As filed with the Securities and Exchange Commission on April 18, 1997
Registration No. 333-
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ALLIANCE FARMS COOPERATIVE ASSOCIATION
(Name of small business issuer in its charter)
COLORADO
(State or jurisdiction
of 0213 84-1270685
incorporation or (Primary Standard Industrial (I.R.S. Employer
organization) Classification Code Number) Identification No.)
302 IDLEWILD STREET
YUMA, COLORADO 80759
(970) 848-3231
(Address and telephone number of principal executive offices)
44425 COUNTY ROAD Q
ECKLEY, COLORADO 80727
(Address of principal place of business)
WAYNE N. SNYDER
CHAIRMAN OF THE BOARD AND PRESIDENT
3315 NORTH OAK TRAFFICWAY, DEPARTMENT 47
KANSAS CITY, MISSOURI 64116
(816) 891-3686
(Name, address and telephone number of agent for service)
Copies to:
JAMES W. ALLEN, ESQ.
STINSON, MAG & FIZZELL, P.C.
1201 WALNUT STREET, SUITE 2800
KANSAS CITY, MISSOURI 64106-6251
(816) 842-8600
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
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, as amended, check the following box. [X]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
maximum maximum
Amount offering aggregate
Title of each class of securities to be price offering Amount of
to be registered registered per share(1) price(1) registration fee
<S> <C> <C> <C> <C>
Common Stock ($.01 par value per share) . . . . . . 51 shares $80,000 $4,080,000 $1,236
Class B Common Stock ($.01 par value per share). . 108 shares $70,000 $7,560,000 $2,291
<FN>
(1) Estimated solely for the purpose of calculating the registration fee.
</TABLE>
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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
ALLIANCE FARMS COOPERATIVE ASSOCIATION
Cross-reference Sheet Showing Location in Prospectus of:
PART I - INFORMATION REQUIRED IN PROSPECTUS
<TABLE>
<CAPTION>
FORM SB-2 ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
<S> <C>
1. Front of Registration Statement and Outside Front
Cover of Prospectus ............................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus ........................................ Inside Front Cover Page
3. Summary Information and Risk Factors .............. Prospectus Summary; Risk Factors
4. Use of Proceeds ................................... Use of Proceeds
5. Determination of Offering Price ................... Plan of Distribution--Offering Price
6. Dilution .......................................... Not applicable
7. Selling Security Holders .......................... Not applicable
8. Plan of Distribution .............................. Plan of Distribution
9. Legal Proceedings ................................. Business--Legal Proceedings
10.Directors, Executive Officers, Promoters and Control
Persons ........................................... Management--Directors and Executive Officers
11.Security Ownership of Certain Beneficial Owners and
Management ........................................ Principal Stockholders
12.Description of Securities ......................... Description of Capital Stock; Restrictions on Sale
or Other Transfer of the Shares--Cooperative
Association Laws and Charter Documents
13.Interest of Named Experts and Counsel ............. Not applicable
14.Disclosure of Commission Position on Indemnification
for Securities Act Liabilities .................... Management--Limitation on Liability and
Indemnification of Directors and Officers
15.Organization Within Last Five Years ............... Certain Relationships and Related Transactions
16.Description of Business ........................... Prospectus Summary; Risk Factors; Selected
Financial Data; Business; Certain Relationships and
Related Transactions; Feeder Pig Purchase
Agreement; Weaned Pig Purchase Agreement
17.Management's Discussion and Analysis or Plan of Management's Discussion and Analysis of Financial
Operation ......................................... Condition and Results of Operations
18.Description of Property .......................... Business--Facilities
19.Certain Relationships and Related
Transactions ...................................... Certain Relationships and Related Transactions
20.Market for Common Equity and Related Stockholder Risk Factors; Patronage Distribution Policy;
Matters ........................................... Description of Capital Stock; Restrictions on
Sale or Other Transfer of the Shares
Management--Director Compensation and
21.Executive Compensation .... --Executive Compensation
22.Financial Statements ...... Financial Statements
23.Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure Not applicable
</TABLE>
PROSPECTUS (Subject to Completion)
Dated April 18, 1997
ALLIANCE FARMS COOPERATIVE ASSOCIATION
51 Shares of Common Stock
and
108 Shares of Class B Common Stock
Alliance Farms Cooperative Association, a Colorado cooperative
association ("Alliance" or the "Company"), is offering up to an aggregate of
51 shares (the "Class A Shares") of its Common Stock, $.01 par value ("Class
A Common"), and 108 shares (the "Class B Shares" and together with the Class
A Shares, the "Shares") of its Class B Common Stock, $.01 par value ("Class B
Common" and together with the Class A Common, the "Common Stock"),
exclusively to producers of agricultural products, associations of such
producers, and federations of such associations, at a price of $80,000 per
Class A Share and a price of $70,000 per Class B Share. The Shares are being
offered on a "best efforts, all-or-none" basis for (a) 17 Class A Shares (a
"Minimum Class A Block"), and thereafter may continue to be offered on such
basis with respect to successive Minimum Class A Blocks until 51 Class A
Shares have been issued and sold, and (b) 18 Class B Shares (a "Minimum Class
B Block" and together with a Minimum Class A Block, a "Minimum Block"), and
thereafter may continue to be offered on such basis with respect to
successive Minimum Class B Blocks until 108 Class B Shares have been issued
and sold. As of the date of this Prospectus, the Company has not consummated
the issuance and sale of any shares of Common Stock in this offering. The
consummation of the issuance and sale of each Minimum Class A Block will be
conditioned upon and subject to the Company obtaining a commitment for at
least $2,720,000 of term debt borrowings. As of the date of this Prospectus,
the Company has obtained such a commitment with respect to the Class A Shares
offered hereby until August 31, 1997. The consummation of the issuance and
sale of each Minimum Class B Block will be conditioned upon and subject to
the Company obtaining a commitment for at least $2,100,000 of term debt
borrowings. As of the date of this Prospectus, the Company is engaged in
negotiations with a lender to obtain such a commitment with respect to the
Class B Shares. The offering price per Share has been arbitrarily determined
by the Company based upon the Company's anticipated equity capital
requirements for the development of one new feeder pig production facility
with respect to each Minimum Class A Block sold and upon the anticipated
output of feeder pigs (i.e., pigs weighing at least 30 pounds) from each such
facility, and based upon the Company's anticipated equity capital
requirements for the development of one new weaned pig production facility
with respect to each Minimum Class B Block sold and upon the anticipated
output of weaned pigs (i.e., pigs weighing at least six pounds) from each
such facility. Each investor must purchase a minimum of (a) one Class A
Share, and in addition must enter into a Feeder Pig Purchase Agreement with
the Company in the form attached to this Prospectus as Exhibit B, or (b) one
Class B Share, and in addition must enter into a Weaned Pig Purchase
Agreement with the Company in the form attached to this Prospectus as
Exhibit C. No fractional shares will be issued. There can be no assurance
that any or all of the Shares in this offering will be sold. Pending the
sale of one or more Minimum Class A Blocks or Minimum Class B Blocks, all
funds received in payment of the public offering price for Shares will be
deposited in an interest bearing escrow account with NationsBank, N.A. (Mid-
West) (formerly Boatmen's National Bank). The offering of the Shares will
terminate on , 1998 (550 days from the , 1997
commencement of the offering), unless extended by the Company for a period of
up to an additional 180 days. See "Business--Financing" and "Plan of
Distribution."
The Company intends to sell the Shares through agents designated by the
Company or, if permitted under applicable law, directly to one or more
purchasers through the efforts of its directors, officers and employees. The
Company has retained Interstate/Johnson Lane Corporation ("I/JL") to serve as
its agent in connection with this offering. See "Plan of Distribution."
There is no public market for the Class A Common or Class B Common of
the Company, and no public market is expected to develop as a result of any
offering of the Shares. The Shares offered hereby are subject to the
provisions of the Colorado Cooperative Association Law and the Company's
Articles of Incorporation and Bylaws which restrict the transferability of
the Shares. No assignment or transfer of the Company's Class A Common or
Class B Common will be permitted without the consent of the Company's Board
of Directors, which consent may not be given unless, the assignee or
transferee of the Class A Common executes and delivers to the Company a
Feeder Pig Purchase Agreement and the assignee or transferee of the Class B
Common executes and delivers to the Company a Weaned Pig Purchase Agreement.
No dividends will be paid by Alliance on its Class A Common or Class B
Common, although stockholders will be entitled to patronage distributions
based on the quantity or value of business done by the Company with or for
its stockholders. The ability of the Company to pay patronage distributions
in cash, however, is restricted under the loan agreement with the Company's
existing lender. See "Risk Factors --Distributions and Dividends" and "--
Lack of Liquidity; Absence of Market for Shares," "Patronage Distribution
Policy," "Description of Capital Stock" and "Restrictions on Sale or Other
Transfer of the Shares."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS", APPEARING ON PAGES 9 THROUGH 18, FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING DISCOUNTS AND PROCEEDS TO THE
PRICE TO PUBLIC COMMISSIONS (1) COMPANY (1)(2)
<S> <C> <C> <C>
Per Share of Class A Common $80,000 $784.31 $79,215.69
Total Class A Minimum (3) $1,360,000 $40,000 $1,320,000
Total Class A Maximum (3) $4,080,000 $40,000 $4,040,000
Per Share of Class B Common $70,000 $392.16 $69,607.84
Total Class B Minimum (4) $1,260,000 $40,000 $1,220,000
Total Class B Maximum (4) $7,560,000 $40,000 $7,520,000
</TABLE>
(Footnotes on next page)
The date of this Prospectus is , 1997.
DESCRIPTION: The following paragraph is on landscape on the front page of
the Prospectus.
[Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.]
(End of Description of landscape paragraph)
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH ANY OFFERING MADE HEREBY OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF CLASS A COMMON AND
CLASS B COMMON OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
The Company is currently subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and in accordance
therewith the Company files annual and quarterly reports and other information
with the Securities and Exchange Commission (the "Commission"). See "Additional
Information." The Company intends to furnish to its stockholders annual reports
containing financial statements audited by an independent certified public
accounting firm. In addition, the Company intends to make available to its
stockholders quarterly reports containing unaudited financial information for
each of the first three quarters of each fiscal year.
TABLE OF CONTENTS
PAGE
Prospectus Summary ........... 3
Risk Factors ................. 9
The Company................... 18
Use of Proceeds............... 18
Patronage Distribution
Policy....................... 22
Capitalization ............... 23
Selected Financial Data....... 25
Management's Discussion and
Analysis of Financial
Condition and Results
of Operations................. 26
Business...................... 33
Feeder Pig Purchase
Agreement................... 47
Weaned Pig Purchase
Agreement................... 50
Management ................... 53
Certain Relationships
and Related
Transactions................ 56
Principal Stockholders ....... 59
Description of Capital
Stock ........................ 60
Restrictions on Sale or
Other Transfer
of the Shares ....... 62
Plan of Distribution...........63
Legal Matters................. 68
Experts....................... 68
Additional Information ....... 68
Index of Financial
Statements .................F-1
Exhibit A --
Form of Subscription
Agreement...................A-1
Exhibit B --
Form of Feeder Pig
Purchase Agreement..........B-1
Exhibit C --
Form of Weaned Pig
Purchase Agreement.......... C-1
The Company will provide without charge to each person who receives a
Prospectus, upon written or oral request of such person, a copy of any of the
information that has been incorporated by reference in this Prospectus (not
including exhibits to the information that is incorporated by reference unless
the exhibits are themselves specifically incorporated by reference). Such a
request should be directed to Mr. Wayne N. Snyder, Chairman of the Board and
President of the Company, at Farmland Industries, Inc., 3315 North Oak
Trafficway, Department 47, Kansas City, Missouri 64116 (telephone number 816-
891-3686), until the termination of the offering.
Until , 1997 (90 days after the date of this Prospectus) all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
(1)The Company intends to sell the Shares directly to one or more purchasers
through the efforts of its directors, officers and employees, if permitted
under applicable law, in which event no Underwriting Discounts and
Commissions will be paid, or through agents designated by the Company. The
Company has entered into an agency agreement with I/JL providing for the
payment by Alliance of a lump sum fee of $40,000 regardless of whether any or
all of the Shares are sold. For purposes of estimating Per Share amounts, it
is assumed that all 51 Class A Shares and all 108 Class B Shares will be
sold. For purposes of estimating the Proceeds to the Company, it is assumed
that all Shares sold will be sold through the Company's agent, I/JL. The
Company has agreed to indemnify I/JL against certain liabilities, including
liabilities under the Securities Act of 1933. See "Plan of Distribution."
(2)Before deduction of expenses payable by the Company estimated at $100,000.
(3)The Company intends to offer and sell the Shares on a "best efforts, all-or-
none" basis for (a) a Minimum Class A Block of 17 Class A Shares, and
thereafter may continue to offer Class A Shares on such basis with respect to
successive Minimum Class A Blocks until 51 Class A Shares have been issued
and sold, and (b) a Minimum Class B Block of 18 Class B Shares, and
thereafter may continue to offer Class B Shares on such basis with respect to
successive Minimum Class B Blocks until 108 Class B Shares have been issued
and sold. Pending the sale of a Minimum Block, all funds received in payment
of the public offering price for the Shares will be deposited in an interest-
bearing escrow account. As of the date of this Prospectus, the Company has
not consummated the issuance and sale of any Shares. See "Plan of
Distribution."
PROSPECTUS SUMMARY
The following information is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.
All references to "Alliance" and the "Company" in this Prospectus include
Alliance Farms Cooperative Association and its predecessor, Yuma Feeder Pig
Limited Liability Company ("Yuma LLC"), unless the context indicates otherwise.
THE COMPANY
The Company is a cooperative association engaged in the production of
feeder pigs for sale to its members who own shares of Class A Common, and
intends to engage in the production of weaned pigs for sale to its members who
own shares of Class B Common. The Company was formed as a cooperative
association under the laws of the state of Colorado on May 3, 1994, but did not
engage in any business activity until July, 1994. The Company's predecessor,
Yuma LLC, was formed in October, 1991 and commenced shipment of feeder pigs in
March, 1993. On July 13, 1994 (July 9, 1994 for accounting purposes), the
Company acquired the entire equity ownership rights and interests in Yuma LLC,
and thereupon Yuma LLC was dissolved and liquidated and its assets, liabilities
and feeder pig production operations were assigned to and assumed by Alliance.
As of the date of this Prospectus, the Company owned and operated five 2,450-sow
feeder pig production facilities located in Yuma County, Colorado (approximately
150 miles east of Denver), one 2,450-sow feeder pig production facility located
in Wayne County, Illinois (approximately 100 miles east of St. Louis, Missouri),
and was in the process of developing one additional feeder pig facility of
comparable size in Wayne County, Illinois. Financing for the acquisition of
real estate, facilities construction and acquisition of breeding stock with
respect to the six existing facilities already has been obtained and will not be
provided by any proceeds from the sale of the Shares offered hereby, however,
the proceeds from the sale of the first Minimum Class A Block of 17 Class A
Shares offered hereby will be applied to the Illinois facility presently under
development. See "The Company," "Business" and "Use of Proceeds."
The principal executive offices of the Company are located at 302 Idlewild
Street, Yuma, Colorado 80759, and its telephone number is (970) 848-3231.
RISK FACTORS
The Company and its business, and an investment in the Shares, will be
subject to a high degree of risk, including, without limitation, the various
risks described under "Risk Factors."
THE OFFERING
Securities Offered 51 shares of the Company's Class A Common at an offering
price of $80,000 per share and 108 shares of the Company's
Class B Common at an offering price of $70,000 per share See
"Plan of Distribution" and "Description of Capital Stock."
Investor Suitability The Shares are being offered exclusively to producers of
agricultural products, associations of such producers, and
federations of such associations. In addition, Iowa
investors must satisfy certain net worth and gross income
threshold requirements described herein. Each investor
purchasing one or more Class A Shares must enter into a
Feeder Pig Purchase Agreement, pursuant to which such
investor must purchase his or her proportionate share of the
Company's feeder pig production, and each investor
purchasing one or more Class B Shares must enter into a
Weaned Pig Purchase Agreement, pursuant to which such
investor must purchase his or her proportionate share of the
Company's weaned pig production. See "Plan of
Distribution," "Feeder Pig Purchase Agreement" and "Weaned
Pig Purchase Agreement."
Subscription and Payment Payment of the public offering price for the Class
A Common being subscribed for, together with two copies of
(i) an executed Subscription Agreement, and (ii) an
executed Feeder Pig Purchase Agreement, must be delivered to
the Company or its agent on or before the termination of the
offering. Payment of the public offering price for the
Class B Common being subscribed for, together with two
copies of (i) an executed Subscription Agreement, and (ii)
an executed Weaned Pig Purchase Agreement, must be
delivered to the Company or its agent on or before the
termination of the offering. See "Plan of Distribution--
Subscription Procedure."
Minimum Investment Each investor must make a minimum investment of one
Share of Class A Common or Class B Common. See "Plan of
Distribution."
Transfer Restrictions The Shares are subject to the provisions of the
Colorado Cooperative Association Law and the Company's
Articles of Incorporation and Bylaws, which restrict the
transferability of Common Stock. These restrictions include
a requirement that the Company's Board of Directors give its
consent prior to any transfer of Common Stock, that the
transferee of Class A Common enter into a Feeder Pig
Purchase Agreement with the Company, and that the transferee
Class B Common enter into a Weaned Pig Purchase Agreement
with the Company. In addition, the Company has the right to
purchase a member's Common Stock under certain
circumstances. See "Restrictions on Sale or Other Transfer
of the Shares."
Closing Conditions The Shares are being offered on a "best efforts, all-or-
none" basis for (a) a Minimum Class A Block of 17 Class A
Shares, and thereafter may continue to be offered on such
basis with respect to successive Minimum Class A Blocks
until 51 Class A Shares have been issued and sold, and (b) a
Minimum Class B Block of 18 Class B Shares, and thereafter
may continue to be offered on such basis with respect to
successive Minimum Class B Blocks until 108 Class B Shares
have been issued and sold. As of the date of this
Prospectus, the Company has not consummated the issuance and
sale of any shares of Common Stock in this offering. This
offering will not be consummated unless (a) at least one
Minimum Class A Block of 17 Class A Shares is issued and
sold and the Company receives a commitment for at least
$2,720,000 of term debt borrowings with respect to each such
Minimum Class A Block, or (b) at least one Minimum Class B
Block of 18 Class B Shares is issued and sold and the
Company receives a commitment for at least $2,100,000 of
term debt borrowings with respect to each such Minimum Class
B Block. As of the date of this Prospectus, the Company has
obtained such a commitment with respect to the Class A
Shares offered hereby until August 31, 1997, and is engaged
in negotiations with a lender to obtain such a commitment
with respect to the Class B Shares. Pending the Company's
acceptance of subscriptions for a Minimum Block, all funds
received in payment of the public offering price for Shares
will be deposited in an interest-bearing escrow account
established at NationsBank, N.A. (Mid-West) (formerly
Boatmen's National Bank). If Alliance does not issue Shares
for which funds have been deposited in the escrow account
prior to the termination of the offering, such funds will be
refunded to the prospective investors, together with any
interest earned thereon and without deduction for expenses.
See "Business--Financing" and "Plan of Distribution."
Termination of the Offering The offering will terminate on , 1998
(550 days from the , 1997 commencement of the
offering), unless extended by the Company for a period of up
to an additional 180 days. See "Plan of Distribution--
Termination of the Offering."
SUMMARY FINANCIAL DATA
The summary historical financial information presented below reflects the
fiscal 1996 operations of Alliance, the fiscal 1995 operations of Alliance, and
the fiscal 1994 combined operations of Yuma LLC from September 1, 1993 through
July 8, 1994 and of Alliance from July 9, 1994 through August 31, 1994. Such
financial information under the captions "Statement of Operations Information"
and "Balance Sheet Information" as of and for the fiscal years ended August 31
is derived from the financial statements of Alliance for the years ended August
31, 1996 and 1995 and the period from inception (July 9, 1994) through
August 31, 1994 and from the financial statements of Yuma LLC for the period
from September 1, 1993 to July 8, 1994, all of which have been audited by the
Company's independent certified public accountants. The summary historical
financial information as of February 28, 1997 and for the six months ended
February 28, 1997 and February 29, 1996 is derived from the unaudited financial
statements of Alliance. In the opinion of the Company, such interim financial
information includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for such interim
periods. In the opinion of management, the financial condition and results of
operations set forth herein cannot be relied upon as being representative of the
continuing prospects for the Company. The following summary financial
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the audited
financial statements and related notes thereto and other information included
elsewhere in this Prospectus. See "Selected Financial Data."
STATEMENT OF OPERATIONS
INFORMATION:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED AUGUST 31, FEBRUARY 28,
1996 1995 1994 1997 1996
<S> <C> <C> <C> <C> <C>
Net sales $7,037,927 $1,554,113 $2,309,319 $6,519,998 $2,871,276
Cost of goods sold 6,422,838 1,836,388 1,912,268 5,549,049 3,008,706
Gross income (loss) 615,089 (282,275) 397,051 970,949 (137,430)
Expenses related to
start-up of new
facilities and
conversion of
existing
facility 426,926 754,756 B 75,668 B
Administrative
expenses 369,787 101,927 36,629 214,996 170,565
Loss on sale of
breeding stock 226,738 112,797 56,474 81,020 170,537
Operating income
(loss) (408,362) (1,251,755) 303,948 599,265 $ (478,532)
Interest expense (1,001,329) (289,082) (1,375) (680,584) (439,320)
Other income 66,604 27,509 28,246 85,786 7,574
(934,725) (261,573) 26,871 (594,798) (431,746)
Net income (loss) $(1,343,087) $(1,513,328) $ 330,819 $ 4,467 $(910,278)
OTHER INFORMATION:
Pigs Sold 148,926 46,858 46,014 112,800 67,241
</TABLE>
<TABLE>
<CAPTION>
AS OF AUGUST 31, AS OF FEBRUARY 28,
BALANCE SHEET INFORMATION: 1996 1995 1994 1997
<S> <C> <C> <C> <C>
Working Capital (Deficit) $(257,702) $1,238,271 $1,980,861 $(1,139,041)
Total Assets 20,845,613 14,571,940 5,322,834 22,344,378
Shareholders' Equity 4,606,289 4,627,693 4,860,610 4,610,756
</TABLE>
USE OF PROCEEDS
Class A Common The net proceeds to the Company from the sale of the Class A
Shares offered hereby, after deducting expenses payable in
connection with this offering, are estimated to be
approximately $1,220,000 if one Minimum Class A Block is
sold and approximately $3,940,000 if all 51 Class A Shares
offered hereby are sold. The Company intends to use the net
proceeds from the sale of each Minimum Class A Block,
together with approximately $2,720,000 of term debt
borrowings for which the Company seeks to obtain a
commitment with respect to each such Minimum Class A Block,
for the development of one new feeder pig production
facility to be situated in or around Yuma County, Colorado,
Wayne County, Illinois or other locations selected by the
Company, including the purchase of real estate, the
construction of the facility, and the acquisition of
breeding stock, and the demands for working capital during
the initial start-up period for the facility. In this
regard, the net proceeds from the sale of the first Minimum
Class A Block will be applied to the Company's second
Illinois feeder pig production facility that presently is
under development, including the repayment of up to
$1,360,000 of any related debt financing, together with
interest thereon, provided by Farmland Industries, Inc.
("Farmland"). If all 51 Class A Shares offered hereby are
sold, the net proceeds to the Company, together with
approximately $8,160,000 of term debt borrowings, will be
used for the development of three new 2,450-sow feeder pig
production facilities (including one feeder pig production
facility under development in Wayne County, Illinois). The
Company anticipates that the net proceeds of the offering of
each Minimum Class A Block, the approximately $2,720,000 of
term debt borrowings for which the Company seeks to obtain a
commitment with respect to each such Minimum Class A Block,
and any interest earned thereon, will be adequate to
maintain its current and planned operations during the
Company's start-up phase for each new facility, which is
anticipated to be up to 13 to 15 months after completion of
the offering of such Minimum Class A Block. As of the date
of this Prospectus, the Company has obtained a commitment
until August 31, 1997 for the approximately $2,720,000 of
debt financing required with respect to each Minimum Class A
Block of Class A Shares offered hereby. See "Use of
Proceeds," "Business--Financing" and "Risk Factors."
Class B Common The net proceeds to the Company from the sale of the Class B
Shares offered hereby, after deducting expenses payable in
connection with this offering, are estimated to be
approximately $1,120,000 if one Minimum Class B Block of 18
Class B Shares is sold and approximately $7,420,000 if all
108 Class B Shares offered hereby are sold. The Company
intends to use the net proceeds from the sale of each
Minimum Class B Block, together with approximately
$2,100,000 of term debt borrowings for which the Company
seeks to obtain a commitment with respect to each such
Minimum Class B Block, for the development of one new weaned
pig production facility to be situated in or around Yuma
County, Colorado, Wayne County, Illinois or other locations
selected by the Company, including the purchase of real
estate, the construction of the facility, and the
acquisition of breeding stock, and the demands for working
capital during the initial start-up period for the facility.
If all 108 Class B Shares offered hereby are sold, the net
proceeds to the Company, together with approximately
$12,600,000 of term debt borrowings, will be used for the
development of six new 2,450-sow weaned pig production
facilities. The Company anticipates that the net proceeds
of the offering of each Minimum Class B Block, the
approximately $2,100,000 of term debt borrowings for which
the Company seeks to obtain a commitment with respect to
each such Minimum Class B Block, and any interest earned
thereon, will be adequate to maintain its planned operations
during the Company's start-up phase for each new facility,
which is anticipated to be up to 11 to 13 months after
completion of the offering of such Minimum Class B Block.
See "Use of Proceeds," "Business--Financing" and "Risk
Factors."
FEEDER PIG PURCHASE AGREEMENT
Each investor purchasing one or more Class A Shares must enter into a Feeder
Pig Purchase Agreement, in the form attached hereto as Exhibit B, pursuant to
which the investor member will be required to purchase, and the Company will be
required to sell, Qualifying Pigs (as defined in the Agreement) in lots of no
less than 900, and no more than 1,000, pigs per lot, as determined by the
Company. Lots of Qualifying Pigs are to be made available to members of the
Company on a rotating schedule determined and implemented by the Company, with
the number of lots made available to a member and the frequency of availability
being based upon the member's proportionate ownership interest in the Company's
outstanding Class A Common and the actual production of Qualifying Pigs from the
Company's facilities. If the Company is successful in implementing its business
plan and the proposed new production facilities are developed on schedule, the
initial lots of feeder pigs for new investor members are not expected to be
available for up to 13 to 15 months after completion of the offering of a
Minimum Class A Block to such members. In the event that the production of
feeder pigs exceeds two and seven-tenths (2.7) lots per share of Class A Common
on a prospective rolling 12-month basis, the Company may sell such excess
production to non-members, or retain such excess production for the Company's
own purposes, in lieu of selling such excess production pursuant to the Feeder
Pig Purchase Agreements. The purchase price for Qualifying Pigs will be
established pursuant to a formula consisting of the sum of the following
factors: the financing cost per pig, the operating cost per pig, and a $4.50
per pig production margin (all as defined in the Agreement). Payment of the
estimated purchase price is due not less than one day prior to the scheduled
shipment date and is subject to adjustment within five days following delivery
for certain variations in the average weight of the pigs.
A member's Feeder Pig Purchase Agreement will remain in effect for a period
of ten years after the date the first delivery of Qualifying Pigs is made to the
member thereunder and thereafter automatically will be renewed for succeeding
one year terms unless earlier terminated by the member. The Company may
terminate a member's Feeder Pig Purchase Agreement if the member fails to
purchase, pay for, and take delivery of any two lots of Qualifying Pigs when and
as made available to the member; provided, however, that for each ten shares of
Class A Common owned by a member, the number of such failures necessary before
the Company may terminate such member's Agreement is increased by one. In
addition, the member will be responsible for the damages and expenses incurred
by the Company as a result of any such failure, including (a) the difference
between the price payable by the member for the Qualifying Pigs that member has
failed to purchase, pay for, and take delivery under the Agreement and the then
current market price for feeder pigs, (b) $3,000, which amount is intended to
cover the Company's administrative and other costs and expenses associated with
such failure, and (c) all costs of collection, enforcement, and prosecution of
the Company's rights and remedies. The member may terminate the Feeder Pig
Purchase Agreement if the Company materially breaches any obligation or covenant
in the Agreement and such breach is not cured within 30 days following notice of
such breach given by the member to the Company. Furthermore, if the first
delivery of Qualifying Pigs thereunder is not made within 24 months of the date
of the Feeder Pig Purchase Agreement, the member may terminate the Agreement
within three months after the expiration of such 24-month period. A member's
Feeder Pig Purchase Agreement automatically terminates if the member assigns or
transfers all shares of Class A Common from which the member's right to purchase
lots of Qualifying Pigs under the Agreement derives. Except as described above,
a member does not have the right to terminate the Feeder Pig Purchase Agreement
prior to the expiration of the initial or any extended term thereof. As alluded
to above, a member has the right to terminate the Feeder Pig Purchase Agreement
at the expiration of the initial or any extended term thereof by giving notice
to the Company at least one year prior to the expiration of such initial or
extended term that the member desires to exercise such termination right. The
foregoing termination rights constitute the member's exclusive rights of
termination under the Feeder Pig Purchase Agreement.
As security for the performance of the member's obligations under the Feeder
Pig Purchase Agreement and for the Company's option to purchase a member's Class
A Common under certain circumstances, a security interest in all of the member's
Class A Common will be granted to the Company and the certificates representing
shares of Class A Common will be retained by Alliance. A member's failure to
perform his purchase obligation under the Feeder Pig Purchase Agreement, among
other occurrences, may result in the Company's foreclosure on this security
interest. No member has the right to demand the return of or to receive any of
the member's capital from the Company as a result of the termination of the
Feeder Pig Purchase Agreement or otherwise and regardless of whether demanded
prior to the expiration of the initial or any extended term of the Feeder Pig
Purchase Agreement or at any time after the expiration of any such term.
Moreover, the Company is under no obligation to redeem or repurchase its Class A
Common prior to the expiration of the initial or any extended term of the Feeder
Pig Purchase Agreement or at any time after the expiration of any such term.
The Class A Shares will not be readily marketable, and purchasers thereof may
not be able to liquidate their investment in the event of any emergency or
otherwise. See "Risk Factors--Obligation to Purchase Pigs," "-- Right of
Alliance to Acquire Shares" and "-- Lack of Liquidity; Absence of Market for
Shares," "Restrictions on Sale or Other Transfer of the Shares--Cooperative
Association Laws and Charter Documents" and "Feeder Pig Purchase Agreement."
WEANED PIG PURCHASE AGREEMENT
Each investor purchasing one or more Class B Shares must enter into a Weaned
Pig Purchase Agreement, in the form attached hereto as Exhibit C, pursuant to
which the investor member will be required to purchase, and the Company will be
required to sell, Qualifying Pigs (as defined in the Agreement) in lots of no
less than 925, and no more than 1,025, pigs per lot, as determined by the
Company. The Company intends to allocate its production of weaned pigs from all
facilities between those that are to be sent to nurseries and developed by the
Company into feeder pigs, on the one hand, and those that are to be sold as
weaned pigs, on the other hand, in the same proportion that the number of the
Company's operating feeder pig production facilities bears to the number of the
Company's operating weaned pig production facilities. Lots of Qualifying Pigs
are to be made available to members of the Company on a rotating schedule
determined and implemented by the Company, with the number of lots made
available to a member and the frequency of availability being based upon the
member's proportionate ownership interest in the Company's outstanding Class B
Common and the Company's actual production of Qualifying Pigs that are to be
sold to members of the Company as weaned pigs. If the Company is successful in
implementing its business plan and the proposed new production facilities are
developed on schedule, the initial lots of weaned pigs for new investor members
are not expected to be available for up to 11 to 13 months after completion of
the offering of a Minimum Class B Block to such members. In the event that the
production of weaned pigs exceeds two and seven-tenths (2.7) lots per share of
Class B Common on a prospective rolling 12-month basis, the Company may sell
such excess production to non-members, or retain such excess production for the
Company's own purposes, in lieu of selling such excess production pursuant to
the Weaned Pig Purchase Agreements. The Company intends to cause any such
excess production of weaned pigs to be retained by the Company and developed
into feeder pigs. The purchase price for Qualifying Pigs will be established
pursuant to a formula consisting of the sum of the following factors: the
financing cost per pig, the operating cost per pig, and a $0 to $4.50 per pig
production margin, as determined by the Company (all as defined in the
Agreement). Payment of the estimated purchase price is due not less than one
day prior to the scheduled shipment date and is subject to adjustment within
five days following delivery for certain variations in the average weight of the
pigs.
A member's Weaned Pig Purchase Agreement will remain in effect for a period of
ten years after the date the first delivery of Qualifying Pigs is made to the
member thereunder and thereafter automatically will be renewed for succeeding
one year terms unless earlier terminated by the member. The Company may
terminate a member's Weaned Pig Purchase Agreement if the member fails to
purchase, pay for, and take delivery of any two lots of Qualifying Pigs when
and as made available to the member; provided, however, that for each ten
shares of Class B Common owned by a member, the number of such failures
necessary before the Company may terminate such member's Agreement is
increased by one. In addition, the member will be responsible for the damages
and expenses incurred by the Company as a result of any such failure,
including (a) the difference between the price payable by the member for the
Qualifying Pigs that member has failed to purchase, pay for, and take delivery
under the Agreement and the then current market price for weaned pigs, (b)
$3,000, which amount is intended to cover the Company's administrative and
other costs and expenses associated with such failure, and (c) all costs of
collection, enforcement, and prosecution of the Company's rights and remedies.
The member may terminate the Weaned Pig Purchase Agreement if the Company
materially breaches any obligation or covenant in the Agreement and such
breach is not cured within 30 days following notice of such breach given by
the member to the Company. Furthermore, if the first delivery of Qualifying
Pigs thereunder is not made within 24 months of the date of the Weaned Pig
Purchase Agreement, the member may terminate the Agreement within three months
after the expiration of such 24-month period. A member's Weaned Pig Purchase
Agreement automatically terminates if the member assigns or transfers all
shares of Class B Common from which the member's right to purchase lots of
Qualifying Pigs under the Agreement derives. Except as described above, a
member does not have the right to terminate the Weaned Pig Purchase Agreement
prior to the expiration of the initial or any extended term thereof. As
alluded to above, a member has the right to terminate the Weaned Pig Purchase
Agreement at the expiration of the initial or any extended term thereof by
giving notice to the Company at least one year prior to the expiration of such
initial or extended term that the member desires to exercise such termination
right. The foregoing termination rights constitute the member's exclusive
rights of termination under the Weaned Pig Purchase Agreement.
As security for the performance of the member's obligations under the Weaned
Pig Purchase Agreement and for the Company's option to purchase a member's
Class B Common under certain circumstances, a security interest in all of the
member's Class B Common will be granted to the Company and the certificates
representing shares of Class B Common will be retained by Alliance. A
member's failure to perform his purchase obligation under the Weaned Pig
Purchase Agreement, among other occurrences, may result in the Company's
foreclosure on this security interest. No member has the right to demand the
return of or to receive any of the member's capital from the Company as a
result of the termination of the Weaned Pig Purchase Agreement or otherwise
and regardless of whether demanded prior to the expiration of the initial or
any extended term of the Weaned Pig Purchase Agreement or at any time after
the expiration of any such term. Moreover, the Company is under no obligation
to redeem or repurchase its Class B Common prior to the expiration of the
initial or any extended term of the Weaned Pig Purchase Agreement or at any
time after the expiration of any such term. The Class B Shares will not be
readily marketable, and purchasers thereof may not be able to liquidate their
investment in the event of any emergency or otherwise. See "Risk Factors--
Obligation to Purchase Pigs," "-- Right of Alliance to Acquire Shares" and "-
Lack of Liquidity; Absence of Market for Shares," "Restrictions on Sale or
Other Transfer of the Shares--Cooperative Association Laws and Charter
Documents" and "Weaned Pig Purchase Agreement."
RISK FACTORS
An investment in the Shares involves a high degree of risk. In addition to
general investment risks and other information contained in this Prospectus, the
factors discussed below should be carefully considered in evaluating the Company
and its business and a possible investment in the Shares.
EARLY STAGE OF DEVELOPMENT
The Company was formed in May, 1994 (with its predecessor, Yuma LLC, being
formed in October, 1991) and is at an early stage of development. Although the
Company has been engaged in the production of feeder pigs since July 1994 (which
process includes the production of weaned pigs), the Company has not engaged at
all in the production of weaned pigs for sale. The Company is subject to all of
the risks inherent in the establishment of a new business and the operation of a
business generally, including the need for substantial capital to support its
facilities development efforts, the need to attract and retain qualified
personnel and experienced management, the risks related to facility location and
construction, changes in market conditions and costs, competition, inflation,
production efficiency, quality control, herd health, environmental and other
governmental laws and regulations, and the other risks described in this
Prospectus. There can be no assurance that the Company successfully will
implement its business plan to develop additional feeder pig production
facilities and weaned pig production facilities and realize any significant
economies of scale or that the feeder pigs and weaned pigs, as the case may be,
to be raised at such facilities will be made available to the Company's
stockholders under the Feeder Pig Purchase Agreements and the Weaned Pig
Purchase Agreements, respectively, in quantities which are sufficient to meet
the requirements of such stockholders and at prices that are less than otherwise
could be obtained from other sources. If the Company is successful in
implementing its business plan and any new pig production facilities are
developed on schedule, the initial lots of feeder pigs resulting from the
development and expansion of the Company's feeder pig production operations are
not expected to be available to new Class A Common investor members for up to 13
to 15 months after completion of the sale of a Minimum Class A Block to such
members and the initial lots of weaned pigs resulting from the development of
the Company's weaned pig production operations are not expected to be available
to new Class B Common investor members for up to 11 to 13 months after
completion of the sale of a Minimum Class B Block to such members. New investor
members will not be entitled to purchase pigs pursuant to the Feeder Pig
Purchase Agreements or Weaned Pig Purchase Agreements, as the case may be, until
such time. See "Business."
BREEDING STOCK
The availability in sufficient numbers of genetically consistent breeding
stock that satisfies the characteristics required by the Company and that can be
obtained on acceptable terms and prices is critical to the Company's operations.
No assurances can be given that the Company's requirements for breeding stock
will be satisfied on acceptable terms and prices, if at all. See "Business."
HERD HEALTH
The health of the breeding herd and pigs produced by the Company can greatly
impact, and has greatly impacted, the profitability of the Company. In the
event that the Company's breeding herd or feeder or weaned pig population
contracts a disease causing diminished breeding stock productivity, or extreme
mortality and morbidity, the Company will face substantial cost or loss and its
operating results will be adversely affected. In addition, herd health problems
will result in an increase in the price for pigs under the Feeder Pig Purchase
Agreements and Weaned Pig Purchase Agreements as well as a reduction in the pigs
available for purchase by stockholders under said Agreements. Alliance and its
members have suffered the consequences referred to in this paragraph as a result
of herd health problems. Although it is anticipated that each of the new
facilities to be developed, in part, with the proceeds from this offering will
be designed in an attempt to allow for disease separation between the
facilities, large numbers of animals will be raised together and may be
vulnerable to disease. No assurance can be given that the Company will be able
to avoid herd health problems. See "Business," "Feeder Pig Purchase Agreement"
and Weaned Pig Purchase Agreement."
VOLATILE INPUT COSTS
Because the cost of feed and other supplies constitute a substantial portion
of the cost of producing a feeder or weaned pig, the Company's profitability is
extremely sensitive to changes in the cost of such inputs. These costs are
subject to substantial fluctuations based upon regional and seasonal
availability and demand, including those attributable to crop conditions,
weather and other factors. A substantial increase in the cost of these inputs,
or a substantial decline in the availability of these inputs, could materially
adversely affect the performance of the Company and result in the price for pigs
under the Feeder Pig Purchase Agreements or Weaned Pig Purchase Agreements, as
the case may be, being higher than otherwise could be obtained from other
sources. Moreover, Alliance's operating results are dependent upon the sale
price paid to Alliance for feeder or weaned pigs, which in turn is or will be
determined in part based on the twelve month historical rolling average of
operating costs incurred by Alliance in producing feeder pigs and the five month
historical rolling average of operating costs incurred by Alliance in producing
weaned pigs. Actual changes in the sale price of feeder and weaned pigs
therefore will lag changes in the related operating costs and may adversely
affect Alliance's operating results, particularly in the event of sudden
movements, or continual increases, in such operating costs. See "Business--
Purchase of Feed and Other Inputs," "Feeder Pig Purchase Agreement" and "Weaned
Pig Purchase Agreement."
ADEQUATE WATER SUPPLY
The Company's operations are dependent upon the availability of an ample
supply of pure water at reasonable cost. Although the Company has obtained the
necessary commercial water well permits to obtain the water necessary to conduct
its current operations in Colorado, the Company has been advised that it will be
unable to obtain any new commercial well permits in Colorado. Accordingly, the
Company has found it necessary in Colorado to obtain the water necessary for its
operations through the purchase of more expensive, irrigated land or other real
property already having the necessary commercial well permits. No assurance can
be given that the Company will be able to obtain the water permits necessary to
enable it to expand its operations in Colorado, Illinois or other locations
selected by the Company. The Company's inability to obtain the necessary water
well permits for the expansion of its operations could have a material adverse
effect on the Company's business. See "Business--Facilities--Location of
Facilities."
OBLIGATION TO PURCHASE PIGS
Each investor purchasing one or more Class A Shares must enter into a Feeder
Pig Purchase Agreement, pursuant to which such investor is obligated to purchase
his or her proportionate share of the Company's feeder pig production for an
initial term of ten years and, unless earlier terminated by the member, for
succeeding one year renewal terms, and each investor purchasing one or more
Class B Shares must enter into a Weaned Pig Purchase Agreement, pursuant to
which such investor is obligated to purchase his or her proportionate share of
the Company's weaned pig production that is to be sold to members as weaned pigs
for an initial term of ten years and, unless earlier terminated by the member,
for succeeding one year renewal terms. In each such case, pigs will be made
available to members of the Company on a rotating schedule determined and
implemented by the Company, with the number of lots made available to a member
and the frequency of availability being based upon the member's proportionate
ownership interest in the Company's outstanding Class A Common, with respect to
feeder pigs, the member's proportionate ownership interest in the Company's
outstanding Class B Common, with respect to weaned pigs and the actual
production of Qualifying Pigs from the Company's facilities. No assurance can
be given that the availability of feeder or weaned pigs to members will coincide
with the member's needs or capacity to take delivery.
The purchase price for feeder and weaned pigs will be established pursuant to
a formula consisting of the sum of the following factors: the financing cost
per pig, the operating cost per pig, and a production margin of $4.50 per pig,
in the case of feeder pigs, and of $0 to $4.50 per pig (as determined by the
Company in its discretion), in the case of weaned pigs (all as defined in the
Feeder Pig Purchase Agreement or Weaned Pig Purchase Agreement, as the case may
be). The Company believes the effect of such pricing is to shift the risks of
increasing production costs and lower market prices for pigs from the Company
and to the member. No assurance can be given that the price for feeder and
weaned pigs under the Feeder Pig Purchase Agreements or Weaned Pig Purchase
Agreement, as the case may be, will be less than otherwise could be obtained
from other sources. Among other factors, a substantial increase in operating
costs, including the costs of feed and other supplies and the costs associated
with diminished breeding stock health or productivity, or extreme mortality and
morbidity, could result in a higher price to be paid by members for feeder and
weaned pigs than otherwise could be obtained from other sources. Moreover, the
prevailing market price for feeder and weaned pigs could decline below the price
to be paid for pigs under the Feeder Pig Purchase Agreements or Weaned Pig
Purchase Agreement, as the case may be. If a member fails to purchase, pay for,
and take delivery of any two lots of pigs when and as made available to the
member, the Company may terminate the member's Feeder Pig Purchase Agreement or
Weaned Pig Purchase Agreement, as the case may be, and foreclose upon the
Company's security interest in the member's Common Stock; provided, however,
that for each ten shares of Common Stock owned by a member, the number of such
permitted failures is increased by one. In addition, the member will be
responsible for the damages and expenses incurred by the Company as a result of
any failure to purchase, pay for, and take delivery of any lot of Qualifying
Pigs, including (a) damages equal to the difference between the price payable by
the member for the Qualifying Pigs that member has failed to purchase, pay for,
and take delivery under the Agreement and the then current market price for
feeder or weaned pigs, as the case may be, (b) $3,000, which amount is intended
to cover the Company's administrative and other costs and expenses associated
with such failure, and (c) all costs of collection, enforcement, and prosecution
of the Company's rights and remedies.
With certain limited exceptions relating to the Company's breach of any of
its obligations under the Feeder Pig Purchase Agreement or Weaned Pig Purchase
Agreement, as the case may be, or the Company's failure to deliver pigs within
24 months of the date of such Agreement, a member does not have the right to
terminate such Agreement prior to the expiration of the initial or any extended
term of such Agreement. The member's right to terminate the Feeder Pig Purchase
Agreement or Weaned Pig Purchase Agreement, as the case may be, at the
expiration of the initial or any extended term thereof may be exercised only if
the member gives notice to the Company at least one year prior to the expiration
of such initial or extended term that the member desires to exercise such
termination right. A member has no other right to terminate the Feeder Pig
Purchase Agreement or Weaned Pig Purchase Agreement, as the case may be.
Moreover, no member has the right to demand the return of or to receive any of
the member's capital from the Company as a result of the termination of any such
Agreement or otherwise and regardless of whether demanded prior to the
expiration of the initial or any extended term of such Agreement or at any time
after the expiration of any such term. The Company is under no obligation to
redeem or repurchase its Common Stock prior to the expiration of the initial or
any extended term of the Feeder Pig Purchase Agreement or Weaned Pig Purchase
Agreement, as the case may be, or at any time after the expiration of any such
term. See "Risk Factors--Right of Alliance to Acquire Shares" and "-- Lack of
Liquidity; Absence of Market for Shares," "Business," "Feeder Pig Purchase
Agreement," "Weaned Pig Purchase Agreement" and "Restrictions on Sale or Other
Transfer of the Shares--Cooperative Association Laws and Charter Documents."
UNPURCHASED AND EXCESS PIGS
Each investor purchasing one or more Class A Shares must enter into a Feeder
Pig Purchase Agreement, pursuant to which such investor agrees to purchase his
or her proportionate share of the Company's feeder pig production, and each
investor purchasing one or more Class B Shares must enter into a Weaned Pig
Purchase Agreement, pursuant to which such investor agrees to purchase his or
her proportionate share of the Company's weaned pig production that is to be
sold to members of the Company as weaned pigs. The failure of the Company's
stockholders to purchase their respective share of the Company's pig production
could materially adversely affect the performance of the Company. In the event
that one or more stockholders fail to purchase their respective share of the
Company's pig production, it will be necessary for the Company to find alternate
purchasers for its unpurchased pigs. In addition, it also may be necessary to
find alternate purchasers to the extent the Company's production of feeder pigs
exceeds two and seven-tenths (2.7) lots per share of Class A Common on a
prospective rolling 12-month basis or to the extent the Company's production of
weaned pigs exceeds two and seven-tenths (2.7) lots per share of Class B Common
on a prospective rolling 12-month basis. Stockholders will not be obligated
under the Feeder Pig Purchase Agreements or Weaned Pig Purchase Agreements to
purchase their proportionate share of such excess production. Although the
Company has agreed to provide Farmland the first opportunity to purchase feeder
and weaned pigs that stockholders have failed to purchase and any excess feeder
and weaned pig production during the five year period ending July 13, 1999, no
assurances can be given that Farmland will exercise its option to purchase any
such excess pigs. In addition, no assurances can be given that alternate
purchasers will be available, or that any such alternate purchasers will agree
to purchase feeder or weaned pigs upon terms as favorable to the Company as
those contained in the Feeder Pig Purchase Agreements or Weaned Pig Purchase
Agreements, as the case may be. To the extent that unpurchased feeder or weaned
pigs are sold to alternate purchasers at prices less than would have been
obtained under such Agreements, the price for feeder or weaned pigs to
stockholders may increase. See "Feeder Pig Purchase Agreement," "Weaned Pig
Purchase Agreement" and "Certain Relationships and Related Transactions--
Farmland."
LOSSES ASSOCIATED WITH START-UP
The Company was formed recently and has a limited history of operations. The
development of feeder and weaned pig production facilities entails substantial
up front expenditures for the purchase of real estate, the construction of the
facilities, and the acquisition of breeding stock and for working capital during
the initial start-up period for each new facility. As a result, the Company
anticipates that the development of feeder and weaned pig production facilities
will result in Alliance's continued incurrence of losses. There can be no
assurance that Alliance will become profitable after it ceases facilities
development activities. See "Selected Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
NO LOAN COMMITMENT; FUNDING CONDITIONS
With respect to its offering of each Minimum Class A Block of 17 Class A
Shares, the Company anticipates that it will be required to borrow at least
$2,720,000 of term debt in order to further its business strategy in developing
each additional feeder pig production facility. With respect to its offering of
each Minimum Class B Block of 18 Class B Shares, the Company anticipates that
it will be required to borrow at least $2,100,000 of term debt in order to
further its business strategy in developing each weaned pig production facility.
Assuming the sale by the Company of all 51 Class A Shares offered hereby, the
Company intends to borrow an aggregate of at least $8,160,000, which in
combination with the net proceeds of the offering of such Class A Shares, is
anticipated to be sufficient to enable it to construct or acquire three new
feeder pig production facilities (including one facility under development),
acquire breeding stock, and pay start-up and operating expenses in order to
further develop and expand its feeder pig production business. As of the date of
this Prospectus, the Company has obtained a commitment for the necessary feeder
pig production loans from its current lender, CoBank, ACB ("CoBank") until
August 31, 1997 (extended from the original February 28, 1997 expiration date).
No assurances can be given that the Company will be able to obtain an extension
of such commitment after that date on favorable terms, if at all. Assuming the
sale by the Company of all 108 Class B Shares offered hereby, the Company
intends to borrow an aggregate of at least $12,600,000, which in combination
with the net proceeds of the offering of such Class B Shares, is anticipated to
be sufficient to enable it to construct or acquire six new weaned pig production
facilities, acquire breeding stock, and pay start-up and operating expenses in
order to develop its weaned pig production business. As of the date of this
Prospectus, the Company is engaged in negotiations with a lender to obtain a
commitment for the necessary weaned pig production loans. No assurances can be
given that the Company will be able to obtain such commitment on favorable
terms, if at all.
The actual advance of funds under the CoBank commitment or any other loan
commitment that reasonably could be made available to the Company is or will be
subject to the satisfaction of certain conditions precedent. In addition, any
such commitment may be withdrawn or terminated by the prospective lender under
certain circumstances. There is no assurance that the funding conditions
precedent will be satisfied and that the loan funds will be made available to
the Company when needed, that the debt service requirements of such loan will
not result in the price for feeder or weaned pigs under the Feeder Pig Purchase
Agreements or Weaned Pig Purchase Agreements, as the case may be, being higher
than otherwise could be obtained from other sources, that alternative sources of
financing will be available on acceptable terms, or that the aggregate borrowing
needs of the Company will not exceed $8,160,000, with respect to feeder pig
production, or $12,600,000, with respect to weaned pig production. In the event
that the CoBank commitment for a feeder pig production loan or any extension of
such commitment is withdrawn or terminated, or the Company is unable to obtain
an acceptable commitment for a weaned pig production loan from a lender prior to
or concurrently with the consummation of the offering of any Minimum Class A
Block or Minimum Class B Block of Shares, all subscriptions for each such
Minimum Block of Shares will be rejected and any amount received by the Company
in payment of the subscription price will be returned to the prospective
investors, together with any interest earned thereon and without deduction for
expenses. See "Business--Financing," "Plan of Distribution--Subscription
Procedure," "-- Escrow of Proceeds" and "-- Termination of the Offering," "Use
of Proceeds" and "Capitalization."
SUBSTANTIAL INDEBTEDNESS
The Company is highly leveraged and will continue to be so after its
anticipated borrowing of term debt in connection with the issuance and sale by
the Company of all or part of the Shares offered hereby. The degree to which
the Company is and will be leveraged could have an adverse impact on the
Company, including (i) increased vulnerability to adverse general economic and
market conditions, (ii) impaired ability to obtain additional financing for
future working capital, capital expenditures, general corporate or other
purposes, and (iii) dedication of a significant portion of cash provided by
operating activities to the payment of debt obligations and thereby reducing
funds available for operations or distribution. The Company's ability to make
required debt service payments in the future will be dependent upon the
Company's operating results, which are subject to financial, economic and other
factors affecting the Company, many of which are beyond its control. Moreover,
such operating results will be dependent upon the sale price paid to the Company
for feeder pigs, which in turn is determined in part based on the twelve month
historical rolling average of operating costs incurred by the Company in
producing such pigs, and upon the sale price paid to the Company for weaned
pigs, which in turn will be determined in part based on the five month
historical rolling average of operating costs incurred by the Company in
producing such pigs. Actual changes in the sale price of feeder and weaned pigs
therefore will lag changes in the related operating costs and may affect the
Company's ability to timely make required debt service payments. No assurance
can be given that the Company will be able to make required debt service
payments. No person has agreed to guarantee the obligation of the Company to
make timely debt service payments. See "Capitalization," "Business--Financing,"
"Feeder Pig Purchase Agreement" and "Weaned Pig Purchase Agreement."
ASSETS SECURING DEBT; CREDIT AGREEMENT RESTRICTIONS
The Company entered into various loan agreements and other documentation with
the Company's existing lender, CoBank. Pursuant to such loan documentation ,
the Company has been, and anticipates that it will be, required to grant liens
on substantially all of its properties and assets to CoBank and to comply with
various affirmative and negative covenants, including but not limited to (i)
maintenance of minimum levels of working capital, (ii) restrictions on the
incurrence of additional indebtedness, (iii) restrictions on certain liens,
mergers, sales of assets, investments, guaranties, loans, advances and business
activities unrelated to existing operations, and (iv) restrictions on the
declaration and payment of dividends or patronage distributions. There can be
no assurance that Alliance will be able to achieve and maintain compliance with
the prescribed covenants of such loan documentation. Alliance has successfully
sought and received consents, waivers and amendments to its loan documentation
on various occasions. If further consents, waivers or amendments are requested
by Alliance, including any such consents, waivers or amendments required for the
payment of rebates on the price of pigs sold, there can be no assurance that
Alliance's lender will again grant such requests. The failure to obtain any
such consents, waivers or amendments would reduce Alliance's flexibility to
respond to adverse industry conditions and could have a material adverse effect
on Alliance's results of operations, financial condition and business. If an
event of default occurs under the Company's loan documentation, the lender will
have the right to foreclose upon such collateral. In addition, the terms of the
Company's financing with CoBank might adversely affect the ability of the
Company to obtain additional financing for any future expansion efforts,
including the development of feeder or weaned pig production facilities. No
person has agreed to guarantee the obligation of the Company to make timely debt
service payments. See "Business--Financing."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING; AND WORKING CAPITAL
DEFICIT
The Company anticipates that the net proceeds of the offering of each Minimum
Class A Block of 17 Class A Shares, the $2,720,000 of term debt borrowings for
which the Company seeks to obtain a commitment with respect to each such Minimum
Class A Block, and any interest earned thereon, will be adequate to maintain its
current and planned operations during the Company's start-up phase for each new
feeder pig production facility, which is anticipated to be up to 13 to 15 months
after completion of the offering of such Minimum Class A Block. As of the date
of this Prospectus, the Company has obtained a commitment until August 31, 1997
for the approximately $2,720,000 of debt financing required with respect to each
such Minimum Class A Block. The Company anticipates that the net proceeds of
the offering of each Minimum Class B Block of 18 Class B Shares, the $2,100,000
of term debt borrowings for which the Company seeks to obtain a commitment with
respect to each such Minimum Class B Block, and any interest earned thereon,
will be adequate to maintain its planned operations during the Company's start-
up phase for each new weaned pig production facility, which is anticipated to be
up to 11 to 13 months after completion of the offering of such Minimum Class B
Block. No assurance can be given that circumstances and events will not occur
that would consume capital resources available for each new feeder or weaned pig
production facility before such time and thereby require additional financing to
be raised. The Company is and will be subject to the risks normally associated
with debt financing, including the risk that the Company's cash flow will be
insufficient to meet required payments of principal and interest and the risk
that indebtedness will not be able to be refinanced or that the terms of such
refinancing will not be as favorable as the terms of the original indebtedness
and thereby increasing the cost to stockholders of feeder or weaned pigs made
available under the Feeder Pig Purchase Agreements or Weaned Pig Purchase
Agreements, as the case may be. As of February 28, 1997, Alliance had a working
capital deficit of $1,139,041. The Company anticipates that it will be required
to raise additional capital in order to further expand its operations beyond the
expansion contemplated in connection with the offering of Shares made hereby.
Such capital may be raised through additional private or public financings, as
well as collaborative relationships, borrowings and other available sources. If
the Company needs to raise additional funds, there can be no assurance that
additional or sufficient financing will be available, or, if available, that it
will be available on acceptable terms. If additional funds are raised by
issuing equity securities of the Company, dilution to then existing stockholders
may result. If adequate funds are not available, the Company may be required to
significantly curtail a portion of its planned operations. See "Business."
COMPETITION
Many of the Company's existing or potential competitors may have
substantially greater financial, technical and personnel resources than the
Company. There can be no assurance that the Company's competitors will not be
more successful than the Company in developing and improving pork production
technologies and raising consistent high quality feeder and weaned pigs that are
more economical to raise than any which may be developed or raised by the
Company. Moreover, as additional competitors commence operations, the supply of
feeder or weaned pigs may exceed demand and result in a downward pressure on the
prevailing market prices for such pigs. Under the Feeder Pig Purchase
Agreements or Weaned Pig Purchase Agreements, as the case may be, each investor
will be obligated to purchase his proportionate share of the Company's feeder or
weaned pig production based in large part on Alliance's cost of production.
Accordingly, if the Company is not successful in developing and improving pork
production technologies relative to its competitors or if the prevailing market
prices for feeder or weaned pigs decline below those applicable under such
Agreements, each investor may be obligated to purchase his proportionate share
of the Company's feeder or weaned pig production at a price higher than could be
available from other sources. The Company's ability to achieve or maintain cost
competitive feeder or weaned pig production operations on an ongoing basis may
depend on its ability to raise additional capital, which may not then be
available on acceptable terms, if at all. See "Business--Business Environment"
and "-- Competition," "Feeder Pig Purchase Agreement" and "Weaned Pig Purchase
Agreement."
ANTI-CORPORATE FARMING SENTIMENT
The development of large corporate farming operations and concentration of
hog production in larger-scale facilities, such as those of the Company, has
increased dramatically over the last decade. This development has engendered
opposition from residents of Colorado, Illinois and other states in which the
Company conducts, or may conduct, its business operations. Such opposition may
reflect various concerns, including concerns about pollution and effluent
emissions, excessive water use, offensive odor, humane treatment of animals and
the perceived threat to small farmers and the family farm. To the extent that
public opposition is expressed with respect to large corporate farming
operations such as those of the Company, national, state or local laws
restricting their operations may be enacted in response, legal proceedings may
be instituted to obtain monetary awards, injunctive orders or other legal or
equitable remedies, potential employees may be dissuaded from accepting a
position with such corporate farming operators, property owners may be reluctant
to sell parcels to such corporate farming operators, or other consequences may
result that could have a material adverse effect on the Company and its
business. No assurances can be given that public opposition will not result in
the occurrence of any one or more of such adverse consequences. See "Business--
Business Environment."
EXPANSION
Within up to 13 to 15 months after the completion of the offering of each
Minimum Class A Block of 17 Class A Shares, the Company anticipates that it will
be able to develop a new feeder pig production facility as a result of such
offering and that the initial lots of feeder pigs produced from such facility
would be available to investor members, and within up to 11 to 13 months after
the completion of the offering of each Minimum Class B Block of 18 Class B
Shares, the Company anticipates that it will be able to develop a new weaned pig
production facility as a result of such offering and that the initial lots of
weaned pigs produced from such facility would be available to investor members.
There can be no assurance that the Company or its contractors will be able to
achieve this goal. The development and successful operation of each new
facility depends on various factors, including the availability of suitable
sites, regulatory compliance, the ability to meet construction schedules, the
capabilities of the Company's contractors, the ability to maintain facility
construction costs within original estimates, the ability of the Company to
manage its anticipated expansion generally and to hire and train qualified
personnel, and general economic and business conditions. Many of the foregoing
factors are not within the control of the Company or its contractors, and
therefore no assurance can be given that the Company's expansion objectives and
goals will be successfully implemented. See "Business."
CONTROL BY CURRENT STOCKHOLDERS; POTENTIAL CONFLICTS OF INTEREST
As of the date of this Prospectus, Farmland, Farmers Cooperative Elevator
Company, Yuma Farmers Milling and Mercantile Cooperative Company ("Yuma
Cooperative"), and Farmers Cooperative Association collectively own 81 shares of
the Company's Class A Common, which for such stockholders will constitute
approximately 42.0%, 10.9%, 10.1% and 5.0%, respectively, of the combined voting
power of the shares of Common Stock outstanding immediately after completion of
the offering of one Minimum Class A Block of 17 Class A Shares, approximately
41.7%, 10.8%, 10.0% and 5.0%, respectively, of the combined voting power of the
shares of Common Stock outstanding immediately after completion of the offering
of one Minimum Class B Block of 18 Class B Shares, approximately 32.7%, 8.5%,
7.8% and 3.9%, respectively, of the combined voting power of the shares of
Common Stock outstanding immediately after completion of the offering of all 51
Class A Shares offered hereby, approximately 24.5%, 6.4%, 5.9% and 2.9%,
respectively, of the combined voting power of the shares of Common Stock
outstanding immediately after completion of the offering of all 108 Class B
Shares offered hereby, and approximately 19.6%, 5.1%, 4.7% and 2.4%,
respectively, of the combined voting power of the shares of Common Stock
outstanding immediately after completion of the offering of all 159 Shares
offered hereby (in each case, assuming that such stockholders do not purchase
any Shares in the offering). Although no one cooperative association
stockholder is permitted to vote shares of Common Stock representing 25% or more
of the shares outstanding during any period in which the Company has borrowed
money from a lender subject to regulations of the Farm Credit Administration
regarding loan policies and operations (such as the Company's current lender),
the above-named stockholders could continue to exercise a significant degree of
influence or control over the Company with respect to the election of directors
and other matters if they, or several of them, agree to vote together on such
matters. See "Principal Stockholders" and "Description of Capital Stock."
The Company has contracted with Farmland and Yuma Cooperative for the
provision of certain requirements of the Company, including the supply of feed
and other inputs, breeding stock, and administrative services. The Company's
agreements with Farmland and Yuma Cooperative may be modified in the future and
the Company may enter into additional agreements or transactions with Farmland
and Yuma Cooperative. Farmland, through its various business divisions,
subsidiaries and affiliates, is engaged in the production of livestock
elsewhere, in the sale of the above described supplies and services to other
parties, and in the slaughter and processing of hogs. Farmland may have
conflicting interests in the provision of such services to the Company in light
of its other business activities. Similarly, Yuma Cooperative also may have
conflicting interests in the provision of goods and services to the Company.
See "Certain Relationships and Related Transactions."
ATTRACTION AND RETENTION OF EMPLOYEES
The Company is dependent on members of its management and facilities
operations personnel, the loss of whose services might adversely affect the
achievement and success of its planned expansion activities. In addition,
attracting and retaining qualified facilities operations personnel will be
important to the Company's success. The inability to acquire and retain the
services of such management and facilities operations personnel could have a
material adverse effect on the Company's operations and significantly impact its
prospects for success. Although the Company has contracted with Farmland and
others to provide certain managerial, administrative and other services,
Alliance can give no assurance that it will be able to attract and retain the
personnel it needs on acceptable terms. See "Business--Employees," "Management"
and "Certain Relationships and Related Transactions."
DISTRIBUTIONS AND DIVIDENDS
No dividends will be paid by Alliance on its Common Stock. Investors who
anticipate the need for an immediate return on their investment should refrain
from purchasing the Shares. The Company, however, intends to make annual
patronage distributions of its net margins (as hereinafter defined), if any, to
its members on the basis of the quantity or value of business done by the
Company with or for the member-patrons. Such patronage distributions may be
paid in cash, written notices of allocation, whether qualified or non-qualified,
or a combination thereof, as determined by the Company's Board of Directors in
its sole discretion. The Company has entered into various loan agreements and
other documentation with its existing lender which restrict the Company's
ability to pay patronage distributions in cash. See "Patronage Distribution
Policy" and "Business--Financing."
TAXABLE INCOME WITHOUT SUFFICIENT CASH DISTRIBUTIONS TO PAY THE TAX
The Company is required annually to distribute its patronage sourced income
to its stockholder-patrons on the basis of the quantity or value of business
done with or for its stockholder-patrons. Subject to restrictions imposed by
the Company's lender, the Company anticipates that it will distribute its
patronage distributions through a combination of cash and qualified written
notices of allocation. In such case, the recipient stockholder-patron will have
to report in its taxable income the cash and the face amount of the qualified
written notices of allocation. The Company's Board of Directors will determine
each year the portion of the patronage distribution which is to be paid in cash
or qualified written notice of allocation, although the Company anticipates that
at least twenty percent of the patronage distribution will be paid in cash.
Accordingly, a stockholder may have to pay income taxes on the patronage
distributions in an amount that exceeds (possibly by a substantial amount) the
cash distributions which may be made by the Company to the stockholder. See
"Patronage Distribution Policy" and "Business--Federal Income Taxation."
ARBITRARY DETERMINATION OF OFFERING PRICE; DILUTION
The public offering price for the Shares has been determined arbitrarily by
the Company and is not based on any recognized criteria of value. Among the
factors considered in making such determination are the amount of the
anticipated debt borrowings, together with the net proceeds from the sale of the
Shares, required to develop each additional feeder pig production facility or
weaned pig production facility, as the case may be, which factor takes into
account the anticipated development costs for new facilities, the applicable
debt-to-equity ratio or minimum equity amount that the Company anticipated would
be required by its lender, and the anticipated interest and debt service
requirements associated with such borrowings. The public offering price for the
Class A Shares and Class B Shares, respectively, may not necessarily reflect any
relationship to the Company's assets, historical losses, book value or other
criteria of value. It is anticipated that purchasers of shares of Common Stock
in this offering, especially purchasers of Class A Shares, will experience
immediate and substantial dilution in net tangible book value. See "Plan of
Distribution--Offering Price."
GOVERNMENT REGULATION
The Company is subject to various federal, state and local government
regulations, including those restricting certain types of investor-owned
livestock production operations and those concerning the environment,
occupational safety and health, and zoning. While the Company attempts to
monitor all aspects of its regulatory compliance responsibilities, there can be
no assurance that it will satisfy all applicable governmental regulations or
obtain all required approvals. Failure to comply with applicable regulations
can, among other things, result in fines, suspensions of regulatory approvals,
operating restrictions, and criminal prosecution. Changes in or additions to
applicable regulations also could adversely affect the Company and its business.
See "Business--Government Regulation" and "--Waste Disposal and Environmental
Matters."
RIGHT OF ALLIANCE TO ACQUIRE SHARES
Upon the occurrence of certain events, the Company has the option, but not
the obligation, to purchase an investor's Shares (a) by tendering to the
investor (i) the lesser of (A) the price paid to the Company for such investor's
Shares and (B) the book value of such Shares and capital credits associated
therewith, less (ii) any indebtedness due the Company from the investor, or (b)
by tendering to the investor a nonvoting certificate of participation
representing the investor's interest at the time of such tender in a face amount
equal to the amount specified in clause (a) above. The occurrences giving rise
to such option and to a termination of the investor's membership in the Company
include the following events: (a) the investor's termination of a Feeder Pig
Purchase Agreement or Weaned Pig Purchase Agreement, as the case may be, without
having executed and delivered a replacement for such Agreement or the investor's
failure to be a party to such Agreement, and (b) the Company's Board of
Directors by resolution finds that the investor has (i) intentionally or
repeatedly violated any provision of the Company's Articles of Incorporation or
Bylaws, (ii) breached a Feeder Pig Purchase Agreement or Weaned Pig Purchase
Agreement, as the case may be, or materially breached any other contract with
Company, (iii) remained indebted to the Company for 90 days after such
indebtedness first becomes payable, or (iv) willfully obstructed any lawful
purpose or activity of the Company. The provisions giving the Company the right
to purchase an investor's Common Stock will make it more difficult to effect a
change in control of the Company. See "Risk Factors--Obligation to Purchase
Pigs" and "-- Lack of Liquidity; Absence of Market for Shares," "Feeder Pig
Purchase Agreement," "Weaned Pig Purchase Agreement" and "Restrictions on Sale
and Other Transfer of the Shares--Cooperative Association Laws and Charter
Documents."
LACK OF LIQUIDITY; ABSENCE OF MARKET FOR SHARES
Potential investors in the Shares should be fully aware of the long-term
nature of their investment and of their related obligation to purchase feeder or
weaned pigs under the Feeder Pig Purchase Agreement or Weaned Pig Purchase
Agreement, as the case may be. No public market presently exists for the Common
Stock of the Company and no public market is expected to develop for the
existing Common Stock of the Company or the Shares as a result of the offering
contemplated hereby. Transfers of Common Stock are subject to significant
restrictions and limitations set forth in the Colorado Cooperative Association
Law and the Company's Articles of Incorporation and Bylaws, including a
requirement that the Company's Board of Directors give its consent prior to any
transfer of Shares, that the transferee of Class A Common enter into a Feeder
Pig Purchase Agreement with the Company, and that the transferee of Class B
Common enter into a Weaned Pig Purchase Agreement with the Company. In
addition, the Company has the right to purchase a member's Common Stock under
certain circumstances at a price that may be less than could otherwise be
obtained from other potential purchasers. The certificates representing the
Shares will bear one or more legends describing or referencing certain
applicable restrictions on transfer. In order to subscribe for Shares, (a) each
investor in Class A Common must enter into a Feeder Pig Purchase Agreement
pursuant to which such investor is obligated to purchase his or her
proportionate share of the Company's feeder pig production for an initial term
of ten years and, unless earlier terminated by the member, for succeeding one
year renewal terms, and (b) each investor in Class B Common must enter into a
Weaned Pig Purchase Agreement pursuant to which such investor is obligated to
purchase his or her proportionate share of the Company's weaned pig production
that is to be sold to members as weaned pigs for an initial term of ten years
and, unless earlier terminated by the member, for succeeding one year renewal
terms. With certain limited exceptions relating to the Company's breach of any
of its obligations under the Feeder Pig Purchase Agreement or Weaned Pig
Purchase Agreement, as the case may be, or the Company's failure to deliver
feeder or weaned pigs within 24 months of the date of such Agreement, a member
does not have the right to terminate such Agreement prior to the expiration of
the initial or any extended term of the Agreement. The member's right to
terminate the Feeder Pig Purchase Agreement or Weaned Pg Purchase Agreement, as
the case may be, at the expiration of the initial or any extended term thereof
may be exercised only if the member gives notice to the Company at least one
year prior to the expiration of such initial or extended term that the member
desires to exercise such termination right. A member has no other right to
terminate the Feeder Pig Purchase Agreement or Weaned Pg Purchase Agreement, as
the case may be. Moreover, no member has the right to demand the return of or
to receive any of the member's capital from the Company as a result of the
termination of such Agreement or otherwise and regardless of whether demanded
prior to the expiration of the initial or any extended term of such Agreement or
at any time after the expiration of any such term. The Company is under no
obligation to redeem or repurchase its Common Stock prior to the expiration of
the initial or any extended term of the Feeder Pig Purchase Agreement or Weaned
Pg Purchase Agreement, as the case may be, or at any time after the expiration
of any such term. For these and other reasons, the Shares will not be readily
marketable, and purchasers thereof must bear the economic risk of investment for
an indefinite period and may not be able to liquidate their investment in the
event of any emergency or otherwise. See "Restrictions on Sale or Other
Transfer of the Shares" and "Description of Capital Stock."
ADDITIONAL FACTORS
Additional risk and uncertainties that may affect future results of
operations, financial condition or business of Alliance include, but are not
limited to: the effect of economic and industry conditions on prices for
Alliance's feeder and weaned pigs and its cost structure; the ability to keep
pace with technological change timely and cost-effectively and to provide better
service and remain competitive; adverse publicity, news coverage by the media,
or negative reports by industry analysts regarding Alliance or its feeder or
weaned pigs which may have the effect of reducing the reputation and goodwill of
Alliance; and the ability to attract and retain capital for growth and
operations on competitive terms.
THE COMPANY
The Company is a cooperative association engaged in the production of feeder
pigs for sale to its members who own shares of Class A Common, and intends to
engage in the production of weaned pigs for sale to its members who own shares
of Class B Common. As of the date of this Prospectus, the Company owned and
operated five 2,450-sow feeder pig production facilities located in Yuma County,
Colorado (approximately 150 miles east of Denver), one 2,450-sow feeder pig
production facility located in Wayne County, Illinois (approximately 100 miles
east of St. Louis, Missouri), and was in the process of developing one
additional feeder pig facility of comparable size in Wayne County, Illinois.
Financing for the acquisition of real estate, facilities construction and
acquisition of breeding stock with respect to the six existing facilities
already has been obtained and will not be provided by any proceeds from the sale
of the Shares offered hereby, however, the proceeds from the sale of the first
Minimum Class A Block of 17 Class A Shares offered hereby will be applied to the
Illinois facility presently under development. See "Use of Proceeds" and
"Business." The Company's business strategy is to produce feeder and weaned
pigs for sale to its members at competitive prices by utilizing modern
facilities, management practices designed to maximize productivity and high
quality genetically consistent breeding stock.
The Company was formed as a cooperative association under the laws of the
state of Colorado on May 3, 1994, but did not engage in any business activity
until July, 1994. The Company's predecessor, Yuma LLC, was formed in October,
1991 and commenced shipment of feeder pigs in March, 1993. On July 13, 1994
(July 9, 1994 for accounting purposes), the Company acquired the entire equity
ownership rights and interests in Yuma LLC from Farmland and Yuma Cooperative,
and thereupon Yuma LLC was dissolved and liquidated and its assets, liabilities
and feeder pig production operations were assigned to and assumed by Alliance.
The Company's principal executive offices are located at 302 Idlewild Street,
Yuma, Colorado 80759, and its telephone number is (970) 848-3231. Unless the
context otherwise requires, the terms "Alliance" and the "Company," as used in
this Prospectus, refer to Alliance Farms Cooperative Association and its
predecessor, Yuma LLC.
USE OF PROCEEDS
CLASS A SHARES
The net proceeds to the Company from the sale of the Class A Shares offered
hereby, after deducting expenses payable in connection with this offering, are
estimated to be approximately $1,220,000 if one Minimum Class A Block of 17
Class A Shares is sold and approximately $3,940,000 if all 51 Class A Shares
offered hereby are sold. The Company intends to use the net proceeds from the
sale of each Minimum Class A Block, together with approximately $2,720,000 of
term debt borrowings for which the Company seeks to obtain a commitment with
respect to each such Minimum Class A Block, for the development of one new
feeder pig production facility to be situated in or around Yuma County,
Colorado, Wayne County, Illinois or other locations selected by the Company,
including the purchase of real estate, the construction of the facility, and the
acquisition of breeding stock, and the demands for working capital during the
initial start-up period for the facility. In this regard, the net proceeds from
the sale of the first Minimum Class A Block will be applied to the Company's
second Illinois feeder pig production facility that presently is under
development, including the repayment of up to $1,360,000 of any related debt
financing, together with interest thereon, provided by Farmland. If all 51
Class A Shares offered hereby are sold, the net proceeds to the Company,
together with approximately $8,160,000 of term debt borrowings, will be used for
the development of three 2,450-sow feeder pig production facilities (including
one feeder pig production facility under development in Wayne County, Illinois).
Each new feeder pig production facility may be developed in tandem with, or as a
part of, one or more other facilities. As of the date of this Prospectus, the
Company has obtained a commitment until August 31, 1997 for the approximately
$2,720,000 of debt financing required with respect to each Minimum Class A Block
of Class A Shares offered hereby.
The allocation of the offering proceeds from the sale of the Class A Shares
offered hereby and term debt borrowings among the uses set forth below
represents the Company's present intention on the basis of circumstances at the
date of this Prospectus. Unforeseen changes in circumstances may result in the
reallocation of such proceeds and term debt borrowings among the uses mentioned
below or to other presently unexpected uses. Pending use of the net proceeds
from the sale of the Class A Shares offered hereby for the purposes set forth
herein, such proceeds will be invested in short-term certificates of deposit or
other interest bearing instruments. The following summary of use of proceeds
does not include any interest income earned on the investment of the net
proceeds from this offering, which income would be added to the Company's
working capital as it is earned.
<TABLE>
<CAPTION>
MINIMUM ENTIRE
OFFERING OFFERING
(17 SHARES) (51 SHARES)*
<S> <C> <C>
SOURCE OF FUNDS:
Gross Proceeds of Offering $ 1,360,000 $ 4,080,000
Less Offering Costs (1) 140,000 140,000
Net Proceeds of Offering 1,220,000 3,940,000
Term Debt Borrowings (2) 2,720,000 8,160,000
Total Funds Available $ 3,940,000 $ 12,100,000
USE OF FUNDS:
Real Estate and Facilities
Construction (3) $ 2,750,000 $ 8,600,000
Breeding Stock (4) 625,000 1,875,000
Project Development Costs and
Working Capital (5) 565,000 1,625,000
Total Facilities
Development Costs $ 3,940,000 $ 12,100,000
</TABLE>
(1) Offering costs consist of offering agent commissions and expenses, legal
and accounting fees, filing fees, printing costs and other miscellaneous
expenses.
