATION IN THE AMOUNT OF
$1,000,000.00
/s/ GEORGE HASTINGS
- ------------------------------ ------------------------
AQUAPRO CORPORATION DATE
BY: GEORGE HASTINGS, PRESIDENT
<PAGE> 44
This instrument was prepared by: LEIGH ANN VANCE
----------------------------------------------
COMMUNITY BANK, INDIANOLA P O BOX 28 INDIANOLA, MS 38751 887-4513 (Name,
Address and Telephone No.)
LAND DEED OF TRUST
THIS INDENTURE, made and entered into this day by and between AQUAPRO
-------------
CORPORATION
- --------------------------------------------------------------------------------
whose address is 4307 CENTRAL PIKE HERITAGE
---------------------------------------------------------------
(Street No. or RFD No. and Box) (City)
TN , as Grantor (herein designated as "Debtor"), and
- -------------------------------
(County) (State)
RICHARD G. NOBLE
- --------------------------------------------------------------------------------
as Trustee, and
- ----------------------------------------------------------------
COMMUNITY BANK, INDIANOLA
- --------------------------------------------------------------------------------
of INDIANOLA , Mississippi as Beneficiary (herein
- -------------- -------------------------
designated as "Secured Party"), WITNESSETH:
WHEREAS, Debtor is indebted to Secured Party in the full sum of
-----------
ONE MILLION AND NO/100
- --------------------------------------------------------------------------------
Dollars ($1,000,000.00) evidenced by ONE promissory note of even date herewith
------------- -----
in favor of Secured Party, bearing interest from 5/06/98 at the rate specified
---------
in the note , providing for payment of attorney's fees for collection
-----------
if not paid according to the terms thereof and being due and payable as set
forth below:
DEBTOR AGREES TO PAY $1087039.73 AT MATURITY FINAL MATURITY BEING 3/15/99
* THIS LOAN CONTAINS A VARIABLE RATE CLAUSE.
WHEREAS, Debtor desires to secure prompt payment of (a) the indebtedness
described above according to its terms and any extensions thereof, (b) any
additional and future advances with interest thereon which Secured Party may
make to Debtor as provided in Paragraph 1, (c) any other indebtedness which
Debtor may now or hereafter owe to Secured Party as provided in Paragraph 2 and
(d) any advances with interest which Secured Party may make to protect the
property herein conveyed as provided in Paragraphs 3, 4, 5 and 6 (all being
herein referred to as the "Indebtedness").
NOW THEREFORE, In consideration of the Indebtedness herein recited, Debtor
hereby conveys and warrants unto Trustee the land described below situated in
the City of County of SUNFLOWER State of Mississippi:
------------- -----------
SEE ATTACHED EXHIBIT "A"
<PAGE> 45
9. Debtor shall be in default under the provisions of this Deed of Trust
if Debtor (a) shall fail to comply with any of Debtor's covenants or
obligations contained herein, (b) shall fail to pay any of the indebtedness
secured hereby, or any installment thereof or interest thereon, as such
indebtedness, installment or interest shall be due by contractual agreement or
by acceleration, (c) shall become bankrupt or insolvent or be placed in
receivership, (d) shall, if a corporation, a partnership or an unincorporated
association be dissolved voluntarily or involuntarily, or (e) if Secured Party
in good faith deems itself insecure and its prospect of repayment seriously
impaired.
10. Secured Party may at any time, without giving formal notice to the
original or any successor Trustee, or to Debtor, and without regard to the
willingness or inability of any such Trustee to execute this trust, appoint
another person or succession of persons to act as Trustee, and such appointee
in the execution of this trust shall have all the powers vested in and
obligations imposed upon Trustee. Should Secured Party be a corporation or an
unincorporated association, then any officer thereof may make such appointment.
11. Each privilege, option or remedy provided in this Deed of Trust to
Secured Party is distinct from every other privilege, option or remedy
contained herein or afforded by law or equity, and may be exercised
independently, concurrently, cumulatively or successively by Secured Party or
by any other owner or holder of the indebtedness. Forebearance by Secured Party
in exercising any privilege, option or remedy after the right to do so has
accrued shall not constitute a waiver of Secured Party's right to exercise such
privilege, option or remedy in event of any subsequent accrual.
12. The words "Debtor" or "Secured Party" shall each embrace one
individual, two or more individuals, a corporation, a partnership or an
unincorporated association, depending on the recital herein of the parties to
this Deed of Trust. The covenants herein contained shall bind, and the benefits
herein provided shall inure to, the respective legal or personal
representatives, successors or assigns of the parties hereto subject to the
provisions of Paragraph 8. If there be more than one Debtor, then Debtor's
obligations shall be joint and several. Whenever in this Deed of Trust the
context so requires, the singular shall include the plural and the plural the
singular. Notices required herein from Secured Party to Debtor shall be sent to
the address of Debtor shown in this Deed of Trust.
IN WITNESS WHEREOF, Debtor has executed this Deed of Trust on the 6th
-----
day of May 1998.
-----------
CORPORATE, PARTNERSHIP OR ASSOCIATION SIGNATURE INDIVIDUAL SIGNATURES
AQUAPRO CORPORATION
- -------------------------------------------------- --------------------------
Name of Debtor
By PRESIDENT
- -------------------------------------------------- --------------------------
GEORGE S HASTINGS Title
Attest: /s/ GEORGE S HASTINGS
- -------------------------------------------------- --------------------------
Title
(Seal)
--------------------------
INDIVIDUAL ACKNOWLEDGEMENT
STATE OF MISSISSIPPI
COUNTY OF
---------------------------------
Personally appeared before me, the undersigned authority in and for the
said county and state, on this day of
----- ----------------------------------,
within my jurisdiction, the within named
------------------------------------
who acknowledged that
- ----------------------------------- -------------------
(he/she/they) executed the above and foregoing instrument.
- ---------
My Commission Expires
------------------------- -----------------------------
(Seal) Notary Public
CORPORATE, PARTNERSHIP OR ASSOCIATION ACKNOWLEDGEMENT
STATE OF MISSISSIPPI
COUNTY OF SUNFLOWER
---------------------------------
Personally appeared before me, the undersigned authority in and for the
said county and state, on this 6th day of MAY 1998
--- ------------------------------------,
within my jurisdiction, the within named GEORGE S HASTINGS
------------------------------------
and
- ---------------------------------- ----------------------------------------
who acknowledged that HE/SHE (he/she/they) is-are PRESIDENT
- -------- -------- -----------------
and of AQUAPRO CORPORATION a
-------------------- -------------------------------------------------
CORPORATION (corporation/partnership/unincorporated association), and that
- ----------------
for and on behalf of the said organization, and as its act and deed HE/SHE
----------
(he/she/they) executed the above and foregoing instrument, after first having
been duly authorized by said corporation so to do.
My Commission Expires
------------------------- ---------------------------
(Seal) Notary Public
Page 3 of 3
<PAGE> 46
4240594
TRACT #1
TO THE CHANCERY CLERK OF SUNFLOWER COUNTY, MISSISSIPPI
LAND SITUATED IN THE LOTS 1,2,3, QUARTER OF THE 6,7,8,11 & 12
QUARTER OF SECTION 21 TOWNSHIP 19 NORTH
RANGE 3 WEST SUNFLOWER COUNTY, MISSISSIPPI
TRACT #2
LAND SITUATED IN THE QUARTER OF THE
QUARTER OF SECTION TOWNSHIP
RANGE COUNTY, MISSISSIPPI
<PAGE> 47
EXHIBIT "A"
276.933 acres, more or less, located in all of Lots 2, 3, 4, 5 and 6 and in
parts of Lots 1, 7, 8, 11 and 12 in Section 21, Township 19 North, Range 3
West, Sunflower County, Mississippi and further described as follows:
Commence at the Northeast Corner of Section 21, Township 19 North, Range 3
West, Sunflower County, Mississippi; thence South 89degree31'09" West
782.82 feet along the North of Section 21 to a point on the Centerline of a
public gravel road and the centerline of Roundaway Bayou to the Point of
Beginning; thence continue South 89degree31'09" West 4,408.10 feet along
the centerline of said gravel road to a point on the Northwest corner of
said Section 21; thence South 00degree58'23" West 2,594.73 feet along the
West line of said Section 21 to a point on the centerline of Mississippi
Highway Ndegree3; thence South 16degree49'21" East 1,136.71 feet along the
centerline of said Mississippi Highway Ndegree3 to a point on the
centerline of Roundaway Bayou; thence Northeasterly 5,880.00 feet more or
less, along said centerline of Roundaway Bayou to the Point Of Beginning.
