EXHIBIT 10.35
APPENDIX A
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TRANSACTION AGREEMENT
between
CENEX HARVEST STATES COOPERATIVES,
a Minnesota cooperative association
and
FARMLAND INDUSTRIES, INC.,
a Kansas cooperative corporation
Dated as of September 23, 1999
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TABLE OF CONTENTS
ARTICLE I
THE TRANSACTION............................................................1
Section 1.01 Overview of Transaction.....................................1
Section 1.02 The Closing.................................................2
Section 1.03 Actions at the Closing......................................2
Section 1.04 Effect of Transaction.......................................3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CHSC.....................................5
Section 2.01 Organization and Good Standing..............................6
Section 2.02 Financial Statements........................................6
Section 2.03 Absence of Liabilities......................................6
Section 2.04 Title to Property...........................................6
Section 2.05 Intellectual Property.......................................7
Section 2.06 Compliance with Laws, etc...................................7
Section 2.07 Pending Litigation, Claims, Actions, Proceedings or
Investigations..............................................7
Section 2.08 Absence of Defaults.........................................7
Section 2.09 Authorization...............................................8
Section 2.10 Insurance...................................................8
Section 2.11 Governmental Authorization..................................8
Section 2.12 Subsidiaries................................................8
Section 2.13 SEC Filings.................................................9
Section 2.14 Absence of Certain Changes..................................9
Section 2.15 Taxes.......................................................9
Section 2.16 Employee Benefit Plans.....................................10
Section 2.17 Environmental Matters......................................11
Section 2.18 Pooling; Tax Treatment.....................................12
Section 2.19 No Dissenters' Rights......................................12
Section 2.20 Acquisition Co.............................................12
Section 2.21 Full Disclosure............................................13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FARMLAND................................13
Section 3.01 Organization and Good Standing.............................13
Section 3.02 Financial Statements.......................................14
Section 3.03 Absence of Liabilities.....................................14
Section 3.04 Title to Property..........................................14
Section 3.05 Intellectual Property......................................14
Section 3.06 Compliance with Laws, etc..................................15
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Section 3.07 Pending Litigation, Claims, Actions, Proceedings or
Investigations.............................................15
Section 3.08 Absence of Defaults........................................15
Section 3.09 Authorization..............................................15
Section 3.10 Insurance..................................................16
Section 3.11 Governmental Authorization.................................16
Section 3.12 Subsidiaries...............................................16
Section 3.13 SEC Filings................................................16
Section 3.14 Absence of Certain Changes.................................17
Section 3.15 Taxes......................................................17
Section 3.16 Employee Benefit Plans.....................................18
Section 3.17 Environmental Matters......................................19
Section 3.18 Pooling; Tax Treatment.....................................19
Section 3.19 No Dissenters' Rights......................................19
Section 3.20 Full Disclosure............................................20
ARTICLE IV
PRE-CLOSING COVENANTS.....................................................20
Section 4.01 Selection of Structure.....................................20
Section 4.02 Good Faith Efforts.........................................20
Section 4.03 Preservation of Business...................................21
Section 4.04 Conduct of Business........................................21
Section 4.05 Meetings of Members........................................22
Section 4.06 Full Access................................................22
Section 4.07 Notice of Developments.....................................23
Section 4.08 Exclusive..................................................23
Section 4.09 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filings..................................23
Section 4.10 Tax and Accounting Treatment...............................23
ARTICLE V
CLOSING CONDITIONS........................................................23
Section 5.01 Conditions to Obligations of Each Party....................24
Section 5.02 Additional Conditions to Obligation of CHSC................24
Section 5.03 Additional Conditions to Obligation of Farmland............25
ARTICLE VI
POST-CLOSING AGREEMENTS...................................................26
Section 6.01 Consolidation of Benefit Plans.............................26
Section 6.02 Patronage Distributions....................................26
Section 6.03 Indemnification of Former Officers; Insurance..............26
ARTICLE VII
TERMINATION...............................................................27
Section 7.01 Termination of Agreement...................................27
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Section 7.02 Effect of Termination......................................27
ARTICLE VIII
MISCELLANEOUS.............................................................28
Section 8.01 Waiver of Conditions.......................................28
Section 8.02 Amendment..................................................28
Section 8.03 Binding Nature.............................................28
Section 8.04 Counterparts...............................................28
Section 8.05 Entire Agreement...........................................28
Section 8.06 Notices....................................................28
Section 8.07 Non-Survival of Representations and Warranties.............29
Section 8.08 Captions...................................................29
Exhibits
Exhibit A-1 - Structure A Plan of Merger
Exhibit A-2 - Structure A Surviving Entity Bylaws
Exhibit B-1 - Structure B Plans of Merger
Exhibit B-2 - Structure B Surviving Entity Bylaws
Exhibit C - Senior Management Reporting Relationships
Exhibit D - Capital Plan
CHSC Disclosure Schedule
Farmland Disclosure Schedule
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TRANSACTION AGREEMENT
THIS TRANSACTION AGREEMENT (this "Agreement") is made and entered into
as of September 23, 1999, by and between CENEX HARVEST STATES COOPERATIVES, a
Minnesota cooperative association ("CHSC"), and FARMLAND INDUSTRIES, INC., a
Kansas cooperative corporation ("Farmland").
WHEREAS, each of CHSC and Farmland is an agricultural cooperative
organized for the purposes of benefitting and serving its members and patrons;
and
WHEREAS, the parties believe that the unification of their respective
business operations and assets will be in the best interest of their respective
members; and
WHEREAS, on May 6, 1999, the parties entered into a Memorandum of
Intent pursuant to which both parties agreed to negotiate in good faith to reach
agreement on the principal terms of a transaction pursuant to which they would
combine their respective assets and business operations into a single entity,
through a form of business combination to be determined by the parties, and
WHEREAS, the parties have now reached agreement as to the final terms
and conditions of such business combination, and wish to reduce such agreement
to writing as more particularly described herein.
NOW THEREFORE, in consideration of the foregoing and the mutual
representations, warranties and covenants herein contained, the parties hereto
agree as follows:
ARTICLE I
THE TRANSACTION
SECTION 1.01 OVERVIEW OF TRANSACTION.
At the Effective Time (as such term is defined in section 1.04 hereof),
CHSC and Farmland will combine into a single entity named "United Country
Brands, Inc." (the "Surviving Entity"). The combination will be in the form of
either (a) Structure A, which will be a merger of Farmland with and into CHSC,
with CHSC as the Surviving Entity, such merger to become effective at the
Effective Time ("Structure A"), or (b) a merger, prior to the Effective Time, of
CHSC into UCB Acquisition Co., an Ohio cooperative corporation and wholly-owned
subsidiary of CHSC ("Acquisition Co."), with Acquisition Co. as the survivor in
such merger (the "CHSC/Acquisition Co. Merger"), and immediately thereafter, the
merger of Farmland into Acquisition Co., with Acquisition Co. as the Surviving
Entity ("Structure B"). The parties anticipate and agree that Structure A
constitutes the structure that is preferred by the parties and the default
structure to accomplish the combination, and agree that Structure A shall be
used (and that the parties will use their best efforts to resolve any issues
relating to the use of Structure A) unless, prior to the Closing
(as defined herein), either party obtains an opinion of counsel to the effect
that use of such Structure A would have a Material Adverse Effect (as defined
herein) on the Surviving Entity. If Structure A is used to accomplish the
combination, then (i) the parties shall execute, deliver and file the Agreement
and Plan of Merger attached hereto as Exhibit A-1 to effectuate the merger
therein contemplated; and (ii) effective as of the Effective Time, the Surviving
Entity will be governed by Articles of Incorporation in the form attached hereto
as Schedule I to such Plan of Merger and Bylaws in the form attached hereto as
Exhibit A-2, and will otherwise continue to operate and exist as a cooperative
association organized under the laws of the State of Minnesota. If Structure B
is used to accomplish the combination, then (i) CHSC shall take appropriate
action to effectuate the CHSC/Acquisition Co. Merger, and in connection
therewith, shall execute, deliver and file the appropriate Agreement and Plan of
Merger attached hereto as Exhibit B-1 and shall redeem all of its outstanding
Equity Participation Units in the Defined Business Units; (ii) thereafter the
parties shall execute, deliver and file the appropriate Agreement and Plan of
Merger attached hereto as Exhibit B-1 as required by law to effectuate the
merger of Farmland into Acquisition Co.; and (iii) effective as of the Effective
Time, the Surviving Entity will be governed by Articles of Incorporation in the
form attached hereto as Schedule I to such Plan of Merger and Bylaws in the form
attached hereto as Exhibit B-2, and will (subject to Section 4.01 hereof)
continue to operate and exist as a cooperative association organized under the
laws of the State of Ohio. The Agreement and Plan of Merger so used and
executed, delivered and filed as hereinabove provided is referred to herein as
the "Plan of Merger", the Articles of Incorporation which serve as the Articles
of Incorporation of the Surviving Entity are referred to herein as the
"Surviving Entity Articles", the Bylaws which serve as the Bylaws of the
Surviving Entity are referred to herein as the "Surviving Entity Bylaws", and
the merger transaction therein contemplated, together with all actions,
consents, agreements and transactions described herein or otherwise necessary or
desirable in connection therewith, are referred to collectively herein as the
"Transaction."
SECTION 1.02 THE CLOSING.
Unless this Agreement is terminated and the Transaction is abandoned as
provided in Article VII hereof, the closing for the Transaction (the "Closing")
shall take place on or before February 29, 2000, or such other date as the
parties may mutually determine (the "Closing Date"), subject to the satisfaction
or waiver of all conditions to the obligations of each of the parties to
consummate the Transaction (other than conditions with respect to actions which
the respective parties will take at the Closing itself).
SECTION 1.03 ACTIONS AT THE CLOSING.
At the Closing, the parties shall (a) execute and deliver the Agreement
and Plan of Merger pursuant to Section 1.01 above, (b) deliver the various
certificates, instruments and documents referred to in the Plan of Merger or in
Article V of this Agreement, and (c) cause to be filed with the Secretary of
State of the appropriate states the Plan of Merger, certificate of merger or
such other documents as may be required by the applicable laws to effectuate the
Transaction pursuant to the terms of the Plan of Merger and this Agreement.
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SECTION 1.04 EFFECT OF TRANSACTION.
The Transaction shall become fully effective at 12:02 a.m. Central Time
on March 1, 2000 (the "Effective Time"). The Transaction shall have the effect
set forth in the Plan of Merger, this Agreement and applicable state law. At any
time after the Effective Time, the Surviving Entity may take any action
(including executing and delivering any document) in the name and on behalf of
either party to this Agreement in order to carry out and effectuate the
Transaction contemplated by this Agreement. At the Effective Time, without any
further action on the part of the members or the boards of directors of either
CHSC or Farmland:
(a) ARTICLES AND BYLAWS. The Surviving Entity Articles and the
Surviving Entity Bylaws shall become the articles of incorporation and
bylaws of the Surviving Entity, as provided in the Plan of Merger.
(b) BOARD OF DIRECTORS.
(i) TRANSITION BOARD. Each of the then current
directors of Farmland and the then current directors of CHSC
will become directors of the Surviving Entity, to serve
according to the Surviving Entity Bylaws, so that the board of
directors of the Surviving Entity as of the Effective Time
will consist of all of the then current directors of both
Farmland and CHSC. Each party agrees to take all actions
necessary to reduce, as of the Effective Time, the number of
directors on the Board of Directors of such party to seventeen
(17).
(ii) PRODUCER DIRECTORS AFTER DECEMBER 2001.
Effective for and after the annual meeting of the members of
the Surviving Entity to be held in December 2001, for purposes
of Section 4.4(b) of the Surviving Entity Bylaws and subject
to review and reapportionment by the Board of Directors of the
Surviving Entity pursuant to Section 4.4(c) of the Surviving
Entity Bylaws from time to time, the numbers of producer
directors in each director district shall be as follows:
District 1 -- one (1) producer director; District 2 -- two (2)
producer directors; District 3 -- four (4) producer directors;
District 4 -- five (5) producer directors; District 5 -- two
(2) producer directors; District 6 -- one (1) producer
director; and District 7 -- three (3) producer directors.
(c) BOARD OFFICERS. For the period from the Effective Time to
the annual meeting of the members of the Surviving Entity to be held in
December 2000 (the "Transition Period"), ▇▇▇▇▇ ▇▇▇▇▇▇▇ will serve as
Chairman of the Board and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ will serve as the Vice
Chairman of the Board. In addition, effective as of the Effective Time,
there shall be established an Executive Committee of the Board, and the
following Standing Committees of the Board: Capital, Finance/Audit,
Governance and Corporate Responsibility (including compensation). For
the Transition Period the Capital Committee will be chaired
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by Merlin Van Walleghen, the Finance/Audit Committee of the Board will
be chaired by ▇▇▇▇▇ ▇▇▇▇▇▇, the Governance Committee will be chaired by
▇▇▇▇▇▇ ▇▇▇▇▇▇ and the Corporate Responsibility Committee will be
chaired by ▇▇▇▇ ▇▇▇▇▇▇. For the Transition Period, the Chairman and
Vice Chairman of the Board, together with the Chairs of the Standing
Committees, shall make up the Executive Committee.
(d) OFFICE OF LEADERSHIP. The "Office of Leadership" will
consist of the Chief Executive Officer and the President of the
Surviving Entity. ▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇") will serve as Chief Executive
Officer of the Surviving Entity, reporting to the board of directors of
the Surviving Entity. It is anticipated that ▇▇▇▇▇ shall serve in that
capacity through no later than December 31, 2003; and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇") will serve as the President of the Surviving Entity,
reporting to the Chief Executive Officer of the Surviving Entity. Upon
expiration of ▇▇▇▇▇'▇ service as Chief Executive Officer, it is
anticipated that ▇▇▇▇▇▇▇ shall assume the role of President and Chief
Executive Officer of the Surviving Entity. Both the Chief Executive
Officer and the President will serve at the pleasure of the Board of
Directors of the Surviving Entity at all times, subject, however, to
the monetary provisions of any applicable employment contract. Such
employment contracts will provide that ▇▇▇▇▇, as Chief Executive
Officer, may not demote, discharge, change the senior management
reporting relationships (described in paragraph (e) below) of, or
otherwise materially adversely change the status of, ▇▇▇▇▇▇▇, as
President, without the agreement of the Executive Committee of the
Board of Directors.
(e) SENIOR MANAGEMENT. Senior management will be as designated
by the Office of Leadership from time to time in accordance with the
Surviving Entity Bylaws. The reporting relationships between senior
management and the Office of Leadership are identified in Exhibit C
attached hereto and will be incorporated into employment contracts with
the Chief Executive Officer and the President.
(f) EXCHANGE AND CONVERSION OF STOCK, NON-STOCK EQUITY AND
PATRONAGE EQUITIES. At and as of the Effective Time, without any
further action by the parties or any of their respective members, and
as further described in the Plan of Merger, (i) each member of CHSC and
each member of Farmland shall become a member of the Surviving Entity,
to the extent they are eligible for membership under the Surviving
Entity Articles and the Surviving Entity Bylaws, and (ii) except for
any stock and equity interests of Farmland in CHSC or any stock
interest of CHSC in Farmland (which shall, in each case, be
extinguished), the stock, non-stock equity and patronage equity
interests of each member, patron and former patron of Farmland shall be
exchanged for non-stock equity and patronage equity interests in the
Surviving Entity at their stated value amount on a dollar-for-dollar
basis, as further described in the Plan of Merger.
(g) CAPITAL PLAN. From and after the Effective Time, the
Surviving Entity will operate pursuant to a capital plan that adheres
to the principles set forth on Exhibit D attached hereto and the
Surviving Entity shall use its best efforts to adopt and implement a
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capital plan that incorporates such principles (the "Capital Plan").
The Capital Plan may be adopted and amended from time to time, by the
board of directors of the Surviving Entity, provided that amendment of
any provisions of the Capital Plan relating to disposition of the Terra
tax case shall require a vote of three-fourths (3/4) of the full board
of directors of the Surviving Entity, and provided further that any
such amendment shall, as far as feasible, adhere to the "Key Terra
Principles" described on Exhibit D attached hereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CHSC
CHSC represents and warrants to Farmland and the Surviving Entity that
the statements contained in this Article II are correct and complete in all
material respects as of the date of this Agreement, except as set forth in the
CHSC Disclosure Schedule delivered by CHSC to Farmland attached hereto (the
"CHSC Disclosure Schedule"). Nothing in the CHSC Disclosure Schedule shall be
deemed adequate to disclose an exception to a representation or warranty made
herein unless the CHSC Disclosure Schedule identifies the exception with
particularity and describes the relevant facts in detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself). For purposes
of this Agreement (a) the word "Subsidiary" when used with respect to any Person
(as herein defined) means any other Person, whether incorporated or
unincorporated (i) of which fifty percent or more of the securities or other
ownership interests is directly owned or controlled by such Person or by any one
or more of its Subsidiaries, or (ii) of which securities or other interests
having by their terms ordinary voting power to elect fifty percent or more of
the board of directors or others performing similar functions with respect to
such corporation or other organization is directly owned or controlled by such
Person or by any one or more of its Subsidiaries, or (iii) when such Person is
CHSC, the entities listed on the CHSC Disclosure Schedule, or (iv) when such
Person is Farmland, the entities listed on the Farmland Disclosure Schedule (as
herein defined), (b) "Person" means an individual, a corporation, a limited
liability company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof, and (c) a "Material Adverse Effect" with respect to any
Person means a material adverse effect on the financial condition, business,
liabilities, properties, assets or results of operations, taken as a whole, of
such Person and its Subsidiaries, taken as a whole, except to the extent
resulting from (w) any changes in general United States or global economic
conditions, (x) any changes affecting the agricultural industry in general, (y)
matters whose significance or impact would reasonably be expected to be
primarily short term (i.e., under one year) or (z) matters disclosed on the
Person's Disclosure Schedule.
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SECTION 2.01 ORGANIZATION AND GOOD STANDING.
CHSC is a cooperative association duly organized and existing under
Chapter 308A of the Minnesota Statutes, is in good standing under the laws of
the State of Minnesota, and has all requisite corporate power and authority to
own its properties and conduct its business as it is presently being conducted.
CHSC is duly qualified to do business and is in good standing in each
jurisdiction in which it conducts business or owns or leases properties of a
nature which would require such qualification, except for those jurisdictions
where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect on CHSC. CHSC has heretofore delivered
to Farmland true and complete copies of the CHSC articles of incorporation and
bylaws as currently in effect.
SECTION 2.02 FINANCIAL STATEMENTS.
CHSC has delivered to Farmland (a) its audited financial statements as
of August 31, 1998, accompanied by the opinion of PricewaterhouseCoopers, (b)
the audited financial statements of CENEX, Inc. for the year ended September 30,
1997 and the eight months ended May 31, 1998, (c) the audited financial
statements of Harvest States Cooperatives for the year ended May 31, 1998, and
(d) the unaudited financial statements of CHSC for the nine months ended May 31,
1999. Such financial statements fairly present the financial position of CHSC at
the dates indicated therein and the results of its operation for the periods
indicated therein, in conformity with generally accepted accounting principles
consistently applied ("GAAP"). There has been no material adverse change in the
financial condition or results of operations of CHSC since May 31, 1999.
SECTION 2.03 ABSENCE OF LIABILITIES.
Neither CHSC nor any Subsidiary of CHSC has any liabilities or
obligations, absolute or contingent, except for liabilities and obligations
which are (i) reflected in the financial statements referred to in Section 2.02,
(ii) fully covered by insurance, except for reasonable deductibles or
self-insured retention levels, (iii) incurred in the ordinary course of business
since May 31, 1999 and not materially different in type or amount from those
reflected in the financial statements referred to in Section 2.02, or (iv) would
not in the aggregate reasonably be expected to have a Material Adverse Effect on
CHSC.
SECTION 2.04 TITLE TO PROPERTY.
Except as reflected in the notes accompanying the audited financial
statements of CHSC, CHSC has good and marketable title to all real and personal
property reflected as owned on the books and records of CHSC as of the date of
this Agreement and owns outright all other assets, properties or property
interests acquired since that date, in each case free of all mortgages, liens,
charges and encumbrances, other than (i) easements, rights-of-way and other
encumbrances which do not materially impair the use of such real or personal
property for the same or similar purposes as such real or personal property has
been used by CHSC prior to the Effective Time, (ii) liens for
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current taxes that are not yet due and payable, (iii) liens related to the
acquisition of inventory or otherwise arising in the normal course of business,
and (iv) other liens, encumbrances and title defects which would not reasonably
be expected to have a Material Adverse Effect on CHSC.
SECTION 2.05 INTELLECTUAL PROPERTY.
CHSC owns or possesses, is licensed under or otherwise has lawful
access to, all patents, trade secrets, know-how, other confidential information,
trademarks, service marks, copyrights, trade names, logos and other intellectual
property, whether registered or unregistered, necessary for the lawful conduct
of its business as currently conducted, without any infringement of or conflict
with the industrial or intellectual property rights of any third party, except
as would not reasonably be expected to have a Material Adverse Effect on CHSC.
CHSC does not know or have reason to know of any unauthorized use or disclosure
or misappropriation of any of its intellectual property, which disclosure, use,
or misappropriation would reasonably be expected to have a Material Adverse
Effect on CHSC.
SECTION 2.06 COMPLIANCE WITH LAWS, ETC.
CHSC is in compliance with all applicable laws and regulations the
violation of which would reasonably be expected to have a Material Adverse
Effect on CHSC. CHSC has all governmental authorizations, consents, licenses and
permits required by law or otherwise necessary for the proper operation of its
business as currently conducted, all of such licenses and permits are in full
force and effect and no action to terminate, withdraw, not renew or materially
limit or otherwise change any such license or permit is pending or has been
threatened by any governmental agency or other party, except as would not
reasonably be expected to have a Material Adverse Effect on CHSC.
SECTION 2.07 PENDING LITIGATION, CLAIMS, ACTIONS, PROCEEDINGS OR
INVESTIGATIONS.
There is no action, proceeding or investigation pending against, or to
the best of the knowledge of CHSC after reasonable inquiry, is threatened
against CHSC or any Subsidiary of CHSC or any of the assets which are owned by
CHSC or any Subsidiary of CHSC which would reasonably be expected to have a
Material Adverse Effect on CHSC.
SECTION 2.08 ABSENCE OF DEFAULTS.
CHSC is not in default under any provision of its Articles of
Incorporation or Bylaws or any indenture, mortgage, loan agreement or other
material agreement to which it is a party or by which it is bound, and CHSC is
not in violation of any statute, order, rule or regulation of any court or
governmental agency having jurisdiction over it or its properties, which, in
each case, could have a Material Adverse Effect on CHSC, and, except for any
consent or approval identified on the CHSC Disclosure Schedule, neither the
execution and delivery of this Agreement nor the consummation of the Transaction
in accordance with this Agreement will in any respect conflict with or result in
a breach of any of the foregoing, which could have a Material Adverse Effect on
CHSC.
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SECTION 2.09 AUTHORIZATION.
CHSC has the corporate power and authority to enter into and to perform
its obligations under this Agreement (subject to the approval of its members as
required by Section 5.01(a)). This Agreement and the Transaction have been duly
and validly authorized by the Board of Directors of CHSC, and (except for the
approvals of its members, as required by Section 5.01(a)) no other corporate
action is required by CHSC in connection with this Agreement or the Transaction.
This Agreement constitutes the valid and binding agreement of CHSC, enforceable
against CHSC in accordance with its terms, except to the extent such enforcement
may be limited by the application of equitable principles where equitable relief
is sought or bankruptcy and other laws relating to the enforcement of creditors'
rights generally.
SECTION 2.10 INSURANCE.
CHSC has secured appropriate insurance policies which (i) are issued by
sound and reputable insurance companies duly authorized to write said insurance,
(ii) are in full force and effect, (iii) are sufficient for compliance with all
requirements of law and all agreements to which CHSC is a party, and (iv)
provide reasonable insurance coverage for the assets and operations of CHSC and
all liabilities related thereto.
SECTION 2.11 GOVERNMENTAL AUTHORIZATION.
The execution, delivery and performance by CHSC of this Agreement and
the consummation of the Transaction by CHSC require no action by or in respect
of, or filing with, any governmental body, agency, official or authority other
than (a) the filing of appropriate documents to effect the Plan of Merger under
applicable law, (b) compliance with any applicable requirements of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), (▇)
compliance with applicable requirements of U.S. state and federal securities
laws and (d) other actions or filings which if not taken or made would not,
individually or in the aggregate, have a Material Adverse Effect on CHSC or the
Surviving Entity following the Effective Time.
SECTION 2.12 SUBSIDIARIES.
Each Subsidiary of CHSC is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, has all powers and
all governmental licenses, authorizations, consents and approvals required to
carry on its business as now conducted, except for those the absence of which
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on CHSC. Each Subsidiary of CHSC is duly qualified to do
business and is in good standing in each jurisdiction where the character of the
property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where failure to be so
qualified would not, individually or in the aggregate, have a Material Adverse
Effect on CHSC.