(2) The Company anticipates that in connection with the development of each new
feeder pig production facility, it will require at least $2,720,000 in
addition to the net proceeds from this offering. Accordingly, the
consummation of the issuance and sale of each Minimum Class A Block of 17
Class A Shares will be conditioned upon and subject to the Company
obtaining a commitment for at least $2,720,000 of term debt borrowings. As
of the date of this Prospectus, the Company has obtained such a commitment
with respect to the Class A Shares offered hereby until August 31, 1997
(extended from the original February 28, 1997 expiration date). No
assurances can be given that an extension of such commitment after such
date will be obtained on favorable terms, if at all. See "Business--
Financing."
(3) The Company has budgeted approximately $2,750,000 for completion of the
physical facilities for each new 2,450-sow feeder pig production facility,
which may be developed in tandem with, or as a part of, one or more other
facilities. The Company anticipates that up to $1,360,000 of this amount
with respect to its second Illinois facility presently under development
initially will be financed with a non-revolving term loan obtained from
Farmland, and that the net proceeds from the sale of the first Minimum
Class A Block of 17 Class A Shares offered hereby will be used to repay the
outstanding balance of this loan. As of the date of this Prospectus,
Alliance has borrowed $200,000 from Farmland for the acquisition of certain
real property in Wayne County, Illinois on which the second Illinois
facility is under development, and has obtained a commitment from Farmland
for the provision of an additional $1,160,000 loan. The Farmland loan
provides for amortization over a ten-year period, at a variable rate equal
to CoBank's then national variable rate plus 1.25%. As of the date of this
Prospectus, interest accrued on the outstanding principal balance of the
Farmland loan at a rate of 9.5% per annum (calculated by adding 125 basis
points to CoBank's national variable rate of 8.25% in effect as of such
date). The payment schedule for the Farmland loan requires the Company to
make interest-only payments for the life of the loan, with a final balloon
payment of the outstanding loan balance to be made upon the earlier of (i)
the Company's issuance and sale of a Minimum Class A Block, and (ii) the
expiration of ten years. Funds advanced to Alliance pursuant to the
Farmland loan were used as working capital to fund the acquisition of
certain real property in Wayne County, Illinois and any future advances
would be applied to construction costs and other working capital purposes.
As presently proposed, the construction of each new feeder pig facility,
including breeding, gestation, farrowing, nursery and attendant office
buildings and related equipment, is estimated to cost approximately
$2,250,000, plus the cost of the land and land improvements. This estimate
is based on estimates of construction costs furnished to the Company in
connection with the construction of its five most recently developed
facilities and of the one comparable facility which is in a preliminary
stage of development. The Company has estimated the cost of the land and
land improvements required for each 2,450-sow facility to be approximately
$500,000 based on its anticipated land requirements and the actual cost of
the Company's recent land purchases. Included in the Company's budget
respecting the issuance and sale of all 51 Class A Shares offered hereby is
approximately $350,000 for the construction of ancillary production
buildings or residential facilities for use by facilities operations
personnel if sufficient housing is unavailable. Sites for the one or more
facilities to be developed with the proceeds of this offering have not been
selected by the Company. No assurances can be given that the actual costs
for the acquisition of the necessary land and the construction of the
facilities will not exceed the Company's estimates.
(4) The Company has budgeted approximately $625,000 for the acquisition of the
breeding stock required for each new 2,450-sow facility based on the
Company's recent acquisition costs for other breeding stock and the
Company's estimated cost of developing its own breeding stock from its
breeding stock multiplier herd. The actual cost of acquiring the necessary
breeding stock may exceed the Company's estimates.
(5) If the Company is successful in implementing its business plan and each new
feeder pig production facility is developed on schedule, the initial lots
of feeder pigs produced from such facility are not expected to be available
to Class A Common investor members for up to 13 to 15 months following
completion of the offering. The amounts shown represent costs and expenses
expected to be incurred and expended by the Company during construction of
the facility and the 45- to 60-day breeding stock acclimation period and
prior to shipment of the initial lots of feeder pigs. These amounts are
budgeted at approximately $474,000 for each new 2,450-sow facility and
include working capital for the payment of salaries, feed and veterinary
costs, utilities, insurance, overhead and administration, interest
requirements on up to $1,360,000 of facilities development financing that
the Company anticipates it may incur (although no assurances can be given
that it will obtain such financing) with respect to each new facility
(including interest requirements on the up to $1,360,000 Farmland non-
revolving term loan referred to in note (3) above), taxes, and accounting
and legal fees, among others. Amounts allocated to working capital may be
used for any of the purposes set forth above, as needed, or for any other
use that management for the Company determines to be in the best interests
of the Company.
CLASS B SHARES
The net proceeds to the Company from the sale of the Class B Shares offered
hereby, after deducting expenses payable in connection with this offering, are
estimated to be approximately $1,120,000 if one Minimum Class B Block of 18
Class B Shares is sold and approximately $7,420,000 if all 108 Class B Shares
offered hereby are sold. The Company intends to use the net proceeds from the
sale of each Minimum Class B Block, together with approximately $2,100,000 of
term debt borrowings for which the Company seeks to obtain a commitment with
respect to each such Minimum Class B Block, for the development of one new
weaned pig production facility to be situated in or around Yuma County,
Colorado, Wayne County, Illinois or other locations selected by the Company,
including the purchase of real estate, the construction of the facility, and the
acquisition of breeding stock, and the demands for working capital during the
initial start-up period for the facility. If all 108 Class B Shares offered
hereby are sold, the net proceeds to the Company, together with approximately
$12,600,000 of term debt borrowings, will be used for the development of six
2,450-sow weaned pig production facilities. Each new weaned pig production
facility may be developed in tandem with, or as a part of, one or more other
facilities.
The allocation of the offering proceeds from the sale of the Class B Shares
offered hereby and term debt borrowings among the uses set forth below
represents the Company's present intention on the basis of circumstances at the
date of this Prospectus. Unforeseen changes in circumstances may result in the
reallocation of such proceeds and term debt borrowings among the uses mentioned
below or to other presently unexpected uses. Pending use of the net proceeds
from the sale of the Class B Shares offered hereby for the purposes set forth
herein, such proceeds will be invested in short-term certificates of deposit or
other interest bearing instruments. The following summary of use of proceeds
does not include any interest income earned on the investment of the net
proceeds from this offering, which income would be added to the Company's
working capital as it is earned.
<TABLE>
<CAPTION>
MINIMUM ENTIRE
OFFERING OFFERING
(18 SHARES) (108 SHARES)*
<S> <C> <C>
SOURCE OF FUNDS:
Gross Proceeds of Offering $ 1,260,000 $ 7,560,000
Less Offering Costs (1) 140,000 140,000
Net Proceeds of Offering 1,120,000 7,420,000
Term Debt Borrowings (2) 2,100,000 12,600,000
Total Funds Available $ 3,220,000 $ 20,020,000
USE OF FUNDS:
Real Estate and Facilities
Construction (3) $ 2,115,000 $ 13,390,000
Breeding Stock (4) 625,000 3,750,000
Project Development Costs and
Working Capital (5) 480,000 2,880,000
Total Facilities Development
Costs $ 3,220,000 $ 20,020,000
</TABLE>
(1) Offering costs consist of offering agent commissions and expenses, legal
and accounting fees, filing fees, printing costs and other miscellaneous
expenses.
(2) The Company anticipates that in connection with the development of each new
weaned pig production facility, it will require at least $2,100,000 in
addition to the net proceeds from this offering. Accordingly, the
consummation of the issuance and sale of each Minimum Class B Block of 18
Class B Shares will be conditioned upon and subject to the Company
obtaining a commitment for at least $2,100,000 of term debt borrowings. As
of the date of this Prospectus, the Company is engaged in negotiations with
a lender to obtain a commitment for the necessary weaned pig production
loans. No assurances can be given that the Company will be able to obtain
such commitment on favorable terms, if at all. See "Business--Financing."
(3) The Company has budgeted approximately $2,115,000 for completion of the
physical facilities for each new 2,450-sow weaned pig production facility,
which may be developed in tandem with, or as a part of, one or more other
facilities. As presently proposed, the construction of each new weaned pig
facility, including breeding, gestation, farrowing, nursery and attendant
office buildings and related equipment, is estimated to cost approximately
$1,819,000, plus the cost of the land and land improvements. This estimate
is based on estimates of construction costs furnished to the Company in
connection with the construction of its five most recently developed feeder
pig production facilities and of the one comparable facility which is in a
preliminary stage of development. The Company has estimated the cost of
the land and land improvements required for each 2,450-sow facility to be
approximately $296,000 based on its anticipated land requirements and the
actual cost of the Company's recent land purchases. Included in the
Company's budget respecting the issuance and sale of all 108 Class B Shares
offered hereby is approximately $700,000 for the construction of ancillary
production buildings or residential facilities for use by facilities
operations personnel if sufficient housing is unavailable. Sites for the
one or more facilities to be developed with the proceeds of this offering
have not been selected by the Company. No assurances can be given that the
actual costs for the acquisition of the necessary land and the construction
of the facilities will not exceed the Company's estimates.
(4) The Company has budgeted approximately $625,000 for the acquisition of the
breeding stock required for each new 2,450-sow facility based on the
Company's recent acquisition costs for other breeding stock and the
Company's estimated cost of developing its own breeding stock from its
breeding stock multiplier herd. The actual cost of acquiring the necessary
breeding stock may exceed the Company's estimates.
(5) If the Company is successful in implementing its business plan and each new
weaned pig production facility is developed on schedule, the initial lots
of weaned pigs produced from such facility are not expected to be available
to Class B Common investor members for up to 11 to 13 months following
completion of the offering. The amounts shown represent costs and expenses
expected to be incurred and expended by the Company during construction of
the facility and the 45- to 60-day breeding stock acclimation period and
prior to shipment of the initial lots of weaned pigs. These amounts are
budgeted at approximately $417,000 for each new 2,450-sow facility and
include working capital for the payment of salaries, feed and veterinary
costs, utilities, insurance, overhead and administration, taxes, and
accounting and legal fees, among others. Amounts allocated to working
capital may be used for any of the purposes set forth above, as needed, or
for any other use that management for the Company determines to be in the
best interests of the Company.
PATRONAGE DISTRIBUTION POLICY
No dividends have been, or will be, paid by Alliance on its Common Stock.
The Company intends to distribute, however, at least annually, all of its net
margins, if any, as patronage distributions to its stockholders on the basis of
the quantity or value of business done by the Company with or for each
stockholder with respect to pigs sold pursuant to the Feeder Pig Purchase
Agreements, Weaned Pig Purchase Agreements or the Swine Production Services
Agreement. The Company's "net margins" for this purpose generally are equal to
the Company's net income under generally accepted accounting principles (taxable
income through and including August 31, 1997) attributable to patronage sourced
business done with or for the Company's members (determined before reduction for
patronage distributions paid by the Company). In this regard, the Company will
compute its net income or taxable income, as the case may be, separately for
each group of members (including successors and permitted assigns) whose shares
of the Company's Common Stock originally were issued in connection with the
Company's acquisition or development of one or more feeder or weaned pig
production units financed in part thereby. A stockholder's share of the
Company's net margins will be payable to him or her after the close of each
fiscal year. The Company's Board of Directors has the right to pay the
patronage distribution in qualified written notices of allocation, non-qualified
written notices of allocation, cash or any combination thereof. The written
notices of allocation will be issued in the form of Alliance capital credits.
The extent of the cash portion of the patronage distributions will be determined
annually and will depend upon the Company's financial condition, results of
operation, capital commitments and other factors deemed relevant by the Board of
Directors. The Company has entered into various loan agreements and other
documentation with its existing lender which restrict the Company's ability to
pay patronage distributions in cash. See "Business--Financing" and "-- Federal
Income Taxation." The Company's Board of Directors authorized, with the consent
and approval of CoBank, the payment of a $670,167 rebate to its members with
respect to feeder pigs sold to such members by Alliance during the fiscal year
ended August 31, 1996. After the payment of this rebate, the Company does not
intend to make any future rebate payments to its members.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
February 28, 1997, as adjusted to give effect to the full advancement of the
remaining $142,000 of funds then available under the Company's existing credit
facility, and as further adjusted to give effect to the sale of the minimum of
17 Class A Shares and 18 Class B Shares, respectively, the maximum of 51 Class A
Shares and 108 Class B Shares, respectively, and all 159 Shares offered hereby,
the repayment of the non-revolving term loan obtained from Farmland with respect
to Alliance's development of its second Illinois facility and the Company's
anticipated borrowing of at least $2,720,000 of term debt with respect to the
sale of the minimum of 17 Class A Shares and of at least $8,160,000 of term debt
with respect to the sale of the maximum 51 Class A Shares offered hereby, for
which borrowings the Company seeks to obtain a commitment from its existing
lender, and the Company's anticipated borrowing of at least $2,100,000 of term
debt with respect to the sale of the minimum of 18 Class B Shares and of at
least $12,600,000 of term debt with respect to the sale of the maximum 108 Class
B Shares offered hereby, for which borrowings the Company seeks to obtain a
commitment. As of the date of this Prospectus, the Company has obtained a
commitment until August 31, 1997 for the approximately $2,720,000 of debt
financing required with respect to each Minimum Class A Block of Class A Shares
offered hereby. This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and related notes thereto and other information
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS FURTHER ADJUSTED FOR THE OFFERING(2)
MINIMUM MAXIMUM MAXIMUM
AS ADJUSTED BOTH
ACTUAL FOR BANK DEBT CLASS A CLASS B CLASS A CLASS B CLASSES
<S> <C> <C> <C> <C> <C> <C> <C>
Debt(1)................ $13,700,124 $13,842,124 $16,562,124 $15,942,124 $22,002,124 $26,442,124 $34,602,124
Stockholders' equity:
Common stock, $.01
par value; 5,000 shares
authorized (102 shares
issued; 102 shares
issued, as adjusted; 119
shares issued, as further
adjusted (minimum);
issued, issued, as
further adjusted
(maximum 1 1 1 1 1 1 2
Class B
Common stock, $.01
par value; 5,000 shares
authorized (zero shares
issued; zero shares
issued, as adjusted; 18
shares issued, as further
adjusted (minimum); and
108 shares issued, as
further adjusted
(maximum 1 1
Additional paid-in capital 7,487,653 7,487,653 8,707,653 8,607,653 11,427,652 14,907,652 18,987,651
Deficit (2,876,898) (2,876,898) (2,876,898) (2,876,898) (2,876,898) (2,876,898) (2,876,898)
Total stockholders' equity 4,610,756 4,610,756 5,830,756 5,730,756 8,550,756 12,030,756 16,110,756
Total capitalization $18,310,880 $18,452,880 $22,392,880 $21,672,880 $30,552,880 $38,472,880 $50,712,880
</TABLE>
(1)On May 19, 1995, the Company entered into various loan documents with CoBank
related to a $23,600,000 secured credit facility. This credit facility
provides for up to $18,850,000 of non-revolving term debt and $4,750,000 of
revolving term credit. The unused portion of the credit facility expires
August 31, 1997 (extended from the original February 28, 1997 expiration
date) with respect to the non-revolving term debt and June 20, 2006 with
respect to the revolving term credit. As of the date of this Prospectus,
the Company intends to enter into negotiations with CoBank to obtain an
extension of the CoBank loan or to obtain a commitment for a new loan after
the August 31, 1997 expiration of the existing CoBank loan commitment. No
assurances can be given that such negotiations will be successful and that
such commitment will be obtained on favorable terms, if at all. The Company
borrowed $760,000 from Farmland in August 1996 in order to purchase certain
real property in Yuma County, Colorado. As of February 28, 1997, the
outstanding balance of loans made by CoBank under the credit facility was
$13,922,000, and the outstanding balance of the Farmland loan was $816,424.
Amounts shown in the As Adjusted column assume that all funds available from
the CoBank credit facility and the Farmland loan have been advanced, and
amounts shown in the As Further Adjusted columns assume that all funds from
the anticipated borrowing of non-revolving term debt and revolving term
credit in connection with this offering have been advanced.
(2) Net of offering costs.
SELECTED FINANCIAL DATA
The selected historical financial information presented below reflects the
fiscal 1996 and 1995 operations of Alliance, and the fiscal 1994 combined
operations of Yuma LLC from September 1, 1993 through July 8, 1994 and of
Alliance from July 9, 1994 through August 31, 1994. Such financial information
under the captions "Statement of Operations Information" and "Balance Sheet
Information" as of and for the fiscal years ended August 31 is derived from the
financial statements of Alliance for the period from inception (July 9, 1994)
through August 31, 1996 and from the financial statements of Yuma LLC for the
period from September 1, 1993 to July 8, 1994, all of which have been audited by
KPMG Peat Marwick LLP, independent certified public accountants. The summary
historical financial information as of February 28, 1997, and for the six months
ended February 28, 1997 and February 29, 1996 is derived from the unaudited
financial statements of Alliance. In the opinion of the Company, such interim
financial information includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for such
interim periods. In the opinion of management, the financial condition and
results of operations set forth herein cannot be relied upon as being
representative of the continuing prospects for the Company. The following
selected financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the audited financial statements and related notes thereto and other information
included elsewhere in this Prospectus.
STATEMENT OF OPERATIONS
INFORMATION:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31, SIX MONTHS ENDED FEBRUARY 28,
1996 1995 1994 1997 1996
<S> <C> <C> <C> <C> <C>
Net sales $ 7,037,927 $ 1,554,113 $ 2,309,319 $ 6,519,998 $ 2,871,276
Cost of goods sold 6,422,838 1,836,388 1,912,268 5,549,049 3,008,706
Gross income (loss) 615,089 (282,275) 397,051 970,949 (137,430)
Expenses related to start-up of new
facilities and conversion of
existing facility 426,926 754,756 B 75,668 B
Administrative expenses 369,787 101,927 36,629 214,996 170,565
Loss on sale of breeding stock 226,738 112,797 56,474 81,020 170,537
Operating income (loss) (408,362) (1,251,755) 303,948 599,265 $ (478,532)
Interest expense (1,001,329) (289,082) (1,375) (680,584) (439,320)
Other income 66,604 27,509 28,246 85,786 7,574
(934,725) (261,573) 26,871 (594,798) (431,746)
Net income (loss) $(1,343,087) $(1,513,328) $ 330,819 $ 4,467 $ (910,278)
OTHER INFORMATION:
Pigs Sold 148,926 46,858 46,014 112,800 67,241
<CAPTION>
AS OF AUGUST 31, AS OF
FEBRUARY 28,
BALANCE SHEET INFORMATION: 1996 1995 1994 1997
<S> <C> <C> <C> <C>
Working Capital (Deficit) $ (257,702) $ 1,238,271 $ 1,980,861 $(1,139,041)
Total Assets 20,845,613 14,571,940 5,322,834 22,344,378
Shareholders' Equity 4,606,289 4,627,693 4,860,610 4,610,756
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company commenced operations in July, 1994, following its acquisition
of the entire equity ownership rights and interest in Yuma LLC, a Colorado
limited liability company in which Farmland and Yuma Cooperative owned 71.5% and
28.5%, respectively, of the outstanding equity interests. Subsequent to the
Company's acquisition of Yuma LLC, Yuma LLC was dissolved and liquidated and
Alliance received all assets and liabilities of Yuma LLC and continued the
feeder pig production operations of Yuma LLC as described herein. As a result
of these transactions, a portion of the financial information presented herein
relates to the financial condition and results of operations of Yuma LLC. The
results of operations for the year ended August 31, 1994 are principally those
of Yuma LLC, but also include the results of operations of the Company from July
9, 1994 to August 31, 1994. The results of operations for the years ended
August 31, 1996 and 1995, respectively, and the six months ended February 28,
1997 and 1996, respectively, are entirely the results of operations of the
Company. Unlike Yuma LLC, Alliance was burdened with debt financing costs
during the development and start-up of its feeder pig production facilities. In
addition, Alliance generally produces feeder pigs of lighter weight than those
of Yuma LLC, and sells its feeder pigs at prices lower than the price at which
Yuma LLC sold its feeder pigs.
THREE MONTHS ENDED FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
Shipments of feeder pigs were higher for the three months ended February
28, 1997 than in the prior year's period. Alliance shipped 57,746 feeder pigs
for the quarter ended February 28, 1997 compared to 33,290 feeder pigs shipped
for the quarter ended February 29, 1996 for an increase of 73%. Net sales for
the quarter ended February 28, 1997 increased to $3,316,983 from $1,443,563 for
the prior year period, an increase of $1,873,420, or 130%. The selling price
per pig is determined pursuant to the formula established under Alliance's
Feeder Pig Purchase Agreements with its members. The selling price is based on
Alliance's operating costs (which are based on a twelve month rolling average),
debt service and an additional $4.50 per pig. The above increase in volume and
sales dollars is a result of having six units in production for the quarter
ended February 28, 1997 as compared to four units in production for the quarter
ended February 29, 1996. The sales price per pig pursuant to the Feeder Pig
Purchase Agreement also was higher due to an increase in the twelve month
rolling average of operating costs. This increase in the rolling average of
operating costs resulted from a decline in feeder pigs shipped per unit.
Additionally, a sales rebate of $148,230 was accrued during the quarter ended
February 29, 1996 which reduced net sales. During the three months ended
February 28, 1997, Alliance did not accrue the sales rebate of $4.50 per pig
shipped due to Alliance's decision to no longer pay a sales rebate. Average net
sales price was $57.44 and $43.36 during the quarter ended February 28, 1997 and
February 29, 1996, respectively.
Alliance incurred positive gross margins of $347,397 and $12,609 for the
three month periods ended February 28, 1997 and February 29, 1996, respectively.
This improvement in gross margin is primarily due to the nature of the
contractual pricing arrangements applicable to Alliance's sale of feeder pigs to
its members. As previously described, the selling price is based on, among
other things, Alliance's operating costs on a twelve month historical rolling
average. For the second quarter of fiscal 1997, Alliance's net sales price
exceeded then current operating costs (at the time pigs were shipped) by $14.37
per pig sold. For the second quarter of fiscal 1996, the net sales price
exceeded then current operating costs (at the time pigs were shipped) by $7.19
per pig sold.
Sales to Farmland for the three month periods ended February 28, 1997 and
February 29, 1996 were $1,956,704 and $972,066 respectively. The average net
sales price per head was $57.44 and $43.36 and the average industry market price
per head was $56.20 and $34.66 during 1997 and 1996, respectively.
Loss on sale of breeding stock was $21,362 for the three months ended
February 28, 1997 as compared to $96,146 for the prior year period. This
decrease is attributable to the existence of more newly developed facilities
culling animals during the second quarter of fiscal 1996 as compared to more
mature facilities culling animals during the second quarter of fiscal 1997.
Administrative expenses were $122,027 for the three months ended February
28, 1997 compared to $96,898 for the prior year period. This increase reflects
the increased operations and includes higher administrative, payroll and
professional fees.
Interest expense of $357,932 for the three months ended February 28, 1997
as compared to $222,744 for the prior year period, was incurred in financing the
development of four existing and two new feeder pig facilities. This increase
is primarily due to the increase in the outstanding loan balance. As of
February 28, 1997, Alliance had borrowed $13,922,000 from CoBank for
construction and start up costs and $816,424 from Farmland for the purchase of
land which is intended to be used for future expansion.
Alliance incurred a net loss of $110,670 for the three months ended
February 28, 1997 compared to a net loss of $397,770 for the prior year period.
The net loss for the second quarter of fiscal 1997 was attributable to the
current costs exceeding the rolling average cost that per pig sales prices are
based on, caused by a decrease in productivity from the first quarter of fiscal
1997 due to herd health issues, partially offset by decreasing corn prices. The
net loss for the second quarter of fiscal 1996 was attributable primarily to
then current costs exceeding the rolling average cost that per pig sales prices
are based on, caused in part by high death loss due to herd health issues, as
well as rising corn prices. In addition to operating risks and uncertainties
associated with any business, Alliance's ability to generate net income is
limited by any start-up expenses that are incurred with respect to facilities
development and by the selling price formula feeder pigs that contains a $4.50
production margin.
SIX MONTHS ENDED FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
Shipments of feeder pigs were higher for the six months ended February 28,
1997 than in the prior year's period. Alliance shipped 112,800 feeder pigs for
the six months ended February 28, 1997 compared to 67,241 feeder pigs shipped
for the six months ended February 29, 1996 for an increase of 68%. Net sales
for the six months ended February 28, 1997 increased to $6,519,998 from
$2,871,276 for the prior year period, an increase of $3,648,722 or 127%. The
selling price per pig is determined pursuant to the formula established under
Alliance's Feeder Pig Purchase Agreements with its members. The selling price
is based on Alliance's operating costs (which are based on a twelve month
rolling average), debt service and an additional $4.50 per pig. The above
increase in volume and sales dollars is primarily due to six units operating at
full capacity for the six months ended February 28, 1997 as compared to four
units operating at full capacity for the six months ended February 29, 1996.
The sales price per pig pursuant to the Feeder Pig Purchase Agreement also was
higher due to an increase in the twelve month rolling average of operating
costs. Additionally, a sales rebate of $301,010 was accrued during the six
months ended February 29, 1996 which reduced net sales. During the six months
ended February 28, 1997, Alliance did not accrue the sales rebate of $4.50 per
pig shipped due to Alliance's decision to no longer pay a sales rebate. Average
net sales price was $57.80 and $43.07 during the six months ended February 28,
1997 and February 29, 1996, respectively.
Alliance incurred a positive gross margin of $970,949 and a negative gross
margin of $137,430 for the first half of fiscal 1997 and fiscal 1996,
respectively. This improvement in gross margin is primarily due to the nature
of the contractual pricing arrangements applicable to Alliance's sale of feeder
pigs to its members. As previously described, the selling price is based on,
among other things, Alliance's operating costs on a twelve month historical
rolling average. For the first half of fiscal 1997, Alliance's net sales price
exceeded then current operating costs (at the time pigs were shipped) by $14.73
per pig sold. For the first half of fiscal 1996, the net sales price exceeded
then current operating costs (at the time pigs were shipped) by $6.90 per pig
sold.
Sales to Farmland for the first half of fiscal 1997 and 1996 were
$3,961,082 and $1,945,808 respectively. The average net sales price per head
was $57.80 and $43.07 and the average industry market price per head was $53.99
and $35.73 during 1997 and 1996, respectively.
Loss on sale of breeding stock was $81,020 for the six months ended
February 28, 1997 as compared to $170,637 for the prior year period. This
decrease is attributable to the existence of more newly developed facilities
culling animals during the first half of fiscal 1996 as compared to more mature
facilities culling animals during the first half of fiscal 1997.
Administrative expenses were $214,996 for the six months ended February 28,
1997 compared to $170,565 for the prior year period. This increase reflects the
increased operations and includes higher administrative, payroll and
professional fees.
Interest expense of $680,584 for the six months ended February 28, 1997 as
compared to $439,320 for the prior year period, was incurred in financing the
development of four existing and two new feeder pig facilities. This increase
is primarily due to the increase in the outstanding loan balance.
Alliance incurred net income of $4,467 for the six months ended February
28, 1997 compared to a net loss of $910,278 for the prior year period. The
small net income for the first half of fiscal 1997 was partially attributable to
an improvement in productivity at the beginning of the fiscal year which
decreased throughout the first half of fiscal 1997 due to herd health issues,
offset by decreasing corn prices. The net loss for the first half of fiscal
1996 was attributable primarily to then current costs exceeding the rolling
average cost that per pig sales prices are based on, caused in part by high
death loss due to herd health issues, as well as rising corn prices.
Additionally, Alliance's net sales price for pigs exceeded current operating
costs in the first half of fiscal 1997 by $7.83 more than in the first half of
fiscal 1996. Alliance also accrued a $301,010 rebate in the first half of
fiscal 1996 that was not accrued in the first half of fiscal 1997.
FISCAL YEARS ENDED AUGUST 31, 1996 AND 1995.
Shipments of feeder pigs were higher for the fiscal year ended August 31,
1996 than in the prior year's period. Alliance shipped 148,926 feeder pigs
during fiscal 1996 compared to 46,858 feeder pigs shipped during fiscal 1995, an
increase of approximately 218%. Net sales for the fiscal year ended August 31,
1996 increased to $7,037,927 from $1,554,113 for the prior year, an increase of
$5,438,814 or approximately 350%. This increase in volume and sales dollars is
primarily due to four units operating for the fiscal year ended August 31, 1996
versus one unit for the fiscal year ended August 31, 1995 and the change in
Alliance's contract price, effective July 13, 1995, to include $4.50 per pig in
addition to the financing cost and operating cost on which the price was
previously based.
Alliance's sales for the fiscal year ended August 31, 1996 have been
reduced by the accrual of a rebate of $670,167 that is intended to be paid to
its members with respect to feeder pigs sold to such members by Alliance during
such fiscal year. See "Patronage Distribution Policy." Alliance incurred a
positive gross margin of $615,089 and a negative gross margin of $282,275 for
fiscal 1996 and 1995, respectively. This improvement in gross margin is
primarily due to the nature of the contractual pricing arrangements applicable
to the Company's sale of feeder pigs to its members. The selling price for
Alliance's feeder pigs is based on, among other things, the 12-month rolling
average of operating costs per pig. For the fiscal year ended August 31, 1996,
the Company's operating costs at the time pigs were sold (the then current
operating costs) exceeded the historical rolling average of operating costs by
$0.09 per head sold. For the fiscal year ended August 31, 1995, the Company's
then current operating costs exceeded the historical rolling average of
operating costs by $6.37 per head sold. The substantial difference between
fiscal 1995's then current operating costs and historical rolling average
operating costs is principally due to Alliance's culling of a greater portion of
its herd than is customary in order to accommodate their replacement with
multiplier unit animals, in addition to the resulting decline in production.
Sales to Farmland (including sales to Farmland of Yuma Cooperative's share
of feeder pigs produced by the Company) for fiscal 1996 and 1995 were $5,035,160
and $1,467,069, respectively. The average net sales price per head was $48.12
and $33.16 and the average industry market price per head was $41.15 and $32.17
during 1996 and 1995, respectively.
Alliance recorded start-up costs of $426,926 and $754,756 relating to the
operation of new production facilities during the fiscal years ended August 31,
1996 and 1995, respectively, and conversion of the existing unit to a multiplier
unit during the fiscal year ended August 31, 1995. All costs for the fiscal
year ended August 31, 1996 and $647,751 of the costs for the fiscal year ended
August 31, 1995 were comprised of utilities, feed, labor and other general
expenses prior to the operation of the new feeder pig production facilities, and
$107,005 of the costs for the fiscal year period ended August 31, 1995 were
attributable to the conversion of the existing 2,450-sow feeder pig unit from a
commercial sow unit to a multiplier sow unit.
Loss on sale of breeding stock was $226,738 for the fiscal year ended
August 31, 1996 as compared to $112,797 for the prior year period. This
increase is attributable to the existence of newly developed facilities in
fiscal 1995, from which culling of animals was not necessary until near the end
of that fiscal year, as compared to more mature facilities in fiscal 1996, from
which culling of animals occurred throughout that fiscal year.
Administrative expenses were $369,787 for the fiscal year ended 1996
compared to $101,927 for the prior year period. This increase reflects the
increased operations and includes higher administrative, payroll and
professional fees.
Interest expense of $1,001,329 for fiscal 1996 compared to $289,082 for
fiscal 1995 was incurred in financing the development of the four existing and
two new feeder pig production facilities.
Alliance incurred a net loss of $1,343,087 for the fiscal year ended August
31, 1996 compared to a net loss of $1,513,328 for the prior year period. The
fiscal 1996 loss was attributable to $426,926 of start-up expenses related to
the development of two feeder pig production facilities and a loss of $226,738
on the sale of breeding stock. The remaining amount of the net loss is
primarily attributable to current costs exceeding the rolling average cost that
per pig prices are base on, caused in part by high death loss due to herd health
issues, as well as rising corn prices. The fiscal 1995 loss was attributable to
$754,756 of start-up expenses related to facilities development and a loss of
$112,797 on the sale of breeding stock. In addition, the Company's operating
costs at the time pigs were sold during both fiscal 1996 and 1995 exceeded the
historical rolling average of operating costs from which the selling price for
pigs was based. During all of fiscal 1996, the selling price for Alliance's
feeder pigs was based on the 12-month rolling average of operating costs per
pig, the debt service financing cost per pig, and a $4.50 per pig production
margin. The Company accrued a $670,167 rebate, however, that is intended to
provide each member with a $4.50 payment per pig sold to such member during
fiscal 1996; thereby effectively eliminating the production margin. The $4.50
per pig production margin was not added to the price of feeder pigs sold during
fiscal 1995 until after July 13, 1995. In addition operating risks and
uncertainties associated with any business, the Company's ability to generate
net income is limited by any start-up expenses that are incurred with respect to
facilities development, by the Company's selling price formula for feeder pigs
that contains a $4.50 production margin, and by the possible return of all or a
portion of such rebate to the Company's members.
FISCAL YEARS ENDED AUGUST 31, 1995 AND 1994.
Shipments of feeder pigs from the Company's feeder pig production
facilities were sustained at approximately the same level for the fiscal year
ending August 31, 1995 as were made in the prior fiscal year. The Company
shipped 46,858 feeder pigs in the fiscal year ended August 31, 1995 as compared
to 46,014 feeder pigs shipped in the prior fiscal year.
Although the level of production for fiscal 1995 was comparable to that for
fiscal 1994, net sales for fiscal 1995 declined to $1,554,113 from $2,309,319
for the prior year period, a decline of $755,206 or approximately 32.7%. This
decline resulted from a reduction in the average selling price of feeder pigs
from $51.04 per pig in fiscal 1994 to $33.16 in fiscal 1995. In addition, the
selling price per pig for approximately ten months of fiscal 1995 was determined
pursuant to the formula established under the Company's Interim Feeder Pig
Purchase Agreements with Farmland and Yuma Cooperative, which selling price is
substantially less than would have been obtained under the feeder pig marketing
agreement to which Yuma LLC was a party in fiscal 1994. Finally, the Company
currently markets a feeder pig of lighter weight than that previously marketed
by Yuma LLC in fiscal 1994, which further accounts for the reduction in the
sales price per pig. The decline in net sales more than offset the $75,880
reduction in cost of goods sold from $1,912,268 in fiscal 1994 to $1,836,388 in
fiscal 1995.
In fiscal 1995, the Company incurred expenses of $754,756 related to the
start-up of three feeder pig production facilities and the conversion of the
existing facility to a multiplier unit. The start-up costs attributable to the
three new facilities, including utilities, feed, labor and other expenses,
accounted for $647,751 and the remaining $107,005 was due to the conversion of
an existing feeder pig facility to a multiplier unit and the related replacement
of commercial sows with more expensive multiplier sows. This conversion began
in August 1994 and was substantially complete in January 1995. Productivity
declined to an average of 17.4 feeder pigs per sow in inventory for fiscal 1995
from an average of 18.8 feeder pigs per sow in the prior fiscal year as the
Company culled a greater portion of its herd than was customary in order to
accommodate their replacement with multiplier unit animals. This herd culling
also accounts for the increased loss on sale of breeding stock from $56,474 for
the year ended August 31, 1994 to $112,797 for fiscal 1995. With the completion
of the facility conversion, management is hopeful that productivity and loss on
sale of breeding stock levels will be comparable to fiscal 1994 levels. No
start-up and conversion expenses were incurred by the Company in fiscal 1994.
Administrative expenses were $101,927 for the year ended August 31, 1995 as
compared to $36,629 for the prior fiscal year. This increase was attributable
to $26,932 of amortization expenses for organizational costs and loan
origination fees, $33,102 of legal fees and $41,893 of miscellaneous expenses,
including administrative employee salaries and office equipment lease payments.
Interest expense was $289,082 for the year ended August 31, 1995 as
compared to $1,375 for the prior year period. Interest for the year ended
August 31, 1995 was due to interest incurred on financing the construction of
three feeder pig production facilities. After repaying the remaining balance of
its long-term debt in October, 1993, the Company had no long-term indebtedness
for the remainder of fiscal 1994. As of August 31, 1995 Alliance had borrowed
$9,165,000 from CoBank.
LIQUIDITY AND CAPITAL RESOURCES
At February 28, 1997, the Company reported a working capital deficit of
$1,139,041 and total assets of $22,344,378. The Company issued 17 shares of
Class A Common in October 1995 for net proceeds of approximately $1,324,461.
The Company used these funds, in combination with $3,219,899 of net proceeds
from previous sales of Class A Common and borrowings of $14,738,424 through
February 28, 1997, for the development, population, and start-up of five feeder
pig production facilities in Yuma County, Colorado and one feeder pig production
facility in Wayne County, Illinois.
As of the date of this Prospectus, the Company has 102 shares of Class A
Common issued and outstanding and no issued and outstanding shares of Class B
Common, and is offering an additional 51 Class A Shares and 108 Class B Shares
to qualified prospective investors. As of February 28, 1997, $142,000 was
immediately available to Alliance under its credit facility with CoBank.
JWA[1]An additional $211,000 of term loans is to became available approximately
90 days following completion of construction of the Company's first Illinois
facility (anticipated to occur in April 1997). In the opinion of management,
these arrangements for debt capital are adequate for Alliance's present
operating and capital plans. In the event that an additional 51 shares of Class
A Common are issued and sold prior to the August 31, 1997 expiration of the
CoBank loan commitment, another $8,160,000 would be eligible for borrowing. The
net proceeds from any such sale of Class A Common, together with such additional
borrowings, would be used for future capital expansion of up to three additional
feeder pig production facilities, including the Company's second facility in
Wayne County, Illinois. There can be no assurance that any additional shares of
Class A Common will be sold and that the additional borrowing required for such
capital expansion would be available. As of the date of this Prospectus, the
Company intends to enter into negotiations with CoBank to obtain an extension of
the CoBank loan and to obtain a commitment for a new loan with respect to the
offering of Class B Common and to take the place of the existing CoBank loan
commitment that is scheduled to expire on August 31, 1997. No assurances can be
given that such negotiations will be successful and that such commitments will
be obtained on favorable terms, if at all.
During the six months ended February 28, 1997, Alliance made capital
expenditures of $516,764 for the construction of its fifth feeder pig production
facility in Yuma County, Colorado and its first feeder pig production facility
in Wayne County, Illinois, as well as capital expenditures of $399,650 for the
acquisition of real property on which additional facilities could be developed,
and capital expenditures of $900,271 for the construction of its second feeder
pig production facility in Wayne County, Illinois. The remaining capital
expenditures were for replacement of breeding stock and the completion of
construction related to the Company's first four facilities.
The Company has commenced development of a second feeder pig production
facility in Wayne County, Illinois. Alliance estimates that an additional
$2,300,000 of facilities development costs will be incurred before the facility
is operating at full capacity. As more fully described below, the Company has
agreed with CoBank and Farmland concerning the provision of the necessary
financing of such costs, which financing will consist of an advance of
$2,720,000 under the CoBank credit facility and a loan from Farmland of
$1,360,000 (including $200,000 previously loaned by Farmland to Alliance).
On May 19, 1995, the Company entered into various loan documents with
CoBank related to a $23,600,000 secured credit facility. This credit facility
provides for up to $18,850,000 of non-revolving term debt and $4,750,000 of
revolving term credit. Proceeds from the term debt may be used for construction
of feeder pig production facilities and are advanced by CoBank as construction
costs are incurred by Alliance. Proceeds from revolving term credit may be used
for working capital and other purposes. The actual advance of funds under this
credit facility is subject to the satisfaction of certain conditions precedent
and may be withdrawn or terminated by CoBank under certain circumstances. No
assurances can be given that the funding conditions precedent will be satisfied
and that the Company will be able to obtain sufficient financing when needed, or
that alternative sources of financing will be available on acceptable terms. In
addition, the unused portion of the credit facility expires August 31, 1997 with
respect to the non-revolving term debt and June 20, 2006 with respect to the
revolving term credit. As of the date of this Prospectus, the Company intends to
enter into negotiations with CoBank to obtain an extension of the CoBank loan or
to obtain a commitment for a new loan after the August 31, 1997 expiration of
the existing CoBank loan commitment. No assurances can be given that such
negotiations will be successful and that such commitment will be obtained on
favorable terms, if at all.
The availability of non-revolving term debt and revolving term credit under
the CoBank credit facility is subject to specified equity investment levels in
the Company being satisfied. The availability of $6,330,000 of unused term
loans and $1,830,000 of revolving term credit under the CoBank credit facility
is restricted and may be made available to the Company only to the extent that
additional equity investment is made in the Company. With respect to each
additional equity investment of $1,360,000 obtained by the Company (e.g., 17
shares of Common Stock sold for at least $80,000 each) prior to the August 31,
1997 expiration of the CoBank loan commitment, the Company is entitled to obtain
advances under the credit facility of $2,720,000 ($2,110,000 of term loans and
$610,000 of revolving term credit), up to an aggregate of $8,160,000. The
Company has agreed with CoBank and Farmland that it may obtain an advance under
the CoBank credit facility of $2,720,000 and a loan from Farmland of $1,360,000
(including $200,000 previously loaned by Farmland to Alliance), without the
necessity of satisfying the additional equity investment requirement. See
"Business--Financing."
Installments of principal and interest under the Company's credit facility
are payable monthly in arrears by the 20th day of the month. Principal payments
with respect to the initial $8.3 million of non-revolving term loans are to be
made in 114 monthly installments of $72,500 each, beginning January 20, 1996,
with the remaining unpaid balance being due and payable on July 20, 2005.
Principal payments pursuant to the loan terms with respect to each $2,100,000 of
new non-revolving term loans are to be made in monthly installments of $18,700
each, beginning on the 20th day of the eighteenth month following the date of
the initial advance of such $2,110,000 loan. Principal payments pursuant to the
loan terms with respect to the revolving term loan are to be made in 24 equal
monthly installments of the principal that is outstanding as of the June 20,
2006 expiration of the revolving loan commitment, beginning on the 20th day of
the month following the payment in full of the new non-revolving term loan (but
in no event later than March 20, 2008). Interest accrues on the outstanding
principal balance of the loan at a rate equal to either (i) a variable rate
equal to CoBank's then national variable rate plus 1.25%, or (ii) CoBank's then
quoted rates for fixed rate loans, as may be elected from time to time by the
Company. As of February 28, 1997, interest accrued on the outstanding principal
balance of the loan at a rate of 9.5% per annum (calculated by adding 125 basis
points to CoBank's national variable rate of 8.25% in effect as of such date).
See "Business--Financing."
During the course of the loan, the Company may be required to make equity
investments at a rate not to exceed 1% of the average five-year principal loan
balance (which equity investments may be satisfied out of CoBank's non-cash
patronage distributions) until the Company meets CoBank's target level of equity
investment, which currently is 11.5% of the Company's average five-year
principal loan balance. In addition, the Company is required to comply with
various affirmative and negative covenants, including but not limited to (i)
maintenance of at least $2,250,000 of equity, plus $550,000 of equity for each
facility developed by the Company after its initial four facilities (the Company
had $4,610,756 of equity as of February 28, 1997), (ii) maintenance of modified
working capital (calculated as current assets, plus available revolving term
credit, minus current liabilities (excluding the current portion of term debt
payments)) of at least $210,000, plus $98,000 of modified working capital for
each facility developed by the Company after its initial four facilities (the
Company had $41,259 of modified working capital as of February 28, 1997), (iii)
provision of monthly financial statements and audited annual financial
statements to CoBank, (iv) restrictions on the occurrence of additional
indebtedness, (v) restrictions on certain liens, mergers, sales of assets,
investments, guaranties, loans, advances and business activities unrelated to
existing operations, and (vi) restrictions on the declaration and payment of the
cash portion of patronage distributions and other distributions or allocations
of the Company's earnings, surplus or assets. The Company was in compliance
with each of these covenants as of February 28, 1997, except the modified
working capital covenant as to which the Company has obtained a waiver from
CoBank as of February 28, 1997. Management believes that Alliance will have the
ability to maintain compliance with the above covenants in the foreseeable
future. See "Business--Financing."
The Company intends to continue to operate its existing feeder pig
production facilities and sell feeder pigs produced therefrom. Funding of the
ongoing operation of its facilities will be provided from the sale of feeder
pigs and available working capital. The Company believes that such funding
sources are adequate for current operations. The Company also intends to
develop weaned pig production facilities and sell weaned pigs produced
therefrom. As of the date of this Prospectus, the Company has not obtained a
commitment from any lender for the provision of the requisite term debt
financing for such development efforts.
Cash used by Alliance in its operating activities totaled $280,449 during
the fiscal year ended August 31, 1996 compared with $1,045,286 in the prior year
period This decrease in cash used reflects the improvement in operations before
provision for depreciation and amortization and accrual for rebates offset in
part by increased inventories. Other major uses of cash include $8,808,888 for
capital additions or improvements, $1,366,333 for acquisition of additional
inventory and $580,000 for payments applied to the Company's outstanding long
term debt. Cash provided by Alliance in its operating activities totaled
$2,132,967 for the six months ended February 28, 1997 compared with $286,505
used by Alliance in its operating activities in the prior year period. The
increase in cash provided by operating activities is primarily attributable to
the improvement in operations before the provision for depreciation and
amortization.
Major sources of cash for the fiscal year ended August 31, 1996 included
$1,321,683 received from the issuance and sale of 17 shares of the Company's
Class A Common, $3,798,000 of long term debt, and an increase of $1,276,000 in
the Company's revolving term credit.
INCOME TAXES
The Company is a Colorado cooperative association. Results of its
operations for the years ended August 31, 1996 and 1995 were a loss of
$1,343,087 and $1,513,328, respectively. Deferred income taxes have not been
provided, because all sales are to members and all future sales are anticipated
to be to members. Accordingly, no taxable income resulted for any of these
periods and no provision is made for income taxes by the Company.
INFLATION
Inflation is believed to have a relatively minor impact on the operations
of the Company. While certain costs, such as salaries, are affected by
inflation, the Company believes that the factors which most affect its results
of operations are the cost of feed and other inputs and the productivity of the
breeding stock herd which are each influenced by a variety of factors. Further,
the Company will sell its feeder and weaned pig production under terms which
cause the sales price of feeder pigs to be adjusted for changes in the cost of
production per unit, including increases in costs caused by inflation. The
precise impact of inflation on the Company's costs is not readily ascertainable.
RECENT ACCOUNTING PRONOUNCEMENT
Statement of Financial Accounting Standards No. 121 -- Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of
("Statement 121") is effective for fiscal years beginning after December 15,
1995 (Alliance's 1997 fiscal year). Statement 121 establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangible assets and goodwill related to those assets to be held and used and
for long-lived assets and certain identifiable intangibles to be disposed of.
The adoption of Statement 121 did not have a significant impact on Alliance's
financial statements.
BUSINESS
GENERAL
The Company is a cooperative association engaged in the production of
feeder pigs for sale to its members who own shares of Class A Common, and
intends to engage in the production of weaned pigs for sale of its members who
own shares of Class B Common. The Company was formed as a cooperative
association under the laws of the state of Colorado on May 3, 1994, but did not
engage in any business activity until July, 1994. The Company's predecessor,
Yuma LLC, was formed in October, 1991 and commenced shipment of feeder pigs in
March, 1993. On July 13, 1994 (July 9, 1994 for accounting purposes), the
Company acquired the entire equity ownership rights and interests in Yuma LLC
from Farmland and Yuma Cooperative, and thereupon Yuma LLC was dissolved and
liquidated and its assets, liabilities and feeder pig production operations were
assigned to and assumed by Alliance. As of the date of this Prospectus, the
Company owned and operated five 2,450-sow feeder pig production facilities
located in Yuma County, Colorado (approximately 150 miles east of Denver), one
2,450-sow feeder pig production facility located in Wayne County, Illinois
(approximately 100 miles east of St. Louis, Missouri), and was in the process of
developing one additional feeder pig facility of comparable size in Wayne
County, Illinois. See "Business--Expansion" and "Business--Facilities."
The Company's business strategy is to produce feeder and weaned pigs for
sale to its members at competitive prices by utilizing modern facilities,
management practices designed to maximize productivity and high quality
genetically consistent breeding stock. The Company intends to expand its
existing feeder pig production operations by using the net proceeds from the
sale of additional shares of its Class A Common, together with term debt
borrowings, to develop or acquire and thereafter operate additional 2,450-sow
feeder pig production facilities, and to develop weaned pig production
operations by using the net proceeds from the sale of shares of its Class B
Common, together with term debt borrowings, to develop or acquire and thereafter
operate 2,450-sow weaned pig production facilities. In this regard, the Company
intends to use the net proceeds from the sale of each block of 17 shares of
Class A Common, together with term debt borrowings, to develop or acquire one
such feeder pig production facility, and to use the net proceeds from the sale
of each block of 18 shares of Class B Common, together with term debt
borrowings, to develop or acquire one such weaned pig production facility.
Accordingly, the net proceeds from the sale of the 51 Class A Shares offered
hereby, together with term debt borrowings, are intended to be used to develop
and operate up to three additional 2,450-sow feeder pig production facilities,
and the net proceeds from the sale of the 108 Class B Shares offered hereby,
together with term debt borrowings, are intended to be used to develop and
operate up to six 2,450-sow weaned pig production facilities. As of the date of
this Prospectus, the Company was in the process of developing its second
Illinois feeder pig production facility. The Company intends to apply the net
proceeds from the sale of the first Minimum Class A Block of 17 Class A Shares
offered hereby to the development of this facility, including the repayment of
up to $1,360,000 of any related debt financing, together with interest thereon,
provided by Farmland. See "Description of Business--Financing."
Operation of the Company's facilities is the responsibility of the
management staff of the Company. The Company has contracted with Farmland to
provide certain administrative services to the Company, including accounting,
production record keeping, feed and other input purchasing, employee training,
and breeding stock replacement logistics. See "Business--Employees,"
"Management" and "Certain Relationships and Related Transactions."
The Company has entered into contractual arrangements with certain of its
members, including Farmland and Yuma Cooperative. Pursuant to the Swine
Production Services Agreement between the Company and Farmland, Farmland has
agreed to provide certain administrative, advisory and consulting services to
the Company. Pursuant to the Feed Purchase Agreement between the Company and
Yuma Cooperative, Yuma Cooperative has agreed to provide Alliance with feed-
grains and feed additives for the production of feed at Yuma Cooperative's
contract rates. Farmland and Yuma Cooperative, as members, have contracted to
purchase a share of the feeder pigs to be produced by the Company under the same
terms required of the Company's other members except that during the period
commencing on July 13, 1994 and ending on August 11, 1995, the date the Company
first produced and shipped feeder pigs pursuant to the Feeder Pig Purchase
Agreements with the Company's existing members, the price paid by Farmland and
Yuma Cooperative for feeder pigs was based only on the Company's operating cost
per pig; provided, however, that such price was increased by $4.50 per feeder
pig after July 13, 1995. Commencing on August 11, 1995, the date the Company
first produced and shipped feeder pigs pursuant to the Feeder Pig Purchase
Agreements with the Company's existing members (other than Farmland and Yuma
Cooperative), the price paid by Farmland and Yuma Cooperative for feeder pigs is
and will be under terms comparable to those applicable to the Company's members
pursuant to the Feeder Pig Purchase Agreements. Finally, the Company has agreed
to provide Farmland the first opportunity to purchase any feeder and weaned pigs
produced by the Company in excess of the Company's supply commitments to other
members or that other members have failed to purchase during the term of the
Swine Production Services Agreement (and in no event less than the five year
period ending July 13, 1999). The Company intends to cause any such excess
production of weaned pigs, however, to be retained by the Company for
developement into feeder pigs. See "Certain Relationships and Related
Transactions" and "Feeder Pig Purchase Agreement" and "Weaned Pig Purchase
Agreement."
Hog production is subject to substantial risks. Success is dependent upon
obtaining high levels of breeding stock productivity, controlling the cost and
efficiency of purchased feed and other inputs while minimizing herd exposure to
disease or other factors which can adversely impact the operation. See "Risk
Factors."
BUSINESS ENVIRONMENT
The pork industry has undergone substantial change in recent years, with
respect to the production and processing of hogs. The Company believes that
current economics of the industry favor large, well-capitalized hog producers,
which use consistent, high-quality breeding stock and employ management
practices designed to maximize productivity. As a result, hog production has
become increasingly differentiated between large-scale farrowing operations
producing feeder pigs and less capital intensive smaller-scale hog finishing
operations.
Concentration of Production. The last decade saw a dramatic increase in the
concentration of hog production in larger scale facilities and a corresponding
decline in the number of farms producing hogs. Based on data available from the
U.S. Department of Agriculture, the number of farms producing hogs in the United
States has declined, while the percentage of the nation's total hog inventory
held on farms having more than a 500 head inventory, as well as the average
number of hogs per farm, has increased.
The Company believes there are several causes for the increasing
concentration of hog production into the hands of larger producers. Large,
specialized hog producers may be able to produce hogs for lower cost than
smaller scale independent farmers through economies of scale and the use of
improved genetics, nutrition, and management practices, many of which are more
easily implemented in modern, large-scale facilities. Since this cost advantage
would seem to be more readily available to those making a substantial investment
in facilities, efficient hog production has become a capital-intensive industry.
The Company believes that in the wake of the "agricultural crisis" of the mid-
1980's, capital for hog production has become more difficult to obtain and has
presented an increasingly large barrier to entry. Additionally, packers
generally pay premiums to producers both for the supply of a large volume of
hogs and for providing hogs of superior carcass merit with respect to the yield,
leanness and consistency. Larger operations populated with genetically
consistent stock bred for high productivity and carcass quality therefore may be
able to obtain a premium on the sale of their hogs that may not be available to
smaller producers.
Production Differentiation. In addition to the increasing concentration of
hog production in larger scale facilities, hog production increasingly has
become differentiated between feeder pig production operations (which includes
operations relating to the production of weaned pigs) and pig finishing
operations. The Company believes that this is partly the result of three-site
management practices which dictate the separation of production into three
stages: breeding through farrowing; nursery; and finishing; with each phase of
production being conducted in separate locations to minimize the risk of
transmission of disease. In producing feeder pigs, the Company engages in the
first two of these stages of production, while the Company's production of
weaned pigs will involve only the first of these stages of production.
Production of feeder and weaned pigs -- which is less dependent upon
variable feed cost and more dependent upon herd health, facilities and breeding
stock investment -- is increasingly being conducted in specialized facilities.
Finishing of hogs to market weight, the economics of which are principally
driven by feed cost, is increasingly handled by producers engaged exclusively in
the finishing of hogs, with many of those producers finishing hogs under
contract to the producer of the feeder pig. The Company believes that this
increasing specialization is attributable to the capital intensive nature of
farrowing operations and the complexity of management.
BREEDING STOCK
Fully populated, each of the Company's feeder and weaned pig production
facilities which is either in existence, under development or proposed is
anticipated to be stocked with approximately 2,450 sows. The Company intends to
maintain an adequate population of female-line grandparent stock in its
multiplier units to produce commercial gilts for use by the Company in any
future facilities development or to replace the commercial herd as it is culled
or lost to death. Barrows and any excess gilts from the multiplier units will
be sold by the Company as feeder or weaned pigs.
The Company's feeder and weaned pigs have been and will continue to be
produced from genetically consistent breeding stock. The Company currently
utilizes breeding stock from both DeKalb Swine Breeders and Pig Improvement
Company ("P.I.C."), but intends to discontinue the use of breeding stock
obtained from DeKalb Swine Breeders by the Autumn of 1997. As further
improvements in genetics are recognized, the characteristics of the Company's
breeding stock may change. The Company intends to continually evaluate the cost
and characteristics of breeding stock developed by other producers, and, in the
Company's discretion, to populate all or a portion of its facilities with such
breeding stock.
The Company continually culls a portion of its breeding herd and replaces
these animals with new breeding stock in order to maintain the productivity of
its breeding herd. The selection of animals to be culled is based on subjective
determinations as to the animal's productivity, which generally declines as the
animals mature. The Company believes that it is positioned to generate all or
substantially all of its breeding stock replacements through its breeding stock
multiplier herd. The Company believes that its multiplier units are and will be
able to produce virtually all of the replacement gilts and initial breeding
stock populations required by the Company for the foreseeable future. The
Company believes that its internal production of replacement gilts will result
in the cost of its breeding stock replacements being lower than could be
obtained from outside sources and will preserve the Company's control over its
entire operation. No assurance can be given that the Company will be successful
in producing any portion of its required breeding stock replacements or that the
cost for such replacements will be lower than could be obtained from outside
sources.
With respect to each facility under development or proposed, the Company
intends to place breeding stock in the facility over a five month period
beginning with the completion of the facility's breeding building. It is
anticipated that approximately 800 head of breeding stock will be delivered to
the facility in the first month followed by deliveries of 400 to 450 head over
the remaining four months until the facility is fully stocked. Following an
initial resting period of 45 to 60 days in order to acclimate and monitor each
group of breeding stock, breeding will be commenced.
Alliance implemented an artificial insemination ("AI") program in its
Colorado operations and plans to use AI in its other facilities. Although no
assurances can be given, Alliance believes that the use of AI will allow more
rapid improvements in carcass quality and assist in maintaining higher health
status of the herds.
Alliance has begun planning operations to depopulate the five 2,450-sow
feeder pig production facilities located in Yuma County, Colorado in order to
repopulate these units with P.I.C. females. It is anticipated that sourcing for
this repopulation will be from Alliance's Illinois facility, which is a P.I.C.
multiplier unit. Although no assurances can be given, management believes this
change eventually will improve both productivity and health of the sow units and
may result in improved production results in both nursery and finishing pig
performance. Repopulation is expected to begin in August 1997 with P.I.C.
feeder pigs available in October 1997. Completion of the repopulation project
is anticipated to occur by June 1998.
PURCHASE OF FEED AND OTHER INPUTS
Farmland has agreed to assist the Company in arranging for the provision of
the Company's requirements for feed and other inputs, including animal health
products, pursuant to the Swine Production Services Agreement between the
Company and Farmland. The Company intends to purchase a portion of these
products from Yuma Cooperative upon the prices and terms set forth in the Feed
Purchase Agreement between the Company and Yuma Cooperative. Farmland will
establish the specifications of all supplies purchased, as well as for the
purchasing and delivery of all requirements in coordination with the Company.
See "Certain Relationships and Related Transactions."
The Company's Feed Purchase Agreement with Yuma Cooperative provides for
the Company's purchase of feed manufactured by Yuma Cooperative on a delivered
cost basis to be determined based upon a fixed charge for the grinding, mixing,
and delivery of feed ($14 per ton as of November 1, 1996), in addition to the
actual delivered cost of the feed ingredients. Feed rations which are pelleted
are subject to a surcharge ($7 per ton as of November 1, 1996). Both the fixed
charge and the surcharge are subject to annual increases in November of each
year corresponding to any increases in the Consumer Price Index--Retail Items.
Corn provided by Yuma Cooperative for use in feed generally is sold to the
Company at delivered cost plus, in the absence of available Company grain
storage facilities, a $.10 per bushel handling fee. The Company has the right
under the Feed Purchase Agreement, in its sole discretion, to purchase and
provide its own corn for feed manufacturing. Corn and soybean meal may be
substituted from time to time with other ingredients meeting equivalent
nutritional requirements based upon temporal price differentials. See "Risk
Factors," "Business--Sale of Animals" and "Certain Relationships and Related
Transactions."
The Company believes that feed costs presently account for approximately
35% to 40% of the cost of producing a feeder pig and that feed costs will
account for approximately 20% and 25% of the cost of producing a weaned pig.
The principal components of swine feed are corn and soybean meal, which are
commodities subject to substantial fluctuations in cost due to changing market
conditions, seasonality, and regional variations. While the Company intends to
recover changes in feed costs by making corresponding adjustments in the selling
prices for its feeder and weaned pigs, the actual changes in the sales price of
feeder and weaned pigs will lag changes in feed cost because the Company
determines the cost of feeder pigs on a twelve month historical rolling average
basis and intends to determine the cost of weaned pigs on a five month
historical rolling average basis. This pricing method may adversely impact the
Company's operations in the event of sudden movements, or continual increases,
in the cost of feed or other inputs. See "Certain Relationships and Related
Transactions," "Business--Sale of Animals," "Feeder Pig Purchase Agreement" and
"Weaned Pig Purchase Agreement."
SALE OF ANIMALS
The Company intends to sell its feeder and weaned pigs to its members.
Accordingly, the Company has contracted with its members (and intends to
contract with investor members in connection with the offering of Shares made
hereby) for the sale of the feeder and weaned pigs produced at the Company's
facilities. Feeder Pig Purchase Agreements (a form of which is attached hereto
as Exhibit B) are to be executed by investors in connection with the offering of
Class A Shares made hereby as a condition to a subscription for Class A Shares.
Weaned Pig Purchase Agreements (a form of which is attached hereto as Exhibit C)
are to be executed by investors in connection with the offering of Class B
Shares made hereby as a condition to a subscription for Class B Shares.
Investors in the Company will be required to purchase, and the Company will be
required to sell, lots of feeder pigs produced by the Company in amounts
proportionate to the respective member's pro rata share of the Company's Class A
Common, but in no event greater than two and seven-tenths (2.7) lots per share
of Class A Common on a prospective rolling 12-month basis. Presently, each
share of Class A Common held in the Company will entitle the respective member
to contract to purchase one delivery allotment per 102-allotment block made
available to the members under the Feeder Pig Purchase Agreements. Similarly,
investors in the Company will be required to purchase, and the Company will be
required to sell, lots of weaned pigs produced by the Company that are to be
sold to members in amounts proportionate to the respective member's pro rata
share of the Company's Class B Common, but in no event greater than two and
seven-tenths (2.7) lots per share of Class B Common on a prospective rolling 12-
month basis. The Company intends to allocate its production of weaned pigs from
all facilities between those that are to be sent to nurseries and developed by
the Company into feeder pigs, on the one hand, and those that are to be sold as
weaned pigs, on the other hand, in the same proportion that the number of the
Company's operating feeder pig production facilities bears to the number of the
Company's operating weaned pig production facilities. The lots of feeder and
weaned pigs purchased by the respective member from time to time will not
necessarily be produced from the same feeder or weaned pig production facility.
In the event that the Company issues additional shares of Common Stock for the
construction of additional feeder or weaned pig production facilities, the
number of participants in the allotment of feeder or weaned pigs, as the case
may be, will be increased, although such increase is not anticipated to
materially change an investor's right to receive his anticipated allotment of
pigs. Casualty to the Company's facilities, diminished breeding stock
productivity or extreme mortality or morbidity, among other adverse
circumstances, could reduce the number of feeder or weaned pigs available for
purchase by members and increase the price of pigs under the Feeder Pig Purchase
Agreements or Weaned Pig Purchase Agreements, as the case may be. See "Risk
Factors."
If the Company is successful in implementing its business plan and any new
feeder and weaned pig production facilities are developed on schedule, the
initial lots of feeder pigs resulting from the development and expansion of the
Company's feeder pig production operations are not expected to be available to
new investor members for up to 13 to 15 months after completion of the sale of a
Minimum Class A Block of Class A Shares to such members and the initial lots of
weaned pigs resulting from the development of the Company's weaned pig
production operations are not expected to be available to new investor members
for up to 11 to 13 months after completion of the sale of a Minimum Class B
Block of Class B Shares to such members. New investor members will not be
entitled to purchase pigs from the Company until such time. Investors in the
Company are required to contract for the purchase of Qualifying Pigs (as that
term is defined in the Feeder Pig Purchase Agreement or Weaned Pig Purchase
Agreements, as the case may be) from the facilities. Each such contract, or
Feeder Pig Purchase Agreement or Weaned Pig Purchase Agreements, as the case may
be, constitutes an irrevocable ten-year commitment. Each lot of pigs purchased
by an investor member pursuant to any such Agreement will be priced based upon
the following factors: the financing cost per pig, the operating cost per pig,
and a production margin of $4.50 per pig, in the case of feeder pigs, and of $0
to $4.50 per pig (as determined by the Company in its discretion), in the case
of weaned pigs (all as defined in such Agreement). In the event that an
investor member fails at least twice to perform his purchase obligation under
such Agreement, such investor member will be in default, which default may
result in the relinquishment of his purchase rights under such Agreement. For
each ten shares of Common Stock owned by a member, the number of such failures
that will result in a default is increased by one. A member's failure to
perform his purchase obligation, among other circumstances, also may result in
the Company's foreclosure on its security interest granted in the member's
Common Stock. In addition, the member will be responsible for the damages and
expenses incurred by the Company as a result of any failure to purchase, pay
for, and take delivery of any lot of Qualifying Pigs under the Feeder Pig
Purchase Agreement or Weaned Pig Purchase Agreements, as the case may be,
including (a) damages equal to the difference between the price payable by the
member for the Qualifying Pigs that member has failed to purchase, pay for, and
take delivery under the Agreement and the then current market price for feeder
or weaned pigs, as the case may be, (b) $3,000, which amount is intended to
cover the Company's administrative and other costs and expenses associated with
such failure, and (c) all costs of collection, enforcement, and prosecution of
the Company's rights and remedies. If the Company produces feeder pigs in
excess of two and seven-tenths (2.7) lots per share of Class A Common on a
prospective rolling 12-month basis or produces weaned pigs in excess of two and
seven-tenths (2.7) lots per share of Class B Common on a prospective rolling 12-
month basis, the Company may sell such excess production to non-members, or
retain such excess production for the Company's own purposes, in lieu of selling
such excess production pursuant to the Feeder Pig Purchase Agreements or Weaned
Pig Purchase Agreements, as the case may be. The Company has agreed in its
Swine Production Services Agreement with Farmland to provide Farmland the first
opportunity to purchase any such excess production and any feeder or weaned pigs
that members have failed to purchase during the term of said Agreement (and in
no event less than the five year period ending July 13, 1999). The Company
intends to cause any such excess production of weaned pigs, however, to be
retained by the Company for developement into feeder pigs. See "Feeder Pig
Purchase Agreement," "Weaned Pig Purchase Agreement," "Certain Relationships and
Related Transactions," "Restrictions on Sale or Other Transfer of the Shares--
Cooperative Association Laws and Charter Documents" and "Plan of Distribution."
As of the date of this Prospectus, the Company has reached an agreement
with the Company's existing lender and Farmland concerning the provision by such
lender and Farmland of full debt financing for the development of a second
Illinois facility. See "Business--Financing." In connection with obtaining
this financing, Farmland has contracted to purchase, until the first to occur of
the expiration of one year and the date on which Farmland is repaid on its loan,
the marginal increase in Alliance's production of feeder pigs (approximately 46
lots of feeder pigs on a prospective rolling 12-month basis) resulting from the
development of the facility constructed using the proceeds of such financing.
Farmland's purchase of such feeder pigs would be under substantially the same
terms required of the Company's members pursuant to the Feeder Pig Purchase
Agreements, except that the purchase price for pigs does not include the $4.50
per pig production margin. See "Feeder Pig Purchase Agreement."
Competition
The feeder and weaned pig production business is competitive and fragmented
among family-owned and investor-owned farms and large-scale agribusiness pig
production operations. Feeder and weaned pigs are available at sale barn
auction, markets such as Farmland's Pig Finder7 electronic pig auction market,
and under contract from producers. Competition is based upon price, product
consistency and quality, ability to deliver the required quantities and ability
to meet delivery schedules. Although there are a great number of operations
that compete with the Company, as discussed elsewhere in this Prospectus the
Company has contracted with its members (and intends to contract with investor
members in connection with the offering of Shares made hereby) for the sale of
feeder and weaned pigs produced at the Company's facilities. If the Company
produces pigs in excess of its supply commitments to members, however, the
Company may sell such excess production to non-members. The Company believes
that its most important competitive strengths are its ability to provide
competitive pricing and the quality and consistency of the pigs produced by it.
See "Business Environment," "Feeder Pig Purchase Agreement" and "Weaned Pig
Purchase Agreement."
EXPANSION
Expansion is an important element of the Company's business plan. The
Company's present intent is to construct or acquire (a) three 2,450-sow feeder
pig production facilities (including the Company's second Illinois facility
under development and subject to the sale of all Class A Shares offered hereby)
in addition to the Company's existing facilities and facilities under
development, following completion or acquisition of which the Company will be
operating a total of nine such facilities, and (b) six 2,450-sow weaned pig
production facilities (subject to the sale of all Class B Shares offered
hereby), following completion or acquisition of which the Company will be
operating a total of six such facilities. The ability of the Company to
construct or acquire each of such three feeder pig production facilities is
subject to it obtaining at least $3,940,000 of net financing proceeds (at least
$12,100,000 in the aggregate for all three facilities), and the ability of the
Company to construct or acquire each of such six weaned pig production
facilities is subject to it obtaining at least $3,220,000 of net financing
proceeds (at least $20,020,000 in the aggregate for all six facilities). As of
the date of this Prospectus, the Company has commenced preliminary development
activities with respect to a second feeder pig production facility in Wayne
County, Illinois in anticipation of obtaining such necessary financing. No
assurances can be given that the Company will obtain the financing required for
the development of the second Illinois facility. See "Business--Financing."
The Company believes that substantial economies of scale will be realized
in the event that the Company is able to expand beyond the three feeder pig
production facilities and six weaned pig production facilities that the Company
presently intends to construct or acquire. These additional economies are
expected to include savings and enhancements in the production of breeding
stock, economies in the production of feed, and enhancement of management and
labor productivity. The Company intends to pursue expansion of its operations
as financial, managerial and other resources become available. No assurance can
be given as to when or if such resources will become available to Alliance so as
to allow it to proceed with such expansion.
Hog production operations require the availability of ample pure water at
reasonable cost. Although the Company has obtained access to water necessary
for it to conduct its current operations in Colorado and Illinois, the Company
has been advised that it will be unable to obtain any new commercial well
permits in Colorado. Accordingly, the Company has found it necessary in
Colorado to obtain the water necessary for its operations through the purchase
of more expensive, irrigated land or other real property already having the
necessary commercial well permits. No assurance can be given that the Company
will be able to obtain the water permits necessary to enable it to expand its
operations in Colorado, Illinois or other locations selected by the Company.
See "Risk Factors--Adequate Water Supply."
FINANCING
The ability of the Company (a) to implement its business strategy and
construct or acquire additional feeder pig production facilities is subject to
it obtaining at least $3,940,000 of net financing proceeds with respect to each
such facility, and (b) to implement its business strategy and construct or
acquire new weaned pig production facilities is subject to it obtaining at least
$3,220,000 of net financing proceeds with respect to each such facility. In
this regard, the Company is engaged in the offering of the Shares. In addition
to the proceeds to be received from the possible issuance and sale of one or
more Minimum Class A Blocks or one or more Minimum Class B Blocks, the Company
would be required to obtain additional funds through secured term debt
borrowings. The Company anticipates that (a) with respect to each Minimum Class
A Block of 17 Class A Shares issued by the Company at the offering price set
forth on the cover page of this Prospectus, the Company would be required to
borrow approximately $2,720,000 of term debt borrowings in order to construct
one new feeder pig production facility and related support facilities, to
purchase breeding stock, and to provide working capital for operations, and (b)
with respect to each Minimum Class B Block of 18 Class B Shares issued by the
Company at the offering price set forth on the cover page of this Prospectus,
the Company would be required to borrow approximately $2,100,000 of term debt
borrowings in order to construct one new weaned pig production facility and
related support facilities, to purchase breeding stock, and to provide working
capital for operations. The amount of this proposed financing has been
determined based upon the anticipated capital expansion and business operations
needs of the Company and the anticipated net proceeds from the issuance of the
Shares. See "Risk Factors," "Use of Proceeds" and "Plan of Distribution."
On May 19, 1995, the Company entered into various loan documents with
CoBank related to a $23,600,000 secured credit facility. This credit facility
provides for up to $18,850,000 of non-revolving term debt and $4,750,000 of
revolving term credit. Proceeds from the term debt may be used for construction
of feeder pig production facilities and are advanced by CoBank as construction
costs are incurred by Alliance. Proceeds from revolving term credit may be used
for working capital and other purposes. The actual advance of funds under this
credit facility is subject to the satisfaction of certain conditions precedent
and may be withdrawn or terminated by CoBank under certain circumstances. No
assurances can be given that the funding conditions precedent will be satisfied
and that the Company will be able to obtain sufficient financing when needed, or
that alternative sources of financing will be available on acceptable terms. In
addition, the unused portion of the credit facility expires August 31, 1997
(extended from the original February 28, 1997 expiration date) with respect to
the non-revolving term debt and June 20, 2006 with respect to the revolving term
credit. As of the date of this Prospectus, the Company intends to enter into
negotiations with CoBank to obtain an extension of the CoBank loan or to obtain
a commitment for a new loan after the August 31, 1997 expiration of the existing
CoBank loan commitment. No assurances can be given that such negotiations will
be successful and that such commitment will be obtained on favorable terms, if
at all.
As of the date of this Prospectus, the Company has not obtained a credit
facility for construction of weaned pig production facilities. As of the date
of this Prospectus, the Company is engaged in negotiations with CoBank to obtain
a commitment for such a credit facility. No assurances can be given that such
negotiations will be successful and that such commitment will be obtained on
favorable terms, if at all. If any such commitment is obtained from CoBank or
any other lender, it is anticipated that the actual advance of funds under any
credit facility would subject to the satisfaction of certain conditions
precedent and further subject to early withdrawal or termination by the lender
under certain circumstances. No assurances can be given that the funding
conditions precedent will be satisfied and that the Company will be able to
obtain sufficient financing when needed, or that alternative sources of
financing will be available on acceptable terms.
The availability of non-revolving term debt and revolving term credit under
the CoBank credit facility is subject to specified equity investment levels in
the Company being satisfied. As of February 28, 1997, $142,000 was immediately
available to Alliance under its credit facility with CoBank. JWA[2]An
additional $211,000 of term loans is to became available approximately 90 days
following construction of the Company's facilities under development. The
availability of $6,330,000 of unused term loans and $1,830,000 of revolving term
credit under the CoBank credit facility is restricted and may be made available
to the Company only to the extent that additional equity investment is made in
the Company. With respect to each additional equity investment of $1,360,000
obtained by the Company (e.g., 17 shares of Common Stock sold for at least
$80,000 each), the Company is entitled to obtain advances under the credit
facility of $2,720,000 ($2,110,000 of term loans and $610,000 of revolving term
credit), up to an aggregate of $8,160,000. As more fully described below, as of
the date of this Prospectus, the Company has agreed with CoBank and Farmland
that it may obtain an advance under the CoBank credit facility of $2,720,000 and
a loan from Farmland of $1,360,000 (including $200,000 previously loaned by
Farmland to Alliance), without the necessity of satisfying the additional equity
investment requirement.
Prior to any advance being made by CoBank under the credit facility,
certain conditions precedent must be addressed to CoBank's satisfaction,
including but not limited to (i) provision of environmental audits respecting
the Company's realty, (ii) obtaining performance bonds and lien payment bonds
and builder's risk casualty insurance respecting such construction, (iii)
obtaining a chain of title and title insurance respecting the Company's realty,
and (iv) provision of evidence that CoBank has a perfected first priority lien
on all security for the Company's obligations. As of February 28, 1997, the
outstanding balance of loans made by CoBank under this credit facility was
$13,922,000.
As an temporary alternative to funding an expansion of the Company's
operations with a combination of debt and equity financing, as of the date of
this Prospectus CoBank and Farmland have agreed to the provision of full debt
financing. This financing alternative was obtained in connection with the
commencement of preliminary development activities on a second feeder pig
production facility in Wayne County, Illinois. See "Business--Expansion." Such
financing consists of $2,110,000 of non-revolving term debt and $610,000 of
revolving term debt obtained from CoBank and $1,360,000 of subordinated non-
revolving term debt from Farmland (including $200,000 previously loaned by
Farmland to the Company for the acquisition of certain real property in Wayne
County, Illinois). See "Business--Facilities" and "Certain Relationships and
Related Transactions--Farmland--Real Estate Loans."
The CoBank portion of this financing will be provided under the Company's
existing credit facility. The Farmland portion of this financing will be
provided on terms substantially identical to those applicable to the $200,000
loan previously made by Farmland to Alliance for the acquisition of certain real
property in Wayne County, Illinois. See "Certain Relationships and Related
Transactions--Farmland--Real Estate Loans." In this regard, the Farmland
portion of the financing will provide for amortization over a ten-year period,
at a variable rate equal to CoBank's then national variable rate plus 1.25%.
The payment schedule for the Farmland loan will require the Company to make
interest-only payments for the life of the loan, with a final balloon payment of
the outstanding loan balance to be made upon the earlier of (i) the Company's
issuance and sale of a Minimum Block of the Shares, and (ii) the expiration of
ten years. Alliance's obligation to Farmland will be secured by a mortgage on
the facilities constructed with the proceeds of the loan, which mortgage will be
second in priority to that of CoBank. In addition, Farmland has agreed to
purchase all feeder pigs produced at the facility that was constructed using the
proceeds of the Farmland loan until the first to occur of the expiration of one
year and the date on which Farmland is repaid on its loan. See "Business--Sale
of Animals." As a result of the larger portion of indebtedness associated with
this financing alternative (and the higher debt service related thereto) as
compared with the debt and equity alternative discussed above, the net proceeds
from the issuance of Shares that would be required must be correspondingly
greater in order to provide for the balloon payment of principal and required
installments of interest under the Farmland loan. No assurances can be given
that the Company will be able to obtain the financing required for the
development of the second Illinois facility.