LESS AND EXCEPT:
1. 2.53 acres, more or less, located in Lots 1, 2, 3 and 4, for a County
Gravel Road right-of-way and described as follows: Commence at the
Northeast corner of Section 21, Township 19 North, Range 3 West; thence
South 89degree31'09" West 782.82 feet along the North line of Section 21 to
the centerline of a public gravel road and the Point Of Beginning; thence
continue South 89degree31'09" West along the centerline of the North line
of Section 21 and the centerline of the said public gravel road a distance
of 4,408.10 feet to the West line of Section 21, thence South 25 feet;
thence North 89degree31'09" East and parallel to the centerline of the said
public gravel road 4,408.10 feet to the centerline of Roundaway Bayou;
thence North 25 feet to the centerline of the said public gravel road and
the Point Of Beginning.
2. 0.990 acres, more or less, located in Lot 12 of Section 21, Township 19
North, Range 3 West, for a church and cemetery site for Traveler's Rest
Missionary Baptist Church and described as follows: Commence at the
Northwest corner of said Section 21, thence South 00degree58'23" West
2,594.73 feet along the West line of said Section 21 to a point on the
centerline of Mississippi Highway Ndegree 3; thence South 16degree49'23"
East 562.44 feet to a
<PAGE> 48
point on the centerline of said Mississippi Highway Ndegree3; thence North
73degree10'38" East 110.00 feet to the Point Of Beginning; thence South
76degree12'30" East 159.86 feet; thence South 13degree58'04" East 292.47
feet; thence South 76degree01'59" West 123.17 feet; thence North
16degree49'22" West 367.38 feet to the Point of Beginning.
3. 3,350 acres, more or less, located in Lot 5 and 12 of Section 21,
Township 19 North, Range 3 West, for Mississippi Highway Ndegree3
right-of-way and described as follows; Commence at the Northwest corner of
said Section 21; thence South 00degree58'23" West along the West line of
said Section 21, 2,234.81 feet to the Point Of Beginning which is 110.00
feet East and at a right angle to the said Mississippi Highway Ndegree3;
thence continue South 00degree58'23" West 359.92 feet along the West line
of said Section 21 to the centerline of Mississippi Highway Ndegree3;
thence South 16degree49'21" East 1,136.71 feet along the centerline of said
Mississippi Highway Ndegree3; thence South 88degree23'03" East 115.95 feet
to a point on the East right-of-way of said Mississippi Highway Ndegree3;
thence North 16degree49'22" West 1,516.09 feet along the said East
right-of-way of Mississippi Highway Ndegree3 to the Point Of Beginning.
4. 1.518 acres, more or less, located in Lots 1, 2, 3 and 4, for a
telephone cable and described as follows: Commence at the Northeast corner
of Section 21, Township 19 North, Range 3 West; thence South 89degree31'09"
West 782.82 feet along the North line of Section 21 and the centerline of a
public gravel road; thence South 25.00 feet to the Point Of Beginning;
thence South 89degree31'09" West and parallel to the centerline of the
public gravel road 4,408.10 feet to the West line of Section 21, thence
South 15 feet; thence North 89degree31' 09" East and parallel to the
centerline of the said public gravel road 4,408.10 feet to a point on the
centerline of Roundaway Bayou; thence North 15 feet to the Point Of
Beginning.
ATTACHED TO AND FORMING PART OF THAT CERTAIN DEED OF TRUST DATED 5/6/98 IN
THE NAME OF AQUAPRO CORPORATION IN THE AMOUNT OF $1,000,000.00
/s/ GEORGE HASTINGS
---------------------------------- ---------------------------
AQUAPRO CORPORATION DATE
BY: GEORGE HASTINGS, PRESIDENT
<PAGE> 1
EXHIBIT 10.13
PROMISSORY NOTE LOAN NO. 780038
$1,422,000.00 DATE June 9, 1998
-----------------------------------
ASSN. North Mississippi
BRANCH: Cleveland
For value received, I, We, or any of Us, the undersigned, jointly and
severally, promise to pay to the order of the FARM CREDIT BANK OF TEXAS, at its
office in the city of Austin, Travis County, Texas, the principal sum of One
Million Four Hundred Twenty Two Thousand DOLLARS ($1,422,000.00), lawful money
of the United States of America, according to the tenor, effect and reading
hereof, with interest from the date the principal is advanced until paid at the
rate or rates hereinafter provided. Interest will be calculated on the basis of
a 30-day month and a 360-day year and will be accrued for the number of days
that principal is outstanding.
Interest shall be payable from time to time on the remaining unpaid
principal balance prior to default or maturity, as follows:
-- The initial rate of interest payable on this note shall be 8.35
percent per annum. At the option of the payee or other Farm Credit
System Institution that becomes the holder of this note, the rate of
interest may be either increased or decreased at any time and from
time to time as authorized, but in no event to exceed the rate
permitted by the Farm Credit Act of 1971, Public Law 92-181, as
amended, and the regulations promulgated thereunder. If this note is
transferred to the Federal Agricultural Mortgage Corporation, or to a
holder that is not a Farm Credit System Institution, then this note
shall bear interest at the lesser of (a) a fixed rate equal to the
rate of interest applicable to this note on the date of transfer, or
(b) a fixed rate that will result in an effective yield equal to the
maximum lawful rate.
The indebtedness shall be payable in Twenty (20) consecutive annual
installments beginning on April 1, 1999, and thereafter on the first day of
April of each calendar year until the indebtedness, both principal and
interest, is fully paid.
This note shall be payable in successive equal installments of principal
and interest in an amount sufficient to amortize the indebtedness over the term
of the loan, the amount being subject to adjustment to reflect any increase or
decrease in the interest rate, if applicable.
In addition to the foregoing annual installments of principal and
interest, there shall be due and payable the following: $37,000.00 on each of
the first Five (5) payment dates, namely April 1, 1999, April 1, 2000, April 1,
2001, April 1, 2002, and April 1, 2003. Each such additional payment shall be
applied to the unpaid balance of principal; however, the payment of such
additional amounts shall not cause any reduction or reamortization of the
regular annual installments nor shall it alter the due dates of the regular
annual installments.
The undersigned hereby authorize the holder to apply any payment(s) made
on this note or owed under the loan agreement or any instrument securing or
related to this note (collectively, the "Loan Documents") to such part of the
Indebtedness as the holder may elect.
After default in the payment of any amount due under this note or in the
performance of any obligation under this note or the Loan Documents, or upon
the death of any of the undersigned, the holder of this note may, at its
option, accelerate the maturity hereof and declare the entire unpaid principal
balance and accrued interest to be due and payable. The holder's forbearance to
exercise this option shall not constitute a waiver of the right to exercise the
same in the event of any subsequent default.
If the unpaid balance of this note is not paid in full at maturity of this
note, whether maturity occurs by lapse of time or by acceleration, the unpaid
principal and past due interest shall bear interest at a default rate equal to
the rate of interest applicable to this note on the date of maturity plus an
additional four percent (4%) per annum. Prior to maturity of this note, any
amount owing under this note which is not paid when due, and any advance made
by the holder of this note pursuant to any of the Loan Documents, shall bear
interest at a default rate equal to the rate in effect at the time repayment of
such amount or advance is received by the holder of this note plus an
additional four percent (4%) per annum. Any such amount or advance which is not
paid prior to maturity shall bear interest at a default rate equal to the rate
of interest applicable to the note on the date of maturity plus an additional
four percent (4%) per annum from the date such amount is due or such advance is
made, and such amount or advance plus accrued default interest thereon shall be
added to the unpaid principal at maturity. Notwithstanding the foregoing, if the
holder of this note is not a Farm Credit System Institution, then the default
rate shall be limited so that it shall not exceed a rate that will result in an
effective yield in excess of the maximum lawful rate.
