UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 28, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 2-62681
GOLD KIST INC.
(Exact name of registrant as specified in its charter)
GEORGIA 58-0255560
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
244 Perimeter Center Parkway, N.E., Atlanta, Georgia 30346
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (770)
393-5000
N/A
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
GOLD KIST INC. AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
September 28, 1996 and June 29, 1996 . . 1
Consolidated Statements of Operations -
Three Months Ended September 28, 1996
and September 30, 1995 . . . . . . . . . 2
Consolidated Statements of Cash Flows -
Three Months Ended September 28, 1996
and September 30, 1995. . . . . . . . . . 3
Notes to Consolidated Financial
Statements . . . . . . . . . . . . . . . 4 - 5
Item 2. Management's Discussion and Analysis of
Consolidated Results of Operations and
Financial Condition . . . . . . . . . . . 6 - 8
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . 9
Item 6. Exhibits and Reports on Form 8-K . . . . . 10
<TABLE>
Page 1
Item 1. Financial GOLD KIST INC. AND SUBSIDIARIES
Statements CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Sept. 28, June 29,
1996 1996
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 17,540 20,562
Receivables, principally trade, including
notes receivable of $68,396 at September
28, 1996 and $71,238 at June 29, 1996,
less allowance for doubtful accounts of
$8,274 at September 28, 1996 and $7,726
at June 29, 1996 215,133 242,411
Inventories (note 3) 268,871 270,367
Other current assets 36,698 39,204
Total current assets 538,242 572,544
Investments 106,259 104,728
Property, plant and equipment, net 270,301 255,728
Other assets 41,472 42,960
$956,274 975,960
LIABILITIES AND EQUITY
Current liabilities:
Notes payable and current maturities of
long-term debt:
Short-term borrowings $112,200 112,800
Subordinated loan certificates 32,523 30,574
Current maturities of long-term debt 19,694 27,089
164,417 170,463
Accounts payable 119,305 126,340
Accrued compensation and related expenses 26,057 32,590
Patronage refunds and equity payable 23,930 24,043
Interest left on deposit 12,296 12,119
Other current liabilities 19,507 22,532
Total current liabilities 365,512 388,087
Long-term debt, excluding current maturities 190,492 188,948
Accrued postretirement benefit costs 41,441 40,271
Other liabilities 4,808 4,072
Total liabilities 602,253 621,378
Minority interest 29,024 28,172
Patrons' and other equity:
Common stock, $1.00 par value - Authorized
500 shares; issued and outstanding 36 at
September 28, 1996 and June 29, 1996 36 36
Patronage reserves 204,374 209,140
Unrealized gain on marketable equity
security (net of deferred income taxes
of $13,881 at September 28, 1996 and
$13,116 at June 29, 1996) 22,202 20,978
Retained earnings 98,385 96,256
Total patrons' and other equity 324,997 326,410
Contingent liabilities (note 5)
$956,274 975,960
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
Page 2
GOLD KIST INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Three Months Ended
Sept. 28, Sept. 30,
1996 1995
<S> <C> <C>
Net sales volume $519,291 438,814
Cost of sales 479,163 386,529
Gross margins 40,128 52,285
Distribution, administrative and general
expenses 38,352 35,245
Net operating margins 1,776 17,040
Other income (deductions):
Interest income 3,193 2,567
Interest expense (6,385) (4,978)
Equity in loss of partnership (note 4) (855) (969)
Miscellaneous, net 645 1,880
(3,402) (1,500)
Margins (loss) before income taxes and
minority interest (1,626) 15,540
Income tax expense (benefit) (693) 5,421
Margins (loss) before minority interest (933) 10,119
Minority interest (890) (1,079)
Net margins (loss) $ (1,823) 9,040
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
Page 3
GOLD KIST INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
<CAPTION>
Three Months Ended
Sept. 28, Sept. 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net margins (loss) $ (1,823) 9,040
Non-cash items included in net margins:
Depreciation and amortization 9,975 9,805
Equity in loss of partnership 855 969
Patronage refunds (394) (205)
Deferred income tax expense (benefit) (449) 445
Other 3,568 (743)
Changes in operating assets and liabilities:
Receivables 27,278 22,518
Inventories 1,496 (12,484)
Other current assets 2,576 (4,899)
Accounts payable and accrued expenses (16,593) (10,496)
Interest left on deposit 177 389
Net cash provided by operating activities 26,666 14,339
Cash flows from investing activities:
Acquisitions of property, plant and equipment (22,208) (23,605)
Other, net (2,013) (1,537)
Net cash used in investing activities (24,221) (25,142)
Cash flows from financing activities:
Short-term borrowings (repayments), net 1,349 15,852
Proceeds from long-term debt 6,822 4,494
Principal payments of long-term debt (12,673) (9,017)
Patronage refunds and other equity paid in cash (965) (668)
Net cash provided by (used in) financing
activities (5,467) 10,661
Net change in cash and cash equivalents (3,022) (142)
Cash and cash equivalents at beginning of period 20,562 16,597
Cash and cash equivalents at end of period $ 17,540 16,455
Supplemental disclosure of cash flow data:
Cash paid during the periods for:
Interest (net of amounts capitalized) $ 6,298 3,821
Income taxes $ 2,773 524
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
Page 4
GOLD KIST INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Thousands)
(Unaudited)
1. The accompanying unaudited consolidated financial statements
reflect the accounts of Gold Kist Inc. and its subsidiaries
("Gold Kist"). These consolidated financial statements
should be read in conjunction with Management's Discussion
and Analysis of Consolidated Results of Operations and
Financial Condition and the Notes to Consolidated Financial
Statements on pages 13 through 17 and pages 25 through 36,
respectively, of Gold Kist's Annual Report in the previously
filed Form 10-K for the year ended June 29, 1996.
2. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of normal recurring accruals) necessary to
present fairly the financial position, the results of
operations, and the cash flows. All significant
intercompany balances and transactions have been eliminated
in consolidation. Results of operations for interim periods
are not necessarily indicative of results for the entire
year.