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SECTION 2.13 SEC FILINGS.
(a) CHSC has delivered to Farmland (i) its annual report on Form 10-K
for its fiscal year ended August 31, 1998, (ii) its quarterly reports on Form
10-Q for its fiscal quarters ended after August 31, 1998, (iii) all of its other
reports, statements, schedules and registration statements filed with the SEC
since August 31, 1998 (the documents referred to in this Section 2.13(a) being
referred to collectively as the "CHSC SEC Documents").
(b) As of its filing date, each CHSC SEC Document complied as to form
in all material respects with the applicable requirements of the Securities
Exchange Act of 1934 (the "Exchange Act").
(c) As of its filing date, each CHSC SEC Document filed pursuant to the
Exchange Act did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
SECTION 2.14 ABSENCE OF CERTAIN CHANGES.
Except as set forth in the CHSC Disclosure Schedule, since May 31,
1999, CHSC and its Subsidiaries have conducted their business in the ordinary
course consistent with past practice and there has not been: (a) any event,
occurrence or development of a state of circumstances or facts which has had or
reasonably would be expected to have, individually or in the aggregate, a
Material Adverse Effect on CHSC; (b) any transaction or commitment made, or any
contract, agreement or settlement entered into, by (or judgment, order or decree
affecting) CHSC or any of its Subsidiaries relating to its assets or business
(including the acquisition or disposition of any assets) or any relinquishment
by CHSC or any of its Subsidiaries of any contract or other right, in either
case, material to CHSC and its Subsidiaries taken as a whole, other than
transactions, commitments, contracts, agreements or settlements (including
without limitation settlements of litigation and tax proceedings) in the
ordinary course of business consistent with past practice, those contemplated by
this Agreement, or as agreed to in writing by Farmland; (c) any change in any
method of accounting or accounting practice (other than any change for tax
purposes) by CHSC or any of its Subsidiaries, except for any such change which
is not significant or which is required by reason of a concurrent change in
GAAP; or (d) any increase in (or amendments to the terms of) compensation, bonus
or other benefits payable to directors, officers or employees of CHSC or any of
its Subsidiaries, other than in the ordinary course of business consistent with
past practice, as permitted by this Agreement, or as agreed to in writing by
Farmland.
SECTION 2.15 TAXES.
Except as set forth in the CHSC Balance Sheet dated May 31, 1999
(including the notes thereto) and except as would not, individually or in the
aggregate, have a Material Adverse Effect on CHSC, (i) all CHSC Tax Returns
required to be filed with any taxing authority by, or with respect
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to, CHSC and its Subsidiaries have been filed in accordance with all applicable
laws; (ii) CHSC and its Subsidiaries have timely paid all Taxes shown as due and
payable on the CHSC Tax Returns that have been so filed, and, as of the time of
filing, the CHSC Tax Returns correctly reflected the facts regarding the income,
business, assets, operations, activities and the status of CHSC and its
Subsidiaries (other than Taxes which are being contested in good faith and for
which adequate reserves are reflected on the CHSC Balance Sheet); (iii) CHSC and
its Subsidiaries have made provision for all Taxes payable by CHSC and its
Subsidiaries for which no CHSC Tax Return has yet been filed; (iv) the charges,
accruals and reserves for Taxes with respect to CHSC and its Subsidiaries
reflected on the CHSC Balance Sheet are adequate under GAAP to cover the Tax
liabilities accruing through the date thereof; (v) there is no action, suit,
proceeding, audit or claim now proposed or pending against or with respect to
CHSC or any of its Subsidiaries in respect of any Tax where there is a
reasonable possibility of an adverse determination; and (vi) to the best of
CHSC's knowledge and belief, neither CHSC nor any of its Subsidiaries is liable
for any Tax imposed on any entity other than such Person, except as the result
of the application of Treas. Reg. Section 1.1502-6 (and any comparable provision
of the tax laws of any state, local or foreign jurisdiction) to the affiliated
group of which CHSC is the common parent. For purposes of this Agreement,
"Taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, excise, stamp, real or personal property, ad valorem, withholding,
social security (or similar), unemployment, occupation, use, service, service
use, license, net worth, payroll, franchise, severance, transfer, recording,
employment, premium, windfall profits, environmental (including taxes under
Section 59A of the Internal Revenue Code of 1986, as amended (the "Code")),
customs duties, capital stock, profits, disability, sales, registration, value
added, alternative or add-on minimum, estimated or other taxes, assessments or
charges imposed by any federal, state, local or foreign governmental entity and
any interest, penalties, or additions to tax attributable thereto. For purposes
of this Agreement, "Tax Returns" shall mean any return, report, form or similar
statement required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
SECTION 2.16 EMPLOYEE BENEFIT PLANS.
(a) Prior to the date hereof, CHSC has provided Farmland with a list
identifying each material "employee benefit plan," as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974 ("ERISA"), each material
employment, severance or similar contract, plan, arrangement or policy
applicable to any director, former director, employee or former employee of CHSC
and each material plan or arrangement (written or oral), providing for
compensation, bonuses, profit-sharing, stock option or other stock related
rights or other forms of incentive or deferred compensation, vacation benefits,
insurance coverage (including any self-insured arrangements), health or medical
benefits, disability benefits, workers' compensation, supplemental unemployment
benefits, severance benefits and post-employment or retirement benefits
(including compensation, pension, health, medical or life insurance benefits)
which is maintained, administered or contributed to by CHSC and covers any
employee or director or former employee or director of CHSC, or under which CHSC
has any liability. Such material plans (excluding any such plan that is a
"multiemployer
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plan", as defined in Section 3(37) of ERISA) are referred to collectively herein
as the "CHSC Employee Plans".
(b) Each CHSC Employee Plan has been maintained in compliance with its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations (including but not limited to ERISA and the Code) which
are applicable to such Plan, except where failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect on CHSC.
(c) Neither CHSC nor any affiliate of CHSC has incurred a liability
under Title IV of ERISA that has not been satisfied in full, and no condition
exists that presents a material risk to CHSC or any affiliate of CHSC of
incurring any such liability other than liability for premiums due the Pension
Benefit Guaranty Corporation (which premiums have been paid when due).
(d) Each CHSC Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from federal income tax pursuant to Section 501(a) of the Code.
(e) No director or officer or other employee of CHSC or any of its
Subsidiaries will become entitled to any retirement, severance or similar
benefit or enhanced or accelerated benefit solely as a result of the
transactions contemplated hereby.
(f) Each CHSC Employee Plan that provides for post-retirement health
and medical, life or other insurance benefits for retired employees of CHSC or
any of its Subsidiaries has been adequately reserved for in CHSC's financial
statements.
(g) There has been no amendment to, written interpretation or
announcement (whether or not written) by CHSC or any of its affiliates relating
to, or change in employee participation or coverage under, any CHSC Employee
Plan which would increase materially the expense of maintaining such CHSC
Employee Plan above the level of the expense incurred in respect thereof for the
12 months ended May 31, 1999.
SECTION 2.17 ENVIRONMENTAL MATTERS.
(a) Except as set forth in the CHSC SEC Documents filed prior to the
date hereof and with such exceptions as, individually or in the aggregate, have
not had, and would not reasonably be expected to have, a Material Adverse Effect
on CHSC (i) no notice, notification, demand, request for information, citation,
summons, complaint or order has been received by, and no investigation, action,
claim, suit, proceeding or review is pending or, to the knowledge of CHSC or any
of its Subsidiaries, threatened by any Person against, CHSC or any of its
Subsidiaries, and no penalty has been assessed against CHSC or any of its
Subsidiaries, in each case, with respect to any matters relating to or arising
out of any Environmental Law; (ii) CHSC and its Subsidiaries are and have been
in compliance with all Environmental Laws; (iii) there are no liabilities of
CHSC or any of its
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Subsidiaries relating to or arising out of any Environmental Law of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, and there is no existing condition, situation or set of circumstances
which could reasonably be expected to result in such a liability; and (iv) there
has been no environmental investigation, study, audit, test, review or other
analysis conducted of which CHSC has knowledge in relation to the current or
prior business of CHSC or any of its Subsidiaries or any property or facility
now or previously owned, leased or operated by CHSC or any of its Subsidiaries
which has not been delivered to Farmland at least five days prior to the date
hereof. All liabilities of CHSC or any of its Subsidiaries relating to or
arising out of any Environmental Law of any kind whatsoever have been adequately
reserved for on the financial statements of CHSC, or for unconsolidated
Subsidiaries, on the financial statements of such Subsidiaries.
(b) For purposes of this Agreement, the term "Environmental Laws" means
any federal, state, local and foreign statutes, laws (including, without
limitation, common law), judicial decisions, regulations, ordinances, rules,
judgments, orders, codes, injunctions, permits, governmental agreements or
governmental restrictions relating to human health and safety, the environment
or to pollutants, contaminants, wastes, or chemicals.
SECTION 2.18 POOLING; TAX TREATMENT.
The parties intend that the Transaction be accounted for under the
"pooling of interests" method under the requirements of Opinion No. 16 (Business
Combinations) of the Accounting Principles Board of the American Institute of
Certified Public Accountants, the Financial Accounting Standards Board, and the
rules and regulations of the Securities and Exchange Commission. Neither CHSC
nor any of its affiliates has taken or agreed to take any action or is aware of
any fact or circumstance that would prevent the Transaction from qualifying (i)
for "pooling of interests" accounting treatment as described above or (ii) as a
reorganization within the meaning of Section 368 of the Code (a "368
Reorganization").
SECTION 2.19 NO DISSENTERS' RIGHTS.
No member of CHSC or any other holder of equity of CHSC, other than the
holders of Equity Participation Units as defined in CHSC's Bylaws and as further
defined in resolutions of the CHSC board of directors establishing the defined
business units to which such Equity Participation Units relate, have the right
to dissent from the Transaction and receive payment for their interest in cash
or otherwise receive any property or other interest in the Transaction, other
than as provided in the Plan of Merger.
SECTION 2.20 ACQUISITION CO.
Acquisition Co. has been formed by CHSC solely for the purpose of
carrying out the Transaction if Structure B is selected. Acquisition Co. is a
"Subsidiary" of CHSC for purposes hereof. Acquisition Co. has no assets or
liabilities, other than nominal assets to comply with any organizational
requirements of Ohio law.
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SECTION 2.21 FULL DISCLOSURE.
CHSC has disclosed to Farmland all facts material to the transactions
contemplated in this Agreement, including disclosure of all material contracts
(as such term is described in Item 601 of Regulation S-K under the Securities
Act of 1933, as amended ("Regulation S-K")). No representation, warranty, or
covenant by CHSC contained in this Agreement or the Plan of Merger, and no
statement contained in any certificate, schedule, or other documents or
instrument furnished to Farmland pursuant hereto or in connection with the
transactions contemplated hereby, including responses to Farmland inquiries put
to CHSC in the course of its investigation to confirm the warranties and
representations of CHSC in this Agreement, when taken as a whole, contains or
will contain any untrue statement of a material fact or omits or will omit a
material fact which would make it misleading as to CHSC.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FARMLAND
Farmland represents and warrants to CHSC and the Surviving Entity that
the statements contained in this Article III are correct and complete in all
material respects as of the date of this Agreement, except as set forth in the
Farmland Disclosure Schedule attached hereto (the "Farmland Disclosure
Schedule"). Nothing in the Farmland Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
Farmland Disclosure Schedule identifies the exception with particularity and
describes the relevant facts in detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do with the
existence of the document or other item itself).
SECTION 3.01 ORGANIZATION AND GOOD STANDING.
Farmland is a cooperative corporation duly organized and existing under
Chapter 17, Article 16 of the Kansas Statutes, is in good standing under the
laws of the State of Kansas, and has all requisite corporate power and authority
to own its properties and conduct its business as it is presently being
conducted. Farmland is duly qualified to do business and is in good standing in
each jurisdiction in which it conducts business or owns or leases properties of
a nature which would require such qualification, except for those jurisdictions
where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect on Farmland. Farmland has heretofore
delivered to Farmland true and complete copies of the Farmland articles of
incorporation and bylaws as currently in effect.
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SECTION 3.02 FINANCIAL STATEMENTS.
Farmland has delivered to CHSC (a) its audited financial statements as
of August 31, 1998, accompanied by the opinion of KPMG-Peat Marwick, and (b) its
unaudited financial statements for the nine months ended May 31, 1999. Such
financial statements fairly present the financial position of Farmland at the
dates indicated therein and the results of its operation for the periods
indicated therein, in conformity with GAAP. There has been no material adverse
change in the financial condition or results of operations of Farmland since May
31, 1999.
SECTION 3.03 ABSENCE OF LIABILITIES.
Neither Farmland nor any Subsidiary of Farmland has any liabilities or
obligations, absolute or contingent, except for liabilities and obligations
which are (i) reflected in the financial statements referred to in Section 3.02,
(ii) fully covered by insurance, except for reasonable deductibles or
self-insured retention levels, (iii) incurred in the ordinary course of business
since May 31, 1999 and not materially different in type or amount from those
reflected in the financial statements referred to in Section 3.02, or (iv) would
not in the aggregate reasonably be expected to have a Material Adverse Effect on
Farmland.
SECTION 3.04 TITLE TO PROPERTY.
Except as reflected in the notes accompanying the audited financial
statements of Farmland, Farmland has good and marketable title to all real and
personal property reflected as owned on the books and records of Farmland as of
the date of this Agreement and owns outright all other assets, properties or
property interests acquired since that date, in each case free of all mortgages,
liens, charges and encumbrances, other than (i) easements, rights-of-way and
similar encumbrances which do not materially impair the use of such real or
personal property for the same or similar purposes as such real or personal
property has been used by Farmland prior to the Effective Time, (ii) liens for
current taxes that are not yet due and payable, (iii) liens related to the
acquisition of inventory or otherwise arising in the normal course of business,
and (iv) other liens, encumbrances and title defects which would not reasonably
be expected to have a Material Adverse Effect on Farmland.
SECTION 3.05 INTELLECTUAL PROPERTY.
Farmland owns or possesses, is licensed under or otherwise has lawful
access to, all patents, trade secrets, know-how, other confidential information,
trademarks, service marks, copyrights, trade names, logos and other intellectual
property, whether registered or unregistered, necessary for the lawful conduct
of its business as currently conducted, without any infringement of or conflict
with the industrial or intellectual property rights of any third party, except
as would not reasonably be expected to have a Material Adverse Effect on
Farmland. Farmland does not know or have reason to know of any unauthorized use
or disclosure or misappropriation of any of its intellectual property. which
disclosure, use, or misappropriation would reasonably be expected to have a
Material Adverse Effect on Farmland.
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SECTION 3.06 COMPLIANCE WITH LAWS, ETC.
Farmland is in compliance with all applicable laws and regulations the
violation of which would reasonably be expected to have a Material Adverse
Effect on Farmland. Farmland has all governmental authorizations, consents,
licenses and permits required by law or otherwise necessary for the proper
operation of its business as currently conducted, all of such licenses and
permits are in full force and effect, and no action to terminate, withdraw, not
renew or materially limit or otherwise change any such license or permit is
pending or has been threatened by any governmental agency or other party, except
as would not reasonably be expected to have a Material Adverse Effect on
Farmland.
SECTION 3.07 PENDING LITIGATION, CLAIMS, ACTIONS, PROCEEDINGS OR
INVESTIGATIONS.
There is no action, proceeding or investigation pending against, or to
the best of the knowledge of Farmland after reasonable inquiry, is threatened
against Farmland or any Subsidiary of Farmland or any of the assets which are
owned by Farmland or any Subsidiary of Farmland which would reasonably be
expected to have a Material Adverse Effect on Farmland.
SECTION 3.08 ABSENCE OF DEFAULTS.
Farmland is not in default under any provision of its Articles of
Incorporation or Bylaws or any indenture, mortgage, loan agreement or other
material agreement to which it is a party or by which it is bound, and Farmland
is not in violation of any statute, order, rule or regulation of any court or
governmental agency having jurisdiction over it or its properties, which, in
each case, could have a Material Adverse Effect on Farmland, and, except for any
consent or approval identified on the Farmland Disclosure Schedule, neither the
execution and delivery of this Agreement nor the consummation of the Transaction
in accordance with this Agreement will in any respect conflict with or result in
a breach of any of the foregoing, which could have a Material Adverse Effect on
Farmland.
SECTION 3.09 AUTHORIZATION.
Farmland has the corporate power and authority to enter into and to
perform its obligations under this Agreement (subject to the approvals of its
members as required by Section 5.01(b)). This Agreement and the Transaction have
been duly and validly authorized by the Board of Directors of Farmland, and
(except for the approvals of its members as required by Section 5.01(b)) no
other corporate action is required by Farmland in connection with this Agreement
or the Transaction. This Agreement constitutes the valid and binding agreement
of Farmland, enforceable against Farmland in accordance with its terms, except
to the extent such enforcement may be limited by the application of equitable
principles where equitable relief is sought or bankruptcy and other laws
relating to the enforcement of creditors' rights generally.
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SECTION 3.10 INSURANCE.
Farmland has secured appropriate insurance policies which (i) are
issued by sound and reputable insurance companies duly authorized to write said
insurance, (ii) are in full force and effect, (iii) are sufficient for
compliance with all requirements of law and all agreements to which Farmland is
a party, and (iv) provide reasonable insurance coverage for the assets and
operations of Farmland and all liabilities related thereto.
SECTION 3.11 GOVERNMENTAL AUTHORIZATION.
The execution, delivery and performance by Farmland of this Agreement
and the consummation of the Transaction by Farmland require no action by or in
respect of, or filing with, any governmental body, agency, official or authority
other than (a) the filing of appropriate documents to effect the Plan of Merger
under applicable law, (b) compliance with any applicable requirements of the HSR
Act, and (c) other actions or filings which if not taken or made would not,
individually or in the aggregate, have a Material Adverse Effect on Farmland or
the Surviving Entity following the Effective Time.
SECTION 3.12 SUBSIDIARIES.
Each Subsidiary of Farmland is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization, has all powers
and all governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted, except for those the absence of which
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Farmland. Each Subsidiary of Farmland is duly
qualified to do business and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where failure
to be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on Farmland.
SECTION 3.13 SEC FILINGS.
(a) Farmland has delivered to CHSC (i) its annual report on Form 10-K
for its fiscal year ended August 31, 1998, (ii) its quarterly reports on Form
10-Q for its fiscal quarters ended after August 31, 1998, (iii) all of its other
reports, statements, schedules and registration statements filed with the SEC
since August 31, 1998 (the documents referred to in this Section 3.13(a) being
referred to collectively as the "Farmland SEC Documents").
(b) As of its filing date, each Farmland SEC Document complied as to
form in all material respects with the applicable requirements of the Exchange
Act.
(c) As of its filing date, each Farmland SEC Document filed pursuant to
the Exchange Act did not contain any untrue statement of a material fact or omit
to state any material fact
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necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
SECTION 3.14 ABSENCE OF CERTAIN CHANGES.
Except as set forth in the Farmland Disclosure Schedule, since May 31,
1999, Farmland and its Subsidiaries have conducted their business in the
ordinary course consistent with past practice and there has not been: (a) any
event, occurrence or development of a state of circumstances or facts which has
had or reasonably would be expected to have, individually or in the aggregate, a
Material Adverse Effect on Farmland; (b) any transaction or commitment made, or
any contract, agreement or settlement entered into, by (or judgment, order or
decree affecting) Farmland or any of its Subsidiaries relating to its assets or
business (including the acquisition or disposition of any assets) or any
relinquishment by Farmland or any of its Subsidiaries of any contract or other
right, in either case, material to Farmland and its Subsidiaries taken as a
whole, other than transactions, commitments, contracts, agreements or
settlements (including without limitation settlements of litigation and tax
proceedings) in the ordinary course of business consistent with past practice,
those contemplated by this Agreement, or as agreed to in writing by CHSC; (c)
any change in any method of accounting or accounting practice (other than any
change for tax purposes) by Farmland or any of its Subsidiaries, except for any
such change which is not significant or which is required by reason of a
concurrent change in GAAP; or (d) any increase in (or amendments to the terms
of) compensation, bonus or other benefits payable to directors, officers or
employees of Farmland or any of its Subsidiaries, other than in the ordinary
course of business consistent with past practice, as permitted by this
Agreement, or as agreed to in writing by CHSC.
SECTION 3.15 TAXES.
Except as set forth in the Farmland Balance Sheet dated May 31, 1999
(including the notes thereto) and except as would not, individually or in the
aggregate, have a Material Adverse Effect on Farmland, (i) all Farmland Tax
Returns required to be filed with any taxing authority by, or with respect to,
Farmland and its Subsidiaries have been filed in accordance with all applicable
laws; (ii) Farmland and its Subsidiaries have timely paid all Taxes shown as due
and payable on the Farmland Tax Returns that have been so filed, and, as of the
time of filing, the Farmland Tax Returns correctly reflected the facts regarding
the income, business, assets, operations, activities and the status of Farmland
and its Subsidiaries (other than Taxes which are being contested in good faith
and for which adequate reserves are reflected on the Farmland Balance Sheet);
(iii) Farmland and its Subsidiaries have made provision for all Taxes payable by
Farmland and its Subsidiaries for which no Farmland Tax Return has yet been
filed; (iv) the charges, accruals and reserves for Taxes with respect to
Farmland and its Subsidiaries reflected on the Farmland Balance Sheet are
adequate under GAAP to cover the Tax liabilities accruing through the date
thereof; (v) there is no action, suit, proceeding, audit or claim now proposed
or pending against or with respect to Farmland or any of its Subsidiaries in
respect of any Tax where there is a reasonable possibility of an adverse
determination; and (vi) to the best of Farmland's knowledge and belief, neither
Farmland nor any of its Subsidiaries is liable for any Tax imposed on any entity
other than such Person, except as the
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result of the application of Treas. Reg. Section 1.1502-6 (and any comparable
provision of the tax laws of any state, local or foreign jurisdiction) to the
affiliated group of which Farmland is the common parent.
SECTION 3.16 EMPLOYEE BENEFIT PLANS.
(a) Prior to the date hereof, Farmland has provided CHSC with a list
identifying each material "employee benefit plan," as defined in Section 3(3) of
ERISA, each material employment, severance or similar contract, plan,
arrangement or policy applicable to any director, former director, employee or
former employee of Farmland and each material plan or arrangement (written or
oral), providing for compensation, bonuses, profit-sharing, stock option or
other stock related rights or other forms of incentive or deferred compensation,
vacation benefits, insurance coverage (including any self-insured arrangements),
health or medical benefits, disability benefits, workers' compensation,
supplemental unemployment benefits, severance benefits and post-employment or
retirement benefits (including compensation, pension, health, medical or life
insurance benefits) which is maintained, administered or contributed to by
Farmland and covers any employee or director or former employee or director of
Farmland, or under which Farmland has any liability. Such material plans
(excluding any such plan that is a "multiemployer plan", as defined in Section
3(37) of ERISA) are referred to collectively herein as the "Farmland Employee
Plans".
(b) Each Farmland Employee Plan has been maintained in compliance with
its terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations (including but not limited to ERISA and the Code) which
are applicable to such Plan, except where failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect on Farmland.
(c) Neither Farmland nor any affiliate of Farmland has incurred a
liability under Title IV of ERISA that has not been satisfied in full, and no
condition exists that presents a material risk to Farmland or any affiliate of
Farmland of incurring any such liability other than liability for premiums due
the Pension Benefit Guaranty Corporation (which premiums have been paid when
due).
(d) Each Farmland Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from federal income tax pursuant to Section 501(a) of the Code.
(e) No director or officer or other employee of Farmland or any of its
Subsidiaries will become entitled to any retirement, severance or similar
benefit or enhanced or accelerated benefit solely as a result of the
transactions contemplated hereby.
(f) Each Farmland Employee Plan that provides for post-retirement
health and medical, life or other insurance benefits for retired employees of
Farmland or any of its Subsidiaries has been adequately reserved for in
Farmland's financial statements.
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(g) There has been no amendment to, written interpretation or
announcement (whether or not written) by Farmland or any of its affiliates
relating to, or change in employee participation or coverage under, any Farmland
Employee Plan which would increase materially the expense of maintaining such
Farmland Employee Plan above the level of the expense incurred in respect
thereof for the 12 months ended May 31, 1999.
