SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Ag Services of America, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[x] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, no par value per share
(2) Aggregate number of securities to which transaction applies:
5,479,514 shares of common stock and options to purchase 22,480
shares of common stock.
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
the sum of (i) 5,479,514 shares of common stock at $8.50 per
share and (ii) cash-out of 22,480 shares of common stock subject
to options at an aggregate cost of $29,060.
(4) Proposed maximum aggregate value of transaction: $46,604,929
(5) Total fee paid: $3,770.34
[x] Fee paid previously with preliminary materials. [ ] Check box if any
part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
November 26, 2003
Dear Shareholder:
As you may know, on October 31, 2003, Ag Services of America, Inc.
entered into an agreement and plan of reorganization and a related
agreement and plan of merger, which we refer to collectively as the
merger agreement, with Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.,
Rabobank Nederland, which we refer to as Rabobank, and a subsidiary of
Rabobank pursuant to which we will become a wholly-owned subsidiary of
Rabobank. A special meeting of our shareholders will be held on Tuesday,
December 30, 2003, at 9:00 A.M., Central Standard Time, to vote on a
proposal to approve the merger agreement so that the merger can occur,
subject to the satisfaction of certain other closing conditions. The
meeting will be held at our corporate headquarters at 1309 Technology
Parkway, Cedar Falls, Iowa. Notice of this special meeting is enclosed.
Upon completion of the merger, you will be entitled to receive $8.50
in cash for each share of Ag Services common stock that you own. This
price represents a 39.6% premium over the average closing price per share
for the 30 days ended October 31, 2003, the last trading day prior to the
public announcement that Ag Services and Rabobank had entered into the
merger agreement.
This proxy statement gives you detailed information about the
special meeting and the merger and includes the merger agreement as
Annex A. The receipt of cash in exchange for shares of common stock
in the merger will constitute a taxable transaction to U.S. taxpayers
for U.S. federal income tax purposes. We encourage you to read the
proxy statement and the merger agreement carefully.
In connection with its evaluation of the merger, the board of
directors considered a number of factors, including the written opinion
of Burnham Securities Inc., delivered on October 31, 2003, to a special
committee of our board of directors to the effect that, based upon and
subject to the factors and assumptions set forth in that opinion, the
$8.50 in cash per share to be received by holders of shares of Ag Services
common stock pursuant to the merger agreement is fair from a financial
point of view to those holders. The Burnham Securities opinion is
not a recommendation as to how any holder of shares of Ag Services
common stock should vote with respect to the merger. The written
opinion of Burnham Securities is attached as Annex B to the proxy
statement, and you should read it carefully.
Our board of directors has fixed the close of business on
November 25, 2003, as the record date for the special meeting and only
holders of common stock on the record date are entitled to vote at the
special meeting. On the record date, there were 5,479,514 shares of
common stock outstanding and entitled to vote.
Our directors, who own or control a total of 1,142,067 shares of
our common stock, representing approximately 21% of all outstanding
shares, have entered into separate agreements in which they agreed to
vote in favor of approving the merger agreement.
As described in the enclosed materials, our board of directors has
unanimously approved the merger agreement and determined that the merger
agreement and the merger are fair to, and in the best interests of,
Ag Services and our shareholders. The board of directors recommends a
vote "FOR" the merger agreement.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE
COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT IN THE
ENCLOSED PRE-PAID ENVELOPE. SUBMITTING YOUR PROXY WILL NOT PREVENT YOU
FROM VOTING IN PERSON.
Our board of directors and management appreciate your continuing
support of our company, and we hope you will support this important
transaction.
Sincerely,
/s/ Henry C. Jungling, Jr.
-------------------------
Henry C. Jungling, Jr.
President
/s/ Gaylen D. Miller
-------------------------
Gaylen D. Miller
Chairman of the Board
/s/ Kevin D. Schipper
-------------------------
Kevin D. Schipper
Chief Executive Officer
and Secretary
This proxy statement is dated November 26, 2003 and is first
being mailed to shareholders on or about December 1, 2003.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 30, 2003
Dear Ag Services of America, Inc. Shareholder,
It is my pleasure to invite you to the special meeting of the
shareholders of Ag Services of America, Inc., an Iowa corporation, to be
held on Tuesday, December 30, 2003, at our corporate headquarters,
1309 Technology Parkway, Cedar Falls, Iowa, at 9:00 a.m., Central
Standard Time.
At the special meeting, we will ask you to consider and vote on a
proposal to approve an agreement and plan of reorganization and a related
agreement and plan of merger that we entered into on October 31, 2003 with
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., Rabobank Nederland
("Rabobank") and Utrecht-America Acquisition Corp. II, a wholly-owned
subsidiary of Rabobank, pursuant to which, among other things, we will
merge with the subsidiary of Rabobank and holders of our common stock
will be entitled to a cash payment of $8.50 per share.
The accompanying proxy statement describes the proposal in greater
detail. If you were a shareholder at the close of business on
November 25, 2003, you are entitled to notice of, and you may vote at,
the special meeting.
Whether or not you plan to attend the special meeting, we ask that
you submit your proxy as soon as possible so that your shares can be voted
at this meeting. You may vote by mailing a traditional proxy card or by
voting in person. Submitting your proxy will NOT prevent you from voting
in person. Please review the instructions on the enclosed proxy card and
in the proxy statement regarding your voting options.
By order of the board of directors,
/s/ Kevin D. Schipper
-------------------------
Kevin D. Schipper
Corporate Secretary
Cedar Falls, IA
November 26, 2003
YOUR VOTE IS IMPORTANT
Please complete, sign and date the enclosed proxy card and mail
it promptly in the enclosed return envelope.
TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERS ABOUT THE PROPOSAL AND THE SPECIAL MEETING 1
SUMMARY 4
The Proposed Merger 4
The Parties to the Merger Agreement 4
The Special Meeting 4
Shareholder Voting Agreements 5
Recommendation of Our Board of Directors 5
Opinion of Our Financial Advisor 5
Interests of Certain Persons in the Transaction 5
Material U.S. Federal Income Tax Consequences 6
Appraisal Rights 6
Conditions to the Merger 6
Termination of the Merger Agreement 6
Additional Information 7
THE PARTIES TO THE AGREEMENT AND PLAN OF REORGANIZATION 8
Ag Services of America, Inc. 8
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.,
Rabobank Nederland 8
Utrecht-America Acquisition Corp. II 8
THE SPECIAL MEETING 9
Date, Time and Place 9
Matter to Be Considered 9
Record Date and Shares Entitled to Vote; Procedures for Voting;
Quorum 9
Vote Required 9
Voting of Proxies 10
Revocability of Proxies 10
Proxy Solicitation 10
THE MERGER 12
Background of the Merger 12
Reasons for the Merger 16
Factors Considered by the Board 17
Opinion of Our Financial Advisor 18
Financing of the Merger 26
Material U.S. Federal Income Tax Consequences of the Merger to our
Shareholders 26
Regulatory Considerations; Changes in Structure of Our Business 27
Appraisal Rights 27
Shareholder Voting Agreements 28
Interests of Certain Persons in the Merger 28
Employment Agreements 29
Consultancy and Non-Competition Agreements 30
PROPOSAL - APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION 31
Agreement and Plan of Reorganization 31
The Merger 31
Merger Consideration 31
Treatment of Stock Options 31
Directors and Officers 31
Charter and Bylaws 32
Payment for the Shares 32
Representations and Warranties 32
Conduct of Business Pending the Merger 34
Efforts to Complete the Merger 35
Conditions to the Merger 35
Termination of the Merger Agreement 37
Termination Fees 38
Amendment, Extension and Waiver 39
BENEFICIAL OWNERSHIP OF COMMON STOCK AND CORPORATE INFORMATION 39
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS 40
WHERE YOU CAN FIND MORE INFORMATION 42
ANNEX A - AGREEMENT AND PLAN OF REORGANIZATION A-1
ANNEX B - OPINION OF BURNHAM SECURITIES INC. B-1
QUESTIONS AND ANSWERS ABOUT THE PROPOSAL AND THE SPECIAL MEETING
Below are brief answers to frequently asked questions concerning the
proposals and the special meeting. These questions and answers do not,
and are not intended to, address all the information that may be important
to you. You should read the summary and the remainder of this proxy
statement, including all annexes, carefully.
1. Q: Why Did You Send Me This Proxy Statement?
A: We sent you this proxy statement and the enclosed proxy card because
our board of directors is soliciting your proxy to vote at a special
meeting of shareholders. This proxy statement summarizes the information
you need to know to vote at the special meeting. However, you do not
need to actually attend the special meeting to vote your shares. Instead,
you may simply complete, date, and sign the enclosed proxy card and return
it in the enclosed envelope.
We intend to send this proxy statement, the attached Notice of Special
Meeting and the enclosed proxy card on or about December 1, 2003 to all
shareholders of record at the close of business on November 25, 2003, the
record date for the special meeting. At the close of business on the
record date for the special meeting, there were 5,479,514 shares of our
common stock entitled to vote on the matter to be voted upon at the
special meeting. Our common stock is currently our only class of voting
stock.
2. Q: What am I Being Asked to Vote on at the Special Meeting?
A: At our special meeting, we will ask you to consider and vote on a
proposal to approve an agreement and plan of reorganization and a related
agreement and plan of merger with Cooperatieve Centrale Raiffeisen-
Boerenleen-bank B.A., Rabobank Nederland, which we refer to as Rabobank,
and Utrecht-America Acquisi-tion Corp. II, a wholly-owned subsidiary of
Rabobank, which we refer to as Merger Sub. Pursuant to the agreement
and plan of reorganization and the related agreement and plan of merger,
we will merge with Merger Sub, and become a wholly-owned subsidiary of
Rabobank. You will be entitled to receive a cash payment of $8.50 per
share for each share of our common stock you own, upon surrender of
your stock certificates after completion of the merger.
3. Q: Is the Board of Directors Recommending that I Vote in Favor of
the Proposal?
A: Yes. After considering a number of factors, our board of directors
unanimously determined that the terms of the agreement and plan of
reorganization and the related agreement and plan of merger, which we refer
to collectively as the merger agreement, are fair to, and in the best
interests of, Ag Services and our shareholders. Our board of directors
recommends that you vote FOR approval of the merger agreement.
4. Q: How Many Votes Do I Have?
A: Each share of our common stock that you own entitles you to one vote
on the matters to be voted on at the special meeting. The enclosed proxy
card indicates the number of shares of our common stock that you own.
5. Q: What Vote Is Required to Approve the Proposal?
A: A quorum is necessary to hold a valid special meeting. A quorum is
reached when the holders of at least a majority of the outstanding shares
of stock entitled to be cast are present in person or represented by proxy.
As long as a quorum is present, the merger will be approved if the number
of shares cast in favor of the merger agreement exceeds the number of
shares cast against the merger agreement.
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6. Q: How Will the Votes be Counted?
A: All votes will be tabulated by the inspector of election appointed
for the meeting, who will separately tabulate affirmative and negative
votes, abstentions and broker non-votes. If you indicate "ABSTAIN" on
the proposal when granting your proxy, your shares will still count
towards a quorum but will not be counted as a vote either for or against
the proposal. Broker non-votes will be counted towards a quorum but
will not be counted as a vote either for or against the proposal.
Therefore, broker non-votes will not be counted in determining the number
of votes on the proposal. Broker non-votes occur when brokers do not
vote on some matters because they have not been authorized to vote by
the beneficial owners of the shares and do not have discretionary
authority to vote on those matters.
7. Q: How Do I Vote by Granting a Proxy?
A: If you are a shareholder of record, you may direct your vote by
granting a proxy. You can grant your proxy by mailing in your completed,
signed and dated proxy card. Whether or not you plan to attend the
special meeting, we urge you to grant your proxy by signing, dating and
returning the enclosed proxy card in the enclosed postage-prepaid
(for the United States only) envelope.
8. Q: How Do I Direct My Vote If My Shares Are Held in a Brokerage
Account or By a Bank or Other Nominee?
A: If you are the beneficial owner of shares held for you in a brokerage
account or by a bank or other nominee, you may direct your vote by
submitting voting instructions to your broker, bank or nominee, which
will grant a proxy in accordance with your instructions. To direct
your vote, you should follow the instructions provided on the voting
instructions card provided by your broker, bank or nominee.
A number of brokers and banks are participating in a program provided
through ADP Investor Communication Services that offers telephone and
Internet voting options. If your broker or bank is participating in that
program, you may be able to direct the voting of your shares by telephone,
by calling the telephone number shown on the voting form that you receive
from your broker or bank, or over the Internet at the voting website of
ADP Investor Communications (www.proxyvote.com). If your broker or bank
participates in a different program and provides different instructions
for directing your vote telephonically or over the Internet, you should
follow those instructions instead.