3. Inventories consist of the following:
<TABLE>
<CAPTION>
Sept. 28, 1996 June 29, 1996
<S> <C> <C>
Merchandise for sale $ 80,973 83,886
Live poultry and hogs 102,478 95,682
Marketable products - poultry 43,075 40,047
Marketable products - cotton 361 11,258
Raw materials and supplies 41,984 39,494
$268,871 270,367
</TABLE>
4. Gold Kist has a 33% interest in Golden Peanut Company, a
Georgia general partnership. Gold Kist's investment in the
partnership was $17.4 million at September 28, 1996 and
$17.2 million at June 29, 1996. In July 1996, the
Association made an additional investment of $1.2 million in
the partnership.
Summarized operating statement information of Golden Peanut
Company is shown below:
<TABLE>
<CAPTION>
Three Months Ended
Sept. 30, Sept. 30,
1996 1995
<S> <C> <C>
Net sales and other
operating income $86,189 103,073
Costs and expenses 88,755 105,981
Net loss $(2,566) (2,908)
</TABLE>
5. In January 1993, certain Alabama member patrons of the
Association filed a lawsuit in the Circuit Court of
Jefferson County, Alabama, Tenth Judicial Circuit against
the Association and Golden Poultry and certain directors and
officers of the companies. (Ronald Pete Windham and Windham
Enterprises, Inc. on their behalf and on behalf of and for
the use and benefit of Gold Kist, Inc. and its
shareholders/members v. Harold O. Chitwood, individually in
his capacity as an officer of Gold Kist and a Director of
Golden Poultry; et al). The lawsuit alleges that the named
defendants violated their fiduciary duties by diverting
Page 5
GOLD KIST INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Amounts in Thousands)
(Unaudited)
corporate opportunities from the Association to Golden
Poultry and Carolina Golden Products Company in connection
with the creation of Golden Poultry and Carolina Golden
Products Company and by permitting their continued
operations. In March 1994, the Court certified the Windham
litigation as a class action. In September 1995, Golden
Poultry and Carolina Golden Products Company were dismissed
from the litigation. On October 25, 1995, the jury in the
Windham case returned verdicts in favor of the plaintiffs in
the litigation. On July 2, 1996, the Jefferson County,
Alabama Circuit Court Judge entered a memorandum opinion and
non-final judgment in the case directing Gold Kist to
acquire the approximately 27% of Company shares currently
owned by investors so that all of the issued and outstanding
stock of the Company would be owned by Gold Kist or a wholly
owned subsidiary, either through a merger or a tender offer
for the minority shares of Golden Poultry stock outstanding.
The Court denied the plaintiffs' demands for additional
allocations and cash distributions to the class members. On
September 13, 1996, subsequent to motions for
reconsideration filed by the plaintiffs and Gold Kist, the
court entered a Final Judgment and Decree modifying its July
2, 1996 Order. The Final Judgment and Decree, clarified and
reaffirmed by Order of the Court dated November 4, 1996,
relieves Gold Kist of the requirement to acquire the 27% of
Golden Poultry common stock not already owned by Gold Kist.
This Final Judgment and Decree requires Gold Kist to acquire
or redeem all Golden Poultry common stock and/or stock
options held or issued to Gold Kist officers and directors
and their spouses and minor children. The Court also
ordered Gold Kist to cause the surrender of all Golden
Poultry stock options held by Gold Kist officers and
directors or the exercise of such options and purchase by
Gold Kist of the resultant stock, to redeem from eligible
members approximately $21.2 million of notified equity of
Gold Kist, to pay $4.2 million in attorney's fees to the
plaintiffs' attorneys and to establish a policy prohibiting
officers and directors of Gold Kist from future ownership of
Golden Poultry stock. An appeal of the Final Judgment may
be filed by the parties, which could have the effect of
staying the Final Judgment pending the outcome of any
appeal.
The Company is also party to other various legal and
administrative proceedings, all of which management believes
constitute ordinary routine litigation incident to the
business conducted by the Company, or are not material in amount.
Page 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net Sales Volume
The Association's net sales volume of $519.3 million for the
three month period ended September 28, 1996 increased 18.3% as
compared to the same period a year ago. The Poultry segment's
net sales volume increased 16.7% for the quarter ended September
28, 1996 as compared to the same quarter last fiscal year. The
Poultry segment's increase in net sales volume was primarily the
result of a 10.8% increase in pounds of broiler products marketed
and a 5.8% increase in average broiler selling prices. Poultry
market prices for the quarter ended September 28, 1996 increased
as compared to the same quarter last year due primarily to the
slowdown in poultry industry expansion and the continuation of
strong export sales. Net sales volume in the Agri-Services
segment for the three month period ended September 28, 1996
increased approximately 25.0% as compared to the same period a
year ago. The Agri-Services segment's net sales increase
reflected growth in its cotton marketing operation and increased
sales of fertilizer.
Net Operating Margins
The Association had net operating margins of $1.8 million for the
quarter ended September 28, 1996 as compared to $17.0 million for
the quarter ended September 30, 1995. The decrease in net
operating margins was primarily the result of the increased feed
ingredient costs which was partially offset by the increase in
broiler selling prices. The Poultry segment had net operating
margins of $13.3 million for the three months ended September 28,
1996 as compared to net operating margins of $25.7 million in the
same period last fiscal year. Feed ingredient costs for the three
months ended September 28, 1996 increased 39.0% as compared to
the same three month period a year ago. Market prices for feed
ingredients reached 40 year historic highs in the summer of 1996
due to the poor grain harvest in 1995 and export demand for U.S.
feed grains. Market prices for feed ingredients are likely to
decline in 1997 as a result of the substantial 1996 grain
harvest.
The Agri-Services segment had a net operating loss of
approximately $9.4 million for the quarter ended September 28,
1996 as compared to $6.9 million in the same period a year ago.
The increase in the net operating loss for the quarter ended
September 28, 1996 as compared to the same period last year was
primarily due to increased operating costs associated with retail
operations acquired last fiscal year.
Page 7
Other Income (Deductions)
Interest income of $3.2 million for the quarter ended September
28, 1996 increased $626,000 as compared to the same period a
year ago. The increase was due primarily to increased crop
financing provided to patrons and customers of the Association.
Interest expense for the three months ended September 28, 1996
increased $1.4 million to $6.4 million as a result of increased
borrowings necessary to fund the Association's expansion
programs.
