EXECUTION COPY
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of June 20, 2000, by and
between AGWAY, INC., a Delaware corporation ("Agway") and SOUTHERN STATES
COOPERATIVE, INC., a Virginia agricultural cooperative corporation ("Southern
States").
WHEREAS, Agway wishes to sell and assign to Southern States, and
Southern States wishes to purchase and assume from Agway, for the consideration
and on the terms and conditions set forth herein, certain business operations of
the consumer wholesale business of Agway, and various assets that are used in
connection therewith (collectively, the "Consumer Wholesale Dealer Distribution
Business," as defined herein), and certain liabilities of the Consumer Wholesale
Dealer Distribution Business.
NOW, THEREFORE, in consideration of the mutual agreements and the
representations and warranties, conditions and promises contained herein, and
intending to be legally bound hereby Agway and Southern States hereby agree as
follows (capitalized terms having the meaning given in Article XIX or elsewhere
herein):
ARTICLE I
SALE AND PURCHASE OF THE PURCHASED ASSETS AND ASSUMPTION OF THE DEALER
AGREEMENTS AND THE ASSUMED LIABILITIES
At the Closing, and subject to the terms and conditions of this
Agreement: (a) Agway shall sell, transfer, convey, assign and deliver to
Southern States, and Southern States shall purchase and acquire from Agway, the
Purchased Assets free and clear of all Liens, and (b) Agway shall assign to
Southern States, and Southern States shall assume from Agway, the Dealer
Agreements and the Assumed Liabilities. No other agreements or liabilities of
Agway arising out of the Consumer Wholesale Dealer Distribution Business, the
ownership or operation of any of the Purchased Assets, the consummation of the
transactions under this Agreement or otherwise, except as expressly provided in
this Agreement, shall be assumed by Southern States.
For purposes of this Agreement, the Consumer Wholesale Dealer
Distribution Business of Agway shall mean all dealer marketing, development,
operations and distribution associated with the consumer wholesale business of
Agway.
ARTICLE II
THE PURCHASED ASSETS
2.1. The Purchased Assets. The "Purchased Assets" shall
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mean all right, title, interest and claims of Agway in and to the following
assets:
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(a) the Inventory;
(b) the Owned Personal Property as identified
more particularly on Schedule 6.8.1;
(c) the Accounts Receivable;
(d) the Prepaid Expenses;
(e) the Dealer Agreements;
(f) the Real Property Leases as listed on
Schedule 6.5.1 (including all of Agway's right, title, and interest, if any, in
and to the Improvements located on the Leased Real Property);
(g) the Personal Property Leases listed on
Schedule 6.8.3;
(h) the Assignable Permits;
(i) subject to any legal restrictions and
required consents, copies of all of the books, records, computer files,and other
files, data or other existing and available information of Agway relating
specifically to or used in connection with the Consumer Wholesale
Dealer Distribution Business and the Purchased Assets, including but not limited
to (i) dealer purchase histories, (ii) dealer credit files and payment
histories, (iii) vendor supply histories, including prices, terms of payment,
storage or title retention agreements and other information of a similar nature,
(iv) those records or other files evidencing all goods sold and services
rendered on credit pursuant to the Dealer Agreements and which have given rise
to the Accounts Receivable; and (v) those records or other files relating to
shipments made and services performed, discounts allowed, payments received,
returns and other credits, and all late charges, interest and costs which may
have been or may be added to the Accounts Receivable, for all periods beginning
on July 1, 1998, and ending on or before the Closing Date which Agway can
reasonably make available to Southern States without adversely impacting its own
business operations (including its tax obligations), and which are requested by
Southern States in writing on or after the Closing ("Records").
Southern States acknowledges that Agway is not transferring,
and shall retain all rights with respect to, any vendor rebates or recoveries
related to products or business disclosed on, or substantially similar to the
programs disclosed on, Schedule 2.1.
ARTICLE III
THE ASSUMED LIABILITIES
3.1. The Assumed Liabilities. The "Assumed Liabilities"
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shall mean the following obligations and liabilities of Agway relating solely to
the Consumer Wholesale Dealer Distribution Business:
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(a) all of Agway's liabilities and obligations
under and pursuant to the Real Property Leases and Personal Property Leases
existing on or arising after the Closing Date; provided, that, Southern States
will not assume any obligation or liability resulting from or arising out of
any default or nonperformance by Agway prior to the Closing Date under or with
respect thereto;
(b) all of Agway's liabilities and obligations
under and pursuant to the Dealer Agreements, provided, that, Southern States
shall not assume any obligation or liability resulting from or arising out of
any default or nonperformance by Agway prior to the Closing Date under or with
respect thereto;
(c) any liability or obligation that arises from
any Post-Closing Environmental Condition;
(d) all of Agway's liabilities and obligations
incurred in the ordinary course of business related to commitments to purchase
inventory for the Consumer Wholesale Dealer Distribution Business for shipment
in the ordinary course of business in amounts that ordinarily would last not
more than 120 days after the Closing and such other inventory purchase
commitments as may be listed in Schedule 3.1(d); and
(e) any obligations or liabilities related to
on-going agreements, contracts, or commitments related to the Consumer Wholesale
Dealer Distribution Business, incurred in the ordinary course of business, as
listed in Schedule 3.1(e).
3.2. The Excluded Liabilities. Except for the Assumed
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Liabilities, and any obligations pursuant to this Agreement, Southern States
shall not assume any obligation, payment or liability of Agway of any kind,
whether fixed, contingent, known or unknown and whether existing as of the
Closing or arising thereafter. Without limiting the generality of the foregoing,
and regardless of whether any of the foregoing may be disclosed to Southern
States pursuant to Article VI hereof, or otherwise, or whether Southern States
may have knowledge of the same, Southern States shall not be deemed to assume
any liability, payment or obligation of Agway arising out of or relating to: (a)
any workers' compensation claims related to the operation of the Consumer
Wholesale Dealer Distribution Business prior to the Closing, or any other claims
or liabilities relating to the employment by Agway of persons prior to the
Closing; (b) any actual or alleged tortious conduct of Agway or any of its
employees or agents; (c) any claim for products liability related to products
manufactured or distributed by Agway in the operation of the Consumer Wholesale
Dealer Distribution Business prior to the Closing; (d) any claim for breach of
warranty or contract versus Agway related to the operation of the Consumer
Wholesale Dealer Distribution Business prior to the Closing; (e) any claim
predicated on strict liability or any similar legal theory related to the
operation of the Consumer Wholesale Dealer Distribution Business prior to the
Closing; (f) the violation of any law, ordinance or regulation in effect prior
to the Closing related to the operation of the Consumer Wholesale Dealer
Distribution Business prior to the Closing but not related to any Pre-Closing
Environmental Condition; (g) any business or business activities of Agway which
are not part of the Consumer Wholesale Dealer Distribution Business; (h) any tax
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liabilities, except as otherwise expressly provided herein; (i) any liabilities
under any Agway employee benefit plans or programs, or for accrued vacation or
sick pay; (j) any intercompany or intracompany liabilities or corporate charges;
(k) any liability in any pending or threatened litigation, governmental
proceeding, or workers compensation claim; (l) any liability or obligation to
any dealer or other customer of Agway for any credit balances or prepayment
account held by Agway at the time of closing; (m) any other indebtedness not
listed as an Assumed Liability; (n) any liabilities or obligations of Agway
under any collective bargaining agreements; (o) any liability or obligation that
arises from any Pre-Closing Environmental Condition; or (p) any other
liabilities of Agway not within the scope of the definition "Assumed
Liabilities" (collectively, the "Excluded Liabilities").
ARTICLE IV
CLOSING PURCHASE PRICE
The purchase price to be paid by Southern States to Agway
shall be the sum of the amounts determined under Sections 4.1, 4.2 and 4.3. The
purchase price shall be payable as provided for in Section 4.4 below.
4.1. Accounts Receivable. The purchase price for the Accounts
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Receivable shall be the aggregate stated unpaid amount thereof as shown on
Agway's books and records as of its last statement cut-off date, which shall be
as of a date not more than seven (7) days prior to the Closing Date. This
balance will be "rolled forward" to the Closing Date as necessary and subject to
Section 8.8 below.
4.2. Inventory. The purchase price for the Inventory will be
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Agway's cost or fair market value, whichever is lower, except as provided for in
the last sentence of this Section 4.2. On or before the Closing, Agway and
Southern States shall jointly conduct a physical count and inspection of the
Inventory in accordance with the Inventory Procedures included as Annex A to
this Agreement. The purchase price for obsolete, discontinued, damaged, shopworn
and inventory held in stock longer than 180 days will be negotiated pursuant to
the Inventory Procedures.
4.3. Owned Personal Property. The purchase price for the
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Owned Personal Property will be based on the fair market value or book value of
such assets, as agreed upon by Agway and Southern States.
4.4 Method of Payment. Southern States shall deliver to
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Agway at the Closing, in cash or other immediately available funds, an amount
equal to the sum of the amounts required under Sections 4.1, 4.2 and 4.3 above.
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ARTICLE V
THE CLOSING
5.1. Time and Place. The consummation of the transactions
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contemplated in this Agreement (the "Closing") shall take place at such location
as Southern States and Agway may mutually agree, at 9:00 a.m., Eastern Standard
Time, on July 10, 2000, or such other date as Agway and Southern States may
agree (the "Closing Date"). All actions at the Closing shall be deemed to be
taken simultaneously, and all documents executed at the Closing shall be
effective as of 12:01 a.m. on the Closing Date.
5.2. Actions by Agway at the Closing. At the Closing, Agway
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shall deliver to Southern States the following:
(a) a bill of sale to the Owned Personal Property and the
Inventory as shall be effective to vest in Southern States good and sufficient
title to the Owned Personal Property and Inventory free and clear of Liens,
which shall be in substantially the form of Exhibit A attached hereto;
(b) an assignment and transfer of Accounts Receivable
conveying all of Agway's right, title, and interest in and to the Accounts
Receivable (excluding any security interest, guarantees or other collateral
relating to Accounts Receivable) which shall be in substantially the form of
Exhibit B attached hereto;
(c) a license agreement(the "License Agreement") providing
for the use by Southern States of the trade name "AGWAY" and the trademarks set
forth in Annex A of the License Agreement (Exhibit C of this Agreement);
(d) an Assignment and Assumption Agreement to: (i) the
Dealer Agreements; (ii) the Real Property Leases; (iii) the Personal Property
Leases; and (iv) the other Assumed Liabilities in substantially the form of
Exhibit D attached hereto, or such other form of assignment reasonably requested
by Southern States or Agway, which shall, among other things, convey good and
marketable title to the leasehold interests in the Leased Real Property, free
and clear of Liens together with such instruments of assignment and transfer of
all of Agway's right, title, and interest in, the Assignable Permits, the
Prepaid Expenses, and the Records of Agway relating to the Consumer Wholesale
Dealer Distribution Business, as may be reasonably requested by Southern States;
(e) an executed Transition Services Agreement; (f) the
certificate of Agway described in Section 11.2;
(g) a certificate of good standing of Agway from the
Secretary of State of Delaware, dated within thirty (30) days of the Closing
Date;
(h) copies, certified by the Secretary of Agway, of the
resolutions of the board of directors of Agway approving the transactions
contemplated herein;
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(i) the Closing Consents; and
(j) such other documents and instruments as may be
reasonably requested by Southern States, including, without limitation, the
documents, instruments, and other items required to be delivered by Agway to
Southern States pursuant to Article XI hereof.
5.3. Actions by Southern States at the Closing. At the
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Closing, Southern States shall deliver to Agway the following:
(a) the purchase price payable in accordance with the
provisions of Article 4;
(b) an Assignment and Assumption Agreement to (i) the
Dealer Agreements, (ii) the Real Property Leases, (iii) the Personal Property
Leases, and (iv) the other Assumed Liabilities, in substantially the form of
Exhibit D attached hereto, or such other form of assignment reasonably
requested by Southern States or Agway;
(c) an executed Transition Services Agreement;
(d) a certificate of good standing of Southern States from
the Virginia State Corporation Commission, dated within thirty (30) days of the
Closing Date;
(e) the certificate of Southern States described in
Section 10.2;
(f) copies, certified by the Secretary of Southern
States, of the resolutions of the board of directors of Southern States
approving the transactions contemplated herein; and
(g) such other documents and instruments as may be
reasonably requested by Agway, including, without limitation, the documents,
instruments, and other items required to be delivered by Southern States to
Agway pursuant to Article X hereof.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF AGWAY
Agway represents and warrants to Southern States as follows, and
acknowledges and confirms that Southern States is relying upon such
representations and warranties in connection with the execution, delivery and
performance of this Agreement:
6.1. Corporate Organization and Authority. Agway is a
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Delaware corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware. Agway is duly qualified to conduct
business as a foreign corporation in the jurisdictions listed on Schedule 6.1,
which are all of the jurisdictions in which Agway is required to be so qualified
in order to conduct the Consumer Wholesale Dealer Distribution Business and
in which the failure of Agway to so qualify would have a material adverse
effect on the financial condition or operations of the Consumer Wholesale Dealer
Distribution
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Business. Agway has the requisite corporate power and authority to own or lease
the Purchased Assets, to carry on the Consumer Wholesale Dealer Distribution
Business as it is now being conducted, to execute and deliver this Agreement,
and to consummate the transactions contemplated herein. The execution and
delivery of this Agreement by Agway, and the consummation by Agway of the
transactions contemplated herein, has been duly and validly approved and
authorized by the board of directors of Agway.
6.2. Validity of Agreement; No Violation; Consents.
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6.2.1. This Agreement has been duly authorized, executed
and delivered by Agway and is a valid and binding obligation of Agway,
enforceable against Agway in accordance with its terms, except as may be limited
by bankruptcy,reorganization, insolvency and similar laws of general application
relating to or affecting the enforcement of rights of creditors or the relief of
debtors. Except as otherwise set forth herein or as set forth on Schedule 6.2.1,
the execution, delivery, and performance of this Agreement by Agway and the
consummation of the transactions contemplated herein, will not: (a) violate or
conflict with any provision of the Certificate of Incorporation or Bylaws of
Agway; (b) violate or conflict in any material respect with any provision of any
law, rule, regulation, order, permit, certificate, writ, judgment, injunction,
decree, determination, award, or other decision of any court, governmental
agency or instrumentality binding upon Agway or to which the Purchased Assets
are subject; (c) violate, conflict with, or result in the breach of or a default
under, or result in the acceleration of any liability, or the cancellation or
termination of any of the Dealer Agreements or the Real Property Leases which
have not been waived; or (d) result in the creation, or imposition of, any Lien
upon, or with respect to, any of the Purchased Assets.
6.2.2. Agway may execute, deliver and perform this
Agreement without the necessity of Agway obtaining any consent, approval,
authorization or wavier or giving any notice or otherwise, except for the
expiration of any waiting period required under the HSR Act or such consents,
approvals, authorizations, waivers and notices (a) disclosed on Schedule 6.2.2
hereto (the "Required Consents"); or (b) which have been obtained and are
unconditional and are in full force and effect.
6.3. Absence of Certain Changes.
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(a) Except as set forth on Schedule 6.3, since June 26,
1999, Agway has conducted the Consumer Wholesale Dealer Distribution Business
only in the usual and ordinary course of business consistent with Agway prior
practices and there has not been:
(i) any material adverse change in the financial
condition, operations, assets, or liabilities of the Consumer Wholesale Dealer
Distribution Business;
(ii) any damage, destruction, or loss, whether or not
covered by insurance, which has materially and adversely affected or will
materially and adversely affect the Purchased Assets or the Consumer Wholesale
Dealer Distribution Business;
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(iii) any other fact, event or condition of any
character that will materially and adversely affect the Purchased Assets or the
Consumer Wholesale Dealer Distribution Business, or could reasonably be expected
materially to disrupt, interrupt, prevent or impair the conduct of the Consumer
Wholesale Dealer Distribution Business.
(b) Except as set forth on Schedule 6.3, since June 26,
1999, Agway has not, with respect to the Consumer Wholesale Dealer Distribution
Business or with respect to the Purchased Assets:
(i) entered into any transaction or contract, or
amended or terminated any transaction or contract, except normal transactions
or contracts consistent in nature and scope with prior practices and entered
into in the ordinary course of business in arms length transactions;
(ii) with respect to the Consumer Wholesale Dealer
Distribution Business, canceled or waived any claim or right of substantial
value, or sold, transferred, distributed or otherwise disposed of any of the
Purchased Assets, except in the ordinary course of business;
(iii) agreed to do any of the foregoing.
(c) With respect to Agway, there has not occurred any fact,
event or condition of any character that may materially and adversely affect the
obligation of Agway to repurchase unpaid Accounts Receivable under Section 14.6
below.