9. Q: How Will My Shares be Voted If I Grant My Proxy?
A: If you properly fill in your proxy card and send it to us in time
to vote, the proxy holders named on your proxy card will vote your
shares as you have directed. If you sign the proxy card but do not
make specific choices, the proxy holders will vote your shares "FOR"
approval of the merger agreement as recommended by our board of
directors.
10. Q: May I Revoke My Proxy?
A: If you grant your proxy, you may revoke it at any time before it is
exercised at the special meeting by any one of the following three ways:
* filing a written notice of revocation with our Corporate Secretary no
later than the special meeting;
* filing another executed proxy, which bears a later date, with our
Corporate Secretary; or
* attending the special meeting and voting in person. Please note that
simply attending the special meeting (but not voting) will NOT revoke
your proxy.
11. Q: Can I Still Vote in Person if I Have Already Granted My Proxy?
A: Yes. If you plan to attend the special meeting and vote in person,
we will give you a ballot at the meeting. However, if your shares are
held in the name of your broker, bank or other nominee, you must bring
a proxy issued in your name from the broker, bank or nominee indicating
that you were the beneficial owner of the shares on November 25, 2003,
the record date for voting. Granting your proxy will not affect your
right to attend the special meeting and vote in person.
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12. Q: Who Pays the Costs of Soliciting These Proxies?
A: We will pay all costs of soliciting these proxies, including preparing,
assembling, printing and mailing the enclosed materials. We will ask
banks, brokers and other institutions, nominees and fiduciaries to forward
the proxy material to their principals. We may reimburse them for their
expenses.
13. Q: Do I Have Appraisal Rights for the Proposal to be Considered at
the Special Meeting?
A: As a shareholder, you are not entitled to appraisal rights in the
event you dissent from approval of the proposal.
14. Q: Should I Send In My Stock Certificates Now?
A: No. After the merger is completed, you will be sent detailed written
instructions for exchanging your Ag Services stock certificates for the
merger consideration.
15. Q: Will I Owe Taxes As A Result Of The Merger?
A: The merger will be a taxable transaction for all U.S. holders of
Ag Services common stock. As a result, assuming you are a U.S. taxpayer,
the cash you receive in the merger for your shares of Ag Services common
stock will be subject to the United States federal income tax and also
may be taxed under applicable state, local, and other tax laws. In
general, you will recognize gain or loss equal to the difference between
(1) the amount of cash you receive and (2) the adjusted tax basis of your
shares of Ag Services common stock surrendered. Refer to the section
entitled "The Merger -- Material U.S. Federal Income Tax Consequences
of the Merger to Our Shareholders" on page 21 of this proxy statement
for a more detailed explanation of the tax consequences of the merger.
You should consult your tax advisor on how specific tax consequences
of the merger apply to you.
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SUMMARY
This summary, together with the preceding question and answer section,
highlights important information relating to the agreement and plan of
reorganization and the related agreement and plan of merger, which we
collectively refer to as the merger agreement, and other matters discussed
in greater detail elsewhere in this proxy statement. This summary
includes parenthetical references to pages in other portions of this
proxy statement containing a more detailed description of the topics
presented in this summary. This summary does not contain all of the
information you should consider before voting on the proposal. To
more fully understand the matter to be considered at the special meeting,
you should read carefully this entire proxy statement and all of its
annexes, including the merger agreement which is attached as Annex A,
before voting on whether to approve the proposal.
The Proposed Merger
* In the merger, a wholly-owned subsidiary of Rabobank will merge with
and into Ag Services with Ag Services continuing as the surviving
corporation.
* Upon completion of the merger, each issued and outstanding share of
our common stock will automatically be cancelled and cease to exist and
will be converted into the right to receive $8.50 in cash, without
interest, per share.
* As a result of the merger, Ag Services will cease to be an independent,
publicly traded company and will become a wholly-owned subsidiary of
Rabobank.
The Parties to the Merger Agreement (page 7)
* Ag Services of America, Inc.
* Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., Rabobank Nederland,
which we refer to as Rabobank.
* Utrecht-America Acquisition Corp II, which we refer to as Merger Sub,
is an Iowa corporation and a subsidiary of Rabobank.
The Special Meeting (page 7)
* Date, Time and Place (page 7). The special meeting will take place on
Tuesday, December 30, 2003, at 9:00 a.m., local time, at 1309 Technology
Parkway, Cedar Falls, Iowa.
* Matter to be Considered (page 7). Shareholders will consider and
vote on a proposal to approve the merger agreement. A copy of the merger
agreement is attached as Annex A to this proxy statement.
* Record Date and Shares Entitled to Vote; Quorum (page 8). The record
date for determining the holders of shares of our common stock entitled
to notice of, and to vote at, the special meeting is November 25, 2003.
On the record date, 5,479,514 shares of our common stock were outstanding
and entitled to vote on the proposal to approve the transaction. The
presence, in person or by proxy, of shares representing at least a
majority of all the votes entitled to be cast is necessary to constitute
a quorum for the transaction of business at the meeting.
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* Vote Required (page 8). The merger agreement will be approved if the
number of shares cast in favor of the merger agreement exceeds the number
of shares cast against the merger agreement. Each share of our common
stock is entitled to one vote. Our directors, who currently hold
approximately 21% of our outstanding shares, have agreed to vote to
approve the merger agreement.
* Procedures for Voting (page 7). You may vote shares you hold of record
in either of two ways:
* by completing and returning the enclosed proxy card, or
* by voting in person at the special meeting.
If you hold shares of our common stock in "street name" through a broker
or other financial institution, you must follow the instructions provided
by the broker or other financial institution regarding how to instruct
it to vote those shares.
* Voting of Proxies (page 8). Shares of common stock represented by
properly executed proxies received at or prior to the special meeting
that have not been revoked will be voted at the meeting in accordance
with the instructions indicated on the proxies. Shares of common stock
represented by properly executed proxies for which no instruction is
given will be voted FOR approval of the proposal.
* Revocability of Proxies (page 8). Your proxy may be revoked at any
time before it is voted. If you complete and return the enclosed proxy
card but wish to revoke it, you must either (1) file with our Corporate
Secretary a written, later-dated notice of revocation, (2) send a
later-dated proxy card to our Corporate Secretary at or before the
special meeting, or (3) attend the special meeting and vote in person.
Please note that your attendance at the meeting will not, by itself,
revoke your proxy.
* Failure to vote. If you indicate "ABSTAIN" on the proposal when
granting your proxy, your shares will still count towards a quorum but
will not be counted as a vote either for or against the proposal. If
you are a holder of record and send your proxy but do not instruct
how to vote, your shares will count toward a quorum and will be
counted as a vote FOR the proposal.