SECTION 3.17 ENVIRONMENTAL MATTERS. Except as set forth in the Farmland
SEC Documents filed prior to the date hereof and with such exceptions as,
individually or in the aggregate, have not had, and would not reasonably be
expected to have, a Material Adverse Effect on Farmland (i) no notice,
notification, demand, request for information, citation, summons, complaint or
order has been received by, and no investigation, action, claim, suit,
proceeding or review is pending or, to the knowledge of Farmland or any of its
Subsidiaries, threatened by any Person against, Farmland or any of its
Subsidiaries, and no penalty has been assessed against Farmland or any of its
Subsidiaries, in each case, with respect to any matters relating to or arising
out of any Environmental Law; (ii) Farmland and its Subsidiaries are and have
been in compliance with all Environmental Laws; (iii) there are no liabilities
of Farmland or any of its Subsidiaries relating to or arising out of any
Environmental Law of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in such a liability; and (iv) there has been no environmental investigation,
study, audit, test, review or other analysis conducted of which Farmland has
knowledge in relation to the current or prior business of Farmland or any of its
Subsidiaries or any property or facility now or previously owned, leased or
operated by Farmland or any of its Subsidiaries which has not been delivered to
CHSC at least five days prior to the date hereof. All liabilities of Farmland or
any of its Subsidiaries relating to or arising out of any Environmental Law of
any kind whatsoever have been adequately reserved for on the financial
statements of Farmland, or for unconsolidated Subsidiaries, on the financial
statements of such Subsidiaries.
SECTION 3.18 POOLING; TAX TREATMENT.
The parties intend that the Transaction be accounted for under the
"pooling of interests" method under the requirements of Opinion No. 16 (Business
Combinations) of the Accounting Principles Board of the American Institute of
Certified Public Accountants, the Financial Accounting Standards Board, and the
rules and regulations of the Securities and Exchange Commission. Neither
Farmland nor any of its affiliates has taken or agreed to take any action or is
aware of any fact or circumstance that would prevent the Transaction from
qualifying (i) for "pooling of interests" accounting treatment as described
above or (ii) as a 368 Reorganization.
SECTION 3.19 NO DISSENTERS' RIGHTS.
No member of Farmland or any other holder of equity of Farmland have
the right to dissent from the Transaction and receive payment for their interest
in cash or otherwise receive any property or other interest in the Transaction,
other than as provided in the Plan of Merger.
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SECTION 3.20 FULL DISCLOSURE.
Farmland has disclosed to CHSC all facts material to the transactions
contemplated in this Agreement, including disclosure of all material contracts
(as such term is described in Item 601 of Regulation S-K). No representation,
warranty, or covenant by Farmland contained in this Agreement or the Plan of
Merger, and no statement contained in any certificate, schedule, or other
documents or instrument furnished to CHSC pursuant hereto or in connection with
the transactions contemplated hereby, including responses to CHSC inquiries put
to Farmland in the course of its investigation to confirm the warranties and
representations of Farmland in this Agreement, when taken as a whole, contains
or will contain any untrue statement of a material fact or omits or will omit a
material fact which would make it misleading as to Farmland.
ARTICLE IV
PRE-CLOSING COVENANTS
The parties agree as follows with respect to the period between the
execution of this Agreement and the Closing Date:
SECTION 4.01 SELECTION OF STRUCTURE.
The board of directors of each of CHSC and Farmland shall work together
to determine whether Structure A or Structure B shall be selected as the most
appropriate structure for the Transaction. If Structure B is selected, CHSC
agrees to take such action as the sole member of Acquisition Co., or otherwise,
to permit Acquisition Co. to take such actions as may be necessary to effect the
CHSC/Acquisition Co. Merger pursuant to applicable law, it being understood that
following such Merger the Surviving Entity shall be reincorporated as a
cooperative association under Chapter 308A of the Minnesota Statutes as soon as
practicable after the issue or issues that precluded use of Structure A have
been resolved, unless the board of directors of the Surviving Entity, by a
three-fourths (3/4) vote, determines otherwise.
SECTION 4.02 GOOD FAITH EFFORTS.
Each party will use its good faith efforts (i) to take all action
necessary to render accurate, as of the Closing Date, its representations and
warranties contained herein, and to refrain from taking any action which would
render any such representation or warranty inaccurate as of the Closing Date,
(ii) to perform or cause to be satisfied each covenant or condition to be
performed or satisfied by it pursuant to this Agreement or the Plan of Merger,
and to cause the Transaction to be consummated, and (iii) to obtain all licenses
or other approvals required to be obtained by it from any appropriate
governmental or regulatory body or other person in connection with the carrying
out of the Transaction and the continued operation of business by the Surviving
Entity after the Closing Date, including without limitation the consents and
approvals identified in each party's Disclosure Schedule.
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SECTION 4.03 PRESERVATION OF BUSINESS.
Each party shall, and shall cause each of its Subsidiaries to, conduct
its business in the ordinary course and in a manner consistent with its past
practices (except as expressly contemplated hereby), and shall use good faith
efforts to preserve intact its business organization, properties (except as they
may be sold, used or otherwise disposed of in the ordinary course) and the good
will of its members, suppliers, customers and others having business
relationships with it.
SECTION 4.04 CONDUCT OF BUSINESS.
Each Party agrees to not engage in, and agrees to cause each of its
Subsidiaries not to engage in, any practice, take any action, or enter into any
transaction outside of the ordinary course of business without the prior consent
of the other party to this Agreement. Without limiting the generality of the
foregoing, each party shall not and each party agrees to cause each of its
Subsidiaries to not:
(a) grant to any person any option to purchase, or other right
to acquire, capital stock or other equity interests, except for
allocation of patronage equities in a manner consistent with past
practice;
(b) issue any capital stock or other equity interests, except
in the ordinary course of business;
(c) make any material amendment to enter into or terminate any
material contract, lease or understanding;
(d) amend its Articles of Incorporation, Bylaws, or any board
policies;
(e) incur any indebtedness for borrowed money or make any
commitment to borrow money, except indebtedness incurred in the
ordinary course of business pursuant to credit arrangements existing as
of the date of this Agreement (including any renewals thereof);
(f) make any material capital expenditures other than in the
ordinary course of business;
(g) mortgage any of its assets, or except in the ordinary
course of business, sell any of its assets having an aggregate value
which would be material to its business;
(h) pay any dividends or make any distributions with respect
to its capital stock or equity interests, except in the ordinary course
of business;
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(i) reclassify, combine, subdivide, split-up, or amend its
capital stock or equity interests;
(j) purchase, acquire or redeem any shares of capital stock or
other equity interests (other than in satisfaction of allocated
losses), except pursuant to the existing equity redemption/base capital
plans of the party; or
(k) agree or commit to do any of the foregoing.
SECTION 4.05 MEETINGS OF MEMBERS.
The parties will take all steps necessary to call special meetings of,
and/or mail votes by, the members of Farmland and CHSC, to be held on or around
November 23, 1999 for purposes of considering and voting on the Transaction and
other matters covered by this Agreement in accordance with their respective
Articles of Incorporation, Bylaws and applicable law. The parties will cooperate
with each other in connection with the special member meetings and/or mail votes
and will develop a mutually agreed upon plan for disseminating information
concerning the Transaction to their members (including holding member
information meetings and preparation of a joint statement of terms and
conditions to be mailed to members).
SECTION 4.06 FULL ACCESS.
Each party will permit the authorized representatives of the other
party to have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of such party, to all premises,
properties, personnel, books, records (including tax records), contracts, and
documents of or pertaining to such party. The obligations of each party with
respect to any "Confidential Information" (as such term is defined in that
certain Confidentiality Agreement between the parties dated April 8, 1999 (the
"Confidentiality Agreement")) furnished by the other party shall be governed in
all respects by the Confidentiality Agreement, the terms of which are
incorporated herein by this reference. If for any reason the Transaction is not
consummated, each party will promptly return all documents, papers, books,
records and other materials (and all copies thereof) embodying any Confidential
Information obtained in the course of its investigation and evaluation.
SECTION 4.07 NOTICE OF DEVELOPMENTS.
Each party will give prompt written notice to the other of any
development which could reasonably be expected to result in a Material Adverse
Effect on such party or which would cause a breach of any of its representations
and warranties contained herein. Except as specified in such written notice, no
disclosure by a party pursuant to this Section 4.07 shall be deemed to amend or
supplement such party's Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
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SECTION 4.08 EXCLUSIVE.
Neither party will (i) solicit, initiate, or encourage the submission
of any proposal or offer from any person relating to the acquisition of any
capital stock or other voting securities, or any substantial portion of the
assets of, such party (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
person to do or seek any of the foregoing. Each party will notify the other
party immediately if any person makes any proposal, offer, inquiry, or contact
with respect to any of the foregoing.
SECTION 4.09 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ FILINGS.
CHSC and Farmland shall prepare and file with the Antitrust Division of
the U.S. Justice Department (the "Antitrust Division") and the Federal Trade
Commission (the "FTC"), all reports required to be filed in connection with the
Transaction pursuant to the HSR Act. Each of CHSC and Farmland shall cooperate
fully with each other in preparation of such reports. If either the Antitrust
Division or the FTC requests that additional information be filed pursuant to
the HSR Act, CHSC and HSR shall prepare and file such additional information as
soon as practicable after the request, and shall cooperate fully with each other
in preparation of such additional information. With respect to preparation or
filing of any of the reports or additional information described in this Section
4.09, each party shall bear its own costs.
SECTION 4.10 TAX AND ACCOUNTING TREATMENT.
Each of the parties shall not take any action and shall not fail to
take any action, which action or failure to act would prevent, or would be
reasonably likely to prevent, the Transaction from qualifying (a) for "pooling
of interests" accounting treatment as described in Sections 2.19 and 3.19, or
(b) as a 368 Reorganization.
ARTICLE V
CLOSING CONDITIONS
SECTION 5.01 CONDITIONS TO OBLIGATIONS OF EACH PARTY.
The respective obligations of CHSC and Farmland to consummate the
Transaction and other matters described in this Agreement are, at their
respective options, subject to the satisfaction or waiver of each of the
following conditions on or before the Closing Date:
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(a) The members of CHSC shall have approved this Agreement,
the Plan of Merger, and the Transaction, all in accordance with the
requirements of applicable law and the Articles of Incorporation and
Bylaws of CHSC;
(b) The members of Farmland shall have approved this
Agreement, the Plan of Merger, and the Transaction, all in accordance
with the requirements of applicable law and the Articles of
Incorporation and Bylaws of Farmland;
(c) If Structure B is to be used to effect the combination,
all steps then legally feasible to reincorporate the Surviving Entity
as a Minnesota cooperative association (as described in Section 4.01
hereof) shall have been taken;
(d) The parties shall have made the filings required by
Section 4.09 above under the HSR Act, and all applicable time periods
under the HSR Act shall have expired;
(e) No injunction, restraining order or order of any nature
issued by any court of competent jurisdiction, government or
governmental agency enjoining the Transaction shall have been issued
and remain in effect;
(f) All consents, approvals and waivers which are necessary in
connection with the Transaction, or any part thereof, shall have been
obtained, including the consents and approvals referred to in Section
4.02 above, other than any such consents, approvals or waiver as do
not, individually or in the aggregate, have a Material Adverse Effect
on the Surviving Entity; and
(g) No action shall have been threatened or instituted by any
governmental agency or any other person challenging the legality of the
Transaction, seeking to prevent or delay consummation of the
Transaction or seeking to obtain divestiture or other relief in the
event of consummation of the Transaction. It is understood in the event
that such an action is threatened or instituted, the parties will first
attempt for a period of 90 days to obtain dismissal or other favorable
resolution of such threatened or actual action prior to exercise of
their right to terminate hereunder.
SECTION 5.02 ADDITIONAL CONDITIONS TO OBLIGATION OF CHSC.
The obligation of CHSC to consummate the Transaction is, at its option,
subject to the satisfaction or waiver of each of the following additional
conditions at the Closing Date.
(a) All the representations and warranties of Farmland
contained in this Agreement shall be true and correct in all material
respects on the Closing Date as though such representations and
warranties were made on and as of the Closing Date, and Farmland shall
have performed all of its obligations and complied with all of its
covenants contained
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in this Agreement and in the Plan of Merger to be performed or complied
with prior to the Closing Date;
(b) There shall have occurred no change since the date hereof
in the assets, liabilities, financial condition or operations of
Farmland which, in the reasonable judgment of CHSC, has or is likely to
have a Material Adverse Effect on the Surviving Entity; provided,
however, that an adverse ruling in the Terra tax case referred to on
Exhibit D hereto shall not be considered as such a change;
(c) CHSC shall have received a certificate, dated as of the
Closing Date, and executed by the President of Farmland, certifying in
such detail as CHSC may reasonably request as to the accuracy of such
representations and warranties, the fulfillment of such obligations,
compliance with such covenants and satisfaction of the conditions to
CHSC's obligation as of the Closing Date; and
(d) All actions, proceedings and documents necessary to carry
out the Transaction shall be reasonably satisfactory to CHSC
SECTION 5.03 ADDITIONAL CONDITIONS TO OBLIGATION OF FARMLAND.
The obligation of Farmland to consummate the Transaction is, at its
option, subject to the satisfaction or waiver of each of the following
additional conditions on or before the Closing Date:
(a) All the representations and warranties of CHSC contained
in this Agreement shall be true and correct in all material respects on
the Closing Date as though such representations and warranties were
made on and as of the Closing Date, and CHSC shall have performed all
of its obligations and complied with all of its covenants contained in
this Agreement and in the Plan of Merger to be performed or complied
with prior to the Closing Date;
(b) There shall have occurred no change since the date hereof
in the assets, liabilities, financial condition or operations of CHSC
which, in the reasonable judgment of Farmland, has or is likely to have
a Material Adverse Effect on the Surviving Entity;
(c) Farmland shall have received a certificate, dated as of
the Closing Date, executed by the President of CHSC, certifying in such
detail as Farmland may reasonably request as to the accuracy of such
representations and warranties, the fulfillment of such obligations,
compliance with such covenants and satisfaction of the conditions to
Farmland's obligations as of the Closing Date; and
(d) All actions, proceedings and documents necessary to carry
out the Transaction shall be reasonably satisfactory to Farmland,
including the effectiveness of the CHSC/Acquisition Co. Merger, if
Structure B is selected.
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ARTICLE VI
POST-CLOSING AGREEMENTS
With respect to issues relating to the Surviving Entity subsequent to
the Effective Time, CHSC and Farmland agree as follows:
SECTION 6.01 CONSOLIDATION OF BENEFIT PLANS.
Within a reasonable period of time after the Effective Time, the
Surviving Entity shall take steps to consolidate the various benefit plans
provided to the employees of the respective parties in accordance with the
applicable provisions of the Code and ERISA. This consolidation of plans shall
be accomplished in a manner to be determined by the Surviving Entity.
SECTION 6.02 PATRONAGE DISTRIBUTIONS.
Following the Effective Time and within the time period required by
Subchapter T of the Code, the Surviving Entity will make patronage allocations
to the former members of each party (a) based on patronage transactions with the
respective parties during each party's respective fiscal year or portion thereof
immediately preceding the Effective Time and (b) in accordance with the terms of
the bylaws of the party that are in effect during the period such patronage
transaction occurred. The distributions of such allocation shall be in the form
of cash and equity credits in a manner consistent with the previous patronage
distributions of each party.
SECTION 6.03 INDEMNIFICATION OF FORMER OFFICERS; INSURANCE.
The surviving Entity shall indemnify each director, officer, manager,
employee or agent of CHSC or Farmland, and each person serving at the request of
CHSC or Farmland as a director, officer, manager, employee or agent of any other
entity, partnership, joint venture, trust or enterprise, against any losses,
claims or expenses incurred by such person prior to the Effective Time that
would be indemnifiable under Bylaws of the Surviving Entity as in force on the
Effective Time and otherwise to the fullest extent provided or permitted by any
statute which applies to any type of corporation of the state of incorporation
of the Surviving Entity as in effect at such time. The Surviving Entity shall
maintain insurance coverage against any such loss, claim or expense in an amount
of at least $20,000,000, subject to standard exclusions and exceptions to
coverage, for a period of not less than six (6) years after the Effective Time,
subject to the right of the Board of Directors to discontinue such coverage on
grounds of unreasonable cost.
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ARTICLE VII
TERMINATION
SECTION 7.01 TERMINATION OF AGREEMENT.
This Agreement shall be terminated and the Transaction abandoned if at
any time prior to the Closing:
(a) The members of CHSC at the CHSC member meeting called for
the purpose of voting on the Transaction, fail to approve the
Transaction as required by Section 5.01(a), or the members of Farmland
at the Farmland member meeting called for the purpose of voting on the
Transaction, fail to approve the Transaction as required by Section
5.01(b); or
(b) The parties mutually agree in writing to terminate this
Agreement; or
(c) Either party delivers a written notice to the other to the
effect that (i) one or more of the conditions to its obligations as set
forth herein cannot be met, (ii) the other party has defaulted in a
material respect under one or more of its covenants or agreements
contained herein, or (iii) any of the representations or warranties of
the other party are or have become materially untrue or incorrect as of
the date of such notice, and in any case such condition or conditions
have not been satisfied, such default or defaults have not been
remedied or such representation or warranty has not been rendered true
and correct within thirty (30) days after such notice is mailed; or
(d) The Closing has not occurred on or before December 31,
2000, or such later date as the parties may mutually agree upon.
SECTION 7.02 EFFECT OF TERMINATION.
If this Agreement is terminated pursuant to Section 7.01 above, all
rights and obligations of the parties hereunder shall terminate without any
liability of either party to the other (except for any liability of a party for
breach of this Agreement); provided, however, that the confidentiality and
return of documents provisions contained in or referred to Section 4.06 above
shall survive any such termination.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 WAIVER OF CONDITIONS.
Any party may, at its option, waive in writing any and all of the
conditions herein contained to which its obligations hereunder are subject. A
party, by consummating the transactions contemplated herein, shall be deemed to
have waived any breach of a warranty, representation, covenant or condition of
which such party received written notice prior to the Closing Date if the notice
specifically referred to this Section 8.01 and described the breach in
reasonable detail.
SECTION 8.02 AMENDMENT.
The parties by mutual consent may, before or after approval of this
Agreement by the members, amend, modify or supplement this Agreement in such
manner as may be agreed upon in writing.
SECTION 8.03 BINDING NATURE.
This Agreement shall be binding upon and inure only to the benefit of
the parties hereto and their respective successors and assigns, provided that
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned or delegated by any of the parties hereto without the prior
written consent of the other parties hereto.
SECTION 8.04 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 8.05 ENTIRE AGREEMENT.
Except for the Confidentiality Agreement (the terms of which are
incorporated herein by reference pursuant to Section 4.06 hereof), this
Agreement, the Plan of Merger and the other documents referred to herein and
therein set forth the entire understanding of the parties hereto with respect to
the matters provided for herein and therein and supersede all prior agreements,
covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of either party.
SECTION 8.06 NOTICES.
All notices, requests, demands and other communications hereunder shall
be deemed to have been duly given if delivered or mailed, certified or
registered mail, with postage prepaid:
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If to CHSC:
Cenex Harvest States Cooperatives
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Vice President and General Counsel
If to Farmland:
Farmland Industries, Inc.
Department 62
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
SECTION 8.07 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the parties contained in Articles
II and III of this Agreement shall form the basis for closing conditions only,
shall not survive the Closing Date and, except to the extent of the principles
for the Capital Plan in Exhibit D hereto, shall not form the basis for any
action by or on behalf of either party or any third party for breach,
misrepresentation or indemnity at any time after the Closing Date.
SECTION 8.08 CAPTIONS.
The article and section headings of this Agreement are for convenience
only and shall not affect the meaning or construction of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
CENEX HARVEST STATES FARMLAND INDUSTRIES, INC.
COOPERATIVES
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------- --------------------------------------
Its Chief Executive Officer Its President and Chief Executive Officer
-------------------------------- -------------------------------------
Attest: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Corporate Secretary
The undersigned, UCB Acquisition Co., an Ohio cooperative corporation,
the only member of which is Cenex Harvest States Cooperatives, hereby joins in
the foregoing Transaction Agreement and agrees to take all actions required to
effect Structure B, as therein defined, if said structure is selected pursuant
to Section 1.01 of said Transaction Agreement.
UCB ACQUISITION CO.
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Date: September 23, 1999
--------------------------------- --------------------------------------
President
-▇▇-
▇▇▇▇▇▇▇ ▇-▇
STRUCTURE A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Plan") is dated as of _______
__, 2000, and is by and between CENEX HARVEST STATES COOPERATIVES ("CHSC") and
FARMLAND INDUSTRIES, INC. ("Farmland"), each of which may be referred to herein
as a "Constituent Cooperative"' and both of which may be collectively referred
to herein as the "Constituent Cooperatives".
RECITALS
WHEREAS, CHSC is a cooperative association organized under Chapter 308A
of the Minnesota Statutes (as amended, the "Minnesota Act"), and Farmland is a
cooperative corporation organized under Article 16 of Chapter 17 of the Kansas
Statutes (as amended, the "Kansas Act"); and
WHEREAS, the respective Boards of Directors of CHSC and Farmland and
the respective members of CHSC and Farmland have approved and adopted this Plan
and the transactions contemplated hereby in the manner required by Section
308A.801 of the Minnesota Act and Sections 17-1637 and 17-1638 of the Kansas
Act, and in the manner required by their respective Articles of Incorporation
and Bylaws;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements of the parties contained herein, the parties hereto
agree as follows:
AGREEMENT
SECTION 1. THE MERGER. As of the Effective Time (as defined in Section
8), CHSC and Farmland shall combine through merger (the "Merger"), in accordance
with the applicable provisions of the Minnesota Act and the Kansas Act; and
CHSC, whose name shall change to "United Country Brands, Inc." and whose
Articles of Incorporation and Bylaws each shall be amended and restated in their
entirety as further provided herein, shall be the surviving cooperative and
shall continue to exist by virtue of, and shall be governed by, the Minnesota
Act.
SECTION 2. ARTICLES OF MERGER. On or before the Effective Time, CHSC
and Farmland each shall execute articles of merger (the "Articles of Merger")
and/or a certificate of merger (the "Certificate of Merger") setting forth the
information required by and otherwise in compliance with Section 308A.801 of the
Minnesota Act and Sections 17-1637 and 17-1638 of the Kansas Act. The Articles
of Merger and/or the Certificate of Merger shall be filed with the Secretary of
State of the State of Minnesota or as otherwise required by the Minnesota Act,
and with the Secretary of State
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of the State of Kansas or as otherwise required by the Kansas Act, and shall
provide that the Merger shall become effective on the Effective Time.
SECTION 3. EFFECT OF THE MERGER. From and after the Effective Time,
without any further action by the Constituent Cooperatives or any of their
respective members:
(a) United Country Brands, Inc., as the surviving
cooperative in the Merger, shall have all of the
rights, privileges, immunities and powers, and shall
be subject to all the duties and liabilities, of a
cooperative organized under the Minnesota Act;
(b) United Country Brands, Inc., as the surviving
cooperative in the Merger, shall possess all of the
rights, privileges, immunities and franchises, of a
public as well as a private nature, of each
Constituent Cooperative, and all property, real,
personal and mixed, and all debts due on whatever
account, including all choses in action, and each and
every other interest of or belonging to or due to
each Constituent Cooperative, shall be deemed to be
and hereby is vested in United Country Brands, Inc.,
without further act or deed, and the title to any
property, or any interest therein, vested in either
Constituent Cooperative, shall not revert or be in
any way impaired by reason of the Merger;
(c) United Country Brands, Inc. shall be responsible and
liable for all of the liabilities and obligations of
each Constituent Cooperative, and any claim existing
or action or proceeding pending by or against one of
the Constituent Cooperatives may be prosecuted as if
the Merger had not taken place and United Country
Brands, Inc. may be substituted in its place;
(d) neither the rights of creditors nor any liens upon
the property of either of the Constituent
Cooperatives shall be impaired by the Merger; and
(e) the Merger shall have any other effect set forth in
the Minnesota Act and the Transaction Agreement dated
September __, 1999, by and between CHSC and Farmland
(the "Transaction Agreement"), all with the effect
and to the extent provided in the applicable
provisions of the Minnesota Act and the Kansas Act.
SECTION 4. ARTICLES OF INCORPORATION; BYLAWS. From and after the
Effective Time, pursuant to the Articles of Merger and without any further
action by the Constituent Cooperatives or any of their respective members:
(a) the name of CHSC, as the surviving cooperative in the
Merger, shall be changed to "United Country Brands,
Inc."; and
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(b) the Articles of Incorporation of United Country
Brands, Inc., as the surviving cooperative in the
Merger, shall be amended and restated in their
entirety to read as set forth in SCHEDULE I attached
hereto and made a part hereof (the "Surviving Entity
Articles").
From and after the Effective Time, without any further action by the
Constituent Cooperatives or any of their respective members, the Bylaws of
United Country Brands, Inc., as the surviving cooperative in the Merger, shall
be amended and restated in their entirety to read as set forth in EXHIBIT A-2
attached to the Transaction Agreement and made a part hereof (the "Surviving
Entity Bylaws").
