<PAGE>
As filed with the Securities and Exchange Commission on May 2, 2000
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
Southern States Cooperative, Incorporated
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(Exact name of registrant as specified in its charter)
Virginia
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(State or other jurisdiction of incorporation or
organization)
5191
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(Primary Standard Industrial Classification Code Number)
54-0387200
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(I.R.S. Employer Identification No.)
6606 West Broad Street
Richmond, Virginia 23230
(804) 281-1000
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(Address and telephone number of registrant's
principal executive office)
N. HOPPER ANCARROW, JR., ESQ.
Vice President, General Counsel and Secretary
Southern States Cooperative, Inc.
6606 West Broad Street
Richmond, Virginia 23230
(804) 281-1205
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(Name, address and telephone number of agent for service)
Copy to:
F. CLAIBORNE JOHNSTON, JR., ESQ.
Mays & Valentine, L.L.P.
1111 East Main Street
Richmond, Virginia 23218
(804) 697-1214
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement, as
determined by market conditions.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------
Proposed Proposed
Title of Each Class Maximum Maximum Proposed Maximum Amount of
of Securities to Amount to Offering Price Aggregate Registration
be Registered be Registered Per Unit Offering Price Fee (1)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Senior Notes $50,000,000 100% $50,000,000 $13,200
- --------------------------------------------------------------------------------------
</TABLE>
(1) The registration fee was calculated in accordance with Section 6 of the
Securities Act of 1933, as amended.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PRELIMINARY PROSPECTUS
- ----------------------
$50,000,000
SOUTHERN STATES COOPERATIVE, INCORPORATED
Senior Notes
Due from Six Months to Seven Years From Date of Issue
--------------------
Southern States Cooperative, Incorporated:
. We are a regional farmers' supply and marketing cooperative. Our principal
office is located at 6606 West Broad Street, Richmond, Virginia 23230, and
our telephone number is 804-281-1000.
The Offering:
. Manner of Offering: Our offering is not underwritten by any broker-dealer.
-------------------
We will offer the Senior Notes through certain of our employees. We are not
paying any commission or remuneration to these employees based on sales of
the Senior Notes.
. Proceeds: Because this offering is not underwritten, we have no assurance
---------
what amount of proceeds we may receive from the offering. If all of the
Senior Notes offered are sold, we will receive approximately $49.25 million
of the proceeds, after paying approximately $750,000 in offering expenses.
. Anticipated Trading Market: We do not expect there to be any trading market
---------------------------
for the Senior Notes and we will not make application to list the Senior
Notes on any securities exchange or to include them in any automated
quotation system.
The Senior Notes:
. Form: The Senior Notes will be issued in certificated form.
-----
. Denominations: The Senior Notes will be issued in minimum denominations of
--------------
$1,000, $10,000 or $100,000, and increments of $100, $500 and $1,000,
respectively.
. Maturities: The Senior Notes will mature from six months to seven years
-----------
from date of issue.
. Interest Rates: Interest on each of the Senior Notes will be at fixed rates
---------------
which we will establish as of the first business day of the month for
Senior Notes issued during that month. Once a rate for a particular Senior
Note is set, it will not be changed while that Senior Note is outstanding.
. Interest Payment Dates: Interest on the six month Senior Notes will be paid
-----------------------
at their maturity. Interest on all other notes will be paid quarterly.
Interest will accrue from the date of original issuance of each Senior
Note.
. Redemption: The Senior Notes may be redeemed by holders prior to maturity
-----------
subject to a mandatory interest penalty except in limited circumstances.
The five and seven year Senior Notes are subject to redemption at the
option of Southern States after two years from the date of issuance.
. Ranking: The Senior Notes will be unsecured and rank equally with all other
--------
unsecured and unsubordinated debt of Southern States.
This prospectus does not constitute an offer to sell or the solicitation of an
offer to buy, nor shall there be any offer or solicitation of such offer or sale
of the Senior Notes by any person, in any jurisdiction in which it is unlawful
for such person to make an offer, solicitation or sale.
We urge you to carefully read the "Risk Factors" section beginning on page 3,
where we describe specific risks associated with the offering, along with the
rest of this prospectus, before you make your investment decision.
--------------------
Neither the Securities and Exchange Commission, nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities, and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
--------------------
The date of this preliminary prospectus is ___________, 2000.
<PAGE>
You should rely only on the information contained in this document or to which
we have referred you. Southern States has not authorized anyone to provide you
with information that is different. This document may only be used where it is
legal to sell the Senior Notes. The information in this document may only be
accurate on the date of this document.
TABLE OF CONTENTS
Page
----
Prospectus Summary.......................................................... 1
Risk Factors................................................................ 3
Use of Proceeds............................................................. 6
Selected Historical Consolidated Financial Information...................... 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................. 11
Southern States............................................................. 30
Business of Southern States................................................. 35
Management.................................................................. 53
Description of the Senior Notes............................................. 63
Plan of Distribution........................................................ 73
Absence of Public Market, Redemption and Market Risk........................ 74
Legal Matters............................................................... 74
Experts..................................................................... 74
Available Information....................................................... 74
Disclosure Regarding Forward Looking Statements............................. 75
Index to Financial Statements............................................... F-1
<PAGE>
PROSPECTUS SUMMARY
Because this is a summary, it does not contain all the information that may
be important to you. You should read the entire document before making your
investment decision. Southern States Cooperative, Incorporated's fiscal year
ends on June 30.
Southern States Cooperative, Incorporated
Southern States is a regional farmers' supply and marketing cooperative.
. As a supply cooperative, Southern States provides agricultural
supplies and services to its members and others through its crops,
feed, petroleum, retail farm supply, and farm and home divisions.
. As a marketing cooperative, Southern States provides marketing
services for its members through its grain marketing and livestock
marketing divisions.
For many years, Southern States has served a wide range of rural and urban
customers in its traditional Mid-Atlantic territory of Delaware, Maryland,
Virginia, West Virginia, Kentucky and North Carolina. As a result of the
acquisitions of Michigan Livestock Exchange in April 1998 and the Gold Kist
Inputs Business in October 1998, Southern States also currently operates in
Michigan, Ohio, Indiana, Alabama, Arkansas, Florida, Georgia, Louisiana,
Mississippi and South Carolina.
Southern States is owned by over 300,000 farmer and local cooperative
members. It is the principal cooperative in a cooperative distribution system
that encompassed over 700 retail locations as of December 31, 1999. Southern
States operates through several divisions:
. Crops division -- procures, manufactures and distributes fertilizer,
seed and crop protectants to members and other customers.
. Feed division -- procures, manufactures and distributes a wide range
of dairy, livestock, equine, poultry, pet and aquaculture feeds.
. Petroleum division -- sells petroleum products, including all grades
of gasoline, kerosene, fuel oil, diesel fuel and propane, as well as
petroleum equipment.
. Retail Farm Supply division -- operates company-owned and managed
local cooperative retail farm supply locations throughout the
Mid-Atlantic, Southeast and South Central regions of the United
States.
. Farm and Home division -- distributes farm and home products at
wholesale to retail farm supply locations and at retail through urban
and suburban retail locations.
. Grain Marketing division -- operates a year-round market for produced
grains, primarily corn, soybeans, wheat and barley.
. Livestock Marketing division -- operates livestock auction facilities
and swine buying stations in Michigan, Ohio, Indiana and Kentucky.
1
<PAGE>
The Offering
We are offering several series of notes (the Senior Notes) in this
prospectus. You must invest the minimum amounts set forth in the following table
to purchase each Senior Note:
<TABLE>
<CAPTION>
Minimum Initial
Series Initial Investment Interest Rate
- ------------------------------------------------------ -------------------- ---------------
<S> <C> <C>
Six month maturity, Series A (Standard Certificate) $ 1,000 %
Six month maturity, Series B (Large Certificate) 10,000 %
Six month maturity, Series C (Jumbo Certificate) 100,000 %
One year maturity, Series D (Standard Certificate) 1,000 %
One year maturity, Series E (Large Certificate) 10,000 %
Two year maturity, Series F (Standard Certificate) 1,000 %
Two year maturity, Series G (Large Certificate) 10,000 %
Five year maturity, Series H (Standard Certificate) 1,000 %
Five year maturity, Series I (Large Certificate) 10,000 %
Seven year maturity, Series J (Standard Certificate) 1,000 %
Seven year maturity, Series K (Large Certificate) 10,000 %
</TABLE>
We are not using an underwriter to offer the Senior Notes. Instead,
designated employees of Southern States will be selling the Senior Notes on our
behalf. Our employees will not receive any commission or remuneration based on
sales of the Senior Notes.
The Senior Notes will rank equally with all of our unsecured and
unsubordinated debt obligations. Interest on each of the Senior Notes will be
determined as we describe in "Description of the Senior Notes--Interest Rates."
We will redeem the Senior Notes upon your request subject to an interest penalty
except in limited circumstances. We will also have the option to redeem the five
and seven year maturity Senior Notes, after two years from the dates of
issuance, prior to their maturity. See "Description of the Senior
Notes--Redemption at the Option of Southern States."
2
<PAGE>
RISK FACTORS
You should read carefully the following risk factors and the other sections
of this prospectus before purchasing any Senior Notes.
Risk Factors Relating to the Senior Notes
There is no public trading market for the Senior Notes.
There is no present market for the Senior Notes. We do not intend to create
or encourage a trading mechanism for the Senior Notes, and it is highly unlikely
that any secondary trading market will develop. We do not intend to apply for a
listing of the Senior Notes on any securities exchange. Any secondary market
which might develop for, and the market value of, the Senior Notes will be
affected by a number of factors which are independent of our creditworthiness.
These factors include the level and direction of interest rates, the remaining
period to maturity of the Senior Notes, our right to redeem the Senior Notes,
our right to issue Senior Notes at interest rates higher than the rates for the
Senior Notes previously issued, the aggregate principal amount of the Senior
Notes and the availability of comparable investments. In addition, the market
value of the Senior Notes may be affected by numerous other interrelated
factors, including factors that affect the U.S. corporate debt market generally,
and Southern States specifically.
There is no assurance that in the event we redeem your Senior Notes, you
will be able to reinvest the proceeds in comparable securities at an effective
interest rate as high as that of the Senior Notes. You should rely solely on our
ability to repay at maturity the principal of the offered Senior Notes as the
source for liquidity in this investment. See "Description of the Senior
Notes--Interest Rates," "--Redemption at the Option of Holders" and
"--Redemption at the Option of Southern States."
Holders of the Senior Notes will have redemption rights but we will impose an
interest penalty for early redemption under most circumstances.
You may redeem your investment in the Senior Notes prior to maturity. Early
redemption without any interest penalty is permitted in the case of death of a
holder of Senior Notes or if the holder is holding a Senior Note in an
individual retirement account established under section 408 of the Internal
Revenue Code and the redemption is necessary to satisfy mandatory withdrawal
requirements. We will impose an interest penalty for redemptions made at your
request prior to maturity for reasons other than death or IRA withdrawals. In
the case of six month and one year Senior Notes, the penalty will be equal to
three months' interest. In the case of Senior Notes with a maturity date of more
than one year, the interest penalty will be equal to six months' interest. The
penalty could exceed the amount of interest paid or accrued on the Senior Note
to the redemption date, and result in a redemption price that is less than the
principal amount of the Senior Note. The effect of the interest penalty is more
fully described under "Description of the Senior Notes--Redemption at the Option
of Holders." Depending on your investment objective, the imposition of interest
penalties may make these Senior Notes an unsuitable investment for you.
3
<PAGE>
Your ability to transfer the Senior Notes will be limited.
You may transfer your interest in a Senior Note, in whole but not in part,
and only upon the delivery to the transfer agent of a written instrument of
transfer which is duly executed by the holder of the Senior Note(s) to be
transferred or by the holder's duly authorized attorney or legal representative.
Risk Factors Relating to Southern States
Restrictions in our credit facilities could affect our ability to pay interest
and principal on these Senior Notes.
Our credit facilities relating to our senior debt contain financial
covenants. Violation of these financial covenants or any other breach relating
to our senior debt, including payment defaults, would create a default on our
senior debt. If a default occurs, we may not be able to draw on our credit
facilities in order to make payments of principal and interest on the Senior
Notes.
As a cooperative, we have limited ability to raise equity in the capital
markets.
As a cooperative, we raise equity primarily through the retention of a
portion of our patronage refunds and through retention of net savings (retained
earnings) generated from transactions with non-members.
Declining commodity prices have resulted in lower revenues and significant
reductions in our net savings in fiscal 1998 and 1999.
Our recent operating results have been adversely affected by significant
declines in a wide range of agricultural commodity prices. Net savings for the
fiscal year ended June 30, 1998 were $10.7 million. We experienced a loss for
the fiscal year ended June 30, 1999 of $2.1 million. These results were
significantly below the net savings of $27.5 million achieved for the year ended
June 30, 1997 and the $27.6 million achieved for the year ended June 30, 1996.
These reductions in net savings in fiscal 1998 and 1999 were attributable to
significant price declines in petroleum products, grains, livestock and
fertilizer coupled with volume reductions in petroleum and grain marketing as a
result of warmer than usual weather during the heating season and drought and
flood conditions that adversely affected grain harvests.
We expect lower than usual commodity prices in many of our product lines to
continue for some time in the future. As a result, our operating results in
fiscal 2000 and future periods will continue to be adversely affected until
prices return to more normal levels.
The cyclical and often unpredictable nature of the agriculture business can
reduce our revenues and our ability to meet our payment obligations under the
Senior Notes.
Agriculture is generally cyclical in nature. Agricultural commodities
experience wide fluctuations in price, based largely on the supply of farm
commodities and demand for raw or processed products.
4
<PAGE>
The cyclical nature of the agriculture business is something over which we
have no control; at times it negatively affects our revenues and operating
results. Currently, the agriculture industry is experiencing a period of
depressed prices for a wide variety of commodities. This has affected our
operating results in terms of lower sales, lower net savings and increased
credit risk among some of our customers. In addition, a portion of our business
is dependent on the demand of farmers for particular products, which is
influenced by the general farm economy and the success of particular crops.
The cyclical nature of our operations related to various commodities can
result in significant variations from year to year and over a period of years in
sales volume, cost of goods and cost of raw materials. These variations could
negatively affect our net income and reduce our ability to meet our payment
obligations with respect to the Senior Notes.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Weather conditions impact the demand for our products and services.
Historically, weather conditions have had a significant impact on the farm
economy and, consequently, our operating results. Weather conditions affect the
demand for, and in some cases the supply of, products, which in turn has an
impact on our prices. For example, weather patterns such as flood, drought or
frost can cause crop failures that in turn affect the supply of feed and seed
and the marketing of grain products, as well as the demand for fertilizer, crop
protectants, seeds and other agronomic supplies. In recent years, we have
experienced unusually severe weather conditions, including ice storms, floods
and wind damage, and a summer dearth of water and pasture in some states.
Weather conditions also directly affect the demand for petroleum products,
particularly during the winter heating season. Adverse weather conditions can
also impact the financial position of agricultural producers who do business
with us. This, in turn, may adversely affect the ability of the producers to
repay their obligations to us in a timely manner. Accordingly, the weather can
have a material effect on our business, financial condition, and results of
operations.
Competition in the agribusiness industry could materially adversely affect our
business and operating results.
We compete against large national and regional manufacturers and suppliers
as well as small independent businesses operating in our territory for sales of
feed, fertilizer, seed, grain, livestock, petroleum and farm supplies.
Competition with other suppliers is based primarily on price and service.
Agriculture, and the entire food industry, is consolidating rapidly. The
potential inability to compete successfully would result in a loss of customers,
which could have a material adverse effect on our business, financial condition,
and results of operations. For example, some of our competitors may offer
supplies or services on more favorable terms, and some may have capital
resources, research and development staffs, facilities or name recognition that
may be greater than ours. See "Business of Southern States--Other Factors
Affecting the Business of Southern States--Competition."
5
<PAGE>
Exposure to environmental liabilities could materially adversely affect our
business.
The use and handling of fertilizer, crop protectants and petroleum products
sometimes result in environmental contamination. We are governed by stringent
and changing federal, state and local environmental laws and regulations,
including those governing the labeling, use, storage, discharge and disposal of
hazardous materials. These laws and regulations impose liability for the cleanup
of environmental contamination. Because we use and handle hazardous substances
in our business, changes in environmental requirements or an unanticipated
significant adverse environmental event could have a material adverse effect on
our business, financial condition and results of operations. See "Business of
Southern States--Other Factors Affecting the Business of Southern
States--Matters Involving the Environment."
USE OF PROCEEDS
We are offering for sale $50 million principal amount of Senior Notes. The
offering is not underwritten and no assurance can be provided as to the amount
of net proceeds Southern States may receive as a result of this offering. If all
of the Senior Notes offered are sold, we will receive no more than approximately
$49.25 million of the proceeds from the sale of the Senior Notes, after paying
approximately $750,000 in offering expenses. Southern States intends to use the
net proceeds from the sale of the Senior Notes to repay other senior
indebtedness, including but not limited to indebtedness under Southern States'
$200 million three-year revolving credit facility with various commercial banks
that matures in January, 2002. At December 31, 1999, Southern States had $138.5
million outstanding under this facility. Interest rates under this facility are
determined by Southern States under one of three options: on a competitive bid
process, LIBOR plus .95%, or a base rate which is the higher of the prime rate
or the federal funds rate plus .50%. As of December 31, 1999, interest rates on
advances under that facility varied from 6.22% to 7.60% per annum. Amounts are
drawn under this facility to fund general working capital needs. If
substantially less than the maximum proceeds are obtained from the sale of the
Senior Notes, and to the extent cash flow from future operations is not
sufficient, Southern States will borrow any necessary additional funds under its
revolving credit facility or other credit facilities or from other lenders.
6
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical consolidated financial data,
except wholesale volume data, for Southern States are derived from the unaudited
financial statements of Southern States as of and for the six months ended
December 31, 1999 and 1998, and from the audited financial statements of
Southern States as of and for each of the years in the five-year period ended
June 30, 1999. The selected historical financial data, except wholesale volume
data, for the Gold Kist Inputs Business are derived from the audited statements
of operations and cash flows of the Gold Kist Inputs Business for the two years
ended June 27, 1998, and June 28, 1997. Since October 1998, the Gold Kist Inputs
Business has been operated as part of and incorporated into the financial
statements of Southern States. The following selected historical financial data
should be read together with information appearing in the respective
consolidated financial statements and accompanying notes included in prospectus.
Southern States Cooperative, Incorporated
<TABLE>
<CAPTION>
As of and for the
Six Months Ended
December 31 As of and for the Fiscal Year Ended June 30
-------------------- --------------------------------------------
1999 1998 1999 1998 1997
---- ---- ---- ---- ----
(unaudited) (Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Summary of Operations:
Net purchases by patrons.......................... $547,033 $ 438,109 $1,286,224 $1,026,630 $1,097,174
Net marketings for patrons........................ 38,948 42,773 76,541 92,863 115,972
Other operating revenue........................... 1,434 2,092 3,595 3,793 2,954
-------- ---------- ---------- ---------- ----------
Total revenue............................. $587,415 $ 482,975 $1,366,360 $1,123,287 $1,216,100
Cost of products purchased and
marketed................................... 470,013 392,567 1,114,783 931,436 1,014,440
-------- ---------- ---------- ---------- ----------
Gross margin...................................... 117,402 90,407 251,577 191,851 201,659
Selling, general & administrative................. 128,153 108,578 247,635 175,784 166,132
-------- ---------- ---------- ---------- ----------
(Loss) savings on operations............... (10,751) (18,171) 3,942 16,067 35,527
Other deductions (net)............................ 6,317 2,740 5,392 2,496 2,025
-------- ---------- ---------- ---------- ----------
(Loss) savings before income taxes......... (17,068) (20,911) (1,450) 13,571 33,502
Distributions on trust preferred securities....... (1,200)
Income taxes (benefit)............................ (7,151) (5,494) (597) 2,961 6,036
Undistributed (loss) earnings of
Statesman Financial Corporation,
net of tax................................. (252) (176) (1,222) 57 35
Cumulative effect of change in
accounting method, net of tax.............. 1,590 --- --- --- ---
-------- ---------- ---------- ---------- ----------
Net (loss) savings $(9,779) $ (15,592) $ (2,075) $ 10,667 $ 27,501
======== ========== ========== ========== ==========
Distribution of Net Savings (Loss):
Dividends on stock................................ $ 888 $ 278 $ 1,008 $ 961 $ 805
Patronage refunds payable in cash................. --- --- --- 2,379 6,884
Patronage refund allocations...................... --- --- --- 3,703 10,591
Retained in the business.......................... (10,667) (15,870) (3,083) 3,624 9,221
-------- ---------- ---------- ---------- ----------
Net savings (loss)......................... $(9,779) $ (15,592) $ (2,075) $ 10,667 $ 27,501
======== ========== ========== ========== ==========
Statement of Cash Flows and Other
Statement of Operations Data:
Cash flow from operating activities............... $ 16,292 $ 90,749 $ 143,917 $ 33,602 $ 31,430
Cash flow used by investing activities............ 2,578 (230,460) (268,090) (43,833) (20,981)
Cash flow from (used by) financing
activities.................................. 2,434 178,950 127,563 8,730 (11,881)
<CAPTION>
As of and for the Fiscal Year Ended June 30
-------------------------------------------
1996 1995
---- ----
(Amounts in thousands)
<S> <C> <C>
Summary of Operations:
Net purchases by patrons.......................... $1,008,841 $ 911,449
Net marketings for patrons........................ 110,667 99,185
Other operating revenue........................... 3,141 3,093
---------- ----------
Total revenue............................. $1,122,649 $1,013,727
Cost of products purchased and
marketed................................... 926,753 835,139
---------- ----------
Gross margin...................................... 195,896 178,588
Selling, general & administrative................. 157,809 150,678
---------- ----------
(Loss) savings on operations............... 38,087 27,910
Other deductions (net)............................ 3,483 4,780
---------- ----------
(Loss) savings before income taxes......... 34,604 23,130
Distributions on trust preferred securities.......
Income taxes (benefit)............................ 7,049 4,926
Undistributed (loss) earnings of
Statesman Financial Corporation,
net of tax................................. 39 39
Cumulative effect of change in
accounting method, net of tax.............. --- ---
---------- ----------
Net (loss) savings $ 27,594 $ 18,243
========== ==========
Distribution of Net Savings (Loss):
Dividends on stock................................ $ 989 $ 1,108
Patronage refunds payable in cash................. 6,669 3,812
Patronage refund allocations...................... 10,306 5,961
Retained in the business.......................... 9,630 7,362
---------- ----------
Net savings (loss)......................... $ 27,594 $ 18,243
========== ==========
Statement of Cash Flows and Other
Statement of Operations Data:
Cash flow from operating activities............... $ 25,631 $ 19,560
Cash flow used by investing activities............ (19,690) (21,537)
Cash flow from (used by) financing
activities.................................. (141) 4,859
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
EBITDA (1) ....................................... $ 12,951 $ 3,060 $ 47,969 $ 48,104 $ 65,704
Interest expense.................................. 16,293 13,357 28,413 16,859 15,566
Depreciation and amortization..................... 12,592 10,374 22,394 17,612 16,598
CF Industries, Inc.
patronage dividend (2)....................... --- --- --- 5,513 13,128
Capital expenditures.............................. 20,162 24,529 46,603 33,905 19,945
</TABLE>
<TABLE>
<S> <C> <C>
EBITDA (1) ....................................... $ 66,150 $ 53,297
Interest expense.................................. 15,237 14,798
Depreciation and amortization..................... 16,267 15,327
CF Industries, Inc.
patronage dividend (2)....................... 12,729 4,846
Capital expenditures.............................. 18,529 17,333
</TABLE>
<TABLE>
<CAPTION>
As of and for the
Six Months Ended As of and for the Fiscal Year Ended June 30
December 31 -------------------------------------------
---------------
1999 1998 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
(unaudited) (Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital............................... $137,658 $148,501 $153,507 $ 90,098 $108,682 $103,911 $ 92,154
Property, plant and equipment (net)........... 197,645 183,082 189,118 129,193 104,002 101,549 99,535
Investments................................... 119,153 106,782 114,786 103,874 82,369 71,549 63,849
Total assets.................................. 697,273 747,160 681,748 462,296 409,160 385,551 343,173
Long-term debt................................ 183,827 267,524 276,562 136,041 109,902 107,523 99,580
Selected Ratios:
Ratio of earnings to combined fixed charges
and preferred stock dividends (3).......... --- --- --- 1.63x 2.76x 2.89x 2.30x
Ratio of EBITDA to interest expense........... .80x .23 1.69x 2.85x 4.22x 4.34x 3.60x
Long-term debt/EBITDA......................... 14.19 87.43 5.77x 2.83x 1.67x 1.63x 1.87x
Current ratio (4)............................. 1.59 1.50x 1.73x 1.71x 2.00x 2.00x 2.11x
Long-term debt to total capitalization (5).... .41x .62x .61x 0.43x 0.38x 0.40x 0.40x
Wholesale Volume Data ('000's):
Supply
Feed--tons............................... 678 589 1,276 917 924 895 875
Fertilizer--tons......................... 505 357 1,891 1,155 1,137 1,054 1,021
Seed -pounds, 100 wt..................... 1,042 947 1,948 1,673 1,384 1,305 1,412
Petroleum--gallons....................... 177,719 150,309 325,527 314,614 349,863 340,556 306,874
Marketing
Grain marketing-bushels.................. 11,888 11,649 22,456 24,830 29,380 27,637 28,517
Livestock marketing-head
Cattle................................ 332 300 596 642 599 N/A N/A
Swine................................. 634 793 1,466 2,689 2,516 N/A N/A
Other................................. 77 77 136 136 120 N/A N/A
Statesman Financial Corporation (6):
Total assets.................................. $238,079 $183,353 $287,559 $236,143 $152,400 $168,971 $144,384
Receivables financed.......................... 204,620 104,978 252,312 202,908 127,717 140,158 97,167
Debt.......................................... 203,850 146,250 250,452 200,795 133,230 150,024 126,409
Total equity.................................. 34,749 32,133 35,541 31,574 18,349 18,078 17,050
Net interest income (expense) and fee
income .................................... 1,385 1,635 (397) 4,152 3,793 3,560 2,980
Net (loss) income ............................ (736) (501) (3,611) 134 85 86 84
</TABLE>
8
<PAGE>
Gold Kist Inputs Business
<TABLE>
<CAPTION>
For the Fiscal Year Ended
-------------------------------------------------------
June 27, 1998 June 28, 1997
------------- -------------
(Amounts in thousands)
<S> <C> <C>
Summary of Operations:
Net sales .................................................. $480,542 $488,409
Cost of sales............................................... 393,711 389,798
--------- --------
Gross margin........................................... 86,831 98,611
Distribution, administrative and general.................... 105,291 98,456
--------- --------
Savings (loss) on operations........................... (18,460) 155
Other deductions (net)...................................... 1,465 2,746
--------- --------
Loss before income taxes............................... (19,925) (2,591)
Income tax benefit ......................................... (7,576) (972)
--------- ---------
Net loss .............................................. $(12,349) $ (1,619)
========= =========
Other Data:
EBITDA (1) ................................................. $ (1,062) $ 14,877
Interest expense............................................ 12,675 11,282
Depreciation and amortization............................... 6,188 6,186
CF Industries, Inc. patronage dividend (2).................. 3,696 10,108
Capital expenditures........................................ 4,729 9,375
</TABLE>
<TABLE>
<CAPTION>
For the Fiscal Year Ended
-------------------------------------------------------
June 27, 1998 June 28, 1997
------------- -------------
<S> <C> <C>
Selected Ratio:
Ratio of EBITDA/interest expense............................ (0.08)x 1.32x
Wholesale Volume Data ('000's):
Supply
Feed--tons.............................................. 272 272
Fertilizer--tons....................................... 1,126 1,127
Grain--bushels handled................................. 10,563 13,862
Cotton--bales ginned................................... 102 110
Peanut--tons handled................................... 35 57
</TABLE>
9
<PAGE>
- ---------------
(1) EBITDA is defined as savings (loss) before income tax plus interest,
depreciation and amortization expenses after the cumulative effect of
change in accounting method, net of tax. EBITDA should not be considered as
an alternative to net savings (as determined in accordance with generally
accepted accounting principles), as a measure of operating performance or
as an alternative to net cash provided by operating, investing and
financing activities (as determined in accordance with generally accepted
accounting principles) as a measure of its ability to meet cash needs.
Southern States believes that EBITDA is a measure commonly reported and
widely used by investors as a measure of operating performance and debt
servicing ability because it assists in comparing performance on a
consistent basis without regard to interest, taxes, depreciation and
amortization, which can vary significantly depending upon capitalization
structure, tax status (particularly when comparing a cooperative company to
a non-cooperative company), accounting methods (particularly when
acquisitions are involved) or non operating factors (such as historical
cost). Accordingly, this information and the related other EBITDA ratios,
including ratio of EBITDA to interest expense and long term debt/EBITDA has
been disclosed in this prospectus to permit a more complete comparative
analysis of operating performance relative to companies within and outside
of the industry and of Southern States' debt servicing ability. However,
EBITDA, EBITDA to interest expense and long term debt/EBITDA may not be
comparable in all instances to other similar types of measures used by
other companies in the agricultural industry.
(2) For further information concerning Southern States' relationship to CF
Industries, Inc., see "Business of Southern States--Investments in Other
Companies and Cooperatives."
(3) In the calculation of the ratio of earnings to combined fixed charges and
preferred stock dividends, earnings consist of net savings before income
taxes and the cumulative effect of accounting changes plus interest expense
on indebtedness, amortization of financing costs and the portion of rental
expense representative of the interest factor. Fixed charges consist of
interest expense on indebtedness before deduction of capitalized interest,
amortization of financing costs, the portion of rental expense
representative of the interest factor and the pre-tax earnings required to
cover preferred stock dividends. Earnings were insufficient to cover fixed
charges by $18.4 million and $21.0 million for the six months ended
December 31, 1999 and 1998, respectively, and by $2.6 million for the year
ended June 30, 1999.
(4) Current ratio is defined as total current assets divided by total current
liabilities.
(5) Total capitalization is defined as the total of long-term debt, Capital
Securities, Series A, mandatorily redeemable preferred stock, preferred
stock, capital stock and patrons' equity.
(6) Southern States owns 38.4% of the common stock of Statesman Financial
Corporation. Statesman purchases significant amounts of receivables from
Southern States and provides agricultural production loans, building loans,
equipment loans, renovation loans, revolving credit loans and other loans
to and financing for customers of Southern States. See "Business of
Southern States--Affiliated Financing Services."
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read together with the
consolidated financial statements and accompanying notes included in this
prospectus.
General
Management's discussion of sales, operating margins (or losses) and other
factors affecting Southern States' pretax net savings (or losses) during the six
month periods ended December 31, 1999 and 1998 and during the fiscal years ended
June 30, 1999, 1998 and 1997, is based upon the following tables. Operating
margins, as utilized in the tables below, consist of divisional (segment)
operating results, including an allocation of interest expense based upon
divisional assets employed and excluding any allocation of general corporate
overhead.
Divisional Sales and Operating Margins
(in thousands)
<TABLE>
<CAPTION>
Sales for Operating Margins for
the fiscal year ended the fiscal year ended
-------------------------------------- ------------------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Crops $ 193,745 $ 154,825 $ 160,448 $12,422 $16,866 $26,609
Feed 181,287 145,582 161,940 11,826 6,121 6,302
Petroleum 165,645 193,098 250,260 6 1,650 7,108
Retail Farm Supply 532,287 336,260 336,044 (519) 4,855 5,855
Farm and Home 209,564 196,116 188,426 8,326 5,967 7,173
Marketing 79,637 94,517 116,211 (380) 1,782 3,585
Other 4,194 2,889 2,771 (1,169) (527) (198)
---------- ---------- ---------- ------- ------- -------
Total $1,366,359 $1,123,287 $1,216,100 30,512 36,714 56,434
========== ========== ==========
General corporate overhead (31,962) (23,143) (22,894)
Income tax benefit (expense) 597 (2,961) (6,039)
Undistributed (loss) earnings of Statesman Financial Corp., net of tax (1,222) 57 35
-------- ------- -------
Net (loss) savings $(2,075) $10,667 $27,501
======== ======= =======
<CAPTION>
Sales for Operating Margins for
the six months ended December 31 the six months ended December 31
------------------------------------ --------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Crops $ 42,948 $ 44,810 $ 18 $ (1,072)
Feed 91,689 84,536 5,572 5,865
Petroleum 122,130 76,320 3,045 (5,403)
Retail Farm Supply 204,750 145,660 (7,845) (5,618)
Farm and Home 84,475 85,923 661 76
Marketing 40,214 44,625 (697) 123
Other 1,209 1,101 (508) (534)
--------- --------- -------- ---------
Total $ 587,415 $ 482,975 246 (6,563)
========= =========
General corporate overhead (18,514) (14,347)
Undistributed (loss) earnings of Statesman Financial Corp., net of tax (252) (176)
Cumulative effect of change in accounting method, net of tax 1,590 ---
Income tax benefit 7,151 5,494
-------- --------
Net loss $(9,779) $(15,592)
======== ========
</TABLE>
11
<PAGE>
Agriculture is both seasonal and cyclical in nature. As a result, our sales
and operating margins fluctuate greatly on a quarterly basis. The first quarter
is typically the weakest for both sales and operating margins, and losses are
expected. The second quarter also typically results in operating losses,
although sales are stronger than in the first quarter due principally to
increased sales of petroleum products. The third and fourth quarters are the
largest contributors to both sales and profitability for the year. See "Business
of Southern States--Other Factors Affecting the Business of Southern
States--Seasonality."
A major portion of Southern States' business is dependent on the demand of
farmers for the purchase of supplies and services, which is influenced by
weather, the general farm economy and the success of particular crops. Prices of
agricultural supplies are sensitive to world-wide economic and political
factors. Commodities marketed by Southern States on behalf of its members
fluctuate in price, based on the supply of such commodities and the demand for
the raw or processed products.
Acquisition and Integration of the Gold Kist Inputs Business
Effective October 1998, Southern States acquired the agriservices (or
"inputs") business formerly operated by Gold Kist Inc., a major southeastern
agricultural cooperative organization. Through this acquisition, Southern States
acquired an inputs business that was very similar to its own agricultural supply
operations, enabling it to:
. expand its agricultural supply activities and services into the
geographically contiguous, eight-state Gold Kist territory;
. increase its purchasing power with vendors;
. distribute its products through expanded distribution channels;
. increase the opportunity to provide livestock marketing services in the
area served; and
. achieve efficiencies and economies of scale, capitalizing on its operating
expertise as it combines the Gold Kist Inputs Business with Southern
States' operations.
The acquisition of the Gold Kist Inputs Business significantly enlarged
Southern States' operations, increasing its assets at the date of acquisition by
approximately $220 million and its membership base by approximately 29,000, and
on a pro forma basis, its sales by more than 40% at that time. This acquisition
solidified Southern States' position as a principal supplier of agricultural
inputs east of the Mississippi River.
Prior to the acquisition, Southern States developed a business plan to
improve the operating performance and reduce the operating losses the Gold Kist
Inputs Business had experienced in recent years under Gold Kist's management.
This plan contemplated that Southern States would:
. substantially reduce unprofitable business locations, particularly in the
West Texas and Mississippi Delta regions, through divestiture, closure or
other appropriate remedial steps;
12
<PAGE>
. implement Southern States' credit underwriting standards and practices,
which require more stringent policies and controls over the approval and
monitoring of credit transactions;
. implement Southern States' commodity price risk management policies;
. reduce administrative costs through centralization of procurement,
accounting and administration; and
. develop and expand the Southern States private dealer network in the Gold
Kist territory.
The Gold Kist Inputs Business is now operated as an integral part of
Southern States, and separate financial statements are no longer produced.
Southern States believes it has made substantial progress toward achieving a
number of its objectives, even though its operations in the former Gold Kist
territory for the year ended June 30, 1999 were still disappointing.
Consistent with Southern States' business plan for reducing the
pre-acquisition losses of the Gold Kist Inputs Business, through March 31, 2000,
we have closed or otherwise disposed of 30 store locations acquired as part of
the Gold Kist Inputs Business. These included all of our seven retail locations
in West Texas which we leased to an unrelated third party for a three year
period, also providing the lessee the option to purchase the properties. Costs
to exit these businesses were approximately $1.3 million. Pursuant to EITF 95-3,
these costs were accrued in the opening balance sheet. Southern States recorded
closure costs of approximately $200,000 in the year ended June 30, 1999, and
approximately $1.1 million in the first quarter of fiscal 2000.
Southern States anticipated that the implementation of more stringent
credit underwriting standards, although beneficial in the long run, initially
would adversely impact sales in the former Gold Kist territory because a number
of patrons would no longer qualify for credit approval. For this reason,
Southern States had anticipated an approximate 10% reduction in sales in the
former Gold Kist territory from those in the same period for the prior year.
Actual sales in the former Gold Kist territory for the year ended June 30, 1999,
were 30% lower (by approximately $70 million) than sales during the same period
in the prior year.
This decline was attributable to several factors, as drought conditions
reduced crop yields and low commodity prices reduced dollar sales volume to a
degree much greater than originally anticipated. Although it is difficult to
separate the impact of weather, low prices and more stringent credit standards,
Southern States believes that the imposition of tougher credit standards was the
predominant reason for the lower than expected sales in this territory.
Southern States anticipates a portion of the lost sales in the former Gold
Kist territory will be replaced as leased land is turned over to financially
stronger farmers, as sales to existing customers are expanded through
cross-selling techniques available through new computer systems and as Southern
States achieves an increasing market share through expanded product offerings in
the former Gold Kist territory through a new distribution facility in central
Alabama. In addition, there is substantial sales potential with the addition of
many private dealers and independent cooperatives in the former Gold Kist
territory, most of whom were signed up after the 1999 selling season ended.
13
<PAGE>
While it is still too early to draw conclusions regarding the performance
of the receivables portfolio originated by Southern States in the former Gold
Kist territory, Southern States believes these receivables ultimately will
perform at delinquency rates similar to Southern States' historical standards.
Losses in the Gold Kist Inputs Business from unfavorable commodity futures
contracts were eliminated for the year ended June 30, 1999 through the
implementation of Southern States' commodity price risk management policies
concurrent with the date of acquisition. Losses from such transactions in the
former Gold Kist Inputs Business were $4.1 million for the year ended June 27,
1998.
In addition, Southern States achieved savings of approximately $7.0 million
as of June 30, 1999 in procurement, accounting and administration functions
through the immediate consolidation of these functions into Southern States'
existing operations resulting in reduced employment levels as compared to
historical. The consolidation of these functions resulted in reducing the number
of employees in these areas from approximately 1,450 which were employed at Gold
Kist just prior to the purchase to approximately 900 as of June 30, 1999.
Southern States has rapidly expanded its private dealer network into the
former Gold Kist territory. As of December 31, 1999, 107 new private dealer
locations in this new territory, including 30 independent cooperative locations,
had completed the Southern States certification process and were purchasing
product from Southern States. Five others, including three independent
cooperatives, were in various stages of that process. Approximately 40 other
private dealers and independent cooperatives throughout the Gold Kist territory
have been identified as prospective private dealers for Southern States.
Overall, although Southern States did not achieve its sales goals or its
operating performance goals for the former Gold Kist territory for the year
ended June 30, 1999, it continues to believe that the acquisition of the Gold
Kist Inputs Business enhances Southern States' strategic position and that over
time the business in the new territory will make a significant positive
contribution to Southern States' business. Through savings in employee costs,
avoided credit losses and savings in other areas such as shrinkage, insurance
expenses and the use of precision ag (which is the use of satellite technology
to map areas for the application of fertilizer), Southern States made
substantial progress in reducing the Gold Kist Inputs Business operating losses
of $18.5 million in 1998 to less than $10 million in 1999.
Historical Results of Operations
Six Months Ended December 31, 1999 Compared to Six Months Ended December
31, 1998
While sales and operating margins are typically weak during the first six
months of the fiscal year, they are usually mitigated by sales of petroleum
products. In 1999, sales and operating margins in petroleum products were
greatly improved due to overall net increases in worldwide petroleum prices.
This improvement partially reduced exposure to operating losses within other
segments (particularly the Retail Farm Supply division which includes the Gold
Kist Inputs Business) at a time when results are typically weak.
14
<PAGE>
Net sales of $587.4 million for the six months ended December 31, 1999,
reflected a 21.6% increase of $104.4 million from $483.0 million for the
comparative 1998 period. Despite the inclusion of the net sales of the Gold Kist
Inputs Business since its October, 1998 acquisition, net sales were lower than
anticipated primarily as a result of lower Fertilizer, Feed and Marketing
volumes. These volumes have continued to be impacted negatively by worldwide
supply and demand factors for fertilizer and grain products. Average unit price
varied from a 34.2% decrease in Fertilizer to an increase of 52.1% in Petroleum.
The net loss for the six months ended December 31, 1999 of $9.8 million was
$5.8 million lower than the $15.6 million loss for the corresponding six months
ended December 31, 1998. Improved profitability in Southern States' Petroleum
segment due to increased volume at higher prices was primarily responsible for
the reduced company-wide loss. A gain of approximately $1.6 million resulting
from the cumulative effect of an accounting change also favorably impacted
overall results. Effective July 1, 1999, Southern States changed its method of
accounting for refunds from the Southern States Insurance Exchange. In addition
to the $1.6 million gain, this change also resulted in the recognition of an
insurance refund reducing insurance expense by $2.3 million in Southern States
operating results for the period ended December 31, 1999.
Crops
Sales in the Crops division decreased $1.9 million (4.2%) from $44.8
million for the six months ended December 31, 1998 to $42.9 million for the
comparative 1999 period. The decrease occurred in the seed and crop protection
product lines and was due to a unit volume decrease in seed and overall decrease
in crop protection products. Seed prices also decreased slightly. Increased
sales of fertilizer due to an increase in volume primarily in the acquired Gold
Kist Inputs Business territory offset, in part, the lower seed and crop
protection product sales. Fertilizer prices declined during this period.
Operating margin for the Crops division of $18,000 represented a $1.1
million improvement compared to the same period in the prior year. The primary
reasons for this improvement were an improved gross margin and increased
miscellaneous and finance income, partially offset by higher selling, general
and administrative expenses.
Feed
Feed division sales increased $7.2 million (8.5%) from $84.5 million for
the six months ended December 31, 1998, to $91.7 million for the comparative
1999 period. The increase was caused primarily by a 15% increase in tonnage,
partially offset by a 4.5% decrease in average unit selling prices. Most of the
increased tonnage is attributable to the acquisition of the Gold Kist Inputs
Business in October 1998.
The operating margin for the Feed division decreased approximately $.3
million from $5.9 million for the six months ended December 31, 1998, to $5.6
million for the comparative 1999 period. The decrease in operating profit
resulted from the increased delivery costs and
15
<PAGE>
compensation expense from the acquisition of the Gold Kist Inputs Business. This
was offset in part by a higher gross margin.
Petroleum
Petroleum division sales increased $45.8 million (60.0%) from $76.3 million
for the six months ended December 31, 1998, to $122.1 million for the
comparative 1999 period. The overall sales revenue increase resulted from a
52.1% average unit price increase and a 16.9% increase in gallons sold.
The Petroleum division's operating margin increased $8.4 million from a
loss of $5.4 million for the six months ended December 31, 1998, to a profit of
$3.0 million for the 1999 period. Higher unit prices not only produced higher
sales revenues but also resulted in an increased gross margin both in total and
on a per gallon basis for gasoline and fuel oil products. The improved unit
margin was due to selling inventory purchased at prices lower than current
market prices. Margin improvements were realized in gasoline and fuel oil
operations. However, replacement costs for inventory purchases subsequent to
December 31, 1999, were at higher prices and will have a negative impact on
operating margin. In 1998, Southern States recorded a $3.0 million provision for
environmental remediation, which negatively impacted results last year. Lower
operating expenses in the current year also contributed to the improved
operating margin.
Retail Farm Supply
Sales of the Retail Farm Supply division increased $59.1 million (40.6%)
from $145.7 million for the six months ended December 31, 1998, to $204.8
million for the comparative 1999 period. The substantial sales increase is
primarily attributable to the sales increase in the acquired Gold Kist Inputs
Business territory of approximately $61.8 million, which having been acquired on
October 13, 1998, had no sales in the first three and one half months last year.
Sales in the acquired Gold Kist territory did not meet Southern States'
expectations because of continued price deflation and drought conditions in
portions of the Southeast, as discussed above in "--Acquisition and Integration
of the Gold Kist Inputs Business."
Retail Farm Supply's operating loss at $7.8 million was $2.2 million higher
than the $5.6 million operating loss recorded last year. The operating loss for
the current six-month period was due to a loss of $8.5 million in the acquired
Gold Kist Inputs Business territory. In the comparable prior year period, the
Gold Kist locations, which were operated by Southern States only for
approximately two and one half months of the six-month period, lost $2.2
million. Higher salaries and related compensation costs, an increase in
allocated interest expense as well as additional expenses for leased equipment
coupled with lower than expected volume produced the loss in the current year.
In addition, the reserve for environmental remediation liabilities was increased
by $1.1 million which decreased operating profits by the same amount. Gross
margin increases in crop protection, seed and fertilizer products offset the
higher level of expense. The operating loss was partially offset by
approximately $.8 million, representing this division's portion of the insurance
refund discussed above.
16
<PAGE>
Farm and Home
Sales of the Farm and Home division decreased $1.4 million (1.7%) from
$85.9 million for the six months ended December 31, 1998, to $84.5 million for
the 1999 period. This decrease is primarily the result of a $1.9 million (8.1%)
decrease in the sales recorded at Wetsel, Inc., an independently-operated
wholly-owned subsidiary of Southern States. The decrease was primarily
attributable to reduced grass and farm seed selling prices.
Operating margin for the Farm and Home division increased $.6 million from
$.1 million for the six months ended December 31, 1998, to $.7 million for the
1999 period. The increased operating margin resulted from a gain from the
disposal of fixed assets, improved gross margins for both Farm and Home and
Wetsel and reduced operating expenses at Wetsel.
Marketing
Sales in the Marketing division, including Michigan Livestock Exchange,
decreased $4.4 million (9.9%) from $44.6 million for the six months ended
December 31, 1998, to $40.2 million for the 1999 period. This decrease is
primarily attributable to reduced soybean sales volume at lower selling prices
within the Grain Marketing Division. Sales of wheat also were lower in the
current period due to both a decline in volume and decreased selling prices. The
decline in grain marketing revenue resulted from a combination of influences.
Drought conditions in the summer of 1999 impacted the quality and the quantity
of wheat and corn produced in Southern States' Mid-Atlantic territory and
resulted in a lower than anticipated volume in bushels marketed. In addition, a
strong western United States harvest caused a $.41 (12.1%) reduction in the
average unit price per bushel for grain marketed. Sales for the Michigan
Livestock Exchange increased slightly.
Operating margin for the Marketing division decreased $.8 million from $.1
million profit for the six months ended December 31, 1998, to a $.7 million loss
for the 1999 period. The decrease in operating margin was primarily attributable
to the closure of operations of a significant customer of Michigan Livestock
Exchange, as well as reduced bushel volume and pricing.
General Corporate Overhead
General corporate overhead, consisting primarily of general and
administrative costs not allocated to the divisions (such as information
systems, human resources and central management costs offset by various
miscellaneous income items), increased $4.2 million, from $14.3 million for the
six months ended December 31, 1998, to $18.5 million for the comparative 1999
period. The increase was due mainly to higher compensation expenses related to
the acquired Gold Kist Inputs Business. Depreciation, contractual services and
travel expense also increased.
Company-wide interest expense, which is substantially allocated to
operating divisions based on assets employed and included as a charge against
divisional margins, increased approximately $2.9 million (22.0%) from $13.4
million for the six months ended December 31, 1998, to $16.3 million for the
1999 period. Receivables from the additional sales generated by
17
<PAGE>
the Gold Kist acquisition resulted in additional discounts from receivables sold
to Statesman Financial Corporation, which are classified as interest expense.
Interest Income and Service Charges
Interest income including finance charges increased $.5 million due to
Southern States benefiting from owning the accounts receivable acquired from
Gold Kist for the entire six-month period this year as compared to approximately
three months for the comparable period last year.
Miscellaneous Income, net
Miscellaneous income, net decreased $1.1 million from $3.7 million for the
six months ended December 31, 1998 to $2.6 million for the comparative 1999
period. The current year includes a $.3 million loss on discontinued programs.
The amount recorded in the prior year was insignificant. The prior year included
contract settlement income totalling $1.3 million from the closure of operations
of a significant customer. These unfavorable variances were partially offset by
an increase in the gain on the disposal of fixed assets in the current year.
Provision for Income Tax Benefit
The income tax benefit for the six months of fiscal year 2000 increased to
$7.2 million from the income tax benefit of $5.5 million in fiscal year 1999, an
increase of $1.7 million. The Company has assumed patronage refunds will not be
paid during fiscal year 2000 and has not recognized the related tax benefit;
therefore, the effective tax rate increased to 39.2% from 26.2% for the same
period in fiscal year 1999.
Fiscal 1999 Compared to Fiscal 1998
Net sales of $1.4 billion increased approximately $243 million (21.6%) from
$1.1 billion in 1998. The higher net sales, which is reflected in the Retail
Farm Supply, Feed and Crops divisions, were due to the additional volume from
the acquisition of the Gold Kist Inputs Business in October, 1998. These
increases were partially offset in the Petroleum, Marketing and Feed divisions
which experienced decreases in average commodity prices ranging from 4.9% in
fertilizer to 20.6% in petroleum. Net loss for 1999 amounted to $2.1 million, a
decrease of approximately $12.8 million from a net savings of $10.7 million in
1998. Petroleum and grain prices in particular were related to world-wide supply
and demand factors.
Crops
Sales of the Crops division increased $38.9 million (25.1%) from $154.8
million in 1998 to $193.7 million in 1999. Fertilizer sales, which comprise
approximately 68.6% of Crops division sales, increased approximately 45.6%. A
63.8% increase in fertilizer tonnage was partially offset by a 4.9% decline in
selling prices. The majority of this increase in tonnage resulted from increased
sales of fertilizer and crop protection products primarily in the former Gold
Kist Inputs Business territory. Sales of seed, which comprise approximately
12.8% of
18
<PAGE>
Crops division sales, were flat. Sales of crop protection products, which
comprise approximately 18.6% of Crops division sales, increased by 14.7% from
1998 to 1999.
Operating margin for the Crops division decreased by $4.4 million from
$16.9 million in 1998 to $12.4 million in 1999. The decrease was the result of
higher employee costs ($3.7 million), increased allocated interest ($2.0
million) and lease expense ($1.1 million) in the seed and crop protection areas
and are attributable to the acquisition of the Gold Kist Inputs Business in
October, 1998.
Feed
Sales of the Feed division increased $35.7 million (24.5%) from $145.6
million in 1998 to $181.3 million in 1999. This increase resulted primarily from
a 39.2% increase in tonnage, partially offset by a 13% decrease in the average
unit-selling price. The majority of the increased tonnage is attributable to the
acquisition of the Gold Kist Inputs Business in October, 1998.
Operating margin for the Feed division increased $5.7 million from $6.1
million in 1998 to $11.8 million in 1999. The increase in operating profit
primarily resulted from the increase in tonnage. This was partially offset by
the lower selling prices and increased employee expenses resulting from the
acquisition of the Gold Kist Inputs Business. Feed division operating margin as
a percentage of sales for the 1999 fiscal year increased from 4.2% for the prior
period to 6.5% for the comparative 1999 period. This increase in profit
primarily resulted from a 16% decrease in the cost of raw materials which was
partially offset by a 13% reduction in average selling prices.
Petroleum
Sales of the Petroleum division decreased $27.5 million (16.6%) from $193.1
million in 1998 to $165.6 million in 1999. The overall sales revenue decline
resulted from the net impact of an average unit selling price decrease of
approximately 20.6%. In addition, the decrease in heating degree-days in 1999
led to significantly less demand for heating oil. This was partially offset by a
volume increase of 3.5%. Higher gasoline sales produced most of this increase.
The Petroleum division's operating margin decreased from $1.7 million for
1998 to break even ($0 operating margin) for 1999. In the second quarter of
fiscal 1999, the Petroleum division recorded a $3.0 million provision related to
the estimated cost to remediate ground water contamination at an operating site.
Offsetting this were improvements in the gross margin due to favorable purchase
variances when compared to the prior year as well as a reduction in retail
operating expenses.
Retail Farm Supply
Sales of the Retail Farm Supply division increased $196 million (36.8%)
from $336.3 million in 1998 to $532.3 million in 1999. The increase in sales was
primarily attributable to sales in the former Gold Kist Inputs Business of
approximately $206 million in revenue since its
19
<PAGE>
acquisition in October, 1998. The addition of the Gold Kist Inputs Business
increased unit volume in seed, fertilizer and crop protection products. These
increases were slightly offset by a decrease in petroleum revenues due to the
net decline in worldwide petroleum pricing compared to the corresponding 1998
period.
Operating margin for the Retail Farm Supply division decreased $5.4 million
from $4.9 million for 1998 to a loss of $.5 million for 1999. The increase in
operating losses was primarily attributable to losses in the acquired Gold Kist
Inputs Business territory of approximately $5 million since its acquisition in
October, 1998. These increased losses mainly resulted from increased employee
related costs, additional operating lease expense and depreciation resulting
from the acquisition.
Farm and Home
Including sales of Wetsel, Inc., sales of the Farm and Home division
increased $13.5 million (6.9%) from $196.1 million for 1998 to $209.6 million
for 1999. This increase resulted from the higher sales volume of Wetsel, Inc.,
which grew by $2.3 million (4.0%), as well as higher sales in the urban and
suburban area stores over the same period.
Farm and Home operating margin increased by $2.3 million from $6.0 million
in 1998 to $8.3 million in 1999. The increase in operating profit primarily
resulted from higher sales volume at a flat margin percentage in both the urban
and suburban stores and at Wetsel, Inc.
Marketing
Sales of the Marketing division decreased $14.9 million (15.8%) from $94.5
million in 1998 to $79.6 million in 1999. Livestock marketing revenues of $10.9
million, attributable to the acquisition of Michigan Livestock Exchange on April
1, 1998, served to partially offset the decrease. Grain bushels marketed
decreased 9.6% from 1998 to 1999 with large decreases in wheat, corn and barley
bushels marketed, which were partially offset by an increase in soybean bushels
marketed.
Operating margin for the Marketing division decreased $2.2 million, from
$1.8 million in 1998 to a loss of $.4 million in 1999. Decreased profitability
primarily resulted from lower grain marketing volume and a relative increase in
the cost of marketing which combined to produce a $1.3 million decrease in the
gross margin. In addition, increased employee related expenses and
administrative expenses unfavorably impacted the results for the Michigan
Livestock Exchange.
General Corporate Overhead
General corporate overhead increased approximately 37.3% from $23.3 million
for 1998 to $32.0 million for 1999. The increase resulted primarily from
increased employee related expenses ($8.2 million) and higher retail support
services, ($1.0 million). Company wide interest expense, which is substantially
allocated to operating divisions based on assets employed and included as a
charge against divisional margins, increased $11.6 million (68.6%) from $16.9
million in 1998 to $28.4 million in 1999. This was primarily as a result of
higher borrowing levels to finance the acquisition of the Gold Kist Inputs
Business.
20
<PAGE>
Interest Income and Service Charges
Interest income, including finance charges, increased $3.4 million due to
the growth of the Company's accounts receivable portfolio which resulted in
increased finance charges of approximately $2.6 million. The growth in accounts
receivable was mainly due to the addition of receivables purchased in the
acquisition of the Gold Kist Inputs Business on October 13, 1998. Interest
income increased approximately $856,000 due to accrued interest on the purchase
price adjustments relating to the Gold Kist acquisition.
Miscellaneous Income, net
Miscellaneous income, net increased by $5.2 million from $6.6 million in
fiscal 1998 to $11.8 million in 1999. The increase reflects a $1.3 million
increase in the gain on the disposal of fixed assets in the current year, a $1.3
million increase in contract settlement income from the closure of operations of
a significant customer and $2.0 million increase from numerous sources, none of
which, individually, was material.
Provision for Income Tax Expense (Benefit)
Income taxes in 1999 were a benefit of $.6 million, a decrease of $3.6
million from $3.0 million expense in 1998 primarily due to a $15.0 million
decrease in pretax net savings. The effective income tax rate was 41.2% in 1999
versus 21.8% in 1998. Because the Company did not pay patronage refunds during
fiscal year 1999, the effective tax rate increased from the corresponding period
in 1998. Also, see Note 12 of Notes to the Southern States Consolidated
Financial Statements for an analysis of the differences between the statutory
income tax rate and Southern States' effective income tax rate.
Undistributed (Loss) Earnings of Statesman Financial Corporation
During 1999, Southern States' undistributed loss from its interest in
Statesman Financial Corporation, net of income taxes, was $1.2 million as
compared to a small gain on its investment in 1998 of $56,721, net of taxes. The
primary reasons for the drop in Southern States' equity earnings in Statesman
Financial Corporation are a decrease in net interest income, including the
provision for credit losses, and an increase in general and administrative
expenses.
Fiscal 1998 Compared to Fiscal 1997
Net sales of $1.1 billion decreased approximately $96 million (7.9%) from
$1.2 billion in 1997. The decrease in net sales primarily reflected lower
volumes in the Petroleum, Marketing and Feed divisions as well as lower unit
prices in all divisions. These divisions experienced 12 month average decreases
in prices from a minimum of 6.0% in fertilizer to a high of 18.0% in petroleum.
Net savings for 1998 amounted to $10.7 million, a decrease of approximately
$16.8 million (61%) from $27.5 million for 1997. Petroleum and grain prices in
particular were related to world-wide supply and demand factors.
21
<PAGE>
Crops
Sales of the Crops division decreased $9.4 million (5.9%) from $160.4
million in 1997 to $151 million in 1998. Fertilizer sales, which comprise
approximately 62% of Crops division sales, decreased approximately 4.5%, with
fertilizer selling prices declining approximately 6.0%, partially offset by a
1.5% increase in tonnage. Sales of seed, which comprise approximately 17% of
Crops division sales, increased approximately 2.2% due to unit volume increases
of 20.8%, which were mostly offset by decreases in average selling price of
18.6%. Sales of crop protection products, which comprise approximately 21% of
Crops division sales, increased by 4.6% from 1997 to 1998.
Operating margin for the Crops division decreased by $9.7 million from
$26.6 million in 1997 to $16.9 million in 1998. The decrease resulted primarily
from a decrease of $7.6 million in the patronage refund from CF Industries, a
fertilizer supply cooperative owned by the Company and 10 other regional
cooperatives, as well as from decreased fertilizer operating margins driven by
lower fertilizer selling prices.
Feed
Sales of the Feed division decreased $16.3 million (10.1%) from $161.9
million in 1997 to $145.6 million in 1998. This decrease resulted primarily from
lower unit prices and decreases in volume of 9.2% and 0.8%, respectively.
Operating margin for the Feed division decreased $0.2 million from $6.3
million in 1997 to $6.1 million in 1998. This decrease in profit primarily
resulted from lower selling prices partially offset by a $500,000 reduction in
central management expense during 1998.
Petroleum
Sales of the Petroleum division decreased $57.2 million (22.8%) from $250.3
million in 1997 to $193.1 million in 1998. Petroleum gallons decreased by 35.3
million (10%), primarily due to lower commercial gasoline and fuel oil sales. In
addition, the decrease in heating degree-days led to significantly less demand
for heating oil. Average unit selling prices decreased 18% from 1998, also
contributing to the lower sales revenue.
The Petroleum division's operating margin decreased by $5.4 million from
$7.1 million for 1997 to $1.7 million for 1998. The decline in operating margin
resulted from both decreases in worldwide petroleum prices, which led to
inventory write-downs, and decreases in sales volume.
Retail Farm Supply
Sales of the Retail Farm Supply division remained relatively consistent
with the prior year, increasing only slightly from $336.0 million in 1997 to
$336.3 million in 1998. Increased unit volume in crop protection products and
seed was offset by both lower unit volume and pricing in feed and petroleum.
Volume increases in seed were the result of a later growing
22
<PAGE>
season in 1998 and greater demand for soybean seed.
Operating margin for the Retail Farm Supply division decreased $1.0 million
from $5.9 million for 1997 to $4.9 million for 1998. The decrease in operating
margin resulted primarily from an increase in operational expenses principally
due to the acquisition of the two private dealer operations in Kentucky, which
was partially offset by higher margins resulting mainly from more favorable
fertilizer pricing.
Farm and Home
Including sales of Wetsel, Inc., sales of the Farm and Home division
increased $7.7 million (4.1%) from $188.4 million for 1997 to $196.1 million for
1998. This increase resulted from the higher sales volume of Wetsel, Inc., which
grew by $6.4 million (12.9%), as well as higher sales in the urban and suburban
area stores over the same period.
Farm and Home operating margin decreased by $1.2 million from $7.2 million
in 1997 to $6.0 million in 1998. The decrease in operating margin primarily
resulted from higher operating expenses in both the urban and suburban stores
and at Wetsel, Inc.
Marketing
Sales of the Marketing division decreased $21.7 million (18.7%) from $116.2
million in 1997 to $94.5 million in 1998. Livestock marketing revenues of $3.2
million for the three months ended June 30, 1998, attributable to the
acquisition of Michigan Livestock Exchange on April 1, 1998, served to partially
offset the decrease. Grain bushels marketed decreased 15.5% from 1997 to 1998
with large decreases in corn and soybean bushels marketed, which were partially
offset by an increase in wheat bushels marketed.
Operating margin for the Marketing division decreased $1.8 million, from
$3.6 million in 1997 to $1.8 million in 1998. Decreased profitability primarily
resulted from lower grain marketing volume due to depressed corn and bean
acreage yields and reduced corn drying revenue due to a drought during the
summer of 1997.
General Corporate Overhead
General corporate overhead increased approximately 1.7% from $22.9 million
for 1997 to $23.3 million for 1998. The increase resulted primarily from
increased employee related expenses partially offset by an increase in service
charge revenue. Company wide interest expense, which is substantially allocated
to operating divisions based on assets employed and included as a charge against
divisional margins, increased $1.3 million (8.3%) from $15.6 million in 1997 to
$16.9 million in 1998 primarily as a result of higher borrowing levels.
Miscellaneous Income, net
Miscellaneous income, net increased $0.7 million from to $5.9 million in
fiscal 1997 to $6.6 million in 1998. The increase reflects changes in a number
of non-operating accounts, none of which are material in either period.
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<PAGE>
Provision for Income Tax Expense
Income taxes in 1998 were $3.0 million, a decrease of $3.0 million (50%)
from $6.0 million in 1997 primarily due to a 59% decrease in pretax net savings.
The effective income tax rate was 21.8% in 1998 versus 18.0% in 1997. See Note
12 of Notes to the Southern States Consolidated Financial Statements for an
analysis of the differences between the statutory income tax rate and Southern
States' effective income tax rate.
Liquidity and Capital Resources at December 31, 1999
In January, 1999, Southern States entered into a new $200 million
three-year revolving credit facility with various commercial banks that matures
in January, 2002. This facility replaced the $140 million in short-term and
long-term facilities with CoBank, ACB that were in place at December 31, 1998,
and the $92 million in uncommitted facilities with various commercial banks.
Under the terms of this new facility, Southern States must maintain a ratio of
funded indebtedness to capitalization of not more than .50 to 1, have tangible
net worth of at least $256 million plus 25% of net income in each fiscal year
and at the end of each fiscal quarter, have a ratio of consolidated cash flow to
consolidated interest expense and distribution on trust preferred securities of
greater than 1.50 to 1. Interest rates under this facility are determined by
Southern States under one of three options: on a competitive bid basis; LIBOR
plus .95%, or base rate which is the higher of the prime rate or the Federal
Funds Rate plus .50%. There is also a facility fee of .30% on this revolver.
Amounts are drawn under this facility to fund general working capital needs. On
December 31, 1999, Southern States had $138.5 million outstanding under this
facility, with interest rates on advances under this facility varying from 6.22%
to 7.60% per annum.
At December 31, 1999, Southern States also had outstanding $33 million in
term notes held by CoBank that are payable at various dates with a final
maturity of November 1, 2004. Amortization on this term loan is $2 million due
on November 1, 2000, $7 million due on November 1, 2001 and November 1, 2002, $9
million due November 1, 2003 and $8 million due November 1, 2004. Interest on
this term loan is at: fixed quoted rates, variable quoted rates or at LIBOR plus
.95%. Interest rates on this term loan vary from 5.9% to 7.5%. Proceeds of this
term loan were used for general working capital purposes. The financial
covenants are the same as those under the three-year revolving credit facility
discussed above.
At December 31, 1999, Southern States also had outstanding balances of
approximately $11.8 million in three industrial revenue bonds. These bonds carry
variable rates of interest that at December 31, 1999, ranged from 5.0% to 5.75%.
A $2.1 million bond has a final maturity date of August 1, 2004, a $3.0 million
bond has a final maturity date of September 1, 2005, and the $6.7 million bond
has a final maturity date of January 1, 2016.
In October, 1998, Southern States borrowed $218.3 million under a 180-day
"bridge" loan facility with NationsBank, N.A., First Union National Bank and
CoBank to finance the purchase of the Gold Kist Inputs Business. In January,
1999, this facility was paid down by $118.3 million utilizing proceeds of the
new Southern States' syndicated three-year revolving credit facility discussed
above. On September 7, 1999, this facility was further paid down by $25.9
million. Funds used to retire this debt were primarily proceeds from the final
purchase
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<PAGE>
price settlement relating to the Gold Kist acquisition. On October 5, 1999, the
remaining outstanding balance of approximately $74 million was paid off through
the sale of securities by Southern States and Southern States Capital Trust I
pursuant to the financing commitment with Gold Kist described below.
On October 5, 1999, Southern States Capital Trust I, a trust subsidiary of
Southern States, issued to Gold Kist $60 million liquidation amount of Step-Up
Rate Capital Securities, Series A ("Series A"), for which it received $59.4
million in gross proceeds, net of a placement fee of $600,000. Distributions on
the Series A securities are cumulative at a rate of 8% per annum, increasing to
8.5% on July 5, 2000, and to 8.75% on July 5, 2001. The Series A securities
mature on October 5, 2029. Also on October 5, 1999, Southern States issued to
Gold Kist $40 million liquidation amount of Step-Up Rate Series B Cumulative
Redeemable Preferred Stock, $100 par value per share ("Series B"), for which it
received $39.2 million in gross proceeds, net of a placement fee of $800,000.
Cash dividends on the Series B securities are cumulative at an initial rate of
7.5% per annum, increasing to 8% on July 5, 2000, and to 8.25% on July 5, 2001.
Distributions on the Series A securities and dividends on the Series B
securities are both payable quarterly, in arrears, on January 5, April 5, July 5
and October 5 of each year.
The proceeds from the sale of both the Series A and the Series B securities
were used to reduce Southern States' indebtedness and pay off the bridge loan
facility which had been utilized to finance the Gold Kist acquisition.
The Series A and Series B securities are subject to mandatory redemption
for so long as they are held by Gold Kist, at a redemption price equal to the
liquidation amount of the securities redeemed plus all unpaid and accumulated
amounts distributable with respect to the securities, from the proceeds of any
sale by Southern States of substantially similar securities. To the extent
Southern States places with other purchasers capital and/or equity securities
similar to the Series A and Series B securities in an amount less than $100
million, the Series A and Series B securities owned by the Gold Kist shall be
redeemed correspondingly on a dollar-for-dollar basis.
Southern States' wholly-owned subsidiary, Wetsel, Inc., maintains separate
credit facilities. Wetsel has an uncommitted short term credit facility with
CoBank that fluctuates from $8 million in amount during the period from March 1,
2000, to June 30, 2000; to $4 million from July 1, 2000, to December 31, 2000,
to $8 million from January 1, 2001 through February 28, 2001. The facility
matures on February 28, 2001. This facility had a $2.8 million outstanding
balance at December 31, 1999 and an interest rate of 4.65%. On July 1, 1999,
Wetsel's credit facilities were revised. In addition, the subsidiary has a
committed $5 million long-term revolver that matures February 28, 2002. This
revolver carries a facility fee of .30%. Interest rates on these lines are, at
the subsidiary's option, at CoBank's National Variable Rate plus .25%, quoted
fixed rates or at a preset rate of LIBOR plus 1.05%. Wetsel also has a $2
million term note with CoBank with $1 million maturing January 15, 2000 and $1
million maturing January 15, 2001. Interest rates on this term loan vary from
6.65% to 6.90%.
Southern States and Statesman Financial Corporation are parties to an
agreement under which Statesman purchases receivables from Southern States
without recourse. Under the terms
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<PAGE>
of the agreement, Southern States pays fees on receivables sold to Statesman.
Receivables sold to Statesman totaled approximately $537.8 million and $498.2
million for six months ended December 31, 1999 and 1998, respectively. Statesman
pays volume incentive fees to Southern States at the end of the fiscal year in
connection with the purchase of receivables. In addition, under the terms of the
agreement, Southern States was obligated to maintain a computed minimum
investment in Statesman's preferred stock of $22.7 million and $16.4 million at
December 31, 1999 and 1998, respectively. See Note 5 of the Notes to the
Southern States Consolidated Financial Statements included in this prospectus.
Cash and cash equivalents at December 31, 1999 were $40.0 million, which
represents a decrease of $14.6 million from $54.6 million at December 31, 1998.
Net cash provided by operating activities for the six months ended December 31,
1999 and 1998 amounted to $16.3 million and $90.7 million, respectively. The
decrease in net cash provided by operating activities resulted from decreases in
accounts payable and accrued expenses. Undistributed earnings of finance
companies and joint ventures also negatively impacted cash flow from operating
activities. Net cash provided by investing activities for the six months ended
December 31, 1999, amounted to $2.6 million, an increase of $233.0 million over
the comparable period last year. In October of 1998, the company invested $203.1
million for acquisition of the Gold Kist Inputs business which resulted in a
cash outflow from investing activities totaling $230.5 million for the six
months ended December 31, 1998. In the current six-month period, Southern States
received a $19.9 million purchase price adjustment relating to the return of
accounts receivable to Gold Kist. In addition, capital expenditures decreased in
the current year by $4.4 million. Net cash provided by financing activities for
the six months ended December 31, 1999, of $2.4 million was primarily the result
of net borrowing activities. For the six months ended December 31, 1998 cash
provided from financing activities was $179.0 million due to proceeds from a
bridge loan of $218.3 million to finance the Gold Kist acquisition.
Cash and cash equivalents at June 30, 1999 were $18.7 million, which
represents an increase of $3.3 million from $15.4 million at June 30, 1998. Net
cash provided by operating activities for the year ended June 30, 1999 and 1998
amounted to $143.9 million and $33.6 million, respectively. The increase in net
cash provided by operating activities resulted from an increase in accounts
payable and a decrease in net receivables partially offset by a decrease in
advances from managed local cooperatives, an increase in inventories and lower
net savings. Net cash used in investing activities for the year ended June 30,
1999 amounted to $268.1 million, an increase of $224.3 million from cash used in
investing activities in the corresponding 1998 period. This increase resulted
primarily from investment in Gold Kist ($218.3 million) and a $12.7 million
increase in capital expenditures over the prior year. Net cash provided by
financing activities for the year ended June 30, 1999, of $127.6 million and net
cash used by financing activities for the year ended June 30, 1998, were
primarily the result of net borrowing activities.
Capital expenditures for the six months ended December 31, 1999, totaled
$20.2 million. Southern States had outstanding commitments for the construction
and acquisition of property, plant and equipment totaling approximately $2.5
million at December 31, 1999. Southern States also maintains a reserve for
environmental expenditures which totaled $3.4 million at December
26
<PAGE>
31, 1999. See Note 13 of the Notes to the Southern States Consolidated Financial
Statements included in this prospectus.
Capital expenditures for the year ended June 30, 1999, totaled $46.6
million which compares to $33.9 million in capital expenditures for the year
ended June 30, 1998. Of this 1999 amount, approximately $1.02 million related to
compliance with environmental regulations. Southern States had outstanding
commitments for the construction and acquisition of property, plant and
equipment totaling approximately $2.2 million at June 30, 1999 and approximately
$7.1 million at June 30, 1998. Southern States also maintains a reserve for
environmental expenditures which totaled $3.2 million at June 30, 1999 and $2
million at June 30, 1998.
Southern States anticipates capital expenditures of approximately $42.5
million in the fiscal year ending June 30, 2000. Also, included in projected
capital expenditures is $1.0 to $2.0 million in anticipated costs for
environmental remediation projects in the year ending June 30, 2000.
Management believes that Southern States' cash on hand, anticipated funds
from operations, and amounts currently available under its various credit
facilities will be sufficient to cover its working capital needs, capital
expenditures, debt service requirements and tax obligations. Southern States
intends to maintain and further strengthen its financial condition and, in its
efforts to do so, may from time to time consider other possible transactions,
including acquisitions, other capital market transactions or dispositions of
businesses that no longer meet its strategic objectives.
New Accounting Standards
In June of 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended by SFAS No. 137, which is
effective for fiscal quarters beginning after June 15, 2000. SFAS No. 133
establishes accounting and reporting standards for derivative instruments
including derivative instruments embedded in other contracts, and for hedging
activities. It requires that an entity recognize all derivatives as assets or
liabilities in the statement of financial position and measure those instruments
at fair value. Southern States will adopt SFAS No. 133 in fiscal year 2001.
Southern States is currently evaluating any impact of the derivatives standard.
Market Risks from Changing Commodity Prices and Interest Rates
The principal market risks affecting Southern States are exposure to
changes in commodity prices and changes to interest rates on borrowings.
Although Southern States has international sales volume and related accounts
receivable for foreign customers, Southern States considers the foreign currency
exchange risk in such activities to be immaterial.
Interest Rate Risk. Southern States uses interest rate swaps to hedge
interest rate changes on a portion of its borrowings. At December 31, 1999,
Southern States had outstanding nine variable to fixed interest rate swaps with
a $180 million notional amount and a fair market value of $5.1 million with
terms ranging from three to seven years. The swaps carried coupons with a
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<PAGE>
weighted average rate of 6.02% and 6.18% at December 31, 1999 and 1998,
respectively. Assuming December 31, 1999 variable rates and borrowings, a
one-hundred-basis-point change in interest rates would impact Southern States'
net interest expense by approximately $970,385 on an annualized basis, net of
the effect of the swaps.
Commodities Risk. The table below provides information about Southern
States' petroleum, grain and agricultural commodity inventories and related
futures contracts that are sensitive to changes in commodity prices. For
inventories, the table presents the carrying amount and fair value at December
31, 1999. For futures contracts, the table presents the notional amounts in the
unit of measure for the particular item that is being hedged, the weighted
average of the contract prices and the fair value of those contracts. Contract
amounts are used to calculate the contractual payments and quantity of commodity
to be exchanged under the futures contracts.
28
<PAGE>
On-Balance Sheet Commodity Position and Related Derivatives
-----------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1999
-----------------
Balance Sheet Position Carrying Amount Fair Value
- ---------------------- --------------- ----------
<S> <C> <C>
Petroleum................................. $ 13,046,972 $ 9,159,247
Grain..................................... 12,361,844 12,361,844
Feed...................................... 7,265,823 8,089,791
<CAPTION>
Expected Maturity
Futures Contracts (Short) Year 2000 Fair Value
- ------------------------- --------- ----------
<S> <C> <C>
Petroleum Contract - Gallons.............. 3,150,000 N/A
Petroleum Contract Amount................. $ 2,121,000 $ 2,113,545
Grain Contract - Bushels.................. 4,604,462 N/A
Grain Contract Amount..................... $ 15,884,287 $ 15,272,605
Agriculture Commodities - Bushels 0 0
Agriculture Commodities Contract
Amount................................. 0 0
<CAPTION>
Expected Maturity
Futures Contracts (Long) Year 2000 Fair Value
- ------------------------ --------- ----------
<S> <C> <C>
Petroleum Contract - Gallons.............. 924,000 N/A
Petroleum Contract Amount................. $ 426,818 $ 490,728
Grain Contract - Bushels.................. 2,103,427 N/A
Grain Contract Amount..................... $ 15,710,927 $ 5,366,665
Agriculture Commodities - Bushels 341,891 N/A
Agriculture Commodities Contract
Amount................................. $ 830,795 $ 699,167
</TABLE>
See "Business of Southern States--Other Factors Affecting the Business of
Southern States--Commodity Price Hedging Activities" for information concerning
hedging activities utilized by Southern States to minimize the risk of change in
commodity prices on various commodities bought and sold in its business.
29
<PAGE>
SOUTHERN STATES
General
Southern States is a regional farmers' supply and marketing cooperative.
With fiscal 1999 sales of $1.4 billion, we are one of the largest agricultural
cooperatives east of the Mississippi River. We serve a wide range of rural and
urban customers in our traditional six-state Mid-Atlantic territory of Delaware,
Maryland, Virginia, West Virginia, Kentucky and North Carolina and, more
recently in Michigan, Ohio and Indiana. We also expanded our operations in
October, 1998 into the Southeastern and South Central states through the
acquisition of the Gold Kist Inputs Business. We are owned by over 300,000
farmer and local cooperative members. We are the principal cooperative in a
cooperative distribution system that now encompasses over 700 retail locations
serving farmer members and other customers through both company-owned facilities
and a network of local agricultural cooperatives and private dealers. See "--The
Southern States Distribution System" below.
Founded in 1923, Southern States operated for many years exclusively as a
supply (or "inputs") cooperative, procuring, manufacturing, processing and
distributing fertilizer, crop protectants, feed and seed and other farm supply
items on behalf of its farmer members. Since 1977, we also have marketed grain
for members and currently market approximately 25 to 30 million bushels of grain
annually, primarily in our traditional Mid-Atlantic territory. In 1998, we
entered the livestock marketing business through the acquisition of Michigan
Livestock Exchange, a 75-year old, livestock marketing cooperative operating in
the four-state territory of Michigan, Ohio, Indiana and Kentucky. As a result,
we believe that we are one of the largest livestock marketing cooperatives in
the United States.
Our members must be agricultural producers or agricultural cooperative
associations comprised of agricultural producers. Business with members is
conducted on a cooperative basis, and patrons who are members or who are
eligible to be members are qualified to receive patronage refunds out of net
savings on their business. See "Farm Cooperatives" and "Southern
States--Cooperative Structure." We also engage in supply and marketing
transactions with other customers who are not eligible for membership and who do
not qualify for patronage refunds. In addition, we engage in non-cooperative
activities through several subsidiaries.
The Southern States Distribution System
We are the principal cooperative in a cooperative distribution system that
serves our farmer members in our Mid-Atlantic territory and the Southeastern and
South Central states through:
. 217 company-owned retail farm supply and petroleum outlets and 25
company-owned urban and suburban retail locations,
. 70 local agricultural or petroleum cooperatives operating at 87 locations
under standardized management contracts with Southern States,
. 47 independently owned and operated local retail cooperatives that
distribute Southern States supplies and products at 73 locations, and
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<PAGE>
. A network of 321 private dealers operating approximately 340 locations who
sell Southern States supplies and products at retail under retail
distribution agreements with Southern States.
Unless specifically noted otherwise, all location numbers are given as of
March 31, 2000.
Company-Owned Facilities. As described in greater detail below, we sell a
significant portion of our product and service volume through our retail farm
supply locations, urban and suburban retail locations and retail petroleum
facilities. To support this retail distribution network, we operate a number of
owned and leased bulk manufacturing and distribution facilities. See "Business
of Southern States--Agricultural Inputs and Services--Petroleum," "--Retail Farm
Supply" and "--Farm and Home." In fiscal 1999, Southern States sold
approximately 54% of its total product and service volume through these
company-owned facilities.
Managed Local Cooperatives. The 70 managed local cooperatives, usually
organized on a county level, are a significant component of our distribution
system. The managed local cooperatives have their own local membership and
locally-elected boards of directors, but each is a member of Southern States and
each operates under a standardized management agreement with Southern States. In
almost all instances, the managed local cooperatives use the name "Southern
States" in their operations. Sales to the managed local cooperatives accounted
for approximately 16% of our total product and service volume in fiscal 1999.
We have no equity interest in the managed local cooperatives and no
representation on the boards of directors, but we manage day to day operations
and recommend policies to their boards of directors. The standardized management
agreements are renewed annually, and may be canceled by either party at the end
of any year provided there is no outstanding indebtedness owed Southern States.
We assess a management, accounting and administrative fee which approximates the
actual cost of service. No management agreements with local cooperatives have
been canceled in our history other than as a result of mergers of local
cooperatives into Southern States or, in a few cases, liquidation of a local
managed cooperative.
Private Dealers. We also distribute supplies and products through a network
of 321 independent, privately-owned dealers, operating a total of approximately
340 dealer locations. These dealers agree to sell our supplies and products at
retail to our members and others and to maintain adequate records of sales in
order that we may allocate any patronage refund to these members. Sales to
private dealers accounted for approximately 10% of our total product and service
volume in fiscal 1999. We have expanded our private dealer system into the
former Gold Kist territory.
Independent Cooperatives. We also distribute supplies and products to 47
independently owned and operated local cooperatives operating 73 locations.
These cooperatives are members of Southern States and use Southern States as a
major supply source, but do not operate under a management contract with
Southern States and do not use the "Southern States" name. Sales to independent
cooperatives represented approximately 3% of our total product and service
volume in fiscal 1999.
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Commercial and Other Accounts. In addition to the component parts of the
Southern States distribution system within our territory, we sell products to
over 4,000 commercial and other accounts, including other cooperatives located
outside our territory, who purchase supplies from us. Commercial accounts
include resellers who do not have a private dealer agreement with us, as well as
non-agricultural consumers. Commercial accounts are not eligible for membership
in Southern States and are not eligible for patronage refunds. Other accounts
include producers of agricultural products who purchase on a wholesale basis and
other regional cooperatives. These accounts are eligible for membership and for
wholesale patronage refunds. Sales to commercial and other accounts in fiscal
1999 accounted for approximately 17% of our total product and service volume.
Cooperative Structure
Members and Membership Stock. Members of Southern States must be
agricultural producers or agricultural cooperative associations comprised of
agricultural producers. Members must own at least one share of membership stock.
An agricultural producer who qualifies for membership but is not already a
member will automatically receive the first $1.00 of any patronage refund in the
form of one share of membership common stock. Under Virginia law and our
articles of incorporation and bylaws, the issuance or transfer of our membership
common stock is limited to:
. bona fide agricultural producers who use our services or supplies, and
. cooperatives whose membership is comprised of such persons.
Each member, regardless of the number of shares of membership common stock
registered in the member's name, is entitled to only one vote in the affairs of
Southern States. Under various circumstances, like the death of a stockholder,
we repurchase common stock from our members at par value ($1 per share) plus
declared and unpaid dividends, if any. In the event of liquidation or other
disposition of our assets, the holders of common stock, after satisfaction of
obligations to creditors and to holders of all preferred stock, would be
entitled to receive a maximum of the $1 per share par value plus declared and
unpaid dividends, if any, for each share of common stock held. Our board of
directors may from time to time issue any and all of the authorized but unissued
common stock without first offering such shares to existing holders of common
stock, on such terms as it deems advisable, but not for less than par value.
Governance. The members of Southern States annually elect on a staggered
basis members of the board of directors to serve for three-year terms. Only our
members or members of a retail agricultural purchasing cooperative handling
supplies of Southern States are eligible to be elected by the members to serve
on the board of directors. At the present time, the board of directors consists
of 23 persons, 17 of whom are member-elected. Six additional directors,
designated by statute as public directors, are appointed for three-year terms,
on a staggered basis, by the director of agricultural extension for the
Commonwealth of Virginia. Each of these appointed directors represents a
different state in our traditional Mid-Atlantic territory. Public directors need
not be members or stockholders of Southern States. See "Management--Directors."
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Our bylaws provide for a division of the territory in which we operate into
nine or more election districts. These election districts are determined on the
basis of the annual volume of business done with Southern States by customers,
with consideration given to the business done with members in, and geographical
area of, each election district. The bylaws further provide that the Board may
modify and redistrict whenever, in its discretion, it is advisable in order to
maintain substantial equality in the volume of business done in the different
districts.
Under our bylaws, each election district is to be represented on the board
by one director, elected at an election district meeting by delegates to the
meeting. The members served by each private agency, each retail branch of
Southern States, and each retail agricultural supply cooperative handling
supplies of Southern States are entitled to vote in the election of delegates to
election district meetings. Delegates are elected by our membership and the
membership of the retail agricultural purchasing cooperatives at their local
annual meetings. The directors elected by each election district are then
presented to the annual meeting of our members. Our bylaws only permit voting in
person at election district meetings.
Our officers are elected by our board of directors to serve on a
full-time salaried basis.
Patronage Refunds. As a cooperative, we operate for the benefit of our
members and other patrons. We are obligated by our bylaws to return at the end
of the fiscal year all net savings from patronage-sourced business, after
payment of dividends on capital stock and additions to reserves, to the members
and other patrons eligible for membership in proportion to their respective
purchases. These net savings are the equivalent of profits and are allocated to
each member patron and each patron eligible for membership in the form of
patronage refunds on the basis of each person's percentage patronage.
In fiscal 1999, approximately two-thirds of our supply business was with
members and subject to patronage refunds. We also engage in supply and marketing
transactions with other customers who are not eligible for membership and who
therefore do not qualify for and do not receive patronage refunds. In addition,
through several subsidiaries, we engage in non-cooperative activities that do
not generate patronage refunds.
Patronage refunds are normally paid partially in cash and partially in the
form of non-interest bearing patronage refund allocations. Beginning with the
fiscal year ended June 30, 1974, the policy of the board of directors regarding
patronage refunds changed from payment of the non-cash portion of the refund in
shares of membership capital stock or debentures to payment in the form of
patronage refund allocations, which are participations not bearing interest or
paying dividends. Since 1974, patronage refunds have been paid 40% in cash and
60% in patronage refund allocations. The Internal Revenue Code requires a
minimum cash component of 20%.
We believe our policy of paying a higher cash component than is required by
law contributes to continued patronage. See "Description of the Senior
Notes--Covenants and Restrictions on Payments--Restrictions on Payments" for
restrictions on the redemption of patronage refund allocations in the event of a
default on the Senior Notes.
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Our bylaws further require that issuance of patronage refund allocations be
in annual series, and identified by year issued. The bylaws require that the
redemption of patronage refund allocations take place proportionately in the
order of issuance when the board of directors determines that sufficient funds
are available. An exception is made to this policy for redemption upon the death
of a holder or to settle amounts in default owed to Southern States.
In February 1996, we redeemed our 1974 patronage refund allocations, which
totaled slightly over $6 million. In February 1997, we redeemed our 1975
patronage refund allocations, which also totaled approximately $6 million. In
March 1998, we redeemed our 1976 patronage refund allocations, which totaled
approximately $4.6 million. To provide continued support to our equity base, in
1997 and 1998, a number of our managed local cooperatives exchanged
approximately $1.2 million and $800,000, respectively, of their revolved
patronage refund allocations for an equivalent value in shares of Southern
States' membership common stock. In fiscal 1999, we did not redeem any patronage
refund allocations.
Our bylaws require that all of our debts shall be entitled to priority over
patronage refund allocations. In the event of operating losses, these losses may
be charged in the order of issuance by years to patronage refund allocations and
to operating capital reserves. We are deemed to have a lien upon and security
interest in patronage refund allocations as collateral for any indebtedness owed
to Southern States by the holder.
Operating Capital. Annually, from fiscal year net savings, our board of
directors has made additions to operating capital. These reserves are used for
general purposes and are analogous to retained earnings. The equities of member
patrons in such additions are recognized by Southern States. Further, our bylaws
provide that in the event the board of directors determines these reserves have
served their purpose, if any balance remains, it shall be returned to the member
patrons in proportion to their interests. Otherwise, these reserves will be
returned to the member patrons only upon dissolution of Southern States.
Cooperative Taxation. A cooperative is a corporation for federal income tax
purposes. We compute our taxable income and federal income tax liability in
essentially the same manner as any ordinary corporation. However, to the extent
that we, as a cooperative, declare and pay patronage refunds to our members, we
are allowed to deduct those amounts from our pre-tax income. Patronage refunds
may be paid in the form of cash or credits, which are sometimes referred to as
patronage refund allocations, or a combination of both.
A cooperative may deduct from its pre-tax income both the amount of the
cash patronage refund and the face amount of any credits or noncash patronage
refund allocations. A cooperative's members, however, must recognize both those
amounts in the computation of their respective taxable incomes. In order to
qualify for the federal income tax deduction for patronage refunds, the
cooperative must pay at least 20% of the patronage refund in cash. Our board of
directors determines the amount and form in which we pay our patronage refunds.
See "--Patronage Refunds" above.
To the extent that we distribute notices of allocation that do not qualify
for the federal income tax deduction for patronage refunds, have income from
transactions with nonmember customers or have income from non-patronage sources,
we are taxed at the normal corporate
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rate. We have subsidiaries that are not cooperatives; all the income of these
subsidiaries is subject to corporate income taxes.
BUSINESS OF SOUTHERN STATES
We are both a supply and a marketing cooperative. We function as a supply
cooperative providing agricultural inputs and services to our members and others
through our Crops, Feed, Petroleum, Retail Farm Supply, and Farm and Home
divisions. We function as a marketing cooperative marketing our members'
products through our Grain Marketing and Livestock Marketing divisions. In
addition to providing products and services to its members, we provide products
and services to our managed local cooperatives and to numerous independent
dealers and cooperatives.
Business Strategy
As a farmer-owned agricultural cooperative, our primary function is to
enhance our members' economic welfare and bargaining power. To fulfill this
function, Southern States pursues business initiatives that increase its
purchasing power with vendors, lower its production, processing and distribution
costs, increase its customer base and capitalize upon its management expertise.
Our ultimate objective is to position ourself as the business of choice for
meeting the needs of our members and other customers for products and
value-added services. To achieve this goal, we seek to:
. Offer a Full Line of Superior Products and Services: Southern States offers
a full selection of high quality products and services at competitive
prices designed to meet the diverse needs of its farmer membership base.
The ability to use its purchasing power and its manufacturing/processing
expertise allows it to be price competitive within its defined market
areas.
. Develop Value-Added, Technologically Advanced Products and Services: In
addition to its more traditional services, such as fertilizer spreading,
crop protectant application and insect scouting, Southern States offers
technologically advanced services, supported by reliable equipment and
highly trained service technicians in order to increase market share with
existing customers and attract new customers. For example, Southern States'
Growmaster program uses Global Positioning Satellites and computerized
delivery vehicles in selected locations to optimize the application of
plant nutrients on farmers' fields, maximizing production in an
environmentally responsible manner. In addition, Southern States completed
a research and development program in the field of aquaculture, one of the
fastest growing segments in the agriculture industry, in order to provide
its farmer members with a viable alternative product line, including fish
stock, fish feed and guaranteed grower payment to farmer producers for
harvested fish. We are now actively marketing this program.
. Use Multiple Distribution Channels to Maximize Market Penetration: Southern
States uses a variety of distribution channels to create multiple outlets
for its product offerings in order to generate increased business volumes
and economies of scale. The
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use of several diverse distribution channels enables Southern States to
reach many different types of customers and maximize market penetration.
. Access State-of-the-Art Products and Technology through Partnerships and
Strategic Alliances: Southern States seeks to access products and
technology through partnerships and strategic alliances, thereby
significantly expanding Southern States' scope with minimal additional
capital requirements. Investments with other interregional cooperatives in
the U.S. and abroad afford Southern States access to world class sources of
fertilizer products, seeds, animal genetics, and other ingredients required
for Southern States' operations. The recent acquisition of Michigan
Livestock Exchange is expected to lead to alliances up and down the food
chain, from the producer to the retailer.
. Evaluate Opportunities to Enter New Markets and Achieve Operating
Efficiencies and Maximize Buying Power: Southern States has and will
continue to capitalize on acquisition opportunities that will enable it to
enter new markets, increase its scale of operations and achieve operating
efficiencies in order to better service the economic interests of its
farmer-members. For example, in 1986 through acquisition, Southern States
entered the North Carolina market which, according to United States
Department of Agriculture statistics, currently ranks fourth in farm income
in the United States. In 1998, through its acquisition of Michigan
Livestock Exchange, Southern States became one of the largest cooperative
marketers of livestock in the United States and now is able to offer
Michigan Livestock Exchange's marketing and other value-added services,
such as genetics, specialized financing programs and feeding and animal
health programs, to Southern States' customers in its traditional
mid-Atlantic territory.
. Adapt its Business in Selected Locations to Accommodate Changing
Demographics and the Increasing Urbanization of its Customer Base: Many
rural areas have become urban or suburban markets, reflecting
well-documented demographic changes. Southern States continues to adapt its
business to better serve this changing customer base. Products and services
sold through the Farm and Home and Retail Farm Supply divisions cater to
the needs of the urban and suburban consumer, and include lawn and garden
supplies, pet supplies and homeowner services. Sales of these products and
services to urban and suburban consumers can, in part, offset the cyclical
nature of Southern States' agricultural operations.
Agricultural Inputs and Services
We operate our agricultural inputs and services business through six
operating divisions: Crops, Feed, Petroleum, Retail Farm Supply, Farm and Home,
and Marketing. Our purchase of the Gold Kist Inputs Business has significantly
bolstered these operating divisions. We have integrated the Gold Kist Inputs
Business into our pre-existing operating divisions as described below. The
results for each division below include each division's allocated portion of the
Gold Kist Inputs Business for the period from October 13, 1998 to June 30, 1999.
We do not prepare separate financial statements for the Gold Kist Inputs
Business.
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Crops
Through its Crops division, we procure, manufacture, process and distribute
fertilizer, seed, and crop protectants to our members and others through the
Southern States distribution system. We believe that we are the largest provider
in our Mid-Atlantic territory for fertilizer, seed and crop protectants in large
part as a result of our ability to custom-supply fertilizer, seed and crop
protectant products and our extensive and diverse distribution system. Sales of
the Crops division in fiscal 1999 were $193.7 million.
We distribute granular, blended and liquid fertilizer and fertilizer
materials in bagged and bulk form. Our annual fertilizer sales volume is
approximately 2.0 million tons, with approximately 1.3 million tons sold through
company-owned retail facilities and the managed local cooperatives. The
remainder is shipped directly to private dealers, independent cooperatives and
commercial accounts. See "Southern States--The Southern States Distribution
System."
Our Crops division has an annual production capacity of approximately 2
million tons of fertilizer at 10 strategically located plants. We procure
approximately 50% of the fertilizer we sell from CF Industries, Inc., a
cooperative owned by 9 regional cooperatives including Southern States, which
produces and supplies fertilizer materials to its members. See "--Investments in
Other Companies and Cooperatives" below. CF Industries is one of North America's
largest commercial fertilizer manufacturers and distributors. We purchase the
remainder of our fertilizer materials from more than 40 other suppliers.
Through our Crops division, we produce and sell field and vegetable seeds,
including small grains, soybeans, grasses, and legumes. We also procure,
manufacture and distribute crop protection products such as herbicides and
pesticides through our Retail Farm Supply and Farm and Home divisions and to
other cooperatives and dealers. Sales of crop protectants are enhanced by our
ability to cross-sell seed products and offer superior application services
through quality equipment and highly trained personnel.
The Crops division operates five bulk crop protectant storage facilities in
the former Gold Kist territory and distributes agricultural and specialty crop
protectants, including pesticides, growth regulators and surface-active agents
that it purchases from approximately 15 manufacturers. Competition for sales of
crop protectants is primarily on the basis of price and service since most
retailers have access to the same inventory of products produced by the major
manufacturers. The Crops division also provides aerial application of fertilizer
for forestry customers and ground application of fertilizer and crop protectants
for turf customers.
The Crops division has successfully applied licensed genetic technology to
finished products, for example, by incorporating the Roundup(R) resistant gene
into its soybean seed products so that Roundup(R) destroys weeds but not the
plant. This ability, coupled with the division's access to Southern States'
extensive and diverse distribution system, makes us an attractive partner for
bio-tech firms. For instance, we are a member-owner of FFR, Incorporated, which
is owned by Southern States and three other regional cooperatives. FFR,
Incorporated employs skilled plant breeders who use various facilities and
regional test stations to develop improved varieties of corn, soybeans, alfalfa,
clover, grass and sorghum-sudan.
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Feed
Through our Feed division, we procure and manufacture dairy, livestock,
equine, poultry, pet and aquacultural feeds. Our feed products are manufactured
in 15 feed mills, four of which were acquired in the purchase of the Gold Kist
Inputs Business. Feed products are distributed at wholesale and retail
throughout our territory. See "Southern States--The Southern States Distribution
System." Approximately 65% of the feed distributed in fiscal 1999 was delivered
in bulk form directly from the feed mill to the farm with the remainder sold in
bag form.
Fiscal 1999 production of the mills was approximately 1.3 million tons,
with resulting sales of $181.3 million. We believe that we are the largest feed
company in our Mid-Atlantic territory. We are currently ranked in the top ten
commercial feed companies in the United States.
Our feed mills are batch process mills in which ingredients are weighed.
These mills are capable of precision feed mixing. Our mill operations produce
and market approximately 7,500 different feeds, including custom blended feeds
and feeds containing various medications. Pro Way is a dairy feed sold through a
special program which includes survey and analysis of feed ingredients needed
for a particular herd.
Feed ingredients are purchased in the marketplace from many sources,
including major grain companies. Feed formulation is based on the cost of
various alternative ingredients in a given week. Our Feed division partners with
others in the industry in order to have access to national brands and
technological developments in the field without incurring substantial capital
outlays and the associated risks. In November 1996, we joined with six other
cooperatives in a pet food joint venture in Ohio, known as Pro Pet. In February,
1998, we completed a cooperative milling joint venture in Pennsylvania with
Agway Inc., a large Syracuse, New York based supply cooperative. In addition, we
participate with eight other cooperatives in Cooperative Research Farms, a
network of two research farms, each devoted to a specified branch of animal
husbandry. Cooperative Research Farms provides extensive feed research
permitting its members to formulate improved feeds and feeding programs and is
one of the largest private research efforts in the world for large animal
feeding.
As a result of the acquisition of the Gold Kist Inputs Business, the Feed
division also markets dog food under the Pay Day, Pro Balanced and Performance
Plus trademarks through independent dealers, under the Gold Kist and Pro
Balanced trademarks through company-owned retail stores, and under the Gold Kist
and Top Notch trademarks through grocery wholesalers and retail chain stores.
Pro Balanced cat food is also marketed through independent dealers,
company-owned retail stores and grocery wholesalers and retail chain stores. Pro
Balanced, Pay Day, Gold Kist, Top Notch, and Performance Plus were registered
trademarks of Gold Kist, all of which, except for the name Gold Kist, were
purchased by Southern States under the asset purchase agreement.
Petroleum
Through our Petroleum division, we distribute all grades of gasoline,
kerosene, fuel oil, diesel fuel and propane, and other related petroleum
products. Approximately 70% of petroleum
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sales in fiscal 1999 were made to non-members of the cooperative. Our farm
delivery services distinguish us from our competition in the petroleum business.
The division experiences seasonal increases in sales and working capital
requirements in the fall and winter months, as a result of its emphasis on oil
and propane heating fuels.
Approximately 65% of the Petroleum division's products were purchased on a
contract basis, with the balance purchased on the spot market. We own two bulk
terminals with aggregate storage capacity of approximately 6.5 million gallons
of product. We manage the throughput of our products at 26 dedicated storage
terminals.
We also own and operate 19 retail petroleum distribution locations and
distribute petroleum products through four managed local cooperatives. Current
sales volume for the division approximates 326 million gallons annually.
Petroleum sales for fiscal 1999 were $165.6 million.
Retail Farm Supply
We distribute agricultural supplies through our Retail Farm Supply
division, which through March 31, 2000, operated approximately 200 company-owned
and managed local cooperative retail farm supply locations in its Mid-Atlantic
territory and, as of March 31, 2000, an additional 89 retail locations in its
Southeastern and South Central territory. The retail store locations act as
distribution centers, supplying members and others with agricultural production
materials procured or manufactured through our Crops, Feed and Petroleum
divisions.
Although the retail stores may vary considerably from location to location,
the typical store is a complete farm supply center offering for sale many
agricultural products including feeds, animal health products, fertilizers,
pesticides, seeds, petroleum, farm supplies and equipment. The typical store
also offers farm delivery and crop protectant application services, precision
farming, customized fertilizer spreading, field mapping, soil testing, insect
scouting and agronomic and animal nutrition advice. Approximately 50 locations
sell petroleum products.
The retail farm supply stores sell supplies and services to our members,
other farmers and to a lesser extent to contractors and home owners. Southern
States believes the quality "on the farm" services provided by the Retail Farm
Supply division in conjunction with the products sold through them, in essence
offering "one-stop-shopping," distinguish our retail farm supply operations from
other options available to our customer base.
As a result of the acquisition of the Gold Kist Inputs Business and as of
March 31, 2000, the Retail Farm Supply division operates 16 receiving and
storage facilities, with an aggregate storage capacity of approximately seven
million bushels, for handling unprocessed farm commodities such as soybeans,
corn and other grains. Nearly all of these storage facilities are licensed by
the federal or state government and can issue negotiable warehouse receipts.
In addition, as a result of the acquisition of the Gold Kist Inputs
Business, the Retail Farm Supply division acquired and now operates five cotton
ginning and storage facilities at various locations in the former Gold Kist
territory through which we provide ginning and storage services to members and
non-members.
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The Retail Farm Supply division accounts for approximately 39% of our total
product and service volume at June 30, 1999. Sales through these facilities in
fiscal 1999 were $532.3 million.
Farm and Home
The Farm and Home division distributes farm and home products at wholesale
and retail. Sales of the Farm and Home division for fiscal 1999 were $209.6
million.
Wholesale. The division provides wholesale purchasing and distribution of
farm and home products through centralized purchasing and four distribution
centers. In fiscal 1999, approximately 40% of the Farm and Home division's sales
volume was generated through its distribution centers, with the remaining 60% of
its sales volume attributed to direct shipments from the vendor to customer. The
largest customers of Farm and Home wholesale operations are our Retail Farm
Supply stores, which accounted for approximately 43% of Farm and Home sales
volume in fiscal 1999, and the independent private dealers, which accounted for
approximately 32% of its sale volume for the same period. Other customers
include the Farm and Home retail stores discussed below and a number of
diversified U. S. commercial and international accounts.
Retail. The Farm and Home division also operates 25 urban and suburban
retail locations. These locations, which are in the process of converting to the
trade name of Garden South, offer a wide array of products and services,
including lawn and garden supplies and tools, power equipment, pet food, bird
seed, hunting and equestrian supplies and landscape consulting services. These
urban retail stores also provide technical and sales services in the form of
knowledgeable in-store assistance and home delivery, which help distinguish
Southern States' Farm and Home retail operations from its competitors.
Wetsel. Wetsel, Inc., an independently-operated, wholly-owned subsidiary of
Southern States, also serves as a wholesale distributor of agronomic supplies to
dealers and commercial accounts in several eastern and midwestern states. Sales
to lawn and garden centers in fiscal 1999 accounted for approximately 49% of
Wetsel's sales, with the balance of its sales made to the turf industry (22%),
greenhouse industry (15%) and farms (14%). Wetsel also operates one retail store
in Harrisonburg, Virginia.
Marketing Services
Grain Marketing
Through our Grain Marketing division, we purchase corn, soybeans, wheat and
barley from our members and market these grain products, assuming all risks
related to selling such grain. Grain is priced in the United States principally
through bids based on organized commodity markets.
The Grain Marketing division, centrally managed from Richmond, Virginia,
consists of 13 grain elevators located primarily along the eastern seaboard and
at a single location in central Kentucky. Storage capacity for those grain
elevators as of March 31, 2000 was approximately 10.1 million bushels. The
division markets approximately 25 million bushels of grain annually, primarily
corn, soybeans, and wheat and barley, selling approximately 15% of this volume
to our
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Feed division. The balance is sold to other customers which include large
commercial grain buyers. Grain Marketing sales for fiscal 1999 were $68.5
million.
Livestock Marketing
Effective April 1, 1998, we acquired, through merger, Michigan Livestock
Exchange, a 75-year old, Michigan livestock marketing cooperative with
approximately 60,000 members in its four-state territory of Michigan, Indiana,
Ohio and Kentucky. The addition of Michigan Livestock Exchange provides us with
an expanded membership base and cross-selling opportunities for our other farm
products in a territory outside, but contiguous to our Mid-Atlantic territory.
Moreover, as a supplier of agricultural inputs to farmers, we intend to use our
livestock marketing operations as a means to further integrate ourself into the
conception-to-consumption system which is emerging in the food industry. This
coordinated system links inputs, producers, processors, distributors and the
ultimate consumer to promote operational efficiency and product consistency and
to enhance farmer profitability.
Through Michigan Livestock Exchange, which has become the Livestock
Marketing division, Southern States operated 11 traditional livestock auction
facilities and 16 swine buying stations as of March 31, 2000. We also offer a
vertically coordinated approach intended to help farmers produce and market
their products through the packers to the customers. We do so by providing
inputs to the livestock producer in an efficient, low-cost manner and then by
marketing the livestock products to meet the expectations of the ultimate
consumers for uniform, high-quality products.
In addition to providing livestock marketing services for members on a
commission basis and through purchases as principal, the division provides price
contracts, financial services for lending and investing in livestock and
livestock facilities, animal health sales, related real estate services and
livestock marketing strategies. During the six months ended December 31, 1999,
Michigan Livestock Exchange marketed approximately 634,000 butcher hogs and
300,000 head of cattle.
Acquisition of the Gold Kist Inputs Business
In October 1998, Southern States purchased from Gold Kist Inc., a major
southeastern marketing and supply cooperative, the Gold Kist Inputs Business.
Through this portion of its business, Gold Kist purchased, manufactured and
processed a wide range of farm supply items for distribution and sale in the
eight-state territory of Alabama, Arkansas, Florida, Georgia, Louisiana,
Mississippi, South Carolina and Texas. The assets acquired in October 1998
included:
. four fertilizer plants, one of which is leased;
. four crop protectant distribution centers, one of which is leased;
. 23 grain elevators, five of which are leased;
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. 15 peanut buying stations, six of which are leased;
. five cotton gins, two of which are leased;
. four feed mills;
. one seed processing plant; and
. approximately 100 retail farm supply stores and branch facilities.
The acquisition also included a number of owned and leased distribution and
storage facilities and substantially all inventory and other agreed upon assets
associated with the Gold Kist Inputs Business. The purchased assets did not
involve the existing Gold Kist poultry, pork, acquaculture, seed marketing,
cotton marketing and other businesses.
As described above, the Gold Kist Inputs Business has been integrated into
Southern States' various operating divisions. We do not compile separate
financial statements for the Gold Kist Inputs Business. For a discussion of our
efforts to integrate the Gold Kist Inputs Business, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Acquisition and
Integration of the Gold Kist Inputs Business."
Representations and Warranties. The asset purchase agreement contains
customary representations and warranties concerning the status of the Gold Kist
Inputs Business and the assets purchased. Most representations and warranties
survived the closing and do not expire until June 30, 2001. Gold Kist has agreed
to indemnify Southern States for losses arising out of environmental
representations and warranties for a ten year period following the closing, up
to an aggregate maximum of $35 million. The Gold Kist indemnity for
environmental claims will be effective only when the aggregate amount of
Southern States' losses for each individual claim exceeds $25,000. Gold Kist has
agreed to indemnify Southern States for any loss other than environmental loss
arising from breaches of the representations and warranties to the extent that
such losses do not exceed $10 million. There is a $500,000 threshold for losses
other than environmental losses before a claim may be asserted against Gold
Kist.
Non-Competition. Under the asset purchase agreement, Gold Kist agreed to a
five-year non-competition agreement within the territory in which Gold Kist
presently does business.
Financing Commitment. In connection with the closing of Southern States'
purchase of the Gold Kist Inputs Business, Southern States and Gold Kist entered
into a separate agreement under which Gold Kist agreed to purchase on or before
April 5, 1999 (later extended to October 5, 1999), up to $100 million of
preferred stock or other specified equity-type securities from Southern States
or an affiliated entity of Southern States if Southern States had not been able
to sell an equal amount of similar securities by that date. As described in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources at December 31, 1999," on October 5,
1999, Southern States sold to Gold Kist pursuant to this commitment $40 million
liquidation amount of preferred stock and $60 million of capital securities
issued by Southern States Capital Trust I.
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Properties
Our principal operating facilities are our feed mills, fertilizer plants,
petroleum storage and distribution facilities, our other farm supply storage and
distribution facilities and our retail store facilities. These facilities are
described elsewhere in this prospectus in the sections describing our various
operating divisions. See "--Agricultural Inputs and Services" and "--Marketing
Services" above.
Our corporate headquarters building, containing approximately 200,000
square feet of office space, is located on 11.8 acres in Richmond, Virginia. An
unrelated third-party constructed the headquarters building on land owned by
Southern States and leased to the owner of the building for a 70-year period
expiring in 2048. We lease and occupy approximately 170,000 square feet of the
building. See Note 13 of the Notes to the Southern States Consolidated Financial
Statements for additional information concerning Southern States' lease
arrangement for its corporate headquarters and for other operating leases.
Information Systems
The information systems used to support our business operations consist of
a number of networked computer components running a mixture of internally
developed and purchased software applications. Our strategy has been to move
away from large mainframe systems towards smaller, more flexible minicomputer
and server based systems. This allows us to take advantage of new technology,
and provides us the flexibility to tailor computing needs to the application,
and ultimately to the needs of the business units such technology supports. This
strategy permits us to upgrade or expand only where it is needed and avoid
excess capacity where it is not needed, resulting in cost efficiencies for the
processes that require support.
We still have a variety of older applications that are processed under a
timesharing agreement on a mainframe computer. The timesharing agreement has
enabled us to significantly reduce operating costs and to maintain a core
application solution as we focus on other prioritized applications. We now own
and utilize in excess of 300 file servers in support of our Retail Store
operations and over 30 file servers to support other applications used
throughout Southern States. Other integrated computer systems support our
distribution and manufacturing functions, our feed, fertilizer, petroleum, grain
and related functions, and financial, payroll and human resources systems.
We believe that our information systems are sufficient to meet our current
needs and future expansion plans.
Affiliated Financing Services
Through two affiliated entities, Statesman Financial Corporation and
Statesman's wholly-owned subsidiary, Michigan Livestock Credit Corporation,
Southern States provides a variety of financing programs to its members and
other customers. These programs, which are intended to enhance
"one-stop-shopping" services, support our ability to sell our products, generate
profits and provide an important source of liquidity through the purchase of
significant amounts of receivables from Southern States. Through our direct
investments in Statesman and Michigan
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Livestock Credit and our financing services agreements with each of them, we are
exposed to credit and interest rate risk resulting from the ongoing operations
of Statesman and Michigan Livestock Credit.
Statesman Financial Corporation
Statesman Financial Corporation is owned 38.4% by Southern States and 36.1%
by 62 of the managed local cooperatives. The remaining 25.5% is owned by Land
O'Lakes, Inc., a regional farm supply cooperative headquartered in Minneapolis,
Minnesota; MFA, Incorporated, a regional farm supply cooperative headquartered
in Columbia, Missouri; and MFA Oil Company, a regional petroleum cooperative
headquartered in Columbia, Missouri. Southern States accounts for its ownership
in Statesman by the equity method.
Statesman engages in a variety of financing programs with us and our
customers. These programs include accounts receivable financing, consumer retail
financing, leasing services, asset based financing and agrifinancing. The
consumer retail financing receivables, asset-based loans, and agrifinancing
receivables are primarily obligations of customers of Southern States. See Note
5 of the Notes to the Southern States Consolidated Financial Statements included
in this prospectus.
Statesman and Southern States have entered into a financing services and
contributed capital agreement setting forth the terms under which Statesman
purchases accounts receivable from us and defining other financing programs that
Statesman may provide to our customers. Under the terms of the agreement, we are
obligated to maintain a computed minimum investment in Statesman's noncumulative
preferred stock, based on the average daily balances of receivables sold to
Statesman. The amount of this preferred stock held by Southern States was $23.4
million as of December 31, 1999.
The parties have entered into this financing services and contributed
capital agreement so that, by selling these receivables to Statesman, we are
able to obtain more favorable financing than if we held these obligations for
our own account and financed those additional assets ourself.
Accounts Receivable Financing. From time to time and subject to acceptance
by Statesman, Statesman purchases the following types of receivables from us:
. retail customer accounts receivable;
. grain marketing customer accounts receivable;
. advances that we make to managed member cooperatives under the
management agreement between us and each managed member cooperative; and
. wholesale customer accounts receivable.
Under the terms of the financing services and contributed capital
agreement, we sell these receivables to Statesman on a discounted basis. These
discounts provide Statesman with revenues sufficient to cover anticipated
interest charges and average historical charge-offs.
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<PAGE>
These discounts are calculated based on historical credit losses, current
delinquency status and the anticipated cost of carrying the purchased accounts
receivable. The credit losses component of the discount rate has a minimum
percentage provision that may be modified from time to time as agreed by
Statesman and Southern States. For the six month period ended December 31, 1999,
these discounts ranged from .05% to .35% of the receivables purchased.
Receivables purchased by Statesman through December 31, 1999 and 1998
totaled approximately $537.8 million and $498.2 million, respectively. Statesman
paid volume incentive fees to Southern States related to this program of
approximately $1.9 million and $1.3 million for the years ended June 30, 1999
and 1998, respectively.
Consumer Retail Financing. Through its consumer retail financing arm,
Statesman provides a private label credit card program for retail customers who
may present their credit cards at our retail branch locations, managed member
cooperative locations, and participating independent market locations. Statesman
assesses a merchant discount ranging from 1.25% to 1.75% of the transaction
amount. Customers may elect to revolve their balances and pay finance charges at
an APR no greater than 18% based on the average daily balance. Statesman
assesses late payment fees of up to $14.50 each month against customers who fail
to make payments within the terms of the program. All merchant discounts,
finance charges and late payment fees constitute income to Statesman.
Statesman also offers an installment sales financing program for retail
customers who wish to finance single purchase transactions over a period ranging
from three to sixty months. These transactions are documented on installment
sales contracts that are offered to Statesman for purchase. Finance charges do
not exceed 24% APR. This is a seldom used program. The volume outstanding under
this program at any one time rarely exceeds $250,000.
Statesman's consumer retail finance charge income was approximately $1.4
million for each of the years ended June 30, 1999 and 1998. In addition,
Statesman's merchant discount and late payment fee income totaled approximately
$266,000 and $224,000 for the years ended June 30, 1999 and 1998, respectively.
Statesman paid no volume incentive fees to Southern States related to this
program for the years ended June 30, 1999 and 1998.
Leasing Services. Statesman, as lessor, has entered into operating leases
with Southern States and our patrons for computer equipment, liquid propane
tanks, credit bureau terminals and agricultural equipment. The net book value of
the equipment was approximately $5.1 million and $7.0 million as of June 30,
1999 and 1998, respectively. This program generated revenues for Statesman of
approximately $2.1 million and $2.5 million for the years ended June 30, 1999
and 1998, respectively. Our payments to Statesman for leasing services amount to
approximately 97% of Statesman's total leasing revenue. Statesman paid volume
incentive fees to Southern States related to this program of approximately
$175,000 and $295,000 for the years ended June 30, 1999 and 1998, respectively.
Asset Based Financing. Statesman offers working capital financing to
credit-approved private dealers of our products and independent cooperatives
through a revolving line of credit program collateralized by the debtor's
accounts receivable and inventories. Interest is charged
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<PAGE>
on a floating interest rate basis and these contract maturities are periodically
reviewed for renewal. This program generated revenues of approximately $748,000
million and $1.0 million for the years ended June 30, 1999 and 1998,
respectively.
Agrifinancing. Statesman offers nonrecourse extended crop, livestock and
feed financing for one to five year periods to our selected customers. The notes
are collateralized by the debtor's real estate, livestock or other tangible
holdings. This program generated revenues of approximately $157,000 and $123,000
for the years ended June 30, 1999 and 1998, respectively.
Croptime financing. Statesman provides collateralized operating loans to
approved borrowers that require financing beyond inputs for crop farming.
Croptime loans may be used for land rent, custom spraying, harvest costs, labor,
irrigation and other expenses related to crop production. Payment is timed to
harvest and/or marketing dates. The program began in January 1999 and has
generated revenues of approximately $427,000 for the year ended June 30, 1999.
Volume incentive fee paid to Southern States related to this program was
$110,000 for the year ended June 30, 1999.
Michigan Livestock Credit Corporation
Effective April 1, 1998, Michigan Livestock Credit, all of whose shares of
common stock were owned by Michigan Livestock Exchange, was merged into a
wholly-owned subsidiary of Statesman coincident with the merger of Michigan
Livestock Exchange with Southern States. Upon the effective date of the merger,
the name of the Statesman subsidiary was changed to Michigan Livestock Credit
Corporation.
Michigan Livestock Credit was organized in 1989 for the purpose of assuming
various lending operations previously conducted by Michigan Livestock Exchange.
The primary lines of business are loans (primarily for buildings, equipment,
livestock and operating needs), a livestock feeding program, a beef improvement
program and livestock leasing. Its loans are substantially collateralized by
livestock, buildings or other property. As of June 30, 1999, the building loan
portion of the portfolio was approximately $46 million, or 77% of Michigan
Livestock Credit's total portfolio. The Livestock Feeding Program is a bailment
program in which the livestock are owned by Michigan Livestock Credit and the
farmers/producers house and feed the animals in their facilities. Livestock
Feeding Program loans aggregated $11.7 million at June 30, 1999. At June 30,
1999, the beef improvement and livestock leasing programs amounted to only $700
thousand.
Southern States has a financing support agreement with Michigan Livestock
Credit similar to the agreement it has with Statesman. Under the terms of the
agreement, we are obligated to maintain a computed minimum investment in
Michigan Livestock Credit preferred stock, based on the average balance of
receivables outstanding at Michigan Livestock Credit. The amount of preferred
stock held by Southern States under this agreement was $14.2 million at December
31, 1999.
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<PAGE>
Investments in Other Companies and Cooperatives
Apart from our interest in our affiliated financing companies, we have
substantial investments, totaling approximately $83.1 million as of December 31,
1999, in other companies and cooperatives. Our largest investments are in other
cooperatives from which we purchase supplies or services and from which we in
turn receive patronage dividends. The patronage dividends received from these
investments can vary greatly from year to year depending on the performance of
the underlying cooperative.
Our largest single investment is in CF Industries. See "--Agricultural
Inputs and Services--Crops" above. At June 30, 1999, Southern States' investment
in CF Industries was $43.5 million, represented by ownership of preferred stock
issued to Southern States and other members in accordance with a base capital
plan that is based upon each member's purchases from CF Industries over a
rolling 5-year period. Under the plan, annual adjustments are made to each
member's required preferred stock ownership. Our preferred stock ownership
represented approximately 5.6% of the outstanding preferred stock of CF
Industries at June 30, 1999. There was no patronage refund paid to us by CF
Industries for the fiscal year ended June 30, 1999. The patronage refund paid to
us by CF Industries was $5.5 million and $13.1 million for each of the fiscal
years ended June 30, 1998 and 1997, respectively.
Our second largest investment in other companies and cooperatives, apart
from our affiliated financing companies, is in Southern States Insurance
Exchange (the Exchange). The Exchange is a Virginia-domiciled insurance
reciprocal licensed to write lines of insurance in Southern States' Mid-Atlantic
territory and Pennsylvania. The Exchange provides a wide-range of property and
casualty coverages for its subscribers (policyholders). Subscribers of the
Exchange include Southern States, the managed local cooperatives, private
dealers and other parties. At the discretion of the Advisory Committee, the
Exchange pays cash dividends from its operating income to its subscribers and
allocates its remaining net income to individual subscriber accounts in
accordance with the subscriber agreement. In addition, the Exchange returns
prior years' subscriber savings when, in the judgment of its board of directors,
it is prudent to do so.
At June 30, 1999, our investment in the Exchange was $12.5 million,
representing the accumulated unreturned savings in Southern States' subscriber
account. Southern States recorded cash dividends and undistributed savings of
$4.0 million, $3.4 million and $2.9 million for each of the fiscal years ended
June 30, 1999, 1998 and 1997, respectively. The Insurance Exchange is operated
by its attorney-in-fact and manager, Southern States Underwriters, Inc., a
subsidiary of Southern States. The Insurance Exchange carries A.M. Best's
highest rating of A+ Superior.
As of June 30, 1999, we reported total investments in other companies and
cooperatives including CF Industries and the Insurance Exchange, of $78.4
million. Our investments are stated at cash invested plus unpaid qualified
written notices of allocation. See Note 6 of the Notes to the Southern States
Consolidated Financial Statements included in this prospectus.
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Other Factors Affecting the Business of Southern States
Seasonality
Our business is highly seasonal. The first and second fiscal quarters
historically have lower sales revenue and unit volume than the third and fourth
quarters. The majority of sales and greatest demand for working capital for our
agricultural operations occur in late winter and spring, which represents the
prime planting season for our customer base.
For the Retail Farm Supply and Farm and Home divisions, with an emphasis on
farm-related and yard and garden products, the majority of sales and the
greatest demand for working capital also occur in late winter and spring. A
majority of our sales in our Crops division occurs in the spring.
Offsetting such seasonal effects to some degree, sales related to our grain
and feed operations tend to be highest during fall and winter. In addition, we
place a product emphasis on oil and propane heating fuels in the late fall and
early winter months. The grain, feed and petroleum operations create seasonal
increases in sales and working capital requirements during the fall and winter
months.
Competition
We are one of the principal suppliers of agricultural input east of the
Mississippi River. We are also one of the largest livestock marketing
cooperatives in the United States in terms of the number of head of livestock
sold for member producers.
Competition in feed, fertilizer, seed, grain, livestock, petroleum and farm
supplies exists with large national and regional manufacturers and suppliers as
well as small independent businesses operating in our territory. However, major
competitors vary from area to area. No single competitor competes throughout our
entire territory. We believe we have a competitive advantage because through our
extensive and diverse distribution system, we offer a full line of basic farm
supplies and services at locations convenient to patrons rather than limiting
our sales to a single line such as feed, seed or fertilizer. We believe that
member ownership, name recognition, reputation for quality service and value,
competent personnel and a long tradition of leadership enhance our competitive
position.
Employee Relations
As of March 31, 2000, we employed approximately 5,425 persons.
Additionally, the managed local cooperatives employed approximately 900 persons.
Approximately 60 company employees at two locations are members of labor unions.
There have been no work stoppages in the past 17 years. We consider our
relationship with employees to be good.
Matters Involving the Environment
We are subject to stringent and changing federal, state and local
environmental laws and regulations, including those governing the labeling, use,
storage, discharge, disposal and cleanup
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of hazardous materials as well as those governing the use, labeling and disposal
of crop protectants, fertilizers and seed products. We believe that our
operations are in substantial compliance with all applicable environmental laws
and regulations as currently interpreted and that we have obtained or applied
for the necessary permits to conduct its business. Because we use regulated
substances and generate hazardous materials in our business, from time to time
we are involved in administrative or judicial proceedings and inquiries relating
to environmental matters. Changes in environmental requirements or an
unanticipated significant adverse environmental event could have a material
adverse effect on our business, financial condition or results of operations.
As of December 31, 1999, Southern States had four sites at which
environmental investigation and remediation is ongoing and costs may be
significant. At one site, we are investigating and remediating soil and
groundwater petroleum contamination under an order issued by the Kentucky
Department for Environmental Protection. All necessary permits have been
obtained and the remediation plan has been implemented. As of March 31, 2000, we
believe that future investigation and remediation costs at this site will be
between $1.5 million and $3.1 million.
At a second site, we continue to monitor nitrate contamination of the soil
and groundwater under a consent agreement under the Virginia Voluntary
Remediation Program. We have completed a soil remediation program related to the
immediate site and are in discussions with the Virginia Department of
Environmental Quality regarding the appropriate scope of investigation of
possible groundwater contamination relating to the site. Based on the
information presently known, we believe that as of March 31, 2000 future
monitoring and remediation costs at this site will be in the range of $571,000
to $1.1 million.
At the third site, we expect that we will incur expenses of approximately
$30,000 per year for an as yet undetermined period on future operations and
maintenance costs associated with a groundwater remediation system implemented
to address nitrate contamination. The costs for the third site are subject to
reimbursement by the prior owner of the site pursuant to an indemnification
agreement.
At a fourth site, formerly used by Southern States as a petroleum bulk
storage plant, on-going remediation and monitoring activities have resulted in a
decision to implement a more aggressive plan of remediation. The anticipated
costs of this plan of remediation were, at March 31, 2000, in the range of
$462,000 to $1.6 million.
During fiscal 1997, 1998 and 1999, Southern States incurred expenditures of
approximately $477,447, $872,306 and $2,247,512, respectively, for environmental
investigation and remediation at all owned or leased properties. As of December
31, 1999, we had reserved $3.38 million for future investigation and remediation
costs associated with all currently or formerly owned or leased properties,
including the three sites discussed above. Based on current information and
regulatory requirements, we believe that the accruals established for
environmental expenditures are adequate. As of March 31, 2000, we have reserves
of $3.44 million for future environmental investigation and remediation costs.
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In addition, as a result of off-site disposal activities, we have been
identified as a potentially responsible party under the federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980 at two sites that
are listed on the Superfund National Priorities List. CERCLA imposes joint and
several liability on specified parties for the costs of investigation and
remediation of contaminated properties, regardless of fault or the legality of
the original disposal. Southern States has executed de minimis settlement
agreements for both of these sites. The de minimis agreements provide us with
statutorily authorized protection from private actions by third parties seeking
to recover site clean-up costs, and further provide that the EPA will not
institute proceedings against us relating to the clean-up of the sites. The
agreements can be set aside by the EPA only if we failed to disclose material
facts with respect to our involvement in the sites or if aggregate site clean-up
costs exceed a dollar threshold specified in the agreements, which is ordinarily
set at a multiple of anticipated clean-up costs.
Under the agreement to purchase the Gold Kist Input Business, Southern
States acquired 20 properties specifically identified as having potential
environmental liabilities. Gold Kist has agreed to assume responsibility for
these liabilities, and has agreed, during the 10 years following the
acquisition, to indemnify Southern States for environmental claims when the
aggregate amount of Southern States' losses for each individual claim exceeds
$25,000, up to a maximum limit of $35 million in the aggregate. We do not
consider our risk of incurring material environmental costs with respect to
these properties to be significant in light of its indemnification agreement
with Gold Kist.
We have expended, and expect in the future to expend, funds for compliance
with environmental laws and regulations. These expenditures may impact Southern
States' future net income. We do not anticipate, however, that our competitive
position will be adversely affected by these expenditures or by new
environmental laws and regulations. Environmental expenditures are capitalized
when the expenditures provide future economic benefits.
During fiscal 1999, Southern States had environmental capital expenditures
of approximately $1.02 million. We estimate that environmental capital
expenditures for fiscal 2000 will be in the range of $1.0 million to $2.0
million and that excluding capital expenditures associated with properties
acquired as a part of the Gold Kist Inputs Business, reasonably foreseeable
future levels of capital expenditures for environmental compliance will be
comparable. However, there can be no assurance that expenditures will not be
higher because of continually changing environmental compliance standards and
technology.
Government Regulation
Southern States' business is impacted by numerous federal, state and local
laws that have been enacted to promote fair trade practices, safety, health and
welfare. We believe that our operating procedures conform to the intent of these
laws and that we are currently in substantial compliance with all of these laws,
the violation of which could have a material adverse effect on us.
In addition to the environmental laws discussed in the preceding section,
policies may be implemented from time to time by the United States Department of
Agriculture, the Department of Energy or other governmental agencies which may
impact the demands of farmers for our
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products or which may impact the methods by which our operations are conducted.
These policies may impact our farm supply and grain storage and marketing
operations.
In 1996, the Federal Agriculture Improvement and Reform Act ("FAIR") was
signed into law. The FAIR legislation, which is sometimes referred to as the
1996 "Freedom to Farm" law, represented the most significant change in
government farm programs in more than 60 years. Under FAIR, the former system of
variable price-linked subsidy payments to farmers was replaced by a program of
fixed payments which decline over a seven-year period. In addition, FAIR
eliminated federal planting restrictions and acreage controls. Southern States
believes that FAIR was intended to accelerate the trend toward greater market
orientation and reduced government influence on the agricultural sector. Whether
this legislation favorably impacts the agriculture sector or our business
depends in large part on whether U.S. agriculture becomes more competitive in
world markets as the agriculture industry moves toward greater market
orientation, the extent to which governmental actions expand international trade
agreements and whether market access opportunities for U.S. agriculture are
increased.
In October 1998, Congress passed legislation that temporarily increased the
subsidy payments that were being phased out by the 1996 FAIR legislation. The
1998 legislation was enacted in response to a variety of world-wide economic
conditions adversely affecting agriculture, including substantial decreases in
the prices of various farm commodities from levels prevailing at the time the
FAIR legislation was enacted. We are not able to predict how this most recent
legislation might affect our business.
In late 1999, Congress enacted legislation providing $8.7 billion in
emergency relief for farmers impacted by low commodity prices and natural
disasters. This legislation further undercut the philosophy that motivated
passage of the FAIR legislation in 1996.
Commodity Price Hedging Activities
We use commodities futures contracts to minimize the risks associated with
the fluctuation in market prices of grains and petroleum products. These futures
contracts are commitments to either purchase or sell designated amounts and
varieties of grain and petroleum products at a future date, and may be settled
in cash or through delivery. We maintain hedged positions on our petroleum
products on a periodic basis. With respect to grain, however, our strategy is to
maintain fully hedged positions to the greatest extent possible. Our hedging
activities are for the sole purpose of eliminating the risk of market price
fluctuations. No futures contracts are purchased or sold for purely speculative
purposes. For additional information on commodity price hedging, see Note 15 of
the Notes to the Southern States Consolidated Financial Statements included in
this prospectus.
Southern States maintains hedged positions on petroleum products inventory
to protect against price declines from the time it purchases product to the time
the product is sold. Due to historical market behavior, which results in high
market prices eventually returning to more normalized levels, we perceive our
risk from a decrease in market prices as being greater as the level of market
price increases. For that reason, we seek to hedge a larger proportion of
product "imbalance" when prices are high. A product imbalance occurs when
Southern States has
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entered into an agreement to sell more product (inventory) than it has purchased
(i.e., a short position) or when Southern States has purchased more product
(inventory) than it has agreements to sell (i.e., a long position). For example,
at a price level below $.50/gal., Southern States typically hedges only 10%-20%
of the product imbalance; at a price level of $.75/gal., Southern States
ordinarily hedges approximately 80% of the imbalance. The hedge is usually a
contract to sell either Number 2 heating oil or gasoline. The term of the
contract is usually 30 to 60 days. Average inventory held by Southern States
ranges from approximately 10 to 12 million gallons. Company policy limits the
maximum number of gallons that can be hedged at any one time to 12.6 million
gallons or 300 contracts.
We also seek to minimize price risks inherent in our grain marketing
operations by engaging in hedging activities in which we enter into obligations
to both purchase grain for a set price on a specific date and to sell grain at a
set price on a specific date to protect the value of open purchase contracts,
open sales contracts and grain inventory from adverse price changes in the corn,
wheat and soybean markets. Company policy limits the aggregate unhedged position
in wheat, corn and soybeans to a maximum of 100,000 bushels. Any imbalance
resulting from the receipt of more or less grain than anticipated is hedged the
day immediately following receipt through the use of additional futures
contracts or through balancing against other receipts or sales. During harvest
periods when deliveries are at their heaviest volume, we will "pre-hedge" the
day's projected receipts to avoid large unhedged overnight positions. A
pre-hedge contract is a management decision to sell short in the market in
anticipation of overnight purchases. Receipts are anticipated based upon
discussions with local growers about their anticipated delivery date and time
and also based upon specific crop harvest knowledge in a given region. Commodity
futures are traded only on regulated exchanges such as the Chicago Board of
Trade.
We are also a purchaser of agricultural commodities used for the
manufacture of feeds. We use commodity futures for hedging purposes to reduce
the effect of changing commodity prices on a portion of our commodity
inventories and related purchase and sale contracts. We typically enter into
contracts to sell 30% to 35% of our feed inventory at a future date for a set
price. Feed ingredients futures contracts, primarily corn and soybean meal, are
recognized when closed and are accounted for at market. Gains and losses on the
transactions are recorded as a component of product cost. At June 30, 1999, the
fair value of our outstanding commodity futures positions for feed ingredients
was not material.
Legal Proceedings
Southern States is involved in various legal proceedings that arise in the
normal course of business. Based upon its evaluation of the information
currently available, we believe that the ultimate resolution of these
proceedings will not have a material adverse effect on our financial position,
liquidity or results of operations.
We maintain general liability and property insurance and an umbrella and
excess liability policy in amounts we consider adequate and customary for our
business. However, we expect that from time to time we will experience legal
claims in excess of our insurance coverage or claims that ultimately will not be
covered by insurance. Several insurance coverages carried by Southern States are
underwritten by Southern States Insurance Exchange. See "--Investments in Other
Companies and Cooperatives" above.
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MANAGEMENT
Directors
The board of directors of Southern States presently consists of 23 persons.
Our members annually elect, on a staggered basis, members of the board of
directors to serve for three year-terms. Members are elected through an election
district process, on a district representation basis. The districts are redrawn
from time to time by the board of directors to provide for equitable
representation of members in our territory. At the present time, 17 of the 23
members of the board of directors are member-elected, or member-designated. The
other six current members of the board, designated by Virginia law as public
directors, are appointed for three-year terms, on a staggered basis, by the
director of agricultural extension for the Commonwealth of Virginia. Each of
these appointed directors represents a different state in our traditional
Mid-Atlantic territory. Public directors need not be members of Southern States.
The directors of Southern States are as follows:
<TABLE>
<CAPTION>
Expiration Years
Age as of of Present Served
December 31, Term as as
Name 1999 Position(s) Held Director Director Residence
- ---- ---- ---------------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Earl L. Campbell 58 Chairman of the Board; 2000 14 Danville, Kentucky
Executive Committee
John Henry Smith 49 Vice Chairman of the Board; 2000 8 Rosedale, Virginia
Executive Committee, Chairman
Michael W. Beahm 48 Member & Institutional 2002 3 Roanoke, Virginia
Relations Committee
Cecil D. Bell, Jr.* 59 Audit Committee, Chairman 2001 10 Georgetown, Kentucky
Floyd K. Blessing 72 Executive and Budget Committees 2001 15 Houston, Delaware
Jere L. Cannon 58 Audit Committee 2002 24 Flemingsburg, Kentucky
William F. Covington* 74 Member & Institutional 2000 13 Mebane, North Carolina
Relations Committee, Chairman;
Executive Committee
George E. Fisher 67 Member & Institutional 2002 12 Gordonsville, Virginia
Relations Committee
R. Bruce Johnson 48 Budget Committee 2000 5 West Point, Virginia
James A. Kinsey* 50 Executive and Audit 2000 8 Flemington, West Virginia
Committees
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
J. Wayne McAtee 55 Budget Committee 2000 17 Cadiz, Kentucky
Richard F. Price 69 Executive and Member & 2001 31 Phoenix, Maryland
Institutional Relations Committees
William G. Pridgeon 47 Member & Institutional Relations 2000 1 Montgomery, Michigan
Committee
Curry A. Roberts* 42 Audit Committee 2001 7 Charlottesville, Virginia
James A. Stonesifer* 56 Budget Committee 2002 3 Union Bridge, Maryland
William W. Vanderwende* 66 Budget Committee, Chairman 2002 18 Bridgeville, Delaware
Wilbur C. Ward 61 Audit Committee 2001 6 Clarkton, North Carolina
Charles A. Wilfong 41 Member & Institutional Relations 2001 4 Dunmore, West Virginia
Committee
John B. East 48 Member & Institutional Relations 2002 Elected Nov. Leesburg, Alabama
Committee 1999
Raleigh O. Ward, Jr. 48 Member & Institutional Relations 2002 Elected Nov. Effingham, South Carolina
Committee 1999
H. Michael Davis 48 Budget Committee 2000 1 Valdosta, Georgia
Herbert A. Daniel, Jr. 48 Audit Committee 2001 1 Claxton, Georgia
James E. Brady, Jr. 64 Executive and Audit Committees 2001 1 Marion, Alabama
</TABLE>
* Messrs. Bell (Kentucky), Covington (North Carolina), Kinsey (West
Virginia), Roberts (Virginia), Stonesifer (Maryland) and Vanderwende (Delaware)
are designated public directors.
In connection with the April, 1998, acquisition of Michigan Livestock
Exchange, which expanded our operations into the states of Michigan, Ohio and
Indiana, the board of directors was expanded by one seat. William Pridgeon,
formerly the chairman of the board of directors of Michigan Livestock Exchange,
was designated by the membership of Michigan Livestock Exchange to represent the
Michigan Livestock Exchange territory on the board of directors for a term
expiring in 2000.
In connection with the October, 1998, acquisition of the Gold Kist Inputs
Business, the board of directors was expanded by six additional seats. Under the
terms of the agreement for the purchase of the Gold Kist Inputs Business,
Southern States amended its bylaws to provide for the election by the board of
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directors of Gold Kist Inc., sitting as delegates to a special election district
for the Gold Kist territory, of six additional directors for staggered terms
from among the new members in the Gold Kist territory.
Under the staggered terms, two directors initially will serve for one year,
two for two years, and two for three years. Upon the expiration of these terms,
two directors from the Gold Kist territory will be elected annually for
three-year terms. Messrs. Davis, Daniel, and Brady each of whom previously
served as and will continue to serve as a director of Gold Kist, and Messrs.
R.Ward and East, have been elected as directors from the territory formerly
served by the Gold Kist Inputs Business. A sixth individual, Mr. W. P. Smith,
Jr., was elected to serve as a director for Southern States from the Gold Kist
territory for a two year term, but died unexpectedly in November, 1998. The
vacancy on the board created by Mr. Smith's death has not been filled.
During the past five years, each of the directors has owned and/or managed
substantial farming operations, producing a wide range of agricultural products.
While the size and type of products produced on, and the number of personnel
employed at, each of the director's farms varies, each director's business
activities have been primarily related to owner-managed agribusiness
enterprises.
There are no family relationships among any of the directors and executive
officers.
Mr. Price is a member of the board of directors of CoBank, ACB, which has
various lending relationships with Southern States. Mr. Kinsey is a member of
the board of directors of Agfirst Bank, FCB, a farm credit bank that
participates in CoBank's commitments under Southern States' revolving credit
facility. Mr. Brady is a director of The Perry County Bank, Marion, Alabama; Mr.
Price is also a director of Sparks State Bank, Sparks, Maryland; Mr. Bell is a
director of Farmers Capital Bank Corporation, Frankfort, Kentucky; and Mr.
Wilfong is a director of Farm Family Holdings, Inc., Glenmont, New York.
Compensation Committee Interlocks and Insider Participation
Messrs. J. H. Smith (Chairman), Campbell, Blessing, Covington, Brady and
Pridgeon, serve as members of our executive committee which functions as our
compensation committee. None of these directors, nor any of our executive
officers, has any of the relationships to Southern States that is required to be
disclosed by the regulations of the Securities and Exchange Commission.
Director Compensation
Our bylaws provide that compensation and expense reimbursement policies for
directors shall be established periodically by the board of directors.
Currently, directors receive a per diem of $400, with the chairman receiving a
per diem of $600, plus expenses incurred while traveling to and from and
attending meetings of the board of directors or other official meetings or
conferences.
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Directors Deferred Compensation Plan. The Southern States directors
deferred compensation plan permits non-employee directors to defer all or part
of their meeting fees, retainers or other remuneration received. The amount to
be deferred and the period for deferral is specified by an election made prior
to the beginning of each calendar year. Payments begin under the plan generally
upon the director's death or the date specified by the director in his deferral
election. The director's deferred account balance is credited with interest at a
rate determined by the administrator for each deferral cycle. Distributions are
made in quarterly installments over 10 years. All amounts accrued under the plan
have been funded in a trust which is secure against all contingencies except
insolvency of Southern States.
Transactions With Directors Who Are Members and Customers
Our members, including our directors, are also our customers and/or
customers of our affiliated financing companies. They purchase products from us
in the normal course of operating their farm businesses and may sell certain
agricultural products to us at market price. The prices, terms and conditions of
any purchase or sale transaction are on the same basis for all of our members.
Executive Officers
The executive officers of Southern States are as follows:
Age as of
Name Dec. 31, Positions and Offices Held
- ---- 1999 --------------------------
----
Wayne A. Boutwell 55 President and Chief Executive Officer --
Mr. Boutwell began his career in 1970
with the USDA in Washington, D.C. He
served as President and CEO of the
National Council of Farmer Cooperatives
from 1983 until 1996. In September 1996,
Mr. Boutwell was named President and
Chief Executive Officer - Elect of
Southern States. Mr. Boutwell serves on
the board of CF Industries, Inc., the
National Council of Farmer Cooperatives,
Mississippi State University Agribusiness
Institute, and the International Food and
Agribusiness Management Association. Mr.
Boutwell received his B.S. and M.S.
degrees in Agricultural Economics from
Mississippi State University and his
Ph.D. from Virginia Tech.
K. Gene McClung 56 Group Vice President, Marketing &
Logistical Services - Mr. McClung
commenced his career with Southern States
in 1964. He has served in a variety of
local, regional and headquarters
managerial positions. He was promoted to
his present position effective April 1,
1998, after serving as Vice President of
Planning, Logistics and Business
Development. Mr. McClung also served
Southern States for a number of years as
Director, Credit and Financial Services
and as President of Statesman Financial
Corporation. Mr. McClung received his
B.A. degree from Tri-State Baptist
College.
George W. Winstead 57 Group Vice President, Ag Inputs &
Services -- Mr. Winstead began his career
with Southern States in 1968. He has been
in his present position since July 1,
1993, having previously served in a
variety of local, regional and
headquarters managerial positions. Mr.
Winstead serves as
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chairman of the board of Universal
Cooperatives Inc. and Cooperative
Milling, Inc. Mr. Winstead received his
B.S. from East Carolina University.
Jonathan A. Hawkins 60 Senior Vice President and Chief Financial
Officer -- Mr. Hawkins was named to his
current position in 1990. He joined
Southern States in 1980 and was promoted
to Vice President and Treasurer in 1983.
Prior to joining Southern States, Mr.
Hawkins served as a Vice President of
Bank of Virginia in Richmond, Virginia.
He currently serves as Chairman of the
Board of the Institute of Cooperative
Financial Officers. Mr. Hawkins received
his B.A. in Mathematics from the
University of Richmond.
Gene R. Anderson 59 Senior Vice President, Corporate and
Member Services -- Mr. Anderson joined
Southern States on May 1, 1986, as Vice
President for Human Resources. He was
promoted to his present position on
October 15, 1998, having previously
served in several headquarters managerial
capacities. Before joining Southern
States, Mr. Anderson worked for 23 years
for E.I. Du Pont de Nemours & Co. Mr.
Anderson has a B.A. in Industrial
Relations from the University of North
Carolina.
C.A. Miller 60 Senior Vice President, Corporate
Information and Support Services -- Mr.
Miller joined Southern States as Director
of Information Systems in 1979 and was
later promoted to Vice President. Mr.
Miller was promoted to his current
position on October 15, 1998. Prior to
joining Southern States, Mr. Miller
served as Vice President of Deposit
Guaranty National Bank in Jackson,
Mississippi, and then as Senior Vice
President of the First National Bank of
Birmingham, Alabama. Mr. Miller has a
B.A. in Banking and Finance and an M.B.A.
in Finance and Economics from the
University of Mississippi.
N. Hopper Ancarrow, Jr. 54 Vice President, General Counsel and
Secretary -- Mr. Ancarrow joined Southern
States' legal staff in 1971 and from 1972
until 1987 served as Assistant Secretary
of Southern States. In 1987, he was named
Vice President, General Counsel and
Secretary. Mr. Ancarrow earned his B.A.
from the University of North Carolina and
his J.D. from the College of William &
Mary - Marshall Wythe School of Law.
Richard G. Sherman 52 Vice President, Human Resources -- Mr.
Sherman joined Southern States in June
1988 as Director of Human Resources at
the central office in Richmond, Virginia.
He was promoted to his current position
in August 1989. Before joining Southern
States, Mr. Sherman worked for Texas City
Refining Inc. and Agway Inc. He has a
B.A. in Economics and Business from Rider
College, an M.A. in Human Resources from
the University of Houston and holds a
Senior Professional in Human Resources
designation.
Our officers serve for a term of one year and until their successors are
elected by the board of directors. During the past five years the principal
occupation of each of the above
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named executive officers, other than Mr. Boutwell, has been as an officer or
employee of Southern States.
Executive Compensation
The following table shows, for the fiscal years ended June 30, 1999, 1998
and 1997, all compensation paid or accrued by Southern States and its
subsidiaries to its chief executive officer and each of the four other most
highly compensated executive officers.
You should read the following information with the data in the table below:
. "Salary" reflects salary before pretax contributions under the Southern
States thrift plan and before pretax contributions under the Southern
States flexible benefits plan.
. "Bonus" reflects share of earnings fund and executive bonus, if any,
accrued for each of the fiscal years under the Southern States deferred
compensation plan, including the incentive compensation awards in addition
to the deferral rights. The various incentive compensation awards are
described below. For Mr. Boutwell, $29,615 was paid, or electively
deferred, from his incentive account for the fiscal year ended June 30,
1998 under the CEO incentive program under the Southern States deferred
compensation plan. For the fiscal years ended June 30, 1999 and 1998,
$286,714 and $61,115 was subtracted from Mr. Boutwell's incentive account
as a result of incentive shortfalls for the respective years. However, the
balance is not reduced below $0, and effective for fiscal years beginning
on or after July 1, 1999, there will be no further subtractions from Mr.
Boutwell's incentive account as a result of incentive shortfalls. Any
balance in the incentive account is subject to forfeiture. See "--Bonus
Compensation--CEO Incentive Program" below.
. "Other Annual Compensation" reflects, in the case of Messrs. Hawkins and
Ancarrow, that portion of the interest earned under the Southern States
deferred compensation plan above 120% of the applicable federal rate in
those accounts not deemed invested in externally managed investments, as
well as amounts attributable to Southern States' payment of certain taxes
on their behalf. Other than such amounts, for the fiscal years ended June
30, 1999, 1998 and 1997 no amount of "Other Annual Compensation" was paid
to any of the executive officers listed in the table, except for
perquisites and other personal benefits which for each named executive
officer did not exceed the lesser of $50,000 or 10% of the amounts reported
as salary and bonus for such individual.
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<TABLE>
<CAPTION>
Annual Compensation
---------------------------------------
Year
Ending Other Annual All Other
Name and Principal Position June 30 Salary Bonus Compensation Compensation
--------------------------- ------- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Wayne A. Boutwell 1999 $419,910 $ --- --- $11,500(1)
President and Chief Executive 1998 381,429 29,615 --- 13,033(1)
Officer (1) 1997 278,250 --- --- ---
George W. Winstead 1999 $180,512 $ --- --- $ 7,873(2)
Group Vice President 1998 169,778 15,826 --- 7,471(2)
Ag Inputs & Services 1997 160,116 46,495 --- 8,865(2)
K. Gene McClung 1999 $166,292 $ --- --- $7,152(3)
Group Vice President 1998 133,428 17,712 --- 6,877(3)
Marketing & Logistical Services 1997 109,080 26,343 --- 8,035(3)
Jonathan A. Hawkins 1999 $172,008 $ --- $2,150 $9,208(4)
Senior Vice President and 1998 154,591 25,630 1,924 9,168(4)
Chief Financial Officer 1997 139,784 43,430 1,733 10,834(4)
N. Hopper Ancarrow, Jr. 1999 $150,128 $24,986 $1,160 $5,937(5)
Vice President, General Counsel 1998 144,409 22,731 1,046 5,853(5)
and Secretary 1997 138,229 41,262 954 7,465(5)
</TABLE>
(1) Mr. Boutwell became president and chief executive officer effective
February 1, 1997. Reflects $2,400 and $3,934 contributed or matched by Southern
States or its subsidiaries for fiscal years 1999 and 1998, respectively, under
the Southern States thrift plan. The remaining amount shown for each fiscal year
was paid by Southern States for life insurance premiums under a split dollar
life insurance agreement. Southern States will recover the cost of premium
payments from the cash value of the policies.
(2) Reflects $2,867, $2,465 and $3,859 contributed or matched by Southern
States or its subsidiaries for fiscal years 1999, 1998 and 1997, respectively,
under the Southern States thrift plan. The remaining amount shown for each
fiscal year was paid by Southern States for life insurance premiums under a
split dollar life insurance agreement. Southern States will recover the cost of
premium payments from the cash value of the policies.
(3) Reflects $2,644, $2,369 and $3,528 contributed or matched by Southern
States or its subsidiaries for fiscal years 1999, 1998 and 1997, respectively,
under the Southern States thrift plan. The remaining amount shown for each
fiscal year was paid by Southern States for life insurance premiums under a
split dollar life insurance agreement. Southern States will recover the cost of
premium payments from the cash value of the policies.
(4) Reflects $2,520, $2,481 and $4,147 contributed or matched by Southern
States or its subsidiaries for fiscal years 1999, 1998 and 1997, respectively,
under the Southern States thrift plan. The remaining amount shown for each
fiscal year was paid by Southern States for life insurance premiums under a
split dollar life insurance agreement. Southern States will recover the cost of
premium payments from the cash value of the policies.
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(5) Reflects $2,218, $2,134 and $3,746 contributed or matched by Southern
States or its subsidiaries for fiscal years 1999, 1998 and 1997, respectively,
under the Southern States thrift plan. The remaining amount shown for each
fiscal year was paid by Southern States for life insurance premiums under a
split dollar life insurance agreement. Southern States will recover the cost of
premium payments from the cash value of the policies.
Deferred Compensation
The Southern States deferred compensation plan permits executive employees
designated to defer all or part of their salary and all or part of their bonus
compensation. The amount to be deferred and the period for deferral is specified
by an election made before the beginning of each fiscal year. Payments begin
under the plan generally upon the executive's death or disability or at
cessation of employment, or upon election, not later than that executive's 65th
birthday. The executive's deferred account balance is credited with earnings and
losses based on deemed investments selected by the executive from the same funds
available for actual investment under the Southern States thrift plan.
Distributions are made in quarterly installments over 10 years. All vested
amounts accrued under the plan have been funded in a trust which is secure
against all contingencies except insolvency of Southern States. Amounts deferred
pursuant to the plan for the accounts of the named individuals during the fiscal
years ended June 30, 1997, 1998 and 1999 are included under the salary and bonus
columns in the cash compensation table.
Bonus Compensation
Earnings Fund Program. All regular employees other than the chief executive
officer who are designated as eligible by the board are entitled to a
proportionate share of the earnings fund under the deferred compensation plan
for each fiscal year. The earnings fund share provided to each employee is
dependent upon the employee's position, the employee's fiscal year end salary
and the performance of Southern States for the fiscal year. The earnings fund
includes amounts by which Southern States exceeds a threshold level of
performance. Distributions under this program are made annually after the close
of the fiscal year. For the fiscal year ending on June 30, 2000, the chief
financial officer and the two group vice presidents are entitled to the greater
of their proportional share of the Earnings Fund Program or any award granted
under the CFO and Group Vice Presidents Incentive Program described below.
Executive Bonus. Each executive designated by the board is also eligible
for an executive bonus, if any, in the amount determined by, and in the
discretion of, the chief executive officer. Executive bonuses are awarded based
on an assessment of the executive's performance during the preceding 12 months
and are payable after the close of the fiscal year. For fiscal years beginning
on and after July 1, 2000, the executive bonus may not exceed 15% of salary for
the fiscal year in the case of the chief financial officer, the two group vice
presidents and Series 200 executives (who are senior vice presidents and group
vice presidents and the chief fiancial officer, unless they are specifically in
a different group) or 10% of salary for the fiscal year in the case of Series
100 executives (who are titled as directors of various divisions of Southern
States).
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CEO Incentive Program. The CEO incentive program is a long term incentive
program under which the chief executive officer is granted an award of 1.5% of
the amount by which savings before taxes exceeds 10% of the total stockholders'
and patrons' equity determined at the end of the prior year. Each award is
placed in an incentive account established on the books of Southern States with
a beginning balance of $150,000. One-third of the balance in the incentive
account is distributed as of the end of each fiscal year. No distribution
however, will be made for any fiscal year in which Southern States incurs a
loss. Any positive balance in the incentive account is forfeited upon the chief
executive officer's early termination of employment. The board retains the right
to adjust earnings used for determining the award for any unusual gains or
losses incurred during the fiscal year. However, the board may not reduce the
balance in the incentive account or defer a scheduled payment for which no
deferral election has been filed by the chief executive officer.
CFO and Group Vice Presidents Incentive Program. For the fiscal year ending
June 30, 1999, the Company's chief financial officer (Mr. Hawkins) and its two
group vice presidents (Messrs. Winstead and McClung), were eligible for
incentive awards equal to .40% of the amount by which savings before taxes
exceeds a 4% return on total assets as determined at the end of the preceding
fiscal year. No awards were made for that year. Awards made under this program
are placed in an incentive account established on the books of Southern States.
One-half of the balance in the incentive account is distributed at the end of
each fiscal year. The accumulated balance in the executive's incentive account
will be paid at the end of the fiscal year following the executive's termination
of employment for any reason. The board retains the right to adjust earnings
used for determining the award for unusual gains or losses incurred during the
fiscal year. However, the board may not reduce the balance in the incentive
account or defer a scheduled payment for which no deferral election is in place
under the plan. For the fiscal year ending June 30, 2000, these executives will
be granted the greater of the incentive award described above or their share of
the awards made under the Earnings Fund Program. This program is eliminated for
fiscal years beginning on or after July 1, 2000.
Retirement Benefits
The following table shows the estimated annual benefits payable in the form
of a single life annuity upon retirement under Southern States' retirement
program, consisting of the retirement plan for employees of Southern States and
the Southern States supplemental retirement plan, to persons in specified years
of service and average earnings classifications, before offset of Social
Security benefits, assuming retirement at 65 or at or after 62 with 30 years of
creditable service:
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<TABLE>
<CAPTION>
Estimated Annual Benefits For Years of Service Indicated
--------------------------------------------------------
Highest 36
Month
Average
Earnings 10 15 20 25 30 or more
-------- -- -- -- -- ----------
<S> <C> <C> <C> <C> <C>
$50,000 $10,000 $15,000 $20,000 $25,000 $30,000
100,000 20,000 30,000 40,000 50,000 60,000
150,000 30,000 45,000 60,000 75,000 90,000
200,000 40,000 60,000 80,000 100,000 120,000
250,000 50,000 75,000 100,000 125,000 150,000
300,000 60,000 90,000 120,000 150,000 180,000
350,000 70,000 105,000 140,000 175,000 210,000
400,000 80,000 120,000 160,000 200,000 240,000
450,000 90,000 135,000 180,000 225,000 270,000
500,000 100,000 150,000 200,000 250,000 300,000
</TABLE>
Compensation covered by the Plan includes compensation set forth in the
columns entitled "Salary" and "Bonus" in the Summary Compensation Table reduced
by the bonus amounts that are electively deferred by executives under the
Southern States deferred compensation plan. The credited years of service as of
December 31, 1999, under the retirement income plan for the five executive
officers listed in the summary compensation table are as follows: Mr. Boutwell
(3); Mr. Winstead (31); Mr. McClung (31); Mr. Hawkins (19); and Mr. Ancarrow
(28).
Security Ownership of Beneficial Owners and Management
Our stockholder equity consists of our membership common stock and our
preferred stock. Only the shares of membership common stock have voting rights.
Under our articles of incorporation and under applicable Virginia law, each
of our members has only one vote in our business affairs, regardless of the
number of shares of common stock owned. See "Southern States--Cooperative
Structure."
At December 31, 1999, none of our directors or the executive officers
listed in the summary compensation table, either individually or as a group,
beneficially owned in excess of one percent of any class of Southern States'
equity. At December 31, 1999, we knew of no person or entity to be the
beneficial owner of more than five percent of our common shares.
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DESCRIPTION OF THE SENIOR NOTES
The term "Senior Notes" describes the notes we are offering by this
prospectus. We will issue the Senior Notes in multiple series under an Indenture
between us and First Union National Bank. We have summarized the material
provisions of the Indenture below. The forms of the Senior Notes have been
included as exhibits to the Indenture which has been filed as an exhibit to the
registration statement. You should read the Indenture and the forms of the
Senior Notes for provisions that may be important to you. In the summary below,
we have included references to section numbers of the Indenture so you can
easily locate these provisions. Capitalized terms used in the summary have the
meanings specified in the Indenture.
Under this prospectus, Southern States is offering the following Senior
Notes, issuable in series, as follows:
Minimum
Series Initial Investment
- ---------------------------------------------------- ----------------------
Six month, Series A (Standard Certificate) $ 1,000
Six month, Series B (Large Certificate) 10,000
Six month, Series C (Jumbo Certificate) 100,000
One year, Series D (Standard Certificate) 1,000
One year, Series E (Large Certificate) 10,000
Two year, Series F (Standard Certificate) 1,000
Two year, Series G (Large Certificate) 10,000
Five year, Series H (Standard Certificate) 1,000
Five year, Series I (Large Certificate) 10,000
Seven year, Series J (Standard Certificate) 1,000
Seven year, Series K (Large Certificate) 10,000
Ranking
The Senior Notes will be our direct, unsecured obligations and will rank
equally with all other unsecured and unsubordinated debt of Southern States.
The Indenture does not limit the amount of Senior Notes that we may issue
under it. We may issue Senior Notes from time to time under the Indenture in one
or more series by entering into supplemental indentures or by a resolution of
our Board of Directors or by action taken pursuant to a Board resolution.
(Section 3.01 of the Indenture).
The Indenture does not limit the amount of other securities that may be
issued by Southern States or other indebtedness that may be incurred by Southern
States, either secured or
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unsecured, superior or subordinate to the Senior Notes, and does not protect the
holders of Series Notes if we engage in a highly leveraged transaction.
Maturities
The maturity date for each Senior Note will be calculated from the date of
original issuance. For example, in the case of a five year Senior Note issued on
October 1, 2000, the maturity date will be September 30, 2005. In the case of a
seven year Senior Note issued on June 15, 2002, the maturity date will be June
14, 2009. In the case of all Senior Notes, the payment of the principal amount,
together with any accrued but unpaid interest to the date of maturity, will be
made at maturity. Payment will be made at maturity only upon presentation and
surrender of the Senior Note. No interest will accrue after the date of
maturity, regardless of the date of presentation and surrender of the Senior
Note.
Denominations
The Senior Notes will be sold in minimum denominations ranging from $1,000
to $100,000. The Series A, D, F, H and J Senior Notes (the "Standard Certificate
Notes") will be sold in minimum denominations of $1,000 and increments of $100
above that amount. Holders of Standard Certificate Notes electing to reinvest
interest, however, may hold Standard Certificate Notes in any principal amount
over $1,000.
The Series B, E, G, I and K Senior Notes (the "Large Certificate Notes")
will be sold in minimum denominations of $10,000 and increments of $500 above
that amount. Holders of Large Certificate Notes who elect to reinvest interest,
however, may hold Large Certificate Notes in any principal amount over $10,000.
The Series C Senior Notes (the "Jumbo Certificate Notes") will be sold in
minimum denominations of $100,000 and increments of $1,000 above that amount.
Holders of Jumbo Certificate Notes who elect to reinvest interest, however, may
hold Jumbo Certificate Notes in any principal amount over $100,000. (Sections
3.01 and 3.02 of the Indenture.)
Interest Rates
The rate of interest paid on the Senior Notes will be determined from time
to time by the Board of Directors of Southern States or its delegate, after
giving consideration to the current rates of interest established by various
money markets and Southern States' need for funds. All Senior Notes of the same
series issued during a particular calendar month will bear the same interest
rate. A new interest rate for each series of Senior Notes will be established
each month as of the first business day of the month. Any change in the interest
rates will not affect the interest rate on any Senior Note already issued and
for which the full purchase price was received prior to the change.
Interest payments will be calculated based on a 365 day year.
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On the date of this prospectus, the interest rates on the Senior Notes are
as follows:
Series Interest Rate
----------------------------------------------------------------------------
Six month, Series A (Standard Certificate) %
Six month, Series B (Large Certificate) %
Six month, Series C (Jumbo Certificate) %
One year, Series D (Standard Certificate) %
One year, Series E (Large Certificate) %
Two year, Series F (Standard Certificate) %
Two year, Series G (Large Certificate) %
Five year, Series H (Standard Certificate) %
Five year, Series I (Large Certificate) %
Seven year, Series J (Standard Certificate) %
Seven year, Series K (Large Certificate) %
Whenever the interest rates are changed, we will amend this prospectus to
specify the interest rates in effect after the date of the change. In addition,
we will set forth the applicable interest rate for each Senior Note in the
confirmation of purchase you receive on the purchase of a Senior Note. In
addition, each Senior Note will state on its face the rate of interest it will
bear.
Interest Payments
Interest will be payable on the Senior Notes as follows:
. in the case of six month Senior Notes, interest will be payable only
at maturity.
. in the case of all other Senior Notes, interest will be paid quarterly
on January 1, April 1, July 1 and October 1, to holders of record on
the 15th day of the preceding month (or, if originally issued between
the record date and the payment date, to the holder on the date of
original issuance except that in the case of original issuances made
on or after the 15th day of March, June, September and December and
prior to the 1st day of the next succeeding month, interest from the
date of original issuance through the end of the month in which such
purchase was made will be paid at the time of and together with the
next full quarterly interest payment.)
As the holder of a Senior Note, you will have the option of receiving interest
(and principal) payments by check or by electronic transfer to an account
designated by you. (Sections 3.07 and 6.01 of the Indenture.)
Interest Reinvestment Option
At the time of application for purchase of a Senior Note (other than a
six month Senior Note), or at any time thereafter, the holder, by written notice
to Southern States, may elect to
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have all interest payable on the Senior Notes reinvested automatically. In the
event a holder selects the automatic reinvestment option, the interest due on
each quarterly interest payment date will be added to the principal amount of
the Senior Note and will earn interest thereafter on the same basis and at the
same rate as the original principal amount. As a holder, you may revoke the
election as to future interest payments at any time by written notice to
Southern States. Notice will be effective on the date it is received by Southern
States. Interest reinvested will be subject to federal income tax as if the
interest had been received by the holder at the time reinvested. (Section 3.07
of the Indenture.)
Redemption at the Option of Holders
Southern States will redeem Senior Notes prior to maturity at the request
of the holder subject to the imposition of an interest payment penalty, except
in limited circumstances:
. in the case of death of a holder of Senior Notes upon written request
and delivery of satisfactory proof of death and other documentation
and in accordance with applicable laws.
. in the case of Senior Notes if the holder is holding a Senior Note in
an individual retirement account (an "IRA") established under section
408 of the Internal Revenue Code, Southern States will redeem, upon
written request, Senior Notes to the extent necessary to satisfy
mandatory withdrawals from the IRA which are required by the Internal
Revenue Code. This redemption will be made only upon sufficient proof
to Southern States that a mandatory withdrawal from the IRA is
required. In general, the Internal Revenue Code requires mandatory
withdrawals from an IRA to commence on April 1 following the calendar
year in which the beneficiary reaches the age of 70 1/2 years.
In such an event, redemption will be in an amount equal to the full
principal amount of the Senior Note being redeemed, plus interest accrued and
unpaid thereon to the date of redemption. (Sections 3.01 and 5.01 of the
Indenture.)
Interest Penalties for Early Redemption. Southern States will impose an
interest penalty for redemptions made at the request of a holder prior to
maturity for reasons other than death or IRA withdrawals. In the case of six
month and one year Senior Notes, the penalty will be equal to three months'
interest. In the case of Senior Notes with a maturity date of more than one
year, the interest penalty will be equal to six months' interest. In all cases,
the interest penalty will be computed at the nominal (simple interest) rate
shown on the Senior Note being redeemed. This interest penalty will be deducted
from your proceeds upon redemption regardless of the length of time the Senior
Note has been outstanding. The penalty could exceed the amount of interest paid
or accrued on the Senior Note to the redemption date, thus resulting in a
redemption price that is less than the principal amount of the Senior Note.
(Section 5.01 of the Indenture.)
Redemption prior to maturity will be made at the face value of the Senior
Notes plus accrued interest, less any applicable interest penalty for early
redemption. The following examples illustrate the calculation of the redemption
price assuming the stated principal amounts and interest rates and assuming that
the Senior Note is being redeemed for a reason other than
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death or permitted IRA withdrawals. The total redemption price in each example
will vary with different interest rates and principal amounts.
. For a one year Senior Note in the principal amount of $1,000 bearing
interest at 6.5%, purchased on December 1, 2000, and redeemed at the
request of the holder on January 15, 2001, the redemption price would
equal:
$1,000.00 (Principal amount)
plus 8.02 (45 days' accrued interest at 6.5% per annum)
---------
1,008.02
less 16.25 (3 months' simple interest at 6.5% per annum)
---------
$991.77 (Total Redemption Price)
. For a five year Senior Note in the principal amount of $5,000 bearing
interest at 7.0%, purchased on October 1, 2000, and redeemed at the
request of the holder on June 15, 2001, the redemption price would
equal:
$5,000.00 (Principal amount)
(75 days' accrued interest at 7.0% per annum,
plus 71.92 since the last payment date)
---------
5,062.92
less 175.00 (6 months' simple interest at 7.0% per annum)
---------
$4,896.92 (Total Redemption Price)
Redemption at the Option of Southern States
At any time after two years from the date of original issuance but prior to
maturity, at the option of Southern States, Southern States may redeem all, or a
portion, of the five year and seven year Senior Notes. This redemption may be
made on not less than fifteen days' written notice to the holder, at the face
value of the Senior Note plus accrued interest to the date of redemption only.
The Indenture permits Southern States to select at its discretion which Senior
Notes to redeem. (Section 4.01 of the Indenture.)
Payment and Paying Agent
The paying agent will pay the principal of any Senior Notes at maturity and
upon the receipt of certificates for Senior Notes that are surrendered to it.
The paying agent will pay principal and interest on the Senior Notes, subject to
such surrender where applicable, at its office or, at the option of the holder
of the Senior Note:
. by wire transfer to an account at a banking institution in the United
States that is designated in writing to the paying agent; or
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<PAGE>
. by check mailed to the address of the person entitled to the payment,
as that address appears in the security register for those Senior
Notes. (Sections 3.07 and 6.01 of the Indenture.)
The trustee will act as paying agent for the Senior Notes. The principal
corporate trust office of the trustee will be the office through which the
paying agent acts. We may, however, change or add paying agents or approve a
change of the office through which a paying agent acts. (Section 6.04 of the
Indenture.)
Any money that we have paid to a paying agent for principal or interest on
the Senior Notes that remains unclaimed at the end of two years after that
principal or interest has become due will be repaid to us at our request. After
repayment to Southern States, holders of the Senior Notes should look only to us
for those payments. (Section 6.06 of the Indenture.)
Transferability
The Senior Notes are transferable on the books of Southern States when
properly endorsed but are not negotiable.
Each of the Senior Notes is transferable, in whole but not in part, upon
the delivery to the transfer agent of a written instrument of transfer duly
executed by the holder of the Senior Note(s) to be transferred or by his duly
authorized attorney or legal representative. The trustee will act as transfer
agent for the Senior Notes. (Section 3.05 of the Indenture.)
Modification of the Indenture; Waiver
The Indenture contains provisions permitting Southern States and the
trustee to enter into one or more supplemental indentures without the consent of
the holders of any of the Senior Notes in limited circumstances. (Section 12.01
of the Indenture.) These include:
. to reflect the succession of another corporation to Southern States
and the assumption by such successor of the covenants and obligations
of Southern States, including the Senior Notes issued and any related
interest;
. to add to the covenants of Southern States for the benefit of the
holders of all or any series of Senior Notes issued under the
Indenture (and if such covenants are to be for the benefit of less
than all series of Senior Notes, stating that such covenants are
expressly being included solely for the benefit of specific series) or
to surrender any right or power conferred upon Southern States;
. to add any additional events of default with respect to all or any
series of Senior Notes issued under the Indenture;
. to change or eliminate any of the provisions of the Indenture relating
to one or more series of Senior Notes issued under the Indenture;
however, no such change or elimination shall become effective until
there are no longer any Senior Notes
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<PAGE>
outstanding of any series that is entitled to the benefit of such
provision and was created before the execution of such supplemental
indenture;
. to establish the form or terms of Senior Notes of any series issued
under the Indenture;
. to reflect the appointment of, and provide for the acceptance of
appointment by, a successor trustee with respect to the issued Senior
Notes and to add to or change any of the provisions of the Indenture
as necessary to provide for or facilitate the administration of the
trust by more than one trustee;
. to cure any ambiguity or correct or supplement any provision in the
Indenture that may be inconsistent with any other provision in the
Indenture or to add new provisions with respect to matters or
questions arising under the Indenture as long as the new provisions
are not inconsistent with the provisions of the Indenture, and
provided that this action does not adversely affect in any material
respect the interests of the holders of any series of Senior Notes
issued under the Indenture;
. to modify, eliminate or add to the provisions of the Indenture to the
extent required to qualify the Indenture under the Trust Indenture Act
or under any similar federal statute subsequently enacted, and to add
to the Indenture such other provisions as may be expressly required
under the Trust Indenture Act; or
. to enable the issuance of uncertificated Senior Notes and to permit
registration, transfer and exchange of Senior Notes by book-entry.
Under the Indenture, our rights and obligations and the rights of the
holders, except as provided in the next sentence, may be modified with the
consent of the holders of a majority in aggregate principal amount of the
outstanding Senior Notes of each series affected by the modification. However,
no modification of the principal or interest payment terms, and no modification
reducing the percentage required for modifications, is effective against any
holder without the holder's consent. (Section 12.02 of the Indenture.) In
addition, we may supplement the Indenture without the consent of any holders of
Senior Notes to create new series of Senior Notes and for certain other
purposes. (Sections 3.01 and 12.01 of the Indenture.)
The holders of a majority of the outstanding Senior Notes of any series
under the Indenture with respect to which a default has occurred and is
continuing may waive a default for that series, except a default in the payment
of principal or interest on the Senior Notes or a default with respect to a
covenant or provision that cannot be amended or modified without the consent of
the holder of each outstanding Senior Note of the series affected. (Sections
8.03 and 8.05 of the Indenture.)
Defaults and Notice of Default
An "event of default" under the Indenture means any of the following:
. our failure to pay the principal of the Senior Notes when due;
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<PAGE>
. our failure to pay any interest on the Senior Notes when due, for a
period of 60 days;
. certain events of bankruptcy, insolvency or reorganization of Southern
States;
. our failure to perform any other covenant or agreement contained in
the Indenture for a period of 90 days after the trustee or the holders
of at least a majority in principal amount of the outstanding Senior
Notes have given written notice of the default; or
. any other event of default included in the Indenture or any
supplemental indenture. (Section 8.01 of the Indenture.)
An event of default for a particular series of Senior Notes does not
necessarily constitute an event of default for any other series of Senior Notes
issued under the Indenture. (Sections 8.02 and 8.03 of the Indenture.)
If an event of default for any series of Senior Notes occurs and continues,
the trustee or the holders of at least a majority in aggregate principal amount
of the Senior Notes of that series may declare the entire principal of the
Senior Notes of that series, and all interest accrued thereon, due and payable
immediately upon written notice to Southern States. However, in the case of an
event of default arising from specific events of bankruptcy, insolvency or
reorganization of Southern States, all Senior Notes will become due and payable
without further action or notice. (Section 8.03 of the Indenture.)
Southern States is bound by various loan agreements that govern its
outstanding indebtedness. Certain events of default under the Indenture would
also constitute an event of default under those agreements which, among other
things, could cause an acceleration of the indebtedness payable by Southern
States under those agreements.
The Indenture provides that the trustee shall within 90 days after the
occurrence of a default, not including periods of grace, give the holders of the
affected series of Senior Notes notice of all defaults known to it, unless those
defaults have been cured. The trustee may, however, withhold notice to the
holders of Senior Notes of any default (except a default in the payment of
principal or interest) if the trustee considers the withholding of notice to be
in the best interests of the holders. (Section 8.02 of the Indenture.)
In case of a breach of a general covenant by Southern States, the trustee
may make a written demand to Southern States to cure such breach. The trustee
must make a demand for cure if requested by holders of a majority in principal
amount of the Senior Notes of the series affected by the breach. If Southern
States fails to cure the breach within 90 days of the trustee's demand, the
breach will be considered an event of default under the Indenture. (Section 8.01
of the Indenture.)
The Indenture provides that the trustee may sue Southern States in the case
of our default in the payment of the principal of any Senior Note when due and
payable, or in the case of a default in the payment of interest on any Senior
Note for any period of 60 days after such interest is due. The Indenture further
provides that the right of any holder to receive payment of the principal of and
interest on any Senior Note, or to institute a suit for the enforcement of a
70
<PAGE>
payment, may not be impaired without the consent of that holder, unless, with
regard to overdue interest payments, holders of 75% in principal amount of the
outstanding Senior Notes of the affected series consent, on behalf of the
holders of all the Senior Notes of the affected series, to the postponement of
the overdue interest payments. The Indenture also provides that the holders of
at least a majority in principal amount of the outstanding Senior Notes of each
series have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or to consent, on behalf of
the holders of all Senior Notes of such series, to the waiver of any past
default and its consequences, except for a default in the payment of principal
or interest. (Sections 8.04, 8.05 and 8.06 of the Indenture.)
Other than its duties in case of a default, a trustee is not obligated to
exercise any of its rights or powers under the Indenture at the request, order
or direction of any holders, unless the holders offer the trustee reasonable
indemnity. If they provide this reasonable indemnification, the holders of a
majority in principal amount of any series of Senior Notes may direct the time,
method and place of conducting any proceeding or any remedy available to the
trustee, or exercising any power conferred upon the trustee, for any series of
Senior Notes. (Sections 8.06 and 9.04 of the Indenture.)
The holder of any Senior Note will have an absolute and unconditional right
to receive payment of the principal and, within certain limitations, any
interest on that Senior Note on its maturity date or redemption date and to
enforce those payments. (Section 8.05 of the Indenture.)
Authentication and Delivery
The Senior Notes may be authenticated and delivered upon the written order
of Southern States without any further corporate action. (Sections 3.01 and 3.03
of the Indenture).
Satisfaction and Discharge
We may discharge all of our obligations (except those described below) to
holders of the Senior Notes issued under the Indenture, whose notes have not
already been delivered to the trustee for cancellation and either have become
due and payable or are by their terms due and payable within one year, or are to
be called for redemption within one year. The discharge of our obligations will
be accomplished by depositing with the trustee an amount certified to be
sufficient to pay when due the principal and interest on all outstanding Senior
Notes. However, certain of our obligations under the Indenture will survive,
including our obligations with respect to the following:
. remaining rights of holders to register the transfer, conversion,
substitution or exchange of Senior Notes of the applicable series;
. rights of holders to receive payments of principal of, and any
interest on, the Senior Notes of the applicable series, and other
rights, duties and obligations of the holders of Senior Notes with
respect to any amounts deposited with the trustee;
. rights of holders regarding replacement, in the case of Senior Notes
evidenced by physical certificates, of lost, stolen or mutilated
Senior Notes; and
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<PAGE>
. the rights, obligations and immunities of the trustee under the
Indenture. (Section 14.01 of Indenture.)
Covenants
Under the Indenture we will:
. pay the principal and interest on the Senior Notes when due;
. maintain a place of payment;
. deliver an officer's certificate to the trustee under the Indenture at
the end of each fiscal year confirming our compliance with our
obligations under the Indenture; and
. deposit sufficient funds with any paying agent on or before the due
date for any principal and interest. (Sections 6.01, 6.02, 6.04 and
7.05 of the Indenture.)
Consolidation, Merger or Sale
The Indenture provides that Southern States may consolidate or merge with
or into, or sell all or substantially all of its properties and assets to,
another corporation or other entity, provided that any successor assumes
Southern States' obligations under the Indenture and the Senior Notes issued
under the Indenture. We must also deliver an opinion of counsel to the trustee
affirming our compliance with all conditions in the Indenture relating to the
transaction. When the conditions of the Indenture are satisfied, the successor
will succeed to and be substituted for Southern States under the Indenture, and
we will be relieved of our obligations under the Indenture and the Senior Notes
issued under them. (Sections 13.01, 13.02 and 13.03 of the Indenture.)
Statements as to Compliance
The Indenture requires Southern States to file with the trustee annually an
officer's certificate affirming the absence of certain defaults under the terms
of the Indenture. (Section 7.05 of the Indenture).
Information Concerning the Trustee
First Union National Bank is the trustee under the Indenture. We and
certain of our affiliates maintain deposit accounts and banking relationships
with First Union National Bank. The Trustee also serves as trustee under another
indenture pursuant to which securities of ours and of certain of our affiliates
are outstanding.
The trustee will perform only those duties that are specifically set forth
in the Indenture unless an event of default under the Indenture occurs and is
continuing. The trustee is under no obligation to exercise any of its powers
under the Indenture at the request of any holder of Senior Notes unless that
holder offers reasonable indemnity to the trustee against the costs, expenses
and liabilities which it might incur as a result. (Section 9.04 of the
Indenture.)
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<PAGE>
PLAN OF DISTRIBUTION
The offering of Senior Notes made by this prospectus is not underwritten.
Sales of the Senior Notes offered hereby will be solicited through direct
mailings and through personal contact by certain designated employees of
Southern States. No commission will be paid to any employee of Southern States
in connection with the sale of the Senior Notes. The individual employees of
Southern States who participate in the sale of the Senior Notes may be deemed to
be underwriters of this offering within the meaning of that term as defined in
Section 2(11) of the Securities Act.
The Senior Notes will be offered for sale only in those states of the
United States where it is legal to make such offers. Southern States will
register or qualify the sale of the Senior Notes in all states where it is
offering the Senior Notes and registration or qualification is required.
Southern States will also register as a broker-dealer or issuer-dealer under the
state laws of all states where it is offering the Senior Notes and its
registration as a broker-dealer or issuer-dealer is required. Certain employees
of Southern States who will be participating in the sale of the Senior Notes
will register as an agent under the state laws of all states where their
registration as agent is required. Southern States will not accept subscriptions
from investors residing in those states where Southern States and its employees
have not complied with these state law requirements.
The Senior Notes offered hereby may not be offered or sold, directly or
indirectly, nor may this prospectus or any other offering material or
advertisements in connection with the offer and sale of any Senior Notes be
distributed or published in any jurisdiction, except under circumstances that
will result in compliance with the applicable rules and regulations of such
jurisdictions. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any Senior Notes offered hereby in any
jurisdiction in which such an offer or a solicitation is unlawful.
The individual Southern States employees who will participate in the sale
of the Senior Notes are relying on Rule 3a4-1 of the Exchange Act as a "safe
harbor" from registration as a broker in connection with the offer and sale of
the Senior Notes. In order to rely on the "safe harbor" provisions of Rule
3a4-1, an employee must (1) not be subject to any statutory disqualification;
(2) not be compensated in connection with his or her participation in the offer
and sale of the Senior Notes by the payment of commissions or other remuneration
based either directly or indirectly on sales of the Senior Notes; and (3) not be
an associated person of a broker or dealer. In addition, each employee must meet
any one of three other qualifications. He or she must: (i) restrict his or her
participation to only certain types of transactions involving offers and sales
of the Senior Notes; (ii) perform substantial duties for the issuer, after the
close of the offering, not connected with transactions in securities, and not
have been associated with a broker or dealer for the preceding 12 months, and
not participate in selling and offering securities for any issuer more than once
every 12 months; or (iii) restrict his or her participation to preparing or
delivering written communications or responding to inquiries of potential
purchasers, or performing ministerial or clerical work in connection with
effecting any securities transactions. The employees of Southern States intend
to comply with the "safe harbor" provisions of Rule 3a4-1.
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<PAGE>
ABSENCE OF PUBLIC MARKET, REDEMPTION AND MARKET RISK
There is no present market for the Senior Notes and there is no intent on
the part of Southern States to create or encourage a trading mechanism for the
securities. Southern States does not intend to apply for listing of the Senior
Notes on any securities exchange. Any secondary market for, and the market value
of, the Senior Notes will be affected by a number of factors independent of the
creditworthiness of Southern States, including the level and direction of
interest rates, the remaining period to maturity of the securities, the right of
Southern States to redeem the securities, the aggregate principal amount of the
Senior Notes and the availability of comparable investments. In addition, the
market value of the Senior Notes may be affected by numerous other interrelated
factors, including factors that affect the U.S. corporate debt market generally,
and Southern States specifically. See the "Risk Factors" section of this
prospectus beginning on page 3.
LEGAL MATTERS
Mays & Valentine, L.L.P., Richmond Virginia, will issue an opinion for
Southern States concerning the legality of the securities.
EXPERTS
The consolidated financial statements as of June 30, 1999 and 1998 and for
each of the three years in the period ended June 30, 1999, included in this
prospectus, have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The statements of operations and cash flows of the Gold Kist Inputs
Business for the two years ended June 27, 1998 and June 28, 1997 have been
included in this prospectus in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere in this prospectus, and upon
the authority of that firm as experts in accounting and auditing.
AVAILABLE INFORMATION
Southern States has filed a registration statement on Form S-1 under the
Securities Act of 1933. This prospectus does not contain all of the information
set forth in the registration statement, parts of which are omitted in
accordance with the rules and regulations of the Commission. Reference is made
to the registration statement for further information with respect to Southern
States and the securities offered by this prospectus. While statements contained
in this prospectus concerning the provisions of documents are necessarily
summaries, Southern States believes that all material terms of those documents
have been provided in the prospectus.
Following the offering of the Senior Notes, Southern States will file
annual, quarterly and other periodic reports with the Securities and Exchange
Commission as required by the Securities Exchange Act of 1934. Although Southern
States will not be required to provide holders of the capital securities with an
annual report to shareholders containing audited financial statements, the
annual reports on Form 10-K filed with the SEC will contain audited
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<PAGE>
consolidated financial statements of Southern States. These reports and other
materials filed with the SEC may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: 7 World
Trade Center, Suite 1300, New York, New York 10048; and Northwestern Atrium, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of this
material also may be obtained at prescribed rates from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the public reference rooms. Southern States' filings will also be available
to the public at the SEC Internet site (http://www.sec.gov).
------------------
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, including statements
regarding Southern States expected financial position, business and financing
plans. These forward-looking statements reflect Southern States views with
respect to future events and financial performance. The words "believe,"
"expect," "plans" and "anticipate" and similar expressions as used with respect
to the operations of the Gold Kist Inputs Business following our acquisition of
that business, and otherwise, identify forward-looking statements. Although
Southern States believes that the expectations reflected in such forward-looking
statements are reasonable, Southern States can give no assurance that such
expectations will prove to be correct. Important factors that could cause actual
results to differ materially from such expectations are disclosed in this
prospectus, including the risks and uncertainties described under "Risk
Factors." All subsequent written and oral forward-looking statements
attributable to Southern States or persons acting on Southern States behalf are
expressly qualified in their entirety by these cautionary statements. Southern
States cautions you not to place undue reliance on these forward-looking
statements, which speak only as of the date of this prospectus. Southern States
is not obligated to publicly release any revisions to these forward-looking
statements to reflect events or circumstances after the date of this prospectus
or to reflect the occurrence of unanticipated events.
---------------------
Trademarks and service marks are italicized where they appear in this
prospectus. All trademarks and service marks referred to in this prospectus
other than Roundup(R) are registered trademarks of Gold Kist Inc., and (other
than the "Gold Kist" mark), were conveyed to Southern States in connection with
its acquisition of the Gold Kist Inputs Business. Roundup(R) is a registered
trademark of the Monsanto Company.
75
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Audited Financial Statements
Page
Southern States Cooperative, Inc. and Subsidiaries
Report of Independent Accountants..........................................F-3
Consolidated Balance Sheet at June 30, 1999 and 1998.......................F-4
Consolidated Statement of Operations for the Years Ended
June 30, 1999, 1998, and 1997.........................................F-6
Consolidated Statement of Patrons' Equity for the Years Ended
June 30, 1999, 1998, and 1997.........................................F-7
Consolidated Statement of Cash Flows for the Years Ended
June 30, 1999, 1998, and 1997.........................................F-8
Notes to Consolidated Financial Statements.................................F-9
Inputs Business of Gold Kist Inc.
Independent Auditors' Report...............................................F-33
Statements of Operations for the Years Ended June 28, 1997
and June 27, 1998.....................................................F-34
Statements of Cash Flows for the Years Ended June 28, 1997
and June 27, 1998.....................................................F-35
Notes to Financial Statements..............................................F-36
Unaudited Interim Financial Statements
Southern States Cooperative, Inc. and Subsidiaries
Consolidated Balance Sheet at December 31, 1999 and June 30, 1999..........F-40
Consolidated Statement of Operations for the Six Months Ended
December 31, 1999 and 1998............................................F-42
Consolidated Statement of Patrons' Equity as of
December 31, 1999 and June 30, 1999...................................F-43
Consolidated Statement of Cash Flows for the Six Months Ended
December 31, 1999 and 1998............................................F-44
Notes to Consolidated Financial Statements.................................F-45
Inputs Business of Gold Kist Inc.
Statements of Operations for the Three Months Ended
September 26, 1998 and September 27, 1997..............................F-50
Statements of Cash Flows for the Three Months Ended
September 26, 1998 and September 27, 1997..............................F-51
Notes to Financial Statements..............................................F-52
F-1
<PAGE>
Pro Forma Financial Statements
Southern States Cooperative, Inc. and Subsidiaries
Unaudited Pro Forma Combined Condensed Financial Information ..............F-53
Unaudited Pro Forma Combined Condensed Statement of Operations for the
Year Ended June 30, 1999..............................................F-54
Notes to the Unaudited Pro Forma Combined Condensed Statement of
Operations............................................................F-55
Unaudited Pro Forma Combined Condensed Financial Data......................F-56
Notes to the Unaudited Pro Forma Combined Condensed Financial Data.........F-57
F-2
<PAGE>
Report of Independent Accountants
To the Board of Directors of
Southern States Cooperative, Incorporated:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, patrons' equity and of cash flows present
fairly, in all material respects, the financial position of Southern States
Cooperative, Incorporated and Subsidiaries (the "Company") at June 30, 1999 and
1998, and the results of their operations and their cash flows for each of the
three years then ended, in conformity with accounting principles generally
accepted in the United States. These financial statements are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
October 29, 1999
Richmond, Virginia
F-3
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET, June 30, 1999 and 1998
----------
<TABLE>
<CAPTION>
ASSETS 1999 1998
---- ----
Current assets:
<S> <C> <C>
Cash and cash equivalents (Note 1k) $ 18,742,408 $ 15,352,446
Receivables, net (Notes 3 and 5) 117,375,357 55,329,766
Inventories (Notes 1c and 4) 213,141,319 133,167,494
Prepaid expenses 7,241,450 7,325,862
Deferred income taxes (Notes 1h and 12) 6,689,496 4,989,913
Deferred charges 840,022 960,334
-------------- --------------
Total current assets 364,030,052 217,125,815
-------------- --------------
Investments and other assets:
Investments:
Statesman Financial Corporation (Notes 1a and 5) 23,651,051 18,144,573
Michigan Livestock Credit Corporation (Notes 1a and 5) 12,718,722 10,156,000
Other companies (principally cooperatives) (Notes 1f and 6) 78,416,407 75,573,146
Receivables (Notes 3 and 5) 1,544,553 1,316,515
Other assets 12,269,263 10,787,753
-------------- --------------
Total investments and other assets 128,599,996 115,977,987
-------------- --------------
Property, plant and equipment (Notes 1d and 7) 378,196,657 304,577,628
Less accumulated depreciation 189,079,016 175,384,990
-------------- --------------
Property, plant and equipment, net 189,117,641 129,192,638
-------------- --------------
$681,747,689 $462,296,440
============== ==============
</TABLE>
F-4
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET, June 30, 1999 and 1998
-----------------
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' AND
PATRONS' EQUITY 1999 1998
---- ----
Current liabilities:
<S> <C> <C>
Short-term notes payable (Note 8) $ 5,600,000 $ 7,100,000
Current maturities of long-term debt (Note 9) 3,836,938 1,833,434
Accounts payable 138,486,921 71,235,641
Accrued expenses:
Environmental remediation (Note 1g and 13b) 972,477 429,649
Payrolls, employee benefits, related taxes and other 39,801,159 34,398,390
Accrued income taxes 2,050,129 2,380,815
Dividends payable 380,106 341,450
Patronage refunds payable in cash 2,378,378
Advances from managed member cooperatives (Note 2) 19,395,311 6,929,943
--------------- ---------------
Total current liabilities 210,523,041 127,027,700
--------------- ---------------
Long-term debt:
Bridge loan facility (Note 9) 100,000,000
Long-term debt (Note 9) 176,562,296 136,041,301
--------------- ---------------
Total long-term debt 276,562,296 136,041,301
--------------- ---------------
Other noncurrent liabilities:
Employee benefits 7,070,509 6,936,519
Deferred income taxes (Notes 1h and 12) 2,969,365 4,745,538
Environmental remediation (Note 1g and 13b) 2,218,664 746,498
Miscellaneous 4,538,213 5,403,204
--------------- ---------------
Total other noncurrent liabilities 16,796,751 17,831,759
--------------- ---------------
Redeemable preferred stock (Note 10) 2,114,100 2,114,100
--------------- ---------------
Stockholders' and patrons' equity:
Stockholders' equity:
Capital stock (Note 10):
Preferred 1,485,000 1,494,200
Common 12,147,082 12,195,018
--------------- ---------------
Total stockholders' equity 13,632,082 13,689,218
Patrons' equity 162,119,419 165,592,362
--------------- ---------------
Total stockholders' and patrons' equity 175,751,501 179,281,580
--------------- ---------------
$681,747,689 $462,296,440
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
for the years ended June 30, 1999, 1998 and 1997
---------------
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
Sales and other operating revenue:
<S> <C> <C> <C>
Net purchases by patrons (Note 2) $1,286,224,242 $1,026,630,260 $1,097,173,192
Net marketing for patrons 76,540,489 92,862,915 115,972,257
Other operating revenue 3,594,761 3,793,343 2,954,306
----------------- ------------------- -------------------
1,366,359,492 1,123,286,518 1,216,099,755
Cost of products purchased and marketed and other operating
costs (Notes 1c, 6 and 13b) 1,114,782,525 931,435,923 1,014,440,358
----------------- ------------------- -------------------
Gross margin 251,576,967 191,850,595 201,659,397
Selling, general and administrative expenses 247,634,813 175,783,844 166,132,518
----------------- ------------------- -------------------
Savings on operations 3,942,154 16,066,751 35,526,879
----------------- ------------------- -------------------
Other deductions (income):
Interest expense (Notes 5, 8, and 9) 28,413,129 16,859,373 15,565,523
Interest income and service charges (Note 2) (11,209,244) (7,800,390) (7,660,693)
Miscellaneous income, net (11,812,081) (6,562,688) (5,879,437)
----------------- ------------------- -------------------
5,391,804 2,496,295 2,025,393
----------------- ------------------- -------------------
(Loss) savings before income taxes and undistributed
(loss) earnings in Statesman Financial Corporation (1,449,650) 13,570,456 33,501,486
Income taxes (Notes 1h and 12) (596,570) 2,960,539 6,035,412
----------------- ------------------- -------------------
(Loss) savings before undistributed earnings in
Statesman Financial Corporation (853,080) 10,609,917 27,466,074
Undistributed (loss) earnings of Statesman Financial
Corporation, net of income taxes (1,221,685) 56,721 35,367
----------------- ------------------- -------------------
Net (loss) savings $ (2,074,765) $ 10,666,638 $ 27,501,441
================= =================== ===================
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF PATRONS' EQUITY
for the years ended June 30, 1999, 1998 and 1997
--------------------
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
Patronage refund allocations:
<S> <C> <C> <C>
Balance, beginning of year $ 68,151,124 $ 67,566,625 $ 63,445,207
Allocation from net savings for the year 3,702,869 10,590,586
Allocations assumed in merger (Note 17) 2,683,000
Adjustments to prior year's allocation 74,627 153,836 102,104
Redemptions (381,552) (5,955,206) (6,571,272)
---------------- ----------------- ------------------
Balance, end of year 67,844,199 68,151,124 67,566,625
---------------- ----------------- ------------------
Operating capital:
Balance, beginning of year 97,441,238 93,948,702 84,653,534
Net (loss) savings (2,074,765) 10,666,638 27,501,441
Patronage refunds payable in:
Cash (2,378,378) (6,884,321)
Patronage refund allocations (3,702,869) (10,590,586)
Adjustments to prior year's estimated patronage refunds,
net of income taxes (71,790) (123,724) 82,219
Dividends on capital stock declared:
Preferred (278,419) (279,407) (283,808)
Common, $.06 per share (729,551) (681,536) (521,439)
Other reductions (11,493) (8,188) (8,338)
---------------- ----------------- ------------------
Balance, end of year 94,275,220 97,441,238 93,948,702
---------------- ----------------- -----------------
Total patrons' equity $162,119,419 $165,592,362 $161,515,327
================ ================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended June 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
Operating activities:
<S> <C> <C> <C>
Net (loss) savings $ (2,074,765) $ 10,666,638 $ 27,501,441
Adjustments to reconcile net (loss) savings to cash
provided by operating activities:
Depreciation 22,129,980 17,256,620 16,302,811
Amortization 264,036 355,252 295,558
Deferred income taxes (3,475,756) 274,611 (392,258)
Gain on sale of property and equipment (1,822,468) (510,695) (927,289)
Undistributed loss (earnings) of finance company and
joint ventures 1,168,609 (289,720) (189,019)
Noncash patronage refunds received (4,746,591) (6,764,372) (9,855,976)
Redemption of noncash patronage refunds received 2,763,912 2,335,408 2,148,256
Cash provided by current assets and liabilities (Note 16) 129,710,351 10,277,837 (3,453,180)
---------------- ---------------- ----------------
Cash from operating activities 143,917,308 33,601,579 31,430,344
---------------- ---------------- ----------------
Investing activities:
Additions to property, plant and equipment (46,602,932) (33,904,668) (19,944,578)
Proceeds from disposal of property, plant and equipment 7,017,655 1,743,604 1,820,230
Additional investments in affiliates and other companies (10,224,875) (10,430,352) (2,856,293)
Net cash paid for acquisitions (Notes 17 and 18) (218,279,732) (1,241,347)
---------------- ---------------- ----------------
Cash used in investing activities (268,089,884) (43,832,763) (20,980,641)
---------------- ---------------- ----------------
Financing activities:
Net increase (decrease) in short-term notes payable (1,500,000) 4,725,000 2,200,000
Proceeds from long-term debt 584,234,093 49,172,487 7,000,000
Repayment of long-term debt (551,502,998) (31,594,763) (7,969,689)
Proceeds from bridge loan facility 218,313,467
Repayment of bridge loan facility (118,313,467)
Net redemptions of equities required by lender (Note 9) 126,480 42,160 (67,009)
Dividends on capital stock paid (969,314) (1,022,041) (958,265)
Patronage refunds paid in cash (2,378,378) (6,884,321) (6,668,809)
Redemption of stockholders' and patrons' equity (537,929) (6,630,611) (6,631,292)
Proceeds from issuance of capital stock 90,584 921,929 1,214,365
---------------- ---------------- ----------------
Cash provided by financing activities 127,562,538 8,729,840 (11,880,699)
---------------- ---------------- ----------------
Increase (decrease) in cash and cash equivalents 3,389,962 (1,501,344) (1,430,996)
Balance at beginning of year 15,352,446 16,853,790 18,284,786
---------------- ---------------- ----------------
Balance at end of year $ 18,742,408 $ 15,352,446 $ 16,853,790
================ ================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------
1. Summary of Significant Accounting Policies:
------------------------------------------
a. Basis of Presentation - The consolidated financial statements include
---------------------
the accounts of Southern States Cooperative, Incorporated ("Southern
States") and its wholly owned subsidiaries (collectively the
"Company"). Upon consolidation, all significant intercompany accounts
and transactions have been eliminated. Southern States' investment in
Statesman Financial Corporation ("SFC" or the "Corporation") is
accounted for by the equity method (see Note 5). Michigan Livestock
Credit Corporation ("MLCC") is a wholly owned subsidiary of SFC.
Effective April 1, 1998, Michigan Livestock Exchange ("MLE") merged
with the Company. Pursuant to the merger, MLE became a division of the
Company, operating under the name MLE Marketing.
On October 13, 1998, the Company purchased the agricultural farm
supply inputs business ("Inputs Business") of Gold Kist, Inc. (the
"Gold Kist Inputs Business"), a Georgia marketing cooperative. The
Gold Kist Inputs Business' results of operations have been included in
the Company's consolidated results of operations since the date of
acquisition (See Note 18).
b. Lines of Business - The Company's primary lines of business are the
-----------------
procurement, processing and distribution of agricultural production
supplies and the marketing of grain and livestock, for its members.
The Company distributes its products through a network of retail,
wholesale and processing facilities primarily located in Alabama,
Arkansas, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland,
Mississippi, North Carolina, South Carolina, Texas, Virginia and West
Virginia. The Company markets grain through a network of grain
facilities located in Delaware, Kentucky, Maryland, North Carolina and
Virginia. The Company markets livestock through a network of livestock
facilities located in Indiana, Kentucky, Michigan and Ohio.
c. Inventories and Cost of Products Purchased and Marketed - Inventories,
-------------------------------------------------------
except grain, are stated at the lower of cost or market. Cost is
determined on various bases, including average; first-in, first-out;
and specific- identification. Grain inventories are stated at net
market, as adjusted for unrealized gains and losses on open futures
contracts, and open purchase and sales contracts. Grain inventories
are substantially hedged to minimize risks arising from price
volatility due to market fluctuations. Patronage refunds from supplier
cooperatives in the form of qualified written notices of allocation
are recorded as received and are accounted for as reductions of cost
of products purchased and marketed. Nonqualified written notices of
allocation are not recorded until the cash is received.
d. Property, Plant and Equipment - Property, plant and equipment is
-----------------------------
recorded at cost. The costs of property additions, major renewals and
betterments are capitalized while the costs of ordinary maintenance
and repairs are charged to operations as incurred. The costs of
property additions include interest capitalized during major plant
construction.
The Company early adopted American Institute of Certified Public
Accountants ("AICPA") Statement of Position No. 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use"
("SOP 98-1") effective July 1, 1997. SOP 98-1 requires capitalization
of certain costs incurred during the application development stage of
an internal use software development project, including: (i) external
direct costs of materials and services consumed in developing or
obtaining internal-use computer software, which the company previously
capitalized and (ii) payroll and payroll-related costs for employees
who are directly associated with and who devote time to the
internal-use computer software project, which the company did not
previously capitalize. Capitalized costs are amortized over three or
ten year periods depending on the expected term of the benefit to be
received. Unamortized balances were $11,027,801 and $6,928,276 at June
30, 1999 and 1998, respectively.
Depreciation is determined principally by the straight-line method
based on estimated useful lives (buildings and improvements 20 to 40
years, machinery and equipment 4 to 20 years, furniture and fixtures 5
to 10 years, software 10 years). Gains and losses on disposition or
retirement of assets are reflected in income as incurred.
F-9
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------
1. Summary of Significant Accounting Policies, continued:
------------------------------------------
e. Impairment of Long-Lived Assets - The Company reviews long-lived
-------------------------------
tangible and intangible assets in accordance with SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." For assets to be held and used in
operations, this standard requires that, whenever events indicate that
an asset may be impaired, undiscounted cash flows are analyzed at the
lowest level for which there are identifiable and independent cash
flows. If the sum of these undiscounted cash flows is less than the
carrying amount of the asset, an impairment loss is recognized.
Measurement of the loss is based on the estimated fair value of the
asset.
f. Investments - Investments in other cooperatives are stated at cost
-----------
(cash invested) plus qualified written notices of allocation, less
redemptions. The equity method of accounting is used for investments
in other companies in which Southern States' voting interest is 20 to
50 percent. The Company will reduce or write-off the carrying value of
an investment when events indicate that the investment is impaired and
the Company will not be able to recover the full carrying value of the
investment.
g. Environmental Compliance and Remediation - Environmental compliance
----------------------------------------
costs include the cost of purchasing and/or constructing assets to
prevent, limit and/or control pollution or to monitor the
environmental status at various locations. These costs are capitalized
and depreciated based on estimated useful lives.
Environmental remediation costs of facilities used in current
operations are generally immaterial and are expensed as incurred.
Remediation costs and post remediation costs at facilities that relate
to an existing condition caused by past operations are accrued as
liabilities on an undiscounted basis when it is probable that such
costs will be incurred and when such costs are reasonably estimated.
h. Income Taxes - For income tax purposes, Southern States is a nonexempt
------------
agricultural cooperative. Accordingly, Southern States does not pay
income taxes on that portion of savings distributed in qualified
written notices of allocation arising from sales to members, patrons
eligible for membership and certain other patrons; such savings are
included in the taxable income of these members and patrons. Deferred
income tax liabilities and assets are determined based on differences
between financial statement carrying amounts and tax bases of assets
and liabilities using enacted tax rates in effect for the years in
which the differences are expected to reverse.
i. Employee Retirement Plan - The employees of Southern States and
------------------------
certain subsidiaries are covered under a multiemployer defined benefit
retirement plan. Southern States' policy is to fund and expense an
amount equal to Southern States' share of the actuarially determined
funding requirement of the plan.
j. Common Stock and Patronage Refunds Payable - Southern States is an
------------------------------------------
agricultural cooperative operating for the benefit of its
stockholders/members and other patrons. Pursuant to its bylaws,
Southern States is obligated to return all patronage-sourced savings
for each year, after payment of dividends on capital stock and
reasonable additions to capital reserves, to such members, patrons
eligible for membership and certain other patrons in proportion to the
volume of business transacted with them during the year. See Note 10
with respect to requirements for membership and common stock
ownership.
k. Cash and Cash Equivalents - The Company considers all highly liquid
-------------------------
investments purchased with an original maturity of three months or
less to be cash equivalents.
F-10
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
---------------------
1. Summary of Significant Accounting Policies, continued:
------------------------------------------
l. Estimates - The preparation of financial statements in conformity with
---------
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
m. Transfers of Financial Assets - The Company accounts for transfers of
-----------------------------
financial assets pursuant to Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" ("SFAS 125").
SFAS 125 applies a control oriented financial components approach to
financial-asset-transfer transactions.
Transactions between SFC and Southern States met SFAS 125's conditions
for sale accounting, consistent with prior years; accordingly, the
finance receivables sold to SFC were recorded as sales of financial
assets and all related discounts were expensed as incurred.
n. New Accounting Standards - During the Company's fiscal year ended June
------------------------
30, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits", which
standardizes the disclosure requirements for pensions and other
postretirement benefits to the extent practicable and eliminates
certain disclosures that are no longer useful. This standard was
effective for the year ended June 30, 1999. The adoption of the
standard resulted only in additional disclosure and did not have an
impact on the financial position or results of operations. In addition
in June of 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended, which is
effective for fiscal quarters beginning after June 15, 2000. SFAS No.
133 establishes accounting and reporting standards for derivative
instruments including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity
recognize all derivatives as assets or liabilities in the statement of
financial position and measure those instruments at fair value. The
Company will adopt SFAS No. 133 in its fiscal year 2001. The Company
is currently evaluating any impact of the derivatives standard.
o. Revenue Recognition - Revenue from the sale of goods is recognized
-------------------
when title and risk of loss have transferred to the buyer, which is
generally when the product is delivered. Service revenue is recognized
upon completion of the rendered service. Rebates from crop protection
product suppliers are recorded as a reduction to cost of products
purchased when earned and received in cash or when earned and
acknowledged by the supplier(s) at the end of supplier's program year.
p. Derivatives - As part of its asset/liability management program, the
-----------
Company utilizes financial derivatives to reduce the Company's
sensitivity to interest rate fluctuations and commodity hedges to
reduce market price fluctuations relating to grain and petroleum
products. Net receipts or payments under the interest rate swap
agreements are recognized as adjustments to interest expense. Realized
and unrealized gains and losses on futures contracts for grain and
petroleum products are accounted for on a deferral basis.
q. Reclassifications - Certain reclassifications have been made to the
-----------------
1998 and 1997 financial statements to conform to the 1999
presentation.
F-11
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------
2. Managed Member Cooperatives:
---------------------------
Under management agreements, Southern States performs various financial,
management and accounting services for other agricultural cooperatives
("managed member cooperatives"). There were 70, 70 and 72 such cooperatives
at June 30, 1999, 1998 and 1997, respectively. These managed member
cooperatives are owned entirely by their stockholders and patrons and thus
are associated with Southern States solely by management agreements (the
"Agreements"). For services performed, Southern States was reimbursed
$4,162,656 in 1999, $3,947,069 in 1998 and $3,795,021 in 1997.
Under the Agreements, cash is advanced by Southern States to the managed
member cooperatives (primarily as revolving advances for sales of products
to the managed member cooperatives) and excess cash of the managed member
cooperatives is advanced to Southern States. The interest rate charged or
credited on monthly balances of these advances approximates the CoBank, ACB
national variable rate. Net interest expense incurred by Southern States on
net advances totaled $199,837 in 1999. Net interest income charged by
Southern States to Managed Member Cooperatives on net advances totaled
$296,423 in 1998 and $647,554 in 1997.
During 1999, 1998 and 1997 certain managed member cooperatives chose to
reinvest approximately $0, $1.2 million and $1.2 million, respectively, of
their revolved patronage refund allocations in an equivalent amount of $1
par value shares of the Company's membership common stock.
Net purchases by patrons include purchases by managed member cooperatives
of approximately $195,312,918 in 1999, $209,833,488 in 1998 and
$218,673,169 in 1997.
3. Receivables:
-----------
The Company grants credit to farmers and other retail and wholesale
purchasers of agricultural production supplies primarily in Alabama,
Arkansas, Delaware, Florida, Georgia, Indiana, Kentucky, Louisiana,
Maryland, Michigan, Mississippi, North Carolina, Ohio, South Carolina,
Texas, Virginia and West Virginia. Receivables at year-end were as follows:
<TABLE>
<CAPTION>
Current: 1999 1998
---- ----
Trade:
<S> <C> <C>
Accounts $ 251,925,304 $ 149,625,090
Notes 11,433,076 5,034,802
Advances to managed member cooperatives (Note 2) 27,398,280 24,644,909
Less receivables sold to SFC (Note 5) (169,177,100) (121,331,851)
-------------- --------------
121,579,560 57,972,950
Less allowance for doubtful accounts (4,204,203) (2,643,184)
-------------- --------------
Total current receivables $ 117,375,357 $ 55,329,766
============== ==============
Noncurrent:
Trade notes $ 1,544,553 $ 1,316,515
-------------- --------------
Total noncurrent receivables $ 1,544,553 $ 1,316,515
============== ==============
</TABLE>
Interest is earned and recognized on accounts receivable based on average
outstanding balances beginning either from account inception or after
30-day interest free periods dependent upon the type and anticipated
duration of the account receivable.
F-12
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------------
4. Inventories:
-----------
<TABLE>
<CAPTION>
Inventories at year-end consisted of the following:
1999 1998
Finished goods: ---- ----
<S> <C> <C>
Purchased for resale $183,115,888 $115,667,733
Manufactured 5,902,728 4,384,872
-------------- ---------------
189,018,616 120,052,605
Materials and supplies 24,122,703 13,114,889
-------------- ---------------
Totals $213,141,319 $133,167,494
============== ===============
</TABLE>
5. Investments in Finance Companies:
--------------------------------
SFC and Southern States are parties to an agreement dated September 16,
1991, and amended effective January 12, 1999, under which SFC purchases
from Southern States certain receivables without recourse. Under the terms
of the agreement, Southern States pays certain fees on receivables sold to
SFC. In addition, certain receivables are discounted to provide SFC with
revenues sufficient to cover interest charges incurred and historical
charge-offs. Receivables sold to SFC totaled approximately $1,194,700,000,
$996,700,000, and $991,500,000 for 1999, 1998 and 1997, respectively. The
related fees and discounts for 1999, 1998 and 1997 were $10,600,000,
$9,500,000 and $8,200,000, respectively. SFC paid volume incentive fees,
which are recorded as miscellaneous income in the statement of operations,
to Southern States for purchases of receivables of $1,875,000, $1,320,000,
and $1,375,000 for 1999, 1998 and 1997, respectively. In addition, pursuant
to the aforementioned contractual arrangement between Southern States and
SFC, Southern States services certain accounts receivable sold to SFC.
Under the terms of the agreement, Southern States is obligated to maintain
a computed minimum investment in SFC's Class A noncumulative preferred
stock ("Class A Preferred Stock"), based on the average daily balances of
receivables sold to SFC. The amount of Class A Preferred Stock held by
Southern States was $23,418,000 and $17,918,000 at June 30, 1999 and 1998,
respectively.
The consumer retail financing receivables, asset-based loans, and
agrifinancing receivables are primarily due from customers of Southern
States.
SFC has entered into operating lease agreements with Southern States and
its patrons whereby Southern States and its patrons lease computer
equipment, liquid propane tanks, and agricultural equipment from SFC. The
net book value of the assets leased to Southern States and its patrons by
SFC totaled approximately $5,100,000 and $7,005,000 as of June 30, 1999 and
1998, respectively. Total operating lease expenses incurred by Southern
States under the lease agreements totaled approximately $2,100,000,
$2,460,000 and $2,663,000 in 1999, 1998 and 1997 respectively. SFC paid
volume incentive fees to Southern States for operating lease agreements
totaling $175,000, $295,000 and $392,000 in 1999, 1998 and 1997,
respectively.
As of April 1, 1998, MLCC became a wholly owned subsidiary of SFC. MLCC and
Southern States are parties to an agreement dated April 1, 1998, under
which MLCC provides agricultural production loans, building loans,
equipment loans, renovation loans, revolving credit loans, and other loans
to and financing for customers of Southern States. Under the agreement,
Southern States agrees to provide MLCC with equity capital in exchange for
shares of MLCC preferred stock. The amount of MLCC preferred stock held by
Southern States was $14,156,000 and $10,156,000 at June 30, 1999 and 1998,
respectively.
F-13
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
5. Investment in Finance Companies, continued:
-------------------------------
The following unaudited proforma results of operations, assume that the
purchase of MLCC had occurred on July 1, 1997. The unaudited proforma
results of operations are presented for informational purposes only and do
not purport to be indicative of SFC's future consolidated results of
operations.
Year ended June 30, 1998
------------------------
Interest and service fee income $24,791,835
================
Net loss $(2,026,773)
================
A consolidated condensed balance sheet and statement of operations for SFC
as of June 30, 1999 and 1998, and for the years then ended, are as follows:
Balance Sheet
-------------
<TABLE>
<CAPTION>
Assets 1999 1998
- ------ ---- ----
<S> <C> <C>
Cash $ 8,221,133 $ 3,917,971
Notes receivable, net of allowance for credit losses of $3,941,274 for
1999 and $4,394,408 for 1998 42,357,610 51,122,515
Notes receivable--livestock feeding program, net of allowance
for credit losses of $1,674,722 for 1999 and $1,802,789 for 1998 10,030,885 12,297,639
Dairy leases and beef improvement program, net of allowance
for credit losses of $297,819 for 1999 and $113,525 for 1998 369,268 1,163,952
Finance receivables, net of allowance for credit losses of
$3,611,470 for 1999 and $3,152,085 for 1998 185,628,609 138,323,980
Crop time financing receivables 13,925,948
Due from Southern States 757,673 6,094,171
Deferred income taxes 5,337,791 3,266,169
Other 4,128,061 1,832,193
Investments in other cooperatives 11,341,183 10,922,574
Property, plant and equipment, including equipment leased to others, net 5,460,541 7,201,610
------------ ------------
Total assets $287,558,702 $236,142,774
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Notes payable:
Short-term lines of credit $219,702,000 $166,545,000
Term loans 30,750,000 34,250,000
Accounts payable, deferred credit, and accrued expenses 1,439,065 3,710,416
Due to Southern States 126,930
Dividends payable 63,277
Preferred stock 38,574,000 31,074,000
Stockholders' equity (3,033,293) 500,081
------------ ------------
Total liabilities and stockholders' equity $287,558,702 $236,142,774
============ ============
</TABLE>
F-14
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
5. Investment in Finance Companies, continued:
-------------------------------
<TABLE>
<CAPTION>
Statement of Operations 1999 1998 1997
----------------------- ------------- ----------- -----------
<S> <C> <C> <C>
Net interest income (expense) and fee income $ (397,166) $4,152,215 $3,793,217
General and administrative expenses 5,452,660 3,932,000 3,652,292
----------- ---------- ----------
Income (loss) before provision for income taxes (5,849,826) 220,215 140,925
Provision (benefit) for income taxes (2,238,622) 86,318 55,703
----------- ---------- ----------
Net (loss) income $(3,611,204) $ 133,897 $ 85,222
=========== ========== ==========
Southern States' equity interest, net of income taxes $(1,221,685) $ 56,721 $ 38,368
=========== ========== ==========
</TABLE>
SFC has a Master Loan Agreement with CoBank, ACB ("CoBank") that provides
for a $25,000,000 term loan payable due November 6, 2000 plus interest at
an average interest rate of 6.80%. No borrowings were outstanding at June
30, 1999.
On January 12, 1999, SFC renewed an agreement for a syndicated bank lending
facility providing for line of credit borrowings totaling $250 million.
This agreement is renewable annually and is administered by CoBank. The
line of credit borrowings of $168,183,000 at June 30, 1999 bear interest at
varying rates (approximately 5.97% at June 30, 1999). As of June 30, 1999,
the balance of the amortizing term loan was $4 million payable $2 million
annually in fiscal 2000 and 2001 plus interest at varying interest rates
(approximately 7.69% at June 30, 1999). SFC is required to maintain
investments in CoBank's capital stock and allocated equities based on
percentages of the average loans outstanding. These investments are pledged
as collateral for the notes payable.
SFC terminated its Loan Agreement with Crestar Bank ("Crestar") that
provided for a $10 million line of credit (subject to certain net worth
restrictions), with a balance of $75,000 at May 31, 1999. The line of
credit bore interest at varying rates established by Crestar (approximately
5.69% at May 31, 1999).
On April 8, 1999, the Corporation entered into a credit agreement with
Wachovia Bank ("Wachovia") that provides for a $5 million line of credit
($1,819,000 borrowed at June 30, 1999) which is utilized to manage the
Corporation's daily cash requirements. The line of credit bears interest at
varying rates established by Wachovia (approximately 6.18% at June 30,
1999). Since inception, the average daily borrowing under the line of
credit was approximately $213,000.
MLCC has an agreement for a syndicated bank lending facility that provides
for a line of credit totaling $80 million that is renewable annually and is
administered by CoBank. The line of credit borrowings of $49,700,000 at
June 30, 1999 bore interest at varying rates (approximately 6.02% at June
30, 1999).
MLCC terminated its loan agreement with Crestar that provided for a
$5,000,000 line of credit with a balance of $855,000 at May 31, 1999. The
line of credit bore interest at varying rates established by Crestar
(approximately 5.69% at May 31, 1999).
MLCC has subordinated debt of $1,750,000 that consists of notes payable to
two farm bureaus, which notes are unsecured and subordinated to all "senior
debt" of MLCC. "Senior debt" includes all indebtedness of MLCC to banks.
These notes have interest rates of 10% to 10.5% and are due at various
times through October 31, 2000.
F-15
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------
5. Investment in Finance Companies, continued:
-------------------------------
Under the most restrictive debt agreement, SFC cannot exceed a debt to net
worth ratio of 7.5 to 1 at the end of each month. SFC plans to repay
certain borrowings by August 31, 1999 in order to comply with this
requirement. SFC is also required to achieve a "TIER" (Times Interest
Earned Ratio) of 1.1 to 1 or greater. TIER is defined as net income before
interest and taxes plus the sum of depreciation and net additions to
reserves for losses, all divided by interest expense. SFC is also required
to maintain a "Defaulted Receivable Ratio" not to exceed .0055 to 1. The
Defaulted Receivable Ratio is calculated on a rolling 12 month average, the
ratio actual monthly retail and wholesale write-offs (net of recoveries),
plus the monthly change in retail and wholesale accounts over 90 days past
due to the previous month-end accounts receivable (net of unearned finance
charges).
On August 1, 1996, SFC entered into a Financing Services and Contributed
Capital Agreement (the "Agreement") with Land O'Lakes, Inc., successor to
Countrymark Cooperative, Inc. ("Land O'Lakes"), whereby SFC extends
revolving credit to customers of Land O'Lakes through the issuance of
credit cards. Under the terms of the Agreement, Land O'Lakes is obligated
to maintain a computed minimum investment in SFC's Class A noncumulative
preferred stock. At June 30, 1999 and 1998 pursuant to the Agreement, Land
O'Lakes had no investment in the Corporation's Class A preferred stock. In
connection with this transaction, SFC and Land O'Lakes reentered into a
Common Stock Subscription and Redemption Agreement (the "Common Stock
Agreement"). Additionally, for as long as Land O'Lakes maintains at least
8.0% ownership in SFC's common stock, Land O'Lakes is entitled to maintain
one representative on the Board of Directors of SFC. The termination of the
Common Stock Agreement is contingent upon the termination of participation
under the Financing Services and Contributed Capital Agreement. If Land
O'Lakes terminates the Common Stock Agreement, the Corporation is then
obligated to repurchase all shares of common stock owned by Land O'Lakes at
the par value.
On December 3, 1998, the Corporation entered into a Financing Services and
Contributed Capital Agreement (the "MFA Agreement") with MFA Oil Company
("MFA Oil") and on December 16, 1998 with MFA Incorporated ("MFA") whereby
the Corporation is allowed to extend revolving credit to customers of MFA
Oil and MFA through the issuance of credit cards. Under the terms the MFA
Agreement, MFA and MFA Oil are obligated to maintain a computed minimum
investment in the Corporation's Class A noncumulative preferred stock. At
June 30, 1999 pursuant to the MFA agreement, MFA and MFA Oil had no
investment in SFC's Class A preferred stock. If the actual investment
exceeds the computed minimum, the Corporation will, upon written request
from MFA and MFA Oil, redeem the excess number of shares. Upon written
notice, the MFA Agreement may be terminated by either party.
In connection with this transaction, the Corporation and MFA and MFA Oil
also entered into a Common Stock Subscription and Redemption Agreement (the
"Common Stock Agreement"). As part of the Common Stock Agreement, MFA and
MFA Oil each purchased 73 shares of the Corporation's common stock
(approximately 8.5% of the Corporation's authorized common stock) for
$60,444 each. Additionally, for as long as MFA and MFA Oil maintain at
least an 8% ownership in the Corporation's common stock, MFA and MFA Oil
are entitled to maintain one representative each on the Board of Directors
of the Corporation. The termination of the Common Stock Agreement is
contingent upon the termination of participation under the Financing
Services and Contributed Capital Agreement. If MFA or MFA Oil terminates
the Common Stock Agreement, the Corporation is then obligated to repurchase
all shares of common stock owned by MFA or MFA Oil at the par value.
As a result of the Common Stock Agreement, the 859 shares of outstanding
common stock are owned 38.42% by Southern States, 36.08% by 62
independently owned agriculture cooperatives, 8.5% by Land O'Lakes, 8.5% by
MFA and 8.5% by MFA Oil.
F-16
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
6. Investments in Other Companies:
------------------------------
Investments in other companies consisted of the following at year end:
1999 1998
---- ----
CF Industries, Inc. $43,473,877 $43,473,877
CoBank, ACB 7,964,176 7,479,858
St. Paul Bank 1,474,092 1,470,947
Southern States Insurance Exchange 12,474,193 11,266,484
Universal Cooperatives, Inc. 3,339,991 3,216,156
Other cooperatives and companies 2,804,363 2,772,154
Joint ventures 6,885,715 5,893,670
----------- -----------
Totals $78,416,407 $75,573,146
=========== ===========
At June 30, 1999 and 1998, the Company's aggregate equity in the net assets of
these investees exceeded the carrying value of such investments by
approximately $31,500,000 and $15,650,000, respectively. Patronage refunds
received for 1999 and 1998 are detailed in the table below. The cash portion
of patronage refunds totaled $403,809 and $2,918,799 for 1999 and 1998,
respectively.
1999 1998
---- ----
CF Industries, Inc. $ - $5,512,596
CoBank, ACB 872,568 477,526
Southern States Insurance Exchange 3,969,818 3,407,439
Universal Cooperatives, Inc. 247,670 232,667
Other cooperatives 60,344 52,943
---------- ----------
Totals $5,150,400 $9,683,171
========== ==========
Purchases by Southern States from CF Industries, Inc. and Universal
Cooperatives, Inc. were approximately $121 million and $88 million in 1999
and 1998, respectively.
7. Property, Plant and Equipment:
-----------------------------
Property, plant and equipment at year end is summarized as follows:
1999 1998
---- ----
Land $ 21,687,177 $ 16,496,766
Buildings and improvements 122,791,864 90,332,409
Machinery and equipment 129,660,133 100,032,931
Furniture and fixtures 35,464,195 28,667,191
Automotive equipment 53,867,421 53,307,919
Construction in progress 14,725,867 15,740,412
------------ ------------
Totals $378,196,657 $304,577,628
============ ============
F-17
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------
7. Property, Plant and Equipment, continued:
-----------------------------
At June 30, 1999 and 1998, property, plant and equipment, having an
aggregate book value of $11,160,153 and $6,990,070, respectively, was
pledged as collateral under industrial revenue financings (see Note 9).
The cost of property, plant and equipment includes: interest capitalized in
the amount of $901,701, $451,478 and $164,506 in 1999, 1998 and 1997,
respectively; and capitalized software in the amount of $14,618,592 and
$9,610,641 at June 30, 1999 and 1998, respectively. Depreciation expense
associated with capitalized software was $408,577, $234,027 and $237,251 in
1999, 1998 and 1997, respectively.
8. Short-Term Notes Payable:
------------------------
At June 30, 1999, short-term notes of $5,600,000 bearing interest at rates
of 7.50% and 8.00% were payable to CoBank. At June 30, 1998, short-term
notes of $7,100,000 bearing interest at 7.75% and 8.00% were payable to
CoBank. At June 30, 1999, the Company had short-term lines of credit with
other institutions totaling $7,000,000 which do not require the maintenance
of compensating balances because generally credit extension is subject to
availability of funds. At June 30, 1999 and 1998, there were no borrowings
under these lines of credit.
During 1999, average daily short-term borrowings were approximately
$21,203,150 (maximum outstanding - $66,500,000) at a weighted average
interest rate approximating 7.65%. During 1998, such borrowings averaged
approximately $47,636,986 (maximum outstanding - $81,300,000) at a weighted
average interest rate approximating 5.77%. These rates were computed net of
qualified patronage refunds received from CoBank.
9. Long-Term Debt:
--------------
Long-term debt at year-end consisted of:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Term notes - CoBank due 2005, 6.82% and 6.99% per annum at
June 30, 1999 and 1998, respectively (a) $ 37,000,000 $ 38,000,000
Revolving term loan - CoBank due 2001, 6.11%-6.31% and 6.12%
per annum at June 30, 1998 and 1997, respectively (a) 93,000,000
Syndicated line of credit (expires January 11, 2002) 127,600,000
Industrial revenue financings (b) 12,570,000 6,620,000
Notes due through 2003 (maximum rate 10%) 174,163 254,735
Liability under lease 3,055,071
------------ ------------
Total long-term debt 180,399,234 137,874,735
Less current maturities 3,836,938 1,833,434
------------ ------------
Long-term debt due after one year 176,562,296 136,041,301
Bridge loan facility (c) 100,000,000
------------ ------------
$276,562,296 $136,041,301
============ ============
</TABLE>
F-18
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
9. Long-Term Debt, continued:
--------------
(a) The term notes with CoBank are payable $3,000,000 in 2000, $3,000,000
in 2001, $7,000,000 annually in 2002 and 2003, $9,000,000 in 2004, and
$8,000,000 in 2005. The credit facilities include a syndicated bank
line of credit agreement totaling, in aggregate, $200,000,000. This
agreement, which expires in 2002, enables the Company to refinance
short-term debt on a long-term basis. Accordingly, certain current
maturities of long-term debt intended to be refinanced were
reclassified as long-term debt (see Note 9(b)). Under the terms of the
short-term and long-term loan agreements with CoBank, the Company is
required to maintain investments in CoBank's capital stock and
allocated equities based on percentages of the average loans
outstanding. At June 30, 1999 and 1998, such investments in the
amounts of $7,964,176 and $7,479,858, respectively, were pledged as
collateral for indebtedness to CoBank.
(b) Three industrial revenue financings require payments sufficient to
enable the industrial development authorities to pay principal,
premium, if any, and interest on the revenue bonds. The obligations
mature serially in the following annual amounts: $750,000 annually in
fiscal 2000 through 2004, $1,620,000 in 2005, $500,000 in 2006, and
6,700,000 in 2016. The obligations bear interest at rates ranging from
3.65% to 3.85%.
(c) In October 1998, Southern States borrowed $218.3 million under a
180-day "bridge" loan facility with NationsBank, N.A., First Union
Bank and CoBank to finance the purchase of the Gold Kist Inputs
Business. In January, 1999 this facility was paid down by $118.3
million utilizing proceeds from the Southern States syndicated three
year facility. The bridge loan facility has been classified as long
term debt since the Company had the ability and intent to refinance
the debt. The weighted average interest rate on this loan was 5.99%.
Long-term debt maturing within each of the four fiscal years after June 30,
2000 is as follows: 2001 - $232,520,207; 2002 - $8,068,573; 2003 -
$8,050,159; 2004 - $10,066,286; thereafter - $17,857,071.
The Company had outstanding letters of credit in the amount of $15,000,000
and $20,000,000 at June 30, 1999 and 1998 to collateralize certain
liabilities.
Under the most restrictive outstanding debt agreement, the Company is
required to maintain, at fiscal year end and at the end of each fiscal
quarter, on a consolidated basis: (a) the ratio of consolidated outstanding
debt to capitalization not to exceed .50 to 1.00, (b) tangible net worth
not to be less than the sum of $256,000,000 plus twenty-five percent of the
net income (no reduction for net losses) of the Company for each such
fiscal year and, (c) the ratio of consolidated cash flow for four
consecutive fiscal quarters to consolidated interest expense plus
distributions during such period not to be less than 1.5 to 1.00.
See Note 15, Derivative Financial Instruments for information relating to
interest swaps.
On October 5, 1999, Southern States Capital Trust I, a trust subsidiary of
Southern States, issued to Gold Kist $59.4 million Step-Up Rate Capital
Securities, Series A ("Series A"), net of issuance costs of $600,000.
Distributions are cumulative relating to the Series A securities at a rate
of 8% per annum, increasing to 8.5% on July 5, 2000 and 8.75% on July 5,
2001. The Series A securities mature on October 5, 2029. Also on October 5,
1999, Southern States issued to Gold Kist $40 million Step-Up Rate Series B
Cumulative Redeemable Preferred Stock, $100 par value per share ("Series
B"). Issuance costs incurred with respect to the Series B securities
totaled $800,000. Cash dividends are cumulative at an initial rate of 7.5%,
increasing to 8% per annum 9 months after the date of issuance and
increasing to 8.25% per annum twenty-one months after the issuance of the
Series B securities. Dividends are payable quarterly, in arrears on January
5, April 5, July 5 and October 5 of each year. The proceeds from the sale
of both the Series A securities and the Series B securities were used to
reduce Company debt and pay off the bridge loan facility which had been
utilized to finance the Gold Kist acquisition.
F-19
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
---------
10. Capital Stock:
-------------
At June 30, 1999, Southern States' authorized capital stock consisted of
20,000,000 shares of common stock ($1 par value) and 1,000,000 shares of
cumulative preferred stock ("5% - 6% Preferred Stock") ($100 par value),
issuable in series. The 5% to 6% preferred stock is redeemable at par plus
declared and unpaid dividends, if any, and redemption is limited to 20,000
shares annually. The Company's Articles of Incorporation were restated on
July 13, 1998 to increase the authorized shares of preferred stock from
200,000 shares to 1,000,000 shares, $100 par value per share.
Wetsel, Inc. ("Wetsel"), a wholly owned subsidiary, has authorized 35,000
shares of Series 1, Class A cumulative redeemable preferred stock. At June
30, 1999 and 1998, Wetsel had 21,141 shares ($2,114,000) of 9% Series 1,
Class A cumulative redeemable preferred stock ("9% Redeemable Preferred
Stock") outstanding. Pursuant to an agreement dated February 3, 1995, this
stock may not be called for redemption by Wetsel or put for redemption by
the holders prior to December 31, 1999.
Southern States' authorized common stock is membership common stock and,
pursuant to the requirements of the Agricultural Cooperative Association
Act of Virginia and the Articles of Incorporation and Bylaws of Southern
States, its issuance or transfer is limited to bona fide producers of
agricultural products and cooperative associations that are owned and
controlled by such producers who use the services or supplies of Southern
States. Dividends on Southern States' common stock are limited annually to
6% of this stock's aggregate par value.
Patronage refund allocations represent allocated undistributed member
margins. Patronage refund allocations do not bear interest and are
subordinated to all common and preferred shares outstanding and
indebtedness of the Company. Patronage refund allocations may be redeemed
at the discretion of the Board of Directors.
Each member, regardless of the number of shares of common stock registered
in the member's name, is entitled to one vote in the affairs of Southern
States. Under various circumstances (e.g., death of stockholder), Southern
States repurchases common stock from its members at par value plus declared
and unpaid dividends, if any. In the event of liquidation or other
disposition of the assets of Southern States, the holders of common stock,
after satisfaction of obligations to creditors and to holders of all
preferred stock, would be entitled to receive a maximum of $1 per share
(par value) plus declared and unpaid dividends, if any. Any remaining
amounts shall be returned to members and other patrons on a pro rata basis
of their respective interest therein.
F-20
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
10. Capital Stock, continued:
-------------
Changes in preferred stock ($100 par) and common stock ($1 par) during 1998
and 1999 follow:
<TABLE>
<CAPTION>
9%
5% - 6% Preferred Redeemable Preferred Common
----------------------------- ------------------------------ -----------------------------------
Outstanding Aggregate Outstanding Aggregate Outstanding Aggregate
Shares Par Value Shares Par Value Shares Par Value
----------- --------------- ------------ ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Balances, June 30, 1996 16,389 $1,638,900 21,141 $2,114,100 10,847,364 $10,847,364
Issued 349 34,900 1,179,465 1,179,465
Redeemed (1,306) (130,600) (105,407) (105,407)
----------- --------------- ------------ ---------------- ---------------- -----------------
Balances, June 30, 1997 15,432 $1,543,200 21,141 $2,114,100 11,921,422 $11,921,422
Issued 424 42,400 879,529 879,529
Redeemed (914) (91,400) (605,933) (605,933)
----------- --------------- ------------ ---------------- ---------------- -----------------
Balances, June 30, 1998 14,942 $1,494,200 21,141 $2,114,100 12,195,018 $12,195,018
Issued 507 50,700 39,884 39,884
Redeemed (599) (59,900) (87,820) (87,820)
----------- --------------- ------------ ---------------- ---------------- -----------------
Balances, June 30, 1999 14,850 $1,485,000 21,141 $2,114,100 12,147,082 $12,147,082
=========== =============== ============ ================ ================ ================
</TABLE>
F-21
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------------
11. Employee Benefit and Compensation Plans:
---------------------------------------
Southern States sponsors a multiemployer defined benefit retirement plan
(the "Plan") which is noncontributory and includes substantially all
employees of Southern States, certain subsidiaries, SFC, and 70 managed
member cooperatives ("the Participating Employers"). Plan assets are not
segregated for each Participating Employer and are used to provide benefits
for participants of all Participating Employers. Benefit formulas and
pension cost allocation and funding methodologies are the same for all
Participating Employers. If a Participating Employer withdraws from the
plan, the Participating Employer does not withdraw any assets from the Plan
and does not assume any of the Plan's obligation. Thus, information
relating specifically to Southern States is not available. For 1999, 1998
and 1997, Southern States' expenses, including administrative expenses,
were $1,210,865, $3,004,146 and $3,899,638, respectively. A comparison of
accumulated benefits, as estimated by the Plan's actuary, and net assets of
the Plan is presented below.