In connection with the Company's acquisition of certain real property in
Yuma County, Colorado, the Company borrowed $760,000 from Farmland. This loan
is evidenced by a promissory note providing for amortization over a ten-year
period, at a variable rate of interest equal to CoBank's prime rate. The
payment schedule for this loan requires the Company to make interest-only
payments for the life of the loan, with a final balloon payment of all principal
to be made upon the expiration of the ten-year term. See "Business--Facilities"
and "Certain Relationships and Related Transactions--Farmland--Real Estate
Loans."
The CoBank credit facility provides for the monthly payment of principal
and interest. Principal payments pursuant to the loan terms with respect to the
initial $8.3 million of non-revolving term loans are to be made in 114 monthly
installments of $72,500 each, beginning January 20, 1996, with the remaining
unpaid balance being due and payable on July 20, 2005. Principal payments
pursuant to the loan terms with respect to each $2,110,000 of new non-revolving
term loans are to be made in monthly installments of $18,700 each, beginning on
the 20th day of the eighteenth month following the date of the initial advance
of such $2,110,000 loan. Principal payments pursuant to the loan terms with
respect to the revolving term loan are to be made in 24 equal monthly
installments of the principal that is outstanding as of the June 20, 2006
expiration of the revolving loan commitment, beginning on the 20th day of the
month following the payment in full of the new non-revolving term loan (but in
no event later than March 20, 2008). Interest accrues on the outstanding
principal balance of the loan at a rate equal to either (i) a variable rate
equal to CoBank's then national variable rate plus 1.25%, or (ii) CoBank's then
quoted rates for fixed rate loans, as may be elected from time to time by the
Company, and is payable monthly in arrears by the 20th day of the following
month. During the period in which principal under the loan is outstanding,
portions of such principal may bear interest at such variable rate while other
portions may bear interest at such fixed rate. As of February 28, 1997,
interest accrued on the outstanding principal balance of the loan at a rate of
9.5% per annum (calculated by adding 125 basis points to CoBank's national
variable rate of 8.25% in effect as of such date). The interest rate(s)
applicable to the loan are subject to reduction at specified times upon the
Company's satisfaction of certain conditions relating to the Company's equity
level and debt service coverage ratio. As of February 28, 1997, no reductions
in the Company's interest rate had been made. The Company is permitted to
prepay the loan at any time without penalty, except that in the event that fixed
rate balances are prepaid, the Company is required to pay CoBank a surcharge in
an amount equal to CoBank's funding losses with respect thereto or, if the
CoBank loan is refinanced by another lender, a surcharge in an amount sufficient
(on a present value basis) to enable CoBank to maintain the yield it would have
earned on the amount repaid for the period such amount was scheduled to be
outstanding at a fixed rate.
In obtaining the initial non-revolving CoBank loan, the Company was
required to pay a $50,000 origination fee as well as make an equity investment
in CoBank of $1,000. In addition, the Company paid a $36,000 origination fee in
connection with the refinancing of its existing CoBank loan, and will be
required to pay a $6,000 fee with respect to the origination of each $2,110,000
of new non-revolving term loans. During the course of the loan, the Company may
be required to make additional equity investments at a rate not to exceed 1% of
the average five-year principal loan balance (which additional equity
investments may be satisfied out of CoBank's non-cash patronage distributions)
until the Company meets CoBank's target level of equity investment, which
currently is 11.5% of the Company's average five-year principal loan balance.
In addition, the Company was required to grant a first perfected lien and
security interest on substantially all of its properties and assets to CoBank
and to assign to CoBank all of the Company's rights in and to the existing
Feeder Pig Purchase Agreements. The Company is required to comply with various
affirmative and negative covenants, including but not limited to (i)maintenance
of at least $2,250,000 of equity, plus $550,000 of equity for each facility
developed by the Company after its initial four facilities ($3,350,000 of equity
was required at February 28, 1997 and the Company had $4,610,756 of equity at
such date), (ii) maintenance of modified working capital (calculated as current
assets, plus available revolving term credit, minus current liabilities
(excluding the current portion of term debt payments)) of at least $210,000,
plus $98,000 of modified working capital for each facility developed by the
Company after its initial four facilities ($406,000 of modified working capital
was required at February 28, 1997 and the Company had $41,259 of modified
working capital at such date), (iii) provision of monthly financial statements
and audited annual financial statements to CoBank, (iv) restrictions on the
incurrence of additional indebtedness, (v) restrictions on certain liens,
mergers, sales of assets, investments, guaranties, loans, advances and business
activities unrelated to existing operations, and (vi) restrictions on the
declaration and payment of the cash portion of patronage distributions and other
distributions or allocations of the Company's earnings, surplus or assets. The
Company was in compliance with each of these covenants as of February 28, 1997,
except the modified working capital covenant as to which the Company has
obtained a waiver from CoBank as of February 28, 1997. Management believes that
Alliance will have the ability to maintain compliance with the above covenants
in the foreseeable future.
FACILITIES
Facilities in Existence or Under Development. As of the date of this
Prospectus, the Company conducted operations from its five existing 2,450-sow
feeder pig production facilities located in Yuma County, Colorado (approximately
150 miles east of Denver), and from its one existing 2,450-sow production
facility in Wayne County, Illinois. As of the date of this Prospectus, the
Company does not have any weaned pig production facilities. The original Yuma
County, Colorado feeder pig production facility was constructed in a
configuration different than that employed with respect to the Company's other
facilities and is anticipated to be different than that employed for future
feeder pig production facilities. The original facility consists of six
separate buildings, including two breeding buildings, two gestation buildings,
and two farrowing buildings, all of which are situated together on an
approximately 160 acre site with a separately accessed nursery building, while
each of the Company's other facilities consist of a three-building sow breeding,
gestation and farrowing complex situated together, with a separately accessed
nursery building. Management believes that the condition of its facilities
presently is adequate for the Company's business, and that its facilities are
adequately covered by insurance. Each of the existing facilities, including
land and buildings, was constructed for between $2,243,000 and $2,495,000, and
has been or will be pledged as security for the Company's loan from CoBank under
the terms of a deed of trust/mortgage.
Between September and December 1995, the Company purchased approximately
1,000 acres of real property in Yuma County, Colorado, upon which the Company
has developed one feeder pig production facility and holds the remaining acreage
for the development of additional production facilities (the "Additional
Colorado Property"). The acquisition cost of this Additional Colorado Property
was approximately $760,000. The Company obtained funding for the purchase of
the Additional Colorado Property from the proceeds of a loan obtained from
Farmland. In conjunction with this loan, the Company delivered to Farmland a
promissory note evidencing the debt providing for the amortization of the loan
over a ten-year period, at a variable rate equal to CoBank's prime rate. As of
February 28, 1997, CoBank's prime rate was 8.25%. The payment schedule of the
promissory note requires that the Company make interest-only payments for the
life of the loan, with a final balloon payment of the principal at the
expiration of the ten-year term. To secure the obligations of the promissory
note, the Company has agreed to execute a deed of trust in favor of Farmland
covering all of the Additional Colorado Property, which deed of trust is second
in priority to that of CoBank with respect to the production facility
constructed thereon. See "Certain Relationships and Related Transactions--
Farmland--Real Estate Loans."
As of the date of this Prospectus, the Company has acquired approximately
442 acres of real property in Wayne County, Illinois, including a 90 acre tract
acquired pursuant to the exercise of the option referred to below. The Company
has developed one feeder pig production facility on these 442 acres. In
addition, as of the date of this Prospectus the Company has commenced
preliminary development activities with respect to a second feeder pig
production facility located on this property. See "Business--Expansion."
In November 1996, the Company entered into a contract pursuant to which the
Company has been granted the option to purchase approximately 500 acres of real
property in Wayne County, Illinois (the "Option Property"). Under the terms of
this option contract, if the Company fails to fully exercise the option as to
the entire Option Property prior to November 1998, the Company shall be
responsible for a $150,000 liquidated damages payment to the owner of the Option
Property. The Company's responsibility for this liquidated damages payment is
secured by a stand-by letter of credit issued by CoBank. Until the expiration
of this letter of credit, the revolving term credit available to the Company
will be reduced by $150,000. In November 1996, the Company exercised its rights
under this option contract to acquire an approximately 90 acre tract of the
Option Property, including 45 acres (the "45 Acre Tract") on which the Company
has commenced preliminary development activities with respect to a second
Illinois sow production facility. The Company obtained funding for the purchase
of the 45 Acre Tract from the proceeds of a $200,000 loan provided by Farmland.
In conjunction with this loan, the Company delivered to Farmland a promissory
note evidencing the debt providing for amortization over a ten-year period, at a
variable rate equal to CoBank's then national variable rate plus 1.25%. The
payment schedule for the Farmland loan requires the Company to make
interest-only payments for the life of the loan, with a final balloon payment of
all principal to be made upon the earlier of (i) the Company's issuance and sale
of a Minimum Block of Shares, and (ii) the expiration of ten years. Alliance's
obligation to Farmland under this note is secured by a mortgage on the 45 Acre
Tract. See "Certain Relationships and Related Transactions--Farmland--Real
Estate Loans."
The Company maintains its administrative offices at 302 Idlewild Street in
Yuma, Colorado. This office space has been made available to the Company by
Farmland at no cost to the Company.
Proposed Facilities. In connection with the offering of the 51 Class A
Shares hereby, the Company intends to construct or acquire up to three
additional 2,450-sow feeder pig production facilities in or around Yuma County,
Colorado, Wayne County, Illinois, or other locations selected by the Company
(one facility with respect to each 17 Class A Shares sold in this offering).
The Company intends to construct or acquire up to six 2,450-sow weaned pig
production facilities in or around Yuma County, Colorado, Wayne County,
Illinois, or other locations selected by the Company (one facility with respect
to each 18 Class B Shares sold in this offering) in connection with the offering
of the 108 Class B Shares hereby. The Company has commenced preliminary
development activities with respect to a second feeder pig production facility
located in Wayne County, Illinois in anticipation of obtaining the necessary
financing. As of the date of this Prospectus CoBank and Farmland have agreed to
the provision of full debt financing consisting of $2,110,000 of non-revolving
term debt and $610,000 of revolving term debt obtained from CoBank and
$1,360,000 of subordinated non-revolving term debt from Farmland (including
$200,000 previously loaned by Farmland to the Company for the acquisition of
certain real property in Wayne County, Illinois). Upon the Company's issuance
and sale of a Minimum Block of Shares, the net proceeds of such issuance and
sale will be applied to the repayment of the Farmland $1,360,000 subordinated
non-revolving term debt. No assurances can be given that the Company will be
able to obtain the financing required for the development of the second Illinois
facility. In addition to the three feeder pig production facilities and six
weaned pig production facilities that the Company presently intends to construct
or acquire, the Company intends to develop feeder pig production facilities and
weaned pig production facilities in the future as financial, managerial and
other resources become available. No assurance can be given that such resources
will become available to Alliance so as to allow it to proceed with the
development of such additional facilities. See "Business--Expansion" and "--
Financing."
It is anticipated that each of the three feeder pig production facilities
to be developed, in part, with the proceeds from the 51 Class A Shares in this
offering, including the second Illinois facility presently in a preliminary
stage of development, will consist of a three-building sow breeding, gestation,
and farrowing complex situated together on a site, with nursery buildings being
separate from the rest of the complex to allow for disease separation between
the facilities. The six weaned pig production facilities to be developed, in
part, with the proceeds from the 108 Class B Shares in this offering will
consist of a three-building sow breeding, gestation, and farrowing complex
situated together on a site. As presently proposed, the construction of each
new feeder pig production facility is anticipated to cost approximately
$2,750,000, including the cost of land and land improvements, and the
construction of each new weaned pig production facility is anticipated to cost
approximately $2,115,000, including the cost of land and land improvements. The
Company has estimated the cost of land and land improvements to be approximately
$500,000 per feeder pig production facility and approximately $296,000 per
weaned pig production facility. No assurance can be given that the actual
development costs for the new facilities will not exceed the Company's
estimates. See "Use of Proceeds." It is anticipated that construction of the
proposed facilities will be handled by contractors on a "turn-key" basis and
will be phased-in over time, beginning with construction of the breeding
buildings, followed by construction of the gestation, farrowing, and nursery
buildings as production of the breeding herd progresses. In this regard, the
Company has contracted with Central Confinement, Inc., Columbus, Nebraska, for
the construction of the second feeder pig production facility situated in Wayne
County, Illinois. The Company anticipates that it will stagger the construction
of the proposed new facilities, with the construction of no more than one
facility being initiated in each month following completion of an offering. The
development of each feeder pig production facility is anticipated to require up
to 13 to 15 months after completion of the offering of a Minimum Class A Block
of Shares and each weaned pig production facility is anticipated to require up
to 11 to 13 months after completion of the offering of a Minimum Class B Block
of Shares.
As capital funds are available and the economic benefit is determinable,
the Company intends to consider the construction of certain additional
facilities, including a truck wash facility in close proximity to the production
units, an off-site boar stud facility for semen collection, handling, and
laboratory equipment used in artificial insemination, a dead animal disposal
center, bulk storage for the holding of feed grain inventories, and feed
manufacturing equipment. Additionally, depending upon the characteristics of
each site purchased, the Company may be required to construct single-family
housing for its management employees. No determination has been made at this
time as to the necessity of any such construction, and the Company presently has
no firm plan to develop any of such additional facilities.
Location of Proposed Facilities. The Company intends to locate the
proposed new feeder pig production facilities and weaned pig production
facilities in or around Yuma County, Colorado, Wayne County, Illinois or other
locations selected by the Company. With the exception of the second Illinois
facility, the Company has not, as of the date of this Prospectus, identified
specific sites for the location of the facilities. In selecting a site for the
Company's facilities, the Company considers a variety of factors, including
those referred to below.
As a threshold matter, the Company's facilities must be located in a state
such as Colorado and Illinois, among others, in which the applicable laws do not
prohibit ownership of a hog production facility by a corporation, including
cooperative associations such as the Company. Although state laws may contain
restrictions relating to zoning, water management, and environmental
regulations, particularly with respect to feeder and weaned pig production
operations, the Company must not be prohibited from constructing or operating
its facilities. With respect to climatic conditions, temperatures may be cold
in the winter so long as they are believed by the Company to be adequately
temperate and low in humidity to accommodate the existing and planned
operations. Hog production operations require the availability of ample pure
water at reasonable cost. Although the Company has obtained access to water
necessary for it to conduct its current operations in Colorado, the Company has
been advised that it will be unable to obtain any new commercial well permits in
Colorado. Accordingly, the Company has found it necessary in Colorado to obtain
the water necessary for its operations through the purchase of more expensive,
irrigated land or other real property already having the necessary commercial
well permits. No assurance can be given that the Company will be able to obtain
the water permits necessary to enable it to expand its operations in Colorado,
Illinois or other locations selected by the Company. Hog production operations
also must have access to feed at reasonable cost. The cost of feed is a
function of the local availability of high-quality feed grain and soybeans and
the capacity to process these ingredients, all relative to the local demand for
these inputs. Alliance believes that ample production of corn and ingredient
processing facilities exist within the Yuma County, Colorado and Wayne County,
Illinois regions and adequate transportation is available to haul in feed-grains
to the facilities. However, soybean meal must be hauled into Yuma County.
Productivity of the Company's operations largely will be dependent upon its
ability to keep the operations free from diseases. The Company believes that
the location of feeder and weaned pig production facilities in a region that
does not contain a relatively large population of other hogs is desirable in
helping to minimize the risk of disease-related problems.
WASTE DISPOSAL AND ENVIRONMENTAL MATTERS
Several environmental requirements potentially are applicable to feeder and
weaned pig production operations such as those conducted or proposed to be
conducted by the Company. Generally, these requirements take the form of
federal statutory and regulatory requirements that are, in some cases, reflected
in similar state requirements. In other instances, state or local requirements
may exist separately and without federal precedent.
The principal environmental regulations with which the Company must comply
are related to the handling and disposal of waste water generated at the
Company's facilities. The federal Clean Water Act generally prohibits the
discharge of pollutants into the waters of the United States. The Environmental
Protection Agency ("EPA") has further issued regulations that prohibit the
discharge of waste water from animal feedlot operations into the waters of the
United States, except under certain circumstances when excessive rainfall runoff
added to existing process waste water exceeds the design capacity of the waste
water handling and treatment facilities. These regulations therefore generally
require that waste water handling and treatment facilities for "animal feedlots"
(which term is defined broadly enough to cover the Company's operations) be of a
non-discharge nature.
To comply with these federal requirements, animal feedlot operators, such
as the Company, must either obtain a permit from the EPA for its operations, or,
in the case of a state which has been granted authority by EPA to carry out a
Clean Water Act program, application must be made to the state. The State of
Colorado and the State of Illinois each has been granted such authority by EPA.
The Colorado and Illinois regulations generally adopt the format of the EPA
provisions for animal feedlots, and generally require concentrated animal
feeding operations to be operated as no-discharge facilities. These regulations
require that the Company design, construct, and operate waste water control
structures capable of retaining and processing all waste water and storm runoff
which enter the facility, with the exception of water generated from rainfall in
excess of certain prescribed parameters. Moreover, these regulations authorize
the state agency to require the removal of accumulated manure and process waste
water as necessary to prevent the overflow of the containment and processing
structure. The Company uses lagoon containment and processing systems at its
production facilities to comply with these regulations.
Land application of manure and process waste water also is regulated by
Colorado and Illinois regulations. Generally, these regulations authorize the
state agency to require that manure and process waste water not be distributed
on lands in a manner that affects the quality of waters, impairs existing
beneficial uses, or exceeds estimated soil infiltration rates, and shall not be
applied when the land is frozen, saturated or during rainfall. Sprinkler
irrigation equipment must include a back flow prevention device. Land
application rates are established on a case-by-case basis after taking into
account the nature and type of manure or process waste water and the
characteristics of the area to which it is to be applied.
Each feeder or weaned pig production facility is or will be designed to
enable the removal of animal waste by means of emptying shallow pits located
under the slatted floors of each facility. Animal waste falls through the
slatted floor into the pit which is filled with water. Periodically, each pit
is drained and refilled. Waste water drained from a pit is moved into a lagoon
system for treatment. All lagoons must be of a size adequate to accommodate the
anticipated volume of waste water to be generated together with storm water
runoff. Further, each lagoon must be lined with a material that prevents or
inhibits the seepage of waste water into the ground water below.
Cost of design and construction of waste water treatment systems vary by
facility based upon the characteristics of each individual site. The Company
has estimated that the cost of construction of lagoons and the attendant pumps
and piping required to handle the waste water generated at each feeder or weaned
pig production facility will range from approximately $100,000 to $135,000.
Ongoing expenditures to handle waste water consist principally of expenditures
for utilities and maintenance. Such ongoing expenditures do not constitute a
significant operating cost to the Company.
EMPLOYEES
Operating management of each of the Company's existing and future
facilities will be the responsibility of each respective production facility's
General Manager. The General Manager will have overall responsibility for the
operation of the facility. Additional department managers likely will oversee
the breeding/gestation, farrowing, and nursery departments. It is anticipated
that each facility under development or proposed will employ eleven persons in
breeding through farrowing operations, including management and laborers.
Pursuant to the Swine Production Services Agreement between the Company and
Farmland, Farmland has agreed to assist in providing certain administrative
services to the Company, including the coordination of the Company's training of
personnel to be employed by the Company and the selection of employees.
As of February 28, 1997, the Company employed approximately 121 persons, of
whom 117 were full-time employees and four were part-time employees. Of the
Company's 117 full-time employees, 14 employees are assigned to perform various
facilities operation services for Pig Producers I, L.P. ("Pig Producers"), a
limited partnership in which Farmland holds a 12.5% interest. Pig Producers is
engaged in the production of feeder pigs from a 2,450-sow feeder pig production
facility located in Yuma County, Colorado. The Company is reimbursed by Pig
Producers for all wages, benefits and other costs attributable to the 14
Alliance employees performing services for Pig Producers. See "Certain
Relationships and Related Transactions--Farmland." The Company is not a party
to any collective bargaining agreement and considers its relationship with
employees to be satisfactory.
FEDERAL INCOME TAXATION
The following is a general discussion of certain Federal income tax
provisions applicable to Alliance and the Federal income tax consequences of the
ownership of Shares of Alliance by an investor. It is impractical to comment
on all aspects of Federal, state and local laws which may affect the tax
consequences of an investment in the Shares. The following discussion is merely
a summary of some of the federal income tax principles applicable to Alliance
and the investors, and does not purport to be a complete analysis or listing of
all potential tax consequences or risks inherent in purchasing or owning Common
Stock in Alliance. Each prospective investor should consult his or her own tax
advisor.
The following discussion of federal income tax matters is based upon the
Internal Revenue Code of 1986, as amended to date (the "Code"), the regulations
promulgated or proposed thereunder, the position of the Service set forth in its
published revenue rulings, revenue procedures and other announcements and court
decisions as in effect on the date of this Prospectus. No assurance can be
given that future legislative or administrative actions or court decisions will
not result in changes in the law which would result in significant modification
to the following discussion. Any such legislative or administrative action or
decision may or may not be retroactively applied with respect to transactions
completed prior to the effective date of such action.
Taxation of a Taxable Cooperative. Alliance has been formed as a
cooperative association under Colorado law and intends to operate as a
cooperative for Federal income tax purposes. A taxable cooperative is subject
to Federal income tax on its Federal taxable income and generally computes its
taxable income the same as any other C corporation. However, a taxable
cooperative is allowed to deduct in computing its taxable income amounts
distributed to its members or patrons as patronage dividends. Due to the
ability of a cooperative to deduct patronage dividends with respect to its
patronage sourced earnings, the income earned by a cooperative with respect to
business done with or for the cooperative's member-patrons is subject to a
single-level of Federal income taxation, at the level of the member-patrons.
However, a taxable cooperative may not distribute non-patronage sourced earnings
to its member-patrons as patronage dividends. Accordingly, the cooperative must
report such non-patronage sourced income in its taxable income and is subject to
Federal income taxation on such income.
As mentioned above, a cooperative may deduct amounts paid to its member-
patrons as patronage dividends. In order to qualify as a patronage dividend,
the amount paid to each member-patron by the cooperative must be (1) on the
basis of the quantity or value of business done with or for the member; (2)
pursuant to a pre-existing legal obligation; and (3) determined with reference
to the net earnings from the business done with or for its member-patrons. A
cooperative may pay patronage dividends in cash, a written notice of allocation
or a combination thereof. The written notice of allocation either may be a
qualified written notice or a nonqualified written notice. A qualified written
notice of allocation is a written notice of allocation which (1) the distributee
has consented to take into income at the stated dollar amount and has received
at least twenty percent of the dividend in cash or (2) the distributee may
redeem for cash at its stated value for a period of at least ninety days
following the notice. The Company's Bylaws provide that Alliance stockholders
have consented to take qualified written notices of allocation into income at
the stated amount as a result of acquiring Alliance Common Stock. A
nonqualified written notice of allocation is a written notice of allocation that
fails to satisfy the above described requirements for a qualified written notice
of allocation
A patronage dividend paid with a qualified written notice of allocation or
cash is deductible by the cooperative for the year with respect to which the
patronage dividend is paid and is taxable to the member-patron in the year the
patronage dividend is received. Since a cooperative may pay up to eighty
percent of a patronage dividend in a qualified written notice of allocation, a
member-patron may have insufficient cash distributed to the member-patron to pay
the income tax incurred by the patron as a result of the receipt of the
patronage dividend. A nonqualified written notice of allocation is deductible
by the cooperative and taxable to the member-patron when such notice is redeemed
by the cooperative for cash.
As described above, a cooperative may only distribute as patronage
dividends the portion of its income which qualifies as patronage sourced income.
Alliance will operate as a supply cooperative, which produces and sells pigs to
its member-patrons. The income Alliance realizes on its sale of the pigs to its
member-patrons should be treated as patronage sourced income. Alliance is
obligated under the Bylaws to distribute such income to its member-patrons as
patronage dividends based the quantity or value of business done with or for its
member-patrons.
If Alliance realizes income from business which is not done with or for
member-patrons, such as income from the sale of pigs to a person who is not an
Alliance stockholder, such income will not be patronage sourced income and
Alliance will not be able to distribute and deduct such amount to its member-
patrons as a patronage dividend. In such case, Alliance will have to include
such income in the computation of its Federal taxable income. If Alliance
distributes such non-patronage sourced earnings to its stockholders, such
distribution likely will be treated as a taxable dividend to its stockholders.
Taxation of Alliance Stockholder. Alliance is obligated to distribute its
patronage sourced earnings to its member-patrons as patronage dividends. The
member-patrons will be required to include such patronage dividends in their
taxable income although the time at which such amount is includible is dependent
on how the patronage dividend is distributed. Alliance may pay the patronage
dividend in cash, a qualified written notice of allocation or a non-qualified
written notice of allocation, or any combination thereof. A member must include
in its income a patronage dividend paid in cash or a qualified written notice of
allocation in the year such dividend is received. A member must include in its
income a patronage dividend paid by a non-qualified written notice of allocation
in the year in which such notice, or portion thereof, is redeemed by the
cooperative for cash. If Alliance realizes income from non-patronage sources
and distributes such income to its stockholders, the stockholders likely will
have to report such income as dividend income. In connection with the term debt
borrowings for which the Company anticipates it will obtain commitments prior to
or concurrently with the consummation of the offering of each Minimum Block of
Shares, the Company may be required to enter into a credit agreement which
restricts the Company's ability to pay patronage distributions in cash. The
loan agreement with the Company's existing lender contains such a restriction.
See "Patronage Distribution Policy" and "Business--Financing."
The portion of any patronage distributions paid in qualified written
notices of allocations will be made through the issuance of capital credits. If
Alliance redeems the capital credits which were issued, the redeeming member
will recognize capital gain or loss in an amount equal to the difference between
the redemption proceeds received and the member's basis in the redeemed capital
credits. Since a member's basis in a capital credit received as a patronage
dividend is equal to the face amount of the capital credit, a member generally
will not recognize any gain or loss on the redemption of a capital credit.
In the event of a sale of Alliance Common Stock by a member, the gain or
loss realized by the selling member for federal income tax purposes will
generally be characterized as capital gain or loss provided that the Common
Stock was held as a capital asset. The amount of the gain or loss will be equal
to the difference between the adjusted tax basis of his equity sold and the
amount realized on such sale.
THE FOREGOING DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX
PLANNING, PARTICULARLY BECAUSE THE TAX CONSEQUENCES OF AN INVESTMENT IN ALLIANCE
ARE COMPLEX AND NOT THE SAME FOR ALL TAX PURPOSES. PROSPECTIVE INVESTORS ARE
STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS.
GOVERNMENT REGULATION
The Company is subject to various federal, state and local government
regulations, including those restricting certain types of investor-owned
livestock production and those concerning the environment, occupational safety
and health and zoning. In addition, its employment practices are governed by
minimum wage, overtime and other working condition regulations. The Company has
not experienced significant difficulty in complying with applicable regulations
and compliance generally has not had an adverse effect on the Company's
business. See "Business--Waste Disposal and Environmental Matters."
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a
party or to which any of its property is subject.
FEEDER PIG PURCHASE AGREEMENT
GENERAL
The rights and obligations of the parties with respect to the sale of
feeder pigs by the Company to its members will be governed by the Feeder Pig
Purchase Agreements, in the form attached hereto as Exhibit B. Prospective
investors should carefully examine the Feeder Pig Purchase Agreement. Although
the following summary describes the material provisions of the Feeder Pig
Purchase Agreement, it does not purport to be a complete statement of all
provisions of the Feeder Pig Purchase Agreement and in no way modifies or amends
the Feeder Pig Purchase Agreement.
PURCHASE
The Company intends to sell feeder pigs that meet particular minimum
weight, health, nutrition and genetic quality standards to members of the
Company who have entered into a Feeder Pig Purchase Agreement with the Company.
Feeder pigs that meet such standards, as set forth in the Feeder Pig Purchase
Agreement, are referred to as "Qualifying Pigs." Pursuant to the terms of the
Feeder Pig Purchase Agreement, the member of the Company is required to
purchase, and the Company is required to sell, Qualifying Pigs in lots of no
less than 900, and no more than 1,000, Qualifying Pigs per lot, as determined by
the Company. Such lots of feeder pigs are to be made available to members of
the Company on a rotating schedule determined and implemented by the Company,
with the number of lots made available to a member and the frequency of
availability being based upon the member's proportionate ownership interest in
the Company's outstanding Class A Common and the actual production of Qualifying
Pigs from the Company's facilities. If the Company is successful in
implementing its business plan and the proposed new feeder pig production
facilities are developed on schedule, the initial lots of feeder pigs resulting
from the development and expansion of the Company's feeder pig production
operations are not expected to be available to new investor members for up to 13
to 15 months after completion of the sale of a Minimum Class A Block of Shares
to such members. New investor members will not be entitled to purchase feeder
pigs from the Company until such time. In the event that the production of
feeder pigs exceeds two and seven-tenths (2.7) lots per share of Class A Common
on a prospective rolling 12-month basis, the Company may sell such excess
production to non-members, or retain such excess production for the Company's
own purposes, in lieu of selling such excess production pursuant to the Feeder
Pig Purchase Agreements. The Company has agreed in its Swine Production
Services Agreement with Farmland to provide Farmland the first opportunity to
purchase excess feeder pigs produced by the Company during the term of said
Agreement (and in no event less than the five year period ending July 13, 1999).
See "Certain Relationships and Related Transactions--Farmland."
PRICE
The Company intends to sell Qualifying Pigs, subject to adjustment for
weight as described below, pursuant to a pricing formula consisting of the sum
of the following factors: the financing cost per pig, the operating cost per
pig, and a $4.50 per pig production margin. The financing cost per pig
applicable to a member is to be determined on a rolling 12-month prospective
basis and will be equal to the quotient obtained by dividing (i) the sum of the
anticipated required payments of principal and interest (including any scheduled
sinking fund payments) for the ensuing 12-month period with respect to the term
debt borrowings incurred by the Company in connection with the consummation of
the sale of Class A Common to such member, by (ii) the total number of
Qualifying Pigs anticipated to be produced and shipped by the Company during
such 12-month period from the one or more feeder pig production facilities
developed through the use of such term debt borrowings and the net proceeds from
the sale of Class A Common to such member (such estimate being based on the
total estimated number of Qualifying Pigs to be produced and shipped by the
Company during such 12-month period from all feeder pig production facilities of
the Company). The operating cost per pig is to be determined on a rolling 12-
month historical basis and will be equal to the quotient obtained by dividing
(i) the sum of (A) all expenses (excluding interest expense, depreciation and
amortization) of the Company, plus (B) the net cash flow cost of all capital
expenditures of the Company (including any capital sinking fund payments) for
production facility and breeding stock improvements and replacements, in each
case, for the 12 months preceding the then present month of shipment, by (ii)
the number of Qualifying Pigs produced and shipped by the Company during such
12-month period. At the time the Company notifies a member that a lot is
available for purchase by the member pursuant to the member's Feeder Pig
Purchase Agreement, the Company will furnish to the member an estimate of the
total purchase price of all Qualifying Pigs included in the lot, and the member
is required to pay such estimated total purchase price to the Company not less
than one day prior to the scheduled shipment date. The actual total purchase
price of all Qualifying Pigs included in a lot sold to a member will be based
upon weight at the time of loading and settlement of any adjustments shall be
made within five days following delivery.
WEIGHT ADJUSTMENT
The purchase price for Qualifying Pigs is subject to adjustment based upon
the extent of any variation in the average weight of Qualifying Pigs from 45
pounds. To the extent that the average weight of a shipment of Qualifying Pigs
exceeds 45 pounds per pig, the purchaser will pay an additional $.25 per pound
per pig on the first five pounds by which the average weight exceeds 45 pounds
per pig and an additional $.20 per pound per pig for the average weight between
50 pounds and 60 pounds. To the extent that the average weight of a shipment of
Qualifying Pigs is less than 45 pounds per pig, the purchase price will be
decreased by $.25 per pound per pig.
DELIVERY OF PIGS
The Company will be responsible for obtaining, at the Company's expense,
all health permits necessary to qualify the pigs for interstate shipment. It is
anticipated that all lots of Qualifying Pigs will be weighed at the Company's
expense at a state-inspected scale near the Company's production facility.
Delivery is to be FOB shipping point, with the members bearing the risk of loss
during transit, and the trucks used to haul Qualifying Pigs from the Company's
production facility must be thoroughly cleaned and disinfected prior to loading.
A member may inspect the lot of Qualifying Pigs to be purchased by such member
prior to loading. After the delivery of pigs at their destination, a member
will have the right to seek an appropriate price adjustment for any pig which is
found not to be a Qualifying Pig. Such adjustment will be made following the
Company's inspection of the subject pigs, and will be determined through mutual
agreement of the Company and the member.
TERM AND TERMINATION
A member's Feeder Pig Purchase Agreement will be for an initial term
commencing on the date entered into and continuing for a period of 120 months
after the date the first delivery of Qualifying Pigs is made to the member
thereunder, subject to earlier termination upon the occurrence of certain
events. Feeder Pig Purchase Agreements will be extended automatically for
succeeding one year terms unless the member gives to the Company, not less than
one year prior to the expiration of the initial or any extended term, notice
that the member desires to terminate the Feeder Pig Purchase Agreement as of the
expiration of such initial or extended term. The Company may terminate a
member's Feeder Pig Purchase Agreement if the member fails to purchase, pay for,
and take delivery of any two lots of Qualifying Pigs when and as made available
to the member; provided, however, that for each ten shares of Common Stock owned
by a member, the number of such failures necessary before the Company may
terminate such member's Agreement is increased by one. The member may terminate
the Feeder Pig Purchase Agreement if the Company materially breaches any
obligation or covenant in the Agreement and such breach is not cured within 30
days following notice of such breach given by the member to the Company.
Furthermore, if the first delivery of Qualifying Pigs thereunder is not made
within 24 months of the date of the Feeder Pig Purchase Agreement, the member
may terminate the Agreement within three months after the expiration of such 24-
month period. If either party is prevented from performing under the Feeder Pig
Purchase Agreement because of reasons beyond its control which make it
commercially impossible to perform, however, then that party is relieved from
such performance so long as it remains commercially impossible to perform. A
member's Feeder Pig Purchase Agreement automatically terminates if the member
assigns or transfers all shares of Class A Common from which the member's right
to purchase lots of Qualifying Pigs under the Agreement derives. Except as
described above, a member does not have the right to terminate the Feeder Pig
Purchase Agreement prior to the expiration of the initial or any extended term
thereof. As noted above, the member's right to terminate the Feeder Pig
Purchase Agreement at the expiration of the initial or any extended term thereof
may be exercised only if the member gives notice to the Company at least one
year prior to the expiration of such initial or extended term that the member
desires to exercise such termination right. The foregoing termination rights
constitute the member's exclusive rights of termination under the Feeder Pig
Purchase Agreement. No member has the right to demand the return of or to
receive any of the member's capital from the Company as a result of the
termination of the Feeder Pig Purchase Agreement or otherwise and regardless of
whether demanded prior to the expiration of the initial or any extended term of
the Feeder Pig Purchase Agreement or at any time after the expiration of any
such term. The Company is under no obligation to redeem or repurchase its Class
A Common prior to the expiration of the initial or any extended term of the
Feeder Pig Purchase Agreement or at any time after the expiration of any such
term. See "Risk Factors--Lack of Liquidity; Absence of Market for Shares,"
"Restrictions on Sale or Other Transfer of the Shares--Cooperative Association
Laws and Charter Documents."
EFFECT OF PURCHASER DEFAULT
If a member fails to purchase, pay for, and take delivery of any lot of
Qualifying Pigs when and as made available to the member pursuant to the Feeder
Pig Purchase Agreement, the member is responsible for the damages and expenses
incurred by the Company as a result of such failure. In particular, the member
is liable for (a) the difference between the price payable by the member for the
Qualifying Pigs that member has failed to purchase, pay for, and take delivery
under the Agreement and the then current market price for feeder pigs, (b)
$3,000, which amount is intended to cover the Company's administrative and other
costs and expenses associated with such failure to purchase, pay for, and take
delivery of the Qualifying Pigs, and (c) all costs of collection, enforcement,
and prosecution of the Company's rights and remedies under the Agreement or
otherwise arising. If a member fails to pay promptly the damages and expenses
incurred by the Company as a result of the member's failure to purchase, pay for
and take delivery of a lot of Qualifying Pigs, such member will not be permitted
to purchase any other lots unless and until such damages and expenses are paid,
and such member also will be responsible for all damages and expenses accruing
to the Company with respect to lots that such member is not permitted to
purchase as a result thereof. In addition to the member's responsibility for
such damages and expenses, the Company may pursue other remedies, including the
termination of the member's Feeder Pig Purchase Agreement. If the member is
prevented from performing under the Feeder Pig Purchase Agreement because of
reasons beyond the member's control which make it commercially impossible to
perform, however, then the member is relieved from such performance so long as
it remains commercially impossible to perform. See "Feeder Pig Purchase
Agreement--Term and Termination" and "-- Grant of Security Interest."
GRANT OF SECURITY INTEREST
Pursuant to the Feeder Pig Purchase Agreement, a member grants to the
Company, as security for the performance of all of the member's obligations
under the Feeder Pig Purchase Agreement, a security interest in all of the
member's equity interest in the Company. In this regard, the certificates
representing shares of Class A Common will be retained by Alliance and members
will be required to endorse appropriate stock powers with respect to such
certificates. The Company's security interest in the member's shares of Class A
Common is to be senior to all others, except for any permissible pledge or other
security interest granted in such shares by the member to any financial
institution for purposes of securing a loan used in financing the member's
acquisition of such shares and as otherwise agreed by the Company in its
discretion. A member's failure to perform his purchase obligation under the
Feeder Pig Purchase Agreement, among other occurrences, may result in the
Company's foreclosure on the security interest in the member's Class A Common.
See "Risk Factors--Obligation to Purchase Pigs" and "-- Right of Alliance to
Acquire Shares" and "Restrictions on Sale or Other Transfer of the Shares--
Cooperative Association Laws and Charter Documents."
WARRANTIES
The Company makes no warranties, express or implied, with respect to feeder
pigs produced by it, except as expressly provided in the Feeder Pig Purchase
Agreement. The Company specifically disclaims any warranties of merchantability
or fitness for a particular purpose and makes no warranty as to any specific
level of performance with respect to any pigs sold thereunder.
ARBITRATION
Any controversy arising out or relating to a Feeder Pig Purchase Agreement
or any breach thereof (other than certain controversies that include, but are
not limited to, controversies arising out of a member's failure to purchase, pay
for, and take delivery of any lot of Qualifying Pigs and the Company's exercise
of any rights or remedies related thereto) is required to be submitted to
binding arbitration under the Feeder Pig Purchase Agreement. Arbitration
hearings are to take place in Denver, Colorado, or at such other location as the
Company and such member may agree, with judgment upon the award rendered by the
arbitrator being entered in any court having jurisdiction.
WEANED PIG PURCHASE AGREEMENT
GENERAL
The rights and obligations of the parties with respect to the sale of
weaned pigs by the Company to its members will be governed by the Weaned Pig
Purchase Agreements, in the form attached hereto as Exhibit C. Prospective
investors should carefully examine the Weaned Pig Purchase Agreement. Although
the following summary describes the material provisions of the Weaned Pig
Purchase Agreement, it does not purport to be a complete statement of all
provisions of the Weaned Pig Purchase Agreement and in no way modifies or amends
the Weaned Pig Purchase Agreement.
PURCHASE
The Company intends to sell weaned pigs that meet particular minimum
weight, health, nutrition and genetic quality standards to members of the
Company who have entered into a Weaned Pig Purchase Agreement with the Company.
Weaned pigs that meet such standards, as set forth in the Weaned Pig Purchase
Agreement, are referred to as "Qualifying Pigs." Pursuant to the terms of the
Weaned Pig Purchase Agreement, the member of the Company is required to
purchase, and the Company is required to sell, Qualifying Pigs in lots of no
less than 925, and no more than 1,025, Qualifying Pigs per lot, as determined by
the Company. Such lots of weaned pigs are to be made available to members of
the Company on a rotating schedule determined and implemented by the Company,
with the number of lots made available to a member and the frequency of
availability being based upon the member's proportionate ownership interest in
the Company's outstanding Class B Common and the actual production of Qualifying
Pigs from the Company's facilities. The Company intends to allocate its
production of weaned pigs from all facilities between those that are to be sent
to nurseries and developed by the Company into feeder pigs, on the one hand, and
those that are to be sold as weaned pigs, on the other hand, in the same
proportion that the number of the Company's operating feeder pig production
facilities bears to the number of the Company's operating weaned pig production
facilities. If the Company is successful in implementing its business plan and
the proposed new weaned pig production facilities are developed on schedule, the
initial lots of weaned pigs resulting from the development and expansion of the
Company's weaned pig production operations are not expected to be available to
new investor members for up to 11 to 13 months after completion of the sale of a
Minimum Class B Block of Shares to such members. New investor members will not
be entitled to purchase weaned pigs from the Company until such time. In the
event that the production of weaned pigs that are to be sold to members exceeds
two and seven-tenths (2.7) lots per share of Class B Common on a prospective
rolling 12-month basis, the Company may sell such excess production to non-
members, or retain such excess production for the Company's own purposes, in
lieu of selling such excess production pursuant to the Weaned Pig Purchase
Agreements. The Company intends to cause any such excess production of weaned
pigs to be retained by the Company for development into feeder pigs. The
Company has agreed in its Swine Production Services Agreement with Farmland to
provide Farmland the first opportunity to purchase any excess weaned pigs that
are to be sold by the Company during the term of said Agreement (and in no event
less than the five year period ending July 13, 1999). See "Certain
Relationships and Related Transactions--Farmland."
PRICE
The Company intends to sell Qualifying Pigs, subject to adjustment for
weight as described below, pursuant to a pricing formula consisting of the sum
of the following factors: the financing cost per pig, the operating cost per
pig, and a production margin of $0 to $4.50 per pig (as determined by the
Company in its discretion). The financing cost per pig applicable to a member is
to be determined on a rolling five-month prospective basis and will be equal to
the quotient obtained by dividing (i) the sum of the anticipated required
payments of principal and interest (including any scheduled sinking fund
payments) for the ensuing 12-month period with respect to the term debt
borrowings incurred by the Company in connection with the consummation of the
sale of Class B Common to such member, by (ii) the total number of Qualifying
Pigs anticipated to be produced and shipped by the Company during such 12-month
period from the one or more weaned pig production facilities developed through
the use of such term debt borrowings and the net proceeds from the sale of Class
B Common to such member (such estimate being based on the total estimated number
of Qualifying Pigs to be produced and shipped by the Company during such 12-
month period from all weaned pig production facilities of the Company). The
operating cost per pig is to be determined on a rolling five-month historical
basis and will be equal to the quotient obtained by dividing (i) the sum of (A)
all expenses (excluding interest expense, depreciation and amortization) of the
Company, plus (B) the net cash flow cost of all capital expenditures of the
Company (including any capital sinking fund payments) for production facility
and breeding stock improvements and replacements, in each case, for the five
months preceding the then present month of shipment, by (ii) the number of
Qualifying Pigs produced and shipped by the Company during such five-month
period. The production margin per pig is to be determined by the Company in its
discretion, subject to the satisfaction of any applicable covenants imposed by
the Company's lender. At the time the Company notifies a member that a lot is
available for purchase by the member pursuant to the member's Weaned Pig
Purchase Agreement, the Company will furnish to the member an estimate of the
total purchase price of all Qualifying Pigs included in the lot, and the member
is required to pay such estimated total purchase price to the Company not less
than one day prior to the scheduled shipment date. The actual total purchase
price of all Qualifying Pigs included in a lot sold to a member will be based
upon weight at the time of loading and settlement of any adjustments shall be
made within five days following delivery.
WEIGHT ADJUSTMENT
The purchase price for Qualifying Pigs is subject to adjustment based upon
the extent of any variation in the average weight of Qualifying Pigs from 8 to
12 pounds. To the extent that the average weight of a shipment of Qualifying
Pigs exceeds 12 pounds per pig, the purchaser will pay an additional $1.00 per
pound per pig. To the extent that the average weight of a shipment of
Qualifying Pigs is less than 8 pounds per pig, the purchase price will be
decreased by $1.00 per pound per pig.
DELIVERY OF PIGS
The Company will be responsible for obtaining, at the Company's expense,
all health permits necessary to qualify the pigs for interstate shipment. It is
anticipated that all lots of Qualifying Pigs will be weighed at the Company's
expense at a state-inspected scale near the Company's production facility.
Delivery is to be FOB shipping point, with the members bearing the risk of loss
during transit, and the trucks used to haul Qualifying Pigs from the Company's
production facility must be thoroughly cleaned and disinfected prior to loading.
A member may inspect the lot of Qualifying Pigs to be purchased by such member
prior to loading. After the delivery of pigs at their destination, a member
will have the right to seek an appropriate price adjustment for any pig which is
found not to be a Qualifying Pig. Such adjustment will be made following the
Company's inspection of the subject pigs, and will be determined through mutual
agreement of the Company and the member.
TERM AND TERMINATION
A member's Weaned Pig Purchase Agreement will be for an initial term
commencing on the date entered into and continuing for a period of 120 months
after the date the first delivery of Qualifying Pigs is made to the member
thereunder, subject to earlier termination upon the occurrence of certain
events. Weaned Pig Purchase Agreements will be extended automatically for
succeeding one year terms unless the member gives to the Company, not less than
one year prior to the expiration of the initial or any extended term, notice
that the member desires to terminate the Weaned Pig Purchase Agreement as of the
expiration of such initial or extended term. The Company may terminate a
member's Weaned Pig Purchase Agreement if the member fails to purchase, pay for,
and take delivery of any two lots of Qualifying Pigs when and as made available
to the member; provided, however, that for each ten shares of Common Stock owned
by a member, the number of such failures necessary before the Company may
terminate such member's Agreement is increased by one. The member may terminate
the Weaned Pig Purchase Agreement if the Company materially breaches any
obligation or covenant in the Agreement and such breach is not cured within 30
days following notice of such breach given by the member to the Company.
Furthermore, if the first delivery of Qualifying Pigs thereunder is not made
within 24 months of the date of the Weaned Pig Purchase Agreement, the member
may terminate the Agreement within three months after the expiration of such 24-
month period. If either party is prevented from performing under the Weaned Pig
Purchase Agreement because of reasons beyond its control which make it
commercially impossible to perform, however, then that party is relieved from
such performance so long as it remains commercially impossible to perform. A
member's Weaned Pig Purchase Agreement automatically terminates if the member
assigns or transfers all shares of Class B Common from which the member's right
to purchase lots of Qualifying Pigs under the Agreement derives. Except as
described above, a member does not have the right to terminate the Weaned Pig
Purchase Agreement prior to the expiration of the initial or any extended term
thereof. As noted above, the member's right to terminate the Weaned Pig
Purchase Agreement at the expiration of the initial or any extended term thereof
may be exercised only if the member gives notice to the Company at least one
year prior to the expiration of such initial or extended term that the member
desires to exercise such termination right. The foregoing termination rights
constitute the member's exclusive rights of termination under the Weaned Pig
Purchase Agreement. No member has the right to demand the return of or to
receive any of the member's capital from the Company as a result of the
termination of the Weaned Pig Purchase Agreement or otherwise and regardless of
whether demanded prior to the expiration of the initial or any extended term of
the Weaned Pig Purchase Agreement or at any time after the expiration of any
such term. The Company is under no obligation to redeem or repurchase its Class
B Common prior to the expiration of the initial or any extended term of the
Weaned Pig Purchase Agreement or at any time after the expiration of any such
term. See "Risk Factors--Lack of Liquidity; Absence of Market for Shares,"
"Restrictions on Sale or Other Transfer of the Shares--Cooperative Association
Laws and Charter Documents."
EFFECT OF PURCHASER DEFAULT
If a member fails to purchase, pay for, and take delivery of any lot of
Qualifying Pigs when and as made available to the member pursuant to the Weaned
Pig Purchase Agreement, the member is responsible for the damages and expenses
incurred by the Company as a result of such failure. In particular, the member
is liable for (a) the difference between the price payable by the member for the
Qualifying Pigs that member has failed to purchase, pay for, and take delivery
under the Agreement and the then current market price for weaned pigs, (b)
$3,000, which amount is intended to cover the Company's administrative and other
costs and expenses associated with such failure to purchase, pay for, and take
delivery of the Qualifying Pigs, and (c) all costs of collection, enforcement,
and prosecution of the Company's rights and remedies under the Agreement or
otherwise arising. If a member fails to pay promptly the damages and expenses
incurred by the Company as a result of the member's failure to purchase, pay for
and take delivery of a lot of Qualifying Pigs, such member will not be permitted
to purchase any other lots unless and until such damages and expenses are paid,
and such member also will be responsible for all damages and expenses accruing
to the Company with respect to lots that such member is not permitted to
purchase as a result thereof. In addition to the member's responsibility for
such damages and expenses, the Company may pursue other remedies, including the
termination of the member's Weaned Pig Purchase Agreement. If the member is
prevented from performing under the Weaned Pig Purchase Agreement because of
reasons beyond the member's control which make it commercially impossible to
perform, however, then the member is relieved from such performance so long as
it remains commercially impossible to perform. See "Weaned Pig Purchase
Agreement--Term and Termination" and "-- Grant of Security Interest."
GRANT OF SECURITY INTEREST
Pursuant to the Weaned Pig Purchase Agreement, a member grants to the
Company, as security for the performance of all of the member's obligations
under the Weaned Pig Purchase Agreement, a security interest in all of the
member's equity interest in the Company. In this regard, the certificates
representing shares of Class B Common will be retained by Alliance and members
will be required to endorse appropriate stock powers with respect to such
certificates. The Company's security interest in the member's shares of Class B
Common is to be senior to all others, except for any permissible pledge or other
security interest granted in such shares by the member to any financial
institution for purposes of securing a loan used in financing the member's
acquisition of such shares and as otherwise agreed by the Company in its
discretion. A member's failure to perform his purchase obligation under the
Weaned Pig Purchase Agreement, among other occurrences, may result in the
Company's foreclosure on the security interest in the member's Class B Common.
See "Risk Factors--Obligation to Purchase Pigs" and "-- Right of Alliance to
Acquire Shares" and "Restrictions on Sale or Other Transfer of the Shares--
Cooperative Association Laws and Charter Documents."
WARRANTIES
The Company makes no warranties, express or implied, with respect to weaned
pigs produced by it, except as expressly provided in the Weaned Pig Purchase
Agreement. The Company specifically disclaims any warranties of merchantability
or fitness for a particular purpose and makes no warranty as to any specific
level of performance with respect to any pigs sold thereunder.
ARBITRATION
Any controversy arising out or relating to a Weaned Pig Purchase Agreement
or any breach thereof (other than certain controversies that include, but are
not limited to, controversies arising out of a member's failure to purchase, pay
for, and take delivery of any lot of Qualifying Pigs and the Company's exercise
of any rights or remedies related thereto) is required to be submitted to
binding arbitration under the Weaned Pig Purchase Agreement. Arbitration
hearings are to take place in Denver, Colorado, or at such other location as the
Company and such member may agree, with judgment upon the award rendered by the
arbitrator being entered in any court having jurisdiction.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The names of the current directors and executive officers of the Company,
their ages and present positions and offices with the Company are as follows:
Name Age Position and Offices Held
Wayne N. Snyder 53 Chairman of the Board, President and Director
Scott R. Webster 36 Vice President and Chief Operating Officer
Doug Brown 38 Treasurer, Secretary and Director
Merl Daniel 51 Director
Gerald D. Johnson 54 Director
Loren Keppy 35 Director
Set forth below is a description of the business experience of each director
and executive officer of the Company.
Wayne N. Snyder has served as Chairman of the Board, President and Director
of the Company since its formation in May, 1994, and has served as General
Manager of Yuma LLC, the Company's predecessor, from October, 1991 to July,
1994. Mr. Snyder has served as Director of Livestock Production for Farmland
since 1989. In that capacity, he is responsible for all activities of
Farmland's livestock production department. His professional career includes
over 20 years of experience with Farmland in a variety of positions, including
Regional Manager and Vice President--Sales.
Scott R. Webster has served as Vice President and Chief Operating Officer of
the Company since July, 1995, and has served as a member of the Company's senior
management since November, 1994. Mr. Webster is Manager of Pork Production for
Farmland, where he is responsible for all of Farmland's pork production
activities. Prior to joining Farmland in November, 1994, Mr. Webster served as
Director of Nutrition, Research and Development at Brown's of Carolina since
June, 1992, where he was involved in developing the company from 8,000 sows to
50,000 sows. He has been involved in pork production activities since 1975 and
also was employed by DeKalb Feeds upon the completion of a Master of Science
degree from the University of Missouri in 1985 until June, 1992.
Doug Brown has served as Treasurer and as a Director of the Company since
its formation in May, 1994, and as Secretary of the Company since October, 1994.
He served as a manager of Yuma LLC from October, 1991 to July, 1994. Mr. Brown
has served as the Vice President and General Manager of Yuma Cooperative since
1990. Prior to that time, Mr. Brown served as the general manager of the
Douglas Farmers Cooperative in Douglas, Oklahoma for four years.
Merl Daniel has served as a Director of the Company since March, 1995. Mr.
Daniel has been employed by Farmland since 1968, and has served in his present
capacity of Vice President and Controller for Farmland since July, 1992. From
October, 1990 to July, 1992, he served as Farmland's Director MIS, Operations
and Technical Support, in which capacity he managed Farmland's computer
operations. Prior to October, 1990, Mr. Daniel served Farmland in a variety of
other capacities.
Gerald D. Johnson has served as a Director of the Company since September,
1994. Mr. Johnson has been employed by Farmers Cooperative Elevator Company,
Plymouth, Nebraska as its General Manager since October 1992. Prior to that
date, he served six years as Controller of Farmers Cooperative Business
Association, Shelby, Nebraska. For the approximately 32 years prior to assuming
such position, he served in a variety of positions with several other
cooperative associations.
Loren Keppy has served as a Director of the Company since June 1996. Mr.
Keppy has been self-employed as a farmer since 1984. In this regard, he
currently operates a 5,000 head per year hog finishing operation near Durant,
Iowa, in addition to farming 470 acres of crops. Mr. Keppy received a Bachelor
of Science degree in Industrial Technology from the University of Northern Iowa,
and is a member of the River Valley Coop.
Officers are elected annually by the Board of Directors and serve until
their respective successors are duly elected and qualified. The Company's Board
of Directors currently consists of five directors: Messrs. Snyder, Brown,
Daniel, Johnson and Keppy. The members of the Board of Directors are elected
for one year terms expiring at the annual meeting of stockholders or until their
respective successors are duly elected and qualified, unless sooner removed or
disqualified. The Company's Articles of Incorporation and Bylaws provide that
at least a majority of the directors constituting the Board of Directors shall
be, and less than a majority of the directors need not be, members or duly
authorized representatives of members of the Company.
LIMITATION ON LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation provides, in effect, that a director
of the Company, in his capacity as such, will not be personally liable to the
Company or its members or stockholders for monetary damages for violations of a
director's fiduciary duty. In accordance with the Colorado Cooperative
Association Law, however, the Articles of Incorporation do not eliminate or
limit the liability of a director for breaching his duty of loyalty, acting or
failing to act in good faith, engaging in intentional misconduct or knowingly
violating a law, or obtaining an improper personal benefit. Although the
Articles of Incorporation preclude monetary damage awards occasioned by a breach
of a director's fiduciary duty, it does not relieve a director of his fiduciary
duties and does not prevent a stockholder from seeking equitable remedies,
including an injunction prohibiting a proposed action or transaction, or from
seeking recision of a transaction.
The Company's Articles of Incorporation permit the Company to indemnify its
directors, officers, employees and agents, or any person who serves at the
request of the Company as a director, officer, partner, trustee, employee,
fiduciary or agent of another corporation or other person or of an employee
benefit plan, to the fullest extent permitted by Colorado law. The Company's
Bylaws require the Company to indemnify any person against all liabilities and
expenses actually and reasonably incurred by such person in connection with any
proceeding by reason of the fact that such person is or was serving as a
director or officer of the Company or, while a director or officer of the
Company, is or was serving at the Company's request as a director, officer,
partner, trustee, employee, fiduciary or agent of another corporation or other
person or of an employee benefit plan; provided that such person acted in good
faith and in a manner such person reasonably believed, in the case of conduct in
an official capacity, to be in the Company's best interests and, in all other
cases, to be not opposed to the Company's best interests, and, with respect to
any criminal action or proceeding, that such person had no reasonable cause to
believe such person's conduct was unlawful; and provided, further, that the
Company shall not indemnify any person for any liabilities or expenses incurred
by such person in connection with a proceeding by or in the right of the Company
in which such person shall have been adjudged to be liable to the Company or in
connection with any other proceeding in which such person shall have been
adjudged to have derived an improper personal benefit. The indemnification
provided by the Company's Articles of Incorporation and Bylaws is not exclusive
of any other rights to which those seeking indemnification may be otherwise
entitled. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company 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.
DIRECTOR COMPENSATION
Although the Company's Bylaws provide that directors may be compensated for
their services, no compensation has been awarded to, earned by or paid to
members of the Company's Board of Directors for service to the Company as such.
Each director may be reimbursed for such director's reasonable out-of-pocket
expenses incurred in the performance of service to the Company as a director if
authorized by the Board of Directors.
EXECUTIVE COMPENSATION
No compensation has been awarded, earned by or paid to Wayne N. Snyder, the
chief executive officer of the Company, by the Company for services rendered to
the Company as such during the period from the Company's organization on May 3,
1994 through August 31, 1996. Mr. Snyder is employed by Farmland, which has
agreed to provide certain administrative, advisory and consulting services to
the Company under the terms of a Swine Production Services Agreement. No
executive officer of the Company at August 31, 1996 was awarded, earned or was
paid compensation in excess of $100,000 for services rendered to the Company as
such during the fiscal year ended August 31, 1996. See "Management--Directors
and Executive Officers" and "Certain Relationships and Related Transactions."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
GENERAL
As of the date of this Prospectus, Farmland and Yuma Cooperative own
approximately 49.0% and 11.8%, respectively, of the Class A Common of the
Company. In connection with the formation of the Company as a Colorado
cooperative association on May 3, 1994, one share of the Company's Class A
Common was issued to Farmland for the purchase price of $100. On July 13, 1994,
the Company acquired the entire equity ownership rights and interests in Yuma
LLC, a Colorado limited liability corporation in which Farmland and Yuma
Cooperative owned approximately 71.5% and 28.5%, respectively, of the
outstanding equity interests. In exchange for their respective equity interests
in Yuma LLC, Farmland and Yuma Cooperative were issued 30 shares and 12 shares,
respectively, of the Company's Class A Common. Yuma LLC thereupon was dissolved
and liquidated and its assets and liabilities were assigned to and assumed by
Alliance. Said assets and liabilities have been reflected on the Company's
balance sheet at Yuma LLC's book value, which consisted of $3,027,091 and
$80,291 in total assets and liabilities, respectively, at July 8, 1994. As of
the date of this Prospectus, the Company has consummated its issuance and sale
to Farmland of an additional 17 Class A Shares in exchange for the purchase
price of $1,360,000. The Company has entered into various contractual
arrangements with both Farmland and Yuma Cooperative for the provision of
specific goods and services. All future transactions between the Company and
its officers, directors, employees and affiliates, including Farmland and Yuma
Cooperative, will be on terms no less favorable to the Company than can be
obtained from unaffiliated parties. All such transactions will be subject to
the approval of a majority of the independent outside members of the Board of
Directors who do not have an interest in the transactions. See "Principal
Stockholders."
FARMLAND
Farmland is a Kansas cooperative association engaged in regional farm supply
and marketing operations, including the processing and marketing of pork and
beef. Farmland's livestock production department is directly engaged in the
production of feeder pigs and finished hogs through contractual arrangements
with independent producers, the ownership of pig production operations in joint
venture with both agricultural cooperatives and independent producers, as well
as other activities including the operation of feeder pig brokerage services.
Wayne N. Snyder, Scott R. Webster and Merl Daniel each are employed by Farmland
and presently serve as directors or executive officers of the Company.
Farmland, through its various business divisions and interests, is engaged
in providing to competitors of the Company certain goods and services, including
the supply of feed and other inputs, breeding stock and administrative services,
among others, which are comparable to those being provided by Farmland to the
Company. Moreover, Farmland also is directly engaged in the production of hogs
through the direct ownership of animals and facilities, through contractual
arrangements with other producers, and through joint venture arrangements
established with other parties. Because of Farmland's various activities, there
may arise conflicts of interest between Farmland and the Company. The Company
anticipates that Farmland may continue to engage and invest in activities and
businesses other than those of Alliance. Thus, Farmland may have conflicts of
interest in allocating its resources and management time, services and functions
among the Company and such other activities. Similarly, with respect to the
employees of Farmland serving as officers or directors of the Company,
Farmland's other business interests may result in competition for their time,
services and functions.
Swine Production Consulting and Services Agreement. The Company has entered
into various contractual arrangements with Farmland for the provision of
specific goods and services. Under the terms of a Swine Production Services
Agreement with the Company, Farmland, acting as independent contractor, has
agreed to provide certain administrative, advisory and consulting services to
the Company, including the following: performing various ministerial services,
including data entry of transactions for accounting purposes and computer
generation of financial and operational reports and checks; compilation of the
production records with respect to each feeder and weaned pig production
facility; logistical backup and coordination, including facilitating the
acquisition, servicing, transportation and sale of genetic stock, breeding
stock, feeder pigs and weaned pigs; facilitating the purchase of inputs for the
Company; assistance in sourcing feed ingredients, animal health products and
veterinarian services; assistance in arranging financing; assistance in
selection of suitable sites for the Company's facilities; assistance in
obtaining appropriate permits for the construction and operation of facilities
for the Company; assistance in the recruitment, selection and training of
general managers for the Company; and advice and consultation with respect to
management practices, feed formulations and other aspects of the Company.
Farmland has agreed to assist the Company in acquiring the necessary
management and labor to adequately staff and operate the Company's pig
production facilities. The Company will cause the new pig production facilities
to be constructed, provide initial and replacement breeding stock purchased from
Farmland or other sources which, under normal circumstances, will be sufficient
to keep the facilities in full production and provide adequate record keeping to
allow Farmland to provide the accounting and reporting functions required of it
under the Swine Production Services Agreement. Finally, the Company will grant
Farmland reasonable access to the facilities, in accordance with good
bio-security practices, to allow Farmland to provide its required services.
Farmland will be paid one dollar ($1.00) for each feeder or weaned pig sold by
the Company as partial compensation for Farmland's duties under the agreement.
Such amount is subject to adjustment annually commensurate with, and based upon,
changes in the Consumer Price Index. For the years ended August 31, 1996 and
1995, the Company paid Farmland a total of $151,905 and $47,045, respectively,
for its provision of administrative, advisory and consulting services pursuant
to the Swine Production Services Agreement. Farmland also may provide a
significant portion of the feed ingredients, nutritional supplements and animal
health supplies required by the Company at Farmland's customary rates. For the
years ended August 31, 1996 and 1995, the Company purchased $303,963 and
$71,438, respectively, of feed ingredients, nutritional supplements and animal
health supplies from Farmland.
Farmland will purchase from the Company gilts produced by the Company for
purposes of finishing for use as breeding stock by the Company, subject to
available finishing capacity of Farmland. Upon completion of such finishing,
Farmland will resell to the Company any such gilts that survive finishing by
Farmland. The purchase price to be paid by Farmland to the Company for gilts
will be based on the purchase price specified in the Feeder Pig Purchase
Agreement between Farmland and the Company or, if no such agreement is then in
effect, the purchase price specified in the most recent effective Feeder Pig
Purchase Agreement between Farmland and the Company. The purchase price to be
paid by the Company to Farmland for finished gilts will be based upon the
prevailing market price of hogs at the time of purchase, plus any royalty fees
payable by Farmland and a handling fee of $10.00 per gilt. For the years ended
August 31, 1996 and 1995, the Company purchased finished gilts from Farmland at
an aggregate price of $872,979 and $189,253, respectively. In the event that
the Company does not purchase any such finished gilts, Farmland may either
market such gilts for slaughter or retain such gilts for use as breeding stock.
Farmland has agreed to pay a $10.00 per head fee to the Company for any such
finished gilts that are retained by Farmland for use as breeding stock. For
the year ended August 31, 1996, Farmland paid $31,590 of such fees to the
Company.
It is anticipated that Farmland may provide hybrid gilts from additional
multiplier facilities to meet a portion of the Company's initial stocking and
ongoing requirements for breeding stock with respect to each pig production
facility in existence, under development or proposed. The actual number of
replacement gilts purchased from Farmland will be affected by the Company's
requirements and the availability of animals from Farmland's facilities. The
purchase price of replacement hybrid breeding stock is to be based upon the
prevailing market price of breeding stock at the time of purchase.
In the Swine Production Services Agreement, the Company has granted Farmland
an option during the term of the Agreement (and in no event less than the
five-year period ending July 13, 1999) to purchase (a) excess feeder pigs
produced by the Company and excess weaned pigs produced by the Company at the
price per pig equal to the average price per pig paid by stockholders under
Feeder Pig Purchase Agreements or Weaned Pig Purchase Agreements, as the case
may be, for the then immediately preceding month, and (b) feeder pigs and weaned
pigs that a stockholder has failed to purchase under such stockholder's Feeder
Pig Purchase Agreement or Weaned Pig Purchase Agreements, as the case may be, at
the price per pig determined pursuant to such Agreement. The Company also has
granted Farmland an option to purchase any shares of Common Stock reacquired by
the Company.
Feeder Pig Purchase Agreement. As a member of the Company, Farmland has
contracted with the Company to purchase a share of the feeder pigs to be
produced by the Company under the same terms required of the Company's other
members, except that during the period commencing on July 13, 1994 and ending on
August 11, 1995, the date the Company first produced and shipped feeder pigs
pursuant to the Feeder Pig Purchase Agreements with the Company's existing
members, the price paid by Farmland for feeder pigs was based only on the
Company's operating cost per pig; provided, however, that such price was
increased by $4.50 per feeder pig after July 13, 1995. Commencing on August 11,
1995, the date the Company first produced and shipped feeder pigs pursuant to
the Feeder Pig Purchase Agreements with the Company's existing members (other
than Farmland and Yuma Cooperative), the price paid by Farmland for feeder pigs
is and will be under terms comparable to those applicable to the Company's
members pursuant to the Feeder Pig Purchase Agreements. For the years ended
August 31, 1996 and 1995, Farmland purchased feeder pigs from the Company
(including Yuma Cooperative's share of feeder pigs produced by the Company) at
an aggregate price of $5,035,160 and $1,467,069, respectively. Finally, the
Company has agreed to provide Farmland the first opportunity to purchase any
feeder pigs produced by the Company in excess of the Company's supply
commitments to other members or that other members have failed to purchase
during the term of the Swine Production Services Agreement (and in no event less
than the five-year period ending July 13, 1999). See "Feeder Pig Purchase
Agreement" and "Certain Relationships and Related Transactions--Yuma
Cooperative--Feeder Pig Purchase Agreement."
Real Estate Loans. Between September and December 1995, the Company
purchased approximately 1,000 acres of real property in Yuma County, Colorado,
upon which the Company has developed one production facility and holds the
remaining acreage for the development of additional production facilities (the
"Additional Colorado Property"). The acquisition cost of this Additional
Colorado Property was approximately $760,000. The Company obtained funding for
the purchase of the Additional Colorado Property from the proceeds of a loan
obtained from Farmland. In conjunction with this loan, the Company delivered to
Farmland a promissory note evidencing the debt providing for the amortization of
the loan over a ten-year period, at a variable rate equal to CoBank's prime
rate. As of August 31, 1996, CoBank's prime rate was 8.25%. The payment
schedule of the promissory note requires that the Company make interest-only
payments for the life of the loan, with a final balloon payment of the principal
at the expiration of the ten-year term. To secure the obligations of the
promissory note, the Company has agreed to execute a deed of trust in favor of
Farmland covering all of the Additional Colorado Property, which deed of trust
is second in priority to that of CoBank with respect to the production facility
constructed thereon. See "Business--Facilities."
In November 1996, the Company exercised its rights under an option contract
to acquire an approximately 90 acre tract of real property in Wayne County,
Illinois, including 45 acres (the "45 Acre Tract") on which the Company has
commenced preliminary development activities with respect to a second Illinois
sow production facility. The Company obtained funding for the purchase of the
45 Acre Tract from the proceeds of a $200,000 loan provided by Farmland. In
conjunction with this loan, the Company delivered to Farmland a promissory note
evidencing the debt providing for amortization over a ten-year period, at a
variable rate equal to CoBank's then national variable rate plus 1.25%. The
payment schedule for the Farmland loan requires the Company to make
interest-only payments for the life of the loan, with a final balloon payment of
all principal to be made upon the earlier of (i) the Company's issuance and sale
of a Minimum Block of Shares, and (ii) the expiration of ten years. Alliance's
obligation to Farmland under this note is secured by a mortgage on the 45 Acre
Tract. See "Business--Facilities."
Pig Producers I, L.P. Farmland holds a 12.5% interest in Pig Producers I,
L.P. ("Pig Producers"), a limited partnership engaged in the production of
feeder pigs from a 2,450-sow feeder pig production facility located in Yuma
County, Colorado. The Company has assigned 14 employees of its employees to
perform various facilities operation services for Pig Producers. Pig Producers
reimburses the Company for all wages, benefits and other costs attributable to
these 14 Alliance employees. From time to time, the Company and Pig Producers
also engage in various commercial transactions related to the sale of genetic
stock, breeding stock, feed ingredients and animal health supplies.
YUMA COOPERATIVE
Yuma Cooperative is a Colorado cooperative association engaged in farm
supply and grain marketing activities. Doug Brown is Vice President and General
Manager of Yuma Cooperative and serves as a director and executive officer of
the Company.
Yuma Cooperative is engaged in providing to competitors of the Company and
other users certain goods and services, including the supply of feed and animal
health products, which are comparable to those provided by Yuma Cooperative to
the Company. Because of its other business activities, conflicts of interest
may arise between Yuma Cooperative and the Company. With respect to the
employees of Yuma Cooperative serving as officers or directors of the Company,
Yuma Cooperative's other business interests may result in competition for their
time, services and functions.
Feed Purchase Agreement. The Company has entered into a Feed Purchase
Agreement with Yuma Cooperative respecting the supply of manufactured feed and
animal health products. In this capacity, Yuma Cooperative has agreed to
purchase feed-grains and feed additives for the production of feed which,
together with animal health products, will be sold to the Company. In exchange
for providing these goods and services, Yuma Cooperative is entitled to
compensation based upon a fixed charge for the grinding, mixing, and delivery of
feed ($14 per ton as of November 1, 1996), in addition to the actual delivered
cost of the feed ingredients. Feed rations which are pelleted are subject to a
surcharge ($7 per ton as of November 1, 1996). Both the fixed charge and the
surcharge are subject to annual increases in November of each year corresponding
to any increases in the Consumer Price Index -- Retail Items. Corn provided by
Yuma Cooperative for use in feed generally is sold to the Company at delivered
cost plus, in the absence of available Company grain storage facilities, a $.10
per bushel handling fee. The Company has the right under the Feed Purchase
Agreement, in its sole discretion, to purchase and provide its own corn for feed
manufacturing. For the years ended August 31, 1996 and 1995, the Company
purchased $3,423,773 and $1,068,014, respectively, of feed from Yuma
Cooperative. See "Business--Purchase of Feed and Other Inputs."
Feeder Pig Purchase Agreement. As a member of the Company, Yuma Cooperative
has contracted with the Company to purchase a share of the feeder pigs to be
produced by the Company under the same terms required of the Company's other
members, except that during the period commencing on July 13, 1994 and ending on
August 11, 1995, the date the Company first produced and shipped feeder pigs
pursuant to the Feeder Pig Purchase Agreements with the Company's existing
members, the price paid by Yuma Cooperative for feeder pigs was based only on
the Company's operating cost per pig; provided, however, that such price was
increased by $4.50 per feeder pig after July 13, 1995. Commencing on August 11,
1995, the date the Company first produced and shipped feeder pigs pursuant to
the Feeder Pig Purchase Agreements with the Company's existing members (other
than Farmland and Yuma Cooperative), the price paid by Yuma Cooperative for
feeder pigs is and will be under terms comparable to those applicable to the
Company's members pursuant to the Feeder Pig Purchase Agreements. For the years
ended August 31, 1996 and 1995, Yuma Cooperative's share of feeder pigs produced
by the Company was purchased from the Company by Farmland. See "Feeder Pig
Purchase Agreement" and "Certain Relationships and Related Transactions--
Farmland--Feeder Pig Purchase Agreement."
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of the date of this
Prospectus regarding the beneficial ownership of Class A Common by Farmland,
Farmers Cooperative Elevator Company, Yuma Cooperative and Farmers Cooperative
Association; the only persons who were the beneficial owners of more than 5% of
the outstanding Class A Common as of such date. No directors or executive
officers of the Company were the beneficial owners of Alliance Class A Common as
of the date of this Prospectus. As of that date, no shares of Class B Common
were outstanding. All information with respect to beneficial ownership has been
furnished by the respective 5% or more stockholder.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF CLASS A
BENEFICIAL OWNER BENEFICIAL OWNER(1) COMMON OUTSTANDING
<S> <C> <C>
Farmland Industries, Inc. (2)
3315 North Oak Trafficway 50 49.0%
Kansas City, MO 64116
Farmers Cooperative Elevator
Company (3)
501 East Main Street 13 12.7%
Plymouth, NE 68424
Yuma Farmers Milling and Mercantile
Cooperative Company (4)
101 South Detroit 12 11.8%
Yuma, CO 80759
Farmers Cooperative Association (5)
212 North Agora Street 6 5.9%
Marathon, Iowa 50565
</TABLE>
(1)Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power
and/or investment power with respect to those securities. Unless otherwise
indicated, the persons or entities identified in this table have sole voting
and investment power with respect to all shares shown as beneficially owned
by them. Percentage ownership calculations are based on 102 shares of Class
A Common outstanding.
(2)The voting and disposition of the shares of Class A Common held by Farmland
are subject to the discretion of the board of Directors of Farmland.
Pursuant to the Company's Articles of Incorporation, Farmland is prohibited
from voting shares of Common Stock representing 25% or more of the shares
outstanding during any period in which the Company has borrowed money from a
lender subject to regulations of the Farm Credit Administration regarding
loan policies and operations (such as the Company's current lender). As of
the date of this Prospectus, the Company had borrowed funds from such a
lender. See "Business--Financing" and "Description of Capital Stock."
(3)The voting and disposition of the shares of Class A Common held by Farmers
Cooperative Elevator Company are subject to the discretion of the Board of
Directors of Farmers Cooperative Elevator Company.
(4)The voting and disposition of the shares of Class A Common held by Yuma
Cooperative are subject to the discretion of the Board of Directors of Yuma
Cooperative.
(5)The voting and disposition of the shares of Class A Common held by Farmers
Cooperative Association are subject to the discretion of the Board of
Directors of Farmers Cooperative Association.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 5,000 shares of
(Class A) common stock, $.01 par value per share, and 5,000 shares of Class B
common stock, $.01 par value per share. As of the date of this Prospectus,
there were 102 shares of Class A Common outstanding, which were held of record
by 17 stockholders, and no shares of Class B Common outstanding. Only producers
of agricultural products, associations of such producers, and federations of
such associations who have executed and delivered to the Company a Feeder Pig
Purchase Agreement may own Class A Common, and only producers of agricultural
products, associations of such producers, and federations of such associations
who have executed and delivered to the Company a Weaned Pig Purchase Agreement
may own Class B Common. Only stockholders of the Company may be members of the
Company. Except as otherwise specifically described under this "Description of
Capital Stock" caption, the powers, preferences and rights of the Class A Common
and Class B Common are in all respects identical. To the extent permitted by
applicable law, the Board of Directors of the Association is authorized to
provide by resolution for the issuance of shares of stock of any class or of any
series of any class at any time and to determine, prior to the issuance of any
shares of stock of that class or series, the designations, preferences,
limitations and relative rights, if any, thereof.
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders, except that during any period in
which the Company has borrowed money from a lender subject to regulations of the
Farm Credit Administration regarding loan policies and operations (such as the
Company's current lender), (i) no cooperative association stockholder is
permitted to vote shares of Common Stock representing 25% or more of the shares
then outstanding with respect to any matter as to which members are not entitled
to vote separately as a group or class and (ii) no cooperative association
stockholder is permitted to vote shares of Common Stock representing 25% or more
of the shares of any class then outstanding with respect to any matter as to
which members are entitled to vote separately as a group or class. JWA[3]A
majority of the outstanding shares of Common Stock entitled to vote constitutes
a quorum at any stockholder meeting, except that if any class of capital stock
is entitled to vote separately as a class or group, such a quorum must also be
obtained with respect to such class. The affirmative vote of at least two-
thirds of the shares represented at a meeting at which a quorum is present is
required to amend the Company's Articles of Incorporation, to approve certain
mergers, consolidations or sales of all or substantially all of the Company's
assets and to approve certain other matters. Holders of the Class A Common and
holders of the Class B Common must vote separately as groups or classes with
respect to amendments to the Articles of Incorporation that alter or change the
designation, preferences, limitations or relative rights of their respective
classes of stock so as to affect them adversely and with respect to such other
matters as may require group or class votes under applicable law. Holders of
the Common Stock do not have cumulative voting rights in the election of
directors or preemptive rights to purchase additional shares of Common Stock,
and have no subscription, redemption or conversion rights.