6.4. Taxes. Agway has prepared and timely filed with the
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appropriate governmental agencies all tax reports, filings and returns required
to be filed by it related to the Consumer Wholesale Dealer Distribution
Business, and Agway has paid, or made provision for the payment of, all such
taxes which have become due pursuant to said returns or pursuant to any
assessment received by Agway. Except as disclosed in Schedule 6.4, all federal,
state, city, and foreign income, profits, franchise, sales, use, occupation,
property, excise, and other taxes due in connection with the Consumer Wholesale
Dealer Distribution Business have been fully paid or shall be fully paid by
Agway as of the date hereof or hereafter when due. Agway has not received notice
of any tax deficiency outstanding, proposed or assessed against it with respect
to the Consumer Wholesale Dealer Distribution Business, nor has it executed any
waiver of any statute of limitations on the assessment or collection of any tax.
There are no tax liens upon, pending against or, to the Best Knowledge of Agway
threatened against, any Purchased Asset.
6.5. Real Property.
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6.5.1. Schedule 6.5.1 sets forth a complete list of all
leases or subleases (the "Real Property Leases"), of real property leased by
Agway primarily used in the Consumer Wholesale Dealer Distribution Business and
being assumed by Southern States in connection with its purchase of the Consumer
Wholesale Dealer Distribution Business (the "Leased Real Property"). Except as
disclosed on Schedule 6.5.1, the Real Property Leases are in full force and
effect, are valid and enforceable in accordance with their terms and constitute
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the legal, valid and binding obligations of Agway and, to the Best Knowledge of
Agway, of the other parties thereto (except, in each case, as may be limited by
bankruptcy, reorganization, insolvency and similar laws of general application
relating to or affecting the enforcement of rights of creditors or the relief of
debtors), and, to the Best Knowledge of Agway, no condition exists or event, act
or omission has occurred which, with or without notice, lapse of time or both,
would constitute a default or a basis of force majeure or other claim of
excusable delay or nonperformance thereunder. Agway has made available to
Southern States a copy of each of the Real Property Leases, and each such copy
is correct and complete and includes any and all modifications thereof. The
interest of Agway in and under any of the Real Property Leases is unencumbered
and subject to no present Lien, except for any Lien listed in Schedule 6.5.1.
6.5.2. To the Best Knowledge of Agway, except as described
on Schedule 6.5.2 hereto, (a) no improvement or structure on any Leased Real
Property encroaches on any adjacent property or conflicts with the rights of any
owner thereof, and (b) no improvement or structure on any real property owned or
leased by any other person encroaches on any Leased Real Property.
6.5.3. Except as set forth on Schedule 6.5.3, to the Best
Knowledge of Agway, all easements, rights of way, licenses, and other
non-ownership interests, if any, granted to or by Agway in any of the Leased
Real Property (the "Realty Use Rights") are valid and effective in accordance
with their terms. Agway has furnished Southern States with copies of all
material written Realty Use Rights which it has, all of which are identified on
Schedule 6.5.3.
6.5.4. To the Best Knowledge of Agway, the Improvements
located on the Leased Real Property are in substantial compliance with all
applicable material building, fire, and other regulatory laws, ordinances, and
regulations. Agway has not received any written notice of any violation thereof.
6.5.5. To the Best Knowledge of Agway, all requisite
certificates of occupancy and other material permits or approvals legally
required with respect to the Improvements located on the Leased Real Property
and the occupancy and use thereof, have been obtained and are currently in full
force and effect.
6.6. Dealer Agreements and Other Contracts.
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6.6.1. Schedule 6.6.1 sets forth a list of all dealer
agreements or contracts (the "Dealer Agreements"), and such other written
agreements (other than the Real Property Leases and the Personal Property
Leases), purchase orders, and commitments, if any, and whether or not in the
ordinary course of business, to which Agway is a party or is bound, which
primarily relate to the Consumer Wholesale Dealer Distribution Business and
which Southern States agrees to assume in connection with the purchase of the
Consumer Wholesale Dealer Distribution Business. Agway has furnished to Southern
States a copy of each of the Dealer Agreements, and other agreements, if any,
listed on Schedule 6.6.1, and each such copy is correct and complete and
includes all modifications thereof.
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6.6.2. All of the Dealer Agreements are in full force and
effect and constitute the legal, valid and binding obligations of Agway and, to
the Best Knowledge of Agway, of the other parties thereto (except, in each case,
as may be limited by bankruptcy, reorganization, insolvency and similar laws of
general application relating to or affecting the enforcement of rights of
creditors or the relief of debtors), and to the Best Knowledge of Agway, no
condition exists or event, act or omission has occurred which, with or without
notice, or lapse of time or both, would constitute a default or a basis of force
majeure or other claim of excusable delay or nonperformance thereunder. No
consent of any party to the Dealer Agreements is required to assign the Dealer
Agreements, and Agway's rights and obligations thereunder, to Southern States.
No other party to any Dealer Agreement has notified Agway of the assertion of
its right to renegotiate the terms or conditions of any Dealer Agreement, and,
to the Best Knowledge of Agway, no such basis exists.
6.7. Permits. Schedule 6.7 sets forth a list of all material
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governmental licenses, permits, consents, approvals, or certificates issued to
Agway and which are primarily related to the Consumer Wholesale Dealer
Distribution Business (the "Permits"). Agway has furnished to Southern States a
copy of each of the Permits, and each such copy is correct and complete and
includes any and all modifications thereof. To the Best Knowledge of Agway: (a)
the Permits are in full force and effect; (b) Agway is not in material violation
of any of the Permits; (c) no proceedings for the suspension or cancellation of
any of the Permits is pending or threatened; (d) no condition exists which (with
or without notice, the passage of time or both) would constitute a material
violation of any of the Permits; and (e) the Permits constitute all material
governmental licenses, permits, consents, approvals or certificates required to
be obtained or held by Agway in connection with operation of the Consumer
Wholesale Dealer Distribution Business as presently conducted, the failure to
obtain which would have a material adverse effect on the financial condition or
operations of the Consumer Wholesale Dealer Distribution Business; provided,
however, that no representation is made in this sentence with respect to
"Environmental Permits", as to which all representations and warranties are set
forth in Section 6.14 hereof. Those Permits (including the Environmental
Permits) which are assignable by Agway to Southern States are marked with an
asterisk on Schedule 6.7, and are referred to herein as the "Assignable
Permits".
6.8. Title to and Condition of Personal Property.
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6.8.1. Schedule 6.8.1 sets forth a list of machinery,
equipment, furniture, fixtures, and other items of tangible personal property
(other than Inventory) or intangible personal property, including but not
limited to the "electronic catalogue" software developed by Agway for the
Consumer Wholesale Dealer Distribution Business and the copyright thereto, that
are owned by Agway and that are primarily used in connection with the Consumer
Wholesale Dealer Distribution Business and that are being purchased by Southern
States in connection with the purchase of the Consumer Wholesale Dealer
Distribution Business (the "Owned Personal Property"). To the Best Knowledge of
Agway, the list is accurate in all material respects.
6.8.2. Except for the Liens on Schedule 6.8.2., all of
which will be removed prior to the Closing except as otherwise contemplated
herein, Agway has good and sufficient title to the Owned Personal Property,
free and clear of any Liens.
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6.8.3. Schedule 6.8.3 sets forth a list of all machinery,
equipment, furniture, fixtures, vehicles and other items of tangible personal
property, if any, that are leased by Agway and that are primarily used in the
Consumer Wholesale Dealer Distribution Business (the "Leased Personal
Property"), the leases for which (the "Personal Property Leases") are being
assumed by Southern States in connection with the purchase of the Consumer
Wholesale Dealer Distribution Business. Agway has valid leasehold interests in
all the Leased Personal Property. The Personal Property Leases are valid and in
full force and effect.
6.8.4. All of the Owned Personal Property and Leased
Personal Property used by Agway in the Consumer Wholesale Dealer Distribution
Business and the operations thereof is owned or leased by Agway and not owned or
leased by any member, shareholder or affiliate thereof. To the Best Knowledge of
Agway, the Owned Personal Property and the Leased Personal Property is,
collectively, in reasonable operating condition, and has been appropriately
maintained in the ordinary course of business, conforms to all material
requirements of law and is substantially fit for use in accordance with and
sufficient for Agway's present operations, subject to ordinary wear and tear.
6.9. Accounts Receivable. The Accounts Receivable are valid
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and enforceable obligations arising out of the sale of goods and/or services by
Agway in connection with the operations of the Consumer Wholesale Dealer
Distribution Business prior to the Closing and, to the Best Knowledge of Agway
arose out of arms-length transactions free of defenses and without right of set
off or deduction on the part of account debtors. To the Best Knowledge of Agway,
no basis presently exists for the assertion of any defense, counterclaim or
set-off. Except as disclosed on Schedule 6.9, all of the Accounts Receivable are
within 60 days of the time of the sale of goods or rendering of services which
gave rise to such Accounts Receivable, none is evidenced by an instrument or
chattel paper, and no judgment has been obtained on any Account Receivable.
6.10. Trademarks and Trade Name. Annex A of the License
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Agreement (Exhibit C) sets forth a list of all trademarks or trademark
registrations, (the "Trademarks") trade names or service marks, used or owned by
Agway relating to or covering use of the name "Agway" which will be licensed
under the License Agreement, in connection with the Consumer Wholesale Dealer
Distribution Business. Except as set forth on Annex A of the License Agreement,
the Trademarks are currently in compliance with all legal and present
requirements (including payment of filing, examination, maintenance fees, and
affidavits of use and incontestability), are valid and enforceable and are not
subject to any maintenance fees or taxes on actions or filings falling due
within ninety (90) days after the Closing Date.
6.11. Inventory. Except as set forth in Schedule 6.11, Agway
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has good and sufficient title to the Inventory, free and clear of any Liens,
which Liens shall be released at or prior to the Closing. Except as set forth in
Schedule 6.11, all Inventory consists of, and will at the Closing Date consist
of, a quantity and quality usable and saleable in the ordinary course of
business, except for obsolete items and items of below-standard quality, which
shall be appropriately addressed in accordance with the Inventory Procedures.
6.12. Labor Relations.
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6.12.1. Agway is not a party to any collective bargaining
agreements related to the Consumer Wholesale Dealer Distribution Business.
6.12.2. To the Best Knowledge of Agway: (a) Agway is in
compliance in all material respects with all Federal, state, and other
applicable laws regarding employment practices, terms and conditions of
employment, and wages and hours with respect to the Consumer Wholesale Dealer
Distribution Business; (b) since December 31, 1999, Agway has not engaged in any
unfair labor practice with respect to the Consumer Wholesale Dealer Distribution
Business; (c) there is no unfair labor practice complaint against Agway pending
before the National Labor Relations Board or any similar state or local labor
agency with respect to the Consumer Wholesale Dealer Distribution Business; (d)
there is no labor strike, dispute, slowdown, representation question or stoppage
pending or threatened against or involving the Consumer Wholesale Dealer
Distribution Business; (e) there exists no grievance which may have a material
adverse effect upon the Consumer Wholesale Dealer Distribution Business; (f) no
arbitration proceeding arising out of or under any collective bargaining
agreement is pending or threatened with respect to the Consumer Wholesale Dealer
Distribution Business; and (g) since December 31, 1999, Agway has not
experienced any strike, interruption, or material work slowdown by its labor
force due to employment problems of any nature with respect to the Consumer
Wholesale Dealer Distribution Business.
6.13. Litigation. Except as set forth on Schedule 6.13, (a)
----------
Agway is not subject to any judgment, award, order, or decree or involved in any
governmental action or any proceeding in which relief is sought or ordered
affecting the operation of the Consumer Wholesale Dealer Distribution Business
or the Purchased Assets or which would prevent, delay, question or challenge the
transactions contemplated by this Agreement; (b) there are no actions, claims,
suits, proceedings (whether in equity or in law) or investigations pending or,
to the Best Knowledge of Agway, threatened, involving or against the Consumer
Wholesale Dealer Distribution Business or the Purchased Assets before any court
or governmental or regulatory body which individually or in the aggregate would
have a material adverse effect on the condition, financial or otherwise, of the
Consumer Wholesale Dealer Distribution Business or which question or challenge
the validity of this Agreement or any action taken or to be taken pursuant to
this Agreement; and (c) to the Best Knowledge of Agway, no facts exist which
would serve as a basis under current laws or regulations, for the institution of
any actions, laws, audit investigation, claim, or procedure which might affect
materially and adversely the business or financial condition of the Consumer
Wholesale Dealer Distribution Business.
6.14. Environmental. Except as set forth on Schedule 6.14,
-------------
to the Best Knowledge of Agway with respect to the Leased Real Property and
the Consumer Wholesale Dealer Distribution Business:
(a) all underground petroleum or chemical storage
tanks located under the Leased Real Property are in compliance with all
Environmental Laws;
(b) Agway is not the subject of any governmental
investigation or proceeding pertaining to the presence, generation, discharge,
emission, release or threatened release, spill, use, storage, processing,
receiving, containment, treatment, shipment, transportation, handling or
<PAGE>
disposition of any Hazardous Material, nor has Agway provided (or been required
to provide) nor received notice of any violation of any Environmental Law or
release or threat of release of Hazardous Materials or received any claim or
notice under any Environmental Laws with respect to the Leased Real Property or
the other Purchased Assets;
(c) included within the list of Permits on Schedule
6.7 are all Permits and other governmental authorizations currently held by
Agway relating to the Consumer Wholesale Dealer Distribution Business pursuant
to or relating to any Environmental Law, including EPA product registrations
(the "Environmental Permits"), and Agway is conducting the Consumer Wholesale
Dealer Distribution Business in compliance with the Environmental Permits,
which constitute all of the environmental permits, approvals, certificates, or
other authorizations required to be obtained from any public, governmental,
regulatory or judicial authority to conduct the Consumer Wholesale Dealer
Distribution Business in substantially the same manner and extent it is
presently conducted by Agway; and
(d) there is no action, activity, circumstance,
condition, event, or incident, including without limitation, the release,
emission, discharge, presence, or disposal of any Hazardous Material, that could
reasonably be expected to form the basis of any environmental claim or result in
any liability, remedial action or penalties against Agway with respect to the
Consumer Wholesale Dealer Distribution Business, the Leased Real Property or the
other Purchased Assets.
6.15. Insurance. Agway maintains policies of insurance which
---------
insure the Purchased Assets and the Consumer Wholesale Dealer Distribution
Business in commercially reasonable amounts for occurrences normally insured
against. There are no claims by Agway pending or, to the Best Knowledge of
Agway, threatened with respect to the Purchased Assets or the Consumer Wholesale
Dealer Distribution Business under said policies or disputes with underwriters,
and, to the Best Knowledge of Agway, all premiums due and payable have been paid
and all such policies are in full force and effect in accordance with their
respective terms.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF SOUTHERN STATES
Southern States represents and warrants to Agway as follows, and
acknowledges and confirms that Agway is relying upon such representations and
warranties in connection with the execution, delivery and performance of this
Agreement:
7.1. Corporate Organization and Authority. Southern States is
------------------------------------
an agricultural cooperative corporation duly organized, validly existing, and in
good standing under the laws of the Commonwealth of Virginia, and is (or will be
at the Closing Date) duly qualified to conduct business as a foreign corporation
in the states of Maine, New Hampshire, Vermont, Massachusetts, Rhode Island,
Connecticut, New York, New Jersey, Pennsylvania, Ohio, Delaware and Maryland.
Southern States has the requisite corporate power and authority to execute and
<PAGE>
deliver this Agreement and to consummate the transactions contemplated herein
and therein. The execution and delivery of this Agreement by Southern States and
the consummation by Southern States of the transactions contemplated herein and
therein have been duly and validly approved and authorized by the board of
directors of Southern States.
7.2. Validity of Agreement; No Violation. This Agreement has
-----------------------------------
been duly executed and delivered by Southern States. This Agreement is a valid
and binding obligation of Southern States, enforceable in accordance with its
terms, except as may be limited by bankruptcy, reorganization, insolvency and
similar laws of general application relating to or affecting the enforcement of
rights of creditors or the relief of debtors. The execution, delivery, and
performance of this Agreement by Southern States and the consummation of the
transactions contemplated hereby will not: (a) violate or conflict with any
provision of the Articles of Incorporation or Bylaws of Southern States or (b)
violate or conflict in any material respect with any provision of any law, rule,
regulation, order, permit, certificate, writ, judgment, injunction, decree,
determination, award, or other decision of any court, governmental agency or
instrumentality binding upon Southern States or to which Southern States is
subject.
7.3. Brokers or Finders. Southern States has not incurred
------------------
any obligation or liability, contingent or otherwise, for brokers or finders
fees or commissions or other similar payments in connection with this Agreement.