July 1
------------------------------
1999 1998
---- ----
Actuarial present value of plan benefits:
Vested $122,399,788 $ 98,115,602
Nonvested 3,929,335 2,834,524
------------- ------------
Total benefits $126,329,123 $100,950,126
============= ============
Net assets available for benefits $154,922,073 $148,571,687
============= ============
The discount rates used in computing the present value of plan benefits
were 6.95%, 7.34% and 7.47% for the years ended June 30, 1999, 1998 and
1997, respectively. Also, the method of calculating ages as of the
valuation dates was changed from age last birthday for June 30, 1998 to age
nearest birthday for June 30, 1999.
The Corporation has a non-qualified supplemental retirement plan covering
certain employees, which provides for incremental retirement payments from
the Company's funds so that total retirement payments equal amounts that
would have been payable from the Company's multiemployer retirement plan if
it were not for limitations imposed by income tax regulations. The amounts
expensed for the supplemental retirement plan were $278,334, $232,755 and
$$422,530 in 1999, 1998 and 1997, respectively. The accumulated benefit
obligation recognized in the Company's consolidated balance sheet at June
30, 1999 and 1998 was $1,551,912 and $1,115,854 respectively.
Southern States provides certain life insurance benefits for retired
employees. Substantially all of Southern States' employees may become
eligible for those benefits, generally upon attaining normal retirement age
while employed by Southern States. Those and similar benefits for active
employees are provided through insurance companies whose premiums are based
on benefits paid. The costs of these benefits for retired employees are a
function of the annual pension plan valuation.
Costs for postretirement benefits other than pensions, primarily medical
benefit costs, are accrued during the employee's period of service. In
connection with the July 1, 1993 adoption of SFAS No. 106, "Postretirement
Benefits Other Than Pensions," the Company recognized accumulated
postretirement benefit obligation ("APBO") (the "transition obligation") of
$5,043,773. The transition obligation is being amortized over a period of
20 years and is recorded in miscellaneous other noncurrent liabilities. The
Company's policy is to fund these benefits on a pay-as-you-go basis.
F-22
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
11. Employee Benefit and Compensation Plans, continued:
---------------------------------------
<TABLE>
<CAPTION>
Summary postretirement plan information is as follows: June 30, June 30,
1999 1998
---- ----
Actuarial present value of benefit obligations:
Accumulated postretirement benefit obligation:
<S> <C> <C>
Retirees $ 2,508,512 $ 2,732,229
Fully eligible, active plan participants 957,117 621,812
Other active plan participants 2,119,157 585,216
------------ -----------
5,584,786 3,939,257
Unrecognized prior service cost (1,186,007) (551,158)
Unrecognized net gain 15,101 1,076,486
Transition obligation being recognized over 20 years (3,530,639) (3,782,828)
----------- -----------
Accrued postretirement benefit cost $ 883,241 $ 681,757
=========== ===========
Year ended June 30,
<CAPTION>
1999 1998 1997
---- ---- ----
Net periodic postretirement benefit cost:
<S> <C> <C> <C>
Service cost $ 86,209 $ 80,194 $116,692
Interest cost 277,853 285,888 339,746
Amortization of unrecognized prior service cost 61,240 61,240
Amortization of net gain (45,504) (47,960)
Amortization of transition obligation 252,189 252,189 252,189
-------- -------- --------
$631,987 $631,551 $708,627
======== ======== ========
</TABLE>
Because the Company has established a maximum amount it will pay per
retiree under the plan, health care cost trends do not affect the
calculation of the accumulated benefit obligation or the net postretirement
benefit cost. The discount rate used to determine the APBO was 7.0% at June
30, 1999 and 7.5% at June 30, 1998. The unrecognized prior service cost
resulted from a 1997 plan amendment which extended an employer cost freeze
previously effective January 1, 1997, to January 1, 2000, and from a 1999
amendment that changed the benefit eligibility for employees retiring under
65 from age 55 with 20 years of service to the earlier of 1) age 55 with 20
years of service, 2) age 60 with 15 years of service, or 3) age 62 with 10
years of service.
Under the Company's 401(k) plan, the Company matches employee contributions
and may make discretionary contributions based on the Company's
performance. Employee contributions are matched to the extent of 40% of the
participant's first 3% contributed and 15% of the next 2% contributed. The
Company's matching contributions for 1999, 1998 and 1997 were $1,292,942,
$1,001,382 and $865,909, respectively. The Company did not make a
discretionary contribution in fiscal 1999 or 1998. The Company provided for
an additional contribution of $672,136 for 1997.
The Company has in effect other compensation plans for management and
retail store personnel under which current and deferred awards, based
principally on operating results, are made. The aggregate charge to
operations with respect to these plans approximated $3,273,819 in 1999, and
$1,793,045 in 1998 and $2,488,144 in 1997.
F-23
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------------
12. Income Taxes:
------------
Income tax expense consisted of the following:
1999 1998 1997
---- ---- ----
Current:
Federal $ 2,035,460 $2,123,899 $5,297,003
State 466,283 567,276 1,130,667
------------ ----------- ------------
Total current 2,501,743 2,691,175 6,427,670
Deferred federal and state (3,098,313) 274,611 (392,258)
------------ ----------- ------------
Total $ (596,570) $2,965,786 $6,035,412
============ =========== ============
The significant differences between the U.S. federal statutory income tax
rate and the effective income tax rate are as follows:
1999 1998 1997
---- ---- ----
Statutory federal income tax rate 35.0% 35.0% 35.0%
Patronage refund deduction 0.0 (15.6) (18.2)
State income taxes, net of federal benefit 5.8 3.0 2.1
Other, net .4 (0.6) (0.9)
----- ----- -----
Effective income tax rate 41.2% 21.8% 18.0%
===== ===== =====
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities
as of June 30, 1999 and 1998 are as follows:
1999 1998
------------ ------------
Current deferred tax assets:
Allowance for doubtful accounts $ 962,542 $ 1,058,273
Inventory costs 1,314,607 935,034
Uninsured losses 1,410,054 512,983
Accrued vacation pay 3,002,293 2,062,041
Other, net 421,582
------------ ------------
Net current deferred income tax asset 6,689,496 4,989,913
------------ ------------
Noncurrent deferred tax assets (liabilities):
Deferred compensation 2,607,410 2,603,258
Non-qualified patronage refund allocations:
Issued 1,417,560 1,419,261
Received (980,160) (1,001,333)
Property, plant and equipment (9,399,969) (7,933,404)
Net operating loss carryforward 2,529,530 0
Other, net 856,264 166,680
------------ ------------
Net noncurrent deferred income tax liability (2,969,365) (4,745,538)
------------ ------------
Net deferred income tax asset $ 3,720,131 $ 244,375
============ ============
F-24
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-------------------
13. Commitments and Other Matters:
-----------------------------
a. Leases - Southern States is party to an agreement whereby an
------
investment company (the "Owner") constructed, on land owned by
Southern States and leased to the Owner for a 70-year term expiring in
2048, a headquarters building for lease to Southern States. Under the
terms of the building lease, Southern States is obligated to pay rent
(net of income from the land rental) based upon the cost of the
building and executory costs such as insurance, maintenance and
property taxes. This operating lease has an initial term of 30 years,
expiring in October 2008, and contains options allowing Southern
States to renew the lease for two additional five-year periods and to
purchase the building, at certain times throughout the lease, at the
greater of the building's original cost or its then fair market, value
as defined in the lease. Should Southern States not exercise its
purchase option by the expiration of the building lease, the Owner has
options, exercisable throughout the remaining term of the land lease,
to purchase the land at its then fair market value.
In addition, the Company leases transportation, data processing and
other equipment under operating leases expiring generally during the
next five years. Rent expense approximated $18,058,165 in 1999,
$8,700,650 in 1998 and $8,109,700 in 1997.
The Company's approximate minimum lease commitments under
noncancellable leases, less noncancelable subleases, are as follows:
Office Building
-----------------------
Year Equipment Lease Sublease Totals
---- --------- ----- -------- ------
2000 $11,874,346 $ 742,538 $(571,479) $12,045,405
2001 8,090,227 742,538 (594,338) 8,238,427
2002 5,594,652 742,538 (618,112) 5,719,078
2003 3,647,547 742,538 (208,713) 4,181,372
2004 2,296,880 742,538 3,039,418
Thereafter 2,875,708 3,155,786 6,031,494
b. Other Matters - The Company's 1999, 1998 and 1997 consolidated
-------------
statement of operations includes a provision in cost of products
purchased and marketed and other operating costs of $4,204,456,
$872,306, and $477,447, respectively, to cover estimated environmental
remediation costs. These costs are offset by recoveries, primarily
from state agencies, of certain environmental costs expended in prior
periods, of $0, $100,000 and $41,415 in 1999, 1998 and 1997
respectively. The unpaid portion of such costs totaled $3,191,141 and
$1,176,147 at June 30, 1999 and 1998, respectively, and is included as
a liability in the Company's consolidated balance sheet for the
respective years. Amounts accrued do not take into consideration
claims for recovery from insurance or state underground storage tank
remediation trust funds. When specific amounts within a range cannot
be determined, the Company has accrued the minimum amount within that
range. The remaining actual environmental remediation liability may be
different from management's estimates due to the uncertainty of the
extent of pollution, the complexity of laws and government regulations
and their interpretation, the varying costs and effectiveness of
alternative cleanup technologies and methods, the uncertain level of
insurance or other types of recovery, and the uncertain level of the
Company's involvement. As the scope of the Company's environmental
contingencies becomes more clearly defined, it is possible that
expenditures in excess of those amounts already accrued may be
necessary. However, management believes that these overall costs are
expected to be incurred over an extended period of time and, as a
result, such contingencies are not anticipated to have a material
impact on the consolidated financial position or liquidity, but could
have a material adverse effect on future annual operating results.
F-25
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------------
13. Commitments and Other Matters, continued:
-----------------------------
In early January of 1999, the Company received additional information and
revised estimates of the cost of containment, remediation and monitoring
activities related to environmental contamination at one of the Company's
past operating sites. Based upon this additional information the Company
accrued $3.0 million for the additional estimated cost of remediating this
site. These costs are expected to be expended over a twenty-year period
with approximately $1.1 million to be expended by December 31, 2000 and the
remaining portion spread over the remaining 19 years. Expenditures for the
first ten years are for capital equipment and site remediation and
expenditures after year ten are expected to be for site monitoring and
reporting. The liability accrual and remediation methodology has been
developed by a third party environmental consultant and is based on known
remediation methodologies and techniques.
The Company is a defendant in several lawsuits arising in the ordinary
course of business. While the outcome of any litigation cannot be predicted
with certainty, the Company believes that the ultimate disposition of these
matters will not have a material adverse effect on its consolidated
financial position, liquidity or results of operations.
At June 30, 1999 and 1998, commitments for the construction and acquisition
of plant and equipment totaled approximately $2.2 million and $7.1 million,
respectively.
14. Fair Value of Financial Instruments:
-----------------------------------
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and Accounts Receivable - The carrying amounts approximate fair
----------------------------
value because of the short maturity of these assets.
Long-term Investments - Long-term investments, principally in supplier
---------------------
cooperatives, are carried at cost and unpaid qualified written notices
of allocation are carried at stated or par value. The Company believes
it is not practicable to estimate the fair value of the securities of
supplier cooperatives without incurring excessive costs because there
is no established market for these securities and it is inappropriate
to estimate future cash flows which are largely dependent on future
patronage earnings of the supplier cooperatives.
Accounts Payable and Notes Payable - The carrying amounts approximate
----------------------------------
fair value because of the short maturity of these liabilities.
Long-term Debt - The fair value of the Company's long-term debt is
--------------
estimated based on the discounted cash flow of that debt, using
estimated current rates for debt of the same remaining maturities. At
June 30, 1999, the estimated fair value of the long-term debt totaling
$280,399,234 was $262,474,093. At June 30, 1998, the estimated fair
value of the long-term debt totaling $137,874,735 was $134,290,704.
F-26
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----------------
15. Derivative Financial Instruments:
--------------------------------
As part of its' asset/liability management program, the Company utilizes
financial derivatives to reduce the Company's sensitivity to interest rate
fluctuations. At June 30, 1999, the Company had outstanding seven variable
to fixed interest rate swaps with a notional amount of $140,000,000 and
fair market value of $1,777,395 with terms ranging from three to seven
years. Under terms of these agreements, the company is paying fixed
interest rates ranging from 4.930% to 6.420% and receiving a variable rate
based on 3-month London Interbank offered rates ("LIBOR") of 5.368% at June
30, 1999. At June 30, 1998, the Company had outstanding four variable to
fixed interest rate swaps with a notional amount of $65,000,000 and fair
market value of $(1,216,369) with terms ranging from two to five years.
Under the terms of these agreements, the Company was paying fixed interest
rates ranging from 6.335% to 6.760% and receiving a variable rate based on
3-month LIBOR of 5.719% at June 30, 1998. These interest rate swaps are
being used to convert certain floating rate debt to fixed rates. Net
receipts or payments under the agreements are being recognized as
adjustments to interest expense. The Company is exposed to credit losses in
the event of counterparty nonperformance, but does not anticipate any such
losses.
The Company uses futures contracts to protect purchase and sales contract
prices from directly related fluctuations in the market price of grains and
petroleum products. Those futures contracts are commitments to either
purchase or sell designated amounts and varieties of grain and petroleum
products at a future date, generally not exceeding a period of six months,
for a specified price, and may be settled in cash or through delivery. The
Company hedges purchases and sales with the sole purpose of eliminating the
risk of market price fluctuations. No futures contracts are purchased or
sold for purely speculative purposes. The Company is exposed to credit
losses in the event of counterparty nonperformance, but does not anticipate
any such losses.
Realized and unrealized gains and losses on futures contracts are accounted
for on a deferral basis. Net realized gains and losses on open and closed
futures contracts, primarily in grain futures, reported in the statement of
operations under Cost of products purchased and marketed were net gains of
$1,210,383, $1,016,672 and $2,417,602 for 1999, 1998 and 1997 respectively.
Since these net realized gains were the result of hedging transactions,
they were substantially offset by net losses realized on cash transactions.
New crop grain futures are futures contracts to hedge fixed purchase price
commitments with grain producers to purchase set volumes of grain at set
prices with set delivery dates. Deferred gains on open and closed new crop
grain futures reported in the balance sheet under accrued expenses were
$543,343 and $274,802 for 1999 and 1998, respectively. Deferred losses on
open and closed new crop grain futures reported in the balance sheet under
other assets were $830,390 and $1,144,721 for 1999 and 1998, respectively.
At June 30, 1999 the Company's open and closed new crop grain futures were
as follows:
<TABLE>
<CAPTION>
Weighted Average
Bushels Contract Amount Price/Bushel Terms
------- --------------- ------------ -----
<S> <C> <C> <C> <C>
Corn 1,955,000 $4,513,688 $2.2625 Dec. 99
70,000 $ 164,850 $2.3550 Mar. 00
Soybeans 215,000 $ 990,613 $4.6075 Nov. 99
Corn (for wheat) 195,000 $ 411,938 $2.1125 Jul. 99
--------- ---------- -------
Total 2,475,000 $6,081,088 $2.4570
</TABLE>
The carrying value for these contracts at June 30, 1999 was an unrealized
gain of $274,205, which was substantially hedged or offset by an unrealized
loss of approximately the same amount on the matching open forward purchase
commitments to acquire grains.
F-27
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------------------
16. Supplemental Disclosures of Cash Flow Information:
-------------------------------------------------
The components of cash provided by current assets and liabilities, net of
the effect of balances acquired from the acquisition of the Gold Kist
Inputs Business on October 13, 1998 and MLE on April 1, 1998, follow:
1999 1998 1997
---- ---- ----
Receivables $ 61,950,915 $ 27,870,279 $(3,475,635)
Inventories (4,776,701) (6,476,370) (7,664,598)
Prepaid expenses 1,492,252 (1,173,102) 840,253
Accounts payable 65,855,438 (29,534,741) 6,738,389
Accrued expenses 8,138,855 20,838,166 1,335,287
Other, net (2,950,408) (1,246,395) (1,226,876)
-------------- ------------- -------------
$129,710,351 $ 10,277,837 $(3,453,180)
============== ============= =============
Cash payments for interest were $20,758,285, $17,145,980 and $15,316,454
for 1999, 1998 and 1997, respectively. Cash payments for income taxes were
$2,719,806, 2,533,809 and $6,463,517 for 1999, 1998 and 1997, respectively.
During fiscal 1999, non-cash transactions included the assumption of
liabilities totaling $9,793,404. During fiscal 1998, non-cash transactions
included the assumption of patronage refund allocations from Michigan
Livestock Exchange ("MLE") totaling $2,683,000.
17. Merger:
------
On April 1, 1998, Southern States completed a merger with MLE Marketing, a
livestock marketing cooperative headquartered in East Lansing, Michigan.
MLE operates livestock dealer and auction markets in Indiana, Kentucky,
Michigan and Ohio. The merger constituted a tax-free reorganization and has
been accounted for using the purchase method under Accounting Principles
Board Opinion No. 16 ("APB 16"). The acquisition of MLE was completed for
approximately $3.5 million. In that connection, the Company issued 60,664
shares (par value $60,664) of its common stock to the former members of MLE
and assumed patronage refund allocations issued in prior years to MLE
members in the amount of $2,683,000. Pro forma results of operations for
the year ended June 30, 1998 as if the acquisition of MLE occurred as of
the beginning of the respective period is not presented, as the effect is
not material.
The fair value of the assets acquired and liabilities assumed is summarized
as follows (in thousands):
Current assets $ 23,290
Investments 10,352
Property, plant and equipment 7,680
Other non-current assets 4,389
Current liabilities (33,251)
Long-term liabilities (8,963)
--------
$ 3,497
========
F-28
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------------
18. Acquisition of Gold Kist Inputs Business:
----------------------------------------
On October 13, 1998, the Company purchased the Gold Kist Inputs Business of
Gold Kist Inc. ("Gold Kist"), a Georgia cooperative marketing association.
The net assets purchased included certain inventory, real property,
personal property, and certain accounts receivable, other assets, and
certain liabilities. The initial estimated net purchase price of $218
million, (net of liabilities assumed of approximately $21.5 million and
subject to a final purchase price adjustment) was financed utilizing a
bridge loan facility. This acquisition has been accounted for under the
purchase method of accounting. The purchase price has been preliminarily
allocated to inventory, accounts receivable and property plant and
equipment based on estimated fair values at the date of acquisition,
pending final determination of certain acquired balances. The Gold Kist
Inputs Business' results of operations have been included in the Company's
consolidated statement of operations since the date of acquisition.
In connection with the purchase transaction, the Company delivered to Gold
Kist a post-closing statement of net asset value (the "Post-Closing
Valuation") prepared pursuant to the terms of the purchase agreement (the
"Agreement"). The final purchase price as determined by the Company
pursuant to the adjusted Post-Closing Valuation was approximately $198
million compared to an initial estimated purchase price (after deducting
the $10 million hold back provided for in the Agreement) of $218 million.
Taking into account certain agreed upon adjustments, the Company's
Post-Closing Valuation resulted in a repayment by Gold Kist to the Company
of approximately $21 million on September 3, 1999, with interest from the
closing date. The difference between the initial estimated purchase price
as determined by the pre-closing valuation and the Company's determination
of the final purchase price as shown by the adjusted Post-Closing Valuation
was principally due to the Company not purchasing certain accounts
receivable that were included in the initial purchase price.
The following unaudited pro forma consolidated results of operations
assumes that the purchase of Gold Kist had occurred at the beginning of
each respective year. The unaudited pro forma consolidated results are
presented for informational purposes only and do not purport to be
indicative of the Company's future consolidated results of operations.
Year Ended Year Ended
June 30,1999 June 30,1998
------------ ------------
Revenues $1,457,867,492 $1,603,828,518
============== ==============
Loss on operations $ (5,217,846) $ (3,161,249)
============== ==============
Net loss $ (8,108,864) $ (544,363)
============== ==============
F-29
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-------------------
19. Quarterly Results of Operations:
-------------------------------
The Company's unaudited quarterly results of operations were as follows:
<TABLE>
<CAPTION>
Fiscal 1999 Quarters
September 30 December 31 March 31 June 30
------------ ----------- -------- -------
<S> <C> <C> <C> <C>
Sales and other operating revenue $210,892,909 $227,216,075 $413,901,376 $514,349,132
Gross margin 34,970,645 55,436,515 72,705,734 88,464,073
Net (loss) savings (8,081,367) (7,510,864) 2,663,564 10,853,902
Fiscal 1998 Quarters
September 30 December 31 March 31 June 30
------------ ----------- -------- -------
Sales and other operating revenue $234,836,414 $244,613,823 $282,240,987 $361,595,294
Gross margin 34,115,913 39,788,781 52,918,937 65,026,964
Net (loss) savings (5,501,643) (2,029,222) 7,885,182 10,312,321
</TABLE>
F-30
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-----------------
20. Segment Information:
-------------------
The Company has six reporting segments or divisions: Crops, Feed,
Petroleum, Retail Farm Supply, Farm and Home, and Marketing. The crops
segment procures, manufactures, processes and distributes fertilizer, seed
and crop protection products. The feed segment procures and manufactures
dairy, livestock, equine, poultry, pet and aquacultural feeds. The
petroleum segment distributes all grades of gasoline, kerosene, fuel oil,
propane and other related petroleum products. The retail farm supply
segment distributes agricultural supplies through approximately 300 Company
owned and managed member cooperatives. The farm and home segment
distributes farm and home products through wholesale and retail centers.
The marketing segment purchases corn, soybean, wheat, barley and livestock
from its members and markets these products.
The Company evaluates performance based upon operating profit or loss.
Interest expense is allocated to each of the segment assets employed and
excluding the allocation of general overhead. The Company accounts for
intersegment sales at current market prices.
The following table presents information about the Company's reported
segment profit and segment assets as well as the reconciliation of
reportable segment revenues, operating profit and assets to the Company's
consolidated totals.
<TABLE>
<CAPTION>
1999 Retail Farm
Crops Feed Petroleum Farm Supply and Home Marketing
------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues from external customers $193,745,243 $181,287,240 $165,645,121 $532,287,286 $209,563,533 $79,637,454
Intersegment revenues 285,085,607 70,473,727 13,663,909 -- 51,301,878 6,871,948
Interest expense 4,175,956 2,676,378 1,218,823 11,747,410 3,046,888 1,220,555
Depreciation and amortization 1,821,066 2,984,380 1,985,752 9,080,996 2,011,605 1,371,066
Profit 12,422,440 11,825,694 5,867 (518,604) 8,326,288 (380,799)
Assets 119,567,826 47,542,388 36,378,354 197,754,505 69,022,499 46,421,387
Capital expenditures 3,774,689 3,695,269 35,209 21,574,003 345,728 2,354,457
</TABLE>
1999
Other Total
------------ --------------
Revenues from external customers $4,193,615 $1,366,359,492
Intersegment revenues 794,754 428,191,823
Interest expense 4,327,119 28,413,129
Depreciation and amortization 3,139,151 22,394,016
Profit (1,169,078) 30,511,808
Assets 166,923,095 683,610,054
Capital expenditures 14,824,577 46,603,932
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
---------------
1998 Retail Farm
Crops Feed Petroleum Farm Supply and Home Marketing
------------ ------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues from external customers $154,825,265 $145,581,994 $193,097,559 $336,259,693 $196,116,317 $ 94,516,837
Intersegment revenues 156,898,258 62,314,122 17,555,622 -- 40,404,007 8,876,637
Interest expense 2,461,380 1,805,800 1,488,294 6,570,858 2,965,678 (191,898)
Depreciation and amortization 1,315,274 2,107,916 2,057,166 6,594,762 1,844,868 910,256
Profit 16,865,664 6,120,676 1,650,180 4,855,530 5,966,802 1,781,884
Assets 55,508,563 34,270,787 35,634,480 104,946,956 69,168,805 51,698,503
Capital expenditures 1,102,859 3,046,937 2,499,106 14,372,371 2,380,587 820,786
</TABLE>
Other Total
------------- --------------
Revenues from external customers $ 2,888,853 $1,123,286,518
Intersegment revenues 711,122 286,759,768
Interest expense 1,759,261 16,859,373
Depreciation and amortization 2,781,630 17,611,872
Profit (526,980) 36,713,756
Assets 111,068,346 462,296,440
Capital expenditures 9,682,022 33,904,668
<TABLE>
<CAPTION>
1997 Retail Farm
Crops Feed Petroleum Farm Supply and Home Marketing
------------ ------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues from external customers $160,448,334 $161,939,799 $250,260,067 $336,043,632 $188,425,641 $116,211,167
Intersegment revenues 152,832,784 65,124,073 21,514,906 -- 40,531,928 20,572,748
Interest expense 1,911,693 1,711,774 1,078,107 6,376,174 2,963,301 1,989
Depreciation and amortization 1,253,195 2,118,456 1,946,686 6,220,394 1,721,362 756,392
Profit 26,609,406 6,301,755 7,106,830 5,854,165 7,172,649 3,585,102
Assets 50,852,032 32,269,622 36,414,775 106,164,547 64,464,842 15,487,755
Capital expenditures 1,363,892 2,481,491 2,280,690 7,368,498 1,947,395 1,104,470
</TABLE>
Other Total
------------- --------------
Revenues from external customers $ 2,771,115 $1,216,099,755
Intersegment revenues 781,968 301,358,407
Interest expense 1,522,485 15,565,523
Depreciation and amortization 2,581,947 16,598,432
Profit (197,898) 56,432,009
Assets 103,506,540 409,160,113
Capital expenditures 3,398,142 19,944,578
The following is a reconciliation of reportable segment profit to the
Company's consolidated totals.
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Total profit for reportable segments $ 30,511,808 $ 36,713,756 $ 56,432,009
General corporate overhead (31,961,458) (23,143,300) (22,930,523)
------------ ------------ ------------
(Loss) savings before income taxes and
undistributed (loss) earnings in Statesman
Financial Corporation $ (1,449,650) $ 13,570,456 $ 33,501,486
============ ============ ============
</TABLE>
F-32
<PAGE>
Independent Auditors' Report
The Board of Directors
Gold Kist Inc.:
Southern States Cooperative, Incorporated:
We have audited the accompanying statements of operations and cash flows of
the Inputs Business (as defined in Note 1) of Gold Kist Inc. and subsidiaries
(the "Company") for each of the years in the two-year period ended June 27,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements of the Company's Inputs Business to
be sold to Southern States Cooperative, Inc. were prepared pursuant to the Asset
Purchase Agreement described in Note 1, and are not intended to be a complete
presentation of the Inputs Business's results of operations and cash flows as if
the Inputs Business had operated as a stand-alone company.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and the cash flows of the
Inputs Business of Gold Kist Inc. and subsidiaries for each of the years in the
two-year period ended June 27, 1998, pursuant to the Asset Purchase Agreement
described in Note 1, in conformity with generally accepted accounting
principles.
KPMG LLP
Atlanta, Georgia
August 26, 1998
F-33
<PAGE>
<TABLE>
<CAPTION>
INPUTS BUSINESS OF GOLD KIST INC.
STATEMENTS OF OPERATIONS
(Amounts in Thousands)
Years Ended
-------------------------------
June 28, 1997 June 27, 1998
-------------- --------------
<S> <C> <C>
Net sales............................................. $488,409 $480,542
Cost of sales......................................... 389,798 393,711
-------- --------
Gross margin...................................... 98,611 86,831
Distribution, administrative and general expenses..... 98,456 105,291
-------- --------
Net operating margin (loss)....................... 155 (18,460)
-------- --------
Other income (deductions):............................
Interest income................................... 8,448 10,041
Interest expense.................................. (11,282) (12,675)
Miscellaneous, net................................ 88 1,169
-------- --------
Total other deductions........................ (2,746) (1,465)
-------- --------
Loss before income taxes.......................... (2,591) (19,925)
Income tax benefit (note 6)........................... 972 7,576
-------- --------
Net loss.......................................... $ (1,619) $(12,349)
======== ========
</TABLE>
See accompanying notes to financial statements.
F-34
<PAGE>
INPUTS BUSINESS OF GOLD KIST INC.
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<TABLE>
<CAPTION>
Years Ended
-----------------------------
June 28, 1997 June 27, 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss..................................................... $(1,619) $(12,349)
Non-cash items included in net loss:
Depreciation and amortization............................. 6,186 6,188
Allowance for doubtful accounts........................... 2,282 5,773
Gains on sales of assets.................................. (23) (475)
Equity in loss of limited liability corporation........... -- 481
Other..................................................... (82) (34)
Changes in operating assets and liabilities:
Receivables............................................... 2,831 (8,334)
Crop notes receivable..................................... (8,479) (10,746)
Inventories............................................... (1,678) (7,623)
Other current assets...................................... 447 564
Accounts payable and accrued expenses..................... 4,909 9,166
------- --------
Net cash provided by (used in) operating activities.... 4,774 (17,389)
------- --------
Cash flows from investing activities:
Acquisitions of investments............................... -- (1,673)
Acquisitions of property, plant and equipment............. (9,375) (4,729)
Proceeds from disposals of property, plant and equipment.. 404 871
Other..................................................... (101) (367)
------- --------
Net cash used in investing activities.................. (9,072) (5,898)
------- --------
Cash flows from financing activities:
Principal payments of long-term debt...................... (270) (232)
Net transfers form Gold Kist Inc.......................... 4,568 23,519
------- --------
Net cash provided by financing activities.............. 4,298 23,287
------- --------
Net change in cash and cash equivalents................ -- --
Cash and cash equivalents at beginning of year............... -- --
------- --------
Cash and cash equivalents at end of year..................... $ -- $ --
======= ========
Supplemental disclosure of cash flow data:
Cash paid during the years for:
Interest paid to third parties............................ $ 510 $ 468
======= ========
Income taxes (note 6)..................................... $ -- $ --
======= ========
</TABLE>
See accompanying notes to financial statements.
F-35
<PAGE>
INPUTS BUSINESS OF GOLD KIST INC.
NOTES TO FINANCIAL STATEMENTS
June 28, 1997 and June 27, 1998
(Dollar Amounts in Thousands)
(1) Basis of Presentation
Gold Kist Inc. ("Gold Kist" or "Company") and Southern States Cooperative,
Incorporated ("Southern States") have entered into an Asset Purchase Agreement
(the "Agreement"), dated as of July 23, 1998, pursuant to which the Company has
agreed to sell and assign, and Southern States has agreed to purchase and
assume, the assets and certain of the liabilities of the Company's agricultural
inputs business. The affected assets include substantially all of the assets of
the Company's Agri-Services segment, as well as certain crop notes receivable of
AgraTrade Financing, Inc., the Company's wholly-owned finance subsidiary (such
businesses and certain other assets to be acquired are referred to as the
"Inputs Business"). The Agri-Services segment purchases, manufactures and
processes fertilizers, agricultural chemicals, seeds, pet foods, feed and animal
health products and other farm supply items for distribution and sale at
wholesale and retail. Additionally, the segment serves as a contract procurement
agent for and storer of farm commodities such as soybeans, grain and peanuts and
is engaged in cotton processing and storage.
The financial statements are not intended to be a complete presentation of
the results of operations and cash flows as if the Inputs Business had operated
as a stand-alone company. Intercompany transactions within the Inputs Business
have been eliminated. The accompanying financial statements present the results
of operations and cash flows of the Inputs Business, based upon the structure of
the transaction as described in the Agreement. The transaction as set forth in
the Agreement is hereinafter referred to as the Acquisition.
Gold Kist provides various services to the Inputs Business including, but
not limited to, facilities management, information systems processing, corporate
protection and risk management, payroll and employee benefits administration,
auditing and financial reporting, credit, engineering, and government and public
relations services. Gold Kist allocates these expenses and all other central
operating costs, first on the basis of direct usage when identifiable, with the
remainder allocated among Gold Kist's businesses on the basis of their
respective assets, revenues, headcount, or other measures. In the opinion of
management of Gold Kist, these methods of allocated costs are reasonable. These
expenses totaled $5.8 million and $5.4 million in 1997 and 1998, respectively.
The Inputs Business has been financed by operating cash flow and advances
from Gold Kist. Gold Kist has allocated interest expense to the Inputs Business
based upon net operating assets employed at interest rates that approximate
market. Interest expense charged to the Inputs Business for 1997 and 1998 was
$10.8 million and $12.2 million, respectively.
Sales of animal feeds from the Inputs Business to Gold Kist approximated
$5.4 million in 1997 and $6.0 million in 1998. The Inputs Business recorded
cotton procurement commission revenue from Gold Kist of $95 for 1998. These
amounts have been included in the statements of operations.
The Inputs Business participates in a centralized cash management system
wherein cash receipts are transferred to and cash disbursements are funded by
Gold Kist.
Significant accounting policies are designated below as an integral part of
the notes to financial statements to which the policies relate.
F-36
<PAGE>
INPUTS BUSINESS OF GOLD KIST INC.
NOTES TO FINANCIAL STATEMENTS
June 28, 1997 and June 27, 1998
(Dollar Amounts in Thousands)
(a) Fiscal Year
Gold Kist employs a 52/53 week fiscal year. The financial statements
for 1997 and 1998 reflect 52 weeks.
(b) Use of Estimates
Management of Gold Kist has made a number of estimates and assumptions
to prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from these
estimates.
(c) Depreciation
Depreciation of plant and equipment is calculated by the straight-line
method over the estimated useful lives of the respective assets
(buildings and improvement--10 to 25 years, machinery and equipment--4
to 10 years).
(d) Goodwill
In 1997, Gold Kist acquired a cotton gin at Morven, Georgia that is
included in the Inputs Business. The cash purchase price totaled $1.7
million. Of this amount, $423 of goodwill was recorded to reflect the
excess of cash prices for these businesses over the fair values of
their net assets. The goodwill for this acquisition is being amortized
on a straight-line basis over a 15 year period.
(2) Crop Notes Receivable
The Inputs Business issues crop notes receivables to farmers and third
party agricultural inputs dealers which are generally secured by crop liens and
bear interest at variable rates based on the prime lending rate. The increase in
the bad debts provision on crop notes receivable for the year ended June 27,
1998 reflects the increase in the age of outstanding crop notes and a
deterioration in the credit quality of specific crop notes. These factors were
primarily the result of poor crop yields and low farm commodity prices during
1998. An allowance for doubtful notes has been recorded, the activity of which
is summarized as follows:
Years Ended
------------------------------
June 28, 1997 June 27, 1998
-------------- --------------
Allowance for doubtful notes -
beginning of the fiscal year... $ 2,193 $ 2,706
Bad debts provisions on crop
notes receivable.............. 1,528 6,798
Write-off of crop notes receivable.. (1,015) (2,688)
------- -------
Allowance for doubtful notes -
end of the fiscal year......... $ 2,706 $ 6,816
======= =======
F-37
<PAGE>
INPUTS BUSINESS OF GOLD KIST INC.
NOTES TO FINANCIAL STATEMENTS
June 28, 1997 and June 27, 1998
(Dollar Amounts in Thousands)
(3) Futures and Options Transactions
Gold Kist on behalf of the Inputs Business engages in commodity futures and
options transactions to manage the risk of adverse price fluctuations with
regard to its animal feed ingredient purchases. Gains and losses on futures
contracts are recognized when closed. Option contracts are valued at fair market
value. Gains or losses on futures and options transactions are included as a
part of product cost. Cost of sales for the fiscal years ended June 28, 1997 and
June 27, 1998 include losses on futures and options transactions of $465
thousand and $4.1 million, respectively.
(4) Investments
At June 27, 1998, Gold Kist had a $28.8 million investment in CF
Industries, Inc., a major fertilizer cooperative, that is not included in the
acquisition. The Inputs Business Statements of Operations include patronage
refunds from CF Industries, Inc. of $10.1 million and $3.7 million,
respectively, for 1997 and 1998. These patronage refunds are reflected as a
reduction in cost of sales.
(5) Rent Expense
Total rental expense on operating leases was $12.4 million and $12.0
million in 1997 and 1998, respectively.
(6) Income Taxes
The operations of the Inputs Business are included in the consolidated
income tax returns of Gold Kist. All income tax payments are made by Gold Kist
and are not allocated to the Inputs Business. Pursuant to the Agreement, Gold
Kist will retain all income tax liabilities and rights to all tax refunds
relating to operations prior to the closing date of the acquisition. The
statements of operations reflect management's estimates of income tax benefit
using effective federal and state statutory rates as if the Inputs Business was
operated as a stand-alone company. As Gold Kist manages its tax position on a
consolidated basis, which takes into account the results of all of its
operations, the Inputs Business's effective tax rate could vary in the future
from that reported in the accompanying statements of operations. The Inputs
Business's future effective tax rate will largely depend on Southern States'
structure and tax strategies.
The components of the income tax benefit were as follows:
June 28, 1997 June 27, 1998
-------------- --------------
Current:
- --------
Federal $(222) $(5,007)
State (12) (698)
----- -------
(234) (5,705)
----- -------
Deferred:
- ---------
Federal (671) (1,701)
State (67) (170)
----- -------
(738) (1,871)
----- -------
$(972) $(7,576)
===== =======
The effective tax rates were different from the United States statutory
rates for the reasons set forth below:
June 28, 1997 June 27, 1998
-------------- --------------
Computed expected income tax benefit $(881) $(6,974)
Effect of state income taxes (8) (433)
Other (83) (169)
----- -------
$(972) $(7,576)
===== =======
F-38
<PAGE>
INPUTS BUSINESS OF GOLD KIST INC.
NOTES TO FINANCIAL STATEMENTS
June 28, 1997 and June 27, 1998
(Dollar Amounts in Thousands)
(7) Profit Sharing and Retirement Plans
The Inputs Business participates in various incentive plans provided by
Gold Kist for its employees, including a voluntary profit sharing and investment
plan, as well as an annual incentive plan for key employees. The Inputs Business
also participates in Gold Kist's two noncontributory defined benefit pension
plans, as well as a retiree health care benefit plan. All obligations and
liabilities of these plans associated with Inputs Business will be retained by
Gold Kist.
The costs of these plans have been allocated by Gold Kist to the Inputs
business based upon either plan participation, unit profitability or relative
payroll costs. Total benefit plan costs charged to the Inputs Business
operations were $1.5 million for 1997 and $1.1 million for 1998.
F-39
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
as of December 31, 1999 and June 30, 1999
----------------
December 31,
1999
ASSETS (Unaudited) June 30, 1999
-------------- -------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 40,046,593 $ 18,742,408
Receivables, net 69,793,161 117,375,357
Inventories 240,768,190 213,141,319
Prepaid expenses 11,574,457 7,241,450
Deferred income taxes 6,610,490 6,689,496
Deferred charges 258,329 840,022
------------ ------------
Total current assets 369,051,220 364,030,052
------------ ------------
Investments and other assets:
Investments:
Statesman Financial Corporation 23,552,999 23,651,051
Michigan Livestock Credit Corporation 12,535,110 12,718,722
Other companies (principally cooperatives) 83,065,066 78,416,407
Receivables 1,415,989 1,544,553
Other assets 10,008,404 12,269,263
------------ ------------
Total investments and other assets 130,577,568 128,599,996
------------ ------------
Property, plant and equipment 396,121,000 378,196,657
Less accumulated depreciation 198,476,318 189,079,016
------------ ------------
Property, plant and equipment, net 197,644,682 189,117,641
------------ ------------
$697,273,470 $681,747,689
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-40
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
as of December 31, 1999 and June 30, 1999
----------------------
December 31,
LIABILITIES AND STOCKHOLDERS' AND 1999
PATRONS' EQUITY (Unaudited) June 30, 1999
-------------- -------------
Current liabilities:
<S><C> <C> <C>
Short-term notes payable $ 2,800,000 $ 5,600,000
Current maturities of long-term debt 3,838,541 3,836,938
Accounts payable 157,639,853 138,486,921
Accrued expenses:
Environmental remediation 1,533,462 972,477
Payrolls, employee benefits, related taxes
and other 42,554,190 39,801,159
Accrued income taxes - 2,050,129
Dividends payable 1,231,857 380,106
Advances from managed member cooperatives 21,795,359 19,395,311
--------------- -------------
Total current liabilities 231,393,262 210,523,041
--------------- -------------
Long-term debt
Bridge loan facility 100,000,000
Long-term debt 183,827,179 176,562,296
--------------- -------------
Total long term debt 183,827,179 276,562,296
--------------- -------------
Other noncurrent liabilities:
Employee benefits 7,349,164 7,070,509
Deferred income taxes 2,814,045 2,969,365
Environmental remediation 1,848,564 2,218,664
Miscellaneous 4,847,148 4,538,213
--------------- -------------
Total other noncurrent liabilities 16,858,921 16,796,751
--------------- -------------
Capital Securities, Series A 59,405,000
Redeemable preferred stock 2,114,100 2,114,100
Stockholders' and patrons' equity:
Capital stock:
Preferred 41,449,500 1,485,000
Common - $1 par value; 12,116,877 and
12,147,082 shares outstanding at
December 31, 1999 and June 30, 1999,
respectively 12,116,877 12,147,082
--------------- -------------
Total stockholders' equity 53,566,377 13,632,082
Patrons' equity 150,108,631 162,119,419
--------------- -------------
Total stockholders' and patrons' equity 203,675,008 175,751,501
--------------- -------------
$697,273,470 $681,747,689
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-41
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
for the six months ended December 31, 1999 and 1998
(Unaudited)
------------------------
<S> <C> <C>
Six Months Ended
December 31,
----------------
1999 1998
---- ----
Sales and other operating revenue:
Net purchases by patrons $547,032,752 $438,108,984
Net marketing for patrons 38,948,249 42,773,380
Other operating revenue 1,433,810 2,092,136
----------------- ---------------
587,414,811 482,974,500
Cost of products purchased and marketed and other
operating costs 470,012,491 392,567,340
----------------- ---------------
Gross margin 117,402,320 90,407,160
Selling, general and administrative expenses 128,153,470 108,578,082
----------------- ---------------
Loss on operations (10,751,150) (18,170,922)
----------------- ---------------
Other deductions (income):
Interest expense 16,292,760 13,356,897
Interest income and service charges (7,373,532) (6,874,400)
Miscellaneous income, net (2,602,156) (3,742,750)
----------------- ---------------
6,317,072 2,739,747
----------------- ---------------
Loss before distribution on
Capital Securities, Series A, income
tax benefit, undistributed loss in
Statesman Financial Corporation and
cumulative effect of change in
accounting method (17,068,222) (20,910,669)
Distributions on Capital Securities, Series A (1,200,000)
Loss before income tax benefit,
undistributed loss in Statesman
Financial Corporation and cumulative
effect of change in accounting method (18,268,222) (20,910,669)
Income tax benefit (7,151,364) (5,494,473)
----------------- ---------------
Loss before undistributed loss in
Statesman Financial Corporation and
cumulative effect of change in (11,116,858) (15,416,196)
accounting method
Undistributed loss of Statesman Financial Corporation,
net of income taxes (252,322) (176,035)
Cumulative effect of change in accounting method 1,589,996
----------------- ---------------
Net loss $ (9,779,184) $(15,592,231)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-42
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF PATRONS' EQUITY
as of December 31, 1999 and June 30, 1999
-----------------
December 31,
1999
(Unaudited) June 30, 1999
-------------- --------------
Patronage refund allocations:
<S><C> <C> <C>
Balance, beginning of year $ 67,844,199 $ 68,151,124
Adjustments to prior year's allocation 74,627
Redemptions (529,934) (381,552)
------------ ------------
Balance, end of quarter 67,314,265 67,844,199
------------ ------------
Operating capital:
Balance, beginning of year 94,275,220 97,441,238
Net loss from operations (9,779,184) (2,074,765)
Adjustments to prior year's estimated patronage refunds,
net of income taxes (71,790)
Dividends on capital stock declared:
Preferred (888,485) (278,419)
Common, $.06 per share (729,551)
Stock issuance costs (800,000)
Other reductions (13,185) (11,493)
------------ ------------
Balance, end of period 82,794,366 94,275,220
------------ ------------
Total patrons' equity $150,108,631 $162,119,419
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-43
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended December 31, 1999 and 1998
(Unaudited)
-----------------
<S><C> <C> <C>
Six Months Ended
December 31,
----------------
1999 1998
---- ----
Operating activities:
Net loss $ (9,779,184) $ (15,592,231)
Adjustments to reconcile net loss to cash (used)
provided by operating activities:
Depreciation and amortization 12,591,896 10,374,180
Deferred income taxes (76,314) (2,927,628)
Gain on sale of property and equipment (1,064,141) 228,536
Undistributed (earnings) loss of insurance exchange
and joint ventures (4,597,925) 242,469
Undistributed loss of Statesman Finance Company, net
of tax 252,322 176,035
Noncash patronage refunds received (60,524) (2,529)
Redemption of noncash patronage refunds received 1,609 86,124
Cash provided by current assets and liabilities 19,024,386 98,163,918
------------ ------------
Cash provided in operating activities 16,292,125 90,748,874
------------ ------------
Investing activities:
Additions to property, plant and equipment (20,161,506) (24,529,052)
Proceeds from disposal of property, plant and equipment 2,817,279 626,112
Additional investments in other companies (5,000) (3,441,670)
Net cash paid for acquisition (203,105,507)
Proceeds from purchase price adjustment 19,927,176 -
------------ ------------
Cash provided (used) in investing activities 2,577,949 (230,450,117)
------------ ------------
Financing activities:
Net decrease in short-term notes payable (2,800,000) (4,700,000)
Proceeds from bridge loan facility 218,313,467
Proceeds from long-term debt 467,051,336 7,000,000
Repayment of long-term debt, including bridge loan
facility (559,784,850) (40,794,205)
Proceeds from sale of Capital Securities, Series A 59,400,000
Proceeds from sale of preferred stock 39,200,000
Dividends on capital stock paid (36,734)
Patronage refunds paid in cash (575,650)
Net redemption of stockholders' and patrons' equity (595,641) (293,447)
---------------------------------
Cash provided in financing activities 2,434,111 178,950,165
---------------------------------
Increase in cash and cash equivalents 21,304,185 39,248,922
Balance at beginning of year 18,742,408 15,352,446
---------------------------------
Balance at end of period $ 40,046,593 $ 54,601,368
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-44
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
---------------
1. Basis of Presentation
---------------------
In the opinion of management, the accompanying unaudited consolidated
financial statements of Southern States Cooperative, Inc. ("Southern
States") and its wholly owned subsidiaries (collectively the "Company")
contain all adjustments necessary to present fairly, in all material
respects, the Company's consolidated financial position as of December 31,
1999 and the consolidated results of operations and cash flows for the six
month periods ended December 31, 1999 and 1998. All adjustments are of a
normal, recurring nature. These financial statements should be read in
conjunction with the June 30, 1999 consolidated financial statements and
notes thereto included herein. The results of operations for the six months
ended December 31, 1999 and 1998 are not indicative of the results to be
expected for the full year as the farming industry is very cyclical.
On October 13, 1998, the Company purchased the agricultural farm supply
inputs business ("Inputs Business") of Gold Kist Inc. (the "Gold Kist
Inputs Business"), a Georgia marketing cooperative. The Gold Kist Inputs
Business' results of operations have been included in the Company's
consolidated results of operations since the date of acquisition (See
Note 7).
Certain amounts in the accompanying unaudited consolidated financial
statements for the six month period December 31, 1998 have been
reclassified to conform to the current presentation.
2. Inventory
---------
Inventories at December 31, 1999 and June 30, 1999 consisted of the
following:
December 31, 1999 June 30, 1999
----------------- -------------
Finished goods:
Purchased for resale $204,921,630 $183,115,888
Manufactured 6,532,989 5,902,728
------------ ------------
211,454,619 189,018,616
Materials and Supplies 29,313,571 24,122,703
------------ ------------
Totals $240,768,190 $213,141,319
============ ============
3. Other Information
-----------------
The Company is a defendant in several lawsuits arising in the ordinary
course of business. While the outcome of any litigation cannot be predicted
with certainty, the Company believes that the ultimate disposition of these
matters will not have a material adverse effect on its consolidated
financial position or results of operations.
The Company's accrued environmental costs represents the cost to cover
estimated environmental remediation costs. The remaining actual
environmental remediation liability may be different from management's
estimates due to uncertainty of the extent of the pollution, the complexity
of laws and government regulations and their interpretation, the varying
costs and effectiveness of alternative cleanup technologies and methods,
the uncertain level of insurance or other types of recovery, and the
uncertain level of the Company's involvement.
F-45
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
--------------
In February of 2000, the Company received additional information and
revised estimates of the cost of containment, remediation and monitoring
activities related to environmental contamination at four of the Company's
operating sites. Based upon this additional information the Company accrued
$1.2 million for the additional estimated cost of remediating these sites.
These costs are expected to be expended over a five-year period with
approximately $538,000 to be expended by December 31, 2000 and the
remaining portion spread over the remaining four years.
Because the events that resulted in the additional accrual occurred prior
to closing the period ended December 31, 1999, the accrued amounts are
reflected in the financial statements for that period.
In early January of 1999, the Company received additional information and
revised estimates of the cost of containment, remediation and monitoring
activities related to environmental contamination at one of the Company's
past operating sites. Based upon this additional information the Company
accrued $3.0 million for the additional estimated cost of remediating this
site. These costs are expected to be expended over a ten-year period with
approximately $1.1 million to be expended by December 31, 2000 and the
remaining portion spread over the remaining 9 years. Expenditures for the
first five years are for capital equipment and site remediation and
expenditures after year five are expected to be for site monitoring and
reporting.
4. Supplemental Disclosures of Cash Flow Information
-------------------------------------------------
The components of cash provided by (used in) current assets and
liabilities:
2000 1999
----- ----
Receivables $ 27,812,928 $ 35,404,580
Inventories (27,626,871) (36,901,730)
Prepaid expenses (4,333,007) (603,851)
Accounts payable 21,552,985 88,465,853
Accrued expenses 1,481,371 12,721,830
Other, net 136,980 (953,688)
------------ ------------
$19,024,386 $ 98,132,994
============ ============
Dividends declared but not paid during the six-month periods ended December
31, 1999 and 1998, were $888,485 and $137,405, respectively. Cash payments
for interest expense were $15,959,291 and $12,501,597 for the six-month
periods ended December 31, 1999 and 1998, respectively. Cash payments for
income taxes were $269,700 and $673748 for the six month periods ended
December 31, 1999 and 1998, respectively.
5. Segment Information
-------------------
The Company has six reporting segments or divisions: Crops, Feed,
Petroleum, Retail Farm Supply, Farm and Home, and Marketing. The crops
segment procures, manufactures, processes and distributes fertilizer, seed
and crop protection products. The feed segment procures and manufactures
dairy, livestock, equine, poultry, pet and aquacultural feeds. The
petroleum segment distributes all grades of gasoline, kerosene, fuel oil,
propane and other related petroleum products. The retail farm supply
F-46
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
---------------
segment distributes agricultural supplies through approximately 300 Company
owned retail locations and managed local cooperatives. The farm and home
segment distributes farm and home products at wholesale and retail centers.
The marketing segment purchases corn, soybeans, wheat, barley and livestock
from its members and markets these products.
The Company evaluates performance based on operating profit or loss.
Interest expense is allocated to each of the segments based upon segment
assets employed and excludes the allocation of general corporate overhead.
The Company accounts for intersegment sales at current market prices.
The following tables present information about the Company's reported
segment profits and losses as well as the reconciliation of reportable
segment revenues and operating losses to the Company's consolidated totals
for the six months ended December 31, 1999 and 1998, respectively.
<TABLE>
<CAPTION>
Revenues from Intersegment Segment
External Customers Revenues Profit (Loss)
-----------------------------------------------------------------------------------------
Six months ended Six months ended Six months ended
December 31, December 31, December 31,
-----------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998
-------------- ------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Retail Farm Supply $204,750,034 $145,660,417 $ 0 $ 0 $(7,844,968) $(5,618,493)
Feed 91,689,393 84,536,467 37,138,281 32,660,337 5,571,973 5,864,444
Crops 42,947,704 44,809,535 91,473,085 50,377,109 18,072 (1.071,968)
Farm and Home 84,474,763 85,922,994 27,024,712 18,677,222 660,650 76,351
Petroleum 122,130,004 76,319,727 10,187,384 6,981,099 3,045,781 (5,403,341)
Marketing 40,213,864 44,624,623 4,098,991 3,469,108 (696,735) 122,639
Other 1,209,049 1,100,737 0 0 (508,950) (533,628)
------------------------------------------------------------------------------------------
Total $587,414,811 $482,974,500 $169,922,453 $112,164,875 $ 245,823 $(6,563,996)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
General corporate expenses (18,514,045) (14,346,673)
-------------------------------
Loss before income tax benefit,
undistributed loss in Statesman
Financial Corporation and cumulative
effect of change in accounting method. $(18,268,222) $(20,910,669)
-------------------------------
</TABLE>
6. New Accounting Standards
------------------------
In June of 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended, which is effective for
fiscal quarters beginning after June 15, 2000. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. It requires that an entity recognize all derivatives as assets
or liabilities in the statement of financial position and measure those
instruments at fair value. The Company will adopt SFAS No. 133 in the
fiscal year 2001. The Company is currently evaluating any impact of the
derivatives standard.
F-47
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
---------------
7. Acquisition of Gold Kist Inputs Business
-----------------------------------------
On October 13, 1998, the Company purchased the Gold Kist Inputs Business of
Gold Kist Inc. ("Gold Kist"), a Georgia cooperative marketing association.
The net assets purchased included certain inventory, real property,
personal property, and certain accounts receivable, other assets, and
certain liabilities. The initial estimated net purchase price of $218
million, (net of liabilities assumed of approximately $21.5 million and
subject to a final purchase price adjustment) was financed utilizing a
bridge loan facility. This acquisition has been accounted for under the
purchase method of accounting. The purchase price has been preliminarily
allocated to inventory, accounts receivables and property plant and
equipment based on estimated fair values at the date of acquisition,
pending final determination of certain acquired balances. The Gold Kist
Inputs Business' results of operations have been included in the Company's
consolidated statement of operations since the date of acquisition.
In connection with the purchase transaction, the Company delivered to Gold
Kist a post-closing statement of net asset value (the "Post-Closing
Valuation") prepared pursuant to the terms of the purchase agreement (the
"Agreement"). The final purchase price as determined by the Company
pursuant to the Post-Closing Valuation was approximately $198 million
compared to an estimated purchase price (after deducting the $10 million
hold back provided for in the Agreement) of $218 million. Taking into
account certain agreed upon adjustments, the Company's Post-Closing
Valuation resulted in a repayment by Gold Kist to the Company of
approximately $21 million, including interest. The difference between the
initial estimated purchase price as determined by the pre-closing valuation
and the Company's determination of the final purchase price as shown by the
Post-Closing Valuation was principally due to the Company not purchasing
certain accounts receivable that were included in the initial purchase
price.
Consistent with the Company's business plan for reducing the
pre-acquisition losses of the Gold Kist Inputs Business, the Company has
finalized its rationalization plan, which will result in the closure of 29
locations. Costs to exit these locations were approximately $1.3 million,
most of which represent severance and facility closure costs. These costs
were have been recorded as an adjustment to the purchase accounting of Gold
Kist. At December 31, 1999, the Company had paid approximately $300,000,
most of which related to severance costs. The remaining portion of the
reserve relates primarily to facility closure costs, which are anticipated
to be expended by June 2000.
8. Financing Agreements
--------------------
On January 12, 1999, Southern States entered into a new $200 million three-
year revolving credit facility with various commercial banks, including
Bank of America (formerly NationsBank, N.A.), First Union National Bank and
CoBank. Under the terms of this facility, Southern States must maintain a
ratio of funded indebtedness to capitalization of less than or equal to .50
to 1, have tangible net worth of at least $256 million plus 25% of net
income in a fiscal year and maintain a ratio of consolidated cash flow to
consolidated interest expense and distribution on Capital Securities,
Series A of greater than 1.50 to 1. Interest rates under this facility are
determined on a competitive bid basis or at a LIBOR-based maximum rate.
F-48
<PAGE>
SOUTHERN STATES COOPERATIVE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
---------------
In January of 1999, Southern States repaid $118.3 million of its
outstanding indebtedness under the bridge loan facility by borrowing an
equivalent amount under this new credit facility. On October 5, 1999, in
connection with the issuance of the securities to Gold Kist, Inc., the
bridge loan facility was repaid in full. See Note 10.
9. Change in Accounting Method
---------------------------
Effective July 1, 1999, Southern States Cooperative changed its method of
accounting for its investment in the Southern States Insurance Exchange
(the "Insurance Exchange") and began recognizing operating results on this
investment on a quarterly basis. Prior to the accounting change, Southern
States' portion of the annual earnings relating to the Insurance Exchange,
which year ends on December 31, were recognized in Southern States' third
quarter, which ends March 31. Although this method was acceptable under
accounting rules for agricultural cooperatives, Southern States believes
the new method is preferable because operating results relating to the
Insurance Exchange are more appropriately matched with the period in which
the revenue is earned.
Pro forma amounts assuming the change in application of accounting method
applied retroactively (unaudited):
Six Months Ended
----------------
December 31, 1999 December 31, 1998
----------------- -----------------
Net loss $6,194,494 $7,621,748
10. Issuance of Securities
----------------------
On October 5, 1999, Southern States Capital Trust I, a trust subsidiary of
Southern States, issued to Gold Kist $59.4 million Step-Up Rate Capital
Securities, Series A ("Series A"), net of issuance costs of $600,000.
Distributions are cumulative relating to the Series A securities at a rate
of 8% per annum, increasing to 8.5% on July 5, 2000 and 8.75% on July 5,
2001. The Series A securities mature on October 5, 2029. Also on October 5,
1999, Southern States issued to Gold Kist $40 million Step-Up Rate Series B
Cumulative Redeemable Preferred Stock, $100 par value per share ("Series
B"). Issuance costs incurred with respect to the Series B securities
totaled $800,000. Cash dividends are cumulative at an initial rate of 7.5%,
increasing to 8% per annum 9 months after the date of issuance and
increasing to 8.25% per annum twenty-one months after the issuance of the
Series B securities. Dividends are payable quarterly, in arrears on January
5, April 5, July 5 and October 5 of each year. The proceeds from the sale
of both the Series A securities and the Series B securities were used to
reduce Company debt and pay off the bridge loan facility which had been
utilized to finance the Gold Kist acquisition.
F-49
<PAGE>
INPUTS BUSINESS OF GOLD KIST INC.
STATEMENTS OF OPERATIONS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------
September 26, 1998 September 27, 1997
------------------- -------------------
<S> <C> <C>
Net sales............................ $91,508 $104,735
Cost of sales........................ 78,506 91,495
------- --------
Gross margin...................... 13,002 13,240
Distribution, administrative and
general expenses.................... 22,054 22,444
------- --------
Net operating loss................ (9,052) (9,204)
Other income (deductions):
Interest income................... 3,209 2,972
Interest expense.................. (3,994) (3,168)
Miscellaneous, net................ 171 753
------- --------
Total other deductions.......... (614) 557
------- --------
Loss before income taxes.......... (9,666) (8,647)
Income tax benefit (note 2).......... 3,625 3,288
------- --------
Net loss.......................... $(6,041) $ (5,359)
======= ========
</TABLE>
See accompanying notes to financial statements.
F-50
<PAGE>
INPUTS BUSINESS OF GOLD KIST INC.
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-------------------
September 26, 1998 September 27, 1997
------------------- -------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................... $ (6,041) $ (5,359)
Non-cash items included in net
income (loss):
Depreciation and amortization...... 1,592 1,520
Allowance for doubtful accounts.... (828) 292
(Gains) losses on sales of assets.. 11 (396)
Other.............................. 1,062 30
Changes in operating assets and
liabilities:
Receivables........................ 25,692 17,428
Crop notes receivable.............. (6,996) (7,017)
Inventories........................ 13,840 8,233
Other current assets............... 408 (3,068)
Accounts payable and other current
liabilities....................... (38,535) (24,348)
-------- --------
Net cash used in operating
activities....................... (9,795) (12,685)
-------- --------
Cash flows from investing activities:
Acquisitions of property, plant and
equipment.......................... (21) (2,270)
Proceeds from disposals of
property, plant and equipment...... 56 594
-------- --------
Net cash provided by (used in)
investing activities............ 35 (1,676)
-------- --------
Cash flows from financing activities:
Principal payments of long-term debt (52) (47)
Net transfers from Gold Kist Inc.... 9,812 14,409
-------- --------
Net cash provided by financing
activities...................... 9,760 14,362
-------- --------
Net change in cash and cash
equivalents..................... - -
Cash and cash equivalents at
beginning of year................... - -
-------- --------
Cash and cash equivalents at end of
year................................ $ - $ -
======== ========
Supplemental disclosure of cash flow
data:
Cash paid during the years for:
Interest paid to third parties..... $ 87 $ 117
======== ========
Income taxes (note 2).............. $ - $ -
======== ========
</TABLE>
See accompanying notes to financial statements.
F-51
<PAGE>
INPUTS BUSINESS OF GOLD KIST INC.
NOTES TO FINANCIAL STATEMENTS
(Amounts in Thousands)
(Unaudited)
1. Gold Kist Inc. ("Gold Kist" or "Company") and Southern States Cooperative,
Incorporated ("Southern States") have entered into an Asset Purchase
Agreement (the "Agreement"), dated as of July 23, 1998, pursuant to which
the Company has agreed to sell and assign, and Southern States has agreed
to purchase and assume, the assets and certain of the liabilities of the
Company's agricultural inputs business. The affected assets include
substantially all of the assets of the Company's Agri-Services segment, as
well as certain crop notes receivable of AgraTrade Financing, Inc., the
Company's wholly-owned finance subsidiary (such businesses and certain
other assets to be acquired are referred to as the "Inputs Business"). The
Agri-Services segment purchases, manufactures and processes fertilizers,
agricultural chemicals, seeds, pet foods, feed and animal health products
and other farm supply items for distribution and sale at wholesale and
retail. Additionally, the segment serves as a contract procurement agent
for and storer of farm commodities such as soybeans, grain and peanuts and
is engaged in cotton processing and storage.
The financial statements are not intended to be a complete presentation of
the results of operations and cash flows as if the Inputs Business had
operated as a stand-alone company. Intercompany transactions within the
Inputs Business have been eliminated. The accompanying financial statements
present the results of operations and cash flows of the Inputs Business,
based upon the structure of the transaction as described in the Agreement.
The transaction as set forth in the Agreement is hereinafter referred to as
the Acquisition.
The accompanying unaudited financial statements reflect the accounts of the
Inputs Business of Gold Kist Inc. ("Inputs Business"). All significant
intercompany transactions have been eliminated. Due to the seasonality of
the Inputs Business, results of operations for interim periods are not
necessarily indicative of results for the entire year.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of normal recurring
accruals) necessary to present fairly the results of operations and cash
flows.
2. The operations of the Inputs Business are included in the consolidated
income tax returns of Gold Kist. All income tax payments are made by Gold
Kist and are not allocated to the Inputs Business. The statements of
operations reflect management's estimates of income tax benefit using
effective federal and state statutory rates as if the Inputs Business was
operated as a stand-alone company. As Gold Kist manages its tax position
on a consolidated basis, which takes into account the results of all of its
operations, the Inputs Business's effective tax rate could vary in the
future from that reported in the accompanying statements of operations. The
Inputs Business's future effective tax rate will largely depend on Southern
States's structure and tax strategies.
F-52
<PAGE>
SOUTHERN STATES COOPERATIVE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial statements
have been prepared from and should be read in conjunction with, the historical
financial statements and the related notes of Southern States and the Gold Kist
Inputs Business included elsewhere in this prospectus.
The unaudited pro forma combined condensed statements of operations for the
year ended June 30, 1999, have been prepared to give effect to the acquisition
of the Gold Kist Inputs Business as if this transactions occurred on July 1,
1998. For further information concerning this acquisition, see "Business of
Southern States Acquisition of the Gold Kist Inputs Business."
The pro forma adjustments are based upon available information and
estimates and assumptions which management of Southern States believes are
reasonable. The unaudited pro forma combined condensed statements of operations
do not purport to represent what Southern States' results of operations would
have actually been had the transaction described in the respective notes
occurred on July 1, 1998. In addition, the unaudited pro forma combined
condensed financial statements do not purport to project Southern States'
financial position or results of operations for any future date or period.
F-53
<PAGE>
SOUTHERN STATES COOPERATIVE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the Year Ended June 30, 1999
<TABLE>
<CAPTION>
Historical
---------------------------------
Gold Kist
Southern Inputs Pro Forma
States Business Adjustments Pro Forma Combined
-------- --------- ----------- ------------------
(amounts in thousands)
<S> <C> <C> <C> <C>
Net sales...................................... $1,366,359 $91,508 $1,457,867
Cost of sales.................................. 1,114,782 78,506 $ 108 (1) 1,193,396
---------- ------- ----------- ----------
Gross margin................................. 251,577 13,002 (108) 264,471
Selling, general and administrative............ 247,635 22,054 269,689
---------- ------- ----------
Savings (loss) on operations................. 3,942 (9,052) (108) (5,218)
Other income (deductions):
Interest expense............................. (28,413) (3,994) (3,768) (2)
3,888 (2) (32,287)
Interest income and service charges.......... 11,209 3,209 14,418
Miscellaneous income, net.................... 11,812 171 11,983
---------- ------- ----------- ----------
(5,392) (614) (120) (5,886)
---------- ------- ----------- ----------
Loss before income tax, and undistributed
loss in Statesman Financial Corporation..... (1,450) (9,666) 12 (11,104)
Income tax expense (benefit)................... (597) (3,625) 5 (3) (4,217)
---------- ------- ----------- ----------
Loss before undistributed loss in Statesman
Financial Corporation....................... (853) (6,041) 7 (6,887)
Undistributed loss in Statesman Financial
Corporation, net of tax....................... (1,222) (1,222)
---------- ------- ----------- ----------
Net loss..................................... $ (2,075) $(6,041) $ 7 $ (8,109)
========== ======= =========== ==========
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements
F-54
<PAGE>
SOUTHERN STATES COOPERATIVE, INC.
NOTES TO THE UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS
(in thousands of dollars, unless otherwise noted)
Basis of Presentation
- ---------------------
Effective October 13, 1998, Southern States acquired the Gold Kist Inputs
Business. The Gold Kist Inputs Business results of operations have been included
in the Southern States' historical consolidated statement of operations since
the date of acquisition. The results of operations of the Gold Kist Inputs
Business from July 1, 1998 through September 30, 1998 have been included as a
pro forma adjustment in the unaudited pro forma combined condensed statement of
operations for the year ended June 30, 1999. The results of operations for the
Gold Kist Inputs Business for the 13 day period from October 1, 1998 to October
13, 1998 have been excluded. This 13 day period is not considered material for
this presentation.
Southern States' fiscal year is based upon a 12 calendar month year ended
June 30, 1999. Gold Kist Inputs Business quarterly information includes 13
weeks. Southern States quarterly information is based upon three month calendar
quarters.
Pro Forma Adjustments
- ---------------------
(1) Adjustment to increase depreciation expense based on the amounts assigned
and the estimated remaining useful lives of plant and equipment ranging
from 2 to 19 years.
(2) To reflect increased interest expense of $3,768 on borrowings utilizing the
bridge loan facility with a weighted average borrowing rate of
approximately 6.00% for 105 days for the period ended June 30, 1999. Also,
to reflect elimination of $3,888 of interest expense on liabilities not
assumed by Southern States.
(3) To record the income tax effect of the pro forma adjustments affecting
income at the applicable income tax rate, including the elimination of
interest expense allocated by Gold Kist Inc. to the Gold Kist Inputs
Business based on assets employed.
F-55
<PAGE>
SOUTHERN STATES COOPERATIVE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
(in thousands of dollars, unless otherwise noted)
The following unaudited pro forma combined condensed financial data give
effect to the acquisition of the Gold Kist Inputs Business using the purchase
method of accounting (this adjustment only impacts the pro forma statement of
operations for the year ended June 30, 1999).
The unaudited pro forma combined condensed financial data are intended for
information purposes only and are not necessarily indicative of the future
financial position or results of operations of Southern States had the
acquisition described above occurred on the indicated dates or been in effect
for the period presented. The unaudited pro forma combined condensed financial
data should be read in conjunction with, and is qualified in its entirety by,
the unaudited pro forma financial statements and the historical consolidated
financial statements of Southern States and the Gold Kist Inputs Business,
including in each case the related notes, included elsewhere in this prospectus,
and with "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
Fiscal Year
Ended
June 30, 1999
----------------------
(amounts in thousands)
<S> <C>
Statement of Operations Data:
Sales and other operating revenue........................... $1,457,867
Cost of products purchased and marketed..................... 1,193,396
Selling, general and administrative expenses................ 269,689
----------
Loss on operations (1)...................................... $ (5,218)
==========
Interest expense............................................ $ 32,287
As of
June 30, 1999
--------------
Other Data:
Cash flows from operations.................................. $ 140,257
Cash flows used in investing activities..................... (268,090)
Cash flows from financing activities........................ 127,562
Ratio of earnings to fixed charges (3) (4).................. N/A
EBITDA (2).................................................. 42,837
Ratio of EBITDA to interest expense......................... 1.31x
Current ratio (5)........................................... N/A
Long-term debt to total capitalization (6).................. N/A
</TABLE>
F-56
<PAGE>
SOUTHERN STATES COOPERATIVE, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
(1) Loss on operations represents loss before other deductions, other income,
income taxes and distributions on Capital Securities, Series A.
(2) EBITDA is defined as savings (loss) before income tax and after
distributions on Capital Securities, Series A, plus interest, depreciation
and amortization expenses after the cumulative effect of change in
accounting method, net of tax. EBITDA should not be considered as an
alternative to net savings (as determined in accordance with generally
accepted accounting principles), as a measure of operating performance or
as an alternative to net cash provided by operating, investing and
financing activities (as determined in accordance with generally accepted
accounting principles) as a measure of its ability to meet cash needs.
Southern States believes that EBITDA is a measure commonly reported and
widely used by investors as a measure of operating performance and debt
servicing ability because it assists in comparing performance on a
consistent basis without regard to interest, taxes, depreciation and
amortization, which can vary significantly depending upon capitalization
structure, tax status (particularly when comparing a cooperative company to
a non-cooperative company), accounting methods (particularly when
acquisitions are involved) or non operating factors (such as historical
cost). Accordingly, this information and the related other EBITDA ratios,
including the ratio of EBITDA to interest expense, have been disclosed in
this prospectus to permit a more complete comparative analysis of operating
performance relative to companies within and outside of the industry and of
Southern States' debt servicing ability. However, EBITDA and EBITDA to
interest expense may not be comparable in all instances to other similar
types of measures used by other companies in the agricultural industry.
(3) In the calculation of the ratio of earnings to fixed charges, earnings
consist of net savings (loss) before income taxes after consideration of
distributions on the Capital Securities, Series A, plus fixed charges.
Fixed charges consist of interest expense on indebtedness, amortization of
financing costs, that portion of rental expense representative of the
interest factor and distributions on the Capital Securities, Series A.
(4) On a pro forma basis, earnings were insufficient to cover fixed charges by
$12.2 million for the year ended June 30, 1999.
(5) Current ratio is defined as total current assets divided by total current
liabilities.
(6) Total capitalization is defined as the total of long-term debt, Capital
Securities, Series A, net, mandatorily redeemable preferred stock, capital
stock and patrons' equity.
F-57
<PAGE>
================================================================================
You should rely only on the information contained in this prospectus or other
information to which this prospectus refers. Southern States has not authorized
anyone to provide you with information that is different. Southern States is not
making an offer of the Senior Notes in any state where the offer is not
permitted. This prospectus is not an offer to sell, and it is not soliciting an
offer to buy, the Senior Notes offered hereby by anyone in any jurisdiction in
which such offer or solicitation is not authorized, or in which the person
making such offer or solicitation is not qualified to do so, or to any person to
whom it is unlawful to make such offer or solicitation. You should not assume
that the information in this prospectus is accurate as of any date other than
the date of this prospectus.
TABLE OF CONTENTS
Page
----
Prospectus Summary ..................................................... 1
Risk Factors ........................................................... 3
Use of Proceeds ........................................................ 6
Selected Historical Consolidated Financial
Information ......................................................... 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations ....................... 11
Southern States ........................................................ 30
Business of Southern States ............................................ 35
Management ............................................................. 53
Description of the Senior Notes ........................................ 63
Plan of Distribution ................................................... 73
Absence of Public Market, Redemption and
Market Risk ......................................................... 74
Legal Matters .......................................................... 74
Experts ................................................................ 74
Available Information .................................................. 74
Disclosure Regarding Forward Looking
Statements .......................................................... 75
Index to Financial Statements........................................... F-1
$50,000,000
[Southern States Logo]
SENIOR NOTES
Due From
Six Months to Seven Years
From Date of Issuance
--------------------
Prospectus
--------------------
____________ __, 2000
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses to be incurred by
Southern States in connection with the issuance and distribution of the Senior
Notes to be offered. All amounts are estimates except for the SEC registration
fee:
Registration under the Securities Act of 1933, as amended ........ $13,200
Accounting Fees and Expenses .....................................
Blue Sky Fees and Expenses .......................................
Legal Fees and Expenses ..........................................
Trustee and Transfer Agent Fees ..................................
Printing and Engraving Expenses ..................................
Miscellaneous
-------
Total ....................................................... $
=======
Item 14. Indemnification of Directors and Officers
Sections 13.1-698 and 13.1-702 of the Code of Virginia (1950) (the "Code")
provide that, unless limited by its articles of incorporation, a corporation
shall indemnify a director or officer who entirely prevails in the defense of
any proceeding to which he was a party because he is or was a director or
officer of the corporation against reasonable expenses incurred by him in
connection with the proceeding. Further, under Sections 13.1-697 and 13.1-702 of
the Code, a corporation may indemnify an individual made a party to a proceeding
because he is or was a director or officer against reasonable expenses incurred
in the proceeding if (i) he conducted himself in good faith, and (2) he
believed, in the case of conduct in his official capacity with the corporation
that his conduct was in its best interests and, in all other cases, that his
conduct was at least not opposed to its best interests, and (3) in the case of
any criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. Such indemnification is not permissible however, (a) in connection
with a proceeding by or in the right of the corporation in which the director
was adjudged liable to the corporation or (b) in connection with any other
proceeding charging improper personal benefit to him, whether or not involving
action in his official capacity, in which he was adjudged liable on the basis
that personal benefit was improperly received by him.
Article D of the Restated Articles of Incorporation of Southern States
reads as follows:
The Association shall indemnify any person who was or is a party
to any threatened, pending or completed action, suit, or proceeding,
whether civil, criminal, administrative, arbitrative or investigative
by reason of the fact that he is or was a director,
II-1
<PAGE>
officer, employee or agent of the Association, or is or was serving at
the request of the Association as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding to the full extent permitted under Title 13.1 of the Code
of Virginia, as the same may be amended from time to time, and under
any other controlling statutes or regulation whether Federal or State.
Such indemnification shall be in addition to, and not in limitation
of, any other indemnity required by law or agreement.
The Company maintains a Directors and Officers Liability Insurance Policy
(the "Policy") in place with Federal Insurance Company which indemnifies
directors and officers of the Company against certain damages and expenses
relating to claims against them caused by negligent acts, errors or omissions.
The Policy is a "claims made" policy with a $ 15,000,000 policy aggregate.
Item 15. Recent Sales of Unregistered Securities
During the three fiscal years ended June 30, 1999, the Company issued the
following:
A. Southern States Membership Common Stock. Southern States' common stock
---------------------------------------
is membership common stock, issued at a price equal to its $1.00 par value per
share. Southern States' membership common stock, notwithstanding a 6% dividend
feature, does not have characteristics typical of an investment security. As an
agricultural cooperative, voting rights in the Company are per capita,
regardless of the number of shares of membership common stock held; there is no
opportunity for capital appreciation, as shares are issued at par ($1.00 per
share) and are redeemable at par; there is no trading market in such shares as
they are subject to significant transfer restrictions. Pursuant to the
requirements of the Agricultural Cooperative Association Act of Virginia and the
Articles of Incorporation and Bylaws of Southern States, its issuance and
transfer is limited to bona fide producers of agricultural products and
cooperative associations that are owned and controlled by such producers who use
the services or supplies of Southern States. An agricultural producer who
qualifies for membership but is not already a member will automatically receive
the first $1.00 of any patronage refund in the form of one share of membership
common stock. Southern States is of the opinion that its membership common stock
should not be considered a security within the meaning of the federal securities
laws, but is nevertheless providing the information below to comply with the
requirements of this Item 15 under a contrary view.
II-2
<PAGE>
1. Issuance of Shares of Membership Common Stock to Managed Local
Cooperatives in Lieu of Cash Refunds of Patronage Refund Allocations.
(a) Securities Issued. During the fiscal years ended June 30, 1997, 1998
and 1999, the Company issued an aggregate of 1,179,265 shares, 803,329 shares
and no shares of its membership common stock, respectively, to 66 managed local
cooperatives, all of which are managed by the Company under uniform management
contracts and all of which operate as an integral part of the Southern States
cooperative distribution system. See "Southern States--The Southern States
Distribution System--Managed Local Cooperatives" in the Prospectus included as
Part I of this registration statement. The shares of membership stock issued in
1997 and 1998 were issued in lieu of cash payments made on the Company's
patronage refund allocations previously distributed to patrons for the fiscal
years ended June 30, 1975 and 1976, respectively. See "Southern
States--Cooperative Structure--Patronage Refunds" in the Prospectus included as
Part I of this registration statement.
(b) Underwriters and Other Purchasers. No underwriters were involved.
See (a) above.
(c) Consideration. The shares were issued at par value ($1.00 per share)
in lieu of an equivalent dollar amount otherwise payable in cash upon
revolvement of the Company's patronage refund allocations for the years in
question.
(d) Exemption from Registration Claimed. The Company is of the opinion
that even if its shares of membership common stock are considered to be
securities for purposes of the Securities Act of 1933, the issuance of such
shares was exempt from registration pursuant to Section 4(2) of the Securities
Act in the circumstances described. The offer and sale of shares exchanged with
the managed local cooperatives was made exclusively to a limited and clearly
defined class of offerees, namely the 70 managed local cooperatives who operate
under a management agreement with Southern States and who, by virtue of their
relationship with Southern States, are familiar with and have access to complete
information concerning the business and financial position of Southern States.
The offer and sale was not made through any general advertisement or
solicitation.
2. Issuance of Shares of Membership Common Stock to Agricultural Producers
Who Wish to Qualify to Do Business with the Company on a Cooperative Basis.
(a) Securities Issued. During each of the fiscal years ended June 30,
1997, 1998 and 1999, the Company issued one (1) share of its membership common
stock, $1.00 par value per share, to each of approximately 200 agricultural
producers who purchased one share each in order to qualify for membership in the
Company. Such transactions usually involved agricultural producers who did not
wish to wait to receive a share of membership common stock in connection with a
future patronage refund based upon business done with the Company.
II-3
<PAGE>
(b) Underwriters and Other Purchasers. No underwriters were involved.
See (a) above.
(c) Consideration. $1.00 per share. See (a) above.
(d) Exemption from Registration Claimed. The Company is of the opinion
that the issuance of one (1) share of its membership common stock, at a purchase
price of $1.00, to persons wishing to qualify to do business with the Company on
a cooperative basis, does not involve the issuance of a security for purposes of
the Securities Act of 1933, and that even if such transactions are viewed as
involving the issuance of a security, such transactions were exempt under Rule
504 of Regulation D. In no year during the three year period ending June 30,
1999, did the issuance of shares of membership common stock by the Company
pursuant to Section 3(b) or in violation of Section 5(a) of the Securities Act
exceed the aggregate $1 million limitation of Rule 504. The Company believes it
complied with the requirements of Rule 504 in all material respects with respect
to the issuance of these shares.
3. Issuance of Shares in Connection with Mergers of Managed Local
Cooperatives into the Company.
(a) Securities Issued. In the fiscal year ended June 30, 1998, the
Company issued approximately 4,120 shares of its membership common stock to
members of two managed local cooperatives that were merged into the Company
during that period.
(b) Underwriters and Other Purchasers. No underwriters were involved.
See (a) above.
(c) Consideration. $1.00 per share. See (a) above.
(d) Exemption from Registration Claimed. The Company is of the opinion
that even if its shares of membership common stock are considered to be
securities for purposes of the Securities Act of 1933, the issuance of such
shares was exempt from registration under Rule 504 of Regulation D. The
aggregate dollar amount of this offering, based upon the par value of the shares
of membership common stock issued, was under $5,000. The Company believes all
applicable requirements of Rule 504 were met. The Company filed a Form D with
respect to these two transactions under cover of letter dated February 17, 1998.
4. Issuance of Shares in Connection with Merger of Michigan Livestock
Exchange with and into the Company.
(a) Securities Issued. The Company has issued or will issue a maximum of
approximately 78,000 shares of its membership common stock to members of
Michigan Livestock Exchange ("MLE"), a Michigan cooperative, in connection with
the merger of MLE into the Company effective April 1, 1998. The merger agreement
specified that each active member of MLE who held allocated equities of MLE at
the time of the merger would receive one share of the Company's membership
common stock in exchange for, and in lieu of, the first
II-4
<PAGE>
$1.00 of allocated equity held in MLE, which allocated equity was assumed by the
Company in the merger.
(b) Underwriters and Other Purchasers. No underwriters were involved.
See (a) above.
(c) Consideration.
(i) One share of membership common stock, $1.00 par value, was
issued or will be issued to each of approximately 38,000 members of MLE as
described in (a) above as part of the consideration for the merger; there were
no discounts or commissions. Members of MLE are required by law to own one share
of the Company's membership common stock in order to be a member of the Company.
Each share issued represents, and will be issued in lieu of, the first $1.00 of
any allocated equity due to such member of MLE, which allocated equities were
assumed by the Company in the merger.
(ii) A maximum of approximately 40,000 of the shares referenced in
(a) above will be issued on the basis of one share per member, to MLE members
who were not due any allocated equity from MLE at the time of merger, in order
to qualify such members of MLE for membership in the Company. The consideration
is $1.00 per share which was deemed by the parties to the merger to have been
paid as part of the merger consideration.
(d) Exemption from Registration Claimed. The Company is of the opinion
that even if its shares of membership common stock are considered to be
securities for purposes of the Securities Act of 1933, the issuance of such
shares was exempt from registration under Rule 504 of Regulation D, as the
consideration for such shares was limited to $1.00 per share, or a maximum of
approximately $78,000. The Company believes all requirements of Rule 504 were
met. The Company filed a Form D with respect to this transaction under cover of
letter dated February 17, 1998.
B. Southern States 6% Cumulative Preferred Stock. Southern States' 6%
cumulative preferred stock is issued at a price equal to its $100.00 par value.
(a) Securities Issued. During its fiscal years ended June 30, 1997, 1998
and 1999, the Company issued 349, 424 and 507 shares, respectively, of its 6%
cumulative preferred stock to existing holders of such securities, in lieu of
cash dividends thereon, pursuant to prior elections made by such holders to
receive additional shares in lieu of cash dividends.
(b) Underwriters and Other Purchasers. No underwriters were involved.
See (a) above.
(c) Consideration. Each of the shares referenced in (a) above was issued
at par value, for $100.00 per share, in lieu of cash dividends in like amount.
II-5
<PAGE>
(d) Exemption from Registration Claimed. The Company's 6% cumulative
preferred stock was initially sold in 1970 pursuant to the exemption in Section
3(a)(5)(B) of the Securities Act. At that time, purchasers were given the option
of electing to receive future dividends, if declared, in the form of cash or in
additional shares of the same issue. The Company is of the opinion that the
issuance of additional shares of its 6% cumulative preferred stock pursuant to
such elections is not a sale of such securities within the meaning of Section
2(3) of the Securities Act. The Company relies on the interpretive ruling of the
General Counsel of the SEC listed at 17 C.F.R. Section 231.929 (par. 1121 of the
CCH Federal Securities Law Reports) in support of this position.
C. "Payment Plus" Debt Obligations.
(a) Securities Issued. On April 1, 1998, Michigan Livestock Exchange
("MLE"), a Michigan cooperative, merged into the Company. MLE has, for a number
of years, operated a "Payment Plus" program under which farmers and other
members of MLE who sell livestock to or through MLE, can elect to receive sales
proceeds on a deferred basis. Such proceeds are payable upon demand of the MLE
member, and are paid with interest at a specified rate. If not earlier paid,
such obligations are paid 12 months after the date of the livestock sale
transaction that gave rise to such proceeds. The Payment Plus obligations of
MLE, at the time of its merger into the Company, were secured by an irrevocable
stand-by letter of credit issued by the St. Paul Bank for Cooperatives. MLE had
outstanding Payment Plus indebtedness of approximately $14,000,000 at April 1,
1998, held by approximately 550 members of MLE. Payment Plus obligations became
obligations of the Company upon the effective date of the merger. At June 30,
1998 and June 30, 1999, respectively, the Company had outstanding Payment Plus
indebtedness of approximately $14 million held by approximately 520 and 500
patrons, respectively.
(b) Underwriters and Other Purchasers. No underwriters were involved.
See (a) above.
(c) Consideration. Payment Plus obligations are interest-bearing debt
obligations for livestock sales proceeds owed by MLE (now the Company) to
members as a result of commercial transactions handled by MLE (now the Company).
(d) Exemption from Registration Claimed. Prior to its merger into the
Company, MLE was a farmers' cooperative organization exempt from tax under
section 521 of the Internal Revenue Code of 1954. Accordingly, if the Payment
Plus obligations of MLE are viewed as securities, the Company is of the view
they were exempt from registration pursuant to section 3(a)(5)(B) of the
Securities Act of 1933. Upon the merger of MLE into the Company effective April
1, 1998, the Payment Plus obligations became obligations of the Company.
Although the Payment Plus obligations (as obligations of the Company) no longer
qualify for the exemption in section 3(a)(5)(B) of the 1933 Act, the Company has
continued to maintain the bank letter of credit securing such obligations and,
accordingly, is of the opinion that if such obligations constitute securities,
they are exempt from registration by virtue of the exemption from registration
provided by section 3(a)(2) of the 1933 Act.
II-6
<PAGE>
D. Step-Up Rate Series B Cumulative Redeemable Preferred Stock and Step-Up
Rate Capital Securities.
(a) Securities Issued. On October 5, 1999, the Company issued and sold
to Gold Kist Inc. ("Gold Kist") $40,000,000 aggregate liquidation amount of its
Step-Up Rate Series B Cumulative Redeemable Preferred Securities. As part of the
same transaction, Gold Kist purchased $60,000,000 aggregate liquidation amount
of Step-Up Rate Capital Securities issued by Southern States Capital Trust I, a
trust subsidiary of the Company.
(b) Underwriters and Other Purchasers. No underwriters were involved.
Gold Kist was the sole purchaser of the preferred securities and the capital
securities.
(c) Consideration. Gold Kist paid the Company and Southern States
Capital Trust I a total of $100 million for the preferred securities and capital
securities (or $98.6 million, net of a commitment fee Southern States paid to
Gold Kist in connection with the sale).
(d) Exemption from Registration Claimed. The sale of securities to Gold
Kist in October, 1999, was made pursuant to a fixed price commitment letter,
dated October 13, 1998, between the Company and Gold Kist. The parties entered
into the commitment letter in connection with the Company's acquisition from
Gold Kist of its agriservices (or "inputs") business. See "Business of Southern
StatesAcquisition of the Gold Kist Inputs BusinessFinancing Commitment" in the
prospectus constituting Part I of this registration statement. In entering into
this commitment letter and making this sale of securities to Gold Kist, the
Company relied on the exemption from federal registration contained in (S) 4(2)
of the Securities Act of 1933.
Item 16. Exhibits, Financial Statement Schedules
(A) EXHIBITS
An index of exhibits appears at page II-10 and is incorporated herein by
reference.
(B) FINANCIAL STATEMENT SCHEDULES
Schedule II - Valuation and Qualifying Accounts and Report of Independent
Public Accountants on Schedule II
All other schedules are omitted as the required information is inapplicable
or the information is presented in the Consolidated Financial Statements or
related notes included herein.
II-7
<PAGE>
Item 17. Undertakings
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to its registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-8
<PAGE>
B. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Southern States
Cooperative, Incorporated has duly caused this Registration Statement on Form S-
1 to be signed on its behalf
II-9
<PAGE>
by the undersigned, thereunto duly authorized, in the County of Henrico, State
of Virginia on May 1, 2000.
SOUTHERN STATES COOPERATIVE,
INCORPORATED
BY: /s/ Wayne A. Boutwell
-----------------------------------------
Wayne A. Boutwell
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-1 has been signed for the following persons in
the capacities indicated on May 1, 2000.
/s/ Wayne A. Boutwell President and Chief
- ---------------------- Executive Officer
Wayne A. Boutwell
/s/ Jonathan A. Hawkins Senior Vice President and
- ------------------------ Chief Financial Officer
Jonathan A. Hawkins
/s/ Robert W. Taylor Controller and
- --------------------- Principal Accounting Officer
Robert W. Taylor
Michael W. Beahm, Cecil D. Bell, Jr., Floyd K. Blessing,
James E. Brady, Jr., Earl L. Campbell, Jere L. Cannon,
William F. Covington, Herbert A. Daniel, Jr., H. Michael Davis,
John B. East, George E. Fisher, R. Bruce Johnson,
James A. Kinsey, J. Wayne McAtee, Richard F. Price,
William Pridgeon, Curry A. Roberts, John Henry Smith,
James A. Stonesifer, William W. Vanderwende,
Raleigh O. Ward, Jr., Wilbur C. Ward, Charles A. Wilfong Directors
By: /s/ N. Hopper Ancarrow, Jr.
------------------------------------
N. Hopper Ancarrow, Jr.
Attorney-In-Fact
II-10
<PAGE>
EXHIBIT INDEX
to Registration Statement
on Form S-1
SOUTHERN STATES COOPERATIVE, INCORPORATED
Exhibit No. Description of Exhibit
- ----------- ----------------------
ARTICLES OF INCORPORATION AND BYLAWS:
3.1 (a) Restated Articles of Incorporation of Southern States Cooperative,
Incorporated, effective July 30, 1998
(b) Articles of Amendment, effective October 1, 1999, to Restated
Articles of Incorporation of Southern States Cooperative,
Incorporated
3.2 Bylaws of Southern States Cooperative, Incorporated, amended as of
March 29, 1999
INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES:
4.1 Form of Indenture between Southern States Cooperative, Incorporated
and First Union National Bank, dated ________,2000
4.2 Form of Senior Notes for Southern States Cooperative, Incorporated
(included as Exhibits A-K to Exhibit 4.1 above)
Certain instruments relating to long-term debt not being registered have
been omitted in accordance with Item 601(b) (4) (iii) of Regulation S-K.
Registrant will furnish a copy of any such instrument to the Commission
upon its request.
5* Opinion of Mays & Valentine, L.L.P. regarding the legality of the
Senior Notes
MATERIAL CONTRACTS:
10.1 (a) Asset Purchase Agreement between Gold Kist Inc. and Southern
States Cooperative, Inc., dated July 23, 1998
(b) Letter Agreement between Gold Kist Inc. and Southern States
Cooperative, Inc., dated as of October 13, 1998, amending the
Asset Purchase Agreement
II-11
<PAGE>
(c) Amendment to Asset Purchase Agreement, dated September 7, 1999,
between Gold Kist Inc. and Southern States Cooperative, Inc.
(d) Commitment Letter between Gold Kist Inc. and Southern States
Cooperative, Inc., dated October 13, 1998
(e) Letter Agreement between Gold Kist Inc. and Southern States
Cooperative, Inc., dated as of March 25, 1999, amending the
Commitment Letter
(f) Purchase Agreement among Southern States Capital Trust I,
Southern States Cooperative, Inc. and Gold Kist Inc., dated
October 5, 1999
10.2 (a) Revolving Credit Agreement between Southern States Cooperative,
Incorporated and CoBank, ACB, First Union National Bank,
NationsBank, N.A. and various other lenders, dated January 12,
1999, as amended February 3, 1999
(b) Consent Agreement between Southern States Cooperative,
Incorporated and CoBank, ACB, First Union National Bank,
NationsBank, N.A. and various other lenders, dated as of March
25, 1999, relating to the Revolving Credit Agreement, as amended
February 3, 1999
(c) Second Amendment to Revolving Credit Agreement and Consent
Agreement between Southern States Cooperative, Incorporated and
CoBank, ACB, First Union National Bank, Bank of America, N.A. and
various other lenders, dated December 22, 1999
(d) Third Amendment to Revolving Credit Agreement Southern States
Cooperative, Incorporated and CoBank, ACB, First Union National
Bank, Bank of America, N.A. and various other lenders, dated
January 31, 2000
(e) Consent Agreement between Southern States Cooperative,
Incorporated and CoBank, ACB, First Union National Bank, Bank of
America, N.A. and various other lenders, dated as of April 19,
2000, relating to the Revolving Credit Agreement, as amended
January 31, 2000
10.3 Fourth Amended and Restated Financing Services and Contributed Capital
Agreement between Southern States Cooperative, Incorporated and
Statesman Financial Corporation, dated January 12, 2000
10.4 (a) Financing Services and Contributed Capital Agreement between
Southern States Cooperative, Incorporated and Michigan Livestock
Credit Corporation, dated April 1, 1998
II-12
<PAGE>
(b) Amendment to Financing Services and Contributed Capital Agreement
between Southern States Cooperative, Incorporated and Michigan
Livestock Credit Corporation, dated November 6, 1998 (included as
Exhibit I to Exhibit 10.2(a) above)
(c) Second Amendment to Financing Services and Contributed Capital
Agreement between Southern States Cooperative, Incorporated and
Michigan Livestock Credit Corporation, dated March 25, 1999
10.5 (a) Southern States Insurance Exchange Subscriber's Agreement and
Power of Attorney, dated April 27, 1988
(b) Agreement between Southern States Insurance Exchange and Southern
States Underwriters, Incorporated, dated April 27, 1988
10.6 (a) Form of Management Agreement between Southern States Cooperative,
Incorporated and various local managed cooperatives (listed in
Attachment A to Exhibit 10.6(a))
(b) Management/Operating Agreement between Orange-Madison Cooperative
Farm Service, Inc. and Southern States Cooperative, Inc., dated
March 1, 1991, as amended by Reclassification Agreement, dated
September 1, 1991, as amended November 20, 1992, as amended April
1, 1993, as amended February 1, 1994, as amended May 1, 1994, as
amended March 2, 1995
10.7 (a) Member Product Purchase Agreement between CF Industries, Inc. and
Southern States Cooperative, Incorporated, dated October 18,
1974, as supplemented by letter from J. Sultenfuss to G. Adlich,
dated January 7, 1998
(b) CF Industries, Inc. Product Purchase Agreement Assignment and
Assumption Agreement by and among Gold Kist Inc., Southern States
Cooperative, Inc. and CF Industries, Inc., dated October 13, 1998
10.8 Agreement and Plan of Merger between and among Southern States
Cooperative, Incorporated, and Michigan Livestock Exchange, Statesman
Financial Corporation and Michigan Livestock Credit Corporation, dated
as of December 31, 1997
10.9 (a) Ground Lease between Southern States Cooperative, Incorporated,
as Lessor, and Gold Bond Stamp Company of Georgia, as Lessee,
dated as of July 15, 1977
II-13
<PAGE>
(b) Lease and Agreement between Gold Bond Stamp Company of Georgia,
as Lessor and Southern States Cooperative, Incorporated, as
Lessee, dated as of July 15, 1977.
10.10 Lease Agreement with Purchase Option by and between Scott Petroleum
Corporation and Gold Kist Inc., dated January 5, 1995
MANAGEMENT REMUNERATION PLANS:
10.11 Southern States Supplemental Retirement Plan, effective November 11,
1987, as amended and restated through Fourth Amendment, effective July
1, 1995
10.12 Southern States Deferred Compensation Plan, effective July 1, 1995, as
amended and restated through Sixth Amendment, effective October 1,
1999
10.13 Southern States Directors Deferred Compensation Plan, effective July
1, 1989, as amended and restated through First Amendment, effective
July 1, 1995
10.14 Form of Executive Split Dollar Agreement between Southern States
Cooperative, Incorporated and certain executive officers (listed in
Attachment A to Exhibit 10.14)
12 Computation of Ratios
21 List of Subsidiaries
CONSENTS OF EXPERTS AND COUNSEL:
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of KPMG LLP
23.3* Consent of Mays & Valentine, L.L.P. (included in Exhibit 5.1)
24 Powers of Attorney
25 Statement of Eligibility on Form T-1 under the Trust Indenture Act of
1939, as amended, of First Union National Bank as Trustee under the
Indenture
27 Financial Data Schedule
- ---------------------
* To be filed by amendment.
II-14
<PAGE>
Report of Independent Public Accountants on Schedule II
Southern States Cooperative, Incorporated
To the Board of Directors of
Southern States Cooperative, Incorporated
In connection with our audits of the consolidated financial statements of
Southern States Cooperative, Incorporated and Subsidiaries as of June 30, 1999
and 1998, and for each of the three years in the period ended June 30, 1999,
which financial statements are included in the Prospectus, we have also audited
the financial statement schedule listed in Item 16 herein.
In our opinion, this financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
/s/ PricewaterhouseCoopers LLP
Richmond, Virginia
May 2, 2000
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
SOUTHERN STATES COOPERATIVE, INCORPORATED
(In thousands)
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- --------
Additions
---------
Balance Charged Balance
at Beginning to Costs and Charged to at End of
of the Period Expenses Other Accounts Deductions Period
------------- -------- -------------- ---------- ------
<S> <C> <C> <C> <C> <C>
Year ended 6-30-99
Reserves and allowances
deducted from asset accounts:
Allowance for doubtful accounts $2,643 $246 $1,832 (1) $517 (2) $4,204
Allowance for discounts and
other deductions 0 0 0 0
------------- ----------- ----------- ----------- -----------
$2,643 $246 $ 1,832 $517 $4,204
============= =========== =========== =========== ===========
Year ended 6-30-98
Reserves and allowances
deducted from asset accounts:
Allowance for doubtful accounts $2,237 $100 $1,233 (3) $927 (2) $2,643
Allowance for discounts and
other deductions 0 0 0 0
------------- ----------- ----------- ----------- -----------
$2,237 $100 $ 1,233 $927 $2,643
============= =========== =========== =========== ===========
Year ended 6-30-97
Reserve and allowances
deducted from asset accounts:
Allowance for doubtful accounts $2,217 $93 $73 (2) $2,237
Allowance for discounts and
other deductions 0 0 0 0
------------- ----------- ------------ -----------
$2,217 $93 $73 $ 2,237
============= =========== ============ ===========
</TABLE>
(1) Allowance balance of Inputs Business at acquisition
(2) Accounts charged off, net of recoveries
(3) Allowance balance of Michigan Livestock Exchange at acquisition
S-2
<PAGE>
EXHIBIT 3.1(a)
RESTATED ARTICLES OF INCORPORATION
OF
SOUTHERN STATES COOPERATIVE, INCORPORATED
The name of the Association is Southern States Cooperative, Incorporated.
The purposes for which this Association is formed are to engage in any
cooperative activity for producers of agricultural products in connection with:
(a) Producing, assembling, marketing, buying or selling agricultural
products, or harvesting, preserving, drying, processing,
manufacturing, blending, canning, packing, ginning, grading,
storing, warehousing, handling, transporting, shipping, or
utilizing such products, or manufacturing or marketing the by-
products thereof.
(b) Manufacturing, processing, storing, transporting, delivering,
handling, buying for or furnishing supplies to its members and
other patrons.
(c) Performing or furnishing business or educational or other
services, including the services of buildings, machinery and
equipment, and assuming production and marketing risks, on a
cooperative basis.
(d) Financing any of the above enumerated activities for its members
and patrons.
The authorized capital stock of this Association shall be 20,000,000 shares
of Common Stock, of the par value of $1 each, and 1,000,000 shares of Preferred
Stock, of the par value of $100 each. Such capital stock may be issued from time
to time by the Board of Directors of this Association as they deem necessary.
1. Preferred Stock
(a) The Board of Directors may, from time to time, issue Preferred Stock in one
or more series, with variations as may be determined by the Board of Directors
prior to the issuance thereof, and may reclassify any of the authorized but
unissued Preferred Stock of a particular series as shares, or additional shares,
of any other series, whether then or theretofore created (except any series as
to which it shall have been otherwise provided at the time of creating such
series), as to (i)the distinctive serial designations; (ii) the rate or rates,
which may be fixed or otherwise, of cumulative, non-cumulative or partially
cumulative dividends thereon, provided, however, the dividend rate which the
Preferred Stock of any series shall be entitled to receive shall not exceed the
maximum dividend rate permitted by law, (iii) the times of payment of dividends;
(iv) the redemption price, if any, and the premium payable thereon, if any; (v)
the preference payable on liquidation or dissolution or winding up of the
Association; and provided, further, all shares of Preferred Stock shall be of
<PAGE>
equal rank and shall be identical in all other respects, except in respect of
the particulars that may be fixed by the Board of Directors, as hereinabove
provided; and all shares of each series shall be identical.
One share of said Preferred Stock shall be designated "4% Series Cumulative
Preferred Stock"; 2,175 shares of said Preferred Stock shall be designated "5%
Series Cumulative Preferred Stock"; and 100,000 shares of said Preferred Stock
shall be designated "6% Series Cumulative Preferred Stock". The cumulative
dividends on each series specified above shall be payable one-half on January 1
and one-half on June 30 of each year and all shares of each such series shall be
identical and of equal rank except in respect to the rate of dividend thereon.
The preferences, voting powers, rights, restrictions and qualifications of
the Preferred Stock of the Association shall be as follows:
The Preferred Stock of each series shall be preferred as to assets and
dividends, and out of the net savings of the Association for each fiscal year
cumulative dividends at, but not exceeding, the fixed dividend rate for each
series shall be declared and paid at such periods as the Board of Directors
shall fix for each series, before any dividends may be declared on the Common
Stock for such year.
All or any of the outstanding Preferred Stock, or any series thereof, may
be redeemed by the Association at any time as may be determined by the Board of
Directors after thirty (30) days' notice and upon payment in cash of the stated
redemption price thereof, plus accrued and unpaid dividends, if any. In the
event only part of the outstanding Preferred Stock or of any series thereof
shall be redeemed, that part to be so redeemed shall be determined by drawing
lots.
In the event of any liquidation or dissolution or winding up (whether
voluntary or involuntary) of the Association, then, after the payment of its
debts, the holders of each series of the outstanding Preferred Stock shall have
a preference on the assets of the Association and shall be entitled to be paid
therefrom in full both the stated preference on liquidation, dissolution or
windup, or if no liquidation preference is stated, at the par value of their
shares, and the unpaid dividends accrued thereon before any amount shall be paid
to the holders of the Common Stock or any other class of stock ranking junior to
the Preferred Stock.
(b) As used in this Section 1, "articles of incorporation" shall mean the
articles of incorporation as in effect at any time or as may thereafter be
amended, and shall include, without limitation, all provisions contained in any
articles of amendment or restatement creating the Preferred Stock.
<PAGE>
For the purposes of the articles of incorporation, any class or
series of stock of the Association shall be deemed to rank---
(i) prior to another class or series either as to dividends or
upon liquidation, if the holders of such class or series shall be
entitled to the receipt of dividends or of amounts distributable on
liquidation, dissolution or winding-up, as the case may be, in
preference or priority to holders of such other class or series;
(ii) on a parity with another class or series either as to
dividends or upon liquidation, whether or not the dividend rates,
dividend payment dates, or redemption or liquidation prices per share
thereof are different from those of such others, if the holders of
such class or series of stock shall be entitled to receipt of
dividends or amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in proportion to their respective
dividend rates or prices, without preference or priority one over the
other with respect to the holders of such other class or series; and
(iii) junior to another class or series either as to dividends or
upon liquidation, if the rights of the holders of such class or series
shall be subject or subordinate to the rights of the holders of such
other class or series in respect of the receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up, as
the case may be.
2. Common Stock
(a) Subject to the provisions of law, the preferences of any capital
stock ranking prior (as defined in paragraph (b) of Section 1 above) to the
Common Stock and any restrictions contained in the Bylaws of the
Association, dividends may be paid on the Common Stock, at such times and
in such amounts as may be declared by the Board of Directors out of funds
legally available therefor.
(b) The Common Stock shall be issued to, held by, or transferred to,
only such persons or associations as are eligible for membership in the
Association according to the requirements for membership prescribed in the
Bylaws of the Association.
(c) Voting rights in this Association shall be vested in its common
stockholder-members; provided, however, each member shall be entitled to
one and only one vote regardless of the number of shares or amount of stock
owned by such member.
(d) Whenever any member desires to sell his Common Stock, he shall
first offer it to the Association, for purchase by the Association, or by a
person or persons designated by the Board of Directors of the Association,
at its par value plus declared and unpaid dividends. In the event such
stock is not purchased by the Association, or by a person or persons
designated as aforesaid, within thirty (30)
<PAGE>
days after the receipt of a written notice by the Association offering the
said stock for sale, then the member may sell the said Common Stock to any
other person or association eligible for membership in the Association.
This restriction on the transfer of Common Stock shall be printed upon
every Common Stock certificate. If the Board of Directors decides to
repurchase such Common Stock, the Association shall have the right to apply
any sum or sums of money in which the member may be indebted to the
Association on the payment therefor. The Association shall be deemed to
have a prior lien against such Common Stock as security for the payment of
such indebtedness. This shall also govern the repurchase of the Common
Stock in case of death, dismissal, expulsion, or withdrawal of any member
or members.
3. Other Matters
The Board of Directors may, from time to time, sell any and all of the
unissued capital stock of the Association, whether the same be any of the
original authorized capital or of any increase thereof, without first
offering the same to stockholders then existing, and all such sales may be
made upon such terms and conditions as by the said Board may be deemed
advisable, and may restrict a purchase, sale, distribution, transfer,
owning and holding of stock as fully and to the extent authorized by law.
The Association shall indemnify any person who was or is a party to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, arbitrative or investigative by reason of the fact
that he is or was a director, officer, employee or agent of the Association, or
is or was serving at the request of the Association as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding to the full extent permitted
under Title 13.1 of the Code of Virginia, as the same may be amended from time
to time, and under any other controlling statutes or regulation whether Federal
or State. Such indemnification shall be in addition to, and not in limitation
of, any other indemnity required by law or agreement.
The number of directors shall be fixed by the Bylaws and in the absence of
a bylaw fixing the number, the number shall be fifteen (l5).
<PAGE>
EXHIBIT 3.1(b)
SOUTHERN STATES COOPERATIVE, INCORPORATED
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
Pursuant to the provisions of Virginia Code Sections 13.1-318 and
13.1-639, Southern States Cooperative, Incorporated, a Virginia
agricultural cooperative corporation (the "Association"), desires to amend
its Articles of Incorporation to the extent and in the manner hereinafter
set forth and states the following in connection therewith:
1. Name of Association. The name of the Association is Southern
-------------------
States Cooperative, Incorporated.
2. Text of Amendment. The Restated Articles of Incorporation of the
-----------------
Association shall be amended by the addition of a new Article C(1)(c) to
the Restated Articles of Incorporation, which amendment shall be in the
form as set forth in Exhibit A attached hereto (the "Amendment").
3. Adoption by Board of Directors. The Amendment was duly adopted by
------------------------------
the Board of Directors of the Association on September 28, 1999. No action
on the Amendment by the shareholders of the Association was required.
4. Effective Date of Amendment. The Amendment shall become effective
---------------------------
on October 1, 1999.
Dated: September 28, 1999
SOUTHERN STATES COOPERATIVE,
INCORPORATED
By: /s/ N. Hopper Ancarrow, Jr.
---------------------------
N. Hopper Ancarrow, Jr.
Vice President and Secretary
<PAGE>
EXHIBIT A
---------
Southern States Cooperative, Inc.
Amendment to Restated Articles of Incorporation
to Create a New Series of Preferred Stock
Designated as
Step-Up Rate Series B Cumulative Redeemable Preferred Stock
_______________________________________________________________
The following shall be inserted as a new subsection (c) to Article C,
Section 1. of the Association's Restated Articles of Incorporation:
(c). Step-Up Rate Series B Cumulative Redeemable Preferred Stock.
1. Designation and Amount; No Fractional Shares. The series of
--------------------------------------------
preferred stock shall be designated as the "Step-Up Rate Series B Cumulative
Redeemable Preferred Stock" (the "Series B Preferred Stock"). The Series B
Preferred Stock shall be perpetual and the authorized number of shares of Series
B Preferred Stock shall be 40,000 shares. The Series B Preferred Stock is
issuable in whole shares only.
2. Dividends. (A) (i) Holders of shares of Series B Preferred Stock
---------
shall be entitled to receive, when, as and if declared by the Board of Directors
out of funds of the Association legally available for payment, cumulative cash
dividends at the initial rate of 7.5% per annum per share on the liquidation
preference of $1000 per share; such initial rate to be increased to 8.0% per
annum per share effective 9 months after the date of the initial issuance of the
Series B Preferred Shares; and to 8.25% per annum 21 months after the date of
the initial issuance of the Series B Preferred Shares. Dividends on the Series B
Preferred Stock shall be payable quarterly, in arrears, on January 5, April 5,
July 5, and October 5 of each year, commencing January 5, 2000 (each a "Dividend
Payment Date"). If any date on which dividends would otherwise be payable shall
be or be declared a national or New York State holiday, or if banking
institutions in the State
<PAGE>
of New York shall be closed because of a banking moratorium or otherwise on such
date, then the Dividend Payment Date shall be the next succeeding day on which
such banks shall be open. Dividends on shares of the Series B Preferred Stock
shall be fully cumulative and shall accumulate (whether or not earned or
declared), on a daily basis, without interest, from the previous Dividend
Payment Date, except that the first dividend shall accrue, without interest,
from the date of initial issuance of the Series B Preferred Stock. Accumulated
and unpaid dividends shall not bear interest. Dividends shall be payable, in
arrears, to holders of record as they appear on the stock transfer records of
the Association on each record date, which shall be the 15th day immediately
preceding each such Dividend Payment Date (each of which dates being a "Dividend
Payment Record Date"). Dividends payable on the Series B Preferred Stock for any
full quarterly period shall be computed on the basis of a 360-day year
consisting of twelve 30-day months and, for any period shorter than a full
quarter, on the basis of the actual number of days elapsed in such a 90-day
quarter. For example, the period from October 5 to but excluding January 5 will
be considered a full quarterly period. Dividends shall cease to accrue on the
Series B Preferred Stock on the date of their earlier redemption pursuant to
Section 6, unless the Association shall default in providing funds for the
payment of the redemption price on the shares called for redemption pursuant
thereto.
(ii) If, prior to 18 months after the date of the
original issuance of the Series B Preferred Stock, one or more amendments to the
Internal Revenue Code of 1986, as amended (the "Code"), are enacted that reduce
the percentage of the dividends-received deduction (currently 70%) as specified
in section 243(a)(1) of the Code or any successor provision (the "Dividends-
Received Percentage"), the amount of each dividend payable (if declared) per
share of Series B Preferred Stock for dividend payments made on or after the
<PAGE>
effective date of such change in the Code will be adjusted by multiplying the
amount of the dividend payable described above (before adjustment) by the
following fraction (the "DRD Formula"), and rounding the result to the nearest
cent (with one-half cent rounded up):
1-.35(1-.70)
------------
1-.35(1-DRP)
(iii) For the purposes of the DRD Formula, "DRP" means
the Dividends-Received Percentage (expressed as a decimal) applicable to the
dividend in question; provided, however, that if the Dividends-Received
Percentage applicable to the dividend in question shall be less than 50%, then
the DRP shall equal .50. Notwithstanding the foregoing provisions, if, with
respect to any such amendment, the Association received either an unqualified
opinion of independent tax counsel selected by the Association or a private
letter ruling or similar form of authorization from the Internal Revenue Service
("IRS") to the effect that such amendment does not apply to a dividend payable
on the Series B Preferred Stock, then such amendment will not result in the
adjustment provided for pursuant to the DRD Formula with respect to such
dividend. Such opinion shall be based upon the legislation amending or
establishing the DRP or upon a published pronouncement of the IRS addressing
such legislation.
(iv) If any such amendment to the Code is enacted after
the dividend payable on a Dividend Payment Date has been declared, the amount of
the dividend payable on such Dividend Payment Date will not be increased;
instead, additional dividends (the "Post Declaration Date Dividends") equal to
the excess, if any, of (x) the product of the dividend paid by the Association
on such Dividend Payment Date and the DRD Formula (where the DRP used in the DRD
Formula would be equal to the greater of the Dividend Received Percentage
applicable to the dividend in question and .50) over (y) the dividend paid by
the Association on
<PAGE>
such Dividend Payment Date, will be payable (if declared) to holders of Series B
Preferred Stock on the Dividend Payment Record Date applicable to the next
succeeding Dividend Payment Date or, if the Series B Preferred Stock is called
for redemption prior to such Dividend Payment Record Date, to holders of Series
B Preferred Stock on the applicable redemption date, as the case may be, in
addition to any other amounts payable on such date. Notwithstanding the
foregoing provisions, if with respect to any such amendment, the Association
receives either an unqualified opinion of independent tax counsel selected by
the Association or a private letter ruling or similar form of authorization from
the IRS to the effect that such amendment does not apply to a dividend so
payable on the Series B Preferred Stock, then such amendment will not result in
the payment of Post Declaration Date Dividends. The opinion referenced in the
previous sentence shall be based upon the legislation amending or establishing
the DRP or upon a published pronouncement of the IRS addressing such
legislation.
(v) If any such amendment to the Code is enacted and
the reduction in the Dividends-Received Percentage retroactively applies to a
Dividend Payment Date as to which the Association previously paid dividends on
the Series B Preferred Stock (each, an "Affected Dividend Payment Date"), the
Association will pay (if declared) additional dividends (the "Retroactive
Dividends") to holders of Series B Preferred Stock on the Dividend Payment
Record Date applicable to the next succeeding Dividend Payment Date (or, if such
amendment is enacted after the dividend payable on such Dividend Payment Date
has been declared, to holders of Series B Preferred Stock on the Dividend
Payment Record Date following the date of enactment), or, if the Series B
Preferred Stock is called for redemption prior to such Dividend Payment Record
Date, to holders of Series B Preferred Stock on the applicable redemption date,
as the case may be, in an aggregate amount equal to the excess of (x) the
product of the dividend paid by the
<PAGE>
Association on each Affected Dividend Payment Date and the DRD Formula (where
the DRP used in the DRD Formula would be equal to the greater of the Dividends-
Received Percentage and .50 applied to each Affected Dividend Payment Date over
(y) the sum of the dividend paid by the Association on each Affected Dividend
Payment Date. The Association will only make one payment of Retroactive
Dividends for any such amendment. Notwithstanding the foregoing provisions, if,
with respect to any such amendment, the Association receives either an
unqualified opinion of independent tax counsel selected by the Association or a
private letter ruling or similar form of authorization from the IRS to the
effect that such amendment does not apply to a dividend payable on an Affected
Dividend Payment Date for the Series B Preferred Stock, then such amendment will
not result in the payment of Retroactive Dividends with respect to such Affected
Dividend Payment Date. The opinion referenced in the previous sentence shall be
based upon the legislation amending or establishing the DRP or upon a published
pronouncement of the IRS addressing such legislation.
(vi) Notwithstanding the foregoing, no adjustment in
the dividends payable by the Association shall be made and no Post Declaration
Date Dividends or Retroactive Dividends shall be payable by the Association in
respect of the enactment of any amendment to the Code 18 months or more after
the date of original issuance of the Series B Preferred Stock to which the
reduced Dividends-Received Percentage applies.
(vii) In the event that the amount of dividends payable
per share of the Series B Preferred Stock is adjusted pursuant to the DRD
Formula and/or Post Declaration Date Dividends or Retroactive Dividends are to
be paid, the Association will give notice of each such adjustment and, if
applicable, any Post Declaration Date Dividends and Retroactive Dividends to the
holders of Series B Preferred Stock.
<PAGE>
(B) No dividends may be declared or paid or set apart for payment
on any Parity Preferred Stock (as defined in Section 8 below), unless there
shall also be or have been declared and paid or set apart for payment on the
Series B Preferred Stock dividends for all dividend payment periods of the
Series B Preferred Stock ending on or before the dividend payment date of such
Parity Preferred Stock, ratably in proportion to the respective amounts of
dividends (x) accumulated and unpaid on such Parity Preferred Stock, on the one
hand, and (y) accumulated and unpaid through the dividend payment period or
periods of the Series B Preferred Stock next preceding such dividend payment
date, on the other hand.
(C) Except as set forth in the preceding sentence or as provided
in the immediately following paragraph, unless full cumulative dividends on the
Series B Preferred Stock have been paid through the most recently completed
quarterly dividend period of the Series B Preferred Stock,(i) no dividends may
be paid or declared and set aside for payment or other distribution made with
respect to the common stock or on any other stock or patrons' equity of the
Association ranking junior to or on a parity with the Series B Preferred Stock
as to dividends, nor (ii) may any common stock or any other stock of the
Association ranking junior to or on a parity with the Series B Preferred Stock
as to dividends, or any outstanding patrons' equity (whether in the form of
patronage refund allocations or otherwise), be redeemed, purchased or otherwise
acquired for any consideration by the Association or any payment be made to or
available for a sinking fund for the redemption of any shares of such stock or
patrons' equity; provided, however, that any moneys deposited before the
prohibition in this sentence against such a deposit takes effect in any sinking
fund with respect to any preferred stock of the Association in compliance with
the provisions of such sinking fund may thereafter be applied to the purchase or
redemption of such preferred stock in accordance with the terms of such sinking
fund, regardless
<PAGE>
of whether at the time of such application full cumulative dividends upon shares
of the Series B Preferred Stock outstanding to the last Dividend Payment Date
shall have been paid or declared and set apart for payment; provided further
that any such junior or parity stock or common stock may be converted into or
exchanged for stock of the Association ranking junior to the Series B Preferred
Stock as to dividends and upon liquidation; and provided further that the
limitations of this paragraph (C) shall not operate to prohibit the repurchase
of common stock held by a member, upon the death or dissolution of such member
or otherwise because such member has ceased to be eligible for membership in the
Association, if the Board of Directors of the Association approves such
repurchase or redemption pursuant to a policy of assuring that the Association
operates as a cooperative in compliance with Subchapter T of the Code.
(D) Notwithstanding the foregoing paragraph, the Association shall
be permitted to declare and pay or set apart for payment patronage dividends or
refunds, subject to the limitation that, whenever the terms described in the
foregoing paragraph would operate to restrict dividends, not more than 40% of
such aggregate patronage dividends or refunds for any fiscal year (exclusive of
patronage dividends or refunds not individually exceeding $25.00 paid solely in
cash under the Company's policy governing the all-cash payment of de minimis
patronage dividends or refunds, as such policy shall exist from time to time)
shall be in cash, with the remainder to be paid in the form of common stock or
patronage refund allocations or other non-cash consideration as permitted by
Subchapter T of the Code.
(E) Any dividend payment made on the Series B Preferred Stock
shall first be credited against the earliest accumulated but unpaid dividend due
with respect to such shares which remains payable.
<PAGE>
3. Liquidation Preference. The shares of Series B Preferred Stock shall
----------------------
rank, upon the liquidation, dissolution or winding up of the Association, prior
to the shares of common stock and any other stock or patrons' equity of the
Association ranking junior to the Series B Preferred Stock as to rights upon
liquidation, dissolution or winding up of the Association, so that in the event
of any liquidation, dissolution or winding up of the Association, whether
voluntary or involuntary, the holders of the Series B Preferred Stock shall be
entitled to receive out of the assets of the Association available for
distribution to its stockholders, whether from capital, surplus or earnings,
before any distribution is made to holders of shares of common stock or any
other such junior stock or patrons' equity or to members of the Association, an
amount equal to $1000 per share plus an amount equal to all dividends (whether
or not earned or declared) accumulated and unpaid on the shares of Series B
Preferred Stock to the date of final distribution. The holders of the Series B
Preferred Stock shall not be entitled to receive the preferential amounts as
aforesaid until the liquidation preference of any other stock of the Association
issued with the affirmative vote of the holders of at least a majority of the
shares of such Series B Preferred Stock and ranking senior to the Series B
Preferred Stock as to rights upon liquidation, dissolution or winding up shall
have been paid (or a sum set aside therefor sufficient to provide for payment)
in full. After payment to the holders of the Series B Preferred Stock of the
full amount of the preferential amounts as aforesaid, the holders of shares of
Series B Preferred Stock will not be entitled to any further participation in
any distribution of assets by the Association. If, upon any liquidation,
dissolution or winding up of the Association, the assets of the Association, or
proceeds thereof, distributable among the holders of shares of Parity Preferred
Stock and Series B Preferred Stock shall be insufficient to pay in full the
preferential amounts payable thereon, then such assets, or the proceeds thereof,
shall be distributable among such holders ratably in accordance with the
respective amounts which would be payable on such shares if all
<PAGE>
amounts payable thereon were paid in full. For the purposes of the preceding
sentence, neither a consolidation nor merger of the Association with or into any
other corporation, nor a merger of any other corporation with or into the
Association, nor a sale, lease, exchange or transfer of all or substantially all
of the Association's assets shall, without further action by the Association, be
considered a liquidation, dissolution or winding up of the Association.
4. Conversion. The Series B Preferred Stock is not convertible into, or
----------
exchangeable for, other securities or property.
5. Voting Rights. The Series B Preferred Stock, except as provided
-------------
herein or as otherwise from time to time required by law, shall have no voting
rights.
So long as any shares of any Series B Preferred Stock remain
outstanding, the Association shall not, without the affirmative vote of the
holders of at least a majority of the shares of such Series B Preferred Stock
(i) authorize, create or issue any capital stock of the Association ranking, as
to dividends or upon liquidation, dissolution or winding up, prior to such
Series B Preferred Stock, or reclassify any authorized capital stock of the
Association into any such shares of such capital stock or issue any obligation
or security convertible into or evidencing the right to purchase any such shares
of capital stock, or (ii) amend, alter or repeal, whether by merger,
consolidation or otherwise, the articles of amendment creating this Series B
Preferred Stock or the Restated Articles of Incorporation of the Association so
as to adversely affect the powers, preferences or special rights of such Series
B Preferred Stock. Any increase in the amount of authorized common stock or
other authorized preferred stock, or any increase or decrease in the number of
shares of any series of preferred stock other than the Series B Preferred Stock
or the authorization, creation and issuance of other classes or series of common
stock or other stock, in each case ranking on a parity with or junior to the
shares of Series B Preferred
<PAGE>
Stock with respect to the payment of dividends and the distribution of assets
upon liquidation, dissolution or winding up, shall not be deemed to adversely
affect such powers, preferences or special rights.
The foregoing voting provisions shall not apply if, at or prior to
the time when the act with respect to which such vote would otherwise be
required or upon which the holders of Series B Preferred Stock shall be entitled
to vote shall be effected, all outstanding shares of Series B Preferred Stock
shall have been redeemed or called for redemption and sufficient funds shall
have been deposited in trust to effect such redemption as provided in Section 6
hereof.
6. Redemption.
----------
(A) The shares of Series B Preferred Stock shall not be redeemable
prior to January 1, 2010. On and after such date, the Association, at its
option, may redeem shares of the Series B Preferred Stock as a whole or in part,
at any time or from time to time, at a redemption price equal to $1000 per
share, plus, in each case, an amount equal to all dividends (whether or not
earned or declared) accumulated and unpaid to, but excluding, the date fixed for
redemption.
(B) The holders of shares of Series B Preferred Stock at the close
of business on a Dividend Payment Record Date shall be entitled to receive the
dividend payable on such shares on the corresponding Dividend Payment Date
notwithstanding (1) the call for redemption thereof (except that holders of
shares having a redemption date occurring between such Record Date and the
Dividend Payment Date shall not be entitled to receive such dividend on such
Dividend Payment Date) or (2) the Association's default in payment of the
dividend due on such Dividend Payment Date.
(C) If fewer than all the outstanding shares of Series B Preferred
Stock are to be redeemed, the number of shares to be redeemed shall be
determined by the Board of Directors
<PAGE>
and the shares to be redeemed shall be selected by lot or shall be pro rata as
determined by the Board of Directors in its sole discretion.
(D) If full cumulative dividends on the Series B Preferred Stock
have not been paid or set apart for payment with respect of all prior dividend
periods, the Series B Preferred Stock may not be redeemed in part and the
Association may not purchase or acquire any shares of the Series B Preferred
Stock otherwise than pursuant to a purchase or exchange offer made on the same
terms to all holders of the Series B Preferred Stock.
(E) In the event the Association shall redeem shares of Series B
Preferred Stock, written notice of such redemption shall be given by first class
mail, postage prepaid, mailed not less than 30 days nor more than 60 days prior
to the redemption date, to each holder of record of the shares to be redeemed at
such holder's address as the same appears on the stock books of the Association;
provided, however, that no failure to give the notice of redemption as required
by this subparagraph 6(E) nor any defect therein shall affect the validity of
the proceeding for the redemption of any shares of Series B Preferred Stock to
be redeemed except as to the holder to whom the Association has failed to mail
said notice or except as to the holder whose notice was defective. Each such
notice shall state: (a) the redemption date; (b) the number of shares of Series
B Preferred Stock to be redeemed and, if less than all the shares held by such
holder are to be redeemed from such holder, the number of shares to be redeemed
from such holder; (c) the redemption price and any accumulated and unpaid
dividends to the redemption date; (d) the place or places where certificates for
such shares are to be surrendered for payment of the redemption price; and (e)
that dividends on the shares to be redeemed will cease to accrue on such
redemption date (unless the Association shall default in providing funds for the
payment of the
<PAGE>
redemption price of the shares called for redemption at the time and place
specified in such notice).
(F) If a notice of redemption has been given pursuant to this
Section 6 and if, on or before the date fixed for redemption, the funds
necessary for such redemption shall have been set aside by the Association,
separate and apart from its other funds, in trust for the pro rata benefit of
the holders of the shares of Series B Preferred Stock so called for redemption,
then, notwithstanding that any certificates for such shares have not been
surrendered for cancellation, on the redemption date dividends shall cease to
accrue on the shares to be redeemed, and at the close of business on the
redemption date the holders of such shares shall cease to be stockholders with
respect to such shares and shall have no interest in or claims against the
Association by virtue thereof and shall have no voting or other rights with
respect to such shares, except the right to receive the moneys payable upon
surrender (and endorsement, if required by the Association) of their
certificates (including through the Depository Trust Company or other securities
depository, if applicable), and the shares evidenced thereby shall no longer be
outstanding. The Association's obligation to provide funds for the payment of
the redemption price (and any accumulated and unpaid dividends to the redemption
date) of the shares called for redemption shall be deemed fulfilled if, on or
before a redemption date, the Association shall deposit, with a bank or trust
company, or an affiliate of a bank or trust company, having an office or agency
in New York City and having a capital and surplus of at least $500,000,000, such
funds sufficient to pay the redemption price (and any accumulated and unpaid
dividends to the redemption date) of the shares called for redemption, in trust
for the account of the holders of the shares to be redeemed (and so as to be and
continue to be available therefor), with irrevocable instructions and authority
<PAGE>
to such bank or trust company that such funds be delivered upon redemption of
the shares of Series B Preferred Stock so called for redemption.
(G) Subject to applicable escheat laws, any moneys so set aside by
the Association and unclaimed at the end of two years from the redemption date
shall revert to the general funds of the Association, after which reversion the
holders of such shares so called for redemption shall look only to the general
funds of the Association for the payment of the amounts payable upon such
redemption. Any interest accrued on funds so deposited shall be paid to the
Association from time to time.
(H) Shares of Series B Preferred Stock that have been issued and
reacquired in any manner, including shares purchased or redeemed, shall (upon
compliance with any applicable provisions of the laws of the Commonwealth of
Virginia) have the status of authorized and unissued shares of the class of
Preferred Stock undesignated as to series and may be redesignated and reissued
as part of any series of the preferred stock except Series B Preferred Stock.
7. Amendment of Resolution. The Board shall have the right from time to
-----------------------
time to amend this resolution within the limitations provided by law, subject in
all cases to the limitations and restrictions of Section 5 above.
8. Rank. Any stock of any class or classes or series of the Association
----
shall be deemed to rank:
(a) prior to shares of the Series B Preferred Stock, either as to
dividends or upon liquidation, dissolution or winding up, or both, if the
holders of stock of such class or classes or series shall be entitled by the
terms thereof to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of shares of the Series B Preferred Stock;
<PAGE>
(b) on a parity with shares of the Series B Preferred Stock,
either as to dividends or upon liquidation, dissolution or winding up, or both,
whether or not the dividend rates, dividend payment dates, or redemption or
liquidation prices per share thereof be different from those of the Series B
Preferred Stock, if the holders of stock of such class or classes or series
shall be entitled by the terms thereof to the receipt of dividends or of amounts
distributed upon liquidation, dissolution or winding up, as the case may be, in
proportion to their respective dividend rates or liquidation prices, without
preference or priority of one over the other as between the holders of such
stock and the holders of shares of Series B Preferred Stock (the term "Parity
Preferred Stock" being used to refer to any stock ranking on a parity with the
shares of Series B Preferred Stock, either as to dividends or upon liquidation,
dissolution or winding up, or both, as the context may require, so that, for
example, a particular stock may be Parity Preferred Stock when dealing with
dividends but may not be a Parity Preferred Stock when dealing with liquidation,
dissolution or winding up of the Association); and
(c) junior to shares of the Series B Preferred Stock, either as to
dividends or upon liquidation, dissolution or winding up, or both, if such class
or classes shall be common stock or if the holders of the Series B Preferred
Stock shall be entitled to the receipt of dividends or of amounts distributable
upon liquidation, dissolution or winding up, as the case may be, in preference
or priority to the holders of stock of such class or classes.
The Series B Preferred Stock shall rank, as to dividends and upon
liquidation, dissolution or winding up, on a parity with the Association's 5%
Series Cumulative Preferred Stock and the Association's 6% Series Cumulative
Preferred Stock, and senior to the Association's common stock and any patrons'
equity of the Association.
<PAGE>
9. Restrictions on Transfer.
------------------------
(A) The shares of Series B Preferred Stock have not been
registered under the Securities Act of 1933, as amended (the "Securities Act")
and, until the earlier of two years (or such shorter period as is prescribed by
paragraph (k) of Rule 144 under the Securities Act as then in effect) after the
issuance of such shares or the registration of the shares, may not be offered or
sold except (i) to "qualified institutional buyers" (as defined in Rule 144A
under the Securities Act) in reliance upon the exemption from the registration
requirements of the Securities Act provided by Rule 144A, or (ii) in other
transactions exempt from the registration requirements of the Securities Act.
(B) Until the earlier of two years (or such shorter period as is
prescribed by paragraph (k) of Rule 144 under the Securities Act as then in
effect) after the issuance of such shares or the registration of the share under
the Securities Act, the Series B Preferred Stock may not be sold or otherwise
transferred in an amount that is less than $100,000 in aggregate liquidation
preference. Any such transfer of Series B Preferred Stock in an amount less than
$100,000 in aggregate liquidation preference shall be deemed to be void and of
no legal effect whatsoever. Any such transferee shall be deemed not to be the
holder of such Series B Preferred Stock for any purpose, including, but not
limited to, the receipt of dividends on such Series B Preferred Stock, and such
transferee shall be deemed to have no interest whatsoever in such Series B
Preferred Stock.
(C) Until the earlier of two years (or such shorter period as is
prescribed by paragraph (k) of Rule 144 under the Securities Act as then in
effect) after the issuance of such shares or the time when the shares of Series
B Preferred Stock are registered under the Securities
<PAGE>
Act, all certificates representing such Series B Preferred Stock will bear a
legend referring to the restrictions described above.
<PAGE>
EXHIBIT 3.2
(March 29, 1999)
THE BYLAWS OF
SOUTHERN STATES COOPERATIVE, INCORPORATED
ARTICLE I - PURPOSES AND POWERS
The purposes for which this Association is formed are set forth in the
Articles of Incorporation.
ARTICLE II - MEMBERSHIP
Section 1. Eligibility. Bona fide producers of agricultural products
(including tenants and landlords receiving a share of the crop) and cooperative
associations owned and controlled by bona fide producers of agricultural
products which comply with the provisions of the Agricultural Marketing Act, [12
USCA Section 1141j(a)] may become members of the Association by complying with
the membership requirements.
Section 2. Membership Requirements. Any person or association eligible for
membership, upon the acquisition of one (1) or more shares of the common capital
stock of the Association shall be deemed a lawful member entitled to vote.
Section 3. Voting. Each member shall be entitled to one (1) and only one
(1) vote regardless of the number of shares or amount of the common capital
stock of the Association owned by such member.
Section 4. Dismissal of Members. The Board of Directors shall have the
right to dismiss any member or members who have been adjudged by the Board of
Directors to have violated any of the membership requirements as provided in
these Bylaws; or to be acting contrary to the aims and purposes, or the best
interests of the Association, or has failed to patronize the Association for a
period of three (3) years or longer, provided, however, that any such member or
members shall have an opportunity to appear in his or their own behalf before
the next regular or special meeting of the membership, whose decision in all
such matters shall be final. The Board of Directors shall repurchase at par
value, plus any accrued and unpaid dividends, the common capital stock of any
member or members dismissed hereunder within a reasonable time after such
dismissal.
Section 5. Subsequent Ineligibility. In the event any member shall cease
to be eligible to hold membership in the Association, such member may be
required to surrender said common stock at par value, plus any declared and
unpaid dividends.
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Section 6. Death of Members. The Board of Directors may repurchase at par
value, plus any declared and unpaid dividends, the common capital stock of any
deceased member. Should the Association not desire to repurchase such stock of a
deceased member it may be sold or transferred to any other person eligible for
membership in the Association as set forth in Section 1 of this Article. An
association of producers shall be deemed deceased when it is no longer eligible
for membership in the Association.
Section 7. Roll. A roll of the members and their addresses shall be kept
by the Association. Each member shall notify the Association of any change of
address within fifteen (15) days of any such change. The Board of Directors may
suspend the voting rights of any member who fails to give such notice of any
change of address and withhold dividends on any membership stock registered in
such member's name and notice of any membership meetings until his new address
can be ascertained and his eligibility to continue his membership in this
Association can be determined.
Section 8. Annual Meetings. The annual meeting of the members of this
Association shall be held at such time and place in the State of Virginia or in
any other State as may be allowed by law, as the Board of Directors may
determine.
Section 9. Special Meetings. Special meetings of the members may be held
at any place within the State of Virginia or in any other State as may be
allowed by law, at any time upon the call of the Board of Directors, or at least
ten percent (10%) of the members of the Association.
Section 10. Notice of Meetings. Written or printed notice of all meetings
of the members, annual or special, setting forth the time and place together
with a statement of purposes thereof and containing any other information that
may be required by law, shall be mailed to each member eligible to vote at his
address as the same appears on the records of the Association not less than
fifteen (15) days prior to the date of such meeting. In lieu of notice given in
any other manner, all or any meetings of members, annual or special, may, if the
Board of Directors so directs as to any or all such meetings, be held after
notice by publication in a periodical published by or for the Association which
substantially all the members of the Association receive, or in a newspaper or
newspapers, whose combined circulation is general in the territory in which the
Association operates.
Section 11. Quorum at Meetings for All Members. A quorum at any meeting of
the members (except local membership meetings which shall be governed by Section
3 of Articles IV and V and Section 4 of Article VI) shall consist of fifty (50)
members, represented in person, or by proxy. A majority of such quorum shall
decide any question that may come before the meeting, except as otherwise
provided by law, the Articles of Incorporation, or these Bylaws.
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Section 12. Quorum at Election District Meetings. A quorum at any Election
District Meeting shall consist of ten (10) delegates or alternates present in
person. A majority of such quorum shall decide any question that may come before
the meeting.
Section 13. Proxy Voting. Absent members may vote at all meetings of the
members by proxy in writing.
Section 14. Order of Business. The order of business at the annual meetings
and, as far as possible, at all other meetings of the members shall be
determined by the Board of Directors.
Section 15. Voting by Mail. The Board of Directors may, if it deems it
necessary or desirable, submit amendments to the Bylaws or other matters to the
members for their determination by mail ballot. Printed copies of proposed Bylaw
amendments or other questions so submitted and an appropriate mail ballot shall
be mailed to each and every member eligible to vote at his address as the same
appears on the records of the Association, not less than fifteen (15) days prior
to the date when said ballots must be returned by mail in order to be counted.
ARTICLE III - CAPITAL STOCK
Section 1. Certificates. Certificates of stock may be issued and shall be
signed by either the President and Chairman of the Board of Directors, Vice
President and Vice Chairman of the Board of Directors, Treasurer, or Assistant
Treasurer, and the Secretary or Assistant Secretary or any two (2) officers
authorized by the Board of Directors, under the corporate seal, and on the
record of each certificate shall be entered the name of the person owning the
shares, represented thereby, the number of such shares and the date of issue.
Facsimile signatures of such officers and a facsimile of the seal of the
Association may be used. The Board of Directors may elect to adopt the
provisions of the Virginia Code permitting shares to be issued without
certificates.
Section 2. Payment for Stock. (a) Except as may be limited by the Articles
of Incorporation, preferred capital stock may be issued for not less than its
par value for cash, or in exchange for real, personal or other property at
valuations determined by the Board of Directors and may be issued and held by
any person, firm or corporation.
(b) Common capital stock, including fractional shares, may be issued for
not less than its par value for cash, or in payment of patronage refunds as
provided in the Bylaws, or for the promissory notes of the members. The
Association shall hold the common capital stock as security for the payment of
said notes, but such retention shall not affect the members' right to vote. In
the event any such notes be not paid at maturity, the Board of Directors may
return to the member the amount paid by him and cancel his membership. The said
common capital
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stock shall be issued to and held by only such persons as are eligible for
membership in the Association.
Section 3. Repurchase of Common Capital Stock. (a) Whenever any member
desires to sell his common capital stock he shall first offer it to the
Association for purchase by the Association, or by a person or persons
designated by the Board of Directors of the Association, at its par value plus
declared and unpaid dividends, if any. In the event such stock is not purchased
by the Association, or by a person or persons designated as aforesaid, within
thirty (30) days after the receipt of a written notice by the Association
offering the said stock for sale, then the member may sell the said common
capital stock to any person eligible for membership in the Association. This
restriction on the transfer of common capital stock shall be printed upon every
common stock certificate, or in the disclosure statement issued in lieu of a
certificate.
(b) If the Board of Directors decides to repurchase such common capital
stock, the Association shall have the right to apply any sum or sums of money
for which the member may be indebted to the Association on the payment therefor.
This section shall also govern the repurchase of the common capital stock in
case of the death, dismissal, expulsion, or withdrawal of any member or members.
Section 4. Transfers. Transfers of shares shall be made only on the
records of the Association by the holder in person or under power of attorney
duly executed, witnessed and filed with the Association, and upon surrender of
any outstanding certificates of such shares. Transfers will be made only when
the stockholder is not delinquent in his indebtedness to the Association.
Transfers of the common capital stock shall be made only after the requirements
of Article III, Section 3, of these Bylaws have been satisfied.
Section 5. Dividends. The Board of Directors may declare dividends on
common capital stock not to exceed six percent (6%) per annum and on the
preferred capital stock of the Association at a rate per annum to be fixed by
the Board of Directors not to exceed the maximum rate permitted by law, together
with any dividends in arrears on shares of preferred capital stock.
ARTICLE IV - PRIVATE DEALERS AND ADVISORY BOARDS
Section 1. Establishment of Private Dealers. Distribution of supplies and
services may be provided through Private Dealers that agree to resell the
Association's products and services to members of the Association and others.
Each Private Dealer must agree to operate in a manner that reflects the
cooperative nature of transactions in the Association's goods with Members and
Patrons entitled to patronage refunds under Article XII of these Bylaws. Unless
otherwise agreed, Members and Patrons entitled to patronage refunds under
Article XII who acquire goods and services offered by the Association through
such Private Dealers shall be
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deemed patrons of the Association for patronage refund purposes with respect to
such goods and services.
Nothing herein shall prevent the establishment of distribution through
other types of non-cooperative outlets when deemed beneficial to the overall
economic well being of the Association.
Section 2. Establishment and Election of Advisory Boards. Where in the
judgment of Management factors such as, among others, the number of members
served by a Private Dealer and the volume of transactions in the Association's
goods and services handled by a Private Dealer justify the creation of a local
Advisory Board to serve as a liaison between the members patronizing one (1) or
more of such Private Dealers, the local members shall elect, from their own
number, at their local annual meeting, an Advisory Board. Each Advisory Board
shall consist of six (6) members whose terms of office shall be three (3) years.
A member of an Advisory Board shall only be eligible to be elected to succeed
himself for one (1) additional term before going off the Advisory Board for at
least one (1) year. All vacancies on the Advisory Board shall be filled by the
remaining members of the said Advisory Board, subject to confirmation by the
local members of the Association served by the Private Dealer at their next
local annual meeting. The Advisory Board shall elect a Chairman, a Vice
Chairman, and a Secretary for terms of one (1) year.
Section 3. Quorum. At all local meetings of the members as provided for in
this Article a quorum shall consist of ten (10) members then having voting
power. A majority of such quorum shall decide any question that may come before
the meeting. At all meetings of the Advisory Board a majority of the Advisory
Board shall constitute a quorum. A majority of such quorum shall decide any
questions that may come before the meeting.
Section 4. Cancellation of Private Dealer Agreement. In the event of the
cancellation of such Private Dealer Agreement, the Advisory Board for such
Private Dealer shall continue in office until a new Private Dealer shall be
appointed. In the event it shall not prove practical or feasible to so appoint
another Private Dealer, such Advisory Board shall be deemed to have resigned as
Advisory Board members and the members of the Association served by such Private
Dealer shall be invited to participate in membership activities of the nearest
retail distribution point serving members of the Association.
ARTICLE V - STOCKHOLDER ADVISORY BOARDS
Section 1. Election of Stockholder Advisory Board. The local members of
the Association, served by a retail service of the Association, shall elect from
their own number a Stockholder Advisory Board at their local annual meeting.
Each Stockholder Advisory Board shall consist of six (6) members, whose terms of
office shall be for three (3) years. The terms of office shall be so arranged
that the terms of two (2) members shall expire each year. A member of an
Advisory Board shall only be eligible to be elected to succeed himself for one
(1)
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additional term before going off the Advisory Board for at least one (1) year.
All vacancies on the Stockholder Advisory Board shall be filled by the remaining
members of said Advisory Board, subject to confirmation by the local members of
the Association served by the retail service at their next local annual meeting.
The Stockholder Advisory Board shall elect a Chairman, Vice Chairman and a
Secretary for terms of one (1) year. Management shall determine which retail
locations shall be grouped together as a retail service having a Stockholder
Advisory Board; and where two (2) or more Stockholder Advisory Boards are
grouped together to form one (1) Advisory Board, management may provide for such
combined Advisory Board to have more than six (6) members in situations where it
is deemed necessary to do so to adequately represent Members. Nothing herein
shall prevent the establishment of a retail service without a Stockholder
Advisory Board where circumstances warrant that decision. But the Members at
such a retail service shall be provided an opportunity to participate in nearby
local membership activities designated by Management.
Section 2. Duties of Stockholder Advisory Board. Each Stockholder Advisory
Board shall serve in an advisory capacity with respect to operation of the
retail service it serves and shall make recommendations to the Board of
Directors of the Association on matters referred to the Advisory Board by the
Directors and may make recommendations to the Directors on policies affecting
the retail service.
Section 3. Quorum. At all local meetings of the members as provided for in
this Article a quorum shall consist of ten (10) members then having voting
power. A majority of such quorum shall decide any questions that may come before
the meeting. At all meetings of the Stockholder Advisory Board a majority of the
Advisory Board shall constitute a quorum. The majority of such quorum shall
decide any questions that may come before the meeting.
ARTICLE VI - MARKETING
(A)
GRAIN MARKETING
Section 1A. Grain Producers Advisory Board Election. The Grain Producers
Advisory Board shall consist of as many eligible members elected by the
membership in each region for terms of three (3) years each as may, from time to
time, be established by the Board of Directors. If more than one (1) member
represents a region, the terms shall be staggered. The Advisory Board shall also
have one (1) at-large member as provided in Section 2A of this Article. Each
member of the Advisory Board shall serve until the election and acceptance of
his duly qualified successor. Vacancies, other than from the expiration of a
term of office, shall be filled from the region in which the vacancy occurs, by
a majority vote of the remaining Advisory Board members. The Board of Directors
shall divide the territory served by Grain Marketing into at least four (4)
geographic regions so that as far as practical, each area of such territory
shall be represented on the Grain Producers Advisory Board. Changes in the
number
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and boundaries of these regions may be made by the Board from time to time as
circumstances require.
Elections for members of the Grain Producers Advisory Board shall be held
in accordance with procedures not inconsistent with these Bylaws. The chairmen
of the Elevator Advisory Boards in each region shall each appoint a nominating
committee consisting of one (1) member from their respective Elevator Advisory
Board and two (2) grain producer members from the area served by such Elevator.
These nominating committees shall nominate at least two (2) members from the
region for each position on the Grain Producers Advisory Board to be filled. In
the event there shall be more than one (1) Elevator Advisory Board in a region,
there shall be a nominee from the area served by each Elevator.
Grain producer members who have failed to use the grain marketing services
of the Association within the three (3) fiscal years immediately preceding any
election held under this Article, shall be ineligible to vote in such election.
The nominee in each region receiving the highest number of votes from the
region shall be deemed elected to the Grain Producers Advisory Board. The term
of office shall begin on December 1 in the year of election and shall end on
December 1 three (3) years thereafter, or until the election and acceptance of a
duly qualified successor, whichever is later, unless duly terminated at an
earlier date. In the event of a tie, the winner shall be determined by lot.
The mailing address of each grain producer member shall determine the
region in which the member shall vote. Members of the Grain Producers Advisory
Board may succeed themselves.
The Grain Producers Advisory Board shall elect a Chairman, Vice Chairman,
and a Secretary for terms of one (1) year.
Section 2A. The At-Large Grain Producers Advisory Board Member. In addition
to the elected members of the Grain Producers Advisory Board, one (1) at-large
Member shall be appointed by the Board of Directors for a term of three (3)
years, or until his successor is appointed. The at-large Member shall have the
same powers and rights as other members of the Advisory Board. Any vacancy
occurring in the office of at-large Advisory Board Member shall be filled in the
same manner as the original appointment was made.
Section 3A. Duties of the Grain Producers Advisory Board. The Grain
Producers Advisory Board shall serve in an advisory capacity to the Board of
Directors with respect to the operation of the Grain Marketing Division, and
shall make recommendations to the Board of Directors of the Association on
matters referred to the Grain Producers Advisory Board by the Board of Directors
and may make recommendations to the Board on policies affecting Grain Marketing
operations.
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Section 4A. Quorum. At all local membership meetings of Grain Marketing
members as provided for in this Article, a quorum shall consist of ten (10)
grain producer members then having voting power. A majority of such quorum shall
decide any question that may come before the meeting. At all meetings of the
Grain Producers Advisory Board or Elevator Advisory Boards, a majority of the
Grain Producers Advisory Board or Elevator Advisory Boards shall constitute a
quorum. A majority of such quorum shall decide any questions that may come
before the meeting.
Section 5A. Elevator Advisory Boards. The Board of Directors shall
establish the duties, method of selection, terms of office and the number of
Advisory Boards established in the various regions in which Grain Marketing has
patrons. It shall be the purpose of these Advisory Boards to serve as the
community liaison between the Grain Producers Advisory Board and communities
where Grain Marketing operations are substantial enough to warrant the creation
of such a local Advisory Board. It shall be an express responsibility of the
Grain Producers Advisory Board to make recommendations to the Board of Directors
with regard to the specific responsibilities of the Board of Directors under
this section.
(B)
LIVESTOCK MARKETING
Section 1B. Livestock Divisional Board Election. The Livestock Divisional
Board shall consist of as many eligible members in each region for terms of
three (3) years each as may, from time to time, be established by the Board of
Directors. If more than one (1) member represents a region, the terms shall be
staggered. The Livestock Divisional Board shall also have one (1) at-large
member as provided in Section 2B of this Article. The initial Livestock
Divisional Board shall be appointed by the Board of Directors and shall
thereafter be self perpetuating with all vacancies, whether from the expiration
of term of office or otherwise, to be filled by a majority vote of the remaining
Livestock Divisional Board from eligible members from the region in which the
vacancy occurs. Each member of the Livestock Divisional Board shall serve until
the appointment and acceptance of his duly qualified successor. The Board of
Directors shall divide the territory served by the Livestock Marketing Division
into at least four (4) geographic regions so that as far as practical, each area
of such territory shall be represented on the Livestock Divisional Board.
Changes in the number and boundaries of these regions may be made from time to
time as circumstances require.
The Livestock Divisional Board shall elect a Chairman, Vice Chairman, and a
Secretary for terms of one (1) year.
Section 2B. The At-Large Livestock Divisional Board Member. In addition to
the appointed members of the Livestock Divisional Board, one (1) at-large Member
shall be appointed by the Board of Directors for a term of three (3) years, or
until his successor is appointed. The at-large Member shall have the same powers
and rights as other members of the Livestock Divisional Board. Any vacancy
occurring in the office of at-large Livestock
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Divisional Board member shall be filled in the same manner as the original
appointment was made.
Section 3B. Duties of the Livestock Divisional Board. The Livestock
Divisional Board shall serve in an advisory capacity to the Board of Directors
with respect to the operation of the Livestock Marketing Division, and shall
make recommendations to the Board of Directors on matters referred to the
Livestock Divisional Board, and may make recommendations to the Board of
Directors on policies affecting Livestock Marketing Division operations.
ARTICLE VII - ELECTION DISTRICTS
The Board of Directors shall divide the territory in which the Association
operates into nine (9) or more Election Districts on the basis of the annual
volume of business done with the Association, with proper consideration being
given to the member patronage and geographical area of each. The Board of
Directors may modify and redistrict the territory whenever advisable in order to
maintain substantial equality in the volume of business done in the different
districts.
ARTICLE VIII - DIRECTORS
Section 1. Powers. The business of the Association shall be managed under
the direction of the Board of Directors.
Section 2. Number of Directors. The Board of Directors shall consist of
one (1) Director elected from the membership in each Election District and up to
a maximum of six (6) Public Directors residing within the operating territory of
the Association.
Section 3. Term of Office. Directors representing Election Districts and
Public Directors shall serve a term of three (3) years and thereafter until
their successors are elected or appointed.
Section 4. Election District Meetings. Each Election District shall be
represented by one (1) Director who shall be elected at an Election District
Meeting of the delegates from the respective districts. Delegates shall be
elected by the members served by the Association through its retail distribution
system, its grain elevators, its livestock marketing system, and its member
cooperatives in each Election District. The number of delegates and the
procedure for selecting them shall be determined from time to time in a manner
that provides all members in good standing an opportunity to vote for at least
one (1) delegate to such Election District Meeting. Such delegates shall be
elected by the members of the Association and the member
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retail cooperatives. In addition to a delegate or delegates, an alternate or
alternates shall also be elected by such members to serve in the event the
delegate or delegates shall be unable or unwilling to serve. The time and place
of an Election District Meeting in each Election District shall be determined by
the Board of Directors of the Association and at least ten (10) days' written
notice of the time and place of said meeting shall be mailed by the Secretary of
the Election District to each delegate elected in each Election District. If any
delegate shall be unable or unwilling to attend such Election District Meeting,
his alternate shall serve in his place. A quorum at such meeting shall consist
of the lessor of (i) 50% of the eligible delegates, or alternates, present in
person or (ii) ten (10) delegates or alternates in person. All matters,
including the election of a Director, shall be decided by majority vote of the
delegates or alternates present. Proxy voting shall not be permitted in such
Election District Meetings. The nominating committee selected under Section 5 by
the delegates shall choose a Chairman and Secretary to serve until the
adjournment of the next Election District Meeting. Vacancies in those offices
shall be filled in the same manner. Complete records of the Election District
proceedings shall be recorded by the Secretary of the Election District. The due
election of the Director by the Election District Meeting shall be final.
Section 4A. Initial Election of Directors Representing the Gold Kist
Territory. Notwithstanding anything to the contrary in these Bylaws, the members
served by the Association as a result of the acquisition of the inputs business
assets (the "Inputs Business") of Gold Kist Inc. ("Gold Kist") pursuant to an
Asset Purchase Agreement dated July 23, 1998, shall be initially represented on
the Board of Directors by six (6) additional Directors from such new members
residing in the states of Georgia, Florida, South Carolina, Alabama,
Mississippi, Tennessee, Louisiana, Texas, and Arkansas (the "Gold Kist Operating
Territory") who shall be elected for staggered terms (two serving for one year,
two for two years, and two for three years, in each case such period to be
measured from the date of the next annual meeting of members of the Association
following the closing date of the purchase of the Gold Kist Inputs Business) by
the Gold Kist Board of Directors sitting as delegates to a Special Election
district Meeting convened for such election. Such Special Election District
Meeting shall be held as promptly as practicable following the closing date of
the purchase of the Gold Kist Inputs Business. For the purposes of this Section
4A, the Election District shall be defined as the Gold Kist operating territory.
Subsequent representation on the Board of Directors for the Gold Kist operating
territory commencing at the November 1999 annual meeting of the members of the
Association shall be from new Election Districts to be equitably established by
the Board of Directors pursuant to Article VII of these Bylaws.
Section 5. Nominating Committee. The delegates to an Election District
Meeting may elect for the next Election District Meeting a nominating committee
consisting of not less than three (3) nor more than five (5) members, who shall
either be members of the Association or members of a retail member cooperative
whose duty it shall be, prior to such next Election District Meeting, to
nominate one (1) or more persons to serve as Director and to advise delegates in
the district prior to such Election District Meeting the names and
qualifications of such nominees. In the event any member of a nominating
committee shall be unable or unwilling to serve, the remaining members, so long
as they shall not be less than three (3) in
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number, shall have full power to act. In the event the members of the nominating
committee remaining shall be less than three (3), the additional members
necessary to bring the total to three (3) shall be selected by the member or
members able and willing to serve.
Section 6. Eligibility. Only members of the Association residing in the
Election District or members of a retail member cooperative residing in such
district shall be eligible to serve on the Board of Directors of the
Association. Provided, however, that for the purpose of determining eligibility
for election to the Board of Directors, a member who does not reside in any
Election District, but does reside in the Association's trading area, as
determined by the Board of Directors, in a state contiguous to an Election
District, shall be eligible for election to the Board of Directors in such
Election District. No private dealer, or person having a financial interest in
such dealer, or employee of such dealer, or any person who is or has been an
employee of the Association, or any association affiliated with the Association,
at any time during the ten (10) year period immediately prior to the Election
District Meeting at which such person stands for election, shall be eligible for
nomination for, or service on, the Board of Directors of the Association; nor
shall any such person be eligible to be a delegate to, or to vote in, any
Election District Meeting.
Section 7. Vacancies. Any vacancy, other than from the expiration of a
term of office, in the office of elected director shall be filled for the
unexpired term by the delegates last elected in the election district which the
director represented, at a special Election District Meeting called by the Board
of Directors of the Association. Wide discretion shall be vested in the Board of
Directors in the matter of calling a special Election District Meeting when such
vacancy shall occur within the year in which a regular Election District Meeting
is scheduled to be called in such district.
Section 8. Public Director. Public Directors shall be appointed each for a
term of three (3) years, on a staggered basis, by the Director of the State
Agricultural Extension Service of the Commonwealth of Virginia. In the case of
any vacancy in the office of Public Director such vacancy shall be filled by the
person named by the public official mentioned herein. In the event of any delay
in the appointment of a Public Director, the incumbent shall hold office until
the new appointment is made. In the event the addition or deletion of a Public
Director is made necessary, the term of any appointment may be adjusted in order
to provide for the expiration of about one-third (1/3) of the terms of all
Public Directors each year.
Section 9. Compensation. Subject to applicable law and amendments thereof
from time to time, compensation and expense reimbursement policies in respect to
Directors shall be established periodically by the Board of Directors.
Section 10. Meetings. Regular meetings of the Board of Directors shall be
held at least once each quarter at such time and place as may be determined by
the Board of Directors. Special meetings of the Board of Directors shall be held
upon call of the President and Chairman of the Board of Directors or upon
written request of a majority of the Directors.
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Section 11. Notice of Meetings. Notice of both regular and special meetings
shall be mailed by the Secretary to each member of the board at his last known
post office address not less than five (5) days before any such meeting, and
notice of special meetings shall state the purpose thereof.
Section 12. Quorum. A majority of the Board of Directors shall constitute a
quorum at any meeting.
ARTICLE IX - EXECUTIVE COMMITTEE
Section 1. Election. The Board of Directors may elect from their own
number an Executive Committee of not less than three (3) members. A majority of
the members of the Committee shall constitute a quorum for the transaction of
any business that may come before any meeting thereof and a majority of the
members of the Committee present shall decide any question that may come before
such meeting. Two (2) days oral or written notice shall be given before each
meeting.
Section 2. Powers and Duties. The Executive Committee shall have such
powers and duties as may, from time to time, be prescribed by the Board of
Directors and as may be consistent with law. Minutes of all meetings of the
Executive Committee shall be kept by the Secretary and submitted to the Board of
Directors.
ARTICLE X - OFFICERS AND AGENTS
Section 1. Election of Officers. The officers of the Association shall be
a President and Chairman of the Board of Directors, a Vice President and Vice
Chairman of the Board of Directors, a President and Chief Executive Officer, a
Secretary, a Treasurer, and such other officers as may from time to time be
elected or appointed by the Board of Directors, all of whom shall be elected for
one (1) year terms and shall hold office until their successors are elected and
qualified. The President and Chairman of the Board of Directors and the Vice
President and Vice Chairman of the Board of Directors shall be elected by the
Board of Directors from their own number. The President and Chief Executive
Officer, Secretary and Treasurer and other officers as may be elected or
appointed shall be elected or appointed by the Board of Directors, but need not
be Directors or members of the Association.
Section 2. President and Chairman of the Board of Directors. The President
and Chairman of the Board of Directors shall preside at all meetings, shall have
general supervision of the affairs of the Association, sign all certificates of
stock and may sign and countersign all contracts and other instruments of the
Association; shall make reports to the Board of Directors and members, and
perform all such other duties as are incident to this office or are properly
required of this officer by the Board of Directors.
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Section 3. Vice President and Vice Chairman of the Board of Directors. The
Vice President and Vice Chairman of the Board of Directors shall exercise all
functions of the President and Chairman of the Board of Directors in the absence
or disability of the latter, and such officer may with the Secretary or any
Assistant Secretary sign certificates of stock.
Section 4. The President and Chief Executive Officer. The President and
Chief Executive Officer shall carry out the policies of the Association
established from time to time by the Board of Directors and shall be the General
Manager of its operations, including all purchasing, marketing, manufacturing,
processing, distribution, and service activities required to effectuate the
Association's purposes as outlined in its Articles of Incorporation and the
policies of the Board of Directors enacted in furtherance thereof. The President
and Chief Executive Officer shall have authority to sign checks, drafts, notes,
and all other orders for the payment of money and to sign the corporate name to
all deeds, contracts, leases, and other documents of every nature and
description. Such officer may delegate the authority vested in this office, or
any portion of it, to subordinate agents and employees.
Section 5. Subordinate Agents and Employees. Subject to the policies
established by the Board of Directors, the President and Chief Executive Officer
shall have the authority to employ, fix the compensation of, supervise, and
terminate the employment of all agents and employees of the Association except
as otherwise provided. If the President and Chief Executive Officer deems it to
be in the best interests of the Association, such officer may, from time to
time, confer upon such subordinate agents of the Association such operational
titles and designations (including those of Vice President with appropriate
indication of such agents' areas of operation) as the President and Chief
Executive Officer may determine, provided that any title or designation so
conferred shall not constitute such agent an officer of the Association.
Section 6. Secretary. The Secretary shall issue notices for all meetings,
of the Board of Directors and members, except Election District Meetings, shall
keep the minutes of the meetings of the Directors, Executive Committee, and the
Annual and Special Meetings of all the members, shall have charge of the seal
and corporate books, shall sign with the President and Chairman of the Board of
Directors, such instruments as require such signature and may sign certificates
of stock. The Secretary shall make such reports and perform such other duties as
are incident to this office or properly required of the Secretary by the Board
of Directors or the President and Chief Executive Officer. The Secretary may
delegate the performance of any of his or her duties to one (1) or more
Assistant Secretaries.
Section 7. Treasurer. The Treasurer shall have the custody of all the
funds and securities of the Association, and shall deposit the same in the name
of the Association in such bank or banks as the Directors may select. The
Treasurer shall have authority to sign all checks, drafts, notes, and orders for
the payment of money and to sign the corporate name to deeds, contracts, and
leases and other documents of every nature and description. The Treasurer shall
at all reasonable times exhibit his or her books and accounts to any Director
13
<PAGE>
upon application at the office of the Association during business hours. He or
she shall give bond with sufficient surety in such amounts as the Board of
Directors may require, the premium for which shall be paid by the Association.
The Treasurer may delegate the performance of any of his or her official duties
to one (1) or more Assistant Treasurers, provided they give bond with surety
approved by the President and Chief Executive Officer.
Section 8. Removal. Any officer may be removed at any time by the Board of
Directors.
ARTICLE XI
PATRONAGE REFUND ALLOCATIONS AND SIMILAR INTERESTS
The Board of Directors may elect to satisfy any patronage refund wholly or
partially in Patronage Refund Allocations or any other non-cash form which shall
be paid in such manner and on such terms and conditions as may be approved by
the Board of Directors from time to time not inconsistent with these Bylaws. The
following terms and conditions shall apply to Patronage Refund Allocations:
(a) All debts of the Association shall be entitled to priority over all
Patronage Refund Allocations.
(b) Retirement of Patronage Refund Allocations and similar interests shall
take place pro rata in the order of issuance when the Board of Directors
determines there are funds available for that purpose.
(c) The Association shall have a right to apply such Patronage Refund
Allocations to any indebtedness owed to the Association by the holder thereof
after maturity and shall be deemed to have a lien thereon as security for such
indebtedness.
(d) In order to contribute to the liquidity of estates of owners of
Patronage Refund Allocations, the Board of Directors may establish a policy of
redeeming such Patronage Refund Allocations upon the owner's death.
The Board of Directors is not prohibited from adding such additional terms
and conditions as may be deemed appropriate.
ARTICLE XII- DISPOSITION OF NET EARNINGS
Section 1. (a) As used in this Article, the term "Member" shall be deemed
to include any person, firm, or corporation owning at least one (1) share of the
common stock of the
14
<PAGE>
Association; the term "Patron" shall include (i) any person, firm, or
corporation which is eligible for membership in the Association but is not a
Member of the Association, and (ii) any person, firm, or corporation, which is
not a Member of the Association, with whom the Association has in effect an
Agreement in writing pursuant to which it has agreed to pay patronage refunds to
such person on the basis of the quantity or value of the Association's business
done with or for such person during the fiscal year.
(b) The Board of Directors may set aside each fiscal year, from the net
earnings, such amounts as the Board of Directors in its discretion deems
necessary for the efficient prosecution of the Association's business, provided,
however, that no amounts shall be so set aside which are not reasonable in
amount, giving due regard to the purposes thereof (such amounts being sometimes
hereinafter referred to as "reasonable reserves"). Such reasonable reserves may
be used for such proper corporate purposes as shall be determined by the Board
of Directors, including, but not limited to the accumulation of working capital,
contributions to sinking funds to meet future indebtedness, payment of federal
income taxes, acquisition of funds for expansion or replacement, payment of
dividends on capital stock or accumulations of reserves to offset price
declines. Such unallocated reserves shall either be apportioned on the books of
the Association on a patronage basis to Members and Patrons who were or became
such during the fiscal year, or else the books and records of the Association
shall afford a means for doing so at any time.
Section 2. (a) This Association shall be operated upon the cooperative
basis in carrying out its business within the scope of the objects and purposes
defined in Article B of the Articles of Incorporation. It shall be operated in
such manner as to qualify this Association as a farmers cooperative association
as defined in the Agricultural Marketing Act [12 USCA, Section 1141j(a)], and
the Capper-Volstead Act [7 USCA, Section 291]. The Association shall annually
determine its net earnings (loss), including the appropriate portions thereof
constituting net earnings for patronage refunds, and with respect to such net
earnings, it shall then allocate and distribute patronage refunds to its Members
and Patrons determined on the basis of their patronage with the Association
during such year. The Association shall be absolutely liable for the payment of
patronage refunds as provided herein without further action on the part of any
officer or of the Board of Directors. The Association shall pay such patronage
refunds as soon as practicable after the close of the fiscal year and in no
event later than eight and one-half (8 1/2) months after the close thereof. Each
transaction between this Association and each Member and Patron shall be subject
to and include as a part of its terms, whether or not the same shall be
expressly referred to in said transaction, the provisions of this Article XII.
(b) The Association's overall net earnings (loss) shall first be
determined using generally accepted accounting principles. The overall net
amount thereof applicable to the Association's marketing, supply and/or service
operating functions, including their respective allocation units, shall then be
increased or decreased, as the case may be, in accordance with the applicable
rules and regulations for computing income taxes in order to determine the
overall net earnings (loss) of the Association.
15
<PAGE>
(c) From the amount of total net earnings so determined, there shall then
be transferred to and credited to reserves created under 1 (b) of this Article
such net amounts of extraneous income and/or expense which are unrelated to the
marketing, purchasing and/or service operations carried on by the Association
for its Members and Patrons on a cooperative basis.
(d) The Association's remaining net earnings (loss) shall then be divided
into two (2) parts on the basis of the quantity or value of business done by the
Association with or for persons acquiring supplies or services from, or
marketing products through the Association. These parts shall consist of (i) a
non-patronage-sourced portion determined on the basis of the quantity or value
of business done with or for persons who are not eligible to receive patronage
refunds from the Association, and (ii) a remaining patronage-sourced portion
attributable to the quantity or value of business done with or for Members
and/or Patrons who are eligible to receive patronage refunds from the
Association. These parts shall then be handled or adjusted as follows.
(e) The non-patronage-sourced portion of net earnings (loss) as defined in
2 (d) (i) above, shall be retained and credited to the Association's reserves or
deficit as the case may be. The patronage-sourced portion of an overall net
loss, as defined in 2 (d) (ii) above shall be retained and handled in accordance
with Section 4.
(f) There shall then be deducted and recouped, from the patronage-sourced
amount of net earnings still remaining, in accordance with 4 (a) below, the
accumulated amount of patronage-sourced losses from prior year(s) then
remaining, but only to the extent such prior year(s)' loss(es) have not
otherwise been disposed of by the Board of Directors. The amount to be deducted
hereunder shall be further limited to an amount which does not exceed the lesser
of (i) the current year's patronage-sourced net earnings amount before such
deduction, or (ii) the amount of any available, patronage sourced net operating
loss carry-overs or carry-forwards from the current or prior year(s).
(g) Any remaining patronage-sourced, net earnings shall be further reduced
(but not below zero) by the ratably-determined portion of dividends on stock
paid or payable for the fiscal year. The amount of this reduction shall not
exceed the lesser of (i) the amount by which current or accumulated earnings and
profits of the Association would be reduced (but not below zero) by reason of
payment or accrual of such dividends or (ii) the current year(s)' patronage-
sourced, remaining net earnings to which this adjustment applies.
(h) Any remaining patronage-sourced net earnings shall be further reduced
(but not below zero) by any additional appropriations to the reserves created
under 1 (b) from patronage-sourced net earnings.
(i) Any amount then remaining, shall constitute the net earnings of the
Association from which Member(s) and Patron(s) patronage refunds shall be paid,
and such amount shall be apportioned among the Member(s) and Patron(s) of the
allocation units on any equitable
16
<PAGE>
patronage basis(es) approved by the Board of Directors, and the amount so
determined, shall be paid as patronage refunds in the form of qualified or of
non-qualified written notices of allocation, provided, however, that a payment
by a qualified, written notice of allocation shall be accompanied by not less
than twenty percent (20%) of the stated dollar amount thereof in cash with the
balance in such form as may be determined by the Board of Directors not
inconsistent with other provisions of these Bylaws.
(j) If the net earnings in any allocation unit is insufficient to pay a
patronage refund of at least one-half of one percent (1/2 of 1%) of the total
dollar volume of business with Members and Patrons for each fiscal year in a
purchasing allocation unit, or the Livestock Marketing Allocation Unit, or one-
half (1/2) cent per bushel in Grain Marketing, then such net earnings, in the
discretion of the Board of Directors, may be carried by the Association in the
reserve established under 1 (b) of this Article.
Section 3. Patronage refunds may be distributed in cash, credits,
Patronage Refund Allocations, revolving fund certificates, capital equity
certificates, preferred or common stock, certificates of indebtedness, letters
of advice, or any combination thereof designated by the Board of Directors and
in accordance with these Bylaws. By entering into a business transaction with
this Association, the Members and Patrons agree to accept a distribution of the
patronage refund under these Bylaws, in such form or forms as are hereinabove
provided in this Section, in satisfaction of the obligation of this Association
to make the patronage refund; and the Members and Patrons shall be deemed to
have received the amount of such patronage refund and reinvested the same in
whatever non-cash allocation or allocations may be established pursuant to this
provision. The books and records of this Association shall show the interest of
each Member and Patron which shall be credited on this Association's books to
the respective Member and/or Patron.
Section 4. The Board of Directors of this Association shall have complete
discretion to determine the handling and ultimate disposition of the
Association's loss(es) and the form, priority and manner in which such loss(es)
or portion(s) thereof shall be taken into account, retained, and ultimately
recouped. The Board may retain loss(es) of the Association and subsequently (a)
recoup and dispose of them by offset against the net earnings of the Association
of subsequent year(s), or (b) may apply such loss(es) to prior year(s)'
patronage allocations at any time in order to recoup and dispose of them by
means of offset and cancellation against Member(s) and Patron(s)' allocations or
book credits; or the Board of Directors may select and use any other method of
disposition as the Board of Directors, in its sole discretion, shall from time
to time determine.
Section 5. In the discretion of the Board of Directors, no patronage
refund or dividend on capital stock shall be paid to any Member or Patron who is
indebted to the Association until such debt has been paid, or the said patronage
refund or dividend may be offset against such Member's or Patron's indebtedness,
and the balance, if any, remitted to such Member or Patron. The Association
shall be deemed to have a security interest in such patronage refund to secure
such indebtedness. The Board of Directors may require that the first dollar of
any cash patronage refund to any Patron who is not a Member, but who is
qualified for
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membership in the Association, shall be applied to the purchase of one (1) share
of the Association's membership capital stock.
Section 6. Notwithstanding any contrary provisions in these Bylaws, the
Board of Directors shall fix and/or amend from time to time the minimum amount
which shall be paid as a patronage refund and any amount less than that so fixed
shall not be distributed to the Member or Patron entitled thereto (unless he
claims it in cash) but shall be retained by the Association as though it were
part of a reasonable reserve set aside pursuant to Section 1 (b) of this
Article.
Section 7. Each person who hereafter applies for and is accepted to
membership in this Association shall, by such act alone, consent that the amount
of any distributions with respect to his patronage which are made in written
notices of allocation (as defined in 26 U.S.C. (S)1388) and which are received
by him from the Association, will be taken into account by him at their stated
dollar amounts in the manner provided in 26 U.S.C. (S)1385(a) in the taxable
year in which such written notices of allocation are received by him, provided,
however, that this consent will not extend to written notices of allocation
clearly denominated on their face to be "nonqualified."
ARTICLE XIII - DISSOLUTION
In the event of any liquidation or dissolution or winding up (whether
voluntary or involuntary) of the Association, then, after the payment of its
debts, including all outstanding debentures, the holders of the outstanding
Preferred Stock shall have a preference on the assets of the Association, and
shall be entitled to be paid therefrom in full both the par value of their
shares and the unpaid dividends accrued thereon before any amount shall be paid
to the holders of the Common Stock. After the holders of the Preferred Stock
shall have been paid par value for their Preferred Stock, plus all accrued and
unpaid cumulative dividends thereon, the holders of Common Stock shall be
entitled to be paid the par value of such stock, plus declared and unpaid
dividends thereon. After said Common Stock has received its par value, plus
declared and unpaid dividends thereon, any balance in or unused portion of
Patronage Refund Allocations, capital book equities, or other allocations, and
capital reserves shall be returned to members and other patrons on a pro rata
basis of their respective interest therein.
Any assets and funds then remaining shall be distributed to the patrons of
the Association on the basis of the ratio the patronage of each patron bears to
the total patronage of the Association during the period of its operation. As
used in this Article, patronage refers to business done with or through the
Association on a cooperative basis.
ARTICLE XIV - AUDITING
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At least once each year, the Board of Directors shall secure the services
of a certified public accountant, who shall make a proper audit of the records
and accounts of the Association and render a comprehensive report in writing
thereof, which report shall be submitted to and considered by the Board of
Directors in executive session. Special audits shall be made upon order of the
Board of Directors or upon a majority vote of the members at any regular or
special meeting.
ARTICLE XV - MISCELLANEOUS
Section 1. Fiscal Year. The Fiscal Year of the Association shall begin on
July 1 of each year and shall end on the 30th day of June of the following year.
Section 2. Seal. The seal of the Association shall consist of two (2)
concentric circles between which shall be written the name of the Association
and in the center of which shall be the word, "Seal."
Section 3. Limitation of Liability and Indemnification of Directors and
Others. The Association shall indemnify any person who was or is a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative by reason of the fact
that he is or was a director, officer, or employee of the Association, or is or
was serving at the request of the Association as a director, officer, or
employee of another corporation, partnership, joint venture, trust or other
enterprise, or as a "fiduciary" (as defined by Section 3[21](A) of the Employee
Retirement Income Security Act of 1974, and as the same shall be from time to
time amended, called the "act") with regard to any "employee benefit plan" (as
defined in Section 3(3) of the Act), in which employees of the Association, or
any subsidiary, affiliate, or managed cooperative are participants because of
such employment.
The indemnification shall be against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding to the full
extent permitted under Title 13.1 of the Code of Virginia, as the same may be
amended from time to time, and under any other controlling statutes or
regulations whether Federal or State. Such indemnification shall be in addition
to, and not in limitation of, any other indemnity required by law or agreement.
If in order to be entitled to indemnity an affirmative determination must
be made that the indemnitee has met some standard of conduct under applicable
law, indemnification to which the indemnitee is entitled shall be made promptly
upon the determination by independent legal counsel in a written opinion, which
counsel shall be acceptable to indemnitee and a disinterested quorum of the
Board of Directors, or, at the option of the indemnitee, shall be selected by
the Chief Judge of the U.S. District Court for the Eastern District of Virginia.
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Section 4. Service Charges. A service charge may be assessed on any checks
issued in payment of dividends on capital stock, interest on debentures,
redemptions of capital stock, debentures or patronage refund allocations, and
patronage refunds paid wholly in cash that are not presented for payment within
120 days of the date of issuance (the "stale date"). The service charge will be
assessed at the stale date and annually on the anniversary date of the check
issuance date. The amount of the service charge will approximate the cost of
special handling and maintaining the account on the Association's records. This
charge will be determined by and reviewed periodically by management. Mailings
other than checks related to patron equities that are returned unclaimed may
initiate annual service charge assessments on accounts that are not otherwise
being assessed service charges. The Association shall through appropriate means
endeavor to communicate with members and patrons to advise them of this Bylaw
and the rules and regulations established hereunder.
Section 5. Forfeiture and Insufficient Mailing Addresses. In addition to
the service charges provided for in Section 4. above, any check issued as
described in Section 4. that is not presented for payment within 120 days of the
date of issuance because of the payee's failure to maintain a proper mailing
address will result in a cessation of future mailings related to such payee's
equity account. On the third anniversary of the check issuance date, if no
correct mailing address for the payee has been located or provided, the payee's
entire account balance shall be forfeited to the Association. The amounts
forfeited will include, but not be limited to, common stock, accumulated
dividends on common stock, patronage refund allocations (even if not yet called
by the Board for revolvement), capital book equities or any similar credit
reflected on the records of the Association. These forfeiture rules do not apply
to debentures or preferred stock.
ARTICLE XVI - AMENDMENTS
These Bylaws may be amended, altered, repealed, added to, or revised by a
majority vote of the Board of Directors, or by the vote of two-thirds (2/3) of
the members voting thereon at any regular or special meeting of the members, or
by the written assent of two-thirds (2/3) of the members voting thereon by mail
ballot, provided that written notice of the proposed Bylaw amendments or
revisions shall have been delivered to each member or mailed to his last known
address as shown by the records of the Association, at least fifteen (15) days
prior to such meeting or the date on which the mail ballots must be returned to
be counted. Any modification of the Bylaws made by the Board of Directors shall
be reported at the next Annual Meeting of the Association and may be repealed or
changed by the members in any manner authorized by applicable law.
20
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EXHIBIT 4.1
SOUTHERN STATES COOPERATIVE, INCORPORATED
AND
FIRST UNION NATIONAL BANK, TRUSTEE
FORM OF
SENIOR INDENTURE
Dated as of ___________, 2000
Providing for Issuance of Senior Notes
by
SOUTHERN STATES COOPERATIVE, INCORPORATED
<PAGE>
Cross Reference Sheet Showing the Location in the Indenture of the
Provisions Inserted Pursuant to Section 310 through 318(a) Inclusive
of the Trust Indenture Act of 1939
SECTION NUMBER OF TRUST
INDENTURE ACT OF 1939 INDENTURE SECTION
SEC. 310 - ELIGIBILITY AND DISQUALIFICATION OF TRUSTEE
(a)(1).................................. Sec. 6.03
(2).................................. Sec. 9.01
(3).................................. Not applicable
(4).................................. Not applicable
(b) .................................. Sec. 9.14
SEC. 311 - PREFERENTIAL COLLECTION OF CLAIMS AGAINST OBLIGOR
(a)..................................... Sec. 9.15
(b)..................................... Sec. 9.15
SEC. 312 - BONDHOLDERS' LISTS
(a)..................................... Sec. 7.01
(b)..................................... Sec. 7.02(b)
(c)..................................... Sec. 7.02(c)
SEC. 313 - REPORTS BY INDENTURE TRUSTEE
(a)..................................... Sec. 7.03
(b)..................................... Sec. 7.03
(c)..................................... Sec. 7.03
(d)..................................... Sec. 7.03
SEC. 314 - REPORTS BY OBLIGOR; EVIDENCE OF COMPLIANCE WITH INDENTURE PROVISIONS
(a)..................................... Sec. 7.04; 7.05
(b)..................................... Not applicable
(c)(1).................................. Sec. 16.06
(2).................................. Sec. 16.06
(3).................................. Not applicable
(d)..................................... Not applicable
(e)..................................... Sec. 16.06
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SEC. 315 - DUTIES AND RESPONSIBILITY OF THE TRUSTEE
(a) .................................... Sec. 9.02; 9.03; 9.04
(b) .................................... Sec. 8.02
(c) .................................... Sec. 9.02
(d) .................................... Sec. 9.04
(1).................................. Sec. 9.04(a); 9.04(b)
(2).................................. Sec. 9.04(c)
(3).................................. Sec. 9.04(d)
(e) .................................... deemed contained in Indenture
pursuant to Trust Indenture Act.
SEC. 316 - DIRECTIONS AND WAIVERS BY BONDHOLDERS; PROHIBITION OF IMPAIRMENT OF
HOLDER'S RIGHT TO PAYMENT
(a) .................................... Sec. 8.06
(1).................................. Sec. 8.06
(2).................................. Sec. 8.06
(b)..................................... Sec. 8.05
(c)..................................... deemed contained in Indenture
pursuant to Trust Indenture Act
SEC. 317 - SPECIAL POWERS OF TRUSTEE; DUTIES OF PAYING AGENTS
(a) .................................... Sec. 8.04
(1).................................. Sec. 8.04
(2).................................. Sec. 8.04
(b) .................................... Sec. 6.04; 9.09
SEC. 318 - EFFECT OF PRESCRIBED INDENTURE PROVISIONS
(a) ................................. Sec. 16.08
(b) ................................. Sec. 16.08
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
part of the Indenture.
ii
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TABLE OF CONTENTS
Page
RECITALS.................................................................. 1
ARTICLE ONE: DEFINITIONS................................................. 1
Section 1.01 Definitions.......................................... 1
ARTICLE TWO: NOTE FORMS.................................................. 4
Section 2.01 Forms Generally...................................... 4
Section 2.02 Form of Trustee's Certificate of Authentication...... 4
Section 2.03 Uncertificated Notes................................. 5
ARTICLE THREE: THE NOTES................................................. 5
Section 3.01. Amount Unlimited; Issuable in Series................. 5
Section 3.02. Denominations........................................ 7
Section 3.03. Execution, Authentication, Delivery and Dating....... 8
Section 3.04. Temporary Notes...................................... 8
Section 3.05. Registration, Transfer and Exchange.................. 9
Section 3.06. Replacement Notes.................................... 10
Section 3.07. Payment of Interest; Interest Rights Preserved....... 10
Section 3.08. Cancellation......................................... 12
Section 3.09. CUSIP Numbers........................................ 12
ARTICLE FOUR: REDEMPTION BY ASSOCIATION.................................. 12
Section 4.01. Notes Subject to Redemption.......................... 12
Section 4.02. Notice of Redemption................................. 13
Section 4.03. Notes Payable on Redemption Date..................... 13
Section 4.04. Notes Redeemed in Part............................... 13
ARTICLE FIVE: REDEMPTION BY HOLDER....................................... 13
Section 5.01. Redemption by Holder................................. 13
Section 5.02. Notes Redeemed in Part............................... 14
Section 5.03. No Set-Aside......................................... 14
ARTICLE SIX: PARTICULAR COVENANTS OF THE ASSOCIATION..................... 14
Section 6.01. Payments of Principal and Interest.................. 14
Section 6.02. Maintenance of Office or Agency..................... 14
Section 6.03. Appointment of Trustee.............................. 14
Section 6.04. Appointment of Duties of Paying Agent............... 15
Section 6.05. Report to Trustee................................... 15
Section 6.06. Unclaimed Monies.................................... 16
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ARTICLE SEVEN: HOLDERS' LISTS AND REPORTS BY TRUSTEE
AND ASSOCIATION........................................................ 16
Section 7.01. Association to Furnish Trustee Names and
Addresses of Holders............................ 16
Section 7.02. Preservation of Information, Communications
to Holders...................................... 16
Section 7.03. Reports by Trustee................................... 17
Section 7.04. Reports by the Association........................... 17
Section 7.05. Annual Review Certificate............................ 17
ARTICLE EIGHT: REMEDIES IN EVENT OF DEFAULT.............................. 18
Section 8.01. Event of Default Defined............................. 19
Section 8.02. Trustee to Notify Holder of Defaults................. 19
Section 8.03. Acceleration Upon Default............................ 19
Section 8.04. Right of Trustee to Sue Association Upon Default..... 20
Section 8.05. Right of Holder to Receive Payment or Sue............ 20
Section 8.06. Right of Holders to Direct Time, Method and
Place of Conducting Proceeding for Remedy
Available to Trustee............................ 20
Section 8.07. Notice of Defaults................................... 21
ARTICLE NINE: CONCERNING THE TRUSTEE..................................... 21
Section 9.01 Qualification of Trustee............................. 21
Section 9.02 Acceptance and Undertaking of Trustee................ 21
Section 9.03 Examination of Evidence by Trustee................... 21
Section 9.04 Trustee not Relieved of Liability for Own
Negligence or Willful Misconduct................ 22
Section 9.05 Trustee May Rely on Recitals of Fact................. 23
Section 9.06 Right of Trustee to Rely on Certain Documents........ 23
Section 9.07 Trustee Not Responsible for Approval of Any Expert... 23
Section 9.08 Right of Trustee to Become Owner or Pledgee
of Notes........................................ 24
Section 9.09 Monies Received by Trustee to be Held in Trust....... 24
Section 9.10 Compensation of Trustee.............................. 24
Section 9.11 Enforcement by Trustee of Right to Compensation...... 24
Section 9.12 Trustee May Rely Upon Certificate of Association ... 26
Section 9.13 Right of Trustee to Give Notice of Action............ 26
Section 9.14. Conflicting Interest of Trustee...................... 26
Section 9.15. Duties of Trustee if it Becomes Creditor of
Association..................................... 27
Section 9.16. Resignation and Discharge of Trustee................. 27
Section 9.17. Removal of Trustee................................... 27
Section 9.18. Filling Vacancy...................................... 28
Section 9.19. Duties of Successor Trustee.......................... 28
Section 9.20. Merger or Consolidation of or with Trustee........... 29
Section 9.21. Duties of Trustee Governed by Laws of Virginia....... 29
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ARTICLE TEN: CONCERNING THE HOLDERS...................................... 30
Section 10.01. Proof of Action by Holders........................... 30
Section 10.02. What Constitutes a Writing........................... 30
Section 10.03. Holder Named in Note Treated as Absolute Owner....... 30
Section 10.04. Notes Owned by Association to be Disregarded in
Computing Requisite Amount of Notes............. 30
Section 10.05. Holders May Revoke Prior Action...................... 31
ARTICLE ELEVEN: HOLDERS MEETINGS......................................... 31
Section 11.01. Purpose of Meetings.................................. 31
Section 11.02. Call of Meeting and Notice Required.................. 31
Section 11.03. Request of Trustee to Call Meeting................... 32
Section 11.04. Who May Vote at Meeting.............................. 32
Section 11.05. Regulations Made by Trustee.......................... 32
Section 11.06. Form of and Recording Vote........................... 33
ARTICLE TWELVE: SUPPLEMENTAL INDENTURES.................................. 33
Section 12.01. Supplemental Indentures Without Consent of
Holders......................................... 33
Section 12.02. Supplemental Indentures With Consent of Holders...... 34
Section 12.03. Compliance with Trust Indenture Act.................. 35
Section 12.04. Execution of Supplemental Indentures................. 35
Section 12.05. Reference in Notes to Supplemental Indentures........ 36
ARTICLE THIRTEEN: CONSOLIDATION, MERGER, SALE OR
CONVEYANCE ............................................... 36
Section 13.01. Consolidation or Merger of or with Association...... 36
Section 13.02. Rights and Duties of Successor Corporation or
Entity.......................................... 36
Section 13.03. Opinion of Counsel.................................. 37
ARTICLE FOURTEEN: SATISFACTION, DISCHARGE AND DEFEASANCE................. 37
Section 14.01. Termination of Association's Obligations Under
the Indenture................................... 37
Section 14.02. Application of Trust Funds........................... 38
Section 14.03. Applicability of Defeasance Provisions;
Association's Option to Effect Defeasance
or Covenant Defeasance.......................... 39
Section 14.04. Defeasance and Discharge............................. 39
Section 14.05. Covenant Defeasance.................................. 39
Section 14.06. Conditions to Defeasance or Covenant Defeasance...... 40
Section 14.07. Deposited Money and Government Obligations to
Be Held in Trust................................ 42
Section 14.08. Repayment to Association............................. 42
Section 14.09. Indemnity for Government Obligations................. 42
Section 14.10. Reinstatement........................................ 42
ARTICLE FIFTEEN: IMMUNITY OF INCORPORATORS, STOCKHOLDERS
OFFICERS AND DIRECTORS................................................. 43
Section 15.01. No Recourse.......................................... 43
v
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ARTICLE SIXTEEN: MISCELLANEOUS PROVISIONS................................ 43
Section 16.01. Covenants of Association Bind its Successors
and Assigns..................................... 43
Section 16.02. Acts by Successor Corporation........................ 44
Section 16.03. Surrender of Rights and Powers Reserved to
Association..................................... 44
Section 16.04. Service of Notice on Association..................... 44
Section 16.05. Indenture Governed by Laws of Virginia............... 44
Section 16.06. Officers' Certificate and Opinion of Counsel......... 44
Section 16.07. Due Date on Saturday, Sunday or Legal Holiday........ 45
Section 16.08. Conflict with Trust Indenture Act.................... 45
Section 16.09. Indenture Executed in Counterparts................... 45
EXHIBITS: FORM OF NOTES
Exhibit A Six Month, Series A (Standard Certificate).................. A-1
Exhibit B Six Month, Series B (Large Certificate)..................... B-1
Exhibit C Six Month, Series C (Jumbo Certificate)..................... C-1
Exhibit D One Year, Series D (Standard Certificate)................... D-1
Exhibit E One Year, Series E (Large Certificate)...................... E-1
Exhibit F Two Year, Series F (Standard Certificate)................... F-1
Exhibit G Two Year, Series G (Large Certificate)...................... G-1
Exhibit H Five Year, Series H (Standard Certificate).................. H-1
Exhibit I Five Year, Series I (Large Certificate)..................... I-1
Exhibit J Seven Year, Series J (Standard Certificate)................. J-1
Exhibit K Seven Year, Series K (Large Certificate).................... K-1
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THIS INDENTURE (the "Indenture"), dated as of the ______day of __________,
2000, between Southern States Cooperative, Incorporated, an agricultural
cooperative corporation duly organized and existing under the laws of the
Commonwealth of Virginia (hereinafter sometimes referred to as the
"Association"), and First Union National Bank, a national banking association
duly organized and existing under the laws of the United States of America
(hereinafter sometimes referred to as the "Trustee").
RECITALS
The Association has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness ("Notes") to be issued in
one or more series as provided herein.
All acts and things necessary to make the Notes, when executed by the
Association and authenticated and delivered by the Trustee as in this Indenture
provided, the valid, binding and legal obligations of the Association, and to
constitute these presents a valid Indenture and agreement according to its
terms, have been done and performed, and the execution of this Indenture and the
issue hereunder of the Notes have in all respects been duly authorized, and the
Association, in the exercise of legal right and power in it vested, executes
this Indenture and proposes to make, execute, issue and deliver the Notes.
For and in consideration of the premises and the purchase of the Notes by
the Holders thereof, it is mutually covenanted and agreed as follows for the
equal and ratable benefit of the Holders of the Notes or of any series thereof:
ARTICLE ONE
DEFINITIONS
Section 1.01 Definitions.
-----------
The terms defined in this Section 1.01 (except as herein otherwise
expressly provided or unless the context otherwise requires) for all purposes of
this Indenture and of any indenture supplemental hereto shall have the
respective meanings specified in this Section 1.01. All other terms used in this
Indenture which are defined in the Trust Indenture Act of 1939 or which are by
reference therein defined in the Securities Act of 1933, as amended (except as
herein otherwise expressly provided or unless the context otherwise requires),
shall have the meanings assigned to such terms in said Trust Indenture Act and
in said Securities Act as in force at the date of this Indenture as originally
executed.
The term "Association" shall mean Southern States Cooperative,
Incorporated, and subject to the provisions of Article Thirteen, shall also
include its successors and assigns.
The terms "Association Order" and "Association Request" shall mean,
respectively, a written order or request signed in the name of the Association
by two officers, one of whom must be the Chairman of the Board, the President,
the Chief Executive Officer, a Group Vice President, the Chief Financial
Officer, the Treasurer or the Secretary of the Association.
<PAGE>
The term "authorized newspaper" shall mean a newspaper printed in the
English language and customarily published at least once a day for at least five
days in each calendar week and of general circulation in the city in which it is
published.
The term "Board of Directors", when used with the reference to the
Association, shall mean the Board of Directors of the Association, or the
Executive Committee of such Board.
The term "Board Resolution" shall mean a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Association to have been duly
adopted by its Board of Directors and to be in full force and effect on the date
of such certification, and delivered to the Trustee.
The term "Default" shall have the meaning specified in Section 8.02.
The term "Defaulted Interest" shall have the meaning specified in Section
3.07.
The term "Event of Default" shall mean any event specified in Section 8.01.
The term "Government Obligations" shall mean Notes that are (x) direct
obligations of the United States of America, for the payment of which its full
faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case (x) or
(y), are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act of 1933, as amended) as custodian with respect to
any such Government Obligation or a specific payment of principal of or interest
on any such Government Obligation held by such custodian for the account of the
holder of such depository receipt, provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
principal of or interest on the Government Obligation evidenced by such
depository receipt.
The term "Holder" means a Person in whose name a Note of any series is
registered in the Register.
The term "Indenture" shall mean this Instrument as originally executed and
as it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively. The term "Indenture" shall also include the terms of particular
series of Notes established as contemplated by Section 3.01.
The term "Interest Payment Date", with respect to any note, shall mean the
Stated Maturity of an installment of interest on such note.
2
<PAGE>
The term "Note" or "Notes" has the meaning stated in the first recital of
this Indenture and more particularly means a Note or Notes of the Association
issued, or a certificate evidencing ownership thereof, authenticated and
delivered under this Indenture.
The term "Officers' Certificate" shall mean a certificate signed by the
President and/or any Group Vice President or Chief Financial Officer and by an
accountant who may be the Controller, any Assistant Controller or any other
accounting officer of the Association. Each such certificate shall include the
statements provided for in Section 16.06, if and to the extent required by the
provisions thereof.
The term "Opinion of Counsel" shall mean an opinion in writing signed by
legal counsel, who shall be satisfactory to the Trustee and who may be an
employee of or of counsel to the Association. Each such opinion shall include
the statements provided for in Section 16.06, if and to the extent required by
the provisions thereof.
The term "Outstanding" when used with reference to Notes, shall, subject to
the provisions of Section 10.04, mean, as of any particular time, all Notes
authenticated and delivered by the Trustee under this Indenture, except
(a) Notes theretofore cancelled by the Trustee or delivered to the
Trustee cancelled or for cancellation;
(b) Notes for the payment or redemption of which monies in the
necessary amount shall have been deposited in trust with the Trustee or shall
have been set aside and segregated in trust by the Association, provided,
however, that if such Notes are to be redeemed, notice of such redemption shall
have been given as provided in Article Four, or provision satisfactory to the
Trustee shall have been made for giving such notice; and
(c) Notes in lieu of or in substitution for which other Notes shall
have been authenticated and delivered pursuant to the terms of Section 3.06.
The term "Register" has the meaning specified in Section 3.05.
The term "Registrar" has the meaning specified in Section 3.05.
The term "Responsible Officer", when used with respect to the Trustee,
shall mean the President, any Vice President, the Secretary, the Treasurer, any
trust officer, or any other officer or assistant officer of the Trustee
customarily performing functions similar to those performed by the persons who
at the time shall be such officers, respectively, or one to whom any corporate
trust matter is referred because of his knowledge of and familiarity with the
particular subject.
The term "Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 3.07.
The term "Stated Maturity", when used with respect to any Note or any
installment of principal thereof or interest thereon, means the date specified
in such Note or in an interest coupon representing such installment of interest
as the fixed date on which the principal of such Note or such installment of
principal or interest is due and payable.
3
<PAGE>
The term "Trustee" shall mean First Union National Bank and, subject to the
provisions of Article Nine hereof, shall also include its successors and
assigns.
The term "Trust Indenture Act of 1939" (except as herein otherwise
expressly provided or unless the context otherwise requires) shall mean the
Trust Indenture Act of 1939 as in force at the date of this Indenture when
originally executed.
The term "Uncertificated Notes" shall mean a Note that is not represented
by a certificate.
ARTICLE TWO
NOTE FORMS
Section 2.01. Forms Generally.
---------------
The Notes of each series and the Trustee's certificate of authentication
and the interest coupons, if any, to be attached shall be in substantially such
form as attached hereto as Exhibits A through K or as shall be established by or
pursuant to a Board Resolution or in one or more indentures supplemental hereto,
in each case with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
applicable securities exchange, organizational document, governing instrument or
law or as may, consistently herewith, be determined by the officers executing
such Notes and interest coupons, if any, to be attached thereto, as evidenced by
their execution of the Notes and interest coupons, if any. If temporary Notes of
any series are issued as permitted by Section 3.04, the form thereof also shall
be established as provided in the preceding sentence. If the forms of Notes and
interest coupons, if any, of any series are established by, or by action taken
pursuant to, a Board Resolution, a copy of the Board Resolution together with an
appropriate record of any such action taken pursuant thereto, including a copy
of the approved form of Notes or interest coupons, if any, shall be delivered to
the Trustee at or prior to the delivery of the Association Order contemplated by
Section 3.03 for the authentication and delivery of such Notes. Any portion of
the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.
The definitive Notes and interest coupons, if any, may be printed,
typewritten, lithographed or engraved, or may be produced in any other manner,
all as determined by the officers executing such Notes and interest coupons, if
any, as evidenced by their execution of such Notes and interest coupons, if any.
Section 2.02. Form of Trustee's Certificate of Authentication.
-----------------------------------------------
Unless otherwise provided as contemplated by Section 3.01, the Trustee's
certificate of authentication shall be included on the Notes and shall be
substantially in the form as follows:
4
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Notes referred to in the within-mentioned Indenture.
FIRST UNION NATIONAL BANK
________________________________
As Trustee
By:_____________________________
Authorized Signatory
Section 2.03. Uncertificated Notes.
--------------------
(a) In lieu of issuing certificates to evidence ownership of Notes, the
Association may determine to issue the Notes of any series, including any series
which has previously been issued in certificated form, as Uncertificated Notes.
Any Uncertificated Notes shall be treated as "uncertificated securities" as the
term is used in Article 8 of the Uniform Commercial Code as in effect in the
Commonwealth of Virginia, and such Article 8, to the maximum extent permitted by
law, shall govern the Uncertificated Notes. Notwithstanding any provision of
this Indenture to the contrary, the registration on the Register of any Note
which is in uncertificated form, whether upon original issuance or transfer,
shall be deemed to constitute an authentication of such Note by the Trustee, and
no further authentication shall be necessary. In addition, whenever any
provision of this Indenture shall require that a Note be surrendered, that
requirement shall not apply to a Note in uncertificated form, to the extent that
such provision requires surrender of a physical certificate.
(b) The Association may establish any rules, regulations, procedures
and forms for the purpose of noting ownership of Uncertificated Notes, for
registration of transfers, exchanges, and surrenders of Uncertificated Notes and
for other matters pertaining to the issuance of Notes in uncertificated form as
the Association, in its discretion, shall deem necessary or desirable.
ARTICLE THREE
THE NOTES
Section 3.01. Amount Unlimited; Issuable in Series.
------------------------------------
(a) The aggregate principal amount of Notes that may be authenticated
and delivered under this Indenture is unlimited. The Notes may be issued from
time to time in one or more series.
(b) The following matters shall be established with respect to each
series of Notes issued hereunder (i) by a Board Resolution, (ii) by action taken
pursuant to a Board Resolution and (subject to Section 3.03) set forth, or
determined in the manner provided, in an Officers' Certificate or (iii) in one
or more indentures supplemental hereto:
5
<PAGE>
(1) the title of the Notes of the series (which title shall distinguish
the Notes of the series from all other series of Notes);
(2) any limit upon the aggregate principal amount of the Notes of the
series which may be authenticated and delivered under this Indenture
which limit shall not pertain to Notes authenticated and delivered
upon registration of transfer of, or in exchange for, or in lieu of,
other Notes of the series pursuant to Section 3.04, 3.05 or 3.06;
(3) the date or dates on which the principal of and premium, if any, on
the Notes of the series shall be payable or the method or methods of
determination thereof;
(4) the rate or rates at which the Notes of the series shall bear
interest, if any, or the method or methods of calculating such rate or
rates of interest, the date or dates from which such interest shall
accrue or the method or methods by which such date or dates shall be
determined, the Interest Payment Dates on which any such interest
shall be payable, the right, if any, of the Association to defer or
extend an Interest Payment Date, the record date, if any, for the
interest payable on any Interest Payment Date, and the basis upon
which interest shall be calculated if other than a 365-day year;
(5) the place or places where the principal of, premium, if any, and
interest, if any, on Notes of the series shall be payable, any Notes
of the series may be surrendered for registration of transfer, any
Notes of the series may be surrendered for exchange, and notices and
demands to or upon the Association in respect of the Notes of the
series and this Indenture may be served and where notices to Holders
may be sent;
(6) the period or periods within which, the price or prices at which, and
the other terms and conditions upon which, Notes of the series may be
redeemed, in whole or in part, at the option of the Association and,
if other than as provided in Article Four, the manner in which the
particular Notes of such series (if less than all Notes of such series
are to be redeemed) are to be selected for redemption;
(7) the obligation, if any, of the Association to redeem or purchase Notes
of the series pursuant to any sinking fund or analogous provisions or
upon the happening of a specified event or at the option of a Holder
thereof and the period or periods within which, the price or prices at
which and the other terms and conditions upon which, Notes of the
series shall be redeemed or purchased, in whole or in part, pursuant
to such obligation;
(8) the denominations in which Notes of the series shall be issuable;
(9) if other than the entire principal amount thereof, the portion of the
principal amount of Notes of the series which shall be payable upon
declaration of acceleration thereof pursuant to Section 8.03 or the
method by which such portion shall be determined;
6
<PAGE>
(10) provisions, if any, granting special rights to the Holders of Notes of
the series upon the occurrence of such events as may be specified;
(11) any deletions from, modifications of or additions to the Events of
Default set forth in Section 8.01 or covenants of the Association set
forth in Article Six pertaining to the Notes of the series;
(12) the forms of the Notes and interest coupons, if any, of the series;
(13) the applicability, if any, to the Notes and interest coupons, if any,
of the series of Sections 14.04 and 14.05, or such other means of
defeasance or covenant defeasance as may be specified for the Notes
and interest coupons, if any, of such series;
(14) if other than the Association, the identity of any Registrar and any
Paying Agent;
(15) any restrictions on the registration, transfer or exchange of the
Notes of the series; and
(16) any other terms of the series including any terms which may be
required by or advisable under United States laws or regulations or
advisable (as determined by the Association) in connection with the
marketing of Notes of the series.
(c) Subject to any controlling provision of the Trust Indenture Act,
in the event of any inconsistency between the terms of this Indenture and the
terms applicable to a series of Notes established in the manner permitted by
Section 3.01, the (i) Board Resolution, (ii) Officers' Certificate or (iii)
supplemental indenture setting forth such conflicting term shall prevail.
(d) All Notes of any one series and interest coupons, if any,
appertaining thereto shall be substantially identical except as to denomination
and except as may otherwise be provided (i) by a Board Resolution, (ii) by
action taken pursuant to a Board Resolution and (subject to Section 3.03) set
forth, or determined in the manner provided, in the related Officers'
Certificate or (iii) in an indenture supplemental hereto. All Notes of any one
series need not be issued at the same time and, unless otherwise provided,
additional Notes of any series may be issued from time to time, without the
consent of the then Holders of Notes of that series.
(e) If any of the terms of the Notes of any series are established by
action taken pursuant to a Board Resolution, a copy of such Board Resolution
shall be delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth, or providing the manner for determining, the terms of
the Notes of such series, and an appropriate record of any action taken pursuant
thereto in connection with the issuance of any Notes of such series shall be
delivered to the Trustee prior to the authentication and delivery thereof.
Section 3.02. Denominations.
-------------
Unless otherwise provided as contemplated by Section 3.01, any Notes of a
series denominated in Dollars shall be issuable in denominations of not less
than U.S. $1,000.
7
<PAGE>
Section 3.03. Execution, Authentication, Delivery and Dating.
----------------------------------------------
(a) The Notes, upon the execution of this Indenture, or from time to
time thereafter, may be executed by the Association and delivered to the Trustee
for authentication, and, upon Association Order, the Trustee shall thereupon
authenticate and deliver said Notes.
(b) Unless otherwise provided as contemplated by Section 3.01, the
Notes shall be dated the first day in which the payment of the full purchase
price thereof is received by the Association at its offices in Richmond (Henrico
County), Virginia.
(c) The Notes will be signed on behalf of the Association by its
President or Group Vice President or Senior Vice President, under its corporate
seal, attested by its Secretary or Assistant Secretary. The signatures of such
officers and the corporate seal of the Association may be facsimile signatures.
(d) Only such Notes as shall bear thereon a certificate of
authentication substantially in the form herein before recited, executed by the
Trustee, shall be entitled to the benefits of this Indenture or be valid or
obligatory for any purposes. Such certificate by the Trustee upon any Note
executed by the Association shall be conclusive evidence that the Note so
authenticated has been duly authenticated and delivered hereunder and that the
Holder is entitled to the benefits of this Indenture.
(e) In case any officer of the Association who shall have signed any of
the Notes shall cease to be such officer before the Notes so signed shall have
been authenticated and delivered by the Trustee, or disposed of by the
Association, such Notes nevertheless may be authenticated and delivered or
disposed of as though the person who signed such Notes had not ceased to be such
officer of the Association; and any Notes may be signed on behalf of the
Association by such persons as, at the actual date of the execution of such
Note, shall be the proper officers of the Association, although at the date of
the execution of this Indenture any such person was not such officer.
Section 3.04. Temporary Notes.
---------------
Pending the preparation of definitive Notes of any series, the Association
may execute and, upon Association Order, the Trustee shall authenticate and
deliver temporary Notes of such series which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor and form, with or without interest coupons, of the
definitive Notes in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Notes may determine, as conclusively evidenced by their execution
of such Notes and interest coupons, if any.
If temporary Notes of any series are issued, the Association will cause
definitive Notes of such series to be prepared without unreasonable delay. After
preparation of definitive Notes of such series, the temporary Notes of such
series shall be exchangeable for definitive Notes of such series upon surrender
of the temporary Notes of such series at the office or agency of the Association
pursuant to Section 6.02 for such series, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes of any series
(accompanied by any unmatured interest coupons appertaining thereto), the
Association shall execute and the
8
<PAGE>
Trustee shall authenticate and deliver in exchange therefor a like principal
amount of definitive Notes of the same series of authorized denominations and of
like tenor. Until so exchanged, the temporary Notes of any series shall in all
respects be entitled to the same benefits under this Indenture as definitive
Notes of such series except as otherwise specified as contemplated by Section
3.01.
Section 3.05. Registration, Transfer and Exchange.
-----------------------------------
The Association shall cause to be kept at the office or agency to be
maintained by the Association in accordance with Section 6.02 a register (the
"Register") in which, subject to such reasonable regulations as it may
prescribe, the Association shall provide for the registration of Notes and the
registration of transfers of Notes. The Register shall be in written form or any
other form capable of being converted into written form within a reasonable
time. The Trustee is hereby initially appointed "Registrar" for the purpose of
registering Notes and transfers of Notes as herein provided.
Upon surrender for registration of transfer of any Note of any series at
the office or agency maintained pursuant to Section 6.02 for that series, the
Association shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Notes of
the same series, of any authorized denominations and of a like aggregate
principal amount and tenor and containing identical terms and provisions.
At the option of the Holder, Notes of any series may be exchanged for other
Notes of the same series, of any authorized denominations, of a like aggregate
principal amount and tenor and containing identical terms and provisions, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, the Association shall execute, and the
Trustee shall authenticate and deliver, the Notes that the Holder making the
exchange is entitled to receive.
All Notes issued upon any registration of transfer or upon any exchange of
Notes shall be the valid obligations of the Association, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or for
exchange shall (if so required by the Association, the Registrar or the Trustee)
be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Association, the Registrar and the Trustee duly executed by
the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or for any
exchange of Notes, but the Association may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration or transfer or exchange of Notes, other than exchanges
pursuant to Section 3.04 or Section 12.05 not involving any transfer.
The Association shall not be required (i) to issue, register the transfer
of, or exchange the Notes of any series for a period beginning at the opening of
business 15 days before any
9
<PAGE>
selection for redemption of Notes of such series and ending at the close of
business on the earliest date on which the relevant notice of redemption is
deemed to have been given to all Holders of such series to be redeemed; or (ii)
to register the transfer of or exchange any Note so selected for redemption, in
whole or in part, except the unredeemed portion of any Note being redeemed in
part.
Pursuant to Section 3.01, the foregoing provisions relating to
registration, transfer and exchange may be modified, supplemented or superseded
with respect to any series of Notes by a Board Resolution or in one or more
indentures supplemental hereto.
Section 3.06. Replacement Notes.
-----------------
In case any Note shall become mutilated or be destroyed, lost or stolen,
the Association in its discretion may execute, and upon its request the Trustee
shall authenticate and deliver, a new Note bearing a number not
contemporaneously Outstanding, in exchange and substitution for the mutilated
Note, or in lieu of and substitution for the Note so destroyed, lost or stolen.
In every case the applicant for a substituted Note shall furnish to the
Association and to the Trustee such security or indemnity as may be required by
them to save each of them harmless, and, in every case of destruction, loss or
theft, the applicant shall also furnish to the Association and to the Trustee
evidence to their satisfaction of the destruction, loss or theft of such Note
and of the ownership thereof. The Trustee may authenticate any such Note and
deliver the same upon the written request or authorization of any officer of the
Association. Upon the issuance of any substituted Note, the Association may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith and, in addition, a further sum not exceeding Two Dollars ($2.00) for
each Note so issued in substitution. In case any Note which has matured or is
about to mature shall become mutilated or be destroyed, lost or stolen, the
Association may, instead of issuing a substitute Note, pay the same (without
surrender thereof except in the case of a mutilated Note) if the applicant for
such payment shall furnish the Association and any Registrar with such security
or indemnity as it may require to save it harmless, and, in every case of
destruction, loss or theft, the applicant shall also furnish to the Association
and to the Trustee evidence to their satisfaction of the destruction, loss or
theft.
Every substituted Note issued pursuant to the provisions of this Section
3.06 by virtue of the fact that any Note is destroyed, lost or stolen shall,
with respect to such Note, constitute an additional contractual obligation of
the Association, whether or not the destroyed, lost or stolen Note shall be
found at any time, and shall be entitled to all the benefits of this Indenture
equally and proportionately with any and all other Notes duly issued hereunder.
All Notes shall be held and owned upon the express condition that the foregoing
provisions are exclusive with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Notes, and shall preclude any and all other
rights or remedies, notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement or payment of securities
without their surrender.
Section 3.07. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Unless otherwise provided pursuant to Section 3.01, interest on any Note of
a series which is payable, and is punctually paid or duly provided for, on any
Interest Payment Date shall
10
<PAGE>
be paid to the person in whose name that Note of that series is registered at
the close of business on the record date for such interest. Interest on Notes
with a Stated Maturity of six months or less will be payable only at maturity.
In the case of all other Notes, interest will be paid quarterly to Holders of
record on the 15th day of the preceding month (or, if originally issued between
the record date and the payment date, to the Holder on the date of original
issuance, except that in the case of original issuance made on or after the 15th
day of March, June, September, and December and prior to the first day of the
next succeeding month, interest from the date of original issuance through the
end of the month in which such original issuance was made will be paid at the
time of and together with the next full quarterly interest payment.) The Holder
has the option to elect whether interest will be paid by check or by electronic
fund transfer to an account designated by the Holder. A Holder must elect a
method of interest payment by providing written notice to the Association. A
Holder may change his election regarding method of interest payment at any time
by written notice to the Association.
A Holder may elect to have all interest paid on the Notes reinvested
automatically. A Holder may elect the automatic reinvestment option by providing
written notice to the Association. In the event the Holder elects the automatic
reinvestment option, the interest due on each quarterly interest payment date
will be added to the principal amount of the Note and will earn interest
thereafter on the same basis as the original principal amount. A Holder may
revoke his election to participate in the automatic reinvestment option as to
future interest payments at any time by written notice to the Association.
Notice of revocation shall be effective on the date the notice is received by
the Association.
Unless otherwise provided pursuant to Section 3.01, any interest on any
Note of a series which is payable, but is not punctually paid or duly provided
for, on any Interest Payment Date and interest on such defaulted interest at the
then applicable interest rate borne by the Notes of that series, to the extent
lawful (such defaulted interest and interest thereon herein collectively called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
record date; and such Defaulted Interest may be paid by the Association, at its
election in each case, as provided in Subsection (a) or (b) below:
(a) The Association may elect to make payment of any Defaulted Interest
to the persons in whose names the Notes of that series are registered at the
close of business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Association shall
notify the Trustee in writing of the amount of Defaulted Interest proposed to be
paid on each Note of that series and the date (not less than 30 days after such
notice) of the proposed payment, and at the same time the Association shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in trust for the
benefit of the persons entitled to such Defaulted Interest as in this Subsection
provided. Thereupon the Trustee shall fix a Special Record Date for the payment
of such Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Association in writing of such Special Record
Date. In the name and at the expense of the Association, the Trustee shall cause
notice of the proposed payment of such Defaulted Interest and the Special Record
Date therefor to be mailed, first-class postage prepaid, to each Holder at his
address as it appears in the Register, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted Interest
and the Special Record Date
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therefor having been so mailed, such Defaulted Interest shall be paid to the
persons in whose names the Notes of that series are registered on such Special
Record Date and shall no longer be payable pursuant to the following Subsection
(b).
(b) The Association may make payment of any Defaulted Interest in any
other lawful manner if, after written notice given by the Association to the
Trustee of the proposed payment pursuant to this Section 3.07, such payment
shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 3.07, each Note of
any series delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Note of the same series shall carry the
rights to interest accrued and unpaid, and to accrue, which were carried by such
other Note of the same series.
Section 3.08. Cancellation.
------------
All Notes surrendered for payment, redemption, exchange or transfer shall,
if surrendered to the Association, be cancelled and delivered to the Trustee,
or, if surrendered to the Trustee, shall be cancelled by it, and no Note shall
be issued in lieu thereof except as expressly permitted by any of the provisions
of this Indenture. On request of the Association, the Trustee shall deliver to
the Association a certificate of cancellation, including such cancelled Notes
held by the Trustee. If the Association shall acquire any of the Notes, such
acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Notes unless and until the same are delivered
to the Trustee cancelled or for cancellation.
Section 3.09. CUSIP Numbers.
-------------
The Association in issuing the Notes may use "CUSIP" numbers (if then
generally in use and in addition to the other identification numbers printed on
the Notes), and, in such case, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Notes or as contained in any notice of a redemption and
that reliance may be placed only on the other identification numbers printed on
the Notes, and any such redemption shall not be affected by any defect in or
omission of such numbers.
ARTICLE FOUR
REDEMPTION BY ASSOCIATION
Section 4.01. Notes Subject to Redemption.
---------------------------
To the extent, if any, provided pursuant to Section 3.01, the Association
may, from time to time, redeem any Outstanding Note of any series by payment of
the face amount thereof, plus accrued interest to the date of such payment, upon
not less than fifteen (15) days written notice mailed to the Holder named in the
Register, at the address designated therein, by
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ordinary first class United States mail, properly addressed and stamped and
deposited in the United States.
Section 4.02. Notice of Redemption.
--------------------
Unless otherwise provided as contemplated by Section 3.01, each such notice
of redemption shall specify the date fixed for redemption and shall state that
payment of the redemption price of the Note or Notes to be redeemed will be made
at the office to be maintained by the Association in accordance with the
provisions of Section 6.02 upon presentation and surrender of such Note or
Notes, that interest accrued to the date fixed for redemption will be paid, and
that on and after said date interest thereon will cease to accrue.
Section 4.03. Notes Payable on Redemption Date.
--------------------------------
Unless otherwise provided as contemplated by Section 3.01, if the giving of
notice of redemption shall have been completed as above provided, the Note or
Notes specified in such notice shall become due and payable on the date and at
the place stated in such notice at the face amount thereof, together with
interest accrued to the date fixed for redemption, and on and after such date
fixed for redemption (unless the Association shall default in the payment of
such Note or Notes at the face amount thereof, together with interest accrued to
date fixed for redemption) interest on the Note or Notes so called for
redemption shall cease to accrue. On presentation and surrender of such Note or
Notes at the place of payment in said notice specified, the said Note or Notes
shall be paid or redeemed by the Association at the face amount thereof,
together with interest accrued thereon to the date fixed for redemption.
Section 4.04. Notes Redeemed in Part.
----------------------
Any Note which is to be redeemed only in part pursuant to this Article Four
shall be surrendered to the office to be maintained by the Association in
accordance with the provisions of Section 6.02, and the Association shall
execute, and the Trustee shall authenticate and deliver to the Holder of such
Note without service charge, a new Note or Notes of the same series, of any
authorized denomination as requested by such Holder in aggregate principal
amount equal to, and in exchange for, the unredeemed portion of the principal of
the Note of that series so surrendered that is not redeemed or purchased.
ARTICLE FIVE
REDEMPTION BY HOLDER
Section 5.01. Redemption by Holder.
--------------------
To the extent, if any, provided pursuant to Section 3.01, the Association
agrees to redeem Notes of any series prior to maturity by payment of the
principal thereof, plus interest to the date of such payment only, at the place
and at the rate specified pursuant to Section 3.01, upon surrender of such
Notes, accompanied by a written request for early redemption to the Association
and such other documentation as shall be specified pursuant to Section 3.01.
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Section 5.02. Notes Redeemed in Part.
----------------------
Any Note which is to be redeemed only in part pursuant to this Article Five
shall be surrendered to the office to be maintained by the Association in
accordance with the provisions of Section 6.02, and the Association shall
execute, and the Trustee shall authenticate and deliver to the Holder of such
Note without service charge, a new Note or Notes of the same series, of any
authorized denomination as requested by such Holder in aggregate principal
amount equal to, and in exchange for, the unredeemed portion of the principal of
the Note of that series so surrendered that is not redeemed or purchased.
Section 5.03. No Set-Aside.
------------
The amounts available for the redemption of Notes prior to maturity
pursuant to this Article Five shall not be set aside in a separate fund or held
in trust.
ARTICLE SIX
PARTICULAR COVENANTS OF THE ASSOCIATION
Section 6.01. Payments of Principal and Interest.
----------------------------------
The Association will duly and punctually pay or cause to be paid the
principal of and interest on each of the Notes at the respective times and place
and in the manner provided in the Notes. The principal of and interest on the
Notes shall be payable only to or upon the written order of the Holder named in
the Notes. Payment will be made at maturity only upon presentation and surrender
of the Note. The Holder has the option to elect whether payment of interest,
principal and premium, if any, will be paid by check or by electronic fund
transfer to an account designated by the Holder. A Holder must elect a method of
payment by providing written notice to the Association. A Holder may change his
election regarding method of interest payment at any time by written notice to
the Association.
Section 6.02. Maintenance of Office or Agency.
-------------------------------
The Association will maintain an office or agency where the Notes of each
series may be presented for transfer, exchange, redemption and payment, and
where notices and demands to or upon the Association with respect to the Notes
of each series or to this Indenture may be served. The Association will give to
the Trustee notice of the location of such office or agency and of any change of
location thereof. In case the Association shall fail to maintain such office or
agency or shall fail to give such notice of the location or of any change in the
location thereof, presentations and demands may be made and notices may be
served at the principal office of the Trustee.
Section 6.03. Appointment of Trustee.
----------------------
The Association covenants and agrees that whenever necessary to avoid or
fill a vacancy in the office of the Trustee, the Association will in the manner
provided in Section 9.18 appoint a
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Successor Trustee so that there shall at all times be a Trustee hereunder which
shall at all times be a bank or trust company, which shall at all times be a
corporation or banking association organized and doing business under the laws
of the United States or of any State or Territory or of the District of
Columbia, with a capital and surplus of at least $250,000,000, and authorized
under such laws to exercise corporate trust powers and subject to supervision or
examination by Federal, State, Territorial or District of Columbia authority.
Section 6.04. Appointment of Duties of Paying Agent.
-------------------------------------
(a) Whenever the Association shall appoint a paying agent other than the
Trustee or the Association, it will cause such paying agent to execute and
deliver to the Trustee an instrument in which such agent shall agree with the
Trustee, subject to the provisions of this Section 6.04, that: (1) it will hold
all sums held by it as agent for the payment of the principal of or interest on
the Notes of any series (whether such sums have been paid to it by the
Association or by any other obligor on the Notes of such series) in trust for
the benefit of the Holders of the Notes of such series; and (2) it will give the
Trustee notice of any failure by the Association (or by any other obligor on the
Notes of such series) to make any payment of the principal of or interest on the
Notes of such series when the same shall be due and payable.
(b) If the Association shall act as its own paying agent, it will, on or
before each due date of the principal of or interest on the Notes of any series,
set aside, segregate and hold in trust for the benefit of the holders of the
Notes of such series a sum sufficient to pay such principal of and interest so
becoming due. The Association will promptly notify the Trustee of any failure to
take such action.
(c) Whenever the Association shall have one or more paying agents for any
series of Notes, it will, on or prior to each due date of the principal of or
any premium or interest on any Notes of that series, deposit with a paying agent
a sum sufficient to pay such amount, such sum to be held as provided in the
Trust Indenture Act, and (unless such paying agent is the Trustee), the
Association will promptly notify the Trustee of its action or failure to act.
(d) Notwithstanding anything in this Section 6.04 to the contrary, the
Association may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by it, or by any paying agent hereunder, as
required by this Section 6.04, such sums to be held by the Trustee upon the
trusts herein contained.
(e) Notwithstanding anything in this Section 6.04 to the contrary, the
agreement to hold sums in trust as provided in this Section 6.04 is subject to
the provisions of Article Fourteen.
Section 6.05. Report to Trustee.
-----------------
To the extent provided pursuant to Section 3.01, the Association covenants
and agrees to report in writing to the Trustee as soon as practicable the
interest rate per annum determined to be payable on the Notes and the effective
date of such rate of interest.
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Section 6.06. Unclaimed Monies.
----------------
Any money deposited with the Trustee or any paying agent, or then held by
the Association, in trust for the payment of any principal of or premium or
interest on any Note of any series and remaining unclaimed for two years after
such principal, premium, if any, or interest has become due and payable shall be
paid, without liability for interest thereon, to the Association on Association
Request, or (if then held by the Association) shall be discharged from such
trust; and the Holder of such Note and interest coupon, if any, shall
thereafter, as an unsecured general creditor, look only to the Association for
payment thereof of the amount, without liability for interest thereon, and all
liability of the Trustee or such paying agent with respect to such trust money,
and all liability of the Association as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such paying agent, before being required
to make any such repayment, may in the name and at the expense of the
Association cause to be published once, in an Authorized Newspaper in each place
where the office or agency of the Association pursuant to Section 6.02 is
located with respect to such series, or cause to be mailed by first-class mail
to such Holder, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be repaid
to the Association.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND ASSOCIATION
Section 7.01. Association to Furnish Trustee Names and Addresses of
-----------------------------------------------------
Holders.
- -------
The Association will furnish or cause to be furnished to the Trustee:
(a) semiannually, not more than 15 days after May 1 and November 1
reasonably require, of the names and addresses of the Holders of Notes on such
dates; and
(b) at such other times as the Trustee may request in writing, within 30
days after the receipt by the Association of any such request, a list of similar
form and content for any or all series as of a date not more than 15 days prior
to the time such list is furnished; excluding from any such list, with respect
to (a) and (b) above, names and addresses possessed by the Trustee in its
capacity as Registrar.
Section 7.02. Preservation of Information, Communications to Holders.
------------------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders of Notes contained in the most
recent list furnished to the Trustee as provided in Section 7.01 and the names
and addresses of Holders of Notes received by the Trustee in its capacity as
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.01 upon receipt of a new list so furnished.
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(b) The rights of Holders of Notes to communicate with other Holders with
respect to their rights under this Indenture or under the Notes, and the
corresponding rights and privileges of the Trustee, shall be as provided in the
Trust Indenture Act.
(c) Every Holder of Notes and interest coupons appertaining thereto, by
receiving and holding the same, agrees with the Association and the Trustee that
neither the Association nor the Trustee nor any agent of any of them shall be
held accountable by reason of the disclosure of information as to the names and
addresses of the Holders of Notes made pursuant to the Trust Indenture Act.
Section 7.03. Reports by Trustee.
------------------
(a) The Trustee shall transmit to Holders of Notes such reports concerning
the Trustee and its actions under this Indenture as may be required pursuant to
Section 313 of the Trust Indenture Act, at the times and in the manner provided
pursuant thereto.
(b) Reports so required to be transmitted at stated intervals of not more
than 12 months shall be transmitted no later than July 15 in each calendar year,
commencing with the first July 15 after the first issuance of Notes under this
Indenture.
Section 7.04. Reports by the Association.
--------------------------
The Association shall file with the Trustee and the Commission, and
transmit to the Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to Section 314 of the Trust
Indenture Act at the times and in the manner provided pursuant to the Trust
Indenture Act; provided that any such information, documents or reports required
to be filed with the Commission pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 shall be filed with the Trustee within 15 days
after the same is so required to be filed with the Commission. Notwithstanding
anything contrary herein, the Trustee shall have no duty to review such
documents for purposes of determining compliance with any provisions of this
Indenture.
Section 7.05. Annual Review Certificate.
-------------------------
The Association covenants and agrees to deliver to the Trustee, within 120
days after the end of each fiscal year of the Association, a certificate in
substantially the same form prescribed by Section 16.06 hereof from the
principal executive officer, principal financial officer or principal accounting
officer of the Association stating that a review of the activities of the
Association during such year and of performance under this Indenture has been
made under his or her supervision and to the best of his or her knowledge, based
on such review, the Association has fulfilled all of its obligations under this
Indenture throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to him or
her and the nature and status thereof. For purposes of this Section 7.05, such
compliance shall be determined without regard to any period of grace or
requirement of notice provided under this Indenture.
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ARTICLE EIGHT
REMEDIES IN EVENT OF DEFAULT
Section 8.01. Event of Default Defined.
------------------------
Unless otherwise provided pursuant to Section 3.01, "Event of Default",
wherever used herein with respect to the Notes of any series, means any one of
the following events which has occurred and is continuing (whatever the reason
for such Event of Default and whether it be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree, order of any
court or any order, rule or regulation of any administrative or government
body):
(a) Failure to pay principal of (or any installment of the principal of) or
any premium on any Note of that series, after such principal or premium shall
have become due and payable;
(b) Failure to pay interest of any Note of that series or any interest
coupon appertaining thereto for a period of 60 days after such interest shall
have become due or payable; and
(c) The expiration of a period of 90 days following:
(1) the adjudication of the Association as a bankrupt by any court of
competent jurisdiction;
(2) the entry of an order approving a petition seeking reorganization of
the Association under the Federal Bankruptcy Code or any other
applicable law or statute of the United States of America, or any
State thereof; or
(3) the appointment of a trustee or a receiver of all or substantially all
of the property of the Association;
unless, with respect to (1), (2), and (3) above, during such period such
adjudication, order or appointment of a receiver or trustee shall be vacated;
(d) The filing by the Association of a voluntary petition in bankruptcy or
the making of an assignment for the benefit of creditors; the consenting by the
Association to the appointment of a receiver or trustee of all or any part of
its property; the filing by the Association of a petition or answer seeking
reorganization under the Federal Bankruptcy Code, or any other applicable law or
statute of the United States of America, or of any State thereof; or the filing
by the Association of a petition to take advantage of any insolvency act;
(e) Failure to perform any other covenant or agreement contained herein or
in any indenture supplemental hereto or in any Note of that series for a period
of 90 days following the mailing by the Trustee to the Association of a written
demand that such failure be cured, such failure not having been cured in the
meantime. The Trustee may, and, if requested in writing by the Holders of a
majority in principal amount of the Notes of that series then outstanding, shall
make such demand.
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(f) Any other Event of Default provided as contemplated by Section 3.01
with respect to Notes of that series.
Section 8.02. Trustee to Notify Holder of Defaults.
------------------------------------
The Trustee shall, within 90 days after the occurrence thereof, give to the
Holders of the affected series notice of all Defaults known to it, unless such
Defaults shall have been cured before the giving of such notice (the term
"Default" being hereby defined to be the events specified in subsections (a),
(b), (c), (d), (e) and (f) of Section 8.01 not including any periods of grace
provided for in said subsections and irrespective of the written demand
specified in subsection (e) of Section 8.01); provided that, except in the case
of Default in the payment of the principal of or interest on any of the Notes,
or in the payment of any sinking or purchase fund installment, if any, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors or responsible officers, or both, of the Trustee, in good
faith determine that the withholding of such notice is in the interests of such
Holders.
Section 8.03. Acceleration Upon Default.
-------------------------
Upon the occurrence of an Event of Default, the Trustee may, and upon the
written request of the Holders of at least a majority in principal amount of the
affected series of Notes then Outstanding shall, by notice in writing given to
the Association, declare the principal of all Notes of the affected Series then
Outstanding and the interest accrued thereon immediately due and payable, and
upon any such declaration the same shall become and shall be immediately due and
payable, notwithstanding anything in this Indenture or in the Notes contained to
the contrary; provided, however, that upon the occurrence of an Event of Default
specified in subsection (c) or (d) of Section 8.01, the principal of the Notes
and the interest accrued thereon shall be immediately due and payable without
any further action or notice. This provision, however, is subject to the
condition that if, at any time after the principal of the Notes shall have been
so declared due and payable and before any judgment or decree for the payment of
the monies due shall have been obtained or entered as hereinafter provided, the
Association shall pay or shall deposit with the Trustee a sum sufficient to pay
all maturing installments of interest upon all of the Notes of the affected
series and the principal of any and all of the Notes of the affected series
which shall have become due otherwise than by acceleration (with interest upon
such principal and on overdue installments of interest to the date of such
payment or deposit) and such amount as shall be sufficient to cover reasonable
compensation to the Trustee, its agents, attorneys and counsel, and all other
expenses and liabilities incurred, and all advances made by the Trustee, except
as a result of its negligence or bad faith, and any and all Events of Default
under the Indenture, other than the nonpayment of the principal of Notes which
shall have become due by acceleration, shall have been remedied, then and in
every such case the holders of a majority in aggregate principal amount of the
Notes of the affected series then Outstanding, by written notice to the
Association and to the Trustee, may waive all Events of Default and rescind and
annul such declaration and its consequences; but no such waiver or rescission
and annulment shall extend to or shall affect any subsequent Event of Default or
shall impair any right consequent thereon.
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If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case the Association, the Trustee and the
Holders shall, subject to any determination in such proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
such proceeding had not been instituted.
Section 8.04. Right of Trustee to Sue Association Upon Default.
------------------------------------------------
In the case of a default in payment of the principal of any Note of any
series, when the same shall become due and payable, or in the case of a default
in the payment of the interest on any Note of any series for a period of 60 days
after such interest shall become due and payable, the Trustee may recover
judgment, in its own name and as trustee of an express trust, against the
Association or other obligor for the whole amount of such principal and interest
remaining unpaid, together with interest upon the overdue principal and premium,
if any, and to the extent the payment of such interest shall be legally
enforceable, upon overdue installments of interest, if any, at the rate borne by
Notes of that series.
The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee and of
the Holders allowed in any judicial proceedings relative to the Association or
any other obligor on the Notes or its creditors, or its properties.
Section 8.05. Right of Holder to Receive Payment or Sue.
-----------------------------------------
Notwithstanding any other provision of this Indenture, the right of any
Holder of any Note to receive payment of the principal of and interest on such
Note, on or after the respective due dates expressed on such Note, or to
institute suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder, except as to a postponement of an interest payment consented to as
provided in Section 8.06.
Section 8.06. Right of Holders to Direct Time, Method and Place of
----------------------------------------------------
Conducting Proceeding for Remedy Available to Trustee.