All outstanding shares of Common Stock are, and when issued the Shares
offered hereby will be, validly issued, fully paid and nonassessable. Holders
of Common Stock are entitled to such patronage distributions as may be paid in
the manner determined by the Board of Directors out of funds legally available
therefor, subject to certain provisions contained in the loan agreement with the
Company's existing lender which restrict the ability of Alliance to pay
patronage distributions in cash. The Company intends to distribute, at least
annually, all of its net margins, if any, as patronage distributions to its
stockholders on the basis of the quantity or value of business done by the
Company with or for each stockholder. The Company's "net margins" for this
purpose generally are equal to the Company's net income under generally accepted
accounting principles (taxable income through and including August 31, 1997)
attributable to patronage sourced business done with or for the Company's
members (determined before reduction for patronage distributions paid by the
Company). In this regard, the Company will compute its net income or taxable
income, as the case may be, separately for each group of members (including
successors and permitted assigns) whose shares of the Company's Common Stock
originally were issued in connection with the Company's acquisition or
development of one or more feeder or weaned pig production units financed in
part thereby. See "Patronage Distribution Policy."
Upon liquidation, dissolution or winding-up of the Company, the assets
legally available for distribution to stockholders, after satisfying the prior
distribution rights of creditors of the Company, are distributable ratably among
the holders of capital credits and Common Stock at that time outstanding in
proportion to the sum of (a) the consideration received by the Company in
exchange for each such share of Common Stock issued to the holder thereof (or
such holder's predecessors in interest), plus (b) the aggregate amount of
principal payments made by such holder (or such holder's predecessors in
interest) pursuant to such holder's (or such holder's predecessors in
interest's) Feeder Pig Purchase Agreement or Weaned Pig Purchase Agreement, as
the case may be, with respect to the debt incurred by the Company for the
construction and working capital needs of the production facilities constructed
with respect to the issuance of such holder's shares of Common Stock.
The Shares are subject to provisions of the Colorado Cooperative Association
Law and the Company's Articles of Incorporation and Bylaws which restrict the
transferability of the Common Stock, and include a Bylaw provision that gives
the Company the right to purchase the Common Stock of a stockholder upon the
occurrence of certain events. Such provisions will make it more difficult to
effect a change in control of the Company. See "Restrictions on Sale or Other
Transfer of the Shares." In addition, the Company's Articles of Incorporation
require approval by the holders of at least two-thirds of a quorum of the
outstanding shares of Common Stock to amend, alter, change or repeal any
provision of the Company's Articles of Incorporation, to approve any sale,
lease, exchange or other disposition of all or substantially all of the property
and assets of the Company, to approve any merger or consolidation of which the
Company is a party and to which the vote of the members is required by law, or
to approve any dissolution or voluntary termination of the Company. Such
provision could make it more difficult to effect a change in control of the
Company.
The transfer agent for the Common Stock is the Secretary of the Company.
RESTRICTIONS ON SALE OR OTHER TRANSFER OF THE SHARES
SECURITIES LAWS
Upon completion of this offering (assuming the sale and issuance of all 51
Class A Shares and all 108 Class B Shares offered hereby), there will be 261
shares of Common Stock outstanding, including 153 shares of Class A Common and
108 shares of Class B Common. Of these shares, the 51 Class A Shares and 108
Class B Shares issued and sold in this offering will be freely transferable
without restriction under the Securities Act of 1933, as amended (the "Act"),
unless acquired by an "affiliate" (as that term is defined under the Act) of the
Company, in which case they will be subject to certain resale limitations under
the Act. Of the remaining 102 shares of Class A Common held by existing
stockholders of the Company, 10 shares are freely transferable without
restriction under the Act, 68 shares (including 55 shares owned by "affiliates"
of the Company) are "restricted securities" (as such term is used in Rule 144
under the Act), and the remaining 24 shares are owned by an "affiliate" of the
Company. The restricted shares and the shares owned by "affiliates" of the
Company are subject to restrictions on resale imposed by the Act and must be
held indefinitely unless they are registered under the Act or an exemption from
registration thereunder is then available. The Company is the only party who
may register its Common Stock under the Act, and it has not agreed to register
any shares of Common Stock under the Act for resale or to comply with any
exemption under the Act for the resale of any such shares.
Section 4(1) of the Act provides an exemption from registration under the
Act for the resale of securities in the event that the seller of such
securities is not then an "issuer", "dealer" or "underwriter" of the securities
proposed to be resold. Rule 144 was adopted by the Securities and Exchange
Commission as a safe harbor for determining whether a seller would be considered
an "underwriter" for purposes of that exemption. Sales of "restricted" shares
or shares owned by an "affiliate" cannot be made under Rule 144 unless each of
its requirements are satisfied at the time of such sale. Although Rule 144
provides a means for reselling restricted shares and shares owned by affiliates,
it is not the exclusive means for reselling such securities.
In general, Rule 144 currently provides that a person (or persons whose
shares are aggregated) who has beneficially owned restricted shares for at least
two years (reduced to one year effective April 29, 1997), including persons who
may be deemed to be affiliates of the Company, would be entitled to sell within
any three-month period a number of shares that does not exceed the greater of 1%
of the then outstanding shares preceding such sale, provided that the Company
has filed certain periodic reports with the Securities and Exchange Commission
(or made publicly available certain information concerning it) and the sale is
made in a "broker's transaction" or in a transaction directly with a "market-
maker," as those terms are used in Rule 144, without the solicitation of buy
orders by the broker or such person, and without such person making any payment
to any person other than the broker who executes the order to sell the shares of
Common Stock. A person (or persons whose shares are aggregated) who is not
deemed to have been an affiliate of the Company at any time during the 90 days
preceding a sale by such person, and who has beneficially owned restricted
shares for at least three years (reduced to two years effective April 29, 1997),
would be entitled to sell such shares under Rule 144 without regard to the
volume limitations and public information and manner of sale requirements
described above. The term "affiliate" is defined to mean a person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Company. The Securities and
Exchange Commission ordinarily would presume, without limitation, that an
officer, director or the beneficial owner of five percent or more of the
outstanding voting securities of the Company would fall within this definition.
Restricted shares properly sold in reliance upon Rule 144 are thereafter
freely tradeable without restriction or registration under the Act, unless
thereafter held by an affiliate of the Company. The 68 shares of Class A Common
held by existing stockholders that are restricted securities have been
beneficially owned for over two years, and an aggregate of 13 of these shares
are owned by non-affiliates. No person has any right to demand registration of
shares of the Common Stock.
COOPERATIVE ASSOCIATION LAWS AND CHARTER DOCUMENTS
The Colorado Cooperative Association Law and the Company's Articles of
Incorporation provide that the certificates of membership in the Company (which
also represent shares of Common Stock of the Company) shall not be assignable or
transferable except upon consent of the Board of Directors, and that the Company
shall have the right in its Bylaws to limit the transfer or assignment of
membership and the terms and conditions upon which transfers or assignments may
be allowed. The Company's Bylaws provide that the equity interests issued by
the Company may not be assigned or transferred, except upon the consent of the
Company's Board of Directors, and that the Company's Board of Directors may not
give such consent unless any such assignee or transferee of Class A Common
executes and delivers to the Company a Feeder Pig Purchase Agreement and any
such assignee or transferee of Class B Common executes and delivers to the
Company a Weaned Pig Purchase Agreement. Only producers of agricultural
products, associations of such producers, and federations of such associations
may own Common Stock of the Company.
In addition to the foregoing transfer restrictions, the Company's Bylaws
give the Company the right to purchase a member's Common Stock under certain
circumstances, which may adversely affect transferability. Such right is in
addition to any right the Company may have to foreclose on the security interest
in member's Common Stock pursuant to the Feeder Pig Purchase Agreement or Weaned
Pig Purchase Agreement, as the case may be. In particular, the Company has the
option under its Bylaws to purchase a member's Shares upon the occurrence of
certain specified events (a) by tendering to the member (i) the lesser of (A)
the price paid to the Company for such investor's Shares, and (B) the book value
of the Shares and capital credits associated therewith, less (ii) any
indebtedness due the Company from the member, or (b) by tendering to the member
a nonvoting certificate of participation representing the member's interest at
the time of such tender in a face amount equal to the amount specified in clause
(a) above. The occurrences giving rise to such option include the following
events: (a) a member's termination of a Feeder Pig Purchase Agreement or Weaned
Pig Purchase Agreement, as the case may be, without having executed and
delivered a replacement for such Agreement or the member's failure to be a party
to such Agreement, and (b) the Company's Board of Directors by resolution finds
that a member has (i) intentionally or repeatedly violated any provision of the
Company's Articles of Incorporation or Bylaws, (ii) breached a Feeder Pig
Purchase Agreement or Weaned Pig Purchase Agreement, as the case may be, or
materially breached any other contract with Company, (iii) remained indebted to
the Company for 90 days after such indebtedness first becomes payable, or (iv)
willfully obstructed any lawful purpose or activity of the Company. In the
event the Company exercises either option, the voting stock of the member shall
be canceled, and the member shall thereafter have no voting rights in the
Company. The Company is under no obligation, however, to redeem or repurchase
an investor's Common Stock at any time. See "Risk Factors--Right of Alliance to
Acquire Shares" and "-- Lack of Liquidity; Absence of Market for Shares" and
"Feeder Pig Purchase Agreement."
Finally, a legend in substantially the following form will be placed on each
certificate representing Shares of Common Stock issued in the offering:
Sale, transfer or hypothecation of the shares represented by this
certificate is restricted by the provisions of the Colorado cooperative
association law and the Articles of Incorporation and Bylaws of Alliance Farms
Cooperative Association (the "Company"), a copy of which provisions may be
inspected at the principal offices of the Company, and all provisions of which
are hereby incorporated by reference in this certificate.
The transfer and other restrictions discussed above could make it more
difficult to effect a change in control of the Company.
PLAN OF DISTRIBUTION
GENERAL
The Company intends to sell the Shares through agents designated by the
Company or, if permitted under applicable law, directly to one or more
purchasers through the efforts of its directors, officers and employees. In
this regard, the Company has retained Interstate/Johnson Lane Corporation
("I/JL") to serve as its agent in connection with this offering. The Company
has reserved the right to sell the Shares directly to investors on its own
behalf in those jurisdictions where and in such manner as it is authorized to do
so. In the event that the Company sells Shares directly to investors through
the efforts of its directors, officers and employees, such directors, officers
and employees will not be compensated in connection with such participation
through the payment of commissions or other remuneration based either directly
or indirectly on transactions in the Shares offered. Any offering of the Shares
will be made exclusively to producers of agricultural products, associations of
such producers, and federations of such associations. No one has committed to
purchase any of the Shares.
Agents participating in the distribution of the Shares may be deemed to be
underwriters within the meaning of the Securities Act of 1933, and any
commissions and other compensation received by them may be deemed to be
underwriting discounts and commissions under the Act. The Company anticipates
that it will enter into an agency agreement with I/JL providing for the payment
by Alliance of a lump sum fee of $40,000 regardless of whether any or all Shares
offered hereby are sold. It is anticipated that the Company will agree to
reimburse I/JL for its reasonable out-of-pocket expenses in connection with the
offering of the Shares. The net proceeds to the Company from the sale of the
Shares will be the public offering price of the Shares less any commissions and
other attributable expenses of issuance and distribution.
I/JL may be entitled, under an agency agreement to be entered into with the
Company, to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act of 1933, and may be entitled to
contribution with respect to payments which I/JL may be required to make in
respect thereof. Agents may engage in transactions with or perform services for
the Company in the ordinary course of business.
INVESTOR SUITABILITY STANDARDS
The Shares may be offered and sold only to producers of agricultural
products, associations of such producers, and federations of such associations.
In addition, if any investor in the offering is a resident of Iowa, or otherwise
is subscribing for Shares in Iowa, such investor must (i) have a net worth, or
joint net worth with that investor's spouse, in either case, exclusive of home,
furnishings and automobiles ("Adjusted Net Worth") of at least $65,000 at the
time of such investor's purchase, and an annual gross income of at least $65,000
for each of the investor's two most recent tax years; or (ii) have Adjusted Net
Worth of at least $250,000 at the time of such investor's purchase. Each
investor will be required to represent in writing in the Subscription Agreement
that the investor is a producer of agricultural products, an association of such
producers, or a federation of such associations and, if a resident of Iowa, or
otherwise subscribing for Shares in Iowa, that the investor meets the foregoing
suitability standards for Iowa investors.
MINIMUM BLOCK REQUIREMENT
The Class A Shares will be offered on a "best efforts, all-or-none" basis
for 17 Class A Shares (a "Minimum Class A Block"), and thereafter may continue
to be offered on such basis with respect to successive Minimum Class A Blocks of
Shares until 51 Class A Shares have been issued and sold. The Class B Shares
will be offered on a "best efforts, all-or-none" basis for 18 Class B Shares (a
"Minimum Class B Block"), and thereafter may continue to be offered on such
basis with respect to successive Minimum Class B Blocks of Shares until 108
Class B Shares have been issued and sold. As of the date of this Prospectus,
the Company has not consummated the issuance and sale of any shares of Common
Stock in this offering. Any agent of the Company involved in the offer or sale
of the Shares will be acting on such "best efforts, all-or-none" basis during
the period of such agent's appointment. There can be no assurance that any or
all of the Shares will be sold.
The number of Class A Shares constituting a Minimum Class A Block has been
determined by the Company based on the number of lots of feeder pigs (900 to
1,000 pigs per lot) that the Company anticipates can most efficiently be made
available to members of the Company from a single 2,450-sow feeder pig
production facility. Pursuant to the Feeder Pig Purchase Agreements to be
entered into by investors at the time a subscription for Class A Shares is made,
each member of the Company owning shares of Class A Common will be required to
purchase feeder pigs in lots of no less than 900, and no more than 1,000, pigs
per lot, as determined by the Company. Such lots of feeder pigs are to be made
available to such members of the Company on a rotating schedule determined and
implemented by the Company. The number of lots made available to a member and
the frequency of availability are to be based upon the member's proportionate
equity interest in the Company's Class A Common and the actual production of
Qualifying Pigs from the Company's feeder pig production facilities. The
Company anticipates that the production of one 2,450-sow feeder pig production
facility will be adequate to provide lots of between 900 and 1,000 feeder pigs
to 17 members (assuming that each such member owns only one Class A Share) in
order of rotation such that delivery of a lot of between 900 and 1,000 feeder
pigs can be made to a member at approximately the time at which the pigs
previously delivered to such member are finished to market weight and available
for shipment to slaughter. There can be no assurance that the Company will be
successful in meeting this production schedule, or that feeder pigs will be
available for shipment to a member at a time when the member is able to
accommodate their delivery. Accordingly, the Company believes that a Minimum
Class A Block requirement is necessary to provide for sufficient new members to
accommodate the anticipated output of feeder pigs from a single 2,450-sow feeder
pig production facility. See "Feeder Pig Purchase Agreement."
The number of Class B Shares constituting a Minimum Class B Block has been
determined by the Company based on the number of lots of weaned pigs (925 to
1,025 pigs per lot) that the Company anticipates can most efficiently be made
available to members of the Company from a single 2,450-sow weaned pig
production facility. Pursuant to the Weaned Pig Purchase Agreements to be
entered into by investors at the time a subscription for Class B Shares is made,
each member of the Company owning shares of Class B Common will be required to
purchase weaned pigs in lots of no less than 925, and no more than 1,025, pigs
per lot, as determined by the Company. Such lots of weaned pigs are to be made
available to such members of the Company on a rotating schedule determined and
implemented by the Company. The number of lots made available to a member and
the frequency of availability are to be based upon the member's proportionate
equity interest in the Company's Class B Common and the actual production of
Qualifying Pigs from the Company's weaned pig production facilities. The
Company anticipates that the production of one 2,450-sow weaned pig production
facility will be adequate to provide lots of between 925 and 1,025 weaned pigs
to 18 members (assuming that each such member owns only one Class B Share) in
order of rotation such that delivery of a lot of between 925 and 1,025 weaned
pigs can be made to a member at approximately the time at which the pigs
previously delivered to such member are finished to market weight and available
for shipment to slaughter. There can be no assurance that the Company will be
successful in meeting this production schedule, or that weaned pigs will be
available for shipment to a member at a time when the member is able to
accommodate their delivery. Accordingly, the Company believes that a Minimum
Class B Block requirement is necessary to provide for sufficient new members to
accommodate the anticipated output of weaned pigs from a single 2,450-sow weaned
pig production facility. See "Weaned Pig Purchase Agreement."
The minimum investment for each investor is not less than one Share. In
addition, each investor purchasing one or more Class A Shares must enter into a
Feeder Pig Purchase Agreement with the Company in the form attached to this
Prospectus as Exhibit B and each investor purchasing one or more Class B Shares
must enter into a Weaned Pig Purchase Agreement with the Company in the form
attached to this Prospectus as Exhibit C. No fractional shares will be issued.
FINANCING COMMITMENT REQUIREMENT
The consummation of the issuance and sale of the Shares will be conditioned
upon and subject to Alliance obtaining a commitment for at least $2,720,000 of
term debt borrowings with respect to each Minimum Class A Block of Class A
Shares and a commitment for at least $2,100,000 of term debt borrowings with
respect to each Minimum Class B Block of Class B Shares. As of the date of this
Prospectus, the Company has obtained a commitment for the necessary loans with
respect to the Class A Shares from its current lender, CoBank, until August 31,
1997. No assurances can be given that an extension of such commitment will be
obtained on favorable terms, if at all. As of the date of this Prospectus, the
Company has not obtained a commitment for the necessary loans with respect to
the Class B Shares, but is engaged in negotiations with a lender to obtain a
commitment for such loans. If any loan commitment is withdrawn or terminated,
or the Company is unable to obtain an acceptable commitment for such a loan from
another lender prior to or concurrently with the termination date of the
offering, all outstanding subscriptions for Shares in a Minimum Block for which
such a commitment is not obtained will be rejected and any amounts received by
the Company in payment of the public offering price will be returned to
subscribers. See "Business--Financing."
SUBSCRIPTION PROCEDURE
In order for an investor to subscribe for one or more Shares in a Minimum
Block, the following items must be delivered to the Company or its agent on or
before the termination of the offering (see "Termination of the Offering"
below):
(1) two completed and executed copies of a Subscription Agreement in
the form attached to this Prospectus as Exhibit A;
(2) the subscriber's check, bank draft or wire transfer (contact
Alliance for wire transfer instructions), payable to the order of "Alliance
Farms Cooperative Association Escrow No. 1482300" in an amount representing
the aggregate purchase price of the Shares being subscribed for; and
(3) two completed and executed copies of a Feeder Pig Purchase Agreement
in the form attached to this Prospectus as Exhibit B, with respect to a
subscription for Class A Shares, and two completed and executed copies of a
Weaned Pig Purchase Agreement in the form attached to this Prospectus as Exhibit
C, with respect to a subscription for Class B Shares.
In addition, if any investor in the offering is a resident of Iowa, or otherwise
is subscribing for Shares in Iowa, such investor may be required to deliver to
the Company a completed and executed Potential Investor Questionnaire with
respect to the Adjusted Net Worth and gross income thresholds described under "-
- - Investor Suitability Standards" above.
Pending the Company's acceptance of subscriptions for a Minimum Class A
Block of 17 Class A Shares or a Minimum Class B Block of 18 Class B Shares in
this offering, all funds received by the Company and its agents in payment of
the public offering price for the Shares promptly will be deposited in an
interest-bearing escrow account established at NationsBank, N.A. (Mid-West)
(formerly Boatmen's National Bank), Kansas City, Missouri. Payment of the
offering price must be made payable to the order of "Alliance Farms Cooperative
Association Escrow No. 1482300," the escrow account established at such bank.
Upon the Company's acceptance of subscriptions for one or more Minimum Class A
Blocks or one or more Minimum Class B Blocks, as the case may be, and the
satisfaction of certain other conditions, all funds deposited in the escrow
account with respect to such Shares will be paid to the Company. Subscriptions
for Shares that collectively do not constitute a Minimum Block of Shares will
not be accepted by the Company. In the event that Alliance does not issue
Shares for which funds have been deposited in the escrow account prior to the
termination of the offering, such funds will be refunded to the prospective
investors, together with any interest earned thereon and without any deduction
being made for expenses. All subscriptions for Shares submitted by subscribers
shall be irrevocable and shall survive the death or disability of the
subscriber, in the case of an individual, or the dissolution or bankruptcy of
the subscriber, in the case of an entity. There can be no assurance that any or
all of the Shares will be sold. See "Plan of Distribution--Escrow of Proceeds."
Alliance reserves the right, in its sole and absolute discretion, to accept
or reject any subscription, in whole or in part, and no subscription shall be
binding on Alliance unless and until accepted by Alliance. Each subscriber will
be promptly notified by Alliance as to whether his or her subscription has been
accepted. If a subscription is accepted, an authorized officer of Alliance will
execute both copies of the Subscription Agreement and the Feeder Pig Purchase
Agreement or Weaned Pig Purchase Agreement, as the case may be, submitted by the
subscriber and return one executed copy of each such agreement. The Shares of
Common Stock shall not be deemed to be owned by an investor until both copies of
the Subscription Agreement and the applicable Feeder Pig Purchase Agreement or
Weaned Pig Purchase Agreement have been executed by the investor and
countersigned by Alliance and the subscription procedure described above
otherwise has been complied with. Alliance and its agent will arrange for
delivery of the certificates for Shares of Common Stock as promptly as
practicable thereafter, which certificates will, however, be retained by
Alliance as security for the performance by the investor of his obligations
under the Feeder Pig Purchase Agreement or Weaned Pig Purchase Agreement, as the
case may be, to purchase his proportionate share of the Company's pig
production. In this regard, investors will be required to endorse appropriate
stock powers with respect to such certificates. The Company may agree in its
discretion, however, to permit the investor to pledge or grant a security
interest in the investor's shares of Common Stock to any financial institution
for purposes of securing a loan used in financing the investor's acquisition of
such shares. See "Feeder Pig Purchase Agreement" and "Weaned Pig Purchase
Agreement."
ESCROW OF PROCEEDS
The Company has entered into an escrow agreement (the "Escrow Agreement")
pursuant to which all funds received by the Company and its agents in payment of
the public offering price for the Shares promptly will be deposited in an
interest-bearing escrow account with NationsBank, N.A. (Mid-West) (formerly
Boatmen's National Bank), Kansas City, Missouri (the "Escrow Agent"). All such
funds will be held in escrow during the "Escrow Period" which shall begin with
the commencement of the offering and terminate upon the earlier of (i) the date
upon which the Escrow Agent has disbursed and delivered $4,080,000 in collected
funds with respect to Class A Shares and $7,560,000 with respect to Class B
Shares to the Company in accordance with the Escrow Agreement, and (ii) the
termination of the offering, whether by lapse of time or the election of the
Company to do so. During the Escrow Period, subscribers will have no right to a
return of their payment. All escrowed funds may be invested in bank accounts,
bank money-market accounts, short-term certificates of deposit issued by a bank
or short-term securities issued or guaranteed by the U.S. Government, as
specified by the Company.
Funds deposited into escrow may be disbursed to the Company, in the amount
of $1,360,000 with respect to Class A Shares and $1,260,000 with respect to
Class B Shares (the "Minimum"), or an integral multiple thereof, upon the
satisfaction of the following conditions: (i) the Escrow Agent has received
written confirmation from the Company that the Company has obtained a commitment
for at least $2,720,000 of debt financing or borrowings with respect to the
disbursement of each Minimum for Class A Shares and a commitment for at least
$2,100,000 of debt financing or borrowings with respect to the disbursement of
each Minimum for Class B Shares; (ii) the Escrow Agent has received an affidavit
from the Company and its agents in the offering identifying the number of Shares
subscribed for and the amount of proceeds deposited into escrow and certifying
that (a) there have been no material omissions or changes in the financial
condition of the Company, or other changes of circumstances, that would render
the amount of proceeds inadequate to finance the Company's proposed plan of
operations, business or enterprise, and (b) there have been no material
omissions or changes that would render the representations contained in the
registration statement, including the prospectus constituting a part thereof, to
be fraudulent, false or materially misleading; and (iii) the Escrow Agent has
received an order permitting the requested disbursement of proceeds from the
securities administrators of those states which impose such condition, if any.
The Company shall be entitled to any interest earned on the funds disbursed to
it and remaining after deduction for fees and reimbursement of costs and
expenses due the Escrow Agent.
Upon the termination of the Escrow Period, any proceeds remaining in escrow
are to be disbursed to the prospective investor from whom they were received
upon the Escrow Agent's receipt of an order permitting the requested
disbursement of proceeds from the securities administrators of those states
which impose such condition, if any. Such refunded proceeds are to be disbursed
to investors without any deduction, penalty or expense thereon being made.
Interest earned on funds to be returned to prospective investors shall be paid
to such investors as designated or approved in writing by the Company.
In consideration of its services under the Escrow Agreement, the Escrow
Agent has been paid an initial acceptance fee in an amount equal to $750, and
will be paid an annual base fee in an amount equal to $750. In addition, the
Company will pay to the Escrow Agent $7 for each cash transaction processed by
the Escrow Agent to reimburse it for its actual cost in accepting and disbursing
funds, and $15 for each investment transaction made with respect to the escrowed
funds. A cash management fee equal to 3 of 1% per annum of the principal amount
of the escrowed funds may also be payable depending upon the investment selected
for the escrowed funds. No fees, reimbursement for costs and expenses, or any
moneys whatsoever shall be paid out of or chargeable to investors' funds held in
escrow by the Escrow Agent.
OFFERING PRICE
The Shares are being offered at the public offering price set forth on the
cover page of this Prospectus. This public offering price has been arbitrarily
determined by the Company and is not based on any recognized criteria of value.
Among the factors considered in making such determination are the amount of the
anticipated debt borrowings, together with the net proceeds from the sale of the
Shares, required to develop each additional feeder or weaned pig production
facility, which factor takes into account the anticipated development costs for
new facilities, the applicable debt-to-equity ratio or minimum equity amount
that the Company anticipates will be required by potential lenders, and the
anticipated interest and debt service requirements associated with such
borrowings. The Company also considered the interest requirements on up to
$1,360,000 of feeder pig facilities development financing that the Company
anticipates it may incur with respect to each new feeder pig production
facility. See "Business--Financing." To a much lesser extent the Company also
considered the prevailing market conditions for feeder pigs, the financial
prospects and anticipated business potential of the Company, the history of and
prospects for the industry in which the Company competes, the state of the
Company's development and other similar factors. The public offering price may
not necessarily reflect any relationship to the Company's assets, historical
losses, book value or other financial statement criteria of value.
ABSENCE OF PUBLIC MARKET
There is no public market for the Common Stock of the Company, and no
public market for the Common Stock is expected to develop as a result of the
offering of the Shares. Transfers of the Shares will be subject to significant
restrictions and limitations set forth in the Colorado Cooperative Association
Law and the Company's Articles of Incorporation and Bylaws. The certificates
representing the Shares will bear one or more legends describing or referencing
certain applicable restrictions on transfer. For these and other reasons, the
Shares will not be readily marketable, and purchasers thereof must bear the
economic risk of investment for an indefinite period and may not be able to
liquidate their investment in the event of any emergency or otherwise. See
"Restrictions on Sale or Other Transfer of the Shares" and "Description of
Capital Stock."
The Company does not intend to apply for listing of the Shares on a
national securities exchange.
TERMINATION OF THE OFFERING
The offering of the Shares will terminate on , 1998 (550 days
from the , 1997 commencement of the offering), unless extended by
the Company for a period of up to an additional 180 days. Alliance has the
right to terminate the offering at any time. In the event a Minimum Class A
Block has not been fully subscribed for prior to the termination date of the
offering, or Alliance does not have a commitment for at least $2,720,000 of term
debt borrowings with respect to a Minimum Class A Block prior to or concurrently
with such date, all outstanding subscriptions for Class A Shares that do not
constitute a Minimum Class A Block or for which such a commitment is not
obtained, as the case may be, will be rejected and any amounts received by the
Company in payment of the public offering price will be returned to subscribers.
In the event a Minimum Class B Block has not been fully subscribed for prior to
the termination date of the offering, or Alliance does not have a commitment for
at least $2,100,000 of term debt borrowings with respect to a Minimum Class B
Block prior to or concurrently with such date, all outstanding subscriptions for
Class B Shares that do not constitute a Minimum Class B Block or for which such
a commitment is not obtained, as the case may be, will be rejected and any
amounts received by the Company in payment of the public offering price will be
returned to subscribers. See "Plan of Distribution--Subscription Procedure."
LEGAL MATTERS
The validity of the Shares will be passed upon for the Company by Stinson,
Mag & Fizzell, P.C., 1201 Walnut Street, Kansas City, Missouri 64106-2150.
EXPERTS
The financial statements of Alliance Farms Cooperative Association as of
August 31, 1996 and August 31, 1995 and for the years ended August 31, 1996 and
1995, included herein and elsewhere in the registration statement of which this
Prospectus is a part, have been included herein and in the registration
statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company is currently subject to the informational requirements of the
Exchange Act, and in accordance therewith the Company files annual and quarterly
reports and other information with the Commission. Such reports and other
information may be inspected and copied at the Commission's office located at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the regional
offices of the Commission located at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such materials can be obtained
from the Public Reference Section of the Commission located at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates.
This Prospectus constitutes an integral part of a Registration Statement on
Form SB-2 (which, together with all amendments, exhibits and schedules thereto,
is referred to as the "Registration Statement") filed by the Company with the
Commission in Washington, D.C. under the Securities Act of 1933, as amended,
with respect to the Shares being offered by this Prospectus. This Prospectus
does not contain all information set forth in the Registration Statement,
certain portions of which have been omitted as permitted by the rules and
regulations of the Commission. For further information with respect to the
Company and the Shares offered hereby, reference is made to the Registration
Statement and related exhibits. The Registration Statement, including the
exhibits and schedules thereto, may be inspected and copied at the Commission's
offices located at the addresses set forth above. Copies of the Registration
Statement or any portion thereof can be obtained at prescribed rates from the
Public Reference Section of the Commission located at the address set forth
above.
INDEX OF FINANCIAL STATEMENTS
Page
ALLIANCE FARMS COOPERATIVE ASSOCIATION
Independent Auditors' Report........................................... F-2
Balance Sheets as of August 31, 1996 and 1995.......................... F-3
Statements of Operations for the years ended
August 31, 1996 and 1995......................................... F-4
Statement of Shareholders' Equity for the years
ended August 31, 1996 and 1995................................... F-5
Statements of Cash Flows for the years
ended August 31, 1996 and 1995................................... F-6
Notes to Financial Statements.......................................... F-7
Condensed Balance Sheets as of
February 28, 1997 (unaudited) and August 31, 1996 ............... F-12
Condensed Statements of Operations
for the three and six months ended
February 28, 1997 and 1996 (unaudited)........................... F-13
Condensed Statements of Cash Flows for the six months ended
February 28, 1997 and 1996 (unaudited)................................ F-14
Notes to Condensed Financial Statements................................ F-15
Independent Auditors' Report
The Board of Directors
Alliance Farms Cooperative Association:
We have audited the accompanying balance sheets of Alliance Farms Cooperative
Association as of August 31, 1996 and 1995 and the related statements of
operations, shareholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Association's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Alliance Farms Cooperative
Association as of August 31, 1996 and 1995 and the results of its operations and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.
Kansas City, Missouri KPMG Peat Marwick LLP
October 23, 1996
ALLIANCE FARMS COOPERATIVE ASSOCIATION
BALANCE SHEETS
August 31, 1996 and 1995
<TABLE>
<CAPTION>
August 31, 1996 August 31, 1995
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $0 $1,477,213
Receivables 72,448 31,887
Inventory (Note 4) 2,435,477 1,069,144
Other current assets 48,273 19,274
Total current assets 2,556,198 2,597,518
Property, plant and equipment, at cost (Note 5) 16,491,601 10,345,236
Less accumulated depreciation 1,333,291 705,989
15,158,310 9,639,247
Breeding stock 3,928,215 2,877,957
Less accumulated depreciation 1,013,872 708,363
2,914,343 2,169,594
Other assets, net of $51,568 and $29,462
accumulated amortization 216,762 165,581
$20,845,613 $14,571,940
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank overdraft 575,749 0
Current maturities of long-term debt (Note 6) 870,000 580,000
Accounts payable (Note 3) 526,193 672,957
Accrued rebates (Note 2) 670,167 41,139
Accrued expenses 171,791 65,151
Total current liabilities 2,813,900 1,359,247
Long-term debt (Note 6) 13,425,424 8,585,000
Shareholders' equity
Common stock of $.01 par value; authorized
10,000 shares, issued and outstanding 102 shares
(85 shares at August 31, 1995) 1 1
Additional paid-in capital 7,487,653 6,165,970
Accumulated deficit (2,881,365) (1,538,278)
Total shareholders' equity 4,606,289 4,627,693
Commitments (Note 7) ------ ------
$20,845,613 $14,571,940
<FN>
See accompanying notes to financial statements
</TABLE>
ALLIANCE FARMS COOPERATIVE ASSOCIATION
STATEMENTS OF OPERATIONS
For the years ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Net sales (Note 2) $7,037,927 $1,554,113
Cost of goods sold 6,422,838 1,836,388
Gross margin/(loss) 615,089 (282,275)
Expenses related to start-up
of new production facilities 426,926 754,756
Administrative expenses 369,787 101,927
Loss on sale of breeding stock 226,738 112,797
Operating loss ($408,362) ($1,251,755)
Other income (expense):
Interest expense (1,001,329) (289,082)
Other 66,604 27,509
(934,725) (261,573)
Net loss ($1,343,087) ($1,513,328)
<FN>
See accompanying notes to financial statements
</TABLE>
ALLIANCE FARMS COOPERATIVE ASSOCIATION
STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended August 31, 1996 and August 31, 1995
<TABLE>
<CAPTION>
Additional Total
Common paid-in Accumulated Shareholders'
stock capital deficit equity
<S> <C> <C> <C> <C>
Balance at August 31, 1994 $1 4,885,559 (24,950) $4,860,610
Sale of 17 shares of common
stock - $.01 par per share,
net of $82,356 offering costs --- 1,280,411 --- 1,280,411
Net loss --- --- (1,513,328) (1,513,328)
Balance at August 31, 1995 $1 6,165,970 (1,538,278) $4,627,693
Sale of 17 shares of common
stock - $.01 par per share,
net of $38,317 offering costs --- 1,321,683 --- 1,321,683
Net loss --- --- (1,343,087) (1,343,087)
Balance at August 31, 1996 $1 7,487,653 (2,881,365) $4,606,289
<FN>
See accompanying notes to financial statements
</TABLE>
ALLIANCE FARMS COOPERATIVE ASSOCIATION
STATEMENTS OF CASH FLOWS
For the years ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Cash flow from operating activities:
Net loss $(1,343,087) $(1,513,328)
Adjustment to reconcile net loss to net cash
used in operating activities:
Provision for depreciation and amortization 1,721,482 862,206
Loss on sale of breeding stock 226,738 112,797
Changes in assets and liabilities:
Receivables (40,561) 1,185
Inventory (1,366,333) (791,628)
Other current assets (28,999) 5,624
Other assets (38,593) (39,165)
Accounts payable (146,764) 245,943
Accrued rebates 629,028 41,139
Accrued expenses 106,640 29,941
Net cash used in (280,449) (1,045,286)
operating activities
Cash flows from investing activities:
Capital expenditures (8,808,888) (10,044,382)
Proceeds from sale of breeding stock 626,268 88,051
Net cash used in investing activities (8,182,620) (9,956,331)
Cash flows from financing activities
Proceeds from issuance of long term debt 3,798,000 9,165,000
Net increase in revolving term credit 1,276,000 ---
Payment on long term debt (580,000) ---
Increase in note payable to Farmland 636,424 ---
Issuance of common stock, net of offering costs 1,321,683 1,280,411
Loan origination fees (42,000) (74,180)
Bank overdraft 575,749 ---
Net cash provided by
financing activities: 6,985,856 10,371,231
Decrease in cash and cash
equivalents (1,477,213) (630,386)
Cash and cash equivalents at beginning of period $1,477,213 $2,107,599
Cash and cash equivalents at end of period $0 $1,477,213
Supplemental schedule of cash paid for interest: $989,334 $228,977
<FN>
See accompanying notes to financial statements
</TABLE>
Alliance Farms Cooperative Association
Notes to Financial Statements
1. Description of the Business and Summary of Significant Accounting Policies
Alliance Farms Cooperative Association (Alliance) is a cooperative
association engaged in the production of feeder pigs for sale to its
members. As of August 31, 1996 Alliance owned and was operating five
2,450-sow feeder pig production facilities in Yuma County, Colorado and a
comparable facility was being developed in Wayne County, Illinois.
( a ) Inventory
Inventories are stated at the lower of cost or market. Cost has been
determined by the average cost method for feeder pigs.
Inventoriable costs are costs incurred in producing feeder pigs at the
feeder pig production facility from the time of gestation through sale of
the feeder pig. Such costs include feed, care and a proportionate share of
the depreciation of the breeding stock and facilities. Market value used
for purposes of computing lower of cost or market approximates the ultimate
sale price of feeder pigs which is determined contractually between
Alliance Farms and its members/patrons.
( b ) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is
calculated on the straight-line method over the estimated useful lives of
the assets, generally from three to twenty years. Major repairs that
extend the life of an asset are capitalized. Normal repair and maintenance
costs are expensed.
Statement of Financial Accounting Standards No. 121 - Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of
("Statement 121") is effective for fiscal years beginning after December
15, 1995 (Alliance's 1997 fiscal year). Statement 121 establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangible assets and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable
intangibles to be disposed of. Management expects the adoption of
Statement 121 will not have a significant impact on Alliance's financial
statements.
( c ) Breeding Stock
Breeding stock is stated at cost. Depreciation on breeding stock is
calculated on the straight-line method over the estimated breeding life of
the animals, three years.
( d ) Cash and Cash Equivalents
Cash and cash equivalents in the accompanying statement of cash flows
include cash on hand and short-term investments with original maturities of
less than ninety days.
( e ) Other Assets
Other assets consist of organizational costs which are amortized over five
years and loan origination fees which are amortized over the term of the
loan, 12 years.
( f ) Sales
Alliance Farms recognizes sales at the time pigs are shipped.
( g ) Income Taxes
Alliance Farms is subject to income taxes on all income not distributed to
patrons as patronage refunds. Deferred income taxes have not been
provided, because all sales were to members for the periods ended August
31, 1996, 1995 and 1994 and all future sales are anticipated to be to
members.
( h ) Use of Estimates
Management of Alliance has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results
could differ from those estimates.
2. Sales
Alliance has sold 100% of its feeder pigs to its members for the fiscal
year ended August 31, 1996 and 1995 at a contractual price which is based
on Alliance's operating costs (which are based on a twelve month rolling
average), debt service and, after July 13, 1995, an additional $4.50 per
pig and at a contractual price which was based on Alliance's operating
costs (which were based on a twelve month rolling average) for the first
nine months of the fiscal year ended August 31, 1995.
Alliance's sales for the fiscal years ended August 31, 1996 and 1995 have
been reduced by the accrual of a rebate of $670,167 and $41,139,
respectively. The 1996 accrual is intended to be paid to its members after
the end of the fiscal year.
Because the contractual price for the sale of a feeder pig is determined
based upon, among other things, a twelve month historical rolling average
for operating costs and to the extent that current operating costs per pig
exceed the historical average operating costs, Alliance may incur a
negative gross margin on the sale of its feeder pigs during periods of
rising costs.
Alliance's average net sales price and the average industry market price
were as follows:
Fiscal Year Ended
August 31
1996 1995
Average Net Sales Price 48.12 33.16
Average Industry Market* 41.15 32.17
*As published by Spark's Companies, Inc. (from the USDA's Market News
Service)
3. Transactions with Farmland and Yuma Cooperative
As of August 31, 1996 and 1995, Farmland Industries, Inc. (Farmland) owned
approximately 49% and 47.1%, respectively, of the Common Stock of Alliance,
and Yuma Farmers' Milling and Mercantile Cooperative (Yuma Cooperative)
owned approximately 11.8% and 14.1%, respectively, of the Common Stock of
Alliance.
Alliance purchased feed from Yuma Cooperative and animal health supplies
and breeding stock from Farmland based on market prices. Yuma Cooperative
and Farmland are members of Alliance. Alliance also sold feeder pigs to
Farmland and Yuma Cooperative. Such purchases and sales were as follows:
Fiscal Year Ended
August 31
1996 1995
Feed Purchases $ 3,423,773 $ 1,068,014
Animal Health Purchases 303,963 71,438
Breeding Stock 872,979 189,253
Feeder Pig Sales 5,035,160 1,467,069
Farmland provides the Company with an administrative office in Yuma,
Colorado at no cost to the Company. Farmland also performs administrative,
advisory and consulting services on behalf of Alliance pursuant to a
contractual agreement. The agreement provides that Farmland will be
compensated for such services in an amount equal to one dollar per pig
shipped adjusted annually for inflation for a term of ten years commencing
July 13, 1994. Amounts paid by Alliance to Farmland under such agreement
were as follows:
Fiscal Year Ended
August 31
1996 1995
Management Fee $ 151,905 $ 47,045
Alliance owed $38,650 and $137,722 at August 31, 1996 and $66,597 and
$32,882 at August 31, 1995 to Farmland and Yuma Cooperative respectively,
for goods and services. Alliance is also obligated to Farmland in the
amount of $636,424 at August 31, 1996 pursuant to a $760,000 promissory
note. See note 6.
4. Inventory
Major components of inventories as of August 31, 1996 and August 31, 1995
are as follows:
August 31
1996 1995
Feeder Pigs $ 2,265,056 $ 993,554
Other 170,421 75,590
$ 2,435,477 $ 1,069,144
5. Property, Plant and Equipment
Property, plant and equipment at August 31, 1996 and 1995 consisted of the
following:
1996 1995
Land $ 1,717,079 $ 261,340
Buildings 13,129,134 7,599,070
Site Improvements 1,019,936 422,458
Machinery and equipment 254,316 123,034
Mobile equipment 27,346 ----
Furniture and office equipment 21,694 11,139
Construction in progress 322,096 1,928,195
$ 16,491,601 $10,345,236
6. Long-Term Debt
Long term debt at August 31, 1996 and 1995 consisted of the following:
1996 1995
CoBank Term Loan $ 11,518,000 $ 8,300,000
CoBank Revolving Term Credit 2,141,000 865,000
Note Payable to Farmland 636,424 ----
14,295,424 9,165,000
Less Current Maturities 870,000 580,000
$ 13,425,424 $ 8,585,000
On May 19, 1995, Alliance entered into a $23,600,000 secured credit
facility with CoBank. This agreement provides for $18,850,000 of term
loans and $4,750,000 of revolving term credit. Proceeds from the term
loans are used for construction of feeder pig production facilities and are
advanced by CoBank as Alliance incurs construction costs. Proceeds from
revolving term credit may be used for working capital and other purposes.
The unused commitments expire February 28, 1997 for the term loans and June
20, 2006 for the revolving term credit. Interest accrues on the
outstanding principle balance of the loan at a rate equal to CoBank's
national variable rate, plus 1.25% (9.5% at August 31, 1996). Alliance
capitalized $38,181 and $60,105 of interest on construction for the fiscal
years ended August 31, 1996 and 1995 respectively.
At August 31, 1996, no additional term loans were immediately available,
$422,000 of term loans will be made available by CoBank upon final
acceptance of the feeder pig production facilities and $779,000 of
revolving term credit was immediately available.
Additional amounts available of term loans of $6,330,000 and revolving term
credit of $1,830,000 are restricted and available only as additional shares
of common stock are sold ($2,110,000 of term loans and $610,000 of
revolving term credit for every $1,360,000 of common stock sold).
Alliance is required to comply with various covenants, including, but not
limited to (i) maintaining at least $3,350,000 of shareholder's equity,
(ii) maintaining modified working capital (calculated as current assets,
plus the available revolving term credit, minus current liabilities
excluding the current portion of term debt payments) of at least $406,000,
(iii) restrictions on the incurrence of additional indebtedness, and (iv)
restrictions on the declaration and payment of the cash portion of
patronage distributions and other distributions or allocations of earnings,
surplus or assets. As of August 31, 1996 Alliance was in compliance with
all covenants. Alliance may be required to make equity investments in
CoBank in an amount not to exceed 1% of the average five-year principal
loan balance until Alliance meets CoBank's target level of equity
investment, which is currently 11.5% of the average five-year principal
loan balance. As of August 31, 1996, substantially all assets of Alliance
were pledged to CoBank.
At August 31, 1996, $636,424 had been borrowed from Farmland pursuant to a
$760,000 loan agreement. The loan agreement with Farmland provides for
interest at CoBank's prime rate and requires repayment in 2005.
Long-term debt as of August 31, 1996 matures during the fiscal years ending
August 31 in the following amounts:
1997 $870,000
1998 1,262,700
1999 1,318,800
2000 1,318,800
2001 1,318,800
Thereafter 8,206,324
$14,295,424
7. Commitments
As of August 31, 1996, Alliance Farms was operating five 2,450 sow feeder
pig production units and had an additional unit under construction. At August
31, 1996, commitments for construction of such facilities totaled approximately
$655,000. These commitments will be funded through bank borrowings.
8. Fair Value of Financial Instruments
Alliance has financial instruments which are comprised of cash and cash
equivalents, receivables, and long-term debt. The fair value of receivables and
long-term debt are estimated using current interest rates for similar
instruments. The carrying amounts of cash and cash equivalents approximate fair
value because of the short maturity of these instruments.
ALLIANCE FARMS COOPERATIVE ASSOCIATION
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 28, 1997 AUGUST 31, 1996
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Receivables $ 81,664 $ 72,448
Inventory (Note 4) 2,749,075 2,435,477
Other current assets 63,718 48,273
Total current assets 2,894,457 2,556,198
Property, plant and equipment, at cost 18,487,977 16,491,601
Less accumulated depreciation 1,744,283 1,333,291
16,743,694 15,158,310
Breeding stock 3,748,486 3,928,215
Less accumulated depreciation 1,244,087 1,013,872
2,504,399 2,914,343
Other assets, net of $66,502 and $51,568
accumulated amortization 201,828 216,762
$ 22,344,378 $20,845,613
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank Overdraft $287,900 $575,749
Current maturities of long-term debt (Note 5) 1,038,300 870,000
Accounts payable (Note 3) 1,846,953 526,193
Accrued rebates (Note 2) 670,167 670,167
Accrued expenses 190,178 171,791
Total current liabilities 4,033,498 2,813,900
Long-term debt (Note 5) 13,700,124 13,425,424
Shareholders' Equity
Common stock of $.01 par value; authorized 1 1
100,000 shares, issued and outstanding 102 shares
Additional paid-in capital 7,487,653 7,487,653
Accumulated deficit (2,876,898) (2,881,365)
Total shareholders' equity 4,610,756 4,606,289
Commitments (Note 6) B B
$ 22,344,378 $ 20,845,613
<FN>
See accompanying notes to condensed financial statements
</TABLE>
ALLIANCE FARMS COOPERATIVE ASSOCIATION
CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTH PERIODS ENDED SIX MONTH PERIODS ENDED FEBRUARY 28
FEBRUARY 28
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales (Note 2) $3,316,983 $1,443,563 $6,519,998 $2,871,276
Cost of goods sold 2,969,586 1,430,954 5,549,049 3,008,706
Gross income (loss) 347,397 12,609 970,949 (137,430)
Expenses realted to start-up of new -- -- 75,668 --
production facilities
Adminstrative expenses 122,027 96,898 214,996 170,565
Loss on sale of breeding stock 21,362 96,146 81,020 170,537
Operating income (loss) $204,008 ($180,435) $599,265 ($478,532)
Other income (expense):
Interest expense (357,932) (222,744) (680,584) (439,320)
Other 43,254 5,409 85,786 7,574
(314,678) (217,335) (594,798) (431,746)
($110,670) ($397,770) $4,467 ($910,278)
Net income (loss)
<FN>
See accompanying notes to condensed financial statements
</TABLE>
ALLIANCE FARMS COOPERATIVE ASSOCIATION
STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
SIX MONTH PERIODS ENDED
FEBRUARY 28
1997 1996
<S> <C> <C>
Cash flow from operating activities:
Net income (loss) $ 4,467 $ (910,278)
Adjustment to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Provision for depreciation and amortization 1,046,591 764,849
Loss on sale of breeding stock 81,020 170,537
Changes in assets and liabilities:
Receivables (9,216) (9,183)
Inventory (313,598) (397,012)
Other current assets (15,444) (18,587)
Other assets B 36,116
Accounts payable 1,320,760 13,094
Accrued expenses 18,387 63,959
Net cash provided by (used in) operating activities 2,132,967 (286,505)
Cash flows from investing activities:
Capital expenditures (2,681,508) (5,085,248)
Proceeds from sale of breeding stock 393,390 175,170
Net cash used in investing activities ( 2,288,118) (4,910,078)
Cash flows from financing activities:
Proceeds from issuance of long term debt 211,000 B
Net increase in revolving term credit 487,000 1,735,000
Payment on long term debt (435,000) (145,000)
Increase in note payable to Farmland 180,000 636,424
Issuance of common shares, net of offering cost B 1,321,683
Loan origination fees B (42,000)
Increase (decrease) in bank overdraft (287,849) 213,263
Net cash provided by financing activities: 155,151 3,719,370
Decrease in cash and cash equivalents B (1,477,213)
Cash and cash equivalents at beginning of period B 1,477,213
Cash and cash equivalents at end of period $ B B
<FN>
See accompanying notes to condensed financial statements
</TABLE>
ALLIANCE FARMS COOPERATIVE ASSOCIATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Interim Financial Statements
The accompanying condensed unaudited financial statements reflect all
adjustments (consisting of only normal recurring adjustments) which in the
opinion of management, are necessary for a fair presentation of the
financial position, results of operations and cash flows for the interim
periods presented. Income taxes have not been provided because Alliance
Farms Cooperative Association ("Alliance") expects to derive 100% of its
net income principally from the sale of feeder pigs to its members which
will be apportioned and distributed to members of Alliance on a patronage
basis in accordance with its by-laws.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting
principles have been condensed or omitted. The accompanying unaudited
condensed financial statements should be read in conjunction with the
financial statements and notes in Alliance's August 31, 1996 Annual Report
on Form 10-KSB.
2. Sales
Alliance sold 100% of its feeder pigs to its members for the three and six
month periods ended February 28, 1997 and February 29, 1996 at a
contractual price which is based on Alliance's operating costs (which are
based on a twelve month rolling average), debt service and an additional
$4.50 per pig sold.
Alliance accrued a rebate of $670,167 as of February 28, 1997 and August
31, 1996. Such rebate was accrued in fiscal 1996 and is payable to
Alliance's members. Alliance intends to pay the accrued rebate in fiscal
1997 when sufficient cash and working capital is available. Alliance has
not accrued a rebate in fiscal 1997 as it does not intend to pay a rebate
to its members on fiscal 1997 sales.
Because the contractual price for the sale of a feeder pig is determined
based upon, among other things, a twelve month historical rolling average
for operating costs and to the extent that current operating costs per pig
exceed the historical average operating costs, Alliance may incur a
negative gross margin on the sale of its feeder pigs during periods of
rising costs.
Alliance's average net sales price and the average industry market price
were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
February 28 February 28
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Average Net Sales Price 57.44 43.36 57.80 43.07
Average Industry Market* 56.20 34.66 53.99 35.73
*As published by the USDA's Market News Service
</TABLE>
3. Transactions with Farmland and Yuma
Alliance purchased feed from Yuma Farmers' Milling and Mercantile
Cooperative ("Yuma"), and animal health supplies and breeding stock from
Farmland Industries, Inc. ("Farmland") based on market prices. Yuma and
Farmland are members of Alliance. Alliance also sold feeder pigs to
Farmland and Yuma. Such purchases and sales were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
February 28 February 28
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Feed Purchases .............$ 983,028 $681,697 $2,095,440 $1,268,134
Animal Health Purchases .....165,698 33,056 377,247 93,256
Breeding Stock ...............351,062 381,333 494,756 457,950
Feeder Pig Sales ...........1,956,704 972,066 3,961,082 1,945,808
</TABLE>
Farmland also pays Alliance a royalty for any pigs raised by Alliance and
sold to a Farmland finisher that are then selected as breeding stock for
Farmland's contract herds pursuant to the swine production services agreement.
The royalty, which is $10 per head selected, paid to Alliance under such
agreement was as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
February 28 February 28
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Royalty Income $ 40,000 $ 0 $ 72,600 $ 0
</TABLE>
Farmland also performs administrative, advisory and consulting services on
behalf of Alliance pursuant to a contractual agreement. The agreement
provides that Farmland will be compensated for such services in an amount
equal to one dollar per pig shipped adjusted annually for inflation for a
term of ten years commencing July 13, 1994. Amounts paid by Alliance to
Farmland under such agreement were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
February 28 February 28
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Management Fee $ 63,980 $ 33,956 $121,596 $ 68,586
</TABLE>
Alliance owed $222,590 and $203,624 at February 28, 1997 and $36,850 and
$137,722 at August 31, 1996 to Farmland and Yuma respectively, for goods
and services.
4. Major components of inventories as of February 28, 1997 and August 31, 1996
are as follows:
<TABLE>
<CAPTION>
FEBRUARY 28 AUGUST 31
1997 1995
<S> <C> <C>
Feeder Pigs...................... $2,502,303 $2,265,056
Other............................ 246,772 170,421
$2,749,075 $2,435,477
</TABLE>
5. Long-Term Debt
On May 19, 1995, Alliance entered into a $23,600,000 secured credit
facility with CoBank. This agreement provides for $18,850,000 of term
loans and $4,750,000 of revolving term credit. Proceeds from the term
loans are used for construction of feeder pig production facilities and are
advanced by CoBank as Alliance incurs construction costs. Proceeds from
revolving term credit may be used for working capital and other purposes.
The expiration date for the unused commitments for the term loans has been
extended from February 28, 1997 to August 31, 1997. The unused revolving
term credit expires June 20, 2006. Interest accrues on the outstanding
principal balance of the loan at a rate equal to CoBank's national variable
rate, plus 1.25% (9.5% at February 28, 1997).
Long term debt at February 28, 1997 and August 31, 1996 consisted of the
following:
FEBRUARY 28 AUGUST 31
1997 1995
CoBank Term Loan................... $11,294,000 $11,518,000
CoBank Revolving Term Credit....... $ 2,628,000 $ 2,141,000
Note Payable, Farmland............. $ 816,424 $ 636,424
$14,738,424 $14,295,424
Less Current Maturities............ $ 1,038,300 $ 870,000
$13,700,124 $13,425,424
At February 28, 1997, no additional term loans were immediately available,
$211,000 of term loans will be available upon acceptance by CoBank of a
feeder pig production facility and $142,000 of revolving term credit was
immediately available.
Additional amounts of term loans of $6,330,000 and revolving term credit of
$1,830,000 are restricted and available only as additional shares of common
stock are sold ($2,110,000 of term loans and $610,000 of revolving term
credit for every $1,360,000 of common stock sold).
Alliance is required to comply with various covenants, including, but not
limited to (i) maintaining at least $3,350,000 of shareholder's equity,
(ii) maintaining modified working capital (calculated as current assets
plus the available revolving term credit minus current liabilities
excluding the current portion of term debt payments) of at least $406,000,
(iii) restrictions on the occurrence of additional indebtedness,
(iv) restrictions on the declaration and payment of the cash portion of
patronage distributions and other distributions or allocations of earnings,
surplus or assets. As of February 28, 1997, Alliance was in compliance
with all covenants, except the modified working capital covenant, for which
Alliance has obtained a waiver from CoBank as of February 28, 1997.
Management believes that Alliance will have the ability to maintain
compliance with the above covenants in the foreseeable future. Alliance
may be required to make equity investments in CoBank in an amount not to
exceed 1% of the average five-year principal loan balance until Alliance
meets CoBank's target level of equity investment, which is currently 11.5%
of the average five-year principal loan balance. As of February 28, 1997,
substantially all assets of Alliance were pledged to CoBank.
At February 28, 1997, $816,424 had been borrowed from Farmland pursuant to
a $760,000 loan agreement and a $200,000 loan agreement. The $760,000 loan
agreement provides for interest at CoBank's prime rate and requires
repayment in 2005. The $200,000 loan agreement provides for interest at
CoBank's prime rate plus 1.25% and requires repayment in November 2006, or
upon the sale of an additional 17 shares of common stock by Alliance if
that occurs prior to November 2006
Long-term debt as of February 28, 1997 matures during the fiscal years
ending August 31 in the following amounts:
1997................... $ 870,000
1998................... 1,262,700
1999................... 1,318,800
2000................... 1,318,800
2001................... 1,318,800
Thereafter............. 7,611,024
$13,700,124
6. Alliance Farms is currently operating six 2,450 sow feeder pig production
units and has an additional unit under construction in Wayne County,
Illinois. As of February 28, 1997, commitments for construction of this
facility totaled approximately $2,109,900.
EXHIBIT A
SUBSCRIPTION AGREEMENT
Alliance Farms Cooperative Association
c/o Farmland Industries, Inc.
3315 North Oak Trafficway
Department 47
Kansas City, Missouri 64116
Attention: Wayne N. Snyder
Gentlemen:
1. Subscription.
a. The undersigned understands that Alliance Farms Cooperative
Association, a Colorado cooperative association (the "Company"), may offer up to
(i) an aggregate of 51 shares (the "Class A Shares") of its (Class A) Common
Stock, $.01 par value, on a "best efforts, all-or-none" basis for not less than
17 Class A Shares (a "Minimum Class A Block"), and thereafter may continue to
offer Class A Shares on such basis with respect to successive Minimum Class A
Blocks until 51 Class A Shares have been issued and sold, and (ii) an aggregate
of 108 shares (the "Class B Shares" and together with the Class A Shares, the
"Shares") of its Class B Common Stock, $.01 par value, on a "best efforts, all-
or-none" basis for not less than 18 Class B Shares (a "Minimum Class B Block"),
and thereafter may continue to offer Class B Shares on such basis with respect
to successive Minimum Class B Blocks until 108 Class B Shares have been issued
and sold. The undersigned acknowledges and agrees that prior to the execution
of this Subscription Agreement, the undersigned has received the Company's
Prospectus dated , 1997 for the Shares, which Prospectus contains the
form of this Subscription Agreement.
b. The undersigned hereby subscribes for and agrees to purchase
(i) Class A Shares at a price of $80,000 per share, and (ii) Class
B Shares at a price of $70,000 per share pursuant to the terms and conditions of
this Subscription Agreement (the "Subscription")<F1> The undersigned
understands and agrees that in order to subscribe for any Shares, the following
items must be delivered to the Company on or before 5:00 p.m. on ,
1998 (or by 5:00 p.m. on , 1999 if the termination of the offering is
extended by the Company):
[FN]
One Class A Share or one Class B Share is the minimum number of Shares for
which an investor may subscribe, as described in the Prospectus.
(A) two completed and executed copies of this Subscription
Agreement;
(B) the undersigned's check, bank draft or wire transfer
(contact the Company for wire transfer instructions), payable to the order
of "Alliance Farms Cooperative Association Escrow No. 1482300" in an amount
representing the aggregate purchase price of the Shares being subscribed
for hereunder (which amount is equal to the product obtained by multiplying
the number of Class A Shares being subscribed for by $80,000 per Share plus
the product obtained by multiplying the number of Class B Shares being
subscribed for by $70,000 per Share);
(C) (if the undersigned is subscribing for any Class A Shares)
two completed and executed copies of the Feeder Pig Purchase Agreement in
the form attached to the Prospectus as Exhibit B;<F2>
[FN]
Please do not date the Feeder Pig Purchase Agreement; the Company will date
the Feeder Pig Purchase Agreement upon acceptance of subscriptions.
(D) (if the undersigned is subscribing for any Class B Shares)
two completed and executed copies of the Weaned Pig Purchase Agreement in
the form attached to the Prospectus as Exhibit C;<F3> and
[FN]
Please do not date the Weaned Pig Purchase Agreement; the Company will date
the Weaned Pig Purchase Agreement upon acceptance of subscriptions.
(E) one executed stock power respecting the Class A Shares
subscribed by the undersigned hereunder in favor of the Company as
contemplated by Section 17 of the Feeder Pig Purchase Agreement.<F4>
[FN]
A form stock power is attached hereto as Annex 1 for your convenience.
Please do not date or otherwise complete the stock power; the Company will
date and complete the stock power upon acceptance of subscriptions.
(F) one executed stock power respecting the Class B Shares
subscribed by the undersigned hereunder in favor of the Company as
contemplated by Section 17 of the Weaned Pig Purchase Agreement.<F5>
[FN]
A form stock power is attached hereto as Annex 1 for your convenience.
Please do not date or otherwise complete the stock power; the Company will
date and complete the stock power upon acceptance of subscriptions.
In addition, if the undersigned is a resident of Iowa, or otherwise is
subscribing for Shares in Iowa, the undersigned may be required to deliver to
the Company a completed and executed Potential Investor Questionnaire with
respect to the representation and warranty made pursuant to Section 3.l below.
The undersigned understands that pending the Company's acceptance of
subscriptions for a Minimum Class A Block or a Minimum Class B Block in this
offering and the satisfaction of certain other conditions, all funds received by
the Company in payment of the offering price for the Shares promptly will be
deposited in an interest-bearing escrow account established at NationsBank, N.A.
(Mid-West) (formerly Boatmen's National Bank), Kansas City, Missouri. Payment
of the applicable offering price must be made payable to the order of "Alliance
Farms Cooperative Association Escrow No. 1482300", the escrow account
established at such bank. Upon the Company's acceptance of subscriptions for a
Minimum Class A Block of 17 Class A Shares or for a Minimum Class B Block of 18
Class B Shares, and the satisfaction of certain other conditions, all funds
deposited in the escrow account with respect to such Shares, together with any
interest earned thereon, will be paid to the Company. In the event that the
Company does not issue Shares for which funds have been deposited in the escrow
account prior to the termination of the offering, such funds will be refunded to
the respective subscribers, together with any interest earned thereon and
without any deduction being made for expenses.
1. The undersigned understands that this Subscription shall be
irrevocable, except as otherwise provided by virtue of applicable federal and
state securities laws, and shall survive the death or disability of the
undersigned, in the case of an individual, or the dissolution or bankruptcy of
the undersigned, in the case of an entity.
2. Acceptance of Subscription. The undersigned understands that if and
to the extent this Subscription is not accepted by the Company, in whole or in
part, prior to 5:00 p.m. on , 1998 (or by 5:00 p.m. on ,
1999 if the termination date of the offering is extended by the Company), any
amount so received by the Company will be returned to the undersigned. The
undersigned acknowledges that the management of the Company reserves the right,
in its sole and absolute discretion, to accept or reject this Subscription, in
whole or in part, and that this Subscription shall not be binding unless and
until accepted by the Company. The undersigned agrees that subscriptions need
not be accepted in the order they are received.
3. Representations, Warranties and Agreement. The undersigned represents
and warrants to the Company and its officers, directors, employees, agents and
controlling persons, and agrees with such persons, as follows:
a. The undersigned and his or her representative, if any, have
been furnished all additional information relating to the Company, its
business and financial condition, the offering of the Shares and any
other matter set forth in the Prospectus which they have requested.
b. The undersigned agrees that the certificates evidencing the
Shares being purchased by the undersigned shall be stamped or
otherwise imprinted with a conspicuous legend in substantially the
following form:
Sale, transfer or hypothecation of the shares represented by
this certificate is restricted by the provisions of the
Colorado cooperative association law and the Articles of
Incorporation and Bylaws of Alliance Farms Cooperative
Association (the "Company"), a copy of which provisions may
be inspected at the principal offices of the Company, and
all provisions of which are hereby incorporated by reference
in this certificate.
The undersigned agrees that the Shares or any of them shall be sold,
pledged, assigned, hypothecated, or otherwise transferred (with or
without consideration) (a "Transfer") only if such Transfer is
permissible under the Colorado cooperative association law and the
Company's Articles of Incorporation and Bylaws. The undersigned
understands that the Company has not agreed to register the Shares for
distribution in accordance with the provisions of certain applicable
state securities law (the "State Acts"), that the Company is the only
party who may register the Shares under certain State Acts and that
the Company has not agreed to comply with any exemption under the
State Acts for the resale of the Shares. The undersigned understands
that there is and likely will be no market for the (Class A) Common
Stock or Class B Common Stock of the Company and that the undersigned
therefore may be unable to sell or dispose of the Shares.
c. The undersigned agrees that a stop transfer order shall be
placed on the transfer books maintained with respect to the Shares
which gives effect to the restrictive legend set forth in Section 3.b.
d. The undersigned understands that no federal or state agency
has passed upon the Shares or upon the accuracy or adequacy of the
Prospectus, or made any finding or determination as to the fairness of
the investment or any recommendation or endorsement of the Shares.
The undersigned understands that the Prospectus may not have been
filed with or reviewed by certain state securities administrators.
e. The undersigned is a producer of agricultural products, an
association of such producers, or a federation of such associations.
f. If a natural person, the undersigned is a citizen of the
United States of America, is at least 21 years of age, and has the
legal capacity to execute, deliver and perform this Agreement, and his
or her principal residence is located within the state designated
under his or her name below.
g. If the undersigned is a corporation, trust, partnership, or
any other entity, such entity is authorized and otherwise duly
qualified and empowered to execute and deliver this Subscription
Agreement and thereupon shall become legally bound thereby, all
necessary actions have been taken to authorize and approve the
investment in the Shares, such entity was not formed for the purpose
of making the investment in the Shares and such entity's principal
place of business is located at the address set forth on the signature
page hereof.
h. The undersigned acknowledges and agrees that certain
commissions as described in the Prospectus may be due and payable to
certain selling agents or other representatives of the Company in
connection with this Subscription.
i. The undersigned acknowledges that the Company may assign the
Company's rights in and to the Feeder Pig Purchase Agreement and/or
Weaned Pig Purchase Agreement executed by the undersigned and any and
all other assets of the Company to any lender that may provide
financing to the Company in connection with the construction of feeder
or weaned pig production facilities or the operation thereof, or both,
and the undersigned consents to any such assignment.
j. If the undersigned is a resident of Iowa, or otherwise is
subscribing for Shares in Iowa, the undersigned certifies that the
undersigned either (i) has a net worth, or joint net worth with the
undersigned's spouse, in either case, exclusive of home, furnishings
and automobiles ("Adjusted Net Worth") of at least $65,000 as of the
date hereof, and an annual gross income of at least $65,000 for each
of the undersigned's two most recent tax years; or (ii) has Adjusted
Net Worth of at least $250,000 as of the date hereof.
4. Taxpayer Identification Number. The undersigned agrees to complete,
execute and return to the Company a Form W-9, "Payer's Request for Taxpayer
Identification Number and Certification", concurrently with the delivery of the
executed copy of this Subscription Agreement. <F6>
[FN]
A Form W-9 is attached hereto as Annex 2 for your convenience.
5. Indemnification. The undersigned agrees to indemnify and hold
harmless the Company, its officers, directors, employees, shareholders and
affiliates, and any person acting on behalf of the Company, from and against any
and all damage, loss, liability, cost and expense (including attorneys' fees)
which any of them may incur by reason of the failure by the undersigned to
fulfill any of the terms or conditions of this Subscription Agreement. All
representations, warranties and covenants contained in this Subscription
Agreement, and the indemnification contained in this Section 5 shall survive the
acceptance of this Subscription.
6. No Waiver. Notwithstanding any of the representations, warranties,
acknowledgements or agreements made herein by the undersigned, the undersigned
does not thereby or in any other manner waive any of the rights granted to the
undersigned under federal or state securities law.
7. Entire Agreement; Modification. This Subscription Agreement
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof, and neither this Subscription Agreement nor any
provisions hereof shall be waived, changed, discharged or terminated except by
an instrument in writing signed by the party against whom any waiver, change,
discharge or termination is sought.
8. Notices. Any notice, demand or other communication which any party
hereto may be required, or may elect, to give to anyone interested hereunder
shall be effective only if it is in writing and personally delivered or sent by
certified or registered mail, return receipt requested, postage prepaid, or by a
nationally recognized overnight delivery service, with delivery confirmed,
addressed to: in the case of the Company: Alliance Farms Cooperative
Association, c/o Farmland Industries, Inc., 3315 North Oak Trafficway,
Department 47, Kansas City, Missouri 64116, Attention: Wayne N. Snyder, or at
such other address as the Company shall so notify the undersigned pursuant
hereto, and in the case of the undersigned at the address set forth on the
signature page thereof or at such other address as the undersigned shall so
notify the Company pursuant hereto. Any such notice, demand or other
communication shall be deemed to have been given as of the date when so
delivered.
9. Binding Effect. Except as otherwise provided herein, this
Subscription Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators,
successors, legal representatives and assigns. If the undersigned is more than
one person, the obligations of the undersigned shall be joint and several and
the agreements, representations, warranties and acknowledgements herein
contained shall be deemed to be made by and be binding upon each such person and
the undersigned's respective heirs, executors, administrators, successors, legal
representatives and assigns.
10. Type of Ownership. The Subscriber wishes to own the Shares as follows
(mark one):
[ ] Separate or individual property;
[ ] Joint tenants with right of survivorship (both parties must sign all
required documents);
[ ] Community property (both parties must sign all required documents);
[ ] Trust (include name of trust, name of trustee, and include a copy of
the trust instrument);
[ ] Corporation (include articles of incorporation, bylaws and certified
corporate resolution authorizing the investment and signature);
[ ] Partnership (include a copy of the partnership agreement and a written
consent of partners authorizing the investment and signature);
[ ] Other (specify): .
(Note: Subscribers should seek the advice of their attorney in deciding in
which of the above forms they should take ownership of the Shares, since
different forms of ownership may have varying gift tax, estate tax, income tax
and other consequences, depending on the state of the Subscriber's domicile and
the Subscriber's particular personal circumstances.)
The name(s) in which the Shares are to be held is:
11. Assignability. The undersigned agrees not to transfer or assign this
Subscription Agreement, or any of the undersigned's interest herein, and further
agrees that the transfer or assignment of the Shares shall be made only in
accordance with the terms and conditions of this Subscription Agreement, the
Company's Articles of Incorporation and Bylaws, and all applicable laws.
12. Applicable Law. This Subscription Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado.
[The remainder of this page intentionally has been left blank]
THE UNDERSIGNED HEREBY REPRESENTS THAT THE UNDERSIGNED HAS READ THIS
SUBSCRIPTION AGREEMENT IN ITS ENTIRETY.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this day of , 199 , at ,
.
(city) (state)
INDIVIDUALS SIGN HERE
Note: If the Subscriber wishes to own the Shares with another person as joint
tenants, or as community property, both individuals must sign this Subscription
Agreement.
Signature
Name (please print)
Social Security Number
Principal Residence Address of Subscriber
Street Address
City and State Zip Code
Additional Individual (if any)
Signature
Name (please print)
Social Security Number
Principal Residence Address of Subscriber
Street Address
City and State Zip Code
THE UNDERSIGNED HEREBY REPRESENTS THAT THE UNDERSIGNED HAS READ THIS
SUBSCRIPTION AGREEMENT IN ITS ENTIRETY.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this day of , 199 , at ,
.
(city) (state)
ORGANIZATIONS SIGN HERE
Note: If signed on behalf of a corporation, please submit the corporation's
articles of incorporation, bylaws, and certified corporate resolution
authorizing the investment and signature. If signed on behalf of a partnership,
please submit a copy of the partnership agreement and a written consent of
partners authorizing the investment and signature. If signed on behalf of a
trust, please submit the name of the trust, name of the trustee, and a copy of
the trust instrument.
Printed Name of Organization
By:
Signature
Printed Name and Title
By:
(Additional signature if required by
governing instrument)
Printed Name and Title
Federal Taxpayer Identification Number
Address of Principal Place of Business:
Street Address
City and State Zip Code
Country (if other than U.S.A.)
ALLIANCE FARMS COOPERATIVE ASSOCIATION hereby [accepts][rejects] the above
Subscription on this day of , 199 , at ,
Colorado.
ALLIANCE FARMS COOPERATIVE ASSOCIATION
By:
Name:
Title:
ANNEX 1
STOCK POWER
FOR VALUE RECEIVED, hereby sell, assign and transfer
unto ( ) Shares of the Common Capital Stock of the
Alliance Farms Cooperative Association standing in its name on the books of said
association represented by Certificate No. herewith and do hereby
irrevocably constitute and appoint attorney to
transfer the said stock on the books of the within named Company with full power
of substitution in the premises.
Dated 19
In the Presence of
ANNEX 2
Form W-9
(Rev. March 1994) REQUEST FOR TAXPAYER Give form to the
Department of the requester. Do NOT
Treasury IDENTIFICATION NUMBER send to the IRS.
AND CERTIFICATION
Internal Revenue Service
Please print or type:
Name (if joint names, list first and circle the name of the person or entity
whose number you enter in Part 1 below. SEE INSTRUCTIONS ON PAGE 2 IF YOUR NAME
HAS CHANGED.)
Business name (Sole proprietors see instructions on page 2.)
Please check appropriate box: [ ] Individual/Sole proprietor [ ]
Corporation
[ ] Partnership [ ] Other
Address (number, street, and apt. or suite no.)
Requester's name and address
(optional)
City, state and ZIP code
PART I TAXPAYER IDENTIFICATION NUMBER (TIN) List account
numbers(s) here
(optional)
Enter your TIN in the appropriate box. Forindividuals, this is your social
security number (SSN). For sole proprietors, see the instructions on page 2.
For other entities, it is your employer identification number (EIN). IF you do
not have a number, see HOW TO GET A TIN below.
Note: If the account is in more than one name, see the chart on page 2 for
guidelines on whose number to enter. - >
Social security number
- -
PART II For Payees Exempt From Backup Withholding (See Part II Instructions on
page 2)
OR
Employer identification number
PART III CERTIFICATION
Under penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me), and
2.I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service
that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or (d) the IRS has notified me that I am no longer
subject to backup withholding.
CERTIFICATION INSTRUCTIONS.--You must cross out item 2 above if you have been
notified by the IRS that you are currently subject to backup withholding because
of underreporting interest or dividends on your tax return. For real estate
transactions, item 2 does not apply. For mortgage interest paid, the
acquisition or abandonment of secured property, cancellation of debt,
contributions to an individual retirement arrangement (IRA), and generally
payments other than interest and dividends, you are not required to sign the
Certification, but you must provide your correct TIN. (Also see PART III
INSTRUCTIONS on page 2.)
Sign
Here Signature > Date >
Section references are to the Internal Revenue Code.
PURPOSE OF FORM.--A person who is required to file an information return with
the IRS must get your correct TIN to report income paid to you, real estate
transactions, mortgage interest you paid, the acquisition or abandonment of
secured property, cancellation of debt, or contributions you made to an IRA.
Use Form W-9 to give your correct TIN to the requester (the person requesting
your TIN) and, when applicable, (1) to certify the TIN you are giving is correct
(or you are waiting for a number to be issued), (2) to certify you are not
subject to backup withholding, or (3) to claim exemption from backup withholding
if you are an exempt payee. Giving your correct TIN and making the appropriate
certifications will prevent certain payments from being subject to backup
withholding.
NOTE: If a requester gives you a form other than a W-9 to request your TIN, you
must use the requester's form if it is substantially similar to this Form W-9.
WHAT IS BACKUP WITHHOLDING?--Persons making certain payments to you must
withhold and pay to the IRS 31% of such payments under certain conditions. This
is called "backup withholding." Payments that could be subject to backup
withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee pay, and certain payments from
fishing boat operators. Real estate transactions are not subject to backup
withholding.
If you give the requester your correct TIN, make the proper certifications, and
report all your taxable interest and dividends on your tax return, your payments
will not be subject to backup withholding. Payments you receive will be subject
to backup withholding if:
1. You do not furnish your TIN to the requestor, or
2. The IRS tells the requester that you furnished an incorrect TIN, or
3. The IRS tells you that you are subject to backup withholding because
you did not report all your interest and dividends on your tax return (for
reportable interest and dividends only), or
4. You do not certify to the requester that you are not subject to backup
withholding under 3 above (for reportable interest and dividend accounts opened
after 1983 only), or
5. You do not certify your TIN. See the Part III instructions for
exceptions.
Certain payees and payments are exempt from backup withholding and
information reporting. See the Part II instructions and the separate
INSTRUCTIONS FOR THE REQUESTER OF FORM W-9.
HOW TO GET A TIN.--If you do not have a TIN, apply for one immediately. To
apply, get FORM SS-5, Application for a Social Security Number Card (for
individuals), from your local office of the Social Security Administration, or
FORM SS-4, Application for Employer Identification Number (for businesses and
all other entities), from your local IRS office.
If you do not have a TIN, write "Applied For" in the space for the TIN in
Part I, sign and date the form, and give it to the requester. Generally, you
will then have 60 days to get a TIN and give it to the requester. If the
requester does not receive your TIN within 60 days, backup withholding, if
applicable, will begin and continue until you furnish your TIN.
NOTE: Writing "Applied For" on the form means that you have already applied for
a TIN OR that you intend to apply for one soon.
As soon as you receive your TIN, complete another Form W-9, include your
TIN, sign and date the form, and give it to the requester.