ARTICLE VIII
COVENANTS OF AGWAY
8.1. Access. Prior to the Closing, Agway shall provide
------
Southern States with reasonable access during normal business hours to the
Purchased Assets and to Agway's employees, officers, agents and consultants,
books and records (including property or sales tax returns, dealer state sales
tax exemption certificates), and such other information relating to the Consumer
Wholesale Dealer Distribution Business, subject to any legal restrictions or
limitations and its existing policies with respect to providing information
about its employees to other potential employers or other proprietary or
confidential information, as Southern States may reasonably request. Agway shall
provide Southern States with, or allow Southern States to make, copies, at
Southern States' expense, of any requested materials that are relevant to the
Consumer Wholesale Dealer Distribution Business and do not contain any
confidential or proprietary information about Agway or otherwise violate any
internal procedures of Agway. Southern States shall advise Agway, and obtain
Agway's consent (which shall not be unreasonably withheld), before contacting
any third-party in connection with its due diligence of the Consumer Wholesale
Dealer Distribution Business. Southern States shall use its reasonable efforts
to minimize any disruption to Agway's business in connection with the conduct of
the due diligence process contemplated herein, and Agway shall receive
reasonable advance notice of and shall have the right to participate in, any
discussions Southern States might have with any federal or state regulatory
authorities about Agway or the Consumer Wholesale Dealer Distribution Business.
Prior to the Closing, Southern States will not, without the consent of Agway,
conduct a "Phase II" environmental assessment or any other environmental
<PAGE>
investigation of Agway's Leased Real Property, other than visual inspections of
the properties. Southern States shall use its best efforts to complete its due
diligence, subject to any additional disclosures by Agway, no later than June
30, 2000.
8.2. Conduct of Business.
-------------------
8.2.1. Affirmative Covenants. Prior to the Closing,
----------------------
except as may be agreed to in writing by Agway and Southern States, Agway shall
conduct the Consumer Wholesale Dealer Distribution Business, in all material
respects, according to its ordinary and usual course of business and
consistent with Agway's prior practice. Without limiting the generality of the
foregoing, Agway shall: (a) maintain in effect and fully perform all of its
obligations under the Dealer Agreements and the Real Property Leases in
accordance with the terms thereof; (b) give prompt written notice to Southern
States of any notice given or received by Agway of any default or breach or
alleged default or breach under any of the Dealer Agreements, the Real Property
Leases or the Personal Property Leases and of any claim or threat to commence
any action, suit, proceeding, or investigation against Agway with respect to the
Consumer Wholesale Dealer Distribution Business; (c) maintain the Owned
Personal Property, the Leased Personal Property and Improvements on the
Leased Real Property in the same condition and repair as on the date of this
Agreement, ordinary wear and tear excepted; (d) comply, in all material
respects, with all laws applicable to it in the conduct of the Consumer
Wholesale Dealer Distribution Business; (e) use its best efforts to preserve
the business of the Consumer Wholesale Dealer Distribution Business in
accordance with Agway's Retail Plan contained in Schedule 6.3 (a); (f) maintain
in full force and effect all insurance policies currently in effect with respect
to the Purchased Assets, or policies that provide coverage that is comparable to
such insurance policies; and (g) promptly advise Southern States of any breach
of any representation or warranty, covenant, condition or obligation of Agway
hereunder.
8.2.2. Negative Covenants. Prior to the Closing,
------------------
except as may be agreed in writing by Agway and Southern States or as may be
disclosed in the Schedules to this Agreement, Agway shall not: (i) enter into
or agree to enter into any lease, contract, commitment, transaction or
understanding of any kind with respect to the Consumer Wholesale Dealer
Distribution Business, outside of the ordinary course of business, or to amend
or agree to amend any of the Dealer Agreements, the Personal Property Leases or
the Real Property Leases except in the ordinary course of business; (ii)
purchase or otherwise commit to purchase inventory for the Consumer Wholesale
Dealer Distribution Business in amounts that would ordinarily last more than
180 days beyond the Closing Date; (iii) alter in any material respect its
current credit policies as they relate to the Accounts Receivable; or (iv)
voluntarily take any action which would render any representation and warranty
of Agway contained in Article VI hereof inaccurate at any time between the date
hereof and the Closing Date, including as of the Closing Date.
8.3. Consents of Third Parties. Agway shall use its
----------------------------
commercially reasonable efforts to obtain the Closing Consents prior to the
Closing Date, and to obtain the remaining Required Consents as soon as
practicable following the Closing Date, including in each case as applicable and
without limitation: (i) as required, the consent of the landlords or lessors of
the Leased Real Property and the lessors of the Leased Personal Property to the
assignment to, and assumption by, Southern States of the Real Property Leases
and the Personal Property Leases; (ii) as required, the consent of third parties
to the assignment to, and assumption by, Southern States of the Dealer
<PAGE>
Agreements; and (iii) as required, the consent of any governmental, public or
regulatory authority to the assignment to Southern States of the Assignable
Permits.
8.4. Cooperation. Agway shall cooperate with Southern States
-----------
to effect the consummation of the transactions contemplated herein
on the Closing Date.
8.5. Supplement to Schedules. After the date hereof, Agway
------------------------
shall, from time to time prior to or at the Closing, by notice to Southern
States, supplement or amend any Schedule, including without limitation, one or
more supplements or amendments thereto, to correct any matter which would
constitute a breach of any representation or warranty set forth herein. Such
supplemental or amended Schedule shall not be deemed to cure any willful and
intentional breach of such representation or warranty for the purposes of
Article XVI hereof. If, however, the Closing occurs, such supplemental or
amended Schedule shall be effective to cure and correct for all purposes any
breach of any representation or warranty that would have existed by reason of
Agway not having made such supplement or amendment.
8.6. Satisfaction of Conditions. Agway shall use its best
----------------------------
efforts (not to include the expenditure of any substantial sums) to cause the
conditions to the obligations of Southern States contained in Article XI to be
satisfied to the extent that the satisfaction of such conditions is in the
control of Agway; however, the foregoing shall not constitute a limitation upon
the covenants and obligations of Agway otherwise expressly set forth in this
Agreement.
8.7. No Other Negotiations. In consideration of the time and
---------------------
expense that will be incurred by Southern States in connection with the
transaction contemplated by this Agreement, Agway agrees that following the
execution of this Agreement or until termination of this Agreement pursuant to
Article XVI hereof, it shall not, nor shall it permit any of its subsidiaries
to, nor shall it authorize or permit any officer, director or employee of, or
any investment banker, attorney, accountant or other advisor or representative
of, Agway or any of its subsidiaries to, directly or indirectly, (i) solicit,
initiate or encourage the submission of any Acquisition Proposal (as hereinafter
defined) or (ii) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or agree to or endorse,
or take any other action to facilitate any Acquisition Proposal or any inquiries
or the making of any proposal that constitutes, or may reasonably be expected to
lead to, any Acquisition Proposal; provided, however, that nothing in this
Section 8.7 shall require the members of the Board of Directors of Agway to
violate their fiduciary duties. Agway shall as promptly as practicable advise
Southern States orally and in writing of the receipt by it (or any of the other
entities of persons referred to above) after the date hereof of any Acquisition
Proposal, or any inquiry which could lead to any Acquisition Proposal, the
material terms and conditions of such Acquisition Proposal or inquiry, and the
identity of the person making any such Acquisition Proposal or inquiry. Agway
will keep Southern States fully informed of the status and details of any such
Acquisition Proposal or inquiry. The term "Acquisition Proposal" as used herein
means any offer or proposal involving the purchase of all or any portion of all
the assets of the Agway Consumer Wholesale Dealer Distribution Business as
defined and specified in Article I of this Agreement.
<PAGE>
8.8. Payments on Accounts Receivable. If, after the Closing,
-------------------------------
Agway receives any check, draft or other payment on or on account of any of the
Accounts Receivable, it shall promptly endorse such check, draft or other
payment to Southern States without recourse and mail it to Southern States,
along with any supporting documentation, at such address as Southern States
shall furnish for this purpose. Such payments shall be applied to the Accounts
Receivable as provided for in Section 14.6 below.
8.9. Preparation of Financial Statements for Consumer
-------------------------------------------------------
Wholesale Dealer Distribution Business. Agway will cause to be prepared separate
--------------------------------------
"carve-out" financial statements of the Consumer Wholesale Dealer Distribution
Business (the "CWDDB Financial Statements). The CWDDB Financial Statements will
be prepared in accordance with the rules and regulations of the Securities and
Exchange Commission (the "SEC") and will be for such periods that are required
by the SEC for inclusion in SEC filings of Southern States. To the extent SEC
rules and regulations require some or all of the CWDDB Financial Statements to
be audited, Agway will cause such financial statements to be audited. Such
statements will be accompanied by supporting schedules indicating assumptions,
allocations, and reclassifications made in conjunction with the preparation of
the CWDDB Financial Statements. Agway shall provide by June 15, 2000, projected
financial statements of the CWDDB (the "Projected CWDDB Financial Statement")
for the period ending on and as of June 24, 2000 (Agway's fiscal year-end),
which statement Southern States may use in arranging any financing required by
Southern States in connection with the consummation of the transactions
contemplated by the Agreement. The Projected CWDDB Financial Statement will be
prepared on a basis consistent with the rules and regulations of the SEC unless
modified by Agway with the consent of Southern States.
ARTICLE IX
COVENANTS OF SOUTHERN STATES
9.1. Cooperation. Southern States shall cooperate with Agway
-----------
to effect the consummation of the transactions contemplated herein on the
Closing Date and will use its reasonable efforts to obtain the necessary
financing to meet the Closing Date. Southern States shall also use its
reasonable efforts to cause Agway to be relieved at Closing, or as soon
thereafter as may be practicable, from any and all liabilities with respect to
the Assumed Liabilities.
9.2. Negative Covenant. Southern States shall not take any
------------------
action which would render any representation and warranty of Southern States
contained in Article VII hereof inaccurate at any time between the date hereof
and the Closing Date, including as of the Closing Date, and shall promptly
advise Agway of any breach of any representation or warranty, covenant,
condition or obligation of Southern States hereunder.
9.3. Satisfaction of Conditions. Southern States shall use its
--------------------------
best efforts (not to include the expenditure of any substantial sums) to cause
the conditions to the obligations of Agway contained in Article X to be
satisfied to the extent that the satisfaction of such conditions is in the
<PAGE>
control of Southern States; however, the foregoing shall not constitute a
limitation upon the covenants and obligations of Southern States otherwise
expressly set forth in this Agreement.
ARTICLE X
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF AGWAY
The obligations of Agway hereunder are subject to the fulfillment of
each of the following conditions prior to or at the Closing any one of which may
be waived in whole or in part by the Agway:
10.1. Performance of Obligations. Southern States shall have
--------------------------
performed, or complied with, in all respects, all of its agreements and
covenants expressly required to be performed or complied with on or before the
Closing Date hereunder.
10.2. Representations and Warranties. The representations
-------------------------------
and warranties of Southern States made herein shall be deemed to have been made
again at and as of the Closing Date and shall then be true in all material
respects, and Southern States shall deliver to Agway a certificate of an officer
of Southern States dated as of the Closing Date, certifying to that effect.
10.3. Closing Consents. Agway and Southern States shall have
----------------
received the Closing Consents, and any HSR Act waiting period with respect to
the transaction contemplated hereby shall have expired or been terminated.
10.4. Miscellaneous. Agway shall have received such other
-------------
instruments and documents as Agway and its counsel may reasonably request,
including but not limited to the instruments and documents to be delivered by
Southern States to Agway pursuant to Section 5.3 hereof.
10.5. Absence of Litigation. No temporary restraining order,
---------------------
preliminary injunction or permanent injunction or other order preventing the
consummation of the transactions and other actions contemplated under this
Agreement shall have been issued by any Federal or state court and remain in
effect. Southern States agrees to use commercially reasonable efforts to have
any such injunction or order lifted.
10.6. No Change In Law. No law, order or regulation shall
----------------
have been enacted which prohibits the Closing or the satisfaction of any of the
conditions to the obligations of Agway contained in this Article X.
<PAGE>
ARTICLE XI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SOUTHERN STATES
The obligations of Southern States hereunder are subject to the
fulfillment of each of the following conditions prior to or at the Closing, any
one of which may be waived in whole or in part by Southern States:
11.1. Performance of Obligations. Agway shall have
------------------------------
performed, or complied with, in all respects all of its agreements and covenants
expressly required to be performed or complied with on or before the Closing
Date hereunder.
11.2. Representations and Warranties. The representations
-------------------------------
and warranties of Agway made herein shall be deemed to have been made again at
and as of the Closing Date and shall then be true in all material respects, and
Agway shall deliver to Southern States a Certificate of an officer of Agway,
dated as of the Closing Date, certifying to that effect.
11.3. Closing Consents. Agway and Southern States shall have
----------------
received the Closing Consents and any HSR Act waiting period with respect to the
transaction contemplated hereby shall have expired or been terminated.
11.4. No Material Adverse Change. There shall not have been
--------------------------
any material adverse change in (i) the assets, liabilities, the business or
condition, financial or otherwise, or the results of operations of the Consumer
Wholesale Dealer Distribution Business, or (ii) in the financial condition,
taken on a consolidated basis, of Agway and its subsidiaries.
11.5. Financing. Southern States shall have obtained the
---------
financing necessary to consummate the transactions contemplated in this
Agreement, on terms and conditions reasonably satisfactory to Southern States.
11.6. Transition Services. On or before the Closing, Agway
-------------------
and Southern States shall have entered into a Transition Services Agreement in
substantially the same form as Exhibit E hereto, pursuant to which Agway shall
provide to Southern States the services specified therein and on the terms and
conditions set forth therein.
11.7. Environmental. On or before the Closing, Southern
-------------
States shall have completed to its satisfaction "Phase I" environmental
examinations of the Leased Real Property. Southern States shall use best efforts
to complete "Phase I" examinations no later than June 30, 2000.
11.8. Logistical Arrangements. On or before the Closing,
------------------------
Southern States shall have entered into arrangements to its satisfaction
regarding outbound freight transportation from the distribution centers located
on the Leased Real Property.
11.9. Due Diligence. Southern States shall have completed to
-------------
its satisfaction its due diligence with respect to the Consumer Wholesale Dealer
Distribution Business and the Purchased Assets, including specifically the Real
Property Leases, the Accounts Receivable and the Dealer Agreements, as well as
<PAGE>
its credit evaluation of the dealers who are parties to the Dealer Agreements.
Southern States shall use its best efforts to complete its due diligence,
subject to any additional information or disclosures which may be provided by
Agway, no later than June 30, 2000.
11.10. Projected CWDDB Financial Statement. On or before the
-----------------------------------
Closing, Southern States and, to the extent necessary, its external auditors,
shall have had an opportunity to review the Projected CWDDB Financial Statement
and shall have concluded in their reasonable judgment, and after discussion and
review with Agway management, that the methodology employed and the allocations
and reclassifications made in the preparation of the Projected CWDDB Financial
Statement are reasonable.
11.11. Miscellaneous. Southern States shall have received
-------------
such other instruments and documents as Southern States and its counsel may
reasonably request, including but not limited to the instruments and documents
to be delivered by Agway to Southern States pursuant to Section 5.2 hereof.
11.12. Absence of Litigation. No temporary restraining
-----------------------
order, preliminary injunction or permanent injunction or other order preventing
the consummation of the transactions and other actions contemplated under this
Agreement shall have been issued by any Federal or state court and remain in
effect. Agway agrees to use commercially reasonable efforts to have any such
injunction or order lifted.
11.13. No Change in Law. No law, order or regulation shall
----------------
have been enacted which prohibits the Closing or the satisfaction of any of the
conditions to the obligations of Southern States contained in this Article XI.
ARTICLE XII
CONFIDENTIALITY
12.1. Confidentiality. Each party shall continue to abide by
---------------
the terms of the confidentiality agreement between Agway and Southern States,
dated May 1, 2000, (the "Confidentiality Agreement") subject to Southern States'
and Agway's right to make such disclosures as either may deem appropriate to
their lenders or other parties who are involved in arranging financing for
either Southern States or Agway. No public announcement of the execution of or
relating to this Agreement shall be made by either party without the prior
consent of the other, provided, however, that either party shall be entitled to
make such disclosures as may in the opinion of its counsel be required to comply
with applicable laws or the requirements of the Securities and Exchange
Commission or the National Association of Securities Dealers.