- -----------------------------------------------------
The Holders of not less than a majority in principal amount of the
Outstanding Notes of each series affected (with each such series voting as a
separate class unless all series are affected in a substantially similar manner,
in which case all series so affected shall vote as a single class) shall have
the right to:
(a) direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred upon
the Trustee, under this Indenture; or
20
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(b) on behalf of the Holders of all such Notes of such series, consent to
the waiver of any past Default and its consequences, except an Event of Default
in the payment of principal or interest, provided that:
(1) such direction shall not be in conflict with any rule of law or with
this Indenture or expose the Trustee to personal liability and
(2) the Trustee may take any other action deemed proper by the Trustee
that is not inconsistent with such direction.
The Holders of not less than 75 per centum in principal amount of the
Outstanding Notes of each series may consent on behalf of the Holders of all the
Outstanding Notes of such series to the postponement of any interest payment for
a period not exceeding three years from its due date.
Section 8.07. Notice of Defaults.
------------------
The Trustee shall not be required to take notice or deemed to have notice
of any Default or Event of Default hereunder, unless the Trustee shall have
received specific notice in writing of such Default or Event of Default from the
Association or the Holders of not less than 10% in principal amount of any
series of Notes Outstanding, and in the absence of any such notice so received,
the Trustee may conclusively assume that no Default or Event of Default exists.
ARTICLE NINE
CONCERNING THE TRUSTEE
Section 9.01. Qualification of Trustee.
------------------------
The Trustee shall at all times be a bank or trust company eligible under
Section 6.03 and have a combined capital and surplus of not less than
$250,000,000. If the Trustee publishes reports of condition at least annually,
pursuant to law or to the requirements of any supervising or examining authority
referred to in Section 6.03, then for the purpose of this Section the combined
capital and surplus of the Trustee shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published.
Section 9.02. Acceptance and Undertaking of Trustee.
-------------------------------------
The Trustee hereby accepts the trust hereby created. The Trustee
undertakes, prior to an Event of Default, and after the curing of all Events of
Default which may have occurred, to perform such duties and only such duties as
are specifically set forth in this Indenture, and in case of an Event of Default
(which has not been cured) to exercise such of the rights and powers vested in
it by this Indenture, and to use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
Section 9.03. Examination of Evidence by Trustee.
----------------------------------
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The Trustee, upon receipt of evidence furnished to it by or on behalf of
the Association pursuant to any provision of this Indenture, will examine the
same to determine whether or not such evidence conforms to the requirements of
this Indenture.
Section 9.04. Trustee Not Relieved of Liability for Own Negligence or
-------------------------------------------------------
Willful Misconduct.
- ------------------
No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act,
or its own willful misconduct, except that:
(a) prior to an Event of Default hereunder and after the curing of all
Events of Default which may have occurred, the Trustee shall not be liable
except for the performance of such duties as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read into this
Indenture against the Trustee but the duties and obligations of the Trustee,
prior to an Event of Default and after the curing of all Events of Default which
may have occurred, shall be determined solely by the express provisions of this
Indenture;
(b) prior to an Event of Default hereunder and after the curing of all
Events of Default which may have occurred, and in the absence of bad faith on
the part of the Trustee, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
resolutions, requests, letters, reports, notices, consents, certificates,
opinions or other documents conforming to the requirements of this Indenture;
(c) the Trustee shall not be personally liable for any error of judgment
made in good faith by a responsible officer or officers of the Trustee unless it
shall be proved that the Trustee was negligent in ascertaining the pertinent
facts;
(d) the Trustee shall not be personally liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of not less than a majority in principal amount of the
Notes of each affected series at the time Outstanding relating to the time,
method, and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, under this
Indenture;
(e) notwithstanding anything elsewhere in this Indenture, before taking any
action under this Indenture, the Trustee may require that satisfactory indemnity
be furnished to it by the Holders of the Notes or other persons for the
reimbursement of all reasonable costs and expenses to which it may be put and to
protect it against all liability which it may incur in or by reason of such
action, except liability which is adjudicated to have resulted from its
negligence or willful misconduct by reason of any action so taken;
(f) the permissive right of the Trustee to do things enumerated in the
Indenture shall not be construed as a duty and the Trustee shall not be
answerable for other than its own negligent action, its own negligent failure to
act or its own willful misconduct;
22
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(g) the Trustee shall not be required to give any bond or security in
respect of the execution of the trusts and powers granted hereunder or otherwise
in respect of this Indenture;
(h) whether or not expressly provided herein, every provision of this
Indenture relating to the conduct or affecting the liability of or conveying
rights and duties affording protection to the Trustee whether in its capacities
as Trustee, paying agent, Registrar or in any other capacity shall be subject to
the provisions of this Article Nine.
Section 9.05. Trustee May Rely on Recitals of Fact.
------------------------------------
The recitals of fact contained herein, in the Notes, and in any prospectus
or other document shall be taken as the statements of the Association, and the
Trustee assumes no responsibility for the correctness of the same. The Trustee
makes no representations as to the validity or sufficiency of this Indenture or
of the Notes issued hereunder.
Section 9.06. Right of Trustee to Rely on Certain Documents.
---------------------------------------------
To the extent permitted by Sections 9.02, 9.03 and 9.04:
(a) The Trustee may rely and shall be protected in acting upon any
resolution, certificate, opinion, notice, request, consent, order, appraisal,
report, bond, or other paper or document believed by it to be genuine and to
have been signed or presented by the proper party or parties; and
(b) The Trustee may consult with counsel and the opinion of such counsel
shall be full and complete authorization and protection in respect of any action
taken or suffered by it hereunder in good faith and in accordance with the
opinion of such counsel.
Section 9.07. Trustee Not Responsible for Approval of Any Expert.
--------------------------------------------------
The Trustee shall not be under any responsibility for the approval of any
expert, attorney, accountant, or agent for any of the purposes expressed in this
Indenture, except that nothing in this Section 9.07 contained shall relieve the
Trustee of its obligation to exercise reasonable care with respect to the
approval of independent experts, attorneys, accountants, or agents who may
furnish opinions or certificates to the Trustee pursuant to any provisions of
this Indenture.
Any resolution of the Board of Directors or Executive Committee of the
Association shall be evidenced to the Trustee by a copy thereof certified by the
Secretary or an Assistant Secretary of the Association to have been duly
adopted, and the Trustee may rely upon such copy as conclusive evidence of the
adoption of such resolution.
Nothing contained in this Section 9.07 shall be deemed to modify the
obligation of the Trustee to exercise after an Event of Default the rights and
powers vested in it by this Indenture with the degree of care and skill
specified in Section 9.02.
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Section 9.08. Right of Trustee to Become Owner or Pledgee of Notes.
----------------------------------------------------
The Trustee, in its individual or any other capacity, may become the Holder
or pledgee of Notes with the same rights it would have if it were not a Trustee.
Section 9.09. Monies Received by Trustee to be Held in Trust.
----------------------------------------------
Subject to the provisions of Section 6.06, all monies received by the
Trustee whether as Trustee or paying agent shall, until used or applied as
herein provided, be held in trust for the purposes for which they were paid, but
need not be segregated from other funds except to the extent required by law.
The Trustee shall have no liability for interest on any monies received by it
hereunder except as may be agreed upon in writing with the Association from time
to time and as may be permitted by law.
Section 9.10. Compensation of Trustee.
-----------------------
The Association covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to reasonable compensation for all
services rendered by it in the execution of the trusts hereby created and in the
exercise and performance of any of the powers and duties hereunder to the
Trustee, which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust, and the Association
will reimburse the Trustee for all advances made by the Trustee in accordance
with any of the provisions of this Indenture and will pay to the Trustee from
time to time its expenses and disbursements (including, without limitation, the
reasonable compensation and the expenses and disbursements of its counsel and of
all persons not regularly in its employ). The Association also covenants to
indemnify the Trustee for, and to hold it harmless against, any loss, liability
or expense incurred without negligence or bad faith on the part of the Trustee,
arising out of or in connection with the acceptance or administration of this
trust, including the costs and expenses of defending against any claim of
liability in the premises. The Association further covenants and agrees to pay
interest to the Trustee at the rate of one hundred fifty percent (150%) of the
prime commercial lending rate of the Trustee upon all amounts paid, advanced or
disbursed by the Trustee for which it is entitled to reimbursement or indemnity
as herein provided. The obligations of the Association to the Trustee under this
Section 9.10 shall constitute additional indebtedness subject to this Indenture.
Such additional indebtedness shall be secured by a lien prior to that of the
Notes upon the trust estate, including all property or funds held or collected
by the Trustee as such.
Section 9.11. Enforcement by Trustee of Right to Compensation.
-----------------------------------------------
In order to further assure the Trustee that it will be compensated,
reimbursed and indemnified as provided in Section 9.10 and that the prior lien
provided for in Section 9.10 upon the trust estate to secure the payment of such
compensation, reimbursement and indemnity will be enforced for the benefit of
the Trustee, all parties to this Indenture agree, and each Holder of any Note by
his acceptance thereof shall be deemed to have agreed that in the event of:
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(a) the adjudication of the Association as a bankrupt by any court of
competent jurisdiction,
(b) the filing of any petition seeking the reorganization of the
Association under the Federal Bankruptcy Code or any other applicable law or
statute of the United States of America or of any State thereof,
(c) the appointment of one or more trustees or receivers of all or
substantially all of the property of the Association,
(d) the filing of any bill to foreclose this Indenture,
(e) the filing by the Association of a petition to take advantage of any
insolvency act, or
(f) the institution of any other proceeding wherein it shall become
necessary or desirable to file or present claims against the Association, the
Trustee may file from time to time in any such proceeding or proceedings one or
more claims, supplemental claims and amended claims as a secured creditor for
its reasonable compensation for all services rendered by it (including services
rendered during the course of any such proceeding or proceedings) and for
reimbursement of all advances, expenses and disbursements (including, without
limitation, the reasonable compensation and the expenses and disbursements of
its counsel and of all persons not regularly in its employ) made or incurred by
it in the execution of the trusts hereby created and in the exercise and
performance of any of the powers and duties herein of the Trustee, and for any
and all amounts to which the Trustee is entitled as indemnity as provided in
Section 9.10; and the Trustee and its counsel and agents may file in any such
proceeding or proceedings applications or petitions for compensation for such
services rendered, for reimbursement for such advances, expenses and
disbursements, and for such indemnity. The claim or claims of the Trustee filed
in any such proceeding or proceedings shall be reduced by the amount of
compensation for services, reimbursement for advances, expenses and
disbursements, and indemnity paid to it following final allowance to it and to
its counsel and agents by the court in any such proceeding as an expense of
administration or in connection with a plan of reorganization or readjustment.
To the extent that compensation, reimbursement and indemnity are denied to the
Trustee or to its counsel or other agents because of not being rendered or
incurred in connection with a plan of reorganization or readjustment, approved
as required by law, because such services were not rendered in the interests of
and with benefit to the estate of the Association as a whole but in the
interests of and with benefit to the Holders of the Notes in the execution of
the trusts hereby created or in the exercise and performance of any of the
powers and duties hereunder of the Trustee or because of any other reason, the
court may, to the extent permitted by law, allow such claim, as supplemented and
amended, in any such proceeding or proceedings and for the purposes of any
reorganization or readjustment of the Association's obligations, classify the
Trustee as a secured creditor of a class separate and distinct from that of
other creditors of a class having priority and precedence over the class in
which the Holders of Notes are placed by reason of having a lien, prior and
superior to that of the Holders of the Notes, as such. The amount of the claim
or claims of the Trustee for services rendered and for advances, expenses and
disbursements, including, without limitation,
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the reasonable compensation and expenses and disbursements of its counsel and of
all persons not regularly in its employ which are not allowed and paid in any
such proceeding, but for which the Trustee is entitled to the allowance of a
secured claim as herein provided, may be fixed by the court or judge in any such
proceeding or proceedings to the extent that such court or judge has or
exercises jurisdiction over the amount of any such claim or claims.
If, and to the extent that the Trustee and its counsel and other persons
not regularly in its employ do not receive compensation for services rendered,
reimbursement of its or their advances, expenses and disbursements, or
indemnity, as herein provided, as the result of allowances made in any such
proceeding or by any plan of reorganization or readjustment or obligations of
the Association, the Trustee shall be entitled, in priority to the Holders of
Notes, to receive any distributions of any securities, dividends or other
disbursements which would otherwise be made to the Holders of Notes in any such
proceeding or proceedings and is hereby constituted and appointed, irrevocably,
the attorney-in-fact for the Holders of the Notes and each of them to collect
and receive, in their name, place and stead, such distributions, dividends or
other disbursements, to deduct therefrom the amounts due to the Trustee, its
counsel and other persons not regularly in its employ on account of services
rendered, advances, expenses, and disbursements made or incurred, or indemnity,
and to pay and distribute the balance, pro rata, to the Holders of the Notes.
The Trustee shall have a lien upon any securities or other considerations to
which Holders of Notes may become entitled pursuant to any such plan of
reorganization or readjustment of obligations, or in any such proceeding or
proceedings; and the court or judge in any such proceeding or proceedings may
determine the terms and conditions under which any such lien shall exist and be
enforced.
Section 9.12. Trustee May Rely Upon Certificate of Association.
------------------------------------------------
Whenever in the administration of the trusts of this Indenture, prior to an
Event of Default hereunder, the Trustee shall deem it necessary or desirable
that a matter be proved or established prior to taking or suffering any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate in substantially the form prescribed by Section 16.06 hereof
signed by the President or Vice President of the Association and delivered to
the Trustee, and such certificate shall be full warrant to the Trustee for any
action taken or suffered by it under the provisions of this Indenture upon the
faith thereof.
Section 9.13. Right of Trustee to Give Notice of Action.
-----------------------------------------
Whenever it is provided in this Indenture that the Trustee shall take any
action upon the happening of a specified event or upon the fulfillment of any
action or upon the request of the Association or of Holders, the Trustee taking
such action shall have full power to give any and all notices and to do any and
all acts and things incidental to such action.
Section 9.14. Conflicting Interest of Trustee.
-------------------------------
If the Trustee has or shall acquire a conflicting interest within the
meaning of Section 310(b) of the Trust Indenture Act, the Trustee shall either
eliminate such conflicting interest or
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resign, to the extent and in the manner provided by, and subject to the
provisions of, the Trust Indenture Act and this Indenture. To the extent
permitted by the Trust Indenture Act, the Trustee shall not be deemed to have a
conflicting interest by virtue of being a trustee under this Indenture with
respect to Notes of more than one series or a trustee under the Junior
Subordinated Indenture dated October 5, 1999.
Section 9.15. Duties of Trustee if It Becomes Creditor of Association.
-------------------------------------------------------
If and when the Trustee shall be or become a creditor of the Association
(or other obligor under the Notes of any series), the Trustee shall be subject
to the provisions of the Trust Indenture Act regarding the collection of claims
against the Association (or any such other obligor). A Trustee who has resigned
or been removed shall be subject to the Trust Indenture Act Section 311(a) to
the extent indicated therein.
Section 9.16. Resignation and Discharge of Trustee.
------------------------------------
The Trustee may at any time resign and be discharged of the trusts hereby
created by giving written notice to the Association specifying the day upon
which such resignation shall take effect and thereafter publishing notice
thereof, in one newspaper printed in the English language and customarily
published on each business day and of general circulation in the County of
Henrico, Commonwealth of Virginia, once in each of three successive calendar
weeks, in each case on any business day of the week, and such resignation shall
take effect upon the day specified in such notice unless previously a successor
trustee shall have been appointed by the Holders or the Association in the
manner hereinafter provided in Section 9.18, and in such event such resignation
shall take effect immediately on the appointment of such successor trustee. This
Section shall not be applicable to resignations pursuant to Section 9.14.
Section 9.17. Removal of Trustee.
------------------
The Trustee may be removed at any time by an instrument or concurrent
instruments in writing filed with the Trustee and signed and acknowledged by the
Holders of a majority in principal amount of the Notes then Outstanding or by
their attorneys in fact duly authorized.
In case at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.01, then the Trustee shall resign immediately
in the manner and with the effect specified in Section 9.16; and, in the event
that the Trustee does not resign immediately in such case, then it may be
removed forthwith by an instrument or concurrent instruments in writing filed
with the Trustee and either (a) signed by the President or Group Vice President
or Chief Financial Officer of the Association with its corporate seal attested
by the Secretary or Assistant Secretary of the Association or (b) signed and
acknowledged by the Holders of ten per centum (10%) in principal amount of the
Notes then outstanding of a particular series or by their attorneys in fact duly
authorized.
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Section 9.18. Filling Vacancy.
---------------
In case at any time the Trustee shall resign or shall be removed or shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or if
the receiver of the Trustee or of its property shall be appointed, or if any
public officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, a
vacancy shall be deemed to exist in the office of Trustee, and a successor or
successors may be appointed by the Holders of a majority in principal amount of
the Notes then Outstanding hereunder, by an instrument or concurrent instruments
in writing signed and acknowledged by such Holders or by their attorneys in fact
duly authorized, and delivered to such new trustee, notification thereof being
given to the Association and the retiring trustee, provided, nevertheless, that
until a new trustee shall be appointed by the Holders as aforesaid, the
Association, by instrument executed by order of its Board of Directors or
Executive Committee and duly acknowledged by its President or Vice President,
may appoint a trustee to fill such vacancy until a new trustee shall be
appointed by the Holders as herein authorized. The Association shall publish
notice of any such appointment made by it in the manner provided in Section
9.16. Any new trustee appointed by the Association shall, immediately and
without further act, be superseded by a trustee appointed by the Holders, as
above provided if such appointment by the Holders be made prior to the
expiration of one year after the first publication of notice of the appointment
of the new trustee by the Association.
If no appointment of a successor trustee shall be made pursuant to the
foregoing provisions of this section within six months after a vacancy shall
have occurred in the office of trustee, the Holder of any Note Outstanding
hereunder or any retiring trustee may apply to any court of competent
jurisdiction to appoint a successor trustee. Said court may thereupon after such
notice, if any, as such court may deem proper and prescribe, appoint a successor
trustee.
If the Trustee resigns because of a conflict of interest as provided in
subsection (a) of Section 9.14 and a successor has not been appointed by the
Association or the Holders or, if appointed, has not accepted the appointment
within thirty days after the date of such resignation, the resigning Trustee may
apply to any court of competent jurisdiction for the appointment of a successor
trustee.
Any trustee appointed under the provisions of this Section in succession to
the Trustee shall be a bank or trust company eligible under Section 6.03 and
9.01 and qualified under Section 9.14.
Any trustee which has resigned or been removed shall nevertheless retain
the lien upon the trust estate, including all property or funds held or
collected by the trustee as such, to secure the amounts due to the trustee as
compensation, reimbursements, expenses and indemnity, afforded to it by Section
9.10 and retain the rights afforded to it by Section 9.11.
Section 9.19. Duties of Successor Trustee.
---------------------------
Any successor trustee appointed hereunder shall execute, acknowledge and
deliver to his or its predecessor trustee, and also to the Association, an
instrument accepting such
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appointment hereunder, and thereupon such successor trustee, without any further
act, deed or conveyance, shall become fully vested with all the estates,
properties, rights, powers, trusts, duties and obligations of his or its
predecessor in trust hereunder, with like effect as if originally named as
Trustee herein and the obligations and duties of the Trustee ceasing to act
shall cease and terminate; but the trustee ceasing to act shall nevertheless, on
the written request of the Association, or of the successor trustee, or of the
Holders of ten per centum (10%) in principal amount of the Notes then
Outstanding hereunder, execute, acknowledge and deliver such instruments of
conveyance and further assurances and do such other things as may reasonably be
required for more fully and certainly vesting and confirming in such successor
trustee all the right, title and interest of the Trustee to which he or it
succeeds under this Indenture, and such rights, powers, trusts, duties, and
obligations, and the Trustee ceasing to act shall also, upon like request, pay
over, assign and deliver to the successor trustee any money or other property
subject to the lien of this Indenture. Should any deed, conveyance or instrument
in writing from the Association be required by the new trustee for more fully
and certainly vesting in and confirming to such new trustee such estates,
properties, rights, powers, trusts and duties, any and all such deeds,
conveyances and instruments in writing shall, on request, be executed,
acknowledged and delivered by the Association.
Section 9.20. Merger or Consolidation of or with Trustee.
------------------------------------------
Any corporation into which the Trustee may be merged or with which it may
be consolidated or any corporation resulting from any merger or consolidation to
which the Trustee shall be a party or any corporation to which substantially all
the corporate trust business and assets of the Trustee may be transferred,
provided such corporation shall be eligible under the provisions of Sections
6.03 and 9.01 and qualified under Section 9.14, shall be the successor trustee
under this Indenture, without the execution or filing of any paper or the
performance of any further act on the part of any other parties hereto, anything
herein to the contrary notwithstanding. In case any of the Notes contemplated to
be issued hereunder shall have been authenticated but not delivered, any such
successor to the Trustee may, subject to the same terms and conditions as though
such successor to the Trustee had itself authenticated such Notes, adopt the
certificate of authentication of the original Trustee or of any successor to it
as trustee hereunder, and deliver the said Notes so authenticated; and in case
any of said Notes shall not have been authenticated, any successor to the
Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor trustee, and in all such cases such
certificates shall have the full force which it is anywhere in said Notes or in
the Indenture provided that the certificate of the Trustee shall have; provided,
however, that the right to authenticate Notes in the name of the Trustee shall
apply only to its successor or successors by merger or consolidation or sale as
aforesaid.
Section 9.21. Duties of Trustee Governed by Laws of Virginia.
----------------------------------------------
The duties, liabilities, rights, privileges and immunities of the Trustee
in relation to the Holders of the Notes shall be governed exclusively by the
laws of the Commonwealth of Virginia.
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ARTICLE TEN
CONCERNING THE HOLDERS
Section 10.01. Proof of Action by Holders.
--------------------------
Whenever in this Indenture it is provided that the Holders of a specified
percentage in aggregate principal amount of the Notes of a particular series may
take any action (including the making of any demand or request, the giving of
any notice, consent or waiver or the taking of any other action) the fact that
at the time of taking any such action the Holders of such specified percentage
have joined therein may be evidenced (a) by any instrument or any number of
instruments of similar tenor executed by Holders in person or by agent or proxy
appointed in writing, or (b) by the record of the Holders of Notes voting in
favor thereof at any meeting of Holders duly called and held in accordance with
the provisions of Article Eleven, or (c) by a combination of such instrument or
instruments and any such record of such a meeting of Holders.
Section 10.02. What Constitutes a Writing.
--------------------------
For the purposes hereof, a "writing" shall include tangible written text
produced by telex, telefacsimile, computer retrieval, or other process by which
electronic signals are transmitted by telephone or otherwise.
Section 10.03. Holder Named in Note Treated as Absolute Owner.
----------------------------------------------
The Association, the Trustee and any paying agent may deem and treat the
Holder or Holders named in the Register for any Outstanding Note as the absolute
owner of such Note (whether or not such Note shall be overdue and
notwithstanding any notation of ownership or other writing thereon made by
anyone other than the Association) for the purpose of receiving payment thereof
or on account thereof and for all other purposes, and neither the Association
nor the Trustee nor any paying agent shall be affected by any notice to the
contrary.
Section 10.04. Notes Owned by Association to be Disregarded in Computing
---------------------------------------------------------
Requisite Amount of Notes.
- -------------------------
For the purposes of this section, and in every other instance of a
direction or consent by Holders of Notes under this Indenture, in determining
whether the Holders of the requisite aggregate principal amount of Notes have
concurred in any direction, consent or waiver under this Indenture, Notes which
are registered in the name of the Association or any other obligor on the Notes
or by any person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Association or any other obligor on
the Notes shall be disregarded and deemed not to be Outstanding for the purpose
of any such determination, except that for the purpose of determining whether
the Trustee shall be protected in relying on any such direction, consent or
waiver only Notes in regard to which the Trustee shall have received written
notice identifying such persons or obligors by name and address which the
Trustee knows are so owned shall be so disregarded.
30
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Section 10.05. Holders May Revoke Prior Action.
-------------------------------
At any time prior to (but not after) the evidencing to the Trustee as
provided in Section 10.01, of the taking of any action by the Holders of the
percentage in aggregate principal amount of the Notes of any series specified in
this Indenture in connection with such action, any Holder of a Note of such
series which is shown by the evidence to be included in the Notes the Holders of
which have consented to such action may, by filing written notice with the
Trustee at its principal office and upon proof of owning as provided in Section
10.02, revoke such action so far as concerns such Note. Except as aforesaid any
such action taken by the Holder of any Note shall be conclusive and binding upon
such Holder and upon all future Holders of such Note and of any Note issued in
exchange or substitution therefor, irrespective of whether or not any notation
in regard thereto is made upon such Note. Any action taken by the Holders of the
percentage in aggregate principal amount of the Notes of any series specified in
this Indenture in connection with such action shall be conclusively binding upon
the Association, the Trustee and the Holders of the Notes of such series.
ARTICLE ELEVEN
HOLDERS MEETINGS
Section 11.01. Purpose of Meetings.
-------------------
A meeting of Holders of the Notes, or of the Notes of any series, may be
called at any time and from time to time pursuant to the provisions of this
Article Eleven for any of the following purposes:
(a) to give any notice to the Association or to the Trustee, or to give any
directions to the Trustee, or to consent to the waiving of any Default or Event
of Default hereunder and its consequences, or to take any other action
authorized to be taken by Holders pursuant to any of the provisions of Article
Eight;
(b) to remove the Trustee and appoint a successor Trustee pursuant to the
provisions of Article Nine;
(c) to consent to the execution of an Indenture or Indentures supplemental
hereto pursuant to the provisions of Section 12.02; or
(d) to take any other action authorized to be taken by or on behalf of the
Holders of any specified aggregate principal amount of the Notes or of any
series under any other provision of this Indenture or under applicable law.
Section 11.02. Call of Meeting and Notice Required.
-----------------------------------
The Trustee may at any time call a meeting of Holders to take any action
specified in Section 11.01, to be held at such time and at such place in the
City of Richmond or County of Henrico, Commonwealth of Virginia, as the Trustee
shall determine. Notice of every meeting
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of the Holders, setting forth the time and place of such meeting and in general
terms the action proposed to be taken at such meeting, shall be mailed by
ordinary first class mail, postage prepaid, to the Holders of all Outstanding
Notes of the series affected, at their last known post office addresses as shown
by the Register of the Association or Trustee, not less than twenty nor more
than one hundred eight days prior to the date fixed for the meeting.
Section 11.03. Request of Trustee to Call Meeting.
----------------------------------
In case at any time the Association, pursuant to a resolution of its Board
of Directors, or the Holders of at least ten per centum (10%) in aggregate
principal amount of the Notes or of a particular series then Outstanding, shall
have requested the Trustee to call a meeting of Holders to take any action
authorized in Section 11.01, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee shall not
have mailed the notice of such meeting within twenty days after receipt of such
request, then the Association or the Holders of Notes in the amount above
specified may determine the time and the place in said City of Richmond or
County of Henrico for such meeting and may call such meeting by mailing notice
thereof as provided in Section 11.02.
Section 11.04. Who May Vote at Meeting.
-----------------------
To be entitled to vote at any meeting of Holders, a person shall be (a) a
Holder of one or more Outstanding Notes entitled to vote at the meeting, or (b)
a person appointed by an instrument in writing as proxy for a Holder or Holders
of one or more Outstanding Notes entitled to vote at the meeting. The only
persons who shall be entitled to be present or to speak at any meeting of
Holders shall be the Persons entitled to vote at such meeting and their counsel,
any representatives of the Trustee and its counsel and any representatives of
the Association and its counsel.
Section 11.05. Regulations Made by Trustee.
---------------------------
Notwithstanding any other provisions of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any meeting of
Holders in regard to proof of the owning of Notes and of the appointment of
proxies, and in regard to the appointment and duties of inspectors of votes, and
submission and examination of proxies, certificates and other evidence of the
right to vote, and such other matters concerning the conduct of the meeting as
it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Association or by Holders as provided in Section 11.03, in which case the
Association or the Holders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by vote of the Holders of a majority
in principal amount of the Notes represented at the meeting and entitled to
vote.
Subject to the provisions of Section 10.04, at any meeting each Holder or
proxy shall be entitled to one vote for each $1,000 or portion thereof in
principal amount of Notes held or
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represented by him; provided, however, that no vote shall be cast or counted at
any meeting in respect of any Note challenged as not Outstanding and ruled by
the chairman of the meeting to be not Outstanding; and provided further, that
any Holder of a Note or Notes, the aggregate principal amount of which is less
than $1,000, shall nevertheless be entitled to one vote. The chairman of the
meeting shall have no right to vote except as a Holder or proxy. Any meeting of
Holders duly called pursuant to the provisions of Section 11.02 or 11.03 may be
adjourned from time to time, and the meeting may be held as so adjourned without
further notice.
Section 11.06. Form of and Recording Vote.
--------------------------
The vote upon any resolution submitted to any meeting of Holders shall be
by written ballots on which shall be subscribed the signatures of the Holders or
proxies. The permanent chairman of the meeting shall appoint two inspectors of
votes who shall count all votes cast at the meeting for or against any
resolution and who shall make and file with the secretary of the meeting their
verified written reports in duplicate of all votes cast at the meeting. A record
in duplicate of the proceedings of each meeting of Holders shall be prepared by
the secretary of the meeting and there shall be attached to said record the
original reports of the inspectors of votes on any vote by ballot taken thereat
and affidavits by one or more persons having knowledge of the facts setting
forth a copy of the notice of the meeting and showing that said notice was
published as provided in Section 11.02. The record shall be signed and verified
by the affidavits of the permanent chairman and secretary of the meeting and one
of the duplicates shall be delivered to the Association and the other to the
Trustee to be preserved by the Trustee, the latter to have attached hereto the
ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
ARTICLE TWELVE
SUPPLEMENTAL INDENTURES
Section 12.01. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of any Holders, the Association and the Trustee, at any
time and from time to time, may enter into indentures supplemental hereto, in
form reasonably satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another corporation or entity to the
Association and the assumption by any such successor of the covenants and
obligations of the Association herein and in the Notes and any interest coupons
appertaining thereto; or
(b) to add to the covenants of the Association for the benefit of the
Holders of all or any series of Notes (and if such covenants are to be for the
benefit of less than all series of Notes, stating that such covenants are
expressly being included solely for the benefit of such series) or to surrender
any right or power herein conferred upon the Association; or
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<PAGE>
(c) to add any additional Events of Default with respect to all or any
series of Notes; or
(d) to change or eliminate any of the provisions of this Indenture in
respect of one or more series of Notes, provided that any such change or
elimination shall become effective only when there is no Note Outstanding of any
series created prior to the execution of such supplemental indenture which is
entitled to the benefit of such provision; or
(e) to establish the form or terms of Notes of any series as permitted by
Sections 2.01 and 3.01; or
(f) to evidence and provide for the acceptance of appointment hereunder by
a successor Trustee with respect to the Notes pursuant to Section 9.18 and to
add to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by more
than one Trustee; or
(g) to cure any ambiguity, to correct or supplement any provision herein
which may be inconsistent with any other provision herein or to make any other
provisions with respect to matters or questions arising under this Indenture
which shall not be inconsistent with the provisions of this Indenture, provided
such action shall not adversely affect in any material respect the interests of
the Holders of Notes of any series; or
(h) to modify, eliminate or add to the provisions of this Indenture to such
extent as shall be necessary to effect the qualification of this Indenture under
the Trust Indenture Act or under any similar federal statute subsequently
enacted, and to add to this Indenture such other provisions as may be expressly
required under the Trust Indenture Act; or
(i) to enable the issuance of uncertificated Notes and to permit
registration, transfer and exchange of notes by book entry.
Section 12.02. Supplemental Indentures With Consent of Holders.
-----------------------------------------------
With the consent of the Holders of not less than a majority of the
aggregate principal amount of the Outstanding Notes of each series affected by
such supplemental indenture (treating all affected series as one series), the
Association and the Trustee may enter into an indenture or indentures
supplemental hereto to add any provisions to or to change in any manner or
eliminate any provisions of this Indenture or of any other indenture
supplemental hereto or to modify in any manner the rights of the Holders of
Notes of any such series; provided, however, that without the consent of the
Holder of each Outstanding Note affected thereby, an amendment under this
Section may not:
(a) change the Stated Maturity of the principal of, or premium, if any, on,
or any installment of principal of or premium, if any, or interest on, any such
Note, or reduce the principal amount thereof or the rate of interest thereon or
any premium payable upon the redemption thereof, or change the manner in which
the amount of any principal thereof or premium, if any, or interest thereon is
determined, or impair the right to institute suit for the
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enforcement of any such payment on or after the Stated Maturity thereof (or, in
the case of redemption, on or after the Redemption Date);
(b) reduce the percentage in principal amount of the Outstanding Notes of
any series, the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or of certain Defaults
hereunder and their consequences) provided for in this Indenture;
(c) change any obligation of the Association to maintain an office or
agency in the places and for the purposes specified in Section 6.02; or
(d) make any change in this Section 12.02 except to increase any percentage
or to provide that certain other provisions of this Indenture cannot be modified
or waived with the consent of the Holders of each Outstanding Note affected
thereby.
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Notes, or which modifies the rights
of the Holders of Notes of such series with respect to such covenant or other
provision, shall be deemed not to affect the rights under this Indenture of the
Holders of Notes of any other series.
It is not necessary under this Section 12.02 for the Holders to consent to
the particular form of any proposed supplemental indenture, but it is sufficient
if they consent to the substance thereof.
Section 12.03. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to this Indenture or the Notes of one or more series shall
be set forth in a supplemental indenture that complies with the Trust Indenture
Act as then in effect.
Section 12.04. Execution of Supplemental Indentures.
------------------------------------
Upon the execution of any supplemental indenture pursuant to the provisions
of this Article Twelve, this Indenture shall be and be deemed to be modified and
amended in accordance therewith and the respective rights, limitation of rights,
obligations, duties and immunities under this Indenture of the Trustee, the
Association and the Holders of Notes shall thereafter be determined, exercised
and enforced hereunder subject in all respects to such modifications and
amendments, and all the terms and conditions of any such supplemental indenture
shall be and be deemed to be part of the terms and conditions of this Indenture
for any and all purposes.
The Trustee, subject to the provisions of Article Nine, may receive and
rely upon an Opinion of Counsel as conclusive evidence that any such
supplemental indenture complies with the provisions of this Article Twelve.
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Section 12.05. Reference in Notes to Supplemental Indentures.
---------------------------------------------
Notes, including any interest coupons, of any series authenticated and
delivered after the execution of any supplemental indenture pursuant to this
Article may, and shall if required by the Trustee, bear a notation in form
approved by the Trustee as to any matter provided for in such supplemental
indenture. If the Association shall so determine, new Notes including any
interest coupons of any series so modified as to conform, in the opinion of the
Association, to any such supplemental indenture may be prepared and executed by
the Association and authenticated and delivered by the Trustee in exchange for
Outstanding Notes including any interest coupons of such series.
ARTICLE THIRTEEN
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Section 13.01. Consolidation or Merger of or with Association.
----------------------------------------------
Nothing contained in this Indenture or in any of the Notes shall prevent
any consolidation or merger of the Association with or into any other
corporation or entity (whether or not affiliated with the Association), or
successive consolidation or mergers in which the Association or its successor or
successors shall be a party or parties, or shall prevent any sale or conveyance
of the property of the Association as an entirety or substantially as an
entirety to any other corporation or entity (whether or not affiliated with the
Association) authorized to acquire and operate the same; provided, however, and
the Association hereby covenants and agrees, that upon any such consolidation,
merger, sale or conveyance, the due and punctual payment of the principal of and
interest on all the Notes, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture to be performed or observed by the Association, shall be expressly
assumed, by supplemental indentures satisfactory in form to the Trustee executed
and delivered to the Trustee by the corporation or entity formed by such
consolidation, or into which the Association shall have been merged, or by the
corporation or entity which shall have acquired such property.
Section 13.02. Rights and Duties of Successor Corporation or Entity.
----------------------------------------------------
In case of any such consolidation, merger, sale or conveyance and upon any
such assumption by the successor corporation or entity, such successor
corporation or entity shall succeed to and be substituted for the Association,
with the same effect as if it had been named herein as the Association. Such
successor corporation or entity thereupon may cause to be signed, and may issue
either in its own name or in the name of Southern States Cooperative, Inc., any
or all of the Notes issuable hereunder which theretofore shall not have been
signed by the Association and delivered to the Trustee; and, upon the order of
such successor corporation or entity, instead of the Association, and subject to
all the terms, conditions and limitations in this Indenture prescribed, the
Trustee shall authenticate and shall deliver any Notes which previously shall
have been signed and delivered by the officers of the Association to the Trustee
for authentication, and any Notes which such successor corporation or entity
thereafter
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shall cause to be signed and delivered to the Trustee for that purpose. All the
Notes so issued shall in all respects have the same legal rank and benefit under
the Indenture as the Notes theretofore or thereafter issued in accordance with
the terms of this Indenture as though all of such Notes had been issued at the
date of the execution hereof.
In case of any such consolidation, merger, sale or conveyance such changes
in phraseology and form (but not in substance) may be made in the Notes
thereafter to be issued as may be appropriate.
Nothing contained in this Indenture or in any of the Notes shall prevent
the Association from merging into itself any other corporation or entity
(whether or not affiliated with the Association) or acquiring by purchase or
otherwise all or any part of the property of any other corporation or entity
(whether or not affiliated with the Association).
Section 13.03. Opinion of Counsel.
------------------
The Trustee, subject to the provisions of Article Nine, may receive and
rely upon an Opinion of Counsel as conclusive evidence that any such
consolidation, merger, sale or conveyance, and any such assumption, complies
with the provisions of this Article Thirteen.
ARTICLE FOURTEEN
SATISFACTION, DISCHARGE AND DEFEASANCE
Section 14.01. Termination of Association's Obligations Under the
--------------------------------------------------
Indenture.
- ---------
This Indenture shall upon Association Request cease to be of further effect
with respect to Notes of or within any series and any interest coupons
appertaining thereto (except as to (i) rights of registration, transfer or
exchange of such Notes, (ii) rights of replacement of such Notes which may have
been lost, stolen or mutilated as herein expressly provided for, (iii) rights of
holders of Notes to receive payments of principal thereof and interest thereon,
upon the Stated Maturity thereof (but not upon acceleration), and rights of the
Holders to receive mandatory sinking fund payments, if any, (iv) rights of
holders of Notes to convert or exchange Notes, (v) rights, obligations, duties
and immunities of the Trustee hereunder, (vi) any rights of the Holders of Notes
of such series as beneficiaries hereof with respect to the property so deposited
with the Trustee payable to all or any of them, and (vii) the obligations of the
Association under Section 6.02) and the Trustee, upon payment of all amounts due
it under Section 9.10, at the expense of the Association, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture with
respect to such Notes and any interest coupons appertaining thereto when:
(1) either
(A) all such Notes previously authenticated and delivered and all
interest coupons appertaining thereto (other than such Notes and
interest coupons which have been destroyed, lost or stolen and
which have been replaced or paid as
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provided in Section 3.06) have been delivered to the Trustee for
cancellation or
(B) all Notes of such series and, in the case of (i) or (ii) below,
any interest coupons appertaining thereto not theretofore
delivered to the Trustee for cancellation:
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the
name, and at the expense, of the Association,
and the Association, in the case of (i), (ii) or (iii) above, has irrevocably
deposited or caused to be deposited with the Trustee as trust funds in trust for
the purpose money in an amount sufficient to pay and discharge the entire
indebtedness on such Notes and such interest coupons not theretofore delivered
to the Trustee for cancellation, for principal, premium, if any, and interest,
with respect thereto, to the date of such deposit (in the case of Notes which
have become due and payable) or to the Stated Maturity or Redemption Date, as
the case may be;
(2) the Association has paid or caused to be paid all other sums payable
hereunder by the Association; and
(3) the Association has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture as to such series have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the obligation
of the Association to the Trustee and any predecessor Trustee under Section
9.10, and, if money shall have been deposited with the Trustee pursuant to
subclause (B) of clause (1) of this Section, the obligations of the Trustee
under Section 6.06 and 14.02 shall survive.
Section 14.02. Application of Trust Funds.
--------------------------
Subject to the provisions of Section 6.06, all money deposited with the
Trustee pursuant to Section 14.01 shall be held in trust and applied by it, in
accordance with the provisions of the Notes, the interest coupons appertaining
thereto, if any, and this Indenture, to the payment, either directly or through
any paying agent (including the Association acting as its own paying agent) as
the Trustee may determine, to the Persons entitled thereto, of the principal,
premium, if any and any interest for whose payment such money has been deposited
with or received by
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the Trustee, but such money need not be segregated from other funds except as
otherwise provided herein and except to the extent required by law.
Section 14.03. Applicability of Defeasance Provisions; Association's
-----------------------------------------------------
Option to Effect Defeasance or Covenant Defeasance.
- ---------------------------------------------------
Except as otherwise specified as contemplated by Section 3.01 for the Notes
of any series, the provisions of Sections 14.04 through 14.09 inclusive, with
such modifications thereto as may be specified pursuant to Section 3.01 with
respect to any series of Notes, shall be applicable to the Notes and any
interest coupons appertaining thereto.
Section 14.04. Defeasance and Discharge.
------------------------
On and after the date on which the conditions set forth in Section 14.06
are satisfied with respect to the Notes of or within any series, the Association
shall be deemed to have paid and been discharged from its obligations with
respect to such Notes and any interest coupons appertaining thereto (hereinafter
"defeasance"). For this purpose, such defeasance means that the Association
shall be deemed to have paid and discharged the entire indebtedness represented
by such Notes and any interest coupons appertaining thereto which shall
thereafter be deemed to be "Outstanding" only for the purposes of Sections 3.04,
3.05, 3.06, 6.02, 6.06, 14.07 and 14.09 and to have satisfied all its other
obligations under such Notes and any interest coupons appertaining thereto and
this Indenture insofar as such Notes and any interest coupons appertaining
thereto are concerned (and the Trustee, upon payment of all amounts due it under
Section 9.10, at the expense of the Association, shall on an Association Order
execute proper instruments acknowledging the same). Subject to compliance with
this Article Fourteen, the Association may defease the Notes of any series and
any interest coupons appertaining thereto under this Section 14.04
notwithstanding a prior covenant defeasance (as defined herein) under Section
14.05 with respect to such Notes and any interest coupons appertaining thereto.
Following a defeasance, payment of such Notes may not be accelerated because of
an Event of Default.
Section 14.05. Covenant Defeasance.
-------------------
On and after the date on which the conditions set forth in Section 14.06
are satisfied with respect to the Notes of or within any series, (i) the
Association shall be released from its obligations under Section 6.01 and, if
specified pursuant to Section 3.01, its obligations under any other covenant,
with respect to such Notes and any interest coupons appertaining thereto and
(ii) the occurrence of any event specified in Sections 8.01(e) or 8.01(f) (in
each case, with respect to any of the obligations described in clause (i) above)
or 8.01(a) or 8.01(b) shall be deemed not to be or result in a Default or Event
of Default (hereinafter, "covenant defeasance"), and such Notes and any interest
coupons appertaining thereto shall thereafter be deemed to be not "Outstanding"
for the purposes of any request, demand, authorization, direction, notice,
waiver, consent or declaration of Holders (and the consequences of any thereof)
in connection with Section 6.01, such other covenant specified pursuant to
Section 3.01, or Sections 8.01(e) or 8.01(f) (in each case, with respect to any
of the obligations described in clause (i) above) or Sections 8.01(a) or
8.01(b), but shall continue to be deemed
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"Outstanding" for all other purposes hereunder. For this purpose, such covenant
defeasance means that, with respect to such Notes and any interest coupons
appertaining thereto, the Association may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in such
Section or such other covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to such Section or such other covenant or by reason
of reference in any such Section or such other covenant to any other provision
herein or in any other document and such omission to comply shall not constitute
a Default or an Event of Default under Sections 8.01(a), 8.01(b), 8.01(e), or
8.01(f) or otherwise, as the case may be, but, except as specified above, the
remainder of this Indenture and such Notes and any interest coupons appertaining
thereto shall be unaffected thereby.
Section 14.06. Conditions to Defeasance or Covenant Defeasance.
-----------------------------------------------
The following shall be the conditions to application of either Section
14.04 or Section 14.05 to the then Outstanding Notes of or within a series:
(a) The Association shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 6.03 who shall agree to comply with the provisions of Sections 14.03
through 14.09 inclusive and Section 6.06 applicable to the Trustee, for purposes
of such sections also a "Trustee") as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Notes and any interest
coupons appertaining thereto, (A) money in an amount, or (B) Government
Obligations which through the scheduled payment of principal and interest in
respect thereof in accordance with their terms will provide, not later than one
day before the due date of any payment, money in an amount, or (C) a combination
thereof, in an amount sufficient in the opinion of a nationally recognized firm
of independent certified public accountants expressed in a written opinion with
respect thereto delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee (or other qualifying trustee) to pay and discharge,
(x) the principal of (premium, if any) and each installment of interest, if any,
on the Outstanding Notes and any interest coupons appertaining thereto on the
Stated Maturity of such principal or installment of interest and (y) any
mandatory sinking fund payments applicable to such Notes on the day on which
such payments are due and payable in accordance with the terms of this Indenture
and of such Notes and any interest coupons appertaining thereto.
(b) In the case of an election under Section 14.04, the Association shall
have delivered to the Trustee an Opinion of Counsel stating that (x) the
Association has received from, or there has been published by, the Internal
Revenue Service a ruling, or (y) since the date of this Indenture there has been
a change in the applicable Federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the Holders of the
Outstanding Notes and any interest coupons appertaining thereto will not
recognize gain or loss for Federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to Federal income tax on
the same amount, in the same manner and at the same times as would have been the
case if such deposit, defeasance and discharge had not occurred.
40
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(c) In the case of an election under Section 14.05, the Association shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the Outstanding Notes and any interest coupons appertaining thereto
will not recognize gain or loss for Federal income tax purposes as a result of
such deposit and covenant defeasance and will be subject to Federal income tax
on the same amount, in the same manner and at the same times as would have been
the case if such deposit and covenant defeasance had not occurred.
(d) The Association shall have delivered to the Trustee an Officer's
Certificate to the effect that the Notes, if then listed on any securities
exchange or approved for trading in any automated quotation system, will not be
delisted or disapproved for such trading as a result of such deposit.
(e) At the time of such deposit: (A) no default in the payment of all or a
portion of principal of (or premium, if any) or interest on any Senior
Indebtedness of the Association shall have occurred and be continuing, and no
event of default with respect to any Senior Indebtedness of the Association
shall have occurred and be continuing and shall have resulted in such Senior
Indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable and (B) no other event of
default with respect to any Senior Indebtedness of the Association shall have
occurred and be continuing permitting (after notice or the lapse of time, or
both) the holders of such Senior Indebtedness (or a trustee on behalf of the
holders thereof) to declare such Senior Indebtedness due and payable prior to
the date on which it would otherwise have become due and payable, or, in the
case of either Clause (A) or Clause (B) above, each such default or event of
default shall have been cured or waived or shall have ceased to exist.
(f) No Event of Default or event which with notice or lapse of time or both
would become an Event of Default shall have occurred and be continuing on the
date of such deposit or, insofar as Sections 8.01(c) or 8.01(d) are concerned,
at any time during the period ending on the 91st day after the date of such
deposit (it being understood that this condition shall not be deemed satisfied
until the expiration of such period)
(g) The Association shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under Section 14.04 or
the covenant defeasance under Section 14.05 (as the case may be) have been
complied with.
(h) Such defeasance or covenant defeasance shall not result in the trust
arising from such deposit constituting an investment company as defined in the
Investment Company Act of 1940, as amended from time to time, or such trust
shall be registered under such act or exempt from registration thereunder.
(i) Such defeasance or covenant defeasance shall be effected in compliance
with any additional or substitute terms, conditions or limitations which may be
imposed on the Association in connection therewith as contemplated by Section
3.01.
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Section 14.07. Deposited Money and Government Obligations to Be Held in
--------------------------------------------------------
Trust.
- -----
Subject to the provisions of Section 6.06, all money and Government
Obligations (or other property as may be provided pursuant to Section 3.01)
(including the proceeds thereof) deposited with the Trustee pursuant to Section
14.06 in respect of any Notes of any series and any interest coupons
appertaining thereto shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and any interest coupons
appertaining thereto and this Indenture, to the payment, either directly or
through any paying agent (including the Association acting as its own paying
agent) as the Trustee may determine, to the Holders of such Notes and any
interest coupons appertaining thereto of all sums due and to become due thereon
in respect of principal, premium, if any, and interest, if any, but such money
need not be segregated from other funds except as provided herein and except to
the extent required by law.
Section 14.08. Repayment to Association.
------------------------
Subject to the delivery by the Association of any written certification
required by the last paragraph of this Section 14.08, the Trustee (and any
paying agent) shall promptly pay to the Association upon Association Request any
excess money or securities held by them at any time.
The provisions of Section 6.06 shall apply to any money or securities held
by the Trustee or any paying agent under this Article Fourteen that remain
unclaimed for two years after the Maturity of any series of Notes for which
money or securities have been deposited pursuant to Section 14.06(a).
Anything in this Article to the contrary notwithstanding, the Trustee shall
deliver or pay to the Association from time to time upon Association Request any
money or Government Obligations held by it as provided in Section 14.06 with
respect to any Notes which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect the defeasance or covenant defeasance, as
the case may be, with respect to such Notes.
Section 14.09. Indemnity for Government Obligations.
------------------------------------
The Association shall pay, and shall indemnify the Trustee against, any
tax, fee or other charge imposed on or assessed against Government Obligations
deposited pursuant to this Article or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Notes.
Section 14.10. Reinstatement.
-------------
If the Trustee (or paying agent) is unable to apply any money or Government
Obligations in accordance with Section 14.06 by reason of any order or judgment
of any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then
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<PAGE>
the Association's obligations under this Indenture and the Notes shall be
revived and reinstated, with present and prospective effect, as though no
deposit had occurred pursuant to Section 14.06, until such time as the Trustee
(or paying agent) is permitted to apply all such money or Government Obligations
in accordance with Section 14.06; provided, however, that if the Association
makes any payment to the Trustee (or paying agent) of principal, premium, if
any, or interest on any Note following the reinstatement of its obligations, the
Trustee (or paying agent) shall promptly pay any such amount to the Holders of
the Notes and the Association shall be subrogated to the rights of the Holders
of such Notes to receive such payment from the money and Government Obligations
held by the Trustee (or paying agent)
ARTICLE FIFTEEN
IMMUNITY OF INCORPORATORS,
STOCKHOLDERS, MEMBERS, OFFICERS AND DIRECTORS
Section 15.01. No Recourse.
-----------
No recourse under or upon any obligation, covenant or agreement of this
Indenture, or of any Note, or for any claim based thereon or otherwise in
respect thereof, shall be had against any incorporator, stockholder, member,
officer or director, as such, past, present or future, of the Association or of
any successor corporation, either directly or through the Association, whether
by virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise; it being expressly understood that this
Indenture and the obligations issued hereunder are solely corporate obligations,
and that no such personal liability whatever shall attach to, or is or shall be
incurred by, the incorporators, stockholders, members, officers or directors, as
such of the Association or of any successor corporation, or any of them, because
of the creation of the indebtedness hereby authorized, or under or by reason of
the obligations, covenants or agreements contained in this Indenture or in any
of the Notes or implied therefrom; and that any and all such personal liability,
either at common law or in equity or by constitution or statute, of, and any and
all such rights and claims against, every such incorporator, stockholder,
member, officer or director, as such because of the creation of the indebtedness
hereby authorized, or under or by reason of the obligations, covenants or
agreements contained in this Indenture or in any of the Notes or implied
therefrom, are hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of such Notes.
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
Section 16.01. Covenants of Association Bind its Successors and Assigns.
--------------------------------------------------------
All the covenants, stipulations, promises and agreements in this Indenture
contained by or on behalf of the Association shall bind its successors and
assigns, whether so expressed or not.
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Section 16.02. Acts by Successor Corporation.
-----------------------------
Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Association shall and may be done and performed with like force and effect by
the like board, committee or officer of any corporation that shall at the time
be the lawful sole successor of the Association.
Section 16.03. Surrender of Rights and Powers Reserved to Association.
------------------------------------------------------
The Association by instrument in writing executed by authority of
two-thirds of its Board of Directors and delivered to the Trustee may surrender
any of the powers or rights reserved to the Association and thereupon such
powers or rights so surrendered shall terminate both as to the Association and
as to any successor corporation.
Section 16.04. Service of Notice on Association.
--------------------------------
Any notice or demand which by any provision of this Indenture is required
or permitted to be given or served by the Trustee or by the Holders of Notes to
or on the Association may be given or served by being deposited postage prepaid
in a post office letter box addressed (until another address is filed by the
Association with the Trustee pursuant to Section 6.02), as follows:
Southern States Cooperative, Inc.
Attention: Chief Financial Officer
P.O. Box 26234
Richmond, Virginia 23230
Any notice, direction, request or demand by any Holder to or upon the
Trustee shall be deemed to have been sufficiently given or made, for all
purposes, upon receipt by a responsible officer at the principal office of the
Trustee.
Section 16.05. Indenture Governed by Laws of Virginia.
--------------------------------------
This indenture, the securities and any interest coupons appertaining
thereto shall be governed by and construed in accordance with the laws of the
Commonwealth of Virginia.
Section 16.06. Officers' Certificate and Opinion of Counsel.
--------------------------------------------
Upon any application or demand by the Association to the Trustee to take
any action under any of the provisions of this Indenture, the Association shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent provided for in this Indenture relating to the proposed action have
been complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent have been complied with, except that in
the case of any such application or demand as to which the furnishing of such
documents is specifically required by any provisions of this Indenture relating
to such particular application or demand, no additional certificate or opinion
need be furnished.
44
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Each certificate or opinion provided for in this Indenture and delivered to
the Trustee with respect to compliance with a condition or covenant provided for
in this Indenture shall include (1) a statement that the person making such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Section 16.07. Due Date on Saturday, Sunday or Legal Holiday.
---------------------------------------------
In any case where the date of maturity of interest on or principal of the
Notes or the date fixed for redemption of any Note shall be a Saturday or Sunday
or shall, in the County of Henrico, Commonwealth of Virginia, be a legal holiday
or a day on which banking institutions are authorized by law to close, then
payment of interest or principal need not be made on such date, but in any such
case may be made on the next succeeding day not a Saturday, Sunday or a legal
holiday or a day on which banking institutions are authorized by law to close
with the same force and effect as if made on the date of maturity or the date
fixed for redemption, and no interest shall accrue for the period after such
date.
Section 16.08. Conflict with Trust Indenture Act.
---------------------------------
This Indenture is subject to the Trust Indenture Act and if any provision
hereof limits, qualifies or conflicts with the Trust Indenture Act, the Trust
Indenture Act shall control. Whether or not this Indenture is required to be
qualified under the Trust Indenture Act, the provisions of the Trust Indenture
Act required to be included in an indenture in order for such indenture to be so
qualified shall be deemed to be included in this Indenture with the same effect
as if such provisions were set forth herein and any provisions hereof which may
not be included in an indenture which is so qualified shall be deemed to be
deleted or modified to the extent such provisions would be required to be
deleted or modified in an indenture so qualified.
Section 16.09. Indenture Executed in Counterparts.
----------------------------------
This Indenture may be executed in any number of counterparts, each of which
shall be an original; but such counterparts shall together constitute but one
and the same instrument.
First Union National Bank hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions hereinabove set forth.
45
<PAGE>
IN WITNESS WHEREOF, Southern States Cooperative, Incorporated, has caused
this Indenture to be signed and acknowledged by its Senior Vice President and
Chief Financial Officer, and its corporate seal to be affixed hereunto, and the
same to be attested by its Secretary; and First Union National Bank, has caused
this Indenture to be signed and acknowledged by one of its Vice Presidents, and
its corporate seal to be affixed hereunto, and the same to be attested by its
Secretary or Assistant Secretary. Executed and delivered in the County of
Henrico, Commonwealth of Virginia, on ____________, 2000.
(Corporate Seal) SOUTHERN STATES COOPERATIVE, INCORPORATED
--------------------------------------
Name:
Title:
(Corporate Seal) FIRST UNION NATIONAL BANK,
--------------------------------------
Name:
Title:
46
<PAGE>
COMMONWEALTH OF VIRGINIA
COUNTY OF
On this _______ day of __________, 2000, before me personally appeared
___________________ to be personally known, who, being by me duly sworn, did say
that he is the ____________________of Southern States Cooperative, Incorporated,
County of Henrico, Virginia, that the seal affixed to this instrument is the
corporate seal of said corporation and that the said instrument was signed and
sealed in behalf of said corporation by authority of its Board of Directors, and
said __________________________ acknowledged said instrument to be the free act
and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal at my office in ______________, Virginia, the day and year last above
written.
(Notarial Seal)
My commission expires:
COMMONWEALTH OF VIRGINIA
COUNTY OF
On this _________ day of _______________, 2000, before me personally
appeared ______________________, to me personally known, who, being by me duly
sworn, did say that he is a Vice President assigned to the Trust Division of
First Union National Bank, that the seal affixed to this instrument is the
corporate seal of said corporation, and that the said instrument was signed and
sealed in behalf of said corporation by authority of its board of directors and
said ______________________ acknowledged said instrument to be the free act and
deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal at my office in ______________, Virginia, the day and year last above
written.
(Notarial Seal)
My commission expires
47
<PAGE>
EXHIBIT A
---------
NOTE NUMBER: 6MOA-_______________
PRINCIPAL AMOUNT: $_________________
SOUTHERN STATES COOPERATIVE, INCORPORATED
Richmond, Virginia 23230
SENIOR NOTE,
SIX-MONTH, SERIES A
(Standard Certificate)
- ------------------------------------- -------------------------------------
Name Date of Original Issuance
- ------------------------------------- -------------------------------------
Street or P.O. Box Maturity Date
- ------------------------------------- -------------------------------------
City State Interest Rate
THIS NOTE IS NON-NEGOTIABLE
Southern States Cooperative, Incorporated, a Virginia agricultural
cooperative association ("Southern States," which term includes any successor
corporation under the Indenture referred to herein), for value received, hereby
promises to pay to the owner named above or registered assigns (the "Holder"),
the principal amount shown above on the Maturity Date specified above (except to
the extent redeemed or repaid prior to the Maturity Date), and to pay interest
thereon from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance of this Note (the
"Date of Original Issuance") at the interest rate per annum specified above (the
"Interest Rate"), computed on the basis of a 365-day year, until the principal
hereof is paid or duly made available for payment, and to pay interest on
overdue principal and, to the extent permitted by law, overdue interest, at the
Interest Rate. Payment of principal and interest shall be in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts. Payment will be made
at maturity only upon presentation and surrender of this Note.
Interest is payable at maturity or at the date of redemption if redeemed
prior to maturity. If the Maturity Date (or date of redemption or repayment) or
an interest payment date falls on a
A-1
<PAGE>
day which is not a business day, principal or interest payable with respect to
such Maturity Date (or date of redemption or repayment) or interest payment date
will be paid on the next succeeding business day with the same force and effect
as if made on such Maturity Date (or date of redemption or repayment) or
interest payment date, as the case may be, and no interest shall accrue on the
amount so payable for the period from and after such Maturity Date (or any date
of redemption or repayment) or interest payment date.
This Note shall not be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by the Trustee under
the Indenture mentioned on the reverse side hereof.
ISSUED THIS DAY OF , 20__
ATTEST: SOUTHERN STATES COOPERATIVE,
INCORPORATED
SECRETARY_____________________ BY PRESIDENT ______________________
Trustee's Certificate of Authentication
This is one of the Notes described in the Indenture mentioned on the back
hereof.
FIRST UNION NATIONAL BANK
As Trustee By_____________________________________________
Authorized Signature
A-2
<PAGE>
REVERSE SIDE OF SIX-MONTH, SERIES A
(Standard Certificate)
This Note is one of a duly authorized issue of securities (hereinafter
called the "Notes") of Southern States issued and to be issued under an
Indenture dated as of __________, 2000 (herein called the "Indenture") between
Southern States and First Union National Bank, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), to
which the Indenture and all indentures supplemental thereto and the Officers'
Certificate (as defined in the Indenture) setting forth the terms of this series
of Notes reference is hereby made for a statement of the respective rights,
limitation of rights, duties and immunities thereunder of Southern States, the
Trustee and the Holders and the terms upon which the Notes are, and are to be,
authenticated and delivered. The Notes of this series may bear different dates,
mature at different times, bear interest at different rates, be subject to
different redemption or repayment provisions and may otherwise vary and are
entitled to the benefits of the Indenture.
Any interest which is payable, but is not punctually paid or duly provided
for, on any interest payment date and, to the extent permitted by law, interest
on such defaulted interest at the Interest Rate (such defaulted interest and
interest thereon herein collectively called "Defaulted Interest") will not be
payable to the Holder on the applicable record date; and such Defaulted Interest
may be paid by Southern States, at its election in each case, in the time and
manner as provided for in the Indenture.
Payment of the principal of and interest on this Note will be made at the
office or agency of [________] in [_________, ___________]; provided, however,
that at the option of the Holder, payment may be made by check mailed to the
address of the person entitled thereto as such address will appear in the
Register or by electronic funds transfer or similar means to an account
maintained by the person entitled thereto as specified in the Register.
If an Event of Default (as defined in the Indenture) with respect to the
Notes shall occur and be continuing, the Trustee or the Holders of not less than
a majority in principal amount of the outstanding Notes due and payable in the
manner and with the effect and subject to the conditions provided in the
Indenture. Upon certain events of bankruptcy, insolvency or reorganization of
Southern States, the principal of and accrued interest on all of the Notes shall
become due and payable without any declaration by the Trustee or the Holders.
The Indenture contains provisions permitting Southern States and the
Trustee to enter into one or more supplemental indentures under certain
situations without the consent of the Holders of any of the Notes. The Indenture
permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of Southern States and the rights
of the Holders of the Notes of each series under the Indenture to be affected at
any time by Southern States and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Outstanding Notes (as defined in
the Indenture) of each series affected thereby. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Outstanding Notes of each series under the Indenture, on
behalf of the Holders of all Notes of such series, to waive compliance by
Southern States with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Note shall be conclusive
A-3
<PAGE>
and binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not notation of such consent or waiver is made upon this
Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of Southern States, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, places, and rate, and in the coin or currency, herein prescribed.
Subject to the conditions hereinafter set forth, this Note may be redeemed
without penalty at the option of the Holder.
(1) Redemption will be made in the case of death of Holder upon
written request and delivery of satisfactory proof of death and other
documentation and in accordance with applicable laws.
(2) In addition, if this Note is held in an Individual Retirement
Account (an "IRA") established under Section 408 of the Internal
Revenue Code of 1986, as amended (the "IRC"), Southern States will
redeem this Note, upon written request, to the extent necessary to
satisfy mandatory withdrawals from the IRA which are required by the
IRC. Such redemption will be made only upon sufficient proof to
Southern States that a mandatory withdrawal from the IRA is required.
The Holder may redeem this Note prior to maturity for reasons other than death
or IRA withdrawal subject to a penalty. The penalty will be equal to three
months interest.
Redemption prior to maturity will be made, subject to the aforementioned
conditions, upon the surrender of this Note, properly endorsed and accompanied
by written requests for early redemption to Southern States. Redemption prior to
maturity will be made at the face value of this Note plus accrued interest to
the date of redemption. Amounts available for redemption prior to maturity are
not set aside in a separate fund.
As provided in the Indenture, and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Register upon
surrender of this Note for registration of transfer at the office or agency of
Southern States, in Richmond, Virginia, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to Southern States duly
executed by the Holder or by his attorney duly authorized in writing, and
thereupon one or more new Notes of this series having the same terms as this
Note, of authorized denominations, having the same terms and conditions and for
the same aggregate principal amount, will be issued to the designated transferee
or transferees.
The Notes are issuable only in registered form, without coupons. As
provided in the Indenture, and subject to certain limitations therein set forth,
this Note is exchangeable for a like aggregate principal amount of Notes having
the same terms as this Note of different authorized denominations, as requested
by the Holder surrendering the same.
A-4
<PAGE>
No service charge will be made for any such registration of transfer or
exchange of Notes, but Southern States may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
Prior to due presentment of this Note for registration for transfer,
Southern States, the Trustee and any agent of Southern States or the Trustee may
treat the person in whose name this Note is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and neither Southern States,
the Trustee nor any such agent shall be affected by notice to the contrary.
All such terms used in this Note which are defined in the Indenture shall
have the meaning designated to them in the Indenture and all references in the
Indenture to "Security" or "Securities" shall be deemed to include the Notes.
For value received, I, we and each of us hereby sell, assign and transfer
the within Note and the indebtedness evidenced thereby to
----------------------------------
Name
------------------------------------
Address
THIS ASSIGNMENT WILL BECOME EFFECTIVE ONLY WHEN MADE AND ENTERED ON THE
BOOKS OF SOUTHERN STATES COOPERATIVE, INCORPORATED.
Date:________________ Signed: ______________________
Endorsement: ______________________
A-5
<PAGE>
EXHIBIT B
---------
NOTE NUMBER: 6MOB-_______________
PRINCIPAL AMOUNT: $_________________
SOUTHERN STATES COOPERATIVE, INCORPORATED
Richmond, Virginia 23230
SENIOR NOTE,
SIX-MONTH, SERIES B
(Large Certificate)
- -------------------------------------- --------------------------------------
Name Date of Original Issuance
- -------------------------------------- --------------------------------------
Street or P.O. Box Maturity Date
- -------------------------------------- --------------------------------------
City State Interest Rate
THIS NOTE IS NON-NEGOTIABLE
Southern States Cooperative, Incorporated, a Virginia agricultural
cooperative association ("Southern States," which term includes any successor
corporation under the Indenture referred to herein), for value received, hereby
promises to pay to the owner named above or registered assigns (the "Holder"),
the principal amount shown above on the Maturity Date specified above (except to
the extent redeemed or repaid prior to the Maturity Date), and to pay interest
thereon from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance of this Note (the
"Date of Original Issuance") at the interest rate per annum specified above (the
"Interest Rate"), computed on the basis of a 365-day year, until the principal
hereof is paid or duly made available for payment, and to pay interest on
overdue principal and, to the extent permitted by law, overdue interest, at the
Interest Rate. Payment of principal and interest shall be in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts. Payment will be made
at maturity only upon presentation and surrender of this Note.
Interest is payable at maturity or at the date of redemption if redeemed
prior to maturity. If the Maturity Date (or date of redemption or repayment) or
an interest payment date falls on a
B-1
<PAGE>
day which is not a business day, principal or interest payable with respect to
such Maturity Date (or date of redemption or repayment) or interest payment date
will be paid on the next succeeding business day with the same force and effect
as if made on such Maturity Date (or date of redemption or repayment) or
interest payment date, as the case may be, and no interest shall accrue on the
amount so payable for the period from and after such Maturity Date (or any date
of redemption or repayment) or interest payment date.
This Note shall not be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by the Trustee under
the Indenture mentioned on the reverse side hereof.
ISSUED THIS DAY OF , 20__
ATTEST: SOUTHERN STATES COOPERATIVE,
INCORPORATED
SECRETARY _______________________ BY PRESIDENT___________________
Trustee's Certificate of Authentication
This is one of the Notes described in the Indenture mentioned on the back
hereof.
FIRST UNION NATIONAL BANK
As Trustee By_____________________________________
Authorized Signature
B-2
<PAGE>
REVERSE SIDE OF SIX-MONTH, SERIES B
(Large Certificate)
This Note is one of a duly authorized issue of securities (hereinafter
called the "Notes") of Southern States issued and to be issued under an
Indenture dated as of __________, 2000 (herein called the "Indenture") between
Southern States and First Union National Bank, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), to
which the Indenture and all indentures supplemental thereto and the Officers'
Certificate (as defined in the Indenture) setting forth the terms of this series
of Notes reference is hereby made for a statement of the respective rights,
limitation of rights, duties and immunities thereunder of Southern States, the
Trustee and the Holders and the terms upon which the Notes are, and are to be,
authenticated and delivered. The Notes of this series may bear different dates,
mature at different times, bear interest at different rates, be subject to
different redemption or repayment provisions and may otherwise vary and are
entitled to the benefits of the Indenture.
Any interest which is payable, but is not punctually paid or duly provided
for, on any interest payment date and, to the extent permitted by law, interest
on such defaulted interest at the Interest Rate (such defaulted interest and
interest thereon herein collectively called "Defaulted Interest") will not be
payable to the Holder on the applicable record date; and such Defaulted Interest
may be paid by Southern States, at its election in each case, in the time and
manner as provided for in the Indenture.
Payment of the principal of and interest on this Note will be made at the
office or agency of [________] in [_________, ___________]; provided, however,
that at the option of the Holder payment may be made by check mailed to the
address of the person entitled thereto as such address will appear in the
Register or by electronic funds transfer or similar means to an account
maintained by the person entitled thereto as specified in the Register.
If an Event of Default (as defined in the Indenture) with respect to the
Notes shall occur and be continuing, the Trustee or the Holders of not less than
a majority in principal amount of the outstanding Notes due and payable in the
manner and with the effect and subject to the conditions provided in the
Indenture. Upon certain events of bankruptcy, insolvency or reorganization of
Southern States, the principal of and accrued interest on all of the Notes shall
become due and payable without any declaration by the Trustee or the Holders.
The Indenture contains provisions permitting Southern States and the
Trustee to enter into one or more supplemental indentures under certain
situations without the consent of the Holders of any of the Notes. The Indenture
permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of Southern States and the rights
of the Holders of the Notes of each series under the Indenture to be affected at
any time by Southern States and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Outstanding Notes (as defined in
the Indenture) of each series affected thereby. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Outstanding Notes of each series under the Indenture, on
behalf of the Holders of all Notes of such series, to waive compliance by
Southern States with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Note shall be conclusive
B-3
<PAGE>
and binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not notation of such consent or waiver is made upon this
Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of Southern States, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, places, and rate, and in the coin or currency, herein prescribed.
Subject to the conditions hereinafter set forth, this Note may be redeemed
without penalty at the option of the Holder.
(1) Redemption will be made in the case of death of Holder upon
written request and delivery of satisfactory proof of death and
other documentation and in accordance with applicable laws.
(2) In addition, if this Note is held in an Individual Retirement
Account (an "IRA") established under Section 408 of the Internal
Revenue Code of 1986, as amended (the "IRC"), Southern States
will redeem this Note, upon written request, to the extent
necessary to satisfy mandatory withdrawals from the IRA which are
required by the IRC. Such redemption will be made only upon
sufficient proof to Southern States that a mandatory withdrawal
from the IRA is required.
The Holder may redeem this Note prior to maturity for reasons other than death
or IRA withdrawal subject to a penalty. The penalty will be equal to three
months interest.
Redemption prior to maturity will be made, subject to the aforementioned
conditions, upon the surrender of this Note, properly endorsed and accompanied
by written requests for early redemption to Southern States. Redemption prior to
maturity will be made at the face value of this Note plus accrued interest to
the date of redemption. Amounts available for redemption prior to maturity are
not set aside in a separate fund.
As provided in the Indenture, and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Register upon
surrender of this Note for registration of transfer at the office or agency of
Southern States, in Richmond, Virginia, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to Southern States duly
executed by the Holder or by his attorney duly authorized in writing, and
thereupon one or more new Notes of this series having the same terms as this
Note, of authorized denominations, having the same terms and conditions and for
the same aggregate principal amount, will be issued to the designated transferee
or transferees.
The Notes are issuable only in registered form, without coupons. As
provided in the Indenture, and subject to certain limitations therein set forth,
this Note is exchangeable for a like aggregate principal amount of Notes having
the same terms as this Note of different authorized denominations, as requested
by the Holder surrendering the same.
B-4
<PAGE>
No service charge will be made for any such registration of transfer or
exchange of Notes, but Southern States may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
Prior to due presentment of this Note for registration for transfer,
Southern States, the Trustee and any agent of Southern States or the Trustee may
treat the person in whose name this Note is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and neither Southern States,
the Trustee nor any such agent shall be affected by notice to the contrary.
All such terms used in this Note which are defined in the Indenture shall
have the meaning designated to them in the Indenture and all references in the
Indenture to "Security" or "Securities" shall be deemed to include the Notes.
For value received, I, we and each of us hereby sell, assign and transfer
the within Note and the indebtedness evidenced thereby to
----------------------------------
Name
------------------------------------
Address
THIS ASSIGNMENT WILL BECOME EFFECTIVE ONLY WHEN MADE AND ENTERED ON THE
BOOKS OF SOUTHERN STATES COOPERATIVE, INCORPORATED.
Date:________________ Signed: _______________________
Endorsement: _______________________
B-5
<PAGE>
EXHIBIT C
---------
NOTE NUMBER: 6MOC-_____________
PRINCIPAL AMOUNT: $_________________
SOUTHERN STATES COOPERATIVE, INCORPORATED
Richmond, Virginia 23230
SENIOR NOTE,
SIX-MONTH, SERIES C
(Jumbo Certificate)
_____________________________________ _____________________________________
Name Date of Original Issuance
_____________________________________ _____________________________________
Street or P. O. Box Maturity Date
_____________________________________ _____________________________________
City State Interest Rate
THIS NOTE IS NON-NEGOTIABLE
Southern States Cooperative, Incorporated, a Virginia agricultural
cooperative association ("Southern States," which term includes any successor
corporation under the Indenture referred to herein), for value received, hereby
promises to pay to the owner named above or registered assigns (the "Holder"),
the principal amount shown above on the Maturity Date specified above (except to
the extent redeemed or repaid prior to the Maturity Date), and to pay interest
thereon from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance of this Note (the
"Date of Original Issuance") at the interest rate per annum specified above (the
"Interest Rate"), computed on the basis of a 365-day year, until the principal
hereof is paid or duly made available for payment, and to pay interest on
overdue principal and, to the extent permitted by law, overdue interest, at the
Interest Rate. Payment of principal and interest shall be in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts. Payment will be made
at maturity only upon presentation and surrender of this Note.
Interest is payable at maturity or at the date of redemption if redeemed
prior to maturity. If the Maturity Date (or date of redemption or repayment) or
an interest payment date falls on a
C-1
<PAGE>
day which is not a business day, principal or interest payable with respect to
such Maturity Date (or date of redemption or repayment) or interest payment date
will be paid on the next succeeding business day with the same force and effect
as if made on such Maturity Date (or date of redemption or repayment) or
interest payment date, as the case may be, and no interest shall accrue on the
amount so payable for the period from and after such Maturity Date (or any date
of redemption or repayment) or interest payment date.
This Note shall not be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by the Trustee under
the Indenture mentioned on the reverse side hereof.
ISSUED THIS DAY OF , 20__
ATTEST: SOUTHERN STATES COOPERATIVE, INCORPORATED
SECRETARY ______________________ BY PRESIDENT __________________________
Trustee's Certificate of Authentication
This is one of the Notes described in the Indenture mentioned on the back
hereof.
FIRST UNION NATIONAL BANK
As Trustee By __________________________
Authorized Signature
C-2
<PAGE>
REVERSE SIDE OF SIX-MONTH, SERIES C
(Jumbo Certificate)
This Note is one of a duly authorized issue of securities (hereinafter
called the "Notes") of Southern States issued and to be issued under an
Indenture dated as of __________, 2000 (herein called the "Indenture") between
Southern States and First Union National Bank, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), to
which the Indenture and all indentures supplemental thereto and the Officers'
Certificate (as defined in the Indenture) setting forth the terms of this series
of Notes reference is hereby made for a statement of the respective rights,
limitation of rights, duties and immunities thereunder of Southern States, the
Trustee and the Holders and the terms upon which the Notes are, and are to be,
authenticated and delivered. The Notes of this series may bear different dates,
mature at different times, bear interest at different rates, be subject to
different redemption or repayment provisions and may otherwise vary and are
entitled to the benefits of the Indenture.
Any interest which is payable, but is not punctually paid or duly provided
for, on any interest payment date and, to the extent permitted by law, interest
on such defaulted interest at the Interest Rate (such defaulted interest and
interest thereon herein collectively called "Defaulted Interest") will not be
payable to the Holder on the applicable record date; and such Defaulted Interest
may be paid by Southern States, at its election in each case, in the time and
manner as provided for in the Indenture.
Payment of the principal of and interest on this Note will be made at the
office or agency of [________] in [_________, ___________]; provided, however,
that at the option of the Holder payment may be made by check mailed to the
address of the person entitled thereto as such address will appear in the
Register or by electronic funds transfer or similar means to an account
maintained by the person entitled thereto as specified in the Register.
If an Event of Default (as defined in the Indenture) with respect to the
Notes shall occur and be continuing, the Trustee or the Holders of not less than
a majority in principal amount of the outstanding Notes due and payable in the
manner and with the effect and subject to the conditions provided in the
Indenture. Upon certain events of bankruptcy, insolvency or reorganization of
Southern States, the principal of and accrued interest on all of the Notes shall
become due and payable without any declaration by the Trustee or the Holders.
The Indenture contains provisions permitting Southern States and the
Trustee to enter into one or more supplemental indentures under certain
situations without the consent of the Holders of any of the Notes. The Indenture
permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of Southern States and the rights
of the Holders of the Notes of each series under the Indenture to be affected at
any time by Southern States and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Outstanding Notes (as defined in
the Indenture) of each series affected thereby. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Outstanding Notes of each series under the Indenture, on
behalf of the Holders of all Notes of such series, to waive compliance by
Southern States with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Note shall be conclusive
C-3
<PAGE>
and binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not notation of such consent or waiver is made upon this
Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of Southern States, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, places, and rate, and in the coin or currency, herein prescribed.
Subject to the conditions hereinafter set forth, this Note may be redeemed
without penalty at the option of the Holder.
(1) Redemption will be made in the case of death of Holder upon
written request and delivery of satisfactory proof of death and
other documentation and in accordance with applicable laws.
(2) In addition, if this Note is held in an Individual Retirement
Account (an "IRA") established under Section 408 of the Internal
Revenue Code of 1986, as amended (the "IRC"), Southern States
will redeem this Note, upon written request, to the extent
necessary to satisfy mandatory withdrawals from the IRA which are
required by the IRC. Such redemption will be made only upon
sufficient proof to Southern States that a mandatory withdrawal
from the IRA is required.
The Holder may redeem this Note prior to maturity for reasons other than death
or IRA withdrawal subject to a penalty. The penalty will be equal to three
months interest.
Redemption prior to maturity will be made, subject to the aforementioned
conditions, upon the surrender of this Note, properly endorsed and accompanied
by written requests for early redemption to Southern States. Redemption prior to
maturity will be made at the face value of this Note plus accrued interest to
the date of redemption. Amounts available for redemption prior to maturity are
not set aside in a separate fund.
As provided in the Indenture, and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Register upon
surrender of this Note for registration of transfer at the office or agency of
Southern States, in Richmond, Virginia, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to Southern States duly
executed by the Holder or by his attorney duly authorized in writing, and
thereupon one or more new Notes of this series having the same terms as this
Note, of authorized denominations, having the same terms and conditions and for
the same aggregate principal amount, will be issued to the designated transferee
or transferees.
The Notes are issuable only in registered form, without coupons. As
provided in the Indenture, and subject to certain limitations therein set forth,
this Note is exchangeable for a like aggregate principal amount of Notes having
the same terms as this Note of different authorized denominations, as requested
by the Holder surrendering the same.
C-4
<PAGE>
No service charge will be made for any such registration of transfer or
exchange of Notes, but Southern States may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
Prior to due presentment of this Note for registration for transfer,
Southern States, the Trustee and any agent of Southern States or the Trustee may
treat the person in whose name this Note is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and neither Southern States,
the Trustee nor any such agent shall be affected by notice to the contrary.
All such terms used in this Note which are defined in the Indenture shall
have the meaning designated to them in the Indenture and all references in the
Indenture to "Security" or "Securities" shall be deemed to include the Notes.
For value received, I, we and each of us hereby sell, assign and transfer
the within Note and the indebtedness evidenced thereby to
----------------------------------
Name
------------------------------------
Address
THIS ASSIGNMENT WILL BECOME EFFECTIVE ONLY WHEN MADE AND ENTERED ON THE
BOOKS OF SOUTHERN STATES COOPERATIVE, INCORPORATED.
Date:________________ Signed: _______________________
Endorsement: _______________________
C-5
<PAGE>
EXHIBIT D
---------
NOTE NUMBER: 1YRD-_______________
PRINCIPAL AMOUNT: $________________
SOUTHERN STATES COOPERATIVE, INCORPORATED
Richmond, Virginia 23230
SENIOR NOTE,
ONE-YEAR, SERIES D
(Standard Certificate)
_________________________________ __________________________________
Name Date of Original Issuance
_________________________________ __________________________________
Street or P.O. Box Maturity Date
_________________________________ __________________________________
City State Interest Rate
THIS NOTE IS NON-NEGOTIABLE
Southern States Cooperative, Incorporated, a Virginia agricultural
cooperative association ("Southern States," which term includes any successor
corporation under the Indenture referred to herein), for value received, hereby
promises to pay to the owner named above or registered assigns (the "Holder"),
the principal amount shown above on the Maturity Date specified above (except to
the extent redeemed or repaid prior to the Maturity Date), and to pay interest
thereon from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance of this Note (the
"Date of Original Issuance") at the interest rate per annum specified above (the
"Interest Rate"), computed on the basis of a 365-day year, until the principal
hereof is paid or duly made available for payment, and to pay interest on
overdue principal and, to the extent permitted by law, overdue interest, at the
Interest Rate. Payment of principal and interest shall be in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts. Payment will be made
at maturity only upon presentation and surrender of this Note.
Interest is payable at the option of the purchaser, made at the time of
original issuance in one of the following ways: (i) quarterly on January 1,
April 1, July 1, and October 1 to Holders
D-1
<PAGE>
of record on the last preceding December 15, March 15, June 15, and September 15
respectively (or, in the case of the first interest payment date, if originally
issued between the record date and the payment date, to the Holder on the Date
of Original Issuance except that in the case of original issuance made on or
after the 15th of March, June, September and December and prior to the first day
of the next succeeding month, interest from the date of original issuance
through the end of the month in which the purchase was made will be paid at the
time of and together with the next quarterly interest payment); or (ii) at
maturity or at the date of redemption if redeemed prior to maturity, compounded
quarterly, on March 31, June 30, September 30 and December 31 at the Interest
Rate. A Holder may change his election regarding the method of interest payment
at any time by providing written notice to Southern States. Southern States
shall have the right at any time by notice to the Holder to terminate any
obligation to continue retaining the interest of any Holder. Such termination
shall be effective as of the opening of business on the day following the first
interest compounding date after such notice is mailed to the Holder and the
Holder will be paid all interest then accrued and unpaid to the Holder on the
effective date. If the Maturity Date (or date of redemption or repayment) or an
interest payment date falls on a day which is not a business day, principal or
interest payable with respect to such Maturity Date (or date of redemption or
repayment) or interest payment date will be paid on the next succeeding business
day with the same force and effect as if made on such Maturity Date (or date of
redemption or repayment) or interest payment date, as the case may be, and no
interest shall accrue on the amount so payable for the period from and after
such Maturity Date (or any date of redemption or repayment) or interest payment
date.
This Note shall not be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by the Trustee under
the Indenture mentioned on the reverse side hereof.
ISSUED THIS DAY OF , 20__
ATTEST: SOUTHERN STATES COOPERATIVE, INCORPORATED
SECRETARY _________________________ BY PRESIDENT ____________________________
Trustee's Certificate of Authentication
This is one of the Notes described in the Indenture mentioned on the back
hereof.
FIRST UNION NATIONAL BANK
As Trustee By _______________________________
Authorized Signature
D-2
<PAGE>
REVERSE SIDE OF ONE-YEAR, SERIES D
(Standard Certificate)
This Note is one of a duly authorized issue of securities (hereinafter
called the "Notes") of Southern States issued and to be issued under an
Indenture dated as of __________, 2000 (herein called the "Indenture") between
Southern States and First Union National Bank, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), to
which the Indenture and all indentures supplemental thereto and the Officers'
Certificate (as defined in the Indenture) setting forth the terms of this series
of Notes reference is hereby made for a statement of the respective rights,
limitation of rights, duties and immunities thereunder of Southern States, the
Trustee and the Holders and the terms upon which the Notes are, and are to be,
authenticated and delivered. The Notes of this series may bear different dates,
mature at different times, bear interest at different rates, be subject to
different redemption or repayment provisions and may otherwise vary and are
entitled to the benefits of the Indenture.
Any interest which is payable, but is not punctually paid or duly provided
for, on any interest payment date and, to the extent permitted by law, interest
on such defaulted interest at the Interest Rate (such defaulted interest and
interest thereon herein collectively called "Defaulted Interest") will not be
payable to the Holder on the applicable record date; and such Defaulted Interest
may be paid by Southern States, at its election in each case, in the time and
manner as provided for in the Indenture.
Payment of the principal of and interest on this Note will be made at the
office or agency of [________] in [_________, ___________]; provided, however,
that at the option of the Holder payment may be made by check mailed to the
address of the person entitled thereto as such address will appear in the
Register or by electronic funds transfer or similar means to an account
maintained by the person entitled thereto as specified in the Register.
If an Event of Default (as defined in the Indenture) with respect to the
Notes shall occur and be continuing, the Trustee or the Holders of not less than
a majority in principal amount of the outstanding Notes due and payable in the
manner and with the effect and subject to the conditions provided in the
Indenture. Upon certain events of bankruptcy, insolvency or reorganization of
Southern States, the principal of and accrued interest on all of the Notes shall
become due and payable without any declaration by the Trustee or the Holders.
The Indenture contains provisions permitting Southern States and the
Trustee to enter into one or more supplemental indentures under certain
situations without the consent of the Holders of any of the Notes. The Indenture
permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of Southern States and the rights
of the Holders of the Notes of each series under the Indenture to be affected at
any time by Southern States and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Outstanding Notes (as defined in
the Indenture) of each series affected thereby. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Outstanding Notes of each series under the Indenture, on
behalf of the Holders of all Notes of such series, to waive compliance by
Southern States with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Note shall be conclusive
D-3
<PAGE>
and binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not notation of such consent or waiver is made upon this
Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of Southern States, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, places, and rate, and in the coin or currency, herein prescribed.
Subject to the conditions hereinafter set forth, this Note may be redeemed
without penalty at the option of the Holder.
(1) Redemption will be made in the case of death of Holder upon
written request and delivery of satisfactory proof of death and
other documentation and in accordance with applicable laws.
(2) In addition, if this Note is held in an Individual Retirement
Account (an "IRA") established under Section 408 of the Internal
Revenue Code of 1986, as amended (the "IRC"), Southern States
will redeem this Note, upon written request, to the extent
necessary to satisfy mandatory withdrawals from the IRA which are
required by the IRC. Such redemption will be made only upon
sufficient proof to Southern States that a mandatory withdrawal
from the IRA is required.
The Holder may redeem this Note prior to maturity for reasons other than death
or IRA withdrawal subject to a penalty. The penalty will be equal to three
months interest.
Redemption prior to maturity will be made, subject to the aforementioned
conditions, upon the surrender of this Note, properly endorsed and accompanied
by written requests for early redemption to Southern States. Redemption prior to
maturity will be made at the face value of this Note plus accrued interest to
the date of redemption. Amounts available for redemption prior to maturity are
not set aside in a separate fund.
As provided in the Indenture, and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Register upon
surrender of this Note for registration of transfer at the office or agency of
Southern States, in Richmond, Virginia, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to Southern States duly
executed by the Holder or by his attorney duly authorized in writing, and
thereupon one or more new Notes of this series having the same terms as this
Note, of authorized denominations, having the same terms and conditions and for
the same aggregate principal amount, will be issued to the designated transferee
or transferees.
The Notes are issuable only in registered form, without coupons. As
provided in the Indenture, and subject to certain limitations therein set forth,
this Note is exchangeable for a like aggregate principal amount of Notes having
the same terms as this Note of different authorized denominations, as requested
by the Holder surrendering the same.
D-4
<PAGE>
No service charge will be made for any such registration of transfer or
exchange of Notes, but Southern States may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
Prior to due presentment of this Note for registration for transfer,
Southern States, the Trustee and any agent of Southern States or the Trustee may
treat the person in whose name this Note is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and neither Southern States,
the Trustee nor any such agent shall be affected by notice to the contrary.
All such terms used in this Note which are defined in the Indenture shall
have the meaning designated to them in the Indenture and all references in the
Indenture to "Security" or "Securities" shall be deemed to include the Notes.
For value received, I, we and each of us hereby sell, assign and transfer
the within Note and the indebtedness evidenced thereby to
----------------------------------
Name
------------------------------------
Address
THIS ASSIGNMENT WILL BECOME EFFECTIVE ONLY WHEN MADE AND ENTERED ON THE
BOOKS OF SOUTHERN STATES COOPERATIVE, INCORPORATED.
Date:________________ Signed: _______________________
Endorsement: _______________________
D-5
<PAGE>
EXHIBIT E
---------
NOTE NUMBER: 1YRE-_______________
PRINCIPAL AMOUNT: $_________________
SOUTHERN STATES COOPERATIVE, INCORPORATED
Richmond, Virginia 23230
SENIOR NOTE,
ONE-YEAR, SERIES E
(Large Certificate)
_____________________________________ _________________________________
Name Date of Original Issuance
_____________________________________ _________________________________
Street or P.O. Box Maturity Date
_____________________________________ _________________________________
City State Interest Rate
THIS NOTE IS NON-NEGOTIABLE
Southern States Cooperative, Incorporated, a Virginia agricultural
cooperative association ("Southern States," which term includes any successor
corporation under the Indenture referred to herein), for value received, hereby
promises to pay to the owner named above or registered assigns (the "Holder"),
the principal amount shown above on the Maturity Date specified above (except to
the extent redeemed or repaid prior to the Maturity Date), and to pay interest
thereon from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance of this Note (the
"Date of Original Issuance") at the interest rate per annum specified above (the
"Interest Rate"), computed on the basis of a 365-day year, until the principal
hereof is paid or duly made available for payment, and to pay interest on
overdue principal and, to the extent permitted by law, overdue interest, at the
Interest Rate. Payment of principal and interest shall be in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts. Payment will be made
at maturity only upon presentation and surrender of this Note.
Interest is payable at the option of the purchaser, made at the time of
original issuance in one of the following ways: (i) quarterly on January 1,
April 1, July 1, and October 1 to Holders
E-1
<PAGE>
of record on the last preceding December 15, March 15, June 15, and September 15
respectively (or, in the case of the first interest payment date, if originally
issued between the record date and the payment date, to the Holder on the Date
of Original Issuance except that in the case of original issuance made on or
after the 15th of March, June, September and December and prior to the first day
of the next succeeding month, interest from the date of original issuance
through the end of the month in which the purchase was made will be paid at the
time of and together with the next quarterly interest payment); or (ii) at
maturity or at the date of redemption if redeemed prior to maturity, compounded
quarterly, on March 31, June 30, September 30 and December 31 at the Interest
Rate. A Holder may change his election regarding the method of interest payment
at any time by providing written notice to Southern States. Southern States
shall have the right at any time by notice to the Holder to terminate any
obligation to continue retaining the interest of any Holder. Such termination
shall be effective as of the opening of business on the day following the first
interest compounding date after such notice is mailed to the Holder and the
Holder will be paid all interest then accrued and unpaid to the Holder on the
effective date. If the Maturity Date (or date of redemption or repayment) or an
interest payment date falls on a day which is not a business day, principal or
interest payable with respect to such Maturity Date (or date of redemption or
repayment) or interest payment date will be paid on the next succeeding business
day with the same force and effect as if made on such Maturity Date (or date of
redemption or repayment) or interest payment date, as the case may be, and no
interest shall accrue on the amount so payable for the period from and after
such Maturity Date (or any date of redemption or repayment) or interest payment
date.
This Note shall not be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by the Trustee under
the Indenture mentioned on the reverse side hereof.
ISSUED THIS DAY OF , 20__
ATTEST: SOUTHERN STATES COOPERATIVE, INCORPORATED
SECRETARY _________________________ BY PRESIDENT ____________________________
Trustee's Certificate of Authentication
This is one of the Notes described in the Indenture mentioned on the back
hereof.
FIRST UNION NATIONAL BANK
As Trustee By __________________________________
Authorized Signature
E-2
<PAGE>
REVERSE SIDE OF ONE-YEAR, SERIES E
(Large Certificate)
This Note is one of a duly authorized issue of securities (hereinafter
called the "Notes") of Southern States issued and to be issued under an
Indenture dated as of __________, 2000 (herein called the "Indenture") between
Southern States and First Union National Bank, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), to
which the Indenture and all indentures supplemental thereto and the Officers'
Certificate (as defined in the Indenture) setting forth the terms of this series
of Notes reference is hereby made for a statement of the respective rights,
limitation of rights, duties and immunities thereunder of Southern States, the
Trustee and the Holders and the terms upon which the Notes are, and are to be,
authenticated and delivered. The Notes of this series may bear different dates,
mature at different times, bear interest at different rates, be subject to
different redemption or repayment provisions and may otherwise vary and are
entitled to the benefits of the Indenture.
Any interest which is payable, but is not punctually paid or duly provided
for, on any interest payment date and, to the extent permitted by law, interest
on such defaulted interest at the Interest Rate (such defaulted interest and
interest thereon herein collectively called "Defaulted Interest") will not be
payable to the Holder on the applicable record date; and such Defaulted Interest
may be paid by Southern States, at its election in each case, in the time and
manner as provided for in the Indenture.
Payment of the principal of and interest on this Note will be made at the
office or agency of [________] in [_________, ___________]; provided, however,
that at the option of the Holder payment may be made by check mailed to the
address of the person entitled thereto as such address will appear in the
Register or by electronic funds transfer or similar means to an account
maintained by the person entitled thereto as specified in the Register.
If an Event of Default (as defined in the Indenture) with respect to the
Notes shall occur and be continuing, the Trustee or the Holders of not less than
a majority in principal amount of the outstanding Notes due and payable in the
manner and with the effect and subject to the conditions provided in the
Indenture. Upon certain events of bankruptcy, insolvency or reorganization of
Southern States, the principal of and accrued interest on all of the Notes shall
become due and payable without any declaration by the Trustee or the Holders.
The Indenture contains provisions permitting Southern States and the
Trustee to enter into one or more supplemental indentures under certain
situations without the consent of the Holders of any of the Notes. The Indenture
permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of Southern States and the rights
of the Holders of the Notes of each series under the Indenture to be affected at
any time by Southern States and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Outstanding Notes (as defined in
the Indenture) of each series affected thereby. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Outstanding Notes of each series under the Indenture, on
behalf of the Holders of all Notes of such series, to waive compliance by
Southern States with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Note shall be conclusive
E-3
<PAGE>
and binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not notation of such consent or waiver is made upon this
Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of Southern States, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, places, and rate, and in the coin or currency, herein prescribed.
Subject to the conditions hereinafter set forth, this Note may be redeemed
without penalty at the option of the Holder.
(1) Redemption will be made in the case of death of Holder upon
written request and delivery of satisfactory proof of death and
other documentation and in accordance with applicable laws.
(2) In addition, if this Note is held in an Individual Retirement
Account (an "IRA") established under Section 408 of the Internal
Revenue Code of 1986, as amended (the "IRC"), Southern States
will redeem this Note, upon written request, to the extent
necessary to satisfy mandatory withdrawals from the IRA which are
required by the IRC. Such redemption will be made only upon
sufficient proof to Southern States that a mandatory withdrawal
from the IRA is required.
The Holder may redeem this Note prior to maturity for reasons other than death
or IRA withdrawal subject to a penalty. The penalty will be equal to three
months interest.
Redemption prior to maturity will be made, subject to the aforementioned
conditions, upon the surrender of this Note, properly endorsed and accompanied
by written requests for early redemption to Southern States. Redemption prior to
maturity will be made at the face value of this Note plus accrued interest to
the date of redemption. Amounts available for redemption prior to maturity are
not set aside in a separate fund.
As provided in the Indenture, and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Register upon
surrender of this Note for registration of transfer at the office or agency of
Southern States, in Richmond, Virginia, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to Southern States duly
executed by the Holder or by his attorney duly authorized in writing, and
thereupon one or more new Notes of this series having the same terms as this
Note, of authorized denominations, having the same terms and conditions and for
the same aggregate principal amount, will be issued to the designated transferee
or transferees.
The Notes are issuable only in registered form, without coupons. As
provided in the Indenture, and subject to certain limitations therein set forth,
this Note is exchangeable for a like aggregate principal amount of Notes having
the same terms as this Note of different authorized denominations, as requested
by the Holder surrendering the same.
E-4
<PAGE>
No service charge will be made for any such registration of transfer or
exchange of Notes, but Southern States may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
Prior to due presentment of this Note for registration for transfer,
Southern States, the Trustee and any agent of Southern States or the Trustee may
treat the person in whose name this Note is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and neither Southern States,
the Trustee nor any such agent shall be affected by notice to the contrary.
All such terms used in this Note which are defined in the Indenture shall
have the meaning designated to them in the Indenture and all references in the
Indenture to "Security" or "Securities" shall be deemed to include the Notes.
For value received, I, we and each of us hereby sell, assign and transfer
the within Note and the indebtedness evidenced thereby to
____________________________________
Name
____________________________________
Address
THIS ASSIGNMENT WILL BECOME EFFECTIVE ONLY WHEN MADE AND ENTERED ON THE
BOOKS OF SOUTHERN STATES COOPERATIVE, INCORPORATED.
Date:________________ Signed: _______________________
Endorsement: _______________________
E-5
<PAGE>
EXHIBIT F
---------
NOTE NUMBER: 2YRF-_______________
PRINCIPAL AMOUNT: $________________
SOUTHERN STATES COOPERATIVE, INCORPORATED
Richmond, Virginia 23230
SENIOR NOTE,
TWO-YEAR, SERIES F
(Standard Certificate)
_________________________________ _________________________________
Name Date of Original Issue
_________________________________ _________________________________
Street or P.O. Box Maturity Date
_________________________________ _________________________________
City State Interest Rate
THIS NOTE IS NON-NEGOTIABLE
Southern States Cooperative, Incorporated, a Virginia agricultural
cooperative association ("Southern States," which term includes any successor
corporation under the Indenture referred to herein), for value received, hereby
promises to pay to the owner named above or registered assigns (the "Holder"),
the principal amount shown above on the Maturity Date specified above (except to
the extent redeemed or repaid prior to the Maturity Date), and to pay interest
thereon from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance of this Note (the
"Date of Original Issuance") at the interest rate per annum specified above (the
"Interest Rate"), computed on the basis of a 365-day year, until the principal
hereof is paid or duly made available for payment, and to pay interest on
overdue principal and, to the extent permitted by law, overdue interest, at the
Interest Rate. Payment of principal and interest shall be in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts. Payment will be made
at maturity only upon presentation and surrender of this Note.
Interest is payable at the option of the purchaser, made at the time of
original issuance in one of the following ways: (i) quarterly on January 1,
April 1, July 1, and October 1 to Holders
F-1
<PAGE>
of record on the last preceding December 15, March 15, June 15, and September 15
respectively (or, in the case of the first interest payment date, if originally
issued between the record date and the payment date, to the Holder on the Date
of Original Issuance except that in the case of original issuance made on or
after the 15th of March, June, September and December and prior to the first day
of the next succeeding month, interest from the date of original issuance
through the end of the month in which the purchase was made will be paid at the
time of and together with the next quarterly interest payment); or (ii) at
maturity or at the date of redemption if redeemed prior to maturity, compounded
quarterly, on March 31, June 30, September 30 and December 31 at the Interest
Rate. A Holder may change his election regarding the method of interest payment
at any time by providing written notice to Southern States. Southern States
shall have the right at any time by notice to the Holder to terminate any
obligation to continue retaining the interest of any Holder. Such termination
shall be effective as of the opening of business on the day following the first
interest compounding date after such notice is mailed to the Holder and the
Holder will be paid all interest then accrued and unpaid to the Holder on the
effective date. If the Maturity Date (or date of redemption or repayment) or an
interest payment date falls on a day which is not a business day, principal or
interest payable with respect to such Maturity Date (or date of redemption or
repayment) or interest payment date will be paid on the next succeeding business
day with the same force and effect as if made on such Maturity Date (or date of
redemption or repayment) or interest payment date, as the case may be, and no
interest shall accrue on the amount so payable for the period from and after
such Maturity Date (or any date of redemption or repayment) or interest payment
date.
This Note shall not be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by the Trustee under
the Indenture mentioned on the reverse side hereof.
ISSUED THIS DAY OF , 20__
ATTEST: SOUTHERN STATES COOPERATIVE, INCORPORATED
SECRETARY _________________________ BY PRESIDENT ____________________________
Trustee's Certificate of Authentication
This is one of the Notes described in the Indenture mentioned on the back
hereof.
FIRST UNION NATIONAL BANK
As Trustee By _________________________________
Authorized Signature
F-2
<PAGE>
REVERSE SIDE OF TWO-YEAR, SERIES F
(Standard Certificate)
This Note is one of a duly authorized issue of securities (hereinafter
called the "Notes") of Southern States issued and to be issued under an
Indenture dated as of __________, 2000 (herein called the "Indenture") between
Southern States and First Union National Bank, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), to
which the Indenture and all indentures supplemental thereto and the Officers'
Certificate (as defined in the Indenture) setting forth the terms of this series
of Notes reference is hereby made for a statement of the respective rights,
limitation of rights, duties and immunities thereunder of Southern States, the
Trustee and the Holders and the terms upon which the Notes are, and are to be,
authenticated and delivered. The Notes of this series may bear different dates,
mature at different times, bear interest at different rates, be subject to
different redemption or repayment provisions and may otherwise vary and are
entitled to the benefits of the Indenture.
Any interest which is payable, but is not punctually paid or duly provided
for, on any interest payment date and, to the extent permitted by law, interest
on such defaulted interest at the Interest Rate (such defaulted interest and
interest thereon herein collectively called "Defaulted Interest") will not be
payable to the Holder on the applicable record date; and such Defaulted Interest
may be paid by Southern States, at its election in each case, in the time and
manner as provided for in the Indenture.
Payment of the principal of and interest on this Note will be made at the
office or agency of [________] in [_________, ___________]; provided, however,
that at the option of the Holder payment may be made by check mailed to the
address of the person entitled thereto as such address will appear in the
Register or by electronic funds transfer or similar means to an account
maintained by the person entitled thereto as specified in the Register.
If an Event of Default (as defined in the Indenture) with respect to the
Notes shall occur and be continuing, the Trustee or the Holders of not less than
a majority in principal amount of the outstanding Notes due and payable in the
manner and with the effect and subject to the conditions provided in the
Indenture. Upon certain events of bankruptcy, insolvency or reorganization of
Southern States, the principal of and accrued interest on all of the Notes shall
become due and payable without any declaration by the Trustee or the Holders.
The Indenture contains provisions permitting Southern States and the
Trustee to enter into one or more supplemental indentures under certain
situations without the consent of the Holders of any of the Notes. The Indenture
permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of Southern States and the rights
of the Holders of the Notes of each series under the Indenture to be affected at
any time by Southern States and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Outstanding Notes (as defined in
the Indenture) of each series affected thereby. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Outstanding Notes of each series under the Indenture, on
behalf of the Holders of all Notes of such series, to waive compliance by
Southern States with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Note shall be conclusive
F-3
<PAGE>
and binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not notation of such consent or waiver is made upon this
Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of Southern States, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, places, and rate, and in the coin or currency, herein prescribed.
Subject to the conditions hereinafter set forth, this Note may be redeemed
without penalty at the option of the Holder.
(1) Redemption will be made in the case of death of Holder upon
written request and delivery of satisfactory proof of death and
other documentation and in accordance with applicable laws.
(2) In addition, if this Note is held in an Individual Retirement
Account (an "IRA") established under Section 408 of the Internal
Revenue Code of 1986, as amended (the "IRC"), Southern States
will redeem this Note, upon written request, to the extent
necessary to satisfy mandatory withdrawals from the IRA which are
required by the IRC. Such redemption will be made only upon
sufficient proof to Southern States that a mandatory withdrawal
from the IRA is required.
The Holder may redeem this Note prior to maturity for reasons other than death
or IRA withdrawal subject to a penalty. The penalty will be equal to six months
interest.
Redemption prior to maturity will be made, subject to the aforementioned
conditions, upon the surrender of this Note, properly endorsed and accompanied
by written requests for early redemption to Southern States. Redemption prior to
maturity will be made at the face value of this Note plus accrued interest to
the date of redemption. Amounts available for redemption prior to maturity are
not set aside in a separate fund.
As provided in the Indenture, and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Register upon
surrender of this Note for registration of transfer at the office or agency of
Southern States, in Richmond, Virginia, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to Southern States duly
executed by the Holder or by his attorney duly authorized in writing, and
thereupon one or more new Notes of this series having the same terms as this
Note, of authorized denominations, having the same terms and conditions and for
the same aggregate principal amount, will be issued to the designated transferee
or transferees.
The Notes are issuable only in registered form, without coupons. As
provided in the Indenture, and subject to certain limitations therein set forth,
this Note is exchangeable for a like aggregate principal amount of Notes having
the same terms as this Note of different authorized denominations, as requested
by the Holder surrendering the same.
F-4
<PAGE>
No service charge will be made for any such registration of transfer or
exchange of Notes, but Southern States may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
Prior to due presentment of this Note for registration for transfer,
Southern States, the Trustee and any agent of Southern States or the Trustee may
treat the person in whose name this Note is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and neither Southern States,
the Trustee nor any such agent shall be affected by notice to the contrary.
All such terms used in this Note which are defined in the Indenture shall
have the meaning designated to them in the Indenture and all references in the
Indenture to "Security" or "Securities" shall be deemed to include the Notes.
For value received, I, we and each of us hereby sell, assign and transfer
the within Note and the indebtedness evidenced thereby to
----------------------------------
Name
------------------------------------
Address
THIS ASSIGNMENT WILL BECOME EFFECTIVE ONLY WHEN MADE AND ENTERED ON THE
BOOKS OF SOUTHERN STATES COOPERATIVE, INCORPORATED.
Date:________________ Signed: _______________________
Endorsement: _______________________
F-5
<PAGE>
EXHIBIT G
---------
NOTE NUMBER: 2YRG-_______________
PRINCIPAL AMOUNT: $________________
SOUTHERN STATES COOPERATIVE, INCORPORATED
Richmond, Virginia 23230
SENIOR NOTE,
TWO-YEAR, SERIES G
(Large Certificate)
_______________________________ ________________________________
Name Date of Original Issuance
_______________________________ ________________________________
Street or P.O. Box Maturity Date
_______________________________ ________________________________
City State Interest Rate
THIS NOTE IS NON-NEGOTIABLE
Southern States Cooperative, Incorporated, a Virginia agricultural
cooperative association ("Southern States," which term includes any successor
corporation under the Indenture referred to herein), for value received, hereby
promises to pay to the owner named above or registered assigns (the "Holder"),
the principal amount shown above on the Maturity Date specified above (except to
the extent redeemed or repaid prior to the Maturity Date), and to pay interest
thereon from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance of this Note (the
"Date of Original Issuance") at the interest rate per annum specified above (the
"Interest Rate"), computed on the basis of a 365-day year, until the principal
hereof is paid or duly made available for payment, and to pay interest on
overdue principal and, to the extent permitted by law, overdue interest, at the
Interest Rate. Payment of principal and interest shall be in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts. Payment will be made
at maturity only upon presentation and surrender of this Note.
G-1
<PAGE>
Interest is payable at the option of the purchaser, made at the time of
original issuance in one of the following ways: (i) quarterly on January 1,
April 1, July 1, and October 1 to Holders of record on the last preceding
December 15, March 15, June 15, and September 15 respectively (or, in the case
of the first interest payment date, if originally issued between the record date
and the payment date, to the Holder on the Date of Original Issuance except that
in the case of original issuance made on or after the 15th of March, June,
September and December and prior to the first day of the next succeeding month,
interest from the date of original issuance through the end of the month in
which the purchase was made will be paid at the time of and together with the
next quarterly interest payment); or (ii) at maturity or at the date of
redemption if redeemed prior to maturity, compounded quarterly, on March 31,
June 30, September 30 and December 31 at the Interest Rate. A Holder may change
his election regarding the method of interest payment at any time by providing
written notice to Southern States. Southern States shall have the right at any
time by notice to the Holder to terminate any obligation to continue retaining
the interest of any Holder. Such termination shall be effective as of the
opening of business on the day following the first interest compounding date
after such notice is mailed to the Holder and the Holder will be paid all
interest then accrued and unpaid to the Holder on the effective date. If the
Maturity Date (or date of redemption or repayment) or an interest payment date
falls on a day which is not a business day, principal or interest payable with
respect to such Maturity Date (or date of redemption or repayment) or interest
payment date will be paid on the next succeeding business day with the same
force and effect as if made on such Maturity Date (or date of redemption or
repayment) or interest payment date, as the case may be, and no interest shall
accrue on the amount so payable for the period from and after such Maturity Date
(or any date of redemption or repayment) or interest payment date.
This Note shall not be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by the Trustee under
the Indenture mentioned on the reverse side hereof.
ISSUED THIS DAY OF , 20__
ATTEST: SOUTHERN STATES COOPERATIVE, INCORPORATED
SECRETARY _____________________ BY PRESIDENT ____________________________
Trustee's Certificate of Authentication
This is one of the Notes described in the Indenture mentioned on the back
hereof.
FIRST UNION NATIONAL BANK
As Trustee By ________________________________
Authorized Signature
G-2
<PAGE>
REVERSE SIDE OF TWO-YEAR. SERIES G
(Large Certificate)
This Note is one of a duly authorized issue of securities (hereinafter
called the "Notes") of Southern States issued and to be issued under an
Indenture dated as of __________, 2000 (herein called the "Indenture") between
Southern States and First Union National Bank, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), to
which the Indenture and all indentures supplemental thereto and the Officers'
Certificate (as defined in the Indenture) setting forth the terms of this series
of Notes reference is hereby made for a statement of the respective rights,
limitation of rights, duties and immunities thereunder of Southern States, the
Trustee and the Holders and the terms upon which the Notes are, and are to be,
authenticated and delivered. The Notes of this series may bear different dates,
mature at different times, bear interest at different rates, be subject to
different redemption or repayment provisions and may otherwise vary and are
entitled to the benefits of the Indenture.
Any interest which is payable, but is not punctually paid or duly provided
for, on any interest payment date and, to the extent permitted by law, interest
on such defaulted interest at the Interest Rate (such defaulted interest and
interest thereon herein collectively called "Defaulted Interest") will not be
payable to the Holder on the applicable record date; and such Defaulted Interest
may be paid by Southern States, at its election in each case, in the time and
manner as provided for in the Indenture.
Payment of the principal of and interest on this Note will be made at the
office or agency of [________] in [_________, ___________]; provided, however,
that at the option of the Holder payment may be made by check mailed to the
address of the person entitled thereto as such address will appear in the
Register or by electronic funds transfer or similar means to an account
maintained by the person entitled thereto as specified in the Register.
If an Event of Default (as defined in the Indenture) with respect to the
Notes shall occur and be continuing, the Trustee or the Holders of not less than
a majority in principal amount of the outstanding Notes due and payable in the
manner and with the effect and subject to the conditions provided in the
Indenture. Upon certain events of bankruptcy, insolvency or reorganization of
Southern States, the principal of and accrued interest on all of the Notes shall
become due and payable without any declaration by the Trustee or the Holders.
The Indenture contains provisions permitting Southern States and the
Trustee to enter into one or more supplemental indentures under certain
situations without the consent of the Holders of any of the Notes. The Indenture
permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of Southern States and the rights
of the Holders of the Notes of each series under the Indenture to be affected at
any time by Southern States and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Outstanding Notes (as defined in
the Indenture) of each series affected thereby. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Outstanding Notes of each series under the Indenture, on
behalf of the Holders of all Notes of such series, to waive compliance by
Southern States with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Note shall be conclusive
G-3
<PAGE>
and binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not notation of such consent or waiver is made upon this
Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of Southern States, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, places, and rate, and in the coin or currency, herein prescribed.
Subject to the conditions hereinafter set forth, this Note may be redeemed
without penalty at the option of the Holder.
(1) Redemption will be made in the case of death of Holder upon
written request and delivery of satisfactory proof of death and
other documentation and in accordance with applicable laws.
(2) In addition, if this Note is held in an Individual Retirement
Account (an "IRA") established under Section 408 of the Internal
Revenue Code of 1986, as amended (the "IRC"), Southern States
will redeem this Note, upon written request, to the extent
necessary to satisfy mandatory withdrawals from the IRA which are
required by the IRC. Such redemption will be made only upon
sufficient proof to Southern States that a mandatory withdrawal
from the IRA is required.
The Holder may redeem this Note prior to maturity for reasons other than death
or IRA withdrawal subject to a penalty. The penalty will be equal to six months
interest.
Redemption prior to maturity will be made, subject to the aforementioned
conditions, upon the surrender of this Note, properly endorsed and accompanied
by written requests for early redemption to Southern States. Redemption prior to
maturity will be made at the face value of this Note plus accrued interest to
the date of redemption. Amounts available for redemption prior to maturity are
not set aside in a separate fund.
As provided in the Indenture, and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Register upon
surrender of this Note for registration of transfer at the office or agency of
Southern States, in Richmond, Virginia, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to Southern States duly
executed by the Holder or by his attorney duly authorized in writing, and
thereupon one or more new Notes of this series having the same terms as this
Note, of authorized denominations, having the same terms and conditions and for
the same aggregate principal amount, will be issued to the designated transferee
or transferees.
The Notes are issuable only in registered form, without coupons. As
provided in the Indenture, and subject to certain limitations therein set forth,
this Note is exchangeable for a like aggregate principal amount of Notes having
the same terms as this Note of different authorized denominations, as requested
by the Holder surrendering the same.
G-4
<PAGE>
No service charge will be made for any such registration of transfer or
exchange of Notes, but Southern States may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
Prior to due presentment of this Note for registration for transfer,
Southern States, the Trustee and any agent of Southern States or the Trustee may
treat the person in whose name this Note is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and neither Southern States,
the Trustee nor any such agent shall be affected by notice to the contrary.
All such terms used in this Note which are defined in the Indenture shall
have the meaning designated to them in the Indenture and all references in the
Indenture to "Security" or "Securities" shall be deemed to include the Notes.
For value received, I, we and each of us hereby sell, assign and transfer
the within Note and the indebtedness evidenced thereby to
----------------------------------
Name
------------------------------------
Address
THIS ASSIGNMENT WILL BECOME EFFECTIVE ONLY WHEN MADE AND ENTERED ON THE
BOOKS OF SOUTHERN STATES COOPERATIVE, INCORPORATED.
Date:________________ Signed: _______________________
Endorsement: _______________________
G-5
<PAGE>
EXHIBIT H
---------
NOTE NUMBER: 5YRH-_______________
PRINCIPAL AMOUNT: $________________
SOUTHERN STATES COOPERATIVE, INCORPORATED
Richmond, Virginia 23230
SENIOR NOTE,
FIVE-YEAR, SERIES H
(Standard Certificate)
______________________________ ________________________________
Name Date of Original Issuance
______________________________ ________________________________
Street or P.O. Box Maturity Date
______________________________ ________________________________
City State Interest Rate
THIS NOTE IS NON-NEGOTIABLE
Southern States Cooperative, Incorporated, a Virginia agricultural
cooperative association ("Southern States," which term includes any successor
corporation under the Indenture referred to herein), for value received, hereby
promises to pay to the owner named above or registered assigns (the "Holder"),
the principal amount shown above on the Maturity Date specified above (except to
the extent redeemed or repaid prior to the Maturity Date), and to pay interest
thereon from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance of this Note (the
"Date of Original Issuance") at the interest rate per annum specified above (the
"Interest Rate"), computed on the basis of a 365-day year, until the principal
hereof is paid or duly made available for payment, and to pay interest on
overdue principal and, to the extent permitted by law, overdue interest, at the
Interest Rate. Payment of principal and interest shall be in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts. Payment will be made
at maturity only upon presentation and surrender of this Note.
Interest is payable at the option of the purchaser, made at the time of
original issuance in one of the following ways: (i) quarterly on January 1,
April 1, July 1, and October 1 to Holders
H-1
<PAGE>
of record on the last preceding December 15, March 15, June 15, and September 15
respectively (or, in the case of the first interest payment date, if originally
issued between the record date and the payment date, to the Holder on the Date
of Original Issuance except that in the case of original issuance made on or
after the 15th of March, June, September and December and prior to the first day
of the next succeeding month, interest from the date of original issuance
through the end of the month in which the purchase was made will be paid at the
time of and together with the next quarterly interest payment); or (ii) at
maturity or at the date of redemption if redeemed prior to maturity, compounded
quarterly, on March 31, June 30, September 30 and December 31 at the Interest
Rate. A Holder may change his election regarding the method of interest payment
at any time by providing written notice to Southern States. Southern States
shall have the right at any time by notice to the Holder to terminate any
obligation to continue retaining the interest of any Holder. Such termination
shall be effective as of the opening of business on the day following the first
interest compounding date after such notice is mailed to the Holder and the
Holder will be paid all interest then accrued and unpaid to the Holder on the
effective date. If the Maturity Date (or date of redemption or repayment) or an
interest payment date falls on a day which is not a business day, principal or
interest payable with respect to such Maturity Date (or date of redemption or
repayment) or interest payment date will be paid on the next succeeding business
day with the same force and effect as if made on such Maturity Date (or date of
redemption or repayment) or interest payment date, as the case may be, and no
interest shall accrue on the amount so payable for the period from and after
such Maturity Date (or any date of redemption or repayment) or interest payment
date.
This Note shall not be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by the Trustee under
the Indenture mentioned on the reverse side hereof.
ISSUED THIS DAY OF , 20__
ATTEST: SOUTHERN STATES COOPERATIVE, INCORPORATED
SECRETARY _________________________ BY PRESIDENT ____________________________
Trustee's Certificate of Authentication
This is one of the Notes described in the Indenture mentioned on the back
hereof.
FIRST UNION NATIONAL BANK
As Trustee By ________________________________
Authorized Signature
H-2
<PAGE>
REVERSE SIDE OF FIVE-YEAR, SERIES H
(Standard Certificate)
This Note is one of a duly authorized issue of securities (hereinafter
called the "Notes") of Southern States issued and to be issued under an
Indenture dated as of __________, 2000 (herein called the "Indenture") between
Southern States and First Union National Bank, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), to
which the Indenture and all indentures supplemental thereto and the Officers'
Certificate (as defined in the Indenture) setting forth the terms of this series
of Notes reference is hereby made for a statement of the respective rights,
limitation of rights, duties and immunities thereunder of Southern States, the
Trustee and the Holders and the terms upon which the Notes are, and are to be,
authenticated and delivered. The Notes of this series may bear different dates,
mature at different times, bear interest at different rates, be subject to
different redemption or repayment provisions and may otherwise vary and are
entitled to the benefits of the Indenture.
Any interest which is payable, but is not punctually paid or duly provided
for, on any interest payment date and, to the extent permitted by law, interest
on such defaulted interest at the Interest Rate (such defaulted interest and
interest thereon herein collectively called "Defaulted Interest") will not be
payable to the Holder on the applicable record date; and such Defaulted Interest
may be paid by Southern States, at its election in each case, in the time and
manner as provided for in the Indenture.
Payment of the principal of and interest on this Note will be made at the
office or agency of [________] in [_________, ___________]; provided, however,
that at the option of the Holder payment of interest may be made by check mailed
to the address of the person entitled thereto as such address will appear in the
Register or by electronic funds transfer or similar means to an account
maintained by the person entitled thereto as specified in the Register.
If an Event of Default (as defined in the Indenture) with respect to the
Notes shall occur and be continuing, the Trustee or the Holders of not less than
a majority in principal amount of the outstanding Notes due and payable in the
manner and with the effect and subject to the conditions provided in the
Indenture. Upon certain events of bankruptcy, insolvency or reorganization of
Southern States, the principal of and accrued interest on all of the Notes shall
become due and payable without any declaration by the Trustee or the Holders.
The Indenture contains provisions permitting Southern States and the
Trustee to enter into one or more supplemental indentures under certain
situations without the consent of the Holders of any of the Notes. The Indenture
permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of Southern States and the rights
of the Holders of the Notes of each series under the Indenture to be affected at
any time by Southern States and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Outstanding Notes (as defined in
the Indenture) of each series affected thereby. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Outstanding Notes of each series under the Indenture, on
behalf of the Holders of all Notes of such series, to waive compliance by
Southern States with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Note shall be conclusive
H-3
<PAGE>
and binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not notation of such consent or waiver is made upon this
Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of Southern States, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, places, and rate, and in the coin or currency, herein prescribed.
This Note may be redeemed, after two (2) years from Date of Original
Issuance, at the option of Southern States at any time prior to maturity, on at
least fifteen (15) days written notice, at face value plus accred interest to
the date of redemption only. The Indenture permits Southern States to select in
any manner at its discretion the Notes to be redeemed.
Subject to the conditions hereinafter set forth, this Note may be redeemed
without penalty at the option of the Holder.
(1) Redemption will be made in the case of death of Holder upon
written request and delivery of satisfactory proof of death and
other documentation and in accordance with applicable laws.
(2) In addition, if this Note is held in an Individual Retirement
Account (an "IRA") established under Section 408 of the Internal
Revenue Code of 1986, as amended (the "IRC"), Southern States
will redeem this Note, upon written request, to the extent
necessary to satisfy mandatory withdrawals from the IRA which are
required by the IRC. Such redemption will be made only upon
sufficient proof to Southern States that a mandatory withdrawal
from the IRA is required.
The Holder may redeem this Note prior to maturity for reasons other than death
or IRA withdrawal subject to a penalty. The penalty will be equal to six months
interest.
Redemption prior to maturity will be made, subject to the aforementioned
conditions, upon the surrender of this Note, properly endorsed and accompanied
by written requests for early redemption to Southern States. Redemption prior to
maturity will be made at the face value of this Note plus accrued interest to
the date of redemption. Amounts available for redemption prior to maturity are
not set aside in a separate fund.
As provided in the Indenture, and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Register upon
surrender of this Note for registration of transfer at the office or agency of
Southern States, in Richmond, Virginia, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to Southern States duly
executed by the Holder or by his attorney duly authorized in writing, and
thereupon one or more new Notes of this series having the same terms as this
Note, of authorized denominations, having the same terms and conditions and for
the same aggregate principal amount, will be issued to the designated transferee
or transferees.
H-4
<PAGE>
The Notes are issuable only in registered form, without coupons. As
provided in the Indenture, and subject to certain limitations therein set forth,
this Note is exchangeable for a like aggregate principal amount of Notes having
the same terms as this Note of different authorized denominations, as requested
by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange of Notes, but Southern States may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
Prior to due presentment of this Note for registration for transfer,
Southern States, the Trustee and any agent of Southern States or the Trustee may
treat the person in whose name this Note is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and neither Southern States,
the Trustee nor any such agent shall be affected by notice to the contrary.
All such terms used in this Note which are defined in the Indenture shall
have the meaning designated to them in the Indenture and all references in the
Indenture to "Security" or "Securities" shall be deemed to include the Notes.
For value received, I, we and each of us hereby sell, assign and transfer
the within Note and the indebtedness evidenced thereby to
----------------------------------
Name
-----------------------------------
Address
THIS ASSIGNMENT WILL BECOME EFFECTIVE ONLY WHEN MADE AND ENTERED ON THE
BOOKS OF SOUTHERN STATES COOPERATIVE, INCORPORATED.
Date:________________ Signed:_______________________
Endorsement: _______________________
H-5
<PAGE>
EXHIBIT I
---------
NOTE NUMBER: 5YRI-_______________
PRINCIPAL AMOUNT: $________________
SOUTHERN STATES COOPERATIVE, INCORPORATED
Richmond, Virginia 23230
SENIOR NOTE,
FIVE-YEAR, SERIES I
(Large Certificate)
________________________________ _________________________________
Name Date of Original Issuance
________________________________ _________________________________
Street or P.O. Box Maturity Date
________________________________ _________________________________
City State Interest Rate
THIS NOTE IS NON-NEGOTIABLE
Southern States Cooperative, Incorporated, a Virginia agricultural
cooperative association ("Southern States," which term includes any successor
corporation under the Indenture referred to herein), for value received, hereby
promises to pay to the owner named above or registered assigns (the "Holder"),
the principal amount shown above on the Maturity Date specified above (except to
the extent redeemed or repaid prior to the Maturity Date), and to pay interest
thereon from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance of this Note (the
"Date of Original Issuance") at the interest rate per annum specified above (the
"Interest Rate"), computed on the basis of a 365-day year, until the principal
hereof is paid or duly made available for payment, and to pay interest on
overdue principal and, to the extent permitted by law, overdue interest, at the
Interest Rate. Payment of principal and interest shall be in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts. Payment will be made
at maturity only upon presentation and surrender of this Note.
Interest is payable at the option of the purchaser, made at the time of
original issuance in one of the following ways: (i) quarterly on January 1,
April 1, July 1, and October 1 to Holders
I-1
<PAGE>
of record on the last preceding December 15, March 15, June 15, and September 15
respectively (or, in the case of the first interest payment date, if originally
issued between the record date and the payment date, to the Holder on the Date
of Original Issuance except that in the case of original issuance made on or
after the 15th of March, June, September and December and prior to the first day
of the next succeeding month, interest from the date of original issuance
through the end of the month in which the purchase was made will be paid at the
time of and together with the next quarterly interest payment); or (ii) at
maturity or at the date of redemption if redeemed prior to maturity, compounded
quarterly, on March 31, June 30, September 30 and December 31 at the Interest
Rate. A Holder may change his election regarding the method of interest payment
at any time by providing written notice to Southern States. Southern States
shall have the right at any time by notice to the Holder to terminate any
obligation to continue retaining the interest of any Holder. Such termination
shall be effective as of the opening of business on the day following the first
interest compounding date after such notice is mailed to the Holder and the
Holder will be paid all interest then accrued and unpaid to the Holder on the
effective date. If the Maturity Date (or date of redemption or repayment) or an
interest payment date falls on a day which is not a business day, principal or
interest payable with respect to such Maturity Date (or date of redemption or
repayment) or interest payment date will be paid on the next succeeding business
day with the same force and effect as if made on such Maturity Date (or date of
redemption or repayment) or interest payment date, as the case may be, and no
interest shall accrue on the amount so payable for the period from and after
such Maturity Date (or any date of redemption or repayment) or interest payment
date.
This Note shall not be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by the Trustee under
the Indenture mentioned on the reverse side hereof.
ISSUED THIS DAY OF , 20__
ATTEST: SOUTHERN STATES COOPERATIVE, INCORPORATED
SECRETARY _________________________ BY PRESIDENT ____________________________
Trustee's Certificate of Authentication
This is one of the Notes described in the Indenture mentioned on the back
hereof.
FIRST UNION NATIONAL BANK
As Trustee By ____________________________________
Authorized Signature
I-2
<PAGE>
REVERSE SIDE OF FIVE-YEAR, SERIES I
(Large Certificate)
This Note is one of a duly authorized issue of securities (hereinafter
called the "Notes") of Southern States issued and to be issued under an
Indenture dated as of __________, 2000 (herein called the "Indenture") between
Southern States and First Union National Bank, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), to
which the Indenture and all indentures supplemental thereto and the Officers'
Certificate (as defined in the Indenture) setting forth the terms of this series
of Notes reference is hereby made for a statement of the respective rights,
limitation of rights, duties and immunities thereunder of Southern States, the
Trustee and the Holders and the terms upon which the Notes are, and are to be,
authenticated and delivered. The Notes of this series may bear different dates,
mature at different times, bear interest at different rates, be subject to
different redemption or repayment provisions and may otherwise vary and are
entitled to the benefits of the Indenture.
Any interest which is payable, but is not punctually paid or duly provided
for, on any interest payment date and, to the extent permitted by law, interest
on such defaulted interest at the Interest Rate (such defaulted interest and
interest thereon herein collectively called "Defaulted Interest") will not be
payable to the Holder on the applicable record date; and such Defaulted Interest
may be paid by Southern States, at its election in each case, in the time and
manner as provided for in the Indenture.
Payment of the principal of and interest on this Note will be made at the
office or agency of [________] in [_________, ___________]; provided, however,
that at the option of the Holder payment may be made by check mailed to the
address of the person entitled thereto as such address will appear in the
Register or by electronic funds transfer or similar means to an account
maintained by the person entitled thereto as specified in the Register.
If an Event of Default (as defined in the Indenture) with respect to the
Notes shall occur and be continuing, the Trustee or the Holders of not less than
a majority in principal amount of the outstanding Notes due and payable in the
manner and with the effect and subject to the conditions provided in the
Indenture. Upon certain events of bankruptcy, insolvency or reorganization of
Southern States, the principal of and accrued interest on all of the Notes shall
become due and payable without any declaration by the Trustee or the Holders.
The Indenture contains provisions permitting Southern States and the
Trustee to enter into one or more supplemental indentures under certain
situations without the consent of the Holders of any of the Notes. The Indenture
permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of Southern States and the rights
of the Holders of the Notes of each series under the Indenture to be affected at
any time by Southern States and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Outstanding Notes (as defined in
the Indenture) of each series affected thereby. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Outstanding Notes of each series under the Indenture, on
behalf of the Holders of all Notes of such series, to waive compliance by
Southern States with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Note shall be conclusive
I-3
<PAGE>
and binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not notation of such consent or waiver is made upon this
Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of Southern States, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, places, and rate, and in the coin or currency, herein prescribed.
This Note may be redeemed, after two (2) years from Date of Original
Issuance, at the option of Southern States at any time prior to maturity, on at
least fifteen (15) days written notice, at face value plus accred interest to
the date of redemption only. The Indenture permits Southern States to select in
any manner at its discretion the Notes to be redeemed.
Subject to the conditions hereinafter set forth, this Note may be redeemed
without penalty at the option of the Holder.
(1) Redemption will be made in the case of death of Holder upon
written request and delivery of satisfactory proof of death and
other documentation and in accordance with applicable laws.
(2) In addition, if this Note is held in an Individual Retirement
Account (an "IRA") established under Section 408 of the Internal
Revenue Code of 1986, as amended (the "IRC"), Southern States
will redeem this Note, upon written request, to the extent
necessary to satisfy mandatory withdrawals from the IRA which are
required by the IRC. Such redemption will be made only upon
sufficient proof to Southern States that a mandatory withdrawal
from the IRA is required.
The Holder may redeem this Note prior to maturity for reasons other than death
or IRA withdrawal subject to a penalty. The penalty will be equal to six months
interest.
Redemption prior to maturity will be made, subject to the aforementioned
conditions, upon the surrender of this Note, properly endorsed and accompanied
by written requests for early redemption to Southern States. Redemption prior to
maturity will be made at the face value of this Note plus accrued interest to
the date of redemption. Amounts available for redemption prior to maturity are
not set aside in a separate fund.
As provided in the Indenture, and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Register upon
surrender of this Note for registration of transfer at the office or agency of
Southern States, in Richmond, Virginia, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to Southern States duly
executed by the Holder or by his attorney duly authorized in writing, and
thereupon one or more new Notes of this series having the same terms as this
Note, of authorized denominations, having the same terms and conditions and for
the same aggregate principal amount, will be issued to the designated transferee
or transferees.
I-4
<PAGE>
The Notes are issuable only in registered form, without coupons. As
provided in the Indenture, and subject to certain limitations therein set forth,
this Note is exchangeable for a like aggregate principal amount of Notes having
the same terms as this Note of different authorized denominations, as requested
by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange of Notes, but Southern States may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
Prior to due presentment of this Note for registration for transfer,
Southern States, the Trustee and any agent of Southern States or the Trustee may
treat the person in whose name this Note is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and neither Southern States,
the Trustee nor any such agent shall be affected by notice to the contrary.
All such terms used in this Note which are defined in the Indenture shall
have the meaning designated to them in the Indenture and all references in the
Indenture to "Security" or "Securities" shall be deemed to include the Notes.
For value received, I, we and each of us hereby sell, assign and transfer
the within Note and the indebtedness evidenced thereby to
----------------------------------
Name
----------------------------------
Address
THIS ASSIGNMENT WILL BECOME EFFECTIVE ONLY WHEN MADE AND ENTERED ON THE
BOOKS OF SOUTHERN STATES COOPERATIVE, INCORPORATED.
Date:________________ Signed:_______________________
Endorsement: _______________________
I-5
<PAGE>
EXHIBIT J
---------
NOTE NUMBER: 7YRJ-_______________
PRINCIPAL AMOUNT: $________________
SOUTHERN STATES COOPERATIVE, INCORPORATED
Richmond, Virginia 23230
SENIOR NOTE,
SEVEN-YEAR, SERIES J
(Standard Certificate)
________________________________ __________________________________
Name Date of Original Issuance
________________________________ __________________________________
Street or P.O. Box Maturity Date
________________________________ __________________________________
City State Interest Rate
THIS NOTE IS NON-NEGOTIABLE
Southern States Cooperative, Incorporated, a Virginia agricultural
cooperative association ("Southern States," which term includes any successor
corporation under the Indenture referred to herein), for value received, hereby
promises to pay to the owner named above or registered assigns (the "Holder"),
the principal amount shown above on the Maturity Date specified above (except to
the extent redeemed or repaid prior to the Maturity Date), and to pay interest
thereon from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance of this Note (the
"Date of Original Issuance") at the interest rate per annum specified above (the
"Interest Rate"), computed on the basis of a 365-day year, until the principal
hereof is paid or duly made available for payment, and to pay interest on
overdue principal and, to the extent permitted by law, overdue interest, at the
Interest Rate. Payment of principal and interest shall be in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts. Payment will be made
at maturity only upon presentation and surrender of this Note.
Interest is payable at the option of the purchaser, made at the time of
original issuance in one of the following ways: (i) quarterly on January 1,
April 1, July 1, and October 1 to Holders
J-1
<PAGE>
of record on the last preceding December 15, March 15, June 15, and September 15
respectively (or, in the case of the first interest payment date, if originally
issued between the record date and the payment date, to the Holder on the Date
of Original Issuance except that in the case of original issuance made on or
after the 15th of March, June, September and December and prior to the first day
of the next succeeding month, interest from the date of original issuance
through the end of the month in which the purchase was made will be paid at the
time of and together with the next quarterly interest payment); or (ii) at
maturity or at the date of redemption if redeemed prior to maturity, compounded
quarterly, on March 31, June 30, September 30 and December 31 at the Interest
Rate. A Holder may change his election regarding the method of interest payment
at any time by providing written notice to Southern States. Southern States
shall have the right at any time by notice to the Holder to terminate any
obligation to continue retaining the interest of any Holder. Such termination
shall be effective as of the opening of business on the day following the first
interest compounding date after such notice is mailed to the Holder and the
Holder will be paid all interest then accrued and unpaid to the Holder on the
effective date. If the Maturity Date (or date of redemption or repayment) or an
interest payment date falls on a day which is not a business day, principal or
interest payable with respect to such Maturity Date (or date of redemption or
repayment) or interest payment date will be paid on the next succeeding business
day with the same force and effect as if made on such Maturity Date (or date of
redemption or repayment) or interest payment date, as the case may be, and no
interest shall accrue on the amount so payable for the period from and after
such Maturity Date (or any date of redemption or repayment) or interest payment
date.
This Note shall not be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by the Trustee under
the Indenture mentioned on the reverse side hereof.
ISSUED THIS DAY OF , 20__
ATTEST: SOUTHERN STATES COOPERATIVE, INCORPORATED
SECRETARY _________________________ BY PRESIDENT ____________________________
Trustee's Certificate of Authentication
This is one of the Notes described in the Indenture mentioned on the back
hereof.
FIRST UNION NATIONAL BANK
As Trustee By ________________________________
Authorized Signature
J-2
<PAGE>
REVERSE SIDE OF SEVEN-YEAR, SERIES J
(Standard Certificate)
This Note is one of a duly authorized issue of securities (hereinafter
called the "Notes") of Southern States issued and to be issued under an
Indenture dated as of __________, 2000 (herein called the "Indenture") between
Southern States and First Union National Bank, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), to
which the Indenture and all indentures supplemental thereto and the Officers'
Certificate (as defined in the Indenture) setting forth the terms of this series
of Notes reference is hereby made for a statement of the respective rights,
limitation of rights, duties and immunities thereunder of Southern States, the
Trustee and the Holders and the terms upon which the Notes are, and are to be,
authenticated and delivered. The Notes of this series may bear different dates,
mature at different times, bear interest at different rates, be subject to
different redemption or repayment provisions and may otherwise vary and are
entitled to the benefits of the Indenture.
Any interest which is payable, but is not punctually paid or duly provided
for, on any interest payment date and, to the extent permitted by law, interest
on such defaulted interest at the Interest Rate (such defaulted interest and
interest thereon herein collectively called "Defaulted Interest") will not be
payable to the Holder on the applicable record date; and such Defaulted Interest
may be paid by Southern States, at its election in each case, in the time and
manner as provided for in the Indenture.
Payment of the principal of and interest on this Note will be made at the
office or agency of [________] in [_________, ___________]; provided, however,
that at the option of the Holder payment may be made by check mailed to the
address of the person entitled thereto as such address will appear in the
Register or by electronic funds transfer or similar means to an account
maintained by the person entitled thereto as specified in the Register.
If an Event of Default (as defined in the Indenture) with respect to the
Notes shall occur and be continuing, the Trustee or the Holders of not less than
a majority in principal amount of the outstanding Notes due and payable in the
manner and with the effect and subject to the conditions provided in the
Indenture. Upon certain events of bankruptcy, insolvency or reorganization of
Southern States, the principal of and accrued interest on all of the Notes shall
become due and payable without any declaration by the Trustee or the Holders.
The Indenture contains provisions permitting Southern States and the
Trustee to enter into one or more supplemental indentures under certain
situations without the consent of the Holders of any of the Notes. The Indenture
permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of Southern States and the rights
of the Holders of the Notes of each series under the Indenture to be affected at
any time by Southern States and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Outstanding Notes (as defined in
the Indenture) of each series affected thereby. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Outstanding Notes of each series under the Indenture, on
behalf of the Holders of all Notes of such series, to waive compliance by
Southern States with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Note shall be conclusive
J-3
<PAGE>
and binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not notation of such consent or waiver is made upon this
Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of Southern States, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, places, and rate, and in the coin or currency, herein prescribed.
This Note may be redeemed, after two (2) years from Date of Original
Issuance, at the option of Southern States at any time prior to maturity, on at
least fifteen (15) days written notice, at face value plus accred interest to
the date of redemption only. The Indenture permits Southern States to select in
any manner at its discretion the Notes to be redeemed.
Subject to the conditions hereinafter set forth, this Note may be redeemed
without penalty at the option of the Holder.
(1) Redemption will be made in the case of death of Holder upon
written request and delivery of satisfactory proof of death and
other documentation and in accordance with applicable laws.
(2) In addition, if this Note is held in an Individual Retirement
Account (an "IRA") established under Section 408 of the Internal
Revenue Code of 1986, as amended (the "IRC"), Southern States
will redeem this Note, upon written request, to the extent
necessary to satisfy mandatory withdrawals from the IRA which are
required by the IRC. Such redemption will be made only upon
sufficient proof to Southern States that a mandatory withdrawal
from the IRA is required.
The Holder may redeem this Note prior to maturity for reasons other than death
or IRA withdrawal subject to a penalty. The penalty will be equal to six months
interest.
Redemption prior to maturity will be made, subject to the aforementioned
conditions, upon the surrender of this Note, properly endorsed and accompanied
by written requests for early redemption to Southern States. Redemption prior to
maturity will be made at the face value of this Note plus accrued interest to
the date of redemption. Amounts available for redemption prior to maturity are
not set aside in a separate fund.
As provided in the Indenture, and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Register upon
surrender of this Note for registration of transfer at the office or agency of
Southern States, in Richmond, Virginia, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to Southern States duly
executed by the Holder or by his attorney duly authorized in writing, and
thereupon one or more new Notes of this series having the same terms as this
Note, of authorized denominations, having the same terms and conditions and for
the same aggregate principal amount, will be issued to the designated transferee
or transferees.
J-4
<PAGE>
The Notes are issuable only in registered form, without coupons. As
provided in the Indenture, and subject to certain limitations therein set forth,
this Note is exchangeable for a like aggregate principal amount of Notes having
the same terms as this Note of different authorized denominations, as requested
by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange of Notes, but Southern States may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
Prior to due presentment of this Note for registration for transfer,
Southern States, the Trustee and any agent of Southern States or the Trustee may
treat the person in whose name this Note is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and neither Southern States,
the Trustee nor any such agent shall be affected by notice to the contrary.
All such terms used in this Note which are defined in the Indenture shall
have the meaning designated to them in the Indenture and all references in the
Indenture to "Security" or "Securities" shall be deemed to include the Notes.
For value received, I, we and each of us hereby sell, assign and transfer
the within Note and the indebtedness evidenced thereby to
----------------------------------
Name
------------------------------------
Address
THIS ASSIGNMENT WILL BECOME EFFECTIVE ONLY WHEN MADE AND ENTERED ON THE
BOOKS OF SOUTHERN STATES COOPERATIVE, INCORPORATED.
Date:________________ Signed:_______________________
Endorsement: _______________________
J-5
<PAGE>
EXHIBIT K
---------
NOTE NUMBER: 7YRK-_______________
PRINCIPAL AMOUNT: $_________________
SOUTHERN STATES COOPERATIVE, INCORPORATED
Richmond, Virginia 23230
SENIOR NOTE,
SEVEN-YEAR, SERIES K
(Large Certificate)
- -------------------------------- ---------------------------------
Name Date of Original Issuance
- -------------------------------- ---------------------------------
Street or P. O. Box Maturity Date
- -------------------------------- ---------------------------------
City State Interest Rate
THIS NOTE IS NON-NEGOTIABLE
Southern States Cooperative, Incorporated, a Virginia agricultural
cooperative association ("Southern States," which term includes any successor
corporation under the Indenture referred to herein), for value received, hereby
promises to pay to the owner named above or registered assigns (the "Holder"),
the principal amount shown above on the Maturity Date specified above (except to
the extent redeemed or repaid prior to the Maturity Date), and to pay interest
thereon from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance of this Note (the
"Date of Original Issuance") at the interest rate per annum specified above (the
"Interest Rate"), computed on the basis of a 365-day year, until the principal
hereof is paid or duly made available for payment, and to pay interest on
overdue principal and, to the extent permitted by law, overdue interest, at the
Interest Rate. Payment of principal and interest shall be in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts. Payment will be made
at maturity only upon presentation and surrender of this Note.
Interest is payable at the option of the purchaser, made at the time of
original issuance in one of the following ways: (i) quarterly on January 1,
April 1, July 1, and October 1 to Holders
K-1
<PAGE>
of record on the last preceding December 15, March 15, June 15, and September 15
respectively (or, in the case of the first interest payment date, if originally
issued between the record date and the payment date, to the Holder on the Date
of Original Issuance except that in the case of original issuance made on or
after the 15th of March, June, September and December and prior to the first day
of the next succeeding month, interest from the date of original issuance
through the end of the month in which the purchase was made will be paid at the
time of and together with the next quarterly interest payment); or (ii) at
maturity or at the date of redemption if redeemed prior to maturity, compounded
quarterly, on March 31, June 30, September 30 and December 31 at the Interest
Rate. A Holder may change his election regarding the method of interest payment
at any time by providing written notice to Southern States. Southern States
shall have the right at any time by notice to the Holder to terminate any
obligation to continue retaining the interest of any Holder. Such termination
shall be effective as of the opening of business on the day following the first
interest compounding date after such notice is mailed to the Holder and the
Holder will be paid all interest then accrued and unpaid to the Holder on the
effective date. If the Maturity Date (or date of redemption or repayment) or an
interest payment date falls on a day which is not a business day, principal or
interest payable with respect to such Maturity Date (or date of redemption or
repayment) or interest payment date will be paid on the next succeeding business
day with the same force and effect as if made on such Maturity Date (or date of
redemption or repayment) or interest payment date, as the case may be, and no
interest shall accrue on the amount so payable for the period from and after
such Maturity Date (or any date of redemption or repayment) or interest payment
date.
This Note shall not be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by the Trustee under
the Indenture mentioned on the reverse side hereof.
ISSUED THIS DAY OF , 20__
ATTEST: SOUTHERN STATES COOPERATIVE, INCORPORATED
SECRETARY ________________________ BY PRESIDENT ___________________________
Trustee's Certificate of Authentication
This is one of the Notes described in the Indenture mentioned on the back
hereof.
FIRST UNION NATIONAL BANK
As Trustee By ________________________________
Authorized Signature
K-2
<PAGE>
REVERSE SIDE OF SEVEN-YEAR, SERIES K
(Large Certificate)
This Note is one of a duly authorized issue of securities (hereinafter
called the "Notes") of Southern States issued and to be issued under an
Indenture dated as of __________, 2000 (herein called the "Indenture") between
Southern States and First Union National Bank, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), to
which the Indenture and all indentures supplemental thereto and the Officers'
Certificate (as defined in the Indenture) setting forth the terms of this series
of Notes reference is hereby made for a statement of the respective rights,
limitation of rights, duties and immunities thereunder of Southern States, the
Trustee and the Holders and the terms upon which the Notes are, and are to be,
authenticated and delivered. The Notes of this series may bear different dates,
mature at different times, bear interest at different rates, be subject to
different redemption or repayment provisions and may otherwise vary and are
entitled to the benefits of the Indenture.
Any interest which is payable, but is not punctually paid or duly provided
for, on any interest payment date and, to the extent permitted by law, interest
on such defaulted interest at the Interest Rate (such defaulted interest and
interest thereon herein collectively called "Defaulted Interest") will not be
payable to the Holder on the applicable record date; and such Defaulted Interest
may be paid by Southern States, at its election in each case, in the time and
manner as provided for in the Indenture.
Payment of the principal of and interest on this Note will be made at the
office or agency of [________] in [_________, ___________]; provided, however,
that at the option of the Holder payment may be made by check mailed to the
address of the person entitled thereto as such address will appear in the
Register or by electronic funds transfer or similar means to an account
maintained by the person entitled thereto as specified in the Register.
If an Event of Default (as defined in the Indenture) with respect to the
Notes shall occur and be continuing, the Trustee or the Holders of not less than
a majority in principal amount of the outstanding Notes due and payable in the
manner and with the effect and subject to the conditions provided in the
Indenture. Upon certain events of bankruptcy, insolvency or reorganization of
Southern States, the principal of and accrued interest on all of the Notes shall
become due and payable without any declaration by the Trustee or the Holders.
The Indenture contains provisions permitting Southern States and the
Trustee to enter into one or more supplemental indentures under certain
situations without the consent of the Holders of any of the Notes. The Indenture
permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of Southern States and the rights
of the Holders of the Notes of each series under the Indenture to be affected at
any time by Southern States and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Outstanding Notes (as defined in
the Indenture) of each series affected thereby. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the Outstanding Notes of each series under the Indenture, on
behalf of the Holders of all Notes of such series, to waive compliance by
Southern States with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Note shall be conclusive
K-3
<PAGE>
and binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof, whether or not notation of such consent or waiver is made upon this
Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of Southern States, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, places, and rate, and in the coin or currency, herein prescribed.
This Note may be redeemed, after two (2) years from Date of Original
Issuance, at the option of Southern States at any time prior to maturity, on at
least fifteen (15) days written notice, at face value plus accred interest to
the date of redemption only. The Indenture permits Southern States to select in
any manner at its discretion the Notes to be redeemed.
Subject to the conditions hereinafter set forth, this Note may be redeemed
without penalty at the option of the Holder.
(1) Redemption will be made in the case of death of Holder upon
written request and delivery of satisfactory proof of death and
other documentation and in accordance with applicable laws.
(2) In addition, if this Note is held in an Individual Retirement
Account (an "IRA") established under Section 408 of the Internal
Revenue Code of 1986, as amended (the "IRC"), Southern States
will redeem this Note, upon written request, to the extent
necessary to satisfy mandatory withdrawals from the IRA which are
required by the IRC. Such redemption will be made only upon
sufficient proof to Southern States that a mandatory withdrawal
from the IRA is required.
The Holder may redeem this Note prior to maturity for reasons other than death
or IRA withdrawal subject to a penalty. The penalty will be equal to six months
interest.
Redemption prior to maturity will be made, subject to the aforementioned
conditions, upon the surrender of this Note, properly endorsed and accompanied
by written requests for early redemption to Southern States. Redemption prior to
maturity will be made at the face value of this Note plus accrued interest to
the date of redemption. Amounts available for redemption prior to maturity are
not set aside in a separate fund.
As provided in the Indenture, and subject to certain limitations therein
set forth, the transfer of this Note may be registered on the Register upon
surrender of this Note for registration of transfer at the office or agency of
Southern States, in Richmond, Virginia, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to Southern States duly
executed by the Holder or by his attorney duly authorized in writing, and
thereupon one or more new Notes of this series having the same terms as this
Note, of authorized denominations, having the same terms and conditions and for
the same aggregate principal amount, will be issued to the designated transferee
or transferees.
K-4
<PAGE>
The Notes are issuable only in registered form, without coupons. As
provided in the Indenture, and subject to certain limitations therein set forth,
this Note is exchangeable for a like aggregate principal amount of Notes having
the same terms as this Note of different authorized denominations, as requested
by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange of Notes, but Southern States may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
Prior to due presentment of this Note for registration for transfer,
Southern States, the Trustee and any agent of Southern States or the Trustee may
treat the person in whose name this Note is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and neither Southern States,
the Trustee nor any such agent shall be affected by notice to the contrary.
All such terms used in this Note which are defined in the Indenture shall
have the meaning designated to them in the Indenture and all references in the
Indenture to "Security" or "Securities" shall be deemed to include the Notes.
For value received, I, we and each of us hereby sell, assign and transfer
the within Note and the indebtedness evidenced thereby to
----------------------------------
Name
------------------------------------
Address
THIS ASSIGNMENT WILL BECOME EFFECTIVE ONLY WHEN MADE AND ENTERED ON THE
BOOKS OF SOUTHERN STATES COOPERATIVE, INCORPORATED.
Date:________________ Signed: _______________________
Endorsement: _______________________
K-5
<PAGE>
EXHIBIT 10.1(a)
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of July 23, 1998, by and between Gold
Kist Inc., a Georgia cooperative marketing association ("Gold Kist") and
Southern States Cooperative, Inc., a Virginia agricultural cooperative
corporation ("Southern States").
WHEREAS, Gold Kist wishes to sell and assign to Southern States, and
Southern States wishes to purchase and assume from Gold Kist, for the
consideration and on the terms and conditions set forth herein, the business of
certain divisions of Gold Kist, and substantially all of the assets that are
primarily used in connection therewith (the "Inputs Business," as defined
herein), and certain liabilities of the Inputs 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 Gold Kist 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 Assumed
Liabilities
At the Closing, and subject to the terms and conditions of this Agreement:
(a) Gold Kist shall sell, transfer, convey, assign and deliver to Southern
States, and Southern States shall purchase and acquire from Gold Kist, the
Purchased Assets free and clear of all Liens, and (b) Gold Kist shall assign to
Southern States, and Southern States shall assume from Gold Kist, the Assumed
Liabilities. No other liabilities of Gold Kist arising out of the Inputs
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.
ARTICLE II
The Purchased Assets
2.1. The Purchased Assets. The "Purchased Assets" shall mean all
--------------------
right, title, interest and claims of Gold Kist in and to the following assets:
(a) all Inventory;
(b) all Owned Real Property as listed on Schedule 6.6.1;
<PAGE>
(c) all Owned Personal Property as identified more particularly
on Schedule 6.9.1;
(d) all Accounts Receivable;
(e) all Prepaid Expenses;
(f) the Contracts;
(g) the Real Property Leases as listed on Schedule 6.6.2
(including all of Gold Kist's right, title, and interest, if any, in and to the
Improvements located on the Leased Real Property);
(h) the Personal Property Leases listed on Schedule 6.9.3;
(i) Gold Kist's 50% interest in Scott G. Williams, LLC.;
(j) all equity interests (stock and patronage refund allocations)
of Southern States held by Gold Kist;
(k) all Assignable Permits;
(l) all Trademarks as listed on Schedule 6.11, and all other
Intellectual Property Rights of the Inputs Business;
(m) all of Gold Kist's rights and obligations under the CFI
Product Purchase Agreement to the extent the same may be assignable; and,
(n) all of the books, records, computer files, and other files,
data or information, including membership lists or other membership records
(wherever located, and whether in printed form or stored in computer files,
tapes or other medium) of Gold Kist primarily relating to or primarily used in
connection with the Inputs Business and the Purchased Assets and the operations
thereof for all periods beginning on July 1, 1996, and ending on or before the
Closing Date which Gold Kist 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 after the
Closing ("Records"), provided that Southern States will reimburse Gold Kist for
all expenses incurred in providing any such Records for periods ending before
June 27, 1998.
For purposes of this Agreement, the Inputs Business of Gold Kist
shall mean the following Gold Kist operating divisions: the Agri Services
Division, the Fertilizer and Chemical Division, and the Pet Food and Animal
Health Division (excluding Pork Operations), together with (a) the Morven,
Georgia cotton gin and all machinery, equipment and other personal property used
in connection therewith and (b) all qualifying crop time notes receivables
(these to consist of notes made by Gold Kist patrons and dealers, excluding
Dealer Direct Notes) held by Agra Trade Financing, Inc., but not any other
business operations of Agra Trade Financing, Inc. or any other Gold Kist
operations.
2
<PAGE>
2.2. The Excluded Assets. The Purchased Assets shall not include (a)
-------------------
any of the assets, whether tangible or intangible, real or personal, of the Pork
Operations of Gold Kist's Pet Food and Animal Health Division, (b) any cash, (c)
any insurance policies and the rights to refunds thereunder other than as the
parties may agree upon in writing (d) all assets of Gold Kist Plans and
Programs, (e) any tax refunds, (f) the trade names and trademarks containing the
name "Gold Kist", "GK" or any variations thereof, (g) any current assets of the
Inputs Business that are not included in the Post-Closing Statement of Net
Current Asset Value, including any intercompany or intracompany receivables or
claims, (h) any causes of action or claims that Gold Kist may have against third
parties with respect to matters occurring prior to Closing, (i) all assets other
than the Records that are located at the Gold Kist principal office located at
Perimeter Center, Atlanta, Georgia, (j) all assets of any business or business
activities of Gold Kist which are not part of the Inputs Business, (k) any
shares of common stock or patronage preferred stock of CF Industries, Inc. held
by Gold Kist at the Closing, or (l) any other equity interest or investments
(other than the Southern States equity referred to in Section 2.1(j) (the
"Excluded Assets").
ARTICLE III
The Assumed Liabilities
3.1. The Assumed Liabilities. The "Assumed Liabilities" shall mean
-----------------------
the following obligations and liabilities of Gold Kist relating solely to the
Inputs Business:
(a) the accrued expenses (other than as the same may constitute
Excluded Liabilities) and trade accounts payable of the Inputs Business and
obligations with respect to customers' advance payments for products or services
reflected on the Post-Closing Statement of Net Current Asset Value;
(b) all of Gold Kist's liabilities and obligations under and
pursuant to the Real Property Leases, including the Solon Scott Lease, 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 Gold Kist
prior to the Closing Date under or with respect thereto;
(c) all of Gold Kist's liabilities and obligations under and
pursuant to the Contracts, the Operating Agreement of Scott G. Williams, LLC.,
the Guaranty Agreement with respect to Scott G. Williams, LLC., and the CFI
Product Purchase Agreement, provided, that, Southern States shall not assume any
obligation or liability resulting from or arising out of any default, or
nonperformance by Gold Kist prior to the Closing Date under or with respect
thereto;
(d) all of Gold Kist's liabilities under and pursuant to the
Bulloch County, Georgia IDA Bond; and
(e) any liability or obligation that arises from any Post-
Closing Environmental Condition.
3
<PAGE>
3.2. The Excluded Liabilities. Except for the Assumed Liabilities,
------------------------
and any obligations pursuant to this Agreement, Southern States shall not assume
any obligation, payment or liability of Gold Kist of any kind, whether fixed,
contingent, known, or unknown and whether existing as of the Closing or arising
thereafter, and no Excluded Liabilities will be included in the Post Closing
Statement of Net Current Asset Value even if required by GAAP. 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 Gold Kist
arising out of or relating to: (a) any workers' compensation claims related to
the operation of the Inputs Business prior to the Closing, or any other claims
or liabilities relating to the employment by Gold Kist of persons prior to the
Closing including but not limited to the claims and liabilities described in
Section 14.3.2 hereof; (b) any actual or alleged tortious conduct of Gold Kist
or any of its employees or agents; (c) any claim for products liability related
to the operation of the Inputs Business prior to the Closing; (d) any claim for
breach of warranty or contract versus Gold Kist related to the operation of the
Inputs Business prior to the Closing; (e) any claim predicated on strict
liability or any similar legal theory related to the operation of the Inputs
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 Inputs
Business prior to the Closing but not related to any Pre-Closing Environmental
Condition; (g) any business or business activities of Gold Kist which are not
part of the Inputs Business; (h) any tax liabilities, except as otherwise
expressly provided herein; (i) any liabilities under the Plans and Programs,
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) mortgage loans or
any other indebtedness not listed as an Assumed Liability; (m) any liability
arising out of or secured by an Excluded Asset; (n) any liabilities or
obligations of Gold Kist under any collective bargaining agreements; (o) any
liability or obligation that arises from any Pre-Closing Environmental
Condition; or (p) any other liabilities of Gold Kist not within the scope of the
definition "Assumed Liabilities" (collectively, the "Excluded Liabilities").
ARTICLE IV
Purchase Price
4.1. Preparation of Pre-Closing Statement of Net Current Asset Value.
---------------------------------------------------------------
As soon as practicable after the satisfaction of all conditions to Closing, Gold
Kist shall prepare the Pre-Closing Statement of Net Current Asset Value which
shall be based upon the most recent available unaudited month end financial
statement of Gold Kist (not more than 45 days old at Closing). Gold Kist shall
deliver the Pre-Closing Statement of Net Current Asset Value to Southern States
at least ten (10) days prior to the Closing Date, for review by Southern States
and its accountants.
4.2. Estimated Purchase Price. The aggregate estimated purchase price
------------------------
(the "Estimated Purchase Price") of the Purchased Assets shall be an amount
equal to (i) $41.4 million plus (ii) one hundred percent (100%) of the Net
----
Current Asset Value, as set forth on the Pre-Closing Statement of Net Current
Asset Value less (x) the remaining principal balance on the
----
4
<PAGE>
Bulloch County, Georgia IDA Bond and (y) the capitalized liability on the Gold
Kist books for the remaining lease payments under the Solon Scott Lease and less
----
(z) $10 million. Unless otherwise agreed to in writing, however, the Estimated
Purchase Price shall in no event be an amount greater than $251.4 million and
the Purchased Assets shall be reduced to cause the Estimated Purchase Price to
be less than $251.4 million by reducing the Accounts Receivable with Gold Kist
retaining the Accounts Receivable that are most practicable for it to handle.
4.3. Payment of Estimated Purchase Price. The Estimated Purchase
-----------------------------------
Price shall be payable at the Closing by wire transfer of immediately available
funds to Gold Kist's account as provided to Southern States.
4.4. Final Purchase Price. The aggregate final purchase price (the
--------------------
"Final Purchase Price") of the Purchased Assets shall be an amount equal to (i)
$41.4 million plus (ii) one hundred percent (100%) of the Net Current Asset
----
Value as set forth on the Post-Closing Statement of Net Current Asset Value less
----
(x) the remaining principal balance on the Bulloch County, Georgia IDA Bond as
of the Closing Date and (y) the capitalized liability on the Gold Kist books for
the remaining lease payments due on the Solon Scott Lease as of the Closing
Date. Notwithstanding anything else in this Article IV, unless Southern States
otherwise agrees in writing, the Final Purchase Price shall not exceed $251.4
million and the Purchased Assets shall be reduced to cause the Final Purchase
Price to be less than $251.4 million by reducing the Accounts Receivable, with
Gold Kist receiving the Accounts Receivable that are most practicable for it to
handle.
4.5. Post-Closing Adjustment and Payment of Final Purchase Price.
-----------------------------------------------------------
(a) (i) On or before the Closing, Gold Kist and Southern
States shall jointly conduct a physical count and inspection of the Inventory.
Such physical count and inspection shall be conducted in accordance with the
Inventory Procedures (the "Inventory Procedures") attached as Exhibit A which
shall conform to GAAP except insofar as the Inventory Procedures may otherwise
provide in paragraph B(8) thereof. The results of such physical count and
inspection shall be used to determine the value of the Inventory to be set forth
on the Post-Closing Statement of Net Current Asset Value.
(ii) The Accounts Receivable shall be valued in accordance
with GAAP pursuant to the Accounts Receivables Valuation Procedures attached as
Exhibit B (the "Receivables Valuation Procedures").
(b) Southern States shall prepare the Post-Closing Statement of
Net Current Asset Value in accordance with GAAP and pursuant to the applicable
provisions of Section 3.2 and the Inventory Procedures and Receivables Valuation
Procedures. Not later than seventy-five (75) days after the Closing, Southern
States shall deliver the Post-Closing Statement of Net Current Asset Value to
Gold Kist and its accountants for review and verification of compliance with
GAAP, the applicable provisions of Section 3.2 and the Inventory Procedures and
Receivables Valuation Procedures. In connection with the preparation of the
Post-Closing Statement of Net Current Asset Value, Gold Kist shall be permitted
to observe the preparation thereof, and to review all work papers, books and
records of Southern States and its accountants associated with such preparation.
Gold Kist shall cooperate with Southern States and its
5
<PAGE>
accountants to the extent reasonable and practical in the course of preparing
the Post Closing Statement of Net Current Asset Value.
(c) If Gold Kist objects to the Post-Closing Statement of Net
Current Asset Value, it shall give written notice of such objection to Southern
States within thirty (30) days after its receipt thereof. Gold Kist shall, in
such notice, specify in reasonable detail the basis and reason for such
objection and the amount to which Gold Kist objects. If Gold Kist does not
object to the Post-Closing Statement of Net Current Asset Value within such
period, the Post-Closing Statement of Net Current Asset Value shall be final and
binding upon Southern States and Gold Kist. If Gold Kist objects to the Post-
Closing Statement of Net Current Asset Value within such period and Gold Kist
and Southern States are unable to resolve such objection within fifteen (15)
days after written notice of Gold Kist's objection, then such objection shall be
submitted to a mutually agreed upon office of such nationally recognized
independent certified public accounting firm with recognized agricultural
production credit experience as may be jointly selected by Gold Kist and
Southern States, who shall act as an arbitrator. The arbitrator shall be
instructed to use its commercially reasonable efforts to perform such services
within thirty (30) days of the submission to it of the Post-Closing Statement of
Net Current Asset Value and the related dispute and, in any case, as soon as
practicable after such submission. In reaching its decisions hereunder, such
arbitrator shall be guided by GAAP and shall resolve any disputes by determining
what such values should be under GAAP and pursuant to the applicable provisions
of Section 3.2 and the Inventory Procedures and Receivables Valuation
Procedures. 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 Gold Kist. This provision for arbitration shall
be specifically enforceable by the parties and the decision of the arbitrator in
accordance with the provisions hereof shall be final and binding and there shall
be no right of appeal therefrom.
(d) If the Net Current Asset Value as shown on the Post-Closing
Statement of Net Current Asset Value, as finally determined in accordance with
Section 4.5(c), is greater than the Net Current Asset Value as shown on the Pre-
Closing Statement of Net Current Asset Value, then Southern States shall pay to
Gold Kist within two (2) business days after such determination, an amount equal
to the difference between the Final Purchase Price and the Estimated Purchase
Price, plus interest calculated in accordance with Section 4.5(g), by wire
transfer of immediately available funds to Gold Kist's account as provided to
Southern States.
(e) If the Net Current Asset Value as shown on the Post-Closing
Statement of Net Current Asset Value, as finally determined in accordance with
Section 4.5 (c), is less than the Net Current Asset Value as shown on the Pre-
Closing Statement of Net Current Asset Value, but the Final Purchase Price is
nevertheless greater than or equal to the Estimated Purchase Price, then
Southern States shall pay to Gold Kist within two (2) business days after such
determination, an amount equal to the difference between the Final Purchase
Price and the Estimated Purchase Price, plus interest calculated in accordance
with Section 4.5(g), by wire transfer of immediately available funds to Gold
Kist's account as provided to Southern States.
(f) If the Net Current Asset Value as shown on the Post-Closing
Statement of Net Current Asset Value, as finally determined in accordance with
Section 4.5 (c),
6
<PAGE>
is less than the Net Current Asset Value as shown on the Pre-Closing Statement
of Net Current Value, and as a result the Final Purchase Price is less than the
Estimated Purchase Price, then within two (2) business days following such
determination, Gold Kist shall pay to Southern States by wire transfer of
immediately available funds to an account designated by Southern States any
amount by which the Final Purchase Price is less than the Estimated Purchase
Price, plus interest calculated in accordance with Section 4.5(g).
(g) Interest shall accrue, from the Closing Date until paid, on
any amount paid pursuant to Section 4.5(d), Section 4.5(e) or Section 4.5(f) at
an annual rate, computed daily on the basis of an annual period of 360 days,
equal to LIBOR plus one-half percent (1/2%). LIBOR shall mean the London
interbank offered rate for deposits in U.S. dollars for an interest period of
one month as reported on the Telerate Service, determined as of 1:00 p.m. (New
York time) on the first business day of each month.
ARTICLE V
The Closing
5.1. Time and Place. The consummation of the transactions contemplated
--------------
in this Agreement (the "Closing") shall take place at such location as Southern
States and Gold Kist may mutually agree, at 9:00 a.m., Eastern Standard Time, on
October 12, 1998, or such other date as Gold Kist 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 October 12, 1998.
5.2. Actions by Gold Kist at the Closing. At the Closing, Gold Kist
-----------------------------------
shall deliver to Southern States the following:
(a) one or more special warranty deeds, in recordable form for
the appropriate jurisdiction, conveying good and marketable title, free and
clear of Liens, to each parcel of real property included in the Owned Real
Property;
(b) 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 C attached hereto;
(c) an assignment and transfer of Accounts Receivable conveying
all of Gold Kist's right, title, and interest in and to the Accounts Receivable
which shall be in substantially the form of Exhibit D attached hereto;
(d) such instruments of assignment and transfer of all of Gold
Kist's right, title, and interest in the Trademarks, and the other Intellectual
Property Rights of the Inputs Business, the Assignable Permits, the Prepaid
Expenses, and the books and records of Gold Kist relating to the Inputs
Business, as may be reasonably requested by Southern States, including an
assignment of trademarks in the form of Exhibit E;
7
<PAGE>
(e) an Assignment and Assumption Agreement to: (i) the Contracts
(other than the CFI Product Purchase Agreement); (ii) the Real Property Leases;
(iii) the Personal Property Leases; and (iv) the other Assumed Liabilities in
substantially the form of Exhibit F attached hereto, or such other form of
assignment reasonably requested by Southern States or Gold Kist, which shall,
among other things, convey good and marketable title to the leasehold interests
in the Leased Real Property, free and clear of Liens;
(f) the Product Purchase Agreement Assignment and Assumption
Agreement, substantially in the form of Exhibit G attached hereto;
(g) the Operating Agreement Assignment and Amendment,
substantially in the form of Exhibit H attached hereto;
(h) the Transition Services Agreement, substantially in the form
of Exhibit I attached hereto;
(i) the certificate of Gold Kist described in Section 11.2;
(j) a certificate of good standing of Gold Kist from the
Secretary of State of Georgia, dated within thirty (30) days of the Closing
Date;
(k) a certificate of status of foreign corporation for Gold Kist
from the Secretary of State of South Carolina, Florida, Alabama, Mississippi,
Tennessee, Louisiana and Texas, each dated within sixty (60) days of the Closing
Date;
(l) copies, certified by the Secretary of Gold Kist of: (i) the
Certificate of Incorporation of Gold Kist; (ii) the Bylaws of Gold Kist; and
(iii) the resolutions of the board of directors of Gold Kist, approving the
transactions contemplated herein;
(m) the opinion of the General Counsel of Gold Kist described in
Section 11.4;
(n) the Closing Consents; and
(o) 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 Gold Kist to Southern
States pursuant to Article XI hereof.
5.3. Actions by Southern States at the Closing. At the Closing,
-----------------------------------------
Southern States shall deliver to Gold Kist the following:
(a) the Estimated Purchase Price in accordance with the
provisions of Section 4;
(b) the Transition Services Agreement;
8
<PAGE>
(c) an Assignment and Assumption Agreement to (i) the Contracts
(other than the CFI Product Purchase Agreement), (ii) the Real Property Leases,
(iii) the Personal Property Leases, and (iv) the other Assumed Liabilities in
substantially the form of Exhibit F attached hereto, or other form of assignment
reasonably requested by Southern States or Gold Kist;
(d) the Product Purchase Agreement Assignment and Assumption
Agreement;
(e) the Operating Agreement Assignment and Amendment;
(f) a certificate of good standing of Southern States from the
Virginia State Corporation Commission, dated within thirty (30) days of the
Closing Date;
(g) the certificate of Southern States described in Section
10.2;
(h) copies, certified by the Secretary of Southern States, of:
(i) the Articles of Incorporation of Southern States; (ii) the Bylaws of
Southern States; and (iii) the resolutions of the board of directors of Southern
States approving the transactions contemplated herein;
(i) the opinion of counsel to Southern States as described in
Section 10.4; and
(j) such other documents and instruments as may be reasonably
requested by Gold Kist, including, without limitation, the documents,
instruments, and other items required to be delivered by Southern States to Gold
Kist pursuant to Article X hereof.
ARTICLE VI
Representations and Warranties of Gold Kist
Gold Kist 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. Gold Kist is a cooperative
------------------------------------
marketing association duly organized, validly existing, and in good standing
under the laws of the State of Georgia. Gold Kist 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 Gold Kist is required to be so
qualified in order to conduct the Inputs Business and in which the failure of
Gold Kist to so qualify would have a material adverse effect on the financial
condition or operations of the Inputs Business. Gold Kist has the requisite
corporate power and authority to own or lease the Purchased Assets, to carry on
the Inputs 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 Gold Kist, and the consummation by Gold Kist
9
<PAGE>
of the transactions contemplated herein, have been duly and validly approved and
authorized by the board of directors of Gold Kist.
6.2. Validity of Agreement; No Violation; Consents.
---------------------------------------------
6.2.1. This Agreement has been duly authorized, executed and
delivered by Gold Kist and is a valid and binding obligation of Gold Kist,
enforceable against Gold Kist 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
Gold Kist 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 Gold Kist; (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 Gold
Kist 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 Contracts, Bond
Documents, 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. Gold Kist may execute, deliver and perform this Agreement
without the necessity of Gold Kist 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. Inputs Financial Statements. The Inputs Financial Statements,
---------------------------
when prepared, will present fairly, in all material respects, the financial
position of the Inputs Business as of June 27, 1998, and as of June 28, 1997,
and the results of operations of the Inputs Business for each of the three years
ended June 29, 1996, June 28, 1997, and June 27, 1998, in conformity with
generally accepted accounting principles.
6.4. Absence of Certain Changes.
--------------------------
(a) Except as set forth on Schedule 6.4, since June 27, 1998,
Gold Kist has conducted the Inputs Business only in the usual and ordinary
course of business consistent with Gold Kist prior practices and there has not
been:
(i) any material adverse change in the financial condition,
operations, assets, or liabilities of the Inputs 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 Inputs Business;
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<PAGE>
(iii) any other fact, event or condition of any character
that will materially and adversely affect the Purchased Assets or the Inputs
Business, or could reasonably be expected materially to disrupt, interrupt,
prevent or impair the conduct of the Inputs Business.
(b) Except as set forth on Schedule 6.4, since June 27, 1998,
Gold Kist has not, with respect to the Inputs Business or with respect to the
Purchased Assets:
(i) made or agreed to make with respect to the Inputs
Business any capital expenditure or commitment for additions to property, plant
or equipment, except for expenditures and commitments not exceeding $100,000 in
the aggregate;
(ii) made or agreed to make any increase in the
compensation payable to any Business Employees, except for normal and customary
increases made in the ordinary course of business pursuant to presently existing
policies and for severance and other arrangements related to this transaction;
(iii) 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;
(iv) with respect to the Inputs 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;
(v) with respect to the Inputs Business, disposed of, or
permitted to lapse or disclosed to any third person any material proprietary
right (including without limitation any licensed right) listed or described on
Schedule 6.11.1;
(vi) agreed to do any of the foregoing.
6.5. Taxes. Gold Kist has prepared and timely filed with the
-----
appropriate governmental agencies all tax reports, filings and returns required
to be filed by it related to the Inputs Business, and Gold Kist 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 Gold Kist. All
federal, state, city, and foreign income, profits, franchise, sales, use,
occupation, property, excise, and other taxes due in connection with the Inputs
Business have been fully paid or shall be fully paid by Gold Kist as of the date
hereof or hereafter when due. Gold Kist has not received notice of any tax
deficiency outstanding, proposed or assessed against it with respect to the
Inputs 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 Gold Kist threatened against, any Purchased
Asset.
6.6. Real Property.
-------------
6.6.1. Schedule 6.6.1 sets forth a complete list of all real
property owned in whole or in part by Gold Kist primarily used in the Inputs
Business and being purchased by Southern States in connection with its purchase
of the Inputs Business (the "Owned Real
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Property") and a list of all Liens thereon. Gold Kist has good and marketable
title in fee simple to all of the Owned Real Property, free and clear of all
Liens except for those set forth on Schedule 6.6.1.
6.6.2. Schedule 6.6.2 sets forth a complete list of all leases
or subleases (the "Real Property Leases"), of real property leased by Gold Kist
primarily used in the Inputs Business and being assumed by Southern States in
connection with its purchase of the Inputs Business (the "Leased Real
Property"). Except as disclosed on Schedule 6.6.2, the Real Property Leases are
in full force and effect, are valid and enforceable in accordance with their
terms and constitute the legal, valid and binding obligations of Gold Kist and,
to the Best Knowledge of Gold Kist, 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
Gold Kist, 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. Gold Kist 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 Gold Kist in and
under any of the Real Property Leases is unencumbered and subject to no present
Lien, except for any Lien listed in Schedule 6.6.2.
6.6.3. To the Best Knowledge of Gold Kist, except as described
on Schedule 6.6.3 hereto, (a) no improvement or structure on any Owned Real
Property or 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 Owned Real Property or Leased Real Property.
6.6.4. Except as set forth on Schedule 6.6.4, to the Best
Knowledge of Gold Kist, all easements, rights of way, licenses, and other non-
ownership interests, if any, granted to or by Gold Kist in any of the Owned Real
Property (the "Realty Use Rights") are valid and effective in accordance with
their terms. Gold Kist has furnished Southern States with copies of all material
written Realty Use Rights which it has, all of which are identified on Schedule
6.6.4.
6.6.5. To the Best Knowledge of Gold Kist, the Improvements
located on the Owned Real Property and the Leased Real Property are in
substantial compliance with all applicable material building, fire, and other
regulatory laws, ordinances, and regulations. Gold Kist has not received any
written notice of any violation thereof.
6.6.6. To the Best Knowledge of Gold Kist, all requisite
certificates of occupancy and other material permits or approvals legally
required with respect to the Improvements located on the Owned Real Property and
the Leased Real Property and the occupancy and use thereof, have been obtained
and are currently in full force and effect.
6.7. Contracts and Agreements.
------------------------
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6.7.1. Schedule 6.7 sets forth a list of all contracts,
agreements, leases (other than the Real Property Leases and the Personal
Property Leases), licenses, purchase orders, instruments and commitments,
whether written or oral, and whether or not in the ordinary course of business,
to which Gold Kist is a party or is bound, which primarily relate to the Inputs
Business and which Southern States agrees to assume in connection with the
purchase of the Inputs Business, except for the following: purchase orders and
other commitments, whether written or oral, to which Gold Kist is a party or is
bound, which were entered into by Gold Kist in the ordinary course of business,
which do not involve obligations following the Closing Date extending past June
30, 1999 or having a value of more than $50,000 individually, and which, in
every case, are related solely to the Inputs Business (the "Immaterial
Contracts"). The contracts listed on Schedule 6.7 are referred to herein as the
"Material Contracts". The Material Contracts and the Immaterial Contracts are
referred to collectively herein as the "Contracts". Gold Kist has furnished to
Southern States a copy of each of the Material Contracts, and each such copy is
correct and complete and includes all modifications thereof. The Contracts
constitute all existing contracts and commitments of Gold Kist, whether written
or oral: (a) which, together with the Transition Agreement, are necessary to
conduct the Inputs Business in the same manner and to the extent currently
conducted by Gold Kist; (b) by which the Purchased Assets may be bound or
affected; or (c) which primarily relate to or affect the Purchased Assets and
the Inputs Business.
6.7.2. All of the Material Contracts are in full force and
effect and constitute the legal, valid and binding obligations of Gold Kist and,
to the Best Knowledge of Gold Kist, 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 Gold
Kist, 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.
Except for the Required Consents, no consent of any party to the Material
Contracts is required to assign the Material Contracts, and Gold Kist's rights
and obligations thereunder, to Southern States. No other party to any Material
Contract has notified Gold Kist of the assertion of its right to renegotiate the
terms or conditions of any Material Contract, and, to the Best Knowledge of Gold
Kist, no such basis exists.
6.8. Permits. Schedule 6.8 sets forth a list of all material
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governmental licenses, permits, consents, approvals, or certificates issued to
Gold Kist and which are primarily related to the Inputs Business (the
"Permits"). Gold Kist 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 Gold Kist: (a) the Permits are
in full force and effect; (b) Gold Kist 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 Gold Kist in connection with operation of the Inputs Business as
presently conducted, the failure to obtain which would have a material adverse
effect on the financial condition or operations of the Inputs 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 6.16 hereof. Those Permits (including the Environmental
Permits) which are assignable
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by Gold Kist to Southern States are marked with an asterisk on Schedule 6.8, and
are referred to herein as the "Assignable Permits", and the remaining Permits
are referred to herein as the "Nonassignable Permits".
6.9. Title to and Condition of Personal Property.
-------------------------------------------
6.9.1. Schedule 6.9.1 sets forth a computer list of machinery,
equipment, furniture, fixtures, vehicles and other items of tangible personal
property that are owned by Gold Kist and that are primarily used in connection
with the Inputs Business and that are being purchased by Southern States in
connection with the purchase of the Inputs Business (the "Owned Personal
Property"). The computer list is the list used by Gold Kist in its operations
and to the Best Knowledge of Gold Kist, is accurate in all material respects.
The Owned Personal Property, together with the other Purchased Assets,
constitute all assets of Gold Kist which, together with the Transition
Agreement, are necessary to conduct the Inputs Business in the same manner and
to the extent currently conducted by Gold Kist.
6.9.2. Except for the Liens on Schedule 6.9.2., all of which
will be removed prior to the Closing except as otherwise contemplated herein,
Gold Kist has good and sufficient title to the Owned Personal Property, free and
clear of any Liens.
6.9.3. Schedule 6.9.3 sets forth a list of all machinery,
equipment, furniture, fixtures, vehicles and other items of tangible personal
property that are leased by Gold Kist and that are primarily used in the Inputs
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 Inputs Business. Gold Kist has valid leasehold interests in all
the Leased Personal Property. The Personal Property Leases are valid and in full
force and effect.
6.9.4. All of the Owned Personal Property and Leased Personal
Property used by Gold Kist in the Inputs Business and the operations thereof is
owned or leased by Gold Kist and not owned or leased by any member, shareholder
or affiliate thereof. To the Best Knowledge of Gold Kist, 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 Gold Kist's
present operations, subject to ordinary wear and tear. To the Best Knowledge of
Gold Kist, the Inputs Business is not conducted under any material restriction
imposed upon Gold Kist (but not imposed upon other persons conducting similar
businesses or operating similar assets for similar purposes in the localities
where its businesses and assets are located) by any zoning, anti-pollution,
health or other law, ordinance or regulation.
6.10. Accounts Receivable. The Accounts Receivable are valid and bona
-------------------
fide obligations resulting from the operations of the Inputs Business prior to
the Closing and, to the Best Knowledge of Gold Kist arose out of arms-length
transactions free of known defenses and without right of set off or deduction on
the part of account debtors. To the Best Knowledge of Gold Kist, no basis
presently exists for the assertion of any defense, counterclaim or set-off.
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6.11. Intellectual Property.
---------------------
6.11.1. Schedule 6.11 sets forth a list of all trademarks,
trademark registrations, pending applications for trademark registrations (the
"Trademarks") trade names, service marks, copyrights and fictitious business
names used or owned by Gold Kist, or in which Gold Kist has any proprietary
interest, primarily in connection with the Inputs Business and all license
agreements (excluding pre-packaged, mass marketed computer software licensed by
third parties at a cost of less than $2,500 per license) with respect to any of
the foregoing as to which Gold Kist is a licensor or licensee (collectively, the
"Intellectual Property Rights"). Gold Kist is the sole owner of each item listed
on Schedule 6.11, free and clear of all Liens. All assignments of the Trademarks
have been recorded at the United States Patent and Trademark Office. Except as
set forth on Schedule 6.11, the Trademarks are currently in compliance with all
legal 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.
6.11.2. To the Best Knowledge of Gold Kist, Gold Kist has the
right to use, free and clear of any claims or rights of others all Intellectual
Property Rights used by Gold Kist in connection with the Inputs Business.
6.11.3. There are no pending or, to the Best Knowledge of Gold
Kist, threatened claims against Gold Kist by any person with respect to any of
the Trademarks or claims of infringement by Gold Kist on the rights of any
person, and, to the Best Knowledge of Gold Kist, no valid basis exists for any
such claim. Gold Kist has not received any written notice: (a) that any of the
Trademarks or Intellectual Property Rights infringe upon or otherwise conflict
with any patent, invention, copyright, trademark, service mark, trade name, or
trade secret of any other person or (b) of any claim by any other person that it
has any adverse right, title, claim, or interest in and to any of the Trademarks
or Intellectual Property Rights. The Trademarks and Intellectual Property Rights
constitute all of the intellectual property or proprietary rights required by
Gold Kist for the operation of the Inputs Business as presently conducted.
6.12. Inventory. Gold Kist has good and sufficient title to the
---------
Inventory, free and clear of any Liens. Except as set forth in Schedule 6.12,
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, all of which shall be
appropriately written-off or written down in accordance with the Inventory
Procedures in the Post-Closing Statement of Net Current Asset Value.
6.13. Labor Relations.
---------------
6.13.1. Except for the agreement with Teamsters Local Union No.
612, relating to the Guntersville, Georgia, Feed Mill, which Southern States is
not assuming, Gold Kist is not a party to any collective bargaining agreements
related to the Inputs Business. Gold Kist has furnished to Southern States a
copy of the collective bargaining agreement with
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<PAGE>
Teamsters Local Union No. 612, and such copy is correct and complete and
includes any and all modifications thereof.
6.13.2. To the Best Knowledge of Gold Kist: (a) Gold Kist 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 Inputs Business; (b) since
June 27, 1998, Gold Kist has not engaged in any unfair labor practice with
respect to the Inputs Business; (c) there is no unfair labor practice complaint
against Gold Kist pending before the National Labor Relations Board or any
similar state or local labor agency with respect to the Inputs Business; (d)
there is no labor strike, dispute, slowdown, representation question or stoppage
pending or threatened against or involving the Inputs Business; (e) there exists
no grievance which may have a material adverse effect upon the Inputs Business;
(f) no arbitration proceeding arising out of or under any collective bargaining
agreement is pending or threatened with respect to the Inputs Business; and (g)
since June 27, 1998, Gold Kist 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 Inputs Business.
6.14. Employees and Employee Benefits.
-------------------------------
6.14.1. Except as set forth on Schedule 6.14, there are no
employment contracts or severance agreements with any of the employees of Gold
Kist who are employed in the Inputs Business, including employees on leave of
absence (the "Business Employees"). Gold Kist has furnished to Southern States a
list of the Business Employees and will provide such additional information
concerning the Business Employees as Southern States may reasonably request,
subject to its existing policies with respect to providing information about its
employees to other potential employers.
6.14.2. Schedule 6.14 sets forth a complete list of all
employee benefit plans and programs to which Gold Kist is a party and in which
the Business Employees participate (the "Plans and Programs"). None of the Plans
and Programs are multiemployer plans (as defined in ERISA Section 3(37)).
6.15. Litigation. Except as set forth on Schedule 6.15, (a) Gold Kist
----------
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 Inputs 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 Gold
Kist, threatened, involving or against the Inputs 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 Inputs 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 Gold Kist, 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 Inputs
Business.
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6.16. Environmental. Except as set forth on Schedule 6.16, to the Best
-------------
Knowledge of Gold Kist with respect to the Purchased Assets and the Inputs
Business:
(a) all underground petroleum or chemical storage tanks located
under the Owned Real Property or the Leased Real Property are in compliance with
all Environmental Laws, including all regulations regarding petroleum
underground storage tanks that are scheduled to become effective in December
1998;
(b) Gold Kist 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
disposition of any Hazardous Material, nor has Gold Kist 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 Owned Real Property,
the Leased Real Property or the other Purchased Assets;
(c) included within the list of Permits on Schedule 6.8 are all
Permits and other governmental authorizations currently held by Gold Kist
pursuant to or relating to any Environmental Law, including EPA product
registrations (the "Environmental Permits"), and Gold Kist is conducting the
Inputs Business in compliance with the Environmental Permits, which constitute
all of the permits, approvals, certificates, or other authorizations required to
be obtained from any public, governmental, regulatory or judicial authority to
conduct the Inputs Business in substantially the same manner and extent it is
presently conducted by Gold Kist; 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 Gold Kist with respect to
the Inputs Business, the Owned Real Property, the Leased Real Property or the
other Purchased Assets, including the properties of Scott G. Williams LLC.
6.17. Insurance. Gold Kist maintains policies of insurance which
---------
insure the Purchased Assets and the Inputs Business in commercially reasonable
amounts for occurrences normally insured against. There are no claims by Gold
Kist pending or, to the Best Knowledge of Gold Kist, threatened with respect to
the Purchased Assets or the Inputs Business under said policies or disputes with
underwriters, and, to the Best Knowledge of Gold Kist, all premiums due and
payable have been paid and all such policies are in full force and effect in
accordance with their respective terms.
6.18. Membership Information. The membership information to be
----------------------
provided to Southern States by Gold Kist pursuant to Section 2.1(n) above, which
shall consist of the names and addresses of current members of Gold Kist as a
result of their doing business with one or more of the Inputs Divisions, will be
complete and correct to the Best Knowledge of Gold Kist.
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ARTICLE VII
Representations and Warranties of Southern States
Southern States represents and warrants to Gold Kist as follows, and
acknowledges and confirms that Gold Kist 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 State of Virginia, and is (or will be at the
Closing Date) duly qualified to conduct business as a foreign corporation in the
States of Georgia, Alabama, South Carolina, Florida, Mississippi, Tennessee,
Louisiana, Texas and Arkansas. Southern States has the requisite corporate power
and authority to execute and 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 Gold Kist
8.1. Access. Prior to the Closing, Gold Kist shall provide Southern
------
States with reasonable access during normal business hours to the Purchased
Assets and to Gold Kist's employees, officers, agents and consultants, books and
records (including property or sales tax returns), compensation and employee
benefit plan documents, and such other information relating to the Inputs
Business and the Business Employees subject to its existing policies with
respect to providing information about its employees to other potential
employers, as Southern States may reasonably request. Gold Kist shall provide
Southern States with, or allow Southern States to make, copies, at Southern
States' expense, of any requested materials that are relevant
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<PAGE>
to the Inputs Business and do not contain any confidential or proprietary
information about Gold Kist or otherwise violate any internal procedures of Gold
Kist. Gold Kist shall authorize the independent accountants of Gold Kist to
allow the independent accountants of Southern States to review the work papers
and other accounting records of Gold Kist's accountants prepared in connection
with the preparation of the Inputs Financial Statement as provided for in
Section 8.9 below. Southern States shall use its reasonable efforts to minimize
any disruption to Gold Kist's business in connection with the conduct of the due
diligence process contemplated herein, and Gold Kist 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 Gold Kist or the Inputs Business. Prior to the Closing, Southern States
will not, without the consent of Gold Kist, conduct a "Phase II" environmental
assessment or any other environmental investigation of Gold Kist's Owned or
Leased Real Property or any former real property of Gold Kist, other than visual
inspections of the properties; provided, however, that Gold Kist acknowledges
that Southern States may conduct any Phase II assessment, or any other
environmental investigation, with respect to those matters identified on
Schedule 14.12.
8.2. Conduct of Business.
-------------------
8.2.1. Affirmative Covenants. Prior to the Closing, except as
---------------------
may be agreed to in writing by Gold Kist and Southern States, Gold Kist shall
conduct the Inputs Business, in all material respects, according to its ordinary
and usual course of business and consistent with Gold Kist's prior practice.
Without limiting the generality of the foregoing, Gold Kist shall: (a) maintain
in effect and fully perform all of its obligations under the Contracts 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 Gold Kist
of any default or breach or alleged default or breach under any of the Material
Contracts, the Real Property Leases or the Personal Property Leases and of any
claim or threat to commence any action, suit, proceeding, or investigation
against Gold Kist with respect to the Inputs Business; (c) maintain the Owned
Personal Property, the Leased Personal Property and Improvements on the Owned
Real Property and the Leased Real Property in the same condition and repair as
on the date of this Agreement, ordinary wear and tear excepted; (d) protect and
maintain in effect the Trademarks and the Trade Secrets; (e) comply, in all
material respects, with all laws applicable to it in the conduct of the Inputs
Business; (f) preserve the business of the Inputs Business; (g) 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 (h) promptly advise Southern States of any breach of any
representation or warranty, covenant, condition or obligation of Gold Kist
hereunder.
8.2.2. Negative Covenants.
------------------
(a) Prior to the Closing, except as may be agreed in writing
by Gold Kist and Southern States, Gold Kist shall not: (i) make or commit to
make any capital expenditures with respect to the Inputs Business, individually
or in the aggregate, in excess of $100,000; (ii) enter into or agree to enter
into any lease, contract, commitment, transaction or understanding of any kind
with respect to the Inputs Business, outside of the ordinary course of business,
or to amend or agree to amend any of the Material Contracts, the Personal
Property Leases or the Real Property Leases except in the ordinary course of
business; (iii) enter into any
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hedging contract, forward purchase or forward delivery contract, or other
similar contract, arrangement, or agreement relating to the Inputs Business
involving any commitment extending beyond the Closing Date; or (iv) voluntarily
take any action which would render any representation and warranty of Gold Kist
contained in Article VI hereof inaccurate at any time between the date hereof
and the Closing Date, including as of the Closing Date.
(b) If Gold Kist proposes to Southern States in writing that
Gold Kist enter into any hedging contract, forward purchase or forward delivery
contract, or other similar contract, arrangement, or agreement relating to the
Inputs Business involving a commitment extending beyond October 12, 1998, which
written proposal (x) sets forth the basic terms of such contract or agreement,
including the proposed product, delivery date and price, (y) states that such
contract or agreement is subject to the provisions of this Section 8.2.2(b), and
(z) is not approved by Southern States (a "Rejected Proposed Contract"), then,
if the Closing does not occur (i) Southern States will pay to Gold Kist an
amount equal to any net profit which Gold Kist would have realized on all of
such Rejected Proposed Contracts in the aggregate on or before the Rejected
Proposed Contract Termination Date had Gold Kist entered into all of the
Rejected Proposed Contracts, and (ii) Gold Kist will pay to Southern States an
amount equal to any net loss which Gold Kist would have realized on all of such
Rejected Proposed Contracts in the aggregate on or before the Rejected Proposed
Contract Termination Date had Gold Kist entered into all of the Rejected
Proposed Contracts (such calculation to be made and such amount to be paid in
either event as soon as may be practicable after the Rejected Proposed Contract
Termination Date). For purposes of this paragraph, the "Rejected Proposed
Contract Termination Date" shall mean the date as of which all of the Rejected
Proposed Contracts would have matured had they been entered into.
8.2.3. Railroad Agreements. Notwithstanding any other provisions
-------------------
in this Agreement, Gold Kist may cancel any and all Railroad Agreements used in
the Inputs Business, listed on Schedule 8.2.3 hereof, at any time on or before
Closing, and Southern States acknowledges that Gold Kist will not obtain any
consents from the Railroads to the assignment of the Railroad Agreements as a
part of this transaction.
8.3. Consents of Third Parties. Gold Kist 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, or to continue in effect and to assure that the Inputs Business
and Southern States shall be entitled to all of the benefits of the Contracts,
including 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
Contracts; (iii) as required, the consent of any governmental, public or
regulatory authority to the assignment to Southern States of the Assignable
Permits; and (iv) the consent of the other member of Scott G. Williams, LLC. to
the Operating Agreement Assignment and Amendment.
8.4. Cooperation. Gold Kist shall cooperate with Southern States to
-----------
effect the consummation of the transactions contemplated herein on the Closing
Date.
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8.5. Industrial Revenue Bond. Prior to the Closing, Gold Kist shall
-----------------------
use commercially reasonable efforts to permit Southern States to assume Gold
Kist's obligations under the Bulloch County, Georgia IDA Bond.
8.6. Supplement to Schedules. After the date hereof, Gold Kist 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 Gold Kist not
having made such supplement or amendment.
8.7. Satisfaction of Conditions. Gold Kist 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 Gold
Kist; however, the foregoing shall not constitute a limitation upon the
covenants and obligations of Gold Kist otherwise expressly set forth in this
Agreement.
8.8. 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, Gold Kist 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, Gold Kist 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. Gold Kist 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. Gold
Kist 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 Gold Kist Inputs Business as defined and specified in
Article II of this Agreement.
8.9. Audit of Gold Kist Inputs Business. In contemplation of the
----------------------------------
consummation of the transaction contemplated by this Agreement, Gold Kist will
develop in connection with the preparation of its audited financial statements
for its fiscal year ending June 27, 1998, a separate audited financial statement
for the Gold Kist Inputs Business (the "Inputs Financial Statement"), which
shall include a balance sheet as of June 27, 1998 and June 28, 1997, and a
related statement of operations, cash flows and, if and to the extent mutually
21
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agreed, a statement of divisional equity, in any case for each of the three
years ended June 29, 1996, June 28, 1997, and June 27, 1998. Southern States and
Gold Kist agree to share equally the cost of preparing the Inputs Financial
Statement. Gold Kist will use its best efforts to have the Inputs Financial
Statement completed within 60 days of the end of its fiscal year and will make
the Inputs Financial Statement for the Inputs Business available to Southern
States for use in arranging any financing required by Southern States in
connection with the Purchase Transaction.
ARTICLE IX
Covenants of Southern States
9.1. Cooperation. Southern States shall cooperate with Gold Kist to
-----------
effect the consummation of the transactions contemplated herein on the Closing
Date and will use its reasonable efforts to obtain the necessary financing.
Southern States shall also use its reasonable efforts to cause Gold Kist 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 Gold
Kist 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 Gold Kist contained in Article X to be
satisfied to the extent that the satisfaction of such conditions is in the
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.
9.4. Amendment of Bylaws and Board Resolutions. As of the Closing,
-----------------------------------------
Southern States shall have amended its Bylaws to the extent any such amendment
shall be necessary to carry out the intent of this Section 9.4 and Section 14.1,
and its Board of Directors shall have adopted appropriate resolutions, to
provide for (i) the establishment and maintenance for up to two years following
the Closing of a separate allocation unit of Southern States for the operation
of the retail facilities of the Inputs Business for purposes of operations and
patronage; and (ii) the addition of six (6) seats on the Southern States Board
of Directors to proportionately represent the members who will be served by
Southern States through its acquisition of the Purchased Assets and its
operation of the Inputs Business. Southern States will provide that initially
the six additional seats on its Board of Directors will be filled for staggered
terms by designees of Gold Kist serving on the Gold Kist Board of Directors. A
copy of such Bylaws as proposed to be amended to the extent necessary for this
Section 9.4 and Section 14.1 and proposed resolutions referred to above are
attached to this Agreement as Schedule 9.4.
22
<PAGE>
ARTICLE X
Conditions Precedent to the Obligations of Gold Kist
The obligations of Gold Kist 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 Gold Kist:
10.1. Performance of Obligations. Southern States shall have
--------------------------
performed, or complied with, in all respects, all of its agreements and
covenants 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 Gold Kist a Certificate of an
officer of Southern States dated as of the Closing Date, certifying to that
effect.
10.3. Closing Consents. Gold Kist 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. Opinion of Counsel to Southern States. Southern States shall
-------------------------------------
have delivered to Gold Kist the opinion of its counsel, Mays & Valentine,
L.L.P., dated the Closing Date, in form and substance satisfactory to Gold Kist
and its counsel.
10.5. Miscellaneous. Gold Kist shall have received such other
-------------
instruments and documents as Gold Kist and its counsel may reasonably request,
including but not limited to the instruments and documents to be delivered by
Southern States to Gold Kist pursuant to Section 5.3 hereof.
10.6. 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.
10.7. 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 Gold Kist contained in this Article X.
23
<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. Gold Kist shall have performed, or
--------------------------
complied with, in all respects all of its agreements and covenants hereunder.
11.2. Representations and Warranties. The representations and
------------------------------
warranties of Gold Kist 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
Gold Kist shall deliver to Southern States a Certificate of an officer of Gold
Kist, dated as of the Closing Date, certifying to that effect.
11.3. Closing Consents. Gold Kist and Southern States shall have
----------------
received the Closing Consents, (including the Operating Agreement Assignment and
Amendment) and any HSR Act waiting period with respect to the transaction
contemplated hereby shall have expired or been terminated.
11.4. Opinion of Counsel to Gold Kist. Gold Kist shall have delivered
-------------------------------
to Southern States the opinion of its General Counsel, dated the Closing Date,
in form and substance satisfactory to Southern States and its counsel.
11.5. No Material Adverse Change. There shall be no material adverse
--------------------------
change in the assets, liabilities, the business or condition, financial or
otherwise, or the results of operations of the Inputs Business.
11.6. Transition Services. On or before the Closing, Gold Kist and
-------------------
Southern States shall have entered into a Transition Services Agreement in
substantially the same form as Exhibit I hereto, pursuant to which Gold Kist
shall provide to Southern States the services specified therein and on the terms
and conditions set forth therein.
11.7. 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.
11.8. CFI Product Purchase Agreement. Southern States shall have
------------------------------
received the consent of CF Industries, Inc. to the assumption of Gold Kist's
member purchase rights and obligations under the CFI Product Purchase Agreement.
11.9. 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 Gold Kist to Southern States pursuant to Section 5.2 hereof.
24
<PAGE>
11.10. 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. Gold Kist agrees to use commercially reasonable efforts to have any such
injunction or order lifted.
11.11. 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 Gold Kist and Southern States,
dated February 3, 1998 (the "Confidentiality Agreement") subject to Southern
States' and Gold Kist'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 Gold Kist. 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. Also,
until termination of this Agreement as provided for in Article XVI, Gold Kist
agrees it will not reveal the terms of the Southern States proposal set out
herein or in the letter of intent between the parties dated May 15, 1998, to any
person other than those directors, officers, agents and employees, including
attorneys, accountants and business or financial advisors, who need to know such
information, except as contemplated by this Section 12.1.
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 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.
25
<PAGE>
ARTICLE XIII
Destruction of Tangible Assets
13.1. Condition of Tangible Assets. At the Closing, Gold Kist 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. Gold Kist 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 Gold Kist,
and all insurance proceeds payable as a result thereof shall be paid and belong
solely to Gold Kist.
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 Inputs Business (either
(a) or (b) referred to herein as a "Material Loss"), Southern States may in its
sole discretion, by written notice to Gold Kist, 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, Gold Kist and Southern States
shall consummate the transactions contemplated in this Agreement, and at the
Closing Gold Kist 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 Gold Kist 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 to differ materially from the date
hereof if the sum of the book value, as shown on the Gold Kist's books and
records, of the Owned Personal Property destroyed or damaged, or the aggregate
costs of all necessary repairs to, and replacements of, the Owned Personal
Property, is greater than ten percent (10%) of its book value as shown on the
Gold Kist's books and records.
13.4. Liability Upon Termination. If this Agreement is terminated by
--------------------------
Southern States pursuant to this Article XIII, neither Gold Kist nor Southern
States shall be liable or obligated to the other except and to the extent as may
be expressly provided in this Agreement.
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<PAGE>
ARTICLE XIV
Post-Closing and Other Matters
14.1. Operations of Inputs Business After the Closing. Subject
-----------------------------------------------
to appropriate amendments to the bylaws of Southern States to the extent any
such amendment shall be necessary, after the Closing, the retail facilities of
the Gold Kist Inputs Business shall be maintained and operated for a period of
up to two (2) years as the "Southern Retail" allocation unit of Southern States.
14.2. Gold Kist Inputs Business-Members and Patrons. Promptly
---------------------------------------------
following the Closing, Southern States will undertake to add as members of
Southern States those agricultural producers eligible for membership in Southern
States who are members of Gold Kist and who have been, or are, doing business
with the Gold Kist Inputs Divisions. Southern States will undertake to do
business with such persons on a cooperative basis under the articles of
incorporation and bylaws of Southern States as the same shall exist from time to
time. Southern States will, as soon as practical after the Closing, issue to
each such person one share of membership common stock ($1 par value) which
shares shall be deemed to be fully paid at the time of issuance as a result of
the transfer of the Purchased Assets to Southern States by Gold Kist. Patronage
refund allocations or "notified equities" of Gold Kist held by such members of
Gold Kist at the time of Closing shall remain as equity interests of Gold Kist
and Southern States shall have no rights or obligations with respect thereto.
14.3. Employees and Employee Benefits.
-------------------------------
14.3.1. Southern States will undertake to take
applications and consider for employment in connection with its acquisition of
the Inputs Business as many of the Business Employees who are able to work and
are employed on a full-time basis as of the Closing Date, except where there is
a redundancy of position or process or where positions do not fit within the
Southern States organization. The Business Employees to whom Southern States
offers employment and who elect to become employees of Southern States are
hereinafter referred to as the "Transferred Employees". The Transferred
Employees shall become employees of Southern States effective at 12:01 a.m.
Eastern Standard Time on the Closing Date or such later date as may be mutually
agreed upon by the parties. If Gold Kist and Southern States agree that the
Transferred Employees will not become employees of Southern States on the
Closing Date, Gold Kist will lease the Transferred Employees to Southern States
pursuant to a mutually agreed upon employee lease agreement. 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.
14.3.2. Gold Kist shall be and remain liable and
responsible for any and all liabilities or payments arising, prior to the
Closing, in respect to the employment by Gold Kist of the Business Employees or
the termination of that employment, including but not limited to (i) all claims
relating to workers' compensation whether incurred or made by the Business
Employees arising out of events or circumstances which occurred prior to the
Closing Date; (ii) all health expenses incurred by the Business Employees prior
to the Closing Date, whether or not claims for such expenses have been filed
prior to the Closing Date; (iii) any bonus or incentive
27
<PAGE>
plans maintained by Gold Kist; (iv) any severance payable to any of the Business
Employees by reason of the termination of their employment with Gold Kist,
whether such severance is payable under any policy, Plan or Program of Gold Kist
or any collective bargaining agreement referenced in Section 6.13.1, and whether
or not such Business Employees become Transferred Employees; (v) any vacation
accrual which is or becomes payable upon the termination of employment with Gold
Kist; (vi) any benefits payable to the Business Employees under any of Gold
Kist's Plans and Programs; and (vii) any salary, wages or other compensation
payable to the Business Employees for any period of employment prior to the
Closing.
14.3.3. Southern States shall not assume, and Gold
Kist shall retain all obligations to fund or otherwise shall provide all
benefits in respect of or payable under, Gold Kist's Plans and Programs. No
assets or liabilities of any of Gold Kist's Plans and Programs shall be
transferred from such Plans and Programs to any plan maintained or established
by Southern States.
14.3.4. Subject to restrictions and limitations
imposed by applicable law, Southern States agrees to make available to the
Transferred Employees its employee pension benefit plans and programs and for
purposes of determining eligibility to become a participant, to treat service
with Gold Kist or any of its affiliates through the Closing Date as service with
Southern States. In addition, for purposes of determining vesting in the
Southern States employee pension benefit plans, Southern States agrees to treat
service, up to 5 years, with Gold Kist or any of its affiliates through the
Closing Date as service with Southern States.
14.3.5. Subject to restrictions and limitations
imposed by applicable law or by limitations imposed by insurance companies
providing plan benefits or stop loss insurance with respect to the plans,
Southern States agrees to make available to the Transferred Employees its
employee welfare benefit plans and programs and for purposes of determining
eligibility to become a participant, to treat service with Gold Kist or any of
its affiliates through the Closing Date as service with Southern States.
Southern States shall use its best efforts to provide such coverage without
regard to any waiting period, evidence and requirement of insurability,
preexisting condition, actively at work requirement or exclusion or limitation
(except to the extent and in the manner any such waiting period, evidence and
requirement of insurability, preexisting condition, actively at work requirement
or exclusion or limitation applies immediately prior to the Closing). In
addition Southern States will treat service with Gold Kist by the Transferred
Employees as service with Southern States for purposes of vacations, seniority
and the like.
14.3.6. Gold Kist agrees to provide Southern States
with such records as Southern States may reasonably request regarding service of
and participation by employees prior to the Closing Date in employee benefit
plans and programs maintained or participated in by Gold Kist.
14.4. Allocation of Purchase Price. Gold Kist and Southern
States shall allocate the Estimated Purchase Price, when determined, among the
Purchased Assets and the Assumed Liabilities in accordance with an allocation
schedule substantially in the form set forth on Exhibit J. As soon as may be
practicable after the Closing, Gold Kist and Southern States shall amend Exhibit
J to reflect any adjustments to the Estimated Purchase Price made pursuant to
28
<PAGE>
Section 4.5. 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, Gold Kist and Southern States employing the
allocation of the Purchase Price made pursuant to this Section 14.4 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 Gold Kist 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
Gold Kist 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 Gold Kist 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. Gold Kist 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.
14.5. Transition Services Agreement. As a condition to the
-------------------------------
Closing, Gold Kist and Southern States shall enter into a transition services
agreement substantially in the form of Exhibit I hereto (the "Transition
Services Agreement"), pursuant to which Gold Kist agrees to use reasonable
commercial efforts to provide Southern States with certain accounting, computer
and related information support services relating to the operations of the
Inputs Business at a fee equivalent to Gold Kist's costs of providing such
services. Such costs shall include all direct and indirect costs of such
services, including, but not limited to, a reasonable allocation of overhead of
Gold Kist, all stay bonuses, hiring costs and other expenses associated with the
employees providing such services, any costs related to assets used in providing
the services, interest on advances made for the services at Gold Kist's cost of
funds, and any costs associated with any errors of Gold Kist except errors that
reflect the gross negligence of Gold Kist.
14.6. Use of the Gold Kist Name by Southern States after
-------------------------------------------------------
Closing. Gold Kist acknowledges and agrees that Southern States shall have the
- -------
right (i) until the close of business on June 30, 1999, to utilize the packaging
included in the Inventory or replacement packaging therefor, that is imprinted
with the words "Gold Kist" or the initials or trade symbol "GK" (or words or
symbols to similar effect), (ii) until the close of business on September 30,
1999, to sell products or supplies that utilize such packaging and (iii) until
the close of business on the date which is six (6) months after the Closing Date
to utilize trucks and other rolling stock and signage imprinted with the words
"Gold Kist" or the initials or trade symbol "GK" (or words or symbols to similar
effect). At Closing, Gold Kist will abandon the trademarks listed on Schedule
14.6 which utilize the symbol "GK" as a part of the mark. Except as otherwise
provided herein, any use of the name "Gold Kist" or the trade symbol "GK" by
Southern States after the Closing shall only be as authorized in writing by Gold
Kist. Southern States shall be responsible for and shall ensure that all goods
provided and offered by Southern States under the name "Gold Kist" or the trade
symbol "GK" shall be advertised, offered and provided in a high quality manner
and consistent with the quality control standards established by Gold Kist.
Southern States shall cooperate with Gold Kist in facilitating Gold Kist's
control of the quality of goods offered under the name "Gold Kist" or the trade
symbol "GK", to permit reasonable, periodic inspection of
29
<PAGE>
Southern State's operations, at reasonable times and with reasonable notice, and
to supply Gold Kist with specimens of all uses of the name "Gold Kist" or the
trade symbol "GK" upon request.
14.7. Post-Closing Rebates and Annual Volume Discounts. To
------------------------------------------------
the extent any Inputs Business product purchase refund, rebate, annual volume
discount or similar payment is made to Gold Kist after the Closing by any vendor
or supplier of products or supplies, such refund, rebate, annual volume discount
or similar payment shall be paid over to Southern States to the extent such
payment shall be attributable to Inventory purchased by Southern States pursuant
to this Agreement; provided, however, that none of such refunds, rebates, annual
volume discounts or similar payments will be used to reduce Gold Kist's costs of
the Inventory in determining the Net Current Asset Value. To the extent any
Inputs Business product purchase refund, rebate, annual volume discount or
similar payment made to Gold Kist after the Closing shall be based upon sales
volume, such payment shall be paid over to Southern States to the extent any
portion of such payment shall be attributable to sales by Southern States on or
after the Closing Date; provided, however, that the Inventory that is sold by
Southern States will not be counted as both Inventory and sales by Southern
States for purposes of acquiring portions of the same payments under this
Section 14.7. Gold Kist shall provide Southern States upon request with a copy
of any supporting information furnished to Gold Kist by any vendor or supplier
of products in connection with any such refund, rebate, annual volume discount
or similar payment. To the extent any Inputs Business product purchase refund,
rebate, annual volume discount or similar payment made to Southern States after
the Closing shall be based upon sales volume, such payment shall be paid over to
Gold Kist to the extent any portion of such payment shall be attributable to
sales by Gold Kist on or before the Closing Date. Southern States shall provide
Gold Kist upon request with a copy of any supporting information furnished to
Southern States by any vendor or supplier of products in connection with any
such refund, rebate, annual volume discount or similar payment. Gold Kist and
Southern States shall use their reasonable commercial efforts to have each
supplier combine the respective sales where the combination will produce more
rebate, annual volume discount or similar payment. The parties shall share
proportionately in any overall such payments, with all sales sharing equally in
the payments.
14.8. WARN Act. If a plant closing or a mass layoff occurs or
--------
is deemed to occur with respect to the Inputs Business in connection with the
transactions contemplated in this Agreement or after the Closing, Southern
States shall be solely responsible for providing all notices required under the
Work Adjustment and Retraining Notification Act, 29 U.S.C. ss.2109 et seq. or
the regulations promulgated thereunder (the "WARN Act") and for taking all
remedial measures, including without limitation, the payment of all amounts,
penalties, liabilities, costs and expenses if such notices are not provided.
14.9. 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.
14.10. Non-Competition. In consideration of Southern States'
----------------
purchase of the Inputs Business pursuant to this Agreement, Gold Kist agrees
that for a period of five (5) years following the Closing Date, it will not,
directly or indirectly, for itself or on behalf of any
30
<PAGE>
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 in direct competition with any
portion of the Inputs Business within any part of the "Trade Area," as defined
herein, it being acknowledged that none of Gold Kist's other businesses,
including but not limited to its feed production for its poultry and aquaculture
operations, are in competition with any portion of the Inputs Business and that
Gold Kist may acquire up to 5% of the outstanding securities of any competitor
of the Inputs Business whose securities are publicly traded. For purposes of
this Section 14.10, "Trade Area" shall mean the states of Georgia, South
Carolina, Florida, Alabama, Mississippi, Louisiana, Texas, Arkansas, and
Tennessee. Gold Kist recognizes that irreparable injury may result to Southern
States if Gold Kist breaches this Section 14.10, and Gold Kist 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 Gold Kist from engaging in any such act.
14.11. Cooperation Regarding Tax Filings. Gold Kist and
---------------------------------
Southern States shall reasonably cooperate, and shall use reasonable efforts to
cause their respective affiliates, officers, employees, agents, auditors and
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.
"Representatives" means, with respect to any person, the officers, employees,
counsel, accountants, financial advisers, consultants, agents, auditors and
other representatives of such person.
14.12. Investigations After Closing. For a period of ten (10)
----------------------------
years following the Closing, Southern States agrees that it will not conduct
environmental investigations of any Owned Real Property or Leased Real Property
for the purpose of triggering coverage under the indemnity provided pursuant to
Article XV below; provided, however, that Gold Kist acknowledges that (i)
Southern States may conduct any such environmental investigations with respect
to those matters identified on Schedule 14.12, and (ii) as to any other
properties, Southern States may conduct any environmental investigation to the
extent that such investigation is consistent with Prudent Environmental
Management Practice. For the purposes of this Agreement, an environmental
investigation shall be considered to be conducted consistent with Prudent
Environmental Management Practice only if it is necessary for expansion,
renovation, or sale of any property, is necessary to prevent adverse impacts to
human health or the environment, or is otherwise required by law. If a dispute
arises with respect to whether an investigation constitutes a Prudent
Environmental Management Practice, Gold Kist and Southern States agree to
negotiate in good faith in an attempt to resolve such dispute. In the event such
dispute cannot be resolved within twenty (20) days of written notice of a
dispute (or shorter period as exigent circumstances may warrant), Gold Kist and
Southern States shall sel ect within fourteen (14) days thereafter a mutually
satisfactory Environmental Arbitrator, who shall review the information relevant
to the dispute provided by the parties. The Environmental Arbitrator shall,
within thirty (30) days, render a decision binding upon the parties hereto
(absent mutual agreement of the parties to an alternate resolution) and the
parties may enforce any final determination of the Environmental Arbitrator in
any court of competent jurisdiction. If the parties cannot agree on the
selection of an Environmental Arbitrator, the provisions of Section 18.12 of
this Agreement shall apply.
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ARTICLE XV
Indemnification
15.1. Survival. Each of the covenants, agreements, and
--------
representations and warranties of Gold Kist and Southern States herein shall
survive the Closing until 5:00 p.m. Eastern Standard Time on June 30, 2001, at
which time, such covenants, agreements, representations and warranties shall
expire and terminate, provided, however, that (i) the representations and
warranties of Gold Kist respecting taxes set forth in Section 6.5 shall survive
the Closing for the applicable statute of limitations; (ii) the representations
and warranties of Gold Kist respecting environmental matters set forth in
Section 6.16 shall survive the Closing until 5:00 p.m. Eastern Standard Time on
the first anniversary of the Closing Date, at which time such representations
and warranties shall expire and terminate; (iii) the representations and
warranties of Gold Kist to the extent they apply solely to title to the
Purchased Assets set forth in Sections 6.6.1, 6.9.2 and 6.12, and the obligation
of Gold Kist 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 Gold Kist 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 until 5:00
p.m. Eastern Standard Time on the tenth anniversary of the Closing Date, at
which time such representations and warranties shall expire and terminate; (v)
the representations and warranties of Gold Kist set forth in the second sentence
of Section 6.12 shall expire and terminate at Closing; and (vi) the covenants
and agreements of Gold Kist or Southern States to be performed after Closing
Date shall survive the Closing without limitation as to time (the "Survival
Period").
15.2. Indemnification by Gold Kist. Subject to the provisions
----------------------------
of Sections 15.3 and 15.6, Gold Kist 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
Gold Kist of any representation and warranty made by Gold Kist 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 Gold Kist of any agreement or covenant of Gold Kist 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 Gold Kist 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 Gold Kist.
-------------------------------------------
(a) Notwithstanding the provisions of Section 15.2,
Gold Kist shall have no liability to indemnify Southern States Indemnified
Persons hereunder until the aggregate amount of Southern States Indemnified
Persons' indemnifiable losses exceeds $500,000 (the
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"Gold Kist Minimum Amount"). If the aggregate amount of Southern States
Indemnified Persons' indemnifiable losses exceeds the Gold Kist Minimum Amount,
Gold Kist shall Indemnify Southern States Indemnified Persons for the amount
that such indemnifiable losses exceed the Gold Kist Minimum Amount and are less
than or equal to $10,000,000. The foregoing limitations shall not apply to Gold
Kist's indemnification obligations with respect to the following: (i) the
Excluded Liabilities; (ii) the representations and warranties of Gold Kist to
the extent they apply solely to title to the Purchased Assets set forth in
Sections 6.6.1, 6.9.2 and 6.12; (iii) any liability or obligation arising from
any Pre-Closing Environmental Condition or the representations and warranties of
Gold Kist respecting environmental matters contained in Section 6.16 (all of
which matters shall be subject to the limitation of paragraph (b) of this
Section 15.3); (iv) the representations and warranties of Gold Kist respecting
taxes set forth in Section 6.5; (v) the covenants or agreements of Gold Kist to
be performed after Closing Date; or (vi) the failure to comply with the Bulk
Transfer Laws.
(b) Notwithstanding the provisions of Section 15.2.,
Gold Kist shall have no liability to indemnify Southern States Indemnified
Persons hereunder with respect to the matters referenced in clause (iii) of
Section 15.3(a) above with respect to any individual claim until the aggregate
amount of Southern States Indemnified Persons' indemnifiable losses exceed
$15,000 for such claim; provided however, that if the aggregate amount of any
such losses with respect to a claim exceeds $15,000, Gold Kist shall indemnify
Southern States for the entire amount of such claim, including the initial
$15,000 amount.
(c) Notwithstanding the provisions of Sections 15.2
and 15.3(b), Gold Kist shall have no liability to indemnify Southern States
Indemnified Persons hereunder with respect to the matters referenced in clause
(iii) of Section 15.3(a) above for the amount that such indemnifiable losses are
in excess of $35 million.
(d) Notwithstanding the provisions of Section 15.2,
Gold Kist's liability to indemnify Southern States Indemnified Persons shall not
include any costs incurred by Southern States Indemnified Persons in the conduct
of any Site Remediation that was not required to be conducted (i) under any
lawful government order or directive; (ii) under any Environmental Law,
including any action levels or cleanup standards enforced thereunder; or (iii)
to prevent significant risk to human health.
(e) Subject to the provisions of this Article XV,
Southern States agrees that it will not make any new claim or file any new legal
action against Gold Kist for the cost of any Site Remediation claim that first
arises more than ten (10) years after the Closing Date.
15.4. Indemnification by Southern States. Subject to the
-----------------------------------
provisions of Sections 15.5 and 15.6, Southern States shall indemnify and hold
harmless Gold Kist and the directors, officers, employees and shareholders of
Gold Kist (the "Gold Kist Indemnified Persons") against and in respect of all
losses, costs, and expenses suffered or incurred or required to be paid by Gold
Kist Indemnified Persons as a result of: (i) the breach by Southern States of
any representation and warranty made by Southern States to Gold Kist 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 Inputs Business, including
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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 Gold Kist Indemnified Persons hereunder until the
aggregate amount of Gold Kist Indemnified Persons' indemnifiable issues exceeds
$500,000 (the "SSC Minimum Amount"). If the aggregate amount of Gold Kist
Indemnified Persons' indemnifiable losses exceeds the SSC Minimum Amount,
Southern States shall indemnify Gold Kist Indemnified Persons for the amount
that such indemnifiable losses exceed the SSC Minimum Amount and are less than
or equal to $10,000,000. The foregoing limitations 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; (c) the operations by Southern States from and after the Closing of any
Inputs 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 Gold Kist for indemnifiable losses, Southern States
Indemnified Persons shall give notice to Gold Kist 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 Gold Kist
receives the Notice of Loss, Gold Kist 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 Persons shall be entitled to indemnification for
such loss unless Gold Kist's failure to object was inadvertent, and Gold Kist
shall promptly pay such loss. If the failure of Gold Kist 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 Gold Kist receives a Notice of
Loss, Gold Kist 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 Gold
Kist and Gold Kist shall promptly pay such amount. Southern States Indemnified
Persons shall be entitled to indemnification for the portion of such claimed
loss to which Gold Kist objected to upon the earlier of: (a) the Gold Kist'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 Gold Kist Indemnified Persons seek
indemnification from Southern States for indemnifiable losses, Gold Kist
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 Gold Kist 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, Gold Kist
Indemnified Persons shall be entitled to indemnification for such loss unless
Southern States' failure to object was inadvertent, and Southern States shall
promptly pay
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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 Gold Kist 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, Gold Kist 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. Gold Kist 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 Gold
Kist'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.
(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
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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 Gold Kist 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.
15.6.5. Notwithstanding any other provision in this
Article XV, the following procedures shall apply to any claim arising under
clause (iv) of Section 15.2. above or with respect to a breach of the
representations and warranties set forth in Section 6.16. (collectively
"Environmental Claims").
(a) Any Environmental Claim that is of the nature of
a third party claim shall also be governed by the notification procedures set
forth in Section 15.6.1., provided, however, that Southern States shall be
deemed to have provided notice to Gold Kist of the matters identified in
Schedule 14.12. as of the Closing Date. In the event of any inconsistency
between the Section 15.6.1. procedures and the procedures set forth in this
Section 15.6.5., the procedures set forth in this Section 15.6.5. shall govern.
(b) Gold Kist shall assume Principal Management for
the matters identified in Schedule 14.12.
(c) Upon assertion of any Environmental Claim other
than claims arising from the matters identified in Schedule 14.12., Gold Kist
shall be entitled to assume Principal Management. To assume Principal
Management, Gold Kist must notify Southern States within thirty days of notice
to Gold Kist of the Environmental Claim, or such other period as the parties may
agree to in writing, that it intends to assume Principal Management. In the
event Gold Kist does not undertake Principal Management, Southern States may
assume Principal Management of the subject matter of the Environmental Claim.
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(d) The party that does not have Principal Management
for an Environmental Claim shall be entitled, at its sole cost and expense, to
reasonably participate in the management of such Environmental Claim. Such
participation shall include: (i) receiving copies of all reports, work plans and
analytical data submitted to governmental agencies, all notices or other letters
or documents received from governmental agencies, any other non-privileged
documents and correspondence materially bearing on the Environmental Claim, and
notices of material meetings; (ii) the opportunity to attend and participate in
such material meetings; (iii) the right of reasonable consultation with the
party exercising Principal Management; and (iv) the right to approve in writing
in advance all budgets for the Environmental Claim, all material contracts
related thereto, the submission of any cleanup plan or any similar material
action relating to the Environmental Claim and any amendment or modification
thereof, and the acceptance of any consensual governmental orders or
requirements (which approval shall not be unreasonably withheld or delayed).
(e) The party undertaking Principal Management
hereunder for any matter shall manage the matter in good faith and in a
responsible manner, and any activities conducted in connection therewith shall
be undertaken promptly and concluded as expeditiously and as economically as
practicable using commercially reasonable efforts, subject to the schedules and
approvals required by the applicable governmental authorities. The parties agree
to reasonably cooperate with one another in connection with addressing any
Environmental Claim. Either party may take such action as is reasonable under
the circumstances to respond to an actual or threatened emergency or imminent
endangerment situation arising from an Environmental Claim.
(f) Any action with respect to an Environmental Claim
shall be deemed adequate for purposes of satisfying the obligations of this
Section 15.6.5. to the extent such action: (i) attains compliance with any
lawful government order or directive and with applicable Environmental Laws,
including any action levels or cleanup standards enforced thereunder; (ii)
mitigates any significant risk to human health and (iii) achieves such actions
as economically as practicable.
(g) The parties agree to negotiate in good faith
regarding any dispute arising under this section 15.6.5. In the event such
dispute cannot be resolved within twenty (20) days of written notice of a
dispute (or shorter period as exigent circumstances may warrant), Gold Kist and
Southern States shall select within fourteen (14) days thereafter a mutually
satisfactory Environmental Arbitrator, who shall review the information relevant
to the dispute provided by the parties. The Environmental Arbitrator shall
within thirty (30) days render a decision binding upon the parties hereto
(absent mutual agreement of the parties to an alternate resolution) and the
parties may enforce any final determination of the Environmental Arbitrator in
any court of competent jurisdiction. If the parties cannot agree on the
selection of an Environmental Arbitrator, the provisions of Section 18.12 of
this Agreement shall apply.
(h) Gold Kist intends to acquire insurance against
Environmental Claims other than the matters identified in Schedule 14.12 and to
comply with the procedures required by the insurance company pursuant to the
insurance policy in handling any such Environmental Claim. Southern States shall
cooperate in good faith with Gold Kist in connection with such compliance,
including providing reasonable access to the properties related
37
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to the Environmental Claims; provided, however, Gold Kist expressly acknowledges
that Gold Kist's indemnity to Southern States under this Agreement will not be
affected by any provisions under any such insurance policy and that the
procedures required by such insurance policy will in no way affect the financial
obligations of Gold Kist under this Agreement with respect to any Environmental
Claim by Southern States and will not be relevant in determining whether or to
what extent any action with respect to an Environmental Claim is deemed
adequate, appropriate, responsible, commercially reasonable or timely for
purposes of satisfying the obligations of this Section 15.6.5.
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 deduction or tax
benefit received 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, a tax deduction, or 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 Gold Kist 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 Gold Kist and Southern
States;
(b) by Gold Kist (provided that Gold Kist is not in
breach of its obligations under this Agreement): (i) if Gold Kist 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 Gold Kist, 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 Gold Kist; 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
38
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or rectified on or before the Closing or such other prior date required by this
Agreement for the fulfillment of such condition; (ii) if Gold Kist breaches any
representation or warranty made by Gold Kist in this Agreement and such breach
has a material adverse effect on the Purchased Assets or the Inputs Business;
(iii) if Gold Kist fails to comply with any of its covenants or agreements
contained in this Agreement; or (iv) pursuant to Article XIII hereof.
(d) by either Gold Kist or Southern States if the
Closing shall not have occurred on or before November 15, 1998; 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.
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ARTICLE XVII
Bulk Transfer Laws, Expenses and Taxes
17.1. Bulk Transfer Laws. Gold Kist and Southern States hereby waive
------------------
compliance with the provisions of any applicable bulk transfer laws, or any
other similar laws ("Bulk Transfer Laws"), and Gold Kist 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 Gold Kist 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. To the extent such amounts are
---------------------------
not reflected in the calculation of the Estimated Purchase Price pursuant to
Section 4.2 hereof, real estate and ad valorem taxes imposed upon or assessed
against the Owned Real Property or the Leased Real Property or other Purchased
Assets shall be prorated as of the Closing Date.
17.5. Utilities and Other Charges. To the extent such amounts are
---------------------------
not reflected in the calculation of the Estimated Purchase Price pursuant to
Section 4.2 hereof, (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 Contracts and 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 Gold Kist related to the Inputs Business shall be
prorated as of the Closing Date as mutually agreed by Gold Kist and Southern
States.
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
40
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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 Gold Kist 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
With a copy to:
Mays & Valentine, L.L.P.
Post Office Box 1122
1111 East Main Street
Richmond, VA 23219
Attn: F. Claiborne Johnston, Jr., Esq.
Phone: 804-697-1214
Fax: 804-697-1339
If to Gold Kist:
Gold Kist Inc.
P. O. Box 2210
Atlanta, GA 30301-2210
Attn: J. David Dyson,
General Counsel, Vice President and Secretary
Phone: 770-393-5328
Fax: 770-393-5421
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With a copy to:
Alston & Bird LLP
1201 West Peachtree Street
Atlanta, GA 30309-3424
Attn: B. Harvey Hill, Jr., Esq.
Phone: 404-881-7446
Fax: 404-881-4777
18.4. Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision.
18.5. No Assignment. Neither this Agreement nor any interest herein
-------------
may be assigned by either party without the consent of the other party;
provided, however, that Southern States may assign any rights (but not the
obligations) of Southern States under the Agreement to any person providing
financing to Southern States; and provided further, that, upon written notice to
Gold Kist, 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 Gold Kist
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 Gold Kist 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 Georgia, 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.
42
<PAGE>
18.12. Arbitration. Except as otherwise set forth herein, any dispute
-----------
hereunder between Gold Kist 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 Georgia. The arbitration shall be conducted at the Association's regional
office located in the Charlotte, North Carolina 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 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
-------------------
(a) all accounts receivable and notes receivable of the Gold Kist Inputs
Business (excluding intercompany or intracompany accounts receivable) and (b)
all crop time notes receivable held by Agra Trade Financing, Inc. (to include
notes of Gold Kist patrons and Gold Kist dealers, but to exclude any and all
Dealer Direct Notes), in each case existing as of the Closing Date, as set forth
on the books and records of Gold Kist 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.
19.2. Assignable Permits. The term "Assignable Permits" shall have
------------------
the meaning set forth in Section 6.8.
19.3. Assumed Liabilities. The term "Assumed Liabilities" shall have
-------------------
the meaning set forth in Section 3.1.
19.4. Best Knowledge of Gold Kist. The term "Best Knowledge of Gold
---------------------------
Kist", including "Gold Kist's knowledge" and all similar terms or expressions in
this Agreement, shall mean the actual knowledge of the officers and employees of
Gold Kist listed in Schedule 19.4, and the knowledge of any other officers or
employees of Gold Kist shall not be the Best Knowledge of Gold Kist.
19.5. Bond Documents. The term "Bond Documents" shall mean all
--------------
documents and instruments executed in connection with the Bulloch County,
Georgia IDA Bond.
43
<PAGE>
19.6. Bulloch County, Georgia IDA Bond. The term "Bulloch County,
--------------------------------
Georgia IDA Bond" shall mean the Industrial Revenue Bond, in the original
principal amount of $6,700,000 issued by the Industrial Development Authority of
Bulloch County, Georgia, due 2016 (Statesboro Cotton Gin Project).
19.7. Bulk Transfer Laws. The term "Bulk Transfer Laws" shall have
------------------
the meaning set forth in Section 17.1.
19.8. Business Employees. The term "Business Employees" shall have
------------------
the meaning set forth in Section 6.14.1.
19.9. CFI Product Purchase Agreement. The term "CFI Product Purchase
------------------------------
Agreement" shall mean the Gold Kist Member Product Purchase Agreement dated
September 16, 1975 with CF Industries, Inc.
19.10. Closing. The term "Closing" shall have the meaning set forth
-------
in Section 5.1.
19.11. Closing Consents. "Closing Consents" shall mean those third
----------------
party consents included within the Required Consents that are marked by an
asterisk on Schedule 6.2.2.
19.12. Closing Date. The term "Closing Date" shall have the meaning
------------
set forth in Section 5.1.
19.13. Contracts. The term "Contracts" shall have the meaning set
---------
forth in Section 6.7.1; and shall specifically include the CFI Product Purchase
Agreement, to the extent Gold Kist's rights and duties thereunder may be
assignable, but shall specifically exclude any collective bargaining agreements
and any other contracts containing obligations or liabilities excluded in
Section 3.2.
19.14. Dealer Direct Notes. The term "Dealer Direct Notes" shall mean
-------------------
the notes with fertilizer or chemical dealers who are not retail customers of
Gold Kist, but not any notes of customers of such dealers.
19.15. Environmental Arbitrator. The term "Environmental Arbitrator"
------------------------
shall mean a mutually satisfactory technical consultant, lawyer, or other person
selected by Southern States and Gold Kist as an Environmental Arbitrator
pursuant to Section 14.12 or Section 15.6.5(g).
19.16. Environmental Claims. The term "Environmental Claims" shall
--------------------
have the meaning set forth in Section 15.6.5.
19.17. 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,
44
<PAGE>
groundwater or land; or otherwise relating to the handling of Hazardous
Materials or the clean-up or other remediation of Hazardous Materials.
19.18. Environmental Permits. The term "Environmental Permits" shall
---------------------
have the meaning set forth in Section 6.16.
19.19. Estimated Purchase Price. The term "Estimated Purchase Price"
------------------------
shall have the meaning set forth in Section 4.2.
19.20. Excluded Liabilities. The term "Excluded Liabilities" shall
--------------------
have the meaning set forth in Section 3.2.