Equity in loss of partnership of approximately $855,000
represented the Association's prorata share of Golden Peanut
Company's net loss for the quarter ended September 28, 1996.
This compared to a $1.0 million share of the partnership's loss
for the same quarter a year ago.
Miscellaneous, net was $645,000 for the quarter ended September
28, 1996 as compared to $1.9 million for the quarter ended
September 30, 1995. Miscellaneous, net for the three months ended
September 28, 1996 includes patronage refunds in which the
Association is a member and other dividends of $495,000. For the
quarter ended September 28, 1996, miscellaneous, net reflected a
$1.1 million loss related to its ownership interest in a pecan
processing and marketing company. For the quarter ended
September 30, 1995, the Association recorded income of $779,000
related to this investment. Rental income of $499,000 was
included in miscellaneous, net for the quarter ended September
28, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Association's liquidity is dependent upon funds from
operations and external sources of financing. The principal
sources of external short-term financing are proceeds from the
continuous offering of Subordinated Loan Certificates, an
unsecured committed credit facility with a group of banks and
uncommitted letters and lines of credit. In August 1996, the
Association entered into a $250 million unsecured committed
credit facility with nine commercial banks. The facility
includes a five-year $125 million revolving credit commitment and
a $125 million 364-day line of credit commitment. At September
28, 1996, the Association had unused loan commitments of $126.2
million and additional unused uncommitted facilities to provide
loans and letters of credit from banks aggregating approximately
$120.7 million . The primary sources of external long-term
financing are a note agreement with an insurance company,
proceeds from the continuous offering of Subordinated Capital
Certificates of Interest and revolving credit agreements.
Covenants under the terms of loan agreements with lenders include
conditions that could limit the short-term and long-term funds
available from various external sources. The Association was in
compliance with all applicable conditions in loan agreements with
all lenders at September 28, 1996.
Page 8
Working capital and the current ratio were $172.7 million and
1.47 to 1, respectively, at September 28, 1996, as compared to
$184.5 million and 1.48 to 1, respectively, at June 29, 1996.
Patrons equity at September 28, 1996 was $325.0 million as
compared to $326.4 million at June 29, 1996. For the quarter
ended September 28, 1996, the impact of the net loss on patrons'
equity was partially offset by the increase in the unrealized
gain on marketable equity security. Cash and cash equivalents
were approximately $17.5 million at September 28, 1996. Net cash
provided by operations reflected $27.3 million decrease in
receivables during the current quarter. The decline in
receivables reflects the seasonal nature of the Agri-Services
segment's operations. Other uses of cash included expenditures
for the acquisition of property, plant and equipment, repayments
of long-term debt, and patronage refunds and other equity
payments. These items were substantially funded by net cash
provided by operations of $26.7 million and long-term borrowings
of $6.8 million.
For the quarter ended September 28, 1996, the Association's
investment activities included $22.2 million in expenditures for
property, plant and equipment, which were primarily related to
expansion and improvements in the poultry operations and to a
lesser extent the purchase of cotton ginning facilities.
The Association, including its non-cooperative subsidiaries,
plans capital expenditures of approximately $140.0 million in
1997 primarily consisting of expenditures for expansion and
technological advances in poultry production and processing and
to a lesser extent, Agri-Services segment improvements. In
addition, planned capital expenditures include other asset
improvements and necessary replacements. Management intends to
finance the planned 1997 capital expenditures with existing cash
balances and net margins adjusted for non-cash items and
additional long-term borrowings, as needed. In 1997, management
expects cash expenditures to approximate $25.0 million for equity
distributions. The Association believes cash on hand and cash
equivalents at September 28, 1996 and cash expected to be
provided from operations, in addition to borrowings available
under existing credit arrangements and proceeds from the sale of
Subordinated Capital Certificates of Interest, will be sufficient
to maintain cash flows adequate for the Association's projected
growth and operational objectives during 1997.
Page 9
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
In January 1993, certain Alabama member patrons of the
Association filed a lawsuit in the Circuit Court of
Jefferson County, Alabama, Tenth Judicial Circuit against
the Association and Golden Poultry and certain directors and
officers of the companies. (Ronald Pete Windham and Windham
Enterprises, Inc. on their behalf and on behalf of and for
the use and benefit of Gold Kist, Inc. and its
shareholders/members v. Harold O. Chitwood, individually in
his capacity as an officer of Gold Kist and a Director of
Golden Poultry; et al). The lawsuit alleges that the named
defendants violated their fiduciary duties by diverting
corporate opportunities from the Association to Golden
Poultry and Carolina Golden Products Company in connection
with the creation of Golden Poultry and Carolina Golden
Products Company and by permitting
their continued operations. In March 1994, the Court
certified the Windham litigation as a class action. In
September 1995, Golden Poultry and Carolina Golden Products
Company were dismissed from the litigation. On October 25,
1995, the jury in the Windham case returned verdicts in
favor of the plaintiffs in the litigation. On July 2, 1996,
the Jefferson County, Alabama Circuit Court Judge entered a
memorandum opinion and non-final judgment in the case
directing Gold Kist to acquire the approximately 27% of
Company shares currently owned by investors so that all of
the issued and outstanding stock of the Company would be
owned by Gold Kist or a wholly owned subsidiary, either
through a merger or a tender offer for the minority shares
of Golden Poultry stock outstanding. The Court denied the
plaintiffs' demands for additional allocations and cash
distributions to the class members. On September 13, 1996
subsequent to motions for reconsideration filed by the
plaintiffs and Gold Kist, the court entered a Final Judgment
and Decree modifying its July 2, 1996 Order. The Final
Judgment and Decree, clarified and reaffirmed by Order of
the Court dated November 4, 1996, relieves Gold Kist of the
requirement to acquire the 27% of Golden Poultry common
stock not already owned by Gold Kist. This Final Judgment
and Decree requires Gold Kist to acquire or redeem all
Golden Poultry common stock and/or stock options held or
issued to Gold Kist officers and directors and their spouses
and minor children. The Court also ordered Gold Kist to
cause the surrender of all Golden Poultry stock options held
by Gold Kist officers and directors or the exercise of such
options and purchase by Gold Kist of the resultant stock, to
redeem from eligible members approximately $21.2 million of
notified equity of Gold Kist, to pay $4.2 million in
attorney's fees to the plaintiffs' attorneys and to
establish a policy prohibiting officers and directors of
Gold Kist from future ownership of Golden Poultry stock. An
appeal of the Final Judgment may be filed by the parties,
which could have the effect of staying the Final Judgment
pending the outcome of any appeal.
