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PROSPECTUS
[logo]
AGWAY INC.
AND
AGWAY FINANCIAL CORPORATION
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
Price to Underwriting Discounts Proceeds to
Title of Class (1) Public or Commissions (2) Companies (3)
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<S> <C> <C> <C>
AGWAY INC.
Guarantee of Debt Securities -- None --
8% Cumulative Preferred Stock, Series B
Per Unit $ 100 None $ 100
Total $ 1,000,000 None $ 1,000,000
Series HM Preferred Stock (4)
Per Unit $ 25 None $ 25
Total $ 100,000 None $ 100,000
Membership Common Stock (5)
Per Unit $ 25 None $ 25
Total $ 100,000 None $ 100,000
AGWAY FINANCIAL CORPORATION
Guaranteed, Subordinated Money Market Certificates
(minimums 7.5% per annum and 7.75% per annum) due
October 31, 2007 (6)
Per Unit (7) 100% None $ 100/5,000
Total $ 15,000,000 None $ 15,000,000
Guaranteed, Subordinated Member Money Market
Certificates (minimums 8.0% per annum and 8.25%
per annum) due October 31, 2007 (6)
Per Unit (7) 100% None $ 100/5,000
Total $ 30,000,000 None $ 30,000,000
Guaranteed, Subordinated Money Market Certificates
(minimum 8.25% per annum) due October 31, 2001 (6)
Per Unit 100% None $ 2,000
Total $ 10,000,000 None $ 10,000,000
Guaranteed, Subordinated Money Market Certificates
(minimum 8.5% per annum) due October 31, 2003 (6)
Per Unit 100% None $ 2,000
Total $ 20,000,000 None $ 20,000,000
Guaranteed, Subordinated Member and Subordinated
Money Market Certificates under the Interest
Reinvestment Option (ranging from minimum
of 4.5% to 9.5% per annum) due from October 31, 1997
through October 31, 2008
Per Unit 100% None
Total $ 19,140,000 None $ 19,140,000
</TABLE>
------------------
While the Certificates will, at a minimum, pay the stated rate of
interest, a higher rate may be paid based upon the Treasury Bill Rate.
The Certificates bear interest payable semiannually in arrears on January
1 and July 1 of each year. The Certificates are redeemable at the option of the
Company. A complete description of the securities offered by Agway Financial
Corporation ("AFC") is set forth on pages 9 through 18 herein.
There is no market for any of the offered securities other than that
provided by Agway Inc. (Agway) and AFC (together the "Companies") through their
practice of repurchasing certain outstanding securities whenever registered
holders elect to tender them for repurchase. The Companies do not intend to
follow this practice with respect to the 8.25% and 8.5% Subordinated Money
Market Certificates due October 31, 2001 and 2003, respectively, described
herein. For a discussion of certain factors to be considered in connection with
an investment in the securities offered hereby, see the "Risk Factors" section
of this Prospectus set forth on page 4.
FOOTNOTES ARE LOCATED ON PAGE 2
THE DATE OF THIS PROSPECTUS IS OCTOBER 28, 1997
<PAGE>
FOOTNOTES:
(1) See pages 9 through 18 for a description of the securities being offered
and qualifications of the purchaser.
(2) The securities offered by this Prospectus are being offered by the
Companies through their employees. No commission or other remuneration
is being paid directly or indirectly to such persons in connection with
the offer and sale of the securities.
(3) It is assumed that all securities offered are sold and the amount of
proceeds is before deduction of estimated expenses of $127,000. Because
there is no underwriting of the securities offered, there is no assurance
that all or any part of the indicated proceeds will be received by the
Companies from the offering of the securities.
(4) The Series HM Preferred Stock may be purchased only by former members
of Agway Inc.
(5) The Membership Common Stock may be purchased only by persons entitled
to membership in Agway Inc.
(6) The Certificates issued with minimum purchase amounts of $2,000 and
$5,000 bear interest at a rate equal to the greater of (1) the
Certificates' stated rate and (2) the Treasury Bill Rate, as defined on
page 13. The Certificates issued with minimum purchase amounts of $100
bear interest at a rate equal to the greater of (1) the Certificates'
stated rate and (2) one-half percent (.5%) below the Treasury Bill Rate,
as defined on page 13.
(7) Certificates with the same maturity date bearing lower interest rates
will be issued in minimum denominations of $100, while Certificates
bearing a higher interest rate will be issued in minimum denominations of
$5,000.
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NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS; ANY
INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANIES. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF ANY OFFER TO BUY, ANY SECURITIES OTHER THAN
THE SECURITIES COVERED BY THIS PROSPECTUS; NOR DOES IT CONSTITUTE AN OFFER TO
SELL, IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE COMPANIES TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANIES SINCE THE DATE HEREOF.
AVAILABLE INFORMATION
Agway is a cooperative association as defined in the Agricultural Marketing Act
of 1929 and as such is exempt from certain registration, proxy and insider
trading provisions of the Securities Exchange Act of 1934. AFC is a wholly owned
subsidiary of Agway. All holders of Membership Common Stock and/or securities
receive an Annual Report in November of each year which contains the information
called for by Rule 14A-3(b). A Prospectus is also sent in January of each year
to all holders of securities who have elected the interest reinvestment option.
The Annual Report contains financial information that has been audited and
reported upon, with an opinion expressed by certified public accountants. Other
holders of securities may obtain an Annual Report or Prospectus upon request
from: Patricia Edwards, Assistant Secretary, P. O. Box 4761, Syracuse, New York
13221; Telephone: 315-449-6311. Agway shall file with the Securities and
Exchange Commission supplementary and periodic information, documents and
reports required of issuers under Sections 13(a) and 15(d) of the Securities
Exchange Act of 1934. Reports and other information filed with the Commission
can be inspected and copied at the public reference facilities of the SEC,
Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549 as well as the
following Regional Offices: 7 World Trade Center, Suite 1300, New York, New York
10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL
60661-2511. Copies of such materials can be obtained by mail from the Commission
at prescribed rates. Requests should be directed to the SEC's Public Reference
Section. The Securities and Exchange Commission also maintains a web site which
contains information regarding registrants who file electronically, the "EDGAR"
data base. The web site address for the EDGAR data base is
http://www.sec.gov/edgarhp.htm. In addition, materials may be inspected or
obtained at 333 Butternut Drive, DeWitt, New York 13214 (P. O. Box 4933,
Syracuse, New York, 13221; Telephone: 315-449-6436).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Companies hereby incorporate by reference into this Prospectus the Annual
Report of Agway on Form 10-K filed on August 27, 1997, for the fiscal year ended
June 30, 1997, pursuant to Section 13 of the Securities Exchange Act of 1934
(File Number 2-22791). In an exemptive release granted pursuant to a "no action
letter" by the staff of the Securities and Exchange Commission, AFC, as a
separate company, is not required to file periodic reports with respect to these
debt securities but does report summarized AFC financial information in Agway's
financial statement footnotes.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE - Continued
All reports and other documents filed by Agway pursuant to Sections 13(a),
13(c), 14 and 15(d) of the 1934 Act subsequent to the date of this Prospectus
and prior to the termination of the offering of the Certificates hereunder shall
be deemed to be incorporated by reference herein and to be a part hereof from
the date of the filing of such reports and documents.
The Companies will provide a copy of any of the foregoing documents incorporated
herein by reference (other than exhibits to such documents), without charge to
each person to whom a copy of this Prospectus is delivered, upon the written or
oral request of any such person to: Patricia Edwards, Assistant Secretary, P.O.
Box 4761, Syracuse, New York 13221, Telephone: 315-449-6311.