PENALTIES
FAILURE TO FURNISH TIN.--If you fail to furnish your correct TIN to a requester,
you are subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a
false statement with no reasonable basis that results in no backup withholding,
you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
MISUSE OF TINS.--If the requester discloses or uses TINs in violation of Federal
law, the requester may be subject to civil and criminal penalties.
SPECIFIC INSTRUCTIONS
NAME.--If you are an individual, you must generally enter the name shown on your
social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security Administration
of the name change, please enter your first name, the last name shown on your
social security card, and your new last name.
Sole Proprietor.--You must enter your INDIVIDUAL name. (Enter either your
SSN or EIN in Part I.) You may also enter your business name or "doing
business as" name on the business name line. Enter your name as shown on your
social security card and business name as it was used to apply for your EIN on
Form SS-4.
PART I--TAXPAYER IDENTIFICATION NUMBER (TIN)
You must enter your TIN in the appropriate box. If you are a sole proprietor,
you may enter your SSN or EIN. Also see the chart on this page for further
clarification of name and TIN combinations. If you do not have a TIN, follow
the instructions under HOW TO GET A TIN on page 1.
PART II--FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING
Individuals (including sole proprietors) are NOT exempt from backup withholding.
Corporations are exempt from backup withholding for certain payments, such as
interest and dividends. For a complete list of exempt payees, see the separate
Instructions for the Requestor of Form W-9.
If you are exempt from backup withholding, you should still complete this
form to avoid possible erroneous backup withholding. Enter your correct TIN in
Part I, write "Exempt" in Part II, and sign and date the form. If you are a
nonresident alien or a foreign entity not subject to backup withholding, give
the requester a completed FORM W-8, Certificate of Foreign Status.
PART III--CERTIFICATION
For a joint account, only the person whose TIN is shown in Part I should sign.
1. INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984 AND
BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983. You must give your correct TIN,
but you do not have to sign the certification.
2. INTEREST, DIVIDEND, BROKER, AND BARTER EXCHANGE ACCOUNTS OPENED AFTER
1983 AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983. You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester, you
must cross out item 2 in the certification before signing the form.
3. REAL ESTATE TRANSACTIONS. You must sign the certification. You may
cross out item 2 of the certification.
4. OTHER PAYMENTS. You must give your correct TIN, but you do not have to
sign the certification unless you have been notified of an incorrect TIN. Other
payments include payments made in the course of the requester's trade or
business for rents, royalties, goods (other than bills for merchandise), medical
and health care services, payments to a nonemployee for services (including
attorney and accounting fees), and payments to certain fishing boat crew
members.
5. MORTGAGE INTEREST PAID BY YOU, ACQUISITION OR ABANDONMENT OF SECURED
PROPERTY, CANCELLATION OF DEBT, OR IRA CONTRIBUTIONS. You must give your
correct TIN, but you do not have to sign the certification.
PRIVACY ACT NOTICE
Section 6109 requires you to give your correct TIN to persons who must file
information returns with the IRS to report interest, dividends, and certain
other income paid to you, mortgage interest you paid, the acquisition or
abandonment of secured property, cancellation of debt, or contributions you made
to an IRA. The IRS uses the numbers for identification purposes and to help
verify the accuracy of your tax return. You must provide your TIN whether or
not you are required to file a tax return. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not give a TIN to a payer. Certain penalties may also apply.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
FOR THIS TYPE OF ACCOUNT GIVE NAME AND SSN OF:
1.Individual The individual
2. Two or more individuals (joint account) The actual owner of the
account or, if combined funds, the first
individual on the account(1)
3.Custodian account of a minor (Uniform The minor(2)
Gift to Minors Act)
4. a. The usual revocable savings (grantor The grantor-trustee(1)
is also trustee)
b. So-called trust account that is not a The actual owner(1)
legal or valid trust under state law
5.Sole proprietorship The owner(3)
FOR THIS TYPE OF ACCOUNT: GIVE NAME AND EIN OF:
6.Sole proprietorship The owner(3)
7.A valid trust, estate, or pension trust Legal entity(4)
8.Corporate The corporation
9. Association, club, religious, charitable, The organization
educational, or other tax-exempt organization
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of Agriculture The public entity
in the name of a public entity (such as a
state or local government, school district, or
prison) that receives agricultural program
payments
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's SSN.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your SSN or EIN.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the TIN of the personal representative or trustee unless the
legal entity itself is not designated in the account title.)
NOTE: If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
EXHIBIT B
FEEDER PIG PURCHASE AGREEMENT
THIS FEEDER PIG PURCHASE AGREEMENT (this "Agreement") is entered into as of
this day of , 199 , by and between ALLIANCE FARMS
COOPERATIVE ASSOCIATION (hereinafter "Association"), and
(hereinafter "Purchaser").
WHEREAS, Association is engaged in the production and sale of feeder pigs;
and
WHEREAS, Purchaser is a purchaser of feeder pigs, possesses expertise in
swine production and management, and desires to enter into this Agreement for
membership purposes of Association;
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
the parties hereto agree as follows:
1. PURCHASE/SALE OF FEEDER PIGS.
(A) GENERAL. Upon and subject to all terms and conditions set forth
in this Agreement, Purchaser shall purchase from Association, and Association
shall sell to Purchaser, Qualifying Pigs (as defined in Section 2) produced by
Association during the term of this Agreement in lots (hereinafter "Lot" or
"Lots") of no less than 900, and no more than 1,000, Qualifying Pigs per Lot, as
determined by Association, which Lots shall be made available to Purchaser on a
rotating schedule with other members of Association owning Class A Common Stock
(as defined in Article SIXTH of Association's Articles of Incorporation), as
such rotating schedule is determined and implemented by Association on any
reasonable basis.
(B) SCHEDULE. Purchaser acknowledges that Association intends to
conduct a blind drawing, immediately following the consummation of each and
every offering of Class A Common Stock by Association, for purposes of adjusting
such rotating schedule as warranted by the resulting changes in the members of
the Association.
(C) AVAILABILITY. The number of Lots made available to Purchaser and
the frequency of availability of such Lots will be based upon Purchaser's
proportionate equity interest in Association with respect to Association's Class
A Common Stock. Purchaser acknowledges that Lots will not be made available to
Purchaser under this Agreement until Qualifying Pigs are produced and available
from the facilities constructed using the proceeds of the issuance of Class A
Common Stock of Association (including Class A Common Stock of the Association
assigned or transferred to Purchaser) from which the right of Purchaser to
purchase such Lots under this Agreement derives, and that the number of Lots
made available to Purchaser and the frequency of availability of such Lots will
be subject to actual production of Qualifying Pigs from all facilities of
Association. Association shall give notice to Purchaser when a Lot is available
for purchase by Purchaser hereunder, which notice shall specify the anticipated
number of Qualifying Pigs in such Lot and the scheduled shipment date.
(D) EXCESS PRODUCTION. The production of feeder pigs is anticipated
to produce, on a prospective rolling 12-month basis, approximately two and
seven-tenths (2.7) Lots of Qualifying Pigs per share of Class A Common Stock of
Association owned by members of Association for which Lots are to be made
available for purchase hereunder. To the extent that the production of feeder
pigs exceeds such anticipated production, Association shall either sell such
excess production to any person (including a member of Association), at a price
as shall be determined by Association in good faith, or retain such excess
production for Association's own purposes, in lieu of selling such excess
production to the members of Association pursuant to the Feeder Pig Purchase
Agreements between Association and the members of Association.
2. QUALIFYING PIGS. For purposes of this Agreement, the term "Qualifying
Pig" shall mean an individual feeder pig having a minimum weight of 30 pounds,
managed in accordance with Section 7, and free of the following defects (with
terms used in reference to defects being given the meaning generally utilized in
the swine industry) at the time of loading:
(a) uncastrated or freshly castrated males;
(b) ruptures, umbilical or scrotal hernia larger than a two-inch
diameter;
(c) unthrifty, poor-doing pigs;
(d) observable signs of lameness, stiffness, or other locomotor
disorders evidenced by swelling or malformed joints;
(e) transmissible gastroenteritis;
(f) observable abscesses; and
(g) anal prolapse.
3. PURCHASE PRICE OF PIGS.
(a) PRICE. The purchase price for each Qualifying Pig purchased by
Purchaser under this Agreement shall be an amount equal to the sum
of the following:
Financing Cost Per Pig, plus
Operating Cost Per Pig, plus
Production Margin.
Purchaser acknowledges that Association has constructed, or is in the process of
constructing, or both, Production Units as a result of previous offers and sales
of shares of its capital stock and that Association from time to time may
construct additional Production Units as a result of additional offers and sales
of shares of its capital stock. In light of the foregoing, the determination of
the Financing Cost Per Pig portion of the purchase price for a Qualifying Pig
hereunder shall be made separately with respect to each Lot in relation to the
Production Unit(s) that were constructed using the proceeds of the issuance of
Class A Common Stock of Association (including Class A Common Stock of the
Association assigned or transferred to Purchaser) from which Purchaser's right
to purchase such Lot under this Agreement derives.
(b) DEFINITIONS. As used in this Section 3, the following terms
shall have the following meanings:
FINANCING COST PER PIG shall be determined on a prospective rolling 12-
month basis and shall mean an amount equal to the quotient of (i) the sum
of the required payments of interest and principal (including any scheduled
sinking fund payments) to be made during the upcoming 12-month period with
respect to Purchaser's Debt, divided by (ii) Pigs Shipped.
JWA[1]OPERATING COST PER PIG shall be determined on a rolling 12-month
historical basis and shall mean an amount equal to the quotient of (i) the
sum of (A) all direct and indirect production, operating, selling, general,
administrative, and other expenses JWA[2]incurred by Association in the 12
months preceding the then present month of shipment as determined by
Association's accountants utilizing generally accepted accounting
principles consistently applied (excluding any provision for interest
expense or depreciation or amortization of the cost of buildings,
equipment, breeding stock or other capitalized costs which were purchased
as a result of Purchaser's Debt or as a result of the issuance of any
capital stock of Association to any third party), plus (B) the net cash
flow cost of all capital expenditures by Association (including any capital
sinking fund payments) for production facility and breeding stock
improvements and replacements in the 12 months preceding the then present
month of shipment as determined by Association's accountants, divided by
(ii) Pigs Shipped. The direct and indirect production and operating
expenses attributable to a Production Unit which is in the process of
commencing production shall not be included in the determination of
Operating Cost Per Pig, and shipments of pigs attributable to such
Production Unit shall not be included in Pigs Shipped, until such
Production Unit has completed one entire month of full production, shipping
pigs in each week thereof. The net cash flow with respect to capital
expenditures for production facility and breeding stock improvements and
replacements (which net cash flow shall be determined after taking into
account the breeding stock and production facility retirements attributable
to a Production Unit which is in the process of commencing production)
shall not be included in the determination of Operating Cost Per Pig until
the respective Production Unit has completed one entire month of full
production, shipping pigs in each week thereof.
PRODUCTION MARGIN shall mean an amount of up to $4.50, as determined by the
Board of Directors of Association, from time to time, in its sole and
absolute discretionJWA[3].
PIGS SHIPPED shall mean the number of Qualifying Pigs produced and shipped
from Association over the same 12-month period in determining the Operating
Cost Per Pig and the estimated number of Qualifying Pigs that will be
produced and shipped by Association over the 12-month period in determining
the Financing Cost Per Pig. For purposes of determining the Financing Cost
Per Pig, Pigs Shipped shall be equal to the product of (i) Association's
total estimated number of Qualifying Pigs to be produced and shipped by
Association during such 12-month period, multiplied by (ii) a fraction, the
numerator of which shall be the number of Production Units constructed by
Association with respect to the issuance of Class A Common Stock of
Association (including Class A Common Stock of the Association assigned or
transferred to Purchaser) from which the right of Purchaser to purchase
Lots of Qualifying Pigs under this Agreement derives, and the denominator
of which shall be the number of Production Units constructed by Association
with respect to JWA[4]all issuances of its Class A Common Stock. All
estimates relating to Pigs Shipped shall be made by Association using such
historical data and projections as are available to Association.
PRODUCTION UNIT shall mean the land and facilities necessary to house, feed
and care for a group of 2,450 sows and the attendant offspring thereof.
PURCHASER'S DEBT shall mean (i) the debt incurred by Association for the
Production Unit(s) constructed by Association with respect to the issuance
of Class A Common Stock of Association (including Class A Common Stock of
the Association assigned or transferred to Purchaser) from which the right
of Purchaser to purchase Lots of Qualifying Pigs under this Agreement
derives, including any debt incurred for purposes of financing the
acquisition of land for, and construction of, such Production Unit(s),
(ii) any debt incurred for the initial working capital requirements with
respect to the operation of such Production Unit(s), and (iii) any debt
incurred for purposes of refinancing any such debt.
4. PAYMENT OF PURCHASE PRICE. Association shall furnish to Purchaser, at
the time Association notifies Purchaser that a Lot is available for purchase by
Purchaser hereunder, an estimate of the total purchase price of the Qualifying
Pigs included in the Lot, and Purchaser shall, not less than one day prior to
the scheduled shipment date as specified in the notice by Association to
Purchaser, pay such estimated total purchase price to Association in cash, or by
such other means as may be acceptable to Association in its sole and absolute
discretion. Association shall have no obligation to commence transportation of
such Qualifying Pigs to Purchaser prior to full payment of such estimated total
purchase price for such Qualifying Pigs as herein provided. The actual total
purchase price of all Qualifying Pigs included in a Lot shall be based upon
weight at the time of loading and settlement of any adjustments shall be made
within five days following delivery.
5. WEIGHT ADJUSTMENT. The purchase price for each Qualifying Pig as
provided in Section 3 is for a Lot of Qualifying Pigs having an average weight
of 45 pounds. In the event that the average weight of the Qualifying Pigs in a
Lot sold to Purchaser exceeds 45 pounds, Purchaser shall pay Association an
additional twenty-five cents ($0.25) per pound per Qualifying Pig on the number
of pounds (not to exceed five pounds) that the Lot's average shipping weight per
pig exceeds 45 pounds, and an additional twenty cents ($0.20) per pound per
Qualifying Pig on the number of pounds (not to exceed ten pounds) that the Lot's
average shipping weight per pig exceeds 50 pounds. To the extent that the
average weight of the Qualifying Pigs in a Lot sold to Purchaser is less than 45
pounds, twenty-five cents ($0.25) per pound on the number of pounds that the
Lot's average shipping weight per pig is less than 45 pounds shall be deducted
from the purchase price that Purchaser is to pay to Association for each
Qualifying Pig. Purchaser shall have the right to, but shall not be obligated
to, purchase a Lot of Qualifying Pigs hereunder at an average weight of less
than 35 pounds per pig.
6. JWA[5]GENETIC QUALITY. Qualifying Pigs produced by Association will
be progeny from genetic stock selected by Association, from time to time, in its
sole and absolute discretion. Such selection of such genetic stock will be
determined and implemented by Association on a basis that reasonably would be
expected to produce Qualifying Pigs that are capable of producing market hogs
having carcasses that are responsive to consumer demand and thereby maximize the
sales price to be received therefore.
7. MANAGEMENT OF HEALTH AND NUTRITION. Association agrees to comply with
the following health and nutrition programs with respect to all pigs to be
purchased under this Agreement:
(a) Association shall dock tails within 48 hours of a pig's
birth.
(b) Association shall castrate male pigs within ten days of the pig's
birth.
(c) Association shall administer all vacines and antibiotic
treatments and perform such other procedures that are reasonably determined
by Association to be necessary or advisable with respect to a herd health
program.
(d) Association shall maintain Association's swine free from the
psuedorabies virus ("PRV") or any swine disease that would prohibit
interstate shipment of pigs produced by Association, or that might
otherwise materially impair Purchaser's ability to utilize the pigs to be
purchased under this Agreement. If, in the opinion of two veterinarians
selected by Association and reasonably acceptable to Purchaser, any of the
swine produced by Association or used in the production of feeder pigs for
delivery hereunder contracts PRV, Association shall have the opportunity to
cure such impairment within a reasonable period of time and to suspend, at
any time and from time to time, the sale and purchase of feeder pigs
hereunder until such time as said veterinarians determine that PRV no
longer exists.
(e) Association shall use a feeding regimen, feed products, and herd
health products developed or marketed by Farmland Industries, Inc., or any
of its affiliates.
8. RIGHT OF INSPECTION. Upon reasonable notice to Association, Purchaser
or its representative shall have the right to inspect Association's production
records to verify the genetic quality and management of nutrition and health
programs prescribed by this Agreement during normal business hours.
9. ADJUSTMENT FOR NON-QUALIFYING PIGS. Purchaser shall have the right to
inspect Purchaser's Lot of Qualifying Pigs prior to loading. In the event that,
after delivery of such Lot, Purchaser believes that any pig was not a Qualifying
Pig prior to loading (a "Subject Pig"), Purchaser shall notify Association by
telephone of such belief within one (1) business day following delivery as well
as promptly notify Association of such belief in the manner provided in Section
19 hereof. Association shall have the right to inspect any and all Subject Pigs
in investigation of Purchaser's belief, and thereafter Association and Purchaser
shall agree in good faith upon an appropriate adjustment, if any, with respect
to such Subject Pigs. Purchaser hereby acknowledges and agrees that such
adjustment described above shall be Purchaser's sole and exclusive remedy as
against Association arising out of the purchase hereunder of a pig that was not
a Qualifying Pig at the time of loading and that the failure of Association to
deliver Qualifying Pigs as otherwise required hereunder shall not give rise to a
right of Purchaser to terminate this Agreement. Furthermore, in no event shall
Purchaser reject delivery of a Lot of pigs hereunder, but in lieu thereof
Purchaser shall accept each delivery of a Lot of pigs hereunder and, with
respect to any and all pigs that Purchaser believes were not Qualifying Pigs
prior to loading, shall comply with the provisions of this Section 9 and, until
such adjustment, if any, is agreed upon by Association and Purchaser, shall, at
Purchaser's expense, feed, water, treat and care for any and all such pigs as if
Purchaser believed such pigs were Qualifying Pigs prior to loading.
10. HEALTH PERMITS. Association shall provide Purchaser, at Association's
expense, all health permits necessary to qualify all Qualifying Pigs for
interstate shipment.
11. WEIGHING CONDITIONS. All Lots of Qualifying Pigs shall be weighed at
Association's expense at a state-inspected scale in close proximity to
Association's production facility. A copy of all scale tickets will be provided
to Association and to Purchaser.
12. IDENTIFICATION. Association shall appropriately identify, prior to
shipment, all Qualifying Pigs in accordance with the rules that will allow
interstate shipment to the states to which the pigs are being shipped.
13. TRANSPORTATION OF PIGS. Qualifying Pigs shall be shipped to Purchaser
FOB shipping point. Association shall at Purchaser's expense arrange for
transportation of Qualifying Pigs from any of Association's production
facilities as determined by Association; provided, however, that Purchaser shall
pay such transportation costs no later than the time of delivery. Trucks shall
be thoroughly cleaned and disinfected prior to hauling any pigs from
Association's production facilities and after any previously hauled pigs.
14. TERM OF AGREEMENT. The term of this Agreement shall commence on the
date first written above and shall continue for 120 months after the month in
which the first Lot of Qualifying Pigs is shipped by Association to Purchaser
(or Purchaser's direct or indirect assignor or transferor) with respect to the
Class A Common Stock of the Association (including Class A Common Stock of the
Association assigned or transferred to Purchaser) from which the right of
Purchaser to purchase Lots of Qualifying Pigs under this Agreement derives,
subject to the following:
(a) In the event that Purchaser fails to purchase, pay for, and take
delivery of any two Lots (as defined herein or in any other agreement
between Purchaser and Association) when and as made available to Purchaser
in accordance with the terms of this Agreement, any other Feeder Pig
Purchase Agreement or any Weaned Pig Purchase Agreement between Purchaser
and Association, this Agreement shall terminate and Association shall have
the right to exercise its remedies as provided in Section 17 hereof;
provided, however, that in the event Purchaser owns ten or more shares of
capital stock of Association, this Agreement shall terminate and
Association shall have the right to exercise its remedies as provided in
Section 17 hereof only upon Purchaser failing to purchase, pay for, and
take delivery of a number of Lots (as defined herein or in any other
agreement between Purchaser and Association) when and as made available to
Purchaser in accordance with the terms of this Agreement, of any other
Feeder Pig Purchase Agreement or of any Weaned Pig Purchase Agreement
between Purchaser and Association equal to the sum of (i) the quotient
(rounded down to the nearest whole number) of (A) the number of shares of
capital stock owned by Purchaser, divided by (B) ten (10), plus (ii) two
(2).
(b) In the event of a material breach of any agreement or covenant of
Association contained in this Agreement, Purchaser may give written notice
of such breach to Association and, in the event that such breach is not
cured within a period (the "Cure Period") of thirty (30) days following
such notice of breach by Purchaser to Association, Purchaser shall have the
right to terminate this Agreement upon notice to Association, provided that
such notice of termination is given by Purchaser to Association within
thirty (30) days following the Cure Period.
(c) If the first Lot of Qualifying Pigs is not shipped to Purchaser
hereunder within twenty-four (24) months of the date of this Agreement,
Purchaser shall have the right to terminate this Agreement upon notice to
Association, provided that such notice of termination is given by Purchaser
to Association within three (3) months after the expiration of such twenty-
four (24) month period; provided, however, that any such termination shall
not terminate or otherwise affect any other Feeder Pig Purchase Agreement
or any Weaned Pig Purchase Agreement between Purchaser and Association.
(d) In the event Purchaser assigns or transfers, in accordance with
the Articles of Incorporation and Bylaws of Association, all shares of
Class A Common Stock of Association from which Purchaser's right to
purchase Lots under this Agreement derives, this Agreement automatically
shall terminate.
(e) This Agreement shall be extended automatically for
succeeding and consecutive twelve (12) month terms unless Purchaser
gives to Association, not less than twelve (12) months prior to the
expiration of the initial term or any extended term hereof, notice
that Purchaser desires to terminate this Agreement as of the
expiration of such initial or extended term.
Notwithstanding the foregoing, however, the rights of Association to collect
damages and to exercise its remedies under Section 17 hereunder shall survive
any termination of this Agreement.
15. WARRANTIES. ASSOCIATION MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED
TO PURCHASER OTHER THAN AS HEREIN EXPRESSLY PROVIDED, AND SPECIFICALLY (A) MAKES
NO WARRANTY AS TO ANY SPECIFIC LEVEL OF PERFORMANCE WITH RESPECT TO ANY PIGS
SOLD HEREUNDER, AND (B) DISCLAIMS ANY WARRANTIES OF MERCHANTABILITY OR OF
FITNESS FOR A PARTICULAR PURPOSE.
16. FORCE MAJEURE. Either party to this Agreement shall be relieved of
its responsibility and obligations hereunder during any period when performance
is commercially impossible because of reasons beyond its control such as, but
not limited to, fire, explosion, strike, accident, governmental regulations or
intervention, and acts of God.
17. DEFAULT BY PURCHASER; GRANT OF SECURITY INTEREST. Purchaser
acknowledges that the damages suffered by Association in the event of any
failure by Purchaser to purchase, pay for, and take delivery of any Lot when and
as made available to Purchaser in accordance with the terms hereof shall equal,
and Purchaser shall be liable to Association for and shall pay to Association
upon demand, the sum of the following: (a) the difference between the price
payable by Purchaser hereunder for Qualifying Pigs included in such Lot and the
then current market price (as of the scheduled shipment date for such Lot) for
Qualifying Pigs as quoted in any independent industry publication or source
selected by Association, multiplied by the number of Qualifying Pigs in such Lot
that Purchaser has failed to purchase, pay for, and take delivery of, in
accordance with the terms hereof; plus (b) administrative and other costs and
expenses relating to such Lot, which are hereby agreed to equal the amount of
$3,000; plus (c) costs of collection, enforcement, and prosecution of
Association's rights and remedies hereunder or otherwise arising, whether or not
involving a case, action, or other proceeding before any state or federal court
or other body, including, but not limited to, reasonable attorney's fees,
collection agency fees, and other costs of collection; provided, however, that
to the extent applicable law prohibits collection of attorney's fees and/or
costs, this subsection (c) shall be null and void to the extent of such
prohibition, except to preserve Association's rights pursuant to 11 U.S.C.
' 506(b). During any period in which Purchaser has been notified that it is
obligated to pay an amount for damages pursuant to the immediately preceding
sentence and has not paid such amount within three days of such demand,
Association shall not make any future Lots available to Purchaser for purchase
hereunder or under any other Feeder Pig Purchase Agreement between Purchaser and
Association until Purchaser has paid such amount. In the event that Purchaser
is not made available any Lot for purchase hereunder pursuant to the immediately
preceding sentence that Association otherwise would have made available to
Purchaser for purchase hereunder, then Purchaser shall be deemed to have failed
to purchase, pay for, and take delivery of such Lot, and Purchaser shall be
liable for damages with respect to such Lot computed in accordance with the
first sentence of this Section. Upon any termination of this Agreement,
Purchaser's liability for damages incurred by Association with respect to
Purchaser's obligation to purchase, pay for and take delivery of Lots made
available to the Purchaser shall be limited to the damages with respect to such
Lots computed in accordance with the preceding provisions of this Section 17,
and Purchaser shall not be liable for any other damages for the failure to
purchase, pay for or take delivery of Lots hereunder after the termination of
this Agreement.
As security for the due and punctual performance of all of Purchaser's
obligations under this Agreement, Purchaser hereby pledges and grants to
Association, its successors and assigns, a security interest in and lien upon
any and all interest (the "Coop Interest") Purchaser now has or hereafter may
have in Association, including, without limitation, any capital stock or other
rights or interests owned or held by Purchaser, or to which Purchaser is
entitled, as a stockholder of Association and any interest of Purchaser in and
to any dividends, capital or other credits, patronage or other distributions, or
participations arising therefrom. Purchaser shall also deliver and endorse such
stock or other certificates and execute and deliver such financing statements
and other instruments (including, without limitation, stock powers duly endorsed
in blank), and take such other action, as Association may request for purposes
of perfecting or protecting the security interest granted under this Section 17.
Purchaser represents, warrants and agrees that the pledge of the Coop Interest
pursuant to this Section 17 creates a valid and perfected first priority
security interest in the Coop Interest in favor of Association, subordinate only
to any permissible pledge or other security interest granted by Purchaser to any
financial institution for purposes of securing a loan by such financial
institution to Purchaser, the proceeds of which are used to finance Purchaser's
acquisition of the Coop Interest. Notwithstanding the foregoing, however,
Association may release such pledge and grant of a security interest for good
cause, as determined in Association's sole and absolute discretion.
If Purchaser shall be in default under this Agreement, Association may
exercise any and all rights and remedies available to Association hereunder,
under the Articles of Incorporation or Bylaws of Association, under any
applicable Uniform Commercial Code, or otherwise at law or in equity. The
rights and remedies afforded to Association hereunder shall be cumulative and in
addition to, and not in limitation of, any rights and remedies which Association
may otherwise have under the Articles of Incorporation or Bylaws of Association
or under applicable law, including any applicable Uniform Commercial Code. The
exercise or partial exercise of any right or remedy of Association hereunder or
under the Articles of Incorporation or Bylaws of Association or under applicable
law shall not preclude or prejudice the further exercise of that right or remedy
or the exercise of any other right or remedy of Association. No delay or
omission on the part of Association in exercising any right hereunder or
otherwise shall operate as a waiver of such right. A waiver on any one occasion
shall not be construed as a bar or waiver of any right or remedy on any future
occasion.
18. ARBITRATION. In the event of any controversy arising out of or
relating to this Agreement, or any breach hereof, other than any controversy
arising out of or relating to Section 17 hereof or the exercise of any rights or
remedies thereunder, the parties agree to submit the dispute to binding
arbitration in accordance with the Commercial Arbitration Rules then in force of
the American Arbitration Association. Such arbitration shall be initiated by
either party by notifying the other party in writing and requesting a panel of
five (5) arbitrators from the American Arbitration Association, which
arbitrators shall be individuals skilled in the legal and business aspects of
the subject matter of this Agreement and of the dispute. Alternate strikes
shall be made to the panel commencing with the party requesting the arbitration
until one individual remains. Such individual shall be the arbitrator for the
controversy. The party requesting the arbitration shall notify the arbitrator
who shall hold a hearing(s) within 60 days of the notice. Any hearing(s) shall
take place in Denver, Colorado, or such other location as the parties may agree
upon. The arbitrator shall render a decision, including a written opinion in
support thereof, within 30 days after the conclusion of the hearing(s), which
decision shall be final and binding upon the parties without right of appeal.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. Costs of the arbitration will be assessed by the
arbitrator against either or both of the parties, and will be paid promptly by
the party or parties so assessed.
19. NOTICES. Any notice given or required to be given hereunder shall be
deemed to have been effectively given when delivered personally or sent by
United States certified or registered mail, return receipt requested, postage
prepaid, addressed or transmitted to Association at Alliance Farms Cooperative
Association, c/o Farmland Industries, Inc., 3315 North Oak Trafficway,
Department 47, Kansas City, Missouri 64116, Attention: Mr. Wayne N. Snyder, and
to Purchaser at the address set forth below Purchaser's signature, and/or to
such other (or additional) address(es) requested by a notice given in accordance
with this Section.
20. ENTIRE AGREEMENT. This Agreement contains all of the terms agreed
upon by the parties with respect to the subject matter hereof and supersedes all
prior agreements of the parties as to the subject matter hereof; provided,
however, any and all other Feeder Pig Purchase Agreements between Purchaser and
Association respecting issuances of capital stock of Association (including
capital stock of the Association assigned or transferred to Purchaser) from
which the right of Purchaser to purchase Lots under this Agreement does not
derive, and any and all Weaned Pig Purchase Agreements between Purchaser and
Association, shall not be superseded, modified or otherwise affected by this
Agreement. This Agreement may not be modified except in writing, signed by the
parties hereto, that specifically references this Agreement.
21. ASSIGNMENT. This Agreement may not be assigned by either party
without prior written consent of the other party; provided, however, that
Association may assign Association's rights herein and hereto to any lender that
may provide financing to Association in connection with the construction of
facilities or the operation thereof, or both. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
heirs, legal representatives, successors, and permitted assigns.
22. CONSTRUCTION. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Colorado. The parties hereto hereby
agree that if any part, term or provision of this Agreement is held by a court
of competent jurisdiction to be illegal or unenforceable or in conflict with any
controlling state law, the validity of the remaining parts, terms and provisions
of this Agreement shall not be affected, and the rights and obligations of the
parties shall be construed and enforced as if this Agreement did not contain the
particular part, term or provision held to be illegal or unenforceable or in
conflict with any controlling state law. This Agreement and the transactions
contemplated hereunder constitute commercial, and not consumer, transactions.
[The remainder of this page intentionally has been left blank]
THIS AGREEMENT CONTAINS A BINDING ARBITRATION CLAUSE THAT MAY BE ENFORCED
BY THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Agreement effective the
day and year first above written.
ASSOCIATION: PURCHASER:
ALLIANCE FARMS COOPERATIVE
ASSOCIATION
By: By:
Name: Name:
Title: Title:
Purchaser's Address:
EXHIBIT C
WEANED PIG PURCHASE AGREEMENT
THIS WEANED PIG PURCHASE AGREEMENT (this "Agreement") is entered into as of
this day of , 199 , by and between ALLIANCE FARMS
COOPERATIVE ASSOCIATION (hereinafter "Association"), and
(hereinafter "Purchaser").
WHEREAS, Association is or will be engaged in the production and sale of
weaned pigs; and
WHEREAS, Purchaser is a purchaser of weaned pigs, possesses expertise in
swine production and management, and desires to enter into this Agreement for
membership purposes of Association;
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
the parties hereto agree as follows:
1. PURCHASE/SALE OF WEANED PIGS.
(A) GENERAL. Upon and subject to all terms and conditions set forth
in this Agreement, Purchaser shall purchase from Association, and Association
shall sell to Purchaser, Qualifying Pigs (as defined in Section 2) produced by
Association during the term of this Agreement in lots (hereinafter "Lot" or
"Lots") of no less than 925, and no more than 1,025, Qualifying Pigs per Lot, as
determined by Association, which Lots shall be made available to Purchaser on a
rotating schedule with other members of Association owning Class B Common Stock
(as defined in Article SIXTH of Association's Articles of Incorporation), as
such rotating schedule is determined and implemented by Association on any
reasonable basis.
(B) SCHEDULE. Purchaser acknowledges that Association intends to
conduct a blind drawing, immediately following the consummation of each and
every offering of Class B Common Stock by Association, for purposes of adjusting
such rotating schedule as warranted by the resulting changes in the members of
the Association.
(C) AVAILABILITY. The number of Lots made available to Purchaser and
the frequency of availability of such Lots will be based upon Purchaser's
proportionate equity interest in Association with respect to Association's Class
B Common Stock. Purchaser acknowledges that Lots will not be made available to
Purchaser under this Agreement until Qualifying Pigs are produced and available
from the facilities constructed using the proceeds of the issuance of Class B
Common Stock of Association (including Class B Common Stock of the Association
assigned or transferred to Purchaser) from which the right of Purchaser to
purchase such Lots under this Agreement derives, and that the number of Lots
made available to Purchaser and the frequency of availability of such Lots will
be subject to actual production of Qualifying Pigs from all facilities of
Association. Association shall give notice to Purchaser when a Lot is available
for purchase by Purchaser hereunder, which notice shall specify the anticipated
number of Qualifying Pigs in such Lot and the scheduled shipment date.
(D) EXCESS PRODUCTION. The production of weaned pigs is anticipated
to produce, on a prospective rolling 12-month basis, approximately two and
seven-tenths (2.7) Lots of Qualifying Pigs per share of Class B Common Stock of
Association owned by members of Association for which Lots are to be made
available for purchase hereunder. To the extent that the production of weaned
pigs exceeds such anticipated production, Association shall either sell such
excess production to any person (including a member of Association), at a price
as shall be determined by Association in good faith, or retain such excess
production for Association's own purposes, in lieu of selling such excess
production to the members of Association pursuant to the Weaned Pig Purchase
Agreements between Association and the members of Association.
2. QUALIFYING PIGS. For purposes of this Agreement, the term "Qualifying
Pig" shall mean an individual weaned pig that is not utility grade, that has a
minimum weight of at least six (6) pounds at point in time of delivery, that has
the genetic characteristics described in Section 6, that has been managed in
accordance with Section 7, and that has a significant likelihood to perform
economically and reach market weight efficiently.
3. PURCHASE PRICE OF PIGS.
(a) PRICE. The purchase price for each Qualifying Pig purchased by
Purchaser under this Agreement shall be an amount equal to the sum of the
following:
Financing Cost Per Pig, plus
Operating Cost Per Pig, plus
Production Margin.
Purchaser acknowledges that Association has constructed, or is in the process of
constructing, or both, Production Units as a result of previous offers and sales
of shares of its capital stock and that Association from time to time may
construct additional Production Units as a result of additional offers and sales
of shares of its capital stock. In light of the foregoing, the determination of
the Financing Cost Per Pig portion of the purchase price for a Qualifying Pig
hereunder shall be made separately with respect to each Lot in relation to the
Production Unit(s) that were constructed using the proceeds of the issuance of
Class B Common Stock of Association (including Class B Common Stock of the
Association assigned or transferred to Purchaser) from which Purchaser's right
to purchase such Lot under this Agreement derives.
(b) DEFINITIONS. As used in this Section 3, the following terms
shall have the following meanings:
FINANCING COST PER PIG shall be determined on a prospective rolling 12-
month basis and shall mean an amount equal to the quotient of (i) the sum
of the required payments of interest and principal (including any scheduled
sinking fund payments) to be made during the upcoming 12-month period with
respect to Purchaser's Debt, divided by (ii) Pigs Shipped.
OPERATING COST PER PIG shall be determined on a rolling five-month
historical basis and shall mean an amount equal to the quotient of (i) the
sum of (A) all direct and indirect production, operating, selling, general,
administrative, and other expenses incurred by Association in the five
months preceding the then present month of shipment as determined by
Association's accountants utilizing generally accepted accounting
principles consistently applied (excluding any provision for interest
expense or depreciation or amortization of the cost of buildings,
equipment, breeding stock or other capitalized costs which were purchased
as a result of Purchaser's Debt or as a result of the issuance of any
capital stock of Association to any third party), plus (B) the net cash
flow cost of all capital expenditures by Association (including any capital
sinking fund payments) for production facility and breeding stock
improvements and replacements in the five months preceding the then present
month of shipment as determined by Association's accountants, divided by
(ii) Pigs Shipped. The direct and indirect production and operating
expenses attributable to a Production Unit which is in the process of
commencing production shall not be included in the determination of
Operating Cost Per Pig, and shipments of pigs attributable to such
Production Unit shall not be included in Pigs Shipped, until such
Production Unit has completed one entire month of full production, shipping
pigs in each week thereof. The net cash flow with respect to capital
expenditures for production facility and breeding stock improvements and
replacements (which net cash flow shall be determined after taking into
account the breeding stock and production facility retirements attributable
to a Production Unit which is in the process of commencing production)
shall not be included in the determination of Operating Cost Per Pig until
the respective Production Unit has completed one entire month of full
production, shipping pigs in each week thereof.
PRODUCTION MARGIN shall mean an amount of up to $4.50, as determined by the
Board of Directors of Association, from time to time, in its sole and
absolute discretion.
PIGS SHIPPED shall mean the number of Qualifying Pigs produced and shipped
from Association over the same five-month period in determining the
Operating Cost Per Pig and the estimated number of Qualifying Pigs that
will be produced and shipped by Association over the 12-month period in
determining the Financing Cost Per Pig. For purposes of determining the
Financing Cost Per Pig, Pigs Shipped shall be equal to the product of (i)
Association's total estimated number of Qualifying Pigs to be produced and
shipped by Association during such 12-month period, multiplied by (ii) a
fraction, the numerator of which shall be the number of Production Units
constructed by Association with respect to the issuance of Class B Common
Stock of Association (including Class B Common Stock of the Association
assigned or transferred to Purchaser) from which the right of Purchaser to
purchase Lots of Qualifying Pigs under this Agreement derives, and the
denominator of which shall be the number of Production Units constructed by
Association with respect to all issuances of its Class B Common Stock. All
estimates relating to Pigs Shipped shall be made by Association using such
historical data and projections as are available to Association.
PRODUCTION UNIT shall mean the land and facilities necessary to house, feed
and care for a group of 2,450 sows and the attendant offspring thereof.
PURCHASER'S DEBT shall mean (i) the debt incurred by Association for the
Production Unit(s) constructed by Association with respect to the issuance
of Class B Common Stock of Association (including Class B Common Stock of
the Association assigned or transferred to Purchaser) from which the right
of Purchaser to purchase Lots of Qualifying Pigs under this Agreement
derives, including any debt incurred for purposes of financing the
acquisition of land for, and construction of, such Production Unit(s),
(ii) any debt incurred for the initial working capital requirements with
respect to the operation of such Production Unit(s), and (iii) any debt
incurred for purposes of refinancing any such debt.
4. PAYMENT OF PURCHASE PRICE. Association shall furnish to Purchaser, at
the time Association notifies Purchaser that a Lot is available for purchase by
Purchaser hereunder, an estimate of the total purchase price of the Qualifying
Pigs included in the Lot, and Purchaser shall, not less than one day prior to
the scheduled shipment date as specified in the notice by Association to
Purchaser, pay such estimated total purchase price to Association in cash, or by
such other means as may be acceptable to Association in its sole and absolute
discretion. Association shall have no obligation to commence transportation of
such Qualifying Pigs to Purchaser prior to full payment of such estimated total
purchase price for such Qualifying Pigs as herein provided. The actual total
purchase price of all Qualifying Pigs included in a Lot shall be based upon
weight at the time of loading and settlement of any adjustments shall be made
within five days following delivery.
5. WEIGHT ADJUSTMENT. The purchase price for each Qualifying Pig as
provided in Section 3 is for a Lot of Qualifying Pigs having an average weight
of between 8 pounds and 12 pounds. In the event that the average weight of the
Qualifying Pigs in a Lot sold to Purchaser exceeds 12 pounds, Purchaser shall
pay Association an additional one dollar ($1.00) per pound per Qualifying Pig on
the number of pounds that the Lot's average shipping weight per pig exceeds 12
pounds. To the extent that the average weight of the Qualifying Pigs in a Lot
sold to Purchaser is less than 8 pounds, one dollar ($1.00) per pound on the
number of pounds that the Lot's average shipping weight per pig is less than 8
pounds shall be deducted from the purchase price that Purchaser is to pay to
Association for each Qualifying Pig. Purchaser shall have the right to, but
shall not be obligated to, purchase a Lot of Qualifying Pigs hereunder at an
average weight of less than 8 pounds per pig.
6. GENETIC QUALITY. Qualifying Pigs produced by Association will be
progeny from genetic stock selected by Association, from time to time, in its
sole and absolute discretion. Such selection of such genetic stock will be
determined and implemented by Association on a basis that reasonably would be
expected to produce Qualifying Pigs that are capable of producing market hogs
having carcasses that are responsive to consumer demand and thereby maximize the
sales price to be received therefore.
7. MANAGEMENT OF HEALTH AND NUTRITION. Association agrees to comply with
the following health and nutrition programs with respect to all pigs to be
purchased under this Agreement:
(a) Association shall dock tails within 48 hours of a pig's
birth.
(b) Association shall castrate male pigs within ten days of the pig's
birth.
(c) Association shall administer all vacines and antibiotic
treatments and perform such other procedures that are reasonably determined
by Association to be necessary or advisable with respect to a herd health
program.
(d) Association shall maintain Association's swine free from the
psuedorabies virus ("PRV") or any swine disease that would prohibit
interstate shipment of pigs produced by Association, or that might
otherwise materially impair Purchaser's ability to utilize the pigs to be
purchased under this Agreement. If, in the opinion of two veterinarians
selected by Association and reasonably acceptable to Purchaser, any of the
swine produced by Association or used in the production of weaned pigs for
delivery hereunder contracts PRV, Association shall have the opportunity to
cure such impairment within a reasonable period of time and to suspend, at
any time and from time to time, the sale and purchase of weaned pigs
hereunder until such time as said veterinarians determine that PRV no
longer exists.
(e) Association shall use a feeding regimen, feed products, and herd
health products developed or marketed by Farmland Industries, Inc., or any
of its affiliates.
8. RIGHT OF INSPECTION. Upon reasonable notice to Association, Purchaser
or its representative shall have the right to inspect Association's production
records to verify the genetic quality and management of nutrition and health
programs prescribed by this Agreement during normal business hours.
9. ADJUSTMENT FOR NON-QUALIFYING PIGS. Purchaser shall have the right to
inspect Purchaser's Lot of Qualifying Pigs prior to loading. In the event that,
after delivery of such Lot, Purchaser believes that any pig was not a Qualifying
Pig prior to loading (a "Subject Pig"), Purchaser shall notify Association by
telephone of such belief within one (1) business day following delivery as well
as promptly notify Association of such belief in the manner provided in Section
19 hereof. Association shall have the right to inspect any and all Subject Pigs
in investigation of Purchaser's belief, and thereafter Association and Purchaser
shall agree in good faith upon an appropriate adjustment, if any, with respect
to such Subject Pigs. Purchaser hereby acknowledges and agrees that such
adjustment described above shall be Purchaser's sole and exclusive remedy as
against Association arising out of the purchase hereunder of a pig that was not
a Qualifying Pig at the time of loading and that the failure of Association to
deliver Qualifying Pigs as otherwise required hereunder shall not give rise to a
right of Purchaser to terminate this Agreement. Furthermore, in no event shall
Purchaser reject delivery of a Lot of pigs hereunder, but in lieu thereof
Purchaser shall accept each delivery of a Lot of pigs hereunder and, with
respect to any and all pigs that Purchaser believes were not Qualifying Pigs
prior to loading, shall comply with the provisions of this Section 9 and, until
such adjustment, if any, is agreed upon by Association and Purchaser, shall, at
Purchaser's expense, feed, water, treat and care for any and all such pigs as if
Purchaser believed such pigs were Qualifying Pigs prior to loading.
10. HEALTH PERMITS. Association shall provide Purchaser, at Association's
expense, all health permits necessary to qualify all Qualifying Pigs for
interstate shipment.
11. WEIGHING CONDITIONS. All Lots of Qualifying Pigs shall be weighed at
Association's expense at a state-inspected scale in close proximity to
Association's production facility. A copy of all scale tickets will be provided
to Association and to Purchaser.
12. IDENTIFICATION. Association shall appropriately identify, prior to
shipment, all Qualifying Pigs in accordance with the rules that will allow
interstate shipment to the states to which the pigs are being shipped.
13. TRANSPORTATION OF PIGS. Qualifying Pigs shall be shipped to Purchaser
FOB shipping point. Association shall at Purchaser's expense arrange for
transportation of Qualifying Pigs from any of Association's production
facilities as determined by Association; provided, however, that Purchaser shall
pay such transportation costs no later than the time of delivery. Trucks shall
be thoroughly cleaned and disinfected prior to hauling any pigs from
Association's production facilities and after any previously hauled pigs.
14. TERM OF AGREEMENT. The term of this Agreement shall commence on the
date first written above and shall continue for 120 months after the month in
which the first Lot of Qualifying Pigs is shipped by Association to Purchaser
(or Purchaser's direct or indirect assignor or transferor) with respect to the
Class B Common Stock of the Association (including Class B Common Stock of the
Association assigned or transferred to Purchaser) from which the right of
Purchaser to purchase Lots of Qualifying Pigs under this Agreement derives,
subject to the following:
(a) In the event that Purchaser fails to purchase, pay for, and take
delivery of any two Lots (as defined herein or in any other agreement
between Purchaser and Association) when and as made available to Purchaser
in accordance with the terms of this Agreement, any other Weaned Pig
Purchase Agreement or any Feeder Pig Purchase Agreement between Purchaser
and Association, this Agreement shall terminate and Association shall have
the right to exercise its remedies as provided in Section 17 hereof;
provided, however, that in the event Purchaser owns ten or more shares of
capital stock of Association, this Agreement shall terminate and
Association shall have the right to exercise its remedies as provided in
Section 17 hereof only upon Purchaser failing to purchase, pay for, and
take delivery of a number of Lots (as defined herein or in any other
agreement between Purchaser and Association) when and as made available to
Purchaser in accordance with the terms of this Agreement, of any other
Weaned Pig Purchase Agreement or of any Feeder Pig Purchase Agreement
between Purchaser and Association equal to the sum of (i) the quotient
(rounded down to the nearest whole number) of (A) the number of shares of
capital stock owned by Purchaser, divided by (B) ten (10), plus (ii) two
(2).
(b) In the event of a material breach of any agreement or covenant of
Association contained in this Agreement, Purchaser may give written notice
of such breach to Association and, in the event that such breach is not
cured within a period (the "Cure Period") of thirty (30) days following
such notice of breach by Purchaser to Association, Purchaser shall have the
right to terminate this Agreement upon notice to Association, provided that
such notice of termination is given by Purchaser to Association within
thirty (30) days following the Cure Period.
(c) If the first Lot of Qualifying Pigs is not shipped to Purchaser
hereunder within twenty-four (24) months of the date of this Agreement,
Purchaser shall have the right to terminate this Agreement upon notice to
Association, provided that such notice of termination is given by Purchaser
to Association within three (3) months after the expiration of such twenty-
four (24) month period; provided, however, that any such termination shall
not terminate or otherwise affect any other Weaned Pig Purchase Agreement
or any Feeder Pig Purchase Agreement between Purchaser and Association.
(d) In the event Purchaser assigns or transfers, in accordance with
the Articles of Incorporation and Bylaws of Association, all shares of
Class B Common Stock of Association from which Purchaser's right to
purchase Lots under this Agreement derives, this Agreement automatically
shall terminate.
(e) This Agreement shall be extended automatically for
succeeding and consecutive twelve (12) month terms unless Purchaser
gives to Association, not less than twelve (12) months prior to the
expiration of the initial term or any extended term hereof, notice
that Purchaser desires to terminate this Agreement as of the
expiration of such initial or extended term.
Notwithstanding the foregoing, however, the rights of Association to collect
damages and to exercise its remedies under Section 17 hereunder shall survive
any termination of this Agreement.
15. WARRANTIES. ASSOCIATION MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED
TO PURCHASER OTHER THAN AS HEREIN EXPRESSLY PROVIDED, AND SPECIFICALLY (A) MAKES
NO WARRANTY AS TO ANY SPECIFIC LEVEL OF PERFORMANCE WITH RESPECT TO ANY PIGS
SOLD HEREUNDER, AND (B) DISCLAIMS ANY WARRANTIES OF MERCHANTABILITY OR OF
FITNESS FOR A PARTICULAR PURPOSE.
16. FORCE MAJEURE. Either party to this Agreement shall be relieved of
its responsibility and obligations hereunder during any period when performance
is commercially impossible because of reasons beyond its control such as, but
not limited to, fire, explosion, strike, accident, governmental regulations or
intervention, and acts of God.
17. DEFAULT BY PURCHASER; GRANT OF SECURITY INTEREST. Purchaser
acknowledges that the damages suffered by Association in the event of any
failure by Purchaser to purchase, pay for, and take delivery of any Lot when and
as made available to Purchaser in accordance with the terms hereof shall equal,
and Purchaser shall be liable to Association for and shall pay to Association
upon demand, the sum of the following: (a) the difference between the price
payable by Purchaser hereunder for Qualifying Pigs included in such Lot and the
then current market price (as of the scheduled shipment date for such Lot) for
Qualifying Pigs as quoted in any independent industry publication or source
selected by Association, multiplied by the number of Qualifying Pigs in such Lot
that Purchaser has failed to purchase, pay for, and take delivery of, in
accordance with the terms hereof; plus (b) administrative and other costs and
expenses relating to such Lot, which are hereby agreed to equal the amount of
$3,000; plus (c) costs of collection, enforcement, and prosecution of
Association's rights and remedies hereunder or otherwise arising, whether or not
involving a case, action, or other proceeding before any state or federal court
or other body, including, but not limited to, reasonable attorney's fees,
collection agency fees, and other costs of collection; provided, however, that
to the extent applicable law prohibits collection of attorney's fees and/or
costs, this subsection (c) shall be null and void to the extent of such
prohibition, except to preserve Association's rights pursuant to 11 U.S.C.
' 506(b). During any period in which Purchaser has been notified that it is
obligated to pay an amount for damages pursuant to the immediately preceding
sentence and has not paid such amount within three days of such demand,
Association shall not make any future Lots available to Purchaser for purchase
hereunder or under any other Weaned Pig Purchase Agreement between Purchaser and
Association until Purchaser has paid such amount. In the event that Purchaser
is not made available any Lot for purchase hereunder pursuant to the immediately
preceding sentence that Association otherwise would have made available to
Purchaser for purchase hereunder, then Purchaser shall be deemed to have failed
to purchase, pay for, and take delivery of such Lot, and Purchaser shall be
liable for damages with respect to such Lot computed in accordance with the
first sentence of this Section. Upon any termination of this Agreement,
Purchaser's liability for damages incurred by Association with respect to
Purchaser's obligation to purchase, pay for and take delivery of Lots made
available to the Purchaser shall be limited to the damages with respect to such
Lots computed in accordance with the preceding provisions of this Section 17,
and Purchaser shall not be liable for any other damages for the failure to
purchase, pay for or take delivery of Lots hereunder after the termination of
this Agreement.
As security for the due and punctual performance of all of Purchaser's
obligations under this Agreement, Purchaser hereby pledges and grants to
Association, its successors and assigns, a security interest in and lien upon
any and all interest (the "Coop Interest") Purchaser now has or hereafter may
have in Association, including, without limitation, any capital stock or other
rights or interests owned or held by Purchaser, or to which Purchaser is
entitled, as a stockholder of Association and any interest of Purchaser in and
to any dividends, capital or other credits, patronage or other distributions, or
participations arising therefrom. Purchaser shall also deliver and endorse such
stock or other certificates and execute and deliver such financing statements
and other instruments (including, without limitation, stock powers duly endorsed
in blank), and take such other action, as Association may request for purposes
of perfecting or protecting the security interest granted under this Section 17.
Purchaser represents, warrants and agrees that the pledge of the Coop Interest
pursuant to this Section 17 creates a valid and perfected first priority
security interest in the Coop Interest in favor of Association, subordinate only
to any permissible pledge or other security interest granted by Purchaser to any
financial institution for purposes of securing a loan by such financial
institution to Purchaser, the proceeds of which are used to finance Purchaser's
acquisition of the Coop Interest. Notwithstanding the foregoing, however,
Association may release such pledge and grant of a security interest for good
cause, as determined in Association's sole and absolute discretion.
If Purchaser shall be in default under this Agreement, Association may
exercise any and all rights and remedies available to Association hereunder,
under the Articles of Incorporation or Bylaws of Association, under any
applicable Uniform Commercial Code, or otherwise at law or in equity. The
rights and remedies afforded to Association hereunder shall be cumulative and in
addition to, and not in limitation of, any rights and remedies which Association
may otherwise have under the Articles of Incorporation or Bylaws of Association
or under applicable law, including any applicable Uniform Commercial Code. The
exercise or partial exercise of any right or remedy of Association hereunder or
under the Articles of Incorporation or Bylaws of Association or under applicable
law shall not preclude or prejudice the further exercise of that right or remedy
or the exercise of any other right or remedy of Association. No delay or
omission on the part of Association in exercising any right hereunder or
otherwise shall operate as a waiver of such right. A waiver on any one occasion
shall not be construed as a bar or waiver of any right or remedy on any future
occasion.
18. ARBITRATION. In the event of any controversy arising out of or
relating to this Agreement, or any breach hereof, other than any controversy
arising out of or relating to Section 17 hereof or the exercise of any rights or
remedies thereunder, the parties agree to submit the dispute to binding
arbitration in accordance with the Commercial Arbitration Rules then in force of
the American Arbitration Association. Such arbitration shall be initiated by
either party by notifying the other party in writing and requesting a panel of
five (5) arbitrators from the American Arbitration Association, which
arbitrators shall be individuals skilled in the legal and business aspects of
the subject matter of this Agreement and of the dispute. Alternate strikes
shall be made to the panel commencing with the party requesting the arbitration
until one individual remains. Such individual shall be the arbitrator for the
controversy. The party requesting the arbitration shall notify the arbitrator
who shall hold a hearing(s) within 60 days of the notice. Any hearing(s) shall
take place in Denver, Colorado, or such other location as the parties may agree
upon. The arbitrator shall render a decision, including a written opinion in
support thereof, within 30 days after the conclusion of the hearing(s), which
decision shall be final and binding upon the parties without right of appeal.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. Costs of the arbitration will be assessed by the
arbitrator against either or both of the parties, and will be paid promptly by
the party or parties so assessed.
19. NOTICES. Any notice given or required to be given hereunder shall be
deemed to have been effectively given when delivered personally or sent by
United States certified or registered mail, return receipt requested, postage
prepaid, addressed or transmitted to Association at Alliance Farms Cooperative
Association, c/o Farmland Industries, Inc., 3315 North Oak Trafficway,
Department 47, Kansas City, Missouri 64116, Attention: Mr. Wayne N. Snyder, and
to Purchaser at the address set forth below Purchaser's signature, and/or to
such other (or additional) address(es) requested by a notice given in accordance
with this Section.
20. ENTIRE AGREEMENT. This Agreement contains all of the terms agreed
upon by the parties with respect to the subject matter hereof and supersedes all
prior agreements of the parties as to the subject matter hereof; provided,
however, any and all other Weaned Pig Purchase Agreements between Purchaser and
Association respecting issuances of capital stock of Association from which the
right of Purchaser to purchase Lots under this Agreement does not derive, and
any and all Feeder Pig Purchase Agreements between Purchaser and Association,
shall not be superseded, modified or otherwise affected by this Agreement. This
Agreement may not be modified except in writing, signed by the parties hereto,
that specifically references this Agreement.
21. ASSIGNMENT. This Agreement may not be assigned by either party
without prior written consent of the other party; provided, however, that
Association may assign Association's rights herein and hereto to any lender that
may provide financing to Association in connection with the construction of
facilities or the operation thereof, or both. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
heirs, legal representatives, successors, and permitted assigns.
22. CONSTRUCTION. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Colorado. The parties hereto hereby
agree that if any part, term or provision of this Agreement is held by a court
of competent jurisdiction to be illegal or unenforceable or in conflict with any
controlling state law, the validity of the remaining parts, terms and provisions
of this Agreement shall not be affected, and the rights and obligations of the
parties shall be construed and enforced as if this Agreement did not contain the
particular part, term or provision held to be illegal or unenforceable or in
conflict with any controlling state law. This Agreement and the transactions
contemplated hereunder constitute commercial, and not consumer, transactions.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION CLAUSE THAT MAY BE ENFORCED
BY THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Agreement effective the
day and year first above written.
ASSOCIATION: PURCHASER:
ALLIANCE FARMS COOPERATIVE
ASSOCIATION
By: By:
Name: Name:
Title: Title:
Purchaser's Address:
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant is organized under the provisions of article 55 of title 7
of the Colorado Revised Statutes (the "Colorado Cooperative Association Law").
Section 7-55-107.5 of the Colorado Cooperative Association Law provides that
cooperative associations shall have the same powers, rights, and obligations and
shall be subject to the same limitations as apply to corporations for profit as
set forth in article 109 of the Colorado Business Corporation Act. Article 109
of the Colorado Business Corporation Act provides for the indemnification by a
corporation of its officers, directors and certain other persons as follows:
7-109-101. DEFINITIONS. As used in this article:
(1) "Corporation" includes any domestic or foreign entity that is a
predecessor of a corporation by reason of a merger or other transaction in which
the predecessor's existence ceased upon consummation of the transaction.
(2) "Director" means an individual who is or was a director of a
corporation or an individual who, while a director of a corporation, is or was
serving at the corporation's request as a director, officer, partner, trustee,
employee, fiduciary, or agent of another domestic foreign corporation or other
person or of an employee benefit plan. A director is considered to be serving
an employee benefit plan at the corporation's request if his or her duties to
the corporation also impose duties on, or otherwise involve services by, the
director to the plan or to participants in or beneficiaries of the plan.
"Director" includes, unless the context requires otherwise, the estate or
personal representative of a director.
(3) "Expenses" includes counsel fees.
(4) "Liability" means the obligation incurred with respect to a proceeding
to pay a judgment, settlement, penalty, fine, including an excise tax assessed
with respect to an employee benefit plan, or reasonable expenses.
(5) "Official capacity" means, when used with respect to a director, the
office of director in a corporation and, when used with respect to a person
other than a director as contemplated in section 7-109-107, the office in a
corporation held by the officer or the employment, fiduciary, or agency
relationship undertaken by the employee, fiduciary, or agent on behalf of the
corporation. "Official capacity" does not include service for any other
domestic or foreign corporation or other person or employee benefit plan.
(6) "Party" includes a person who was, is, or is threatened to be made a
named defendant or respondent in a proceeding.
(7) "Proceeding" means any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative, or investigative and
whether formal or informal.
7-109-102. AUTHORITY TO INDEMNIFY DIRECTORS. (1) Except as provided in
subsection (4) of this section, a corporation may indemnify a person made a
party to a proceeding because the person is or was a director against liability
incurred in the proceeding if:
(a) The person conducted himself or herself in good faith; and
(b) The person reasonably believed:
(I) In the case of conduct in an official capacity with the
corporation, that his or her conduct was in the corporation's best
interests; and
(II) In all other cases, that his or her conduct was at least not
opposed to the corporation's best interests; and
(c) In the case of any criminal proceeding, the person had no
reasonable cause to believe his or her conduct was unlawful.
(2) A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in or beneficiaries of the plan is conduct that satisfies the
requirement of subparagraph (II) of paragraph (b) of subsection (1) of this
section. A director's conduct with respect to an employee benefit plan for a
purpose that the director did not reasonably believe to be in the interests of
the participants in or beneficiaries of the plan shall be deemed not to satisfy
the requirements of paragraph (a) of subsection (1) of this section.
(3) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
(4) A corporation may not indemnify a director under this section:
(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 that the director
derived an improper personal benefit, whether or not involving action in an
official capacity, in which the director was adjudged liable on the basis
that he or she derived an improper personal benefit.
(5) Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with proceeding.
7-109-103. MANDATORY INDEMNIFICATION OF DIRECTORS. Unless limited by its
articles of incorporation, a corporation shall indemnify a person who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which the person was a party because the person is or was a director, against
reasonable expenses incurred by him or her in connection with the proceeding.
7-109-104. ADVANCE OF EXPENSES TO DIRECTORS. (1) A corporation may pay
for or reimburse the reasonable expenses incurred by a director who is a party
to a proceeding in advance of final disposition of the proceeding if:
(a) The director furnishes to the corporation a written affirmation of
the director's good faith belief that he or she has met the standard of
conduct described in section 7-109-102;
(b) The director furnishes to the corporation a written undertaking,
executed personally or on the director's behalf, to repay the advance if it
is ultimately determined that he or she did not meet the standard of
conduct; and
(c) A determination is made that the facts then known to those making
the determination would not preclude indemnification under this article.
(2) The undertaking required by paragraph (b) of subsection (1) of this
section shall be an unlimited general obligation of the director but need not be
secured and may be accepted without reference to financial ability to make
repayment.
(3) Determinations and authorizations of payments under this section shall
be made in the manner specified in section 7-109-106.
7-109-105. COURT-ORDERED INDEMNIFICATION OF DIRECTORS. (1) Unless
otherwise provided in the articles of incorporation, a director who is or was a
party to a proceeding may apply for indemnification to the court conducting the
proceeding or to another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court considers necessary,
may order indemnification in the following manner:
(a) If it determines that the director is entitled to mandatory
indemnification under section 7-109-103, the court shall order
indemnification, in which case the court shall also order the corporation
to pay the director's reasonable expenses incurred to obtain court-ordered
indemnification.
(b) If it determines that the director is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances,
whether or not the director met the standard of conduct set forth in
section 7-109-102(1) or was adjudged liable in the circumstances described
in section 7-109-102(4), the court may order such indemnification as the
court deems proper; except that the indemnification with respect to any
proceeding in which liability shall have been adjudged in the circumstances
described in section 7-109-102(4) is limited to reasonable expenses
incurred in connection with the proceeding and reasonable expenses incurred
to obtain court-ordered indemnification.
7-109-106. DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION OF
DIRECTORS. (1) A corporation may not indemnify a director under section 7-109-
102 unless authorized in the specific case after a determination has been made
that indemnification of the director is permissible in the circumstances because
the director has met the standard of conduct set forth in subsection 7-109-102.
A corporation shall not advance expenses to a director under section 7-109-104
unless authorized in the specific case after the written affirmation and
undertaking required by section 7-109-104(1)(a) and (1)(b) are received and the
determination required by section 7-109-104(1)(c) has been made.
(2) The determinations required by subsection (1) of this section shall be
made:
(a) By the board of directors by a majority vote of those present at a
meeting at which a quorum is present, and only those directors not parties
to the proceeding shall be counted in satisfying the quorum; or
(b) If a quorum cannot be obtained, by a majority vote of a committee
of the board of directors designated by the board of directors, which
committee shall consist of two or more directors not parties to the
proceeding; except that directors who are parties to the proceeding may
participate in the designation of directors for the committee.
(3) If a quorum cannot be obtained as contemplated in paragraph (a) of
subsection (2) of this section, and a committee cannot be established under
paragraph (b) of subsection (2) of this section, or, even if a quorum is
obtained or a committee is designated, if a majority of directors constituting
such quorum or such committee so directs, the determination required to be made
by subsection (1) of this section shall be made:
(a) By independent legal counsel selected by a vote of the board of
directors or the committee in the manner specified in paragraph (a) or (b)
of subsection (2) of this section, or, if a quorum of the full board cannot
be obtained and a committee cannot be established, by independent legal
counsel selected by a majority vote of the full board of directors; or
(b) By the shareholders.
(4) Authorization of indemnification and advance of expenses shall be made
in the same manner as the determination that indemnification or advance of
expenses is permissible; except that, if the determination that indemnification
or advance of expenses is permissible is made by independent legal counsel,
authorization of indemnification and advance of expenses shall be made by the
body that selected such counsel.
7-109-107. INDEMNIFICATION OF OFFICERS, EMPLOYEES, FIDUCIARIES, AND
AGENTS.
(1) Unless otherwise provided in the articles of incorporation:
(a) An officer is entitled to mandatory indemnification under section
7-109-103, and is entitled to apply for court-ordered indemnification under
section 7-109-105, in each case to the same extent as a director;
(b) A corporation may indemnify and advance expenses to an officer,
employee, fiduciary, or agent of the corporation to the same extent as to a
director; and
(c) A corporation may also indemnify and advance expenses to an
officer, employee, fiduciary, or agent who is not a director to a greater
extent, if not inconsistent with public policy, and if provided for by its
bylaws, general or specific action of its board of directors or
shareholders, or contract.
7-109-108. INSURANCE. A corporation may purchase and maintain insurance
on behalf of a person who is or was a director, officer, employee, fiduciary, or
agent of the corporation, or who, while a director, officer, employee,
fiduciary, or agent of the corporation, is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee, fiduciary, or
agent of another domestic or foreign corporation or other person or of an
employee benefit plan, against liability asserted against or incurred by the
person in that capacity or arising from his or her status as a director,
officer, employee, fiduciary, or agent, whether or not the corporation would
have power to indemnify the person against the same liability under section 7-
109-102, 7-109-103, or 7-109-107. Any such insurance may be procured from any
insurance company designated by the board of directors, whether such insurance
company is formed under the laws of this state or any other jurisdiction of the
United States or elsewhere, including any insurance company in which the
corporation has an equity or any other interest through stock ownership or
otherwise.
7-109-109. LIMITATION OF INDEMNIFICATION OF DIRECTORS. (1) A provision
treating a corporation's indemnification of, or advance of expenses to,
directors that is contained in its articles of incorporation or bylaws, in a
resolution of its shareholders or board of directors, or in a contract, except
an insurance policy, or otherwise, is valid only to the extent the provision is
not inconsistent with sections 7-109-101 to 7-109-108. If the articles of
incorporation limit indemnification or advance of expenses, indemnification and
advance of expenses are valid only to the extent not inconsistent with the
articles of incorporation.
(2) Sections 7-109-101 to 7-109-108 do not limit a corporation's power to
pay or reimburse expenses incurred by a director in connection with an
appearance as a witness in a proceeding at a time when he or she has not been
made a named defendant or respondent in the proceeding.
7-109-110. NOTICE TO SHAREHOLDERS OF INDEMNIFICATION OF DIRECTOR. If a
corporation indemnifies or advances expenses to a director under this article in
connection with a proceeding by or in the right of the corporation, the
corporation shall give written notice of the indemnification or advance to the
shareholders with or before the notice of the next shareholders' meeting. If
the next shareholder action is taken without a meeting at the instigation of the
board of directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consent to such action.
Section 7-55-107(1)(h) of the Colorado Cooperative Association Law provides
that a cooperative association has the power:
If so provided in the articles of incorporation, to eliminate or limit
the personal liability of a director to the association or to its
members or stockholders for monetary damages for breach of fiduciary
duty as a director; except that such provision shall not eliminate or
limit the liability of a director for: Any breach of the director's
duty of loyalty to the association or its members or stockholders;
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; or any transaction from
which the director derived an improper personal benefit. No such
provision shall eliminate or limit the liability of a director to the
association or to its members or stockholders for monetary damages for
any act or omission occurring prior to the date when such provision
becomes effective.
Article NINTH of the Registrant's Articles of Incorporation (a copy of which is
set forth in Exhibits 3.1, 3.1.1, 3.1.2 and 3.1.3) contains such a provision, in
addition to permitting the Registrant to indemnify its directors, officers,
employees and agents, or any person who serves at the request of the Registrant
as a director, officer, partner, trustee, employee, fiduciary or agent of
another corporation or other person or of an employee benefit plan, to the
fullest extent permitted by the laws of the State of Colorado.
Article V of the Registrant's Bylaws (a copy of which is set forth in
Exhibits 3.2, 3.2.1, 3.2.2 and 3.2.3) (the "Bylaws") provides that the
Registrant shall indemnify officers and directors of the Registrant to the
fullest extent permitted by and in the manner permissible under the laws of the
State of Colorado. Section 5.8 of the Bylaws also permits the Board of
Directors to authorize the Registrant to purchase and maintain insurance against
any liability asserted against or incurred by any director, officer, employee,
fiduciary or agent of the Company arising out of his or her capacity as such.
Section 6 of the Agency Agreement (the proposed form of which is set forth
in Exhibit 1.1) provides for indemnification of the Registrant and its
directors and officers in certain circumstances.
For more information regarding the Registrant's undertaking to submit to
adjudication of the issue of indemnification for violation of the securities
laws, see "Undertakings," Item 28 hereof.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets for the various expenses in connection with the
issuance and distribution of the securities being registered hereby, other than
underwriting discounts and commissions. All amounts shown are estimates, except
the SEC registration fee and the NASD filing fee.
SEC registration fee........................... $3,527
NASD filing fee ............................... 1,664
Printing and engraving......................... 10,000
Legal fees and expenses........................ 45,000
Accounting fees and expenses................... 10,000
Escrow agent fees.............................. 1,575
Blue Sky fees and expenses
(including fees of counsel).................. 15,000
Miscellaneous.................................. 13,234
TOTAL ..............................$100,000
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In connection with the organization of the Registrant in May, 1994, the
Registrant sold one share of its common stock, par value $1 per share (the
"Common Stock"), to Farmland Industries, Inc. ("Farmland") for the purchase
price of $100. No underwriters were involved in connection with this sale.
This sale was made in reliance upon the exemption from the registration
requirements of the Securities Act of 1933 (the "Securities Act") pursuant to
Section 4(2) of the Securities Act for transactions by an issuer not involving a
public offering.
In July, 1994, the Registrant sold 25 shares of the Common Stock pursuant
to its Confidential Private Placement Memorandum dated May 4, 1994, as
supplemented by Supplement No. 1 to the Confidential Private Placement
Memorandum dated July 6, 1994, for a cash purchase price of $80,000 per share
and, thus, an aggregate purchase price of $2,000,000. No underwriters were
involved in connection with this sale. The 25 shares of Common Stock were
offered only to producers of agricultural products, associations of such
producers, and federations of such associations. Of the 25 shares offered for
sale, 5 shares were sold to producers of agricultural products and 20 shares
were sold to associations of such producers. This sale of 25 shares of the
Common Stock was made in reliance upon the exemption from the registration
requirements of the Securities Act pursuant to Rule 506 of the Securities Act.
This exemption from registration was available because (i) the 25 shares of the
Common Stock was sold to less than 35 purchasers, (ii) the Registrant reasonably
believed prior to making any sale of the Common Stock that each purchaser who
was not an accredited investor either alone or with his purchaser representative
had such knowledge and experience in financial and business matters that he was
capable of evaluating the merits and risks of the investment in the Common
Stock, (iii) the Registrant furnished to each purchaser that was not an
accredited investor the information required by 17 C.F.R. ' 230.502(b)(2) a
reasonable time prior to sale, (iv) neither the Registrant nor any person acting
on its behalf offered or sold the Common Stock by any form of general
solicitation or general advertising, and (v) the Registrant exercised reasonable
care to assure that the purchasers of the shares of the Common Stock were not
underwriters within the meaning of Section 2(11) of the Securities Act.
Immediately prior to such sale of 25 shares of the Registrant's Common
Stock, the Registrant issued to Farmland 30 shares (in addition to its then one
outstanding share) of Common Stock and to Yuma Farmers Milling-Mercantile
Cooperative Registrant ("Yuma Cooperative") 12 shares of Common Stock in
exchange for their respective equity ownership rights and interests in the Yuma
Feeder Pig Limited Liability Company ("Yuma LLC"). Thereupon, Yuma LLC was
liquidated, whereby all of the assets and liabilities of Yuma LLC were
transferred to the Registrant. Said assets and liabilities have been reflected
on the Registrant's financial statements at Yuma LLC's book value, which was
equal to approximately $2,946,800. No underwriters were involved in connection
with this exchange. This sale was made in reliance upon the exemption from the
registration requirements of the Securities Act pursuant to Section 4(2) of the
Securities Act for transactions by an issuer not involving a public offering.
ITEM 27. EXHIBITS
The following exhibits are filed as part of this Registration Statement:
Exhibit No. Description
* 1.1 Form of Agency Agreement between
Interstate/Johnson Lane Corporation and the
Registrant
# 3.1 Articles of Incorporation (filed on November 7,
1994 as Exhibit 3.1 to the Registrant's
Registration Statement on Form SB-2 (No. 33-86068)
and incorporated herein by reference)
# 3.1.1 Articles of Amendment (filed on November 7, 1994
as Exhibit 3.1.1 to the Registrant's Registration
Statement on Form SB-2 (No. 33-86068) and
incorporated herein by reference)
# 3.1.2 Articles of Amendment (filed on January 10, 1996
as Exhibit 3.1.2 to Post-Effective Amendment No. 2
to the Registrant's Registration Statement on Form
SB-2 (No. 33-86068) and incorporated herein by
reference)
* 3.1.3 Articles of Amendment
# 3.2 Amended and Restated Bylaws (filed on November
7, 1994 as Exhibit 3.2 to the Registrant's
Registration Statement on Form SB-2 (No. 33-86068)
and incorporated herein by reference)
# 3.2.1 Amendments to Amended and Restated Bylaws (filed
on November 7, 1994 as Exhibit 3.2.1 to the
Registrant's Registration Statement on Form SB-2
(No. 33-86068) and incorporated herein by
reference)
# 3.2.2 Amendment to Amended and Restated Bylaws (filed on
January 23, 1995 as Exhibit 3.2.2 to Amendment No.
1 to the Registrant's Registration Statement on
Form SB-2 (No. 33-86068) and incorporated herein
by reference)
* 3.2.3 Amendments to Amended and Restated Bylaws
# 4.1 Articles of Incorporation (filed on November 7,
1994 as Exhibit 3.1 to the Registrant's
Registration Statement on Form SB-2 (No. 33-86068)
and incorporated herein by reference)
# 4.1.1 Articles of Amendment (filed on November 7, 1994
as Exhibit 3.1.1 to the Registrant's Registration
Statement on Form SB-2 (No. 33-86068) and
incorporated herein by reference)
# 4.1.2 Articles of Amendment (filed on January 10, 1996
as Exhibit 3.1.2 to Post-Effective Amendment No. 2
to the Registrant's Registration Statement on Form
SB-2 (No. 33-86068) and incorporated herein by
reference)
* 4.1.3 Articles of Amendment (filed as Exhibit 3.1.3)
# 4.2 Amended and Restated Bylaws (filed on November
7, 1994 as Exhibit 3.2 to the Registrant's
Registration Statement on Form SB-2 (No. 33-86068)
and incorporated herein by reference)
# 4.2.1 Amendments to Amended and Restated Bylaws (filed
on November 7, 1994 as Exhibit 3.2.1 to the
Registrant's Registration Statement on Form SB-2
(No. 33-86068) and incorporated herein by
reference)
# 4.2.2 Amendment to Amended and Restated Bylaws (filed on
January 23, 1995 as Exhibit 3.2.2 to Amendment No.
1 to the Registrant's Registration Statement on
Form SB-2 (No. 33-86068) and incorporated herein
by reference)
* 4.2.3 Amendment to Amended and Restated Bylaws (filed as
Exhibit 3.2.3)
# 4.3 Specimen Form of Certificate Representing
Membership in the Company and the (Class A) Common
Stock (filed on November 7, 1994 as Exhibit 4.3 to
the Registrant's Registration Statement on Form
SB-2 (No. 33-86068) and incorporated herein by
reference)
* 4.4 Specimen Form of Certificate Representing
Membership in the Company and the Class B Common
Stock
# 4.5 Loan Agreement, dated as of September 21, 1994,
between National Bank for Cooperatives and the
Registrant (filed on November 7, 1994 as Exhibit
10.6 to the Registrant's Registration Statement on
Form SB-2 (No. 33-86068) and incorporated herein
by reference)
# 4.5.1 Term Loan Amendment, dated as of May 19, 1995,
between CoBank, ACB (formerly National Bank for
Cooperatives) and the Registrant (filed with the
Registrant's Annual Report on Form 10-KSB for the
fiscal year ended August 31, 1995 as Exhibit
10.6.1 and incorporated herein by reference)
# 4.6 The Registrant's Promissory Note, dated
September 21, 1994, to National Bank for
Cooperatives (filed on November 7, 1994 as
Exhibit 10.7 to the Registrant's Registration
Statement on Form SB-2 (No. 33-86068) and
incorporated herein by reference)
# 4.7 Security Agreement, dated September 21, 1994,
made by the Registrant to National Bank for
Cooperatives (filed on November 7, 1994 as
Exhibit 10.8 to the Registrant's Registration
Statement on Form SB-2 (No. 33-86068) and
incorporated herein by reference)
# 4.8 Correction Deed of Trust, dated November 4,
1994, between the Public Trustee of the County of
Yuma, State of Colorado and the Registrant (filed
on January 23, 1995 as Exhibit 10.9 to Amendment
No. 1 to the Registrant's Registration Statement
on Form SB-2 (No. 33-86068) and incorporated
herein by reference)
# 4.9 Master Loan Agreement, dated as of May 19,
1995, between CoBank, ACB and the Registrant
(filed with the Registrants' Annual Report on Form
10-KSB for the fiscal year ended August 31, 1995
as Exhibit 10.11 and incorporated herein by
reference)
# 4.10 Multiple Advance Term Loan Supplement, dated as of
May 19, 1995, between CoBank, ACB and the
Registrant (filed with the Registrants' Annual
Report on Form 10-KSB for the fiscal year ended
August 31, 1995 as Exhibit 10.12 and incorporated
herein by reference)
* 4.10.1 Amendment to Multiple Advance Term Loan
Supplement, dated as of February 11, 1997, between
CoBank, ACB and the Registrant respecting the
extension of the CoBank credit facility (filed as
Exhibit 10.14.1)
# 4.11 Revolving Term Loan Supplement, dated as of May
19, 1995, between CoBank, ACB and the Registrant
(filed with the Registrants' Annual Report on Form
10-KSB for the fiscal year ended August 31, 1995
as Exhibit 10.13 and incorporated herein by
reference)
# 4.12 Correction Deed of Trust, dated October 23, 1996,
between the Public Trustee of the County of Yuma,
State of Colorado and the Registrant (filed with
the Registrant's Quarterly Report on Form 10-QSB
for the quarter ended February 28, 1997 as Exhibit
10.6 and incorporated herein by reference)
# 4.13 Illinois Mortgage, dated February 23, 1996, from
the Registrant to CoBank, ACB (filed with the
Registrant's Quarterly Report on Form 10-QSB for
the quarter ended February 28, 1997 as Exhibit
10.10 and incorporated herein by reference)
* 4.14 Letter Agreement between the Registrant to CoBank,
ACB respecting the extension of the CoBank credit
facility (filed as Exhibit 10.28)
* 5.1 Opinion of Stinson, Mag & Fizzell, P.C.,
counsel for the Registrant, with respect to the
Registrant's (Class A) Common Stock and Class B
Common Stock
# 10.1 Form of Feeder Pig Purchase Agreement (filed on
January 23, 1995 as Exhibit 10.1 to Amendment No.