Page 10
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit
Designation of Exhibit
in this Report Description of Exhibit
10 (k) (1) Master Loan Agreement
with CoBank dated
as of August 1, 1996
10 (k) (2) Amendment dated as of
August 1, 1996 to Master
Loan Agreement with CoBank
27 Financial Data Schedule
(b) Reports on Form 8-K. Gold Kist has not filed any
reports on Form 8-K during the three months ended
September 28, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
GOLD KIST INC.
(Registrant)
Date November 12, 1996
Gaylord O. Coan
Chief Executive Officer
(Principal Executive Officer)
Date November 12, 1996
Peter J. Gibbons
Vice President, Finance
(Chief Financial Officer)
Page 10
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit
Designation of Exhibit
in this Report Description of Exhibit
10 (k) (1) Master Loan Agreement
with CoBank dated
as of August 1, 1996
10 (k) (2) Amendment dated as of
August 1, 1996 to Master
Loan Agreement with CoBank
27 Financial Data Schedule
(b)Reports on Form 8-K. Gold Kist has not filed any reports on
Form 8-K during the three months ended September 28, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GOLD KIST INC.
(Registrant)
Date November 12, 1996 /s/ Gaylord O. Coan
Gaylord O. Coan
Chief Executive Officer
(Principal Executive Officer)
Date November 12, 1996 /s/ Peter J. Gibbons
Peter J. Gibbons
Vice President, Finance
(Chief Financial Officer)
MLA No. E126
MASTER LOAN AGREEMENT
THIS MASTER LOAN AGREEMENT is entered into as of August 1,
1996, between CoBANK, ACB ("CoBank") and Gold Kist Inc., Atlanta, GA (the
"Company").
BACKGROUND
From time to time CoBank may make loans to the Company. In
order to reduce the amount of paperwork associated therewith,
CoBank and the Company would like to enter into a master loan
agreement. For that reason, and in consideration of CoBank making
one or more loans to the Company, CoBank and the Company agree as
follows:
SECTION 1. Supplements. In the event the Company desires to
borrow from CoBank under the terms of this agreement and CoBank
is willing to lend to the Company under the terms hereof, or in
the event CoBank and the Company desire to consolidate any
existing loans hereunder, the parties will enter into a Supplement
to this agreement (a "Supplement"). Each Supplement will set
forth the amount of the loan, the purpose of the loan, the
interest rate or rate options applicable to that loan, the
repayment terms of the loan, and any other terms and conditions
applicable to that particular loan. Each loan will be governed
by the terms and conditions contained in this agreement and in the
Supplement relating to the loan.
SECTION 2. Availability. Loans will be made available on
any day on which CoBank and the Federal Reserve Banks are open for
business upon the telephonic or written request of the Company.
Requests for loans must be received no later than 12:00 noon
Company s local time on the date the loan is desired. Loans will
be made available by wire transfer of immediately available funds
to such account or accounts as may be authorized by the Company.
The Company shall furnish to CoBank a duly completed and executed
copy of a CoBank Delegation and Wire Transfer Authorization Form,
and CoBank shall be entitled to rely on (and shall incur no
liability to the Company in acting on) any request or direction
furnished in accordance with the terms thereof.
SECTION 3. Repayment. The Company's obligation to repay
each loan shall be evidenced by the promissory note set forth in
the Supplement relating to that loan or by such replacement note
as CoBank shall require. CoBank shall maintain a record of all
loans, the interest accrued thereon, and all payments made with
respect thereto, and such record shall, absent proof of manifest
error, be conclusive evidence of the outstanding principal and
interest on the loans. All payments shall be made by wire
transfer of immediately available funds or by check. Wire
transfers shall be made to ABA No. 307088754 for advice to and
credit of CoBANK (or to such other account as CoBank may direct
by notice). The Company shall give CoBank telephonic notice no
later than 12:00 noon Company s local time of its intent to pay
by wire and funds received after 3:00 p.m. Company s local time
shall be credited on the next business day. Checks shall be
mailed to CoBank, Department 167, Denver, Colorado, 80291-0167 (or to
such other place as CoBank may direct by notice). Credit for
payment by check will not be given until the latter of: (a) the
day on which CoBank receives immediately available funds; or
(b) the next business day after receipt of the check.
SECTION 4. Capitalization. The Company agrees to purchase
such equity in CoBank as CoBank may from time to time require
in accordance with its Bylaws. However, the maximum amount of
equity which the Company shall be obligated to purchase in
connection with any loan may not exceed the maximum amount
permitted by the Bylaws at the time the Supplement relating to
that loan is entered into or such loan is renewed or refinanced
by CoBank.
SECTION 5. Security. The company s obligations under
this agreement, all supplements (whenever executed), and all
instruments and documents contemplated hereby or thereby, shall
be secured by a statutory first lien on all equity which the
Company may now own or hereafter acquire in CoBank. Except for
CoBank s lien on the Company s equity in CoBank, the Company s
obligations hereunder and under each Supplement shall be
unsecured.
SECTION 6. Conditions Precedent.
(A) Conditions to Initial Supplement. CoBank s
obligation to extend credit under the initial Supplement hereto
is subject to the conditions precedent that CoBank receive, in
form and substance satisfactory to CoBank, each of the
following:
(i) This Agreement, Etc. A duly executed copy of this
agreement and all instruments and documents contemplated
hereby.
(ii) Opinion of Counsel. An opinion of counsel to the Company
(which counsel must be acceptable to CoBank).
(B) Conditions to Each Supplement. CoBank s obligation
to extend credit under each Supplement, including the initial
Supplement, is subject to the conditions precedent that CoBank
receive, in form and content satisfactory to CoBank, each of
the following:
(i) Supplement. A duly executed copy of the
Supplement and all instruments and documents contemplated
thereby.
(ii) Evidence of Authority. Such certified board
resolutions, evidence of incumbency, and other evidence that
CoBank may require that the Supplement, all instruments and
documents executed in connection therewith, and, in the case of
initial Supplement hereto, this agreement and all instruments
and documents executed in connection herewith, have been duly
authorized and executed.