TABLE OF CONTENTS
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The Companies.............................................................. 3
Risk Factors............................................................... 4
Selected Financial Data and Ratio of Margins............................... 6
Use of Proceeds............................................................ 8
Description of Securities to be Registered................................. 9
Legal Opinion.............................................................. 19
Experts.................................................................... 19
Distribution and Redemption of Securities Offered.......................... 19
Absence of Public Market, Redemption and Market Risk....................... 19
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THE COMPANIES
Agway Inc., incorporated under the Delaware General Corporation Law in 1964 and
headquartered at 333 Butternut Drive, DeWitt, New York, 13214 (Telephone Number
315-449-6431), is an agricultural cooperative directly engaged in product
manufacturing, processing and distribution, wholesale purchasing and marketing
of agricultural related products for its members and other patrons principally
in twelve northeastern states.
AFC, a wholly owned subsidiary of Agway, is a Delaware corporation incorporated
in 1986 with principal executive offices at 1105 North Market Street,
Wilmington, Delaware 19801 (Telephone Number 302-654-8371). AFC's business
activities consist primarily of securing financing through bank borrowings and
issuance of corporate debt instruments to provide funds to its sole stockholder,
Agway, and AFC's wholly owned subsidiary, Agway Holdings, Inc. (AHI) and its
subsidiaries, for general corporate purposes. The payment of principal and
interest on bank borrowings and on the debt securities offered by this
Prospectus is guaranteed by Agway. This guarantee is full and unconditional, and
joint and several. AFC, through certain subsidiaries of AHI, is involved in
retail and wholesale sales of farm supplies, yard and garden products, pet food
and pet supplies; the distribution of petroleum products; repackaging and
marketing of vegetables; processing and marketing sunflower seeds; the
underwriting and sale of certain types of property and casualty insurance; the
sale of health insurance; and lease financing.
3
<PAGE>
RISK FACTORS
SUBORDINATION. The Money Market Certificates ("the Certificates") offered by
this Prospectus are unsecured obligations of the Company and are subordinated to
all Senior Debt (as defined in "Description of the Certificates Subordination
Provisions") of the Company. Therefore, in the event of bankruptcy, liquidation
or reorganization of the Company, its assets will be available to pay
obligations under the Certificates only after all Senior Debt has been paid in
full, and there may not be sufficient assets remaining to pay amounts due on any
or all of the Certificates then outstanding. As of October 10, 1997, Senior Debt
of $44,650,000 was outstanding. See "Description of the Certificates -
Subordination Provisions."
LIMITATIONS ON TRANSFER. The Series HM Preferred Stock, the Membership Common
Stock, the 8.0% Member Certificates and the 8.25% Member Certificates may not be
transferred, except in certain very limited circumstances. The Series HM
Preferred Stock and the Membership Common Stock may not be transferred other
than to Agway, except with Agway's written consent endorsed on the relevant
certificate. Pursuant to its By-laws, Agway will permit transfers of such stock
only to persons who were Agway members. See "Description of Honorary Member
Preferred Stock, Series HM - Limitations on Ownership and Transfer" and
"Description of Membership Common Stock Limitations on Ownership and Transfer."
The 8.0% and 8.25% Member Certificates may not be transferred, except by will or
operation of law. The 7.5%, 7.75%, 8.25% and 8.5% Certificates are freely
transferable. See "Description of Certificates - Limitations on Ownership and
Transfer."
ABSENCE OF PUBLIC MARKET, REDEMPTION AND MARKET RISK. As noted above, there are
substantial restrictions on the transfer of the Membership Common Stock, Series
HM Preferred Stock and the Member Certificates. With respect to Certificates
that are freely transferable, there is no market for such Certificates and there
is no intention on the part of the Companies to create or encourage a trading
mechanism for those Certificates. The Companies do not intend to apply for a
listing of the Certificates on any securities exchange. The secondary market
for, and the market value of, the Certificates will be affected by a number of
factors independent of the creditworthiness of Agway and AFC, including the
level and direction of interest rates, the remaining period to maturity of the
Certificates, the right of the Companies to redeem the Certificates, the
aggregate principal amount of the Certificates and the availability of
comparable investments. In addition, the market value of the Certificates may be
affected by numerous other interrelated factors, including factors that affect
the U.S. corporate debt market generally and Agway and AFC specifically. There
is no assurance that in the event of redemption the investor will be able to
reinvest the proceeds in comparable securities at an effective interest rate as
high as that of the Certificates. Certificate holders should rely solely on the
Companies' ability to repay principal at maturity of the offered Certificates as
the source for liquidity in this investment. See "Description of Certificates -
Interest Rates," "Redemption Provisions" and "Repurchase Practice."
MARKET PRICE OF AND DIVIDENDS ON AGWAY'S EQUITY. The incidents of ownership of
Agway's Membership Common Stock and Series HM Preferred Stock differ
considerably from those of common stock and preferred stock ownership in a
typical business corporation. The Membership Common Stock may be purchased only
by persons entitled to membership in the Company. Only farmers and cooperative
organizations of farmers who purchase farm supplies or services or market farm
products through Agway may be members. Series HM Preferred Stock can only be
purchased by former Agway members. By reason of the fact that Agway is an
agricultural cooperative, its Membership Common Stock primarily serves the
purpose of evidencing membership in Agway (or, in the case of Series HM
Preferred Stock, former membership) rather than of evidencing an equity interest
in Agway. The equity claim of Membership Common stockholders and Series HM
Preferred stockholders to the assets of Agway is measured by, and restricted to,
the $25 par value of the share, plus dividends declared and unpaid, if any, for
the current year. See "Description of Membership Common Stock" and "Description
of Honorary Member Preferred Stock, Series HM."
NO UNDERWRITING; NO MINIMUM. The offering of securities hereunder is not being
underwritten, there is no assurance that all or any of the securities offered
hereby will be sold, and there is no minimum amount of securities which must be
sold as a condition to the sale of the securities hereunder. In the event that
all or a significant portion of the securities offered hereby are not sold, the
Company would use alternative financing already in place to repay maturing
securities and may secure additional alternative sources of financing, if
needed. If the Company deems it necessary to secure additional alternative
financing, there can be no assurance that it will be able to do so or that it
will be able to do so on terms that are similar to or as favorable as those of
the securities offered hereby.
4
<PAGE>
RISK FACTORS (continued)
AGRICULTURAL ECONOMY AND OTHER FACTORS. The financial condition of the Company
can be directly affected by factors affecting the agricultural economy, since
these factors impact the demand for the Company's products and the ability of
its customers to make payments for products already purchased through credit
extended by the Company. These factors include: (i) changes in government
agricultural programs (e.g., milk marketing orders and acreage reduction
programs) that may adversely affect the level of income of customers of the
Company; (ii) weather-related conditions which periodically occur that can
impact the agricultural productivity and income of the customers of the Company;
and (iii) the relationship of demand relative to supply of agricultural
commodities produced by customers of the Company.
Federal agricultural legislation, formally known as The Federal Agriculture
Improvement and Reform Act of 1996, was signed into law on April 4, 1996. This
legislation replaced the former program of variable price-linked deficiency
payments with fixed payments to farmers which decline over a seven-year period.
This legislation also eliminated federal planting restrictions and acreage
controls allowing farmers more flexibility to plant for the market. The impact
of this legislation on the agricultural economy, and on the financial condition
of the Company, is not expected to be significant in the short-term. The
longer-term impact on the financial condition of the Company of such a major
change in the federal government's role in agriculture cannot be predicted at
this time.
The Company's energy business is impacted by factors such as weather conditions
in the Northeast and the relationship of supply and demand for petroleum
products worldwide as well as within Agway's market. Agway's retail and
insurance businesses can be impacted by weather conditions as well as from
fluctuations in the economy in the northeastern United States that, in general,
affect consumer demand for products. To the extent that these factors adversely
affect the customers of the Company, the financial condition of the Company
could be adversely affected.