12.2. Equitable Remedies. The parties acknowledge and agree
------------------
that in the event of a default or breach by either party of the provisions of
this Article XII, the other party shall sustain irreparable injury and damages,
the amount and extent of which cannot be measured in money and for which there
<PAGE>
does not and shall not exist any adequate remedy at law. Accordingly, each of
the parties hereby agrees that in the event of a default or breach by either
party of the provisions of this Article XII, the other party shall be entitled
to injunctive relief and to specific performance and that in any legal action or
proceeding for injunctive relief and specific performance the party against whom
such action or proceeding is instituted shall be deemed to have hereby been
waived, and shall not assert in such action or proceeding, the defense or claim
that the party instituting such action or proceeding has an adequate remedy at
law or that an adequate remedy at law exists. The foregoing shall not, however,
be deemed to limit or restrict the remedies at law or in equity of either party
for any default or breach of the provisions of this Article XII.
ARTICLE XIII
DESTRUCTION OF TANGIBLE ASSETS
13.1. Condition of Tangible Assets. At the Closing, Agway
----------------------------
shall use its commercially reasonable efforts to deliver physical possession of
the Owned Personal Property, the Leased Personal Property and the Improvements
(collectively, the "Tangible Assets") to Southern States in substantially the
same physical condition as they exist as of the date hereof, except for normal
wear and tear and changes occurring in the usual and ordinary course of business
or incident to the customary use of the same. Agway will amend its schedules to
reflect any material damage to or destruction of Purchased Assets that is
inconsistent with the foregoing sentence.
13.2. Risk of Loss. All risk of loss as a result of any
------------
destruction, damage, or depletion of or to the Tangible Assets prior to the
Closing, whether by reason of fire, theft, accident or other cause, shall be
borne by Agway, and except as provided in Section 13.3 below, all insurance
proceeds payable as a result thereof shall be paid and belong solely to Agway.
13.3. Destruction. If, prior to the Closing, the Tangible
-----------
Assets other than Inventory, are destroyed or damaged to an extent that (a)
their value or physical condition differs in any material respect from the value
or physical condition as it exists as of the date hereof, or (b) the destruction
or damage has a material adverse effect on the operation of the Consumer
Wholesale Dealer Distribution Business (either (a) or (b) referred to herein as
a "Material Loss"), Southern States may in its sole discretion, by written
notice to Agway, terminate this Agreement. If, prior to the Closing, the
Tangible Assets, other than Inventory, are destroyed or damaged, to an extent
that does not result in a Material Loss, or in the event that Southern States in
its sole discretion elects to proceed to Closing notwithstanding the occurrence
of a Material Loss, Agway and Southern States shall consummate the transactions
contemplated in this Agreement, and at the Closing Agway shall deliver physical
possession of the Tangible Assets to Southern States in such physical condition
as the same may then exist, but in that event Agway will pay to Southern States
any net insurance proceeds received for the property damage to the Purchased
Assets, but not any proceeds for business interruption or other kinds of
insurance that may be payable with respect to any period prior to the Closing
Date with respect to such damage or destruction. For purposes of this Section,
the value or physical condition of the Owned Personal Property shall be deemed
<PAGE>
to differ in a material respect from its value or physical condition as of the
date hereof if the greater of (a) the book value, as shown on the Agway's books
and records, of the Owned Personal Property destroyed or damaged, or (b) the
aggregate costs of all necessary repairs to, and replacements of, the Owned
Personal Property, is greater than ten percent (10%) of the aggregate book value
of the Tangible Assets prior to such damage or destruction as shown on the
Agway's books and records.
13.4. Liability Upon Termination. If this Agreement is
----------------------------
terminated by Southern States pursuant to this Article XIII, neither Agway nor
Southern States shall be liable or obligated to the other except and to the
extent as may be expressly provided in this Agreement.
ARTICLE XIV
POST-CLOSING AND OTHER MATTERS
14.1. Covenants Relating to the Consumer Wholesale Dealer
------------------------------------------------------
Distribution Business
---------------------
14.1.1. Agway agrees to license to Southern States,
subject to the terms set forth in the License Agreement attached as Exhibit C,
the use of the AGWAY name and other trademarks for use on brand products,
excluding feed (other than bird feed and pet food), commercial agricultural
fertilizer, commercial agricultural seed and commercial agricultural pesticides,
for distribution to consumer dealers.
14.1.2. Southern States agrees that, during the term
of the License Agreement,it will offer for sale to its dealers in the Trade Area
(and provide commercial support for, as specified in Section 14.1.9 below)
Seedway/Agway vegetable seed and Agway lawn and garden consumer fertilizer
in packages of 40 pounds or less as specified in Schedule 14.1.2, assuming these
products are competitively priced to market when comparing quality, quantity
and marketing. If at any time Southern States believes the Agway products are
not competitively priced to market when comparing quality, quantity and
marketing, Southern States shall promptly provide written notice of its
position in reasonable detail and Agways hall have five (5) business days from
receipt of such notice to address and meet the market price.
14.1.3. Southern States agrees that, during the term
of the License Agreement, it will offer for sale to its dealers in its entire
territory (and provide commercial support for, as specified in Section 14.1.9)
Agway Feathered Friend bird feed, along with other competitive brands, using
the same wholesale margin structure for all such products. If at any time
Southern States believes the Agway product is not competitively priced to market
when comparing quality, quantity and marketing, Southern States shall promptly
provide written notice of its position in reasonable detail, including such
documentation concerning its wholesale margin structure as shall be necessary
in the circumstances, and Agway shall have two (2) business days from
receipt of such notice and supporting information to address and meet the
market price.
<PAGE>
14.1.4. Southern States agrees that, during the term of the
License Agreement, it will provide Agway labeled or other exclusive branded
products in the Trade Area, and to the extent it elects to sell or otherwise
distribute Agway labeled branded products under the Dealer Agreements, it will
provide reasonable commercial support for the Agway brand.
14.1.5. Southern States agrees that Agway will have the
exclusive right and authority, and Southern States acknowledges that Agway
intends, to continue to manufacture, promote, distribute, and sell bagged feed
products, including equine feed, through the Southern States dealer channel in
the Trade Area. Also, subject to the terms of the marketing agreement between
Southern States and Agway dated February 24, 1998, and any renewals, extensions
or replacements thereof, Southern States agrees that Agway will have the
exclusive right and authority, and Southern States acknowledges that Agway
intends, to continue to manufacture, promote, distribute, and sell Legends
bagged feed products through the Southern States channel in the Trade Area.
14.1.6. Subject to the terms of the License Agreement,
Southern States agrees to pay to Agway $100,000 on June 30, 2001 and thereafter,
beginning on August 1, 2002, annualized payments equal to 0.840% of the dollar
volume of gross sales to dealers (including new dealers added to the system) in
the Trade Area for each of the fiscal years ended June 30, 2002 through 2010,
not to exceed $840,300 in any fiscal year.
14.1.7. Southern States agrees that it will consider the
purchase from Agway of Agway's interest in Pro Pet LLC. In the event Southern
States does not purchase Agway's interest in Pro Pet LLC, Agway agrees that it
will sell Pro Pet products to Southern States at Agway's cost (F.O.B. St.
Mary's, Ohio) in such quantities as Southern States may reasonably require for
resale in the Trade Area.
14.1.8. Southern States and Agway will coordinate efforts
to make a joint presentation to promote the Consumer Wholesale Dealer
Distribution Business and its purchase by Southern States at the Spotlight Show
on June 27 and 28, 2000, at Foxwoods, Connecticut.
14.1.9. Southern States agrees to enter into joint efforts
with Seedway and the Agway Sunflower division of Agway ("Agway Sunflower") to
promote the sales of products listed in Schedule 14.8. Southern States agrees to
make reasonable, good faith efforts to make Seedway the "preferred supplier" of
the Southern States dealer network in the Trade Area. Southern States agrees to
make reasonable, good faith efforts to make Agway Sunflower the "preferred
supplier" of the entire Feathered Friend Birdfood line (including Black Oil
Sunflower and all other birdfood) across its entire dealer network, both inside
and outside the Trade Area. Such efforts by Southern States would include but
not be limited to the following:
(a) Organize and conduct semi-annual product review and
sales strategy sessions with each supplier and appropriate Southern States
procurement and sales personnel.
(b) Feature Seedway and Feathered Friend products in
corporate sales circulars according to seasonality.
<PAGE>
(c) Implement direct order and distribution center dealer
sales programs.
(d) Provide adequate dealer point-of-purchase and local
advertising materials.
(e) Make booth space available at semi-annual Shows, i.e.,
Seedway at Shows in the Trade Area; Feathered Friend at all Shows.
(f) Provide adequate training to Southern States corporate
and dealer personnel to promote the sales of products listed in Schedule 14.8.
(g) Include Seedway and Feathered Friend programs in
monthly promotional mailings to dealers according to seasonality and territory
outlined above.
(h) Allow full access to supplier representatives to work
directly with dealers to promote their product sales.
(i) Southern States will impose no markup or marketing
penalties, as compared to competitive lines, that would unfairly restrict the
competitive nature of the products listed in Schedule 14.8.
Any and all of the above may be modified or cancelled upon mutual consent of
Southern States and Agway.
14.2. Employees and Employee Benefits.
-------------------------------
14.2.1. Southern States shall have the right to talk with
and to take applications from and to consider employees of the Consumer
Wholesale Dealer Distribution Business for employment by Southern States in
connection with its acquisition and assumption of the Consumer Wholesale Dealer
Distribution Business. Nothing in this Agreement shall be construed as giving
any person any right to employment or to any terms or conditions of employment
including but not limited to any type or levels of compensation or benefits,
with Southern States.
14.2.2. (a) Agway shall be and remain liable and responsible
for any and all liabilities or payments arising, prior to the Closing, with
respect to the employment by Agway of the Business Employees or the termination
of that employment.
(b) Agway will pay any required severance payments
in accordance with its severance payment policy to present Agway personnel. A
"stay on bonus" will be developed by Agway and Southern States. The cost of the
bonus will be divided equally between Agway and Southern States.
<PAGE>
14.2.3. Southern States shall not assume, and Agway shall
retain all obligations to fund or otherwise shall provide all benefits in
respect of or payable under, Agway's employee benefit plans and programs. No
assets or liabilities of any of Agway's employee benefit plans and programs
shall be transferred to any plan maintained or established by Southern States.
14.3. Allocation of Purchase Price. Agway and Southern States
----------------------------
shall allocate the Purchase Price, when determined, among the Purchased Assets
and the Assumed Liabilities in accordance with an allocation schedule. As soon
as may be practicable after the Closing and prior to filing any tax return which
includes information related to the transactions contemplated in this Agreement,
Agway and Southern States, employing the allocation of the Purchase Price made
pursuant to this Section 14.3, shall prepare mutually acceptable IRS Forms 8594
which they shall use to report the transactions contemplated in this Agreement
to the Internal Revenue Service and to all other taxing authorities. Neither
Agway nor Southern States shall take a position in any tax proceeding, tax audit
or otherwise inconsistent with such allocation; provided, however, that nothing
contained herein shall require Agway or Southern States to contest any proposed
deficiency or adjustment by any taxing authority or agency which challenges such
allocation of the Purchase Price, or exhaust administrative remedies before any
taxing authority or agency in connection therewith, and Agway and Southern
States shall not be required to litigate before any court (including without
limitation the United States Tax Court), any proposed deficiency or adjustment
by any taxing authority or agency which challenges such allocation of the
Purchase Price. Agway and Southern States shall give prompt notice to the other
of the commencement of any tax audit or the assertion of any proposed deficiency
or adjustment by any taxing authority or agency which challenges such allocation
of the Purchase Price.
14.4. Transition Services Agreement. As a condition to the
-------------------------------
Closing, Agway and Southern States shall have entered into a transition services
agreement substantially in the form of Exhibit E hereto (the "Transition
Services Agreement"), pursuant to which Agway agrees to use reasonable
commercial efforts to provide Southern States for a period of up to 180 days
following the Closing, with certain purchasing, distribution, accounting,
customer service, computer and related information support services relating to
the operations of the Consumer Wholesale Dealer Distribution Business. The
Transition Services Agreement shall provide that Southern States will pay to
Agway a monthly fee equivalent to Agway's costs of providing such services.
14.5. Use of the Agway Name by Southern States after Closing.
-------------------------------------------------------
Agway acknowledges and agrees that Southern States shall have the right after
the Closing to use the name "AGWAY" as provided for in the License Agreement.
14.6. Repurchase of Unpaid Accounts Receivable and Application
--------------------------------------------------------
of Proceeds. Agway agrees that on the date that is 120 days from the Closing
------------
Date (or the next business day if applicable) (the "Settlement Date"), it will
repurchase the aggregate stated amount thereof as shown on Southern States'
books and records any balance owed on the Accounts Receivable at the Closing and
for which final payment has not been received within 120 days from Closing,
provided that Agway shall only be obligated to repurchase unpaid Accounts
Receivable which it transferred to Southern States. The purchase price for such
repurchases shall be the face amount of such unpaid Accounts Receivable plus
<PAGE>
interest at the rate of 7.5% per annum from the Closing Date. Any payments
received from customers by Southern States on the Accounts Receivables will be
credited first to the oldest outstanding Account Receivable of the account
debtor unless a customer otherwise specifies the invoice or invoices to which
payment shall be applied because an item is in dispute. On the Settlement Date,
Agway agrees to assign and transfer to Southern States all such security
interests or other collateral held by it securing obligations of the account
debtors on the Accounts Receivable purchased by Southern States and not resold
to Agway.
14.7. Additional Documents. From and after the Closing Date,
---------------------
each of the parties shall, at the request of the other, prepare, execute, and
deliver to the other such additional documents and instruments and take such
action as the other may deem reasonably necessary to further evidence or effect
any of the transactions contemplated herein.
14.8. Non-Competition.
---------------
(a) In consideration of Southern States' purchase of the
Consumer Wholesale Dealer Distribution Business pursuant to this Agreement,
Agway agrees that for a period of ten (10) years following the Closing Date, and
except as otherwise provided for in this Section 14.8, it will not, directly or
indirectly, for itself or on behalf of any individual, partnership, corporation
or any other legal entity, as principal, agent, or otherwise, engage in,
control, manage or otherwise participate in the ownership, control or management
of a business, or enter into any contract or other arrangement with a
third-party which involves the distribution or sale of branded products
currently being sold exclusively through the Consumer Wholesale Dealer
Distribution Business ("Transferred Products") in direct competition, whether by
traditional "bricks and mortar" or by electronic or internet means, within any
part of the Trade Area. Southern States acknowledges that none of Agway's other
businesses are presently in competition with any portion of the Consumer
Wholesale Dealer Distribution Business and that Agway may acquire up to 5% of
the outstanding securities of any competitor of the Consumer Wholesale Dealer
Distribution Business whose securities are publicly traded. For purposes of this
Section 14.8, "Trade Area" shall mean the states of Maine, New Hampshire,
Vermont, Massachusetts, Rhode Island, Connecticut, New York, New Jersey,
Pennsylvania, Ohio (excluding from the operation of this Section 14.8, however,
but only in the State of Ohio, the distribution and sale of Feathered Friend
bird feed products), Delaware and Maryland. Agway recognizes that irreparable
injury may result to Southern States if Agway breaches this Section 14.8, and
Agway agrees that if it engages in any act in violation of the provisions
hereof, Southern States shall be entitled, in addition to any actual damages
proved, to injunctive relief prohibiting Agway from engaging in any such act.
Notwithstanding the foregoing, nothing in this Agreement shall be deemed to
prohibit Agway and/or its present or future affiliate(s) from entering into a
merger, joint venture or other business combination with another entity
provided: (1) the objective of the transaction is not to serve the Consumer
Wholesale Dealer Distribution Business market in the Trade Area; and (2) serving
the Consumer Wholesale Dealer Distribution Business market in the Trade Area is
not a principal element of the other entity's current or future business or, if
that service is such an element, Agway, its affiliate(s) and its personnel will
have no involvement with that element of the combined or resulting business
during the term of the non-competition covenant under this Section 14.8 and no
such combined or resulting business shall use or license the use of the name
"AGWAY" or the Marks (as defined in the License Agreement) in competition with
<PAGE>
the Consumer Wholesale Dealer Distribution Business operated by Southern States
for so long as this non-competition covenant or the License Agreement shall be
in effect.
(b) The non-competition covenant in Section 14.8(a) insofar as
it shall relate to each category of Transferred Products shown on Schedule 14.8,
is subject to and conditional upon the continued satisfaction of each of the
following conditions with respect to each such category as applicable and
default under the provisions below with respect to one such category shall have
no effect upon any other category insofar as this Section 14.8 shall be
concerned:
(i) the three month gross shipped volume for each
category of the Feathered Friend categories of Transferred Products listed on
Schedule 14.8 shall equal or exceed 50% of the average three month gross shipped
volume for each of the corresponding categories of product calculated for the
same three month period over the two years preceding the Closing Date. (For
example, the three month gross shipped volume for each category of Feathered
Friend product for the months of March, April and May of 2001 will be compared
against the average of Agway's gross shipped volume for that category during the
months of March, April, and May for each of 1998 and 1999.)