(iii) Fees and Other Charges. All fees and other charges
provided for herein or in the Supplement.
(iv) Evidence of Perfection, Etc. Such evidence as
CoBank may require that CoBank has a duly perfected first
priority lien on all security for the Company s obligations,
and that the Company is in compliance with Section 8(D) hereof.
(C) Conditions to Each Loan. CoBank s obligation under
each Supplement to make any loan to the Company thereunder is
subject to the condition that no Event of Default (as defined
in Section 11 hereof) or event which with the giving of notice
and/or the passage of time would become an Event of Default
hereunder (a Potential Default ), shall have occurred and be
continuing.
SECTION 7. Representations and Warranties.
(A) This Agreement. The Company represents and warrants
to CoBank that as of the date of this
Agreement:
(i) Compliance. The Company and, to the extent
contemplated hereunder, each Subsidiary, are in compliance with
all of the terms of this agreement, and no Event of Default or
Potential Default exists hereunder.
(ii) Compliance with ERISA. The Company is in
compliance with ERISA and that all plans are fully funded and
the Company has no withdrawal liability.
(B) Each Supplement. The execution by the Company of
each Supplement hereto shall constitute a representation and
warranty to CoBank that:
(i) Applications. Each representation and warranty
and all information set forth in any application or other
documents submitted in connection with, or to induce CoBank to
enter into, such Supplement, is correct in all material
respects as of the date of the Supplement.
(ii) Conflicting Agreements, Etc. This agreement, the
Supplements, and all security and other instruments and
documents relating hereto and thereto (collectively, at any
time, the Loan Documents ), do not conflict with, or require
the consent of any party to, any other agreement to which the
Company is a party or by which it or its property may be bound
or affected, and do not conflict with any provision of the
Company's bylaws, articles of incorporation, or other
organizational documents.
(iii) Compliance. The Company and, to the extent
contemplated hereunder, its Subsidiaries are in compliance with
all of the terms of the Loan Documents (including, without
limitation, Section 8(A) of this agreement on eligibility to
borrow from CoBank).
(iv) Binding Agreement. The Loan Documents create
legal, valid, and binding obligations of the Company which are
enforceable in accordance with their terms, except to the
extent that enforcement may be limited by applicable
bankruptcy, insolvency, or similar laws affecting creditors
rights generally.
SECTION 8. Affirmative Covenants. Unless otherwise agreed
to in writing by CoBank, while this agreement is in effect, the
Company agrees to, and with respect to Subsections 8(B) through
8(G) hereof, agrees to cause each Subsidiary to:
(A) Eligibility. Maintain its status as an entity
eligible to borrow from CoBank.
(B) Corporate Existence, Licenses. Etc. (i) Preserve
and keep in full force and effect its existence and good
standing in the jurisdiction of its incorporation or formation;
(ii) qualify and remain qualified to transact business in all
jurisdictions where the failure to qualify could have a
material adverse effect on the financial condition,
properties, profits, or aspirations of the Company or any
Subsidiary; and (iii) obtain and maintain all licenses,
certificates, permits, authorizations, approvals, and the like
which are material to the conduct of its business or required
by law, rule, regulation, ordinance, code, order, and the like
(collectively, Laws ).
(C) Compliance with Laws. Comply in all material
respects with all applicable Laws, including, without
limitation, all Laws relating to environmental protection and
any patron or member investment program that it may have. In
addition, the Company agrees to cause all persons occupying or
present on any of its properties to comply in all material
respects with all environmental protection Laws.
(D) Insurance. Maintain insurance with insurance
companies or associations acceptable to CoBank in such amounts
and covering such risks as are usually carried by companies
engaged in the same or similar business and similarly situated,
and make such increases in the type or amount of coverage as
CoBank may request. All such policies insuring any collateral
for the Company s obligations to CoBank shall have mortgagee or
lender loss payable clauses or endorsements in form and content
acceptable to CoBank. At CoBank's request, all policies (or
such other proof of compliance with this Subsection as may be
satisfactory to CoBank) shall be delivered to CoBank.
(E) Property Maintenance. Maintain all of its property
that is necessary to or useful in the proper conduct of its
business in good working condition, ordinary wear and tear
excepted.
(F) Books and Records. Keep adequate records and books
of account in which complete entries will be made in accordance
with generally accepted accounting principles ("GAAP")
consistently applied.
(G) Inspection. Permit CoBank or its agents, upon
reasonable notice and during normal business hours or at such
other times as the parties may agree, to examine its
properties, books, and records, and to discuss its affairs,
finances, and accounts, with its respective officers,
directors, employees, and independent certified public
accountants.
(H) Reports and Notices. Furnish to CoBank:
(i) Annual Financial Statements. As soon as
available, but in no event more than 90 days after the
end of each fiscal year of the Company
occurring during the term hereof, annual consolidated and
consolidating financial statements of the Company and its
consolidated Subsidiaries prepared in accordance with GAAP
consistently applied. Such financial statements shall: (a) in
the case of the consolidated statements, be audited by
independent certified public accountants selected by the
Company and acceptable to CoBank; (b) in the case of the
consolidated statements, be accompanied by a report of such
accountants containing an opinion thereon acceptable to CoBank;
(c) be prepared in reasonable detail and in comparative form;
and (d) include a balance sheet, a statement of income, a
statement of retained earnings, a statement of cash flows, and
all notes and schedules relating thereto.
(ii) Interim Financial Statements. As soon as
available, but in no event more than 45 days after the end of
each fiscal quarter of the Company, a
consolidated and consolidating balance sheet of the Company and
its consolidated Subsidiaries as of the end of such
fiscal quarter, a consolidated and consolidating statement of
income for the Company and its consolidated Subsidiaries for
such period and for the period year to date, and such other
interim statements as CoBank may specifically request, all
prepared in reasonable detail and in comparative form in
accordance with GAAP consistently applied and certified by the
Chief Financial Officer or Treasurer of the Company (subject to
normal year-end adjustments)
(iii) Notice of Default. Promptly after becoming aware
thereof, notice of the occurrence of an Event of Default or a
Potential Default.