The Company has exposure to price fluctuations associated with certain commodity
inventories, product gross margins and certain anticipated transactions in its
Agriculture and Energy segments. Commodities such as corn, soy complex, oats,
wheat, gasoline, fuel oil, and propane are purchased at market prices which are
subject to volatility. In order to manage the risk of market price fluctuations,
the Company enters into various exchange-traded futures and option contracts and
over-the-counter option contracts with third parties. The Company closely
monitors and manages its exposure to market price risk on a daily basis in
accordance with policies that put certain limitations on this activity. However,
due to the volatility of the commodities market, the Company may experience
losses (as well as gains) from the use of such contracts during any year. Any
losses (or gains) from the use of such contracts may or may not be realized at
the same level in future years.
The Company's endeavors to limit the effects of changes in interest rates by
matching as closely as possible, on an ongoing basis, the maturity and repricing
characteristics of funds borrowed to finance its leasing activities with the
maturity and repricing characteristics of its lease portfolio. However, a rise
in interest rates would increase the cost of funds borrowed by the Company to
finance its leasing business and could lower the value of the Company's
outstanding leases in the secondary market. In addition, higher interest rates,
inasmuch as they would increase the cost of funds borrowed by the Company, would
also increase the cost of leases and could decrease demand for leases.
ENVIRONMENTAL ISSUES. The Company is subject to a number of governmental
regulations concerning environmental matters, either directly or as a result of
the operations of its subsidiaries. The Company expects that it will be required
to expend funds to participate in the remediation of certain sites, including
sites where the Company has been designated by the Environmental Protection
Agency (EPA) as a potentially responsible party (PRP) under the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA) and sites with
underground fuel storage tanks, and will incur other expenses associated with
environmental compliance.
At June 30, 1997, the Company has been designated as a PRP under CERCLA or as a
third party to the original PRPs in several Superfund sites. The liability under
CERCLA is joint and several, meaning that the Company could be required to pay
in excess of its pro rata share of remediation costs.
5
<PAGE>
RISK FACTORS (continued)
Agway's recorded liability reflects those specific issues where remediation
activities are currently deemed to be probable and where the cost of remediation
is estimable. Estimates of the extent of the Company's degree of responsibility
of a particular site and the method and ultimate cost of remediation require a
number of assumptions for which the ultimate outcome may differ from current
estimates; however, the Company believes that its past experience provides a
reasonable basis for estimating its liability. While the Company does not
anticipate that any such adjustment would be material to its financial
statements, it is reasonably possible that the result of ongoing and/or future
environmental studies or other factors could alter this expectation and require
the recording of additional liabilities. The extent or amount of such events, if
any, cannot be estimated at this time. The settlement of the reserves
established will cause future cash outlays over approximately five years based
upon current estimates, and it is not expected that such outlays will materially
impact the Company's liquidity position.
SELECTED FINANCIAL DATA OF AGWAY INC. AND CONSOLIDATED SUBSIDIARIES
AND RATIO OF MARGINS (EARNINGS)
(Thousands of Dollars Except Per Share and Ratio Amounts)
The following Selected Financial Data of the Company and Consolidated
Subsidiaries has been derived from consolidated financial statements audited by
Coopers & Lybrand L.L.P., whose report for the years ended June 30, 1997, 1996
and 1995 is included in the Annual Report on Form 10-K, and should be read in
conjunction with the full consolidated financial statements of the Company and
Notes thereto.
<TABLE>
<CAPTION>
(In Thousands of Dollars Except Per Share Amounts)
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Years Ended June 30
1997 1996 1995 1994 1993
------------ ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Net sales and revenues (1)... $ 1,671,122 $ 1,662,500 $ 1,592,053 $ 1,694,274 $ 1,719,890
Margin (loss) from
continuing operations (2)(3) $ 10,670 $ 11,147 $ (7,800) $ 555 $ 24,969
Net margin (loss) (2)(3)..... $ 10,670 $ 12,662 $ (15,730) $ (3,445) $ 18,992
Total assets (1)(2).......... $ 1,300,261 $ 1,245,891 $ 1,225,193 $ 1,273,958 $ 1,223,758
Total long-term debt ........ $ 329,695 $ 291,666 $ 268,310 $ 253,104 $ 216,146
Total long-term subordinated
debt...................... $ 438,127 $ 414,927 $ 399,064 $ 407,144 $ 379,619
Cash dividends per share
of common stock .......... $ 1.50 $ 1.50 $ 1.50 $ 1.50 $ 1.50
</TABLE>
(1) Certain amounts reported in fiscal years ended June 30, 1993-1996, have been
reclassified to conform to current year presentation.
(2) The Company changed its method of accounting for certain inventory in the
second quarter of fiscal 1997. As required, the Company has retroactively
adjusted prior years' net margin (loss) for this change. The effect on
margin (loss) from continuing operations and on net margin (loss) for fiscal
years ended June 30, 1993-1996, was $(758), $(141), $178 and $1,062,
respectively.
(3) The 1994 data reflect a $6,065 credit before taxes from business
restructuring and an after-tax operating loss of $4,000 from discontinued
operations; 1995 data reflect an after-tax loss of $12,360 in discontinued
operations related to Hood, an after-tax gain on the sale of Curtice Burns
of $4,430, and a credit before taxes from business restructuring of $3,248;
1996 data reflect a $1,943 credit before taxes from business restructuring
and an after-tax gain on the sale of Hood of $1,515, net of operating losses
until the time of sale.
6
<PAGE>
SELECTED FINANCIAL DATA OF AGWAY INC. AND CONSOLIDATED SUBSIDIARIES
AND RATIO OF MARGINS (EARNINGS)
(Thousands of Dollars Except Per Share and Ratio Amounts)
Ratio of Margins (Earnings)
For purposes of this ratio, margins from continuing operations represent margins
before (i) income taxes and discontinued operations and (ii) fixed charges and
preferred dividend requirements. Fixed charges include interest on debt and the
interest factor of rent. The pro-forma ratio of adjusted margins to fixed
charges and adjusted margins to fixed charges and preferred dividends combined,
of Agway Inc. (parent) as of June 30, 1997, after giving effect to the issuance
of the Certificates offered hereby, would be 1.4 and 1.2, respectively.
<TABLE>
<CAPTION>
June 30,
--------------------------------------------------------
1997 1996 1995 1994 1993
--------- ------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
Ratio of adjusted margins to fixed charges:
Agway Inc. and Consolidated Subsidiaries 1.2 1.3 * 1.1 1.3
========= ======= ========= ======== =======
Agway Inc. (1) 1.4 3.8 1.6 * 1.5
========= ======= ========= ======== =======
Ratio of adjusted margins to fixed charges and
preferred dividends combined:
Agway Inc. and Consolidated Subsidiaries 1.1 1.2 * * 1.3
========= ======= ========= ======== =======
Agway Inc. (1) 1.2 2.5 2.0 * 1.3
========= ======= ========= ======== =======
<CAPTION>
*Adjusted net margin is inadequate to cover fixed charges or fixed charges and
preferred dividends combined. See below for amount deficient.
June 30,
-------------------------------------------------------
1997 1996 1995 1994 1993
--------- ------- --------- -------- ------
<S> <C> <C> <C> <C> <C>
Deficiency of adjusted net margins to total fixed charges:
Agway Inc. and Consolidated Subsidiaries N/D N/D $ 6,053 N/D N/D
========= ======= ========= ======== ======
Agway Inc. (1) N/D N/D N/D $ 17,330 N/D
========= ======= ========= ======== ======
Deficiency of adjusted net margins to total fixed
charges and preferred dividends combined:
Agway Inc. and Consolidated Subsidiaries N/D N/D $ 12,599 $ 31,530 N/D
========= ======= ========= ======== ======
Agway Inc. (1) N/D N/D N/D $ 19,619 N/D
========= ======= ========= ======== ======
</TABLE>
(1) Parent-company ratios are presented since all of AFC's debt is guaranteed
by Agway Inc. This guarantee is full and unconditional, and joint and
several.