(ii) the three month gross sales volume for vegetable seed
purchased from Seedway shall equal or exceed 80% of the average three month
gross sales volume over the two years preceding the Closing Date. (For example,
the three month gross sales volume for vegetable seed purchased from Seedway for
the months of March, April and May of 2001 will be compared against the average
of Agway's gross sales volume for that category during the months of March,
April, and May for each of 1998 and 1999.)
(iii) Southern States shall continue to comply with its
obligations in subsections 14.1.2, 14.1.3, 14.1.4, and 14.1.9, subject in all
cases to the delivery of products to Southern States in sufficient quantities
and qualities to permit Southern States to carry out such obligations; and
subject, further, to the condition that if at any time Agway shall believe that
Southern States is not in compliance with any of subsections 14.1.2, 14.1.3,
14.1.4 or 14.1.9, it shall give Southern States prompt written notice of its
position in reasonable detail and Southern States shall have thirty (30) days
from receipt of such notice to address Agway's stated concern. To the extent
that Southern States shall fail to correct any breach alleged by Agway within
the time period provided, the non competition covenant of Section 14.8(a) shall
be null and void with respect to, but only with respect to, the product line or
lines as to which such breach shall relate.
(c) The non-competition covenant in Section 14.8 (a) in its
entirety shall be subject to and conditional upon the continued satisfaction of
each of the following conditions:
(i) the License Agreement shall continue to be in effect,
and Southern States shall not have failed to cure any breach of any material
provision of the License Agreement after notice of and within the time period
provided for therein for the cure of such a breach.
<PAGE>
(ii) Southern States shall have met its obligations under
Section 14.1.6 in all respects.
In the event any of the foregoing conditions are not met, the non-competition
covenant in Section 14.8(a) shall be null and void as provided for herein.
(d) Further, Southern States agrees that:
(i) Agway's right to compete (through traditional or
electronic or internet means) in the Trade Area with respect to commercial
animal feed (other than bird feed and pet food), commercial agricultural
fertilizer (including turf fertilizer), commercial agricultural seed (including
turf seed) and commercial agricultural pesticides (regardless of brand name)
shall not be restricted or limited in any way;
(ii) Seedway shall have the right to compete in sales to the
Southern States dealer network (through traditional or electronic or internet
means) in the Trade Area with respect to special mix turf seeds and commercial
turf seed in generic branded AGWAY bags, these product lines being understood
and agreed to include products not broadly marketed through or in pre-packaged
branded or "concept" form.
(iii) Wetsel, Inc., a subsidiary of Southern States, will
not manufacture, label or distribute any product bearing the "AGWAY" name or
trademark.
(e) In the event Southern States elects to exercise its
option as provided for in the License Agreement to extend the License Agreement
for a five-year period following the expiration of the initial ten (10) year
term, then the non-competition covenant in Section 14.8(a) above shall continue
for an additional five (5) year period as well subject to Southern States'
continued compliance with subsections 14.8(b) and (c) above. Southern States
and Agway agree that it is the intention of both such parties that the non-
competition covenant in Section 14.8 above shall be continued during any further
extension of the License Agreement as provided for in that Agreement;
nevertheless, the parties recognize that substantially changed circumstances
may require that the covenant be re-addressed at the time of any such further
extension in light of any such substantially changed circumstances existing at
the time. Accordingly, the parties acknowledge that the covenant in Section 14.8
is not binding under the terms of this Agreement beyond the initial ten (10)
year term of the License Agreement and the first five (5)year extension thereof,
if exercised by Southern States, and any further extension of the covenant in
Section 14.8 above beyond the initial ten (10) year term and the first five (5)
year extension, if exercised by Southern States, shall be effective only if
agreed upon in writing by the parties or their respective successors or assigns.
14.9. Cooperation Regarding Tax Filings. Agway and Southern
----------------------------------
States shall reasonably cooperate, and shall use reasonable efforts to cause
their respective affiliates, officers, employees, agents, auditors and other
Representatives reasonably to cooperate, in preparing and filing all tax
returns, including, but not limited to, maintaining and making available to each
other all records necessary in connection with taxes and in resolving all
disputes and audits with respect to all taxable periods relating to taxes.
<PAGE>
ARTICLE XV
INDEMNIFICATION
15.1. Survival. Each of the covenants, agreements, and
---------
representations and warranties of Agway and Southern States herein shall survive
the Closing until 5:00 p.m. Eastern Standard Time one year following the Closing
Date, at which time, such covenants, agreements, representations and warranties
shall expire and terminate, provided, however, that (i) the representations and
warranties of Agway respecting taxes set forth in Section 6.4 shall survive the
Closing for the applicable statute of limitations; (ii) the representations and
warranties of Agway respecting environmental matters set forth in Section 6.14
shall survive the Closing without limitation as to time; (iii) the
representations and warranties of Agway to the extent they apply solely to title
to the Purchased Assets set forth in Sections 6.8.2 and 6.11, and the obligation
of Agway to indemnify Southern States for any loss arising out of any Excluded
Liabilities pursuant to Section 15.2(iii), shall survive the Closing without
limitation as to time; (iv) the obligations of Agway to indemnify Southern
States for any loss arising out of any Pre-Closing Environmental Condition
pursuant to Section 15.2(iv), shall survive the Closing without limitation as to
time; (v) the representations and warranties of Agway set forth in the second
sentence of Section 6.11 shall expire and terminate at Closing; and (vi) the
covenants and agreements of Agway or Southern States to be performed after
Closing Date shall survive the Closing without limitation as to time except that
the covenants contained in Section 14.1 shall survive the Closing and expire and
terminate upon termination of the License Agreement (the "Survival Period").
15.2. Indemnification by Agway. Subject to the provisions of
------------------------
Sections 15.3 and 15.6, Agway shall indemnify, defend and hold harmless Southern
States and the directors, officers, employees and shareholders of Southern
States (the "Southern States Indemnified Persons") against and in respect of all
losses, costs, and expenses suffered or incurred or required to be paid by
Southern States Indemnified Persons as a result of: (i) the breach by Agway of
any representation and warranty made by Agway to Southern States Indemnified
Persons in Article VI of this Agreement and the Schedules including therewith
hereto that is executed and delivered pursuant hereto or in connection with the
closing of the transactions hereunder; (ii) the non-fulfillment by Agway of any
agreement or covenant of Agway contained herein; (iii) the Excluded Liabilities
but not including any liability or obligation arising from any Pre-Closing
Environmental Condition; (iv) any liability or obligation arising from any
Pre-Closing Environmental Condition; (v) the waiver by Agway and Southern States
of compliance with the Bulk Transfers Laws; and (vi) all actions, suits,
proceedings, demands, assessments, judgments, costs, including reasonable
attorney's fees, and expenses incident to any of the foregoing.
15.3. Limitations on Indemnification by Agway. Notwithstanding
---------------------------------------
the provisions of Section 15.2, Agway shall have no liability to indemnify
Southern States Indemnified Persons hereunder until the aggregate amount of
Southern States Indemnified Persons' indemnifiable losses exceeds $50,000 (the
"Agway Minimum Amount"). If the aggregate amount of Southern States Indemnified
Persons' indemnifiable losses exceeds the Agway Minimum Amount, Agway shall
<PAGE>
Indemnify Southern States Indemnified Persons for the amount that such
indemnifiable losses exceed the Agway Minimum Amount and are less than or equal
to $1,000,000. The foregoing cap limitation shall not apply to Agway's
indemnification obligations with respect to the following: (i) the Excluded
Liabilities; (ii) the representations and warranties of Agway to the extent they
apply solely to title to the Purchased Assets set forth in Sections 6.8.2 and
6.11; (iii) any liability or obligation arising from any Pre-Closing
Environmental Condition or the representations and warranties of Agway
respecting environmental matters contained in Section 6.14; (iv) the
representations and warranties of Agway respecting taxes set forth in Section
6.4; (v) the covenants or agreements of Agway to be performed after Closing
Date; or (vi) the failure to comply with the Bulk Transfer Laws.
15.4. Indemnification by Southern States. Subject to the
-------------------------------------
provisions of Sections 15.5 and 15.6, Southern States shall indemnify and hold
harmless Agway and the directors, officers, employees and shareholders of Agway
(the "Agway Indemnified Persons") against and in respect of all losses, costs,
and expenses suffered or incurred or required to be paid by Agway Indemnified
Persons as a result of: (i) the breach by Southern States of any representation
and warranty made by Southern States to Agway in Article VII hereof; (ii) the
nonfulfillment by Southern States of any agreement or covenant of Southern
States contained herein; (iii) the failure of Southern States to discharge, when
due, the Assumed Liabilities; (iv) the operations by Southern States from and
after the Closing of the Consumer Wholesale Dealer Distribution Business,
including but not limited to any liability or obligation arising from any
Post-Closing Environmental Condition; and (v) all actions, suits, proceedings,
demands, assessments, judgments, costs, including reasonable attorney's fees,
and expenses incident to the foregoing.
15.5. Limitations on Indemnification by Southern States.
------------------------------------------------------
Notwithstanding the provisions of Section 15.4, Southern States shall have no
liability to indemnify Agway Indemnified Persons hereunder until the aggregate
amount of Agway Indemnified Persons' indemnifiable issues exceeds $50,000 (the
"SSC Minimum Amount"). If the aggregate amount of Agway Indemnified Persons'
indemnifiable losses exceeds the SSC Minimum Amount, Southern States shall
indemnify Agway Indemnified Persons for the amount that such indemnifiable
losses exceed the SSC Minimum Amount and are less than or equal to $1,000,000.
The foregoing cap limitation shall not apply to Southern States' indemnification
obligations with respect to (a) the Assumed Liabilities; (b) the covenants or
agreements of Southern States to be performed after Closing Date; and (c) the
operations by Southern States from and after the Closing of any Consumer
Wholesale Dealer Distribution Business, including but not limited to any
liability or obligation arising from any Post-Closing Environmental Condition.
15.6. Procedures for Indemnification.
------------------------------
15.6.1. If Southern States Indemnified Persons seek
indemnification from Agway for indemnifiable losses, Southern States Indemnified
Persons shall give notice to Agway of such loss, specifying in reasonable detail
the nature and basis for the claim and the amount thereof (the "Notice of
Loss"). If, within sixty days after the date on which Agway receives the Notice
of Loss, Agway has not delivered to Southern States a notice objecting to all or
any portion of the claimed loss and setting forth the amount of such claimed
loss objected to and the reasons for such objection, Southern States Indemnified
<PAGE>
Persons shall be entitled to indemnification for such loss unless Agway's
failure to object was inadvertent, and Agway shall promptly pay such loss. If
the failure of Agway was inadvertent, the process should be begun again but the
Survival Period with respect to the Claim shall be extended if the First Notice
of Loss was within the Survival Period. If, within sixty days after the date on
which Agway receives a Notice of Loss, Agway delivers to Southern States an
objection to all or any portion of the claimed loss, setting forth the amount of
such loss objected to and the reasons for such objection, Southern States
Indemnified Persons shall be entitled to reimbursement for the portion of such
loss not objected to by Agway and Agway shall promptly pay such amount. Southern
States Indemnified Persons shall be entitled to indemnification for the portion
of such claimed loss to which Agway objected to upon the earlier of: (a) the
Agway's and Southern States' written agreement with respect to the
indemnification of such loss or (b) a final judgment or award of an arbitrator
as provided in Section 18.12.
15.6.2. If Agway Indemnified Persons seek indemnification
from Southern States for indemnifiable losses, Agway Indemnified Persons shall
give a Notice of Loss to Southern States, specifying in reasonable detail the
nature and basis for the claim and the amount thereof. If, within sixty days
after the date on which Southern States receives the Notice of Loss, Southern
States has not delivered to Agway a notice objecting to all or any portion of
the claimed loss and setting forth the amount of such claimed loss objected to
and the reasons for such objection, Agway Indemnified Persons shall be entitled
to indemnification for such loss unless Southern States' failure to object was
inadvertent, and Southern States shall promptly pay such loss. If the failure of
Southern States was inadvertent, the process should be begun again but the
Survival Period with respect to the Claim shall be extended if the first Notice
of Loss was within the Survival Period. If, within sixty days after the date on
which Southern States receives a Notice of Loss, Southern States delivers to
Agway an objection to all or any portion of the claimed loss, setting forth the
amount of such loss objected to and the reasons for such objection, Agway
Indemnified Persons shall be entitled to reimbursement for the portion of such
loss not objected to by Southern States and Southern States shall promptly pay
such amount. Agway Indemnified Persons shall be entitled to indemnification for
the portion of such claimed loss to which Southern States objected to upon the
earlier of: (a) the Agway's and Southern States' written agreement with respect
to the indemnification of such loss or (b) a final judgment or award of an
arbitrator pursuant to Section 18.12.
15.6.3. The obligations and liabilities of an Indemnifying
Person with respect to losses resulting from the assertion of liability by third
parties (each, a "Third Party Claim") shall be subject to the following terms
and conditions:
(a) The Indemnified Persons shall promptly give written
notice to the Indemnifying Persons of any Third Party Claim which might give
rise to any loss by the Indemnified Persons, stating the nature and basis of
such Third Party Claim, and the amount thereof to the extent known; provided,
however, that no delay on the part of the Indemnified Persons in notifying any
Indemnifying Persons shall relieve the Indemnifying Persons from any liability
or obligation hereunder unless (and then solely to the extent) the Indemnifying
Person thereby is prejudiced by the delay. Such notice shall be accompanied by
copies of all relevant documentation with respect to such Third Party Claim,
including, without limitation, any summons, complaint or other pleading which
may have been served, any written demand or any other document or instrument.
<PAGE>
(b) If the Indemnifying Persons shall acknowledge in a
writing delivered to the Indemnified Persons that such Third Party Claim is
properly subject to their indemnification obligations hereunder, then the
Indemnifying Persons shall have the right to assume the defense of any Third
Party Claim at their own expense and by their own counsel, which counsel shall
be reasonably satisfactory to the Indemnified Persons; provided, however, that
-------- -------
the Indemnifying Persons shall not have the right to assume the defense of any
Third Party Claim, notwithstanding the giving of such written acknowledgment, if
(i) the Indemnified Persons shall have been advised by counsel that there are
one or more legal or equitable defenses available to them which are different
from or in addition to those available to the Indemnifying Persons, and, in the
reasonable opinion of the Indemnified Persons, counsel for the Indemnifying
Persons could not adequately represent the interests of the Indemnified Persons
because such interests could be in conflict with those of the Indemnifying
Persons, (ii) such action or proceeding involves, or could have a material
effect on, any material matter beyond the scope of the indemnification
obligation of the Indemnifying Persons or (iii) the Indemnifying Persons shall
not have assumed the defense of the Third Party Claim in a timely fashion.
(c) If the Indemnifying Persons shall assume the defense
of a Third Party Claim (under circumstances in which the proviso to Section
15.6.3(b) is not applicable), the Indemnifying Persons shall not be responsible
for any legal or other defense costs subsequently incurred by the Indemnified
Persons in connection with the defense thereof. If the Indemnifying Persons do
not exercise their right to assume the defense of a Third Party Claim by giving
the written acknowledgment referred to in Section 15.6.3(b), or are otherwise
restricted from so assuming by the proviso to Section 15.6.3(b), the
Indemnifying Persons shall nevertheless be entitled to participate in such
defense with their own counsel and at their own expense. If the defense of a
Third Party Claim is assumed by the Indemnified Persons pursuant to clause (i)
or (ii) of the proviso of Section 15.6.3(b), the Indemnified Persons shall not
be entitled to settle such Third Party Claim without the prior written consent
of the Indemnifying Persons, which consent shall not be unreasonably withheld or
delayed.
(d) If the Indemnifying Persons exercise their right to
assume the defense of a Third Party Claim pursuant to clauses (i) or (ii) of
Section 15.6.3(b), (i) the Indemnified Persons shall be entitled to participate
in such defense with their own counsel at their own expense and (ii) the
Indemnifying Persons shall not make any settlement of any claims without the
written consent of the Indemnified Persons, which consent shall not be
unreasonably withheld or delayed.
15.6.4. Notwithstanding any other provisions of this
Agreement, neither Agway nor Southern States shall have any claim for
indemnification hereunder unless such claim is asserted, as provided herein,
against the other within the Survival Period (in which event the party's right
to indemnification for such matters shall continue until liability is finally
determined), it being acknowledged that the Survival Period of certain
indemnities is without limitation as to time as provided in Sections 15.1, 15.2
and 15.4.