(iv) Notice of Non-Environmental Litigation. Promptly
after the commencement thereof, notice of the commencement of
all actions, suits, or proceedings before any court,
arbitrator, or governmental department, commission, board,
bureau, agency, or instrumentality affecting the Company or any
Subsidiary which, if determined adversely to the Company or
such Subsidiary, could have a material adverse effect on the
financial condition, properties, profits, or operations of the
Company or such Subsidiary. Promptly after receipt thereof,
notice of the receipt of all pleadings, orders, complaints,
indictments, or any other communication alleging a condition
that could either cause the Company or
any Subsidiary to incur liability in excess of $1,000,000 per
occurrence and $2,000,000 in aggregate or could, if determined
adversely to the Company or any Subsidiary have a
material adverse affect on the operations, business, or
properties of the Company or any Subsidiary.
(v) Notice of Environmental Litigation, Etc. Promptly
after receipt thereof, notice of the receipt of all pleadings,
orders, complaints, indictments, or any other communication
alleging a condition that: (a) may require the Company
or any Subsidiary to undertake or
to contribute to a cleanup or other response under
environmental Laws, or which seek penalties, damages or
injunctive relief, related to alleged violations of such Laws,
or which claim personal injury or property damage to any person
as a result of environmental factors or conditions; and (b)
seeks criminal sanctions related to alleged violation of such
laws and/or could, if determined adversely to the Company or
any Subsidiary, have a material adverse affect on the
operations, business, or properties of the Company or any
Subsidiary.
(vi) Bylaws and Articles. Promptly after any change in
the Company s bylaws or articles of incorporation (or like
documents), copies of all such changes, certified by the
Company s Secretary.
(vii) Financial Covenant Certificates. Together with each set of
financial statements furnished to CoBank pursuant to Section
8(H) hereof, a certificate of an officer or employee of the
Company acceptable to CoBank setting forth calculations showing
compliance with the financial covenants set forth in Section 10
hereof.
(viii) SEC Filings. Promptly after filing same, a copy of all
10Ks and 10Qs filed with the Securities and Exchange
Commission.
(ix) Other Information. Such other information
regarding the condition or operations, financial or otherwise,
of the Company or any Subsidiary as CoBank may from time to
time reasonably request, including but not limited to copies of
all pleadings, notices, and communications referred to in
Subsections 8(H)(iv) and (v) above.
SECTION 9. Negative Covenants. This section of this
agreement shall incorporate in their entirety, Sections 7.2
through 7.10 of the Credit Agreement between Gold Kist Inc., as
Borrower and Various Banks and Lending Institutions, as Lenders
and SunTrust and Bank of Atlanta as Agents dated as of August
9, 1996, as amended ( Syndicated Agreement ), a copy of same,
existing as of the date of this agreement, is attached as
Exhibit A. As such, all defined terms within this section
shall have the definitions as described in Section 1.1 of that
Syndicated Agreement. As long as this agreement is in effect,
these covenants and definitions shall remain in place even if
the Syndicated Agreement is terminated. As long as this
agreement is in effect, any amendment to the covenants in
Section 7.2 through 7.10 of the Syndicated Agreement and any
amendment to the definitions in the Syndicated Agreement shall
also apply to this agreement. In the event that CoBank s
involvement in the Syndicated Agreement is terminated for any
reason, the Negative Covenants and definitions in place at the
time of the termination shall continue in place until modified
by the parties hereto.
SECTION 10. Financial Covenants. Unless otherwise agreed
to in writing, while this agreement is in effect:
(A) Consolidated Funded Debt to Leverage Ratio. The
Company shall not permit the ratio of Consolidated Funded Debt
to Total Capital to exceed 0.50 to 1.0, calculated on a
quarterly basis.
(B) Interest Coverage Ratio. The Company shall not
permit the ratio of EBIT to Consolidated Interest Expense to be
less than 1.50 to 1.0, calculated quarterly for the fiscal
quarter then ending and the preceding seven fiscal quarters.
As such, all defined terms within subsections 10(A) and 10(B),
above, shall have the definitions as described in Section 1.1
of the Syndicated Agreement. As long as this agreement is in
effect, these covenants and definitions shall remain in place
even if the Syndicated Agreement is terminated. As long as
this agreement is in effect, any amendment to the definitions
in the Syndicated Agreement shall also apply to this agreement.
In the event that CoBank s involvement in the Syndicated
Agreement is terminated for any reason, the definitions in
place at the time of the termination shall continue in place
until modified by the parties.
(C) Current Ratio. The Company will have at the end of
each fiscal quarter a ratio of consolidated current liabilities
(both as determined in accordance with GAAP consistently
applied) of not less than 1.25 to 1.0.
The current assets and current liabilities of Golden Poultry,
Inc.(a subsidiary of the Company) shall be excluded from the
calculation of this ratio.
SECTION 11. Events of Default. Each of the following shall
constitute an "Event of Default" under this agreement:
(A) Payment Default. The Company should fail to make
any payment to, or to purchase any equity in, CoBank when due.
(B) Representations and Warranties. Any representation
or warranty made or deemed made by the Company herein or in any
Supplement, application, agreement, certificate, or other
document related to or furnished in connection with this
agreement or any Supplement, shall prove to have been false or
misleading in any material respect on or as of the date made or
deemed made.
(C) Certain Affirmative Covenants. The Company or, to
the extent required hereunder, its Subsidiaries should fail to
perform or comply with Sections 8(A) through 8(H)(ii), 8(H)(vi)
or any reporting covenant set forth in any Supplement hereto,
and such failure continues for 15 days after written notice
thereof shall have been delivered by CoBank to the Company.
(D) Other Covenants and Agreements. The Company or, to
the extent required hereunder, its Subsidiaries should fail to
perform or comply with any other covenant or agreement
contained herein or in any other Loan Document or shall use the
proceeds of any loan for an unauthorized purpose.
(E) Cross-Default. The Company should, after any
applicable grace period, breach or be in default under the
terms of any other agreement between the Company and CoBank.
(F) Other Indebtedness. The Company or, to the extent
required hereunder, its Subsidiaries should fail to pay when
due any indebtedness to any other person or entity for borrowed
money or any long-term obligation for the deferred purchase
price of property (including any capitalized lease), or any
other event occurs which, under any agreement or instrument
relating to such indebtedness or obligation, has the effect of
accelerating or permitting the acceleration of such
indebtedness or obligation, whether or not such indebtedness or
obligation is actually accelerated or the right to accelerate
is conditioned on the giving of notice, the passage of time, or
otherwise.
(G) Judgments. A judgment, decree, or order for the
payment of money shall be rendered against the Company or, to
the extent required hereunder, its Subsidiaries and either:
(i) enforcement proceedings shall have been commenced; (ii) a
Lien prohibited under Section 9(B) hereof shall have been
obtained; or (iii) such judgment in excess of $10,000,000,
decree, or order shall continue unsatisfied and in effect for a
period of 30 consecutive days without being vacated,
discharged, satisfied, or stayed pending appeal.
(H) Insolvency, Etc. The Company shall: (i) become
insolvent or shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they
come due; or (ii) suspend its business operations or a material
part thereof or make an assignment for the benefit of
creditors; or (iii) apply for, consent to, or acquiesce in the
appointment of a trustee, receiver, or other custodian for it
or any of its property or, in the absence of such application,
consent, or acquiescence, a trustee, receiver, or other
custodian is so appointed; or (iv) commence or have commenced
against it any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution, or liquidation
Law of any jurisdiction.
(I) Material Adverse Change. Any material adverse
change occurs, as reasonably determined by CoBank, in the
Company's financial condition, results of operation, or ability
to perform its obligations hereunder or under any instrument or
document contemplated hereby.
SECTION 12. Remedies. Upon the occurrence and during the
continuance of an Event of Default or any Potential Default,
CoBank shall have no obligation to continue to extend credit to
the Company and may discontinue doing so at any time without
prior notice. In addition, upon the occurrence and during the
continuance of any Event of Default, CoBank may, upon notice to
the Company, terminate any commitment and declare the entire
unpaid principal balance of the loans, all accrued interest
thereon, and all other amounts payable under this agreement,
all Supplements, and the other Loan Documents to be immediately
due and payable. Upon such a declaration, the unpaid principal
balance of the loans and all such other amounts shall become
immediately due and payable, without protest, presentment,
demand, or further notice of any kind, all of which are hereby
expressly waived by the Company. In addition, upon such an
acceleration:
(A) Enforcement. CoBank may proceed to protect,
exercise, and enforce such rights and remedies as may be
provided by this agreement, any other Loan Document or under
Law. Each and every one of such rights and remedies shall be
cumulative and may be exercised from time to time, and no
failure on the part of CoBank to exercise, and no delay in
exercising, any right or remedy shall operate as a waiver
thereof, and no single or partial exercise of any right or
remedy shall preclude any other or future exercise thereof, or
the exercise of any other right. Without limiting the
foregoing, CoBank may hold and/or set off and apply against the
Company's obligations to CoBank the proceeds of any equity in
CoBank, any cash collateral held by CoBank, or any balances
held by CoBank for the Company s account (whether or not such
balances are then due).
(B) Application of Funds. CoBank may apply all
payments received by it to the Company s obligations to CoBank
in such order and manner as CoBank may elect in its sole
discretion.
In addition to the rights and remedies set forth above: (i) if
the Company fails to purchase any equity in CoBank when
required or fails to make any payment to CoBank when due, then
at CoBank's option in each instance, such obligation or payment
shall bear interest at 4% per annum in excess of CoBank's
National Variable Rate; and (ii) after the maturity of any
loan, whether by reason of acceleration or otherwise, the
unpaid balance of the loan shall automatically bear interest at
4% per annum in excess of the rates that would otherwise be in
effect on such loan. All interest provided for herein shall be
payable on demand and shall be calculated from the date such
payment was due to the date paid on the basis of a year
consisting of 360 days.
SECTION 13. Broken Funding Surcharge. Notwithstanding any
provision contained in any Supplement giving the Company the
right to repay any loan prior to the date it would otherwise be
due and payable, the Company agrees that in the event it repays
any fixed rate balance prior to its scheduled due date or prior
to the last day of the fixed rate period applicable thereto
(whether such payment is made voluntarily, as a result of an
acceleration, or otherwise), the Company will pay to CoBank a
surcharge in an amount which would result in CoBank being made
whole (on a present value basis) for the actual or imputed
funding losses incurred by CoBank as a result thereof.
Notwithstanding the foregoing, in the event any fixed rate
balance is repaid as a result of the Company refinancing the
loan with another lender or by other means, then in lieu of the
foregoing, the Company shall pay to CoBank a surcharge in an
amount sufficient (on a present value basis) to enable CoBank
to maintain the yield it would have earned during the fixed
rate period on the amount repaid. Such surcharges will be
calculated in accordance with methodology established by CoBank
(a copy of which will be made available to the Company upon
request).
SECTION 14. Complete Agreement, Amendments. This
agreement, all Supplements, and all other instruments and
documents contemplated hereby and thereby, are intended by the
parties to be a complete and final expression of their
agreement. No amendment, modification, or waiver of any
provision hereof or thereof, and no consent to any departure by
the Company herefrom or therefrom, shall be effective unless
approved by CoBank and contained in a writing signed by or on
behalf of CoBank, and then such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given. In the event this agreement is
amended or restated, each such amendment or restatement shall
be applicable to all Supplements hereto. The parties
acknowledge that this loan agreement does not supersede or
replace documentation with respect to existing loan agreements.
Specifically, Credit Agreement Dated as of August 9, 1995 By
and Among Gold Kist Inc., as Borrower, Various Banks and
Lending Institutions, as Lenders, and Trust Company Bank, as
Agent, as amended, and Loan Agreement S0020D, as amended,
remain in full force and effect.
SECTION 15. Other Types of Credit. From time to time,
CoBank may issue letters of credit or extend other types of
credit to or for the account of the Company. In the event the
parties desire to do so under the terms of this agreement, such
extensions of credit may be set forth in any Supplement hereto
and this agreement shall be applicable thereto.
SECTION 16. Applicable Law. Except to the extent governed
by applicable federal law, this agreement and each Supplement
shall be governed by and construed in accordance with the laws
of the State of Georgia, without reference to choice of law
doctrine.