N/D No deficiency.
7
<PAGE>
USE OF PROCEEDS
There is no underwriting of the securities offered; thus there is no assurance
that all or any of the proceeds will be received. The net proceeds of the sale
of the offered securities will be no greater than $95,340,000. The funds
received will be applied by the Companies approximately in the relative order
that follows:
<TABLE>
<CAPTION>
AGWAY AFC TOTAL %
-------------- --------------- ------------- ------
<S> <C> <C> <C> <C>
Offering expenses $ 1,000 $ 126,000 $ 127,000 .1
Repurchase of outstanding securities 8,100,000 75,700,000 83,800,000 87.9
Redemption of short- and long-term debt 11,413,000 11,413,000 12.0
-------------- --------------- ------------- ------
$ 8,101,000 $ 87,239,000 $ 95,340,000 100.0%
============== =============== ============= ======
</TABLE>
Although the exact amount is presently indeterminable, it is anticipated,
assuming that all securities hereby offered are sold, that approximately
$83,800,000 of the proceeds of this offering will be used for the repurchase of
outstanding securities, which is a continuation of a practice of providing a
market for the securities by repurchasing such securities (at par value in the
case of preferred and common stock, and at the principal plus accrued interest
in the case of debentures and money market certificates) as the holders (members
or other investors) elect to tender the securities for repurchase. Proceeds from
the offering pending its actual use will be used to pay down short-term debt. As
of October 10, 1997, the range of interest rates and maturities of short-term
debt that will be paid down was 5.43% - 5.53% and October 14, 1997 - October 21,
1997, respectively. The practice of repurchasing securities will not be followed
with respect to the 8.25% and 8.5% Subordinated Money Market Certificates
described herein. To the extent proceeds are available, the amounts of each type
of security estimated to be repurchased within the next year are as follows:
Money Market Certificates $ 74,200,000
Subordinated Debentures 1,500,000
Preferred Stock 8,000,000
Common Stock 100,000
--------------
$ 83,800,000
==============
Approximately $53,200,000 of the above money market securities, at rates of
7.75%-9.5%, mature on October 31, 1997. Because the remaining securities
estimated to be repurchased are those presented by the holders, the Companies
cannot determine at this time the interest rates or maturities of the debt
securities which may be repurchased. However, as described in detail under the
heading "Description of the Interest Reinvestment Option" on page 17, the
possible range of interest rates and maturities are 4.5% - 9.5% and 1997 - 2008,
respectively. If the proceeds of this offering are not sufficient to provide
funds for the repurchase of all securities tendered for repurchase, Agway
intends to utilize available cash from other sources for additional repurchases.
Long-term debt which may be paid consists of capital leases and non-compete
payments.
8
<PAGE>
DESCRIPTION OF SECURITIES TO BE REGISTERED
AGWAY INC.
DESCRIPTION OF 8% CUMULATIVE PREFERRED STOCK, SERIES B ($100 Par Value)
Agway is authorized to issue 250,000 shares of 8% cumulative preferred stock,
Series B, having a par value of $100 per share (the "Series B Preferred Stock").
As of October 10, 1997, 236,826 shares of Series B Preferred Stock, with total
par value of $23,682,600, were outstanding. The following summary of the Series
B Preferred Stock is subject in all respects to the provisions of the amended
Certificate of Incorporation and By-laws of Agway, which are incorporated by
reference to this Registration Statement. The exhibits incorporated by reference
thereto may be obtained from the Commission or from Agway in the same manner as
the documents described under "Available Information" on page 2 of this
Prospectus.
DIVIDEND RIGHTS. The holders of shares of Series B Preferred Stock are entitled
to cumulative dividends at the rate of 8% per annum. The 6% Series A Preferred
Stock has priority with respect to the payment of dividends over the Series B
Preferred Stock, 8% cumulative preferred stock, Series B-1 (the "Series B-1
Preferred Stock"), 7% cumulative preferred stock, Series C (the "Series C
Preferred Stock"), and Series HM Preferred Stock (as defined below). There are
no restrictions in any indenture or other agreement respecting the payment of
dividends on cumulative preferred stock.
VOTING RIGHTS. The holders of Series B Preferred Stock are not entitled to vote
for directors, to participate in meetings or management of Agway, or to vote in
any proceedings except in such statutory proceedings as to which their votes are
required by law.
LIQUIDATION RIGHTS. In the event of any distribution of assets in liquidation or
dissolution of Agway, all debts of Agway shall be paid before the holders of any
class or series of preferred stock or common stock are entitled to any
distribution of assets. If assets remain after all debts are paid, the holders
of the Series A Preferred Stock shall receive the full par value thereof,
together with all cumulative dividends declared, accrued, and unpaid to date of
distribution, before any funds shall be distributed to holders of Series B
Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock or Series
HM Preferred Stock. The holders of Series B Preferred Stock, Series B-1
Preferred Stock, Series C Preferred Stock and Series HM Preferred Stock shall
first receive the full par value thereof, together with all cumulative dividends
accrued and unpaid to date of distribution, before any funds shall be
distributed to holders of common stock of Agway, or credited to retained margins
of Agway.
GENERAL. The Series B Preferred Stock has no pre-emptive or conversion rights.
The shares of Series B Preferred Stock will be, when issued, duly authorized,
validly issued and fully paid and non-assessable and the holders thereof will
not be liable for any payment of Agway's debts.
TRANSFER. Shares of Series B Preferred Stock are freely transferable.
Redemption Provisions. The Series B Preferred Stock is subject, at the option of
the Board of Directors, to redemption, as a whole or in part, upon payment of
the par value thereof ($100 per share) with all accrued dividends to the date
fixed for redemption. In case of partial redemption, shares to be redeemed shall
be drawn by lot. There are no restrictions in any indenture or other document
respecting the redemption or purchase of shares by Agway.
REPURCHASE PRACTICE. While there is no guarantee of repurchase, it is the
present practice of Agway to repurchase, at par, the share of any holder of
Series B Preferred Stock when presented for repurchase, and it is the present
intention of Agway to follow such practice in the future.
9
<PAGE>
DESCRIPTION OF SECURITIES TO BE REGISTERED (Continued)
AGWAY INC. - (CONTINUED)
DESCRIPTION OF HONORARY MEMBER PREFERRED STOCK, SERIES HM ($25 Par Value)
Agway is authorized to issue 80,000 shares of Honorary Member preferred stock
having a par value of $25 per share (the "Series HM Preferred Stock"). As of
October 10, 1997, 2,564 shares of Series HM Preferred Stock, with total par
value of $64,100, were outstanding. The summary description of the Series HM
Preferred Stock which follows is subject in all respects to the provisions of
the amended Certificate of Incorporation and By-laws of Agway, which are
incorporated by reference in this Registration Statement.
LIMITATIONS ON OWNERSHIP AND TRANSFER. Series HM Preferred Stock may be issued
only to individuals who have previously held Agway Membership Common Stock. No
more than one share of such stock may be issued to any one person, and Agway,
acting in its capacity as transfer agent, prevents two shares being issued to
the same person. No subscription for this stock will be accepted unless the
subscriber was a member of Agway. Series HM Preferred Stock may not be
transferred other than to Agway except with its written consent endorsed on the
certificate. Pursuant to its By-laws, Agway will permit transfer of such stock
only to persons who were members in Agway and will limit ownership of the stock
to one share per person.