<PAGE>
15.7. Computation of Losses. In determining the amount of any
---------------------
indemnifiable loss hereunder, the aggregate amount of any insurance proceeds
received by or benefiting the indemnified party and any tax benefit realized by
the indemnified party in connection with the facts giving rise to the right to
indemnification shall be deducted from the amount to be paid by the indemnifying
party. If, with respect to any indemnifiable loss paid by an indemnifying party,
the indemnified party subsequently receives insurance proceeds, or realizes a
tax benefit, the indemnified party shall, as soon as may be practicable, pay to
the indemnifying party an amount equal to such insurance proceeds, tax
deduction, or tax benefit.
15.8. Exclusive Remedy. Notwithstanding anything to the
-----------------
contrary contained herein, except in the case of fraud or willful misconduct,
the indemnity provisions of this Article XV shall be the sole and exclusive
remedy against Southern States or Agway for any breach of the representations,
warranties, agreements and covenants contained in this Agreement.
ARTICLE XVI
TERMINATION
16.1. Procedure for Termination. This Agreement may be
-------------------------
terminated at any time on or before the Closing Date as follows:
(a) by the mutual agreement of Agway and Southern States;
(b) by Agway (provided that Agway is not in breach of its
obligations under this Agreement): (i) if Agway reasonably determines that the
transactions contemplated hereby cannot be consummated because of any
nonfulfillment of any condition set forth in Article X hereof which, as
determined by Agway, cannot be cured or rectified on or before the Closing or
such other prior date required by this Agreement for the fulfillment of such
condition; (ii) if Southern States breaches any representation or warranty made
by Southern States in this Agreement and such breach has a material adverse
effect on Agway; or (iii) if Southern States fails to comply with any of
Southern States' covenants or agreements contained in this Agreement; and
(c) by Southern States (provided that Southern States is
not in breach of its obligations under this Agreement): (i) if Southern States
reasonably determines that the transactions contemplated hereby cannot be
consummated because of any nonfulfillment of any condition set forth in Article
XI hereof which, as determined by Southern States, cannot be cured or rectified
on or before the Closing or such other prior date required by this Agreement for
the fulfillment of such condition; (ii) if Agway breaches any representation or
warranty made by Agway in this Agreement and such breach has a material adverse
effect on the Purchased Assets or the Consumer Wholesale Dealer Distribution
Business; (iii) if Agway fails to comply with any of its covenants or agreements
contained in this Agreement; or (iv) pursuant to Article XIII hereof.
<PAGE>
(d) by either Agway or Southern States if the Closing
shall not have occurred on or before August 15,2000; provided, however, that the
right to terminate this Agreement pursuant to this Section 16.1(d) shall not be
available to any parties whose failure to fulfill any obligation of this
Agreement has been the cause of, or resulted in, the failure of the Closing to
have occurred on or before the aforesaid date.
16.2. Effect of Termination. If this Agreement is terminated
---------------------
as provided in Section 16.1, the obligations of the parties hereunder shall
terminate; provided however, that if this Agreement is terminated by a party as
a result of the other party's willful failure to comply with its agreements or
covenants hereunder, then the party that terminated this Agreement shall have
the right to pursue all legal and equitable remedies available to it.
ARTICLE XVII
BULK TRANSFER LAWS, EXPENSES AND TAXES
17.1. Bulk Transfer Laws. Agway and Southern States hereby
-------------------
waive compliance with the provisions of any applicable bulk transfer laws, or
any other similar laws ("Bulk Transfer Laws"), and Agway hereby agrees to
defend, indemnify, and hold harmless Southern States from and against any costs,
expenses, liability or claims by any person arising out of or due to the failure
to comply with such Bulk Transfer Laws, including, without limitation, any
claims by any person against all or any part of the Purchased Assets, but
excluding any Assumed Liabilities.
17.2. Costs and Expenses. Except as otherwise specifically
-------------------
provided herein, all costs and expenses incurred by or on behalf of Agway and
Southern States, including, without limitation, all fees and expenses of agents,
representatives, counsel, and accountants employed in connection with the
authorization, preparation, execution, and performance of this Agreement or
other matters relating thereto shall be borne solely by the party that incurred
the same and the other party shall have no liability with respect thereof.
17.3. Transfer Taxes. All sales, use, and transfer taxes and
--------------
recording, filing, title, and registration fees or other charges imposed upon or
incurred in connection with or as a result of the transfer of the Purchased
Assets to Southern States and the consummation of the transactions contemplated
herein shall be borne and paid by Southern States.
17.4. Real Estate and Other Taxes. Real estate taxes imposed
---------------------------
upon or assessed against the Leased Real Property shall be prorated as of the
Closing Date as mutually agreed by Agway and Southern States.
17.5. Utilities and Other Charges. (a) Charges for
--------------------------------
electricity, water, gas, and other utilities and for telephone services related
to the Purchased Assets as of or for the calendar month in which the Closing
occurs shall be prorated as of the Closing Date; (b) payments under the Real
Property Leases and the Personal Property Leases as of or for the calendar month
in which the Closing occurs shall be prorated as of the Closing Date; and (c)
other similar prepaid expenses and other charges of Agway related to the
Consumer Wholesale Dealer Distribution Business shall be prorated as of the
Closing Date as mutually agreed by Agway and Southern States.
<PAGE>
ARTICLE XVIII
MISCELLANEOUS
18.1. Entire Agreement. This Agreement, together with the
----------------
Schedules and the Exhibits hereto, constitutes the entire agreement between the
parties with respect to the matters set forth herein and supersedes all prior
agreements, arrangements, and understandings between the parties with respect to
the same.
18.2. Modification. No provision of this Agreement,
-------------
including the provisions of this Section, may be modified, deleted, or amended
in any manner except by an agreement in writing executed by Agway and Southern
States.
18.3. Notices. All notices, requests, consents, and other
-------
communications to, upon, or between the parties shall be in writing and shall be
deemed to have been given, delivered, or made when personally delivered, sent by
telecopy, or when sent or mailed by certified mail, postage prepaid and return
receipt requested to the parties at the address set forth below or to such other
address as any party may specify by notice to the other party:
If to Southern States:
Southern States Cooperative, Inc.
6606 West Broad Street
Richmond, VA 23230-1717
Attn: N. Hopper Ancarrow, Jr.
Vice President and General Counsel
Phone: 804-281-1205
Fax: 804-281-1383
If to Agway:
Agway, Inc.
P. O. Box 4933
Syracuse, NY 13221
Attn: Christopher W. Fox
Associate General Counsel
Phone: 315-449-6431
Fax: 315-449-6253
18.4. Severability. The invalidity or unenforceability of
------------
any provision of this Agreement shall not affect the validity or enforceability
of any other provision.
<PAGE>
18.5. No Assignment. Neither this Agreement nor any interest
-------------
herein may be assigned by either party without the consent of the other party;
and provided further, that, upon written notice to Agway, Southern States may
assign its rights and obligations under this Agreement to an entity organized by
Southern States for the purpose of acquiring the Purchased Assets, provided that
Southern States retains all obligations hereunder pursuant to an agreement that
is reasonably satisfactory to Agway and such assignment is conditioned upon the
prior approval and execution of such agreement.
18.6. Waiver. No waiver of any provision hereof shall be
------
effective against the party waiving such provision unless such waiver is in a
writing executed by such party. The failure, at any time, of any party hereto to
require the performance of any provision hereof shall not affect the right of
such party to enforce the same. The waiver by any party hereto of any condition
or of the breach of any representation, warranty, covenant, or agreement shall
not be deemed to be a further or continuing waiver of such condition or such
breach or of any other condition or the breach of any other representation,
warranty, covenant, or agreement.
18.7. Benefit. This Agreement shall be binding on and inure
-------
to the respective benefit of Southern States and Agway and their respective
successors and permitted assigns.
18.8. Construction. This Agreement shall be construed and
------------
enforced in accordance with the laws of the State of Delaware, other than its
rules with respect to choice of laws.
18.9. Counterparts. This Agreement may be executed in more
------------
than one counterpart, each of which shall be deemed an original and all of which
shall constitute a single instrument and agreement.
18.10. Headings. The underlined headings provided herein are
--------
for convenience only and shall not affect the interpretation of this Agreement.
18.11. Third Party Beneficiaries. None of the provisions of
-------------------------
this Agreement or any document contemplated hereby is intended to grant any
right or benefit to any person or entity which is not a party to this Agreement.
18.12. Arbitration. Except as otherwise set forth herein,any
-----------
dispute hereunder or under any of the agreements included as exhibits or
executed pursuant to the terms of this Agreement between Agway and Southern
States, or any of their successors or assigns, shall be settled by binding
arbitration conducted on a confidential basis, under the US Arbitration Act, if
applicable, and the then-current Commercial Arbitration Rules of the American
Arbitration Association strictly in accordance with the terms of this Agreement
and the substantive law of the State of Delaware. The arbitration shall be
conducted at the Association's office located in the Washington, D.C. area by
three independent arbitrators, at least one of whom shall be knowledgeable in
the agricultural industry, one of whom shall be an attorney and one of whom
shall be a member of a nationally recognized accounting firm familiar with
business engaged in agriculture. Judgment upon the arbitrators' award is binding
and final upon all parties and may be entered and enforced in any court of
<PAGE>
competent jurisdiction. Neither party shall institute a proceeding hereunder
unless at least 60 days prior thereto such party shall have given written notice
to the other party of its intent to do so.
ARTICLE XIX
DEFINITIONS
In addition to the other terms defined herein, the following shall
apply throughout this Agreement:
19.1. Accounts Receivable. The term "Accounts Receivable"
--------------------
shall mean all dealer accounts receivable of the Agway Consumer Wholesale Dealer
Distribution Business arising from the sale of goods or services in the ordinary
course of business (excluding (i) any accounts receivable as to which the
account debtor is a non-U.S. resident; (ii) any accounts as to which the
original term for payment has been extended; (iii) any accounts which are
evidenced by promissory notes or other chattel paper; (iv) accounts of any
account debtor which, in whole or in part, have remained unpaid more than 60
days after the delivery of the goods sold or the services rendered; (v) other
distressed accounts for which collection procedures have been initiated; or (vi)
any intercompany or intracompany accounts receivable) existing as of the Closing
Date as set forth on the books and records of Agway as of the Closing Date,
which books and records shall detail the account name, address, the amount due,
and the aging of all such accounts receivable. Agway reserves the right, in its
discretion, to exclude other accounts receivable which may have collection
issues connected with them.
19.2. Agway Indemnified Person. The term "Agway Indemnified
------------------------
Person" shall have the meaning set forth in Section 15.4.
19.3. Agway Minimum Amount. The term "Agway Minimum Amount"
--------------------
shall have the meaning set forth in Section 15.3.
19.4. Assignable Permits. The term "Assignable Permits"
------------------
shall have the meaning set forth in Section 6.7.
19.5. Assumed Liabilities. The term "Assumed Liabilities"
-------------------
shall have the meaning set forth in Section 3.1.
19.6. Best Knowledge of Agway. The term "Best Knowledge of
-----------------------
Agway", including "Agway's knowledge" and all similar terms or expressions in
this Agreement, shall mean the actual knowledge of the officers and employees of
Agway listed in Schedule 19.6, and the knowledge of any other officers or
employees of Agway shall not be the Best Knowledge of Agway.
19.7. Bulk Transfer Laws. The term "Bulk Transfer Laws"
-------------------
shall have the meaning set forth in Section 17.1.
<PAGE>
19.8. Closing. The term "Closing" shall have the meaning set
-------
forth in Section 5.1.
19.9. Closing Consents. "Closing Consents" shall mean those
----------------
third party consents included within the Required Consents that, by agreement of
Agway and Southern States, are so indicated on Schedule 6.2.2.
19.10. Closing Date. The term "Closing Date" shall have the
------------
meaning set forth in Section 5.1.
19.11. Consumer Wholesale Dealer Distribution Business. The
-----------------------------------------------
term "Consumer Wholesale Dealer Distribution Business" shall have the meaning
set forth in Article I.
19.12. Dealer Agreements. The term "Dealer Agreements" shall
-----------------
have the meaning set forth in Section 6.6.1.
19.13. Environmental Laws. The term "Environmental Laws"
--------------------
shall mean any and all federal, state or local statutes, laws, regulation,
ordinances, court decisions, orders or rules relating to the environment;
occupational safety and health; the effect of Hazardous Materials on the
environment or human health; emissions, discharges or releases of Hazardous
Materials into the environment, including without limitation into ambient air,
surface water, groundwater or land; or otherwise relating to the handling of
Hazardous Materials or the clean-up or other remediation of Hazardous Materials.
19.14. Environmental Permits. The term "Environmental
-----------------------
Permits" shall have the meaning set forth in Section 6.14.
19.15. Excluded Liabilities. The term "Excluded Liabilities"
--------------------
shall have the meaning set forth in Section 3.2.
19.16. Hazardous Materials. The term "Hazardous Materials
--------------------
shall mean any and all "hazardous substances," "hazardous wastes," "pollutants,"
"contaminants" or "toxic substances," as defined by the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601
et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42
U.S.C. Section 7401 et seq., or the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., and regulations promulgated thereunder, or any analogous
federal, state or local laws and regulations; including but not limited to
petroleum and petroleum products, polychlorinated biphenyls ("PCBs"),
radioactive materials and asbestos.
19.17. HSR Act. The terms "HSR Act" shall mean the
--------
Hart-Scott-Rodino Antitrust Improvements Act of 1996, as amended, or any
successor law, and regulations and rules issues pursuant to that Act or any
successor law.
19.18. Improvements. The term "Improvements" shall mean all
------------
of the buildings, structures, improvements, fixtures, and appurtenances,
including construction in progress, located on the "Leased Real Property," as
defined herein, as the case may be.
<PAGE>
19.19. Inventory. The term "Inventory" shall mean all
---------
inventory of merchandise for sale, operating supplies, and warehoused items
including items held under consignment, if any, including any associated vendor
warranties applicable to such merchandise held for sale and operating supplies
held with respect to or otherwise related to the Consumer Wholesale Dealer
Distribution Business, counted and valued pursuant to Section 4.2 of this
Agreement; provided, however, that the term "Inventory" shall not include any
merchandise held for sale by any person under consignment from Agway, except as
may be specifically agreed to by Southern States.
19.20. Leased Personal Property. The term "Leased Personal
------------------------
Property" shall have the meaning set forth in Section 6.8.3.
19.21. Leased Real Property. The term "Leased Real Property"
--------------------
shall have the meaning set forth in Section 6.5.1.
19.22. License Agreement. The term "License Agreement" shall
-----------------
have the meaning set forth in Section 5.2(c).
19.23. Liens. The term "Liens" shall mean all liens,
-----
encumbrances, leases, casements, covenants, licenses, defects of title, claims,
security interests, mortgages, pledges, charges, restrictions, equities,
agreements and rights of others of every nature and description whatsoever;
provided, however, that the term "Liens" shall not include any "Permitted Liens"
as defined below.
19.24. Owned Personal Property. The term "Owned Personal
-------------------------
Property" shall have the meaning set forth in Section 6.8.1.
19.25. Permits. The term "Permits" shall have the meaning
-------
set forth in Section 6.7.
19.26. Permitted Lien. The term "Permitted Liens" shall mean
--------------
(a) all liens, encumbrances, leases, easements, covenants, licenses, defects of
title, claims, security interests, mortgages, pledges, charges, restrictions,
equities, agreements and rights of others of every nature and description
whatsoever which arise in the ordinary course of business and do not materially
adversely affect the full use and enjoyment of the assets subject thereto for
the purposes for which they are currently used, or materially detract from their
value; and (b) liens for taxes not yet due and payable.
19.27. Personal Property Leases. The term "Personal Property
------------------------
Leases" shall have the meaning set forth in Section 6.8.3.
19.28. Post-Closing Environmental Conditions. The term
-----------------------------------------
"Post-Closing Environmental Conditions" shall mean any and all conditions of any
Leased Real Property acquired by Southern States, including soil, surface water
and groundwater contamination, resulting from the disposal or release of
Hazardous Materials by Southern States after the Closing Date; or that is
attributable to the operation of the Consumer Wholesale Dealer Distribution
Business by Southern States after the Closing Date; provided, however, that any
migration of contamination first released prior to the Closing Date shall
constitute a Pre-Closing Environmental Condition to the extent applicable to
such migration and shall constitute a Post-Closing Environmental Condition to
the extent caused after the Closing Date by operations of the Consumer Wholesale
Dealer Distribution Business.
<PAGE>
19.29. Pre-Closing Environmental Conditions. The term
----------------------------------------
"Pre-Closing Environmental Conditions" shall mean any and all conditions of any
Leased Real Property or any other property formerly owned or leased by Agway as
a part of the Consumer Wholesale Dealer Distribution Business, including soil,
surface water and groundwater contamination, resulting from the disposal or
release of Hazardous Materials, which condition was in existence on, or arose
from, such property on or before the Closing Date; or that is attributable to
the operation of the Consumer Wholesale Dealer Distribution Business or the
Purchased Assets on or before the Closing Date.