SECTION 17. Notices. All notices hereunder shall be in
writing and shall be deemed to be duly given upon delivery if
personally delivered or sent by telegram or facsimile
transmission, or 3 days after mailing if sent by express,
certified or registered mail, to the parties at the following
addresses (or such other address for a party as shall be
specified by like notice):
If to CoBank, as follows:
CoBank, ACB
Attention: Credit Department
67 Hunt Street
Agawam, MA 01001
If to the Company, as follows:
Gold Kist Inc.
Attention: Vice President, Finance
244 Perimeter Center Parkway, N.E.
Atlanta, GA 30346
SECTION 18. Taxes and Expenses. To the extent allowed by
law, the Company agrees to pay all reasonable out-of-pocket
costs and expenses (including the fees and expenses of counsel
retained by CoBank) incurred by CoBank in connection with the
origination, administration, collection, and enforcement of
this agreement and the other Loan Documents, including, without
limitation, all costs and expenses incurred in perfecting,
maintaining, determining the priority of, and releasing any
security for the Company s obligations to CoBank, and any
stamp, intangible, transfer, or like tax payable in connection
with this agreement or any other Loan Document.
SECTION 19. Effectiveness and Severability. This agreement
shall continue in effect until: (i) all indebtedness and
obligations of the Company under this agreement, all
Supplements, and all other Loan Documents shall have been paid
or satisfied; (ii) CoBank has no commitment to extend credit to
or for the account of the Company under any Supplement; and
(iii) either party sends written notice to the other
terminating this agreement. Any provision of this agreement or
any other Loan Document which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or thereof.
SECTION 20. Successors and Assigns. This agreement, each
Supplement, and the other Loan Documents shall be binding upon
and inure to the benefit of the Company and CoBank and their
respective successors and assigns, except that the Company may
not assign or transfer its rights or obligations under this
agreement, any Supplement or any other Loan Document without
the prior written consent of CoBank.
SECTION 21. Participations, Etc. From time to time, CoBank
may sell to one or more banks or other financial institutions a
participation in one or more of the loans or other extensions
of credit made pursuant to this agreement. However, no such
participation shall relieve CoBank of any commitment made to
the Company under any Supplement hereto. In connection with
the foregoing, CoBank may disclose information concerning the
Company or any Subsidiary to
any participant or prospective participant, provided that such
participant or prospective participant agrees to keep such
information confidential.
IN WITNESS WHEREOF, the parties have caused this agreement to
be executed by their duly authorized officers as of the date
shown above.
CoBANK, ACB Gold Kist Inc.
By: /s/ Porter Little By: /s/ Stephen O. West
Title: Vice President Title: Treasurer
7270
Loan No. E126S01
UNCOMMITTED REVOLVING CREDIT SUPPLEMENT
THIS SUPPLEMENT to the Master Loan Agreement dated August 1, 1996 (the
"MLA ) is entered into as of August 1, 1996 between GOLD KIST INC. (the
"Company ) and CoBANK, ACB ("CoBank ).
SECTION 1. The Uncommitted Revolving Credit Facility. On the terms
and subject to the conditions set forth in the MLA and this Supplement,
CoBank hereby establishes a revocable, revolving credit facility in favor of
the Company pursuant to which CoBank may, but shall not be obligated to, make
loans to the Company from time to time during the period set forth below in
an aggregate principal amount not to exceed $20,000,000 at any one time
outstanding (the "Facility ). CoBank shall have the right in its sole
discretion and at any time to terminate the Facility or to refuse to make any
loan requested by the Company, all without furnishing prior notice or
incurring any liability to the Company. In addition, upon paying all amounts
owing hereunder (including, without limitation, all accrued interest and, if
applicable, any surcharges contemplated by Section 13 of the MLA), the
Company shall have the right to terminate the Facility at any time in its
sole discretion and without furnishing prior notice or incurring any
liability to CoBank.
SECTION 2. Purpose. The purpose of the Facility is to finance the
operating needs of the Company.
SECTION 3. Term. Subject to each party s right to terminate the
Facility at any time, the term of the Facility shall be from August 1, 1996,
up to but not including August 1, 1997. However, subject to each party's
continuing right to terminate the Facility at any time, the term of the
Facility shall be automatically extended for one or more additional one year
periods unless on or before the expiration of the Facility in any year,
either party receives written notice from the other to the contrary.
SECTION 4. Interest. The unpaid principal balance of each loan
shall bear interest at a rate per annum equal at all times to the rate of
interest established by CoBank from time to time as its National Variable
Rate, which Rate is intended by CoBank to be a reference rate and not its
lowest rate. The National Variable Rate will change on the date established by
CoBank as the effective date of any change therein and CoBank agrees to
notify the Company promptly after any such change. Notwithstanding the
foregoing, from time to time at the request of the Company, the rate of interest
charged hereunder may be fixed on such balances, for such periods (including
periods extending beyond the maturity date of the loans), and at such rates
as may be quoted by CoBank in its sole discretion in each instance. Upon the
expiration of any fixed rate period, interest shall automatically accrue at the
variable rate provided for above unless the amount fixed is repaid or fixed
for an additional period. In the event CoBank consents to one or more balances
being fixed for a period or periods extending beyond the maturity date of the
loans and the Commitment is not renewed, then each such balance shall be due and
payable on the last day of its fixed rate period and the promissory note set
forth below shall be deemed amended accordingly. Interest shall be
calculated on the actual number of days each loan is outstanding on the basis
of a year consisting of 360 days and be payable monthly in arrears by the
20th day of the following month.
SECTION 5. Promissory Note. The Company promises to repay each loan
made under the Facility in full ON DEMAND or, if no demand is made, on the
first Business Day following the expiration of the Facility. The Company
agrees that CoBank may make a demand for payment at any time without
furnishing prior notice or incurring any liability to the Company. In
addition to the above, the Company promises to pay interest on the unpaid
principal balance of the loans at the times and in accordance with the
provisions set forth in Section 4 hereof.
IN WITNESS WHEREOF, the parties have caused this Supplement to the MLA
to be executed by their duly authorized officers as of the date shown above.
CoBANK, ACB Gold Kist Inc.
By: /s/ Porter Little By: /s/ Stephen O. West
Title: Vice President Title: Treasurer
7269
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<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-END> SEP-28-1996
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