If any amount owed under this note or the loan documents is not paid when
due, the holder shall be entitled to collect default interest from the date(s)
of default in an amount produced by applying the applicable default interest
rate as set out above to the amount in default. If said default(s) is not cured
within fifteen (15) days of the occurrence of such default(s), the holder shall
be entitled to collect an additional default interest charge of $25.00.
If any amount due under this note shall be collected by legal proceedings
or through a probate or bankruptcy court, whether or not the note is in
default, or if this note is placed in the hands of an attorney (salaried,
corporate or any other attorney) for collection after default or maturity or
for enforcement of any of the holder's rights under this note or the Loan
Documents, the undersigned agree to pay all costs incurred by the holder,
including reasonable costs of attorneys (salaried, corporate or any other
attorney) and other costs provided for in the Loan Documents.
The undersigned and each assumptor, surety, guarantor and endorser of this
note or any part of this note, severally waive demand, presentment, notice of
dishonor, notice of intent to accelerate maturity, notice of acceleration,
diligence in collecting, grace, notice and notice of protest, and agree to one
or more renewals, extensions and rearrangements of this note, for any period or
periods of time and upon any terms and conditions, whether before or after
default or maturity, without notice from or prejudice to the holder of this
note. The holder of this note may, at its option, at any time and from time to
time, release anyone liable to pay the indebtedness, or release all or any part
of the collateral securing this note, and any such actions shall not release or
impair the obligations of the undersigned under this note except as expressly
agreed to in writing by the holder.
Unless provided otherwise by separate agreement between the undersigned
and the payee, the principal balance of this note may be prepaid, in whole or
in part, without penalty. Any amount so prepaid may be applied, at the holder's
election, first to accrued interest on the amount of the tendered prepayment
and the balance to the reduction of principal. Prepayment shall not defer the
due date of any installment as provided above but may reduce or discharge one
or more of the installments last maturing.
The holder of this note may, at the holder's discretion and as an
accommodation to the undersigned, accept late or partial payment of any amount
due under this note or any of the Loan Documents; however, acceptance of one or
more late or partial payments shall not constitute a waiver of any default nor
of the holder's right to receive timely payment. Acceptance of any partial
payment after default and acceleration shall not constitute a reinstatement of
the preacceleration payment schedule, nor shall it impair any of the holder's
rights or remedies under this note or any of the Loan Documents.
Forbearance of the holder of this note to exercise any right or option
granted in this note or in any of the Loan Documents, or to collect any money
advanced under any of the Loan Documents, shall not constitute a waiver of the
right to do so, nor render the holder of this note liable for damages or to
account for money not collected, nor shall the exercise of such right or option
constitute an election of remedies or prejudice any of the holder's other
rights.
The holder of this note shall have the right to endorse, transfer or
assign this note or any interest in this note to any person or entity, at any
time and under any terms and conditions, in the holder's discretion.
AQUAPRO CORPORATION
By: /s/ George S. Hastings, Jr., Pres /s/ George S. Hastings, Jr.
---------------------------------- --------------------------------
George S. Hastings, Jr., President George S. Hastings, Jr.
Signed in Sunflower County, Mississippi Signed in Sunflower County,
on the 9th day of June, 1998. Mississippi
on the 9th day of June, 1998.
<PAGE> 2
FARM CREDIT BANK OF TEXAS INTEREST RATE DISCLOSURE
The following disclosure is made in accordance with Section 4.13(a) of the
Farm Credit Act of 1971, as amended. The "effective rate" is not the same as the
"Annual Percentage Rate" under Federal Truth-in-Lending.
DATE: June 4, 1998 LOAN: 780038
------------ ------
LENDER: FARM CREDIT BANK OF TEXAS ASSOCIATION: FLBA OF NORTH MISSISSIPPI
------------------------- -------------------------
BORROWER: AquaPro Corporation BRANCH: CLEVELAND
------------------------- -------------------------
STATED INTEREST RATE EFFECTIVE INTEREST RATE*
(The rate of interest currently (The stated rate of interest for your
applicable to your loan.) loan adjusted to take into account
your required ownership of stock or
participation certificates and
origination fees.)**
If loan is a variable/adjustable rate loan. 8.350% 8.7499%
*This is a projection subject to change should particular loan provisions
be modified during the term of the loan, such as the amount of stock or
participation certificates or the timing of repayment. You will be notified 10
days prior to any increase in the effective rate due to a stock adjustment. You
will be notified of any increase or decrease in the stated rate. Notice
requirements are set by regulation and are subject to change in the future.
**Based on a fee of $7,110.00.
Representative Example: If the stock or participation certificate
requirement was increased to 4.00% but the origination fee remained as stated
above, the effective interest rate would be 8.8664%.
This is an ADJUSTABLE RATE LOAN--The stated rate of interest is subject to
change during the life of the loan and may be changed as follows:
Interest rates on VARIABLE INTEREST RATE LOANS may, upon notice, increase
or decrease without limitation at the Bank's discretion at any time. The
Standard Adjustment Factors which the institution takes into account in making
adjustments to the interest rate are the cost of funds to the Farm Credit Bank
of Texas, expenses of the bank and associations, necessary reserves and
contributions to equity and the costs of providing services to members. The
Standard Adjustment Factors may be changed during the life of the loan.
Default: Default status is a Standard Adjustment Factor. Where applicable,
the stated interest rate may increase by up to two percent (2%) as a result of
default.
FLBA Stock: Except with respect to stock protected under 12 U.S.C. Section
2151, et seq., capital stock, A-stock, C-stock and participation certificates
are at-risk investments.
Loan options: The Farm Credit Bank of Texas offers loans with maturities
from five to forty years, with interest rates which are variable, one-year
adjustable, or which are fixed for certain specified periods and which may then
provide the borrower an opportunity to seek an additional fixed period or
one-year adjustable rate period or to convert to a purely variable rate for the
balance of the loan maturity. Under certain conditions which may include payment
of a fee, borrower may also be permitted to convert to other existing loan
programs.
See your contract documents for further information on loan terms and
conditions.
BORROWER RIGHTS:
This loan is subject to the following Borrower Rights as set forth in the
Farm Credit Act of 1971, as amended, 12 U.S.C. Section 2199, et seq.
ACCESS TO DOCUMENTS (Section 2200). At closing, Borrower (or Borrower's
agent, if applicable) shall receive copies of loan documents signed by Borrower.
Upon request thereafter, Borrower is entitled to: (1) All documents signed or
delivered by Borrower; and (2) copies of Creditor's charter and bylaws.
NOTICE OF ACTION ON APPLICATION (Section 2201). Creditor shall provide
prompt written notice of action taken on loan and restructure applications,
including notice of a right to review if the loan or restructure application is
denied or if the loan request is reduced.
CREDIT REVIEW COMMITTEE/RESTRUCTURING DISTRESSED LOANS (Section 2202 and
Section 2202a-c). Borrower is entitled to the following: the right to a review
by a Credit Review Committee of a denial of or a reduction in a loan request or
a denial of a restructure request; the right to seek restructuring of a
distressed loan; if principal indebtedness is forgiven as part of a restructure,
Creditor must write off an equal dollar amount of stock obligation. See
Creditor's Distressed Loan Restructuring Policy for a complete explanation of
these rights, which policy is available upon request.