Shareholder Voting Agreements (page 22)
Our directors, James D. Gerson, Henry C. Jungling, Michael Lischin,
Ervin Mellema, Gaylen D. Miller and Kevin D. Schipper, who currently
own a total of approximately 21% of the outstanding shares of our
common stock, each entered into separate shareholder voting agreements
with Rabobank, under which each agreed to vote his shares in favor of
approval of the merger agreement.
Recommendation of Our Board of Directors
Our board of directors has unanimously adopted the merger agreement and
has determined that it is fair to, and in the best interests of,
Ag Services and our shareholders, that we enter into the merger agreement
and complete the merger. Our board of directors unanimously recommends
that shareholders vote FOR approval of the merger agreement.
Opinion of Our Financial Advisor (page 14)
In connection with the proposed transaction, our financial advisor,
Burnham Securities Inc., delivered to a special committee of our board
of directors an opinion as to the fairness to our shareholders, as of
October 31, 2003, from a financial point of view, of the consideration
to be received by our shareholders in the merger pursuant to the merger
agreement. The full text of the written opinion of Burnham Securities,
dated October 31, 2003, is attached to this proxy statement as Annex B.
We encourage you to read the opinion carefully in its entirety for a
description of the procedures followed, assumptions made, matters
considered and limitations on Burnham Securities' review. The opinion
of Burnham Securities is addressed to a special committee of our board
of directors and does not constitute a recommendation to any shareholder
as to any matters relating to the merger agreement.
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Interests of Certain Persons in the Transaction (page 23)
When considering the recommendation of our board of directors, you should
be aware that some of our directors and executive officers have interests
in the transaction that are different from, or in addition to, yours.
These interests include, among others:
* interests of some of our directors and executive officers under their
current employment agreements and under consulting agreements or new
employment agreements we entered into with them as a condition to
Rabobank's execution of the merger agreement; and
* our agreement to repay some of our directors and executive officers
following the completion of the merger the amounts we owe them under
loans they have made to us.
Material U.S. Federal Income Tax Consequences (page 21)
The receipt of $8.50 in cash for each share of our common stock pursuant
to the merger will be a taxable transaction to U.S. taxpayers for U.S.
federal income tax purposes. For U.S. federal income tax purposes, each
of our shareholders generally will realize taxable gain or loss as a
result of the merger measured by the difference, if any, between $8.50
per share and the adjusted tax basis in that share owned by the
shareholder. That gain or loss will be a capital gain or loss if the
share is held as a capital asset in the hands of the shareholder, and
will be long-term capital gain or loss if the share has been held for
more than one year at the time of the consummation of the merger.
Shareholders are urged to consult their own tax advisors as to the
particular tax consequences to them of the merger.
Appraisal Rights (page 22)
Our shareholders are not entitled to appraisal rights in connection with
the transactions contemplated by the merger agreement.
Conditions to the Merger (page 29)
The completion of the transactions contemplated by the merger agreement
depends on the satisfaction or waiver of a number of conditions,
including, but not limited to, the following:
* the approval of the merger agreement by our shareholders;
* the receipt of all approvals, consents, agreements and waivers of
third parties and governmental and regulatory authorities necessary to
consummate the merger;
* the execution of various additional agreements and certificates;
* the absence of any legal restraint preventing the consummation of the
transactions;
* the accuracy of the parties' representations and warranties in the
merger agreement, subject to materiality qualifiers;
* the delivery by us of environmental assessments relating to each
property we own or operate;
* the adjustment of our business structure, including not taking title
to agricultural inputs, so that we are substantially engaged in financial
activities;
* the performance by each party of its obligations under the merger
agreement in all material respects; and
* the absence of a material adverse effect.
Termination of the Merger Agreement (page 30)
We and Rabobank may mutually agree in writing to terminate the merger
agreement.
Either we or Rabobank may terminate the merger agreement if:
* our shareholders do not approve the merger agreement;
* the closing does not occur by February 29, 2004;
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* a governmental entity has issued a permanent injunction or other order
or decree preventing the transaction that is in effect and has become
final and nonappealable; or
* the other party breaches any of its representations, warranties or
covenants in the merger agreement, which breach is incurable or is not
cured within 30 calendar days of written notice of the breach.
In addition, Rabobank may terminate the merger agreement if our board
of directors withdraws its recommendation in favor of the proposal
contained in this proxy statement or recommends another transaction.
The merger agreement also provides that, in certain specified
circumstances, we must pay Rabobank a termination fee of $1,400,000.
Additional Information
If you have questions about the proposals or this proxy statement, or
would like additional copies of the proxy statement or the proxy, you
should call Kevin D. Schipper, our Corporate Secretary, at
(319) 277-0261.
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THE PARTIES TO THE AGREEMENT AND PLAN OF REORGANIZATION
Ag Services of America, Inc.
We are an Iowa corporation and one of the leading providers of crop
input financing and agricultural services primarily to growers of corn,
soybeans and other crops in the central United States.
Our principal executive office is located at 1309 Technology Parkway,
Cedar Falls, Iowa 50613, and our telephone number is 319-277-0261.
Our common stock is currently traded on the New York Stock Exchange
under the symbol "ASV."
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., Rabobank Nederland
Rabobank, headquartered in Utrecht, The Netherlands, is a provider
of a broad range of financial services with approximately 341 independent
local cooperative member community banks in The Netherlands, which
together have more than 1,200,000 members. Rabobank is represented
internationally with over 140 locations in 34 countries. Rabobank had
approximately $461.6 billion of assets as of June 30, 2003 (based on an
exchange rate of $1.1473 per Euro). Rabobank is a registered bank holding
company and a financial holding company under applicable U.S. federal laws
and regulations. In the United States, Rabobank offers a broad range of
financial services, primarily in the food and agriculture industry,
directly and through bank and nonbank subsidiaries. Rabobank's principal
office in the United States is located at 245 Park Avenue, New York,
New York 10167 and its telephone number is 212-916-7800.
Utrecht-America Acquisition Corp. II
Merger Sub is an Iowa corporation formed solely for the purpose of
facilitating the transactions contemplated by the merger agreement.
Merger Sub is an indirect wholly-owned subsidiary of Rabobank.
