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FOR INFORMATION ONLY
This Registration Statement has been filed with the Securities and Exchange
Commission but has not yet become effective. The information contained herein is
subject to completion or amendment.
As filed with the Securities and Exchange Commission on March 31, 2000
Registration Number 000-___________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Act of 1934
SIMS AGRICULTURAL PRODUCTS CO.
(Name of small business issuer in its charter)
OHIO 34-1665183
(State or jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3795 COUNTY ROAD 29
P. O. BOX 69
MT. GILEAD, OHIO 43338
(419) 946-2015
(Address and telephone number of principal executive offices)
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
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(Title of Class)
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.
This Registration Statement contains forward-looking statements. These
statements relate to future events or Sims' future financial performance. In
some cases, you can identify forward-looking statements by terminology such as
"may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate",
"predict", "potential", or "continue", the negative of such terms, or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially.
Although Sims believes that the expectations reflected in the forward-
looking statements are reasonable, Sims cannot guarantee its future results,
levels of activity, performance or achievement. Neither Sims nor any other
person assumes responsibility for the accuracy or completeness of the forward-
looking statements. Sims is under no duty to update any of the forward-looking
statements after the date of this Registration Statement to conform such
statements to actual results or to changes in Sims' expectations.
SPECIAL NOTE REGARDING SIMS' REASONS FOR FILING
THIS REGISTRATION STATEMENT.
Sims' common stock is quoted on the OTC Bulletin Board of the National
Association of Securities Dealers, Inc. (NASD) under the symbol "SAGGE". (Prior
to March 10, 2000, the stock was quoted under the symbol "SAGG".) Effective
January 4, 1999, the NASD adopted rules requiring any issuer having its
securities quoted on the OTC Bulletin Board to become a "reporting issuer"
required to file reports under the Securities Exchange Act of 1934. Sims is not
currently required to file reports under the Securities Exchange Act of 1934.
Sims is filing this Registration Statement to voluntarily make itself subject to
such reporting requirements and bring itself into compliance with NASD
requirements for continued listing on the OTC Bulletin Board. Under the NASD's
"phase-in" schedule, Sims has until April 5, 2000 to become a "reporting
issuer". This Registration Statement will not become effective for 60 days from
the date it is filed. Prior to becoming effective, Sims will be required to
satisfy all comments of the Securities and Exchange Commission concerning this
Registration Statement. It is unknown when and whether Sims will satisfy these
comments. Therefore, OTC Bulletin Board quotations of Sims' common stock may
cease after April 5, 2000. If this occurs, Sims intends to make application to
have its common stock quoted in the "pink sheets" of the National Quotations
Bureau, LLC. Listing in the "pink sheets" as opposed to the OTC Bulletin Board
could have a negative impact on trading in Sims' common stock because the pink
sheets are not as accepted by most broker/dealers as are securities quoted on
the OTC Bulletin Board. If, as is likely, the common stock ceases to be quoted
on the OTC Bulletin Board for failure of Sims to become a "reporting issuer" by
April 5, 2000, Sims intends to reapply for listing as soon as possible following
the effectiveness of this Registration Statement. However, Sims can give no
assurance that the NASD will permit quotations of Sims' common stock to be
reinstated.
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PART I -Disclosure Alternative 2
Item 6 - Description of Business
THE COMPANY
Sims produces a complete line of single element micronutrients and a line
of custom-mixed, homogenized micronutrient packages for both domestic and
international agricultural markets. Sims also manufactures and markets
micronutrient products for the lawn care industry. Sims' products are marketed
primarily under the "Sims Ag-Product, Inc.", "BinBuster", and "BinBuster2000"
brands. Sims also produces private label products for key customers.
THE MICRONUTRIENT INDUSTRY
Micronutrients are essential to all plant growth and include the elements
boron, copper, iron, magnesium, manganese, molybdenum and zinc. Nature is the
primary source of most nutrients consumed by plants. But due to an increase in
the crop rotation rate in the United States over the last 20 years,
micronutrients have been removed from the soil so quickly, that it has become
necessary for growers to replace these micronutrients more frequently.
Micronutrients are estimated to represent less than one percent of the 53.4
million tons of fertilizer used in the United States annually, or approximately
400,000 tons. Sims believes there will be increased demand for micronutrients as
growers become more aware of the output relationships between crop rotation and
micronutrient depletion.
Plant growth requires sixteen nutrients. Three of the sixteen nutrients,
namely carbon (C), hydrogen (H) and oxygen (O), are non-mineral elements that
are readily available in the atmosphere and water. The other thirteen mineral
nutrients typically are divided into three categories: three primary nutrients,
three secondary nutrients, and seven micronutrients.
The primary nutrients include nitrogen (N), phosphorus (P) and potassium
(K). The term "fertilizer" typically refers to these three primary nutrients.
Most fertilizer products are labeled with the percentage of primary nutrients
the product contains (e.g. 18-46-0). Plants require relatively large quantities
of the primary nutrients. Most soils quickly become deficient if these primary
nutrients are not replenished on a regular basis.
The secondary nutrients include calcium (Ca) and sulfur (S). Although
secondary nutrients are just as important to plant growth as primary nutrients,
plants require less secondary than primary nutrients, and most soils either
contain sufficient levels of these nutrients or a single application will
correct a deficiency for a number of years.
The six principle micronutrients or "trace elements" include boron (B),
copper (Cu), iron (Fe), magnesium (Mg), manganese (Mn), and zinc (Zn). Plants
require only small amounts of micronutrients and, like secondary nutrients, most
soils either have adequate levels of these trace elements or a single
application will correct a deficiency for a number of years.
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Although plants require only small amounts of micronutrients, these trace
elements play vital roles in plant development. For example, boron plays a key
role in the growth of pollen tubes and germination of pollen grain, in seed and
cell wall formation, in sugar translocation and in protein formation. Zinc is
essential for certain metabolic reactions, the development of enzyme systems,
and the production of chlorophyll and carbohydrates. Micronutrient deficiencies
will limit growth even if sufficient quantities of all other nutrients are
available.
COMPANY HISTORY
Sims was incorporated in Ohio in December 1990. Sims' address is 3795
County Road 29, P. O. Box 69, Mt. Gilead, Ohio 43338. Its telephone number is
(419) 946-2015.
Sims commenced operations in January 1999 following its purchase of all of
the assets of Gro-Care Corporation (Gro-Care), a manufacturer of nitrogen
phosphate potash (NPK) fertilizer and granular nitrogen sulfate (GNS). In
September 1991, Sims converted to manufacturing a complete line of
micronutrients under the "Sims Ag-Product" label. Sims continued its production
of GNS until the spring of 1992.
In 1997 Sims opened the Global Micronutrient Institute (GMI) in Casey,
Illinois in a joint venture with Arise Research & Discovery, Inc., an
agricultural research company. GMI is a research and training center designed to
educate people in the agribusiness industry in the need for micronutrients and
help in marketing Sims products.
In 1997 Sims acquired the assets of the Specialty Products Division of the
Fertilizer Corporation of America. This acquisition gave Sims access to
Caribbean, Latin America and Asian markets with the addition of foreign sales
representatives, an existing customer base, and employees familiar with export
procedures.
PRODUCTS
Sims produces a complete line of single element micronutrients and a line
of over 20 custom-mixed, homogenized micronutrient packages (also called
proprietary products) sold under the names "Sims Ag Products, Inc." "BinBuster",
"BinBuster 2000" and private labels. Sims pays close attention to the granular
size and density of its micronutrient products to ensure an even distribution of
nutrients. The following table describes Sims' complete line of single element
micronutrients.
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Sims Agricultural Products Company
Single Element Product Line
As of February 29, 2000
Product Uses
28% Manganese Oxysulfate beans, corn, soybeans, peanuts, potatoes,
alfalfa, cotton, apples, sweet corn, rice,
wheat, sudangrass, tobacco, tomatoes,
spearmint, sorghum and oats.
40% Manganese Oxysulfate beans, corn, peanuts, potatoes, alfalfa,
sweet corn, rice, wheat, sudangrass, tobacco,
tomatoes and oats.
10% Boron Used in acid soils for alfalfa, beans, citrus
fruits, corn, cotton, peanuts, potatoes,
soybeans, tomatoes and wheat.
15% Copper Oxysulfate citrus fruits, corn, wheat, oats, barley,
flax (linen fiber), sudangrass, and various
vegetable crops.
50% Iron Oxysulfate sugar beets, barley, citrus fruits, corn,
beans, sorghum, lawn turf, sudangrass, and
various vegetable crops.
36% Magnesium Oxysulfate of corn, citrus fruits, grasses, vegetables
and tobacco.
36%, 31% and 20% Zinc All crops.
Oxysulfate
Sims' products have distinct advantages over the competitive products including:
. Improved quality as measured by product sizing (granulometry) and dust
control. Sims is making further reduction in its screen range to 6 X 10 mesh
which will result in improved uniformity, improved compatibility with other
fertilizer raw materials, additional reductions of fines/dust and less
variation in nutrient analysis.
. Higher concentration of sulfuric acid into the product. This will improve
product uniformity and homogeneity.
. Clean, non-regulated industrial by-products and co-products used in the
manufacture of its products.
. Five years of agronomic research in numerous states and on numerous crops that
has demonstrated the value and performance of its products and concepts in the
use of micronutrients.
SALES AND MARKETING
Sims believes that it maintains a competitive niche by employing
technically competent sales people and supporting their efforts with ongoing
scientific research data relating to the use and benefits of micronutrients.
Sims' primary customer base is located within 1,000 miles of Mount Gilead and
includes national and regional fertilizer blenders, large agricultural co-ops
and large independent distributors of proprietary fertilizer products or
services.
Customers have traditionally been price sensitive. Recently, however, there
has been a shift toward concerns for quality, service, and demonstrated or
perceived agronomic value. Sims offers its distributors and their dealers a
broad range of customer support services including dealer training meetings,
formulation consultation, business consultation and agronomy
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consultation. Management expects to see price stability throughout the industry
in the foreseeable future.
Dallas Paul, President of Sims, who joined Sims in 1991, heads the sales
and marketing function. The sales force, consisting of four individuals,
currently deals with more than 40 distributors or intermediaries that have
dealer network coverage in the continental U.S. and all provinces of Canada. The
most significant distribution relationship is with Stoller Canada, the exclusive
distributor of BinBuster Granular Micronutrients in Canada. Sims also has
international distributorships or sales representatives in Mexico, Chile,
Argentina, SE Asia, New Zealand, Australia, India, Europe and the Middle East.
Sims' marketing objectives include the following:
. Aggressively position BinBuster Granular Micronutrients as offering
superior value and superior quality relative to the products' exceptional
nutrient and physical qualities and research demonstrated agronomic
benefits.
. Focus Sims' marketing and sales efforts in Sims' primary market defined as
the states of Kentucky, Illinois, Indiana, Michigan, Missouri, New York,
Ohio, Pennsylvania, Wisconsin and Canada.
. Focus on select customers in secondary markets including the SE, Delta, SW,
Plains, NW and the International Market.
. Increase sales of proprietary products as Sims has a greater gross profit
margin on these.
. Continue to educate select customers about the benefits of micronutrients
and the advantages of Sims' products over competitors.
Sims believes that it faces strong competition in its primary market. Sims
plans to focus on the implementation of marketing strategies designed to
maximize its performance in Sims' primary market, given its current position and
available marketing resources. Sims' primary strategies are to grow by competing
more aggressively based on quality and service while maintaining competitive
pricing and to enhance its product line through improved positioning of its
products in the market. Specifically, Sims has determined that addressing its
competition and enhancing the market's perception of its products are the most
important elements of its marketing program for the coming year.
Sims plans to pursue this strategy by marketing the BinBuster brand
Granular Micronutrients as the superior granular micronutrients products offered
in the industry based on guaranteed agronomic results proven by years of
scientific research, superior physical characteristics including dust-free
uniformly sized granules and heavy metal content of products below industry and
customer standards. Sims plans to position the BinBuster brand as Granular
Micronutrients that provide guaranteed agronomic results in dust-free, uniformly
sized granules that meet industry and customer standards for nutrient
availability, nutrient analysis, and non-nutritive metal content at a superior
value. Sims' analysis indicates that customers are concerned about quality, but
are not willing to pay more than a 2% to 3% premium above competitor prices for
high quality, agronomically proven products. Sims' prices will be set on par
with or slightly higher than the average for the target market, reflecting
customer perception of value. This reflects consistency in Sims' prices for the
coming period.
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COMPETITION
Sims' analysis of the marketing situation indicates that it is in a
competitive market that had been growing at a rate of 2% to 4% annually before
the last two years. Sims defined its core market as granular fertilizer blenders
of primary, secondary, and micronutrients in the fertilizer industry. This plan
targets companies in this industry throughout the U.S., Canada, the Caribbean,
Central America, Mexico, Argentina, SE Asia, New Zealand, and Australia. The key
decision-maker Sims must reach in order to make the sale at these companies may
be the national, regional, or local purchasing manager, product manager, retail
outlet manager, or owner.
Sims believes that its primary competitors are Frit Industries, Agrium, and
American Mineral. Sims believes that its product offerings are generally
superior in agronomic value, quality, and competitively priced. Customers
typically compare Sims offering with those of its direct competitors on the
basis of nutrient content, granulometry, dust, packaging, and price. Sims
believes that customers currently view Sims' offerings as superior on physical
characteristics, nutrient content and packaging.
Sims is smaller than its closest competitors, as it is not involved in
other business. In terms of production and sales of granular micronutrients,
Sims is smaller than Frit Industries, but larger than Agrium and American
Mineral. Size differences are not a significant advantage in its industry once a
minimum level of production is achieved. But, because Sims is not diversified in
other businesses, Sims needs to be a low cost producer of quality products
supported by savvy marketing, new product development, and agronomic research to
maintain and grow its competitive advantage in the marketplace.
Sims' marketing plan is designed to help it compete effectively against Frit
Industries, Agrium, and American Mineral.
Other smaller competitors of Sims in the oxysulfate or oxide business include:
. Tri Chem (Stephen G. Williams) located in Atlanta, GA and partially owned by
Goldkist (currently being purchased by Southern States Co-op). Primary
products are zinc and manganese oxysulfates and granular ulexite. Once a
producer of granular zinc from EPA exempted flue dust and currently examining
its future in this business after its long time source of raw material moved
its operations.
. Stroller Enterprises located in Houston, TX whose products are toll
manufactured in AK. Products are a full line of oxysulfates and a line of
granulated micronutrients based on ammonium sulfate. Stroller is a
significant distributor of liquid micronutrients and nutrient solutions,
domestically and internationally, with numerous companies in many countries.
. Cameron Chemical located in Suffolk, VA. New producer of wide range of
oxysulfates and oxides, primarily for sale and distribution in the SE. Once a
raw material supplier and toll manufacturer for Sims Agricultural, now a
competitor in some markets. Marketing, sales and
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distribution handled by AgriBusiness Technologies of Albany, GA, once a
distributor for Sims Agricultural.
These competitors produce only one or two products, and do not currently
produce formulas containing two or more secondary and micronutrients.
Historically, these companies have focused their marketing and sales efforts on
the animal feed, industrial, and/or consumer markets. Several of these companies
have had a significant impact on the agricultural market by positioning their
products as sulfates which are "100 percent water soluble" and therefore can be
more available to the plant, and also "environmentally clean" when compared to
"oxysulfates" and "oxides" in general. Two companies, Cozinco and American
Microtrace are leaders in this regard, though one combination manufacturer,
Agrium, has also used similar positioning of their products. The marketing
effort has been successful at converting significant levels of business to
sulfates and represents a marketing challenge to Sims in positioning its
products. Because of the threat of sulfates to Sims oxysulfates, Sims needs to
develop and implement a marketing program to educate and inform customers about
the relative advantages of using its products.
Additional competition is present in the form of producers of granular
NPK's containing micronutrients, including Agrium, Florida Favorite, Royster
Clark, and Northern Star. These producers add individual micronutrients in the
form of oxides in their NPK granulation processes resulting in value-added or
premium granular complete fertilizers with secondary and micronutrients. These
firms are concentrated primarily in the southeast United States.
CONCENTRATION OF SALES
For the fiscal years ended June 30, 1999 and June 30, 1998, Agri-Business
represented 3% and 26% of Sims' total sales respectively. For the same period,
Stoller of Canada represented 12% and 10% of Sims' total sales respectively. For
the same period, Helena Chemical represented 13% and 7% of Sims' total sales
respectively. For the six months ended December 31, 1999 and December 31, 1998,
Stoller of Canada represented 2% and 14% of Sims' total sales, respectively. For
the same period, Helena Chemical represented 8% and 13% of Sims' total sales
respectively. The loss of Stoller of Canada as a customer could have an adverse
impact on the profitability of Sims. Sims' five major customers represent
approximately 46% and 31% of Sims' total sales, respectively, for the fiscal
years ended June 30, 1999 and 1998. For the six months ended December 31, 1999
and December 31, 1998, Sims' five major customers represented 36% and 50% of
Sims' total sales, respectively. If Sims lost the Stoller of Canada' business,
the current estimated reduction in net income before taxes would be
approximately $160,000.
LACK OF DIVERSIFICATION
Sims' business is not diversified, relying predominantly upon the sale of
its micronutrients for its revenue. Revenue generation will be limited by the
success of Sims in marketing these products. Since Sims' micronutrients are sold
primarily to fertilizer and agricultural retail companies, a significant portion
of Sims' revenues are dependent upon the agricultural industry as a whole. Due
to this, Sims' first six months of every fiscal year (July
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through December) has a net operating loss. Any health concerns with respect to
micronutrients could have an adverse impact on micronutrient sales and Sims'
profitability.
GENERAL ECONOMIC CLIMATE
Sims' operations are dependent upon economic factors affecting the
agricultural industry generally. These factors include, among others, labor
disputes or restrictions imposed by governmental authorities, changes in
federal, state or local tax laws applicable to Sims, availability of working
capital, consumer spending habits and fluctuations in the availability and
pricing of crops. Sims may not have adequate capital to survive prolonged work
stoppages, strikes, lack of market acceptance or economic maladies in general.
Raw material shortages and increases in raw material prices, taxes, energy and
labor costs would adversely affect Sims.
DEPENDENCE ON KEY PERSONNEL
The success of Sims' business depends in large part on its ability to
retain the services of Dallas H. Paul, Sims' President. Mr. Paul currently does
not have an employment agreement or noncompetition agreement with Sims. The loss
of his services or the inability of Mr. Paul could have a material adverse
effect on Sims. In the event of the loss of Mr. Paul's services, it could prove
difficult to replace him. Sims carries a "key man" life insurance policy on Mr.
Paul in the amount of $1,000,000 and is the beneficiary such insurance policy.
Sims also carries and pays for a "key man" life insurance policy on Michael
Barry, the Director of Purchasing, in the amount of $100,000 and is entitled to
all of the benefits of such policy.
OPERATIONS AND MANAGEMENT/EMPLOYEES
As of December 31, 1999, Sims employed 29 people, 10 of whom are seasonal
employees. None of Sims' employees are members of labor unions. Sims believes
that its relationships with its employees are satisfactory.
ABILITY TO MANAGE GROWTH
Sims' future profitability will be subject to a number of risks,
particularly those associated with managing its anticipated growth. Sims'
ability to manage its anticipated growth will depend upon a number of factors,
including hiring, training and retention of skilled management and other
personnel; availability of adequate financing and other factors, many of which
are beyond Sims' control. There can be no assurance that Sims will achieve its
anticipated growth.
TRADEMARKS
The green leaf design used in Sims' logo is trademarked. Sims has also
obtained registered trademark status for "BinBuster Micros".
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GOVERNMENTAL REGULATION
The manufacture and sale of Sims' products are subject to regulation by a
variety of regulatory authorities, including, but not limited to, federal,
state, county and city agencies administering laws and regulations relating to
health, labor, taxation and the agricultural industry. Sims believes that it is
in material compliance with applicable government regulations. Sims incurs
minimal additional costs to comply with these regulations.
COMPLIANCE WITH BANK COVENANTS
Sims currently has outstanding mortgages payable and notes payable to
National City Bank and has agreed to maintain certain financial ratios and
comply with certain other covenants and requirements imposed by NCB. There can
be no assurance that Sims will be able to comply with the covenants and other
requirements imposed on Sims by NCB. The failure of Sims to comply with such
requirements from NCB, or any other future lender, may result in such lending
institution requiring the immediate repayment of Sims' debt obligations which
could adversely impact Sims' profitability.
PLEDGE OF ASSETS
Sims has granted a security interest in all of its assets as collateral for
Sims' existing line of credit. In the event of a default in connection with such
line of credit, the secured party could foreclose on its security interest and
force a sale of all of Sims' assets.
DESCRIPTION OF SUBORDINATED DEBT WARRANTS
Sims may issue up to 323,000 Common Shares upon the exercise of
subordinated debt warrants. The warrants were originally issued pursuant to the
issuing subordinated debt to various Sims' management individuals during June
1999 and will expire on June 30, 2006. Sims may issue up to 250,000 Common
Shares upon the exercise of other warrants originally issued to several
management members and directors for guaranteeing a line-of-credit with a
financial institution. These warrants will expire in July 2006. Sims may issue
up to 250,000 Common Shares upon the exercise of additional subordinated debt
warrants originally issued pursuant to issuing subordinated debt to various
individuals during November and December 1999 and which will expire on December
31, 2006. All of the warrants provide for an exercise price of $.01 per share.
The warrants were originally issued to subordinated debt holders and line-of-
credit guarantors as compensation.
LIMITED PUBLIC MARKET
There is currently only a limited public market for Sims' common shares,
which are currently traded on the NASD OTC Bulletin Board. On February 4, 2000,
the closing price for the common shares was $3.50 per share. There can be no
assurance that such public market will continue in the future. As of January 31,
2000, Sims had five (5) listed market makers. However, trading of Sims' common
shares is sporadic and trading volume is very small. During the four weeks ended
on January 31, 1999, the average weekly trading volume was 20,575
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common shares. To continue to qualify for quotation on the NASD OTC Bulletin
Board, Sims must maintain at least two market makers. There can be no assurance
that Sims will be able to continue to meet such requirement. If the common
shares of Sims are delisted, resales of common shares may, subject to certain
exemptions and exclusions, become subject to the SEC's penny stock regulations,
which impose certain special requirements on broker-dealers selling such low-
priced securities and prevent broker-dealers from selling such low-priced
securities to persons for whom such securities are deemed unsuitable.
For all of the reasons set forth above, a holder of the Shares may not be
able to liquidate his or her investment readily, if at all.
SHARES ELIGIBLE FOR FUTURE SALES
Of the 2,483,371 common shares of Sims outstanding at December 31, 1999,
702,560 common shares were freely tradable 1,780,811 common shares, including
1,127,557 common shares held by officers and directors, were "restricted" and/or
"control" shares. These shares could be sold under federal securities laws only
pursuant to a registration statement under the Securities Act of 1933, an
exemption from such registration or in a transaction satisfying all of the
requirements of Rule 144 under the Securities Act . Rule 144 provides, in
essence, that, with respect to shares acquired more than one year but less than
two years ago from an issuer or an affiliate of an issuer in a private placement
("restricted shares") and shares held by affiliates of an issuer ("control
shares"), a holder may only sell that number of shares in any three (3) month
period which is equal to the greater of (a) one percent (1%) of the issuer's
outstanding shares or (b) the average weekly volume of sales during the four
calendar weeks preceding the sale. The sale of a substantial number of common
shares of Sims, or the perception that such sales could occur, could adversely
affect prevailing market prices for the common shares.
NOTES PAYABLE
In January 1996, Sims borrowed $645,286 on a mortgage note payable to NCB
collateralized by the real estate located at 3795 County Road 29 in Mt. Gilead,
Ohio and by substantially all the assets of Sims. The mortgage note is payable
in monthly installments of $5,555.50, plus variable interest at a rate of the
bank's base rate plus 0.5%. Final payment will be due on January 28, 2001. Also
in January 1996, Sims borrowed $610,000 on a mortgage note payable from NCB
payable in monthly installments of $5,239.36 plus interest at a rate of prime
plus 0.5% commencing on February 28, 1996. Final payment will be due on February
28, 2004. In March 1997, Sims borrowed $500,000 on a mortgage note payable from
NCB payable in monthly installments of $4,166.67 plus interest at a rate of
prime plus 0.5% commencing on January 28, 1998. Final payment will be due on
January 28, 2008. The Wall Street Journal Prime rate as of February 29, 2000 was
8.75%. In November 1997, Sims borrowed $300,000 on a mortgage note payable from
NCB payable in monthly installments of $3,125.00 plus interest at a rate of
5.75% commencing on December 28, 1997. Final payment will be due on December 28,
2005. All tangible property must be fully insured. The financial covenants and
ratios imposed by NCB with respect to such notes are as follows. Sims must
maintain: (i) a minimum tangible net worth ratio of not less than 1.5 to 1.0 at
June 30 each year, (ii) an adjusted debt service ratio in excess of 1.25 to
1.00. The term `Tangible Net Worth" means Sims' total
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assets excluding all intangible assets (i.e., goodwill, trademarks, patents,
copyrights, organizational expenses and similar intangible items, but including
leaseholds and leasehold improvements) less total Debt. The term "Debt" means
all of Sims' liabilities. Except as provided above, all computations made to
determine compliance with the requirements contained in this paragraph shall be
made in accordance with accounting principles acceptable to NCB, applied on a
consistent basis, and certified by Sims as being true and correct.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION PLAN OF OPERATION
SIX MONTHS ENDED DECEMBER 31, 1999 COMPARED TO
SIX MONTHS ENDED DECEMBER 31, 1998
Sales: Net sales for the six months ended December 31, 1999 were
$1,527,004, a decrease of $783,917 or 34% as compared to net sales of $2,310,921
for the six months ended December 31, 1998. The decrease is due to slow
international orders during the period and a continued depression in the
agricultural market.
Cost of sales: Cost of sales for the six months ended December 31, 1999
were $1,418,367 or 93% of net sales as compared with $2,140,701 or 93% of sales
for the six months ended December 31, 1998. Cost of sales is always high for the
first six months of operations, as this period is Sims' slowest period for
sales.
Gross Profit: Gross profit for the six months ended December 31, 1999 was
$108,637, a decrease of $61,583 or 36% as compared to gross profit of $170,220
for the six months ended December 31, 1998. As a percentage of net sales, gross
profit was 7% for the six months ended December 31, 1999 as compared to 7% for
the six months ended December 31, 1998. The decrease in gross profit is related
to the decrease in sales.
Operating expenses: Operating expenses were $545,261 for the six months
ended December 31, 1999 representing a decrease of $285,818 as compared to
$831,079 for the six months ended December 31, 1998. As a percent of net sales,
operating expenses were 36% for the six months ended December 31, 1999 as
compared to 36% for the six months ended December 31, 1998. The decrease is the
result of cutbacks in staffing and related expenses and reducing travel
expenses.
Net loss from operations: Net loss from operations was $(663,195) or $(.27)
per share for the six months ended December 31, 1999 as compared to $(660,859)
or $(.36) per share for the six months ended December 31, 1998. The decrease in
the loss is primarily attributable to the decrease in operating expenses.
Carry Forward Loss: We have net operating loss carry forwards of
approximately $3,237,007 for tax purposes to affect future taxable income. The
net operating loss carry forwards expire between 2007 and 2014.
12
<PAGE>
Liquidity and Capital Resources: We have a line of credit with National
City Bank of Columbus (NCB) who advances us funds secured by inventory and
accounts receivable.
Sources of Additional Working Capital: Sims has outstanding warrants,
which, if all are exercised, would provide an additional $956,337 in proceeds to
Sims. The primary factors that would encourage warrant holders to exercise their
warrants is if the common stock of Sims becomes registered with the SEC and
maintains it listing on the NASDAQ and whether the price at which the common
stock trades exceeds the exercise price of the warrants.
TWELVE MONTHS ENDED JUNE 30, 1999 COMPARED TO
SIX MONTHS ENDED JUNE 30, 1998
Sales: Net sales for the twelve months ended June 30, 1999 were $6,566,986,
a decrease of $4,562,056 or 41% as compared to net sales of $11,129,042 for the
twelve months ended June 30, 1998. The decrease is due to losing a major
distributor in the southeast, terminating import sales during the period and a
depression in the domestic agricultural market.
Cost of sales: Cost of sales for the twelve months ended June 30, 1999 were
$5,642,632 or 86% of net sales as compared with $10,200,556 or 92% of sales for
the twelve months ended June 30, 1998. The increase in the percentage is due to
the termination of low margin import sales.
Gross Profit: Gross profit for the twelve months ended June 30, 1999 was
$924,354, a decrease of $4,132 or .4% as compared to gross profit of $928,486
for the twelve months ended June 30, 1998. As a percentage of net sales, gross
profit was 14% for the twelve months ended June 30, 1999 as compared to 8% for
the twelve months ended June 30, 1998. The increased percentage in gross profit
is related to the termination of low margin import sales.
Operating expenses: Operating expenses were $2,114,200 for the twelve
months ended June 30, 1999 representing an increase of $157,698 as compared to
$1,956,502 for the twelve months ended June 30, 1998. As a percent of net sales,
operating expenses were 32% for the twelve months ended June 30, 1999 as
compared to 18% for the twelve months ended June 30, 1999. The increase is the
result of expensing goodwill, in the amount or $474,868, related to the purchase
of the assets of an import/export business.
Net loss from operations: Net loss from operations was $(1,579,568) or
$(.64) per share for the twelve months ended June 30, 1999 as compared to
$(1,410,574) or $(.62) per share for the twelve months ended June 30, 1998. The
increase in the loss is primarily attributable to the goodwill expensed during
1999.
Carry Forward Loss: We have net operating loss carry forwards of
approximately $3,237,007 for tax purposes to affect future taxable income. The
net operating loss carry forwards expire between 2007 and 2014.
Liquidity and Capital Resources: We have a line of credit with National
City Bank of Columbus (NCB) who advances us funds secured by inventory and
accounts receivable.
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<PAGE>
Sources of Additional Working Capital: Sims has outstanding warrants, which, if
all are exercised, would provide an additional $956,337 in proceeds to Sims.
The primary factors that would encourage warrant holders to exercise their
warrants is if the common stock of Sims becomes registered with the SEC and
maintains it listing on the NASDAQ and whether the price at which the common
stock trades exceeds the exercise price of the warrants.
Item 7 - Description of Property
Sims owns an approximately 30-acre property in Mt. Gilead, Ohio. As of
December 31, 1999 mortgage indebtedness outstanding on the Mt. Gilead property
totaled $1,294,558 (see discussion under the caption "Notes Payable"). Sims'
facilities on the Mt. Gilead property consist of an approximately 26,540 square
foot steel frame manufacturing facility with an annual capacity of approximately
30,000 tons (current production is approximately 15,000 tons annually); an
approximately 19,200 square foot steel-frame warehouse; and an approximately
11,124 square foot laboratory, maintenance and executive office facility.
Sims owns substantially all of the furniture and equipment at its Mt.
Gilead facilities. Sims believes that its Mt. Gilead facilities are adequate for
its current and anticipated needs and are adequately covered by insurance.
Item 8 - Directors, Executive Officers and Significant Employees
Following are the name, position and age of each Sims director and
executive officer as of March 15, 2000.
NAME AGE POSITION
Dallas H. Paul 54 President/Director
Michael L. Barry 47 Director of Material
Purchasing
Frederic T. Heasley 61 Director of Product
Development
Thomas H. Cunningham 44 Secretary/Treasurer and
Controller
David Christopherson 60 Director
David Rupp 51 Director
Tadd Seitz 58 Director
Ross Strayer 59 Director
Dallas H. Paul
Mr. Paul has served as Sims' President since 1992. Prior to joining Sims in
1991, Mr. Paul held management positions with Chevron Chemical Company, The
Andersons in Maumee, Ohio and Webstrand Corporation in Toledo, Ohio. Mr. Paul
has served as a director of Sims since 1992. His current term expires in 2001.
14
<PAGE>
Michael L. Barry
Mr. Barry joined Sims in January 1998 as Director of Material Purchasing.
Prior to joining Sims Mr. Barry served as Vice President, Quality and Technology
for American Micro Trace Corporation from 1988 to 1998.
Frederic T. Heasley
For more than the past five years Mr. Heasley has served Sims in various
sales positions. He became Director of Product Development in 1997.
Thomas H. Cunningham
Mr. Cunningham has served as Sims' controller since 1998. Prior to joining
Sims Mr. Cunningham was employed by Robert J. LeHew & Associates, Sims' outside
accounting firm at the time, since 1992.
David Christopherson
For more than the past five years Mr. Christopherson has served as
President, and is the majority owner of Fertilizer Corporation of America (FCA).
Mr. Christopherson is also Chairman and Managing Director of Eastern Caribbean
Fertilizer Company (BARBADOS Limited (ECFCO)), Chairman of Atlantic Caribbean
Agriculture en Industrial Chemicals (ATCAR) Suriname, and represents Norsk Hydro
fertilizer interests in the Caribbean. Mr. Christopherson has served as a
director of Sims since 1998. His current term expires in 2002.
David Rupp
For the past five years Mr. Rupp has served as President of Penrod, George
& Co., Certified Public Accountants. Mr. Rupp has served as a director of Sims
since 1995. His current term expires in 2001.
Tadd Seitz
Mr. Seitz retired from The Scotts Company, a manufacturer of lawn care and
gardening products, in 1996, after almost 25 years of service. During his
tenure at Scotts, Mr. Seitz served as its President, Chief Executive Officer,
and Chairman of the Board. Mr. Seitz was inducted into the Central Ohio
Business Hall of Fame in 1995. Mr. Seitz has served as a director of Sims since
1997. His current term expires in 2002.
Ross Strayer
For more than the past five years Mr. Strayer has served as President for
Perfection Finishers, Specialty Glass, and Master Vac, companies wholly owned by
Mr. Strayer. Mr. Strayer has served as a director of Sims since 1991. His
current term expires in 2001.
15
<PAGE>
Item 9 - Remuneration of Directors and Officers Salary Compensation Table
CAPACITIES IN WHICH AGGREGATE
NAME OF INDIVIDUAL RENUMERATION WAS RECEIVED RENUMERATION
Dallas H. Paul President and Director (1) $100,000
David Christopherson Director (2) $ 5,000
David Rupp Director (2) $ 5,000
Tadd Seitz Director (2) $ 0
Ross Strayer Director (2) $ 0
Thomas H. Cunningham Secretary/Treasurer (3) $ 50,000
(1) Mr. Paul was also granted 20,000 options under Sims' 1995 employee Stock
Option Plan during 1999. The exercise price of the options is $2.55, the
average market price for the 10 trading days prior to grant.
(2) In addition to reimbursement of reasonable expenses incurred in attending
meetings of the Board of Directors, members of the Board of Directors
receive annually, at their election, either $5,000 and options for 5,000
shares or options for 12,500 shares. During 1999 Messrs. Seitz and Strayer
each elected to receive 12,500 options; and Messrs. Christopherson and Rupp
each elected to receive options for 5,000 shares and $5,000.
(3) During 1999 Mr. Cunningham was also granted 10,000 options under Sims' 1995
Stock Option plan. The exercise price is of the options is $2.55, the
average market price for the 10 trading days prior to grant.
1995 Stock Option Plan: The 1995 Stock Option Plan was adopted by Sims'
Board of Directors and approved by its shareholders in December 1995. The plan
allows the granting of stock options which may or may not qualify as incentive
stock options under the Internal Revenue Code of 1986. Options may be granted to
any person serving Sims, or any subsidiary, as an employee or consultant,
including officers and directors who are also employees. The plan is
administered by the Stock Option Committee of the Board of Directors which
consists of at least three members of the Board of Directors, none of whom are
eligible to receive options under the plan while serving on the Committee.
Grants of options under the plan are made in the discretion of the Stock Option
Committee. 600,000 shares may be issued upon the exercise of options under the
plan. As of December 31, 1999, Sims has issued options to acquire 180,000 shares
under the plan.
1996 Directors Stock Option Plan: The 1996 Directors Stock Option Plan was
adopted by Sims' Board of Directors and approved by its shareholders in December
1996. The plan allows the granting of non-qualified stock options to non-
employee directors. The plan is administered by Sims' Board of Directors or, if
appointed by the Board, of a committee of not less than three directors. If a
committee is appointed, members of the committee while serving are not eligible
to receive grants under the plan. 600,000 shares may be issued upon the
exercise of options under the plan. As of December 31, 1999, Sims has issued
options to acquire 165,250 common shares under the plan.
16
<PAGE>
Item 10 - Security Ownership of Management and Certain Security Holders
The following table sets forth beneficial ownership of Sims' capital stock
as of March 20, 2000 by (i) the three highest paid officers and directors of
Sims; (ii) all officers and directors as a group; and (iii) each shareholder
known to Sims who owns beneficially more than ten percent (10%) of any class of
Sims' outstanding capital stock. The address for all persons listed is 3795
County Road 29, Mt. Gilead, Ohio 43338.
Amount Percent of
Title of class Name of owner owned class
Common Dallas H. Paul 244,375 8.50%
Common David Christopherson 225,774 7.85%
Common David Rupp 26,292 *
Common Tadd Seitz 114,650 3.99%
Common Ross Strayer 906,625 31.52%
Common G. Cameron Bowen 639,340 22.23%
Common All Officers and Directors 1,520,083 52.85%
As a group (5 persons)
Preferred Ross Strayer 125 100.0%
* Less than 1%
The following table sets forth certain information regarding beneficial
ownership of options, warrants or rights to purchase shares of Sims capital
stock as of January 31, 2000 by (i) the three highest paid officers and
directors of Sims; (ii) all officers and directors as a group; and (iii) each
shareholder known to Sims who owns beneficially more than ten percent (10%) of
any class of capital stock. All options and warrants are exercisable for common
stock. The address for all persons listed is 3795 County Road 29, Mt. Gilead,
Ohio 43338.
Name and address Title and amount securities called Exercise Date of
of owner for by options, warrants or rights price exercise
Dallas H. Paul 4,500 Options $5.50 2/19/00
32,500 Options $6.07 2/20/01
25,000 Options $7.20 11/17/01
20,000 Options $2.55 10/13/03
150,000 Warrants $0.01 6/30/02
19,875 Warrants $0.01 4/30/00
David Christopherson 4,000 Options $7.20 11/17/01
5,000 Options $4.35 12/15/02
5,000 Options $1.07 12/15/03
17
<PAGE>
Name and address Title and amount securities called Exercise Date of
of owner for by options, warrants or rights price exercise
David Rupp 1,500 Options $5.50 2/19/00
6,500 Options $6.07 2/20/01
4,000 Options $7.20 11/17/01
5,000 Options $4.35 12/15/02
5,000 Options $1.07 12/15/03
20,000 Warrants $0.01 6/30/02
13,250 Warrants $0.01 4/30/00
Tadd Seitz 4,000 Options $7.20 11/17/01
12,500 Options $4.35 12/15/02
12,500 Options $1.07 12/15/03
28,572 Warrants $7.00 12/31/07
200,000 Warrants $0.01 6/30/02
13,250 Warrants $0.01 4/30/00
Ross Strayer 20,250 Options $5.50 2/19/00
105,000 Options $6.07 2/20/01
4,000 Options $7.20 11/17/01
12,500 Options $4.35 12/15/02
12,500 Options $1.07 12/15/03
13,250 Warrants $0.01 4/30/00
Thomas Cunningham 5,000 Warrants $0.01 6/30/02
10,000 Options $2.55 10/13/03
Item 11 - Interest of Management and Others in Certain Transactions
In June 1999 certain Sims' officers made loans to Sims as follows: Dallas
H. Paul, $150,000; Tadd Seitz, $200,000; David Rupp, $20,000; Thomas Cunningham,
$5,000; and Frederic Heasley, $3,000. The loans, which are unsecured, are due
in June 2002 and bear interest at 12% annually. Repayment of the loans is
subordinated to repayment of Sims' indebtedness to its principle lender. In
connection with the loans, Sims granted each of the lenders a warrant to
purchase one share of Sims' common stock, at a price of $0.01 per share, for
each dollar loaned. The warrants expire on June 30, 2006.
In October 1999 certain Sims' officers guaranteed a line of credit with
State Bank and Trust. The following guaranteed $50,000 each: Tadd Seitz, David
Rupp, and Ross Strayer. Dallas H. Paul guaranteed $75,000 and William Pereboom
(a minority shareholder) guaranteed $25,000. In connection with the guarantees,
Sims granted each of the guarantors a warrant to purchase 265 shares of Sims'
common stock, at a price of $0.01 per share, for every $1,000 guaranteed. The
warrants expire on October 31, 2006.