MISCELLANEOUS (Section 2002d, e). Creditor may not require additional
collateral if Borrower has made all accrued payments. Creditor may not require a
reduction in outstanding principal balance which exceeds regularly scheduled
principal installment except in limited circumstances. If Borrower pays all
accrued payments, including penalties, Creditor may not accelerate loan based
solely on Borrower's past untimely payments. If Creditor places borrower's loan
in non-accrual status and this results in an adverse action to Borrower,
Creditor shall notify borrower of the change in his/her status, which action may
be subject to review. Creditor may not require a Borrower who has pledged
agricultural property to waive any state mediation rights.
RIGHT OF FIRST REFUSAL (Section 2219a). When the Creditor first elects to
sell or lease agricultural real property acquired by Creditor which was
previously owned by Borrower, the Creditor must first notify the Borrower of
his/her right to purchase or lease the property for a price or rental rate equal
to its appraised fair market value or appraised fair rental value, as
appropriate.
If you have any questions concerning the foregoing information, please
contact your loan officer.
The undersigned hereby acknowledge(s) receipt of a copy of this statement.
AQUAPRO CORPORATION
/s/ G.S. Hastings Jr. BY: /s/ G.S. Hastings Jr., Pres
------------------------ ----------------------------------
George S. Hastings, Jr. George S. Hastings, Jr., President
------------------------ ----------------------------------
<PAGE> 3
A. SETTLEMENT STATEMENT
U.S. DEPARTMENT OF HOUSING
AND URBAN DEVELOPMENT OMB NO. 2502-0265
B. TYPE OF LOAN
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1. [ ] FHA 2. [ ] FmHA 3. [X] Conv. Unic. 6. FILE NUMBER 7. LOAN NUMBER 8. MORTGAGE INS CASE NUMBER
4. [ ] VA 5. [ ] Conv. Ins. AQUAP98-014.01 780038
</TABLE>
C. NOTE: This form is furnished to give you a statement of actual settlement
costs. Amounts paid to and by the settlement agent are shown. Items
marked "[POC]" were paid outside the closing; they are shown here for
informational purposes and are not included in the totals.
5.0 10-96 (8/AQUAP.HUD/AQUAP98-014.01)
<TABLE>
<CAPTION>
<S> <C> <C>
D. NAME AND ADDRESS OF BORROWER E. NAME AND ADDRESS OF SELLER F. NAME AND ADDRESS OF LENDER
Aquapro Corporation Farm Credit Bank of Texas
4307 Central Pike P.O. Box 1819
Hermitage, TN 37076 Cleveland, MS 38732
G. PROPERTY LOCATION H. SETTLEMENT AGENT 640537967 I. SETTLEMENT DATE
Frme in Sunf. Bol & Lefl Ctys Clark, Davis & Belk, P.A. June 9, 1998
PLACE OF SETTLEMENT Disburse: 06-15-98
200 Second Street
Indianola, MS 38751
</TABLE>
<TABLE>
<CAPTION>
J. SUMMARY OF BORROWER'S TRANSACTION K. SUMMARY OF SELLER'S TRANSACTION
<S> <C> <C> <C> <C> <C>
100. GROSS AMOUNT DUE FROM BORROWER 400. GROSS AMOUNT DUE TO SELLER
101. Contract Sales Price 401. Contract Sales Price
102 Personal Property 402. Personal Property
103. Settlement Charges to Borrower line1400 17,713.00 403.
104. 404.
105. 405.
Adjustments for items paid by Seller in advance Adjustments for items paid by Seller in advance
106. City/town taxes to 406. City/town taxes to
107. County taxes to 407. County taxes to
108. Assessments to 408. Assessments to
109. 409.
110. 410.
111. 411.
112. See Addit'l Diab. Exhibit 1,215,643.18 412.
120. GROSS AMOUNT DUE FROM BORROWER 1,233,356.18 420. GROSS AMOUNT DUE TO SELLER 0.00
200. AMOUNTS PAID BY OR IN BEHALF OF BORROWER 500. REDUCTIONS IN AMOUNT DUE TO SELLER
201. Deposit or earnest money 501. Excess Deposit (see instructions)
202. Principal Amount of New Loan (o) 1,422,000.00 502. Settlement Charges to Seller line1400
203. Existing Loan(s) Taken Subject to 503. Existing Loans Taken Subject to
204. 504. Payoff of first mortgage loan
205. 505. Payoff of second mortgage loan
206. 506.
207. 507.
208. 508.
209. 509.
Adjustments for items unpaid by Seller Adjustments for items unpaid by Seller
210. City/town taxes to 510. City/town taxes to
211. County taxes to 511. County taxes to
212. Assessments to 512. Assessments to
213. 513.
214. 514.
215. 515.
216. 516.
217. 517.
218. 518.
219. 519.
220. TOTAL PAID BY/FOR BORROWER 1,422,000.00 520. TOTAL REDUCTION AMOUNT DUE SELLER 0.00
300. CASH AT SETTLEMENT FROM/TO BORROWER 600. CASH AT SETTLEMENT TO/FROM SELLER
301. Gross Amt Due from Borrower (line 120) 1,233,356.18 601. Gross Amount Due to Seller (line 420) 0.00
302. Less Amt Paid by/for Borrower (line 220) (1,422,000.00) 602. Less Reductions Due Seller (line 520) 0.00)
303. CASH [ ] FROM [X] TO BORROWER 188,643.82 603. CASH [ ] [X] FROM SELLER 0.00
</TABLE>
The undersigned hereby acknowledge receipt of a completed copy of pages 1 & 2
of this statement and any attachments referred to herein.
BORROWER Aquapro Corporation SELLER
-------------------------- ----------------------
-------------------------- ----------------------
<PAGE> 4
SETTLEMENT STATEMENT PAGE 2
L. SETTLEMENT CHARGES
<TABLE>
<CAPTION>
PAID FROM PAID FROM
BORROWER'S SELLER'S
FUNDS AT FUNDS AT
SETTLEMENT SETTLEMENT
<S> <C> <C>
700. Total Sales/Brokers Commissions Based on Price $
Division of Commission (line 700) as follows:
701. $ to
702. $ to
703. Commission Paid at Settlement
704.
800. ITEMS PAYABLE IN CONNECTION WITH LOAN
801. Loan Origination Fee .5000 % to Farm Credit Bank of Texas 7,110.00
802. Loan Discount % to
803. Appraisal Fee to
804. Credit Report to
805. Lender's Inspection Fee to
806. Mortgage Ins. App. Fee to
807. Assumption Fee to
808.
809.
810.
811.
900. ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE
901. Interest from to $ /day( days %)
902. Mortgage Insurance Premium for months to
903. Hazard Insurance Premium for 1.0 years to
904. to
905.
1000. RESERVES DEPOSITED WITH LENDER
1001. Hazard Insurance months (a) $ per month
1002. Mortgage Insurance months (a) $ per month
1003. City/town taxes months (a) $ per month
1004. County taxes months (a) $ per month
1005. Assessments months (a) $ per month
1006. months (a) $ per month
1007. months (a) $ per month
1008.
1100. TITLE CHARGES
1101. Settlement Fee to Clark, Davis & Belk, P.A. 7,110.00
1102. Title Search to
1103. Title Examination to
1104. Title Ins. Binder to Clark, Davis & Belk, P.A. 30.00
1105. Document Prep. to
1106. Notary Fees to
1107. Attorney's Fees to Clark, Davis & Belk, P.A.
(includes above item numbers: )
1108. Title Insurance to Lawyers Title 3,183.00
$1,273.20 to Lawyer's Title
$1,909.80 to Clark, Davis & Belk, P.A.
(includes above item numbers: )
1109. Lender's Coverage $1,422,000.00
1110. Owner's Coverage $
1111.
1112.
1113.
1200. GOVERNMENT RECORDING AND TRANSFER CHARGES
1201. Recording Fees: Deed $55.00; Mortgage $33.00; Releases $42.00 130.00
1202. City/County Tax/Stamps: Deed $ ; Mortgage $
1203. State Tax/Stamps: Deed $ ; Mortgage $
1204. FedEx Charges to Clark, Davis & Belk, P.A. 25.00
1205.