19.21. Final Purchase Price. The term "Final Purchase Price" shall
--------------------
have the meaning set forth in Section 4.4.
19.22. GAAP. The term "GAAP" shall mean generally accepted accounting
----
principles as applied in the United States.
19.23. Gold Kist Indemnification Person. The term "Gold Kist
--------------------------------
Indemnification Person" shall have the meaning set forth in Section 15.4.
19.24. Gold Kist Minimum Amount. The term "Gold Kist Minimum Amount"
------------------------
shall have the meaning set forth in Section 15.3.
19.25. Guaranty Agreement. The term "Guaranty Agreement" shall mean
------------------
the guaranty by Gold Kist of obligations of Scott G. Williams, LLC. to Sun Trust
Bank.
19.26. 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.
19.27. 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.
19.28. Improvements. The term "Improvements" shall mean all of the
------------
buildings, structures, improvements, fixtures, and appurtenances, including
construction in progress, located on the "Owned Real Property," as defined
herein, or the "Leased Real Property," as defined herein, as the case may be.
19.29. Inputs Business. The term "Inputs Business" shall have the
---------------
meaning set forth in Section 2.1.
45
<PAGE>
19.30. Inputs Financial Statement. The term "Inputs Financial
--------------------------
Statement" shall have the meaning set forth in Section 8.9.
19.31. Intellectual Property Rights. The term "Intellectual Property
----------------------------
Rights" shall have the meaning set forth in section 6.11.1.
19.32. Inventory. The term "Inventory" shall mean all inventory of
---------
operating supplies, raw materials, work-in-process, and finished goods related
to the Inputs Business, counted pursuant to this Agreement.
19.33. Inventory Procedures. The term "Inventory Procedures" shall
--------------------
mean the Inventory Procedures as set forth in Exhibit A hereto.
19.34. Leased Personal Property. The term "Leased Personal Property"
------------------------
shall have the meaning set forth in Section 6.9.3.
19.35. Leased Real Property. The term "Leased Real Property" shall
--------------------
have the meaning set forth in Section 6.6.2.
19.36. 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.
19.37. Net Current Asset Value. The term "Net Current Asset Value"
-----------------------
shall mean the book value (lower of Gold Kist cost or market) of the Inventory,
net of usual and customary reserves, computed on a first-in first-out basis in
accordance with GAAP and the Inventory Procedures, plus the Accounts Receivable
----
as valued pursuant to GAAP and the Receivables Valuation Procedures, and plus
the Prepaid Expenses, as defined herein, less the accrued expenses and the trade
----
accounts payable of the Inputs Business, all as calculated in accordance with
GAAP; provided, however, that neither the current portion of the Bulloch County,
Georgia IDA Bond nor the current portion of the Solon Scott Lease will be
included as a liability in this computation if and to the extent that any such
current portion is included in the total amount of such respective obligation
deducted in the calculations of the Estimated Purchase Price pursuant to Section
4.2. and the Final Purchase Price pursuant to Section 4.4.
19.38. Nonassignable Permits. The term "Nonassignable Permits" shall
---------------------
have the meaning set forth in Section 6.8.
19.39. Operating Agreement Assignment and Amendment. The term
--------------------------------------------
"Operating Agreement Assignment and Amendment" shall mean the Assignment of
Interest and Amendment to Operating Agreement of the Scott G. Williams, LLC.,
delivered at closing pursuant to Section 5.2(g) and 5.3(e), substantially in the
form of Exhibit H attached hereto.
19.40. Owned Personal Property. The term "Owned Personal Property"
-----------------------
shall have the meaning set forth in Section 6.9.1.
46
<PAGE>
19.41. Owned Real Property. The term "Owned Real Property" shall have
-------------------
the meaning set forth in Section 6.6.1.
19.42. 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; (b) liens
for taxes not yet due and payable; and (c) liens existing in connection with the
Bulloch County, Georgia IDA Bond and the Solon Scott Lease.
19.43. Permits. The term "Permits" shall have the meaning set forth
-------
in Section 6.8.
19.44. Personal Property Leases. The term "Personal Property Leases"
------------------------
shall have the meaning set forth in Section 6.9.3.
19.45. Plans and Programs. The term "Plans and Programs" shall have
------------------
the meaning set forth in Section 6.14.2.
19.46. Post-Closing Environmental Conditions. The term "Post-Closing
-------------------------------------
Environmental Conditions" shall mean any and all conditions of any Owned Real
Property or 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 Inputs 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 Inputs Business.
19.47. Post-Closing Statement of Net Current Asset Value. The term
-------------------------------------------------
"Post-Closing Statement of Net Current Asset Value" shall mean the statement of
Net Current Asset Value, calculated as of the Closing Date.
19.48. Pre-Closing Environmental Conditions. The term "Pre-Closing
------------------------------------
Environmental Conditions" shall mean any and all conditions of any Owned Real
Property, Leased Real Property, or any other property formerly owned or leased
by Gold Kist as a part of the Inputs Business, or that is attributable to the
operations or properties of Scott G. Williams LLC., (to the extent of Southern
States' interest in Scott G. Williams, LLC.), 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
Inputs Business or the Purchased Assets on or before the Closing Date,
including, but not limited to, the scheduled conditions under Section 6.16 of
the Agreement.
47
<PAGE>
19.49. Pre-Closing Statement of Net Current Asset Value. The term
------------------------------------------------
"Pre-Closing Statement of Net Current Asset Value" shall mean the statement of
"Net Current Asset Value," as defined herein, calculated as of the Closing Date
as provided for in Section 4.1.
19.50. Prepaid Expenses. The term "Prepaid Expenses" shall mean those
----------------
accounts relating to the Inputs Business which benefit Southern States and are
included in the Post-Closing Statement of Net Current Asset Value.
19.51. Principal Management. The term "Principal Management" shall
--------------------
mean the authority to direct the handling of the subject matter of an
Environmental Claim as provided in Section 15.6.5.
19.52. Product Purchase Agreement Assignment and Assumption
----------------------------------------------------
Agreement. The term "Product Purchase Agreement Assignment and Assumption
- ---------
Agreement" shall mean the CF Industries, Inc. Product Purchase Agreement
Assignment and Assumption Agreement, delivered at Closing pursuant to Sections
5.2(f) and 5.3(d) as set forth substantially in the form of Exhibit G.
19.53. Purchased Assets. The term "Purchased Assets" shall have the
----------------
meaning set forth in Section 2.1.
19.54. Purchase Transaction. The term "Purchase Transaction" shall
--------------------
mean the asset purchase transaction contemplated by this Agreement and any and
all transactions related thereto.
19.55. Real Property Leases. The term "Real Property Leases" shall
--------------------
have the meaning set forth in Section 6.6.2.
19.56. Receivables Valuation Procedures. The term "Receivables
--------------------------------
Valuation Procedures" shall mean the Accounts Receivable Valuation Procedures as
set forth in Exhibit B hereto.
19.57. Records. The term "Records" shall have the meaning set forth
-------
in Section 2.1(n).
19.58. Rejected Proposed Contract. The term "Rejected Proposed
--------------------------
Contract" shall have the meaning set forth in Section 8.2.2.(b).
19.59. Rejected Proposed Contract Termination Date. The term
-------------------------------------------
"Rejected Proposed Contract Termination Date" shall have the meaning set forth
in Section 8.2.2(b).
19.60. Required Consents. The term "Required Consents" shall have the
-----------------
meaning set forth in Section 6.2.2.
19.61. Scott G. Williams, LLC. The term "Scott G. Williams, LLC."
----------------------
shall mean the Georgia limited liability company established under that name
under articles of organization dated June 27, 1997.
48
<PAGE>
19.62. Site Remediation. The term "Site Remediation" shall mean the
----------------
remediation of environmental conditions on any Owned Real Property or Leased
Real Property, including the investigation, cleanup, and monitoring of such
remediation.
19.63. Solon Scott Lease. The term "Solon Scott Lease" shall mean the
-----------------
Lease Agreement with Purchase Option dated January 5, 1995 between Gold Kist and
Scott Petroleum Corporation, a Mississippi corporation.
19.64. Southern States Indemnified Persons. The term "Southern States
-----------------------------------
Indemnified Persons" shall have the meaning set forth in Section 15.2.
19.65. SSC Minimum Amount. The term "SSC Minimum Amount" shall have
------------------
the meaning set forth in Section 15.5.
19.66. Survival Period. The term "Survival Period" shall have the
---------------
meaning set forth in Section 15.1.
19.67. Tangible Assets. The term "Tangible Assets" shall have the
---------------
meaning set forth in Section 13.1.
19.68. Trademarks. The term "Trademarks" shall have the meaning set
----------
forth in Section 6.11.1.
19.69. Transition Services Agreement. The term "Transition Services
-----------------------------
Agreement" shall have the meaning set forth in Section 14.5.
19.70. Transferred Employees. The term "Transferred Employees" shall
---------------------
have the meaning set forth in Section 14.3.1.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
SOUTHERN STATES COOPERATIVE,
INCORPORATED
By: _________________________________________
Wayne A. Boutwell
Chief Executive Officer and President
GOLD KIST INC.
By: _________________________________________
Gaylord O. Coan
Chief Executive Officer and Chairman
49
<PAGE>
EXHIBIT 10.1(b)
October 13, 1998
Gold Kist Inc.
P.O. Box 2210
Atlanta, GA 30301-2210
Attn: J. David Dyson,
General Counsel, Vice President and Secretary
Asset Purchase Agreement-
Scott G. Williams, LLC. and Wilson Pugh
Gentlemen:
Recent conversations relating to the anticipated closing under
the Asset Purchase Agreement, dated as of July 23, 1998, (the "Agreement"), by
and between Southern States Cooperative, Inc. ("Southern States") and Gold Kist
Inc. ("Gold Kist") have indicated that Gold Kist will be unable to deliver the
Operating Agreement Assignment and Amendment or the consent of the landlord (the
"Wilson Pugh Consent") under the "Wilson-Pugh" lease with respect to Leased Real
Property located in Portland Arkansas (the "Wilson Pugh Property") as agreed at
Closing. This letter is to confirm certain agreements between Gold Kist and
Southern States relating to the Operating Agreement Assignment and Amendment and
the Wilson Pugh Consent.
Southern States and Gold Kist have agreed that:
a) Notwithstanding the provisions of Section 11.3 of the Agreement, or any
other provision of the Agreement, neither (i) delivery of the Operating
Agreement Assignment and Amendment at Closing, and receipt of the
consent and signature of Acts 16:25, Inc. thereto nor (ii) delivery of
the Wilson Pugh Consent, shall be a condition to the obligations of
Southern States under that Agreement, or otherwise considered a
condition to Closing.
b) With respect to the Operating Agreement Assignment and Amendment:
i) At Closing, Southern States will neither acquire Gold
Kist's 50% interest in Scott G. Williams, LLC. nor
assume any of Gold Kist's obligations with respect to
<PAGE>
such interest, including without limitation,
obligations under the Operating Agreement or the
Guaranty Agreement with respect to Scott G. Williams,
LLC.; and
ii) The Estimated Purchase Price and the Final Purchase
Price for the Purchased Assets shall be reduced by
$1.36 million.
c) With respect to the Wilson Pugh Property:
i) At Closing, Southern States will neither take an
assignment of the lease(s) between Gold Kist and
Wilson Pugh with respect to the Wilson Pugh Property
nor acquire the liquid fertilizer tank (and related
site improvements) located on such property. Southern
States will purchase the Inventory and Owned Personal
Property located on the Wilson Pugh Property and will
remove such assets as soon as practicable after
Closing;
ii) The Estimated Purchase Price and the Final Purchase
Price for the Purchased Assets shall be reduced by
$125,088.00; and
iii) Gold Kist and Southern States acknowledge that, in
connection with the calculation of the Net Current
Asset Value as shown on the Post Closing Statement of
Net Asset Value, the lease payments made by Gold Kist
with respect to the Wilson Pugh Property shall not be
included in Prepaid Expenses.
d) As a result of the agreements set forth in paragraphs (b)(ii) and
(c)(ii) above, the $41.4 million figure set forth in clause (i) of each
of Sections 4.2 and 4.4 of the Agreement shall be reduced to
$39,914,912.00 .
Capitalized terms not otherwise defined herein shall have the
meanings ascribed in the Agreement. The Agreement, except as specifically
amended by this letter agreement, is hereby ratified and confirmed and shall
remain in full force and effect in accordance with its terms.
Please sign the enclosed copy of this letter agreement to
evidence your agreement to the foregoing.
Very truly yours,
-------------------------------------
Wayne A. Boutwell
Chief Executive Officer and President
SEEN AND AGREED:
<PAGE>
GOLD KIST INC.
By:___________________________
M.A. Stimpert
Senior Vice President
<PAGE>
EXHIBIT 10.1(c)
AMENDMENT TO
ASSET PURCHASE AGREEMENT
This Agreement made as of the 7 day of September, 1999, by and between Gold
Kist Inc., a Georgia cooperative marketing association ("GK"), and Southern
States Cooperative, Inc., a Virginia agricultural cooperative, a corporation
("Southern States").
WITNESSETH:
WHEREAS, GK and Southern States desire to amend the terms of the Asset
Purchase Agreement dated as of July 23, 1998 (the "Agreement") to change the
minimum amount of certain indemnifiable losses for which Gold Kist shall be
liable pursuant to the Asset Purchase Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and obligations contained herein, it is mutually agreed as follows:
1. The Agreement is incorporated herein by reference and is specifically
made a part hereof. All provisions, terms, covenants and conditions
set forth therein shall remain in full force and effect and shall
apply to this Agreement, except as specifically and expressly modified
herein.
2. GK and Southern States hereby agree that Section 15.3(b) of the
Agreement shall be amended to read as follows:
(b) Notwithstanding the provisions of Section 15.2, Gold Kist shall
have no liability to indemnify Southern States Indemnified
Persons hereunder with respect to the matters referenced in
clause (iii) of Section 15.3(a) above with respect to any
individual claim until the aggregate amount of Southern States
Indemnified Persons' indemnifiable losses exceed $25,000 for
such claims; provided, however, that if the aggregate amount of
any such losses with respect to a claim exceeds $25,000, Gold
<PAGE>
Kist shall indemnify Southern States for the entire amount of
such claim, including the initial $25,000 amount.
3. This amendment to the Agreement shall be deemed to be effective as of
October 13, 1998.
IN WITNESS WHEREOF, the parties have duly executed this amendment to
the Agreement as of the date first above written.
GOLD KIST INC.
By: /s/ M. A. Stimpert
-------------------------------
Title: Senior Vice President
---------------------------
SOUTHERN STATES COOPERATIVE, INC.
By:_______________________________
Title:____________________________
<PAGE>
EXHIBIT 10.1(d)
October 13, 1998
Southern States Cooperative, Inc.
6606 West Broad Street
P.O. Box 26234
Richmond, Virginia 23260
Ladies and Gentlemen:
In order to facilitate the closing of the Asset Purchase
Agreement dated July 23, 1998, between Southern States Cooperative, Inc.
("Southern States") and Gold Kist Inc. ("Gold Kist") for the purchase of the
Gold Kist Inputs Business, and subject to the terms and conditions set out below
and on the attached Terms Sheet, Gold Kist hereby commits to purchase under the
circumstances described below from Southern States and from a trust entity to be
formed by Southern States, $100 million principal (liquidation) amount of
preferred securities (the "Preferred Securities") in the form described in each
of Annex A and Annex B to the attached Terms Sheet.
Approval of Gold Kist Lenders. The commitment of Gold Kist set
forth herein and on the attached Terms Sheet is expressly
subject to receipt of approvals by (1) CoBank, ACB; (2) the
Prudential Insurance Company of America and (3) Cooperative
Centrale Raiffeisen - BoerenleekBank B.A., "Rabobank
Nederland", New York Branch, as Agent, under the Gold Kist
Credit Agreement dated August 4, 1998, with various banks and
lending institutions as lenders.
This obligation of Gold Kist to purchase the Preferred
Securities shall be of no force and effect if, prior to the Purchase Date (as
specified in the Terms Sheet), Southern States shall have placed with other
purchasers similar capital and/or equity in a minimum amount of $100 million. To
the extent that, prior to the Purchase Date, Southern States shall have placed
with other purchasers capital and/or equity securities similar to the Preferred
Securities in an amount less than $100 million, then the Gold Kist commitment to
purchase Preferred Securities shall be reduced correspondingly on a
dollar-for-dollar basis. For purposes of this letter and the attachments hereto,
any Southern States preferred stock or subordinated debt will be considered
similar securities to the Preferred Securities.
This commitment is a duly authorized, irrevocable obligation
of Gold Kist Inc., enforceable in accordance with its terms. If you are in
agreement with the terms and conditions stated above, and as set forth in the
Terms Sheet attached and the annexes thereto, please signify by executing and
returning a copy of this letter to the undersigned.
<PAGE>
Sincerely,
------------------------
M. A. Stimpert
Senior Vice President
Agreed to by Southern States Cooperative, Inc.
- -------------------------------------
Wayne A. Boutwell
President and Chief Executive Officer
Attachment to Commitment Letter
Dated October 13, 1998
Terms Sheet for Purchase of Southern States
Preferred Securities by Gold Kist
1. Time of Purchase:
The date on which Gold Kist will purchase the Preferred Securities (the
"Purchase Date") will be 175 days after October 9, 1998 which is the effective
date of the 180-day senior bridge facility made available to Southern States for
the purchase of the Gold Kist Inputs Business (the "Senior Bridge Facility") in
the event Southern States has not placed a minimum of $100 million of similar
securities prior to the Purchase Date. Accordingly the Purchase Date will be
April 2, 1999. The purchase of the Preferred Securities will be made pursuant to
one or more purchase agreements containing customary terms and conditions.
2. Composition of the $100 million of Preferred Securities:
The $100 million of Preferred Securities shall be comprised of (a) $40
million of DRD Preferred (as more specifically described on Annex A), bearing an
initial dividend rate of 7.5% per annum and (b) $60 million of Capital
Securities (as more specifically described on Annex B), bearing an initial
distribution rate of 8.0% per annum. If less than $100 million amount of
Preferred Securities is placed with Gold Kist, the amount of each type of
Preferred Securities sold to Gold Kist will be as determined by Southern States,
not to exceed, in the case of the DRD Preferred, $40 million liquidation amount,
and in the case of the Capital Securities, $60 million liquidation amount.
Similarly, upon any redemption of less than the entire $100 million of Preferred
<PAGE>
Securities, Southern States shall have the right to redeem whichever type of
Preferred Securities (DRD Preferred or Capital Securities) it wishes, in any
amount up to the entire outstanding amount held by Gold Kist. For so long as the
Preferred Securities are held by Gold Kist, the Preferred Securities will be
subject to mandatory redemption from the net proceeds of all placements of
substantially similar securities by Southern States until the Preferred
Securities held by Gold Kist have been redeemed in their entirety.
If Southern States places securities similar to the Preferred
Securities prior to the Purchase Date, Southern States will immediately instruct
the LOC bank described in paragraph 4 below, to issue an amendment to the LOC or
a replacement LOC reflecting a reduction in the amount of the LOC to the extent
that Gold Kist's commitment to purchase Preferred Securities has thereby been
reduced.
3. Purchase price; Fees Associated with the Placement of the Preferred
Securities with Gold Kist:
Gold Kist shall purchase the Preferred Securities at par. Southern
States shall pay to Gold Kist at the time of purchase a placement fee equal to
2% of the liquidation amount of the DRD Preferred and 1% of the liquidation
amount of the Capital Securities. The amount of the placement fee paid to Gold
Kist shall be refunded to Southern States on a pro rata basis upon any
redemption, in whole or in part, of the Preferred Securities from Gold Kist.
4. Terms and Conditions of the Letter of Credit ("LOC") Supporting the Gold Kist
Purchase Agreement:
Gold Kist's obligation to purchase the Preferred Securities shall be
secured by an irrevocable direct pay bank letter of credit ("LOC"). The LOC
shall be in an amount at least equal to the purchase price of the Preferred
Securities which Gold Kist is committed to purchase, shall have an initial term
expiring no earlier than 10 days after the Purchase Date and shall be
irrevocable and unconditional. The LOC shall be issued by a financial
institution located in the United States (including, but not limited to,
Rabobank's U.S. branch) with a debt rating of AA/Aa2 or higher. A draft of the
LOC will be provided to Southern States not later than October 9, 1998. Southern
States also shall be furnished with an opinion satisfactory to it from counsel
for the LOC bank, including foreign counsel if appropriate, as to the due
authorization, execution and delivery and binding effect of the LOC.
5. Fees Associated with the LOC and Other Financing Costs:
Southern States will bear the cost, not to exceed 125 basis points per
annum, payable monthly, for the LOC for its initial term and any renewal
thereof. Gold Kist will be responsible for the costs of changes, if any, to Gold
Kist's various loan agreements. Southern States will be responsible for all
costs of its Senior Bridge Facility.
6. Provisions Relating to the Transfer of Preferred Securities by Gold Kist:
<PAGE>
Gold Kist shall hold any Preferred Securities purchased by it for a
period of at least nine (9) months from the Purchase Date. Upon the expiration
of that period (contemplated to terminate in January, 2000) Gold Kist may, at
its election, give notice to Southern States of its desire to sell the Preferred
Securities, in whole or in part. Delivery of notice shall commence a 120-day
waiting period during which Gold Kist may not sell or offer to sell the
Preferred Securities or any portion thereof without the consent of Southern
States. Within 10 business days of Gold Kist giving notice of its desire to
sell, Southern States shall advise Gold Kist of its intentions with respect to
the placement or sale of the Preferred Securities or similar securities. If,
during the waiting period, Southern States determines not to place the Preferred
Securities or similar securities, then Southern States shall so advise Gold Kist
and Southern States shall not unreasonably refuse to waive the remainder of the
waiting period. Upon the later of (1) expiration of the 120-day waiting period
(which could occur as early as April, 2000) and (2) termination of a placement
of the Preferred Securities or similar securities commenced by Southern States
prior to the end of the waiting period, Gold Kist will be free to transfer the
Preferred Securities as permitted by law and subject to the transfer
restrictions described in the draft Offering Memorandums proposed by Southern
States, copies of which have been furnished to Gold Kist. Southern States will
provide such financial and other information and assistance as may reasonably be
required by Gold Kist in its efforts to resell the Preferred Securities.
7. Special Counsel:
Sullivan & Cromwell will serve as special counsel in connection with
the purchase of the Preferred Securities. Southern States shall be responsible
for the fees and expenses of special counsel.
8. Southern States Obligation:
Southern States shall be obligated to continue with all good faith
reasonable efforts to place, on terms and conditions reasonably satisfactory to
Southern States, through one or more of the markets referenced below, a minimum
of $50 million of perpetual preferred stock and a minimum of $75 million of
trust preferred securities substantially similar to the Capital Securities
proposed to be sold to Gold Kist. Southern States shall pursue its efforts
concurrently on three separate "tracks":
(1) Rule 144A offerings as presently contemplated by Southern
States.
(2) Private placement market.
(3) Registered public offering of trust preferred securities
and/or preferred stock.
<PAGE>
Annex A
Description of Preferred Stock to be Issued
to Gold Kist Inc. by Southern States Cooperative, Inc.
(Supplements Description of Series A Preferred Stock
in Draft Offering Memorandum)
1. Purchase Amount. $40 million principal (liquidation) amount.
2. Designation and Rank. Series B Cumulative Redeemable Preferred Stock.
Ranks pari passu with other Southern States preferred stock.
3. Dividend Rate. 7.5% per annum initial rate; subject to increase to 8.0%
per annum nine months after the Purchase Date; and to 8.25% twenty-one
months after the Purchase Date. Dividends payable quarterly.
4. Mandatory Redemption. Mandatorily redeemable while held by Gold Kist as
described in the Terms Sheet.
5. Transferability. Preferred Stock to be transferable in minimum
principal amounts of $100,000 to QIBs or Institutional Accredited
Investors pursuant to Rule 144A or Rule 501(a)(1), (2), (3) or (7),
subject to the conditions and restrictions on transfer set out in the
draft Offering Memorandum for the Preferred Stock.
6. Form of Certificate. Preferred Stock to be delivered as a single
physical certificate; $100,000 block limitation on transfers.
Application will be made to DTC for book-entry transfer and trading in
PORTAL if requested by Gold Kist.
7. Other Information. Except as otherwise provided above, the Preferred
Stock will be similar in its terms and conditions to, and subject to
restrictions on transfer similar to those applicable to, the proposed
issue of ___% Series A Preferred Stock described in the draft Offering
Memorandum prepared by Southern States with respect thereto, a copy of
which has been furnished to Gold Kist.
Annex B
Description of Capital Securities to be Issued to
Gold Kist Inc. by Southern States Capital Trust II and
Guaranteed by Southern States Cooperative, Inc.
(Supplements Description of Series A Capital Securities
in Draft Offering Memorandum)
<PAGE>
1. Purchase Amount. $60 million liquidation amount of Series B Capital
Securities issued by Southern States Capital Trust [ II ], a Delaware
business trust (the "Trust").
2. Payment Source. Capital Securities payable solely from payments made on
8% Adjustable Rate Junior Subordinated Deferrable Interest Debentures
of Southern States (ranking senior to Southern States' preferred stock,
common stock and all patrons' equities; subordinated to Senior Debt -
virtually all of the Company's indebtedness is Senior Debt). The Junior
Subordinated Debentures will have a thirty (30) year maturity. The
interest rate payable on the Junior Subordinated Debentures will be
adjustable in the same manner described in paragraph 5 below for the
Capital Securities.
3. Guarantee. Capital Securities guaranteed by Southern States to the
extent of funds held by the Trust (same as provided for in the
contemplated 144A Offering).
4. Documentation. Issue to be fully documented as a Rule 144A issue of
Capital Securities, substantially similar to documentation for the
Capital Securities presently contemplated by Southern States,
including:
(1) Trust Agreement (for organizational purposes).
(2) Amended and Restated Trust Agreement.
(3) Indenture.
(4) Guarantee.
(5) Purchase Agreement.
(6) Delaware Trustee - First Union Trust Company, N.A.
(7) Property Trustee, Guarantee Trustee and Debenture Trustee -
First Union National Bank.
5. Interest Rate. The initial rate of distributions on the Capital
Securities shall be 8% per annum; subject to increase to 8.5% nine
months after the Purchase Date; and to 8.75% per annum twenty-one
months after the Purchase Date. Distributions payable semi-annually.
6. Mandatory Redemption. Mandatorily redeemable while held by Gold Kist as
described in the Terms Sheet.
7. Transferability. Capital Securities to be transferable in minimum
principal amounts of $100,000 to QIBs or Institutional Accredited
Investors pursuant to Rule 144A or Rule 501(a)(1), (2), (3) or (7),
<PAGE>
subject to the conditions and restrictions on transfer set out in the
draft Offering Memorandum for the Capital Securities.
8. Form of Security. Capital Securities to be delivered as a single
physical certificate; $100,000 block limitation on transfers.
Application will be made to DTC for book-entry transfer and trading in
PORTAL if requested by Gold Kist.
9. Other Information. Except as otherwise provided above, the Capital
Securities will be similar in its terms and conditions, and subject to
restrictions on transfer similar to those applicable, to the proposed
issue of the Capital Securities described in the draft Offering
Memorandum prepared by Southern States with respect thereto, a copy of
which has been furnished to Gold Kist.
<PAGE>
EXHIBIT 10.1(e)
[Gold Kist stationery]
March 25, 1999
Southern States Cooperative, Inc.
6606 West Broad Street
Richmond, Virginia 23230-1717
SUBJECT: Amendment to Commitment Letter ("Commitment Letter") Dated October 13,
1998, Between Southern States Cooperative, Inc. ("Southern States")
and Gold Kist Inc. ("Gold Kist")
Ladies and Gentlemen:
This letter shall serve to amend the above-referenced Commitment Letter to
revise the Purchase Date and for other purposes. For purposes of this letter,
the capitalized terms used herein shall have the same definition as set forth in
the Commitment Letter, except as otherwise provided herein. Specifically, the
parties have agreed as follows:
1. The Commitment Letter and the Terms Sheet therefor shall be amended by
revising Section 1 of the Terms Sheet to provide that the Purchase Date
shall be extended from April 2, 1999 to October 5, 1999.
2. The Commitment Letter and the Terms Sheet therefor shall be amended by
adding the following sentence at the end of section 3 of the Terms Sheet:
"The payment of the Purchase Price by Gold Kist for the Preferred
Securities purchased shall be made directly to NationsBank, N.A. as
Administrative Agent for the account of Southern States."
3. The letter of credit issued by Cooperatieve Centrale Raiffeisen-
Boerenleenbank B.A. - "Rabobank Nederland", New York Branch ("Rabobank")
pursuant to section 4 of the Terms Sheet is assignable and, with the
consent of Rabobank, Southern States rights thereunder shall be assigned to
NationsBank, N.A., as Administrative Agent, and payment thereunder shall be
made directly to NationsBank, N.A., as Administrative Agent for the account
of Southern States.
4. The parties agree that any costs incurred by Gold Kist in having the LOC
amended or assigned for the purposes of this agreement shall be borne by
Southern States.
<PAGE>
Southern States Cooperative
March 25, 1999
Page 2
5. Except as expressly amended herein, the terms and provisions of the
Commitment Letter and Terms Sheet and Annexes thereto shall remain
unchanged and in full force and effect.
If you are in agreement with the amendment of the Commitment Letter as stated
above, please signify by executing and returning a copy of this letter to the
undersigned.
Sincerely,
/s/ Stephen O. West
-------------------------------------
Stephen O. West
Chief Financial Officer and Treasurer
SOW:pf
Enc.
Agreed to by Southern States Cooperative, Inc.
By: /s/ Wayne A. Boutwell
-------------------------------------
Wayne A. Boutwell
President and Chief Executive Officer
<PAGE>
EXHIBIT 10.1(f)
SOUTHERN STATES CAPITAL TRUST I
Step-Up Rate Capital Securities, Series A
(Liquidation Amount $1,000 Per Capital Security)
guaranteed to the extent set forth in the Guarantee by
SOUTHERN STATES COOPERATIVE, INCORPORATED
and
Step-Up Rate Series B Cumulative Redeemable Preferred Securities
(Liquidation Amount $1,000 Per Preferred Security)
Issued by
SOUTHERN STATES COOPERATIVE, INCORPORATED
_____________________________________
Purchase Agreement
------------------
October 5, 1999
Gold Kist Inc.
244 Perimeter Center Parkway, N.E.
Atlanta, Georgia 30346-2397
Gentlemen:
Pursuant to the commitment letter dated October 13, 1998, by and
between Gold Kist Inc. ("Gold Kist") and Southern States Cooperative,
---------
Incorporated, and the Terms Sheet attached thereto, as amended by letter dated
March 29, 1999 (the "Commitment Letter"), Southern States Capital Trust I, a
-----------------
statutory business trust formed under the laws of the State of Delaware (the
"Trust"), and Southern States Cooperative, Incorporated, an agricultural
-----
cooperative corporation organized under the laws of Virginia, as depositor of
the Trust and as guarantor (the "Company"), agree, subject to terms and
-------
conditions stated herein, that the Trust will issue and sell to Gold Kist Inc.
(the "Purchaser") an aggregate of $60,000,000 liquidation amount of Step-Up Rate
---------
Capital Securities, Series A (liquidation amount $1,000 per capital security)
(the "Capital Securities") representing undivided beneficial interests in the
------------------
assets of the Trust, guaranteed on a subordinated basis by the Company as to the
payment of distributions and as to payments on liquidation or redemption, to the
extent set forth in a guarantee agreement (the "Guarantee") between the Company
---------
and First Union National Bank, as trustee (the "Guarantee Trustee"). The Trust
-----------------
is to purchase, with the proceeds of the sale of the Capital Securities and
$1,856,000 liquidation amount of its Common Securities (liquidation amount
$1,000 per common security) (the "Common Securities" and together with the
-----------------
Capital Securities, the "Trust Securities"), $61,856,000 aggregate principal
----------------
amount of Step-Up Rate Junior Subordinated Deferrable Interest Debentures due
September 30, 2029 (the "Debentures") of the Company, to be issued pursuant to a
----------
Junior Subordinated Indenture (the "Indenture") between the Company and First
---------
Union National Bank, as trustee (the "Debenture Trustee").
-----------------
<PAGE>
The Company will be the holder of 100% of the Common Securities. The
Trust will be subject to the terms of an Amended and Restated Trust Agreement
(the "Trust Agreement"), among the Company, as depositor, First Union National
---------------
Bank, as Property Trustee ("Property Trustee") and First Union Trust Company,
----------------
National Association, as Delaware Trustee (the "Delaware Trustee"), and two
----------------
individual trustees who are employees or officers of or affiliated with the
Company (the "Administrative Trustees"). The Property Trustee, the Delaware
-----------------------
Trustee and the Administrative Trustees are collectively referred to herein as
the "Trustees."
--------
Pursuant to the Commitment Letter, the Company and the Purchaser also
agree, subject to terms and conditions stated herein, that the Company will sell
to the Purchaser 40,000 shares (liquidation preference of $1,000 per share) of
its Step-Up Rate Series B Cumulative Redeemable Preferred Stock, $100 par value
per share (the "Preferred Securities" and together with the Capital Securities,
--------------------
the "Securities"). This Purchase Agreement is referred to herein as the
----------
"Agreement."
---------
The Securities have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), and are being sold pursuant to this
--------------
Agreement in reliance on the exemption therefrom contained in Section 4(2) of
the Securities Act.
1. Representations, Warranties and Agreements of the Company and the
Trust. The Company and the Trust, jointly and severally, represent and warrant
to, and agree with the Purchaser that as of the date hereof:
(a) The Company has been duly organized and is validly existing and
in good standing under the laws of the Commonwealth of Virginia, is duly
qualified to do business and is in good standing in each jurisdiction in
which its ownership or lease of property or the conduct of its business
requires such qualification, save where the failure to be so qualified
would not reasonably be expected to have a material adverse effect on the
business or property of the Company, and has all power and authority
necessary to own or hold its properties and to conduct the business in
which it is engaged and the authorized capital stock of Company consists of
(i) 20,000,000 shares of common stock of which 12,057,177 were issued and
outstanding as of August 31, 1999, and (ii) 1,000,000 shares of preferred
stock, of which 271 shares of 5% Series Cumulative Preferred Stock were
issued and outstanding as of August 31, 1999, and of which 14,354 shares of
6% Series Cumulative Preferred Stock were issued and outstanding as of
August 31, 1999;
(b) This Agreement has been duly authorized, executed and delivered
by the Company and the Trust;
(c) The issuance of the Securities, and the consummation by the
Company and the Trust of the transactions contemplated herein (the
"Transactions") will not conflict with or result in a breach or violation
------------
of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or the Trust is a party or by which the
2
<PAGE>
Company or the Trust is bound or to which any of the properties or assets
of the Company or the Trust is subject, and such actions will not result in
any violation of the provisions of the Amended and Restated Articles of
Incorporation or bylaws of the Company, the governing documents for the
Trust or any statute or order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or the
Trust or any of the properties or assets of either the Company or the
Trust;
(d) The Trust has been duly created and is validly existing as a
statutory business trust in good standing under the Business Trust Act of
the State of Delaware (the "Delaware Business Trust Act") with the trust
---------------------------
power and authority to own its property and conduct its business as
contemplated by this Agreement, and has conducted and will conduct no
business other than the Transactions and has no liabilities other than its
obligations in connection with the Transactions;
(e) The Guarantee, the Debentures, the Trust Agreement, the expense
agreement referred to in the Trust Agreement, and the Indenture
(collectively, the "Guarantor Agreements") have each been duly authorized,
--------------------
as appropriate, by the Company and the Trust and when validly executed and
delivered by the Company and, in the case of the Guarantee, by the
Guarantee Trustee, in the case of the Trust Agreement, by the Trustees, and
in the case of the Indenture, by the Debenture Trustee, and, in the case of
the Debentures, when validly authenticated and delivered by the Debenture
Trustee, will constitute valid and legally binding obligations of the
Company and of the Trust as parties thereto, enforceable in accordance with
their respective terms, subject, as to enforcement, to bankruptcy,
insolvency, moratorium, reorganization and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles (whether considered in a proceeding in equity or at law);
(f) The Preferred Securities have been duly and validly authorized
and, when issued and delivered against payment of the consideration
specified in this Agreement, will be duly and validly issued and fully paid
and non-assessable cumulative redeemable preferred stock of the Company,
and will have the rights set forth in the Amendment to the Company's
Articles of Incorporation authorizing the Step-Up Rate Series B Cumulative
Redeemable Preferred Stock;
(g) The Capital Securities have been duly and validly authorized by
the Trust, and, when issued and delivered against payment therefor as
provided herein, will be duly and validly issued and fully paid and non-
assessable undivided beneficial interests in the assets of the Trust; the
issuance of the Capital Securities is not subject to preemptive or other
similar rights; the terms of the Capital Securities are valid and binding
on the Trust; and the holders of the Capital Securities will be entitled to
the same limitation of personal liability extended to stockholders of
private corporations for profit organized under the General Corporation Law
of the State of Delaware;
(h) The financial statements (including in each case the related
schedules and notes) of the Company issued in connection with the period
ending June 30, 1999 fairly
3
<PAGE>
present in all material respects the consolidated financial position of the
Company and its subsidiaries as of the dates specified therein and the
consolidated results of their operations and cash flows for the respective
periods so specified and have been prepared, in accordance with generally
accepted accounting principles ("GAAP"), consistently applied throughout
the periods involved except as set forth in the notes thereto; and
(i) Neither the Trust, the Company nor any subsidiary of the Company
is an "investment company" within the meaning of such term under the
------------------
Investment Company Act of 1940, as amended, and the rules and regulations
of the Securities and Exchange Commission (the "Commission") thereunder.
----------
2. Purchase of the Securities by the Purchaser. (a) On the basis of
the representations and warranties herein contained, and subject to the terms
and conditions herein set forth, the Trust agrees to sell to the Purchaser and
the Purchaser agrees to purchase from the Trust, $60,000,000 aggregate
liquidation amount of the Capital Securities at a purchase price equal to 100%
of the liquidation amount of such Capital Securities.
(b) On the basis of the representations and warranties herein
contained, and subject to the terms and conditions herein set forth, the Company
agrees to sell to the Purchaser and the Purchaser agrees to purchase from the
Company, $40,000,000 aggregate liquidation amount of the Preferred Securities at
a purchase price equal to 100% of the liquidation amount of such Preferred
Securities.
(c) The Trust shall not be obligated to deliver any of the
Securities, except upon payment for all of the Securities to be purchased as
hereinafter provided.
3. Sale and Resale of the Securities by the Purchaser.
(a) The Purchaser hereby represents and warrants to, and agrees with
the Company and the Trust that it (i) is not acquiring the Securities with
a view to the distribution thereof; (ii) is acquiring the Securities for
its own account and with its general corporate assets and not with the
assets of any separate account in which any employee benefit plan, as those
terms are used in ERISA, has any interest; and (iii) will, when permitted
by the terms of this Agreement and the Securities and if selling within two
years (or such shorter period as is prescribed by paragraph (k) of Rule 144
under the Securities Act as then in effect) after the issuance of the
Securities, sell the Securities only: (1) to persons whom it reasonably
believes to be qualified institutional buyers ("Qualified Institutional
-----------------------
Buyers") as defined in Rule 144A under the Securities Act, as such rule may
------
be amended from time to time ("Rule 144A") or, if any such person is buying
---------
for one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented that each such
account is a Qualified Institutional Buyer, to whom notice has been given
that such sale is being made in reliance on Rule 144A or (2) in
transactions exempt from registration under the Securities Act with
purchasers who execute letters of representation in the form included as
Exhibit A to this Agreement.
4
<PAGE>
(b) The Purchaser shall hold any Securities purchased by it for a
period of at least nine (9) months from the Closing Date. Upon the
expiration of that period, and subject to Section 3 of this Agreement and
the provisions of the Securities, the Purchaser may, at its election, give
notice to the Company of its desire to sell the Securities, in whole or in
part. Delivery of notice shall commence a 120-day waiting period during
which the Purchaser may not sell or offer to sell the Securities or any
portion thereof without the consent of the Company. Within 10 business
days of the Purchaser giving notice of its desire to sell, the Company
shall advise the Purchaser of its intentions with respect to the placement
or sale of other securities similar to the Securities. If, during the
waiting period, the Company determines not to place or sell any such
similar securities, then the Company shall so advise the Purchaser and the
Company shall not unreasonably refuse to waive the remainder of the waiting
period. Upon the later of (1) expiration of the 120-day waiting period and
(2) termination of a placement of similar securities commenced by the
Company prior to the end of the waiting period, the Purchaser will be free
to transfer the Securities as permitted by law and subject to the transfer
restrictions set forth in the Securities.
(c) The Company will provide such financial and other information and
assistance as may reasonably be required by the Purchaser in its efforts to
resell the Securities.
4. Delivery of and Payment for the Securities.
(a) Payment of the purchase price for, and delivery of, the
Securities shall be made at the offices of the Company, Richmond, Virginia
or at such other place as shall be agreed upon by the Company, the Trust
and you, at 9:30 a.m. (E.D.S.T), on October 5, 1999 (such date and time of
payment and delivery being herein called the "Closing Date").
------------
(b) On the Closing Date, payment for the Capital Securities shall be
made to or for the account of the Company and the Trust and payment for the
Preferred Securities shall be made to Bank of America, N.A., as
Administrative Agent for the account of the Company, in immediately
available funds by wire transfer to such accounts as the Company shall
specify prior to the Closing Date or by such means as the parties hereto
shall agree prior to the Closing Date against delivery to you of the
certificates evidencing the Securities.
5. Commitment Fee.
(a) Simultaneously with the purchase of the Securities by the
Purchaser, the Company shall pay to the Purchaser a commitment fee equal to
two percent (2%) of the aggregate liquidation amount of the Preferred
Securities and to one percent (1%) of the aggregate liquidation amount of
the Capital Securities. At the Purchaser's request, the Company will apply
the commitment fee with respect to the Capital Securities against the
purchase price to be paid to the Trust for the Capital Securities and will
apply the
5
<PAGE>
commitment fee with respect to the Preferred Securities against the
purchase price to be paid for the Preferred Securities.
(b) The amount of the commitment fee paid to the Purchaser under
paragraph (a) above shall be refunded, without interest, to the Company on
a pro rata basis upon any redemption, in whole or in part, of the
Securities from the Purchaser so that, for example, if 10% of the Capital
Securities are redeemed, 10% of the commitment fee for the Capital
Securities will be refunded as part of the redemption by the Company.
6. Further Agreements of the Company and the Trust. The Company and
the Trust, jointly and severally, further agree:
(a) So long as the Securities are outstanding and during any period
in which the Company is not subject to and in compliance with Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
--------
Act"), to furnish to you and any other holders of the Securities and
---
prospective purchasers of the Securities designated by such holders, upon
request of such holders or such prospective purchasers, the information
required to be delivered pursuant to Rule 144A(d)(4), as amended, or any
successor thereto, under the Securities Act, in order to permit compliance
by such holder with Rule 144A in connection with the resale of the
Securities by such holder.
(b) In addition to the foregoing obligation, so long as the
Securities are outstanding and during any period in which the Company is
not subject to and in compliance with Section 13 or 15(d) of the Exchange
Act, the Company will also deliver to each holder of Securities:
(i) within 45 days after the end of each quarterly fiscal period
in each fiscal year of the Company (other than the last
quarterly fiscal period of each such fiscal year), duplicate
copies of (A) the consolidated balance sheets of the Company
and its subsidiaries as at the end of such quarter, and (B)
the consolidated statements of income, changes in patrons'
equity and cash flows of the Company and its subsidiaries for
such quarter and (in the case of the second and third
quarters) for the portion of the fiscal year ending with such
quarter setting forth in each case in comparative form the
figures for the corresponding periods in the previous fiscal
year, all in reasonable detail, prepared, in accordance with
GAAP in each case (provided, however, that such financial
statements shall not be required to contain notes to the
financial statements), and in each case, certified by a senior
financial officer as fairly presenting, in all material
respects, the financial position of the companies being
reported on and their results of operations and cash flows,
subject to changes resulting from audit and year-end
adjustments;
(ii) within 90 days after the end of each fiscal year of the
Company, duplicate copies of (A) the consolidated balance
sheets of the
6
<PAGE>
Company and its subsidiaries as at the end of such year, and
(B) the consolidated statements of income, changes in
patrons' equity and cash flows of the Company and its
subsidiaries for such year setting forth in comparative form
the figures for the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP (except as noted
therein) accompanied by an opinion thereon of independent
certified public accountants of recognized standing stating
that such financial statements present fairly, in all
material respects, the financial position of the companies
being reported upon and that their results of operations and
cash flows and have been prepared in conformity with GAAP,
and that the examination of such accountants in connection
with such financial statements has been made in accordance
with generally accepted auditing standards, and that such
audit provides a reasonable basis for such opinion in the
circumstances; and
(iii) promptly upon their becoming available, one copy of any (A)
financial statement, report, notice or proxy statement sent
by the Company to public securities holders generally, and
(B) regular or periodic report, registration statement
(without exhibits except as expressly requested by such
holder) and prospectus and all amendments thereto filed by
the Company with the Commission.
The Company agrees to acknowledge the obligation in this Section 6(b) in
writing to any proposed holder of Securities or to any holder of Securities
at any time and from time to time by a separate instrument in writing.
This provision is for the benefit of each holder of Securities and each
such holder shall be entitled to require compliance herewith.
(c) To permit the Purchaser and the representatives of each holder of
Securities that is an institutional investor at the expense of such holder
and upon reasonable prior notice to the Company to visit the principal
executive office of the Company to discuss the affairs, finances and
accounts of the Company and its subsidiaries with their officers, and (with
the consent of the Company which consent will not be unreasonably withheld)
independent public accountants, and to visit the other offices and
properties of the Company and each subsidiary, all at such reasonable times
and as often as may be reasonably requested in writing; and if a Default or
Event of Default then exists, at the expense of the Company to visit and
inspect any of the offices or properties of the Company or any subsidiary,
to examine all their respective books of account, records, reports and
other papers, to make copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective officers
and independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and accounts
of the Company and its subsidiaries), all at such times and as often as may
be requested.
(d) Upon the request of the Purchaser or any other holder of the
Securities that is an institutional investor, to use their best efforts to
permit the Securities to be designated Private Offerings, Resales and
Trading through Automated Linkages Market
7
<PAGE>
("PORTAL") securities in accordance with the rules and regulations adopted
------
by the National Association of Securities Dealers, Inc. relating to trading
in the PORTAL Market and to permit the Securities to be eligible for
clearance and settlement through The Depository Trust Company (the "DTC").
---
(e) Not to, and the Company will cause its affiliates not to, solicit
any offer to buy or offer to sell the Securities by means of any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act.
(f) To take such steps as shall be necessary to ensure that neither
the Trust, the Company nor any subsidiary of the Company shall become an
"investment company" within the meaning of such term under the Investment
------------------
Company Act of 1940 and the rules and regulations of the Commission
thereunder.
(g) To continue, for as long as Gold Kist holds any of the Securities
purchased hereunder, but in no event for more than 60 months from the date
of this Agreement, with all good faith reasonable efforts to place on terms
and conditions reasonably satisfactory to Company, through one or more of
the markets referenced below a minimum of $40 million of perpetual
preferred and a minimum of $60 million of capital securities substantially
similar to the Securities. The Company shall pursue its efforts through:
(A) the Rule 144A market, (B) the private placement market, and/or (C) one
or more registered public offerings of trust preferred and/or preferred
stock.
(h) Subject to the provisions of this subsection 6(h), to use
commercially reasonable efforts to seek and obtain an investment grade
rating (or, at the request of Gold Kist, a non-investment grade rating) of
the Securities from two or more nationally recognized statistical rating
organizations such as Standard & Poor's Rating Services, a division of
McGraw-Hill, Moody's Investor Service, Duff & Phelps Rating Co. and Fitch
Investor Services, and at the request of Gold Kist, to take all
commercially reasonable actions and make all filings and reports necessary
or appropriate to maintain a rating. In either case, however, if the
Company believes that obtaining a non-investment grade rating or
maintaining a rating (when the Company has been advised by the rating
agency that such rating will be downgraded to a non-investment grade
rating) would adversely affect the Company or its securities and advises
Gold Kist of the reasons for its belief, the Company has the right not to
pursue such a rating; provided, however, that if Gold Kist is of a contrary
opinion and advises the Company of the reasons for its belief, and the
Company does not concur with Gold Kist, then the Company will undertake to
secure an opinion of a nationally recognized investment banking firm not
otherwise then performing services for either the Company or Gold Kist with
respect to whether obtaining a non-investment grade rating or whether
maintaining a rating (when the Company has been advised that such rating
will be downgraded to a non-investment grade rating) would adversely affect
the Company or the Company's securities. In the event such an investment
banking firm concludes that obtaining a non-investment grade rating or
maintaining a rating that would be downgraded to a non-investment grade
rating
8
<PAGE>
would adversely affect the Company or its securities, then the Company
shall not be required to pursue such a rating at that time. If an
investment banking firm shall be engaged for the purpose of providing an
opinion referred to in this Section 6(h), the firm shall be mutually agreed
upon by the Company and Gold Kist. The Company shall pay the expense of
such opinion; provided, however, that Gold Kist shall reimburse the Company
for the costs incurred in securing such opinion unless the opinion of such
firm is to the effect that obtaining a non-investment grade rating or that
maintaining a rating (when the Company has been advised that such rating
will be downgraded to a non-investment grade rating) would not adversely
affect the Company or its securities. In no circumstances, however, shall
the Company be required to seek a rating more than once or an investment
banking opinion more than twice under this Section 6(h) in any rolling 12-
month period beginning July 1, 2000. For purposes of this Section 6(h), the
term "adversely affect" shall be construed to mean adverse effects having
more than an immaterial or insubstantial effect.
7. Expenses. The Company and the Trust, jointly and severally,
agree to pay (i) the costs incident to the sale and delivery of the Securities
and any taxes payable in that connection; (ii) all fees and expenses, if any,
incurred in connection with the admission of such Securities for trading in
PORTAL; and (iii) all other costs and expenses incident to the performance of
the obligations of the Company and the Trust, respectively.
8. Conditions to the Purchaser's Obligations. The obligations of the
Purchaser hereunder are subject to the accuracy, on the Closing Date, of the
representations and warranties of the Company and the Trust, contained herein,
to the performance by the Company and the Trust of their obligations hereunder,
and to each of the following additional terms and conditions:
(a) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Guarantor
Agreements, the Securities, and all other legal matters relating to this
Agreement and the transactions contemplated hereby shall be satisfactory in
all respects to counsel for the Purchaser, and the Company and the Trust
shall have furnished to such counsel all documents and information that
they may reasonably request to enable them to pass upon such matters.
(b) Mays & Valentine, L.L.P. shall have furnished to the Purchaser
their written opinion, as counsel to the Company and the Trust, addressed
to the Purchaser and dated the Closing Date, in form and substance
reasonably satisfactory to the Purchaser, to the effect set forth in
Exhibit B hereto and to such further effect as counsel to the Purchaser may
reasonably request.
(c) Potter Anderson & Corroon LLP shall have furnished to the
Purchaser their written opinion, as Delaware counsel to the Company and the
Trust, addressed to the Purchaser and dated the Closing Date, in form and
substance reasonably satisfactory to the Purchaser, to the effect set forth
in Exhibit C hereto and to such further effect as counsel to the Purchaser
may reasonably request.
9
<PAGE>
9. Redemption.
(a) Mandatory Redemption. Notwithstanding any other provision of the
--------------------
Securities or the Guarantor Agreements, the Capital Securities and the
Preferred Securities shall be subject to mandatory redemption, at a
redemption price equal to the liquidation amount of the Securities redeemed
plus all unpaid and accumulated amounts distributable with respect to such
Securities, during the period and to the extent any such Securities are
held by Gold Kist, from the net proceeds of any placement by the Company of
any shares of preferred stock or any subordinated debt (any such placement
of securities being referred to herein as a "Mandatory Redemption Event").
--------------------------
In the event a Mandatory Redemption Event shall occur, the Company shall
have the obligation to redeem, to the full extent of any net proceeds
realized from such a placement or placements, all or any applicable portion
of any Capital Securities or Preferred Securities of the Company held by
Gold Kist, but the Company shall have the right to select for mandatory
redemption whichever type of Securities may be held by Gold Kist. In the
event the Company shall sell or otherwise place shares of its preferred
stock or its subordinated debt to any third-party or parties, it shall give
prompt written notification thereof to Gold Kist, which notice shall
specify a redemption date not more than [three (3)] business days after the
date of such notice at which time the mandatory redemption of all or a
specified portion of the Capital Securities and/or Preferred Securities
held by the Purchaser shall occur. For the avoidance of doubt, the Company
acknowledges that a Mandatory Redemption Event will not necessarily involve
securities having terms similar to the terms of Securities, but includes
all preferred stock and subordinated debt, whether such debt or stock ranks
prior to Securities or not, that any debt that is subordinated in the
payment of principal or interest to any other obligations of Company shall
be subordinated debt and that a sale of part of the Securities by Gold Kist
will have no effect on the Company's obligations upon a Mandatory
Redemption Event with respect to the Securities still held by Gold Kist.
(b) Optional Redemption. Notwithstanding any other provision of the
-------------------
Securities, this Agreement or the Guarantor Agreements and during the
period and to the extent such Securities are held by Gold Kist, the Capital
Securities and the Preferred Securities shall be subject to redemption
before maturity at the option of the Company at any time, in whole or in
part, at a redemption price equal to the liquidation amount of the
Securities redeemed plus all unpaid and accumulated amounts distributable
with respect to such Securities.
(c) Supplemental Redemption Notice. During the period that the
------------------------------
Capital Securities and the Preferred Securities are held by Gold Kist, the
Company agrees that, in addition to any other redemption notice required by
the terms of the Securities, this Agreement or the Guarantor Agreements to
be sent by or on behalf of the Company with respect to any redemption of
the Capital Securities or the Preferred Securities, the Company will send
such redemption notice to Gold Kist by facsimile or by e-mail at the
address specified in Section 11 below or as otherwise furnished to the
Company by Gold Kist in writing.
10
<PAGE>
10. Extinguishment of Commitment Letter. The closing of the sale and
purchase of Securities under this Agreement shall operate to extinguish and
terminate the Commitment Letter in all respects and the bank letter of credit
referred to therein. Company agrees to take any and all actions as may be
reasonably requested by the Purchaser to confirm to the bank the termination of
the letter of credit.
11. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Purchaser, shall be delivered or sent by certified
mail, courier or overnight carrier, hand or facsimile transmission to Gold
Kist Inc., 244 Perimeter Center Parkway, N.E., Atlanta, Georgia 30346-2397
Attention: Chief Financial Officer (Fax: (770) 393-5061); and with a copy
to the General Counsel at the same address (Fax: (770) 393-5421);
(b) if to the Company shall be delivered or sent by certified mail,
courier or overnight carrier, hand or facsimile transmission to the Company
at: 6606 West Broad Street, Richmond, Virginia 23230, Attention: Chief
Financial Officer (Fax: (804) 281-1383);
(c) if to the Trust shall be delivered or sent by certified mail,
courier or overnight carrier, hand or facsimile transmission to the Trust
at: 6606 West Broad Street, Richmond, Virginia 23230, Attention:
Administrative Trustees (Fax: (804) 281-1383).
Any such statements, requests, notices or agreements shall take effect
at the time of receipt thereof.
12. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Purchaser, the Company, the
Trust and their respective successors and assigns and the holders of the
Securities to the extent provided herein, except that the mandatory and optional
redemption and supplemental redemption notice provisions of Section 9 are
personal to Gold Kist and will not apply to any other holder of the Capital
Securities or the Preferred Securities. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons. Nothing in
this Agreement is intended or shall be construed to give any person, other than
the persons referred to in this Section 12, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision contained
herein.
13. Survival. The respective representations, warranties and
agreements of the Company, the Trust and the Purchaser contained in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Securities and
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any of them or any person controlling any of them.
14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of Virginia.
11
<PAGE>
15. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
16. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
If the foregoing correctly sets forth the agreement between the
Company, the Trust and Gold Kist, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
SOUTHERN STATES CAPITAL TRUST I
By: /s/ Leslie T. Newton
----------------------------------
Name: Leslie T. Newton
Title: Administrative Trustee
SOUTHERN STATES COOPERATIVE, INCORPORATED
By: /s/ Jonathan A. Hawkins
----------------------------------
Name: Jonathan A. Hawkins
Title: Senior Vice President and Chief Financial
Officer
Accepted:
GOLD KIST INC.
By: /s/ M. A. Stimpert
-----------------------------
Name: M. A. Stimpert
Title: Senior Vice President
12
<PAGE>
EXHIBIT A
TRANSFEREE LETTER OF REPRESENTATION
Southern States Cooperative, Incorporated ________________________
6606 West Broad Street ________________________
Richmond, Virginia 23230 ________________________
Ladies and Gentlemen:
In connection with the proposed transfer to us of [Step-Up Rate
Capital Securities, Series A (the "Capital Securities")] [Step-Up Rate Series B
Cumulative Redeemable Preferred Stock (the "Preferred Stock")] of Southern
States Cooperative, Incorporated (the "Company"), we confirm that:
1. We understand that the [Capital Securities] [Preferred Stock] has
not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or other applicable securities laws, and may not be
offered, sold, or otherwise transferred except as permitted in the
following sentence. We agree on our behalf and on behalf of any investor
account for which we are purchasing [Capital Securities] [Preferred Stock]
to offer, sell, or otherwise transfer such [Capital Securities] [Preferred
Stock] prior to the date that is two years after the later of the date of
original issue thereof and the last date on which the Company or any
"affiliate" of the Company was the owner of such [Capital Securities]
[Preferred Stock] (or any predecessor thereto) (the "Resale Restriction
Termination Date") only (a) to the Company, (b) pursuant to a registration
statement which has been declared effective under the Securities Act, (c)
so long as the [Capital Securities] [Preferred Stock] is eligible for
resale pursuant to Rule 144A under the Securities Act, to a person we
reasonably believe is a "qualified institutional buyer" (a "QIB") as
defined in Rule 144A of the Securities Act that purchases for its own
account or for the account of QIB to whom notice is given that the transfer
is being made in reliance on Rule 144A, (d) to an institutional "accredited
investor" (an "Institutional Accredited Investor") within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act
that is acquiring the [Capital Securities] [Preferred Stock] for its own
account or for the account of such an Institutional Accredited Investor not
with a view to, or for offer and sale in connection with, any distribution
in violation of the Securities Act, (e) pursuant to any other available
exemption from the registration requirements under the Securities Act,
subject to the right of the Company prior to any such offer, sale, or
transfer pursuant to clause (d) or (e) above to require the delivery of an
opinion of counsel, certifications, a letter from the transferee
substantially similar to this letter, or other information satisfactory to
them.
A-1
<PAGE>
2. We are purchasing the [Capital Securities] [Preferred Stock] for
our own account or for the account of another for whom we are acting and
not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act or any other applicable
securities laws, and we have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of our
investment in the [Capital Securities] [Preferred Stock], and we and any
accounts for which we are acting are each able to bear the economic risk of
our or its investment for an indefinite period.
3. You and the Company are entitled to rely upon this letter and you
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH ,
THE LAWS OF THE STATE OF NEW YORK.
Very truly yours,
___________________________________________
Name of Transferee (please print)
By: _______________________________________
Title: ____________________________________
Date: _____________________________________
Upon transfer, the [Capital Securities] [Preferred Stock] would be
registered in the name of the new beneficial owner as follows:
Name: __________________________________
Address: _______________________________
_______________________________
Taxpayer ID Number: ____________________
A-2
<PAGE>
EXHIBIT B
FORM OF OPINION OF
COUNSEL TO THE COMPANY TO BE DELIVERED
PURSUANT TO SECTION 7(b)
October 5, 1999
Gold Kist Inc.
244 Perimeter Center Parkway, NE
Atlanta, Georgia 30346-2397
Southern States Cooperative, Incorporated
Southern States Capital Trust I
Ladies and Gentlemen:
We have acted as counsel to Southern States Cooperative, Incorporated,
a Virginia agricultural cooperative association (the "Company"), and Southern
States Capital Trust I, a statutory business trust created under the laws of
Delaware (the "Trust"), in connection with the sale of $60,000,000 liquidation
amount of Step-Up Rate Capital Securities, Series A (the "Capital Securities")
of the Trust and $40,000,000 liquidation amount of Step-Up Rate Cumulative
Redeemable Preferred Stock (the "Preferred Stock," and together with the Capital
Securities, the "Securities") of the Company to you under the Purchase Agreement
of even date herewith between you and the Company. The Capital Securities will
be issued by the Trust, and the Guarantee and the Junior Subordinated Debentures
will be issued by the Company to the Trust in connection with the issuance of
the Capital Securities.
The Capital Securities will be issued under an Amended and Restated
Trust Agreement (the "Amended and Restated Trust Agreement") entered into by and
among the Company, the Delaware Trustee, the Property Trustee, and the
Administrative Trustees named therein; the Junior Subordinated Debentures will
be issued under a Junior Subordinated Indenture (the "Indenture") to be entered
into between the Company and the Debenture Trustee; and the Guarantee will be
issued under the Guarantee Agreement (the "Guarantee") between the Company and
the Guarantee Trustee. The Company and the Trust also will enter into an
Expense Agreement.
All capitalized terms not otherwise defined herein have the meanings set
forth in the Purchase Agreement.
In rendering this opinion, we have examined originals or copies, certified
or otherwise identified to our satisfaction, of: (i) the Trust Agreement, dated
December 15, 1998 (the "Trust
B-1
<PAGE>
Agreement"), (ii) the Certificate of Trust of the Trust, filed on December 16,
1998, (iii) the Corrected Certificate of Trust of the Trust, filed on September
28, 1999, (iv) the form of Amended and Restated Trust Agreement pursuant to
which the Capital Securities are to be issued, (v) the form of Capital
Securities Certificate, (vi) the form of Guarantee entered into by and between
the Company and the Trust, pursuant to which the Company will guarantee certain
obligations of the Trust with respect to the Capital Securities, (vii) the form
of Indenture entered into by and between the Company and the Debenture Trustee,
which will govern the Junior Subordinated Debentures to be issued by the
Company, (viii) the form of Junior Subordinated Debenture and (ix) the Articles
of Amendment to the Restated Articles of Incorporation of the Company creating
the series of Step-Up Rate Series B Cumulative Redeemable Preferred Stock. We
have also examined originals or copies, certified or otherwise identified to our
satisfaction, of such other documents, certificates and records as we have
deemed necessary or appropriate for purposes of rendering this opinion. In
rendering this opinion, we have assumed that the Amended and Restated Trust
Agreement, the Guarantee, the Capital Securities, the Indenture and the
Debentures when executed, will be executed in substantially the form reviewed by
us. We have also assumed that the trustees will conduct the affairs of the Trust
in accordance with the Amended and Restated Trust Agreement.
Based upon the foregoing, we are of the following opinions:
1. The Company has been duly formed and is validly existing as a
corporation in good standing under the laws of the Commonwealth of Virginia, is
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction in which its ownership or lease of property or the conduct
of its business requires such qualification, save where the failure to do so
would not reasonably be expected to have a material adverse effect on the
business or property of the Company and has all corporate power and authority
necessary to own or hold its properties and conduct the business in which it is
engaged.
2. The authorized capital stock of the Company consists of (a) 20,000,000
shares of membership common stock of which 12,057,177 were issued and
outstanding as of August 31, 1999, and (b) 1,000,000 shares of preferred stock,
of which 271 shares of 5% Series Cumulative Preferred Stock were issued and
outstanding as of August 31, 1999, and of which 14,354 shares of 6% Series
Cumulative Preferred Stock were issued and outstanding as of August 31, 1999,
all of which shares of stock were duly authorized, validly issued and fully paid
and non-assessable.
3. (a) The execution and delivery by the Company of each of the
Securities, the Trust Agreement, the Amended and Restated Trust Agreement, the
Indenture and the Guarantee has been duly and validly authorized, and when
issued in accordance with the Purchase Agreement, the Preferred Stock will be
duly authorized, validly issued and fully paid and non-assessable.
(b) The Subordinated Debentures to be issued by the Company to the
Trust will, when issued in accordance with the terms of the Indenture,
constitute valid and binding obligations of the Company.
(c) The Guarantee when provided by the Company and upon issuance of
the Capital Securities will constitute a valid and binding obligation of
the Company.
B-2
<PAGE>
4. The Purchase Agreement has been duly authorized, executed and delivered
by the Company and the Trust and constitutes a valid and binding agreement of
the Company and the Trust enforceable against the Company and the Trust in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance or transfer, reorganization,
liquidation, moratorium or other similar laws affecting the rights and remedies
of creditors generally and except as may be subject to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law), and except as rights to indemnity and contribution thereunder may be
limited by applicable law and public policy, and except that no opinion is
expressed as to the enforceability of the choice of law provision thereof;
5. To the best of our knowledge, the issue and sale of the Securities,
the compliance by the Company with all of the provisions of the Purchase
Agreement, and the consummation of the Transactions contemplated thereby, will
not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company is a
party or by which the Company is bound or to which any of the property or assets
of the Company is subject, nor will such actions result in any violation of the
provisions of the articles of incorporation or by-laws of the Company or, to our
knowledge, any statute or any order, rule or regulation of any court or
governmental agency or body of the United States or the State of Virginia having
jurisdiction over the Company or any of its properties or assets; and, except
for such consents, approvals, authorizations, registrations or qualifications as
may be required under applicable state securities laws in connection with the
purchase and distribution of the Securities by the Purchaser, no consent
approval, authorization or order of, or filing or registration with, any such
court or governmental agency or body is required for the execution, delivery and
performance of the Purchase Agreement by the Company and the consummation of the
transactions contemplated thereby;
6. Neither the Company, any of its subsidiaries nor the Trust is an
"investment company" as such term is defined in the Investment Company Act of
---------- -------
1940, as amended;
Our opinion is limited to matters governed by the Federal laws of the
United States of America and the laws of the Commonwealth of Virginia.
Where our opinion as to certain matters of fact is stated to be "to the
best of our knowledge," we have not undertaken any independent investigation or
examination of those matters as a basis for our opinion but have instead relied
solely upon such information as to those matters as is contained in our open
files in the name of the Company or has been provided to us in response to
inquiries made by us to officers of the Company or has otherwise come to our
attention in the course of our representation of the Company or the Trust in
connection with the preparation of the Securities, the Trust Agreement, the
Amended and Restated Trust Agreement, the Indenture, the Guarantee and the
Purchase Agreement and the consummation of the Transactions.
B-3
<PAGE>
For purposes of the opinion rendered in Paragraph 2 above, the statement
therein as to the number of shares of capital stock issued and outstanding on
the date referred to was based solely on information provided to us by the
Company.
In rendering the foregoing opinion, we have relied to the extent we deem
appropriate on the opinion of Potter Anderson & Corroon LLP, Delaware counsel to
the Trust.
Very truly yours,
MAYS & VALENTINE, L.L.P.
B-4
<PAGE>
EXHIBIT C
FORM OF OPINION OF DELAWARE COUNSEL
TO THE GUARANTOR AND THE TRUST
TO BE DELIVERED PURSUANT TO SECTION 7(c)
October 5, 1999
To Each of the Persons Listed
on Schedule I Attached Hereto
Re: Southern States Capital Trust I
-------------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for Southern States Capital
Trust I, a Delaware business trust (the "Trust") in connection with the issuance
of its Step-Up Rate Capital Securities, Series A on the date hereof (the
"Capital Securities") pursuant to the Purchase Agreement as defined in the
Amended and Restated Trust Agreement (the "Trust Agreement"), dated the date
hereof, by and among Southern States Cooperative, Incorporated, as Depositor,
First Union Trust Company, National Association, as Delaware Trustee, First
Union National Bank, as Property Trustee, and the Administrative Trustees named
therein. Initially capitalized terms used herein and not otherwise defined are
used herein as defined in the Trust Agreement.
For purposes of giving the opinions hereinafter set forth, we have
examined only the following documents and have conducted no independent factual
investigations of our own:
1. The Certificate of Trust for the Trust, dated as of December 15,
1998, as filed in the Office of the Secretary of State of the State of Delaware
(the "Secretary of State") on December 16, 1998;
2. The Corrected Certificate of Trust for the Trust, dated as of
September 28, 1999, as filed with the Secretary of State on September 28, 1999;
3. The original trust agreement of the Trust, dated as of December
15, 1998, by and between Southern States Cooperative, Incorporated, as
Depositor, and First Union Trust Company, National Association, as Delaware
Trustee (the "Original Agreement");
4. The Trust Agreement;
<PAGE>
To each of the person on
Schedule I attached hereto
October 5, 1999
Page 2
5. A Certificate of Good Standing for the Trust, dated October 5,
1999, obtained from the Secretary of State;
6. The Purchase Agreement; and
7. The Expense Agreement.
The documents referred to in (1) and (2) are collectively referred to
as the "Certificate." The documents referred to in (3), (4), (6) and (7) are
collectively referred to as the "Agreements" and individually as an "Agreement."
For purposes of this opinion, we have not reviewed any documents
other than the documents listed in (1) through (7) above. In particular, we have
not reviewed any document (other than the documents listed in (1) through (7)
above) that is referred to or incorporated by reference into the documents
reviewed by us. We have assumed that there exists no provision in any document
that we have not reviewed that is inconsistent with the opinions stated herein.
In addition, we have conducted no independent factual investigation of
our own but rather have relied solely on the foregoing documents, the statements
and information set forth therein and the additional matters related or assumed
therein, all of which we have assumed to be true, complete and accurate.
Whenever a statement herein is qualified by the phrase "known by us" or a
correlative phrase, it is intended to indicate the current and actual knowledge
of the attorneys in the firm who have rendered legal services in connection with
the transactions described herein.
Based upon the foregoing, and subject to the assumptions,
qualifications, limitations and exceptions set forth herein, we are of the
opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act and all
filings required under the laws of the State of Delaware with respect to the
creation and valid existence of the Trust have been made.
2. Under the Delaware Business Trust Act and the Trust Agreement,
the Trust has the trust power and authority (a) to own its properties
(including, without limitation, the Debentures) and conduct its business, (b) to
execute and deliver, and to perform its obligations under, the Agreements to
which it is a party, and (c) to issue and perform its obligations under the
Capital Securities and Common Securities, all as described in the Trust
C-2
<PAGE>
To each of the person on
Schedule I attached hereto
October 5, 1999
Page 3
Agreement.
3. The Trust Agreement constitutes a valid and binding obligation of
the Depositor and the Trustees, enforceable against the Depositor and the
Trustees, respectively, in accordance with its terms.
4. Under the Delaware Business Trust Act and the Trust Agreement,
the execution and delivery by the Trust of the Agreements to which it is a
party, and the performance by the Trust of its obligations thereunder, have been
duly authorized by all necessary trust action on the part of the Trust.
5. The Capital Securities (a) have been duly authorized by the Trust
Agreement, and (b) once duly and validly issued in accordance with the Trust
Agreement, will represent valid and fully paid and, subject to the
qualifications set forth in number 8 below, non-assessable undivided beneficial
interests in the assets of the Trust.
6. Once duly and validly issued in accordance with the Trust
Agreement, the Capital Securities will entitle the Holders of the Capital
Securities to the benefits of the Trust Agreement.
7. The Common Securities (a) have been duly authorized by the Trust
Agreement, and (b) once duly and validly issued in accordance with the Trust
Agreement, will represent valid and fully paid undivided beneficial interests in
the assets of the Trust.
8. The Holders of Capital Securities will be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware, except that the Holders of Capital Securities may be obligated to
(a) provide indemnity and/or security in connection with and pay taxes or
governmental charges arising from transfers or exchanges of certificates
representing Capital Securities and the issuance of replacement certificates
representing Capital Securities to the extent provided in the Trust Agreement,
(b) provide security or indemnity in connection with requests of or directions
to the Property Trustee to exercise its rights and powers under the Trust
Agreement, and (c) provide indemnity in connection with violations of the Trust
Agreement or U.S. Federal or state securities laws arising from transfers or
exchanges of certificates representing Capital Securities and the issuance of
replacement certificates representing Capital Securities.
9. Under the Delaware Business Trust Act and the Trust Agreement,
the issuance of the Trust Securities is not subject to preemptive rights.
C-3
<PAGE>
To each of the person on
Schedule I attached hereto
October 5, 1999
Page 4
10. No authorization, approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body of the State of
Delaware known by us to have jurisdiction over the Trust is required for the
issuance and sale of the Securities or the consummation by the Trust of the
transactions contemplated by the Agreements to which it is a party.
11. The (a) purchase of the Debentures by the Trust, (b) distribution
of the Debentures by the Trust in the circumstances contemplated by the Trust
Agreement, and (c) execution, delivery and performance by the Trust of the
Agreements to which it is a party and the consummation of the transactions
contemplated thereunder, will not conflict with or result in a breach or
violation of any of the terms or provisions of the Certificate or the Trust
Agreement or any statute, rule or regulation of the State of Delaware or any
governmental agency or body of the State of Delaware known by us to have
jurisdiction over the Trust.
12. Assuming that the Trust is treated as a grantor trust or
partnership for federal income tax purposes, the Holders of Capital Securities
(other than those holders of Capital Securities who reside or are domiciled in
the State of Delaware) will have no liability for income taxes imposed by the
State of Delaware solely as a result of their participation in the Trust, and
the Trust will not be liable for any income tax imposed by the State of
Delaware.
All of the foregoing opinions contained herein are subject to the
following assumptions, qualifications, limitations and exceptions:
a. The foregoing opinions are limited to the laws of the State
of Delaware presently in effect, excluding the securities laws thereof. We have
not considered and express no opinion on the laws of any other jurisdiction,
including, without limitation, federal laws and rules and regulations relating
thereto.
b. The foregoing opinions in paragraphs 3 and 6 above are
subject to (i) applicable bankruptcy, insolvency, moratorium, fraudulent
conveyance, fraudulent transfer and similar laws relating to or affecting
creditors rights generally including, without limitation, the Delaware Uniform
Fraudulent Conveyance Act, the provisions of the United States Bankruptcy Code
and the Delaware insolvency statutes, (ii) principles of equity including,
without limitation, concepts of materiality, good faith, fair dealing,
conscionability and reasonableness (regardless of whether such enforceability is
considered in a proceeding in equity or at law), (iii) applicable law relating
to fiduciary duties, (iv) public policy limitations with respect to exculpation,
contribution and indemnity provisions, and (v) the limitation that a court
applying Delaware law will enforce a liquidated damages provision in a contract
only where, at the time of contract, actual damages may be difficult to
determine and the stipulated sum is not so grossly disproportionate to the
probable anticipated loss as to be a penalty.
C-4
<PAGE>
To each of the person on
Schedule I attached hereto
October 5, 1999
Page 5
c. We have assumed the due execution and delivery by each party
thereto of each document examined by us. In addition, we have assumed the due
authorization by each party thereto (exclusive of the Trust) of each document
examined by us, and that each of such parties (exclusive of the Trust and the
Administrative Trustees) has the full power, authority, and legal right to
execute, deliver and perform each such document. We also have assumed that each
of the parties (exclusive of the Trust and the Administrative Trustees) to each
of the Agreements is a corporation, bank, national banking association, limited
liability company or trust company duly formed, validly existing and in good
standing under the laws of their respective jurisdictions of organization and
that the Agreements to which each of the entities to each of the Agreements
(other than, in the case of the Trust, as expressly set forth in Paragraph 11)
is a party do not result in the breach of the terms of, and do not contravene
its constituent documents or any law, rule or regulation applicable to it. We
have also assumed that each of the Agreements to which each of the entities is a
party does not (x) result in the breach of the terms of, and does not
contravene, any contractual restriction binding upon such entities, or (y)
(other than, in the case of the Trust as expressly set forth in Paragraphs 10
and 11) require under any law, statute, rule, or regulation any filing with, or
any approval or consent of, any governmental authority. We have further assumed
the legal capacity of any natural persons who are signatories to any of the
Agreements or other documents examined by us.
d. We have assumed that all signatures on documents examined by
us are genuine, that all documents submitted to us as originals are authentic
and that all documents submitted to us as copies conform with the originals.
e. We have assumed that the Original Agreement and the Trust
Agreement collectively, constitute the entire agreement among each of the
respective parties thereto with respect to the subject matter thereof, including
with respect to the creation, operation, dissolution and winding up of the
Trust.
C-5
<PAGE>
To each of the person on
Schedule I attached hereto
October 5, 1999
Page 6
f. We have assumed that no event set forth in Article 9 of the
Trust Agreement has occurred.
g. We have assumed that the Trust derives no income from or
connected with sources within the State of Delaware and has no assets,
activities (other than having a Delaware trustee as required by the Delaware
Business Trust Act and the filing of documents with the Secretary of State) or
employees in the State of Delaware.
h. Notwithstanding any provision in the Trust Agreement to the
contrary, we note that upon the occurrence of an event set forth in Article 9
thereof, the Trust cannot make any payments or distributions to the Holders of
Securities until creditors' claims are either paid in full or reasonable
provision for payment thereof has been made.
i. With respect to the enforceability of any provision of the
Trust Agreement wherein the parties provide for the appointment of a liquidator,
we note that upon the application of any beneficial owner, the Delaware Court of
Chancery has the power, upon cause shown, to wind up the affairs of a Delaware
business trust and in connection therewith to appoint a liquidating trustee
other than the one agreed to by the beneficial owners thereof.
j. We have assumed that the only assets owned by the Trust are
the Debentures, cash on deposit in, or owing to, the Payment Account, and all
proceeds and rights in respect of the same.
k. We have assumed that all of the agreements that are not
governed by Delaware law constitute legal, valid, binding and enforceable
obligations of each of the parties thereto under the laws of the State of New
York.
l. We have assumed that the Trust Securities will be issued and
sold in accordance with the Trust Agreement and the Purchase Agreement. We have
further assumed that the purchase price for the Trust Securities has been paid,
that certificates representing the Trust Securities have been issued by the
Trust, and that such certificates representing Trust Securities have been
received by the Holders thereof, respectively, all in accordance with the Trust
Agreement and the Purchase Agreement.
m. We note that pursuant to the Expense Agreement the
Depositor, as Holder of the Common Securities, is liable for all of the debts
and obligations of the Trust (other than with respect to the Capital Securities)
to the extent not satisfied out of the Trust's assets.
This opinion is rendered solely for your benefit in connection with
the matters
C-6
<PAGE>
To each of the person on
Schedule I attached hereto
October 5, 1999
Page 7
set forth herein and, without our prior written consent, may not be
furnished or quoted to, or relied upon by, any other person or entity for any
purpose. Mays & Valentine, L.L.P. and Sullivan & Cromwell may rely on this
opinion in connection with any legal opinion being rendered by the same on the
date hereof with respect to the matters set forth herein.
Very truly yours,
POTTER ANDERSON & CORROON LLP
C-7
<PAGE>
Schedule I
SOUTHERN STATES COOPERATIVE, INCORPORATED
FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION
FIRST UNION NATIONAL BANK
GOLD KIST INC.
C-1
<PAGE>
EXHIBIT 10.2(a)
REVOLVING CREDIT AGREEMENT
DATED AS OF JANUARY 12, 1999
by and among
SOUTHERN STATES COOPERATIVE, INCORPORATED
as Borrower,
the Banks referred to herein,
as Lenders,
COBANK, ACB,
as Administrative Agent and Documentation Agent
FIRST UNION NATIONAL BANK and NATIONSBANK, N.A.,
as Syndication Agents,
CRESTAR BANK and WACHOVIA BANK, N.A., as Co-Agents
and
NATIONSBANC MONTGOMERY SECURITIES LLC,
as Lead Arranger
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I DEFINITIONS..................................................... 1
SECTION 1.01. Definitions............................................ 1
SECTION 1.02. Accounting Terms....................................... 13
ARTICLE II AMOUNT AND TERMS OF LOANS...................................... 13
SECTION 2.01. The Commitments....................................... 13
SECTION 2.02. Notice and Manner of Borrowing........................ 15
SECTION 2.03. Interest.............................................. 17
SECTION 2.04. Conversions and Renewals.............................. 18
SECTION 2.05. Minimum Amounts....................................... 19
SECTION 2.06. Principal Payments.................................... 19
SECTION 2.07. Fees.................................................. 20
SECTION 2.08. Notes................................................. 20
SECTION 2.09. Use of Proceeds....................................... 20
SECTION 2.10. Method of Payment; Limitation on Set Off and Tax
Withholding........................................... 21
SECTION 2.11. Indemnity............................................. 22
SECTION 2.12. Additional Costs...................................... 22
SECTION 2.13. Limitation on Types of Advances....................... 23
SECTION 2.14. Illegality............................................ 24
SECTION 2.15. Treatment of Affected Loans........................... 24
SECTION 2.16. Capital Adequacy...................................... 24
SECTION 2.17. Investment in CoBank.................................. 25
SECTION 2.18. Reduction of Commitments.............................. 25
ARTICLE III CONDITIONS PRECEDENT.......................................... 26
SECTION 3.01. Conditions Precedent to Initial Use of the Commitments
on and after the Closing Date......................... 26
SECTION 3.02. Conditions Precedent to Each Loan..................... 29
SECTION 3.03. Deemed Representation................................. 29
ARTICLE IV REPRESENTATIONS AND WARRANTIES................................. 30
SECTION 4.01. Incorporation, Good Standing, and Due Qualification... 30
SECTION 4.02. Corporate Power and Authority......................... 30
SECTION 4.03. Legally Enforceable Agreement......................... 30
SECTION 4.04. Financial Statements.................................. 30
SECTION 4.05. Labor Disputes and Acts of God........................ 31
SECTION 4.06. Other Agreements...................................... 31
i
<PAGE>
SECTION 4.07. Litigation............................................ 31
SECTION 4.08. No Defaults on Outstanding Judgments or Orders........ 31
SECTION 4.09. Ownership and Liens................................... 32
SECTION 4.10. Subsidiaries, Affiliates, and Ownership of Stock...... 32
SECTION 4.11. ERISA................................................. 32
SECTION 4.12. Operation of Business................................. 32
SECTION 4.13. Taxes................................................. 32
SECTION 4.14. Compliance With Laws.................................. 32
SECTION 4.15. Existing Obligors; Existing Debt and Guarantees....... 33
SECTION 4.16. Directors, Executive Officers, Principal Shareholders. 33
SECTION 4.17. Year 2000 Compliance.................................. 33
SECTION 4.18. Margin Stock.......................................... 33
SECTION 4.19. Government Regulation................................. 34
ARTICLE V AFFIRMATIVE COVENANTS........................................... 34
SECTION 5.01. Maintenance of Existence.............................. 34
SECTION 5.02. Maintenance of Records................................ 34
SECTION 5.03. Maintenance of Properties............................. 34
SECTION 5.04. Conduct of Business................................... 34
SECTION 5.05. Maintenance of Insurance.............................. 34
SECTION 5.06. Compliance with Laws.................................. 35
SECTION 5.07. Right of Inspection................................... 35
SECTION 5.08. Employee Benefit Plans................................ 35
SECTION 5.09. Eligibility, Etc...................................... 35
SECTION 5.10. Reporting Requirements................................ 35
SECTION 5.11. Year 2000 Preparation................................. 37
ARTICLE VI NEGATIVE COVENANTS............................................. 37
SECTION 6.01. Liens................................................. 37
SECTION 6.02. Mergers, Etc.......................................... 39
SECTION 6.03. Sale of Assets........................................ 39
SECTION 6.04. Investments........................................... 40
SECTION 6.05. Guarantees, Etc....................................... 40
SECTION 6.06. Transactions with Affiliates.......................... 40
SECTION 6.07. Financing Services and Contributed Capital Agreements. 40
SECTION 6.08. Fiscal Year........................................... 41
SECTION 6.09. Leases................................................ 41
SECTION 6.10. Prohibition on Amendment of Certain Agreements, etc... 41
ii
<PAGE>
ARTICLE VII FINANCIAL COVENANTS........................................... 41
SECTION 7.01. Maximum Consolidated Funded Debt to Capitalization.... 41
SECTION 7.02. Minimum Tangible Net Worth............................ 41
SECTION 7.03. Consolidated Cash Flow to Consolidated Interest Expense
and Distributions..................................... 42
ARTICLE VIII EVENTS OF DEFAULT............................................ 42
SECTION 8.01. Events of Default..................................... 42
SECTION 8.02. Remedies.............................................. 44
ARTICLE IX AGENTS......................................................... 45
SECTION 9.01. Authorization and Action.............................. 45
SECTION 9.02. Liability of Agent.................................... 45
SECTION 9.03. Rights of Each Agent as a Bank........................ 46
SECTION 9.04. Independent Credit Decisions.......................... 46
SECTION 9.05. Indemnification....................................... 46
SECTION 9.06. Successor Agents...................................... 47
SECTION 9.07. Sharing of Payments, Etc.............................. 47
SECTION 9.08. Liability of Agents................................... 48
SECTION 9.09. Notices to Agent...................................... 48
SECTION 9.10. Defaults.............................................. 48
SECTION 9.11. Monthly Reports....................................... 48
SECTION 9.12. Withholding Taxes..................................... 48
ARTICLE X MISCELLANEOUS................................................... 49
SECTION 10.01. Amendments, Etc...................................... 49
SECTION 10.02. Notices, Etc......................................... 49
SECTION 10.03. No Waiver............................................ 49
SECTION 10.04. Assignment; Participation............................ 50
SECTION 10.05. Costs, Expenses and Taxes............................ 51
SECTION 10.06. Integration.......................................... 52
SECTION 10.07. Indemnity............................................ 52
SECTION 10.08. Governing Law........................................ 52
SECTION 10.09. Consent to Jurisdiction.............................. 52
SECTION 10.10. Severability of Provisions........................... 53
SECTION 10.11. Usury................................................ 53
SECTION 10.12. Counterparts......................................... 53
SECTION 10.13. Headings............................................. 53
SECTION 10.14. Jury Trial Waiver.................................... 54
SECTION 10.15. Consents; Terminations, etc.......................... 54
</TABLE>
iii
<PAGE>
Exhibits
Exhibit A - Form of Revolving Credit Borrowing Notice
Exhibit B - Form of Bid Rate Loan Quote
Exhibit C - Form of Bid Rate Loan Notice of Borrowing
Exhibit D - Form of Notice of Rescission
Exhibit E - Bank Notice Profile
Exhibit F-1 - Form of Note for Base Rate Loans and LIBOR Loans
Exhibit F-2 - Form of Note for Bid Rate Loans
Exhibit G - Form of Opinion of Company Counsel
Exhibit H - Form of Assignment and Assumption Agreement
Exhibit I - Financing Services and Contributed Capital Agreements
Schedules
Schedule 3.01(M) - Other Credit Facilities
Schedule 4.10 - Subsidiaries, Affiliates, and Ownership of Stock
Schedule 4.15 - Existing Obligors; Existing Debt
Schedule 6.01 - Existing Liens
Schedule 6.04 - Permitted Investments
iv
<PAGE>
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT is entered into as of January 12, 1999, among
SOUTHERN STATES COOPERATIVE, INCORPORATED, a Virginia agricultural cooperative
corporation ("Company"), CoBANK, ACB in its individual capacity ("CoBank"), as
Bank and in its capacity as Administrative Agent and Documentation Agent, FIRST
UNION NATIONAL BANK ("First Union"), as Bank and in its capacity as Syndication
Agent, NATIONSBANK, N.A. ("NationsBank"), as Bank and in its capacity as
Syndication Agent, NATIONSBANC MONTGOMERY SECURITIES LLC, in its capacity as
Lead Arranger, and FMB BANK, as Bank, COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH, as Bank,
BANQUE NATIONALE de PARIS (CHICAGO Branch), as Bank, CRESTAR BANK, as Bank and
in its capacity as Co-Agent, DG BANK DEUTSCHE GENOSSENSCHAFTSBANK AG CAYMAN
ISLANDS BRANCH, as Bank, WACHOVIA BANK, N.A., as Bank and in its capacity as
Co-Agent.
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. For purposes of this Agreement:
"Additional Costs" has the meaning specified in Section 2.12.
"Administrative Agent" shall mean CoBank or any successor appointed
pursuant to Section 9.06 hereof.
"Affected Loans" has the meaning specified in Section 2.15.
"Affiliate" shall mean any Person: (1) directly or indirectly controlling,
controlled by, or under common control with, the Company; (2) which directly or
indirectly beneficially owns or holds five percent (5%) or more of any class of
voting stock of the Company; or (3) five percent (5%) or more of whose voting
stock, membership interest or other equity interest is directly or indirectly
beneficially owned or held by the Company; but managed local cooperatives are
not Affiliates of the Company. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise.
"Agents" shall mean, collectively, the Administrative Agent, the
Documentation Agent and the Syndication Agents.
<PAGE>
"Agreement" shall mean this Revolving Credit Agreement, as amended,
supplemented or modified from time to time.
"Aggregate Commitments" shall mean the aggregate amount of the Banks'
Commitments hereunder, as such amount may be reduced at any time or from time to
time pursuant to this Agreement. On the Closing Date, the Aggregate Commitments
shall be Two Hundred Million Dollars ($200,000,000.00).
"Applicable Lending Office" shall mean, for each Bank and for each type of
Loan, the lending office of such Bank designated as such for such type of Loan
on the signature pages hereof or in the applicable Assignment and Assumption
Agreement or such other office of such Bank as such Bank may from time to time
specify to the Administrative Agent and the Company as the office by which its
Loans of such type are to be made and maintained.
"Applicable Margin" shall mean, for any day, the rate per annum set forth
below, it being understood that the Applicable Margin for (i) Base Rate Loans
shall be the percentage set forth under the column "Base Rate Applicable
Margin", and (ii) LIBOR Loans shall be the percentage set forth under the column
"LIBOR Applicable Margin".
The Applicable Margin shall be determined by reference to the Company's
corporate ratings provided by Standard & Poor's and Moody's as set forth below:
- -------------------------------------------------------------------------------
Pricing Standard & Poor's/Moody's LIBOR Applicable Base Rate
Level Corporate Ratings* Margin Applicable Margin
- -------------------------------------------------------------------------------
I BBB+/Baa1 or higher 0.450% 0.000%
- -------------------------------------------------------------------------------
II BBB/Baa2 0.575% 0.000%
- -------------------------------------------------------------------------------
III BBB-/Baa3 0.800% 0.000%
- -------------------------------------------------------------------------------
IV BB+/Ba1 0.950% 0.250%
- -------------------------------------------------------------------------------
V BB/Ba2 or lower 1.000% 0.375%
- -------------------------------------------------------------------------------
*In the event of a split rating between Standard & Poor's and Moody's, the lower
rating will determine the Applicable Margin.
The Applicable Margin shall be determined and adjusted on the date of each
change in the Company's corporate rating. Adjustments in the Applicable Margin
shall be effective as to all Base Rate Loans and LIBOR Loans, existing and
3
<PAGE>
prospective, from the date of adjustment. The Company shall provide the
Administrative Agent with written notice of any change in the corporate ratings
of the Company within ten (10) Business Days after the Company becomes aware of
or receives notice of such change.
"Assignee" has the meaning specified in Section 10.04 hereof.
"Assignment and Assumption Agreement" shall mean an agreement in the form
attached hereto as Exhibit H acceptable to the Company and the Administrative
Agent pursuant to which a Bank assigns and an Assignee assumes rights and
obligations in accordance with Section 10.04.
"Bank" or "Banks" shall mean one or more of the banks listed in the first
paragraph of this Agreement and all Assignees which qualify as a "Bank" under
Section 10.04 hereof.
"Base Rate" shall mean, for any day, the higher of (a) the Federal Funds
Rate plus one half of one percent (0.50%), or (b) the Prime Rate.
"Base Rate Loan" shall mean a Loan bearing interest with reference to the
Base Rate.
"Bid Rate Loan" shall mean a Loan bearing interest at a specified fixed
rate quoted by a Bank pursuant to Section 2.02(C) hereof.
"Bid Rate Maturity Date" has the meaning specified in Section 2.02(C)
hereof.
"Bridge Loan Agreement" shall mean the Term Loan Credit Agreement dated as
of October 9, 1998, by and among the Company, the lenders identified therein and
NationsBank, as administrative agent for the lenders, and First Union and
CoBank, as co-agents.
"Bridge Loan Facility" shall mean the $225,000,000 term loan credit
facility made available to the Company pursuant to the Bridge Loan Agreement.
"Business Day" shall mean: (1) any day other than a Saturday, Sunday, or
other day on which commercial banks are not authorized to do business or are
required to close in Denver, Colorado, New York, New York, or Richmond,
Virginia; and (2) whenever such day relates to a LIBOR Loan, LIBOR Interest
Period, or notice with respect to a LIBOR Loan, a day on which dealings in U.S.
dollar deposits are also carried out in the London interbank market.
"Capital Lease" shall mean all leases which have been or should be
capitalized on the books of the lessee in accordance with GAAP.
"Capitalization" shall mean Consolidated Funded Debt plus Tangible Net
Worth.
4
<PAGE>
"Cash Equivalents" means (a) securities issued or directly and fully
guaranteed or insured by the United States or any agency or instrumentality
thereof with maturities of not more than twelve months from the date of
acquisition, (b) U.S. dollar time deposits, certificates of deposit, "money
market" accounts or money market mutual funds, and repurchase agreements
relating to direct obligations of the United States with, and commercial paper,
fixed rate notes and loan participations (with maturities of up to 270 days for
any such loan participations) issued by, either (i) a Lender or (ii) a domestic
commercial bank with a short term commercial paper rating of at least A-1 by S&P
or P-1 by Moody's, (c) commercial paper and fixed rate notes issued by a
domestic commercial bank that does not have ratings required under clause (b) of
this definition with maturities of up to 60 days in an aggregate amount not to
exceed $7,500,000, (e) obligations of any domestic Governmental Authority with
respect to which interest is exempt from federal income tax with a long term
rating of at least AA- by S&P or Aa-3 by Moody's, and (f) "low floaters"
(industrial revenue bonds issued as floating rate notes or bonds and backed by a
stand-by letter of credit issued by a Lender or a domestic commercial bank
having the ratings required under clause (b) of this definition).
"Closing Date" shall mean the date of this Agreement.
"CoBank" has the meaning set forth in the preamble hereto.
"Code" shall mean the Internal Revenue Code of 1986 as amended from time
to time, and the regulations and published interpretations promulgated
thereunder.
"Commitment" shall mean each Bank's obligation to make Loans to the
Company pursuant to Section 2.01 hereof, as modified as provided in Section
10.04 hereof or as may be reduced as provided in Section 2.18.
"Company" shall mean Southern States Cooperative, Incorporated.
"Consolidated Cash Flow" shall mean, for any period, the sum of:
(a) savings before income taxes of the Company and its consolidated
Subsidiaries, calculated in accordance with GAAP; plus
(b) Consolidated Interest Expense paid or accrued during such period, to
the extent and only to the extent that such amount was deducted in determining
savings before income taxes of the Company and its consolidated Subsidiaries
calculated in accordance with GAAP; plus
(c) the aggregate amount of Depreciation and amortization during such
period, to the extent and only to the extent that such amount was deducted in
5
<PAGE>
determining savings before income taxes of the Company and its consolidated
Subsidiaries calculated in accordance with GAAP; minus
(d) one-time gains of greater than $1,000,000 during such period of four
consecutive fiscal quarters; minus
(e) extraordinary income during such period, to the extent and only to the
extent that such income was included in determining savings before income taxes
of the Company and its consolidated Subsidiaries calculated in accordance with
GAAP.
"Consolidated Funded Debt" shall mean at any time, without duplication,
(1) all indebtedness or liability for borrowed money, or for the deferred
purchase price of property or services (excluding trade obligations and accrued
expenses), of the Company and its consolidated Subsidiaries; (2) all obligations
of the Company and its consolidated Subsidiaries as lessee under Capital Leases;
(3) all obligations of the Company and its consolidated Subsidiaries under
letters of credit; (4) all obligations of the Company and its consolidated
Subsidiaries arising under bankers' or trade acceptance facilities; (5) all
obligations of the Company and its consolidated Subsidiaries secured by any Lien
on property owned by such Person, whether or not the obligations have been
assumed, and (6) all obligations of the Company and its consolidated
Subsidiaries under Guarantees. "Consolidated Funded Debt" shall not include (i)
any obligations of the Company to any of its customers under any of the
following programs of the Company, in each case, as in effect on the date hereof
(the "Programs"): "Payment Plus"; "Preferred Payment Plan"; "Deferred Payment
Plan"; and "Prepayment Bonus Credit", provided, however, that any reimbursement
obligations of the Company or any of its consolidated Subsidiaries in respect of
any letters of credit issued in connection with, or in support of the Company's
obligations under, any of the Programs, shall be included as "Consolidated
Funded Debt" hereunder, or (ii) any junior subordinated debentures issued by the
Company in connection with the issuance of any Junior Preferred Securities.
"Consolidated Interest Expense" shall mean, for any period, all interest
expense of the Company and its consolidated Subsidiaries (net of any CoBank
patronage refunds), as determined in accordance with GAAP.
"Continuing Credit Facilities" has the meaning specified in Section
3.01(M) hereof.
"Credit Facility" shall mean the revolving loan credit facility extended
to the Company pursuant to Section 2.01 hereof in the aggregate principal amount
not to exceed the Aggregate Commitments.
"Debt" shall mean without duplication (1) indebtedness or liability for
borrowed money, or for the deferred purchase price of property or services
6
<PAGE>
(excluding trade obligations and accrued expenses); (2) obligations as lessee
under Capital Leases; (3) obligations under letters of credit; (4) all
obligations arising under bankers' or trade acceptance facilities; (5) all
obligations secured by any Lien on property owned by such Person, whether or not
the obligations have been assumed, and (6) obligations under Guarantees. "Debt"
shall not include any obligations of the Company to any of its customers under
any of the following programs of the Company, in each case, as in effect on the
date hereof (the "Programs"): "Payment Plus"; "Preferred Payment Plan";
"Deferred Payment Plan"; and "Prepayment Bonus Credit", provided, however, that
any reimbursement obligations of the Company in respect of any letters of credit
issued in connection with, or in support of the Company's obligations under, any
of the Programs, shall be included as "Debt" hereunder.
"Depreciation" shall mean, for any period, total depreciation of the
Company and its consolidated Subsidiaries, as determined in accordance with
GAAP.
"Distributions" shall mean, for any period, all distributions made on all
issues of common stock, preferred stock and Junior Preferred Securities.
"Documentation Agent" shall mean CoBank or any successor appointed
pursuant to Section 9.06 hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
promulgated thereunder.
"ERISA Affiliate" shall mean any corporation or trade or business which is
a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Company or is under common control (within
the meaning of Section 414(c) of the Code) with the Company; provided, however,
that for purposes of provisions herein concerning minimum funding obligations
(imposed under Section 412 of the Code or Section 302 of ERISA), the term "ERISA
Affiliate" shall also include any entity required to be aggregated with the
Company under Section 414(m) or 414 (o) of the Code.
"Event of Default" shall mean any of the events specified in Section 8.01
hereof.
"Existing Obligor" shall mean a Person as of the Closing Date in which the
Company has an Investment or is obligated or committed to make an Investment, or
which has obligations which are, in whole or part, guaranteed by the Company or
which the Company is obligated or committed, in whole or part, to guarantee.
"Facility Fee Percentage" shall mean, for any day, the rate per annum
determined by reference to the Company's corporate ratings provided by Standard
& Poor's and Moody's as set forth below:
7
<PAGE>
- -------------------------------------------------------------
Pricing Standard & Poor's/Moody's Facility Fee
Level Corporate Ratings* Percentage
- -------------------------------------------------------------
I BBB+/Baa1 or higher 0.150%
- -------------------------------------------------------------
II BBB/Baa2 0.175%
- -------------------------------------------------------------
III BBB-/Baa3 0.200%
- -------------------------------------------------------------
IV BB+/Ba1 0.300%
- -------------------------------------------------------------
V BB/Ba2 or lower 0.375%
- -------------------------------------------------------------
*In the event of a split rating between Standard & Poor's and Moody's, the lower
rating will determine the Facility Fee Percentage.
The Facility Fee Percentage shall be determined and adjusted on the date
of each change in the Company's corporate rating. Adjustments in the Facility
Fee Percentage shall be effective from the date of any adjustment in rating. The
Company shall provide the Administrative Agent with written notice of any change
in the corporate ratings of the Company within ten (10) Business Days after the
Company becomes aware of or receives notice of such change.
"Federal Funds Rate" shall mean, for any day, the rate of interest per
annum (rounded upward, if necessary, to the nearest whole multiple of 1/100 of
1%) equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published by the Federal Reserve Bank of New York on the
Business Day next succeeding such day, provided that (A) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day and (B) if no such rate is so
published on the next succeeding Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to the Administrative Agent on such day on
such transactions as determined by the Administrative Agent.
"Financing Services and Contributed Capital Agreements" shall mean (a) the
Fourth Amended and Restated Financing Services and Contributed Capital Agreement
dated as of January 12, 1999, between the Company and Statesman, attached hereto
as Exhibit I, and (b) the Financing Services and Contributed Capital Agreement
dated as of April 1, 1998, between the Company and MLCC, attached hereto as
Exhibit I, in each case, as such agreements may be amended, supplemented,
restated or otherwise modified from time to time upon the prior written consent
of the Banks in accordance herewith.
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"First Union" has the meaning set forth in the preamble hereto.
"GAAP" means generally accepted accounting principles in the United
States.
"GoldKist" shall mean Gold Kist Inc.
"GoldKist Acquisition Agreement" shall mean that certain Asset Purchase
Agreement dated as of July 23, 1998, between the Company and GoldKist, as
amended, supplemented or otherwise modified prior to the date of this Agreement.
"GoldKist Commitment Letter" shall mean that certain Commitment Letter and
related term sheet dated as of October 13, 1998, between the Company and
GoldKist.
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantees" shall have the meaning set forth in Section 6.05 hereof.
"Interest Period" shall mean, with respect to any LIBOR Loan, the period
commencing on the date such Loan is made and ending, as the Company may select
pursuant to either Section 2.02(B) or 2.04 hereof, on the numerically
corresponding day in the first, second, third, or sixth calendar month
thereafter, except that (1) if the Interest Period would end on a day that is
not a Business Day, then such Interest Period shall be extended to the next
Business Day unless such Business Day would fall in the next calendar month, in
which case the Interest Period shall end on the immediately preceding Business
Day; and (2) each such Interest Period that commences on the last Business Day
of a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end on the
last Business Day of the appropriate subsequent calendar month.
"Investment" shall have the meaning set forth in Section 6.04 hereof.
"Junior Preferred Securities" shall mean mandatorily redeemable capital
securities or preferred securities issued by the Company, any Subsidiary of the
Company or any other Person whose financial statements are consolidated with
those of the Company from time to time, in each case, upon terms and conditions
satisfactory to the Agents, the Lead Arranger and their respective counsel.
"Law" means any applicable foreign, federal, state or local statute, law,
rule, regulation, ordinance, order, code, policy or rule of common law, now or
hereafter in effect, and any judicial or administrative interpretation thereof
by a Governmental Authority, including any judicial or administrative order,
consent decree or judgment.
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"Lead Arranger" shall mean NationsBanc Montgomery Securities LLC in its
capacity as sole and exclusive lead arranger for the Credit Facility.
"LIBOR Base Rate" shall mean a rate for deposits in U.S. dollars, with
maturities comparable to the selected LIBOR Interest Period, that appears on the
display designated as page "3750" of the Telerate Service (or such other page as
may replace page 3750 of that service or such other service or services as may
be nominated by the British Bankers' Association for the purpose of displaying
London interbank offered rates for U.S. dollar deposits), determined as of 1:00
p.m. (New York time), two (2) Business Days prior to the commencement of such
Interest Period.
"LIBOR Loan" shall mean a Loan bearing interest with reference to the
LIBOR Rate.
"LIBOR Rate" shall mean, for each LIBOR Loan, the rate per annum (rounded
upwards, if necessary, to the nearest 1/1000 of 1%) determined by the
Administrative Agent to be equal to the quotient of (1) the LIBOR Base Rate for
such LIBOR Loan for such Interest Period divided by (2) one minus the LIBOR
Reserve Requirement for such Interest Period.
"LIBOR Reserve Requirement" means, for any LIBOR Loan, the average actual
rate at which reserves (including any marginal, supplemental, or emergency
reserves) are required to be maintained during the Interest Period for such
LIBOR Loan under Regulation D by member banks of the Federal Reserve System in
New York City with deposits exceeding One Billion Dollars ($1,000,000,000)
against "Eurocurrency Liabilities" (as such term is used in Regulation D).
Without limiting the effect of the foregoing, but without duplication, the LIBOR
Reserve Requirement shall also reflect any other reserves required to be
maintained by such member banks by reason of any Regulatory Change against (1)
any category of liabilities which includes deposits by reference to which the
LIBOR Base Rate is to be determined; or (2) any category of extensions of credit
or other assets which include LIBOR Loans.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment for security purposes, deposit arrangement,
encumbrance, lien (statutory or other), or other security agreement, charge, or
encumbrance of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable Law
of any jurisdiction to evidence any of the foregoing).
"Loan Documents" shall mean this Agreement, the Notes, and any other
(present or future) documentation as may be executed by the parties with respect
to this transaction all as may be amended or restated from time to time.
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"Loans" shall mean the loans made by the Banks pursuant to this Agreement.
"Master Loan Agreement" shall mean that certain Master Loan Agreement
dated as of February 1, 1997, between the Company and CoBank, as amended,
supplemented or otherwise modified from time to time.
"Material Adverse Effect" means a material adverse effect on the
properties, business, assets, prospects, operations or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole, or the ability
of the Company to perform its obligations under the Loan Documents to which it
is a party.
"MLCC" shall mean Michigan Livestock Credit Corporation.
"Moody's" shall mean Moody's Investors Service, Inc.
"Multiemployer Plan" shall mean a Plan described in Section 4001(a)(3) of
ERISA.
"NationsBank" has the meaning set forth in the preamble hereto.
"Net Income" shall mean, with respect to the Company, for any period and
without duplication, net income (or loss) for such period determined in
accordance with GAAP, currently reported as "net savings" in the Company's
financial statements.
"Notes" shall mean the promissory notes described in Section 2.08 hereof.
"Pay Proceeds Letter" has the meaning specified in Section 3.01(R) hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Investments" means (i) cash and Cash Equivalents, (ii)
investments and loans existing on the Closing Date identified on Schedule 6.04,
(iii) investments, loans and advances in wholly-owned Subsidiaries of the
Company, (iv) loans and advances to officers and directors (other than loans
described in clause (ix)) in an aggregate amount up to $2,000,000 at any time
outstanding, (v) loans and investments made pursuant to the requirements of the
Financing Services and Contributed Capital Agreements, (vi) investments in
CoBank, (vii) investments in Southern States Insurance Exchange, Inc., suppliers
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or lenders, in each case, solely as a result of volume or patronage refunds
arising in the ordinary course of business, (viii) investments in or received
from customers in connection with collection of amounts owing to the Company or
its Subsidiaries so long as the aggregate amount of all such investments does
not at any time exceed $7,500,000 and (ix) loans to customers in the ordinary
course of business.
"Person" shall mean an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority, or other entity of whatever nature.
"Plan" shall mean a pension plan which is covered by Title IV of ERISA and
in respect of which the Company or an ERISA Affiliate is an "employer" as
defined in Section 3(5) of ERISA.
"Potential Default" shall mean the occurrence of an event which, with the
giving of notice and/or the passage of time, would become an Event of Default.
"Prime Rate" means, for any day, the rate defined as the "prime rate," as
published from time to time in the Eastern Edition of the Wall Street Journal as
the base rate on corporate loans posted by at least seventy-five percent (75%)
of the United States' thirty (30) largest banks, or if the Wall Street Journal
shall cease publication or cease publishing the "prime rate" on a regular basis,
such other regularly published average prime rate applicable to such commercial
banks as is acceptable to the Administrative Agent in its reasonable discretion.
"Prohibited Transaction" shall mean any transaction set forth in Section
406 of ERISA or Section 4975 of the Code, as each may be amended from time to
time.
"Rabobank Letter of Credit" shall mean that certain Irrevocable Letter of
Credit No. SB14112, dated October 13, 1998, issued by Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch in favor
of the Company in the amount of $100,000,000.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as amended from time to time.
"Regulatory Change" shall mean, with respect to any Bank, any change after
the date of this Agreement in any Law (including Regulation D), including any
change resulting from the adoption or making after such date of any
interpretations, directives, or requests applying to a class of banks including
such Bank, of or under Law (whether or not having the force of law) by any court
or governmental or monetary authority charged with the interpretation or
administration thereof.
"Reportable Event" shall mean any of the events set forth in Section 4043
of ERISA.
"Requisite Banks" shall mean Banks holding at least 66_% of the aggregate
Commitments made by the Banks hereunder, provided however that if (1) there are
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at least three Banks and (2) the Requisite Banks is composed only of the
Administrative Agent then one additional Bank will also be required to
constitute the Requisite Banks.
"Standard & Poor's" shall mean Standard & Poor's Ratings Group, a division
of McGraw Hill, Inc.
"Statesman" shall mean Statesman Financial Corporation.
"Statesman Credit Facility" shall mean a syndicated revolving credit
facility in the aggregate principal amount of up to $250,000,000.00 for
Statesman which one or more Banks are party to as lenders.
"Statesman Term Sheet" shall mean the Commitment Letter and Summary of
Terms and Conditions dated November 20, 1998, by and among Statesman, the Agents
and the Lead Arranger in connection with the Statesman Credit Facility.
"Subsidiary" shall mean, as to any Person, any corporation, partnership,
limited liability company, association or other business entity of which shares
of stock (or equivalent ownership or controlling interest) having ordinary
voting power to elect a majority of the board of directors or other managers
thereof are at the time owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by such Person.
"Syndication Agents" shall mean First Union and NationsBank or any
successors appointed pursuant to Section 9.06 hereof.
"Tangible Net Worth" shall mean at any time the sum, without duplication,
of the following for the Company:
(a) Redeemable preferred stock as reflected on Company's consolidated
balance sheet prepared in accordance with GAAP; plus
(b) Capital stock as reflected on Company's consolidated balance sheet
prepared in accordance with GAAP; plus
(c) patrons' equity as reflected on Company's consolidated balance sheet
prepared in accordance with GAAP; plus
(d) the amount available for drawing under the Rabobank Letter of Credit;
plus
(e) the net cash proceeds received by the Company from any issuance of
Junior Preferred Securities; minus
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(f) the sum of the following (without duplication of deductions in respect
of items already deducted in arriving at stockholders' and patrons' equity): (i)
the book value of all assets which would be treated as intangibles under GAAP,
including without limitation trademarks, trade names, copyrights, and patents
and unamortized debt discount and expense, to the extent that the aggregate book
value of all such assets exceeds $150,000; (ii) any goodwill; and (iii) any
write-up in book value of assets resulting from a revaluation thereof, not in
accordance with GAAP, subsequent to the Closing Date.
"Term Sheet" has the meaning specified in Section 2.07 hereof.
"Termination Date" shall mean January 11, 2002 or such later date as may
otherwise be agreed to by the Company, the Agents and each of the Banks
(provided, however, that none of the Agents or the Banks shall be under any
obligation to extend the Termination Date).
"Total Exposure" shall mean, as to any Person and at any point in time,
the sum of: (1) all Investments made by the Company in such Person; (2) the
amount of any additional Investments which the Company is obligated or committed
to make in such Person; (3) the amount of all obligations of such Person which
the Company has guaranteed; and (4) the amount of any additional obligations of
such Person which the Company is obligated or committed to guarantee.
"Unused Commitment" shall mean at any time, with respect to any Bank, the
amount by which such Bank's Commitment exceeds the sum of the total aggregate
outstanding principal amount of such Bank's Loans, but in any event not less
than zero.
SECTION 1.02 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent with those
applied in the preparation of the annual financial statements referred to in
Section 4.04, and all financial data submitted pursuant to this Agreement shall
be prepared in accordance with such principles.
ARTICLE II
AMOUNT AND TERMS OF LOANS
SECTION 2.01. The Commitments. On the terms and conditions set forth in
this Agreement, each Bank severally agrees to make Loans to the Company from
time to time during the period commencing on the date hereof and ending on (but
not including) the Termination Date, in an aggregate principal amount not to
exceed, at any one time outstanding, the amount set forth opposite such Bank's
name below (such Bank's "Commitment"):
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Name of Bank Amount
------------ ------
CoBank, ACB $62,222,222.22
First Union National Bank $26,666,666.67
NationsBank, N.A. $27,777,777.78
FMB Bank $5,555,555.55
Cooperatieve Centrale Raiffeisen-
Boerenleenbank B.A., "Rabobank Nederland",
New York Branch $11,111,111.11
Banque Nationale de Paris (Chicago Branch) $11,111,111.11
Crestar Bank $26,666,666.67
DG Bank Deutsche Genossenschaftsbank
AG Cayman Islands Branch $6,666,666.67
Wachovia Bank, N.A. $22,222,222.22
TOTAL $200,000,000.00
===============
Provided, however, with respect to Bid Rate Loans each Bank may, but is not
required to, make a Loan in excess of its Commitment. In no event will the
aggregate amount of Loans outstanding, including Bid Rate Loans, at any one time
exceed the Aggregate Commitments.
Within the limits of each Bank's Commitment, and in the case of Bid Rate Loans
for amounts exceeding each Bank's Commitment, the Company may borrow, prepay
pursuant to Section 2.06 hereof, and reborrow. Loans may be outstanding
hereunder as Base Rate Loans, LIBOR Loans, or Bid Rate Loans, or any combination
thereof, as selected by the Company pursuant to Section 2.02 hereof. Base Rate
Loans and LIBOR Loans shall be made by the Banks ratably in proportion to their
projected Unused Commitments as of the date such Loans are to be made. For the
purposes of this Section 2.01 and Section 2.02(C), such Unused Commitments shall
be projected by determining the Unused Commitment of each Bank as of 12:00 noon,
Eastern time on the Business Day on which the Company delivers its notice
requesting a Loan and (x) reducing the amount of such Bank's Unused Commitment
by the sum of (i) the amount if any of any Bid Rate Loans which it has offered
to make on or before the date such new Loan is to be made and which offer the
Company has accepted plus (ii) the amount if any of Base Rate Loans and LIBOR
Loans which the Company has requested and which such Bank will be obligated to
fund on or before the date such new Loan is to be made and (y) increasing the
amount of such Bank's Unused Commitment by the sum of (i) the amount, if any, of
any Base Rate Loans or LIBOR Loans owing to such Bank for which the Company has
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given notice that it will prepay on or before the date such new Loan is to be
made, plus (ii) the amount if any of any Bid Rate Loans owing to such Bank which
are payable on or before the date such new Loan is to be made. A Bank with
Loans, including Bid Rate Loans, equal to or exceeding its Commitment will be
deemed to have no available Unused Commitment for purposes of ratably
apportioning Base Rate Loans and LIBOR Loans. Bid Rate Loans shall be made by
the applicable Banks in the amount of their respective bids, which may exceed
each respective Bank's Commitment, that are accepted by the Company pursuant to
Section 2.02(C) hereof. The obligations of each Bank hereunder are several (and
not joint and several) and the failure of any Bank to perform hereunder shall
not result in liability to any other Bank or increase the Commitment of any
other Bank.
SECTION 2.02 Notice and Manner of Borrowing. The Company shall give notice
of its intent to borrow hereunder in accordance with the following procedures:
(A) Base Rate Loans. In the event the Company desires a Base Rate
Loan, it shall furnish to the Administrative Agent notice of that fact and of
the amount of the Loan no later than 12:30 p.m. Eastern time on the date such
Loan is to be made. Such notice shall be in the form attached hereto as Exhibit
A.
(B) LIBOR Loans. In the event the Company desires a LIBOR Loan, it
shall furnish notice of that fact to the Administrative Agent no later than
12:30 p.m. Eastern time three Business Days prior to the date such Loan is to be
made. Such notice shall be in the form of Exhibit A hereto and shall specify the
amount of the Loan, the date the Loan is to be made, and the Interest Period
applicable thereto. The Interest Period may, at the Company's option, be either
one month, two months, three months, or six months. If on any given day the
Company desires more than one LIBOR Loan having different Interest Periods, it
may so specify in its notice. The Interest Period may, at the Company's option,
extend beyond the Termination Date provided that (i) no Bank is thereby required
to extend the Termination Date or renew this Agreement and (ii) if any Bank does
not, in its sole discretion, extend, renew, or otherwise continue its commitment
on or before the Termination Date then the balance of all LIBOR Loans made by
the terminating Bank will be due and payable on the Termination Date and the
Company will pay all costs relating to prepayment of LIBOR Loans as set forth in
Section 2.11.
(C) Bid Rate Loans. In the event the Company desires a Bid Rate
Loan, it shall notify each of the Banks of such fact by 11:00 a.m. Eastern time
on the date such Loan is proposed to be made. Such notice shall be in the form
of Exhibit A or by telephone confirmed in writing in the form of Exhibit A and
shall specify the amount of the Loan and the proposed maturity date for such
Loan, which maturity date shall not in any event exceed the date which is two
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hundred seventy (270) days from the date of the making of such Bid Rate Loan
(the "Bid Rate Maturity Date"). If the Company desires more than one Bid Rate
Loan with different Bid Rate Maturity Dates, it may so request in its notice.
However, the maximum number of amounts and Bid Rate Maturities for which bids
may be sought on any day may not exceed five and the Company may not solicit
bids from the Banks for Bid Rate Loans more than three times per week. In the
event a Bank, in its sole discretion in each instance, desires to bid on one or
more of the Bid Rate Loans or on a part of one or more of such Loans, it shall,
on or before 11:45 a.m. Eastern time on the day that a Bid Rate Loan is to be
made notify the Company of such fact in the form attached hereto as Exhibit B or
by telephone confirmed in writing in the form of Exhibit B. No Bank may bid more
than three times per week. With respect to Bid Rate Loans, no Bank may bid an
amount which exceeds the projected aggregate Unused Commitments of all of the
Banks, calculated as provided in Section 2.01. The Company shall disregard any
quote which is received late. If the Company desires to accept one or more of
the bids, it shall furnish notice of such fact to the Bank or Banks that made
the bids that were accepted by the Company by 12:30 p.m. Eastern time on the day
the bids were made. Such notice shall be in the form of Exhibit C hereto or by
telephone confirmed in writing in the form of Exhibit C, and a copy thereof
shall be provided to the Administrative Agent provided that the copy submitted
to the Administrative Agent shall not include bid rates or loan pricing
information. The Interest Period may, at the Company's option, extend beyond the
Termination Date provided that (i) no Bank is thereby required to extend the
Termination Date or renew this Agreement and (ii) if any Bank does not, in its
sole discretion, extend, renew, or otherwise continue its commitment on or
before the Termination Date then the balance of all Bid Rate Loans made by the
terminating Bank will be due and payable on the Termination Date and the Company
will pay all costs relating to prepayment of Bid Rate Loans as set forth in
Section 2.11.
Notwithstanding the above, if any Bank gives the Company notice that the Bank
does not intend to make Bid Rate Loans in excess of the Bank's Commitment then,
until such time as the Bank rescinds such notice, the Company will not be
required to notify the subject Bank with respect to Bid Rate Loans that would
exceed the Bank's Commitment. The notice and rescission described in this
paragraph must be in writing, substantially in the form of Exhibit D, and will
be effective three (3) Business Days after receipt.
All notices by the Company to any Bank provided for above shall be sent by
facsimile or if agreed to by the recipient Bank, by e-mail to the e-mail address
specified by such Bank, and shall be effective only upon receipt. Notices to the
Banks shall be directed as provided in the Bank notice profile attached as
Exhibit E. All notices by any Bank to the Company provided for above shall be
sent by facsimile or by e-mail to the Company at the e-mail address specified on
the signature page for the Company, and shall be effective only upon receipt.
Not later than 3:00 p.m. Eastern time on the date (which must be a Business Day)
a Loan is to be made: (i) each Bank, in the case of a Base Rate or LIBOR Loan,
shall make available directly to the Company its share of the Loan; and (ii) the
Bank or Banks whose bid(s) were accepted shall, in the case of Bid Rate Loans,
make available directly to the Company the principal amount of the Bid Rate Loan
which such Bank or Banks agreed to make. The Administrative Agent shall notify
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each Bank of its pro rata share of each Base Rate or LIBOR Loan. Such notice
shall be given by facsimile no later than 1:00 p.m. Eastern time on, in the case
of each Base Rate Loan, the date such Loan is to be made and, in the case of
each LIBOR Loan, the date that is three Business Days prior to the date such
Loan is to be made. Loans will be made available either by credit to an account
maintained by the Company with the Bank or by wire transfer to: (a) such account
or accounts as may be authorized on forms supplied by the Bank; or (b) in the
absence of such authorization, to Crestar Bank, ABA No. 051000020, account of
Southern States Cooperative, Incorporated Account No. 1000780 or such
replacement account as the Company shall specify by notice to each of the Banks.
SECTION 2.03 Interest.
(A) Rates. The Company agrees to pay interest to each Bank on the
outstanding principal balance of such Bank's Loans at a rate per annum as
follows:
(1) For a Base Rate Loan, at a rate equal at all times to the
Base Rate plus the Applicable Margin. Any change in the Base Rate shall be
effective as of the opening of business on the day on which such change in the
Base Rate becomes effective.
(2) For a LIBOR Loan, at a rate equal to the LIBOR Rate plus
the Applicable Margin.
(3) For a Bid Rate Loan, at the specified fixed rate quoted by
the Bank making such Loan and accepted by the Company.
(B) Calculation and Payment. Interest shall be calculated on the
actual number of days each Loan is outstanding on the basis of a year consisting
of 360 days. In calculating interest, the date each Loan is made shall be
included and the date each Loan is repaid shall, if received before 3:00 p.m.
Eastern time, be excluded. Interest shall be payable in immediately available
funds directly to each Bank as follows:
(1) For each Base Rate Loan, monthly in arrears on the 10th
calendar day of the following month and on the Termination Date.
(2) For each LIBOR Loan, on the last day of the Interest
Period applicable thereto and, in the case of an Interest Period greater than
three months, at three-month intervals after the first day of such Interest
Period.
(3) For each Bid Rate Loan on the Bid Rate Maturity Date.
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(C) Default Rate. Any principal, interest or other amounts not paid
when due (whether at maturity, by acceleration, or otherwise) shall bear
interest thereafter until paid in full, payable on demand, at a rate per annum
equal to:
(1) For any such amount payable in respect of a Base Rate Loan
and for all other amounts payable hereunder other than in respect of a LIBOR
Loan or a Bid Rate Loan from the time of default in payment of such amount and
thereafter at a rate equal to the Base Rate plus the Applicable Margin plus 1
and 50/100ths of 1%;
(2) For any such amount payable in respect of a LIBOR Loan, at
a rate equal to the LIBOR Rate plus the Applicable Margin plus 2% from the time
of default in payment of such amount until the end of the then current Interest
Period therefor, and thereafter at a rate equal to the Base Rate plus 1 and
50/100ths of 1%;
(3) For any such amount payable in respect of a Bid Rate Loan,
at a rate equal to the rate quoted by the Bank making such Loan and accepted by
the Company plus 2% from the time of default in payment of such amount until the
Bid Rate Maturity Date, and thereafter at a rate equal to the Base Rate plus 1
and 50/100ths of 1%.
SECTION 2.04 Conversions and Renewals. Subject to Section 2.05 hereof and
provided no Potential Default or Event of Default has occurred and is
continuing, the Company shall have the right, on three Business Day's prior
notice to the Administrative Agent (which notice shall be sent by facsimile and
shall be effective upon receipt), to convert any Base Rate Loan into a LIBOR
Loan or to continue any LIBOR Loan. Such notice must be received by the
Administrative Agent no later than 12:30 p.m. Eastern time and shall state (i)
the amount to be converted or continued; (ii) the date the conversion is to be
effective (which date must be a Business Day); and (iii) the Interest Period
applicable thereto (which period must expire on or prior to the Termination
Date; provided, however, that such Interest Period may, at the Company's option,
extend beyond the Termination Date provided further that (i) no Bank is thereby
required to extend the Termination Date or renew this Agreement and (ii) if any
Bank does not, in its sole discretion, extend, renew, or otherwise continue its
commitment on or before the Termination Date then the balance of all LIBOR Loans
made by the terminating Bank will be due and payable on the Termination Date and
the Company will pay all costs relating to prepayment of LIBOR Loans as set
forth in Section 2.11.). The Administrative Agent shall promptly send a copy of
such notice to each Bank. Any LIBOR Loan which is not continued as provided
above shall, on the last day of the Interest Period applicable thereto,
automatically be converted to a Base Rate Loan. Bid Rate Loans may not be
converted and may not be continued unless; (a) the Company requests bids
pursuant to Section 2.02(C) hereof; (b) the Bank that made the Bid Rate Loan
bids on the new Loan request; and (c) the Company accepts such bid. Unless
continued in that manner, each Bid Rate Loan shall be repaid on the Bid Rate
Maturity Date; and if for any reason such Loan is not repaid on such date, then
such Loan shall bear interest until repaid at the rate set forth in Section
2.03(C) hereof.
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SECTION 2.05 Minimum Amounts. Each Loan and each conversion or
continuation thereof shall be in an amount at least equal to $3,000,000 and in
integral multiples of $1,000,000; provided, however, that Bid Rate Loans made by
any Bank may be in an amount equal to the lesser of $3,000,000 or that Bank's
Unused Commitment at the time that Bank furnishes its bid.
SECTION 2.06 Principal Payments.
(A) Voluntary Prepayments. The Company may prepay Base Rate or LIBOR
Loans, but not Bid Rate Loans. In the event the Company desires to prepay any
LIBOR or Base Rate Loan, it shall furnish to each Bank written or facsimile
notice of that fact (which notice shall be effective upon receipt and
irrevocable) by: (i) in the case of Base Rate Loans, 11:30 a.m. Eastern time on
the date such Loan is to be prepaid; and (ii) in the case of LIBOR Loans, 11:30
a.m. Eastern time two Business Days prior to the date such Loan is to be
prepaid. To the extent so authorized, prepayments may be made in whole (with
accrued interest to the date of prepayment), or in part (without accrued
interest); provided, however, that: (i) partial prepayments must be in a minimum
amount of $1,000,000 with amounts in excess thereof in increments of $100,000,
and the portion of the Loan not prepaid must meet the minimum requirements of
Section 2.05 hereof; and (ii) in the event the Company prepays any LIBOR Loan
prior to the last day of the Interest Period applicable thereto, the Company
must compensate the Bank receiving the prepayment in the manner set forth in
Section 2.11 hereof. All payments of principal and fees contemplated herein
shall be made directly to each Bank in the same proportion that each Bank
contributed to the Loan when it was made.
(B) Mandatory Payments. The Company shall repay the outstanding principal
amount of all Loans in full, together with all accrued but unpaid interest
thereon and all other amounts due and owing hereunder and under the other Loan
Documents, on the Termination Date, provided, however that the Company shall not
be obligated to pay on the Termination Date the principal of, or any accrued and
unpaid interest on, any LIBOR Loan or Bid Rate Loan, the Interest Period of
which extends beyond the Termination Date, made by any Bank that has extended,
renewed or otherwise continued its commitment as provided in Section 2.02(B),
Section 2.02(C) or Section 2.04 hereof. If at any time the outstanding principal
amount of all Loans exceeds the Aggregate Commitments, the Company shall repay
such excess, provided, that any repayment of outstanding Bid Rate Loans shall be
made after the Company has first repaid any and all outstanding LIBOR Loans and
Base Rate Loans. Each repayment pursuant to the immediately preceding sentence
shall be accompanied by any amount required to be paid pursuant to Section 2.11.
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SECTION 2.07 Fees.
(A) In order to compensate the Administrative Agent and the
Documentation Agent for its obligations hereunder, the Company agrees to pay to
(i) the Administrative Agent, for its own account, the annual administration
fees set forth in the Commitment Letter and Summary of Terms and Conditions
dated November 20, 1998 (collectively, the "Term Sheet"), by and among the
Company, Statesman, the Agents and the Lead Arranger, which fees shall be
payable in equal quarterly installments at the end of each fiscal quarter of the
Company, with the first such installment due and payable on March 31, 1999, and
(ii) the Lead Arranger, for its own account, the fees set forth in the fee
letter dated November 20, 1998 (the "Lead Arranger Fee Letter"), between Lead
Arranger and the Company at the times specified therein for payment; provided
that the terms of the Term Sheet and the Lead Arranger Fee Letter shall not be
incorporated herein except as to the amount of fees payable to the Agent and the
Lead Arranger and the time of payment as contemplated herein and therein.
(B) The Company shall pay to each Bank a facility fee in an amount
equal to, for each Bank, the Facility Fee Percentage of the amount of that
Bank's Commitment from and after the Closing Date to the Termination Date
whether or not there is usage under the facility. The facility fee will be
accrued and payable quarterly in arrears (calculated on a 360-day basis), with
the first such payment due and payable on March 31, 1999.
SECTION 2.08. Notes. All Loans made by each Bank under this Agreement
shall be evidenced by, and repaid with interest in accordance with a promissory
note of the Company in substantially the form of Exhibit F-1 attached hereto for
Base Rate Loans and LIBOR Loans and a promissory note in substantially the form
of Exhibit F-2 attached hereto for Bid Rate Loans, in each case, duly completed,
dated the date such Bank becomes a Bank, in the amount of such Bank's
Commitment, and payable to such Bank (collectively, the "Notes"). Each Bank is
hereby authorized to endorse on the schedule attached to the Note held by it the
date and amount of each Loan, the type of Loan, the applicable Interest Period,
and, in the case of Bid Rate Loans, the interest rate on and the Bid Rate
Maturity Date of the Loan, and each conversion, continuation, and payment of
principal amount received by such Bank, provided, however, that the failure to
make such notation shall not limit or otherwise affect the obligations of the
Company under this Agreement or the Note held by such Bank. Each Bank agrees
that prior to the assignment of any Note, it will endorse the schedule attached
to its Note. The records of the Bank reflecting such endorsements shall, in the
absence of manifest error, be conclusive as to the outstanding principal amount
of all Loans owed to the Bank.
SECTION 2.09. Use of Proceeds. The proceeds of the Loans will be used by
the Company (a) on the Closing Date to refinance up to (but not more than)
$118,313,487 in aggregate principal amount of indebtedness incurred by the
Company under the Bridge Loan Facility (the "Bridge Loan Refinancing"), (b)
refinance certain other existing indebtedness of the Company, and (c) to provide
financing for working capital and permitted capital expenditures of the Company,
including the payment of consideration for acquisitions permitted by this
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Agreement and the payment of fees and expenses incurred in connection with the
transactions contemplated hereby. The Company shall not, directly or indirectly,
use any part of the proceeds of any Loan to: (i) refinance or repay all or any
portion of principal indebtedness incurred by the Company under the Bridge Loan
Facility other than in connection with (I) the Bridge Loan Refinancing, and (II)
the repayment of principal under the Bridge Loan Facility in an amount equal to
the lesser of (x) the actual amount of all underwriting discounts, fees and
commissions, if any, paid in cash by the Company after the Closing Date from the
gross proceeds of any and all issuances of Junior Preferred Securities occurring
after the Closing Date, and (y) an amount equal to the product of 0.035 times
the gross proceeds of any and all issuances of Junior Preferred Securities
occurring after the Closing Date; or (ii) for the purpose of purchasing or
carrying any margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System or to extend credit to any Person for
the purpose of purchasing or carrying any such margin stock, or for any purpose
which violates, or is inconsistent with, Regulation X of such Board of
Governors.
SECTION 2.10 Method of Payment; Limitation on Set Off and Tax
Withholding.
(A) Method of Payment. The Company shall make each payment under
this Agreement and the Notes not later than 3:00 p.m. Eastern time on the date
when due in lawful money of the United States and in immediately available
funds. The Company hereby authorizes each Bank, if and to the extent payment is
not made when due, to charge from time to time against any account of the
Company with such Bank any amount so due. If any payment date is stated to be
due on a day which is not a Business Day, then such payment shall be made on the
next succeeding Business Day, and such extension of time shall be included in
the computation of the payment of interest.
(B) Limitation on Set Off and Tax Withholding. Without limiting any
other provision of this Agreement, all payments (including, without limitation,
principal, interest and/or fees) made under or pursuant to this Agreement or any
Note shall be made by the Company without regard to any rights of set off or
counterclaim and in such amounts as may be necessary in order that all such
payments (after deduction or withholding for or on account of any present or
future taxes, levies, imposts, duties or other charges of whatsoever nature
imposed by any governmental authority, other than any tax on or measured by the
net income of a Bank pursuant to the income tax laws of the United States or of
the jurisdictions where such Bank's principal office is located (collectively,
"Taxes")) shall not be less than the amounts otherwise specified to be paid
under this Agreement and/or the Notes. If the Company is required by law to make
any deduction or withholding on account of Taxes from any payment due hereunder
(principal, interest or otherwise), then the amount payable will be increased to
such amount which, after deduction from such increased amount of all amounts
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required to be deducted or withheld therefrom, will not be less than the amount
otherwise due and payable. Without prejudice to the foregoing, if any Bank or
the Administrative Agent is required to make any payment on account of Taxes,
the Company will, upon notification by the Bank or the Administrative Agent,
promptly indemnify such person against such Taxes together with any interest,
penalties and expenses payable or incurred in connection therewith.
SECTION 2.11. Indemnity. The Company shall indemnify each Bank against any
loss, cost or expense which such Bank may sustain or incur as a consequence of
(a) any failure by the Company to borrow or to continue, convert or extend any
Loan hereunder after notice of such borrowing, continuing, conversion or
extension has been given pursuant to Section 2.02, or 2.04, or (b) any payment,
prepayment or conversion by the Company of a LIBOR Loan or Bid Rate Loan
required by any other provision of this Agreement or otherwise made or deemed
made on a date other than the last day of the Interest Period or the Bid Rate
Maturity Date applicable thereto. In the case of any such event, the Company
shall, upon demand by such Bank (with a copy of such demand to the
Administrative Agent), pay to such Bank any amounts required to compensate such
Bank for any reasonable loss, cost or expense which such Bank may incur as a
result of such action or inaction by the Company, including, without limitation,
any reasonable loss, cost, or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Bank to fund or maintain
such Loan or proposed Loan. Each determination by a Bank under this Section 2.11
shall be in good faith and shall be conclusive absent manifest error.
SECTION 2.12. Additional Costs. The Company shall pay directly to each
Bank within fifteen (15) days of a request for payment under this Section 2.12,
such amounts as such Bank may determine in good faith to be necessary to
compensate it for any increased costs which such Bank determines are
attributable to its making or maintaining any LIBOR Loan, or its obligation to
convert any Base Rate Loan to a LIBOR Loan hereunder, or any reduction in any
amount receivable by such Bank hereunder in respect of any such LIBOR Loan or
such obligation (such increases in costs and reductions in amounts receivable
being herein called "Additional Costs"), resulting from any Regulatory Change
which:
(A) Changes the basis of taxation of any amounts payable to such
Bank under this Agreement or the Notes in respect of any such LIBOR Loan (other
than changes in the rate of income tax imposed on such Bank or its Applicable
Lending Office by the jurisdiction in which such Bank has its principal office
or such Applicable Lending Office); or
(B) Imposes or modifies any reserve, special deposit, deposit
insurance or assessment, minimum capital, capital ratio or similar requirements
relating to any extensions of credit of the type specified herein which is not
included in the computation of "LIBOR Rate" provided that the Company shall have
no obligation to pay any such amount to any Bank unless such Bank shall have
provided the Company with written notice of such Regulatory Change and a
detailed computation of the interest rate change within thirty (30) days of when
the Bank becomes aware of such Regulatory Change.
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Without limiting the effect of the provisions of the first paragraph of
this Section 2.12, in the event that, by reason of any Regulatory Change, any
Bank either (1) incurs Additional Costs based on or measured by the excess above
a specified level of the amount of a category of deposits or other liabilities
of such Bank which includes deposits by reference to which the LIBOR Loan is
determined as provided in this Agreement or a category of extensions of credit
or other assets of such Bank which includes loans based on the LIBOR Loan; or
(2) becomes subject to restrictions on the amount of such a category of
liabilities or assets which it may hold, then, if such Bank so elects by notice
to the Company (with a copy to the Administrative Agent), the obligation of such
Bank to make or continue, or to convert Base Rate Loans into LIBOR Loans, shall
be suspended until such Regulatory Change ceases to be in effect (in which case
the provisions of Section 2.15 hereof shall be applicable).
Each Bank agrees to allocate increased costs charged to the Company pursuant to
this Section 2.12 among its similarly situated borrowers in good faith and on an
equitable basis.
Determinations and allocations by such Bank for purposes of this Section
2.12 of the effect of any Regulatory Change pursuant to the first or second
paragraph of this Section 2.12, on its costs or rate of return of maintaining
the LIBOR Loans or on amounts receivable by it in respect of the LIBOR Loans,
and the amounts required to compensate such Bank under this Section 2.12, shall
be conclusive absent manifest error.
SECTION 2.13. Limitation on Types of Advances. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of the LIBOR
Rate for any Interest Period:
(A) The Administrative Agent determines (which determination shall
be conclusive) that quotations of interest rates in the definition of "LIBOR
Base Rate" in Section 1.01 hereof are not being provided for the relevant
maturities for purposes of determining rates of interest for LIBOR Loans, as
provided in this Agreement; or
(B) Any Bank determines (which determination shall be conclusive)
that the relevant rates of interest referred to in the definition of "LIBOR Base
Rate" in Section 1.01 hereof, upon the basis of which the rate of interest for
LIBOR Loans for such Interest Period is to be determined, do not adequately
cover all the LIBOR funding costs to such Bank of making or maintaining such
LIBOR Loan for such Interest Period (and such Bank shall provide written notice
and justification of its determination to Administrative Agent which can be
shared with the Company);
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then the Administrative Agent shall give the Company prompt notice thereof, and
so long as such condition remains in effect, in the case of subsection (A)
above, the Banks, and in the case of subsection (B) above, the Bank that makes
the determination, shall be under no obligation to make LIBOR Loans, convert
Base Rate Loans into LIBOR Loans, or continue LIBOR Loans, and the Company
shall, without penalty, on the last day of the then current applicable Interest
Period for each outstanding LIBOR Loan, either prepay such LIBOR Loan owing to
such Bank, or convert such LIBOR Loan into a Base Rate Loan in accordance with
Section 2.04.
SECTION 2.14. Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to honor its obligation to make or maintain LIBOR Loans hereunder
or convert Base Rate Loans into LIBOR Loans, then such Bank shall promptly
notify the Administrative Agent and the Company thereof and such Bank's
obligation to make or continue, or to convert Base Rate Loans into, LIBOR Loans,
shall be suspended until such time as such Bank may again make and maintain
LIBOR Loans (in which case the provisions of Section 2.15 hereof shall be
applicable).
SECTION 2.15. Treatment of Affected Loans. If the obligations of any Bank
to make or continue LIBOR Loans, or to convert Base Rate Loans into LIBOR Loans
are suspended pursuant to Sections 2.12, 2.13 or 2.14 hereof (Loans so affected
being herein called "Affected Loans"), such Bank's Affected Loans shall be
automatically converted into Base Rate Loans on the last day(s) of then current
Interest Period(s) for the Affected Loans (or, in the case of a conversion
required as a result of Section 2.14, on such earlier date as such Bank may
specify to the Company if in such Bank's judgment such conversion is necessary
to comply with such change in Law).
To the extent that such Bank's Affected Loans have been so converted, all
payments and prepayments of principal which would otherwise be applied to such
Bank's Affected Loans shall be applied instead to its Base Rate Loans. All Loans
which would otherwise be made or continued by such Bank as LIBOR Loans shall be
made or continued instead as Base Rate Loans and, all Base Rate Loans of such
Bank which would otherwise be converted into LIBOR Loans shall remain as Base
Rate Loans.
SECTION 2.16. Capital Adequacy. If any Bank shall have determined that,
after the date hereof, the adoption of any applicable Law regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank, or
comparable agency charged with the interpretation or administration thereof, or
any request or directive regarding capital adequacy (whether or not having the
force of Law) of any such Governmental Authority, central bank, or comparable
agency, has or would have the effect of reducing the rate of return on capital
of such Bank (or its parent) as a consequence of such Bank's obligations
hereunder to a level below that which such Bank (or its parent) could have
achieved but for such adoption, change, request, or directive (taking into
consideration its policies with respect to capital adequacy existing on the date
of this Agreement) by an amount deemed by such Bank to be material, then from
time to time, within fifteen (15) days after written demand by such Bank (with a
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copy to the Administrative Agent), the Company shall pay to such Bank such
additional amount or amounts as will compensate such Bank (or its parent) for
such reduction. A certificate of any Bank claiming compensation under this
Section shall be conclusive in the absence of manifest error.
SECTION 2.17. Investment in CoBank. The Company agrees to make such
investment in CoBank as may from time to time be required in accordance with the
Farm Credit Act of 1971, as amended, the regulations of the Farm Credit
Administration, the bylaws of CoBank, and the capital plan of CoBank as adopted
by CoBank's board of directors, all as may be amended from time to time.
CoBank's pro rata share of the Loans and other obligations due to CoBank shall
be secured by a statutory first lien on all equity which the Company may now own
or hereafter acquire in CoBank. Such equity shall not, however, constitute
security for the obligations due to any other Bank. CoBank shall not be
obligated to set off or otherwise apply such equities to the Company's
obligations to CoBank.
SECTION 2.18. Reduction of Commitments. Upon at least five (5) calendar
days prior written notice to the Administrative Agent, the Company shall have
the right, without premium or penalty, to terminate the Commitments, in whole or
in part, provided that:
(A) (i) Any such termination shall apply to ratably and permanently
reduce the Commitment of each Bank, (ii) no voluntary prepayment of Bid Rate
Loans will be permitted, (iii) any partial termination shall be in an aggregate
amount of at least $10,000,000 and integral multiples of $5,000,000 in excess
thereof, (iv) after a partial termination of Commitments, any Bank with Bid Rate
Loans outstanding in excess of its reduced Commitment will be deemed to have
made a Bid Rate Loan in excess of its Commitment as provided in Section 2.01,
(v) to the extent a prepayment results from a whole or partial termination of
the Commitments, the Company will pay all costs relating to prepayment of a
LIBOR Loan as set forth in Section 2.11 and (vi) the Company shall comply with
the provisions of Section 2.06(B); and
(B) If after a partial termination of the Commitments, one or more
Banks has outstanding Base Rate Loans and LIBOR Loans, in the aggregate, in
excess of the such Bank's reduced Commitment then the Company shall reduce, by
prepayment, the subject Base Rate Loans and LIBOR Loans to the amount of such
Bank's Commitment on the effective date of any such partial termination; and
(C) If after a partial termination of the Commitments, no Bank has
outstanding Base Rate Loans and LIBOR Loans, in the aggregate, in excess of the
Bank's reduced Commitment, then, unless otherwise required under Section
2.06(B), no prepayment shall be required by the Company in connection with such
partial termination of the Commitments.
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(D) Upon a reduction in the Commitments, the facility fee, as
described in Section 2.07, will be determined based on the reduced Commitments
and, accordingly, the facility fee for each Bank will be reduced.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01. Conditions Precedent to Initial Use of the Commitments on
and after the Closing Date. The obligation of the Banks on or after the Closing
Date to make the initial Loans is subject to the conditions precedent that the
Administrative Agent shall have received on or before the Closing Date each of
the following documents, in form and substance satisfactory to the
Administrative Agent, each Bank and their respective counsel, and each of the
following requirements shall have been fulfilled:
(A) Evidence of Due Organization and all Corporate Actions by the
Company. A certificate of the Secretary or Assistant Secretary of the Company
dated the Closing Date, attesting to the certificate of incorporation of the
Company and all amendments thereto, to the amended bylaws of the Company, and to
all corporate actions taken by the Company, including resolutions of its board
of directors, authorizing the execution, delivery, and performance of the Loan
Documents, and each document to be delivered pursuant to the Loan Documents.
(B) Incumbency and Signature Certificate of the Company. A
certificate of the Secretary or Assistant Secretary of the Company, dated the
Closing Date, certifying the names and true signatures of the officers of the
Company authorized to sign the Loan Documents, and any documents to be delivered
pursuant to the Loan Documents.
(C) Good Standing Certificate of the Company. A certificate, dated
within ten (10) Business Days of the Closing Date, from the Secretary of State
(or other appropriate official) of the jurisdiction of incorporation of the
Company certifying as to the due incorporation and good standing of the Company.
(D) Notes. The Notes for each Bank, duly executed by the Company.
(E) Opinion of Counsel for Company. A favorable opinion of Mays &
Valentine, L.L.P., counsel for the Company, dated the Closing Date substantially
in the form of Exhibit G.
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(F) Payment of Fees. Payment in full to the Agents of all fees
required to be paid as of such date pursuant to the terms of the Term Sheet,
this Agreement and any other Loan Document. Payment in full to the Lead
Arranger, for its own account, of all fees required to be paid as of such date
pursuant to the terms of the Lead Arranger Fee Letter at the times specified
therein for payment.
(G) Officer's Certificate. The following statements shall be true
and the Administrative Agent shall have received a certificate signed by a duly
authorized officer of the Company dated the Closing Date stating that:
(1) The representations and warranties contained in this
Agreement are, as of the Closing Date, as though made on and as of such date,
correct in all material respects; and
(2) No Potential Default or Event of Default has occurred and
is continuing.
(H) Due Diligence and Additional Documentation. The Agents shall
have received and reviewed all requested information and documents necessary for
the completion of their due diligence review of the Company, and the results of
such due diligence review shall be satisfactory to each of the Agents. The
Company shall have obtained and executed and delivered to the Administrative
Agent, such other approvals, opinions, or documents as any Bank may reasonably
request.
(I) No Material Adverse Change. Since June 30, 1998, there shall not
have occurred any material adverse change in the condition (financial or
otherwise), operations, properties, assets, business, liabilities (actual or
contingent) or prospects of the Company or any of its Subsidiaries, taken as a
whole, or any event or condition that has had or could be reasonably expected to
have a Material Adverse Effect. There shall not have occurred any material
disruption of or material adverse change in financial, banking or capital market
conditions that, in the sole judgment of the Agents or the Lead Arranger, could
materially impair the syndication of the Credit Facility.
(J) Absence of Litigation. No litigation by any Person or
Governmental Authority shall be pending or threatened against the Company (i)
with respect to the Credit Facility or any of the Loan Documents executed in
connection therewith or the transactions contemplated thereby, or (ii) which
could reasonably be expected to have a Material Adverse Effect.
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(K) Minimum Rating. The Company shall have achieved a corporate
rating of BB+ or better from Standard & Poor's and Ba1or better from Moody's,
such rating shall then be in effect and no downgrading shall have occurred in
such rating by either of such rating agencies.
(L) Additional Documentation; Financial Statements. Such other
approvals, opinions, or documents as the Agents or any Bank may reasonably
request. The Agents and each Bank shall have received recent annual and interim
financial statements and other financial information with respect to the Company
and its consolidated Subsidiaries, in each case, prepared in accordance with
GAAP. Without limitation of the foregoing, the Agents and each Bank shall have
received (A) audited consolidated financial statements for the Company and its
consolidated Subsidiaries for the fiscal year ended June 30, 1998, and (B)
unaudited consolidated financial statements for the Company and its consolidated
Subsidiaries for the fiscal quarter ended September 30, 1998 and the five-month
period ended November 30, 1998.
(M) Other Credit Facilities. The Company shall have terminated the
line of credit facilities in place prior to the Closing Date as set forth on
Schedule 3.01(M) hereto and all obligations of the Company under such line of
credit facilities shall have been paid in full, except for the following line of
credit facilities which shall not be terminated, but shall remain outstanding in
accordance with their terms (the "Continuing Credit Facilities"): (i) that the
line of credit provided by CoBank to the Company pursuant to that certain
Consolidating Supplement (designated as Loan No. E131TO2) to the Master Loan
Agreement dated February 1, 1997, by and between CoBank and the Company; (ii)
that certain Line of Credit Agreement No. S-4308 dated January 29, 1992,
provided by CoBank to the Company, in the amount of $10,000,000; (iii) that
certain Loan Agreement No. T-4391 dated January 18, 1994, provided by Wetsel,
Inc. to the Company, in the amount of $3,000,000; and (iv) the overnight line of
credit currently provided by Crestar Bank to the Company. Without limiting the
foregoing, prior to or simultaneously with any funding of the initial Loans, the
Administrative Agent shall have received evidence in form and substance
reasonably satisfactory to the Administrative Agent, that with the proceeds of
the initial Loans $118,313,487 in aggregate principal amount of indebtedness
incurred by the Company under the Bridge Loan Facility evidenced by the Bridge
Loan Agreement and any loan documents executed by the Company in connection
therewith has been paid.
(N) Amendment to Bridge Loan Agreement. The Company and the other
parties to the Bridge Loan Agreement shall have entered into an amendment, in
form and substance satisfactory to the Agents and the Banks (the "Bridge Loan
Amendment"), pursuant to which effective as of the Closing Date: (i) the
aggregate term loan commitment of the lenders thereunder shall be reduced to a
principal amount not to exceed the amount available for drawing under the
Rabobank Letter of Credit (after giving effect to the prepayment required to be
made on the Closing Date pursuant to Section 3.01(M) of this Agreement), and
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(ii) the Company shall be required to repay (without penalty) the principal
amount of any outstanding term loans under the Bridge Loan Agreement with the
entire proceeds from any draws at any time, and from time to time, made under
the Rabobank Letter of Credit. The Agents shall have received a copy of the
fully executed Bridge Loan Amendment.
(O) Financing Services and Contributed Capital Agreements. The
Financing Services and Contributed Capital Agreements shall be in full force and
effect and shall be in form and substance satisfactory to the Agents, the Lead
Arranger and their respective legal counsel.
(P) Satisfaction of Conditions to the Closing of the Statesman
Credit Facility. All of the conditions precedent to the closing of, and the
initial funding of any loans under, the Statesman Credit Facility as described
in the Statesman Term Sheet shall have been satisfied in full.
(Q) Lending Commitments. The Company and Statesman shall have
received lending commitments from financial institutions satisfactory to the
Agents of not less than $400,000,000 in the aggregate for this Credit Facility
and the Statesman Credit Facility.
(R) Pay Proceeds Letter. The Company shall have executed and
delivered to the Administrative Agent and each Bank a pay proceeds letter dated
the Closing Date (the "Pay Proceeds Letter"), in form and substance satisfactory
to the Administrative Agent and the Banks.
SECTION 3.02. Conditions Precedent to Each Loan. The obligations of
the Banks to make each Loan after the Closing Date shall be subject to the
further conditions precedent that on the date of providing such Loan;
(A) The following statements shall be true:
(1) All the representations and warranties contained in
Article IV of this Agreement, and each of the other Loan Documents are, as of
the date of such Loan, correct; and
(2) No Potential Default or Event of Default has occurred and
is continuing hereunder or would result from providing such Loan;
(B) Appropriate notices with respect to funding have been made to
either the Banks or the Administrative Agent as appropriate.
SECTION 3.03. Deemed Representation. Each request for a Loan and
acceptance by the Company of any proceeds of such Loan, as the case may be,
shall constitute a representation and warranty that on the date of each request
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and on the date each Loan is made or issued: (1) all of the representations and
warranties contained in Article IV of this Agreement and the other Loan
Documents are correct and (2) no Potential Default or Event of Default has
occurred and is continuing hereunder or would result from such Loan.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to each Bank that:
SECTION 4.01. Incorporation, Good Standing, and Due Qualification. The
Company is duly incorporated, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation; has the corporate power and
authority to own its assets and to transact the business in which it is now
engaged or proposed to be engaged in; and is duly qualified as a foreign
corporation and in good standing under the laws of each other jurisdiction in
which such qualification is required.
SECTION 4.02. Corporate Power and Authority. The execution, delivery, and
performance by the Company of the Loan Documents have been duly authorized by
all necessary corporate action and do not and will not (1) require any consent
or approval of the stockholders of the Company, of any Governmental Authority or
of any other Person; (2) contravene the Company's charter or bylaws; (3) violate
any provision of any Law, order, writ, judgment, injunction, decree,
determination, or award presently in effect having applicability to the Company;
(4) result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease, or instrument to which the
Company is a party or by which it or its properties may be bound or affected;
(5) except as contemplated by this Agreement, result in or require the creation
or imposition of any Lien, upon or with respect to any of the properties now
owned or hereafter acquired by the Company; or (6) cause the Company to be in
default under any such Law, order, writ, judgment, injunction, decree,
determination, or award or any such indenture, agreement, lease, or instrument.
SECTION 4.03. Legally Enforceable Agreement. This Agreement and each of
the other Loan Documents are legal, valid, and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency, and other similar laws affecting creditors' rights
generally.
SECTION 4.04. Financial Statements. The audited balance sheet of the
Company and its consolidated Subsidiaries as of June 30, 1998, and the related
statements of operations, patrons' equity, and cash flows of the Company and its
consolidated Subsidiaries for the fiscal year then ended, and the accompanying
footnotes, together with the opinion thereon, dated August 31, 1998 (except as
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to note 19, for which the date is October 13, 1998), of PricewaterhouseCoopers
LLP, independent certified public accountants, the unaudited balance sheet of
the Company and its consolidated Subsidiaries as of September 30, 1998 and
November 30, 1998, and the related statements of operations of the Company and
its consolidated Subsidiaries for the periods then ended, copies of which have
been furnished to each Bank, in each case, are complete and fairly present the
financial condition of the Company and its consolidated Subsidiaries as of such
date and the results of the operations of the Company and its consolidated
Subsidiaries for the period covered by such statements, all in accordance with
GAAP (except that the interim financial statements for the quarterly period
ending September 30, 1998 and for the five-month period ended November 30, 1998
are subject to year-end adjustments) consistently applied, and since June 30,
1998, there has been no material adverse change in the financial condition of
the Company and its consolidated Subsidiaries. There are no liabilities of the
Company and its consolidated Subsidiaries, fixed or contingent, which are
material but are not reflected in the financial statements or in the notes
thereto. No information, exhibit, or report furnished by the Company to any Bank
in connection with the negotiation of this Agreement contained any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statement contained therein not materially misleading.
SECTION 4.05. Labor Disputes and Acts of God. Neither the business nor the
properties of the Company are affected by any fire, explosion, accident, strike,
lockout, or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or of the public enemy, or other casualty (whether or not covered by
insurance), which has resulted in or might reasonably be expected to result in a
material adverse change in the business properties, assets, operations, or
condition, financial or otherwise, of the Company.
SECTION 4.06. Other Agreements. The Company is not a party to any
indenture, loan or credit agreement, or to any lease or other agreement or
instrument, or subject to any charter or corporate restriction, which could have
a Material Adverse Effect. The Company is not in default in any respect in the
performance, observance, or fulfillment of any of the obligations, covenants, or
conditions contained in any agreement or instrument material to its business to
which the Company is a party.
SECTION 4.07. Litigation. To the knowledge of the executive officers of
the Company, there are no pending or threatened actions or proceedings against
or affecting the Company before any court, governmental agency, or arbitrator,
which might reasonably be expected to, in any one case or in the aggregate,
materially adversely affect the financial condition of the Company or the
ability of the Company to perform its obligation under the Loan Documents.
SECTION 4.08. No Defaults on Outstanding Judgments or Orders. The Company
has satisfied all judgments in excess of $1,000,000 (not covered by insurance),
and the Company is not in default with respect to any judgment, writ,
injunction, decree, rule, or regulation of any court, arbitrator, or federal,
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state, municipal, or other Governmental Authority, commission, board, bureau,
agency, or instrumentality, domestic or foreign which might reasonably be
expected to result in a material adverse change in the business prospects or
financial condition of the Company.
SECTION 4.09. Ownership and Liens. The Company has title to, or valid
leasehold interests in, all of its properties and assets, real and personal,
including the properties and assets and leasehold interests reflected in the
financial statements referred to in Section 4.04 (other than any properties or
assets disposed of in the ordinary course of business), and none of the
properties and assets owned by the Company and none of its leasehold interests
are subject to any Lien, except such as may be permitted pursuant to Section
6.01 of this Agreement.
SECTION 4.10. Subsidiaries, Affiliates, and Ownership of Stock. On the
date hereof, the Company does not have any Subsidiaries other than as described
in Schedule 4.10. Set forth in Schedule 4.10 is a complete and accurate list of
the Subsidiaries and Affiliates of the Company, showing the jurisdiction of
incorporation or formation of each and showing the percentage of the Company's
ownership of the outstanding stock or other interest of each Subsidiary and
Affiliate. All of the outstanding capital stock or other ownership interest of
each Subsidiary and Affiliate owned by the Company has been validly issued, is
fully paid and nonassessable, and is owned by the Company free and clear of all
Liens except for those Liens permitted under Section 6.01 hereof.
SECTION 4.11. ERISA. The Company is in compliance in all material respects
with all applicable provisions of ERISA. Neither a Reportable Event nor a
Prohibited Transaction has occurred and is continuing with respect to any Plan;
no notice of intent to terminate a Plan has been filed, nor has any Plan been
terminated; no circumstances exist which constitute grounds entitling the PBGC
to institute proceedings to terminate, or appoint a trustee to administer, a
Plan, nor has the PBGC instituted any such proceedings; neither the Company nor
any ERISA Affiliate has any liability arising from the complete or partial
withdrawal from a Multiemployer Plan, the Company and each ERISA Affiliate have
met their minimum funding requirements under ERISA with respect to all of their
Plans and the present value of all vested benefits under each Plan does not
exceed the fair market value of all Plan assets allocable to such benefits, as
determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA; and neither the Company nor any ERISA Affiliate has
incurred any liability to the PBGC under ERISA.
SECTION 4.12. Operation of Business. The Company possesses all material
licenses, permits, franchises, patents, copyrights, trademarks, and trade names,
or rights thereto, to conduct its business substantially as now conducted and as
presently proposed to be conducted, and the Company is not in violation of any
rights of others with respect to any of the foregoing.
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SECTION 4.13. Taxes. The Company has filed all tax returns (federal,
state, and local) required to be filed and has paid all taxes, assessments, and
governmental charges and levies shown thereon to be due, including interest and
penalties.
SECTION 4.14. Compliance With Laws. The Company has duly complied in all
material respects with all applicable Laws. Without limiting the foregoing, the
Company has duly complied in all material respects with, and its businesses,
operations, assets, equipment, property, leaseholds, or other facilities are in
compliance in all material respects with, the provisions of all federal, state,
and local environmental, health, and safety Laws. The Company has been issued
all federal, state, and local permits, licenses, certificates, and approvals
required in any material respect for the operation of its business.
SECTION 4.15. Existing Obligors; Existing Debt and Guarantees. Set forth
in Schedule 4.15 is a complete and accurate list of (i) all Existing Obligors
and the Total Exposure of the Company with respect to each such Obligor, (ii)
all Debt of the Company (which schedule shall identify the nature of such Debt,
the name of the lender, the principal amount outstanding and whether or not such
Debt is secured), and (iii) all Guarantees of the Company (which schedule shall
identify the nature of such Guarantees, the beneficiaries of such Guarantees,
the amount of the obligation guaranteed thereunder and whether or not the
obligations of the guarantors under such Guarantees are secured), in each case,
as of the date of this Agreement.
SECTION 4.16. Directors, Executive Officers, Principal Shareholders. No
director, executive officer or principal shareholder of the Company or any
Affiliate is a director, executive officer or principal shareholder of any Bank
except for Wayne Boutwell, who is a director of Crestar Bank, James A. Kinsey
who is a director of the Company and Richard Price who is a director of the
Company and CoBank. For the purposes hereof the terms "director", "executive
officer", and "principal shareholder" (when used with reference to any Bank)
have the respective meanings assigned thereto in Regulation O issued by the
Board of Governors of the Federal Reserve System.
SECTION 4.17. Year 2000 Compliance. The Company has (i) initiated a review
and assessment of all areas within its business and operations (including those
affected by suppliers, vendors and customers) that could be adversely affected
by the "Year 2000 Problem" (that is, the risk that computer applications used by
the Company (or its suppliers, vendors and customers) may be unable to recognize
and perform properly date-sensitive functions involving certain dates prior to,
on and after December 31, 1999), (ii) developed a plan and timeline for
addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan in accordance with the timetable. Based on the foregoing,
the Company believes that all computer applications (including those of its
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suppliers, vendors and customers) that are material to its business and
operations are reasonably expected on a timely basis to be able to perform
properly date-sensitive functions for all dates before and after January 1, 2000
(that is, be "Year 2000 compliant"), except to the extent that a failure to do
so could not reasonably be expected to have a Material Adverse Effect.
SECTION 4.18. Margin Stock. The Company is not engaged principally or as
one of its significant activities in the business of extending credit for the
purpose of "purchasing" or "carrying" any "margin stock" (as each such term is
defined or used in Regulation U of the Board of Governors of the Federal Reserve
System). The Company will not, directly or indirectly, use any part of the
proceeds of the Loans for the purpose of purchasing or carrying any margin stock
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System or to extend credit to any Person for the purpose of purchasing
or carrying any such margin stock, or for any purpose which violates, or is
inconsistent with, Regulation X of such Board of Governors.
SECTION 4.19. Government Regulation. The Company is not an "investment
company" or a company "controlled" by an "investment company" (as each such term
is defined or used in the Investment Company Act of 1940, as amended) and the
Company is not, nor after giving effect to any Loan will it be, a "Holding
Company" or a "Subsidiary Company" of a "Holding Company" or an "Affiliate" of a
"Holding Company" within the respective meanings of each of the quoted terms of
the Public Utility Holding Company Act of 1935 as amended, or any other
applicable Law which materially limits its ability to incur or consummate the
transactions contemplated hereby.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any of the Notes shall remain unpaid, or any Bank shall have
any Commitment hereunder, or any other amount is owing by the Company to any
Bank hereunder, the Company will:
SECTION 5.01. Maintenance of Existence. Preserve and maintain its
corporate existence and good standing in the jurisdiction of its incorporation,
and qualify and remain qualified, as a foreign corporation in each jurisdiction
in which such qualification is required.
SECTION 5.02. Maintenance of Records. Keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company.
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SECTION 5.03. Maintenance of Properties. Maintain and preserve all of its
properties (tangible and intangible) that are necessary or useful in the proper
conduct of its business in good working order and condition, ordinary wear and
tear excepted.
SECTION 5.04. Conduct of Business. Continue to engage in a business of the
same general type as conducted by it on the date of this Agreement, or
reasonably related thereto, or as contemplated by the Financing Services and
Contributed Capital Agreements.
SECTION 5.05 Maintenance of Insurance. Maintain insurance with financially
sound and reputable insurance companies or associations in such amounts and
covering such risks as are usually carried by companies engaged in the same or a
similar business and similarly situated.
SECTION 5.06. Compliance with Laws. Comply in all material respects with
all applicable Laws. Without limiting the foregoing, the Company will: (i)
comply in all material respects, and cause all Persons occupying or present on
any of its properties to so comply, with all applicable environmental, health
and safety Laws; and (ii) pay before the same become delinquent all taxes,
assessments, and governmental charges imposed upon it or its property, except to
the extent provided in Section 6.01(C) hereof.
SECTION 5.07. Right of Inspection. At any reasonable time and from time to
time, upon reasonable notice, permit any Agent, any Bank or any agent or
representative thereof to examine and make copies of and abstracts from its
records and books of account, visit its properties and discuss its affairs,
finances, and accounts with any of its respective officers, directors and
independent accountants.
SECTION 5.08. Employee Benefit Plans. Make or cause to be made all
payments or contributions to all Plans covered by Title IV of ERISA which are
necessary to enable those Plans to continuously meet all minimum funding
standards or requirements.
SECTION 5.09. Eligibility, Etc. Maintain its eligibility to borrow
from CoBank and purchase such equity in CoBank as provided in Section 2.17
hereof.
SECTION 5.10. Reporting Requirements. Furnish to the Administrative
Agent for distribution to each of the Banks:
(A) Quarterly Financial Statements. As soon as available, and in any
event within 45 days after each fiscal quarter end of the Company (other than
June), a balance sheet of the Company and its consolidated Subsidiaries as of
the end of such fiscal quarter, and related consolidated statements of
operations of the Company and its consolidated Subsidiaries for the period
commencing at the end of the previous fiscal year and ending with the end of
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such fiscal quarter, all in reasonable detail and stating in comparative form
the respective figures for the corresponding date and period in the previous
fiscal year and all prepared in accordance with GAAP consistently applied and
certified by the chief financial officer of the Company (subject to year-end
adjustments).
(B) Annual Financial Statements. As soon as available and in any event
within 90 days after the end of each fiscal year of the Company, a balance sheet
of the Company and its consolidated Subsidiaries as of the end of such fiscal
year, and related consolidated statements of operations, patrons' equity, and
cash flows of the Company and its consolidated Subsidiaries for such fiscal
year, all in reasonable detail and stating in comparative form the respective
figures for the corresponding date and period in the prior fiscal year and all
prepared in accordance with GAAP consistently applied and, audited in accordance
with generally accepted auditing standards by, and accompanied by, an opinion
thereon acceptable to the Administrative Agent from independent accountants
selected by the Company and of recognized national standing.
(C) Certificate of No Default. Together with each of the statements
furnished under Subsection 5.10(A) and (B) hereof, a certificate of the chief
financial officer of the Company (a) certifying that to the best of such
officer's knowledge, no Potential Default or Event of Default has occurred and
is continuing, or if a Potential Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof and the action which is
proposed to be taken with respect thereto; and (b) containing computations
demonstrating compliance with the covenants contained in Article VII hereof.
(D) Notice of Litigation. Promptly after the commencement thereof,
notice of all actions, suits, and proceedings before any court or governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign, affecting the Company which, if determined adversely to the Company,
might reasonably be expected to have a Material Adverse Effect.
(E) Notice of Environmental Matters. Promptly after receipt thereof,
notice of the receipt of all pleadings, orders, complaints, indictments, or any
other communications alleging a condition that may require the Company to
undertake or to contribute to a cleanup or other response under environmental
Laws, or which seeks penalties, damages, injunctive relief, or criminal
sanctions relating to alleged violations of such Laws, or which claims personal
injury or property damage to any person as a result of environmental factors or
conditions; provided, however, that the Company shall not be required to furnish
notice of any of the foregoing unless the allegation made, remedy sought, or
claim made, if determined adversely to the Company, might reasonably be expected
to have a Material Adverse Effect.
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(F) Notice of Potential Defaults and Events of Default. As soon as
possible and in any event within fifteen (15) days after the occurrence of each
Potential Default or Event of Default, a written notice setting forth the
details of such Potential Default or Event of Default and the action which is
proposed to be taken by the Company with respect thereto.
(G) Annual Budgets. Promptly upon becoming available, but in no
event later than 90 days after each fiscal year end, a copy of the Company's
annual operating budget approved by the Company's board of directors, together
with the assumptions and projections upon which the budget is based, in each
case, consistent with the form of annual operating budget for the Company
provided to the Administrative Agent prior to the date of this Agreement. In
addition, if any material changes are made to such budget during the year, then
the Company will furnish copies of any such changes promptly after such changes
have been approved by the Company's board of directors.
(H) General Information; SEC Filings. With reasonable promptness,
such other information and financial reports respecting the condition or
operations, financial or otherwise, of the Company as any Bank may from time to
time reasonably request. All filings of regular and special reports by the
Company with the Securities and Exchange Commission and all annual and quarterly
reports and notices of meetings and proxy information provided by the Company to
its equity holders.
(I) Management Reports, etc. Promptly after receipt thereof, copies
of any management report submitted to the Company or its board of directors by
its independent public accountants in connection with their auditing function
and any management responses thereto.
(J) Notice of Other Credit Arrangements. The Company will promptly,
and in any event within fifteen (15) days, notify the Administrative Agent of
the amount, terms, and conditions of any credit facilities extended or otherwise
made available to the Company that exceed $5,000,000 in the aggregate. Provided,
however, any such notice to the Administrative Agent will not include pricing
and interest rate terms with respect to the subject credit facilities. Notice
will not be required with respect to: (A) Debt of the Company under this
Agreement; (B) Debt incurred prior to the Closing Date and disclosed on Schedule
4.15; and (C) uncommitted short term debt of the Company in an amount not to
exceed $10,000,000 at any one time outstanding.
SECTION 5.11. Year 2000 Preparation. The Company shall take all action
necessary to assure that Company's computer-based systems are able to operate
and effectively process data including dates prior to, on and after December 31,
1999. At the request of the Administrative Agent, the Company shall provide the
Administrative Agent and the Banks assurances reasonably satisfactory to the
Administrative Agent and the Banks of the Company's compliance with this Section
5.11.
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ARTICLE VI
NEGATIVE COVENANTS
So long as any of the Notes shall remain unpaid, or any Bank shall have
any Commitment hereunder, or any other amount is owing by the Company to any
Bank hereunder, the Company will not:
SECTION 6.01. Liens. Create, incur, assume, or suffer to exist any
Lien upon or with respect to any or its properties now owned or hereafter
acquired, except:
(A) Liens existing on the date of this Agreement listed on Schedule
6.01.
(B) Liens in favor of CoBank on all equity which the Company may now
own or hereafter acquire in CoBank to secure obligations of the Company to
CoBank.
(C) Liens for taxes or assessments or other government charges or
levies if not yet delinquent or, if delinquent: (i) are being contested in good
faith by appropriate proceedings; (ii) for which appropriate reserves have been
established in accordance with GAAP; and (iii) the amount secured (including
interest and penalties) does not exceed $1,000,000.
(D) Liens imposed by Law in favor of mechanics, material suppliers,
landlords, warehouses, carriers, and similar entities, securing obligations
incurred in the ordinary course of business which are not past due for more than
30 days or which are being contested in good faith by appropriate proceedings
and for which appropriate reserves have been established in accordance with
GAAP.
(E) Liens under workers' compensation, unemployment insurance,
Social Security, or similar legislation (other than ERISA).
(F) Liens, deposits, or pledges to secure the performance of bids,
tenders, contracts (other than contracts for the payment of money), and like
obligations which arise in the ordinary course of business of the Company as
conducted on the date hereof.
(G) Judgment and other similar Liens not constituting an Event of
Default under Section 8.01(G) hereof.
(H) Easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere with the
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occupation, use, and enjoyment by the Company of the property or assets
encumbered thereby in the normal course of its business and materially impair
the value of the property subject thereto.
(I) Purchase-money Liens on any real property, fixtures, and
equipment hereafter acquired or the assumption of any Lien on real property,
fixtures, and equipment existing at the time of such acquisition (and not
created in contemplation of such acquisition), or Liens incurred in connection
with any Capital Lease; provided that:
(1) Any property subject to any of the foregoing is acquired by
the Company in the ordinary course of its business and the Lien on any such
property attaches to such asset concurrently or within ninety (90) days after
the acquisition thereof or completion of construction thereof;
(2) The obligation secured by any such Lien shall not exceed
100% of the lesser of the cost or the fair market value of such property as of
the time of acquisition or construction of the property covered thereby;
(3) Each such Lien shall attach only to the property so
acquired or constructed and fixed improvements thereon; and
(4) Such acquisition is not prohibited under Section 6.02
hereof.
(J) Liens not otherwise permitted by clauses (A) through (I),
inclusive, of this Section 6.01, provided that the aggregate amount of
obligations secured by such Liens does not at any time exceed $2,500,000.
SECTION 6.02. Mergers, Etc. Wind up, liquidate or dissolve itself,
reorganize, merge or consolidate with or into, or convey, sell, assign,
transfer, lease, or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to any Person, or acquire all or substantially all
of the assets or the business of any Person, except (1) for capital expenditures
made in the ordinary course of business of the Company, and (2) for acquisitions
so long as the aggregate cash and non-cash consideration paid, directly or
indirectly, by the Company (including, without limitation, any indebtedness
assumed by the Company)for all such acquisitions in any fiscal year of the
Company does not exceed $10,000,000.
SECTION 6.03. Sale of Assets. Sell, lease, assign, transfer, or otherwise
dispose of any of its now owned or hereafter acquired assets (including, without
limitation, receivables, and leasehold interests), except (i) sales, leases or
other dispositions of assets in the ordinary course of its business, (ii) sales
and other dispositions of assets as provided in the Financing Services and
Contributed Capital Agreements, (iii) the sale of obsolete assets or assets no
longer used or useful in the business, provided that the net proceeds from any
and all such sales of assets are reinvested in assets of the Company that are
used or useful in the business of the Company as conducted in accordance with
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Section 5.04, (iv) sales of assets other than pursuant to clauses (i), (ii) and
(iii) above with an aggregate value not to exceed $10,000,000 in any year, and
(v) sales and other dispositions of certain assets acquired from GoldKist in an
aggregate amount not to exceed $30,000,000. In connection with any sale or other
disposition, or series of related sales or other dispositions, of assets of the
type referred to in clause (v) above in an aggregate amount of $10,000,000 or
more, the Company shall provide the Administrative Agent with a report
describing in reasonable detail the assets which are the subject of such sale or
other disposition (or series of related sales or other dispositions) by not
later than 30 days after the date of such sale or other disposition (or series
of related sales or dispositions).
SECTION 6.04. Investments. Except as otherwise provided herein, make loans
to, advances to, capital contributions or investments in any Person
("Investments") except Permitted Investments; provided, however, that
transactions contemplated under the Financing Services and Contributed Capital
Agreements and transactions in the normal course of business of the Company as
currently conducted shall not be deemed to be, or be deemed to result in,
Investments.
SECTION 6.05. Guarantees, Etc. Assume, guarantee, endorse, or otherwise be
or become directly or contingently responsible or liable (including, but not
limited to, by an agreement to purchase any obligation, stock, assets, goods, or
services, or to supply or advance any funds, assets, goods, or services, or an
agreement to maintain or cause such Person to maintain a minimum working capital
or net worth or otherwise to assure the creditors of any Person against loss),
for obligations of any Person (collectively, "Guarantees"), except: (1) by the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; (2) Guarantees of the
obligations of any Person, provided that the Total Exposure of the Company in
respect of all such Guarantees may not exceed $7,500,000 at any one time in the
aggregate; (3) any liability contemplated by the Financing Services and
Contributed Capital Agreements; (4) any Guarantee of the payment of any capital
securities constituting Junior Preferred Securities out of funds held by the
issuer of such capital securities, provided that such Guarantee is subordinated
in right of payment to the Loans and all other obligations of the Company
hereunder and upon terms and conditions satisfactory to the Agents and their
respective counsel.
SECTION 6.06. Transactions with Affiliates. Enter into any transaction,
including, without limitation, the making of any Investments or Guarantees, the
purchase, sale, or exchange of property or the rendering of any service, with
any Affiliate, except for (1) transactions in the ordinary course of business of
the Company with one or more of Statesman, MLCC and Wetsel, Inc., and pursuant
to the reasonable requirements of its business and upon fair and reasonable
terms no less favorable to the Company than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate and (2) transactions
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involving the purchase or placement of insurance with Southern States Insurance
Exchange, Inc. Provided, however, the Company may engage in transactions in the
normal course of business as contemplated by the Financing Services and
Contributed Capital Agreements.
SECTION 6.07. Financing Services and Contributed Capital Agreements.
Without the prior written consent of Banks holding at least 75% of the aggregate
Commitments (provided, however, that if (1) there are at least three Banks and
(2) the Administrative Agent holds 75% of the aggregate Commitments then the
consent of one additional Bank will also be required), the Company shall not
modify, amend, terminate, fail to maintain, breach, waive, or otherwise make any
change to or fail to comply with the terms of the Financing Services and
Contributed Capital Agreements.
SECTION 6.08. Fiscal Year. Change its current fiscal year end date.
SECTION 6.09. Leases. Become a lessee under any operating lease if, after
giving effect thereto, the total lease expenses of the Company thereunder,
together with the total lease expenses of the Company, as lessee, under all
other operating leases then in effect, would exceed $30,000,000 in the aggregate
for any fiscal year of the Company.
SECTION 6.10. Prohibition on Amendment of Certain Agreements, etc. (a)
Consent to, or enter into, any instrument, document or agreement which would
result in the amendment, modification, waiver or termination of all or any of
the provisions of the GoldKist Commitment Letter, the GoldKist Acquisition
Agreement or the Rabobank Letter of Credit, (b) release GoldKist from any of its
material obligations under the GoldKist Commitment Letter and the GoldKist
Acquisition Agreement, nor shall the Company fail to perform any of its material
obligations under the GoldKist Commitment Letter and the GoldKist Acquisition
Agreement, or (c) consent to, or enter into, any instrument or agreement (other
than the Bridge Loan Amendment) which would result in the amendment,
modification, waiver or termination of all or any of the provisions of the
Bridge Loan Agreement, without the prior written consent of Banks, provided that
nothing in this Section 6.10 shall be construed as prohibiting (i) the required
repayment of the Company's obligations pursuant to the terms of Sections 2.09
and 3.01(M) or (N) hereof and the Bridge Loan Agreement as amended by the Bridge
Loan Amendment, or making of any draw requests by the Company under the Rabobank
Letter of Credit, or (ii) any reduction in the face amount of the Rabobank
Letter of Credit so long as after giving effect to any such reduction the face
amount of such Letter of Credit available for drawing is not less than (x) an
amount equal to the purchase price of the Junior Preferred Securities which
Goldkist is then or thereafter obligated to purchase pursuant to the Goldkist
Commitment Letter as in effect on the date hereof, or (y) the aggregate term
loan commitment of the lenders under the Bridge Loan Agreement as of the date of
any such proposed reduction.
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ARTICLE VII
FINANCIAL COVENANTS
So long as any of the Notes shall remain unpaid, or any Bank shall have
any Commitment hereunder, or any other amount is owing by the Company to any
Bank hereunder:
SECTION 7.01. Maximum Consolidated Funded Debt to Capitalization. The
Company shall not permit at any time, and as determined at the end of each
fiscal quarter, the ratio of Consolidated Funded Debt to Capitalization as of
such date to exceed 0.50 to 1.00.
SECTION 7.02. Minimum Tangible Net Worth. The Company shall not
permit at any time, and as determined at the end of each fiscal quarter,
Tangible Net Worth to be less than the sum of:
(a) $256,000,000; plus
(b) an amount equal to the sum, for each fiscal year of the Company ending
subsequent to the Closing Date, of the greater of:
(i) zero dollars ($0); and
(ii) twenty-five percent (25%) of the Net Income of the
Company for each such fiscal year.
SECTION 7.03. Consolidated Cash Flow to Consolidated Interest Expense and
Distributions. As determined at the end of each fiscal quarter, the Company
shall not permit the ratio of (a) Consolidated Cash Flow for the period of four
(4) consecutive fiscal quarters ending on or immediately prior to such date to
(b) Consolidated Interest Expense paid or accrued during such period plus
Distributions made during such period, to be less than 1.50 to 1.00.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default. Each of the following events shall
be an "Event of Default":
(A) The Company shall fail to make any payment of principal when due
and payable. The Company shall fail to make any payment of interest, fees or any
other amounts hereunder or under any other Loan Document and such failure shall
not be cured within five (5) days of the applicable due date.
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(B) Any representation or warranty made or deemed made by the
Company in this Agreement, any other Loan Document, or any certificate,
document, opinion, or financial or other statement furnished at any time under
or in connection with any Loan Document, shall prove to have been incorrect,
incomplete, or misleading in any material respect on or as of the date made or
deemed made.
(C) The Company shall fail to perform or observe any term, covenant,
or agreement contained in Article V hereof (other than Sections 5.05 or 5.10(F))
and such failure continues for 15 calendar days after the occurrence thereof,
provided that no Event of Default shall occur as a result of any failure of the
Company to qualify or to maintain its qualification as a foreign corporation as
required by Section 5.01 or as a result of any failure of the Company to comply
with applicable Laws as required by Section 5.06 until 15 days after an
executive officer of the Company has knowledge of such failure.
(D) The Company shall fail to comply with Sections 5.05 or 5.10(F)
hereof or shall fail to perform or observe any other term, covenant, or
agreement contained herein or in any Loan Document to which it is a party.
(E) The Company shall: (a) fail to pay any Debt (other than Debt
arising hereunder) to CoBank or any other Bank, or any interest or premium
thereon, when due (after giving effect to any applicable grace period); (b) fail
to pay any Debt (other than Debt arising hereunder or to CoBank or any other
Bank) in excess of $5,000,000 of the Company, or any interest or premium
thereon, when due (after giving effect to any applicable grace period); or (c)
fail to perform or observe any term, covenant, or condition on its part to be
performed or observed under any agreement or instrument relating to any Debt
referred to in (a) or (b) above when required to be performed or observed, if
the effect of such failure to perform or observe is to accelerate, or to permit
the acceleration of the maturity of such Debt (with respect to (b) above Debt
must exceed $5,000,000), whether or not such Debt is actually accelerated.
(F) The Company (a) shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as such debts become due;
or (b) shall make an assignment for the benefit of creditors, or petition or
apply to any tribunal for the appointment of a custodian, receiver, or trustee
for it or a substantial part of its assets; or (c) shall commence any proceeding
under any bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution, or liquidation law or statute of any jurisdiction; or (d) shall
have had any such petition or application filed or any such proceeding commenced
against it in which an order for relief is entered or an adjudication or
appointment is made, and which remains undismissed for a period of 60 days or
more; or (e) shall take any corporate action indicating its consent to, approval
of, or acquiescence in any such petition, application, proceeding, or order for
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relief or the appointment of a custodian, receiver, or trustee for all or any
substantial part of its properties; or (f) shall suffer any such custodianship,
receivership, or trusteeship to continue undischarged for a period of 60 days or
more.
(G) One or more judgments, decrees, or orders for the payment of
money in excess of $2,500,000 in the aggregate (not covered by insurance) shall
be rendered against the Company, and such judgments, decrees, or orders shall
continue unsatisfied and in effect for a period of 30 consecutive days without
being vacated, discharged, satisfied, or stayed or bonded pending appeal.
(H) Any of the following events shall occur or exist with respect to
the Company and any ERISA Affiliate under ERISA: any Reportable Event shall
occur; complete or partial withdrawal from any Multiemployer Plan shall take
place; any Prohibited Transaction shall occur; a notice of intent to terminate a
Plan shall be filed, or a Plan shall be terminated; or circumstances shall exist
which constitute grounds entitling the PBGC to institute proceedings to
terminate a Plan, or the PBGC shall institute such proceedings; and in each case
above, such event or condition, together with all other events or conditions, if
any, could subject the Company or any ERISA Affiliate to any tax, penalty, or
other liability which in the aggregate may exceed $1,000,000.
(I) The Financing Services and Contributed Capital Agreements shall,
at any time after execution, cease to be in full force and effect, or shall be
revoked or declared null and void, or the validity or enforceability thereof
shall be contested by the Company, or the Company shall deny any further
liability or obligation thereunder, or shall breach or otherwise fail to
perform its obligations thereunder, or any representation or warranty set forth
therein shall be breached.
(J) If there is a material adverse change in the financial condition
of the Company or the ability of the Company to carry out its obligations under
the Loan Documents.
(K) If the Company fails to promptly use one hundred percent (100%)
of the net proceeds received from the issuance of any Junior Preferred
Securities to repay the principal of any outstanding loans made to the Company
under the Bridge Loan Facility in accordance with Section 3.3(b)(ii) of the
Bridge Loan Agreement as in effect on the date hereof.
(L) The Company shall fail to maintain its existence as a Virginia
agricultural cooperative corporation.
SECTION 8.02. Remedies. If any Event of Default shall occur and be
continuing, the Administrative Agent shall upon the request of the Requisite
Banks, by notice to the Company; (1) declare the Commitments to be terminated,
whereupon the same shall forthwith terminate; (2) declare the outstanding Notes,
all interest thereon, and all other amounts payable under this Agreement and all
other Loan Documents to be forthwith due and payable, whereupon the Notes, all
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such interest, and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest, or further notice of any kind,
all of which are hereby expressly waived by the Company; (3) exercise any
remedies provided in any of the Loan Documents; and/or (4) exercise any rights
and remedies provided by Law; provided, however, that upon the occurrence of an
Event of Default referred to in Section 8.01(F), the Commitments shall
automatically terminate and the outstanding Notes and any other amounts payable
under this Agreement or any of the Loan Documents, and all interest on any of
the foregoing, shall be forthwith due and payable without presentment, demand,
protest, or further notice of any kind, all of which are hereby expressly waived
by the Company. The parties hereto agree that all payments made by the Company
after the occurrence of an Event of Default which is not expressly waived in
accordance with the terms of this Agreement will be applied ratably to each Bank
based on the proportion that each Bank's outstanding Loans bears to the total of
such Loans.
ARTICLE IX
AGENTS
SECTION 9.01. Authorization and Action. Each Bank hereby irrevocably
appoints and authorizes (a) the Administrative Agent to act as its agent
hereunder and under any other Loan Document with such powers as are specifically
delegated to the Administrative Agent by the terms of this Agreement and any
other Loan Document together with such other powers as are reasonably incidental
thereto, (b) the Documentation Agent to act as its agent hereunder and under any
other Loan Document with such powers as are specifically delegated to the
Documentation Agent by the terms of this Agreement and any other Loan Document
together with such other powers as are reasonably incidental thereto, and (c)
the Syndication Agents to act as its agents hereunder and under any other Loan
Document with such powers as are specifically delegated to the Syndication
Agents by the terms of this Agreement and any other Loan Document together with
such other powers as are reasonably incidental thereto. The duties of the Agents
and the Lead Arranger shall be mechanical and administrative in nature and none
of the Agents or the Lead Arranger shall by reason of this Agreement be a
trustee or fiduciary for any Bank. The Agents and the Lead Arranger shall have
no duties or responsibilities except those expressly set forth herein. As to any
matters not expressly provided for by this Agreement (including, without
limitation, enforcement or collection of the Notes), none of the Agents or the
Lead Arranger shall be required to exercise any discretion or take any action,
but shall be required to act or to refrain from acting (and shall be fully
protected in so acting or so refraining from acting) upon the instructions of
the Requisite Banks, and such instructions shall be binding upon all Banks and
all holders of Notes; provided, however, that none of the Agents or the Lead
Arranger shall be required to take any action which exposes the Agents or the
Lead Arranger to personal liability or which is contrary to this Agreement or
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applicable Law. The Company shall pay any fees agreed to by the Company and the
Agents and the Company and the Lead Arranger with respect to the Agents' or Lead
Arranger's services hereunder and in connection with the syndication of this
Credit Facility.
SECTION 9.02. Liability of Agent. Neither the Agents, the Lead Arranger
nor any of their respective directors, officers, agents or employees shall be
liable for any action taken or omitted to be taken by them under or in
connection with this Agreement in the absence of their own gross negligence or
willful misconduct. Without limitation of the generality of the foregoing, the
Administrative Agent: (1) may treat the payee of any Note as the holder thereof
until the Administrative Agent receives written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to the
Administrative Agent; (2) may consult with legal counsel (including counsel for
the Company), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants, or
experts; (3) makes no warranty or representation to any Bank and shall not be
responsible to any Bank for any recitals, statements, warranties, or
representations made in this Agreement and any other Loan Document or in any
certificate or other document or instrument referred to or provided for in, or
received under, this Agreement or any other Loan Document; (4) shall not have
any duty to ascertain or to inquire as to the performance or observance of any
of the terms, covenants, or conditions of this Agreement on the part of the
Company, or to inspect the property (including the books and records) of the
Company; (5) shall not be responsible to any Bank for the due execution,
legality, validity, enforceability, genuineness, perfection, sufficiency, or
value of this Agreement or any other instrument or document furnished pursuant
thereto or for the failure of the Company to comply with the terms hereof or any
other Loan Document; and (6) shall incur no liability under or in respect of
this Agreement by acting upon any notice, consent, certificate, or other
instrument or writing (which may be sent by telegram, telex, or facsimile
transmission) believed by it to be genuine and signed or sent by the proper
parties.
SECTION 9.03. Rights of Each Agent as a Bank. With respect to its
Commitment, the Loans made by it and the Note issued to it, each Agent shall
have the same rights and powers under this Agreement as any other Bank and may
exercise the same as though it were not an Agent hereunder; and the term "Bank"
or "Banks" shall, unless otherwise expressly indicated, include each Agent in
its individual capacity. Each Agent and its affiliates may accept deposits from,
lend money to, act as trustee under the indentures of, and generally engage in
any kind of business with the Company, and any Person who may do business with
or own securities of the Company or any of its Subsidiaries or Affiliates, all
as if such Agent was not an Agent and without any duty to account therefor to
the Banks.
SECTION 9.04. Independent Credit Decisions. Each Bank acknowledges that it
has, independently and without reliance upon the Agents, the Lead Arranger or
any other Bank and based on such documents and information as it has deemed
appropriate, conducted its own investigation into the affairs of the Company and
made its own credit analysis and decision to enter into this Agreement. Each
Bank also acknowledges that it will, independently and without reliance upon the
Agents, the Lead Arranger or any other Bank and based on such documents and
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information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement. Except for
notices, reports and other documents and information expressly required to be
furnished to the Banks by the Administrative Agent hereunder, the Agents shall
have no duty or responsibility to provide any Bank with any credit or other
information concerning the affairs, financial condition or business of the
Company (or any of its Affiliates) which may come into the possession of any
Agent or any of its Affiliates.
SECTION 9.05. Indemnification. The Banks agree to indemnify each Agent and
the Lead Arranger (to the extent not reimbursed by the Company), ratably
according to the respective amounts of their Commitments, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against any Agent
or the Lead Arranger in any way relating to or arising out of this Agreement,
any Loan Document, or any action taken or omitted by any Agent or the Lead
Arranger under this Agreement or any Loan Document, provided that no Bank shall
be liable for any portion of any of the foregoing resulting from any Agent's or
the Lead Arranger's gross negligence or willful misconduct. Without limitation
of the foregoing, each Bank agrees to reimburse the Administrative Agent (to the
extent not reimbursed by the Company) promptly upon demand for its ratable share
of any out-of-pocket expenses (including counsel fees) incurred by the
Administrative Agent in connection with the preparation, administration, or
enforcement of, or legal advice in respect of rights or responsibilities under,
this Agreement. Provided however, the Banks will not be required to reimburse
the Administrative Agent for: (1) the initial costs associated with the loan
closing, including preparation of documentation; and (2) routine administrative
duties.
SECTION 9.06. Successor Agents. The Administrative Agent may resign at any
time by giving at least 60 days' prior written notice thereof to the Banks and
the Company and may be removed at any time with cause by the Requisite Banks.
The Agents (other than the Administrative Agent) may resign at any time by
giving notice thereof to the Banks and the Company and may be removed at any
time with cause by the Requisite Banks. Upon any such resignation or removal of
the Administrative Agent, the Requisite Banks shall have the right, with the
approval of the Company, which approval will not be unreasonably withheld, to
appoint a successor Administrative Agent which shall be a commercial bank or
member of the Farm Credit System organized under the laws of the United States
or any state thereof and have equity capital of at least $500,000,000. If no
successor Administrative Agent shall have been so appointed by the Requisite
Banks, and shall have accepted such appointment, within 30 days after the
Administrative Agent shall have given notice of resignation or the Requisite
Banks' removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Banks, appoint a successor
Administrative Agent, which must be located within the United States. Upon the
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acceptance of any appointment as the Administrative Agent hereunder by a
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations under this Agreement.
After the resignation or removal of any Agent hereunder, the provisions of this
Article IX shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was an Agent under this Agreement.
SECTION 9.07. Sharing of Payments, Etc. If any Bank shall obtain any
payment in respect of the obligations of the Company under this Agreement and
the other Loan Documents (whether voluntary, involuntary, through the exercise
of any right of setoff, or otherwise) in excess of its ratable share of payments
obtained by all the Banks, such Bank shall purchase from the other Banks such
participations in the Loans as shall be necessary to cause such purchasing Bank
to share the excess payment ratably with each of the other Banks; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from such purchasing Bank, such purchase of Loans from each Bank
shall, to the extent necessary to ratably share the amount recovered, be
rescinded and each Bank shall repay to the purchasing Bank the purchase price of
any interest or other amount paid or payable by the purchasing Bank in respect
of the total amount so recovered. The Company agrees that any Bank so purchasing
a participation from another Bank pursuant to this Section 9.07 may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of setoff) with respect to such participation as fully as if such Bank
were the direct creditor of the Company in the amount of such participation.
SECTION 9.08. Liability of Agents. None of the Agents or the Lead Arranger
shall have any liabilities or responsibilities to the Company or any of its
Affiliates on account of the failure of any Bank to perform its obligations
hereunder or to any Bank on account of the failure of the Company or any of its
Affiliates to perform their respective obligations hereunder or any other Loan
Document.
SECTION 9.09. Notices to Agent. On or prior to 4:00 p.m. Eastern time on
each Business Day, each Bank will notify the Administrative Agent of each Loan
made by such Bank on such day and all payments or prepayments of Loans received
by such Bank on such day.
SECTION 9.10. Defaults. None of the Agents shall be deemed to have
knowledge of the occurrence of a Potential Default or Event of Default (except
with respect to a default in payment of principal, interest, and fees required
to be paid to an Agent in its individual capacity as a Bank or for the account
of the Banks) unless an Agent has received notice from a Bank or the Company
specifying such Potential Default or Event of Default and stating that such
notice is a "Notice of Default." In the event that an Agent receives such a
Notice of Default, such Agent shall give prompt notice thereof to the Banks. The
Administrative Agent shall take such action with respect to such Potential
Default or Event of Default which is continuing as shall be directed by the
Requisite Banks; provided that, unless and until the Administrative Agent shall
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have received such directions, the Administrative Agent may take such action, or
refrain from taking such action, with respect to such Potential Default or Event
of Default as it shall deem advisable and in the best interest of the Banks; and
provided further that the Administrative Agent shall not be required to take any
such action which it determines to be contrary to Law.
SECTION 9.11. Monthly Reports. Within fifteen (15) days of the end of each
month the Administrative Agent will send to the Company and each Bank a report
for the prior month indicating as of the end of such month all Loans provided by
the Banks.
SECTION 9.12. Withholding Taxes. Each Bank represents that it is entitled
to receive any payments to be made to it hereunder without the withholding of
any tax and will furnish to the Administrative Agent and to the Company such
forms, certifications, statements, and other documents as the Administrative
Agent or the Company may request from time to time to evidence such Bank's
exemption from the withholding of any tax imposed by any jurisdiction or to
enable the Administrative Agent or the Company, as the case may be, to comply
with any applicable Laws relating thereto. Without limiting the effect of the
foregoing, if any Bank is not created or organized under the Laws of the United
States of America or any state thereof, such Bank will furnish to the
Administrative Agent and the Company Form 4224 or Form 1001 of the Internal
Revenue Service, or such other forms, certifications, statements, or documents,
duly executed and completed by such Bank as evidence of such Bank's exemption
from the withholding of United States tax with respect thereto.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments, Etc. No amendment, modification, termination,
or waiver of any provision of this Agreement or of any other Loan Document nor
consent to any departure by the Company herefrom or therefrom shall in any event
be effective unless the same shall be in writing and signed by the
Administrative Agent and the Requisite Banks (provided that the required consent
or approval of the Administrative Agent may not be unreasonably withheld), and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given; provided, however, that no amendment,
waiver or consent shall, unless in writing and signed by all the Banks, do any
of the following: (1) waive any of the conditions precedent specified in Section
3.01 hereof; (2) increase the Commitment of any Bank; (3) reduce the principal
of, or interest on, the Notes, or the facility fees or any other amount due
hereunder or under any Loan Document; (4) postpone any date fixed for any
payment of principal of, or interest on, the Notes, or the facility fees or any
other amount due hereunder or under any Loan Document; (5) change the percentage
of the Commitments or of the aggregate unpaid principal amount of the Notes or
the number of Banks which shall be required for the Banks or any of them to act
hereunder; or (6) amend, modify or waive any provision of this Section 10.01.
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SECTION 10.02. Notices, Etc. All notices and other communications provided
for under this Agreement and under the other Loan Documents shall be in writing
(including facsimile transmissions) and mailed, transmitted or delivered to the
parties at the addresses shown next to each party's signature hereto or, as to
each party, at such other address as shall be designated by such party in a
written notice to all other parties complying as to delivery with the terms of
this Section 10.02. Except as is otherwise provided in this Agreement, all such
notices and communications shall be effective when deposited in the mail or,
with respect to any facsimile transmission, when sent with confirmation of
transmission received by the sending party, addressed as aforesaid, except that
notices to the Administrative Agent shall not be effective until received.
SECTION 10.03. No Waiver. No failure or delay on the part of any Bank or
the Administrative Agent in exercising any right, power, or remedy hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right, power, or remedy preclude any other or further exercise thereof
or the exercise of any other right, power, or remedy hereunder. The rights and
remedies provided herein are cumulative, and are not exclusive of any other
rights, powers, privileges, or remedies, now or hereafter existing, at law or in
equity or otherwise.
SECTION 10.04. Assignment; Participation. This Agreement shall be binding
upon, and shall inure to the benefit of, the Company, the Administrative Agent,
the Banks and their respective successors and permitted assigns. The Company may
not assign or transfer its rights or obligations hereunder. Any Bank may at any
time grant to one or more banks or other Persons (each a "Participant")
participating interests in its portion of the Loans. In no event shall a
Participant constitute a Bank for purposes hereof, except that any Participant
that is chartered under the Farm Credit Act of 1971, as amended, shall be deemed
to be a Bank hereunder solely for purposes of voting rights. In the event of any
such grant by a Bank of a participating interest to a Participant, whether or
not upon notice to the Company and the Administrative Agent, such Bank shall
remain responsible for the performance of its obligations hereunder, and the
Company and the Administrative Agent shall continue to deal solely and directly
with such Bank in connection with such Bank's rights and obligations hereunder.
Any agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Company hereunder and under any other Loan
Document including, without limitation, the right to approve any amendment,
modification, or waiver of any provision of this Agreement or any other Loan
Document; provided that such participation agreement may provide that such Bank
will not agree to any modification, amendment, or waiver of this Agreement
described in the proviso in Section 10.01 without the consent of the
Participant. All Loans that are made by CoBank and that are retained for its own
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account and are not included in any grants of participation interests shall be
entitled to patronage distributions in accordance with the bylaws of CoBank and
its practices and procedures related to patronage distributions. Accordingly,
all Loans that are included in a grant of participation interest of CoBank shall
not be entitled to patronage distributions.
Any Bank may at any time assign to one or more banks or other Persons
(each an "Assignee") a proportionate part of all of its rights and obligations
under this Agreement and its Note, and such Assignee shall assume such rights
and obligations, pursuant to an Assignment and Assumption Agreement executed by
such Assignee and the Bank, in substantially the form of Exhibit H, with and
subject to the consent of the Administrative Agent and the Company (which
consent of the Company and the Administrative Agent will not be unreasonably
withheld or delayed) provided, that: (1) during the occurrence and continuance
of any Potential Default or Event of Default neither the consent of the
Administrative Agent nor the consent of the Company shall be required for such
assignment; (2) if the Assignee of any Bank is an affiliate of such Bank,
neither the consent of the Administrative Agent nor the consent of the Company
shall be required for such assignment; (3) the minimum amount that may be
assigned shall be $10,000,000, except in the case of any assignment of a Bank's
entire Commitment or in the case of any assignment from one Bank to another
Bank; (4) the assigning Bank or Assignee shall pay the Administrative Agent a
processing and recordation fee of Three Thousand Five Hundred Dollars ($3,500),
except in the case of any assignment from one Bank to another Bank; and (5) no
assignment shall be made hereunder unless in conjunction therewith the assigning
Bank shall have assigned a proportionate part (based upon the percentage of the
assigning Bank's aggregate Commitment being assigned hereunder) of all of its
rights and obligations as lender under the Statesman Credit Facility. Upon
execution and delivery of such instrument and payment by such Assignee to the
assigning Bank of an amount equal to the purchase price agreed between the Bank
and such Assignee, such Assignee shall be a Bank under this Agreement and shall
have all the rights and obligations of a Bank with the Commitments as set forth
in such Assignment and Assumption Agreement, and the assigning Bank shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the consummation
of any assignment pursuant to this paragraph, a new Note or Notes shall be
issued by the Company. If the Assignee is not incorporated under the laws of the
United States of America or a state thereof, it shall, prior to the first date
on which interest or fees are payable hereunder for its account, deliver to the
Company and the Administrative Agent certification as to exemption from
deduction or withholding of any United States federal income taxes in accordance
with Section 9.12.
Any Bank may at any time assign all or any portion of its rights under
this Agreement and its Note to a Federal Reserve Bank. No such assignment shall
release the transferor Bank from its obligations hereunder.
The Company agrees to provide all assistance reasonably requested by a
Bank to enable such Bank either to sell participations in or make assignments of
its portion of the Loans as permitted by this Section 10.04. The Banks will not
disclose any confidential information about the Company to any potential
assignee or participant without the consent of the Administrative Agent and the
Company, which consent will not be unreasonably withheld by the Company.
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SECTION 10.05. Costs, Expenses and Taxes. The Company agrees to pay on
demand all costs and expenses incurred by the Agents and the Lead Arranger in
connection with the preparation, execution, delivery and filing of the Loan
Documents, and of any amendment, modification, or supplement to the Loan
Documents, Agents' and Lead Arranger's due diligence review of the Company, and
the syndication of this Credit Facility, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel (including, without
duplication, the allocated cost of any internal legal counsel used by such
Persons in lieu of outside counsel) for each Agent and the Lead Arranger
incurred in connection with advising the Agents, the Lead Arranger or any of the
Banks as to their rights and responsibilities hereunder or under any Loan
Document. The Company also agrees to pay all such costs and expenses, including
court costs and all reasonable fees and expenses of counsel (including, without
duplication, the allocated cost of internal legal counsel used by such Persons
in lieu of outside counsel), incurred by the Administrative Agent and the Banks
in connection with enforcement of the Loan Documents, or any amendment,
modification, or supplement thereto, whether by negotiation, legal proceedings,
or otherwise, and to pay after an Event of Default all reasonable fees and
expenses of counsel (including, without duplication, the allocated cost of
internal legal counsel used by such Persons in lieu of outside counsel) retained
by the Administrative Agent and each Bank incurred in connection with the
enforcement and collection of the Loan Documents. In addition, the Company shall
pay any and all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing, and recording of any
of the Loan Documents and the other documents to be delivered under any such
Loan Documents, and agrees to hold each Agent, the Lead Arranger and each of the
Banks harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or failing to pay such taxes and fees. The
provisions of this Section 10.05, Section 2.10, Section 2.12 and Section 2.16
shall survive the termination of this Agreement.
SECTION 10.06. Integration. This Agreement and the Loan Documents contain
the entire agreement between the parties relating to the subject matter hereof
and supersede all oral statements and prior writings with respect thereto.
SECTION 10.07. Indemnity. In addition to the payment of expenses pursuant
to Section 10.05 hereof, the Company hereby agrees to defend, indemnify and hold
each Agent, the Lead Arranger, each Bank and each of the respective officers,
directors, employees, agents and affiliates of each of them harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever (including, without duplication, attorney fees and the
allocated cost of internal legal counsel used by such Persons in lieu of outside
counsel) arising directly or indirectly from (a) the activities of the Company,
its predecessors in interest, (b) the exercise by the Agents, the Lead Arranger
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or the Banks of any right or remedy granted to them under this Agreement or any
of the other Loan Documents, (c) any claim, and the prosecution or defense
thereof, arising out of or in any way relating to or arising out of this
Agreement, any Loan Document, the Banks' agreement to make Loans or the use or
intended use of the proceeds of any of the Loans hereunder, (d) the collection
or enforcement of the obligations of the Company hereunder or under any other
Loan Document, or (e) arising directly or indirectly from the violation of any
environmental protection, health or safety Law, whether such claims are asserted
by any governmental agency or any other person. This indemnity shall survive
termination of this Agreement; provided, that the Company shall have no
obligation to indemnify any Person for losses, claims, damages, liabilities or
other expenses resulting from the gross negligence or willful misconduct of such
Person.
SECTION 10.08. Governing Law. Except to the extent governed by applicable
Federal Law, this Agreement and the Notes shall be governed by, and construed in
accordance with, the Laws of the Commonwealth of Virginia.
SECTION 10.09. Consent to Jurisdiction. THE COMPANY HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY COMMONWEALTH OF VIRGINIA OR UNITED STATES
FEDERAL COURT SITTING IN THE COMMONWEALTH OF VIRGINIA OVER ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES, OR ANY OTHER
LOAN DOCUMENT, AND THE COMPANY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
COMMONWEALTH OF VIRGINIA OR FEDERAL COURT. THE COMPANY IRREVOCABLY CONSENTS TO
THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES OF SUCH PROCESS TO THE COMPANY AT ITS ADDRESSES SPECIFIED IN
SECTION 10.02. THE COMPANY AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. THE COMPANY FURTHER
WAIVES ANY OBJECTION TO AN ACTION OR PROCEEDING IN SUCH STATE ON THE BASIS OF
FORUM NON CONVENIENS. NOTHING IN THIS SECTION 10.09 SHALL AFFECT THE RIGHT OF
ANY BANK TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT
THE RIGHT OF ANY BANK TO BRING ANY ACTION OR PROCEEDING AGAINST THE COMPANY OR
ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 10.10. Severability of Provisions. Any provision of any Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
54
<PAGE>
unenforceability without invalidating the remaining provisions of such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 10.11. Usury. Anything herein to the contrary notwithstanding, the
obligations of the Company under this Agreement and the Notes to each Bank shall
be subject to the limitation that payments of interest shall not be required to
that Bank to the extent that receipt thereof would be contrary to provisions of
Law applicable to that Bank limiting rates of interest which may be charged or
collected by such Bank.
SECTION 10.12. Counterparts. This Agreement may be executed in any number
of counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
SECTION 10.13. Headings. Article and Section headings in the Loan
Documents are included in such Loan Documents for the convenience of reference
only and shall not constitute a part of the applicable Loan Documents for any
other purpose.
SECTION 10.14. Jury Trial Waiver. THE COMPANY AND EACH BANK HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM, WHETHER IN
CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. NO OFFICER OF ANY BANK OR OF THE
AGENTS HAS AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS PROVISION.
SECTION 10.15. Consents; Terminations, etc. Each Bank that is a party to
this Agreement hereby consents to the extent required under any agreement
between the Bank and the Company, to the Company entering into this Agreement
and obtaining the credit provided under this Agreement. The Company and each
Bank that is a party to any agreement (as amended or supplemented) listed in
Schedule 3.01(M) hereby agrees that all such agreements (other than any such
agreements evidencing the Continuing Credit Facilities and the Continuing Bid
Rate Loans (defined below)), will terminate upon the payment of the proceeds of
the initial Loan(s) funded on the Closing Date in accordance with the Pay
Proceeds Letter. Notwithstanding the foregoing, certain existing loans made by
CoBank to the Company and identified on Schedule 3.01(M) hereto (the "Continuing
Bid Rate Loans") shall remain outstanding and be deemed to be Bid Rate Loans
under this Agreement for all purposes, and shall be subject to all of the terms
and conditions of this Agreement and the other Loan Documents applicable to Bid
Rate Loans, except that each such Continuing Bid Rate Loan shall be deemed to be
55
<PAGE>
made solely by CoBank, shall bear interest at the interest rate applicable to
such loan immediately prior to the effectiveness of this Agreement until the end
of its stated interest period, and shall be due and payable on the date
specified as the maturity date for such loan.
[Remainder of page intentionally blank; next page is signature page]
56
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first written.
THE COMPANY:
SOUTHERN STATES COOPERATIVE, INCORPORATED
6606 West Broad St.
By: /s/ Jonathan A. Hawkins Richmond, VA 23230
-------------------------- Fax: 804.281.1650
Title: Sr. Vice President & Treasurer P.O. Box 25567
------------------------------ Richmond, VA 23260
E-mail Address: [email protected]
(Signature Page 1 for Southern States Cooperative Revolving Credit Agreement)
<PAGE>
THE AGENTS, LEAD ARRANGER AND BANKS:
COBANK, ACB, as Administrative Agent,
Documentation Agent and Bank 5500 S. Quebec Street
Englewood, CO 80111
Fax: 303-694-5830
By: /s/ Lori O'Flaherty P.O. Box 5110
-------------------------------- Denver, CO 80217
Title: Vice President Attention: Lori O'Flaherty
-----------------------------
(Signature Page 2 for Southern States Cooperative Revolving Credit Agreement)
<PAGE>
FIRST UNION NATIONAL BANK,
as Syndication Agent and Bank 7 North 8th Street
Third Floor, Mail Code VA-3260
Richmond, VA 23219
By: /s/ Eileen McCuchard Fax: (804) 788-9673
--------------------------------
Title: Vice President
-----------------------------
(Signature Page 3 for Southern States Cooperative Revolving Credit Agreement)
<PAGE>
NATIONSBANK, N.A., as Syndication Agent
and Bank 101 North Tryon Street
15th Floor
Charlotte, NC 28255
By: /s/ William F. Sweney Fax: 704-409-0009
----------------------------------
William F. Sweeney
Title: Vice President
-------------------------------
(Signature Page 4 for Southern States Cooperative Revolving Credit Agreement)
<PAGE>
NATIONSBANC MONTGOMERY 231 South LaSalle Street
SECURITIES LLC, as Lead Arranger Chicago, IL 60697
Fax: 312-828-7448
By: /s/
-------------------------------------
Title: Vice President
----------------------------------
(Signature Page 5 for Southern States Cooperative Revolving Credit Agreement)
<PAGE>
FMB BANK, 25 South Charles Street
as Bank Mail Code 101-744
Baltimore, MD 21201
Fax: 410-244-4294
By: /s/ Susan Elliott Benninghoff
-----------------------------------
Susan Elliott Benninghoff
Title: Vice President
--------------------------------
(Signature Page 6 for Southern States Cooperative Revolving Credit Agreement)
<PAGE>
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH, as Bank
Funding and payment notices to:
By: /s/
--------------------------------- C/O Rabo Support Services, Inc.
Title: V.P. 10 Exchange Place, 16th Floor
----------------------------- Jersey City, NJ 07302
By: /s/ Attention: Corporate Services
--------------------------------- Fax: 201.499.5329
Title:
------------------------------
All other notices:
245 Park Avenue
New York, NY 10167
Fax: 212.916.7880
(Signature Page 7 for Southern States Cooperative Revolving Credit Agreement)
<PAGE>
BANQUE NATIONALE de PARIS 209 South LaSalle Street
(CHICAGO BRANCH), as Bank Chicago, IL 60604
Fax: 312-977-1380
By: /s/ Arnaud Collin du Bocage
----------------------------------
Arnaud Collin du Bocage
Title: Executive Vice President & General Manager
-------------------------------------------
(Signature Page 8 for Southern States Cooperative Revolving Credit Agreement)
<PAGE>
CRESTAR BANK, 919 East Main Street, 22nd Floor
as Co-Agent and Bank Richmond, VA 23219
Fax: 804-782-5413
By: /s/
------------------------------------
Title: S.V.P.
---------------------------------
(Signature Page 9 for Southern States Cooperative Revolving Credit Agreement)
<PAGE>
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
AG CAYMAN ISLANDS BRANCH, as Bank
303 Peachtree Street, N.E. Suite 2900
By: /s/ Kurt A. Morris Atlanta, GA 30308
------------------------------- Fax: 404-524-4006
Kurt A. Morris
Title: Vice President
----------------------------
By: /s/ Bobby Ryan Oliver, Jr.
-------------------------------
Bobby Ryan Oliver, Jr.
Title: Vice President
----------------------------
(Signature Page 10 for Southern States Cooperative Revolving Credit Agreement)
<PAGE>
WACHOVIA BANK, N.A., 1021 East Cary Street, 3rd Floor
as Co-Agent and Bank Richmond, VA 23219
Fax: 804-697-7581
Attention: Chris Borin
By: /s/ Christopher C. Borin
----------------------------------
Christopher C. Borin
Title: Senior Vice President
--------------------------------
<PAGE>
Exhibit A
REVOLVING CREDIT BORROWING NOTICE
To: [Insert names of Banks and contact persons]
From: Southern States Cooperative, Incorporated (the "Company")
Date: _____________________________
Pursuant to Section 2.02 of the Revolving Credit Agreement dated as of January
___, 1999, the Company hereby gives notice of its intent to (1) borrow in
accordance with the terms set forth in A through C below; or (2) convert or
continue an existing Loan, as set forth in D below. Capitalized terms used
herein but not otherwise specifically defined shall have the meanings ascribed
to such terms in the Revolving Credit Agreement.
A. Base Rate Loan
Amount of Loan Date of Loan
-------------- ------------
$---------------------- ---------------------
B. LIBOR Loan(s)
Amount of Loan(s) Date of Loan(s) * Interest Period(s)**
----------------- ----------------- --------------------
$--------------------- -------------------- ------------------
$--------------------- -------------------- ------------------
* At least three Business Day's prior notice must be given.
** One month, two months, three months or six months
C. Bid Rate Loan
------------------------------------------------------------------------
Bid Rate Maturity
Amount of Loan(s) Date of Loan(s) Date(s)
----------------- --------------- ------------------
$------------------- ------------------- ---------------------
$------------------- ------------------- ---------------------
$------------------- ------------------- ---------------------
$------------------- ------------------- ---------------------
$------------------- ------------------- ---------------------
<PAGE>
D. Conversions and Continuations
Convert Base Rate Loan(s) Effective Interest
to LIBOR Loan(s) Continue LIBOR Loan(s) Date(s)* Period(s)**
- ------------------------- ---------------------- --------- -----------
$--------------------- --------------------- --------- ---------
$---------------------- --------------------- --------- ---------
* At least three Business Day's prior notice must be given.
** One month, two months, three months or six months
The submission of this Notice is and shall be deemed a certification by the
Company that:
(a) The obligations of the Company as set forth in the Revolving
Credit Agreement and the other Loan Documents are valid, binding and enforceable
obligations of the Company as of the date hereof, both before and after giving
effect to the Loan requested herein, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar state
or federal debtor relief laws from time to time in effect which affect the
enforcement of creditors' rights in general and the availability of equitable
remedies;
(b) All of the conditions applicable to the Loan requested herein as
set forth in the Revolving Credit Agreement have been satisfied as of the date
hereof and will remain satisfied to the date of such Loan;
(c) All of the representations and warranties contained in Article
IV of the Revolving Credit Agreement and the other Loan Documents are correct;
and
(d) No Potential Default or Event of Default has occurred and is
continuing or would result from such Loan.
IN WITNESS WHEREOF, the undersigned has executed this Notice as of the
date first written.
SOUTHERN STATES COOPERATIVE, INCORPORATED
By: ______________________________________________
Name: ______________________________________________
Title: ______________________________________________
<PAGE>
Exhibit B
BID RATE LOAN QUOTE
To: Southern States Cooperative, Incorporated (the "Company")
From: [Name of Bank]
Date: ________________________
In response to the Revolving Credit Borrowing Notice of the Company dated the
date hereof, and pursuant to Section 2.02 of the Revolving Credit Agreement,
dated as of January ___, 1999, we hereby make the following Bid Rate Loan
quote(s) on the following terms:
Bid Rate
Amount of Loan(s) Maturity Date(s) Bid Rate(s)*
----------------- ---------------- -----------
$------------------- --------------------- ------------------
$------------------- --------------------- ------------------
$------------------- --------------------- ------------------
$------------------- --------------------- ------------------
$------------------- --------------------- ------------------
* Specify rate of interest per annum (to the nearest 1/1000 of 1%).
This bid expires at 12:30 p.m. (Eastern time) if not accepted in whole or in
part by the Company on or before such time.
[NAME OF BANK]
By: ________________________________________
Name: ________________________________________
Title ________________________________________
1
<PAGE>
Exhibit C
BID RATE LOAN NOTICE OF BORROWING
To: [Name of Bank]
Attention:
From: Southern States Cooperative, Incorporated (the "Company")
Date: ________________________
Pursuant to Section 2.02 of the Revolving Credit Agreement dated as of January
___, 1999, the Company hereby accepts your offer, set forth in your Bid Rate
Loan Quote dated the date hereof, in the following principal amount(s) for the
following period(s) and at the following Rate(s):
Bid Rate Bid Rate(s)
Amount of Loan(s) Maturity Date(s) Quoted
----------------- ---------------- ------
$------------------- --------------------- ------------------
$------------------- --------------------- ------------------
$------------------- --------------------- ------------------
$------------------- --------------------- ------------------
$------------------- --------------------- ------------------
SOUTHERN STATES COOPERATIVE, INCORPORATED
By: ________________________________________
Name: ________________________________________
Title ________________________________________
2
<PAGE>
Exhibit D
(Bid Rate Notices + Intentions Regarding Bids over Commitment)
[Bank Letterhead]
[Date]
Southern States Cooperative, Incorporated
6606 West Broad Street
Richmond, VA 23230
[Notice of intention not to bid over Commitment]
Gentlemen:
Please accept this letter as notice provided under Section 2.02 of the Revolving
Credit Agreement dated January ___, 1999. [Bank] does not intend to make Bid
Rate Loans in excess of its Commitment and, accordingly, Southern States is not
required to give [Bank] notice of such Bid Rate Loans.
This notice is effective three (3) days after receipt and will remain in effect
until it is rescinded.
[Signature]
******************************************************************************
[Date]
Southern States Cooperative, Incorporated
6606 West Broad Street
Richmond, VA 23230
[Rescission of notice]
Gentlemen:
Please accept this letter as a rescission of [Bank's] previous notice provided
under Section 2.02 of the Revolving Credit Agreement dated January ___, 1999.
[Bank] now intends to make Bid Rate Loans in excess of its Commitment and,
accordingly, Southern States is required to give [Bank] notice of such Bid Rate
Loans.
<PAGE>
This rescission is effective three (3) days after receipt.
[Signature]
<PAGE>
Exhibit E
Bank Notice Profile
(Information for contacting Banks relating to borrowing notices.)
Bank Name: CoBank, ACB
Address: 5500 S. Quebec St., Englewood, CO 80111
P.O. Box 5110, Denver, CO 80217
Attention: Lori O'Flaherty
Telephone Number: 303-740-4342
Fax: 303-694-5830
Backup for contact Person:
Special Instructions:
Bank Name: First Union National Bank
Address: 7 North 8th Street
3rd Floor, Mail Code VA-3260
Richmond, VA 23219
Telephone Number:
Fax: 804-788-9673
Contact Person:
Backup for contact Person:
Special Instructions:
Bank Name: NationsBank, N.A.
Address: 101 North Tryon Street
15th Floor
Charlotte, NC 28255
Telephone Number: 704-386-3781
Fax: 704-409-0009
Contact Person: Jacquetta Banks
Backup for contact Person:
Special Instructions:
Bank Name: FMB Bank
Address: 25 South Charles Street
Mail Code 101-744
Baltimore, MD 21201
Telephone Number:
Fax: 410-244-4294
Contact Person:
<PAGE>
Backup for contact Person:
Special Instructions:
Bank Name: Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank
Nederland",
New York Branch
Address: c/o Rabo Support Services, Inc.
10 Exchange Place, 16th Floor
Jersey City, NJ 07302
Attention: Corporate Services
Telephone Number:
Fax: 201-499-5329
Backup for contact Person:
Special Instructions: For funding and payment notices forward correspondences
to the address above. For all other notices: 245 Park Avenue, New York, NY
10167, Fax: 212-916-7880.
Bank Name: Banque Nationale de Paris (Chicago Branch)
Address: 209 South LaSalle Street
Chicago, IL 60604
Telephone Number:
Fax: 312-977-1380
Contact Person:
Backup for contact Person:
Special Instructions:
Bank Name: Crestar Bank
Address: 919 East Main Street, 22nd Floor
Richmond, VA 23219
Telephone Number:
Fax: 804-782-5413
Contact Person:
Backup for contact Person:
Special Instructions:
Bank Name: DG Bank Deutsche Genossenschaftsbank, AG Cayman Islands Branch
Address: 303 Peachtree Street, N.E., Suite 2900
Atlanta, GA 30308
Telephone Number:
Fax: 404-524-4006
Contact Person:
Backup for contact Person:
Special Instructions:
<PAGE>
Bank Name: Wachovia Bank, N.A.
Address: 100 North Main Street
20th Floor
Winston-Salem, NC 27102
Attention: Melissa Fox
Telephone Number: 336-732-5182
Fax: 336-732-3257
E-mail address: [email protected]
Backup for contact Person: Chris Borin
1021 East Cary Street, 3rd Floor
Richmond, VA 23219
E-mail address: [email protected]
Telephone Number: 804-697-6820
Fax: 804-697-7581
Special Instructions:
<PAGE>
Exhibit F-1
REVOLVING CREDIT NOTE
$____________________________ Richmond, Virginia
January ___, 1999
FOR VALUE RECEIVED, Southern States Cooperative, Incorporated, a
Virginia agricultural cooperative corporation (the "Borrower"), HEREBY PROMISES
TO PAY to the order of ____________________ ____________________ ("Bank") at its
office, located at ____________________________________, for the account of its
appropriate Applicable Lending Office, the principal sum of __________________
Dollars ($_______________), or the aggregate unpaid principal amount of all
advances under all Loans (as defined in the Revolving Credit Agreement referred
to below) other than Bid Rate Loans made by Bank to the Borrower pursuant to
Sections 2.01 and 2.02 of the Revolving Credit Agreement (including amounts in
excess of the amount shown above), in lawful money of the United States of
America and in immediately available funds, on the Termination Date. The
Borrower also promises to pay interest on the unpaid principal balance of the
Loans for the period such balance is outstanding, at said office for the account
of said Applicable Lending Office, in like money, at the rates of interest
provided in the Revolving Credit Agreement, at the times and calculated in the
manner set forth in Section 2.03(B) of the Revolving Credit Agreement. Any
amount of principal hereof which is not paid when due, whether at stated
maturity, by acceleration, or otherwise, shall bear interest from the date when
due until said principal amount is paid in full, payable on demand, at a rate
per annum equal at all times to the rate set forth in Section 2.03(C) of the
Revolving Credit Agreement.
The Borrower hereby authorizes the Bank to endorse on the schedule
annexed to this Note: (i) the amount and type of all Loans; (ii) in the case of
LIBOR Loans, the applicable Interest Periods; and (iii) all continuations,
conversions and payments of principal amounts in respect of such Loans, provided
however, that the failure to make such notation with respect to any Loan or
payment shall not limit or otherwise affect the obligation of the Borrower under
the Revolving Credit Agreement or this Note. The records of the Bank reflecting
such endorsements shall, in the absence of manifest error, be conclusive as to
the outstanding principal amount of all Loans owed to the Bank.
This is one of the Notes referred to in that certain Revolving
Credit Agreement (as amended, restated or supplemented from time to time, the
"Revolving Credit Agreement") dated as of January ___, 1999, among the Borrower,
CoBank, ACB, as Bank and in its capacity as Administrative Agent and
<PAGE>
Documentation Agent, First Union National Bank, as Bank and in its capacity as
Syndication Agent, NationsBank, N.A., as Bank and in its capacity as Syndication
Agent, NationsBanc Montgomery Securities LLC, in its capacity as Lead Arranger,
and the financial institutions as are, or may from time to time become, parties
thereto as "Banks" (the "Banks"), to evidence the Loans (other than Bid Rate
Loans) made by the Bank thereunder.
All Capitalized terms used herein and not defined herein shall have
the meanings given to them in the Revolving Credit Agreement.
The Revolving Credit Agreement provides for the acceleration of the
maturity of principal upon the occurrence of an Event of Default and for
prepayments on the terms and conditions specified therein.
The Borrower hereby waives presentment, notice of dishonor, protest
and any other notice with respect to this Note.
Subject to the terms and qualifications of the Revolving Credit
Agreement, the Borrower hereby agrees to pay on demand all reasonable costs and
expenses actually incurred in collecting the Borrower's obligations hereunder or
in enforcing or attempting to enforce any of the Bank's rights hereunder in each
case after the occurrence and during the continuance of an Event of Default,
including, but not limited to, reasonable attorneys' fees and expenses if
collected by or through an attorney, whether or not suit is filed.
This Note shall be governed by, and interpreted and construed in
accordance with, the laws of the Commonwealth of Virginia, provided, that, as to
the maximum rate of interest which may be charged or collected if the Laws
applicable to the Bank permit it to charge or collect a higher rate than the
Laws of the Commonwealth of Virginia, then such Laws applicable to the Bank
shall apply to the Bank under this Note.
IN WITNESS WHEREOF, the undersigned has caused this Note to be
executed by its officer thereunto duly authorized, as of the date first written.
SOUTHERN STATES COOPERATIVE, INCORPORATED
By: __________________________________________
Name: ________________________________________
Title: _______________________________________
2
<PAGE>
SCHEDULE TO REVOLVING CREDIT NOTE
REVOLVING CREDIT LOANS (BASE Rate Loans and/or LIBOR Loans)
<TABLE>
<CAPTION>
Date
Revolving
Credit
Loan Unpaid
Made, Type of Amount of Principal Name of
Continued Revolving Revolving Applicable Amount of Balance of Person
Converted Credit Credit Interest Principal Revolving Making
or Paid Loan Loan Period Prepaid Credit Note Notation
<S> <C> <C> <C> <C> <C> <C>
- ---------- ----------- ----------- ------------ ----------- ----------- ---------
- ---------- ----------- ----------- ------------ ----------- ----------- ---------
- ---------- ----------- ----------- ------------ ----------- ----------- ---------
- ---------- ----------- ----------- ------------ ----------- ----------- ---------
- ---------- ----------- ----------- ------------ ----------- ----------- ---------
- ---------- ----------- ----------- ------------ ----------- ----------- ---------
- ---------- ----------- ----------- ------------ ----------- ----------- ---------
- ---------- ----------- ----------- ------------ ----------- ----------- ---------
- ---------- ----------- ----------- ------------ ----------- ----------- ---------
</TABLE>
<PAGE>
Exhibit F-2
REVOLVING CREDIT NOTE
Richmond, Virginia
January ___, 1999
FOR VALUE RECEIVED, Southern States Cooperative, Incorporated, a Virginia
agricultural cooperative corporation (the "Borrower"), HEREBY PROMISES TO PAY to
the order of ____________________ ____________________ ("Bank") at its office,
located at ____________________________________, for the account of its
appropriate Applicable Lending Office, the principal sum equal to the aggregate
unpaid principal amount of all advances under all Bid Rate Loans (as defined in
the Revolving Credit Agreement referred to below) made by Bank to the Borrower
pursuant to Sections 2.01 and 2.02 of the Revolving Credit Agreement (including
amounts in excess of the amount shown above), in lawful money of the United
States of America and in immediately available funds on such Loan's Bid Rate
Maturity Date. The Borrower also promises to pay interest on the unpaid
principal balance of the Loans for the period such balance is outstanding, at
said office for the account of said Applicable Lending Office, in like money, at
the rates of interest provided on the schedule annexed to this Note, at the
times and calculated in the manner set forth in Section 2.03(B) of the Revolving
Credit Agreement. Any amount of principal hereof which is not paid when due,
whether at stated maturity, by acceleration, or otherwise, shall bear interest
from the date when due until said principal amount is paid in full, payable on
demand, at a rate per annum equal at all times to the rate set forth in Section
2.03(C) of the Revolving Credit Agreement.
The Borrower hereby authorizes the Bank to endorse on the schedule
annexed to this Note: (i) the applicable rates and Bid Rate Maturity Dates; and
(ii) all continuations, conversions and payments of principal amounts in respect
of such Loans, provided however, that the failure to make such notation with
respect to any Loan or payment shall not limit or otherwise affect the
obligation of the Borrower under the Revolving Credit Agreement or this Note.
The records of the Bank reflecting such endorsements shall, in the absence of
manifest error, be conclusive as to the outstanding principal amount of all
Loans owed to the Bank.
This is one of the Notes referred to in that certain Revolving
Credit Agreement (as amended, restated or supplemented from time to time, the
"Revolving Credit Agreement") dated as of January ___, 1999, among the Borrower,
CoBank, ACB, as Bank and in its capacity as Administrative Agent and
Documentation Agent, First Union National Bank, as Bank and in its capacity as
Syndication Agent, NationsBank, N.A., as Bank and in its capacity as Syndication
1
<PAGE>
Agent, NationsBanc Montgomery Securities LLC, in its capacity as Lead Arranger,
and the financial institutions as are, or may from time to time become, parties
thereto as "Banks" (the "Banks"), to evidence the Bid Rate Loans made by the
Bank thereunder.
All Capitalized terms used herein and not defined herein shall have
the meanings given to them in the Revolving Credit Agreement.
The Revolving Credit Agreement provides for the acceleration of the
maturity of principal upon the occurrence of an Event of Default and for
prepayments on the terms and conditions specified therein.
The Borrower hereby waives presentment, notice of dishonor, protest
and any other notice with respect to this Note.
Subject to the terms and qualifications of the Revolving Credit Agreement,
the Borrower hereby agrees to pay on demand all reasonable costs and expenses
actually incurred in collecting the Borrower's obligations hereunder or in
enforcing or attempting to enforce any of the Bank's rights hereunder in each
case after the occurrence and during the continuance of an Event of Default,
including, but not limited to, reasonable attorneys' fees and expenses if
collected by or through an attorney, whether or not suit is filed.
This Note shall be governed by, and interpreted and construed in
accordance with, the laws of the Commonwealth of Virginia, provided, that, as to
the maximum rate of interest which may be charged or collected if the Laws
applicable to the Bank permit it to charge or collect a higher rate than the
Laws of the Commonwealth of Virginia, then such Laws applicable to the Bank
shall apply to the Bank under this Note.
IN WITNESS WHEREOF, the undersigned has caused this Note to be
executed by its officer thereunto duly authorized, as of the date first written.
SOUTHERN STATES COOPERATIVE, INCORPORATED
By: ____________________________________________
Name: __________________________________________
Title: _________________________________________
2
<PAGE>
SCHEDULE TO REVOLVING CREDIT NOTE
BID RATE LOANS
Date
Bid Rate
Loan Amount Interest Name of
Made of Bid Rate for Bid Rate Amount of Person
Continued, Rate Bid Rate Maturity Principal Making
or Paid Loan Loan Date Repaid Notation
- ---------- ----------- ----------- ------------ -----------
- ---------- ----------- ----------- ------------ -----------
- ---------- ----------- ----------- ------------ -----------
- ---------- ----------- ----------- ------------ -----------
- ---------- ----------- ----------- ------------ -----------
- ---------- ----------- ----------- ------------ -----------
- ---------- ----------- ----------- ------------ -----------
- ---------- ----------- ----------- ------------ -----------
3
<PAGE>
Exhibit G
FORM OF OPINION OF COMPANY COUNSEL
[Mays & Valentine, L.L.P. Letterhead]
January 12, 1999
TO THE PERSONS LISTED ON SCHEDULE 1
Re: $200,000,000 Revolving Credit Agreement with
Southern States Cooperative, Incorporated
Ladies and Gentlemen:
We have acted as counsel for Southern States Cooperative, Incorporated
(the "Company") in connection with the preparation, execution, and delivery of
the Revolving Credit Agreement dated as of January 12, 1999 (the "Credit
Agreement"), among the Company, CoBank, ACB, in its individual capacity, as Bank
and in its capacity as Administrative Agent and Documentation Agent, First Union
National Bank, as Bank and in its capacity as Syndication Agent, NationsBank,
N.A., as Bank and in its capacity as Syndication Agent, NationsBanc Montgomery
Securities LLC, in its capacity as Lead Arranger, and FMB Bank, as Bank,
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "RaboBank Nederland", New
York Branch, as Bank, Banque Nationale de Paris (Chicago Branch), as Bank,
Crestar Bank, as Bank and in its capacity as Co-Agent, DG Bank Deutsche
Genossenschaftsbank AG Cayman Islands Branch, as Bank, and Wachovia Bank, N.A.,
as Bank and in its capacity as Co-Agent. This opinion is being furnished to you
at the request of the Company pursuant to Section 3.01(E) of the Credit
Agreement. Capitalized terms used herein which are not defined herein shall have
the meanings assigned to such terms in the Credit Agreement.