DIVIDEND RIGHTS. The holders of the Series HM Preferred Stock are entitled to
receive annual dividends, when, as and if declared by the Board of Directors.
Dividends are non-cumulative. There are no restrictions in any indenture or
other agreement respecting the payment of dividends on Series HM Preferred
Stock.
VOTING RIGHTS. The holders of Series HM Preferred Stock have no voting rights.
LIQUIDATION RIGHTS. In the event of any distribution of assets in liquidation or
dissolution of Agway, all debts of Agway shall be paid before the holders of any
class or series of preferred stock or common stock are entitled to any
distribution of assets. If assets remain after all debts are paid, the holders
of the Series HM Preferred Stock would be entitled, subject to the liquidation
rights of the Series A Preferred Stock, Series B Preferred Stock, Series B-1
Preferred Stock and Series C Preferred Stock, to receive only the par value
thereof ($25 per share) plus accrued dividends, if any. Any net assets of Agway
remaining after payment of the par value and accrued dividends on the Series HM
Preferred Stock would be distributed to the holders of the common stock of Agway
and any net assets remaining after the rights of such holders had been satisfied
would be distributed to the members and/or patrons of Agway to whom its retained
margin would be credited.
GENERAL. The Series HM Preferred Stock has no pre-emptive or conversion rights.
The shares of Series HM Preferred Stock will be, when issued, duly authorized,
validly issued and fully paid and non-assessable and the holders thereof will
not be liable for any payment of Agway's debts.
REDEMPTION PROVISIONS. The Series HM Preferred Stock is subject, at the option
of the Board of Directors, to redemption, as a whole or in part, upon payment of
the par value thereof ($25 per share) with all accrued dividends to the date
fixed for redemption. In case of partial redemption, shares to be redeemed shall
be drawn by lot. There are no restrictions in any indenture or other document
respecting the redemption or purchase of shares by Agway.
REPURCHASE PRACTICE. While there is no guarantee of repurchase, it is the
present practice of Agway to repurchase, at par, the share of any holder of
Series HM Preferred Stock when presented for repurchase, and it is the present
intention of Agway to follow such practice in the future.
10
<PAGE>
DESCRIPTION OF SECURITIES TO BE REGISTERED (Continued)
AGWAY INC. - (CONTINUED)
DESCRIPTION OF MEMBERSHIP COMMON STOCK ($25 Par Value)
Agway is authorized to issue 300,000 shares of membership common stock having a
par value of $25 per share (the "Membership Common Stock"). As of October 10,
1997, 104,522 shares of Membership Common Stock (78,962 shares active and 25,560
shares called by the Company but not surrendered by the holder), with total par
value of $2,613,050, were outstanding. The summary description of the Membership
Common Stock which follows is subject in all respects to the provisions of the
amended Certificate of Incorporation and By-laws of Agway, which are
incorporated by reference in this Registration Statement.
LIMITATIONS ON OWNERSHIP AND TRANSFER. Membership Common Stock may be issued
only to persons entitled to membership in Agway. No more than one share of such
stock may be issued to any one person, and Agway, acting in its capacity as
transfer agent, prevents two shares from being issued to the same person either
through new application or transfer. No subscription for Membership Common Stock
will be accepted unless the subscriber is qualified for membership in Agway, as
determined by a local geographic committee applying criteria set forth in
Agway's By-Laws. Membership in Agway consists of farmers or cooperative
organizations of farmers who are record holders of one share of Membership
Common Stock of Agway and who purchase farm supplies or farm services or market
farm products through Agway or franchised representatives. Membership Common
Stock may not be transferred other than to Agway except with its written consent
endorsed on the certificate. Pursuant to its By-laws, Agway will permit transfer
of such stock only to persons entitled to membership in Agway and will limit
ownership of the stock to one share per person. If any holder of Membership
Common Stock has ceased to be a member of Agway because the member has ceased to
be a farmer, or because the member has done no business with Agway since the
beginning of its preceding fiscal year, such stock held by the member may be
called for repurchase at the par value thereof, plus accrued dividends, if any.
It is the present intention of Agway to call such stock for repurchase under
such circumstances. Stock not being called for repurchase would allow the
continued rights and privileges of membership.
DIVIDEND RIGHTS. The holders of the Membership Common Stock are entitled to
receive annual dividends, when, as and if declared by the Board of Directors.
Dividends are non-cumulative. The holders of preferred stock are entitled to
receive, when, as and if declared by the Board of Directors, preferential
dividends before any dividends shall be declared or paid or set aside for the
Membership Common Stock. Such dividends are cumulative except in the case of HM
Preferred Stock. There are no other restrictions in any indenture or other
agreement respecting the payment of dividends on Membership Common Stock.
VOTING RIGHTS. The Membership Common Stock carries the exclusive voting rights
of Agway, on the basis of one vote for each share of such stock.
LIQUIDATION RIGHTS. In the event of any liquidation of Agway or other
disposition of its assets, the holders of the Membership Common Stock would be
entitled, after all debts of Agway are paid, subject to the liquidation rights
of the Series A Preferred Stock, the Series B Preferred Stock, the Series B-1
Preferred Stock, the Series C Preferred Stock and the Series HM Preferred Stock
to receive only the par value thereof ($25 per share) plus dividends declared
and unpaid, if any, for the current year. Any net assets of Agway remaining
after payment of the par value and accrued dividends on the Membership Common
Stock would be distributed to the members and/or patrons of Agway to whom its
retained margin would be credited. No person is entitled to any distribution of
assets with respect to the retained margin or otherwise prior to the dissolution
of Agway.
GENERAL. The Membership Common Stock has no pre-emptive or conversion rights.
The shares of Membership Common Stock will be, when issued, duly authorized,
validly issued and fully-paid and non-assessable and the holders thereof will
not be liable for any payment of Agway's debts.
REDEMPTION PROVISIONS. The Membership Common Stock is subject to redemption if
any holder ceases to be a member of Agway.
REPURCHASE PRACTICE. While there is no guarantee of repurchase, it is the
present practice of Agway to repurchase, at par, the share of any holder of
Membership Common Stock when presented for repurchase, and it is the present
intention of Agway to follow such practice in the future.
11
<PAGE>
DESCRIPTION OF SECURITIES TO BE REGISTERED (Continued)
AGWAY FINANCIAL CORPORATION
The following are the securities currently being issued by AFC, which are
guaranteed by Agway (such securities being referred to herein as the
"Certificates"). This guarantee is full and unconditional, and joint and
several. AFC may change the minimum rate of interest offered or the maturity
date for Certificates sold after the date of such change by filing a supplement
to this Prospectus with the Securities and Exchange Commission setting forth the
new terms. Any change in the interest rate or maturity date offered will not
affect the rate of interest on or maturity date of any Certificates theretofore
issued.
TITLE OF CLASS
- --------------------------------------------------------------------------------
CERTIFICATES:
Subordinated Money Market Certificates
(minimum 7.5% per annum) due October 31, 2007
(the "7.5% Certificates")
Subordinated Member Money Market Certificates
(minimum 8.0% per annum) due October 31, 2007
(the "8.0% Member Certificates")
Subordinated Money Market Certificates
(minimum 7.75% per annum) due October 31, 2007
(the "7.75% Certificates")
Subordinated Member Money Market Certificates
(minimum 8.25% per annum) due October 31, 2007
(the "8.25% Member Certificates")
Subordinated Money Market Certificates
(minimum 8.25% per annum) due October 31, 2001
(the "8.25% Certificates")
Subordinated Money Market Certificates
(minimum 8.5% per annum) due October 31,
2003 (the "8.5% Certificates")
Subordinated Member and Subordinated Money Market
Certificates under the Interest Reinvestment
Option (ranging from minimum of 4.5% to 9.5%
per annum) due from October 31, 1997 through
October 31, 2008
12
<PAGE>
DESCRIPTION OF SECURITIES TO BE REGISTERED (Continued)
AGWAY FINANCIAL CORPORATION - (CONTINUED)
DESCRIPTION OF THE CERTIFICATES
INTEREST RATES. Interest on the 7.5% Certificates and 8.0% Member Certificates,
issued in $100 denominations, is payable semiannually on January 1 and July 1,
and at maturity, at a rate per annum for each semiannual period equal to the
greater of (1) the Certificates' "stated rate" (the "stated rate" is 7.5% for
the 7.5% Certificates and 8.0% for the 8.0% Member Certificates); and (2)
one-half percent (.5%) below the "Treasury Bill Rate" (as defined below).