1 to the Registrant's Registration Statement on
Form SB-2 (No. 33-86068) and incorporated herein
by reference)
# 10.2 Swine Production Services Agreement, dated July
13, 1994, between Farmland Industries, Inc. and
the Registrant (filed on November 7, 1994 as
Exhibit 10.2 to the Registrant's Registration
Statement on Form SB-2 (No. 33-86068) and
incorporated herein by reference)
# 10.2.1 First Amendment to Swine Production Services
Agreement, dated as of July 26, 1996, between
Farmland Industries, Inc. and the Registrant
(filed with the Registrant's Quarterly Report on
Form 10-QSB for the quarter ended February 28,
1997 as Exhibit 10.1 and incorporated herein by
reference)
* 10.2.2 Second Amendment to Swine Production Services
Agreement, dated as of April 14, 1997, between
Farmland Industries, Inc. and the Registrant
# 10.3 Feed Purchase Agreement, dated July 13, 1994,
between the Yuma Farmers Milling-Mercantile
Cooperative Company of Yuma, Colorado and the
Registrant (filed on November 7, 1994 as Exhibit
10.3 to the Registrant's Registration Statement on
Form SB-2 (No. 33-86068) and incorporated herein
by reference)
# 10.4 Interim Feeder Pig Purchase Agreement, dated July
13, 1994, between Farmland Industries, Inc. and
the Registrant (filed on November 7, 1994 as
Exhibit 10.4 to the Registrant's Registration
Statement on Form SB-2 (No. 33-86068) and
incorporated herein by reference)
# 10.4.1 First Amendment to Interim Feeder Pig Purchase
Agreement, dated July 13, 1994, between Farmland
Industries, Inc. and the Registrant (filed on
November 7, 1994 as Exhibit 10.4.1 to the
Registrant's Registration Statement on Form SB-2
(No. 33-86068) and incorporated herein by
reference)
# 10.5 Interim Feeder Pig Purchase Agreement, dated July
13, 1994, between the Yuma Farmers Milling-
Mercantile Cooperative Company of Yuma, Colorado
and the Registrant (filed on November 7, 1994 as
Exhibit 10.5 to the Registrant's Registration
Statement on Form SB-2 (No. 33-86068) and
incorporated herein by reference)
# 10.5.1 First Amendment to Interim Feeder Pig Purchase
Agreement, dated July 13, 1994, between the Yuma
Farmers Milling-Mercantile Cooperative Company of
Yuma, Colorado and the Registrant (filed on
November 7, 1994 as Exhibit 10.5.1 to the
Registrant's Registration Statement on Form SB-2
(No. 33-86068) and incorporated herein by
reference)
# 10.6 Loan Agreement, dated as of September 21, 1994,
between National Bank for Cooperatives and the
Registrant (filed on November 7, 1994 as Exhibit
10.6 to the Registrant's Registration Statement on
Form SB-2 (No. 33-86068) and incorporated herein
by reference)
# 10.6.1 Term Loan Amendment, dated as of May 19, 1995,
between CoBank, ACB (formerly National Bank for
Cooperatives) and the Registrant (filed with the
Registrant's Annual Report on Form 10-KSB for the
fiscal year ended August 31, 1995 as Exhibit
10.6.1 and incorporated herein by reference)
# 10.7 The Registrant's Promissory Note, dated September
21, 1994, to National Bank for Cooperatives (filed
on November 7, 1994 as Exhibit 10.7 to the
Registrant's Registration Statement on Form SB-2
(No. 33-86068) and incorporated herein by
reference)
# 10.8 Security Agreement, dated September 21, 1994, made
by the Registrant to National Bank for
Cooperatives (filed on November 7, 1994 as Exhibit
10.8 to the Registrant's Registration Statement on
Form SB-2 (No. 33-86068) and incorporated herein
by reference)
# 10.9 Correction Deed of Trust, dated November 4, 1994,
between the Public Trustee of the County of Yuma,
State of Colorado and the Registrant (filed on
January 23, 1995 as Exhibit 10.9 to Amendment No.
1 to the Registrant's Registration Statement on
Form SB-2 (No. 33-86068) and incorporated herein
by reference)
# 10.10 Effluent Agreement, dated September 15, 1994,
between RMR Ranch, Inc., and the Registrant
(filed on November 7, 1994 as Exhibit 10.13 to the
Registrant's Registration Statement on Form SB-2
(No. 33-86068) and incorporated herein by
reference)
# 10.11 Swine Production Management Agreement, dated March
2, 1992, between DEKALB Swine Breeders, Inc. and
Yuma Feeder Pig Limited Liability Company (the
predecessor to the Registrant) (filed on November
7, 1994 as Exhibit 10.20 to the Registrant's
Registration Statement on Form SB-2 (No. 33-86068)
and incorporated herein by reference)
# 10.12 Contract to License Primary Swine (No. 3158),
executed by the Registrant on July 20, 1994,
between DEKALB Swine Breeders, Inc. and the
Registrant (filed on January 23, 1995 as Exhibit
10.21 to Amendment No. 1 to the Registrant's
Registration Statement on Form SB-2 (No. 33-86068)
and incorporated herein by reference)
# 10.13 Master Loan Agreement, dated as of May 19, 1995,
between CoBank, ACB and the Registrant (filed with
the Registrant's Annual Report on Form 10-KSB for
the fiscal year ended August 31, 1995 as
Exhibit 10.11 and incorporated herein by
reference)
# 10.14 Multiple Advance Term Loan Supplement, dated as of
May 19, 1995, between CoBank, ACB and the
Registrant (filed with the Registrant's Annual
Report on Form 10-KSB for the fiscal year ended
August 31, 1995 as Exhibit 10.12 and incorporated
herein by reference)
* 10.14.1 Amendment to Multiple Advance Term Loan
Supplement, dated as of February 11, 1997, between
CoBank, ACB and the Registrant respecting the
extension of the CoBank credit facility
# 10.15 Revolving Term Loan Supplement, dated as of May
1995, between CoBank, ACB and the Registrant
(filed with the Registrant's Annual Report on Form
10-KSB for the fiscal year ended August 31, 1995
as Exhibit 10.13 and incorporated herein by
reference)
# 10.16 Contract for Alliance Farms Cooperative
Association, dated September 14, 1995, between the
Registrant and Farmer Boy Ag, Inc. (filed with the
Registrant's Annual Report on Form 10-KSB for the
fiscal year ended August 31, 1995 as Exhibit 10.14
and incorporated herein by reference).
# 10.17 Master Construction Agreement, dated September 18,
1995, between the Registrant and Central
Confinement Service, Ltd. (filed with the
Registrant's Annual Report on Form 10-KSB for the
fiscal year ended August 31, 1995 as Exhibit 10.15
and incorporated herein by reference).
# 10.18 The Registrant's Promissory Note, dated August
30, 1995, to Farmland Industries, Inc. (filed with
the Registrant's Annual Report on Form 10-KSB for
the fiscal year ended August 31, 1995 as
Exhibit 10-16 and incorporated herein by
reference.
# 10.19 Camborough-22 Closed Herd Multiplier Agreement,
dated March 1, 1996, between Pig Improvement
Company, Inc. and the Registrant (filed with the
Registrant's Quarterly Report on Form 10-QSB for
the quarter ended February 28, 1997 as Exhibit
10.2 and incorporated herein by reference)
# 10.20 Option Contract, dated November 20, 1996, between
Bill L. Bailey and Norma Jean Bailey, and the
Registrant (filed with the Registrant's Quarterly
Report on Form 10-QSB for the quarter ended
February 28, 1997 as Exhibit 10.3 and incorporated
herein by reference)
* 10.21 The Registrant's Promissory Note, dated November
27, 1996, to Farmland Industries, Inc.
* 10.22 Amended and Restated Illinois Mortgage, dated as
of November 27, 1996, from the Registrant to
Farmland Industries, Inc.
# 10.23 Correction Deed of Trust, dated October 23, 1996,
between the Public Trustee of the County of Yuma,
State of Colorado and the Registrant (filed with
the Registrant's Quarterly Report on Form 10-QSB
for the quarter ended February 28, 1997 as Exhibit
10.6 and incorporated herein by reference)
# 10.24 Master Construction Agreement, dated November 22,
1996 (Illinois #2 sow unit), between the
Registrant and Central Confinement Service, Ltd.
(filed with the Registrant's Quarterly Report on
Form 10-QSB for the quarter ended February 28,
1997 as Exhibit 10.7 and incorporated herein by
reference)
# 10.25 Master Construction Agreement, dated November 22,
1996 (Illinois #2 nursery), between the Registrant
and Central Confinement Service, Ltd. (filed with
the Registrant's Quarterly Report on Form 10-QSB
for the quarter ended February 28, 1997 as Exhibit
10.8 and incorporated herein by reference)
# 10.26 Master Construction Agreement, dated November 22,
1996 (Illinois #2 isolation building), between the
Registrant and Central Confinement Service, Ltd.
(filed with the Registrant's Quarterly Report on
Form 10-QSB for the quarter ended February 28,
1997 as Exhibit 10.9 and incorporated herein by
reference)
# 10.27 Illinois Mortgage, dated February 23, 1996, from
the Registrant to CoBank, ACB (filed with the
Registrant's Quarterly Report on Form 10-QSB for
the quarter ended February 28, 1997 as Exhibit
10.10 and incorporated herein by reference)
* 10.28 Letter Agreement between the Registrant to CoBank,
ACB respecting the extension of the CoBank credit facility
* 10.29 Form of Weaned Pig Purchase Agreement
* 10.30 Loan Agreement, dated as of November 27, 1996,
between the Registrant and Farmland Industries,
Inc.
* 10.31 Security Agreement, dated as of November 27, 1996,
made by the Registrant to Farmland Industries,
Inc.
* 10.32 Accrued Interest Agreement, dated as of February
28, 1997, between the Registrant and Farmland
Industries, Inc.
* 10.33 Excess Feeder Pig Purchase Agreement, dated as of
February 28, 1997, between the Registrant and
Farmland Industries, Inc.
* 23.1 Consent of KPMG Peat Marwick LLP, the Registrant's
Independent Public Accountant
* 23.2 Consent of Stinson, Mag & Fizzell, P.C., the
Registrant's counsel, is contained in the Opinion
of Counsel filed as Exhibit 5.1
* 24.1 Power of Attorney (included on the signature page
to this Registration Statement)
# 99.1 Escrow Agreement, dated as of February 17, 1995,
among the Registrant, Doug Brown,
Interstate/Johnson Lane Corporation and
NationsBank, N.A. (Mid-West) (formerly Boatmen's
National Bank) (filed on February 22, 1995 as
Exhibit 99.1 to Amendment No. 2 to the
Registrant's Registration Statement on Form SB-2
(No. 33-86068) and incorporated herein by
reference)
* 99.1.1 Amendment to Escrow Agreement, dated as of
January 31, 1997, among the Registrant, Doug
Brown, Interstate/Johnson Lane Corporation and
NationsBank, N.A. (Mid-West) (formerly Boatmen's
National Bank)
* 99.2 Form of Subscription Agreement
* Filed herewith.
# Documents filed as exhibits to previous filings of the Registrant under
the Securities Act of 1993 or the Securities Exchange Act of 1934 and
incorporated herein by reference.
ITEM 28. UNDERTAKINGS
A. The undersigned registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a fundamental change
in the information in the registration statement; and
(iii) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act of 1933, treat
each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be
the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
B. The undersigned registrant hereby undertakes that, if it is registering
equity securities for sale in an underwritten offering, it will provide to the
underwriter at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
C. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described in Item 24
hereof, 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
Securities Act and will be governed by the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Kansas
City, State of Missouri, on April 18, 1997.
ALLIANCE FARMS COOPERATIVE ASSOCIATION
By:
Wayne N. Snyder, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints Wayne N. Snyder, Doug Brown and
Gerald D. Johnson, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and all
documents relating thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing necessary or advisable
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
Signature and Title Date
April 18, 1997
Wayne N. Snyder
Chairman of the Board, President
and Director
(Principal Executive Officer and Principal
Financial and Accounting Officer)
April 18, 1997
Doug Brown
Treasurer, Secretary and Director
April 18, 1997
Merl Daniel
Director
April 18, 1997
Gerald D. Johnson
Director
April 18, 1997
Loren Keppy
Director
EXHIBIT 99
EXHIBIT INDEX
Exhibit No. Description Page
* 1.1 Form of Agency Agreement between Interstate/Johnson Lane
Corporation and the Registrant
# 3.1 Articles of Incorporation (filed on November 7,
1994 as Exhibit 3.1 to the Registrant's
Registration Statement on Form SB-2 (No. 33-86068)
and incorporated herein by reference)
# 3.1.1 Articles of Amendment (filed on November 7, 1994
as Exhibit 3.1.1 to the Registrant's Registration
Statement on Form SB-2 (No. 33-86068) and
incorporated herein by reference)
# 3.1.2 Articles of Amendment (filed on January 10, 1996
as Exhibit 3.1.2 to Post-Effective Amendment No. 2
to the Registrant's Registration Statement on Form
SB-2 (No. 33-86068) and incorporated herein by
reference)
* 3.1.3 Articles of Amendment
# 3.2 Amended and Restated Bylaws (filed on November
7, 1994 as Exhibit 3.2 to the Registrant's
Registration Statement on Form SB-2 (No. 33-86068)
and incorporated herein by reference)
# 3.2.1 Amendments to Amended and Restated Bylaws (filed
on November 7, 1994 as Exhibit 3.2.1 to the
Registrant's Registration Statement on Form SB-2
(No. 33-86068) and incorporated herein by
reference)
# 3.2.2 Amendment to Amended and Restated Bylaws (filed on
January 23, 1995 as Exhibit 3.2.2 to Amendment No.
1 to the Registrant's Registration Statement on
Form SB-2 (No. 33-86068) and incorporated herein
by reference)
* 3.2.3 Amendments to Amended and Restated Bylaws
# 4.1 Articles of Incorporation (filed on November 7,
1994 as Exhibit 3.1 to the Registrant's
Registration Statement on Form SB-2 (No. 33-86068)
and incorporated herein by reference)
# 4.1.1 Articles of Amendment (filed on November 7, 1994
as Exhibit 3.1.1 to the Registrant's Registration
Statement on Form SB-2 (No. 33-86068) and
incorporated herein by reference)
# 4.1.2 Articles of Amendment (filed on January 10, 1996
as Exhibit 3.1.2 to Post-Effective Amendment No. 2
to the Registrant's Registration Statement on Form
SB-2 (No. 33-86068) and incorporated herein by
reference)
* 4.1.3 Articles of Amendment (filed as Exhibit 3.1.3)
# 4.2 Amended and Restated Bylaws (filed on November
7, 1994 as Exhibit 3.2 to the Registrant's
Registration Statement on Form SB-2 (No. 33-86068)
and incorporated herein by reference)
# 4.2.1 Amendments to Amended and Restated Bylaws (filed
on November 7, 1994 as Exhibit 3.2.1 to the
Registrant's Registration Statement on Form SB-2
(No. 33-86068) and incorporated herein by
reference)
# 4.2.2 Amendment to Amended and Restated Bylaws (filed on
January 23, 1995 as Exhibit 3.2.2 to Amendment No.
1 to the Registrant's Registration Statement on
Form SB-2 (No. 33-86068) and incorporated herein
by reference)
* 4.2.3 Amendment to Amended and Restated Bylaws (filed as
Exhibit 3.2.3)
# 4.3 Specimen Form of Certificate Representing
Membership in the Company and the (Class A) Common
Stock (filed on November 7, 1994 as Exhibit 4.3 to
the Registrant's Registration Statement on Form
SB-2 (No. 33-86068) and incorporated herein by
reference)
* 4.4 Specimen Form of Certificate Representing
Membership in the Company and the Class B Common
Stock
# 4.5 Loan Agreement, dated as of September 21, 1994,
between National Bank for Cooperatives and the
Registrant (filed on November 7, 1994 as Exhibit
10.6 to the Registrant's Registration Statement on
Form SB-2 (No. 33-86068) and incorporated herein
by reference)
# 4.5.1 Term Loan Amendment, dated as of May 19, 1995,
between CoBank, ACB (formerly National Bank for
Cooperatives) and the Registrant (filed with the
Registrant's Annual Report on Form 10-KSB for the
fiscal year ended August 31, 1995 as Exhibit
10.6.1 and incorporated herein by reference)
# 4.6 The Registrant's Promissory Note, dated
September 21, 1994, to National Bank for
Cooperatives (filed on November 7, 1994 as
Exhibit 10.7 to the Registrant's Registration
Statement on Form SB-2 (No. 33-86068) and
incorporated herein by reference)
# 4.7 Security Agreement, dated September 21, 1994,
made by the Registrant to National Bank for
Cooperatives (filed on November 7, 1994 as
Exhibit 10.8 to the Registrant's Registration
Statement on Form SB-2 (No. 33-86068) and
incorporated herein by reference)
# 4.8 Correction Deed of Trust, dated November 4,
1994, between the Public Trustee of the County of
Yuma, State of Colorado and the Registrant (filed
on January 23, 1995 as Exhibit 10.9 to Amendment
No. 1 to the Registrant's Registration Statement
on Form SB-2 (No. 33-86068) and incorporated
herein by reference)
# 4.9 Master Loan Agreement, dated as of May 19,
1995, between CoBank, ACB and the Registrant
(filed with the Registrants' Annual Report on Form
10-KSB for the fiscal year ended August 31, 1995
as Exhibit 10.11 and incorporated herein by
reference)
# 4.10 Multiple Advance Term Loan Supplement, dated as of
May 19, 1995, between CoBank, ACB and the
Registrant (filed with the Registrants' Annual
Report on Form 10-KSB for the fiscal year ended
August 31, 1995 as Exhibit 10.12 and incorporated
herein by reference)
* 4.10.1 Amendment to Multiple Advance Term Loan
Supplement, dated as of February 11, 1997, between
CoBank, ACB and the Registrant respecting the
extension of the CoBank credit facility (filed as
Exhibit 10.14.1)
# 4.11 Revolving Term Loan Supplement, dated as of May
19, 1995, between CoBank, ACB and the Registrant
(filed with the Registrants' Annual Report on Form
10-KSB for the fiscal year ended August 31, 1995
as Exhibit 10.13 and incorporated herein by
reference)
# 4.12 Correction Deed of Trust, dated October 23, 1996,
between the Public Trustee of the County of Yuma,
State of Colorado and the Registrant (filed with
the Registrant's Quarterly Report on Form 10-QSB
for the quarter ended February 28, 1997 as Exhibit
10.6 and incorporated herein by reference)
# 4.13 Illinois Mortgage, dated February 23, 1996, from
the Registrant to CoBank, ACB (filed with the
Registrant's Quarterly Report on Form 10-QSB for
the quarter ended February 28, 1997 as Exhibit
10.10 and incorporated herein by reference)
* 4.14 Letter Agreement between the Registrant to CoBank,
ACB respecting the extension of the CoBank credit
facility (filed as Exhibit 10.28)
* 5.1 Opinion of Stinson, Mag & Fizzell, P.C.,
counsel for the Registrant, with respect to the
Registrant's (Class A) Common Stock and Class B
Common Stock
# 10.1 Form of Feeder Pig Purchase Agreement (filed on
January 23, 1995 as Exhibit 10.1 to Amendment No.
1 to the Registrant's Registration Statement on
Form SB-2 (No. 33-86068) and incorporated herein
by reference)
# 10.2 Swine Production Services Agreement, dated July
13, 1994, between Farmland Industries, Inc. and
the Registrant (filed on November 7, 1994 as
Exhibit 10.2 to the Registrant's Registration
Statement on Form SB-2 (No. 33-86068) and
incorporated herein by reference)
# 10.2.1 First Amendment to Swine Production Services
Agreement, dated as of July 26, 1996, between
Farmland Industries, Inc. and the Registrant
(filed with the Registrant's Quarterly Report on
Form 10-QSB for the quarter ended February 28,
1997 as Exhibit 10.1 and incorporated herein by
reference)
* 10.2.2 Second Amendment to Swine Production Services
Agreement, dated as of April 14, 1997, between
Farmland Industries, Inc. and the Registrant
# 10.3 Feed Purchase Agreement, dated July 13, 1994,
between the Yuma Farmers Milling-Mercantile
Cooperative Company of Yuma, Colorado and the
Registrant (filed on November 7, 1994 as Exhibit
10.3 to the Registrant's Registration Statement on
Form SB-2 (No. 33-86068) and incorporated herein
by reference)
# 10.4 Interim Feeder Pig Purchase Agreement, dated July
13, 1994, between Farmland Industries, Inc. and
the Registrant (filed on November 7, 1994 as
Exhibit 10.4 to the Registrant's Registration
Statement on Form SB-2 (No. 33-86068) and
incorporated herein by reference)
# 10.4.1 First Amendment to Interim Feeder Pig Purchase
Agreement, dated July 13, 1994, between Farmland
Industries, Inc. and the Registrant (filed on
November 7, 1994 as Exhibit 10.4.1 to the
Registrant's Registration Statement on Form SB-2
(No. 33-86068) and incorporated herein by
reference)
# 10.5 Interim Feeder Pig Purchase Agreement, dated July
13, 1994, between the Yuma Farmers Milling-
Mercantile Cooperative Company of Yuma, Colorado
and the Registrant (filed on November 7, 1994 as
Exhibit 10.5 to the Registrant's Registration
Statement on Form SB-2 (No. 33-86068) and
incorporated herein by reference)
# 10.5.1 First Amendment to Interim Feeder Pig Purchase
Agreement, dated July 13, 1994, between the Yuma
Farmers Milling-Mercantile Cooperative Company of
Yuma, Colorado and the Registrant (filed on
November 7, 1994 as Exhibit 10.5.1 to the
Registrant's Registration Statement on Form SB-2
(No. 33-86068) and incorporated herein by
reference)
# 10.6 Loan Agreement, dated as of September 21, 1994,
between National Bank for Cooperatives and the
Registrant (filed on November 7, 1994 as Exhibit
10.6 to the Registrant's Registration Statement on
Form SB-2 (No. 33-86068) and incorporated herein
by reference)
# 10.6.1 Term Loan Amendment, dated as of May 19, 1995,
between CoBank, ACB (formerly National Bank for
Cooperatives) and the Registrant (filed with the
Registrant's Annual Report on Form 10-KSB for the
fiscal year ended August 31, 1995 as Exhibit
10.6.1 and incorporated herein by reference)
# 10.7 The Registrant's Promissory Note, dated September
21, 1994, to National Bank for Cooperatives (filed
on November 7, 1994 as Exhibit 10.7 to the
Registrant's Registration Statement on Form SB-2
(No. 33-86068) and incorporated herein by
reference)
# 10.8 Security Agreement, dated September 21, 1994, made
by the Registrant to National Bank for
Cooperatives (filed on November 7, 1994 as Exhibit
10.8 to the Registrant's Registration Statement on
Form SB-2 (No. 33-86068) and incorporated herein
by reference)
# 10.9 Correction Deed of Trust, dated November 4, 1994,
between the Public Trustee of the County of Yuma,
State of Colorado and the Registrant (filed on
January 23, 1995 as Exhibit 10.9 to Amendment No.
1 to the Registrant's Registration Statement on
Form SB-2 (No. 33-86068) and incorporated herein
by reference)
# 10.10 Effluent Agreement, dated September 15, 1994,
between RMR Ranch, Inc., and the Registrant
(filed on November 7, 1994 as Exhibit 10.13 to the
Registrant's Registration Statement on Form SB-2
(No. 33-86068) and incorporated herein by
reference)
# 10.11 Swine Production Management Agreement, dated March
2, 1992, between DEKALB Swine Breeders, Inc. and
Yuma Feeder Pig Limited Liability Company (the
predecessor to the Registrant) (filed on November
7, 1994 as Exhibit 10.20 to the Registrant's
Registration Statement on Form SB-2 (No. 33-86068)
and incorporated herein by reference)
# 10.12 Contract to License Primary Swine (No. 3158),
executed by the Registrant on July 20, 1994,
between DEKALB Swine Breeders, Inc. and the
Registrant (filed on January 23, 1995 as Exhibit
10.21 to Amendment No. 1 to the Registrant's
Registration Statement on Form SB-2 (No. 33-86068)
and incorporated herein by reference)
# 10.13 Master Loan Agreement, dated as of May 19, 1995,
between CoBank, ACB and the Registrant (filed with
the Registrant's Annual Report on Form 10-KSB for
the fiscal year ended August 31, 1995 as
Exhibit 10.11 and incorporated herein by
reference)
# 10.14 Multiple Advance Term Loan Supplement, dated as of
May 19, 1995, between CoBank, ACB and the
Registrant (filed with the Registrant's Annual
Report on Form 10-KSB for the fiscal year ended
August 31, 1995 as Exhibit 10.12 and incorporated
herein by reference)
* 10.14.1 Amendment to Multiple Advance Term Loan
Supplement, dated as of February 11, 1997, between
CoBank, ACB and the Registrant respecting the
extension of the CoBank credit facility
# 10.15 Revolving Term Loan Supplement, dated as of May
1995, between CoBank, ACB and the Registrant
(filed with the Registrant's Annual Report on Form
10-KSB for the fiscal year ended August 31, 1995
as Exhibit 10.13 and incorporated herein by
reference)
# 10.16 Contract for Alliance Farms Cooperative
Association, dated September 14, 1995, between the
Registrant and Farmer Boy Ag, Inc. (filed with the
Registrant's Annual Report on Form 10-KSB for the
fiscal year ended August 31, 1995 as Exhibit 10.14
and incorporated herein by reference).
# 10.17 Master Construction Agreement, dated September 18,
1995, between the Registrant and Central
Confinement Service, Ltd. (filed with the
Registrant's Annual Report on Form 10-KSB for the
fiscal year ended August 31, 1995 as Exhibit 10.15
and incorporated herein by reference).
# 10.18 The Registrant's Promissory Note, dated August
30, 1995, to Farmland Industries, Inc. (filed with
the Registrant's Annual Report on Form 10-KSB for
the fiscal year ended August 31, 1995 as
Exhibit 10-16 and incorporated herein by
reference.
# 10.19 Camborough-22 Closed Herd Multiplier Agreement,
dated March 1, 1996, between Pig Improvement
Company, Inc. and the Registrant (filed with the
Registrant's Quarterly Report on Form 10-QSB for
the quarter ended February 28, 1997 as Exhibit
10.2 and incorporated herein by reference)
# 10.20 Option Contract, dated November 20, 1996, between
Bill L. Bailey and Norma Jean Bailey, and the
Registrant (filed with the Registrant's Quarterly
Report on Form 10-QSB for the quarter ended
February 28, 1997 as Exhibit 10.3 and incorporated
herein by reference)
* 10.21 The Registrant's Promissory Note, dated November
27, 1996, to Farmland Industries, Inc.
* 10.22 Amended and Restated Illinois Mortgage, dated as
of November 27, 1996, from the Registrant to
Farmland Industries, Inc.
# 10.23 Correction Deed of Trust, dated October 23, 1996,
between the Public Trustee of the County of Yuma,
State of Colorado and the Registrant (filed with
the Registrant's Quarterly Report on Form 10-QSB
for the quarter ended February 28, 1997 as Exhibit
10.6 and incorporated herein by reference)
# 10.24 Master Construction Agreement, dated November 22,
1996 (Illinois #2 sow unit), between the
Registrant and Central Confinement Service, Ltd.
(filed with the Registrant's Quarterly Report on
Form 10-QSB for the quarter ended February 28,
1997 as Exhibit 10.7 and incorporated herein by
reference)
# 10.25 Master Construction Agreement, dated November 22,
1996 (Illinois #2 nursery), between the Registrant
and Central Confinement Service, Ltd. (filed with
the Registrant's Quarterly Report on Form 10-QSB
for the quarter ended February 28, 1997 as Exhibit
10.8 and incorporated herein by reference)
# 10.26 Master Construction Agreement, dated November 22,
1996 (Illinois #2 isolation building), between the
Registrant and Central Confinement Service, Ltd.
(filed with the Registrant's Quarterly Report on
Form 10-QSB for the quarter ended February 28,
1997 as Exhibit 10.9 and incorporated herein by
reference)
# 10.27 Illinois Mortgage, dated February 23, 1996, from
the Registrant to CoBank, ACB (filed with the
Registrant's Quarterly Report on Form 10-QSB for
the quarter ended February 28, 1997 as Exhibit
10.10 and incorporated herein by reference)
* 10.28 Letter Agreement between the Registrant to CoBank, ACB
respecting the extension of the CoBank credit facility
* 10.29 Form of Weaned Pig Purchase Agreement
* 10.30 Loan Agreement, dated as of November 27, 1996,
between the Registrant and Farmland Industries,
Inc.
* 10.31 Security Agreement, dated as of November 27, 1996,
made by the Registrant to Farmland Industries,
Inc.
* 10.32 Accrued Interest Agreement, dated as of February
28, 1997, between the Registrant and Farmland
Industries, Inc.
* 10.33 Excess Feeder Pig Purchase Agreement, dated as of
February 28, 1997, between the Registrant and
Farmland Industries, Inc.
* 23.1 Consent of KPMG Peat Marwick LLP, the Registrant's
Independent Public Accountant
* 23.2 Consent of Stinson, Mag & Fizzell, P.C., the
Registrant's counsel, is contained in the Opinion
of Counsel filed as Exhibit 5.1
* 24.1 Power of Attorney (included on the signature page
to this Registration Statement)
# 99.1 Escrow Agreement, dated as of February 17, 1995,
among the Registrant, Doug Brown,
Interstate/Johnson Lane Corporation and
NationsBank, N.A. (Mid-West) (formerly Boatmen's
National Bank) (filed on February 22, 1995 as
Exhibit 99.1 to Amendment No. 2 to the
Registrant's Registration Statement on Form SB-2
(No. 33-86068) and incorporated herein by
reference)
* 99.1.1 Amendment to Escrow Agreement, dated as of
January 31, 1997, among the Registrant, Doug
Brown, Interstate/Johnson Lane Corporation and
NationsBank, N.A. (Mid-West) (formerly Boatmen's
National Bank)
* 99.2 Form of Subscription Agreement
* Filed herewith.
# Documents filed as exhibits to previous filings of the Registrant under
the Securities Act of 1993 or the Securities Exchange Act of 1934 and
incorporated herein by reference.
Exhibit 1.1
ALLIANCE FARMS COOPERATIVE ASSOCIATION
A COLORADO COOPERATIVE ASSOCIATION
AGENCY AGREEMENT
, 1997
Interstate/Johnson Lane Corporation
121 West Trade Street
Charlotte, North Carolina 28202
Gentlemen:
The undersigned, Alliance Farms Cooperative Association, a Colorado
cooperative association (the "Association"), hereby confirms its agreement with
you as follows:
1. INTRODUCTION.
This Agreement sets forth the understanding and agreement among the
Association and you whereby you will serve as agent for the Association in
connection with the Association's sale, on a best efforts basis, of (a) a
minimum of 17 and a maximum of 51 shares of the Associations' (Class A) Common
Stock (the "Class A Shares"), and (b) a minimum of 18 and a maximum of 108
shares of the Association's Class B Common Stock (the "Class B Shares", and
together with the Class A Shares, the "Shares"), at the respective purchase
prices and subject to the terms and conditions set forth in the Prospectus dated
, 1997, as amended or as supplemented if the Association shall have
filed with the Securities and Exchange Commission any amendment thereof or
supplement thereto (the "Prospectus"), relating to the offer and sale of the
Shares. The Prospectus is included in a Registration Statement on Form SB-2
(Registration No. 333- ) filed with the Securities and Exchange Commission
(the "Registration Statement"), which Registration Statement has become
effective pursuant to Section 8 of the Securities Act of 1933, as amended, on
the date of the execution of this Agreement. Capitalized terms used herein
which are not otherwise defined shall have the same meanings as provided in the
Prospectus.
2. REPRESENTATIONS AND WARRANTIES OF THE ASSOCIATION.
The Association represents and warrants to you and agrees with you
that:
(a) When the Registration Statement became effective and upon the
first delivery of the Prospectus to you, the Prospectus did contain and
will contain, as the case may be, all statements that are required to be
stated therein in accordance with applicable federal and state securities
laws and regulations and in all material respects conforms and will
conform, as the case may be, to the requirements of such laws and
regulations and did not include and will not include, as the case may be,
any untrue statements of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
except that no representations or warranties are made with respect to
statements or omissions made in reliance upon and in conformity with
written information furnished to the Association with respect to you, by
you or on your behalf expressly for use in the Prospectus or any amendment
or supplement thereof.
(b) The Association is a cooperative association duly organized and
validly existing pursuant to the Colorado Cooperative Association Law (the
"CAL"), with all corporate authority necessary to conduct its business as
described in all material respects in the Prospectus, subject only to
regulatory approvals as described in the Prospectus. The Association has
been duly organized to function as a cooperative association as described
in all material respects in the Prospectus. The Board of Directors has
authorized the Shares to be issued pursuant to the Registration Statement
and the Prospectus. Provided the requisite minimum number of Subscriptions
are received and accepted by the Association, upon acceptance of such
Subscriptions and payment therefor each such accepted subscriber will
become a shareholder of the Association entitled to all the benefits of a
shareholder under the CAL.
(c) There is no litigation or governmental proceeding pending or to
the Association's knowledge threatened involving the business of the
Association that might materially and adversely affect the value or the
operation of the business or the financial condition of the Association,
except as may be disclosed in the Prospectus.
(d) Any historical financial statements (other than pro forma
financial statements) together with related schedules and notes included in
the Prospectus present fairly the financial position of the subject entity
as of the respective dates and for the respective periods indicated and
such financial statements have been prepared in conformity with generally
accepted accounting principles applied on a basis that is consistent in all
material respects during the periods involved, except as may be disclosed
in the Prospectus.
(e) The Association is not in default which has not been waived in
the performance of any obligation, agreement or condition contained in any
agreement by which the Association is bound. Neither the execution and
delivery of this Agreement nor the consummation of the transactions herein
contemplated, nor compliance with the terms and provisions hereof conflict
with or result in a breach of any of the terms, provisions or conditions of
any agreement or instrument to which the Association is a party or by which
it is bound, or any order, rule or regulation applicable to the Association
of any court or any governmental body or administrative agency having
jurisdiction over the Association.
(f) The Shares conform in all material respects to the description
thereof contained in the Prospectus, and will have been duly and validly
authorized for issuance and, when paid for as described in the Prospectus,
will be validly issued, fully paid and nonassessable.
(g) The person or persons executing this Agreement on behalf of the
Association are duly authorized so to sign, and this Agreement is and will
be a valid, legal and binding agreement of the Association, enforceable in
accordance with its terms, except as rights to indemnity hereunder may be
limited by federal or state securities laws and except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting the rights of creditors generally and subject to
general principles of equity.
(h) No officer or director of the Association or shareholder of the
Association identified under the heading "Principal Stockholders" in the
Prospectus is affiliated with a member of the National Association of
Securities Dealers, Inc., nor is any of those persons subject to "statutory
disqualification" (as defined in Section 3(a)(39) of the Securities
Exchange Act of 1934) regarding any such affiliation, except that Farmland
Industries, Inc., a shareholder of the Association, is affiliated with
Farmland Securities Company, a member of the National Association of
Securities Dealers, Inc.
(i) No affiliate of the Association has received nor is entitled to
receive, directly or indirectly, any compensation or other benefit
including, but not limited to, any commission or similar fee relating to
the investments in or of the Association, except as specifically described
in the Prospectus.
(j) Any additional written or oral information provided to
prospective purchasers of Shares by authorized representatives of the
Association ("Authorized Persons") will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading.
3. AGENT IN CONNECTION WITH OFFERING.
(a) The Association hereby appoints you its non-exclusive agent in
connection with this offering to assist in the sale for the account and
risk of the Association (1) a minimum of 17 and a maximum of 51 Class A
Shares, and (2) a minimum of 18 and a maximum of 108 Class B Shares. Your
appointment hereunder shall continue from the effective date of this
Agreement until the earlier to occur of (i) the date this Agreement
terminates or (ii) the date the offering is fully subscribed as determined
by the Association. You agree to use your best efforts as agent in
connection with this offering to assist in the sale of such numbers of
Class A Shares and Class B Shares as contemplated by this Agreement at the
respective prices and subject to the terms and conditions set forth in the
Prospectus; provided, however, that the Association reserves the right to
reject any prospective investor ("Investor") or reduce his Subscription as
provided herein. Subject to the terms and conditions and upon the basis of
the representations and warranties set forth herein, you accept such
appointment and agree to assist in the sale of the Shares. The Company has
reserved the right to sell the Shares directly to Investors on its own
behalf through the efforts of its officers and employees in those
jurisdictions where and in such manner as it is authorized to do so.
(b) Each person desiring to purchase Shares will be required to
complete and execute the Subscription Agreement in the form included in the
Prospectus as Exhibit A thereto and to deliver the Subscription Agreement
to you together with payment of the applicable subscription price (the
"Subscription Documents"). In addition, each subscriber of Class A Shares
must complete and execute a Feeder Pig Purchase Agreement in the form
included in the Prospectus as Exhibit B thereto and to deliver said
agreement to you, and each subscriber of Class B Shares must complete and
execute a Weaned Pig Purchase Agreement in the form included in the
Prospectus as Exhibit C thereto and to deliver said agreement to you. The
subscription price is payable by delivery of a check or bank draft, or by
wire transfer, in the amount of $80,000.00 per Class A Share subscribed and
in the amount of $70,000.00 per Class B Share subscribed. Checks and bank
drafts should be made payable to the order of "Alliance Farms Cooperative
Association Escrow No. 1482300" and delivered to NationsBank, N.A. (Mid-
West) (formerly Boatmen's National Bank), the Escrow Agent for the
Association, at 920 Main Street, 11th Floor, Corporate Trust Department,
Kansas City, Missouri 64105, Attention: Augusta Nelson.
(c) All sales to Investors will be conditioned upon the receipt of
Subscriptions accepted by the Association for 17 Class A Shares (the
"Minimum Class A Sales"), or an integral multiple thereof, or for 18 Class
B Shares (the "Minimum Class B Sales"), or an integral multiple thereof, in
each case, on or before , 1998 at 5:00 P.M., Kansas City,
Missouri, time (or until , 1999, if the offering is extended by
the Association or a prior date designated by the Association). The date
on which the Association determines that the offering is to be terminated
is herein referred to as the "Termination Date". If Minimum Class A Sales
or Minimum Class B Sales have not been made by the Termination Date, or if
the Association has exercised its discretion, as provided in the
Prospectus, to terminate the offering, this Agreement shall terminate and
there shall be returned, within 30 days of such termination, to Investors
who have subscribed for Shares, their executed Subscription Agreements and
Counterpart Signature Pages, plus any and all other documents executed by
the Investors together with a refund by the Escrow Agent of their
subscription payments plus interest, as provided in the Escrow Agreement.
(d) At the Closing Date, you will direct the Escrow Agent to deliver
to the Association the subscription funds together with accrued interest
thereon and other documents in its possession attributable to subscribers
whose subscription agreements have been accepted in accordance with the
Escrow Agreement. Upon receipt of subscription funds from the Escrow
Agent, the Association will pay all sums then currently due to you.
(e) The term "Closing Date" as used herein shall refer to the date on
which the Escrow Agent transfers funds received from subscribers for Shares
to the Association. The Closing Date may occur on such date or dates as
you and the Association shall agree at any time after you have received,
and the Association has accepted, subscriptions for at least 17 Class A
Shares or at least 18 Class B Shares and final regulatory approvals have
been received as described in the Prospectus. The right of the Association
to receive such funds on the Closing Date is subject to fulfillment of the
conditions of the Escrow Agreement. This Agreement and the offering of
Shares contemplated hereby will terminate on the earlier of (a) the
acceptance and receipt by the Association of subscriptions for 51 Class A
Shares and 108 Class B Shares, (b) the Termination Date, or (c) the date on
which the Association exercises its discretion to terminate the offering.
(f) The Shares will be sold only to persons who warrant or represent
that they meet the suitability requirements set forth in the Prospectus and
the Subscription Agreement.
(g) In consideration for your execution of this Agreement, and for
the performance of your obligations hereunder, the Association agrees to
pay or cause to be paid to you a fixed lump sum fee of $40,000 whether or
not a successful closing of the offering contemplated in the Prospectus has
occurred.
4. FURTHER AGREEMENTS OF THE ASSOCIATION.
The Association further agrees that it will:
(a) Deliver to you promptly such number of copies of the Prospectus
as you may reasonably request.
(b) If during the offering of Shares any event relating to or
affecting the Association shall occur as a result of which it is necessary,
in the opinion of the Association's counsel, to amend or supplement the
Prospectus in order to make the Prospectus not misleading in light of the
circumstances existing at the time it is delivered to an Investor, the
Association will forthwith prepare and furnish to you a reasonable number
of copies of an amendment or amendments of, or a supplement or supplements
to, the Prospectus that will amend or supplement the Prospectus so that it
will not contain an untrue statement of a material fact or omit a statement
of material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances existing at the
time the Prospectus is delivered to an Investor, not misleading.
(c) Furnish or make available to you or your counsel any and all
documentation reasonably requested in connection with your due diligence
efforts regarding information in the Prospectus.
5. PAYMENT OF EXPENSES.
The Association will pay all expenses in connection with (i) the
preparation, printing, filing and delivering of the Registration Statement and
the Prospectus, including the cost of all copies thereof and any amendments
thereof or supplements thereto, (ii) the preparation and copying of other
solicitation material and related documents, (iii) filing fees and expenses
necessary to comply with the laws of any state for the offering and sale of the
Shares, including reasonable fees of your counsel, (iv) the fees of the
Association's counsel and accountant, and all reasonable out-of-pocket expenses
incurred by you including fees of counsel in connection with this transaction
whether or not the transactions contemplated herein are consummated.
6. INDEMNIFICATION.
(a) Subject to the conditions set forth below, the Association agrees
to indemnify and hold harmless you and each person, if any, who controls
you within the meaning of Section 15 of the Securities Act of 1933, as
amended (the "1933 Act"), against any and all losses, liabilities, claims,
damages and expenses whatsoever (including, but not limited to, any and all
expenses whatsoever reasonably incurred in investigating, preparing for,
defending against or settling any litigation, commenced or threatened, or
any claim whatsoever) arising out of or based upon any untrue or alleged
untrue statement of a material fact contained in the Prospectus (as from
time to time amended or supplemented) or arising from the omission or
alleged omission therefrom of a material fact required to be stated therein
or necessary to make the statements therein not misleading, unless such
statement or omission was made in reliance upon and in conformity with
written information furnished to the Association by you or on your behalf
expressly for use in the Prospectus or any amendment or supplement thereof,
and will reimburse you and each such controlling person for any legal or
other expenses reasonably incurred by you or any such controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action.
You agree to indemnify and hold harmless the Association and each
person, if any, who controls the Association within the meaning of
Section 15 of the 1993 Act against any and all losses, liabilities, claims,
damages and expenses whatsoever (including, but not limited to, any and all
expenses whatsoever reasonably incurred in investigating, preparing for,
defending against or settling any litigation, commenced or threatened, or
any claim whatsoever) arising out of or based upon any untrue or alleged
untrue statement of a material fact contained in the Prospectus (as from
time to time amended or supplemented) or arising from the omission or
alleged omission therefrom of a material fact required to be stated therein
or necessary to make the statements therein not misleading, only to the
extent that such statement or omission was made in reliance upon and in
conformity with written information furnished to the Association by you or
on your behalf expressly for use in the Prospectus or any amendment or
supplement thereof, and will reimburse the Association and each such
controlling person for any legal or other expenses reasonably incurred by
the Association or any such controlling person in connection with
investigating or defending any such loss, claims, damage, liability or
action.
No indemnified party will have any liability (whether direct or
indirect, in contract, tort or otherwise) to the Association for or in
connection with such engagement except for any such liability for losses,
damages, liabilities, expenses or claims incurred by the Association that
result primarily from the indemnified party's bad faith or gross negligence
or as otherwise provided above.
(b) Promptly after receipt by an indemnified party under this section
of notice of the commencement of any action, but in no event later than
fifteen (15) business days after receipt of notice of such commencement,
such indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this section, notify in writing the
indemnifying party of the commencement thereof; and the omission so to
notify the indemnifying party will relieve it from any liability under this
section as to the particular item for which indemnification is then being
sought, but not for any other liability that it may have to any indemnified
party, and if the indemnified party notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein, and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel who shall be to the reasonable satisfaction of such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation incurred at the written request of the
indemnifying party; provided, however, that if, notwithstanding the
election of an indemnifying party to assume the defense thereof, the
indemnifying party shall not have employed counsel to take charge of the
defense of such action or proceeding or such indemnified party shall have
reasonably concluded that there may be defenses available to it that are
different from or additional to those available to the indemnifying party
(in which case the indemnifying party shall not have the right to direct
the defense of such action or proceeding on behalf of the indemnified
party), then in any such events such legal or other expenses of the
indemnified party shall be borne by the indemnifying party. Any such
indemnifying party shall not be liable to any such indemnified party on
account of any settlement of any claim or action effected without the
consent of such indemnifying party.
(c) Notwithstanding any other provision of this section, you and each
person who controls you within the meaning of Section 15 of the 1933 Act
shall not be indemnified for any violation of federal securities laws
arising out of the offer and sale of the Shares unless (i) such
indemnification is specifically approved by a court of law or equity that
shall have been advised as to the current position of the Securities and
Exchange Commission regarding indemnification for violations of such
securities laws or (ii) such indemnification is for (A) settlement costs
(which may include legal and other expenses) or (B) litigation costs (which
may include legal and other expenses) if a successful defense has been
made.
7. DUE DILIGENCE.
You undertake and represent that you have reasonable grounds to
believe, based on information made available to you by the Association, that all
material facts have been adequately and accurately disclosed and provide a
reasonable basis for evaluating an investment in the Association.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE.
Except as the context otherwise requires, all representations,
warranties and agreements contained in this Agreement shall be deemed to be
representations, warranties and agreements of the Association and shall remain
operative and in full force and effect regardless of any investigation made by
you, or on your behalf, or by any controlling person or by or on behalf of the
Association and shall survive the Closing Date in the event of the closing of
the offering contemplated in the Prospectus, but shall not survive the
Termination Date in the event that Minimum Class A Sales or Minimum Class B
Sales are not made prior to the termination of such offering.
9. EFFECTIVE DATE, TERM AND TERMINATION OF AGREEMENT.
(a) This Agreement shall become effective as of the date first
written above. This Agreement shall terminate on the date corresponding to
the occurrence of:
i. The exercise by the Association of its discretion to
terminate the offering prior to the Closing Date; or, if not
so exercised,
ii. The failure to make the Minimum Class A Sales or Minimum
Class B Sales by the Closing Date; or, if such sales are
made;
iii. The failure of the Association to receive the regulatory
approvals as contemplated in the Prospectus; or, if such
approvals are granted,
iv. The payment to you of all amounts due under this Agreement.
(b) If this Agreement shall be terminated after Minimum Class A Sales
or Minimum Class B Sales are made by reason of any failure on the part of
the Association to perform any undertaking or to satisfy any condition of
this Agreement by it to be performed or satisfied (the parties hereto
understanding that the Association shall not bear any responsibility for
failure of regulatory approvals to be received and that said failure would
not trigger the application of this Subsection (b)), the Association shall
be obligated to pay you the fee and expenses reimbursement as provided
herein but will have no additional liability to you except for such
liabilities, if any, as may exist or thereafter arise under Section 6
hereof.
10. NOTICES.
(a) All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and if sent to you shall be
mailed by overnight delivery or certified mail, return receipt requested,
postage prepaid, or hand-delivered to:
Interstate/Johnson Lane Corporation
Attention: Mr. James H. Glen, Jr.
121 West Trade Street
Charlotte, NC 28202
If sent to the Association, such communications shall be mailed by
overnight delivery or certified mail, return receipt requested, postage
prepaid, or hand-delivered to:
Alliance Farms Cooperative Association
Attention: Mr. Wayne N. Snyder
3315 North Oak Trafficway
Department 47
Kansas City, MO 64116
with a copy to:
Stinson, Mag & Fizzell, P.C.
Attention: James W. Allen, Esquire
1201 Walnut Street, Suite 2800
Kansas City, MO 64106-6237
(b) A notice shall be deemed to be given by you to the Association or
by the Association to you when it is mailed as provided in Subsection (a)
of this Section 11 or upon hand delivery to the appropriate address.
11. PARTIES.
This Agreement shall inure solely to the benefit of, and shall be
binding upon you, the Association and the controlling persons referred to in
Section 6 hereof, and their respective successors, heirs, legal representatives
and assigns, and no other person shall be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provision herein contained.
12. CONSTRUCTION.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Colorado.
13. ENTIRE AGREEMENT.
This Agreement sets forth the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersedes and cancels any and all prior agreements and understandings, written
or oral, among the parties hereto with respect to the subject matter.
14. AMENDMENT.
This Agreement may be amended only by a writing signed by all of the
parties hereto. Except as otherwise provided herein, any provision contained in
this Agreement may be waived by any party hereto upon a writing signed by the
party against whom such waiver is sought to be enforced.
15. AGREEMENT.
The foregoing agreement shall be in addition to any rights that any
indemnified party may have at common law or otherwise, and shall be in addition
to any liability which the Association may otherwise have. The Association
hereby consents to personal jurisdiction, service and venue in any court in
which any claim which is subject to this agreement is brought against you or the
Association. This Agreement and the duties, rights and obligations arising
hereunder may be assigned by a party hereto only with the prior written consent
of all other parties hereto.
16. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
If the foregoing correctly sets forth the understanding between you
and the Association, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement between us.
Sincerely,
ALLIANCE FARMS COOPERATIVE
ASSOCIATION
By:
Wayne N. Snyder
Chairman of the Board
and President
Approved and Agreed to:
INTERSTATE/JOHNSON LANE CORPORATION
By:
James H. Glen, Jr.
Senior Vice President
Date: , 1997
Exhibit 3.1.3
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
ALLIANCE FARMS COOPERATIVE ASSOCIATION
The undersigned, Alliance Farms Cooperative Association, a Colorado
cooperative association (the "Association"), for the purpose of amending the
Articles of Incorporation of the Association in accordance with Article 55 of
Title 7 of the Colorado Revised Statutes, does hereby make and execute these
Articles of Amendment of Articles of Incorporation and does hereby certify that:
1. The name of the Association is Alliance Farms Cooperative Association.
2. The following three resolutions were unanimously approved by the Board
of Directors of the Association and thereafter approved by the members of the
Association in accordance with the provisions of Section 7-55-109 of the
Colorado Revised Statutes and set forth the text of three amendments to the
Articles of Incorporation of the Association:
RESOLVED, that subparagraph (a) of Article SIXTH of the Articles
of Incorporation of the Association is amended to read in its entirety
as follows:
(a) Capitalization. The authorized capital stock of the
Association is $100.00, divided into 5,000 shares of common
stock, par value of one cent ($0.01) per share (designated as
"Class A Common Stock"), and 5,000 shares of Class B common
stock, par value of one cent ($0.01) per share (designated as
"Class B Common Stock"). For purposes of these Articles of
Incorporation, Class A Common Stock and Class B Common Stock are
collectively referred to as "common stock". Immediately prior to
the amendment of this subparagraph (a) of Article SIXTH dividing
the authorized capital stock of the Association into two classes,
the authorized capital stock of the Association consisted of
10,000 shares of common stock, par value of one cent ($0.01) per
share, that have been designated "Class A Common Stock" as a
result of such amendment.
Except as otherwise required by law or expressly provided in
these Articles of Incorporation or in the Bylaws, the powers,
preferences and rights of the Class A Common Stock and Class B
Common Stock, and the qualifications, limitations or restrictions
thereof, shall be in all respects identical.
To the extent permitted by law, including Articles 55 and
106 of Title 7 of the Colorado Revised Statutes, the Board of
Directors of the Association is authorized to provide by
resolution for the issuance of shares of stock of any class or of
any series of any class at any time and from time to time and, in
the manner from time to time prescribed under the laws of the
State of Colorado, to determine, prior to the issuance of any
shares of stock of that class or series, the designations,
preferences, limitations and relative rights, if any, thereof
(including, without limitation, those preferences, limitations
and relative rights relating to redemption, dissolution,
conversion and exchange).
RESOLVED, that subparagraph (d) of Article SEVENTH of the
Articles of Incorporation of the Association is amended to read in its
entirety as follows:
(d) Voting Rights. Only members of the Association shall
have voting rights. Each member is entitled to cast one (1)
vote, in person, by mail or, to the extent permitted by law, by
other means approved by the Board of Directors, with respect to
each share of common stock of the Association standing in such
member's name on the transfer books of the Association; provided,
however, (i) in the event that the Association borrows money from
a lender subject to the provisions of 12 C.F.R. Part 614, as
amended from time to time, and any cooperative association member
holds, at any time during the period in which any portion of such
indebtedness remains outstanding, twenty-five percent (25%) or
more of the issued and outstanding shares of common stock of the
Association, then for voting purposes only with respect to any
matter as to which members casting votes with respect to shares
of common stock are not entitled to vote separately as a group or
class, the number of shares of common stock of the Association
with respect to which such member shall be entitled to vote shall
be deemed, during the period of time that any portion of such
indebtedness remains outstanding, to equal an whole number of
shares nearest to, but less than, twenty-five percent (25%) of
the issued and outstanding shares of common stock of the
Association, (ii) in the event that the Association borrows money
from a lender subject to the provisions of 12 C.F.R. Part 614, as
amended from time to time, and any cooperative association member
holds, at any time during the period in which any portion of such
indebtedness remains outstanding, twenty-five percent (25%) or
more of the issued and outstanding shares of Class A Common Stock
of the Association, then for voting purposes only with respect to
any matter as to which members casting votes with respect to
shares of Class A Common Stock are entitled to vote separately as
a group or class, the number of shares of Class A Common Stock of
the Association with respect to which such member shall be
entitled to vote shall be deemed, during the period of time that
any portion of such indebtedness remains outstanding, to equal an
whole number of shares nearest to, but less than, twenty-five
percent (25%) of the issued and outstanding shares of Class A
Common Stock of the Association, and (iii) in the event that the
Association borrows money from a lender subject to the provisions
of 12 C.F.R. Part 614, as amended from time to time, and any
cooperative association member holds, at any time during the
period in which any portion of such indebtedness remains
outstanding, twenty-five percent (25%) or more of the issued and
outstanding shares of Class B Common Stock of the Association,
then for voting purposes only with respect to any matter as to
which members casting votes with respect to shares of Class B
Common Stock are entitled to vote separately as a group or class,
the number of shares of Class B Common Stock of the Association
with respect to which such member shall be entitled to vote shall
be deemed, during the period of time that any portion of such
indebtedness remains outstanding, to equal an whole number of
shares nearest to, but less than, twenty-five percent (25%) of
the issued and outstanding shares of Class B Common Stock of the
Association. Cumulative voting is not permitted in the election
of directors. To the extent permitted by law, any and all
actions to be taken by members of the Association may be approved
by a majority of the votes entitled to be cast with respect
thereto by members present, in person, by mail or, to the extent
permitted by law, by other means approved by the Board of
Directors, at a meeting at which a quorum (determined in
accordance with the Bylaws) is present, with the members casting
votes with respect to shares of Class A Common Stock and the
members casting votes with respect to shares of Class B Common
Stock voting together as a single group or class; provided,
however, that any amendment, alteration, change or repeal of any
provision of these Articles of Incorporation, any sale, lease,
exchange or other disposition of all or substantially all of the
property and assets of the Association, whether or not in the
usual and regular course of its business, any merger or
consolidation of which the Association is a party and to which
the vote of the members is required by law, and any dissolution
or voluntary termination of the Association, shall first be
approved by a two-thirds (2/3) majority of the votes entitled to
be cast with respect thereto by members present, in person, by
mail or, to the extent permitted by law, by other means approved
by the Board of Directors, at a meeting at which a quorum
(including a quorum with respect to any class of capital stock
entitled to vote separately as a group or class) is present; and
provided further, however, that members casting votes with
respect to shares of Class A Common Stock and members casting
votes with respect to shares of Class B Common Stock shall vote
separately as groups or classes with respect to amendments to
these Articles of Incorporation that alter or change the
designation, preferences, limitations or relative rights of their
respective classes of stock so as to affect them adversely and
with respect to such other matters as may require group or class
votes under applicable law, including Articles 55 and 110 of
Title 7 of the Colorado Revised Statutes.
RESOLVED, that Article SEVENTH of the Articles of Incorporation
of the Association is amended by adding a new subparagraph (f) to said
Article which shall be inserted immediately following the existing
subparagraph (e) of said Article, such new subparagraph (f) to read in
its entirety as follows:
(f) Liquidation Rights. In the event of voluntary or
involuntary liquidation, distribution or sale of assets,
dissolution or winding up, of the Association, the assets of the
Association remaining for payment or distribution to holders of
outstanding capital credits and the Association's capital stock
shall be distributed as specified in the Bylaws.
3. The date of the approval of each of the foregoing amendments by the
members of the Association is April 14, 1997.
4. No voting group of members were entitled to vote separately on either
of the foregoing amendments.
IN WITNESS WHEREOF, these Articles of Amendment have been executed by
the Association by its President, and attested to by its Secretary, on April 14,
1997.
ALLIANCE FARMS COOPERATIVE ASSOCIATION
By:
Wayne N. Snyder, President
ATTEST:
Doug Brown, Secretary
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
The foregoing instrument was acknowledged before me this 14th day of
April, 1997, by Wayne N. Snyder, President of Alliance Farms Cooperative
Association, a Colorado cooperative association, on behalf of the cooperative
association.
Notary Public
My Commission expires: .
Exhibit 3.2.3
AMEMDMENTS
TO
AMENDED AND RESTATED BYLAWS
OF
ALLIANCE FARMS COOPERATIVE ASSOCIATION
The Amended and Restated Bylaws of Alliance Farms Cooperative
Association (the "Association") were amended by the Board of Directors at its
March 21, 1997 meeting and by the members of the Association at its April 14,
1997 meeting, as follows:
RESOLVED, that the Bylaws of the Association be, and they hereby
are, amended as follows:
1. The present Section 2.1 of the Bylaws is deleted in its entirety and
the following new Section 2.1 is inserted in lieu thereof:
2.1 Limitations and Qualifications. Only producers of
agricultural products, associations of such producers, and
federations of such associations, who have executed and
delivered to the Association a Feeder Pig Purchase Agreement
(as defined in Section 3.2 of these Bylaws) may own Class A
Common Stock (as defined in Article SIXTH of the Articles of
Incorporation) of the Association. Only producers of
agricultural products, associations of such producers, and
federations of such associations, who have executed and
delivered to the Association a Weaned Pig Purchase Agreement
(as defined in Section 3.2 of these Bylaws) may own Class B
Common Stock (as defined in Article SIXTH of the Articles of
Incorporation) of the Association. Except as provided in
the two immediately preceding sentences, no person may own
the capital stock of the Association. Only stockholders of
the Association may be members of the Associations, and each
stockholder of the Association shall be a member of the
Association.
2. The first paragraph of the present Section 2.2 of the Bylaws is
deleted in its entirety and the following new first paragraph is
inserted in lieu thereof:
In the event that (a) a member (i) has terminated a
Feeder Pig Purchase Agreement between the Association and
the member or a Weaned Pig Purchase Agreement between the
Association and the member without having executed and
delivered to the Association a replacement Feeder Pig
Purchase Agreement or a replacement Weaned Pig Purchase
Agreement, as the case may be, or (ii) fails to be a party
to a Feeder Pig Purchase Agreement with the Association or a
Weaned Pig Purchase Agreement with the Association, or (b)
the Board of Directors by resolution finds that a member has
(i) intentionally or repeatedly violated any provision of
the Articles of Incorporation or these Bylaws, or (ii)
breached a Feeder Pig Purchase Agreement or a Weaned Pig
Purchase Agreement or materially breached any other contract
with the Association or (iii) remained indebted to the
Association for ninety (90) days after such indebtedness
first became payable, or (iv) willfully obstructed any
lawful purpose or activity of the Association, then the
Board of Directors, in its sole discretion, may terminate
such member's membership in and association with the
Association in any manner hereinafter provided.
3. The present Section 2.4 of the Bylaws is deleted in its entirety and
the following new Section 2.4 is inserted in lieu thereof:
2.4 Transferability of Equity Interests. The equity
interests issued by the Association may not be assigned or
transferred, except upon consent of the Board of Directors;
provided, however, that the Board of Directors shall not
give such consent absent the execution and delivery to the
Association of a Feeder Pig Purchase Agreement, with respect
to an assignment or transfer of Class A Common Stock (as
defined in Article SIXTH of the Articles of Incorporation),
or a Weaned Pig Purchase Agreement, with respect to an
assignment or transfer of Class B Common Stock (as defined
in Article SIXTH of the Articles of Incorporation), by such
assignee or transferee.
4. The present Section 3.2(b) of the Bylaws is deleted in its entirety
and the following new Section 3.2(b) is inserted in lieu thereof:
(b) Feeder Pig Purchase Agreements and Weaned Pig Purchase
Agreements. Without limiting the foregoing, the Association may
make (i) uniform feeder pig purchase agreements ("Feeder Pig
Purchase Agreements") with its members owning Class A Common
Stock (as defined in Article SIXTH of the Articles of
Incorporation) that require such members to, among other things,
purchase from the Association feeder pigs that meet particular
minimum weight, management and quality standards; provided,
however, that the application of the terms of the Feeder Pig
Purchase Agreements may result in different prices for the
purchase of feeder pigs, and (ii) uniform weaned pig purchase
agreements ("Weaned Pig Purchase Agreements") with its members
owning Class B Common Stock (as defined in Article SIXTH of the
Articles of Incorporation) that require such members to, among
other things, purchase from the Association weaned pigs that meet
particular minimum weight, management and quality standards;
provided, however, that the application of the terms of the
Weaned Pig Purchase Agreements may result in different prices for
the purchase of weaned pigs. The allocation of any and all pigs
produced by the Association between those that are to be retained
by the Association for development into feeder pigs and those
that are to be sold pursuant to the Weaned Pig Purchase
Agreements will be determined by the Association based on the
average production of pigs at weaned pig age from all Production
Units (as defined below) and will be distributed in proportion to
the number of Class A Production Units (as defined below), on the
one hand, and the number of Class B Production Units (as defined
below), on the other hand. For purposes of this Section 3.2, (i)
"Production Units" means the Class A Production Units and Class B
Production Units, (ii) a "Class A Production Unit" means a feeder
pig production facility necessary to house, feed and care for a
group of approximately 2,450 sows and the attendant offspring
thereof (A) that is constructed using the proceeds of the
issuance of 17 shares of Class A Common Stock of Association and
(B) from which an initial lot of weaned pigs has been produced,
and (iii) a "Class B Production Unit" means a weaned pig
production facility necessary to house, feed and care for a group
of approximately 2,450 sows and the attendant offspring thereof
(A) that is constructed using the proceeds of the issuance of 18
shares of Class B Common Stock of Association and (B) from which
an initial lot of weaned pigs has been produced. The Board of
Directors shall have the power to carry out all agreements of the
Association with its members in every way advantageous to the
Association representing the members collectively and to modify
the terms of the form of Feeder Pig Purchase Agreements and of
the form of Weaned Pig Purchase Agreements so long as each such
modification maintains the relative economics of each member's
financing cost per pig as of the date or dates that each such
member's shares of capital stock were issued by the Association.
5. The present Section 9.1(a) of the Bylaws is deleted in its entirety
and the following new Section 9.1(a) is inserted in lieu thereof:
(a) The Association annually shall distribute as patronage
distributions to its member-patrons all of its net margins
realized by the Association on its patronage sourced income. The
Association's net margins through and including August 31, 1997
are equal to the Association's Federal taxable income realized by
the Association from patronage sourced business done with or for
its member-patrons, computed before reduction for patronage
distributions paid by the Association hereunder, and the
Association's net margins from and after September 1, 1997 are
equal to the Association's net income (computed under generally
accepted accounting principles) realized by the Association from
patronage sourced business done with or for its member-patrons,
computed before reduction for patronage distributions paid by the
Association hereunder. The Association shall compute its net
income (taxable income through and including August 31, 1997)
separately for each group of member-patrons, together with their
successors and permitted assigns (each such group of member-
patrons, including their successors and permitted assigns, are
referred to as a "Member Group"), whose shares of capital stock
originally were issued by the Association in connection with the
provision of financing for the acquisition or development of one
or more production units that were the subject of the issuance of
capital stock to such group (each, a "Member Group's Production
Unit"). In determining the amount of the Member Group's net
income (taxable income through and including August 31, 1997),
the Association shall separately take into account the
depreciation deductions and financing costs attributable to the
related Member Group's Production Unit(s). The amount of the
patronage dividend shall be computed separately for each Member
Group and the patronage dividend shall be equal to the net margin
computed for each such Member Group, and not reduced by any net
loss realized by any other Member Group. The allocation of net
margins as patronage distributions shall be made only with
respect to feeder pigs sold pursuant to the terms of the Feeder
Pig Purchase Agreements between the Association and the members,
weaned pigs sold pursuant to the terms of the Weaned Pig Purchase
Agreements between the Association and the members, and feeder
pigs and weaned pigs sold pursuant to the Swine Production
Services Agreement between the Association and Farmland
Industries, Inc. (or its successors or assigns).
6. The present Section 9.5 of the Bylaws is deleted in its entirety and
the following new Section 9.5 is inserted in lieu thereof:
9.5 Dissolution or Liquidation. Except as otherwise
provided in the Articles of Incorporation, in the event of the
dissolution or liquidation of the Association, the Association
shall distribute its assets in the following order of priority:
(1) to the payment of debts and liabilities of the Association;
(2) to setting up such reserves as the Board of Directors shall
determine to be reasonably necessary or appropriate for any
contingent or unforeseen liabilities or obligations of the
Association; and (3) among the holders of outstanding capital
credits and the Association's capital stock ratably in proportion
to the sum of:
(a) the cash, property or other consideration received
by the Association in exchange for each such share
of capital stock issued to the holder thereof (or
such holder's predecessors in interest of such
share), as determined by the Board of Directors,
plus
(b) the aggregate amount of any and all payments of
principal made by such holder (or such holder's
predecessors in interest), as determined by the
Board of Directors, pursuant to such holder's (or
such holder's predecessors in interest's) Feeder
Pig Purchase Agreement or Weaned Pig Purchase
Agreement, as the case may be, with respect to
(i) the debt incurred by the Association for the
production facilities constructed by the
Association with respect to the issuance of each
such share of capital stock from which the right
of such holder (or such holder's predecessors in
interest) to purchase pigs under such Agreement
derives, (ii) any debt incurred for the initial
working capital requirements with respect to the
operation of such production facilities, and
(iii) any debt incurred for purposes of
refinancing any such debt respectively.
# # # # #
EXHIBIT 4.4
INCORPORATED UNDER THE COOPERATIVE ASSOCIATION LAWS OF COLORADO
Number Shares
ALLIANCE FARMS COOPERATIVE ASSOCIATION
a Colorado cooperative association
This Certificate of Membership also represents shares of Class B common stock of
the Association. 5,000 shares of Class B common stock authorized, $0.01 par
value
THIS CERTIFIES THAT is a
member of, and is the owner of
Shares of the Class B
Common Stock of,
ALLIANCE FARMS COOPERATIVE ASSOCIATION,
transferable by the holder hereof on the books of the Association in person or
by duly authorized attorney only upon surrender of this Certificate properly
endorsed. The Articles of Incorporation of the Association, as from time to
time amended, the Bylaws of the Association, as from time to time amended, and
the laws of the State of Colorado, as from time to time amended, are by
reference incorporated herein, and the holder hereof, by accepting this
Certificate, consents to the provisions thereof and agrees to be bound thereby.
(See reverse for limitations and other provisions.)
IN WITNESS WHEREOF, the Association has caused this Certificate to be
signed by its duly authorized officers this day of
A.D. 19 .
PRESIDENT SECRETARY
Sale, transfer or hypothecation of the shares represented by this certificate is
restricted by the provisions of the Colorado cooperative association law and the
Articles of Incorporation and Bylaws of Alliance Farms Cooperative Association
(the "Company"), a copy of which provisions may be inspected at the principal
offices of the Company, and all provisions of which are hereby incorporated by
reference in this certificate.
CERTIFICATE
of
Membership
and
Shares
of the
Class B Common Stock
of
ALLIANCE FARMS
COOPERATIVE ASSOCIATION
ISSUED TO
DATE
For Value Received, hereby sell, assign and transfer unto
Shares of the Class B Common Stock represented by the within Certificate, and
do hereby irrevocably constitute and appoint
attorney to transfer the said Stock on the books of the within named
Association with full power of substitution in the premises.
Dated 19
In presence of
Exhibit 5.1
April 18, 1997
Alliance Farms Cooperative Association
201 South Main Street
Yuma, Colorado 80759
Gentlemen:
We refer to the Registration Statement on Form SB-2 of Alliance Farms
Cooperative Association, a Colorado cooperative association (the "Company"),
filed with the Securities and Exchange Commission for the purpose of registering
under the Securities Act of 1933, as amended, 51 shares of (Class A) Common
Stock, par value of $.01 per share, and 108 shares of Class B Common Stock, par
value of $.01 per share, to be offered by the Company.
We have examined the Articles of Incorporation, as amended, and the
Amended and Restated Bylaws of the Company, as presently in effect, minutes of
the applicable meetings of the board of directors and stockholders of the
Company, together with such other corporate records, certificates of public
officials and other documents as we have deemed relevant to this opinion.
Based upon the foregoing, it is our opinion that:
1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Colorado.
2. All necessary corporate action has been taken to authorize the
issuance and sale by the Company of 51 shares of (Class A) Common Stock, par
value $.01 per share, and 108 shares of Class B Common Stock, par value of $.01
per share, for the consideration set forth in such Registration Statement, and,
upon the issuance and sale of such shares for such consideration, such shares
will be duly and legally issued, fully paid and nonassessable.
We hereby consent to the reference to our firm under the heading
"Legal Matters" in the Prospectus which constitutes a part of such Registration
Statement. We also consent to the inclusion of this opinion in the Registration
Statement as an exhibit thereto.
Very truly yours,
JWA:ard
Exhibit 10.2.2
SECOND AMENDMENT TO
SWINE PRODUCTION SERVICES AGREEMENT
THIS SECOND AMENDMENT TO SWINE PRODUCTION SERVICES AGREEMENT is
entered into effective as of the 14th day of April, 1997, by and between
ALLIANCE FARMS COOPERATIVE ASSOCIATION (hereinafter "Association") and FARMLAND
INDUSTRIES, INC. (hereinafter "Farmland").
WHEREAS, Association and Farmland are parties to a Swine Production
Services Agreement, dated as of July 13, 1994, as amended by a First Amendment
to Swine Production Services Agreement, dated as of July 26, 1996 (as so
amended, the "Agreement");
WHEREAS, Association and Farmland desire to amend the Agreement as
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree that the Agreement be amended as follows:
1. The Agreement is hereby amended by modifying all references
therein to the term "Operation" to refer to the substantial farrow to
feeder pig operations and farrow to weaned pig operations commenced or to
be commenced by Association.
2. Section 2(c) of the Agreement (relating to services provided by
Farmland) hereby is amended by inserting therein a reference to weaned pigs
such that said Section 2(c) shall read in its entirety as follows:
(c) logistical backup and coordination, including facilitating
the acquisition, servicing, transportation and sale of genetic stock,
breeding stock, weaned pigs and feeder pigs.
3. Section 3(a) of the Agreement (relating to compensation provided
to Farmland) hereby is amended by inserting therein a reference to the
compensation payable with respect to weaned pigs such that said Section
3(a) shall read in its entirety as follows:
(a) As compensation to Farmland, Association shall, on the first
day of each month, pay Farmland the sum of (i) $1.00 per weaned pig
shipped by the Operation (including gilts shipped by the Operation to
Farmland pursuant to the provisions of Section 10 hereof), (ii) $1.00
per feeder pig shipped by the Operation (including gilts shipped by
the Operation to Farmland pursuant to the provisions of Section 10
hereof), and (iii) $1.00 per feeder pig retained by the Operation for
finishing as breeding stock (as may be evidenced by movement of any
such pig from the nursery building or otherwise), during the
immediately preceding month. This amount shall be increased, on an
annual basis, by a percentage rate equal to the annual rate of
inflation, as disclosed by the Consumer Price Index - Retail Index as
published by the United States Department of Commerce using the Index
for 1994 as the base year for purposes of the calculations required by
this Section 3.
4. The introductory clause of Section 4 of the Agreement (relating
to Association's obligations) hereby is amended by inserting therein a
reference to weaned pig operations such that said introductory clause of
Section 4 shall read in its entirety as follows:
OBLIGATIONS OF ASSOCIATION. In connection with the Operation,
Association shall provide all capital, management and labor associated
generally with the ownership and operation of a farrow to feeder pig
operation, and farrow to weaned pig operation, of the size and type of
the Operation and specifically shall provide the following:
5. Sections 8(a) and (d) of the Agreement (relating to Farmland's
right to purchase excess pigs) hereby are amended to grant Farmland the
right to purchase excess weaned pigs by inserting in Sections 8(a) and (d)
references to Weaned Pig Purchase Agreements such that said Sections 8(a)
and (d) shall read in their entirety as follows:
(a) If, at any time during the term of this Agreement, (i)
Association produces more Qualifying Pigs (as defined in the Feeder
Pig Purchase Agreements or Weaned Pig Purchase Agreements, as the case
may be, entered into by Association members) than are made available
by Association for purchase under the Feeder Pig Purchase Agreements
or Weaned Pig Purchase Agreements, as the case may be, or to be used
by Association in its breeding stock multiplier unit (such pigs
representing said excess production being hereinafter collectively
referred to as "Production Pigs"), or (ii) a member of Association
fails to purchase Qualifying Pigs pursuant to a Feeder Pig Purchase
Agreement or Weaned Pig Purchase Agreement, as the case may be,
between Association and such member (the pigs not so purchased being
hereinafter collectively referred to as "Default Pigs") (Production
Pigs and Default Pigs being hereinafter collectively referred to as
"Excess Pigs"), Association shall give Farmland notice by telephone of
each such occurrence (the "Pig Notice").
* * * *
(d) In the event that Farmland timely exercises a right to
purchase Excess Pigs granted hereunder, then Farmland shall purchase
the Excess Pigs described in Farmland's notice described in subsection
(b) of this Section upon the terms and conditions set forth in the
Feeder Pig Purchase Agreement or Weaned Pig Purchase Agreement, as the
case may be, to which Farmland is a party and which is then in effect;
provided however, that with respect to the purchase of Production
Pigs, the purchase price per pig shall be the average purchase price
per pig sold by Association pursuant to the Feeder Pig Purchase
Agreements or Weaned Pig Purchase Agreements, as the case may be, for
the immediately preceding month, and that with respect to the purchase
of Default Pigs, the purchase price per pig shall be the purchase
price under the applicable Feeder Pig Purchase Agreement or Weaned Pig
Purchase Agreement, as the case may be, with respect to such Default
Pigs.
In addition, the heading to Section 8 shall be amended to eliminate the
reference to "Feeder Pigs" such that said shall read "Purchase of Excess
Pigs by Farmland".
6. Section 10(b) of the Agreement (relating to the price paid by
Farmland for gilts to be finished into breeding stock) hereby is amended by
inserting therein a reference to the price specified in Weaned Pig Purchase
Agreements such that said Section 10(b) shall read in its entirety as
follows:
(b) PIG PURCHASE PRICE. The price per head, FOB shipping point,
for the feeder pig gilts purchased by Farmland for finishing pursuant
to this Section shall be the purchase price specified in the Feeder
Pig Purchase Agreement as then in effect between Farmland and
Association or, if no such agreement is then in effect, the purchase
price specified in the most recent effective Feeder Pig Purchase
Agreement between Farmland and Association. The price per head, FOB
shipping point, for the weaned pig gilts purchased by Farmland for
finishing pursuant to this Section shall be the purchase price
specified in the Weaned Pig Purchase Agreement as then in effect
between Farmland and Association or, if no such agreement is then in
effect, the purchase price specified in the most recent effective
Feeder Pig Purchase Agreement between Association and a member of the
Association.