For purposes of this opinion, we have examined, among other things:
(a) the Credit Agreement and the Notes, each dated the date hereof, issued
by the Company to the Banks (the "Notes");
(b) the Fourth Amended and Restated Financing Services and Contributed
Capital Agreement dated the date hereof between the Company and Statesman
Financial Corporation (together with the Credit Agreement and the Notes referred
to herein collectively as the "Financing Documents"); and
4
<PAGE>
(c) documents furnished by the Company pursuant to Section 3.01 of the
Credit Agreement, including the Articles of Incorporation and Bylaws of the
Company and all amendments thereto.
For purposes of the opinions expressed below, we have assumed (i) the
authenticity of all documents submitted to us as originals, (ii) the conformity
to the originals of all documents submitted as certified or photostatic copies
and the authenticity of the originals; (iii) the legal capacity of natural
persons, and (iv) the due authorization, execution and delivery of all documents
by all parties (other than the Company) and the validity and binding effect
thereof on such parties.
Based upon the foregoing and subject to the qualifications hereinafter set
forth, we are of the opinion that:
1. The Company is an agricultural cooperative corporation duly
incorporated and validly existing under the laws of the Commonwealth of Virginia
and has all corporate power required to carry on its business as now conducted.
2. The execution, delivery, and performance by the Company of the
Financing Documents are within the Company's corporate power and have been duly
authorized by all necessary corporate action.
3. The Financing Documents have been duly executed and delivered on behalf
of the Company, and constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforceability of
creditors' rights generally and by general equitable principles whether
enforcement is sought by proceedings in equity or at law.
4. The execution, delivery and performance by the Company of the Financing
Documents (i) require no action by or in respect of, or filing with, any
governmental body, agency or official; (ii) do not contravene or constitute
(with or without the giving of notice or lapse of time or both) a default under
any provision of applicable law or regulation, the Articles of Incorporation or
Bylaws of the Company, or to our knowledge, any agreement, judgment, injunction,
order, decree or other instrument known to us and binding upon the Company; and
(iii) to our knowledge do not result in the creation or imposition of any Lien
on any asset of the Company (other than Liens in favor of CoBank on any equity
interest of the Company in CoBank).
5. To our knowledge, there are no actions or proceedings against the
Company pending before any court, governmental authority, regulatory body, or
arbitrator: (a) with respect to the Financing Documents; (b) which could have a
material adverse effect on the ability of the Company to conduct its business as
presently conducted; or (c) which individually seeks or could reasonably be
expected to seek in excess of $1,000,000 from the Company.
We express no opinion as to those provisions of the Financing Documents
which purport to make oral amendments and waivers ineffective, and we express no
opinion as to those provisions of the Financing Documents which would waive the
right of the Company to object to venue.
5
<PAGE>
The opinion and statements expressed herein are subject to the following
qualifications:
The opinions and statements expressed herein are restricted to matters
governed by the laws of the United States of America and the laws of the
Commonwealth of Virginia.
We express no opinion with respect to any instrument or document other
than instruments or documents referred to above.
The opinions expressed herein are effective as of the date hereof. No
expansion of the opinions may be made by implication or otherwise. We express no
opinions other than as herein expressly set forth. We do not undertake to advise
you of any matter within the scope of this letter that comes to our attention
after the date of this letter and disclaim any responsibility to advise you of
any further changes in law or fact that may affect the opinions set forth
herein.
This letter is rendered to you in connection with the transactions
described above and may not be relied upon by any other person, or participant,
or by you in any other context or for any other purpose. It may not be referred
to in whole or in part nor may copies thereof be furnished or delivered to any
other person without our prior written consent, except that you may furnish
copies hereof: (i) to prospective and actual parties (including Participants and
Assignees) to the financing transactions contemplated by the Financing
Documents; (ii) to your respective independent auditors, attorneys, and other
advisors; (iii) to any governmental authority having jurisdiction over you; (iv)
pursuant to any order or legal process of any court of competent jurisdiction or
any governmental agency; and (v) in connection with any legal action arising out
of any of the Financing Documents or the transactions contemplated thereby.
Very truly yours,
6
<PAGE>
SCHEDULE 1
CoBank, ACB, as Administrative Agent, Cooperatieve Centrale Raiffeisen-
Documentation Agent and Bank Boerenleenbank B.A., "RaboBank
P.O. Box 5110 Nederland"
Denver, Colorado 80217 New York Branch
245 Park Avenue
New York, New York 10167
First Union National Bank, Banque Nationale de Paris (Chicago
as Syndication Agent and Bank Branch)
7 North 8th Street, 3rd Floor 209 South LaSalle Street
Mail Code VA-3260 Chicago, Illinois 60604
Richmond Virginia 23219
NationsBank, N.A., as Syndication Crestar Bank
Agent and Bank 919 East Main Street, 22nd Floor
101 North Tryon Street, 15th Floor Richmond, Virginia 23219
Charlotte, North Carolina 28255
NationsBanc Montgomery Securities LLC, DG Bank Deutsche Genossenschaftsbank
as Lead Arranger AG Cayman Islands Branch
4400 South LaSalle Street 303 Peachtree Street, N.E., Suite 2900
Chicago, Illinois 60605 Atlanta, Georgia 30308
FMB Bank Wachovia Bank, N.A.
25 South Charles Street 1021 East Cary Street, 3rd Floor
Mail Code 101-744 Richmond, Virginia 23219
Baltimore, Maryland 21201
<PAGE>
Exhibit H
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of _______ __, among
_______________, (the "Assignor"), _______________ (the "Assignee"), Southern
States Cooperative, Incorporated (the "Company"), and CoBank, ACB ("CoBank"), in
its capacity as Administrative Agent.
PRELIMINARY STATEMENTS
1. This Assignment and Assumption Agreement (the "Agreement") relates to
the Revolving Credit Agreement (as amended from time to time, the "Credit
Agreement") dated as of January ___, 1999, originally among the Company, CoBank,
First Union National Bank, NationsBank, N.A., _________ and each other lender
which may thereafter execute and deliver an Assignment and Assumption Agreement
pursuant to the Credit Agreement (each a "Bank" and, collectively, the "Banks"),
CoBank, as Administrative Agent and Documentation Agent, First Union National
Bank, as Syndication Agent, NationsBank, N.A., as Syndication Agent, and
NationsBanc Montgomery Securities LLC, as Lead Arranger. All capitalized terms
not otherwise defined herein shall have the respective meanings set forth in the
Credit Agreement.
2. Subject to the terms and conditions set forth in the Credit Agreement,
the Assignor (a) is required to make Base Rate Loans and LIBOR Loans from time
to time to the Company and (b) may in its sole discretion make Bid Rate Loans
from time to time to the Company.
3. Base Rate Loans made to the Company by the Assignor under the Credit
Agreement in the aggregate principal amount of ______________ Dollars
($_________) are outstanding at the commencement of business on the date hereof.
This Agreement shall become effective prior to any Base Rate Loans made on the
date hereof.
4. LIBOR Loans made to the Company by the Assignor under the Credit
Agreement in the aggregate principal amount of ______________ Dollars
($_________) are outstanding at the commencement of business on the date hereof.
This Agreement shall become effective prior to any LIBOR Loans made on the date
hereof.
5. Bid Rate Loans made to the Company by the Assignor under the Credit
Agreement in the aggregate principal amount of ______________ Dollars
($_________) are outstanding at the commencement of business on the date hereof.
The amount and Bid Rate Maturity Date for each of the Assignor's Bid Rate Loans
is set forth in Exhibit A attached hereto. This Agreement shall become effective
prior to any Bid Rate Loans made on the date hereof.
<PAGE>
6. The Assignor desires to assign to the Assignee a proportionate share of
all of the rights of the Assignor under the Credit Agreement as follows:
a) a __ % interest in all outstanding Base Rate Loans (such percentage
equaling $______ at the commencement of business on the date hereof);
b) a __ % interest in all outstanding LIBOR Loans (such percentage equaling
$______ at the commencement of business on the date hereof);
c) a __ % interest in all outstanding Bid Rate Loans (such percentage
equaling $______ at the commencement of business on the date hereof); and
d) a __ % of the Assignor's Commitment ("Assigned Commitment") (such
percentage equaling $______ at the commencement of business on the date hereof).
The Assignee desires to accept assignment of such rights and assume the
corresponding obligations from the Assignor on such terms. The assigned Loans
described in clause (a) through (c) above are, collectively, referred to as the
"Assigned Loans".
NOW THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
SECTION 1. Assignment. The Assignor hereby assigns to the Assignee all of
the rights of the Assignor under the Credit Agreement in and to the Assigned
Commitment and the Assigned Loans (together with interest accrued thereon to the
date of this Agreement), and the Assignee hereby accepts such assignment from
the Assignor and assumes all of the obligations of the Assignor under the Credit
Agreement in and to the Assigned Commitment. Upon the execution and delivery
hereof by the Assignor, the Assignee, the Company (to the extent required) and
the Administrative Agent (to the extent required) and the payment of the amount
specified in Section 2 required to be paid on the date hereof (a) the Assignee
shall, as of the commencement of business on the date hereof, succeed to the
rights and be obligated to perform the obligations of a Bank under the Credit
Agreement with a Commitment in an amount equal to the Assigned Commitment and
with Loans in a principal amount equal to the Assigned Loans, and (b) the
Commitment and the Loans of the Assignor shall, as of the commencement of
business on the date hereof, be reduced correspondingly and the Assignor
released from its obligations under the Credit Agreement to the extent such
obligations have been assumed by the Assignee. The assignment provided for
herein shall be without recourse to the Assignor, except that Assignor warrants
that it (i) is the legal and beneficial owner of the Assigned Loans, (ii) owns
the Assigned Loans free and clear of any Liens and (iii) has the right to make
the assignments contemplated by this Agreement.
<PAGE>
SECTION 2. Payments. As consideration for the assignment and sale
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the
date hereof in immediately available funds an amount equal to ________________
Dollars ($__________) in principal. It is understood that interest and
commitment fees and other fees payable to the Assignor under the Credit
Agreement accrued to but not including the date hereof are for the account of
the Assignor and such interest and fees accruing from and including the date
hereof are for the account of the Assignee. Each of the Assignor and the
Assignee hereby agrees that if it receives any amount under the Credit Agreement
which is for the account of the other party hereto, it shall receive the same
for the account of such other party to the extent of such other party's interest
therein and shall promptly pay the same to such other party.
SECTION 3. Consent of the Company and the Administrative Agent. This
Agreement is conditioned upon the consent of the Company and the Administrative
Agent pursuant to Section 10.04 of the Credit Agreement (unless consent is not
required pursuant to Section 10.04). The execution of this Agreement by the
Company and the Administrative Agent is evidence of such consent. Pursuant to
Section 10.04 of the Credit Agreement, the Company has agreed to execute and
deliver (1) to the Assignee a new Note or Notes payable to the order of the
Assignee to evidence the assignment and assumption provided for herein and (2)
to the Assignor, in substitution for its existing Note or Notes, a new Note or
Notes resulting from the Assignment payable to the order of the Assignor to
evidence the assignment and assumption provided for herein.
SECTION 4. Non-Reliance on Assignor. The Assignor makes no representation
or warranty in connection with, and shall have no responsibility with respect
to, the solvency, financial condition, or statements of the Company or any other
party to any Loan Document, or the validity and enforceability of the
obligations of the Company or any other party to a Loan Document in respect of
the Credit Agreement, any Note, or any other Loan Document. The Assignee
acknowledges that it has, independently and without reliance on the Assignor,
the Agents or the Lead Arranger and based on such documents and information as
it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement and will continue to be responsible for making its own
independent appraisal of the business affairs and financial condition of the
Company and the other parties to the Loan Documents.
SECTION 5. Certification of Exemption. [For Banks not organized under the
Laws of the United States.] As soon as possible, but in any event prior to the
date on which interest or fees are payable under the Credit Agreement, Assignee
agrees to provide to the Administrative Agent and the Company Form 4224 or Form
1001 of the Internal Revenue Service, or such other forms, certifications,
statements or documents, duly executed and completed by the Assignee, as
evidence of Assignee's exemption from the withholding of United States tax with
respect thereto.
SECTION 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Virginia.
<PAGE>
SECTION 7. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered to by their duly authorized officers as of the date first above
written.
<PAGE>
Exhibit I
AMENDMENT TO FINANCING SERVICES AND
CONTRIBUTED CAPITAL AGREEMENT
This AMENDMENT TO FINANCING SERVICES AND CONTRIBUTED CAPITAL AGREEMENT
(the "Amendment") is made as of this 6th day of November, 1998, between SOUTHERN
STATES COOPERATIVE, INCORPORATED (the "Cooperative"), a Virginia corporation,
and MICHIGAN LIVESTOCK CREDIT CORPORATION ("MLCC"), a Virginia corporation.
The parties hereto are parties to a Financing Services and Contributed
Capital Agreement dated as of the 1st day of April, 1998 (the "Agreement") and
desire to amend the provisions of Section 13.03 of the Agreement.
Accordingly, the parties hereto agree that Section 13.03 is amended to
read as follows:
SECTION 13.03. REDEMPTION OF CLASS X PREFERRED STOCK. MLCC covenants
and agrees that if on any TAPOS Determination Date the amount of MLCC
Class X Preferred Stock held by the Cooperative exceeds the Minimum
Class X Investment computed as of such date, it will, subject to the
provisions of Section 13.04, upon written demand by the Cooperative
redeem for cash at its par value those shares held by the Cooperative
which are in excess of the Minimum Class X Investment determined as of
such date, provided that MLCC will not repurchase any MLCC Class X
Preferred Stock if at the time MLCC is indebted (as therein defined)
under the Revolving Credit Agreement (the "Credit Agreement") dated as
of November 6, 1998 by and among MLCC, the Lenders identified therein
and CoBank, as Agent or has the right to borrow under the Credit
Agreement, and if the ratio of the total Debt of MLCC to the sum of
its total Debt and its Net Worth (as such terms are defined in the
Credit Agreement) is greater than 0.5 to 1 or if such ratio would be
greater than 0.5 to 1 after such repurchase.
PRIOR AGREEMENT
---------------
Except as otherwise expressly amended by this Amendment, the Agreement is
and shall continue to be in full force and effect in accordance with its terms.
<PAGE>
The Cooperative and MLCC further covenant and agree that each reference in any
agreement or other document to the Agreement shall be deemed to refer to the
Agreement as amended by this Amendment and as it may be amended from time to
time hereafter.
This Amendment shall be governed by and construed and be interpreted in
accordance with the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, SOUTHERN STATES COOPERATIVE, INCORPORATED and MICHIGAN
LIVESTOCK CREDIT CORPORATION have caused this Amendment to be executed by their
duly authorized officers all as of the date first above written.
SOUTHERN STATES COOPERATIVE,
INCORPORATED
By:
---------------------------------------
Its:
---------------------------------------
MICHIGAN LIVESTOCK CREDIT CORPORATION
By:
---------------------------------------
Its:
---------------------------------------
<PAGE>
FOURTH AMENDED AND RESTATED
FINANCING SERVICES AND CONTRIBUTED CAPITAL AGREEMENT
FOURTH AMENDED AND RESTATED FINANCING SERVICES AND CONTRIBUTED CAPITAL
AGREEMENT ("Agreement") dated as of the _____ day of January, 1999, between
SOUTHERN STATES COOPERATIVE, INCORPORATED (the "Cooperative"), a Virginia
corporation, and STATESMAN FINANCIAL CORPORATION ("Statesman"), a Virginia
corporation.
Cooperative desires from time to time to sell to Statesman certain
accounts receivable owing to it, certain installment sales contracts and certain
Crop Time Notes, and Statesman is interested in purchasing such receivables,
installment sales contracts and Crop Time Notes. The parties desire to set forth
the terms and conditions upon which such sales may be made. The Cooperative also
desires to have Statesman issue from time to time credit cards to customers of
the Cooperative and its Local Cooperatives and Dealerships, to extend from time
to time asset based financing, agricultural production loans and term loans to
customers of the Cooperative pursuant to separate agreements to be entered into
between each such customer and Statesman and to lease personal property from
time to time to customers of the Cooperative, Local Cooperatives and
Dealerships. Therefore, the parties hereto agree as follows:
ARTICLE I
---------
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
SECTION 1.01. DEFINED TERMS. As used in this Agreement, the following
terms have the following meanings (terms defined in the singular to have the
same meaning when used in the plural and vice versa):
"Accounts Receivable - Local Cooperative" means the amounts advanced by
the Cooperative to a Local Cooperative and owing from time to time from such
Local Cooperative to the Cooperative.
"Agreement" means this Fourth Amended and Restated Financing Services and
Contributed Capital Agreement, as it may be amended, supplemented, or modified
from time to time.
"Agricultural Production Loan" means to loan for a term of not more than
one year, the proceeds of which are used to raise crops or livestock.
"Approved Contracts" means those Installment Sales Contracts arising out
of the sale of goods by a Retail Service or a customer of the Cooperative which
have been approved in advance by Statesman as evidenced by a Statesman Approval
Number.
<PAGE>
"Approved Notes" means those Crop Time Notes arising out of the sale of
goods and services by the Cooperative which have been approved in advance by
Statesman.
"Asset Based Financing" means financing of a Dealership by Statesman
secured by accounts receivable, inventory, equipment, including rolling stock,
real estate and other fixed assets, or any of such items.
"Average Total Delinquency Percentage" means with respect to each of
Retail Accounts, Grain Marketing Accounts and Accounts Receivable - Local
Cooperatives (each a "type" of Receivable) that percentage determined by
dividing the average total delinquent Receivables of that type (including any
Receivables of that type sold to Statesman which are delinquent), measured as of
the last day of each calendar month, for the twelve-month period ending on the
last Business Day of the calendar month preceding a settlement date by the
average total Receivables of that type owing the Cooperative (including those
sold to Statesman), measured as of the last day of each calendar month, for the
same twelve-month period. "Average Total Delinquency Percentage" means with
respect to Wholesale Accounts that percentage determined by dividing the average
total delinquent Wholesale Accounts (including any Wholesale Accounts sold to
Statesman which are delinquent), measured as of the last day of each calendar
month, for the twelve-month period ending on the last Business Day of the
calendar month preceding the date of determination by the average total
Wholesale Accounts owing the Cooperative (including those sold to Statesman),
measured as of the last day of each calendar month, for the same twelve-month
period.
"Average Total Delinquency Percentage Variance" means with respect to each
of Retail Accounts, Grain Marketing Accounts and Accounts Receivable Local
Cooperatives (each a "type" of Receivable) the difference, regardless of which
is greater, between (i) the Average Total Delinquency Percentage for that type
of Receivables computed as of the last Business Day of the calendar month
preceding any settlement date and (ii) the percentage obtained by dividing the
total delinquent Receivables of that type (including Receivables of that type
sold to Statesman which are delinquent) on such date by the total Receivables of
that type (including those sold to Statesman) on such date. "Average Total
Delinquency Percentage Variance" means with respect to Wholesale Accounts the
difference, regardless of which is greater, between (i) the Average Total
Delinquency Percentage for Wholesale Accounts computed as of the last Business
Day of the calendar month preceding the date of determination and (ii) the
percentage obtained by dividing the total delinquent Wholesale Accounts
(including Wholesale Accounts sold to Statesman which are delinquent) on such
date by the total Wholesale Accounts (including those sold to Statesman) on such
date.
"Balances Owed" means the net amount payable to the Cooperative on
Receivables as a result of goods sold or services performed, or both, after
adjustment for all rebates, credits and all other adjustments made by the
Cooperative on all Purchased Receivables.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in Richmond, Virginia, are authorized or required to
close under applicable law.
<PAGE>
"Collateral" means any property which is subject to a purchase money
security interest securing the obligations of the obligor on a Purchased
Contract or a Purchased Note.
"Crop Time Notes" means promissory notes of Customers of the Cooperative
evidencing amounts due for the purchase of goods and services from the
Cooperative, which are payable in one year or less.
"Customer of the Cooperative" means a member of the Cooperative or other
Person who purchases goods or services from the Cooperative.
"Dealership" means any wholesale customer of the Cooperative which has
purchased merchandise or products from the Cooperative for resale to its
customers and shall include a private dealer of the Cooperative but shall not
include a Retail Service or a Local Cooperative.
"Default" means any of the events specified in Article X, whether or not
any requirement for the giving of notice or the lapse of time, or both, has been
satisfied.
"Dispute" has the meaning set forth in Section 4.06.
"Eligible Contracts" means Installment Sales Contracts arising out of the
sale of goods by Retail Services or a customer of the Cooperative other than
Approved Contracts which Statesman has determined to purchase from the
Cooperative.
"Eligible Notes" means Crop Time Notes other than Approved Notes which
Statesman has determined to purchase from the Cooperative.
"Eligible Receivables" means Receivables which Statesman has determined to
purchase from the Cooperative.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof.
"Event of Default" means any of the events specified in Section 10.01,
provided that any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.
"GAAP" means generally accepted accounting principles consistently applied
with respect to a corporation conducting a business the same as or similar to
that of the Cooperative and its Subsidiaries, if any, as in effect from time to
time.
"Grain Marketing Accounts" means amounts owed to the Cooperative for the
purchase of grain commodities, whether evidenced by open account, note, or
otherwise or any combination thereof.
<PAGE>
"Headquarters" means the office of Statesman at 6606 West Broad Street,
Post Office Box 25567, Richmond, Virginia 23260.
"Historical Charge Off Percentage" means with respect to each of Retail
Accounts, Grain Marketing Accounts and Accounts Receivable - Local Cooperatives
(each a "type" of Receivable) that percentage which is obtained by dividing (a)
the sum of (i) gross bad debt expense of the Cooperative for Receivables of that
type for any fiscal year and (ii) the gross bad debt expense of Statesman for
such fiscal year for Receivables of that type purchased from the Cooperative by
(b) the total dollar volume for sales which generate Receivables of that type
(whether cash or non-cash) of the Cooperative for such fiscal year.
"Independent Cooperative" means a cooperative which is not a Local
Cooperative.
"Installment Sales Contract" means a written agreement providing for the
deferred payment of the purchase price of goods sold in the ordinary course of
business.
"Installment Sales Financing" means the purchasing by Statesman of chattel
paper (as defined in Article 9 of the Uniform Commercial Code of Virginia)
arising out of a sale of merchandise by a Retail Service, Local Cooperative or
Dealership.
"Leases" means contracts for the lease of personal property for a fixed
period of time by Statesman to the Cooperative, a Local Cooperative, a
Dealership or a customer of any.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), charge or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code of Virginia or comparable law of any jurisdiction to evidence
any of the foregoing).
"Local Cooperative" means any corporation which is managed by the
Cooperative under a management agreement or contract.
"Loan" means an Agricultural Production Loan, a Term Loan, an asset based
loan or any substantially similar extension of credit now or hereafter made by
Statesman to a Customer of the Cooperative or other Person.
"Manufacturer" means the original equipment manufacturer of goods offered
for sale by the Cooperative.
"Multiemployer Plan" means a Plan described in Section 4001(a)(3) of ERISA
which covers employees of the Cooperative or to which the Cooperative is or may
be required to make contributions under ERISA.
<PAGE>
"Net Balance" means with respect to an Installment Sales Contract, the
outstanding balance owing on such Installment Sales Contract including any
applicable late charges but exclusive of any unearned finance charges as
provided for in such Installment Sales Contract and means with respect to a Crop
Time Note, the outstanding principal balance owing on such Crop Time Note and
all accrued and unpaid interest thereon.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority, or other entity of whatever nature.
"Plan" means any employee welfare plan established or maintained by the
Cooperative or to which the Cooperative has made contributions in the past or
may in the future be required to make contributions under ERISA.
"Prohibited Transaction" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended from time
to time.
"Purchased Contracts" means Approved Contracts and Eligible Contracts
which have been purchased by Statesman from the Cooperative or a customer of the
Cooperative.
"Purchased Notes" means Approved Notes and Eligible Notes which have been
purchased by Statesman from the Cooperative.
"Purchased Receivables" means Eligible Receivables which have been
purchased by Statesman from the Cooperative.
"Purchased Wholesale Accounts" means Wholesale Accounts which have been
purchased by Statesman from the Cooperative.
"Receivables" means the amounts owing the Cooperative from time to time
for the sale of goods or the performance of services in the ordinary course of
business and shall include Retail Accounts, Grain Marketing Accounts, and
Accounts Receivable - Local Cooperatives.
"Receivables Certificate" means the certificate referred to in Section
2.03(1).
"Reserve Account" means the account established under the provisions of
Section 2.04.
"Retail Accounts" means amounts owing the Cooperative arising out of the
sale in the ordinary course of business of goods and services by Retail Services
<PAGE>
or by stores which were then owned and operated by Gold Kist Inc., which amounts
are not evidenced by Installment Sales Contracts.
"Retail Service" means any retail store owned and operated by the
Cooperative.
"Southern States Credit Card Program" means the program of Statesman to
approve revolving or open-end credit in specific amounts for individual
customers of the Cooperative, Local Cooperatives and Dealerships, to extend
credit to such customers for the purchase of goods from the Cooperative, Local
Cooperatives and Dealerships and to settle periodically with the Cooperative,
Local Cooperatives and Dealerships for purchases made by customers pursuant to
that program, as such program may exist from time to time.
"Statesman Approval Number" means a number given by Statesman to a Retail
Service to evidence that a particular Installment Sales Contract is an Approved
Contract.
"Subsidiary" means any corporation the majority of the voting shares of
which at the time are owned directly or indirectly by the Cooperative and/or by
one or more Subsidiaries of the Cooperative.
"Term Loan" means a secured loan with the principal amortized over a
period of 5 to 7 years, the proceeds of which are used for agricultural
production.
"Termination Date" means that date on which certain obligations of the
parties hereunder may be terminated as provided in Section 11.04.
"Wholesale Accounts" means any obligation arising out of the sale of goods
or the performance of services in the ordinary course of business which is not
an Account Receivable - Local Cooperative, Grain Marketing Account, or Retail
Account.
"Wholesale Reserve Account" means the account established under the
provisions of Section 4.04.
ARTICLE II
----------
ACCOUNTS RECEIVABLE FINANCING
-----------------------------
SECTION 2.01. PURCHASE OF RECEIVABLES. Statesman may from time to time,
at its option upon the terms and subject to the conditions contained in this
Agreement, purchase Receivables from the Cooperative, provided that Statesman
has determined in its sole and absolute discretion that such Receivables are
acceptable to it (which acceptable Receivables are herein referred to as the
"Eligible Receivables"), and in no event shall Statesman purchase Receivables if
<PAGE>
after such purchase the aggregate amount owing on all Receivables purchased by
Statesman from the Cooperative shall exceed TWO HUNDRED MILLION DOLLARS
($200,000,000). All such purchases shall be made without recourse to the
Cooperative except so far as Statesman shall have the right to make charges to
the Reserve Account as provided in Section 2.05, and nothing contained herein
shall obligate Statesman to purchase any Receivables.
SECTION 2.02. OFFER TO SELL. The Cooperative may from time to time offer
to sell Receivables to Statesman as herein provided, but, except as the parties
may otherwise agree, no Receivable from any obligor shall be sold unless all
accounts owing from such obligor to the Cooperative are sold, and no Retail
Account arising out of a sale at any Retail Service shall be sold unless all
Retail Accounts arising out of sales at such Retail Service are sold.
SECTION 2.03. PROCEDURES.
(1) Prior to 11:00 a.m. (Richmond, Virginia, time) on the tenth Business
Day of each month, or such later day as may be agreed to by Statesman, the
Cooperative shall deliver to Statesman by hand or send by telecopy a certificate
substantially in the form of Exhibit A attached hereto (a "Receivables
Certificate") with the blanks therein appropriately completed and reflecting the
following information for the preceding month:
(a) the amount of all Receivables arising out of sales of goods or
services during the preceding month, if any, which were sold by the Cooperative
to Statesman as of the end of such preceding month;
(b) Receivables which were previously sold to Statesman under the
provisions of this Article II showing the outstanding balances as of the last
day of the preceding month in the aggregate for Retail Accounts, Grain Marketing
Accounts and Accounts Receivable - Local Cooperatives;
(c) Receivables which were previously sold to Statesman pursuant to
this Article II upon which there was any change in the outstanding balance
during such month, and all debits and credits thereon, including without
limitation payments and other remittances by or on behalf of the account
obligor, credits, rebates and adjustments, showing in the aggregate for Retail
Accounts, Grain Marketing Accounts and Accounts Receivable - Local Cooperatives
the prior balance, the amount and nature of adjustments and the balance as of
the last day of the preceding month;
(d) the Cooperative shall promptly make available to Statesman, at
Statesman's request, listings of accounts with balances and other referenced
amounts by obligor that are referred to in Sections 2.03(1)(a), (b) and (c).
(2) Not later than 11:00 a.m. (Richmond, Virginia, time) on the fifth
Business Day after receipt by Statesman of the Receivables Certificate,
Statesman shall pay to the Cooperative the amount by which (a) the aggregate
outstanding balance on each Receivable it has purchased exceeds (b) the Purchase
Discount (as herein defined) and the amount, if any, to be placed in the Reserve
<PAGE>
Account pursuant to Section 2.04, provided, however, that Statesman may choose
not to pay for any Receivable evidenced by a promissory note or other instrument
unless such note or other instrument has been endorsed and delivered to
Statesman.
(3) Promptly upon delivery of the certificate described in Section
2.03(1), the Cooperative shall assign and transfer as provided in such
certificate those Receivables Statesman is purchasing and all proceeds thereof,
cash or non-cash.
(4) (a) For purposes of this Article II, the Purchase Discount for Retail
Accounts shall be the product obtained by multiplying the outstanding balance of
the Retail Accounts being purchased by (i) the average Historical Charge Off
Percentage of the Cooperative for Retail Accounts for the three preceding fiscal
years times (ii) the sum of 1 plus the Average Total Delinquency Percentage
Variance for Retail Accounts, plus the anticipated interest charges for the
current month relating to the outstanding purchased Retail Accounts. Such amount
shall be computed according to the following formula:
Discount = Retail Accounts being purchased x [(aHCO%) x (1 + ADV)] +
AIC
where
aHCO% = average Historical Charge Off Percentage for Retail Accounts
for the three preceding fiscal years which for purposes of
this calculation shall not be less than 0.35% or such other
percentage as may be from time to time agreed to by the
Cooperative and Statesman.
ADV = Average Total Delinquency Percentage Variance for Retail
Accounts.
AIC = the anticipated interest charges for the current month for
borrowings relating to outstanding Retail Accounts purchased
by Statesman.
(b) For purposes of this Article II, the Purchase Discount for Grain
Marketing Accounts shall be the product obtained by multiplying the outstanding
balance of the Grain Marketing Accounts being purchased by (i) the average
Historical Charge Off Percentage of the Cooperative for Grain Marketing Accounts
for the three preceding fiscal years times (ii) the sum of 1 plus the Average
Total Delinquency Percentage Variance for Grain Marketing Accounts, plus the
anticipated interest charges for the current month relating to the outstanding
purchased Grain Marketing Accounts. Such amount shall be computed according to
the following formula:
Discount = Grain Marketing Accounts being purchased x [(aHCO%) x (1 +
ADV)] + AIC
<PAGE>
where
aHCO% = average Historical Charge Off Percentage for Grain Marketing
Accounts for the three preceding fiscal years which for
purposes of this calculation shall not be less than 0.15% or
such other percentage as may be from time to time agreed to by
the Cooperative and Statesman.
ADV = Average Total Delinquency Percentage Variance for Grain
Marketing Accounts.
AIC = the anticipated interest charges for the current month for
borrowings relating to outstanding Grain Marketing Accounts
purchased by Statesman.
(c) For purposes of this Article II, the Purchase Discount for
Accounts Receivable - Local Cooperatives shall be the product obtained by
multiplying the outstanding balance of the Accounts Receivable - Local
Cooperatives being purchased by (i) the average Historical Charge Off Percentage
of the Cooperative for Accounts Receivable - Local Cooperatives for the three
preceding fiscal years times (ii) the sum of 1 plus the Average Total
Delinquency Percentage Variance for Accounts Receivable - Local Cooperatives,
plus the anticipated interest charges for the current month relating to the
outstanding purchased Accounts Receivable - Local Cooperatives. Such amount
shall be computed according to the following formula:
Discount = Accounts Receivable - Local Cooperatives being purchased x
[(aHCO%) x (1 + ADV)] + AIC
where
aHCO% = average Historical Charge Off Percentage for Accounts
Receivable - Local Cooperatives for the three preceding fiscal
years which for purposes of this calculation shall not be less
than .05% or such other percentage as may be from time to time
agreed to by the Cooperative and Statesman.
ADV = Average Total Delinquency Percentage Variance for Accounts
Receivable - Local Cooperatives.
AIC = the anticipated interest charges for the current month for
borrowings relating to outstanding Accounts Receivable Local
Cooperatives purchased by Statesman.
Notwithstanding anything to the contrary contained in this Agreement, a
portion of such purchase price shall be placed in the reserve account described
in Section 2.04.
<PAGE>
SECTION 2.04. RESERVE ACCOUNT. Statesman shall place in a reserve account
(the "Reserve Account") an amount not to exceed one-eighth of one percent
(0.125%) of the aggregate outstanding balance on each Receivable it elects to
purchase, provided, however, that in no event shall any additional amount be
deducted from the Purchase Price paid to the Cooperative or placed in the
Reserve Account if the aggregate amount in the Reserve Account is equal to or
greater than one quarter of one percent (0.25%) of the aggregate unpaid balance
of all Receivables which Statesman has purchased from the Cooperative (including
the Receivables being paid for on such date). Funds in the Reserve Account need
not be segregated from other funds of Statesman. If at the end of any fiscal
year of Statesman, the balance in the Reserve Account after charges to the
Reserve Account as permitted in Section 2.05 is greater than one-eighth of one
percent (0.125%) of the balance owing on Receivables which Statesman has
purchased from the Cooperative, no Event of Default shall have occurred and be
continuing and no obligation of the Cooperative to Statesman is then due and
payable, Statesman will upon request of the Cooperative remit such excess to the
Cooperative.
SECTION 2.05. CHARGES TO RESERVE ACCOUNT. Statesman may in its sole and
absolute discretion charge losses on Purchased Receivables related to Credit
Risk (as defined in Section 4.06) against the Reserve Account. Statesman agrees
to add to the Reserve Account the amount received as a recovery less associated
collection costs on any Purchased Receivables which were previously charged to
the Reserve Account. Statesman shall notify the Cooperative promptly in writing
of any such reduction in the Reserve Account. As of the end of each month,
Statesman will provide the Cooperative with a report of transactions in the
Reserve Account during such month showing the balance in such account as of the
end of such month.
SECTION 2.06. PAYMENTS FROM THE COOPERATIVE. Monthly with the delivery of
each Receivables Certificate the Cooperative shall remit to Statesman in
immediately available funds an amount equal to the sum of (i) all payments
received by the Cooperative during the preceding month on Purchased Receivables,
(ii) all rebates or credits on any Purchased Receivable allowed by the
Cooperative during the preceding month, and (iii) all other adjustments made by
the Cooperative on any Purchased Receivable during such month which resulted in
a reduction of the amount owing thereon, minus any proceeds the Cooperative has
collected on Purchased Receivables and paid to Statesman since the delivery of
the previous Receivables Certificate.
SECTION 2.07. METHOD OF PAYMENT. All payments from the Cooperative to
Statesman under the terms of this Agreement shall be made to Statesman in
immediately available funds in Richmond, Virginia. Whenever any payment is
scheduled to be made on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day.
SECTION 2.08. FACILITY FEES FOR PURCHASE OF RECEIVABLES. The Cooperative
will pay to Statesman by the tenth Business Day of each month, or such later day
as may be agreed to by Statesman, a Facility Fee in such amount as shall be
agreed upon from time to time by the Cooperative and Statesman.
<PAGE>
SECTION 2.09. COLLECTION OF RECEIVABLES. Statesman hereby authorizes the
Cooperative to collect Purchased Receivables, subject to direction and control,
but Statesman may, without cause or notice, curtail or terminate said authority
at any time. Upon receipt of all checks, drafts, cash and other remittance in
payments of or on account of the Purchased Receivables, the Cooperative will
account to Statesman for such proceeds as herein provided. The Cooperative will
endorse all checks, drafts and other items evidencing such proceeds where
necessary to permit collection of such items, which endorsement Statesman is
also hereby authorized to make, as attorney-in-fact on behalf of the
Cooperative.
The Cooperative will pay all proceeds it collects on Purchased Receivables
to Statesman monthly no later than the tenth Business Day of each month or at
such other intervals as Statesman may from time to time request.
If the Cooperative receives any promissory note or other instrument (other
than a check) in payment of or on account of any Purchased Receivable, it will
immediately endorse the same and deliver it to Statesman.
Within ten (10) days of receipt of a written request of Statesman, the
Cooperative will notify the obligor on each Purchased Receivable to make
payments to Statesman at its Headquarters or at such other address as Statesman
shall have furnished to the Cooperative in writing and shall promptly deliver to
Statesman all proceeds of any Purchased Receivables then held by the
Cooperative. From and after receipt of such request, the Cooperative will
promptly forward to Statesman all checks, drafts, cash and other remittances
received by it in payment of or on account of any Purchased Receivable.
If the Cooperative shall fail to notify account obligors to make payments
to Statesman as herein provided, and in any event upon the occurrence of an
Event of Default, Statesman may so notify such account obligors.
SECTION 2.10. REPURCHASE OF RECEIVABLES. If the Cooperative shall at any
time determine not to sell to Statesman the Retail Accounts arising out of sales
made at any Retail Service, the Cooperative will with the consent of Statesman
promptly repurchase from Statesman all Retail Accounts arising out of sales made
at such Retail Service which Statesman has previously purchased from it. The
purchase price for such Retail Accounts will be the Balances Owed on the Retail
Accounts giving credit for all payments received by Statesman to the date of
sale to the Cooperative.
<PAGE>
ARTICLE III
-----------
INSTALLMENT SALES FINANCING
---------------------------
SECTION 3.01. GENERAL. Statesman will from time to time, upon the terms
and subject to the conditions contained in this Agreement, purchase from the
Cooperative Approved Contracts. Statesman may from time to time, at its option,
purchase from the Cooperative other Installment Sales Contracts arising out of
the sale of goods by Retail Services as provided in Section 3.03. Nothing
contained herein shall obligate Statesman to purchase any Installment Sales
Contract other than those Installment Sales Contracts which have been approved
in advance by Statesman as evidenced by a Statesman Approval Number (which
contracts are herein referred to as "Approved Contracts").
SECTION 3.02. NON-RECOURSE PURCHASES. Statesman will from time to time
upon the terms and subject to the conditions contained in this Agreement,
purchase Approved Contracts from the Cooperative. Such purchases shall be
without recourse to the Cooperative except as specifically provided for herein.
SECTION 3.03. FULL RECOURSE OPTION.
(1) Statesman may from time to time, at its option upon the terms and
subject to the conditions contained in this Agreement, purchase from the
Cooperative Installments Sales Contracts arising out of the sales of goods by
Retail Services, which Installment Sales Contracts Statesman has determined in
its sole and absolute discretion to be acceptable (which contracts are herein
referred to as "Eligible Contracts"), notwithstanding the fact that such
contracts have not been previously approved by Statesman and do not bear an
appropriate Statesman Approval Number. All purchases of such contracts shall be
subject to full recourse to the Cooperative as provided in paragraph (2) of this
Section 3.03.
(2) If any installment on any Installment Sales Contract purchased under
the provisions of this Section 3.03 is not paid within ninety (90) days of the
date it is scheduled to be paid, upon written demand by Statesman, the
Cooperative will repurchase such contract immediately for its Net Balance.
SECTION 3.04. PURCHASE PRICE; DELIVERY OF PURCHASED CONTRACTS. The
purchase price for Approved Contracts and Eligible Contracts shall be the Net
Balance or such other amount as may from time to time be agreed to in writing by
the Cooperative and Statesman. Upon receipt of an Approved Contract or Eligible
Contract duly endorsed and all related credit information, and the satisfaction
of all the conditions set forth in Article VI hereof, provided no Event of
<PAGE>
Default shall have occurred and be continuing, and provided Statesman shall not
then be entitled to require that the Cooperative repurchase Purchased Contracts
under the provisions of Section 3.03 hereof, Statesman shall pay the Cooperative
in cash the purchase price for each such Approved Contract or Eligible Contract.
Promptly thereafter, the Cooperative will notify each obligor on each such
Purchased Contract to make all future payments to Statesman at its Headquarters.
The Cooperative authorizes Statesman to insert its name, or the name of any
other assignee, in the space provided therefor in the assignment clause of all
Purchased Contracts and to return to the Cooperative all Installment Sales
Contracts not purchased. Statesman will identify in writing those contracts it
agrees to purchase and will return those contracts it declines to purchase. The
Cooperative is authorized to cancel the endorsement on each Installment Sales
Contract which Statesman does not purchase.
SECTION 3.05. WARRANTIES.
(1) By the delivery and sale of each such Installment Sales Contract under
the provisions of Section 3.02 or Section 3.03, the Cooperative warrants to
Statesman that:
(a) It has good title to such Installment Sales Contract or is
authorized to obtain payment on behalf of one who has good title and the sale
and transfer thereof are otherwise rightful;
(b) Each such Installment Sales Contract is a binding obligation
arising from the sale of merchandise by a Retail Service in the ordinary course
of business as described in the contract to a person or entity specified therein
as the obligor and constitutes the valid and legally binding obligation of such
obligor enforceable in accordance with its terms; such contract states the full
agreement of the parties and arises out of legally sufficient consideration;
(c) All signatures on such Installment Sales Contract are genuine or
authorized and all obligors thereon have the capacity to execute such contract;
(d) Such Installment Sales Contract has not been materially altered;
(e) No obligor on such Installment Sales Contract has any defense,
set off or counterclaim against the Cooperative which is good against it;
(f) The conduct of the Cooperative in making the sale out of which
each contract arose was in all material respects in compliance with all
applicable laws and was not induced by fraud, false or misleading
representations or any other manner of unfair or deceptive trade practices or
other unlawful conduct;
(g) All credit information concerning the obligors on such contracts
was obtained and recorded in strict compliance with all applicable state and
federal laws, and the Cooperative has no reason to believe that any such
information is false, misleading or incomplete in any respect;
(h) All current credit information with respect to such obligors has
been accurately reported to Statesman;
<PAGE>
(i) The Installment Sales Contract forms provided by Statesman have
not been altered, modified or supplemented in any respect;
(j) All information required to be disclosed in such forms has been
accurately recorded therein and the Cooperative has complied with the
Truth-in-Lending Act and all other applicable disclosure laws, federal and
state;
(k) No fee has been charged with respect to any contract and no such
contract includes any deferred payment price or other charge which violates any
applicable usury law or consumer protection law;
(l) Such Installment Sales Contract contains all of the terms and
conditions of the agreement between the Cooperative and the obligors with
respect to such purchase and the Cooperative has not entered into any other
agreement with any obligor with respect to such contract and has not waived or
agreed to waive any term or condition contained in the form or taken any other
action which might result in any constructive or implied waiver or modification
thereof;
(m) Each down payment shown in each Installment Sales Contract has
actually been received in cash from the obligors or a person paying such amount
on behalf of the obligors and no part thereof has been directly or indirectly
advanced by the Cooperative;
(n) Each trade-in shown in each Installment Sales Contract has
actually been delivered to the Cooperative and the amount recorded in the
contract accurately reflects the agreed value thereof;
(o) All aspects of the sale have been in strict compliance with all
applicable consumer protection acts and regulations, including without
limitation the Truth-in-Lending Act, the Equal Credit Opportunity Act and any
applicable state law;
(p) All applicants for credit have been given all notices required
by applicable law;
(q) The Cooperative has no knowledge of any insolvency proceeding
involving any party obligated on such Installment Sales Contract; and
(r) Such Installment Sales Contract is not subject to any claim,
lien, security interest, charge or other encumbrance in favor of any one other
than the Cooperative and Statesman, and the Cooperative has not offered such
Contract for sale to any purchaser other than Statesman.
(2) The Cooperative further represents and warrants that it is and shall
be solvent at the time of each sale of any Installment Sales Contract.
<PAGE>
SECTION 3.06. REMEDIES OF STATESMAN WITH RESPECT TO INSTALLMENT SALES
CONTRACTS PURCHASED UNDER THE PROVISIONS OF THIS ARTICLE THREE.
(1) Breach of Warranty. If any warranty made by the Cooperative under the
provisions of Section 3.05 of this Agreement shall prove to have been false in
any material respect as it relates to any Purchased Contract, the Cooperative
covenants and agrees promptly upon written demand by Statesman to purchase such
Purchased Contract for the Net Balance in immediately available funds. Statesman
covenants and agrees that upon receipt of such payment it will cancel the
endorsement and deliver such Purchased Contract to the Cooperative at the
address stated in Section 11.07 of this Agreement. Statesman represents and
warrants to the Cooperative with respect to each such Installment Sales Contract
that the Net Balance paid to it is the Net Balance of such contract and that
except as disclosed in a writing accompanying such contract, Statesman has not
released any party to such contract from its obligation thereunder, released any
security interest directly securing such contract or consented to any reduction
in the amount owing thereon or the extension of the due date for any payment or
installment thereunder. Such transfer from Statesman to the Cooperative will be
without recourse and except as provided in the immediately preceding sentence,
without representation or warranty of any nature or type.
(2) Determination of Breach. For the purpose of determining whether or not
any warranty made by the Cooperative under the provisions of Section 3.05 was
false and that the Cooperative is therefore obliged to repurchase any Purchased
Contract, the Cooperative shall be bound by a written statement of an officer of
Statesman that in the reasonable judgment of Statesman it has determined that
any obligor under any Purchased Contract has refused to make any scheduled
payment under such contract because of any fact which has been represented as
otherwise by the Cooperative to Statesman under the provisions of Section 3.05
hereof.
SECTION 3.07. CONTRACT FORMS. Statesman will provide and the Cooperative
will use forms of contracts and credit applications previously approved by
Statesman. In the event Statesman determines that any previously approved form
should not be used, it will so advise the Cooperative and the Cooperative will
discontinue any use of such form.
SECTION 3.08. PAYMENTS. The Cooperative will cause each Retail Service on
the day of receipt of any payment on any Purchased Contract to report such
payment to Statesman at its Headquarters. The Cooperative covenants and agrees
that all payments received by it on Purchased Contracts will be charged to the
Cooperative's intercompany accounts payable to Statesman and paid to Statesman
in collected funds no less frequently than every five (5) business days. In the
event the Cooperative shall fail to endorse any check or other item when
necessary to permit its collection, Statesman is authorized, as its
attorney-in-fact to make such endorsement on behalf of the Cooperative.
<PAGE>
SECTION 3.09. OBLIGOR COMPLAINTS AND RETURNED MERCHANDISE.
(1) The Cooperative shall, within three (3) Business Days of its receipt,
provide Statesman with a copy of any written complaint from any obligor(s)
relating to any Purchased Contract or any merchandise or service purchased
thereunder;
(2) If the purchaser under any Purchased Contract returns merchandise, for
any reason, within 10 days from the date of the sale, the Cooperative will fully
reimburse such purchaser for any down payment and immediately repurchase the
Purchased Contract from Statesman for its Net Balance.
SECTION 3.10. MODIFICATIONS, EXTENSIONS. Statesman may, without affecting
the agreements of the Cooperative herein, change, modify, extend or renew the
dates and amounts of the periodic installment payments in any Purchased
Contract.
SECTION 3.11. WARRANTY, SERVICE, OR SIMILAR AGREEMENTS. The Cooperative
covenants and agrees to indemnify and hold Statesman harmless from any and all
losses arising out of the breach of any performance or extended warranties and
all service or similar agreements made by Manufacturer, the Cooperative, or any
other Person relating to merchandise which is the subject of any Purchased
Contract, even if any such warranty, service, or similar agreements are not
immediately effective. Unless such agreement expressly provides otherwise, the
Cooperative agrees to provide repairs and service to the purchaser of the
merchandise at its usual rates of charge.
SECTION 3.12. REPOSSESSION.
(1) The Cooperative will, at Statesman's request, act as its agent in the
repossession of any property described in any Purchased Contract in accordance
with all applicable laws and in that capacity take certain actions, including
the transportation of the property from its location to the Cooperative's place
of business, repair and restoration of the property to a marketable condition,
and storage, without storage fee. Statesman will compensate the Cooperative for
its reasonable actual costs in such transportation, repair, and restoration,
except as covered by an extended warranty or service agreement. In the event
Statesman directs the Cooperative on its behalf to sell the property, it will
pay the Cooperative such commission as is agreed upon from time to time by the
Cooperative and Statesman and as evidenced by Statesman's letter. The
Cooperative agrees to sell said property in accordance with the applicable
provisions of the Uniform Commercial Code, as it may be amended from time to
time, and other applicable law.
(2) Where an extended warranty or service agreement is included in the
sales contract purchased, the Cooperative hereby agrees to perform at its
expense or have performed such warranty or service work under the terms of such
extended warranty or service agreement. A pro rata refund will be paid in cash
<PAGE>
to Statesman of the unearned identifiable charge assessed for the extended
warranty or service agreement, which will then be credited to any balance due on
such Purchased Contract.
ARTICLE IIIA
------------
CREDIT CARD FINANCING
---------------------
Section 3A.01. Approval of Customer's Credit. Statesman agrees to review
information on customers of the Cooperative, Local Cooperatives and Dealerships
recorded on its Statesman Revolving Credit Card Application and Agreement forms
and submitted to it by the Cooperative, a Local Cooperative or a Dealership and
to approve extending open-end or revolving credit to such customers in a
specific dollar amount or to deny such credit.
Section 3A.02. Purchases By Credit Card Customers. After Statesman has
approved the credit of a customer in the Southern States Credit Card Program, so
long as the customer pays his or her account in accordance with the terms
thereof established from time to time by Statesman and otherwise complies with
the terms thereof and is not bankrupt or insolvent, Statesman will extend credit
to such customer up to the preapproved dollar limit for the purchase of goods
and services from the Cooperative, a Local Cooperative or a Dealership.
Section 3A.03. Approval of Requests to Change Credit. Statesman agrees
upon request of the Cooperative, a Local Cooperative or a Dealership to review
information on customers of the Cooperative, such Local Cooperative or such
Dealership and to approve changing the amount of open-end or revolving credit
for such customers to a specific dollar amount or to deny such change.
Section 3A.04. Settlement for Purchases. Statesman will periodically
settle with the Cooperative and each Local Cooperative and Dealership for
purchases made from the Cooperative or such Local Cooperative or Dealership, as
the case may be, under the Southern States Credit Card Program by periodically
crediting to the Cooperative or such Local Cooperative or Dealership, as the
case may be, the aggregate amount of such purchases since the last settlement
date, net of the applicable merchant's discount as may be agreed to from time to
time by the Cooperative or such Local Cooperative or Dealership, as the case may
be, and Statesman. All sales under the Southern States Credit Card Program made
in accordance with the instructions provided from time to time by Statesman to
the Cooperative, the Local Cooperatives and the Dealerships will be without
recourse. Statesman may, however, require the Cooperative, a Local Cooperative
or a Dealership to reimburse it for certain purchases as may be agreed to from
time to time by Statesman and the Cooperative, such Local Cooperative or such
Dealership. The parties acknowledge and agree that in the event of any conflict
between the terms hereof and any other agreement between the parties or between
Statesman and a Local Cooperative or a Dealership with respect to such rights
and obligations, the terms of the other agreement shall govern.
<PAGE>
ARTICLE IIIB
------------
ASSET BASED FINANCING
---------------------
SECTION 3B.01. GENERAL. From time to time at the request of the
Cooperative, Statesman may extend asset based financing to customers of the
Cooperative. Such financing shall be extended pursuant to separate agreements to
be entered into between each such customer and Statesman.
SECTION 3B.02. TERMS AND CONDITIONS. Nothing contained herein shall
obligate Statesman to extend any asset based financing to any person. All
decisions with respect to asset based financing shall be made by Statesman in
its sole discretion, subject to such agreements as Statesman may enter into from
time to time with its asset based borrowers.
ARTICLE IIIC
------------
PERSONAL PROPERTY LEASING
-------------------------
SECTION 3C.01. LEASES TO THE COOPERATIVE. Statesman will from time to time
lease computers, computer equipment and other equipment to the Cooperative,
which equipment may be subleased by the Cooperative to others. Such leases shall
be on such terms and conditions as may be agreed to from time to time by
Statesman and the Cooperative and will be evidenced by lease agreements between
Statesman and the Cooperative.
SECTION 3C.02. APPROVAL OF CUSTOMER'S CREDIT. Statesman agrees to review
information on customers of the Cooperative, Local Cooperatives and Dealerships
recorded on its Statesman application forms for the lease of liquid propane
tanks (or other personal property then being leased by Statesman) and submitted
to it by the Cooperative, a Local Cooperative or a Dealership and to approve
leasing such property to such customers or to determine not to lease such
property.
SECTION 3C.03. PAYMENT FOR LEASED PROPERTY. If Statesman approves the
lease of personal property to customers of the Cooperative, a Local Cooperative
or a Dealer, it will promptly notify the Cooperative or the Local Cooperative or
Dealership which requested such lease, and if it has received a properly
completed Lease Agreement appropriately signed by the customer and the
Cooperative, the Local Cooperative or the Dealership, as the case may be, it
will remit to the Cooperative, or to the Local Cooperative or Dealership which
requested such lease the invoice price of the leased equipment.
<PAGE>
SECTION 3C.04. COLLECTION OF RENT. The Cooperative, or the Local
Cooperative or Dealership which requested the lease will serve as the agent of
Statesman in the collection of the monthly rent due under the lease and will
remit to Statesman monthly from the proceeds of liquid propane sold to the
lessee the monthly rentals due under the lease.
ARTICLE IIID
------------
AGRICULTURAL PRODUCTION LOANS
-----------------------------
SECTION 3D.01. GENERAL. Statesman may from time to time extend
Agricultural Production Loans to customers of the Cooperative and other Persons.
Such financing shall be extended pursuant to separate agreements to be entered
into between each such Person and Statesman.
SECTION 3D.02. TERMS AND CONDITIONS. Nothing contained herein shall
obligate Statesman to extend any Agricultural Production Loan to any person. All
decisions with respect to Agricultural Production Loans shall be made by
Statesman in its sole discretion, subject to such agreements as Statesman may
enter into from time to time with its Agricultural Production Loan borrowers.
ARTICLE IIIE
------------
CROP TIME NOTES
---------------
SECTION 3E.01. GENERAL. Statesman will from time to time, upon the terms
and subject to the conditions contained in this Agreement, purchase from the
Cooperative Crop Time Notes which have been approved by Statesman. Nothing
contained herein shall obligate Statesman to purchase any Crop Time Note other
than those Crop Time Notes which have been approved in advance by Statesman
(which Notes are herein referred to as "Approved Notes").
SECTION 3E.02. NON-RECOURSE PURCHASES. The purchase of Crop Time Notes
under this Agreement shall be without recourse to the Cooperative except as
specifically provided for herein.
SECTION 3E.03. FULL RECOURSE OPTION.
(1) Statesman may from time to time, at its option upon the terms and
subject to the conditions contained in this Agreement, purchase from the
Cooperative Crop Time Notes arising out of the sales of goods or the providing
of services by the Cooperative, which Crop Time Notes Statesman has determined
in its sole and absolute discretion to be acceptable (which Notes are herein
<PAGE>
referred to as "Eligible Notes"), notwithstanding the fact that such Notes have
not been previously approved by Statesman. All purchases of such Notes shall be
subject to full recourse to the Cooperative as provided in paragraph (2) of this
Section 3E.03.
(2) If any Crop Time Note purchased under the provisions of this Section
3E.03 is not paid within ninety (90) days of the date it is scheduled to be
paid, upon written demand by Statesman, the Cooperative will repurchase such
Note immediately for its Net Balance.
SECTION 3E.04 PURCHASE PRICE; DELIVERY OF PURCHASED NOTES. The purchase
price for Approved Notes and Eligible Notes shall be the Net Balance or such
other amount as may from time to time be agreed to in writing by the Cooperative
and Statesman. Upon receipt of an Approved Note or Eligible Note duly endorsed
and all related credit information, and the satisfaction of all the conditions
set forth in Article VI hereof, provided no Event of Default shall have occurred
and be continuing, and provided Statesman shall not then be entitled to require
that the Cooperative repurchase Eligible Notes under the provisions of Section
3E.03 hereof, Statesman shall pay the Cooperative in cash the purchase price for
each such Approved Note or Eligible Note. Promptly thereafter, the Cooperative
will notify each obligor on each such Crop Time Note to make all future payments
to Statesman at its Headquarters. The Cooperative authorizes Statesman to insert
its name, or the name of any other assignee, in the space provided therefor in
the assignment clause of all Crop Time Notes it has purchased and to return to
the Cooperative all Crop Time Notes not purchased. Statesman will identify in
writing those Notes it agrees to purchase and will return those Notes it
declines to purchase. The Cooperative is authorized to cancel the endorsement on
each Crop Time Note which Statesman does not purchase.
SECTION 3E.05. WARRANTIES.
(1) By the delivery and sale of each such Crop Time Note under the
provisions of Section 3E.02 or Section 3E.03, the Cooperative warrants to
Statesman that:
(a) It has good title to such Crop Time Note or is authorized to
obtain payment on behalf of one who has good title and the sale and transfer
thereof are otherwise rightful;
(b) Each such Crop Time Note is a binding obligation arising from
the sale of merchandise or services by the Cooperative in the ordinary course of
business as described in the Note to a person or entity specified therein as the
obligor and constitutes the valid and legally binding obligation of such obligor
enforceable in accordance with its terms; such Note states the full agreement of
the parties and arises out of legally sufficient consideration;
(c) All signatures on such Crop Time Note are genuine or authorized
and all obligors thereon have the capacity to execute such Note;
(d) Such Crop Time Note has not been materially altered;
<PAGE>
(e) No obligor on such Crop Time Note has any defense, set off or
counterclaim against the Cooperative which is good against it;
(f) The conduct of the Cooperative in making the sale out of which
each Note arose was in all material respects in compliance with all applicable
laws and was not induced by fraud, false or misleading representations or any
other manner of unfair or deceptive trade practices or other unlawful conduct;
(g) All credit information concerning the obligors on such Notes was
obtained and recorded in strict compliance with all applicable state and federal
laws, and the Cooperative has no reason to believe that any such information is
false, misleading or incomplete in any respect;
(h) All current credit information with respect to such obligors has
been accurately reported to Statesman;
(i) The Crop Time Note forms provided by Statesman have not been
altered, modified or supplemented in any respect;
(j) All information required to be disclosed in such forms has been
accurately recorded therein and to the extent applicable, the Cooperative has
complied with the Truth-in-Lending Act and all other applicable disclosure laws,
federal and state;
(k) No fee has been charged with respect to any Note and no such
Note includes any deferred payment price or other charge which violates any
applicable usury law or consumer protection law;
(l) Such Crop Time Note contains all of the terms and conditions of
the obligation of the obligors evidenced thereby and the Cooperative has not
entered into any other agreement with the obligor with respect to such Note and
has not waived or agreed to waive any term or condition contained in the form or
taken any other action which might result in any constructive or implied waiver
or modification thereof;
(m) All aspects of the sale out of which such Crop Time Note arose
have been in strict compliance with all applicable consumer protection acts and
regulations, including without limitation the Truth-in-Lending Act, the Equal
Credit Opportunity Act and any applicable state law;
(n) All applicants for credit have been given all notices required
by applicable law;
(o) The Cooperative has no knowledge of any insolvency proceeding
involving any party obligated on such Crop Time Note; and
(p) Such Crop Time Note is not subject to any claim, lien, security
interest, charge or other encumbrance in favor of any one other than the
<PAGE>
Cooperative and Statesman, and the Cooperative has not offered such Note for
sale to any purchaser other than Statesman.
(2) The Cooperative further represents and warrants that it is and shall
be solvent at the time of each sale of any Crop Time Note.
SECTION 3E.06. REMEDIES OF STATESMAN WITH RESPECT TO CROP TIME NOTES
PURCHASED UNDER THE PROVISIONS OF THIS ARTICLE THREE.
(1) Breach of Warranty. If any warranty made by the Cooperative under the
provisions of Section 3E.05 of this Agreement shall prove to have been false in
any material respect as it relates to any Purchased Note, the Cooperative
covenants and agrees promptly upon written demand by Statesman to purchase such
Purchased Note for the Net Balance in immediately available funds. Statesman
covenants and agrees that upon receipt of such payment it will cancel the
endorsement and deliver such Purchased Note to the Cooperative at the address
stated in Section 11.07 of this Agreement. Statesman represents and warrants to
the Cooperative with respect to each such Crop Time Note that the Net Balance
paid to it is the Net Balance of such Note and that except as disclosed in a
writing accompanying such Note, Statesman has not released any party to such
Note from its obligation thereunder, released any security interest directly
securing such Note or consented to any reduction in the amount owing thereon or
the extension of the due date for any payment or installment thereunder. Such
transfer from Statesman to the Cooperative will be without recourse and except
as provided in the immediately preceding sentence, without representation or
warranty of any nature or type.
(2) Determination of Breach. For the purpose of determining whether or not
any warranty made by the Cooperative under the provisions of Section 3E.05 was
false and that the Cooperative is therefore obliged to repurchase any Purchased
Note, the Cooperative shall be bound by a written statement of an officer of
Statesman that in the reasonable judgment of Statesman it has determined that
any obligor under any Purchased Note has refused to make any scheduled payment
under such Note because of any fact which has been represented as otherwise by
the Cooperative to Statesman under the provisions of Section 3E.05 hereof.
SECTION 3E.07. NOTE FORMS. Statesman will provide and the Cooperative will
use forms of Crop Time Notes and credit applications previously approved by
Statesman. In the event Statesman determines that any previously approved form
should not be used, it will so advise the Cooperative and the Cooperative will
discontinue any use of such form.
SECTION 3E.08. PAYMENTS. The Cooperative will on the day of receipt of any
payment on any Purchased Note forward such payment to Statesman at its
Headquarters. In the event the Cooperative shall fail to endorse any check or
other item when necessary to permit its collection, Statesman is authorized, as
its attorney-in-fact to make such endorsement on behalf of the Cooperative.
<PAGE>
SECTION 3E.09. OBLIGOR COMPLAINTS AND RETURNED MERCHANDISE.
(1) The Cooperative shall, within three (3) Business Days of its receipt,
provide Statesman with a copy of any written complaint from any obligor relating
to any Purchased Note or any merchandise or service purchased thereunder;
(2) If the obligor on any Purchased Note returns merchandise, for any
reason, within 10 days from the date of the sale, the Cooperative will fully
reimburse such obligor for any down payment and immediately repurchase the
Purchased Note from Statesman for its Net Balance.
SECTION 3E.10. MODIFICATIONS, EXTENSIONS. Statesman may, without
affecting the agreements of the Cooperative herein, change, modify, extend or
renew the dates and amounts of any scheduled payment on any Purchased Note.
SECTION 3E.11. REMEDIES.
Statesman may exercise such remedies with respect to the enforcement of
the Purchased Notes as it may deem appropriate. The Cooperative will cooperate
with Statesman in the enforcement of the Purchased Notes.
ARTICLE IIIF
------------
TERM LOANS
----------
SECTION 3F.01. GENERAL. Statesman may from time to time extend Term Loans
to Customers of the Cooperative and other Persons. Such loans shall be extended
pursuant to separate agreements to be entered into between each such Person and
Statesman.
SECTION 3F.02. TERMS AND CONDITIONS. Nothing contained herein shall
obligate Statesman to extend any Term Loan to any person. All decisions with
respect to Term Loans shall be made by Statesman in its sole discretion, subject
to such agreements as Statesman may enter into from time to time with its Term
Loan borrowers.
ARTICLE IV
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FINANCING WHOLESALE ACCOUNTS
----------------------------
SECTION 4.01. PURCHASE OF WHOLESALE ACCOUNTS. Statesman shall from time
to time, upon the terms and subject to the conditions contained in this
Agreement, purchase Wholesale Accounts from the Cooperative, provided that
Statesman has determined in its sole and absolute discretion that such Wholesale
Accounts are acceptable to it and as to which approval has not been withdrawn by
Statesman as provided below. All such purchases shall be made without recourse
to the Cooperative except as provided in Sections 4.09 and 4.11 and except so
far as Statesman shall have the right to make charges to the Wholesale Reserve
Account as provided in Section 4.05.
<PAGE>
SECTION 4.02. REPAYMENT TERMS OFFERED ON CREDIT SALES. The Cooperative
agrees to provide Statesman with a comprehensive list of all credit repayment
plans (the "Repayment Terms") which it plans to offer to Cooperative Wholesale
Account customers. Statesman will review the Repayment Terms to be offered prior
to their implementation by the Cooperative and will advise the Cooperative of
its acceptance of the proposed Repayment Terms. Statesman will purchase only
those invoices which are in conformity with the preestablished Repayment Terms
which have been approved by Statesman. The Cooperative will not make any changes
in the Repayment Terms offered to the Wholesale Account customers without first
obtaining Statesman's written approval.
The requested credit line, anticipated sales volume, financial
information, credit application and any other information which Statesman in its
sole discretion may request shall be obtained by the Cooperative, and each and
every sale to Wholesale Accounts shall be made only in accordance with the
Statesman approved Repayment Terms and the Statesman Approval, which may be
withdrawn at any time before actual delivery of merchandise or rendition of
services to the customer.
SECTION 4.03. PROCEDURES.
(1) Prior to the generation of new receivables, the Cooperative will
provide to Statesman information concerning customers to which the Cooperative
plans to sell merchandise or render a service which will result in the creation
of a Wholesale Account. Statesman will review the information and determine in
its sole and absolute discretion the terms under which the Cooperative may sell
to the customer such that Statesman will purchase the resulting Wholesale
Account (the "Statesman Approval"). Any customer which has been approved by
Statesman will hereinafter be referred to as an "Approved Wholesale Account."
Statesman will notify the Cooperative in writing of its decision.
(2) Not later than 10:00 a.m. (Richmond, Virginia, time) on each Business
Day, the Cooperative will provide to Statesman information on Approved Wholesale
Accounts being offered to Statesman for purchase. This information shall include
all information which Statesman may reasonably request and shall be in a form
satisfactory to Statesman.
(3) Not later than 12 noon (Richmond, Virginia, time) on the same Business
Day, Statesman will confirm to the Cooperative those Approved Wholesale Accounts
it is purchasing and will prepare and deliver its check drawn on Crestar Bank,
Richmond, Virginia, or other bank satisfactory to the Cooperative, or make an
ACH transfer or wire transfer, for the face amount of the Wholesale Accounts
<PAGE>
which Statesman is purchasing less any amount to be placed in the Wholesale
Reserve Account pursuant to Section 4.04 and less the Purchase Discount for
Wholesale Accounts. Statesman may choose not to pay for any Wholesale Account
evidenced by a promissory note or other instrument unless such note or other
instrument has been endorsed and delivered to Statesman.
(4) For purposes of this Article IV, the Purchase Discount for Wholesale
Accounts shall be the product obtained by multiplying the outstanding balance of
the Wholesale Accounts being purchased by (i) the average Historical Charge Off
Percentage of the Cooperative for Wholesale Accounts for the three preceding
fiscal years times (ii) the sum of 1 plus the Average Total Delinquency
Percentage Variance for Wholesale Accounts, plus the anticipated net interest
charges for the current month relating to the outstanding purchased Wholesale
Accounts. Such amount shall be computed according to the following formula:
Discount = Wholesale Accounts being purchased x [(aHCO%) x (1 + ADV)] +
AIC
where
aHCO% = average Historical Charge Off Percentage for Wholesale
Accounts for the three preceding fiscal years which for
purposes of this calculation shall not be less than .35% or
such other percentage as may be from time to time agreed to
by the Cooperative and Statesman.
ADV = Average Total Delinquency Percentage Variance for Wholesale
Accounts.
AIC = the amount by which the anticipated interest charges for the
current month for borrowings relating to outstanding
Wholesale Accounts purchased by Statesman exceed the finance
charges anticipated to be collected during such month by
Statesman on Wholesale Accounts.
(5) Upon receipt of such payment, the Cooperative shall sell, assign, and
convey to Statesman and without any further action on its part, shall be deemed
to have sold, assigned and conveyed to Statesman each such Approved Wholesale
Account, and all of the Cooperative's interest in the goods represented by such
Wholesale Accounts and in all goods that may be returned by customers obligated
on such Wholesale Accounts, all its rights as an unpaid vendor or lienor, all
its rights of stoppage in transit, replevin and reclamation relating thereto,
all its rights in and to all security therefor and guarantees thereof, and
guarantees thereto, all of its rights against third parties with respect
thereto, and all other proceeds thereof, cash or non-cash. Any goods so
recovered or returned shall be segregated in a manner acceptable to Statesman
and held for Statesman's account as owner. The Cooperative shall notify
Statesman promptly of all such returned or recovered goods.
(6) Statesman may at any time and from time to time revoke the Statesman
Approval with respect to any customer of the Cooperative or reduce the amount of
Wholesale Accounts owing from such customer which it will purchase from the
Cooperative or change the Repayment Term approved for such customer. It will
<PAGE>
promptly notify the Cooperative of its decision to revoke the Statesman Approval
for any Wholesale Account, or to reduce the amount of such Account or change
terms and Statesman shall not be obligated to purchase any Wholesale Account
arising out of the delivery of any merchandise to or the commencement of any
service for such obligor which occurs after such notice is given to the
Cooperative except as Statesman shall have otherwise agreed. The revocation or
alteration of the Statesman Approval with respect to a customer shall not affect
the right of the Cooperative to extend credit for merchandise or services to any
customer, but all payments received from such customer shall be applied to
earliest invoices first, and payments shall be applied to invoices included in
Wholesale Accounts purchased by Statesman before they are applied to invoices
arising after the revocation or alteration of the Statesman Approval with
respect to such customer or the reduction of the amount of credit approved for
such customer.
SECTION 4.04. WHOLESALE RESERVE ACCOUNT. Statesman shall place in a
reserve account (the "Wholesale Reserve Account") an amount not to exceed
one-eighth of one percent (0.125%) of the aggregate outstanding balance on each
invoice it elects to purchase, provided, however that in no event shall any
additional amount be deducted from the amount paid to the Cooperative under this
Article IV or placed in the Wholesale Reserve Account if the aggregate amount in
the Wholesale Reserve Account is equal to or greater than one quarter of one
percent (0.25%) of the aggregate unpaid balance of all Wholesale Accounts which
Statesman has purchased from the Cooperative (including the invoices being
purchased on such date). Funds in the Wholesale Reserve Account need not be
segregated from other funds of Statesman. If at the end of any fiscal year of
Statesman, the balance in the Wholesale Reserve Account after charges to the
Reserve Account as provided in Section 4.05 is greater than one-eighth of one
percent (0.125%) of the balance owing on Wholesale Accounts which Statesman has
purchased from the Cooperative, no Event of Default shall have occurred and be
continuing and no obligation of the Cooperative to Statesman is then due and
payable, Statesman will upon request of the Cooperative remit such excess to the
Cooperative.
SECTION 4.05. CHARGES TO WHOLESALE RESERVE ACCOUNT. Statesman may in its
sole and absolute discretion charge losses on Purchased Wholesale Accounts
related to Credit Risk as set forth in Section 4.06 against the Wholesale
Reserve Account. Statesman agrees to add to the Wholesale Reserve Account the
amount received as a recovery less associated collection costs on any purchased
Wholesale Accounts which were previously charged to the Wholesale Reserve
Account. Statesman shall notify the Cooperative promptly in writing of any such
reduction in the Wholesale Reserve Account. As of the end of each month,
Statesman will provide the Cooperative with a report of transactions in the
Wholesale Reserve Account during such month showing the balance in such account
as of the end of such month.
SECTION 4.06. CREDIT RISK. On all Purchased Wholesale Accounts, Statesman
agrees to assume any loss which is due solely to the financial inability of the
customer to pay at maturity (the "Credit Risk") unless the representation
contained in paragraph (l)(i) of Section 4.10 was not true at the time Statesman
purchased such Wholesale Account, provided the customer has received and
<PAGE>
accepted the goods and/or services which gave rise to such Purchased wholesale
Account without any Dispute. The term "Dispute" shall mean any dispute,
deduction, claim, offset, defense or counterclaim of any kind, including,
without limitation, any dispute relating to goods or services already paid for
or relating to any obligation to the Cooperative other than the Wholesale
Account on which payment is being withheld.
SECTION 4.07. FACILITY FEE FOR PURCHASED WHOLESALE ACCOUNTS. The
Cooperative will pay to Statesman by the tenth Business Day of each month, or
such later day as may be agreed to by Statesman, a Facility Fee in such amount
as shall be agreed upon from time to time by the Cooperative and Statesman.
SECTION 4.08. PAYMENTS FROM THE COOPERATIVE. If any remittances on
Wholesale Accounts which have been purchased by Statesman are made directly to
the Cooperative, the Cooperative shall immediately deliver them to Statesman in
Richmond, Virginia, in precisely the form received, and until they are so
delivered they shall be held in trust by the Cooperative for the benefit of
Statesman.
SECTION 4.09. DISPUTES. The Cooperative will promptly notify Statesman of
and settle at the Cooperative's cost and expense, including attorneys' fees, all
Disputes relating to Wholesale Accounts which Statesman has purchased. However,
if any Dispute is not settled by the Cooperative within sixty days after the
invoice date or within such shorter period as Statesman may determine, Statesman
may settle, compromise or litigate such Dispute in Statesman's or the
Cooperative's name upon such terms as Statesman in Statesman's sole discretion
may deem advisable and for the Cooperative's account and risk. Statesman may
also at its discretion and without notice to the Cooperative take possession of
and sell any returned goods at such prices and upon such terms as Statesman
deems advisable. The Cooperative shall promptly pay to Statesman any deficiency,
and all costs and expenses, including attorneys' fees, resulting from any such
Dispute, and if the Cooperative fails to pay such amount, Statesman may deduct
it from any payment it is required to make to the Cooperative under the terms of
this Agreement.
SECTION 4.10. WARRANTIES.
(1) With respect to each Approved Wholesale Account which the Cooperative
offers to sell under this Article IV, the Cooperative warrants to Statesman
that:
(a) It has good title to such Wholesale Account, there is no
restriction on its sale and transfer and the sale and transfer thereof is
otherwise rightful;
(b) Such Wholesale Account is a binding obligation arising from the
sale of merchandise or the provision of a service by the Cooperative in the
ordinary course of business, as described in the invoice relating to such
transaction, to a person or entity specified therein as the obligor, arises out
of legally sufficient consideration, and constitutes the valid and legally
binding obligation of such obligor enforceable in accordance with its terms;
<PAGE>
(c) No invoice has been materially altered;
(d) The obligor on such Wholesale Account has no defense, set off or
counterclaim against the Cooperative which is good against it;
(e) The conduct of the Cooperative in making the sale or sales out
of which such Wholesale Account arose was in all material respects in compliance
with all applicable laws and was not induced by fraud, false or misleading
representations or any other manner of unfair or deceptive trade practices or
other unlawful conduct;
(f) All credit information concerning the obligor on such Wholesale
Account was obtained and recorded in strict compliance with all applicable state
and federal laws, and the Cooperative has no reason to believe that any such
information is false, misleading or incomplete in any respect;
(g) All current credit information with respect to such obligor has
been accurately reported to Statesman;
(h) The terms and conditions of the agreement between the
Cooperative and the obligor with respect to such Wholesale Account, including
the Repayment Terms, are not materially different from those approved by
Statesman for such obligor, and the Cooperative has not amended or waived or
agreed to amend or waive any such term or condition or taken any other action
which might result in any constructive or implied waiver or modification
thereof;
(i) The Cooperative has no knowledge of any insolvency proceeding
involving the obligor on such Wholesale Account; and
(j) Such Wholesale Account is not subject to any claim, lien,
security interest, charge or other encumbrance in favor of any one other than
the Cooperative and Statesman, and the Cooperative has not offered such
Wholesale Account for sale to any purchaser other than Statesman.
(2) The Cooperative further represents and warrants that it is and shall
be solvent at the time of each sale of Wholesale Accounts.
SECTION 4.11. REMEDIES OF STATESMAN WITH RESPECT TO WHOLESALE ACCOUNTS
PURCHASED UNDER THE PROVISIONS OF THIS ARTICLE FOUR.
(1) Breach of Warranty. If any warranty made by the Cooperative under the
provisions of Section 4.10 of this Agreement shall prove to have been false in
any material respect as it relates to any Wholesale Account purchased by
Statesman, the Cooperative covenants and agrees promptly upon written demand by
Statesman to purchase such Wholesale Account for the net balance owing thereon,
including accrued interest, in immediately available funds. Statesman covenants
<PAGE>
and agrees that upon receipt of such payment it will promptly transfer and
assign such Wholesale Account and all proceeds thereof to the Cooperative.
Statesman represents and warrants to the Cooperative with respect to each such
Wholesale Account it sells back to the Cooperative that the net balance paid to
it is the net balance owing on such Wholesale Account and that except as
disclosed in a writing at the time of such sale, Statesman has not released the
obligor thereon of its obligation thereunder, or consented to any reduction in
the amount owing thereon or the extension of the due date for any payment or
installment thereunder. Such transfer from Statesman to the Cooperative will be
without recourse and except as provided in the immediately preceding sentence,
without representation or warranty of any nature or type.
(2) Determination of Breach. For the purpose of determining whether or not
any warranty made by the Cooperative under the provisions of Section 4.10 was
false and that the Cooperative is therefore obliged to repurchase any Wholesale
Account, the Cooperative shall be bound by a written statement of an officer of
Statesman that in the reasonable judgment of Statesman it has determined that
any obligor under any Wholesale Account has refused to make any scheduled
payment under such contract because of any fact which has been represented as
otherwise by the Cooperative to Statesman under the provisions of Section 4.10
hereof.
SECTION 4.12. WHOLESALE ACCOUNTS WHICH ARE NOT APPROVED. Statesman may
from time to time purchase Wholesale Accounts other than Approved Wholesale
Accounts at such price as may from time to time be agreed to by the parties
hereto. Except for the price and the absence of any obligation of Statesman to
purchase such Wholesale Accounts, and to the extent the parties may otherwise
agree at the time of such sale, all aspects of such sales shall be similar to
the sales of Approved Wholesale Accounts.
SECTION 4.13. NOTICE TO OBLIGORS; STATEMENTS. Statesman may notify the
obligor on each Wholesale Account that Statesman purchases from the Cooperative
that such account has been purchased by Statesman and that all payments with
respect to such Wholesale Accounts and inquiries with respect thereto should be
addressed to Statesman at its address. Such notice may at the option of
Statesman be given in the name of the Cooperative or of Statesman. Thereafter,
Statesman will maintain the records with respect to each such account and send
appropriate statements to each obligor thereon.
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Statesman to purchase Receivables, Installment Sales Contracts,
Wholesale Accounts and Crop Time Notes from it and to make Loans to Customers of
the Cooperative, the Cooperative represents and warrants to Statesman as
follows:
SECTION 5.01. SUBSIDIARIES. The Cooperative has the following
Subsidiaries and none others:
<PAGE>
Name of Subsidiary Percentage Owned by Cooperative
------------------ -------------------------------
AgriLand Exchange, Inc. 100%
Mountain State Greenhouses, Inc. 100%
SSC Insurance Agency, Inc. 100%
Southern States Holdings, Inc. 100%
Southern States Underwriters, Inc. 100%
Virginia Seed Service, Inc. 100%
Wetsel, Inc. 100%
SECTION 5.02. GOOD STANDING. Each of the Cooperative and its Subsidiaries
is a corporation organized and existing in good standing under the laws of its
respective jurisdiction of incorporation and each has the corporate power to own
its property and to carry on its business as now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of the properties owned by it therein or in which the transaction
of its business makes such qualification necessary.
SECTION 5.03. CORPORATE AUTHORITY. The Cooperative has full power and
authority to enter into this Agreement, to sell Receivables, Approved Contracts,
Eligible Contracts, Wholesale Accounts and Crop Time Notes, to execute and
deliver Receivables Certificates and instruments conveying such Receivables,
contracts and notes, to endorse contracts and notes and to incur the obligations
provided for herein, all of which have been duly authorized by all proper and
necessary corporate action. No consent or approval of stockholders or of any
public authority is required as a condition to the validity of this Agreement or
the sale of any Receivable, Installment Sales Contract, Wholesale Account or
Crop Time Note.
SECTION 5.04. BINDING AGREEMENTS. This Agreement constitutes, and each
endorsement by the Cooperative of a Purchased Contract, when made and such
Purchased Contract is delivered pursuant hereto for value received, will
constitute, the valid and legally binding obligations of the Cooperative
enforceable against the Cooperative in accordance with its terms.
SECTION 5.05. LITIGATION. There are no proceedings pending or, so far as
the officers of the Cooperative know, threatened before any court or
administrative agency that, in the opinion of the officers of the Cooperative,
will materially adversely affect the financial condition or operations of the
Cooperative or any of its Subsidiaries.
SECTION 5.06. NO CONFLICTING AGREEMENTS. There is no charter, bylaw or
preference stock provision of the Cooperative or any of its Subsidiaries and no
provision of any existing mortgage, indenture, contract or agreement binding on
the Cooperative or any of its Subsidiaries or affecting their respective
properties that would conflict with or in any way prevent the execution,
delivery or carrying out of the terms of this Agreement or the sale or transfer
of any Receivable, Installment Sales Contract, Wholesale Account or Crop Time
Note.
<PAGE>
SECTION 5.07. BALANCE SHEET. The consolidated balance sheet of the
Cooperative and its Subsidiaries as of June 30, 1998, and the related
consolidated statements of operations, patrons' equity and of cash flows for the
period then ended certified by PricewaterhouseCoopers L.L.P., and the unaudited
consolidated balance sheet of the Cooperative and its Subsidiaries as of
September 30, 1998, and the related statement of operations for the period then
ended, heretofore delivered to Statesman, are complete and correct and fairly
present the financial condition of the Cooperative and its Subsidiaries and the
results of their operations and transactions in their surplus accounts as of the
dates and for the periods referred to therein and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the period involved. There are no liabilities, direct or
indirect, fixed or contingent of the Cooperative or any of its Subsidiaries as
of the dates of such balance sheets that are not reflected therein or in the
notes thereto. There has been no material adverse change in the financial
condition or operations of the Cooperative since the dates of those balance
sheets, and there has been no other material adverse change in the Cooperative.
SECTION 5.08. LICENSES. The Cooperative has all licenses necessary or
desirable for it to conduct its businesses as presently being conducted and such
businesses are in compliance with all applicable laws in all material respects.
SECTION 5.09. EMPLOYEE BENEFIT PENSION PLANS. No fact, including but not
limited to, any Reportable Event as defined in Section 4043 of ERISA, exists in
connection with any employee benefit pension plan of the Cooperative covered by
said Act, which might constitute grounds for the termination of any such plan by
the PBGC or for the appointment of any trustee to administer any such plan by
the appropriate United States District Court.
SECTION 5.10. RECEIVABLES FREE OF LIENS. Except as the Cooperative has
expressly disclosed to Statesmen in writing, no Receivable is subject to any
mortgage, pledge, security interest or other lien or encumbrance of any kind.
ARTICLE VI
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CONDITIONS
----------
The Cooperative will not offer to sell any Receivables, Installment Sales
Contracts, Wholesale Accounts or Crop Time Notes to Statesman unless:
SECTION 6.01. LEGAL MATTERS. It shall have satisfied any legal concerns
reported to the Cooperative by Statesman or its counsel with respect to the
purchase of any Receivable, Installment Sales Contract, Wholesale Account or
Crop Time Note.
SECTION 6.02. EVIDENCE OF CORPORATE ACTION. Statesman shall have received
certified copies of papers evidencing all corporate action taken by the
<PAGE>
Cooperative to authorize this Agreement and the sale of Receivables, Installment
Sales Contracts, Wholesale Accounts and Crop Time Notes, and such other papers
as Statesman may reasonably require.
SECTION 6.03. REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties set forth in Article V hereof shall be true and correct as of the
date of such offer, except to the extent they relate solely to an earlier date.
SECTION 6.04. ABSENCE OF DEFAULTS. No Default or Event of Default shall
have occurred and be continuing.
SECTION 6.05. CERTIFICATE OF INCUMBENCY. The Cooperative shall have
delivered to Statesman in a form satisfactory to Statesman a list setting forth
the names and signatures of each officer or employee of the Cooperative who is
authorized to sign Receivables Certificates, to transfer Receivables and to
transfer and endorse Installment Sales Contracts and Crop Time Notes, together
with the signature of such person.
SECTION 6.06. FINANCING STATEMENTS. Statesman shall have received
receipted copies of financing statements in appropriate form and showing they
have been filed in the appropriate offices to satisfy the filing requirements of
the applicable Uniform Commercial Code relating to the sale of accounts.
SECTION 6.07. OPINION OF COUNSEL FOR THE COOPERATIVE. Statesman shall have
received a favorable written opinion of counsel for the Cooperative dated as of
the date of the first purchase of Receivables, Installment Sales Contracts or
Wholesale Accounts hereunder, and, if so requested by Statesman, annually
thereafter, as to all matters referred to in Article V, except Sections 5.07,
5.08 and 5.09, that financing statements in the appropriate form have been filed
in the appropriate offices in which to file financing statements for any
Receivables sold by the Cooperative and stating that as of the date of such
opinion the indices to financing statements in such offices do not disclose any
financing statements of record showing the Cooperative or any of its
Subsidiaries as debtor and including a description of any accounts, contract
rights, general intangibles or other rights to the payment of money of such
debtor.
SECTION 6.08. CREDIT STANDARDS. The Cooperative shall have delivered to
Statesman a written statement of its then current standards for extending credit
to its customers and its collection policy for Receivables, Installment Sales
Contracts, Wholesale Accounts and Crop Time Notes, together with any applicable
additions thereto, deletions therefrom or modifications thereof.
<PAGE>
ARTICLE VII
-----------
AFFIRMATIVE COVENANTS
---------------------
The Cooperative covenants and agrees with Statesman that so long as the
Cooperative may offer to sell Receivables, Installment Sales Contracts,
Wholesale Accounts or Crop Time Notes to Statesman hereunder and until payment
in full of all Purchased Receivables, Purchased Contracts, Purchased Wholesale
Accounts and Purchased Notes and performance of all other obligations of the
Cooperative hereunder, the Cooperative will:
SECTION 7.01. FINANCIAL STATEMENTS. Furnish to Statesman (i) as soon as
available, but in no event more than forty-five (45) days after the end of each
quarterly period in each of its fiscal years, a consolidated balance sheet of
the Cooperative and its Subsidiaries as of the close of such quarter and a
consolidated statement of operations to the close of such quarter, certified by
the chief financial officer of the Cooperative and accompanied by a certificate
of that officer stating whether any event has occurred that constitutes an Event
of Default hereunder or that would constitute such an Event of Default with the
giving of notice or the lapse of time, or both, and, if so, stating the facts
with respect thereto; (ii) as soon as available, but in no event more than
ninety (90) days after the close of each of the Cooperative's fiscal years, a
copy of the annual audit report of the Cooperative in reasonable detail,
substantially similar to the financial statements referred to in Section 5.07
above, prepared in accordance with generally accepted accounting principles
applied on a basis consistent with that of the preceding year and certified by
PricewaterhouseCoopers L.L.P. or other independent certified public accountants
of recognized national standing, which report shall include a consolidated
balance sheet of the Cooperative and its Subsidiaries as of the end of such
fiscal year, consolidated statements of operations, patrons' equity and of cash
flows for such fiscal year, accompanied by a certificate of said accountants
stating whether any event existed as of the end of such fiscal year that
constituted a Default or an Event of Default hereunder; (iii) promptly upon
their becoming available, copies of all financial statements, reports, notices,
and proxy statements sent by the Cooperative to patrons or stockholders and of
all regular, periodic and special reports or any registration statement filed by
the Cooperative or any of its Subsidiaries with any securities exchange or with
the Securities and Exchange Commission or any governmental authority succeeding
to any or all of the functions of the Securities and Exchange Commission; and
(iv) such additional information, reports, or statements, including interim
financial statements, as Statesman may from time to time reasonably request. The
Cooperative will also upon request permit Statesman and its agents to inspect
its books and records.
SECTION 7.02. TAXES. Pay and discharge all taxes, assessments, and
governmental charges upon it, its income, and its properties prior to the date
on which penalties are attached thereto, unless and to the extent only that such
taxes, assessments, and governmental charges shall be contested by it in good
faith and by appropriate proceedings, and the Cooperative shall have set aside
on its books adequate reserves with respect to any such tax, assessment or
charge so contested.
<PAGE>
SECTION 7.03. BUSINESS PLAN. Furnish to Statesman as soon as available,
but in any event within 120 days after the Cooperative's new fiscal year, a copy
of the Cooperative's new fiscal year business plan which will contain, but not
be limited to, projected balance sheets, profit and loss statements, changes in
cash flow each prepared in accordance with generally accepted accounting
principles consistently applied, estimated usage of indebtedness, and
assumptions utilized in preparing the business plan.
SECTION 7.04. PAYMENT OF OBLIGATIONS. Pay and discharge at or before their
maturity all its indebtedness and other obligations and liabilities, except when
the same may be contested in good faith and by appropriate proceedings, and the
Cooperative shall have set aside on its books adequate reserves with respect to
any such obligation or liability.
SECTION 7.05. INSURANCE. Maintain adequate insurance with responsible
companies satisfactory to Statesman in such amounts and against such risks as is
customarily carried by owners of similar businesses and property.
SECTION 7.06. CORPORATE EXISTENCE, LICENSES, PERMITS, ETC. Maintain its
corporate existence in good standing and maintain all permits and licenses
necessary or desirable for the conduct of its business.
SECTION 7.07. PROPERTIES. Maintain, preserve, and protect all franchises
and trade names and preserve all the remainder of its property used or useful in
the conduct of its business and keep the same in good repair, working order, and
condition, and from time to time make or cause to be made all necessary and
proper repairs, renewals, replacements, betterments, and improvements thereto so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times, and permit Statesman and its agents to
enter upon and inspect such properties.
SECTION 7.08. EMPLOYEE BENEFIT PENSION PLANS. Promptly during each year,
pay contributions that in the judgment of the chief executive and chief
financial officers of the Cooperative after reasonable inquiry are believed
adequate to meet at least the minimum funding standards set forth in Sections
302 through 305 of ERISA, with respect to each employee benefit plan of the
Cooperative, if any, covered by that Act; file each annual report required to be
filed pursuant to Section 103 of ERISA in connection with each such plan for
each year; and notify Statesman within ten (10) days of the occurrence of a
Reportable Event (as defined in Section 4043 of ERISA) that might constitute
grounds for termination of any such plan by PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer any such
plan, provided that nothing contained herein shall prohibit the Cooperative from
terminating any such plan if it has theretofore complied with the provisions of
this Section.
SECTION 7.09. COMPLIANCE WITH LAWS. The Cooperative shall not knowingly be
in violation of any laws, ordinances, governmental rules and regulations
(collectively "Laws") to which it is subject and will not knowingly fail to
obtain any licenses, permits, franchises or other governmental authorizations
<PAGE>
necessary to the ownership of its property or to the conduct of its business,
which violation or failure to obtain might materially adversely affect the
business, profit, operations, or condition (financial or otherwise) of the
Cooperative, provided, however, that the Cooperative shall be deemed to have
complied with this provision so long as it is contesting in good faith and by
the appropriate proceedings the violation of any such law and has set aside on
its books adequate reserves in respect thereof, if so required, in accordance
with generally accepted accounting principles. Without limiting the foregoing,
the Cooperative agrees to comply, and to cause all persons occupying, leasing or
renting any properties of the Cooperative to comply with all laws relating to
environmental protection.
SECTION 7.10. RECORD RETENTION. Retain records of compliance with all
applicable consumer protection laws and the log of any complaints for the longer
of twenty-five (25) months or any time period required by applicable law.
SECTION 7.11. BOOKS AND RECORDS. Maintain complete and accurate books and
records with respect to all transactions with all account obligors of Purchased
Receivables and Purchased Wholesale Accounts and all parties obligated on
Purchased Contracts and Purchased Notes, including without limitation records of
all sales, deliveries, charges, payments, discounts, allowances and other
credits, make such records available for inspection by Statesman and its agents
at all reasonable times and upon request of Statesman deliver the same to
Statesman at its Headquarters.
SECTION 7.12. COOPERATION. The Cooperative will cooperate with Statesman
in all reasonable respects in collecting any Receivables, Installment Sales
Contracts or Wholesale Accounts or Crop Time Notes which Statesman has acquired
from the Cooperative, but nothing contained herein shall obligate the
Cooperative to incur any out of pocket expenses.
ARTICLE VIII
------------
NEGATIVE COVENANTS
------------------
The Cooperative covenants and agrees with Statesman that so long as the
Cooperative may offer to sell Receivables, Installment Sales Contracts,
Wholesale Accounts or Crop Time Notes to Statesman hereunder and until payment
in full of all Purchased Receivables, Purchased Contracts, Purchased Wholesale
Accounts and Purchased Notes and performance of all other obligations of the
Cooperative hereunder, without the written consent of Statesman, the Cooperative
will not:
SECTION 8.01. MORTGAGES AND PLEDGES. Create, incur, assume, or suffer to
exist any mortgage, pledge, lien, or other encumbrance of any kind upon, or any
security interest in, any of its property or assets, whether now owned or
hereafter acquired, except (i) liens for taxes not yet delinquent or being
contested in good faith and by appropriate proceedings; (ii) liens in connection
with workers' compensation, unemployment insurance, or other social security
<PAGE>
obligations; (iii) deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations, surety
or appeal bonds, and other obligations of like nature arising in the ordinary
course of business; (iv) mechanic's, workman's, materialman's, landlord's,
carrier's, or other like liens arising in the ordinary course of business with
respect to obligations that are not due or that are being contested in good
faith; (v) those mortgages, pledges, liens, and encumbrances reflected in the
financial statements referred to in Section 5.07 above; (vi) mortgages, pledges,
liens, and encumbrances in favor of Statesman; (vii) zoning restrictions,
easements, licenses, restrictions on the use of real property or minor
irregularities in the title thereto, which do not, in the opinion of the
Cooperative, materially impair the use of such property in the operation of the
business of the Cooperative or the value of such property for the purposes of
such business; and (viii) any mortgage, encumbrance or other lien upon, or
security interest in, any property hereafter acquired by the Cooperative created
contemporaneously with such acquisition to secure or provide for the payment or
financing of any part of the purchase price thereof, or the assumption of any
mortgage, encumbrance or lien upon, or security interest in, any such property
hereafter acquired existing at the time of such acquisition, or the acquisition
of any such property subject to any mortgage, encumbrance or other lien or
security interest without the assumption thereof, provided that each such
mortgage, encumbrance, lien or security interest shall attach only to the
property so acquired and fixed improvements thereon. Nothing contained in this
Section 8.01 shall prohibit the Cooperative from entering into any lease
required to be capitalized by generally accepted accounting principles in
accordance with the Financial Accounting Standards Board Statement No. 13
(Accounting for Leases) in effect on the date of this Agreement, provided such
lease is not otherwise prohibited by the terms of this Agreement.
SECTION 8.02. MERGER, ACQUISITION OR SALE OF ASSETS. (1) Enter into any
merger or consolidation with, or acquire all or substantially all of the assets
of, any person, firm, joint venture, or corporation, unless the Cooperative is
the surviving corporation and upon the consummation of its merger the net worth
of the surviving corporation is not less than the net worth of the Cooperative
prior to the merger and there shall exist no Event of Default, provided,
however, that in the case of any merger of a Local Cooperative, as defined in
Article I - Section 1.01, the Cooperative's Chief Financial Officer shall
certify to Statesman Financial Corporation that the Cooperative has Net Worth in
an amount not less than 95% of the Net Worth of the Cooperative immediately
prior to such merger and no event shall have occurred or condition exist which
with the giving of notice or lapse of time, or both, would constitute such an
Event of Default, or (2) sell, lease, or otherwise dispose of all or
substantially all of its assets except in the ordinary course of its business.
SECTION 8.03. CHANGES IN NAME; LOCATION. Without giving Statesman at least
sixty (60) days prior written notice, change its name, its principal place of
business or the place in which it may keep its records relating to Receivables,
Installment Sales Contracts and Wholesale Accounts.
<PAGE>
SECTION 8.04. AMENDMENT OF PAYMENT TERMS. Amend or modify any Purchased
Receivable, Purchased Contract or Purchased Wholesale Account or consent to the
extension of the time of any payment or release of any collateral securing the
obligation of the obligor or otherwise waive any term or condition of such
Purchased Receivable, Purchased Contract or Purchased Wholesale Account except
to the extent the Cooperative may deem appropriate to facilitate the ultimate
collection of such obligation.
SECTION 8.05. CREDIT STANDARDS; COLLECTION POLICY. Amend in any material
respect its standards for extending credit to its customers or its collection
policy for Receivables, Installment Sales Contracts, Wholesale Accounts and Crop
Time Notes; or make any other amendment or modification to such standards or
policy without having given Statesman not less than ten (10) days prior written
notice thereof.
ARTICLE IX
-----------
CONTRIBUTED CAPITAL PLAN
------------------------
SECTION 9.01. DEFINITIONS. As used in this Article the following terms
shall have the following definitions:
"Contributed Capital Rate" means the ratio of debt to tangible net worth
which institutional lenders extending credit to Statesman require it to maintain
from time to time, whether such ratio is stated as an affirmative or negative
covenant, and in the event Statesman is required to maintain different ratios on
different dates, "Contributed Capital Rate" means the ratio which is in effect
on the applicable TAPOS Determination Date.
"Determination Period" or "Determination Periods" means the calendar
month, the six calendar month period and the twelve calendar month period
immediately preceding the TAPOS Determination Date.
"Minimum Class A Investment" means the number of shares of Statesman Class
A Preferred Stock determined by Statesman as follows:
MI = (HT/(PV x R)) - RE
where
MI = Minimum Class A Investment (stated at the par value).
HT = the highest TAPOS computed for the Cooperative during any of
the three Determination Periods.
<PAGE>
PV = the par value of one share of the Statesman Class A
Preferred Stock.
R = the Contributed Capital Rate, expressed as a decimal.
RE = As of the TAPOS Determination Date (x) the product of (i)
the percentage of the total outstanding common stock of
Statesman held by the Cooperative and (ii) the sum of
Statesman's Retained Earnings and Paid In Capital divided by
(y) the par value of Class A Preferred Stock.
If the Minimum Class A Investment computed using this formula is a
fraction, it will be rounded upward to the next whole number of shares.
"TAPOS" means calculated total program outstanding as determined by
Statesman for each of the three Determination Periods according to the following
formula:
TAPOS = RPP + NR + ISF + PN + WA + LN + CCR + L + NBC - SAP
where
RPP = average Purchased Receivables previously purchased and
outstanding during such Determination Period.
NR = Eligible Receivables tendered for purchase subsequent to the
end of the previous Determination Period.
ISF = average net Purchased Contracts outstanding during such
Determination Period.
PN = average net Purchased Notes outstanding during such
Determination Period.
WA = average net Purchased Wholesale Accounts outstanding during
such Determination Period.
LN = average Loans outstanding during such Determination Period.
CCR = average amount outstanding on accounts of customers of the
Cooperative, Local Cooperatives and Dealerships under the
Southern States Credit Card Program during such Determination
Period.
L = average Leases outstanding to the Cooperative, Local
Cooperatives, Dealerships and customers of any of them during
such Determination Period.
NBC = average investment (stated at par value) which Statesman was
required to maintain in CoBank ACB (formerly the National Bank
for Cooperatives) during such Determination Period in support
of Cooperative related borrowings.
<PAGE>
SAP = average outstanding Class A Preferred Stock of Statesman
held by the Cooperative during such Determination Period
(stated at the par value).
In the computation for a Determination Period of one month, the amounts of
RPP, ISF, PN, WA, LN, CCR, L, NBC, TD and SAP as of the last Business Day of
such calendar month shall be used as the average for such month. In computations
for other Determination Periods, the average for each such amount shall be
computed using the outstanding amounts as of the last Business Day of each month
in such Determination Period.
"TAPOS Determination Date" means the date during each calendar month on
which the month-end calculation is made to determine the amount due.
SECTION 9.02. PURCHASE OF STOCK. Upon the delivery to Statesman of the
first Receivables Certificate hereunder the Cooperative will purchase Statesman
Class A Preferred Stock with such par value as will cause it to have a Minimum
Class A Investment in Statesman Class A Preferred Stock and on each TAPOS
Determination Date thereafter it will acquire such additional Statesman Class A
Preferred Stock if any as may be necessary for it to maintain a Minimum Class A
Investment.
SECTION 9.03. REDEMPTION OF CLASS A PREFERRED STOCK. Statesman covenants
and agrees that if on any TAPOS Determination Date the amount of Statesman Class
A Preferred Stock held by the Cooperative exceeds the Minimum Class A Investment
computed as of such date, it will, subject to the provisions of Section 9.04,
upon written demand by the Cooperative redeem for cash at its par value those
shares held by the Cooperative which are in excess of the Minimum Class A
Investment determined as of such date. The Cooperative covenants and agrees that
notwithstanding the provisions contained in paragraph (v) of subsection 5(b) of
Article II of the Articles of Incorporation of Statesman the Cooperative shall
not have any right to redeem shares held by it except as provided herein.
SECTION 9.04. CUMULATIVE OBLIGATIONS. The obligation of the Cooperative
hereunder to purchase Statesman Class A Preferred Stock shall be in addition to
any other undertaking the Cooperative may have entered into or may hereafter
enter into to purchase such stock as a result of Asset Based Financing or
Installment Sales Financing provided by Statesman to any Local Cooperative,
Independent Cooperative or Dealership of the Cooperative or any lease financing
by Statesman for the Cooperative, and the obligations of the Cooperative to
purchase Statesman Class A Preferred Stock under, or as a condition to, each
such financing arrangement shall be cumulative.
<PAGE>
ARTICLE X
---------
EVENTS OF DEFAULT
-----------------
SECTION 10.01. Each of the following shall constitute an "Event of
Default" hereunder:
(a) Default shall be made in the payment of any amount payable
hereunder, when and as the same becomes due and payable, whether at the stated
maturity thereof or by acceleration or otherwise; or
(b) Default shall be made in the due observance or performance of
any other term, covenant, or agreement contained in this Agreement; or
(c) Any representation or warranty made by the Cooperative herein,
or in any Receivables Certificate or any statement or representation made in any
other certificate, report, or opinion delivered pursuant hereto shall prove to
have been incorrect in any material respect when made; or
(d) The Cooperative or any Subsidiary of the Cooperative shall
become insolvent or unable to meet its obligations as they mature, make an
assignment for the benefit of creditors, consent to the appointment of a trustee
or a receiver, or admit in writing its inability to pay its debts as they
mature; or
(e) A trustee or receiver shall be appointed for the Cooperative or
any Subsidiary of the Cooperative or for a substantial part of its properties
without the consent of the Cooperative or such Subsidiary and not be discharged
within thirty (30) days; or
(f) Bankruptcy, reorganization, arrangement, insolvency, or
liquidation proceedings shall be instituted by or against the Cooperative or any
Subsidiary of the Cooperative, and, if instituted against it, be consented to by
the Cooperative or such Subsidiary or remain undismissed for a period of thirty
(30) days; or
(g) Any default shall be made with respect to any obligation for the
payment of borrowed money of the Cooperative or any Subsidiary of the
Cooperative when due or the performance of any other obligation incurred in
connection with any indebtedness for borrowed money of the Cooperative or any
Subsidiary of the Cooperative, if the effect of such default is to accelerate
the maturity of such indebtedness; or
(h) Any final judgment for the payment of money in excess of ONE
HUNDRED THOUSAND DOLLARS ($100,000.00) which in the opinion of Statesman is not
adequately insured or indemnified against shall be rendered against the
<PAGE>
Cooperative or any Subsidiary of the Cooperative and the same shall remain
undischarged for a period of thirty (30) days during which time execution shall
not be effectively stayed; or
(i) Any substantial part of the properties of the Cooperative or any
Subsidiary of the Cooperative shall be sequestered or attached and shall not
have been returned to the possession of the Cooperative or such Subsidiary or
released from such attachment within thirty (30) days; or
(j) The occurrence of a Reportable Event as defined in Section 4043
of ERISA which might constitute grounds for termination of any employee benefit
plan of the Cooperative or any Subsidiary of the Cooperative covered by ERISA by
PBGC or grounds for the appointment by the appropriate United States District
Court of a trustee to administer any such plan; or
(k) Complete or partial withdrawal under Section 4201 or 4204 of
ERISA from a Multiemployer Plan by any other party which is or may be required
under the provisions of ERISA to make a contribution to such Plan, except as a
result of the merger of such party with the Cooperative.
Upon the occurrence and continuation of any Event of Default, Statesman
may, by notice to the Cooperative take any or all of the following actions: (i)
terminate any obligation it may have to review any Receivables, Installment
Sales Contract, Wholesale Account or Crop Time Note tendered to it, (ii)
terminate any obligation it may otherwise have to purchase any Eligible
Receivable, any Approved Contract, any Eligible Contract, any Wholesale Account,
any Approved Note or any Eligible Note, (iii) terminate any obligation it may
have to repay to the Cooperative any part of the Reserve Account so long as any
Purchased Receivable shall remain unpaid, and (iv) terminate any obligation it
may have to repay to the Cooperative any part of the Wholesale Reserve Account
so long as any Purchased Wholesale Account shall remain unpaid.
ARTICLE XI
----------
MISCELLANEOUS
-------------
SECTION 11.01. INDEMNIFICATION.
(a) The Cooperative shall indemnify Statesman, its officers,
directors, agents and employees and hold them and each of them harmless from and
against all loss, cost, damage, and expense, including reasonable attorney fees,
at any time incurred:
(1) because of any liability of the Cooperative, Manufacturer,
or any other Person (other than Statesman) related to any merchandise which is
the subject of any sale or to any service performed or goods furnished by the
Cooperative, Manufacturer, or any other Person or entity in connection with any
<PAGE>
sale out of which any Purchased Receivable, Purchased Contract, Purchased
Wholesale Account or Purchased Note arose, including, but not limited to,
services performed under any warranty or other agreement obligating the
Cooperative, Manufacturer, or other Person or entity to perform such services or
furnish goods; or
(2) because of any liability of the Cooperative for any action
at any time taken or not taken by the Cooperative.
(b) The Cooperative covenants and agrees to indemnify Statesman, its
officers, directors, agent and employees and hold them and each of them harmless
from and against all loss, cost, damage, and expense, including reasonable
attorneys' fees, at any time incurred by them or any of them because of any
violation of state or Federal law or regulation by the Cooperative or other
illegal or actionable conduct resulting from acts or omissions by the
Cooperative or its agents in connection with the sale of merchandise, providing
of services or extension of credit.
SECTION 11.02. NOTICES.
(a) By Statesman. In consideration of the Agreement of the
Cooperative to make a capital investment in Statesman based upon the amount of
asset based loans made by Statesman to customers of the Cooperative, Statesman
covenants and agrees to use its best efforts to notify the Cooperative promptly
in the event it terminates its agreement to extend asset based financing to any
Dealership of the Cooperative (as defined in the Agreement), if it gives any
notice to any such Dealership of any event of default under the terms of any
financing agreement between such Dealership and Statesman, if any such
Dealership defaults in the payment of any obligation for principal or interest
owing to Statesman and such default continues for a period of ten (10) days or
more, or if any officer of Statesman has knowledge that any condition exists or
event has occurred with respect to such Dealership which constitutes grounds for
the termination by Statesman of its financing arrangements with such Dealership
or which would constitute such grounds with the giving of notice or lapse of
time or both.
(b) By Cooperative. In consideration of the agreement by Statesman
to provide the Cooperative with such notices, the Cooperative covenants and
agrees it will promptly notify Statesman upon the occurrence of any of the
following events: the Cooperative puts any such Dealership on C.O.D. or
otherwise limits sales to such Dealership, or terminates any existing agreement
between the Cooperative and any such Dealership; any such Dealership makes any
material misrepresentation to the Cooperative; there is a material change in the
management or ownership of such Dealership; any material adverse change occurs
in the financial condition or operations of such Dealership; or if to the
knowledge of any executive officer of the Cooperative an event of default has
occurred under any agreement between any such Dealership and the Cooperative or
any condition exists or event has occurred which with the giving of notice or
lapse of time or both would constitute such an Event of Default.
SECTION 11.03. FAILURE TO RECORD SECURITY INSTRUMENT. No failure
(intentional or inadvertent) by Statesman to file any financing statement
<PAGE>
relating to a security instrument (whether conditional sales contract, chattel
mortgage, or security agreement) contained in or arising out of any Eligible
Contract or any Receivable shall impair or void the obligations of the
Cooperative hereunder.
SECTION 11.04. TERMINATION. This Agreement may be terminated by either
party hereto by giving the other party ninety days (90) prior written notice of
such termination prior to any anniversary date of this Agreement. No such
termination shall affect any rights of the parties accruing up to the date of
final payment of all Purchased Contracts, Purchased Receivables, Purchased
Wholesale Accounts, Purchased Notes and Southern States Credit Card Program
outstandings previously purchased or relieve the Cooperative from ownership
requirements for Statesman Class A Preferred Stock as required in Section 9.02.
SECTION 11.05. SUCCESSORS. The covenants, representations, and agreements
herein set forth shall be binding upon the parties hereto and their successors
and assigns.
SECTION 11.06. AMENDMENTS, ETC. No amendment, modification, termination,
or waiver of any provision of this Agreement shall in any event be effective
unless the same shall be in writing and signed by Statesman, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 11.07. NOTICES, ETC. All notices and other communications
provided for under this Agreement shall be in writing and mailed, faxed,
telegraphed or delivered, if to the Cooperative at its address at:
SOUTHERN STATES COOPERATIVE, INCORPORATED
6606 WEST BROAD STREET (ZIP 23230)
POST OFFICE BOX 26234
RICHMOND, VIRGINIA 23260
ATTENTION: MR. J. A. HAWKINS
and if to Statesman, at its address at
STATESMAN FINANCIAL CORPORATION
6606 WEST BROAD STREET (ZIP 23230)
POST OFFICE BOX 25567
RICHMOND, VIRGINIA 23260
ATTENTION: MR. JOHN C. FROMAN
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section 11.07. All such notices and communications shall, when mailed,
be effective when deposited addressed as aforesaid.
<PAGE>
SECTION 11.08. SEVERABILITY OF PROVISIONS. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 11.09. HEADINGS. Article and Section headings in this Agreement
are included in such Agreement for the convenience of reference only and shall
not constitute a part of the Agreement for any other purpose.
SECTION 11.10. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the laws of the Commonwealth of Virginia.
SECTION 11.11. SURVIVAL. All warranties, representations and covenants
made by the Cooperative herein, or in any agreement referred to herein or on any
certificate, document or other instrument delivered by it or on its behalf under
this Agreement, shall be considered to have been relied upon by Statesman and
shall survive the delivery to Statesman of the Receivables, Purchased Contracts,
Purchased Wholesale Accounts and Purchased Notes purchased pursuant hereto
regardless of any investigation made by Statesman or on its behalf. All
statements in any such certificate or other instrument shall constitute
warranties and representations by the Cooperative hereunder. Except as otherwise
expressly provided herein, all covenants made by the Cooperative hereunder or
under any other agreement or instrument shall be deemed continuing until the
Purchased Contracts, Purchased Receivables, Purchased Wholesale Accounts and
Purchased Notes and all other liabilities and obligations of the Cooperative to
Statesman are satisfied in full.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the date first above written.
SOUTHERN STATES COOPERATIVE,
INCORPORATED
ATTEST: By:
---------------------------------------
- -------------------------- Title:
---------------------------------------
<PAGE>
STATESMAN FINANCIAL CORPORATION
ATTEST: By:
-----------------------------------
- ------------------------------- Title:
---------------------------------
<PAGE>
FIRST AMENDMENT
TO
REVOLVING CREDIT AGREEMENT
THIS FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT is made as of February
3, 1999 by and among SOUTHERN STATES COOPERATIVE, INCORPORATED (the "Company"),
COBANK, ACB in its individual capacity as a Bank and in its capacity as
Administrative Agent and Documentation Agent, FIRST UNION NATIONAL BANK, as a
Bank and in its capacity as Syndication Agent, NATIONSBANK, N.A., as a Bank and
in its capacity as Syndication Agent, FMB BANK, as a Bank, COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH, as a
Bank, BANQUE NATIONALE de PARIS (CHICAGO Branch), as a Bank, CRESTAR BANK, as a
Bank and in its capacity as Co-Agent, DG BANK DEUTSCHE GENOSSENSCHAFTSBANK AG
CAYMAN ISLANDS BRANCH, as a Bank, WACHOVIA BANK, N.A., as a Bank and in its
capacity as Co-Agent.
RECITALS
A. As of January 12, 1999, the Banks entered into a Revolving Credit
Agreement ("Credit Agreement") with the Company.
B. The parties hereto desire to amend the Credit Agreement to provide (i)
that certain indebtedness of the Company be excluded from the definition of
"Consolidated Funded Debt" set forth in the Credit Agreement and (ii) that the
Company be permitted to amend or modify certain terms and conditions of the
Goldkist Acquisition Agreement (as defined in the Credit Agreement), all as
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the parties hereto hereby agree as follows:
1. Definition of Consolidated Funded Debt. The definition of "Consolidated
Funded Debt" set forth in Section 1.01 of the Credit Agreement is amended and
restated in its entirety as follows:
"Consolidated Funded Debt" shall mean at any time, without
duplication, (1) all indebtedness or liability for borrowed money, or for
the deferred purchase price of property or services (excluding trade
obligations and accrued expenses), of the Company and its consolidated
Subsidiaries; (2) all obligations of the Company and its consolidated
Subsidiaries as lessee under Capital Leases; (3) all obligations of the
<PAGE>
Company and its consolidated Subsidiaries under letters of credit; (4) all
obligations of the Company and its consolidated Subsidiaries arising under
bankers' or trade acceptance facilities; (5) all obligations of the
Company and its consolidated Subsidiaries secured by any Lien on property
owned by such Person, whether or not the obligations have been assumed,
and (6) all obligations of the Company and its consolidated Subsidiaries
under Guarantees. "Consolidated Funded Debt" shall not include (i) any
obligations of the Company to any of its customers under any of the
following programs of the Company, in each case, as in effect on the date
hereof (the "Programs"): "Payment Plus"; "Preferred Payment Plan";
"Deferred Payment Plan"; and "Prepayment Bonus Credit", provided, however,
that any reimbursement obligations of the Company or any of its
consolidated Subsidiaries in respect of any letters of credit issued in
connection with, or in support of the Company's obligations under, any of
the Programs, shall be included as "Consolidated Funded Debt" hereunder,
(ii) any junior subordinated debentures issued by the Company in
connection with the issuance of any Junior Preferred Securities, or (iii)
the principal balance outstanding under the Bridge Loan Agreement from
time to time."
2. Amendment to Section 6.10. Section 6.10 of the Credit Agreement
is amended and restated in its entirety as follows:
"SECTION 6.10. Prohibition on Amendment of Certain Agreements,
etc. (a) Consent to, or enter into, any instrument, document or agreement
which would result in the amendment, modification, waiver or termination
of all or any of the provisions of the GoldKist Commitment Letter, the
GoldKist Acquisition Agreement or the Rabobank Letter of Credit, provided,
that the Company may amend or modify those provisions of the Goldkist
Acquisition Agreement pertaining to the time periods and the methods for
resolving discrepancies in the final purchase price of the purchased
assets, (b) release GoldKist from any of its material obligations under
the GoldKist Commitment Letter and the GoldKist Acquisition Agreement (as
the same may be amended as permitted under subsection 6.10 (a) above), nor
shall the Company fail to perform any of its material obligations under
the GoldKist Commitment Letter and the GoldKist Acquisition Agreement (as
the same may be amended as permitted under subsection 6.10 (a) above), or
(c) consent to, or enter into, any instrument or agreement (other than the
Bridge Loan Amendment) which would result in the amendment, modification,
waiver or termination of all or any of the provisions of the Bridge Loan
Agreement, without the prior written consent of Banks, provided that
nothing in this Section 6.10 shall be construed as prohibiting (i) the
required repayment of the Company's obligations pursuant to the terms of
Sections 2.09 and 3.01(M) or (N) hereof and the Bridge Loan Agreement as
amended by the Bridge Loan Amendment, or making of any draw requests by
the Company under the Rabobank Letter of Credit, or (ii) any reduction in
the face amount of the Rabobank Letter of Credit so long as after giving
effect to any such reduction the face amount of such Letter of Credit
<PAGE>
available for drawing is not less than (x) an amount equal to the purchase
price of the Junior Preferred Securities which Goldkist is then or
thereafter obligated to purchase pursuant to the Goldkist Commitment
Letter as in effect on the date hereof, or (y) the aggregate term loan
commitment of the lenders under the Bridge Loan Agreement as of the date
of any such proposed reduction."
3. Effective Date of Amendment. This Amendment shall become effective on
the date the Administrative Agent receives an original or facsimile copy of this
Amendment (or original or facsimile counterparts thereof) duly executed by the
Company and the Requisite Banks. Upon this Amendment becoming effective, the
Administrative Agent will notify each party hereto in writing and will provide
copies of all documentation in connection herewith.
4. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia.
5. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties to this Amendment in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
6. Confirmation. To the extent not expressly modified hereby, all terms
and conditions of the Credit Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first written.
<PAGE>
THE COMPANY:
SOUTHERN STATES COOPERATIVE, INCORPORATED
6606 West Broad St.
By: /s/ Jonathan Hawkins Richmond, VA 23230
-------------------------- Fax: 804.281.1650
Title: Senior Vice President & Treasurer P.O. Box 25567
--------------------------------- Richmond, VA 23260
E-mail Address:
<PAGE>
THE AGENTS, LEAD ARRANGER AND BANKS:
COBANK, ACB, as Administrative Agent,
Documentation Agent and Bank 5500 S. Quebec Street
Englewood, CO 80111
Fax: 303-694-5830
By: /s/ Lori L. Flaherty P.O. Box 5110
----------------------------- Denver, CO 80217
Title: Vice President Attention: Lori O'Flaherty
--------------------------
(Signature Page for First Amendment to Southern States Cooperative Revolving
Credit Agreement dated as of January 12, 1999)
<PAGE>
FIRST UNION NATIONAL BANK,
as Syndication Agent and Bank 7 North 8th Street
Third Floor, Mail Code VA-3260
Richmond, VA 23219
By: /s/ Fax: (804) 788-9673
----------------------------------
Title: SVP
-------------------------------
(Signature Page for First Amendment to Southern States Cooperative Revolving
Credit Agreement dated as of January 12, 1999)
<PAGE>
NATIONSBANK, N.A., as Syndication Agent
and Bank
---------------
---------------
---------------
---------------
By: /s/ William F. Sweeney Fax:
--------------------------------- -----------
Title: Vice President
------------------------------
(Signature Page for First Amendment to Southern States Cooperative Revolving
Credit Agreement dated as of January 12, 1999)
<PAGE>
FMB BANK, 25 South Charles Street
as Bank Mail Code 101-744
Baltimore, MD 21201
Fax: 410-244-4294
By: /s/ Susan Elliot Benninghoff
----------------------------
Title: Vice President
--------------------------
(Signature Page for First Amendment to Southern States Cooperative Revolving
Credit Agreement dated as of January 12, 1999)
<PAGE>
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH, as Bank
Funding and payment notices to:
By:/s/ Hans F. Breckhoven
-----------------------
Title: Vice President C/O Rabo Support Services, Inc.
------------------- 10 Exchange Place, 16th Floor
Jersey City, NJ 07302
By: /s/ Attention: Corporate Services
---------------------- Fax: 201.499.5329
Title:
-------------------
All other notices:
245 Park Avenue
New York, NY 10167
Fax: 212.916.7880
(Signature Page for First Amendment to Southern States Cooperative Revolving
Credit Agreement dated as of January 12, 1999)
<PAGE>
BANQUE NATIONALE de PARIS 209 South LaSalle Street
(CHICAGO BRANCH), as Bank Chicago, IL 60604
Fax: 312-977-1380
By: /s/
----------------------------------
Title: Executive Vice President & General Manager
------------------------------------------
(Signature Page for First Amendment to Southern States Cooperative Revolving
Credit Agreement dated as of January 12, 1999)
<PAGE>
CRESTAR BANK, 919 East Main Street, 22nd Floor
as Co-Agent and Bank Richmond, VA 23219
Fax: 804-782-5413
By: /s/
--------------------------
Title: S.V.P.
----------------------
(Signature Page for First Amendment to Southern States Cooperative Revolving
Credit Agreement dated as of January 12, 1999)
<PAGE>
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
AG CAYMAN ISLANDS BRANCH, as Bank
By: /s/ Kurt A. Morris 303 Peachtree Street, N.E. Suite 2900
------------------ Atlanta, GA 30308
Fax: 404-524-4006
Title: Vice President
--------------
By: /s/ James L. Yager, CPA
-----------------------
Title: Vice President
--------------------
(Signature Page for First Amendment to Southern States Cooperative Revolving
Credit Agreement dated as of January 12, 1999)
<PAGE>
WACHOVIA BANK, N.A., 1021 East Cary Street, 3rd Floor
as Co-Agent and Bank Richmond, VA 23219
Fax: 804-697-7581
Attention: Chris Borin
By: /s/ Christopher C. Borin
-----------------------------
Title: Senior Vice President
---------------------------
(Signature Page for First Amendment to Southern States Cooperative Revolving
Credit Agreement dated as of January 12, 1999)
<PAGE>
EXHIBIT 10.2(b)
March 25, 1999
Southern States Cooperative, Incorporated
6606 West Broad Street
Richmond, Virginia 23230
Attention: Jonathan A. Hawkins
Senior Vice President and Chief Financial Officer
Re: Consent
Gentlemen:
Reference is made to the Revolving Credit Agreement, dated as of January
12, 1999, among Southern States Cooperative, Incorporated, a Virginia
agricultural cooperative corporation (the "Company"), CoBank, ACB in its
individual capacity ("CoBank"), as Bank and in its capacity as Administrative
Agent and Documentation Agent, First Union National Bank ("First Union"), as
Bank and in its capacity as Syndication Agent, NationsBank, N.A.
("NationsBank"), as Bank and in its capacity as Syndication Agent, Nationsbanc
Montgomery Securities LLC, in its capacity as Lead Arranger, and FMB Bank, as
Bank, Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank
Nederland", New York Branch ("Rabobank"), as Bank, Banque Nationale de Paris
(Chicago Branch), as Bank, Crestar Bank, as Bank and in its capacity as Co-
Agent, DG Bank Deutsche Genossenschaftsbank AG Cayman Islands Branch, as Bank,
and Wachovia Bank, N.A., as Bank and in its capacity as Co-Agent, as amended by
that certain First Amendment to Revolving Credit Agreement dated as of February
3, 1999 (as so amended, the "Credit Agreement"). Capitalized terms used herein
and not defined herein have the meanings ascribed thereto in the Credit
Agreement.
The Company has indicated that it will enter into (i) the Amendment No.2 to
the Bridge Loan Agreement dated as of March , 1999, by and among the
----
Company, NationsBank, N.A., as administrative agent, and First Union National
Bank and CoBank, as co-agents, substantially in the form attached hereto as
Exhibit A (the "Second Amendment"), pursuant to which, among other things, the
- ---------
maturity date of the term loan made by the lenders thereunder shall be extended
from April 7, 1999 to October 8, 1999, (ii) an amendment to the GoldKist
Commitment Letter dated March 25, 1999 by and between the Company and Gold Kist
Inc., substantially in the form attached hereto as Exhibit B (the "GoldKist
---------
Commitment Letter Amendment"), pursuant to which, among other things, the
obligation of GoldKist thereunder to purchase Junior Preferred Securities shall
be extended from April 2, 1999 to October 5, 1999 and the payment of the
purchase price for any Junior Preferred Securities shall be required to be made
directly to NationsBank in repayment of the outstanding principal amount under
the Bridge Loan Agreement, and (iii) a collateral assignment of rights under the
Rabobank Letter of Credit dated as of March , 1999 by the Company in favor of
--
NationsBank, N.A., as administrative agent
<PAGE>
Southern States Cooperative, Incorporated
March 25, 1999
Page 2
the form attached hereto as Exhibit C (the "Collateral Assignment"; together
---------
with the Second Amendment and the GoldKist Commitment Letter Amendment referred
to herein collectively as the "Amendment Documents"), pursuant to which, among
other things, the Company's rights to draw under such letter of credit shall be
assigned, and any payments thereunder shall be directed, to NationsBank to repay
the outstanding principal amount under the Bridge Loan Agreement.
The Company hereby represents and warrants to the Administrative Agent and
the Banks that, except for the items described in the next succeeding paragraph
for which a consent has been requested, the execution, delivery and performance
of the Amendment Documents, does not, and when consummated, will not, violate
any term or provision of the Credit Agreement or create a Potential Default or
Event of Default thereunder.
The Company has requested the written consent of the Administrative Agent
and Requisite Banks to the amendment of the Bridge Loan Agreement and the
GoldKist Commitment Letter and the assignment of the Rabobank Letter of Credit
in accordance with the terms of the Amendment Documents. In reliance upon the
representations and warranties provided by the Company to the Administrative
Agent and Banks by which the Company has requested such consent, the
Administrative Agent and each of the Banks signatory hereto, constituting
Requisite Banks, hereby consents to the amendment of the Bridge Loan Agreement
and the GoldKist Commitment Letter and the assignment of the Rabobank Letter of
Credit in accordance with the terms of the Amendment Documents. The consent in
the immediately preceding sentence applies solely to the Potential Default and
Event of Default under Section 6.01 and clauses (a) and (c) of Section 6.10 of
the Credit Agreement that otherwise would result from the amendment of the
Bridge Loan Agreement and the GoldKist Commitment Letter and the assignment of
the Rabobank Letter of Credit pursuant to the Amendment Documents. The consent
provided for above shall be void ab initio and of no force and effect whatsoever
--------------
if the form and substance of the final, fully executed, Amendment Documents are
not substantially the same as the form of such documents attached hereto as
Exhibits A, B and C. Without limiting the foregoing sentence, the Administrative
- -------------------
Agent and each of the Banks expressly reserves any and all rights it may have
under the Credit Agreement or any other Loan Documents arising out of or in
connection with any Potential Default or Event of Default thereunder and not
specifically waived herein.
Except as expressly modified by this consent agreement, the terms and
provisions of the Credit Agreement, are hereby ratified and confirmed and shall
continue in full force and effect. Without limiting any conditions to
effectiveness set forth above, the consent provided herein is to be effective
only upon receipt by the Administrative Agent of an execution counterpart of
this consent agreement signed by the Requisite Banks and the Company; and is
conditioned upon the correctness of all representations and warranties made by
the Company herein. This consent
<PAGE>
Southern States Cooperative, Incorporated
March 25, 1999
Page 3
agreement shall be governed by, construed and enforced in accordance with the
laws of the Commonwealth of Virginia, without reference to the conflicts or
choice of law principles thereof.
Please evidence your acknowledgment of and agreement to the foregoing by
executing this letter below in the place indicated.
Sincerely,
COBANK, ACB, as Administrative Agent
and Bank
/s/ Lori L. O'Flaherty
--------------------------------
Vice President
--------------------------------
Accepted and agreed to as of
the date first written above:
FIRST UNION NATIONAL BANK,
as Bank
By: /s/ Eileen McCushard
------------------------------
Title: Vice President
------------------------------
NATIONSBANK, N.A., as Bank
By: /s/ William F. Sweeney
------------------------------
Title: Vice President
------------------------------
<PAGE>
Southern States Cooperative, Incorporated
March 25, 1999
Page 4
FMB BANK,
as Bank
By: /s/ Susan Elliott Benninghoff
------------------------------------------
Title: Susan Elliott Benninghoff, Vice President
------------------------------------------
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH, as Bank
By: /s/ Michiel V.M. Vandervoort
------------------------------------------
Title: Michiel V.M. Vandervoort
Vice President
------------------------------------------
By: /s/ W. Pieter C. Kodde
------------------------------------------
W. Pieter C. Kodde
Title: Vice President
------------------------------------------
BANQUE NATIONALE de PARIS
(CHICAGO BRANCH), as Bank
By: /s/ Arnaud Collin du Bocage
------------------------------------------
Title: Executive Vice President & General Manager
------------------------------------------
CRESTAR BANK,
as Bank
By: /s/
------------------------------------------
Title: Senior Vice President
------------------------------------------
<PAGE>
Southern States Cooperative, Incorporated
March 25, 1999
Page 5
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
AG CAYMAN ISLANDS BRANCH, as Bank
By: /s/ Kurt A. Morris
-----------------------------------
Kurt A. Morris
Title: Vice President
-----------------------------------
By: /s/ James I. Yager
-----------------------------------
Title: James I. Yager, CPA
-----------------------------------
Vice President
WACHOVIA BANK, N.A.,
as Bank
By: /s/ Christopher Barin
-----------------------------------
Title: Senior Vice President
-----------------------------------
SOUTHERN STATES COOPERATIVE, INCORPORATED
By: /s/ Jonathan Hawkins
-----------------------------------
Title: Senior Vice President and Treasurer
-----------------------------------
<PAGE>
EXHIBIT A
---------
[Bridge Loan Amendment to be attached]
EXHIBIT B
---------
[GoldKist Commitment Letter Amendment to be attached]
EXHIBIT C
---------
[Rabobank Letter of Credit Amendment to be attached]
<PAGE>
EXHIBIT A
AMENDMENT NO 2
THIS AMENDMENT NO.2 (the "Amendment"), dated as of March l999, to
--------- --
the Credit Agreement referenced below, is by and among SOUTHERN STATES
COOPERATIVE, INCORPORATED, a Virginia agricultural cooperative corporation, the
lenders identified herein, NATIONSBANK, N.A., as Administrative Agent, and FIRST
UNION NATIONAL BANK and COBANK, ACB, as Co-Agents. Terms used but not otherwise
defined shall have the meanings provided in the Credit Agreement.
WITNESSETH
WHEREAS, a $225 million credit facility has been established in favor
of Southern States Cooperative, Incorporated, a Virginia agricultural
cooperative corporation (the "Borrower"), pursuant to the terms of that Term
--------
Loan Credit Agreement dated as of October 9, 1998 (as amended and modified, the
"Credit Agreement") among the Borrower, the Lenders identified therein,
----------------
NationsBank, N.A., as Administrative Agent, and First Union National Bank and
CoBank, ACB, as Co-Agents;
WHEREAS, the Borrower has requested certain modifications to the
Credit Agreement;
WHEREAS, such modifications require the consent of all the Lenders;
WHEREAS, the Lenders have consented to the requested modifications on
the terms and conditions set forth herein;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. The Credit Agreement is amended in the following respects:
1.1 In Section 1.1, the following definitions are amended or added to read
as follows:
"Applicable Percentage" means, for any day, (a) in the case of
---------------------
Eurodollar Loans, a per annum rate equal to 0.50% and (b) in the case
of Base Rate Loans, a per annum rate equal to 0.0%; provided,
--------
however, upon the occurrence of a default with respect to any
-------
financial covenant under the Michigan Livestock Credit Agreement or
the Statesman Financial Corporation Credit Agreement, the Applicable
Percentage shall be, for any day, (a) in the case of Eurodollar Loans,
a per annum rate equal to 1.00% and (b) in the case of Base Rate
Loans, a per annum rate equal to 0.0%.
"Debt Transaction" means, with respect to the Borrower or any of
----------------
its
<PAGE>
Subsidiaries, any sale, issuance placement of Funded Debt, whether or
not evidenced by promissory note or other written evidence of
indebtedness.
"GoldKist Commitment Letter" means that certain commitment letter
--------------------------
dated as October 13, 1998 between GoldKist and the Borrower relating
to the commitment of GoldKist to purchase up to $100 million of
preferred securities from the Borrower, as amended and restated from
time to time.
"Michigan Livestock Credit Agreement" means that certain
-----------------------------------
Revolving Credit Agreement dated as of November 6,1998 among Michigan
Livestock Credit Corporation, the banks party thereto, and CoBank,
ACB, as agent for the Banks, as amended and restated from time to
time.
"Revolving Credit Agreement" means that certain Revolving Credit
--------------------------
Agreement dated as of January 12, 1999 by and among the Borrower, the
banks referred to therein, CoBank, ACB, as Administrative Agent and
Documentation Agent, First Union National Bank and NationsBank, N.A.,
as Syndication Agents, Crestar Bank and Wachovia Bank, N.A., as Co-
Agents. and NationsBanc Montgomery Securities LLC, as Lead Arranger,
as amended and restated from time to time.
"Statesman Financial Corporation Credit Agreement" means that
------------------------------------------------
certain Revolving Credit Agreement dated as of January 12. 1999 by and
among Statesman Financial Corporation, the banks referred to therein,
CoBank, ACB, as Administrative Agent and Documentation Agent, First
Union National Bank and NationsBank, N.A., as Syndication Agents,
Crestar Bank and Wachovia Bank, N.A., as Co-Agents, and NationsBanc
Montgomery Securities LLC, as Lead Arranger, as amended and restated
from time to time.
1.2 In Section 1.1 of the Credit Agreement, the definitions of
"Investment" and "Permitted Liens" are deleted in their entirety.
1.3 Section 2.1(c) of the Credit Agreement is amended to read as follows:
(c) Repayment. The Term Loans shall be duo and payable in full
---------
on October 8, 1999.
1.4 Section 6.1 through Section 6.18 of the Credit Agreement are deleted
in their entirety, and a new Section 6.1. is added to read as follows:
6.1 Incorporation of Covenants from Revolving Credit Agreement.
----------------------------------------------------------
The affirmative covenants contained in Article V, the negative
covenants contained in Article VI and the financial covenants
contained in Article VII, respectively, of the Revolving Credit
Agreement as in effect on the date of Amendment No. 2 (collectively,
the "Incorporated Covenants"), together with the related definitions
----------------------
set forth in Section 1.01 of the Revolving Credit Agreement as
<PAGE>
in effect on the date of Amendment No.2. are incorporated herein by
reference with the same effect as if stated at length herein; provided
--------
that references therein (a) to "this Agreement" or "the Credit
Agreement" shall be deemed to include this Credit Agreement, (b)
references therein to "Bank" or "Banks" shall be deemed to include the
Lenders under this Credit Agreement and (c) references to the
"Administrative Agent" shall be deemed to include the Administrative
Agent under this Credit Agreement. The Borrower covenants and agrees
that the Incorporated Covenants shall be as binding on the Borrower as
if set forth fully herein.
1.5 A new Section 6.2 is added to read as follows:
6.2 Placement of Preferred Securities. If the Borrower has not
---------------------------------
issued preferred securities in a registered public offering or in Rule
144A transaction by September 15, 1999, the Borrower shall immediately
begin the process required to complete the issuance and delivery of
preferred securities to GoldKist pursuant to the GoldKist Commitment
Letter. The Administrative Agent shall have the right to review and
approve the process.
1.6 Clause (c) of Section 7.1 of the Credit Agreement is amended to read
as follows:
(c) failure to observe or comply with (A) the financial covenants
in Article VII of the Incorporated Covenants or the negative covenants
in Article VI of the Incorporated Covenants (except in the case of
negative covenants contained in Article VI of the Incorporated
Covenants, those defaults which may occur or arise other than on
account of or by affirmative or intentional act of the Borrower or
Subsidiary or event or condition which the Borrower shall with
know1edge permit to exist, all of which shall be subject to the
provisions of clause (B) hereof), inclusive, or (B) any of the other
covenants or provisions contained herein or in any other Credit
Document and such failure to observe or comply shall continue for a
period of 30 days after the earlier of actual knowledge of a
responsible officer of the Borrower or notice to the Borrower thereof,
or
2. This Amendment shall be effective upon satisfaction of the following
conditions precedent:
(a) Execution of this Amendment by the Borrower and all of the
Lenders;
(b) Receipt by the Administrative Agent of an opinion of counsel
to the Borrower relating to this Amendment and the transactions
contemplated herein, which opinion shall be in form and substance
satisfactory to the Lenders;
(c) Receipt by the Administrative Agent of an opinion of counsel
to GoldKist relating to the GoldKist Commitment Letter, which opinion
shall be in form and substance satisfactory to the Lenders;
<PAGE>
(d) Receipt by the Administrative Agent of a certified copy of an
amendment to the GoldKist Commitment Letter which shall (i) extend the
Purchase Date (as defined in the GoldKist Commitment Letter) to
October 5, 1999 and (ii) provide that any payment made thereunder in
respect of the Preferred Securities (as defined in the GoldKist
Commitment Letter) shall be made directly to the Administrative Agent,
which amendment shall be in form and substance satisfactory to the
Lenders;
(e) Receipt by the Administrative Agent of certified copy of the
consent to the GoldKist Commitment Letter by (i) CoBank, ACB, (ii)
Prudential Insurance Company of America and (iii) RaboBank, as Agent
under that certain Credit Agreement dated as of August 4, 1998 by and
among GoldKist, as borrower, and various banks and lending
institutions, as lenders;
(f) Receipt by the Administrative Agent of a certified copy of an
amendment to the Revolving Credit Agreement to allow for this
Amendment, the amendment to the GoldKist Commitment Letter and the
collateral assignment of the RaboBank Letter of Credit, which
amendment shall be in form and substance satisfactory to the Lenders;
(g) Receipt by the Administrative Agent of certified copy of the
Michigan Livestock Credit Agreement and all amendments thereto (which
shall include an amendment extending the termination date to at least
October 8, 1999), which shall be in form and substance satisfactory to
the Lenders;
(h) Execution by the Borrower and the Administrative Agent, and
acknowledgment thereof by RaboBank, of a collateral assignment of the
Letter of Credit to the Administrative Agent, which shall be in form
and substance satisfactory to the Lenders;
(i) Receipt by the Administrative Agent of (i) the original
RaboBank Letter of Credit and (ii) an undated draw certificate
executed by Southern States relating to the RaboBank Letter of Credit;
and
(j) Receipt by the Administrative Agent, for the ratable benefit
of the Lenders, of a fee equal to 5 basis points (0.05%) on aggregate
outstanding principal amount of the Term Loan.
3. Except as modified hereby, all of the terms and provisions of the
Credit Agreement (including Schedules and Exhibits) shall remain in
force and effect.
4. The Borrower agrees to pay all reasonable costs and expenses of the
Administrative Agent in connection with the preparation, execution and
delivery of this Amendment, including without limitation the
reasonable fees and expenses of Moore & Van Allen, PLLC.
<PAGE>
5. This Amendment may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original and
it shall not be necessary in making proof of this Amendment to produce
or account for more than one such counterpart.
6. This Amendment shall be deemed to be a contract made under, and for
all purposes shall be construed in accordance with the laws of the
Commonwealth of Virginia.
[Remainder of Page intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed end delivered as of the date
first above written.
BORROWER: SOUTHERN STATES COOPERATIVE, INCORPORATED,
- -------- a Virginia agricultural cooperative corporation
By:__________________________________________
Name:
Title:
LENDERS: NATIONSBANK, N.A.,
- ------- as Administrative Agent and as a Lender
By:__________________________________________
Name:
Title:
FIRST UNION NATIONAL BANK,
as Co-Agent and as a Lender
By:__________________________________________
Name:
Title:
COBANK, ACB,
as Co-Agent and as a Lender
By:__________________________________________
Name:
Title:
<PAGE>
EXHIBIT B
Draft 3/10/99
[GoldKist stationery]
March __, 1999
Southern States Cooperative, Inc.
6606 West Broad Street
P. O. Box 26234
Richmond, Virginia 23260
Amendment to Commitment Letter dated October 13, 1998
-----------------------------------------------------
Ladies and Gentlemen:
This letter will serve to amend our commitment letter to you dated
October 13, 1998, and the Terms Sheet attached thereto, in the following
respects:
1. The purchase date specified in section 1 of the Terms Sheet shall
be amended to delete "April 2, 1999" and to insert in lieu
thereof "[October 1], 1999"; and the words "175 days after
October 9, 1998" shall be amended to read "[358]" days after
October 9, 1998."
2. Payment by GoldKist Inc. for any securities of Southern States
Cooperative, Inc. ("Southern States") purchased under the
commitment letter dated October 13, 1998, as amended hereby,
shall [if requested by NationsBank, N.A.] be made directly to
NationsBank, N.A., as Administrative Agent for the account of
Southern States, in order to repay outstanding indebtedness under
Southern States' Senior Bridge Facilty.
<PAGE>
3. The letter of credit issued by Cooperative Centrale Raiffeisen-
BoerenleenBank, B.A.-"RaboBank Nederland", New York Branch
("RaboBank") pursuant to section 4 of the Terms Sheet shall, with
the consent of RaboBank, be amended to make Southern States'
rights thereunder assignable to NationsBank, N.A., as
Administrative Agent, and for payment thereunder to be made, [if
requested by NationsBank, N.A.,] directly to NationsBank, N.A.,
as Administrative Agent, for the account of Southern States.
In all other respects, the commitment letter dated October 13, 1998,
and the Terms Sheet attached thereto, shall remain unchanged and in full force
and effect.
Sincerely,
--------------------------------
M.A. Stimpert
Senior Vice President
Agreed to by Southern States Cooperative, Inc.
- ----------------------------------------------
Wayne A. Boutwell
President and Chief Executive Officer
<PAGE>
EXHIBIT C
COMMONWEALTH OF VIRGINIA COLLATERAL ASSIGNMENT OF RIGHTS
UNDER LETTER OF CREDIT AND
CITY OF RICHMOND DURABLE POWER OF ATTORNEY
THIS COLLATERAL ASSIGNMENT OF RIGHTS UNDER LETTER OF CREDIT AND
DURABLE POWER OF ATTORNEY (this "Assignment") is made as of March , 1999, by
---------- --
SOUTHERN STATES COOPERATIVE, INCORPORATED, a Virginia agricultural cooperative
corporation (the "Assignor" or "Southern States"), to NATIONSBANK, N.A., as
-------- ---------------
administrative agent for the holders of the Secured Obligations (the "Assignee"
--------
or the "Administrative Agent").
--------------------
WITNESSETH
WHEREAS, Southern States agreed to purchase the GoldKist Inputs
Business pursuant to the terms of that Asset Purchase Agreement dated as of July
23, 1998 (the "GKIB Purchase Agreement") between Southern States, as purchaser,
------------------------
and GoldKist, Inc. ("GoldKist"), as seller;
--------
WHEREAS, a $225 million bridge loan facility (the "Bridge Loan" or
-----------
"Bridge Loan Facility") was established in favor of Southern. States pursuant to
- ------- -------------
the terms of that Credit Agreement dated as of October 8,1998 (as amended and
modified, the "Bridge Credit Agreement") among Southern States, the lenders
-----------------------
identified therein (the "Lenders") and NationsBank, N.A., as Administrative
-------
Agent, for the purpose of, among other things, financing the acquisition of' the
GoldKist Inputs Business pursuant to the GKIB Purchase Agreement;
WHEREAS, in order to facilitate establishment of the Bridge Loan
Facility and the sale of the GoldKist Inputs Business, GoldKist agreed pursuant
to that Commitment Letter dated as of October 13, 1998 (as amended and modified,
the "GoldKist Preferred Securities Purchase Agreement") between Southern States
------------------------------------------------
and GoldKist to purchase from Southern States up to $100 million in preferred
securities in the event Southern States were not so issue at least $100 million
in publicly offered or privately placed preferred securities;
WHEREAS, the purchase obligations of GoldKist under the GoldKist
Preferred Securities Purchase Agreement were secured by an irrevocable standby
letter of credit no. SB 14112 dated October 13, 1998 issued by Cooperative
Centrale Raiffeisen-BoerenleenBank, B.A. - "RaboBank Nederland", New York Branch
(as amended and modified, the "Rabobank Letter of Credit') to Southern States,
------------------ -------
as beneficiary;
WHEREAS, Southern States has requested extension of the maturity date
of the Bridge Loan;
<PAGE>
WHEREAS, the lenders under the Bridge Loan Facility have required this
Collateral Assignment, among other things, as a condition to the extension of
the maturity date of the Bridge Loan;
NOW, THEREFORE, IN ORDER to secure the payment of the loans and
obligations owing under the Bridge Credit Agreement and the other Credit
Documents as referenced and defined therein (including interest accruing after
bankruptcy or insolvency, regardless of whether such interest is allowed as a
claim in the bankruptcy or insolvency proceeding) (collectively, the "Secured
-------
Obligations") and as an essential and integral part of the security therefor,
- -----------
and in consideration of the premises and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Assignor does
hereby immediately and absolutely sell, assign, transfer and set over to the
Administrative Agent, and its successors and assigns in such capacity, the
rights, interests and privileges which the Assignor has and may have in the
Rabobank Letter of Credit, any additional letters of credit issued in
replacement thereof or as additional security for the purchase obligations of
GoldKist under the GoldKist Preferred Securities Purchase Agreement, as such
additional letters of credit may be amended, modified, extended, renewed or
replaced from time to time (collectively, the "Subject Letters of Credit"), with
-------------------------
all proceeds, issues, income and profits due and becoming due therefrom, and
neither the acceptance of this Assignment nor collection of sums due under the
Subject Letters of Credit shall constitute a waiver of any rights of the holders
of the Secured Obligations under the Bridge Credit Agreement or other operative
documents relating thereto.
1. Payment of Proceeds Under the Subject Letters of Credit. For so
-------------------------------------------------------
long as this Assignment shall be in effect, any and all proceeds of any drawings
under the Subject Letters of Credit will be paid directly to the Administrative
Agent as follows (or pursuant to alternative written payment instructions
provided by the Administrative Agent to the issuer of the Subject Letter of
Credit):
NationsBank, N.A., as Administrative Agent
Charlotte, North Carolina
ABA no:
Acct. no.:
Attn: Agency Services
Phone: (312) 828-
Fax: (312) 828-
Reference: Southern States Cooperative, Incorporated
The Assignor will give notice to the issuers of the Subject Letters of Credit of
the payment instructions and other provisions of this Assignment and take such
other action as necessary or appropriate to give effect hereto.
2. Durable Power of Attorney. The Assignor hereby grants to the
-------------------------
Administrative Agent a durable power of attorney, and hereby designates the
Administrative
<PAGE>
Agent as its attorney-in-fact, to execute and deliver, for and on behalf of the
Assignor, all drafts, draw certificates, instruments, affidavits and
certificates as may be necessary or convenient to exercise the Assignor's rights
under the Letter of Credit. This durable power of attorney is coupled with an
interest and shall be irrevocable without the prior written consent of' the
Administrative Agent. So long as no Event of Default (as defined in the Bridge
Credit Agreement) shall exist under any of the Credit Documents, however, the
Administrative Agent agrees that it will not exercise this durable power of
attorney.
3. Delivery of' RaboBank Letter of Credit. Concurrently with the
--------------------------------------
Assignor's execution of this Assignment, the Assignor has delivered the original
RaboBank Letter of Credit to the Administrative Agent.
4. Indemnity. Neither the Administrative Agent nor any Lender shall
---------
be obligated to perform or discharge any obligation or duty to be performed or
discharged by the Assignor under the Subject Letters of Credit, and the Assignor
hereby agrees to indemnify the Administrative Agent and the Lenders for, and to
save them harmless from, any liability arising from the exercise of any rights
under the Subject Letter of Credit or from this Assignment, except in the event
of the Administrative Agent's gross negligence or willful misconduct
(specifically including the Administrative Agent's failure to keep the Letter of
Credit in its possession).
5. Representations and Warranties of the Assignor. The Assignor
----------------------------------------------
represents and warrants that (i) the Assignor has full right and title to assign
to the Administrative Agent its rights under the RaboBank Letter of Credit and
any payments, income, proceeds and profits due or to become due thereunder; (ii)
no prior assignment of any interest in the RaboBank Letter of Credit has been
made; (iii) the RaboBank Letter of Credit is in full force and effect, and (iv)
there are no existing defaults under the provisions of the RaboBank Letter of
Credit.
6. Covenants of the Assignor. The Assignor covenants and agrees that
-------------------------
(i) the Assignor shall promptly (but in any event within three (3) Business Days
after receipt thereof by the Borrower) deliver to the Administrative Agent any
additional letters of credit issued in replacement of the RaboBank Letter of
Credit or issued as additional security for the purchase obligations of GoldKist
under the GoldKist Preferred Securities Purchase Agreement; and (ii) without
the prior written consent of the Administrative Agent, the Assignor will not
hereafter cancel, surrender, terminate, or draw upon the Subject Letters of
Credit or materially change, alter or modify the same or execute any other
assignment of the Assignor's rights under the Subject Letters of Credit.
7. Governing Law. This Assignment shall be governed by, and
-------------
construed in accordance with, the laws of the Commonwealth of Virginia.
8. Duration of Assignment. This Assignment shall remain in full
----------------------
force and effect as until the Secured Obligations are paid in full and all
commitments relating thereto are terminated.
<PAGE>
9. Security Agreement. It is understood and acknowledged by the
------------------
parties that this Assignment shall constitute a security agreement as defined by
the Uniform Commercial Code in effect in the Commonwealth of Virginia granting a
security interest in all of Assignor's right, title and interest, whether now
existing or hereafter arising, in the Subject Letters of Credit to secure
repayment and performance of all of the Assignor's obligations to the
Administrative Agent including, without limitation, repayment of the Secured
Obligations and compliance with the Assignor's obligations under the Bridge
Credit Agreement.
10. Further Assurances. The Assignor shall take such further actions
------------------
and shall execute such other documents as may be necessary or as may be required
by the Administrative Agent to protect or perfect the liens and security
interests created or intended to be created hereby and otherwise to complete the
transactions contemplated hereby.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly
executed under seal by authority duly given as of the date first above written.
SOUTHERN STATES COOPERATIVE, INCORPORATED
a Virginia agricultural cooperative corporation
By:________________________________________
Name:
Title:
ATTEST:
By:__________________________________
Name:
Title:
[CORPORATE SEAL]
ACCEPTED AND AGREED:
NATIONSBANK, N.A.
in its capacity as Administrative Agent
By:__________________________________
Name:
Title:
ACKNOWLEDGMENT:
COOPERATIVE CENTRALE RAIFFEISEN - BOERENLEENBANK B.A. - "RABOBANK NEDERLAND",
NEW YORK BRANCH, in its capacity as issuer of the RaboBank Letter of Credit
By:__________________________________
Name:
Title:
<PAGE>
COMMONWEALTH OF VIRGINIA
COUNTY OF ______________________
On this, the _________day of March, 1999, before me, the subscriber, a
notary public in and for the State and County aforesaid, personally appeared
_____________________, __________________________ of Southern States
Cooperative, Incorporated, a Virginia agricultural cooperative corporation, who
acknowledged that he, as such ___________________, being authorized to do so,
executed the foregoing instrument on behalf of said corporation for the purposes
therein contained.
WITNESS my hand and seal the day and year aforesaid.
_______________________________
Notary Public
My Commission Expires:_____________________________
<PAGE>
EXHIBIT 10.2(c)
SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT
AND CONSENT AGREEMENT
THIS SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Amendment"), is
dated as of December 22, 1999 by and among SOUTHERN STATES COOPERATIVE,
INCORPORATED, a Virginia agricultural cooperative corporation (the "Company"),
the financial institutions listed on the signature pages hereto as banks (the
"Banks"), and COBANK, ACB, as administrative agent for the Banks (in such
capacity, the "Administrative Agent").
RECITALS
WHEREAS, the Banks, the Administrative Agent and the Company are parties to
that certain Revolving Credit Agreement entered into as of January 12, 1999, as
amended by that certain First Amendment to Revolving Credit Agreement dated as
of February 3, 1999 (as so amended, the "Existing Credit Agreement"; and as
amended by this Amendment, the "Amended Credit Agreement"; capitalized terms
used herein and not otherwise defined herein shall have the meanings ascribed to
them in the Existing Credit Agreement);
WHEREAS, the Company, the Banks and the Administrative Agent desire to
enter into this Amendment to, subject to certain terms and conditions contained
herein, amend certain provisions of the Existing Credit Agreement; and
WHEREAS, the Company and GoldKist have resolved certain discrepancies in
the final purchase price of the purchased assets under the GoldKist Acquisition
Agreement pursuant to which among other things, (i) GoldKist has agreed to
repurchase from the Company certain accounts receivable, and (ii) subject to the
consent of the Banks and the Administrative Agent, GoldKist and the Company have
agreed that the indemnification provisions set forth in Section 15.3(b) of the
GoldKist Acquisition Agreement will be amended as provided in the Amendment to
the GoldKist Acquisition Agreement attached hereto as Exhibit A (the "GoldKist
---------
Amendment").
NOW, THEREFORE, in consideration of the premises and the agreements,
covenants and provisions herein contained and for TEN DOLLARS ($10.00) and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
SECTION 1. AMENDMENTS TO EXISTING CREDIT AGREEMENT
---------------------------------------
Subject to the satisfaction of the condition precedent set forth in Section
4 of this Amendment, the Company, the Banks and the Administrative Agent hereby
agree that the Existing Credit Agreement be, and it hereby is, amended as
follows:
1.1 General. Upon and after the date hereof, all references to the
-------
Existing Credit Agreement in that document or in any other Loan Document shall
mean the Existing Credit Agreement as amended hereby. Except as expressly
provided herein, the execution and delivery of this Amendment do not and will
not amend, modify or supplement any provision of, or constitute a consent to or
a waiver of any noncompliance with the provisions of, the Existing Credit
Agreement, and, except as specifically provided in this Amendment, the Existing
Credit Agreement shall remain in full force and effect and is hereby ratified
and confirmed.
1.2 Amendment to Section 1.01. Section 1.01 of the Existing Credit
-------------------------
Agreement is amended by amending and restating the definitions of "Consolidated
Cash Flow" and "Permitted Investments" set forth therein to read in their
entirety as follows:
"Consolidated Cash Flow" shall mean, for any period, the sum of:
(a) savings before income taxes of the Company and its consolidated
Subsidiaries, undistributed (loss) earnings in Statesman Financial
Corporation and distributions on capital securities, calculated in
accordance with GAAP; plus
----
(b) undistributed (loss) earnings in Statesman Financial Corporation,
net of income taxes, calculated in accordance with GAAP; plus
----
(c) Consolidated Interest Expense paid or accrued during such period,
to the extent and only to the extent that such amount was deducted in
determining item (a) above, calculated in accordance with GAAP; plus
----
(d) the aggregate amount of Depreciation and amortization during such
period, to the extent and only to the extent that such amount was deducted
in determining item (a) above, calculated in accordance with GAAP; minus
-----
(e) one-time gains of greater than $1,000,000 during such period;
minus
-----
(f) extraordinary income during such period, to the extent and only
to the extent that such income was included in determining item (a) above,
calculated in accordance with GAAP.
2
<PAGE>
"Permitted Investments" means (i) cash and Cash Equivalents, (ii)
investments and loans existing on the Closing Date identified on Schedule
--------
6.04, (iii) investments, loans and advances in wholly-owned Subsidiaries of
----
the Company, (iv) loans and advances to officers and directors (other than
loans described in clause (ix)) in an aggregate amount up to $2,000,000 at
any time outstanding, (v) loans and investments made pursuant to the
requirements of the Financing Services and Contributed Capital Agreements,
(vi) investments in CoBank, (vii) investments in Southern States Insurance
Exchange, Inc., suppliers or lenders, in each case, solely as a result of
volume or patronage refunds arising in the ordinary course of business,
(viii) investments in or received from customers in connection with
collection of amounts owing to the Company or its Subsidiaries so long as
the aggregate amount of all such investments does not at any time exceed
$7,500,000, (ix) loans to customers in the ordinary course of business, (x)
investments by the Company in a Receivables Entity in connection with a
Qualified Receivables Transaction; provided, however, that any investment
--------- -------
in any such Receivables Entity is in the form of a Purchase Money Note, or
any equity interest or interests in accounts receivable and related assets
generated by the Company and transferred to such Receivables Entity in
connection with a Qualified Receivables Transactions and (x) other
investments made after the Closing Date so long as (a) the amount of any
single such investment under this clause (x) does not at any time exceed
$2,000,000, and (b) after giving effect to such proposed investment, the
aggregate amount of all such investments under this clause (x) does not
exceed $5,000,000 in any fiscal year of the Company.
1.3 Amendment to Section 6.06. Section 6.06 of the Existing Credit
-------------------------
Agreement is amended by amending and restating such section in its entirety as
follows:
SECTION 6.06. Transactions with Affiliates. Enter into any transaction,
including, without limitation, the making of any Investments or Guarantees, the
purchase, sale, or exchange of property or the rendering of any service, with
any Affiliate, except for (1) transactions in the ordinary course of business of
the Company with one or more of Statesman, MLCC and Wetsel, Inc., and pursuant
to the reasonable requirements of its business and upon fair and reasonable
terms no less favorable to the Company than would obtain in a comparable arm's-
length transaction with a Person not an Affiliate; (2) transactions involving
the purchase or placement of insurance with Southern States Insurance Exchange,
Inc.; and (3) purchases or sales of services, products or other assets from or
to Affiliates in the ordinary course of business of the Company, each of which
purchases or sales is upon fair and reasonable terms no less favorable to the
Company than would obtain in a comparable arm's-length transaction with a Person
not an Affiliate and does not result in a loss to the Company on any such
purchase or sale; provided, however, the Company may engage in transactions in
-----------------
the normal course of business as contemplated by the Financing Services and
Contributed Capital Agreements.
SECTION 2. CONSENT
-------
Subject to the satisfaction of the conditions precedent set forth in
Section 4 of this Amendment and in reliance upon the representations and
warranties provided by the Company to the Administrative Agent and Banks by
which the Company has requested such consent, the Administrative Agent and each
of the Banks signatory hereto, constituting Requisite Banks,
3
<PAGE>
hereby grant their consent, in accordance with Section 6.10 (a) of the Existing
Credit Agreement, to the Company entering into the GoldKist Amendment, provided,
--------
however, that such consent shall be deemed void ab initio and of no force or
- -------
effect whatsoever unless the form and substance of the final fully executed
GoldKist Amendment is substantially the same as set forth in Exhibit A attached
---------
hereto.
SECTION 3. REPRESENTATIONS AND WARRANTIES
--------------- --- ----------
In order to induce the Administrative Agent and the Banks to enter into
this Amendment, the Company hereby represents and warrants to the Administrative
Agent and the Banks as follows:
3.1 Authorization of Amendment, Etc. The Company has the right and power,
-------------------------------
and has taken all necessary action to authorize the execution, delivery and
performance by it of this Amendment in accordance with its terms. This
Amendment has been duly executed and delivered by the Company and is a legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
3.2 Compliance of Amendment with Laws, Etc. The execution, delivery and
--------------------------------------
performance of this Amendment in accordance with its terms do not and will not,
by the passage of time, the giving of notice or otherwise,
(a) require any governmental approval or violate any applicable law
relating to the Company;
(b) conflict with, result in a breach of or constitute a default
under the articles or certificate of incorporation or bylaws of the
Company, any material provisions of any indenture, agreement or other
instrument to which the Company is a party or by which the Company or any
of its properties may be bound or any governmental approval relating to the
Company, or
(c) result in or require the creation or imposition of any Lien upon
or with respect to any property now owned or hereafter acquired by the
Company.
3.3 Representations in Credit Agreement. Immediately prior to the
-----------------------------------
effectiveness of this Amendment, all of the representations set forth in the
Existing Credit Agreement were accurate in all material respects as of the date
hereof, except to the extent that such representations and warranties expressly
relate to an earlier date, in which case such representations and warranties
shall have been true and correct on and as of such date. After giving effect to
this Amendment, all of the representations and warranties set forth in the
Amended Credit Agreement, will be accurate in all material respects as of the
date hereof, except to the extent that such representations and warranties
expressly relate to an earlier date, in which case such representations and
warranties shall have been true and correct on and as of such date.
4
<PAGE>
SECTION 4. CONDITIONS TO EFFECTIVENESS
---------------------------
The effectiveness of this Amendment is subject to the satisfaction in full
of each of the following conditions precedent:
4.1 Executed Loan Documents. This Amendment shall have been duly
-----------------------
authorized and executed by the parties hereto in form and substance
satisfactory to the Administrative Agent, shall be in full force and effect and
no default shall exist hereunder, and the Company and the Banks party hereto
shall have delivered original counterparts hereof to the Administrative Agent.
4.2 Final GoldKist Amendment. The Company shall have delivered to the
------------------------
Administrative Agent the final, execution copy, of the GoldKist Amendment.
SECTION 5. MISCELLANEOUS
-------------
5.1 Counterparts. This Amendment may be executed by each party to this
------------
Amendment upon a separate copy, and in such case one counterpart of this
amendment shall consist of enough of such copies to reflect the signature of all
of the parties to this Amendment. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Amendment or its terms to produce or account
for more than one of such counterparts.
5.2 Section References. The references in this Amendment to any section
------------------
are, unless otherwise specified, to such section of this Amendment.
5.3 Construction. This Amendment is a Loan Document executed pursuant to
------------
the Existing Credit Agreement and shall be construed, administered and applied
in accordance with all of the terms and provisions of the Existing Credit
Agreement.
5.4 Governing Law. This amendment shall be governed by, construed and
-------------
enforced in accordance with the laws of the Commonwealth of Virginia, without
reference to the conflicts or choice of law principles thereof.
5.5 Successors and Assigns. This amendment shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors and
assigns.
5.6 Effectiveness. The amendments set forth in Section 1 hereof shall
-------------
become effective as of the date of this Amendment (and shall not apply to any
period prior to the date of this Amendment), upon the satisfaction of all of the
conditions precedent set forth in Section 4 hereof
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers hereunder duly authorized as of the day
and year first written above.
SOUTHERN STATES COOPERATIVE,
INCORPORATED
By: /s/ Leslie T. Newton
------------------------------------
Title: VICE PRESIDENT & TREASURER
---------------------------------
COBANK, ACB, as Administrative Agent
and Bank
By: /s/ Lori L. O'Flaherty
------------------------------------
Title: Vice President
----------------------------------
FIRST UNION NATIONAL BANK,
as Bank
By: /s/ Eileen McCrichard
--------------------------------------
Title: Vice President
----------------------------------
BANK OF AMERICA, N.A. (successor by merger to
NationsBank, N.A.), as Bank
By: /s/
-------------------------------------
Title: Principal
----------------------------------
<PAGE>
FMB Bank,
as Bank
By: /s/
------------------------------------
Title: Vice President
----------------------------------
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH, as Bank
By: /s/
-------------------------------------
Title: Vice President
----------------------------------
By: /s/ Edward Peyser
-------------------------------------
Title: Vice President
----------------------------------
BANQUE NATIONALE de PARIS
(CHICAGO BRANCH), as Bank
By: /s/
-------------------------------------
Title: Senior Vice President
----------------------------------
CRESTAR BANK,
as Bank
By: /s/ C. Gray Key
-------------------------------------
Title: Vice President
----------------------------------
<PAGE>
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
AG CAYMAN ISLANDS BRANCH, as Bank
By: /s/ Kurt A. Morris
--------------------------------------
Title: Vice President
----------------------------------
By: /s/ Eric K. Zimmerman
-------------------------------------
Title: Assistant Vice President
----------------------------------
WACHOVIA BANK, N.A.,
as Bank
By: /s/
-------------------------------------
Title: Senior Vice President
---------------------------------
<PAGE>
AMENDMENT TO
ASSET PURCHASE AGREEMENT
This Agreement made as of the 7 day of September, 1999, by and between
- ---------
Gold Kist Inc., a Georgia cooperative marketing association ("GK"), and Southern
States Cooperative, Inc., a Virginia agricultural cooperative, a corporation
("Southern States").
WITNESSETH:
WHEREAS, GK and Southern States desire to amend the terms of the Asset
Purchase Agreement dated as of July 23, 1998 (the "Agreement") to change the
minimum amount of certain indemnifiable losses for which Gold Kist shall be
liable pursuant to the Asset Purchase Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and obligations contained herein, it is mutually agreed as follows:
1. The Agreement is incorporated herein by reference and is specifically made
a part hereof. All provisions, terms, covenants and conditions set forth
therein shall remain in full force and effect and shall apply to this
Agreement, except as specifically and expressly modified herein.
2. GK and Southern States hereby agree that Section 15.3(b) of the Agreement
shall be amended to read as follows:
(b) Notwithstanding the provisions of Section 15.2, Gold Kist shall have
no liability to indemnify Southern States Indemnified Persons
hereunder with respect to the matters referenced in clause (iii) of
Section 15.3(a) above with respect to any individual claim until the
aggregate amount of Southern States Indemnified Persons' indemnifiable
losses exceed $25,000 for such claims;
<PAGE>
provided, however, that if the aggregate amount of any such losses
with respect to a claim exceeds $25,000, Gold
Kist shall indemnify Southern States for the entire amount of such
claim, including the initial $25,000 amount.
3. This amendment to the Agreement shall be deemed to be effective as of
October 13, 1998.
IN WITNESS WHEREOF, the parties have duly executed this amendment to
the Agreement as of the date first above written.
GOLD KIST INC.
By: /s/ M. A. Stimpert
--------------------------
Title: Senior Vice President
-----------------------
SOUTHERN STATES COOPERATIVE, INC.
By:___________________________
Title:________________________
<PAGE>
EXHIBIT 10.2(d)
THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT
This THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Amendment"), is
dated as of January 31, 2000 by and among SOUTHERN STATES COOPERATIVE,
INCORPORATED, a Virginia agricultural cooperative corporation (the "Company"),
the financial institutions listed on the signature pages hereto as banks (the
"Banks"), and COBANK, ACB, as administrative agent for the Banks (in such
capacity, the "Administrative Agent").
RECITALS
WHEREAS, the Banks, the Administrative Agent and the Company are parties to
that certain Revolving Credit Agreement entered into as of January 12, 1999, as
amended by that certain First Amendment to Revolving Credit Agreement dated as
of February 3, 1999 and that certain Second Amendment to Revolving Credit
Agreement and Consent Agreement, dated as of December 22, 1999 (as so amended,
the "Existing Credit Agreement"; and as amended by this Amendment, the "Amended
Credit Agreement"; capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Existing Credit
Agreement);
WHEREAS, the Company, the Banks and the Administrative Agent desire to
enter into this Amendment to amend certain provisions of the Existing Credit
Agreement; and
NOW, THEREFORE, in consideration of the premises and the agreements,
covenants and provisions herein contained and for TEN DOLLARS ($10.00) and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO EXISTING CREDIT AGREEMENT
---------------------------------------
Subject to the satisfaction of the conditions precedent set forth in
Section 3 of this Amendment, the Company, the Banks and the Administrative
Agent hereby agree that the Existing Credit Agreement be, and it hereby is,
amended as follows:
1.1 General. Upon and after the date hereof, all references to the
-------
Existing Credit Agreement in that document or in any other Loan Document shall
mean the Existing Credit Agreement as amended hereby. Except as expressly
provided herein, the execution and delivery of this Amendment do not and will
not amend, modify or supplement any provision of, or constitute a consent to or
a waiver of any noncompliance with the provisions of, the Existing Credit
Agreement, and, except as specifically provided in this Amendment, the Existing
Credit Agreement shall remain in full force and effect and is hereby ratified
and confirmed.
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Third Amendment to Revolving Credit Agreement/
Southern States
1.2 Amendments to Section 1.01. (a) Section 1.01 of the Existing Credit
--------------------------
Agreement is amended by amending and restating the definitions of "Applicable
Margin", "Commitment", "Consolidated Funded Debt", "Debt", "Facility Fee
Percentage" and "Permitted Investments" set forth therein in their entirety as
follows:
"Applicable Margin" shall mean, for any day, the rate per annum set
forth below, it being understood that the Applicable Margin for (i) Base
Rate Loans shall be the percentage set forth under the column "Base Rate
Applicable Margin", and (ii) LIBOR Loans shall be the percentage set forth
under the column "LIBOR Applicable Margin".
The Applicable Margin shall be determined by reference to the
Company's corporate rating provided by Standard & Poor's as set forth
below:
- --------------------------------------------------------------------------------
Pricing Standard & Poor's LIBOR Applicable Base Rate
Level Corporate Rating Margin Applicable Margin
- --------------------------------------------------------------------------------
I BBB+ or higher 0.450% 0.000%
- --------------------------------------------------------------------------------
II BBB 0.575% 0.000%
- --------------------------------------------------------------------------------
III BBB- 0.800% 0.000%
- --------------------------------------------------------------------------------
IV BB+ 0.950% 0.250%
- --------------------------------------------------------------------------------
V BB or lower 1.000% 0.375%
- --------------------------------------------------------------------------------
The Applicable Margin shall be determined and adjusted on the date of
each change in the Company's corporate rating. Adjustments in the
Applicable Margin shall be effective as to all Base Rate Loans and LIBOR
Loans, existing and prospective, from the date of adjustment in rating.
The Company shall provide the Administrative Agent with written notice of
any change in the corporate rating of the Company within ten (10) Business
Days after the Company becomes aware of or receives notice of such change.
Notwithstanding the foregoing, during the period from December 1, 1999
through October 31, 2000, unless a change in the Company's corporate rating
justifying an increase in the Applicable Margin occurs, the Applicable
Margin for all LIBOR Loans shall be 0.950% and for all Base Rate Loans
shall be 0.250%, and no adjustment to reduce the Applicable Margin shall be
made.
"Commitment" shall mean each Bank's obligation to make Loans to the
Company pursuant to Section 2.01 hereof, as modified as provided in Section
10.4 hereof or as may be reduced as provided in Section 2.06 or Section
2.18 hereof.
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Third Amendment to Revolving Credit Agreement/
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"Consolidated Funded Debt" shall mean at any time, without
duplication, (1) all indebtedness or liability for borrowed money, or for
the deferred purchase price of property or services (excluding trade
obligations and accrued expenses), of the Company and its consolidated
Subsidiaries; (2) all obligations of the Company and its consolidated
Subsidiaries as lessee under Capital Leases; (3) all obligations of the
Company and its consolidated Subsidiaries under letters of credit; (4) all
obligations of the Company and its consolidated Subsidiaries arising under
bankers' or trade acceptance facilities; (5) all obligations of the Company
and its consolidated Subsidiaries secured by any Lien on property owned by
such Person, whether or not the obligations have been assumed, (6) all
obligations of the Company and its consolidated Subsidiaries under
Guarantees, and (7) eighty-five percent (85%) of the original cost of all
property leased by the Company or its consolidated Subsidiaries under
Synthetic Leases. "Consolidated Funded Debt" shall not include (i) any
obligations of the Company to any of its customers under any of the
following programs of the Company, in each case, as in effect on the date
hereof (the "Programs"): "Payment Plus"; "Preferred Payment Plan";
"Deferred Payment Plan"; and "Prepayment Bonus Credit", provided, however,
-------- -------
that any reimbursement obligations of the Company or any of its
consolidated Subsidiaries in respect of any letters of credit issued in
connection with, or in support of the Company's obligations under, any of
the Programs, shall be included as "Consolidated Funded Debt" hereunder, or
(ii) any junior subordinated debentures issued by the Company in connection
with the issuance of any Junior Preferred Securities.
"Debt" shall mean without duplication (1) indebtedness or liability
for borrowed money, or for the deferred purchase price of property or
services (excluding trade obligations and accrued expenses); (2)
obligations as lessee under Capital Leases; (3) obligations under letters
of credit; (4) all obligations arising under bankers' or trade acceptance
facilities; (5) all obligations secured by any Lien on property owned by
such Person, whether or not the obligations have been assumed, (6)
obligations under Guarantees and (7) all obligations as lessee under each
Synthetic Lease to make payments to the lessor thereunder upon termination
of such Synthetic Lease. "Debt" shall not include any obligations of the
Company to any of its customers under any of the following programs of the
Company, in each case, as in effect on the date hereof (the "Programs"):
"Payment Plus"; "Preferred Payment Plan"; "Deferred Payment Plan"; and
"Prepayment Bonus Credit", provided, however, that any reimbursement
-------- -------
obligations of the Company in respect of any letters of credit issued in
connection with, or in support of the Company's obligations under, any of
the Programs, shall be included as "Debt" hereunder.
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Third Amendment to Revolving Credit Agreement/
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"Facility Fee Percentage" shall mean, for any day, the rate per annum
determined by reference to the Company's corporate rating provided by
Standard & Poor's as set forth below:
- --------------------------------------------------------------------------------
Standard &
Poor's Facility
Pricing Corporate Fee
Level Rating Percentage
- --------------------------------------------------------------------------------
I BBB+ or higher 0.150%
- --------------------------------------------------------------------------------
II BBB 0.175%
- --------------------------------------------------------------------------------
III BBB- 0.200%
- --------------------------------------------------------------------------------
IV BB+ 0.300%
- --------------------------------------------------------------------------------
V BB or lower 0.375%
- --------------------------------------------------------------------------------
The Facility Fee Percentage shall be determined and adjusted on the
date of each change in the Company's corporate rating. Adjustments in the
Facility Fee Percentage shall be effective from the date of any adjustment
in rating. The Company shall provide the Administrative Agent with written
notice of any change in the corporate rating of the Company within ten (10)
Business Days after the Company becomes aware of or receives notice of such
change.
Notwithstanding the foregoing, during the period from December 1, 1999
through October 31, 2000, unless a change in the Company's corporate rating
justifying an increase in the Facility Fee Percentage occurs, the Facility
Fee Percentage shall be 0.300%, and no adjustment to reduce the Facility
Fee Percentage shall be made.
"Permitted Investments" means (i) cash and Cash Equivalents, (ii)
investments and loans existing on the Closing Date identified on Schedule
--------
6.04, (iii) investments, loans and advances in wholly-owned Subsidiaries of
----
the Company, (iv) loans and advances to officers and directors (other than
loans described in clause (ix)) in an aggregate amount up to $2,000,000 at
any time outstanding, (v) loans and investments made pursuant to the
requirements of the Financing Services and Contributed Capital Agreements,
(vi) investments in CoBank, (vii) investments in Southern States Insurance
Exchange, Inc., suppliers or lenders, in each case, solely as a result of
volume or patronage refunds arising in the ordinary course of business,
(viii) investments in or received from customers in connection with
collection of amounts owing to the Company or its Subsidiaries so long as
the aggregate amount of all such investments does not at any time exceed
$7,500,000, (ix) loans to customers in the ordinary course of business,
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Third Amendment to Revolving Credit Agreement/
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(x) investments by the Company in a Receivables Entity in connection with
the Qualified Receivables Transaction; provided, however, that any
-------- -------
investment in any such Receivables Entity is in the form of a Purchase
Money Note, or any equity interest or interests in wholesale receivables
and related assets generated by the Company and transferred to such
Receivables Entity in connection with the Qualified Receivables Transaction
and (xi) other investments made after the Closing Date so long as (a) the
amount of any single such investment under this clause (xi) does not at any
time exceed $2,000,000, and (b) after giving effect to such proposed
investment, the aggregate amount of all such investments under this clause
(xi) does not exceed $5,000,000 in any fiscal year of the Company.
(b) Section 1.01 of the Existing Credit Agreement is further amended by
adding the following terms to read in their entirety as follows:
"Commitment Reduction Date" means the 20th day of each month,
commencing with the second month following the month in which the initial
closing of the Qualified Receivables Transaction occurs.
"Excess QRT Proceeds" means, as of any Commitment Reduction Date, the
amount, if any, by which the balance of wholesale receivables transferred
pursuant to the Qualified Receivables Transaction outstanding as of the
Reporting Day of the month immediately preceding such Commitment Reduction
Date exceeds the Target Balance as of such Commitment Reduction Date;
provided, however, that if such excess amount is less than $2,000,000, the
-------- -------
Excess QRT Proceeds as of such Commitment Reduction Date shall be deemed to
be zero.
"Purchase Money Note" means a promissory note of a Receivables Entity
evidencing a line of credit, which may be irrevocable, from the Company to
a Receivables Entity in connection with the Qualified Receivables
Transaction, which note is repayable from cash available to the Receivables
Entity, other than amounts required to be established as reserves pursuant
to agreements, amounts required to be paid to investors in respect of
interest, principal and other amounts owing to such investors and amounts
owing to such investors and amounts required to be paid in connection with
the purchase of newly generated wholesale receivables.
"Qualified Receivables Transaction" means a transaction or series of
transactions pursuant to which (1) the Company sells, conveys or otherwise
transfers to a Receivables Entity, and (2) such Receivables Entity may
sell, convey or otherwise transfer to any other Person, or may grant a
security interest or other interest in, any wholesale receivables of the
Company (whether now existing or arising in the future), and any assets
related thereto (including, without limitation, all collateral securing
such wholesale receivables, all contracts and guarantees or other
obligations (including letters of credit and insurance) in respect of such
wholesale receivables, and the proceeds of such wholesale
5
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Third Amendment to Revolving Credit Agreement/
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receivables) which are customarily transferred, or in respect of which
security interests or other interests are customarily granted in connection
with asset securitizations involving accounts receivable.
"Receivables Entity" means a wholly-owned subsidiary of the Company or
any other Person in which the Company makes an investment and to which the
Company transfers wholesale receivables and related assets in connection
with the Qualified Receivables Transaction, and:
(1) which engages in no activities other than in connection with the
financing of accounts receivable;
(2) which is designated by the Board of Directors of the Company as a
Receivables Entity as provided below;
(3) no portion of the Debt or any other obligations (contingent or
otherwise) of which:
(a) is guaranteed by the Company (excluding guarantees of
obligations (other than the principal of, and interest on, Debt)
pursuant to Standard Securitization Undertakings or guarantees of
Standard Securitization Undertakings);
(b) is recourse to or obligates the Company in any way other
than pursuant to Standard Securitization Undertakings or guarantees of
Standard Securitization Undertakings; or
(c) subjects any property or asset of the Company, directly or
indirectly, contingently or otherwise, to the satisfaction thereof,
other than pursuant to Standard Securitization Undertakings or
guarantees of Standard Securitization Undertakings;
(4) with which the Company does not have any material contract,
agreement, arrangement or understanding (except in connection with a
Purchase Money Note or the Qualified Receivables Transaction) other than on
terms no less favorable to the Company than those that might be obtained at
the time from Persons that are not Affiliates of the Company, other than
fees payable in the ordinary course of business in connection with
servicing accounts receivable; and
(5) to which the Company does not have any obligation to maintain or
preserve such entity's financial condition or cause such entity to achieve
certain levels of operating results.
Any designation by the Board of Directors of the Company required
under clause (2) above shall be evidenced by delivery to the Administrative
Agent of a
6
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Third Amendment to Revolving Credit Agreement/
Southern States
certified copy of a resolution of the Board of Directors of the Company
giving effect to such designation and a certificate of the chief financial
officer of the Company certifying that such designation complies with the
foregoing conditions.
"Reporting Day" means, for any month, the day in such month as of
which the monthly report required to be provided to the Administrative
Agent pursuant to Section 5.10(K) sets forth the outstanding balance of
wholesale receivables transferred by the Company pursuant to the Qualified
Receivables Transaction.
"Standard Securitization Undertakings" means representations,
warranties, covenants, indemnities and obligations to pay fees, costs and
expenses made or undertaken by the Company that are reasonably customary in
securitization of accounts receivable transactions.
"Synthetic Lease" means any lease that is not reflected on the
Company's books as a liability and is treated as an operating lease, in
accordance with GAAP, but which arises under a transaction in which the
property subject to such lease is owned by the Company for purposes of the
Code.
"Target Balance" means, as of the first Commitment Reduction Date,
$40,000,000, and as of each Commitment Reduction Date occurring thereafter,
the sum of the amount of the Target Balance as of the immediately preceding
Commitment Reduction Date plus the amount of Excess QRT Proceeds, if any,
----
as of the immediately preceding Commitment Reduction Date.
1.3 Amendment to Subsection 2.06(B). Subsection 2.06(B) of the Existing
-------------------------------
Credit Agreement is amended by amending and restating such subsection in its
entirety as follows:
(B) Mandatory Repayments and Reduction of Commitments.
(i) On Termination Date. The Company shall repay the outstanding
principal amount of all Loans in full, together with all accrued but unpaid
interest thereon and all other amounts due and owing hereunder and under
the other Loan Documents, on the Termination Date, provided, however that
-------- -------
the Company shall not be obligated to pay on the Termination Date the
principal of, or any accrued and unpaid interest on, any LIBOR Loan or Bid
Rate Loan, the Interest Period of which extends beyond the Termination
Date, made by any Bank that has extended, renewed or otherwise continued
its commitment as provided in Section 2.02(B), Section 2.02(C) or Section
2.04 hereof. If at any time the outstanding principal amount of all Loans
exceeds the Aggregate Commitments, the Company shall repay such excess,
provided, that any repayment of outstanding Bid Rate Loans shall be made
after the Company has first repaid any and all outstanding LIBOR Loans and
Base Rate Loans. Each repayment pursuant to the immediately preceding
sentence shall be accompanied by any amount required to be paid pursuant to
Section 2.11.
7
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Third Amendment to Revolving Credit Agreement/
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(ii) In Connection with the Qualified Receivables Transaction.
(a) Immediately upon the initial closing of the Qualified
Receivables Transaction, the Company shall repay the Loans in a principal
amount of $21,000,000. Such repayment shall be applied in the following
order: (1) first to Base Rate Loans, (2) second, to such LIBOR Loans as the
Company shall elect, and (3) lastly, only if all Base Rate Loans and LIBOR
Loans are being repaid, to such Bid Rate Loans as the Company shall elect.
The repayment required hereunder shall be accompanied by payment of all
accrued interest on the amount repaid. In the event any LIBOR Loan or Bid
Rate Loan is repaid prior to the last day of the Interest Period or the Bid
Rate Maturity Date applicable thereto, the Company shall compensate the
Bank receiving such repayment in the manner set forth in Section 2.11
hereof. With respect to each Base Rate Loan and LIBOR Loan repaid pursuant
to this Subsection 2.06(B)(ii)(a), all payments of principal and interest
contemplated herein shall be made directly to each Bank in the same
proportion that each Bank contributed to the Loan when it was made.
The repayment pursuant to this Subsection 2.06(B)(ii)(a) shall be
applied to ratably and permanently reduce the Commitment of each Bank, such
that the amount of the reduction in the Aggregate Commitments equals the
amount of principal repaid. Upon such repayment and reduction, any Bank
with Bid Rate Loans outstanding in excess of its reduced Commitment will be
deemed to have made a Bid Rate Loan in excess of its Commitment as provided
in Section 2.01. From and after such a reduction in the Aggregate
Commitments, the facility fee provided for in Section 2.07 will be
determined based on the reduced Commitment of each Bank and, accordingly,
the facility fee for each Bank will be reduced.
(b) On each Commitment Reduction Date, the Aggregate
Commitments shall be permanently reduced in an amount equal to fifty
percent (50%) of the Excess QRT Proceeds as of such date.
Any such reduction shall be applied to ratably and permanently reduce
the Commitment of each Bank. If, after such reduction of the Aggregate
Commitments, the aggregate amount of Loans outstanding exceeds the amount
of the Aggregate Commitments as so reduced, the Company shall repay the
Loans in an amount at least sufficient to reduce the aggregate amount of
Loans outstanding to the amount of the Aggregate Commitments as so reduced.
Such repayment shall be applied in the following order: (1) first to Base
Rate Loans, (2) second, to such LIBOR Loans as the Company shall elect, and
(3) lastly, only if all Base Rate Loans and LIBOR Loans are being repaid,
to such Bid Rate Loans as the Company shall elect. The repayment required
hereunder shall be accompanied by payment of all accrued interest on the
amount repaid. In the event any LIBOR Loan or Bid Rate Loan is repaid
prior to the last day of the Interest Period or the Bid Rate Maturity Date
applicable thereto, the Company shall compensate the
8
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Third Amendment to Revolving Credit Agreement/
Southern States
Bank receiving such repayment in the manner set forth in Section 2.11
hereof. With respect to each Base Rate Loan and LIBOR Loan repaid pursuant
to this Subsection 2.06(B)(ii)(b), all payments of principal and interest
contemplated herein shall be made directly to each Bank in the same
proportion that each Bank contributed to the Loan when it was made.
Upon such repayment and reduction, any Bank with Bid Rate Loans
outstanding in excess of its reduced Commitment will be deemed to have made
a Bid Rate Loan in excess of its Commitment as provided in Section 2.01.
From and after such a reduction in the Aggregate Commitments, the facility
fee provided for in Section 2.07 will be determined based on the reduced
Commitment of each Bank and, accordingly, the facility fee for each Bank
will be reduced.
1.4 Amendments to Section 5.10. (a) Subsection 5.10(J) of the Existing
--------------------------
Credit Agreement is amended by amending and restating such section in its
entirety as follows:
(J) Notice of Other Credit Arrangements. The Company will promptly, and in
any event within fifteen (15) days, notify the Administrative Agent of the
amount, terms, and conditions of any credit facilities (including Synthetic
Leases and asset securitization transactions) extended or otherwise made
available to the Company that exceed $5,000,000 in the aggregate; provided,
--------
however, that any such notice to the Administrative Agent will not include
-------
pricing and interest rate terms with respect to the subject credit
facilities. Notice will not be required with respect to: (A) Debt of the
Company under this Agreement; (B) Debt incurred prior to the Closing Date
and disclosed on Schedule 4.15; and (C) uncommitted short term debt of the
-------------
Company in an amount not to exceed $10,000,000 at any one time outstanding.
(b) Section 5.10 of the Existing Credit Agreement is amended by adding
thereto the following Subsection (K):
(K) Reports with Respect to the Qualified Receivables Transaction. (i)
Promptly, and in any event within ten (10) days of preparation or receipt
thereof, copies of a monthly report prepared by or provided to the Company
in connection with the Qualified Receivables Transaction that sets forth
the balance of wholesale receivables transferred by the Company pursuant to
the Qualified Receivables Transaction outstanding as of the Reporting Day
of the month covered by such report, and (ii) such other information
regarding the Qualified Receivables Transaction as the Administrative Agent
may reasonably request from time to time.
1.5 Amendment to Section 6.01. Section 6.01 of the Existing Credit
-------------------------
Agreement is amended by adding thereto the following clauses (K) and (L):
9
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Third Amendment to Revolving Credit Agreement/
Southern States
(K) Liens granted pursuant to any Synthetic Lease on the property leased
thereunder.
(L) Liens granted pursuant to the requirements of the Qualified
Receivables Transaction which are customarily granted in connection with
asset securitizations involving accounts receivable.
1.6 Amendment to Section 6.03. Section 6.03 of the Existing Credit
-------------------------
Agreement is amended by amending and restating such section in its entirety as
follows:
SECTION 6.03. Sale of Assets. Sell, lease, assign, transfer, or otherwise
dispose of any of its now owned or hereafter acquired assets (including,
without limitation, receivables and leasehold interests), except (i) sales,
leases or other dispositions of assets in the ordinary course of its
business, (ii) sales and other dispositions of assets as provided in the
Financing Services and Contributed Capital Agreements, (iii) the sale of
obsolete assets or assets no longer used or useful in the business,
provided that the net proceeds from any and all such sales of assets are
--------
reinvested in assets of the Company that are used or useful in the business
of the Company as conducted in accordance with Section 5.04, (iv) sales of
assets other than pursuant to clauses (i), (ii) and (iii) above with an
aggregate value not to exceed $10,000,000 in any year, (v) sales and other
dispositions of certain assets acquired from GoldKist in an aggregate
amount not to exceed $30,000,000, and (vi) sales of wholesale receivables
and related assets pursuant to the Qualified Receivables Transaction. In
connection with any sale or other disposition, or series of related sales
or other dispositions, of assets of the type referred to in clause (v)
above in an aggregate amount of $10,000,000 or more, the Company shall
provide the Administrative Agent with a report describing in reasonable
detail the assets which are the subject of such sale or other disposition
(or series of related sales or other dispositions) by not later than 30
days after the date of such sale or other disposition (or series of related
sales or dispositions).
1.7 Amendment to Section 6.06. Section 6.06 of the Existing Credit
-------------------------
Agreement is amended by amending and restating such section in its entirety as
follows:
SECTION 6.06. Transactions with Affiliates. Enter into any transaction,
including, without limitation, the making of any Investments or Guarantees,
the purchase, sale, or exchange of property or the rendering of any
service, with any Affiliate, except for (1) transactions in the ordinary
course of business of the Company with one or more of Statesman, MLCC and
Wetsel, Inc., and pursuant to the reasonable requirements of its business
and upon fair and reasonable terms no less favorable to the Company than
would obtain in a comparable arm's-length transaction with a Person not an
Affiliate; (2) transactions involving the purchase or placement of
insurance with Southern States Insurance Exchange, Inc.; (3) purchases or
sales of services, products or other assets from or to Affiliates in the
ordinary course of business of the Company, each of which purchases or
sales
10
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Third Amendment to Revolving Credit Agreement/
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is upon fair and reasonable terms no less favorable to the Company than
would obtain in a comparable arm's-length transaction with a Person not an
Affiliate and does not result in a loss to the Company on any such purchase
or sale; and (4) sales or other transfers or dispositions of wholesale
receivables and related assets of the types specified in the definition of
the Qualified Receivables Transaction, and acquisitions of Permitted
Investments described in clause (x) of the definition of Permitted
Investments in connection with the Qualified Receivables Transaction,
provided, however, the Company may engage in transactions in the normal
-------- -------
course of business as contemplated by the Financing Services and
Contributed Capital Agreements.
1.8 Amendment to Section 6.09. Section 6.09 of the Existing Credit
-------------------------
Agreement is amended by amending and restating such section in its entirety as
follows:
SECTION 6.09. Leases. Become a lessee under any operating lease
other than (i) Synthetic Leases, so long as the original cost of all
property subject thereto (including all costs, fees and expenses incurred
in connection with the acquisition, design, engineering, construction,
assembly, installation, testing and completion of the property) does not
exceed $35,000,000 in the aggregate at any one time and (ii) other
operating leases so long as the total lease expenses of the Company under
such other operating leases do not exceed $30,000,000 in the aggregate for
any fiscal year of the Company.
SECTION 2. REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the Administrative Agent and the Banks to enter into this
Amendment, the Company hereby represents and warrants to the Administrative
Agent and the Banks as follows:
2.1 Authorization of Amendment, Etc. The Company has the right and power,
-------------------------------
and has taken all necessary action, to authorize it to execute, deliver and
perform its obligations under this Amendment in accordance with its terms. This
Amendment has been duly executed and delivered by the Company and is a legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
2.2 Compliance of Amendment with Laws, Etc. The execution, delivery and
--------------------------------------
performance of this Amendment in accordance with its terms do not and will not,
by the passage of time, the giving of notice or otherwise,
(a) require any governmental approval or violate any applicable law
relating to the Company;
(b) conflict with, result in a breach of or constitute a default under
the articles or certificate of incorporation or bylaws of the Company, any
material provisions of any indenture, agreement or other instrument to
which the Company is a party or by which
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Third Amendment to Revolving Credit Agreement/
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the Company or any of its properties may be bound or any governmental
approval relating to the Company, or
(c) result in or require the creation or imposition of any Lien upon
or with respect to any property now owned or hereafter acquired by the
Company.
2.3 Representations in Credit Agreement. Immediately prior to the
-----------------------------------
effectiveness of this Amendment, all of the representations set forth in the
Existing Credit Agreement were accurate in all material respects as of the date
hereof, except to the extent that such representations and warranties expressly
relate to an earlier date, in which case such representations and warranties
shall have been true and correct on and as of such date. After giving effect to
this Amendment, all of the representations and warranties set forth in the
Amended Credit Agreement, will be accurate in all material respects as of the
date hereof, except to the extent that such representations and warranties
expressly relate to an earlier date, in which case such representations and
warranties shall have been true and correct on and as of such date.
SECTION 3. EFFECTIVENESS
-------------
This Amendment shall become effective upon the satisfaction in full of each
of the following conditions precedent:
3.1 Executed Documents. This Amendment shall have been duly authorized and
------------------
executed by the parties hereto in form and substance satisfactory to the
Administrative Agent, shall be in full force and effect and no default shall
exist hereunder, and the Company and the Banks party hereto shall have delivered
original counterparts hereof to the Administrative Agent.
3.2 Amendment Fees. The Company shall have paid to each Bank in
--------------
immediately available funds an amendment fee in an amount equal to 2.5 b.p.
(0.025%) of the amount of such Bank's Commitment.
SECTION 4. MISCELLANEOUS
-------------
4.1 Counterparts. This Amendment may be executed by each party to this
------------
Amendment upon a separate copy, and in such case one counterpart of this
amendment shall consist of enough of such copies to reflect the signature of all
of the parties to this Amendment. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Amendment or its terms to produce or account
for more than one of such counterparts.
4.2 Construction. This Amendment is a Loan Document executed pursuant to
------------
the Existing Credit Agreement and shall be construed, administered and applied
in accordance with all of the terms and provisions of the Existing Credit
Agreement.
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Third Amendment to Revolving Credit Agreement/
Southern States
4.3 Governing Law. This amendment shall be governed by, construed and
-------------
enforced in accordance with the laws of the Commonwealth of Virginia, without
reference to the conflicts or choice of law principles thereof.
4.4 Successors and Assigns. This amendment shall be binding upon and inure
----------------------
to the benefit of the parties hereto and their respective successors and
assigns.
[Signatures Begin on Next Page]
13
<PAGE>
Third Amendment to Revolving Credit Agreement/
Southern States
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective duly authorized officers as of the day and year
first written above.
THE COMPANY:
SOUTHERN STATES COOPERATIVE,
INCORPORATED
By: /s/ Leslie T. Newton
-------------------------------
Title: Vice President & Treasurer
THE ADMINISTRATIVE AGENT AND THE BANKS:
COBANK, ACB, as Administrative Agent
and Bank
By: /s/ Lori L. O'Flaherty
-------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK,
as Bank
By: /s/ Eileen McCrickard
-------------------------------
Title: Vice President
<PAGE>
Third Amendment to Revolving Credit Agreement/
Southern States
BANK OF AMERICA, N.A. (successor by merger to
NationsBank, N.A.), as Bank
By: /s/
-------------------------------
Title: Principal
ALLFIRST BANK (formerly known as FMB Bank),
as Bank
By: /s/
-------------------------------
Title: Vice President
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH, as Bank
By: /s/
-------------------------------
Title: Vice President
By: /s/
-------------------------------
Title:
-------------------------------
BANQUE NATIONALE de PARIS
(CHICAGO BRANCH), as Bank
By: /s/
-------------------------------
Title: Executive Vice President and
General Manager
<PAGE>
Third Amendment to Revolving Credit Agreement/
Southern States
CRESTAR BANK,
as Bank
By: /s/
-------------------------------
Title: Senior Vice President
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
AG CAYMAN ISLANDS BRANCH, as Bank
By: /s/ Kurt A. Morris
-------------------------------
Title: Vice President
By: /s/ Eric K. Zimmerman
-------------------------------
Title: Assistant Vice President
WACHOVIA BANK, N.A.,
as Bank
By: /s/
-------------------------------
Title: Senior Vice President
714360
<PAGE>
EXHIBIT 10.2(e)
April 19, 2000
Southern States Cooperative, Incorporated
6606 West Broad Street
Richmond, Virginia 23230
Attention: Leslie T. Newton
Vice President and Treasurer
Re: Consent
Dear Ms. Newton:
Reference is made to the Revolving Credit Agreement, dated as of January
12, 1999, among Southern States Cooperative, Incorporated, a Virginia
agricultural cooperative corporation (the "Company"), CoBank, ACB in its
individual capacity), as Bank and in its capacity as Administrative Agent (the
"Administrative Agent") and Documentation Agent, First Union National Bank, as
Bank and in its capacity as Syndication Agent, Bank of America, N.A., as Bank
and in its capacity as Syndication Agent, Nationsbanc Montgomery Securities LLC,
in its capacity as Lead Arranger, and Allfirst Bank, as Bank, Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch,
as Bank, Banque Nationale de Paris (Chicago Branch), as Bank, Crestar Bank, as
Bank and in its capacity as Co-Agent, DG Bank Deutsche Genossenschaftsbank AG
Cayman Islands Branch, as Bank, and Wachovia Bank, N.A., as Bank and in its
capacity as Co-Agent, as amended by that certain First Amendment to Revolving
Credit Agreement dated as of February 3, 1999, that certain Second Amendment to
Revolving Credit Agreement and Consent Agreement, dated as of December 22, 1999,
and that certain Third Amendment to Revolving Credit Agreement, dated as of
January 31, 2000 (as so amended, the "Credit Agreement"). Capitalized terms
used and not otherwise defined herein have the meanings ascribed to them in the
Credit Agreement.
In October, 1999, the Company purchased a cotton gin and related assets for
approximately $4,000,000. These assets were originally intended to have been
purchased by Silver Lake Growers Gin, LLC, an entity intended to be 75% owned by
approximately 70 local cotton farmers, with the Company and F&W Agriservices
each maintaining a 12.5% equity interest. That transaction was delayed due to
substantial damage to the 1999 cotton crop caused by two hurricanes in 1999. To
date approximately 42% of the equity of Silver Lake Growers Gin, LLC has been
purchased by local cotton farmers, and the Company has received indications of
interest from others. The Company now desires to sell the cotton gin and
related assets to the Silver Lake Growers Gin, LLC in return for consideration
equal to approximately $4,000,000, to be paid part in cash and part in equity
interests in the LLC. Immediately after this transaction, the Company will hold
approximately 40%, and F&W Agriservices will own approximately 18%, of the
equity of Silver Lake Growers Gin, LLC. If possible, the Company will later
sell some of its equity interests in the Silver Lake Growers Gin, LLC to
additional local cotton farmers. Because the LLC is an "Affiliate" of Southern
States pursuant to the terms of the Credit Agreement, the consent of Requisite
Banks and the Administrative Agent pursuant to Section 6.06 of the Credit
Agreement is required for the Company to complete this transaction.
<PAGE>
Southern States Cooperative, Incorporated
April 19, 2000
Page 2
The Administrative Agent and each of the Banks signatory hereto,
constituting Requisite Banks, hereby consent to sale by the Company of a cotton
gin and related assets to the Silver Lake Growers Gin, LLC as described in the
preceding paragraph; provided, however, that the Company's resulting equity
ownership of the LLC is in compliance with clause (xi) of the term "Permitted
Investments" under the Credit Agreement. The consent in the immediately
preceding sentence applies solely to the Potential Default and Event of Default
that otherwise would result from the transaction. Without limiting the
foregoing sentence, the Administrative Agent and each of the Banks expressly
reserves any and all rights it may have under the Credit Agreement or any other
Loan Documents arising out of or in connection with any Potential Default or
Event of Default thereunder and not specifically waived herein.
Except as expressly modified by this consent agreement, the terms and
provisions of the Credit Agreement, are hereby ratified and confirmed and shall
continue in full force and effect. Without limiting any conditions to
effectiveness set forth above, the consent provided herein is to be effective
only upon receipt by the Administrative Agent of an execution counterpart of
this consent agreement signed by the Requisite Banks and the Company. This
consent agreement shall be governed by, construed and enforced in accordance
with the laws of the Commonwealth of Virginia, without reference to the
conflicts or choice of law principles thereof.
<PAGE>
Southern States Cooperative, Incorporated
April 19, 2000
Page 3
Please evidence your acknowledgment of and agreement to the foregoing by
executing this letter below in the place indicated.
Sincerely,
COBANK, ACB, as Administrative Agent
and Bank
By: /s/ Lori L. O'Flaherty
-------------------------
Title: Vice President
----------------------
Accepted and agreed to as of
the date first written above:
FIRST UNION NATIONAL BANK,
as Bank
By: /s/ Eileen McCrickard
------------------------------
Title: Vice President
---------------------------
BANK OF AMERICA, N.A. (successor by merger
to NationsBank, N.A.), as Bank
By: /s/ William F. Sweeney
------------------------------
Title: Principal
---------------------------
<PAGE>
ALLFIRST BANK (formerly known as FMB Bank),
as Bank
By: /s/ Eugene Sutter
---------------------------------
Title: VP
------------------------------
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH, as Bank
By: /s/ Betty Mills
---------------------------------
Title: Executive Director
------------------------------
By: /s/ Edward
---------------------------------
Title: Executive Director
------------------------------
BANQUE NATIONALE de PARIS
(CHICAGO BRANCH), as Bank
By: /s/
----------------------------------
Title: Executive Vice President & General Manager
---------------------------------------------
<PAGE>
CRESTAR BANK,
as Bank
By: /s/ C. Gray Key
----------------------------------
Title: Vice President
-------------------------------
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
AG CAYMAN ISLANDS BRANCH, as Bank
By: /s/ J. W. Somers
----------------------------------
Title: S.V.P.
-------------------------------
By: /s/ Kurt A. Morris
----------------------------------
Title: Vice President
-------------------------------
WACHOVIA BANK, N.A.,
as Bank
By: /s/ Christopher C. Borin
-----------------------------------
Title: Senior Vice President
--------------------------------
SOUTHERN STATES COOPERATIVE,
INCORPORATED
By: /s/ Leslie T. Newton
-----------------------------------
Title: Vice President and Treasurer
--------------------------------
<PAGE>
EXHIBIT 10.3
FOURTH AMENDED AND RESTATED
FINANCING SERVICES AND CONTRIBUTED CAPITAL AGREEMENT
FOURTH AMENDED AND RESTATED FINANCING SERVICES AND CONTRIBUTED CAPITAL
AGREEMENT ("Agreement") dated as of the 12th day of January, 2000, between
SOUTHERN STATES COOPERATIVE, INCORPORATED (the "Cooperative"), a Virginia
corporation, and STATESMAN FINANCIAL CORPORATION ("Statesman"), a Virginia
corporation.
Cooperative desires from time to time to sell to Statesman certain
accounts receivable owing to it, certain installment sales contracts and certain
Crop Time Notes, and Statesman is interested in purchasing such receivables,
installment sales contracts and Crop Time Notes. The parties desire to set
forth the terms and conditions upon which such sales may be made. The
Cooperative also desires to have Statesman issue from time to time credit cards
to customers of the Cooperative and its Local Cooperatives and Dealerships, to
extend from time to time asset based financing, agricultural production loans
and term loans to customers of the Cooperative pursuant to separate agreements
to be entered into between each such customer and Statesman and to lease
personal property from time to time to customers of the Cooperative, Local
Cooperatives and Dealerships. Therefore, the parties hereto agree as follows:
ARTICLE I
---------
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
SECTION 1.01. DEFINED TERMS. As used in this Agreement, the
-------------
following terms have the following meanings (terms defined in the singular to
have the same meaning when used in the plural and vice versa):
"Accounts Receivable - Local Cooperative" means the amounts advanced
---------------------------------------
by the Cooperative to a Local Cooperative and owing from time to time from such
Local Cooperative to the Cooperative.
"Agreement" means this Fourth Amended and Restated Financing Services
---------
and Contributed Capital Agreement, as it may be amended, supplemented, or
modified from time to time.
"Agricultural Production Loan" means to loan for a term of not more
-----------------------------
than one year, the proceeds of which are used to raise crops or livestock.
"Approved Contracts" means those Installment Sales Contracts arising
------------------
out of the sale of goods by a Retail Service or a customer of the Cooperative
which have been approved in advance by Statesman as evidenced by a Statesman
Approval Number.
<PAGE>
"Approved Notes" means those Crop Time Notes arising out of the sale
--------------
of goods and services by the Cooperative which have been approved in advance by
Statesman.
"Asset Based Financing" means financing of a Dealership by Statesman
---------------------
secured by accounts receivable, inventory, equipment, including rolling stock,
real estate and other fixed assets, or any of such items.
"Average Total Delinquency Percentage" means with respect to each of
------------------------------------
Retail Accounts, Grain Marketing Accounts and Accounts Receivable - Local
Cooperatives (each a "type" of Receivable) that percentage determined by
dividing the average total delinquent Receivables of that type (including any
Receivables of that type sold to Statesman which are delinquent), measured as of
the last day of each calendar month, for the twelve-month period ending on the
last Business Day of the calendar month preceding a settlement date by the
average total Receivables of that type owing the Cooperative (including those
sold to Statesman), measured as of the last day of each calendar month, for the
same twelve-month period. "Average Total Delinquency Percentage" means with
------------------------------------
respect to Wholesale Accounts that percentage determined by dividing the average
total delinquent Wholesale Accounts (including any Wholesale Accounts sold to
Statesman which are delinquent), measured as of the last day of each calendar
month, for the twelve-month period ending on the last Business Day of the
calendar month preceding the date of determination by the average total
Wholesale Accounts owing the Cooperative (including those sold to Statesman),
measured as of the last day of each calendar month, for the same twelve-month
period.
"Average Total Delinquency Percentage Variance" means with respect to
---------------------------------------------
each of Retail Accounts, Grain Marketing Accounts and Accounts Receivable -
Local Cooperatives (each a "type" of Receivable) the difference, regardless of
which is greater, between (i) the Average Total Delinquency Percentage for that
type of Receivables computed as of the last Business Day of the calendar month
preceding any settlement date and (ii) the percentage obtained by dividing the
total delinquent Receivables of that type (including Receivables of that type
sold to Statesman which are delinquent) on such date by the total Receivables of
that type (including those sold to Statesman) on such date. "Average Total
-------------
Delinquency Percentage Variance" means with respect to Wholesale Accounts the
- -------------------------------
difference, regardless of which is greater, between (i) the Average Total
Delinquency Percentage for Wholesale Accounts computed as of the last Business
Day of the calendar month preceding the date of determination and (ii) the
percentage obtained by dividing the total delinquent Wholesale Accounts
(including Wholesale Accounts sold to Statesman which are delinquent) on such
date by the total Wholesale Accounts (including those sold to Statesman) on such
date.
"Balances Owed" means the net amount payable to the Cooperative on
-------------
Receivables as a result of goods sold or services performed, or both, after
adjustment for all rebates, credits and all other adjustments made by the
Cooperative on all Purchased Receivables.
"Business Day" means any day other than a Saturday, Sunday or other
------------
day on which commercial banks in Richmond, Virginia, are authorized or required
to close under applicable law.
2
<PAGE>
"Collateral" means any property which is subject to a purchase money
----------
security interest securing the obligations of the obligor on a Purchased
Contract or a Purchased Note.
"Crop Time Notes" means promissory notes of Customers of the
---------------
Cooperative evidencing amounts due for the purchase of goods and services from
the Cooperative, which are payable in one year or less.
"Customer of the Cooperative" means a member of the Cooperative or
---------------------------
other Person who purchases goods or services from the Cooperative.
"Dealership" means any wholesale customer of the Cooperative which has
----------
purchased merchandise or products from the Cooperative for resale to its
customers and shall include a private dealer of the Cooperative but shall not
include a Retail Service or a Local Cooperative.
"Default" means any of the events specified in Article X, whether or
-------
not any requirement for the giving of notice or the lapse of time, or both, has
been satisfied.
"Dispute" has the meaning set forth in Section 4.06.
-------
"Eligible Contracts" means Installment Sales Contracts arising out of
------------------
the sale of goods by Retail Services or a customer of the Cooperative other than
Approved Contracts which Statesman has determined to purchase from the
Cooperative.
"Eligible Notes" means Crop Time Notes other than Approved Notes which
--------------
Statesman has determined to purchase from the Cooperative.
"Eligible Receivables" means Receivables which Statesman has
--------------------
determined to purchase from the Cooperative.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the regulations and published interpretations
thereof.
"Event of Default" means any of the events specified in Section 10.01,
----------------
provided that any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.
"GAAP" means generally accepted accounting principles consistently
----
applied with respect to a corporation conducting a business the same as or
similar to that of the Cooperative and its Subsidiaries, if any, as in effect
from time to time.
"Grain Marketing Accounts" means amounts owed to the Cooperative for
------------------------
the purchase of grain commodities, whether evidenced by open account, note, or
otherwise or any combination thereof.
"Headquarters" means the office of Statesman at 6606 West Broad
------------
Street, Post Office Box 25567, Richmond, Virginia 23260.
3
<PAGE>
"Historical Charge Off Percentage" means with respect to each of
--------------------------------
Retail Accounts, Grain Marketing Accounts and Accounts Receivable - Local
Cooperatives (each a "type" of Receivable) that percentage which is obtained by
dividing (a) the sum of (i) gross bad debt expense of the Cooperative for
Receivables of that type for any fiscal year and (ii) the gross bad debt expense
of Statesman for such fiscal year for Receivables of that type purchased from
the Cooperative by (b) the total dollar volume for sales which generate
Receivables of that type (whether cash or non-cash) of the Cooperative for such
fiscal year.
"Independent Cooperative" means a cooperative which is not a Local
-----------------------
Cooperative.
"Installment Sales Contract" means a written agreement providing for
--------------------------
the deferred payment of the purchase price of goods sold in the ordinary course
of business.
"Installment Sales Financing" means the purchasing by Statesman of
---------------------------
chattel paper (as defined in Article 9 of the Uniform Commercial Code of
Virginia) arising out of a sale of merchandise by a Retail Service, Local
Cooperative or Dealership.
"Leases" means contracts for the lease of personal property for a
------
fixed period of time by Statesman to the Cooperative, a Local Cooperative, a
Dealership or a customer of any.
"Lien" means any mortgage, deed of trust, pledge, security interest,
----
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), charge or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code of Virginia or comparable law of any jurisdiction to evidence
any of the foregoing).
"Local Cooperative" means any corporation which is managed by the
-----------------
Cooperative under a management agreement or contract.
"Loan" means an Agricultural Production Loan, a Term Loan, an asset
----
based loan or any substantially similar extension of credit now or hereafter
made by Statesman to a Customer of the Cooperative or other Person.
"Manufacturer" means the original equipment manufacturer of goods
------------
offered for sale by the Cooperative.
"Multiemployer Plan" means a Plan described in Section 4001(a)(3) of
------------------
ERISA which covers employees of the Cooperative or to which the Cooperative is
or may be required to make contributions under ERISA.
"Net Balance" means with respect to an Installment Sales Contract, the
-----------
outstanding balance owing on such Installment Sales Contract including any
applicable late charges but exclusive of any unearned finance charges as
provided for in such Installment Sales Contract and means with respect to a Crop
Time Note, the outstanding principal balance owing on such Crop Time Note and
all accrued and unpaid interest thereon.
4
<PAGE>
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, business
------
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority, or other entity of whatever nature.
"Plan" means any employee welfare plan established or maintained by
----
the Cooperative or to which the Cooperative has made contributions in the past
or may in the future be required to make contributions under ERISA.
"Prohibited Transaction" means any transaction set forth in Section
----------------------
406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended
from time to time.
"Purchased Contracts" means Approved Contracts and Eligible Contracts
-------------------
which have been purchased by Statesman from the Cooperative or a customer of the
Cooperative.
"Purchased Notes" means Approved Notes and Eligible Notes which have
---------------
been purchased by Statesman from the Cooperative.
"Purchased Receivables" means Eligible Receivables which have been
---------------------
purchased by Statesman from the Cooperative.
"Purchased Wholesale Accounts" means Wholesale Accounts which have
----------------------------
been purchased by Statesman from the Cooperative.
"Receivables" means the amounts owing the Cooperative from time to
-----------
time for the sale of goods or the performance of services in the ordinary course
of business and shall include Retail Accounts, Grain Marketing Accounts, and
Accounts Receivable - Local Cooperatives.
"Receivables Certificate" means the certificate referred to in Section
-----------------------
2.03(1).
"Reserve Account" means the account established under the provisions
---------------
of Section 2.04.
"Retail Accounts" means amounts owing the Cooperative arising out of
---------------
the sale in the ordinary course of business of goods and services by Retail
Services or by stores which were then owned and operated by Gold Kist Inc.,
which amounts are not evidenced by Installment Sales Contracts.
"Retail Service" means any retail store owned and operated by the
--------------
Cooperative.
"Southern States Credit Card Program" means the program of Statesman
-----------------------------------
to approve revolving or open-end credit in specific amounts for individual
customers of the Cooperative, Local Cooperatives and Dealerships, to extend
credit to such customers for the purchase of goods from the Cooperative, Local
Cooperatives and Dealerships and to settle periodically with the Cooperative,
Local Cooperatives and Dealerships for purchases made by customers pursuant to
that program, as such program may exist from time to time.
5
<PAGE>
"Statesman Approval Number" means a number given by Statesman to a
-------------------------
Retail Service to evidence that a particular Installment Sales Contract is an
Approved Contract.
"Subsidiary" means any corporation the majority of the voting shares
----------
of which at the time are owned directly or indirectly by the Cooperative and/or
by one or more Subsidiaries of the Cooperative.
"Term Loan" means a secured loan with the principal amortized over a
---------
period of 5 to 7 years, the proceeds of which are used for agricultural
production.
"Termination Date" means that date on which certain obligations of the
----------------
parties hereunder may be terminated as provided in Section 11.04.
"Wholesale Accounts" means any obligation arising out of the sale of
------------------
goods or the performance of services in the ordinary course of business which is
not an Account Receivable - Local Cooperative, Grain Marketing Account, or
Retail Account.
"Wholesale Reserve Account" means the account established under the
-------------------------
provisions of Section 4.04.
ARTICLE II
----------
ACCOUNTS RECEIVABLE FINANCING
-----------------------------
SECTION 2.01. PURCHASE OF RECEIVABLES. Statesman may from time to
-----------------------
time, at its option upon the terms and subject to the conditions contained in
this Agreement, purchase Receivables from the Cooperative, provided that
Statesman has determined in its sole and absolute discretion that such
Receivables are acceptable to it (which acceptable Receivables are herein
referred to as the "Eligible Receivables"), and in no event shall Statesman
purchase Receivables if after such purchase the aggregate amount owing on all
Receivables purchased by Statesman from the Cooperative shall exceed TWO HUNDRED
MILLION DOLLARS ($200,000,000). All such purchases shall be made without
recourse to the Cooperative except so far as Statesman shall have the right to
make charges to the Reserve Account as provided in Section 2.05, and nothing
contained herein shall obligate Statesman to purchase any Receivables.
SECTION 2.02. OFFER TO SELL. The Cooperative may from time to time
-------------
offer to sell Receivables to Statesman as herein provided, but, except as the
parties may otherwise agree, no Receivable from any obligor shall be sold unless
all accounts owing from such obligor to the Cooperative are sold, and no Retail
Account arising out of a sale at any Retail Service shall be sold unless all
Retail Accounts arising out of sales at such Retail Service are sold.
SECTION 2.03. PROCEDURES.
----------
(1) Prior to 11:00 a.m. (Richmond, Virginia, time) on the tenth
Business Day of each month, or such later day as may be agreed to by Statesman,
the Cooperative shall deliver to Statesman by hand or send by telecopy a
certificate substantially in the form of Exhibit A attached
---------
6
<PAGE>
hereto (a "Receivables Certificate") with the blanks therein appropriately
completed and reflecting the following information for the preceding month:
(a) the amount of all Receivables arising out of sales of goods or
services during the preceding month, if any, which were sold by the Cooperative
to Statesman as of the end of such preceding month;
(b) Receivables which were previously sold to Statesman under the
provisions of this Article II showing the outstanding balances as of the last
day of the preceding month in the aggregate for Retail Accounts, Grain Marketing
Accounts and Accounts Receivable - Local Cooperatives;
(c) Receivables which were previously sold to Statesman pursuant to
this Article II upon which there was any change in the outstanding balance
during such month, and all debits and credits thereon, including without
limitation payments and other remittances by or on behalf of the account
obligor, credits, rebates and adjustments, showing in the aggregate for Retail
Accounts, Grain Marketing Accounts and Accounts Receivable - Local Cooperatives
the prior balance, the amount and nature of adjustments and the balance as of
the last day of the preceding month;
(d) the Cooperative shall promptly make available to Statesman, at
Statesman's request, listings of accounts with balances and other referenced
amounts by obligor that are referred to in Sections 2.03(1)(a), (b) and (c).
(2) Not later than 11:00 a.m. (Richmond, Virginia, time) on the fifth
Business Day after receipt by Statesman of the Receivables Certificate,
Statesman shall pay to the Cooperative the amount by which (a) the aggregate
outstanding balance on each Receivable it has purchased exceeds (b) the Purchase
Discount (as herein defined) and the amount, if any, to be placed in the Reserve
Account pursuant to Section 2.04, provided, however, that Statesman may choose
not to pay for any Receivable evidenced by a promissory note or other instrument
unless such note or other instrument has been endorsed and delivered to
Statesman.
(3) Promptly upon delivery of the certificate described in Section
2.03(1), the Cooperative shall assign and transfer as provided in such
certificate those Receivables Statesman is purchasing and all proceeds thereof,
cash or non-cash.
(4) (a) For purposes of this Article II, the Purchase Discount for Retail
Accounts shall be the product obtained by multiplying the outstanding balance of
the Retail Accounts being purchased by (i) the average Historical Charge Off
Percentage of the Cooperative for Retail Accounts for the three preceding fiscal
years times (ii) the sum of 1 plus the Average Total Delinquency Percentage
Variance for Retail Accounts, plus the anticipated interest charges for the
current month relating to the outstanding purchased Retail Accounts. Such amount
shall be computed according to the following formula:
Discount = Retail Accounts being purchased x [(aHCO%) x (1 + ADV)] + AIC
7
<PAGE>
where
aHCO% = average Historical Charge Off Percentage for Retail Accounts for
the three preceding fiscal years which for purposes of this
calculation shall not be less than 0.35% or such other
percentage as may be from time to time agreed to by the
Cooperative and Statesman.
ADV = Average Total Delinquency Percentage Variance for Retail
Accounts.
AIC = the anticipated interest charges for the current month for
borrowings relating to outstanding Retail Accounts purchased by
Statesman.
(b) For purposes of this Article II, the Purchase Discount for Grain
Marketing Accounts shall be the product obtained by multiplying the outstanding
balance of the Grain Marketing Accounts being purchased by (i) the average
Historical Charge Off Percentage of the Cooperative for Grain Marketing Accounts
for the three preceding fiscal years times (ii) the sum of 1 plus the Average
Total Delinquency Percentage Variance for Grain Marketing Accounts, plus the
anticipated interest charges for the current month relating to the outstanding
purchased Grain Marketing Accounts. Such amount shall be computed according to
the following formula:
Discount = Grain Marketing Accounts being purchased x
[(aHCO%) x (1 + ADV)] + AIC
where
aHCO% = average Historical Charge Off Percentage for Grain Marketing
Accounts for the three preceding fiscal years which for
purposes of this calculation shall not be less than 0.15% or
such other percentage as may be from time to time agreed to
by the Cooperative and Statesman.
ADV = Average Total Delinquency Percentage Variance for Grain
Marketing Accounts.
AIC = the anticipated interest charges for the current month for
borrowings relating to outstanding Grain Marketing Accounts
purchased by Statesman.
(c) For purposes of this Article II, the Purchase Discount for
Accounts Receivable - Local Cooperatives shall be the product obtained by
multiplying the outstanding balance of the Accounts Receivable - Local
Cooperatives being purchased by (i) the average Historical Charge Off Percentage
of the Cooperative for Accounts Receivable - Local Cooperatives for the three
preceding fiscal years times (ii) the sum of 1 plus the Average Total
Delinquency Percentage Variance for Accounts Receivable - Local Cooperatives,
plus the anticipated interest charges for the current month relating to the
outstanding purchased Accounts Receivable - Local Cooperatives. Such amount
shall be computed according to the following formula:
Discount = Accounts Receivable - Local Cooperatives being purchased x
8
<PAGE>
[(aHCO%) x (1 + ADV)] + AIC
where
aHCO% = average Historical Charge Off Percentage for Accounts
Receivable -Local Cooperatives for the three preceding fiscal
years which for purposes of this calculation shall not be less
than .05% or such other percentage as may be from time to time
agreed to by the Cooperative and Statesman.
ADV = Average Total Delinquency Percentage Variance for Accounts
Receivable - Local Cooperatives.
AIC = the anticipated interest charges for the current month for
borrowings relating to outstanding Accounts Receivable - Local
Cooperatives purchased by Statesman.
Notwithstanding anything to the contrary contained in this Agreement, a
portion of such purchase price shall be placed in the reserve account described
in Section 2.04.
SECTION 2.04. RESERVE ACCOUNT. Statesman shall place in a reserve account
---------------
(the "Reserve Account") an amount not to exceed one-eighth of one percent
(0.125%) of the aggregate outstanding balance on each Receivable it elects to
purchase, provided, however, that in no event shall any additional amount be
deducted from the Purchase Price paid to the Cooperative or placed in the
Reserve Account if the aggregate amount in the Reserve Account is equal to or
greater than one quarter of one percent (0.25%) of the aggregate unpaid balance
of all Receivables which Statesman has purchased from the Cooperative (including
the Receivables being paid for on such date). Funds in the Reserve Account need
not be segregated from other funds of Statesman. If at the end of any fiscal
year of Statesman, the balance in the Reserve Account after charges to the
Reserve Account as permitted in Section 2.05 is greater than one-eighth of one
percent (0.125%) of the balance owing on Receivables which Statesman has
purchased from the Cooperative, no Event of Default shall have occurred and be
continuing and no obligation of the Cooperative to Statesman is then due and
payable, Statesman will upon request of the Cooperative remit such excess to the
Cooperative.
SECTION 2.05. CHARGES TO RESERVE ACCOUNT. Statesman may in its sole and
--------------------------
absolute discretion charge losses on Purchased Receivables related to Credit
Risk (as defined in Section 4.06) against the Reserve Account. Statesman agrees
to add to the Reserve Account the amount received as a recovery less associated
collection costs on any Purchased Receivables which were previously charged to
the Reserve Account. Statesman shall notify the Cooperative promptly in writing
of any such reduction in the Reserve Account. As of the end of each month,
Statesman will provide the Cooperative with a report of transactions in the
Reserve Account during such month showing the balance in such account as of the
end of such month.
SECTION 2.06. PAYMENTS FROM THE COOPERATIVE. Monthly with the delivery of
-----------------------------
each Receivables Certificate the Cooperative shall remit to Statesman in
immediately available funds an amount equal to the sum of (i) all payments
received by the Cooperative during
9
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the preceding month on Purchased Receivables, (ii) all rebates or credits on any
Purchased Receivable allowed by the Cooperative during the preceding month, and
(iii) all other adjustments made by the Cooperative on any Purchased Receivable
during such month which resulted in a reduction of the amount owing thereon,
minus any proceeds the Cooperative has collected on Purchased Receivables and
paid to Statesman since the delivery of the previous Receivables Certificate.
SECTION 2.07. METHOD OF PAYMENT. All payments from the Cooperative to
-----------------
Statesman under the terms of this Agreement shall be made to Statesman in
immediately available funds in Richmond, Virginia. Whenever any payment is
scheduled to be made on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day.
SECTION 2.08. FACILITY FEES FOR PURCHASE OF RECEIVABLES. The Cooperative
-----------------------------------------
will pay to Statesman by the tenth Business Day of each month, or such later day
as may be agreed to by Statesman, a Facility Fee in such amount as shall be
agreed upon from time to time by the Cooperative and Statesman.
SECTION 2.09. COLLECTION OF RECEIVABLES. Statesman hereby authorizes the
-------------------------
Cooperative to collect Purchased Receivables, subject to direction and control,
but Statesman may, without cause or notice, curtail or terminate said authority
at any time. Upon receipt of all checks, drafts, cash and other remittance in
payments of or on account of the Purchased Receivables, the Cooperative will
account to Statesman for such proceeds as herein provided. The Cooperative will
endorse all checks, drafts and other items evidencing such proceeds where
necessary to permit collection of such items, which endorsement Statesman is
also hereby authorized to make, as attorney-in-fact on behalf of the
Cooperative.
The Cooperative will pay all proceeds it collects on Purchased Receivables
to Statesman monthly no later than the tenth Business Day of each month or at
such other intervals as Statesman may from time to time request.
If the Cooperative receives any promissory note or other instrument (other
than a check) in payment of or on account of any Purchased Receivable, it will
immediately endorse the same and deliver it to Statesman.
Within ten (10) days of receipt of a written request of Statesman, the
Cooperative will notify the obligor on each Purchased Receivable to make
payments to Statesman at its Headquarters or at such other address as Statesman
shall have furnished to the Cooperative in writing and shall promptly deliver to
Statesman all proceeds of any Purchased Receivables then held by the
Cooperative. From and after receipt of such request, the Cooperative will
promptly forward to Statesman all checks, drafts, cash and other remittances
received by it in payment of or on account of any Purchased Receivable.
If the Cooperative shall fail to notify account obligors to make payments
to Statesman as herein provided, and in any event upon the occurrence of an
Event of Default, Statesman may so notify such account obligors.
10
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SECTION 2.10. REPURCHASE OF RECEIVABLES. If the Cooperative shall at any
-------------------------
time determine not to sell to Statesman the Retail Accounts arising out of sales
made at any Retail Service, the Cooperative will with the consent of Statesman
promptly repurchase from Statesman all Retail Accounts arising out of sales made
at such Retail Service which Statesman has previously purchased from it. The
purchase price for such Retail Accounts will be the Balances Owed on the Retail
Accounts giving credit for all payments received by Statesman to the date of
sale to the Cooperative.
ARTICLE III
-----------
INSTALLMENT SALES FINANCING
---------------------------
SECTION 3.01. GENERAL. Statesman will from time to time, upon the terms
-------
and subject to the conditions contained in this Agreement, purchase from the
Cooperative Approved Contracts. Statesman may from time to time, at its option,
purchase from the Cooperative other Installment Sales Contracts arising out of
the sale of goods by Retail Services as provided in Section 3.03. Nothing
contained herein shall obligate Statesman to purchase any Installment Sales
Contract other than those Installment Sales Contracts which have been approved
in advance by Statesman as evidenced by a Statesman Approval Number (which
contracts are herein referred to as "Approved Contracts").
SECTION 3.02. NON-RECOURSE PURCHASES. Statesman will from time to time
----------------------
upon the terms and subject to the conditions contained in this Agreement,
purchase Approved Contracts from the Cooperative. Such purchases shall be
without recourse to the Cooperative except as specifically provided for herein.
SECTION 3.03. FULL RECOURSE OPTION.
--------------------
(1) Statesman may from time to time, at its option upon the terms and
subject to the conditions contained in this Agreement, purchase from the
Cooperative Installments Sales Contracts arising out of the sales of goods by
Retail Services, which Installment Sales Contracts Statesman has determined in
its sole and absolute discretion to be acceptable (which contracts are herein
referred to as "Eligible Contracts"), notwithstanding the fact that such
contracts have not been previously approved by Statesman and do not bear an
appropriate Statesman Approval Number. All purchases of such contracts shall be
subject to full recourse to the Cooperative as provided in paragraph (2) of this
Section 3.03.
(2) If any installment on any Installment Sales Contract purchased under
the provisions of this Section 3.03 is not paid within ninety (90) days of the
date it is scheduled to be paid, upon written demand by Statesman, the
Cooperative will repurchase such contract immediately for its Net Balance.
SECTION 3.04. PURCHASE PRICE; DELIVERY OF PURCHASED CONTRACTS. The
-----------------------------------------------
purchase price for Approved Contracts and Eligible Contracts shall be the Net
Balance or such other amount as may from time to time be agreed to in writing by
the Cooperative and Statesman. Upon receipt of an Approved Contract or Eligible
Contract duly
11
<PAGE>
endorsed and all related credit information, and the satisfaction of all the
conditions set forth in Article VI hereof, provided no Event of Default shall
have occurred and be continuing, and provided Statesman shall not then be
entitled to require that the Cooperative repurchase Purchased Contracts under
the provisions of Section 3.03 hereof, Statesman shall pay the Cooperative in
cash the purchase price for each such Approved Contract or Eligible Contract.
Promptly thereafter, the Cooperative will notify each obligor on each such
Purchased Contract to make all future payments to Statesman at its Headquarters.
The Cooperative authorizes Statesman to insert its name, or the name of any
other assignee, in the space provided therefor in the assignment clause of all
Purchased Contracts and to return to the Cooperative all Installment Sales
Contracts not purchased. Statesman will identify in writing those contracts it
agrees to purchase and will return those contracts it declines to purchase. The
Cooperative is authorized to cancel the endorsement on each Installment Sales
Contract which Statesman does not purchase.
SECTION 3.05. WARRANTIES.
----------
(1) By the delivery and sale of each such Installment Sales Contract under
the provisions of Section 3.02 or Section 3.03, the Cooperative warrants to
Statesman that:
(a) It has good title to such Installment Sales Contract or is
authorized to obtain payment on behalf of one who has good title and the sale
and transfer thereof are otherwise rightful;
(b) Each such Installment Sales Contract is a binding obligation
arising from the sale of merchandise by a Retail Service in the ordinary course
of business as described in the contract to a person or entity specified therein
as the obligor and constitutes the valid and legally binding obligation of such
obligor enforceable in accordance with its terms; such contract states the full
agreement of the parties and arises out of legally sufficient consideration;
(c) All signatures on such Installment Sales Contract are genuine or
authorized and all obligors thereon have the capacity to execute such contract;
(d) Such Installment Sales Contract has not been materially altered;
(e) No obligor on such Installment Sales Contract has any defense, set
off or counterclaim against the Cooperative which is good against it;
(f) The conduct of the Cooperative in making the sale out of which
each contract arose was in all material respects in compliance with all
applicable laws and was not induced by fraud, false or misleading
representations or any other manner of unfair or deceptive trade practices or
other unlawful conduct;
(g) All credit information concerning the obligors on such contracts
was obtained and recorded in strict compliance with all applicable state and
federal laws, and the Cooperative has no reason to believe that any such
information is false, misleading or incomplete in any respect;
12
<PAGE>
(h) All current credit information with respect to such obligors has
been accurately reported to Statesman;
(i) The Installment Sales Contract forms provided by Statesman have
not been altered, modified or supplemented in any respect;
(j) All information required to be disclosed in such forms has been
accurately recorded therein and the Cooperative has complied with the Truth-in-
Lending Act and all other applicable disclosure laws, federal and state;
(k) No fee has been charged with respect to any contract and no such
contract includes any deferred payment price or other charge which violates any
applicable usury law or consumer protection law;
(l) Such Installment Sales Contract contains all of the terms and
conditions of the agreement between the Cooperative and the obligors with
respect to such purchase and the Cooperative has not entered into any other
agreement with any obligor with respect to such contract and has not waived or
agreed to waive any term or condition contained in the form or taken any other
action which might result in any constructive or implied waiver or modification
thereof;
(m) Each down payment shown in each Installment Sales Contract has
actually been received in cash from the obligors or a person paying such amount
on behalf of the obligors and no part thereof has been directly or indirectly
advanced by the Cooperative;
(n) Each trade-in shown in each Installment Sales Contract has
actually been delivered to the Cooperative and the amount recorded in the
contract accurately reflects the agreed value thereof;
(o) All aspects of the sale have been in strict compliance with all
applicable consumer protection acts and regulations, including without
limitation the Truth-in-Lending Act, the Equal Credit Opportunity Act and any
applicable state law;
(p) All applicants for credit have been given all notices required by
applicable law;
(q) The Cooperative has no knowledge of any insolvency proceeding
involving any party obligated on such Installment Sales Contract; and
(r) Such Installment Sales Contract is not subject to any claim, lien,
security interest, charge or other encumbrance in favor of any one other than
the Cooperative and Statesman, and the Cooperative has not offered such Contract
for sale to any purchaser other than Statesman.
(2) The Cooperative further represents and warrants that it is and shall
be solvent at the time of each sale of any Installment Sales Contract.
13
<PAGE>
SECTION 3.06. REMEDIES OF STATESMAN WITH RESPECT TO INSTALLMENT SALES
-------------------------------------------------------
CONTRACTS PURCHASED UNDER THE PROVISIONS OF THIS ARTICLE THREE.
- --------------------------------------------------------------
(1) Breach of Warranty. If any warranty made by the Cooperative under the
------------------
provisions of Section 3.05 of this Agreement shall prove to have been false in
any material respect as it relates to any Purchased Contract, the Cooperative
covenants and agrees promptly upon written demand by Statesman to purchase such
Purchased Contract for the Net Balance in immediately available funds.
Statesman covenants and agrees that upon receipt of such payment it will cancel
the endorsement and deliver such Purchased Contract to the Cooperative at the
address stated in Section 11.07 of this Agreement. Statesman represents and
warrants to the Cooperative with respect to each such Installment Sales Contract
that the Net Balance paid to it is the Net Balance of such contract and that
except as disclosed in a writing accompanying such contract, Statesman has not
released any party to such contract from its obligation thereunder, released any
security interest directly securing such contract or consented to any reduction
in the amount owing thereon or the extension of the due date for any payment or
installment thereunder. Such transfer from Statesman to the Cooperative will be
without recourse and except as provided in the immediately preceding sentence,
without representation or warranty of any nature or type.
(2) Determination of Breach. For the purpose of determining whether or not
-----------------------
any warranty made by the Cooperative under the provisions of Section 3.05 was
false and that the Cooperative is therefore obliged to repurchase any Purchased
Contract, the Cooperative shall be bound by a written statement of an officer of
Statesman that in the reasonable judgment of Statesman it has determined that
any obligor under any Purchased Contract has refused to make any scheduled
payment under such contract because of any fact which has been represented as
otherwise by the Cooperative to Statesman under the provisions of Section 3.05
hereof.
SECTION 3.07. CONTRACT FORMS. Statesman will provide and the Cooperative
--------------
will use forms of contracts and credit applications previously approved by
Statesman. In the event Statesman determines that any previously approved form
should not be used, it will so advise the Cooperative and the Cooperative will
discontinue any use of such form.
SECTION 3.08. PAYMENTS. The Cooperative will cause each Retail Service on
--------
the day of receipt of any payment on any Purchased Contract to report such
payment to Statesman at its Headquarters. The Cooperative covenants and agrees
that all payments received by it on Purchased Contracts will be charged to the
Cooperative's intercompany accounts payable to Statesman and paid to Statesman
in collected funds no less frequently than every five (5) business days. In the
event the Cooperative shall fail to endorse any check or other item when
necessary to permit its collection, Statesman is authorized, as its attorney-in-
fact to make such endorsement on behalf of the Cooperative.
SECTION 3.09. OBLIGOR COMPLAINTS AND RETURNED MERCHANDISE.
-------------------------------------------
(1) The Cooperative shall, within three (3) Business Days of its receipt,
provide Statesman with a copy of any written complaint from any obligor(s)
relating to any Purchased Contract or any merchandise or service purchased
thereunder;
14
<PAGE>
(2) If the purchaser under any Purchased Contract returns merchandise, for
any reason, within 10 days from the date of the sale, the Cooperative will fully
reimburse such purchaser for any down payment and immediately repurchase the
Purchased Contract from Statesman for its Net Balance.
SECTION 3.10. MODIFICATIONS, EXTENSIONS. Statesman may, without affecting
-------------------------
the agreements of the Cooperative herein, change, modify, extend or renew the
dates and amounts of the periodic installment payments in any Purchased
Contract.
SECTION 3.11. WARRANTY, SERVICE, OR SIMILAR AGREEMENTS. The Cooperative
----------------------------------------
covenants and agrees to indemnify and hold Statesman harmless from any and all
losses arising out of the breach of any performance or extended warranties and
all service or similar agreements made by Manufacturer, the Cooperative, or any
other Person relating to merchandise which is the subject of any Purchased
Contract, even if any such warranty, service, or similar agreements are not
immediately effective. Unless such agreement expressly provides otherwise, the
Cooperative agrees to provide repairs and service to the purchaser of the
merchandise at its usual rates of charge.
SECTION 3.12. REPOSSESSION.
------------
(1) The Cooperative will, at Statesman's request, act as its agent in the
repossession of any property described in any Purchased Contract in accordance
with all applicable laws and in that capacity take certain actions, including
the transportation of the property from its location to the Cooperative's place
of business, repair and restoration of the property to a marketable condition,
and storage, without storage fee. Statesman will compensate the Cooperative for
its reasonable actual costs in such transportation, repair, and restoration,
except as covered by an extended warranty or service agreement. In the event
Statesman directs the Cooperative on its behalf to sell the property, it will
pay the Cooperative such commission as is agreed upon from time to time by the
Cooperative and Statesman and as evidenced by Statesman's letter. The
Cooperative agrees to sell said property in accordance with the applicable
provisions of the Uniform Commercial Code, as it may be amended from time to
time, and other applicable law.
(2) Where an extended warranty or service agreement is included in the
sales contract purchased, the Cooperative hereby agrees to perform at its
expense or have performed such warranty or service work under the terms of such
extended warranty or service agreement. A pro rata refund will be paid in cash
to Statesman of the unearned identifiable charge assessed for the extended
warranty or service agreement, which will then be credited to any balance due on
such Purchased Contract.
ARTICLE IIIA
------------
CREDIT CARD FINANCING
---------------------
SECTION 3A.01. APPROVAL OF CUSTOMER'S CREDIT. Statesman agrees to review
-----------------------------
information on customers of the Cooperative, Local Cooperatives and Dealerships
15
<PAGE>
recorded on its Statesman Revolving Credit Card Application and Agreement forms
and submitted to it by the Cooperative, a Local Cooperative or a Dealership and
to approve extending open-end or revolving credit to such customers in a
specific dollar amount or to deny such credit.
SECTION 3A.02. PURCHASES BY CREDIT CARD CUSTOMERS. After Statesman has
----------------------------------
approved the credit of a customer in the Southern States Credit Card Program, so
long as the customer pays his or her account in accordance with the terms
thereof established from time to time by Statesman and otherwise complies with
the terms thereof and is not bankrupt or insolvent, Statesman will extend credit
to such customer up to the preapproved dollar limit for the purchase of goods
and services from the Cooperative, a Local Cooperative or a Dealership.
SECTION 3A.03. APPROVAL OF REQUESTS TO CHANGE CREDIT. Statesman agrees
-------------------------------------
upon request of the Cooperative, a Local Cooperative or a Dealership to review
information on customers of the Cooperative, such Local Cooperative or such
Dealership and to approve changing the amount of open-end or revolving credit
for such customers to a specific dollar amount or to deny such change.
SECTION 3A.04. SETTLEMENT FOR PURCHASES. Statesman will periodically
------------------------
settle with the Cooperative and each Local Cooperative and Dealership for
purchases made from the Cooperative or such Local Cooperative or Dealership, as
the case may be, under the Southern States Credit Card Program by periodically
crediting to the Cooperative or such Local Cooperative or Dealership, as the
case may be, the aggregate amount of such purchases since the last settlement
date, net of the applicable merchant's discount as may be agreed to from time to
time by the Cooperative or such Local Cooperative or Dealership, as the case may
be, and Statesman. All sales under the Southern States Credit Card Program made
in accordance with the instructions provided from time to time by Statesman to
the Cooperative, the Local Cooperatives and the Dealerships will be without
recourse. Statesman may, however, require the Cooperative, a Local Cooperative
or a Dealership to reimburse it for certain purchases as may be agreed to from
time to time by Statesman and the Cooperative, such Local Cooperative or such
Dealership. The parties acknowledge and agree that in the event of any conflict
between the terms hereof and any other agreement between the parties or between
Statesman and a Local Cooperative or a Dealership with respect to such rights
and obligations, the terms of the other agreement shall govern.
ARTICLE IIIB
------------
ASSET BASED FINANCING
---------------------
SECTION 3B.01. GENERAL. From time to time at the request of the
-------
Cooperative, Statesman may extend asset based financing to customers of the
Cooperative. Such financing shall be extended pursuant to separate agreements
to be entered into between each such customer and Statesman.
SECTION 3B.02. TERMS AND CONDITIONS. Nothing contained herein shall
--------------------
obligate Statesman to extend any asset based financing to any person. All
decisions with respect
16
<PAGE>
to asset based financing shall be made by Statesman in its sole discretion,
subject to such agreements as Statesman may enter into from time to time with
its asset based borrowers.
ARTICLE IIIC
------------
PERSONAL PROPERTY LEASING
-------------------------
SECTION 3C.01. LEASES TO THE COOPERATIVE. Statesman will from time to
-------------------------
time lease computers, computer equipment and other equipment to the Cooperative,
which equipment may be subleased by the Cooperative to others. Such leases
shall be on such terms and conditions as may be agreed to from time to time by
Statesman and the Cooperative and will be evidenced by lease agreements between
Statesman and the Cooperative.
SECTION 3C.02. APPROVAL OF CUSTOMER'S CREDIT. Statesman agrees to review
-----------------------------
information on customers of the Cooperative, Local Cooperatives and Dealerships
recorded on its Statesman application forms for the lease of liquid propane
tanks (or other personal property then being leased by Statesman) and submitted
to it by the Cooperative, a Local Cooperative or a Dealership and to approve
leasing such property to such customers or to determine not to lease such
property.
SECTION 3C.03. PAYMENT FOR LEASED PROPERTY. If Statesman approves the
---------------------------
lease of personal property to customers of the Cooperative, a Local Cooperative
or a Dealer, it will promptly notify the Cooperative or the Local Cooperative or
Dealership which requested such lease, and if it has received a properly
completed Lease Agreement appropriately signed by the customer and the
Cooperative, the Local Cooperative or the Dealership, as the case may be, it
will remit to the Cooperative, or to the Local Cooperative or Dealership which
requested such lease the invoice price of the leased equipment.
SECTION 3C.04. COLLECTION OF RENT. The Cooperative, or the Local
------------------
Cooperative or Dealership which requested the lease will serve as the agent of
Statesman in the collection of the monthly rent due under the lease and will
remit to Statesman monthly from the proceeds of liquid propane sold to the
lessee the monthly rentals due under the lease.
ARTICLE IIID
------------
AGRICULTURAL PRODUCTION LOANS
-----------------------------
SECTION 3D.01. GENERAL. Statesman may from time to time extend
-------
Agricultural Production Loans to customers of the Cooperative and other Persons.
Such financing shall be extended pursuant to separate agreements to be entered
into between each such Person and Statesman.
SECTION 3D.02. TERMS AND CONDITIONS. Nothing contained herein shall
--------------------
obligate Statesman to extend any Agricultural Production Loan to any person.
All decisions with
17
<PAGE>
respect to Agricultural Production Loans shall be made by Statesman in its sole
discretion, subject to such agreements as Statesman may enter into from time to
time with its Agricultural Production Loan borrowers.
ARTICLE IIIE
------------
CROP TIME NOTES
---------------
SECTION 3E.01. GENERAL. Statesman will from time to time, upon the terms
-------
and subject to the conditions contained in this Agreement, purchase from the
Cooperative Crop Time Notes which have been approved by Statesman. Nothing
contained herein shall obligate Statesman to purchase any Crop Time Note other
than those Crop Time Notes which have been approved in advance by Statesman
(which Notes are herein referred to as "Approved Notes").
SECTION 3E.02. NON-RECOURSE PURCHASES. The purchase of Crop Time Notes
----------------------
under this Agreement shall be without recourse to the Cooperative except as
specifically provided for herein.
SECTION 3E.03. FULL RECOURSE OPTION.
--------------------
(1) Statesman may from time to time, at its option upon the terms and
subject to the conditions contained in this Agreement, purchase from the
Cooperative Crop Time Notes arising out of the sales of goods or the providing
of services by the Cooperative, which Crop Time Notes Statesman has determined
in its sole and absolute discretion to be acceptable (which Notes are herein
referred to as "Eligible Notes"), notwithstanding the fact that such Notes have
not been previously approved by Statesman. All purchases of such Notes shall be
subject to full recourse to the Cooperative as provided in paragraph (2) of this
Section 3E.03.
(2) If any Crop Time Note purchased under the provisions of this Section
3E.03 is not paid within ninety (90) days of the date it is scheduled to be
paid, upon written demand by Statesman, the Cooperative will repurchase such
Note immediately for its Net Balance.
SECTION 3E.04 PURCHASE PRICE; DELIVERY OF PURCHASED NOTES. The purchase
-------------------------------------------
price for Approved Notes and Eligible Notes shall be the Net Balance or such
other amount as may from time to time be agreed to in writing by the Cooperative
and Statesman. Upon receipt of an Approved Note or Eligible Note duly endorsed
and all related credit information, and the satisfaction of all the conditions
set forth in Article VI hereof, provided no Event of Default shall have occurred
and be continuing, and provided Statesman shall not then be entitled to require
that the Cooperative repurchase Eligible Notes under the provisions of Section
3E.03 hereof, Statesman shall pay the Cooperative in cash the purchase price for
each such Approved Note or Eligible Note. Promptly thereafter, the Cooperative
will notify each obligor on each such Crop Time Note to make all future payments
to Statesman at its Headquarters. The Cooperative authorizes Statesman to
insert its name, or the name of any other assignee, in the space provided
therefor in the assignment clause of all Crop Time Notes it has purchased and to
return to the Cooperative all Crop Time Notes not purchased. Statesman will
identify in writing
18
<PAGE>
those Notes it agrees to purchase and will return those Notes it declines to
purchase. The Cooperative is authorized to cancel the endorsement on each Crop
Time Note which Statesman does not purchase.
SECTION 3E.05. WARRANTIES.
----------
(1) By the delivery and sale of each such Crop Time Note under the
provisions of Section 3E.02 or Section 3E.03, the Cooperative warrants to
Statesman that:
(a) It has good title to such Crop Time Note or is authorized to
obtain payment on behalf of one who has good title and the sale and transfer
thereof are otherwise rightful;
(b) Each such Crop Time Note is a binding obligation arising from the
sale of merchandise or services by the Cooperative in the ordinary course of
business as described in the Note to a person or entity specified therein as the
obligor and constitutes the valid and legally binding obligation of such obligor
enforceable in accordance with its terms; such Note states the full agreement of
the parties and arises out of legally sufficient consideration;
(c) All signatures on such Crop Time Note are genuine or authorized
and all obligors thereon have the capacity to execute such Note;
(d) Such Crop Time Note has not been materially altered;
(e) No obligor on such Crop Time Note has any defense, set off or
counterclaim against the Cooperative which is good against it;
(f) The conduct of the Cooperative in making the sale out of which
each Note arose was in all material respects in compliance with all applicable
laws and was not induced by fraud, false or misleading representations or any
other manner of unfair or deceptive trade practices or other unlawful conduct;
(g) All credit information concerning the obligors on such Notes was
obtained and recorded in strict compliance with all applicable state and federal
laws, and the Cooperative has no reason to believe that any such information is
false, misleading or incomplete in any respect;
(h) All current credit information with respect to such obligors has
been accurately reported to Statesman;
(i) The Crop Time Note forms provided by Statesman have not been
altered, modified or supplemented in any respect;
(j) All information required to be disclosed in such forms has been
accurately recorded therein and to the extent applicable, the Cooperative has
complied with the Truth-in-Lending Act and all other applicable disclosure laws,
federal and state;
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(k) No fee has been charged with respect to any Note and no such Note
includes any deferred payment price or other charge which violates any
applicable usury law or consumer protection law;
(l) Such Crop Time Note contains all of the terms and conditions of
the obligation of the obligors evidenced thereby and the Cooperative has not
entered into any other agreement with the obligor with respect to such Note and
has not waived or agreed to waive any term or condition contained in the form or
taken any other action which might result in any constructive or implied waiver
or modification thereof;
(m) All aspects of the sale out of which such Crop Time Note arose
have been in strict compliance with all applicable consumer protection acts and
regulations, including without limitation the Truth-in-Lending Act, the Equal
Credit Opportunity Act and any applicable state law;
(n) All applicants for credit have been given all notices required by
applicable law;
(o) The Cooperative has no knowledge of any insolvency proceeding
involving any party obligated on such Crop Time Note; and
(p) Such Crop Time Note is not subject to any claim, lien, security
interest, charge or other encumbrance in favor of any one other than the
Cooperative and Statesman, and the Cooperative has not offered such Note for
sale to any purchaser other than Statesman.
(2) The Cooperative further represents and warrants that it is and shall be
solvent at the time of each sale of any Crop Time Note.
SECTION 3E.06. REMEDIES OF STATESMAN WITH RESPECT TO CROP TIME NOTES
-----------------------------------------------------
PURCHASED UNDER THE PROVISIONS OF THIS ARTICLE THREE.
- ----------------------------------------------------
(1) Breach of Warranty. If any warranty made by the Cooperative under the
------------------
provisions of Section 3E.05 of this Agreement shall prove to have been false in
any material respect as it relates to any Purchased Note, the Cooperative
covenants and agrees promptly upon written demand by Statesman to purchase such
Purchased Note for the Net Balance in immediately available funds. Statesman
covenants and agrees that upon receipt of such payment it will cancel the
endorsement and deliver such Purchased Note to the Cooperative at the address
stated in Section 11.07 of this Agreement. Statesman represents and warrants to
the Cooperative with respect to each such Crop Time Note that the Net Balance
paid to it is the Net Balance of such Note and that except as disclosed in a
writing accompanying such Note, Statesman has not released any party to such
Note from its obligation thereunder, released any security interest directly
securing such Note or consented to any reduction in the amount owing thereon or
the extension of the due date for any payment or installment thereunder. Such
transfer from Statesman to the Cooperative will be without recourse and except
as provided in the immediately preceding sentence, without representation or
warranty of any nature or type.
20
<PAGE>
(2) Determination of Breach. For the purpose of determining whether or not
-----------------------
any warranty made by the Cooperative under the provisions of Section 3E.05 was
false and that the Cooperative is therefore obliged to repurchase any Purchased
Note, the Cooperative shall be bound by a written statement of an officer of
Statesman that in the reasonable judgment of Statesman it has determined that
any obligor under any Purchased Note has refused to make any scheduled payment
under such Note because of any fact which has been represented as otherwise by
the Cooperative to Statesman under the provisions of Section 3E.05 hereof.
SECTION 3E.07. NOTE FORMS. Statesman will provide and the Cooperative
----------
will use forms of Crop Time Notes and credit applications previously approved by
Statesman. In the event Statesman determines that any previously approved form
should not be used, it will so advise the Cooperative and the Cooperative will
discontinue any use of such form.
SECTION 3E.08. PAYMENTS. The Cooperative will on the day of receipt of
--------
any payment on any Purchased Note forward such payment to Statesman at its
Headquarters. In the event the Cooperative shall fail to endorse any check or
other item when necessary to permit its collection, Statesman is authorized, as
its attorney-in-fact to make such endorsement on behalf of the Cooperative.
SECTION 3E.09. OBLIGOR COMPLAINTS AND RETURNED MERCHANDISE.
-------------------------------------------
(1) The Cooperative shall, within three (3) Business Days of its receipt,
provide Statesman with a copy of any written complaint from any obligor relating
to any Purchased Note or any merchandise or service purchased thereunder;
(2) If the obligor on any Purchased Note returns merchandise, for any
reason, within 10 days from the date of the sale, the Cooperative will fully
reimburse such obligor for any down payment and immediately repurchase the
Purchased Note from Statesman for its Net Balance.
SECTION 3E.10. MODIFICATIONS, EXTENSIONS. Statesman may, without
-------------------------
affecting the agreements of the Cooperative herein, change, modify, extend or
renew the dates and amounts of any scheduled payment on any Purchased Note.
SECTION 3E.11 REMEDIES.
--------
Statesman may exercise such remedies with respect to the enforcement of the
Purchased Notes as it may deem appropriate. The Cooperative will cooperate with
Statesman in the enforcement of the Purchased Notes.
ARTICLE IIIF
------------
TERM LOANS
----------
SECTION 3F.01. GENERAL. Statesman may from time to time extend Term Loans
-------
to Customers of the Cooperative and other Persons. Such loans shall be extended
pursuant to separate agreements to be entered into between each such Person and
Statesman.
21
<PAGE>
SECTION 3F.02. TERMS AND CONDITIONS. Nothing contained herein shall
--------------------
obligate Statesman to extend any Term Loan to any person. All decisions with
respect to Term Loans shall be made by Statesman in its sole discretion, subject
to such agreements as Statesman may enter into from time to time with its Term
Loan borrowers.
ARTICLE IV
----------
FINANCING WHOLESALE ACCOUNTS
----------------------------
SECTION 4.01. PURCHASE OF WHOLESALE ACCOUNTS. Statesman shall from time
------------------------------
to time, upon the terms and subject to the conditions contained in this
Agreement, purchase Wholesale Accounts from the Cooperative, provided that
Statesman has determined in its sole and absolute discretion that such Wholesale
Accounts are acceptable to it and as to which approval has not been withdrawn by
Statesman as provided below. All such purchases shall be made without recourse
to the Cooperative except as provided in Sections 4.09 and 4.11 and except so
far as Statesman shall have the right to make charges to the Wholesale Reserve
Account as provided in Section 4.05.
SECTION 4.02. REPAYMENT TERMS OFFERED ON CREDIT SALES. The Cooperative
---------------------------------------
agrees to provide Statesman with a comprehensive list of all credit repayment
plans (the "Repayment Terms") which it plans to offer to Cooperative Wholesale
Account customers. Statesman will review the Repayment Terms to be offered
prior to their implementation by the Cooperative and will advise the Cooperative
of its acceptance of the proposed Repayment Terms. Statesman will purchase only
those invoices which are in conformity with the preestablished Repayment Terms
which have been approved by Statesman. The Cooperative will not make any
changes in the Repayment Terms offered to the Wholesale Account customers
without first obtaining Statesman's written approval.
The requested credit line, anticipated sales volume, financial information,
credit application and any other information which Statesman in its sole
discretion may request shall be obtained by the Cooperative, and each and every
sale to Wholesale Accounts shall be made only in accordance with the Statesman
approved Repayment Terms and the Statesman Approval, which may be withdrawn at
any time before actual delivery of merchandise or rendition of services to the
customer.
SECTION 4.03. PROCEDURES.
----------
(1) Prior to the generation of new receivables, the Cooperative will
provide to Statesman information concerning customers to which the Cooperative
plans to sell merchandise or render a service which will result in the creation
of a Wholesale Account. Statesman will review the information and determine in
its sole and absolute discretion the terms under which the Cooperative may sell
to the customer such that Statesman will purchase the resulting Wholesale
Account (the "Statesman Approval"). Any customer which has been approved by
Statesman will
22
<PAGE>
hereinafter be referred to as an "Approved Wholesale Account." Statesman will
notify the Cooperative in writing of its decision.
(2) Not later than 10:00 a.m. (Richmond, Virginia, time) on each Business
Day, the Cooperative will provide to Statesman information on Approved Wholesale
Accounts being offered to Statesman for purchase. This information shall
include all information which Statesman may reasonably request and shall be in a
form satisfactory to Statesman.
(3) Not later than 12 noon (Richmond, Virginia, time) on the same Business
Day, Statesman will confirm to the Cooperative those Approved Wholesale Accounts
it is purchasing and will prepare and deliver its check drawn on Crestar Bank,
Richmond, Virginia, or other bank satisfactory to the Cooperative, or make an
ACH transfer or wire transfer, for the face amount of the Wholesale Accounts
which Statesman is purchasing less any amount to be placed in the Wholesale
Reserve Account pursuant to Section 4.04 and less the Purchase Discount for
Wholesale Accounts. Statesman may choose not to pay for any Wholesale Account
evidenced by a promissory note or other instrument unless such note or other
instrument has been endorsed and delivered to Statesman.
(4) For purposes of this Article IV, the Purchase Discount for Wholesale
Accounts shall be the product obtained by multiplying the outstanding balance of
the Wholesale Accounts being purchased by (i) the average Historical Charge Off
Percentage of the Cooperative for Wholesale Accounts for the three preceding
fiscal years times (ii) the sum of 1 plus the Average Total Delinquency
Percentage Variance for Wholesale Accounts, plus the anticipated net interest
charges for the current month relating to the outstanding purchased Wholesale
Accounts. Such amount shall be computed according to the following formula:
Discount = Wholesale Accounts being purchased x [(aHCO%) x (1 + ADV)] +
AIC
where
aHCO% = average Historical Charge Off Percentage for Wholesale
Accounts for the three preceding fiscal years which for
purposes of this calculation shall not be less than .35% or
such other percentage as may be from time to time agreed to
by the Cooperative and Statesman.
ADV = Average Total Delinquency Percentage Variance for Wholesale
Accounts.
AIC = the amount by which the anticipated interest charges for the
current month for borrowings relating to outstanding
Wholesale Accounts purchased by Statesman exceed the finance
charges anticipated to be collected during such month by
Statesman on Wholesale Accounts.
(5) Upon receipt of such payment, the Cooperative shall sell, assign, and
convey to Statesman and without any further action on its part, shall be deemed
to have sold, assigned and conveyed to Statesman each such Approved Wholesale
Account, and all of the Cooperative's interest in the goods represented by such
Wholesale Accounts and in all goods that may be returned by customers obligated
on such Wholesale Accounts, all its rights as an unpaid vendor or
23
<PAGE>
lienor, all its rights of stoppage in transit, replevin and reclamation relating
thereto, all its rights in and to all security therefor and guarantees thereof,
and guarantees thereto, all of its rights against third parties with respect
thereto, and all other proceeds thereof, cash or non-cash. Any goods so
recovered or returned shall be segregated in a manner acceptable to Statesman
and held for Statesman's account as owner. The Cooperative shall notify
Statesman promptly of all such returned or recovered goods.
(6) Statesman may at any time and from time to time revoke the Statesman
Approval with respect to any customer of the Cooperative or reduce the amount of
Wholesale Accounts owing from such customer which it will purchase from the
Cooperative or change the Repayment Term approved for such customer. It will
promptly notify the Cooperative of its decision to revoke the Statesman Approval
for any Wholesale Account, or to reduce the amount of such Account or change
terms and Statesman shall not be obligated to purchase any Wholesale Account
arising out of the delivery of any merchandise to or the commencement of any
service for such obligor which occurs after such notice is given to the
Cooperative except as Statesman shall have otherwise agreed. The revocation or
alteration of the Statesman Approval with respect to a customer shall not affect
the right of the Cooperative to extend credit for merchandise or services to any
customer, but all payments received from such customer shall be applied to
earliest invoices first, and payments shall be applied to invoices included in
Wholesale Accounts purchased by Statesman before they are applied to invoices
arising after the revocation or alteration of the Statesman Approval with
respect to such customer or the reduction of the amount of credit approved for
such customer.
SECTION 4.04. WHOLESALE RESERVE ACCOUNT. Statesman shall place in a
-------------------------
reserve account (the "Wholesale Reserve Account") an amount not to exceed one-
eighth of one percent (0.125%) of the aggregate outstanding balance on each
invoice it elects to purchase, provided, however that in no event shall any
additional amount be deducted from the amount paid to the Cooperative under this
Article IV or placed in the Wholesale Reserve Account if the aggregate amount in
the Wholesale Reserve Account is equal to or greater than one quarter of one
percent (0.25%) of the aggregate unpaid balance of all Wholesale Accounts which
Statesman has purchased from the Cooperative (including the invoices being
purchased on such date). Funds in the Wholesale Reserve Account need not be
segregated from other funds of Statesman. If at the end of any fiscal year of
Statesman, the balance in the Wholesale Reserve Account after charges to the
Reserve Account as provided in Section 4.05 is greater than one-eighth of one
percent (0.125%) of the balance owing on Wholesale Accounts which Statesman has
purchased from the Cooperative, no Event of Default shall have occurred and be
continuing and no obligation of the Cooperative to Statesman is then due and
payable, Statesman will upon request of the Cooperative remit such excess to the
Cooperative.
SECTION 4.05. CHARGES TO WHOLESALE RESERVE ACCOUNT. Statesman may in its
------------------------------------
sole and absolute discretion charge losses on Purchased Wholesale Accounts
related to Credit Risk as set forth in Section 4.06 against the Wholesale
Reserve Account. Statesman agrees to add to the Wholesale Reserve Account the
amount received as a recovery less associated collection costs on any purchased
Wholesale Accounts which were previously charged to the Wholesale Reserve
Account. Statesman shall notify the Cooperative promptly in writing of any such
reduction in the Wholesale Reserve Account. As of the end of each month,
Statesman
24
<PAGE>
will provide the Cooperative with a report of transactions in the Wholesale
Reserve Account during such month showing the balance in such account as of the
end of such month.
SECTION 4.06. CREDIT RISK. On all Purchased Wholesale Accounts, Statesman
-----------
agrees to assume any loss which is due solely to the financial inability of the
customer to pay at maturity (the "Credit Risk") unless the representation
contained in paragraph (l)(i) of Section 4.10 was not true at the time Statesman
purchased such Wholesale Account, provided the customer has received and
accepted the goods and/or services which gave rise to such Purchased Wholesale
Account without any Dispute. The term "Dispute" shall mean any dispute,
deduction, claim, offset, defense or counterclaim of any kind, including,
without limitation, any dispute relating to goods or services already paid for
or relating to any obligation to the Cooperative other than the Wholesale
Account on which payment is being withheld.
SECTION 4.07. FACILITY FEE FOR PURCHASED WHOLESALE ACCOUNTS. The
---------------------------------------------
Cooperative will pay to Statesman by the tenth Business Day of each month, or
such later day as may be agreed to by Statesman, a Facility Fee in such amount
as shall be agreed upon from time to time by the Cooperative and Statesman.
SECTION 4.08. PAYMENTS FROM THE COOPERATIVE. If any remittances on
-----------------------------
Wholesale Accounts which have been purchased by Statesman are made directly to
the Cooperative, the Cooperative shall immediately deliver them to Statesman in
Richmond, Virginia, in precisely the form received, and until they are so
delivered they shall be held in trust by the Cooperative for the benefit of
Statesman.
SECTION 4.09. DISPUTES. The Cooperative will promptly notify Statesman of
--------
and settle at the Cooperative's cost and expense, including attorneys' fees, all
Disputes relating to Wholesale Accounts which Statesman has purchased. However,
if any Dispute is not settled by the Cooperative within sixty days after the
invoice date or within such shorter period as Statesman may determine, Statesman
may settle, compromise or litigate such Dispute in Statesman's or the
Cooperative's name upon such terms as Statesman in Statesman's sole discretion
may deem advisable and for the Cooperative's account and risk. Statesman may
also at its discretion and without notice to the Cooperative take possession of
and sell any returned goods at such prices and upon such terms as Statesman
deems advisable. The Cooperative shall promptly pay to Statesman any
deficiency, and all costs and expenses, including attorneys' fees, resulting
from any such Dispute, and if the Cooperative fails to pay such amount,
Statesman may deduct it from any payment it is required to make to the
Cooperative under the terms of this Agreement.
SECTION 4.10. WARRANTIES.
----------
(1) With respect to each Approved Wholesale Account which the Cooperative
offers to sell under this Article IV, the Cooperative warrants to Statesman
that:
(a) It has good title to such Wholesale Account, there is no
restriction on its sale and transfer and the sale and transfer thereof is
otherwise rightful;
25
<PAGE>
(b) Such Wholesale Account is a binding obligation arising from the
sale of merchandise or the provision of a service by the Cooperative in the
ordinary course of business, as described in the invoice relating to such
transaction, to a person or entity specified therein as the obligor, arises out
of legally sufficient consideration, and constitutes the valid and legally
binding obligation of such obligor enforceable in accordance with its terms;
(c) No invoice has been materially altered;
(d) The obligor on such Wholesale Account has no defense, set off or
counterclaim against the Cooperative which is good against it;
(e) The conduct of the Cooperative in making the sale or sales out of
which such Wholesale Account arose was in all material respects in compliance
with all applicable laws and was not induced by fraud, false or misleading
representations or any other manner of unfair or deceptive trade practices or
other unlawful conduct;
(f) All credit information concerning the obligor on such Wholesale
Account was obtained and recorded in strict compliance with all applicable state
and federal laws, and the Cooperative has no reason to believe that any such
information is false, misleading or incomplete in any respect;
(g) All current credit information with respect to such obligor has
been accurately reported to Statesman;
(h) The terms and conditions of the agreement between the Cooperative
and the obligor with respect to such Wholesale Account, including the Repayment
Terms, are not materially different from those approved by Statesman for such
obligor, and the Cooperative has not amended or waived or agreed to amend or
waive any such term or condition or taken any other action which might result in
any constructive or implied waiver or modification thereof;
(i) The Cooperative has no knowledge of any insolvency proceeding
involving the obligor on such Wholesale Account; and
(j) Such Wholesale Account is not subject to any claim, lien, security
interest, charge or other encumbrance in favor of any one other than the
Cooperative and Statesman, and the Cooperative has not offered such Wholesale
Account for sale to any purchaser other than Statesman.
(2) The Cooperative further represents and warrants that it is and shall
be solvent at the time of each sale of Wholesale Accounts.
SECTION 4.11. REMEDIES OF STATESMAN WITH RESPECT TO WHOLESALE ACCOUNTS
--------------------------------------------------------
PURCHASED UNDER THE PROVISIONS OF THIS ARTICLE FOUR.
- ---------------------------------------------------
(1) Breach of Warranty. If any warranty made by the Cooperative under the
------------------
provisions of Section 4.10 of this Agreement shall prove to have been false in
any material respect
26
<PAGE>
as it relates to any Wholesale Account purchased by Statesman, the Cooperative
covenants and agrees promptly upon written demand by Statesman to purchase such
Wholesale Account for the net balance owing thereon, including accrued interest,
in immediately available funds. Statesman covenants and agrees that upon receipt
of such payment it will promptly transfer and assign such Wholesale Account and
all proceeds thereof to the Cooperative. Statesman represents and warrants to
the Cooperative with respect to each such Wholesale Account it sells back to the
Cooperative that the net balance paid to it is the net balance owing on such
Wholesale Account and that except as disclosed in a writing at the time of such
sale, Statesman has not released the obligor thereon of its obligation
thereunder, or consented to any reduction in the amount owing thereon or the
extension of the due date for any payment or installment thereunder. Such
transfer from Statesman to the Cooperative will be without recourse and except
as provided in the immediately preceding sentence, without representation or
warranty of any nature or type.
(2) Determination of Breach. For the purpose of determining whether or not
-----------------------
any warranty made by the Cooperative under the provisions of Section 4.10 was
false and that the Cooperative is therefore obliged to repurchase any Wholesale
Account, the Cooperative shall be bound by a written statement of an officer of
Statesman that in the reasonable judgment of Statesman it has determined that
any obligor under any Wholesale Account has refused to make any scheduled
payment under such contract because of any fact which has been represented as
otherwise by the Cooperative to Statesman under the provisions of Section 4.10
hereof.
SECTION 4.12. WHOLESALE ACCOUNTS WHICH ARE NOT APPROVED. Statesman may
-----------------------------------------
from time to time purchase Wholesale Accounts other than Approved Wholesale
Accounts at such price as may from time to time be agreed to by the parties
hereto. Except for the price and the absence of any obligation of Statesman to
purchase such Wholesale Accounts, and to the extent the parties may otherwise
agree at the time of such sale, all aspects of such sales shall be similar to
the sales of Approved Wholesale Accounts.
SECTION 4.13. NOTICE TO OBLIGORS; STATEMENTS. Statesman may notify the
------------------------------
obligor on each Wholesale Account that Statesman purchases from the Cooperative
that such account has been purchased by Statesman and that all payments with
respect to such Wholesale Accounts and inquiries with respect thereto should be
addressed to Statesman at its address. Such notice may at the option of
Statesman be given in the name of the Cooperative or of Statesman. Thereafter,
Statesman will maintain the records with respect to each such account and send
appropriate statements to each obligor thereon.
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Statesman to purchase Receivables, Installment Sales Contracts,
Wholesale Accounts and Crop Time Notes from it and to make Loans to Customers of
the Cooperative, the Cooperative represents and warrants to Statesman as
follows:
SECTION 5.01. SUBSIDIARIES. The Cooperative has the following
------------
Subsidiaries and none others:
27
<PAGE>
<TABLE>
<CAPTION>
Name of Subsidiary Percentage Owned by Cooperative
------------------ -------------------------------
<S> <C>
AgriLand Exchange, Inc. 100%
Mountain State Greenhouses, Inc. 100%
SSC Insurance Agency, Inc. 100%
Southern States Holdings, Inc. 100%
Southern States Underwriters, Inc. 100%
Virginia Seed Service, Inc. 100%
Wetsel, Inc. 100%
</TABLE>
SECTION 5.02. GOOD STANDING. Each of the Cooperative and its Subsidiaries
-------------
is a corporation organized and existing in good standing under the laws of its
respective jurisdiction of incorporation and each has the corporate power to own
its property and to carry on its business as now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of the properties owned by it therein or in which the transaction
of its business makes such qualification necessary.
SECTION 5.03. CORPORATE AUTHORITY. The Cooperative has full power and
-------------------
authority to enter into this Agreement, to sell Receivables, Approved Contracts,
Eligible Contracts, Wholesale Accounts and Crop Time Notes, to execute and
deliver Receivables Certificates and instruments conveying such Receivables,
contracts and notes, to endorse contracts and notes and to incur the obligations
provided for herein, all of which have been duly authorized by all proper and
necessary corporate action. No consent or approval of stockholders or of any
public authority is required as a condition to the validity of this Agreement or
the sale of any Receivable, Installment Sales Contract, Wholesale Account or
Crop Time Note.
SECTION 5.04. BINDING AGREEMENTS. This Agreement constitutes, and each
------------------
endorsement by the Cooperative of a Purchased Contract, when made and such
Purchased Contract is delivered pursuant hereto for value received, will
constitute, the valid and legally binding obligations of the Cooperative
enforceable against the Cooperative in accordance with its terms.
SECTION 5.05. LITIGATION. There are no proceedings pending or, so far as
----------
the officers of the Cooperative know, threatened before any court or
administrative agency that, in the opinion of the officers of the Cooperative,
will materially adversely affect the financial condition or operations of the
Cooperative or any of its Subsidiaries.
SECTION 5.06. NO CONFLICTING AGREEMENTS. There is no charter, bylaw or
-------------------------
preference stock provision of the Cooperative or any of its Subsidiaries and no
provision of any existing mortgage, indenture, contract or agreement binding on
the Cooperative or any of its Subsidiaries or affecting their respective
properties that would conflict with or in any way prevent the execution,
delivery or carrying out of the terms of this Agreement or the sale or transfer
of any Receivable, Installment Sales Contract, Wholesale Account or Crop Time
Note.
SECTION 5.07. BALANCE SHEET. The consolidated balance sheet of the
-------------
Cooperative and its Subsidiaries as of June 30, 1998, and the related
consolidated statements of
28
<PAGE>
operations, patrons' equity and of cash flows for the period then ended
certified by PricewaterhouseCoopers L.L.P., and the unaudited consolidated
balance sheet of the Cooperative and its Subsidiaries as of September 30, 1998,
and the related statement of operations for the period then ended, heretofore
delivered to Statesman, are complete and correct and fairly present the
financial condition of the Cooperative and its Subsidiaries and the results of
their operations and transactions in their surplus accounts as of the dates and
for the periods referred to therein and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the period involved. There are no liabilities, direct or indirect,
fixed or contingent of the Cooperative or any of its Subsidiaries as of the
dates of such balance sheets that are not reflected therein or in the notes
thereto. There has been no material adverse change in the financial condition or
operations of the Cooperative since the dates of those balance sheets, and there
has been no other material adverse change in the Cooperative.
SECTION 5.08. LICENSES. The Cooperative has all licenses necessary or
--------
desirable for it to conduct its businesses as presently being conducted and such
businesses are in compliance with all applicable laws in all material respects.
SECTION 5.09. EMPLOYEE BENEFIT PENSION PLANS. No fact, including but not
------------------------------
limited to, any Reportable Event as defined in Section 4043 of ERISA, exists in
connection with any employee benefit pension plan of the Cooperative covered by
said Act, which might constitute grounds for the termination of any such plan by
the PBGC or for the appointment of any trustee to administer any such plan by
the appropriate United States District Court.
SECTION 5.10. RECEIVABLES FREE OF LIENS. Except as the Cooperative has
-------------------------
expressly disclosed to Statesmen in writing, no Receivable is subject to any
mortgage, pledge, security interest or other lien or encumbrance of any kind.
ARTICLE VI
----------
CONDITIONS
----------
The Cooperative will not offer to sell any Receivables, Installment Sales
Contracts, Wholesale Accounts or Crop Time Notes to Statesman unless:
SECTION 6.01. LEGAL MATTERS. It shall have satisfied any legal concerns
-------------
reported to the Cooperative by Statesman or its counsel with respect to the
purchase of any Receivable, Installment Sales Contract, Wholesale Account or
Crop Time Note.
SECTION 6.02. EVIDENCE OF CORPORATE ACTION. Statesman shall have received
----------------------------
certified copies of papers evidencing all corporate action taken by the
Cooperative to authorize this Agreement and the sale of Receivables, Installment
Sales Contracts, Wholesale Accounts and Crop Time Notes, and such other papers
as Statesman may reasonably require.
SECTION 6.03. REPRESENTATIONS AND WARRANTIES. Each of the representations
------------------------------
and warranties set forth in Article V hereof shall be true and correct as of the
date of such offer, except to the extent they relate solely to an earlier date.
29
<PAGE>
SECTION 6.04. ABSENCE OF DEFAULTS. No Default or Event of Default shall
-------------------
have occurred and be continuing.
SECTION 6.05. CERTIFICATE OF INCUMBENCY. The Cooperative shall have
-------------------------
delivered to Statesman in a form satisfactory to Statesman a list setting forth
the names and signatures of each officer or employee of the Cooperative who is
authorized to sign Receivables Certificates, to transfer Receivables and to
transfer and endorse Installment Sales Contracts and Crop Time Notes, together
with the signature of such person.
SECTION 6.06. FINANCING STATEMENTS. Statesman shall have received
--------------------
receipted copies of financing statements in appropriate form and showing they
have been filed in the appropriate offices to satisfy the filing requirements of
the applicable Uniform Commercial Code relating to the sale of accounts.
SECTION 6.07. OPINION OF COUNSEL FOR THE COOPERATIVE. Statesman shall
--------------------------------------
have received a favorable written opinion of counsel for the Cooperative dated
as of the date of the first purchase of Receivables, Installment Sales Contracts
or Wholesale Accounts hereunder, and, if so requested by Statesman, annually
thereafter, as to all matters referred to in Article V, except Sections 5.07,
5.08 and 5.09, that financing statements in the appropriate form have been filed
in the appropriate offices in which to file financing statements for any
Receivables sold by the Cooperative and stating that as of the date of such
opinion the indices to financing statements in such offices do not disclose any
financing statements of record showing the Cooperative or any of its
Subsidiaries as debtor and including a description of any accounts, contract
rights, general intangibles or other rights to the payment of money of such
debtor.
SECTION 6.08. CREDIT STANDARDS. The Cooperative shall have delivered to
----------------
Statesman a written statement of its then current standards for extending credit
to its customers and its collection policy for Receivables, Installment Sales
Contracts, Wholesale Accounts and Crop Time Notes, together with any applicable
additions thereto, deletions therefrom or modifications thereof.
ARTICLE VII
-----------
AFFIRMATIVE COVENANTS
---------------------
The Cooperative covenants and agrees with Statesman that so long as the
Cooperative may offer to sell Receivables, Installment Sales Contracts,
Wholesale Accounts or Crop Time Notes to Statesman hereunder and until payment
in full of all Purchased Receivables, Purchased Contracts, Purchased Wholesale
Accounts and Purchased Notes and performance of all other obligations of the
Cooperative hereunder, the Cooperative will:
SECTION 7.01. FINANCIAL STATEMENTS. Furnish to Statesman (i) as soon as
--------------------
available, but in no event more than forty-five (45) days after the end of each
quarterly period in each of its fiscal years, a consolidated balance sheet of
the Cooperative and its Subsidiaries as of the close of such quarter and a
consolidated statement of operations to the close of such quarter, certified by
the chief financial officer of the Cooperative and accompanied by a certificate
of that
30
<PAGE>
officer stating whether any event has occurred that constitutes an Event of
Default hereunder or that would constitute such an Event of Default with the
giving of notice or the lapse of time, or both, and, if so, stating the facts
with respect thereto; (ii) as soon as available, but in no event more than
ninety (90) days after the close of each of the Cooperative's fiscal years, a
copy of the annual audit report of the Cooperative in reasonable detail,
substantially similar to the financial statements referred to in Section 5.07
above, prepared in accordance with generally accepted accounting principles
applied on a basis consistent with that of the preceding year and certified by
PricewaterhouseCoopers L.L.P. or other independent certified public accountants
of recognized national standing, which report shall include a consolidated
balance sheet of the Cooperative and its Subsidiaries as of the end of such
fiscal year, consolidated statements of operations, patrons' equity and of cash
flows for such fiscal year, accompanied by a certificate of said accountants
stating whether any event existed as of the end of such fiscal year that
constituted a Default or an Event of Default hereunder; (iii) promptly upon
their becoming available, copies of all financial statements, reports, notices,
and proxy statements sent by the Cooperative to patrons or stockholders and of
all regular, periodic and special reports or any registration statement filed by
the Cooperative or any of its Subsidiaries with any securities exchange or with
the Securities and Exchange Commission or any governmental authority succeeding
to any or all of the functions of the Securities and Exchange Commission; and
(iv) such additional information, reports, or statements, including interim
financial statements, as Statesman may from time to time reasonably request. The
Cooperative will also upon request permit Statesman and its agents to inspect
its books and records.
SECTION 7.02. TAXES. Pay and discharge all taxes, assessments, and
-----
governmental charges upon it, its income, and its properties prior to the date
on which penalties are attached thereto, unless and to the extent only that such
taxes, assessments, and governmental charges shall be contested by it in good
faith and by appropriate proceedings, and the Cooperative shall have set aside
on its books adequate reserves with respect to any such tax, assessment or
charge so contested.
SECTION 7.03. BUSINESS PLAN. Furnish to Statesman as soon as available,
-------------
but in any event within 120 days after the Cooperative's new fiscal year, a copy
of the Cooperative's new fiscal year business plan which will contain, but not
be limited to, projected balance sheets, profit and loss statements, changes in
cash flow each prepared in accordance with generally accepted accounting
principles consistently applied, estimated usage of indebtedness, and
assumptions utilized in preparing the business plan.
SECTION 7.04. PAYMENT OF OBLIGATIONS. Pay and discharge at or before
----------------------
their maturity all its indebtedness and other obligations and liabilities,
except when the same may be contested in good faith and by appropriate
proceedings, and the Cooperative shall have set aside on its books adequate
reserves with respect to any such obligation or liability.
SECTION 7.05. INSURANCE. Maintain adequate insurance with responsible
---------
companies satisfactory to Statesman in such amounts and against such risks as is
customarily carried by owners of similar businesses and property.
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SECTION 7.06. CORPORATE EXISTENCE, LICENSES, PERMITS, ETC. Maintain its
--------------------------------------------
corporate existence in good standing and maintain all permits and licenses
necessary or desirable for the conduct of its business.
SECTION 7.07. PROPERTIES. Maintain, preserve, and protect all franchises
----------
and trade names and preserve all the remainder of its property used or useful in
the conduct of its business and keep the same in good repair, working order, and
condition, and from time to time make or cause to be made all necessary and
proper repairs, renewals, replacements, betterments, and improvements thereto so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times, and permit Statesman and its agents to
enter upon and inspect such properties.
SECTION 7.08. EMPLOYEE BENEFIT PENSION PLANS. Promptly during each year,
------------------------------
pay contributions that in the judgment of the chief executive and chief
financial officers of the Cooperative after reasonable inquiry are believed
adequate to meet at least the minimum funding standards set forth in Sections
302 through 305 of ERISA, with respect to each employee benefit plan of the
Cooperative, if any, covered by that Act; file each annual report required to be
filed pursuant to Section 103 of ERISA in connection with each such plan for
each year; and notify Statesman within ten (10) days of the occurrence of a
Reportable Event (as defined in Section 4043 of ERISA) that might constitute
grounds for termination of any such plan by PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer any such
plan, provided that nothing contained herein shall prohibit the Cooperative from
terminating any such plan if it has theretofore complied with the provisions of
this Section.
SECTION 7.09. COMPLIANCE WITH LAWS. The Cooperative shall not knowingly
--------------------
be in violation of any laws, ordinances, governmental rules and regulations
(collectively "Laws") to which it is subject and will not knowingly fail to
obtain any licenses, permits, franchises or other governmental authorizations
necessary to the ownership of its property or to the conduct of its business,
which violation or failure to obtain might materially adversely affect the
business, profit, operations, or condition (financial or otherwise) of the
Cooperative, provided, however, that the Cooperative shall be deemed to have
complied with this provision so long as it is contesting in good faith and by
the appropriate proceedings the violation of any such law and has set aside on
its books adequate reserves in respect thereof, if so required, in accordance
with generally accepted accounting principles. Without limiting the foregoing,
the Cooperative agrees to comply, and to cause all persons occupying, leasing or
renting any properties of the Cooperative to comply with all laws relating to
environmental protection.
SECTION 7.10. RECORD RETENTION. Retain records of compliance with all
----------------
applicable consumer protection laws and the log of any complaints for the longer
of twenty-five (25) months or any time period required by applicable law.
SECTION 7.11. BOOKS AND RECORDS. Maintain complete and accurate books and
-----------------
records with respect to all transactions with all account obligors of Purchased
Receivables and Purchased Wholesale Accounts and all parties obligated on
Purchased Contracts and Purchased Notes, including without limitation records of
all sales, deliveries, charges, payments, discounts, allowances and other
credits, make such records available for inspection by Statesman
32
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and its agents at all reasonable times and upon request of Statesman deliver the
same to Statesman at its Headquarters.
SECTION 7.12. COOPERATION. The Cooperative will cooperate with Statesman
-----------
in all reasonable respects in collecting any Receivables, Installment Sales
Contracts or Wholesale Accounts or Crop Time Notes which Statesman has acquired
from the Cooperative, but nothing contained herein shall obligate the
Cooperative to incur any out of pocket expenses.
ARTICLE VIII
------------
NEGATIVE COVENANTS
------------------
The Cooperative covenants and agrees with Statesman that so long as the
Cooperative may offer to sell Receivables, Installment Sales Contracts,
Wholesale Accounts or Crop Time Notes to Statesman hereunder and until payment
in full of all Purchased Receivables, Purchased Contracts, Purchased Wholesale
Accounts and Purchased Notes and performance of all other obligations of the
Cooperative hereunder, without the written consent of Statesman, the Cooperative
will not:
SECTION 8.01. MORTGAGES AND PLEDGES. Create, incur, assume, or suffer to
---------------------
exist any mortgage, pledge, lien, or other encumbrance of any kind upon, or any
security interest in, any of its property or assets, whether now owned or
hereafter acquired, except (i) liens for taxes not yet delinquent or being
contested in good faith and by appropriate proceedings; (ii) liens in connection
with workers' compensation, unemployment insurance, or other social security
obligations; (iii) deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations, surety
or appeal bonds, and other obligations of like nature arising in the ordinary
course of business; (iv) mechanic's, workman's, materialman's, landlord's,
carrier's, or other like liens arising in the ordinary course of business with
respect to obligations that are not due or that are being contested in good
faith; (v) those mortgages, pledges, liens, and encumbrances reflected in the
financial statements referred to in Section 5.07 above; (vi) mortgages, pledges,
liens, and encumbrances in favor of Statesman; (vii) zoning restrictions,
easements, licenses, restrictions on the use of real property or minor
irregularities in the title thereto, which do not, in the opinion of the
Cooperative, materially impair the use of such property in the operation of the
business of the Cooperative or the value of such property for the purposes of
such business; and (viii) any mortgage, encumbrance or other lien upon, or
security interest in, any property hereafter acquired by the Cooperative created
contemporaneously with such acquisition to secure or provide for the payment or
financing of any part of the purchase price thereof, or the assumption of any
mortgage, encumbrance or lien upon, or security interest in, any such property
hereafter acquired existing at the time of such acquisition, or the acquisition
of any such property subject to any mortgage, encumbrance or other lien or
security interest without the assumption thereof, provided that each such
mortgage, encumbrance, lien or security interest shall attach only to the
property so acquired and fixed improvements thereon. Nothing contained in this
Section 8.01 shall prohibit the Cooperative from entering into any lease
required to be capitalized by generally accepted accounting principles in
accordance with the Financial
33
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Accounting Standards Board Statement No. 13 (Accounting for Leases) in effect on
the date of this Agreement, provided such lease is not otherwise prohibited by
the terms of this Agreement.
SECTION 8.02. MERGER, ACQUISITION OR SALE OF ASSETS. (1) Enter into any
-------------------------------------
merger or consolidation with, or acquire all or substantially all of the assets
of, any person, firm, joint venture, or corporation, unless the Cooperative is
the surviving corporation and upon the consummation of its merger the net worth
of the surviving corporation is not less than the net worth of the Cooperative
prior to the merger and there shall exist no Event of Default, provided,
however, that in the case of any merger of a Local Cooperative, as defined in
Article I - Section 1.01, the Cooperative's Chief Financial Officer shall
certify to Statesman Financial Corporation that the Cooperative has Net Worth in
an amount not less than 95% of the Net Worth of the Cooperative immediately
prior to such merger and no event shall have occurred or condition exist which
with the giving of notice or lapse of time, or both, would constitute such an
Event of Default, or (2) sell, lease, or otherwise dispose of all or
substantially all of its assets except in the ordinary course of its business.
SECTION 8.03. CHANGES IN NAME; LOCATION. Without giving Statesman at
-------------------------
least sixty (60) days prior written notice, change its name, its principal place
of business or the place in which it may keep its records relating to
Receivables, Installment Sales Contracts and Wholesale Accounts.
SECTION 8.04. AMENDMENT OF PAYMENT TERMS. Amend or modify any Purchased
--------------------------
Receivable, Purchased Contract or Purchased Wholesale Account or consent to the
extension of the time of any payment or release of any collateral securing the
obligation of the obligor or otherwise waive any term or condition of such
Purchased Receivable, Purchased Contract or Purchased Wholesale Account except
to the extent the Cooperative may deem appropriate to facilitate the ultimate
collection of such obligation.
SECTION 8.05. CREDIT STANDARDS; COLLECTION POLICY. Amend in any material
-----------------------------------
respect its standards for extending credit to its customers or its collection
policy for Receivables, Installment Sales Contracts, Wholesale Accounts and Crop
Time Notes; or make any other amendment or modification to such standards or
policy without having given Statesman not less than ten (10) days prior written
notice thereof.
ARTICLE IX
----------
CONTRIBUTED CAPITAL PLAN
------------------------
SECTION 9.01. DEFINITIONS. As used in this Article the following terms
-----------
shall have the following definitions:
"Contributed Capital Rate" means the ratio of debt to tangible net worth
------------------------
which institutional lenders extending credit to Statesman require it to maintain
from time to time, whether such ratio is stated as an affirmative or negative
covenant, and in the event Statesman is required to maintain different ratios on
different dates, "Contributed Capital Rate" means the ratio which is in effect
------------------------
on the applicable TAPOS Determination Date.
34
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"Determination Period" or "Determination Periods" means the calendar month,
-------------------- ---------------------
the six calendar month period and the twelve calendar month period immediately
preceding the TAPOS Determination Date.
"Minimum Class A Investment" means the number of shares of Statesman Class
--------------------------
A Preferred Stock determined by Statesman as follows:
MI = (HT/(PV x R)) - RE
where
MI = Minimum Class A Investment (stated at the par value).
HT = the highest TAPOS computed for the Cooperative during any of
the three Determination Periods.
PV = the par value of one share of the Statesman Class A
Preferred Stock.
R = the Contributed Capital Rate, expressed as a decimal.
RE = As of the TAPOS Determination Date (x) the product of (i)
the percentage of the total outstanding common stock of
Statesman held by the Cooperative and (ii) the sum of
Statesman's Retained Earnings and Paid In Capital divided by
(y) the par value of Class A Preferred Stock.
If the Minimum Class A Investment computed using this formula is a
fraction, it will be rounded upward to the next whole number of shares.
"TAPOS" means calculated total program outstanding as determined by
-----
Statesman for each of the three Determination Periods according to the following
formula:
TAPOS = RPP + NR + ISF + PN + WA + LN + CCR + L + NBC - SAP
where
RPP = average Purchased Receivables previously purchased and
outstanding during such Determination Period.
NR = Eligible Receivables tendered for purchase subsequent to the
end of the previous Determination Period.
ISF = average net Purchased Contracts outstanding during such
Determination Period.
PN = average net Purchased Notes outstanding during such
Determination Period.
WA = average net Purchased Wholesale Accounts outstanding during
such Determination Period.
35
<PAGE>
LN = average Loans outstanding during such Determination Period.
CCR = average amount outstanding on accounts of customers of the
Cooperative, Local Cooperatives and Dealerships under the
Southern States Credit Card Program during such
Determination Period.
L = average Leases outstanding to the Cooperative, Local
Cooperatives, Dealerships and customers of any of them
during such Determination Period.
NBC = average investment (stated at par value) which Statesman was
required to maintain in CoBank ACB (formerly the National
Bank for Cooperatives) during such Determination Period in
support of Cooperative related borrowings.
SAP = average outstanding Class A Preferred Stock of Statesman
held by the Cooperative during such Determination Period
(stated at the par value).
In the computation for a Determination Period of one month, the amounts of
RPP, ISF, PN, WA, LN, CCR, L, NBC, TD and SAP as of the last Business Day of
such calendar month shall be used as the average for such month. In computations
for other Determination Periods, the average for each such amount shall be
computed using the outstanding amounts as of the last Business Day of each month
in such Determination Period.
"TAPOS Determination Date" means the date during each calendar month on
------------------------
which the month-end calculation is made to determine the amount due.
SECTION 9.02. PURCHASE OF STOCK. Upon the delivery to Statesman of the
-----------------
first Receivables Certificate hereunder the Cooperative will purchase Statesman
Class A Preferred Stock with such par value as will cause it to have a Minimum
Class A Investment in Statesman Class A Preferred Stock and on each TAPOS
Determination Date thereafter it will acquire such additional Statesman Class A
Preferred Stock if any as may be necessary for it to maintain a Minimum Class A
Investment.
SECTION 9.03. REDEMPTION OF CLASS A PREFERRED STOCK. Statesman covenants
-------------------------------------
and agrees that if on any TAPOS Determination Date the amount of Statesman Class
A Preferred Stock held by the Cooperative exceeds the Minimum Class A Investment
computed as of such date, it will, subject to the provisions of Section 9.04,
upon written demand by the Cooperative redeem for cash at its par value those
shares held by the Cooperative which are in excess of the Minimum Class A
Investment determined as of such date. The Cooperative covenants and agrees that
notwithstanding the provisions contained in paragraph (v) of subsection 5(b) of
Article II of the Articles of Incorporation of Statesman the Cooperative shall
not have any right to redeem shares held by it except as provided herein.
SECTION 9.04. CUMULATIVE OBLIGATIONS. The obligation of the Cooperative
----------------------
hereunder to purchase Statesman Class A Preferred Stock shall be in addition to
any other undertaking the Cooperative may have entered into or may hereafter
enter into to purchase such stock as a result of Asset Based Financing or
Installment Sales Financing provided by Statesman
36
<PAGE>
to any Local Cooperative, Independent Cooperative or Dealership of the
Cooperative or any lease financing by Statesman for the Cooperative, and the
obligations of the Cooperative to purchase Statesman Class A Preferred Stock
under, or as a condition to, each such financing arrangement shall be
cumulative.
ARTICLE X
---------
EVENTS OF DEFAULT
-----------------
SECTION 10.01. Each of the following shall constitute an "Event of
Default" hereunder:
(a) Default shall be made in the payment of any amount payable
hereunder, when and as the same becomes due and payable, whether at the stated
maturity thereof or by acceleration or otherwise; or
(b) Default shall be made in the due observance or performance of any
other term, covenant, or agreement contained in this Agreement; or
(c) Any representation or warranty made by the Cooperative herein, or
in any Receivables Certificate or any statement or representation made in any
other certificate, report, or opinion delivered pursuant hereto shall prove to
have been incorrect in any material respect when made; or
(d) The Cooperative or any Subsidiary of the Cooperative shall become
insolvent or unable to meet its obligations as they mature, make an assignment
for the benefit of creditors, consent to the appointment of a trustee or a
receiver, or admit in writing its inability to pay its debts as they mature; or
(e) A trustee or receiver shall be appointed for the Cooperative or
any Subsidiary of the Cooperative or for a substantial part of its properties
without the consent of the Cooperative or such Subsidiary and not be discharged
within thirty (30) days; or
(f) Bankruptcy, reorganization, arrangement, insolvency, or
liquidation proceedings shall be instituted by or against the Cooperative or any
Subsidiary of the Cooperative, and, if instituted against it, be consented to by
the Cooperative or such Subsidiary or remain undismissed for a period of thirty
(30) days; or
(g) Any default shall be made with respect to any obligation for the
payment of borrowed money of the Cooperative or any Subsidiary of the
Cooperative when due or the performance of any other obligation incurred in
connection with any indebtedness for borrowed money of the Cooperative or any
Subsidiary of the Cooperative, if the effect of such default is to accelerate
the maturity of such indebtedness; or
(h) Any final judgment for the payment of money in excess of ONE
HUNDRED THOUSAND DOLLARS ($100,000.00) which in the opinion of Statesman is not
adequately insured or indemnified against shall be rendered against the
Cooperative or any
37
<PAGE>
Subsidiary of the Cooperative and the same shall remain undischarged for a
period of thirty (30) days during which time execution shall not be effectively
stayed; or
(i) Any substantial part of the properties of the Cooperative or any
Subsidiary of the Cooperative shall be sequestered or attached and shall not
have been returned to the possession of the Cooperative or such Subsidiary or
released from such attachment within thirty (30) days; or
(j) The occurrence of a Reportable Event as defined in Section 4043
of ERISA which might constitute grounds for termination of any employee benefit
plan of the Cooperative or any Subsidiary of the Cooperative covered by ERISA by
PBGC or grounds for the appointment by the appropriate United States District
Court of a trustee to administer any such plan; or
(k) Complete or partial withdrawal under Section 4201 or 4204 of
ERISA from a Multiemployer Plan by any other party which is or may be required
under the provisions of ERISA to make a contribution to such Plan, except as a
result of the merger of such party with the Cooperative.
Upon the occurrence and continuation of any Event of Default, Statesman
may, by notice to the Cooperative take any or all of the following actions: (i)
terminate any obligation it may have to review any Receivables, Installment
Sales Contract, Wholesale Account or Crop Time Note tendered to it, (ii)
terminate any obligation it may otherwise have to purchase any Eligible
Receivable, any Approved Contract, any Eligible Contract, any Wholesale Account,
any Approved Note or any Eligible Note, (iii) terminate any obligation it may
have to repay to the Cooperative any part of the Reserve Account so long as any
Purchased Receivable shall remain unpaid, and (iv) terminate any obligation it
may have to repay to the Cooperative any part of the Wholesale Reserve Account
so long as any Purchased Wholesale Account shall remain unpaid.
ARTICLE XI
----------
MISCELLANEOUS
-------------
SECTION 11.01. INDEMNIFICATION.
---------------
(a) The Cooperative shall indemnify Statesman, its officers,
directors, agents and employees and hold them and each of them harmless from and
against all loss, cost, damage, and expense, including reasonable attorney fees,
at any time incurred:
(1) because of any liability of the Cooperative, Manufacturer,
or any other Person (other than Statesman) related to any merchandise which is
the subject of any sale or to any service performed or goods furnished by the
Cooperative, Manufacturer, or any other Person or entity in connection with any
sale out of which any Purchased Receivable, Purchased Contract, Purchased
Wholesale Account or Purchased Note arose, including, but not limited to,
services performed under any warranty or other agreement obligating the
Cooperative, Manufacturer, or other Person or entity to perform such services or
furnish goods; or
38
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(2) because of any liability of the Cooperative for any action
at any time taken or not taken by the Cooperative.
(b) The Cooperative covenants and agrees to indemnify Statesman, its
officers, directors, agent and employees and hold them and each of them harmless
from and against all loss, cost, damage, and expense, including reasonable
attorneys' fees, at any time incurred by them or any of them because of any
violation of state or Federal law or regulation by the Cooperative or other
illegal or actionable conduct resulting from acts or omissions by the
Cooperative or its agents in connection with the sale of merchandise, providing
of services or extension of credit.
SECTION 11.02. NOTICES.
-------
(a) By Statesman. In consideration of the Agreement of the
------------
Cooperative to make a capital investment in Statesman based upon the amount of
asset based loans made by Statesman to customers of the Cooperative, Statesman
covenants and agrees to use its best efforts to notify the Cooperative promptly
in the event it terminates its agreement to extend asset based financing to any
Dealership of the Cooperative (as defined in the Agreement), if it gives any
notice to any such Dealership of any event of default under the terms of any
financing agreement between such Dealership and Statesman, if any such
Dealership defaults in the payment of any obligation for principal or interest
owing to Statesman and such default continues for a period of ten (10) days or
more, or if any officer of Statesman has knowledge that any condition exists or
event has occurred with respect to such Dealership which constitutes grounds for
the termination by Statesman of its financing arrangements with such Dealership
or which would constitute such grounds with the giving of notice or lapse of
time or both.
(b) By Cooperative. In consideration of the agreement by Statesman to
--------------
provide the Cooperative with such notices, the Cooperative covenants and agrees
it will promptly notify Statesman upon the occurrence of any of the following
events: the Cooperative puts any such Dealership on C.O.D. or otherwise limits
sales to such Dealership, or terminates any existing agreement between the
Cooperative and any such Dealership; any such Dealership makes any material
misrepresentation to the Cooperative; there is a material change in the
management or ownership of such Dealership; any material adverse change occurs
in the financial condition or operations of such Dealership; or if to the
knowledge of any executive officer of the Cooperative an event of default has
occurred under any agreement between any such Dealership and the Cooperative or
any condition exists or event has occurred which with the giving of notice or
lapse of time or both would constitute such an Event of Default.
SECTION 11.03. FAILURE TO RECORD SECURITY INSTRUMENT. No failure
-------------------------------------
(intentional or inadvertent) by Statesman to file any financing statement
relating to a security instrument (whether conditional sales contract, chattel
mortgage, or security agreement) contained in or arising out of any Eligible
Contract or any Receivable shall impair or void the obligations of the
Cooperative hereunder.
SECTION 11.04. TERMINATION. This Agreement may be terminated by either
-----------
party hereto by giving the other party ninety days (90) prior written notice of
such termination prior
39
<PAGE>
to any anniversary date of this Agreement. No such termination shall affect any
rights of the parties accruing up to the date of final payment of all Purchased
Contracts, Purchased Receivables, Purchased Wholesale Accounts, Purchased Notes
and Southern States Credit Card Program outstandings previously purchased or
relieve the Cooperative from ownership requirements for Statesman Class A
Preferred Stock as required in Section 9.02.
SECTION 11.05. SUCCESSORS. The covenants, representations, and agreements
----------
herein set forth shall be binding upon the parties hereto and their successors
and assigns.
SECTION 11.06. AMENDMENTS, ETC. No amendment, modification, termination,
----------------
or waiver of any provision of this Agreement shall in any event be effective
unless the same shall be in writing and signed by Statesman, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 11.07. NOTICES, ETC. All notices and other communications
-------------
provided for under this Agreement shall be in writing and mailed, faxed,
telegraphed or delivered, if to the Cooperative at its address at:
SOUTHERN STATES COOPERATIVE, INCORPORATED
6606 WEST BROAD STREET (ZIP 23230)
POST OFFICE BOX 26234
RICHMOND, VIRGINIA 23260
ATTENTION: MR. J. A. HAWKINS
and if to Statesman, at its address at
STATESMAN FINANCIAL CORPORATION
6606 WEST BROAD STREET (ZIP 23230)
POST OFFICE BOX 25567
RICHMOND, VIRGINIA 23260
ATTENTION: MR. JOHN C. FROMAN
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section 11.07. All such notices and communications shall, when mailed,
be effective when deposited addressed as aforesaid.
SECTION 11.08. SEVERABILITY OF PROVISIONS. Any provision of this
--------------------------
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 11.09. HEADINGS. Article and Section headings in this Agreement
--------
are included in such Agreement for the convenience of reference only and shall
not constitute a part of the Agreement for any other purpose.
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SECTION 11.10. GOVERNING LAW. This Agreement shall be construed in
-------------
accordance with and governed by the laws of the Commonwealth of Virginia.
SECTION 11.11. SURVIVAL. All warranties, representations and covenants
--------
made by the Cooperative herein, or in any agreement referred to herein or on any
certificate, document or other instrument delivered by it or on its behalf under
this Agreement, shall be considered to have been relied upon by Statesman and
shall survive the delivery to Statesman of the Receivables, Purchased Contracts,
Purchased Wholesale Accounts and Purchased Notes purchased pursuant hereto
regardless of any investigation made by Statesman or on its behalf. All
statements in any such certificate or other instrument shall constitute
warranties and representations by the Cooperative hereunder. Except as otherwise
expressly provided herein, all covenants made by the Cooperative hereunder or
under any other agreement or instrument shall be deemed continuing until the
Purchased Contracts, Purchased Receivables, Purchased Wholesale Accounts and
Purchased Notes and all other liabilities and obligations of the Cooperative to
Statesman are satisfied in full.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the date first above written.
SOUTHERN STATES COOPERATIVE,
INCORPORATED
ATTEST: By: /s/
----------------------
/s/ Title: ___________________
- -----------------------
STATESMAN FINANCIAL CORPORATION
ATTEST: By: /s/
----------------------
/s/
- ----------------------- Title: ___________________
41
<PAGE>
EXHIBIT 10.4(a)
FINANCING SERVICES AND CONTRIBUTED CAPITAL AGREEMENT
FINANCING SERVICES AND CONTRIBUTED CAPITAL AGREEMENT ("Agreement")
dated as of the 1st day of April, 1998, between SOUTHERN STATES COOPERATIVE,
INCORPORATED (the "Cooperative"), a Virginia corporation, and MICHIGAN LIVESTOCK
CREDIT CORPORATION ("MLCC"), a Virginia corporation.
The Cooperative desires to have MLCC extend from time to time
agricultural production loans, building loans, equipment loans, renovation
loans, revolving credit loans, and other loans to and financing for customers of
the Cooperative and other persons pursuant to separate agreements to be entered
into between each such customer and MLCC and to lease dairy cattle and other
livestock from time to time to customers of the Cooperative and other persons,
and to contract with third parties to feed cattle and other livestock. MLCC
desires to have the Cooperative provide it with equity capital, and each of the
parties desires to have its business operations complement the business
operations of the other party. Therefore, the parties hereto agree as follows:
ARTICLE I
---------
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
SECTION 1.01. DEFINED TERMS. As used in this Agreement, the following
-------------
terms have the following meanings (terms defined in the singular to have the
same meaning when used in the plural and vice versa):
"Agreement" means this Financing Services and Contributed Capital
---------
Agreement, as it may be amended, supplemented, or modified from time to time.
"Agricultural Production Loan" means to loan for a term of not more
----------------------------
than one year, the proceeds of which are used to raise crops or livestock.
"Building Loan" means a loan secured by a mortgage lien on hog barns
-------------
and other amenities or other buildings with the principal amortized over a
period of 7 to 10 years.
"Business Day" means any day other than a Saturday, Sunday or other day
------------
on which commercial banks in Richmond, Virginia, are authorized or required to
close under applicable law.
"Collateral" means any property which is subject to a security interest
----------
or other lien securing the obligations of the obligor to MLCC.
"Customer of the Cooperative" means a member of the Cooperative or
---------------------------
other person who purchases goods or services from the Cooperative.
"Default" means any of the events specified in Article XIV, whether or
-------
not any requirement for the giving of notice or the lapse of time, or both, has
been satisfied.
<PAGE>
"Equipment Loan" means a loan secured by a security interest in farming
--------------
equipment with its principal amortized over a period of 3 to 5 years.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the regulations and published interpretations
thereof.
"ERISA Reportable Event" means any of the events specified in Section
----------------------
14.01 (j) or (k), provided that any requirement for the giving of notice, the
lapse of time, or both, has been satisfied.
"Event of Default" means any of the events specified in Section 14.01,
----------------
provided that any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.
"Headquarters" means the office of MLCC at 6606 West Broad Street, Post
------------
Office Box 25567, Richmond, Virginia 23260.
"Leases" means contracts for the lease of dairy cattle or other
------
livestock for a fixed period of time by MLCC to a Customer of the Cooperative or
other Person.
"Lien" means any mortgage, deed of trust, pledge, security interest,
----
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), charge or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code of Virginia or comparable law of any jurisdiction to evidence
any of the foregoing).
"Livestock Feeding Agreement" means an agreement pursuant to which MLCC
---------------------------
contracts with third Persons to take possession of and feed livestock in order
that such livestock may be sold at a profit.
"Loan" means an Agricultural Production Loan, a Building Loan, an
----
Equipment Loan, a Renovation Loan, a Revolving Credit Loan, or any substantially
similar extension of credit now or hereafter made by MLCC to a Customer of the
Cooperative or other Person.
"Local Cooperative" means any corporation which is managed by the
-----------------
Cooperative under a management agreement or contract.
"Manufacturer" means the original equipment manufacturer of goods
------------
offered for sale by the Cooperative.
"Multi-employer Plan" means a Plan described in Section 4001(a)(3) of
-------------------
ERISA which covers employees of the Cooperative or to which the Cooperative is
or may be required to make contributions under ERISA.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
2
<PAGE>
"Person" means an individual, partnership, corporation, business
------
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority, or other entity of whatever nature.
"Plan" means any employee welfare plan established or maintained by
----
the-Cooperative or to which the Cooperative has made contributions in the past
or may in the future be required to make contributions under ERISA.
"Prohibited Transaction" means any transaction set forth in Section
----------------------
406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended
from time to time.
"Renovation Loan" means a loan with the principal amortized over a
---------------
period of 5 to 7 years, the proceeds of which are used to renovate farm
equipment or farm buildings and other structures.
"Revolving Credit Loan" means a loan which permits the borrower to
---------------------
obtain advances from time to time, make payments from time to time, and borrow
again from time to time.
"Subsidiary" means any corporation the majority of the voting shares
----------
of which at the time are owned directly or indirectly by the Cooperative and/or
by one or more Subsidiaries of the Cooperative.
"Termination Date" means that date on which certain obligations of the
----------------
parties hereunder may be terminated as provided in Section 15.03.
ARTICLE II
----------
AGRICULTURAL PRODUCTION LOANS
-----------------------------
SECTION 2.01. GENERAL. MLCC may from time to time extend Agricultural
-------
Production Loans to customers of the Cooperative and other Persons. Such
financing shall be extended pursuant to separate agreements to be entered into
between each such Person and MLCC.
SECTION 2.02. TERMS AND CONDITIONS. Nothing contained herein shall
--------------------
obligate MLCC to extend any Agricultural Production Loan to any person. All
decisions with respect to Agricultural Production Loans shall be made by MLCC in
its sole discretion, subject to such agreements as MLCC may enter into from time
to time with its Agricultural Production Loan borrowers.
3
<PAGE>
ARTICLE III
-----------
BUILDING LOANS
--------------
SECTION 3.01. GENERAL. MLCC may from time to time extend Building Loans
-------
to Customers of the Cooperative and other Persons. Such loans shall be extended
pursuant to separate agreements to be entered into between each such Person and
MLCC.
SECTION 3.02. TERMS AND CONDITIONS. Nothing contained herein shall
--------------------
obligate MLCC to extend any Building Loan to any person. All decisions with
respect to Building Loans shall be made by MLCC in its sole discretion, subject
to such agreements as MLCC may enter into from time to time with its Building
Loan borrowers.
ARTICLE IV
----------
EQUIPMENT LOANS
---------------
SECTION 4.01. GENERAL. MLCC may from time to time extend Equipment
-------
Loans to Customers of the Cooperative and other Persons. Such financing shall be
extended pursuant to separate agreements to be entered into between each such
Person and MLCC.
SECTION 4.02. TERMS AND CONDITIONS. Nothing contained herein shall
--------------------
obligate MLCC to extend any Equipment Loan to any Person. All decisions with
respect to Equipment Loans shall be made by MLCC in its sole discretion, subject
to such agreements as MLCC may enter into from time to time with its Equipment
Loan borrowers.
ARTICLE V
---------
REVOLVING CREDIT LOANS
----------------------
SECTION 5.01. GENERAL. MLCC may from time to time extend Revolving
-------
Credit Loans to Customers of the Cooperative and other Persons. Such financing
shall be extended pursuant to separate agreements to be entered into between
each such Person and MLCC.
SECTION 5.02. TERMS AND CONDITIONS. Nothing contained herein shall
--------------------
obligate MLCC to extend any Revolving Credit Loan to any Person. all decisions
with respect to Revolving Credit Loans shall be made by MLCC in its sole
discretion, subject to such agreements as MLCC may enter into from time to time
with its Revolving Credit Loan borrowers.
4
<PAGE>
ARTICLE VI
----------
RENOVATION LOANS
----------------
SECTION 6.01. GENERAL. MLCC may from time to time extend Renovation
-------
Loans to Customers of the Cooperative and other Persons. Such financing shall be
extended pursuant to separate agreements to be entered into between each such
Person and MLCC.
SECTION 6.02. TERMS AND CONDITIONS. Nothing contained herein shall
--------------------
obligate MLCC to extend any Renovation Loan to any Person. All decisions with
respect to Renovation Loans shall be made by MLCC in its sole discretion,
subject to such agreements as MLCC may enter into from time to time with its
Renovation Loan borrowers.
ARTICLE VII
-----------
LEASING OF DAIRY CATTLE AND OTHER LIVESTOCK
-------------------------------------------
SECTION 7.01. GENERAL. MLCC may from time to time lease dairy cattle or
-------
other livestock to Customers of the Cooperative and other Persons. Such leases
shall be made pursuant to separate lease agreements to be entered into between
each such Person and MLCC.
SECTION 7.02. TERMS AND CONDITIONS. Nothing contained herein shall
--------------------
obligate MLCC to lease dairy cattle or other livestock to any Person. All
decisions with respect to such leases shall be made by MLCC in its sole
discretion, subject to such agreements as MLCC may from time to time enter into
with the lessees of such dairy cattle or other livestock.
ARTICLE VIII
------------
LIVESTOCK FEEDING PROGRAM
-------------------------
SECTION 8.01. GENERAL. MLCC may from time to time enter into Livestock
-------
Feeding Agreements with Customers of the Cooperative and other Persons. Such
transactions shall be governed by separate agreements to be entered into between
each such Person and MLCC.
SECTION 8.02. TERMS AND CONDITIONS. Nothing contained herein shall
--------------------
obligate MLCC to enter into any livestock feeding program with any Person. All
decisions with respect to such livestock feeding programs shall be made by MLCC
in its sole discretion, subject to such agreements as MLCC may enter into from
time to time with respect to such livestock feeding programs.
5
<PAGE>
ARTICLE IX
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce MLCC to make Loans and extend other credit accommodations to
its Customers and to lease dairy cattle and other livestock to its Customers and
to enter into livestock feeding programs with its Customers, the Cooperative
represents and warrants to MLCC as follows:
SECTION 9.01. SUBSIDIARIES. The Cooperative has the following
------------
Subsidiaries and none others:
Name of Subsidiary Percentage Owned by Cooperative
------------------ -------------------------------
Mountain State Greenhouses, Inc. 100%
SSC Insurance Agency, Inc. 100%
Southern States Holdings, Inc. 100%
Southern States Underwriters, Inc. 100%
Virginia Seed Service, Inc. 100%
Wetsel, Inc. 100%
SECTION 9.02. GOOD STANDING. Each of the Cooperative and its
-------------
Subsidiaries is a corporation organized and existing in good standing under the
laws of its respective jurisdiction of incorporation and each has the corporate
power to own its property and to carry on its business as now being conducted
and is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the properties owned by it therein or in
which the transaction of its business makes such qualification necessary.
SECTION 9.03. CORPORATE AUTHORITY. The Cooperative has full power and
-------------------
authority to enter into this Agreement, and to incur the obligations provided
for herein, all of which have been duly authorized by all proper and necessary
corporate action. No consent or approval of stockholders or of any public
authority is required as a condition to the validity of this Agreement.
SECTION 9.04. BINDING AGREEMENTS. This Agreement constitutes the valid
------------------
and legally binding obligation of the Cooperative enforceable against the
Cooperative in accordance with its terms.
SECTION 9.05. LITIGATION. There are no proceedings pending or, so far
----------
as the officers of the Cooperative know, threatened before any court or
administrative agency that, in the opinion of the officers of the Cooperative,
will materially adversely affect the financial condition or operations of the
Cooperative or any of its Subsidiaries.
SECTION 9.06. NO CONFLICTING AGREEMENTS. There is no charter, bylaw or
-------------------------
preference stock provision of the Cooperative or any of its Subsidiaries and no
provision of any existing mortgage, indenture, contract or agreement binding on
the Cooperative or any of its
6
<PAGE>
Subsidiaries or affecting their respective properties that would conflict with
or in any way prevent the execution, delivery or carrying out of the terms of
this Agreement.
SECTION 9.07. BALANCE SHEET. The consolidated balance sheet of the
-------------
Cooperative and its Subsidiaries as of June 30, 1997, and the related statements
of income and retained earnings and changes in cash flow for the period then
ended certified by Coopers & Lybrand L.L.P., and the unaudited consolidated
balance sheet of the Cooperative and its Subsidiaries as of January 31, 1998,
and the related statement of income for the period then ended, heretofore
delivered to MLCC, are complete and correct and fairly present the financial
condition of the Cooperative and its Subsidiaries and the results of their
operations as of the dates and for the periods referred to therein and have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the period involved. There are no liabilities,
direct or indirect, fixed or contingent of the Cooperative or any of its
Subsidiaries as of the dates of such balance sheets that are not reflected
therein or in the notes thereto. There has been no material adverse change in
the financial condition or operations of the Cooperative since the dates of
those balance sheets, and there has been no other material adverse change in the
Cooperative.
SECTION 9.08. LICENSES. The Cooperative has all licenses necessary or
--------
desirable for it to conduct its businesses as presently being conducted and such
businesses are in compliance with all applicable laws in all material respects.
SECTION 9.09. EMPLOYEE BENEFIT PENSION PLANS. No fact, including but
------------------------------
not limited to, any Reportable Event as defined in Section 4043 of ERISA, exists
in connection with any employee benefit pension plan of the Cooperative covered
by said Act, which might constitute grounds for the termination of any such plan
by the PBGC or for the appointment of any trustee to administer any such plan by
the appropriate United States District Court.
ARTICLE X
---------
CONDITIONS
----------
The Cooperative will not request that MLCC make a Loan or otherwise
extend credit to any Person, lease dairy cattle or other livestock to any
Person, or enter into any livestock feeding program with any Person unless:
SECTION 10.01. LEGAL MATTERS. It shall have satisfied any legal
-------------
concerns reported to the Cooperative by MLCC or its counsel with respect to
making of any Loans, the leasing of any livestock or the entering into of any
livestock feeding program.
SECTION 10.02. EVIDENCE OF CORPORATE ACTION. MLCC shall have received
----------------------------
certified copies of papers evidencing all corporate action taken by the
Cooperative to authorize this Agreement and such other papers as MLCC may
reasonably require.
SECTION 10.03. REPRESENTATIONS AND WARRANTIES. Each of the
------------------------------
representations and warranties set forth in Article IX hereof shall be true and
correct as of the date of such offer, except to the extent they relate solely to
an earlier date.
7
<PAGE>
SECTION 10.04. ABSENCE OF DEFAULTS. No Event of Default as defined in
-------------------
Section 14.01 shall have occurred and be continuing and no event shall have
occurred or condition exist which with the giving of notice or lapse of time or
both would constitute such an Event of Default.
ARTICLE XI
----------
AFFIRMATIVE COVENANTS
---------------------
The Cooperative covenants and agrees with MLCC that so long as the
Cooperative may request that MLCC make a Loan or otherwise extend credit to any
Person, lease dairy cattle or other livestock to any Person, or enter into any
livestock feeding program and until payment in full of all Loans, the payment of
all obligations under Leases and livestock feeding programs and performance of
all other obligations of the Cooperative hereunder, the Cooperative will:
SECTION 11.01. FINANCIAL STATEMENTS. Furnish to MLCC (i) as soon as
--------------------
available, but in no event more than forty-five (45) days after the end of each
quarterly period in each of its fiscal years, a consolidated balance sheet of
the Cooperative and its Subsidiaries as of the close of such quarter and a
profit and loss statement to the close of such quarter, certified by the chief
financial officer of the Cooperative and accompanied by a certificate of that
officer stating whether any event has occurred that constitutes an Event of
Default hereunder or that would constitute such an Event of Default with the
giving of notice or the lapse of time, or both, and, if so, stating the facts
with respect thereto; (ii) as soon as available, but in no event more than
ninety (90) days after the close of each of the Cooperative's fiscal years, a
copy of the annual audit report of the Cooperative in reasonable detail,
substantially similar to the financial statements referred to in Section 9.07
above, prepared in accordance with generally accepted accounting principles
applied on a basis consistent with that of the preceding year and certified by
Coopers & Lybrand L.L.P. or other independent certified public accountants of
recognized national standing, which report shall include a consolidated balance
sheet of the Cooperative and its Subsidiaries as of the end of such fiscal year,
a statement of income and retained earnings for such fiscal year and changes in
cash flow for such fiscal year, accompanied by a certificate of said accountants
stating whether any event existed as of the end of such fiscal year that
constituted an Event of Default hereunder or that would constitute such an Event
of Default with the giving of notice or the lapse of time, or both, and, if so,
stating the facts with respect thereto; (iii) promptly upon their becoming
available, copies of all financial statements, reports, notices, and proxy
statements sent by the Cooperative to patrons or stockholders and of all
regular, periodic and special reports or any registration statement filed by the
Cooperative or any of its Subsidiaries with any securities exchange or with the
Securities and Exchange Commission or any governmental authority succeeding to
any or all of the functions of the Securities and Exchange Commission; and (iv)
such additional information, reports, or statements, including interim financial
statements, as MLCC may from time to time reasonably request.
SECTION 11.02. TAXES. Pay and discharge all taxes, assessments, and
-----
governmental charges upon it, its income, and its properties prior to the date
on which penalties are attached thereto, unless and to the extent only that such
taxes, assessments, and governmental charges shall be contested by it in good
faith and by appropriate proceedings, and the Cooperative
8
<PAGE>
shall have set aside on its books adequate reserves with respect to any such
tax, assessment or charge so contested.
SECTION 11.03. BUSINESS PLAN. Furnish to MLCC as soon as available, but
-------------
in any event within 120 days after the Cooperative's new fiscal year, a copy of
the Cooperative's new fiscal year business plan which will contain, but not be
limited to, projected balance sheets, profit and loss statements, changes in
cash flow each prepared in accordance with generally accepted accounting
principles consistently applied, estimated usage of indebtedness, and
assumptions utilized in preparing the business plan.
SECTION 11.04. PAYMENT OF OBLIGATIONS. Pay and discharge at or before
----------------------
their maturity all its indebtedness and other obligations and liabilities,
except when the same may be contested in good faith and by appropriate
proceedings, and the Cooperative shall have set aside on its books adequate
reserves with respect to any such obligation or liability.
SECTION 11.05. INSURANCE. Maintain adequate insurance with responsible
---------
companies satisfactory to MLCC in such amounts and against such risks as is
customarily carried by owners of similar businesses and property.
SECTION 11.06. CORPORATE EXISTENCE, LICENSES, PERMITS, ETC. Maintain
-------------------------------------------
its corporate existence in good standing and maintain all permits and licenses
necessary or desirable for the conduct of its business.
SECTION 11.07. PROPERTIES. Maintain, preserve, and protect all
----------
franchises and trade names and preserve all the remainder of its property used
or useful in the conduct of its business and keep the same in good repair,
working order, and condition, and from time to time make or cause to be made all
necessary and proper repairs, renewals, replacements, betterments, and
improvements thereto so that the business carried on in connection therewith may
be properly and advantageously conducted at all times, and permit MLCC and its
agents to enter upon and inspect such properties.
SECTION 11.08. EMPLOYEE BENEFIT PENSION PLANS. Promptly during each
----------------------------
year, pay contributions that in the judgment of the chief executive and chief
financial officers of the Cooperative after reasonable inquiry are believed
adequate to meet at least the minimum funding standards set forth in Sections
302 through 305 of ERISA, with respect to each employee benefit plan of the
Cooperative, if any, covered by that Act; file each annual report required to be
filed pursuant to Section 103 of ERISA in connection with each such plan for
each year; and notify MLCC within ten (10) days of the occurrence of a
Reportable Event (as defined in Section 4043 of ERISA) that might constitute
grounds for termination of any such plan by PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer any such
plan, provided that nothing contained herein shall prohibit the Cooperative from
terminating any such plan if it has theretofore complied with the provisions of
this Section.
SECTION 11.09. COMPLIANCE WITH LAWS. Not knowingly be in violation of
-------------------
any laws, ordinances, governmental rules and regulations (collectively "Laws")
to which it is subject and will not knowingly fail to obtain any licenses,
permits, franchises or other governmental authorizations necessary to the
ownership of its property or to the conduct of its
9
<PAGE>
business, which violation or failure to obtain might materially adversely affect
the business, profit, operations, or condition (financial or otherwise) of the
Cooperative, provided, however, that the Cooperative shall be deemed to have
complied with this provision so long as it is contesting in good faith and by
the appropriate proceedings the violation of any such law and has set aside on
its books adequate reserves in respect thereof, if so required, in accordance
with generally accepted accounting principles. Without limiting the foregoing,
the Cooperative agrees to comply, and to cause all persons occupying, leasing or
renting any properties of the Cooperative to comply with all laws relating to
environmental protection.
ARTICLE XII
-----------
NEGATIVE COVENANTS
------------------
The Cooperative covenants and agrees with MLCC that so long as the
Cooperative may request that MLCC make a Loan or otherwise extend credit to any
Person, lease dairy cattle or other livestock to any Person, or enter into any
livestock feeding program and until payment in full of all Loans, the payment of
all obligations under Leases and livestock feeding programs and performance of
all other obligations of the Cooperative hereunder, without the written consent
of MLCC, the Cooperative will not:
SECTION 12.01. MORTGAGES AND PLEDGES. Create, incur, assume, or suffer
---------------------
to exist any mortgage, pledge, lien, or other encumbrance of any kind upon, or
any security interest in, any of its property or assets, whether now owned or
hereafter acquired, except (i) liens for taxes not yet delinquent or being
contested in good faith and by appropriate proceedings; (ii) liens in connection
with workers' compensation, unemployment insurance, or other social security
obligations; (iii) deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations, surety
or appeal bonds, and other obligations of like nature arising in the ordinary
course of business; (iv) mechanic's, workman's, materialman's, landlord's,
carrier's, or other like liens arising in the ordinary course of business with
respect to obligations that are not due or that are being contested in good
faith; (v) those mortgages, pledges, liens, and encumbrances reflected in the
financial statements referred to in Section 9.07 above; (vi) mortgages, pledges,
liens, and encumbrances in favor of MLCC; (vii) zoning restrictions, easements,
licenses, restrictions on the use of real property or minor irregularities in
the title thereto, which do not, in the opinion of the Cooperative, materially
impair the use of such property in the operation of the business of the
Cooperative or the value of such property for the purposes of such business; and
(viii) any mortgage, encumbrance or other lien upon, or security interest in,
any property hereafter acquired by the Cooperative created contemporaneously
with such acquisition to secure or provide for the payment or financing of any
part of the purchase price thereof, or the assumption of any mortgage,
encumbrance or lien upon, or security interest in, any such property hereafter
acquired existing at the time of such acquisition, or the acquisition of any
such property subject to any mortgage, encumbrance or other lien or security
interest without the assumption thereof, provided that each such mortgage,
encumbrance, lien or security interest shall attach only to the property so
acquired and fixed improvements thereon. Nothing contained in this Section 12.01
shall prohibit the Cooperative from entering into any lease required to be
capitalized by generally accepted accounting principles in accordance with the
Financial Accounting Standards Board
10
<PAGE>
Statement No. 13 (Accounting for Leases) in effect on the date of this
Agreement, provided such lease is not otherwise prohibited by the terms of this
Agreement.
SECTION 12.02. MERGER, ACQUISITION OR SALE OF ASSETS. (1) Enter into
-------------------------------------
any merger or consolidation with, or acquire all or substantially all of the
assets of, any person, firm, joint venture, or corporation, unless the
Cooperative is the surviving corporation and upon the consummation of its merger
the net worth of the surviving corporation is not less than the net worth of the
Cooperative prior to the merger and there shall exist no Event of Default as
defined in Section 14.01, provided, however, that in the case of any merger of a
Local Cooperative, as defined in Article I - Section 1.01, the Cooperative's
Chief Financial Officer shall certify to MLCC that the Cooperative has Net Worth
in an amount not less than 95% of the Net Worth of the Cooperative immediately
prior to such merger and no event shall have occurred or condition exist which
with the giving of notice or lapse of time, or both, would constitute such an
Event of Default, or (2) sell, lease, or otherwise dispose of all or
substantially all of its assets except in the ordinary course of its business.
ARTICLE XIII
------------
CONTRIBUTED CAPITAL PLAN
------------------------
SECTION 13.01. DEFINITIONS. As used in this Article the following terms
-----------
shall have the following definitions:
"Contributed Capital Rate" means the ratio of debt to tangible net
------------------------
worth which institutional lenders extending credit to MLCC require it to
maintain from time to time, whether such ratio is stated as an affirmative or
negative covenant, and in the event MLCC is required to maintain different
ratios on different dates, "Contributed Capital Rate" means the ratio which is
------------------------
in effect on the applicable TAPOS Determination Date.
"Determination Period" or "Determination Periods" means the calendar
-------------------- ---------------------
month, the six calendar month period and the twelve calendar month period
immediately preceding the TAPOS Determination Date.
"Minimum Class X Investment" means the number of shares of MLCC Class X
--------------------------
Preferred Stock determined by MLCC as follows:
MI = (HT/(PV x R)) - RE
where
MI = Minimum Class X Investment (stated at the par value).
HT = The highest TAPOS during any of the three Determination
Periods.
PV = The par value of one share of the MLCC Class X Preferred
Stock.
R = The Contributed Capital Rate, expressed as a decimal.
11
<PAGE>
RE = The balance of MLCC's retained earnings as of the TAPOS
Determination Date divided by the par value of Class X
Preferred Stock.
If the Minimum Class X Investment computed using this formula is a
fraction, it will be rounded upward to the next whole number of shares.
"TAPOS" means calculated total program outstanding as determined by
MLCC for each of the three Determination Periods according to the following
formula:
TAPOS = AL + L + LFP + NBC - TD - SAP
where
AL = Average amount of Loans outstanding during such
Determination Period.
L = Average Leases outstanding during such Determination
Period.
LFP = Average cost to MLCC of livestock owned by MLCC which
is subject to a Livestock Feeding Agreement.
NBC = Average investment (stated at par value) which MLCC was
required to maintain in CoBANK ACB during such
Determination Period.
TD = Average term debt which is excluded in the
determination of the Contributed Capital Rate during
such Determination Period.
SAP = Average outstanding Preferred Stock of MLCC of all
classes during such Determination Period (stated at the
par value).
In the computation for a Determination Period of one month, the amounts
of AL, LFP, L, NBC, TD and SAP as of the last Business Day of such calendar
month shall be used as the average for such month. In computations for other
Determination Periods, the average for each such amount shall be computed using
the outstanding amounts as of the last Business Day of each month in such
Determination Period.
"TAPOS Determination Date" means the date during each calendar month on
------------------------
which the month-end calculation is made to determine the amount due.
SECTION 13.02. PURCHASE OF STOCK. Upon the request of MLCC on or after
-----------------
the date of this Agreement, the Cooperative will purchase MLCC Class X Preferred
Stock with such par value as will cause it to have a Minimum Class X Investment
in MLCC Class X Preferred Stock and on each TAPOS Determination Date thereafter
it will acquire such additional MLCC Class X Preferred Stock if any as may be
necessary for it to maintain a Minimum Class X Investment.
SECTION 13.03. REDEMPTION OF CLASS X PREFERRED STOCK. MLCC covenants
-------------------------------------
and agrees that if on any TAPOS Determination Date the amount of MLCC Class X
Preferred Stock held by the Cooperative exceeds the Minimum Class X Investment
computed as
12
<PAGE>
money of the Cooperative or any Subsidiary of the Cooperative when due or the
performance of any other obligation incurred in connection with any indebtedness
for borrowed of such date, it will, subject to the provisions of Section 13.04,
upon written demand by the Cooperative redeem for cash at its par value those
shares held by the Cooperative which are in excess of the Minimum Class X
Investment determined as of such date.
SECTION 13.04. CUMULATIVE OBLIGATIONS. The obligation of the
----------------------
Cooperative hereunder to purchase MLCC Class X Preferred Stock shall be in
addition to any other undertaking the Cooperative may have entered into or may
hereafter enter into to purchase such stock as a result of Loans or Leases or
livestock feeding programs provided by MLCC to any Customer of the Cooperative
or any lease financing by MLCC for the Cooperative, and the obligations of the
Cooperative to purchase MLCC Class X Preferred Stock under, or as a condition
to, each such financing arrangement shall be cumulative.
ARTICLE XIV
-----------
EVENTS OF DEFAULT
-----------------
SECTION 14.01. Each of the following shall constitute an "Event of
Default" hereunder:
(a) Default shall be made in the payment of any amount payable
hereunder, when and as the same becomes due and payable, whether at the stated
maturity thereof or by acceleration or otherwise; or
(b) Default shall be made in the due observance or performance
of any other term, covenant, or agreement contained in this Agreement; or
(c) Any representation or warranty made by the Cooperative
herein or any statement or representation made in any certificate, report, or
opinion delivered pursuant hereto shall prove to have been incorrect in any
material respect when made; or
(d) The Cooperative or any Subsidiary of the Cooperative shall
become insolvent or unable to meet its obligations as they mature, make an
assignment for the benefit of creditors, consent to the appointment of a trustee
or a receiver, or admit in writing its inability to pay its debts as they
mature; or
(e) A trustee or receiver shall be appointed for the Cooperative
or any Subsidiary of the Cooperative or for a substantial part of its properties
without the consent of the Cooperative or such Subsidiary and not be discharged
within thirty (30) days; or
(f) Bankruptcy, reorganization, arrangement, insolvency, or
liquidation proceedings shall be instituted by or against the Cooperative or any
Subsidiary of the Cooperative, and, if instituted against it, be consented to by
the Cooperative or such Subsidiary or remain undismissed for a period of thirty
(30) days; or
(g) Any default shall be made with respect to any obligation for
the payment of borrowed money of the Cooperative or any Subsidiary of the
Cooperative when due or the performance of any other obligation incurred in
connection with any indebtedness for borrowed
13
<PAGE>
money of the Cooperative or any Subsidiary of the Cooperative, if the effect of
such default is to accelerate the maturity of such indebtedness; or
(h) Any final judgment for the payment of money in excess of ONE
MILLION DOLLARS ($1,000,000.00) which in the opinion of MLCC is not adequately
insured or indemnified against shall be rendered against the Cooperative or any
Subsidiary of the Cooperative and the same shall remain undischarged for a
period of thirty (30) days during which time execution shall not be effectively
stayed; or
(i) Any substantial part of the properties of the Cooperative or
any Subsidiary of the Cooperative shall be sequestered or attached and shall not
have been returned to the possession of the Cooperative or such Subsidiary or
released from such attachment within thirty (30) days; or
(j) The occurrence of a Reportable Event as defined in Section
4043 of ERISA which might constitute grounds for termination of any employee
benefit plan of the Cooperative or any Subsidiary of the Cooperative covered by
ERISA by PBGC or grounds for the appointment by the appropriate United States
District Court of a trustee to administer any such plan; or
(k) Complete or partial withdrawal under Section 4201 or 4204 of
ERISA from a Multi-employer Plan by any other party which is or may be required
under the provisions of ERISA to make a contribution to such Plan, except as a
result of the merger of such party with the Cooperative.
Upon the occurrence and continuation of any Event of Default, MLCC
may, by notice to the Cooperative terminate any obligation it may have to review
any application tendered to it for any Loan or other extension of credit, any
Lease or any livestock feeding program
ARTICLE XV
----------
MISCELLANEOUS
-------------
SECTION 15.01. INDEMNIFICATION.
---------------
(a) The Cooperative shall indemnify MLCC, its officers,
directors, agents and employees and hold them and each of them harmless from and
against all loss, cost, damage, and expense, including reasonable attorney fees,
at any time incurred:
(1) because of any liability of the Cooperative,
Manufacturer, or any other Person (other than MLCC) related to any merchandise
which is the subject of any sale or to any service performed or goods furnished
by the Cooperative, Manufacturer, or any other Person or entity in connection
with any sale which, in either case, was financed directly or indirectly by
MLCC, including, but not limited to, services performed under any warranty or
other agreement obligating the Cooperative, Manufacturer, or other Person or
entity to perform such services or furnish goods; or
14
<PAGE>
(2) because of any liability of the Cooperative for any
action at any time taken or omitted to be taken by the Cooperative.
(b) The Cooperative covenants and agrees to indemnify MLCC, its
officers, directors, employees, and agents and hold them and each of them
harmless from and against all loss, cost, damage, and expense, including
reasonable attorneys' fees, at any time incurred by them or any of them because
of any violation of state or Federal law or regulation by the Cooperative or
other illegal or actionable conduct resulting from acts or omissions by the
Cooperative or its agents in connection with the sale of merchandise, providing
of services or extension of credit.
SECTION 15.02. COOPERATION.
-----------
(a) General. Each of the parties hereto covenants and agrees
-------
with the other party that it will cooperate generally with the other in
identifying and soliciting good customers, will make appropriate business
referrals to the other and will generally conduct its business in a manner which
may enhance the business of the other.
(b) Sharing of Information. Each party covenants and agrees that
----------------------
upon request of the other party it will share with such other party financial
and other information it has on its customers and other Persons, provided that
nothing contained herein shall obligate either party to share any information if
so doing would violate any applicable law, any agreement to which it is a party,
or any actual or implied understanding it may have with any Person about the
confidentiality of such information.
(c) Forwarding of Payments. If either party receives any payment
----------------------
which is, or includes any amount which is, properly payable to the other party,
it will promptly remit to the other party such amount as is payable to the other
party
(d) Review by MLCC. MLCC covenants and agrees that it will
--------------
promptly review and respond to any reasonable request for credit, the lease of
livestock or any of its other business service being generally offered by it
which it receives from any Person known by it to be a Customer of the
Cooperative.
SECTION 15.03. TERMINATION. This Agreement may be terminated by either
-----------
party hereto by giving the other party ninety days (90) prior written notice of
such termination prior to any anniversary date of this Agreement. No such
termination shall affect any rights of the parties accruing up to the date of
final payment of all Loans to customers of the Cooperative which MLCC has
previously funded, or Leases or livestock feeding programs which MLCC has
previously entered into, or relieve the Cooperative from ownership requirements
for MLCC Class X Preferred Stock as required in Section 13.02.
SECTION 15.04. SUCCESSORS. The covenants, representations, and
----------
agreements herein set forth shall be binding upon the parties hereto and their
successors and assigns.
SECTION 15.05. AMENDMENTS, ETC. No amendment, modification,
---------------
termination, or waiver of any provision of this Agreement shall in any event be
effective unless the same shall
15
<PAGE>
be in writing and signed by MLCC, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 15.06. NOTICES, ETC. All notices and other communications
------------
provided for under this Agreement shall be in writing and mailed, faxed,
telegraphed or delivered, if to the Cooperative at its address at:
SOUTHERN STATES COOPERATIVE, INCORPORATED
6606 WEST BROAD STREET (ZIP 23230)
POST OFFICE BOX 26234
RICHMOND, VIRGINIA 23260
ATTENTION: MR. J. A. HAWKINS
and if to MLCC, at its address at
MICHIGAN LIVESTOCK CREDIT CORPORATION
6606 WEST BROAD STREET (ZIP 23230)
POST OFFICE BOX 25567
RICHMOND, VIRGINIA 23260
ATTENTION: MR. JOHN C. FROMAN
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section 15.06. All such notices and communications shall, when mailed,
be effective when deposited addressed as aforesaid.
SECTION 15.07. SEVERABILITY OF PROVISIONS. Any provision of this
--------------------------
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 15.08. HEADINGS. Article and Section headings in this Agreement
--------
are included in such Agreement for the convenience of reference only and shall
not constitute a part of the Agreement for any other purpose.
SECTION 15.09. GOVERNING LAW. This Agreement has been entered into, and
-------------
shall be governed in all respects by, the laws of the Commonwealth of Virginia.
SECTION 15.10. SURVIVAL. All warranties, representations and covenants
--------
made by the Cooperative herein, or in any agreement referred to herein or on any
certificate, document or other instrument delivered by it or on its behalf under
this Agreement, shall be considered to have been relied upon by MLCC and shall
survive the making of Loans by MLCC and the entering into by MLCC of any leases
or livestock feeding programs regardless of any investigation made by MLCC or on
its behalf. All statements in any such certificate or other instrument shall
constitute warranties and representations by the Cooperative hereunder. Except
as otherwise expressly provided herein, all covenants made by the Cooperative
hereunder or under any other agreement or instrument shall be deemed continuing
until payment in full of all
16
<PAGE>
Loans, the payment of all obligations under Leases and livestock feeding
programs and performance and satisfaction in full of all other obligations and
liabilities of the Cooperative hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
SOUTHERN STATES COOPERATIVE,
INCORPORATED
ATTEST: By:_______________________________
______________________ Title:____________________________
MICHIGAN LIVESTOCK CREDIT
CORPORATION
ATTEST: By:______________________________
_____________________ Title:___________________________
17
<PAGE>
EXHIBIT 10.4(c)
SECOND AMENDMENT TO FINANCING SERVICES AND
CONTRIBUTED CAPITAL AGREEMENT
This SECOND AMENDMENT TO FINANCING SERVICES AND CONTRIBUTED CAPITAL
AGREEMENT (the "Amendment") is made as of this 25th day of March, 1999, between
SOUTHERN STATES COOPERATIVE, INCORPORATED (the "Cooperative"), a Virginia
corporation, and MICHIGAN LIVESTOCK CREDIT CORPORATION ("MLCC"), a Virginia
corporation.
The parties hereto are parties to a Financing Services and Contributed
Capital Agreement dated as of the 1st day of April, 1998 as amended by an
Amendment to Financing Services and Contributed Capital Agreement dated as of
November 6, 1998 (as so amended, the "Agreement") and desire to amend the
provisions of Section 13.01 of the Agreement.
Accordingly, the parties hereto agree as follows:
AMENDMENT
- ---------
Section 13.01 of the Agreement is amended to read as follows:
SECTION 13.01. DEFINITIONS. As used in this Article the following
-----------
terms shall have the following definitions:
"Contributed Capital Rate" means the ratio of debt to tangible net
------------------------
worth which institutional lenders extending credit to MLCC require it to
maintain from time to time, whether such ratio is stated as an affirmative or
negative covenant, and in the event MLCC is required to maintain different
ratios on different dates, "Contributed Capital Rate" means the ratio which is
------------------------
in effect on the applicable TAPOS Determination Date.
"Determination Period" or "Determination Periods" means the calendar
-------------------- ---------------------
month, the six calendar month period and the twelve calendar month period
immediately preceding the TAPOS Determination Date.
"Minimum Class X Investment" means the number of shares of MLCC Class
--------------------------
X Preferred Stock determined by MLCC as follows:
MI = (HT/(PV x R)) - RE
where
MI = Minimum Class X Investment (stated at the par value).
HT = The highest TAPOS during any of the three Determination Periods.
PV = The par value of one share of the MLCC Class X Preferred Stock.
R = The Contributed Capital Rate, expressed as a decimal.
<PAGE>
RE = The balance of MLCC's retained earnings as of the TAPOS
Determination Date divided by the par value of Class X
Preferred Stock.
If the Minimum Class X Investment computed using this formula is a
fraction, it will be rounded upward to the next whole number of shares.
"TAPOS" means calculated total program outstanding as determined by MLCC
-----
for each of the three Determination Periods according to the following formula:
TAPOS = AL + L + LFP + CA + NBC - TD - SAP
where
AL = Average amount of Loans outstanding during such Determination
Period.
L = Average Leases outstanding during such Determination Period.
LFP = Average cost to MLCC of livestock owned by MLCC which is subject
to a Livestock Feeding Agreement.
CA = Assets acquired in satisfaction of contractual obligations owing
to MLCC, including without limitation, assets acquired by
foreclosure or by transfer in lieu of foreclosure, valued as
carried on the books of MLCC.
NBC = Average investment (stated at par value) which MLCC was required
to maintain in CoBANK ACB during such Determination Period.
TD = Average term debt which is excluded in the determination of the
Contributed Capital Rate during such Determination Period.
SAP = Average outstanding Preferred Stock of MLCC of all classes
during such Determination Period (stated at the par value).
In the computation for a Determination Period of one month, the amounts of
AL, LFP, L, CA, NBC, TD and SAP as of the last Business Day of such calendar
month shall be used as the average for such month. In computations for other
Determination Periods, the average for each such amount shall be computed using
the outstanding amounts as of the last Business Day of each month in such
Determination Period.
"TAPOS Determination Date" means the date during each calendar month on
------------------------
which the month-end calculation is made to determine the amount due.
2
<PAGE>
PRIOR AGREEMENT
- ---------------
Except as otherwise expressly amended by this Amendment, the Agreement is
and shall continue to be in full force and effect in accordance with its terms.
The Cooperative and MLCC further covenant and agree that each reference in any
agreement or other document to the Agreement shall be deemed to refer to the
Agreement as amended by this Amendment and as it may be amended from time to
time hereafter.
This Amendment shall be governed by and construed and be interpreted in
accordance with the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, SOUTHERN STATES COOPERATIVE, INCORPORATED and MICHIGAN
LIVESTOCK CREDIT CORPORATION have caused this Amendment to be executed by their
duly authorized officers all as of the date first above written.
SOUTHERN STATES COOPERATIVE,
INCORPORATED
By: John Hawkins
---------------------------------
Its: Sr. Vice President and CFO
--------------------------------
MICHIGAN LIVESTOCK CREDIT CORPORATION
By: Leslie T. Newton
--------------------------------
Its: V.P. and Treasurer
--------------------------------
3
<PAGE>
EXHIBIT 10.5(a)
SOUTHERN STATES INSURANCE EXCHANGE
of which
SOUTHERN STATES UNDERWRITERS, INCORPORATED
6606 West Broad Street, Richmond, Virginia
is
ATTORNEY-IN-FACT
________________
SUBSCRIBER'S AGREEMENT AND POWER OF ATTORNEY
The undersigned (the "Undersigned") and certain other parties who have
executed agreements identical to this Agreement (all of whom with the
Undersigned, when insured through the reciprocal insurer established hereunder,
are hereinafter collectively referred to as the "Subscribers") desire to engage
in interinsurance or in exchanging contracts of insurance on the reciprocal
plan, and to accept, cede, and retrocede reinsurance of any risks permitted by
law, through an attorney-in-fact having authority to obligate the Subscribers
personally on contracts of insurance or reinsurance ("insurance contracts") made
with any of the Subscribers as a policyholder or with other insureds or
reinsureds, it being understood that no such other insured or reinsured will be
deemed to be a Subscriber by virtue of being an insured or reinsured, and it
being further understood that no person or entity ceding reinsurance to or
purchasing or assuming reinsurance from the insurance reciprocal established
hereunder will be deemed to be a Subscriber by virtue of any such transaction.
It is the intent and purpose of this Subscriber's Agreement and Power of
Attorney (this "Agreement") to vest in an attorney-in-fact the power necessary
to enable the Subscribers to achieve this objective.
Accordingly, and in consideration of the execution of agreements identical
to this Agreement by other Subscribers and of the execution of this Agreement by
the Attorney-in-Fact (identified in Article V below), the Undersigned hereby
joins the other Subscribers to constitute the SOUTHERN STATES INSURANCE EXCHANGE
(the "Reciprocal"), a domestic reciprocal insurer organized and licensed under
the laws of Virginia, with this Agreement setting forth the rights, privileges,
and obligations of the Subscribers as underwriters and as policyholders, and the
powers and duties of the Attorney-in-Fact, all of which is hereby made subject
to the requirements of applicable law.
I. CLASSES OF SUBSCRIBERS; VOTING RIGHTS
Each Subscriber shall be deemed to be either a Class I Subscriber or a
Class II Subscriber. Each Subscriber which is a cooperative association, as
determined by the Advisory Committee (described in Article IV below), shall be
deemed to be a Class I Subscriber, and all other Subscribers shall be deemed to
be Class II Subscribers. Class I Subscribers shall have the sole power to vote
in the election of the Advisory Committee, the removal by Subscribers of members
of the Advisory Committee, or any other affairs of the Reciprocal which the
Advisory Committee may put to a vote of the Subscribers, and only Class I
Subscribers will be entitled to notice of, or to attend, any annual or special
meeting of the Subscribers. On all matters on which the Subscribers are entitled
to vote, each Class I Subscriber shall be entitled to one vote per $100 of the
annual net premiums paid by such Subscriber during the calendar year immediately
preceding the date of such vote. Proxy voting is permitted. There will be no
fractional votes.
<PAGE>
II. SUBSCRIBER'S LIMITED LIABILITY AS AN INTER-INSURER
1. Contingent Assessment Liability. The liability for each Subscriber
subject to assessment for the obligations of the Reciprocal shall not be joint,
but shall be individual and several. Each Subscriber subject to assessment shall
have a contingent assessment liability for payment of actual losses and expenses
incurred while such Subscriber's policy (or policies) is or was in force, but no
Subscriber shall be assessed or charged with an aggregate or contingent
liability on any one policy for obligations incurred by the Reciprocal in any
one calendar year in excess of one times the earned premium on such policy.
2. Assessments. Assessments may be levied from time to time upon the
Subscribers, (i) other than as to nonassessable policies, by the Attorney-in-
Fact upon the prior approval of the Advisory Committee, to the extent permitted
by applicable law, or (ii) as otherwise required by applicable law. Each
Subscriber's share of a deficiency for which an assessment is made, not
exceeding in any event such Subscriber's maximum aggregate contingent liability
as set forth in Section 1 of this Article, shall be computed by applying to the
premiums earned on the Subscriber's policy or policies during the period to be
covered by the assessment, the ratio of the total deficiency to the total
premiums earned during such period upon all policies subject to the assessment.
In computing the earned premiums for the purposes of this section, the gross
premium received by the Reciprocal for a policy shall be used as a base,
deducting therefrom only charges not recurring upon the renewal or extension of
the policy. No Subscriber shall have an offset against any assessment for which
he is liable on account of any claim for unearned premium or losses payable.
3. Time Limit for Assessment. Unless otherwise provided by applicable
law, every Subscriber having contingent liability shall be liable for and shall
pay his share of any assessment as computed and limited in accordance with this
Article if, while such Subscriber's policy is in force or within one year after
its termination, such Subscriber is notified by the Attorney-in- Fact or the
Virginia State Corporation Commission or the receiver of its intention to levy
such assessment, or if delinquency proceedings are commenced against the
Reciprocal under the provisions of chapter 3 of Title 38.1 of the Virginia Code
while such Subscriber's policy is in force or within one year after its
termination.
4. Non-assessable Policies. When, in the judgment of the Advisory
Committee, sufficient reserves for the payment of losses have been accumulated
to make possible the issuance of non-assessable policies, the Advisory Committee
may direct the Attorney-in-Fact to apply to the regulatory bodies of the states
in which the Reciprocal is duly licensed to transact insurance for the necessary
authorization (i) to reduce or extinguish the contingent liability of the
Subscribers under the Reciprocal's policies then in force in such states and
(ii) to omit provisions imposing contingent liability in all policies delivered
or issued for delivery in such states.
III. MEETINGS OF CLASS I SUBSCRIBERS
1. Annual Meetings. The annual meetings of the Class l Subscribers shall
be held annually, on the day and at the place, hour, and location in the state
of Virginia designated by the Advisory Committee. Only Class I Subscribers shall
be entitled to notice of, and to attend, annual meetings.
2. Special Meetings. Special meetings of the Class I Subscribers may be
called by the Attorney-in-Fact or the Advisory Committee. Only Class I
Subscribers shall be entitled to notice of, and to attend, special meetings.
<PAGE>
3. Quorum. The presence in person or by proxy of a majority of the votes
of Class I Subscribers at any annual or special meeting of the Class I
Subscribers shall constitute a quorum for the transaction of business.
4. Notice of Meetings. Written notice stating the place, day, and hour of
every meeting of the Subscribers (and, in case of a special meeting, the purpose
or purposes for which the meeting is called) shall be given to each Class I
Subscriber not less than ten nor more than fifty days previous thereto, either
personally or by mail, by or at the direction of the Secretary of the Advisory
Committee to each Class I Subscriber. Meetings may be held without notice if all
of the Class I Subscribers are present in person or by proxy or if notice is
waived by those Class I Subscribers not present, either before or after such
meeting. If the notice is mailed, such notice shall be deemed to be given when
deposited in the United States mail addressed to the Class I Subscriber at its
address as it appears on the records of the Reciprocal.
5. Action Without a Meeting. Any action which is required or which may be
taken at a meeting of the Class I Subscribers may be taken without a meeting if
a consent in writing, setting forth the action so taken, shall be signed by all
of the Class I Subscribers.
IV. ADVISORY COMMITTEE
1. Membership. There shall be an Advisory committee of not less than six
(6) nor more than fifteen (15) persons. Not less than three-fourths of such
Committee shall be composed of Class I Subscribers or representatives of the
Class I Subscribers other than the Attorney-in-Fact or any person employed by,
representing, or having a financial interest in the Attorney-in-Fact. At each
Annual Meeting of the Subscribers, the Class I Subscribers will determine the
size of the Advisory Committee, and the members of the Advisory Committee will
be elected by a majority of the votes of those Class I Subscribers present or
represented by proxy at the Meeting. Each member shall be elected for a term of
one year and shall serve until his successor is elected and qualified, or until
such member resigns or is removed by the Class I Subscribers or by the Advisory
Board, or until such member's membership ceases automatically as provided in
Section 4 of this Article.
2. Quorum. A majority of the members of the Advisory Committee shall
constitute a quorum for the transaction of business.
3. Action Without a Meeting. Any action which may be taken at a meeting
of the Advisory Committee may be taken without a meeting if a consent in
writing, setting forth the action so taken. shall be signed by all of the
members of the Advisory Committee.
4. Vacancies. Any vacancies on the Advisory Committee occurring between
annual meetings of the Subscribers shall be filled for the unexpired portion of
the term by the remaining members of the Advisory Committee, except that
vacancies caused by the removal of members by the Class I Subscribers shall be
filled for the unexpired portion of the term by the Class I Subscribers.
5. No Uninsured Members. In case the Reciprocal shall for any reason
cease to grant insurance to any Subscriber represented on the Advisory
Committee, such Subscriber and any representative of such Subscriber on the
Advisory Committee shall automatically thereupon cease to be a member of the
Advisory Committee.
6. Personal Liability and Indemnification. No members of the Advisory
Committee shall, as such, incur any personal liability for any loss of any kind,
except for such loss arising by reason of his own gross negligence or willful
misconduct. Each person who at any time serves as a member of the Advisory
Committee shall be indemnified by the Reciprocal against any and all liabilities
incurred by
<PAGE>
him in such capacity or arising out of his status as such a member to the
fullest extent permitted under Virginia law, except there shall be no indemnity
against his gross negligence or willful misconduct.
7. Powers of the Advisory Committee. In addition to all of the powers
necessary or appropriate to perform its duties hereunder or as required by law,
the Advisory Committee shall have full power and discretion:
(i) To adopt regulations applicable to the Attorney-in-Fact, not
inconsistent herewith, as the Advisory Committee may see fit.
(ii) At any time and with or without cause, by a vote of at least three-
fourths of its members, to suspend the Attorney-in-Fact from its
functions or remove it from the office of Attorney-in-Fact and
terminate its powers.
(iii) To fix the amount of travel expenses to be allowed for attendance at
meetings of the Advisory Committee or of sub-committees thereof, and
to fix reasonable compensation to Advisory Committee members for
time spent on behalf of the Reciprocal.
(iv) To appoint such sub-committees of the Advisory Committee as shall be
necessary or appropriate and delegate to such sub-committees
authority to exercise any or all of its own powers.
(v) To place limitations on the authority of the Attorney-in-Fact to
transact insurance on behalf of the Reciprocal.
(vi) to modify the terms of this Subscribers Agreement jointly with the
Attorney-in-Fact; provided that no such modification shall be
effective retroactively, nor as to any insurance contract issued
prior thereto.
(vii) To call special meetings of the Subscribers.
(viii) To disqualify any Subscriber to act further as such for failure to
pay assessments or for acts detrimental to the interests of the
Reciprocal.
(ix) To remove any member of the Advisory Committee, with or without
cause. by vote of a majority of the Advisory Committee.
8. Duties of the Advisory Committee. The Advisory Committee shall have
the following duties.
(i) To supervise the finances of the Reciprocal and the Reciprocal's
operations to such extent as to assure their conformity with this
Agreement.
(ii) To supervise and direct the management of the business and affairs
of the Reciprocal, subject to any limitations set forth in this
Agreement or in applicable law.
(iii) To fix the times and places of its own meetings.
(iv) To elect a Chairman, Vice-Chairman, and Secretary.
(v) To fix, by mutual agreement with the Attorney-in-Fact, the
management fee of the Attorney-in-Fact for its services in
fulfilling its obligations hereunder, provided such fees shall not
exceed during any one year ten percent (10%) of all revenues
received or due on premiums and investment income during such year,
with no deduction being made from such premiums and investment
income for any costs or expenses of the Reciprocal (including, by
way of example rather than limitation, costs of reinsurance).
<PAGE>
(vi) To direct the Attorney-in-Fact in the safeguarding of all moneys
and other assets and in the making and changing of investments.
(vii) To determine proper investments for funds of the Reciprocal not
necessary for the day-to-day business of the Reciprocal, and to
contract with investment advisors and consultants for the
management of the Reciprocal's investment portfolio.
(viii) To cause proper notice of each annual meeting of Subscribers (and
of each special meeting of Subscribers called by it or by the
Attorney-in-Fact) to be mailed by the Secretary to every Class I
Subscriber.
(ix) To select qualified auditors to audit the books and accounts of
the Attorney-in-Fact and the Reciprocal whose report shall be
given to the Advisory Committee.
(x) To fill any vacancy which may occur in the office of
attorney-in-fact at any time by selecting and appointing a
successor and executing thereto in the name and on behalf of each
Subscriber a power of attorney, designation, or other instrument
as may be necessary or proper to enable such successor to act as
attorney-in-fact with all the powers and duties herein given to
the Attorney-in-Fact, without any further action on the part of
the Undersigned; and the Advisory Committee will mail to all the
Subscribers timely notice of each and every such change.
(xi) To fill for the unexpired term any vacancy which may occur in the
Advisory Committee.
(xii) To determine annually the amount of, and to direct the
Attorney-in-Fact to establish and maintain, a special surplus
reserve hereinafter referred to as the "Reserve for
Contingencies".
(xiii) To contract, subcontract, or otherwise enter into contracts or
agreements, for the purpose of securing and obtaining such
services, consultation, and advice, as it may deem necessary or
desirable in fulfilling its obligations under this Agreement.
V. ATTORNEY-IN-FACT
1. Appointment. The Undersigned hereby appoints Southern States
Underwriters, Incorporated ("Underwriters"), a Virginia corporation with its
principal place of business in the Southern States Building, 6606 West Broad
Street, Richmond, Virginia (Henrico County), its attorney-in-fact (when acting
in its capacity as attorney-in-fact for the Subscribers, Underwriters and each
successor to the office of attorney-in-fact are herein referred to as the
"Attorney-in-Fact"), with the powers and duties set forth herein. The scope of
this appointment is limited to the purposes contemplated by this Agreement. In
case of the dissolution, resignation, suspension, removal, or withdrawal of
Underwriters as Attorney-in-Fact the Advisory Committee shall appoint a
successor Attorney-in-Fact.
2. Powers and Duties. The Attorney-in-Fact shall manage the Reciprocal,
subject to the supervision of the Advisory Committee, and shall have the power
to act for and bind the Subscribers in all transactions relating to or arising
out of the operations of the Reciprocal. In addition, the Attorney-in-Fact shall
have all of the powers and responsibilities set forth herein or set forth in the
policies and directives of the Advisory Committee, as well as the power to
perform or execute on behalf of the Reciprocal, in its name or otherwise, any
other act or thing or writing in relation to any transaction by the Reciprocal
which is or may be necessary to carry out the purposes set forth in this
Agreement. Without limiting the generality of the foregoing, the Attorney-in-
Fact shall have the following powers and duties:
(i) To prepare insurance contracts with such terms as it deems proper.
<PAGE>
(ii) To sign insurance contracts in its own name as acting for all of
the Subscribers, or in the name of the Reciprocal on behalf of the
Subscribers, for any kinds of insurance permitted in Article VI of
this Agreement.
(iii) To issue insurance contracts on behalf of the Reciprocal to
Subscribers and to other persons and entities.
(iv) To accept, retrocede, and cede on behalf of the Reciprocal
reinsurance; provided, however, that the terms of all reinsurance
to be accepted shall be subject (either collectively or
individually) to approval or ratification by the Advisory
Committee.
(v) To accept service of process on behalf of the Reciprocal and to
appoint the Secretary of the Commonwealth and his successors in
office, as well as the appropriate officials of other states in
which the Reciprocal is or becomes authorized to transact
business, as agent of the Reciprocal upon whom may be served all
lawful process against or notice to the Reciprocal.
(vi) To bind risks by temporary binder.
(vii) To adjust, settle, and pay any loss covered by any insurance
contract issued by the Reciprocal, by compromise or otherwise; to
receive and give all notices; to receive proofs of loss, agree to
appraisals, and recover amounts due the Reciprocal under all
insurance contracts.
(viii) To acknowledge or contest any claim that may be made on account of
any insurance contracts issued by the Reciprocal, to retain legal
counsel, and to defend, compromise, or settle any suit or
proceeding that may be brought against the Reciprocal on account
of such contracts, and to enter into such other arrangements which
in its judgment shall be expedient to prevent a multiplicity of
suits or to minimize expenses.
(ix) To enforce, in its own name or otherwise, the payment or
performance of any obligation, of any kind whatsoever, of any
person or entity to the Reciprocal; and to institute, prosecute,
defend, compromise, and settle, in its own name or otherwise, any
suit or other legal proceeding arising out of the operations of
the Reciprocal.
(x) To endorse all checks, drafts, and other papers drawn to the order
of the Reciprocal and deposit the same to its account as such
Attorney-in-Fact, and disburse from such funds all claims under
insurance contracts issued by the Reciprocal, and expenses to
settle such claims.
(xi) To offset any dividend, distribution, money, credit, balance, or
any other payment or obligation of any kind whatsoever due or
credited to a Subscriber or a former Subscriber or an insured or a
reinsured, or to any account of any of them, against amounts due
the Reciprocal by such Subscriber, former Subscriber, insured, or
reinsured, or against debits or deficit balances in any account of
any of them.
(xii) To maintain a reserve fund of not less than that required by law.
(xiii) To execute and file any and all instruments and papers, and do any
and all acts, required by the laws of Virginia or any other state
in which the Advisory Committee determines that it is desirable
for the Reciprocal to be licensed or authorized to transact
business.
(xiv) Before resigning, to give to the Advisory Committee at least
ninety (90) days' written notice of its intention so to do.
<PAGE>
(xv) At its option, to delegate in writing any or all of the powers
and duties hereby conferred upon it, at any time and from time to
time, to one or more Deputies and/or Assistant Deputies (who may
be either persons, firms, or corporations) nominated by it,
provided that the Advisory Committee shall first approve such
nominations. The powers of any Deputy or Assistant Deputy shall
be subject to revocation by the Advisory Committee or by the
Attorney-in-Fact at any time upon written notice to such Deputy
or Assistant Deputy (and, in the case of revocation by the
Advisory Committee, to the Attorney-in-Fact). In the event the
Attorney-in-Fact shall, as permitted herein, delegate all of its
powers and duties hereunder, then, upon approval by the Advisory
Committee, the management fee to be paid to the Attorney-in-Fact
hereunder may be withdrawn from the funds of the Reciprocal by
such Deputy, but only to the extent the Attorney-in-Fact would
have otherwise been permitted hereunder to withdraw such funds to
cover such fee.
(xvi) To pay to each member of the Advisory Committee the allowance for
traveling expenses incident to attendance at Advisory Committee
meetings and such other fees or allowances as may be prescribed
by the Advisory Committee.
(xvii) To comply with all applicable bond or other requirements imposed
upon the Attorney-in-Fact under Virginia law or under the law of
any other state in which the Reciprocal is duly licensed to
transact insurance, or as may be prescribed by the Advisory
Committee.
(xviii) To account for all moneys and other property of the Reciprocal
coming into its hands, and to refrain from withdrawing or
appropriating for its own use from the funds of the Reciprocal
any moneys or property to which it is not entitled under this
Agreement.
(xix) To pay out of the funds of the Reciprocal all expenses and
disbursements of every kind and character incident to the
Reciprocal's administration and the exchange of insurance
contacts, including but not limited to the costs of securing,
issuing, exchanging and administering insurance contracts, the
cost of reinsurance, collection expenses, investment expenses,
losses. damages, judgments, court costs, legal expenses, losses
adjustment expenses, license fees, taxes, inspection expenses,
annual meeting expenses, and expenses for audits, examinations,
rating bureaus, and insurance, trade and service organizations;
provided, however, that the Attorney-in-Fact must pay out of its
own funds all customary office and business expenses (including
but not limited to wages paid to employees, fees paid to deputies,
rent, printing, stationery, and postage) and all expenses incurred
in connection with bonds and other legal requirements affecting
the ability of the Attorney-in-Fact to serve in such capacity.
(xx) To deduct for itself from the funds of the Reciprocal an annual
management fee, to the extent and at such times expressly
permitted by the Advisory Committee.
(xxi) To contract, subcontract, or otherwise enter into contracts or
agreements, at its own expense, for the purpose of securing and
obtaining such services, consultation, and advice, as it may deem
necessary or desirable in fulfilling its obligations under this
Agreement.
Each of the foregoing powers and duties of the Attorney-in-Fact shall be
subject to the limitations thereon placed by the Advisory Committee, by other
provisions of this Agreement, or by applicable law.
VI. CONTRACTS OF INSURANCE
The Attorney-in-Fact, while acting as Attorney-in-Fact for the
Subscribers, is authorized to transact on behalf of the Reciprocal any or all of
the classes of insurance (including reinsurance) which a reciprocal insurer may
be permitted to transact under the law of the states in which the Reciprocal is
<PAGE>
duly licensed to transact insurance. subject to the limitations placed on this
authority by the Advisory Board; provided, however, that the Attorney-in-Fact
may not transact such business on behalf of the Reciprocal except in conformity
with applicable law.
VII. GENERAL PROVISIONS
1. Distribution. All savings resulting from the operation of the
Reciprocal, calculated after setting aside the reserves and surplus required by
applicable law together with the Reserve for Contingencies and such additional
reserves for losses and other funds as shall be determined by the Advisory
Committee to be necessary or desirable, may be allocated between classes of
Subscribers, and among the Subscribers of a class on an equitable basis by lines
of insurance, and credited to the Subscriber's individual surplus accounts or
returned to the Subscribers, at such times and in such manner as the Advisory
Committee shall determine in its sole discretion.
2. Termination of Subscribership. The Undersigned may revoke this
Agreement at any time upon written notice to the Attorney-in-Fact. Upon such
revocation, or upon the termination or cancellation (whether by the Undersigned
or otherwise) of all of the Undersigned's insurance contracts issued by the
Reciprocal, or upon the disqualification of the Undersigned as a Subscriber by
the Advisory Committee, the Undersigned will immediately cease to be a
Subscriber, in which event the Undersigned shall cease to assume any liability
as an insurer on any insurance contract issued after the date its subscribership
ceases, it being understood that the terms of the Agreement and provisions of
law applicable to insurance contracts issued prior to such date shall remain in
full operation and effect as to the Undersigned.
3. Settlement of Accounts After Termination. In the event of a
termination of a subscribership, the Attorney-in-Fact shall close the former
Subscriber's account and return to such former Subscriber, as provided in this
Section and subject to offset by the Attorney-in-Fact, the unexpended portion of
the former Subscriber's premium deposit and surplus accounts as such accounts
then stand; provided, however, that such accounts shall be adjusted subsequent
to such termination for any claims, losses, or other expenses attributable to
the policy period for which such Subscriber is responsible notwithstanding
termination of subscribership. The Attorney-in-Fact shall return the amount of
such adjusted accounts to the former Subscriber at such time or over such period
of time as may be selected by the Advisory Committee; provided, however, that
such amounts shall be returned by the end of the third calendar year following
the date of the termination of subscribership: provided, further, in any event,
that if such payment would reduce the funds of the Reciprocal to an amount less
than the sum of the legal reserve, the Reserve for Contingencies, the surplus
required by law, and such additional surplus as the Advisory Committee deems
prudent to the financial condition of the Reciprocal, then such payment shall be
deferred until it can be made without so reducing such funds. If the former
Subscriber's pro rata share of the Reciprocal's reserve for losses account is
represented by a debit or deficit balance, such amount shall be deducted from
any funds due him or, in case such funds are insufficient, the former Subscriber
will pay over to the Attorney-in-Fact the amount of such deficiency upon demand.
In no event shall a former Subscriber receive any distribution or any payment
for credits, surplus, savings, or reserves so long as a claim against such
former Subscriber is outstanding and unpaid, unless otherwise directed by the
Advisory Committee.
4. Conflicts With Applicable Law; Savings Clause. If any provision or
portion of this Agreement conflicts with, or is in any way inconsistent with,
applicable law, then such provision or portion shall be interpreted in a manner
that is consistent with such law and, given this constraint, in a manner that is
as consistent as possible with the intent of this Agreement. If any provision or
portion of
<PAGE>
this Agreement is held to be invalid or unenforceable, such invalidity or
unenforceabiIity shall not affect or impair the remainder of this Agreement
5. Pronouns. Any personal pronoun used herein to refer to the Attorney-
in-Fact shall apply regardless of whether the Attorney-in-Fact is a firm,
corporation, or one or more individuals.
6. Headings. Headings used in this Agreement are for convenience only
and shall not affect the construction of this Agreement.
7. Governing Law. This Agreement shall be interpreted under and governed
by the laws of the Commonwealth of Virginia.
8. Covenant to Perform; Ratification. In consideration of the premises,
the Undersigned covenants that it will fully and faithfully carry out execute,
and perform everything which the Attorney-in-Fact shall by virtue hereof bind
it, and in the same manner the Undersigned hereby ratifies all that the
Attorney-In-Fact may lawfully do or cause to be done by virtue hereof.
The following signature evidences the agreement of the Undersigned to the
terms of this Agreement.
_________________________________
By_______________________________
Its ___________________________
Dated:________________
In consideration of the execution of this Agreement by the party whose
signature appears above, Southern States Underwriters, Incorporated agrees to
the terms of this Agreement.
SOUTHERN STATES UNDERWRITERS,
INCORPORATED
By_______________________________
Its ___________________________
Dated:________________
<PAGE>
EXHIBIT 10.5(b)
AGREEMENT made this 27th day of April, 1988, between Southern States
Insurance Exchange, a Virginia reciprocal insurer (the "Reciprocal") and
Southern States Underwriters, Incorporated, a Virginia corporation
("Underwriters");
In consideration of the mutual covenants and agreements contained
herein the parties agree as follows:
WITNESSETH:
1. The Reciprocal and Underwriters do hereby agree to a modification of
the Subscribers Agreement and Power of Attorney (the "Agreement") to delete from
the Agreement ARTICLE I. CLASSES OF SUBSCRIBERS; VOTING RIGHTS and replace it
with a new Article I as follows:
I. CLASSES OF SUBSCRIBERS; VOTING RIGHTS
Each Subscriber shall be deemed to be either a Class I Subscriber or a
Class II Subscriber. Each Subscriber which is a cooperative association, as
determined by the Advisory Committee (described in Article IV below), shall be
deemed to be a Class I Subscriber, and all other Subscribers shall be deemed to
be Class II Subscribers. Class I Subscribers shall have the sole power to vote
in the election of the Advisory Committee, the removal by Subscribers of members
of the Advisory Committee, or any other affairs of the Reciprocal which the
Advisory Committee may put to a vote of the Subscribers, and only Class I
Subscribers will be entitled to notice of, or to attend, any annual or special
meeting of the Subscribers. On all matters on which the Class I Subscribers are
entitled to vote, each Class I Subscriber shall be entitled to one vote. Proxy
voting is permitted. There will be no fractional votes.
2. The Reciprocal is joining with Underwriters to effect this
modification of the Agreement pursuant to the action of the Advisory Committee
of the Reciprocal at its April 26, 1988, meeting mandating the modification
under the authority granted in Article IV 7 (vi) of the Agreement.
3. The foregoing modification of the Agreement will be communicated by
Underwriters to all subscribers and become a part of each Agreement then in
effect or thereafter entered into effective as of July 1, 1988.
WITNESSETH the following signatures and seals as of this 27th day of
April, 1988.
SOUTHERN STATES INSURANCE EXCHANGE
BY: /s/ Gene A. James
-----------------------------------
Chairman of the Advisory Committee
<PAGE>
SOUTHERN STATES UNDERWRITERS, INCORPORATED
BY: /s/ Gene R. Anderson
-----------------------------------
President
<PAGE>
EXHIBIT 10.6(a)
(As amended to 4/1/93)
MANAGEMENT AGREEMENT
BETWEEN
------------------------------------------------------------------------------
AND
SOUTHERN STATES COOPERATIVE, INCORPORATED
THIS AGREEMENT, made and executed between ____________
______________________________________________, an agricultural cooperative
association of the State of Virginia, with its principal place of business at
_________________________________ (and duly qualified to transact business in
the State of _______________), hereinafter called "Local Cooperative", and
SOUTHERN STATES COOPERATIVE, INCORPORATED, a cooperative agricultural
association of the State of Virginia, with its registered office at 6606 West
Broad Street, Richmond, Virginia, hereinafter called "Southern States", this
_____ day of _____________, 19____.
WHEREAS, the Local Cooperative is a producer-owned and
producer-controlled cooperative association, organized and operated for the
mutual help and benefit of the members thereof, and Southern States is an
agricultural cooperative association, organized and operated for the mutual help
and benefit of its members; and
WHEREAS, Southern States is in a position to furnish quality
supplies and render management, accounting, and other like services to its
members at low cost by reason of its several plants, warehouses, other
facilities, and trained personnel; and
WHEREAS, the Local Cooperative can operate at less expense by
using - along with other similar Local Cooperatives affiliated with Southern
States - the services and supplies now made available by Southern States
W I T N E S S E T H :
That in consideration of the mutual obligations herein
provided, the admission of the Local Cooperative to membership in Southern
States, and other good and valuable consideration, IT IS AGREED BETWEEN THE
PARTIES HERETO that the Local Cooperative shall immediately subscribe to and pay
for one (1) share of the common capital stock of Southern States Cooperative,
Incorporated, and when a share of said stock is issued accordingly, the Local
Cooperative shall thereupon be deemed to have employed Southern States as its
agent and/or attorney in fact to manage its business affairs upon the following
terms:
1. All capital that is necessary or required by the Local
Cooperative for successful and profitable operations shall be obtained, except
<PAGE>
as hereinafter provided, from Southern States at the same rate of interest
charged by Southern States to other affiliated Local Cooperatives, not to exceed
the prevailing legal rate of interest; provided, however, that in the event the
Local Cooperative shall call upon Southern States for capital Southern States
determines is not necessary for successful and profitable operations, or for
capital in excess of the Local Cooperative's net worth, Southern States shall
have the privilege of requiring the Local Cooperative to raise such capital by
the sale of its own investment stock. All capital advanced by Southern States to
the Local Cooperative shall be on open account or on the basis of negotiable
notes executed by the Local Cooperative, and the Local Cooperative, through its
officers and directors, agrees to furnish from time to time any collateral for
such advances that may be required by Southern States. The Local Cooperative at
all times shall have the privilege of raising a part or all of its capital
requirements by the sale of its own investment stock or securities.
2. Southern States shall make available to Local Cooperative
all commodities and supplies manufactured, processed, assembled, handled, or
distributed by it, and the Local Cooperative in turn agrees to use the wholesale
facilities and services of Southern States as its principal source of supply for
all such commodities, recognizing that farmers can perform for themselves
through their own wholesale plants such services at cost to the Local
Cooperative and its members. However, this section shall in no way preclude the
Local Cooperative from handling commodities and supplies manufactured,
processed, assembled, handled, or distributed by others or performing local
custom services that may be beneficial to local patrons.
3. No new services shall be undertaken or existing services
discontinued by, or in behalf of, Local Cooperative until the same have been
approved by the Board of Directors of Local Cooperative.
4. Southern States shall supervise and/or make purchases of
commodities and supplies for the account of the Local Cooperative, and when
purchases are made, shall charge said purchases to Local Cooperative's account
and Southern States may make contracts for the account of the Local Cooperative
in the regular course of its business, including contracts for marketing its
products or the products of members or patrons marketing through the Local
Cooperative, and contracts of agency, including agreements whereby the Local
Cooperative shall act as agent for the sale of farm machinery, farm, garden,
orchard, and other supplies, materials, and equipment used by farmers, and
arrange all the terms thereof, all in accordance with policies previously
determined by the Board of Directors of the Local Cooperative, but without the
necessity of specific authority from the Board for any individual transaction or
any series of transactions.
5. Southern States shall be authorized to draw upon such funds
of the Local Cooperative as shall be required to properly carry on the
operations of the Local Cooperative, and Southern States shall at all times keep
accurate accounts of its receipts and disbursements for the account of the Local
Cooperative and shall repay any advances made by the Local Cooperative and not
expended in its behalf by Southern States within thirty (30) days after demand
by the Local Cooperative, less any amount that may be due Southern States by
Local Cooperative
<PAGE>
6. Services rendered by Southern States to the Local
Cooperative under this Agreement shall include supervision of management and
credit, accounting, internal auditing, procurement and training of personnel,
assistance with local meetings and membership relations, general assistance in
legal, real estate, engineering, traffic, information and publicity, and
merchandising matters, special marketing services, preparation of tax returns,
payment of dividends on any outstanding stock, and distribution of patronage
refunds. Southern States shall perform all services under this Agreement for
Local Cooperative on an actual cost basis. Special charges, such as local legal
fees, special outside audits, engineering and preparation of blueprints of
construction, postage, parcel post, freight, advertising, etc., shall be paid by
the Local Cooperative.
Southern States, at the beginning of each fiscal year,
in the light of the total purchasing volume of the Local Cooperative for the
preceding year and anticipated expenses for the ensuing year, shall advise the
Local Cooperative of the charge to be made by Southern States for the ensuing
year as Southern States' estimated fee for such year for Local Cooperative's
purchasing operations. At the end of each fiscal year, after the actual cost of
rendering such service has been determined by Southern States, in the event the
actual cost shall be less than the estimated fee actually paid, such difference
shall be credited to the Local Cooperative by Southern States. In the event the
actual cost shall be more than the estimated fee actually paid, such difference
shall be paid to Southern States by the Local Cooperative.
Southern States, at the beginning of each fiscal year,
in the light of the total marketing volume of the Local Cooperative for the
preceding year and anticipated expenses for the ensuing year, shall advise the
Local Cooperative of the charge per bushel to be made on Local Cooperative's
monthly volume for the ensuing year, as Southern States' estimated fee for such
year for Local Cooperative's marketing operations. At the end of each fiscal
year, after the actual cost of rendering such service has been determined by
Southern States, in the event the actual cost shall be less than the estimated
fee actually paid, such difference shall be credited to the Local Cooperative by
Southern States. In the event the actual cost shall be more than the estimated
fee actually paid, such difference shall be paid to Southern States by the Local
Cooperative.
7. The Local Cooperative authorizes and directs Southern
States to apply and contract for and otherwise arrange and effect, for and on
behalf of the Local Cooperative, insurance and bond coverage usually carried by
business corporations rendering a local farm supply or petroleum service,
including where the exposure exists:
(1) Fire and lightning extended coverage sprinkler leakage on
buildings, machinery, equipment, and merchandise;
(2) Workmen's Compensation;
(3) Fidelity Bonds;
<PAGE>
(4) Public Liability;
(5) Safe Burglary;
(6) Inside and Outside Holdup;
(7) Automobile Collision, Fire, Theft, Public Liability,and Property
Damage; and
(8) Cargo in Owned Vehicles.
Specific coverage shall be effected promptly by
Southern States upon notification of the necessity for same by the President or
Manager of the Local Cooperative. Southern States is hereby granted wide
discretion in arranging for insurance and bond coverage for the Local
Cooperative, and shall be responsible for losses only to the extent coverage has
been arranged and actually effected. Southern States shall be required to use
only its best judgment in arriving at proper values reported for the account of
the Local Cooperative as required by applicable co-insurance clauses or
otherwise, and the selection of insurance or indemnity companies or other means
of effecting insurance coverage shall be also in the sole discretion of Southern
States. The Local Cooperative agrees to pay all premiums and other costs of said
insurance coverage promptly upon receipt of the notice of the same.
8. The Southern States Employee Welfare Benefit Plans
heretofore adopted by Southern States for the benefit of its employees shall be,
and hereby are, adopted (together with all the included plans) as the Employee
Welfare Benefit Plans of the Local Cooperative for the benefit of its employees
(and Directors, in the case of the Travel Plan), and all amendments and
modifications of said Plans hereafter approved by the Board of Directors of
Southern States (or where appropriate, the Employee Benefits Administrative
Committee [the "EBAC"]) shall apply automatically to the employees (and
Directors, where applicable) of said Local Cooperative; and Southern States
shall advise the Local Cooperative of any such amendment hereafter adopted.
Southern States is authorized to execute such instruments and to perform any and
all acts as may be necessary on behalf of the Local Cooperative to accept,
continue in force, or amend said Plans. As of January 1, 1993, the following are
included plans:
Southern States Medical Plan
Southern States Dental Plan
Southern States Term Life Plan
Southern States Special Accidental Death and Dismemberment Plan
Southern States Travel Accident Plan
Southern States Long Term Disability Plan
Southern States Health Care Spending Account
Southern States Dependent Care Spending Account
Southern States Flexible Benefit Plan
Southern States Employee Assistance Plan
(if applicable in geographic area)
Southern States Severance Plan
9. The Retirement Plan for Employees of Southern States
<PAGE>
Cooperative, Incorporated, as amended and restated effective July 1, 1989,
heretofore adopted by Southern States for the benefit of its employees shall be
and hereby is, adopted as the Retirement Plan of the Local Cooperative for the
benefit of its employees, and all amendments and modifications of said Plan
hereafter approved by the Board of Directors of Southern States (or where
appropriate, the Employee Benefits Administrative Committee [the "EBAC"] or the
Employee Benefits Investment Committee [the "EBIC]) shall apply automatically to
the employees of said Local Cooperative; and Southern States shall advise the
Local Cooperative of any such amendment hereafter adopted. Southern States is
authorized to execute such instruments and to perform any and all acts as may be
necessary on behalf of the Local Cooperative to accept, continue in force, or
amend said Plan.
10. The Southern States Thrift Plan and Trust, as amended and
restated effective January 1, 1987, heretofore adopted by Southern States for
the benefit of its employees shall be and hereby is, adopted as the Thrift Plan
of the Local Cooperative for the benefit of its employees, and all amendments
and modifications of said Plan hereafter approved by the Board of Directors of
Southern States (or where appropriate, the Employee Benefits Administrative
Committee [the "EBAC"] or the Employee Benefits Investment Committee [the
"EBIC"] shall apply automatically to the employees of said Local Cooperative;
and Southern States shall advise the Local Cooperative of any such amendment
hereafter adopted. Southern States is authorized to execute such instruments and
to perform any and all acts as may be necessary on behalf of the Local
Cooperative to accept, continue in force, or amend said Plan.
11. The vacation and sick leave policies of Local Cooperative
shall be the same as the present vacation and sick leave policies of Southern
States. Changes to these policies shall be subject to the approval of the Board
of Directors of Local Cooperative.
12. The Local Cooperative agrees that payment of dividends on
outstanding common or preferred stock, or interest on debentures or interest on
other capital contributions, setting aside reasonable and necessary reserves,
and the payment of patronage refunds to patrons can have an important bearing
upon the operations of the Local Cooperative, and that it will, therefore, first
consult Management of Southern States before such dividends are declared, such
reserves set aside, such interest declared, and such patronage refunds declared
by the Board of Directors of Local Cooperative.
13. If and when the Local Cooperative shall declare a dividend
on its preferred and common stock, or shall authorize payment of interest on
debentures or other capital contributions, the funds for that purpose shall be
turned over to the duly authorized agents of Southern States, together with a
list of stockholders, and owners of such debentures or capital contributions,
and it shall be the duty of Southern States to pay the dividend or interest
pursuant to the terms of the resolutions passed by the Board of Directors of the
Local Cooperative.
<PAGE>
14. In case the Local Cooperative shall declare a patronage
refund in cash and/or instruments evidencing such refund, the funds for that
purpose shall be turned over to the duly authorized agents of Southern States,
and the Local Cooperative shall furnish Southern States with a list of patrons
entitled to the same, and it shall be the duty of Southern States to pay the
refund pursuant to the terms of the resolution passed by the Board of Directors
of the Local Cooperative.
15. The Local Cooperative agrees to follow all accounting
practices prescribed by the Management of Southern States Cooperative,
Incorporated, and agrees to permit accountants, or other persons designated by
said Management of Southern States Cooperative, Incorporated, to audit and
inspect its books and records at such times as said Management may deem
advisable. Southern States shall be required to make at least one audit of the
affairs of the Local Cooperative each year and shall, in addition, cause the
records it keeps for Local Cooperative to be included among the records audited
in the Annual Audit of Southern States by an independent public accounting firm.
Southern States shall review the results of such audits with the Board of
Directors of Local Cooperative from time to time. Any other audits desired by
the Board of Directors of Local Cooperative shall be paid for by the Local
Cooperative.
16. It shall be the policy of the Local Cooperative to enter
into no contract or agreement with any officer or director whereby such officer
or director would receive any financial benefits, direct or indirect, and
differing in any way from the business relations accorded regular members of the
Local Cooperative, or any other kind of contract differing from terms generally
current. Neither shall the Local Cooperative purchase goods or services from any
officers or directors (except farm products produced by such officer or
director), nor shall it employ any son or son-in-law, daughter or
daughter-in-law, of any officers or directors.
17. The Local Cooperative agrees that at the first meeting of
its Board of Directors following the execution of this Agreement, a Credit
Policy based upon the best interests of the Local Cooperative shall be duly
adopted if such policy already shall not be in effect.
18. The Local Cooperative agrees to employ a Manager
satisfactory to Southern States, and to secure such cooperation and working
relations between the Manager of the Local Cooperative and Southern States as is
necessary for efficient and satisfactory operations, and in the event such
cooperation is found not to exist, to discharge such Manager. The compensation
of the Manager and other employees of the Local Cooperative shall, with the
advice of Southern States, be determined by the Board of Directors of Local
Cooperative, provided, in the case of an emergency, Southern States is
authorized to adjust such compensation, subject to approval of such adjustment
at the next meeting of the Board of Directors of Local Cooperative. For the
purpose of arranging a proper Fidelity Bond covering such Manager and all
employees of the Local Cooperative, Local Cooperative agrees that such Manager
and all employees of the Local Cooperative shall be included under the Blanket
Fidelity Bond covering all employees of Southern States and its affiliated Local
Cooperatives, the premium and cost of such coverage to be charged to the account
of the Local Cooperative.
<PAGE>
19. This Agreement shall be in full force and effect during the
current fiscal year, ending June 30, 19___, and shall continue from year to year
thereafter unless and until terminated by either of the parties hereto by the
giving of sixty (60) days' written notice prior to the expiration of the then
current fiscal year, provided that Local Cooperative may not exercise this
privilege of terminating the Agreement unless and until it shall have repaid all
monies that may be due and owing to Southern States.
IN WITNESS WHEREOF, ___________________________________
______________________________________________________________________________
has caused this Agreement to be executed in its name, on its behalf, and under
its corporate seal, by its respective President or Vice President, and attested
by its Assistant Secretary, pursuant to the authority duly invested in them by
its Board of Directors, and SOUTHERN STATES COOPERATIVE, INCORPORATED, has
caused this Agreement to be executed in its name, on its behalf, and under its
corporate seal, by its President and Chief Executive Officer or its Group Vice
President - Retail & Marketing Services and attested by its Secretary or
Assistant Secretary, all done as of this _____ day of ___________________,
19___.
___________________________
___________________________
ATTEST: By:________________________
President
___________________________
Assistant Secretary
(CORPORATE SEAL)
SOUTHERN STATES COOPERATIVE,
INCORPORATED
ATTEST: By:____________________
Title:_________________
(CORPORATE SEAL)
<PAGE>
Attachment A
to EXHIBIT 10.6(a)
SCHEDULE IDENTIFYING OMITTED DOCUMENTS
Managed Local Cooperatives Having Management Agreements
with the Company Substantially in the Form of the
Management Agreement Filed as EXHIBIT 10.7(a):
Augusta Petroleum Cooperative, Incorporated
Southern States Beckley Cooperative, Incorporated
Southern States Bedford Cooperative, Incorporated
Southern States Bowling Green Petroleum Cooperative, Incorporated
Southern States Breck Cooperative, Incorporated
Southern States Bristol Cooperative, Incorporated
Brunswick Cooperative Association, Incorporated
Southern States Buckhannon Cooperative, Incorporated
Southern States Campbell Cooperative, Incorporated
Southern States Carroll County Cooperative, Incorporated
Southern States Charlottesville Cooperative, Incorporated
Southern States Chatham Cooperative, Incorporated
Southern States Chesapeake Association, Incorporated
Southern States Clark Cooperative, Incorporated
Southern States Clarksburg Cooperative, Incorporated
Culpeper Petroleum Cooperative, Incorporated
Southern States Cumberland Cooperative, Incorporated
Southern States Cynthiana Cooperative, Incorporated
<PAGE>
Southern States Danville Cooperative, Incorporated
Farmers Cooperative, Inc.
Southern States Flemingsburg Cooperative, Incorporated
Southern States Frederick Cooperative, Incorporated
Southern States Front Royal Cooperative, Incorporated
Southern States Galax Cooperative, Incorporated
Southern States Georgetown Cooperative, Incorporated
Southern States Glasgow Cooperative, Incorporated
Southern States Hampstead Cooperative, Incorporated
Southern States Hardin Cooperative, Incorporated
Southern States Henderson Cooperative, Incorporated
Southern States Hopkinsville Cooperative, Incorporated
Southern States Hopkinsville Petroleum Cooperative, Incorporated
Southern States Horse Cave Cooperative, Incorporated
Southern States Huntington Cooperative, Incorporated
Kent Cooperative, Incorporated
Southern States Leitchfield Cooperative, Incorporated
Southern States Lexington Cooperative, Incorporated
Southern States London Cooperative, Incorporated
Southern States Loudoun County Cooperative, Incorporated
Southern States Madisonville Cooperative, Incorporated
Southern States Marion Cooperative, Incorporated
Southern States Marlinton Cooperative, Incorporated
Marshall County Cooperative, Incorporated
Southern States Martinsburg Cooperative, Incorporated
Southern States Martinsville Cooperative, Incorporated
<PAGE>
Southern States Maysville Cooperative, Incorporated
Southern States Milford Cooperative, Incorporated
Southern States Morgantown Cooperative, Incorporated
Southern States Mount Airy Cooperative, Incorporated
Southern States Oak Hill Cooperative, Incorporated
Southern States Oakland Cooperative, Incorporated
Southern States Owenton Cooperative, Incorporated
Southern States Petersburg Cooperative, Incorporated
Southern States Pulaski Cooperative, Incorporated
Southern States Roanoke Cooperative, Incorporated
Rockingham Petroleum Cooperative, Incorporated
Russell County Cooperative, Incorporated
Southern States Russellville Cooperative, Incorporated
Southern States Shelbyville Cooperative, Incorporated
Southern States Simpson Cooperative, Incorporated
Southern States Smyrna-Clayton Cooperative, Incorporated
Southern States Somerset Cooperative, Incorporated
Southern States Southside Cooperative, Incorporated
Southern States Spencer Cooperative, Incorporated
Southern States Taneytown Cooperative, Incorporated
Southern States Tazewell Cooperative, Incorporated
Southern States Tidewater Petroleum Cooperative, Incorporated
Washington Farmers Cooperative, Incorporated
Southern States Winchester Cooperative, Incorporated
Southern States Woodsboro Cooperative, Incorporated
* None of the management agreements between the Company and the local
cooperatives listed above differ in any material way from the prototype
<PAGE>
management agreement provided as Exhibit 10.6(a) to this Registration Statement.
<PAGE>
EXHIBIT 10.6(b)
MANAGEMENT/OPERATING AGREEMENT
------------------------------
THIS AGREEMENT is made as of this 1st day of March, 1991, by and
between Orange-Madison Cooperative Farm Service, Inc. ("Orange-Madison"), a
nonstock corporation organized pursuant to the Virginia Agricultural Association
Act, and Southern States Cooperative, Inc. ("Southern States"), a corporation
organized pursuant to the Virginia Agricultural Cooperative Association Act.
--------------------
Orange-Madison is an agricultural cooperative association
organized and operated for the mutual help and benefit of the members
thereof.
Orange-Madison owns and operates three retail stores located in
Madison, Orange, and Gordonsville, Virginia and various other
facilities and equipment.
Southern States is an agricultural cooperative association
organized and operated for the mutual help and benefit of the members
thereof.
Southern States, among other services that it provides to its
members, has the ability and the expertise to provide management and
related services to independent local agricultural cooperative
associations in an efficient and cost-effective manner.
Orange-Madison has experienced operating losses for the past
several operating years and has been exploring and investigating
various alternatives to eliminate future operating losses while
continuing to provide a full range of services to its member-patrons.
In an effort, and with the intention, to (i) retain ownership of
its assets, (ii) retain its status as an independent local
agricultural cooperative association, (iii) eliminate future operating
losses, and (iv) continue to provide a full range of services to its
member-patrons, Orange-Madison has discussed with Southern States
various arrangements whereby Southern States would furnish supplies
and render certain management and related services to certain
activities of Orange-Madison.
Southern States is willing to furnish supplies and to render
management and related services to certain activities of Orange-
Madison as set forth in this Agreement.
<PAGE>
Orange-Madison desires to retain Southern States to furnish
supplies and to render management and related services for certain
activities of Orange-Madison as set forth in this Agreement.
------------------------------
NOW, THEREFORE, in consideration of the mutual obligations and
covenants contained herein, Orange-Madison and Southern States agree as follows:
1. Definitions. As used herein, the following terms shall have the
-----------
following meanings:
a. Advance Account Rate. The term "Advance Account Rate" shall
--------------------
mean the Co-Bank National Seasonal Variable Rate (as it exists from time to
time), plus one-quarter percent (1/4%).
b. Business. The term "Business" shall mean the activities and
--------
business directly associated with or relating to Managed Assets, including the
operations relating to the retail stores and the facilities included among the
Managed Assets but excluding the operations relating to the facilities included
among the Excluded Assets.
c. Claims. The term "Claims" shall include, without limitation,
------
claims, demands, suits, causes of action for personal injury or property damage
(including any depreciation of property values, lost use of property,
consequential damages arising directly or indirectly out of Environmental
Conditions); actual or threatened damages to natural resources; claims for the
recovery of response costs or administrative or judicial orders directing the
performance of investigations, response or remedial actions under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"),
42 U.S.C. (S) 9601, et seq.; the Toxic Substance Control Act ("TSCA"), 15 U.S.C.
-- ---
(S) 2601, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. (S)
-- ---
1802, et seq.; the Resources Conservation and Recovery Act ("RCRA"), 42 U.S.C.
-- ---
(S) 9601, et seq.; the Clean Water Act ("CWA"), 33 U.S.C. (S) 1251, et seq.; the
-- --- -- ---
Safe Drinking Water Act, 42 U.S.C. (S) 300(f), et seq.; the Clean Air Act
-- ---
("CAA"), 42 U.S.C. (S) 7401, et seq. or other Environmental Laws, including the
-- ---
laws and regulations promulgated by the Commonwealth of Virginia; a requirement
to implement "corrective action" pursuant to any order or permit issued pursuant
to RCRA; claims for restitution, contribution or equitable indemnity from third
parties or any governmental agency; fines, penalties, liens against property;
claims for injunctive relief or other orders or notices of violation from
federal, state or local agencies or courts; and, with regard to any present or
former employees, exposure to or injury from Environmental Conditions or
Environmental Noncompliance.
-2-
<PAGE>
d. Effective Date. The term "Effective Date" shall mean March
--------------
1, 1991, on which date Southern States shall assume its duties with respect to
the management of the Business and the Managed Assets.
e. Environmental Conditions. The term "Environmental
------------------------
Conditions" shall mean conditions of the environment, including the natural
resources (including flora and fauna), soil, surface water, ground water, any
present or potential drinking water supply, subsurface strata or the ambient
air, relating to or arising out of the use, handling, storage, treatment,
recycling, generation, transportation, off-site shipment, release, spilling,
leaking, pumping, pouring, emptying, discharging, injecting, escaping, leaching,
disposal, dumping or threatened release of Hazardous Materials by Orange-Madison
or Orange-Madison's predecessors in interest, agents, representatives, employees
or independent contractors.
f. Environmental Expenses. The term "Environmental Expenses"
----------------------
shall include any liability, loss, cost or expense including, without
limitation, costs of investigation, cleanup, remedial or response action, the
costs associated with posting financial assurances for the completion of
response, remedial or corrective actions, the preparation of any closure or
other necessary or required plans or analyses or other reports or analyses
submitted to or prepared by regulating agencies, including the cost of health
assessments, epidemiological studies and the like, retention of engineers and
other expert consultants, legal counsel, capital improvements, operation and
maintenance testing and monitoring costs, power and utility costs and pumping
taxes or fees, and administrative costs incurred by governmental agencies.
g. Environmental Laws. The term "Environmental Laws" shall mean
------------------
CERCLA, TSCA, the Hazardous Materials Transportation Act, 49 U.S.C. (S) 1802, et
--
seq., RCRA, CWA, the Safe Drinking Water Act, 42 U.S.C. (S) 300(f), et seq.,
- --- -- ---
CAA, and the plans, rules, regulations or ordinances adopted, or other criteria
and guidelines promulgated pursuant to the preceding laws or other similar laws,
regulations, rule or ordinance now or hereafter in effect, including laws and
regulations promulgated by the Commonwealth of Virginia.
h. Environmental Noncompliance. The term "Environmental
---------------------------
Noncompliance" means, but is not limited to: (i) the release or threatened
release of any Hazardous Materials into the environment, any storm drain, sewer,
septic system or publicly owned treatment works, in violation of any effluent or
emission limitations, standards or other criteria or guidelines established by
any federal, state or local law, regulation, rule, ordinance, plan or order;
(ii) any noncompliance of physical structure, equipment, process or facility
with the requirements of building or fire codes, zoning or land use regulations
or ordinance, conditional use permits and the like; (iii) any noncompliance with
federal, state or local requirements governing occupational safety and health;
(iv) any facility operations, procedures designs, etc., which do not conform to
the statutory or regulatory requirements of CERCLA, CAA, CWA, TSCA, RCRA or any
other Environmental Laws, including the laws and regulations promulgated by the
Commonwealth of Virginia, intended to protect public health, welfare and the
environment; (v) the failure to have obtained permits, variances or other
authorizations necessary for the legal operation of any equipment, process,
facility or any other activity; and (vi) the operation of any facility or
equipment in violation of any permit condition, schedule or compliance,
administrative or court order and the like.
-3-
<PAGE>
i. Escrow Agreement. The term "Escrow Agreement" shall have the
----------------
meaning ascribed to it in Section 5 hereof.
j. Excluded Assets. The term "Excluded Assets" shall mean those
---------------
assets and that property, plant, and equipment owned and/or operated by Orange-
Madison on the Effective Date and listed or described on Appendix I attached
hereto and incorporated herein by reference.
k. Existing Current Assets. The term "Existing Current Assets"
-----------------------
shall mean all cash, inventory, and accounts receivable on hand or otherwise
owned or held by Orange-Madison on the Effective Date; provided, however, that
such term shall not include the Excluded Assets.
l. Fixed Capital Requirements. The term "Fixed Capital
--------------------------
Requirements" shall mean payments for repairs, improvements, or additions to
property, plant, and equipment (which repairs, improvements, and additions
relate to the Business and the Managed Assets and are capitalized in accordance
with Southern States' policies and procedures as they exist from time to time).
m. Hazardous Materials. The term "Hazardous Materials" shall
-------------------
mean hazardous substances, hazardous constituents, toxic substances or related
materials, whether solids, liquids or gases, including but not limited to
substances defined as "hazardous wastes," "hazardous substances, "toxic
substances," "pollutants," "contaminants," "chemicals known to the State to
cause cancer or reproductive toxicity," "petroleum, crude oil or any fraction
thereof" or other similar designations in, or otherwise subject to regulation
under CERCLA, TSCA, the Hazardous Materials Transportation Act, 49 U.S.C. (S)
1802, et seq., RCRA, CWA, the Safe Drinking Act, 42 U.S.C. (S) 300(f), et seq.,
-- --- -- ---
CAA, and in the plans, rules, regulations or ordinances adopted, or other
criteria and guidelines promulgated pursuant to the preceding laws or other
Environmental Laws; and any other substances, constituents or wastes subject to
environmental regulations under any applicable federal, state or local law,
regulation or ordinance now or hereafter in effect.
n. Managed Assets. The term "Managed Assets" shall mean all
--------------
assets and/or all property, plant, and equipment owned and/or operated by
Orange-Madison on the Effective Date other than the Excluded Assets.
o. Notice. The term "Notice" shall have the meaning ascribed to
------
it in Section 19(e) hereof.
p. Savings or Loss Before Taxes. The term "Savings or Loss
----------------------------
Before Taxes" shall mean the annual results derived from the operations of
Orange-Madison, prior to any (i) provision for income taxes, (ii) provision for
loss reimbursement under Section 6 hereof, and (iii) any patronage
distributions, and as reported to members or shareholders in reports compiled
and presented using generally accepting accounting principles ("GAAP").
-4-
<PAGE>
q. Adjustments to Savings or Loss Before Taxes. The term
-------------------------------------------
"Adjustments to Savings or Loss Before Taxes" shall mean the sum of (s) the
excess of (i) calculated earnings on the proceeds of Existing Current Assets,
computed at the Advance Account Rate over (ii) any actual earnings from
investing the proceeds of the sale or disposition of the Existing Current
Assets, (t) any loss, cost, expense, gain, or earnings associated with or
relating, attributable, or allocable to Excluded Assets, (u) any loss, cost,
expense, gain or earnings not directly associated with or directly relating,
attributable, or allocable to the conduct of the Business or the Managed Assets,
(v) any loss resulting from any Environmental Expenses or Claims of the Managed
Assets (to the extent such Environmental Expenses or Claims relate to
Environmental Conditions or Environmental Noncompliance existing at the
Effective Date) or of the Excluded Assets, (w) any loss or gain resulting from
the sale or disposition of Excluded Assets, (x) any write-off or recoveries of
accounts receivable (to the extent such accounts receivable are included in
Existing Current Assets), (y) any other loss, cost, expense, gain, or earnings
of a non-operating nature, or (z) any other loss, cost, expense, gain, or
earnings that are associated with or relating, attributable, or allocable to
operations prior to the Effective Date or subsequent to the Termination Date,
and not previously adjusted in (s) through (y) hereof.
r. Operating Losses. "Operating Losses" shall mean Savings or
----------------
Loss Before Taxes reduced or increased by Adjustments to Savings or Loss Before
Taxes.
s. Term. The term "Term" shall have the meaning ascribed to it
----
in Section 16 hereof.
t. Termination Date. The term "Termination Date" shall have the
----------------
meaning ascribed to it in Section 16 hereof.
u. Working Capital Requirements. The term "Working Capital
----------------------------
Requirements" shall mean the funds required for, or invested in, accounts
receivable, inventory, cash on hand, or other current assets required for,
associated with, or relating to the conduct of the Business; provided, however,
that the term "Working Capital Requirements" shall not include funds required
for retirement of Orange-Madison patron equity.
2. Management and Services Generally.
---------------------------------
a. Southern States is hereby retained, under the direction of
the Board of Directors of Orange-Madison, to manage and operate the Business and
the Managed Assets. Southern States shall render the following services in
connection with its management and operation of the Business and the Managed
Assets: (i) management, management supervision, credit administration,
accounting, internal auditing, procurement and training of personnel, (ii)
general assistance in legal, real estate, engineering, traffic, information and
publicity, and merchandising matters, (iii) special marketing services, (iv)
distribution of patronage refunds and other patronage notices, and (v) such
other services as are expressly described herein, including, but not limited to,
services relating to Environmental Expenses, Claims, Environmental Conditions
and Environmental Noncompliance as provided in the Agreement or in the Escrow
Agreement.
-5-
<PAGE>
b. Southern States shall compile financial data generated from
its management and operation of the Business and the Managed Assets and from
Orange-Madison's management and operation of the Excluded Assets for the
preparation of periodic financial reports and the preparation of tax returns for
the combined operations of Orange-Madison. Southern States will not be
responsible for the generation, analysis or review of such financial information
regarding the Excluded Assets and will have no control over the management of
the Excluded Assets in order to achieve certain accounting or tax results. Based
on and subject to the foregoing, Southern States shall make periodic reports
regarding the status of its compilation of such financial data to the Board of
Directors of Orange-Madison and shall prepare tax returns and periodic and/or
annual reports for Orange-Madison.
c. For the calendar year ended December 31, 1991, and in
consideration of the management of and the services provided to the Business and
Managed Assets by Southern States hereunder (including the employment by
Southern States of the General Manager described in Section 2(g) hereof),
Orange-Madison shall pay to Southern States an annual fee (the "Management Fee")
of $150,000.00, which fee shall be payable in equal monthly installments. At the
beginning of each calendar year thereafter, Southern States shall advise the
Board of Directors of Orange-Madison in writing of the charge to be made by
Southern States for the ensuing year as Southern States' management fee for such
year; provided, however, that in no event shall such fee be increased from year
to year by a percentage greater than the percentage increase in the similar fee
charged by Southern States to its managed local cooperatives.
d. In addition to the Management Fee described in Section 2(c)
hereof, Orange-Madison shall pay to Southern States (i) an annual fee (the "RSS
Rental Fee") estimated at $27,420.00 in connection with the rental by Orange-
Madison of certain retail support systems owned by Southern States and to be
installed at the Orange-Madison retail stores, and (ii) an annual fee (the "RSS
Maintenance Fee") estimated at $9,360.00 in connection with the agreement by
Southern States to service and maintain the retail support systems owned by
Southern States and to be installed at the Orange-Madison retail stores.
e. The Management Fee, the RSS Rental Fee, and the RSS
Maintenance Fee, which shall be included in the calculation of Savings or Loss
Before Taxes as such term is defined in Section 1 hereof, constitute all of the
fees payable by Orange-Madison to Southern States pursuant to this Agreement.
f. Special charges, such as local legal fees, local consulting
fees, appraisals, fees or expenses relating to permitting, advertising, etc.,
shall be for the account of Orange-Madison, are not included in the Management
Fee, and shall be included in the calculation of Savings or Loss Before Taxes as
such term is defined in Section 1 hereof; provided, however, that all such
charges, as a condition to their inclusion in the calculation of Savings or Loss
Before Taxes, must be (i) reasonable in amount, (ii) related to the operation of
the Business and the Managed Assets, (iii) unrelated to the Excluded Assets, and
(iv) reasonably acceptable in all respects (including the incurrence thereof) to
Southern States. All other special charges, including without limitation those
described in Section 2(i) hereof, shall be for the account of Orange-Madison and
shall be paid from the proceeds of the sale or other disposition of the Excluded
Assets or of the Existing Current Assets. In the event that special charges of
the
-6-
<PAGE>
type described in the immediately preceding sentence and reasonable in amount
are incurred by Orange-Madison at the direction of the Board of Directors of
Orange-Madison after the proceeds of the sale or other disposition of the
Excluded Assets have been expended and the proceeds of the sale or other
disposition of the Excluded Assets have been expended and the proceeds of the
sale or other disposition of Existing Current Assets have been expended in
accordance with the provisions of Section 5 hereof, such special charges shall
be paid by Orange-Madison; provided, however, that such special charges shall
not be included in Working Capital Requirements or in the calculation of Saving
or Loss Before Taxes as such terms are defined in Section 1 hereof.
g. Following nomination by Southern States and approval by the
Board of Directors of Orange-Madison, Southern States shall employ, for and on
behalf of Orange-Madison, a general manager of the Business and the Managed
Assets. Such general manager shall secure such cooperation and working relations
between Orange-Madison and Southern States as is necessary for efficient and
satisfactory operations of the Business and the Managed Assets. If such general
manager is found by Southern States and the Board of Directors of Orange-Madison
to have mismanaged the Business and the Managed Assets, Southern States,
following consultation with the Board of Directors of Orange-Madison, shall
replace such general manager with another person nominated and approved in the
manner provided in this Section 2(g).
h. During the Term of this Agreement, in connection with the
presentation and discussion of the annual budget for the Business and the
Managed Assets, the Board of Directors of Orange-Madison, following consultation
with Southern States, shall determine and establish a merit fund to be used by
Southern States to effect compensation increases to the employees of the
Business and the Managed Assets. The compensation (including any increase in
compensation) of each of the employees of the Business and the Managed Assets
shall, with the advice of the Board of Directors of Orange-Madison, be
determined by Southern States.
i. Notwithstanding anything herein to the contrary, the Board
of Directors of Orange-Madison shall retain all corporate powers granted to them
by the Articles of Incorporation and By-laws of Orange-Madison or by applicable
law, including without limitation the power to retain attorneys, auditors,
engineers, and similar advisors.
3. Working Capital and Fixed Asset Requirements.
--------------------------------------------
a. All Working Capital Requirements in connection with the
Business and Managed Assets shall be provided by Southern States at the Advance
Account Rate, which shall be the same rate of interest charged by Southern
States to other affiliated local cooperatives. All capital provided by Southern
States shall be, at Southern States' sole discretion, on open account or on the
basis of negotiable notes executed by Orange-Madison, and Orange-Madison,
through its officers and directors, agrees to furnish from time to time any
collateral for such advances that may be required by Southern States, including
without limitation a first lien security interest in inventory (other than that
included in Excluded Assets) and proceeds therefrom financed by working capital
provided by Southern States. Orange-Madison at all times shall have the
privilege of raising a part of all of its capital requirements by the sale of
its own investment stock or securities.
-7-
<PAGE>
b. All Fixed Capital Requirements shall be advanced by Southern
States, upon the recommendation of the general manager and the approval of the
Board of Directors of Orange-Madison, provided that no year shall the amount
committed for, or advanced with respect to, Fixed Capital Requirements exceed
Orange-Madison's prior year depreciation expense associated with the Managed
Assets.
4. Calculation of Savings or Loss Before Taxes and Operating Losses.
----------------------------------------------------------------
a. Pursuant to, and in accordance with the provisions and
restrictions of Section 2(b) hereof, Southern States shall calculate Savings or
Loss Before Taxes and Operating Losses for each year during the Term and shall
submit such calculations for the review and approval of the Board of Directors
of Orange-Madison, or their duly appointed representative, within 120 days
following the end of each calendar year during the Term hereof. Southern States
will consult with the Board of Directors or its duly appointed representative
and provide them with such information as is reasonably necessary to permit such
a review of such calculations.
b. In the event that the Board of Directors of Orange-Madison,
or their duly authorized representative, in good faith reasonably dispute the
calculation of Savings of Loss Before Taxes and Operating Losses submitted by
Southern States pursuant to Section 4(a) hereof, such calculations shall be
submitted to an independent accounting firm, mutually acceptable to the Board of
Directors of Orange-Madison and to Southern States, with the cost being borne
equally by Southern States and Orange-Madison. The findings of such independent
accounting firm shall be conclusive and binding on both Southern States and the
Board of Directors of Orange-Madison.
5. Proceeds of Existing Current Assets.
-----------------------------------
a. As soon after the Effective Date as shall be practicable,
not to exceed ten (10) days from the Effective Date, Southern States and
representatives of Orange-Madison shall take a physical inventory of the
merchandise inventory of Orange-Madison, other than that inventory which is a
part of the Excluded Assets (the "Inventory"). Only items that are normally
merchandised for resale are to be included in the Inventory. Southern States and
Orange-Madison shall value such Inventory that is in good, saleable condition at
cost or market (in quantities purchased by Orange-Madison), whichever is lower,
plus freight in. All damaged, obsolete, or unsaleable Inventory shall be
discounted and valued in accordance with its conditions, age, and potential
resale value.
b. On the Effective Date, Southern States shall advance to
Orange-Madison, pursuant to and in accordance with the provisions of Section 3
hereof (including without limitation the provisions thereof requiring the
execution of Orange-Madison of notes and such other documents as shall be
necessary to create a first lien security interest in favor of Southern States),
an amount equal to the sum of the following: (i) the amount of cash on hand or
otherwise owned or held by Orange-Madison on the Effective Date; and (ii) the
amount determined by multiplying the book value of the accounts receivable of
Orange-Madison on the
-8-
<PAGE>
Effective Date by .85. Following completion of the inventory described in
Section 5(a) hereof, Southern States shall advance to Orange-Madison an amount
equal to the value of the Inventory of Orange-Madison as determined pursuant to
Section 5(a) hereof. The amounts thus advanced shall, in addition to all
proceeds from the sale or other disposition of Existing Current Assets, be held
and applied in accordance with Section 5(c) hereof. The valuations determined
for Inventory and accounts receivable shall be reflected in the financial
statements of Orange-Madison immediately prior to the Effective Date.
c. All proceeds derived form the sale or other disposition of
Existing Current Assets (except for proceeds of those Existing Current Assets
with respect to which Southern States has made an advance pursuant to Section
5(b) hereof which proceeds have been set aside pursuant to Section 5(b) hereof)
shall be set aside and held in escrow pursuant to, and in accordance with the
terms of the Escrow Agreement attached hereto as Appendix II and incorporated
herein by reference (the "Escrow Agreement"). The Escrow Agreement generally
shall provide that the proceeds derived from the sale or disposition of Existing
Current Assets shall be set aside and applied to (i) provide a $50,000.00 fund
for such purposes as the Board of Directors of Orange-Madison shall direct
pursuant to Section 2(i) hereof, (ii) pay down by $1,000,000.00 the working
capital loan extended to Orange-Madison by CoBank, (iii) pay down trade
creditors of Orange-Madison other than Southern States, (iv) provide a fund for
Environmental Expenses and Claims associated with the Managed Assets. Following
expiration or termination of the Escrow Agreement, the proceeds derived from the
sale or disposition of Existing Current Assets shall continue to be set aside by
Orange-Madison. Orange-Madison shall be solely responsible for applying such
proceeds (w) to provide a fund for Environmental Expenses and Claims associated
with the Excluded Assets, (x) repairs and improvements to property, plant, and
equipment (which repairs, improvements, and additions relate to the Excluded
Assets and are capitalized in accordance with Southern States' policies and
procedures as they exist from time to time) (y) to pay for all other costs or
expenses not described in, or funded pursuant to, Section 3 above, up to the
cumulative amount of $100,000.00, and thereafter (z) to pay down any loans
extended to Orange-Madison by CoBank.
6. Operating Losses. In the event Orange-Madison experiences
----------------
Operating Losses during the Term of this Agreement, Southern States shall cover,
bear, or otherwise absorb such losses. As defined in Section 1 hereof,
"Operating Losses" do not include Environmental Expenses and/or Claims relating
to any Environmental Conditions or Environmental Noncompliance existing at the
Effective Date or any Environmental Expenses and/or Claims relating directly or
indirectly to the Excluded Assets.
7. Commodities and Supplies.
------------------------
a. Southern States shall make available to Orange-Madison all
commodities and supplies manufactured, processed, assembled, handled, or
distributed by it. Orange-Madison agrees to use the wholesale facilities and
services of Southern States as its principal source of supply for all such
commodities and supplies, recognizing that farmers can perform such services for
themselves through their own wholesale plants at cost to Orange-Madison and its
members. Southern States' commodities and supplies shall be sold or furnished
-9-
<PAGE>
to Orange-Madison at "service guide" prices (as established from time to time by
Southern States) or less.
b. This section shall in no way preclude Orange-Madison from
handling commodities and supplies manufactured, processed, assembled, handled,
or distributed by others or performing local custom services that may be
beneficial to local patrons.
8. Services and Operations of Orange-Madison. No new services or
-----------------------------------------
operations shall be undertaken or existing services or operations discontinued
by, or on behalf of, Orange-Madison until the same have been approved by the
Board of Directors of Orange-Madison. In addition, no indebtedness secured by
any interest in the Managed Assets shall be incurred by Orange-Madison without
Southern States' prior written consent.
9. Purchases and Commodities. Southern States shall supervise and/or
-------------------------
make purchases of commodities and supplies for the Business and Managed Assets,
which purchases shall be for the account of Orange-Madison and shall be charged
to Orange-Madison's account. Southern States may make contracts for the account
of the Business and Managed Assets of Orange-Madison in the regular course of
its Business, including contracts for marketing its products or the products of
members or patrons marketing through Orange-Madison, and contracts of agency,
including agreements whereby Orange-Madison shall act as agent for the sale of
farm machinery, farm, garden, orchard, and other supplies, materials, and
equipment used by farmers, and arrange all the terms thereof, all in accordance
with policies previously determined by the Board of Directors of Orange-Madison,
but without the necessity of specific authority from the Board for any
individual transaction or any series of transactions.
10. Operating Expenses and Accounts. Southern States shall be
-------------------------------
authorized to draw upon funds of Orange-Madison (other than the funds described
in Section 5 above) as shall be required to properly carry on the operations of
the Business and Managed Assets of Orange-Madison, and Southern States shall at
all times keep accurate accounts of its receipts and disbursements with respect
to the Business and Managed Assets of Orange-Madison and shall repay any
advances made by Orange-Madison and not expended in its behalf by Southern
States in connection with the Business and Managed Assets within thirty (30)
days after demand by Orange-Madison, less any amount that may be due Southern
States from Orange-Madison.
11. Insurance. Unless Orange-Madison already has in full force and
---------
effect coverage satisfactory to Southern States covering all identifiable known
exposures, Orange-Madison authorizes and directs Southern States to obtain or
attempt to obtain, for and on behalf of Orange-Madison, all insurances and bonds
with respect to the Business and the Managed Assets usually carried by like
businesses providing local farm supply or petroleum services. Such insurance or
bonds will include, but not be limited to:
a. All risk or specified perils property insurance covering the
physical assets of buildings, machinery and equipment,
furniture and fixtures, and stocks of merchandise on an
actual cash value or replacement cost basis;
-10-
<PAGE>
b. Workmen's Compensation;
c. All fidelity, license, and permit bonds;
d. Comprehensive general and automotive liability in limits not
less than $1,000,000 single limit bodily injury and property
damage;
e. Crime coverages to include burglary (merchandise and/or
safe) and robbery;
f. Automobile physical damage comprehensive and collision;
g. Owned cargo while being transported;
h. Director and officer liability; and
i. Such other coverages as needed for data processing equipment
or other unique exposures.
Specific coverage shall be effected promptly by Southern States upon
notification of the necessity for same to the Board of Directors of Orange-
Madison. Southern States is hereby granted wide discretion in arranging for
insurance and bond coverage for Orange-Madison with respect to the Business and
Managed Assets and the selection of insurance or indemnity companies or other
means of effecting insurance coverage shall be also in the sole discretion of
Southern States. Orange-Madison agrees to pay all premiums and other costs of
said insurance coverage promptly upon receipt of the notice of the same, which
premiums and other costs shall be included in the calculation of Savings or Loss
Before Taxes as such term is defined in Section 1 hereof.
12. Payment of Patronage Refunds. Orange-Madison agrees that payment
----------------------------
of patronage refunds to patrons can have an important bearing upon the
operations of Orange-Madison, and that it will, therefor, first consult with
Southern States before such patronage refunds are authorized by the Board of
Directors of Orange-Madison.
13. Accounting. Pursuant to, and in accordance with, the provisions
----------
and restrictions of Section 2(b) hereof, Orange-Madison agrees (i) to follow all
accounting practices prescribed by Southern States with respect to the Business
and the Managed Assets, (ii) to conform its accounting practices with respect to
the Excluded Assets to those prescribed by Southern States with respect to the
Business and the Managed Assets, and (iii) to permit accountants, or other
persons designated by Southern States to audit and inspect its books and records
at such times as Southern States may deem advisable. Southern States shall be
required to make at least one audit of the affairs of the Business and the
Managed Assets (an "Internal Compliance Audit") during the Term of this
Agreement. Southern States shall review the results of such Internal Compliance
Audits with the Board of Directors of Orange-Madison from time to time. Any
audits other than the Internal Compliance Audits desired by the Board of
Directors of
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<PAGE>
Orange-Madison shall be paid by Orange-Madison and the cost thereof shall not be
included in the calculation of Savings or Loss Before Taxes as such term is
defined in Section 1 hereof.
14. Policy Against Conflicts of Interest. It shall be the policy of
------------------------------------
Orange-Madison to enter into no contract or agreement with any officer or
director whereby such officer or director would receive any financial benefits,
direct or indirect, differing in any way from the business relations accorded
regular members of Orange-Madison, or any other kind of contract differing from
terms generally current. Neither shall Orange-Madison purchase goods or services
from any officers or directors (except farm products produced by such officer or
director), nor shall it employ any spouse, parent, son or son-in-law, daughter
or daughter-in-law, of any officers or directors.
15. Credit Policy. Orange-Madison agrees that at the first meeting of
-------------
its Board of Directors following the execution of this Agreement, the credit
policy described on Appendix III attached hereto and incorporated herein by
reference shall be duly adopted.
16. Term and Termination.
--------------------
a. Term. The term of this Agreement (the "Term") shall commence
----
on the Effective Date, and shall terminate, unless sooner terminated as provided
in Section 16(b) hereof on December 31, 1993 (the "Termination Date").
b. Termination. This Agreement may be terminated by mutual
-----------
consent of Orange-Madison and Southern States. In addition, either party may
immediately terminate this Agreement if the other party (i) is in default of any
material provision of this Agreement and continues in default for a period of
ten (10) days following notice by the nondefaulting party, or (ii) files a
petition for bankruptcy or reorganization under the Federal Bankruptcy Act or
makes an assignment for the benefit of creditors, or (iii) is guilty of any
fraudulent act or of willful withholding of any funds, payments or property of
the other party or to which the other party lawfully is entitled.
c. On or before the Termination Date or any sooner termination
hereof, all amounts and monies that may be due and owing to Southern States by
Orange-Madison shall be and become immediately due and payable.
d. As soon as practicable following the Termination Date,
Southern States shall use its reasonable efforts to deliver to Orange-Madison
all material records generated or maintained by Southern States with respect to
the Business and the Managed Assets during the Term hereof.
17. Treatment/Handling of Excluded Assets.
-------------------------------------
a. Orange-Madison shall retain all responsibility for the
management and operation of the Excluded Assets. Such management and operation
shall include the following: (i) management, management supervision, credit
administration, accounting (including tax accounting), internal auditing,
procurement and training of personnel; (ii) general
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<PAGE>
management for legal, real estate, engineering, traffic, information and
publicity, marketing and merchandising matters; and (iii) other activities in
the management and operation of the Excluded Assets.
b. Any and all costs associated with the activities and
responsibilities described in Section 17(a) shall be paid, after the expiration
or termination of the Escrow Agreement, from the proceeds from the sale or other
disposition of the Existing Current Assets and shall not be included in the
calculation of Savings or Loss Before Taxes as such term is defined in Section 1
hereof.
c. Southern States shall have no control or authority over the
activities of the Excluded Assets and shall not participate in the management or
operation of the Excluded Assets. Upon request by Southern States, Orange-
Madison shall provide information to Southern States regarding Orange-Madison's
management and operation of the Excluded Assets for information purposes. Such
communication shall not be construed as control or authority by Southern States
over the Excluded Assets.
18. Treatment/Handling of Environmental Conditions and Environmental
----------------------------------------------------------------
Noncompliance Relating to the Managed Assets.
- --------------------------------------------
a. The parties acknowledge that the Managed Assets, which will
be operated henceforth by Southern States by this Agreement, have certain
Environmental Conditions and/or Environmental Noncompliance as of the Effective
Date of this Agreement. With respect to existing Environmental Conditions or
Environmental Noncompliance, and without in any way limiting the scope of
Orange-Madison's obligations under Sections 19(a) and (b) hereof, Orange-Madison
will be responsible for all investigations, studies, cleanup, corrective action
or response or remedial action, including defense costs, required by any local,
state or federal government agency now or hereafter authorized to regulate
environmental matters (hereinafter "Governmental Entities"), or by any consent
decrees or court or administrative order now or hereafter applicable to the
Business and Managed Assets, or by any federal, state or local law, regulation,
rule or ordinance now or hereafter in effect.
b. Orange-Madison shall pay all costs in connection with any
investigations, studies, cleanup, repair and remedial action relating to the
matters acknowledged in 18(a) including, without limitation, all capital
improvements, installation, operation, maintenance, testing, monitoring costs,
preparation of plans, designs, applications, studies and reports by or for
Governmental Entities or other regulating agencies, the preparation of closure
or other required plans, the retention of legal counsel, engineers and other
expert consultants. The parties acknowledge that the proceeds held in escrow
pursuant to the Escrow Agreement shall be used, in part, to pay the costs listed
in the preceding sentence but further acknowledge that such proceeds shall not
limit or be deemed to limit the liability of Orange-Madison to pay all such
costs.
c. Southern States shall have the right to control and manage
all investigations and any environmental cleanup, remediation or related
activities relating to matters acknowledged in 18(a).
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<PAGE>
d. In the event that Environmental Conditions or Environmental
Noncompliance (other than that described in Section 18(a) hereof) arise at the
Managed Assets subsequent to the date hereof, Southern States shall promptly
notify Orange-Madison of any such Environmental Conditions or Environmental
Noncompliance, but Southern States shall have the exclusive right to control and
manage the resolution of such issues. Orange-Madison will pay all reasonable
costs incurred by Southern States in defending and correcting the conditions
that constitute Environmental Conditions or Environmental Noncompliance, which
costs shall be included in the calculation of Savings or Loss Before Taxes as
such term as defined in Section 1 hereof. The provisions of this Section 18 do
not diminish Orange-Madison's obligations under Section 19(a) and (b) hereof.
19. Miscellaneous.
-------------
a. General Indemnification. Orange-Madison shall indemnify and
-----------------------
hold Southern States and its officers, directors, employees, agents, members,
and affiliates harmless from and against any and all losses, damages, costs, and
out-of-pocket expenses, including reasonable attorney's and other expert's fees,
incurred by them and arising out of or resulting from (i) the ownership or
operation of the Excluded Assets, (ii) the ownership or operation of the Managed
Assets either before or after the term of this Agreement, or (iii) the business
and operations of Orange-Madison, the management of which business and
operations are not expressly assumed by Southern States hereunder.
b. Environmental Indemnification. Orange-Madison agrees to
-----------------------------
indemnify, defend by counsel acceptable to Southern States and hold harmless
Southern States, its subsidiaries, affiliates, successors and assigns and their
respective directors, officers, employees, shareholders, representatives and
agents (hereinafter for the purposes of this Section referred to collectively as
"Southern States") from and without limitation, diminution in value, losses,
liabilities and expenses, lawsuits, deficiencies, interest, penalties,
attorneys' fees and all amounts paid in defense or settlement of the foregoing
whether or not arising out of third-party claims, which may be imposed upon or
incurred by Southern States or asserted against Southern States by any other
party or parties (including Governmental Entities), in connection with any
Environmental Conditions or Environmental Noncompliance arising out of,
resulting from or attributable to, the assets, business or operations of Orange-
Madison, Orange-Madison's predecessors in interest, including, without
limitation, any Claims, Expenses, losses, liabilities, etc., resulting from the
alleged exposure of any person to Environmental Conditions or Environmental
Noncompliance, regardless of whether such Environmental Conditions or
Environmental Noncompliance or exposure resulted from activities of Orange-
Madison or Orange-Madison's agents, representatives, employees or independent
contractors and the breach of any of Southern States' representatives and
warranties. Orange-Madison's obligations pursuant to this Section shall exist
regardless of whether Southern States is alleged or held to be strictly or
jointly and severally liable.
c. Southern States' Indemnification. Southern States shall
--------------------------------
indemnify and hold Orange-Madison and its officers, directors, employees,
agents, members, and affiliates harmless from and against any and all losses,
damages, costs, and out-of-pocket expenses,
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<PAGE>
including reasonable attorney's and other expert's fees, incurred by them and
arising out of or resulting from (i) Southern States' willful and continued
failure to substantially perform its obligations hereunder, or (ii) any willful
conduct by Southern States pursuant to this Agreement that is unlawful, illegal,
or otherwise prohibited by law. For purposes, hereof, no conduct shall be deemed
"willful" unless done or omitted to be done not in good faith and without
reasonable belief that the action or omission was in the best interests of the
Business or the Managed Assets.
d. Retail Support System. Upon the expiration or termination of
---------------------
this Agreement, in the event that Orange-Madison is and remains an independent,
unaffiliated local cooperative and a customer of Southern States, Southern
States shall grant to Orange-Madison a non-exclusive, non-transferable license
for the use of the software associated with the retail support system described
in Section 2 hereof and shall sell, lease, or otherwise transfer to Orange-
Madison the hardware or other equipment associated therewith on substantially
the same terms as such software, hardware, or other equipment is made available
to other independent, unaffiliated, local cooperatives that are customers of
Southern States.
e. Notices. All notices, requests, demands, and other
-------
communications required or permitted to be given hereunder (a "Notice") shall be
deemed to have been duly given if in writing, signed by or on behalf of the
party giving them, and delivered by hand, or sent by first class, certified, or
registered mail, postage prepaid (and such Notice will be deemed to have been
given as of the date delivered by hand or as of the third (3rd) business day
after the date mailed), addressed:
(1) If to Orange-Madison, to:
W. W. Sanford, III
Post Office Box 165
Orange, Virginia 22960
with a copy to:
Donald E. Showalter, Esquire
Wharton, Aldhizer & Weaver
100 South Mason Street
Harrisonburg, Virginia 22801
(2) If to Southern States, to:
Southern States Cooperative, Inc.
6606 West Broad Street
Richmond, Virginia 23260
Attn: N. Hopper Ancarrow, Jr., Esquire
Such names and addresses may be changed by such a Notice.
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<PAGE>
f. Assignment. This Agreement and all rights and obligations
----------
hereunder may not be sold, assigned, or transferred by Southern States or
Orange-Madison.
g. Entire Agreement Modification. This Agreement, including the
-----------------------------
Appendices referred to herein and which form a part hereof, contains the entire
understanding of the parties hereto with respect to the subject matter contained
herein. This Agreement may not be changed except by a writing signed by each of
the parties.
h. Governing Law. The interpretation and enforcement of this
-------------
Agreement will be in accordance with the laws of the Commonwealth of Virginia.
i. Waiver. The failure of any party to this Agreement at any
------
time or times to require performance of any provisions of this Agreement shall
in no matter affect the right to enforce the same. No waiver by any party to
this Agreement of any condition, or of the breach of any term, provision,
warranty, representation, agreement, or covenant contained in this Agreement,
whether by conduct or otherwise, in any one or more instances shall be deemed or
construed as a further or continuing waiver of any such condition or breach or a
waiver of any other condition or of the breach of any other term, provision,
warranty, representation, agreement, or covenant contained in this Agreement.
j. Severability. In the event that any court of competent
------------
jurisdiction shall determine that any provision of this Agreement is invalid,
such determination shall not affect the validity of any other provision of this
Agreement which shall remain in full force and effect and which shall be
construed as to be valid under applicable law.
k. Section Headings: Gender. The section headings or captions
------------------------
contained herein are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement. The use of any gender herein
shall be deemed to be or include other genders and the use of the singular
herein shall be deemed to be or include the plural (and vice versa).
l. Counterparts. This Agreement may be executed by each party
------------
upon a separate copy, and in such case one counterpart of this Agreement shall
consist of enough of such copies to reflect the signature of all of the parties
to this Agreement. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, and it shall not be necessary in
making proof of this Agreement or the terms of this Agreement to produce or
account for more than one of such counterparts.
IN WITNESS WHEREOF, the parties hereof have caused this Agreement
to be executed on the day and year first above written.
SOUTHERN STATES COOPERATIVE,
INCORPORATED
(Corporate Seal) By: /s/ John Hawkins
--------------------------------------
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<PAGE>
Its: Sr. Vice President and Treasurer
-------------------------------------
ORANGE-MADISON COOPERATIVE FARM
SERVICE, INC.
(Corporate Seal) By: /s/ W. W. Sanford, III
--------------------------------------
Its: President
-------------------------------------
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<PAGE>
APPENDIX I
EXCLUDED ASSETS
1. Real estate and improvements, including grain bins, known as "Old Orange
Feed Mill Property," which property is more specifically described as
follows:
All those four certain lots or parcels of land lying and being
situate in the Town of Orange, Spotswood Magistrial District,
Orange County, Virginia, at the southern Terminus of Mill Street,
all as shown and described as lot #1 containing 0.6175 acres,
more or less, Lot #2 containing 0.4054 acres, more or less, Lot
#3 containing 0.9175 acres, more or less, and Lot #4 containing
0.6293 acres, more or less, as containing 1.693 acres by a plat
of a survey thereof by Stearns L. Coleman, C.L.S., dated December
17, 1990.
The said property as described includes the former Orange Milling
Company property, with the flour mill and "tile warehouse"
buildings still standing thereon in 1986, plus a tract of
railroad property, shown on the plat appended to its deed of
conveyance to the Cooperative to be 0.849 acre. Also conveyed but
not shown or described above is all that right, title and
interest of the Cooperative in and to all that strip of adjoining
land lying between the car clearance line on the north side of
the C & O Ry, siding noted in the description of the tract of
land hereinabove described and the center line of the said C and
O Ry, siding.
Being the same tracts or parcels of land, title to which vested
in Orange-Madison Cooperative Farm Service, Incorporated,
together with and subject to certain rights of way, easements and
covenants, under and by virtue of the following deeds:
(1) Deed from V. R. Shackelford and Peachy Lyne
Shackelford, his wife, dated February 19, 1937, and recorded
in Orange County Deed Book 110 at page 45. (Orange-Madison
Cooperative Farm Bureau, Incorporated, the named Grantee in
said deed, having changed its name by amendments to its
charter filed with the State Corporation Commission of
Virginia on October 15, 1951, to Orange-Madison Cooperative
Farm Service, Incorporated.)
(2) Deed from V. R. Shackelford and Peachy Lyne
Shackelford, his wife, dated January 15, 1946, and recorded
in Orange County Deed Book 125 at page 321. (Orange-Madison
Cooperative Farm Bureau, Incorporated, the Grantee in said
deed, having changed its name as noted in (1) above.)
<PAGE>
(3) Deed from the Chesapeake and Ohio Railway Company
dated May 14, 1958, and recorded in Orange County Deed Book
181 at page 137.
(4) Deed from Henry C. DeJarnette, et ux, dated March
28, 1969, and recorded in Orange County Deed Book 238 at
page 392.
This tract is subject to the reservation of a 10' easement
along the northern portion of the land so conveyed, said
reservation made and described in a deed from the said Henry
C. DeJarnette to John Long in a deed dated June 15, 1936,
and recorded in Orange County Deed Book 108 at page 238.
2. Inventories consisting primarily of fee, grains and feed ingredients, which
inventories are in amounts usual and customary and are located at the "Old
Orange Feed Mill Property" on the Effective Date.
3. Rapidan Mill note receivable (Mel Hall note) or the proceeds therefrom.
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<PAGE>
RECLASSIFICATION AGREEMENT
THIS AGREEMENT is made as of this 1st day of September, 1991, by and
between ORANGE-MADISON COOPERATIVE FARM SERVICE, INC. ("Orange-Madison"), a
nonstock corporation organized pursuant to the Virginia Agricultural Cooperative
Association Act, and SOUTHERN STATES COOPERATIVE, INC. ("Southern States"), a
corporation organized pursuant to the Virginia Agricultural Cooperative
Association Act.
RECITALS
--------
WHEREAS, Orange-Madison and Southern States are parties to a certain
Management/Operating Agreement, dated March 1, 1991 (the "Operating Agreement"),
through which Southern States renders management and related services with
respect to the Managed Assets but not with respect to the Excluded Assets.
WHEREAS, the Excluded Assets are identified on Appendix 1 to the
Operating Agreement.
WHEREAS, in accordance with the terms and conditions set forth herein,
the parties desire (i) to reclassify as a Managed Asset that parcel of real
property (and improvements thereon) lying and being situate in the Town of
Orange, Spotswood Magisterial District, Orange County, Virginia at the southern
Terminus of Mill Streets, shown and described as lot #1 containing 0.6175 acres
more or less, and more specifically described on Appendix 1 to the Operating
Agreement (the "Grain Facility"), and (ii) to grant Southern States a security
interest in the feed, grain, and feed ingredients, which Orange-Madison owns and
stores in the Grain Facility.
WHEREAS, the parties desire that the Operating Agreement continue in
full force and effect in accordance with its terms in all other respects.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual obligations and
covenants contained herein, Orange-Madison and Southern States agree as follows:
1. Reclassification. Notwithstanding the provisions of the Operating
----------------
Agreement, (i) the parties hereby reclassify the Grain Facility as a Managed
Asset, effective September 1, 1991 (the "Effective Date"), to be operated by
Southern States in accordance with the Operating Agreement, and (ii) Orange-
Madison hereby grants Southern States a security interest in the inventory at
such facility, which inventory includes but is not limited to feed, grains, and
feed ingredients, which security interest the parties acknowledge is evidence
and perfected by the following financing statements: (a) financing statement
number 910310406, which was filed with the State Corporation Commission of the
Commonwealth of Virginia, on March 4, 1991, (b) financing statement number
45081, which was filed with the Circuit Court Clerk's Office in Madison County,
Virginia on March 1, 1991, and (c) financing statement
<PAGE>
number 910075, which was filed with the Circuit Court Clerk's Office in Orange
County, Virginia on March 1, 1991.
2. Term. The Grain Facility shall remain a Managed Asset and this
----
Agreement shall remain in effect for a period of twelve (12) months from the
Effective Date (the "Initial Term"). At the end of such Initial Term, this
Agreement shall be automatically renewed from year to year (each, a "Renewal
Term") until and unless terminated as provided herein. Notwithstanding the
foregoing, this Agreement shall not be renewed for any Renewal Term and shall
expire and terminate at and as of the end of the Initial Term if Southern States
shall have notified Orange-Madison, in writing, of its intent to terminate the
Agreement at the expiration of the Initial Term at least sixty (60) days prior
to the expiration of such Initial Term.
3. Termination. This Agreement may be terminated, effective at the
-----------
end of the current Renewal Term, if any, by Southern States notifying Orange-
Madison, in writing, of its intent to terminate the Agreement at least sixty
(60) days prior to the expiration of such Renewal Term. In addition, this
Agreement will terminate immediately upon the termination of the Operating
Agreement as provided in Paragraph 16b thereof, without any notice or other
action by the parties hereunder.
4. Effect of Expiration or Termination.
-----------------------------------
a. Upon the expiration of the Initial Term or, if applicable, a
Renewal Term, the Grain Facility shall cease being a Managed Asset and shall
convert back to an Excluded Asset.
b. In the event this Agreement is terminated, prior to the
expiration hereof, pursuant to Paragraph 3 above, the parties rights hereunder
shall be determined in accordance with Paragraph 16 of the Operating Agreement.
5. Miscellaneous.
-------------
a. Defined Terms. All capitalized terms used herein and not
-------------
otherwise defined shall have the meaning assigned to them in the Operating
Agreement.
b. Notices. All notices, requests, demands, and other communications
-------
required or permitted to be given hereunder shall be deemed to have been duly
given if given in accordance with Section 19e of the Operating Agreement.
c. Assignment. This Agreement and all rights and obligations
----------
hereunder may not be sold, assigned, or transferred by Southern States or
Orange-Madison.
d. Entire Agreement: Modification. This Agreement contains the
------------------------------
entire understanding of the parties hereof with respect to the subject matter
contained herein. This Agreement may not be changed except by a writing signed
by each of the parties.
-2-
<PAGE>
e. Governing Law. The interpretation and enforcement of this
-------------
Agreement will be in accordance with the laws of the Commonwealth of Virginia.
f. Waiver. The failure of any party to this Agreement at any time or
------
times to require performance of any provisions of this Agreement shall in no
manner affect the right to enforce the same. No waiver by any part of this
Agreement of any condition, or of the breach of any term, provision, warranty,
representation, agreement or covenant contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed or construed
as a further or continuing waiver of any such condition or breach or a waiver of
any other condition or of the breach of any other term, provision, warranty,
representation, agreement, or covenant contained in this Agreement.
g. Severability. In the event that any court of competent
------------
jurisdiction shall determine that any provision of this Agreement is invalid,
such determination shall not affect the validity of any other provision of this
Agreement which shall remain in full force and effect and which shall be
construed as to be valid under applicable law.
h. Section Headings: Gender. The section headings or captions
------------------------
contained herein are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement. The use of any gender herein
shall be deemed to be or include other genders and the use of the singular
herein shall be deemed to be or include the plural (and vice versa).
i. Counterparts. This Agreement may be executed by each party upon a
------------
separate copy, and in such case one counterpart of this Agreement shall consist
of enough of such copies to reflect the signature of all of the parties to this
Agreement. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, and it shall not be necessary in making proof
of this Agreement or the terms of this Agreement to produce or account for more
than one of such counterparts.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereof have caused their duly
authorized representatives to execute this Agreement on the day and year first
above written.
SOUTHERN STATES COOPERATIVE,
INCORPORATED
(Corporate Seal)
By: /s/ Thomas M. Kirkpatrick
-------------------------------------
Its: Vice President Retail Division II
------------------------------------
ORANGE-MADISON COOPERATIVE FARM
SERVICE, INC.
(Corporate Seal)
By: /s/ W. W. Sanford, III
-------------------------------------
Its: President
------------------------------------
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<PAGE>
AMENDMENT TO MANAGEMENT/OPERATING AGREEMENT
THIS AGREEMENT is made as of this 20th day of November, 1992, by and
between ORANGE-MADISON COOPERATIVE FARM SERVICE, INC. ("Orange-Madison"), a
nonstock corporation organized pursuant to the Virginia Agricultural Cooperative
Association Act, and SOUTHERN STATES COOPERATIVE, INC. ("Southern States"), a
corporation organized pursuant to the Virginia Agricultural Association Act.
WHEREAS, Orange-Madison and Southern States are parties to a certain
Management/Operating Agreement, dated March 1, 1991 (the "Operating Agreement"),
through which Southern States renders management and related services with
respect to the managed assets and provides all Working Capital Requirements in
connection with the Business and Managed Assets; and
WHEREAS, the Operating Agreement excludes funds required for retirement
of Orange-Madison patron equity from the term Working Capital Requirements; and
WHEREAS, the parties desire to amend the provisions of the Operating
Agreement (i) to permit a limited retirement of Orange-Madison patron equity
from Working Capital Requirements, and (ii) to require the repayment to Southern
States of all Working Capital Requirements used to retire Orange-Madison patron
equity from the proceeds derived from the sale of Existing Current Assets as a
cost under Section 5(c)(y) of the Operating Agreement; and
WHEREAS, the parties desire that the Operating Agreement continue in
full force and effect in accordance with its terms in all other respects.
<PAGE>
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual obligations and
covenants contained herein, Orange-Madison and Southern States agree as follows:
1. Notwithstanding the definition of Working Capital Requirements
contained in Section 1(u) of the Operating Agreement or any other provision of
the Operating Agreement, Working Capital Requirements shall include a maximum of
$30,000 in the aggregate to retire Orange-Madison patron equity to settle
estates during the Term, and any extensions or renewals thereof, of the
Operating Agreement. It is the intent of the parties that the funds available
for such retirements be limited to a maximum of $30,000 which shall be a
cumulative ceiling for the full term of the Operating Agreement, beginning March
1, 1991, and extending through December 31, 1993.
2. Section 5(c)(y) of the Operating Agreement is amended to require
that all Working Capital Requirements utilized for the retirement of patron
equity shall be repaid to Southern States out of the proceeds available from the
termination of the Escrow Agreement derived from the sale or other disposition
of Existing Current Assets. Working Capital Requirements advanced for the
retirement of patron equity shall be evidenced by a negotiable promissory note
in the amount of $30,000 which shall be executed by Orange-Madison and against
which existing and future advances for said retirements shall be made. The
parties agree that said note shall be repaid from funds remitted to Orange-
Madison pursuant to Section 8(b) of the Escrow Agreement dated as of March 1,
1991, by and between Southern States and Orange-Madison and applied by Orange-
Madison as permitted by Paragraph 2 of the Management of Excluded Asset Fund
Agreement dated as of March 1, 1991, by and between National Bank for
Cooperatives ("CoBank") and Orange-Madison.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereof have caused their duly authorize
representatives to execute this Agreement on the day and year first above
written.
SOUTHERN STATES COOPERATIVE,
INCORPORATED
(Corporate Seal)
By: /s/ John Hawkins
-----------------------------------
Its: Sr. Vice President & Treasurer
----------------------------------
ORANGE-MADISON COOPERATIVE FARM SERVICE, INC.
(Corporate Seal)
By: /s/
-----------------------------------
Its: Chairman
----------------------------------
National Bank for Cooperatives joins in the execution of the above and
within Amendment to evidence its consent to same and to evidence its written
consent to the application of funds as required by Paragraph 2 of the Management
of Excluded Asset Fund Agreement, dated as of March 1, 1991, between National
Bank for Cooperatives and Orange-Madison.
NATIONAL BANK FOR COOPERATIVES
By: /s/ Thomas C. Martin
-----------------------------------
Its: Assistant Vice President
-----------------------------------
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<PAGE>
THIRD AMENDMENT TO MANAGEMENT/OPERATING AGREEMENT
THIS AGREEMENT is made as of this 1st day of April, 1993, by and between
ORANGE-MADISON COOPERATIVE FARM SERVICE, INC. ("Orange-Madison"), a nonstock
corporation organized pursuant to the Virginia Agricultural Cooperative
Association Act, and SOUTHERN STATES COOPERATIVE, INC. ("Southern States"), a
corporation organized pursuant to the Virginia Agricultural Cooperative
Association Act.
WHEREAS, Orange-Madison and Southern States are parties to a certain
Management/Operating Agreement, dated March 1, 1991, as amended in September
1991 and November 1992, (the "Operating Agreement"), through which Southern
States renders management and related services with respect to the managed
assets and provides all Working Capital Requirements in connection with the
Business and Managed Assets; and
WHEREAS, the parties desire to amend the provisions of the Operating
Agreement (i) to provide for the adoption by Orange-Madison of certain of the
Southern States benefit plans and employee vacation and sick leave policies, and
(ii) to provide for the automatic renewal of the Operating Agreement from year
to year after December 31, 1993; and
WHEREAS, the parties desire that the Operating Agreement, as amended,
continue in full force and effect in accordance with its terms in all other
respects.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual obligations and covenants
contained herein, Orange-Madison and Southern States agree as follows:
<PAGE>
1. The Operating Agreement is amended to add the following provisions in
Section 19, to be designated as Sections 19(m), (n), and (p):
19. Miscellaneous.
-------------
m. Welfare Benefit Plans. Effective as of the dates set forth
---------------------
below, the Southern States Employee Welfare Benefit Plans heretofore adopted by
Southern States for the benefit of its employees shall be, and hereby are,
adopted (together with all the included plans) as the Employee Welfare Benefit
Plans of Orange-Madison for the benefit of its employees, (and Directors, in the
case of the Travel Accident Plan), and all amendments and modifications of said
Plans hereafter approved by the Board of Directors of Southern States (or where
appropriate, the Employee Benefits Administrative Committee [the "EBAC"]) shall
apply automatically to the employees (and Directors, where applicable) of
Orange-Madison; and Southern States shall advise Orange-Madison of any such
amendment hereafter adopted. Southern States is authorized to execute such
instruments and to perform any and all acts as may be necessary on behalf of
Orange-Madison to accept, continue in force, or amend said Plans. As of the date
of this Agreement, the following are included plans and the effective dates of
adoption by Orange-Madison are set forth below.
-2-
<PAGE>
<TABLE>
<CAPTION>
Orange-Madison
Name of Plan Effective Date
------------ --------------
<S> <C>
Southern States Medical Plan April 1, 1993
Southern States Dental Plan April 1, 1993
Southern States Term Life Plan July 1, 1993
Southern States Special Accidental April 1, 1993
Death and Dismemberment Plan
Southern States Travel Accident Plan April 1, 1993
Southern States Long Term April 1, 1993
Southern States Health Care January 1, 1994
Spending Account
Southern State Dependent Care January 1, 1994
Spending Account
Southern States Flexible Benefit Plan April 1, 1993
Southern States Employee Assistance Plan - April 1, 1993
(if applicable in geographic area)
Southern States Severance Plan January 1, 1994
</TABLE>
(n) Retirement Plan. Effective January 1, 1994, the Retirement Plan for
---------------
Employees of Southern States Cooperative, Incorporated, as amended and restated
effective July 1, 1989, heretofore adopted by Southern States for the benefit of
its employees shall be and hereby is, adopted as the Retirement Plan of Orange-
Madison for the benefit of its employees, and all amendments and modifications
of said Plan hereafter approved by the Board of Directors of Southern States (or
where appropriate, the Employee Benefits Administrative Committee [the "EBAC"]
or the Employee Benefits Investment Committee [the "EBIC"]) shall apply
automatically to the employees of Orange-Madison; and Southern States shall
advise Orange-
-3-
<PAGE>
Madison of any such amendment hereafter adopted. Southern States is authorized
to execute such instruments and to perform any and all acts as may be necessary
on behalf of Orange-Madison to accept, continue in force, or amend said Plan.
(o) Thrift Plan. Effective January 1, 1994, the Southern States
-----------
Thrift Plan and Trust, as amended and restated effective January 1, 1987,
heretofore adopted by Southern States for the benefit of its employees shall be
and hereby is, adopted as the Thrift Plan of Orange-Madison for the benefit of
its employees, and all amendments and modifications of said Plan hereafter
approved by the Board of Directors of Southern States (or where appropriate, the
Employee Benefits Administrative Committee [the "EBAC"] or the Employee Benefits
Investment Committee [the "EBIC"]) shall apply automatically to the employees of
Orange-Madison; and Southern States shall advise Orange-Madison of any such
amendment hereafter adopted. Southern States is authorized to execute such
instruments and to perform any and all acts as may be necessary on behalf of
Orange-Madison to accept, continue in force, or amend said Plan.
(p) Vacation and Sick Leave Policies. Effective January 1, 1994, the
--------------------------------
vacation and sick leave policies of Orange-Madison shall be the same as the
present vacation and sick leave policies of Southern States effective January 1,
1994. Changes to these policies shall be subject to the approval of the Board of
Directors of Orange-Madison.
2. Section 16(a) of the Operating Agreement is amended to read as
follows:
(a) Term. The term of this Agreement (the "Term") shall commence on
----
the Effective Date and continue in full force and effect through December 31,
1993, and shall continue, unless sooner terminated as provided in Section 16(b)
hereof, from year to year thereafter until terminated by either party hereto by
the giving of at least sixty (60) days' prior
-4-
<PAGE>
written notice to the other party of its intention to terminate at the end of
the then current calendar year (the "Termination Date").
IN WITNESS WHEREOF, the parties hereof have caused their duly authorized
representatives to execute this Agreement on the day and year first above
written.
SOUTHERN STATES COOPERATIVE,
INCORPORATED
(Corporate Seal)
By: /s/ M. T. Ragsdale
--------------------------------------
Its: Executive Vice President and Chief
Operating Officer
ORANGE-MADISON COOPERATIVE FARM
SERVICE, INC.
(Corporate Seal)
By: /s/
---------------------------------------
Its: Chairman of Board
--------------------------------------
-5-
<PAGE>
FOURTH AMENDMENT TO MANAGEMENT/OPERATING AGREEMENT
THIS AGREEMENT is made as of this 1st day of February, 1994, by and between
ORANGE-MADISON COOPERATIVE FARM SERVICE, INC. ("Orange-Madison"), a nonstock
corporation organized pursuant to the Virginia Agricultural Cooperative
Association Act, and SOUTHERN STATES COOPERATIVE, INC. ("Southern States"), a
corporation organized pursuant to the Virginia Agricultural Cooperative
Association Act.
WHEREAS, Orange-Madison and Southern States are parties to a certain
Management/Operating Agreement, dated March 1, 1991, as amended in September
1991, November 1992, and April 1993 (the "Operating Agreement"), through which
Southern States renders management and related services with respect to the
managed assets and provides all Working Capital Requirements in connection with
the Business and Managed Assets; and
WHEREAS, the parties desire to amend the provisions of the Operating
Agreement to remove Southern States' obligation to cover, bear, or otherwise
absorb the Orange-Madison Operating Losses, as defined in the Operating
Agreement, after December 31, 1993; and
WHEREAS, the parties desire that the Operating Agreement, as amended,
continue in full force and effect in accordance with its terms in all other
respects.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual obligations and covenants
contained herein, Orange-Madison and Southern States agree as follows:
1. The Operating Agreement is amended to delete in its entirety the
provisions of Section 6, effective January 1, 1994.
<PAGE>
IN WITNESS WHEREOF, the parties hereof have caused their duly authorized
representatives to execute this Agreement on the day and year first above
written.
SOUTHERN STATES COOPERATIVE,
INCORPORATED
(Corporate Seal)
By: /s/ John Hawkins
---------------------------------
Its: Sr. Vice President & CFO
--------------------------------
ORANGE-MADISON COOPERATIVE FARM
SERVICE, INC.
(Corporate Seal)
By: /s/
---------------------------------
Its: Board Chairman
--------------------------------
-2-
<PAGE>
FIFTH AMENDMENT TO MANAGEMENT/OPERATING AGREEMENT
THIS AGREEMENT is made as of this 1st day of May, 1994, by and between
ORANGE-MADISON COOPERATIVE FARM SERVICE, INC. ("Orange-Madison"), a nonstock
corporation organized pursuant to the Virginia Agricultural Cooperative
Association Act, and SOUTHERN STATES COOPERATIVE, INC. ("Southern States"), a
corporation organized pursuant to the Virginia Agricultural Cooperative
Association Act.
WHEREAS, Orange-Madison and Southern States are parties to a certain
Management/Operating Agreement, dated May 1, 1991, as amended in September 1991,
November 1992, April 1993, and February 1994 (the "Operating Agreement"),
through which Southern States renders management and related services with
respect to the Managed Assets and provides all Working Capital Requirements in
connection with the Business and Managed Assets; and
WHEREAS, the parties desire to amend the provisions of the Operating
Agreement to reclassify as a Managed Asset that parcel of real property,
together with the improvements thereon, lying and being situate in the Town of
Orange, Spotswood Magisterial District, Orange County, Virginia, at the southern
terminus of Mill Street, shown and described as Lot #2 containing 0.4054 acres,
more or less; Lot #3 containing 0.917 acres, more or less; and Lot #4 containing
0.6293 acres, more or less, as shown on a plat of survey thereof by Stearns L.
Coleman, dated December 17, 1990, and described in Appendix 1 to the Operating
Agreement (the "Mill Street Facility"). Said Mill Street Facility being adjacent
to the Grain Facility which was reclassified as a Managed Asset by a
Reclassification Agreement, effective as of September 1, 1991; and
<PAGE>
WHEREAS, the parties desire that the Operating Agreement, as amended,
continue in full force and effect in accordance with its terms in all other
respects.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual obligations and covenants
contained herein, Orange-Madison and Southern States agree as follows:
1. The Operating Agreement is amended to reclassify the Mill Street
Facility as a Managed Asset to be managed by Southern States in accordance with
the Operating Agreement, effective May 1, 1994.
IN WITNESS WHEREOF, the parties hereof have caused their duly authorized
representatives to execute this Agreement on the day and year first above
written.
SOUTHERN STATES COOPERATIVE,
INCORPORATED
(Corporate Seal)
By: /s/ John Hawkins
-------------------------------------
Its: Sr. Vice President & CFO
-----------------------------------
ORANGE-MADISON COOPERATIVE FARM
SERVICE, INC.
(Corporate Seal)
By: /s/
-------------------------------------
Its: Board Chairman
------------------------------------
-2-
<PAGE>
SIXTH AMENDMENT TO MANAGEMENT/OPERATING AGREEMENT
THIS AGREEMENT is made as of this 2nd day of March, 1995, by and between
ORANGE-MADISON COOPERATIVE FARM SERVICE, INC. ("Orange-Madison"), a nonstock
corporation organized pursuant to the Virginia Agricultural Cooperative
Association Act, and SOUTHERN STATES COOPERATIVE, INC. ("Southern States"), a
corporation organized pursuant to the Virginia Agricultural Cooperative
Association Act.
WHEREAS, Orange-Madison and Southern States are parties to a certain
Management/Operating Agreement, dated March 1, 1991, as amended in September
1991, November 1992, April 1993, February 1994, and May 1994 (the "Operating
Agreement"), through which Southern States renders management and related
services with respect to the Managed Assets and provides all Working Capital
Requirements in connection with the Business and Managed Assets; and
WHEREAS, the Operating Agreement and the Amendment to Management/Operating
Agreement, dated November 20, 1992, limit and restrict funds required for
retirement of Orange-Madison patron equity from Working Capital Requirements;
and
WHEREAS, the parties desire to amend the provisions of the Operating
Agreement to permit retirement of Orange-Madison patron equity in order to
settle estates (without limiting the aggregate maximum of such retirements to
settle patron estates); and
WHEREAS, the parties desire that the Operating Agreement, as amended,
continue in full force and effect in accordance with its terms in all other
respects.
<PAGE>
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual obligations and covenants
contained herein, Orange-Madison and Southern States agree as follows:
1. The $30,000 limitation on the retirement of Orange-Madison patron
equity to settle estates is removed. (Said $30,000 limitation was set forth in
the Amendment to Management/Operating Agreement, dated November 20, 1992.)
2. Section 1(u) of the Operating Agreement is amended to add the
following clause to the end of the section: ". . . except for redemptions to
settle estates of deceased patrons."
IN WITNESS WHEREOF, the parties hereof have caused their duly
authorized representatives to execute this Agreement on the day and year first
above written.
SOUTHERN STATES COOPERATIVE,
INCORPORATED
(Corporate Seal)
By: /s/ John Hawkins
--------------------------------------
Its: Sr. Vice President & CFO
-------------------------------------
ORANGE-MADISON COOPERATIVE FARM
SERVICE, INC.
(Corporate Seal)
By: /s/
--------------------------------------
Its: Board Chairman
-------------------------------------
-2-
<PAGE>
EXHIBIT 10.7(a)
January 7, 1998
Mr. Greg Adlich
Vice President, Crops Division
Southern States Cooperative, Inc.
P. O. Box 26234
Richmond, Virginia 23260
Subject: MEMBER PRODUCT PURCHASE AGREEMENT
Schedules of Product Purchases
Contract Year 2001-2002
Dear Greg:
As is required by the Member Product Purchase Agreement (Section III, Paragraph
3.2) we are enclosing Schedules of Product Purchases for designation of your
company's product requirements.
The foundation of that Agreement is the execution of a mutually agreeable
schedule of purchases for the next five (5) years. Because the Member Product
Agreement is an integral part of the CF Industries, Inc. long-term financing, it
is essential that designations thereunder be kept current.
In accordance with the provisions of the Agreement, at the end of each year a
mutually agreeable supplement to the Schedules of Product Purchases covering the
fifth (5th) year hence is to be executed by each Member and by CF.
It is imperative that supplements to the Schedules of Product Purchases for
contract year 2001-2002 be executed formally by each Member and by CF. To allow
both the Members and CF, respectively, adequate time to prepare and analyze
these product requirements, the timetable on the following page is suggested.
<PAGE>
Mr. Greg Adlich
Vice President, Crops Division
Southern States Cooperative, Inc.
January 7, 1998
Page 2
February 16, 1998 - Member product requirements for contract year
2001-2002 should be submitted to CF, in
duplicate, both copies to be signed and dated
by an appropriate officer of the Member.
February 27, 1998 - CF and the Members are to agree mutually to
product requirements for contract year 2001-
2002.
March 9, 1998 - All Schedules of Product Purchases are to be
executed by appropriate officers of both CF
and the Member, and one (1) copy is to be
returned to Member.
We recognize that a substantial amount of effort will be needed by Members to
prepare these forecast product requirements. To assist Members in this regard,
if we are so requested CF will be pleased to make available assistance from our
Marketing and Member Services personnel.
We look forward to working with you to make the Member Product Purchase
Agreement a successful tool for Members and CF to meet the plant food
requirements of your farmer patrons.
Sincerely yours,
/s/ John H. Sultenfuss
John H. Sultenfuss
Senior Vice President
Marketing and Sales
JHS:DJB
Attachments
cc: M.R. Smith
<PAGE>
CF INDUSTRIES, INC.
MEMBER PRODUCT PURCHASE AGREEMENT
October 18, 1974
<PAGE>
CF INDUSTRIES, INC.
-------------------
MEMBER PRODUCT PURCHASE AGREEMENT
---------------------------------
Contents
--------
Section Page
- ------- ----
I Nature of Agreement 2
II Definitions 2
III Term 3
IV Price and Patronage 4
V Payments 6
VI Taxes 6
VII Specifications 7
VIII Quantity 7
IX Damages 10
X Allocation 12
XI Delivery 15
XII Force Majeure 15
XIII Default and Waiver 17
XIV Assignment 18
XV Warranties 18
XVI Modifications 19
XVII Cooperation 20
XVIII Disputes 20
XIX Notices 21
XX Law 21
<PAGE>
MEMBER PRODUCT PURCHASE AGREEMENT
---------------------------------
This Agreement made and entered into by and between CF INDUSTRIES, INC., an
agricultural cooperative association organized under the laws of the State of
Illinois ("Co-op"), and ________________________________________, an
agricultural cooperative association organized under the laws of
______________________________________________ ("Member"),
WITNESSETH
----------
WHEREAS, Co-op has undertaken at the instance and request of its
members to develop and operate plants and equipment for the production and
distribution of fertilizer materials for the benefit of its members; and
WHEREAS, Co-op has committed a substantial financial investment in
production and distribution facilities for the benefit of its members and in
reliance on the Agreement will commit additional funds for expansion of such
facilities to meet the requirements of its members; and
WHEREAS, Member wishes to participate in the benefits of a dependable
long-term supply of fertilizers and to cooperate with other members of Co-op in
the development and operation of production and distribution facilities by the
execution of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained it is hereby agreed as follows:
<PAGE>
I
NATURE OF AGREEMENT
-------------------
Nature of 1.1 This Agreement is generally intended to provide for the
Agreement sale and purchase by Member of fertilizer materials produced,
purchased and distributed by Co-op.
II
DEFINITIONS
-----------
Definitions As used in this Agreement the following terms shall have the
following respective meanings:
2.1 "Facilities" shall mean the plants and equipment
operated by Co-op for the manufacture, storage and distribution
of fertilizer materials.
2.2 "Ton" shall mean two thousand pounds avoirdupois.
2.3 "Year" shall mean a fiscal year of twelve (12)
consecutive months commencing July 1st and ending June 30th.
2.4 "Month" shall mean a calendar month.
2.5 "Product" shall mean any fertilizer materials (in dry,
liquid or gaseous form) sold and purchased or to be sold and
purchased hereunder.
2.6 "Nutrient" shall mean the nitrogen, phophorous or
potassium content of Product, expressed as N, P/2/O/5/ and K/2/O
respectively.
2.7 "Available Supply" shall mean the quantity of all
Product or Nutrient secured by Co-op for distribution to its
members from assured
-2-
<PAGE>
sources, whether by manufacture, or (except for "spot purchases")
by purchase or barter, during each Year; it shall not mean
Product processed or exchanged with or sold to other persons in
connection with contracts with non-members for the general
benefit of all members.
2.8 "Shipping Point" shall mean the place designated by Co-
op for the delivery of Product within the relevant market area.
III
TEAM
----
Term 3.1 The term of this Agreement shall be as follows:
(a) Base Period - The Base Period of this Agreement
shall be a term of ten Years commencing on the first day of July,
1975.
(b) Evergreen Period - After the expiration of the
Base Period this Agreement shall remain in force for an
indefinite term until the Product sales and purchases provided in
the Schedule of Product Purchases and all supplements thereto
have been completed as required by this Agreement.
3.2 At the end of the first Year of this Agreement and each
Year thereafter, the parties shall execute a mutually agreeable
supplement to the schedule of Product Purchases covering the
fifth Year hence, as further provided in Section 8.5. The parties
agree that the supplements to the Schedule of Product Purchases
for the sixth through tenth Years of the Base Period shall
provide for the sale and purchase of Product in an aggregate
quantity not less than the aggregate quantity to be sold and
purchased during the first through fifth years of the Base
Period.
-3-
<PAGE>
IV
PRICE AND PATRONAGE
-------------------
Price and 4.1 The parties to this Agreement have intentionally left
Patronage the purchase price to be paid by Member to Co-op for Product open
for later determination. It is the intention of the parties that
they be bound by this Agreement from the date of signing of the
Agreement, even though the price is not determined at that time.
Each Year pricing policies of Co-op shall be reviewed and
established by its Board of Directors at the time of adoption of
the annual budget.
4.2 The price applicable to each shipment of Product shall
be generally competitive with fair market prices in effect for
sales to independent purchasers by producers of like Products of
the same grade and quality (excluding prices for spot sales on an
isolated or irregular basis) for shipment to the same class of
trade, or absent such market, the price to dealers with
appropriate discounts, the same date, after appropriate
adjustment for the allowances and discounts customarily granted
for freight (as appropriate to Co-op's established distribution
system in the relevant market) and for prompt payment.
4.3 Co-op shall from time to time publish effective prices
for each type of Product.
4.4 Co-op may from time to time offer as an allowance to
induce Member to accept delivery of certain Product during each
Year in substantially equal quantities each Month an amount
representative of the cost savings realized by Co-op as a
consequence of such uniform delivery (as compared with normal
seasonal delivery patterns which would be expected to occur in a
free market in a period of adequate supply).
-4-
<PAGE>
4.5 Subject to the Articles of Incorporation and Bylaws of
Co-op, each Year Co-op shall distribute to Member on a fair and
equitable basis that part of the net earnings remaining after
setting aside reasonable and adequate reserves recognized from
business transacted with all members of Co-op during such Year as
patronage dividends in the form of cash, shares of stock,
certificates of interest, or such other notification of patronage
participation as Co-op shall determine; and Member hereby
consents and agrees to include in the gross income of Member all
patronage dividends in the taxable year received.
4.6 In the event of Force Majeure, or other contingency as
provided in Article XII hereof, including, without limitation,
governmental action, resulting in a substantial increase in the
estimated costs of operation of Co-op, the minimum price for any
or all Product effected by such event shall be appropriately
increased.
V
PAYMENTS
--------
Payments 5.l Payment for Product shall be made by Member to Co-op
within thirty days after Member takes delivery of Product.
5.2 Payments shall be made in U.S. dollars.
5.3 Payment shall be made at the office of Co-op at Long
Grove, Illinois, or as otherwise specified by Co-op.
-5-
<PAGE>
VI
TAXES
-----
Taxes 6.1 The Price established pursuant to this Agreement shall
not include excise, transfer, sales or other taxes, or charges
payable to governments, imposed, levied, assessed or collected
for the transfer or sale, of Product. Member shall pay and be
responsible for the amount of all such taxes or other charges and
shall pay directly as due or advance the amount due to Co-op for
timely payment.
6.2 Member shall be entitled to contest the imposition of
any such taxes or charges and Co-op shall render full cooperation
to Member in this behalf.
VII
SPECIFICATIONS
--------------
Specifi- 7.1 All Products shall conform to quality specifications
cations generally accepted in the industry.
7.2 In theevent any Product delivered deviates from the
foregoing specifications, Member shall be entitled to a rice
adjustment to the extent of any loss on the resale f the Product
resulting from the granting of actual and reasonable credits or
cost reductions to purchasers; provided notice of such deviation
and adequateopportunity to inspect and to accept a return of such
Product shall have been given to Co-op prior to resale.
7.3 Member shall have the right to inspect Product either
at the time of delivery or at the time of unloading from the
carrier and within ten business days after such inspection must
give notice to Co-op of any claim
-6-
<PAGE>
for damages on account of condition, quality or grade of the
Product, specifying in detail the basis of such claim. The
failure of Member to comply with these conditions shall
constitute acceptance of the Product by Member, except in the
event of latent defects not readily discoverable in the ordinary
routine of business.
VIII
QUANTITY
--------
Quantity 8.1 Member shall purchase from Co-op and Co-op shall sell
to Member during each Year the quantity of nutrient (contained in
Product of various types) as set forth in the Schedule of Product
Purchases hereto attached.
8.2 Co-op reserves the right to adjust production of a
particular Product and to substitute other Product containing in
the aggregate the same Nutrient content as the curtailed Product
when appropriate to the best interests of the Product needs of
substantially all of its members after giving due consideration
to the effect of such adjustment of production upon each of its
members; provided, Co-op shall give to member reasonable notice
and opportunity to cancel its commitment for the Product to be
curtailed.
8.3 The quantity of Product delivered hereunder shall be
governed by weights and measurements taken by Co-op at the time
of delivery to carrier. Member may call for an examination of any
weighing or measuring devices to be made by an independent
qualified examiner at Member's cost. If such examination
discloses any inaccuracy in the weighing or measuring equipment
of 1% or more, the cost of examination and correction shall be
-7-
<PAGE>
reimbursed by Co-op to Member and all invoices for shipments of
Product during the period of such inaccuracy, but not more than
thirty days prior to the examination, shall be adjusted
appropriately.
8.4 Co-op will use its best efforts to ship and Member will
use its best efforts to accept delivery of Product in
approximately equal weekly quantities.
8.5 During each Year this Agreement is in force, and not
later than three Months prior to the end of such Year, Member
shall furnish to Co-op a proposed supplement (commonly referred
to as "intents") to the Schedule of Product Purchases setting
forth the types and quantities of Product, if any, Member desires
to purchase from Co-op during the succeeding fifth Year;
provided, however, that Member and Co-op must mutually agree on
the quantities of Nutrient to be sold and purchased pursuant to
such supplement and Co-op may decline to accept changes in
quantities of Nutrient to the extent appropriate to equitably
supply all members of Co-op. In determining whether a proposed
supplement is acceptable Coop shall consider, among other
factors, the ability of Co-op to produce, acquire and distribute
Products and Member's ability to provide storage and distribute
Products. The proposed purchases ("intents") as accepted by Co-op
shall become a permanent index for purposes of applying the
allocation formulas described in Section 10.2 hereof. Member may
make reasonable amendments to the Schedule of Product Purchases
to change the Product mix, but not to change the quantity of
Nutrient, after reasonable prior notice and within the practical
-8-
<PAGE>
constraints of Co-op's productive capacities and its commitments
to other members.
8.6 Co-op shall use its best efforts to make available 110%
of the quantity of N and P2O5, and 100% of the quantity of K2O
agreed to be sold to Member in the form of Product needed by
Member in each Year.
IX
DAMAGES
-------
Damages 9.1 If any Nutrient Co-op agreed to sell hereunder during
each Year remains unshipped one month after the end of such Year
by reason of a breach or default of Member, Coop shall be
entitled to recover liquidated damages calculated as follows:
If the Nutrient shipped is less than the percentage in
column A but not less than the percentage in column B the
amount of such damages shall be the percentage in column C
(on a non-cumulative basis) of the highest price published
by Co-op applicable to Member for such Nutrient (determined
in proportion to the types of Product not taken) during the
Year of default for the quantity of Nutrient unshipped.
A B C
- - -
100% 90% --%
90 89 5
89 88 7.5
88 87 10
87 86 12.5
86 0 15
-9-
<PAGE>
9.2 If any Nutrient Member agreed to purchase hereunder
during each Year remains unshipped one Month after the end of
such Year by reason of a breach or default of Co-op, Member shall
be entitled to recover liquidated damages calculated as follows:
If the Nutrient shipped is less than the percentage in column A,
abut not less than the percentage in column B, the amount of such
damages shall be the percentage in column C (on a noncumulative
basis) of the highest price published by Co-op applicable to
Member for such Nutrient (determined in proportion to the types
of Product not shipped) during the Year of default for the
Nutrient unshipped.
A B C
- - -
100% 96% --%
96 95 5
95 94 7.5
94 93 10
93 92 12.5
92 O 15
9.3 Member may from time to time waive its rights to
purchase Nutrient in order to permit other members to purchase
said Nutrient; in such event, Member waiving rights to purchase
shall not be liable for liquidated damages if an actual sale of
such Nutrient is made to another member at the current published
price to the extent of such sale.
9.4 Upon the request of Member Co-op will act as agent for
Member and assist Member to dispose of any Nutrient which Member
agreed to purchase, but which exceeds Member's need for such
Nutrient.
-10-
<PAGE>
X
ALLOCATION
----------
10.1 All allocations of Product shall be determined in equivalent tons of
Nutrient (N, P2O5 or K2O); for example, the N and P2O5 content of diammonium
phosphate shall be considered separately.
10.2 In the event Co-op, for any reason, shall be unable to supply the
needs of all members as expressed in their proposals for purchases of Product
and supplements ("intents") thereto, Co-op shall allocate the Available Supply
of Product among all members on the following basis:
(a) During the Year commencing July l, 1975, Member shall be
entitled to purchase that part of the Available Supply of Nutrient
which bears the same proportion to the total Available Supply of
Nutrient as the quantity of Nutrient shipped to Member during the
prior Year bears to the total quantity of Nutrient shipped from Co-
op to all members of Co-op during the prior Year.
(b) During the Year commencing July l, 1976, Member shall be
entitled to purchase that part of the Available Supply of Nutrient
which bears the same proportion to the total Available Supply of
Nutrient as a number determined by adding three times the quantity
of Nutrient shipped to Member in the prior Year to the quantity of
Nutrient Member proposed to purchase in the current Year and
dividing the sum by four, bears to a number determined by adding
three times the total quantity of Nutrient shipped by Co-op to all
members of Coop during the prior Year to the quantity of Nutrient
all members of Co-op proposed to purchase in the current Year and
dividing the sum by four.
(c) During the Year commencing July 1, 1977, Member shall be
entitled to purchase that part of the Available Supply of Nutrient
which bears the same proportion to the total Available Supply of
Nutrient as a number determined by
-11-
<PAGE>
adding the quantity of Nutrient shipped to Member in the prior Year
to the quantity of Nutrient Member proposed to purchase in the
current Year and dividing the sum by two, bears to a number
determined by adding the total quantity of Nutrient shipped by Co-op
to all members of Co-op during the prior Year to the quantity of
Nutrient all members of Co-op proposed to purchase in the current
Year and dividing the sum by two.
(d) During the Year commencing July 1, 1978, Member shall be
entitled to purchase that part of the Available Supply of Nutrient
which bears the same proportion to the total Available Supply of
Nutrient as a number determined by adding the quantity of Nutrient
shipped to Member in the prior Year to three times the quantity of
Nutrient Member proposed to purchase in the current Year and
dividing the sum by four, bears to a number determined by adding the
total quantity of Nutrient shipped by Co-op to all members of Co-op
during the prior Year to three times the quantity of Nutrient all
members of Co-op proposed to purchase in the current Year and
dividing the sum by four.
(e) During the Year commencing July 1, 1979, and each Year
thereafter, Member shall be entitled to purchase that part of the
Available Supply of Nutrient which bears the same proportion to the
total Available Supply of Nutrient as the quantity of Nutrient
Member proposed to purchase in the current Year, bears to the total
quantity of Nutrient all members of Co-op proposed to purchase from
Co-op during the current Year.
-12-
<PAGE>
XI
DELIVERY
--------
Delivery 11.1 All Products shall be delivered to Member and risk of
loss shall pass at the Shipping Point.
11.2 Delivery by Co-op to carrier shall constitute delivery
to Member, and if Member requires that the Product be shipped to
the order of Member or freight prepaid or allowed, after delivery
of the Product to carrier, Co-op shall be deemed to be acting for
the account and the accommodation of Member.
11.3 Co-op shall not be obligated to deliver in any Month
more than twelve percent of the annual quantity of any Product,
other than anhydrous ammonia and nitrogen solutions, to be sold
and purchased during that Year.
11.4 Delivery orders shall be placed by Member in
accordance with reasonable procedures established from time to
time by Co-op after adequate prior notice to Member.
XII
FORCE MAJEURE
-------------
Force l2.l In the event of either party being rendered unable by
Majeure Force Majeure to perform any of its obligations in receiving or
delivering Product hereunder, the obligations of such party shall
be suspended, to the extent it is unable, in whole or in part, to
receive or deliver Product by reason of Force Majeure, during the
continuance of any inability so caused and the cause of such
inability shall, so far as possible, be remedied with reasonable
diligence.
-13-
<PAGE>
12.2 The term "Force Majeure" as used in this Agreement
shall mean natural catastrophy, strikes, lockouts, or other
industrial disturbances, acts of the public enemy, wars, declared
or undeclared, blockades, insurrections, riots, fires, civil
disturbances, explosions, curtailment of power or natural gas,
compliance with laws, governmental regulations, orders and
requests, whether valid or not, curtailment or other inability to
obtain equipment, supplies, materials, or transportation
Facilities, breakdown of Facilities, machinery or equipment and
any other cause whether of the kinds herein enumerated or
otherwise, not within the reasonable control of the party
claiming suspension, all of which by the exercise of due
diligence such party could not have reasonably foreseen and
provided against; provided, however, that the settlement of
strikes or lockouts shall be entirely within the discretion of
the party having the difficulty.
12.3 In addition to all other contingencies, the
obligations to make future deliveries of Product hereunder are
contingent upon the construction of additional production and
distribution Facilities. If such additional Facilities are not
completed as planned for reasons beyond the reasonable control of
Co-op, then Co-op shall be excused from delivery of so much of
the Product as would have been available if the Facilities were
completed.
12.4 During any period of shortage of Product caused by any
of the foregoing causes, Co-op may prorate the Available Supply
of Product among its members and customers under this and other
agreements on a fair and equitable basis. The parties hereby
agree that in the event of a Force Majeure it may not be feasible
to implement the provisions of Article X hereof relating to
Allocations.
-14-
<PAGE>
12.5 It is expressly understood and agreed that in no event
shall the provisions of this Article XII be construed to excuse
or suspend the obligations of Member under this Agreement so as
to enable Member to purchase Product from other Sources at more
favorable prices, or on more favorable credit terms, or to honor
other purchase agreements or to first exhaust supplies of Product
available from productive Facilities owned, directly or
indirectly, by Member, whether now or hereafter existing.
XIII
DEFAULT AND WAIVER
------------------
Default 13.1 If either party shall fail to perform any of the and
and covenants or obligations imposed upon it in this Agreement
Waiver (except where such failure shall be excused under Article XII
hereof) , the other party shall notify the party in default in
writing of the alleged default and if the party in default shall
not undertake with all due diligence to correct the same to
comply with the obligations and covenants hereof within thirty
(30) days from and after receiving such notice, then,
notwithstanding any other provision of this Agreement, the
complaining party shall have the right to terminate this
Agreement on notice in writing to the party in default, and such
termination shall not constitute a waiver of any other remedy to
which the party not in default may be entitled for breach of the
contract.
13.2 Waiver by either party of any breach of the terms and
conditions herein contained shall not be construed as a waiver of
any subsequent breach of the same or any other provision of this
Agreement.
-15-
<PAGE>
XIV
ASSIGNMENT
----------
Assignment 14.1 This Agreement shall not be assignable by either party
without the prior written consent of the other party, except by
merger or consolidation of Member with agricultural cooperative
association and except that Co-op shall have full right and power
to assign the benefit of all or any part of this Agreement, and
either party shall have the right to grant a security interest
herein to any financial institution in connection with any
agreement made for the benefit of the party.
XV
WARRANTIES
----------
Warranties 15.1 Co-op makes no warranty, express or implied,
concerning any Product other than that it shall conform to the
specifications set forth in Article VII hereof. All other
warranties of any kind, express or implied in fact or by law,
including, but not limited to, implied warranties of
merchantability or fitness for any particular purpose or any
implied warranty arising from course of dealing or usage of any
trade, are expressly excluded from this warranty and from this
Agreement.
MODIFICATION
Modifica- 16.1 This Agreement constitutes the entire Agreement
tion between the parties hereto for the sale and purchase of Product
from Agreements, understandings, representations, conditions and
warranties by and between the parties.
-16-
<PAGE>
16.2 Neither party shall be liable for any representation
or warranty of any kind, express or implied, not expressly set
forth in this Agreement.
16.3 This Agreement may not be modified or amended except
by written instrument signed by both of the parties and shall not
be modified or altered by any subsequent course of performance by
either of the parties, except as expressly otherwise herein
provided.
XVI
COOPERATION
-----------
17.1 The parties agree to cooperate fully with one another
and to carry out the intents and purposes of this Agreement and
whenever consent may be required of either party with respect
hereto such consent shall not be unreasonably withheld.
XVIII
DISPUTES
--------
Disputes 18.1 The parties agree that as a condition precedent to
commencement of any suit, all disputes and controversies of every
kind and nature between the parties hereto arising out of or in
connection with this Agreement, its construction, validity,
interpretation, performance, operation, enforcement, breach,
continuance, or termination, which is not disposed of by
agreement of the parties, shall be submitted for decision by the
full Board of Directors of Co-op by presentation of a concise
statement of the matter in controversy in sufficiently
comprehensive form to express the nature of the
-17-
<PAGE>
controversy and the issues to be decided. The Board of Directors
shall promptly render a decision on the issues at its regular
meeting next after the submission.
18.2 If either party is not satisfied with the result of
such decision such party shall be entitled to pursue all other
available lawful remedies.
XIX
NOTICES
-------
Notices 19.1 Unless otherwise provided herein, any notice required
under the terms hereof shall be in writing and shall be deemed
delivered when deposited in the United States or Canadian mails,
postage prepaid, addressed as follows:
To Co-op CF Industries, Inc.
Salem Lake Drive
Long Grove, Illinois
To Member
or to such other address as either party may designate in
writing.
XX
LAW
---
Law 20.1 This Agreement shall be construed and governed in
accordance with the laws of the State of Illinois, U.S.A.
-18-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the
parties pursuant to authorization of their respective Boards of
Directors this 16th day of September, 1974.
"Co-op" CF INDUSTRIES, INC,
By /s/
--------------------------
"Member"
Southern States Cooperative, Inc.
By /s/
-----------------------------
June 30, 1975
-19-
<PAGE>
EXHIBIT 10.7(b)
CF INDUSTRIES, INC. PRODUCT PURCHASE AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT
KNOW ALL MEN BY THESE PRESENTS, that, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and pursuant to
that certain Asset Purchase Agreement dated as of July 23, 1998 (the "Asset
Purchase Agreement"), between Gold Kist Inc., a Georgia agricultural cooperative
marketing association ("Gold Kist") and Southern States Cooperative, Inc., a
Virginia agricultural cooperative corporation ("Southern States"), Gold Kist
hereby assigns all of its rights and obligations under a certain Member Product
Purchase Agreement (executed September 16, 1975) between Gold Kist and CF
Industries, Inc., a Delaware corporation ("CF") (the "MPPA") to Southern States,
and Southern States accepts and assumes all such rights and obligations to the
same extent as if it had executed a new MPPA.
This agreement is further subject to the terms and provisions of that
certain letter agreement dated June 1, 1998, between CF, Southern States, and
Gold Kist, and shall be binding upon, and inure to the benefit of, Gold Kist,
Southern States, and their respective successors and assigns.
IN WITNESS WHEREOF, each of Gold Kist and Southern States has caused this
instrument to be signed and delivered by its duly authorized officer on October
13, 1998.
GOLD KIST INC.
By /s/ Gayland O. Coan
------------------------
Name: Gaylord O. Coan
Title: President and Chairman
SOUTHERN STATES COOPERATIVE, INC.
By /s/ Wayne A. Boutwell
----------------------------
Name: Wayne A. Boutwell
Title: President and CEO
CONSENTED AND AGREED TO:
CF INDUSTRIES, INC.
By /s/ Robert C. Liuzzi
--------------------
Name: Robert C. Liuzzi
Title: President and CEO
<PAGE>
EXHIBIT 10.8
================================================================================
AGREEMENT AND PLAN OF MERGER
between and among
SOUTHERN STATES COOPERATIVE, INCORPORATED
and
MICHIGAN LIVESTOCK EXCHANGE
and
STATESMAN FINANCIAL CORPORATION
and
MICHIGAN LIVESTOCK CREDIT CORPORATION
Dated as of December 31, 1997
================================================================================
<PAGE>
Agreement
Table of Contents
(Not Part of the Agreement)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
The Mergers............................................................... 1
1.1. Merger of MLE into Southern States.................................. 1
1.2. Merger of MLCC into Statesman....................................... 1
1.3. Consummation of the MLE Merger and the MLCC Merger.................. 1
1.4. Approval by MLE Members and MLCC Stockholders....................... 2
ARTICLE II
Closing................................................................... 2
2.1. Time and Place...................................................... 2
ARTICLE III
Representations and Warranties of the MLE and MLCC........................ 2
3.1. Organization........................................................ 2
3.2. Subsidiaries........................................................ 3
3.3. Member Equities and Capitalization.................................. 3
3.4. Authority Relative to this Agreement................................ 4
3.5. Consents and Approvals; No Violation................................ 4
3.6. Financial Statements and Reports.................................... 4
3.7. Absence of Undisclosed Liabilities.................................. 5
3.8. Absence of Material Adverse Change.................................. 5
3.9. Finders and Investment Bankers...................................... 5
3.10. Severance, Termination, Change in Control and Similar Agreements.... 5
3.11. Real Property....................................................... 6
3.12. Title to and Condition of Personal Property......................... 7
3.13. Litigation.......................................................... 7
3.14. Compliance with other Instruments and Laws.......................... 7
3.15. Taxes............................................................... 8
3.16. Employees........................................................... 9
3.17. Employee Benefit Plans and Programs................................. 9
3.18. Accounts and Notes Receivable....................................... 13
3.19. Insurance........................................................... 13
3.20. Intellectual Property............................................... 13
3.21. Contracts........................................................... 14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
3.22. Environmental Matters............................................... 15
3.23. Disclosure.......................................................... 16
ARTICLE IV
Separate Representations and Warranties of MLCC........................... 17
4.1. Financial Statements and Reports.................................... 17
4.2. Absence of Undisclosed Liabilities.................................. 17
ARTICLE V
Representations and Warranties of Southern States......................... 17
5.1. Organization........................................................ 17
5.2. Authority Relative to this Agreement................................ 18
5.3. Consents and Approvals; No Violation................................ 18
5.4 Financial Statements and Reports.................................... 18
5.5. Litigation.......................................................... 18
5.6 Absence of Undisclosed Liabilities.................................. 19
5.7 Absence of Material Adverse Change.................................. 19
5.8 Finders and Investment Bankers...................................... 19
5.9 Compliance with Other Instruments and Laws.......................... 19
5.10 Disclosure.......................................................... 20
ARTICLE VI
Representations and Warranties of Statesman............................... 20
6.1. Organization........................................................ 20
6.2. Authority Relative to this Agreement................................ 20
6.3. Consents and Approvals; No Violation................................ 21
6.4 Financial Statements and Reports.................................... 21
6.5. Litigation.......................................................... 21
6.6. Absence of Undisclosed Liabilities.................................. 22
6.7 Absence of Material Adverse Change.................................. 22
6.8 Compliance with Other Instruments and Laws.......................... 22
6.9 Disclosure.......................................................... 23
ARTICLE VII
Conduct of Business Pending the Merger.................................... 23
7.1. Conduct of Business of the MLE Companies............................ 23
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE VIII
Additional Agreements................................................... 25
8.1. Southern States By-laws.......................................... 25
8.2. MLE Results of Operations........................................ 26
8.3 Exchange of MLE Equities......................................... 26
8.4. MLCC Lending Programs............................................ 26
8.5. Additional Agreements............................................ 26
8.6. No Solicitation of Acquisition Proposals......................... 27
8.7. Access to Information; Confidentiality........................... 27
8.8. Public Announcements............................................. 27
ARTICLE IX
Closing Conditions...................................................... 28
9.1. Conditions Precedent to the Obligations of All Parties........... 28
9.2. Conditions Precedent to the Obligations of MLE................... 28
9.3. Conditions Precedent to Obligations of MLCC...................... 29
9.4. Conditions Precedent to Obligations of Southern States........... 29
9.5 Conditions Precedent to Obligations of Statesman................. 30
ARTICLE X
Termination and Abandonment............................................. 31
10.1. Termination...................................................... 31
10.2. Procedure and Effect of Termination.............................. 32
10.3. Effect on MLCC Merger of Termination by MLE or Southern States... 32
ARTICLE XI
Miscellaneous........................................................... 32
11.1. Amendment and Modification....................................... 32
11.2. Waiver of Compliance; Consents................................... 32
11.3. Investigations; Survival of Warranties........................... 33
11.4. Notices.......................................................... 33
11.5. Assignment; Parties in Interest.................................. 34
11.6. Further Assurances............................................... 34
11.7. Governing Law.................................................... 34
11.8. Counterparts..................................................... 34
11.9. Entire Agreement................................................. 34
11.10. Severability..................................................... 34
</TABLE>
iii
<PAGE>
EXHIBITS
Exhibit A Plan of Merger of Michigan Livestock Exchange with and into Southern
States Cooperative, Incorporated
Exhibit B Plan of Merger of Michigan Livestock Credit Corporation with and
into Statesman Financial Corporation
Exhibit C Proposed Amendments to Bylaws of Southern States Cooperative,
Incorporated
iv
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
Agreement and Plan of Merger dated as of December 31 1997 (the
"Agreement"), between and among Southern States Cooperative, Incorporated, a
Virginia agricultural cooperative corporation ("Southern States"), and Michigan
Livestock Exchange, a Michigan non-stock cooperative membership corporation
("MLE"), Statesman Financial Corporation, a Virginia corporation ("Statesman"),
and Michigan Livestock Credit Corporation, a Michigan corporation ("MLCC").
ARTICLE I
The Mergers
1.1. Merger of MLE into Southern States. At the Effective Time (as
----------------------------------
defined in Section 1.3 hereof), in accordance with this Agreement and the
Virginia Stock Corporation Act ("VSCA") and applicable Michigan law, MLE shall
be merged into Southern States (the "MLE Merger") under and in accordance with
the terms of the Plan of Merger attached hereto as Exhibit A (the "MLE Plan of
-----------
Merger"), the separate existence of MLE shall cease, and Southern States shall
- ------
continue as the surviving corporation of the MLE Merger with the effect as
provided for under the VSCA and applicable Michigan law. The Articles of
Incorporation and By-laws of the surviving corporation in the MLE Merger shall
be the Articles of Incorporation and By-laws of Southern States as in effect
immediately prior to the Effective Time, except as the By-laws of Southern
States shall be amended as of the Effective Time as provided for in Section 8.1
of this Agreement, until thereafter amended as provided for therein and under
the VSCA.
1.2. Merger of MLCC into Statesman. At the Effective Time (as defined
-----------------------------
in Section 1.3 hereof), in accordance with this Agreement and the Virginia Stock
Corporation Act ("VSCA") and applicable Michigan law, MLCC shall be merged into
Statesman or with or into a wholly owned subsidiary of Statesman (the "MLCC
Merger") under and in accordance with the terms of the Plan of Merger attached
hereto as Exhibit B (the "MLCC Plan of Merger"), the separate existence of MLCC
-------------------
shall cease, and Statesman shall continue as the surviving corporation of the
MLCC Merger with the effect as provided for under the VSCA and applicable
Michigan law. The Articles of Incorporation and By-laws of the surviving
corporation in the MLCC Merger shall be the Articles of Incorporation and By-
laws of Statesman as in effect immediately prior to the Effective Time until
thereafter amended as provided for therein and under the VSCA.
1.3. Consummation of the MLE Merger and the MLCC Merger. The parties
--------------------------------------------------
hereto will cause each of the MLE Merger and the MLCC Merger to be consummated
by delivering to the State Corporation Commission of the Commonwealth of
Virginia (the "Virginia Commission") articles of merger (the "Articles of
Merger") in such form as required by, and executed and acknowledged in
accordance with, the relevant provisions of the VSCA. Each of the MLE Merger and
the MLCC Merger shall become effective as of the time that the Virginia
Commission finds that the Articles of Merger comply with the requirements of law
and that all required fees have been paid, and it shall issue a certificate of
merger with respect to the MLE Merger and the MLCC Merger for record in
accordance with the relevant provisions of the VSCA (or at such later time
specified as the effective time in the Articles of Merger). The term
<PAGE>
"Effective Time" shall mean the date and time at which the MLE Merger and MLCC
Merger become effective.
1.4. Approval by MLE Members and MLCC Stockholders. The MLE Merger
---------------------------------------------
shall be approved by the members of MLE and the MLCC Merger shall be approved by
the shareholders of MLCC, in each case in accordance with applicable Michigan
law. In order to consummate the MLE Merger, MLE shall, in accordance with
applicable law, duly call, give notice of, convene and hold a meeting of its
members as soon as practical, for the purposes of voting on and approving the
adoption of this Agreement and the MLE Plan of Merger. Subject to Section 8.6,
MLE shall include in the materials distributed to its members in connection with
the meeting called to vote upon this Agreement, the recommendation of the Board
of Directors of MLE that the members of MLE vote in favor of the approval of the
MLE Merger and the adoption of this Agreement and the MLE Plan of Merger.
ARTICLE II
Closing
2.1. Time and Place. The closing of the transactions provided for in
--------------
this Agreement (the "Closing") shall take place at the main office of Southern
-------
States in Richmond, Virginia, at 10:00 a.m., local time, as soon as practicable
following satisfaction of the closing conditions set forth in Article IX,
provided, however, that the parties hereto agree to use all reasonable efforts
to consummate the Closing on or before April 1, 1998, or as soon as practicable
thereafter. The date on which the Closing actually occurs is herein referred to
as the "Closing Date."
ARTICLE III
Representations and Warranties of MLE and MLCC
MLE represents and warrants to Southern States with respect to itself
and, where applicable with respect to each of the Subsidiaries (as hereinafter
defined), and MLCC represents and warrants to each of Southern States and
Statesman with respect to itself, as follows:
3.1. Organization. MLE is a non-stock, membership corporation duly
------------
organized, validly existing and in good standing under the laws of the State of
Michigan. MLCC is a stock corporation duly organized, validly existing and in
good standing under the laws of the State of Michigan. Each of MLE and MLCC has
all requisite power and authority, and all governmental licenses, authorizations
and approvals, to own, lease and operate its properties and to carry on its
business as now being conducted. Each of MLE and MLCC is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification necessary. Each of MLE and MLCC has heretofore
delivered or made available to Southern States accurate and complete copies of
its Articles of Incorporation and By-laws, as amended and in effect on the date
hereof.
2
<PAGE>
3.2. Subsidiaries. Except as specifically set forth in Schedule 3.2,
------------
neither MLE nor MLCC has any subsidiaries and neither of them owns any capital
stock of or equity interests in any corporation, partnership, joint venture or
other entity or enterprise. MLE owns directly or indirectly each of the
outstanding shares of capital stock or other ownership interest of each of MLE's
subsidiaries shown on Schedule 3.2. (Each subsidiary of MLE listed on Schedule
3.2 is hereinafter referred to as a "Subsidiary" and MLE together with all of
----------
the Subsidiaries, are hereinafter referred to as the "MLE Companies".) Each of
-------------
the outstanding shares of capital stock or other ownership interest of each of
the Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and, except as set forth on Schedule 3.2, is owned, directly or
indirectly, by MLE free and clear of all liens, pledges, security interests,
claims or other encumbrances. The following information for each Subsidiary set
forth in Schedule 3.2 is true and correct: (i) its name and jurisdiction of
incorporation or organization and all jurisdictions where it is or is required
to be qualified to do business; (ii) its authorized capital stock or other
ownership interest; and (iii) the number of issued and outstanding shares of
capital stock or other ownership interest, the names of the holders thereof, and
the number of shares or amount of interest held by each such holder. Each of the
Subsidiaries is duly organized, validly existing and in good standing under the
laws of its state of organization and has all requisite power and authority, and
all government licenses, authorization and approvals, to own, lease and operate
its properties and to carry on its business as now being conducted. Each
Subsidiary is duly qualified or licensed and in good standing to do business in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary.
3.3. Member Equities and Capitalization.
----------------------------------
(a) The aggregate amount of members' and patrons' equities of
MLE is accurately reflected on the MLE Financial Statements (as defined herein)
and the individual member's and patron's equities of MLE are accurately
reflected on MLE's books and records. MLE has furnished to Southern States an
accurate and complete list of member and patron allocated equities broken down
by year of allocation.
(b) All issued and outstanding capital stock or other ownership
interests in MLE or any of its subsidiaries are duly authorized, validly issued,
fully paid, non-assessable and free of preemptive rights.
(c) Except as set forth in Schedule 3.3(c), there are not now,
and at the Closing there will not be, any options, warrants, calls,
subscriptions, or other rights or other agreements or commitments of any nature
whatsoever (either firm or conditional) obligating MLE or any Subsidiary to
issue, transfer, deliver or sell, or cause to be issued, transferred, delivered
or sold, any additional shares of capital stock or other equity interest of MLE
or any Subsidiary, or any options, warrants, calls or other rights with respect
to any securities of, or equity interest in, MLE or any Subsidiary or any
securities or obligations convertible into or exchangeable for any such capital
stock or other interest, or obligating MLE or any Subsidiary to grant, extend or
enter into any such agreement or commitment, and no authorization therefor has
been given or made.
3.4. Authority Relative to this Agreement. Each of MLE and MLCC has
------------------------------------
all requisite power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby on behalf of itself and all of
the Subsidiaries. The execution and delivery of this Agreement by each of MLE
and MLCC and the consummation by each of
3
<PAGE>
MLE and MLCC of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of each of MLE and MLCC, and immediately
prior to the Closing, no other corporate or cooperative action or proceedings on
the part of any of the MLE Companies or any of their respective shareholders or
members will be necessary to authorize this Agreement or the consummation of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of MLE and MLCC and constitutes a valid and
legally binding agreement, enforceable against each of MLE and MLCC in
accordance with its terms.
3.5. Consents and Approvals; No Violation. Except as specifically set
------------------------------------
forth in Schedule 3.5, (i) there is no legal impediment to the consummation of
the transactions contemplated by this Agreement; (ii) no filing with, notice to,
or permit, authorization, consent or approval of, any public body or authority
or other third party is necessary for the consummation of the transactions
contemplated by this Agreement; and (iii) neither the execution and delivery of
this Agreement, consummation of the transactions contemplated hereby, nor
compliance with any of the provisions hereof will (A) conflict with or result in
any violation of any provision of the Articles of Incorporation or By-Laws of
MLE or any Subsidiary, (B) violate any statute, rule, regulation, order, writ,
injunction or decree of any public body or authority by which MLE, any
Subsidiary or any of their respective properties is bound, (C) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration or any right to receive prepayment penalties) or the loss of any
benefit to which MLE or any Subsidiary is entitled, under any contract,
agreement, note, bond, mortgage, indenture, license, lease, franchise, permit or
other instrument or obligation to which MLE or any Subsidiary is a party, or by
which any of them or any of their properties are bound, or (D) result in the
creation of any lien, encumbrance or charge of any kind on any asset of MLE or
any Subsidiary.
3.6. Financial Statements and Reports. MLE has furnished to Southern
--------------------------------
States the following financial statements (collectively, the "MLE Financial
-------------
Statements"): (i) audited consolidated, and unaudited consolidating, balance
- ----------
sheets, statements of income, statements of changes in members' and
stockholders' equity and statements of cash flows as of and for the three most
recently ended fiscal years (the fiscal year ended December 31, 1996 being
referred to herein as the "MLE Last Fiscal Year End") of MLE and the
------------------------
Subsidiaries; (ii) unaudited consolidated and consolidating balance sheets and
statements of income, changes in members' and stockholders' equity and cash flow
of MLE and the Subsidiaries as of and for the nine (9) month period ended
September 30, 1997; and (iii) unaudited consolidated and consolidating balance
sheets of MLE as of November 30, 1997 (the "MLE Balance Sheet"). The MLE
-----------------
Financial Statements are correct and complete in all material respects with
respect to each item therein, and present fairly the consolidated financial
position, results of operations and changes in members' and stockholders' equity
of MLE and the Subsidiaries as of and for the periods indicated, and are
consistent in all material respects with the books and records of MLE and each
of the Subsidiaries (which books and records are correct and complete in all
material respects). The audited MLE financial statements have been prepared in
accordance with generally accepted accounting principles applied consistently
throughout the periods covered thereby.
3.7. Absence of Undisclosed Liabilities. Except as specifically set
----------------------------------
forth in Schedule 3.7, there are no liabilities, obligations or contingencies of
any nature whatsoever (whether absolute, accrued, contingent or otherwise),
except for liabilities, obligations or contingencies which are accrued or
reserved against on the MLE Balance Sheet or are immaterial
4
<PAGE>
liabilities which were incurred after the date of the MLE Balance Sheet in the
ordinary course of business consistent with past practice.
3.8. Absence of Material Adverse Change. Except as specifically set
----------------------------------
forth in Schedule 3.8, since the date of the MLE Balance Sheet, the business of
MLE and each of the Subsidiaries has been operated in the usual and ordinary
course and substantially in the same manner as previously conducted, and there
has not been: (i) except for the effect of reserves established with the consent
of Southern States or Statesman in contemplation of the Mergers, any material
adverse change in the business, financial condition, results of operations or
prospects of MLE or any Subsidiary, and, to the best knowledge of MLE, no fact
or condition exists or is contemplated or threatened which might reasonably be
expected to result in any such material adverse change; (ii) any material
impairment of the ability of MLE or any Subsidiary to perform their respective
obligations under this Agreement; (iii) any material threat or impediment to the
consummation of the MLE Merger or the MLCC Merger and the other transactions
contemplated by this Agreement; (iv) any loss or, to the best knowledge of MLE,
threatened or contemplated loss of business of one or more customers of MLE or
any Subsidiary, which loss will have a material adverse effect upon the
business, results of operations or prospects of MLE or any Subsidiary; (v) any
material loss, damage, condemnation or destruction of or to any of the
properties of MLE or any Subsidiary (whether covered by insurance or not); (vi)
any borrowings by MLE or any Subsidiary arising other than in the ordinary
course of business consistent with past practices; (vii) any mortgage, pledge,
lien or encumbrance made on any of the Real Property (as defined in Section 3.11
hereof), Personal Property (as defined in Section 3.12 hereof) or other
properties or assets of MLE or any Subsidiary other than in the ordinary course
of business consistent with past practices; or (viii) any sale, transfer or
other disposition of any of the Real Property, Personal Property or other assets
or properties of MLE or any Subsidiary, other than (A) in the ordinary course of
business consistent with past practices or (B) as contemplated by this
Agreement.
3.9. Finders and Investment Bankers. Except as specifically set forth
------------------------------
in Schedule 3.9, all negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on without the intervention
of any person acting on behalf of MLE or any Subsidiary in such manner as to
give rise to any claim against MLE or any Subsidiary for any broker's or
finder's fee or similar compensation.
3.10. Severance, Termination, Change in Control and Similar
-----------------------------------------------------
Agreements. Except as specifically set forth in Schedule 3.10, neither MLE nor
- ----------
any Subsidiary is a party to or bound by any agreement or arrangement for the
benefit of any current or former employee or director providing for any
severance, termination or retention payments or benefits or for any payments or
benefits payable in connection with or as a result of, directly or indirectly,
any change in control of MLE or any Subsidiary, and neither MLE nor any
Subsidiary will be a party to or bound by any such agreement or arrangement at
the Closing. No amount that could be received (whether in cash or property) as a
result of the consummation of the transactions contemplated by this Agreement by
any officer, director or employee of MLE or any Subsidiary under any employment,
severance or termination agreement or other compensation arrangement or plan
currently in effect will be characterized as an "excess parachute payment" (as
such term is defined in Section 280G(b)(1) of the Internal Revenue Code of 1986,
as amended (the "Code")).
3.11. Real Property.
-------------
5
<PAGE>
(a) Schedule 3.11 contains a complete and correct list of all
real property and all interests in real property owned by MLE and each of the
Subsidiaries (collectively, the "Owned Real Property"). Schedule 3.11 also sets
-------------------
forth the owner of each parcel of Owned Real Property and describes all
improvements thereon. Each of MLE and each Subsidiary, as the case may be, has
good, valid and marketable fee simple title to its Owned Real Property free and
clear of all Liens, other than (i) Liens existing on the date hereof and
specifically identified on Schedule 3.11, and (ii) statutory Liens for taxes not
yet due and payable (the items referred to in the foregoing clauses (i) and (ii)
are, collectively, "Permitted Liens").
---------------
(b) Schedule 3.11 contains a complete and correct list of all
leases, subleases, licenses and occupancy agreements (collectively, "Leases")
------
pursuant to which MLE or any of its Subsidiaries is the lessee, sublessee,
licensee or occupant of any real property leased or subleased by MLE or any
Subsidiary (collectively, the "Leased Real Property"). Schedule 3.11 also
--------------------
contains a complete and correct list of all leases, subleases, licenses and
occupancy agreements pursuant to which MLE or any Subsidiary is the lessor,
sublessor or licensor of any part of the Leased Real Property or the Owned Real
Property (collectively, the "Other Leases"). Schedule 3.11 also sets forth the
------------
landlord and tenant for each Lease and each Other Lease. MLE has delivered or
made available to Southern States complete and correct copies of the Leases and
the Other Leases. MLE and each Subsidiary have duly complied with the material
provisions of each of the Leases or Other Leases to which MLE or any Subsidiary
is a party and is not in default under any of the Leases or Other Leases. To the
best knowledge of MLE, no condition or state of facts exists which, with notice
or the passage of time or both, would constitute a default under any of the
Lease or Other Leases. Each of the Leases or Other Leases is in full force and
effect and is enforceable by MLE or such Subsidiary against all other parties
thereto.
(c) Except as specifically set forth in Schedule 3.11, the
Owned Real Property and the Leased Real Property (collectively, the "Real
Property") constitute all the fee simple and leasehold interests in real
property of MLE or any Subsidiary.
(d) Except as specifically set forth in Schedule 3.11, there
are no proceedings in eminent domain or other similar proceedings pending or
threatened affecting any portion of the Real Property. There exists no writ,
injunction, decree, order or judgment outstanding, nor any litigation pending or
threatened, relating to the ownership, lease, use, occupancy or operation by any
person of any Real Property.
(e) Except as specifically set forth in Schedule 3.11, the use
and operation of the Real Property in the conduct of the business of MLE or any
Subsidiary does not violate in any material respect any instrument of record or
other agreement affecting the Real Property. There is no material violation of
any covenant, condition, restriction, easement or order of any governmental
authority having jurisdiction over the Real Property or any other person
entitled to enforce the same affecting the Real Property or the use or occupancy
thereof. MLE and each of the Subsidiaries enjoy peaceful and undisturbed
possession under the Leases for the Leased Real Property.
(f) Except as specifically set forth in Schedule 3.11, the
Real Property is in compliance in all material respects with all applicable
building, environmental, zoning, subdivision and other land use and similar
applicable laws, codes, ordinances, rules, regulations and orders of
governmental authorities (collectively, the "Real Property Laws"), and neither
------------------
MLE nor any Subsidiary has received any notice of violation or claimed violation
of any Real
6
<PAGE>
Property Law. There is no pending or, to the best knowledge of MLE, anticipated
change in any Real Property Law that will have or result in a material adverse
effect upon the ownership, alteration, use, occupancy or operation of the Real
Property or any portion thereof. No current use by MLE or any Subsidiary of the
Real Property is dependent on a nonconforming use or other governmental approval
the absence of which would materially limit the use of such properties or assets
in the business of MLE or any Subsidiary.
3.12. Title to and Condition of Personal Property.
-------------------------------------------
(a) Except as specifically set forth in Schedule 3.12,
MLE and each of the Subsidiaries have good title to all material tangible assets
constituting personal property purported to be owned by it, including, without
limitation, all such personal property reflected on the MLE Balance Sheet or
acquired after the date thereof, all fixed assets, chattels, machinery,
equipment, leasehold improvements, computer hardware, fixtures, furniture,
furnishings, handling equipment, implements, parts, tools and accessories of all
kinds, and has valid leasehold interests in all personal property leased by it,
in each case free and clear of all Liens (personal property owned or leased by
MLE, collectively, the "Personal Property").
-----------------
(b) Except as specifically set forth in Schedule 3.12,
the Personal Property is in good operating condition, in good repair, has been
well maintained, conforms with all applicable ordinances and regulations,
environmental laws,, regulations and ordinances and is substantially fit for use
in accordance with MLE and each Subsidiary's past practices.
3.13. Litigation. Except as specifically set forth in Schedule
----------
3.13, there is no action, suit, proceeding or investigation pending, or, to the
best knowledge of MLE, threatened against MLE or any Subsidiary which relates to
the transactions contemplated by this Agreement or which would, if adversely
determined, result in any liability to MLE or any Subsidiary, nor has MLE or any
Subsidiary received threat of any such action, proceeding, investigation or
inquiry. No such action, proceeding or, to the best knowledge of MLE,
investigation or inquiry has been pending at any time since the MLE Last Fiscal
Year End. There are no citations, fines or penalties heretofore asserted against
MLE or any Subsidiary under any federal, state or local law regulation, or
ordinance which remain unpaid, nor has MLE or any Subsidiary received any notice
or any other communication since MLE's Last Fiscal Year End from any federal,
state or local agency or other governmental authority with respect to any
material violations or alleged violations of any federal, state or local law or
regulation.
3.14. Compliance with Other Instruments and Laws. Except as
------------------------------------------
specifically set forth in Schedule 3.14, neither MLE nor any Subsidiary is in
violation of or default under any term of, nor is there any set of facts which
would, upon receipt of notice or passage of time constitute a violation of or
default under (i) its Articles of Incorporation or By-laws; (ii) any note, bond,
mortgage, indenture, instrument or agreement relating to indebtedness for
borrowed money; (iii) any judgment, decree or order of any court or governmental
body; or (iv) any other material contract, agreement, license, lease, franchise,
permit or other instrument or obligation to which it is a party or by which it
or any of its properties or assets is bound. MLE and each of the Subsidiaries
are in compliance in all material respects with all statutes, laws, ordinances,
rules, regulations, permits, concessions, grants, franchises, licenses and other
governmental authorizations and approvals applicable to the operation of their
respective businesses. All permits, concessions, grants, franchises, licenses
and other governmental authorizations and approvals material to the conduct of
the businesses of MLE or any Subsidiary have been duly
7
<PAGE>
obtained and are in full force and effect, and there are no proceedings pending
or, to the best knowledge of MLE, threatened which may result in the revocation,
cancellation, suspension or materially adverse modification thereof. None of
such permits, concessions, grants, franchises, licenses or other governmental
authorizations and approvals will be affected in a manner that would have an
adverse effect on the financial condition, operations or business of MLE or any
of the Subsidiaries by the consummation of the transactions contemplated by this
Agreement.
3.15. Taxes.
-----
(a) MLE and each of the Subsidiaries have duly and timely
filed all federal, state, and local tax returns required to be filed by or with
respect to MLE or any Subsidiary or any of their respective assets or business,
and all such returns are true and correct in all material respects. True and
complete copies of all such tax returns for the preceding five years have been
furnished or made available to Southern States. MLE and each of the Subsidiaries
have duly and timely paid, collected and withheld all taxes, levies, duties,
imposts, assessments, fees and other governmental charges (including any
interest and penalties thereon and additions thereto) ("Taxes") that are or may
-----
be required to be paid, collected or withheld by or with respect to MLE or any
Subsidiary or any of their respective assets or business, except for Taxes not
yet due and for which adequate reserves are being maintained and reflected on
the MLE Balance Sheet in accordance with generally accepted accounting
principles. Except as specifically set forth on Schedule 3.15, no taxing
authority is now asserting or, to the best knowledge of MLE, threatening to
assert against MLE or any Subsidiary any deficiency or claim for Taxes. Except
as specifically set forth on Schedule 3.15, neither MLE nor any Subsidiary (i)
has been granted any waiver of any statute of limitations with respect to, or
any extension of a period for the assessment of, any Tax or (ii) is currently
under, or has received notice of commencement of, any audit by any taxing
authority, or is a party to any judicial proceeding with respect to Taxes.
(b) Except as specifically set forth in Schedule 3.15,
there is no contract or agreement (including Tax sharing, allocation and
indemnification agreements) under which MLE or any Subsidiary has, or may at any
time in the future have, an obligation to contribute to the payment of any
portion of any Tax (or pay any amount computed by reference to any portion of
any Tax).
(c) Except as specifically set forth in Schedule 3.15, no
written ruling has been received from, and no closing or other similar agreement
has been executed with, any taxing authority that is presently binding upon MLE
or any Subsidiary or any of their respective assets or business.
(d) Schedule 3.15 sets forth (i) all states and
localities in which MLE or any Subsidiary is required to file Tax returns or pay
Taxes and (ii) all elections with respect to Taxes presently binding upon MLE or
any Subsidiary.
(e) None of the assets of MLE or any of its Subsidiaries
(i) is properly required to be treated as being owned by any other person under
the "safe harbor lease" provisions of former Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended, or (ii) has been financed with or directly or
indirectly secures any bond or debt the interest on which is tax exempt under
Section 103(a) of the Code.
8
<PAGE>
3.16. Employees. Except as specifically set forth on Schedule
---------
3.16, MLE and each Subsidiary has complied in all material respects with all
legal requirements relating to the employment of labor, including, without
limitation, provisions relating to wages, hours, equal opportunity, collective
bargaining and the payment of social security and other Taxes. Except as set
forth in Schedule 3.16, neither MLE nor any Subsidiary is a party to or bound by
any collective bargaining agreement, nor has any of them experienced any
strikes, grievances, claims of unfair labor practice or other collective
bargaining disputes. Neither MLE nor any Subsidiary has any knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of MLE or any Subsidiary. Schedule 3.16
contains (i) a list of all grievances, if any, filed pursuant to any collective
bargaining agreement which is presently pending and which involves any employee
at any facility of MLE or the Subsidiaries, as well as a description and the
status of each, (ii) a list of all pending unfair labor practice charges, if
any, as well as a description of and a statement as to the status of each, filed
prior to the date hereof with any governmental agency by or on behalf of any
employee at any facility of MLE or any Subsidiary, and (iii) a list of all
pending employee-related litigation, if any, including administrative
proceedings, as well as a description of and a statement as to the status of
each case, filed by or on behalf of any employee at any facility of MLE or the
Subsidiaries.
3.17. Employee Benefit Plans and Programs.
-----------------------------------
(a) Schedule 3.17 lists (i) each "employee benefit
-------------
plan" within the meaning of Section 3(3) of ERISA (including, without
limitation, pension, profit sharing, stock bonus, medical reimbursement, life
insurance, disability and severance pay plans) that is maintained or otherwise
contributed to by, or under which there is any continuing obligation on the part
of, MLE or any Subsidiary for the benefit of any current or former employee or
director, spouse or former spouse, dependent or beneficiary thereof of MLE or
any Subsidiary or any of its current or former ERISA Affiliates (collectively,
"Employees") and (ii) all other employee benefit plans, agreements, programs,
policies or other arrangements (including, without limitation, vacation, sick,
personal or other leave and dependent care), not subject to ERISA, that are
maintained or otherwise contributed to by, or under which there is any
continuing actual or contingent obligation on the part of, MLE or any Subsidiary
for the benefit of any Employee (collectively, "Plans"). For purposes hereof, an
-----
"ERISA Affiliate" means each entity that is or, depending on the context, was a
---------------
member of a controlled group or affiliated service group of which MLE or any
Subsidiary or, depending on the context, was such a member or that is or,
depending on the context, was under common control with MLE or any Subsidiary
(within the meaning of Sections 414(b), 414(c), 414(m) or 414(o) of the Code).
(b) Schedule 3.17 hereto also contains a true and
-------------
complete list of the terms and conditions of employment, including compensation,
change in control agreements, severance and benefit continuation agreements and
other benefits other than Plans, of present and former employees of MLE or any
Subsidiary and the spouses, former spouses, dependents or beneficiaries of any
such persons.
(c) With respect to each of the Plans which is not
a "multiemployer plan" (as such term is defined in Section 3(37) of ERISA), MLE
and each Subsidiary has made available to Southern States:
9
<PAGE>
(i) a current, accurate and complete copy (or, to
the extent no such copy exists, an accurate description) of the Plan document
therefor (including all existing amendments thereto that shall become effective
at a later date) and, to the extent applicable;
(ii) any related trust agreement, annuity contract,
insurance contract (including, without limitation, any stop loss coverage), or
other funding instrument;
(iii) any summary plan description and all summaries of
material modifications thereto;
(iv) any related investment manager agreement,
administrative services agreement or other agreement with any service provider;
(v) the last five years' annual reports on IRS Form 5500
series;
(vi) for any Plan which is a defined benefit pension plan,
the last five years' actuarial valuation reports;
(vii) the last five years' tax returns on Form 990 for any
trust funds;
(viii) the last five years' tax or other returns on which
excise taxes relating thereto has been reported;
(ix) for any Plan which is a health, life insurance,
disability or accident plan, the claims experience for the last three years; and
(x) the latest employee handbook and all modifications
thereto.
(d) Except as set forth in Schedule 3.17, with respect to
-------------
each of the Plans which is not a "multiemployer plan" (as such term is defined
in Section 3(37) of ERISA):
(i) each such Plan has been established and administered
in compliance with its terms and with the applicable provisions, if any, of
ERISA and the Code and of any applicable state or other law, and neither MLE nor
any ERISA Affiliate has received any written notice alleging to the contrary
with respect to any such plan;
(ii) each such Plan is enforceable in accordance with the
written terms thereof and no representation or assurance has been made to any
Employee of MLE or any ERISA Affiliate that differs from the written terms of
any such Plan;
(iii) MLE has the right to amend or terminate each such
Plan at any time and for any reason;
(iv) there is no action, claim or demand of any kind
(other than routine claims for benefits), whether through litigation,
administrative or other proceedings or otherwise, that has been brought or, to
the best knowledge of MLE, is proposed or threatened, against any such Plan or
the assets thereof, against the fiduciary of any such plan, or against MLE or
any Subsidiary;
10
<PAGE>
(v) each Plan that is intended to be qualified
within the meaning of Section 401(a) of the Code has received a favorable
determination letter as to its qualification, and to the best knowledge of MLE,
there are no facts or circumstances that would jeopardize any Plan's
qualification under Section 401(a) of the Code;
(vi) each Plan that is intended to be a cafeteria plan
within the meaning of Section 125 of the Code has been established and operated
in accordance with the applicable requirements thereof, and, to the best
knowledge of MLE, there are no facts or circumstances that would jeopardize any
Plan's treatment as a cafeteria plan under Section 125 of the Code;
(vii) to the best knowledge of MLE no "reportable event"
(as such term is used in Section 4043 of ERISA), "prohibited transaction" (as
such term is used in Section 4975 of the Code or ERISA), or "accumulated funding
deficiency" (as such term is used in Section 412 or 4971 of the Code) has
occurred, or would occur by reason of the consummation of the transactions
contemplated in this Agreement, with respect to any Plan;
(viii) MLE and each Subsidiary and each of their respective
ERISA Affiliates has complied with the health care continuation requirements of
Section 601, et seq. of ERISA and COBRA with respect to Employees;
-- ---
(ix) Neither MLE nor any Subsidiary has any
obligation under any Plan to provide health, life insurance or other welfare
benefits to former employees, spouses, former spouses, or their dependents
except as specifically required by law;
(x) the Real Property, Personal Property and other
properties and assets of MLE and the Subsidiaries are not subject to any liens
or other encumbrances (whether absolute or contingent), or any condition which
could result in any such lien or encumbrance, under the Code or ERISA with
respect to the Plans;
(xi) there are no liabilities which would have a
material adverse effect with respect to the Plans which are not disclosed in the
MLE Balance Sheet;
(xii) none of the agreements listed on Schedule 3.17
------------
hereto will be breached by the execution, delivery and performance of this
Agreement by either MLE or MLCC;
(xiii) none of the agreements listed on Schedule
--------
3.17 hereto requires Southern States or Statesman to retain any Employee of MLE
- ----
or any Subsidiary as an Employee for any period of time or to assume any
employment, compensation, fringe benefit, welfare pension, profit sharing or
deferred compensation plan or other employee benefit plan in respect of any
Employee of MLE, any Subsidiary or any ERISA Affiliate; and
(xiv) each Plan which is a defined benefit pension
plan, which is subject to Title IV of ERISA is fully funded on a plan
termination basis.
(e) With respect to each of the Plans which is
a "multiemployer plan" (as such term is defined in Section 3(37) of ERISA),
except as set forth in Schedule 3.17:
-------------
11
<PAGE>
(i) MLE has identified each such plan on Schedule 3.17 as
-------------
such a multiemployer plan and has disclosed the ongoing regular contribution
obligation thereunder to Southern States;
(ii) neither MLE nor any Subsidiary has incurred
any withdrawal liability with respect to any such multiemployer plan that
remains unsatisfied, or would incur any withdrawal liability with respect to any
such multiemployer plan if it or any of its ERISA Affiliates withdrew at the
Closing; and no withdrawal liability will be triggered by reason of the
consummation of the transactions contemplated in this Agreement;
(iii) MLE has made available to Southern States a
current, accurate and complete copy (or, to the extent no such copy exists, an
accurate description) of the plan document therefor (including all existing
amendments thereto that shall become effective at a later date), and any summary
plan description and all summaries of material modifications thereto;
(iv) there is no action, claim or demand of any kind
(other than routine claims for benefits), whether through litigation,
administrative or other proceedings or otherwise, that has been brought or, to
the best knowledge of MLE, is proposed or threatened, against or by any such
multiemployer plan or the assets thereof, MLE or any Subsidiary or any fiduciary
of any such multiemployer plan;
(v) the Real Property, Personal Property and other
properties and assets of MLE and the Subsidiaries are not subject to any liens
or other encumbrances (whether absolute or contingent), or any condition which
could result in any such lien or encumbrance, under the Code or ERISA with
respect to any such multiemployer plan; and
(vi) there are no liabilities with respect to any
such multiemployer plan which are not disclosed in the MLE Balance Sheet.
(f) Information provided by MLE to Southern States
regarding the costs of benefits and administration of the Plans for the
Employees of MLE and the Subsidiaries is accurate and complete.
3.18. Accounts and Notes Receivable. Except as specifically set
-----------------------------
forth in Schedule 3.18, the accounts receivable and notes receivable of MLE or
any Subsidiary reflected on the MLE Balance Sheet, and such additional accounts
receivable or notes receivable as are reflected on the books of MLE or any
Subsidiary on the date hereof, including, without limitation, all customer
accounts receivable and notes receivable, are genuine and represent the valid
and binding obligations of the obligor thereon, enforceable in accordance with
their terms and are good and collectible at the recorded amounts thereof, are
free and clear of any Liens and have arisen only from bona fide transactions in
the ordinary course of business.
3.19. Insurance. Each of MLE and each Subsidiary has fire and
---------
casualty insurance policies with extended coverages, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. Schedule 3.19 lists all policies of
insurance covering MLE or any Subsidiary and their respective properties as
maintained by MLE or such Subsidiary on the date hereof. Such policies are in
full force and effect and all premiums due thereon have been paid. MLE and the
Subsidiaries have
12
<PAGE>
complied in all material respects with the terms and provisions of such
policies. No notice of termination or premium increase has been received under
any of such policies.
3.20. Intellectual Property.
---------------------
(a) For purposes of this Section 3.20, the term "Intellectual
Property" means the United States and foreign trademarks, trade names, trade
dress, copyrights, and similar rights, including registrations and applications
to register or renew the registration of any of the foregoing, the United States
and foreign letters patent and patent applications, and inventions, processes,
designs, formulae, trade secrets, know-how, computer software, data, customer
lists, and all similar intellectual property rights, tangible embodiments of any
of the foregoing (in any medium including electronic media), and licenses of any
of the foregoing.
(b) Schedule 3.20 sets forth a complete andcorrect list of all
Intellectual Property that is owned by MLE or any Subsidiary (the "Owned
Intellectual Property"), which term includes all owned computer software. Except
as specifically set forth in Schedule 3.20, the Owned Intellectual Property
constitutes all Intellectual Property used or held for use in connection with,
necessary for the conduct of, or otherwise material to the business of MLE or
any Subsidiary. Schedule 3.20 sets forth a complete and correct list of all
written or oral licenses and arrangements (i) pursuant to which the use by any
person of Intellectual Property is permitted by MLE or any Subsidiary and (ii)
pursuant to which the use by MLE of Intellectual Property is permitted by any
person (collectively, together with any of the foregoing relating to computer
software, the "Intellectual Property Licenses"). Immediately after the Closing,
------------------------------
Southern States or Statesman, as the case may be, will have the right to use all
Intellectual Property described in Schedule 3.20 and will own all Owned
Intellectual Property, free and clear of Liens. True and complete copies of all
Intellectual Property Licenses have been furnished to Southern States and
Statesman. MLE and the Subsidiaries have duly complied with the provisions of
each Intellectual Property License and none of them is in default under any such
Intellectual Property License. To the best knowledge of MLE, no condition or
state of facts exists which, with notice or the passage of time or both, would
constitute a default under any such Intellectual Property License. All
Intellectual Property Licenses are in full force and effect and are enforceable
by MLE or any Subsidiary, as the case may be, against all other parties thereto.
Except as specifically set forth in Schedule 3.20, (i) the conduct of the
business of MLE and the Subsidiaries does not infringe the rights of any third
party in respect of any Intellectual Property, (ii) to the best knowledge of
MLE, none of the Owned Intellectual Property is being infringed by third
parties, and (iii) there is no claim or demand of any person pertaining to, or
any proceeding which is pending or, to the best knowledge of MLE, threatened
that challenges the rights of MLE or any Subsidiary in respect of any Owned
Intellectual Property or Intellectual Property License, or that claims that any
default exists under any Intellectual Property License.
3.21. Contracts.
---------
(a) Except as may be listed on another Schedule to this
Agreement, Schedule 3.21 sets forth a list of all material written agreements,
contracts and commitments, together with all amendments thereto, and accurate
descriptions of all oral agreements of the following types to which MLE or any
Subsidiary is a party as of the date hereof:
13
<PAGE>
(i) Borrowing and Lending Arrangements. Mortgages,
----------------------------------
indentures, security agreements and other agreements and instruments relating to
the borrowing of money or advances of credit;
(ii) Partnership. Partnership or joint venture
-----------
agreements;
(iii) Employment. Employmentagreements and consulting
----------
agreements;
(iv) Bonus and Benefit Plans. Bonus, profit sharing,
-----------------------
compensation, stock option, pension, retirement, severance, deferred
compensation or other plans, agreements, arrangements, trusts or funds for the
benefit of employees, including all arrangements subject to ERISA;
(v) Sales Agency. Material sales agency, manufacturer's
------------
representative or distributorship agreements, supply agreements, marketing
agreements, advertising agreements, agreements with outside credit card
companies, licenses and other agreements relating to Intellectual Property,
including all Intellectual Property Licenses;
(vi) Capital Expenditures. Agreements or commitments for
--------------------
capital expenditures to be made in excess of $50,000 for any single project;
(vii) Investment Agreements. Agreements to provide funds
---------------------
or to make any investment (in the form of a loan, capital contribution or
otherwise) in any entity or business;
(viii) Agreements with Affiliates. Agreements or
--------------------------
commitments with any officer or director of MLE or any Subsidiary or with any
entity or business venture in which such officer or director has a direct or
indirect interest or any person who owns more than 5% of the issued and
outstanding equity of MLE or any Subsidiary;
(ix) Loan Agreements. Loans, credit, factoring,
---------------
subordination or similar agreements;
(x) Powers of Attorney. Outstanding powers of attorney
------------------
empowering any person, company or other organization to act on behalf of MLE or
any Subsidiary;
(xi) Guaranty. Outstanding guaranty or similar type of
--------
agreement, whether or not entered into in the ordinary course of business;
(xii) Professional Advisors. All agreements, contracts,
---------------------
commitments and understandings with professional advisors for services to be
rendered on behalf of MLE or a Subsidiary;
(xiii) Customer Agreements. Agreements or other
-------------------
arrangements with customers of any of the MLE Companies with an aggregate value
in excess of $50,000;
(iv) Other Agreements. All other agreements, contracts
----------------
and commitments (excluding purchase orders, sales orders and contracts for the
purchase of goods
14
<PAGE>
and services created in the ordinary course of business), including, without
limitation, real estate leases, written or oral, to which MLE or any Subsidiary
is a party or by which any of its properties is bound as of the date hereof, any
one (or series) of which in any way involve payments or receipts of more than
$50,000 following the date hereof, and all Intellectual Property Licenses; and,
(b) True and compete copies of all of the agreements, contracts
and commitments referred to in this Section 3.21 (the "Material Contracts") have
------------------
been furnished or made available to Southern States. MLE and each of the
Subsidiaries have duly complied with the provisions of each Material Contract to
which MLE or any such Subsidiary is a party and neither MLE nor any Subsidiary
is in default under any such Material Contract. All Material Contracts to which
MLE or any Subsidiary is a party are in full force and effect and are
enforceable by MLE or such Subsidiary against all other parties thereto.
3.22. Environmental Matters.
---------------------
(a) As used in this Agreement:
(i) "Applicable Environmental Law" means federal, state
----------------------------
and local laws, principles of common law, regulations, and ordinances that exist
on the date hereof, relating to pollution or protection of the environment which
are applicable to MLE or any Subsidiary or their respective businesses,
including laws relating to the emission, discharge, release or threatened
release of any Hazardous Substance (as hereinafter defined) into the
environment, or otherwise relating to the presence, manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of any
Hazardous Substance.
(ii) "Hazardous Substance" means any pollutant,
-------------------
contaminant, toxic or hazardous or extremely hazardous substance, material,
waste, constituent or chemical (including, petroleum or any product, by-product,
or fraction thereof, asbestos and asbestos-containing materials, polychlorinated
biphenyls ("PCBs"), pesticides, defoliants, explosives, flammables, corrosives
----
and urea formaldehyde) that is regulated by or requires notification,
investigation or remediation under any Applicable Environmental Law.
(b) Except as specifically set forth in Schedule 3.22 hereto:
(i) Each of MLE and the Subsidiaries has obtained all
material permits, licenses and other authorizations and filed all notices which
are required to be obtained or filed by MLE or such Subsidiary under any
Applicable Environmental Law;
(ii) Each of MLE and the Subsidiaries is in compliance in
all material respects with all terms and conditions of such required permits,
licenses and authorizations;
(iii) Each of MLE and the Subsidiaries is in compliance in
all material respects with all requirements contained in any Applicable
Environmental Law;
(iv) There are no past or present activities related to
the presence, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge, release or
threatened release into the environment, of a material amount of any Hazardous
Substance by MLE or any Subsidiary;
15
<PAGE>
(v) The properties and plants of MLE or any Subsidiary do
not contain any asbestos, PCBs, aboveground or underground storage tanks in any
form, any surface impoundment, lagoon, landfill or other containment facility
for the storage, treatment or disposal of any Hazardous Substance, or any
wetlands area; and
(vi) Neither MLE nor any Subsidiary has knowledge or
received notice of any violation of any Applicable Environmental Law, nor has it
been advised by any governmental agency of any actual or potential claim,
liability or demand pursuant to any Applicable Environmental Law, including but
not limited to, a claim, notice or demand under the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. ss.ss.9601 et seq.
("CERCLA") or other similar state law, brought by any governmental agency,
private party or other entity with respect to the operation of the business of
MLE or any Subsidiary.
3.23. Disclosure. This Agreement, including all Schedules and
----------
other exhibits or related documents, does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements and information contained herein, in light of the circumstances in
which they are made, not misleading. There is no material fact which has not
been disclosed to Southern States or Statesman in writing, which is or could be
anticipated to be material to Southern States' or Statesman's decision to
consummate the transactions contemplated by the Agreement on the terms and
conditions set forth herein.
ARTICLE IV
Separate Representations and Warranties of MLCC
In addition to, and severally with, the representations and warranties
made by MLCC in the preceding Article III, MLCC represents and warrants to each
of Southern States and Statesman as follows:
4.1. Financial Statements and Reports. MLCC has furnished to
--------------------------------
Statesman the following financial statements (collectively, the "MLCC Financial
--------------
Statements"): (i) audited balance sheet, statement of income, statement of
- ----------
changes in stockholders' equity and statement of cash flows as of and for the
fiscal year ended December 31, 1996 (the "MLCC Last Fiscal Year End") of MLCC;
-------------------------
the (ii) unaudited balance sheets and statements of income, changes in
stockholders' equity and cash flow of MLCC as of and for the two fiscal years
ended December 31, 1994 and December 31, 1995 and for the nine (9) month period
ended September 30, 1997; and (iii) unaudited balance sheet of MLCC as of
November 30, 1997 (the "MLCC Balance Sheet"). The MLCC Financial Statements are
------------------
correct and complete in all material respects with respect to each item therein,
and present fairly the consolidated financial position, results of operations
and changes in stockholders' equity of MLCC as of and for the periods indicated,
and are consistent in all material respects with the books and records of MLCC
(which books and records are correct and complete in all material respects). The
audited MLCC financial statements have been prepared in accordance with
generally accepted accounting principles applied consistently throughout the
periods covered thereby.
4.2. Absence of Undisclosed Liabilities. Except as specifically set
----------------------------------
forth in Schedule 4.2, there are no liabilities, obligations or contingencies of
any nature whatsoever (whether absolute, accrued, contingent or otherwise),
except for liabilities, obligations or contingencies which are accrued or
reserved against on the MLCC Balance Sheet or are
16
<PAGE>
liabilities which were incurred after the date of the MLCC Balance Sheet in the
ordinary course of business consistent with past practice.
ARTICLE V
Representations and Warranties of Southern States
Southern States represents and warrants to MLE as follows:
5.1. Organization. Southern States is an agricultural cooperative
------------
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Virginia. Southern States has all requisite power
and authority, and all governmental licenses, authorizations and approvals, to
own, lease and operate its properties and to carry on its business as now being
conducted. Southern States is duly qualified or licensed and in good standing to
do business in each jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary. Southern States has heretofore delivered or made available to MLE
accurate and complete copies of its Articles of Incorporation and By-laws, as
amended and in effect on the date hereof.
5.2. Authority Relative to this Agreement. Southern States has all
------------------------------------
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Southern States and the consummation by Southern
States of the transactions contemplated hereby have been duly and validly
authorized and approved by the Board of Directors of Southern States, and,
immediately prior to the Closing, no other corporate action or proceedings on
the part of Southern States or its shareholders will be necessary to authorize
this Agreement or the consummation of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Southern States
and constitutes a valid and binding agreement of Southern States, enforceable
against Southern States in accordance with its terms.
5.3. Consents and Approvals; No Violation. Except as specifically
------------------------------------
set forth in Schedule 5.3, (i) there is no legal impediment to the consummation
of the transactions contemplated by this Agreement; (ii) no filing with, and no
permit, authorization, consent or approval of, any public body or authority is
necessary for the consummation by Southern States of the transactions
contemplated by this Agreement; and (iii) neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby nor
compliance by Southern States with any of the provisions hereof will: (A)
conflict with or result in any violation of any provision of the Articles of
Incorporation or By-laws of Southern States, (B) violate any statute, rule,
regulation, order, writ, injunction or decree of any public body or authority by
which Southern States is bound, or (C) except as specifically set forth in
Schedule 5.3, (1) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any contract,
agreement, note, bond, mortgage, indenture, license, lease, franchise, permit or
other instrument or obligation to which Southern States is a party, or by which
it or any of its properties is bound, or (2) result in the creation of any lien,
encumbrance or charge of any kind on any asset of Southern States.
17
<PAGE>
5.4. Financial Statements and Reports. Southern States has furnished
--------------------------------
to MLE the following financial statements (collectively, the "Southern States
---------------
Financial Statements"): (i) audited consolidated balance sheet, statement of
- --------------------
income, statement of changes in stockholders' equity and statement of cash flows
as of and for the fiscal year ended June 30, 1997 ("Southern States Last Fiscal
---------------------------
Year End") of Southern States; and (ii) unaudited consolidated balance sheet
- --------
("Southern States Balance Sheet") and statements of income, changes in
-----------------------------
stockholders' equity and cash flow of Southern States as of and for the five (5)
month period ended November 30, 1997. The Southern States Financial Statements
are correct and complete in all material respects with respect to each item
therein, have been prepared in accordance with generally accepted accounting
principles applied consistently throughout the periods covered thereby, and
present fairly the consolidated financial position, results of operations and
changes in stockholders' equity of Southern States as of and for the periods
indicated, and are consistent in all material respects with the books and
records of Southern States (which books and records are correct and complete in
all material respects).
5.5. Litigation. Except as specifically set forth in Schedule 5.5,
----------
there is no action, proceeding or investigation pending, or to the best
knowledge of Southern States threatened, against Southern States which relates
to the transactions contemplated by this Agreement or which would, if adversely
determined, result in any liability to Southern States, nor has Southern States
received threat of any such action, proceeding investigation or inquiry. No such
action, proceeding or, to the best knowledge of Southern States, investigation
or inquiry has been pending, at any time since the date of Southern States Last
Fiscal Year End. There are no citations, fines, or penalties heretofore asserted
against Southern States under any federal, state or local law, regulation or
ordinance which remain unpaid, nor has Southern States received notices or any
other communications since Southern States Last Fiscal Year End from any
federal, state or local agency or other governmental authority with respect to
any material violations or alleged violations of any federal, state or local law
or regulation.
5.6. Absence of Undisclosed Liabilities. Except as specifically set
----------------------------------
forth in Schedule 5.6, there are no liabilities, obligations or contingencies of
any nature whatsoever (whether absolute, accrued, contingent or otherwise),
except for liabilities, obligations or contingencies which are accrued or
reserved against on the Southern States Balance Sheet or are immaterial
liabilities which were incurred after the date of the Southern States Balance
Sheet in the ordinary course of business consistent with past practice.
5.7. Absence of Material Adverse Change. Except as specifically set
----------------------------------
forth in Schedule 5.7, since the date of the Southern States Balance Sheet, the
business of Southern States has been operated in the usual and ordinary course
and substantially in the same manner as previously conducted, and there has not
been: (i) any material adverse change in the business, financial condition,
results of operations or prospects of Southern States, and, to the best
knowledge of Southern States, no fact or condition exists or is contemplated or
threatened which might reasonably be expected to result in any such material
adverse change; (ii) any material impairment of the ability of Southern States
to perform its obligations under this Agreement; (iii) any material threat or
impediment to the consummation of the MLE Merger or the MLCC Merger and the
other transactions contemplated by this Agreement; (iv) any loss or, to the best
knowledge of Southern States, threatened or contemplated loss of business of one
or more customers of Southern States, which loss will have a material adverse
effect upon the business, results of operations or prospects of Southern States;
(v) any material loss, damage, condemnation or destruction of or to any of the
properties of Southern States (whether covered
18
<PAGE>
by insurance or not); (vi) any borrowings by Southern States arising other than
in the ordinary course of business consistent with past practices; (vii) any
mortgage, pledge, lien or encumbrance made on any of the properties or assets of
Southern States arising other than in the ordinary course of business consistent
with past practices; or (viii) any sale, transfer or other disposition of any of
the assets or properties of Southern States, other than (A) in the ordinary
course of business consistent with past practices or (B) as contemplated by this
Agreement.
5.8. Finders and Investment Bankers. Except as specifically set
------------------------------
forth in Schedule 5.8, all negotiations relating to this Agreement and the
transactions contemplated hereby have been carried on without the intervention
of any person acting on behalf of Southern States in such manner as to give rise
to any claim against Southern States for any broker's or finder's fee or similar
compensation.
5.9. Compliance with Other Instruments and Laws. Except as
------------------------------------------
specifically set forth in Schedule 5.9, Southern States is not in violation of
or default under any term of nor is there any set of facts which would, upon
receipt of notice or passage of time constitute a violation of or default under
(i) its Articles of Incorporation or By-laws; (ii) any note, bond, mortgage,
indenture, instrument or agreement relating to indebtedness for borrowed money;
(iii) any judgment, decree or order of any court or governmental body; or (iv)
any other material contract, agreement, license, lease, franchise, permit or
other instrument or obligation to which it is a party or by which it or any of
its properties or assets is bound. Southern States is in compliance in all
material respects with all statutes, laws, ordinances, rules, regulations,
permits, concessions, grants, franchises, licenses and other governmental
authorizations and approvals applicable to the operation of their respective
businesses. All permits, concessions, grants, franchises, licenses and other
governmental authorizations and approvals material to the conduct of the
business of Southern States have been duly obtained and are in full force and
effect, and there are no proceedings pending or, to the best knowledge of
Southern States, threatened which may result in the revocation, cancellation,
suspension or materially adverse modification thereof. None of such permits,
concessions, grants, franchises, licenses or other governmental authorizations
and approvals will be affected in a manner that would have an adverse effect on
the financial condition, operations or business of Southern States by the
consummation of the transactions contemplated by this Agreement.
5.10. Disclosure. This Agreement, including all Schedules and other
----------
exhibits or related documents, does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements and information contained herein, in light of the circumstances in
which they are made, not misleading. There is no material fact which has not
been disclosed to MLE in writing, which is or could be anticipated to be
material to MLE's decision to consummate the transactions contemplated by the
Agreement on the terms and conditions set forth herein.
19
<PAGE>
ARTICLE VI
Representations and Warranties of Statesman
Statesman represents and warrants to MLCC as follows:
6.1. Organization. Statesman is a corporation duly incorporated,
------------
validly existing and in good standing under the laws of the Commonwealth of
Virginia. Statesman has all requisite power and authority, and all governmental
licenses, authorizations and approvals, to own, lease and operate its properties
and to carry on its business as now being conducted. Statesman is duly qualified
or licensed and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary. Statesman has heretofore
delivered or made available to MLCC accurate and complete copies of its Articles
of Incorporation and By-laws, as amended and in effect on the date hereof.
6.2. Authority Relative to this Agreement. Statesman has all
------------------------------------
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Statesman and the consummation by Statesman of the
transactions contemplated hereby have been duly and validly authorized and
approved by its Board of Directors and, to the extent required by law, its
shareholders, and, immediately prior to the Closing, no other corporate action
or proceedings on the part of Statesman or its shareholders will be necessary to
authorize this Agreement or the consummation of the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Statesman and constitutes a valid and binding agreement of Statesman,
enforceable against Statesman in accordance with its terms.
6.3. Consents and Approvals; No Violation. Except as specifically
------------------------------------
set forth in Schedule 6.3, (i) no filing with, and no permit, authorization,
consent or approval of, any public body or authority is necessary for the
consummation by Statesman of the transactions contemplated by this Agreement;
and (ii) neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby nor compliance by Statesman
with any of the provisions hereof will (A) conflict with or result in any
violation of any provision of the Articles of Incorporation or By-laws of
Statesman, (B) violate any statute, rule, regulation, order, writ, injunction or
decree of any public body or authority by which Statesman is bound, or (C)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any contract, agreement, note, bond,
mortgage, indenture, license, lease, franchise, permit or other instrument or
obligation to which Statesman is a party, or by which it or any of its
properties is bound.
6.4. Financial Statements and Reports. Statesman has furnished to
--------------------------------
MLCC the following financial statements (collectively, the "Statesman Financial
-------------------
Statements"): (i) audited balance sheet, statement of income, statement of
- ----------
changes in stockholders' equity and statements of cash flows as of and for the
fiscal year ended June 30, 1997 ("Statesman Last Fiscal Year End") of Statesman;
------------------------------
and (ii) unaudited balance sheet ("Statesman Balance Sheet") and statement of
-----------------------
income, changes in stockholders' equity and cash flow of Statesman as of and for
the five (5) month period ended November 30, 1997. The Statesman Financial
Statements are correct and complete in all material respects with respect to
each item therein, have been prepared in
20
<PAGE>
accordance with generally accepted accounting principles applied consistently
throughout the periods covered thereby, and present fairly the consolidated
financial position, results of operations and changes in stockholders' equity of
Statesman as of and for the periods indicated, and are consistent in all
material respects with the books and records of Statesman (which books and
records are correct and complete in all material respects).
6.5. Litigation. Except as specifically set forth in Schedule 6.5,
----------
there is no action, proceeding or investigation pending, or, to the best
knowledge of Statesman, threatened against Statesman which relates to the
transactions contemplated by this Agreement or which would, if adversely
determined, result in any liability to Statesman, nor has Statesman received
threat of any such action, proceeding, investigation or inquiry. No such action,
proceeding or, to the best knowledge of Statesman, investigation or inquiry has
been pending at any time since the Statesman Last Fiscal Year End. There are no
citations, fines, or penalties heretofore asserted against Statesman under any
federal, state or local law, regulation or ordinance which remain unpaid, nor
has Statesman received notices or any other communications since the Statesman
Last Fiscal Year End from any federal, state or local agency or other
governmental authority with respect to any material violations or alleged
violations of any federal, state or local law or regulation.
6.6. Absence of Undisclosed Liabilities. Except as specifically set
----------------------------------
forth in Schedule 6.6, there are no liabilities, obligations or contingencies of
any nature whatsoever (whether absolute, accrued, contingent or otherwise),
except for liabilities, obligations or contingencies which are accrued or
reserved against on the Statesman Balance Sheet or are immaterial liabilities
which were incurred after the date of the Statesman Balance Sheet in the
ordinary course of business consistent with past practice.
6.7. Absence of Material Adverse Change. Except as specifically set
----------------------------------
forth in Schedule 6.7, since the date of the Statesman Balance Sheet, the
business of Statesman has been operated in the usual and ordinary course and
substantially in the same manner as previously conducted, and there has not
been: (i) any material adverse change in the business, financial condition,
results of operations or prospects of Statesman, and, to the best knowledge of
Statesman, no fact or condition exists or is contemplated or threatened which
might reasonably be expected to result in any such material adverse change; (ii)
any material impairment of the ability of Statesman to perform its obligations
under this Agreement; (iii) any material threat or impediment to the
consummation of the MLE Merger or the MLCC Merger and the other transactions
contemplated by this Agreement; (iv) any loss or, to the best knowledge of
Statesman, threatened or contemplated loss of business of one or more customers
of Statesman, which loss will have a material adverse effect upon the business,
results of operations or prospects of Statesman; (v) any material loss, damage,
condemnation or destruction of or to any of the properties of Statesman (whether
covered by insurance or not); (vi) any borrowings by Statesman arising other
than in the ordinary course of business consistent with past practices; (vii)
any mortgage, pledge, lien or encumbrance made on any of the properties or
assets of Statesman arising other than in the ordinary course of business
consistent with past practices; or (viii) any sale, transfer or other
disposition of any of the assets or properties of Statesman, other than (A) in
the ordinary course of business consistent with past practices or (B) as
contemplated by this Agreement.
21
<PAGE>
6.8. Compliance with Other Instruments and Laws. Except as
------------------------------------------
specifically set forth in Schedule 6.8, Statesman is not in violation of or
default under any term of nor is there any set of facts which would, upon
receipt of notice or passage of time constitute a violation of or default under
(i) its Articles of Incorporation or By-laws; (ii) any note, bond, mortgage,
indenture, instrument or agreement relating to indebtedness for borrowed money;
(iii) any judgment, decree or order of any court or governmental body; or (iv)
any other material contract, agreement, license, lease, franchise, permit or
other instrument or obligation to which it is a party or by which it or any of
its properties or assets is bound. Statesman is in compliance in all material
respects with all statutes, laws, ordinances, rules, regulations, permits,
concessions, grants, franchises, licenses and other governmental authorizations
and approvals applicable to the operation of their respective businesses. All
permits, concessions, grants, franchises, licenses and other governmental
authorizations and approvals material to the conduct of the business of
Statesman have been duly obtained and are in full force and effect, and there
are no proceedings pending or, to the best knowledge of Statesman, threatened
which may result in the revocation, cancellation, suspension or materially
adverse modification thereof. None of such permits, concessions, grants,
franchises, licenses or other governmental authorizations and approvals will be
affected in a manner that would have an adverse effect on the financial
condition, operations or business of Statesman by the consummation of the
transactions contemplated by this Agreement.
6.9. Disclosure. This Agreement, including all Schedules and other
----------
exhibits or related documents, does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements and information contained herein, in light of the circumstances in
which they are made, not misleading. There is no material fact which has not
been disclosed to MLCC in writing, which is or could be anticipated to be
material to MLCC's decision to consummate the transactions contemplated by the
Agreement on the terms and conditions set forth herein.
22
<PAGE>
ARTICLE VII
Conduct of Business Pending the Merger
7.1. Conduct of Business of the MLE Companies. Each of the MLE
----------------------------------------
Companies hereby covenants to Southern States, and MLCC covenants to Statesman,
that, except as specifically provided in this Agreement or except with the prior
written consent of Southern States, or, in the case of MLCC, Statesman, during
the period from the date of this Agreement to the Closing, each of the MLE
Companies will conduct its operations only in the ordinary and usual course
consistent with past practice, and will use its customary and reasonable efforts
to preserve intact its business organization, to keep available the services of
its officers, employees and consultants, to maintain satisfactory relationships
with suppliers, customers and all others having business relationships with it
and to maintain accounting records consistent with past practice. MLE and each
of the Subsidiaries will promptly advise Southern States, or, in the case of
MLCC, Statesman, in writing of any change in the financial condition, operations
or business of any of the MLE Companies which MLE or MLCC, as the case may be,
recognizes is or is likely to be materially adverse to any of the MLE Companies.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement, prior to the Closing, without the prior
written consent of Southern States, or, in the case of MLCC, Statesman, neither
MLE nor any Subsidiary will do or enter into any written or oral agreement to do
any of the following:
(a) amend the Articles of Incorporation or By-Laws of MLE or
any Subsidiary;
(b) rescind, modify, amend or otherwise change or affect any
of the resolutions of the Boards of Directors of MLE or any Subsidiary approving
the execution of this Agreement and recommending it to the members of MLE for
approval;
(c) (i) except as mutually agreed by MLE and Southern States,
based upon the results of operations of MLE for the fiscal year ended December
31, 1997, either: (A) pay any patronage refund or (B) authorize any additional
allocated patrons equity; or (ii) authorize for issuance, issue, sell, deliver
or agree or commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any equity or shares of capital stock of any class of MLE or of any
Subsidiary, or any securities convertible into or exchangeable for such equity
or shares of capital stock;
(d) split, combine or reclassify any member's equity or shares
of capital stock of MLE or of any Subsidiary of any class, declare, set aside or
pay any dividend or other distribution (whether in cash, stock or property or
any combination thereof) in respect of any class of equity or capital stock of
MLE or of any Subsidiary, or redeem or otherwise acquire any such equity or
shares of capital stock;
(e) except in the ordinary course of business under existing
lines of credit, consistent with past practice and not in excess of current
requirements or as may be required to extend MLE's and/or MLCC's existing credit
facilities with St. Paul Bank until April 30, 1998 upon terms and conditions
substantially similar to the terms of MLE's current credit
23
<PAGE>
facilities with St. Paul Bank, (i) create, incur, assume, maintain or permit to
exist any long-term debt, including obligations in respect of capital leases
(other than obligations under capital leases existing on the date hereof) or
create, incur, assume, maintain or permit to exist any short-term borrowing in
an aggregate amount for MLE or any such Subsidiary exceeding $500,000, (ii)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person;
(iii) make any loans, advances or capital contributions to, or investments in,
any other person; or (iv) waive, release, grant or transfer any material rights
or modify or change any existing license, lease, contract or other document
material to MLE or any Subsidiary;
(f) (i) increase or commit to increase in any manner the
compensation, bonus, bonus opportunity, fringe benefits or other benefits of any
employee, or enter into or commit to enter into, any employment or consulting
agreement with or for the benefit of any person employed or otherwise engaged by
MLE or any Subsidiary as of the date of this Agreement, except as any of such
may occur in the ordinary course of business and in accordance with its
customary past practices (and in any such event MLE will consult with Southern
States before taking such action); (ii) increase or commit to increase in any
manner the benefits, rights or entitlements under any Plan of any Employee;
(iii) pay or commit to pay any pension or other retirement benefit or allowance
not required by an existing Plan; (iv) amend or commit to amend any Plan; (v)
institute or enter into or commit to institute or enter into any bonus, profit-
sharing, incentive, stock option or other equity benefit, deferred compensation,
severance, retention, change in control, pension, retirement, health, welfare,
group insurance or other employee or retiree benefit plan, agreement, trust,
fund or arrangement; or (vi) hire or employ any additional employee (either on a
salaried or hourly basis) other than on a part time basis and consistent with
past practice and seasonal needs without first advising Southern States of such
intended new hire;
(g) except in the ordinary course of business, consistent with
past practice, sell, transfer, lease, license, mortgage or otherwise dispose of,
or encumber, or agree to sell, transfer, lease, license, assign, mortgage or
otherwise dispose of or encumber, any properties, real, personal or mixed,
including automobiles, whether owned or leased;
(h) enter into any other agreements, commitments or contracts
which, individually or in the aggregate, are material to MLE or any Subsidiary,
except agreements, commitments or contracts for the purchase, sale or lease of
goods or services in the ordinary course of business consistent with past
practice and not in excess of current requirements, or otherwise make any
material change in the conduct of the business or operations of MLE or any such
Subsidiary;
(i) enter into any agreement, commitment or contract with
respect to the purchase of any capital assets involving an amount in excess of
$50,000 for any single project;
(j) enter into any other agreements, leases, commitments or
contracts which individually involve the expenditure of more than $25,000
(except for purchase orders, sales orders and contracts for the purchase of
goods and services in the ordinary course of business);
24
<PAGE>
(k) except as specifically permitted in this Agreement,
willfully take any action or omit to take any action that would result in the
representations and warranties of MLE and the Subsidiaries contained in this
Agreement not being true and correct on the date made or, except with respect to
those representations and warranties made as of a specified date, on the Closing
Date or in any of the conditions to the consummation of the transactions
contemplated hereby not being satisfied on the Closing Date;
(l) make any new elections, or make any changes to current
elections, with respect to Taxes;
(m) create any subsidiary of MLE or any Subsidiary whether by
acquisition, merger or otherwise; provided, that if Southern States consents to
--------
the creation of any such subsidiary, then any representations or warranties of
MLE and the Subsidiaries relating to their respective subsidiaries or the
business to be acquired by any such subsidiary made by MLE or any Subsidiary
shall be deemed to be made with respect to such acquired subsidiary or acquired
business, with the same force and effect as the representations and warranties
made by MLE and the Subsidiaries in Article III hereof; or
(n) change any method of accounting or any accounting
principle or practice used by MLE or any Subsidiary.
ARTICLE VIII
Additional Agreements
8.1. Southern States By-laws. As of the Effective Time of the MLE
-----------------------
Merger, Southern States shall have amended its By-laws in the manner set forth
in Exhibit C to this Agreement and its Board of Directors shall have adopted the
appropriate resolutions to provide for the following: (i) the establishment and
maintenance of MLE's operations and activities relating to livestock marketing
prior to the Effective Time as a separate allocation unit of Southern States for
purposes of operations and patronage of the MLE business ("MLE Allocation
Unit"); (ii) the creation of an election district providing for one seat on
Southern States' Board of Directors based on commission volume and other inputs
and services; and (iii) the establishment of a livestock marketing board for the
purpose of consulting with Southern States with respect to the business and
operations of the MLE Allocation Unit. The livestock marketing board initially
will be composed of the twelve persons serving as members of the board of
directors of MLE at the Effective Time plus up to five additional persons to be
designated by the Board of Directors of Southern States. The livestock marketing
board shall be reduced to not more than twelve members by the date which is five
years after the Effective Time of the MLE Merger.
8.2. MLE Results of Operations. MLE covenants that, exclusive of the
-------------------------
effect of any reserves established with the consent of Southern States in
contemplation of the Mergers, the results of operations of the MLE Companies,
determined in accordance with accounting principals consistently applied in
accordance with past practices, for the period between September 30, 1997 and
the final day of the month immediately preceding the Closing shall not be a
deficit amount.
8.3. Exchange of MLE Equities. Southern States agrees that, at the
------------------------
Effective Time, it will assume on a dollar for dollar basis the allocated
patrons' equities of MLE existing
25
<PAGE>
on the books of MLE at such time, provided, however, that the first dollar of
each such members' allocated equity shall be exchanged for and represented by
one share of Southern States' membership common stock, $1.00 par value per
share. Southern States further agrees that those allocated member and patron
equities assumed by Southern States will be revolved with Southern States'
patronage refund allocations, treating MLE's 1983 class year of assumed equities
as if they were patronage refund allocations of Southern States for the year
1977, with corresponding treatment for subsequent years of MLE equities assumed
(e.g., 1984 member equities of MLE will be revolved at the same time as Southern
States revolves its 1978 patronage refund allocations), provided, however, that
no more than one class year of MLE equities will be revolved by Southern States
in any one fiscal year. Patronage equities of the MLE Allocation Unit arising
after the Effective Time of the MLE Merger will be subject to revolvement under
the same policies applicable to all other Southern States patronage refund
allocations as determined by the Board of Directors of Southern States from time
to time. Southern States agrees that operating savings of Southern States
attributable to the business of Statesman will be allocated among the members
and patrons of Southern States in such a manner as will cause the patrons of the
MLE Allocation Unit to share equitably in such operating savings.
8.4. MLCC Lending Programs. After the Effective Time, Statesman will
---------------------
undertake to continue to provide the animal and facility credit programs
currently provided by MLCC, subject to the exercise of its good faith business
judgment concerning the nature and extent of such programs and the terms and
conditions of credit to individual obligors.
8.5. Additional Agreements. Each of the parties hereto agrees to use
---------------------
all reasonable efforts to take or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement and to cooperate with each other in connection with the foregoing,
including using its best efforts to obtain all necessary consents, approvals and
authorizations as are required to be obtained under any Federal, state or local
law or regulation, to defend all lawsuits or other legal proceedings challenging
this Agreement or the consummation of the transactions contemplated hereby, to
cause to be lifted or rescinded any injunction or restraining order or other
order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby, and to effect all necessary registrations and
Filings.
8.6. No Solicitation of Acquisition Proposals. Until such time, if
----------------------------------------
any, as this Agreement is terminated pursuant to Section 10.1, MLE will not, and
will cause each of the Subsidiaries and their respective directors, officers,
employees, representatives, partners and agents (collectively, the
"Representatives") to not, 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 contained in this
paragraph shall prohibit the Board of Directors of MLE from furnishing
information to, or entering into discussions or negotiations with, any person or
entity that makes an unsolicited bona fide Acquisition Proposal if, and only to
the extent that (A) the Board of Directors of MLE, after consultation with and
based upon the advice of independent legal counsel, determines in good faith
that such action is necessary for the Board of Directors of MLE to comply with
its fiduciary duties to its members and patrons under applicable law and (B)
prior to taking such action, MLE
26
<PAGE>
(x) provides reasonable notice to Southern States to the effect that it is
taking such action and (y) receives from such other person or entity an executed
confidentiality agreement in reasonably customary form. MLE shall as promptly as
practicable advise Southern States orally and in writing of the receipt by it
(or any of the other entities or 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. MLE 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 involving the capital stock, membership
rights and/or allocated patrons' equities of MLE or any of its subsidiaries, any
proposal for a merger, consolidation or other business combination involving MLE
or any of its subsidiaries, any proposal or offer to acquire in any manner a
substantial portion of the business or assets of MLE or any of its subsidiaries,
or any proposal or offer with respect to any other transaction similar to any of
the foregoing with respect to MLE or any of its subsidiaries, other than the
business combination contemplated by this Agreement.
8.7. Access to Information; Confidentiality. MLE and Southern States
--------------------------------------
shall each afford to the other and to the other's financial advisors, legal
counsel, accountants, consultants, financing sources, and other authorized
representatives access during normal business hours throughout the period prior
to the Effective Time to all of its books, records, properties, plants and
personnel and, during such period, each shall furnish as promptly as practicable
to the other all information as such other party reasonably may request,
provided that neither party shall disclose to the other any competitively
sensitive information and no investigation pursuant to this Section 8.7 shall
affect any representations or warranties made herein or the conditions to the
obligations of the respective parties to consummate the MLE Merger and the MLCC
Merger. Each party shall continue to abide by the terms of the confidentiality
agreement between MLE and Southern States, dated November 5, 1997 (the
"Confidentiality Agreement").
8.8. Public Announcements. Southern States, Statesman and the MLE
--------------------
Companies will consult with each other before issuing any press release or
otherwise making any public statements with respect to this Agreement and shall
not issue any such press release or make any such public statement prior to such
consultation without the mutual consent of Southern States and MLE, except as in
the opinion of counsel for the MLE Companies or Southern States is required by
law.
ARTICLE IX
Closing Conditions
9.1. Conditions Precedent to the Obligations of All Parties. The
------------------------------------------------------
respective obligations of each party to effect the Closing of each of the MLE
Merger and the MLCC Merger shall be subject to the fulfillment at or prior to
the Closing of each of the following conditions: (i) none of the parties hereto
shall be subject to a preliminary or permanent injunction or other order, decree
or ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission nor any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority shall be in effect which would (A) make the acquisition or holding by
Southern States of the assets and/or equities of the MLE Companies illegal or
make the acquisition or holding by Statesman of the assets and/or capital
27
<PAGE>
stock of MLCC illegal or (B) otherwise prevent the consummation of the Closing
as contemplated by this Agreement; and (ii) receipt of all governmental,
environmental, regulatory and other third-party consents and approvals required
to effect the transactions contemplated herein.
9.2. Conditions Precedent to the Obligation of MLE. The obligation
---------------------------------------------
of MLE to effect the Closing is also subject to the fulfillment, at or prior to
the Closing Date, of the following additional conditions:
(a) Southern States shall have performed in all material
respects each obligation to be performed by it hereunder on or prior to the
Closing, and the transactions contemplated herein shall have been approved by
the Board of Directors and, to the extent required by law, the members of
Southern States.
(b) The representations and warranties of Southern States set
forth in this Agreement shall be true and correct at and as of the Closing as if
made at and as of such time, except to the extent that any such representation
or warranty is made as of a specified date (in which case such representation or
warranty shall have been true and correct as of such date).
(c) MLE shall have received a certificate, dated the Closing
Date, of the Chief Executive Officer, Chief Operating Officer, or any Senior
Vice President of Southern States to the effect that the conditions specified in
paragraphs (a) and (b) of this Section 9.2 have been fulfilled.
(d) MLE shall have received the opinion of Mays & Valentine,
L.L.P., counsel to Southern States, addressed to them and dated the Closing
Date, as to such items and in such form and substance as are reasonably
requested by MLE.
(e) The By-laws of Southern States shall have been amended as
contemplated in Section 8.1 above.
9.3. Conditions Precedent to Obligations of MLCC. The obligation of
-------------------------------------------
MLCC to effect the Closing shall be subject to the fulfillment, at or prior to
the Closing Date, of the following additional conditions:
(a) Statesman shall have performed in all material respects
each obligation to be performed by it hereunder on or prior to the Closing, and
the transactions contemplated herein shall have been approved by the Board of
Directors and, to the extent required by law, shareholders of Statesman.
(b) The representations and warranties of Statesman set forth
in this Agreement shall be true and correct at and as of the Closing as if made
at and as of such time, except to the extent that any such representation or
warranty is made as of a specified date (in which case such representation or
warranty shall have been true and correct as of such date).
(c) MLCC shall have received a certificate, dated the Closing
Date, of the President or any Vice President of Statesman to the effect that the
conditions specified in paragraphs (a) and (b) of this Section 9.3 have been
fulfilled.
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<PAGE>
(d) MLCC shall have received the opinion of Mays & Valentine,
L.L.P., counsel to Statesman, addressed to them and dated the Closing Date, as
to such items and in such form and substance as are reasonably requested by
MLCC.
9.4. Conditions Precedent to Obligations of Southern States. The
------------------------------------------------------
obligation of Southern States to effect the Closing shall be subject to the
fulfillment, at or prior to the Closing Date, of the following additional
conditions:
(a) Each of the MLE Companies shall have performed in all
material respects each of its obligations under this Agreement required to be
performed by it on or prior to the Closing pursuant to the terms hereof.
(b) The representations and warranties of each of MLE and MLCC
contained in this Agreement shall be true and correct when made and at and as of
the Closing Date as if made at and as of such time, except to the extent that
any such representation or warranty is made as of a specified date (in which
case such representation or warranty shall have been true and correct as of such
date).
(c) Except for the effect of reserves established with the
consent of Southern States in contemplation of the Mergers, there shall not have
occurred after the date hereof any material adverse change in the financial
condition, business or results of operations of any of the MLE Companies.
(d) Southern States shall be satisfied that the consolidated
balance sheet of MLE as of the final day of the month immediately preceding the
Closing reflects all such reserves or other provisions for loss or contingencies
as shall be necessary or appropriate to its continuing business and operations
as contemplated by this Agreement.
29
<PAGE>
(e) Southern States shall have received a certificate, dated
the Closing Date, of the President of MLE to the effect that the conditions
specified in paragraphs (a), (b), (c), (f) and (j), of this Section 9.4
applicable to each of MLE and the Subsidiaries have been fulfilled.
(f) There shall not be any action or proceeding commenced by
or before any court or governmental agency or authority in the United States, or
threatened by any governmental agency or authority in the United States, that
challenges the consummation of the Closing or seeks to impose material
limitations on the ability of Southern States to exercise full rights of
ownership of any of the material assets or business of any of the MLE Companies
or seeks material damages from any of the MLE Companies in connection with such
ownership.
(g) All necessary third-party consents relating to the
transactions contemplated by this Agreement shall have been obtained and shall
be in full force and effect.
(h) Southern States shall have received the opinion of
McDermott, Will & Emery, counsel to the MLE Companies, addressed to it and dated
the Closing Date, as to such items and in such form and substance as are
reasonably requested by Southern States.
(i) Southern States shall be satisfied with the results of its
environmental due diligence of all of the Real Property.
(j) Southern States shall have received satisfactory assurance
from all lessors under the Leases regarding the status of such Leases and the
effect on the status of such Leases of this Agreement and the consummation of
the transactions contemplated hereby.
(k) Southern States shall have received satisfactory assurance
that the Marketing and Management Agreement, dated November 2, 1994, between
MLE, Indiana Livestock Exchange and Thorn Apple Valley, Inc., a Michigan
corporation and any other designated agreement shall continue in full force and
effect without interruption or alteration, in any fashion on account of the
consummation of the transactions contemplated herein.
(l) Southern States shall have received the written consent of
CoBANK, ACB relating to the transactions contemplated by this Agreement and such
consent shall be in full force and effect.
9.5. Conditions Precedent to Obligations of Statesman. The
------------------------------------------------
obligations of Statesman to effect the Closing of the MLCC Merger shall be
subject to the fulfillment, at or prior to the Closing Date, of the following
additional conditions:
(a) MLCC shall have performed in all material respects its
obligations under this Agreement required to be performed by it on or prior to
the Closing pursuant to the terms hereof.
(b) The representations and warranties of MLCC contained in
this Agreement shall be true and correct when made and at and as of the Closing
Date as if made at and as of such time, except to the extent that any such
representation or warranty is made as of a specified date (in which case such
representation or warranty shall have been true and correct as of such date).
30
<PAGE>
(c) There shall not have occurred after the date hereof any
material adverse change in the financial condition, business or results of
operations of MLCC.
(d) Statesman shall have received a certificate, dated the
Closing Date, of the President of MLCC, to the effect that the conditions
specified in paragraphs (a), (b), (c) and (f) of this Section 9.5 applicable to
MLCC have been fulfilled.
(e) There shall not be any action or proceeding commenced by
or before any court or governmental agency or authority in the United States, or
threatened by any governmental agency or authority in the United States, that
challenges the consummation of the Closing or seeks to impose material
limitations on the ability of Statesman to exercise full rights of ownership of
any of the material assets or business of MLCC or seeks material damages from
MLCC in connection with such ownership.
(f) All necessary third-party consents relating to the
transactions contemplated by this Agreement shall have been obtained and shall
be in full force and effect.
(g) Statesman shall have received the opinion of McDermott,
Will & Emery, counsel to MLCC, addressed to it and dated the Closing Date, as to
such items and in such form and substance as are reasonably requested by
Statesman.
(h) Statesman shall have received satisfactory assurance from
all of MLCC's lenders regarding the status of their respective loans to MLCC and
the effect on the status of such loans of this Agreement and the consummation of
the transactions contemplated hereby.
(i) Statesman shall have received the written consent of
CoBANK, ACB, Crestar Bank, NationsBank, N.A. First Union National Bank, SunTrust
Bank, Atlanta, Wachovia Bank of North Carolina, N.A. relating to the
transactions contemplated by this Agreement and such consents shall be in full
force and effect.
ARTICLE X
Termination and Abandonment
10.1. Termination. With respect to all of the transactions
-----------
contemplated hereby, this Agreement may be terminated at any time prior to the
Closing:
(a) by mutual consent of MLE and Southern States;
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<PAGE>
(b) by either MLE or Southern States if the Closing shall not
have occurred on or before April 30, 1998; provided, however, that the right to
-------- -------
terminate this Agreement pursuant to this Section 10.1(b) shall not be available
to any party 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;
(c) by Southern States, if an MLE Company shall have breached
any of its covenants herein or shall have made a misrepresentation or if
Southern States is not satisfied with the results of its environmental due
diligence as stated in Section 9.4(h).
(d) by MLE, if Southern States shall have made a
misrepresentation herein;
(e) by either Southern States or MLE, if any court of
competent jurisdiction or other governmental agency of competent jurisdiction
shall have issued an order, decree or ruling or taken any other action binding
on the parties hereto restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated herein, and such order, decree,
ruling or other action shall have become final and non-appealable; provided,
--------
however, that neither Southern States nor the MLE Companies may terminate this
- -------
Agreement as a result of any such order, decree, ruling or other action issued
at the request of a party seeking to purchase any of the MLE Companies'
equities, shares or assets unless such order, decree, ruling or other action is
issued without the consent of and over the opposition of the party seeking to
terminate this Agreement pursuant to this Section 10.1(e).
10.2. Procedure and Effect of Termination. In the event of
-----------------------------------
termination of this Agreement pursuant to Section 10.1 by either Southern States
or MLE, written notice thereof shall forthwith be given to the other and this
Agreement shall terminate, without further action by either of them. If this
Agreement is terminated as provided herein, no party hereto shall have any
liability or further obligation to any other party to this Agreement except that
the provisions of the final sentence of Section 8.7, Article XI and this Section
10.2 shall survive such termination.
10.3. Effect on MLCC Merger of Termination by MLE or Southern States.
--------------------------------------------------------------
In the event of termination of this Agreement pursuant to this Article X, all
obligations of either Statesman or MLCC under this Agreement also shall be
terminated simultaneously.
ARTICLE XI
Miscellaneous
11.1. Amendment and Modification. Subject to applicable law, this
--------------------------
Agreement may be amended, modified or supplemented by mutual agreement of
Southern States and MLE or, as applicable, with respect to the MLCC Merger by
Statesman and MLCC at any time before Closing; provided, however, that this
-----------------
Agreement may not be amended except by an instrument in writing signed by each
of the parties hereto.
11.2. Waiver of Compliance; Consents. Any failure of Southern States
------------------------------
or Statesman, on the one hand, or any of the MLE Companies, on the other hand,
to comply with any obligation, covenant, agreement or condition herein may be
waived by MLE, or with respect to Statesman, MLCC on the one hand, or Southern
States, or with respect to MLCC, Statesman
32
<PAGE>
on the other, respectively, only by a written instrument signed by the party or
parties granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
11.2.
11.3. Investigations; Survival of Warranties. The respective
--------------------------------------
representations, warranties and covenants of Southern States, Statesman and the
MLE Companies contained herein or in any certificates, schedules or other
documents delivered prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party hereto. Each and every
representation, warranty and covenant of Southern States, Statesman or any of
the MLE Companies and each of their respective officers, directors, shareholders
and partners shall expire with, and be terminated and extinguished by, the
Closing; provided, however, this Section 11.3 shall have no effect upon any
-----------------
other obligation of the parties hereto to be performed before or after the
Closing or on the obligations of the parties described in Sections 8.1, 8.3, and
8.4 and in the final sentence of Section 8.7 and in this Article XI, all of
which will survive the Closing.
11.4. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice; provided that notices of a change of address shall be effective
only upon receipt thereof):
(a) if to Southern States or Statesman, to:
Wayne A. Boutwell, Chief Executive Officer
Southern States Cooperative, Inc.
6606 West Broad Street
Richmond, Virginia 23230-1717
Phone: (804) 281-1000
Fax: (804) 281-1383
with a copy to:
N. Hopper Ancarrow, Jr., Esquire
Vice President and General Counsel
Southern States Cooperative, Inc.
Richmond, Virginia 23230-1717
Phone: (804) 281-1205
Fax: (804) 281-1383
(b) if to the MLE Companies, to:
Thomas H. Reed, CEO
Michigan Livestock Exchange
806 Coolidge Road
East Lansing, Michigan 48823
Phone: (517) 337-2856
Fax: (517) 337-6070
33
<PAGE>
with a copy to:
Michael R. Fayhee, Esquire
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60603
Phone: (312) 984-7522
Fax: (312) 984-2097
11.5. Assignment; Parties in Interest. This Agreement and all of the
-------------------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties, provided that Southern States and Statesman may assign either of
--------
their respective rights and obligations to one or more affiliates, but no such
assignment shall relieve Southern States or Statesman of their respective
obligations hereunder. This Agreement is not intended to confer upon any other
person except the parties hereto any rights or remedies.
11.6. Further Assurances. From time to time, at Southern States' or
------------------
Statesman's request and without further consideration, the MLE Companies will
execute and deliver to Southern States or Statesman, as the case may be, such
documents and take such action as Southern States or Statesman may reasonably
request in order to consummate the transactions contemplated hereby and to vest
in Southern States and with respect to MLCC, Statesman good and valid title to
the respective assets of the MLE Companies.
11.7. Governing Law. This Agreement shall be governed by the laws of
-------------
the Commonwealth of Virginia without regard to the laws that might otherwise
govern under applicable principles of conflicts of law as to all matters,
including, but not limited to, matters of validity, construction, effect,
performance and remedies.
11.8. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.9. Entire Agreement. This Agreement, including the documents and
----------------
instruments referred to herein, embodies the entire agreement and understanding
of the parties hereto in respect of the MLE Merger and MLCC Merger and all other
matters contained herein. There are no restrictions, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein. This Agreement, together with the documents and instruments
referred to herein, supersedes all prior agreements and understandings between
the parties with respect to the MLE Merger and MLCC Merger and such other
matters.
11.10. Severability. If any provision of this Agreement shall be held
------------
illegal, invalid or unenforceable, the parties hereto agree that such provision
shall be enforced to the maximum extent permissible so as to effect the intent
of the parties, and the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby. If necessary to effect the intent of the parties hereto, the parties
will negotiate in good faith to amend this Agreement to replace the
unenforceable language with enforceable language which as closely as possible
reflects such intent.
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<PAGE>
IN WITNESS WHEREOF, Southern States, Statesman, MLE and MLCC have
caused this Agreement to be signed by their respective duly authorized officers
on the date first above written.
SOUTHERN STATES COOPERATIVE,
INCORPORATED
By: ______________________________________________
Name: Wayne A. Boutwell
Title: President and Chief Executive Officer
STATESMAN FINANCIAL CORPORATION
By: ______________________________________________
Name: Jonathan A. Hawkins
Title: President
MICHIGAN LIVESTOCK EXCHANGE
By: ______________________________________________
Name: Thomas H. Reed
Title: President and Chief Executive Officer
MICHIGAN LIVESTOCK CREDIT CORPORATION
By: ______________________________________________
Name: Thomas H. Reed
Title: President
35
<PAGE>
EXHIBIT A
Plan of Merger
of
Michigan Livestock Exchange
with and into
Southern States Cooperative, Inc.
1. The names of the merging corporations are Michigan Livestock Exchange
("MLE"), a Michigan non-stock membership corporation and Southern States
Cooperative, Inc. ("SSC"), a Virginia agricultural cooperative corporation.
MLE shall be merged with and into SSC and SSC shall be the surviving
corporation in the merger (the "Merger").
2. Upon the effective date of the Merger, the membership interests in MLE
shall be extinguished, and each membership interest shall be and become one
share of membership common stock of SSC, $1 par value per share.
3. Upon the effective date of the Merger, allocated patronage equities of MLE
existing on such date shall be and become allocated patronage equities of
SSC on a dollar for dollar basis, except that the first dollar of each
allocated patron's equity of MLE thereafter shall be represented by the one
share of SSC membership common stock, $1 par value per share, exchanged for
each membership interest in MLE as provided for in Section 2 above.
4. The Articles of Incorporation and By-laws of SSC as in effect prior to the
Merger shall continue (until amended or repealed as provided by applicable
law) to be the Articles of Incorporation and By-laws of SSC provided,
however, that the By-laws of SSC shall be amended as of the effective date
of the Merger in the form provided for in the Agreement of Merger of which
this Plan of Merger is a part.
5. The directors of SSC after the Merger shall consist of the same individuals
serving as members of the board of directors prior to the Merger, with the
addition of William Pridgeon, who shall be the duly elected director of the
MLE Allocation Unit of SSC until his successor shall have been duly elected
in accordance with the By-laws of SSC.
36
<PAGE>
EXHIBIT B
Plan of Merger
of
Michigan Livestock Credit Corporation
with and into
SFC II Corporation
1. The names of the merging corporations are Michigan Livestock Credit
Corporation ("MLCC"), a Michigan corporation, and SFC II Corporation ("SFC
II"), a Virginia corporation. MLCC shall be merged with and into SFC II and
SFC II shall be the surviving corporation in the merger (the "Merger").
2. Upon the effective date of the Merger, by virtue of the Merger and without
any action on the part of any of the parties hereto or any holder of any of
the following securities: (i) the 100,000 shares of MLCC Common Stock, par
value $1.00 per share, held by Michigan Livestock Exchange, a Michigan non-
stock corporation which is the sole holder of MLCC Common Stock, shall be
converted into shares of SFC II Class X Preferred Stock, $1,000 par value
per share, with the aggregate number of shares of Class X Preferred Stock
to be issued to be equal to the number of shares (or, if that number is not
an even number, than to the next lowest whole number) determined by
dividing (a) the net equity of MLCC as shown on its balance sheet as of the
close of the month end immediately prior to the effective date of the MLCC
Merger, by (b) one thousand dollars ($1,000.00). For purposes of this
section 2 of this Plan of Merger, the "net equity" of MLCC shall mean its
total equity after the establishment of such loan loss reserves or other
reserves for contingencies as shall be satisfactory to Statesman Financial
Corporation less the aggregate liquidation preference of any shares of MLCC
preferred stock then outstanding. No fractional shares of SFC II Class X
Preferred Stock shall be issued pursuant to this Plan of Merger; (ii) each
outstanding share of MLCC Class A Preferred Stock, par value $1.00 per
share, shall be converted into one (1) share of SFC II Class A Preferred
Stock, par value $1.00 per share; (iii) each outstanding share of MLCC
Class B Preferred Stock, par value $1.00 per share, shall be converted into
one (1) share of SFC II Class B Preferred Stock, par value $1.00 per share;
and (iv) each outstanding share of MLCC Class C Preferred Stock, par value
$20.00 per share, shall be converted into one (1) share of SFC II Class C
Preferred Stock, par value $20.00 per share.
3. The Articles of Incorporation and By-laws of SFC II as in effect prior to
the Merger shall continue (until amended or repealed as provided by
applicable law) to be the Articles of Incorporation and By-laws of SFC II
provided, however, that the Articles of Incorporation of SFC II shall be
amended as of the effective date of the Merger to change the name of SFC II
to "Michigan Livestock Credit Corporation".
37
<PAGE>
EXHIBIT C
Proposed Amendments to By-laws of
Southern States Cooperative, Inc.
Article VI of the By-laws of Southern States Cooperative, Inc. shall
be amended to renumber the current provisions of Article VI as Article VI(A),
and to add a new Article VI(B) as follows:
(B)
Livestock Marketing
Section 1B. Livestock Divisional Board Election. The Livestock
Divisional Board shall consist of as many eligible members in each region for
terms of three (3) years each as may, from time to time, be established by the
Board of Directors. If more than one (1) member represents a region, the terms
shall be staggered. The Livestock Divisional Board shall also have one (1) at-
large member as provided in Section 2B of this Article. The initial Livestock
Divisional Board shall be appointed by the Board of Directors and shall
thereafter be self perpetuating with all vacancies, whether from the expiration
of term of office or otherwise, to be filled by a majority vote of the remaining
Livestock Divisional Board from eligible members from the region in which the
vacancy occurs. Each member of the Livestock Divisional Board shall serve until
the appointment and acceptance of his duly qualified successor. The Board of
Directors shall divide the territory served by the Livestock Marketing Division
into at least four (4) geographic regions so that as far as practical, each area
of such territory shall be represented on the Livestock Divisional Board.
Changes in the number and boundaries of these regions may be made from time to
time as circumstances require.
The Livestock Divisional Board shall elect a Chairman, Vice Chairman
and Secretary for terms of one (1) year.
Section 2B. The At-Large Livestock Divisional Board Member. In
addition to the appointed members of the Livestock Divisional Board, one (1) at-
large Member shall be appointed by the Board of Directors for a term of three
(3) years, or until his successor is appointed. The at-large member shall have
the same powers and rights as other members of the Livestock Divisional Board.
Any vacancy occurring in the office of at-large Livestock Advisory Board member
shall be filled in the same manner as the original appointment was made.
Section 3B. Duties of the Livestock Divisional Board. The Livestock
Divisional Board shall serve in an advisory capacity to the Board of Directors
with respect to the operation of the Livestock Marketing Division, and shall
make recommendations to the Board of Directors on matters referred to the
Livestock Divisional Board, and may make recommendations to the Board of
Directors on policies affecting Livestock Marketing Division operations.
Amend Article VIII, Section 4: Add "its livestock marketing
facilities" after elevators in the sixth line.
FINANCING SERVICES AND CONTRIBUTED CAPITAL AGREEMENT
38
<PAGE>
EXHIBIT 10.9(a)
GROUND LEASE
between
SOUTHERN STATES COOPERATIVE, INCORPORATED
as Lessor
and
GOLD BOND STAMP COMPANY OF GEORGIA
as Lessee
Dated: as of July 15, 1977
Location: Richmond, Virginia.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
1. DEMISE OF PREMISES.................................................................... 1
2. CERTAIN DEFINITIONS................................................................... 2
3. TITLE AND CONDITION................................................................... 4
4. USE OF PROPERTY; QUIET ENJOYMENT...................................................... 5
5. TERM.................................................................................. 5
6. RENT.................................................................................. 5
7. NET LEASE; NON-TERMINABILITY.......................................................... 6
8. TAXES AND ASSESSMENTS; COMPLIANCE WITH LAW............................................ 7
9. LIENS................................................................................. 8
10. INDEMNIFICATION....................................................................... 9
11. MAINTENANCE AND REPAIR................................................................ 10
12. ALTERATIONS, RELEASE OF LAND AND REDUCTION
OF BASIC RENT......................................................................... 10
13. CONDEMNATION.......................................................................... 12
14. CASUALTY.............................................................................. 16
15. ASSIGNMENT, SUBLETTING AND MORTGAGING................................................. 17
16. PERMITTED CONTESTS.................................................................... 17
17. CONDITIONAL LIMITATIONS; DEFAULT PROVISION............................................ 20
18. ADDITIONAL RIGHTS OF LESSOR........................................................... 26
19. NOTICES............................................................................... 26
</TABLE>
<PAGE>
<TABLE>
<S> <C>
20. ESTOPPEL CERTIFICATES................................................................. 27
21. NO MERGER............................................................................. 29
22. SURRENDER............................................................................. 30
23. SEPARABILITY.......................................................................... 30
24. RIGHTS OF MORTGAGEE................................................................... 31
25. APPRAISERS............................................................................ 34
26. THE SUBLEASE.......................................................................... 35
27. ATTORNMENT OF SUBLESSEE; NO PERSONAL LIABILITY
OF LESSEE............................................................................. 38
28. OPTION TO PURCHASE.................................................................... 39
29. TERMINATION OF OPTIONS................................................................ 41
30. TERMINATION OF AGREEMENT FOR LEASE AND
DEVELOPMENT........................................................................... 42
31. TERMINATION DATE AGREEMENT............................................................ 42
32. BINDING EFFECT........................................................................ 42
33. HEADINGS.............................................................................. 43
34. GOVERNING LAW......................................................................... 43
35. SCHEDULES............................................................................. 43
Schedule A-1 Description of Land...................... 44
A-2 Permitted Encumbrances.................. 46
A-3 Lessee's Equipment...................... 47
</TABLE>
<PAGE>
<TABLE>
<S> <C>
B Description of Improvements............. 48
C Lease Term and Rent..................... 49
SIGNATURE PAGE........................................................................ 50
ACKNOWLEDGEMENTS...................................................................... 51
</TABLE>
<PAGE>
THIS LEASE, dated as of July 15, 1977, between SOUTHERN STATES
COOPERATIVE, INCORPORATED, a Virginia Corporation (herein, together with its
successors and assigns, called "Lessor") having an address at Seventh and Main
Streets, P. O. Box 1656, Richmond, Virginia 23213, and GOLD BOND STAMP COMPANY
OF GEORGIA, a New Jersey corporation, (herein, together with its successors and
assigns, called "Lessee") having an address at 12755 State Highway 55,
Minneapolis, Minnesota.
1. Demise of Premises.
------------------
(a) In consideration of rents and covenants herein stipulated to be paid
and performed and upon the terms and conditions hereinafter specified, Lessor
hereby demises and lets to Lessee, for the term hereinafter described, the
premises consisting of
(i) the parcel of land described in Schedule A-I hereto, and
(ii) all easements, rights and appurtenances relating to such parcel,
but not including Improvements as hereinafter defined such premises being
herein called the "Leased Premises".
(b) Lessee shall improve the Leased Premises through the construction of
the Improvements (hereinafter defined) as described in Schedule B hereto. Such
Improvements shall be completed in a good and workmanlike manner, and shall be
completed expeditiously in compliance with all laws, ordinances, orders, rules,
regulations and requirements applicable thereto. All work done in connection
with such Improvements shall comply with the requirements of any insurance
policy required to be maintained by Lessee hereunder. Lessee shall promptly pay
all costs and expenses of such Improvements, shall discharge all liens (other
than the Mortgage hereinafter defined) filed against the Leased Premised arising
out of the same and shall procure and
<PAGE>
pay for all permits and licenses required in connection with such Improvements.
Lessee shall deliver to Lessor immediately after substantial completion of such
construction a Certificate duly executed on behalf of Lessee to the effect that
(i) such construction has been completed in a manner satisfactory to
it; and
(ii) all building permits and certificates of occupancy, if any are
required, have been obtained and that all applicable zoning and use laws,
ordinances, regulations and agreements permit the use of the Property, as
hereinafter defined, for the purposes contemplated.
2. CERTAIN DEFINITIONS.
-------------------
(a) The term "Improvements" means, an office building consisting of the
buildings, structures and other improvements on the Leased Premises at the date
hereof, if any, and hereafter erected thereon, together with all equipment
fixtures and items of personal property attached to or used in the operation or
maintenance of the improvements now or hereafter on the Leased Premises and
owned by Lessee, specifically including, but not limited to, those items
enumerated on Schedule A-3 hereto, which building equipment is used in the
operation and maintenance of the Leased Premises or of any building, structure
or other improvement thereon and which may or may not be affixed to the Leased
Premises, including without limitation, fixtures, machinery, elevators, air-
conditioning systems and equipment and all additions, alterations, restorations
and repairs to and replacements of any of the foregoing (but not including trade
fixtures, machinery and equipment and/or computers which are the property of a
sublessee or third parties).
-2-
<PAGE>
(b) The term "Lessee" means, the lessee in possession under this Lease and
shall include any successor assignees of Lessee's interest in this Lease.
(c) The term "Lessee's Estate" means, all the right, title and interest of
Lessee in the Property.
(d) The term "Lessor's Estate" means, all the right, title and interest of
Lessor in the Leased Premises.
(e) The term "Mortgage" means, the Deed of Trust from Lessee, as grantor
to the Trustees named therein, for the benefit of The Lincoln National Life
Insurance Company and upon discharge thereof any deed of trust, mortgage or
other security instrument which creates a first lien on Lessee's Estate.
(f) The term "Mortgagee" means, the mortgagee or a beneficiary, under any
Mortgage.
(g) The term "Property" means, the Leased Premises and Improvements,
collectively.
(h) The term "Sublease" means, any lease of the Improvements and sublease
of the Leased Premises.
(i) The term "Sublessee" means, any lessee under a Sublease.
(j) The term "Notes" means, any notes which are secured by a Mortgage.
3. TITLE AND CONDITION
-------------------
The Leased Premises are demised and let subject to
-3-
<PAGE>
(i) the rights of any parties in possession thereof and the existing
state of the title thereof as of the commencement of the term of this
Lease,
(ii) any state of facts which an accurate survey or physical inspection
thereof might show, and
(iii) all zoning regulations, restrictions, rules and ordinances, building
restrictions and other laws and regulations now in effect or
hereafter adopted by any governmental authority having jurisdiction
over the Property.
4. USE OF PROPERTY; QUIET ENJOYMENT.
--------------------------------
(a) Lessee may occupy and use the Property for an office building and for
any other lawful purpose.
(b) If and so long as Lessee shall observe and perform all covenants,
agreements and obligations required to be observed and performed by it
hereunder, Lessor warrants peaceful and quiet occupation and enjoyment of the
Leased Premises by Lessee; however, Lessor and its agents may enter upon and
inspect the Leased Premises at reasonable times.
5. TERM.
----
Subject to other terms, covenants, agreements and conditions contained
herein, Lessee shall have and hold the Leased Premises for a term which shall
commence and expire on the dates set forth in Schedule C hereto.
6. RENT.
----
-4-
<PAGE>
(a) Lessee covenants to pay to Lessor, as rent for the Leased Premises
during the term of this Lease, the respective amounts set forth in Schedule C
hereto (herein called the "Basic Rent") on the dates set forth in Schedule C
(herein called the "Basic Rent Payment Dates") in lawful money of the United
States of America at Lessor's address set forth above or at such other place or
to such other person as Lessor from time to time may designate in writing.
(b) Lessee covenants to pay and discharge, when the same shall become due,
as additional rent, all other amounts, liabilities and obligations which Lessee
assumes or agrees to pay or discharge pursuant to this Lease, together with
every fine, penalty, interest and cost which may be added for non-payment or
late payment thereof and, in the event of any failure by Lessee to pay or
discharge any of the foregoing, Lessor shall have all rights, powers and
remedies provided herein, by law or otherwise in the case of non-payment of the
Basic Rent (provided, however, that amounts payable as liquidated damages
pursuant to Paragraph 17(f) shall not constitute additional rent).
7. NET LEASE; NON TERMINABILITY.
----------------------------
This Lease is a net lease, and, except as otherwise expressly provided
herein, any present or future law to the contrary notwithstanding, Lessee shall
not be entitled to any abatement, reduction, set-off, counterclaim, release or
reduction with respect to any Basic Rent, additional rent or other sum payable
hereunder, nor shall the obligations of Lessee hereunder be affected, by reason
of: any damage to or destruction of the Premises; any taking of the Premises or
any part thereof by condemnation or otherwise; any prohibition, limitation,
restriction or prevention of Lessee's use, occupancy or enjoyment of the
Premises, or any interference with such use, occupancy or enjoyment by any
person; any
-5-
<PAGE>
eviction by paramount title or otherwise, any default by Lessor hereunder or
under any other agreement, the impossibility or illegality of performance by
Lessor, Lessee or both; any action of any governmental authority; or any other
cause whether similar or dissimilar to the foregoing. The parties intend that
the obligations of Lessee hereunder shall be separate and independent covenants
and agreements and shall continue unaffected unless such obligations shall have
been modified or terminated pursuant to an express provision of this Lease.
8. TAXES AND ASSESSMENTS; COMPLIANCE WITH LAW.
------------------------------------------
(a) Lessee shall pay: (i) all taxes, assessments, levies, fees, water and
sewer rents and charges, and all other governmental charges, general and
special, ordinary and extraordinary, foreseen and unforeseen, which are, at any
time prior to or during the term hereof, imposed or levied upon or assessed
against (A) the Property, (B) any Basic Rent, additional rent or other sum
payable hereunder or (C) this Lease or the leasehold estate hereby created or
which arise in respect of the operation, possession or use of the Property; (ii)
all gross receipts or similar taxes imposed or levied upon, assessed against or
measured by any Basic Rent, additional rent or other sum payable hereunder;
(iii) all sales, use and similar taxes at any time levied, assessed or payable
on account of the acquisition, leasing or use of the Property; and (iv) all
charges for utilities serving the Property. Lessee shall not be required to pay
any franchise, estate, inheritance, transfer, income or similar tax of Lessor
(other than any tax referred to in clause (ii) above. Lessee will furnish to
Lessor, promptly after demand therefor, proof of payment of all items referred
to above which are payable by Lessee. If any such assessment may legally be paid
in installments, Lessee may pay such assessment in installments; in such event,
-6-
<PAGE>
Lessee shall be liable only for installments which become due and payable during
the term hereof.
(b) Lessee shall comply with and cause the Property to comply with (i) all
statutes, laws, rules, orders, regulations or ordinances applicable to the
Property or the use thereof and (ii) all contracts (including insurance
policies), agreements and restrictions applicable to the Property as the
ownership, occupancy or use thereof, including but not limited to all such
statutes, laws, rules, orders, regulations or ordinances, requirements,
contracts, agreements and restrictions which require structural, unforeseen or
extraordinary changes to the Improvements.
9. LIENS.
-----
Lessee will not directly or indirectly create or permit to be created or to
remain, and will promptly discharge, at its expense, any mortgage, lien,
encumbrance or charge on, pledge of, or conditional sale or other title
retention agreement with respect to the Property or any part thereof or Lessee's
interest therein or the Basic Rent or additional rent payable under this Lease,
other than the Mortgage, Permitted Encumbrances as defined in Schedule A-2
attached hereto, and any mortgage, lien, encumbrance or other charge on, pledge
of, or conditional sale or any other title retention agreement created by or
resulting from any act of or failure to act by Lessor. The existence of any
mechanic's, laborer's, materialman's, supplier's or vendor's lien, or any right
in respect thereof, shall not constitute a violation of this Paragraph 9, if
payment is not yet due upon the contract or for the goods or services in respect
of which any such lien has arisen. Nothing contained in this Lease shall be
construed as constituting the consent or request of Lessor, expressed or
implied, to or for the performance of any labor or services or the furnishing
-7-
<PAGE>
of any goods or materials by any contractor, sub-contractor, laborer,
materialman or vendor.
10. INDEMNIFICATION.
---------------
Lessee shall defend all actions against Lessor with respect to, and shall
pay, protect, indemnify and save harmless Lessor from and against, any and all
liabilities, losses, damages, costs, expenses (including reasonable attorneys'
fees and expenses), causes of action, suits, claims, demands or judgments of any
nature arising from (i) injury to or death of any person, or damage to or loss
of property, on the Property or on adjoining sidewalks, streets or ways, or
connected with the use, condition or occupancy of any thereof, (ii) violation of
this Lease, (iii) any act or omission of Lessee or its agents, contractors,
licensees, sublessees or invitees, and (iv) any contest referred to in Paragraph
16.
11. MAINTENANCE AND REPAIR.
----------------------
Lessee will maintain at its expense the Property in good repair and
condition, except for ordinary wear and tear, and will make with reasonable
promptness all structural and non-structural, foreseen and unforeseen and
ordinary and extraordinary changes and repairs which may be required to keep the
Property in good repair and condition. Lessor shall not be required to maintain,
repair or rebuild the Improvements or to maintain the Property, and Lessee
waives the right to make repairs at the expense of Lessor pursuant to any law at
any time in effect.
12. ALTERATIONS, RELEASE OF LAND AND REDUCTION OF BASIC RENT.
--------------------------------------------------------
-8-
<PAGE>
(a) Lessee may, without expense to Lessor, make additions to and
alterations of the Improvements at any time located or constructed on the Leased
Premises, and Lessee may make substitutions and replacements for the same,
provided that
(i) the market value of the Leased Premises shall not be lessened by
reason of any such addition, alteration, substitution or replacement,
(ii) the foregoing actions shall be performed in a good and
workmanlike manner, and
(iii) such additions, substitutions and replacements shall be
expeditiously completed in compliance with all laws, ordinances, orders,
rules, regulations and requirements applicable thereto.
Lessee shall promptly pay all costs and expenses of each such addition,
alteration, substitution or replacement and subject to Paragraph 9 shall
discharge all liens filed against the Property arising out of the same. Lessee
shall procure and pay for all permits and licenses required in connection with
any such addition, alteration, substitution or replacement.
(b) Lessee may, at its expense,
(i) construct upon the Leased Premises any additional buildings,
structures or other improvements and
(ii) install, assemble or place upon the Leased Premises any items of
machinery or equipment used or useful in Lessee's business, in each case
upon compliance with all the terms and conditions set forth in Paragraph
12(a).
-9-
<PAGE>
(c) In the event any Sublessee is entitled pursuant to the Sublease to a
release therefrom of any portion of the Leased Premises necessary for the
construction and operation of proposed additional improvements, Lessor and
Lessee will release such portion of the Leased Premises from the terms of this
Lease and the Basic Rent shall thereafter be reduced in the proportion that the
area of the released portion bears to the area of the Leased Premises covered by
this Lease immediately prior to such release.
13. CONDEMNATION.
------------
(a) If a portion of the Leased Premises shall be taken in or by
condemnation or other eminent domain proceedings pursuant to any law, general or
special, Lessee shall have the option, at its expense, to repair any damage to
the Leased Premises caused by such taking in conformity with the requirements of
Paragraph 11(a) promptly after such taking so that, after the completion of such
repair, the Leased Premises shall be, as nearly as practicable, in its condition
immediately prior to such taking.
(b) Except as herein otherwise specifically provided, if a portion of the
Leased Premises shall be taken as aforesaid, this Lease shall continue but the
Basic Rent thereafter payable by Lessee shall be reduced from the date of each
such partial taking by an amount equal to the product of the Basic Rent payable
at the time of each such taking multiplied by a fraction, the numerator of which
is the area of the Leased Premises taken and the denominator of which is the
area of the Leased Premises immediately prior to such taking.
(c) If the entire Leased Premises shall be taken in or by condemnation or
other eminent domain proceedings under any law, general or special (other than a
taking for
-10-
<PAGE>
temporary use), this Lease shall terminate on the date of the termination of the
Sublease occasioned by such taking, except with respect to obligations and
liabilities of Lessee under this Lease, actual or contingent, which have arisen
on or prior to such date of termination, upon payment by Lessee of
(i) all Basic Rent due with respect to the period during which this
Lease is in effect, and
(ii) all other sums due and payable by it under this Lease to and
including such date, and Lessee shall not be required to repair the
Property pursuant to Paragraph 12(a).
If at the time of a taking (other than a taking for temporary use)
under such proceedings of any substantial portion of the Property which is
sufficient, in the good faith judgment of Lessee, to render the remaining
portion thereof uneconomic for Lessee's continued use or occupancy, Lessee,
at its election, may give written notice to Lessor of the termination of
this Lease on any date for the payment of Basic Rent after the date of such
taking (but not less than thirty (30) days after such taking) provided that
the Sublease shall have terminated on or by such date, and this Lease shall
terminate as of the date specified in such notice.
(d) All awards and payments made on account of any taking of the Property
in condemnation or other eminent domain proceedings shall be paid as follows:
(i) if on account of the Leased Premises, to Lessor, and, if on
account of the Improvements, to Lessee; or
-11-
<PAGE>
(ii) if the award cannot be so allocated by the condemning authority
or the court before which such action is pending, to Lessor and Lessee in
proportion to the fair market value of the Leased Premises and the
Improvements, respectively, determined as of the date prior to such taking
as if this Lease had not been and would not be terminated by reason of such
taking. If Lessor and Lessee are unable to agree upon such respective
values, such values shall be determined by appraisal within a reasonable
time in accordance with Paragraph 25 and the fees for such appraisal shall
be deducted from the awards and payments made with respect to the Property
prior to the disbursement of such awards and payments in accordance with
this clause, provided, however, that all payments to be made under this
Paragraph 13(d) shall be subject to the provisions of the Sublease and the
Mortgage, as long as the same are in effect. For the purposes of this
Lease, all amounts payable pursuant to any agreement with any condemning
authority which has been made in settlement of or under threat of such
taking shall be deemed to constitute an award made in such proceeding.
(e) In the event of a taking in or by such proceedings of all or any
portion of the Leased Premises for temporary use, this Lease shall continue in
full effect without reduction or abatement of Basic Rent and additional rent,
and Lessee, subject to the provisions of the Sublease and the Mortgage, as long
as the same are in effect, shall be entitled, after paying the reasonable
expenses of Lessor, Lessee and the Mortgagee incurred in collecting the same, to
make claim for, recover and retain any awards or proceeds made on account
thereof, whether in the form of rents or otherwise, unless such period of
temporary use or occupancy shall extend beyond the term of this Lease, in
-12-
<PAGE>
which case such awards or proceeds, after deducting the cost of repairs made to
the Improvements by Lessee by reason thereof, shall be apportioned between
Lessor and Lessee as of such date of expiration of the term of this Lease.
(f) In the event of the termination of the Sublease as the result of the
rejection of the Sublessee's offer to purchase the Property resulting from
condemnation of a portion of the Property, Lessor shall have the right to
terminate this Lease by purchasing Lessee's Estate at its fair market value,
determined as of the date immediately following such damage or destruction.
14. CASUALTY.
--------
(a) If the improvements shall be substantially damaged or destroyed in any
single casualty during the term hereof so that the Property shall in the
judgment of Lessee, be uneconomic for restoration for Lessee's continued use and
occupancy, then Lessee may give notice to Lessor, within thirty (30) days after
such occurrence, of its intention to terminate this Lease on any business day
specified in such notice which occurs not less than thirty (30) days after the
date of giving of such notice, provided that any Sublease in effect shall have
terminated on or by such date, and this Lease shall terminate on the date
specified in such notice. The entire compensation or proceeds payable in
connection with any damage or destruction of the Improvements shall be payable
to Lessee, provided, however, that all payments to be made under this Paragraph
14 shall be subject to the provisions of the Sublease and the Mortgage, as long
as the same are in effect.
(b) In the event of the termination of the Sublease as the result of the
rejection of the Sublessee's offer to purchase the Property resulting from
substantial damage or
-13-
<PAGE>
destruction to the Property, Lessor shall have the right to terminate this Lease
by purchasing Lessee's Estate at its fair market value, determined as of the
date immediately following such damage or destruction.
15. ASSIGNMENT, SUBLETTING AND MORTGAGING.
-------------------------------------
Lessee may assign, transfer, sell, mortgage or pledge the whole or any part
of its interest in this Lease, its interest in the leasehold estate hereby
created and the term hereby demised and let, as security or otherwise, and may
sublet the whole or any part of the Property. Lessee may also mortgage or pledge
its interest in and to any sublease, including without limitation, the Sublease,
and the rentals payable thereunder. Lessee shall, at or prior to the time of any
such assignment, transfer, sale, mortgage, pledge or sublease, give Lessor
notice thereof. Lessor agrees to execute and deliver, at the request of Lessee,
an agreement modifying this Lease and containing such modifications hereof as
may be required by the Mortgagee, provided that such modifications do not
(i) increase Lessor's liability hereunder,
(ii) reduce or diminish Lessee's obligations hereunder, or
(iii) release Lessee from any of its obligations hereunder.
16. PERMITTED CONTESTS.
------------------
Lessee shall not be required to
(a) pay any tax, assessment, levy, fee, water or sewer rent or charge
referred to in Paragraph 8(a),
(b) comply with any statute, law, rule, order, regulation or ordinance
referred-to in Paragraph 8(b), or
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<PAGE>
(c) discharge or remove any lien, encumbrance or charge referred to in
Paragraph 9 or 12(a), so long as Lessee shall contest, in good faith and without
expense to Lessor, the existence, amount or validity thereof, the amount of the
damage caused thereby or the extent of its liability therefor by appropriate
proceedings which shall operate during the pendency thereof to prevent
(i) the collection of, or other realization upon the tax,
assessment, levy, fee, water or sewer rent or charge or lien, encumbrance
or charge so contested,
(ii) the sale, forfeiture or loss of the Property or any part thereof
or the Basic Rent or any additional rent or any portion thereof to satisfy
the same or to pay any damages caused by any such encroachment, hindrance,
obstruction, violation or impairment,
(iii) any interference with the use or occupancy of the Property or
any part thereof,
(iv) any interference with the payment of the Basic Rent or any
additional rent or any portion thereof, and
(v) in the case of any statute, law, rule, order, regulation or
ordinance, imposition of any criminal liability upon the Lessor.
Anything to the contrary notwithstanding in this Paragraph, Lessee shall
also not be required to take any action described in clauses (a) through (c)
above, so long as Lessee or Sublessee shall contest the existence, amount or
validly thereof, the amount of the damage caused thereby or the extent of
Lessee's liability therefor. While any such
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<PAGE>
proceedings are pending, Lessor shall not have the right to pay, remove or cause
to be discharged the tax, assessment, levy, fee, water or sewer rent or charge
or lien, encumbrance or charge thereby contested. Lessee further agrees that
each such contest shall be promptly prosecuted to a final conclusion. Lessee
will pay or cause to be paid and save Lessor harmless from and against any and
all losses, judgments, decrees and costs (including all reasonable attorneys'
fees and expenses) in connection with any such contest and will, promptly after
the final settlement or determination of such contest, fully pay and discharge
the amounts which shall be levied, assessed, charged or imposed or be determined
to be payable therein or in connection therewith, together with all penalties,
fines, interests, costs and expenses thereof or in connection therewith and
perform all acts, the performance of which shall be ordered or decreed as a
result thereof.
17. CONDITIONAL LIMITATIONS, DEFAULT PROVISION.
------------------------------------------
(a) Any of the following occurrences or acts shall constitute an event of
default under this Lease: if Lessee, at any time during the continuance of this
Lease (and with regard to subparagraphs l and 2, regardless of the pendency of
any bankruptcy, reorganization, receivership, insolvency or other proceedings,
at law, in equity or before any administrative tribunal, which have or might
have the effect of preventing Lessee from complying with the terms of this
Lease), shall
(i) fail to make any payment of Basic Rent, additional rent or other
sum herein required to be paid by Lessee for ten (10) days after written
notice thereof, or
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<PAGE>
(ii) fail to observe or perform any other provision hereof for thirty
(30) days after Lessor shall have deliver to Lessee notice of such failure
(provided that in the case of any default referred to in this clause (2)
which cannot with diligence be cured within such thirty (30) day period, if
Lessee shall prosecute promptly to cure the same and thereafter shall
prosecute the curing of such default with diligence, then upon receipt by
Lessor of a certificate duly authorized on behalf of Lessee stating the
reason that such default cannot be cured within thirty (30) days and
stating that Lessee is proceeding with diligence to cure such default, the
time within which such failure may be cured shall be extended for such
period as may be necessary to complete the curing of the same with
diligence), or
(iii) shall file a petition in bankruptcy or for reorganization or for
an arrangement pursuant to any federal or state bankruptcy law or any
similar federal or state law, or shall be adjudicated a bankrupt or become
insolvent or shall make an assignment for the benefit of creditors or shall
admit in writing its inability to pay its debts generally as they become
due, or if a petition or answer proposing the adjudication or Lessee as a
bankrupt or its reorganization pursuant to any federal or state bankruptcy
law or any similar federal or state law shall be filed in any court and
Lessee shall consent to or acquiesce in the filing thereof or such petition
or answer shall not be discharged or denied within 90 days after the filing
thereof or if a receiver, trustee or liquidator of Lessee or of all or
substantially all of the assets of Lessee or of Lessee's Estate shall be
appointed in any proceeding brought by Lessee, or if any such receiver,
trustee or liquidator shall be appointed in any proceeding brought against
Lessee and shall not be discharged within 90
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<PAGE>
days after such appointment, or if Lessee shall consent to or acquiesce in
such appointment.
Notwithstanding the foregoing, the happening of an act or occurrence
described in this Paragraph 17(a) shall not constitute an event of default under
this Lease if the happening of such act or occurrence has occurred under the
Sublease and constitutes an event of default thereunder on the part of the
Sublessee.
(b) If an event of default shall have happened and be continuing Lessor
shall have the right at its election then or at any time thereafter while such
event of default shall continue, to give Lessee written notice of Lessor's
intention to terminate the term of this Lease on a date specified in such
notice. Upon the giving of such notice, the term of this Lease and the estate
hereby granted shall expire and terminate on such date as fully and completely
and with the same effect as if such date were the date herein fixed for the
expiration of the term of this Lease, and all rights of Lessee hereunder shall
expire and terminate, but Lessee shall remain liable as hereinafter provided.
Unless such notice shall have been given, this Lease shall not terminate,
notwithstanding any default under this Lease and the abandonment of the Property
by Lessee. If an event of default shall have happened and be continuing and
Lessee shall have abandoned the Property, Lessor may, at its option, enforce all
of its rights and remedies under this Lease, including the right to receive
Basic Rent, additional rent and all other sums payable hereunder as they become
due. Moreover, Lessor shall be entitled to recover from Lessee all costs of
maintenance and preservation of the Leased Premises, and all costs (including
attorney's and receiver's fees, incurred in connection with the appointment of
and performance by a receiver to protect the Leased Premises and Lessor's
interest under this Lease.
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<PAGE>
(c) If an event of default shall have happened and be continuing, Lessor
shall have the immediate right, whether or not the term of this Lease shall have
been terminated pursuant to Paragraph 17(b), to re-enter and repossess the
Property or any part thereof by force, summary proceedings ejectment or
otherwise and the right to remove all persons and property therefrom. Lessor
shall be under no liability for or by reason of any entry, repossession or
removal. No such re-entry or taking of possession of the Property by Lessor
shall be construed as an election on Lessor's part to terminate the term of this
Lease unless a written notice of such intention be given to Lessee pursuant to
Paragraph 17(b), or unless the termination of this Lease be decreed by a court
of competent jurisdiction.
(d) At any time or from time to time after the repossession of the
Property or any part thereof pursuant to Paragraph 17(c), whether or not the
term of this Lease shall have been terminated pursuant to Paragraph 17(b),
Lessor may (but shall be under no obligation to) relet the Property or any part
thereof for the account of Lessee, in the name of Lessee or Lessor or otherwise
without notice to Lessee, for such term or terms (which may be greater or less
than the period which would otherwise have constituted the balance of the term
of this Lease) and on such conditions (which may include concessions or free
rent) and for such uses as Lessor, in its absolute discretion, may determine,
and Lessor may collect and receive any rents payable by reason of such
reletting. Lessor shall not be responsible or liable for any failure to relet
the Property or any part thereof or for any failure to collect any rent due upon
such reletting.
(e) No expiration or termination of the term of this Lease pursuant to
Paragraph 17(b), by operation of law or otherwise, and no repossession of the
Property or
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<PAGE>
any part thereof pursuant to Paragraph 17(c) or otherwise, and no reletting of
the Property or any part thereof pursuant to Paragraph 17(d), shall relieve
Lessee of its liabilities and obligations hereunder, all of which shall survive
such expiration, termination, repossession or reletting.
(f) In the event of any expiration or termination of this Lease or
repossession of the Property or any part thereof by reason of the occurrence of
an event of default, Lessee will pay to Lessor the Basic Rent, additional rent
and other sums required to be paid by Lessee to and including the date of such
expiration termination or repossession; and, thereafter, Lessee shall, until the
end of what would have been the term of this Lease in the absence of such
expiration, termination or repossession, and whether or not the Property or any
part thereof shall have been relet, be liable to Lessor for, and shall pay to
Lessor, as liquidated and agreed current damages
(A) the Basic Rent, additional rent and other sums which would
be payable under this Lease by Lessee in the absence of such
expiration, termination or repossession, less
(B) the net proceeds, if any, of any reletting effected for the
account of Lessee pursuant to Paragraph 17(d), after deducting from
such proceeds all Lessor's expenses in connection with such reletting
(including without limitation, all repossession costs, brokerage
commissions, legal expenses, attorney's fees, alteration costs and
expenses of preparation for such reletting).
Lessee will pay such current damages on the days on which the Basic
Rent would have been payable under this Lease in the absence of such expiration,
termination
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<PAGE>
recover or repossession, and Lessor shall be entitled to recover the same
from Lessee on each such day.
(g) The words "enter", "re-enter" or "re-entry", as used in this
Paragraph l7, are not restricted to their technical meaning.
18. ADDITIONAL RIGHTS OF LESSOR.
---------------------------
No right or remedy herein conferred upon or reserved to Lessor is
intended to be exclusive of any other right or remedy, and each and every
remedy shall be cumulative and in addition to any other right or remedy
given hereunder or now or hereafter existing at law or in equity or by
statute, provided that Lessor shall not be reimbursed for any loss or
damage more than once.
19. NOTICES.
-------
All notices, demands, requests, consents, approvals and other
instruments required or permitted to be given pursuant to the terms of this
Lease shall be in writing and shall be deemed to have been properly given
if
(a) with respect to Lessor, sent by certified mail, postage prepaid,
addressed to Lessor at its address first above set forth, and
(b) with respect to Lessee, sent by certified mail, postage prepaid,
addressed to Lessee at its address first above set forth.
Lessor and Lessee shall each have the right from time to time to
specify as its address for purposes of this Lease any other address in the
United States of America upon giving fifteen (l5) days written notice
thereof, similarly given, to the other party. A counterpart or confirmed
copy of each notice required or permitted to be given hereunder
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<PAGE>
shall also be given to the Mortgagee, if the Mortgage is then in effect,
and to the Sublessee, if a Sublease is then in effect, sent by registered
or certified mail, postage prepaid, in each case at the last address of the
Mortgagee or the Sublessee, as the case may be, known to the party giving
such notice.
20. ESTOPPEL CERTIFICATES.
---------------------
(a) Lessee will execute, acknowledge and deliver to Lessor, promptly
upon request but not more often than once each six (6) months, a
certificate certifying
(i) that this Lease is unmodified and in full effect (or, if
there have been modifications, that this Lease is in full effect, as
modified, and stating the modifications),
(ii) the dates, if any, to which the Basic Rent, additional rent
and other sums payable hereunder have been paid and the amount of the
Basic Rent currently payable, and
(iii) that no notice has been received by Lessee of any default
which has not been cured, or, if any default for which notice has been
received has not been cured, specifying the nature and period of
existence thereof and what action Lessee is taking or proposes to take
with respect thereto.
Any such certificate may be relied upon by any prospective purchaser of the
Leased Premises or any part thereof.
(b) Lessor will execute, acknowledge and deliver to Lessee, promptly
upon request, a certificate certifying
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(i) that this Lease is unmodified and in full effect (or, if
there have been modifications, that this Lease is in full effect, as
modified, and stating the modifications),
(ii) the dates, if any, to which the Basic Rent, additional rent
and other sums payable hereunder have been paid and the amount of the
Basic Rent currently payable, and
(iii) that no notice has been given by Lessor of any default
which has not been cured, or if any default for which notice has been
given has not been cured, specifying the nature and period of existence
thereof and what action Lessor is taking or proposes to take with
respect thereto.
Any such certificate may be relied upon by any prospective assignee of
Lessee's interest in this Lease or the Mortgagee or any assignee of the
Mortgagee.
(c) Lessee will cause the Sublease to contain a provision requiring
the Sublessee to execute, acknowledge and deliver to Lessor, promptly upon
request, but not more often than once each six (6) months, a certificate
certifying
(i) that the Sublease is unmodified and in full effect (or if
there have been modifications, that the Sublease is in full effect as
modified, and stating the modifications),
(ii) the dates, if any, to which the Basic Rent, additional rent
and other sums payable under the Sublease have been paid and the amount
of the Basic Rent currently payable thereunder, and
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<PAGE>
(iii) that no notice has been received by the Sublessee of
default under the Sublease which has not been cured or, if any default
for which notice has been received has not been cured, specifying the
nature and period of existence thereof and what action the Sublessee is
taking or proposes to take with respect thereto.
21. NO MERGER.
---------
There shall be no merger of this Lease or of the leasehold estate
hereby created with the fee estate in the Leased Premises or any part
thereof by reason of the fact that the same person may acquire or hold,
directly or indirectly, this Lease or the leasehold estate hereby created
or any interest in this Lease or in such leasehold estate and the fee
estate in the Leased Premises or any interest in such fee estate.
22. SURRENDER.
---------
Upon the expiration or earlier termination of this Lease, Lessee shall
peaceably leave and surrender the Leased Premises to Lessor in the same
condition in which the Leased Premises were originally received from Lessor
at the commencement of the term of this Lease, except as improved,
repaired, rebuilt, restored, altered or added to as provided in, permitted
by or required by any provisions of this Lease and except for ordinary wear
and tear and except as provided in Paragraphs l3 and l4. Lessee shall have
the right to remove from the Leased Premises on or prior to such expiration
or earlier termination all property situated thereon which is not owned by
Lessor, including the Improvements, or, at its election, to allow such
property to remain on the Leased Premises, but Lessee shall be required to
repair, at its expense, any damage to the Leased Premises resulting from
any such removal. Such property not so removed shall become
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<PAGE>
the property of Lessor, and Lessor may thereafter, at its expense, cause
such property to be removed from the Leased Premises and disposed of.
23. SEPARABILITY.
------------
Each and every covenant and agreement contained in this Lease is, and
shall be construed to be, a separate and independent covenant and
agreement, and the breach of any such covenant or agreement by Lessor shall
not discharge or relieve Lessee from its obligations to perform the same.
If any term or provision of this Lease or the application thereof to any
person or circumstance shall to any extent be invalid and unenforceable,
the remainder of this Lease, or the application of such term or provision
to persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each term and provision
of this Lease shall be valid and shall be enforced to the extent permitted
by law.
24. RIGHTS OF MORTGAGEE.
-------------------
(a) If Lessee shall be in default in the observance or performance of
any covenant in this Lease beyond any applicable period of grace referred
to herein, Lessor shall send written notice of such default to the
Mortgagee at its address set forth in the Mortgage or as the Mortgagee may
designate by notice to Lessor. The Mortgagee shall have 30 days after
delivery of such written notice from Lessor within which to cure or remove
such default, and if such default cannot with diligence be cured within
such 30 day period, a reasonable time thereafter, provided, that the
Mortgagee proceeds promptly to cure the same and thereafter prosecutes the
curing of such default with diligence. Notwithstanding any other provision
of this Lease, Lessor shall not have any right pursuant to this Lease or
otherwise to terminate this Lease due to such default unless
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<PAGE>
Lessor shall have first given written notice thereof to the Mortgagee and
unless the Mortgagee shall have failed to cure or remove, or cause to be
cured or removed, such default within the time required by this
subparagraph (a).
(b) Lessor will accept performance by the Mortgagee or the Sublessee
or either of them of any covenant, agreement or obligation of Lessee
contained in this Lease with the same effect as though performed by lessee.
(c) Lessor shall have no rights in and to the rentals payable to
Lessee under any Sublease of all or any part of the Property, which rentals
may be assigned by Lessee to the Mortgagee.
(d) If this Lease shall be terminated for any reason, (other than
pursuant to Paragraphs l3 and l4) or in the event of the rejection or
disaffirmance of this Lease pursuant to bankruptcy law or other law
affecting creditor's rights, Lessor will enter into a new lease of the
Leased Premises with the Mortgagee, or any party designated by the
Mortgagee, not less than ten (l0) nor more than thirty (30) days after the
request of the Mortgagee referred to below, for the remainder of the term
of this Lease, effective as of the date of such termination, rejection or
disaffirmance, upon all the terms and provisions contained in this Lease,
provided, that the Mortgagee makes a written request to Lessor for such new
lease within ninety (90) days after the effective date of such termination,
rejection or disaffirmance, as the case may be, and such written request is
accompanied by a copy of the new lease, prepared at Lessee's expense, duly
executed and acknowledged by the Mortgagee, or the party designated by the
Mortgagee to be the lessee thereunder, and the Mortgagee cures all defaults
under this Lease which can be cured by the payment of money and pays to
Lessor all Basic Rent and additional rent
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which would at the time of such execution and delivery be due and payable
by Lessee under this Lease but for such rejection, disaffirmance or
termination, less net amounts received by Lessor under Paragraph 17(d), if
any. If the Mortgagee, or the party so designated by the Mortgagee, shall
have entered into a new lease with Lessor pursuant to this subparagraph
(d), then any default under this Lease which cannot be cured by the payment
of money shall be deemed cured. Any new lease made pursuant to this
subparagraph (d) shall have the same priority of lien as this Lease and
shall be accompanied by a conveyance of Lessor's title, if any, to the
Improvements (free of any mortgage or other lien, charge or encumbrance
created or suffered to be created by Lessor) for a term of years equal in
duration to the term of the new lease. The provisions of this subparagraph
(d) shall survive the termination, rejection or disaffirmance of this Lease
and shall continue in full effect thereafter to the same extent as if this
subparagraph (d) were a separate and independent contract made by Lessor,
Lessee and the Mortgagee and, from the effective date of such termination,
rejection or disaffirmance of this Lease to the date of execution and
delivery of such new lease, the Mortgagee may use and enjoy the leasehold
estate created by this Lease without hindrance by Lessor.
(e) Lessor will not accept a voluntary surrender of this Lease. This
Lease shall not be modified without the prior written consent of the
Mortgagee.
(f) The provisions of this Paragraph 24 are for the benefit of the
Mortgagee and may be relied upon and shall be enforceable by the Mortgagee.
Neither the Mortgagee nor any other holder or owner of the indebtedness
secured by the Mortgage or otherwise shall be liable upon the covenants,
agreements or obligations of Lessee
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<PAGE>
contained in this Lease, unless and until the Mortgagee or such holder or
owner becomes the lessee hereunder.
25. APPRAISERS.
----------
Whenever in this Lease it is provided that any question shall be
determined by appraisers, such questions shall be submitted to a board of
appraisers, three (3) in number, each of whom shall be a qualified member
of the American Institute of Real Estate Appraisers, or any successor of
such Institute, or if such organization or successor shall no longer be in
existence, a recognized national association or institute of appraisers.
One such appraiser shall be named by each of the parties hereto and the
third shall be selected by the two so named, and the decision of any two
(2) of such appraisers shall be final and conclusive on the parties hereto.
If the two appraisers designated by the parties fail to select a third
appraiser within fifteen (l5) days after the appointment by such parties,
either party shall have the right to apply to the American Institute of
Real Estate Appraisers or such successor for the designation of a third
appraiser. Lessor agrees that it will recognize any designation by Lessee
of the Mortgagee as the party to exercise the rights of Lessee with respect
to the selection of appraisers in connection with any dispute arising
hereunder which it is provided herein is to be determined by appraisal
pursuant to this Paragraph. The cost of any such appraisal shall be borne
equally by Lessor and Lessee.
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<PAGE>
26. THE SUBLEASE.
------------
So long as the Sublease shall be in effect:
(i) Lessor and Lessee shall not agree between themselves to any
termination (except as expressly provided in Paragraph 13 or l4
hereof), surrender or modification of this Lease without the prior
written consent of the Sublessee;
(ii) Lessor will give to the Sublessee a copy of any notice or
other communication given by Lessor to Lessee, at the time of giving
such notice or communication to Lessee, and Lessor will not exercise
any right, power or remedy with respect to any default hereunder and
no notice to Lessee of any default and no termination of this Lease in
connection therewith shall be effective, unless Lessor shall have
given to the Sublessee written notice or a copy of its notice to
Lessee of such default or any such termination, as the case may be;
(iii) Lessor will not exercise any right power or remedy with
respect to any event of default hereunder until the expiration of any
grace period provided with respect thereto, plus
(A) in the case of a default constituting an event of
default under clause (l) of Paragraph 17(a), fifteen (l5) days after
the date Lessor has given to the Sublessee written notice of such
default or a copy of its notice to Lessee of such default (as
required by clause (ii) above), or
(B) in the case of a default constituting an event of default
under clause (2) of Paragraph 17(a), thirty (30) days after the last
to occur of
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<PAGE>
(1) any grace period provided with respect
thereto, or
(2) the date Lessor gives to the Sublessee
written notice of such default or a copy of its notice
to Lessee of such default (as required by clause (ii)
above).
Lessor will not exercise any right, power or remedy with
respect to any default referred to in subclause (B) of this
clause (iii), if
(x) the Sublessee, within such thirty (30) day period
referred to in subclause (B), shall give to Lessor
written notice that it intends to undertake the
correction of such default or to cause the same to
be corrected, and
(y) the Sublessee shall thereafter prosecute
diligently the correction of such default, and
(iv) the performance by the Sublessee of any of the terms and
provisions of this Lease on Lessee's part to be performed shall be
deemed to be performance thereof by Lessee.
27. ATTORNMENT OF SUBLESSEE; NO PERSONAL LIABILITY OF LESSEE.
--------------------------------------------------------
(a) Lessee shall cause the Sublease to contain language to the
following effect:
If:
(i) the Ground Lease shall terminate for any reason other
than as specifically provided for in Paragraphs l3 and l4 thereof, or
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(ii) the Ground Lease shall have been rejected or disaffirmed
by Lessee thereunder or any trustee or receiver thereof pursuant to
bankruptcy or insolvency law or other law affecting creditor's rights
and if the Mortgagee (or its designee) shall not have entered into a
new lease or acquired the interest of the Lessee thereunder pursuant
to Paragraph 24 thereof,
the Sublessee under the Sublease shall attorn to Ground Lessor. Upon the
Ground Lessor's acceptance thereof, Ground Lessor and such Lessee shall
continue the Sublease in full force and effect as a direct lease from the
Ground Lessor to such Lessee on the same terms and conditions of the
Sublease, including without limitation, the obligation to pay Basic Rent,
additional rent and all other sums (including without limitation, sums
payable pursuant to Paragraph 19(a) of the Sublease) payable under the
Sublease (as those terms are defined in the Sublease) for the period after
the termination, rejection or disaffirmance of the Ground Lease, and all of
the terms and conditions of the Sublease shall be binding upon the Ground
Lessor and such Lessee to the same extent as if Ground Lessor and such
Lessee had been the original lessor and lessee, respectively, under the
Sublease.
(b) the Lessor agrees that if the Sublessee shall attorn to Lessor in
accordance with the Sublease, Lessor shall accept such attornment and
thereafter continue the Sublease in full force and effect as a direct lease
from Lessor to the Sublessee on the same terms and conditions of the
Sublease, including, without limitation, the obligation to pay Basic Rent,
additional rent and any other sums payable under the Sublease (as those
terms are defined in the Sublease) for the period after the termination,
rejection or disaffirmance of this Lease and that all of the terms and
conditions of the Sublease shall
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<PAGE>
be binding upon Lessor and the Sublessee to the same extent as if Lessor
and Sublessee had been the original lessor and lessee, respectively, under
the Sublease.
(c) Lessee agrees that the provisions of Paragraphs 27(a) and 27(b)
shall be for the benefit of the Sublessee and that the Sublessee may rely
thereon in entering into the Sublease.
28. OPTION TO PURCHASE.
------------------
Provided the Sublessee shall not have purchased the Premises (as
defined in the Sublease) pursuant to paragraph 11 or 13 of the Sublease or
Paragraph l3(f) or 14(b) hereof, Lessee shall have the right to purchase
the Leased Premises upon the expiration of the Sublease, as the same may be
extended pursuant to paragraph 3 thereof, and thereafter once every five
years during the term of this Lease, on the last day of such five year
period, subject to the following terms and conditions:
(i) At least 130 days prior written notice must have been given
to Lessor.
(ii) The purchase price shall be the fair market value of the
Leased Premises, such value determined pursuant to Paragraph 25
hereof.
(iii) Lessor shall convey title subject only to (w) Permitted
Encumbrances, (x) all charges, liens, security interests and
encumbrances attaching to the title on or after the commencement of
the term hereof which shall have not been created by Lessor or which
shall be consented to by Lessee, and (y) all applicable laws,
regulations, ordinances, and Permitted Encumbrances, but free
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<PAGE>
of the lien of the Mortgage and charges, liens, security interests and
encumbrances resulting from acts of Lessor taken without the consent
of Lessee.
(iv) Upon the date fixed for any purchase of Lessor's interest
in the Leased Premises or any portion thereof hereunder, Lessee shall
pay to Lessor the purchase price therefor specified herein together
with all Basic Rent, additional rent and other sums then due and
payable hereunder to and including such date of purchase, and Lessor
shall deliver to Lessee a conveyance of the Leased Premises and any
other instruments necessary to convey the title thereto. Lessee shall
pay all charges incident to such conveyance and assignment, including
counsel fees, escrow fees, recording fees, title insurance premiums
and all applicable taxes (other than any income or franchise taxes of
Lessor) which may be imposed by reason of such conveyance and
assignment and the delivery of said conveyance and other instruments.
Upon the completion of any such purchase of the Leased Premises but
not prior thereto, this Lease shall terminate, except with respect to
obligations and liabilities of Lessee hereunder, actual or contingent,
which have arisen on or prior to such date of purchase.
29. TERMINATION OF OPTIONS.
----------------------
Anything herein to the contrary notwithstanding, each option to
purchase contained in this Lease shall terminate on the earlier of the
following dates: (i) the specific date of termination referred to in each
option; or (ii) that date which is 2l years after the death of the last
survivor of the descendants of Franklin D. Roosevelt, former president of
the United States of America, who was alive on the date of this Lease.
-33-
<PAGE>
30. TERMINATION OF AGREEMENT FOR LEASE AND DEVELOPMENT TERM.
-------------------------------------------------------
If the Agreement for Lease and Development dated as of April 18, 1977
herewith between Lessor and Lessee (the "Agreement for Lease and
Development") is terminated pursuant to Paragraph 6.7 thereof, then this
Lease shall automatically cease and terminate as of the date of termination
of the Agreement for Lease and Development, and shall be of no further
force and effect between Lessor and Lessee.
31. TERMINATION DATE AGREEMENT.
--------------------------
Upon the occurrence of the Permanent Loan Funding Date, as defined in
the Agreement for Lease and Development, Lessor and Lessee shall enter into
a written agreement setting forth the Termination Date, as defined in
Schedule C hereof.
32. BINDING EFFECT.
--------------
All of the covenants, conditions and obligations contained in this
Lease shall be binding upon and inure to the benefit of the respective
successors and assigns of Lessor and Lessee to the same extent as if each
such successor and assign were in each case named as a party to this Lease;
and the term "Lessor", as used in this Lease, shall include any successor
owner or owners, at any time, of the Leased Premises or any part thereof.
This Lease may not be changed, modified or discharged except by a writing
signed by Lessor and Lessee [and consented to by the Mortgagee, if such
consent is required pursuant to Paragraph 24(f) hereof].
-34-
<PAGE>
33. HEADINGS.
--------
The headings to the various paragraphs and schedules of this Lease
have been inserted for reference only and shall not to any extent have the
effect of modifying, amending or changing the expressed terms and
provisions of this Lease.
34. GOVERNING LAW.
-------------
This Lease shall be governed by and interpreted under the laws of the
State of Virginia.
35. SCHEDULES.
---------
The following are Schedules A-1, A-2, A-3, B and C referred to in this
Lease.
-35-
<PAGE>
SCHEDULE A-1
------------
ALL that certain lot, piece or parcel of land, with appurtenances thereunto
pertaining, lying and being in Brookland District, Henrico County,
Virginia, containing 11.80 acres, more or less, outlined in red, on "Map of
11.80 Acres Of Land In Brookfield, In Brookland District, Henrico County,
Virginia" dated September 22, 1976, revised January 12, 1977, February 8,
1977, and February 14, 1977, made by LaPrade Brothers, Civil Engineers and
Surveyors, Richmond, Virginia, a copy of which said plat was recorded on
February 15, 1977 in the Clerk's Office of the Circuit Court for the County
of Henrico, Virginia in Deed Book 1714, page 684.
TOGETHER with a non-exclusive easement of ingress and egress for vehicular
and pedestrian traffic over the private road as it meanders east from Broad
Street through the "Brookfield Development" to the west line of the above
described property, said non- exclusive easement for ingress and egress for
vehicular and pedestrian traffic is outlined in red on "Map of Private Road
In Brookfield From Broad Street Road to Southern States Cooperative,
Incorporated, Property in Brookland District, Henrico County, Virginia"
dated February 11, 1977, made by LaPrade Brothers, Civil Engineers and
Surveyors, Richmond, Virginia, a copy of which plat was recorded on
February 15, 1977 in the aforesaid Clerk's Office in Deed Book 1714, page
684.
TOGETHER with a non-exclusive easement to drain surface water along a path
shaded in blue on the plat entitled "Easement For Surface Drainage Across
Richmond Equivest, Inc. Property, From North Line Southern States
Cooperative, Inc. Property To South Line Of 1-64," dated February 18, 1977,
made by LaPrade Brothers, Civil Engineers and Surveyors, Richmond,
Virginia, a copy of which plat was recorded on March 28, 1977 in the
aforesaid Clerk's Office in Deed Book 1716, page 1137.
-36-
<PAGE>
SCHEDULE A-2
------------
(a) Easements, rights of way, restrictions and other minor defects
and irregularities in the title and ownership of the Leased Premises, which do
not materially impair the use thereof for the purposes for which it is held by
Lessor or leased by Lessee or materially affect its value;
(b) Rights reserved to or vested in any municipality or public
authority by the terms of any right, power, franchise, grant, license, permit,
and rights of any municipality or public authority to condemn or appropriate the
Leased Premises;
(c) Any liens thereon for taxes, assessments, fees, water, sewer or
other rents, rates and charges, excises, levees, license fees, permits,
inspection fees and other governmental authorities, which are not delinquent to
the extent that penalties for nonpayment may be assessed, or, if delinquent, the
amount or validity of which, is being contested as permitted by paragraph 16 of
the Lease;
(d) Liens which arise by operation of law in the ordinary course of
business securing claims, which are not delinquent, of materialmen, mechanics,
workmen, repairmen, suppliers, carriers, warehousemen, landlords, vendors or
employees.
-37-
<PAGE>
SCHEDULE A-3
------------
l. Miscellaneous plumbing
2. Kitchen equipment
3. Exhaust fans
4. Vinyl wallcovering
5. Sound insulation
6. Miscellaneous built-in shelving, counters and storage
7. Graphics and signage
8. Drapes
9. Full-height doors
10. Special lighting
11. Carpet
12. Millwork
-38-
<PAGE>
SCHEDULE B
----------
An eight-story office building containing approximately 210,000 square
feet, together with paved, striped and lighted parking for approximately
750 cars, to be constructed in accordance with the plans and specifications
prepared by Cooper, Carry & Associates, Inc., Architects, pursuant to an
Agreement between Lessee and Cooper, Carry & Associates, Inc.
-39-
<PAGE>
SCHEDULE C
----------
TERM
----
The term of this Lease shall commence on August l, 1977, and end at
midnight on the earlier of (i) the last day of the month in which the
seventieth (70th) anniversary of the Permanent Loan Funding Date (as
defined in the Agreement for Lease and Development) occurs or (ii) January
l, 2050 (the "Termination Date").
RENT
----
The Basic Rent from the commencement of the term until the Permanent
Loan Funding Date shall be at the rate of $1.00 per annum payable in
arrears on the day immediately preceding the Permanent Loan Funding Date.
The Basic Rent from the Permanent Loan Funding Date through the
Termination Date shall be at the rate of $127,500 per annum, payable
monthly in arrears on the last day of the month in installments of $10,625,
provided that if the Permanent Loan Funding Date shall occur on a date
other than the first day of a calendar month, the first monthly installment
shall be prorated to the end of such calendar month.
-40-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
signed and sealed as of the day and year first above written.
SOUTHERN STATES COOPERATIVE,
INCORPORATED
[CORPORATE SEAL]
By: /s/ John J. Feland
-------------------------
Vice President
ATTEST:
By: /s/ E.M. Holdaway
------------------
Secretary
GOLD BOND STAMP COMPANY
OF GEORGIA
[CORPORATE SEAL]
By: /s/ H. W. Greenough
---------------------------
President
ATTEST:
By: /s/ C. C. Krause
----------------------
Assistant Secretary
-41-
<PAGE>
STATE OF VIRGINIA :
: ss.:
CITY OF RICHMOND :
I, Lois E. Sisk, a Notary Public in and for the State and City
aforesaid, do certify that John J. Feland, and E. M. Holdaway a Vice
President and Secretary respectively, of SOUTHERN STATES COOPERATIVE,
INCORPORATED, a Virginia corporation, whose names are signed to the writing
above, bearing date as of the 15th day of July, 1977, have acknowledged the
same before me in my City aforesaid.
Given under my hand this 29th day of July 10, 1977.
/s/ Lois E. Sisk
----------------------------
Notary Public
Commission Expires 10-14-80
[NOTARIAL SEAL]
-42-
<PAGE>
STATE OF Minnesota :
: ss..
COUNTY OF HENNEPIN :
I, Terri Nims, a Notary Public in and for the State and County
aforesaid, do certify that H. W. Greenough and C. C. Krause a President and
Assistant Secretary, respectively, of GOLD BOND STAMP COMPANY OF GEORGIA, a
New Jersey corporation, whose names are signed to the writing above,
bearing date as of the 15 day of July, 1977, have acknowledged the same
before me in my County aforesaid.
Given under my hand this 26 day of July, 1977.
/s/ Terri Nims
--------------------
Notary Public
[NOTARIAL SEAL]
-43-
<PAGE>
EXHIBIT 10.9(b)
LEASE AND AGREEMENT
between
GOLD BOND STAMP COMPANY OF GEORGIA
as Lessor
and
SOUTHERN STATES COOPERATIVE, INCORPORATED
as Lessee
Dated as of July 15, 1977
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Paragraph Page
- --------- ----
<S> <C>
1 Lease of Premises; Title and Condition................................................ 1
2 Use................................................................................... 2
3 Terms................................................................................. 2
4 Rent.................................................................................. 3
5 Net Lease; Non-Terminability.......................................................... 4
6 Taxes and Assessments; Compliance with Law............................................ 5
7 Liens................................................................................. 6
8 Indemnification....................................................................... 7
9 Maintenance and Repair................................................................ 7
10 Alterations; Land Release............................................................. 8
11 Condemnation and Casualty............................................................. 11
12 Insurance............................................................................. 14
13 Purchase Right........................................................................ 16
14 Procedure Upon Purchase............................................................... 17
15 Assignment and Subletting............................................................. 18
16 Permitted Contests.................................................................... 19
17 Conditional Limitations; Default Provisions........................................... 20
18 Additional Rights of Lessor........................................................... 23
19 Ground Lease.......................................................................... 25
20 Notices, Offers and Other Instruments................................................. 26
21 Estoppel Certificates................................................................. 27
22 No Merger............................................................................. 27
23 Surrender............................................................................. 28
24 Merger, Consolidation or Sale of Assets............................................... 28
25 Termination of Options................................................................ 29
26 Termination of Agreement for Lease and Development.................................... 29
27 Commencement Agreement................................................................ 29
28 Separability; Binding Effect; Governing Law........................................... 30
29 Schedules............................................................................. 31
</TABLE>
Schedule A - Description of the Premises, the Ground Lease
Equipment and Fixtures of Lessor;
Liens and Encumbrances
Schedule B - Terms and Basic Rent Payments
Schedule C - Purchase Prices
Schedule D - Released Parcels
i
<PAGE>
Location of Definitions
- -----------------------
Agreement for Lease and Development - paragraph 26
Basic Rent - paragraph 4 and Schedule B.
Commencement Agreement - paragraph 27
Event of default - paragraph 17(a).
Extended Terms - paragraph 3 and Schedule B. Fair Market Value - paragraph 13.
Ground Lease - paragraph l.
Ground Lessor - paragraph 19(c).
Impositions - paragraph 6
Improvements - paragraph l.
Interim Term - paragraph 3 and Schedule B.
Lease Year - Schedule B
Lessee - page l.
Lessor - page l.
Lessor's Cost - Schedule C.
Mortgage - paragraph 12(b).
Mortgagee - paragraph 12(b).
Net Proceeds - paragraph 11(a).
Payment Dates - paragraph 4 and Schedule B.
Permitted Encumbrances - paragraph 7.
Premises - paragraph l.
Primary Term - paragraph 3 and Schedule B.
Primary Term Commencement Date -Schedule B.
Project Costs - paragraph 13.
Released Parcel - paragraph 10(b)
Remaining Parcel - paragraph 10(b)
Termination Date - paragraph 11(b).
Trade Fixtures - paragraph 10(a).
ii
<PAGE>
LEASE AND AGREEMENT, dated as of July 15, 1977, (this Lease), between
GOLD BOND STAMP COMPANY OF GEORGIA, a New Jersey corporation (Lessor) having an
address at 12755 State Highway 55, Minneapolis, Minnesota 55441, and SOUTHERN
STATES COOPERATIVE, INCORPORATED, a Virginia corporation (herein, together with
any corporation succeeding thereto by consolidation, merger or acquisition of
its assets substantially as an entirety, called Lessee), having an address at
Seventh and Main Streets, P. O. Box 1656, Richmond, Virginia 23213.
1. Lease of Premises; Title and Condition. In consideration of the
--------------------------------------
rents and covenants herein stipulated to be paid and performed by Lessee and
upon the terms and conditions herein specified, Lessor hereby subleases and
leases to Lessee, and Lessee hereby sublets and lets from Lessor, the premises
(the Premises) consisting of (i) Lessor's interests in the land described in
Part I of Schedule A pursuant to the ground lease described in Part II of
Schedule A (the Ground Lease), together with all of Lessor's other interests
under the Ground Lease, (ii) all buildings and other improvements and all
equipment, fixtures and items of personal property attached to or used in the
operation or maintenance of the improvements now or hereafter located on the
land and owned by Lessor, specifically including, but not limited to, those
items enumerated in Part III of Schedule A (the Improvements), and (iii) all
easements, rights and appurtenances relating to the Premises. The Premises are
leased to Lessee in their present condition without representation or warranty
by Lessor and subject to the rights of parties in possession, to the existing
state of title, to all applicable legal requirements now or hereafter in effect,
and to all the terms and conditions of, and to the continuance of, the Ground
Lease. Lessee has examined the Premises and title thereto and the Ground Lease
and has found the same satisfactory. Lessor and Lessee acknowledge that the
Improvements on the Premises have been
<PAGE>
designed and are being constructed in accordance with plans approved by Lessee,
and that construction of the Improvements is being supervised by Lessee. Solely
as between Lessor and Lessee, the taking of possession of the Premises by Lessee
shall be conclusive evidence that the Premises are in good condition and that
Lessee has accepted the Premises "as is." Lessor makes no warranties or
representations, express or implied, as to the design, construction, condition,
merchantability or quality of the Improvements or the materials, equipment,
fixtures, appliances or workmanship in the Improvements, nor as to the fitness
of the Improvements, materials, equipment, fixtures or appliances for any
particular purpose, whether known or unknown to Lessor, it being agreed that, as
between Lessor and Lessee, all such risks regarding the proper design,
construction and condition of the Premises as of the date of taking of
possession by Lessee are to be borne by Lessee.
2. Use. Lessee may occupy and use the Premises for any lawful
---
purpose, subject to the provisions of the Ground Lease.
3. Terms. The Premises are leased for an interim term (the Interim
-----
Term), a primary term of thirty years (the Primary Term), and, at Lessee's
option, for two consecutive additional terms of five years each (the Extended
Terms), unless and until the term of this Lease shall expire or be terminated
pursuant to any provisions hereof. The Interim Term, Primary Term and each
Extended Term shall commence and expire on the dates set forth in Schedule B.
Lessee may exercise its option to extend the term of this Lease for an Extended
Term by giving notice thereof to Lessor not less than six months before the
expiration of the then existing Term.
4. Rent. (a) Lessee shall pay to Lessor in lawful money of the
----
United States as fixed rent for the Premises, the amounts set forth in Schedule
B (Basic Rent) on the dates set
2
<PAGE>
forth therein (Payment Dates), at Lessor's address as set forth above, or at
such other address or to such other person as Lessor from time to time may
designate.
(b) All amounts which Lessee is required to pay pursuant to this
Lease (other than Basic Rent, amounts payable upon purchase of the Premises and
amounts payable as liquidated damages pursuant to paragraph 17), together with
every fine, penalty, interest and cost which may be added for non-payment or
late payment thereof, shall constitute additional rent. If Lessee shall fail to
pay any additional rent, Lessor shall have the right to pay the same and shall
have all rights, powers and remedies with respect thereto as are provided herein
or by law in the case of non-payment of Basic Rent. Lessee shall pay to Lessor
interest at the rate of 12% per annum on all overdue Basic Rent from due date
thereof until paid, and on all overdue additional rent paid by Lessor on behalf
of Lessee from the date of payment by Lessor until repaid by Lessee. Lessee
shall also pay to Lessor any delinquent handling charge on the Mortgage (as
hereinafter defined) paid by Lessor. Lessee shall perform all its obligations
under this Lease at its sole cost and expense, and shall pay all Basic Rent and
additional rent when due, without notice or demand.
5. Net Lease; Non-Terminability. (a) This Lease is a net lease, and,
----------------------------
except as otherwise expressly provided herein, any present or future law to the
contrary notwithstanding, Lessee shall not be entitled to any abatement,
reduction, set-off, counterclaim, defense or deduction with respect to any Basic
Rent, additional rent or other sum payable hereunder, nor shall the obligations
of Lessee hereunder be affected, by reason of: any damage to or destruction of
the Premises; any taking of the Premises or any part thereof by condemnation or
otherwise; any prohibition, limitation, restriction or prevention of Lessee's
use, occupancy or enjoyment of the Premises, or any interference with such use,
occupancy or enjoyment by any
3
<PAGE>
person; any eviction by paramount title or otherwise; any default by Lessor
hereunder or under any other agreement; the termination of the Ground Lease; the
impossibility or illegality of performance by Lessor, Lessee or both; any action
of any governmental authority; or any other cause whether similar or dissimilar
to the foregoing. The parties intend that the obligations of Lessee hereunder
shall be separate and independent covenants and agreements and shall continue
unaffected unless such obligations shall have been modified or terminated
pursuant to an express provision of this Lease.
(b) Lessee shall remain obligated under this Lease in accordance with
its terms and shall not take any action to terminate, rescind or avoid this
Lease, notwithstanding any bankruptcy, insolvency, reorganization, liquidation,
dissolution or other proceeding affecting Lessor or any assignee of Lessor or
any action with respect to this Lease which may be taken by any trustee,
receiver or liquidator or by any court. Except as otherwise expressly provided
herein, Lessee waives all rights to terminate or surrender this Lease, or to any
abatement or deferment of Basic Rent, additional rent or other sums payable
hereunder.
6. Taxes and Assessments; Compliance with Law. (a) Lessee shall pay:
------------------------------------------
(1) all taxes, assessments, levies, fees, water and sewer rents and charges, and
all other governmental charges, general and special, ordinary and extraordinary,
foreseen and unforeseen, which are, at any time prior to or during the term
hereof, imposed or levied upon or assessed against (A) the Premises, (B) any
Basic Rent, additional rent or other sum payable hereunder or (C) this Lease or
the leasehold estate hereby created or which arise in respect of the operation,
possession or use of the Premises; (ii) all gross receipts or similar taxes
imposed or levied upon, assessed against or measured by any Basic Rent,
additional rent or other sum payable hereunder; (iii) all sales, use and similar
taxes at any time levied, assessed or payable on account of the acquisition,
leasing or
4
<PAGE>
use of the Premises; and (iv) all charges for utilities serving the Premises
(all of which are collectively referred to as "impositions"). In no event,
however, shall Lessee be required to pay any franchise, estate, inheritance,
transfer, income or similar tax of Lessor (other than any tax referred to in
clause (ii) above). Lessee will furnish to Lessor, promptly after demand
therefor, proof of payment of all impositions which are payable by Lessee. If
any such assessment may legally be paid in installments, Lessee may pay such
assessment in installments. If, however, by law, any imposition is or may be
payable in installments, Lessee may pay the same (with any accrued interest on
the unpaid balance of such imposition) in installments as the same become due
and before any interest or additional charge may be added thereto for the non-
payment of any such installment; and provided, further, that any imposition
payable with respect to a fiscal tax period during which the term of this Lease
shall expire or terminate, otherwise than (i) because of the fault of Lessee or
(ii) if Lessee purchases the Property pursuant to paragraph 11 or 13, shall be
adjusted between Lessor and Lessee as of the expiration or termination of the
term of this Lease, so that Lessee shall pay only an amount which bears the same
relation to the total imposition as the part of such fiscal tax period included
within the term of this Lease bears to the entire fiscal tax period. With
respect to any assessment which by law is or may be payable in installments,
Lessee shall pay only those installments which become due during the term of
this Lease.
(b) Lessee shall comply with and cause the Premises to comply with
(i) all legal requirements applicable to the Premises or the use thereof and
(ii) all contracts (including insurance policies), agreements and restrictions
applicable to the Premises or the ownership, occupancy or use thereof, including
but not limited to all such legal requirements, contracts,
5
<PAGE>
agreements and restrictions which require structural, unforeseen or
extraordinary changes to the Improvements.
7. Liens. Lessee will promptly remove and discharge any charge, lien,
-----
security interest or encumbrance upon the Premises or any Basic Rent, additional
rent or other sum payable hereunder which arises for any reason, including all
liens which arise out of the use, occupancy, construction, repair or rebuilding
of the Premises or by reason of labor or materials furnished or claimed to have
been furnished to Lessee or for the Premises, but not including the liens and
encumbrances set forth in Part IV of Schedule A, the Mortgage, Permitted
Encumbrances (as defined in the Mortgage), and any mortgage, charge, lien,
security interest or encumbrance created by Lessor or Ground Lessor, as
hereinafter defined, without the consent of Lessee.
8. Indemnification. Lessee shall defend all actions against Lessor
---------------
with respect to, and shall pay, protect, indemnify and save harmless Lessor from
and against, any and all liabilities, losses, damages, costs, expenses
(including reasonable attorneys' fees and expenses), causes of action, suits,
claims, demands or judgments of any nature arising from (i) injury to or death
of any person, or damage to or loss of property, on the Premises, or connected
with the use, condition or occupancy of any thereof, (ii) violation of this
Lease, (iii) any act or omission of Lessee or its agents, contractors,
licensees, sublessees or invitees, and (iv) any contest referred to in paragraph
16.
9. Maintenance and Repair. Lessee will maintain at its expense the
----------------------
Premises in good repair and condition, except for ordinary wear and tear, and
will make with reasonable promptness all structural and non-structural, foreseen
and unforeseen and ordinary and extraordinary changes and repairs which may be
required to keep the Premises in good repair and
6
<PAGE>
condition. Lessor shall not be required to maintain, repair or rebuild the
Improvements or to maintain the Premises, and Lessee waives the right to make
repairs at the expense of Lessor pursuant to any law at any time in effect.
10. Alterations; Land Release. (a) Lessee may, at its expense, make
-------------------------
additions to and alterations of the Improvements, construct additional
Improvements and make substitutions and replacements for the Improvements,
provided that (i) the market value of the Premises shall not be materially
lessened thereby, (ii) such work shall be expeditiously completed in a good and
workmanlike manner and in compliance with all applicable legal requirements and
the requirements of all insurance policies required to be maintained by Lessee
hereunder, and (iii) no Improvements shall be demolished unless Lessee shall
have first furnished Lessor with such surety bonds or other security acceptable
to Lessor as shall be necessary to assure rebuilding of such Improvements. All
such additions, alterations, additional Improvements, substitutions and
replacements shall be and remain part of the realty and the property of Lessor
and shall be subject to this Lease. Lessee may place upon the Premises any
furniture, furnishings, inventory, trade fixtures, machinery, computers or
equipment belonging to Lessee or third parties (collectively, Trade Fixtures)
and may remove the same at any time during the term of this Lease. Lessee shall
repair any damage to the Premises caused by such removal. Lessor agrees to
execute a waiver on the form reasonably specified by the owner of such Trade
Fixtures which relinquishes any rights Lessor may now or hereafter have, by
nature of this Lease, to such Trade Fixtures.
(b) Provided no event of default has occurred or is occurring under
this Lease, Lessee shall have the right at any time during the Primary Term, on
sixty (60) days prior written notice, to have released from this Lease and the
Ground Lease a portion of the Premises
7
<PAGE>
substantially similar (but in no event greater on a square foot basis) to Area
#1 or Area #2 as shown on the plat of the Premises attached hereto as Schedule D
together with non-exclusive easement for parking and access (the "Released
Parcel") under the following terms and conditions:
(i) The improvements to be constructed on the Released Parcel
shall be harmonious and consistent in use with the Improvements.
(ii) If adequate parking is not available on the Released Parcel
for the improvements constructed thereon, Lessee shall construct parking
(including, if necessary, deck parking) in order to provide on the Released
Parcel and the Remaining Parcel (as hereinafter defined) the number of
parking spaces required by the County of Henrico to serve both the
Improvements and all improvements constructed on the Released Parcel.
(iii) If necessary, Lessor and Lessee will both execute a non-
exclusive cross-easement agreement to insure adequate access and parking
for the Released Parcel and the Remaining Parcel.
(iv) Notice of release shall be accompanied by a survey of the
Premises indicating by metes and bounds the location of the Released Parcel
including any non- exclusive cross-easement.
(v) The remaining portion of the Premises subject to this Lease
(the "Remaining Parcel") shall (A) be capable of being operating as a
totally separate physical unit without additional cost to Lessor, (B)
include the original Improvements and existing parking areas, (c) be no
more than one parcel of land, (D) have access to public streets
8
<PAGE>
and easements of maintenance, and (E) not be in violation of any applicable
covenant, law, ordinance or statute.
(vi) Lessor and Lessee shall execute and deliver a supplement to
this Lease in recordable form reflecting the release from this Lease of the
Released Parcel.
(vii) Lessor shall cooperate with Lessee in obtaining a release of
the Released Parcel from the Mortgage pursuant to the provisions thereof,
and shall execute and deliver a supplement to any assignment of this Lease
in favor of the Mortgagee (as hereinafter defined) reflecting the release.
(viii) Lessee shall bear all costs and expenses incurred in obtaining
the release of the Released Parcel from this Lease, the Ground Lease, the
Mortgage and any assignment.
(ix) There shall be no decrease in the Basic Rent payable hereunder
except to the extent there is a reduction in the Basic Rent payable under
the Ground Lease, in which case the Basic Rent payable herein shall be
reduced by the amount of any reduction in the Basic Rent payable under the
Ground Lease.
11. Condemnation and Casualty. (a) Lessee hereby irrevocably
-------------------------
assigns to Lessor any award, compensation or insurance payment to which Lessee
may become entitled by reason of its interest in the Premises (i) if the
Premises are damaged or destroyed by fire or other casualty or (ii) if the use,
occupancy or title of the Premises or any part thereof is taken, requisitioned
or sold in, by or on account of any actual or threatened eminent domain
proceeding or other action by any person having the power of eminent domain.
Lessee is hereby authorized and empowered in the name and on behalf of Lessor to
appear in any such proceeding or action,
9
<PAGE>
to negotiate, prosecute and adjust any claim for any award, compensation or
insurance payment on account of any such damage, destruction, taking,
requisition or sale, and to collect any such award, compensation or insurance
payment. Lessor shall be entitled to participate in any such proceeding, action,
negotiation, prosecution or adjustment. All amounts paid in connection with any
such damage, destruction, taking, requisition or sale shall be applied pursuant
to this paragraph 11, and all such amounts (minus the expense of collecting such
amounts) are herein called the Net Proceeds. Lessee shall take all appropriate
action in connection with each such proceeding, action, negotiation, prosecution
and adjustment and shall pay all expenses thereof, including the cost of
Lessor's participation therein.
(b) If an occurrence of the character referred to in clause (i) or
(ii) of paragraph 11(a) shall affect all or a substantial portion of the
Premises and shall render the Premises unsuitable for restoration for continued
use and occupancy in Lessee's business, in Lessee's sole discretion, then Lessee
shall, not later than 90 days after such occurrence, deliver to Lessor (A)
notice of its intention to terminate this Lease on the next Payment Date (the
Termination Date) which occurs not less than 90 days after the delivery of such
notice and (B) a certificate of Lessee describing the event giving rise to such
termination and stating that its board of directors has determined that such
event has rendered the Premises unsuitable for restoration for continued use and
occupancy in Lessee's business. If the Termination Date occurs during the
Interim Term or the Primary Term, such notice shall be accompanied by an
irrevocable offer by Lessee to purchase Lessor's interest in any remaining
portion of the Premises and the Net Proceeds, if any, payable in connection with
such occurrence (or the right to receive the same when made, if payment thereof
has not yet been made) on the Termination Date, at a price determined in
accordance with Schedule C. If either (l) Lessor shall reject such offer by
notice
10
<PAGE>
given to Lessee not later than the 20th day prior to the Termination Date or (2)
the Termination Date occurs during an Extended Term, this Lease shall terminate
on the Termination Date except with respect to obligations and liabilities of
Lessee hereunder, actual or contingent, which have arisen on or prior to the
Termination Date, upon payment by Lessee of all Basic Rent, additional rent and
other sums then due and payable hereunder to and including the Termination Date,
and the Net Proceeds shall belong to Lessor. Unless Lessor shall have rejected
such offer in accordance with this paragraph, Lessor shall be conclusively
presumed to have accepted such offer, and, on the Termination Date, shall convey
Lessor's interest in the remaining portion of the Premises, if any, to Lessee or
its designee and shall assign to Lessee or its designee all Lessor's interest in
the Net Proceeds, pursuant to and upon compliance with paragraph 14.
(c) If, after an occurrence of the character referred to in clause
(i) or (ii) of paragraph 11(a), Lessee does not give notice of its intention to
terminate this Lease, then this Lease shall continue in full effect, and Lessee
shall repair any damage to the Premises caused by such event in conformity with
the requirements of paragraph 10 so as to restore the Premises (as nearly as
practicable) to the condition and market value thereof immediately prior to such
occurrence. Lessee shall be entitled to receive the Net Proceeds payable in
connection with such occurrence, but only against certificates of Lessee
delivered to Lessor from time to time as such work of repair progresses, each
such certificate describing the work of repair for which Lessee is requesting
payment and the cost incurred by Lessee in connection therewith and stating that
Lessee has not theretofore received payment for such work. Any Net Proceeds
remaining after final payment has been made for such work shall be retained by
Lessor. In the event of any temporary requisition, this Lease shall remain in
full effect for the term of this Lease then in effect and Lessee shall be
entitled to the Net Proceeds payable by reason thereof and allocable to
11
<PAGE>
such term; and the balance of the Net Proceeds payable by reason thereof shall
be paid to Lessor. If the cost of any repairs required to be made by Lessee
pursuant to this paragraph 11(c) shall exceed the amount of such Net Proceeds,
the deficiency shall be paid by Lessee.
12. Insurance. (a) Lessee will maintain insurance on the
---------
Premises of the following character:
(i) Insurance against loss by fire, lightning and other risks from
time to time included under "extended coverage" policies, in amounts
sufficient to prevent Lessor or Lessee from becoming a co-insurer of any
loss but in any event in amounts not less than 90% of the actual
replacement value of the Improvements exclusive of foundations and
excavations; such insurance to include a replacement cost endorsement, and
a $50,000 deductible clause, provided Lessee in such event pays up to
$50,000 to be applied and treated as Net Proceeds.
(ii) General public liability insurance against claims for bodily
injury, death or property damage occurring on, in or about the Premises and
adjoining streets and sidewalks, in the minimum amounts of $1,000,000 for
any one accident, and $100,000 for property damage, or in such other
amounts as from time to time are commonly obtained in the case of
commercial property located in the Richmond area similar to the Premises,
when occupied by a Lessee having a net worth at the time such determination
is being made comparable to the net worth of Lessee and its affiliates.
(iii) Workmen's compensation insurance to the extent required by the
law of the state in which the Premises are located and to the extent
necessary to protect Lessor and the Premises against workmen's compensation
claims.
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Such insurance shall be written by companies with a financial rating of A+ or
better by Alfred M. Best's Key Rating Guide, or if the same shall be
discontinued, by companies of approximate net worth and recognized financial
standing to those rated A+ or better. The insurance required by clauses (i) and
(ii) above shall name as insured parties Lessor and Lessee as their interests
may appear.
(b) Every such policy (other than any general public liability or
workmen's compensation policy) shall bear a first mortgagee endorsement in favor
of the mortgagee or beneficiary (the Mortgagee) under any mortgage or deed of
trust creating a first lien on Lessor's interest in the Premises (the Mortgage);
and any loss under any such policy shall be payable to the Mortgagee to be held
and applied pursuant to paragraph 11. Every policy referred to in paragraph
12(a) shall provide that it will not be cancelled except after 10 day's written
notice to Lessor and the Mortgagee and that it shall not be invalidated by any
act or neglect of Lessor or Lessee, nor by occupancy of the Premises for
purposes more hazardous than permitted by such policy, nor by any foreclosure or
other proceedings relating to the Premises, nor by change in title to the
Premises, nor by waiver of subrogation rights by insured.
(c) Lessee shall deliver to Lessor and the Mortgagee original or
duplicate policies or certificates of insurers, satisfactory to the Mortgagee,
evidencing the existence of all insurance which is required to be maintained by
Lessee hereunder, such delivery to be made (i) promptly after the execution and
delivery hereof and (ii) within at least 30 days prior to the expiration of any
such insurance. Promptly after payment of premiums for all insurance policies
required to be maintained pursuant to paragraph 12(a), Lessee will send to
Lessor and the Mortgagee evidence of such payment. Any insurance required
hereunder may be provided under blanket policies.
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13. Purchase Right. Lessee shall have the option to purchase
--------------
Lessor's interest in the Premises on the last day of the fifteenth, twentieth,
and twenty-fifth Lease Year, as such term is defined in Schedule B, and on the
last day of the Primary Term or any Extended Term then in effect, upon 90 days'
prior notice to Lessor, at a price equal to the greater of (i) Project Costs, as
defined in Paragraph 1.20 of the Agreement for Lease and Development, or (ii)
the fair market value ("Fair Market Value") of Lessor's interest in the Premises
(considered as encumbered by this Lease) as of the date of purchase based upon
the present value of both the remaining rental payments due under this Lease and
the residual value of the Premises using the then current rate of
capitalization, such value to be as determined by Lessor and Lessee, or, if
Lessor and Lessee fail to agree, as determined by appraisers selected in the
following manner: Lessor and Lessee shall each appoint an appraiser, and the
Fair Market Value shall be as determined by the two appraisers so appointed. If
the two appraisers so appointed are unable to agree upon Fair Market Value, fair
market value shall be determined by a third appraiser selected by the two
appraisers appointed by the parties hereto. All appraisers shall be members in
good standing of the American Institute of Real Estate Appraisers or any
organization succeeding thereto. Lessor and Lessee shall share the costs of such
appraisals equally. If Lessee shall have paid a portion of the Project Costs
pursuant to Paragraph 4.4 of the Agreement for Lease and Development, the Fair
Market Value of the Premises as above determined shall be reduced by an amount
which bears the same ratio to the amount of the Project Costs paid for by Lessee
pursuant to Paragraph 4.4 of the Agreement of Lease and Development as the Fair
Market Value of the Premises as above determined bears to the total Project
Costs. The Fair Market Value of the Premises shall also be reduced by the
aggregate of all capital expenditures (other than Project Costs) made by Lessee
with respect to the Premises, including but not limited to expenditures for
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drainage on the non-exclusive easement as shown on a plat entitled "Easement For
Surface Drainage Across Richmond Equivest, Inc. Property, From North Line
Southern States Cooperative, Inc. Property to South Line of 1-64", as more
particularly described on Schedule A Part I. On such date of purchase, Lessor
shall convey its interest in the Premises to Lessee or its designee pursuant to
and in compliance with paragraph 14 hereof.
Notwithstanding the foregoing option in Lessee to purchase Lessor's
interest in the Premises, Lessor and Lessee agree that, in order for Lessee to
exercise such right, Lessee must either (x) pay off the outstanding indebtedness
of the Mortgage, including accrued interest and any prepayment penalty, or (y)
take title subject to the Mortgage and expressly assume all of the terms,
covenants and conditions of the Mortgage and expressly agree to become
personally liable on the promissory note or other evidence of indebtedness.
14. Procedure Upon Purchase. (a) If Lessee shall purchase
-----------------------
Lessor's interest in the Premises pursuant to this Lease, Lessor shall convey
title thereto as it existed on the date of the commencement of the term hereof,
and Lessee or its designee shall accept such title, subject, however, to (i) all
charges, liens, security interests and encumbrances attaching thereto on or
after such date which shall not have been created or suffered by Lessor or which
shall be consented to by Lessee and (ii) all applicable laws, regulations,
ordinances and Permitted Encumbrances, but free of charges, liens, security
interests and encumbrances resulting from acts of Lessor taken without the
consent of Lessee, and the Mortgage, except that in regard to a purchase
pursuant to paragraph 13, the purchase price shall be reduced by (i) the amount
of principal and interest, if any, paid by Lessee if Lessee discharges the
Mortgage pursuant to paragraph 13, or by (ii) the outstanding principal and
interest secured by the Mortgage as of the
15
<PAGE>
date of purchase if Lessee assumes the indebtedness secured by the Mortgage
pursuant to paragraph 13.
(b) Upon the date fixed for any purchase of Lessor's interest in the
Premises hereunder, Lessee shall pay to Lessor the purchase price therefor
specified herein together with all Basic Rent, additional rent and other sums
then due and payable hereunder to and including such date of purchase, and
Lessor shall deliver to Lessee a proper deed of conveyance with Special Warranty
of Title of Lessor's interest in the Premises then being sold to Lessee and any
other instruments necessary to convey the title thereto described in paragraph
14(a) and to assign any other property then required to be assigned by Lessor
pursuant hereto. Lessee shall pay all charges incident to such conveyance and
assignment, including counsel fees, escrow fees, recording fees, title insurance
premiums and all applicable taxes (other than any income or franchise taxes of
Lessor) which may be imposed by reason of such conveyance and assignment and the
delivery of said conveyance and other instruments. Upon the completion of any
such purchase of Lessor's entire interest in the Premises but not prior thereto,
this Lease shall terminate, except with respect to obligations and liabilities
of Lessee hereunder, actual or contingent, which have arisen prior to such date
of purchase.
15. Assignment and Subletting. Lessee may sublet all or any portion
-------------------------
of the Premises or assign its interest hereunder. No such assignment or sublease
shall modify or limit any right or power of Lessor hereunder or affect or reduce
any obligation of Lessee hereunder, and all such obligations shall continue in
full effect as obligations of a principal and not of a guarantor or surety, as
though no assignment or subletting had been made. Neither this Lease nor the
term hereby demised shall be mortgaged by Lessee, nor shall Lessee mortgage or
pledge its interest in any sublease of the Premises or the rentals payable
thereunder. Any such mortgage
16
<PAGE>
or pledge, and any sublease or assignment made otherwise than as permitted by
this paragraph l5, shall be void. Lessee shall, within 10 days after the
execution of any assignment, deliver a conformed copy thereof to Lessor.
16. Permitted Contests. Lessee shall not be required, nor shall
------------------
Lessor have the right, to pay, discharge or remove any tax, assessment, levy,
fee, rent, charge, lien or encumbrance, or to comply with any legal requirement
applicable to the Premises or the use thereof, so long as Lessee shall contest
the existence, amount or validity thereof by appropriate proceedings which shall
prevent the collection of or other realization upon the tax, assessment, levy,
fee, rent, charge, lien or encumbrance so contested, and the sale, forfeiture or
loss of the Premises or any Basic Rent or any additional rent, to satisfy the
same, and which shall not affect the payment of any Basic Rent or any additional
rent, and provided that such contest shall not subject Lessor to the risk of any
material civil liability or any criminal liability. Lessee shall give such
reasonable security as may be demanded by Lessor or the Mortgagee to insure
payment of such tax, assessment, levy, fee, rent, charge, lien or encumbrance
and to prevent any sale or forfeiture of the Premises by reason of such non-
payment.
17. Conditional Limitations; Default Provisions. (a) Any of the
-------------------------------------------
following occurrences or acts shall constitute an event of default under this
Lease; (i) if Lessee shall (l) fail to pay any Basic Rent, additional rent or
other sum required to be paid by Lessee hereunder and such failure shall
continue for 10 days after notice to Lessee of such failure or (2) fail to
observe or perform any other provision hereof and such failure shall continue
for 30 days after notice to Lessee of such failure (provided, that in the case
of any such default which cannot be cured by the payment of money and cannot
with diligence be cured within such 30-day period, if Lessee shall commence
promptly to cure the same and thereafter prosecute the curing thereof with
17
<PAGE>
diligence, the time within which such default may be cured shall be extended for
such period as is necessary to complete the curing thereof with diligence); or
(ii) if Lessee shall file a petition in bankruptcy or for reorganization or for
an arrangement pursuant to any federal or state bankruptcy law or any similar
federal or state law, or shall be adjudicated a bankrupt or become insolvent or
shall make an assignment for the benefit of creditors or shall admit in writing
its inability to pay its debts generally as they become due, or if a petition or
answer proposing the adjudication of Lessee as a bankrupt or its reorganization
pursuant to any federal or state bankruptcy law or any similar federal or state
law shall be filed in any court and Lessee shall consent to or acquiesce in the
filing thereof or such petition or answer shall not be discharged or denied
within 90 days after the filing thereof; or (iii) if a receiver, trustee or
liquidator of Lessee or of all or substantially all of the assets of Lessee or
of the Premises or Lessee's estate therein shall be appointed in any proceeding
brought by Lessee, or if any such receiver, trustee or liquidator shall be
appointed in any proceeding brought against Lessee and shall not be discharged
within 90 days after such appointment, or if Lessee shall consent to or
acquiesce in such appointment; or (iv) if the Premises shall have been left
unoccupied and unattended for a period of 30 days.
(b) If an event of default shall have happened and be continuing,
Lessor shall have the right to give Lessee notice of Lessor's intention to
terminate the term of this Lease on a date not less than 5 days after the date
of such notice. Upon the giving of such notice, the term of this Lease and the
estate hereby granted shall expire and terminate on such date as fully and
completely and with the same effect as if such date were the date herein fixed
for the expiration of the term of this Lease, and all rights of Lessee hereunder
shall expire and terminate, but Lessee shall remain liable as hereinafter
provided.
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(c) If an event of default shall have happened and be continuing,
Lessor shall have the immediate right, whether or not the term of this Lease
shall have been terminated pursuant to paragraph 17(b), to re-enter and
repossess the Premises by summary proceedings, ejectment or in any manner Lessor
determines to be necessary or desirable and the right to remove all persons and
property therefrom. Lessor shall be under no liability by reason of any such re-
entry, repossession or removal. No such re-entry or repossession of the Premises
shall be construed as an election by Lessor to terminate the term of this Lease
unless a notice of such intention is given to Lessee pursuant to paragraph
17(b), or unless such termination is decreed by a court of competent
jurisdiction.
(d) At any time or from time to time after the re-entry or
repossession of the Premises pursuant to paragraph 17(c), whether or not the
term of this Lease shall have been terminated pursuant to paragraph 17(b),
Lessor may (but shall be under no obligation to) relet the Premises for the
account of Lessee, in the name of Lessee or Lessor or otherwise, without notice
to Lessee, for such term or terms and on such conditions and for such uses as
Lessor, in its absolute discretion, may determine, subject to the provisions of
the Ground Lease. Lessor may collect and receive any rents payable by reason of
such reletting. Lessor shall not be liable for any failure to relet the Premises
or for any failure to collect any rent due upon any such reletting.
(e) No expiration or termination of the term of this Lease pursuant
to paragraph 17(b), by operation of law or otherwise, and no re-entry or
repossession of the Premises pursuant to paragraph 17(c) or otherwise, and no
reletting of the Premises pursuant to paragraph 17(d) or otherwise, shall
relieve Lessee of its liabilities and obligations hereunder, all of which shall
survive such expiration, termination, re-entry, repossession or reletting.
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(f) In the event of any expiration or termination of the term of this
Lease or re-entry or repossession of the Premises by reason of the occurrence of
an event of default, Lessee will pay to Lessor all Basic Rent, additional rent
and other sums required to be paid by Lessee to and including the date of such
expiration, termination, re-entry or repossession; and, thereafter, Lessee
shall, until the end of what would have been the term of this Lease in the
absence of such expiration, termination, re-entry or repossession, and whether
or not the Premises shall have been relet, be liable to Lessor for, and shall
pay to Lessor, as liquidated and agreed current damages: (i) all Basic Rent,
additional rent and other sums which would be payable under this Lease by Lessee
in the absence of such expiration, termination, re-entry or repossession, less
(ii) the net proceeds, if any, of any reletting effected for the account of
Lessee pursuant to paragraph 17(d), after deducting from such proceeds all
Lessor's expenses in connection with such reletting (including all repossession
costs, brokerage commissions, property management fees, reasonable attorneys'
fees and expenses, employees' expenses, alteration costs and expenses of
preparation for such reletting). Lessee will pay such current damages on the
days on which Basic Rent would be payable under this Lease in the absence of
such expiration, termination, re-entry or repossession, and Lessor shall be
entitled to recover the same from Lessee on each such day.
(g) The words "re-enter" or "re-entry" as used in this paragraph 17
are not restricted to their technical meaning.
18. Additional Rights of Lessor. (a) No right or remedy hereunder
---------------------------
shall be exclusive or any other right or remedy, but shall be cumulative and in
addition to any other right or remedy hereunder or now or hereafter existing.
Failure to insist upon the strict performance of any provision hereof or to
exercise any option, right, power or remedy contained herein shall not
20
<PAGE>
constitute a waiver or relinquishment thereof for the future. Receipt by Lessor
of any Basic Rent, additional rent or other sum payable hereunder with knowledge
of the breach of any provision hereof shall not constitute waiver of such
breach, and no waiver by Lessor of any provision hereof shall be deemed to have
been made unless in writing. Lessor shall be entitled to injunctive relief in
case of the violation, or attempted or threatened violation, of any provision
hereof, or to a decree compelling performance of any provision hereof, or to any
other remedy allowed to Lessor by law.
(b) Lessee hereby waives and surrenders for itself and all those
claiming under it, including creditors of all kinds, (i) any right and privilege
which it or any of them may have to redeem the Premises or to have a continuance
of this Lease after termination of Lessee's right of occupancy by order or
judgment of any court or by any legal process or writ, or under the terms of
this Lease, or after the termination of the term of this Lease as herein
provided, and (ii) the benefits of any law which exempts property from liability
for debt or for distress for rent.
(c) If Lessee shall be in default in the performance of any of its
obligations hereunder, Lessee shall pay to Lessor, on demand, all expenses
incurred by Lessor as a result thereof, including reasonable attorneys' fees and
expenses. If Lessor shall be made a party to any litigation commenced against
Lessee and Lessee, at its expense, shall fail to provide Lessor with counsel
approved by Lessor, Lessee shall pay all costs and reasonable attorneys' fees
and expenses incurred by Lessor in connection with such litigation.
19. Ground Lease. (a) Lessee will duly and punctually observe and
------------
perform, at its expense, all covenants, terms and conditions imposed by the
Ground Lease upon the lessee thereunder (excluding the payment of Basic Rent),
to the end that, during the term of this Lease,
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Lessor shall have no responsibility for compliance with the provisions of the
Ground Lease and shall be exonerated from all liability thereunder.
(b) If any event shall occur which, pursuant to the terms of the
Ground Lease, with or without the passage of time, shall enable the lessee under
the Ground Lease to terminate the same, Lessee shall notify Lessor thereof
within 5 days after Lessee shall have become aware of the occurrence thereof.
Notwithstanding any such right of termination, Lessee shall take no action so to
terminate the Ground Lease and shall take such action, if any, as shall be
necessary to maintain the estate of Lessor in the Premises, except as provided
in Paragraphs 13 and 14 of the Ground Lease.
(c) If any event shall occur which, pursuant to the terms of the
Ground Lease, with or without the passage of time, shall enable the lessor
thereunder (the Ground Lease) to terminate the same or to impair or restrict the
rights of the lessee thereunder, Lessee shall notify Lessor within 5 days after
Lessee shall have become aware of the occurrence thereof and shall take such
action, if any, as shall be necessary to maintain the rights of Lessor in the
Premises and to enable the full enjoyment of such rights as they existed prior
to such impairment or restriction, except as provided in Paragraphs 13 and 14 of
the Ground Lease.
(d) If (i) the Ground Lease shall terminate for any reason other than
as specifically provided for in Paragraphs 13 and 14 thereof, or (ii) the Ground
Lease shall have been rejected or disaffirmed by the lessee thereunder or any
trustee or receiver thereof pursuant to bankruptcy or insolvency law or other
law affecting creditors' rights and if the Mortgagee (or its designee) shall not
have entered into a new lease or acquired the interest of the lessee thereunder
pursuant to Paragraph 24 thereof, then Lessee shall attorn to the Ground Lessor.
Upon Ground Lessor's acceptance thereof, Ground Lessor and Lessee shall continue
this Lease in
22
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full force and effect as a direct lease from Ground Lessor to Lessee on the same
terms and conditions of this Lease, including without limitation, the obligation
to pay Basic Rent, additional rent and all other sums [including without
limitation, sums payable pursuant to paragraph 19(a) payable under this Lease
for the period after the termination, rejection or disaffirmance of the Ground
Lease], and all of the terms and conditions of this Lease shall be binding upon
Ground Lessor and Lessee to the same extent as if Ground Lessor and Lessee had
been the original lessor and lessee, respectively, under this Lease.
20. Notices, Offers and Other Instruments. All notices, offers,
-------------------------------------
consents and other instruments given pursuant to this Lease shall be in writing
and shall be validly given when mailed by prepaid registered or certified mail,
(a) if to Lessor, addressed to Lessor at its address set forth above, and (b) if
to Lessee, addressed to Lessee at its address set forth above. Lessor and Lessee
each may from time to time specify any address in the United States as its
address for purposes of this Lease by giving 15 days' written notice to the
other party.
21. Estoppel Certificates. Lessee will, from time to time, promptly
---------------------
upon request by Lessor but not more often than once each six (6) months,
execute, acknowledge and deliver to Lessor a certificate of Lessee stating:
(i) that this Lease is unmodified and in full effect (or if there
have been modifications, that this Lease is in full effect as modified,
and stating the modifications),
(ii) the dates, if any, to which the Basic Rent, additional rent and
other sums payable under this Lease have been paid and the amount of the
Basic Rent currently payable thereunder, and
23
<PAGE>
(iii) that no notice has been received by Lessee of default under this
Lease which has not been cured or, if any default for which notice has been
received has not been cured, specifying the nature and period of existence
thereof and what action Lessee is taking or proposes to take with respect
thereto.
Any such certificate may be relied upon by any prospective mortgagee or
purchaser of the Premises.
22. No Merger. There shall be no merger of this Lease or of the
---------
leasehold estate hereby created with either the Ground Lease or the leasehold
estate thereby created or the fee estate in the Premises by reason of the fact
that the same person acquires or holds, directly or indirectly, this Lease or
the leasehold estate hereby created or any interest herein or in such leasehold
estate as well as either or both (a) the Ground Lease or the leasehold estate
thereby created or any interest in the Ground Lease or such leasehold estate or
(b) the fee estate in the Premises or any interest in such fee estate.
23. Surrender. Upon the expiration or termination of the term of
---------
this Lease, Lessee shall surrender the Premises to Lessor in the condition in
which the Premises were originally received from Lessor, except as repaired,
rebuilt, restored, altered or added to as permitted or required hereby and
except for ordinary wear and tear and in the case of termination pursuant to
paragraph 11, except for the condemned portion of the Premises or the damage
giving rise to such termination. Lessee shall remove from the Premises on or
prior to such expiration or termination all property situated thereon which is
not owned by Lessor, and shall repair any damage caused by such removal.
Property not so removed shall become the property of Lessor, and Lessor may
cause such property to be removed from the Premises and disposed of,
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but the cost of any such removal and disposition and of repairing any damage
caused by such removal shall be borne by Lessee.
24. Merger, Consolidation or Sale of Assets. It shall be a
---------------------------------------
condition precedent to the merger of Lessee into another corporation, to the
consolidation of Lessee with one or more other corporations and to the sale or
other disposition of all or substantially all the assets of Lessee to one or
more other entities that the surviving entity or transferee of assets, as the
case may be, shall deliver to Lessor and to the Mortgagee an acknowledged
instrument in recordable form assuming all obligations, covenants and
responsibilities of Lessee hereunder and under any instrument executed by Lessee
consenting to the assignment of Lessor's interest in this Lease to the Mortgagee
as security for indebtedness. Lessee covenants that it will not merge or
consolidate or sell or otherwise dispose of all or substantially all of its
assets unless such an instrument shall have been so delivered.
25. Termination of Options. Anything herein to the contrary
----------------------
notwithstanding, each option to purchase contained in this Lease shall terminate
on the earlier of the following dates: (i) the specific date of termination
referred to in each option; or (ii) that date which is 21 years after the death
of the last survivor of the descendants of Franklin D. Roosevelt, former
president of the United States of America, who was alive on the date of this
Lease.
26. Termination of Agreement for Lease and Development. If the
--------------------------------------------------
Agreement for Lease and Development of even date herewith between Lessor and
Lessee (the Agreement of Lease and Development) is terminated pursuant to
Paragraph 6.7 thereof during the Interim Term, then this Lease shall
automatically cease and terminate as of the date of termination of the Agreement
for Lease and Development, and shall be of no further force and effect between
Lessor and Lessee.
25
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27. Commencement Agreement. Upon the occurrence of the Primary
----------------------
Term Commencement Date, Lessor and Lessee shall enter into a written
Commencement Agreement forth:
(a) The Primary Term Commencement Date.
(b) The Basic Rent payable during:
(i) the first Lease year
(ii) the second through and including the fifteenth Lease Year;
(iii) the sixteenth Lease Year through the end of the Primary
Term; and
(iv) the Extended Terms.
(c) The amount of Project Costs, and the amount, if any, paid by
Lessee for Project Costs pursuant to Paragraph 4.4 of the Agreement for Lease
and Development.
Notwithstanding the refusal or failure of either or both parties hereto to
execute the Commencement Agreement, the Primary Term of this Lease at the Basic
Rent herein provided shall nonetheless commence.
28. Separability; Binding Effect; Governing Law. Each provision
-------------------------------------------
hereof shall be separate and independent and the breach of any such provision by
Lessor shall not discharge or relieve Lessee from its obligations to perform
each and every covenant to be performed by Lessee hereunder. If any provision
hereof or the application thereof to any person or circumstance shall to all
extent be invalid or unenforceable, the remaining provisions hereof, or the
application of such provision to persons or circumstances other than those as to
which it is invalid or unenforceable, shall not be affected thereby, and each
provision hereof shall be valid and shall be enforceable to the extent permitted
by law. All provisions contained in this Lease
26
<PAGE>
shall be binding upon, inure to the benefit of, and be enforceable by, the
respective successors and assigns of Lessor and Lessee to the same extent as if
each such successor and assign were named as a party hereto. This Lease may not
be changed, modified or discharged except by a writing signed by Lessor and
Lessee. This Lease shall be governed by and interpreted under the laws of the
Commonwealth of Virginia.
29. Schedules. The following are Schedules A, B and C referred to
---------
it this Lease, which Schedules are hereby incorporated by reference herein.
27
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SCHEDULE A
Part 1 - Description of the Premises
ALL that certain lot, piece or parcel of land, with improvements thereon and
appurtenances thereunto pertaining, lying and being In Brookland District,
Henrico County, Virginia, containing 11.80 acres, more or less, outlined in red,
on "Map of 11.80 Acres of Land in Brookfield, In Brookland District, Henrico
County, Virginia" dated September 22, 1976, revised January 12, 1977, February
8, 1977, and February 14, 1977, made by LaPrade Brothers, Civil Engineers and
Surveyors, Richmond, Virginia, a copy of which said plat was recorded on
February 15, 1977 in the Clerk's Office of the Circuit Court for the County of
Henrico, Virginia in Deed Book 1714, page 684.
TOGETHER with a non-exclusive easement of ingress and egress for vehicular and
pedestrian traffic over the private road as it meanders east from Broad Street
through the "Brookfield Development" to the west line of the above described
property, said non-exclusive easement for ingress and egress for vehicular and
pedestrian traffic is outlined in red on "Map of Private Road In Brookfield From
Broad Street Road to Southern States Cooperative, Incorporated, Property in
Brookland District, Henrico County, Virginia" dated February 11, 1977, made by
LaPrade Brothers, Civil Engineers and Surveyors, Richmond, Virginia, a copy of
which plat was recorded on February 15, 1977 in the aforesaid Clerk's Office in
Deed Book 1714, page 684.
TOGETHER with a non-exclusive easement to drain surface water along a path
shaded in blue on the plat entitled "Easement For Surface Drainage Across
Richmond Equivest, Inc. Property, From North Line Southern States Cooperative,
Inc. Property To South Line of 1-64," dated February 18, 1977, made by LaPrade
Brothers, Civil Engineers and Surveyors, Richmond,
28
<PAGE>
Virginia, a copy of which plat was recorded on March 28, 1977 in the aforesaid
Clerk's Office in Deed Book 1716, page 1137.
29
<PAGE>
PART II - Description of the Ground Lease
Ground Lease, dated as of July 15, 1977, between Southern
States Cooperative, Incorporated, as lessor, and Gold Bond Stamp Company of
Georgia, a New Jersey Corporation, as lessee, covering the above-described Land,
a memorandum of which is recorded in the Clerk's office of the Circuit Court of
Henrico County, Virginia.
30
<PAGE>
PART III - Equipment and Fixtures Owned by Lessor:
1. Miscellaneous plumbing
2. Kitchen equipment
3. Exhaust fans
4. Vinyl wallcovering
5. Graphics and signage
6. Sound insulation
7. Miscellaneous built-in shelving, counters and storage
8. Drapes
9. Full height doors
10. Special lighting
11. Carpet
12. Millwork
31
<PAGE>
Part IV - Liens and Encumbrances
1. Real estate taxes and assessments not yet delinquent.
2. Reservations, restrictions and provisions contained in the Deed dated
February 15, 1977 from Richmond Equivest, Inc., a Virginia corporation, as
grantor, to Southern States Cooperative, Incorporated, a Virginia
corporation, as grantee, and recorded February 15, 1977 in the Clerk's
Office of the Circuit Court of Henrico County, Virginia, in Deed Book 1714,
page 684, as follows:
(a) The reservation of a non-exclusive sixteen (16) foot permanent
and a thirty-six (36) foot initial construction easement over, across and
under the Leased Premises for a water line at the location shown on a plat
attached to the Deed.
(b) The reservation of a non-exclusive sixteen (16) foot permanent
storm sewer easement over, across and under the Leased Premises at the
location shown on a plat attached to the Deed.
(c) A restrictive covenant by which Grantee agrees that Grantor
shall be entitled to review and approve the submission by Grantee of future
plans of development with respect to the Leased Premises and Grantee's
final plan relative to the exterior appearance of any buildings or
additions to buildings proposed for the Leased Premises and the site plan
of such improvements, the approval thereof not to be unreasonably withheld.
Grantor shall have the right to require deck parking for any substantial
expansion of Improvements after initial construction. Grantor shall not
disapprove future Plans of Development because an additional building,
an addition to an existing building,
32
<PAGE>
or deck parking is proposed on the Leased Premises. This covenant runs with
the land and shall be effective for fifteen (15) years after the date of
the Deed.
(d) A covenant by the Grantee to join in the dedication of certain
roadways off of the Leased Premises, if requested by Grantor, for a period
of fifteen (15) years after the date of the Deed.
3. Counterpart Water and Sewer Agreement dated November 22, 1976 and recorded
in the aforesaid Clerk's Office between Richmond Equivest, Inc., and County
of Henrico, Virginia whereby Richmond agrees to construct and install water
distribution system and a sewage disposal system in accordance with plans
and specifications approved by County pursuant to the terms and conditions
of Water and Sewer Agreements of August 24, 1971 in Deed Book 1480, pages
460 and 469 respectively, which this Agreement incorporates by reference
and which systems are to serve a tract of 11.8 acres being developed by
Richmond.
4. Restrictive Covenants: By instrument dated September 6, 1968, recorded in
Deed Book 1372, page 74, Virginia Shopping Center, Inc. imposed
restrictions on the insured real estate. Amended by Agreement dated October
15, 1970, recorded in Deed Book 1446, page 257.
5. Easements affecting the private road known as Brookfield Road between Broad
Street and the Leased Premises, as follows:
(a) Easement granted Virginia Electric and Power Company dated April
10, 1972, recorded in Deed Book 1513, page 32, for underground cables and
conduits, with right to clear and right of ingress and egress.
33
<PAGE>
(b) Easement granted Chesapeake and Potomac Telephone Company dated
February 2, 1976, recorded in Deed Book 1669, page 790, for underground
cables, etc., 10' wide to serve Richmond Corporation Headquarters building
and land adjacent to the south.
(c) Easement granted Board of Supervisors of Henrico County dated
November 4, 1975, recorded in Deed Book 1658, page 853, for construction,
operation and maintenance of water and sewer service lines through, over
and under property of Richmond Equivest in accordance with two plats
recorded therewith.
6. Terms, conditions and covenants contained in an agreement dated February
15, 1977, between Richmond Equivest, Inc., a Virginia corporation, as
seller, and Southern States Cooperative, Incorporated, a Virginia
corporation, as buyer, including inter alia the following:
(a) Buyer agrees to pay one-half of the cost of extending the
private road known as Brookfield Road to the Leased Premises, and to
reimburse Seller on an annual basis for one-half of the cost of maintaining
the extended portion.
(b) Seller has the non-exclusive easement to introduce storm water
from a tract of land owned by Seller, containing approximately four (4)
acres on the east line of Falmouth Street, into Buyer's storm sewer system
to the extent of the excess capacity of that system created by oversizing
of the same as requested by Seller.
7. Conditional Exclusive Option to Purchase the Leased Premises in favor of
Richmond Equivest, Inc. under agreement dated February 15, 1977.
34
<PAGE>
SCHEDULE B
----------
Terms and Basic Rent Payments
-----------------------------
I. Lease Terms
-----------
l. The Interim Term shall commence on August 1, 1977 and end at
midnight on the day which immediately precedes the Primary Term Commencement
Date, as hereafter defined, unless earlier terminated pursuant to the provisions
of this Lease.
2. The Primary Term shall commence on the Primary Term Commencement
Date and shall end at midnight on the earlier of (i) the last day of the month
in which the thirtieth (30th) anniversary of the Primary Term Commencement Date
occurs or (ii) January l, 2010, unless earlier terminated or extended pursuant
to the provisions of this Lease.
3. The first Extended Term shall commence on the day next following
the termination of the Primary Term and shall end at midnight on the date which
is the fifth (5th) anniversary thereof, unless earlier terminated pursuant to
the provisions of this Lease.
4. The second Extended Term shall commence on the day next following
the termination of the first Extended Term and shall end at midnight on the date
which is the fifth (5th) anniversary thereof, unless earlier terminated pursuant
to the provisions of this Lease.
II. Basic Rent
----------
1. Each monthly installment of Basic Rent during the Interim Term is
$1.00 and is payable in arrears on August 31, 1977 and thereafter on the last
day of the month.
2. Each monthly installment of Basic Rent during the first Lease
Year of the Primary Term is $(1), and is payable in arrears on the last day of
the month.
35
<PAGE>
3. Each monthly installment of Basic Rent after the first (1st), through
and including, the fifteenth (15th) Lease Year of the Primary Term is $(2), and
is payable in arrears on the last day of the month.
4. Each monthly installment of Basic Rent after the fifteenth (15th)
Lease Year of the Primary Term through the end of the Primary Term, and each
Extended Term, if the same are exercised by Lessee pursuant to paragraph 3 of
this Lease, is $(3), and is payable in arrears on the last day of the month.
III. Definitions
-----------
1. "Lease Year" shall mean each twelve-month period commencing on the
first day of the month preceding the Primary Term Commencement Date and each
anniversary thereof, all or any portion of which occurs during the Primary Term
or any Extended Term.
2. "Primary Term Commencement Date" shall mean the date on which the
indebtedness secured by the Mortgage is distributed.
- ----------------------------
(1) An amount calculated as follows:
(a) Multiplying the sum of (i) the original principal amount of
indebtedness secured by the Mortgage and (ii) the amount paid by Lessor pursuant
to Paragraph 4.2 (as limited by Paragraph 4.4) of the Agreement for Lease and
Development by .000129.
(b) Add to the product obtained in clause (a) above the annual Basic
Rent payable under the Ground Lease.
(c) Divide the sum obtained in clause (b) above by 12.
(2) An amount calculated as follows:
(a) Multiply the sum of (i) the original principal amount of
indebtedness secured by the Mortgage and (ii) the amount paid by Lessor pursuant
to Paragraph 4.2 (as limited by Paragraph 4.4) of the Agreement of Lease and
Development by the sum of (x) the debt constant
36
<PAGE>
of the indebtedness secured by the Mortgage (that is, 0.0928016724) multiplied
by 0.958 and (y) .0015.
(b) Add to the product obtained in clause (a) above the annual basic
Rent payable under the Ground Lease.
(c) Subtract from the sum obtained in clause (b) above an amount equal
to .1224 multiplied by the product of l.085 times one-half of the available
Investment Tax Credit.
(d) Divide the difference obtained in clause (c) by 12.
(3) An amount calculated as follows:
(a) Multiply the sum of (i) the original principal amount of
indebtedness secured by the Mortgage and (ii) the amount paid by Lessor pursuant
to Paragraph 4.2 (as limited by Paragraph 4.4) of the Agreement of Lease and
Development by the sum of (x) the debt constant of the indebtedness secured by
tie Mortgage (that is, 0.0928016724) multiplied by 0.958 and (y) .0015.
(b) Add to the product obtained in clause (a) above the annual
Basic Rent payable under the Ground Lease.
(c) Divide the sum obtained in clause (b) above by 12.
37
<PAGE>
SCHEDULE C
-----------
Purchase Prices
---------------
(1) Interim Term. Upon a purchase of the Premises pursuant to paragraph 11(b)
of this Lease during the Interim Term, the purchase price shall be the amount of
Project Costs paid by Lessor pursuant to Paragraph 4.2 of the Agreement for
Lease and Development.
(2) Primary Term. Upon a purchase of the Premises pursuant to paragraph 11(b)
of this Lease during the Primary Term, the purchase price shall be the principal
amount of indebtedness secured by the Mortgage as of the Termination Date with
accrued and unpaid interest thereon through the Termination Date.
SCHEDULE D
-----------
Released Parcels
----------------
[site plan by Cooper, Carry & Associates, Architects: omitted]
38
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this
Lease to be duly executed and delivered, and caused their corporate seals to be
hereunto affixed and attested, all as of the date first above written.
[Corporate Seal] GOLD BOND STAMP COMPANY OF GEORGIA
as Lessor
Attest: By /s/ H. W. Greenough
---------------------------------
Pres.
By /s/ C. C. Krause
-----------------------------
SOUTHERN STATES COOPERATIVE,
INCORPORATED
as Lessee
By /s/ John J. Feland
---------------------------------
Vice President
[Corporate Seal]
Attest:
By /s/ E. M. Holdaway
-----------------------------
Assistant Secretary
39
<PAGE>
STATE OF MINNESOTA )
) ss.:
COUNTY OF HENNEPIN )
I, Terry Nims, a Notary Public here and for the State and County
aforesaid, do certify that H. W. Greenough and C. C. Krause, whose names as
President and an Assistant Secretary, respectively, of GOLD BOND STAMP COMPANY
OF GEORGIA, a New Jersey Corporation, are signed to the writing above, bearing
date as of July 15, 1977, have acknowledged the same before me in my County
aforesaid.
Given unto my hand and official seal this 26 day of July, 1977.
[Notarial Seal]
/s/ Terry Nims
-----------------------------
Notary Public
My commission expires: Apr. 22, 1983
----------------------------
COMMONWEALTH OF VIRGINIA )
) ss.:
CITY OF RICHMOND )
I, Linda S. Morris, a Notary Public here and for the State and City
aforesaid, do certify that John J. Feland and E. M. Holdaway, whose names, as
Vice President and an Secretary, respectively, of SOUTHERN STATES COOPERATIVE,
INCORPORATED, a Virginia Corporation, are signed to the writing above, bearing
date as of July 15, 1977, have acknowledged the same before me in my City
aforesaid.
Given unto my hand and official seal this 29th day of July, 1977.
[Notarial Seal]
/s/ Linda S. Morris
-----------------------------
Notary Public
My commission expires: December 17, 1977
40
<PAGE>
EXHIBIT 10.10
LEASE AGREEMENT WITH PURCHASE OPTION
------------------------------------
THIS AGREEMENT, dated the 5th day of January, 1995, by and between
SCOTT PETROLEUM CORPORATION, a Mississippi corporation, with offices in Itta
Bena, Mississippi ("Lessor"), and GOLD KIST INC., a cooperative marketing
association organized pursuant to the Georgia Cooperative Marketing Act with
corporate offices in Atlanta, Georgia ("Lessee").
W I T N E S S E T H:
Lessor, for and in consideration of the terms, covenants, and
conditions herein contained, does hereby lease and demise to Lessee, and Lessee
does hereby take from Lessor, upon and subject to the terms, covenants, and
conditions herein contained, Lessor's interest in certain real property in
various counties in the State of Mississippi (more particularly described in
Exhibit A, attached hereto and incorporated herein by reference), together with
all improvements thereon ("Premises") and all equipment thereon including, but
not limited to the items specified in Exhibit B, attached hereto and
incorporated herein by reference (the "Equipment") (Premises and Equipment
referred to collectively as the "Facilities").
TO HAVE AND TO HOLD the Premises at the rental and upon the terms,
covenants and conditions herein contained and for the term set forth herein.
1. Term - The term of the lease herein made shall be for ten (10) years,
----
beginning on January 5, 1995, and ending on December 31, 2004, unless
sooner terminated as provided herein.
2. Rent - Lessee agrees to pay the Lessor as monthly rent for the leased
----
Facilities the amount of $30,081 per month during the term of this lease.