Interest on the 7.75% Certificates and 8.25% Member Certificates, issued in
$5,000 denominations, is payable semiannually on January 1 and July 1, and at
maturity, at a rate per annum for each semiannual period equal to the greater of
(1) the Certificates' "stated rate" (the "stated rate" is 7.75% for the 7.75%
Certificates and 8.25% for the 8.25% Member Certificates); and (2) the "Treasury
Bill Rate" (as defined below).
Interest on the 8.25% and 8.5% Certificates, issued in $2,000 denominations, is
payable semiannually on January 1 and July 1, and at maturity, at a rate per
annum for each semiannual period equal to the greater of (1) the Certificates'
"stated rate" of 8.25% for the 8.25% Certificates and 8.5% for the 8.5%
Certificates; and (2) the "Treasury Bill Rate" (as defined below).
U.S. Treasury bills are issued and traded on a discount basis, the amount of the
discount being the difference between their face value at maturity and their
sales price. The per annum discount rate on a U.S. Treasury bill is the
percentage obtained by dividing the amount of the discount on such U.S. Treasury
bill by its face value at maturity and annualizing such percentage on the basis
of a 360-day year. The Federal Reserve Board currently publishes such rates
weekly in its Statistical Release H.15 (519). Unlike the interest on U.S.
Treasury bills, interest on the Certificates will not be exempt from state and
local income taxation.
The "Treasury Bill Rate" for each semiannual interest payment date is the
arithmetic average of the weekly per annum auction average discount rates at
issue date for U.S. Treasury bills with maturities of 26 weeks (which may vary
from the market discount rates for the same weeks), as published for each week
by the Federal Reserve Board, during the period June 1 to November 30,
inclusive, for the January 1 interest payment date or during the period December
1 to May 31, inclusive, for the July 1 interest payment date or during the
period June 1 to September 30 for interest payable on the maturity date (each
such period, an "Interest Determination Period"). In the event that the Federal
Reserve Board does not publish the weekly per annum auction average discount
rate for a particular week, AFC shall select a publication of such rate by any
Federal Reserve Bank or any U.S. Government department or agency to be used in
computing the arithmetic average. The Treasury Bill Rate will be rounded to the
nearest one hundredth of a percentage point.
In the event that AFC in good faith determines that for any reason a Treasury
Bill Rate is not published for a particular week in an Interest Determination
Period with respect to a particular interest payment date or the maturity date,
as applicable, an "Alternate Rate" will be substituted for the Treasury Bill
Rate for such period and date. The Alternate Rate will be the arithmetic average
of the weekly per annum auction average discount rates for those weeks in the
relevant Interest Determination Period for which rates are published as
described above, if any, and the weekly per annum auction average discount rates
or market discount rates or stated interest rates for comparable issue(s) of
securities as is selected by AFC, with the concurrence of the Trustee, for those
weeks in the Interest Determination Period for which no rate is published as
described above. The Alternate Rate will be rounded to the nearest one hundredth
of a percentage point.
In the further event that AFC in good faith determines that neither the Treasury
Bill Rate nor Alternate Rate can be computed for the period June 1 to November
30, inclusive, for the January 1 interest payment date or for the period
December 1 to May 31, inclusive, for the July 1 interest payment date, the rate
of interest payable with respect to any Certificate will be the rate stated
thereon.
The last interest payment date for the Certificates is the date of maturity.
Interest payable on the Certificates at maturity shall be calculated as
described above, during the period June 1 to September 30 in the year of
maturity.
13
<PAGE>
DESCRIPTION OF SECURITIES TO BE REGISTERED (Continued)
AGWAY FINANCIAL CORPORATION - (CONTINUED)
DESCRIPTION OF THE CERTIFICATES (Continued)
The following chart sets forth for the periods indicated:
(1) The "Treasury Bill Rate," as defined above.
(2) The highest per annum discount rate on six month U.S. Treasury Bills at
one of the 26 auctions during the period used to calculate the "Treasury
Bill Rate."
(3) The lowest per annum discount rate on six month U.S. Treasury Bills at one
of the 26 auctions during the period used to calculate the "Treasury Bill
Rate."
Payment Average
Date "Treasury Bill Rate" High Low
- --------------------------------------------------------------------------------
Jan.-93 3.28% 3.90% 2.78%
Jul.-93 3.14% 3.46% 2.95%
Jan.-94 3.16% 3.30% 3.02%
Jul.-94 3.71% 4.81% 3.14%
Jan.-95 5.04% 5.85% 4.53%
Jul.-95 6.01% 6.42% 5.65%
Jan.-96 5.37% 5.61% 5.22%
Jul.-96 5.01% 5.25% 4.71%
Jan.-97 5.20% 5.38% 5.07%
Jul.-97 5.18% 5.45% 4.97%
If the Certificates currently being offered had been outstanding on July 1,
1997, the stated interest rates would have been paid. Although the period June
1, 1997 to November 30, 1997, is not complete as of the date of this Prospectus
(and hence the Treasury Bill Rate for the July 1, 1998 interest payment date
cannot yet be determined), the average Treasury Bill Rate as of October 10, 1997
was 5.14%.
The six-month U.S. Treasury Bill Rate has fluctuated widely during the periods
shown in the chart. This rate can be expected to fluctuate in the future. These
fluctuations will cause the rate of interest payable on the Certificates issued
in $5,000 and $2,000 denominations to exceed the stated rate whenever the
Treasury Bill Rate exceeds the stated rate. Interest payable on the Certificates
issued in $100 denominations will exceed the stated rate when the Treasury Bill
Rate exceeds the stated rate by more than one-half percent (.5%).
GENERAL. Mellon Bank, F.S.B. assumed Trustee responsibilities pursuant to an
Agreement of Resignation, Appointment and Acceptance dated September 3, 1996 by
and among KeyCorp, Key Bank of New York, Agway Financial Corporation and Mellon
Bank. AFC is authorized to issue the Certificates pursuant to the indenture
dated as of August 23, 1989, between AFC and the Key Bank of New York, as
Trustee at that time, as supplemented by the supplemental indenture dated August
24, 1992. The indenture and supplemental indenture are filed as exhibits to the
Registration Statement and reference is made thereto for a complete statement of
the terms and provisions of these Certificates.
The Certificates bear interest payable semiannually on January 1 and July 1 of
each year and at maturity at the rates quoted herein. Principal and interest on
the Certificates will be payable at the office of the transfer agent, Agway, in
DeWitt, New York. Additional amounts may be added to the principal of any
Certificate pursuant to an election by the holder thereof to have the semiannual
interest payments added to and increase the principal amount of the Certificate.
The 7.5% Certificates and 8.0% Member Certificates are to be issued in
registered form only in denominations of $100 and multiples thereof. The 7.75%
Certificates and 8.25% Member Certificates are to be issued in registered form
only in denominations of $5,000 and multiples thereof. The 8.25% and 8.5%
Certificates (not eligible for the Company's normal repurchase practice) are to
be issued in registered form only in denominations of $2,000 and multiples
thereof.