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THE SPECIAL MEETING
Date, Time and Place
We are furnishing this proxy statement to holders of our common
stock in connection with the solicitation of proxies by our board of
directors for use at the special meeting to be held on Tuesday,
December 30, 2003, 9:00 a.m., local time, at our headquarters at
1309 Technology Parkway; Cedar Falls, Iowa, and at any adjournments or
postponements of the special meeting. This proxy statement, the
attached notice of special meeting and the accompanying proxy card are
first being sent or given to our shareholders on or about December 1, 2003.
Matter to Be Considered
At the special meeting, holders of record of our common stock as of
the close of business on November 25, 2003 will consider and vote upon a
proposal to approve the merger agreement. A copy of the merger agreement
is attached as Annex A to this proxy statement.
Record Date and Shares Entitled to Vote; Procedures for Voting; Quorum
Our board of directors has fixed the close of business on
November 25, 2003, as the record date for determining the holders of
shares of our common stock who are entitled to notice of, and to
vote at, the special meeting. A shareholders' list will be available
for inspection by any shareholder entitled to vote at the special
meeting beginning two business days after the date of the Notice of
Special Meeting and continuing through the special meeting. As of
the record date, 5,479,514 shares of our common stock were issued
and outstanding. You are entitled to one vote for each share of our
common stock that you hold as of the record date.
If you are a record holder of shares of our common stock on the
record date, you may vote those shares of our common stock in person at
the special meeting or by proxy as described below under "Voting of
Proxies." If you hold shares of our common stock in "street name"
through a broker or other financial institution, you must follow the
instructions provided by the broker or other financial institution
regarding how to instruct it to vote those shares.
The presence, in person or by proxy, of shares representing at
least a majority of all the votes entitled to be cast on the approval
of the proposal is necessary to constitute a quorum for the transaction
of business at the special meeting.
Vote Required
Under the laws of the state of Iowa, we are required to submit the
merger agreement to our shareholders for approval. The merger agreement
will be approved if the number of shares cast in favor of the merger
agreement exceeds the number of shares cast against the merger
agreement.
Our directors, James D. Gerson, Henry C. Jungling, Michael Lischin,
Ervin Mellema, Gaylen D. Miller and Kevin D. Schipper, have each agreed,
under the terms of separate shareholder voting agreements, to vote
shares currently representing a total of approximately 21% of the
outstanding shares of our common stock in favor of approval of the merger
agreement. See "The Merger -- Shareholder Voting Agreements."
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Voting of Proxies
Whether or not you plan to attend the special meeting in person,
you are requested to complete, sign, date and promptly return the enclosed
proxy card in the postage-prepaid envelope provided for this purpose to
ensure that your shares are voted. Shares of common stock represented by
properly executed proxies received at or prior to the special meeting
that have not been revoked will be voted at the special meeting in
accordance with the instructions indicated on the proxies as to the
proposal and in accordance with the judgment of the persons named in
the proxies on all other matters that may properly come before the
special meeting. Shares of common stock represented by properly executed
proxies for which no instruction is given on the proxy card will be
voted "FOR" approval of the merger agreement.
If you indicate "ABSTAIN" on the proposal when granting your proxy,
your shares will still count towards a quorum but will not be counted as
a vote either for or against the proposal. Broker non-votes will be
counted towards a quorum but will not be counted as a vote either for or
against the proposal. Therefore, broker non-votes will not be counted
in determining the number of votes on the proposal. Broker non-votes
occur when brokers do not vote on some matters because they have not
been authorized to vote by the beneficial owners of the shares and do
not have discretionary authority to vote on those matters.
If the special meeting is postponed or adjourned, at any subsequent
reconvening of the special meeting, all proxies will be voted in the
same manner as they would have been voted at the original convening of
the special meeting (except for any proxies that previously have been
revoked or withdrawn effectively).
Please return your marked proxy card promptly so your shares can be
represented at the special meeting, even if you plan to attend the meeting
in person.
Revocability of Proxies
You may revoke your proxy at any time prior to the time it is voted at
the special meeting. You may revoke your proxy by:
* executing a later-dated proxy card relating to the same
shares and delivering it to our Corporate Secretary before
the taking of the vote at the special meeting;
* filing with our Corporate Secretary, before the taking of the
vote at the special meeting, a written notice of revocation
bearing a later date than the proxy card; or
* attending the special meeting and voting in person (although
attendance at the special meeting will not, in and of itself,
revoke a proxy).
Any written revocation or subsequent proxy card should be delivered
to Ag Services of America, Inc., 1309 Technology Parkway, P.O. Box 668,
Cedar Falls, IA 50613, Attention: Corporate Secretary, or hand delivered
to our Corporate Secretary or his representative before the taking of
the vote at the special meeting.
Proxy Solicitation
This proxy solicitation is being made on behalf of our board of
directors. We will solicit proxies initially by mail. Further
solicitation may be made by our directors, officers and employees
personally, by telephone, facsimile, e-mail, Internet or otherwise,
but they will not be specifically compensated for these services.
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Upon request, we will reimburse brokers, dealers, banks or similar
entities acting as nominees for their reasonable expenses incurred
in forwarding copies of the proxy materials to the beneficial owners
of the shares of our common stock they hold of record. We will bear
the expenses incurred in connection with printing, filing and mailing
of this proxy statement.
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THE MERGER
Background of the Merger
Our Historical Relationship with Rabobank
In addition to the currently proposed merger, we have had a lengthy
relationship with Rabobank, which has included the following:
* With the exception of a brief period when another bank was the
agent, Rabobank has been, since 1990, agent bank and lead credit
provider under our revolving line of credit. Today, Rabobank
is the only lender under this credit facility.
* Rabobank served as the agent bank and lead back-up liquidity
provider under an asset backed securitized financing program
that we established in March 1997 with Rabobank's support.
This program served as our principal credit facility from 1997
until 2003. As explained in "Our Relationship with Rabobank
Prior to the Proposed Merger," below, this program began a
wind-down in November 2002 and was terminated as of July 2003.
* During 2002 and early 2003, Rabobank provided investment banking
services to us through the Mergers and Acquisitions Group of its
New York branch and recommended that we pursue strategic
alternatives, including a significant investment in, or sale of,
our company. This engagement culminated in our executing an
agreement with American Securities Capital Partners, LP, which
we call ASCP, providing for a substantial equity investment by
ASCP in our company. This transaction, which was terminated in
September 2003, is described in more detail later in this section
under the heading "Our Relationship with Rabobank Prior to the
Proposed Merger."
* Robeco, LLC (formerly known as Weiss Peck & Greer, L.L.C.), an
indirect subsidiary of Rabobank that provides investment and
advisory services in the United States, reported that as of
October 31, 2003, it held approximately 3.1% of our Common Stock.