SECTION 5. BOARD OF DIRECTORS. From and after the Effective Time,
without any further action by the Constituent Cooperatives or any of their
respective members, each person serving as a director of one of the Constituent
Cooperatives immediately prior to the Effective Time shall become a director of
United Country Brands, Inc., as the surviving cooperative in the Merger, to
serve in accordance with the Surviving Entity Bylaws.
SECTION 6. EXCHANGE, REDESIGNATION AND CONVERSION AND CONTINUATION OF
CAPITAL STOCK, NON-STOCK EQUITY INTERESTS, PATRONS' EQUITIES AND MEMBERSHIPS. As
of the Effective Time, the manner and basis of exchanging and continuing the
shares of capital stock, non-stock equity interests, patronage equity interests
(including all entitlements to patronage refunds), any other allocated equity
interests, and unallocated and capital reserves of CHSC and Farmland (all such
interests referred to herein as "CHSC Equity Interests" or "Farmland Equity
Interests", respectively), and membership interests in CHSC and Farmland, for
equal Equity Interests and membership interests in United Country Brands, Inc.,
shall be as set forth in this Section 6:
(a) CONTINUATION OF CHSC MEMBERSHIPS. As of the Effective
Time, without any further action by the Constituent
Cooperatives or any of their respective members, each
member of CHSC shall be and continue as a member of
United Country Brands, Inc., to the extent such
member is eligible for membership under the Surviving
Entity Articles and the Surviving Entity Bylaws, in
such class and with such incidents of membership as
are set forth in the Surviving Entity Articles and
the Surviving Entity Bylaws.
(b) CONTINUATION OF FARMLAND MEMBERSHIPS. As of the
Effective Time, without any further action by the
Constituent Cooperatives or any of their respective
members, each member of Farmland shall become and be
a member of United Country Brands, Inc., to the
extent such member is eligible for membership under
the Surviving Entity Articles and the Surviving
Entity Bylaws, in such class and with such incidents
of membership as are set forth in the Surviving
Entity Articles and the Surviving Entity Bylaws.
(c) CONTINUATION OF CHSC EQUITY INTERESTS. As of the
Effective Time, without any further action by the
Constituent Cooperatives or any of their respective
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members, all CHSC Equity Interests standing on the
books of CHSC immediately prior to the Effective Time
shall be determined and continued as like and equal
Equity Interests in United Country Brands, Inc. at
their stated dollar amount on a dollar-for-dollar
basis, year of issue (as determined necessary), and
with the other rights and preferences of such CHSC
Equity Interests; provided, however, that as of the
Effective Time, an amount equal to the unallocated
capital reserves of CHSC, minus an amount equal to
the deferred patronage equity of CHSC (as computed
from the books and records of CHSC as of the
Effective Time, in accordance with generally accepted
accounting principles, consistently applied), and
minus $100 million, shall be allocated and
distributed to the CHSC members (in such manner and
to such members as the CHSC board of directors shall
specify prior to the Effective Time) in the form of
allocated nonpatronage equity of United Country
Brands, Inc.
(d) CONVERSION OF FARMLAND EQUITY INTERESTS. As of the
Effective Time, without any further action by the
Constituent Cooperatives or any of their respective
members or equity holders, all Farmland Equity
Interests standing on the books of Farmland
immediately prior to the Effective Time shall be
converted into equal Equity Interests in United
Country Brands, Inc. at their stated dollar amount on
a dollar-for-dollar basis, as follows:
(i) Common Stock and Associate Member Common
Stock. Each share of common stock and
associate member common stock of Farmland
issued and outstanding or otherwise standing
on the books of Farmland immediately prior
to the Effective Time shall be exchanged for
allocated patronage equity or allocated
nonpatronage equity of United Country
Brands, Inc. in a face amount of $25.00, and
in such designations or series so as to
preserve the year of issue (as United
Country Brands, Inc. deems necessary) and
other terms and conditions of the original
issuance.
(ii) Patronage Equity Interests. All capital
credits, patronage refunds and any other
allocated or to be allocated equity
interests (including all entitlements to
patronage refunds) as of the Effective Time
which are not included in clause (i) above
shall be exchanged for allocated patronage
equity or allocated nonpatronage equity of
United Country Brands, Inc. in a face amount
equal to such capital credits, patronage
refunds, allocated or to be allocated equity
interests, entitlements to patronage
refunds, or other equity interests in such
denominations or other designations or
series so as to preserve the year of issue
(as United Country Brands, Inc. deems
necessary) and other terms and conditions of
the original issuance.
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(iii) SF Services Warrants. The outstanding
Warrants for Equity Interests of Farmland
issued in the acquisition of SF Services,
Inc. shall, from and after the Effective
Time, represent warrants to convert into
United Country Brands, Inc. allocated
patronage equity or allocated nonpatronage
equity in the same face amount as the
Warrants could have been converted into face
amount Farmland Equity Interests.
(iv) Unallocated Surplus. There shall be
allocated to the Farmland members (in such
manner and to such members as the Farmland
board of directors shall specify prior to
the Effective Time) an amount equal to the
amount by which Farmland's earned surplus
account (as computed from the books and
records of Farmland as of the Effective
Time, in accordance with generally accepted
accounting principles, consistently applied)
exceeds $100 million, and United Country
Brands, Inc. allocated nonpatronage equity
shall be so issued to such Farmland members
as of the Effective Time; provided, however,
that the United Country Brands, Inc.
allocated nonpatronage equity issued
hereunder shall be registered in the name of
United Country Brands, Inc. to be held by it
in escrow and disposed of as provided in the
Capital Plan of United Country Brands, Inc.
(v) Preferred Stock. Each share of 8% Series A
Cumulative Redeemable Preferred Stock of
Farmland issued and outstanding or otherwise
standing on the books of Farmland
immediately prior to the Effective Time
shall be converted into one share of 8%
Series A Cumulative Redeemable Preferred
Stock of United Country Brands, Inc.
(vi) Net Effect. The net effect of the conversion
of Farmland Equity Interests for equal
Equity Interests in United Country Brands,
Inc. shall be that the holders of Farmland
Equity Interests standing on the books of
Farmland immediately prior to the Effective
Time shall hold and will have equal Equity
Interests in United Country Brands, Inc.
immediately following the Effective Time, in
terms of stated dollar amount on a
dollar-for-dollar basis, year of issue (as
determined necessary) and any other rights
and preferences.
(e) Notwithstanding the foregoing provisions, the
following shall be canceled and extinguished as of
the Effective Time:
(i) any membership interest which Farmland has
in CHSC;
(ii) any CHSC Equity Interest held by Farmland;
(iii) any membership interest which CHSC has in
Farmland; and
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(iv) any Farmland Equity Interest held by CHSC.
(f) SURVIVING ENTITY ARTICLES AND BYLAWS TO GOVERN.
Membership in United Country Brands, Inc. and all
Equity Interests in United Country Brands, Inc.
issued or credited in exchange for Farmland Equity
Interests and continued and credited with respect to
CHSC Equity Interests as described above, shall in
all instances be governed by the provisions of the
Surviving Entity Articles and the Surviving Entity
Bylaws.
(g) FURTHER ASSURANCES OF HOLDERS OF EQUITY. Each holder
of CHSC Equity Interests and each holder of Farmland
Equity Interests shall take such action or cause to
be taken such action as United Country Brands, Inc.
may reasonably deem necessary or appropriate to
effect the exchange and continuation of the equity
interests hereunder, including without limitation the
indorsement and delivery of any stock certificates or
other evidences of equity being exchanged or
continued hereunder.
SECTION 7. FURTHER ASSURANCES. From time to time and after the
Effective Time, as and when requested by United Country Brands, Inc., or its
successors or assigns, CHSC and Farmland shall execute and deliver or cause to
be executed and delivered all such deeds and other instruments, and shall take
or cause to be taken all such further action or actions, as United Country
Brands, Inc., or its successors or assigns, may deem necessary or desirable in
order to vest in and confirm to United Country Brands, Inc., or its successors
or assigns, title to and possession of all of the properties, rights,
privileges, powers and franchises referred to in Section 3 of this Plan, and
otherwise to carry out the intent and purposes of this Plan. If United Country
Brands, Inc. shall at any time deem that any further assignments or assurances
or any other acts are necessary or desirable to vest, perfect or confirm of
record or otherwise the title to any property or to enforce any claims of CHSC
or Farmland vested in United Country Brands, Inc. pursuant to this Plan, the
officers of United Country Brands, Inc., or its successors or assigns, are
hereby specifically authorized as attorneys-in-fact of each of CHSC and Farmland
(which appointment is irrevocable and coupled with an interest), to execute and
deliver any and all such deeds, assignments and assurances and to do all such
other acts in the name and on behalf of each of CHSC and Farmland, or otherwise,
as such officer shall deem necessary or appropriate to accomplish such purpose.
SECTION 8. EFFECTIVE TIME. The Merger shall become effective at 12:02
a.m. Central Time on March 1, 2000 (the "Effective Time").
SECTION 9. TERMINATION AND AMENDMENT.
(a) TERMINATION. At any time prior to the filing of this
Plan, or a certificate or articles of merger in lieu
thereof, with the Secretaries of State of the State
of Minnesota and the State of Kansas, this Plan may
be terminated by the mutual consent of the boards of
directors of CHSC and Farmland notwithstanding
approval of this Plan by the members or stockholders
of such entities.
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(b) AMENDMENT. In addition, the boards of directors of
CHSC and Farmland may amend this Plan at any time
prior to the filing of this Plan, or a certificate or
articles of merger in lieu thereof, with the
Secretaries of State of the State of Minnesota and
the State of Kansas, provided that an amendment made
subsequent to the adoption of this Plan by the
members or stockholders of CHSC and Farmland shall
not:
(i) alter or change the amount or kind of
shares, securities, cash, property or
rights, or any of the proceedings, in
exchange for or on conversion of all or any
of the shares of any class or series thereof
of such entities;
(ii) alter or change any term of the articles of
incorporation of United Country Brands,
Inc.; or
(iii) alter or change any of the terms and
conditions of this Plan if such alteration
or change would adversely affect the members
or holders of any class or series thereof of
such entities.
SECTION 10. GOVERNING LAW. This Plan shall be governed by and construed
in accordance with the laws of the States of Minnesota and Kansas.
IN WITNESS WHEREOF, this Plan has been agreed to and executed by the
duly authorized representatives of CHSC and Farmland, as of the date first set
forth above.
CENEX HARVEST STATES FARMLAND INDUSTRIES, INC.
COOPERATIVES
By By
--------------------------------- --------------------------------------
Its Its
-------------------------------- -------------------------------------
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SCHEDULE I
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
UNITED COUNTRY BRANDS, INC.
ARTICLE I
NAME, REGISTERED AGENT, REGISTERED OFFICE
AND PRINCIPAL PLACE OF BUSINESS
SECTION 1.1 NAME. The name of this cooperative association shall be
United Country Brands, Inc. (this "Cooperative").
SECTION 1.2 REGISTERED AGENT AND REGISTERED OFFICE. The registered
agent of this Cooperative shall be CT Corporation System. The registered office
for this Cooperative shall be located at [to be inserted].
SECTION 1.3 PRINCIPAL PLACE OF BUSINESS. The principal place of
business for this Cooperative shall be in the city of Kansas City, Missouri, and
in the county of Clay County, Missouri.
ARTICLE II
PURPOSES AND POWERS
SECTION 2.1 PURPOSES. This Cooperative is organized for the
following purposes:
(a) to receive, handle, store, warehouse, manufacture, process,
market, purchase, sell and otherwise deal in the agricultural products and
services of its members, nonmember patrons and others;
(b) to manufacture, buy, sell, market, store, warehouse, acquire,
transport, distribute, process, produce, drill, mine, refine, and otherwise deal
in and procure for its members, nonmember patrons and others, fertilizer,
petroleum products, feed, grain, livestock, machinery, equipment, supplies, and
other goods, products, merchandise and services used or useful in farming and
the agricultural industry;
(c) to engage in activities involving agricultural education,
research and development, legislation and economic or social conditions
pertaining to the agricultural industry;
(d) to engage in the financing of the activities described above;
and
(e) to engage in any activity connected with or related to any such
purposes, and to engage in any other lawful purpose.
To this end, the business and activities of this Cooperative shall be conducted
on a cooperative basis, as provided in the Bylaws of this Cooperative
("Bylaws").
SECTION 2.2 AUTHORIZATION; POWERS. In addition to other powers, this
Cooperative may perform every act and thing necessary, proper, incidental or
convenient to the conduct of its business or the accomplishment of its purposes.
This Cooperative shall have all powers, privileges and rights conferred by
applicable law. Without limiting the foregoing, this Cooperative shall have the
power to:
(a) borrow money from and to loan money to its members, nonmember
patrons and others;
(b) guarantee or stand as surety on loans made to its members,
nonmember patrons and others by lenders;
(c) issue bonds, deeds of trust, debentures, notes, and other
obligations and to secure the same by pledge, mortgage, or trust deed on any
property; and draw, make, accept, endorse, guarantee, execute, and issue
promissory notes, bills of exchange, drafts, warrants, warehouse receipts,
certificates and other obligations, and negotiable or transferable instruments
for any purpose deemed necessary to further the objectives for which this
Cooperative is formed;
(d) acquire, purchase, hold, lease, encumber, sell, exchange, and
convey such real estate, buildings, and personal property as this Cooperative
may require;
(e) purchase, acquire, own, mortgage, pledge, sell, assign, transfer
or otherwise dispose of, equity or debt securities created by any other
corporation or other legal entity wherever organized, with all the rights,
powers and privileges of ownership thereof;
(f) borrow money, to incur obligations and to assume obligations of
any other person, individual, corporation or other legal entity, in any amount;
and make contracts for hire;
(g) issue equity and debt securities, whether certificated or
uncertificated, as further provided in these Articles of Incorporation
("Articles") and in the Bylaws;
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(h) join with other cooperatives, limited liability companies,
corporations, partnerships, associations or other entities to form district,
state, or national marketing, manufacturing, purchasing and service
organizations and other organizations engaged in the general purposes for which
this Cooperative is formed, and to purchase, acquire, and hold the capital stock
or other equity interest and the notes, bonds, and other obligations of such
organizations;
(i) have one or more offices, and to conduct any or all of its
operations and business, and promote its purposes without restriction as to
places or amounts; and
(j) carry on any other business in connection with the foregoing and
to engage in any of such activities on its own account or as agent for others,
or alone or in association with others, and to employ agents, consultants and
nominees to perform any or all of the powers described herein.
The powers, privileges and rights specified herein shall, except where otherwise
expressed, be in no way limited or restricted by reference to or inference from
the terms of any other provision of these Articles. The enumeration of powers,
privileges and rights herein shall not be held to limit or restrict in any
manner the general powers, privileges and rights conferred upon this Cooperative
under applicable law.
ARTICLE III
DURATION
This Cooperative shall have perpetual existence.
ARTICLE IV
MEMBERSHIP AND AUTHORIZED CAPITAL INSTRUMENTS
SECTION 4.1 MEMBERSHIP BASIS. This Cooperative is organized on a
membership basis with capital stock.
SECTION 4.2 QUALIFICATION OF MEMBERS. Membership in this Cooperative
shall be restricted to producers of agricultural products and associations of
such producers who patronize this Cooperative in accordance with terms and
conditions prescribed by the Board of Directors (the "Board") and only such
producers and associations of such producers shall be eligible voting members of
this Cooperative. For purposes of this Article, "producers of agricultural
products" shall mean persons (including individuals and joint ventures,
corporations, partnerships, limited liability companies, unincorporated
associations or other legal entities owned or controlled by individual farmers,
ranchers or their family groups) that are engaged in the production of one or
3
more agricultural products, including tenants of land used for the production of
such products and lessors of land that receive as rent therefor any part of the
product of such land.
The Board may establish minimum levels of business that cooperative
associations and producers must transact with or through this Cooperative to be
eligible for membership in this Cooperative, and also may adopt such additional
conditions, qualifications, methods of acceptance, duties, rights and privileges
of membership in this Cooperative as it may from time to time deem advisable.
The Board may refuse membership or provide conditional membership to an
applicant in its sole and absolute discretion. A membership in this Cooperative
is transferable only with the consent and approval of the Board .
SECTION 4.3 MEMBER, CLASSES. This Cooperative shall have three (3)
classes of members, which are hereby designated as the "Cooperative Association
Member" class, the "Defined Member" class, and the "Individual Member" class, as
more particularly described in the Bylaws. This Cooperative may have such
additional classes of members, with such designations, and such relative rights,
preferences, privileges and limitations, as may be provided in the Bylaws of
this Cooperative.
SECTION 4.4 VOTING RIGHTS. Voting rights in this Cooperative arise
solely by virtue of membership and only members shall have voting power. Each
member shall have a minimum of one (1) vote in the affairs of this Cooperative,
and may otherwise be entitled to additional votes as further authorized in the
Bylaws. This Cooperative has affiliated cooperative members and additional votes
are provided based on the amount of business transacted, the amount of equity
held and the number of members in the affiliated cooperative member.
SECTION 4.5 NON-MEMBER PATRONAGE. Associations of producers of
agricultural products and producers of agricultural products described in the
first paragraph of Section 4.2 and other individuals and entities who patronize
this Cooperative under conditions established by the Board or as provided in the
Bylaws, but who are otherwise not eligible to be members of this Cooperative may
nevertheless conduct business with this Cooperative on a patronage basis as a
nonmember patron, as more particularly provided in the Bylaws or by Board
policy. Such nonmember patrons are not members and are not entitled to voting
rights or other privileges incident to membership.
SECTION 4.6 BOARD OF DIRECTORS. In addition to and not by way of
limitation of the powers granted to the Board by applicable law or elsewhere in
these Articles or the Bylaws, the Board shall have the following authority and
powers, which may be exercised from time to time at its sole and absolute
discretion:
(a) DEFINED BUSINESS UNITS. The Board by resolution may establish
and organize separate defined business units of this Cooperative ("Defined
Business Unit") with respect to the operations of this Cooperative, on such
terms and conditions and having such rights, preferences, privileges and
limitations as the Board deems appropriate, as may be further provided in the
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Bylaws. The Board may sell, liquidate, dissolve or wind up any Defined Business
Unit, in which event, subject to the rights of holders of preferred stock of
this Cooperative, the excess of assets over liabilities of such Defined Business
Unit shall be used first to redeem the Equity Participation Units (as defined
below) of the Defined Business Unit on a pro rata basis.
(b) EQUITY PARTICIPATION UNITS. The Board by resolution may
establish and issue one or more than one class or series of equity participation
units ("Equity Participation Units") in connection with each Defined Business
Unit, may set forth the designation of classes or series of Equity Participation
Units, and may fix the relative rights, preferences, privileges and limitations
of each class or series of Equity Participation Units, as may be further
provided in the Bylaws. Equity Participation Units shall not entitle the holder
to voting rights and may be issued to and held only by Defined Members. Equity
Participation Units may only be sold or transferred with the approval of the
Board.
(c) ISSUANCE OF DEBT AND/OR EQUITY. The Board by resolution may
establish and issue to any person (whether member, nonmember patron, or other
person) one or more than one class or series of debt or equity, may set forth
the designation of classes or series of such debt or equity, and may fix the
relative rights, preferences, privileges and limitations of each class or series
of debt or equity, including, without limitation, one or more than one class or
series of preferred stock, including specifically, the 8% Series A Cumulative
Redeemable Preferred Shares, par value $25.00 per share, described in the
Appendix to these Articles. Dividends may be paid on the equity capital of this
Cooperative established pursuant to this Section 4.6(c); provided, however, that
dividends on such equity capital may not exceed eight percent (8%) per annum.
Debt or equity established pursuant to this Section 4.6(c) shall not entitle the
holder to voting rights. Unless otherwise expressly authorized by the Board,
equity established and issued pursuant to this Section 4.6(c) may only be sold
or transferred with the approval of the Board of Directors.
ARTICLE V
NET INCOME AND LOSS
The net income of this Cooperative in excess of dividends on equity
capital and additions to reserves shall be distributed to members and nonmember
patrons annually or more often on the basis of patronage. The records of this
Cooperative may show the interest of members and equity holders in the reserves.
Net income may be accounted for and distributed on the basis of allocation units
that may be functional, divisional, departmental, geographic, or otherwise. Net
income may be distributed in cash, allocated patronage equities (including
without limitation patrons equities), revolving fund certificates, securities of
this Cooperative, other securities, or any combination thereof. Any such
allocated equity shall be redeemable only at the option of the Board. The net
loss of an allocation unit or allocation units may be offset against the net
income of other allocation units to the extent permitted by applicable law. The
foregoing provisions of this Article V shall be implemented as more particularly
provided in the Bylaws.
5
ARTICLE VI
FIRST LIEN
This Cooperative shall have a first lien on all equity interests
standing on its books for all indebtedness of the respective holders or owners
thereof to this Cooperative. This Cooperative shall also have the right,
exercisable at the option of the Board, to set off such indebtedness against the
face amount of such equity interests; provided, however, that nothing contained
herein shall give the holder of such equity interests any right to have such set
off made.
ARTICLE VII
CERTAIN CORPORATE ACTIONS; DISSOLUTION
SECTION 7.1 SUPERMAJORITY VOTE. A merger, consolidation, liquidation
or dissolution involving this Cooperative, or the sale of all or substantially
all of the assets and property of this Cooperative, may be authorized by the
members in accordance with applicable law; provided, however, in the event the
Board declares, by resolution adopted by a majority of the Board present and
voting, that the action involves or is related to a hostile takeover, then, to
the extent permitted by applicable law, the action may be adopted only upon the
approval of eighty percent (80%) of the total voting power of the members of
this Cooperative, whether or not present and voting on the action.
Notwithstanding Article X of these Articles of Incorporation, this Article may
be amended only upon the approval of eighty percent (80%) of the total voting
power of the members of this Cooperative, whether or not present and voting on
the amendment.
SECTION 7.2 DISSOLUTION, LIQUIDATION, AND WINDING UP. In the event
of any dissolution, liquidation or winding up of this Cooperative, whether
voluntary or involuntary, all debts and liabilities of this Cooperative shall be
paid first according to their respective priorities. As more particularly
provided in the Bylaws, the remaining assets shall then be paid to the holders
of equity capital to the extent of their interests therein and any excess shall
be paid to the patrons of this Cooperative on the basis of their past patronage.
The Bylaws may provide more particularly for the allocation among the members
and nonmember patrons of this Cooperative of the consideration received in any
merger or consolidation to which this Cooperative is a party.
ARTICLE VIII
BOARD OF DIRECTORS
The business and affairs of this Cooperative shall be managed
by a Board of Directors of not less than twenty-five (25) directors, with the
exact number of directors as shall be specified in the Bylaws.
6
ARTICLE IX
LIMITATION OF DIRECTOR LIABILITY
No director of this Cooperative shall be personally liable to this
Cooperative or its members for monetary damages for breach of fiduciary duty as
a director, except for liability: (a) for a breach of the director's duty of
loyalty to this Cooperative or its members; (b) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law;
(c) for a transaction from which the director derived an improper personal
benefit; or (d) for an act or omission occurring prior to the date when the
provisions of this Article (or predecessor thereto) became effective.
It is the intention of the members of this Cooperative to limit or
eliminate the personal liability of the directors of this Cooperative to the
greatest extent permitted under applicable law. If amendments to applicable law
are passed after the effective date of this Article which authorize cooperatives
to act to further limit or eliminate the personal liability of directors, then
the liability of the directors of this Cooperative shall be limited or
eliminated to the greatest extent permitted by applicable law, as so amended.
Any repeal or modification of this Article by the members of this Cooperative
shall not adversely affect any right of or any protection available to a
director of this Cooperative serving prior to or at the time of such repeal or
modification.
ARTICLE X
AMENDMENT
These Articles of Incorporation may be amended in accordance with
applicable law; provided, however, in the event the Board declares, by
resolution adopted by a majority of the Board present and voting, that the
amendment involves or is related to a hostile takeover, then, to the extent
permitted by applicable law, the amendment may be adopted only upon the approval
of eighty percent (80%) of the total voting power of the members, whether or not
present and voting on the amendment.
# # #
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APPENDIX
RIGHTS, PREFERENCES, LIMITATIONS, RESTRICTIONS AND DESIGNATIONS
OF THE
8% SERIES A CUMULATIVE REDEEMABLE PREFERRED SHARES
OF
UNITED COUNTRY BRANDS, INC.
(i) DESIGNATION. The Series of Preferred Stock is hereby designated
as "8% Series A Cumulative Redeemable Preferred Shares" (hereinafter referred to
as the "Series A Preferred Shares").
(ii) NUMBER. The maximum number of authorized shares of the Series A
Preferred Shares shall be 2,000,000.
(iii) RELATIVE SENIORITY.
(A) In respect of rights to receive dividends and to
participate in distribution of payments in the event of any liquidation,
dissolution or winding up of United Country Brands, Inc. (the "Corporation"),
the Series A Preferred Shares shall rank (x) senior to the common shares,
associate member common shares and all other capital credits, equity interests
and shares of capital stock of the Corporation which, by their terms, rank
junior to the Series A Preferred Shares and (y) on a parity with all other
preferred shares of the Corporation which are not, by their terms, junior to the
Series A Preferred Shares.