14
<PAGE>
DESCRIPTION OF SECURITIES TO BE REGISTERED (Continued)
AGWAY FINANCIAL CORPORATION - (CONTINUED)
DESCRIPTION OF THE CERTIFICATES (Continued)
The Certificates are unsecured obligations of AFC, and the payment thereof is to
be subordinated to other debt (except debts similarly subordinated) as
hereinafter described. There is no provision in the indentures that would
prevent AFC or Agway from incurring additional debt or which would restrict the
interest rate or other terms of such other debt.
LIMITATIONS ON OWNERSHIP AND TRANSFER. The 8.0% Member Certificates and 8.25%
Member Certificates may be purchased only by members of Agway. The 7.5% and
7.75% Certificates may be sold to the general public and are generally purchased
by non-member patrons of Agway, Agway employees and former employees. The 8.25%
and 8.5% Certificates (not subject to repurchase practice) may be purchased by
both members of Agway and the general public.
Agway, acting as transfer agent, is able to prevent issuing or reissuing a
Member Money Market Certificate to other than holders of the Membership Common
and Honorary Member Preferred Stock.
REDEMPTION PROVISIONS. Upon not less than 30 days' written notice, AFC may, at
its option, redeem all, or by lot, from time to time any part of the
Certificates at the principal amount thereof, together with accrued interest
from the last interest payment date to the date fixed for redemption at the
stated rate. Should the Certificates be redeemed by lot, all Certificates not
redeemed will be accorded equal treatment in any subsequent redemption.
REPURCHASE PRACTICE. While there is no guarantee of repurchase, it is the
present practice of AFC to repurchase at face value, plus interest accrued at
the stated rate, the Certificates of any holder whenever presented for
repurchase. It is the intention of AFC to follow such practice in the future
with respect to all of the Certificates offered in this Prospectus except the
8.25% and 8.5% Certificates, which AFC does not intend to repurchase.
INTEREST REINVESTMENT OPTION. At the time of application for purchase of the
Certificates, or at any time thereafter, the holder may elect to have all
interest paid on the Certificate reinvested automatically. In the event that the
automatic reinvestment option is elected, the interest due on each semiannual
interest payment date will be added to the principal amount of the Certificate
and will earn interest thereafter on the same basis as the original principal
amount. This election may be revoked only as to future interest payments at any
time by written notice to AFC, effective on the date when the revocation notice
is duly received by AFC. Interest reinvested will be subject to federal income
tax as if it had been received by the certificate holder at the time reinvested.
SUBORDINATION PROVISIONS. The payment of the principal and interest on the
Certificates is subordinated in right of payment, to the extent set forth in the
indenture, to the prior payment in full of all "Senior Debt." Senior Debt is
defined as the principal of, and interest on (a) indebtedness (other than the
indebtedness of AFC with respect to its debentures and Certificates issued under
indentures dated as of October 1, 1974, September 1, 1976, September 1, 1978,
August 25, 1982, September 1, 1985, September 1, 1986, August 24, 1987, August
23, 1988 and August 23, 1989 and supplemental indenture dated August 24, 1992)
of AFC for money borrowed from or guaranteed to banks, trust companies,
insurance companies, and other financial institutions, including dealers in
commercial paper, charitable trusts, pension trusts, and other investing
organizations, evidenced by notes or similar obligations, or (b) indebtedness
(other than with respect to the indentures noted in clause (a) above) of AFC
evidenced by notes, debentures or certificates issued under the provisions of an
indenture or similar instrument between AFC and a bank trust company, unless in
any case covered by clause (a) or (b) the instrument creating or evidencing the
indebtedness provides that such indebtedness is not superior or is subordinate
in right of payment to the certificates. Senior Debt, as thus defined, includes
all debt presently outstanding except indebtedness with respect to the
debentures described in clause (a) above. As of October 10, 1997, Senior Debt of
$44,650,000 was outstanding.
15
<PAGE>
DESCRIPTION OF SECURITIES TO BE REGISTERED (Continued)
AGWAY FINANCIAL CORPORATION - (CONTINUED)
DESCRIPTION OF THE CERTIFICATES (Continued)
In the event of any distribution of assets of AFC under any total liquidation or
reorganization of AFC, the holders of all Senior Debt shall be entitled to
receive payment in full before the holders of the Certificates are entitled to
receive any payment. After payment in full of the Senior Debt, the holders of
the Certificates will be entitled to participate in any distribution of assets,
both as such holders and by virtue of subrogation to the rights of the holders
of Senior Debt, to the extent that the Senior Debt was benefited by the receipt
of distributions to which the holders of the Certificates would have been
entitled if there had been no subordination. By reason of such subordination, in
the event of AFC's insolvency, holders of Senior Debt may receive more, ratably,
and holders of the certificates may receive less, ratably, than other creditors
of AFC. The subordinated debentures and Certificates rank pari passu with each
other.
MODIFICATION OF INDENTURES. The indentures permit modification or amendment
thereof, but no modification of the terms of payment or reduction of the
percentage required for modification will be effective against any certificate
holder without his consent.
EVENTS OF DEFAULT AND WITHHOLDING OF NOTICE THEREOF TO CERTIFICATE HOLDERS. The
indentures provide for the following Events of Default: (i) failure to pay
interest upon any of the Certificates when due, continued for a period of 30
days; (ii) failure to pay principal of the Certificates or Senior Debt when due;
(iii) failure to perform any other covenant of AFC as set forth in the
indentures, continued for 90 days after written notice by the Trustee or the
holders of at least 25% in principal amount of the Certificates then
outstanding.
The Trustee, within 90 days after the occurrence of the default, is to give the
certificate holders notice of all defaults known to Trustee, unless cured prior
to the giving of such notice, provided that, except in the case of default in
the payment of principal or interest on any of the Certificates, the Trustee may
withhold such notice if and so long as it in good faith determines that the
withholding of such notice is in the interest of the certificate holders.
Upon the happening and during the continuance of a default, the Trustee or the
holders of 25% in aggregate principal amount of the Certificates may declare the
principal of all the Certificates and the interest accrued thereon due and
payable, but the holders of a majority of the Certificates may waive all
defaults and rescind such declaration if the default is cured. Subject to the
provisions of the indenture relating to the duties of the Trustee in case any
such default shall have occurred and be continuing, the Trustee will be under no
obligation to exercise any of its rights or powers at the request, order or
direction of any of the certificate holders unless they shall have offered to
the Trustee reasonable security or indemnity. Subject to such provisions for
security or indemnity, a majority of the holders of outstanding Certificates
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee.
GUARANTEE BY AGWAY. If AFC or any of its successors fails punctually to pay any
such principal and interest, Agway has guaranteed to cause any such payment to
be punctually made when and as such payment becomes due and payable, whether at
maturity, upon acceleration or mandatory redemption or otherwise. This guarantee
is full and unconditional, and joint and several. To the extent that Agway has
guaranteed payments due under the Certificates, its failure to make payment
under its guarantee shall constitute an Event of Default under the indenture,
and Certificate holders may proceed against Agway to the same extent, and in the
same manner, as described above under "Events of Default and Withholding Notice
Thereof to Certificate Holders."
THE TRUSTEE. Mellon Bank, F.S.B. assumed Trustee responsibilities pursuant to an
Agreement of Resignation, Appointment and Acceptance dated September 3, 1996 by
and among KeyCorp, Key Bank of New York, Agway Financial Corporation and Mellon
Bank. Key Bank of New York was the Trustee under a supplemental indenture dated
as of October 1, 1986, between Key Bank, Agway and AFC, which amends the
indentures between the Key Bank and Agway dated as of October 1, 1974, September
1, 1976, September 1, 1978, August 25, 1982, September 1, 1985, and September 1,
1986. The debentures and certificates issued under the October 1, 1974,
September 1, 1976, September 1, 1978, August 25, 1982, September 1, 1985,
September 1, 1986, August 24, 1987, and August 23, 1988 indentures and the
supplemental indenture dated August 24, 1992 rank equally as debt instruments of
AFC with the certificates covered by the indenture dated August 23, 1989 being
described herewith.
16
<PAGE>
DESCRIPTION OF SECURITIES TO BE REGISTERED (Continued)
AGWAY FINANCIAL CORPORATION - (CONTINUED)
DESCRIPTION OF THE CERTIFICATES (Continued)
The indentures contain certain limitations on the right of the Trustee, as a
creditor of AFC, to obtain payment of claims in certain cases, or to realize on
certain property received in respect of any such claim as security or otherwise.
AUTHENTICATION AND DELIVERY. The Certificates may be authenticated and delivered
upon the written order of AFC without any further corporate action.
SATISFACTION AND DISCHARGE OF INDENTURES. The indentures may be discharged upon
payment or redemption of all Certificates or upon deposit with the Trustee of
funds sufficient therefor.
EVIDENCE AS TO COMPLIANCE WITH CONDITIONS AND COVENANTS. As evidence of
compliance with the covenants and conditions provided for in the indentures, AFC
is to furnish to the Trustee Officer's Certificates each year stating that such
covenants and conditions have been complied with.
On October 1, 1986, AFC assumed Agway's obligations under the indentures between
the Trustee and Agway. A supplemental indenture was filed as an exhibit to the
Registration Statement No. 33-8676, dated September 11, 1986, and reference is
made thereto for a complete statement of the terms and provisions of such
obligations.
DESCRIPTION OF THE INTEREST REINVESTMENT OPTION
GENERAL. If the Certificate holder has elected to have all interest paid on the
Certificate reinvested automatically, the interest due on each semiannual
interest payment date will be added to the principal amount of the certificate
and will earn interest thereafter on the same basis as the original principal
amount. This election may be revoked - as to future interest payments only - by
written notice to AFC, effective on the date when the revocation notice is duly
received by AFC. Interest reinvested will be subject to federal income tax as if
it had been received by the certificate holder at the time reinvested.
RATES ON PREVIOUSLY ISSUED CERTIFICATES. The stated rates of interest on
Certificates previously issued by AFC that remain outstanding (and upon which
the interest reinvestment option might be exercised by any holder thereof) are
as follows:
Certificates having minimum face amounts of $100:
<TABLE>
<CAPTION>
Stated Rate of Interest Due October 31, Stated Rate of Interest Due October 31,
----------------------- --------------- ----------------------- ---------------
<S> <C> <C> <C>
9.0% 1997 8.0% 2005
9.5% 1997 8.5% 2005
4.5% 2001 5.5% 2006
5.0% 2001 6.0% 2006
6.5% 2001 6.25% 2006
7.0% 2001 6.75% 2006
7.0% 2002 7.25% 2006
7.5% 2002 7.75% 2006
6.75% 2003 7.50% 2007
7.25% 2003 8.00% 2007
8.0% 2004 6.0% 2008
8.5% 2004 6.5% 2008
7.5% 2005 8.5% 2008
9.0% 2008
</TABLE>
Interest on these outstanding Certificates is payable semiannually on January 1
and July 1, and at maturity, at the rate per annum for each semiannual period
equal to the greater of (1) the Certificates' "stated rate"; and (2) one-half
percent (.5%) below the "Treasury Bill Rate" (as defined above).
17
<PAGE>
DESCRIPTION OF SECURITIES TO BE REGISTERED (Continued)
AGWAY FINANCIAL CORPORATION - (CONTINUED)
DESCRIPTION OF THE INTEREST REINVESTMENT OPTION (Continued)
Certificates having minimum face amounts of $5,000:
<TABLE>
<CAPTION>
Stated Rate of Interest Due October 31, Stated Rate of Interest Due October 31,
----------------------- --------------- ----------------------- ---------------
<S> <C> <C> <C>
6.5% 1998 8.5% 2001
7.0% 1998 9.0% 2001
8.5% 1998 5.5% 2002
9.0% 1998 6.0% 2002
7.5% 1999 7.0% 2003
8.0% 1999 7.5% 2003
9.0% 2000 6.5% 2006
9.5% 2000 7.0% 2006
4.75% 2001 7.5% 2006
5.25% 2001 8.0% 2006
6.75% 2001 7.75% 2007
7.25% 2001 8.25% 2007
</TABLE>
Interest on these outstanding Certificates is payable semiannually on January 1
and July 1, and at maturity, at the rate per annum for each semiannual period
equal to the greater of (1) the Certificates' "stated rate"; and (2) the
"Treasury Bill Rate" (as defined above).
Certificates having minimum face amounts of $2,000:
Stated Rate of Interest Due October 31,
----------------------- --------------
7.75% 1997
8.0% 1998
7.25% 2000
7.75% 2000
8.25% 2001
7.5% 2002
8.0% 2002
8.5% 2003
Interest on these outstanding Certificates is payable semiannually on January 1
and July 1, and at maturity, at the rate per annum for each semiannual period
equal to the greater of (1) the Certificates' "stated rate"; and (2) the
"Treasury Bill Rate" (as defined above).
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<PAGE>
LEGAL OPINION
Legal matters in connection with the securities offered hereby have been passed
upon for the Companies by David M. Hayes, Esq., Senior Vice President, General
Counsel and Secretary of Agway. Mr. Hayes is a Director and the General Counsel
EXPERTS
The audited financial statements incorporated by reference in this Prospectus
have been audited by Coopers & Lybrand L.L.P. and Price Waterhouse LLP. The
companies and periods covered by these examinations are indicated in their
respective reports. Such financial statements have been so included in reliance
upon the reports of the various independent accountants given on the authority
of each firm as an expert in accounting and auditing.
DISTRIBUTION AND REDEMPTION OF SECURITIES OFFERED
Sale of the securities offered hereby will be solicited through direct mailings
and/or personal contact by certain designated employees of Agway. No salesmen
will be employed to solicit the sale of these securities, and no commission or
discount will be paid or allowed to anyone in connection with their sale. The
individual Agway employees who participate in the sale of these securities may
be deemed to be underwriters of this offering within the meaning of that term as
defined in Section 2(11) of the Securities Act of 1933, as amended.
While there is no guarantee of repurchase, the Companies intend to continue
their practice of repurchasing, when presented for redemption, any security
being offered in this Prospectus, other than the 8.25% and 8.5% Subordinated
Money Market Certificates described herein.
ABSENCE OF PUBLIC MARKET, REDEMPTION AND MARKET RISK
There is no market for the debentures and Certificates and there is no intent on
the part of the Companies to create or encourage a trading mechanism for these
debentures and Certificates. The Companies do not intend to apply for listing of
the debentures and Certificates on any securities exchange. Any secondary market
for, and the market value of, the debentures and Certificates will be affected
by a number of factors independent of the creditworthiness of Agway and AFC,
including the level and direction of interest rates, the remaining period to
maturity of the debentures and Certificates, the right of the Companies to
redeem the debentures and Certificates, the aggregate principal amount of the
debentures and Certificates and the availability of comparable investments. In
addition, the market value of the debentures and Certificates may be affected by
numerous other interrelated factors, including factors that affect the U.S.
corporate debt market generally, and Agway and AFC specifically.
19
<PAGE>
AGWAY INC.
AGWAY
FINANCIAL
CORPORATION
[logo]
PROSPECTUS
Until December 7, 1997, all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a Prospectus. This is in addition to the obligations of dealers to
deliver a Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
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