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<PAGE>
Cameron Chemical Company, 100% owned by Cameron Bowen, has sold raw and
finished materials and provided services to Sims. The following summarizes the
transactions for 1999 and 1998 and account balances with Cameron Chemical as of
June 30, 1999 and 1998:
1999 1998
Raw, finished material and service purchases $ 2,445 $2,759,444
Trade payables 69,016 255,321
Item 12. Description of Capital Stock
Authorized Capital Stock
Sims is authorized by its Amended Articles of Incorporation to issue 250
shares of serial preference stock, par value $.001 per share, and 4,000,000
shares of common stock, no par value. At its annual shareholders meeting held
December 11, 1996, Sims' shareholders voted to increase the authorized common
stock from 4,000,000 shares to 8,000,000 shares. Sims has not, however, filed
an amendment to its Articles of Incorporation with the Ohio Secretary of State
implementing such increase because of the increased franchise taxes which would
be due to the State of Ohio upon such filing.
Common Stock
The holders of common stock are entitled to one vote for each share on all
matters voted on by stockholders, including election of directors. Except as
otherwise required by law, or provided in any resolution adopted by the Board of
Directors with respect to any series of preferred stock, the holders of such
shares possess all voting power of Sims. Sims' Amended Articles of
Incorporation do not provide for cumulative voting in the election of directors.
Subject to any preferential rights of any outstanding shares of preferred stock
created by the Board of Directors from time to time, the holders of the common
stock are entitled to such dividends as are declared from time to time by the
Board of Directors from funds legally available for such purpose, and upon
liquidation will be entitled to receive pro rata all of Sims' assets available
for distribution to such holders. The holders of common stock have no pre-
emptive rights to purchase newly issued securities of Sims. At December 31,
1999, there were 2,483,371 common shares issued and outstanding.
Preferred Stock
Sims' Amended Articles of Incorporation authorizes the Board of Directors
to establish one or more series of preferred stock and to determine with respect
to any series of preferred stock the terms and rights, preferences and
limitations of such series, including dividend rights, the dates from which
dividends will be cumulative; the dates when dividends, if declared, will be
payable; redemption rights and price or prices, if any, for shares of any series
of preferred stock; the terms and amounts of any sinking fund provided for the
purchase or redemption of shares of any series; amounts payable on preferred
shares of any series in the event of any voluntary or involuntary dissolution,
liquidation or winding up of the business and affairs of Sims; whether
19
<PAGE>
the shares are convertible into the shares of any other series or other class of
shares and, if so, the conversion price or prices, any adjustments thereof and
all other terms and conditions upon which such conversion may be made;
restrictions on the issuance of shares of the same series or any class or
series; and the voting rights of any shares in the series. Sims believes that
the ability of its Board of Directors to issue one or more series of preferred
stock provides Sims with flexibility in structuring possible future financings
and acquisitions and in meeting other corporate needs which may arise. The
authorized shares of preferred stock, as well as shares of common stock, will be
available for issuance without future action by Sims' shareholders, unless such
action is required by applicable law or the rules of any stock exchange or
automated quotation system on which Sims' securities may be listed or traded at
the time of issuance.
So long as any of Sims' preferred stock is outstanding, no dividends in
excess of $0.05 per share per year, except payable in common stock or junior
preferred stock, may be paid or declared, or any distribution be made, on the
common stock or any shares ranking junior to the preferred stock, nor may any
shares of common stock be purchased, retired or otherwise reacquired by the
corporation unless all accrued and unpaid dividends on the preferred stock have
been declared and paid or some sufficient for payment thereof set apart.
By resolutions dated June 30, 1993, Sims' Board of Directors fixed the
terms of the Series A Preferred Shares and the Series B Preferred Shares as
follows:
"The Company is authorized to issue Two Hundred Fifty (250)
shares of preferred stock, of which 125 have been authorized as Series A
Preferred Shares and 125 as Series B Preferred Shares, having a declared
value and liquidation preference of $2,000 per Share. Upon liquidation,
dissolution or winding up of the affairs of the Company, and after payment
of creditors, the assets legally available for distribution will be divided
ratably on a share-for-share basis among the holders of the outstanding
shares of Common Stock, after payment of $2,000 per Share for each Series A
and Series B Preferred Share issued and outstanding.
The Series A Preferred Stock is a non-participating preferred
stock which carries no voting rights, except as explicitly required by Ohio
law. The Series B Preferred Shares carry no voting rights, except as may be
explicitly required by Ohio law. The Series A Preferred Stock is putable by
the holder in the event that the Company completes a public offering in the
aggregate amount of $1,250,000 on or before December 31, 1994. The put
price is $2,000 per Series A Preferred Share. The Company shall notify the
holder of the Series A Preferred Shares within thirty days of the
completion of the $1,250,000 public offering. For purposes of this right,
completion shall mean receipt by the Company of gross offering proceeds in
excess of $1,000,000, but only to the extent that the gross offering
proceeds exceeds $1,000,000. The intent of this provision is that the
Series A Preferred Shares may only be put to the Company and thereupon
redeemed with and to the extent that the gross public offering proceeds
exceed $1,000,000.
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The Series A Preferred Shares are not entitled to any dividends. The
Series B Preferred Shares are entitled to a cumulative annual dividend
equivalent to the Wall Street Journal Prime Rate, adjusted semi-annually
and payable semi-annually on November 30 and May 30 of each year,
commencing November 30, 1994. The time period for commencement of dividends
shall be January 1, 1994. The liquidation preference is increased by any
cumulated, unpaid dividends. No dividends may be paid on the Company's
Common Stock until and unless all dividends for the Series B Preferred
Shares have been paid in full. The Series B Preferred Shares shall not
participate with the Common Shares in any common dividend.
No other preferred shares shall be issued by the Company unless such
shares are subordinate in liquidation to the Series A and Series B
Preferred Shares. However, the Company has reserved the right to issue
additional preferred shares which could have dividend rights or other
rights more favorable than the terms of the Series A or B Preferred Shares.
The Company shall have the right to call the Series B Preferred Shares
for redemption at any time on thirty (30) days written notice to the
holder, at $2,000 per share plus accrued and unpaid dividends, if any.
Restrictions on Resale of Shares
--------------------------------
The Series A and Series B Preferred Shares are to be issued pursuant
to Ross Strayer pursuant to exemption from registration in Ohio and
exemption from federal registration under Regulation D, Rule 504 of the
Securities Act of 1933, as amended. The Series A and Series B Preferred
Shares will be "restricted securities" and bear significant restrictions
against transfer, sale or assignment."
The Series A Preferred Shares were converted into 1,020 of common stock per
share of preferred stock in 1998. At March 30, 2000, there were 125 Series B
Preferred Shares issued and outstanding.
WARRANTS AND OPTIONS
At June 30, 1999, 383,000 shares of common stock were reserved against the
exercise of outstanding warrants expiring June 30, 2006. As of June 30, 1999, a
total of 180,000 options for common shares were outstanding under Sims' 1995
Stock Option Plan to key employees. At June 30, 1999, a total of 165,250 options
were outstanding under Sims' 1996 directors Stock Option Plan. (See Notes G and
H to Sims' Financial Statements included herein.)
21
<PAGE>
PART II
Item 1 - Market Price of and Dividends on the Registrant's Common Equity and
Related Shareholder Matters
Sims' common shares are currently traded on the NASDAQ Over-the-counter
Bulletin Board under the symbol "SAGGE". (Prior to March 10, the common shares
were traded under the symbol "SAGG".) Sims' common shares may be delisted from
the OTC Bulletin Board after April 5, 2000 if this Registration Statement has
not been declared by the SEC prior to such date. (See Special Note regarding
Sims' Reasons for Filing this Registration Statement.) The following table sets
forth the high and low sales prices of the common shares of Sims as reported by
The NASDAQ Over-the-counter Bulletin Board. The quotations reflect inter-dealer
prices, without retail mark-up, mark-down, or commission and may not represent
actual transactions:
QUARTER ENDED HIGH LOW
Calendar 1999
December 31, 1999 3.00 0.812
September 30, 1999 3.00 1.25
June 30, 1999 4.50 1.25
March 31, 1999 6.50 1.81
Calendar 1998
December 31, 1998 7.87 2.00
September 30, 1998 6.50 1.62
June 30, 1998 9.00 3.87
March 31, 1998 11.00 5.00
As of March 20, 2000 there were approximately 300 record holders of Sims'
common shares.
Sims' Series B Preferred Shares pays annual dividends at the prime rate as
published in the Wall Street Journal, adjusted semi-annually. The Series B
Preferred Shares have the right to dividends in arrears before any dividends may
be paid on the common stock. Dividends of $26,826 were paid in fiscal 1998; and
$20,467 in fiscal 1999. For the six months ended December 31, 1999, $15,529 in
dividends has been paid. Dividends in arrears on the Series B preferred shares
amounted to $630 at December 31, 1999.
Sims has never declared or paid dividend on its common shares and does not
intend to do so in the foreseeable future. So long as any of Sims' preferred
stock is outstanding, no dividends in excess of $0.05 per share per year may be
paid except dividends payable on common stock or junior preferred stock. (See
Description of Capital Stock.)
22
<PAGE>
Item 2 - Legal Proceedings
Other than routine litigation incidental to Sims' business, Sims is not a
party to any pending legal proceeding.
Item 3 - Changes in and Disagreements with Accountants
There have been no changes or disagreements with Sims' accountants in the
last two years.
Item 4 - Recent Sales of Unregistered Securities
During September 1997 and October 1998 Sims issued a total of 147,071
common shares in connection with the acquisition of assets of an import/export
business.
During 1999 Sims issued warrants to purchase an aggregate of 699,250 common
shares to certain shareholders and officers of Sims in connection with certain
loans and guarantees provided by such shareholders and officers.
The issuance of securities described above were deemed to be exempt from
registration under the Securities Act of 1933 in reliance on Section 4(2) of the
Securities Act of 1933 and/or rules and regulations promulgated thereunder by
the Securities and Exchange Commission.
Item 5 - Indemnification of Directors and Officers
Ohio Revised Code Section 1701.13 authorizes indemnification of Sims'
directors, officers, employees and agents; allows the advancement of costs of
defending against litigation; and permits companies incorporated in Ohio to
purchase insurance on behalf of directors, officers, employees and agents
against liabilities whether or not under the circumstances such companies could
have the power to indemnify against such liabilities under the provisions of the
statute. Sims' Amended Code of Regulations provides for indemnification of its
officers, directors, employees and agents to the fullest extent permitted by
Ohio law. Sims' Amended Code of Regulations will, to the fullest extent
permitted by Ohio law, provide indemnification against liability of a director
or officer to Sims or its shareholders for damages for breach of such director's
or officer's fiduciary duties to Sims, except where a director or officer: (a)
violates criminal law, unless such person had reasonable cause to believe his
conduct was lawful or had no reasonable cause to believe his conduct was
unlawful; (b) a transaction from which such person derived an improper benefit;
or (c) authorizes an unlawful dividend. While liability for monetary damages has
been eliminated, equitable remedies such as injunctive relief or rescission
remain available.
23
<PAGE>
PART F/S
The financial statements and supplementary data required by this Item are filed
as a part of this Form 10-SB. See, Index to Financial Statements at page F-1 of
this Form 10-SB.
24
<PAGE>
PART III
Item 1. Index to Exhibits.
Exhibit Exhibit
Number Description
- ------ -----------
3.1 Amended Articles of Incorporation of Registrant
3.2 Minutes of Registrant's Annual Shareholders Meeting dated December 11,
1996
3.3 Action by the Directors of Registrant effective June 30, 1993
3.4 Amended Code of Regulations of Registrant
4.2 Specimen Common Stock Certificate of Registrant
4.3 Form of Non-Negotiable Subordinated Promissory Notes issued to various
directors, officers and shareholders of Registrant in June and
December 1999
4.4 Form of Warrant Agreement between Registrant and various officers,
directors and shareholders of Registrant in June and December 1999
4.5 Form of Redeemable Warrant Certificate issued to various directors,
officers and shareholders of Registrant in June and December 1999
10.1 Sims Agricultural Products Co. 1995 Stock Option Plan
10.2 Sims Agricultural Products Co. 1996 Directors Stock Option Plan
10.3 Replacement Promissory Note of Registrant in favor of National City
Bank, in the original principal amount of $645,286 dated January 12,
1996
10.4 Promissory Note of Registrant in favor of National City Bank,
in the original principal amount of $500,000 dated March 14, 1997
10.5 Replacement Promissory Note of Registrant in favor of National City
Bank, in the original principal amount of $610,000 dated January 12,
1996
10.6 Commercial Installment Note of Registrant in favor of National City
Bank, in the original principal amount of $300,000 dated March 21,
1997
10.7 Mutual Release Agreement by and between Fertilizer Corporation of
America, David Christopherson and Registrant dated October 18, 1999.
25
<PAGE>
Item 2. Description of Exhibits.
The exhibits filed herewith are identified in the Index to Exhibits
following the signature page to this Registration Statement.
26
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
SIMS AGRICULTURAL PRODUCTS CO.
Date: March 31, 2000
--------------
By /s/ Dallas H. Paul
---------------------------
Dallas H. Paul, President
27
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
INDEX TO FINANCIAL STATEMENTS PAGE
- -----------------------------------------------------------------------------------------------
<S> <C>
Report of Independent Accountants (dated September 20, 1999) F-2
- -----------------------------------------------------------------------------------------------
Balance Sheets as of June 30, 1999 and 1998 F-3
- -----------------------------------------------------------------------------------------------
Statements of Operations for the years ended June 30, 1999 and 1998 F-5
- -----------------------------------------------------------------------------------------------
Statements of Shareholders' Equity for the years ended June 30, 1999 and 1998 F-6
- -----------------------------------------------------------------------------------------------
Statements of Cash Flows for the years ended June 30, 1999 and 1998 F-7
- -----------------------------------------------------------------------------------------------
Notes to the Financial Statements F-9
- -----------------------------------------------------------------------------------------------
Balance Sheets (Unaudited) as of December 31, 1999 and December 31, 1998 F-17
- -----------------------------------------------------------------------------------------------
Statements of Operations (Unaudited) for the six months ended
December 31, 1999 and December 31, 1998 F-19
- -----------------------------------------------------------------------------------------------
Statements of Shareholders' Equity (Unaudited) for the ended
December 31, 1999 and December 31, 1998 F-20
- -----------------------------------------------------------------------------------------------
Statements of Cash Flows (Unaudited) for the six months ended
December 31, 1999 and December 31, 1998 F-21
- -----------------------------------------------------------------------------------------------
Notes to the Financial Statements (Unaudited) F-23
- -----------------------------------------------------------------------------------------------
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Sims Agricultural Products Company
Mt. Gilead, Ohio
We have audited the accompanying balance sheets of Sims Agricultural Products
Company as of June 30, 1999 and 1998, and the related statements of operations,
shareholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of Sims' 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 Sims as of June 30, 1999 and
1998, and the results of its operations and its cash flows for the years then
ended, in conformity with generally accepted accounting principles.
Crowe, Chizek and Company LLP
Columbus, Ohio
July 23, 1999, except for Note E as to which
the date is October 6, 1999
F-2
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
BALANCE SHEETS
June 30, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
<S> <C> <C>
CURRENT ASSETS
Cash $ 27,219 $ 2,263
Trade accounts receivable, net of allowance for
doubtful accounts of $5,698 in 1999 and $0 in 1998 572,515 1,633,618
Inventory 1,095,778 2,836,135
Prepaid expenses and other 83,047 45,502
Deferred income taxes 0 73,245
--------------- --------------
Total current assets 1,778,559 4,590,763
--------------- --------------
PROPERTY AND EQUIPMENT
Land 28,267 28,267
Buildings 2,691,757 2,639,412
Furniture and fixtures 125,107 123,179
Equipment 2,802,524 2,720,720
Trucks and automobiles 7,674 6,547
--------------- --------------
5,655,329 5,518,125
Less accumulated depreciation 1,650,519 1,248,242
--------------- --------------
4,004,810 4,269,883
--------------- --------------
OTHER ASSETS
Deferred income taxes - 222,083
Goodwill 52,470 268,390
--------------- --------------
52,470 490,473
--------------- --------------
$ 5,835,839 $ 9,351,119
=============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
Continued
F-3
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
BALANCE SHEETS
June 30, 1999 and 1998
LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998
CURRENT LIABILITIES
Short term borrowings $ 1,223,028 $ 2,780,053
Current portion of long-term debt 228,257 227,215
Accounts payable 936,925 2,231,913
Accrued salaries and related taxes 42,360 53,567
Accrued expenses and taxes 64,092 60,467
------------- -------------
Total current liabilities 2,494,662 5,353,215
------------- -------------
LONG TERM DEBT 1,206,829 1,435,022
SUBORDINATED DEBT 930,110 0
SHAREHOLDERS' EQUITY
Preferred stock - Class B 250,000 250,000
Common stock 3,084,381 2,765,513
Additional paid in capital 712,990 510,000
Accumulated deficit (2,843,133) (2,843,133)
------------- -------------
Total shareholders' equity 1,204,238 2,562,882
------------- -------------
$ 5,835,839 $ 9,351,119
============= =============
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
STATEMENTS OF OPERATIONS
For the years ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
SALES $ 6,566,986 $11,129,042
COST OF SALES 5,642,632 10,200,556
----------- -----------
GROSS MARGIN 924,354 928,486
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 1,639,332 1,956,502
IMPAIRMENT OF LONG LIVED ASSET (GOODWILL) 474,868 0
----------- -----------
LOSS FROM OPERATIONS (1,189,846) (1,028,016)
OTHER INCOME (EXPENSE)
Interest expense (399,767) (388,492)
Miscellaneous income 10,045 5,934
----------- -----------
LOSS BEFORE INCOME TAXES (1,579,568) (1,410,574)
PROVISION FOR INCOME TAXES 280,467 (448,996)
----------- -----------
NET LOSS $(1,860,035) $ (961,578)
=========== ===========
LOSS PER SHARE
Basic and fully dilutive $(0.76) $(0.42)
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
STATEMENT OF SHAREHOLDERS' EQUITY
For the years ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
Retained
Preferred Preferred Additional Earnings
Stock Stock Common Paid-in (Accumulated
Class A Class B Stock Capital Deficit)
<S> <C> <C> <C> <C> <C>
Balances as of July 1, 1997 $ 510,000 $ 250,000 $1,426,874 $ 510,000 $ 25,773
125 shares of preferred stock
converted to 127,500
common shares (510,000) 510,000
103,659 shares of common
stock issued 828,639
Net loss (961,578)
Preferred stock dividends (26,826)
---------- ---------- ---------- ---------- -----------
Balances as of June 30, 1998 0 250,000 2,765,513 510,000 (962,631)
81,212 shares common stock
issued 318,868
383,000 stock warrants
issued 202,990
Net loss (1,860,035)
Preferred stock dividends (20,467)
---------- ---------- ---------- ---------- -----------
Balances as of June 30, 1999 $ 0 $ 250,000 $3,084,381 $ 712,990 $(2,843,133)
========== ========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
STATEMENTS OF CASH FLOWS
For the years ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,860,035) $ (961,578)
Adjustments to reconcile net loss to net cash from
operating activities
Depreciation and amortization 503,150 462,491
Impairment of long lived asset (goodwill) 474,868 0
Loss (gain) on sales of assets (7,272) 3,893
Stock issued for commissions 0 24,000
Change in assets and liabilities
Accounts receivable 1,061,103 (467,059)
Inventory 1,740,357 (707,846)
Prepaid expenses (37,545) (7,069)
Accounts payable (1,294,988) 1,128,299
Accrued salaries and related taxes (11,207) 41,032
Accrued expenses and taxes 298,953 (481,395)
----------- -----------
Net cash from operating activities 867,384 (965,232)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment (360,626) (567,797)
Acquisition of other assets 0 (49,598)
Proceeds on sale of assets 189,741 4,700
----------- -----------
Net cash from investing activities (170,885) (612,695)
CASH FLOWS FROM INVESTING ACTIVITIES
Net short term borrowing (1,557,025) 1,070,053
Proceeds from long-term debt 0 565,000
Payments on long-term debt (227,151) (240,492)
Proceeds from subordinated debt 930,110 0
Proceeds from issuance of stock warrants 202,990 0
Proceeds from issuance of stock 0 150,000
Preferred stock dividends (20,467) (26,826)
----------- -----------
Net cash from financing activities (671,543) 1,517,735
----------- -----------
Net change in cash 24,956 (60,192)
Cash at beginning of year 2,263 62,455
----------- -----------
Cash at end of year $ 27,219 $ 2,263
=========== ===========
</TABLE>
Continued
F-7
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
STATEMENTS OF CASH FLOWS
For the years ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the year
Interest paid $399,895 $387,812
Income taxes paid 0 18,000
Noncash transactions
Issuance of 65,859 shares of common stock for
business purchase 0 654,639
Exchange of 127,500 shares of common stock for
125 shares of preferred stock 0 510,000
Issuance of 3,514 shares of common stock for
Commissions 0 24,000
Issuance of 81,212 shares of common stock for
Goodwill 318,868 0
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
NOTES TO THE FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - Sims manufactures micronutrients for the Agricultural
Industry and markets throughout the United States and Canada. During 1998,
Sims purchased the assets of an export/import business dealing in
micronutrients and now markets worldwide (see Note C). A significant part of
Sims' business is dependent upon a few customers. Approximately $866,000
(13%) and $3,007,000 (26%) of revenues were attributable to one customer in
1999 and 1998, respectively, and $787,000 (12%) and $1,112,000 (10%) were
attributable to another unrelated customer in 1999 and 1998, respectively.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results will differ from those estimates.
CASH FLOWS - For purposes of the statement of cash flows, Sims considers all
investments purchased with a maturity of three months or less to be cash
equivalents.
INVENTORY - Sims' inventory is valued at the lower of first in, first out
(FIFO) cost or market (see Note D).
PROPERTY AND EQUIPMENT - Sims' property and equipment are stated at cost.
Depreciation is computed on the straight-line method over their estimated
useful lives for book purposes and accelerated methods for tax purposes.
Estimates of useful lives are as follows:
Buildings 20 to 40 years
Furniture & fixtures 5 to 10 years
Equipment 7 to 15 years
Vehicles 5 years
Depreciation amounted to $443,230 in 1999 and $431,463 in 1998. Expenditures
for major renewals and betterments that extend the useful lives of property
and equipment are capitalized. Expenditures for maintenance and repairs are
charged to expense as incurred.
INCOME TAXES - Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes. Deferred taxes are recognized for differences between the
basis of assets and liabilities for financial statement and income tax
purposes. The differences relate primarily to depreciable assets (use of
different depreciation methods and lives for financial statement and income
tax purposes). The deferred tax assets and liabilities represent the future
tax consequences of those differences, which will be deductible when the
assets and liabilities are recovered or settled and the utilization of net
operating loss carryforwards.
F-9
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
NOTES TO THE FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
GOODWILL - Goodwill represents the cost of certain assets acquired September
1, 1997 over their fair value plus the additional earnout paid in 1999 (See
Note C). In 1999, Sims reviewed the goodwill for impairment. Management
concluded to expense the additional earnout of $318,868, adjust the carrying
value $156,000 for impairment and change the estimated useful life of the
remaining goodwill from 8 years to 5 years in 1999. Goodwill expense charged
to operations was $534,787 in 1999 and $31,200 in 1998.
RECLASSIFICATIONS - Certain reclassifications were made to the prior year
financial statements for comparative purposes.
NOTE B - OPERATING CONDITIONS
At June 30, 1999, Sims has a deficiency of working capital of $716,103. The
net loss for the year ended June 30, 1999 is $1,860,035. Sims has taken steps
to significantly decrease the losses by locating new sources of lower cost raw
material; eliminating low profit, capital intensive operations such as the
subcontracted manufacturing operations in Suffolk and the import operations of
the international division; reducing operating costs by consolidating job
descriptions and running the business with fewer employees; shifting
production to nights to decrease utility costs; and other cost reduction
measures. Sims has developed a new line of lawn care products that it hopes
will open new markets and provide diversification from the agricultural
markets. Sims has secured $930,000 of subordinated debt from members of the
Board of Directors and certain employees to provide operating capital for the
next fiscal year (see Note F). Sims also intends to seek additional capital
from a limited, public offering of additional shares of common stock during
fiscal 2000. Sims believes that these actions will restore profitable
operations and will make improvements to its working capital during fiscal
2000.
NOTE C - BUSINESS ACQUISITION
During September 1997, Sims acquired the assets of an import/export business
by issuing 65,859 shares of common stock. The assets acquired were as
follows:
ASSETS
Inventory $404,639
Goodwill 250,000
Net assets acquired $654,639
In addition, the former shareholder of the import/export business is entitled
to receive additional shares of Sims' common stock and warrants upon attaining
certain earnings over a three year period. The common stock and warrants will
be recorded as goodwill as issued or exercised. Earnings are measured on a
cumulative basis as of August 31, 1998, 1999 and 2000.
Continued
F-10
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
NOTES TO THE FINANCIAL STATEMENTS
NOTE C - BUSINESS ACQUISITION (continued)
The August 31, 1998 threshold was obtained and Sims recorded $318,868 of
goodwill for the 81,212 shares of common stock issued in 1999. (See Note A).
At June 30, 1999, management estimates the required cumulative earnings level
will not be attained at August 31, 1999; therefore, no liability has been
accrued. Additional shares of common stock valued at approximately $300,000
and approximately 25,000 warrants (exercise price $9.94 a share) may be issued
each year if the minimum required earnings are met.
NOTE D - INVENTORY
Inventory consists of the following:
1999 1998
Raw materials $ 257,166 $ 991,529
Finished goods 711,847 1,741,581
Packaging materials 126,765 103,025
---------- ----------
$1,095,778 $2,836,135
NOTE E - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Mortgage payable to a bank requiring monthly payments of $4,167 plus interest at the
bank's base rate plus .25%. The note matures in March 2007 and is secured by real
estate. $440,492 $490,497
Note payable to a bank requiring monthly payments of $719 including interest of prime
plus .25%. The note matures in March 2002 and is secured by equipment. 21,101 27,635
Mortgage payable to a bank requiring monthly payments of $5,556 plus interest at the
bank's base rate plus .25%. The note matures in January 2001 and is secured by real
estate. 417,511 484,177
Note payable to a credit corporation requiring payments of $1,800 for the first 3
months and $318 thereafter. Includes interest at 10.75%, matures April 2002 and is
secured by equipment. 9,277 11,935
</TABLE>
Continued
F-11
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
NOTES TO THE FINANCIAL STATEMENTS
NOTE E - LONG-TERM DEBT (continued)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Mortgage payable to a bank requiring monthly payments of $3,125 plus interest at
5.75%. The note matures November 2005 and is secured by equipment and real estate. 240,625 278,125
Mortgage payable to a bank requiring monthly payments of $5,239 plus interest at the
bank's base rate plus .75%. The note matures in February 2004 and is secured by real
estate. 304,451 367,323
Note payable to a leasing company requiring monthly payments of $101 including
interest at 13.529%, maturing September 2002 and secured by equipment. 1,629 2,545
1,435,086 1,662,237
Current maturities of long-term debt 228,257 227,215
Long-term debt, net of current maturities $1,206,829 $1,435,022
Maturities of long-term debt are as follows:
Year ending June 30, 2000 $ 228,257
2001 228,790
2002 226,086
2003 217,042
2004 207,133
Thereafter 327,778
</TABLE>
Sims has a $4,500,000 revolving line of credit, with a balance of $1,223,028
at June 30, 1999. Advances on the line are payable on demand and based on a
percentage of accounts receivable and inventory and incur interest at prime
plus .25%. The credit line is secured by accounts receivable, inventory and
property and equipment.
The five loan agreements with the bank contain restrictive covenants including
a tangible net worth requirement and a debt service coverage ratio. Sims
either was in compliance with or had received waivers on October 6, 1999 for
these covenants.
Continued
F-12
<PAGE>
NOTE F - SUBORDINATED DEBT
On August 10, 1998 two directors loaned Sims $750,100 subordinated to all Bank
debt. The unsecured loans require monthly interest at 10% and mature August
30, 2009. On June 30, 1999, several directors and employees advanced Sims
$383,000 in exchange for unsecured notes that are subordinated to all Bank
debt. These notes include detachable stock warrants. The unsecured $383,000
notes require monthly interest payments at 12% per annum and mature June 30,
2002. Warrants for 383,000 shares were granted to the lenders entitling the
holders to purchase common stock at $.01 per share. One third of these
warrants are exercisable on every June 30 of the years 2000, 2001 and 2002.
The warrants were valued at $.53 resulting in an $202,990 original issue
discount on the subordinated debt and a corresponding increase in paid in
capital. The original issue discount will be amortized into interest expense
over the three-year term of the unsecured, subordinated debt using the
straight-line method.
NOTE G - CAPITAL STOCK
There were 250 shares of preferred stock authorized at June 30, 1999 and 1998.
125 shares were issued and outstanding as of June 30, 1999 and 1998. There are
two classes (A & B) of preferred stock, each consisting of 125 shares, both of
which are non-voting. Series A was converted into 1,020 shares of common stock
per share of preferred stock during 1998. Series B pays annual dividends at
the Wall Street Journal Prime Rates, adjusted semi-annually. The Series B
shares have the right to dividends in arrears before any dividends may be paid
on common stock.
Dividends in arrears amounted to $5,420 at June 30, 1999.
Sims has 4 million shares of common stock authorized at no par value at June
30, 1999 and 1998. There were 2,483,371 shares issued and outstanding at June
30, 1999 and 2,402,159 shares issued and outstanding at June 30, 1998.
Shares of common stock were reserved at June 30, 1999 for the exercise of
383,000 outstanding warrants expiring June 30, 2006. Each warrant entitles
the holder to purchase one share of stock at $.01 per share (see Note F).
Shares of common stock were also reserved at June 30, 1998 for the exercise of
28,572 outstanding warrants expiring December 31, 2007. Each warrant entitles
the holder to purchase one share of stock at $7.00 per share. In addition
Sims has reserved 75,453 warrants which may be issued to purchase one share of
common stock each at $9.94 as part of a business acquisition upon achieving
certain profitability levels (see Note C).
Earnings per common share is calculated using the weighted average number of
common shares outstanding during the fiscal year. The weighted average was
2,459,684 shares for the year ended June 30, 1999 and 2,286,472 shares for the
year ended June 30, 1998.
Continued
F-13
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
NOTES TO THE FINANCIAL STATEMENTS
NOTE H - STOCK OPTIONS
Sims has granted options pursuant to its 1995 Stock Option Plan to key
employees. Options that have been granted and are outstanding generally
expire 10 years from the date of grant or 3 months from the employee's
termination of employment and become exercisable at the rate of 25% per year
based on the number of full years the options are held from the date of grant.
As of June 30, 1999 and 1998 a total of 180,000 and 222,000 options were
outstanding, 74,875 and 29,875 options were exercisable and 420,000 and
378,000 options were available to be granted. All options are granted at an
exercise price not less than 100% of the fair market value per share of Sims'
common stock on the grant date. No options granted under the plan were
compensatory. The following is a summary of the activity in Sims' stock
option plan:
<TABLE>
<CAPTION>
Option Plan
Price Per Share Shares
<S> <C> <C>
Outstanding, July 1, 1997 $5.50 - $6.07 117,000.
Granted during the year $7.20 117,000.
Expired during the year $5.50 - $6.07 (12,000)
Outstanding, June 30, 1998 $5.50 - $7.20 222,000.
Expired during the year $7.20 (42,000)
Outstanding, June 30, 1999 $5.50 - $7.20 180,000.
</TABLE>
The weighted average per share price of the outstanding options is $5.94 and
$6.07 as of June 30, 1999 and 1998, respectively.
<TABLE>
<CAPTION>
Option Plan
Price Per Share Shares
<S> <C> <C>
Exercisable, July 1, 1997 $5.50 4,250
Expired during the year $5.50 (625)
Options becoming exercisable $5.50 - $6.07 26,250
Exercisable, June 30, 1998 $5.50 - $6.07 29,875
Options becoming exercisable $5.50 - $7.20 45,000
Exercisable, June 30, 1999 $5.50 - $7.20 74,875
</TABLE>
Continued
F-14
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
NOTES TO THE FINANCIAL STATEMENTS
NOTE H - STOCK OPTIONS (continued)
The weighted average per share price of the exerciseable options is $6.27 and
$5.93 as of June 30, 1999 and 1998, respectively.
Sims has granted options pursuant to its 1996 Directors Stock Option Plan.
Options that have been granted and are outstanding generally expire 10 years
from the date of grant or 6 months from the director's termination and become
exercisable at the rate of 25% per year based on the number of full years the
options are held from the date of grant. As of June 30, 1999 and 1998 a total
of 165,250 and 278,500 options were outstanding, 76,063 and 75,125 options were
exercisable and 434,750 and 321,500 options were available to be granted. All
options are granted at an exercise price not less than 100% of the fair market
value per share of Sims' common stock on the grant date. No options granted
under the plan were compensatory. The following is a summary of the activity
in Sims' stock option plan:
<TABLE>
<CAPTION>
Option Plan
Price Per Share Shares
<S> <C> <C>
Outstanding, July 1, 1997 $5.50 - $6.07 258,500
Granted during the year $7.20 20,000
Outstanding, June 30, 1998 $5.50 - $7.20 278,500
Granted during the year $4.35 16,000
Expired during the year $5.50 - $7.20 (129,250)
Outstanding, June 30, 1999 $4.35 - $7.20 165,250
</TABLE>
The weighted average per share price of the outstanding options is $5.94 and
$6.07 as of June 30, 1999 and 1998, respectively.
<TABLE>
<CAPTION>
Option Plan
Price Per Share Shares
<S> <C> <C>
Exercisable, July 1, 1997 $5.50 10,500
Options becoming exercisable $5.50 - $6.07 64,625
Exercisable, June 30, 1998 $5.50 - $6.07 75,125
Expired during the year $5.50 - $6.07 (36,375)
Options becoming exercisable $5.50 - $7.20 37,313
Exercisable, June 30, 1999 $5.50 - $7.20 76,063
</TABLE>
Continued
F-15
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
NOTES TO THE FINANCIAL STATEMENTS
NOTE H - STOCK OPTIONS (continued)
The weighted average per share price of the exerciseable options is $6.01 and
$5.91 as of June 30, 1999 and 1998, respectively.
In accordance with the provisions of SFAS 123, Sims applies APB Opinion 25 and
related interpretations in accounting for its stock option plans and,
accordingly, does not recognize compensation cost. If Sims had elected to
recognize compensation cost based on the fair value of the options granted at
grant date as prescribed by SFAS 123, net income and earnings per share would
have been reduced to the pro forma amounts indicated in the table below:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Net loss - as reported $(1,704,035) $ (961,578)
Net loss - pro forma (1,721,459) (1,159,313)
Loss per share - as reported $ (0.69) $ (0.42)
Loss per share - pro forma (0.70) (0.51)
</TABLE>
NOTE I - LEASES
Sims leases trucks and railcars under lease arrangements classified as
operating leases. The leases generally are for a period of twelve months with
an automatic twelve-month renewal at the end of the lease. Total rent expense
under these leases totaled $5,618 in 1999 and $14,700 in 1998. The future
minimum lease payments under non-cancelable operating leases as of June 30,
1999 consist $1,169 due in 2000.
NOTE J - RELATED PARTY TRANSACTIONS
A Company owned by one of Sims' largest shareholders has sold raw, finished
materials and provided services to Sims. The following summarizes the
transactions for 1999 and 1998 and account balances with this related company
as of June 30, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Raw, finished material and service purchases $ 2,445 $2,759,444
Trade payables 69,016 255,321
</TABLE>
Continued
F-16
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
NOTES TO THE FINANCIAL STATEMENTS
NOTE K - INCOME TAXES
The provision for income taxes for the year ended June 30, 1999 and 1998
consists of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Current $ (14,861) $ 1,086
Deferred (548,412) (450,994)
Change in valuation allowance 843,740 -
Total expense (benefit) $ 280,467 $(448,996)
</TABLE>
A valuation was established against Sims' deferred tax assets because of the
uncertainty that they would generate future tax benefits. The effect of this
component is shown above as a separate component of the provision for income
taxes.
The components of the deferred tax assets are as follows:
<TABLE>
<S> <C> <C>
Net operating loss carryforward $1,092,001 $ 540,111
Alternative minimum tax deposits 9,496 21,379
Section 263A inventory 41,825 39,087
1,143,322 600,577
</TABLE>
The components of the deferred tax liabilities are as follows:
<TABLE>
<S> <C> <C>
Depreciation 299,582 305,249
Net $ 843,740 $ 295,328
Valuation allowance (843,740) -
Net deferred tax asset $ - $ 295,328
</TABLE>
At June 30, 1999, Sims has, for income tax reporting purposes, net operating
loss carryovers available to reduce future taxable income as follows:
Net Operating
Expiration Date Loss Carryover
June 30, 2007 $ 174,809
June 30, 2008 67,869
June 30, 2011 7,462
June 30, 2012 34,143
June 30, 2013 1,384,583
June 30, 2014 1,568,141
$3,237,007
F-17
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
BALANCE SHEETS (unaudited)
December 31, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
<S> <C> <C>
CURRENT ASSETS
Cash $ 2,913 $ 25,803
Trade accounts receivable, net of allowance for
doubtful accounts of $6,941 in 1999 and $1,831 in
1998 713,641 1,303,016
Inventory 1,151,225 2,102,116
Prepaid expenses and other 31,132 95,026
Deferred income taxes - 73,245
----------- -----------
Total current assets 1,898,911 3,599,206
----------- -----------
PROPERTY AND EQUIPMENT
Land 28,267 28,267
Buildings 2,692,277 2,659,582
Furniture and fixtures 155,480 159,193
Equipment 2,863,003 2,786,169
Trucks and automobiles 18,256 7,675
---------- -----------
5,757,283 5,640,886
Less accumulated depreciation 1,876,190 1,434,952
----------- -----------
3,881,093 4,205,934
----------- -----------
OTHER ASSETS
Deferred income taxes - 432,327
Goodwill 34,980 561,889
----------- -----------
34,980 994,216
----------- -----------
$ 5,815,691 $ 8,799,356
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
Continued
F-18
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
BALANCE SHEETS
December 31, 1999 and 1998
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998
<S> <C> <C>
CURRENT LIABILITIES
Short term borrowings $ 1,667,473 $ 2,571,425
Current portion of long-term debt 228,257 227,215
Accounts payable 970,325 1,576,108
Accrued salaries and related taxes 18,272 61,018
Accrued expenses and taxes 82,250 64,407
----------- -----------
Total current liabilities 2,966,577 4,500,173
----------- -----------
LONG TERM DEBT 1,102,989 1,321,360
SUBORDINATED DEBT 1,088,622 750,100
SHAREHOLDERS' EQUITY
Preferred stock - Class B 250,000 250,000
Common stock 3,084,381 3,084,381
Additional paid in capital 845,490 510,000
Accumulated deficit (3,522,368) (1,616,658)
----------- -----------
Total shareholders' equity 657,503 2,227,723
----------- -----------
$ 5,815,691 $ 8,799,356
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-19
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
STATEMENTS OF OPERATIONS
For the six months ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
SALES $ 1,525,004 $ 2,310,921
COST OF SALES 1,418,367 2,140,701
----------- -----------
GROSS MARGIN 108,637 170,220
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 545,261 831,079
----------- -----------
LOSS FROM OPERATIONS (436,624) (660,859)
OTHER INCOME (EXPENSE)
Interest expense (229,445) (204,772)
Miscellaneous income 2,874 12,031
----------- -----------
LOSS BEFORE INCOME TAXES (663,195) (853,600)
PROVISION FOR INCOME TAXES 0 (210,244)
----------- -----------
NET LOSS $ (663,706) $ (643,356)
=========== ===========
LOSS PER SHARE
Basic and fully dilutive $ (0.27) $ (0.27)
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-20
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
STATEMENT OF SHAREHOLDERS' EQUITY
For the six months ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Retained
Preferred Preferred Additional Earnings
Stock Stock Common Paid-in (Accumulated
Class A Class B Stock Capital Deficit)
<S> <C> <C> <C> <C> <C>
Balances as of July 1, 1998 $0 $250,000 $2,765,513 $510,000 $ (962,631)
81,212 shares of common 318,868
stock issued
Net loss (643,356)
Preferred stock dividends (10,671)
----- -------- ---------- -------- -----------
Balances December 31, 1998 $0 $250,000 $3,084,381 $510,000 $(1,616,658)
===== ======== ========== ======== ===========
Balances as of June 30, 1999 $0 $250,000 $3,084,381 $712,990 $(2,843,133)
250,000 stock warrants
issued 132,500
Net loss (663,706)
Preferred stock dividends (15,529)
----- -------- ---------- -------- -----------
Balances December 31, 1999 $0 $250,000 $3,084,381 $845,490 $(3,522,368)
===== ======== ========== ======== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-21
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
STATEMENTS OF CASH FLOWS
For the six months ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(663,705) $(643,357)
Adjustments to reconcile net loss to net cash from
operating activities
Depreciation and amortization 271,352 251,558
Loss (gain) on sales of assets 0 (9,510)
Change in assets and liabilities
Accounts receivable (141,127) 330,603
Inventory (55,447) 734,017
Prepaid expenses 51,208 (49,523)
Accounts payable 33,399 (651,543)
Accrued salaries and related taxes (6,368) 9,900
Accrued expenses and taxes 439 1,492
--------- ---------
Net cash from operating activities (510,249) (26,363)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment (101,954) (322,471)
Acquisition of other assets 0 (210,244)
Proceeds on sale of assets 0 169,739
--------- ---------
Net cash from investing activities (101,954) (362,976)
CASH FLOWS FROM INVESTING ACTIVITIES
Net short term borrowing 444,445 541,471
Payments on long-term debt (181,601) (113,660)
Proceeds from subordinated debt 208,082 750,100
Proceeds from issuance of stock warrants 132,500 0
Preferred stock dividends (15,529) (10,671)
--------- ---------
Net cash from financing activities 587,897 417,140
--------- ---------
Net change in cash (24,306) 27,801
Cash at beginning of year 27,219 62,455
--------- ---------
Cash at December 31, $ 2,913 $ 2,263
========= =========
</TABLE>
Continued
F-22
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
STATEMENTS OF CASH FLOWS
For the six months ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the six months:
Interest paid $399,895 $387,812
Income taxes paid 0 0
Noncash transactions
Issuance of 81,212 shares of common stock for
Goodwill 318,868
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-23
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
NOTES TO THE FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - Sims manufactures micronutrients for the Agricultural
Industry and markets throughout the United States and Canada. During 1998,
Sims purchased the assets of an export/import business dealing in
micronutrients and now markets worldwide (see Note C). A significant part of
Sims' business is dependent upon a few customers. Approximately $39,000 (2%)
and $399,000 (14%) of revenues were attributable to one customer in 1999 and
1998, respectively, and $136,800 (8%) and $372,000 (13%) were attributable to
another unrelated customer in 1999 and 1998, respectively.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results will differ from those estimates.