19.30. Prepaid Expenses. The term "Prepaid Expenses" shall
----------------
mean those prepaid expenses relating to the Consumer Wholesale Dealer
Distribution Business which will inure to the benefit of Southern States.
19.31. Projected CWDDB Financial Statement. The term
----------------------------------------
"Projected CWDDB Financial Statement shall have the meaning set forth in Section
8.9.
19.32. Purchased Assets. The term "Purchased Assets" shall
-----------------
have the meaning set forth in Section 2.1.
19.33. Real Property Leases. The term "Real Property Leases"
--------------------
shall have the meaning set forth in Section 6.6.1.
19.34. Records. The term "Records" shall have the meaning
-------
set forth in Section 2.1(i).
19.35. Required Consents. The term "Required Consents" shall
-----------------
have the meaning set forth in Section 6.2.2.
19.36. Southern States Indemnified Persons. The term
---------------------------------------
"Southern States Indemnified Persons" shall have the meaning set forth in
Section 15.2.
19.37. SSC Minimum Amount. The term "SSC Minimum Amount"
-------------------
shall have the meaning set forth in Section 15.5.
19.38. Survival Period. The term "Survival Period" shall
----------------
have the meaning set forth in Section 15.1.
19.39. Tangible Assets. The term "Tangible Assets" shall
---------------
have the meaning set forth inSection 13.1.
19.40. Trade Area. The term "Trade Area" shall have the
----------
meaning set forth in Section 14.8.
<PAGE>
19.41. Trademarks. The term "Trademarks" shall have the
----------
meaning set forth in Section 6.10.
19.42. Transition Services Agreement. The term "Transition
-----------------------------
Services Agreement" shall have the meaning set forth in Section 14.4.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
SOUTHERN STATES COOPERATIVE, INCORPORATED
By: /s/ Wayne A. Boutwell
------------------------------------
Wayne A. Boutwell
Its: President and Chief Executive Officer
AGWAY, INC.
By: /s/ Robert A. Fischer, Jr.
------------------------------------
Robert A. Fischer, Jr.
Vice President
<PAGE>
ANNEX A
INVENTORY PROCEDURES
A. DATE OF INVENTORY
1. A complete physical count will be taken of all inventory on hand
prior to the closing date as defined in the Agreement, including all merchandise
for sale, operating supplies, consigned and warehoused items.
2. All business locations will be closed for business in order to
take physical inventory counts.
B. PROCEDURES
1. All receiving, shipping and production records will be updated
in the appropriate accounting systems prior to the start of the physical
inventory counts.
2. Locations will suspend, where possible, receiving, shipping and
production until accurate physical counts have been made. If not feasible, then
procedures appropriate for the location will be developed to control the
movement of goods during the inventory counting.
3. In advance of the inventory counting process, inventory will be
appropriately organized and grouped together, where possible, to facilitate an
accurate physical inventory count.
4. Prior to the start of the inventory counts, items which have
been sold to a patron will be identified and segregated to prevent them from
being counted as inventory available for sale.
5. All inventory items at both distribution centers and any
specified off-site storage locations will be counted. This includes all
merchandise inventory; to include damaged, obsolete, items lacking a
current EPA registration number, any crop protection products without the
required Worker Protection Standard label, slow moving, consigned, and
warehoused items at both distribution center locations and designated off-site
storage locations.
6. Merchandise inventory items, particularly crop protection
products, that do not have a current EPA registration number (banned for
agricultural use) will not be counted in Inventory purchased by Southern States.
Also, any crop protection products without the required Worker Protection
Standard label will not be counted in Inventory purchased by Southern States.
The value of these items shall be appropriately discounted by the individuals
designated by Southern States and Agway and if such items are not saleable
merchandise the purchase price may be fully discounted.
7. A designated Southern States and an Agway employee will
supervise all inventory count teams at each location (the location count team
supervisors).
<PAGE>
8. Count teams will consist of two employees, where possible, one
with previous counting experience, if at all possible.
9. The location count team supervisors for each location will be
responsible for maintaining a master log of the count sheets/book.
10. Prior to starting the inventory count process at each
location, a meeting will be held by the location count team supervisors with the
count teams to review the procedures for the inventory counts.
11. Standard detailed inventory count procedures will be provided
each location prior to the counts to insure all counts are performed in a
consistent manner.
12. Individuals designated by Southern States and Agway will have
the responsibility for ensuring all purchased inventory is valued in accordance
with the Asset Purchase Agreement.
13. All saleable inventory items will be valued at the lower of
Agway cost or market (with market defined as current replacement cost). Any
inventory considered damaged, obsolete, physically deteriorated or unsaleable
will be valued at net realizable value less a normal margin. This determination
will be made by the individuals designated by Southern States and Agway.
14. Slow moving inventory items (defined as those items on inventory
at a location that have not been sold for over six (6) months) will be
identified using the slow moving report (most current month-end) provided
by Agway. These items will be valued at the lesser of Agway cost less the
reserve percentage provided by Agway or the net realizable value less a normal
margin.
15. If the quantity of inventory items on hand at a location is
excessive (i.e., more than a 180-day "period of supply"), the value of these
items will be appropriately discounted by the individuals designated by Southern
States and Agway.
16. If the location count team supervisors cannot resolve a dispute
related to the count of the inventory, they will document the items in question
and contact appropriate supervisors for a resolution of the issue, as necessary.
17. Upon completion of the inventory counts, the Southern States
count team supervisor and the Agway count team supervisor will sign and date the
final count sheets and master log. One copy will be sent to Agway and the other
to Southern States.
5
<PAGE>
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS, that Agway, Inc., a Delaware
corporation ("Agway"), for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and pursuant to that certain Asset
Purchase Agreement dated as of June 20, 2000, (the "Asset Purchase Agreement")
between Agway and Southern States Cooperative, Inc., a Virginia agricultural
cooperative corporation ("Southern States'), has granted, bargained, sold,
assigned, conveyed, transferred and delivered, and by this instrument Agway
grants, bargains, sells, assigns, transfers, conveys and delivers unto Southern
States, its successors and assigns forever, all of its right, title, interest
and copyright, in or to the Owned Personal Property, the Inventory, the Records,
the Assignable Permits and the Prepaid Expenses (each as defined in the Asset
Purchase Agreement), free and clear of any and all Liens (as defined in the
Asset Purchase Agreement), except as provided in the Asset Purchase Agreement.
This instrument is subject to the terms and conditions of the
Asset Purchase Agreement, and in the event of any conflict between this
instrument and the Asset Purchase Agreement, the terms of the Asset Purchase
Agreement shall control.
This instrument shall be binding upon, and inure to the
benefit of, Agway and Southern States, and their respective successors and
assigns.
IN WITNESS WHEREOF, Agway has caused this instrument to be
signed and delivered by its duly authorized officer on July 31, 2000.
AGWAY, INC.
By /s/ Robert A. Fischer, Jr.
-----------------------------------
Name: Robert A. Fischer, Jr.
Title: Vice President
6
<PAGE>
ASSIGNMENT AND TRANSFER OF ACCOUNTS RECEIVABLE
KNOW ALL MEN BY THESE PRESENTS, that Agway, Inc., a Delaware
corporation ("Agway"), for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and pursuant to that certain Asset
Purchase Agreement dated as of June 20, 2000 (the "Asset Purchase Agreement")
between Agway and Southern States Cooperative, Inc., a Virginia agricultural
cooperative corporation ("Southern States"), does hereby sell, transfer, assign,
convey and deliver to Southern States all of its right, title and interest in
and to the Accounts Receivable (as defined in the Asset Purchase Agreement).
The instrument is subject to the terms and provisions of the
Asset Purchase Agreement, and in the event of any conflict between this
instrument and the Asset Purchase Agreement, the terms of the Asset Purchase
Agreement shall control. Nothing herein shall affect the respective duties and
obligations of Agway and Southern States under the Asset Purchase Agreement.
This instrument shall be binding upon, and inure to the
benefit of, Agway and Southern States, and their respective successors and
assigns.
IN WITNESS WHEREOF, Agway has caused this instrument to be
signed and delivered by its duly authorized officer on July 31, 2000.
AGWAY, INC.
By /s/ Robert A. Fischer, Jr.
----------------------------------
Name: Robert A. Fischer, Jr.
Title: Vice President
8
<PAGE>
LICENSE AGREEMENT
This LICENSE AGREEMENT, dated as of July 31 , 2000 (the "Effective
Date"), is made by Agway, Inc., a Delaware corporation ("Agway"), and Southern
States Cooperative, Incorporated, a Virginia agricultural cooperative
corporation ("Southern States").
WHEREAS, Agway and Southern States have entered into an Asset Purchase
Agreement dated June 20, 2000, pursuant to which Agway proposes to sell and
assign and Southern States proposes to purchase and assume the Consumer
Wholesale Dealer Distribution Business (as defined in the Asset Purchase
Agreement) of Agway; and
WHEREAS, the Asset Purchase Agreement provides for Agway to license to
Southern States the name "AGWAY" and any registered or unregistered trademark or
trademarks associated therewith, for use as contemplated by the Asset Purchase
Agreement;
NOW THEREFORE, Agway and Southern States enter into the License
Agreement for and in consideration of the mutual covenants and agreements set
forth in the Asset Purchase Agreement.
1. License. Agway hereby grants to Southern States,for use solely in
-------
connection with the Consumer Wholesale Dealer Distribution Business as defined
in the Asset Purchase Agreement, a non-exclusive right for the term of this
license agreement to use the name "AGWAY" and the registered trademark
"AGWAY"(R) and any other trademarks listed on Annex A (collectively, the
"Marks"), throughout the Trade Area in connection with the sale of products
manufactured or distributed by Agway or any other third-party authorized with
Agway's prior written consent, including, without limitation, the right to use
the Marks in sales brochures, point-of-sale store displays, in Southern States'
web site, excluding domain names or within domain names, and for other marketing
purposes; provided, however, that during the term of this License Agreement
Agway agrees that it will not license or sublicense any other person to use the
Marks in the Trade Area in competition with the Consumer Wholesale Dealer
Distribution Business operated by Southern States. Southern States also shall
have the right, in its sole discretion, to sub-license dealers who execute a
trademark license agreement, which complies with the terms of this License
Agreement, with Southern States and enter into a Dealer Agreement with Southern
States for the distribution of products sold by Agway and/or Southern States or
other vendors, to use the name "AGWAY" in their trade name if they desire to do
so. Southern States shall also have the right, in its sole discretion, to
sub-license to Statesman Financial Corporation ("Statesman"), the non-exclusive
right to provide credit cards and services related thereto (hereinafter
"Credit") which use the name "AGWAY" and the Marks on such credit cards and
associated invoices, provided, that Statesman executes a trademark sub-license
agreement with Southern States (the "Statesman Sublicense") pursuant to which
Statesman agrees to comply with all relevant terms of this License Agreement,
and provided further that if either (i) there is a change in Control of
Statesman (as hereinafter defined) or (ii) if Statesman violates any of the
terms of the Statesman Sublicense including, but not limited to, the provisions
of section 2 hereof relating to quality control and right to approve use of the
Marks, then, in either such event, Agway shall have the right to require
Southern States to terminate the Statesman Sublicense. Neither Southern States
nor any third party shall have the right to manufacture any products bearing the
Marks unless previously authorized in writing by Agway to do so. The license of
the Marks related to the FEATHERED FRIEND mark granted hereunder is limited to
FEATHERED FRIEND products manufactured or provided by Agway unless otherwise
authorized in writing by Agway. For purposes of this License Agreement, the
term "Change in Control of Statesman" shall mean one or more sales or transfers,
by operation of law or otherwise, or the creation of new stock or ownership
interests, by which an aggregate of more than fifty percent (50%) of the stock
in Statesman shall become vested, legally or beneficially, in a party or parties
which are not agricultural cooperatives.
2. Quality Control and Right to Approve Use of Marks. Except as
---------------------------------------------------------
otherwise provided herein, any use of the Marks by Southern States after the
Closing shall only be as authorized in writing by Agway. Southern States shall
<PAGE>
be responsible for and shall ensure that all goods and services provided and
offered by Southern States under the Marks shall be advertised, offered and
provided in a high quality manner and suited to the protection and enhancement
of the goods and/or services used in association with the Marks and the good
will pertaining thereto, and shall meet or exceed (i) Agway's commercially
reasonable quality standards and inspection and approval requirements as
provided by Agway to Southern States and its sublicensees in writing from time
to time as part of Agway's trademark and service mark quality assurance
activities; and (ii) any and all government standards, regulations, guidelines,
rules, laws, or the like regarding such goods and/or services. Southern States
shall cooperate with Agway in facilitating Agway's control of the quality of
goods offered under the Marks to permit reasonable, periodic inspection of
Southern State's and its sublicensees' operations, at reasonable times and with
reasonable notice and as coordinated with Southern States' Procurements
Department, and to supply Agway with specimens of all uses of the Marks upon
request. Moreover, Southern States and its sublicensees shall upon request
submit to Agway for inspection current production samples, advertising, tags,
shipping materials, packaging, and labels of the goods and pictures and
advertising of the services used with the Marks. Southern States shall monitor
its sublicensees and manufacturers to assure compliance with the provisions
set forth in this Section. Southern States shall promptly notify Agway upon
learning of a material failure by a sublicensee or manufacturer to comply with
the provisions set forth in this Section and shall take all corrective actions
as may be necessary or appropriate to prevent the failure from recurring; and,
in Agway's discretion, Southern States shall terminate the sublicensee and/or
manufacturer if such party intentionally or repeatedly fails to comply with the
provisions set forth in this Section.
3. Term. The initial term of this License Agreement shall be ten (10)
----
years from the Effective Date. Should Southern States fail to comply with any
provision of this License Agreement, Agway may terminate this License Agreement
upon 30 days' written notice to Southern States, provided Southern States has
not corrected such default during the notice period. If Southern States makes
any assignment of assets or business for the benefit of creditors, or if a
trustee or receiver is appointed to administer or conduct its business affairs,
or if it is adjudged in any legal proceeding to be either a voluntary or
involuntary bankrupt, then all the rights granted herein shall forthwith cease
and terminate without prior notice or legal action by Agway.
4. Payments. This License Agreement and the rights granted to Southern
--------
States hereunder are subject to and contingent upon the continued payments in
accordance with Section 14.1.6 of the Asset Purchase Agreement.
5. Option to Extend. Southern States shall have the right, at its
------------------
election, and at no additional cost to it, by written notice to Agway on or
before the ninth anniversary of the Effective Date of this License Agreement, to
extend the license granted hereby on the terms provided for under this License
Agreement, for an additional five-year period commencing upon the expiration of
the initial ten (10) year term provided for in Section 3 above; and Southern
States shall have the further right, at its election, and at no additional cost
to it, by written notice to Agway on or before the 14th anniversary of the
Effective Date of this License Agreement, to extend the license granted hereby,
on the terms provided for under this License Agreement, for an additional
five-year period commencing upon the expiration of the first five (5) year
extension provided for in this Section 5.
2
<PAGE>
6. Ownership of Marks. Agway hereby represents and warrants that (i)
------------------
it is the exclusive owner of the Marks, and (ii) to the best of its knowledge,
has received no notice that the Marks infringe upon any mark protected by the
trademark laws of the United States; and Southern States hereby acknowledges
Agway's exclusive right, title, and interest in and to the Marks and will not at
any time do or cause to be done any act or thing contesting or in any way
impairing or tending to impair any part of such right, title, and interest. In
connection with use of the Marks, Southern States will not in any manner
represent that it has any ownership in the Marks thereof, and Southern States
acknowledges that use of the Marks will not create in Southern States' favor any
right, title, or interest in or to the Marks, but all uses of the Marks by
Southern States and its sublicensees will inure to the benefit of Agway. Upon
termination of this Agreement in any manner provided herein, Southern States and
sublicensees will cease and desist from all use of the Marks in any way, and
Southern States will at no time adopt or use, without Agway's prior written
consent, any word or mark which is likely to be similar to or confusing with any
of the Marks. Southern States also agrees it will not assign this License
Agreement, by operation of law or otherwise, without the prior written consent
of Agway, and may not sublicense the Marks except as expressly provided herein.
7. Option to Terminate. In the event Agway shall merge into any
---------------------
other entity in which it or an affiliate is not the surviving entity, or sell
all or substantially all its agricultural assets to another entity or contribute
all or substantially all such assets to an entity owned or controlled 50% or
more, directly or indirectly, by one or more third-parties, or engages in any
other transaction constituting a change-in-control of Agway, then in such
event, Southern States shall have the right, which right shall be exercised by
written notice to Agway within ninety (90) days of the first public announcement
of the effective date of such change-in-control transaction, to elect to
terminate this License Agreement. In the event Southern States shall elect to
terminate this Agreement pursuant to this Section 7, then Southern States'
obligation to make any further payments under section 14.1.6 of the Asset
Purchase Agreement also shall terminate as of the date of termination.
8. No Limitation on Other Trade Names or Brand Names in the Trade
-----------------------------------------------------------------
Area. Nothing contained in this License Agreement or the Asset Purchase
----
Agreement shall be deemed to preclude Southern States from licensing new
dealers in the Trade Area to do business under a trade name other than "AGWAY"
or from selling products in the Trade Area utilizing brand names other than
"AGWAY" through persons with whom it has a Dealer Agreement in effect, or
through any other person.
9. Subject to Asset Purchase Agreement. The parties acknowledge and
-----------------------------------
agree that this License Agreement is subject to the terms and conditions of the
Asset Purchase Agreement and, in the event of any conflict between this License
Agreement and the Asset Purchase Agreement, the terms of the Asset Purchase
Agreement shall control.
10. Indemnity. Agway assumes no liability to Southern States or its
---------
sublicensees or to third parties with respect to the performance characteristics
of products manufactured, distributed, or sold by Southern States under the
Marks (provided such products are not manufactured by Agway) or to the use of
3
<PAGE>
the Marks in the Trade Area. Southern States hereby agrees to indemnify, defend,
and hold harmless Agway against any and all claims, suits, losses, damages and
expenses, including attorneys fees, arising out of or based upon the
manufacture, distribution or sale by Southern States, it sublicensees, and/or
third-party manufacturers (other than Agway) who manufacture such products for
Southern States or its sublicensees and the use by third parties of such
products distributed or sold by Southern States, its sublicensees, and/or third
party manufacturers or arising out of any alleged unauthorized use of any Marks
by Southern States, its sublicensees and/or third party manufacturers.
11. Definitions. Capitalized terms used in this License Agreement shall
-----------
have the meaning ascribed to them in the Asset Purchase Agreement, unless
expressly defined herein.
12. Successors and Assigns. Agway hereby agrees that this License
------------------------
Agreement shall be binding upon its representatives, successors and assigns.
13. Governing Law. Agway hereby agrees that this License Agreement shall
-------------
be governed by the laws of the State of Delaware.
14. Counterparts. This License Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original.
15. Maintenance of Marks. Agway agrees to take all necessary and
---------------------
appropriate actions to maintain the validity and enforceablility of the Marks
during the term of this License Agreement, including payment of all required
fees.
IN WITNESS WHEREOF, the undersigned has caused this License Agreement
to be executed as of the date first appearing above.
AGWAY, INC.
By /s/ Robert A. Fischer, Jr.
----------------------------------------
Name: Robert A. Fischer, Jr.
Title: Vice President
SOUTHERN STATES COOPERATIVE, INC.
By /s/ Wayne A. Boutwell
---------------------------------------
Name: Wayne A. Boutwell
Title: President and CEO
<PAGE>
STATE OF Virginia )
----------
)
CITY/COUNTY OF Henrico )
-----------
The foregoing instrument was acknowledged before me by Robert A.
Fischer, Jr. Vice President, for and on behalf of Agway, Inc. this 28th day of
----
July, 2000.
----------
/s/ Judy A. Chavis
---------------------------
Notary Public
My commission expires 1-31-03
-----------
STATE OF Virginia
--------
CITY/COUNTY OF Henrico
----------
The foregoing instrument was acknowledged before me by Wayne A.
Boutwell, President and CEO, for and on behalf of Southern States Cooperative,
Incorporated, this 28th day of July, 2000.
---- ----
/s/ Judy A. Chavis
--------------------------
Notary Public
My commission expires 1-31-03
---------
<PAGE>
ANNEX A of
License Agreement
-----------------
TRADEMARKS
----------
Mark Serial Number Registered Number
---- ------------- -----------------
FEATHERED FRIEND(R) #829,871
FEATHERED FRIEND and ---- ----
DESIGN (R) ---- #1,516,596
Favorite(TM) ---- ----
BIRDSNACK(R) ---- #1,672,726
FLYER'S CHOICE(R) ---- #1,132,812
CARDINAL'S CHOICE(R) ---- #2,021,320
Shell-less Select(TM) #75/746/053 ----
Woodpecker's Pick(TM) #75/723,153 ----
Chickadee's Choice(TM) #75/723,223 ----
FINCH DELIGHT(R) ---- #1,448,763
AGWAY(R) ---- #808,749; #813,
726; #1,847,932
only
Sunny Green(TM) ---- ----
WEAR GREEN(R) ---- #712,670
SHADY GREEN(R) ---- #1,188,858
GREENLAWN(R) ---- #733,641
GRASSROOTS(R) ---- ----
HI-TRACTION(R) ---- #1,622,533
EASY-STIR(R) ---- #1,641,278
AGWAY(R)People who know.
Brands you trust(TM) ---- ----
AGWAY(R)Your Yard Garden
and Pet Place(TM) ---- ----
10
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
KNOW ALL MEN BY THESE PRESENTS, that, for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, and
pursuant to that certain Asset Purchase Agreement dated as of June 20, 2000 (the
"Asset Purchase Agreement") between Agway, Inc., a Delaware corporation
("Agway") and Southern States Cooperative, Inc., a Virginia agricultural
cooperative corporation ("Southern States"), Agway hereby assigns to Southern
States its rights and obligations under, and Southern States hereby accepts such
assignment and assumes and agrees to pay, satisfy and discharge in accordance
with their terms (subject to any valid defenses or offsets against the obligee
to whom such liabilities, payments and obligations are owed), (i) the Dealer
Agreements and other Assumed Liabilities, (ii) the Real Property Leases and
(iii) the Personal Property Leases (as defined in the Asset Purchase Agreement).
Notwithstanding the foregoing, Southern States does not assume any liability or
obligation resulting from or arising out of any default or nonperformance by
Agway, prior to the date hereof under or with respect to the Dealer Agreements,
or the Real Property Leases or the Personal Property Leases, as defined in the
Asset Purchase Agreement and included in the Assumed Liabilities.
The instrument is subject to the terms and provisions of the
Asset Purchase Agreement, and in the event of any conflict between this
instrument and the Asset Purchase Agreement, the terms of the Asset Purchase
Agreement shall control. Nothing herein shall affect the respective duties and
obligations of Agway and Southern States under the Asset Purchase Agreement,
including without limitation, the indemnification obligations of Agway and
Southern States set forth in Article XV of the Asset Purchase Agreement.
This instrument shall be binding upon, and inure to the
benefit of, Agway and Southern States, and their respective successors and
assigns.
IN WITNESS WHEREOF, each of Agway and Southern States has
caused this instrument to be signed and delivered by its duly authorized officer
on July 31, 2000.
AGWAY, INC.
By /s/ Robert A Fischer, Jr.
---------------------------------------
Name: Robert A. Fischer, Jr.
Title: Vice President
SOUTHERN STATES COOPERATIVE, INC.
By /s/ Wayne A. Boutwell
--------------------------------------
Name: Wayne A. Boutwell
Title: President and CEO
<PAGE>
TRANSITION SERVICES AGREEMENT
AGREEMENT, made July 31, 2000, by and between SOUTHERN STATES
COOPERATIVE, INC., a Virginia agricultural cooperative corporation ("Southern
States"), and AGWAY, INC., a Delaware corporation ("Agway").
WHEREAS, Agway and Southern States have entered into an Asset Purchase
Agreement, dated as of June 20, 2000 (the "Asset Purchase Agreement"),
pursuant to which Agway is selling and assigning to Southern States, and
Southern States is purchasing and assuming from Agway, certain assets and
liabilities of Agway related to, or arising from, the Agway "Consumer Wholesale
Dealer Distribution Business," as defined in the Asset Purchase Agreement; and
WHEREAS, the Asset Purchase Agreement provides for the execution and
delivery of a transition services agreement, as a condition to the Closing, by
which Agway will provide certain transition services to Southern States in the
form of certain purchasing, distribution, accounting, customer service,
advertising, inventory management, dealer development, human resources,
computer, and information support services in preparation for and following the
Closing.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, Agway and Southern States agree as follows:
Section 1. Services. During the "Term," as defined herein, Agway shall
--------
provide, or cause one or more of its affiliates to provide, to Southern States
the services listed and described on Annex A attached hereto (the "Services").
Before any additional billable services may be performed, Agway will provide
Southern States with a brief description of each task to be performed, an
estimate of the time and costs, and target date for completion. Electronic mail
may be used for Agway's delivery of task descriptions and estimates, and for
Southern States' approval.
Section 2. Duration of Services. Except as may otherwise be provided
--------------------
on Annex A attached hereto, Agway shall provide to Southern States each of the
services listed and described on Annex A until such time as Southern States
notifies Agway that it no longer requires such service, but in no event shall
the services be provided longer than the Term. Subject to Section 3 below, if
prior to the expiration of this Agreement Southern States determines that it no
longer requires particular services from Agway, it shall give Agway prompt
written notice to that effect and Agway shall discontinue the provision of such
services 30 days after receipt of such notice unless Southern States and Agway
have mutually agreed to an earlier termination date.
Section 3. Charges for Services. Agway shall perform and provide the
--------------------
Services for the charges set forth on Annex B; provided, however, with respect
to computer and information support, accounting and human resources services
listed on Annex B, the parties agree that Southern States shall pay Agway for a
minimum of three (3) months at the stated rates shown on Annex B, regardless
whether this Agreement is terminated early for any reason.
Section 4. Payment for Services. Agway shall bill or invoice Southern
--------------------
States for the amounts due pursuant to Section 3 on a monthly basis. Agway shall
make available to Southern States all supporting documentation upon request.
Southern States shall pay each such bill or invoice within 15 days after its
receipt thereof.
<PAGE>
Section 5. Books and Records. During the Term and for a period of
-----------------
one year after the expiration of the Term, Agway shall maintain true and
accurate books and records of account in which full, true, and correct entries
shall be made of the charges for, and out-of-pocket costs and expenses incurred
by Agway in connection with performing and providing, the Services.
Section 6. Verification of Bills and Invoices. Upon reasonable notice
----------------------------------
to Agway and during normal business hours, Southern States may inspect the books
and records of Agway described in Section 5 for the sole purpose of verifying
the accuracy of any bill or invoice provided by Agway hereunder. If Southern
States objects to the accuracy of any bill, Southern States must deliver notice
of such objection to Agway within ten days following receipt of such bill,
specifying in detail the amounts objected to and the basis for such objection.
Southern States shall pay any amounts on such bill that are not objected to, and
Southern States and Agway shall negotiate in good faith to resolve the dispute
regarding the objected to amounts. If Southern States and Agway shall not have
resolved the dispute within fifteen days following Southern States' notice of
objection, then subject to the terms of, and as provided for in Section 18.12 of
the Asset Purchase Agreement, such objection shall be submitted to a mutually
agreed upon office of a nationally recognized independent certified public
accounting firm jointly selected by Southern States and Agway, who shall act as
arbitrator. Each of the parties shall bear all costs and expenses incurred by it
(including legal and accounting fees) in connection with such arbitration;
provided, however, that the fees and expenses of the arbitrator shall be shared
equally by Southern States and Agway. This provision for arbitration shall be
specifically enforceable by the parties and the decision of the arbitrator in
accordance with the provisions here shall be final and binding and there shall
be no right of appeal therefrom.
Section 7. Representations and Warranties. Agway represents and
---------------------------------
warrants to Southern States that Agway shall perform and provide the Services
with the same degree of care which it would provide the Services for its own
account, and in all cases consistent with past practice.
Section 8. Limitation of Liability. Agway shall not be liable to
-------------------------
Southern States for any direct, indirect, special, incidental, consequential, or
any other damages incurred by Southern States as a result of, or arising out of,
the Services, except as a result of the gross negligence of Agway or by reason
of the breach of any representation made herein.
Section 9. Indemnification by Southern States. Southern States shall
----------------------------------
indemnify and hold harmless Agway, and its respective directors, officers,
employees, and agents against and with respect to any loss, cost, or expense
(including reasonable attorneys' fees), suffered or incurred by Agway as a
result of any act or omission by Agway taken hereunder pursuant to the
instructions of Southern States.
Section 10. Term and Termination. The term of this Agreement (the
---------------------
"Term") shall begin on the date set forth above and, unless earlier terminated
as provided herein, shall expire at the close of business on October 15, 2000.
<PAGE>
Either party may terminate this Agreement upon written notice to the other party
upon default in performance of the obligations hereunder.
Section 11. Cumulative Effect. The rights and obligations of Agway
------------------
and Southern States under this Agreement shall be cumulative with and not
exclusive of the rights and obligations of Agway and Southern States under
the Asset Purchase Agreement.
Section 12. Force Majeure. Agway shall not be responsible for delays
-------------
or failures to provide or perform the Services that result from acts of God,
strikes, lockouts, riots, war, epidemics, governmental regulations imposed after
the fact, fire, power failures, materials or components shortages beyond Agway's
control, earthquakes, other natural elements, or any other act beyond Agway's
control.
Section 13. Relationship of Parties. For all purposes, Agway and
-------------------------
Southern States shall be deemed to be independent contractors and nothing
contained herein shall be deemed to constitute a joint venture, partnership,
employer-employee relationship, or other agency relationship.
Section 14. Notices. All notices, consents, orders, invoices, and
-------
other communications to, upon and between the parties shall be in writing and
shall be deemed to have been given, delivered, made, and received when
personally delivered or when sent or mailed by certified mail, postage prepaid
and return receipt requested, addressed as provided for in the Asset Purchase
Agreement.
Section 15. Effect. This Agreement shall be binding on and inure to
------
the benefit of Agway and Southern States and their respective successors and
assigns.
Section 16. Entire Agreement. This Agreement, together with the
------------------
Annexes attached hereto, constitutes the entire agreement between Agway and
Southern States with respect to the subject matter hereof.
Section 17. Modification. No provision of this Agreement,
------------
including the provisions of this Section, and the Annexes hereto, may be
modified, deleted, or amended except by an agreement in writing executed by
Agway and Southern States.
Section 18. Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision.
Section 19. No Assignment. Neither this Agreement nor any interest
-------------
herein may be assigned by either Agway or Southern States without the consent
of the other.
Section 20. Construction. This Agreement is executed and delivered
------------
in the State of Delaware and shall be construed and enforced in accordance
with the laws of such state.
Section 21. Counterparts. This Agreement may be executed in more
------------
than one counterpart, each of which shall be deemed an original.
<PAGE>
Section 22. Headings. The underlined headings herein are for
--------
convenience only and shall not affect the interpretation of this Agreement.
IN WITNESS WHEREOF, Agway and Southern States have duly executed and
delivered this Agreement as of the date first written above.
SOUTHERN STATES COOPERATIVE, INC.
By: /s/ Wayne A. Boutwell
-----------------------------
President and CEO
AGWAY, INC.
By: /s/ Robert A. Fischer, Jr.
-----------------------------
Vice President
<PAGE>
ANNEX A
TRANSITION SUPPORT SERVICES TO BE PROVIDED
------------------------------------------
Agway shall provide to Southern States the following purchasing,
inventory management, customer service, advertising and marketing, computer and
related information support, and accounting services relating to the operations
of the Consumer Wholesale Dealer Distribution Business:
Purchasing/Inventory Management
Customer Service
Advertising and Marketing
Computer and Related Information Support
Accounting
Human Resources
<PAGE>
ANNEX B
CHARGES FOR TRANSITION SUPPORT SERVICES
---------------------------------------
The following services will be billed to Southern States based on actual
expenses incurred by the department to complete the work performed outlined in
Annex A. A monthly expense statement (by service) will be provided to Southern
States detailing the costs incurred by Agway on behalf of Southern States.
*Estimated Monthly Fee
---------------------
- Purchasing/Inventory Management $128,800/month
- Customer Service $ 88,800/month
- Advertising & Marketing - Department Costs $ 32,200/month
- Advertising $216,700/month
* THE ESTIMATED MONTHLY FEE IS BASED ON AGWAY'S FISCAL YEAR 2001 BUDGET FOR THE
RESPECTIVE SERVICE/DEPARTMENT. SEASONALITY AND FUNCTIONS PERFORMED WILL HAVE
AN IMPACT ON THE ACTUAL EXPENSES INCURRED.
The following services will be billed to Southern States at the rates stated
below:
- Computer and Information Support $112,000/month (minimum 3 months)
- Accounting $ 55,100/month (minimum 3 months)
- Human Resources $ 1,000/month (minimum 3 months)
In the event that Southern States is not able to negotiate a Distribution
Agreement with Ryder Logistics, Agway agrees to assist in providing the
distribution/freight needs of Southern States. The fee for this service will be
mutually agreed upon by Agway and Southern States.