1300. ADDITIONAL SETTLEMENT CHARGES
1301. Survey to
1302. Pest Inspection to
1303. Loan processing fee to Farm Credit Bank 125.00
1304.
1305.
1400. TOTAL SETTLEMENT CHARGES
(Enter On Lines 103. Section J and 502. Section K) 17,713.00 0.00
</TABLE>
By signing page 1 of this statement, the signatories acknowledge receipt of a
completed copy of page 2 of this 2 page statement.
-------------------------------------
(8/AQUAP. HUD/AQUA W. Dean Belk
Certified to be a true copy Settlement Agent
<PAGE> 5
==========ADDITIONAL DISBURSEMENTS EXHIBIT==========
Buyer/Borrower: Aquapro Corporation
Lender: Farm Credit Bank of Texas
Settlement Agreement: Clark, Davis & Belk, P.A.
200 Second Street
Indianola, MS 38751
Settlement Date: 06-09-98 Disburse: 06-15-98
Property Location: Frms in Sunf, Bol & Lefl Ctys
<TABLE>
<CAPTION>
Description/Payee Note/RefNo Buyer/Borrower Seller
- ----------------- ---------- -------------- ------
<S> <C> <C> <C>
Circle Creek III X16 78 15 314,261.01
To: Metropolitan Life
Circle Creek IV X16 80 26 210,231.72
To: Metropolitan Life
Circle Creek VI X16 99 70 133,900.01
To: Metropolitan Life
Circle Creek VII 90029 268,402.57
To: Farm Credit Bank of Texas
Circle Creek VIII 758256 246,187.87
To: Farm Credit Bank of Texas
FLBA Stock
To: Farm Credit Bank of Texas 42,660.00
============== ======
Total additional disbursements shown on line 112 $1,215,643.18
</TABLE>
<PAGE> 6
DISBURSEMENT STATEMENT
<TABLE>
<S> <C> <C>
Address: 4307 Central Pike GF No. AQUAP98014
Hermitage, TN 37076
Mortgagor: AquaPro Corporation
to
Mortgagee: Farm Credit Bank of Texas Loan Number: 780038
Property: Circle Creek 7 & 8, Bolivar County; Circle Creek 3 & 6,
Sunflower County, and Circle Creek 4, Leflore County
</TABLE>
- --------------------------------------------------------------------------------
RECEIPTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DATE FROM AMOUNT
<S> <C> <C> <C>
6/9/98 Federal Land Bank $857,514.56
--------------
* TOTAL: $857,514.56
--------------
</TABLE>
- --------------------------------------------------------------------------------
DISBURSEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DATE CHECK NO. CHECK TO AMOUNT
<S> <C> <C> <C>
6/9/98 Title Agent
------------------------------------------------- --------------
7518 Binder Clark, Davis & Belk, P.A. 30.00
Owner's Policy
7518 & 7519 Mortgagee's Policy Lawyers Title Ins. Corp. 3,183.00
Closing Fee
Tax Certificates
Tax Renditions
Recording fees: .00
Paid to Lender:
Commission:
7518 Attorney's Fees: Clark, Davis & Belk, P.A. 7,100.00
Survey:
Taxes:
7518 Federal Express charges-Clark, Davis & Belk 25.00
Hazard Insurance:
Pest Inspection:
7521 Liens: Metropolitan (III) 314,261.01
7522 Metropolitan (IV) 210,231.72
7523 Metropolitan (VI) 133,900.01
------------------------------------------------- --------------
7520 Balance due to Seller: 188,643.82
--------------
TOTAL: $857,514.56
--------------
</TABLE>
- ---------------------------------------
ESCROW OFFICER
- ---------------------------------------
TITLE AGENT - Clark, Davis & Belk, P.A.
for LAWYERS TITLE INSURANCE CORPORATION
-----------------------------------
(To be used if no disbursement statement is otherwise provided.)
<TABLE>
<S> <C>
(*) Withheld by lender:
Closing fee 7,110.00
Loan Processing Fee 125.00
Stock Purchase 42,660.00
Circle Creek VII Lien 268,402.57
Circle Creek VIII Lien 246,187.87
----------
$564,485.44
</TABLE>
<PAGE> 7
DEED OF TRUST AND SECURITY AGREEMENT
Page 1 Loan No.: 780038
Name : AquaPro Corporation
Assn. : FLBA of North Mississippi
Branch : CLEVELAND
Borrower's Initials /s/
-----------
STATE OF MISSISSIPPI
COUNTY OF
----------------------
WHEREAS,
AquaPro Corporation, acting herein by and through its duly authorized
officer(s) George S. Hastings, Jr., President; and George S. Hastings, Jr.
hereinafter "Borrower," whether one or more, is/are indebted to the FARM
CREDIT BANK OF TEXAS, a corporation and federal instrumentality, hereinafter
"Beneficiary," in the principal sum of ONE MILLION FOUR HUNDRED TWENTY TWO
THOUSAND Dollars together with interest thereon, as evidenced by a promissory
note, payable to the order of the FARM CREDIT BANK OF TEXAS which bears interest
and is payable according to the terms of said note and which has a final
maturity date of April 01, 2019;
NOW, THEREFORE, in consideration of the premises and in order to secure the
prompt and full payment of said indebtedness, and any further advance(s),
additional advance(s), and/or readvance(s), and/or any renewal(s),
extension(s), restructuring(s), reamortization(s), and/or any other loan
treatment(s) thereof, or any part thereof, and the interest thereon and any and
all other indebtedness(es) (including future advance(s) now or hereafter owed
by any of the undersigned to the Beneficiary), whether such indebtedness(es)
is/are primary or secondary, direct or indirect, contingent or absolute,
matured or unmatured, joint or several, and otherwise secured or not, and to
secure the faithful performance of and compliance with all the terms,
agreements, provisions, obligations, covenants, conditions, warrants,
representations, and stipulations herein made, or made in any Loan Agreement or
in any other document related to the promissory note described herein,
AquaPro Corporation, acting herein by and through its duly authorized
officer(s) George S. Hastings, Jr., President
hereinafter "Grantor," whether one or more, in consideration of the premises and
other good and valuable consideration paid to Grantor by Arnold R. Henson as
Trustee, whose address is Post Office Box 15919, Austin, Texas 78761,
hereinafter "Trustee," does hereby convey and warrant unto Trustee the following
described real estate situated in
BOLIVAR (1st Judicial District), LEFLORE, SUNFLOWER, County(ies), Mississippi;
to wit:
SEE ATTACHED EXHIBIT "A"
together with all buildings and other improvements, hereditaments and
appurtenances thereunto belonging, or in any wise appertaining now existing or
hereafter erected upon the premises and all the income and rents arising
therefrom. Grantor does hereby intent to convey and does convey all of Grantor's
right, title, and interest in and to any strips and gores Grantor may now own
contiguous to the above described property.
It is explicitly understood and agreed, as part of the consideration for the
loan made to the Borrower and secured by the premises hereinabove described,
this instrument covers and includes all surface, subsurface and/or mineral
estate ownership now or after acquired by the undersigned in the above property
and whether or not expressly excepted from the description to the above security
premises, any provisions herein to the contrary being of no force and effect.
AND FOR THE CONSIDERATION AFORESAID, and as further security for any and all
debt(s) and obligation(s) described above, said Grantor does hereby assign,
pledge and transfer to the Beneficiary, and grant to the Beneficiary a security
interest in and to the following described property and interests, to wit: (1)
all timber of all kind, character and description planted and/or growing, or to
be planted and/or grown, on the hereinabove described property; (2) all crop
allotments, quotas, or (3) all rents, profits, issues, income, royalties,
bonuses, and revenues of said property, or any part or interest herein, from
time to time accruing whether under leases or tenancies now existing or
hereafter created; (4) each and every policy of hazard insurance, or the like,
now or hereafter in effect which insures said property or any building, fixture
and/or improvement thereon, or any part thereof, (or rights to return premiums)
and/or all proceeds or payments thereunder; (5) all judgments, award of damages
and settlements hereafter made resulting from condemnation proceedings or the
taking of the real property, or any part thereof, under the power of eminent
domain, or for any damage (whether caused by such taking or otherwise) to the
property, or any part thereof, or to any rights appurtenant thereto; (6) all
building materials, equipment, fixtures and fittings of all kind, character, and
description used in connection with or relating to said property and/or
buildings fixtures or improvements thereon; and/or (7) all tangible or
intangible property specifically described as follows, to wit:
STATE OF MISSISSIPPI
COUNTY OF LEFLORE
I CERTIFY THIS DOCUMENT WAS FILED
AND RECORDED June 9, 1998 AT 2:23 p.m.
IN BOOK NO. 481 PAGE 601
SAM ABRAHAM
CHANCERY CLERK
BY: /s/ DIANE KELLY D.C.
---------------------
and products, proceeds, additions and/or replacements of any or all of the above
described property.
GRANTOR FURTHER COVENANTS, WARRANTS, AND AGREES:
1. To pay when due all taxes, liens, judgments, assessments or fees assessed
against said property and to promptly furnish Beneficiary with tax receipts or
like documents evidencing payment of or release from all taxes, liens,
judgments, assessments or fees. By execution hereof, Grantor agrees to pay when
due all community water system assessment and meter fees, if any, applicable to
be said property, and in the event of foreclosure, hereby does transfer and
assign to the purchaser all of Grantor's interest and
<PAGE> 8
DEED OF TRUST AND SECURITY AGREEMENT
Page 2 Loan No. : 780038
Name : AquaPro Corporation
Assn. : FLBA OF NORTH MISSISSIPPI
Branch : CLEVELAND
Borrower's Initials
-------------------------------------------------------------
membership, if any, in said community water system applicable to said property,
and agrees to execute such documents as are necessary to effectuate such
transfer.
2. To insure and keep insured buildings and other improvements now on, or which
may hereafter be placed on, said premises, against loss or damage by fire,
windstorm and/or all hazards included within "extended coverage," as well as
loss or damage by flood, any policy evidencing such insurance to be deposited
with, and loss thereunder to be payable to Beneficiary as its interest may
appear, and providing for immediate notification to Beneficiary of any lapse,
cancellation or other impairment of said insurance. All policies shall be
written by reliable insurance companies authorized to write policies of
insurance in the State of Mississippi, acceptable to Beneficiary. At the option
of Beneficiary, and subject to general regulations of the Farm Credit
Administration, sums received by Beneficiary from such insurance companies may
be used to pay for reconstruction or repair of destroyed or damaged buildings
or improvement(s); or, if not so applied may, at the sole option of
Beneficiary, be applied in payment of any indebtedness matured or unmatured,
secured by this deed of trust.
3. That premises hereinbefore described shall be continuously used for
agriculture in a husbandlike manner; that waste will not be committed or
permitted and adequate terraces and drainage ditches be constructed and
maintained; that all improvements now on said premises, on hereafter put
thereon, be kept in good condition and repair, and not be removed or
demolished; that merchantable timber, stone, gravel, minerals, water, caliche,
geothermal energy, clay, sand, soil or improvements not be removed from said
security without the written consent of the Beneficiary. If timber land is
involved as security, Grantor will follow good and approved forestry practices
to minimize fire danger, guard against erosion or depreciation, protect young
trees, and maintain forest production; it being intended and agreed, however,
that no timber now or hereafter affected hereby will be cut, removed, damaged
or turpentined (except such as is customarily used on the property for fuel,
fencing or repairs) without the prior written consent of Beneficiary, and then
only upon compliance with such terms and conditions as shall be established by
Beneficiary. Grantor will promptly notify Beneficiary of any damage to timber
from any source. Grantor will, where practical, promptly notify Beneficiary of
any potential damage to timber. In the event this covenant, or any part, is
breached, Grantor agrees to pay all costs and expenses, including reasonable
attorney's fees, incurred by Beneficiary in investigating such violation and in
protecting and preserving this security.
4. That this deed of trust and security agreement is a valid first lien against
all the land, interests and improvements offered and/or appraised as security
for this loan, and that the property and interests described herein is now free
and clear of any and all other liens and encumbrances, except as otherwise set
forth herein. If the validity of this deed of trust or if Grantor's title to
any of said land, interests or improvements is questioned in any manner or if
any part of such land, interests or improvements is not properly described
herein, Beneficiary may, in its discretion, investigate and take such action as
it considers necessary or desirable for the protection of its interests and for
this purpose may employ legal counsel or expert assistance and Grantor will
promptly pay all expenses so incurred by Beneficiary.
5. That if Grantor defaults in any of the provisions of paragraphs 1, 2, 3, 4,
or 14 hereof, then Beneficiary may pay such taxes, liens, judgments, or
assessments, obtain and pay for such insurance, or advance such attorney's
fees, expenses and costs Beneficiary advanced, and that all amounts so advanced
shall be secured hereby.
6. That all representations and statements made in the application for this
loan are true and correct, that the proceeds of this loan will be used solely
for the purposes specified in said application, and that Grantor and Borrower
will comply with all requirements and conditions imposed by Beneficiary in
making this loan.
7. To not sell, assign, or convey any part or all of the mortgaged premises
(regardless of whether the buyer or assignee "assumes" the note or taxes the
mortgaged premises "subject to" such note, or whether by contract for deed or
sale) without first obtaining the Beneficiary's prior written consent as long
as the above note or any part remains unpaid. If Grantor or one of the Grantors
is a corporation not to change the substantial ownership and/or control of said
corporation, without first obtaining the Beneficiary's prior written consent as
long as the above note or any part remains unpaid.
8. That all payments of principal and interest (or any part thereof) not made
when due shall bear interest from due date to the date of payment thereof by
maker or assumptor at the default rate which is equal to the current interest
rate of the note at date payment is made plus an additional four percent (4%)
per annum. All advances made by the holder hereof shall be secured by and under
this deed of trust and shall be payable with default interest from the date
each advance is made until paid by maker or assumptor at the rate which is
equal to the current interest rate of the note at the date repayment is made
plus an additional four percent (4%) per annum. Should repayment not be made by
the maker or assumptor, the default interest rate of this note shall be fixed
at the time legal proceedings of whatever character are instituted or at the
time the indebtedness thereby created is matured or reinstated.
9. That Beneficiary may at any time, without notice, release any of the
property described herein, grant extensions or deferments of time of payment of
the indebtedness secured hereby, or any part thereof, grant subordinations of
lien(s), or release from liability any parties who are or may become liable for
the payment of said indebtedness, without affecting the priority of this lien
or the personal liability of the Grantor or Borrower or any other party liable
or who may become liable for the indebtedness secured by this instrument. If
all or any part of the property hereinabove described becomes vested in any
party other than Grantor, Mortgagee may, without notice to Grantor, deal with
such successor in interest with reference to this instrument and the debt(s)
and obligation(s) hereby secured in the same manner as with the Grantor,
without in any way releasing, vitiating or discharging the Grantor's or
Borrower's liability hereunder or for the debt(s) and obligations(s) hereby
secured, and extension(s) of time for payment or other loan treatment(s)
described herein given or permitted by Mortgagee shall not operate to release,
vitiate, or discharge the liability of the Grantor or Borrower herein, either
in whole or in part.
10. This instrument and the note secured hereby are subject to the Farm Credit
Act of 1971 and regulations promulgated pursuant thereto, and all Acts
amendatory thereof or supplementary thereto, and the laws of the State of
Mississippi, not inconsistent therewith.
11. That the failure of Beneficiary to exercise any option or make any decision
or election under any term or covenant, herein expressed, shall not be deemed a
waiver of the right to exercise such option or make such decision or election
at any time.
12. That each covenant and agreement herein contained shall insure to the
benefit of and bind the successors and assigns of Beneficiary and Grantor.