CASH FLOWS - For purposes of the statement of cash flows, Sims considers all
investments purchased with a maturity of three months or less to be cash
equivalents.
INVENTORY - Sims' inventory is valued at the lower of first in, first out
(FIFO) cost or market (see Note D).
PROPERTY AND EQUIPMENT - Sims' property and equipment are stated at cost.
Depreciation is computed on the straight-line method over their estimated
useful lives for book purposes and accelerated methods for tax purposes.
Estimates of useful lives are as follows:
Buildings 20 to 40 years
Furniture & fixtures 5 to 10 years
Equipment 7 to 15 years
Vehicles 5 years
Depreciation amounted to $225,670 in 1999 and $226,189 in 1998. Expenditures
for major renewals and betterments that extend the useful lives of property
and equipment are capitalized. Expenditures for maintenance and repairs are
charged to expense as incurred.
INCOME TAXES - Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes. Deferred taxes are recognized for differences between the
basis of assets and liabilities for financial statement and income tax
purposes. The differences relate primarily to depreciable assets (use of
different depreciation methods and lives for financial statement and income
tax purposes). The deferred tax assets and liabilities represent the future
tax consequences of those differences, which will be deductible when the
assets and liabilities are recovered or settled and the utilization of net
operating loss carryforwards.
F-24
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
NOTES TO THE FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
GOODWILL - Goodwill represents the cost of certain assets acquired September
1, 1997 over their fair value plus the additional earnout paid in 1999 (See
Note C). In June 1999, Sims reviewed the goodwill for impairment. Management
concluded to expense the additional earnout of $318,868, adjust the carrying
value $156,000 for impairment and change the estimated useful life of the
remaining goodwill from 8 years to 5 years in 1999. Goodwill expense charged
to operations was $17,490 in 1999 and $25,368 in 1998.
RECLASSIFICATIONS - Certain reclassifications were made to the prior year
financial statements for comparative purposes.
NOTE B - OPERATING CONDITIONS
At June 30, 1999, Sims has a deficiency of working capital of $716,103. The
net loss for the year ended June 30, 1999 is $1,860,035. Sims has taken the
following steps to significantly decrease the losses. Locating new sources of
lower cost raw material; eliminating low profit, capital intensive operations
such as the subcontracted manufacturing operations in Suffolk and the import
operations of the international division; reducing operating costs by
consolidating job descriptions and running the business with fewer employees;
shifting production to nights to decrease utility costs; and other cost
reduction measures. Sims has developed a new line of lawn care products that
is opening new markets and provides diversification from the agricultural
markets. Sims has secured $250,000 in a line of credit from a bank secured by
directors' guarantees (see Note E) and secured $250,000 of subordinated debt
from various individuals to provide operating capital for the fiscal year (see
Note F). Sims believes that these actions will restore profitable operations
and will make improvements to its working capital during fiscal 2000.
NOTE C - BUSINESS ACQUISITION
During September 1997, Sims acquired the assets of an import/export business
by issuing 65,859 shares of common stock. The assets acquired were as
follows:
ASSETS
Inventory $404,639
Goodwill 250,000
Net assets acquired $654,639
In addition, the former shareholder of the import/export business is entitled
to receive additional shares of Sims' common stock and warrants upon attaining
certain earnings over a three-year period. The common stock and warrants will
be recorded as goodwill as issued or exercised. Earnings are measured on a
cumulative basis as of August 31, 1998, 1999 and 2000.
Continued
F-25
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
NOTES TO THE FINANCIAL STATEMENTS
NOTE C - BUSINESS ACQUISITION (continued)
The August 31, 1998 threshold was obtained and Sims recorded $318,868 of
goodwill for the 81,212 shares of common stock issued in 1999 (See Note A).
On October 18, 1999, Sims and the seller signed a mutual release agreement
ending any further obligations on either party's part. There will be no
additional liabilities to Sims and the non-compete agreement by the seller is
cancelled and, therefore, no liability has been accrued
NOTE D - INVENTORY
Inventory consists of the following:
1999 1998
Raw materials $ 311,913 $ 861,942
Finished goods 722,204 1,111,998
Packaging materials 117,108 128,176
---------- ----------
$1,151,225 $2,102,116
NOTE E - LONG-TERM DEBT
Long-term debt consists of the following:
1999 1998
Mortgage payable to a bank requiring monthly payments
of $4,167 plus interest at the bank's base rate plus
.25%. The note matures in March 2007 and is secured
by real estate. $ 415,490 $ 465,494
Note payable to a bank requiring monthly payments of
$719 including interest of prime plus .25%. The note
matures in March 2002 and is secured by equipment. 17,364 24,233
Note payable to a bank requiring monthly payments of
$293 including interest at 8.6%. The note matures in
May 2003 and is secured by a vehicle. 10,364 0
Mortgage payable to a bank requiring monthly payments
of $5,556 plus interest at the bank's base rate plus
.25%. The note matures in January 2001 and is secured
by real estate. 384,178 450,943
Note payable to a credit corporation requiring payments
of $1,800 for the first 3 months and $318 thereafter.
Includes interest at 10.75%, matures April 2002 and is
secured by equipment. 7,837 10,540
F-26
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
NOTES TO THE FINANCIAL STATEMENTS
NOTE E - LONG-TERM DEBT (continued)
1999 1998
Mortgage payable to a bank requiring monthly payments of
$3,125 plus interest at 5.75%. The note matures November
2005 and is secured by equipment and real estate. 221,875 259,375
Mortgage payable to a bank requiring monthly payments of
$5,239 plus interest at the bank's base rate plus .75%.
The note matures in February 2004 and is secured by real
estate. 273,015 335,887
Note payable to a leasing company requiring monthly
payments of $101 including interest at 13.529%, maturing
September 2002 and secured by equipment. 1,123 2,103
1,331,246 1,548,575
Current maturities of long-term debt 228,257 227,215
Long-term debt, net of current maturities $1,102,989 $1,321,360
Maturities of long-term debt are as follows:
Year ending June 30, 2001 $ 228,257
2002 228,790
2003 226,086
2004 217,042
2005 202,814
Thereafter 0
Sims has a $2,500,000 revolving line of credit, with a balance of $1,417,773
at December 31, 1999. Advances on the line are payable on demand and based on
a percentage of accounts receivable and inventory and incur interest at prime
plus 1%. The credit line is secured by accounts receivable, inventory and
property and equipment.
The five loan agreements with the bank contain restrictive covenants including
a tangible net worth requirement and a debt service coverage ratio. Sims
either was in compliance with or had received waivers on October 6, 1999 for
these covenants.
Sims has a $250,000 revolving line of credit with another bank, with a balance
of $249,300 at December 31, 1999. Advances on the line are payable on demand
and incur interest at 12%. Guarantees of the officers and directors of Sims
secure the credit line. The officers and directors were granted warrants for
the purchase of 250,000 shares of common stock. The warrants expire December
31, 2006. Each warrant entitles the holder to purchase one share of stock at
$.01 per share.
F-27
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
NOTES TO THE FINANCIAL STATEMENTS
NOTE F - SUBORDINATED DEBT
On August 10, 1998 two directors loaned Sims $750,100 subordinated to all Bank
debt. The unsecured loans require monthly interest at 10% and mature August
30, 2009. On June 30, 1999, several directors and employees advanced Sims
$383,000 in exchange for unsecured notes that are subordinated to all Bank
debt. These notes include detachable stock warrants. The unsecured $383,000
notes require monthly interest payments at 12% per annum and mature June 30,
2002. Warrants for 383,000 shares were granted to the lenders entitling the
holders to purchase common stock at $.01 per share. One third of these
warrants are exercisable on every June 30 of the years 2000, 2001 and 2002.
The warrants were valued at $.53 resulting in an $202,990 original issue
discount on the subordinated debt and a corresponding increase in paid in
capital. The original issue discount will be amortized into interest expense
over the three-year term of the unsecured, subordinated debt using the
straight-line method. On December 30, 1999, several individuals advanced Sims
$250,000 in exchange for unsecured notes that are subordinated to all Bank
debt. These notes include detachable stock warrants. The unsecured $250,000
notes require monthly interest payments at 12% per annum and mature December
30, 2002. Warrants for 250,000 shares were granted to the lenders entitling
the holders to purchase common stock at $.01 per share. One third of these
warrants are exercisable on every December 30 of the years 2000, 2001 and
2002. The warrants were valued at $.53 resulting in an $132,500 original
issue discount on the subordinated debt and a corresponding increase in paid
in capital. The original issue discount will be amortized into interest
expense over the three-year term of the unsecured, subordinated debt using the
straight-line method.
NOTE G - CAPITAL STOCK
There were 250 shares of preferred stock authorized at December 31, 1999 and
1998. 125 shares were issued and outstanding as of December 31, 1999 and
1998. There are two classes (A & B) of preferred stock, each consisting of
125 shares, both of which are non-voting. Series A was converted into 1,020
shares of common stock per share of preferred stock during 1998. Series B
pays annual dividends at the Wall Street Journal Prime Rates, adjusted semi-
annually. The Series B shares have the right to dividends in arrears before
any dividends may be paid on common stock. Dividends in arrears amounted to
$630 at December 31, 1999.
Sims has 4 million shares of common stock authorized at no par value at
December 31, 1999 and 1998. There were 2,483,371 shares issued and
outstanding at December 31, 1999 and 2,483,371 shares issued and outstanding
at December 31, 1998.
F-28
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
NOTES TO THE FINANCIAL STATEMENTS
NOTE G - CAPITAL STOCK (continued)
Shares of common stock were reserved at December 31, 1999 for the exercise of
383,000 outstanding warrants expiring June 30, 2006. Each warrant entitles
the holder to purchase one share of stock at $.01 per share (see Note F).
Shares of common stock were reserved at December 31, 1999 for the exercise of
66,250 outstanding warrants expiring October 31, 2006. Each warrant entitles
the holder to purchase one share of stock at $.01 per share (see Note E).
Shares of common stock were reserved at December 31, 1999 for the exercise of
250,000 outstanding warrants expiring December 31, 2006. Each warrant
entitles the holder to purchase one share of stock at $.01 per share (see Note
F). Shares of common stock were also reserved at June 30, 1998 for the
exercise of 28,572 outstanding warrants expiring December 31, 2007. Each
warrant entitles the holder to purchase one share of stock at $7.00 per share.
Earnings per common share is calculated using the weighted average number of
common shares outstanding during the fiscal year. The weighted average was
2,483,371 shares for the six months ended December 31, 1999 and 2,419,078
shares for the six months ended December 31, 1998.
NOTE H - STOCK OPTIONS
Sims has granted options pursuant to its 1995 Stock Option Plan to key
employees. Options that have been granted and are outstanding generally
expire 10 years from the date of grant or 3 months from the employee's
termination of employment. The options become exercisable at the rate of 25%
per year based on the number of full years the options are held from the date
of grant. As of December 31, 1999 and 1998 a total of 245,000 and 182,000
options were outstanding, 86,125 and 48,625 options were exercisable and
355,000 and 378,000 options were available to be granted. All options are
granted at an exercise price not less than 100% of the fair market value per
share of Sims' common stock on the grant date. No options granted under the
plan were compensatory. The following is a summary of the activity in Sims'
stock option plan:
<TABLE>
<CAPTION>
Option Plan
Price Per Share Shares
<S> <C> <C>
Outstanding, July 1, 1998 $5.50 - $7.20 222,000
Expired during the period $7.20 (40,000)
Outstanding, December 31, 1998 $5.50 - $7.20 182,000
Outstanding, July 1, 1999 $5.50 - $7.20 180,000
Granted during the period $2.55 80,000
Expired during the period $7.20 (15,000)
Outstanding, December 31, 1999 $2.55 - $7.20 245,000
</TABLE>
Continued
F-29
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
NOTES TO THE FINANCIAL STATEMENTS
NOTE H - STOCK OPTIONS (continued)
The weighted average per share price of the outstanding options is $5.16 and
$6.50 as of December 31, 1999 and 1998, respectively.
<TABLE>
<CAPTION>
Option Plan
Price Per Share Shares
<S> <C> <C>
Exercisable, July 1, 1998 $5.50 29,875
Options becoming exercisable $5.50 - $6.07 18,750
Exercisable, June 30, 1998 $5.50 - $6.07 48,625
Exercisable, July 1, 1999 $5.50 - $6.07 74,875
Options becoming exercisable $5.50 - $7.20 15,000
Expired during the year $5.50 (3,750)
Exercisable, June 30, 1999 $5.50 - $7.20 86,125
</TABLE>
The weighted average per share price of the exerciseable options is $6.39 and
$6.42 as of December 31, 1999 and 1998, respectively.
Sims has granted options pursuant to its 1996 Directors Stock Option Plan.
Options that have been granted and are outstanding generally expire 10 years
from the date of grant or 6 months from the director's termination and become
exercisable at the rate of 25% per year based on the number of full years the
options are held from the date of grant. As of December 31, 1999 and 1998 a
total of 219,250 and 188,250 options were outstanding, 88,813 and 42,750
options were exercisable and 380,750 and 411,750 options were available to be
granted. All options are granted at an exercise price not less than 100% of
the fair market value per share of Sims' common stock on the grant date. No
options granted under the plan were compensatory. The following is a summary
of the activity in Sims' stock option plan:
<TABLE>
<CAPTION>
Price Option Plan
Per Share Shares
<S> <C> <C>
Outstanding, July 1, 1998 $5.50 - $6.07 278,500
Granted during the year $4.35 35,000
Expired during the year $5.50 - $7.20 (129,250)
Outstanding, December 31, 1998 $4.35 - $7.20 184,250
Outstanding, July 1, 1999 $4.35 - $7.20 184,250
Granted during the year $1.07 35,000
Outstanding, December 31, 1999 $1.07 - $7.20 219,250
</TABLE>
Continued
F-30
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
NOTES TO THE FINANCIAL STATEMENTS
NOTE H - STOCK OPTIONS (continued)
The weighted average per share price of the outstanding options is $5.02 and
$5.77 as of December 31, 1999 and 1998, respectively.
<TABLE>
<CAPTION>
Option Plan
Price Per Share Shares
<S> <C> <C>
Exercisable, July 1, 1998 $5.50 - $6.07 75,125
Options becoming exercisable $5.50 - $6.07 4,000
Expired during the year $5.50 - $6.07 (36,375)
Exercisable, June 30, 1998 $5.50 - $6.07 42,750
Exercisable, June 30, 1998 $5.50 - $6.07 76,063
Options becoming exercisable $5.50 - $7.20 12,750
Exercisable, June 30, 1999 $5.50 - $7.20 88,813
</TABLE>
The weighted average per share price of the exerciseable options is $5.90 and
$6.03 as of December 31, 1999 and 1998, respectively.
In accordance with the provisions of SFAS 123, Sims applies APB Opinion 25 and
related interpretations in accounting for its stock option plans and,
accordingly, does not recognize compensation cost. If Sims had elected to
recognize compensation cost based on the fair value of the options granted at
grant date as prescribed by SFAS 123, net income and earnings per share would
have been reduced to the pro forma amounts indicated in the table below:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Net loss - as reported $(663,706) $(643,356)
Net loss - pro forma (688,423) (681,471)
Loss per share - as reported $ (0.27) $ (0.27)
Loss per share - pro forma (0.28) (0.28)
</TABLE>
Continued
F-31
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
NOTES TO THE FINANCIAL STATEMENTS
NOTE I - LEASES
Sims leases trucks and railcars under lease arrangements classified as
operating leases. The leases generally are for a period of twelve months with
an automatic twelve-month renewal at the end of the lease. Total rent expense
under these leases totaled $0 in 1999 and $5,618 in 1998. The future minimum
lease payments under non-cancelable operating leases as of December 31, 1999
consisted of $0.
NOTE J - RELATED PARTY TRANSACTIONS
A Company owned by one of Sims' largest shareholders has sold raw, finished
materials and provided services to Sims. The following summarizes the
transactions for 1999 and 1998 and account balances with this related company
as of December 31, 1999 and 1998:
1999 1998
Raw, finished material and service purchases $107,109 $ 2,445
Trade payables 49,506 143,297
NOTE K - INCOME TAXES
The provision for income taxes for the period ended December 31, 1999 and 1998
consists of the following:
1999 1998
Current $ 511 $ -
Deferred (205,749) (210,244)
Change in valuation allowance 205,749 -
Total expense (benefit) $ 511 $(210,244)
A valuation was established against Sims' deferred tax assets because of the
uncertainty that they would generate future tax benefits. The effect of this
component is shown above as a separate component of the provision for income
taxes. The components of the deferred tax assets are as follows:
Net operating loss carryforward $560,553 $753,833
Alternative minimum tax deposits 9,496 9,496
Section 263A inventory 41,825 41,825
611,874 805,154
The components of the deferred tax liabilities are as follows:
Depreciation 299,582 299,582
Net $ 312,292 $505,572
Valuation allowance (312,292) -
Net deferred tax asset $ - $505,572
F-32
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO
NOTES TO THE FINANCIAL STATEMENTS
NOTE K - INCOME TAXES (continued)
At June 30, 1999, Sims has, for income tax reporting purposes, net operating
loss carryovers available to reduce future taxable income as follows:
Net Operating
Expiration Date Loss Carryover
June 30, 2007 $ 174,809
June 30, 2008 67,869
June 30, 2011 7,462
June 30, 2012 34,143
June 30, 2013 1,384,583
June 30, 2014 1,568,141
$3,237,007
F-33
<PAGE>
INDEX TO EXHIBITS
Exhibit Exhibit
Number Description
- ------ -----------
3.1 Amended Articles of Incorporation of Registrant
3.2 Minutes of Annual Shareholders' Meeting dated December 11, 1996
3.3 Action by the Directors of Registrant effective June 30, 1993
3.4 Amended Code of Regulations of Registrant
4.2 Specimen Common Stock Certificate of Registrant
4.3 Form of Non-Negotiable Subordinated Promissory Notes issued to various
directors, officers and shareholders of Registrant in June and
December 1999
4.4 Form of Warrant Agreement between Registrant and various officers,
directors and shareholders of Registrant in June and December 1999
4.5 Form of Redeemable Warrant Certificate issued to various directors,
officers and shareholders of Registrant in June and December 1999
10.1 Sims Agricultural Products Co. 1995 Stock Option Plan
10.2 Sims Agricultural Products Co. 1996 Directors Stock Option Plan
10.3 Replacement Promissory Note of Registrant in favor of National City
Bank, in the original principal amount of $645,286 dated January 12,
1996
10.4 Promissory Note of Registrant in favor of National City Bank, in the
original principal amount of $500,000 dated March 14, 1997
10.5 Replacement Promissory Note of Registrant in favor of National City
Bank, in the original principal amount of $610,000 dated January 12,
1996
10.6 Commercial Installment Note of Registrant in favor of National City
Bank, in the original principal amount of $300,000 dated March 21,
1997
10.7 Mutual Release Agreement by and between Fertilizer Corporation of
America, David Christopherson and Registrant dated October 18, 1999.
<PAGE>
Exhibit 3.1
OHIO SECRETARY OF STATE CHARTER NUMBER: 787227
PROCESSING STATEMENT ROLL AND FRAME: 5391-0178
1/22/96
05391-0178
CORPORATION: DOCUMENT NUMBER CODE FEE
--------------- ---- ---
SIMS AGRICULTURAL PRODUCTS CO. 95121927601 AMA 35.00
072342
RETURN TO: ENZ, JONES & SEGUIN TOTAL : 35.00
ATTN S SHERIDAN
1000 POLARIS PKY #150 0288
COLUMBUS OH 43240--2005
<PAGE>
[GRAPHIC OMITTED]
The State of Ohio
Bob Taft
Secretary of State
787227
Certificate
It is hereby certified that the Secretary of State of Ohio has custody of the
Records of Incorporation and Miscellaneous Filings; that said records show the
filing and recording of: AMA
of:
SIMS AGRICULTURAL PRODUCTS CO.
United States of America
State of Ohio
Office of the Secretary of State
[THE SEAL OF THE SECRETARY OF STATE OF OHIO]
Recorded on Roll 5391 at Frame 0180 of the Records of Incorporation and
Miscellaneous Filings.
Witness my hand and the seal of the Secretary of State at Columbus, Ohio, this
19TH day of DEC A.D. 1995.
/s/ Bob Taft
- -------------------
Bob Taft
Secretary of State
<PAGE>
12/19/95 BOB TAFT - SECRETARY OF STATE RCPT NO. 951219276
BATCH NO: 048461
CORPORATION NAME DOC NUMBERS CHECK NUMBER CHECK AMOUNT
- ---------------- ----------- ------------ ------------
SIMS AGRICULTURAL PRODUCTS CO (AMD) 95121927601 18490 $35.00
CHECK ISSUED: ENZ JONES & SEGUIN
BY: 100 POLARIS PARKWAY
STE 150
COLUMBUS, OH 43240 TOTAL $35.00
<PAGE>
CERTIFICATE OF AMENDED
ARTICLES OF INCORPORATION OF
SIMS AGRICULTURAL PRODUCTS CO.
Dallas H. Paul, President and John H. Bowen, Secretary of Sims
Agricultural Products Co., an Ohio corporation ("Corporation"), with its
principal place of business located in the City of Mt. Gilead, County of Morrow,
State of Ohio, do hereby certify that a meeting of the shareholders was duly
called and held on the 12th day of December, 1995, at which meeting a quorum of
the shareholders was present in person or by proxy, and that by the affirmative
vote of the holders of shares entitling them to exercise approximately
seventy-six percent (76%) of the voting power of the Corporation, the following
Amended Articles of Incorporation were adopted to supersede and take the place
of the existing Articles and all amendments thereto.
AMENDED ARTICLES OF INCORPORATION OF
SIMS AGRICULTURAL PRODUCTS CO.
The undersigned, for the purpose of amending the articles of a corporation
pursuant to and by virtue of the General Corporation Law of Ohio, hereby
certifies and adopts the following Articles of Incorporation.
Article First
Name
The name of the corporation is Sims Agricultural Products Co.
Article Second
Principal Office
The place in Ohio where the principal business office will be located in
the City of Mt. Gilead, County of Morrow, State of Ohio.
Article Third
Purpose
The nature of the business to be conducted or promoted and the purposes of
the Corporation is: to develop, own, operate and manage business enterprises of
every nature and kind; to own, lease and sell equipment, goods and services of
all kinds, including, without limitation, fertilizers, animal feed supplements
and agricultural micro-nutrients; to own and license others to use trade names,
trademarks, service marks and other similar intellectual properties; to provide
management, consulting and advisory services; and to do any and all things
related to the foregoing and to engage in any other lawful act or activity for
which corporations may be organized under the General Corporation Law of Ohio.
Article Fourth
Capital Stock Classes
The total number of shares of all classes of capital stock which the
Corporation has the authority to issue is 4,000,250 consisting of the following
classes:
(a) Two hundred fifty (250) shares of Serial Preference Stock, $.001
par value, issuable in series, hereinafter "Series Preference
Stock"; and
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(b) Four million (4,000,000) common shares, no par value.
The designations, voting powers, preferences and relative priority,
participating, option or other special rights, and qualifications, limitations
or restrictions of the above classes of stock are as follows:
DIVISION A
EXPRESS TERMS OF THE
SERIAL PREFERENCE STOCK
Section 1. The Serial Preference Stock may be issued from time to time in one or
more series. All shares of Serial Preference Stock shall be of equal rank and
shall be identical, except in respect of the matters that may be fixed by the
Board of Directors as hereinafter provided, and each share of each series shall
be identical with all other shares of such series, except as to the date from
which dividends are cumulative. Subject to the provisions of Sections 2 to 8,
inclusive, of this Division, which provisions shall apply to all Serial
Preference Stock, the Board of Directors hereby is authorized to cause such
shares to be issued in one or more series and with respect to each such series
prior to the issuance thereof to fix:
(a) The designation of the series, which may be by distinguishing number,
letter or title;
(b) The number of shares of the series, which number the Board of
Directors may (except where otherwise provided in the creation of the series)
increase and decrease (but not below the number of shares thereof then
outstanding);
(c) The annual dividend rate of the series, and the date from which
dividends shall be cumulative;
(d) The dates which dividends, if declared, shall be payable;
(e) The redemption rights and price or prices, if any, for shares of the
series;
(f) The terms and amount of any sinking fund provided for the purchase or
redemption of shares of the series;
(g) The amounts payable on shares of the series in the event of any
voluntary or involuntary dissolution, liquidation or winding up of the business
and affairs of the corporation;
(h) Whether the shares of a series are convertible into the shares of any
other series or other class of shares, and, if so, the conversion price or
prices, any adjustments thereof, and all other terms and conditions upon which
such conversion may be made;
(i) Restrictions on the issuance of shares of the same series or any other
class or series;
(j) The voting rights of any shares in any series.
The Board of Directors is authorized to adopt, from time to time, amendments to
the Articles of Incorporation fixing, with respect to each such series, the
matters described in clauses (a) through (j), inclusive of this Section 1.
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Section 2. Nothing in clause (a) through (i), inclusive, of Section 1 above,
shall be construed to require the Board of Directors to fix any particular terms
with respect to a series of shares.
Section 3. The holders of Serial Preference Stock of each series, in preference
to the holders of Common Stock, shall be entitled to receive out of any funds
legally available, and when and as declared by the Board of Directors, dividends
in cash or property at the rate for such series fixed in accordance with the
provisions of Section 1 of this Division and no more, payable on the dates fixed
for such series. No dividends may be paid upon or declared or set apart for any
of the Serial Preference Stock for any dividend period, unless at the same time
a like proportionate dividend for the same dividend period, in proportion to the
respective dividend rates fixed therefor, shall be paid upon or declared or set
apart for all Serial Preference Stock of all series then issued and outstanding
and entitled to receive such dividends.
Section 4. In no event so long as any Serial Preference Stock shall be
outstanding shall any dividends in excess of $.05 per share per year, except
payable in Common Stock or other shares ranking junior to the Serial Preference
Stock, be paid or declared or any distribution be made except as aforesaid on
the Common Stock or any other shares ranking junior to the Serial Preference
Stock, nor shall any Common Stock or any other shares ranking junior to the
Serial Preference Stock be purchased, retired or otherwise required by the
corporation (except out of the proceeds of the sale of Common stock or other
shares ranking junior to the Serial Preference Stock received by the
corporation):
(a) Unless all accrued and unpaid dividends on Serial Preference stock,
including the full dividends for the current quarterly dividend period, shall
have been declared and paid or a sum sufficient for payment thereof set apart;
and
(b) Unless there shall be no arrearages with respect to the redemption of
Serial Preference Stock of any series or any sinking fund provided for shares of
such series in accordance with the provisions of Section 1 of this Division.
Section 5. (a) Subject to the express terms of each series and to the provisions
of Section 7(b)(iv) of this Division, the corporation may from time to time
redeem all or any part of the Serial Preference Stock of any series at the time
outstanding (i) at the option of the Board of Directors at the applicable
redemption price for such series fixed in accordance with the provisions of
Section 1 of this Division, or (ii) in fulfillment of the requirements of any
sinking fund provided for shares of such series at the applicable sinking fund
redemption price fixed in accordance with the provisions of Section 1 of this
Division; together in each case with an amount equal to all dividends accrued
and unpaid thereon (whether or not such dividends shall have been earned or
declared) to the redemption date.
(b) Notice of every such redemption shall be mailed, postage prepaid to
the holders of record of the Serial Preference Stock to be redeemed at their
respective addresses then appearing on the books of the corporation, not less
than thirty (30) days nor more than sixty (60) days prior to the date fixed for
such redemption. At any time before or after notice has been given as above
provided the corporation may segregate on its books an amount equal to the
aggregate redemption price of the shares of Serial Preference Stock to be
redeemed for the purpose of such redemption. Upon the making of such segregation
such holders shall cease to be shareholders with respect to such shares, and
after such notice shall have been given and such deposit shall have been made,
such holders shall have no interest in or claim against the corporation with
respect to such shares except only to receive such money without interest or the
right to exercise, before the redemption date, any unexpired privileges of
conversion. In case less than all of the outstanding shares of Serial Preference
Stock are to be redeemed, the
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corporation shall select pro rata or by lot the shares so to be redeemed in such
manner as shall be prescribed by its Board of Directors.
If the holders of shares of Serial Preference Stock which shall have been
called for redemption shall not, within six years after such segregation, claim
the amount due for the redemption thereof, the corporation shall be relieved of
all responsibility in respect thereof and to such holders.
(c) Any shares of Serial Preference Stock which are redeemed by the
corporation pursuant to the provisions of this Section 5 and any shares of
Serial Preference Stock which are purchased and delivered in satisfaction of any
sinking fund requirements provided for shares of such series and any shares of
Serial Preference Stock which are converted in accordance with the express terms
thereof shall be deemed retired.
Section 6. (a) The holders of Serial Preference Stock of all outstanding series
shall, in case of voluntary liquidation, dissolution or winding up of the
business and affairs of the corporation, be entitled to receive in full, out of
the assets of the corporation, including capital, before any amount shall be
paid or distributed among the holders of any other shares ranking junior to the
Serial Preference Stock, the amounts fixed with respect to the shares in
accordance with Section 1 of this Division. In case the net assets of the
corporation legally available therefor are insufficient to permit the payment
upon all outstanding shares of Serial Preference Stock of the full preferential
amount to which they are respectively entitled, then such net assets shall be
distributed ratably upon outstanding shares of Serial Preference Stock in
proportion to the full preferential amount to which each such share is entitled.
After payment to holders of Serial Preference Stock of the full
preferential amounts as aforesaid, holders of Serial Preference Stock as such
shall have no right or claim to any of the remaining assets of the corporation.
In case of involuntary liquidation, involuntary dissolution or involuntary
winding up of the affairs of the corporation, the holders of Serial Preference
Stock shall, as such holders, (except with respect to any series as to which the
Board of Directors shall have otherwise provided pursuant to Section 1(g) of
this Division, and solely to the extent of such provisions) receive distribution
of the assets of the corporation ratably with the holders of shares of all other
classes share for share, without distinction by reason of class.
(b) The merger or consolidation of the corporation into or with any other
corporation, or the merger of any other corporation into it, or the sale, lease
or conveyance of all or substantially all of the property or business of the
corporation, shall not be deemed to be a dissolution, liquidation or winding up,
voluntary or involuntary, for the purposes of this Section 6.
Section 7. (a) The holders of Serial Preference Stock shall not be entitled to
any vote for each share except as otherwise provided herein or required by law.
(b) To the extent not forbidden by statute, the vote or consent of the
holders of at least a majority of the shares of Serial Preference Stock at the
time outstanding, given in person or by proxy, either in writing or at a meeting
called for the purpose at which the holders of Serial Preference Stock shall
vote separately as a class, shall be necessary to effect any one or more of the
following:
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(i) Any amendment, alteration or repeal of any of the provisions of the
Articles of Incorporation or the Regulations of the corporation which adversely
affects the voting powers, rights or preferences of the holders of Serial
Preference Stock; provided, however, that for the purpose of this clause (i),
neither the amendment of the Articles of Incorporation so as to authorize or
create, or to increase the authorized or outstanding amount of any shares of any
class ranking junior to the Serial Preference Stock, nor any amendment of the
Articles of Incorporation by the directors pursuant to Section 1 of this
Division, which is not contrary to the provision of any amendment to the
Articles authorizing a series of Serial Preference Stock, nor the amendment of
the Regulations so as to increase the number of directors of the corporation
shall be deemed to affect adversely the voting powers, rights or preferences of
the holders of the Serial Preference Stock; and provided further, that if such
amendment, alteration or repeal adversely affects the powers, rights or
preferences of one or more but not all series of Serial Preference Stock at the
time outstanding, only the vote or consent of the holders of at least a majority
of the number of shares at the time outstanding of the series so affected shall
be required;
(ii) The authorization or creation of, or the increase in the authorized
amount of, any shares of the class, or any security convertible into shares of
any class, ranking prior to the Serial Preference Stock;
(iii) The authorization of any shares ranking on a parity with the Serial
Preference Stock or an increase in the authorized number of shares of Serial
Preference Stock;
(iv) The purchase or redemption (for sinking fund purposes or otherwise)
of less than all of the Serial Preference Stock then outstanding except in
accordance with a stock purchase offer made to all holders of record of Serial
Preference Stock then outstanding, unless all dividends upon all Serial
Preference Stock then outstanding, for all previous quarterly dividend periods
shall have been declared and paid or funds therefor set apart and all accrued
sinking fund obligations applicable thereto shall have been complied with.
Section 8. For the purpose of this Division A:
Whenever reference is made to shares "ranking prior to the Serial Preference
Stock" or "on a parity with the Serial Preference Stock," such reference shall
mean and include all shares of the corporation in respect of which the rights of
the holders thereof as to the payment of dividends or as to distributions in the
event of a voluntary liquidation, dissolution, or winding up of the affairs of
the corporation are given preference over or rank equally with (as the case may
be) the rights of the holders of Serial Preference Stock; and whenever reference
is made to shares "ranking junior to the Serial Preference Stock," such
reference shall mean and include all shares of the corporation in respect of
which the rights of the holders thereof as to the payment of dividends and as to
distributions in the event of a voluntary liquidation, dissolution, or winding
up of the affairs of the corporation are junior and subordinate to the rights of
the holders of Serial Preference Stock.
DIVISION B
EXPRESS TERMS OF THE COMMON STOCK
The Common Stock shall be subject to the express terms of the Serial
Preference Stock, and each series thereof. Each share of Common Stock shall be
equal to every other share of Common Stock. The holders of shares of Common
Stock shall be entitled to one vote for each share of such stock upon all
matters presented to the shareholders.
5
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Article Fifth
Records
The books of the Corporation may be kept (subject to any provisions
contained in the statutes) outside the State of Ohio at such place or places as
may be designated from time to time by the Board of Directors or in the bylaws
of the Corporation. Elections of Directors need not be by written ballot unless
the bylaws of the Corporation shall so provide.
Article Sixth
Certain Contracts
No contract or transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other corporation,
partnership, association or other organization in which one or more of its
directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the board or
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if:
(a) The material facts as to his interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the board or committee in good faith authorizes the
contract or transaction by a vote sufficient for such purpose without
counting the vote of the interested director or directors; or
(b) The material fact as to his interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to
vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders. Interested directors
may be counted in determining the presence of a quorum at a meeting of the
Board of Directors or of a committee which authorizes the contract or
transaction.
Article Seventh
Indemnification
1. The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expense (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not of
itself, create a presumption that the person did not act in good faith and
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in a manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
2. The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect to any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnification for such expenses which the
court shall deem proper.
3. To the extent that any person referred to in paragraphs 1 and 2 of this
Article Seventh has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to therein or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
4. Any indemnification under Paragraphs 1 and 2 of this Article Seventh
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs 1 and 2 of this Article
Seventh. Such determination shall be made (a) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (b) if such quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (c) by the stockholders.
5. Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Corporation as provided
in this Article Seventh.
6. The indemnification provided by this Article Seventh shall not be
deemed exclusive of any rights to which those seeking indemnification may be
entitled under any statute, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
7. The Corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation,
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or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article Seventh.
8. For the purposes of this section, references to "the corporation"
include all constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporation so that any person who is or was
a director, officer, employee or agent of such a constituent corporation or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this section with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the same
capacity.
Article Eighth
Stated Capital
The amount of stated capital with which the Corporation will begin
business is Five Hundred Dollars ($500.00).
Article Ninth
Treasury Stock Provisions
The Corporation may purchase, from time to time and to the extent
permitted by the laws of Ohio, shares of any class of stock issued by it. Such
purchase may be made either in the open market or at private or public sale, and
in such manner and amounts, from such holder or holders of outstanding stock of
the corporation and at such prices as the Board of Directors of the corporation
shall from time to time determine, and the Board of Directors is hereby
empowered to authorize such purchases from time to time without any vote of the
holders of any class of shares now or hereafter authorized and outstanding at
the time of any such purchase.
Article Tenth
Voting Rights
Notwithstanding any provisions of the laws of Ohio or hereafter in force
requiring for any purpose the vote of the holders of shares entitling them to
exercise two-thirds (2/3), or any other proportion, of the voting power of the
corporation or of any class or classes of shares thereof, such action, unless
otherwise expressly required by statute may be taken by vote of the holders of
shares entitling them to exercise a majority of the voting power of the
corporation or of such class or classes.
Article Eleventh
Preemptive Rights
No stockholder of the corporation shall, because of his ownership of
stock, have a preemptive or other right to purchase, subscribe for, or take any
part of any stock or any part of the notes, debentures, bonds or other
securities convertible into or carrying options or warrants to purchase stock of
the corporation issued, optioned or sold by it after its incorporation. Any part
of the capital stock and any part of the notes, debentures, bonds or other
securities convertible into or carrying options or warrants to purchase stock of
the corporation authorized by this certificate of incorporation or by an amended
certificate duly
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filed, may at any time be issued, optioned for sale, and sold or disposed of by
the Corporation pursuant to a resolution of its Board of Directors to such
persons and upon such terms as may to such Board seem proper without first
offering such stock or securities or any part thereof to existing shareholders.
Article Twelfth
Cumulative Voting
There shall be no right to cumulate votes in the election of directors.
Article Thirteenth
Control Share Acquisitions
Section 1701.831 of the Ohio Revised Code shall not apply to any control
share acquisition (as defined in Section 1701.01(Z)(1) of the Ohio Revised Code,
as the same may be amended from time to time, or in any successor thereto,
however denominated) of shares of any class of capital stock of the Corporation.
Article Fourteenth
Amendment of Articles
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in the Articles of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
Article Fifteenth
Term
The Corporation shall have perpetual existence.
Article Sixteenth
Supersedence
These Amended Articles of Incorporation take the place and supersede the
existing Articles of Incorporation and all amendments thereto, as herein
amended.