Said rent shall be payable in advance every month on or before the first
day of each month.
3. Lessor's Mortgage - The Facilities are encumbered by a first priority deed
-----------------
of trust in favor of Mark G. Loften as trustee for the benefit of The
Equitable Life Assurance Society of the United States as the same has been
modified (the "Mortgage"). If Lessor fails to make any payment due on the
Mortgage, Lessee may make such payment and any penalty on behalf of Lessor
and reduce the rentals due hereunder by the amount so paid. In addition
Lessee, after making two or more payments within any twelve-month period on
the Mortgage pursuant to this paragraph may exercise immediately the
Purchase Option specified in paragraph 24 and prepay the Mortgage according
to its terms and reduce the Purchase Price under the Purchase Option by the
amount so paid.
4. Competition - Each of the shareholders, officers and directors of Lessor
-----------
hereby agrees that they shall not engage, directly or indirectly, in the
financing, management, or operation of a fertilizer business within a
radius of one hundred
<PAGE>
twenty (120) miles from Indianola, for a period of three (3) years after
the commencement date of the Lease. Should there be a breach by any of the
shareholders, officers or directors of the covenants hereunder and should
Lessee be required to enforce the covenants herein by legal action, Lessee
shall be entitled to recover, in addition to all other remedies available
to Lessee at law or at equity, all attorneys' fees and court costs incurred
by Lessee in requiring compliance with the terms and obligations of this
paragraph. Any action for breach of this Paragraph shall be against the
breaching party only.
5. Taxes - Lessee shall pay or cause to be paid all city, county, and state
-----
property taxes, charges and assessments levied and assessed against the
Facilities and any personal property of Lessee on the Premises. If Lessee
fails to pay taxes and assessments as they become due, so that in Lessor's
judgment its property interest in the Facilities is jeopardized and Lessee
continues in such a failure after being requested by Lessor to pay the
same, Lessor shall have the right to pay such taxes and assessments, and to
add such payment amount together with interest thereon to any installment
of rent thereafter payable hereunder.
6. Services and Utilities - Lessee shall pay for all charges for the provision
----------------------
of all utilities serving the leased Premises and incurred by Lessee in
connection with its use of the Facilities, including, but not limited to,
gas, electricity, and water.
7. Quiet Possession - Lessor warrants and represents that Lessor is presently
----------------
vested with good and marketable title to the Premises and the Equipment and
covenants and agrees that Lessee, upon paying the said rental and observing
the covenants and conditions contained herein, shall have quiet possession
of the Facilities for the term of the lease.
8. Use of the Facilities - The Premises shall be used and occupied by Lessee
---------------------
as a fertilizer and crop protection chemical blending, handling, storage
and distribution facility and for other legal purposes. Lessee shall comply
with all laws, ordinances, rules and regulations concerning the Facilities
and its use thereof, and shall be obligated to comply with any law that
requires any alteration, maintenance, or restoration of the Facilities as a
result of the Lessee's particular and specific use of the Facilities.
Lessee shall not use or permit the use of the Facilities in any manner that
will tend to create waste or a nuisance.
9. Removal of Fuel Tanks at Indianola - Lessor has placed on the Indianola
----------------------------------
property tanks and related piping, diking and other fixtures for the
storage of fuel (the "Tanks"). Lessor, at its sole cost and expense has
agreed to remove the Tanks and remediate the site as may be required. All
such work shall be completed on or before March 1, 1995. So long as
remediation has begun and is being diligently pursued, Scott may extend the
time for remediation until June 1 ,1995. All remediation work shall meet
the requirements of the Mississippi Department of Environmental Quality.
Lessor hereby indemnifies and holds harmless Lessee, its
-2-
<PAGE>
successors and assigns from any and all utilities, costs, damages, and/or
expenses caused by the Tanks and/or their removal and/or the site
remediation.
10. Condition of Facilities - Except for the Tanks as discussed in Paragraph 9
-----------------------
above and except for the warranties made by Lessor in the Agreement of Sale
dated May 8, 1992, between and among the parties hereto and FarmKist
Enterprises, Lessee has examined the leased Facilities and accepts them in
their present condition without any representations on the part of Lessor
or its agents as to the present or future condition or as to the
suitability of the Facilities for Lessee's use thereof. Lessee accepts the
Facilities subject to all applicable municipal, county and state laws,
zoning ordinances and regulations governing and regulating the Facilities
and subject to all matters disclosed pursuant to the terms of this
agreement and any exhibits attached hereto.
11. Repair and Maintenance - Except for damage caused by acts of Lessor, its
----------------------
agents, employees or invitees, Lessee at its expense shall keep in good
order, condition and repair the Facilities and all structures and portions
thereof and shall make any and all necessary repairs to same within a
reasonable time after receipt of written notice from Lessor of the need for
such repairs. In the event Lessee fails to perform its obligations
hereunder, Lessor may at its option come in or upon the Premises after ten
days' prior written notice to Lessee and put the same in good order,
condition, maintenance and repair, and the costs thereof together with
interest thereon shall be due and payable immediately or as additional rent
to Lessor with Lessee's next rental installment.
12. Removal and Substitution of Equipment - If Lessee, in its sole discretion,
-------------------------------------
determines that any item(s) of Equipment have become inadequate, obsolete,
worn out, unsuitable, undesirable, inappropriate or unnecessary for its
purposes at any time, Lessee may remove such items from the Premises and
sell, trade in, or otherwise dispose of them (as a whole or in part)
without any responsibility or accountability to Lessor therefor. If Lessee
elects to substitute and install (if appropriate) other machinery,
equipment and related property or none of such machinery, equipment or
related property shall not be subject to this Agreement. The removal from
the Facilities of any portion of the Equipment pursuant to the provisions
of this Paragraph shall not entitle Lessee to any diminution in or
postponement or abatement of the rents payable hereunder nor to any
reduction in the purchase price if Lessee elects to exercise the purchase
option specified in Paragraph 24.
13. Additions and Alterations - Lessee may make all such changes, alterations,
-------------------------
additions, or improvements in or to the Premises as it may deem necessary,
suitable or desirable. Lessee shall make all such changes, alterations and
improvements in compliance with law and in a good and workmanlike manner
without impairing the structural soundness of the Premises or any
structures located thereon. Unless the Premises are sold to Lessee pursuant
to paragraph 24 of this agreement, Lessor shall, at the termination of this
agreement, have the
-3-
<PAGE>
option to require Lessee to remove any and all changes, alterations,
additions and improvements in and to the Premises and restore the Premises
to the condition as existed upon Lessee's occupancy of the Premises. Unless
Lessor requires their removal, all changes, alterations, additions, and
improvements placed upon the Premises shall become the property of Lessor
and shall remain upon and be surrendered with the Premises at the
termination of this agreement.
14. Condemnation - If the Facilities or any portion thereof are taken under the
------------
power of eminent domain, condemned for a temporary or permanent public or
quasi-public use, or sold under the threat of the exercise of said power,
Lessee may, at Lessee's option, to be exercised in writing to Lessor,
exercise the Purchase Option specified in Paragraph 24. If Lessee does not
exercise the Purchase Option, this Lease shall remain in full force and
effect as to the portion of the Facilities remaining, with no reduction in
rent or the Purchase Price. Any award for the taking of the fee for the
Premises for the purposes hereunder shall be the property of Lessee, and
Lessee shall be entitled to any award for loss of or damage to Lessee's
trade fixtures and removable personal property.
15. Damage or Destruction - In the event of damage to or destruction of the
---------------------
Premises by fire or any other casualty, whether covered by an insurance
policy required to be maintained hereunder or not, during the term of this
Lease or in the event of such a partial destruction thereof as to render
the Premises wholly untenantable or unfit for occupancy, or should the
Premises be so badly injured that the same cannot be repaired within thirty
(30) days from the happening of such injury, then and in such case, Lessee
may exercise the Purchase Option immediately. If Lessee does not exercise
the Purchase Option, this Lease shall remain in full force and effect with
no reduction in rent or in the Purchase Price. Insurance proceeds paid
because of fire, damage or destruction shall be payable as provided in
Paragraph 19. Lessee shall promptly notify Lessor in case of fire or other
damage or destruction to the Premises.
16. Liens - Lessee shall pay, when due, all claims for labor or materials
-----
furnished or alleged to have been furnished to or for Lessee at or for the
use in the Premises for construction or other purposes done by Lessee or
caused to be done by Lessee on the Premises. Lessee shall keep the Premises
free and clear of all liens resulting from construction or repair work done
by or for the Lessee or resulting from Lessee's occupancy or use of the
Premises. If Lessee shall, in good faith, contest the validity of any such
lien, claim, or demand, Lessee shall, at its sole expense, defend itself
and Lessor against the same and shall pay and satisfy any such adverse
judgment that may be rendered thereon before the enforcement thereof
against the Lessor or the Premises, upon the condition that if Lessor shall
require, Lessee shall provide to Lessor a surety bond satisfactory to
Lessor in an amount equal to such contested lien claim or demand
indemnifying Lessor against liability for the same and holding the Premises
free from the effect of such lien or claim. In addition, Lessee shall pay
Lessor's attorneys fees and costs in participating in such action.
-4-
<PAGE>
So long as Lessee is not in default hereunder, Lessor shall not cause or
permit any liens of any nature (excluding the Mortgage) be levied against
the Facilities or any portion thereof. Lessor shall satisfy or otherwise
remove with five days any lien placed on Facilities or any portion thereof
which lien arises through Lessor. If Lessor fails to keep the Facilities
free and clear of liens as specified herein, Lessee may after notice to
Lessor pay any and all such liens and reduce the rent due hereunder by the
sum of such amount paid plus Lessee's costs in satisfying such liens,
including but not limited to, actual attorneys' fees.
17. Indemnity - Lessee shall indemnify and hold Lessor harmless from and
---------
against any and all claims arising from Lessee's use and occupancy of the
Facilities, or from the conduct of Lessee's business or from any activity,
work or things done, permitted or suffered by Lessee in or about the
Premises or elsewhere, and shall further indemnify and hold Lessor harmless
from and against any and all claims arising from any breach or default in
the performance of any obligation on Lessee's part to be performed under
the terms of this Lease or arising from the negligence of the Lessee, or
any of Lessee's agents, contractors, or employees, and from and against all
costs, attorneys' fees, expenses and liabilities incurred in the defense of
any such claim or any action or proceeding brought thereon. In case any
action or proceeding shall be brought against Lessor by reason of any
claim, Lessee, upon notice from Lessor, shall defend the same at Lessee's
expense. Lessee, as a material part of the consideration to Lessor, hereby
assumes all risks of damage to property or injury to persons, in, upon, or
about the Facilities arising from any cause, and Lessee hereby waives all
claims in respect thereof against Lessor. The indemnity obligations of this
paragraph shall not apply to damages directly resulting from the negligence
or intentional acts of Lessor, its agents, servants, or employees.
18. Exemption of Lessor from Liability - Lessee hereby agrees that Lessor shall
----------------------------------
not be liable for injury to Lessee's business or any loss of income
therefrom or for damage to the goods, inventory, equipment, merchandise or
other property of Lessee, Lessee's employees, invitees, customers, or any
other person in or about the Premises, nor shall Lessor be liable for any
injury to the person of Lessee, Lessee's employees, agents or contractors,
whether such damage or injury is caused by or results from fire, steam,
electricity, gas, water or rain, or from the breakage, leakage, obstruction
or other defects of pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures, or from any other cause, whether the
said damage or injury results from conditions arising upon the Premises or
upon portions of the building on the Premises, or from other sources or
places, and regardless of whether the cause of such damage or injury or the
means of repairing the same is inaccessible to Lessee.
19. Insurance - Lessee shall obtain and keep in force a policy of standard fire
---------
and comprehensive hazard insurance covering loss of or damage to the
Premises leased. Pursuant to the terms of the Mortgage, The Equitable Life
Assurance
-5-
<PAGE>
Society of the United States shall be designated as a "loss payee" on such
policies of fire and comprehensive hazard insurance relating to the
property described on Exhibit A as the liquid fertilizer terminal
(Greenville) and the dry fertilizer terminal (Greenville), and such loss
payee clause shall continue throughout the term of this Lease, or until the
Mortgage is satisfied and cancelled, whichever occurs first. Lessor hereby
assigns to Lessee any proceeds from insurance which may be made available
to Lessor by the Grantee under the Mortgage. Lessee shall obtain and keep
in force all insurance which it deems necessary for protection against loss
of or damage to any of its property situated in or about the leased
Premises. Lessee shall, at Lessee's expense, obtain and keep in force
during the term of this Lease, a policy of general and public liability
insurance insuring Lessor and Lessee against any liability for personal
injury and property damage arising out of the use, occupation or
maintenance of the Premises and all areas appurtenant thereto by Lessee.
Such policy shall contain provisions insuring performance by Lessee of the
indemnity provisions of Paragraph 16 hereof.
20. Assignment and Subletting - Lessee may assign, transfer, mortgage, sublet,
-------------------------
or otherwise transfer or encumber all or any part of Lessee's interest in
this Lease or in the Premises leased hereunder upon written notice to
Lessor. No subletting or assignment shall release Lessee of Lessee's
obligations or alter the primary liability of Lessee to pay the rent and to
perform all other obligations of the Lessee hereunder. Lessor may not
assign, transfer, mortgage, sublet or otherwise transfer or encumber its
interest in this Lease or in the Facilities whether by operation of law or
otherwise.
21. Default -
-------
a. The occurrence of any one or more of the following events shall
constitute a default by Lessee:
1) The vacating or abandonment of the Premises by Lessee.
2) The failure by Lessee to pay rent when due, if the failure
continues for fifteen days after notice has been given to Lessee.
3) The failure of Lessee to perform any other provisions, covenants
or conditions of this Lease required of Lessee if such a failure
to perform is not cured within twenty (20) days; Lessee shall not
be in default of this Lease if Lessee commences to cure the
default within the 20-day period and thereafter diligently and in
good faith prosecutes such cure to completion. Lessor shall be in
default upon failure to perform obligations required of Lessor
hereunder within a reasonable time, but in no event later than
twenty (20) days after written notice by Lessee to Lessor
specifying the failure to perform; provided, however, that if the
default cannot reasonably be cured within twenty (20) days,
Lessor shall not be in default of this Agreement if Lessor
commences to cure the default within the
-6-
<PAGE>
twenty (20) day period and thereafter diligently and in good
faith prosecutes such cure to completion.
b. The occurrence of any one or more of the following events shall
constitute a default by Lessor:
1) Failure to make any payment on the Mortgage, if the failure
continues for fifteen (15) days.
2) Failure to keep the Facilities or any portion thereof free and
clear of all liens or encumbrances other than the Mortgage.
3) Failure to remove the fuel tanks at Indianola and/or remediate
the soil and groundwater. So long as remediation has begun and is
being diligently pursued, Scott may extend the time for
remediation until June 1, 1995. All remediation work shall meet
the requirements of the Mississippi Department of Environmental
Quality.
22. Remedies
--------
a. If Lessee is in default, Lessor may, at any time thereafter, with or
without notice of demand and without limiting Lessor in the exercise
of any right or remedy which Lessor may have by reason of such
default:
1) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease Agreement shall terminate
and Lessee shall immediately surrender possession of the Premises
to Lessor. In such event, Lessor shall be entitled to recover
from Lessee all damages incurred by Lessor by reason of Lessee's
default.
2) Maintain Lessee's right to possession in which case this Lease
shall continue in effect whether or not Lessee shall have
abandoned the Premises. In such event, Lessor shall be entitled
to enforce all of Lessor's rights and remedies under this Lease,
including the right to recover the rent as it becomes due
hereunder.
3) Perform at its own expense such obligation that Lessee fails to
perform, the cost of which together with interest thereon shall
be immediately payable or shall be due and payable as additional
rent to Lessor with Lessee's next rental installment.
4) Pursue any other remedy now or hereafter available to Lessor
under applicable laws or judicial decisions.
b. In the event of a default by Lessor, Lessee may:
-7-
<PAGE>
1) Perform at its own expense such obligation that Lessor fails to
perform and deduct the cost thereof from rent thereafter due.
2) May, at its option, immediately exercise the Purchase Option.
23. Surrender of Premises - Upon expiration of the term of this lease or after
---------------------
termination of this lease pursuant to the conditions hereunder, Lessee
shall surrender to Lessor the Premises in good condition, except for
ordinary wear and tear. Lessee shall remove all of its personal property
within the above-stated time and shall perform all restoration and repairs
made necessary by any such removal of changes, alterations, additions,
improvements, trade fixtures or personal property.
24. Option to Purchase
------------------
(a) Lessee shall have the right and option, irrevocable during the term of
this lease (the "Option"), to purchase the Facilities.
(b) The Option may be exercised by Lessee on or after December 1, 2004 by
giving written notice of its exercise to Lessor. In the event of
exercise of the Option, the sale of the Premises shall be closed
within six (6) months following termination of this lease, unless the
closing is extended by mutual consent of the parties. Lessee shall
remain in possession of the Premises during any such extension.
(c) The purchase price for the Facilities shall be determined by the
schedule attached as Exhibit C (the "Purchase Price").
(d) The Purchase Price shall be reduced by the amount of all insurance
proceeds paid during the term hereof to Equitable holder of the
Mortgage, and by the amount of any liens against Lessor satisfied by
Lessee for which a rental deduction was not made by Lessee.
(e) Lessor agrees that Lessee and its servants, agents, employees and
representatives shall have access to the Facilities during the term of
the lease to conduct and commission any surveys, engineering studies,
environmental audits, site studies, test borings, soil and sub-soil
studies, water table and supply, and other investigations Lessee may
deem necessary to conduct on the Premises. Lessee assumes all
responsibilities for its acts, or the acts of its agents, servants,
employees, contractors or representatives, in exercising its rights
hereunder, and agrees to indemnify and hold Lessor harmless from and
against any property damage, personal injury, or claim of lien against
the Premises resulting from the activities permitted hereunder.
(f) At closing, Lessor shall convey good and marketable title to the
Facilities to Lessee by warranty deed subject to easements and
restrictions of record;
-8-
<PAGE>
applicable zoning ordinances; current property taxes; and
encroachments, overlaps, and boundary line disputes and such other
matters as would be disclosed by a current survey and inspection of
the property. Marketable title as provided herein, shall be such title
as is acceptable to a title insurance company (licensed to conduct
business in the state of Mississippi) for issuance of its owner's
title policy at standard rates, subject to standard permitted
exceptions and the exceptions set forth above.
(g) In the event that there are defects in the title or matters of survey
as to the Premises, not excepted as provided herein, at Lessee's
option, Lessee shall have the right either (1) to rescind, at any time
prior to the closing date, its exercise of the Option, and to be
released from any further obligations to proceed with the final
purchase of the Premises unless Lessor, at its expense, shall have
cured such defects to the satisfaction of Lessee within a reasonable
time after having received written notice of the defects from Lessee
or (2) to cure such defects and deduct the cost thereof from the
Purchase Price.
(h) Lessor shall pay all transfer tax or documentary stamp taxes
applicable to the transaction contemplated hereunder and for the
preparation of the warranty deed to effect the transaction. Lessee
shall pay the cost of recording all documents to be recorded. Each
party shall pay its own attorneys fees. Applicable property taxes for
the year in which the closing is effected shall be prorated as of the
date of closing.
(i) Closing shall be held at a time and place mutually agreed upon by
Lessor and Lessee no later than 48 hours prior to the closing time and
no later than the end of the term of this lease.
(j) Each party warrants to the other that it has not dealt with any real
estate agent, broker or finder with respect to this transaction and
that it is not aware of any finder's fee or brokerage or real estate
commission which will result from the execution of this agreement, the
exercise of the Option, or the ultimate consummation of the purchase
contemplated hereby. Any fee generated by or occasioned as a result of
the breach of the warranty contained herein shall be borne by the
breaching party.
25. Surveys - The parties are entering into this Lease with Purchase Option
-------
without conducting surveys of the Premises. At its sole discretion and
expense, Lessee may have surveys on the Premises done. If such surveys are
prepared, the parties agree to modify the legal descriptions for the
Premises to reflect the results of the surveys. Each party shall bear its
own costs in preparing and executing such modification. No adjustment to
the rent or the Purchase Price shall be made due to such surveys.
26. Lessor's Adjacent Storage Tank Facility - Lessor owns a parcel of real
---------------------------------------
property located adjacent to a part of the real property leased hereby
known as the "Dry
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<PAGE>
Fertilizer Terminal (Greenville)", and Lessor and Lessee recognize that it
will be necessary for Lessor to construct a loading facility and install
pipelines for the use of Lessor's storage tank facility. Lessee is
evaluating the feasibility of construction of a railroad spur track on the
Dry Fertilizer Terminal at Greenville, and Lessor might wish to use such
spur track. Therefore, Lessor and Lessee agree:
(a) That, after proper study and evaluation regarding the feasibility
and location and other aspects of such improvements as Lessee shall
deem appropriate, Lessor shall be granted an easement for the
installation of an underground pipeline and a loading facility as may
be reasonably necessary for the use of Lessor's storage tank facility,
such easement to connect Lessor's storage tanks to the loading
facility and extending westwardly to Lake Ferguson; but such easements
for a pipeline and/or a loading facility shall not interfere with the
normal operation of the dry terminal of Lessee nor create a hazard or
unsafe condition by its operation in the midst of the operation of
Lessee's terminal.
(b) The cost of the installation and maintenance of any pipeline or
loading facility of Lessor shall be paid by Lessor; and
(c) To negotiate in good faith an agreement to share the benefits,
costs, and obligations of a railroad spur track which is, or may be,
located on the Dry Fertilizer Terminal in Greenville.
27. Holding Over - If Lessee remains in possession of the Premises or any part
------------
thereof after the termination of this Lease without the express written
consent of the Lessor, such occupancy shall be a tenancy from month to
month at a rental in the amount of the last monthly rental plus all other
charges payable hereunder, and upon all of the terms hereof applicable to a
month to month tenancy; provided, however, that there shall be no renewal
of this Agreement by operation of law.
28. Waiver - No waiver by either party of any provision hereof shall be deemed
------
a waiver of any other provision hereof or of any subsequent breach by the
other party of the same or any other provision. A party's consent to or
approval of any act shall not be deemed to render unnecessary the obtaining
of such party's consent to or approval of any subsequent act by the other
party. The acceptance of rent hereunder by Lessor shall not be a waiver of
any preceding breach by Lessee of any provision hereof, other than the
failure of Lessee to pay the particular rent so accepted, regardless of
Lessor's knowledge of such preceding breach at the time of the acceptance
of such rent.
29. Notice - Any notice, demand, request, consent, approval, or communication
------
that either party desires or is required to give to the other party or to
any other person shall be in writing and either served personally or sent
by pre-paid, first-class mail. Any notice, demand, request, consent,
approval or communication that
-10-
<PAGE>
either party desires or is required to give to the other party shall be
addressed to the other party at the address set forth by the signatures on
this lease. Either party may change its address by notifying the other
party of the change of address with the same formality set forth above in
this paragraph. Notice shall be deemed effective as of the time of mailing
if mailed as provided in this paragraph.
30. Severability - The unenforceability, invalidity, or illegality of any
------------
provision of this lease shall not render the other provisions
unenforceable, invalid, or illegal.
31. Successors - This lease shall be binding upon and inure to the benefit of
----------
the parties and their successors and assigns.
32. Entire Agreement: Amendments - This lease contains all agreements of the
----------------------------
parties with respect to any matter mentioned herein, supersedes all prior
communications, negotiations, and agreements of the parties, and may not be
modified or amended except by written agreement of the parties.
IN WITNESS WHEREOF, the parties have caused this agreement to be executed
by its duly authorized officers as of the day and year first above written.
SCOTT PETROLEUM CORPORATION, Lessor
102 Main Street
-----------------------------
Itta Bene, Mississippi
-----------------------------
By: /s/ Solon Scott
__________________________ --------------------------
Witness Title: President
-----------------------
GOLD KIST INC., Lessee
244 Perimeter Center Parkway, N.E.
Post Office Box 2210
Atlanta, Georgia 30301
Attention: Real Estate Department
/s/ Barbara M. Goetz By: /s/ Allen C. Merritt
- -------------------------- ----------------------------
Witness Title: Vice President
-------------------------
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<PAGE>
CORPORATE ACKNOWLEDGEMENT
STATE OF GEORGIA )
)
COUNTY OF DEKALB )
On this 5 day of January, 1995, before me, the undersigned Notary Public, duly
commissioned, qualified and acting, within and for the said County and State,
appeared in the person the within named Allen C. Merritt to me personally known,
----------------
who stated that he was the Vice President of GOLD KIST INC., a corporation, and
--------------
was duly authorized to execute the foregoing instrument for and in the name and
behalf of said corporation, and further stated and acknowledged that he had so
signed, executed and delivered said instrument for the consideration, uses and
purposes therein mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal, this
the 5 day of January, 1995.
/s/ Carolyn J. Rice
------------------------
NOTARY PUBLIC
My commission expires: [date unclear]
-12-
<PAGE>
STATE OF MISSISSIPPI
COUNTY OF LEFLORE
THIS DAY PERSONALLY APPEARED before me, the undersigned authority in
and for the above named County and State, within my jurisdiction, the within
named SOLON SCOTT, who acknowledged that he is the President, of Scott Petroleum
Corporation, a Mississippi corporation, and that for and on behalf of said
corporation, and as its act and deed, he executed the above and foregoing
instrument on the day and year and for the purposes therein stated, after first
having been duly authorized by said corporation so to do.
GIVEN under my hand and official seal on this, the 5th day of January,
1995.
/s/ Becky W. Diamond
------------------------
NOTARY PUBLIC
My Commission Expires: Nov. 23, 1997
EXHIBIT A
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<PAGE>
PROPERTY DESCRIPTION
-14-
<PAGE>
EXHIBIT "A" TO LEASE FROM
SCOTT PETROLEUM CORPORATION ("LESSOR")
TO GOLD KIST, INC. ("LESSEE")
LESSOR'S UNDIVIDED 1/2 INTEREST IN THE FOLLOWING PROPERTY:
TRACT A
DRY FERTILIZER TERMINAL (GREENVILLE)
PARCEL 1:
Commencing at a concrete monument marking the Southeast corner of
Section 15, Township 18 North, Range 9 West, Washington County,
Mississippi; thence, along the South line of said Section 15, South
89(degrees)16' West 2,355.69 feet; thence North 28(degrees)25' West
3,039.59 feet; thence South 61(degrees)35' West 49.55 feet; thence
South 29(degrees)26'30" East 61.93 feet to the West right-of-way of a
public road, said point being on a circular curve having a radius of
5,661.58 feet and having a chord bearing of South 47(degrees)52'52"
West from said point to the Point of Tangency of said curve, thence
along said curve to the right a distance of 390.70 feet to said Point
of Tangency, thence South 49(degrees)51'06" West 673.44 feet to the
Point of Beginning of the tract herein described; thence continue
South 49(degrees)51'06" West 419.17 feet; thence North
73(degrees)32'05" West 569.34 feet; thence North 16(degrees)27'55"
East 350.00 feet; thence South 73(degrees)32'05" East 800.00 feet to
the Point of Beginning, and containing 5.501 acres, more or less, and
being located in Section 13, Township 18 North, Range 9 West,
Washington County, Mississippi.
TOGETHER WITH THE FOLLOWING EASEMENTS:
{1} An easement for the construction and maintenance of a pipeline as
set forth in Easement Agreement recorded in Book 1660 at Page 263 of
the Land Deed Records of Washington County, Mississippi, said Easement
Agreement providing that upon completion of construction of a
pipeline, said easement shall revert to a width of 10 feet, measuring
5 feet on either side of the centerline of said pipeline, said
easement being more particularly described as follows, to-wit:
[A] An easement 25 feet in width, the centerline of which is described
as follows:
Commence at a concrete monument marking the Southeast corner of
Section 15, Township 18 North, Range 9 West, Washington County,
Mississippi; thence, along the South line of said Section 15, South
89(degrees)16' West 2,355.69 feet; thence North 28(degrees)25' West
3,039.59 feet; thence South 61(degrees)35' West 49.55 feet; thence
South 29(degrees)26'30" East 61.93 feet to the West right-of-way of a
public road, said point being on a circular curve having a radius of
5,661.58 feet and having a
<PAGE>
chord bearing of South 47(degrees)52'52" West from said point to the
Point of Tangency of said curve, thence along said curve to the right a
distance of 390.70 feet to said Point of Tangency, thence South
49(degrees)51'06" West 673.44 feet; thence continue South
49(degrees)51'06" West 419.17 feet; thence North 73(degrees)32'05" West
641.80 feet to the Point of Beginning of said easement centerline;
thence South 22(degrees)14'48" West 759.4 feet to a point on the South
edge of the Greenville Port Terminal docking facility, and the terminus
of said easement centerline.
[B] An easement 20 feet in width, the centerline of which is described
as follows:
Commence at a concrete monument marking the Southeast corner of Section
15, Township 18 North, Range 9 West, Washington County, Mississippi;
thence, along the South line of said Section 15, South 89(degrees)16'
West 2,355.69 feet; thence North 28(degrees)25' West 3,039.59 feet;
thence South 61(degrees)35' West 49.55 feet; thence South
29(degrees)26'30" East 61.93 feet to the West right-of-way of a public
road, said point being on a circular curve having a radius of 5,661.58
feet and having a chord bearing of South 47(degrees)52'52" West from
said point to the Point of Tangency of said curve, thence along said
curve to the right a distance of 390.70 feet to said Point of Tangency,
thence South 49(degrees)51'06" West 673.44 feet; thence continue South
49(degrees)51'06" West 419.17 feet; thence North 73(degrees)32'05" West
569.34 feet; thence North 16(degrees)27'55" East 10.00 feet to the
Point of Beginning of said easement centerline; thence North
73(degrees)32'05" West 71.45 feet; thence South 22(degrees)14'48" West
10.05 feet to the terminus of said easement centerline.
{2} An easement for the construction and maintenance of underground
pilings for the foundation of facilities, as said easement is set forth
in instrument executed by the Board of Supervisors of Washington
County, Mississippi and Greenville Port Commission as grantors and
Scott Petroleum Corporation as grantee, which is recorded in Book 660
at Page 258 of the Land Deed Records of Washington County, Mississippi,
said easement being over and across the following described strip of
land, to-wit:
A strip of land 15 feet wide, adjacent to and parallel with the
Northernmost boundary of the tract containing 5.501 acres, more or
less, located in Section 13, Township 18 North, Range 9 West,
Washington County, Mississippi, described hereinabove.
PARCEL 2:
Commencing at the point of beginning of the property described as
"Tract 1" in Warranty Deed dated May 27, 1988, executed by the
Greenville Port Commission in favor of Scott Petroleum Corporation,
which is recorded in Book 1647, at Page 19, of the Land Deed Records of
Washington County, Mississippi, said property being hereinafter
described in this Deed and the legal descriptions of property and
easements contained herein, as "Tract 1"; thence North 73 degrees 32
minutes 05 seconds West 800.00 feet to the Point of Beginning of the
tract
-2-
<PAGE>
herein described; thence South 16 degrees 27 minutes 55 seconds West
350.00 feet; thence North 73 degrees 32 minutes 05 seconds West 723.91
feet to the top bank of the berm of Lake Ferguson; thence, continue
North 73 degrees 32 minutes 05 seconds West to the thalweg of said Lake
Ferguson; thence northeasterly along said thalweg approximately 450
feet; thence South 73 degrees 32 minutes 05 seconds East to the top
bank of said berm; thence, continue South 73 degrees 32 minutes 05
seconds East 433.49 feet to the Point of Beginning, containing 4.650
acres, more or less, between the top bank of said berm and the west
line of Tract 1, together with the riparian rights adjacent thereto,
and being located in Section 13, Township 18 North, Range 9 West,
Washington County, Mississippi;
LESS AND EXCEPT from the two (2) parcels described above, the following
tract or parcel of land conveyed to Scott Petroleum Corporation by deed
of even date herewith executed by FarmKist Enterprises more
particularly described as follows, to-wit:
PARCEL (A) - AMMONIA TANK FARM SITE:
Commencing at a concrete monument marking the Southeast Corner of
Section 15, Township 18 North, Range 9 West, Washington County,
Mississippi; thence, along the South line of said Section 15, South 89
degrees 16 minutes West 2355.69 feet; thence North 28 degrees 25
minutes West 3039.59 feet; thence South 61 degrees 35 minutes West
49.55 feet; thence South 29 degrees 26 minutes 30 seconds East 61.93
feet to the West right-of-way of a public road, said point being on a
circular curve having a radius of 5661.58 feet and having a chord
bearing of South 47 degrees 52 minutes 52 seconds West from said point
to the Point of Tangency of said curve; thence along said curve to the
right a distance of 390.70 feet to said Point of Tangency; thence South
49 degrees 51 minutes 06 seconds West 1092.61 feet to the Southeast
corner of the property described as "Tract 1" in Warranty deed dated
May 27, 1988, executed by the Greenville Port Commission in favor of
Scott Petroleum Corporation, which s recorded in Book 1647, at Page 19,
of the Land Deed Records of Washington County, Mississippi, said
property being also described as the "Dry Fertilizer Terminal
(Greenville)" in that certain Deed executed by Scott Petroleum
Corporation in favor of FarmKist Enterprises dated May 8, 1992, and
recorded in Book 1764, at Page 89 of said Land Deed Records, said
property being hereinafter described in this Deed and the legal
descriptions of property and easements contained herein, as "Tract 1";
thence North 73 degrees 32 minutes 05 seconds West 23.64 feet to the
Point of Beginning of the tract herein described; thence continue North
73 degrees 32 minutes 05 seconds West 169.11 feet; thence North 16
degrees 36 minutes 32 seconds East 146.98 feet; thence South 73 degrees
09 minutes 40 seconds East 168.58 feet; thence south 16 degrees 24
minutes 05 seconds West 145.88 feet to the Point of Beginning,
containing 0.57 acres, more or less, and being located in Section 13,
Township 18 North, Range 9 West, Washington County, Mississippi.
-3-
<PAGE>
The property conveyed herein is SUBJECT TO easements granted to Scott Petroleum
Corporation by deed of even date herewith executed by FarmKist Enterprises, said
easements being particularly described in said deed as follows:
(A) A perpetual right-of-way and easement twenty (20) feet in width to
install, lay, maintain, operate, repair, replace, alter, renew and
remove underground pipelines and electrical lines, cables, wires and
connections, and all necessary fixtures, equipment and appurtenances
thereto, over, through and across the following described parcel of
property, to-wit:
Commencing at the Southeast Corner of "Tract l", previously described;
thence North 73 degrees 32 minutes 05 seconds West 192.75 feet; thence
North 16 degrees 27 minutes 55 seconds East 10.0 feet to the Point of
Beginning of the centerline of a 20.0 foot wide easement; thence North
73 degrees 32 minutes 05 seconds West 458.02 feet; thence South 22
degrees 14 minutes 48 seconds West 10.05 feet to the terminus of the
present easement described.
(B) The right and easement to install, lay, maintain, operate, repair,
replace, alter, renew and remove underground pipelines on an existing
easement owned by Grantor, which existing easement is described as
follows:
An easement for the construction and maintenance of a pipeline as set
forth in Easement Agreement recorded in Book 1660 at Page 263 of the
Land Deed Records of Washington County, Mississippi, said Easement
Agreement providing that upon completion of construction of a pipeline,
said easement shall revert to a width of 10 feet, measuring 5 feet on
either side of the centerline of said pipeline, said easement being
more particularly described as follows, to-wit:
An easement 25 feet in width, the centerline of which is described as
follows:
Commence at a concrete monument marking the Southeast corner of Section
15, Township 18 North, Range 9 West, Washington County, Mississippi;
thence, along the South line of said Section 15, South 89(degrees)16'
West 2,355.69 feet; thence North 28(degrees)25' West 3,039.59 feet;
thence South 61(degrees)35' West 49.55 feet; thence South
29(degrees)26'30" East 61.93 feet to the West right-of-way of a public
road, said point being on a circular curve having a radius of 5,661.58
feet and having a chord bearing of South 47(degrees)52'52" West from
said point to the Point of Tangency of said curve, thence along said
curve to the right a distance of 390.70 feet to said Point of Tangency,
thence South 49(degrees)51'06" West 673.44 feet; thence continue South
49(degrees)5l'06" West 419.17 feet; thence North 73(degrees)32'05" West
641.80 feet to the Point of Beginning of said easement centerline;
thence South 22(degrees)14'48" West 759.4 feet to a point on the South
edge of the Greenville Port Terminal docking facility, and the terminus
of said easement centerline.
Provided, however, that the use of said easement shall be subject to
the terms and conditions set forth in the Easement Agreement recorded
in Book 1660, at Page
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<PAGE>
263 referred to above, and the installation and maintenance of any
pipelines installed by Grantee shall be performed in such a manner that
the same shall not interfere with any existing pipelines or facilities
owned by Grantor.
(C) A non-exclusive easement for the use of all existing storm sewers and
drainage easements now serving the property as described above as Tract
1, provided, however, that Grantee shall be responsible for paying any
special charges, fees or assessments which might be imposed by any
proper governing body or agency because of Grantee's use of such storm
sewers and drainage easements.
(D) A perpetual right-of-way and non-exclusive easement of ingress and
egress on, over and across the driveways and parking areas, as now
located or as the same may be hereafter located, on land owned by
Grantor adjacent to the above described property, for the purpose of
providing the Grantee herein, its successors and assigns, ingress and
egress from a public road to the above described property, and from
said property to the public road, so that trucks and vehicles of
Grantee, its customers, suppliers, employees and affiliates may have
ingress and egress to and from the above described property, except
that this easement shall not be used by retail customers of Grantee,
said ingress and egress easement being located on Grantor's property
which is more particularly described as follows, to-wit:
PARCEL 1:
Commencing at a concrete monument marking the Southeast corner of
Section 15, Township 18 North, Range 9 West, Washington County,
Mississippi; thence, along the South line of said Section 15, South
89(degrees)16' West 2,355.69 feet; thence North 28(degrees)25' West
3,039.59 feet; thence South 6l(degrees)35' West 49.55 feet; thence
South 29(degrees)26'30" East 61.93 feet to the West right-of-way of a
public road, said point being on a circular curve having a radius of
5,661.58 feet and having a chord bearing of South 47(degrees)52'52"
West from said point to the Point of Tangency of said curve, thence
along said curve to the right a distance of 390.70 feet to said Point
of Tangency, thence South 49(degrees)5l'06" West 673.44 feet to the
Point of Beginning of the tract herein described; thence continue South
49(degrees)5l'06" West 419.17 feet; thence North 73(degrees)32'05" West
569.34 feet; thence North 16(degrees)27'55" East 350.00 feet; thence
South 73(degrees)32'05" East 800.00 feet to the Point of Beginning, and
containing 5.501 acres, more or less, and being located in Section 13,
Township 18 North, Range 9 West, Washington County, Mississippi.
-5-
<PAGE>
PARCEL 2:
Commencing at the point of beginning Tract 1, previously described;
thence North 73 degrees 32 minutes 05 seconds West 800.00 feet to the
Point of Beginning of the tract herein described; thence South 16
degrees 27 minutes 55 seconds West 350.00 feet; thence North 73 degrees
32 minutes 05 seconds West 723.91 feet to the top bank of the berm of
Lake Ferguson; thence, continue North 73 degrees 32 minutes 05 seconds
West to the thalweg of said Lake Ferguson; thence northeasterly along
said thalweg approximately 450 feet; thence South 73 degrees 32 minutes
05 seconds East to the top bank of said berm; thence, continue South 73
degrees 32 minutes 05 seconds East 433.49 feet to the Point of
Beginning, containing 4.650 acres, more or less, between the top bank
of said berm and the west line of Tract 1, together with the riparian
rights adjacent thereto, and being located in Section 13, Township 18
North, Range 9 West, Washington County, Mississippi
Provided, however, that said easement of ingress and egress shall be
used in common with Grantor, and Grantor and Grantee acknowledge and
agree that neither shall unreasonably block the easement areas with
trucks or other vehicles, or restrict the flow of traffic over and
across any part of the common use easements in such a manner that will
unreasonably interfere with the use and enjoyment thereof by either
party. Grantor shall have the right to relocate the driveways and
parking areas as it may deem necessary, provided however, that such
relocation shall not unreasonably interfere with the right of ingress
and egress herein granted to Grantee.
All of said property and easements described above being located in Section 13,
Township 18 North, Range 9 West, Washington County, Mississippi.
TRACT B - LIQUID FERTILIZER TERMINAL (GREENVILLE)
Commencing at the Northwest Corner of the Cemetery Block of Third
Addition to the City of Greenville, Washington County, Mississippi at
the Southeast corner of the intersection of Poplar and Union rights-of-
way according to a plat on file in Book K-2 at Page 1 of the Records of
said County and State; thence North 34(degrees)30' East, along the East
right-of-way of Poplar Street, 416.1 feet; thence North 55(degrees)30'
West 66.5 feet to a concrete monument; thence North 34(degrees)30' East
80.0 feet to the Point of Beginning of the tract herein described;
thence North 55(degrees)30' West 220.0 feet; thence South
34(degrees)30' West 80.0 feet to the North right-of-way of Hunt Street;
thence, along said right-of-way, North 55(degrees)30' West 130.0 feet;
thence North 34(degrees)30' East 600.0 feet to the South right-of-way
of Belle Aire Street; thence, along said right-of-way, South
55(degrees)30' East 130.0 feet; thence South 34(degrees)30' West 183.0
feet; thence South 55(degrees)30' East 220.0 feet to the West right-of-
way of Poplar Street; thence, along said right-of-way, South
34(degrees)30' West 337.0 feet to the Point of Beginning, containing
3.492 acres, more or less, and also being all of Lots 12,
-6-
<PAGE>
15, 18 and 21, the East Half of Lots 16 and 17, the North 120 feet of
Lots 13 and 14, the South 17 feet of Lots 19 and 20, all in Block 12 of
the Belle Aire Addition and Lewys Lane from Belle Aire to Hunt Street,
as recorded on a map in Book 13 at Page 10 of the Records of said
County and State.
TRACT C - LIQUID FERTILIZER TERMINAL (BELZONI)
[A] A 0.17 acre parcel of land located in the Northeast Quarter of
Section 10, Township 15 North, Range 3 West, Humphreys County,
Mississippi, more particularly described as follows, to-wit:
Beginning at an iron pipe at the Northeast corner of Lot 6 of Fleming
Subdivision as shown in Plat Book 2, at Page 39 of the Land Records of
Humphreys County, Mississippi; run thence South 58(degrees)30' East
55.6 feet along the Easterly projected North line of said Lot 6 to an
iron post on the top edge of the Yazoo River bank; thence continue
South 58(degrees)30' East or 25 feet to the low-water line of said
river; thence Southerly along said low-water line of river to the
intersection of the Easterly projection of the South line of said Lot
6; thence North 58(degrees)30' West or 25 feet along said line to an
iron post on the top edge of the river bank; thence continue North
58(degrees)30' West 42.1 feet to an iron pipe at the Southeast corner
of said Lot 6; thence North 20(degrees)38' East 127.28 feet along the
East line of Lot 6 to the Point of Beginning, containing 0.17 acre,
more or less.
[B] A parcel of land containing 0.167 acres located in Sections 3 and
10, Township 15 North, Range 3 West, Humphreys County, Mississippi, and
being part of the former Illinois Central Gulf Railroad right-of-way,
more particularly described as follows, to-wit:
Beginning at an iron pipe at the Northwest corner of Lot 6 of Fleming
Subdivision as shown in Plat Book 2, at Page 39 of the Land Records of
Humphreys County, Mississippi; run thence South 31(degrees)30' West
72.95 feet along the West line of said Lot 6 to an iron pipe; thence
North 58(degrees)30' West 100.0 feet to an iron pin on the East right
of way line of Old U. S. Highway #49 West; thence North 31(degrees)30'
East 72.95 feet along said East right of way line of Highway #49 to an
iron pipe; thence South 58(degrees)30' East 100.0 feet to the Point of
Beginning.
Being a part of former Illinois Central Gulf Railroad property which
was conveyed to Mrs. Eloise Ware Mills, et al, by deed recorded in Book
111, Page 320 of the Land Deed Records of Humphreys County,
Mississippi.
[C] Lot Six (6) of Fleming Subdivision in Humphreys County,
Mississippi, as per map or plat thereof on file in the office of the
Chancery Clerk of said County and State, in Plat Book 2, Page 39; and
being the same property conveyed to the Board of Supervisors of
Humphreys County, Mississippi, by deed dated January 9, 1981, and
recorded in Book 103, Page 319, and being also the same property
-7-
<PAGE>
conveyed by the Board of Supervisors of Humphreys County, Mississippi,
to the undersigned grantors by deed dated July 9, 1986, and recorded in
Book 118, Page 67 of the Land Deed Records of Humphreys County,
Mississippi.
TRACT D - LIQUID FERTILIZER TERMINAL (YAZOO COUNTY)
Beginning at an iron pin at the intersection of the North right-of-way
line of Mississippi Highway No. 49W and the East right-of-way line of
the U. S. Corps of Engineers East Levee of Yazoo River, said point
being 2900 feet South and 540 feet West of the Northeast corner of
Section 30, Township 12 North, Range 2 West; run thence North
21(degrees)18'48" East 364.87 feet along said right-of-way line of
levee to an iron pin; thence South 68(degrees)41'12" East 60.0 feet
along said right-of-way line of levee to an iron pin; thence South
49(degrees)00' East 61.4 feet along the South right-of-way line of a
public gravel road to an iron pin; thence South 2l(degrees)l8'48" West
367.46 feet to an iron pin on the North right-of-way line of U. S.
Highway No. 49; thence North 57(degrees)30' West 120.0 feet along said
right-of-way line to the Point of Beginning, containing 1.0 acre in the
East Half of East Half of Section 30, Township 12 North, Range 2 West,
Yazoo County, Mississippi.
Together with an easement for the purpose of the construction,
maintenance, repair and replacement of a pipeline on, over and across
the following described property, to-wit:
A strip of land 10 feet in width lying adjacent to and North of a line
described as follows: Commencing at an iron pin at the intersection of
the North right-of-way line of Mississippi Highway No. 49W and the East
right-of-way line of the U. S. Corps of Engineers, East levee of Yazoo
River, said point being 2900 feet South and 540 feet West of the
Northeast corner of Section 30, Township 12 North, Range 2 West; run
thence South 57(degrees)30' East 120.0 feet along the North right-of-
way line of U. S. Highway No. 49W to an iron pin at the Southeast
corner of a 1.0 acre lot and the Point of Beginning for the line herein
described; run thence South 57(degrees)30' East 832.0 feet along said
right-of-way line to the end of Wise Brothers property and the end of
line and easement herein described, being located in Sections 29 and
30, Township 12 North, Range 2 West, Yazoo County, Mississippi.
TRACT E - FERTILIZER BRANCH (INDIANOLA)
Commence at the point where the West line of Section 28, Township 19
North, Range 4 West, Sunflower County, Mississippi, intersects the
centerline of an East-West county road that runs along the One-Quarter
Section Line; thence run East along the centerline and centerline
extended of said county road 1,036.5 feet to the East right-of-way of
U. S. Highway 49; thence South 47(degrees)07' West following said East
right-of-way 433.60 feet to the Point of Beginning of the
-8-
<PAGE>
herein described parcel of land; thence continue South 47(degrees)07'
West along said right-of-way 261.0 feet; thence South 42(degrees)53'
East 500.0 feet; thence North 47(degrees)07' East 285.16 feet to the
centerline of a ditch; thence North 45(degrees)39' West following said
ditch 500.58 feet to the Point of Beginning, containing 3.16 acres,
more or less, and being situate in the Northwest Quarter of Southwest
Quarter of Section 28, Township 19 North, Range 4 West, Sunflower
County, Mississippi, subject to any existing easements thereon.
SUBJECT to that certain easement for drainage and road right-of-way
more particularly described in Warranty Deed dated October 2, 1980, and
recorded in Book J-23, Page 561.
TRACT F - VACANT LOT (WINONA)
A part of Residence Lot No. 90, East of the Illinois Central Railroad,
according to the map of the Town of Winona, Mississippi, made by J. W.
Mercer in 1894, as the same is recorded in the office of the Chancery
Clerk of Montgomery County, Mississippi, at Winona, Mississippi, and
particularly described as beginning at a point in the East boundary
line of Cameron Street 200 feet South of the intersection of the East
line of Cameron Street with the South boundary line of Kent Alley;
thence North 83(degrees)10' East 100 feet; thence North 200 feet;
thence Easterly along the South boundary line of Kent Alley 37 feet to
the West boundary line of the right-of-way line of the C & G Railroad;
thence Southeasterly along said railway right-of-way a distance of 397
feet; thence West 400 feet to the East boundary line of Cameron Street;
thence North along the East boundary line of Cameron Street a distance
of 81 feet to the Point of Beginning; subject to existing easement in
favor of C & G Railway for spur track.
TRACT G - BUNGE PARCEL (TCHULA):
A 0.74 acre tract of land located in the West One-half of the Southwest
Quarter (W1/2SW1/4) of Section 8, Township 15 North, Range l East,
Holmes County, Mississippi, and being more particularly described as
follows:
From the Southwest corner of Section 8, Township 15 North, Range l
East, Holmes County, Mississippi, proceed North along the west line of
said Section 8 for a distance of 1,000.60 feet to a point lying on the
centerline of the northerly rail of the northerly spur track of the
Illinois Central Gulf Railroad, as it exists of this date; Thence
proceed N 42(degrees) 57' 00" E along said northerly rail of the
northerly spur track for a distance of 200.20 feet to a point; Thence
proceed N 47(degrees) 03' 00" W for a distance of 10.00 feet to the
Point of Beginning of this description; From said Point of Beginning
proceed N 46(degrees) 54' 46" W along the southwest property line of
the Bunge Corporation property as described in Deed Book 155, at Page
649, for a distance of l50.00 feet to an iron pipe; Thence proceed N
42(degrees) 57' 00" E for a distance of 216.00 feet to an iron pipe;
Thence proceed S 46(degrees) 54' 46" E for a distance of 150.00 feet to
a point on the northern boundary line of the Illinois Central Gulf
Railroad and the southeastern boundary
-9-
<PAGE>
of the Bunge Corporation property; Thence proceed S 42(degree) 57' 00"
W along said northern boundary line of the Illinois Central Gulf
Railroad and the southeastern boundary of the Bunge Corporation
property for a distance of 216.00 feet to the Point of Beginning.
Together with a non-exclusive easement of ingress and egress running
from the parcel of property described above northwardly to the Southern
boundary of U.S. Hwy. 49E, said easement being 30' in width and being
located in the East One-half of the Southeast Quarter (E1/2 SE1/4) of
Section 7, Township 15 North, Range 1 East, and the West One-Half of
the Southwest Quarter (W1/2 SW1/4) of Section 8, Township 15 North,
Range 1, East, Holmes County, Mississippi, and being more particularly
described as follows:
Begin at the Southwest Corner of the above described property and
proceed N 46(degrees) 54' 46" W along the southwest property line of
the Bunge Corporation for a distance of 192.48 feet to a point; Thence
proceed N 27(degrees) 21' 06" W for a distance of 524.21 feet to a
point on the south right-of-way line of U.S. Highway 49E; Thence
proceed N 49(degrees) 57' 25" E along said south right-of-way line of
U.S. Highway 49E for a distance of 30.75 feet to a point; Thence
proceed S 27(degrees) 21' 06" E for a distance of 525.80 feet to a
point; Thence proceed S 46(degrees) 54' 46" E for a distance of 187.24
feet to a point on the northwest line of the above described property;
Thence proceed S 42(degrees) 57' 00" W along said northwest line of the
above described property for a distance of 30.00 feet to the Point of
Beginning.
Attached hereto as Exhibit "A" is a copy of Surveyor's Plat prepared by
Donald M. Byrd, PE, dated May 5, 1994, which depicts the property and
easement hereby conveyed.
TRACT H - INDUSTRIAL PARK LOT (GREENWOOD)
Lot 1 in Block 3 of the Greenwood-Leflore Industrial Park as same
appears on plat thereof recorded in Map Book 6 at page 6 and 7 of the
Records of Maps of Leflore County, Mississippi.
LESS AND EXCEPT THE FOLLOWING PARCEL:
That certain tract or parcel of land in Lot 1 of Block 3 of the
Greenwood Leflore Industrial Park as same appears on plat thereof
recorded in Map Book 6 at Page 6 and 7 of the Records of Maps of
Leflore County, Mississippi, more particularly described by metes and
bounds as follows, to-wit:
Beginning at an iron pin on the Northwest corner of Lot 1 in Block 3 of
the Greenwood-Leflore Industrial Park and the right-of-way line of
Eastman Street; thence run South 30 degrees 15 minutes 50 seconds East
for 50.07 feet to a point, thence run along a curve with a 100 feet
radius for 104.13 feet to a point on the right-of-way line of Sycamore
Street, thence run Easterly along the right-of-way line of Sycamore
Street for 114.68 feet to a point, thence run Northwesterly along
-10-
<PAGE>
a curve with a 300 foot radius for 247.26 feet to a point on the North
boundary line of Lot 1, thence run South 59 degrees 44 minutes 10
seconds West along the boundary of Lot 1 for 7.04 feet to the Point of
Beginning, containing 0.09 acres, more or less.
TRACT K - TANK SITE (VAIDEN)
Part of the SE1/4 of Section 23, T 17 N, R 5 E, Second Judicial
District, Carroll County, Mississippi described as follows: Beginning
at the NE corner of the SE1/4 of said Section 23 and measure thence
West 1408.0 feet to a stake on the East right-of-way of State Highway
#51; thence measure along said East right-of-way S 20(degrees)00' E
602.0 feet and N 20(degrees)00' W 92.10 feet; thence measure N
66(degrees)30' E 64.30 feet to the Point of Beginning of the parcel of
land herein described and from this POINT OF BEGINNING run thence N
66(degrees)30' E 152.55 feet; thence N 19(degrees)30' W 107.70 feet;
thence S 71(degrees)00' W 42.0 feet; thence S l8(degrees)10' E 35.75
feet; thence S 46(degrees)22' W 123.65 feet; thence S 25(degrees)40' E
32.60 feet to the Point of Beginning and containing 0.25 acres, more or
less.
Together with the following described Easements for ingress and egress:
A non-exclusive easement of ingress and egress on, over, across and
through land owned by Grantor, adjacent to the above described
property, for the purpose of providing the Grantee herein, its
successors and assigns, ingress and egress from a public road to the
above described property, and from said property to the public road, so
that trucks and vehicles of Grantee, its customers, suppliers,
employees and affiliates may have ingress and egress to and from the
above-described property, said easements being located on the Grantor's
property which is more particularly described as follows, to- wit:
Beginning at a point at the SW corner of the above described property
and from this POINT OF BEGINNING run thence N 66(degrees)30' E 60.0
feet; thence S 20(degrees)00' E 40.0 feet; thence S 66(degrees)30' W
124.30 feet to a point on the Eastern right-of-way of State Highway
#51; thence N 20(degrees)00' W along said Eastern right of way 40.00
feet; thence N 66(degrees)30'E 64.30 feet to the Point of Beginning.
AND ALSO: Beginning at a point at the SW corner of the above described
property and from this POINT OF BEGINNING run thence N 25(degrees)40' W
32.60 feet; thence N 20(degrees)00' W 87.30 feet; thence N
71(degrees)00' E 23.18 feet; thence S 20(degrees) 00' E 76.75 feet;
thence N 46(degrees)22' E 48.58 feet; thence N 20(degrees) 00' W 58.58
feet; thence N 71(degrees)00' E 93.33 feet; thence N 19(degrees)30' W
20.0 feet; thence S 71(degrees)00' W 217.59 feet to a point on the
Eastern right-of-way of State Highway #51; thence S 20(degrees)00' E
40.0 feet; thence N 71(degrees)00' E 24.26 feet; thence S
20(degrees)00' E 122.82 feet; thence N 66(degrees)30' E 40.0 feet to
the Point of Beginning.
-11-
<PAGE>
EXHIBIT B
---------
[Schedule of Farmkist Fixed Assets @ 12/31/94: omitted]
<PAGE>
EXHIBIT C
---------
<TABLE>
<CAPTION>
Buyout Residual
Date Payment Value Reduction Payment#
- --------- --------- ------------ --------- --------
<S> <C> <C> <C> <C>
2,596,289.25
01/05/95 30,081.00 2,583,516.85 12,772.40 1
02/05/95 30,081.00 2,570,659.30 12,857.55 2
03/05/95 30,081.00 2,557,716.03 12,943.27 3
04/05/95 30,081.00 2,544,686.47 13,029.56 4
05/05/95 30,081.00 2,531,570.05 13,116.42 5
06/05/95 30,081.00 2,518,366.19 13,203.86 6
----------- ----------
180,485.98 77,923.06
07/05/95 30,081.00 2,505,074.30 13,291.89 7
08/05/95 30,081.00 2,491,693.80 13,380.50 8
09/05/95 30,081.00 2,478,224.09 13,469.71 9
10/05/95 30,081.00 2,464,664.59 13,559.50 10
11/05/95 30,081.00 2,451,014.69 13,649.90 11
12/05/95 30,081.00 2,437,273.79 13,740.90 12
01/05/96 30,081.00. 2,423,441.28 13,832.51 13
02/05/96 30,081.00 2,409,516.56 13,924.72 14
03/05/96 30,081.00 2,395,499.01 14,017.55 15
04/05/96 30,081.00 2,381,388.00 14,111.00 16
05/05/96 30,081.00 2,367,182.93 14,205.08 17
06/05/96 30,081.00 2,352,883.15 14,299.78 18
---------- ----------
360,971.97 165,483.04
07/05/96 30,081.00 2,338,488.04 14,395.11 19
08/05/96 30,081.00 2,323,996.96 14,491.08 20
09/05/96 30,081.00 2,309,409.28 14,587.68 21
10/05/96 30,081.00 2,294,724.34 14,684.94 22
11/05/96 30,081.00 2,279,941.51 14,782.83 23
12/05/96 30,081.00 2,265,060.12 14,881.39 24
01/05/97 30,081.00 2,250,079.53 14,980.60 25
02/05/97 30,081.00 2,234,999.06 15,080.47 26
03/05/97 30,081.00 2,219,818.06 15,181.00 27
04/05/97 30,081.00 2,204,535.85 15,282.21 28
05/05/97 30,081.00 2,189,151.75 15,384.09 29
06/05/97 30,081.00 2,173,665.10 15,486.65 30
---------- ----------
360,971.97 179,218.05
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
07/05/97 30,081.00 2,158,075.21 15,589.90 31
08/05/97 30,081.00 2,142,381.38 15,693.83 32
09/05/97 30,081.00 2,126,582.92 15,798.45 33
10/05/97 30,081.00 2,110,679.14 15,903.78 34
11/05/97 30,081.00 2,094,669.34 16,009.80 35
12/05/97 30,081.00 2,078,552.81 16,116.53 36
01/05/98 30,081.00 2,062,328.83 16,223.98 37
02/05/98 30,081.00 2,045,996.69 16,332.14 38
03/05/98 30,081.00 2,029,555.67 16,441.02 39
04/05/98 30,081.00 2,013,005.05 16,550.63 40
05/05/98 30,081.00 1,996,344.08 16,660.96 41
06/05/98 30,081.00 1,979,572.05 16,772.04 42
---------- ----------
360,971.97 194,093.06
07/05/98 30,081.00 1,962,688.19 16,883.85 43
08/05/98 30,081.00 1,945,691.79 16,996.41 44
09/05/98 30,081.00 1,928,582.07 17,109.72 45
10/05/98 30,081.00 1,911,358.28 17,223.78 46
11/05/98 30,081.00 1,894,019.68 17,338.61 47
12/05/98 30,081.00 1,876,565.48 17,454.20 48
01/05/99 30,081.00 1,858,994.92 17,570.56 49
02/05/99 30,081.00 1,841,307.22 17,687.70 50
03/05/99 30,081.00 1,823,501.60 17,805.62 51
04/05/99 30,081.00 1,805,577.28 17,924.32 52
05/05/99 30,081.00 1,787,533.47 18,043.82 53
06/05/99 30,081.00 1,769,369.36 18,164.11 54
---------- ----------
360,971.97 210,202.69
07/05/99 30,081.00 1,751,084.16 18,285.20 55
08/05/99 30,081.00 1,732,677.06 18,407.10 56
09/05/99 30,081.00 1,714,147.24 18,529.82 57
10/05/99 30,081.00 1,695,493.89 18,653.35 58
11/05/99 30,081.00 1,676,716.19 18,777.70 59
12/05/99 30,081.00 1,657,813.30 18,902.89 60
01/05/00 30,081.00 1,638,784.39 19,028.91 61
02/05/00 30,081.00 1,619,628.62 19,155.77 62
03/05/00 30,081.00 1,600,345.15 19,283.47 63
04/05/00 30,081.00 1,580,933.12 19,412.03 64
05/05/00 30,081.00 1,561,391.67 19,541.44 65
06/05/00 30,081.00 1,541,719.96 19,671.72 66
---------- ----------
360,971.97 227,649.40
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
07/05/00 30,081.00 1,521,917.09 19,802.86 67
08/05/00 30,081.00 1,501,982.21 19,934.88 68
09/05/00 30,081.00 1,481,914.43 20,067.78 69
10/05/00 30,081.00 1,461,712.86 20,201.57 70
11/05/00 30,081.00 1,441,376.61 20,336.24 71
12/05/00 30,081.00 1,420,904.79 20,471.82 72
01/05/01 30,081.00 1,400,296.50 20,608.30 73
02/05/01 30,081.00 1,379,550.81 20,745.69 74
03/05/01 30,081.00 1,358,666.82 20,883.99 75
04/05/01 30,081.00 1,337,643.60 21,023.22 76
05/05/01 30,081.00 1,316,480.23 21,163.37 77
06/05/01 30,081.00 1,295,175.76 21,304.46 78
---------- ----------
360,971.97 246,544.19
07/05/01 30,081.00 1,273,729.27 21,446.49 79
08/05/01 30,081.00 1,252,139.80 21,589.47 80
09/05/01 30,081.00 1,230,406.40 21,733.40 81
10/05/01 30,081.00 1,208,528.12 21,878.29 82
11/05/01 30,081.00 1,186,503.97 22,024.14 83
12/05/01 30,081.00 1,164,333.00 22,170.97 84
01/05/02 30,081.00 1,142,014.23 22,318.78 85
02/05/02 30,081.00 1,119,546.66 22,467.57 86
03/05/02 30,081.00 1,096,929.30 22,617.35 87
04/05/02 30,081.00 1,074,161.17 22,768.14 88
05/05/02 30,081.00 1,051,241.25 22,919.92 89
06/05/02 30,081.00 1,028,168.52 23,072.72 90
---------- ----------
360,971.97 267,007.24
07/05/02 30,081.00 1,004,941.98 23,226.54 91
08/05/02 30,081.00 981,560.60 23,381.38 92
09/05/02 30,081.00 958,023.34 23,537.26 93
10/05/02 30,081.00 934,329.17 23,694.17 94
11/05/02 30,081.00 910,477.03 23,852.14 95
12/05/02 30,081.00 886,465.88 24,011.15 96
01/05/03 30,081.00 862,294.65 24,171.22 97
02/05/03 30,081.00 837,962.29 24,332.37 98
03/05/03 30,081.00 813,467.71 24,494.58 99
04/05/03 30,081.00 788,809.83 24,657.88 100
05/05/03 30,081.00 763,987.56 24,822.26 101
06/05/03 30,081.00 738,999.82 24,987.75 102
---------- ----------
360,971.97 289,168.71
</TABLE>
-3-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
07/05/03 30,081.00 713,845.48 25,154.33 103
08/05/03 30,081.00 688,523.46 25,322.03 104
09/05/03 30,081.00 663,032.62 25,490.84 105
10/05/03 30,081.00 637,371.84 25,660.78 106
11/05/03 30,081.00 611,539.98 25,831.85 107
12/05/03 30,081.00 585,535.92 26,004.06 108
01/05/04 30,081.00 559,358.50 26,177.42 109
02/05/04 30,081.00 533,006.56 26,351.94 110
03/05/04 30,081.00 506,478.94 26,527.62 111
04/05/04 30,081.00 479,774.47 26,704.47 112
05/05/04 30,081.00 452,891.96 26,882.50 113
06/05/04 30,081.00 425,830.25 27,061.72 114
---------- ----------
360,971.97 313,169.57
07/05/04 30,081.00 398,588.12 27,242.13 115
08/05/04 30,081.00 371,164.38 27,423.74 116
09/05/04 30,081.00 343,557.81 27,606.57 117
10/05/04 30,081.00 315,767.20 27,790.61 118
11/05/04 30,081.00 287,791.31 27,975.88 119
12/05/04 289,709.92 0.00 287,791.31 120
---------- ----------
440,114.91 425,830.25
</TABLE>
-4-
<PAGE>
EXHIBIT 10.11
SOUTHERN STATES
SUPPLEMENTAL RETIREMENT PLAN
(As Adopted Effective November 11, 1987)
Including:
1. First Amendment
(Effective July 1, 1989)
2. Second Amendment
(Effective July 1, 1989)
3. Third Amendment
(Effective January 1, 1993)
4. Fourth Amendment
(Effective July 1, 1995)
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
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----
<S> <C>
ARTICLE I
Definition of Terms
-------------------
1.1 Administrative Committee............................................ 1
1.2 Administrator....................................................... 1
1.3 Affiliate........................................................... 1
1.4 Beneficiary......................................................... 1
1.5 Board............................................................... 1
1.6 Code................................................................ 1
1.7 Corporation......................................................... 1
1.8 Eligible Employee................................................... 1
1.9 Employee............................................................ 1
1.10 Participant......................................................... 1
1.11 Plan................................................................ 1
1.12 Plan Year........................................................... 1
1.12A Rabbi Trust......................................................... 2
1.13 Retirement Plan..................................................... 2
1.14 Supplemental Death Benefit.......................................... 2
1.15 Supplemental Retirement Benefit..................................... 2
ARTICLE II
----------
Eligibility and Participation
-----------------------------
2.1 Eligibility and Date of Participation............................... 2
2.2 Length of Participation............................................. 2
ARTICLE III
-----------
Supplemental Retirement Benefit
-------------------------------
3.1 Supplemental Retirement Benefit..................................... 2
ARTICLE IV
----------
Death Benefit
-------------
4.1 Death after Benefit Commencement.................................... 3
4.2 Death before Benefit Commencement................................... 3
4.3 Supplemental Death Benefit.......................................... 3
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE V
---------
Vesting
-------
5.1 Vesting Generally................................................... 3
5.2 Forfeiture of Benefits.............................................. 4
5.3 No Restoration of Forfeited Benefits................................ 5
ARTICLE VI
----------
Payment of Benefits
-------------------
6.1 Time and Manner for Payment of Benefits............................. 5
6.2 Discretionary Cash-Out by Lump Sum Payment.......................... 5
6.3 Benefit Determination and Payment Procedure......................... 5
6.4 Payments to Minors and Incompetents................................. 6
6.5 Distribution of Benefit When Distributee Cannot Be Located.......... 6
6.6 Claims Procedure.................................................... 6
ARTICLE VII
-----------
Funding
-------
7.1 Funding............................................................. 7
7.2 Use of Rabbi Trust Permitted........................................ 7
ARTICLE VIII
------------
Fiduciaries
-----------
8.1 Fiduciaries and Duties and Responsibilities......................... 7
8.2 Limitation of Duties and Responsibilities of Fiduciaries............ 7
8.3 Service by Fiduciaries in More Than One Capacity.................... 8
8.4 Allocation or Delegation of Duties and Responsibilities by
Fiduciaries......................................................... 8
8.5 Assistance and Consultation......................................... 8
8.6 Compensation and Expenses........................................... 8
8.7 Indemnification..................................................... 8
ARTICLE IX
----------
Plan Administrator
------------------
9.1 Appointment of Plan Administrator................................... 8
9.2 Corporation as Plan Administrator................................... 9
9.3 Procedure if a Committee............................................ 9
9.4 Action by Majority Vote if a Committee.............................. 9
9.5 Appointment of Successors........................................... 9
9.6 Duties and Responsibilities of Plan Administrator................... 9
9.7 Power and Authority................................................. 9
9.8 Availability of Records............................................. 9
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
9.9 No Action by Plan Administrator with Respect to Own Benefit......... 9
9.10 Limitation on Power and Authority................................... 9
ARTICLE X
---------
Administrative Committee
------------------------
10.1 Makeup and Appointment of Administrative Committee.................. 10
10.2 Administrative Committee Procedures................................. 10
10.3 Powers and Authority................................................ 10
10.4 Plan Interpretation................................................. 10
10.5 Records............................................................. 10
10.6 No Action with Respect to Own Benefit............................... 10
10.7 Necessary Information............................................... 11
ARTICLE XI
----------
Amendment and Termination of Plan
---------------------------------
11.1 Amendment or Termination of the Plan................................ 11
ARTICLE XII
-----------
Miscellaneous
-------------
12.1 Non-assignability................................................... 11
12.2 Right to Require Information and Reliance Thereon................... 11
12.3 Notices and Elections............................................... 11
12.4 Delegation of Authority............................................. 12
12.5 Service of Process.................................................. 12
12.6 Governing Law....................................................... 12
12.7 Binding Effect...................................................... 12
12.8 Severability........................................................ 12
12.9 No Effect on Employment Agreement................................... 12
12.10 Gender and Number................................................... 12
12.11 Titles and Captions................................................. 12
12.12 Construction........................................................ 12
</TABLE>
-iv-
<PAGE>
This SUPPLEMENTAL RETIREMENT PLAN (hereinafter the "Plan") is adopted
the ___ day of November, 1987 and is effective November 11, 1987 (the "Effective
Date" of the Plan) by SOUTHERN STATES COOPERATIVE, INCORPORATED, a Virginia
corporation (hereinafter called the "Corporation");
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Corporation desires to retain the services of certain top
management employees and deems it appropriate to provide for additional
supplemental retirement income for such employees pursuant to the terms of the
Plan in consideration of their services and as an incentive to remain in the
employ of the Corporation;
NOW, THEREFORE, WITNESSETH:
ARTICLE I
---------
Definition of Terms
-------------------
The following words and terms as used in this Plan shall have the
meaning set forth below, unless a different meaning is clearly required by the
context:
1.1 "Administrative Committee": The Administrative Committee provided
for in Article X.
1.2 "Administrator": The plan administrator provided for in Article
IX hereof.
1.3 "Affiliate": Any subsidiary, affiliate or other related business
entity (whether by management contract or ownership) to the Corporation.
1.4 "Beneficiary": The person or persons entitled under the
Retirement Plan to receive any benefits payable thereunder after the
Participant's death.
1.5 "Board": The present and any succeeding Board of Directors of the
Corporation.
1.6 "Code": The Internal Revenue Code of 1986, as the same may be
amended from time to time, or the corresponding section of any subsequent
Internal Revenue Code, and, to the extent not inconsistent therewith,
regulations issued thereunder.
1.7 "Corporation": Southern States Cooperative, Incorporated, a
Virginia corporation.
1.8 "Eligible Employee": An Employee who is a participant in the
Retirement Plan, who is a member of the Corporation's management group and who
is designated as an Eligible Employee by the Chief Executive Officer of the
Corporation.
1.9 "Employee": An individual who is employed in the service of the
Corporation as a common law employee.
1.10 "Participant": An Eligible Employee qualified to participate in
the Plan, for so long as he is considered a Participant, as provided in Article
II hereof.
1.11 "Plan": This document, as contained herein or duly amended, which
shall be known as the "Southern States Supplemental Retirement Plan".
1.12 "Plan Year": The calendar year.
1.12A "Rabbi Trust": A trust fund described in paragraph 7.2 and
established or maintained for the Plan.
<PAGE>
1.13 "Retirement Plan": The Retirement Plan for Employees of Southern
States, a defined benefit pension plan maintained by the Corporation.
1.14 "Supplemental Death Benefit": The Supplemental Pre-Retirement
Spouse's Death Benefit or the Supplemental Alternate Death Benefit due the
Beneficiary of a Participant under the Plan, as determined pursuant to Article
IV hereof.
1.15 "Supplemental Retirement Benefit": The amount due a Participant
or his Beneficiary under the Plan, as determined pursuant to Article III hereof.
ARTICLE II
----------
Eligibility and Participation
-----------------------------
2.1 Eligibility and Date of Participation. Each Eligible Employee
-------------------------------------
shall be a Participant in the Plan commencing with the date he first becomes, or
again becomes, an Eligible Employee.
2.2 Length of Participation. Each Eligible Employee who becomes a
-----------------------
Participant shall be or remain a Participant for so long as he is entitled to
future benefits under the terms of the Plan.
ARTICLE III
-----------
Supplemental Retirement Benefit
-------------------------------
3.1 Supplemental Retirement Benefit. Subject to the terms and
-------------------------------
conditions set forth herein, a Participant who retires under the Retirement Plan
as an Eligible Employee and who becomes entitled to the payment of benefits
under the Retirement Plan shall be entitled to a Supplemental Retirement
Benefit, generally expressed as a benefit payable monthly for the life of the
Participant and commencing at the applicable time provided in paragraph 4.1 of
the Retirement Plan, equal to the excess, if any, of:
(i) The amount of the Participant's accrued benefit under the
Retirement Plan, determined without regard to the limitations on
contributions and benefits imposed by Section 415 of the Code and the
limitation on compensation imposed by Section 401(a)(17) of the Code,
over
(ii) The amount of the Participant's accrued benefit under the
Retirement Plan.
To the extent that the Participant's accrued benefit payable under the
Retirement Plan is increased at any time due to increases in limitations on
contributions and benefits imposed by Section 415 of the Code or to increases in
the compensation limit imposed by Section 401(a)(17) of the Code, whether by
statute, regulations, action of the Secretary of Treasury or his delegate or
otherwise, the Participant's Supplemental Retirement Benefit shall be reduced
correspondingly.
-2-
<PAGE>
ARTICLE IV
----------
Death Benefit
-------------
4.1 Death after Benefit Commencement. If a Participant dies after his
--------------------------------
Supplemental Retirement Benefit commences to be paid, the only benefits payable
under the Plan to his Beneficiary after his death shall be those, if any,
provided under the form of payment being made to him at his death.
4.2 Death before Benefit Commencement. If a Participant dies before his
---------------------------------
Supplemental Retirement Benefit commences to be paid, the only benefit payable
under the Plan with respect to him shall be the Supplemental Death Benefit, if
any, provided in paragraph 4.3.
4.3 Supplemental Death Benefit. Subject to the terms and conditions set
--------------------------
forth herein, if a Participant dies before his Supplemental Retirement Benefit
commences to be paid and either while an Eligible Employee or after retiring as
an Eligible Employee, his Beneficiary shall be entitled to a Supplemental Death
Benefit as follows:
(i) If his Beneficiary is entitled to receive a pre-retirement
spouse's death benefit under the Retirement Plan, such Beneficiary shall be
entitled to receive as a Supplemental Pre-Retirement Spouse's Death Benefit
under the Plan an amount equal to the excess, if any, of:
(A) The amount of such pre-retirement spouse's death benefit
under the Retirement Plan, determined without regard to the
limitations on contributions and benefits imposed by Section 415 of
the Code and without regard to the limitation on compensation imposed
by Section 401(a)(17) of the Code, over
(B) The actual amount of such pre-retirement spouse's death
benefit under the Retirement Plan.
(ii) If his Beneficiary is entitled to receive an alternate death
benefit under the Retirement Plan, such Beneficiary shall be entitled to
receive as a Supplemental Alternate Death Benefit under the Plan an amount
equal to the excess, if any, of:
(A) The amount of such alternate death benefit under the
Retirement Plan, determined without regard to the limitations on
contributions and benefits imposed by Section 415 of the Code and the
limitation on compensation imposed by Section 401(a)(17) of the Code,
over
(B) The actual amount of such alternate death benefit under the
Retirement Plan.
To the extent that the Participant's accrued benefit or his pre-retirement
spouse's death benefit or alternate death benefit payable under the Retirement
Plan is increased at any time due to increases in the limitations on
contributions and benefits imposed by Section 415 of the Code or in the
limitation on compensation imposed by Section 401(a)(17) of the Code, whether by
statute, regulations, action of the Secretary of Treasury or his delegate or
otherwise, the Participant's Supplemental Death Benefit shall be reduced
correspondingly.
ARTICLE V
---------
Vesting
-------
5.1 Vesting Generally. Subject to the forfeiture events described in
-----------------
paragraph 5.2 hereof, a Participant's Supplemental Retirement Benefit or
Supplemental Death Benefit, as the case may be, shall be vested at the time of
his retirement as an Eligible Employee under the Retirement Plan or death while
an Eligible Employee, but only to the extent, and determined in the manner, that
such Participant has a vested and non-forfeitable right to his employer-derived
accrued benefit under the Retirement Plan.
-3-
<PAGE>
5.2 Forfeiture of Benefits.
----------------------
5.2(a) Notwithstanding any contrary provision hereof, the Supplemental
Retirement Benefit and the Supplemental Death Benefit with respect to a
Participant shall be forfeited upon the occurrence of any the following events
(as defined in subparagraph 5.2(b)):
(i) The Participant's voluntary termination of employment with
the Corporation under circumstances which do not constitute retirement for
purposes of the Retirement Plan;
(ii) The Participant's termination of employment with the
Corporation for "cause";
(iii) The Participant's entering into "competition", or his
making an "unauthorized disclosure of confidential information", after his
retirement from the employment of the Corporation, in which case all
payments to or with respect to the Participant shall cease and all payments
made to the Participant or his Beneficiary under the Plan since the
occurrence of such event of forfeiture shall be returned to the
Corporation; or
(iv) The discovery after the Participant's retirement from the
employment of the Corporation or death of "cause" for his termination or of
his "unauthorized disclosure of confidential information" prior to his
retirement or death before retirement, in which case all payments under the
Plan to or with respect to the Participant shall cease and all payments
previously made to the Participant or his Beneficiary under the Plan shall
be returned to the Corporation.
All determinations hereunder shall be made by the Administrative Committee.
5.2(b) For purposes of this paragraph:
(i) "Cause" means the willful gross misconduct of the Participant
which is materially injurious to the Corporation or any Affiliate, the
unauthorized disclosure of confidential information, or the engaging in
competition by the Participant.
(ii) "Competition" means engaging by the Participant, without the
written consent of the Board or a person authorized thereby, in a business
as a more than one percent (1%) stockholder, an officer, a director, an
employee, a partner, an agent, a consultant, or any other individual or
representative capacity (unless the Participant's duties, responsibilities,
and activities, including supervisory activities, for or on behalf of such
business, are not related in any way to such "competitive activity") if it
involves:
(A) Engaging in, or entering into services or providing advice
pertaining to, any line of business that the Corporation or any
Affiliate actively conducts or develops in competition with the
Corporation or any Affiliate in the same geographic area as such
line of business is then conducted, or
(B) Employing or soliciting for employment any employees of
the Corporation or any Affiliate.
(iii) "Unauthorized disclosure of confidential information" means
the disclosure by the Participant, without the written consent of the Board
or a person authorized thereby, to any person other than as required by law
or court order, or other than to an authorized employee of the Corporation
or an Affiliate, or to a person to whom disclosure is necessary or
appropriate in connection with the performance by the Participant of his
duties as an employee or director of the Corporation or an Affiliate
(including, but not limited to, disclosure to the Corporation's or an
Affiliate's outside counsel, accountants or bankers of financial data
properly requested by such persons and approved by an authorized officer of
the Corporation), any confidential information of the Corporation or any
Affiliate with respect to any of the products, services, customers,
suppliers, marketing techniques, methods or future plans of the Corporation
or any Affiliate; provided, however, that:
-4-
<PAGE>
(A) Confidential information shall not include any
information known generally to the public (other than as a result of
unauthorized disclosure by the Participant) or any information of a
type not otherwise considered confidential by persons engaged in the
same business or a business similar to that conducted by the
Corporation or any Affiliate; and
(B) The Participant shall be allowed to disclose confidential
information to his attorney solely for the purpose of ascertaining
whether such information is confidential within the intent of the
Plan, but only so long as the Participant both discloses to his
attorney the provisions of this paragraph and agrees not to waive the
attorney-client privilege with respect thereto.
5.3 No Restoration of Forfeited Benefits. There shall be no restoration
------------------------------------
of forfeited benefits. If a Participant incurs a forfeiture and subsequently is
an Eligible Employee and a Participant, his Supplemental Retirement Benefit and
Supplemental Death Benefit shall be determined as though the Retirement Plan
provided for accrual of benefits without regard to his service credited and
compensation earned prior to such forfeiture.
ARTICLE VI
----------
Payment of Benefits
-------------------
6.1 Time and Manner for Payment of Benefits.
---------------------------------------
6.1(a) A Participant's Supplemental Retirement Benefit, or the Supplemental
Death Benefit with respect to a Participant, shall be payable commencing at the
time that the Participant's accrued benefit or comparable death benefit (other
than his accumulated contributions or contribution refund death benefit)
commences to be paid under the Retirement Plan.
6.1(b) Subject to the forfeiture events of paragraph 5.2, benefits shall be
payable to a Participant and, where applicable, the Participant's Beneficiary in
the manner elected by the Participant (or where applicable, the Beneficiary).
Such election shall be subject to all the same options, conditions, privileges,
actuarial equivalent or value factors, restrictions, benefit suspensions and
other payment provisions as are applicable to the benefits payable under the
Retirement Plan to the Participant or his Beneficiary, provided, however, that
no spousal consent shall be required for any election under the Plan.
6.2 Discretionary Cash-Out by Lump Sum Payment. In the sole discretion of
------------------------------------------
the Administrative Committee, a lump sum payment of benefits, determined on the
basis of applicable actuarial equivalent and value factors under the Retirement
Plan, may be made to a Participant or his Beneficiary if either (i) the entire
actuarial value of the benefit is not over $10,000 or (ii) the monthly payment
amount is not over $100.
6.3 Benefit Determination and Payment Procedure. The Administrative
-------------------------------------------
Committee shall make all determinations concerning eligibility for benefits
under the Plan, the time or terms of payment, and the form or manner of payment
to the Participant (or the Participant's Beneficiary in the event of the death
of the Participant). The Administrative Committee shall promptly notify the
Corporation and, where payments are to be made from a Rabbi Trust, the trustee
thereof, of each such determination that benefit payments are due and provide to
the Corporation or trustee all other information necessary to allow the
Corporation or trustee to carry out said determination, whereupon the
Corporation or trustee shall pay such benefits in accordance with the
Administrative Committee's determination.
6.4 Payments to Minors and Incompetents. If a Participant or Beneficiary
-----------------------------------
entitled to receive any benefits hereunder is a minor or is adjudged to be
legally incapable of giving valid receipt and discharge for such benefits, or is
deemed so by the Administrative Committee, benefits will be paid to such person
as the Administrative Committee may designate for the benefit of such
Participant or Beneficiary. Such payments shall be considered a payment to such
Participant or Beneficiary and shall, to the extent made, be deemed a complete
discharge of any liability for such payments under the Plan.
-5-
<PAGE>
6.5 Distribution of Benefit When Distributee Cannot Be Located. The
----------------------------------------------------------
Administrator shall make all reasonable attempts to determine the identity
and/or whereabouts of a Participant or his Beneficiary entitled to benefits
under the Plan, including the mailing by certified mail of a notice to the last
known address shown on the Corporation's or the Administrator's records. If the
Administrator is unable to locate such a person entitled to benefits hereunder,
or if there has been no claim made for such benefits, the Corporation shall
continue to hold the benefit due such person, subject to any applicable statute
of escheats.
6.6 Claims Procedure.
----------------
6.6(a) A Participant or Beneficiary (the "claimant") shall have the right to
request any benefit under the Plan by filing a written claim for any such
benefit with the Administrator on a form provided by the Administrator for such
purpose. The Administrator shall give such claim due consideration and shall
either approve or deny it in whole or in part. Within ninety (90) days following
receipt of such claim by the Administrator, notice of any denial thereof, in
whole or in part, shall be delivered to, and a receipt therefor shall be
obtained from, the claimant or his duly authorized representative or such notice
of denial shall be sent by registered mail to the claimant, or his duly
authorized representative, at the address shown on the claim form or such
individual's last known address. The aforesaid ninety (90) day response period
may be extended to one hundred eighty (180) days after receipt of the claimant's
claim if special circumstances exist and if written notice of the extension to
one hundred eighty (180) days indicating the special circumstances involved and
the date by which a decision is expected to be made is furnished to the claimant
within ninety (90) days after receipt of the claimant's claim. Such notice of
denial shall be written in a manner calculated to be understood by the claimant
and shall:
(i) Set forth a specific reason or reasons for the denial,
(ii) Make specific reference to the pertinent provisions of the
Plan on which any denial of benefits is based,
(iii) Describe any additional material or information necessary for
the claimant to perfect the claim and explain why such material or
information is necessary, and
(iv) Explain the claim review procedure of subparagraph 6.6(b).
If such notice of denial is not provided to the claimant within the applicable
ninety (90) day or one hundred eighty (180) day period, the claimant's claim
shall be considered denied for purposes of the claim review procedure of
subparagraph 6.6(b).
6.6(b) A Participant or Beneficiary whose claim filed pursuant to
subparagraph 6.6(a) has been denied, in whole or in part, may, within sixty (60)
days following receipt of notice of such denial, or following the expiration of
the applicable period provided for in subparagraph 6.6(a) for notifying the
claimant of the decision on the claim if no notice of denial is provided, make
written application to the Administrative Committee for a review of such claim,
which application shall be filed with the Administrator. For purposes of such
review, the claimant or his duly authorized representative may review Plan
documents pertinent to such claim and may submit to the Administrative Committee
written issues and comments respecting such claim. The Administrative Committee
may schedule and hold a hearing. The Administrative Committee shall make a full
and fair review of any denial of a claim for benefits and issue its decision
thereon promptly, but no later than sixty (60) days after receipt by the
Administrator of the claimant's request for review, or one hundred twenty (120)
days after such receipt if a hearing is to be held or if other special
circumstances exist and if written notice of the extension to one hundred twenty
(120) days is furnished to the claimant within sixty (60) days after the receipt
of the claimant's request for a review. Such decision shall be in writing, shall
be delivered by the Administrator to the claimant and shall:
(i) Include specific reasons for the decision,
(ii) Be written in a manner calculated to be understood by the
claimant, and
(iii) Contain specific references to the pertinent Plan provisions on
which the decision is based.
-6-
<PAGE>
The Administrative Committee's decision made in good faith shall be final.
ARTICLE VII
-----------
Funding
-------
7.1 Funding.
-------
7.1(a) The undertaking to pay the benefits hereunder shall be an unfunded
obligation payable solely from the general assets of the Corporation and subject
to the claims of the Corporation's creditors.
7.1(b) Except as provided in the Rabbi Trust established as permitted in
paragraph 7.2, nothing contained in the Plan and no action taken pursuant to the
provisions of the Plan shall create or be construed to create a trust of any
kind of a fiduciary relationship between the Corporation and the Participant or
his Beneficiary or any other person or to give any Participant or Beneficiary
any right, title or interest in any specific asset or assets of the Corporation.
To the extent that any person acquires a right to receive payments from the
Corporation under the Plan, such rights shall be no greater than the right of
any unsecured general creditor of the Corporation.
7.2 Use of Rabbi Trust Permitted. Notwithstanding any provision herein to
----------------------------
the contrary, the Plan Sponsor may in its sole discretion elect to establish and
fund a Rabbi Trust for the purpose of providing benefits under the Plan.
ARTICLE VIII
------------
Fiduciaries
-----------
8.1 Fiduciaries and Duties and Responsibilities. Authority to control and
-------------------------------------------
manage the operation and administration of the Plan shall be vested in the
following, who, together with their membership, if any, shall be the Fiduciaries
under the Plan with those powers, duties, and responsibilities specifically
allocated to them by the Plan:
8.1(a) Plan Administrator - The Plan Administrator named and serving as
------------------
provided in ARTICLE IX hereof.
8.1(b) Administrative Committee - The Administrative Committee appointed and
------------------------
serving as provided in ARTICLE X hereof.
8.2 Limitation of Duties and Responsibilities of Fiduciaries. The duties
--------------------------------------------------------
and responsibilities, and any liability therefor, of the Fiduciaries provided
for in paragraph 8.1 shall be severally limited to the duties and
responsibilities specifically allocated to each such Fiduciary in accordance
with the terms of the Plan, and there shall be no joint duty, responsibility, or
liability among any such groups of Fiduciaries in the control and management of
the operation and administration of the Plan.
8.3 Service by Fiduciaries in More Than One Capacity. Any person or group
------------------------------------------------
of persons may serve in more than one Fiduciary capacity with respect to the
Plan.
8.4 Allocation or Delegation of Duties and Responsibilities by
----------------------------------------------------------
Fiduciaries. By written agreement filed with the Administrator and the
- -----------
Administrative Committee, any duties and responsibilities of any Fiduciary may
be allocated among Fiduciaries or may be delegated to persons other than
Fiduciaries, provided, however, that any delegation by an Administrator which is
not either the Corporation or the Administrative Committee for which the annual
cost is in excess of any amount set by the Administrative Committee shall be
subject to the advice and consent of the Administrative Committee. Any written
agreement shall specifically set forth the duties and responsibilities so
allocated or delegated, shall contain reasonable provisions for termination, and
shall be executed by the parties thereto.
-7-
<PAGE>
8.5 Assistance and Consultation. A Fiduciary, and any delegate named
---------------------------
pursuant to paragraph 8.4, may engage agents to assist in its duties and may
consult with counsel, who may be counsel for the Corporation, with respect to
any matter affecting the Plan or its obligations and responsibilities hereunder,
or with respect to any action or proceeding affecting the Plan.
8.6 Compensation and Expenses. All compensation and expenses of the
-------------------------
Fiduciaries and their agents and counsel shall be paid or reimbursed by the
Corporation; provided, however, that:
(i) The engagement of such agents by an Administrator which is not
either the Corporation or the Administrative Committee for which the annual
cost is in excess of any amount set by the Administrative Committee shall be
subject to the advice and consent of the Administrative Committee, and
(ii) Each person or committeeman serving as a Fiduciary shall serve
without compensation for such service unless otherwise determined by the
Corporation.
8.7 Indemnification. The Corporation shall indemnify and hold harmless
---------------
any individual who is an employee of the Corporation and who is a Fiduciary or a
member of a Fiduciary under the Plan and any other individual who is an employee
of the Corporation and to whom duties of a Fiduciary are delegated pursuant to
paragraph 8.4, to the extent permitted by law, from and against any liability,
loss, cost or expense arising from their good faith action or inaction in
connection with their responsibilities under the Plan.
ARTICLE IX
----------
Plan Administrator
------------------
9.1 Appointment of Plan Administrator. The Corporation may appoint one or
---------------------------------
more persons to serve as the Plan Administrator (the "Administrator") for the
purpose of carrying out the duties specifically imposed on the Administrator by
the Plan and the Code. In the event more than one person is appointed, the
persons shall form a committee for the purpose of functioning as the
Administrator of the Plan. The person or committeemen serving as Administrator
shall serve for indefinite terms at the pleasure of the Corporation, and may, by
thirty (30) days prior written notice to the Corporation, terminate such
appointment. The Corporation shall inform the Administrative Committee of any
such appointment or termination, and the Administrative Committee may assume
that any person appointed continues in office until notified of any change.
9.2 Corporation as Plan Administrator. In the event that no Administrator
---------------------------------
is appointed or in office pursuant to paragraph 9.1, the Corporation shall be
the Administrator.
9.3 Procedure if a Committee. If the Administrator is a committee, it
------------------------
shall appoint from its members a Chairman and a Secretary. The Secretary shall
keep records as may be necessary of the acts and resolutions of such committee
and be prepared to furnish reports thereof to the Administrative Committee and
the Corporation. Except as otherwise provided, all instruments executed on
behalf of such committee may be executed by its Chairman or Secretary, and the
Administrative Committee may assume that such committee, its Chairman or
Secretary are the persons who were last designated as such to them in writing by
the Corporation or its Chairman or Secretary.
9.4 Action by Majority Vote if a Committee. If the Administrator is a
--------------------------------------
committee, its action in all matters, questions and decisions shall be
determined by a majority vote of its members qualified to act thereon. They may
meet informally or take any action without the necessity of meeting as a group.
9.5 Appointment of Successors. Upon the death, resignation or removal of
-------------------------
a person serving as, or on a committee which is, the Administrator, the
Corporation may, but need not, appoint a successor.
-8-
<PAGE>
9.6 Duties and Responsibilities of Plan Administrator. The Administrator
-------------------------------------------------
shall have the following duties and responsibilities under the Plan:
9.6(a) The Administrator shall be responsible for the fulfillment of all
relevant reporting and disclosure requirements set forth in the Plan and the
Code, the distribution thereof to Participants and their Beneficiaries and the
filing thereof with the appropriate governmental officials and agencies.
9.6(b) The Administrator shall maintain and retain necessary records
respecting its administration of the Plan and matters upon which disclosure is
required under the Plan and the Code.
9.6(c) The Administrator shall make any elections for the Plan required to
be made by it under the Plan and the Code, upon advice and consent of the
Administrative Committee where the Corporation or the Administrative Committee
is not the Administrator.
9.7 Power and Authority. The Administrator is hereby vested with all the
-------------------
power and authority necessary in order to carry out its duties and
responsibilities in connection with the administration of the Plan imposed
hereunder and as may from time to time be granted by the Administrative
Committee. For such purpose, the Administrator shall have the power to adopt
rules and regulations consistent with the terms of the Plan.
9.8 Availability of Records. The Corporation and the Administrative
-----------------------
Committee shall, at the request of the Administrator, make available necessary
records or other information they possess which may be required by the
Administrator in order to carry out its duties hereunder.
9.9 No Action by Plan Administrator with Respect to Own Benefit. No
-----------------------------------------------------------
Administrator who is a Participant shall take any part as the Administrator in
any discretionary action in connection with his participation as an individual.
Such action shall be taken by the remaining Administrator, if any, or otherwise
by the Corporation.
9.10 Limitation on Power and Authority.
---------------------------------
9.10(a) The Administrator shall have no power in any way to modify, alter,
add to or subtract from any provisions of the Plan.
9.10(b) Notwithstanding any grant of authority by the Plan, if the
Administrator is not the Corporation or the Administrative Committee, the
Administrator shall exercise its discretionary authority granted under the Plan,
only as directed or authorized by the Administrative Committee, except in
connection with the following matters (unless otherwise directed by the
Administrative Committee):
(i) Determination of elected benefits under the Retirement Plan.
(ii) Initial review of claims.
If the Administrative Committee authorizes the Administrator to direct payments
from the Plan and notifies the Corporation of such authorization, the
Corporation shall not be responsible to inquire or determine whether any
specific directions or notifications to the Corporation by the Administrator
within the scope of its authorization are with the authority of and/or at the
direction of the Administrative Committee.
ARTICLE X
---------
Administrative Committee
------------------------
10.1 Makeup and Appointment of Administrative Committee. The Board shall
--------------------------------------------------
appoint an Administrative Committee to administer the Plan consisting of one or
more persons who shall serve at the pleasure of the Board and without
-9-
<PAGE>
compensation for service on the Administrative Committee. Vacancies shall be
filled by the Board. A person shall not be ineligible to be a member of the
Administrative Committee because he is or may be a Participant of the Plan. The
Administrator shall be notified by the Corporation of the persons constituting
the membership of the Administrative Committee (including its Chairman and
Secretary) and may assume that any person appointed (or holding the position of
its Chairman or Secretary) continues as a member thereof (or to hold such
position) until notified by the Corporation.
10.2 Administrative Committee Procedures. The Administrative Committee
-----------------------------------
shall adopt rules for the conduct of its business and administration of the Plan
as it considers desirable, provided they do not conflict with the Plan. The
Administrative Committee shall hold meetings upon such notice, at such place or
places, and at such intervals as it may from time to time determine.
10.3 Powers and Authority. The Administrative Committee is hereby vested
--------------------
with all the power and authority necessary in order to carry out its duties and
responsibilities in connection with its administration of the Plan. The
Administrative Committee is empowered to settle claims against the Plan and to
make such equitable adjustments in a Participant's or Beneficiary's rights or
entitlements under the Plan as it deems appropriate in the event an error or
omission is discovered or claimed in the operation or administration of the
Plan. The Administrative Committee may authorize one or more of its members or
any agent to act on its behalf and may contract for legal, accounting, clerical
and other services to carry out the Plan.
10.4 Plan Interpretation. The Administrative Committee may construe the
-------------------
Plan, correct defects, supply omissions or reconcile inconsistencies to the
extent necessary to effectuate the Plan and such action shall be conclusive.
10.5 Records. The Administrative Committee shall keep records reflecting
-------
its administration of the Plan which shall be subject to audit by the
Corporation. Participants may examine records pertaining directly to them during
reasonable business hours.
10.6 No Action with Respect to Own Benefit. No member of the
-------------------------------------
Administrative Committee shall participate in any decision of the Administrative
Committee which involves the payment of benefits to him or in which he has a
financial interest other than as a Participant of the Plan. If the entire
Administrative Committee is disqualified to act by reason of this Section, the
Corporation shall perform as the Administrative Committee.
10.7 Necessary Information. The Corporation and the Administrator shall
---------------------
supply full and timely information to the Administrative Committee of all
matters relating to Participants and Beneficiaries and the Plan.
ARTICLE XI
----------
Amendment and Termination of Plan
---------------------------------
11.1 Amendment or Termination of the Plan.
------------------------------------
11.1(a) The Plan may be terminated at any time by the Board. The Plan may be
amended in whole or in part from time to time by the Board effective as of any
date specified. No amendment or termination shall operate to decrease a
Participant's Supplemental Retirement Benefit, or the Supplemental Death Benefit
with respect to a Participant in pay status, as of the earlier of the date on
which the amendment or termination is approved by the Board or the date on which
an instrument of amendment or termination is signed on behalf of the
Corporation.
11.1(b) The Corporation hereby delegates to the Administrative Committee the
right to modify, alter, or amend the Plan in whole or in part to make any
technical modification, alteration or amendment which in the opinion of counsel
for the Corporation is required by law and is deemed advisable by the
Administrative Committee and to make any other modification, alteration or
amendment which does not, in the Administrative Committee's view, substantially
increase costs, contributions or benefits and does not materially affect the
eligibility, vesting or benefit accrual or allocation provisions of the Plan.
-10-
<PAGE>
ARTICLE XII
-----------
Miscellaneous
-------------
12.1 Non-assignability. The interests of each Participant under the Plan
-----------------
are not subject to claims of the Participant's creditors; and neither the
Participant, nor his Beneficiary, shall have any right to sell, assign, transfer
or otherwise convey the right to receive any payments hereunder or any interest
under the Plan, which payments and interest are expressly declared to be non-
assignable and non-transferable.
12.2 Right to Require Information and Reliance Thereon. The Corporation,
-------------------------------------------------
the Administrative Committee and Administrator shall have the right to require
any Participant, Beneficiary or other person receiving benefit payments to
provide it with such information, in writing, and in such form as it may deem
necessary to the administration of the Plan and may rely thereon in carrying out
its duties hereunder. Any payment to or on behalf of a Participant or
Beneficiary in accordance with the provisions of the Plan in good faith reliance
upon any such written information provided by a Participant or any other person
to whom such payment is made shall be in full satisfaction of all claims by such
Participant and his Beneficiary; and any payment to or on behalf of a
Beneficiary in accordance with the provision so the Plan in good faith reliance
upon any such written information provided by such Beneficiary or any other
person to whom such payment is made shall be in full satisfaction of all claims
by such Beneficiary.
12.3 Notices and Elections. All notices required to be given in writing
--------------------
and all elections required to be made in writing, under any provision of the
Plan, shall be invalid unless made on such forms as may be provided or approved
by the Administrator and, in the case of a notice or election by a Participant
or Beneficiary, unless executed by the Participant or Beneficiary giving such
notice or making such election.
12.4 Delegation of Authority. Whenever the Corporation is permitted or
-----------------------
required to perform any act, such act may be performed by its Chief Executive
Officer or other person duly authorized by its Chief Executive Officer or the
Board.
12.5 Service of Process. The Administrator shall be the agent for service
------------------
of process on the Plan.
12.6 Governing Law. The Plan shall be construed, enforced and administered
-------------
in accordance with the laws of the Commonwealth of Virginia, and any federal law
which preempts the same.
12.7 Binding Effect. The Plan shall be binding upon and inure to the
--------------
benefit of the Corporation, its successors and assigns, and the Participant and
his heirs, executors, administrators and legal representatives.
12.8 Severability. If any provision of the Plan should for any reason be
------------
declared invalid or unenforceable by a court of competent jurisdiction, the
remaining provisions shall nevertheless remain in full force and effect.
12.9 No Effect on Employment Agreement. The Plan shall not be considered
---------------------------------
or construed to modify, amend or supersede any employment agreement between the
Corporation and the Participant heretofore or hereafter entered into unless so
specifically provided.
12.10 Gender and Number. In the construction of the Plan, the masculine
-----------------
shall include the feminine or neuter and the singular shall include the plural
and vice-versa in all cases where such meanings would be appropriate.
12.11 Titles and Captions. Titles and captions and headings herein have
-------------------
been inserted for convenience of reference only and are to be ignored in any
construction of the provisions hereof.
-11-
<PAGE>
12.12 Construction. The Plan is intended to be construed as a "plan which
------------
is unfunded and is maintained by the employer primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees," within the meaning of Sections 201(2), 301(a)(3), and
401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended,
and shall be interpreted and administered accordingly.
IN WITNESS WHEREOF, the Corporation has caused the Plan to be signed on its
behalf by its duly authorized officer or member of its Board of Directors on the
day, month and year aforesaid.
SOUTHERN STATES COOPERATIVE, INCORPORATED
By: /s/ Gene E. James
---------------------------------------
Its President & CEO
---------------------------------------
-12-
<PAGE>
EXHIBIT 10.12
SOUTHERN STATES DEFERRED COMPENSATION PLAN
(As Restated Effective July 1, 1995)
Including:
1. First Amendment
(Effective July 1, 1996)
2. Second Amendment
(Effective July 1, 1997)
3. Third Amendment
(Effective October 1, 1997)
4. Fourth Amendment
(Effective July 1, 1998)
5. Fifth Amendment
(Effective July 1, 1999)
6. Sixth Amendment
(Effective October 1, 1999)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
Definition of Terms
-------------------
1.1 Act................................................................ 1
1.2 Affiliated Employers............................................... 1
1.3 Administrator...................................................... 1
1.4 Beneficiary........................................................ 1
1.5 Benefit Commencement Date.......................................... 1
1.6 Board.............................................................. 2
1.7 Code............................................................... 2
1.8 Corporation........................................................ 2
1.9 Deferred Thrift Benefit............................................ 2
1.10 Earnings Fund Share................................................ 2
1.11 Effective Date..................................................... 2
1.12 Eligible Employee.................................................. 2
1.12A Eligible Executives................................................ 2
1.13 Employee........................................................... 2
1.14 Executive Bonus.................................................... 2
1.15 Fiscal Year........................................................ 2
1.16 Participant........................................................ 3
1.17 Plan............................................................... 3
1.18 Plan Sponsor....................................................... 3
1.19 Plan Year.......................................................... 3
1.20 Rabbi Trust........................................................ 3
1.21 Reserve Account.................................................... 3
1.22 Rollover Account................................................... 3
1.23 Salary............................................................. 3
1.24 Subsidiary......................................................... 3
1.25 Thrift Plan........................................................ 3
ARTICLE II
Participation
-------------
2.1 Participation...................................................... 3
2.2 Termination of Participation....................................... 4
ARTICLE III
Incentive Compensation Awards
-----------------------------
3.1 Earnings Fund Program.............................................. 4
3.2 Executive Bonus Program............................................ 6
3.3 Chief Executive Officer Incentive Program.......................... 6
3.4 Eligible Executives Incentive Program ............................. 6
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE IV
Elective Deferrals
------------------
4.1 Deferral of Earnings Fund Share and Executive Bonus................ 6
4.2 Deferral of Salary................................................. 6
4.3 Deferred Thrift Benefit............................................ 6
ARTICLE V
Allocations to and Vesting in Reserve Account
---------------------------------------------
5.1 Allocations of Deferred Earnings Fund Share and Executive Bonus..... 7
5.2 Allocations of Deferred Salary...................................... 7
5.3 Allocations of Deferred Thrift Benefit.............................. 7
5.4 Subtractions from Reserve Account................................... 7
5.5 Deemed Earnings on Reserve Accounts................................. 7
5.6 Vesting in Reserve Account.......................................... 8
5.7 Equitable Adjustment in Case of Error or Omission................... 8
5.8 Statement of Reserve Account Balance................................ 8
ARTICLE VI
Special Rules Relating to Rollover Account
------------------------------------------
6.1 Transfer to Rollover Account....................................... 8
6.2 Deemed Earnings on Rollover Account................................ 8
6.3 Subtractions from Rollover Account................................. 8
6.4 Vesting in Rollover Account........................................ 8
6.5 Equitable Adjustment in Case of Error or Omission.................. 8
6.6 Statement of Rollover Account Balance.............................. 8
6.7 Death Benefits Attributable to Rollover Account.................... 9
6.8 Disability Benefits Attributable to Rollover Account............... 9
6.9 Restrictions on Death or Disability Benefits....................... 10
ARTICLE VII
Funding
-------
7.1 Funding............................................................ 10
7.2 Use of Rabbi Trust Permitted....................................... 11
ARTICLE VIII
Time and Form of Payment
------------------------
8.1 Current Earning Fund Share and Executive Bonus Payments............ 11
8.2 Distribution of Accounts........................................... 11
8.3 Death After Benefit Commencement................................... 13
8.4 Benefit Determination and Payment Procedure........................ 14
8.5 Payments to Minors and Incompetents................................ 14
8.6 Distribution of Benefit When Distributee Cannot Be Located......... 14
8.7 Claims Procedure................................................... 14
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
ARTICLE IX
Beneficiary Designation
-----------------------
9.1 Beneficiary Designation............................................ 15
ARTICLE X
Withdrawals
-----------
10.1 Severe Financial Hardship Withdrawals.............................. 16
10.2 Other Withdrawals.................................................. 16
ARTICLE XI
Plan Administration
-------------------
11.1 Plan Administrator................................................. 16
11.2 Power and Authority of Administrator............................... 16
ARTICLE XII
Amendment and Termination of Plan
---------------------------------
12.1 Amendment or Termination of the Plan............................... 16
ARTICLE XIII
Adoption by Additional Corporations
-----------------------------------
13.1 Adoption by Additional Corporations................................ 17
ARTICLE XIV
Miscellaneous
-------------
14.1 Non-assignability.................................................. 17
14.2 Right to Require Information and Reliance Thereon.................. 17
14.3 Notices and Elections.............................................. 18
14.4 Delegation of Authority............................................ 18
14.5 Service of Process................................................. 18
14.6 Governing Law...................................................... 18
14.7 Binding Effect..................................................... 18
14.8 Severability....................................................... 18
14.9 No Effect on Employment Agreement.................................. 18
14.10 Gender and Number.................................................. 18
14.11 Titles and Captions................................................ 18
</TABLE>
-iii-
<PAGE>
This Deferred Compensation Plan (hereinafter the "Plan" and formerly known
as the Deferred Incentive Compensation Plan) is amended and restated this 28th
day of June, 1995, effective July 1, 1995, unless otherwise specifically
stated, by Southern States Cooperative, Incorporated, a Virginia corporation
(hereinafter called the "Plan Sponsor");
WITNESSETH:
WHEREAS, the Plan was adopted to provide an incentive compensation program
for certain executives of the Corporation and to allow for the deferral of the
receipt of such incentive compensation; and
WHEREAS, the Plan Sponsor deems it appropriate to expand the deferral
program to include salary deferral, withdrawal rights and the right of a
Participant to select a rate of return for the deemed investment of the Reserve
Account based on various measures permitted by the Administrator.
NOW, THEREFORE, in consideration of the premises herein, the Plan Sponsor
agrees as follows:
ARTICLE I
Definition of Terms
-------------------
The following words and terms as used in this Plan shall have the meaning
set forth below, unless a different meaning is clearly required by the context:
1.1 "Act": The Employee Retirement Income Security Act of 1974, as the
same may be amended from time to time, or the corresponding sections of any
subsequent legislation which replaces it, and, to the extent not inconsistent
therewith, the regulations issued thereunder.
1.2 "Affiliated Employers": The Plan Sponsor and all of its
Subsidiaries.
1.3 "Administrator": The plan administrator provided for in Article XI
hereof.
1.4 "Beneficiary": The person or persons designated by a Participant or
otherwise entitled pursuant to Article IX to receive benefits under the Plan
attributable to such Participant after the death of such Participant.
1.5 "Benefit Commencement Date":
(i) When used with respect to the Reserve Account, the first July 1
or January 1 following the Participant's cessation of employment as an
Employee of the Affiliated Employers for whatever reason.
(ii) When used with respect to the Rollover Account, generally the
first July 1 or January 1 following the earlier of:
(A) The later of:
(I) The Participant's cessation of employment as an Employee
of the Affiliated Employers, or
(II) The date the Participant reaches age fifty-five (55), or
(B) The date the Participant reaches age sixty-five (65).
<PAGE>
In the case of the Death or Disability Benefits described in Article VI, the
first July 1 or January 1 following the Participant's death and receipt of a
claim from the Beneficiary, or following receipt of proof of the
Participant's total and permanent disability. However, if a Participant's
Benefit Commencement Date occurs prior to January 1, 1990, such Participant
shall continue to receive benefit payments as determined under the Plan as
amended effective January 1, 1990.
(iii) Notwithstanding the foregoing, a Participant may elect to defer
his Benefit Commencement Date to a January 1 or July 1, not later than his
65/th/ birthday, provided that such election to defer the Benefit
Commencement Date is filed with the Administrator in the calendar year prior
to, and at least 60 days prior to, the otherwise applicable Benefit
Commencement Date. Only one such election to defer the Benefit Commencement
Date may be made by a Participant.
1.6 "Board": The present and any succeeding Board of Directors of the
Plan Sponsor, unless such term is used with respect to a particular Corporation
and its Employees, in which event it shall mean the present and any succeeding
Board of Directors of that Corporation.
1.7 "Code": The Internal Revenue Code of 1986, as the same may be
amended from time to time, or the corresponding section of any subsequent
Internal Revenue Code, and, to the extent not inconsistent therewith,
regulations issued thereunder.
1.8 "Corporation": The Plan Sponsor and any of its Subsidiaries approved
by the Board of the Plan Sponsor for participation in and adopting the Plan.
1.9 "Deferred Thrift Benefit": The amount awarded to certain
Participants under paragraph 4.3.
1.10 "Earnings Fund Share": The share of the Earnings Fund awarded to
certain Participants under paragraph 3.1, the Chief Executive Officer Incentive
Distribution to the Chief Executive Officer under paragraph 3.3 of the Plan and
the Eligible Executive's Distribution to the Eligible Executives under paragraph
3.4.
1.11 "Effective Date": The Effective Date of this restatement of the Plan
is July 1, 1995.
1.12 "Eligible Employee": An Employee who is employed by the Corporation
in:
(i) Its 200 pay series, or
(ii) Effective July 1, 1989, its 100 pay series.
1.12A "Eligible Executives": The Chief Financial Officer and the Group
Vice Presidents.
1.13 "Employee": An individual who is employed in the service of the
Affiliated Employers as a common law employee.
1.14 "Executive Bonus": The discretionary bonus awarded to certain
Participants under paragraph 3.2.
1.15 "Fiscal Year": The fiscal year of the Plan Sponsor.
1.16 "Participant": An Eligible Employee but only during such period and
for such purposes as he is considered a Participant as described in Article II
of the Plan. Participants may be classified as Active or Inactive Participants
as provided in Article II.
-2-
<PAGE>
1.17 "Plan": This document, as contained herein or as duly amended, which
shall be known as the "Southern States Deferred Compensation Plan". Prior to
July 1, 1995 the Plan was known as the "Southern States Deferred Incentive
Compensation Plan"
1.18 "Plan Sponsor": Southern States Cooperative, Incorporated, a
Virginia corporation, or its corporate successor.
1.19 "Plan Year": The twelve (12) month period beginning on the first day
of July of each year.
1.20 "Rabbi Trust": A trust fund described in paragraph 7.2 and
established or maintained for the Plan.
1.21 "Reserve Account": The bookkeeping account of a Participant
attributable to elective and non-elective deferrals under the Plan and to any
deemed earnings thereon less any amounts transferred pursuant to paragraph 6.1
to the Rollover Account.
1.22 "Rollover Account": The bookkeeping account of a Participant
attributable to elective and non-elective deferrals made prior to January 1,
1990 and deemed earnings thereon (less any distributions made prior to July 1,
1990) which are transferred from the Reserve Account pursuant to paragraph 6.1.
1.23 "Salary": A Participant's regular base salary paid or payable for
personal services rendered to the Corporation as an Eligible Employee, including
that portion of such amount which is electively deferred under or contributed to
this Plan or any other plan, whether a deferred compensation or cafeteria plan,
of the Corporation for such Plan Year, but excluding any such compensation
deferred or contributed from a prior period, bonuses, incentive pay, expense
reimbursement and allowances and benefits not normally paid in cash to the
Participant. Salary for any Plan Year shall be determined as of the first day
of the Plan Year.
1.24 "Subsidiary": A corporation (other than the Plan Sponsor) in which
the Plan Sponsor owns an equity interest and holds fifty percent (50%) or more
of the votes entitled to be cast for directors.
1.25 "Thrift Plan": The Southern States Thrift Plan and Trust as restated
effective January 1, 1987 and as thereafter amended.
ARTICLE II
Participation
-------------
2.1 Participation. The Board, upon recommendation of the President and
-------------
Chief Executive Officer of the Plan Sponsor, shall determine in advance of each
Fiscal Year, the offices and positions that will be entitled to actively
participate in the Plan for the Fiscal Year. Each Eligible Employee who is so
designated by the Board by his office or position for a Fiscal Year shall be a
Participant and an Active Participant in the Plan for the Fiscal Year. In
addition, where a designated office or position is vacated by a Participant and
is subsequently filled during a Fiscal Year, or where an office or position is
newly designated (either a currently filled position or a newly created
position) for participation in the Plan, the Board, upon recommendation of the
President and Chief Executive Officer of the Plan Sponsor, may include any
Active Participant's successor or replacement and/or the individual who fills
the newly designated office or position, as a Participant and an Active
Participant in the Plan for such Fiscal Year, as of a date designated by the
Board. For purposes of this paragraph, the Board's determination of the offices
and positions entitled to actively participate in the Plan shall continue in
effect for subsequent Fiscal Years unless changed in advance of a Fiscal Year.
In making its designation, the Board may distinguish between Employees who are
eligible to participate only in the deferral aspect of the Plan and those who
are eligible for the Earning Fund Program on the Executive Bonus.
-3-
<PAGE>
2.2 Termination of Participation.
----------------------------
2.2(a) A Participant shall cease to be an Active Participant upon the
first to occur of the following events:
(i) The Participant retires or otherwise terminates his employment
with the Corporation; or
(ii) The Participant ceases to be an Eligible Employee.
2.2(b) A Participant shall be an Inactive Participant whenever he is not
an Active Participant but he is still entitled to future benefits under the
terms of the Plan.
2.2(c) An individual shall cease to be a Participant when he is neither an
Active Participant nor an Inactive Participant.
ARTICLE III
Incentive Compensation Awards
-----------------------------
3.1 Earnings Fund Program.
---------------------
3.1(a) With respect to each Fiscal Year, each Covered Participant for such
Fiscal Year shall be entitled to a share (the "Earnings Fund Share") of the
Earnings Fund for such Fiscal Year equal to the ratio of such Covered
Participant's Covered Base Salary for such Fiscal Year to the sum of all Covered
Participants' Covered Base Salary for such Fiscal Year.
3.1(b) For purposes hereof, the following terms shall have the meanings
set forth below:
(i) The term "Applicable Percentage" means the following percentage
determined by reference to the Participant's incentive group:
Incentive Group Applicable Percentage
--------------- ---------------------
200 Pay Series (Incentive Group A) 17 1/2%
200 Pay Series (Incentive Group B) 15%
200 Pay Series (Incentive Group C) 12 1/2%
200 Pay Series (Incentive Group D) 10%
100 Pay Series (Incentive Group E) 10%
(ii) The term "Associated Companies" means corporations (other than
the Plan Sponsor) in which the Plan Sponsor owns an equity interest of more
than five percent (5%) but holds less than fifty percent (50%) of the votes
entitled to be cast for directors.
(iii) The term "Covered Base Salary" for a Fiscal Year means the
product obtained by multiplying a Participant's final annual base salary
determined at the earlier of the last day of the Fiscal Year or the date he
ceases to be an Active Participant by his Applicable Percentage for the
Fiscal Year subject, however, to the following:
(A) Where a Participant becomes an Active Participant on a day
other than the first day of a Fiscal Year, ceases to be an Active
Participant on a day other than the last day of a Fiscal Year, or
becomes a member of a different incentive group while an Active
Participant during a Fiscal Year, his Covered Base Salary shall be
determined separately for each such period, his Covered Base Salary for
each such period shall then be prorated on the basis of the ratio of the
number of days in each such period to the number of days in the Fiscal
Year, and his Covered Base Salary for the Fiscal Year shall be the sum
of his Covered Base Salary for each such period.
-4-
<PAGE>
(B) Where a Participant is designated as a "partial" Covered
Participant for a Fiscal Year, his Covered Base Salary shall be his
otherwise determined Covered Base Salary for the Fiscal Year multiplied
by the "partial" percentage applicable to him.
(iv) The term "Covered Participant" for a Fiscal Year means a
Participant (other than the Chief Executive Officer and the Eligible
Executives) who is an Active Participant designated by the Board to be
eligible for the Earnings Fund Program at any time during the Fiscal Year,
provided, however, that the Chief Executive Officer of the Plan Sponsor may
disqualify a Participant at any time as a result of a performance not deemed
to be of the caliber that warrants treatment as a Covered Participant and
entitlement to a standard Earnings Fund Share:
(A) In whole, in which case the Participant shall not be considered
a Covered Participant and shall not be entitled to an Earnings Fund
Share for the Fiscal Year(s) to which such disqualification relates, or
(B) In part, in which case the President and Chief Executive
Officer of the Plan Sponsor shall designate the percentage (the
"partial" percentage) of the Participant's partial qualification as a
Covered Participant and the Participant shall only be entitled to such a
partial standard Earnings Fund Share (determined by adjusting his
Covered Base Salary) for the Fiscal Year(s) to which such partial
qualification relates.
(v) The term "Earnings Fund" means, with respect to any Fiscal Year,
the lesser of:
(A) The sum of (I) the product obtained by multiplying the excess
of Net Earnings for the Fiscal Year over ten percent (10%) of Net Worth
as of the beginning of the Fiscal Year by five percent (5%) plus (II)
$5,000 for each full one million dollars ($1,000,000) of actual
consolidated dollar volume in total operations of the Affiliated
Employers for the Fiscal Year over budgeted dollar volume in total
operations, or
(B) The aggregate sum of the Covered Base Salary of each Covered
Participant for the Fiscal Year.
(vi) The term "Net Earnings" means the consolidated pre-tax net
earnings of the Affiliated Employers adjusted to reflect the imputed cost of
investments in Associated Companies and to exclude in respect to Associated
Companies all dividends, patronage refunds, gains and losses on investments,
and equity in unrealized earnings and losses.
(vii) The term "Net Worth" means the consolidated book value of the
assets less liabilities of the Affiliated Employers, excluding the recorded
value of investments in Associated Companies.
3.2 Executive Bonus Program.
-----------------------
3.2(a) With respect to each Fiscal Year, an Active Participant designated by
the Board to be eligible for the Elective Bonus Program shall be entitled to a
bonus (the "Executive Bonus") in such amount, if any, as is determined by and in
the discretion of the President and Chief Executive Officer of the Plan Sponsor
as soon as possible following the end of each Fiscal Year based on his
assessment of the Participant's performance during the preceding twelve (12)
months.
3.2(b) The Executive Bonus to which an Active Participant may be entitled
for a Fiscal Year shall not exceed his Covered Base Salary for the Fiscal Year.
3.3 Chief Executive Officer Incentive Program. With respect to each
-----------------------------------------
Fiscal Year beginning on or after July 1, 1997, the Chief Executive Officer
shall be entitled to an Incentive Distribution pursuant to the program described
in Appendix A to the Plan.
-5-
<PAGE>
3.4 Eligible Executives Incentive Program. With respect to each Fiscal
-------------------------------------
Year beginning on or after July 1, 1998, the Eligible Executives shall be
entitled to an Incentive Distribution pursuant to the program described in
Appendix B to the Plan.
ARTICLE IV
Elective Deferrals
------------------
4.1 Deferral of Earnings Fund Share and Executive Bonus. A Participant
---------------------------------------------------
may elect to defer the receipt of any or all of his Earnings Fund Share and his
Executive Bonus for a Fiscal Year. The election to defer such amounts shall be
made annually and filed with the Administrator prior to the beginning of the
Fiscal Year for which such payments will be made; provided, however, that when
an individual becomes an Active Participant on a day other than the first day of
a Fiscal Year, he shall have thirty (30) days after he is notified of
commencement of active participation to file his election with the
Administrator. Such election shall be in writing on a form provided by the
Administrator for this purpose.
4.2 Deferral of Salary. A Participant may elect to defer the receipt of
------------------
any or all of his Salary for a Plan Year. The election to defer such amounts
may be subject to any maximum or minimum percentage or dollar amount as the
Administrator in its sole discretion may determine and shall be made annually
and filed with the Administrator prior to the beginning of the Plan Year for
which such payments will be made; provided, however, that when an individual
becomes an Active Participant on a day other than the first day of a Plan Year,
he shall have thirty (30) days after he is notified of commencement of active
participation to file his election with the Administrator. Such election shall
be in writing on a form provided by the Administrator for this purpose.
4.3 Deferred Thrift Benefit. Each Participant who is an Active
-----------------------
Participant at some time during the period from March 16, 1989 through December
31, 1990, inclusive, and who during such period would have been eligible to be
an active participant in the Thrift Plan but for the exclusion of Employees in
the Corporation's 200 pay series from active participation in the Thrift Plan
shall be entitled to a non-elective deferred award (the "Deferred Thrift
Benefit") in an amount equal to one and one-half percent (1-1/2%) of his
"Compensation" (as defined in the Thrift Plan) for that portion of the 1989 and
1990 calendar years beginning on the later of (i) March 16, 1989 or (ii) the
date he becomes an Active Participant through the earlier of (iii) December 31,
1990 or (iv) the date he is first eligible after March 15, 1989 to become an
active participant in the Thrift Plan. For purposes hereof, such Deferred
Thrift Benefit shall be determined for each such separate period of exclusion
from participation in the Thrift Plan if there is more than one such period with
respect to a Participant.
ARTICLE V
Allocations to and Vesting in Reserve Account
---------------------------------------------
5.1 Allocation of Deferred Earnings Fund Share and Executive Bonus. The
--------------------------------------------------------------
Earning Fund Share and Executive Bonus, or portion thereof, of a Participant for
a Fiscal Year which is deferred pursuant to paragraph 4.1 shall be allocated to
the Participant's Reserve Account upon receipt by the Plan Administrator of
notification authorizing the fiscal year award.
5.2 Allocation of Deferred Salary. The Salary which is deferred pursuant
-----------------------------
to paragraph 4.2 shall be allocated to the Participant's Reserve Account as of
the last day of the calendar month in which such Salary would otherwise have
been paid, if the Participant is employed as of such date. A Participant whose
employment terminates during the calendar month shall be paid the amount of his
deferred Salary for such month in cash.
5.3 Allocation of Deferred Thrift Benefit. The Deferred Thrift Benefit
-------------------------------------
of a Participant with respect to a calendar month shall be allocated to the
Participant's Reserve Account as of the last day of such calendar month.
5.4 Subtractions from Reserve Account. All distributions, withdrawals
---------------------------------
and forfeitures from a Participant's Reserve Account shall be subtracted when
made.
-6-
<PAGE>
5.5 Deemed Earnings on Reserve Accounts.
-----------------------------------
5.5(a) With respect to the Reserve Account of Participants whose benefits
begin to be paid on or after January 1, 1996 and with respect to earnings
credited for periods beginning on and after July 1, 1995, there shall be
credited daily to the Reserve Account of each Participant earnings and losses
based on the deemed investments selected by the Participant (or, if deceased,
his Beneficiary) in accordance with the procedures adopted for the Plan by the
Administrator from time to time. The available investment options shall be the
funds available for directed investment under the Thrift Plan. For periods
prior to October 1, 1997, the Reserve Account of a Participant who does not make
a deemed investment direction shall be credited with earnings and losses as
though his Reserve Account were invested in the Stable Value Fund under the
Thrift Plan. For periods beginning on and after October 1, 1997, the Reserve
Account of a Participant who does not make a deemed investment direction shall
be credited with earnings and losses as though his Reserve Account were invested
in the Default Fund named under the Thrift Plan
5.5(b) With respect to the Reserve Account of Participants whose benefits
begin to be paid on or before July 1, 1995 and with respect to earnings credited
for periods beginning before July 1, 1995, there shall be credited to the
Reserve Account an additional amount equal to the average balance in the Reserve
Account during such Fiscal Year, multiplied by the rate of interest paid on new
debentures sold by the Plan Sponsor during the Fiscal Year, or in the absence of
such debenture rate, the daily average rate of interest charged by CoBank A.C.B.
for variable term loans during the Fiscal Year.
5.5(c) Notwithstanding the foregoing, for the purpose of determining the
balance of a Participant's Reserve Account as of January 1, 1990 that is to be
transferred to the Rollover Account pursuant to paragraph 6.1, there shall be
credited to the Reserve Account an additional amount equal to the average
balance in the Reserve Account during the period beginning July 1, 1989 and
ending December 31, 1989 ( for purposes of this subparagraph the "Crediting
Period"), multiplied by the rate of interest paid on new debentures sold by the
Plan Sponsor during the Crediting Period, or in the absence of such debenture
rate, the daily average rate of interest charged by the National Bank for
Cooperatives, Baltimore Region for variable term loans during the Crediting
Period plus an amount equal to the April 1, 1990 distribution multiplied by the
rate of interest described above and applied for a three month period.
5.6 Vesting in Reserve Account. Except as provided in paragraph 10.2, a
--------------------------
Participant's rights to the balance in his Reserve Account shall be fully vested
and non-forfeitable at all times, and the termination of his employment as an
Eligible Employee for any reason or his death shall not diminish the amount
payable to the Participant or his Beneficiary.
5.7 Equitable Adjustment in Case of Error or Omission. Where an error or
-------------------------------------------------
omission is discovered in the account of a Participant, the Administrator shall
be authorized to make such equitable adjustment as it deems appropriate.
5.8 Statement of Reserve Account Balance. Within a reasonable time after
------------------------------------
the end of each Fiscal Year, the Administrator shall provide to each Participant
(or, if deceased, to his Beneficiary) a statement of the balance as of such date
in his Reserve Account.
ARTICLE VI
Special Rules Relating to Rollover Account
------------------------------------------
6.1 Transfer to Rollover Account. The balance of a Participant's Reserve
----------------------------
Account as of December 31, 1989 less any subtractions made for distributions
made prior to July 1, 1990 shall be transferred as of January 1, 1990 to the
Rollover Account. Notwithstanding the foregoing, in the event that the balance
of a Participant's Reserve Account as of January 1, 1990 is less than Fifteen
Hundred Dollars ($1,500), such Participant's deferred benefit shall not be
transferred to the Rollover Account but shall remain in and subject to the rules
relating to the Reserve Account.
6.2 Deemed Earnings on Rollover Account. Effective January 1, 1990, at
-----------------------------------
the end of each Fiscal Year or such other crediting period required under the
Plan, there shall be credited to the Rollover Account an additional amount
-7-
<PAGE>
equal to the average balance in the Rollover Account during such Fiscal Year or
other crediting period, multiplied by the following annual rate of interest
determined on the basis of the Participant's age as of January 1, 1990:
Under Age 45 10.50%
45-49 11.00%
50-54 11.50%
55-59 12.50%
60 and Over 13.00%
6.3 Subtractions from Rollover Account. All distributions from a
----------------------------------
Participant's Rollover Account shall be subtracted when made.
6.4 Vesting in Rollover Account. A Participant's rights to the balance
---------------------------
in his Rollover Account shall be fully vested and non-forfeitable at all times,
and the termination of his employment as an Eligible Employee for any reason or
his death shall not diminish the amount payable to the Participant or his
Beneficiary.
6.5 Equitable Adjustment in Case of Error or Omission. Where an error or
-------------------------------------------------
omission is discovered in the Rollover Account of a Participant, the
Administrator shall be authorized to make such equitable adjustment as it deems
appropriate.
6.6 Statement of Rollover Account Balance. Within a reasonable time
-------------------------------------
after the end of each Fiscal Year, the Administrator shall provide to each
Participant (or, if deceased, to his Beneficiary) a statement of the balance as
of such date in his Rollover Account.
6.7 Death Benefits Attributable to Rollover Account.
-----------------------------------------------
6.7(a) Effective July 1, 1990, except as provided in subparagraph 6.9, in
the event a Participant who has a balance in his Rollover Account dies while an
Eligible Employee and before his Benefit Commencement Date, then the Beneficiary
of such Participant shall be entitled to a benefit under the Plan (the "Death
Benefit") in an amount equal to the following:
(i) In the event such Participant's death occurs prior to the date
he reaches age 62, the applicable Death Benefit shall be equal to 70% of the
balance of his Rollover Account determined as though he had lived and
earnings had continued to be credited until the last day of the calendar
month in which he would have reached age 65, or the actual balance in his
Rollover Account as of the next July or January 1 following the date of his
death, if greater.
(ii) In the event such Participant's death occurs on or after the
date he reaches age 62, the applicable Death Benefit shall be equal to 100%
of the balance of his Rollover Account determined as though he had lived and
earnings had continued to be credited until the last day of the calendar
month in which he would have reached age 65, or the actual balance in his
Rollover Account as of the next July 1 or January 1 following the date of
his death, if greater.
6.7(b) In the event a Participant who has a balance in his Rollover Account
dies before his Benefit Commencement Date at a time when he is not an Eligible
Employee, then the Beneficiary of such Participant shall be entitled to receive
the balance in the Participant's Rollover Account determined at the next July 1
or January 1 following his death.
6.8 Disability Benefits Attributable to Rollover Account.
----------------------------------------------------
6.8(a) Effective July 1, 1990, except as provided in subparagraph 6.9, in
the event a Participant who has a balance in his Rollover Account becomes
totally and permanently disabled while an Eligible Employee and before his
-8-
<PAGE>
Benefit Commencement Date, then he shall be entitled to a benefit under the Plan
(the "Disability Benefit") in an amount equal to the following:
(i) In the event such Participant provides proof of his total and
permanent disability prior to the date he reaches age 62, the applicable
Disability Benefit shall be equal to 70% of the balance of his Rollover
Account determined as though earnings had continued to be credited until the
last day of the calendar month in which he would have reached age 65, or the
actual balance in his Rollover Account as of the next July 1 or January 1
following the date proof of disability is furnished, if greater.
(ii) In the event such Participant provides proof of his total and
permanent disability on or after the date he reaches age 62, the applicable
Disability Benefit shall be equal to 100% of the balance of his Rollover
Account determined as though earnings had continued to be credited until the
last day of the calendar month in which he would have reached age 65, or the
actual balance in his Rollover Account as of the next July 1 or January 1
following the date proof of disability is furnished, if greater.
6.8(b) For purposes hereof, the determination of total and permanent
disability shall be made by the Administrator in accordance with the following
standard. A Participant shall be considered to be totally and permanently
disabled if he is unable to perform each of the material duties of his regular
occupation or of any gainful occupation for which he is reasonably fitted taking
into consideration his training, education or experience, as well as prior
earnings. In making its determination, the Administrator may rely on the advice
of one or more physicians appointed or approved by the Plan Sponsor and the
Administrator shall have the right to require further medical examinations from
time to time to determine whether there has been any change in the Participant's
physical condition.
6.8(c) In the event that a Participant's total and permanent disability
ceases:
(i) If he again becomes an Eligible Employee, no further
Disability Benefits shall be paid and the balance in his Rollover Account
shall be recomputed and he shall be entitled to the remainder of his
recomputed Rollover Account (including any Death Benefit, if applicable) in
such manner and at such time as though no total and permanent disability had
occurred. The recomputed balance as of the day following the last disability
payment shall be the amount which would have been in the Rollover Account
had the Participant terminated employment on the date payment of the
Disability Benefit began and received payments on the basis of the balance
as of such date during the period of disability.
(ii) If he does not again become an Eligible Employee, no further
Disability Benefits shall be paid and the balance in his Rollover Account
shall be recomputed and he shall be entitled to any remaining payments on
the basis of the recomputed balance. The recomputed balance as of the day
following the last disability payment shall be the amount which would have
been in the Rollover Account had the Participant terminated employment on
the date as of payment of the Disability Benefit began and received payments
on the basis of the balance as of such date during the period of disability.
6.8(d) In the event a Participant who has a balance in his Rollover Account
provides proof of his total and permanent disability before his Benefit
Commencement Date at a time when he is not an Eligible Employee, then he shall
be entitled to receive the balance in his Rollover Account determined at the
next July 1 or January 1 following the date proof of his total and permanent
disability is provided to the Administrator.
6.9 Restrictions on Death or Disability Benefits. Neither the Death
--------------------------------------------
Benefit nor the Disability Benefit described in this ARTICLE shall be paid under
the following circumstances:
(i) The Participant fails to execute such applications, submit to
such physical examinations and provide such truthful and complete
information as may be requested by the Administrator,
-9-
<PAGE>
(ii) The Participant is determined to be uninsurable based on the
underwriting factors applied by the Administrator, or
(iii) The Participant's death or disability is the result of a
suicide or intentional self-inflicted injury which occurs within the
thirteen (13) month period beginning January 1, 1990.
ARTICLE VII
Funding
-------
7.1 Funding.
-------
7.1(a) The undertaking to pay benefits hereunder shall be unfunded
obligation payable solely from the general assets of the Corporation and subject
to the claims of the Corporation's creditors. The Reserve Account and the
Rollover Account shall be maintained as book reserve accounts solely for
accounting purposes.
7.1(b) Except as provided in the Rabbi Trust established as permitted in
paragraph 7.2, nothing contained in the Plan and no action taken pursuant to the
provisions of the Plan shall create or be construed to create a trust of any
kind or a fiduciary relationship between the Corporation and the Participant or
his Beneficiary or any other person. To the extent that any person acquires a
right to receive payments from the Corporation under the Plan, such rights shall
be no greater than the right of any unsecured general creditor of the
Corporation.
7.1(c) Where more than one Corporation participates in the Plan, the funding
and payment provisions hereof shall apply separately to each such Corporation.
7.1(d) The Plan Sponsor may in its discretion make the payment of any or all
benefits under the Plan in lieu of payment by one or more Corporations. Where
the Plan Sponsor makes payments on behalf of other Corporations, the Plan
Sponsor may require contributions by participating Corporations to the Plan
Sponsor at such times (whether before, at or after the time of payment), in such
amounts and or such basis as it may from time to time determine in order to
defray the cost of benefits and administration of the Plan.
7.2 Use of Rabbi Trust Permitted. Notwithstanding any provision herein
----------------------------
to the contrary, the Plan Sponsor may in its sole discretion elect to establish
and fund a Rabbi Trust for the purpose of providing benefits under the Plan.
ARTICLE VIII
Time and Form of Payment
------------------------
8.1 Current Earnings Fund Share and Executive Bonus Payments. A
--------------------------------------------------------
Participant's Earnings Fund Share and Executive Bonus, or portion thereof, for a
Fiscal Year for which no deferral election has been properly filed by the
Participant shall be paid to the Participant (or his Beneficiary) as soon as
practicable following the close of the Fiscal Year.
8.2 Distribution of Accounts.
------------------------
8.2(a) Distributions from a Participant's Reserve Account and Rollover
Account shall commence on the Participant's Benefit Commencement Date.
8.2(b) Distributions from a Participant's Reserve Account which begin to be
paid on or after January 1, 1996 shall be made in quarterly installment payments
to the Participant or his Beneficiary over the Distribution Period on the first
day of each calendar quarter until the Participant's Reserve Account has been
paid in full as follows:
(i) The initial quarterly payment shall be based on the balance in
the Participant's Reserve Account at the end of the calendar quarter
immediately preceding the Benefit Commencement Date. The initial payment
shall be
-10-
<PAGE>
an amount equal to the applicable preceding quarterly balance divided by 41
in the case of a July 1 Benefit Commencement Date or 39 in the case of a
January 1 Benefit Commencement Date. The initial payment amount shall
continue to be made quarterly until the following October 1.
(ii) The quarterly payment amount shall be recalculated and
adjusted beginning with each October payment and continuing until the next
October payment when the payment amount shall again be recalculated based on
the balance in the Participants' Reserve Account after the preceding July 1
payment. The new quarterly payment at each October 1 shall be equal to that
adjusted balance divided by the remaining number of payments to be made.
(iii) The final quarterly payment shall be the balance in the
Participant's Reserve Account and will be paid as soon as reasonably
possible following the completion of the final June 30 valuation.
(iv) All payments, other than the final payment, shall be rounded
to the nearest whole dollar.
(v) All payments will be deducted on a pro rata basis from the
investment options which the Participant has selected pursuant to
subparagraph 5.5(a) as deemed investments of the balance of his Reserve
Account.
(vi) Effective July 1 of a final payment year which begins prior to
October 1, 1997, the Reserve Account of the Participant shall be credited
with deemed earnings and losses based on the performance of the Stable Value
Fund investment under the Thrift Plan.
(vii) Effective July 1 of a final payment year which begins on or
after October 1, 1997, the Reserve Account of the Participant shall be
credited with deemed earnings and losses based on the performance of the
Default Fund investment under the Thrift Plan.
8.2(c) Distributions from a Participant's Reserve Account which begin on or
before July 1, 1995 shall be made in quarterly payments to the Participant or
his Beneficiary over the Distribution Period on the first day of each calendar
quarter until the Participant's Reserve Account has been paid in full as
follows:
(i) The quarterly payments during the Distribution Period are
intended to be substantially equal. Annual recalculations applying the
Payment Factors shall be made in order to compensate for variations between
actual deemed earnings credited pursuant to paragraph 5.5 and the assumed
average rate of ten percent (10%) per annum.
(ii) The initial quarterly payment shall be based on the balance in
Participant's Reserve Account on the immediately preceding June 30th in the
case of a January 1 Benefit Commencement Date and on the June 30th of the
immediately preceding calendar year in the case of a July 1 Benefit
Commencement Date. The initial payment amount shall be an amount equal to
the applicable June 30th balance multiplied by .041527 in the case of a
July 1 Benefit Commencement Date or .040796 in the case of a January 1
Benefit Commencement Date. The initial payment amount shall continue to be
made quarterly until the following October 1.
(iii) The quarterly payment amount shall be recalculated and
adjusted beginning with each October payment and continuing until the next
October payment when the quarterly payment amount shall again be
recalculated. The recalculation shall be based on the balance in the
Participant's Reserve Account after the preceding July payment. The new
quarterly payment amount at each October 1 shall be an amount equal to that
adjusted balance multiplied by the applicable Payment Factor for the
quarterly payment number as of which the recalculation occurs.
(iv) The final quarterly payment shall be the balance in the
Participant's Reserve Account.
(v) All payments, other than the final payment, shall be rounded
to the nearest whole dollar.
(vi) The "Payment Factors" are as follows:
-11-
<PAGE>
<TABLE>
<CAPTION>
Payment Factors
-----------------------------------------------
Quarterly July 1 Benefit January 1 Benefit
Payment Number Commencement Date Commencement Date
-------------- ----------------- -----------------
<S> <C> <C>
1 .041527 .040796
2 .039233
4 .041859
6 .041859
8 .045187
10 .045187
12 .049517
14 .049517
16 .055352
18 .055352
20 .063594
22 .063594
24 .076051
26 .076051
28 .096940
30 .096940
32 .138907
34 .138907
36 .265200
38 .265200
39 Balance
41 Balance
</TABLE>
8.2(d) Distribution from a Participant's Rollover Account shall normally be
made in equal quarterly payments to the Participant or his Beneficiary over the
Distribution Period on the first day of each calendar quarter until the
Participant's Rollover Account has been paid. The quarterly payments shall be
determined on the basis of the applicable interest rate described in paragraph
6.2.
8.2(e) For purposes hereof the term "Distribution Period":
(i) When used with respect to the Reserve Account, the forty-one
(41) consecutive calendar quarters beginning with July in the case of a July
1 Benefit Commencement Date or the thirty-nine (39) consecutive calendar
quarters beginning with January in the case of a January 1 Benefit
Commencement Date.
(ii) When used with respect to the Rollover Account, the forty
(40) consecutive calendar quarters beginning with the Benefit Commencement
Date.
8.2(f) Notwithstanding the foregoing:
(i) The Board shall have the right, in its sole discretion to
vary the manner and the time of making the installment distribution provided
in this paragraph by making such distributions in a lump sum equal to the
balance in the Reserve Account and the Rollover Account at the time in
question or over a shorter or longer period than required herein as it may
find appropriate.
(ii) The Board, in its discretion, may require that the balance or
a portion of the balance in the Participant's Reserve Account or Rollover
Account shall be paid as a lump sum where the balance or a portion of the
-12-
<PAGE>
balance due to the Participant or any Beneficiary under either or both the
Reserve Account or the Rollover Account as of the Benefit Commencement Date
is twenty five hundred dollars ($2,500) or less.
(iii) All lump sum payments made pursuant to this subparagraph shall
be made on July 1 of the calendar year in which the Benefit Commencement
Date otherwise occurs, or if later, the July 1 next following the Board's
determination to make such payment.
8.3 Death After Benefit Commencement. If a Participant dies after his
--------------------------------
Benefit Commencement Date, no benefits shall be payable other than the remaining
benefits due to the Participant under the Plan which shall be paid to his
Beneficiary.
8.4 Benefit Determination and Payment Procedure. The Administrator shall
-------------------------------------------
make all determinations concerning eligibility for benefits under the Plan, the
time or terms of payment, and the form or manner of payment to the Participant
(or the Participant's Beneficiary in the event of the death of the Participant).
The Administrator shall promptly notify the Corporation and, where payments are
to be made from a Rabbi Trust, the trustee thereof, of each such determination
that benefit payments are due and provide to the Corporation or trustee all
other information necessary to allow the Corporation or trustee to carry out
said determination, whereupon the Corporation or trustee shall pay such benefits
in accordance with the Administrator's determination.
8.5 Payments to Minors and Incompetents. If a Participant or Beneficiary
-----------------------------------
entitled to receive any benefits hereunder is a minor or is adjudged to be
legally incapable of giving valid receipt and discharge for such benefits, or is
deemed so by the Administrator, benefits will be paid to such person as the
Administrator may designate for the benefit of such Participant or Beneficiary.
Such payments shall be considered a payment to such Participant or Beneficiary
and shall, to the extent made, be deemed a complete discharge of any liability
for such payments under the Plan.
8.6 Distribution of Benefit When Distributee Cannot Be Located. The
----------------------------------------------------------
Administrator shall make all reasonable attempts to determine the identity
and/or whereabouts of a Participant entitled to benefits under the Plan,
including the mailing by certified mail of a notice to the last known address
shown on the Corporation's or the Administrator's records. If the Administrator
is unable to locate such a person entitled to benefits hereunder, or if there
has been no claim made for such benefits, the Corporation shall continue to hold
the benefit due such person, subject to any applicable statute of escheats.
8.7 Claims Procedure.
----------------
8.7(a) A Participant or Beneficiary (the "claimant") shall have the right to
request any benefit under the Plan by filing a written claim for any such
benefit with the Administrator on a form provided by the Administrator for such
purpose. The Administrator shall give such claim due consideration and shall
either approve or deny it in whole or in part. Within ninety (90) days
following receipt of such claim by the Administrator, notice of any denial
thereof, in whole or in part, shall be delivered to the claimant or his duly
authorized representative or such notice of denial shall be sent by mail to the
claimant or his duly authorized representative at the address shown on the claim
form or such individual's last known address. The aforesaid ninety (90) day
response period may be extended to one hundred eighty (180) days after receipt
of the claimant's claim if special circumstances exist and if written notice of
the extension to one hundred eighty (180) days indicating the special
circumstances involved and the date by which a decision is expected to be made
is furnished to the claimant within ninety (90) days after receipt of the
claimant's claim. Such notice of denial shall be written in a manner calculated
to be understood by the claimant and shall:
(i) Set forth a specific reason or reasons for the denial,
(ii) Make specific reference to the pertinent provisions of the
Plan on which any denial of benefits is based,
-13-
<PAGE>
(iii) Describe any additional material or information necessary for
the claimant to perfect the claim and explain why such material or
information is necessary, and
(iv) Explain the claim review procedure of subparagraph 8.7(b).
If such notice of denial is not provided to the claimant within the applicable
ninety (90) day or one hundred eighty (180) day period, the claimant's claim
shall be considered denied for purposes of the claim review procedure of
subparagraph 8.7(b).
8.7(b) A Participant or Beneficiary whose claim filed pursuant to
subparagraph 8.7(a) has been denied, in whole or in part, may, within sixty (60)
days following receipt of notice of such denial, or following the expiration of
the applicable period provided for in subparagraph 8.7(a) for notifying the
claimant of the decision on the claim if no notice of denial is provided, make
written application to the Administrator for a review of such claim, which
application shall be filed with the Administrator. For purposes of such review,
the claimant or his duly authorized representative may review Plan documents
pertinent to such claim and may submit to the Administrator written issues and
comments respecting such claim. The Administrator may schedule and hold a
hearing. The Administrator shall make a full and fair review of any denial of a
claim for benefits and issue its decision thereon promptly, but no later than
sixty (60) days after receipt by the Administrator of the claimant's request for
review, or one hundred twenty (120) days after such receipt if a hearing is to
be held or if other special circumstances exist and if written notice of the
extension to one hundred twenty (120) days is furnished to the claimant within
sixty (60) days after the receipt of the claimant's request for a review. Such
decision shall be in writing, shall be delivered or mailed by the Administrator
to the claimant or his duly authorized representative in the manner prescribed
in subparagraph 8.7(a) for notices of approval or denial of claims, and shall:
(i) Include specific reasons for the decision,
(ii) Be written in a manner calculated to be understood by the
claimant, and
(iii) Contain specific references to the pertinent Plan provisions
on which the decision is based.
The Administrator's decision made in good faith shall be final.
ARTICLE IX
Beneficiary Designation
-----------------------
9.1 Beneficiary Designation.
-----------------------
9.1(a) Each Participant shall be entitled to designate a Beneficiary
hereunder by filing a designation in writing with the Administrator on the form
provided for such purpose. Any Beneficiary designation made hereunder shall be
effective only if signed and dated by the Participant and delivered to the
Administrator prior to the time of the Participant's death. Any Beneficiary
designation hereunder shall remain effective until changed or revoked hereunder.
9.1(b) Any Beneficiary designation may include multiple, contingent or
successive Beneficiaries and may specify the proportionate distribution to each
Beneficiary.
9.1(c) A Beneficiary designation may be changed by the Participant at any
time, or from time to time, by filing a new designation in writing with the
Administrator.
9.1(d) If the Participant dies without having designated a Beneficiary, or
if the Beneficiary so designated has predeceased him, then his estate shall be
deemed to be his Beneficiary.
9.1(e) If a Beneficiary of the Participant shall survive the Participant but
shall die before the Participant's entire benefit under the Plan has been
distributed, then, absent any other provision by the Participant, the unpaid
balance thereof
-14-
<PAGE>
shall be distributed to the such other beneficiary named by the
deceased Beneficiary to receive his interest or, if none, to the estate of the
deceased Beneficiary. If multiple beneficiaries are designated, absent any
other provision by the Participant, those named or the survivor of them shall
share equally in any amounts payable hereunder.
ARTICLE X
Withdrawals
-----------
10.1 Severe Financial Hardship Withdrawals.
-------------------------------------
10.1(a) In the event of any Severe Financial Hardship and upon written
request of a Participant (or, if subsequent to his death, his Beneficiary), the
Administrator in its sole discretion may pay in one lump sum to the Participant
(or his Beneficiary) all or any portion of the Participant's Reserve Account
and/or Rollover Account. Any such payment shall be limited to that amount
reasonably necessary to alleviate the Severe Financial Hardship, and any
remaining payments or account balances shall be appropriately adjusted.
10.1(b) For purposes hereof, a "Severe Financial Hardship" means an
unforeseeable emergency, and shall be defined in a manner consistent with the
meaning ascribed thereto under Section 457 of the Code as a severe financial
hardship of the Participant (or, if subsequent to his death, his Beneficiary)
resulting from a sudden and unexpected illness, accident or loss of property due
to casualty, or any other similar extraordinary and unforeseeable circumstance
arising as a result of events beyond the control of the Participant (or, if
subsequent to his death, his Beneficiary).
10.2 Other Withdrawals. Upon written request at any time prior to pay out
-----------------
of the entire Reserve Account and Rollover Account, a Participant may elect to
withdraw all or a portion of his Reserve Account and/or his Rollover Account
subject to the following forfeiture provisions:
(i) The Participant shall forfeit ten percent (10%) of the amount
elected to be withdrawn. Such forfeited amount shall be subtracted from the
account from which withdrawn but shall not at any time be distributed to the
Participant; and
(ii) The Participant shall forfeit the right to make additional
deferrals of Salary and/or of his Earnings Fund Share and Executive Bonus
for one full Plan Year following the withdrawal.
It is intended that the forfeitures described herein constitute a "substantial
limitation or restriction" on the right to receive the amounts held in the
Reserve Account and the Rollover Account as that term is used for purposes of
Sections 61 and 451 of the Code. Any remaining payments or account balances
shall be appropriately adjusted.
ARTICLE XI
Plan Administration
-------------------
11.1 Plan Administrator. The Plan shall be administered by a plan
------------------
administrator (the "Administrator") to be appointed by and serve at the pleasure
of the Plan Sponsor, or in the absence of the appointment or in the event any
person so appointed shall fail or cease to serve, the Plan Sponsor shall be the
Administrator.
11.2 Power and Authority of Administrator. The Administrator is hereby
------------------------------------
vested with all the power and authority necessary in order to carry out its
duties and responsibilities in connection with the administration of the Plan,
including the power to interpret the provisions of the Plan. For such purpose,
the Administrator shall have the power to adopt rules and regulations consistent
with the terms of the Plan.
-15-
<PAGE>
ARTICLE XII
Amendment and Termination of Plan
---------------------------------
12.1 Amendment or Termination of the Plan.
------------------------------------
12.1(a) The Plan may be terminated at any time by the Board of the Plan
Sponsor. The Plan may be amended in whole or in part from time to time by the
Board of the Plan Sponsor effective as of any date specified. No amendment or
termination shall operate:
(i) To decrease a Participant's Reserve Account balance or Rollover
Account balance as of the earlier of the date on which the amendment or
termination is approved by the Board of the Plan Sponsor or the date on
which an instrument of amendment or termination is signed or approved on
behalf of the Plan Sponsor, or
(ii) To vary the distribution plan of a Participant under paragraph
6.2 after the Participant retires or otherwise ceases to be employed by the
Affiliated Employers without the consent of the Participant or, if deceased,
his Beneficiary.
12.1(b) Notwithstanding the foregoing, the Board hereby delegates to the
Chief Executive Officer the right to modify, alter, or amend the Plan in whole
or in part to make any technical modification, alteration or amendment which in
the opinion of counsel for the Plan Sponsor is required by law and is deemed
advisable by the Chief Executive Officer and to make any other modification,
alteration or amendment which does not, in the Chief Executive Officer's view,
substantially increase costs, contributions or benefits and does not materially
affect the eligibility, vesting or benefit accrual or allocation provisions of
the Plan.
ARTICLE XIII
Adoption by Additional Corporations
-----------------------------------
13.1 Adoption by Additional Corporations. Any Subsidiary of the Plan
-----------------------------------
Sponsor may adopt the Plan with the consent of the Board of the Plan Sponsor and
approval by its Board.
ARTICLE XIV
Miscellaneous
-------------
14.1 Non-assignability. The interests of each Participant under the
-----------------
Plan are not subject to claims of the Participant's creditors; and neither the
Participant, nor his Beneficiary, shall have any right to sell, assign, transfer
or otherwise convey the right to receive any payments hereunder or any interest
under the Plan, which payments and interest are expressly declared to be non-
assignable and non-transferable.
14.2 Right to Require Information and Reliance Thereon. The
-------------------------------------------------
Corporation and Administrator shall have the right to require any Participant,
Beneficiary or other person receiving benefit payments to provide it with such
information, in writing, and in such form as it may deem necessary to the
administration of the Plan and may rely thereon in carrying out its duties
hereunder. Any payment to or on behalf of a Participant or Beneficiary in
accordance with the provisions of the Plan in good faith reliance upon any such
written information provided by a Participant or any other person to whom such
payment is made shall be in full satisfaction of all claims by such Participant
and his Beneficiary; and any payment to or on behalf of a Beneficiary in
accordance with the provision so the Plan in good faith reliance upon any such
written information provided by such Beneficiary or any other person to whom
such payment is made shall be in full satisfaction of all claims by such
Beneficiary.
-16-
<PAGE>
14.3 Notices and Elections. All notices required to be given in writing
---------------------
and all elections required to be made in writing, under any provision of the
Plan, shall be invalid unless made on such forms as may be provided or approved
by the Administrator and, in the case of a notice or election by a Participant
or Beneficiary, unless executed by the Participant or Beneficiary giving such
notice or making such election. Subject to limitations under applicable
provisions of the Code or the Act (such as the requirement that deferral
elections be in writing), the Administrator is authorized in its discretion to
accept other means for receipt of effective notices, elections, consent and/or
application by Participants and/or Beneficiaries, including but not limited to
interactive voice systems, on such basis and for such purposes as it determines
from time to time.
14.4 Delegation of Authority. Whenever the Plan Sponsor or any other
-----------------------
Corporation is permitted or required to perform any act, such act may be
performed by its President or Chief Executive Officer or other person duly
authorized by its President or Chief Executive Officer or the Board of the
Corporation.
14.5 Service of Process. The Administrator shall be the agent for service
------------------
of process on the Plan.
14.6 Governing Law. The Plan shall be construed, enforced and
-------------
administered in accordance with the laws of the Commonwealth of Virginia, and
any federal law which preempts the same.
14.7 Binding Effect. The Plan shall be binding upon and inure to the
--------------
benefit of the Corporation, its successors and assigns, and the Participant and
his heirs, executors, administrators and legal representatives.
14.8 Severability. If any provision of the Plan should for any reason be
------------
declared invalid or unenforceable by a court of competent jurisdiction, the
remaining provisions shall nevertheless remain in full force and effect.
14.9 No Effect on Employment Agreement. The Plan shall not be considered
---------------------------------
or construed to modify, amend or supersede any employment or other agreement
between the Corporation and the Participant heretofore or hereafter entered into
unless so specifically provided.
14.10 Gender and Number. In the construction of the Plan, the masculine
-----------------
shall include the feminine or neuter and the singular shall include the plural
and vice-versa in all cases where such meanings would be appropriate.
14.11 Titles and Captions. Titles and captions and headings herein have
-------------------
been inserted for convenience of reference only and are to be ignored in any
construction of the provisions hereof.
IN WITNESS WHEREOF, the Plan Sponsor has caused the Plan to be signed on its
behalf by its duly authorized officer or member of its Board of Directors on the
day, month and year aforesaid.
SOUTHERN STATES COOPERATIVE,
INCORPORATED, Plan Sponsor
By: /s/ Gene E. James
----------------------------------
Its President & CEO
----------------------------------
-17-
<PAGE>
SOUTHERN STATES
DEFERRED COMPENSATION PLAN
(As Restated July 1, 1995)
Chief Executive Officer Incentive Program
Appendix A
----------
A-1.1 Definitions.
-----------
A-1.1(a) "EBT": Earnings before tax determined based on the audited
consolidated financial statements of the Plan Sponsor for the Fiscal Year and
appearing as "Savings from continuing operations before income taxes and
cumulative effect of change in accounting principles" adjusted for years
beginning on or after July 1, 1999 to exclude the equity in undistributed
earnings (losses) of associated companies for the Fiscal Year, net of deferred
income taxes.
A-1.1(b) "Incentive Bank":
(i) With respect to the first complete Fiscal Year of any
Chief Executive Officer's term, One Hundred Fifty Thousand Dollars
($150,000) plus any Incentive Formula Award for the Fiscal Year.
(ii) With respect to any Fiscal Year remaining in the Chief
Executive Officer's term, the ending balance in the Incentive Bank for
the prior Fiscal Year less the Incentive Distribution attributable to the
prior Fiscal Year, plus any Incentive Formula Award for the Fiscal Year.
Notwithstanding the foregoing, the ending balance in the Incentive Bank for
the prior Fiscal Year, beginning with the ending balance for the Fiscal Year
ending June 30, 1999, shall not reflect a negative balance.
A-1.1(c) "Incentive Formula Award": 1.5% of the amount by which EBT
for the current Fiscal Year exceeds 10% of the sum of the Plan Sponsor's total
Stockholders' and Patrons Equity determined at the end of the prior Fiscal Year.
For the first five (5) Fiscal Years of employment as Chief Executive Officer, no
Incentive Formula Award will be granted for a partial Fiscal Year. After
completion of five (5) complete Fiscal Years of employment as Chief Executive
Officer, the Incentive Formula Award shall be determined based on the pro rata
portion of the Fiscal Year during which the Chief Executive Officer was employed
in that capacity.
A-1.1(d) "Incentive Distribution": One-third (1/3) of the balance in
the Incentive Bank as of the end of a Fiscal Year, provided, however, no
Incentive Distribution shall be payable for any Fiscal Year in which the Plan
Sponsor incurs a loss.
A-1.1(e) "Stockholders' and Patrons Equity": Stockholders' and
Patrons Equity determined based on audited consolidated financial statements of
the Plan Sponsor at the end of the prior Fiscal Year adjusted to exclude
preferred stocks and accumulated equity in undistributed earnings (losses) of
associated companies, net of deferred income taxes.
A-1.2 Chief Executive Officer Incentive Program. An Incentive
-----------------------------------------
Distribution determined each Fiscal Year shall be payable to the Chief Executive
Officer following the close of such Fiscal Year. If no deferral election is in
place under the Plan, the Incentive Distribution shall be paid to the Chief
Executive Officer, or if deceased, to his Beneficiary, as soon as reasonably
practical following the completion of the audit of the financial statements for
the Fiscal Year.
A-1.3 Forfeiture of Incentive Bank. The entire positive balance of
----------------------------
the Incentive Bank shall be forfeited in the event the Chief Executive Officer
terminates employment with the Plan Sponsor (whether voluntarily or
involuntarily), for any reason including death or disability, prior to
completing at least three (3) complete Fiscal Years of employment as
-A-1-
<PAGE>
Chief Executive Officer. The lesser of the entire positive balance of the
Incentive Bank or One Hundred Fifty Thousand Dollars ($150,000) of the Incentive
Bank will be forfeited in the event the Chief Executive Officer terminates
employment with the Plan Sponsor (whether voluntarily or involuntarily), for any
reason (including death or disability) other than Normal Retirement under the
Retirement Plan for Employees of Southern States, prior to the completing at
least five (5) complete Fiscal Years of employment as Chief Executive Officer.
A-1.4 Payout of Incentive Bank Balance. Upon the Chief Executive
--------------------------------
Officer's termination of employment with the Plan Sponsor for any reason, the
balance in the Incentive Bank, not forfeited pursuant to paragraph A-1.3, shall
be paid to the Chief Executive Officer (or, if deceased, his Beneficiary) as
soon as reasonably possible following the end of the Fiscal Year.
A-1.5 Board Discretion. The Board reserves the right at any time to
----------------
adjust any component of the Chief Executive Officer Incentive Program, including
the right to adjust EBT for unusual gains or losses incurred during a Fiscal
Year. However, the Board may not reduce the balance in the Incentive Bank or
defer payment of an Incentive Distribution for which no deferral election is in
place under the Plan.
A-1.6 Separate Incentive Bank for Each CEO. In the event that the Board
------------------------------------
continues the Chief Executive Officer Incentive Program for an individual who
succeeds the individual in that position on July 1, 1997, a new and separate
Incentive Bank shall be established for such successor.
-A-2-
<PAGE>
SOUTHERN STATES
DEFERRED COMPENSATION PLAN
(As Restated July 1, 1995)
Eligible Executives Incentive Program
Appendix B
----------
B-1.1 Definitions.
-----------
B-1.1(a) "EBT": Earnings before tax determined based on the audited
consolidated financial statements of the Plan Sponsor for the Fiscal Year and
appearing as "Savings from continuing operations before income taxes and
cumulative effect of change in accounting principles".
B-1.1(b) "Incentive Bank":
(i) With respect to the first complete Fiscal Year of any
Eligible Executive's term, any Incentive Formula Award for the Fiscal Year.
(ii) With respect to any Fiscal Year remaining in the Eligible
Executives' term, the ending balance in the Incentive Bank for the prior
Fiscal Year less the Incentive Distribution attributable to the prior Fiscal
Year, plus any Incentive Formula Award for the Fiscal Year.
B-1.1(c) "Incentive Formula Award": .40% of the amount by which EBT
for the current Fiscal Year exceeds a 4% return on Total Assets determined at
the end of the prior Fiscal Year.
B-1.1(d) "Incentive Distribution": One-half (1/2) of the balance in
the Incentive Bank as of the end of a Fiscal Year.
B-1.1(e) "Total Assets": Total assets determined based on the audited
consolidated financial statements of the Plan Sponsor for the Fiscal Year and
appearing at the bottom of the balance sheet of the annual report of the Plan
Sponsor.
B-1.2 Eligible Executives Incentive Program. An Incentive
-------------------------------------
Distribution determined each Fiscal Year shall be payable to each Eligible
Executive following the close of such Fiscal Year. If no deferral election is in
place under the Plan, the Incentive Distribution shall be paid to the Eligible
Executive, or if deceased, to his Beneficiary, as soon as reasonably practical
following the completion of the audit of the financial statements for the Fiscal
Year.
B-1.3 Payout of Incentive Bank Balance. Upon an Eligible
--------------------------------
Executive's termination of employment with the Plan Sponsor for any reason, the
balance in the Incentive Bank shall be paid to such Eligible Executive (or, if
deceased, his Beneficiary) as soon as reasonably possible following the end of
the Fiscal Year.
B-1.4 Board Discretion. The Board reserves the right at any time to
----------------
adjust any component of the Eligible Executives Incentive Program, including the
right to adjust EBT for unusual gains or losses incurred during a Fiscal Year.
However, the Board may not reduce the balance in the Incentive Bank or defer
payment of an Incentive Distribution for which no deferral election is in place
under the Plan.
B-1.5 Separate Incentive Bank for Each Eligible Executives. In the
----------------------------------------------------
event that the Board continues the Eligible Executives Incentive Program for any
individual who succeeds the individuals in those positions on July 1, 1998, a
new and separate Incentive Bank shall be established for such successor.
-B-1-
<PAGE>
EXHIBIT 10.13
SOUTHERN STATES
DIRECTORS DEFERRED COMPENSATION PLAN
(As Restated Effective July 1, 1989)
Including:
1. First Amendment
(Effective July 1, 1995)
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
Definition of Terms
-------------------
1.1 Administrator........................................................................ 1
1.2 Beneficiary.......................................................................... 1
1.3 Benefit Commencement Date............................................................ 1
1.4 Benefit Schedule..................................................................... 1
1.5 Board................................................................................ 1
1.6 Code ................................................................................ 1
1.7 Compensation......................................................................... 1
1.8 Corporation.......................................................................... 1
1.9 Deferral Account..................................................................... 1
1.9(a) Insured Deferral Account............................................................. 2
1.9(b) Plan Deferral Account................................................................ 2
1.10 Deferral Benefit..................................................................... 2
1.11 Deferral Contributions............................................................... 2
1.12 Deferral Cycle....................................................................... 2
1.13 Deferral Cycle Amount................................................................ 2
1.14 Director............................................................................. 2
1.15 Effective Date....................................................................... 2
1.16 Eligible Director.................................................................... 2
1.17 Participant.......................................................................... 2
1.18 Plan ................................................................................ 2
1.19 Plan Sponsor......................................................................... 3
1.20 Plan Year............................................................................ 3
1.20A Rabbi Trust .........................................................................
1.21 Rate of Return....................................................................... 3
1.22 Scheduled Death Benefit.............................................................. 3
ARTICLE II
Eligibility and Participation
-----------------------------
2.1 Eligibility.......................................................................... 3
2.2 Notice and Election Regarding Active Participation................................... 4
2.3 Commencement of Active Participation................................................. 4
2.4 Length of Participation.............................................................. 4
ARTICLE III
Deferral Election, Deferral Account and Adjustments and Benefit Schedules
-------------------------------------------------------------------------
3.1 Deferral Account..................................................................... 5
3.2 Deferral Election.................................................................... 5
3.3 Termination of Deferral Election and Completion of Contribution
of Deferred Cycle Amount............................................................ 6
3.4 Crediting of Deemed Earnings to Deferral Accounts.................................... 6
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
3.5 Equitable Adjustment in Case or Error or Omission................. 6
3.6 Statement of Deferral Account Balance............................. 6
3.7 Issuance of Benefit Schedule...................................... 6
ARTICLE IV
Vesting
-------
4.1 Vesting........................................................... 7
ARTICLE V
Funding
-------
5.1 Funding........................................................... 7
5.2 Use of Rabbi Trust Permitted...................................... 8
ARTICLE VI
Payment of Benefits
-------------------
6.1 Deferral Benefit.................................................. 8
6.2 Time and Form Payment of Insured Deferral Account................. 8
6.3 Time and Form of Payment of Plan Deferral Account................. 8
6.4 Acceleration of Time or Form of Payment........................... 9
6.5 Early Withdrawal Rights........................................... 9
6.6 Benefit Determination and Payment Procedure....................... 9
6.7 Payments to Minors and Incompetents............................... 9
6.8 Distribution of Benefit When Distributee Cannot Be Located........ 10
ARTICLE VII
Beneficiary Designation
-----------------------
7.1 Beneficiary Designation........................................... 10
ARTICLE VIII
Plan Administrator
------------------
8.1 Plan Administrator................................................ 10
8.2 Power and Authority of Administrator.............................. 10
ARTICLE IX
Amendment and Termination of Plan
---------------------------------
9.1 Amendment or Termination of the Plan.............................. 11
ARTICLE X
Adoption by Additional Corporations
-----------------------------------
10.1 Adoption by Additional Corporations.............................. 11
</TABLE>
-ii-
<PAGE>
<TABLE>
ARTICLE XI
Miscellaneous
-------------
<S> <C>
11.1 Non-assignability.............................................. 11
11.2 Right to Require Information and Reliance Thereon.............. 11
11.3 Notices and Elections.......................................... 11
11.4 Delegation of Authority........................................ 11
11.5 Service of Process............................................. 11
11.6 Governing Law.................................................. 11
11.7 Binding Effect................................................. 12
11.8 Severability................................................... 12
11.9 No Effect on Employment Agreement.............................. 12
11.10 Gender and Number.............................................. 12
11.11 Titles and Captions............................................ 12
</TABLE>
-iii-
<PAGE>
This restatement of the DIRECTORS DEFERRED COMPENSATION PLAN
(hereinafter the "Plan") is adopted the day of , 1989 by SOUTHERN STATES
COOPERATIVE, INCORPORATED, a Virginia corporation (hereinafter called the "Plan
Sponsor");
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Plan Sponsor deems it desirable to amend and restate the
Plan as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the covenants
herein contained, the Plan is amended and restated as herein set forth:
ARTICLE I
Definition of Terms
-------------------
The following words and terms as used in this Plan shall have the
meaning set forth below, unless a different meaning is clearly required by the
context:
1.1 "Administrator": The Plan Administrator provided for in Article
VIII hereof.
1.2 "Beneficiary": The person or persons designated by a Participant
or otherwise entitled pursuant to Article VII to receive benefits under the Plan
attributable to such Participant after the death of such Participant.
1.3 "Benefit Commencement Date": The first day of the first period
for which a Participant's Deferral Benefit, if any, under the Plan commences to
be paid as specified in Article VI. There may be separate Benefit Commencement
Dates for different benefits under the Plan.
1.4 "Benefit Schedule": The exhibit or schedule, provided initially
or after revision, attached to a Participant's Deferral Election with respect to
a Deferral Cycle for the purpose of specifying the amount and calculation of
both the Participant's Scheduled Death Benefit for such Deferral Election and
the Rate of Return with respect to such Deferral Election and such other
information as the Administrator deems appropriate. Benefit Schedules may be
provided with estimated figures so long as final Benefit Schedules for a
Deferral Cycle are provided within a reasonable time after the beginning of the
Deferral Cycle.
1.5 "Board": The present and any succeeding Board of Directors of the
Plan Sponsor, unless such term is used with respect to a particular Corporation
and its Directors, in which event it shall mean the present and any succeeding
Board of Directors of that Corporation.
1.6 "Code": The Internal Revenue Code of 1986, as the same may be
amended from time to time, or the corresponding section of any subsequent
Internal Revenue Code, and, to the extent not inconsistent therewith,
regulations issued thereunder.
1.7 "Compensation": A Participant's retainers, fees and other
remuneration for personal services rendered to the Corporation as an Eligible
Director and otherwise payable currently in cash, but exclusive of expense
allowances and reimbursements and amounts previously deferred under this Plan.
1.8 "Corporation": Southern States Cooperative, Incorporated, a
Virginia corporation, and any of its subsidiaries, affiliates, and other related
corporations (whether by management agreement or ownership) approved by the
Board of the Plan Sponsor for participation in and adopting the Plan.
1.9 "Deferral Account": An unfunded, bookkeeping account maintained
on the books of the Corporation for a Participant which reflects his interest in
amounts attributable to Deferral Contributions under the Plan. The Deferral
Account of a Participant consists of two subdivisions, as follows:
1.9(a) "Insured Deferral Account": The Participant's account
balance, if any, under the Plan attributable to:
-1-
<PAGE>
(i) His Deferral Contributions made to the Plan with respect to
Compensation earned prior to July 1, 1989, but only if he elects in or
as part of a Deferral Election filed for a Deferral Cycle to have such
deferred amount applied to a Deferral Cycle, and
(ii) His Deferral Contributions made to the Plan with respect to
Compensation earned after June 30, 1988, unless the Participant elects
that such contributions shall be allocated to the Plan Deferral Account.
Separate subdivisions of the Insured Deferral Account shall be maintained to
reflect Deferral Contributions made with respect to different Deferral Cycles.
1.9(b) "Plan Deferral Account": The Participant's account balance, if
any, under the Plan attributable to his Deferral Contributions made with respect
to Compensation earned prior to July 1, 1989 (unless he elects otherwise) and
his Deferral Contributions made with respect to Compensation earned after June
30, 1989 and which the Participant elects to allocate to the Plan Deferral
Account.
1.10 "Deferral Benefit": The deferred amount due a Participant or his
Beneficiary under the Plan, as determined by the balance in the Participant's
Deferral Account.
1.11 "Deferral Contributions": That portion of a Participant's
Compensation which is deferred under the Plan
1.12 "Deferral Cycle": A period of three (3), or such other number as
the Plan Administrator may provide or permit in a Participant's Deferral
Election, years each beginning on July 1 during which it is intended that the
Participant contribute a stated Deferral Cycle Amount to the Plan.
(i) A Deferral Cycle is identified by the first Plan Year in
which the Deferral Cycle begins and, when determined to be appropriate
by the Administrator, by the last Plan Year in which the Deferral Cycle
ends.
(ii) A Participant may not have more than one Deferral Cycle in
effect at any time.
1.13 "Deferral Cycle Amount": With respect to a Deferral Cycle, the
Deferral Contributions which a Participant states, in his first or timely
amended Deferral Election for the Deferral Cycle, he intends to contribute for
each year of the Deferral Cycle.
1.14 "Director": An individual who is employed as a member of the
Board.
1.15 "Effective Date": The Effective Date of the Plan is May 1, 1987.
The Effective Date of this restatement of the Plan is July 1, 1989.
1.16 "Eligible Director": A Director who is not a common law employee
of the Corporation.
1.17 "Participant": An Eligible Director who elects to participate in
the Plan for so long as he is considered a Participant as provided in Article II
of the Plan. Participants may be classified as Active or Inactive Participants
as provided in Article II.
1.18 "Plan": This document, as contained herein or duly amended,
which shall be known as "Southern States Directors Deferred Compensation Plan".
1.19 "Plan Sponsor": Southern States Cooperative, Incorporated, a
Virginia corporation or its corporate successor.
1.20 "Plan Year": The calendar year.
1.20A "Rabbi Trust": A trust fund described in paragraph 5.2 and
established or maintained for the Plan.
-2-
<PAGE>
1.21 "Rate of Return":
1.21(a) With respect to:
(i) A Participant's Insured Deferral Account and each
subdivision thereof reflecting Deferral Contributions made for different
Deferral Cycles, the annual interest rate contained in the Participant's
Benefit Schedule pertaining thereto.
(ii) A Participant's Plan Deferral Account, the interest rate
paid on new debentures sold by the Plan Sponsor during its fiscal year
ending with or within the Plan Year, or in the absence of such debenture
rate, the daily average rate of interest charged by the National Bank
for Cooperatives, Baltimore Region for variable term loans during the
Plan Year.
1.21(b) The Administrator shall have the power to increase, but not
decrease, the Rate of Return for a Plan Year after the rate is initially
established and communicated to Participants.
1.21(c) The Administrator may, but need not, establish a Rate of Return
that is guaranteed for a period or periods. Any guarantee may vary from Plan
Year to Plan Year, from Deferral Cycle to Deferral Cycle, from Participant to
Participant, or on such other basis as the Administrator may determine from time
to time.
1.22 "Scheduled Death Benefit": A listing in a Participant's Benefit
Schedule of the anticipated death benefit(s) payable to or with respect to the
Participant and the Deferral Cycle and determined on the basis of applicable
facts including the Participant's age and the Rate of Return, assumed
insurability, assumed completion of the contribution of the Deferral Cycle
Amount with respect to which the Benefit Schedule is prepared and such other
factors as the Administrator deems appropriate.
ARTICLE II
Eligibility and Participation
-----------------------------
2.1 Eligibility. Each Eligible Director shall be eligible to
-----------
participate in the Plan and to defer Compensation hereunder.
-3-
<PAGE>
2.2 Notice and Election Regarding Active Participation.
--------------------------------------------------
2.2(a) The Administrator shall give notice of eligibility to each
Director who is anticipated to be eligible to be an Active Participant and make
Deferral Contributions to the Plan as follows:
(i) In the case of a Director anticipated to be eligible to make
a Deferral Election for allocation to the Insured Deferral Account as of
the first day of a Deferral Cycle, within a reasonable period of time
prior to the beginning of each such Deferral Cycle.
(ii) In the case of a Director anticipated to be eligible to make
a Deferral Election for allocation to the Plan Deferral Account as of
the first day of any calendar month, within a reasonable period of time
prior to the beginning of the first such calendar month for which he is
eligible.
2.2(b) In order to become an Active Participant and make Deferral
Contributions with respect to a Plan Year, an Eligible Director must file with
the Administrator an election as hereinafter provided (the "Deferral Election"):
(i) In the case of a Deferral Election for Deferral
Contributions to be allocated to the Insured Deferral Account which is
effective as of the first day of a Deferral Cycle, such election must be
filed at least thirty (30) days (or such later time permitted or
approved by the Administrator) prior to the beginning of the Deferral
Cycle for which the election is made.
(ii) In the case of a Deferral Election for Deferral
Contributions to be allocated to the Plan Deferral Account which is
effective as of the first day of any calendar month, such election must
be filed prior to the beginning of the calendar month for which the
election is made; or
2.2(c) By executing and filing such election with the Administrator, an
Eligible Director consents and agrees to the following:
(i) To be bound by all terms and conditions of the Plan and all
amendments thereto.
(ii) In the case of an election to make Deferral Contributions to
be allocated to the Insured Deferral Account, to execute such
applications and take such physical examinations and to supply
truthfully and completely such information as may be requested by any
health questionnaire issued by the Administrator; and
(iii) In the case of an election to make Deferral Contributions to
be allocated to the Insured Deferral Account, to make the agreed upon
Deferral Contributions to the Plan for each year in the Deferral Cycle.
2.3 Commencement of Active Participation. An Eligible Director shall
------------------------------------
become an Active Participant with respect to a Plan Year only if he is an
Eligible Director on the date in such Plan Year his Deferral Election is
scheduled to become effective and he timely files and has in effect a Deferral
Election with respect to such Plan Year.
2.4 Length of Participation. An individual who is or becomes a
-----------------------
Participant shall be or remain an Active Participant whenever he is an Eligible
Director with a Deferral Election in effect; and he shall be or remain an
Inactive Participant whenever he is entitled to future benefits under the terms
of the Plan and is not considered an Active Participant.
-4-
<PAGE>
ARTICLE III
Deferral Election, Deferral
Account and Adjustments and Benefit Schedules
---------------------------------------------
3.1 Deferral Account.
----------------
3.1(a) The Corporation shall establish and maintain on its books a
Deferral Account, and appropriate subdivisions thereof, for each Participant to
reflect the Participant's benefits under the Plan.
3.1(b) The balance in the Deferral Account of a Participant shall
consist of his Deferral Contributions made to the Plan pursuant to paragraph
3.2, amounts credited pursuant to subparagraph 3.3(b) and deemed earnings or
loss thereon determined pursuant to paragraph 3.4.
3.2 Deferral Election.
-----------------
3.2(a) Subject to the restrictions and conditions hereinafter provided,
an Eligible Director who has not yet reached his Benefit Commencement Date by
the beginning of a calendar month shall be entitled to elect to defer, as a
Deferral Contribution with respect to such calendar month, a dollar amount of
his Compensation which is specified by and in accordance with his direction in
his Deferral Election(s) for such Plan Year. Any such Eligible Director may make
either or both of the following types of Deferral Elections with respect to a
Plan Year:
(i) An individual who is an Eligible Director on the first day
of a Deferral Cycle may make a Deferral Election effective at the
beginning of the Deferral Cycle and such election shall be based on the
rules of subparagraph 3.2(c). Any such election must be filed with the
Administrator at the time required under clause (i) of subparagraph
2.2(b). Deferral Contributions made pursuant to such election shall be
allocated to the Insured Deferral Account.
(ii) An individual who is an Eligible Director on the first day
of any calendar month and who is then eligible to make a Deferral
Election may make an initial or amended Deferral Election in the form of
an initial or increased Deferral Election effective at the beginning of
the calendar month for which filed. Any such election must be filed with
the Administrator at the time required under clause (ii) of subparagraph
2.2(b). Deferral Contributions made pursuant to such election shall be
allocated to the Plan Deferral Account.
3.2(b) Deferral Contributions made by a Participant for a calendar
month shall be credited to his Deferral Account as of the last day of such
calendar month. Such contributions shall be considered made when the
Compensation from which such contributions are deducted would otherwise have
been paid.
3.2(c) For a Deferral Cycle, a Participant's election to defer
Compensation for allocation to the Insured Deferral Account is subject to the
following rules:
(i) A Participant's Deferral Cycle Amount must be stated in
whole dollar amounts.
(ii) Such Deferral Election shall be irrevocable and shall be
effective for the entire Deferral Cycle, provided however that such
Deferral Election may be revised as provided in the election form for a
Deferral Cycle in the event that the Rate of Return is adjusted based on
a health examination.
(iii) Such Deferral Election may contain a designation that all or
part of the Participant's balance in his Plan Deferral Account shall be
allocated to the Insured Deferral Account in equal increments over the
Deferral Cycle.
-5-
<PAGE>
3.3 Termination of Deferral Election and Completion of
--------------------------------------------------
Contribution of Deferral Cycle Amount.
- -------------------------------------
3.3(a) In the event that a Participant ceases to be an Eligible
Director, his Deferral Election shall be terminated and Deferral Contributions
shall automatically cease.
3.3(b) In the event that a Participant ceases to be an Eligible
Director for reasons other than his death, such Participant may contribute from
his funds other than Compensation the remaining Deferral Cycle Amount for each
year in any incomplete Deferral Cycle; provided that in the event of his death
after ceasing to be an Eligible Director, contributions scheduled to be made
thereafter shall not be due. Such contributions shall be made on an after-tax
basis at such time as the Participant and the Administrator shall agree.
3.3(c) If the Participant fails or refuses to complete the
contributions for the Deferral Cycle:
(i) no Scheduled Death Benefit shall be paid with respect to
such incomplete Deferral Cycle, and
(ii) contributions actually made by the Participant for the
Deferral Cycle shall be credited with earnings at the Rate of Return
applicable to the Subdivision of the Insured Deferral Account which
represents such incomplete Deferral Cycle.
The Deferral Benefit payable to the Participant or his surviving spouse
with respect to such subdivision shall be based only on the
contributions to such subdivision plus earnings thereon and shall not be
based on the projected benefit set forth in the Benefit Schedule for
such incomplete Deferral Cycle.
3.4 Crediting of Deemed Earnings to Deferral Accounts.
-------------------------------------------------
3.4(a) At the end of each Plan Year and at such other time as a
Participant's Deferral Benefit becomes payable, there shall be credited to the
Deferral Account an amount representing deemed earnings (without compounding for
the Plan Year) on the average balance of such account during such Plan Year.
Such earnings shall be determined by multiplying such average balance by the
Rate of Return. In the case of a calculation of earnings prior to the end of a
Plan Year, the Rate of Return for the prior Plan Year will be used.
3.4(b) In the event that the Scheduled Death Benefit becomes payable by
reason of the Participant's death prior to the applicable Benefit Commencement
Date, there shall be credited to the Insured Deferral Account the amount
required so that the balances will be equal to the amount of the Scheduled Death
Benefit and no further deemed earnings shall be credited with respect thereto.
3.4(c) If a Participant's Deferral Benefit held in the Plan Deferral
Account is paid in quarterly installments, earnings shall be credited after the
Benefit Commencement Date as provided in clause (ii) of subparagraph 6.3(b).
3.5 Equitable Adjustment in Case of Error or Omission. Where an
-------------------------------------------------
error or omission is discovered in the account of a Participant, the
Administrator shall be authorized to make such equitable adjustment as it deems
appropriate.
3.6 Statement of Deferral Account Balance. Within a reasonable time
-------------------------------------
after the end of each Plan Year and at the date a Participant's Deferral Benefit
becomes payable under the Plan, the Administrator shall provide to each
Participant (or, if deceased, to his Beneficiary) a statement of the balance as
of such date in his Deferral Account.
3.7 Issuance of Benefit Schedule.
----------------------------
3.7(a) Within a reasonable time prior to the Deferral Election filing
date for a Deferral Cycle for a Participant or Eligible Director who is then
anticipated to be eligible to become a Participant, the Administrator shall
provide to such Participant or Eligible Director the applicable Benefit Schedule
for such Deferral Cycle.
-6-
<PAGE>
3.7(b) A Participant's Benefit Schedule(s) shall contain information
regarding Scheduled Death Benefit(s) or Rate(s) of Return applicable thereto and
shall be used in connection with the computation of benefits provided to him
under the Plan.
3.7(c) If:
(i) A Participant elects a greater or lesser Deferral Cycle
Amount or alternate time of payment than is assumed in his Benefit
Schedule,
(ii) A Participant is determined by the Administrator not to
be a satisfactory health risk, or
(iii) The assumed Rate of Return for a Deferral Cycle is changed,
the Administrator shall unilaterally and appropriately modify the Benefit
Schedule in question and the Scheduled Death Benefit thereby affected based on
the assumed underwriting standards of the Plan, actual Rate of Return or actual
Deferral Cycle Amount applicable to the Participant. A copy of any such revised
Benefit Statement shall be provided to the Participant.
ARTICLE IV
Vesting
-------
4.1 Vesting. A Participant's rights to the balance in the Deferral
-------
Account and Deferral Benefit shall be fully vested and non-forfeitable at all
times, and termination of his employment as a Director of the Corporation for
any reason whatsoever or his death shall not in any way diminish the amount
payable to the Participant or his Beneficiary.
ARTICLE V
Funding
-------
5.1 Funding.
-------
5.1(a) The undertaking to pay Deferral Benefits hereunder shall be an
unfunded obligation payable solely from the general assets of the Corporation
and subject to the claims of the Corporation's creditors. The Deferral Account
shall be maintained as a book reserve account solely for accounting purposes.
5.1(b) Except as provided in the Rabbi Trust established as permitted
in paragraph 5.2, nothing contained in the Plan and no action taken pursuant to
the provisions of the Plan shall create or be construed to create a trust of any
kind of a fiduciary relationship between the Corporation and the Participant or
his Beneficiary or any other person or to give any Participant or Beneficiary
any right, title or interest in any specific asset or assets of the Corporation.
To the extent that any person acquires a right to receive payments from the
Corporation under the Plan, such rights shall be no greater than the right of
any unsecured general creditor of the Corporation.
5.1(c) Where more than one Corporation participates in the Plan, the
funding and payment provisions hereof shall apply separately to each such
Corporation.
5.1(d) The Plan Sponsor may in its discretion make payment of any or
all benefits under the Plan in lieu of payment by one or more Corporations.
Where the Plan Sponsor makes payments on behalf of other Corporations, the Plan
Sponsor may require contributions by participating Corporations to the Plan
Sponsor at such times (whether before at or after the time of payment), in such
amounts and on such basis as it may from time to time determine in order to
defray the costs of benefits and administration of the Plan.
5.2 Use of Rabbi Trust Permitted. Notwithstanding any provision
----------------------------
herein to the contrary, the Plan Sponsor may in its sole discretion elect to
establish and fund a Rabbi Trust for the purpose of providing benefits under the
Plan.
-7-
<PAGE>
ARTICLE VI
Payment of Benefits
-------------------
6.1 Deferral Benefit. For purposes hereof, a Participant's Deferral
----------------
Benefit shall be the balance in his Deferral Account at the time in question.
6.2 Time and Form of Payment of Insured Deferral Account.
----------------------------------------------------
6.2(a) A Participant's Deferral Benefit attributable to each
subdivision of his Insured Deferral Account shall become payable at the
following applicable times:
(i) The first day of the calendar quarter selected by the
Participant in the Deferral Election for the subdivision of the Insured
Deferral Account relating to the Deferral Cycle for which the Deferral
Election is made, if the Participant is then alive.
(ii) If earlier, the first day of the calendar quarter following
the date of the Participant's death.
6.2(b) A Participant's Deferral Benefit and/or Scheduled Death Benefit
attributable to each subdivision of his Insured Deferral Account shall be paid
to the Participant or, if deceased, his Beneficiary in cash in forty (40)
substantially equal quarterly installments as set forth in the Participant's
Benefit Schedule with respect to each such subdivision.
6.3 Time and Form of Payment of Plan Deferral Account.
-------------------------------------------------
6.3(a) A Participant's Deferral Benefit attributable to his Plan
Deferral Account with respect to each Deferral Election shall become payable at
one of the following times selected by the Participant in such Deferral Election
and based on the date, which must be the first day of a calendar quarter,
specified by the Participant therein (the "Elected Date"):
(i) Elected Date - the Elected Date.
------------
(ii) Earlier of Elected Date or Termination as a Director - the
----------------------------------------------------
earlier of the Elected Date or the first day of the calendar quarter
next following the date the Participant ceases to be a Director.
(iii) Later of Elected Date or Termination as a Director - the
--------------------------------------------------
later of the Elected Date or the first day of the calendar quarter next
following the date the Participant ceases to be a Director.
A Participant's time of payment election may also include a time of payment
acceleration to the first day of the calendar quarter following the date of his
death where he dies before his otherwise applicable payment date.
6.3(b) A Participant Deferral Benefit attributable to his Plan Deferral
Account with respect to each Deferral Election shall be paid to the Participant
or his Beneficiary in cash in either of the following options selected by the
Participant in such Deferral Election:
(i) Lump Sum Payment - a lump sum payment.
----------------
(ii) Quarterly Installments - substantially equal consecutive
----------------------
quarterly installments payable on the first day of each calendar quarter
over a term certain selected by the Participant in his Deferral Election
but not extending beyond ten (10) years, taking into account projected
earnings on the unpaid portion of any such payments at the Rate of
Return in effect each year.
6.4 Acceleration of Time or Form of Payment. Notwithstanding any
---------------------------------------
provision herein to the contrary, the Board of the Plan Sponsor in its sole
discretion may accelerate the time of payment hereunder or may pay a portion or
all of a Participant's Deferral Benefit or Deferral Account with respect to the
Participant in a lump sum payment in commutation
-8-
<PAGE>
of amounts otherwise to be paid after the Participant ceases to be a Director.
In the case of an Insured Deferral Account (but not the Plan Deferral Account),
the payment shall be discounted at the Rate of Return relating to the
subdivision(s) of such account for which the acceleration relates and for the
period(s) to which it relates.
6.5 Early Withdrawal Rights.
-----------------------
6.5(a) In the event of any unforseeable emergency and upon written
request of a Participant (or, if subsequent to his death, his Beneficiary), the
Board of the Plan Sponsor in its sole discretion may cause to be paid in one
lump sum to the Participant or his Beneficiary all or any portion of the
Participant's Deferral Benefit. Any such payment shall be limited to that amount
reasonably necessary to alleviate the unforseeable emergency. For purposes
hereof an unforseeable emergency shall be defined as a severe financial hardship
to the Participant (or, if subsequent to his death, his Beneficiary) resulting
from a sudden and unexpected illness, accident or loss of property due to
casualty, or any other similar extraordinary and unforseeable circumstance
arising as a result of events beyond the control of the Participant (or, if
subsequent to his death, his Beneficiary).
6.5(b) Upon written request at any time prior to pay out of the
Participant's entire Deferral Benefit, a Participant may elect to withdraw all
or a portion of his Deferral Account subject to the following forfeiture
provisions:
(i) The Participant shall forfeit ten percent (10%) of the
amount elected to be withdrawn. Such forfeited amount shall be
subtracted from the account from which withdrawn but shall not at any
time be distributed to the Participant; and
(ii) The Participant shall forfeit the right to make additional
deferrals of Compensation for one full Plan Year following the
withdrawal.
It is intended that the forfeitures described herein constitute a "substantial
limitation or restriction" on the right to receive the amounts held in the
Deferral Account as that term is used for purposes of Sections 61 and 451 of the
Code. Any remaining payments or account balances shall be appropriately
adjusted.
6.6 Benefit Determination and Payment Procedure. Except to the
-------------------------------------------
extent allocated to the Board of the Plan Sponsor, the Administrator shall make
all determinations concerning eligibility for benefits under the Plan, the time
or terms of payment, and the form or manner of payment to the Participant (or
the Participant's Beneficiary in the event of the death of the Participant). The
Administrator shall promptly notify the Corporation and, where payments are to
be made from a Rabbi Trust, the trustee thereof, of each such determination that
benefit payments are due and provide to the Corporation or trustee all other
information necessary to allow the Corporation or trustee to carry out said
determination, whereupon the Corporation or trustee shall pay such benefits in
accordance with the Administrator's determination.
6.7 Payments to Minors and Incompetents. If a Participant or
-----------------------------------
Beneficiary entitled to receive any benefits hereunder is a minor or is adjudged
to be legally incapable of giving valid receipt and discharge for such benefits,
or is deemed so by the Administrator, benefits will be paid to such person as
the Administrator may designate for the benefit of such Participant or
Beneficiary. Such payments shall be considered a payment to such Participant or
Beneficiary and shall, to the extent made, be deemed a complete discharge of any
liability for such payments under the Plan.
6.8 Distribution of Benefit When Distributee Cannot Be Located. The
----------------------------------------------------------
Administrator shall make all reasonable attempts to determine the identity
and/or whereabouts of a Participant or Beneficiary entitled to benefits under
the Plan, including the mailing by certified mail of a notice to the last known
address shown on the Corporation's or the Administrator's records. If the
Administrator is unable to locate such a person entitled to benefits hereunder,
or if there has been no claim made for such benefits, the Corporation shall
continue to hold the benefit due such person, subject to any applicable statute
of escheats.
ARTICLE VII
Beneficiary Designation
-----------------------
-9-
<PAGE>
7.1 Beneficiary Designation.
-----------------------
7.1(a) Each Participant shall be entitled to designate a Beneficiary
hereunder by filing a designation in writing with the Administrator on the form
provided for such purpose. Any Beneficiary designation made hereunder shall be
effective only if signed and dated by the Participant and delivered to the
Administrator prior to the time of the Participant's death. Any Beneficiary
designation hereunder shall remain effective until changed or revoked hereunder.
7.1(b) Any Beneficiary designation may include multiple, contingent or
successive Beneficiaries and may specify the proportionate distribution to each
Beneficiary.
7.1(c) A Beneficiary designation may be changed by the Participant at
any time, or from time to time, by filing a new designation in writing with the
Administrator.
7.1(d) If the Participant dies without having designated a Beneficiary,
or if the Beneficiary so designated has predeceased him, then his estate shall
be deemed to be his Beneficiary.
7.1(e) If a Beneficiary of the Participant shall survive the
Participant but shall die before the Participant's entire benefit has been
distributed, then, absent any other provision by the Participant, the unpaid
balance thereof shall be distributed to the estate of the deceased Beneficiary.
If multiple beneficiaries are designated, absent any other provision by the
Participant, those named or the survivors of them shall share equally in any
amounts payable hereunder.
ARTICLE VIII
Plan Administrator
------------------
8.1 Plan Administrator. The Plan shall be administered by a plan
------------------
administrator (the "Administrator") to be appointed by and serve at the pleasure
of the Plan Sponsor, or in the absence of the appointment or in the event any
person so appointed shall fail or cease to serve, the Plan Sponsor shall be the
Administrator.
8.2 Power and Authority of Administrator. The Administrator is
------------------------------------
hereby vested with all the power and authority necessary in order to carry out
its duties and responsibilities in connection with the administration of the
Plan, including the power to interpret the provisions of the Plan. For such
purpose, the Administrator shall have the power to adopt rules and regulations
consistent with the terms of the Plan.
-10-
<PAGE>
ARTICLE IX
Amendment and Termination of Plan
---------------------------------
9.1 Amendment or Termination of the Plan. The Plan may be terminated
------------------------------------
at any time by the Board of the Plan Sponsor. The Plan may be amended in whole
or in part from time to time by the Board of the Plan Sponsor effective as of
any date specified. No amendment or termination shall operate to decrease a
Participant's Deferred Benefit as of the earlier of the date on which the
amendment or termination is approved by the Board of the Plan Sponsor or the
date on which an instrument of amendment or termination is signed on behalf of
the Plan Sponsor.
ARTICLE X
Adoption by Additional Corporations
-----------------------------------
10.1 Adoption by Additional Corporations. Any subsidiary, affiliate
-----------------------------------
or other related corporation to the Plan Sponsor (whether by management
agreement or ownership) may adopt the Plan with the consent of the Board of the
Plan Sponsor and approval by its Board.
ARTICLE XI
Miscellaneous
-------------
11.1 Non-assignability. The interests of each Participant under the
-----------------
Plan are not subject to claims of the Participant's creditors; and neither the
Participant, nor his Beneficiary, shall have any right to sell, assign, transfer
or otherwise convey the right to receive any payments hereunder or any interest
under the Plan, which payments and interest are expressly declared to be non-
assignable and non-transferable.
11.2 Right to Require Information and Reliance Thereon. The
-------------------------------------------------
Corporation and Administrator shall have the right to require any Participant,
Beneficiary or other person receiving benefit payments to provide it with such
information, in writing, and in such form as it may deem necessary to the
administration of the Plan and may rely thereon in carrying out its duties
hereunder. Any payment to or on behalf of a Participant or Beneficiary in
accordance with the provisions of the Plan in good faith reliance upon any such
written information provided by a Participant or any other person to whom such
payment is made shall be in full satisfaction of all claims by such Participant
and his Beneficiary; and any payment to or on behalf of a Beneficiary in
accordance with the provision so the Plan in good faith reliance upon any such
written information provided by such Beneficiary or any other person to whom
such payment is made shall be in full satisfaction of all claims by such
Beneficiary.
11.3 Notices and Elections. All notices required to be given in
---------------------
writing and all elections required to be made in writing, under any provision of
the Plan, shall be invalid unless made on such forms as may be provided or
approved by the Administrator and, in the case of a notice or election by a
Participant or Beneficiary, unless executed by the Participant or Beneficiary
giving such notice or making such election.
11.4 Delegation of Authority. Whenever the Plan Sponsor or any other
-----------------------
Corporation is permitted or required to perform any act, such act may be
performed by its President or Chief Executive Officer or other person duly
authorized by its President or Chief Executive Officer or the Board of the
Corporation.
11.5 Service of Process. The Administrator shall be the agent for
------------------
service of process on the Plan.
11.6 Governing Law. The Plan shall be construed, enforced and
-------------
administered in accordance with the laws of the Commonwealth of Virginia.
11.7 Binding Effect. The Plan shall be binding upon and inure to the
--------------
benefit of the Corporation, its successors and assigns, and the Participant and
his heirs, executors, administrators and legal representatives.
-11-
<PAGE>
11.8 Severability. If any provision of the Plan should for any reason
------------
be declared invalid or unenforceable by a court of competent jurisdiction, the
remaining provisions shall nevertheless remain in full force and effect.
11.9 No Effect on Employment Agreement. The Plan shall not be
---------------------------------
considered or construed to modify, amend or supersede any employment or other
agreement between the Corporation and the Participant heretofore or hereafter
entered into unless so specifically provided.
11.10 Gender and Number. In the construction of the Plan, the
-----------------
masculine shall include the feminine or neuter and the singular shall include
the plural and vice-versa in all cases where such meanings would be appropriate.
11.11 Titles and Captions. Titles and captions and headings herein
-------------------
have been inserted for convenience of reference only and are to be ignored in
any construction of the provisions hereof.
IN WITNESS WHEREOF, the Plan Sponsor has caused the Plan to be signed on
its behalf by its duly authorized officer or member of its Board of Directors on
the day, month and year aforesaid.
SOUTHERN STATES COOPERATIVE,
INCORPORATED, Plan Sponsor
By: /s/ Gene A. James
------------------------------
Its President & CEO
-----------------------------
-12-
<PAGE>
EXHIBIT 10.14
SOUTHERN STATES COOPERATIVE, INCORPORATED
SPLIT DOLLAR AGREEMENT
THIS AGREEMENT, made as of the _____ day of ____, 19__, by and
between Southern States Cooperative, Incorporated, a Virginia corporation
(herein called Corporation") and _______ (herein called "Employee"), an
individual residing in the Commonwealth of Virginia.
WHEREAS, Employee is employed by Corporation;
WHEREAS, Employee wishes to obtain life insurance protection for his
family in the event of his death, under a policy of life insurance insuring his
life (herein called the "Policy");
WHEREAS, Corporation is willing to pay a portion of the premium due
on the Policy for Employee, on the terms and conditions herein set forth; and
WHEREAS, Employee will be the owner of the Policy and possess all
incidents of ownership in and to the Policy and the Policy will be collaterally
assigned to Corporation by Employee, in order to secure the repayment of its
interest in the Policy.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants contained herein, the parties agree as follows:
ARTICLE I
Policy
------
1.1 Application for Insurance. Employee has purchased or will
-------------------------
contemporaneously purchase the policy of life insurance insuring his or her
life, which is described in Exhibit A attached hereto and by this reference made
a part hereof, and which was or will be issued by the insurance company
identified in Exhibit A (herein called "Insurer") in the total initial face
amount of Dollars ($ ). The parties hereto have taken all necessary action to
---------- ---
cause Insurer to issue the Policy and shall take any further action which may be
necessary to cause the Policy to conform to the provisions of this Agreement.
1.2 Assignment of Policy. To secure the repayment to Corporation of
--------------------
its Corporate Interest in the Policy arising hereunder and as defined in
paragraph 5.4, Employee has, contemporaneously herewith, assigned the Policy to
Corporation as collateral, in the form attached hereto as Exhibit B (the
"Assignment"). The Assignment shall be filed with Insurer and shall not be
terminated, altered or amended by Employee, without the express written consent
of Corporation. The parties agree to be bound by the terms and conditions of the
Assignment and of this Agreement.
1.3 Additional Policy Benefits and Riders. Employee may add a rider
-------------------------------------
to the Policy for Employee's own benefit. Upon written request by Corporation,
Employee shall add a rider to the Policy for the benefit of Corporation.
ARTICLE II
Ownership of Policy
-------------------
<PAGE>
2.1 Ownership of Policy. Employee shall be the sole and absolute
-------------------
owner of the Policy including all supplemental riders and endorsements, and may
exercise all ownership rights granted to the owner thereof by the terms of the
Policy, except as may otherwise be provided herein.
2.2 Corporation's Rights. Corporation's rights with respect to the
--------------------
Policy shall be limited to the following:
(i) The right to receive the Corporate Interest upon the
occurrence of a Termination Event as defined in paragraph 5.1 or
upon Rollout as defined in paragraph 5.3;
(ii) The right to possess the Policy;
(iii) The right to borrow against the Policy and to secure such
loan with the Policy in an amount which together with the unpaid
interest thereon will at no time exceed the Corporate Interest; and
(iv) The right to release the Assignment upon receipt of the
Corporate Interest.
Corporation shall make the Policy reasonably available to Employee and Insurer.
2.3 Employee's Rights. Employee, as owner of the Policy, shall
-----------------
retain all other rights in the Policy not held by Corporation pursuant to
paragraph 2.2, including but not limited to, the following:
(i) The right to succeed to full ownership of the Policy cash
values after satisfaction of the Corporation Interest upon the
occurrence of a Termination Event or Rollout;
(ii) The right to designate and change the beneficiary or
beneficiaries of the portion of the Policy payable upon the death of
Employee, pursuant to paragraph 4.1 (the "Employee Death Benefit
Portion"); and
(iii) The right to assign Employee's rights in and with respect
to the Policy.
Prior to a Termination Event, Employee shall not have the right to borrow
against the Policy.
2.4 Application of Dividends. Dividends shall be applied to purchase
------------------------
paid-up additional insurance protection.
ARTICLE III
Premium Payments
----------------
3.1 Payment of Premiums on the Policy. On or before the due date of
---------------------------------
each Policy premium, or within the grace period provided therein, Corporation
shall pay the full amount of all premiums (including the cost associated with
all supplemental riders and endorsements) on the Policy to Insurer according to
the schedule of planned annual premiums in the Policy, and shall, upon request,
promptly furnish Employee evidence of timely payment of such premium.
3.2 Reimbursement by Employee. Each month, Employee shall reimburse
-------------------------
Corporation a portion of the premium paid by Corporation. The amount of the
reimbursement shall equal one-twelfth (1/12) of:
(i) The economic value attributable to the life insurance
protection provided to Employee under this Agreement, plus
(ii) The excess, if any, of the actual premium for the Policy
and for any rider added to the Policy to benefit Employee over
Insurer's standard class premium rates for like policies having the
same face amount and carrying no rider.
-2-
<PAGE>
The value of the economic benefit attributable to the life insurance protection
provided to Employee under this Agreement shall be the lower of the PS-58 rates
or Insurer's current published premium rate for annually renewable term
insurance for standard risks, assuming death benefit equal to the face amount of
the Policy less the Corporate Interest.
ARTICLE IV
Death Benefits
--------------
4.1 Employee's Death Benefit Portion. If Employee dies prior to a
--------------------------------
Termination Event, Employee's designated beneficiary or beneficiaries as set
forth in the Policy shall be entitled to receive the excess of the death
proceeds as provided in the Policy over the Corporate Interest. For purposes of
this Agreement, "death proceeds" shall mean the face amount of the death benefit
provided for in the Policy plus any increase in the Death Benefit from
dividends, cash or accumulation value as those terms may be defined in the
Policy contract or option contained therein.
4.2 Corporation's Death Benefit Portion. Corporation shall have the
-----------------------------------
unqualified right to receive a portion of such death benefit equal to the
Corporate Interest.
ARTICLE V
Termination of Agreement
------------------------
5.1 Termination of Agreement. This Agreement shall terminate, without
------------------------
notice, upon the occurrence of any of the following events:
(i) The total cessation of the business of Corporation;
(ii) The bankruptcy, receivership or dissolution of
Corporation;
(iii) The termination of Employee's employment with Corporation
prior to his or her retirement (other than by reason of Employee's
death or disability); or
(iv) The failure of Employee to repay to Corporation, his or
her portion of the premiums required by paragraph 3.2 whether such
failure occurs while Employee is employed with Corporation or
following his or her retirement or disability.
The events described in this paragraph are referred to throughout this Agreement
as "Termination Events". For this purposes, "retirement" means Employee's
retirement determined under the Retirement Plan for Employees of Southern States
and "disability" means the inability to work due to illness or injury as
determined under the Southern States Long Term Disability Plan.
5.2 Disposition of Policy upon Termination of Agreement. If this
---------------------------------------------------
Agreement terminates pursuant to an event described in paragraph 5.1, Employee
shall have the right to obtain a release of the collateral assignment of the
Policy to Corporation. To obtain such release, Employee shall repay to
Corporation within sixty (60) days of the Termination Event, the Corporate
Interest. Alternatively, at the election of Employee prior to the expiration of
said sixty (60) day period, Employee may request, in writing, that Corporation
apply to Insurer for a loan from the Policy the proceeds of which shall be paid
to Corporation in satisfaction of its Corporate Interest. Upon receipt of such
amount, Corporation shall release the collateral assignment of the Policy, by
the execution and delivery of an appropriate instrument of release. If Employee
fails to exercise either such option within such sixty (60) day period, then, at
the request of Corporation, Employee shall execute any document or documents
required by Insurer to transfer the interest of Employee in the Policy to
Corporation. Alternatively, Corporation may enforce its right to be repaid the
Corporate Interest from the cash surrender value of the Policy under the
collateral assignment of the Policy; provided that in the event the cash
surrender value of the Policy exceeds the amount due Corporation, such excess
shall be paid to Employee.
<PAGE>
Thereafter, neither Employee nor his respective heirs, assigns or beneficiaries
shall have any further interest in and to the Policy, either under the terms
thereof or under this Agreement.
5.3 Rollout of Policy to Employee. If an Employee retires or
-----------------------------
terminates employment with Corporation as a result of a disability and no
Termination Event has occurred prior to Employee's reaching his or her Rollout
Age as that term is defined in Exhibit A hereto, Corporation shall surrender
dividend additions (and, if necessary, apply for a loan from the Policy the
proceeds of which shall be paid to Corporation) in an amount sufficient to
satisfy its Corporate Interest and, having obtained such satisfaction, shall
execute any document or documents required by Insurer to release the Assignment
so that Employee's rights in and to the Policy shall become free and clear of
any obligation to Corporation.
5.4 Corporate Interest Defined. Corporate Interest means an amount
--------------------------
equal to the cumulative value of all premiums paid by Corporation, less (i) the
amounts repaid to it by Employee pursuant to paragraph 3.2 and (ii) any
indebtedness secured by the Policy that was incurred by Corporation and remains
outstanding as of the date of such termination, including any interest due on
such indebtedness.
ARTICLE VI
Named Fiduciaries
-----------------
6.1 Fiduciaries. The named fiduciary and Plan Administrator shall be
-----------
Richard G. Sherman.
ARTICLE VII
Claims Procedure
----------------
7.1 Claims Procedure. If for any reason a claim for benefits under
----------------
this Plan is denied, the Plan Administrator shall deliver to the claimant a
written explanation setting forth the specific reasons for the denial, pertinent
references to the section of this Agreement on which the denial is based, such
other data as may be pertinent and information on the procedures to be followed
by the claimant in obtaining a review of his claim, all written in a manner
calculated to be understood by the claimant. For this purpose:
(i) The claimant's claim shall be deemed filed when presented
orally or in writing to the Plan Administrator.
(ii) The Plan Administrator's explanation shall be in writing
delivered to the claimant within ninety (90) days of the date the
claim is filed.
7.2 Claims Review. The claimant shall have sixty (60) days following
-------------
his receipt of the denial of the claim to file with the Plan Administrator a
written request for review of the denial. For such review, the claimant or his
representative may submit pertinent document and written issues and comments.
The Plan Administrator shall decide the issue on review and furnish the claimant
with a copy within sixty (60) days of receipt of the claimant's request for
review of his claim. The decision on review shall be in writing and shall
include specific reasons for the decision, written in a manner calculated to be
understood by the claimant, as well as specific references to the pertinent
provisions of this Agreement on which the decision is based. If a copy of the
decision is not so furnished to the claimant within such sixty (60) days, the
claim shall be deemed denied on review.
ARTICLE VIII
Miscellaneous Provisions
------------------------
-4-
<PAGE>
8.1 Insurer not a Party. Insurer shall be fully discharged from its
-------------------
obligations under the Policy by payment of the Policy death benefit to the
beneficiary or beneficiaries named in the Policy, subject to the terms and
conditions of the Policy. In no event shall Insurer be considered a party to
this Agreement, or any subsequent modifications or amendments of this Agreement.
No provision of this Agreement, nor of any modification or amendment of this
Agreement, shall in any way be construed as enlarging, changing, varying, or in
any other way affecting the obligations of Insurer as expressly provided in the
Policy, except insofar as the provisions of this Agreement are made a part of
the Policy by the Assignment executed by Employee and filed with Insurer in
connection herewith.
8.2 Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision.
8.3 Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties with respect to the matters set forth herein and
supersedes all prior agreements and understandings between the parties with
respect to the same.
8.4 Waiver. No waiver of any provision of this Agreement shall be
------
effective as against the waiving party unless such waiver is in writing signed
by the waiving party. Waiver by a party as provided in this section shall not be
construed as or constitute either a continuing waiver or a waiver of any other
matter.
8.5 Modification. This Agreement may not be amended, altered or
------------
modified, except by a written instrument signed by the parties hereto, or their
respective successors or assigns, and may not be otherwise terminated except as
provided herein.
8.6 Benefit. This Agreement shall be binding on and inure to the
-------
benefit of Corporation and its successors and assigns and Employee and his
successors, assigns, heirs, executors, administrators, and beneficiaries. All
benefits payable pursuant to this Agreement shall be payable only from the
Policy, and only to the extent that the Policy so provides.
8.7 Governing Law. This Agreement, and the rights of the parties
-------------
hereunder, shall be governed by and construed in accordance with the laws of the
Commonwealth of Virginia.
8.8 Original Copies. This Agreement may be executed in more than
---------------
one counterpart, each of which shall be deemed an original.
8.9 Headings. The underlined headings herein are for convenience
--------
only and shall not affect the interpretation of this Agreement.
8.10 Interpretation. This Agreement will be interpreted consistent
--------------
with its being a welfare benefit plan for a select group of management and
highly compensated employees. The Plan Administrator shall have full discretion
authority to interpret the terms of the Agreement which interpretations shall be
binding and conclusive for all purposes.
8.11 Notice to Parties. Any and all notices required to be given
-----------------
under the terms of this Agreement shall be given in writing and signed by the
appropriate party, and shall be sent by certified mail, postage prepaid, to the
appropriate address set forth below:
(i) to Employee at:
---------------------------------------
---------------------------------------
---------------------------------------
-5-
<PAGE>
(ii) to Corporation at:
Southern States Cooperative, Incorporated
6606 West Broad Street
Post Office Box 26234
Richmond, Virginia 23260
ATTN: Richard G. Sherman
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the above written date.
SOUTHERN STATES COOPERATIVE,
INCORPORATED
By:
----------------------------------
President
[INSERT NAME OF EMPLOYEE]
-------------------------------------
-6-
<PAGE>
EXHIBIT A
---------
The following life insurance policy or policies is (are) subject to the attached
Split-Dollar Agreement:
Insurer - Northwestern Mutual Life Insurance Company
Insured -
Policy Number -
Face Amount -
Corporation - Southern States Cooperative Incorporated
Date of Issue - _________________, 19__
Rollout Age -
-7-
<PAGE>
EXHIBIT B
---------
Assignment of Life Insurance Policy as Collateral
-------------------------------------------------
A. FOR VALUE RECEIVED,______ ("Employee") hereby assigns, transfers and setsover
to Southern States Cooperative, Incorporated, with its principal offices in
Richmond, Virginia, its successors and assigns, (herein called the
"Corporation") Policy No.____, issued by The Northwestern Mutual Life Insurance
Company, (herein the "Insurer") and any supplementary contracts issued in
connection therewith (said policy and contracts being herein called the
"Policy"), upon the life of Employee, an individual residing in the Commonwealth
of Virginia and all claims, options, privileges, rights, title and interest
therein and thereunder (except as provided in Paragraph C hereof), subject to
all the terms and conditions of the Policy and to all superior liens, if any,
which Insurer may have against the Policy. The undersigned by this instrument
jointly and severally agree and Corporation, by the acceptance of this
Assignment, agrees to the conditions and provisions herein set forth.
B. It is expressly agreed that, without detracting from the generality of the
foregoing, the following specific rights are included in this Assignment and
pass by virtue hereof:
1. The right to collect from Insurer an amount equal to the Corporate
Interest in the Policy or a portion of the death proceeds as provided for
under the terms of a Split Dollar Agreement between Employee and
Corporation, dated (herein called the "Split Dollar Agreement"), when it
becomes a claim by death or maturity or upon such other events as may be
set forth in the Split Dollar Agreement:
2. The right to surrender the Policy and receive the surrender values thereof
at any time provided by the terms of the Policy and at such other times as
Insurer may allow; and
3. The right to obtain one or more loans or advances on the Policy, either
from Insurer, or, at any time, from other persons, and to pledge or assign
the Policy as security for such loans or advances.
C. It is expressly agreed that the following specific rights, so long as the
Policy has not been surrendered, are reserved and excluded from this Assignment
and do not pass by virtue hereof:
1. The right to collect from Insurer any disability benefit payable in
cash that does not reduce the amount of insurance;
2. The right to designate and change the beneficiary;
3. The right to elect any optional mode of settlement permitted by
the Policy or allowed by Insurer,
but the reservation of these rights shall in no way impair the right of
Corporation to surrender the Policy completely with all its incidents or impair
any other right of Corporation hereunder, and any designation or change of
beneficiary or election of a mode of settlement shall be made subject to this
Assignment and to the rights of Corporation hereunder.
D. This Assignment is made and the Policy is to be held as collateral security
for any and all liabilities of the undersigned, or any of them, to Corporation,
either now existing or that may hereafter arise under the terms of the Split
Dollar Agreement (all of which liabilities secured or to become secured are
herein called "Liabilities").
E. Corporation covenants and agrees with the undersigned as follows:
1. That any balance of sums received hereunder from Insurer remaining after
payment of the then existing Liabilities, matured or unmatured, shall be
paid by Corporation to the persons entitled thereto under the terms of the
Policy had this Assignment not been executed;
-B-1-
<PAGE>
2. That Corporation will not exercise either the right to surrender the
Policy or the right to obtain policy loans from Insurer, except as
expressly provided under the terms of the Split Dollar Agreement; and
3. That Corporation will upon request forward without unreasonable delay to
Insurer the Policy for endorsement of any designation or change of
beneficiary or any election of an optional mode of settlement.
F. Insurer is hereby authorized to recognize Corporation's claims to the
rights hereunder without investigation into the reason for any action taken by
Corporation, or the validity or the amount of the Liabilities or the existence
of any default therein, or the application to be made by Corporation of any
amounts to be paid to Corporation. The sole signature of Corporation shall be
sufficient for the exercise of any rights under the Policy assigned hereby and
the sole receipt of Corporation for any sums received shall be a full discharge
and release to Insurer. Checks for all of any part of the sums payable under the
Policy and assigned herein, shall be drawn to the exclusive order of Corporation
(or to the Beneficiary if so directed by Corporation), if, when, and in such
amounts as may be requested by Corporation.
G. The exercise of any right, option privilege or power given herein to
Corporation shall be at the option of Corporation, but (except as restricted by
Paragraph E(2) above) Corporation may exercise any such right, option, privilege
or power without notice to, or assent by, or affecting the liability of, or
releasing any interest hereby assigned by the undersigned, or any of them.
H. Corporation may take or release other security, may release any party
primarily or secondarily liable for any of the Liabilities, may grant
extensions, renewals or indulgences with respect to the Liabilities, or may
apply to the Liabilities in such order as Corporation shall determine, the
proceeds of the Policy hereby assigned or any amount received on account of the
Policy by the exercise of any right permitted under this Assignment, without
resorting or regard to other security.
I. Each of the undersigned declares that no proceedings in bankruptcy are
pending against him and that his property is not subject to any assignment for
the benefit of creditors.
EXECUTED IN RICHMOND, VIRGINIA THIS ________ DAY OF__________________, 19__.
- --------------------------------- ------------------------------
Witness Employee
Employee's Address:
------------------------------
------------------------------
COMMONWEALTH OF VIRGINIA
OF
- ------- -------
Subscribed, sworn and acknowledged before me by _________________,
the Employee, subscribed and sworn before me by _____, the witness, this
_________ day of _______________, 19__.
[SEAL]________________________
Notary Public
My Commission expires ______.
-B-2-
<PAGE>
Attachment A
to EXHIBIT 10.14
SCHEDULE IDENTIFYING OMITTED DOCUMENTS
Executive Officers who Participate in the Company's
Executive Split Dollar Program Under Agreements Substantially
in the Form of the Split Dollar Agreement Filed as EXHIBIT 10.15
<TABLE>
<CAPTION>
Executive Policy No. Face Amount Age at Rollout Issue Date Status
- --------- ---------- ------ ------ --------- ------
<S> <C> <C> <C> <C> <C>
N. Hopper Ancarrow, Jr. 13126400 103,580 65 11/01/94 Active
Gene R. Anderson 13132450 105,487 75 11/01/94 Active
Wayne A. Boutwell 13969294 208,885 75 11/01/96 Active
Jonathan A. Hawkins 13127063 106,438 75 11/01/94 Active
Kenneth G. McClung 13127184 104,340 66 11/01/94 Active
Charles A. Miller, III 13132566 105,000 75 11/01/94 Active
M. Terry Ragsdale 13127269 159,541 85 11/01/94 Retired
Richard G. Sherman 13127882 103,093 65 11/01/94 Active
George W. Winstead 13126278 104,823 67 11/01/94 Active
</TABLE>
-B-3-
<PAGE>
EXHIBIT 12
Southern States Cooperative
Ratios of earnings to fixed charges
<TABLE>
<CAPTION>
Year ended June 30,
-------------------- ----------------------------------------
1999 1998 1997
-------------------- ----------------- --------------------
<S> <C> <C> <C>
Earnings:
Income (loss) before income taxes, extraordinary charge,
cumulative effect of accounting changes and
and discontinued operations and distributions on Capital
Securities, Series A $ (1,449,650) $13,570,456 $ 33,539,852
Interest expense, net of capitalized interest 28,413,129 16,859,373 15,565,523
Portion of rents representative of interest factor 5,151,839 2,900,188 2,703,206
Amortization of capitalized interest 75,000 62,249 15,143
Distributions on Capital Securities, Series A 0 0 0
-------------------- ----------------- --------------------
Total Earnings $ 32,190,318 $33,392,266 $ 51,823,724
==================== ================= ====================
Fixed Charges:
Interest expense (before deducting capitalized interest) $ 29,314,830 $17,310,851 $ 15,730,029
Portion of rents representative of interest factor 5,151,839 2,900,188 2,703,206
Distributions on Capital Securities, Series A 0 0 0
Preferred stock dividend requirements of majority-owned
subsidiaries grossed up for pre-tax effect 316,063 316,063 316,061
-------------------- ----------------- --------------------
Total Fixed Charges $ 34,782,732 $20,527,102 $ 18,749,297
==================== ================= ====================
Ratio of Earnings to Fixed Charges 0.93 1.63 2.76
==================== ================= ====================
Insufficient to cover fixed charges by 2,592,414
</TABLE>
<TABLE>
<CAPTION>
Year ended June 30, Six months ended
------------------------------------ --------------------
1996 1995 12/31/99
----------------- ----------------- --------------------
<S> <C> <C> <C>
Earnings:
Income (loss) before income taxes, extraordinary charge,
cumulative effect of accounting changes and
and discontinued operations and distributions on Capital
Securities, Series A $ 34,645,994 $23,172,418 $ (17,068,222)
Interest expense, net of capitalized interest 15,236,987 14,797,975 16,292,760
Portion of rents representative of interest factor 2,423,809 2,393,876 2,829,692
Amortization of capitalized interest 10,832 6,051 37,500
Distributions on Capital Securities, Series A 0 0 1,200,000
----------------- ----------------- ------------------
Total Earnings $ 52,317,622 $40,370,320 $ 2,091,730
================= ================= ==================
Fixed Charges:
Interest expense (before deducting capitalized interest) $ 15,352,563 $14,876,278 $16,292,760
Portion of rents representative of interest factor 2,423,809 2,393,876 2,829,692
Distributions on Capital Securities, Series A 0 0 1,200,000
Preferred stock dividend requirements of majority-owned
subsidiaries grossed up for pre-tax effect 316,061 316,063 158,032
----------------- ----------------- ------------------
Total Fixed Charges $ 18,092,434 $17,586,217 $20,480,483
================= ================= ==================
Ratio of Earnings to Fixed Charges 2.89 2.30 0.10
================= ================= ==================
Insufficient to cover fixed charges by 18,388,754
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT 12
Pro Forma
-------------------
Year
Six months ended Ended
-------------------- -------------------
12/31/98 June 30, 1999
-------------------- -------------------
<S> <C> <C>
Earnings:
Income (loss) before income taxes, extraordinary charge,
cumulative effect of accounting changes and
and discontinued operations and distributions on Capital
Securities, Series A $ (20,910,669) $(11,104,000)
Interest expense, net of capitalized interest 13,356,898 32,287,000
Portion of rents representative of interest factor 2,058,653 5,151,839
Amortization of capitalized interest 31,125 75,000
Distributions on Capital Securities, Series A 0 0
-------------------- -------------------
Total Earnings $ (5,463,994) $ 26,409,839
==================== ===================
Fixed Charges:
Interest expense (before deducting capitalized interest) $ 13,356,898 $ 33,188,701
Portion of rents representative of interest factor 2,058,653 5,151,839
Distributions on Capital Securities, Series A 0 0
Preferred stock dividend requirements of majority-owned
subsidiaries grossed up for pre-tax effect 158,032 316,063
-------------------- -------------------
Total Fixed Charges $ 15,573,582 $ 38,656,603
==================== ===================
Ratio of Earnings to Fixed Charges (0.35) 0.68
==================== ===================
Insufficient to cover fixed charges by 21,037,576 12,246,764
</TABLE>
<PAGE>
EXHIBIT 21
Southern States Cooperative, Incorporated
LIST OF SUBSIDIARIES
Name of Subsidiary Jurisdiction of Incorporation
- ------------------ -----------------------------
Southern States Holdings, Inc. Virginia
Southern States Underwriters, Inc. Virginia
SSC Insurance Agency, Inc. Virginia
Wetsel, Inc. Virginia
Mountain State Greenhouses, Inc. Virginia
Agriland Exchange, Inc. Michigan
Virginia Seed Service, Inc. Virginia
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated October 29, 1999, relating to the consolidated financial statements
of Southern States Cooperative, Incorporated and Subsidiaries, which appears in
such Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Richmond, Virginia
May 2, 2000
<PAGE>
EXHIBIT 23.2
The Board of Directors
Southern States Cooperative, Incorporated:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
Atlanta, Georgia
May 1, 2000
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints JONATHAN A. HAWKINS, LESLIE T. NEWTON and N. HOPPER ANCARROW, JR.
and each of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities (including without limitation
in any capacity on behalf of Southern States Cooperative, Inc. (the
"Association") or as an officer or director thereof, to sign a Registration
Statement on Form S-1 for registration of up to $50,000,000 of senior or
subordinated debt securities to be issued by the Association and qualification
of any indenture relating to such debt securities under the Trust Indenture Act
of 1939, and any and all amendments (including post-effective amendments) to
such Registration Statement, and to file the same, with all applications,
statements and exhibits thereto, and all preliminary prospectuses, prospectuses,
prospectus supplements and documents in connection therewith, with the
Securities and Exchange Commission, or with any agency of any of the States,
territories or possessions of the United States of America, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as the undersigned might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Power of Attorney on the 20th, 21st, 24th or 26th day of April , 2000.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Michael W. Beahm /s/ Cecil D. Bell, Jr. /s/ Floyd K. Blessing
- ------------------------------------ ----------------------------------- ---------------------
/s/ Michael W. Beahm /s/ Cecil D. Bell, Jr. /s/ Floyd K. Blessing
/s/ James E. Brady, Jr. /s/ Earl L. Campbell /s/ Jere L. Cannon
- ------------------------------------ ----------------------------------- ------------------
/s/ James E. Brady, Jr. /s/ Earl L. Campbell /s/ Jere L. Cannon
/s/ William F. Covington /s/ Herbert A. Daniel, Jr. /s/ H. Michael Davis
- ------------------------------------ ----------------------------------- --------------------
/s/ William F. Covington /s/ Herbert A. Daniel, Jr. /s/ H. Michael Davis
/s/ John B. East /s/ George E. Fisher /s/ R. Bruce Johnson
- ------------------------------------ ----------------------------------- --------------------
/s/ John B. East /s/ George E. Fisher /s/ R. Bruce Johnson
/s/ James A. Kinsey /s/ J. Wayne McAtee /s/ Richard F. Price
- ------------------------------------ ----------------------------------- --------------------
/s/ James A. Kinsey /s/ J. Wayne McAtee /s/ Richard F. Price
/s/ William G. Pridgeon /s/ Curry A. Roberts /s/ John Henry Smith
- ------------------------------------ ----------------------------------- --------------------
/s/ William G. Pridgeon /s/ Curry A. Roberts /s/ John Henry Smith
/s/ James A. Stonesifer /s/ William W. Vanderwende /s/ Raleigh O. Ward, Jr.
- ------------------------------------ ----------------------------------- ------------------------
/s/ James A. Stonesifer /s/ William W. Vanderwende /s/ Raleigh O. Ward, Jr.
/s/ Wilbur C. Ward /s/ Charles A. Wilfong
- ------------------------------------ ----------------------
/s/ Wilbur C. Ward /s/ Charles A. Wilfong
</TABLE>
<PAGE>
EXHIBIT 25
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM T-1
-----------------------
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED,
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an application to determine eligibility of a trustee pursuant to
Section 305(b) (2) _______
-----------------------
FIRST UNION NATIONAL BANK
(Exact name of Trustee as specified in its charter)
230 SOUTH TRYON STREET, 9TH FL. 22-1147033
CHARLOTTE, NC 28288-1179 (I.R.S. Employer
(Address of principal executive office) (Zip Code) Identification No.)
Patricia A. Welling (804) 343-6067
800 East Main Street, Richmond, Virginia 23219
-----------------------
SOUTHERN STATES COOPERATIVE, INCORPORATED
(Exact name of obligor as specified in its charter)
Virginia
(State or other jurisdiction of 54-0387200
incorporation or organization) (I.R.S. Employer Identification No.)
6606 West Broad Street
Richmond, VA 23230
(Address of principal executive offices) (Zip Code)
-----------------------
Senior Notes of Southern States Cooperative, Incorporated
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
1. General information.
(a) The following are the names and addresses of each examining or
supervising authority to which the Trustee is subject:
The Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Richmond, Richmond, Virginia.
Federal Deposit Insurance Corporation, Washington, D.C.
Securities and Exchange Commission, Division of Market Regulation,
Washington, D.C.
(b) The Trustee is authorized to exercise corporate trust powers.
2. Affiliations with obligor.
The obligor is not an affiliate of the Trustee.
3. Voting Securities of the Trustee.
Response not required.
(See answer to Item 13)
4. Trusteeships under other indentures.
Response not required.
(See answer to Item 13)
5. Interlocking directorates and similar relationships with the obligor or
underwriters.
Response not required.
(See answer to Item 13)
6. Voting securities of the Trustee owned by the obligor or its officials.
Response not required.
(See answer to Item 13)
7. Voting securities of the Trustee owned by underwriters or their officials.
Response not required.
(See answer to Item 13)
8. Securities of the obligor owned or held by the Trustee.
Response not required.
(See answer to Item 13)
2
<PAGE>
9. Securities of underwriters owned or held by the Trustee.
Response not required.
(See answer to Item 13)
10. Ownership or holdings by the Trustee of voting securities of certain
affiliates or security holders of the obligor.
Response not required.
(See answer to Item 13)
11. Ownership or holdings by the Trustee of any securities of a person owning
50 percent or more of the voting securities of the obligor.
Response not required.
(See answer to Item 13)
12. Indebtedness of the obligor to the Trustee.
Response not required.
(See answer to Item 13)
13. Defaults by the obligor.
A. None
B. None
14. Affiliations with the underwriters.
Response not required.
(See answer to Item 13)
15. Foreign trustee.
Trustee is a national banking association organized under the laws of
the United States.
16. List of Exhibits.
(1) *Articles of Incorporation.
(2) Certificate of Authority of the Trustee to conduct business. No
Certificate of Authority of the Trustee to commence business is
furnished since this authority is continued in the Articles of
Association of the Trustee.
3
<PAGE>
(3) *Certificate of Authority of the Trustee to exercise corporate trust
powers.
(4) *By-Laws.
(5) Inapplicable.
(6) Consent by the Trustee required by Section 321(b) of the Trust
Indenture Act of 1939 as amended. Included at Page 5 of this Form T-1
Statement.
(7) *Report of condition of Trustee. Incorporated by reference.
(8) Inapplicable.
(9) Inapplicable.
* Exhibits thus designated have heretofore been filed with the Securities
and Exchange Commission, have not been amended since filing, and are
incorporated herein by reference (See Exhibit T-1 Registration Number 333-
30852).
4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, FIRST UNION NATIONAL BANK, a national banking association
organized and existing under the laws of the United States of America, has duly
caused this Statement of Eligibility and Qualification to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Richmond, and in the Commonwealth of Virginia on the 2nd day of May, 2000.
FIRST UNION NATIONAL BANK
(Trustee)
BY: /s/ Patricia A. Welling
---------------------------------
Vice President
EXHIBIT T-1 (6)
CONSENT OF TRUSTEE
Under Section 321(b) of the Trust Indenture Act of 1939 and in connection
with the issuance by Southern States Cooperative, Incorporated of its Senior
Notes, First Union National Bank, as the Trustee herein named, hereby consents
that reports of examinations of said Trustee by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon requests therefor.
FIRST UNION NATIONAL BANK
BY: /s/ Patricia A. Welling
---------------------------------
Vice President
Dated: May 2, 2000
-----------
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the consolidated
balance sheet and the consolidated statement of operations income filed as part
of the interim report included in the Company's Form S-1 for the quarter ended
December 31, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-31-1999
<CASH> 40,041
<SECURITIES> 0
<RECEIVABLES> 72,855
<ALLOWANCES> 3,062
<INVENTORY> 240,768
<CURRENT-ASSETS> 369,051
<PP&E> 396,121
<DEPRECIATION> 198,476
<TOTAL-ASSETS> 697,274
<CURRENT-LIABILITIES> 231,393
<BONDS> 0
2,114
41,450
<COMMON> 12,117
<OTHER-SE> 150,109
<TOTAL-LIABILITY-AND-EQUITY> 697,273
<SALES> 587,415
<TOTAL-REVENUES> 597,390
<CGS> 470,012
<TOTAL-COSTS> 598,166
<OTHER-EXPENSES> 252
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,493
<INCOME-PRETAX> (18,520)
<INCOME-TAX> (7,151)
<INCOME-CONTINUING> (18,520)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 1,590
<NET-INCOME> (9,779)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