7. The first sentence of Section 10(i) of the Agreement (relating to
Association's disclaimers of warranties for gilts sold to Farmland) hereby
is amended by inserting therein a reference to warranties provided in
Weaned Pig Purchase Agreements such that said first sentence of Section
10(i) shall read in its entirety as follows:
In connection with Association's sale of gilts to Farmland
pursuant to this Section, ASSOCIATION MAKES NO WARRANTIES EITHER
EXPRESS OR IMPLIED (A) WITH RESPECT TO FEEDER PIGS, OTHER THAN THOSE
WARRANTIES EXPRESSLY PROVIDED IN THE FEEDER PIG PURCHASE AGREEMENT
BETWEEN ASSOCIATION AND FARMLAND AS IN EFFECT AT THE TIME OF SALE OR,
IF NO SUCH AGREEMENT IS THEN IN EFFECT, IN THE MOST RECENT EFFECTIVE
FEEDER PIG PURCHASE AGREEMENT BETWEEN FARMLAND AND ASSOCIATION, AND
(B) WITH RESPECT TO WEANED PIGS, OTHER THAN THOSE WARRANTIES EXPRESSLY
PROVIDED IN THE WEANED PIG PURCHASE AGREEMENT BETWEEN ASSOCIATION AND
FARMLAND AS IN EFFECT AT THE TIME OF SALE OR, IF NO SUCH AGREEMENT IS
THEN IN EFFECT, IN THE MOST RECENT EFFECTIVE WEANED PIG PURCHASE
AGREEMENT BETWEEN ASSOCIATION AND A MEMBER OF ASSOCIATION, AND (I)
MAKES NO WARRANTY AS TO ANY SPECIFIC LEVEL OF PERFORMANCE WITH RESPECT
TO ANY SWINE PURCHASED BY FARMLAND UNDER THIS SECTION, AND
(II) DISCLAIMS ANY WARRANTIES OF MERCHANTABILITY OR OF FITNESS FOR A
PARTICULAR PURPOSE.
8. The third sentence of Section 13 of the Agreement (relating to
the survival of Farmland's right to purchase excess feeder pigs) hereby is
amended by inserting therein a reference to weaned pigs such that said
third sentence of Section 13 shall read in its entirety as follows:
Notwithstanding the foregoing, however, the provisions of Section 8,
(i) insofar as they relate to excess feeder pigs, shall survive any
termination of this Agreement occurring within five (5) years after
the date that the first feeder pigs are shipped by Association under
any Feeder Pig Purchase Agreement between Association and any member
of Association (the "First Shipment Date") until five (5) years after
the First Shipment Date, and shall expire and be of no further force
and effect with respect to excess feeder pigs that arise after five
(5) years of the date of this Agreement, and (ii) insofar as they
relate to excess weaned pigs, shall survive any termination of this
Agreement occurring within five (5) years after the date that the
first weaned pigs are shipped by Association under any Weaned Pig
Purchase Agreement between Association and any member of Association
(the "First Weaned Shipment Date") until five (5) years after the
First Weaned Shipment Date, and shall expire and be of no further
force and effect with respect to excess weaned pigs that arise after
five (5) years of the date of the Second Amendment to this Agreement.
9. Except as expressly amended hereby, all of the terms, conditions
and provisions of the Agreement shall remain unamended and in full force
and effect in accordance therewith and are hereby ratified and confirmed.
The amendments provided herein shall be limited precisely as drafted and
shall not constitute an amendment of any other term, condition or provision
of the Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment to Swine Production Services Agreement as of the day and year first
above written.
ALLIANCE FARMS COOPERATIVE
ASSOCIATION
By:
Name:
Title:
FARMLAND INDUSTRIES, INC.
By:
Name:
Title:
Exhibit 10.14.1
No. E039T01A
AMENDMENT
THIS AMENDMENT is entered into as of February 11, 1997 between COBANK, ACB
("CoBank") and ALLIANCE FARMS COOPERATIVE ASSOCIATION, Kansas City, Missouri
(the "Company").
BACKGROUND
CoBank and the Company are parties to a Multiple Advance Term Loan
Supplement dated May 19, 1995 (such agreement, as previously amended, is
hereinafter referred to as the "Supplement"). CoBank and the Company now desire
to amend the Supplement. For that reason, and for valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), CoBank and the
Company agree as follows:
1. Section 3 of the Supplement is hereby amended and restated to read as
follows:
SECTION 3. TERM. Subject to the conditions hereinafter set forth, the
term of the Commitment shall be from the date as of which this Supplement
is entered into, up to but not including August 31, 1997, or such later
date as CoBank may, in its sole discretion, authorize in writing.
2. Except as set forth in this amendment, the Supplement shall continue in
full force and effect as written.
IN WITNESS WHEREOF, the parties have caused this amendment to be executed
by their duly authorized officers as of the date shown above.
COBANK, ACB ALLIANCE FARMS COOPERATIVE
ASSOCIATION
By: By:
Title: Title:
Exhibit 10.21
PROMISSORY NOTE
$1,360,000.00 November 27, 1996
FOR VALUE RECEIVED, the undersigned, Alliance Farms Cooperative
Association, a Colorado corporation ("Borrower"), hereby promises to pay to the
order of Farmland Industries, Inc. a Kansas cooperative corporation ("Lender"),
the principal sum of On Million Three Hundred Sixty Thousand and No/100 DOLLARS
($1,360,000.00), or such lesser amount as may constitute the unpaid principal
amount of the Loan made pursuant to the Loan Agreement of even date herewith
between Borrower and Lender.
Interest will be charged and compounded annually on the outstanding
principal balance of this Note or so much thereof as shall be advanced, at the
per annum rate equal to the sum of (a) one and one-quarter percent (1.25% or 125
basis points), plus (b) the National Variable Rate (collectively, the
"Applicable Rate") with the understanding that the National Variable Rate shall
be the rate most recently announced by CoBank, ACB (the "Bank") as its "National
Variable Rate." The National Variable Rate is one of the Bank's base rates and
serves as a basis upon which effective rates of interest are calculated for
those loans making reference thereto, and is evidenced by the recording thereof
after its announcement in such internal publication or publications as the Bank
may designate. The Applicable Rate shall be adjusted annually based on the
National Variable Rate in effect on the anniversary date of this Note. Interest
shall be computed on the basis of a 360-day year.
It is acknowledged that the Applicable Rate effective on the date of
the execution of this Note is nine and one-half percent (9.5%) per annum, and
this Note will initially bear interest at the rate of nine and one-half percent
(9.5%) per annum.
Principal and interest shall be payable in installments of interest
only on the 1st day of January, 1997, and on the 1st day of each successive
month thereafter until this Note is repaid in full, and (b) a final payment of
all outstanding principal and accrued but unpaid interest due hereunder on the
first to occur of (i) the closing date with respect to Borrower=s next issuance
and sale of a block of at least seventeen (17) shares of its common stock, $.01
par value, and (ii) the 27th day of November, 2006; provided, however, that as
of each anniversary of the date of this Note, Lender shall adjust the amount of
the monthly interest installments to an amount calculated to be the interest
payment sufficient to amortize the then outstanding principal at the then
Applicable Rate as if the outstanding principal were to be fully amortized in
equal monthly installments at the Applicable Rate over the then remaining
portion of an assumed original repayment term of ten (10) years. Lender shall
provide written notice to Borrower of the amount of such adjusted interest
payment promptly upon completing the calculation thereof.
Overdue principal and, to the extent permitted by law, overdue
interest shall bear interest at a rate per annum equal to the lower of two
percent (2%) above the Applicable Rate in effect from time to time or the
maximum rate of interest allowed by applicable law; provided, however, that in
no event shall any amount due hereunder bear interest after maturity at a rate
per annum less than the rate of interest applicable thereto at maturity.
If any installment of this Note becomes due and payable on a Saturday,
Sunday or business holiday in the State of Missouri, payment shall be made on
the next successive business day with the same effect as though made on the due
date.
The Borrower reserves the right to prepay all or any portion of this
Note at any time and from time to time without premium or penalty of any kind.
All payments made hereunder shall be made in lawful currency of the
United States of America at Farmland Industries, P.O. Box 7305, Kansas City,
Missouri 64116, Attn: Paul Miller, or at such other place as the Lender may
designate in writing. All payments made hereunder, whether a scheduled
installment, prepayment, or payment as a result of acceleration, shall be
allocated first to accrued but unpaid interest, next to premiums, penalties, or
liquidated damage amounts, if any, due hereunder, next to installments of
principal overdue or currently due, and then to installments of principal
remaining outstanding hereunder in the inverse order of their maturity.
For the purposes of this Note, the following terms shall have the
following meanings:
(a) "Borrower" shall mean, jointly and severally, Alliance Farms
Cooperative Association, a Colorado corporation, its successors and assigns, and
all other persons or entities succeeding to the interest of the named Borrower
in the property encumbered by the Deed of Trust and any person or entity
becoming liable on this Note, the Deed of Trust, or any of the other Loan
Documents.
(b) "Default" shall mean the failure of Borrower to pay or perform as
required hereunder or as required under the Deed of Trust or the Loan Documents.
(c) "Event of Default" shall mean a Default for which there is no
opportunity to cure or for which all opportunities to cure have expired.
(d) "Lender" shall mean Farmland Industries, Inc., a Kansas
cooperative corporation, and its successors and assigns.
(e) "Loan Documents" shall mean collectively this Note, the Mortgage
and any and all other instruments, agreements and documents now or hereafter
evidencing, securing or otherwise relating to the debt evidenced by this Note.
(f) "Mortgage" shall mean those certain Illinois Mortgages executed
by Borrower, securing this Note and granting Lender a security interest in and
to Buyer's right, title and interest in certain property described therein.
Each person liable hereon agrees, to the extent permitted by law, to
pay all reasonable costs of collection, including attorneys' fees, paid or
incurred by the Lender in enforcing this Note or the rights and remedies herein
provided.
This Note is secured by the Mortgage. It is expressly agreed that all
of the covenants, conditions and agreements contained in those Mortgage and the
Loan Documents are hereby made part of this Note. This Note will be considered
in default (1) upon failure to pay any installment of principal or interest as
required herein on the due date thereof, or (2) upon any default under the
Mortgage or the Loan Documents, or (3) upon the occurrence of any event by which
under the terms of the Mortgage or the Loan Documents this Note may or shall
become due and payable. Upon the occurrence of an Event of Default, and after
expiration of the applicable cure period, Lender may, at its option, declare all
unpaid indebtedness, evidenced by this Note, and any modifications thereof, plus
any other sums owed by Borrower to Lender at the time of such declaration, to be
accelerated and immediately due and payable without notice regardless of the
date of maturity.
Failure at any time to exercise the foregoing or any other options
shall not constitute a waiver of the right to exercise the same or any other
option at any other time in respect of the same event or any other event.
The Borrower, for itself and/or any other entity or persons now or
hereafter liable hereon, hereby waives demand of payment, presentment for
payment, protest, notice of nonpayment or dishonor and any and all other notices
and demands whatsoever, and any and all delays or lack of diligence in the
collection hereof, and expressly consents and agrees to any and all extensions
or postponements of the time of payment hereof from time to time at or after
maturity and any other indulgence and waives all notice thereof.
By executing this Note on behalf of the Borrower, any individual
and/or entity which has signed this Note in a representative capacity on behalf
of Borrower does hereby represent to the Lender that such individual and/or
entity is duly authorized and empowered to execute and deliver this Note on
behalf of the Borrower and that this Note constitutes the legal and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms.
This Note shall be governed by and construed and enforced in
accordance with the laws of the State of Missouri (without reference to conflict
of laws principles of such state), except to the extent preempted by United
States federal law.
IN WITNESS WHEREOF, the undersigned has duly caused this Note to be
executed and delivered at the place specified above and as of the date first
written above.
ALLIANCE FARMS COOPERATIVE ASSOCIATION, a Colorado
corporation
By
Printed Name:
Title:
BORROWER
Exhibit 10.22
AMENDED AND RESTATED ILLINOIS MORTGAGE
THIS AMENDED AND RESTATED ILLINOIS MORTGAGE (the "Mortgage"), dated as
of the 27th day of November, 1996, is from Alliance Farms Cooperative
Association, a Colorado cooperative association, whose address is c/o Farmland
Industries, Inc., 3315 North Oak Trafficway, P.O. Box 7305, Kansas City,
Missouri 64116-0005, Attention: Wayne Snyder, Dept. 122 ("Mortgagor"), to
Farmland Industries, Inc., a Kansas corporation, whose address is 3315 North Oak
Trafficway, P.O. Box 7305, Kansas City, Missouri 64116-0005, Attention: Randy
Vance, Dept. 160 (the "Mortgagee");
GRANTING CLAUSE:
Mortgagor, in consideration of the debt hereinafter mentioned and
created, and the sum of Ten Dollars ($10.00) and other good and valuable
considerations to it paid by Mortgagee, the receipt and sufficiency of which are
hereby acknowledged, does by these presents MORTGAGE AND WARRANT to Mortgagee
all of that real property, legally described on Exhibit A hereto (the "Land"),
and all air space above the surface of the Land, with the tenements,
hereditaments, appurtenances, privileges, easements, franchises, rights,
appendages and immunities thereunto belonging or appertaining (said property,
rights and interests being hereinafter called the "Mortgaged Property")
TO HAVE AND TO HOLD the Mortgaged Property to Mortgagee, its
successors and assigns, in accordance with the provisions contained herein.
NOW, THEREFORE, the condition of this Mortgage is such that if
Mortgagor shall well and truly pay and perform the Secured Obligations (as
hereinafter defined), and shall perform, comply with and abide by each and every
of the agreements, conditions and covenants contained and set forth in this
Mortgage, the Note (as hereinafter defined), and the Loan Documents (as
hereinafter defined), then this Mortgage shall be released, without warranty, in
compliance with Illinois law.
AND, Mortgagor does hereby covenant and agree as follows:
ARTICLE ONE: SECURED OBLIGATIONS
This Mortgage is given to secure the payment of indebtedness in the
aggregate principal sum of One Million Three Hundred Sixty Thousand Dollars
($1,360,000), according to the terms of the Promissory Note, dated of even date
herewith, made by Mortgagor to the order of Mortgagee (the "Note"), and the
terms of any and all other instruments, agreements and documents now or
hereafter evidencing, securing or otherwise relating to the indebtedness
evidenced by the Note (the ALoan Documents@), and the performance and discharge
of each and every obligation of Mortgagor now or hereafter set forth in the Note
and the Loan Documents (the "Secured Obligations").
ARTICLE TWO: GENERAL COVENANTS, REPRESENTATIONS AND WARRANTIES
2.1 Payment and Performance. Mortgagor covenants and agrees to pay
and perform the Secured Obligations and to perform, comply with and abide by
each and every one of the agreements, conditions and covenants contained and set
forth in this Mortgage, the Note and the Loan Documents.
2.2 Title to Mortgaged Property. Mortgagor covenants, agrees and
warrants that it has good and marketable fee simple title to the Mortgaged
Property, free and clear of liens and encumbrances, and that Mortgagor has good
right and lawful authority to mortgage and convey the same in the manner and
form herein set forth.
2.3 Representations and Warranties. As a material inducement to
Mortgagee to enter into the transaction evidenced by the Note and the Loan
Documents, Mortgagor hereby unconditionally represents and warrants that (a)
there are no actions, suits or proceedings of a material nature pending or, to
the knowledge of Mortgagor, threatened against or affecting the Mortgagor or the
Mortgaged Property, or involving the validity or enforceability of this
Mortgage, the Note or the Loan Documents, or the priority of the lien and
security interest created by this Mortgage; and (b) no event has occurred
(including specifically Mortgagor's execution of the Mortgage and its
consummation of the transaction evidenced thereby) which will violate, be in
conflict with, result in the breach of or constitute (with due notice or lapse
of time or both) a default under any statute, regulation, rule, order or
limitation, or any mortgage, deed of trust, lease, contract, bylaws, articles of
incorporation, articles of partnership, partnership certificate or agreement,
declaration of trust or other agreement or document to which Mortgagor is a
party or by which Mortgagor or any of the Mortgaged Property may be bound or
affected, or result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever on the Mortgaged Property other than the
liens and security interests created by, or otherwise permitted by, this
Mortgage.
ARTICLE THREE: TRANSFERS, ENCUMBRANCES AND LIENS
3.1 Sale or Transfer. If, at any time prior to the release of this
Mortgage of record, Mortgagor shall terminate its existence, liquidate or
dissolve, or shall sell all or substantially all of its assets, the same shall,
unless made with Mortgagee's prior written consent, be deemed an unauthorized
assignment, and shall constitute a Default under this Mortgage.
3.2 Claims Against Mortgaged Property. Mortgagor will pay, from time
to time when the same shall become due, all claims and demands of mechanics,
materialmen, laborers and others which, if unpaid, might result in, or permit
the creation of, a lien on the Mortgaged Property or any part thereof, or on the
revenues, rents, issues, income and profits arising therefrom, whether paramount
or subordinate to this Mortgage, and in general will do or cause to be done
everything necessary so that the first lien of this Mortgage shall be fully
preserved, at the cost of Mortgagor, without expense to Mortgagee.
Notwithstanding the foregoing, Mortgagor shall have the right to contest in good
faith any such liens, claims and demands by appropriate proceedings timely
commenced and diligently conducted.
ARTICLE FOUR: TAXES AND PUBLIC CHARGES
Mortgagor, from time to time when the same shall become due and
payable, will pay and discharge all taxes of every kind and nature (including
real and personal property taxes and income, franchise, withholding, profits and
gross receipts taxes), all general and special assessments, levies, permits,
inspection and license fees, all water and sewer rents and charges, and all
other public charges, whether of a like or different nature, imposed upon or
assessed against Mortgagor or the Mortgaged Property or any part thereof or upon
the revenues, rents, issues, income and profits of the Mortgaged Property, or
arising in respect of the occupancy, use or possession thereof. Mortgagor will,
within five (5) days of receipt of a written request from Mortgagee, deliver
receipts evidencing the payment of all such taxes, assessments, levies, fees,
rents and other public charges imposed or assessed against Mortgagor or the
Mortgaged Property or the revenues, rents, issues, income or profits thereof.
ARTICLE FIVE: INSURANCE
Mortgagor shall, at its sole cost and expense, but for the benefit of
Mortgagee and Mortgagor, maintain comprehensive general liability insurance
against claims for personal injury, death or property damage occurring upon, in
or about the Mortgaged Property, which insurance shall afford protection of not
less than $1,000,000 with respect to injury or death to a single person, of not
less than $1,000,000 with respect to injuries or deaths from any one accident,
and of not less than $1,000,000 with respect to property damage.
ARTICLE SIX: CONDEMNATION
If all or any part of the Mortgaged Property hereunder be taken or
damaged by the exercise of the power of eminent domain, Mortgagor may contest
the same in good faith so long as there is no Default under this Mortgage, the
Note or the Loan Documents, but the award for any property so taken is hereby
assigned to Mortgagee, and Mortgagee, upon such award becoming final, is hereby
authorized, in the name of Mortgagor, to execute and deliver acquaintances for,
and release of, any such award and to collect and apply the proceeds to the
payment of the Secured Obligations (such application to be to such portions of
the Secured Obligations, and in such order, as Mortgagee may elect), whether
matured or unmatured, and the remainder, if any, shall be paid to Mortgagor or
such other party or parties as may be legally entitled thereto. In the event of
a partial condemnation, Mortgagor covenants and agrees to commence promptly the
restoration and repair of the remaining Mortgaged Property to as nearly as
possible the same condition as existed prior to such taking, and to prosecute
diligently such restoration and repair to completion. Mortgagor will submit
plans for such restoration and repair to Mortgagee for Mortgagee's written
approval prior to the commencement of such restoration and repair.
ARTICLE SEVEN: DEFAULT AND REMEDIES
7.1 Default. Failure of Mortgagor to comply with any of the
covenants and requirements of this Mortgage, within thirty (30) days after
receipt of written notification thereof, or with any of the covenants and
requirements of the Note or the Loan Documents within the time period specified
therein (including any applicable cure period), shall constitute a "Default"
hereunder.
7.2 Remedies Upon a Default. At any time after a Default has
occurred, the whole of the Note shall become due at Mortgagee's option forthwith
or thereafter at the continuing option of Mortgagee, and this Mortgage shall
remain in force, and Mortgagee may exercise any right, power or remedy permitted
to it by law or by contract, and in particular, without limiting the generality
of the foregoing, Mortgagee shall have the absolute right, at its option and
election, to pursue one or more of the following rights:
(a) Mortgagee shall be entitled thereupon or thereafter without
notice or demand, to the extent permitted by the laws of the State of
Illinois, (i) to institute suit at law or in equity to enforce the
rights of Mortgagee and (ii) to enforce, at Mortgagee's continuing
option, payment of all sums secured hereby by action at law or by suit
in equity to foreclose this Mortgage, either or both, concurrently or
otherwise; and one action or suit shall not abate or be a bar to or
waiver of Mortgagee's right to institute or maintain the other,
provided Mortgagee shall have only one payment and satisfaction of the
Secured Obligations;
(b) Mortgagee shall have the right from time to time to take
action to recover any portion of the Secured Obligations, as the same
becomes due, without regard to whether or not any other portion of the
Secured Obligations shall be due, and without prejudice to the right
of Mortgagee thereafter to bring an action of foreclosure, or any
other action, with respect to any Default existing at the time such
earlier action was commenced.
7.3 Right of Mortgagee to Credit Sale. Upon any sale or sales made
hereunder, Mortgagee may bid for and acquire the Mortgaged Property or any part
thereof and, in lieu of paying cash therefor, may make settlement for the
purchase price by crediting upon the Secured Obligations the net sales price
after deducting therefrom the expenses of sale and the cost of the action and
any other sums which Mortgagee is authorized to deduct under this Mortgage, and,
in such event, this Mortgage, the Note, the Loan Documents and any other
evidence of Secured Obligations may be presented to the person or persons
conducting the sale in order that the amount so used or applied may be credited
upon the Secured Obligations as having been paid.
7.4 Entry by Mortgagee. During the continuance of any Default,
Mortgagee personally, or by its agents or attorneys, may enter into and upon and
take possession of all or any part of the Mortgaged Property, and each and every
part thereof, and may exclude Mortgagor, its agents and servants wholly
therefrom and, having and holding the same, may use, occupy and control the
Mortgaged Property or any part thereof, either personally or by its
superintendents, managers, agents, servants, attorneys or receivers.
7.5 Remedies Cumulative. No remedy conferred upon or reserved to
Mortgagee herein or in the Note or the Loan Documents is intended to be
exclusive of any other remedy or remedies, and each and every such remedy shall
be cumulative and shall be in addition to every remedy given to Mortgagee or now
or hereafter existing at law or in equity or by statute. No delay or omission
by Mortgagee in the exercise of any right or power accruing upon any Default
shall impair any such right or power, or shall be construed to be a waiver of
any such Default or any acquiescence therein; and every power and remedy given
in this Mortgage, the Note, or the Loan Documents, to Mortgagee may be exercised
from time to time as often as may be deemed expedient by Mortgagee. Nothing in
this Mortgage, the Note, or the Loan Documents shall affect the obligation of
Mortgagor to pay the Secured Obligations in the manner and at the time and place
therein respectively expressed. In the event of foreclosure, Mortgagor shall be
fully liable for any deficiency.
7.6 No Waiver. Any failure by Mortgagee to insist upon the strict
performance by Mortgagor of any of the terms and provisions of this Mortgage,
the Note, or the Loan Documents shall not be deemed to be a waiver of any of the
terms and provisions of this Mortgage, the Note, or the Loan Documents, and
Mortgagee, notwithstanding any such failure, shall have the right thereafter to
insist upon the strict performance by Mortgagor of any and all of the terms and
provisions of this Mortgage, the Note or the Loan Documents to be performed by
Mortgagor; and Mortgagee may resort for the payment of the Secured Obligations
to the Mortgaged Property or to any other security therefor held by Mortgagee in
such order and manner as Mortgagee may elect.
7.7 Waiver of Redemption and Other Rights. To the extent permitted
by the laws of the State of Illinois, Mortgagor will not at any time (a) insist
upon, or plead, or in any manner whatever claim or take any benefit or advantage
of, any stay or extension or moratorium law, any exemption from execution or
sale of the Mortgaged Property or any part thereof, wherever enacted, now or at
any time hereafter in force, which may affect the covenants and terms of
performance of this Mortgage, nor (b) claim, take or insist upon any benefit or
advantage of any law now or hereafter in force providing for the valuation or
appraisal of the Mortgaged Property, or any part thereof, prior to any sale or
sales thereof which may be made pursuant to any provision herein, or pursuant to
the decree, judgment or order of any court of competent jurisdiction, nor (c)
after any such sale or sales, claim or exercise any right under any laws
wherever enacted, now or at any time hereafter in force, to redeem the property
so sold or any part thereof. Mortgagor, to the extent permitted by the laws of
the State of Illinois, hereby expressly waives all benefit or advantage of any
such law or laws, and covenants not to hinder, delay or impede the execution of
any power herein granted or delegated to Mortgagee, but to suffer and permit the
execution of every power as though no such law or laws had been made or enacted.
ARTICLE EIGHT: MISCELLANEOUS
8.1 Protection of Mortgagee's Security. Mortgagee may, at its
option, after prior notice is given to Mortgagor by Mortgagee if feasible in
Mortgagee=s reasonable judgment under the circumstances, and without waiving its
right to accelerate the Secured Obligations or any part thereof and to foreclose
the same, pay either before or after delinquency any or all of those certain
obligations required by the terms hereof to be paid by Mortgagor for the
protection of the Mortgage security or for the collection of any of the Secured
Obligations if not paid by Mortgagor at least two (2) days prior to the due date
thereof. The good faith decision of Mortgagee upon any question of fact,
necessity or expediency shall be binding on Mortgagor. All sums so advanced or
paid by Mortgagee shall become Secured Obligations and become an integral part
thereof, subject in all respects to the terms, conditions and covenants of this
Mortgage, as fully and to the same extent as though a part of the original
indebtedness evidenced by the Note and secured by this Mortgage, excepting,
however, that said sums shall be repaid to Mortgagee upon demand by Mortgagee to
Mortgagor for said payment.
8.2 Successors and Assigns. All of the grants, covenants, terms,
provisions and conditions herein shall run with the Mortgaged Property, shall,
subject to the provisions of Section 4 of this Mortgage, apply to and bind the
successors and assigns of Mortgagor, and shall inure to the benefit of the
successors and assigns of Mortgagor and Mortgagee.
8.3 Notices. Except as may otherwise be required by applicable law,
all notices, approvals, waivers, consents, demands, requests and declarations
given or required to be given by either party hereto to the other party shall be
in writing and shall be deemed to have been effectively given when delivered
personally or sent by United States certified or registered mail, return receipt
requested, postage prepaid, to the Mortgagor or the Mortgagee, as the case may
be, at their respective address set forth in the preamble of this Mortgage,
and/or to such other (or additional) address(es) requested by a notice given in
accordance with this Section.
8.4 Corrections and Future Acts. Mortgagor will, upon the reasonable
request of Mortgagee, promptly correct any defect, error, or omission which may
be discovered in the contents of this Mortgage or in the execution or
acknowledgment hereof, and will execute, acknowledge, and deliver such further
instruments and do such further acts as may be necessary or as may be reasonably
requested by Mortgagee to carry out more effectively the purposes of this
Mortgage, to subject to the lien and security interest hereby created any of
Mortgagor's properties, rights, or interest covered or intended to be covered
hereby, and to perfect and maintain such lien and security interest.
8.5 Governing Law. This Mortgage shall be governed by and enforced
according to the laws of the State of Illinois, without reference to the
conflicts of laws principles thereof.
8.6 Severability. If any provision or clause of this Mortgage shall
be held or deemed to be or shall, in fact, be inoperative, invalid or
unenforceable as applied in any particular case or in all cases because it
conflicts with any provisions of any constitution or statute or rule of public
policy, or for any other reason, such determination shall not affect in any way
any other provision or clause herein which can be given effect without the
inoperative, invalid or unenforceable provision or clause.
8.7 Amendments. No alteration or amendment of this Mortgage shall be
effective unless in writing signed by the parties sought to be charged or bound
thereby.
8.8 Counterparts. This Mortgage may be executed in multiple copies,
each of which when so executed and acknowledged shall be deemed to be an
original.
IN WITNESS WHEREOF, Mortgagor has executed and delivered this Mortgage
as of the day and year first above written.
ALLIANCE FARMS COOPERATIVE ASSOCIATION, a Colorado
cooperative association
By:
Name:
Title:
MORTGAGOR
STATE OF )
) SS.
COUNTY OF )
I, the undersigned, a Notary Public, in and for said County, in the State
aforesaid, do hereby certify, that , personally known to
me to be the of said corporation, whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that as an officer of the corporation, he signed and delivered the said
instrument, pursuant to the authority given by the Board of Directors of said
corporation, as their free and voluntary act, and as the free and voluntary act
and deed of said corporation, for the uses and purposes therein set forth.
Given under my hand and notarial seal, this day of
, 1996.
NOTARY PUBLIC
EXHIBIT A: THE LAND
A tract of land located in Section 1, Township 1 North, Range 8 East of the
Third Principal Meridian located in Wayne County, Illinois and more
particularly described as follows:
A part of Section 1, Township 1 North, Range 8 East, 3rd PM, Wayne
County, Illinois and being further described as follows: Commencing
at the southeast corner of the North Half of the North Half of the
Southeast Quarter of said Section 1; thence West, along the south line
of the North Half of the North Half of the Southeast Quarter of
Section 1, a distance of 972.5 feet to the point of beginning; thence
continuing along the south line of the North Half of the North Half of
the Southeast Quarter of Section 1, a distance of 972.5 feet; thence
North, parallel with the east line of Section 1, a distance of 2080
feet; thence East, parallel with the south line of the North Half of
the North Half of the Southeast Quarter of Section 1, a distance of
972.5 feet; thence South, parallel with the east line of Section 1, a
distance of 2080 feet to the point of beginning; containing 46.44
acres, more or less.
AND
A part of Section 1, Township 1 North, Range 8 East, 3rd PM, Wayne
County, Illinois and being further described as follows: Beginning at
the southeast corner of the North Half of the North Half of the
Southeast Quarter of said Section 1; thence West, along the south line
of the North Half of the North Half of the Southeast Quarter of
Section 1, a distance of 972.5 feet; thence North, parallel with the
east line of Section 1, a distance of 2080 feet; thence East, parallel
with the south line of the North Half of the North Half of the
Southeast Quarter of Section 1, a distance of 972.5 feet to a point on
the east line of Section 1; thence South, along the east line of
Section 1, a distance of 2080 feet to the point of beginning;
containing 46.44 acres, more or less.
Exhibit 10.28
February 11, 1997
Alliance Farms Cooperative Association
3315 North Oak Trafficway
Kansas City, MO 64116
Attention: President
Gentlemen:
Reference is made to the Master Loan Agreement (MLA No. E039), dated as of May
19, 1995 (the "MLA"), between CoBank, ACB ("CoBank") and Alliance Farms
Cooperative Association (the "Company"), as supplemented by the Multiple Advance
Term Loan Supplement (Loan No. E039T01), dated as of May 19, 1995 (the "Multiple
Advance Supplement"), and the Revolving Term Loan Supplement (Loan No. E039T02),
dated as of May 19, 1995 (the "Revolver Supplement"), and to the related Loan
Agreement (No. T2300), dated September 21, 1994 (the "Original Loan Agreement"),
as amended by the Term Loan Amendment (Loan No. 2300A), dated as of May 19, 1995
(the MLA and the Original Loan Agreement, as so supplemented and amended,
together with all promissory notes, mortgages, deeds of trust, security
agreements, waivers, consents and other documentation entered into with respect
thereto or as contemplated thereby, being referred to herein as the "CoBank Loan
Documentation").
Reference is further made to the Loan Agreement, dated as of November 27, 1996,
between the Company and Farmland Industries, Inc. ("Farmland"), together with
all promissory notes, mortgages, deeds of trust, security agreements, waivers,
consents and other documentation entered into with respect thereto or as
contemplated thereby, each in the form furnished to CoBank by the Company (the
"Farmland Loan Documentation"), and to the Excess Feeder Pig Purchase Agreement
(the "Farmland Pig Agreement") to be entered into between the Company and
Farmland, in the form furnished to CoBank by the Company.
Reference is further made to the Subordination Agreement (the "Subordination
Agreement") to be entered into between CoBank and Farmland, pursuant to which
the loan evidenced by the Farmland Loan Documentation is being subordinated to
the loan evidenced by the CoBank Loan Documentation.
As you know, pursuant to the CoBank Loan Documentation, CoBank has committed to
make loans to the Company from time to time to finance the debt portion of the
construction, development and start-up costs of up to five farrowing units and
related support facilities upon the Company attaining specified equity
investment levels. To date, CoBank has provided debt financing for two such
farrowing units and related support facilities. We understand that, pursuant to
the Farmland Loan Documentation, Farmland has committed to make up to $1,360,000
of loans (the "Farmland Loan") to the Company to finance a portion of the
construction, development and start-up costs of the Company's second Wayne
County, Illinois farrowing unit and related support facilities (the "Second
Illinois Facilities"). In this regard, we note that the provision to the
Company of the Farmland Loan, as well as the creation and incurrence of liens
arising as a result thereof, presently are permitted under the second sentence
of Section 9(A) and Section 9(B)(vii) of the MLA, based on your certification
that the conditions specified in said sections have been satisfied..
The purpose of this letter is to inform you that CoBank hereby acknowledges,
consents and agrees as follows:
1.Pursuant to the exclusive right and privilege granted to CoBank under
Section 3 of the Multiple Advance Supplement to extend the term of the
Commitment (as defined in Section 1 of the Multiple Advance Supplement)
beyond the scheduled February 28, 1997 expiration date, CoBank hereby
extends the term of the Commitment (as defined in Section 1 of the
Multiple Advance Supplement), subject to the conditions set forth in the
Multiple Advance Supplement, up to but not including August 31, 1997.
2.Subject to Farmland's execution and delivery of the Subordination
Agreement, for purposes of the CoBank Loan Documentation, including,
without limitation, Section 10(B) of the MLA, Section 1 of the Multiple
Advance Supplement and Section 1 of the Revolver Supplement, the
Farmland Loan shall be treated by CoBank as, or considered by CoBank in
substitution for, an equity investment in the Company equal to
$1,360,000 (i.e., "member's equity") until it is repaid in accordance
with the Farmland Loan Documentation.
3.CoBank hereby acknowledges, consents and agrees that neither the
Company's execution and delivery of the Farmland Loan Documentation, nor
the provision to the Company of the Farmland Loan and the continued
existence of any indebtedness or liability for borrowed money with
respect thereto, nor the creation, incurrence and continued existence of
any mortgage, deed of trust, pledge, lien, security interest or other
encumbrance on any property or assets, real or personal, of the Company
in connection with the Farmland Loan, shall cause the Company to be in
violation of any of its representations, warranties, covenants and
agreements in the CoBank Loan Documentation and shall not constitute a
default or event of default thereunder.
4.CoBank hereby consents to the performance by the Company, subject to the
terms and conditions of the Subordination Agreement, of the Company's
obligations, covenants and agreements under the Farmland Loan
Documentation in accordance with the terms and conditions thereof,
including, without limitation, the repayment in full of the principal
and accrued interest under the promissory note evidencing the Farmland
Loan on the first to occur of (a) the closing date with respect to the
Company's next issuance and sale of a block of at least 17 shares of its
common stock, $.01 par value, and (b) the 27th day of November 2006.
5.CoBank hereby consents to the Farmland Pig Agreement, and to the
performance by the Company of its obligations, covenants and agreements
thereunder in accordance with the terms and conditions thereof.
Please be advised that the effect of this letter shall be limited to the matters
addressed herein and shall not otherwise operate as a waiver of (a) any right,
power or remedy of CoBank under the CoBank Loan Documentation, or (b) any Event
of Default under the CoBank Loan Documentation. Except as contemplated hereby,
all of the terms conditions and covenants of the CoBank Loan Documentation shall
remain unaltered and in full force and effect and are hereby ratified and
confirmed. Please acknowledge your receipt and acceptance of this letter by
signing a copy of this letter in the space provided below and returning such
copy to the undersigned.
Sincerely,
COBANK, ACB
By:
RECEIVED AND ACCEPTED THIS
11th DAY OF FEBRUARY, 1997
ALLIANCE FARMS COOPERATIVE ASSOCIATION
By:
Exhibit 10.29
WEANED PIG PURCHASE AGREEMENT
THIS WEANED PIG PURCHASE AGREEMENT (this "Agreement") is entered into as of
this day of , 199 , by and between ALLIANCE FARMS
COOPERATIVE ASSOCIATION (hereinafter "Association"), and
(hereinafter "Purchaser").
WHEREAS, Association is or will be engaged in the production and sale of
weaned pigs; and
WHEREAS, Purchaser is a purchaser of weaned pigs, possesses expertise in
swine production and management, and desires to enter into this Agreement for
membership purposes of Association;
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
the parties hereto agree as follows:
1. PURCHASE/SALE OF WEANED PIGS.
(a) GENERAL. Upon and subject to all terms and conditions set forth
in this Agreement, Purchaser shall purchase from Association, and Association
shall sell to Purchaser, Qualifying Pigs (as defined in Section 2) produced by
Association during the term of this Agreement in lots (hereinafter "Lot" or
"Lots") of no less than 925, and no more than 1,025, Qualifying Pigs per Lot, as
determined by Association, which Lots shall be made available to Purchaser on a
rotating schedule with other members of Association owning Class B Common Stock
(as defined in Article SIXTH of Association's Articles of Incorporation), as
such rotating schedule is determined and implemented by Association on any
reasonable basis.
(b) SCHEDULE. Purchaser acknowledges that Association intends to
conduct a blind drawing, immediately following the consummation of each and
every offering of Class B Common Stock by Association, for purposes of adjusting
such rotating schedule as warranted by the resulting changes in the members of
the Association.
(c) AVAILABILITY. The number of Lots made available to Purchaser and
the frequency of availability of such Lots will be based upon Purchaser's
proportionate equity interest in Association with respect to Association's Class
B Common Stock. Purchaser acknowledges that Lots will not be made available to
Purchaser under this Agreement until Qualifying Pigs are produced and available
from the facilities constructed using the proceeds of the issuance of Class B
Common Stock of Association (including Class B Common Stock of the Association
assigned or transferred to Purchaser) from which the right of Purchaser to
purchase such Lots under this Agreement derives, and that the number of Lots
made available to Purchaser and the frequency of availability of such Lots will
be subject to actual production of Qualifying Pigs from all facilities of
Association. Association shall give notice to Purchaser when a Lot is available
for purchase by Purchaser hereunder, which notice shall specify the anticipated
number of Qualifying Pigs in such Lot and the scheduled shipment date.
(d) EXCESS PRODUCTION. The production of weaned pigs is anticipated
to produce, on a prospective rolling 12-month basis, approximately two and
seven-tenths (2.7) Lots of Qualifying Pigs per share of Class B Common Stock of
Association owned by members of Association for which Lots are to be made
available for purchase hereunder. To the extent that the production of weaned
pigs exceeds such anticipated production, Association shall either sell such
excess production to any person (including a member of Association), at a price
as shall be determined by Association in good faith, or retain such excess
production for Association's own purposes, in lieu of selling such excess
production to the members of Association pursuant to the Weaned Pig Purchase
Agreements between Association and the members of Association.
2. QUALIFYING PIGS. For purposes of this Agreement, the term "Qualifying
Pig" shall mean an individual weaned pig that is not utility grade, that has a
minimum weight of at least six (6) pounds at point in time of delivery, that has
the genetic characteristics described in Section 6, that has been managed in
accordance with Section 7, and that has a significant likelihood to perform
economically and reach market weight efficiently.
3. PURCHASE PRICE OF PIGS.
(a) PRICE. The purchase price for each Qualifying Pig purchased by
Purchaser under this Agreement shall be an amount equal to the sum of the
following:
Financing Cost Per Pig, plus
Operating Cost Per Pig, plus
Production Margin.
Purchaser acknowledges that Association has constructed, or is in the process of
constructing, or both, Production Units as a result of previous offers and sales
of shares of its capital stock and that Association from time to time may
construct additional Production Units as a result of additional offers and sales
of shares of its capital stock. In light of the foregoing, the determination of
the Financing Cost Per Pig portion of the purchase price for a Qualifying Pig
hereunder shall be made separately with respect to each Lot in relation to the
Production Unit(s) that were constructed using the proceeds of the issuance of
Class B Common Stock of Association (including Class B Common Stock of the
Association assigned or transferred to Purchaser) from which Purchaser's right
to purchase such Lot under this Agreement derives.
(b) DEFINITIONS. As used in this Section 3, the following terms
shall have the following meanings:
FINANCING COST PER PIG shall be determined on a prospective rolling 12-
month basis and shall mean an amount equal to the quotient of (i) the sum
of the required payments of interest and principal (including any scheduled
sinking fund payments) to be made during the upcoming 12-month period with
respect to Purchaser's Debt, divided by (ii) Pigs Shipped.
OPERATING COST PER PIG shall be determined on a rolling five-month
historical basis and shall mean an amount equal to the quotient of (i) the
sum of (A) all direct and indirect production, operating, selling, general,
administrative, and other expenses incurred by Association in the five
months preceding the then present month of shipment as determined by
Association's accountants utilizing generally accepted accounting
principles consistently applied (excluding any provision for interest
expense or depreciation or amortization of the cost of buildings,
equipment, breeding stock or other capitalized costs which were purchased
as a result of Purchaser's Debt or as a result of the issuance of any
capital stock of Association to any third party), plus (B) the net cash
flow cost of all capital expenditures by Association (including any capital
sinking fund payments) for production facility and breeding stock
improvements and replacements in the five months preceding the then present
month of shipment as determined by Association's accountants, divided by
(ii) Pigs Shipped. The direct and indirect production and operating
expenses attributable to a Production Unit which is in the process of
commencing production shall not be included in the determination of
Operating Cost Per Pig, and shipments of pigs attributable to such
Production Unit shall not be included in Pigs Shipped, until such
Production Unit has completed one entire month of full production, shipping
pigs in each week thereof. The net cash flow with respect to capital
expenditures for production facility and breeding stock improvements and
replacements (which net cash flow shall be determined after taking into
account the breeding stock and production facility retirements attributable
to a Production Unit which is in the process of commencing production)
shall not be included in the determination of Operating Cost Per Pig until
the respective Production Unit has completed one entire month of full
production, shipping pigs in each week thereof.
PRODUCTION MARGIN shall mean an amount of up to $4.50, as determined by the
Board of Directors of Association, from time to time, in its sole and
absolute discretion.
PIGS SHIPPED shall mean the number of Qualifying Pigs produced and shipped
from Association over the same five-month period in determining the
Operating Cost Per Pig and the estimated number of Qualifying Pigs that
will be produced and shipped by Association over the 12-month period in
determining the Financing Cost Per Pig. For purposes of determining the
Financing Cost Per Pig, Pigs Shipped shall be equal to the product of (i)
Association's total estimated number of Qualifying Pigs to be produced and
shipped by Association during such 12-month period, multiplied by (ii) a
fraction, the numerator of which shall be the number of Production Units
constructed by Association with respect to the issuance of Class B Common
Stock of Association (including Class B Common Stock of the Association
assigned or transferred to Purchaser) from which the right of Purchaser to
purchase Lots of Qualifying Pigs under this Agreement derives, and the
denominator of which shall be the number of Production Units constructed by
Association with respect to all issuances of its Class B Common Stock. All
estimates relating to Pigs Shipped shall be made by Association using such
historical data and projections as are available to Association.
PRODUCTION UNIT shall mean the land and facilities necessary to house, feed
and care for a group of 2,450 sows and the attendant offspring thereof.
PURCHASER'S DEBT shall mean (i) the debt incurred by Association for the
Production Unit(s) constructed by Association with respect to the issuance
of Class B Common Stock of Association (including Class B Common Stock of
the Association assigned or transferred to Purchaser) from which the right
of Purchaser to purchase Lots of Qualifying Pigs under this Agreement
derives, including any debt incurred for purposes of financing the
acquisition of land for, and construction of, such Production Unit(s),
(ii) any debt incurred for the initial working capital requirements with
respect to the operation of such Production Unit(s), and (iii) any debt
incurred for purposes of refinancing any such debt.
4. PAYMENT OF PURCHASE PRICE. Association shall furnish to Purchaser, at
the time Association notifies Purchaser that a Lot is available for purchase by
Purchaser hereunder, an estimate of the total purchase price of the Qualifying
Pigs included in the Lot, and Purchaser shall, not less than one day prior to
the scheduled shipment date as specified in the notice by Association to
Purchaser, pay such estimated total purchase price to Association in cash, or by
such other means as may be acceptable to Association in its sole and absolute
discretion. Association shall have no obligation to commence transportation of
such Qualifying Pigs to Purchaser prior to full payment of such estimated total
purchase price for such Qualifying Pigs as herein provided. The actual total
purchase price of all Qualifying Pigs included in a Lot shall be based upon
weight at the time of loading and settlement of any adjustments shall be made
within five days following delivery.
5. WEIGHT ADJUSTMENT. The purchase price for each Qualifying Pig as
provided in Section 3 is for a Lot of Qualifying Pigs having an average weight
of between 8 pounds and 12 pounds. In the event that the average weight of the
Qualifying Pigs in a Lot sold to Purchaser exceeds 12 pounds, Purchaser shall
pay Association an additional one dollar ($1.00) per pound per Qualifying Pig on
the number of pounds that the Lot's average shipping weight per pig exceeds 12
pounds. To the extent that the average weight of the Qualifying Pigs in a Lot
sold to Purchaser is less than 8 pounds, one dollar ($1.00) per pound on the
number of pounds that the Lot's average shipping weight per pig is less than 8
pounds shall be deducted from the purchase price that Purchaser is to pay to
Association for each Qualifying Pig. Purchaser shall have the right to, but
shall not be obligated to, purchase a Lot of Qualifying Pigs hereunder at an
average weight of less than 8 pounds per pig.
6. GENETIC QUALITY. Qualifying Pigs produced by Association will be
progeny from genetic stock selected by Association, from time to time, in its
sole and absolute discretion. Such selection of such genetic stock will be
determined and implemented by Association on a basis that reasonably would be
expected to produce Qualifying Pigs that are capable of producing market hogs
having carcasses that are responsive to consumer demand and thereby maximize the
sales price to be received therefore.
7. MANAGEMENT OF HEALTH AND NUTRITION. Association agrees to comply with
the following health and nutrition programs with respect to all pigs to be
purchased under this Agreement:
(a) Association shall dock tails within 48 hours of a pig's
birth.
(b) Association shall castrate male pigs within ten days of the pig's
birth.
(c) Association shall administer all vacines and antibiotic
treatments and perform such other procedures that are reasonably determined
by Association to be necessary or advisable with respect to a herd health
program.
(d) Association shall maintain Association's swine free from the
psuedorabies virus ("PRV") or any swine disease that would prohibit
interstate shipment of pigs produced by Association, or that might
otherwise materially impair Purchaser's ability to utilize the pigs to be
purchased under this Agreement. If, in the opinion of two veterinarians
selected by Association and reasonably acceptable to Purchaser, any of the
swine produced by Association or used in the production of weaned pigs for
delivery hereunder contracts PRV, Association shall have the opportunity to
cure such impairment within a reasonable period of time and to suspend, at
any time and from time to time, the sale and purchase of weaned pigs
hereunder until such time as said veterinarians determine that PRV no
longer exists.
(e) Association shall use a feeding regimen, feed products, and herd
health products developed or marketed by Farmland Industries, Inc., or any
of its affiliates.
8. RIGHT OF INSPECTION. Upon reasonable notice to Association, Purchaser
or its representative shall have the right to inspect Association's production
records to verify the genetic quality and management of nutrition and health
programs prescribed by this Agreement during normal business hours.
9. ADJUSTMENT FOR NON-QUALIFYING PIGS. Purchaser shall have the right to
inspect Purchaser's Lot of Qualifying Pigs prior to loading. In the event that,
after delivery of such Lot, Purchaser believes that any pig was not a Qualifying
Pig prior to loading (a "Subject Pig"), Purchaser shall notify Association by
telephone of such belief within one (1) business day following delivery as well
as promptly notify Association of such belief in the manner provided in Section
19 hereof. Association shall have the right to inspect any and all Subject Pigs
in investigation of Purchaser's belief, and thereafter Association and Purchaser
shall agree in good faith upon an appropriate adjustment, if any, with respect
to such Subject Pigs. Purchaser hereby acknowledges and agrees that such
adjustment described above shall be Purchaser's sole and exclusive remedy as
against Association arising out of the purchase hereunder of a pig that was not
a Qualifying Pig at the time of loading and that the failure of Association to
deliver Qualifying Pigs as otherwise required hereunder shall not give rise to a
right of Purchaser to terminate this Agreement. Furthermore, in no event shall
Purchaser reject delivery of a Lot of pigs hereunder, but in lieu thereof
Purchaser shall accept each delivery of a Lot of pigs hereunder and, with
respect to any and all pigs that Purchaser believes were not Qualifying Pigs
prior to loading, shall comply with the provisions of this Section 9 and, until
such adjustment, if any, is agreed upon by Association and Purchaser, shall, at
Purchaser's expense, feed, water, treat and care for any and all such pigs as if
Purchaser believed such pigs were Qualifying Pigs prior to loading.
10. HEALTH PERMITS. Association shall provide Purchaser, at Association's
expense, all health permits necessary to qualify all Qualifying Pigs for
interstate shipment.
11. WEIGHING CONDITIONS. All Lots of Qualifying Pigs shall be weighed at
Association's expense at a state-inspected scale in close proximity to
Association's production facility. A copy of all scale tickets will be provided
to Association and to Purchaser.
12. IDENTIFICATION. Association shall appropriately identify, prior to
shipment, all Qualifying Pigs in accordance with the rules that will allow
interstate shipment to the states to which the pigs are being shipped.
13. TRANSPORTATION OF PIGS. Qualifying Pigs shall be shipped to Purchaser
FOB shipping point. Association shall at Purchaser's expense arrange for
transportation of Qualifying Pigs from any of Association's production
facilities as determined by Association; provided, however, that Purchaser shall
pay such transportation costs no later than the time of delivery. Trucks shall
be thoroughly cleaned and disinfected prior to hauling any pigs from
Association's production facilities and after any previously hauled pigs.
14. TERM OF AGREEMENT. The term of this Agreement shall commence on the
date first written above and shall continue for 120 months after the month in
which the first Lot of Qualifying Pigs is shipped by Association to Purchaser
(or Purchaser's direct or indirect assignor or transferor) with respect to the
Class B Common Stock of the Association (including Class B Common Stock of the
Association assigned or transferred to Purchaser) from which the right of
Purchaser to purchase Lots of Qualifying Pigs under this Agreement derives,
subject to the following:
(a) In the event that Purchaser fails to purchase, pay for, and take
delivery of any two Lots (as defined herein or in any other agreement
between Purchaser and Association) when and as made available to Purchaser
in accordance with the terms of this Agreement, any other Weaned Pig
Purchase Agreement or any Feeder Pig Purchase Agreement between Purchaser
and Association, this Agreement shall terminate and Association shall have
the right to exercise its remedies as provided in Section 17 hereof;
provided, however, that in the event Purchaser owns ten or more shares of
capital stock of Association, this Agreement shall terminate and
Association shall have the right to exercise its remedies as provided in
Section 17 hereof only upon Purchaser failing to purchase, pay for, and
take delivery of a number of Lots (as defined herein or in any other
agreement between Purchaser and Association) when and as made available to
Purchaser in accordance with the terms of this Agreement, of any other
Weaned Pig Purchase Agreement or of any Feeder Pig Purchase Agreement
between Purchaser and Association equal to the sum of (i) the quotient
(rounded down to the nearest whole number) of (A) the number of shares of
capital stock owned by Purchaser, divided by (B) ten (10), plus (ii) two
(2).
(b) In the event of a material breach of any agreement or covenant of
Association contained in this Agreement, Purchaser may give written notice
of such breach to Association and, in the event that such breach is not
cured within a period (the "Cure Period") of thirty (30) days following
such notice of breach by Purchaser to Association, Purchaser shall have the
right to terminate this Agreement upon notice to Association, provided that
such notice of termination is given by Purchaser to Association within
thirty (30) days following the Cure Period.
(c) If the first Lot of Qualifying Pigs is not shipped to Purchaser
hereunder within twenty-four (24) months of the date of this Agreement,
Purchaser shall have the right to terminate this Agreement upon notice to
Association, provided that such notice of termination is given by Purchaser
to Association within three (3) months after the expiration of such twenty-
four (24) month period; provided, however, that any such termination shall
not terminate or otherwise affect any other Weaned Pig Purchase Agreement
or any Feeder Pig Purchase Agreement between Purchaser and Association.
(d) In the event Purchaser assigns or transfers, in accordance with
the Articles of Incorporation and Bylaws of Association, all shares of
Class B Common Stock of Association from which Purchaser's right to
purchase Lots under this Agreement derives, this Agreement automatically
shall terminate.
(e) This Agreement shall be extended automatically for
succeeding and consecutive twelve (12) month terms unless Purchaser
gives to Association, not less than twelve (12) months prior to the
expiration of the initial term or any extended term hereof, notice
that Purchaser desires to terminate this Agreement as of the
expiration of such initial or extended term.
Notwithstanding the foregoing, however, the rights of Association to collect
damages and to exercise its remedies under Section 17 hereunder shall survive
any termination of this Agreement.
15. WARRANTIES. ASSOCIATION MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED
TO PURCHASER OTHER THAN AS HEREIN EXPRESSLY PROVIDED, AND SPECIFICALLY (A) MAKES
NO WARRANTY AS TO ANY SPECIFIC LEVEL OF PERFORMANCE WITH RESPECT TO ANY PIGS
SOLD HEREUNDER, AND (B) DISCLAIMS ANY WARRANTIES OF MERCHANTABILITY OR OF
FITNESS FOR A PARTICULAR PURPOSE.
16. FORCE MAJEURE. Either party to this Agreement shall be relieved of
its responsibility and obligations hereunder during any period when performance
is commercially impossible because of reasons beyond its control such as, but
not limited to, fire, explosion, strike, accident, governmental regulations or
intervention, and acts of God.
17. DEFAULT BY PURCHASER; GRANT OF SECURITY INTEREST. Purchaser
acknowledges that the damages suffered by Association in the event of any
failure by Purchaser to purchase, pay for, and take delivery of any Lot when and
as made available to Purchaser in accordance with the terms hereof shall equal,
and Purchaser shall be liable to Association for and shall pay to Association
upon demand, the sum of the following: (a) the difference between the price
payable by Purchaser hereunder for Qualifying Pigs included in such Lot and the
then current market price (as of the scheduled shipment date for such Lot) for
Qualifying Pigs as quoted in any independent industry publication or source
selected by Association, multiplied by the number of Qualifying Pigs in such Lot
that Purchaser has failed to purchase, pay for, and take delivery of, in
accordance with the terms hereof; plus (b) administrative and other costs and
expenses relating to such Lot, which are hereby agreed to equal the amount of
$3,000; plus (c) costs of collection, enforcement, and prosecution of
Association's rights and remedies hereunder or otherwise arising, whether or not
involving a case, action, or other proceeding before any state or federal court
or other body, including, but not limited to, reasonable attorney's fees,
collection agency fees, and other costs of collection; provided, however, that
to the extent applicable law prohibits collection of attorney's fees and/or
costs, this subsection (c) shall be null and void to the extent of such
prohibition, except to preserve Association's rights pursuant to 11 U.S.C.
Section 506(b). During any period in which Purchaser has been notified that it
is obligated to pay an amount for damages pursuant to the immediately preceding
sentence and has not paid such amount within three days of such demand,
Association shall not make any future Lots available to Purchaser for purchase
hereunder or under any other Weaned Pig Purchase Agreement between Purchaser and
Association until Purchaser has paid such amount. In the event that Purchaser
is not made available any Lot for purchase hereunder pursuant to the immediately
preceding sentence that Association otherwise would have made available to
Purchaser for purchase hereunder, then Purchaser shall be deemed to have failed
to purchase, pay for, and take delivery of such Lot, and Purchaser shall be
liable for damages with respect to such Lot computed in accordance with the
first sentence of this Section. Upon any termination of this Agreement,
Purchaser's liability for damages incurred by Association with respect to
Purchaser's obligation to purchase, pay for and take delivery of Lots made
available to the Purchaser shall be limited to the damages with respect to such
Lots computed in accordance with the preceding provisions of this Section 17,
and Purchaser shall not be liable for any other damages for the failure to
purchase, pay for or take delivery of Lots hereunder after the termination of
this Agreement.
As security for the due and punctual performance of all of Purchaser's
obligations under this Agreement, Purchaser hereby pledges and grants to
Association, its successors and assigns, a security interest in and lien upon
any and all interest (the "Coop Interest") Purchaser now has or hereafter may
have in Association, including, without limitation, any capital stock or other
rights or interests owned or held by Purchaser, or to which Purchaser is
entitled, as a stockholder of Association and any interest of Purchaser in and
to any dividends, capital or other credits, patronage or other distributions, or
participations arising therefrom. Purchaser shall also deliver and endorse such
stock or other certificates and execute and deliver such financing statements
and other instruments (including, without limitation, stock powers duly endorsed
in blank), and take such other action, as Association may request for purposes
of perfecting or protecting the security interest granted under this Section 17.
Purchaser represents, warrants and agrees that the pledge of the Coop Interest
pursuant to this Section 17 creates a valid and perfected first priority
security interest in the Coop Interest in favor of Association, subordinate only
to any permissible pledge or other security interest granted by Purchaser to any
financial institution for purposes of securing a loan by such financial
institution to Purchaser, the proceeds of which are used to finance Purchaser's
acquisition of the Coop Interest. Notwithstanding the foregoing, however,
Association may release such pledge and grant of a security interest for good
cause, as determined in Association's sole and absolute discretion.
If Purchaser shall be in default under this Agreement, Association may
exercise any and all rights and remedies available to Association hereunder,
under the Articles of Incorporation or Bylaws of Association, under any
applicable Uniform Commercial Code, or otherwise at law or in equity. The
rights and remedies afforded to Association hereunder shall be cumulative and in
addition to, and not in limitation of, any rights and remedies which Association
may otherwise have under the Articles of Incorporation or Bylaws of Association
or under applicable law, including any applicable Uniform Commercial Code. The
exercise or partial exercise of any right or remedy of Association hereunder or
under the Articles of Incorporation or Bylaws of Association or under applicable
law shall not preclude or prejudice the further exercise of that right or remedy
or the exercise of any other right or remedy of Association. No delay or
omission on the part of Association in exercising any right hereunder or
otherwise shall operate as a waiver of such right. A waiver on any one occasion
shall not be construed as a bar or waiver of any right or remedy on any future
occasion.
18. ARBITRATION. In the event of any controversy arising out of or
relating to this Agreement, or any breach hereof, other than any controversy
arising out of or relating to Section 17 hereof or the exercise of any rights or
remedies thereunder, the parties agree to submit the dispute to binding
arbitration in accordance with the Commercial Arbitration Rules then in force of
the American Arbitration Association. Such arbitration shall be initiated by
either party by notifying the other party in writing and requesting a panel of
five (5) arbitrators from the American Arbitration Association, which
arbitrators shall be individuals skilled in the legal and business aspects of
the subject matter of this Agreement and of the dispute. Alternate strikes
shall be made to the panel commencing with the party requesting the arbitration
until one individual remains. Such individual shall be the arbitrator for the
controversy. The party requesting the arbitration shall notify the arbitrator
who shall hold a hearing(s) within 60 days of the notice. Any hearing(s) shall
take place in Denver, Colorado, or such other location as the parties may agree
upon. The arbitrator shall render a decision, including a written opinion in
support thereof, within 30 days after the conclusion of the hearing(s), which
decision shall be final and binding upon the parties without right of appeal.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. Costs of the arbitration will be assessed by the
arbitrator against either or both of the parties, and will be paid promptly by
the party or parties so assessed.
19. NOTICES. Any notice given or required to be given hereunder shall be
deemed to have been effectively given when delivered personally or sent by
United States certified or registered mail, return receipt requested, postage
prepaid, addressed or transmitted to Association at Alliance Farms Cooperative
Association, c/o Farmland Industries, Inc., 3315 North Oak Trafficway,
Department 47, Kansas City, Missouri 64116, Attention: Mr. Wayne N. Snyder, and
to Purchaser at the address set forth below Purchaser's signature, and/or to
such other (or additional) address(es) requested by a notice given in accordance
with this Section.
20. ENTIRE AGREEMENT. This Agreement contains all of the terms agreed
upon by the parties with respect to the subject matter hereof and supersedes all
prior agreements of the parties as to the subject matter hereof; provided,
however, any and all other Weaned Pig Purchase Agreements between Purchaser and
Association respecting issuances of capital stock of Association from which the
right of Purchaser to purchase Lots under this Agreement does not derive, and
any and all Feeder Pig Purchase Agreements between Purchaser and Association,
shall not be superseded, modified or otherwise affected by this Agreement. This
Agreement may not be modified except in writing, signed by the parties hereto,
that specifically references this Agreement.
21. ASSIGNMENT. This Agreement may not be assigned by either party
without prior written consent of the other party; provided, however, that
Association may assign Association's rights herein and hereto to any lender that
may provide financing to Association in connection with the construction of
facilities or the operation thereof, or both. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
heirs, legal representatives, successors, and permitted assigns.
22. CONSTRUCTION. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Colorado. The parties hereto hereby
agree that if any part, term or provision of this Agreement is held by a court
of competent jurisdiction to be illegal or unenforceable or in conflict with any
controlling state law, the validity of the remaining parts, terms and provisions
of this Agreement shall not be affected, and the rights and obligations of the
parties shall be construed and enforced as if this Agreement did not contain the
particular part, term or provision held to be illegal or unenforceable or in
conflict with any controlling state law. This Agreement and the transactions
contemplated hereunder constitute commercial, and not consumer, transactions.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION CLAUSE THAT MAY BE ENFORCED
BY THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Agreement effective the
day and year first above written.
ASSOCIATION: PURCHASER:
ALLIANCE FARMS COOPERATIVE
ASSOCIATION
By: By:
Name: Name:
Title: Title:
Purchaser's Address:
Exhibit 10.30
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made and entered into as of
November 27, 1996, by and between Alliance Farms Cooperative Association, a
Colorado cooperative association (the "Borrower"), and Farmland Industries,
Inc., a Kansas corporation (the "Lender").
RECITALS:
A. The Borrower is engaged in the business of producing feeder
pigs for sale to its members and third parties.
B. Previously, the Borrower has constructed its feeder pig
production facilities by using the proceeds from a sale of a block of seventeen
(17) shares of its common stock, together with the proceeds of loans from
CoBank, ACB, pursuant to the CoBank Loan Documentation (as hereinafter defined).
C. The Borrower now desires to construct a feeder pig production
facility in Wayne County, Illinois, by the using the proceeds of the Loan (as
hereinafter defined) from the Lender and the proceeds of additional advances
under the CoBank Loan Documentation.
D. In connection with the above described construction project,
the Lender has advanced $200,000.00 to the Borrower on November 27, 1996, for
the purpose of acquiring real estate in Wayne County, Illinois, which advance is
intended to be included as part of the Loan.
SECTION 1 - DEFINITIONS
1.1. Defined Terms. As used in this Loan Agreement, the following
terms have the following meanings:
"Applicable Rate" means the per annum rate equal to the sum of (a) one
and one-quarter percent (1.25% or 125 basis points), plus (b) the National
Variable Rate.
"Business Day" means a day other than a Saturday, Sunday or business
holiday in the State of Missouri.
"CoBank" means CoBank, ACB (formerly National Bank for Cooperatives),
the Borrower=s primary lender.
"CoBank Loan Documentation" collectively means the Master Loan
Agreement (MLA No. E039), dated as of May 19, 1995, between CoBank and the
Borrower, as supplemented by the Multiple Advance Term Loan Supplement (Loan No.
E039T01), dated as of May 19, 1995, and the Revolving Term Loan Supplement (Loan
No. E039T02), dated as of May 19, 1995, and the related Loan Agreement (No.
T2300), dated as of September 21, 1994, between CoBank and the Borrower, as
amended by the Term Loan Amendment (Loan No. T2300A), dated as of May 19, 1995,
true and correct copies of which are attached hereto as Exhibit D.
"Contractual Obligation" means, with respect to any Person, any
provision of any security issued by such Person or of any agreement, instrument
or undertaking to which such person is a party or by which it or any of its
properties is bound.
"Event of Default" means any of the events described in Section 7,
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"GAAP" means generally accepted accounting principles in the United
States of America in effect from time to time.
"Governmental Authority" means 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, and any corporation or other entity owned or controlled (through
stock or capital ownership or otherwise) by any of the foregoing.
"Indebtedness" means, with respect to any Person, at a particular
time, any indebtedness, obligation or liability in respect of which such Person
is an obligor, whether matured or unmatured, liquidated or unliquidated, direct
or contingent, joint or several.
"Interest Payment Date" means the 1st day of January, 1996, and the
1st day of each successive month thereafter.
"Lien" means and includes any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority or other security agreement or preferential
arrangement 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).
"Loan" shall have the meaning ascribed to such term in Section 2.1
hereof.
"Mortgage" collectively means the Illinois Mortgage, substantially in
the form of Exhibit C, to be executed and delivered by the Borrower to the
Lender, and all additional deeds of trust and mortgages as may from time to time
be executed and delivered to or in favor of the Lender by the Borrower.
"National Variable Rate" means the rate most recently announced by
CoBank as its "National Variable Rate." The National Variable Rate is one of
CoBank's Applicable Rates and serves as a basis upon which effective rates of
interest are calculated for those loans making reference thereto, and is
evidenced by the recording thereof after its announcement in such internal
publication or publications as CoBank may designate.
"Note" means the Promissory Note, substantially in the form of Exhibit
A, to be executed and delivered by the Borrower to the Lender.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Requirement of Law" means, with respect to any Person, the
certificate of incorporation and bylaws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or any
interpretation thereof by a Governmental Authority, or any determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its properties or to which such Person
or any of its properties is subject.
"Security Agreement" means the Security Agreement, substantially in
the form of Exhibit B, to be executed and delivered by the Borrower in favor of
the Lender.
"Security Documents" means and includes the Security Agreement and the
Mortgage and all additional security agreements and pledge agreements as may
from time to time be executed and delivered to or in favor of the Lender by the
Borrower.
1.2 Construction. (a) Unless otherwise defined therein, all
terms defined in this Loan Agreement shall have their respective herein defined
meanings when used in the Note, the Security Documents, or any certificate or
other document made or delivered pursuant hereto or thereto. All such
certificates and documents and all Exhibits and Schedules attached to this Loan
Agreement are a part hereof for all purposes.
(b) Unless the context otherwise requires or unless otherwise
provided herein, the terms defined in this Loan Agreement which refer to a
particular agreement, instrument or document also refer to and include all
renewals, extensions, modifications, amendments, and restatements of such
agreement, instrument or document, provided, however, that nothing contained in
this sentence shall be construed to authorize any such renewal, extension,
modification, amendment or restatement other than in accordance with subsection
8.1.
(c) As used in this Loan Agreement and in the Note and in any
certificate or other document made or delivered pursuant to this Loan Agreement,
accounting terms, to the extent not defined in this Agreement, shall have the
respective meanings given to them under GAAP.
(d) Words of the masculine gender shall be deemed and construed to
include correlative words of the feminine and neuter genders. Unless the
context shall otherwise indicate, words importing the singular number shall
include the plural and vice versa, and words importing person shall include
individuals, corporations, partnerships, joint ventures, associations,
joint-stock companies, trusts, unincorporated organizations and governments and
any agency or political subdivision thereof.
(e) The table of contents, captions and headings in this Loan
Agreement are for convenience only and in no way define, limit or describe the
scope or intent of any provisions or sections of this Loan Agreement.
1.3 Calculations. All interest and fees accruing under this Loan
Agreement, the Note or any Security Document or under any other document or
instrument delivered pursuant hereto or thereto shall be calculated on the basis
of actual days elapsed and a year of 360 days.
SECTION 2 - LENDING ARRANGEMENT
2.1. The Loan. The Lender agrees, on the terms and subject to the
satisfaction of the conditions hereinafter set forth, to make a loan to the
Borrower, by means of one or more advances, in the aggregate principal amount of
One Million Three Hundred Sixty Thousand Dollars ($1,360,000) (the "Loan"),
which shall be evidenced by the Note. The Loan shall be payable as to principal
on the first to occur of (a) the closing date with respect to the Borrower=s
next issuance and sale of a block of at least seventeen (17) shares of its
common stock, $.01 par value, and (b) the 27th day of November, 2006.
2.2. Interest.
(a) The Borrower agrees to pay interest on the unpaid principal
amount of the Loan from the date the proceeds thereof are made available to the
Borrower until maturity (whether by acceleration or otherwise) at a rate per
annum equal to the Applicable Rate. The Applicable Rate shall be adjusted
annually based on the National Variable Rate in effect on the anniversary date
of this Loan Agreement.
(b) Overdue principal and, to the extent permitted by law, overdue
interest in respect of the Loan shall bear interest at a rate per annum equal to
the lower of two percent (2%) above the Applicable Rate in effect from time to
time or the maximum rate of interest allowed by applicable law; provided,
however, that in no event shall the Loan bear interest after maturity at a rate
per annum less than the rate of interest applicable thereto at maturity.
(c) Interest shall accrue from and including the date of the Loan
to but excluding the date of any repayment thereof and shall be payable in
arrears on each Interest Payment Date, upon any prepayment, at maturity (whether
by acceleration or otherwise) and, after such maturity, on demand.
2.3. Payments. Except as otherwise specifically provided herein,
all payments due under this Loan Agreement shall be made to the Lender not later
than 12:00 noon (central time) on the date when due and shall be made in lawful
money of the United States of America in immediately available funds at the
Lender's principal office. Whenever any payment to be made hereunder or under
the Note shall be stated to be due on a day which is not a Business Day, payment
shall be made on the next successive Business Day with the same effect as though
made on the due date.
2.4. Prepayment. The Borrower shall have the right to prepay all
or any portion of the Loan at any time and from time to time without premium or
penalty of any kind.
2.5. Additional Costs. If, due to either (i) any Requirement of
Law or (ii) compliance by the Lender with any request from any Governmental
Authority, there shall be any increase in the cost to the Lender of agreeing to
make or making, funding or maintaining the Loan, the Borrower shall from time to
time, upon demand by the Lender, pay to the Lender additional amounts sufficient
to indemnify the Lender against such increased costs. The determination of such
increased costs by the Lender shall be conclusive if made reasonably and in good
faith.
SECTION 3 - REPRESENTATIONS AND WARRANTIES
To induce the Lender to make the Loan hereunder, the Borrower and the
Guarantor hereby represent and warrant to the Lender as follows:
3.1. Financial Condition. The Borrower has furnished the Lender
with the audited balance sheet of the Borrower as at the end of the most recent
fiscal year of the Borrower and the related statement of operations, statement
of shareholder=s equity and statement of cash flows for the fiscal year then
ended, which fairly present the financial position and results of operations of
the Borrower at the times and for the periods covered thereby, all in accordance
with GAAP, and which indicate all contingent liabilities which reasonably would
be expected to have a material adverse effect on the Borrower.
3.2. No Change. Since the date of the end of the most recent
fiscal year of the Borrower, there has been no material adverse change in the
business, operations, assets or financial or other condition of the Borrower.
3.3. Corporate Existence; Compliance with Law. The Borrower is duly
organized and validly existing under applicable law, is qualified to do business
and is in good standing in each jurisdiction where required and has complied
with all laws necessary to conduct its business as presently conducted.
3.4. Corporate Power and Authority. The Borrower has authority,
and has completed all proceedings and obtained all approvals and consents
necessary to execute, deliver, and perform this Loan Agreement, the Note, the
Security Documents and the transactions contemplated hereby and thereby.
3.5. Enforceable Obligations. This Loan Agreement, the Note and
the Security Documents, when executed by the Borrower and delivered to the
Lender, will constitute the legal, valid and binding obligations of the
Borrower, enforceable in accordance with their respective terms, except as may
be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally.
3.6. No Legal Bar. The execution, delivery and performance by the
Borrower of this Loan Agreement, the Note and the Security Documents, the
borrowings by the Borrower hereunder, the use of the proceeds thereof and the
granting of the security interests pursuant to the Security Documents will not
violate any Requirement of Law or any Contractual Obligation of the Borrower
(including, without limitation, Borrower=s obligations under the CoBank Loan
Documentation) and will not result in or require the creation or imposition of
any Lien on any of their respective properties or revenues pursuant to any
Requirement of Law or Contractual Obligation, except for the Liens created
pursuant to the Security Documents.
3.7. No Litigation. No litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or, to the best
knowledge of the Borrower, threatened by or against the Borrower or against any
of its properties or revenues (a) with respect to this Loan Agreement, the Note
or any of the Security Documents or any of the transactions contemplated hereby
or thereby, or (b) which reasonably would be expected to have a material adverse
effect on the business, operations, assets or financial or other condition of
the Borrower .
3.8. No Default. The Borrower is not in default under any
agreement to which it is a party or by which it may be bound (including, without
limitation, under the CoBank Loan Documentation) that reasonably would be
expected to materially adversely affect the Borrower or the Borrower's ability
to perform and observe the obligations binding on it under this Loan Agreement,
the Security Documents and the Note.
3.9. Taxes. All tax returns required of the Borrower have been
filed, there is, to the Borrower=s knowledge, no proposed tax assessment or
liability against the Borrower or its properties which would be material to the
Borrower, and no extension of time for the assessment of any tax of the Borrower
is in effect or has been requested, except as disclosed in financial statements
previously furnished to the Lender.
3.10. Use of Proceeds. All proceeds of the Loan shall be used by
the Borrower for the construction of a feeder pig production facility in Wayne
County, Illinois.
3.11. Subsidiaries. The Borrower, as of the date of this Loan
Agreement, has no subsidiaries.
3.12. Security Documents.
(a) Each Security Document will be effective to create in favor of
the Lender a legal, valid and enforceable security interest in all right, title
and interest of the Borrower in the collateral described therein. When
financing statements have been duly filed and, when appropriate, possession of
such collateral has been taken by the Lender, each of such Security Documents
shall constitute a fully perfected first security interest in all right, title
and interest of the Borrower in such collateral (subject to any security
interest held by CoBank).
(b) The Mortgage will be effective to grant to the Lender a legal,
valid and enforceable mortgage lien on the mortgaged property thereunder. When
the Mortgage is duly recorded and all recording fees and taxes in respect
thereof are paid, the Mortgage shall constitute a fully perfected first lien on
such mortgaged property, subject to the encumbrances and exceptions to title set
forth therein and any lien held by CoBank. All such interests of the Lender
shall, except as noted above, be superior in right to any Lien, existing or
future, which the Borrower or any third Person may have against the mortgaged
property or interests therein.
3.13. Representations and Warranties to CoBank. Each representation
and warranty set forth in the CoBank Loan Documentation is true and correct in
all material respects as of the date hereof, and the Borrower hereby makes and
confirms such representations and warranties to the Lender as if such
representations and warranties were contained in this Loan Agreement and
directly made to the Lender as of the date hereof.
SECTION 4 - CONDITIONS PRECEDENT
The Lender shall have no obligation to make any advance of the Loan
hereunder unless, on or prior to the date of the Loan, the Lender shall have
received the following items (all in form satisfactory to the Lender):
(a) the Note, duly executed by the Borrower;
(b) the Security Agreement, duly executed by the Borrower;
(c) the Mortgage, duly executed by the Borrower; and
(d) any other documents, instruments and reports as the Lender shall
reasonably request including, without limitation, itemized statements and
evidence of expenses incurred by the Borrower in connection with the
construction contemplated by this Loan Agreement.
SECTION 5 - AFFIRMATIVE COVENANTS
So long as any part of the indebtedness contemplated hereby shall
remain unpaid, the Borrower covenants and agrees as follows:
5.1. Financial Statements. (a) The Borrower shall furnish to the
Lender, as soon as available and in any event within 120 days after the end of
each fiscal year of the Borrower, a copy of the annual audited balance sheet of
the Borrower, and the related statement of operations, statement of
shareholder=s equity and statement of cash flows for such fiscal year, all
accompanied by the report by independent certified public accountants of
recognized standing acceptable to the Lender.
(b) The Borrower shall furnish to the Lender, as soon as available
and in any event within 45 days after the end of each of the first three
quarterly periods of each fiscal year of the Borrower, a copy of the unaudited
balance sheet of the Borrower as at the end of each such quarter and the related
statement of operations, statement of shareholder=s equity and statement of cash
flows for such quarterly period and the portion of the fiscal year through such
date, setting forth in each case in comparative form the figures for the
previous fiscal year, certified by the Borrower's chief financial officer
(subject to normal year-end audit adjustments).
(c) All such financial statements shall be complete and correct in
all material respects and be prepared in reasonable detail and in accordance
with GAAP (consistent with the financial statements referred to in subsection
3.1) and applied consistently throughout the periods reflected therein.