IN WITNESS WHEREOF, Dallas H. Paul, President and John H. Bowen, Secretary
of Sims Agricultural Products Co., acting for and on behalf of Sims Agricultural
Products Co., hereunto subscribe their names as of the 12th day of December,
1995.
SIMS AGRICULTURAL PRODUCTS CO.
By: /s/ Dallas H. Paul
-------------------------
Dallas H. Paul, President
By: /s/ John H. Bowen
-------------------------
John H. Bowen, Secretary
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Exhibit 3.2
MINUTES OF ANNUAL SHAREHOLDERS' MEETING
SIMS AGRICULTURAL PRODUCTS, CO.
DECEMBER 11, 1996, 10:00 a.m.
BEST WESTERN UNIVERSITY INN
COLUMBUS, OH
TIME AND PLACE
The annual meeting of the Shareholders of Sims Agricultural Products, Co.,
an Ohio corporation, was held at The Best Western University Inn, Columbus,
Ohio, on the 11th day of December, 1996, commencing at 10:00 a.m., for the
purpose of amending the fifth article of the corporation, to elect the directors
of the corporation, amend no. 1 of the 1995 option plan, to ratify the granting
of options, to ratify the director's option plan, and to ratify the election of
a company auditor, and to transact other business within the powers of the
Shareholders.
CALL TO ORDER - PRESIDENT
The meeting was called to order by Dallas Paul, President of the
Corporation. As authorized by the Code of Regulations of the Corporation, the
President acted as Chairman of the meeting, and John Bowen, Secretary of the
Corporation, acted as Secretary of the meeting and recorded the minutes.
VALIDITY OF THE MEETING
The meeting being held in accordance with the terms of the Code of
Regulations of the Corporation, the President declared that the meeting was
lawfully and properly convened.
INSPECTOR OF ELECTIONS
Mark Dunn, Trust Officer, The Huntington National Bank, served as
inspector of elections at the meeting.
SHAREHOLDERS PRESENT
A roll of the outstanding shares of the Corporation was called, and the
President and Inspector of Elections declared that, in person or by proxy, a
quorum was present.
AMEND ARTICLE FOURTH
Amend article fourth of the articles of incorporation to increase the
common shares from 4 million to 8 million. John Bowen made a motion to amend
article fourth . The motion was seconded by Ross Strayer. By a majority vote of
all shareholders the motion was carried.
<PAGE>
ELECTION OF DIRECTORS
The President presented a proposal to elect Ross Strayer, Cameron Bowen,
Dallas Paul, David Rupp, and John Bowen as directors of the corporation for a
term of one year. Jerry McCloud made a motion to elect the above persons and the
motion was seconded by Rick Schafer. On the majority vote of all shareholders
the motion was carried.
APPROVE/ADOPT AMENDMENT NO. 1 OF THE 1995 STOCK OPTION PLAN
The President presented a proposal to approve and adopt amendment No. 1 of
the 1995 stock option plan. Rick Shafer made a motion to approve and adopt
amendment No. 1 and the motion was seconded by Cameron Bowen. On the majority
vote of all shareholders the motion was carried.
RATIFY THE GRANT OF OPTIONS UNDER THE AMENDED 95 STOCK PLAN
The President presented a proposal to ratify the granting of options under
the amended 95 stock option plan. Mr. Horrocks moved that the grants be ratified
and this motion was seconded by Ken Storer. On the majority vote of all
shareholders the motion was carried.
RATIFY THE ADOPTION OF THE 1996 DIRECTORS STOCK OPTION PLAN
The President presented a proposal to ratify the adoption of the 1996
Directors stock option plan. Jerry McCloud made a motion to adopt the directors
plan and ratify the granting of options under the plan. Dan Torchia seconded the
motion and on the majority vote of all shareholders the motion was carried.
APPOINTMENT OF ROBERT J. LeHEW & ASSOC. AS CORP. AUDITOR
The Chairman then called for a motion to ratify the selection of Robert J.
LeHew and Assoc. as the Corporations' Auditors for the fiscal year 1996-1997.
Upon a motion made by Chris Miller and seconded by Ben Copper, the above was
ratified by a majority vote.
ADJOURNMENT
There being no other further business the president adjourned the meeting.
/s/ John H. Bowen
---------------------------
John H. Bowen/Secretary
<PAGE>
Exhibit 3.3
ACTION BY THE DIRECTORS
of Sims Agricultural Products Co.
Effective June 30, 1993
The undersigned, being all of the Directors of Sims Agricultural
Products Co., an Ohio corporation, do hereby take the following action by this
writing, effective on the date first set forth above.
The following resolution with respect to the issuance of Series A and
Series B Preferred Shares of the Corporation is hereby adopted, approved and
ratified.
RESOLVED, that the Corporation issue 125 Series A Preferred Shares to
Ross Strayer in exchange for $250,000 of short term debt and that the
Corporation issue 125 Series B Preferred Shares to Ross Strayer in
exchange for an additional $250,000 of short term debt.
BE IT FURTHER RESOLVED, that the Series A and Series B Preferred Shares
have the following terms:
The Company is authorized to issue Five Hundred (250) shares of
preferred stock, of which 125 have been authorized as Series A Preferred Shares
and 125 as Series B Preferred Shares, having a declared value and liquidation
preference of $2,000 per Share. Upon liquidation, dissolution or winding up of
the affairs of the Company, and after payment of creditors, the assets legally
available for distribution will be divided ratably on a share-for-share basis
among the holders of the outstanding shares of Common Stock, after payment of
$2,000 per Share for each Series A and Series B Preferred Share issued and
outstanding.
The Series A Preferred Stock is a non-participating preferred stock
which carries no voting rights, except as explicitly required by Ohio law. The
Series B Preferred Shares carry no voting rights, except as may be explicitly
required by Ohio law. The Series A Preferred Stock is putable by the holder in
the event that the Company completes a public offering in the aggregate amount
of $1,250,000 on or before December 31, 1994. The put price is $2,000 per Series
A Preferred Share. The Company shall notify the holder of the Series A Preferred
Shares within thirty days of the completion of the $1,250,000 public offering.
For purposes of this right, completion shall mean receipt by the Company of
gross offering proceeds in excess of $1,000,000, but only to the extent that the
gross offering proceeds exceeds $1,000,000. The intent of this provision is that
the Series A Preferred Shares may only be put to the Company and thereupon
redeemed with and to the extent that the gross public offering proceeds exceed
$1,000,000.
The Series A Preferred Shares are not entitled to any dividends. The
Series B Preferred Shares are entitled to a cumulative annual dividend
equivalent to the Wall Street Journal Prime Rate, adjusted semi-annually and
payable semi-annually on November 30 and May 30 of each year, commencing
November 30, 1994. The time period for commencement of dividends shall
<PAGE>
be January 1, 1994. The liquidation preference is increased by any cumulated,
unpaid dividends. No dividends may be paid on the Company's Common Stock until
and unless all dividends for the Series B Preferred Shares have been paid in
full. The Series B Preferred Shares shall not participate with the Common Shares
in any common dividend.
No other preferred shares shall be issued by the Company unless such
shares are subordinate in liquidation to the Series A and Series B Preferred
Shares. However, the Company has reserved the right to issue additional
preferred shares which could have dividend rights or other rights more favorable
than the terms of the Series A or B Preferred Shares.
The Company shall have the right to call the Series B Preferred Shares
for redemption at any time on thirty (30) days written notice to the holder, at
$2,000 per share plus accrued and unpaid dividends, if any.
Restrictions on Resale of Shares
The Series A and Series B Preferred Shares are to be issued pursuant to
Ross Strayer pursuant to exemption from registration in Ohio and exemption from
federal registration under Regulation D, Rule 504 of the Securities Act of 1933,
as amended. The Series A and Series B Preferred Shares will be "restricted
securities" and bear significant restrictions against transfer, sale or
assignment.
IN WITNESS WHEREOF, the action taken by the undersigned is effective on
the date first set forth above.
----------------------------------------
G. CAMERON BOWEN
----------------------------------------
D. ROSS STRAYER
----------------------------------------
DALLAS H. PAUL
----------------------------------------
JOHN H. BOWEN
2
<PAGE>
Exhibit 3.4
AS AMENDED 12/14/99
AMENDED CODE OF REGULATIONS
OF
SIMS AGRICULTURAL PRODUCTS CO.
INDEX
Section Caption Page
- ------- ------- ----
ARTICLE 1. MEETINGS OF SHAREHOLDERS
1.01 Annual Meetings 1
1.02 Calling of Meetings 1
1.03 Place of Meetings 1
1.04 Notice of Meetings 1
1.05 Waiver of Notice 2
1.06 Quorum 2
1.07 Votes Required 3
1.08 Order of Business 3
1.09 Shareholders Entitled To Vote 3
1.10 Cumulative Voting 3
1.11 Proxies 3
1.12 Inspectors of Election 4
1.13 Shareholder Proposal Notice Procedure 4
ARTICLE 2. DIRECTORS
2.01 Authority and Qualification 4
2.02 Number of Directors and Term of Office 4
2.03 Election 5
2.04 Removal 5
2.05 Vacancies 5
2.06 Meetings 6
2.07 Notice of Meetings 6
2.08 Waiver of Notice 7
2.09 Quorum 7
2.10 Committee of the Directors 7
2.11 Compensation 8
2.12 By-Laws 8
ARTICLE 3. OFFICERS
1
<PAGE>
AS AMENDED 12/14/99
3.01 Officers 8
3.02 Tenure of Officers 8
3.03 Duties of Officers 9
ARTICLE 4. SHARES
4.01 Certificates 9
4.02 Transfers 9
4.03 Transfer Agents and Registrars 10
4.04 Lost, Wrongfully Taken or
Destroyed Certificates 10
ARTICLE 5. INDEMNIFICATION
5.01 Indemnification 10
ARTICLE 6. CERTAIN TRANSACTIONS
6.01 Contracts or Transactions with
Directors and Officers. 12
ARTICLE 7. MISCELLANEOUS
7.01 Seal 13
7.02 Amendments 13
7.03 Action by Shareholders or Directors
without a Meeting. 13
2
<PAGE>
AS AMENDED 12/14/99
AMENDED CODE OF REGULATIONS
OF
SIMS AGRICULTURAL PRODUCTS CO.
ARTICLE 1
MEETING OF SHAREHOLDERS
Section 1.01. Annual Meetings. The annual meeting of the shareholders for
the election of directors, for the consideration of reports to be laid before
such meeting and for the transaction of such other business as may properly come
before such meeting, shall be held on the last day of November in each year or
on such date as may be fixed from time to time by the Board of Directors.
Section 1.02. Calling of Meetings. Meetings of the shareholders may be
called only by the President, the Chairman, all of the directors acting with or
without a meeting, or a majority of at least 25% of all shares outstanding and
entitled to vote thereat.
Section 1.03. Place of Meeting. All meetings of shareholders shall be held
at the principal office of the corporation, unless otherwise provided by action
of the directors. Meetings of shareholders may be held at any place within or
without the State of Ohio.
Section 1.04. Notice of Meetings. (A) Written notice stating the time,
place and purposes of a meeting of the shareholders shall be given either by a
personal delivery or by mail not less than seven nor more than sixty days before
the date of the meeting to each shareholder of record entitled to notice of the
meeting by or at the direction of the Chairman. If mailed, such notice shall be
addressed to the shareholder at his address as it appears on the records of the
corporation. Notice of adjournment of a meeting need not be given if the time
and place to which it is adjourned are fixed and announced at such meeting. In
the event of a transfer of shares after the record date for
3
<PAGE>
AS AMENDED 12/14/99
determining the shareholders, it shall not be necessary to give notice to the
transferee. Nothing herein contained shall prevent the setting of a record date
in the manner provided by law, the Articles or the Regulations for the
determination of shareholders who are entitled to receive notice of or to vote
at any meeting of shareholders or for any purpose required or permitted by law.
(B) Following receipt by the President or the Secretary of a request in
writing, specifying the purpose or purposes for which the persons properly
making such request have called a meeting of the shareholders, delivered either
in person or by registered mail to such officer by any persons entitled to call
a meeting of shareholders, such officer shall cause to be given to the
shareholders entitled thereto notice of a meeting to be held on a date not less
than seven nor more than sixty days after the receipt of such request, as such
officer may fix. If such notice is not given within thirty days after the
receipt of such request by the President or the Secretary, then, and only then,
the person properly calling the meeting may fix the time of meeting and give
notice thereof in accordance with the provisions of the Regulations.
Section 1.05. Waiver of Notice. Notice of the time, place and purpose or
purposes of any meeting of shareholders may be waived in writing, either before
or after the holding of such meeting, by any shareholder, which writing shall be
filed with or entered upon the records of such meeting. The attendance of any
shareholder, in person or proxy, at any such meeting without protesting the lack
of proper notice prior to or at commencement of the meeting shall be deemed to
be a waiver by such shareholder of notice of such meeting.
Section 1.06. Quorum. At any meeting of shareholders, the holders of a
majority of the voting shares of the corporation then outstanding and entitled
to vote thereat, present in person or by proxy, shall constitute a quorum for
such meeting. The holders of a majority of the voting shares
4
<PAGE>
AS AMENDED 12/14/99
represented at a meeting, whether or not a quorum is present, or the Chairman or
the officer of the corporation acting as Chairman of the meeting, may adjourn
such meeting from time to time, and if a quorum is present at such adjourned
meeting any business may be transacted as if the meeting had been held as
originally called.
Section 1.07. Votes Required. At all elections of directors, the
candidates receiving the greatest number of votes shall be elected. Any other
matter submitted to the shareholders for their vote shall be decided by the vote
of such proportions of the shares, or of any class of shares, or of each class,
as is required by law, the Articles or the Regulations.
Section 1.08. Order of Business. The order of business at any meeting of
shareholders shall be determined by the officer of the corporation acting as
chairman of such meeting unless otherwise determined by a vote of the holders of
a majority of the voting shares of the corporation then outstanding, present in
person or by proxy, and entitled to vote at such meeting.
Section 1.09. Shareholders Entitled to Vote. Each shareholder of record on
the books of the corporation on the record date for determining the shareholders
who are entitled to vote at a meeting of shareholders shall be entitled at such
meeting to one vote for each share of the corporation standing in his name on
the books of the corporation on such record date. The directors may fix a record
date for the determination of the shareholders who are entitled to receive
notice of and to vote at a meeting of shareholders, which record date shall not
be a date earlier than the date on which the record date is fixed and which
record date may be a maximum of sixty days preceding the date of the meeting of
shareholders.
Section 1.10. Cumulative Voting. No holder of any class of shares of the
Corporation shall have the right to vote said shares cumulatively.
5
<PAGE>
AS AMENDED 12/14/99
Section 1.11. Proxies. At meetings of the shareholders, any shareholder of
record entitled to vote thereat may be represented and may vote by a proxy or
proxies appointed by an instrument in writing signed by such shareholder, but
such instrument shall be filed with the secretary of the meeting before the
person holding such proxy shall be allowed to vote thereunder. No proxy shall be
valid after the expiration of eleven months after the date of its execution
unless the shareholder executing it shall have specified therein the length of
time it is to continue in force.
Section 1.12. Inspectors of Election. In advance of any meeting of
shareholders, the directors may appoint inspectors of election to act at such
meeting or adjournment thereof; if inspectors are not so appointed, the officer
of the corporation acting as chairman of any such meeting may make such
appointment. In case any person appointed as inspector fails to appear or act,
the vacancy may be filled only by appointment made by the directors in advance
of such meeting, or, if not so filled, at the meeting by the officer of the
corporation acting as chairman of such meeting. No other person or persons may
appoint or require the appointment of inspectors of election.
Section 1.13. Shareholder Proposal Notice Procedure. Subject to the rights
of any holders of preferred shares, only persons who are nominated by, or at the
direction of, the Board of Directors of the Corporation or by a shareholder who
has given timely written notice to the President of the Corporation prior to the
meeting at which directors are to be elected, will be eligible for election as
directors of the Corporation. At an annual meeting, only such business may be
conducted as has been brought before the meeting by, or at the direction of, the
Board, or by a shareholder who has given timely written notice to the President
of the Corporation of such shareholder's intention to bring such business before
such meeting. To be timely, notice of shareholder nominations or proposals to be
made at an annual meeting must be received by the Corporation not less than 30
6
<PAGE>
AS AMENDED 12/14/99
days nor more than 60 days prior to the anniversary date of the prior year's
annual meeting of shareholders. If the anticipated date of next year's annual
meeting is more than 30 days earlier than the prior year's annual meeting, Sims
will so notify the shareholders.
A shareholder's notice to the Corporation proposing to nominate a person for
election as a director must contain: (i) the name, business address and
residence address of the shareholder making the nomination or proposal, and the
number of shares of the Corporation which are beneficially owned by the
shareholder; (ii) the name, age, business address and residence address of each
nominee proposed in such notice, (iii) the principal occupation or employment of
each such nominee for the previous five years; and (iv) the number of shares of
stock of the Corporation which are beneficially owned by each such nominee. No
person may be elected as a director unless he has been nominated by a
shareholder in the manner just described or by the Board of Directors. A
shareholder's notice to the Corporation relating to the conduct of business
other than the nomination of directors must contain: (i) the name, business
address and residence address of the shareholder making the proposal, and the
number of shares of the Corporation which are beneficially owned by the
proposing shareholder; (ii) a complete discussion of the proposal and the
address and telephone number to which the Corporation may direct any inquiries
it may have concerning the proposal. No shareholder proposal may be presented at
an annual meeting unless it has been first presented to the Corporation in the
manner just described. If the Chairman of the Board of other officer presiding
at a meeting determines that a person was not nominated, or other business was
not brought before the meeting, in accordance with the Shareholder Proposal
Notice Procedure, such person will not be eligible as a director, or such
business will not be conducted
7
<PAGE>
AS AMENDED 12/14/99
at such meeting, as the case may be. Nothing in this procedure shall be
interpreted or construed to require the inclusion of information about any
shareholder proposal in the Corporation's proxy statement.
ARTICLE 2
DIRECTORS
Section 2.01. Authority and Qualifications. Except where the law, the
Articles or the Regulations otherwise provide, all authority of the corporation
shall be vested in and exercised by a Board of Directors. Directors need not be
shareholders of the corporation.
Section 2.02. Number of Directors and Term of Office. Until changed in
accordance with the provisions of the Regulations, the number of directors shall
be five (5), three of whom shall be designated Class 1 directors who shall be
elected to a three-year term of office, to serve until their successors are duly
elected, qualified and serving or until their earlier resignation, removal from
office or death, and two of whom shall be designated Class 2 directors, who
shall be elected to a three-year term of office, to serve until the next annual
meeting of shareholders and until their successors are duly elected, qualified
and serving or until their earlier resignation, removal from office or death.
The number of directors may be fixed or changed at a meeting of the shareholders
called for the purpose of electing directors at which a quorum is present, only
by the affirmative vote of the holders of not less than a majority of the voting
shares which are represented at the meeting, in person or proxy, and entitled to
vote on such proposal, but no reduction in the number of directors shall of
itself have the effect of shortening the term of any incumbent director.
In addition, the Board of Directors of the Corporation may, by the
affirmative vote of a majority of the directors, change the number of directors
and fill any director's office that is created
8
<PAGE>
AS AMENDED 12/14/99
by an increase in the number of directors. No reduction in the number of
directors by the Board of Directors shall of itself have the effect of
shortening the term of any incumbent director.
Section 2.03. Election. At each annual meeting of shareholders for the
election of directors, the successors to the directors whose term shall expire
in that year shall be elected, but if the annual meeting is not held or if one
or more of such directors are not elected thereat, they may be elected at a
special meeting called for that purpose. The election of directors shall be by
ballot whenever requested by the presiding officer of the meeting or by the
holders of a majority of the voting shares outstanding, entitled to vote at such
meeting and present in person or by proxy, but unless such request is made, the
election shall be by voice vote.
Section 2.04. Removal. A director or directors may be removed from office,
with or without assigning any cause, only by the vote of the holders of shares
entitled to them to exercise not less than a majority of the voting power of the
corporation to elect directors in place of those to be removed. In case of any
such removal, a new director may be elected at the same meeting for the
unexpired term of each director removed. Failure to elect a director to fill the
unexpired term of any director removed shall be deemed to create a vacancy in
the Board.
Section 2.05. Vacancies. Any vacancy in the Board may be filled by the
remaining directors, though less than a majority of whole authorized number of
directors, by the vote of a majority of their number, for the unexpired term.
Section 2.06. Meetings. A meeting of the directors shall be held
immediately following the adjournment of each annual meeting of shareholders at
which directors are elected, and notice of such meeting need not be given. The
directors shall hold such other meetings as may from time to time be called, and
such other meetings of directors may be called by the Chairman. All meetings
9
<PAGE>
AS AMENDED 12/14/99
of directors may be held at the principal office of the corporation in Mt.
Gilead, Ohio, or at such other place within or without the State of Ohio as the
directors may from time to time determine by a resolution. Meetings of the
directors may also be held through any communications equipment if all persons
participating can hear each other.
Section 2.07. Notice of Meetings. Notice of the time and place of each
meeting of directors for which such notice is required by law, the Articles, the
Regulations or the By-laws shall be given to each of the directors by at least
one of the following methods:
A. By writing mailed not less than three days before such meeting and
addressed to the residence or usual place of business of a director, as such
address on the records of the corporation; or
B. By telegraph, cable, radio, wireless or a writing sent or delivered to
the residence or usual place of business of a director, as the same appears on
the records of the corporation, not later than the day before the date on which
such meeting is to be held, or
C. Personally or by telephone not later than the day before the date on
which such meeting is to be held.
Notice given to a director by any one of the methods specified in the
Regulations shall be sufficient, and the method of giving notice to all
directors need not be uniform. Notice of any meeting of directors may be given
only by the Secretary of the corporation or by the directors calling the
meeting. Any such notice need not specify the purpose or purposes of the
meeting. Notice of adjournment of a meeting of directors need not be given if
the time and place to which it is adjourned are fixed and announced at such
meeting.
Section 2.08. Waiver of Notice. Notice of any meeting of directors may be
waived in writing, either before or after the holding of such meeting, by any
director, which writing shall be filled with
10
<PAGE>
AS AMENDED 12/14/99
or entered upon the records of the meeting. The attendance of any director at
any meeting of the directors without protesting, prior to or at the commencement
of the meeting, the lack of proper notice shall be deemed to be a waiver by him
of notice of such meeting.
Section 2.09. Quorum. A majority of the whole authorized number of
directors shall be necessary to constitute a quorum for a meeting of directors,
except that a majority of the directors in office shall constitute a quorum for
filling a vacancy in the Board. The act of a majority of the directors present
at a meeting at which a quorum is present is the act of the Board, except as
otherwise provided by law, the Articles or the Regulations.
Section 2.10. Committees of the Directors. The directors may create one or
more committees of the directors, each to consist of not less than one (1)
director, and may delegate to such committees any of the authority of the
directors, however conferred, other than that of filling vacancies among the
directors or in any committee of the directors.
Such committee of the directors shall serve at the pleasure of the
directors and shall be subject to the control and direction of the directors.
Each of such committees of the directors may act by a majority of its members at
a meeting or by a writing or writings signed by all of its members. Meetings of
the committee of the directors may be held through any communications equipment
if all persons participating can hear each other.
Any act or authorization of any act by any such committee of the
directors, within the authority delegated to it, shall be as effective for all
purposes as the act or authorization of the directors. Notice of the time and
place of each meeting of any committee of the directors shall be given to each
of its members by at least one of the methods specified in Section 2.07 hereof.
A meeting of any
11
<PAGE>
AS AMENDED 12/14/99
committee of the directors may be called only by the President or by a member of
such committee of the directors.
Section 2.11. Compensation. Directors shall be entitled to receive as
compensation for services rendered and expenses incurred as directors, in such
amount as the directors may determine.
Section 2.12. By-Laws. The directors may adopt, and amend from time to
time, by-laws for their own government, which by-laws shall not be inconsistent
with the law, the Articles or the Regulations.
ARTICLE 3
OFFICERS
Section 3.01. Officers. The Officers of the corporation to be elected by
the directors shall be a President, one or more Vice Presidents, as the
directors may from time to time determine, a Secretary, a Treasurer and such
other officers and assistant officers as the directors may from time to time
elect. If the directors elect a Chairman of the Board, he must be a director.
Officers need not be shareholders of the corporation and may be paid such
compensation as the directors may from time to time determine. Any two or more
offices may be held by the same person, but no officer shall execute,
acknowledge or verify any instrument in more than one capacity if such
instrument is required by law, the Articles, or the Regulations to be executed,
acknowledged or verified by two or more officers.
Section 3.02. Tenure of Office. The officers of the corporation shall hold
office at the pleasure of the directors. Any officer of the corporation may be
removed, either with or without cause, at any time, by the affirmative vote of a
majority of all the directors then in office; such removal, however, shall be
without prejudice to any contract rights of the person so removed.
12
<PAGE>
Section 3.03. Duties of Officers. All officers, as between themselves and
the corporation, shall, respectively, have such duties as are determined by the
directors.
ARTICLE 4
SHARES
Section 4.01. Certificates. Certificates evidencing ownership of shares of
the corporation shall be issued to those entitled to them. Each certificate
evidencing shares of the corporation shall bear a distinguishing number, the
signatures of the President or a Vice President and of the Secretary, the
Treasurer or an Assistant Treasurer (except that when any such certificate is
countersigned by an incorporated transfer agent or registrar, such signatures
may be facsimile, engraved, stamped or printed), and any such recitals as may be
required by law. Certificates evidencing shares of the corporation shall be of
such tenor and design as the directors may from time to time adopt, and may
bear, in addition to the required recitals, such further recitals as are
permitted by law.
Section 4.02. Transfers. Where a certificate evidencing a share or shares
of the corporation is presented to the corporation or its proper agents with a
request to register transfer, the transfer shall be registered as requested if:
1. An appropriate person signs on each certificate so presented or signs
on a separate document an assignment or transfer of shares evidenced by each
such certificate or signs a power to assign or transfer such shares or when the
signature of an appropriate person is written without more on the back of each
certificate; and
2. Reasonable assurance is given that the endorsement of each appropriate
person is genuine and effective, the corporation or its agents reserving the
right to refuse to register a transfer of shares unless the signature of each
appropriate person is guaranteed by a commercial bank or trust company
13
<PAGE>
AS AMENDED 12/14/99
having an office or a correspondent in the City of Columbus, Ohio or in the City
of New York or by a firm having membership in the New York Stock Exchange;
3. All applicable laws relating to the collection of transfer or other
taxes have been compiled with; and
4. The corporation or its agents are not otherwise required or permitted
to refuse to register such transfer by any Agreement between the shareholders
then in effect.
Section 4.03. Transfer Agents and Registrars. The directors may appoint
one or more agents to transfer or to register shares of the corporation, or
both.
Section 4.04. Lost, Wrongfully Taken or Destroyed Certificates. Except as
otherwise provided by law, where the owner of a certificate evidencing shares of
the corporation claim that such certificate has been lost, destroyed or
wrongfully taken, the directors must cause the corporation to issue a new
certificate in place of the original certificate if the owner:
1. So requests before the corporation has notice that such original
certificates have been acquired by a bona fide purchaser; and
2. Files with the corporation, unless waived by the directors, an
indemnity bond, with surety or sureties satisfactory to the corporation in such
sum as the directors may, in their discretion, deem reasonably sufficient as
indemnity against any loss or liability that the corporation may incur by reason
of the issuance of each such new certificate; and
3. Satisfies any other reasonable requirements which may be imposed by the
directors, in their discretion.
14
<PAGE>
AS AMENDED 12/14/99
ARTICLE 5
INDEMNIFICATION
Section 5.01. Indemnification. The corporation shall indemnify each
director and officer, each former director and officer and each person who may
have served at its request as a director, trustee or officer of any other
corporation, partnership, joint venture, trust or other enterprise, to the
greatest extent permitted by Ohio law, with respect to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, to which such person was or is a party by reason of the fact
that he is or was a director or officer of the corporation or is or was serving
at its request as aforesaid. Indemnification hereunder shall include all
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement if actually and reasonably incurred by him in connection with such
action, suit or proceeding. Such expenses shall be paid in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the corporation. In
addition, the corporation may indemnify or agree to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was an employee or agent of
the corporation or is or was serving as an employee or agent of another
enterprise at the request of the corporation; subject, however, to the
limitations imposed by Ohio law. The indemnification provided by this section
shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under the Articles or any agreement, vote of
shareholders or disinterested directors or otherwise (including, without
limitation, insurance), both as to action in his official capacity and as to
action
15
<PAGE>
AS AMENDED 12/14/99
in another capacity while holding such office, and shall continue as to a person
who ceased to be a director, trustee, officer, employee or agent and shall inure
to the benefit of the heirs, executors, administrators and successors of such a
person.
ARTICLE 6
CERTAIN TRANSACTIONS
Section 6.01. Contracts or Transactions with Directors and Officers. No
contract or transaction shall be void or voidable with respect to the
corporation for the reason that it is between the corporation and one or more of
its directors or officers, or between the corporation and any other person in
which one or more of its directors or officers are directors, trustees, or
officers, or have a financial or personal interest, or for the reason that one
or more interested directors or officers participate in or vote at the meeting
of the directors or a committee thereof which authorized such contract or
transaction, if (a) the material facts as to his or their relationship or
interest and as to the contract or transaction are disclosed or are known to the
directors or the committee; and (b) the directors in good faith reasonably
justified by such facts, authorize the contract or transaction by affirmative
vote of a majority of the disinterested directors, even though the disinterested
directors constitute less than a quorum; or (c) the material facts as to his or
their relationship are disclosed or known to the shareholders entitled to vote
thereon and the contract or transaction is specifically approved at a meeting of
the shareholders held for such purpose by the affirmative vote of the holders of
shares entitling them to exercise a majority of the voting power of the
corporation held by persons not interested in the contract or transaction; or
(d) the contract or transaction is fair as to the corporation at the time it is
authorized or approved by the directors, a committee thereof or the
shareholders.
16
<PAGE>
AS AMENDED 12/14/99
Common or interested directors may be counted in determining the presence
of a quorum at any meeting of the directors or of a committee thereof which
authorizes the contract or transactions.
ARTICLE 7
MISCELLANEOUS
Section 7.01. Seal. If the corporation adopts a seal, it shall be
circular, about two inches in diameter, with the name of the corporation
engraved around the margin and the word "SEAL" engraved across the center.
Section 7.02. Amendments. The regulations may be amended or new
regulations may be adopted, at a meeting of shareholders held for such purpose,
by the affirmative vote of the holders of shares entitling them to exercise not
less than a majority of the voting power of the corporation on such proposal, or
without a meeting by the written consent of the holders of shares entitling them
to exercise not less than two-thirds of the voting power of the corporation.
Section 7.03. Action by Shareholders or Directors without a Meeting. Any
action which may be authorized or taken at a meeting of the shareholders or of
the directors or of a committee of the directors, as the case may be, may be
authorized or taken without a meeting with the affirmative vote or approval of,
and in a writing or writings, signed by all the shareholders who would then be
entitled to notice of a meeting of the shareholders held for such purpose or all
the members of such committee of the directors, respectively, which writings
shall be filed with or entered upon the records of the corporation.
17
<PAGE>
Exhibit 4.2
NUMBER SHARES
[LOGO]
Sims Agricultural Products Co.
INCORPORATED UNDER THE LAWS OF THE STATE OF OHIO
This Certifies that:
is the registered holder of:
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, NO PAR VALUE, OF
Sims Agricultural Products Co.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned by the Transfer
Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signature of its
duly authorized officers.
[SEAL]
DATED: ATTEST: Sims Agricultural Products Co.
By: By:
Secretary President
<PAGE>
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in fill
according to applicable laws or regulations.
<TABLE>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT..................Custodian.........................
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right under Uniform Gifts to Minors Act
of survivorship and not as ....................................................
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
TERMS
This certificate and the shares represented thereby shall be held subject to all
of the provisions of the Articles of Incorporation and the By-Laws of said
Corporation, a copy of each of which is on file at the office of the
Corporation, and made a part hereof as fully as though the provisions of said
Articles of Incorporation and By-Laws were imprinted in full on this
certificate, to all of which the holder of this certificate, by acceptance
hereof, assents and agrees to be bound.
For value received, hereby sell, assign and
----------------------------
transfer under
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- ------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
shares
- -------------------------------------------------------------------------
of the capital 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 Corporation with
full power of substitution in the premises.
Dated
-------------------------------
---------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATEVER
<PAGE>
Exhibit 4.3
Sims Agricultural Products Co.
an Ohio corporation
----------------------
Non-Negotiable Subordinated Promissory Note
Date: June 21, 1999 $5,000.00
Sims Agricultural Products Co., an Ohio profit corporation ("Company"),
for value received, hereby promises to pay to Thomas H. Cunningham, an
individual residing at 975 Taylor Road, Mansfield, Ohio 44903 ("Holder") the
principal sum of Five Thousand and 00/100 Dollars, plus interest under this
Note, on or before June 30, 2002, at the office of the Company at 3795 County
Rd. 29, Mt. Gilead, Ohio.
This Note evidences an indebtedness of $5,000.00 and the following is a
statement of the rights of the Holder of this Note and the conditions to which
this Note is subject, to all of which the Holder, by the acceptance of this
Note, assents:
1. Subordination. The rights of the Holder to the principal sum or any
part thereof, or interest thereon, are and shall remain subject and subordinate
to all "senior indebtedness", defined to mean the principal of and premium, if
any, and interest, now or hereafter owing, on the following, whether outstanding
on the date of issuance of this Note or thereafter incurred or created (see
subordination agreement with National City Bank):
(a) Any and all promissory notes or other evidences of indebtedness
of the Company to National City Bank, including but not limited to the
following: (i) Demand Line of Credit/Prime dated November 6, 1997, in the
original principal amount of $4,500,000; (ii) Commercial Installment Note
dated January 12, 1996, in the original principal amount of $610,000;
(iii) Replacement Promissory Note dated January 12, 1996, in the original
principal amount of $645,286.20, (iv) Commercial Note: Term Multiple
Advance/Prime dated March 14, 1997, in the original principal amount of
$500,000; and (v) Commercial Installment Note dated November 21, 1997, in
the original principal amount of $300,000.
(b) indebtedness or obligations of the Company under any written
contract or commitment;
(c) renewals, extension or refunding if any of the indebtedness or
obligations referred to in the preceding clauses (a) and (b).
(d) This note is not subordinated to the notes to Ross Strayer and
Dallas Paul for $375,050 each. Those notes are subordinated to this note.
2. Interest. Company must pay interest on the outstanding principal
balance of this Note from June 21, 1999 at the rate of twelve percent (12%) per
annum. Interest is calculated on the basis of a 360-day year, and is payable
monthly on the last day of each month commencing
1
<PAGE>
July 30, 1999 through June 30, 2002. Interest is payable by mail to the
registered address of the Holder hereof or by wire according to Holder's
instructions.
If any interest payment is past due and remains unpaid more than thirty
(30) days from its initial due date, the Company must issue to the Holder a
warrant entitling the Holder to purchase, at $0.01 per share, one (1) share of
the common stock of the Company for every $1.00 of that month's past due and
unpaid interest. The warrants will expire June 30, 2006 and are subject to the
additional terms and provisions set forth in the Warrant Plan and Warrant
Certificate attached hereto as "Exhibit A."
3. Prepayment. The Company may prepay the principal hereunder at any time,
in whole or in part, without premium or penalty thereon. Unless Company
designates to the contrary in writing at the time of any prepayment, the
prepayment will be applied first to principal, then to interest under this Note.
4. Nonrecourse. This Note is the obligation of the Company only, and no
recourse may be had for the payment thereof against any shareholder, officer, or
director of the Company, directly or through the Company, by virtue of any
statute for the enforcement of any assessments or otherwise, all such liability
of shareholders, directors and officers as such being released by the Holder
hereof by the acceptance of this Note.
5. Remedies. Nothing contained in this Note shall impair, as between the
Company, the Company's creditors other than the Holders of indebtedness to which
this Note is subordinated, and the Holder of this Note, the obligation of the
Company, which is absolute and unconditional, to pay the Holder of this Note the
principal of, and premium, if any, on this Note, as and when due and payable in
accordance with its terms, nor shall anything in this Note prevent the Holder of
this Note from exercising all remedies otherwise permitted by law upon the
occurrence of any event of default, subject to the rights, if any, of the
Holders of indebtedness to which this Note is subordinated, upon the exercise of
any such remedy.
6. Default. If any of the following events occur, which shall be referred
to as an event of default, the entire unpaid principal and accrued interest
hereon shall become immediately due and payable:
(a) default in the payment of principal of the Note at maturity;
(b) the liquidation or dissolution of the Company;
(c) entry of a decree or order adjudging the Company bankrupt or
insolvent, or approving a petition seeking reorganization, arrangement,
adjustment or composition under the Federal Bankruptcy Act or any other
applicable federal or state law, or appointing a receiver, liquidator,
assignee, trustee or other similar official of the Company or of any
substantial part of its property or ordering the winding up or liquidation
of its affairs and the continuance of any such decree or order in effect
for a period of sixty consecutive days; or
2
<PAGE>
(d) the institution by the Company of proceedings to be adjudicated
a bankrupt or insolvent, or the consent by it to the institution of such
proceedings or the filing of a petition or answer or consent seeking
reorganization or release under the Federal Bankruptcy Act or any other
applicable federal or state law, or the consent by the Company to the
filing of any such petition or to the appointment of a receiver,
liquidator, assignee, trustee or other similar official of the Company or
of any substantial part of its property;
(e) the making by the Company of an assignment for the benefit of
creditors, or the admission by the Company in writing of its inability to
pay its debts generally as they become due, or the taking of corporate
action by the Company in furtherance of any such action.
In the event of default under Section 6(a), the Company also must issue to
the Holder three (3) warrants, each of which entitles the Holder to purchase, at
$0.01 per share, one (1) share of the common stock of the Company for every
$1.00 of principal which is due but unpaid on the maturity date. The warrants
will expire June 30, 2006 and are subject to the additional terms and provisions
set forth in the Warrant Plan and Warrant Certificate attached hereto as
"Exhibit A."
7. Waivers. Company and all persons now or hereafter liable for the
payment of the principal or interest due on this Note or any part thereof do
expressly waive presentment for payment, notice of dishonor, protest, notice of
protest, nonpayment and diligence in bringing suit, and, in exercising any right
hereunder, shall be deemed to have waived such rights under this Note.
8. Consents. Company and all persons now or hereafter liable for the
payment of the principal due on the Note or any part thereof consent that the
time of payment may be extended from time to time by Holder without notice and
without effect on any of the Holder's rights hereunder.
9. Severability. If any provision of this Note is declared illegal,
invalid, unreasonable or unenforceable, such provision will be deemed canceled
to the same extent as though it never had appeared herein, but the remaining
provisions shall not be affected thereby.
10. Notices. Any notice to Company or Holder provided for in this Note
must be given by mailing such notice to Company or Holder, as the case may be,
at the address designated above, or at such other address as may be designated
in writing by one party to the other.
11. Amendment. This Note may be amended only by a writing signed by both
parties.
3
<PAGE>
12. Applicable Law and Forum. This Note shall be construed under the laws
of the State of Ohio. Any action or proceeding arising out of or in connection
with this Note shall be instituted in the courts within the State of Ohio.
13. Non-negotiability. The holder hereof may not sell, assign, pledge,
hypothecate, convey or otherwise transfer this Note or any of its rights
hereunder without the prior written consent of the Company.
IN WITNESS WHEREOF, the Company has signed this Note on June 21, 1999.
Sims Agricultural Products Co.
-----------------------------------
By: Dallas H. Paul, President
ATTEST:
- ---------------------------------
Thomas H. Cunningham, Secretary
THIS NOTE WAS ISSUED ON , 1999, WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED, ("THE ACT") IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION
CONTAINED IN SECTION 4(2) AND/OR REGULATION D, RULE 506 PROMULGATED THEREUNDER,
AND/OR SECTION 4(6) AND/OR SECTION 3(B) AND REGULATION D, RULE 504 PROMULGATED
THEREUNDER, AND STATE SECURITIES LAWS. NO TRANSFER OR ASSIGNMENT OF THIS NOTE OF
OR ANY INTEREST THEREIN MAY BE MADE EXCEPT WITH THE PRIOR WRITTEN CONSENT OF THE
COMPANY AND PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT,
UNLESS THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH TRANSFER OR ASSIGNMENT DOES NOT REQUIRE REGISTRATION UNDER THE ACT AND
STATE SECURITIES LAWS.
4
<PAGE>
Exhibit 4.4
WARRANT AGREEMENT
This Warrant Agreement ("Agreement") effective the 21st day of June,
1999 is entered into by and between SIMS AGRICULTURAL PRODUCTS CO., an Ohio
corporation, (hereinafter referred to as the "Company") and Thomas H. Cunningham
("Holder").
W I T N E S S E T H:
WHEREAS, as of the effective date of this Agreement, the Company is
authorized to issue Four Million (4,000,000) shares of common stock on such
terms, conditions and provisions as the Board of Directors of the Company may
from time to time determine; and
WHEREAS, the Board of Directors has authorized the Company to issue
5,000 warrants to purchase common shares of the Company to Holder
pursuant to a Subscription Agreement effective June 21, 1999, (the "Agreement"),
which Agreement is expressly incorporated herein by reference.
NOW, THEREFORE, pursuant to the applicable laws of the State of Ohio, the
parties hereto hereby agree as follows:
1. Redeemable Nontransferable Common Stock Purchase Warrant. The Company
shall issue to Holder, in accordance with the Agreement, 5,000 Common Share
Purchase Warrants (hereinafter referred to as "Warrants"). The Warrants
shall be evidenced by a Warrant Certificate in the form attached hereto as
Exhibit A, the terms and provisions of which are expressly incorporated herein
by reference. Holder may not transfer, assign, pledge or hypothecate any Warrant
without the prior written consent of the Company.
2. Declared Value. The declared value of each Warrant shall be One Cent
($.01).
3. Exercise Price. The exercise price of the Warrants shall be One Cent
($0.01).
4. Par Value. Each common share issuable upon exercise of the Warrants
shall have no par value.
5. Warrant Rights. No Warrant Holder as such, shall be able to vote or
receive dividends or be deemed the Holder of shares of common stock for any
purpose, nor shall anything contained in any Warrant Certificate be construed to
confer upon any Warrant Holder, as such, any of the rights of the shareholder of
the Company or any right to vote, give or withhold consent to any action by the
Company (whether upon recapitalization, issuance of stock, reclassification of
stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings or other actions affecting shareholders, receive dividends or
subscription rights or otherwise, until such Warrants shall have been exercised
and the shares of common stock purchasable upon the exercise thereof, shall
become deliverable as provided in this Warrant Agreement.
1
<PAGE>
If any Warrant Certificate is lost, stolen, mutilated or destroyed, the
Company may, on such terms as to such indemnification or otherwise as it may, in
its discretion, impose (which shall, in the case of a mutilated Warrant
Certificate, include the surrender thereof), issue a new Warrant Certificate of
like denomination and tenor as, and in substitution for, the Warrant Certificate
so lost, stolen, mutilated or destroyed.
6. Warrant Exercise. The Warrants may not be exercised until after June
30, 2000. Thereafter, the Warrants are exercisable as follows: 1,667 Warrants
are exercisable at any time after June 30, 2000; 1,666 Warrants are exercisable
at any time after June 30, 2001; and 1,666 Warrants are exercisable at any time
after June 30, 2002. All of the Warrants expire June 30, 2006. The Warrant
Holder may exercise a Warrant, in whole or in part, by surrendering the Warrant
Certificate, with the subscription form thereon duly executed, to the Company or
its Warrant Agent if any, at the appropriate corporate office, together with the
exercise price for each share of common stock to be purchased, payable in lawful
money of the United States, or by certified check, bank draft or postal or
express money order payable in United States dollars to the order of the
Company. All common shares issued upon the exercise of the Warrants shall be,
upon receipt by the Company of payment therefor, validly issued and outstanding
and fully paid and nonassessable. In case any Warrant Holder shall exercise his
Warrant with respect to less than all of the shares of common stock that may be
purchased under such Warrant, a new Warrant Certificate, continuing on the same
terms as the exercised Warrant Certificate except as to the number of shares
subject to purchase thereunder, shall be countersigned and delivered to or upon
the order of said Warrant Holder.
7. Adjustment of Shares of Common Stock Purchasable or of Warrant Price.
The number of Common Shares purchasable or the Warrant Price, or both, are
subject to adjustment from time to time as follows:
(a) In case the Company shall at any time split, reverse split,
subdivide or combine its outstanding common shares, by reclassification or
otherwise, the Warrant Price or the number of Shares purchasable upon
exercise thereof, or both, then in effect shall be proportionately
decreased or increased, as the case may be, effective simultaneously with
the effective date of such split, reverse split, subdivision or
combination. The Company shall have the option of choosing either an
adjustment in the Warrant Price or the number of Shares purchasable upon
exercise of a Warrant, or a combination of the two. A dividend in the form
of common stock shall be considered a subdivision of shares for the
purposes of this paragraph.
(b) In case of any capital reorganization or of any reclassification
of the common shares of the Company, the Company shall execute an
amendment to this Agreement, providing that the Warrants shall, upon such
capital reorganization or reclassification, evidence the right to purchase
the number of shares of stock or other securities or property of the
Company to which the common shares issuable (at the time of such capital
reorganization or reclassification of common stock) upon exercise of the
Warrants would have been entitled upon such capital reorganization or
reclassification of common shares; and in any such case, if necessary, the
provisions set forth herein
2
<PAGE>
with respect to the rights and interests thereafter of the Warrant Holder
shall be appropriately adjusted so as to be applicable, as nearly as may
reasonably be, to any shares of stock or other securities or property
thereafter deliverable on the exercise of the Warrants. Any such
adjustment which shall be approved by the Board of Directors of the
Company shall for all purposes of this Section 7 conclusively be deemed to
be an appropriate adjustment.
(c) Anything in this Section 7 to the contrary notwithstanding, the
Company shall not be required, except as hereinafter provided, to make any
adjustment of the Warrant Price in any case in which the amount by which
such Warrant Price would be reduced in accordance with the foregoing
provisions would be less than $.10, but in such case any adjustment that
would otherwise be required then to be made will be carried forward and
made at the time and together with the next subsequent adjustment which,
together with any and all such adjustments so carried forward, shall
amount to not less than $.10, provided, however, that adjustments in the
Warrant Price shall be required and made in accordance with the provisions
of this Section 7 (other than this subparagraph c) not later than such
time as may be required in order to preserve the tax-free nature of any
distribution (within the meaning of Section 305 of the United States
Internal Revenue Code of 1986, as amended) to the Warrant Holder or the
holders of common stock. In the event of any split, reverse split,
subdivision or combination of shares of common stock, the $.10 referenced
in this paragraph (as theretofore decreased or increased) shall be
proportionately decreased or increased.
(d) Upon each adjustment of the Warrant Price pursuant to
subparagraphs (a), (b) and (c) of this Section 7, the number of common
shares specified in each Warrant Certificate shall thereupon evidence the
right to purchase that number of common shares (calculated to the nearest
hundredth of a common share) obtained by multiplying the number of common
shares purchasable immediately prior to such adjustment upon exercise of
such Warrant by the Warrant Price in effect immediately prior to such
adjustment and dividing the product so obtained by the Warrant Price in
effect after such adjustment.
(e) Whenever the Warrant Price or the number of common shares
issuable upon the exercise of a Warrant shall be adjusted as herein
provided:
(i) the Company shall compute the adjusted Warrant Price or
the adjusted number of common shares in accordance with such
provisions and shall prepare a certificate signed by its President,
and any Vice President, Treasurer or Secretary, setting forth the
adjusted Warrant Price or the adjusted number of shares of common
stock issuable upon the exercise of a Warrant and showing in
reasonable detail the facts upon which such adjustments are based;
(ii) the Company shall cause to be mailed to the Warrant
Holder in accordance with the provisions of Section 11 hereof a
notice stating that the Warrant Price or the number of shares of
common stock purchasable upon
3
<PAGE>
exercise of the Warrants, or both, have been adjusted and setting
forth the adjusted Warrant Price or the adjusted number of shares of
common stock purchasable upon the exercise of a Warrant.
(f) In case at any time after the date of this Agreement:
(i) the Company shall declare a dividend (or any other
distribution) on its common stock payable otherwise than in cash out
of its undistributed net income;
(ii) the Company shall authorize the grant to the holders of
its common shares of rights to subscribe for or purchase any shares
of any class or of any other rights;
(iii) there shall be any reclassification of the common shares
(other than a split, reverse split, subdivision or combination of
its outstanding common shares);
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be mailed to the Warrant Holder in
accordance with the provisions of Section 11 hereof, at least 20 days
prior to the applicable record date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights, or, if a record is not to be taken,
the date as of which the holders of common shares of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the
date on which such reclassification, dissolution, liquidation or winding
up is expected to become effective, and the date as of which it is
expected that holders of common shares of record shall be entitled to
exchange their common shares for securities or other property deliverable
upon such reclassification, dissolution, liquidation or winding up.
(g) The form of Warrant Certificate need not be changed because of
any change in the Warrant Price or in the number of common shares
purchasable upon the exercise of a Warrant pursuant to this Section 7 and
Warrant Certificates issued after such change may state the same Warrant
Price and the same number of common shares as are stated in the Warrant
Certificates initially issued pursuant to this Agreement. However, the
Company may at any time in its sole discretion (which shall be conclusive)
make any change in the form of Warrant Certificate that it may deem
appropriate that does not affect the substance thereof, and any Warrant
Certificate thereafter issued or countersigned, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be
in the form as so changed.
8. Issuance of Shares Upon Exercise of Warrants. The issuance of shares
and any offer to issue shares upon exercise of the Warrants is conditioned upon
the availability of an
4
<PAGE>
exemption from registration of such issuance under Section 4(2) or Regulation D,
Rule 506 or Section 4(6) of the Securities Act of 1933, as amended (the "Act")
and corresponding state securities laws, or some other exemption from
registration under federal and state securities laws acceptable to the Company.
Holder understands and agrees that the Warrants and the Common Shares to be
issued upon exercise of the Warrants will be considered "restricted" securities
within the meaning of the Act and will be subject to significant limitations on
resale under the Act and state securities laws. Prior to the issuance of such
shares, the Company shall secure from its counsel an opinion to the effect that
the issuance of the shares on the exercise of the Warrants will be a transaction
exempt from registration under applicable federal and state securities laws.
Prior to the resale of such shares, Holder shall secure from his counsel an
opinion to the effect that the resale of the shares received on the exercise of
the Warrants will be done in compliance with applicable federal and state
securities laws. Holder shall indemnify and hold harmless the Company for all
claims, losses or expenses, including attorney fees, arising out of Holder's
failure to comply with all applicable securities laws. The Company shall
indemnify and hold harmless Holder for all claims, losses or expenses, including
attorney fees, arising out of the Company's failure to comply with all
applicable securities laws.
9. Exemption of Shares of Common Stock Issuable Upon Exercise of Warrants.
If any shares of common stock issuable upon the exercise of a Warrant require
the filing of any document or notice or approval of any governmental authority,
or the taking of any other action under the laws of the United States of America
or any state, before such shares of common stock may be validly issued pursuant
to exemption from registration under the laws of the United States of America or
any state, then the Company covenants and represents to the Warrant Holder that
it will in good faith and as expeditiously as possible endeavor to prepare and
make such filing, secure such approval or to take such other action as the case
may be, at its sole expense; provided, however, that in no event shall such
shares of Common Stock be issued, and the Company shall be authorized hereby to
suspend the exercise of all Warrants for the period during which it is
endeavoring to obtain such approval or take such other action. In the event the
Company shall, at any time, suspend the exercise of Warrants as aforesaid, the
expiration date of the Warrants in effect at the date of each such suspension
shall be extended for the number of days such suspension shall be in effect.
10. Warrant Redemption. The Warrants are redeemable by the Company at any
time after issuance through the expiration date of June 30, 2006 at the declared
value of $.01 per Warrant ("Redemption Price"). If the Company shall elect to
redeem Warrants as permitted herein, notice of redemption shall be given to the
Holder of all outstanding Warrants to whom the redemption shall apply by mailing
first class mail a notice of such redemption not less than 60 days prior to the
date fixed for the redemption at his last address as it shall appear upon the
books of the Company, but failure to give such notice by mailing to any Holder
of the Warrant, or any defect therein, shall not effect the legality or validity
of the proceedings for the redemption of any other Warrant. The notice of
redemption to each Holder of Warrants shall specify the date fixed for
redemption (the "Redemption Date") and the Redemption Price, and shall state
that payment of the Redemption Price of the Warrants will be made at the office
of the Company or its Warrant Agent, if any, upon presentation and surrender of
such
5
<PAGE>
Warrants, and shall also state that the right to exercise the Warrants so
redeemable shall terminate on the Redemption Date (stating such date). If the
giving of notice of redemption shall have been completed as above provided, and,
in the case where a Warrant Agent is utilized, its funds sufficient for the
redemption of the Warrant shall have been deposited with the Warrant Agent for
such purpose, the right to exercise the Warrants shall terminate at the close of
business on the Redemption Date, and the Holder of each Warrant shall thereafter
be entitled upon surrender of his Warrant only to receive the Redemption Price
for such Warrant, without interest.
11. Notice. All notices due to a party to this Agreement shall be sent by
U.S. mail, regular postage, at the following addresses:
Sims Agricultural Products Co.
Attn: Dallas H. Paul, President
3795 County Road 29
Mt. Gilead, Ohio 43338
Thomas H. Cunningham
975 Taylor Road
Mansfield, Ohio 44903
or at such other address or addresses as any party may from time to time furnish
to the others in writing.
12. Rights. Except for the rights and privileges specifically set forth
herein, the Holder of the Warrants shall have no other rights, powers,
authorities or privileges as holders of stock of the Company and each Warrant
Holder expressly waives all of such rights to the extent permitted by law.
13. Liability. The Company and the Board of Directors of the Company and
each member thereof will incur no liability for the creation of a series of
preferred stock or a new class of common stock so long as they acted in good
faith in the creation of any such series or class. The Board of Directors'
determination of the dividend rate with respect to any such series or classes of
shares shall be final and conclusive and so long as the Board of Directors acted
in good faith and with reasonable prudence, no Holder of any share of common
stock or Warrant shall have any right to make any claim against any member of
the Board of Directors of the Company. Holders of common shares or Warrants of
the Company shall and do hereby save harmless each member of the Board of
Directors of the Company for any actions taken by them in connection with this
Agreement or the issuance of series or other classes of preferred or common
stock.
14. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Ohio, and the parties agree to submit
themselves to the jurisdiction of the courts of that state, with venue in Morrow
County, for the resolution of any dispute arising hereunder.
6
<PAGE>
15. Titles. The titles and headings contained in this Agreement are for
convenience only and shall not affect the interpretation of any of the terms
hereof.
16. Copies. A copy of this Agreement shall be mailed by the Company to
Warrant Holder upon the written request of such Warrant Holder.
17. Cooperation and Further Assurances. The parties hereto agree that they
will execute and deliver to each other and third parties any and all documents
in addition to those expressly provided for herein that may be necessary or
appropriate to effectuate the provisions of this Agreement, whether before, on
or after the date hereof. The parties mutually agree to cooperate with each
other to the extent reasonably required in order to fully accomplish the
transactions herein contemplated.
18. Amendments. No amendments or variation of the terms and conditions of
this Agreement shall be valid unless evidence by arriving signed by all parties
to this Agreement.
19. Integration. All agreements, contracts, understandings or arrangements
which may have been heretofore made or had with reference to the subject matter
of this Agreement are hereby wholly abrogated, superseded, discharged and
annulled, it being agreed between the parties that this Agreement constitutes
and expresses the entire understanding between them, all other promises,
representations, agreements, understandings and arrangements being herein
merged.
20. Legal Representation. The parties hereto have carefully read this
Agreement and have had ample time and opportunity to discuss the terms and
contents of this Agreement with their attorneys and other advisors and know and
understand the contents of this Agreement. The parties hereto have signed this
Agreement as their own free and voluntary acts.
21. Non-Waiver. The failure of any party to insist in any one or more
instances upon performance by another party of any of the terms and conditions
of this Agreement shall not be construed as a waiver or relinquishment of the
future performance thereof, and the other's obligation with respect to such
future performance shall continue in full force and effect.
22. Restrictions on Assignment. The provisions of this Agreement
pertaining to the rights and duties of Holder are personal to Holder and Holder
shall not assign any such right or delegate any such duty without the prior
written consent of the Company. The Company shall have the right to assign this
Agreement without the consent of Holder.
IN WITNESS WHEREOF, this Agreement has been executed the 21st day of
June, 1999.
7
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO.
By:
----------------------------------
Dallas H. Paul, President
--------------------------------------
"Holder"
8
<PAGE>
EXHIBIT A
WARRANT CERTIFICATE
9
<PAGE>
Exhibit 4.5
REDEEMABLE WARRANT TO PURCHASE
COMMON SHARES OF
SIMS AGRICULTURAL PRODUCTS CO.
Certificate # WA____________ Warrant for 5,000 Shares
VOID AFTER 5:00 P.M., OHIO TIME, ON JUNE 30, 2006, OR IF SUCH DAY IS NOT A
BUSINESS DAY, AS DEFINED ON THE REVERSE SIDE HEREOF, AT 5:00 P.M., OHIO TIME, ON
THE NEXT FOLLOWING BUSINESS DAY, UNLESS EXTENDED BY SIMS AGRICULTURAL PRODUCTS
CO. OR PURSUANT TO THE PROVISIONS OF PARAGRAPH 4 ON THE REVERSE SIDE HEREOF.
This certifies that, for value received, Thomas H. Cunningham (the
"Warrant Holder") is entitled to purchase from SIMS AGRICULTURAL PRODUCTS CO.,
(the "Company"), subject to the terms and conditions hereof and of the Warrant
Agreement mentioned below, at any time after the date hereof until 5:00 p.m.
Ohio time on June 30, 2006, or, if such day is not a Business Day, as defined on
the reverse side hereof at or before 5:00 p.m. Ohio time on the next following
Business Day (the "Expiration Date"), the number of fully paid and nonassessable
common shares, without par value, of the Company (the "Common Shares") stated
above, at the price of $0.01 per Common Share, subject to adjustment as provided
in the Warrant Agreement, by surrendering this Warrant Certificate with the
Subscription Form on the back hereof duly executed, at the office of the Company
in the City of Mt. Gilead, Ohio, or at the office of its Warrant Agent, if any,
and by paying, in full and lawful money of the United States, or by certified
check, bank draft, or postal or express money order payable in United States
Dollars to the order of the Company, the purchase price for each share of Common
Stock as to which this Warrant Certificate is being exercised and upon
compliance with and subject to the exceptions set forth herein and in said
Warrant Agreement.
In case the Warrant Holder shall exercise this Warrant with respect to
less than all of the Common Shares that may be purchased hereunder, a new
Warrant Certificate in respect of the Common Shares as to which this Warrant was
not exercised, continuing on the same terms and conditions as this Warrant
Certificate, shall be signed and delivered to or upon the order of the Warrant
Holder.
In certain contingencies provided for in the Warrant Agreement (to which
reference is hereby specifically made), the number of Common Shares subject to
purchase hereunder the purchase price per share thereof or both, are subject to
adjustment.
In the event this Warrant is not exercised on or before the Expiration
Date with respect to all of the Common Shares that may be purchased hereunder,
this Warrant Certificate shall become void and of no effect.
This Warrant Certificate is issued under and in accordance with the
Warrant Agreement between the Company and the Warrant Holder effective June 21,
1999, and is subject to the terms and provisions contained therein, to all of
which terms and provisions the holder of this Warrant Certificate consents by
acceptance hereof. Copies of the Warrant Agreement are on file at the principal
corporate office of the Company.
THIS WARRANT SHALL BE WHOLLY VOID AND OF NO EFFECT AFTER 5:00 P.M., OHIO
TIME, ON JUNE 30, 2006, OR IF SUCH DAY IS NOT A BUSINESS DAY, AFTER 5:00 P.M.,
OHIO TIME, ON THE NEXT FOLLOWING BUSINESS DAY, UNLESS EXTENDED BY SIMS
AGRICULTURAL PRODUCTS CO., OR PURSUANT TO THE PROVISIONS OF PARAGRAPH 4 ON THE
REVERSE SIDE HEREOF.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed by its President or Vice President by manual or facsimile signature
attested by its Secretary or Assistant Secretary, by manual or facsimile
signature, and a facsimile of its corporate seal to be affixed or imprinted
hereon.
SIMS AGRICULTURAL PRODUCTS CO.
1990
OHIO
SIMS AGRICULTURAL PRODUCTS CO. ATTEST:
By: By:
Dallas H. Paul President Thomas H. Cunningham, Secretary
<PAGE>
SIMS AGRICULTURAL PRODUCTS CO.
1. The Warrant or Warrants represented by this Warrant Certificate (the
"Warrant") may not be exercised until after August 31, 2000. Thereafter, the
Warrants are exercisable as follows: 17,667 Warrants are exercisable at any time
after August 31, 2000; 17,666 Warrants are exercisable at any time after August
31, 2001 and 17,666 Warrants are exercisable at any time after August 31, 2002.
All of the Warrants shall expire at and shall not be exercisable after 5:00
p.m., Ohio time, on August 31, 2006. If any of said dates shall not be a
Business Day (which, as used in this Warrant Certificate, shall mean a day other
than a Saturday, Sunday or other day on which banks in the State of Ohio are
authorized by law to remain closed), then the Warrant shall be exercisable, or
shall expire at and shall not be exercisable, as the case may be, after 5:00
p.m., Ohio time, of the next following date which is a Business Day (the
"Expiration Date").
2. The purchase price for each Common Share purchasable pursuant to the exercise
of the Warrants (hereinafter referred to as the "Warrant Purchase Price") shall
be $0.01 per share (subject to adjustment or provided in the Warrant Agreement),
payable as provided on the face of this Warrant Certificate and in the Warrant
Agreement.
3. Anything contained herein to the contrary notwithstanding, the Company shall
not be required to issue any fraction of a Common Share in connection with the
exercise of rights to purchase under this Warrant, and in any case where the
Warrant Holder would, except for the provisions of this Paragraph 3, be entitled
under the terms of this Warrant to receive a fraction of a Common Share upon the
exercise of this Warrant, the Company shall, upon exercise of the Warrant and
receipt of the Warrant Purchase Price, issue the largest number of whole Common
Shares to which this Warrant is entitled. Except upon the exercise of this
Warrant and its conversion into the right to receive Common Shares, the Company
shall not be required to make any cash or other adjustment in respect of such
fraction of a Common Share to which the Warrant Holder would otherwise be
entitled. In the event of the exercise of this Warrant, the Company shall not be
required to issue an fraction of a Common Share and may at its option pay cash
in lieu of the issuance of such fractional shares, valued at the price of a
Common Share immediately prior to the close of business on the date of such
exercise. The Warrant Holder, by the acceptance of this Warrant, expressly
waives his right to receive a certificate for any fraction of a Common Share or
a fractional Warrant upon exercise hereof.
4. Subject to the terms set forth herein, this Warrant Certificate may be
exercised at the principal corporate office of the Company in the City of Mt.
Gilead, State of Ohio, by the registered holder hereof or by his duly authorized
representative or attorney, upon surrender of this Warrant Certificate duly
endorsed or accompanied (if so required by the Company) by a written instrument
or instruments satisfactory to the Company. If the right to purchase less than
all of the Common Shares covered hereby shall be so exercised, the registered
holder hereof shall be entitled to receive a new Warrant Certificate or Warrant
Certificates covering in the aggregate the whole number of Common Shares with
respect to which the right to purchase shall not have been so exercised.
5. If any Common Shares issuable upon the exercise of this Warrant require the
filing of any document or notice or approval of any governmental authority, or
the taking of any other action under the laws of the United States of America or
any state, before Shares may be validly issued pursuant to an exemption from
federal and state registration acceptable to the Company, then the Company
covenants and represents that it will in good faith and as expeditiously as
possible endeavor to prepare and make such filing, secure such approval or to
take such other action as the case may be, at its full expense; provided,
however, that in no event that such Shares of Common Stock be issued, and the
Company is authorized to suspend the exercise of all Warrants for the period
during which is endeavoring to obtain such approval or take such other action.
In the event the Company shall, at any time, suspend the exercise of Warrants as
aforesaid, the expiration date of this Warrant in effect at the date of each
such suspension shall be extended for the number of days such suspension shall
be in effect.
6. No Warrant Holder, as such, shall be entitled to vote or receive dividends or
be deemed the holder of Common Shares for any purpose, nor shall anything
contained in this Warrant Certificate be construed to confer upon any Warrant
Holder, as such, any of the rights of a shareholder of the Company or any right
to vote, give or withhold consent to any action by the Company (whether upon any
recapitalization, issuance of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings or other actions
affecting shareholders (except as provided in the Warrant Agreement), receive
dividends or subscription rights, or otherwise, until this Warrant shall have
been exercised and the Common Shares purchasable upon the exercise hereof shall
have become deliverable as provided in the Warrant Agreement.
7. The Company may deem and treat the registered holder hereof as the absolute
owner of this Warrant Certificate (notwithstanding any notations of ownership or
writing hereon made by anyone other than the Company) for all purposes and shall
not be affected by any notice to the contrary.
8. This Warrant shall be binding upon any successors or assigns of the Company.
9. THE WARRANT RIGHTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT") OR ANY STATE
SECURITIES LAWS, BUT HAVE BEEN ISSUED IN RELIANCE UPON EXEMPTIONS THEREFROM.
ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD
PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED UNLESS THERE IS IN
EFFECT WITH RESPECT TO SAID WARRANT RIGHTS A REGISTRATION STATEMENT PURSUANT TO
THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE HOLDER HEREOF SHALL
HAVE RECEIVED A WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE HOLDER AND THE
COMPANY THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS
OF THE ACT AND APPLICABLE STATE SECURITIES LAWS.
10. THE ISSUANCE OF SHARES, AND ANY ACTUAL OR IMPLIED OFFER TO ISSUE SHARES,
SHALL BE CONDITIONED ON THE AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION
OF SUCH ISSUANCE UNDER THE APPLICABLE FEDERAL AND STATE SECURITIES LAWS AS SET
FORTH IN THE WARRANT AGREEMENT.
11. THIS WARRANT MAY NOT BE TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE CONVEYED WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY.
PURCHASE FORM
(To be executed by the Warrant Holder if it desires to exercise the Warrant in
whole or part)
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by this Warrant Certificate for, and to purchase
thereunder, ___________________ of the Common Shares provided for herein, and
tenders payment herewith in the amount of $______________ and requests that
certificates for such shares he issued in the name of __________________
_________________________ and, if said number of Common Shares shall not be all
the Common Shares purchasable hereunder, that a new Warrant Certificate for the
balance remaining of the shares purchasable under this Warrant Certificate be
registered in the name and delivered to the undersigned at the address stated
below.
The undersigned hereby represents and warrants that it has not sold or
contracted for the sale of the common shares to be acquired by the exercise
hereof.
Name of Warrant Holder: _____________________
Address: ____________________________________
DATED: ______________________________________
Signature of Registered Holder
SIGNATURE GUARANTEED: _______________________
________________________________________________________________________________
NOTE THE ABOVE SIGNATURE MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE
OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER, UNLESS THE WARRANT HAS BEEN ASSIGNED.
<PAGE>
Exhibit 10.1
AS AMENDED 12/10/97
SIMS AGRICULTURAL PRODUCTS CO.
1995 STOCK OPTION PLAN
ARTICLE I
OBJECTIVES
1.1 The objective of this Plan is to advance the interests of the Company
by stimulating the efforts made on behalf of the Company by key employees, sales
representatives, consultants, and advisors and assisting the Company in
competing effectively with other enterprises for the services of new employees,
sales representatives, consultants, and advisors necessary for the continued
improvement and success of the Company. Stock options granted under the Plan may
be Incentive Stock Options, which are intended to qualify under Section 422 of
the Code, or Nonqualified Stock Options, which are not intended so to qualify.
ARTICLE II
DEFINITIONS
2.1 For purposes of the Plan the following terms shall have the definition
which is attributed to them, unless another definition is clearly indicated by a
particular usage and context.
A. "Board of Directors" means the Board of Directors of the Company.
B. "Code" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
C. "Committee" means the Stock Option Committee appointed by the
Directors from among its members.
D. "Company" means Sims Agricultural Products Co. and any parent or
subsidiary thereof, as the terms "parent" and "subsidiary" are defined for
purposes of Section 422 of the Code.
E. "Effective Date of Exercise" means the date on which the Company
has received written notice of exercise of an Option, in such form as is
acceptable to the Committee, and full payment of the purchase price.
F. "Effective Date of Grant" means the date on which the Committee
makes an award of an Option.
G. "Fair Market Value" means, as of any given, date, the (i) last
reported sale price of the New York Stock Exchange, (ii) last reported
sale price on the NASDAQ National Market System, (iii) last reported sale
price on any other stock exchange on which the Shares are listed, or (iv)
average of the closing bid prices on the 10 most recent trading days, as
reported by the National Association of Securities Dealers, Inc. or
another reputable source, whichever is applicable; provided that if none
of the foregoing is applicable, Fair Market Value shall be determined by
the Committee in good faith.
H. "Incentive Stock Option" shall have the same meaning as given to
that term by Section 422 of the Code and any regulations or rules
promulgated thereunder.
I. "Nonqualified Stock Option" means any Option granted under the
Plan which is not considered an Incentive Stock Option.
J. "Option" means the right to purchase from the Company a stated
number of shares at a specified price. The Option may be granted to a
Participant subject to the terms of this Plan, and such other conditions
and restrictions as the Committee deems appropriate. Each Option shall be
designated by the Committee to be either an Incentive Stock Option or a
Nonqualified Stock Option.
K. "Option Price" means the purchase price per Share subject to an
Option and shall be fixed by the Committee, but shall not be less than
100% of the Fair Market Value of a Share on the Effective Date of Grant in
the case of a Nonqualified Stock Option or less than 100% of the Fair
Market Value of a Share on the Effective Date of Grant in the case of an
Incentive Stock Option, except as otherwise provided in Paragraph 11.2.
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<PAGE>
L. "Permanent and Total Disability" shall have the same meaning as
given to that term by Section 105(d)(4) of the Code and any regulations or
rulings promulgated thereunder.
M. "Plan" means the Sims Agricultural Products Co. 1995 Stock Option
Plan.
N. "Share" means one (1) Share of the no par value common stock of
the Company.
O. "Eligible Employee" means an employee of the Company who, in the
Committee's discretion, is substantially responsible for, or who is
expected to contribute to the success of the Company through his or her
judgment, interest, ability, skill, or special efforts, or any combination
thereof.
P. "Consultant" means a consultant or advisor to the Company,
including without limitation a sales representative, who renders bona fide
services to the Company, not in connection with the offer and sale of
securities in a capital-raising transaction, who is not an employee of the
Company, and who, in the Committee's discretion, has made or is expected
to make a substantial contribution to the success of the Company.
ARTICLE III
PARTICIPANTS
3.1 A "Participant" in the Plan shall be any Eligible Employee or
Consultant to whom the Committee, in its discretion, grants an Option under the
Plan; provided that Consultants shall not be eligible to receive Incentive Stock
Options.
ARTICLE IV
EFFECTIVE DATE AND TERMINATION OF PLAN
4.1 The Plan shall be effective as of the date it was adopted by the Board
of Directors. The Plan shall be submitted to the shareholders of the Company for
approval and ratification as soon as practicable but in any event not later than
12 months after the adoption of the Plan by the Board of Directors. If the Plan
is not approved and ratified by the shareholders of the Company within 12 months
after the adoption of the Plan by the Board of Directors, the Plan and all
Options granted under the Plan shall become null and void and have no further
force or effect. No Options shall be granted under the Plan on or after the
tenth anniversary of the date of adoption by the Board of Directors, but Options
granted prior to such date may extend beyond that date.
ARTICLE V
ADMINISTRATION
5.1 The Plan shall be administered by the Committee, which shall consist
of at least three members of the Board of Directors. No member of the Committee
shall be eligible to receive Options under the Plan while serving on the
Committee. At such time as the Shares have been registered under Section 12 of
the Securities Exchange Act of 1934, as amended (the "1934 Act"), the members of
the Committee shall be "disinterested persons" within the meaning of Rule 16b-3
under the 1934 Act.
5.2 Except as specifically limited by the provisions of the Plan, the
Committee, in its sole discretion, shall have the full and final authority to:
A. Determine which Eligible Employees and Consultants shall be
Participants (as defined in Article III, above);
B. Grant Options provided in the Plan in such form and amount as the
Committee shall determine;
C. Interpret the Plan, adopt, amend and rescind rules and
regulations relating to the Plan, and make all other determinations and
take all other action necessary or advisable for the implementation and
administration of the Plan.
5.3 Any action, decision, interpretation or determination by the Committee
with respect to the application or administration of this Plan shall be final
and binding upon all persons, and need not be uniform with respect to its
determination of recipients, amount, timing, form, terms or provisions of
Options.
5.4 No member of the Committee shall be liable for any action or
determination taken or made in good faith with respect to the Plan or any Option
granted hereunder, and to the extent permitted by law, all members shall be
2
<PAGE>
indemnified by the Company for any liability and expenses which may be incurred
in connection with any claim or cause of action.
ARTICLE VI
SHARES SUBJECT TO THE PLAN
6.1 The maximum aggregate number of Shares which may be issued under the
plan shall be 600,000 Shares. Such Shares may be authorized but unissued Shares
or issued Shares reacquired by the Company and held as treasury Shares. If an
Option granted under the Plan expires or terminates without exercise, the Shares
subject to such expired or terminated Option shall again be available for other
Options to be granted under the Plan. The aggregate number of Shares allocated
to the Plan shall be subject to adjustment pursuant to Article XIV, below.
ARTICLE VII
GRANTING OF OPTIONS
7.1 Subject to the terms and conditions of the Plan, the Committee may, in
its discretion, at any time and from time to time, grant Options to Eligible
Employees and Nonqualified Stock Options to Consultants.
ARTICLE VIII
TERMS AND CONDITIONS OF OPTIONS
8.1 Subject to specific provisions relating to Incentive Stock Options set
forth in Article XI, each Option shall be for a term of from five (5) to no
longer than ten (10) years from the Effective Date of Grant and may not be
exercised during the first twelve (12) months of the term of said Option.
Commencing on the first anniversary of the Effective Date of Grant of an Option,
the Option may be exercised for 25% of the total shares covered by the Option
with an additional 25% of the total shares covered by the Option becoming
exercisable on each succeeding anniversary until the Option is exercisable to
its full extent; provided, however, that the Committee may establish a different
schedule for any particular Option on the Effective Date of Grant. This right of
exercise may be cumulative and may be exercisable in whole or in part. The
Committee in its sole discretion may permit particular holders of Options to
exercise an Option to a greater extent than provided herein after expiration of
the first anniversary of the Effective Date of Grant of the Option.
ARTICLE IX
EXERCISE OF OPTIONS
9.1 Options shall be exercisable in such manner and in such times as the
Committee may determine. Generally, however, any person entitled to exercise an
Option may do so in whole or in part by delivering a written notice of exercise
to the Company, to the attention of its Secretary, at its principal office. The
written notice shall specify the number of shares for which an Option is being
exercised and shall be accompanied by full payment of the Option Price for the
shares being purchased. The issuance of shares upon exercise of an option shall
only be done in compliance with applicable federal and state securities laws. An
Option may, at the discretion of the Committee, provide for accelerated
exercisability in the event of the Participant's death, disability or retirement
or other events in accordance with policies established by the Committee.
ARTICLE X
PAYMENT OF OPTION PRICE
10.1 In the sole discretion of the Committee, payment of the purchase
price may be made in cash, cash equivalents or secured notes acceptable to the
Committee, by surrender of shares of common stock owned by the optionee
exercising the option and having a fair market value on the date of exercise
equal to the option price or in any combination of the foregoing acceptable to
the Committee. If payment by the surrender of shares is permitted by the
Committee, the value of each share shall be deemed to be the Fair Market Value
for a share on the day the shares are surrendered for payment.
ARTICLE XI
INCENTIVE STOCK OPTIONS AND NONQUALIFIED STOCK OPTIONS
11.1 Subject to the other terms and conditions of the Plan:
A. Whenever the Committee grants an Option under the Plan, the
Committee shall designate, in its sole discretion, whether the
Option is an Incentive Stock Option or a Nonqualified Stock Option;
and
3
<PAGE>
B. The Committee may grant to the same Participant an
Incentive Stock Option and a Nonqualified Stock Option at the same
time; provided that the Options shall be deemed to be separate
Options subject to separate grants under the Plan.
11.2 Any Option designated by the Committee as an Incentive Stock Option
will be subject to the general provisions applicable to all Options granted
under the Plan. In addition, the Incentive Stock Option shall be subject to the
following specific provisions:
A. At the time the Incentive Stock Option is granted, if the
employee optionee owns, directly or indirectly, stock representing more
than 10% of the total combined voting power of all classes of stock of the
Company then:
(i) The Option Price must equal at least 110% of the Fair
Market Value on the Effective Date of Grant of the shares subject to
the Option; and
(ii) The term of the Option shall not be greater than five (5)
years from the Effective Date of Grant.
B. The holder of an Incentive Stock Option must remain continuously
employed by the Company for a period of at least twelve (12) months from
the Effective Date of Grant and devote his entire working time, energy and
skill to the services of the Company subject to normal vacations, sick
leave and military absences; provided, however, that such employment shall
be at the pleasure of the Board of Directors or officers of the Company at
such compensation as the Company shall determine. Nothing contained in
this Plan or in any Option granted pursuant to it shall confer upon any
employee any right to continue in the employ of the Company or to
interfere in any way with the right of the Company to terminate employment
at any time. So long as a holder of an Option shall continue to be an
employee of the Company, the Option shall not be affected by any change of
the employee's duties or position.
C. No Incentive Stock Option may be exercised by an employee
optionee unless at all times beginning on the date of the granting of the
Option and ending on the day three (3) months before the date of the
exercise, the individual was an employee of the Company granting the
Option, or a parent or subsidiary corporation.
D. The aggregate fair market value (determined as of the time of
grant) of Shares with respect to which incentive stock options (including
Incentive Stock Options under the Plan and stock options under any other
plan of the Company which qualify as Incentive Stock Options under Section
422 of the Code) are exercisable for the first time by any Participant
during any calendar year shall not exceed $100,000.
E. Shares issued upon the exercise of an Incentive Stock Option may
not be disposed of by the Participant before the later of two years after
the date the Option was granted or one year after the date the Option was
exercised.
11.3 If any Option is not granted, exercised, or held pursuant to the
provisions noted immediately above, it will be considered to be a Nonqualified
Stock Option to the extent that any or all of the grant is in conflict with
these restrictions.
ARTICLE XII
TRANSFERABILITY OF OPTION
12.1 No Option shall be transferable by a Participant other than by will
or the laws of descent and distribution; provided that the Committee may provide
for the irrevocable transfer, with Committee approval and without payment of
consideration, of any Nonqualified Stock Option by a Participant to one or more
of such Participant's spouse, children, grandchildren, nieces, and nephews, to
the trustee of any trust for the principal benefit of one or more such persons,
or to any partnership whose only partners are one or more such persons. Unless
an Option is a Nonqualified Stock Option and is transferred as provided in the
preceding sentence, during the lifetime of the Participant, an Option shall be
exercisable (subject to any other applicable restrictions on exercise) only by
the Participant for his or her own account or by the Participant's authorized
legal representative if the Participant is unable to exercise the Option because
of his or her Permanent and Total Disability. Unless an Option is transferred as
provided above, upon the death of the Participant, an Option shall be
exercisable (subject to any other applicable restrictions on exercise) only by
the executor or administrator of the Participant's estate or by the legatees or
heirs of the Participant.
4
<PAGE>
ARTICLE XIII
TERMINATION OF OPTIONS
13.1 If a Participant's employment by the Company or relationship with the
Company as a Consultant terminates for any reason other than death, Permanent
and Total Disability, or retirement, or, with respect to a Consultant, such
Consultant's becoming an employee of the Company, then: (i) to the extent any
Option held by such Participant is not vested as of the date of such
termination, such Option shall automatically terminate on such date; and (ii) to
the extent any Option held by such Participant is vested as of the date of such
termination, such Option may thereafter be exercised for a period of 90 days
from the date of termination; provided that, upon the termination of the
Participant's employment by the Company or relationship with the Company as a
Consultant for Cause, any and all unexercised Options granted to such
Participant shall immediately lapse and be of no further force or effect. For
purposes of the Plan, whether termination of a Participant's employment by the
Company or relationship with the Company as a Consultant is for "Cause" shall be
determined by the Committee, in its sole discretion.
13.2 If a Participant's employment by the Company or relationship with the
Company as a Consultant terminates by reason of the Participant's death or
Permanent and Total Disability then: (i) to the extent an Option held by such
Participant is not vested as of the date of such death or Permanent and Total
Disability, such Option shall automatically terminate on such date; and (ii) to
the extent an Option held by such Participant is vested as of the date of such
death or Permanent and Total Disability, such Option may thereafter be exercised
by the Participant, the legal representative of the Participant's estate, the
legatee of the Participant under the will of the Participant, or the distributee
of the Participant's estate, whichever is applicable, for a period of one year
from the date of such death or Permanent and Total Disability or until the
expiration of the stated term of such Option, whichever period is shorter.
13.3 If a Participant's employment by the Company or relationship with the
Company as a Consultant terminates by reason of the Participant's retirement,
then each Nonqualified Stock Option held by such Participant may thereafter be
exercised by the Participant according to its terms, and each Incentive Stock
Option held by such Participant may thereafter be exercised by the Participant,
to the extent such Incentive Stock Option is vested as of the date of such
termination, for a period of 90 days from the date of such termination of
employment, or until the expiration of the stated term of such Incentive Stock
Option, whichever period is shorter. For purposes of the Plan, retirement shall
mean a Participant's voluntary termination of employment by the Company or
relationship with the Company as a Consultant after attaining age 55 and having
at least five years of service with the Company.
13.4 Except as otherwise permitted by the Committee in its sole
discretion, no Option held by a transferee of a Participant pursuant to Section
12.1, above, shall remain exercisable for any period of time longer than would
otherwise be permitted under this Article XIII.
ARTICLE XIV
ADJUSTMENTS TO SHARES AND OPTION PRICE
14.1 The Committee shall make appropriate adjustments in the number of
shares subject to an Option or in the Option Price in order to give effect to
changes made in the number of outstanding shares as a result of a merger,
consolidation, recapitalization, reclassification, combination, stock dividend,
stock split, or other relevant change with the determination as to the method
and extent of change being at the sole discretion of the Committee.
ARTICLE XV
OPTION AGREEMENTS
15.1 All Options granted under the Plan shall be evidenced by a written
agreement in such form or forms as the Committee in its sole discretion may
determine.
ARTICLE XVI
AMENDMENT OR DISCONTINUANCE OF PLAN
16.1 The Board of Directors of the Company may at any time amend, suspend,
or discontinue the Plan; provided, however, that no amendments by the Board of
Directors of the Company shall, without further approval of the shareholders of
the Company:
A. Change the class of Participants;
B. Except as provided in Articles VI and XIV hereof, increase the
number of shares which may be subject to Options granted under the Plan;
C. Permit the granting of Options to the individuals who are then
members of the Committee.
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D. Extend the period during which any Option may be granted or
exercised; or
E. Extend the term of the Plan.
16.2 No amendment to the Plan shall alter or impair any Option granted
under the Plan without the consent of the holders thereof.
ARTICLE XVII
MISCELLANEOUS
17.1 Nothing contained in this Plan or in any action taken by the Board of
Directors or shareholders of the Company shall constitute the granting of an
Option. An Option shall be granted only at such time as a written Option shall
have been executed and delivered to the respective Participant and the
Participant shall have executed an agreement respecting the Option in
conformance with the provisions of this Plan.
17.2 Certificates for shares purchased through exercise of Options will be
issued in regular course after exercise of the Option and payment therefore as
called for by the terms of the Option but in no event shall the Company be
obligated to issue certificates more often than once each quarter of each fiscal
year. No persons holding an Option or entitled to exercise an Option granted
under this Plan shall have any rights or privileges of a shareholder of the
Company with respect to any shares issuable upon exercise of such Option until
certificates representing such shares shall have been issued and delivered. No
shares shall be issued and delivered upon exercise of an Option unless and
until, in the opinion of counsel for the Company, the Company has complied with
all applicable federal and state securities laws and with any applicable listing
requirements of any national securities exchange on which the Company's
securities may then be listed as well as any other requirements of law.
A. No Option shall be exercisable unless the Shares are exempt from
registration under the Ohio securities law, are the subject matter of an
exempt transaction, are registered by description or qualification, or are
the subject matter of a transaction which has been registered by
description, as contemplated by Section 1707.03(G)(3) of the Ohio Revised
Code.
B. Any Shares issued upon exercise of any Option may not be sold or
otherwise transferred, and the Company and its transfer agent shall not be
required to transfer any of such Shares, unless they have been registered
under the federal and state securities laws or a valid exemption from such
registration is available.
C. The Company may imprint on each certificate evidencing the
ownership of any such Shares a legend reflecting the restrictions of this
Section 17.2 and may use the following or any other appropriate legend for
that purpose:
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or any state
securities law and may not be sold or otherwise transferred without
such registration unless a valid exemption from such registration is
available and the corporation has received an opinion of, or
satisfactory to, its counsel that such transfer would not violate
any federal or state securities laws.
17.3 In any event of any change in the outstanding common stock by reason
of a stock dividend or distribution, recapitalization, merger, consolidation,
split-up, combination, exchange of shares or the like, the Committee may
appropriately adjust the number of shares of common stock which may be issued
under the Plan, the number of shares of common stock subject to Options
theretofore granted under the Plan, the Option price of Options theretofore
granted under the Plan, and any and all other matters deemed appropriate by the
Committee.
17.4 The Committee's determinations under the Plan (including without
limitation determinations of the persons to receive Options, the form, amount
and timing of such Options and the agreements evidencing same) need not be
uniform and may be made by it selectively among persons who receive, or are
eligible to receive, the awards under the Plan, whether or not such persons are
similarly situated.
17.5 Whenever the Company proposes or is required to issue or transfer
shares of common stock under the Plan, the Company shall have the right to
require the optionee to remit to the Company an amount sufficient to satisfy any
federal, state and/or local withholding tax requirements prior to the delivery
of any certificate or certificate for such shares. Alternatively, the Company
may issue or transfer such shares of common stock net of the number of shares
sufficient to satisfy the withholding tax requirements. For withholding tax
purposes, the shares of common stock shall be valued on the date the withholding
obligation is incurred.
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Exhibit 10.2
AMENDED 12/10/97
SIMS AGRICULTURAL PRODUCTS CO.
1996 DIRECTORS STOCK OPTION PLAN
(S)1. Purpose
The purposes of the Sims Agricultural Products Co. 1996 Directors Stock
Option Plan (the "Plan") are to encourage directors of Sims Agricultural
Products Co., an Ohio corporation (the "Company"), who are not employees of the
Company or any affiliate of the Company eligible to participate in option plans
of the Company for employees, to acquire or increase a proprietary interest in
the Company, to promote and strengthen the interest of such directors in the
development and financial success of the Company, and to assist the Company in
attracting and retaining highly qualified directors by providing such directors
with options (the "Options") to purchase common shares, without par value, of
the Company (the "Shares"). The Options shall be stock options not intended to
qualify as incentive stock options under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
(S)2. Administration of Plan.
The Plan shall be administered by the Company's Board of Directors (the
"Board"); provided that any action taken by the Board with respect to the Plan
shall be authorized by the affirmative vote of a majority of those directors who
are not eligible to participate in the Plan. In its discretion, the Board may
appoint a committee of not less than three directors to administer the Plan (the
"Committee"), and, if it does so, all provisions of this Plan relating to the
Board as administrator shall apply to the Committee. The members of the
Committee, if one is appointed, shall not be eligible to participate in the Plan
while serving on the Committee, and, at such time as the Shares have been
registered under Section 12 of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), the members of the Committee shall be "disinterested persons"
within the meaning of Rule 16b-3 under the 1934 Act. The Board or the Committee
may adopt any rules it considers appropriate for the conduct of its business or
the administration of the Plan, make interpretations of the Plan, and take any
other actions it considers appropriate in connection with the Plan, all in a
manner consistent with the other provisions of the Plan. The decisions of the
Board or the Committee on matters within its jurisdiction under the Plan shall
be conclusive and binding.
(S)3. Shares Subject to the Plan.
The maximum aggregate number of Shares reserved and available for grants
of Options under the Plan shall be 600,000 Shares. Such Shares may be authorized
but unissued Shares or issued Shares reacquired by the Company and held as
treasury Shares. If an Option granted under the Plan expires or terminates
without exercise, the Shares subject to such expired or terminated Option shall
again be available for other Options to be granted under the Plan. The aggregate
number of Shares allocated to the Plan shall be subject to adjustment pursuant
to (S)6.
(S)4. Eligibility.
The persons eligible to receive Options under the Plan shall include only
individuals who are directors of the Company and who (a) are not employees of
the Company or any affiliate of the Company, or (b) are not eligible to
participate in other option plans of the Company in which employees are entitled
to participate (each such individual, an "Eligible Director").
(S)5. Grant and Terms of Options.
Options under the Plan may be granted to Eligible Directors by the Board,
in its discretion, at any time and from time to time. Each Option shall be
evidenced by a written agreement (an "Option Agreement"), and each Option
Agreement shall be dated as of the date on which the Option is granted and
signed by an officer of the Company and the Eligible Director to whom such
Option is granted (Eligible Directors granted Options hereunder, "Grantees").
All Option Agreements shall be consistent with the Plan and shall be subject to
the following terms and conditions:
(a) Vesting. Each Option shall be exercisable only with respect to the
Shares subject to that Option which have become vested. Each Option
shall become vested with respect to a number of Shares equal to 25%
of the total number of Shares subject to the Option on each of the
first four anniversaries of the date the Option is granted; provided
that the Board may, in its discretion, establish a different vesting
schedule for any Option so long as the vesting schedule is set forth
in the applicable Option Agreement.
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(b) Exercise Price. The exercise price per Share issuable upon the
exercise of an Option shall be no less than the fair market value of
the Shares on the date on which the Option is granted. For purposes
of this Plan, the fair market value of the Shares shall mean, as of
any given date, the (i) last reported sale price on the New York
Stock Exchange, (ii) last reported sale price on the NASDAQ National
Market System, (iii) last reported sale price on any other stock
exchange on which the Shares are listed, or (iv) average of the
closing bid prices on the 10 most recent trading days, as reported
by the National Association of Securities Dealers, Inc. or another
reputable source, whichever is applicable; provided that if none of
the foregoing is applicable, fair market value shall be determined
by the Board in good faith.
(c) Maximum Term. Subject to (S)(S)5(f) and 9, the term of each Option
shall commence on the date of grant and shall terminate on the tenth
anniversary of such date.
(d) Method of Exercise. An Option may be exercised, in whole or in part,
by giving written notice to the Secretary of the Company stating the
number of Shares (which must be a whole number) to be purchased and
specifying time for delivery of such Shares, which shall be more
than 10 and less than 20 business days after the exercise of the
Option. Subject to compliance with all other terms and conditions of
the Plan and the Option Agreement relating to such Option, the
Company shall deliver, at the specified time at the principal office
of the Company, a certificate for such Shares to the person entitled
to receive such shares upon receipt of payment of the full purchase
price for such Shares by certified or bank cashier's check or other
form of payment acceptable to the Board, or, if approved by the
Board, by (i) delivery of unrestricted Shares having a fair market
value on the date of such delivery equal to the total exercise
price, (ii) offsetting Shares which are subject to the Option and
which have a fair market value at the time of exercise equal to the
exercise price against the number of Shares subject to the Option
being exercised, or (iii) a combination of the preceding methods.
(e) Transferability. No Option shall be transferable by a Grantee other
than by will or the laws of descent and distribution; provided that
the Board may provide for the irrevocable transfer, with Board
approval and without payment of consideration, of any Option by a
Grantee to one or more of such Grantee's spouse, children,
grandchildren, nieces, and nephews, to the trustee of any trust for
the principal benefit of one or more such persons, or to any
partnership whose only partners are one or more such persons. Unless
an Option is transferred as provided in the preceding sentence,
during the lifetime of a Grantee, an Option shall be exercisable
(subject to any other applicable restrictions on exercise) only by
the Grantee for his or her own account or by the Grantee's
authorized legal representative if the Grantee is unable to exercise
the Option because of his or her disability. Unless an Option is
transferred as provided above, upon the death of a Grantee, an
Option shall be exercisable (subject to any other applicable
restrictions on exercise) only by the executor or administrator of
the Grantee's estate or by the legatees or heirs of the Grantee.
(f) Termination of Option. Except as otherwise provided in (S)9, if a
Grantee ceases to be an Eligible Director for any reason, then all
Options or any unexercised portion of such Options which otherwise
are exercisable by such Grantee shall terminate unless such Options
are exercised within six months after the date such Grantee ceases
to be an Eligible Director (but in no event after expiration of the
original term of any such Option); provided that if such Grantee
ceases to be an Eligible Director by reason of such Grantee's death,
the six-month period shall instead be a one-year period.
(S)6. Changes in Capital Structure.
If the Company (a) pays a stock dividend or makes a distribution in Shares
without receiving consideration in the form of money, services, or property, (b)
subdivides or splits its outstanding Shares into a greater number of Shares, or
(c) combines its outstanding Shares into a smaller number of Shares, then the
aggregate number of Shares reserved for issuance pursuant to the Plan and the
number and exercise price of Shares subject to the unexercised portions of
then-outstanding Options shall be adjusted so that, assuming that Options had
been previously granted for all of the Shares so reserved, the Grantees would be
entitled to receive for the same aggregate price that number of Shares which
they would have owned after the happening of any of the events described above
had they exercised all of such Options prior to the happening of such event. An
adjustment made pursuant to this paragraph shall become effective immediately
after the record date in the case of a dividend or other distribution or the
effective date in the case of a subdivision, split, or combination.
If the Company reclassifies or changes the Shares (except for splitting or
combining, changing par value, changing from par value to no par value, or
changing from no par value to par value) or participates in a consolidation or
merger (other
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than a merger in which the Company is the surviving corporation and which does
not result in any reclassification or change of the Shares except as stated
above), the aggregate number of Shares reserved for issuance pursuant to the
Plan and the number and exercise price of Shares subject to the unexercised
portions of then-outstanding Options shall be adjusted so that, assuming that
Options had been previously granted for all the Shares so reserved, the Grantees
would be entitled to receive for the same aggregate price that number and type
of shares of capital stock which they would have owned after the happening of
any of the events described above had they exercised all of such Options prior
to the happening of such event.
No adjustment pursuant to this section shall be required unless such
adjustment would require an increase or decrease of at least 1% in the number or
price of Shares; provided that any adjustments which by reason of this paragraph
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this section shall be made to
the nearest cent or to the nearest full share, as the case may be. Anything in
this section to the contrary notwithstanding, the Company shall be entitled to
make such reductions in the exercise price, in addition to those required by
this section, as it, in its discretion, shall determine to be advisable in order
that any stock dividends, subdivisions or splits of shares, distribution of
rights to purchase shares or securities, or distribution of securities
convertible into or exchangeable for shares hereafter made by the Company to its
shareholders shall not be taxable.
Whenever an adjustment is made pursuant to the preceding provisions of
this section, the Company shall promptly prepare a notice of such adjustment
setting forth the terms and the effective date of such adjustment and shall mail
such notice of adjustment to the Grantees at their respective addresses
appearing on the records of the Company or at such other address as any Grantees
may from time to time designate in writing to the Company.
(S)7. Compliance with Securities Laws; Delivery of Shares.
No Option shall be exercisable and no Shares shall be delivered under the
Plan except in compliance with all applicable federal and state securities laws
and regulations. The Company may require each person acquiring Shares pursuant
to the exercise of an Option under the Plan (a) to represent and warrant to and
agree with the Company in writing that the participant is acquiring the Shares
without a view to distribution thereof, and (b) to make such additional
representations, warranties, and agreements with respect to the investment
intent of such person or persons exercising the Option as the Company may
reasonably request.
No Option shall be exercisable unless the Shares are exempt from
registration under the Ohio securities law, axe the subject matter of an exempt
transaction, are registered by description or qualification, or are the subject
matter of a transaction which has been registered by description, as
contemplated by Section 1707.03(G)(3) of the Ohio Revised Code.
No Option shall be exercisable unless the Company receives an opinion of,
or satisfactory to, its counsel that the issuance of Shares upon such exercise
would not violate the federal securities laws or any applicable state securities
law.
Any Shares issued upon exercise of any Option may not be sold or otherwise
transferred, and the Company and its transfer agent shall not be required to
transfer any of such Shares, unless they have been registered under the federal
and state securities laws or a valid exemption from such registration is
available.
The Company may imprint on each certificate evidencing the ownership of
any such Shares a legend reflecting the restrictions of this (S)7 and may use
the following or any other appropriate legend for that purpose:
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or any state
securities law and may not be sold or otherwise transferred without
such registration unless a valid exemption from such registration is
available and the corporation has received an opinion of, or
satisfactory to, its counsel that such transfer would not violate
any federal or state securities laws.
All certificates for Shares or other securities delivered under the Plan
shall be subject to such stop-transfer orders and other restrictions as the
Company may deem advisable under the rules, regulations, and other requirements
of the Securities and Exchange Commission, any stock exchange upon which the
Shares are then listed, and any applicable federal or state securities laws.
(S)8. Withholding Tax.
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The Company, at its option, shall have the right to require any person who
is entitled to receive Shares pursuant to the exercise of an Option to pay to
the Company an amount equal to all taxes which the Company is required to
withhold with respect to such Shares or make arrangements satisfactory to the
Company regarding the payment of such taxes, or, in lieu thereof, to retain, or
sell without notice, a number of such Shares sufficient to cover the amount
required to be withheld. The obligations of the Company under the Plan shall be
conditional on such payment or other arrangements acceptable to the Company.
(S)9. Termination for Cause.
Notwithstanding any provision to the contrary in the Plan or in any Option
Agreement, upon the discharge of any Grantee as a director of the Company for
cause, all unexercised Options granted to such Grantee shall immediately lapse
and be of no further force or effect.
(S)10. Change in Control.
(a) Accelerated Vesting. Notwithstanding the provisions of (S)5(a) to
the contrary, if a Change in Control or a Potential Change in
Control (each as defined below) occurs, then all Options theretofore
granted and not fully vested shall thereupon become vested and
exercisable in full and shall remain so exercisable in accordance
with their terms; provided that no Option which has previously been
exercised or otherwise terminated shall become exercisable.
(b) Definition of Change in Control. For purposes of the Plan, a "Change
in Control" means the happening of any of the following:
(i) When any "person" as defined in Section 3(a)(9) of the 1934
Act and as used in Sections 13(d) and 14(d) thereof, including
a "group" as defined in Section 13(d) of the 1934 Act, but
excluding the Company, any subsidiary of the Company, and any
employee benefit plan sponsored or maintained by the Company
or any subsidiary of the Company (including any trustee of
such plan acting as trustee), directly or indirectly, becomes
the "beneficial owner" (as defined in Rule 13d-3 under the
1934 Act, as amended from time to time), of securities of the
Company representing 20% or more of the combined voting power
of the Company's then outstanding securities;
(ii) When, during any period of 24 consecutive months during the
existence of the Plan, the individuals who, at the beginning
of such period, constitute the Board (the "Incumbent
Directors") cease for any reason other than death to
constitute at least a majority of the Board; provided that a
director who was not a director at the beginning of such
24-month period shall be deemed to have satisfied such
24-month requirement (and be an Incumbent Director) if such
director was elected by, or on the recommendation of or with
the approval of, at least two-thirds of the directors who then
qualified as Incumbent Directors either actually (because they
were directors at the beginning of such 24-month period) or by
prior operation of this (S)10(b)(ii); or
(iii) The occurrence of a transaction requiring shareholder approval
for the acquisition of the Company by an entity other than the
Company or a subsidiary of the Company through purchase of
assets, by merger, or otherwise.
Provided that a change in control shall not be deemed to be a
Change in Control for purposes of the Plan if the Board had
approved such change prior to either (A) the commencement of
any event described in (S)(S)10(b)(i), (ii), (iii), or
10(c)(i) of the Plan, or (B) the commencement by any person
other than the Company of a tender offer for Shares.
(c) Definition of Potential Change in Control. For purposes of the Plan,
a "Potential Change in Control" means the happening of any one of
the following:
(i) The approval by shareholders of an agreement by the Company,
the consummation of which would result in a Change in Control
of the Company as defined in (S)10(b); or
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person, or group (other than the
Company, a subsidiary of the Company, or any Company employee
benefit plan
4
<PAGE>
(including any trustee of such plan acting as such trustee))
of the Company representing 5% or more of the combined voting
power of the Company's outstanding securities and the adoption
by the Board of a resolution to the effect that a Potential
Change in Control of the Company has occurred for purposes of
the Plan.
(S)11. Termination and Amendment of Plan.
The Board may alter, amend, suspend, or terminate the Plan at any time,
but no such action shall affect the rights of a Grantee with respect to any
then-outstanding Option under the Plan without the consent of the Grantee. Any
such action shall be conditioned upon the approval of the shareholders of the
Company if such approval is necessary to enable the Plan to comply or to
continue to comply with any rule or qualify for any tax or regulatory treatment
for which or with which the Board deems it appropriate or desirable for the Plan
to comply or qualify.
(S)12. No Enlargement of Rights.
The award of Options under the Plan to an Eligible Director shall not
confer any right to such director to continue as a director of the Company and
shall not restrict or interfere in any way with the fights of the shareholders
of the Company to terminate such directorship, with or without cause, at any
time (subject to any applicable provisions of the Company's articles of
incorporation or code of regulations).
(S)13. Rights as Shareholder.
No Grantee or his transferee or executor or administrator shall have any
rights of a shareholder in the Company with respect to the Shares subject to an
Option unless and until a certificate representing such Shares has been duly
issued and delivered to him under the Plan.
(S)14. Definitions of Subsidiary and Affiliate.
The term "subsidiary" means a subsidiary corporation as defined in
(S)424(f) of the Code. An "affiliate" of, or a person or entity "affiliated"
with, a specified person or entity is a person or entity that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, the person or entity specified.
(S)15. Government Regulations.
Notwithstanding any provisions of the Plan or any Option Agreement, the
Company's obligations under the Plan and any such Option Agreement shall be
subject to all applicable laws, rules, and regulations and to such approvals as
may be required by any governmental or regulatory authorities.
(S)16. Governing Law.
The Plan and all Option Agreements shall be governed by and construed in
accordance with the laws of the State of Ohio.
(S)17. Genders and Numbers.
When permitted by the context, each pronoun used in the Plan includes the
same pronoun in other genders and numbers, and each noun used in the Plan
includes the same noun in other numbers.
(S)18. Captions.
The captions of the various sections and paragraphs of the Plan are not
part of the context of the Plan, but are only labels to assist in locating
those sections, and shall be ignored in construing the Plan.
(S)19. Effective Date.
The Plan shall be effective February 19, 1996.
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<PAGE>
(S)20. Term of Plan.
No Option shall be granted pursuant to the Plan on or after the tenth
anniversary of the effective date of the Plan, but Options granted prior to such
tenth anniversary may extend beyond that date.
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<PAGE>
Exhibit 10.3
Exhibit A
REPLACEMENT PROMISSORY NOTE
$645,286.20 Executed at [ILLEGIBLE], Ohio
Effective as of January 12, 1996
FOR VALUE RECEIVED, the undersigned ("Debtor"), promises to pay to the order of
NATIONAL CITY BANK, COLUMBUS, fka BancOhio National Bank, a national banking
association, ("Bank") at any office of Bank, SIX HUNDRED FORTY-FIVE THOUSAND TWO
HUNDRED EIGHTY-SIX AND 20/100 Dollars ($645,286.20) in lawful money of the
United States together with interest, in sixty (60) consecutive monthly
installments, commencing [ILLEGIBLE], each of which installments shall be Five
Thousand Five Hundred Fifty-Five and 55/100 Dollars ($5,555.55) to be applied
first to accrued interest and then to principal, provided that, in no event
shall any installment be less than the current accrued interest, and except that
the last installment shall be such an amount as will pay this note in full.
Prior to maturity, principal and any overdue interest shall bear interest
payable on the same dates as principal installments are payable and at maturity
and computed (on the basis of a 360-day year and actual days elapsed) at a
fluctuating rate equal to the Prime Rate plus .75% per annum. Debtor may prepay
this note at any time without penalty.
Concurrently with each prepayment of the principal of this note, the undersigned
shall pay the unpaid interest accrued on the principal being prepaid. Each
prepayment shall be applied to the outstanding installments of this note in the
inverse order of their maturities.
If this note is not paid in full at maturity (whether occurring by lapse of time
or acceleration), the principal shall, thereafter until paid, bear interest at a
rate that shall be three percent (3%) per annum greater than the rate per annum
in effect at maturity.
This note is given, in part, as a replacement for and in renewal but not in
satisfaction of certain promissory notes originally executed by the Gro-Care
Corporation and assumed by Debtor as of December 31, 1990, the first being dated
October 7, 1988 in the original principal amount of One Million Five Hundred
Thousand and No/100 Dollars($1,500,000.00); the second being dated January 9,
1990 in the original principal amount of One Million Five Hundred Thousand and
No/100 Dollars ($1,500,000.00); and the third being dated February 6, 1990 in
the original principal amount of One Million and No/100 Dollars ($1,000,000.00)
(all three promissory notes collectively being referred to as the "Original
Notes"). This Replacement Note shall continue to be secured by all of the
collateral which secured the Original Notes including, but not limited to, a
certain Open-End Mortgage Deed and Security Agreement dated October 7, 1988, and
recorded at Volume 266, Page 886, Recorder's Office, Morrow County, Ohio on
October 20, 1988. The Original Notes having been assigned to Bank by a certain
Assignment of Promissory Notes bearing the same effective date as this note.
In this note, (a) "debt" means, collectively, all liabilities now or hereafter
owing by any or all of the undersigned to Bank and includes (without limitation)
this note and every other liability of the undersigned whether
<PAGE>
owing by only one person or entity or by any two or more in a several, joint or
joint and several capacity, whether owing absolutely or contingently, whether
created by note, overdraft, guaranty of payment or other contract or by
quasi-contract, tort, statute or other operation of law, whether incurred
directly to Bank or acquired by Bank by purchase, pledge or otherwise, and
whether participated to or from Bank in whole or in part, (b) "obligor" includes
any person or entity whose credit or property is or shall become obligated on
the debt or any part thereof in any manner and includes (without limitation) any
maker, endorser, guarantor of payment, subordinating creditor, assignor,
pledgor, mortgagor or hypothecator of property, and (c) "Prime Rate" means the
fluctuating rate, as in effect at the time in question, which is publicly
announced from time to time by Bank as being its prime rate thereafter in
effect, with each change in the prime rate (if applicable) automatically and
immediately changing, without notice, the rate thereafter applicable to this
note, (d) "related writing" includes any credit application, financial
statement, financing statement, promissory note, guaranty of payment, indenture,
mortgage, security agreement, authorization, subordination agreement,
certificate or other writing of any form or substance signed by any obligor
(whether as principal or agent) and received by Bank in respect of the debt or
any part thereof.
If (a) any obligor shall become deceased or dissolved, (b) any representation or
warranty made by any obligor in this note or any related writing shall be false
or erroneous in any material respect, (c) any obligor shall fail or omit to
perform or observe any agreement made by that obligor in this note or in any
related writing, (d) a judgment shall be entered against any obligor in any
court of record, or any obligor's deposit account is attached or levied upon,
(e) any voluntary petition by or involuntary petition against any obligor shall
be filed pursuant to any chapter of the United States Bankruptcy Code or any
obligor shall make an assignment for the benefit of creditors, or there shall be
any other marshaling of the assets and liabilities of any obligor for the
benefit of the obligor's creditors, (f) the debt or any part thereof shall not
be paid in full promptly when due (whether due by lapse of time or acceleration
or otherwise), (g) if any obligor enters into any merger or consolidation or
sells, leases or otherwise disposes of all or substantially all of an obligor's
assets in any manner other than in the ordinary course of business, or (h) the
holder of this note, in good faith, believes that the prospect of payment or
performance of any obligation hereunder is impaired, then the holder of this
note in its sole discretion may declare this note to be due forthwith, whereupon
the principal of and interest on this note shall thereupon become immediately
payable in full, all without any presentment, demand, or notice of any kind,
which are hereby waived.
No delay or omission on the part of the holder in exercising any right hereunder
shall operate as a waiver of such right or of any other right under this note.
If any provision of this note shall be declared illegal or unenforceable, such
provision shall be deemed annulled to the same extent as though it never had
appeared herein, but the remaining provisions shall not be affected thereby.
If more than one person or entity has signed this note or the form of guaranty
of payment below, all such persons and entities are jointly and severally liable
on this note and on the warrant of attorney below. This note shall be governed
by Ohio law.
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<PAGE>
The undersigned hereby jointly and severally authorize any attorney at law to
appear in any State or Federal court of record in the United States of America
after the maturity hereof (whether occurring by lapse of time or acceleration),
to waive the issuance and service of process, to admit the maturity of this note
and the amount then appearing due, together with interest and costs of suit, and
thereupon to release all errors and to waive all rights of appeal and stay of
execution. No judgment against less than all of the aforesaid parties shall bar
any subsequent judgment against the other or others or any thereof. Should any
judgment be vacated for any reason this warrant of attorney nevertheless may
thereafter be used for obtaining additional judgments.
WARNING - - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
SIMS AGRICULTURAL PRODUCTS CO.,
an Ohio corporation
By: /s/ Dallas Paul
--------------------------
Its: President
-3-
<PAGE>
PROMISSORY NOTE MODIFICATION AGREEMENT
THIS PROMISSORY NOTE MODIFICATION AGREEMENT (the "Agreement") is made and
entered into effective as of March 7th, 1996, by and between SIMS AGRICULTURAL
PRODUCTS CO. ("Debtor") and NATIONAL CITY BANK, COLUMBUS, a national banking
association ("Bank").
WHEREAS, Debtor executed a certain promissory note (the "Note") dated January
12, 1996, in the original principal amount of $645,286.20 payable to the order
of Bank on or before 1/28/2001, a true and correct copy of which is attached
hereto as Exhibit A and is incorporated herein by reference, which Note is
presently unpaid and represents an outstanding principal balance of $639,730.65;
and
WHEREAS, the parties desire to modify certain provisions with respect to the
monthly payments provided for in the Note, but otherwise to preserve, ratify and
reaffirm all other terms and conditions of the Note and any other instrument or
document executed in connection with the Note.
NOW THEREFORE, in consideration of and subject to the covenants and terms
contained herein and for other good and valuable consideration, the parties
hereto agree as follows:
1. Modification of Monthly Payments. Effective upon the execution hereof,
Debtor shall make monthly payments of Five Thousand Five Hundred
Fifty-Five and 50/100 Dollars, plus accrued interest.
2. Ratification of Note, Mortgage, and Security Agreement. Except as herein
expressly modified, the parties hereto ratify, approve, accept and
reaffirm all of the terms and conditions of the Note, and of any mortgage
deed or security agreement executed in connection with or referencing the
Note, including provisions for the acceleration of the indebtedness as to
any default stated therein, and for any warrant of attorney to confess
judgment as provided in the Note.
3. Continuation of Mortgage Liens and Security Interests. Except for the
modifications above stated, the parties hereby expressly intend that this
Agreement shall not constitute the creation of a new debt or the
extinguishment of the debt evidenced by the Note; nor shall it in any
manner affect or impair any mortgage lien or security interest granted in
connection with the Note, which Debtor hereby acknowledges to be valid and
existing liens on the property described in any mortgage or security
agreement executed in connection with or referencing the Note, and said
mortgage liens or security interests are hereby agreed to be continued in
full force and effect from the date hereof until the debt herein is fully
satisfied.
4. No Course of Dealing; Waiver. Debtor expressly acknowledges and agrees
that the execution of this Agreement shall not constitute a waiver of, and
shall not preclude the exercise of, any right, power or remedy granted to
Bank in any document evidencing the indebtedness of Debtor to Bank, or as
provided by law, except to the extent expressly provided herein. No
previous modification, extension, or compromise entered into
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<PAGE>
with respect to any indebtedness of Debtor to Bank shall constitute a
course of dealing or be inferred or construed as constituting an express
or implied understanding to enter into any future modification, extension
or compromise. No delay on the part of Bank in exercising any right, power
or remedy shall operate as a waiver thereof or otherwise prejudice Bank's
rights, powers or remedies.
5. Promise to Pay. Debtor hereby covenants and promises to pay to the order
of Bank, the unpaid principal balance of the Note together with interest
as provided therein, and hereby promises (as modified by this Agreement)
to perform all of the covenants, conditions, stipulations and agreements
as contained in the Note, and in any other document or instrument executed
in connection with the Note or referencing the Note, and as provided
herein.
6. Setoffs, Claims and Defenses. Debtor and any guarantor of the Note
executing this Agreement hereby certify that, as of the date hereof, they
have no setoffs, counter-claims or other defenses of any nature whatsoever
to the payment of any part of the obligations owed to Bank as of the date
of execution of this Agreement.
7. Obligations Joint and Several. The obligations hereunder of each of the
undersigned, if there be more than one, whether as Debtor or co-maker
shall be joint and several, and any reference herein to Debtor or to the
undersigned shall be deemed to be applicable to each such person
separately as well as to all.
8. Governing Law. This Agreement shall be interpreted and construed in
accordance with and governed by the laws of the State of Ohio. Further,
the parties hereto intend that this Agreement shall be in compliance with
all applicable laws and shall be enforceable in accordance with its terms.
If any provision of this Agreement shall be illegal or unenforceable with
respect to the Note or with respect to any such mortgage deed or security
agreement, such provision shall be deemed canceled to the same extent as
though it never had appeared herein, but the remaining provisions shall
not be affected thereby.
9. Further Assurances. Debtor further agrees to execute and deliver any and
all other documents and take any and all other steps or actions reasonably
deemed necessary by Bank to effectuate this Agreement.
10. Costs and Expenses. Debtor also agrees to reimburse Bank for all costs and
expenses incurred in the preparation, execution and delivery of this
Agreement, including any costs of Bank's Corporate Law Department.
11. Successors and Assigns. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns, and shall inure to the
benefit of Bank and its respective successors and assigns.
12. Titles and Headings. The titles and headings herein are intended to
promote convenience and are not a part of this Agreement for purposes of
interpreting and applying the provisions hereof.
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<PAGE>
13. Confession of Judgment. The undersigned hereby jointly and severally
authorize any attorney at law to appear in any state or federal court of
record in the United States of America after the maturity hereof (whether
occurring by lapse of time or acceleration), to waive the issuance and
service of process, to admit the maturity of this note and the amount then
appearing due, to confess judgment against all of the aforesaid parties
(or any thereof) in favor of the holder hereof for the amount then
appearing due, together with interest and costs of suit, and thereupon to
release all errors and to waive all rights of appeal and stay of
execution. No judgment against less than all of the aforesaid parties
shall bar any subsequent judgment against the other or others or any
thereof. Should any judgment be vacated for any reason this warrant of
attorney nevertheless may thereafter be used for obtaining additional
judgments.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in manner and form sufficient to bind them at Mt. Gilead, Morrow County, Ohio as
of the date first above written.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
SIMS AGRICULTURAL PRODUCTS CO.
By: /s/ Dallas Paul
---------------------------
Its: President
NATIONAL CITY BANK, COLUMBUS
By: /s/ Stanley A. Uchida
---------------------------
Its: Assistant Vice President
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<PAGE>
SECOND PROMISSORY NOTE MODIFICATION AGREEMENT
THIS SECOND PROMISSORY NOTE MODIFICATION AGREEMENT (the "Agreement") is made and
entered into effective as of November 21st, 1997, by and among NATIONAL CITY
BANK OF COLUMBUS, a national banking association, formerly known as NATIONAL
CITY BANK, COLUMBUS ("Bank") and SIMS AGRICULTURAL PRODUCTS CO., an Ohio
corporation ("Debtor").
WHEREAS, Debtor executed a certain Replacement Promissory Note (the "Note")
dated January 12, 1996, in the original principal amount of Six Hundred
Forty-five Thousand Two Hundred Eighty-six and 20/100 Dollars ($645,286.20)
payable to the order of Bank on or before January 28, 2001; and
WHEREAS, the parties executed a previous modification agreement dated effective
as of March 7, 1997, which modified the monthly payments provided for in the
Note; and
WHEREAS, the parties desire to modify the Note with respect to definitions and
events of default provided for therein, but otherwise preserving all other terms
and conditions of the Note and any other instrument or document executed in
connection with the Note.
NOW, THEREFORE, in consideration of and subject to the covenants and terms
contained herein and for other good and valuable consideration, the parties
hereto agree as follows:
1. Modification. The Note is hereby modified by deleting the sixth and
seventh paragraphs thereof in their entirety as written and substituting,
instead, the following:
"The occurrence of any of the following shall constitute an Event of
Default hereunder:
(a) Debtor's Bank Debt or any part thereof shall not be paid
in full promptly when due (whether by lapse of time,
acceleration of maturity or otherwise);
(b) any Obligor shall die or be dissolved;
(c) any representation or warranty made by any Obligor in this
note or any Related Writing shall be false or erroneous in any
material respect;
(d) any Obligor shall fail or omit to perform or observe any
agreement made by that Obligor in this note or in any Related
Writing;
(e) Debtor fails to furnish to Bank, as soon as available and
in any event within ninety (90) days after the end of each of
Debtor's fiscal years, an annual report of Debtor for that
year audited by a certified public accountant selected by
Debtor and reasonably acceptable to Bank;
(f) Debtor fails to furnish to Bank, as soon as available and
in any event within sixty (60) days after the end of each of
the quarterly periods of each of Debtor's fiscal years,
Debtor's balance sheet as at the end of the period and its
income statement and surplus reconciliation for Debtor's
current fiscal year to date certified by an appropriate
officer of Debtor to be true and complete to the best of his
knowledge and belief;
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<PAGE>
(g) the ratio, determined according to GAAP, of Debtor's debt
to its tangible net worth is greater than 1.5 to 1.0 at the
end of any of its fiscal years;
(h) the ratio, determined according to GAAP, of (i) the sum of
Debtor's net profit plus equity injections plus interest
expense to (ii) the sum of Debtor's current portion of long
term debt plus interest expense is less than 1.25 to 1.0 at
the end of any of its fiscal years;
(i) a judgment shall be entered against any Obligor in any
court of record;
(j) any deposit account of any Obligor is attached or levied
upon;
(k) any voluntary petition by or involuntary petition against
any Obligor shall be filed pursuant to any chapter of any
bankruptcy code or any Obligor shall make an assignment for
the benefit of creditors, or there shall be any other
marshalling of the assets and liabilities of any Obligor for
the benefit of that Obligor's creditors;
(l) any Obligor enters into any merger or consolidation or
sells, leases, or otherwise disposes of all or substantially
all of such Obligor's assets in any manner other than in the
ordinary course of business; or
(m) any Obligor's Bank Debt or any part thereof shall not be
paid in full immediately when due (whether by lapse of time,
acceleration of maturity or otherwise).
Upon the occurrence of an Event of Default, the holder of this note
may, in its sole discretion, declare this note to be due and
payable, and the principal of and interest on this note shall
thereupon become immediately payable in full, without any
presentment, demand or notice of any kind, which Debtor hereby
waives. Debtor will pay to Bank all costs and expenses of collection
of this note, including, without limitation, attorneys' fees.
In this note, the following terms have the following meanings:
(a) Bank Debt means Debt payable to Bank, whether initially
payable to Bank or acquired by Bank by purchase, pledge or
otherwise and whether assigned or participated to or from Bank
in whole or in part,
(b) Debt means, collectively, all monetary liabilities, and
any charges or expenses incurred in connection therewith, now
or hereafter owing by the Person or Persons in question,
including, without limitation, every such liability whether
owing by such Person or one (1) of such Persons alone or
jointly, severally or jointly and severally, whether owing
absolutely or contingently, or directly or indirectly, and
whether created by loan, overdraft. guaranty or other contract
or by quasi-contract, tort, statute or other operation of law;
(c) GAAP means generally accepted accounting principles
applied on a consistent basis;
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<PAGE>
(d) Obligor means any Person who is or shall become obligated
or whose property is or shall serve as collateral for the
payment of Debtor's Bank Debt or any part thereof in any
manner and, in addition to Debtor, includes, without
limitation, any maker, endorser, guarantor, subordinating
creditor, assignor, pledgor, mortgagor or hypothecator of
property;
(e) Person means a natural person or entity of any kind,
including, without limitation, any corporation, partnership,
trust, governmental body, or any other form or kind of entity;
(f) Prime Rate means the fluctuating rate of interest which is
publicly announced from time to time by Bank at its principal
place of business as being its "prime rate" or "base rate"
thereafter in effect, with each change in the Prime Rate
automatically, immediately and without notice changing the
fluctuating interest rate thereafter applicable hereunder, it
being agreed that the Prime Rate is not necessarily the lowest
rate of interest then available from Bank on fluctuating rate
loans; and
(g) Related Writing means a writing of any form or substance
signed by any Obligor (whether as principal or agent) or by
any attorney, accountant or other representative of any
Obligor and received by Bank in respect of Debtor's Bank Debt
or any part thereof, including, without limitation, any credit
application, credit agreement, reimbursement agreement,
financial statement, promissory note, guaranty, indenture,
mortgage, security agreement, authorization, subordination
agreement, certificate, opinion or any similar writing."
2. Ratification of Note, Mortgage and Security Agreement. Except as herein
expressly modified, the parties hereto ratify, approve, accept and confirm
all of the terms and conditions of the Note, and of any mortgage deed or
security agreement executed in connection with or referencing the Note,
including provisions for the acceleration of the indebtedness as to any
default stated therein, and for any warrant of attorney to confess
judgment as provided in the Note.
3. Continuation of Mortgage Liens and Security Interests. Except for the
modifications above stated, the parties hereby expressly intend that this
Agreement shall not constitute the creation of a new debt or the
extinguishment of the debt evidenced by the Note; nor shall it in any
manner affect or impair any mortgage lien or security interest granted in
connection with the Note, which Debtor hereby acknowledges to be valid and
existing liens on the property described in any mortgage or security
agreement executed in connection with or referencing the Note, and said
mortgage liens or security interests are hereby agreed to be continued in
full force and effect from the date hereof until the debt herein is fully
satisfied.
4. No Course of Dealing; Waiver. Debtor expressly acknowledges and agrees
that the execution of this Agreement shall not constitute a waiver of, and
shall not preclude the exercise of, any right, power or remedy granted to
Bank in any document evidencing the indebtedness of Debtor to Bank, or as
provided by law, except to the extent expressly provided herein. No
previous modification, extension, or compromise entered into with respect
to any indebtedness of Debtor to Bank shall constitute a course of dealing
or be inferred or construed as constituting an express or implied
understanding to enter into any future modification, extension or
compromise. No delay on the part of Bank in exercising
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<PAGE>
any right, power or remedy shall operate as a waiver thereof or otherwise
prejudice Bank's rights, powers or remedies.
5. Promise to Pay. Debtor hereby covenants and promises to pay to the order
of Bank, the unpaid principal balance of the Note together with interest
as provided therein, and hereby promises (as modified by this Agreement)
to perform all of the covenants, conditions, stipulations and agreements
as contained in the Note, and in any other document or instrument executed
in connection with the Note or referencing the Note, and as provided
herein
6. Setoffs, Claims and Defenses. Debtor hereby certifies that, as of the date
hereof, Debtor has no setoffs, counter-claims or other defenses of any
nature whatsoever to the payment of any part of the obligations owed to
Bank.
7. Governing Law. This Agreement shall be interpreted and construed in
accordance with and governed by the laws of the State of Ohio. Further,
the parties hereto intend that this Agreement shall be in compliance with
all applicable laws and shall be enforceable in accordance with its terms.
If any provision of this Agreement shall be illegal or unenforceable with
respect to the Note or with respect to any such mortgage deed or security
agreement, such provision shall be deemed cancelled to the same extent as
though it never had appeared herein, but the remaining provisions shall
not be affected thereby.
8. Further Assurances. Debtor further agrees to execute and deliver any and
all other documents and take any and all other steps or actions reasonably
deemed necessary by Bank to effectuate this Agreement.
9. Costs and Expenses. Debtor also agrees to reimburse Bank for all costs and
expenses incurred in the preparation, execution and delivery of this
Agreement, including any costs of Bank's Corporate Law Department.
10. Successors and Assigns. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns, and shall inure to the
benefit of Bank and its respective successors and assigns.
11. Titles and Headings. The titles and headings herein are intended to
promote convenience and are not a part of this Agreement for purposes of
interpreting and applying the provisions hereof.
12. Confession of Judgment. The undersigned hereby authorizes any attorney at
law to appear in any state or federal court of record in the United States
of America after the maturity hereof (whether occurring by lapse of time
or acceleration), to waive the issuance and service of process, to admit
the maturity of the Note and the amount then appearing due, to confess
judgment against the undersigned in favor of the holder hereof for the
amount then appearing due, together with interest and costs of suit, and
thereupon to release all errors and to waive all rights of appeal and stay
of execution. No judgment shall bar any subsequent judgment. Should any
judgment be vacated for any reason, this warrant of attorney nevertheless
may thereafter be used for obtaining additional judgments.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in manner and form sufficient to bind them at Mt. Gilead, Morrow County, Ohio,
effective as of the date first above written.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
SIMS AGRICULTURAL PRODUCTS CO.
By: /s/ Dallas H. Paul
---------------------------
Dallas H. Paul
Its: President
NATIONAL CITY BANK, COLUMBUS
By: /s/ Stanley A. Uchida
---------------------------
Stanley A. Uchida
Its: Assistant Vice President
-11-
<PAGE>
Exhibit 10.4
PROMISSORY NOTE MODIFICATION AGREEMENT
THIS PROMISSORY NOTE MODIFICATION AGREEMENT (the "Agreement") is made and
entered into effective as of November 21st, 1997, by and among NATIONAL CITY
BANK OF COLUMBUS, a national banking association ("Bank") and SIMS AGRICULTURAL
PRODUCTS CO., an Ohio corporation ("Borrower").
WHEREAS, Borrower executed a certain Commercial Note: Term Multiple
Advance/Prime (the "Note") dated March 14, 1997, in the original principal
amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) payable to the
order of Bank on or before March 28, 2007; and
WHEREAS, the parties desire to modify the Note with respect to the events of
default provided for therein, but otherwise preserving all other terms and
conditions of the Note and any other instrument or document executed in
connection with the Note.
NOW, THEREFORE, in consideration of and subject to the covenants and terms
contained herein and for other good and valuable consideration, the parties
hereto agree as follows:
1. Modification. The Note is hereby modified by deleting Section 8 thereof in
its entirety as written and substituting, instead, the following:
"8. Events of Default. It shall be an "Event of Default" if (a) all
or any part of the Bank Debt of any Obligor shall not be paid in
full promptly when due (whether by lapse of time, acceleration, or
otherwise); (b) any representation, warranty, or other statement
made by any Person (other than Bank) in any Related Writing shall be
untrue or incomplete in any respect when made; (c) any Person (other
than Bank) shall repudiate or shall fail or omit to perform or
observe any agreement contained in this Note or in any other Related
Writing that is on that Person's part to be complied with; (d) any
indebtedness (other than any evidenced by this Note) of any Obligor
shall not be paid when due, or there shall occur any event,
condition, or other thing which gives (or which with the lapse of
any applicable grace period, the giving of notice, or both would
give) any creditor the right to accelerate or which automatically
accelerates the maturity of any such indebtedness; (e) Bank shall
not receive (in addition to any information described in any
addendum to this Note) without expense to Bank, (i) forthwith upon
each request of Bank made upon Borrower therefor, (A) such
information in writing regarding each Reporting Person's financial
condition, properties, business operations, if any, and pension
plans, if any, prepared, in the case of financial information, in
accordance with generally accepted accounting principles
consistently applied and otherwise in form and detail satisfactory
to Bank or (B) written permission, in form and substance
satisfactory to Bank, from each Reporting Person to inspect (or to
have inspected by one or more Persons selected by Bank) the
properties and records of that Reporting Person and to make copies
and extracts from those records or (ii) prompt written notice
whenever Borrower (or any director, employee, officer, or agent of
Borrower) knows or has reason to know that any Event of Default has
occurred; (f) any judgment shall be entered against any Obligor in
any judicial or administrative tribunal or before any arbitrator or
mediator; (g) any Obligor shall fail or omit to comply with any
applicable law, rule, regulation, or order in any material respect;
(h) any proceeds of any Subject Loan shall be used for any purpose
that is not in the ordinary course of Borrower's business; (i) any
property in which any Obligor now has or hereafter acquires any
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<PAGE>
rights or which now or hereafter secures any Bank Debt shall be or
become encumbered by any mortgage, security interest, or other lien,
except any mortgage, security interest, or other lien consented to
by Bank; (j) any Obligor shall at any time or over any period of
time sell, lease, or otherwise dispose of all or any material part
of that Obligor's assets, except for inventory sold in the ordinary
course of business and other assets sold, leased, or otherwise
disposed of with the consent of Bank; (k) any Obligor shall cease to
exist or shall be dissolved, become legally incapacitated, or die;
(l) any Proceeding shall be commenced with respect to any Obligor;
(m) Borrower fails to furnish to Bank, as soon as available and in
any event within sixty (60) days after the end of each of the
quarterly periods of each of Borrower's fiscal years, Borrower's
balance sheet as at the end of the period and its income statement
and surplus reconciliation for Borrower's current fiscal year to
date certified by an appropriate officer of Borrower to be true and
complete to the best of his knowledge and belief; (n) the ratio,
determined according to GAAP, of Borrower's debt to its tangible net
worth is greater than 1.5 to 1.0 at the end of any of its fiscal
years; (o) the ratio, determined according to GAAP, of (i) the sum
of Borrower's net profit plus equity injections plus interest
expense to (ii) the sum of Borrower's current portion of long term
debt plus interest expense is less than 1 .25 to 1.0 at the end of
any of its fiscal years; (p) there shall occur or commence to exist
any event, condition, or other thing that constitutes an "Event of
Default" as defined in any addendum to this Note; (q) there shall
occur any event, condition, or other thing that has, or, in Bank's
judgment, is likely to have, a material adverse effect on the
financial condition, properties, or business operations of any
Obligor or on Bank's ability to enforce or exercise any agreement or
right arising under, out of, or in connection with any Related
Writing; or (r) the holder of this Note shall, in good faith,
believe that the prospect of payment or performance of any
obligation evidenced by this Note is impaired."
2. Ratification of Note, Mortgage and Security Agreement. Except as herein
expressly modified, the parties hereto ratify, approve, accept and confirm
all of the terms and conditions of the Note, and of any mortgage deed or
security agreement executed in connection with or referencing the Note,
including provisions for the acceleration of the indebtedness as to any
default stated therein, and for any warrant of attorney to confess
judgment as provided in the Note.
3. Continuation of Mortgage Liens and Security Interests. Except for the
modifications above stated, the parties hereby expressly intend that this
Agreement shall not constitute the creation of a new debt or the
extinguishment of the debt evidenced by the Note; nor shall it in any
manner affect or impair any mortgage lien or security interest granted in
connection with the Note, which Borrower hereby acknowledges to be valid
and existing liens on the property described in any mortgage or security
agreement executed in connection with or referencing the Note, and said
mortgage liens or security interests are hereby agreed to be continued in
full force and effect from the date hereof until the debt herein is fully
satisfied.
4. No Course of Dealing; Waiver. Borrower expressly acknowledges and agrees
that the execution of this Agreement shall not constitute a waiver of, and
shall not preclude the exercise of, any right, power or remedy granted to
Bank in any document evidencing the indebtedness of Borrower to Bank, or
as provided by law, except to the extent expressly provided herein. No
previous modification, extension, or compromise entered into with respect
to any indebtedness of Borrower to Bank shall constitute a course of
dealing or be inferred or construed as constituting an express or implied
understanding to enter into any future modification, extension or
compromise. No delay on the part of Bank in exercising
-2-
<PAGE>
any right, power or remedy shall operate as a waiver thereof or otherwise
prejudice Bank's rights, powers or remedies.
5. Promise to Pay. Borrower hereby covenants and promises to pay to the order
of Bank, the unpaid principal balance of the Note together with interest
as provided therein, and hereby promises (as modified by this Agreement)
to perform all of the covenants, conditions, stipulations and agreements
as contained in the Note, and in any other document or instrument executed
in connection with the Note or referencing the Note, and as provided
herein.
6. Setoffs Claims and Defenses. Borrower hereby certifies that, as of the
date hereof, Borrower has no setoffs, counter-claims or other defenses of
any nature whatsoever to the payment of any part of the obligations owed
to Bank.
7. Governing Law. This Agreement shall be interpreted and construed in
accordance with and governed by the laws of the State of Ohio. Further,
the parties hereto intend that this Agreement shall be in compliance with
all applicable laws and shall be enforceable in accordance with its terms.
If any provision of this Agreement shall be illegal or unenforceable with
respect to the Note or with respect to any such mortgage deed or security
agreement, such provision shall be deemed cancelled to the same extent as
though it never had appeared herein, but the remaining provisions shall
not be affected thereby.
8. Further Assurances. Borrower further agrees to execute and deliver any and
all other documents and take any and all other steps or actions reasonably
deemed necessary by Bank to effectuate this Agreement.
9. Costs and Expenses. Borrower also agrees to reimburse Bank for all costs
and expenses incurred in the preparation, execution and delivery of this
Agreement, including any costs of Bank's Corporate Law Department.
10. Successors and Assigns. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns, and shall inure to the
benefit of Bank and its respective successors and assigns.
11. Titles and Headings. The titles and headings herein are intended to
promote convenience and are not a part of this Agreement for purposes of
interpreting and applying the provisions hereof.
12. Confession of Judgment. The undersigned hereby authorizes any attorney at
law to appear in any state or federal court of record in the United States
of America after the maturity hereof (whether occurring by lapse of time
or acceleration), to waive the issuance and service of process, to admit
the maturity of the Note and the amount then appearing due, to confess
judgment against the undersigned in favor of the holder hereof for the
amount then appearing due, together with interest and costs of suit, and
thereupon to release all errors and to waive all rights of appeal and stay
of execution. No judgment shall bar any subsequent judgment. Should any
judgment be vacated for any reason, this warrant of attorney nevertheless
may thereafter be used for obtaining additional judgments.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in manner and form sufficient to bind them at Mt. Gilead, Morrow County, Ohio,
effective as of the date first above written.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
SIMS AGRICULTURAL PRODUCTS CO.
By: /s/ Dallas H. Paul
---------------------------
Dallas H. Paul
Its: President
NATIONAL CITY BANK, COLUMBUS
By: /s/ Stanley A. Uchida
---------------------------
Stanley A. Uchida
Its: Assistant Vice President
-4-
<PAGE>
COMMERCIAL NOTE: TERM MULTIPLE ADVANCE/PRIME (OHIO)
- --------------------------------------------------------------------------------
Amount City, State Date FOR BANK USE ONLY
$500,000.00 Mt. Gilead, Ohio March 14, 1997 ---------------------------------
Obligor # 7391123012
- --------------------------------------------------------------------------------
Tax I.D. #341665183
---------------------------------
Obligation #
---------------------------------
Office Regional Banking Division
---------------------------------
FOR VALUE RECEIVED, Sims Agricultural Products Co. ("Borrower") a(n)
Corporation, whose mailing address is 3795 COUNTY ROAD 29 MOUNT GILEAD OH
43338-9788, hereby promises to pay to the order of NATIONAL CITY BANK OF
COLUMBUS ("Bank"), a national banking association having its banking office at
155 E BROAD ST, COLUMBUS, OHIO 43251, at Bank's banking office (or at such other
place as Bank may from time to time designate by written notice) in lawful money
of the United States of America, the principal sum of
Five Hundred Thousand and no/100 DOLLARS
or such lesser amount as may appear on this Note, or as may be entered in a loan
account on Bank's books and records, or both, together with Interest, all as
provided below.
1. Commitment. This Note evidences an arrangement (the "Subject Commitment")
whereby Borrower may, on the date of this Note and thereafter until (but not
including) December 14th, 1997 (the "Conversion Date") or such earlier data upon
which the Subject Commitment is terminated or reduced to zero, obtain from Bank,
subject to the terms and conditions of this Note, such loans (each a "Subject
Loan") as Borrower may from time to time properly request. The amount of the
Subject Commitment shall be equal to the face amount of this Note, provided,
that (a) Borrower shall have the right, at any time and from time to time, to
permanently reduce the amount of the Subject Commitment to any amount that is an
Integral multiple of One Thousand and no/100 dollars ($1,000.00) (the "Minimum
Borrowing Amount") by giving Bank not less than one (1) Banking Day's prior
notice (which shall be irrevocable) of the effective date of the reduction and
(b) whenever Borrower obtains any Subject Loan, the Subject Commitment shall be
automatically and permanently reduced by an amount equal to the amount of that
Subject Loan. Regardless of any fee or other consideration received by Bank, the
Subject Commitment may be terminated pursuant to section 11.
2. Fees. Borrower shall:
not be required to pay Bank a fee for the Subject Commitment.
3. Loan Requests; Disbursement. A Subject Loan is properly requested if
requested orally or in writing not later than 2:00 p.m., Banking-Office Time, of
the Banking Day upon which that Subject Loan is to be made. Each request for a
Subject Loan shall of itself constitute, both when made and when honored, a
representation and warranty by Borrower to Bank that Borrower is entitled to
obtain the requested Subject Loan. Bank is hereby irrevocably authorized to make
an appropriate entry on this Note, in a loan account on Bank's books and
records, or both, whenever Borrower obtains a Subject Loan. Each such entry
shall be prima facie evidence of the data entered, but the making of such an
entry shall not be a condition to Borrower's obligation to pay. Bank is hereby
directed, absent notice from Borrower to the contrary, to disburse the proceeds
of each Subject Loan to Borrower's general checking account with Bank. Bank
shall have no duty to follow, nor any liability for, the application of any
proceeds of any Subject Loan.
4, Conditions: Subject Loans. Each Subject Loan shall be in an amount that is an
integral multiple of the Minimum Borrowing Amount. Borrower shall not be
entitled to obtain any Subject Loan (a) on or after the Conversion Date or such
earlier date upon which the Subject Commitment is terminated or reduced to zero,
(b) if either at the time of Borrower's request for that loan or when that
request is honored there shall exist or would occur any Event of Default, (c) if
any representation, warranty, or other statement (other than any expressly made
as of a single date) made by any Person (other than Bank) in any Related Writing
would, if made either as of the time of Borrower's request for that Subject Loan
or as of the time when that request is honored, be untrue or incomplete in any
respect, or (d) if the amount of that loan, plus the aggregate amount of all
other Subject Loans for which requests are then pending, would exceed the then
amount of the Subject Commitment.
5. Interest. The unpaid principal balance of each Subject Loan shall at all
times bear Interest at a fluctuating rate equal to one quarter percent (.25%)
per annum plus the Prime Rate, provided, that so long as any principal of or
accrued interest on any Subject Loan is overdue, the entire unpaid principal
balance of each Subject Loan and all overdue interest thereon shall bear
Interest at a fluctuating rate equal to two percent (2%) par annum above the
rate that would otherwise be applicable; provided further, that in no event
shall any principal of or Interest on any Subject Loan bear interest at any time
after Maturity at a lesser rate than the rate applicable hereto immediately
after Maturity. Interest on each Subject Loan shall be payable in arrears on
April 28, 1997 and on the 28th day of each Month thereafter, at Maturity, and on
demand thereafter.
6. Repayment. Subject to section 9, the Subject Loans shall be repayable in one
hundred twenty (120) installments, commencing on the 28th day of the first Month
to begin at least thirty (30) days after the Conversion Date and continuing on
the 28th day of each Month thereafter until paid in full, each such installment
except the final installment to be in a principal amount equal to one-one
hundred twentieth (1/120) of the aggregate unpaid principal balance of the
Subject Loans as of the Conversion Date, and the final installment to be in an
amount equal to all unpaid principal of the Subject Loans. Borrower shall have
the right to prepay the principal of the Subject Loans In whole or In part,
provided, that (a) each such prepayment shall be in an amount that is an
integral multiple or the Minimum Borrowing Amount or is equal to the entire
unpaid principal balance of this Note, (b) each such prepayment made on or after
the Conversion Date shall be applied to the Installments of the Subject Loans in
the Inverse order of their respective due dates, and (c) concurrently with any
prepayment of the entire unpaid principal balance of this Note made on or after
the Conversion Date, Borrower shall prepay the accrued Interest on the principal
being prepaid. Each prepayment of the Subject Loans may be made without premium
or penalty.
7. Definitions. As used in this Note, except where the context clearly requires
otherwise, "Affiliate" means, when used with reference to any Person (the
"subject"), a Person that is in control of, under the control of, or under
common control with, the subject, the term "control" meaning the possession,
directly or indirectly, of the power to direct the management or policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise; "Bank Debt" means, collectively, all Debt to Bank, whether incurred
directly to Bank or acquired by it by purchase, pledge, or otherwise, and
whether participated to or from Bank in whole or in part; "Banking Day" means
any day (other than any Saturday, Sunday or legal holiday) on which Bank's
banking office is open to the public for carrying on substantially all of its
banking functions; "Banking-Office Time" means, when used with reference to any
time, that time determined at the location of Bank's banking office; "Debt"
means, collectively, all obligations of the Person or Persons in question,
including, without limitation, every such obligation whether owing by one such
Person alone or with one or more other Persons in a joint, several, or joint and
several capacity, whether now owing or hereafter arising, whether owing
absolutely or contingently, whether created by lease, loan, overdraft, guaranty
of payment, or other contract, or by quasi-contract, tort, statute, other
operation of law, or otherwise; "Maturity" means, when used with reference to
any Subject Loan, the date (whether occurring by lapse of time, acceleration, or
otherwise) upon which the last scheduled principal installment of that Subject
Loan is due; "Note" means this promissory note (including, without limitation,
each addendum, allonge, or amendment, if any, hereto); "Obligor" means any
Person who, or any of whose property, shall at the time in question be obligated
in respect of all or any part of the Bank Debt of Borrower and (in addition to
Borrower) includes, without limitation, co-makers, endorsers, guarantors,
pledgors, hypothecators, mortgagors, and any other Person who agrees,
conditionally or otherwise, to make any loan to, purchase from, or investment
in, any other Obligor or otherwise assure such other Obligor's creditors or any
of them against loss; "Person" means an individual or entity of any kind,
including, without limitation, any association, company, cooperative,
corporation, partnership, trust, governmental body, or any other form or kind of
entity; "Prime Rate" means the fluctuating rate per annum which is publicly
announced from time to time by Bank as being its so-called "prime rate" or "base
rate" thereafter in effect, with each change in the Prime Rate automatically,
immediately, and without notice changing the Prime Rate thereafter applicable
hereunder, It being acknowledged that the Prime Rate is not necessarily the
lowest rate of interest then available from Bank on fluctuating rate loans;
"Proceeding" means any assignment for the benefit of creditors, any case in
bankruptcy, any marshalling of any Obligor's assets for the benefit of
creditors, any moratorium on the payment of debts; or any proceeding under my
law relating to conservatorship, insolvency, liquidation, receivership,
trusteeship, or any similar event, condition, or other thing; "Related Writing"
means this Note and any indenture, note, guaranty, assignment; mortgage,
security agreement, subordination agreement, notice, financial statement, legal
opinion, certificate, or other writing of any kind pursuant to which all or any
part of the Bank Debt of Borrower is issued, which evidences or secures all or
any part of the Bank Debt of Borrower, which governs the relative rights and
priorities of Bank and one or more other Persons to payments made by, or the
property of, any Obligor, which is delivered to Bank pursuant to another such
writing, or which is otherwise delivered to Bank by or on behalf of any Person
(or any employee, officer, auditor, counsel, or agent of any Person) in respect
of or in connection with all or any part of the Bank Debt of Borrower:
"Reporting Person" means each Obligor and each member of any "Reporting Group"
as defined in any addendum to this Note; and the foregoing definitions shall be
applicable to the respective plurals of the foregoing defined terms.
-5-
<PAGE>
8. Events of Default. It shall be an "Event of Default" if (a) all or any part
of the Bank Debt of any Obligor shall not be paid in full promptly when due
(whether by lapse of time, acceleration, or otherwise); (b) any representation,
warranty, or other statement made by any Person (other than Bank) in any Related
Writing shall be untrue or incomplete in any respect when made; (c) any Person
(other than Bank) shall repudiate or shall fail or omit to perform or observe
any agreement contained in this Note or in any other Related Writing that is on
that Person's part to be complied with; (d) any indebtedness (other than any
evidenced by this Note) of any Obligor shall not be paid when due, or there
shall occur any event, condition, or other thing which gives (or which with the
lapse of any applicable grace period, the giving of notice, or both would give)
any creditor the right to accelerate or which automatically accelerates the
maturity of any such indebtedness; (e) Bank shall not receive (in addition to
any information described in any addendum to this Note) without expense to Bank,
(i) forthwith upon each request of Bank made upon Borrower therefor, (A) such
information in writing regarding each Reporting Person's financial condition,
properties, business operations. If any, and pension plans, if any, prepared, in
the case of financial information, in accordance with generally accepted
accounting principles consistently applied and otherwise in form and detail
satisfactory to Bank or (B) written permission, in form and substance
satisfactory to Bank, from each Reporting Person to inspect (or to have
inspected by one or more Persons selected by Bank) the properties and records of
that Reporting Person and to make copies and extracts from those records or (ii)
prompt written notice whenever Borrower (or any director, employee, officer, or
agent of Borrower) knows or had reason to know that any Event of Default has
occurred; (f) any judgment shall be entered against any Obligor in any judicial
or administrative tribunal or before any arbitrator or mediator, (g) any Obligor
shall fail or omit to comply with any applicable law, rule, regulation, or order
in any material respect; (h) any proceeds of any Subject Loan shall be used for
any purpose that is not in the ordinary course of Borrower's business; (i) any
property in which any Obligor now has or hereafter acquires any rights or which
now or hereafter secures any Bank Debt shall be or become encumbered by any
mortgage, security interest, or other lien, except any mortgage, security
interest, or other lien consented to by Bank; (j) any Obligor shall at any time
or over any period of time sell, lease, or otherwise dispose of all or any
material part of that Obligor's assets, except for inventory sold in the
ordinary course of business and other assets sold, leased, or otherwise disposed
of with the consent of Bank; (k) any Obligor shall cease to exist or shall be
dissolved, become legally incapacitated, or die; (l) any Proceeding shall be
commenced with respect to any Obligor; (m) there shall occur or commence to
exist any event, condition, or other thing that constitutes an "Event of
Default" as defined in any addendum to this Note; (n) there shall occur any
event, condition, or other thing that has, or, in Bank's judgment, is likely to
have, a material adverse effect on the financial condition, properties, or
business operations of any Obligor or on Bank's ability to enforce or exercise
any agreement or right arising under, out of, or in connection with any Related
Writing; or (o) the holder of this Note shall, in good faith, believe that the
prospect or payment or performance of any obligation evidenced by this Note is
impaired.
9. Effects of Default, it any Event of Default (other than the commencement of
any Proceeding with respect to Borrower) shall occur, then, and in each such
case, notwithstanding any provision or inference to the contrary, Bank shall
have the right in its discretion, by giving written notice to Borrower, to (a)
immediately terminate the Subject Commitment (if not already terminated or
reduced to zero) and (b) declare each Subject Loan (if not already due) to be
due, whereupon each Subject Loan shall immediately become due and payable in
full, if any proceeding shall be commenced with respect to Borrower, then,
notwithstanding any provision or inference to the contrary, automatically,
without presentment, protest, or notice of dishonor, all of which are waived by
all makers and all endorsers of this Note, now or hereafter existing, (i) the
Subject Commitment shall immediately terminate (if not already terminated or
reduced to zero) and (ii) each Subject Loan (if not already due) shall
immediately become due and payable in full.
10. Late Charges. If any principal of or interest on any Subject Loan is not
paid within ten (10) days after its due date, then, and in each such case, Bank
shall have the right to assess a late charge, payable by Borrower on demand, in
an amount equal to the greater of twenty dollars ($20.00) or five percent (5%)
of the amount not timely paid.
11. No Setoff. Borrower hereby waives any and all now existing or hereafter
arising rights to recoup or offset any obligation of Borrower under or in
connection with this Note or any Related Writing against any claim or right of
Borrower against Bank.
12. Indemnity; Capital Adequacy. if(a) at any time any governmental authority
shall require National City Corporation, a Delaware corporation, its successors
or assigns, or Bank, whether or not the requirement has the force of law, to
maintain, as support for the Subject Commitment, capital in a specified minimum
amount that either is not required or is greater than that required at the date
of this Note, whether the requirement is implemented pursuant to the "risk-based
capital guidelines" (published at 12 CFR 3 in respect of "national banking
associations", 12 CFR 208 in respect of "state member banks", at and 12 CFR 228
in respect of "bank holding companies") or otherwise, and (b) as a result
thereof the rate of return on capital of National City Corporation, its
successors or assigns, or Bank or both (taking into account their then policies
as to capital adequacy and assuming full utilization of their capital) shall be
directly or indirectly reduced by reason of any new or added capital adequacy
attributable to the Subject Commitment; then, and in each such case, Borrower
shall, on Bank's demand, pay Bank as an additional fee such amounts as will in
Bank's reasonable opinion then, and in each such case, Borrower shall, on Bank's
demand, pay Bank as an additional fee such amounts as will in Bank's reasonable
opinion reimburse National City Corporation, its successors and assigns, and
Bank for any such reduced rate of return. In determining the amount of any such
fee. Bank may use reasonable averaging and attribution methods. Each
determination by Bank shall be conclusive absent manifest error.
13. Indemnity: Administration and Enforcement. Borrower will reimburse Bank, on
Bank's demand from time to time, for any and all fees, costs, and expenses
(including, without limitation, the fees, and disbursements of legal counsel)
incurred by Bank in administering this Note or in protecting, enforcing, or
attempting to protect or enforce its rights under this Note. If any amount
(other than any principal of any Subject Loan and any interest and late charges)
owing under this Note is not paid when due, then, and in each such case,
Borrower shall pay, on Bank's demand, interest on that amount from the due date
thereof until paid in full at a fluctuating rate equal to four percent (4%) per
annum plus the Prime Rate.
14. Waivers; Remedies; Application of Payments. Bank may from time to time in
its discretion grant waivers and consents in respect of this Note or any other
Related Writing or assent to amendments thereof, but no such waiver, consent, or
amendment shall be binding upon Bank unless set forth in a writing (which
writing shall be narrowly construed) signed by Bank. No course of dealing in
respect of, nor any omission or delay in the exercise of, any right, power, or
privilege by Bank shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any further or other exercise thereof or of
any other, as each such right, power, or privilege may be exercised either
independently or concurrently with others and as often and in such order as Bank
may deem expedient. Without limiting the generality of the foregoing, neither
Bank's acceptance or one or more late payments or charges nor Bank's acceptance
of interest on overdue amounts at the respective rates applicable thereto shall
constitute a waiver of any right of Bank. Each right, power, or privilege
specified or referred to in this Note is in addition to and not in limitation of
any other rights, powers, and privileges that Bank may otherwise have or acquire
by operation of law, by other contract, or otherwise. Bank shall be entitled to
equitable remedies with respect to each breach or anticipatory repudiation of
any provision of this Note, and Borrower hereby waives any defense which might
be asserted to bar any such equitable remedy. Bank shall have the right to apply
payments in respect of the indebtedness evidenced by this Note with such
allocation to the respective parts thereof and the respective due dates thereof
as Bank in its sole discretion may from time to time deem advisable.
15. Other Provisions. The provisions of this Note shall bind Borrower and
Borrower's successors and assigns and benefit Bank and its successors and
assigns, including each subsequent holder, if any, of this Note, provided, that
no Person other than Borrower may obtain Subject Loans; provided further, that
neither any such holder of this Note nor any assignee of any Subject Loan,
whether in whole or in part, shall thereby become obligated to grant Borrower
any Subject Loan. Except for Borrower and Bank and their respective successors
and assigns, there are no intended beneficiaries of this Note or the Subject
Commitment. The provisions of sections 10 through 19, both inclusive, shall
survive the payment in full of the principal of and interest on this Note. The
captions to the sections and subsections of this Note are inserted for
convenience only and shall be ignored in interpreting the provisions thereof.
Each reference to a section includes a reference to all subsections thereof
(i.e., those having the same character or characters, to the left of the decimal
point) except where the context clearly does not so permit. If any provision in
this Note shall be or become illegal or unenforceable in any case, then that
provision shall be deemed modified in that case so as to be legal and
enforceable to the maximum extent permitted by law while most nearly preserving
its original intent, and in any case the illegality or unenforceability of that
provision shall affect neither that provision in any other case nor any other
provision. All fees, interest, and premiums for any given period shall accrue on
the first day thereof but not on the last day thereof (unless the last day is
the first day) and in each case shall be computed on the basis of a 360-day year
and the actual number of days in the period. In no event shall interest accrue
at a higher rate than the maximum rate, if any, permitted by law. Bank shall
have the right to furnish to its Affiliates, and to such other Persons as Bank
shall deem advisable for the conduct of its business, information concerning the
business, financial condition, and property of Borrower, the amount of the Bank
Debt of Borrower, and the terms, conditions, and other provisions applicable to
the respective parts thereof. This Note shall be governed by the law (excluding
conflict of laws rules) of the jurisdiction in which Bank's banking office is
located.
-6-
<PAGE>
16. Integration. This Note and, to the extent consistent with this Note, the
other Related Writings, set forth the entire agreement of Borrower and Bank as
to the subject matter of this Note, and may not be contradicted by evidence of
any agreement or statement unless made In a writing (which writing shall be
narrowly construed) signed by Bank contemporaneously with or after the execution
and delivery of this Note. Without limiting the generality of the foregoing,
Borrower hereby acknowledges that Bank has not based, conditioned, or offered to
base or condition the credit hereby evidenced or any charges, fees, interest
rates, or premiums applicable thereto upon Borrowers agreement to obtain any
other credit, property, or service other than any loan, discount, deposit, or
trust service from Bank.
17. Notices and Other Communications. Each notice, demand, or other
communication, whether or not received, shall be deemed to have been given to
Borrower whenever Bank shall have mailed a writing to that effect by certified
or registered mail to Borrower at Borrower's mailing address (or any other
address of which Borrower shall have given Bank notice after the execution and
delivery of this Note); however, no other method of giving actual notice to
Borrower is hereby precluded. Borrower hereby irrevocably accepts Borrower's
appointment as each Obligor's agent for the purpose of receiving any notice,
demand, or other communication to be given by Bank to each such Obligor pursuant
to any Related Writing. Bank shall be entitled to assume that any knowledge
possessed by any Obligor other than Borrower is possessed by Borrower. Each
communication to be given to Bank shall be in writing unless this Note expressly
permits that communication to be made orally, and in any case shall be given to
Bank's Regional Banking Division at Bank's banking office (or any other address
of which Bank shall have given notice to Borrower after the execution and
delivery this Note). Borrower hereby assumes all risk arising out of or in
connection with each oral communication given by Borrower and each communication
given or attempted by Borrower in contravention of this section. Bank shall be
entitled to rely on each communication believed in good faith by Bank to be
genuine.
18. Warrant of Attorney. Borrower hereby authorizes any attorney at law at any
time or times to appear in any state or federal court of record in the United
States of America after all or any pan of the obligations evidenced by this Note
shall have become due, whether by lapse of time, acceleration, or otherwise, and
in each case to waive the issuance and service of process, to present to the
court this Note end any other writing (if any) evidencing the obligation or
obligations in question, to admit the due date thereof and the nonpayment
thereof when due, to confess judgment against Borrower in favor of Bank for the
full amount then appearing due, together with interest and costs of suit, and
thereupon to release all errors and waive all rights of appeal and any stay of
execution. The foregoing warrant of attorney shall survive any judgment, it
being understood that should any judgment against Borrower be vacated for any
reason, Bank may nevertheless utilize the foregoing warrant of attorney in
thereafter obtaining one or more additional judgments against Borrower.
19. Jurisdiction and Venue; Waiver of Jury Trial. Any action, claim,
counterclaim, crossclaim, proceeding, or suit, whether at law or in equity,
whether sounding in tort, contract, or otherwise at any time arising under or in
connection with this Note or any other Related Writing, the administration,
enforcement, or negotiation of this Note or any other Related Writing, or the
performance of any obligation in respect of this Note or any other Related
Writing (each such action, claim, counterclaim, crossclaim, proceeding, or suit,
an "Action") may be brought in any federal or state court located in the city in
which Bank's banking office is located. Borrower hereby unconditionally submits
to the jurisdiction of any such court with respect to each such Action and
hereby waives any objection Borrower may now or hereafter have to the venue of
any such Action brought in any such court. Borrower HEREBY, AND EACH HOLDER OF
THIS Note, BY TAKING POSSESSION THEREOF, KNOWINGLY AND VOLUNTARILY WAIVES JURY
TRIAL IN RESPECT OF ANY Action.
Borrower Sims Agricultural Products Co.
By: /s/ Dallas H. Paul
------------------------------------
Printed Name: Dallas H. Paul
--------------
Title: President
---------
(complete only if required -->) And By:
--------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
-7-
<PAGE>
Exhibit 10.5
EXHIBIT A
COMMERCIAL INSTALLMENT NOTE (with Financial Covenants)
$610,000.00 Executed at [ILLEGIBLE]
[ILLEGIBLE]
FOR VALUE RECEIVED, the undersigned ("Debtor") promises to pay to the order of
NATIONAL CITY BANK, COLUMBUS ("Bank"), which has its principal place of business
in Columbus, Ohio, at any office of Bank SIX HUNDRED TEN THOUSAND DOLLARS
($610,000.00) in lawful money of the United States together with interest, in
ninety-six (96) consecutive monthly installments, commencing the 28th day of
February, 1996. Each installment shall consist of principal in the amount of Six
Thousand Four Hundred Eighty-nine and 36/100 Dollars ($6,489.36) plus the unpaid
interest accrued on this note, except that the final installment shall be in
such amount as will pay all of the unpaid principal of and unpaid interest
accrued on this note in full.
Prior to maturity, principal and any overdue interest shall bear interest
computed daily (on the basis of a 360-day year and actual days elapsed) at a
fluctuating rate which shall be equal to three-quarters of one percent (0.75%)
per annum above the Prime Rate. Debtor may prepay the principal of this note in
whole or in part at any time without premium or penalty.
Concurrently with each prepayment of the principal of this note, Debtor shall
pay the unpaid interest accrued on the principal being prepaid, and each
prepayment shall be applied to the outstanding installments of this note in the
inverse order of their respective due dates.
If Debtor fails to pay an installment in full within ten (10) days after its due
date, Debtor, in each case, will incur and shall pay a late charge equal to five
percent (5%) of the unpaid amount. The payment of late charge will not cure or
constitute a waiver of any Event of Default under this note.
Except as otherwise provided in writing, payments will be applied first to
installments in the order of their respective due dates and then to late charges
in the order of their respective due dates; provided, however, that if a payment
so applied would pay the principal of this note in full, but leave late charges
outstanding, such payment will instead be applied to late charges prior to being
applied to the principal portion of the final installment. Each payment of an
installment shall be applied first to accrued but unpaid interest and then to
principal.
In its discretion, Bank may, from time to time, unilaterally change any
provision for the application of payments and installments by giving a written
notice to Debtor of the change. The notice shall be mailed to the address
indicated herein or such other address that Debtor may furnish in writing to an
appropriate officer of Bank and shall be mailed not less than fifteen (15) days
prior to the effective date of such change.
If this note is not paid in full at maturity (whether by lapse of time,
acceleration of maturity or otherwise), the interest rate otherwise in effect
hereunder shall be increased by three percent (3%) per annum, provided that in
no event shall the principal of and interest on this note bear interest after
<PAGE>
maturity at a rate less than the interest rate actually in effect hereunder
immediately after maturity.
In consideration of Bank's granting the loan evidenced by this note, Debtor
further agrees with Bank as follows:
1. WARRANTIES. Debtor represents and warrants to Bank as follows:
1.1 ORGANIZATION. Debtor is a corporation and in good standing under
Ohio law having its chief executive office at the address set forth
opposite Debtors signature below. Debtor has only the following
Subsidiaries, if any: __________________________. Debtor is duly
qualified to transact business in each state or other jurisdiction
in which Debtor owns or leases any real property or in which
Debtor's counsel reasonably believes such qualification is
necessary.