(B) So long as the Series A Preferred Shares remain
outstanding, the Corporation will not authorize or issue any preferred shares
which rank senior to the Series A Preferred Shares.
(iv) DIVIDENDS.
(A) The holders of the then outstanding Series A Preferred
Shares shall be entitled to receive, when and as declared by the Board of
Directors of the Corporation, out of funds legally available for the payment of
dividends, cumulative cash dividends at the rate of 8.0% of the liquidation
preference of $50 per share per annum (equivalent to $4.00 per share per annum).
Such dividends shall accumulate from December 19, 1997 (which is the date of the
original issue of the Series A Preferred Shares by a predecessor entity of the
Corporation), and shall be payable quarterly in arrears on the 1st day of each
February, May, August and November or, if not a Business Day (as defined below),
the succeeding business day (each, a "Dividend Payment Date"). Any dividends
payable on the Series A Preferred Shares will be computed on the basis of a
360-day year consisting of twelve 30-day months. Dividends will be payable to
holders of record as they appear in the share records of the Corporation at the
close of business on the applicable record date, which shall be the 15th day of
the calendar month immediately
prior to the month in which the applicable Dividend Payment Date falls or such
other date designated by the Board of Directors of the Corporation that is not
more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a
"Dividend Record Date").
"Business Day" means any day other than a Saturday, a Sunday,
or a day on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed.
(B) The amount of any dividends accumulated on any Series A
Preferred Shares at any Dividend Payment Date shall be the amount of any unpaid
dividends accumulated thereon to but excluding such Dividend Payment Date and
the amount of dividends accumulated on any shares of Series A Preferred Shares
at any date other than a Dividend Payment Date shall be equal to the sum of the
amount of any unpaid dividends accumulated thereon to but excluding the last
preceding Dividend Payment Date, plus an amount calculated on the basis of the
annual dividend rate of $4.00 per share for the period after such last preceding
Dividend Payment Date to and including the date as of which the calculation is
made based on a 360-day year of twelve 30-day months. Dividends on the Series A
Preferred Shares will accumulate whether or not the Corporation has earnings,
whether or not there are funds legally available for the payment of such
dividends and whether or not such dividends are authorized or declared.
(C) Except as otherwise expressly provided herein, the Series
A Preferred Shares will not be entitled to any dividends in excess of full
cumulative dividends as described above and shall not be entitled to participate
in the earnings or assets of the Corporation, and no interest, or sum of money
in lieu of interest, shall be payable in respect of any dividend payment or
payments on the Series A Preferred Shares which may be in arrears.
(D) No dividends on the Series A Preferred Shares shall be
authorized by the Board of Directors of the Corporation or be paid or set apart
for payment by the Corporation at such time as the terms and provisions of any
agreement of the Corporation, including any agreement relating to its
indebtedness, prohibits such authorization, payment or setting apart for payment
or provides that such authorization, payment or setting apart for payment would
constitute a breach thereof or a default thereunder, or if such authorization or
payment shall be restricted or prohibited by law.
(E) Except as provided in the immediately following paragraph,
unless full cumulative dividends on the Series A Preferred Shares have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment therefor set apart for such payment on the Series A Preferred Shares for
all past dividend periods and the then current dividend period, no dividends
(other than in common shares, associate member common shares or other capital
stock, capital credits or equity interests ranking junior to the Series A
Preferred Shares as to dividends and upon liquidation) shall be declared or paid
or set aside for payment upon any preferred shares, common shares, associate
member common shares or any other
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capital stock, capital credits or equity interests of the Corporation ranking
junior to or on a parity with the Series A Preferred Shares as to dividends or
upon liquidation, nor shall any preferred shares, common shares, associate
member common shares or any other capital stock, capital credits or equity
interests of the Corporation ranking junior to or on a parity with the Series A
Preferred Shares as to dividends or upon liquidation be redeemed, purchased or
otherwise acquired for any consideration (or any moneys be paid or made
available for a sinking fund for the redemption of such shares) by the
Corporation (except by conversion into or exchange for other capital stock,
capital credits or equity interests of the Corporation ranking junior to the
Series A Preferred Shares as to dividends and upon liquidation).
(F) Notwithstanding the foregoing paragraph, the Corporation
shall be permitted to declare and pay or set apart for payment patronage
dividends or refunds, subject to the limitation that, whenever the terms
described in the foregoing paragraph would operate to restrict dividends, not
more than 20% of such aggregate patronage dividends or refunds for any fiscal
year shall be in cash, with the remainder to be paid in the form of common
stock, associate member common stock, capital credits or equity interests. In
addition, when dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon the Series A Preferred Shares and other
preferred shares of the Corporation ranking on a parity as to dividends with the
Series A Preferred Shares, dividends may be declared on the Series A Preferred
Shares and such other preferred shares provided that such dividends shall be
declared pro rata so that the amount of dividends declared per Series A
Preferred Share and per each other preferred share shall in all cases bear to
each other the same ratio that the accumulated dividends per Series A Preferred
Share and per such other preferred share bear to each other.
(G) Any dividend payment made on the Series A Preferred Shares
shall first be credited against the earliest accumulated but unpaid dividend due
with respect to such shares which remains payable.
(v) LIQUIDATION RIGHTS.
(A) Upon the voluntary or involuntary liquidation, dissolution
or winding up of the Corporation (collectively, a "liquidation"), the holders of
the Series A Preferred Shares then outstanding shall be entitled to be paid out
of the assets of the Corporation legally available for distribution to its
shareholders or members liquidating distributions in cash or property at its
fair market value as determined by the Corporation's Board of Directors in the
amount of a liquidation preference equal to $50 per share plus accumulated and
unpaid dividends, if any, thereon to the date of such liquidation, before any
distribution of assets is made to holders of common shares, associate member
common shares or any other capital stock, capital credits or equity interests of
the Corporation ranking junior to the Series A Preferred Shares as to
liquidation rights.
(B) After payment to the holders of the Series A Preferred
Shares of the full amount of the liquidating distributions to which they are
entitled as provided in paragraph
3
(v) (A), the holders of Series A Preferred Shares, as such, shall have no right
or claim to any of the remaining assets of the Corporation.
(C) If upon any voluntary or involuntary liquidation, the
legally available assets of the Corporation are insufficient to pay the amount
of the liquidating distributions on the Series A Preferred Shares and the
corresponding amounts payable on all other preferred shares of the Corporation
ranking on a parity with the Series A Preferred Shares in the distribution of
assets upon liquidation, then the holders of the Series A Preferred Shares and
such other preferred shares shall share ratably in any such distribution of
assets in proportion to the full liquidating distributions to which they would
otherwise be respectively entitled.
(D) Neither the sale, lease, transfer or conveyance of all or
substantially all of the property or business of the Corporation, nor the merger
or consolidation of the Corporation into or with any other entity or the merger
or consolidation of any other entity into or with the Corporation, shall be
deemed to be a dissolution, liquidation or winding up, voluntary or involuntary,
for the purposes of this paragraph (v).
(vi) REDEMPTION.
(A) Optional Redemption. The Series A Preferred Shares are not
redeemable prior to December 15, 2022. On and after December 15, 2022, the
Corporation may, at its option (subject to the provisions of this
paragraph(vi)), redeem at any time all or, from time to time, part of the Series
A Preferred Shares, payable in cash at a per share redemption price (the
"Redemption Price") set forth in the table below plus, in each case, accumulated
and unpaid dividends, if any, thereon to and including the date fixed for
redemption (the "Redemption Date"), without interest, to the extent the
Corporation will have funds legally available therefor.
If redeemed during the twelve month period,
Beginning December 15, Redemption Price
---------------------- ----------------
2022 ......................................... $52.00
2023 ......................................... 51.60
2024 ......................................... 51.20
2025 ......................................... 50.80
2026 ......................................... 50.40
2027 and thereafter........................... 50.00
(B) Procedures for Redemption.
(1) Notice of redemption will be given by publication in
a newspaper of general circulation in The City of New York, such publication to
be made once a week for two successive weeks commencing not less than 30 nor
more than 60 days prior to the
4
Redemption Date. A similar notice furnished by the Corporation will be mailed by
the registrar, postage prepaid, not less than 30 nor more than 60 days prior to
the Redemption Date, addressed to each holder of record of the Series A
Preferred Shares to be redeemed at the address set forth in the share transfer
records of the registrar. No failure to give such notice or any defect thereto
or in the mailing thereof shall affect the validity of the proceedings for the
redemption of any Series A Preferred Shares except as to the holder to whom
notice was defective or not given. In addition to any information required by
law or by the applicable rules of any exchange upon which Series A Preferred
Shares may be listed or admitted to trading, such notice shall state: (i) the
Redemption Date; (ii) the Redemption Price; (iii) the number of Series A
Preferred Shares to be redeemed; (iv) the place or places where the Series A
Preferred Shares are to be surrendered for payment of the Redemption Price; and
(v) that dividends on the Series A Preferred Shares to be redeemed will cease to
accumulate on such redemption date. If fewer than all the Series A Preferred
Shares held by any holder are to be redeemed, the notice mailed to such holder
shall also specify the number of Series A Preferred Shares to be redeemed from
such holder.
(2) If notice of redemption of any Series A Preferred
Shares has been given in accordance with paragraph (vi)(B)(1) above and provided
that on or before the Redemption Date specified in such notice all funds
necessary for such redemption shall have been irrevocably set aside by the
Corporation in trust for the benefit of the holders of any Series A Preferred
Shares so called for redemption, then from and after the Redemption Date
dividends will cease to accumulate on such Series A Preferred Shares, and such
shares shall no longer be deemed outstanding and all rights of the holders of
such Series A Preferred Shares will terminate, except the right to receive the
Redemption Price. Upon surrender, in accordance with such notice, of
certificates for any Series A Preferred Shares so redeemed (properly endorsed or
assigned for transfer, if the Corporation shall so require and the notice shall
so state), such Series A Preferred Shares shall be redeemed by the Corporation
at the Redemption Price. In case fewer than all the Series A Preferred Shares
represented by any such certificate are redeemed, a new certificate or
certificates shall be issued representing the unredeemed Series A Preferred
Shares without cost to the holder thereof.
(3) Any funds deposited with a bank or trust company for
the purpose of redeeming Series A Preferred Shares shall be irrevocable except
that:
(a) the Corporation shall be entitled to receive
from such bank or trust company the interest or other earnings, if any, earned
on any money so deposited in trust, and the holders of any Series A Preferred
Shares redeemed shall have no claim to such interest or other earnings; and
(b) any balance of monies so deposited by the
Corporation and unclaimed by the holders of the Series A Preferred Shares
entitled thereto at the expiration of two years from the applicable Redemption
Date shall be repaid, together with any interest or other earnings earned
thereon, to the Corporation, and after any such repayment, the
5
holders of the Series A Preferred Shares entitled to the funds so repaid to the
Corporation shall look only to the Corporation for payment without interest or
other earnings.
(4) Unless full cumulative dividends on the Series A
Preferred Shares shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment therefor set apart for such
payment on the Series A Preferred Shares for all past dividend periods and the
then current dividend period, no Series A Preferred Shares shall be redeemed
unless all outstanding Series A Preferred Shares are simultaneously redeemed;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of Series A Preferred Shares pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding Series A Preferred
Shares. In addition, unless full cumulative dividends on the Series A Preferred
Shares shall have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment therefor set apart for such payment on the
Series A Preferred Shares for all past dividend periods and the then current
dividend period, the Corporation shall not purchase or otherwise acquire,
directly or indirectly, any Series A Preferred Shares; provided, however, that
the foregoing shall not prevent the purchase or acquisition of Series A
Preferred Shares pursuant to a purchase or exchange offer made on the same terms
to holders of all outstanding Series A Preferred Shares.
(5) If the Redemption Date is after a Dividend Record
Date and before the related Dividend Payment Date, the dividend payable on such
Dividend Payment Date shall be paid to the holder in whose name the Series A
Preferred Shares to be redeemed are registered at the close of business on such
Dividend Record Date notwithstanding the redemption thereof between such
Dividend Record Date and the related Dividend Payment Date or the Corporation's
default in the payment of the dividend due. Except as provided in this paragraph
(vi), the Corporation will make no payment or allowance for unpaid dividend,
whether or not in arrears, on Series A Preferred Shares to be redeemed.
(6) In case of redemption of less than all Series A
Preferred Shares at the time outstanding, the Series A Preferred Shares to be
redeemed shall be selected pro rata from the holders of record of such Series A
Preferred Shares in proportion to the number of Series A Preferred Shares held
by such holders (with adjustments to avoid redemption of fractional shares) or
by any other equitable method determined by the Corporation.
(vii) VOTING RIGHTS. Except as required by law, and as set forth
below, the holders of the Series A Preferred Shares shall not be entitled to
vote at any meeting of the shareholders or members or otherwise or to
participate in any action taken by the Corporation or the shareholders or
members thereof.
(A) So long as any Series A Preferred Shares remain
outstanding, the Corporation will not, without the affirmative vote or consent
of the holders of at least a majority of the Series A Preferred Shares
outstanding at the time, given in person or by proxy, either in writing or at a
meeting, alter or change the powers, preferences or special rights of the Series
A
6
Preferred Shares so as to affect them adversely; provided, however, that (1) any
increase in the amount of the authorized preferred shares of the Corporation or
the creation or the issuance of any other preferred shares of the Corporation,
or (ii) any increase in the amount of authorized Series A Preferred Shares, in
each case ranking on a parity with or junior to the Series A Preferred Shares
with respect to the payment of dividends and the distribution of assets upon
liquidation, shall not be deemed to adversely affect such powers, preferences or
special rights.
The foregoing voting provisions will not apply if, at or
prior to the time when the act with respect to such vote or consent would
otherwise be required shall be effected, all outstanding Series A Preferred
Shares shall have been redeemed or called for redemption and sufficient funds
shall have been irrevocably deposited in trust to effect such redemption.
(B) On each matter submitted to a vote of the holders of
Series A Preferred Shares in accordance with this paragraph (vii), or as
otherwise required by law, each Series A Preferred Share shall be entitled to
one vote. With respect to each Series A Preferred Share, the holder may
designate a proxy, with each such proxy having the right to vote on behalf of
the holder.
(viii) CONVERSION. The Series A Preferred Shares are not convertible
into or exchangeable for any other property or securities of the Corporation.
(ix) RESTRICTIONS ON TRANSFER.
(A) The Series A Preferred Shares have not been registered
under the Securities Act of 1933, as amended (the "Securities Act") and, until
so registered, may not be offered or sold except to (i) "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act) in reliance upon the
exemption from the registration requirements of the Securities Act provided by
Rule 144A, and (ii) institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) in transactions exempt from
the registration requirements of the Securities Act.
(B) Until registered under the Securities Act, the Series A
Preferred Shares may not be sold or otherwise transferred in an amount that is
less than $100,000 in aggregate liquidation preference. Any such transfer of
Series A Preferred Shares in an amount less than $100,000 in aggregate
liquidation preference shall be deemed to be void and of no legal effect
whatsoever. Any such transferee shall be deemed not to be the holder of such
Series A Preferred Shares for any purpose, including, but not limited to, the
receipt of dividends on such Series A Preferred Shares, and such transferee
shall be deemed to have no interest whatsoever in such Series A Preferred
Shares.
7
(C) Until the Series A Preferred Shares are registered under
the Securities Act, all certificates representing such Series A Preferred Shares
will bear a legend referring to the restrictions described above.
# # #
8
EXHIBIT A-2
AMENDED AND RESTATED
BYLAWS
OF
UNITED COUNTRY BRANDS, INC.
ARTICLE I
OFFICES AND RECORDS
SECTION 1.1 CORPORATE OFFICES. This Cooperative (this "Cooperative")
may have such corporate offices and places of business anywhere as the Board of
Directors (the "Board") may from time to time designate or the business of this
Cooperative may require.
SECTION 1.2 REGISTERED OFFICE AND REGISTERED AGENT. The location of
the registered office and the name of the registered agent of this Cooperative
shall be as stated in the Articles of Incorporation of this Cooperative (the
"Articles") or as shall be determined from time to time by resolution of the
Board and on file in the appropriate public offices.
SECTION 1.3 BOOKS, ACCOUNTS AND RECORDS, AND INSPECTION RIGHTS. The
books, accounts and records of this Cooperative, except as may be otherwise
required by applicable law, may be kept at such place or places as the Board may
from time to time determine. The Board shall determine whether, to what extent
and the conditions upon which the books, accounts and records of this
Cooperative, or any of them, shall be open to the inspection of the members, and
no member shall have any right to inspect any book, account or record of this
Cooperative, except as conferred by law or by resolution of the members or
Board.
ARTICLE II
MEMBERSHIP
SECTION 2.1 QUALIFICATIONS. Producers of agricultural products and
associations of producers of agricultural products who are eligible and who
patronize this Cooperative under conditions established by the Board or as
elsewhere provided in these Bylaws (these "Bylaws") may, upon approval or
pursuant to the authorization of the Board, become members of this Cooperative.
Each transaction between this Cooperative and each member shall be subject to
and shall include as a part of its terms each provision of the Articles and
these Bylaws, whether or not the same be expressly referred to in said
transaction.
SECTION 2.2 CLASSES OF MEMBERS. In accordance with the Articles,
there shall be three classes of members of this Cooperative, which are hereby
designated as the "Cooperative Association" class, "Individual Member" class and
the "Defined Member" class. Membership in a particular class of members shall be
determined as follows:
(a) COOPERATIVE ASSOCIATION MEMBERS. All members which are
cooperative associations shall belong to and be part of the Cooperative
Association class of members and shall become known and be designated as
"Cooperative Association Members;"
(b) INDIVIDUAL MEMBERS. All members who are directly engaged in
production agriculture, including individuals operating as sole proprietors,
farm corporations, farm partnerships or other legal entities, shall belong to
and be part of the Individual Member class of members, and shall become known
and be designated as "Individual Members;" and
(c) DEFINED MEMBERS. All members who are holders of Equity
Participation Units (as described in the Articles) shall belong to and be part
of the Defined Member class of members, and shall become known and be designated
as "Defined Members."
SECTION 2.3 DEFINED MEMBERS AND DEFINED BUSINESS UNITS.
(a) DEFINED BUSINESS UNITS. Each Defined Member holding Equity
Participation Units in a Defined Business Unit (as defined in the Articles)
shall be eligible to receive patronage distributions from the Defined Business
Unit as a separate allocation unit.
(b) DELIVERY RIGHTS AND OBLIGATIONS. The delivery rights and
obligations of each Defined Member shall be as specified in a written agreement
("DBU Agreement") by and between the Defined Member and this Cooperative. A
modification to a DBU Agreement must receive prior written approval from the
Defined Members who (i) hold a majority of the voting power of the Defined
Business Unit that is a party to the subject DBU Agreement, and (ii) who are
present and voting at a meeting of Defined Members holding Equity Participation
Units in such Defined Business Unit. The notice of such meeting must contain the
proposed modification to the DBU Agreement.
(c) DEFINED MEMBER BOARDS. Each Defined Business Unit shall be
represented by a Defined Member Board. The initial members of each Defined
Member Board shall be selected by the Board. Subsequently, the members of the
Defined Business Unit in question shall be entitled to elect, on a one Defined
Member/one vote basis, the members of the Defined Member Board. Each Defined
Member Board shall be made up of at least five (5) but not more than ten (10)
individuals. Each member of a Defined Member Board must be either a Defined
Member in good standing, or a representative of a Defined Member in good
standing and in full compliance with its delivery obligations; provided,
however, that no employee of this Cooperative may serve as a member of any
Defined Member Board. Each Defined Member Board shall be headed by a Chairperson
selected by and from the Board of this Cooperative. Each Defined Member Board
2
shall meet at least quarterly (one of which meetings may be its annual meeting),
and shall be charged with reflecting Defined Member concerns and providing
direct communication to the Board. Individuals serving on a Defined Member Board
shall serve for staggered terms of three (3) years and until their successors
are elected and have qualified. The policies and procedures governing all other
aspects of such Defined Member meetings and Defined Member Boards shall be
established and amended from time to time at the discretion of the Board.
SECTION 2.4 TERMINATION OF MEMBERSHIP. If the Board determines that
a member has become ineligible for membership in this Cooperative, such member
shall have no rights or privileges on account of such membership in the
management of the affairs of this Cooperative, and the membership of such member
may be terminated by the Board. Membership may, at the discretion of the Board,
be terminated whenever the Board by resolution finds that a member has:
(a) intentionally or repeatedly violated any provision of
the Articles, Bylaws or Board policies of this
Cooperative;
(b) failed to patronize this Cooperative during the last two
completed fiscal years;
(c) breached any contract with or duty to this Cooperative;
(d) willfully obstructed any lawful purpose or activity of
this Cooperative;
(e) remained indebted to this Cooperative for ninety (90)
days after such indebtedness becomes payable;
(f) died or legally dissolved; or
(g) failed in the judgment of the Board to comply with the
qualifications and standards adopted by the Board from
time to time;
provided, however, that termination of any member's membership as a result of
any of the circumstances listed in paragraphs (a) through (g) above shall not be
deemed to revoke such member's consent contained in Article IX hereof but rather
such member may only revoke such consent in writing. Upon termination of
membership such member shall thereafter have no voting rights in this
Cooperative. No action taken hereunder shall impair the obligations or
liabilities of a member under any contract with this Cooperative. Redemption of
the equities held by terminated members shall remain at the sole discretion of
the Board.
ARTICLE III
MEETINGS OF MEMBERS
3
SECTION 3.1 ANNUAL AND SPECIAL MEETINGS. The annual meeting of the
members of this Cooperative shall be held at a time and place fixed by the
Board. The Chairman of the Board shall call a special meeting of the members
upon the written petition of at least twenty percent (20%) of the members or
upon a majority vote of the directors present and voting at a Board meeting. The
special members' meeting shall be held at the time and place specified in the
notice of the meeting, and the notice shall also state the purpose of the
special members' meeting. No business shall be considered at the special
members' meeting except as specified in the notice of the meeting. Members'
meetings shall be directed and governed pursuant to rules, procedures and
guidelines set forth from time to time by the Board.
SECTION 3.2 NOTICE OF MEETINGS. Notice of the annual meeting or of a
special meeting of the members shall be published or mailed as prescribed by
law. The notice of a meeting must be published at least two weeks before the
date of the meeting or mailed at least 15 days before the date of the meeting.
The notice shall state the date, time, and place of the meeting, and in the case
of a special meeting, the purposes for which the meeting is called. The
Secretary shall execute a certificate which contains a copy of the notice, shows
the date of mailing or publication (as the case may be), and states the notice
was mailed or published (as the case may be) as prescribed by these Bylaws. The
certificate shall be made a part of the meeting. The failure of any member to
receive notice shall not invalidate any action which may be taken by the members
at a meeting.
SECTION 3.3 VOTING POWER. The voting power of the members of this
Cooperative shall be exercised as follows:
(a) for transactions involving dissolution of this
Cooperative, sale of eighty percent (80%) or more of
this Cooperative's assets or mergers or consolidations
where this Cooperative's members would receive less than
50% of the membership equity of the surviving entity,
the following shall apply:
(i) each Cooperative Association Member shall have one
(1) vote for each producer of agricultural products registered and
accepted as a member of such Cooperative Association Member who
patronized such Member within the preceding fiscal year by
purchasing or marketing goods or services supplied by or marketed by
this Cooperative, including, as applicable, Individual Members and
Defined Members; and
(ii) each Individual Member and Defined Member shall
have one (1) vote; provided, however, that Individual Members and
Defined Members may be grouped with other such members in local
units ("Patrons Associations") as may be established from time to
time pursuant to Section 3.3(b)(ii) below.
(b) for all other matters to be voted on by the membership
of this Cooperative:
(i) each Cooperative Association Member shall have:
4
(A) one (1) vote for each $10,000, or major
fraction thereof, of the average annual business
transacted on a patronage basis with this Cooperative or
with any predecessor cooperative associations during the
three years ending on the last day of this Cooperative's
fiscal year last ended prior to the meeting; and
(B) one (1) vote for each $1,000, or major
fraction thereof, of equity issued by this Cooperative
or by any predecessor cooperative associations as the
initial purchased equity by a member or patron or as a
patronage refund and standing on the books of this
Cooperative in the name of such member; and
(ii) each Individual Member and Defined Member shall
have one (1) vote; provided, however, that Individual Members and
Defined Members may be grouped with other such members in Patrons
Associations as may be established from time to time, and each such
Patrons Association shall have:
(A) one (1) vote for each Individual Member
and Defined Member grouped in such Patrons Association
(minus one vote for any Individual Member or Defined
Member in such Patrons Association who elects to cast a
vote personally under procedures approved by the Board);
plus
(B) one (1) vote for each $10,000, or major
fraction thereof, of the average annual business
transacted with this Cooperative or with any predecessor
cooperative associations (combined sales to and
purchases from) by the Individual Members and Defined
Members grouped in such Patrons Associations, during the
three years ending on the last day of this Cooperative's
fiscal year last ended prior to the meeting; plus
(C) one (1) vote for each $1,000, or major
fraction thereof, of equity issued by this Cooperative
as the initial purchased equity by a member or patron or
as a patronage refund and standing on the books of this
Cooperative in the name of the Individual Members and
Defined Members grouped in such Patrons Associations,
calculated on an aggregate basis.