13. That the following are authorized to select and substitute another Trustee
in the place of the above named Trustee or any successor at any time any of
them may so desire: (1) the Beneficiary herein acting through its President,
Executive Vice President, Senior Vice President, Vice President, Treasurer, or
Secretary, (2) any future holder of the indebtedness secured hereby. It shall
not be necessary to obtain the consent or resignation of the original Trustee
or any successor Trustee before appointing another Trustee in his place and any
such appointee, who may be an agent, employee or officer of Beneficiary, shall
have full and sole power as Trustee herein.
14. That in the event they are required to purchase or do purchase life
insurance (group, credit or other) or private mortgage insurance in connection
with this loan but subsequently fail to pay the premium to keep same in force,
the Beneficiary, at its option, may pay such premium on Grantor's or Borrower's
behalf, charge such payment to the loan, and such advance of premiums shall be
secured by this mortgage and bear interest the same as other advances provided
for in this deed of trust. Any policy evidencing such insurance to be deposited
with and any loss thereunder to be payable to Beneficiary as its interest may
appear.
15. To furnish to the Beneficiary upon request a financial statement and income
statement and income statement attested to by Grantor or Borrower or verified
by a public accountant.
16. All parties to this deed of trust or to the note hereby secured covenant
and agree that upon the death of any signatory, maker
<PAGE> 9
DEED OF TRUST AND SECURITY AGREEMENT
Page 3 Loan No. : 780038
Name : AquaPro Corporation
Assn. : FLBA OF NORTH MISSISSIPPI
Branch : CLEVELAND
Borrower's Initials /s/ GSH
-------------------------------------------------------
or comaker of such note, the owner and holder of said note may, at holder's
option, mature or accelerate the entire balance owing on said note, whereupon
all amounts owing by virtue thereof shall be immediately due and payable.
Now, if Guarantor or Borrower shall pay said indebtedness and any future
advances, additional advances, readvances or any other indebtedness in addition
to the original indebtedness set forth herein, and secured hereby, and keep and
perform all of the covenants and agreements of this deed of trust, it shall
become null and void.
If Grantor or Borrower fails to pay when due any sums secured hereby or
should Grantor or Borrower (or any one of them) fail to abide by or perform any
of the agreements contained herein, become insolvent, commit an Act of
Bankruptcy, or authorize the filing of voluntary petition in bankruptcy, or
allow the above described property to be taken over by a Receiver as long as the
above note remains unpaid, or be adjudicated a bankrupt, or made defendant in a
bankruptcy or receivership proceeding, then, in any such event, Beneficiary may,
at its option, declare all indebtedness secured hereby immediately due and
payable; and the Trustee, at the request of the Beneficiary, shall sell said
property (either as a whole or in parcels, at his election, the provisions of
Section 89-1-55, Mississippi Code of 1972, and Section 111, Mississippi
Constitution of 1890 with respect to offering and selling real estate in parcels
rather than as a whole, being hereby expressly waived) in an attempt to satisfy
the indebtedness hereby secured after giving notice of the time, place, and
terms of sale by publication in some newspaper published in the country in which
said land is situated, or if no newspaper is then published in said county in a
newspaper having general circulation therein, for three consecutive weeks
preceding the date of sale, and by posting one notice at the courthouse of said
county for said time.
In the case the real estate herein described is situated in more than one
county, or in more than one judicial district of a county or counties, a
foreclosure sale of all of said real estate may be made in any one of the
counties or judicial districts in which any part thereof is situated, after
giving notice of the time, place, and terms of sale in the manner above
described in each county and judicial district in which any part of said land
lies.
In the event of foreclosure the proceeds of sale shall be applied (1)
toward payment of the expense of executing this trust, including reasonable
Trustee's fee and a reasonable attorney's fee (both of which fees shall accrue
immediately upon instructions being mailed or otherwise directed to the Trustee
to foreclose), (2) toward liquidation of the indebtedness secured hereby, and
(3) any balance shall be paid to the Grantor or persons entitled thereto. The
purchaser at any such sale or sales shall be under no obligation to see to the
proper application of the purchase money.
It is further stipulated and agreed that in case of any sale hereunder
Grantor shall immediately surrender possession to the purchaser. If Grantor
fails to do so, Grantor shall become a tenant at sufferance of the purchaser,
subject to an action for unlawful entry and detainer.
It is expressly agreed between the parties hereto, that in the event of
foreclosure and sale, that the Beneficiary, hereunder, or its successors and
assigns, may bid at any such sale or sales and may purchase the property secured
hereunder if the high bidder therefor, as if Beneficiary were a stranger to this
conveyance.
For purposes of giving any notice that may be required by the terms of this
deed of trust, Grantor hereby stipulates and agrees that his/her/its mailing
address is as shown below and Beneficiary may rely upon this stipulation until
such time as Beneficiary has been advised in writing by Grantor of a change of
address:
AquaPro Corporation
------------------------------------------------------------------
4307 Central Pike, Hermitage, TENNESSEE 37076 (800) 264-3456
----------------------------------------------------------------------
All riders, appendages, exhibits, erasures, corrections and
interlineations, if any, have been made and approved before signing hereof.
WITNESS the signature of Grantor, this 9th day of June, 1998.
--- ---- ----
AquaPro Corporation
Attest:
By: By: /s/ George S. Hastings, Jr., Pres
------------------------------- ---------------------------------
George S. Hastings, Jr.
Printed Name President
----------------------
Title:
----------------------------
<PAGE> 10
DEED OF TRUST AND SECURITY AGREEMENT
Page 4 Loan No. : 780038
Name : AquaPro Corporation
Assn. : FLBA OF NORTH MISSISSIPPI
Branch : CLEVELAND
Borrower's initials /s/ GSH
----------------------------------------------------------
STATE OF MISSISSIPPI
COUNTY OF
-------------
Personally appeared before me, the undersigned authority in and for the
said county and state, on this 9th day of June, 1998, within my jurisdiction,
the within named
George S. Hastings, Jr., who acknowledged that he is President of AquaPro
- ------------------------------------------------------------------------
Corporation, a Tennessee corporation,
- ------------------------------------------------------------------------
and that for and on behalf of the said corporation, and as its act and deed
(he)(she) executed the above and foregoing instrument, after first having been
duly authorized by said corporation so to do.
/s/
(SEAL) --------------------------------
My Commission Expires:
6/22/2000 Notary Public
- ---------------- --------------------------------
(Official Capacity)
This instrument prepared by:
MARTHA BRIGGS FOR FARM CREDIT BANK OF TEXAS
- -------------------------------------------
P.O. BOX 15919; AUSTIN, TEXAS 78761-5919
- -------------------------------------------
(512) 465-0600
- -------------------------------------------
STATE OF MISSISSIPPI
CERTIFICATE OF CLERK
I hereby certify that this deed of trust was filed for for record in my office
at _______ o'clock __ m. on the _______ day of __________, _____, and duly
recorded on the _____ day of __________, _____, on page _____ of book _____ of
the Land Mortgage Records in my office.
Witness my hand and office seal on this _____ day of __________, _____.
_________________________
Chancery Clerk
By__________________ ___D.C.