Our Relationship with Rabobank Prior to the Proposed Merger
Our business is seasonal in nature, and depends in large part upon
continued access to capital markets and the availability of large amounts
of debt financing. In February of 2002, we defaulted on our principal
credit facility, a $345 million asset backed securitization program, in
which Rabobank participated as a back-up liquidity provider that was
supported by a surety bond issued by MBIA. This default triggered a
default under our secondary facility, a $45 million revolving line of
credit agented by Rabobank. Upon default, MBIA took control of our
collection accounts and began an orderly wind-down of the facility and
the securitization program. At the time of the default, we had made
significant commitments to farmers to fund their 2002 crop year
financing needs. Also at that time, Rabobank, as the lead lender under
our secondary facility, began to actively participate in our efforts
to get the MBIA defaults waived and to increase our financing
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commitments to a level allowing us to meet our commitments for the
2002 crop year. MBIA agreed to increase the asset securitization
program from $345 million to $375 million in exchange for Rabobank
increasing our secondary facility from $45 million to $80 million,
payment of certain fees to MBIA and certain other terms and conditions,
which ultimately limited our ability to commit to or fund 2003 crop
year advances. Rabobank provided 100% of the increase to the secondary
facility.
In May 2002, we retained the investment banking services of Rabobank,
through the Mergers and Acquisitions Group of its New York branch. As
part of its investment banking activities, Rabobank analyzed our capital
structure, including the debt facilities we had in place at that time.
On June 10, 2002, Rabobank recommended that we pursue strategic
alternatives, including a significant investment in, or
sale of, our company. The recommendation was based in large part
on our need for additional capital to support increased credit
facilities in a very challenging credit environment.
At our request, Rabobank initiated contact with 75 parties to elicit
their interest in acquiring or making an investment in our company.
These potential investors consisted of 34 financial sponsors, 33 commercial
banks and other specialty financial institutions and eight strategic
companies in the wholesale/retail crop input distribution industry or
related industries. During the first two weeks of July 2002, Rabobank
received 31 indications of interest, which resulted in 31 fully negotiated
confidentiality agreements. By August 1, 2002, seven parties had expressed
interest in proceeding to the next stage and had requested a meeting with
our senior management. In addition to these seven parties, three crop
input participants expressed an interest in discussing joint venture
opportunities with us, but only if we could obtain a substantial investment
in our company by a financial sponsor. From September 9 to
September 12, 2002, our senior management made presentations to the seven
parties who expressed an interest in making an investment, including
ASCP. On November 2, 2002, we received a preliminary proposal from ASCP
to make a significant equity investment in us. From November 4 through
November 6, 2002, we met with several other prospective investors and
continued to negotiate the final terms of a letter of intent with ASCP.
No other prospective investor elected to proceed further with a
transaction with us.
On November 14, 2002, we publicly announced that we had signed a
letter of intent with ASCP that contemplated a substantial equity
investment by ASCP in us. Following public announcement of this letter
of intent, Rabobank and U.S. Bank National Association made available
an additional $100 million credit facility to finance 2003 crop year
commitments pursuant to an amended and restated credit agreement dated
as of December 11, 2002. In connection with this amended and restated
facility, we agreed that we would not make commitments for 2003 crop
year secured customer loans in excess of $125 million, for 2003 crop
year unsecured customer loans in excess of $20 million, or for any 2004
crop year loans or longer-term loans. We financed a portion of our
2003 crop year loan commitments not financed by the credit agreement
through sales of loan participations to other financial institutions.
Prior to executing the letter of intent with ASCP, our board of
directors had appointed a Special Committee consisting of Messrs. Gerson,
Mellema and Lischin to consider matters related to the ASCP transaction
and made a recommendation to the entire board of directors. Once the
letter of intent was signed, the Special Committee continued to review
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the transaction and oversee management's negotiations with ASCP. The
Special Committee reviewed the available alternatives, which consisted
of the ASCP transaction and liquidation. The Special Committee
ultimately recommended, and our board of directors approved, the
transaction and, on February 24, 2003, we entered into a securities
purchase agreement with ASCP. Reasons for the Special Committee's
recommendation and the board of directors approval of the transaction
included our immediate need for capital that would be satisfied in
the near term by the first tranche of the ASCP investment, our
inability to obtain credit without receiving an investment from a
significant financial partner, the limited financing alternatives
available to us and the uncertainties associated with our liquidation.
In connection with the approval by our board of directors of the
ASCP transaction, Rabobank, in its capacity as our financial adviser,
rendered a fairness opinion on February 24, 2003 to the effect that the
consideration to be received by us pursuant to the transaction was
fair, from a financial point of view, to us. Due to delays in our
securing the financing required to complete the ASCP transaction, and
upon our request, Rabobank confirmed its fairness opinion on June 2, 2003.
The securities purchase agreement provided that we would issue and
sell up to 70,000 shares of 8.375% convertible preferred stock to ASCP
for an aggregate of up to $70,000,000 in three separate tranches and
that ASCP would hold the majority of our voting power upon the first
closing of the sale of convertible preferred stock. The agreement also
required us to obtain acceptable levels of financing as a condition to
ASCP's obligations to make the various investments.
Once we signed the agreement with ASCP, our bank lenders, Rabobank
and U.S. Bank, increased the 2003 crop year facility to $200 million.
In June 2003, the 2003 crop year facility was combined with the Rabobank
secondary facility into a $265 million revolving line of credit. The
maturity of this facility was extended several times to allow us and
ASCP to arrange long term facilities needed to capitalize us. However,
those amendments also provided that an event of default would occur
if ASCP did not make an investment of at least $35 million in us on or
before June 15, 2003. Rabobank and U.S. Bank subsequently extended
this deadline to June 30, 2003. MBIA was fully repaid in July 2003.
Once it became clear that the ASCP investment was not going to occur
before June 30, 2003, we commenced negotiations with our bank lenders,
Rabobank and U.S. Bank, to amend the credit agreement to take into account
the possibility either of an ASCP investment or, if that did not occur by
September 15, 2003, a controlled liquidation of our loan portfolio.
That amendment, which became effective as of June 26, 2003, provided for
a final maturity of October 31, 2004, with several intermediate
reductions in the amount of credit that could be outstanding in respect
of particular types of our loans to customers. Our previous agreement
not to make 2004 crop year or longer-term loan commitments remained in
effect notwithstanding that amendment. The amendment also required us
to begin marketing our longer-term loans through a third-party sales
agent acceptable to the banks no later than October 1, 2003.
Also during that time, in order to fulfill the conditions to ASCP's
obligations, we attempted to replace MBIA's surety bond with another bond
or alternative securitization structure. To this end, we worked on a
securitization structure with a new surety bond issuer and a syndicate
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of banks, including the negotiation of documentation and a rating agency
presentation. Rabobank was prepared to participate in the credit
facility in the amount of $120 million. However, we were unable to
complete the necessary agreements on a timely basis on terms consistent
with ASCP's requirements.
Though the ASCP transaction was approved by our shareholders on
July 14, 2003, the proposed transactions with ASCP were never
consummated because we were unable to secure adequate financing
commitments that were conditions of ASCP's investment in us. We gave
notice terminating the agreement to ASCP on September 3, 2003. ASCP
and we entered into a letter agreement dated September 15, 2003,
pursuant to which we paid ASCP an additional $375,000 to terminate
all further obligations under that agreement, except certain
indemnification and confidentiality obligations.
Events Leading to the Proposed Transaction
Shortly after we gave notice of our intent to terminate the agreement
with ASCP, we contacted Rabobank to ask whether it would meet with us to
discuss a possible transaction. On September 11, 2003, our management met
with representatives of Rabobank to discuss the possibility of Rabobank
acquiring us.
On September 12, 2003, we signed an exclusivity agreement with
Rabobank under which Rabobank would perform due diligence and evaluate
its interest in us with respect to a potential acquisition. The
exclusivity agreement, however, contained an exception permitting us to
seek and negotiate an equity investment of up to 25% with a third party.
Throughout this period, we continued to seek additional sources of
financing as well as an equity investor, but were ultimately unable to
initiate a transaction.
Our board concluded that any proposal by Rabobank should also be
reviewed by our independent directors because of the potential interests
of Messrs. Miller, Jungling and Schipper in the proposed merger. The
board again formed a Special Committee consisting of Messrs. Gerson,
Mellema and Lischin. For more information regarding the interests of
Messrs. Miller, Jungling and Schipper in this transaction, see the
section entitled "The Merger - Interests of Certain Persons in the Merger"
in this proxy statement.
The Special Committee requested that management update the
liquidation analysis completed in May, 2003 in connection with the
board's consideration of the ASCP equity purchase transaction. The
revised liquidation analysis indicated an estimated discounted net
present value of $7.57 per share. The analysis valued us as if we
commenced winding down our business and disposing of our assets in an
orderly fashion, based upon the consideration projected to be received
by us from the sale of our assets and operations over a four-year period,
after deducting estimated selling costs and the application of proceeds
to our obligations. That valuation assumed that remaining cash would be
distributed to shareholders in the form of semi-annual liquidation
dividends, with the final dividend occurring in October, 2007. The
updated analysis reflected our then current financial expectations
including, but not limited to, all charges in connection with the
terminated ASCP transaction, all fees associated with financing
necessary to complete the liquidation and all bank fees due pursuant
to our current credit agreements.
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As Rabobank completed its due diligence process and finalized its
offer, on October 21, 2003, the Special Committee engaged Burnham
Securities Inc. to review the proposed merger and to evaluate its fairness
from a financial point of view to all shareholders.
On October 27, 2003, the Special Committee reviewed the liquidation
analysis and the terms of the proposal by Rabobank to acquire our
common stock for $8.50 per share. At that meeting, Burnham Securities
presented its analysis and delivered its oral opinion to the Special
Committee, subsequently confirmed in its written opinion dated as of
October 31, 2003, to the effect that, as of October 31, 2003 and based
upon the assumptions made, matters considered and limits of review set
forth in its written opinion, the consideration to be received by our
shareholders pursuant to the merger was fair, from a financial point of
view. The Special Committee discussed liquidation as our only viable
alternative to the Rabobank proposal, and reviewed the impact liquidation
would have on our shareholders, employees and customers. On
October 31, 2003, the Special Committee recommended that we enter into
the transaction with Rabobank, our board of directors unanimously
approved the proposed transaction and we executed the merger agreement
with Rabobank and Merger Sub on the same date.
After our agreement with ASCP was terminated, and concurrently with
our discussions with Rabobank leading to the merger agreement, we
negotiated another amendment and restatement to the credit agreement
with our bank lenders, Rabobank and U.S. Bank, which was executed on
October 31, 2003. This amendment permits us to finance a limited volume
of 2004 crop year loans, reduces and further defers significant amendment
and arrangement fees otherwise payable to Rabobank and U.S. Bank, extends
the deadlines by which the outstanding financing for pre-2004 year crop
year loans must be reduced, and extends the final maturity of the
financing by one year, to October 31, 2005. The maximum amount of
financing available at any one time under the new amended and restated
credit agreement is $215 million. Because U.S. Bank was not interested
in continuing to participate in our financing, Rabobank bought their
position in the financing immediately before the October 31, 2003
amendment and restatement of the credit agreement. The amended credit
agreement also permits us, subject to subordination arrangements and
security documents that are satisfactory to Rabobank, to grant liens
on our assets to secure the aggregate $4.4 million of loans that we
owe to Messrs. Jungling, Miller and Schipper.
Reasons for the Merger
In reaching its decision to approve the merger agreement and to
recommend that our shareholders approve the merger agreement, our
board of directors consulted with management and Burnham Securities.
Our board of directors considered a number of factors, including,
without limitation, the following:
* Immediate Need for Capital. The market for debt financing has
been and continues to be very challenging. We have an immediate
need for capital to support our business. We believe that
Rabobank will be able to arrange for, or provide, that financing.
* Lack of Alternatives. Given the imminent time demands of the
growing cycle, our most likely alternative to entering into a
strategic relationship with, or acquisition by, a source of
financing would be that of liquidation.
-16-
* Liquidation Analysis. Prior to the execution of the merger
agreement, a liquidation analysis was updated by management,
which showed that the discounted net present value of the amount
to be realized upon liquidation of the company was estimated to
be $7.57 per share.
* Uncertainties of Liquidation. The Special Committee believes
that the process of liquidation could be very costly and uncertain.
In addition, our credit agreement lenders required that our credit
facilities be reduced in accordance with a very strict timetable,
with payment in full to occur within a shorter time period than the
four years that management would consider to be the optimum period
for the normal course of business-type liquidation. Accordingly,
the likelihood of our being able to undergo an orderly liquidation
would be low. Therefore, our board of directors and the Special
Committee concluded that the completion of the merger transactions
would be a preferable alternative for us.