Provided, however, that no member shall be entitled to vote more
than 5% of the total votes of this Cooperative eligible to be cast.
The most recently completed fiscal year shall be used for
determining each member's number of votes unless otherwise specified by the
Board.
5
For purposes of Section 3.3(b)(i), the dollar value of commodities
delivered by a Defined Member to a Cooperative Association Member for handling
by and on behalf of this Cooperative shall be included in the calculation for
determining the number of permitted votes of the Cooperative Association Member.
For purposes of Section 3.3(b)(ii), the face amount of any Equity Participation
Units issued to and held by a member shall be included in the determination of
the amount of equity in this Cooperative held by such member. In determining the
number of permitted votes of a member, the Board shall give due consideration to
the membership eligibility criteria set forth in these Bylaws and the Articles.
The Board shall have the authority to suspend or adjust voting power to reflect
such criteria, including without limitation the authority to establish
reasonable procedures to address special circumstances. (Such procedures might
include, for example, the following: (a) procedures to equitably adjust the
calculation of the average annual business of members having less than three
full years of business included in the averaging period, and (b) procedures to
equitably measure the business transacted by Cooperative Association Members
that have acquired or merged with other entities that did business with this
Cooperative or with any predecessor cooperative association within the averaging
period.)
(c) Individual Members and Defined Members who are grouped in
Patrons Associations who intend to vote individually hereunder shall be entitled
to do so after complying with procedures established by the Board.
(d) Each Cooperative Association Member or Patrons Association shall
be represented at the members' meetings of this Cooperative by an elected or
appointed delegate or an alternate, which delegate or alternate shall exercise
the voting rights of such Cooperative Association Member or Patrons Association
at such meetings as hereinafter provided.
Each delegate or alternate representing a Cooperative Association
Member shall be selected at the discretion of the Cooperative Association
Member.
Each delegate or alternate representing Individual Members and
Defined Members in a Patrons Association shall be elected on a one member/one
vote basis by the Individual Members and the Defined Members grouped in the
Patrons Association, at an annual meeting of such Patrons Association held
following reasonable notice, and pursuant to such other procedures as the Board
may establish from time to time. In no instance shall managers or other
employees of this Cooperative appoint such delegates or alternates. Such
delegates shall exercise the same powers at such members' meetings as the
delegates of Cooperative Association Members may exercise.
SECTION 3.4 MANNER OF VOTING. At annual and special meetings of
members of this Cooperative, the designated number of permitted votes of members
as provided above shall be cast in the following manner:
6
(a) Each Individual Member and each Defined Member who has provided
notice to vote individually under procedures established by the Board shall be
entitled to cast such member's own vote.
(b) Each Cooperative Association Member and each Patrons Association
representing groups of Individual Members and Defined Members shall cast its
votes through its duly selected delegate or alternate.
(c) Mail voting is permitted where, in the notice of the meeting,
the Board shall have designated that mail voting is permitted for a specific
issue or issues. Any such mail voting shall be conducted pursuant to procedures
adopted by the Board and consistent with applicable law. Nothing in this section
shall, however, prevent the members at an annual or special meeting of this
Cooperative from considering and acting upon issues in addition to those
submitted for mail voting, provided that applicable notice requirements are met.
(d) There shall be no voting by proxy or under power of attorney at
any annual or special meeting of this Cooperative other than through Patrons
Associations as described herein, or in the case of a spouse voting on behalf of
a member.
SECTION 3.5 QUORUM.
(a) A quorum necessary to the transaction of business at any annual
or special meeting of this Cooperative shall be at least 50 members as long as
there are more than 500 members of this Cooperative, or at least ten percent
(10%) of the total number of members if there are 500 or less members of this
Cooperative. A majority of the votes cast in person, by mail vote or by other
approved means, at any meeting of the members, shall decide all questions except
where a greater vote is required by the Articles, by these Bylaws or by law.
(b) Each Cooperative Association Member and Patrons Association
shall certify its delegates and alternates to this Cooperative, in the manner
prescribed by the Board. No individual shall serve as a delegate for more than
one Cooperative Association Member or Patrons Association. A delegate
representing a Patrons Association must be an Individual Member or Defined
Member of the Patrons Association. The Board may establish such additional
eligibility criteria, procedures, standards and structure with respect to the
delegate system of this Cooperative as it from time to time deems advisable. No
employee of this Cooperative shall serve as a delegate or alternate at any
meeting of this Cooperative.
SECTION 3.6 PRESIDING OFFICER. The Chairman of the Board shall
preside at all meetings of the members.
7
ARTICLE IV
BOARD OF DIRECTORS
SECTION 4.1 BOARD OF DIRECTORS. The business and affairs of this
Cooperative shall be governed by the Board. Until the annual meeting of the
members of this Cooperative to be held following the close of the fiscal year
ending in calendar year 2001 (the "2001 annual meeting"), the Board shall
consist of 34 directors, 17 of which shall be individuals serving on the Board
of Directors of Cenex Harvest States Cooperatives and 17 of which shall be
individuals serving on the Board of Directors of Farmland Industries, Inc. at
the effective time of the combination of these two cooperatives. Such Board
shall be designated in the Articles and these Bylaws as the "Transition Board."
Commencing upon the election and qualification of directors at the 2001 annual
meeting of members of this Cooperative, the Board shall consist of twenty-five
(25) directors, eighteen (18) of whom shall be producers as defined herein and
seven (7) of whom shall be local executives as defined herein.
SECTION 4.2 DIRECTOR QUALIFICATIONS. The qualifications for the
office of director shall be as follows:
(a) For producer directors:
(1) At the time of the election, the individual
must be less than the age of 65.
(2) The individual must be a voting member of
this Cooperative or a voting member of a
Cooperative Association Member of this
Cooperative.
(3) The individual must reside in the district
from which he or she is to be elected.
(4) At the time of the election, the
individual's primary occupation must be
farming or ranching.
(5) The individual may not be a full time
employee of this Cooperative or of a
Cooperative Association Member of this
Cooperative.
(6) The qualifications set forth in this Section
4.2(a) shall not apply to any individual
serving on the Transition Board.
(b) For local executive directors:
(1) At the time of the election, the individual
must be less than the age of 65.
(2) The individual must be a full-time executive
employee of a Cooperative Association Member
of this Cooperative.
(3) The Cooperative Association Member employing
the individual must have its primary
headquarters located in the district from
which he or she is to be elected.
8
SECTION 4.3 TRANSITION BOARD, 2001 ELECTIONS.
(a) The terms of each director serving on the Transition Board shall
expire at the 2001 annual meeting. Elections will be held for each of the
twenty-five (25) positions of the new Board at such annual meeting. In advance
of such meeting, the Transition Board shall designate nine (9) of the Board
positions as having three-year terms (to expire at the 2004 annual meeting),
eight of the Board positions as having two-year terms (to expire at the 2003
annual meeting) and eight of the Board positions as having one-year terms (to
expire at the 2002 annual meeting). The determination of the staggered terms
shall be made in an impartial manner using any fair and equitable method as the
Transition Board may determine.
(b) The procedure for electing directors at the 2001 annual meeting
shall be in accordance with Section 4.4 herein.
(c) If a director's position on the Transition Board becomes vacant,
the remaining directors may fill the director's position until the next annual
meeting, at which point a director will be elected by the members pursuant to a
procedure established by the Transition Board.
SECTION 4.4 ELECTION OF DIRECTORS.
(a) At the 2001 annual meeting and at each annual meeting of the
members thereafter, directors shall be elected to fill vacancies created by
expired terms. Beginning at the 2002 annual meeting, the term of office of such
directors shall be three (3) years and until their respective successors are
elected and qualified.
(b) The nomination and election of directors of this Cooperative
shall be by district. The territory served by this Cooperative shall be divided
into districts and each such district shall be represented by at least one (1)
producer director and one (1) local executive director. Each district shall be
represented by one or more producer directors apportioned to the districts on
the basis of eligible votes. In districts with three (3) or more producer
directors, not all of the producer directors may be residents of the same state.
The districts shall be as follows:
DISTRICT 1 includes the States of Washington, Oregon,
California, Nevada, Utah, Idaho, Arizona, New Mexico, Alaska and
Hawaii, the Canadian province of British Columbia and Mexico;
DISTRICT 2 includes the States of Nebraska, Wyoming and
Colorado.
DISTRICT 3 includes the States of North Dakota, South
Dakota and Montana and the Canadian provinces of Alberta,
Saskatchewan and Manitoba.
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DISTRICT 4 includes the States of Minnesota, Wisconsin
and Michigan and the Canadian provinces of Ontario, Quebec,
Newfoundland, New Brunswick, Nova Scotia and ▇▇▇▇▇▇ ▇▇▇▇▇▇ Island.
DISTRICT 5 includes the States of Iowa, Illinois,
Indiana, Ohio, Pennsylvania, Maryland, Delaware, New York, New
Jersey, Connecticut, Massachusetts, Rhode Island, New Hampshire,
Vermont and Maine.
DISTRICT 6 includes the States of Missouri, Arkansas,
Louisiana, Mississippi, Tennessee, Kentucky, Alabama, Georgia,
Florida, South Carolina, North Carolina, Virginia and West Virginia.
DISTRICT 7 includes the States of Kansas, Oklahoma and
Texas.
(c) From time to time, the Board shall review member representation
on the Board. The Board shall have the responsibility and authority to maintain
equitable representation of the members as determined by relative voting power
by reapportioning the number of producer director positions per district (with
each district to have at least one producer director). The Board shall have the
power to finally approve all such reapportionment plans by a majority vote of
those directors present and voting. The membership shall be promptly informed of
any such approved reapportionment plan. Any such reapportionment plan shall be
implemented for each district in which a director position is lost at the first
subsequent annual meeting of this Cooperative which corresponds to the
expiration of the term of office of one or more of such district's producer
directors.
(d) The various districts shall, by caucus, elect directors as
provided herein. The Chairman of the Board may appoint a nominating committee to
facilitate elections in district caucuses for any district where a caucus is to
be held. Candidate nominations for directors may be made from the floor by any
official delegate or eligible voting Individual Member or Defined Member at the
district caucus.
(e) When multiple director positions are to be filled within a
district, each director position will be subject to a separate election. Such
district shall elect each director by a majority of votes cast by members
eligible to vote and voting. If, on the first ballot for a director position, no
candidate receives a majority, there shall be a runoff election between the two
candidates who received the most votes on the first ballot. In the district
caucus, each member entitled to vote shall have the number of votes as
determined under these Bylaws for each election held. The Board may establish at
its discretion quorum requirements and further procedures not inconsistent with
these Bylaws for the nomination and election of directors and the conduct and
timing of district caucuses.
SECTION 4.5 VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Any director
of this Cooperative may resign at any time by submitting a written resignation
to the Chairman of the
10
Board or this Cooperative's Secretary. Vacancies and newly created directorships
may be filled by a majority of the directors then in office, even if less than a
quorum, until the next annual or special meeting of the members, when the
members shall elect a director to serve the unexpired term.
SECTION 4.6 MEETINGS. The Board shall meet regularly at such times
and places as the Board may determine. Special meetings may be called by the
Chairman or by any three directors. All meetings shall be held on such notice as
the Board may prescribe; provided, however, that any business may be transacted
at any meeting without specification of such business in the notice of such
meeting. Directors may participate in any such meeting by means of a conference
telephone conversation or other comparable method of communication by which all
persons participating in the meeting can hear and communicate with each other.
For purposes of taking any action at the meeting, any such directors shall be
deemed present in person at the meeting.
SECTION 4.7 QUORUM AND VOTING. For both the Board and the Executive
Committee of the Board, a quorum shall consist of a majority of the directors
serving on the Board or the Executive Committee as the case may be. A majority
vote of the directors present shall decide all questions except where a greater
vote is required by the Articles, by these Bylaws or by law.
SECTION 4.8 ACTION WITHOUT MEETING. Any action required or permitted
to be taken at a meeting of the Board may be taken without a meeting if all
directors consent thereto in writing and the writing or writings are held with
the minutes or proceedings of the Board.
ARTICLE V
DUTIES OF DIRECTORS
SECTION 5.1 GENERAL POWERS. The business and affairs of this
Cooperative shall be governed by the Board. The Board shall exercise all of the
powers of this Cooperative except as such are by law, the Articles, or these
Bylaws conferred upon or reserved to the members. The Board shall adopt such
policies, rules, regulations, and actions not inconsistent with law, the
Articles or these Bylaws, as it may deem advisable. The day-to-day business
affairs of this Cooperative shall be in the management and control of the Chief
Executive Officer, selected by the Board.
SECTION 5.2 EXECUTIVE COMMITTEE; OTHER COMMITTEES. An executive
committee of six, which shall include the Chairman, Vice Chairman, and four
other members to be elected by the Board from among its own members at its first
meeting after each annual meeting, shall have all the powers and exercise all
the functions of the Board when the Board is not in session, subject to the
Board's general control and direction. The Board may in its discretion also
establish other committees (including, but not limited to, a Capital Committee,
a Finance/Audit Committee, a Governance Committee, and a Corporate
Responsibility Committee). The rules pertaining to such committees shall be
determined by the Board in its sole and absolute discretion.
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SECTION 5.3 BONDS. The Board may require the officers, agents, or
employees charged by this Cooperative with responsibility for the custody of any
of its funds or property to give adequate bonds. Such bonds, unless cash
security is given, shall be furnished by a responsible bonding company and
approved by the Board and the cost thereof shall be paid by this Cooperative.
SECTION 5.4 AUDITS. As often as the Board may consider necessary,
but at least once a year, the Board shall obtain the services of a competent and
independent auditor, who shall make a careful audit of the books and accounts of
this Cooperative and render a report in writing thereon. The annual auditors'
report shall be available at the next annual meeting of the members.
SECTION 5.5 COMPENSATION. The Board may fix the compensation of
directors for serving as directors of this Cooperative.
SECTION 5.6 RESIGNATIONS AND REMOVALS. To the extent permitted by
applicable law, any director of this Cooperative may be removed for cause by
vote of not less than two-thirds (2/3) of the votes cast at any annual meeting
or at any special meeting of the members called for that purpose. In addition,
to the extent permitted by applicable law, any director of this Cooperative may
be removed for cause by vote of not less than three-fourths (3/4) of the full
Board at any regular Board meeting or special Board meeting called for that
purpose. Any director subject to removal shall be informed in writing of the
charges proffered against him or her at least fifteen (15) days before the
membership meeting or Board meeting, as the case may be, and at such meeting
shall have an opportunity to be heard in person or by counsel. Any such meeting
shall be conducted under procedures established at the sole discretion of the
Chairman of the Board. If any director is removed, and there are more than 180
days until the next annual meeting of members, the Board shall arrange for, and
prescribe the procedures of a special election through which the members in the
affected district will fill the vacancy. Officers or agents of the Board may be
removed from office or employment at any time by action of the Board.
ARTICLE VI
OFFICERS
SECTION 6.1 ELECTION OF OFFICERS. Promptly following each annual
meeting of the members, the Board shall elect from its membership a Chairman and
a Vice Chairman. The Board shall also elect a Chief Executive Officer, a
President (who may also be the Chief Executive Officer), one or more
Vice-Presidents (with such designations as recommended by the Chief Executive
Officer), a Secretary and a Treasurer, none of whom need be a director or member
of this Cooperative. The Board may also elect, from time to time, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
as it shall deem necessary, none of whom need be a director or member. Other
than the office of Chairman and Vice
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Chairman, one person may hold one or more of the offices provided for above, if
eligible to hold each such office. If any vacancy shall occur among the offices
set forth above, it shall be filled by the Board at its next regular meeting
following the vacancy. Officers shall be elected annually unless otherwise
provided by the Board. In addition to the authority granted to the officers in
these Bylaws, the officers shall have such powers and authority, including the
power to delegate any responsibility, as the Board may grant such officers from
time to time.
SECTION 6.2 CHAIRMAN. The Chairman shall preside at all meetings of
the members and the Board. Except where the signature of the Chief Executive
Officer is required, the Chairman shall possess the same power as the Chief
Executive Officer to sign all certificates, contracts and other instruments of
this Cooperative which may be authorized by the Board.
SECTION 6.3 VICE CHAIRMAN. In the absence or disability of the
Chairman, the Vice Chairman shall perform the duties and exercise the powers of
the Chairman. The Vice Chairman shall have such other duties as may be assigned
from time to time by the Board.
SECTION 6.4 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer
shall have general supervision of the day-to-day business affairs of this
Cooperative, shall sign or countersign all certificates, contracts or other
instruments of this Cooperative as authorized by the Board, shall make reports
to the Board and members, shall recommend the officers of this Cooperative to
the Board for election (except the offices of Chairman and Vice Chairman), and
shall perform such other duties as are incident to the Chief Executive Officer's
office or are properly required by the Board. In the event the office of
President is not separately filled, the Chief Executive Officer shall also serve
as the President and may exercise the authority of the office of Chief Executive
Officer in either or both capacities.
SECTION 6.5 PRESIDENT. In the event the office of President is
separately filled, the President shall report to the Chief Executive Officer,
and shall perform such duties as the Board may prescribe upon the recommendation
of the Chief Executive Officer. In the absence or disability of the Chief
Executive Officer, the President shall perform the duties and exercise the
powers of the Chief Executive Officer.
SECTION 6.6 VICE PRESIDENTS. In the absence or disability of the
Chief Executive Officer and the President, the Vice Presidents, in the order
designated by the Board, shall perform the duties and exercise the powers of the
President. Each Vice President shall have such other duties as are assigned to
such Vice President from time to time by the Chief Executive Officer or the
President.
SECTION 6.7 SECRETARY. The Secretary shall keep complete minutes of
each meeting of the members and of the Board, and shall, to the extent required
by law, sign with the Chairman or the Chief Executive Officer all notes,
conveyances and encumbrances of real estate, capital securities and instruments
requiring the corporate seal; provided, however, that the Secretary, in writing,
may authorize any other officer or employee to execute or sign the Secretary's
name to any or all such instruments. The Secretary shall keep a record of all
business of this Cooperative, prepare
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and submit to the annual meeting of the members a report of the previous fiscal
year's business, and give all notice as required by law. The Secretary shall
perform such other duties as may be required by the Board. The Board may
delegate, or authorize the Secretary to delegate, to any other officer or
employee, under the supervision of the Secretary, all or any of the duties
enumerated in this section.
SECTION 6.8 TREASURER. The Treasurer shall supervise the safekeeping
of all funds and property of this Cooperative, supervise the books and records
of all financial transactions of this Cooperative, and perform such other duties
as may be required by the Board. The Board may delegate, or authorize the
Treasurer to delegate, to any other officer or employee, under the supervision
of the Treasurer, all or any of the duties enumerated in this section.
ARTICLE VII
INDEMNIFICATION AND INSURANCE
Section 7.1 INDEMNIFICATION. This Cooperative shall indemnify each
person who is or was a director, officer, manager, employee, or agent of this
Cooperative, and any person serving at the request of this Cooperative as a
director, officer, manager, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against expenses,
including attorneys' fees, judgments, fines, and amounts paid in settlement
actually and reasonably incurred to the fullest extent provided or permitted by
any statute of the state of incorporation of this Cooperative which applies to
any type of corporation.
Section 7.2 INSURANCE. This Cooperative shall have power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, manager, employee, or agent of this Cooperative, or is or was serving
at the request of this Cooperative as a director, officer, manager, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise against any liability asserted against that person and incurred by
that person in any such capacity.
ARTICLE VIII
METHOD OF OPERATION - PATRONAGE REFUNDS
SECTION 8.1 COOPERATIVE OPERATION. This Cooperative shall be
operated on a cooperative basis in carrying out its business within the scope of
the powers and purposes defined in the Articles. The net earnings of this
Cooperative shall be computed under generally accepted accounting principles,
unless otherwise determined by the Board, provided, however, that any change
shall be on a prospective basis only. The net earnings of this Cooperative in
excess of amounts credited by the Board to Capital Reserves and amounts of
dividends, if any, paid with respect to equity capital shall be accounted for
and distributed annually on the basis of allocation units as provided in this
Article VIII.
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Each transaction between this Cooperative and each member shall be
subject to and shall include as a part of its terms each provision of the
Articles and Bylaws, whether or not the Articles or Bylaws are expressly
referred to in such transaction. Each member for whom this Cooperative markets
or procures goods or services shall be entitled to the net income arising out of
such transaction as provided in this Article VIII, unless such member and this
Cooperative have expressly agreed to conduct such business on a nonpatronage
basis. No nonmember for whom this Cooperative markets or procures goods or
services shall be entitled to the net income arising out of said transactions as
provided in this Article VIII unless this Cooperative agrees to conduct said
business on a patronage basis.
SECTION 8.2 PATRONS; PATRONAGE BUSINESS; NONPATRONAGE BUSINESS. As
used in this Article VIII, the following definitions shall apply:
(a) The term "patron" shall refer to any member or nonmember with
respect to business conducted with this Cooperative on a patronage basis in
accordance with Section 8.1.
(b) The term "patronage business" shall refer to business done by
this Cooperative with or for patrons.
(c) The term "nonpatronage business" shall refer to business done by
this Cooperative that does not constitute "patronage business."
SECTION 8.3 ESTABLISHMENT OF ALLOCATION UNITS. Allocation units
shall be established by the Board on a reasonable and equitable basis and they
may be functional, divisional, departmental, geographic, or otherwise; provided,
that each Defined Business Unit shall be accounted for as a separate allocation
unit.
SECTION 8.4 CURRENT YEAR'S NET EARNINGS (LOSSES) AND DETERMINATION
OF THE PATRONAGE INCOME OR LOSS OF AN ALLOCATION UNIT. This Cooperative's
overall net earnings or loss shall be determined using generally accepted
accounting principles, unless otherwise determined by the Board; provided,
however, that any change shall be on a prospective basis only, and shall be
divided into (i) a patronage sourced portion, determined on the basis of the
quantity or value of business done by this Cooperative with or for its patrons
who are eligible to receive patronage refunds and (ii) a non-patronage sourced
portion which shall include amounts determined on the basis of the quantity or
value of business done with or for persons who are not eligible to receive
patronage refunds from this Cooperative, plus such net amounts of income,
expenses, or loss which are unrelated to the operations carried on by this
Cooperative for its patrons on a cooperative basis. The net income or net loss
of an allocation unit from patronage business for each fiscal year shall be the
sum of (1) the gross revenues directly attributable to goods or services
marketed or procured for patrons of such allocation unit, plus (2) an equitably
apportioned share of other items of income or gain attributable to this
Cooperative's patronage business, less (3) all expenses and costs of goods or
services directly attributable to goods or
15
services marketed or procured for patrons of such allocation unit, less (4) an
equitably apportioned share of all other expenses or losses attributable to this
Cooperative's patronage business, dividends on equity capital and distributable
net income from patronage business that is credited to the Capital Reserve
pursuant to Section 8.8(c). Expenses and cost of goods or services shall include
without limitation any unit retentions provided in Section 8.9. Such net income
or net loss shall be subject to adjustment as provided in Section 8.6 relating
to losses.
SECTION 8.5 ALLOCATION OF PATRONAGE INCOME WITHIN ALLOCATION UNITS.
The net income of an allocation unit from patronage business for each fiscal
year, less any amounts thereof that are otherwise allocated in dissolution
pursuant to Article X, shall be allocated among the patrons of such allocation
unit in the ratio that the quantity or value of the business done with or for
each such patron bears to the quantity or value of the business done with or for
all patrons of such allocation unit. The Board shall reasonably and equitably
determine whether allocations within any allocation unit shall be made on the
basis of quantity or value.
SECTION 8.6 TREATMENT OF PATRONAGE LOSSES OF AN ALLOCATION UNIT.
(a) METHODS FOR HANDLING PATRONAGE LOSSES. The Board shall have
complete discretion to determine the handling and ultimate disposition of this
Cooperative's patronage-sourced net losses (including allocation unit losses)
and the form, priority and manner in which such losses or portions thereof shall
be taken into account, retained, and ultimately disposed of or recovered. The
Board may retain such losses and subsequently (i) offset all or part of such net
loss against the net income of one or more other allocation units for such
fiscal year to the extent allowed by law; (ii) dispose of them by offset against
the net earnings of this Cooperative (or of one or more of the allocation units)
in subsequent years, (iii) apply such losses to prior years' patronage
allocations at any time in order to dispose of them by means of offset and
cancellation against patron's equity accounts, or (iv) select and use any other
method of disposition of such losses as the Board, in its sole discretion, shall
from time to time determine, provided however, that the net income or net loss
of a Defined Business Unit shall not be netted against the net income or net
loss of any other allocation unit, that patron equities distributed based on the
earnings of a Defined Business Unit shall not be canceled based on the net loss
of other allocation units and that the net loss of a Defined Business Unit shall
not be applied in cancellation of patron equities distributed based on earnings
of other allocation units.
(b) NETTING. If one or more of this Cooperative's allocation units
experience losses during any fiscal year, the losses of such allocation unit(s)
may be allocated to and netted with earnings of one or more of the other
allocation units of this Cooperative or be otherwise handled and disposed of in
accordance with Section 8.6. This Cooperative's patrons shall be notified in any
fiscal year for which such netting occurred.
SECTION 8.7 DISTRIBUTION OF NET INCOME.
(a) PATRONAGE REFUNDS. The net income allocated to a patron pursuant
to Section 8.5 shall be distributed annually or more often to such patron as a
patronage refund; provided,
16
however, that no distribution need be made where the amount otherwise to be
distributed to a patron is less than a DE MINIMUS amount that may be established
from time to time by the Board.
(b) PATRONAGE EQUITIES. Patronage refunds may be distributed in
cash, qualified and non-qualified allocated patronage equities, securities of
this Cooperative, other securities, or any combination thereof designated by the
Board and other equity may be distributed to members or patrons in the form of
allocated non-patronage equity. All such equity is referred to collectively
herein as "Patronage Equities", including, without limitation, the following:
(i) ALLOCATED PATRONAGE EQUITY, which may be in one or
more than one class or series, in such designations or
denominations, and with such relative rights, preferences,
privileges and limitations as may be fixed by the Board, with no
maturity date, and bearing no interest, dividend or other annual
payment.
(ii) ALLOCATED NONPATRONAGE EQUITY, which may be in one
or more than one class or series, in such designations or
denominations, and with such relative rights, preferences,
privileges and limitations as may be fixed by the Board, with no
maturity date, and bearing no interest, dividend or other annual
payment. Allocated Nonpatronage Equity may be distributed to patrons
as part of the allocation and distribution of nonpatronage income.
Such certificates shall be callable for payment in cash or other
assets at such times as may be determined by the Board.
(c) WRITTEN NOTICES OF ALLOCATION. The non-cash portion of a
patronage refund distribution that is attributable to patronage business shall
constitute a written notice of allocation as defined in 26 U.S.C. Section 1388
which shall be designated by the Board as a qualified written notice of
allocation, as a non-qualified written notice of allocation, or any combination
thereof, as provided in such section.
(d) NO VOTING RIGHTS. Patronage Equities shall not entitle the
holders thereof to any voting or other rights to participate in the affairs of
this Cooperative (which rights are reserved solely for the members of this
Cooperative), provided that certain Patronage Equities held by members of this
Cooperative may be a factor in determining the voting power of such members as
more particularly provided in these Bylaws and by the Board.
(e) TRANSFER RESTRICTION. Patronage Equities may only be transferred
with the consent and approval of the Board, and by such instrument of transfer
as may be required or approved by this Cooperative.
(f) BOARD AUTHORITY TO ALLOW CONVERSION. The Board also shall have
the authority to allow conversion of Patronage Equities into Equity
Participation Units, or such other equity interests and/or debt instruments of
this Cooperative on such terms as shall be established by the Board.
17
(g) REDEMPTION DISCRETIONARY. No person shall have any right
whatsoever to require the retirement or redemption of any Patronage Equities, or
of any allocated or unallocated Capital Reserve. Such redemption or retirement
is solely within the discretion and on such terms as determined from time to
time by the Board.
SECTION 8.8 CAPITAL RESERVE. The Board shall cause to be created a
Capital Reserve and shall annually add to the Capital Reserve the sum of the
following amounts:
(a) The annual net income of this Cooperative attributable to
nonpatronage business;
(b) Annual net income from patrons who are unidentified or to whom
the amount otherwise to be distributed is less than the DE MINIMUS amount
provided in Section 8.7(a); and
(c) As determined by the Board on a prospective basis only, an
amount not to exceed 10% of the distributable net income from patronage
business. The discretion to credit patronage income to a Capital Reserve shall
be reduced or eliminated with respect to the net income of any period following
the adoption of a Board resolution that irrevocably provides for such reduction
or elimination with respect to such period.
SECTION 8.9 PER UNIT RETENTIONS. The Board may require from time to
time, capital contributions in addition to the capital contributed from retained
patronage and Equity Participation Units. These capital contributions shall be
made directly through a retain on a per unit basis for the products received by
this Cooperative from its members, and the same may be determined on either a
qualified or a nonqualified basis as defined in Subchapter T of the United
States Internal Revenue Code.
SECTION 8.10 BASE CAPITAL PLAN. For the purposes of acquiring and
maintaining adequate capital to finance the business of this Cooperative, the
Board may establish a Base Capital Plan. The Plan may provide a mechanism for
determining this Cooperative's total capital requirements and each member's or
patron's share thereof (the base capital requirement). As part of the Plan, the
Board may, in its discretion, provide for redemption of capital held by members
or patrons in excess of their base capital requirements and may provide a
mechanism under which the cash portion of the patronage refund payable to
members or patrons will depend upon the degree to which such members or patrons
meet their base capital requirements. Such Plan may be amended or modified from
time to time or suspended by the Board as it deems fit.
ARTICLE IX
CONSENT
SECTION 9.1 CONSENT. Each individual or entity that hereafter
applies for and is accepted to membership in this Cooperative and each member as
of the effective date of this Bylaw who continues as a member after such date
shall, by such act alone, consent that the amount of any
18
distributions with respect to its patronage which are made in qualified written
notices of allocation (as defined in 26 U.S.C. ss. 1388), and which are received
by the member from this Cooperative, will be taken into account by the member at
their stated dollar amounts in the manner provided in 26 U.S.C. ss.1385(a) in
the taxable year in which such qualified written notices of allocation are
received by the member.
SECTION 9.2 CONSENT NOTIFICATION TO MEMBERS AND PROSPECTIVE MEMBERS.
Written notification of the adoption of this Bylaw, a statement of its
significance and a copy of the provision shall be given separately to each
member and prospective member before becoming a member of this Cooperative.
SECTION 9.3 CONSENT OF NONMEMBER PATRONS. If this Cooperative
obligates itself to do business with a nonmember on a patronage basis, such
nonmember must either: (a) agree in writing, prior to any transaction to be
conducted on a patronage basis, that the amount of any distributions with
respect to patronage which are made in written notices of allocation (as defined
in 26 U.S.C. ss. 1388), and which are received by the nonmember patron from this
Cooperative, will be taken into account by the nonmember patron at their stated
dollar amounts in the manner provided in 26 U.S.C. ss.1385(a) in the taxable
year in which such written notices of allocation are received by the nonmember
patron and further, that any revocation of such agreement will terminate this
Cooperative's obligation to distribute patronage with respect to transactions
with such nonmember that occur after the close of this Cooperative's fiscal year
in which the revocation is received; or (b) consent to take the stated dollar
amount of any written notice of allocation into account in the manner provided
in 26 U.S.C. ss. 1385 by endorsing and cashing a qualified check as defined in
and within the time provided in 26 U.S.C. ss.1388(c)(2)(C); provided that
failure to so consent shall cause the written notice of allocation that
accompanies said check to be canceled with no further action on the part of this
Cooperative.
ARTICLE X
MERGER OR CONSOLIDATION, AND DISSOLUTION
SECTION 10.1 MERGER OR CONSOLIDATION. If the terms of a merger or
consolidation of which this Cooperative is a party do not provide the members
and nonmember patrons of this Cooperative with an economic interest in the
surviving entity that is substantially similar to the economic interest
possessed by such members and nonmember patrons in this Cooperative immediately
before such merger or consolidation, the value of the consideration received
shall be divided among them in the same manner as a comparable amount of net
liquidation proceeds would be distributed pursuant to Section 10.2. This shall
not be construed to prevent issuance of differing forms of consideration to
different groups of members and nonmember patrons to the extent allowed by law.
SECTION 10.2 LIQUIDATION, DISSOLUTION AND WINDING-UP. Subject to the
Articles, in the event of any liquidation, dissolution or winding up of the
affairs of this Cooperative, whether
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voluntary or involuntary, equity capital shall be distributed to the holders
thereof as follows: first to payment of the liquidation preference on any
preferred stock of this Cooperative, second to payment of the face amount (par
value) of all Equity Participation Units; third to payment of the face amount
(par value) of all Allocated Patronage Equity and other outstanding equities
(other than Allocated Nonpatronage Equity); and fourth to payment of the face
amount (par value) of Allocated Nonpatronage Equity; provided, however, that,
following payment in full of the liquidation preference on any preferred stock
of this Cooperative, assets held at such time by any Defined Business Unit shall
first be used to redeem the Equity Participation Units of the Defined Business
Unit on a pro rata basis. Any assets remaining after the foregoing payments have
been made shall be allocated among the allocation units in such manner as the
Board, having taken into consideration the origin of such amounts, shall
determine to be reasonable and equitable. Amounts so allocated shall be paid to
current and former patrons of each such allocation unit in proportion to their
patronage of such unit over such period as may be determined to be equitable and
practicable by the Board. Such obligation to distribute shall be construed as a
preexisting duty to distribute any patronage sourced net gain realized in the
winding up process to the maximum extent allowable by law.
ARTICLE XI
GENERAL PROVISION
SECTION 11.1 SEAL. The Board may, by resolution, adopt, alter or
abandon the use of a corporate seal.
SECTION 11.2 AMENDMENTS. Except as otherwise provided herein, these
Bylaws may be amended or altered, in whole or in part, as provided by law, at
any regular or special meeting of the members, when such action has been duly
announced in the notice of such meeting, provided that a majority of the votes
cast by the members entitled to vote and voting, including mail ballots, if
applicable, shall approve such amendment or alteration.
# # #
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EXHIBIT B-1
STRUCTURE B/STEP ONE
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Plan") is dated as of ________
__, 2000, and is by and between CENEX HARVEST STATES COOPERATIVES ("CHSC") and
UCB ACQUISITION CO. ("UCB Acquisition"), each of which may be referred to herein
as a "Constituent Cooperative," and both of which may be collectively referred
to herein as the "Constituent Cooperatives".
RECITALS
WHEREAS, CHSC is a cooperative association organized under Chapter 308A
of the Minnesota Statutes (as amended, the "Minnesota Act"), and UCB Acquisition
is a cooperative association organized under Chapter 29 of Title 17 of the Ohio
Revised Code (as amended, the "Ohio Act"); and
WHEREAS, CHSC is the sole member of UCB Acquisition; and
WHEREAS, the respective Boards of Directors of CHSC and UCB Acquisition
and the respective members of CHSC and UCB Acquisition have approved and adopted
this Plan and the transactions contemplated hereby in the manner required by
Section 308A.801 of the Minnesota Act and Sections 1729.35 and 1729.36 of the
Ohio Act, and in the manner required by their respective Articles of
Incorporation and Bylaws;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements of the parties contained herein, the parties hereto
agree as follows:
AGREEMENT
SECTION 1. THE MERGER. As of the Effective Time (as defined in Section
8), CHSC and UCB Acquisition shall combine through merger (the "Merger"), in
accordance with the applicable provisions of the Minnesota Act and the Ohio Act.
UCB Acquisition, whose Articles of Incorporation and Bylaws each shall be
amended and restated in their entirety as further provided herein, and whose
name shall change to United Country Brands, Inc. ("UCB"), shall be the surviving
cooperative association.
UCB shall continue to exist by virtue of, and shall continue to be
governed by, the Ohio Act. The separate existence of CHSC shall cease as of the
Effective Time.
SECTION 2. ARTICLES OF MERGER AND CERTIFICATE OF MERGER.
(a) THE ARTICLES OF MERGER. On or before the Effective
Time, CHSC and UCB Acquisition each shall execute
articles of merger (the "Articles of Merger") setting
forth the information required by and otherwise in
compliance with Section 308A.801 of the Minnesota
Act. The Articles of Merger shall be filed with the
Secretary of State of the State of Minnesota or as
otherwise required by the Minnesota Act, and shall
provide that the Merger shall become effective at the
Effective Time.
(b) THE CERTIFICATE OF MERGER. On or before the Effective
Time, CHSC and UCB Acquisition each shall execute a
certificate of merger (the "Certificate of Merger")
setting forth the information required by and
otherwise in compliance with Section 1729.38 of the
Ohio Act. The Certificate of Merger shall be filed
with the Secretary of State of the State of Ohio or
as otherwise required by the Ohio Act, and shall
provide that the Merger shall become effective at the
Effective Time.
SECTION 3. EFFECT OF THE MERGER. From and after the Effective Time,
without any further action by the Constituent Cooperatives or any of their
respective members or equity holders:
(a) UCB, as the surviving cooperative association in the
Merger, shall have all of the rights, privileges,
immunities, and powers, and shall be subject to all
the duties and liabilities, of a cooperative
association organized under the Ohio Act;
(b) UCB, as the surviving cooperative association in the
Merger, shall possess all of the rights, privileges,
immunities, and franchises, of a public as well as a
private nature, of each Constituent Cooperative;
(c) all property, including real, personal, and mixed,
and all debts due on whatever account, including all
choses in action, and each and every other interest
of or belonging to or due to each Constituent
Cooperative, shall be deemed to be and hereby is
vested in UCB, without further act or deed;
(d) the title to any property, or any interest therein,
vested in either Constituent Cooperative, shall not
revert or be in any way impaired by reason of the
Merger;
(e) UCB shall be responsible and liable for all of the
liabilities and obligations of each Constituent
Cooperative, and any claim existing or action or
proceeding pending by or against one of the
Constituent Cooperatives may be prosecuted as if the
Merger had not taken place, and UCB may be
substituted in its place;
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(f) without the creditor's consent, neither the rights of
any creditor nor any liens upon the property of
either of the Constituent Cooperatives shall be
impaired by the Merger;
(g) the Merger shall not be considered an assignment; and
(h) the Merger shall have any other effect set forth in
the Ohio Act, and in the Transaction Agreement dated
September, 1999, by and between CHSC, Farmland
Industries, Inc. ("Farmland"), and UCB Acquisition
(the "Transaction Agreement"), all with the effect
and to the extent provided in the applicable
provisions of the Minnesota Act and the Ohio Act.
SECTION 4. ARTICLES OF INCORPORATION AND BYLAWS.
(a) THE SURVIVING ENTITY ARTICLES. From and after the
Effective Time, pursuant to the Certificate of Merger
and the Articles of Merger, and without any further
action by the Constituent Cooperatives or any of
their respective members or equity holders, the
Articles of Incorporation of UCB Acquisition, as the
surviving cooperative association in the Merger,
shall be amended and restated in their entirety to
read as set forth in SCHEDULE I attached to this Plan
and made a part of it (the "Surviving Entity
Articles"). A copy of the Surviving Entity Articles
was provided to the respective members of each
Constituent Cooperative in connection with their
consideration of the Merger.
(b) THE SURVIVING ENTITY BYLAWS. From and after the
Effective Time, without any further action by the
Constituent Cooperatives or any of their respective
members or equity holders, the Bylaws of UCB
Acquisition, as the surviving cooperative
association in the Merger, shall be amended and
restated in their entirety to read as set forth in
EXHIBIT B-2, which is attached to the Transaction
Agreement and made a part of both the Transaction
Agreement and this Plan (the "Surviving Entity
Bylaws"). A copy of the Surviving Entity Bylaws was
provided to the respective members of each
Constituent Cooperative in connection with their
consideration of the Merger.
SECTION 5. BOARD OF DIRECTORS. From and after the Effective Time,
without any further action by the Constituent Cooperatives or any of their
respective members or equity holders:
(a) each person serving as a director of CHSC immediately
prior to the Effective Time shall become a director
of UCB, as the surviving cooperative association in
the Merger, to serve in accordance with the Surviving
Entity Bylaws; and
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(b) each person serving as a director of UCB Acquisition
immediately prior to the Effective Time shall be
removed, and shall no longer serve as a director of
UCB after the Effective Time.
SECTION 6. EXCHANGE, REDESIGNATION, CONVERSION, AND CONTINUATION OF
CAPITAL STOCK, NON-STOCK EQUITY INTERESTS, PATRONS' EQUITIES, AND MEMBERSHIPS.
As of the Effective Time, the manner and basis of exchanging and continuing the
shares of capital stock, non-stock equity interests, patronage equity interests
(including all entitlements to patronage refunds), any other allocated equity
interests, and unallocated and capital reserves of CHSC and of UCB (all such
interests referred to herein as "CHSC Equity Interests" or "UCB Equity
Interests," respectively), and membership interests in CHSC and UCB, shall be as
set forth in this Section 6:
(a) CONTINUATION OF CHSC MEMBERSHIPS. As of the Effective
Time, without any further action by the Constituent
Cooperatives or any of their respective members or
equity holders, each member of CHSC shall become and
be a member of UCB, to the extent such member is
eligible for membership under the Surviving Entity
Articles and the Surviving Entity Bylaws, in such
class and with such incidents of membership as are
set forth in the Surviving Entity Articles and the
Surviving Entity Bylaws.
However, notwithstanding the foregoing provisions,
any membership interest which Farmland has in CHSC
shall be terminated as of the Effective Time, without
any further action by the Constituent Cooperatives or
any of their respective members or equity holders.
(b) TERMINATION OF THE CHSC MEMBERSHIP AND EQUITY
INTERESTS IN UCB ACQUISITION. As of the Effective
Time, without any further action by the Constituent
Cooperatives or any of their respective members or
equity holders, the membership of CHSC in UCB
Acquisition shall be terminated, and all of CHSC's
equity interests in UCB Acquisition shall be
terminated, canceled, and extinguished.
(c) EXCHANGE AND CONTINUATION OF CHSC EQUITY INTERESTS.
As of the Effective Time, without any further action
by the Constituent Cooperatives or any of their
respective members or equity holders, all Equity
Interests standing on the books of CHSC immediately
prior to the Effective Time shall be converted into
Equity Interests in UCB at their stated dollar amount
on a dollar-for-dollar basis, or redeemed and
canceled, as follows:
(i) Equity Participation Units. Each Equity
Participation Unit of CHSC issued and
outstanding or otherwise standing on the
books of CHSC immediately prior to the
Effective Time, including without limitation
all Wheat Milling EPUs and all Oilseed
Processing & Refining EPUs,
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shall be redeemed and canceled in a manner
consistent with the terms and conditions of
the original issuance.
(ii) Patronage Equity Interests. All patronage
certificates and any other allocated or to
be allocated patronage equity interests
(including all entitlements to patronage
refunds) standing on the books of CHSC
immediately prior to the Effective Time,
including without limitation all Capital
Equity Certificates, Certificates of
Indebtedness, and Preferred Capital
Certificates, shall be exchanged for like
and equal patronage certificates, allocated
or to be allocated patronage equity
interests, entitlements to patronage
refunds, allocated patronage equity, or
other like and equal patronage equity
interests on the books of UCB, at the same
stated dollar amount and on a
dollar-for-dollar basis, and in such
denominations or other designations or
series so as to preserve the year of issue
(as UCB deems necessary), along with all of
the other terms and conditions of the
original issuance.
(iii) Nonpatronage Equity Interests. All
nonpatronage certificates and any other
allocated or to be allocated nonpatronage
equity interests (including all entitlements
to nonpatronage refunds) standing on the
books of CHSC immediately prior to the
Effective Time shall be exchanged for like
and equal nonpatronage certificates,
allocated or to be allocated nonpatronage
equity interests, entitlements to
nonpatronage refunds, allocated nonpatronage
equity, or other like and equal nonpatronage
equity interests on the books of UCB, at the
same stated dollar amount and on a
dollar-for-dollar basis, and in such
denominations or other designations or
series so as to preserve the year of issue
(as UCB deems necessary), along with all of
the other terms and conditions of the
original issuance.
(iv) Patronage Payable and Capital Reserve. An
amount equal to the unallocated capital
reserves of CHSC, minus an amount equal to
the deferred patronage equity of CHSC (as
computed from the books and records of CHSC
as of the Effective Time, in accordance with
generally accepted accounting principles,
consistently applied), and minus $100
million, shall be allocated and distributed
to the CHSC members (in such manner and to
such members as the CHSC Board of Directors
shall specify prior to the Effective Time)
in the form of allocated nonpatronage equity
of UCB.
(v) Net Effect. The net effect of the conversion
of CHSC Equity Interests for like and equal
Equity Interests in UCB shall be that the
holders of CHSC Equity Interests standing on
the books of CHSC immediately prior to the
Effective Time shall receive from UCB and
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will have like and equal Equity Interests in
UCB immediately following the Effective Time
in terms of stated dollar amount on a
dollar-for-dollar basis, year of issue (as
UCB deems necessary), and other rights and
preferences, and that the patronage payable,
capital reserve, and other allocated or
unallocated Equity Interests of CHSC
standing on its books immediately prior to
the Effective Time shall be exchanged for
the same identical and equal Equity Interest
in UCB immediately following the Effective
Time, in terms of the stated dollar amount
on a dollar-for- dollar basis, year of issue
(if applicable and as UCB deems necessary),
and other rights and preferences.
Notwithstanding the foregoing provisions,
any CHSC Equity Interests that are held by
Farmland shall be canceled and extinguished
as of the Effective Time, without any
further action by the Constituent
Cooperatives or any of their respective
members or equity holders.
(d) SURVIVING ENTITY ARTICLES AND SURVIVING ENTITY BYLAWS
TO GOVERN. Membership in UCB and all Equity Interests
in UCB issued or credited in exchange for CHSC Equity
Interests, as described above, shall in all instances
be governed by the provisions of the Surviving Entity
Articles and the Surviving Entity Bylaws.
(e) FURTHER ASSURANCES OF HOLDERS OF EQUITY INTERESTS.
Each holder of CHSC Equity Interests shall take such
action or cause to be taken such action as UCB may
reasonably deem necessary or appropriate to effect
the exchange and continuation of the CHSC Equity
Interests described in this Plan, including without
limitation the indorsement and delivery of any stock
certificates or other evidences of equity being
exchanged or continued under this Plan.
(f) NO AFFECTED STOCKHOLDERS. CHSC and UCB Acquisition
agree that the Merger does not involve any "Affected
Stockholders," as defined in Section 1729.35 of the
Ohio Act.
SECTION 7. FURTHER ASSURANCES. From time to time and after the
Effective Time, as and when requested by UCB, or its successors or assigns, CHSC
shall execute and deliver or cause to be executed and delivered all such deeds
and other instruments, and shall take or cause to be taken all such further
action or actions, as UCB, or its successors or assigns, may deem necessary or
desirable in order to vest in and confirm to UCB, or its successors or assigns,
title to and possession of all of the properties, rights, privileges, powers,
and franchises referred to in Section 3 of this Plan, and otherwise to carry out
the intent and purposes of this Plan.
If UCB shall at any time deem that any further assignments or assurances or any
other acts are necessary or desirable to vest, perfect, or confirm of record or
otherwise the title to any property or
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to enforce any claims of CHSC vested in UCB pursuant to this Plan, the officers
of UCB, or its successors or assigns, are hereby specifically authorized as
attorneys-in-fact of CHSC (which appointment is irrevocable and coupled with an
interest), to execute and deliver any and all such deeds, assignments, and
assurances and to do all such other acts in the name of and on behalf of CHSC,
or otherwise, as such officer shall deem necessary or appropriate to accomplish
such purpose.
SECTION 8. EFFECTIVE TIME. The Merger shall become effective at 12:01
a.m. Central Time on March 1, 2000 (the "Effective Time").
SECTION 9. GOVERNING LAW. This Plan shall be governed by and construed
in accordance with the laws of the States of Minnesota and Ohio.
SECTION 10. ABANDONMENT. In accordance with the Ohio Act and the
Minnesota Act, the Merger may be abandoned at any time before the Effective
Time, in the manner described in the Transaction Agreement.
SECTION 11. AMENDMENT. Subject to any requirement or limitation imposed
by law, this Plan may be amended in the manner described in the Transaction
Agreement.
IN WITNESS WHEREOF, this Plan has been agreed to and executed by the
duly authorized representatives of CHSC and UCB Acquisition, as of the date
first set forth above.
CENEX HARVEST STATES UCB ACQUISITION CO.
COOPERATIVES
By By
--------------------------------- --------------------------------------
Its Its
-------------------------------- -------------------------------------
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SCHEDULE I
TO
EXHIBIT B-1
Please refer to Exhibit A-1, Schedule I
STRUCTURE B/STEP TWO
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Plan") is dated as of ________
__, 2000, and is by and between FARMLAND INDUSTRIES, INC. ("Farmland") and UCB
ACQUISITION CO. ("UCB Aquisition"), each of which may be referred to herein as a
"Constituent Cooperative," and both of which may be collectively referred to
herein as the "Constituent Cooperatives".
RECITALS
WHEREAS, Farmland is a cooperative corporation organized under Article
16 of Chapter 17 of the Kansas Statutes (as amended, the "Kansas Act"), and UCB
Acquisition is a cooperative association organized under Chapter 29 of Title 17
of the Ohio Revised Code (as amended, the "Ohio Act"); and
WHEREAS, Cenex Harvest States Cooperatives ("CHSC") is the sole member
of UCB Acquisition; and
WHEREAS, the respective Boards of Directors of Farmland and UCB
Acquisition and the respective members of Farmland and UCB Acquisition have
approved and adopted this Plan and the transactions contemplated hereby in the
manner required by Sections 17-1637 and 17-1638 of the Kansas Act and Sections
1729.35 and 1729.36 of the Ohio Act, and in the manner required by their
respective Articles of Incorporation and Bylaws;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements of the parties contained herein, the parties hereto
agree as follows:
AGREEMENT
SECTION 1. THE MERGER. At the Effective Time (as defined in Section 8),
Farmland and UCB Acquisition shall combine through merger (the "Merger"), in
accordance with the applicable provisions of the Kansas Act and the Ohio Act.
UCB Acquisition, whose Articles of Incorporation and Bylaws each shall be
amended and restated in their entirety as further provided herein, and whose
name shall change to United Country Brands, Inc. ("UCB"), shall be the surviving
cooperative association.
UCB shall continue to exist by virtue of, and shall continue to be
governed by, the Ohio Act. The separate existence of Farmland shall cease as of
the Effective Time.
SECTION 2. ARTICLES OF MERGER AND CERTIFICATE OF MERGER.
(a) THE ARTICLES OF MERGER. On or before the Effective
Time, Farmland and UCB Acquisition each shall execute
articles of merger (the "Articles of Merger") and/or
a certificate of merger (the "Certificate of Merger")
setting forth the information required by and
otherwise in compliance with Sections 17-1637 and
17-1638 of the Kansas Act. The Articles of Merger
and/or the Certificate of Merger shall be filed with
the Secretary of State of the State of Kansas or as
otherwise required by the Kansas Act, and shall
provide that the Merger shall become effective at the
Effective Time.
(b) THE CERTIFICATE OF MERGER. On or before the Effective
Time, Farmland and UCB Acquisition each shall execute
a certificate of merger (the "Certificate of Merger")
setting forth the information required by and
otherwise in compliance with Section 1729.38 of the
Ohio Act. The Certificate of Merger shall be filed
with the Secretary of State of the State of Ohio or
as otherwise required by the Ohio Act, and shall
provide that the Merger shall become effective at the
Effective Time.
SECTION 3. EFFECT OF THE MERGER. From and after the Effective Time,
without any further action by the Constituent Cooperatives or any of their
respective members or equity holders:
(a) UCB, as the surviving cooperative association in the
Merger, shall have all of the rights, privileges,
immunities, and powers, and shall be subject to all
the duties and liabilities, of a cooperative
association organized under the Ohio Act;
(b) UCB, as the surviving cooperative association in the
Merger, shall possess all of the rights, privileges,
immunities, and franchises, of a public as well as a
private nature, of each Constituent Cooperative;
(c) all property, including real, personal, and mixed,
and all debts due on whatever account, including all
choses in action, and each and every other interest
of or belonging to or due to each Constituent
Cooperative, shall be deemed to be and hereby is
vested in UCB, without further act or deed;
(d) the title to any property, or any interest therein,
vested in either Constituent Cooperative, shall not
revert or be in any way impaired by reason of the
Merger;
(e) UCB shall be responsible and liable for all of the
liabilities and obligations of each Constituent
Cooperative, and any claim existing or action or
proceeding pending by or against one of the
Constituent Cooperatives may be prosecuted as if the
Merger had not taken place, and UCB may be
substituted in its place;
-2-
(f) without the creditor's consent, neither the rights of
any creditor nor any liens upon the property of
either of the Constituent Cooperatives shall be
impaired by the Merger;
(g) the Merger shall not be considered an assignment; and
(h) the Merger shall have any other effect set forth in
the Ohio Act, and in the Transaction Agreement dated
September, 1999, by and between CHSC, Farmland, and
UCB Acquisition (the "Transaction Agreement"), all
with the effect and to the extent provided in the
applicable provisions of the Kansas Act and the Ohio
Act.
SECTION 4. ARTICLES OF INCORPORATION AND BYLAWS.
(a) THE SURVIVING ENTITY ARTICLES. From and after the
Effective Time, pursuant to the Certificate of Merger
and the Articles of Merger, and without any further
action by the Constituent Cooperatives or any of
their respective members or equity holders, the
Articles of Incorporation of UCB Acquisition, as the
surviving cooperative association in the Merger,
shall be amended and restated in their entirety to
read as set forth in SCHEDULE I, which is attached to
this Plan and made a part of it (the "Surviving
Entity Articles"). A copy of the Surviving Entity
Articles was provided to the respective members of
each Constituent Cooperative in connection with their
consideration of the Merger.
(b) THE SURVIVING ENTITY BYLAWS. From and after the
Effective Time, without any further action by the
Constituent Cooperatives or any of their respective
members or equity holders, the Bylaws of UCB
Acquisition, as the surviving cooperative association
in the Merger, shall be amended and restated in their
entirety to read as set forth in EXHIBIT B-2, which
is attached to the Transaction Agreement and made a
part of both the Transaction Agreement and this Plan
(the "Surviving Entity Bylaws"). A copy of the
Surviving Entity Bylaws was provided to the
respective members of each Constituent Cooperative in
connection with their consideration of the Merger.
SECTION 5. BOARD OF DIRECTORS. From and after the Effective Time,
without any further action by the Constituent Cooperatives or any of their
respective members or equity holders:
(a) each person serving as a director of Farmland
immediately prior to the Effective Time shall become
a director of UCB, as the surviving cooperative
association in the Merger, to serve in accordance
with the Surviving Entity Bylaws; and
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(b) each person serving as a director of UCB immediately
prior to the Effective Time shall remain a director
of UCB, as the surviving cooperative association in
the Merger, to serve in accordance with the Surviving
Entity Bylaws.
SECTION 6. EXCHANGE, REDESIGNATION, CONVERSION, AND CONTINUATION OF
CAPITAL STOCK, NON-STOCK EQUITY INTERESTS, PATRONS' EQUITIES, AND MEMBERSHIPS.
On the Effective Time, the manner and basis of exchanging and continuing the
shares of capital stock, non-stock equity interests, patronage equity interests
(including all entitlements to patronage refunds), any other allocated equity
interests, and unallocated and capital reserves of Farmland (all such interests
referred to herein as "Farmland Equity Interests"), and membership interests in
Farmland and UCB, for like and equal Equity Interests and membership interests
in UCB, shall be as set forth in this Section 6:
(a) CONTINUATION OF FARMLAND MEMBERSHIPS. As of the
Effective Time, without any further action by the
Constituent Cooperatives or any of their respective
members or equity holders, each member of Farmland
shall become and be a member of UCB, to the extent
such member is eligible for membership under the
Surviving Entity Articles and the Surviving Entity
Bylaws, in such class and with such incidents of
membership as are set forth in the Surviving Entity
Articles and the Surviving Entity Bylaws.
However, notwithstanding the foregoing provisions,
any membership which UCB Acquisition has in Farmland
shall be terminated as of the Effective Time, without
any further action by the Constituent Cooperatives or
any of their respective members or equity holders.
(b) TERMINATION OF THE FARMLAND MEMBERSHIP IN UCB. As of
the Effective Time, without any further action by the
Constituent Cooperatives or any of their respective
members or equity holders, any membership interest
which Farmland has in UCB shall be terminated.
(c) EXCHANGE AND CONTINUATION OF FARMLAND EQUITY
INTERESTS. As of the Effective Time, without any
further action by the Constituent Cooperatives or any
of their respective members or equity holders, all
Equity Interests standing on the books of Farmland
immediately prior to the Effective Time shall be
converted into Equity Interests in UCB at their
stated dollar amount on a dollar-for-dollar basis, as
follows:
(i) Common Stock and Associate Member Common
Stock. Each share of common stock and
associate member common stock of Farmland
issued and outstanding or otherwise standing
on the books of Farmland immediately prior
to the Effective Time shall be exchanged for
allocated patronage equity or allocated
nonpatronage equity of UCB in a face amount
of $25.00, and in such designations or
series
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so as to preserve the year of issue (as UCB
deems necessary) and other terms and
conditions of the original issuance.
(ii) Patronage Equity Interests. All capital
credits, patronage refunds, and any other
allocated or to be allocated equity
interests (including all entitlements to
patronage refunds) as of the Effective Time
which are not included in clause (i) above
shall be exchanged for allocated patronage
equity or allocated nonpatronage equity of
UCB in a face amount equal to such capital
credits, patronage refunds, allocated or to
be allocated equity interests, entitlements
to patronage refunds, or other equity
interests in such denominations or other
designations or series so as to preserve the
year of issue (as UCB deems necessary) and
other terms and conditions of the original
issuance.
(iii) SF Services Warrants. The outstanding
Warrants for Equity Interests of Farmland
issued in the acquisition of SF Services,
Inc. shall, from and after the Effective
Time, represent warrants to convert into UCB
allocated patronage equity or allocated
nonpatronage equity in the same face amount
as the Warrants could have been converted
into face amount Farmland Equity Interests.
(iv) Unallocated Surplus. There shall be
allocated to the Farmland members (in such
manner and to such members as the Farmland
Board of Directors shall specify prior to
the Effective Time) an amount equal to the
amount by which Farmland's earned surplus
account (as computed from the books and
records of Farmland as of the Effective
Time, in accordance with generally accepted
accounting principles, consistently applied)
exceeds $100 million, and UCB allocated
nonpatronage equity shall be so issued to
such Farmland members as of the Effective
Time; provided, however, that the UCB
allocated nonpatronage equity issued
hereunder shall be registered in the name of
UCB to be held by it in escrow and disposed
of as provided in the Capital Plan of UCB.
(v) Preferred Stock. Each share of 8% Series A
Cumulative Redeemable Preferred Stock of
Farmland issued and outstanding or otherwise
standing on the books of Farmland
immediately prior to the Effective Time
shall be converted into one share of 8%
Series A Cumulative Redeemable Preferred
Stock of UCB.
(vi) Net Effect. The net effect of the conversion
of Farmland Equity Interests for like and
equal Equity Interests in UCB shall be that
the holders of Farmland Equity Interests
standing on the books of Farmland
immediately prior to the Effective Time
shall hold and will
-5-
have equal Equity Interests in UCB
immediately following the Effective Time, in
terms of stated dollar amount on a
dollar-for-dollar basis, year of issue (as
determined necessary), and any other rights
and preferences.
Notwithstanding the foregoing provisions,
any Farmland Equity Interests that are held
by UCB Acquisition shall be canceled and
extinguished as of the Effective Time,
without any further action by the
Constituent Cooperatives or any of their
respective members or equity holders.
(d) SURVIVING ENTITY ARTICLES AND SURVIVING ENTITY BYLAWS
TO GOVERN. Membership in UCB and all Equity Interests
in UCB issued or credited in exchange for Farmland
Equity Interests, as described above, shall in all
instances be governed by the provisions of the
Surviving Entity Articles and the Surviving Entity
Bylaws.
(e) FURTHER ASSURANCES OF HOLDERS OF EQUITY INTERESTS.
Each holder of Farmland Equity Interests shall take
such action or cause to be taken such action as UCB
may reasonably deem necessary or appropriate to
effect the exchange and continuation of the Farmland
Equity Interests described in this Plan, including
without limitation the indorsement and delivery of
any stock certificates or other evidences of equity
being exchanged or continued under this Plan.
(f) NO AFFECTED STOCKHOLDERS. Farmland and UCB
Acquisition agree that the Merger does not involve
any "Affected Stockholders," as defined in Section
1729.35 of the Ohio Act.
SECTION 7. FURTHER ASSURANCES. From time to time and after the
Effective Time, as and when requested by UCB, or its successors or assigns,
Farmland shall execute and deliver or cause to be executed and delivered all
such deeds and other instruments, and shall take or cause to be taken all such
further action or actions, as UCB, or its successors or assigns, may deem
necessary or desirable in order to vest in and confirm to UCB, or its successors
or assigns, title to and possession of all of the properties, rights,
privileges, powers, and franchises referred to in Section 3 of this Plan, and
otherwise to carry out the intent and purposes of this Plan.
If UCB shall at any time deem that any further assignments or assurances or any
other acts are necessary or desirable to vest, perfect, or confirm of record or
otherwise the title to any property or to enforce any claims of Farmland vested
in UCB pursuant to this Plan, the officers of UCB, or its successors or assigns,
are hereby specifically authorized as attorneys-in-fact of Farmland (which
appointment is irrevocable and coupled with an interest), to execute and deliver
any and all such deeds, assignments, and assurances and to do all such other
acts in the name of and on behalf of
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Farmland, or otherwise, as such officer shall deem necessary or appropriate to
accomplish such purpose.
SECTION 8. EFFECTIVE TIME. The Merger shall become effective at 12:02
a.m. Central Time on March 1, 2000 (the "Effective Time").
SECTION 9. GOVERNING LAW. This Plan shall be governed by and construed
in accordance with the laws of the States of Kansas and Ohio.
SECTION 10. ABANDONMENT. In accordance with the Kansas Act and the Ohio
Act, the Merger may be abandoned at any time before the Effective Time, in the
manner described in the Transaction Agreement.
SECTION 11. AMENDMENT. Subject to any requirement or limitation imposed
by law, this Plan may be amended in the manner described in the Transaction
Agreement.
IN WITNESS WHEREOF, this Plan has been agreed to and executed by the
duly authorized representatives of Farmland and UCB Acquisition, as of the date
first set forth above.
FARMLAND INDUSTRIES, INC. UCB ACQUISITION CO.
By By
--------------------------------- --------------------------------------
Its Its
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SCHEDULE I
TO
EXHIBIT B-1
Please refer to Exhibit A-1, Schedule I
EXHIBIT B-2
Please refer to Exhibit A-2
Surviving Entity Bylaws
EXHIBIT C
[FLOW CHART]
BOARD OF
DIRECTORS
OFFICE LEADERSHIP
CEO PRESIDENT
ASSISTANTS ASSISTANT
SENIOR MANAGEMENT
B B B A A A A
FINANCE COMMUNICATION ENERGY FARM MKTG GRAIN BASED MEMBER BUSINESS
& SUPPLY FOODS SERVICES DEVELOPMENT
B B B A A A
LEGAL AGRONOMY STRATEGIC ALIGNED REF. FOODS SUPPORT
PLANNING GRAIN LIVESTOCK SERVICES
ALL SENIOR MANAGEMENT REPORTS TO OFFICE OF LEADERSHIP
A AND B DENOTES PRIMARY CONTACT IN OFFICE OF LEADERSHIP
A = PRESIDENT
B = CHIEF EXECUTIVE OFFICER
EXHIBIT D
CAPITAL PLAN
I. Key Principles Underlying the Capital Plan.
1) The total capital required by the Company will be dependent
upon the assets required to be owned to accomplish its mission
as well as the cost and availability of debt.
2) Each base capital pool will have a target level of base
capital.
3) Members of the Company will be required to provide capital
based upon relative use of the capitalization unit and the
respective target levels of base capital.
4) Retention of earnings will be a source of capital. The
percentage of earnings to be paid in cash patronage from a
patronage pool will increase as a member's capital increases
relative to the base capital requirement.
5) If a member has capital levels in excess of base capital
requirements, the excess amount will be subject to retirement
on a basis to be determined by the Board of Directors.
6) Patronage-sourced earnings will be allocated on a patronage
basis provided that the Board will have the authority to
designate a portion of patronage-sourced earnings as
unallocated surplus to build a reserve to absorb losses.
7) Earnings from non-patronage sourced business will generally be
used to build unallocated surplus.
8) The concept of Equity Participation Units developed by Harvest
States will be retained.
9) Minimum capital requirements will be $1,000 for individual
members and $10,000 for member cooperatives, with all existing
members to be grandfathered under existing minimum capital
requirements. New members meet minimum capital requirements
through patronage earnings.
II. Terra Tax Case.
A. Key Terra Principles
1) No owner equities will be adversely impacted in a
consolidated setting as compared to stand alone. In
the event, however, that there is an adverse impact,
it is understood that it should be borne by the
former Farmland stockholders (equity holders).
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2) The Company must maintain a base of permanent equity
to support its operations (i.e. equity which is not
subject to retirement and is not credited to base
capital plan requirements).
3) The outcome of the Terra case will not impact voting
power.
B. Key Terra Agreements
1) Each party will be responsible for $100,000,000 of
permanent equity.
a. As set forth in the Plan of Merger, at the
Effective Time, the Surviving Entity will
allocate and distribute to CHSC members
non-patronage equity interests in the
Surviving Entity in an amount equal to
CHSC's surplus minus CHSC's deferred
patronage as of the Effective Time and minus
$100,000,000. Such non-patronage equity
interests shall not be included for purposes
of voting determinations but shall be
"retirement/base capital eligible equity"
(i.e., included in determining satisfaction
of requirements for base capital and shall
be eligible for redemption under the Capital
Plan).
b. At the Effective Time, the Surviving Entity
will allocate to Farmland members
non-patronage equity interests in the
Surviving Entity in an amount equal to the
excess of the Farmland surplus over
$100,000,000 as of the Effective Time. The
non-patronage equity interests allocated to
Farmland's members shall be distributed to
such members by transfer of such
non-patronage equity interests to the
Surviving Entity to be held in escrow on
behalf of the Farmland members until the
Terra tax case is resolved and is then to be
distributed to Farmland members in
accordance with the provisions set forth
below or canceled. So long as such
non-patronage equity is held in escrow, it
shall not be included for purposes of voting
determinations, shall not be included in
determining satisfaction of requirements for
base capital and shall not be eligible for
redemption under the Capital Plan; however,
once distributed from escrow to Farmland
members, such non-patronage equity shall be
included in determining satisfaction of
requirements for base capital and shall be
eligible for redemption under the Capital
Plan.
2) If Terra is lost:
a. The amount of the Terra loss (which amount
shall be net of the deferred tax asset
created) shall be determined.
b. The amount in 2)a. shall be reduced by an
amount equal to 64.5% of the net
non-patronage income of the Surviving Entity
from the Effective Time.
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c. The net amount determined in 2)b. above
shall first be allocated to Farmland members
by cancellation of the non-patronage equity
issued under 1)b. above up to such net
amount and if, thereafter, there remains any
non-patronage equity held in escrow under
1)b. above, it shall be distributed from
escrow to the appropriate members and shall
be converted to retirement/base capital
eligible equity.
d. If there is any net loss remaining after
application of 2)c. above (the "Remaining
Adjustment"), then equity in an amount equal
to the Remaining Adjustment received by
Farmland members in the Merger for their
Farmland Equity Interests shall be converted
to permanent equity so that such converted
equity will not be included in determining
satisfaction of requirements for base
capital and will not be eligible for
redemption under the Capital Plan. However,
such equity will continue to be counted for
voting purposes.
e. Permanent equity in 2)d. will be converted
to retirement/base capital eligible equity
at a rate of 64.5% of the total
non-patronage earnings (after application of
all expenses other than interest on
borrowings used to pay the Terra
obligation), less an appropriate interest
charge to reflect the borrowings used to pay
the Terra obligation, less the reduction of
the deferred tax asset associated with the
Terra loss.
f. Debt and other funding actions required to
pay a Terra judgment will be serviced from
non-patronage income deemed attributable to
Farmland assets.
g. Equity balances held by estates will be
retired in full regardless of
classification.
h. An example of the foregoing is appended
hereto as Appendix I.
3) If Terra is won, Farmland members' non-patronage
equity allocated under 1)b. above will be converted
into retirement/base capital eligible equity and
distributed from the escrow.
III. Other Contingent Liabilities.
A. Key Principles. The parties recognize that there will be
liabilities that arise in the future out of facts that existed
at the Effective Time, which liabilities would be required to
be paid by the Surviving Entity. Some of such liabilities
and/or the facts related thereto may not be disclosed pursuant
to the Transaction Agreement, or if disclosed, nevertheless
may not be adequately reserved for in the party's financial
statements.
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B. Reclassification. Accordingly, in addition to the Terra Tax
case matter, the Surviving Entity shall make reclassifications
of equity as follows: (a) with respect to Farmland Contingent
Losses, the Surviving Entity shall reclassify the equity that
was received in the Transaction in exchange for Farmland
common stock or other Farmland equity, and (b) with respect to
CHSC Contingent Losses, the Surviving Entity shall reclassify
the equity that was retained with respect to CHSC equity or
was received in exchange for CHSC equity in the Transaction.
C. Procedures and Definitions.
1) As used herein, "Farmland Contingent Loss" is a loss
that exceeds $1,000,000.00 incurred by the Surviving
Entity arising out of a matter or group of related
matters relating to liabilities (fixed, contingent or
otherwise, but not including losses relating to the
Terra Tax case) of Farmland, the material facts of
which existed at the Effective Time but were not
included in Farmland's Disclosure Schedule and were
not adequately reserved for in the financial
statements of Farmland as of the Effective Time, or
even if included in such disclosure schedule, were
not adequately reserved for in the financial
statements of Farmland as of the Effective Time, and
a "CHSC Contingent Loss" is a loss that exceeds
$1,000,000.00 incurred by the Surviving Entity
arising out of a matter or group of related matters
relating to liabilities (fixed, contingent or
otherwise) of CHSC, the material facts of which
existed at the Effective Time but were not included
in CHSC's Disclosure Schedule and were not adequately
reserved for in the financial statements of CHSC as
of the Effective Time, or even if included in such
disclosure schedule, were not adequately reserved for
in the financial statements of CHSC as of the
Effective Time; and which in either case come to
light before October 1, 2000 or such earlier time as
the parties agree. For purposes of these definitions:
(i) a loss shall be deemed to have been incurred at
the earlier of the time that (a) it was actually
incurred, or (b) at the time that the party incurring
the loss is required by GAAP to account for the loss
on its books; (ii) whether a liability was
"adequately" reserved for shall be assessed with
reference to the finally-determined amount of the
liability in question; and (iii) the amount of a
Contingent Loss shall be determined net of any actual
reserves.
2) In determining the amount of any loss, there shall be
taken into account the reserves for such loss that
were provided for in the financial statements of (i)
Farmland or of any unconsolidated Subsidiary of
Farmland, in the instance of determining the amount
of any Farmland Contingent Loss, and (ii) CHSC or of
any unconsolidated Subsidiary of CHSC, in the
instance of determining the amount of any CHSC
Contingent Loss. Determinations of the amount of any
loss shall be made by the board of directors of the
Surviving Entity.
3) Such reclassification of equity shall be done by the
Surviving Entity as follows:
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a. Each party's Contingent Losses shall be
calculated.
b. $20 million shall be deducted from each such
Contingent Loss figure, to arrive at a "Net
Contingent Loss" figure for each party.
c. Reclassification of equity shall be made
with respect to a party only if, and to the
extent that, the aggregate of such party's
Net Contingent Losses exceeds the aggregate
of the other party's Net Contingent Losses.
4) Any such reclassification shall be made in a manner
substantially similar to the procedures for the
reclassification to be made if there is a loss
relating to the Terra Tax case (as set forth in II
above).
5) The provisions of this Part III may be modified upon
the affirmative vote of three-fourths of the full
board of directors of the Surviving Entity.
APPENDIX I
1. Assume a Terra loss with a required payment of $400 million. The
approximate after-tax charge to equity would be $280 million. A
deferred tax asset of $120 million would be created.
2. If Farmland allocated equity is $550 million and unallocated surplus is
$250 million, the $280 million charge would offset the entire
unallocated account; $30 million would be carried in a deficit account.
3. Of the $550 million in allocated equities, $130 million would be
converted to permanent equity. The remaining $420 million would remain
as retirement/base capital eligible equity.
4. Assume, after the Effective Time, the Surviving Entity has total
non-patronage income (after application of all expenses other than
interest on borrowings used to pay the Terra obligation) of $93
million.
5. Of the $93 million in total non-patronage earnings, approximately $60
million would go into the Farmland pool.
6. Assume the interest expense on the Terra note is $25 million. The net
non-patronage sourced income in the Farmland pool would be $35 million.
7. The $35 million net non-patronage sourced income in the pool will be
sheltered with the NOL. As the NOL is used, the deferred tax asset will
be reduced.
8. The net build-up in the unallocated surplus attributable to the
Farmland pool will be $35 million less the reduction in the deferred
tax asset. This net number will be the amount of permanent equity
converted to retirement/base capital eligible equity.