(SEAL)
AFTER RECORDING RETURN TO:
MR. DEAN BELK
ATTORNEY
P.O. BOX 229
INDIANOLA, MS 38751
(601) 887-3312
ADS Form 3023 (Rev. 11/93)
<PAGE> 11
The following described property lying and being situate in the First
Judicial District of Bolivar County, Mississippi, to-wit:
Beginning at the corner common to Sections 8, 9, 16 and 17, Township 20
North, Range 7 West, Bolivar County, Mississippi; thence North 00 degrees 23
minutes 24 seconds East 2,218.51 feet; thence North 89 degrees 56 minutes 59
seconds East 641.83 feet; thence North 78 degrees 33 minutes 13 seconds East
31.60 feet; thence North 89 degrees 15 minutes 23 seconds East 2572.10 feet;
thence North 00 degrees 43 minutes 28 seconds West 1346.39 feet; thence North
89 degrees 32 minutes 28 seconds East 15.00 feet; thence North 00 degrees 27
minutes 32 seconds West 1,484.53 feet to a point on the South right of way
boundary of Mississippi Highway No. 448; thence North 89 degrees 36 minutes 30
seconds East along said South right of way boundary for 105.20 feet to the
point of curvature of a curve to the right; thence along the arc of said curve
described by a chord as North 89 degrees 52 minutes 02 seconds East 99.55 feet
to the point of tangency of said curve; thence continue along the South right
of way boundary of aforesaid Highway No. 448 the following 3 courses and
distance; South 89 degrees 52 minutes 30 seconds East 438.80 feet; South 00
degrees 07 minutes 30 seconds West 10.00 feet; South 89 degrees 52 minutes 30
seconds East 72.33 feet; thence leaving said South right of way boundary South
00 degrees 03 minutes 18 seconds West 5,084.69 feet to the South boundary line
of aforesaid Section 9; thence North 89 degrees 55 minutes 23 seconds West
3,956.48 feet to the point of beginning, containing 249.41 acres, more or less,
and being located in Section 9, Township 20 North, Range 7 West, Bolivar
County, Mississippi;
Being a part of that property described and conveyed in that deed of
record in Book H-138, page 21 of the records on file in the office of the
Chancery Clerk, First Judicial District of Bolivar County, Mississippi;
<PAGE> 12
The following described property lying and being situate in the First
Judicial District of Bolivar County, Mississippi, to-wit:
Commencing at the corner common to Sections 8, 9, 16 and 17, Township 20
North, Range 7 West, Bolivar County, Mississippi; thence North 00 23 degrees 24
minutes East along the West boundary line of said Section 9 for 2,218.51 feet to
the point of beginning of the tract herein described; thence continue North 00
degrees 23 minutes 24 seconds East for 2,839.21 feet to a point on the South
right of way boundary of Mississippi Highway No. 448; thence along said South
right of way boundary the following 7 courses and distances; North 89 degrees 36
minutes 30 seconds East 59.00 feet; North 00 degrees 23 minutes 30 seconds West
10.00 feet; North 89 degrees 36 minutes 30 seconds East 1,100.00 feet; South 00
degrees 23 minutes 30 seconds East 10.00 feet; North 89 degrees 36 minutes 30
seconds East 400.00 feet; North 00 degrees 23 minutes 30 seconds West 10.00
feet; North 89 degrees 36 minutes 30 seconds East 1,652.58 feet; thence leaving
said South right of way boundary South 00 degrees 27 minutes 32 seconds East
1,484.53 feet; thence South 89 degrees 32 minutes 28 seconds West 15.00 feet;
thence South 00 degrees 43 minutes 28 seconds East 1,346.39 feet; thence South
89 degrees 15 minutes 23 seconds West 2,572.10 feet; thence South 78 degrees 33
minutes 13 seconds West 31.60 feet; thence South 89 degrees 56 minutes 59
seconds West 641.83 feet to the point of beginning, containing 210.27 acres,
more or less, and being located in Section 9, Township 20 North, Range 7 West,
Bolivar County, Mississippi;
Being a part of that property described and conveyed in that deed of
record in Book H-138, page 21 of the records on file in the office of the
Chancery Clerk, First Judicial District of Bolivar County, Mississippi;
<PAGE> 13
175 acres of land being that portion of Section No. 21, township 18 North,
Range 3 West lying South and West of Moorhead Bayou; and that portion of
Section No. 28, Township 1 North, Range 3 West lying North and West of Moorhead
Bayou, containing in the aggregate 175 acres, more or less;
This tract maintains all, or portions of, Units 12, 13, 14, 15, 16 and 17
of the S.H. Moore Farm according to a map or file in Plat Book 3, page 23 in
the office of the Chancery Clerk of Sunflower County, Mississippi;
<PAGE> 14
PARCEL 1:
310.58 acres, more or less, located in the West half (W 1/2) of Section 34,
Township 19 North, Range 3 West, Sunflower County, Mississippi, and being
further described as follows:
Begin at the Northwest corner of Section 34, Township 19 North, Range 3 West,
Sunflower County, Mississippi, thence South 00 degrees 13 minutes 07 seconds
East along the West line of Section 34, 5,168.44 feet to a point on the North
right-of-way line (60 minutes feet from the centerline of the North lanes) of
U.S. Highway 82; thence Southeasterly along said right-of-way line and a 00
degrees 09 minutes 59 seconds curvie to the left 561.46 feet to a concrete
right-of-way marker at the end of said curve; thence North 89 degrees 38 minutes
00 seconds East along said right-of-way line 1,928.42 feet; thence North 02
degrees 32 minutes 09 seconds East 901.16 feet; thence North 89 degrees 38
minutes 00 seconds East 105.00 feet to a point on the East line of the West half
of Section 34; thence North 00 degrees 19 minutes 36 seconds West along the East
line of the West half of Section 34 4,281.80 feet to the North line of Section
34; thence South 89 degrees 29 minutes 38 seconds West along the North line of
Section 34 2,630.11 feet to the Point of Beginning.
PARCEL 2:
A 50' x 3200' easement in the West half of the East half of Section 34, Township
19 North, Range 3 West, Sunflower County, Mississippi, and being further
described as follows:
Begin at the Northwest corner of the East half of Section 34, Township 19 North,
Range 3 West; thence South 00 degrees 19 minutes 36 seconds East along the West
line of the East half of Section 34 3,200.00 feet; thence North 89 degrees 29
minutes 38 seconds East 50.00 feet; thence North 00 degrees 19 minutes 36
seconds West 3,200.00 feet to the North line of Section 34; thence South 89
degrees 29 minutes 38 seconds West along the North line of Section 34 50.00 feet
to the Point of Beginning.
Being the same property conveyed to Balmoral/Aquaculture I, LTD., by deed from
Great American Foods Corporation dated December 16, 1986, filed for record
December 16, 1986, at 4:22 o'clock P.M., and recorded in Book X-26, Page 63 in
the office of the Chancery Clerk of Sunflower County, Mississippi.
<PAGE> 15
PARCEL 1
The Northwest Quarter of Section 18, Township 20 North, Range 2 West, Leflore
County, Mississippi, containing 156 acres, more or less.
PARCEL 2
The North Half of the Northeast Quarter of Section 18, Township 20 North, Range
2 West, Leflore County, Mississippi, containing 78 acres, more or less.
PARCEL 3
That certain tract of land in Section 17, Township 20 North, Range 2 West,
Leflore County, Mississippi, described as follows:
Begin at the Northwest Corner of Section 17, Township 20 North, Range 2 West,
and run thence South 88 degrees 50 minutes East, 1174 feet to the center thread
of Quiver River; thence in a southwesterly direction following the center thread
of said Quiver River and the meanderings thereof, as they now exist, to a point
in the West side of said Section 17, which is 722 feet South of the point of
beginning; run thence North along the West side of said Section 17, 722 feet to
the point of beginning and containing 18.18 acres in the Northwest Quarter of
said Section 17.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 112,631
<SECURITIES> 0
<RECEIVABLES> 377,146
<ALLOWANCES> 0
<INVENTORY> 5,533,276
<CURRENT-ASSETS> 6,044,356
<PP&E> 8,406,004
<DEPRECIATION> 2,402,841
<TOTAL-ASSETS> 13,048,192
<CURRENT-LIABILITIES> 1,268,200
<BONDS> 3,829,981
0
0
<COMMON> 15,405,803
<OTHER-SE> (7,455,792)
<TOTAL-LIABILITY-AND-EQUITY> 13,048,192
<SALES> 5,041,463
<TOTAL-REVENUES> 5,041,463
<CGS> 4,316,032
<TOTAL-COSTS> 4,316,032
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 460,393
<INCOME-PRETAX> (1,536,161)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,536,161)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,536,161)
<EPS-PRIMARY> (0.65)
<EPS-DILUTED> (0.65)
</TABLE>