1.2 AUTHORITY. Debtor has requisite power and authority to enter into
this note. No registration with or approval of any governmental
agency of any kind is required on the part of Debtor for the due
execution and delivery or for the enforceability of this note. Each
officer executing and delivering this note on behalf of Debtor has
been duly authorized to do so. Neither the execution and delivery of
this note by Debtor nor its performance and observance of the
respective provisions hereof will violate any existing provision in
its articles of incorporation, regulations or by-laws or any
applicable law or violate or otherwise constitute a default under
any contract or other obligation now existing and binding upon it.
Upon the execution and delivery hereof, this note will become a
valid and binding obligation of Debtor.
1.3 LITIGATION. No litigation or proceeding is pending against Debtor
before any court or any administrative agency which in the opinion
of Debtor's officers might, if successful, have a material, adverse
effect on Debtor.
1.4 TAXES. Debtor has filed all federal, state and local tax returns
which are required to be filed by it and paid all taxes due as shown
thereon (except to the extent, if any, permitted by subsection 2.2).
Neither the Internal Revenue Service nor any other federal, state or
local taxing authority has alleged any material default by Debtor in
the payment of any tax material in amount or threatened to make any
assessment in respect thereof which has not been reflected in the
financial statements referred to in subsection 1.7.
1.5 ASSETS. Debtor has good and marketable title to all assets reflected
in its balance sheet except for changes resulting from transactions
in the ordinary course of business. All such assets are clear of any
mortgage, security interest or other lien of any kind other than any
permitted by subsection 4.3.
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1.6 COMPLIANCE WITH LAW. Debtors operations are in full compliance with
all material requirements imposed by law, whether federal or state,
including, without limitation, the Occupational Safety and Health
Act, federal and state environmental protection laws and zoning
ordinances.
1.7 FINANCIAL STATEMENTS. All financial statements and credit
applications delivered by Debtor to Bank accurately reflect Debtor's
financial condition and operations at the times and for the periods
therein stated.
2. AFFIRMATIVE COVENANTS. Debtor agrees that so long as any Bank Debt remains
outstanding, Debtor shall perform and observe each of the following:
2.1 FINANCIAL STATEMENTS. Debtor will furnish each of the following to
Bank
(a) as soon as available and in any event within ninety (90) days
after the end of each of Debtor's fiscal years, an annual
report of Debtor for that year audited by a certified public
accountant selected by Debtor and reasonably acceptable to
Bank;
(b) As soon as available and in any event within sixty (60) days
after the end of each of the quarterly periods of each of
Debtor's fiscal years,
(1) Debtor's balance sheet as at the end of the period and
its income statement and surplus reconciliation for
Debtor's current fiscal year to date certified by an
appropriate officer of Debtor to be true and complete to
the best of his knowledge and belief, and
(2) that officer's certification that he knows of no
potential Event of Default that is then existing or if
any does, a brief description thereof and of Debtor's
intentions in respect thereof;
(c) forthwith upon Bank's written request, such other information
in writing about Debtor's financial condition, properties and
operations as Bank may from time to time reasonably request.
All of Debtor's financial statements shall be prepared in accordance
with GAAP consistently applied except as disclosed therein and in
form and detail satisfactory to Bank.
2.2 TAXES. Debtor will pay in full, prior in each case to the date when
penalties for the nonpayment thereof would attach, all taxes,
assessments and governmental charges and levies for which it may be
or become subject and all lawful claims which, if unpaid, might
become a lien or charge upon its property; provided, that no item
need be paid so long as and to the extent that it is contested in
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thereof, (d) any litigation or proceeding shall be brought against
Debtor before any court or administrative agency which, if
successful, might have a material, adverse effect on Debtor, (e)
there shall be filed any application for a determination of the
qualified status of any employee benefit plan, or (f) he reasonably
believes that any Potential Event of Default has occurred or that
any other representation or warranty made in section 1 shall for any
reason have ceased in any material respect to be true and complete.
2.9 BUSINESS PURPOSE. All funds disbursed under this note will be used
for business or commercial purposes.
3. FINANCIAL COVENANTS. Debtor will comply with the following financial
covenants with Bank as follows (applicable subsections must be initialed
by Debtor):
3.1 DEBT TO TANGIBLE NET WORTH RATIO. The ratio of all of Debtor's Debt
to its Tangible Net Worth shall not exceed the following amounts for
the periods set forth below:
December 31, 1996 2.0:1
December 31, 1997 2.0:1
December 31, 1998 and thereafter 1.5:1
3.2 CASH FLOW RATIO. The ratio of Debtor's Net Profit plus interest
expense to Debtor's Current Ratio of Long Term Debt plus interest
expense shall not be less than 1.25:1.
4. NEGATIVE COVENANTS. Debtor further covenants with Bank as follows:
4.1 MERGERS. Debtor will not
(a) be a party of any merger or consolidation,
(b) purchase or otherwise acquire the business or all or
substantially all of the assets of another corporation or
business, or
(c) lease as lessor, sell, sell-leaseback or otherwise transfer
(whether in one transaction or a series of transactions) all
or any substantial part of its fixed assets (other than
chattels that shall have become obsolete or no longer useful
in its present business).
4.2 BORROWINGS. Debtor will not create, assume or have outstanding at
any time any Debt; provided, that this subsection shall not apply to
any Bank Debt or any Subordinated Debt or any existing or future
Debt secured by a purchase money security interest permitted by
subsection 4.3 or incurred under a lease permitted by subsection 4.3
or any existing Debt fully disclosed in Debtor's most recent
financial statements, and any renewal or extension thereof in whole
or in part.
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4.3 LIENS; LEASES. Debtor will not (a) acquire or hold any property
subject to any land contract, inventory consignment, lease or other
title retention contract, (b) sell or otherwise transfer any
Receivables, whether with or without recourse, or (c) suffer or
permit any property now owned or hereafter acquired by it to be or
become encumbered by any mortgage, security interest, lien or
financing statement; provided, that this subsection shall not apply
to (i) any lien for a tax, assessment or government charge or levy,
(ii) any lien securing only workers' compensation, unemployment
insurance or similar obligations, (iii) any mechanic's, carrier's,
landlord's or similar common law or statutory lien incurred in the
normal course of business, (iv) zoning ordered restrictions, public
utility easements, minor title irregularities and similar matters
having no adverse effect as a practical matter on the ownership or
use of any of the property in question, (v) any lien securing or
given in lieu of surety, stay, appeal or performance bonds, or
securing performance of contracts or bids (other than contracts for
the payment of money borrowed), or deposits required by law or
governmental regulations or by any court order, decree, judgment or
rule or as a condition to the transaction of business or the
exercise of any right, privilege or license, (vi) any existing lien
fully disclosed in Debtor's most recent financial statements
delivered to Bank, (vii) any mortgage, security interest or other
lien which is created or assumed in purchasing, constructing or
improving any real property or to which any real property is subject
when purchased, provided, that (A) the mortgage, security interest
or other lien is confined to the property in question and (B) the
Debt secured thereby does not exceed the total cost of the purchase,
construction or improvement, (viii) any lease as lessee, (ix) any
transfer of a check or other medium of payment for deposit or
collection, or any similar transaction in the normal course of
business, or (x) any financing statement perfecting a security
interest that would be permissible under this subsection.
5. DEFAULT; REMEDIES. The occurrence of any of the following shall constitute
an Event of Default hereunder: (a) Debtor's Bank Debt or any part thereof
shall not be paid in full promptly when due (whether by lapse of time,
acceleration of maturity or otherwise); (b) any Obligor shall die or be
dissolved; (c) any representation or warranty by any Obligor in this note
or any Related Writing shall be false or erroneous in any material
respect; (d) any Obligor shall fail or omit to perform or observe any
agreement made by that Obligor in this note or in any Related Writing; (e)
a judgment shall be entered against any Obligor in any court of record;
(f) any deposit account of any Obligor is attached or levied upon; (g) any
voluntary petition by or involuntary petition against any Obligor shall be
filed pursuant to any chapter of any bankruptcy code or any Obligor shall
make an assignment for the benefit of creditors, or there shall be any
other marshaling of the assets and liabilities of any Obligor for the
benefit of the Obligor's creditors; or (h) any Obligor's Bank Debt or any
part thereof shall not be paid in full immediately when due (whether due
by lapse of time, or acceleration or otherwise). Upon the occurrence of an
Event of Default, the holder
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subordinating creditor, assignor, pledgor, mortgagor or hypothecator of
property;
Person means a natural person or entity of any kind, including, without
limitation, any corporation, partnership, trust, governmental body, or any
other form or kind of entity;
Potential Event of Default means an event which constitutes, or which with
the lapse of time or the giving of notice or both would constitute an
Event of Default;
Prime Rate means the fluctuating rate of interest which is publicly
announced from time to time by Bank at its principal place of business as
being its prime rate or base rate thereafter in effect, with each change
in the Prime Rate automatically, immediately and without notice changing
the fluctuating interest rate thereafter applicable hereunder, it being
agreed that the Prime Rate is not necessarily the lowest rate of interest
then available from Bank on fluctuating rate loans;
Receivable means a claim for money due or to become due to Debtor, whether
classified as an account, instrument, chattel paper, general intangible,
incorporeal hereditament or otherwise, and all proceeds of the foregoing;
Reinvestment Rate means a rate of interest equal to the bond equivalent
yield for the most actively traded issues of U.S. Treasury Bills, U.S.
Treasury Notes or U.S. Treasury Bonds for a term similar to the period
from the date of prepayment to the due date of the final installment of
this note and in a principal amount comparable to the principal amount
being prepaid, all as reasonably determined by Bank;
Related Writing means a writing of any form or substance signed by any
Obligor (whether as principal or agent) or by any attorney, accountant or
other representative of any Obligor and received by Bank in respect of
Debtor's Bank Debt or any part thereof, including, without limitation, any
credit application, credit agreement, reimbursement agreement, financial
statement, promissory note, guaranty, indenture, mortgage, security
agreement, authorization, subordination agreement, certificate, opinion or
any similar writing, but shall not include any commitment letter issued by
Bank, without regard to whether Debtor or any other Person signed or
acknowledged receipt thereof;
Subordinated Debt means any Debt the payment of which has been
subordinated to the payment in full of Bank Debt, whether by its terms or
by separate written instrument, in either case in form and substance
satisfactory to Bank;
Subsidiary means a person, other than a natural person, of which a
majority of the outstanding capital stock (or other form of ownership) or
a majority of the voting power in any election of directors is (or upon
the exercise of any outstanding warrants, options or other rights would
be) owned directly, or indirectly through one or more Subsidiaries, by
another Person, other than a natural person; and
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Tangible Net Worth means net worth less intangible assets, including,
without limitation, patents, trademarks, goodwill and treasury stock.
7. SHARING INFORMATION. Debtor authorizes Bank to share all credit and
financial information relating to Debtor with Bank's parent company, and
with any subsidiary or affiliate company of Bank or of Bank's parent
company.
8. NOTICES. Except as otherwise provided in this note, a notice to or request
of Debtor shall be deemed to have been given or made hereunder when a
writing to that effect shall have been delivered to an officer of Debtor
or five (5) days after a writing to that effect shall have been deposited
in the United States mail and sent, with postage prepaid, by registered or
certified mail, to Debtor at the address of Debtor's chief executive
office (or to such other address as Debtor may hereafter furnish to Bank
in writing for that purpose), irrespective of whether the writing is
actually received by Debtor. No other method of giving actual notice to or
making a request of Debtor is hereby precluded. Every notice required to
be given to Bank pursuant to this note shall be delivered to an Account
Officer.
9. INTERPRETATION. Any holder's delay or omission in the exercise of any
right under this note shall not operate as a waiver of that right or of
any other right under this note. Bank may from time to time in its
discretion grant Debtor waivers and consents in respect of this note or
any Related Writing, but no such waiver or consent shall bind Bank unless
specifically granted by Bank in writing, which writing shall be strictly
construed. Each right, power or privilege specified or referred to in this
note or any Related Writing is in addition to and not in limitation of any
other rights, powers and privileges that Bank may otherwise have or
acquire by operation of law, by other contract or otherwise. The
provisions of this note and the Related Writings shall bind and benefit
Debtor and Bank and their respective successors and assigns, including
each subsequent holder, if any, of this note. If more than one person or
entity has signed this note then the term Debtor means each of them, they
are jointly and severally liable on this note and on the warrant of
attorney below and each shall be the agent of the others for all purposes
relating to this note. If any provision of this note is determined by a
court of competent jurisdiction to be invalid, illegal or unenforceable,
that determination shall not affect any other provision of this note, and
each such other provision shall be construed and enforced as if the
invalid, illegal or unenforceable provision were not contained herein. The
captions to the various sections and subsections of this note are for
convenience of reference only and shall be disregarded in the
interpretation of this note. This note shall be governed by law of the
State of Ohio.
10. ENTIRE AGREEMENT. This note and the Related Writings set forth the entire
agreement between the parties regarding the transactions contemplated
hereby, and supersede all prior agreements, discussions, representations
and understandings, whether written or oral, and any and all
contemporaneous oral agreements, commitments, discussions, representations
and understandings between the parties relating to the subject matter
hereof.
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11. AMENDMENTS. No amendment, modification or supplement to this note or any
Related Writing shall be binding unless executed in writing by all parties
thereto, and this provision shall not be subject to waiver by any party
and shall be strictly enforced.
12. WARRANT OF ATTORNEY. Debtor authorizes any attorney-at-law to appear in
any state or federal court of record in the United States after this note
matures (whether by lapse of time, acceleration of maturity or otherwise);
to waive the issuance and service of process; to confess judgment against
Debtor in favor of the holder of this note for the amount then appearing
due, together with interest and costs of suit; and to release all errors
and waive all rights of appeal and stay of execution. If any judgment
against Debtor is vacated for any reason, this warrant of attorney may be
used to obtain additional judgments.
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
SIMS AGRICULTURAL PRODUCTS CO.
By: /s/ Dallas Paul
- ---------------------------- ---------------------------------
Address
Its: President
- ---------------------------- ---------------------------------
Phone
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PROMISSORY NOTE MODIFICATION AGREEMENT
THIS PROMISSORY NOTE MODIFICATION AGREEMENT (the "Agreement") is made and
entered into effective as of the 7th day of March, 1996, by and between SIMS
AGRICULTURAL PRODUCTS CO. ("Borrower"); and NATIONAL CITY BANK, COLUMBUS, a
national banking association, with its main office at 155 East Broad Street,
Columbus, Ohio 43251 ("Bank")
WHEREAS, Borrower executed a certain promissory note (the "Note") dated as of
January 12, 1996, in the original principal amount of $610,000.00 payable to the
order of Bank on or before 2/28/2004, a true and correct copy of which is
attached hereto as Exhibit A and is incorporated herein by reference, which Note
is presently unpaid and represents an outstanding principal balance of
$602,902.19; and
WHEREAS, Debtor has qualified for the State of Ohio Linked Deposit Program under
Ohio Revised Code Section 135.61 et seq. (the "Program") for a portion of the
indebtedness evidenced by the Note; and
WHEREAS, the parties desire to modify certain provisions with respect to the
interest rate and monthly payments provided for in the Note, but otherwise to
preserve, ratify and reaffirm all other terms and conditions of the Note and any
other instrument or document executed in connection with the Note.
NOW, ThEREFORE, in consideration of and subject to the covenants and terms
contained herein and for other good and valuable consideration, the parties
hereto agree as follows:
1. Modification.
(a) Interest Rate. From the effective date hereof, and continuing
thereafter until 3/7/98 ("Termination Date"), an amount equal to
$120,000.00 (the "Linked Amount") of the total indebtedness
evidenced by the Note shall bear interest at a rate of six percent
(6.0%) per annum. Interest on any indebtedness evidenced by the Note
which is not included in the Program shall continue to accrue at the
rate as provided for in the Note. Upon the occurrence of the
Termination Date, the maturity of the Note according to its terms,
the disqualification of the Borrower under the Plan, or the
termination of the Plan, whichever occurs first, the rate of
interest on the Linked Amount shall revert to the rate of interest
provided for in the Note.
(b) Monthly Payments. From and after the effective date hereof and until
interest on the Linked Amount reverts to the rate provided for in
the Note, Debtor shall make monthly payments as follows: (i) Linked
Amount - One Thousand Two Hundred Fifty and No/100 Dollars
($1,250.00) plus accrued interest, and (ii) non-Linked Amount - Five
Thousand Two Hundred Thirty-Nine and 36/100 Dollars ($5,239.36) plus
accrued interest.
2. Ratification of Note, Mortgage, and Security Agreement. Except as herein
expressly modified, the parties hereto ratify, approve, accept and
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confirm all of the terms and conditions of the Note, and of any mortgage
deed or security agreement executed in connection with or referencing the
Note, including provisions for the acceleration of the indebtedness as to
any default stated therein, and for any warrant of attorney to confess
judgment as provided in the Note.
3. Continuation of Mortgage Liens and Security interests. Except for the
modifications above stated, the parties hereby expressly intend that this
Agreement shall not constitute the creation of a new debt or the
extinguishment of the debt evidenced by the Note; nor shall it in any
manner affect or impair any mortgage lien or security interest granted in
connection with the Note, which Debtor hereby acknowledges to be valid and
existing liens on the property described in any mortgage or security
agreement executed in connection with or referencing the Note, and said
mortgage liens or security interests are hereby agreed to be continued in
full force and effect from the date hereof until the debt herein is fully
satisfied.
4. No Course of Dealing; Waiver. Debtor expressly acknowledges and agrees
that the execution of this Agreement shall not constitute a waiver of, and
shall not preclude the exercise of, any right, power or remedy granted to
Bank in any document evidencing the indebtedness of Debtor to Bank, or as
provided by law, except to the extent expressly provided herein. No
previous modification, extension, or compromise entered into with respect
to any indebtedness of Debtor to Bank shall constitute a course of dealing
or be inferred or construed as constituting an express or implied
understanding to enter into any future modification, extension or
compromise. No delay on the part of Bank in exercising any right, power or
remedy shall operate as a waiver thereof or otherwise prejudice Bank's
rights, powers or remedies.
5. Promise to Pay. Debtor hereby covenants and promises to pay to the order
of Bank, the unpaid principal balance of the Note together with interest
as provided therein, and hereby promises (as modified by this Agreement)
to perform all of the covenants, conditions, stipulations and agreements
as contained in the Note, and in any other document or instrument executed
in connection with the Note or referencing the Note, and as provided
herein.
6. Setoffs, Claims and Defenses. Debtor and any guarantor of the Note
executing this Agreement hereby certify that, as of the date hereof, they
have no setoffs, counter-claims or other defenses of any nature whatsoever
to the payment of any part of the obligations owed to Bank as of the date
of execution of this Agreement.
7. Obligations Joint and Several. The obligations hereunder of each of the
undersigned, if there be more than one, whether as Debtor or co-maker
shall be joint and several, and any reference herein to Debtor or to the
undersigned shall be deemed to be applicable to each such person
separately as well as to all.
8. Governing Law. This Agreement shall be interpreted and construed in
accordance with and governed by the laws of the State of Ohio. Further,
the parties hereto intend that this Agreement shall be in compliance with
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all applicable laws and shall be enforceable in accordance with its terms.
If any provision of this Agreement shall be illegal or unenforceable with
respect to the Note or with respect to any such mortgage deed or security
agreement, such provision shall be deemed canceled to the same extent as
though it never had appeared herein, but the remaining provisions shall
not be affected thereby.
9. Further Assurances. Debtor further agrees to execute and deliver any and
all other documents and take any and all other steps or actions reasonably
deemed necessary by Bank to effectuate this Agreement.
10. Costs and Expenses. Debtor also agrees to reimburse Bank for all costs and
expenses incurred in the preparation, execution and delivery of this
Agreement, including any costs of Bank's Corporate Law department.
11. Successors and Assigns. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns, and shall inure to the
benefit of Bank and its respective successors and assigns.
12. Titles and Headings. The titles and headings herein are intended to
promote convenience and are not a part of this Agreement for purposes of
interpreting and applying the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in manner and form sufficient to bind them at Mt. Gilead, Morrow County, Ohio as
of the date first above written.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
SIMS AGRICULTURAL PRODUCTS CO.
By: /s/ Dallas H. Paul
---------------------------
Its: President
NATIONAL CITY BANK, COLUMBUS
By: /s/ Stanley A. Uchida
---------------------------
Its: Assistant Vice President
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SECOND PROMISSORY NOTE MODIFICATION AGREEMENT
THIS SECOND PROMISSORY NOTE MODIFICATION AGREEMENT (the "Agreement") is made and
entered into effective as of November 21st, 1997, by and among NATIONAL CITY
BANK OF COLUMBUS, a national banking association, formerly known as NATIONAL
CITY BANK, COLUMBUS ("Bank") and SIMS AGRICULTURAL PRODUCTS CO., an Ohio
corporation ("Debtor"),
WHEREAS, Debtor executed a certain Commercial Installment Note (the "Note")
dated January 12, 1996, in the original principal amount of Six Hundred Ten
Thousand and 00/100 Dollars ($610,000.00) payable to the order of Bank on or
before January 28, 2004; and
WHEREAS, the parties executed a previous modification agreement dated effective
as of March 7, 1997, which temporarily modified the interest rate and monthly
payments provided for in the Note as a result of Debtor's qualification under
the Ohio Small Business Linked Deposit Program; and
WHEREAS, the parties desire to modify the Note with respect to certain financial
covenants provided for therein, but otherwise preserving all other terms and
conditions of the Note and any other instrument or document executed in
connection with the Note.
NOW, THEREFORE, in consideration of and subject to the covenants and terms
contained herein and for other good and valuable consideration, the parties
hereto agree as follows:
1. Modification. The Note is hereby modified by deleting sub-sections 3.1 and
3.2 thereof in their entirety as written and substituting, instead, the
following:
"3.1 DEBT TO TANGIBLE NET WORTH RATIO. The ratio of all of Debtor's Debt
to its Tangible Net Worth shall not exceed the following amounts on
the dates set forth below:
June 30, 1996 2.0 to 1.0
June 30, 1997 2.0 to 1.0
June 30, 1998, and at any fiscal year-end thereafter 1.5 to 1.0
3.2 CASH FLOW RATIO. The ratio of (i) the sum of Debtor's Net Profit
plus equity injections plus interest expense to (ii) the sum of
Debtor's Current Portion of Long Term Debt plus interest expense
shall not be less than 1.25 to 1.0."
2. Ratification of Note, Mortgage and Security Agreement. Except as herein
expressly modified, the parties hereto ratify, approve, accept and confirm
all of the terms and conditions of the Note, and of any mortgage deed or
security agreement executed in connection with or referencing the Note,
including provisions for the acceleration of the indebtedness as to any
default stated therein, and for any warrant of attorney to confess
judgment as provided in the Note.
3. Continuation of Mortgage Liens and Security Interests. Except for the
modifications above stated, the parties hereby expressly intend that this
Agreement shall not constitute the creation of a new debt or the
extinguishment of the debt evidenced by the Note; nor shall it in any
manner affect or impair any mortgage lien or security interest granted in
connection
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with the Note, which Debtor hereby acknowledges to be valid and existing
liens on the property described in any mortgage or security agreement
executed in connection with or referencing the Note, and said mortgage
liens or security interests are hereby agreed to be continued in full
force and effect from the date hereof until the debt herein is fully
satisfied.
4. No Course of Dealing; Waiver. Debtor expressly acknowledges and agrees
that the execution of this Agreement shall not constitute a waiver of, and
shall not preclude the exercise of, any right, power or remedy granted to
Bank in any document evidencing the indebtedness of Debtor to Bank, or as
provided by law, except to the extent expressly provided herein. No
previous modification, extension, or compromise entered into with respect
to any indebtedness of Debtor to Bank shall constitute a course of dealing
or be inferred or construed as constituting an express or implied
understanding to enter into any future modification, extension or
compromise. No delay on the part of Bank in exercising any right, power or
remedy shall operate as a waiver thereof or otherwise prejudice Bank's
rights, powers or remedies.
5. Promise to Pay. Debtor hereby covenants and promises to pay to the order
of Bank, the unpaid principal balance of the Note together with interest
as provided therein, and hereby promises (as modified by this Agreement)
to perform all of the covenants, conditions, stipulations and agreements
as contained in the Note, and in any other document or instrument executed
in connection with the Note or referencing the Note, and as provided
herein.
6. Setoffs, Claims and Defenses. Debtor hereby certifies that, as of the date
hereof, Debtor has no setoffs, counter-claims or other defenses of any
nature whatsoever to the payment of any part of the obligations owed to
Bank.
7. Governing Law. This Agreement shall be interpreted and construed in
accordance with and governed by the laws of the State of Ohio. Further,
the parties hereto intend that this Agreement shall be in compliance with
all applicable laws and shall be enforceable in accordance with its terms.
If any provision of this Agreement shall be illegal or unenforceable with
respect to the Note or with respect to any such mortgage deed or security
agreement, such provision shall be deemed cancelled to the same extent as
though it never had appeared herein, but the remaining provisions shall
not be affected thereby.
8. Further Assurances. Debtor further agrees to execute and deliver any and
all other documents and take any and all other steps or actions reasonably
deemed necessary by Bank to effectuate this Agreement.
9. Costs and Expenses. Debtor also agrees to reimburse Bank for all costs and
expenses incurred in the preparation, execution and delivery of this
Agreement, including any costs of Bank's Corporate Law Department.
10. Successors and Assigns. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns, and shall inure to the
benefit of Bank and its respective successors and assigns.
11. Titles and Headings. The titles and headings herein are intended to
promote convenience and are not a part of this Agreement for purposes of
interpreting and applying the provisions hereof.
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12. Confession of Judgment. The undersigned hereby authorizes any attorney at
law to appear in any state or federal court of record in the United States
of America after the maturity hereof (whether occurring by lapse of time
or acceleration), to waive the issuance and service of process, to admit
the maturity of the Note and the amount then appearing due, to confess
judgment against the undersigned in favor of the holder hereof for the
amount then appearing due, together with interest and costs of suit, and
thereupon to release all errors and to waive all rights of appeal and stay
of execution. No judgment shall bar any subsequent judgment. Should any
judgment be vacated for any reason, this warrant of attorney nevertheless
may thereafter be used for obtaining additional judgments.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in manner and form sufficient to bind them at Mt. Gilead, Morrow County, Ohio,
effective as of the date first above written
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
SIMS AGRICULTURAL PRODUCTS CO.
By: /s/ Dallas H. Paul
---------------------------
Dallas H. Paul
Its: President
NATIONAL CITY BANK OF COLUMBUS
By: /s/ Stanley A. Uchida
---------------------------
Stanley A. Uchida
Its: Assistant Vice President
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<PAGE>
Exhibit 10.6
COMMERCIAL INSTALLMENT NOTE
$300,000.00 Executed at Mt. Gilead, Ohio
November 21st, 1997
FOR VALUE RECEIVED, the undersigned ("Debtor") promises to pay to the order of
NATIONAL CITY BANK OF COLUMBUS, a national banking association ("Bank"), which
has its principal place of business in Columbus, Ohio, at any office of Bank,
THREE HUNDRED THOUSAND AND 00/100 DOLLARS (or, if less, the unpaid principal
attachment to this note or on Bank's loan account records) in lawful money of
the United States together with interest, in ninety-six (96) consecutive monthly
installments, commencing on December 28, 1997. Each installment shall consist of
principal in the amount of Three Thousand One Hundred Twenty-five and 00/100
Dollars ($3,125.00) plus the unpaid interest accrued on this note, except that
the final installment shall be in such amount as will pay all of the unpaid
principal of and unpaid interest accrued on this note in full.
Prior to maturity, principal and any overdue interest shall bear interest
computed daily (on the basis of a 360-day year and actual days elapsed) at a
fluctuating rate which is twenty-five hundredths percent (0.25%) per annum above
the Prime Rate. Debtor may prepay the principal of this note in whole or in part
at any time without premium or penalty.
Concurrently with any prepayment of the principal of this note, Debtor shall pay
the unpaid interest accrued on the principal being prepaid, and each prepayment
shall be applied to the outstanding installments of this note in the inverse
order of their respective due dates.
If Debtor fails to pay an installment in full within ten (10) days after its due
date, Debtor, in each case, will incur and shall pay a late charge equal to the
greater of Twenty and 00/100 Dollars ($20.00) or five percent (5.0%) of the
unpaid amount. The payment of a late charge will not cure or constitute a waiver
of any Event of Default under this note.
Except as otherwise provided in writing, payments will be applied first to
installments in the order of their respective due dates and then to late charges
in the order of their respective due dates; provided, however, that if a payment
so applied would pay the principal of this note in full, but leave late charges
outstanding, such payment will instead be applied to late charges prior to being
applied to the principal portion of the final installment. Each payment of an
installment shall be applied first to accrued but unpaid interest and then to
principal.
In its discretion, Bank may, from time to time, unilaterally change any
provision for the application of payments and installments by mailing a written
notice to Debtor of the change. The notice shall be mailed to the address
indicated herein or such other address that Debtor may furnish in writing to an
appropriate officer of Bank and shall be mailed not less than fifteen (15) days
prior to the effective date of such change.
If this note is not paid in full at maturity (whether by lapse of time,
acceleration of maturity or otherwise), the interest rate otherwise in effect
hereunder shall be increased by three percent (3.0%) per annum, provided that in
no event shall the principal of and interest on this note bear interest after
maturity at a rate less than the interest rate actually in effect hereunder
immediately after maturity.
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<PAGE>
The occurrence of any of the following shall constitute an Event of Default
hereunder:
(a) Debtor's Bank Debt or any part thereof shall not be paid in full
promptly when due (whether by lapse of time, acceleration of maturity or
otherwise);
(b) any Obligor shall die or be dissolved;
(c) any representation or warranty made by any Obligor in this note or any
Related Writing shall be false or erroneous in any material respect;
(d) any Obligor shall fail or omit to perform or observe any agreement
made by that Obligor in this note or in any Related Writing;
(e) Debtor fails to furnish to Bank, as soon as available and in any event
within ninety (90) days after the end of each of Debtor's fiscal years, an
annual report of Debtor for that year audited by a certified public
accountant selected by Debtor and reasonably acceptable to Bank;
(f) Debtor fails to furnish to Bank, as soon as available and in any event
within sixty (60) days after the end of each of the quarterly periods of
each of Debtor's fiscal years, Debtor's balance sheet as at the end of the
period and its income statement and surplus reconciliation for Debtor's
current fiscal year to date certified by an appropriate officer of Debtor
to be true and complete to the best of his knowledge and belief;
(g) the ratio, determined according to GAAP, of Debtor's debt to its
tangible net worth is greater than 1.5 to 1.0 at the end of any of its
fiscal years;
(h) the ratio, determined according to GAAP, of (i) the sum of Debtor's
net profit plus equity injections plus interest expense to (ii) the sum of
Debtor's current portion of long term debt plus interest expense is less
than 1.25 to 1.0 at the end of any of its fiscal years;
(i) a judgment shall be entered against any Obligor in any court of
record;
(j) any deposit account of any Obligor is attached or levied upon;
(k) any voluntary petition by or involuntary petition against any Obligor
shall be filed pursuant to any chapter of any bankruptcy code or any
Obligor shall make an assignment for the benefit of creditors, or there
shall be any other marshalling of the assets and liabilities of any
Obligor for the benefit of that Obligor's creditors;
(l) any Obligor enters into any merger or consolidation or sells, leases,
or otherwise disposes of all or substantially all of such Obligor's assets
in any manner other than in the ordinary course of business; or
(m) any Obligor's Bank Debt or any part thereof shall not be paid in full
immediately when due (whether by lapse of time, acceleration of maturity
or otherwise).
Upon the occurrence of an Event of Default, the holder of this note may, in its
sole discretion, declare this note to be due and payable, and the principal of
and interest on this note shall thereupon become immediately payable in full,
without any presentment, demand or notice of
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<PAGE>
any kind, which Debtor hereby waives. Debtor will pay to Bank all costs and
expenses of collection of this note, including, without limitation, attorneys'
fees.
In this note, the following terms have the following meanings:
(a) Bank Debt means Debt payable to Bank, whether initially payable to
Bank or acquired by Bank by purchase, pledge or otherwise and whether
assigned or participated to or from Bank in whole or in part;
(b) Debt means, collectively, all monetary liabilities, and any charges or
expenses incurred in connection therewith, now or hereafter owing by the
Person or Persons in question, including, without limitation, every such
liability whether owing by such Person or one (1) of such Persons alone or
jointly, severally or jointly and severally, whether owing absolutely or
contingently, or directly or indirectly, and whether created by loan,
overdraft, guaranty or other contract or by quasi-contract, tort, statute
or other operation of law;
(c) GAAP means generally accepted accounting principles applied on a
consistent basis;
(d) Obligor means any Person who is or shall become obligated or whose
property is or shall serve as collateral for the payment of Debtor's Bank
Debt or any part thereof in any manner and, in addition to Debtor,
includes, without limitation, any maker, endorser, guarantor,
subordinating creditor, assignor, pledgor, mortgagor or hypothecator of
property;
(e) Person means a natural person or entity of any kind, including,
without limitation any corporation, partnership, trust, governmental body,
or any other form or kind of entity;
(f) Prime Rate means the fluctuating rate of interest which is publicly
announced from time to time by Bank at its principal place of business as
being its "prime rate" or "base rate" thereafter in effect, with each
change in the Prime Rate automatically, immediately and without notice
changing the fluctuating interest rate thereafter applicable hereunder, it
being agreed that the Prime Rate is not necessarily the lowest rate of
interest then available from Bank on fluctuating rate loans; and
(g) Related Writing means a writing of any form or substance signed by any
Obligor (whether as principal or agent) or by any attorney, accountant or
other representative of any Obligor and received by Bank in respect of
Debtor's Bank Debt or any part thereof, including, without limitation, any
credit application, credit agreement, reimbursement agreement, financial
statement, promissory note, guaranty, indenture, mortgage, security
agreement, authorization, subordination agreement, certificate, opinion or
any similar writing.
Debtor certifies to Bank that all funds disbursed under this note will be used
for business or commercial purposes.
Debtor hereby authorizes Bank to share all credit and financial information
relating to Debtor with Bank's parent company, and with any subsidiary or
affiliate company of Bank or of Bank's parent company.
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<PAGE>
In no event shall the interest rate in effect on this note exceed the maximum
rate permissible under the law governing this note.
Any holder's delay or omission in the exercise of any right under this note
shall not operate as a waiver of that right or of any other right under this
note.
If any provision of this note is determined by a court of competent jurisdiction
to be invalid, illegal or unenforceable, that determination shall not affect any
other provision of this note, and each such other provision shall be construed
and enforced as if the invalid, illegal or unenforceable provision were not
contained herein.
This note and the Related Writings set forth the entire agreement between the
parties regarding the transactions contemplated hereby, and supersede all prior
agreements, commitments, discussions, representations and understandings,
whether written or oral, and any and all contemporaneous oral agreements,
commitments, discussions, representations and understandings between the parties
relating to the subject matter hereof.
No amendment, modification or supplement to this note or any Related Writings
shall be binding unless executed in writing by all parties thereto, and this
provision shall not be subject to waiver by any party and shall be strictly
enforced.
This note shall be governed by the law of the state in which Bank has its
principal place of business.
Debtor authorizes any attorney-at-law to appear in any state or federal court of
record in the United States after this note matures (whether by lapse of time,
acceleration of maturity or otherwise); to waive the issuance and service of
process; to confess judgment against Debtor in favor of the holder of this note
for the amount then appearing due, together with interest and costs of suit; and
to release all errors and waive all rights of appeal and stay of execution. If
any judgment against Debtor is vacated for any reason, this warrant of attorney
may be used to obtain additional judgments.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
3795 County Road 29 SIMS AGRICULTURAL PRODUCTS CO.,
P.O. Box 69 an Ohio corporation
Mt. Gilead, Ohio 43338-0069
(419) 946-2015
By: /s/ Dallas H. Paul
--------------------------------
Dallas H. Paul
Its: President
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<PAGE>
Exhibit 10.7
MUTUAL RELEASE
This Mutual Release is entered into by and between SIMS AGRICULTURAL
PRODUCTS CO., an Ohio corporation, with its principal place of business at 3795
County Road 29, Mt. Gilead, Ohio 43338 ("Sims"), FERTILIZER CORPORATION OF
AMERICA, a Florida corporation with its principal place of business at Miami,
Florida ("FCA") and DAVID CHRISTOPHERSON, an individual residing at Miami,
Florida ("Christopherson").
Background
A. On or about September 1, 1997, Sims purchased substantially all of the
assets of the Specialty Products Division of FCA. Pursuant to that the
Asset Purchase Agreement, a copy of which is attached hereto as Exhibit A,
FCA agreed not to compete with Sims.
B. In connection with the asset purchase, Sims and Christopherson entered
into a Confidentiality and Noncompetition Agreement dated September 1,
1997, pursuant to which, among other things, Christopherson agreed not to
compete with the business of Sims and Sims agreed to pay Christopherson,
as partial consideration for the noncompetition obligations imposed upon
him, common shares of Sims pursuant to a gross margin formula set forth in
the agreement, a copy of which is attached hereto as Exhibit B.
C. This Mutual Release is executed by the parties voluntarily and is intended
to effect the extinguishment of FCA's obligations under Section 5.16 of
the Asset Purchase Agreement, the extinguishment of Chistopherson's
obligations under Section 1 of the Confidentiality and Noncompetition
Agreement. Sims' obligation under Section 7.7 of the Asset Purchase
Agreement regarding Sims' Board of Directors, and Sims' obligation under
Section 3(b) of the Confidentiality and Noncompetition Agreement to pay
additional consideration for the noncompetition obligation imposed on
Christopherson.
Agreement
For good and valuable consideration, the receipt and sufficiency is hereby
acknowledged by all parties, the parties agree as follows:
1. Sims hereby releases and forever discharges FCA and Christopherson from
any and all claims, demands, actions, causes of action, judgments and
executions, which Sims ever had, or now has, or may have against FCA or
Christopherson for violation of the noncompetition obligations imposed
upon them in, respectively, Section 5.16 of the Asset Purchase Agreement
and Section 1 of the Confidentiality and Noncompetition Agreement.
Christopherson is not released from the confidentiality obligation
provided Christopherson may solicit customers of the Specialty Products
Division (that were former customers of FCA).
<PAGE>
2. Christopherson hereby releases and forever discharges Sims and its
officers, directors, shareholders, employees, affiliates, subsidiaries,
legal representatives, administrators, successors and assigns, from any
and all claims, demands, actions, causes of action, judgments and
executions, which he ever had or now has, or may have, against them, for
payment or nonpayment of the additional consideration for the
Noncompetition obligations imposed upon Christopherson in Section 3(b) of
the Confidentiality and Noncompetition Agreement between Sims and
Christopherson dated September 1, 1997. It is understood that all payments
made through the date of this agreement are to be retained by
Christopherson or FCA as the case may be.
3. FCA hereby releases and forever discharges Sims and its officers,
directors, shareholders, employees, affiliates, subsidiaries, legal
representatives, administrators, successors and assigns, from any and all
claims, demands, actions, causes of action, judgments and executions,
which he ever had or now has, or may have, against them, for the
obligations regarding the Board of Directors imposed on Sims in Section
7.7 of the Asset Purchase Agreement. Sims agrees that it will no longer
use the FCA name and that all intellectual rights or intangible rights
revert or will be assigned to FCA including all EPA registrations, or if
lapsed, Sims will cooperate with FCA in reinstating those registrations.
4. The parties agree that their covenants and promises in this Mutual Release
are made only in consideration of the covenants and promises explicitly
made hereunder by the parties, and not in consideration of any other
matter. The parties agree that the foregoing constitutes the entire
agreement between them and that there exist no other agreements, oral or
written, between them relating to any matters covered by this agreement.
The parties agree that the invalidity of any provision or provisions of
this Mutual Release shall not effect the other provisions, and this Mutual
Release shall be construed in all respects as if any invalid provisions
were omitted. The parties agree that the laws of the State of Ohio will
govern the resolution of any dispute arising under this Mutual Release,
and agree to submit themselves to the jurisdiction of the courts of the
State of Ohio, with venue in Morrow County, for the resolution of any such
dispute.
IN WITNESS WHEREOF, the parties have executed this Mutual Release on the
date set forth below their respective signature lines.
SIMS AGRICULTURAL PRODUCTS CO. FERTILIZER CORPORATION OF AMERICA
By: /s/ Dallas H. Paul By: /s/ David C. Christopherson
-------------------------- -----------------------------
Dallas H. Paul David C. Christopherson, President
Date: October 18, 1999 Date: October 13, 1999
By: /s/ David C. Christopherson
-------------------------------------
David C. Christopherson, Individually
Date: October 13, 1999