5.2. Certificates. The Borrower shall furnish to the Lender,
promptly after becoming aware thereof, notice of the occurrence of any event or
condition which would constitute an Event of Default under this Loan Agreement.
5.3. Contractual Obligations, Requirements of Law. The Borrower
shall duly and promptly comply with each Contractual Obligation and Requirement
of Law to which it is subject or by which any of its properties is bound.
5.4. Payment of Indebtedness. The Borrower shall pay, discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all its Indebtedness, except when the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
the Borrower.
5.5. Maintenance of Existence. The Borrower shall preserve and
maintain its corporate existence, franchises and privileges in its jurisdiction
of incorporation, and qualify and remain qualified as a foreign corporation in
each jurisdiction where such qualification is necessary and the failure to be so
qualified would materially adversely affect the business of the Borrower.
5.6. Insurance. The Borrower shall maintain insurance reasonably
satisfactory to the Lender with responsible and reputable insurance companies or
associations in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which the Borrower operates.
5.7. Books and Records. The Borrower shall maintain proper books
of record and account in accordance with GAAP.
5.8. Notices. The Borrower shall promptly notify the Lender in
writing of the occurrence of any event which reasonably would be expected to
materially adversely affect the Borrower.
5.9. Further Assurances. The Borrower shall execute and file all
such further instruments and perform such other acts as the Lender may
reasonably determine are necessary or advisable to maintain the priority of the
liens and security interests created by the Security Documents in all property
subject thereto.
SECTION 6 - NEGATIVE COVENANTS
So long as any part of the Loan shall remain unpaid, the Borrower
covenants and agrees that the Borrower shall not, without the prior written
consent of the Lender, (a) take any actions, or permit to occur any events,
described in the Sections of the CoBank Loan Documentation presently titled
"Negative Covenants", regardless of whether CoBank otherwise agrees thereto, or
(b) supplement, amend or otherwise modify the CoBank Loan Documentation.
SECTION 7 - DEFAULT
If any of the following events occurs and is continuing:
(a) failure by the Borrower to pay in full when due any amount of
principal or interest on the Note; or
(b) failure by the Borrower to perform or observe any of the
provisions contained in Section 6; or
(c) failure by the Borrower to perform or observe any of the
provisions contained in any other subsection hereof if such failure is not
cured within thirty (30) days of the Borrower's knowledge of the failure;
or
(d) failure of any Security Document, for any reason, to be in
full force and effect or any party thereto shall default in the observance
or performance of any of the covenants or agreements contained therein or a
default or an event of default shall occur under any Security Document; or
(e) any representation or warranty made by the Borrower herein
shall be false or misleading in any material respect; or
(f) the Borrower shall default in the payment when due (subject to
any applicable grace period), whether by acceleration or otherwise, of any
other Indebtedness for borrowed money of, or guaranteed by, the Borrower
(including, without limitation, any Indebtedness under the CoBank Loan
Documentation), or the Borrower shall be in default (after giving effect to
any applicable grace period), or an event of default has occurred, under
the terms and conditions of the CoBank Loan Documentation or any other
agreement or evidence of other Indebtedness of the Borrower; or
(g) any admission by the Borrower of its inability to pay its
debts as they mature, the commencement of any bankruptcy, insolvency,
arrangement, reorganization or other debt-relief proceedings by, or the
dissolution, termination of existence or insolvency (however evidenced) of,
the Borrower or any action authorized, taken or suffered by the Borrower
with a view toward any of the same; or
(h) failure by the Borrower within sixty (60) days after the
institution of any proceedings against the Borrower under any law relating
to bankruptcy, insolvency, arrangement, reorganization or relief of debtors
or similar law to have such proceeding dismissed;
then the Lender may, at its election and without demand or notice of any kind,
which are hereby expressly waived, refuse to make further advances of the Loan
hereunder, declare the unpaid balance of any outstanding Note and accrued
interest thereon immediately due and payable, proceed to collect same, and
exercise any and all other rights, powers and remedies given it by this Loan
Agreement, the Note, the Security Documents or by law or in equity.
SECTION 8 - MISCELLANEOUS
8.1. Amendment and Waiver. Neither this Loan Agreement, the Note or
any other instrument or document entered into in connection herewith, nor any
provisions hereof or thereof, may be supplemented, amended, modified, waived,
discharged or terminated orally, but only by an instrument in writing signed by
an authorized officer of the Borrower and of the Lender, respectively.
8.2. Notices. All notices, demands or other communications hereunder
shall be given or made in writing and shall be delivered personally, or sent by
telex, telecopier or registered or certified mail, postage prepaid, return
receipt requested, to the party or parties to whom they are directed at the
following addresses, or at such other addresses as may be designated by notice
from such party to all other parties.
To the Borrower: Alliance Farms Cooperative Association
3315 N. Oak Trafficway
P. O. Box 7305
Kansas City, Missouri 64116
Attention: Paul Miller, Dept. 189
To the Lender: Farmland Industries, Inc.
3315 N. Oak Trafficway
P. O. Box 7305
Kansas City, Missouri 64116
Attention: Randy Vance, Dept. 160
Any notice, demand or other communication given in a manner prescribed in this
paragraph shall be deemed to have been delivered on receipt.
8.3. No Waiver; Cumulative Remedies. Any forbearance, failure, or
delay by the Lender in exercising any right, power or remedy shall not preclude
the further exercise thereof, and all of the Lender's rights, powers and
remedies shall continue in full force and effect until specifically waived in
writing by the Lender. The rights, remedies, powers and privileges herein or
therein are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law. The Borrower shall pay all reasonable and necessary
expenses (including reasonable attorney's fees and disbursements) incurred in
connection with the collection or enforcement of this Loan Agreement and the
Note.
8.4. Survival. The representations and warranties of the Borrower
contained herein shall survive the making of Loan and the making of the advances
of the Loan, and shall remain effective until all indebtedness contemplated
hereby shall have been paid by the Borrower in full.
8.5. Payment of Expenses and Taxes. The Borrower shall (a) pay all
reasonable out-of-pocket costs and expenses of the Lender incurred in the
collection, enforcement and prosecution of its rights and remedies hereunder,
whether or not involving a case, action or proceeding before any state or
federal court (including, without limitation, the reasonable fees and
disbursements of legal counsel) and (b) indemnify and hold the Lender harmless
from and against any and all current and future stamp and other similar taxes
with respect to the foregoing matters and from and against any and all
liabilities with respect to or resulting from any delay or omission (other than
to the extent attributable to the Lender) to pay such taxes.
8.6. Indemnity. The Borrower shall indemnify and hold the Lender
harmless from and against all liabilities, obligations, claims, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
whatsoever which may be imposed on, incurred by or asserted against the Lender
(whether or not caused by the Lender's negligence) growing out of or resulting
from this Loan Agreement, the Note, the Security Documents and any other
document or instrument delivered hereunder or thereunder and all transactions
and events at any time associated therewith (including the enforcement of any
right of the Lender or the defense of any action or inaction by the Lender in
connection therewith), except to the limited extent such liabilities,
obligations, claims, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements are proximately caused by the Lender's gross
negligence or willful misconduct.
8.7. Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, the Lender is hereby
authorized at any time and from time to time, without presentment, demand,
protest or other notice of any kind to the Borrower or to any other Person, any
such notice being hereby expressly waived, to setoff and to appropriate and
apply any and all indebtedness at any time held or owing by the Lender to or for
the credit of the Borrower against and on account of the obligations and
liabilities of the Borrower to the Lender under this Loan Agreement and the
Note, including (without limitation) all claims of any nature or description
arising out of or connected with this Loan Agreement and the Note, irrespective
of whether or not the Lender shall have made any demand hereunder and although
said obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
8.8. Successors and Assigns. This Loan Agreement shall be binding
upon and inure to the benefit of the Borrower, the Lender and their respective
successors and assigns; provided, however, that the Borrower may not assign or
otherwise transfer any of its interest under this Loan Agreement without prior
written consent of the Lender.
8.9. Counterparts. This Loan Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one agreement, and
any party hereto may execute this Loan Agreement by signing any such
counterpart.
8.10. Severability. In case any one or more of the provisions
contained in this Loan Agreement should be invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
8.11. Governing Law. This Loan Agreement and all rights hereunder
shall be governed by and construed in accordance with the laws of the State of
Missouri, without reference to conflict of laws principles of said state.
8.12. Acknowledgments and Admissions. The Borrower hereby
represents, warrants, acknowledges and admits that (a) the Borrower has made an
independent decision to enter into this Loan Agreement and such other
instruments and documents, without reliance on any representation, warranty,
covenant or undertaking by the Lender, whether written, oral or implicit, other
than as expressly set forth in this Loan Agreement, (b) the Lender has not made
any representation, covenant or undertaking to the Borrower in connection with
the rights and obligations of the Borrower pursuant to this Loan Agreement or
any such instruments and documents, (c) there are no representations,
warranties, covenants or undertakings or agreements by the Lender as to this
Loan Agreement or such instruments and documents except as expressly set forth
herein or therein, (d) the relationship between the Lender and the Borrower,
pursuant to this Loan Agreement and such instruments and documents, is and shall
be solely that of creditor and debtor, respectively, (e) the Lender has relied
upon the truthfulness of the foregoing acknowledgments in deciding to execute
and deliver this Loan Agreement and to accept the Note.
8.13. Entire Agreement. This Loan Agreement and the Exhibits
attached hereto embody the entire agreement and understanding between the
parties hereto and supersedes all prior agreements and understandings relating
to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed and delivered this Loan
Agreement as of the date first above written.
ALLIANCE FARMS COOPERATIVE
ASSOCIATION
By:
Name:
Title:
FARMLAND INDUSTRIES, INC.
By:
Name:
Title:
EXHIBIT A - PROMISSORY NOTE
EXHIBIT B - SECURITY AGREEMENT
EXHIBIT C - MORTGAGE
EXHIBIT D - COBANK LOAN DOCUMENTATION
Exhibit 10.31
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made and entered into as of the 27th day of
November, 1996, by and between Alliance Farms Cooperative Association, a
Colorado cooperative association ("Debtor"), whose mailing address is Alliance
Farms Cooperative Association, c/o Farmland Industries, Inc., Attention: Paul
Miller, Dept. 189, and Farmland Industries, Inc., a Kansas corporation ("Secured
Party"), whose mailing address is Farmland Industries, Inc., Attention: Randy
Vance, Dept. 160, Kansas City, Missouri 64116.
In consideration of the mutual covenants and obligations set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Debtor and Secured Party agree as
follows:
I. COLLATERAL; LIABILITIES AND OBLIGATIONS SECURED.
1. Debtor hereby grants to Secured Party a security interest in all
personal property, interests in property and fixtures of Debtor solely with
respect to the feeder pig production facility to be constructed in Wayne County,
Illinois by Debtor using the proceeds of advances made or to be made under the
Loan Agreement, dated as of November 27, 1996, between Debtor and Secured Party
(the ALoan Agreement@), and the proceeds of additional advances made or to be
made under the CoBank Loan Documentation (as defined in the Loan Agreement),
whether now owned or existing or hereafter acquired and wherever located
(collectively the "Collateral"), including, without limiting the generality of
the foregoing:
(a) all structures, buildings, improvements, facilities, additions,
fixtures, equipment, inventory, farm products, and breeding stock and the
offspring therefrom (except to the extent the breeding stock and offspring are
sold by the Debtor in the ordinary course of business), whether presently or
hereafter located on or used in connection with the property described in
Exhibit A attached hereto; and
(b) any and all additions, accessions, replacements and substitutions
to or for any of the foregoing and any and all proceeds and products of any of
the foregoing.
2. The security interest described herein is granted to Secured
Party to secure the performance and payment of any and all obligations and
liabilities of Debtor to Secured Party now existing or hereafter arising, direct
or indirect, absolute or contingent, joint or several, due or to become due,
including without limitation any renewa1s or extensions thereof and
substitutions therefor and any future advances (such obligations and liabilities
being referred to herein as the "Secured Obligations").
II. ADDITIONAL REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF DEBTOR.
Debtor represents, warrants, covenants and agrees as follows:
1. The Collateral will not be misused, abused, wasted or allowed to
deteriorate, except for the ordinary wear and tear of its primary use. Debtor
will notify Secured Party immediately, orally and in writing, of any event
causing material loss or depreciation in value of the Collateral and the amount
of such loss or depreciation and of any other event that materially affects the
Collateral.
2. The Collateral will be kept at the location described in Exhibit
A attached hereto or at such other location as may be consented to in writing by
Secured Party, except for temporary removal consistent with such Collateral's
ordinary primary use. Secured Party may examine and inspect the Collateral at
any reasonable time or times wherever it is located. Secured Party may also
examine and inspect Debtor's books and records during normal business hours.
3. No item of the Collateral is a part of or attached to any real
property or fixtures not subject to the Mortgage (as defined in the Loan
Agreement) or to any personal property not subject to this Security Agreement.
Debtor will not permit any item of the Collateral to otherwise become a part of
or attached to any real property or fixtures or to any personal property without
the prior written consent of Secured Party.
4. Debtor has a place of business only in Yuma County, Colorado and
Wayne County, Illinois. Debtor's chief executive office is at 302 Idlewild
Street, Yuma, Colorado 80759. Debtor will notify Secured Party in writing prior
to any change or discontinuance of Debtor's place or places of business. The
Debtor=s taxpayer identification number is 84-1270685.
5. Debtor will maintain such property and casualty insurance
respecting the collateral with such insurance companies, in such amounts, and
covering such risks, as are usually carried by companies engaged in the same or
similar business and similarly situated and make such increases in the type or
amount of coverage as the Secured Party may reasonably request. Such insurance
shall be payable to Secured Party and Debtor as their respective interests may
appear. All such policies of insurance shall provide for at least 30 days'
prior written notice of cancellation or modification to Secured Party. Debtor
shall furnish Secured Party with certificates or other evidence satisfactory to
Secured Party of compliance with all of the foregoing insurance provisions.
Secured Party is hereby granted authority to act as attorney for Debtor in
obtaining, adjusting and settling any such insurance and endorsing any drafts
issued in connection therewith. Secured Party may apply the proceeds of any
such insurance toward payment of any of the Secured Obligations, whether or not
the same is due and in any order of priority.
6. No financing statements covering any of the Collateral are on
file in any public office except as may show Secured Party or CoBank, ACB as
secured party. Upon the oral or written request of Secured Party, Debtor will
execute in form satisfactory to Secured Party one or more financing statements
pursuant to the applicable Uniform Commercial Code and such other documents as
Secured Party may from time to time reasonably request. Debtor hereby
authorizes Secured Party to file or record one or more financing statements
signed only by Secured Party in any location in any jurisdiction where such
authorization is permitted by law. If applicable law requires Debtor to sign
any financing statement for filing or recording purposes, Debtor hereby appoints
Secured Party or any representative of Secured Party as Debtor's attorney and
agent, with full power of substitution, to sign or endorse Debtor's name on any
such financing statement, and Debtor authorizes Secured Party to file or record
the same. Debtor will pay the cost of filing or recording the financing
statements and other documents referred to above in this paragraph and this
Security Agreement in all public offices where filing or recording is deemed by
Secured Party to be necessary or desirable. A photographic or other
reproduction of this Security Agreement or any financing statement related
hereto shall be sufficient as a financing statement in any jurisdiction where
filing or recording of such a reproduction is permitted by law.
7. Debtor has the power and authority to own and possess the
Collateral, subject to the interest of Secured Party and CoBank, ACB therein.
Debtor has, on the date hereof, or, as to Collateral acquired by Debtor after
the date hereof will have, as soon as Debtor has rights therein, good and
marketable title to the Collateral. Except for the security interest granted
hereby and any security interest of CoBank, ACB granted in connection with the
CoBank Loan Documentation (the ACoBank Security Interest@), Debtor owns the
Collateral free from any prior or adverse lien, charge, security interest or
encumbrance, and Debtor will defend the Collateral against all claims and
demands of all persons at any time claiming the same or any interest therein.
8. Debtor will keep the Collateral free from all unpaid charges,
liens, encumbrances and security interests, other than the security interest
granted hereby and the CoBank Security Interest, will pay promptly all taxes and
assessments with respect to the Collateral or its use or operation, will not use
the Collateral in violation of any ordinance or state or federal statute or any
administrative rule or regulation or any other law or any policy of insurance
thereon and will not sell, transfer, lease, assign or otherwise dispose or
alienate the ownership of the Collateral or any portion thereof or interest
therein in any manner whatsoever except to the extent the breeding stock and
offspring are sold by Debtor in the ordinary course of business. Secured Party
is hereby authorized at its option and in its sole discretion to discharge any
taxes, assessments, liens, security interests, charges or encumbrances at any
time levied or placed on the Collateral, to pay for insurance on the Collateral,
and to pay any costs or expenses incurred in the custody, maintenance or
preservation of the Collateral. Debtor agrees to reimburse Secured Party on
demand for any payment made or any expense incurred by Secured Party pursuant to
the foregoing authorization, and the amount of any such payments or expenses
shall be part of the Secured Obligations and secured by and under this Security
Agreement.
9. All financial information with respect to Debtor that has been or
is hereafter furnished by or on behalf of Debtor to Secured Party is or will be,
as of the date furnished to Secured Party, accurate, correct and complete in all
material respects.
10. Debtor shall from time to time, at its expense, promptly execute
and deliver all further instruments and documents (including without limitation
financing or continuation statements and amendments thereto) and take all
further action that may be necessary or desirable or that Secured Party may
reasonably request in order to evidence, establish, protect or perfect any
security interest granted or purported to be granted hereby or to enable Secured
Party to exercise and enforce its rights and remedies hereunder.
III. EVENTS OF DEFAULT.
The term "Event of Default" as used herein shall mean any one or more
of the following events:
1. The occurrence of an Event of Default (as such term is defined in
the Loan Agreement).
2. Default in the performance of or compliance with any covenant or
agreement of Debtor contained herein.
3. Any representation or warranty made by the Debtor herein shall
be false or misleading in any material respect.
4. Loss, theft, damage, destruction, danger of confiscation or
danger of misuse, abuse, waste or deterioration (except for the ordinary wear
and tear of its primary use) of any material part of the Collateral; the making
of any levy, seizure or attachment of or on the Collateral or any portion
thereof; or the issuance of any injunction with respect to the use or sale of
the Collateral or any portion thereof.
5. Service of any warrant of attachment or garnishment or the making
or issuance of any lien, levy or similar process on or with respect to Debtor.
UPON THE OCCURRENCE OF ANY OF THE FOREGOING DEFAULTS OR EVENTS OF
DEFAULT, DEBTOR SHALL IMMEDIATELY NOTIFY SECURED PARTY OF THE SAME.
IV. SECURED PARTY'S RIGHTS AND REMEDIES.
1. Secured Party may assign this Security Agreement without the
consent of Debtor. In the event of such assignment, the assignee shall be
entitled, upon notifying Debtor, to the performance of all obligations of Debtor
hereunder and to all rights and remedies of Secured Party hereunder. Debtor
will assert no claims or defenses that Debtor may have against Secured Party
against any assignee hereof.
2. Upon the occurrence of an Event of Default and at any time
thereafter, Secured Party may, without notice or demand, declare any or all of
the Secured Obligations immediately due and payable, notwithstanding any
provision to the contrary contained in any agreement or instrument evidencing or
relating to any of the Secured Obligations, and may exercise any and all rights
and remedies of the Secured Party in the enforcement of its security interest
granted or purported to be granted hereby under this Security Agreement, under
the Uniform Commercial Code of the State of Illinois, or under any other
applicable law or in equity, including, without limitation, any or all of the
following remedies:
(a) Secured Party may notify the obligors on any or all Collateral
consisting of accounts, chattel paper, general intangibles, contract rights,
instruments, insurance policies, things in action or the like to make payment
thereon directly to Secured Party, and Secured Party may demand, collect,
receipt for, settle, compromise, adjust, sue for, foreclose or realize upon or
with respect to such Collateral. Until Secured Party elects to exercise any
such right, Debtor is authorized, as agent of Secured Party, to collect and
enforce all such obligations.
(b) Secured Party may receive, open and dispose of mail addressed to
Debtor and endorse notes, checks, drafts, money orders, documents of title or
other evidences of payment, shipment or storage or any other item constituting
or relating to the Collateral on behalf of and in the name of Debtor.
(c) Secured Party may take control of any or all proceeds
constituting a part of the Collateral.
(d) Secured Party may set off any deposits or other moneys due from
Secured Party to Debtor against any of the Secured Obligations, whether or not
the same is due and in any order of priority.
(e) Secured Party shall have all of the rights and be entitled to all
of the remedies of a secured party under the Uniform Commercial Code in effect
in the State of Illinois, including without limitation the right to take
possession of, and to use, occupy and control, the Collateral or any portion
thereof and the premises wherever the foregoing may be, the right to sell, lease
or otherwise dispose of the Collateral or any portion thereof (including the
right to purchase at any public sale) and the right to recover reasonable
expenses of retaking, holding, preparing for sale or lease, selling, leasing and
the like and, to the extent not prohibited by law, reasonable attorneys' fees
and legal expenses incurred by Secured Party.
(f) Secured Party may require Debtor to assemble the Collateral and
make it available to Secured Party at a place to be designated by Secured Party
which is reasonably convenient to both parties, or, if Debtor fails or refuses
to so assemble the Collateral, Secured Party may, and Debtor hereby authorizes
and empowers Secured Party to, enter upon the premises wherever the Collateral
may be in order to remove the same.
3. Secured Party's costs of collection, enforcement and prosecution
of its rights and remedies hereunder or otherwise arising, whether or not
involving a case, action or other proceeding before any state or federal court
or other body, including without limitation attorneys' fees and expenses, shall
be borne solely by Debtor.
4. No delay or omission by Secured Party to exercise any of its
rights or remedies hereunder or otherwise arising shall impair any of such
rights or remedies, nor shall any such delay or omission be construed as a
waiver of any default or Event of Default hereunder, and Secured Party may
exercise every such right and remedy from time to time as often as Secured Party
may deem expedient. All rights and remedies of Secured Party whether or not
granted hereunder shall be cumulative and may be exercised singularly or
concurrently, and no such right or remedy is intended to be exclusive of any
other right or remedy of Secured Party.
5. No waiver by Secured Party of any default or Event of Default
hereunder shall be effective unless in writing and signed and delivered by
Secured Party, and no such waiver of any default or Event of Default shall
extend to or affect any subsequent or other default or Event of Default or shall
impair any rights or remedies consequent thereon.
6. To the extent permitted by law, Debtor hereby waives all benefits
and advantages otherwise afforded Debtor under any laws now or hereafter in
force providing for any stay or extension that would affect the terms of
performance of Debtor under this Security Agreement or providing for the
valuation or appraisal of the Collateral or any portion thereof or for any
rights of redemption thereof, and Debtor will not in any other way hinder, delay
or impede the execution of any right or remedy of Secured Party.
7. Unless the Collateral threatens to decline speedily in value or
is of a type customarily sold on a recognized market, Secured Party will give
Debtor reasonable notice of the time and place of any public sale of the
Collateral or any portion thereof or of the time after which any private sale or
other intended disposition thereof is to be made. The requirements of
reasonable notice shall be met if such notice is mailed, postage prepaid, to
Debtor at least 10 days prior to the date of such sale or disposition.
V. GENERAL.
1. Secured Party shall have no duty as to collection or protection
of the Collateral or any income thereon, nor as to the preservation of rights
against prior parties, nor as to the preservation of any rights pertaining
thereto beyond any duty imposed by law to use reasonable care in the custody and
preservation of Collateral in Secured Party's possession.
2. With respect to any situation in which Secured Party has been
authorized to act for or on behalf of or in the name of Debtor, Debtor hereby
grants to Secured Party and any officer or representative of Secured Party, and
each of them, jointly and severally, with full power of substitution, Debtor's
power of attorney, coupled with an interest and irrevocable so long as any of
the Secured Obligations are outstanding. Debtor hereby ratifies and confirms
any and all such actions taken by Secured Party or any such officer or
representative and will hold Secured Party and any such officer or
representative harmless against any claim made by any person or entity by reason
of such actions.
3. This Security Agreement shall inure to the benefit of and shall
be binding upon Debtor and Secured Party and their respective successors and
assigns.
4. Any demand upon or notice or other communication to Debtor shall
be effective if delivered by hand delivery or deposited in the mails, postage
prepaid, addressed to Debtor at the address of Debtor set forth at the beginning
of this Security Agreement, or, if Debtor has notified Secured Party in writing
of a change of address, to the last address of which Secured Party has been so
notified.
5. This Security Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
6. If any provision of this Security Agreement is contrary to,
prohibited by or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible. If any provision of this Security
Agreement is contrary to, prohibited by or deemed invalid under the applicable
laws or regulations of any jurisdiction, such provision shall not thereby be
rendered invalid in any other jurisdiction.
7. This Security Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute but one and the same instrument.
8. The headings used in this Security Agreement are for convenience
of reference only and shall in no way define, limit or describe the scope or
intent of any provision of this Security Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement on the day and year first above written.
FARMLAND INDUSTRIES, INC.
By:
Name:
Title:
ALLIANCE FARMS COOPERATIVE
ASSOCIATION
By:
Name:
Title:
EXHIBIT A
A tract of land located in Section 1, Township 1 North, Range 8 East of the
Third Principal Meridian located in Wayne County, Illinois and more
particularly described as follows:
A part of Section 1, Township 1 North, Range 8 East, 3rd PM, Wayne
County, Illinois and being further described as follows: Commencing
at the southeast corner of the North Half of the North Half of the
Southeast Quarter of said Section 1; thence West, along the south line
of the North Half of the North Half of the Southeast Quarter of
Section 1, a distance of 972.5 feet to the point of beginning; thence
continuing along the south line of the North Half of the North Half of
the Southeast Quarter of Section 1, a distance of 972.5 feet; thence
North, parallel with the east line of Section 1, a distance of 2080
feet; thence East, parallel with the south line of the North Half of
the North Half of the Southeast Quarter of Section 1, a distance of
972.5 feet; thence South, parallel with the east line of Section 1, a
distance of 2080 feet to the point of beginning; containing 46.44
acres, more or less.
AND
A part of Section 1, Township 1 North, Range 8 East, 3rd PM, Wayne
County, Illinois and being further described as follows: Beginning at
the southeast corner of the North Half of the North Half of the
Southeast Quarter of said Section 1; thence West, along the south line
of the North Half of the North Half of the Southeast Quarter of
Section 1, a distance of 972.5 feet; thence North, parallel with the
east line of Section 1, a distance of 2080 feet; thence East, parallel
with the south line of the North Half of the North Half of the
Southeast Quarter of Section 1, a distance of 972.5 feet to a point on
the east line of Section 1; thence South, along the east line of
Section 1, a distance of 2080 feet to the point of beginning;
containing 46.44 acres, more or less.
Exhibit 10.32
ACCRUED INTEREST AGREEMENT
THIS ACCRUED INTEREST AGREEMENT (the "Agreement") is made and entered
into as of February 28, 1997, by and between Alliance Farms Cooperative
Association, a Colorado cooperative association (the "Borrower"), and Farmland
Industries, Inc., a Kansas corporation (the "Lender").
RECITALS:
A. As of November 27, 1996, the Borrower and the Lender entered into a
Loan Agreement whereby the Lender agreed to loan up to $1,360,000 to the
Borrower (the "Loan Agreement" and, together with all promissory notes,
mortgages, deeds of trust, security agreements, waivers, consents and other
documentation entered into with respect thereto or as contemplated thereby,
collectively the "Farmland Loan Documentation").
B. The Lender and CoBank (as defined in the Loan Agreement) have
entered into a Subordination Agreement, dated February 28, 1997 (the
"Subordination Agreement"), whereby the loan evidenced by the Farmland Loan
Documentation is subordinated to the loan evidenced by the CoBank Loan
Documentation (as defined in the Loan Agreement).
C. The Borrower now desires to have the interest otherwise due and
payable on a monthly basis under the Farmland Loan Documentation accrue pending
the date on which the principal thereunder is due and payable.
AGREEMENT:
In consideration of the mutual covenants and obligations set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Borrower and the Lender agree as follows:
1. Capitalized Terms. Unless otherwise defined in this Agreement, all
capitalized terms used herein shall have meanings ascribed to such terms in the
Loan Agreement.
2. Accrual of Interest. Notwithstanding the requirement under the
Farmland Loan Documentation that the Borrower pay interest on the unpaid
principal amount of the Loan on each Interest Payment Date, the Borrower shall
not make such interest payments on such dates, but instead (a) interest shall
accrue at the rates otherwise stated in the Farmland Loan Documentation, (b)
interest shall compound on each Interest Payment Date, and (c) such accrued and
compounded interest shall be payable in full on the first to occur of (i) the
closing date with respect to the Borrower=s next issuance and sale of a block of
at least seventeen (17) shares of its common stock, $.01 par value, and (ii) the
27th day of November, 2006.
3. Stock Sale Closing. The Borrower shall not close any issuance and
sale of shares of its common stock, $.01 par value unless (a) not less than
seventeen (17) shares of its common stock, $.01 par value, are issued and sold
in connection with such closing, and (b) concurrently with the closing of the
Borrower=s next issuance and sale of a block of at least seventeen (17) shares
of its common stock, $.01 par value, (i) the Borrower shall cause the repayment
in full of the principal under the Farmland Loan Documentation, and the accrued
and compounded interest hereunder and under the Farmland Loan Documentation, to
made to Farmland, and (ii) immediately after such repayment, (A) the
subordination provided for by the Subordination Agreement, or by any other
agreement between the Lender and CoBank, shall not apply to the proceeds of such
repayment, and (B) the Lender shall not be obligated under the Subordination
Agreement, or under any other agreement between the Lender and CoBank, to hold
such proceeds in trust for CoBank or otherwise remit such proceeds to CoBank.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
ALLIANCE FARMS COOPERATIVE
ASSOCIATION
By:
Name:
Title:
FARMLAND INDUSTRIES, INC.
By:
Name:
Title:
Exhibit 10.33
EXCESS FEEDER PIG PURCHASE AGREEMENT
THIS EXCESS FEEDER PIG PURCHASE AGREEMENT (this "Agreement") is entered
into as of this 28th day of February, 1997, by and between ALLIANCE FARMS
COOPERATIVE ASSOCIATION (hereinafter "Association"), and FARMLAND INDUSTRIES,
INC. (hereinafter "Purchaser").
WHEREAS, Association is engaged in the production and sale of feeder pigs;
and
WHEREAS, Purchaser is a purchaser of feeder pigs, possesses expertise in
swine production and management, and desires to enter into this Agreement for
purposes of acquiring feeder pigs;
WHEREAS, Purchaser and Association are parties to a Swine Production
Services Agreement, dated as of July 13, 1994, pursuant to which Purchaser has
been granted the right to purchase all, or any portion, of Association's Excess
Pigs (as defined in Section 2).
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
the parties hereto agree as follows:
1. PURCHASE/SALE OF EXCESS FEEDER PIGS.
(a) GENERAL. Upon and subject to all terms and conditions set forth
in this Agreement, Purchaser shall purchase from Association, and Association
shall sell to Purchaser, Excess Pigs produced by Association, in lots
(hereinafter "Lot" or "Lots") of no less than 900, and no more than 1,000,
Qualifying Pigs (as defined in Section 2) per Lot, as determined by Association,
which Lots shall be made available to Purchaser from one or more of
Association's existing or future feeder pig production facilities. Purchaser's
purchase obligation hereunder shall not exceed 46 Lots per any 12-month period
occurring within the term of this Agreement.
(b) AVAILABILITY. The number of Lots made available to Purchaser and
the frequency of availability of such Lots is not determinable by the parties,
but shall be comparable to the availability and frequency that would be
applicable to a member of Association owning 17 shares of Association's common
stock, $0.01 par value, to which Lots are made available on a rotating schedule
with other members of the Association. Purchaser acknowledges that Lots will
not be made available to Purchaser under this Agreement until Qualifying Pigs
are produced and available from the facilities constructed using the proceeds of
the Farmland Debt (as defined in Section 2), and that the number of Lots made
available to Purchaser and the frequency of availability of such Lots will be
subject to actual production of Qualifying Pigs from all facilities of
Association. Association shall give notice to Purchaser when a Lot is available
for purchase by Purchaser hereunder, which notice shall specify the anticipated
number of Qualifying Pigs in such Lot and the scheduled shipment date.
2. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the following meanings:
EXCESS PIGS shall mean (a) Qualifying Pigs produced by Association that are
in excess of the Qualifying Pigs (i) made available by Association for
purchase under the Feeder Pig Purchase Agreements between Association and
its members or (ii) used by Association in its breeding stock multiplier
units, and (b) Qualifying Pigs that a member of Association has failed to
purchase pursuant to a Feeder Pig Purchase Agreement between Association
and such member.
FARMLAND DEBT shall mean the loan to Association made by Purchaser pursuant
to that certain Loan Agreement, dated as of November 27, 1996, by and
between Purchaser and Association, and evidenced by that certain Promissory
Note, dated November 27, 1996, of Association to Purchaser in the principal
amount of $1,360,000.
QUALIFYING PIGS shall mean feeder pigs having a minimum weight of 35
pounds, managed in accordance with Section 7, and free of the following
defects (with terms used in reference to defects being given the meaning
generally utilized in the swine industry) at the time of loading:
(a) uncastrated or freshly castrated males;
(b) ruptures, umbilical or scrotal hernia larger than a two-inch
diameter;
(c) observable Atrophic Rhinitis, evidenced by deformed or twisted
snout with or without bleeding;
(d) evidence of chronic, untreatable respiratory disease;
(e) unthrifty, poor-doing pigs;
(f) observable signs of lameness, stiffness, or other locomotor
disorders evidenced by swelling or malformed joints;
(g) severe diarrhea or transmissible gastroenteritis;
(h) observable abscesses; and
(i) anal prolapse.
3. PURCHASE PRICE OF PIGS.
(a) PRICE. The purchase price for each Qualifying Pig purchased by
Purchaser under this Agreement shall be an amount equal to the sum of the
following:
Financing Cost Per Pig, plus
Operating Cost Per Pig, plus
Production Margin.
Purchaser acknowledges that Association has constructed, or is in the process of
constructing, or both, Production Units as a result of completed offers and
sales of shares of its capital stock and the provision of the Farmland Debt. In
light of the foregoing, the determination of the Financing Cost Per Pig portion
of the purchase price for a Qualifying Pig hereunder shall be made in relation
to the Production Unit that is being constructed using the proceeds of the
Farmland Debt.
(b) DEFINITIONS. As used in this Section 3, the following terms
shall have the following meanings:
FINANCING COST PER PIG shall be determined on a prospective rolling 12-
month basis and shall mean an amount equal to the quotient of (i) the sum
of the required payments of interest and principal (including any scheduled
sinking fund payments) to be made during the upcoming 12-month period with
respect to Purchaser's Debt, divided by (ii) Pigs Shipped.
OPERATING COST PER PIG shall be determined on a rolling 12-month historical
basis and shall mean an amount equal to the quotient of (i) the sum of (A)
all direct and indirect production, operating, selling, general,
administrative, and other expenses incurred by Association in the 12 months
preceding the then present month of shipment as determined by Association's
accountants utilizing generally accepted accounting principles consistently
applied (excluding any provision for interest expense or depreciation or
amortization of the cost of buildings, equipment, breeding stock or other
capitalized costs which were purchased as a result of Purchaser's Debt and
Farmland Debt or as a result of the issuance of any capital stock of
Association to any third party), plus (B) the net cash flow cost of all
capital expenditures by Association (including any capital sinking fund
payments) for production facility and breeding stock improvements and
replacements in the 12 months preceding the then present month of shipment
as determined by Association's accountants, divided by (ii) Pigs Shipped.
The direct and indirect production and operating expenses attributable to a
Production Unit which is in the process of commencing production shall not
be included in the determination of Operating Cost Per Pig, and shipments
of pigs attributable to such Production Unit shall not be included in Pigs
Shipped, until such Production Unit has completed one entire month of full
production, shipping pigs in each week thereof. The net cash flow with
respect to capital expenditures for production facility and breeding stock
improvements and replacements (which net cash flow shall be determined
after taking into account the breeding stock and production facility
retirements attributable to a Production Unit which is in the process of
commencing production) shall not be included in the determination of
Operating Cost Per Pig until the respective Production Unit has completed
one entire month of full production, shipping pigs in each week thereof.
PRODUCTION MARGIN shall mean an amount equal to zero dollars ($0.00).
PIGS SHIPPED shall mean the number of Qualifying Pigs produced and shipped
from Association over the same 12-month period in determining the Operating
Cost Per Pig and the estimated number of Qualifying Pigs that will be
produced and shipped by Association over the 12-month period in determining
the Financing Cost Per Pig. For purposes of determining the Financing Cost
Per Pig, Pigs Shipped shall be equal to the product of (i) Association's
total estimated number of Qualifying Pigs to be produced and shipped by
Association during such 12-month period, multiplied by (ii) a fraction, the
numerator of which shall be one (i.e., the number of Production Units being
constructed using the proceeds of the Farmland Debt), and the denominator
of which shall be the total number of Production Units constructed by
Association with respect to all issuances of its capital stock or
constructed using the proceeds of the Farmland Debt. All estimates
relating to Pigs Shipped shall be made by Association using such historical
data and projections as are available to Association.
PRODUCTION UNIT shall mean the land and facilities necessary to house, feed
and care for a group of 2,450 sows and the attendant offspring thereof.
PURCHASER'S DEBT shall mean (i) the debt, excluding the Farmland Debt,
incurred by Association for the Production Unit being constructed using the
proceeds of the Farmland Debt, including any debt incurred for purposes of
financing the acquisition of land for, and construction of, such Production
Unit, (ii) any debt, excluding the Farmland Debt, incurred for the initial
working capital requirements with respect to the operation of such
Production Unit, and (iii) any debt incurred for purposes of refinancing
any such debt.
4. PAYMENT OF PURCHASE PRICE. Association shall furnish to Purchaser, at
the time Association notifies Purchaser that a Lot is available for purchase by
Purchaser hereunder, an estimate of the total purchase price of the Qualifying
Pigs included in the Lot, and Purchaser shall, not less than one day prior to
the scheduled shipment date as specified in the notice by Association to
Purchaser, pay such estimated total purchase price to Association in cash, or by
such other means as may be acceptable to Association in its sole and absolute
discretion. Association shall have no obligation to commence transportation of
such Qualifying Pigs to Purchaser prior to full payment of such estimated total
purchase price for such Qualifying Pigs as herein provided. The actual total
purchase price of all Qualifying Pigs included in a Lot shall be based upon
weight at the time of loading and settlement of any adjustments shall be made
within five days following delivery.
5. WEIGHT ADJUSTMENT. The purchase price for each Qualifying Pig as
provided in Section 3 is for a Lot of Qualifying Pigs having an average weight
of 45 pounds. In the event that the average weight of the Qualifying Pigs in a
Lot sold to Purchaser exceeds 45 pounds, Purchaser shall pay Association an
additional twenty-five cents ($0.25) per pound per Qualifying Pig on the number
of pounds (not to exceed five pounds) that the Lot's average shipping weight per
pig exceeds 45 pounds, and an additional fifteen cents ($0.15) per pound per
Qualifying Pig on the number of pounds (not to exceed ten pounds) that the Lot's
average shipping weight per pig exceeds 50 pounds. To the extent that the
average weight of the Qualifying Pigs in a Lot sold to Purchaser is less than 45
pounds, twenty-five cents ($0.25) per pound on the number of pounds that the
Lot's average shipping weight per pig is less than 45 pounds shall be deducted
from the purchase price that Purchaser is to pay to Association for each
Qualifying Pig. Purchaser shall have the right to, but shall not be obligated
to, purchase a Lot of Qualifying Pigs hereunder at an average weight of less
than 40 pounds per pig.
6. GENETIC QUALITY. Qualifying Pigs initially produced by Association
will be progeny from (a) DeKalb hybrid gilts/sows from lines DK 31, DK 33,
DK 43, D 3 and D 9, to the extent such gilts/sows are reasonably available to
Association, mated with DeKalb hybrid boars from lines DK 77, DK 97 and C 4, to
the extent such boars are reasonably available to Association, (b) genetic stock
that is substantially equivalent to or greater quality than such DeKalb genetic
stock described in subsection (a) above (as determined in Association's sole and
absolute discretion), to the extent such genetic stock is reasonably available
to Association from DeKalb or any other producer (including Association or a
member of Association) of genetic stock, or (c) terminal cross gilts/sows mated
with DeKalb hybrid boars from lines DK 77 and DK 97, to the extent such boars
are reasonably available to Association, which terminal cross gilts/sows shall
be progeny of DeKalb hybrid gilts/sows from lines DK 31, DK 33, DK 43, or D 9
stock, to the extent such gilts/sows are reasonably available to Association,
mated with DeKalb hybrid boars from lines DK 77 or DK 97, to the extent such
boars are reasonably available to Association. Association will replace
terminal cross gilts/sows with DeKalb DK 31, DK 33, DK 43, D 3 or D 9 hybrid
genetic stock or genetic stock substantially equivalent to or greater quality
than such DeKalb genetic stock, as such genetic stock becomes reasonably
available to Association from DeKalb or any other producer (including
Association or a member of Association) of genetic stock. Thereafter,
Qualifying Pigs produced by Association will be progeny from genetic stock
described in subsections (a) or (b), or both, of this Section 6, to the extent
such genetic stock is reasonably available to Association from DeKalb or any
other producer (including Association or a member of Association) of genetic
stock.
7. MANAGEMENT OF HEALTH AND NUTRITION. Association agrees to comply with
the following health and nutrition programs with respect to all pigs to be
purchased under this Agreement:
(a) Association shall dock tails within 48 hours of a pig's
birth.
(b) Association shall castrate male pigs within ten days of the pig's
birth.
(c) Association shall, to the extent that Association reasonably
determines that the following procedures are necessary or advisable with
respect to a herd, (i) administer Ivomec to all feeder pigs, (ii) deworm
breeding herd with Atgard or Safe-guard, (iii) spray breeding herd with
Tacktic or Prolate, (iv) vaccinate breeding herd and all offspring with a
federally licensed Atrophic Rhinitis bacterin containing Bordetella and
Pasteurella Multocida, types A & D, (v) inoculate pigs with Erysipelas
Bactrin (or such other inoculum that is substantially equivalent to or
greater quality than Erysipelas Bactrin as determined by Association in its
sole and absolute discretion), and (vi) perform such other procedures that
are reasonably determined by Association to be necessary or advisable with
respect to a herd.
(d) Association shall maintain Association's swine free from the
pseudorabies virus ("PRV") or any swine disease that would prohibit
interstate shipment of pigs produced by Association, or that might
otherwise materially impair Purchaser's ability to utilize the pigs to be
purchased under this Agreement. If, in the opinion of two veterinarians
selected by Association and reasonably acceptable to Purchaser, any of the
swine produced by Association or used in the production of feeder pigs for
delivery hereunder contracts PRV, Association shall have the opportunity to
cure such impairment within a reasonable period of time and to suspend, at
any time and from time to time, the sale and purchase of feeder pigs
hereunder until such time as said veterinarians determine that PRV no
longer exists.
(e) Association shall use a feeding regimen, feed products, and herd
health products developed or marketed by Farmland Industries, Inc., or any
of its affiliates.
8. RIGHT OF INSPECTION. Upon reasonable notice to Association, Purchaser
or its representative shall have the right to inspect Association's production
records to verify the genetic quality and management of nutrition and health
programs prescribed by this Agreement during normal business hours.
9. ADJUSTMENT FOR NON-QUALIFYING PIGS. Purchaser shall have the right to
inspect Purchaser's Lot of Qualifying Pigs prior to loading. In the event that,
after delivery of such Lot, Purchaser believes that any pig was not a Qualifying
Pig prior to loading (a "Subject Pig"), Purchaser shall notify Association by
telephone of such belief within one (1) business day following delivery as well
as promptly notify Association of such belief in the manner provided in Section
19 hereof. Association shall have the right to inspect any and all Subject Pigs
in investigation of Purchaser's belief, and thereafter Association and Purchaser
shall agree in good faith upon an appropriate adjustment, if any, with respect
to such Subject Pigs. Purchaser hereby acknowledges and agrees that such
adjustment described above shall be Purchaser's sole and exclusive remedy as
against Association arising out of the purchase hereunder of a pig that was not
a Qualifying Pig at the time of loading and that the failure of Association to
deliver Qualifying Pigs as otherwise required hereunder shall not give rise to a
right of Purchaser to terminate this Agreement. Furthermore, in no event shall
Purchaser reject delivery of a Lot of pigs hereunder, but in lieu thereof
Purchaser shall accept each delivery of a Lot of pigs hereunder and, with
respect to any and all pigs that Purchaser believes were not Qualifying Pigs
prior to loading, shall comply with the provisions of this Section 9 and, until
such adjustment, if any, is agreed upon by Association and Purchaser, shall, at
Purchaser's expense, feed, water, treat and care for any and all such pigs as if
Purchaser believed such pigs were Qualifying Pigs prior to loading.
10. HEALTH PERMITS. Association shall provide Purchaser, at Association's
expense, all health permits necessary to qualify all Qualifying Pigs for
interstate shipment.
11. WEIGHING CONDITIONS. All Lots of Qualifying Pigs shall be weighed at
Association's expense at a state-inspected scale in close proximity to
Association's production facility. A copy of all scale tickets will be provided
to Association and to Purchaser.
12. IDENTIFICATION. Association shall appropriately identify, prior to
shipment, all Qualifying Pigs in accordance with the rules that will allow
interstate shipment to the states to which the pigs are being shipped.
13. TRANSPORTATION OF PIGS. Qualifying Pigs shall be shipped to Purchaser
FOB shipping point. Association shall at Purchaser's expense arrange for
transportation of Qualifying Pigs from any of Association's production
facilities as determined by Association; provided, however, that Purchaser shall
pay such transportation costs no later than the time of delivery. Trucks shall
be thoroughly cleaned and disinfected prior to hauling any pigs from
Association's production facilities and after any previously hauled pigs.
14. TERM OF AGREEMENT. The term of this Agreement shall commence on the
date first written above and shall continue for twelve (12) months after the
month in which the first Lot of Qualifying Pigs is shipped by Association to
Purchaser hereunder, subject to the following:
(a) In the event that Purchaser fails to purchase, pay for, and take
delivery of any two Lots when and as made available to Purchaser in
accordance with the terms of this Agreement, Association shall have the
right, in its sole discretion, to terminate this Agreement and to exercise
its remedies as provided in Section 17 hereof. The occurrence of any such
failure to purchase, pay for, and take delivery of any two Lots shall not
constitute, trigger or be deemed a default or breach under any Feeder Pig
Purchase Agreement between Purchaser and Association.
(b) In the event of a material breach of any agreement or covenant of
Association contained in this Agreement, Purchaser may give written notice
of such breach to Association and, in the event that such breach is not
cured within a period (the "Cure Period") of thirty (30) days following
such notice of breach by Purchaser to Association, Purchaser shall have the
right to terminate this Agreement upon notice to Association, provided that
such notice of termination is given by Purchaser to Association within
thirty (30) days following the Cure Period.
(c) If the first Lot of Qualifying Pigs is not shipped to Purchaser
hereunder within twenty-four (24) months of the date of this Agreement,
Purchaser shall have the right to terminate this Agreement upon notice to
Association, provided that such notice of termination is given by Purchaser
to Association within three (3) months after the expiration of such twenty-
four (24) month period; provided, however, that any such termination shall
not terminate or otherwise affect any Feeder Pig Purchase Agreement between
Purchaser and Association.
(d) Upon the repayment in full of the Farmland Debt (whether by
prepayment, payment as a result of acceleration or payment at maturity),
this Agreement automatically shall terminate.
(e) This Agreement shall be extended automatically for
succeeding and consecutive twelve (12) month terms unless either party
gives to the other party, not less than two (2) months prior to the
expiration of the initial term or any extended term hereof, notice
that such party desires to terminate this Agreement as of the
expiration of such initial or extended term.
Notwithstanding the foregoing, however, the rights of Association to collect
damages and to exercise its remedies under Section 17 hereunder shall survive
any termination of this Agreement.
15. WARRANTIES. ASSOCIATION MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED
TO PURCHASER OTHER THAN AS HEREIN EXPRESSLY PROVIDED, AND SPECIFICALLY (A) MAKES
NO WARRANTY AS TO ANY SPECIFIC LEVEL OF PERFORMANCE WITH RESPECT TO ANY PIGS
SOLD HEREUNDER, AND (B) DISCLAIMS ANY WARRANTIES OF MERCHANTABILITY OR OF
FITNESS FOR A PARTICULAR PURPOSE.
16. FORCE MAJEURE. Either party to this Agreement shall be relieved of
its responsibility and obligations hereunder during any period when performance
is commercially impossible because of reasons beyond its control such as, but
not limited to, fire, explosion, strike, accident, governmental regulations or
intervention, and acts of God.
17. DEFAULT BY PURCHASER; GRANT OF SECURITY INTEREST. Purchaser
acknowledges that the damages suffered by Association in the event of any
failure by Purchaser to purchase, pay for, and take delivery of any Lot when and
as made available to Purchaser in accordance with the terms hereof shall equal,
and Purchaser shall be liable to Association for and shall pay to Association
upon demand, the sum of the following: (a) the difference between the price
payable by Purchaser hereunder for Qualifying Pigs included in such Lot and the
then current market price (as of the scheduled shipment date for such Lot) for
Qualifying Pigs as quoted in any independent industry publication or source
selected by Association, multiplied by the number of Qualifying Pigs in such Lot
that Purchaser has failed to purchase, pay for, and take delivery of, in
accordance with the terms hereof; plus (b) administrative and other costs and
expenses relating to such Lot, which are hereby agreed to equal the amount of
$3,000; plus (c) costs of collection, enforcement, and prosecution of
Association's rights and remedies hereunder or otherwise arising, whether or not
involving a case, action, or other proceeding before any state or federal court
or other body, including, but not limited to, reasonable attorney's fees,
collection agency fees, and other costs of collection; provided, however, that
to the extent applicable law prohibits collection of attorney's fees and/or
costs, this subsection (c) shall be null and void to the extent of such
prohibition, except to preserve Association's rights pursuant to 11 U.S.C.
' 506(b). During any period in which Purchaser has been notified that it is
obligated to pay an amount for damages pursuant to the immediately preceding
sentence and has not paid such amount within three days of such demand,
Association shall not make any future Lots available to Purchaser for purchase
hereunder until Purchaser has paid such amount. In the event that Purchaser is
not made available any Lot for purchase hereunder pursuant to the immediately
preceding sentence that Association otherwise would have made available to
Purchaser for purchase hereunder, then Purchaser shall be deemed to have failed
to purchase, pay for, and take delivery of such Lot, and Purchaser shall be
liable for damages with respect to such Lot computed in accordance with the
first sentence of this Section. Upon any termination of this Agreement,
Purchaser's liability for damages incurred by Association with respect to
Purchaser's obligation to purchase, pay for and take delivery of Lots made
available to the Purchaser shall be limited to the damages with respect to such
Lots computed in accordance with the preceding provisions of this Section 17,
and Purchaser shall not be liable for any other damages for the failure to
purchase, pay for or take delivery of Lots hereunder after the termination of
this Agreement.
If Purchaser shall be in default under this Agreement, Association may
exercise any and all rights and remedies available to Association hereunder,
under any applicable Uniform Commercial Code, or otherwise at law or in equity.
The rights and remedies afforded to Association hereunder shall be cumulative
and in addition to, and not in limitation of, any rights and remedies which
Association may otherwise have under applicable law, including any applicable
Uniform Commercial Code. The exercise or partial exercise of any right or
remedy of Association hereunder or under applicable law shall not preclude or
prejudice the further exercise of that right or remedy or the exercise of any
other right or remedy of Association. No delay or omission on the part of
Association in exercising any right hereunder or otherwise shall operate as a
waiver of such right. A waiver on any one occasion shall not be construed as a
bar or waiver of any right or remedy on any future occasion.
18. ARBITRATION. In the event of any controversy arising out of or
relating to this Agreement, or any breach hereof, other than any controversy
arising out of or relating to Section 17 hereof or the exercise of any rights or
remedies thereunder, the parties agree to submit the dispute to binding
arbitration in accordance with the Commercial Arbitration Rules then in force of
the American Arbitration Association. Such arbitration shall be initiated by
either party by notifying the other party in writing and requesting a panel of
five (5) arbitrators from the American Arbitration Association, which
arbitrators shall be individuals skilled in the legal and business aspects of
the subject matter of this Agreement and of the dispute. Alternate strikes
shall be made to the panel commencing with the party requesting the arbitration
until one individual remains. Such individual shall be the arbitrator for the
controversy. The party requesting the arbitration shall notify the arbitrator
who shall hold a hearing(s) within 60 days of the notice. Any hearing(s) shall
take place in Denver, Colorado, or such other location as the parties may agree
upon. The arbitrator shall render a decision, including a written opinion in
support thereof, within 30 days after the conclusion of the hearing(s), which
decision shall be final and binding upon the parties without right of appeal.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. Costs of the arbitration will be assessed by the
arbitrator against either or both of the parties, and will be paid promptly by
the party or parties so assessed.
19. NOTICES. Any notice given or required to be given hereunder shall be
deemed to have been effectively given when delivered personally or sent by
United States certified or registered mail, return receipt requested, postage
prepaid, addressed or transmitted to Association at Alliance Farms Cooperative
Association, c/o Farmland Industries, Inc., 3315 North Oak Trafficway,
Department 47, Kansas City, Missouri 64116, Attention: Mr. Wayne N. Snyder, and
to Purchaser at the address set forth below Purchaser's signature, and/or to
such other (or additional) address(es) requested by a notice given in accordance
with this Section.
20. ENTIRE AGREEMENT. This Agreement contains all of the terms agreed
upon by the parties with respect to the subject matter hereof and supersedes all
prior agreements of the parties as to the subject matter hereof; provided,
however, any and all Feeder Pig Purchase Agreements between Purchaser and
Association shall not be superseded, modified or otherwise affected by this
Agreement. This Agreement may not be modified except in writing, signed by the
parties hereto, that specifically references this Agreement.
21. ASSIGNMENT. This Agreement may not be assigned by either party
without prior written consent of the other party; provided, however, that
Association may assign Association's rights herein and hereto to any lender that
may provide financing to Association in connection with the construction of
facilities or the operation thereof, or both. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
heirs, legal representatives, successors, and permitted assigns.
22. CONSTRUCTION. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Colorado. The parties hereto hereby
agree that if any part, term or provision of this Agreement is held by a court
of competent jurisdiction to be illegal or unenforceable or in conflict with any
controlling state law, the validity of the remaining parts, terms and provisions
of this Agreement shall not be affected, and the rights and obligations of the
parties shall be construed and enforced as if this Agreement did not contain the
particular part, term or provision held to be illegal or unenforceable or in
conflict with any controlling state law. This Agreement and the transactions
contemplated hereunder constitute commercial, and not consumer, transactions.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION CLAUSE THAT MAY BE ENFORCED
BY THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Agreement effective the
day and year first above written.
ASSOCIATION: PURCHASER:
ALLIANCE FARMS COOPERATIVE FARMLAND INDUSTRIES, INC.
ASSOCIATION
By: By:
Name: Name:
Title: Title:
Purchaser's Address:
Farmland Industries, Inc.
3315 North Oak Trafficway
Department 160
Kansas City, Missouri 64116
Attention: Randy Vance
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Alliance Farms Cooperative Association:
We consent to the use of our reports included herein, and to the reference to
our firm under the headings "Selected Financial Data" and "Experts" in the
Prospectus.
KPMG Peat Marwick LLP
Kansas City, Missouri
April 18, 1997
Exhibit 99.1.1
AMENDMENT TO ESCROW AGREEMENT
THIS AMENDMENT to the Escrow Agreement referred to below is made and
entered into as of this 31st day of January, 1997, by and among ALLIANCE FARMS
COOPERATIVE ASSOCIATION (the "Issuer"), DOUG BROWN (the "Brown"),
INTERSTATE/JOHNSON LANE CORPORATION (the "Outside Agent") and BOATMEN'S NATIONAL
BANK F/K/A BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY (the "Escrow Agent").
WITNESSETH:
WHEREAS, the Issuer, Brown, the Outside Agent and the Escrow Agent
entered into an Escrow Agreement, dated as of February 17, 1995 (the "Escrow
Agreement"), pursuant to which an interest-bearing escrow account was
established with the Escrow Agent into which funds received from the sale of
shares of the Issuer's capital stock, $0.01 par value may be deposited pending
completion of the escrow period and compliance with the terms of the offering of
such shares and for the purpose of, among others, complying with the securities
laws and regulations of various States; and
WHEREAS, the Issuer, Brown, the Outside Agent and the Escrow Agent
desire to amend certain provisions of the Escrow Agreement on and subject to the
terms hereof;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Issuer, Brown, the Outside Agent and the Escrow Agent do
hereby promise and agree as follows:
1. The Escrow Agreement is hereby amended by modifying all
references therein to the term "Inside Agent" to refer to Brown and such other
persons selected by the Issuer from time to time who are not affiliated with the
Escrow Agent and who shall execute and deliver to the Issuer, the Outside Agent
and the Escrow Agent a written instrument in which each such person covenants
and agrees to perform the obligations applicable to an Inside Agent (or a
Selected Dealer) under the Escrow Agreement, and to be bound by and subject to
the related terms and conditions of the Escrow Agreement insofar as they apply
to an Inside Agent (or a Selected Dealer).
2. The first recital to the Escrow Agreement is deleted in its
entirety and the following new recital is substituted in lieu thereof:
WHEREAS, the Issuer proposes to offer for sale to investors in one or
more offerings (each, an "Offering") through one or more registered
broker/dealers and, in those jurisdictions where permitted by applicable
law, through one or more officers and employees of the Issuer, shares of
its capital stock, $0.01 par value (the "Shares"), at an offering price
specified in the prospectus prepared in connection with the applicable
Offering;
3. The first sentence of Section 2, including clauses (a), (b) and
(c), of the Escrow Agreement is deleted in its entirety and the following new
first sentence of Section 2, including clauses (a), (b) and (c), is substituted
in lieu thereof:
The period of the escrow established hereunder with respect to any Offering
(the "Escrow Period") shall begin with the commencement of such Offering
(the effective date of the Registration Statement filed by the Issuer with
the Securities and Exchange Commission with respect to such Offering) and
shall terminate upon the earlier to occur of the following dates:
(a) The date upon which the Escrow Agent (i) has received
collected funds (as defined below) from the sale of all Shares offered
by the Issuer in such Offering equal to the product of the number of
Shares offered in such Offering multiplied by the offering price per
Share specified in the prospectus prepared in connection with such
Offering <F1>, and (ii) has caused such funds to be disbursed and
delivered to the Issuer in accordance with the terms and conditions of
this Agreement;
[FN]
For example, if 51 Shares are offered in an Offering at an offering price
specified in the related prospectus of $82,000 per Share, the Escrow Agent would
need to receive collected funds of $4,182,000 in order to satisfy Section
2(a)(i).
(b) The expiration of 550 days from the date of the commencement
of such Offering (unless the Issuer has given written notice to the
Escrow Agent of the Issuer's extension of such Offering for up to an
additional 180 days as contemplated by the prospectus prepared in
connection with such Offering, in which event, the expiration of such
additional period of up to 180 days); or
(c) The date upon which the Issuer has given written notice to
the Escrow Agent that the Issuer has terminated such Offering.
4. Section 4(a)(i) of the Escrow Agreement is deleted in its
entirety and the following new Section 4(a)(i) is substituted in lieu thereof:
(i) such disbursement and delivery of funds with respect to an
Offering shall be made only in an amount equal to the product of 17 Shares
(or such other number of Shares constituting a "minimum block" as specified
in the prospectus prepared in connection with such Offering) multiplied by
the offering price per Share specified in the prospectus prepared in
connection with such Offering (the "Minimum"), or an integral multiple of
such product, together with any interest earned to date thereon and
remaining after deduction for fees and reimbursement of costs and expenses
due the Escrow Agent as provided herein;
5. Section 4(a)(ii) of the Escrow Agreement is deleted in its
entirety and the following new Section 4(a)(ii) is substituted in lieu thereof:
(ii) the Escrow Agent must be given written confirmation by the
Issuer that the Issuer has obtained a commitment for not less than
$2,720,000 of debt financing or borrowings with respect to the disbursement
and delivery of each Minimum in an Offering (unless a lesser amount of debt
financing or borrowings with respect to each Minimum is specified in the
prospectus prepared in connection with such Offering, in which event the
Escrow Agent must be given written confirmation by the Issuer that the
Issuer has obtained a commitment for such lesser amount of debt financing
or borrowings);
6. Section 12 of the Escrow Agreement is deleted in its entirety and
the following new Section 12 is substituted in lieu thereof:
After disbursement and delivery of all funds and documents with respect to
an Offering deposited in the Escrow Account pursuant to this Agreement in
accordance with the terms and conditions hereof, the duties and
responsibilities of the Escrow Agent under this Agreement shall cease and
terminate with respect to such Offering.
7. Except as expressly amended hereby, all of the terms, conditions
and provisions of the Escrow Agreement shall remain unamended and in full force
and effect in accordance with its terms, and the Escrow Agreement, as amended
hereby, is hereby ratified and confirmed. The amendments provided herein shall
be limited precisely as drafted and shall not constitute an amendment of any
other term, condition or provision of the Escrow Agreement.
8. References in the Escrow Agreement to "Agreement", "hereof",
"herein" and words of similar impact shall be deemed to be a reference to the
Escrow Agreement as amended by this Amendment.
9. If for any reason any one or more of the provisions contained in
the Escrow Agreement or this Amendment shall be determined to be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained therein and herein shall
not be affected in any way or impaired thereby and shall be enforceable in
accordance with their respective terms.
10. This Amendment may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which shall
constitute one agreement which is binding upon all of the parties hereto,
notwithstanding that all parties are not signatories to the same counterpart.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment and affixed their signatures hereto and as of the date first above
written.
ALLIANCE FARMS COOPERATIVE INTERSTATE/JOHNSON LANE
ASSOCIATION CORPORATION
By: By:
Name:
Name: Title:
Title:
BOATMEN'S NATIONAL BANK
F/K/A BOATMEN'S FIRST NATIONAL
DOUG BROWN BANK OF KANSAS CITY
By:
Name:
Title:
Exhibit 99.2
SUBSCRIPTION AGREEMENT
Alliance Farms Cooperative Association
c/o Farmland Industries, Inc.
3315 North Oak Trafficway
Department 47
Kansas City, Missouri 64116
Attention: Wayne N. Snyder
Gentlemen:
1. Subscription.
a. The undersigned understands that Alliance Farms Cooperative
Association, a Colorado cooperative association (the "Company"), may offer up to
(i) an aggregate of 51 shares (the "Class A Shares") of its (Class A) Common
Stock, $.01 par value, on a "best efforts, all-or-none" basis for not less than
17 Class A Shares (a "Minimum Class A Block"), and thereafter may continue to
offer Class A Shares on such basis with respect to successive Minimum Class A
Blocks until 51 Class A Shares have been issued and sold, and (ii) an aggregate
of 108 shares (the "Class B Shares" and together with the Class A Shares, the
"Shares") of its Class B Common Stock, $.01 par value, on a "best efforts, all-
or-none" basis for not less than 18 Class B Shares (a "Minimum Class B Block"),
and thereafter may continue to offer Class B Shares on such basis with respect
to successive Minimum Class B Blocks until 108 Class B Shares have been issued
and sold. The undersigned acknowledges and agrees that prior to the execution
of this Subscription Agreement, the undersigned has received the Company's
Prospectus dated , 1997 for the Shares, which Prospectus contains the
form of this Subscription Agreement.
b. The undersigned hereby subscribes for and agrees to purchase
(i) Class A Shares at a price of $80,000 per share, and (ii) Class
B Shares at a price of $70,000 per share pursuant to the terms and conditions of
this Subscription Agreement (the "Subscription")<F1>. The undersigned
understands and agrees that in order to subscribe for any Shares, the following
items must be delivered to the Company on or before 5:00 p.m. on ,
1998 (or by 5:00 p.m. on , 1999 if the termination of the offering is
extended by the Company):
[FN]
One Class A Share or one Class B Share is the minimum number of Shares for which
an investor may subscribe, as described in the Prospectus.
(A) two completed and executed copies of this Subscription
Agreement;
(B) the undersigned's check, bank draft or wire transfer
(contact the Company for wire transfer instructions), payable to the order
of "Alliance Farms Cooperative Association Escrow No. 1482300" in an amount
representing the aggregate purchase price of the Shares being subscribed
for hereunder (which amount is equal to the product obtained by multiplying
the number of Class A Shares being subscribed for by $80,000 per Share plus
the product obtained by multiplying the number of Class B Shares being
subscribed for by $70,000 per Share);
(C) (if the undersigned is subscribing for any Class A Shares)
two completed and executed copies of the Feeder Pig Purchase Agreement in
the form attached to the Prospectus as Exhibit B;<F2>
[FN]
Please do not date the Feeder Pig Purchase Agreement; the Company will date the
Feeder Pig Purchase Agreement upon acceptance of subscriptions.
(D) (if the undersigned is subscribing for any Class B Shares)
two completed and executed copies of the Weaned Pig Purchase Agreement in
the form attached to the Prospectus as Exhibit C;<F3> and
[FN]
Please do not date the Weaned Pig Purchase Agreement; the Company will date the
Weaned Pig Purchase Agreement upon acceptance of subscriptions.
(E) one executed stock power respecting the Class A Shares
subscribed by the undersigned hereunder in favor of the Company as
contemplated by Section 17 of the Feeder Pig Purchase Agreement.<F4>
[FN]
A form stock power is attached hereto as Annex 1 for your convenience. Please
do not date or otherwise complete the stock power; the Company will date and
complete the stock power upon acceptance of subscriptions.
(F) one executed stock power respecting the Class B Shares
subscribed by the undersigned hereunder in favor of the Company as
contemplated by Section 17 of the Weaned Pig Purchase Agreement.<F5>
[FN]
A form stock power is attached hereto as Annex 1 for your convenience. Please
do not date or otherwise complete the stock power; the Company will date and
complete the stock power upon acceptance of subscriptions.
In addition, if the undersigned is a resident of Iowa, or otherwise is
subscribing for Shares in Iowa, the undersigned may be required to deliver to
the Company a completed and executed Potential Investor Questionnaire with
respect to the representation and warranty made pursuant to Section 3.l below.
The undersigned understands that pending the Company's acceptance of
subscriptions for a Minimum Class A Block or a Minimum Class B Block in this
offering and the satisfaction of certain other conditions, all funds received by
the Company in payment of the offering price for the Shares promptly will be
deposited in an interest-bearing escrow account established at NationsBank, N.A.
(Mid-West) (formerly Boatmen's National Bank), Kansas City, Missouri. Payment
of the applicable offering price must be made payable to the order of "Alliance
Farms Cooperative Association Escrow No. 1482300", the escrow account
established at such bank. Upon the Company's acceptance of subscriptions for a
Minimum Class A Block of 17 Class A Shares or for a Minimum Class B Block of 18
Class B Shares, and the satisfaction of certain other conditions, all funds
deposited in the escrow account with respect to such Shares, together with any
interest earned thereon, will be paid to the Company. In the event that the
Company does not issue Shares for which funds have been deposited in the escrow
account prior to the termination of the offering, such funds will be refunded to
the respective subscribers, together with any interest earned thereon and
without any deduction being made for expenses.
c. The undersigned understands that this Subscription shall be
irrevocable, except as otherwise provided by virtue of applicable federal and
state securities laws, and shall survive the death or disability of the
undersigned, in the case of an individual, or the dissolution or bankruptcy of
the undersigned, in the case of an entity.
2. Acceptance of Subscription. The undersigned understands that if and
to the extent this Subscription is not accepted by the Company, in whole or in
part, prior to 5:00 p.m. on , 1998 (or by 5:00 p.m. on ,
1999 if the termination date of the offering is extended by the Company), any
amount so received by the Company will be returned to the undersigned. The
undersigned acknowledges that the management of the Company reserves the right,
in its sole and absolute discretion, to accept or reject this Subscription, in
whole or in part, and that this Subscription shall not be binding unless and
until accepted by the Company. The undersigned agrees that subscriptions need
not be accepted in the order they are received.
3. Representations, Warranties and Agreement. The undersigned represents
and warrants to the Company and its officers, directors, employees, agents and
controlling persons, and agrees with such persons, as follows:
a. The undersigned and his or her representative, if any, have
been furnished all additional information relating to the Company, its
business and financial condition, the offering of the Shares and any
other matter set forth in the Prospectus which they have requested.
b. The undersigned agrees that the certificates evidencing the
Shares being purchased by the undersigned shall be stamped or
otherwise imprinted with a conspicuous legend in substantially the
following form:
Sale, transfer or hypothecation of the shares represented by
this certificate is restricted by the provisions of the
Colorado cooperative association law and the Articles of
Incorporation and Bylaws of Alliance Farms Cooperative
Association (the "Company"), a copy of which provisions may
be inspected at the principal offices of the Company, and
all provisions of which are hereby incorporated by reference
in this certificate.
The undersigned agrees that the Shares or any of them shall be sold,
pledged, assigned, hypothecated, or otherwise transferred (with or
without consideration) (a "Transfer") only if such Transfer is
permissible under the Colorado cooperative association law and the
Company's Articles of Incorporation and Bylaws. The undersigned
understands that the Company has not agreed to register the Shares for
distribution in accordance with the provisions of certain applicable
state securities law (the "State Acts"), that the Company is the only
party who may register the Shares under certain State Acts and that
the Company has not agreed to comply with any exemption under the
State Acts for the resale of the Shares. The undersigned understands
that there is and likely will be no market for the (Class A) Common
Stock or Class B Common Stock of the Company and that the undersigned
therefore may be unable to sell or dispose of the Shares.
c. The undersigned agrees that a stop transfer order shall be
placed on the transfer books maintained with respect to the Shares
which gives effect to the restrictive legend set forth in Section 3.b.
d. The undersigned understands that no federal or state agency
has passed upon the Shares or upon the accuracy or adequacy of the
Prospectus, or made any finding or determination as to the fairness of
the investment or any recommendation or endorsement of the Shares.
The undersigned understands that the Prospectus may not have been
filed with or reviewed by certain state securities administrators.
e. The undersigned is a producer of agricultural products, an
association of such producers, or a federation of such associations.
f. If a natural person, the undersigned is a citizen of the
United States of America, is at least 21 years of age, and has the
legal capacity to execute, deliver and perform this Agreement, and his
or her principal residence is located within the state designated
under his or her name below.
g. If the undersigned is a corporation, trust, partnership, or
any other entity, such entity is authorized and otherwise duly
qualified and empowered to execute and deliver this Subscription
Agreement and thereupon shall become legally bound thereby, all
necessary actions have been taken to authorize and approve the
investment in the Shares, such entity was not formed for the purpose
of making the investment in the Shares and such entity's principal
place of business is located at the address set forth on the signature
page hereof.
h. The undersigned acknowledges and agrees that certain
commissions as described in the Prospectus may be due and payable to
certain selling agents or other representatives of the Company in
connection with this Subscription.
i. The undersigned acknowledges that the Company may assign the
Company's rights in and to the Feeder Pig Purchase Agreement and/or
Weaned Pig Purchase Agreement executed by the undersigned and any and
all other assets of the Company to any lender that may provide
financing to the Company in connection with the construction of feeder
or weaned pig production facilities or the operation thereof, or both,
and the undersigned consents to any such assignment.
j. If the undersigned is a resident of Iowa, or otherwise is
subscribing for Shares in Iowa, the undersigned certifies that the
undersigned either (i) has a net worth, or joint net worth with the
undersigned's spouse, in either case, exclusive of home, furnishings
and automobiles ("Adjusted Net Worth") of at least $65,000 as of the
date hereof, and an annual gross income of at least $65,000 for each
of the undersigned's two most recent tax years; or (ii) has Adjusted
Net Worth of at least $250,000 as of the date hereof.
4. Taxpayer Identification Number. The undersigned agrees to complete,
execute and return to the Company a Form W-9, "Payer's Request for Taxpayer
Identification Number and Certification", concurrently with the delivery of the
executed copy of this Subscription Agreement.<F6>
[FN]
A Form W-9 is attached hereto as Annex 2 for your convenience.
5. Indemnification. The undersigned agrees to indemnify and hold
harmless the Company, its officers, directors, employees, shareholders and
affiliates, and any person acting on behalf of the Company, from and against any
and all damage, loss, liability, cost and expense (including attorneys' fees)
which any of them may incur by reason of the failure by the undersigned to
fulfill any of the terms or conditions of this Subscription Agreement. All
representations, warranties and covenants contained in this Subscription
Agreement, and the indemnification contained in this Section 5 shall survive the
acceptance of this Subscription.
6. No Waiver. Notwithstanding any of the representations, warranties,
acknowledgements or agreements made herein by the undersigned, the undersigned
does not thereby or in any other manner waive any of the rights granted to the
undersigned under federal or state securities law.
7. Entire Agreement; Modification. This Subscription Agreement
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof, and neither this Subscription Agreement nor any
provisions hereof shall be waived, changed, discharged or terminated except by
an instrument in writing signed by the party against whom any waiver, change,
discharge or termination is sought.
8. Notices. Any notice, demand or other communication which any party
hereto may be required, or may elect, to give to anyone interested hereunder
shall be effective only if it is in writing and personally delivered or sent by
certified or registered mail, return receipt requested, postage prepaid, or by a
nationally recognized overnight delivery service, with delivery confirmed,
addressed to: in the case of the Company: Alliance Farms Cooperative
Association, c/o Farmland Industries, Inc., 3315 North Oak Trafficway,
Department 47, Kansas City, Missouri 64116, Attention: Wayne N. Snyder, or at
such other address as the Company shall so notify the undersigned pursuant
hereto, and in the case of the undersigned at the address set forth on the
signature page thereof or at such other address as the undersigned shall so
notify the Company pursuant hereto. Any such notice, demand or other
communication shall be deemed to have been given as of the date when so
delivered.
9. Binding Effect. Except as otherwise provided herein, this
Subscription Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators,
successors, legal representatives and assigns. If the undersigned is more than
one person, the obligations of the undersigned shall be joint and several and
the agreements, representations, warranties and acknowledgements herein
contained shall be deemed to be made by and be binding upon each such person and
the undersigned's respective heirs, executors, administrators, successors, legal
representatives and assigns.
10. Type of Ownership. The Subscriber wishes to own the Shares as follows
(mark one):
[ ] Separate or individual property;
[ ] Joint tenants with right of survivorship (both parties must sign all
required documents);
[ ] Community property (both parties must sign all required documents);
[ ] Trust (include name of trust, name of trustee, and include a copy of
the trust instrument);
[ ] Corporation (include articles of incorporation, bylaws and certified
corporate resolution authorizing the investment and signature);
[ ] Partnership (include a copy of the partnership agreement and a written
consent of partners authorizing the investment and signature);
[ ] Other (specify): .
(Note: Subscribers should seek the advice of their attorney in deciding in
which of the above forms they should take ownership of the Shares, since
different forms of ownership may have varying gift tax, estate tax, income tax
and other consequences, depending on the state of the Subscriber's domicile and
the Subscriber's particular personal circumstances.)
The name(s) in which the Shares are to be held is:
11. Assignability. The undersigned agrees not to transfer or assign this
Subscription Agreement, or any of the undersigned's interest herein, and further
agrees that the transfer or assignment of the Shares shall be made only in
accordance with the terms and conditions of this Subscription Agreement, the
Company's Articles of Incorporation and Bylaws, and all applicable laws.
12. Applicable Law. This Subscription Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado.
[The remainder of this page intentionally has been left blank]
THE UNDERSIGNED HEREBY REPRESENTS THAT THE UNDERSIGNED HAS READ THIS
SUBSCRIPTION AGREEMENT IN ITS ENTIRETY.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this day of , 199 , at ,
.
(city) (state)
INDIVIDUALS SIGN HERE
Note: If the Subscriber wishes to own the Shares with another person as joint
tenants, or as community property, both individuals must sign this Subscription
Agreement.
Signature
Name (please print)
Social Security Number
Principal Residence Address of Subscriber
Street Address
City and State Zip Code
Additional Individual (if any)
Signature
Name (please print)
Social Security Number
Principal Residence Address of Subscriber
Street Address
City and State Zip Code
THE UNDERSIGNED HEREBY REPRESENTS THAT THE UNDERSIGNED HAS READ THIS
SUBSCRIPTION AGREEMENT IN ITS ENTIRETY.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this day of , 199 , at ,
.
(city) (state)
ORGANIZATIONS SIGN HERE
Note: If signed on behalf of a corporation, please submit the corporation's
articles of incorporation, bylaws, and certified corporate resolution
authorizing the investment and signature. If signed on behalf of a partnership,
please submit a copy of the partnership agreement and a written consent of
partners authorizing the investment and signature. If signed on behalf of a
trust, please submit the name of the trust, name of the trustee, and a copy of
the trust instrument.
Printed Name of Organization
By:
Signature
Printed Name and Title
By:
(Additional signature if required by
governing instrument)
Printed Name and Title
Federal Taxpayer Identification Number
Address of Principal Place of Business:
Street Address
City and State Zip Code
Country (if other than U.S.A.)
ALLIANCE FARMS COOPERATIVE ASSOCIATION hereby [accepts][rejects] the above
Subscription on this day of , 199 , at ,
Colorado.
ALLIANCE FARMS COOPERATIVE ASSOCIATION
By:
Name:
Title:
