8
EXHIBIT B-10(k)(1)
October 13, 1998
Southern States Cooperative, Inc.
0000 Xxxx Xxxxx Xxxxxx
P. O. Box 26234
Richmond, Virginia 23260
Commitment Letter
Ladies and Gentlemen:
In order to facilitate the closing of the Asset Purchase
Agreement dated July 23, 1998, between Southern States
Cooperative, Inc. ("Southern States") and Gold Xxxx Inc.
("Gold Xxxx") for the purchase of the Gold Xxxx Inputs
Business, and subject to the terms and conditions set out
below and on the attached Terms Sheet, Gold Xxxx hereby
commits to purchase under the circumstances described below
from Southern States and from a trust entity to be formed by
Southern States, $100 million principal (liquidation) amount
of preferred securities (the "Preferred Securities") in the
form described in each of Annex A and Annex B to the attached
Terms Sheet.
Approval of Gold Xxxx Lenders. The commitment of
Gold Xxxx set forth herein and on the attached Terms
Sheet is expressly subject to receipt of approvals
by (1) CoBank, ACB; (2) the Prudential Insurance
Company of America and (3) Cooperative Centrale
Raiffeisen - BoerenleenBank B.A., "Rabobank
Nederland", New York Branch, as Agent, under the
Gold Xxxx Credit Agreement dated August 4, 1998,
with various banks and lending institutions as
lenders.
This obligation of Gold Xxxx to purchase the Preferred
Securities shall be of no force and effect if, prior to the
Purchase Date (as specified in the Terms Sheet), Southern
States shall have placed with other purchasers similar capital
and/or equity in a minimum amount of $100 million. To the
extent that, prior to the Purchase Date, Southern States shall
have placed with other purchases capital and/or equity
securities similar to the Preferred Securities in an amount
less than $100 million, then the Gold Xxxx commitment to
purchase Preferred Securities shall be reduced correspondingly
on a dollar-for-dollar basis. For purposes of this letter and
the attachments hereto, any Southern States preferred stock or
subordinated debt will be considered similar securities to the
Preferred Securities.
This commitment is a duly authorized, irrevocable
obligation of Gold Xxxx Inc., enforceable in accordance with
its terms. If you are in agreement with the terms and
conditions stated above, and as set forth in the Terms Sheet
attached and the annexes thereto, please signify by executing
and returning a copy of this letter to the undersigned.
Sincerely,
/s/ M. A. Stimpert
M. A. Stimpert
Senior Vice President
Agreed to by Southern States Cooperative, Inc.
/s/ Xxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
Attachment to Commitment Letter
Dated October 13, 1998
Terms Sheet for Purchase of Southern States
Preferred Securities by Gold Xxxx
1. Time of Purchase:
The date on which Gold Xxxx will purchase the Preferred
Securities (the "Purchase Date") will be 175 days after
October 9, 1998 which is the effective date of the 180-day
senior bridge facility made available to Southern States for
the purchase of the Gold Xxxx Inputs Business (the "Senior
Bridge Facility") in the event Southern States has not placed
a minimum of $100 million of similar securities prior to the
Purchase Date. Accordingly the Purchase Date will be April 2,
1999. The purchase of the Preferred Securities will be made
pursuant to one or more purchase agreements containing
customary terms and conditions.
2. Composition of the $100 million of Preferred Securities:
The $100 million of Preferred Securities shall be
comprised of (a) $40 million of DRD Preferred (as more
specifically described on Annex A), bearing an initial
dividend rate of 7.5% per annum and (b) $60 million of Capital
Securities (as more specifically described on Annex B),
bearing an initial distribution rate of 8.0% per annum. If
less than $100 million amount of Preferred Securities is
placed with Gold Xxxx, the amount of each type of Preferred
Securities sold to Gold Xxxx will be as determined by Southern
States, not to exceed, in the case of the DRD Preferred, $40
million liquidation amount, and in the case of the Capital
Securities, $60 million liquidation amount. Similarly, upon
any redemption of less than the entire $100 million of
Preferred Securities, Southern States shall have the right to
redeem whichever type of Preferred Securities (DRD Preferred
or Capital Securities) it wishes, in any amount up to the
entire outstanding amount held by Gold Xxxx. For so long as
the Preferred Securities are held by Gold Xxxx, the Preferred
Securities will be subject to mandatory redemption from the
net proceeds of all placements of substantially similar
securities by Southern States until the Preferred Securities
held by Gold Xxxx have been redeemed in their entirety.
If Southern States places securities similar to the
Preferred Securities prior to the Purchase Date, Southern
States will immediately instruct the LOC bank described in
paragraph 4 below, to issue an amendment to the LOC or a
replacement LOC reflecting a reduction in the amount of the
LOC to the extent that Gold Xxxx'x commitment to purchase
Preferred Securities has thereby been reduced.
3. Purchase price; Fees Associated with the Placement of the
Preferred Securities with Gold Xxxx:
Gold Xxxx shall purchase the Preferred Securities at par.
Southern States shall pay to Gold Xxxx at the time of purchase
a placement fee equal to 2% of the liquidation amount of the
DRD Preferred and 1% of the liquidation amount of the Capital
Securities. The amount of the placement fee paid to Gold Xxxx
shall be refunded to Southern States on a pro rata basis upon
any redemption, in whole or in part, of the Preferred
Securities from Gold Xxxx.
4. Terms and Conditions of the Letter of Credit ("LOC")
Supporting the Gold Xxxx Purchase Agreement:
Gold Xxxx'x obligation to purchase the Preferred
Securities shall be secured by an irrevocable direct pay bank
letter of credit ("LOC"). The LOC shall be in an amount at
least equal to the purchase price of the Preferred Securities
which Gold Xxxx is committed to purchase, shall have an
initial term expiring no earlier than 10 days after the
Purchase Date and shall be irrevocable and unconditional. The
LOC shall be issued by a financial institution located in the
United States (including, but not limited to, Rabobank's U.S.
branch) with a debt rating of AA/Aa2 or higher. A draft of
the LOC will be provided to Southern States not later than
October 9, 1998. Southern States also shall be furnished with
an opinion satisfactory to it from counsel for the LOC bank,
including foreign counsel if appropriate, as to the due
authorization, execution and delivery and binding effect of
the LOC.
5. Fees Associated with the LOC and Other Financing Costs:
Southern States will bear the cost, not to exceed 125
basis points per annum, payable monthly, for the LOC for its
initial term and any renewal thereof. Gold Xxxx will be
responsible for the costs of changes, if any, to Gold Xxxx'x
various loan agreements. Southern States will be responsible
for all costs of its Senior Bridge Facility.
6. Provisions Relating to the Transfer of Preferred
Securities by Gold Xxxx:
Gold Xxxx shall hold any Preferred Securities purchased
by it for a period of at least nine (9) months from the
Purchase Date. Upon the expiration of that period
(contemplated to terminate in January, 2000) Gold Xxxx may, at
its election, give notice to Southern States of its desire to
sell the Preferred Securities, in whole or in part. Delivery
of notice shall commence a 120-day waiting period during which
Gold Xxxx may not sell or offer to sell the Preferred
Securities or any portion thereof without the consent of
Southern States. Within 10 business days of Gold Xxxx giving
notice of its desire to sell, Southern States shall advise
Gold Xxxx of its intentions with respect to the placement or
sale of the Preferred Securities or similar securities. If,
during the waiting period, Southern States determines not to
place the Preferred Securities or similar securities, then
Southern States shall so advise Gold Xxxx and Southern States
shall not unreasonably refuse to waive the remainder of the
waiting period. Upon the later of (1) expiration of the 120-
day waiting period (which could occur as early as April, 2000)
and (2) termination of a placement of the Preferred Securities
or similar securities commenced by Southern States prior to
the end of the waiting period, Gold Xxxx will be free to
transfer the Preferred Securities as permitted by law and
subject to the transfer restrictions described in the draft
Offering Memorandums proposed by Southern States, copies of
which have been furnished to Gold Xxxx. Southern States will
provide such financial and other information and assistance as
may reasonably be required by Gold Xxxx in its efforts to
resell the Preferred Securities.
7. Special Counsel:
Xxxxxxxx & Xxxxxxxx will serve as special counsel in
connection with the purchase of the Preferred Securities.
Southern States shall be responsible for the fees and expenses
of special counsel.
8. Southern States Obligation:
Southern States shall be obligated to continue with all
good faith reasonable efforts to place, on terms and
conditions reasonably satisfactory to Southern States, through
one or more of the markets referenced below, a minimum of $50
million of perpetual preferred stock and a minimum of $75
million of trust preferred securities substantially similar to
the Capital Securities proposed to be sold to Gold Xxxx.
Southern States shall pursue its efforts concurrently on three
separate "tracks":
(1) Rule 144A offerings as presently contemplated by
Southern States.
(2) Private placement market.
(3) Registered public offering of trust preferred
securities and/or preferred stock.
Annex A
Description of Preferred Stock to be Issued
to Gold Xxxx Inc. by Southern States Cooperative, Inc.
(Supplements Description of Series A Preferred Stock in Draft
Offering Memorandum)
1. Purchase Amount. $40 million principal (liquidation)
amount.
2. Designation and Rank. Series B Cumulative Redeemable
Preferred Stock. Ranks pari passu with other Southern
States preferred stock.
3. Dividend Rate. 7.5% per annum initial rate; subject to
increase to 8.0% per annum nine months after the Purchase
Date; and to 8.25% twenty-one months after the Purchase
Date. Dividends payable quarterly.
4. Mandatory Redemption. Mandatorily redeemable while held
by Gold Xxxx as described in the Terms Sheet.
5. Transferability. Preferred Stock to be transferable in
minimum principal amounts of $100,000 to QIBs or
Institutional Accredited Investors pursuant to Rule 144A
or Rule 501(a)(1), (2), (3) or (7), subject to the
conditions and restrictions on transfer set out in the
draft Offering Memorandum for the Preferred Stock.
6. Form of Certificate. Preferred Stock to be delivered as
a single physical certificate; $100,000 block limitation
on transfers. Application will be made to DTC for book-
entry transfer and trading in PORTAL if requested by Gold
Xxxx.
7. Other Information. Except as otherwise provided above,
the Preferred Stock will be similar in its terms and
conditions to, and subject to restrictions on transfer
similar to those applicable to, the proposed issue of
___% Series A Preferred Stock described in the draft
Offering Memorandum prepared by Southern States with
respect thereto, a copy of which has been furnished to
Gold Xxxx.
Annex B
Description of Capital Securities to be Issued to
Gold Xxxx Inc. by Southern States Capital Trust II and
Guaranteed by Southern States Cooperative, Inc.
(Supplements Description of Series A Capital Securities in
Draft Offering Memorandum)
1. Purchase Amount. $60 million liquidation amount of
Series B Capital Securities issued by Southern States Capital
Trust [ II ], a Delaware business trust (the "Trust").
2. Payment Source. Capital Securities payable solely from
payments made on 8% Adjustable Rate Junior Subordinated
Deferrable Interest Debentures of Southern States
(ranking senior to Southern States' preferred stock,
common stock and all patrons' equities; subordinated to
Senior Debt - virtually all of the Company's indebtedness
is Senior Debt). The Junior Subordinated Debentures will
have a thirty (30) year maturity. The interest rate
payable on the Junior Subordinated Debentures will be
adjustable in the same manner described in paragraph 5
below for the Capital Securities.
3. Guarantee. Capital Securities guaranteed by Southern
States to the extent of funds held by the Trust (same as
provided for in the contemplated 144A Offering).
4. Documentation. Issue to be fully documented as a Rule
144A issue of Capital Securities, substantially similar
to documentation for the Capital Securities presently
contemplated by Southern States, including:
(1) Trust Agreement (for organizational purposes).
(2) Amended and Restated Trust Agreement.
(3) Indenture.
(4) Guarantee.
(5) Purchase Agreement.
(6) Delaware Trustee - First Union Trust Company, N.A.
(7) Property Trustee, Guarantee Trustee and Debenture
Trustee - First Union National Bank.
5. Interest Rate. The initial rate of distributions on the
Capital Securities shall be 8% per annum; subject to
increase to 8.5% nine months after the Purchase Date; and
to 8.75% per annum twenty-one months after the Purchase
Date. Distributions payable semi-annually.
6. Mandatory Redemption. Mandatorily redeemable while held
by Gold Xxxx as described in the Terms Sheet.
7. Transferability. Capital Securities to be transferable
in minimum principal amounts of $100,000 to QIBs or
Institutional Accredited Investors pursuant to Rule 144A
or Rule 501(a)(1), (2), (3) or (7), subject to the
conditions and restrictions on transfer set out in the
draft Offering Memorandum for the Capital Securities.
8. Form of Security. Capital Securities to be delivered as
a single physical certificate; $100,000 block limitation
on transfers. Application will be made to DTC for book-
entry transfer and trading in PORTAL if requested by Gold
Xxxx.
9. Other Information. Except as otherwise provided above,
the Capital Securities will be similar in its terms and
conditions, and subject to restrictions on transfer
similar to those applicable, to the proposed issue of the
Capital Securities described in the draft Offering
Memorandum prepared by Southern States with respect
thereto, a copy of which has been furnished to Gold Xxxx.
11560/Securities/Exhibit/Commitment Letter