* Recent Market Prices. The $8.50 per share merger consideration
represents a 39.6% premium over the average closing price of our
common stock over the 30 days ended October 31, 2003, the last
trading day prior to the date upon which the proposed merger
was publicly announced.
* Cash Transaction. The merger consideration is all cash, which
provides certainty of value to our holders of common stock compared
to a transaction in which shareholders would receive stock or other
securities. Rabobank has represented to us in the merger agreement
that it has the financial capability to consummate the merger.
* Ability to Access Competitively Priced Credit. We have experienced
difficulty in obtaining credit at competitive rates. Due to the
seasonal nature of our business and the variable marketing cycles
for the crops we finance, many types of credit facilities, such as
asset backed securitization, could be inefficient and, as a result,
costly. Our ability to grow is dependent on the availability of
large amounts of credit at competitive rates.
Factors Considered by the Board
Our board of directors has approved the merger agreement and has
determined that the merger is fair to, and in the best interests of,
our company and our shareholders. During the course of its deliberations,
the board considered, with the assistance of our management and our
financial and other advisors, various factors, including, but not limited
to, the following:
* All of the reasons described under "Reasons for the Transaction"
above;
* Our financial condition, as well as our historical results of
operations and prospects for the future;
* Our limited ability to obtain other sources of capital and credit;
* The terms of the merger agreement, including the provisions for a
break-up fee if we terminate the merger agreement under certain
circumstances;
* Advice rendered by the financial advisor and legal counsel to our
board of directors;
* The oral opinion of Burnham Securities presented to the Special
Committee on October 27, 2003, subsequently confirmed in its written
opinion dated October 31, 2003, to the effect that, as of that date
and based upon the assumptions made, matters considered and limits
of review set forth in its written opinion, the consideration to be
received by the shareholders pursuant to the merger was fair, from
a financial point of view;
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* The fact that gains from an all-cash transaction would be taxable
to our U.S. shareholders for income tax purposes;
* Discussions with management;
* Interests in the transaction of some of our directors and executive
officers;
* Stock price and volume performance for the prior year; and
* The liquidation analysis.
The board did not quantify or otherwise assign relative weights to
the individual items described above. In considering the factors described
above, individual members of the board may have given different weight to
different factors. The board considered all of these factors as a whole
and believes that the factors favor the transaction contemplated by the
merger agreement.
Opinion of Our Financial Advisor
Pursuant to an engagement letter dated October 21, 2003, the Special
Committee retained Burnham Securities as its financial advisor in
connection with its consideration of a possible transaction in which
Rabobank will acquire for cash all of the outstanding shares of Ag Services
for $8.50 per share (and convert each option to purchase Ag Services
common stock into a right to receive cash equal to the excess of $8.50
over the exercise price of the option multiplied by the number of shares
of common stock subject to the option) by means of the merger of a
newly-created subsidiary of Rabobank with and into Ag Services, so that
Ag Services survives the merger as a wholly-owned indirect subsidiary
of Rabobank. Burnham Securities is a nationally recognized firm and,
as part of its investment banking activities, is regularly engaged in
the valuation of businesses and their securities in connection with
such merger transactions and other types of acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. The
Special Committee selected Burnham Securities as its financial advisor
on the basis of its experience and expertise in transactions similar to
the merger. Burnham Securities was not retained to, nor did it, advise
Ag Services or the Special Committee with respect to alternatives to the
merger, assessment of or negotiation of the financial terms of the merger,
or the underlying decisions of the Special Committee or board of
directors to proceed with or effect the merger. Furthermore, Burnham
Securities was not requested to, nor did it, solicit or assist Ag Services
in soliciting indications of interest for all or part of Ag Services.
On October 27, 2003, Burnham Securities rendered its oral opinion to
the Special Committee of our board of directors and subsequently confirmed
in its written opinion dated October 31, 2003, that as of that date and
based upon its review and analyses and such other factors as it deemed
relevant, the consideration to be received by the shareholders of
Ag Services in the merger was fair, from a financial point of view, to
the shareholders of Ag Services. No limitations were imposed by the
Special Committee on the scope of Burnham Securities' investigation or
the procedures to be followed by Burnham Securities in rendering its
opinion. Burnham Securities did not determine the form or amount of
consideration to be offered to shareholders in the merger, which was
agreed to as a result of negotiations between the Special Committee
and Rabobank.
The full text of Burnham Securities' written opinion to the Special
Committee and for the information of the board of directors which sets
forth assumptions made, matters considered and limitations on the review
undertaken in connection with the opinion is attached hereto as Annex B
and is incorporated herein by reference. The following summary of Burnham
Securities' opinion is qualified in its entirety by reference to the full
text of such opinion. Burnham Securities' opinion is directed only to the
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fairness of the consideration to be received by the shareholders of
Ag Services in the merger from a financial point of view, has been provided
for the use by the Special Committee in its evaluation of the merger,
and does not address any other aspect of the merger. Burnham Securities'
opinion is addressed to the Special Committee and for the information of
the board of directors only and does not constitute a recommendation to
any shareholder as to whether to accept the consideration being offered
to such shareholder in the merger or as to how such shareholder should
vote with respect to the merger.
Analysis of Burnham Securities
Burnham Securities, in undertaking the analysis of the proposed
merger, relied on traditional valuation techniques, conducted other
financial studies and analyses, performed such other investigations
and took into account such other factors as it deemed necessary. In
the course of such analysis, Burnham Securities:
* reviewed publicly available information concerning Ag Services,
including its SEC filings dating back to February 28, 1999;
* reviewed certain internal financial statements and other financial
and operating data prepared by Ag Services' senior management;
* analyzed Ag Services' senior management's recently revised
liquidation analysis which gives effect to a liquidation of Ag Services,
conducted discussions with senior management on its liquidation
assumptions and compared the liquidation analysis with outcomes cited in
the Ag Services Proxy Statement, dated June 12, 2003, which was submitted
to Ag Services' shareholders in connection with the prior proposed
securities purchase agreement with ASCP;
* considered the financial and operating changes of Ag Services that
have occurred since February 28, 2002;
* reviewed and discussed with senior management of Ag Services certain
foregoing and prospective strategic and financial issues, including the
impact of the merger;
* compared the financial performance of Ag Services and the prices
and trading activities of its common stock with those of certain other
comparable publicly-traded companies and their respective securities;
* analyzed the trading history of the common stock of Ag Services;
* reviewed premiums of announced or concluded transactions in the
past twelve months for companies classified as Agricultural Services and
Non-Depository Credit Institutions and compared them with the premium
over 1-day and 30-day average closing prices of Ag Services' common
stock on the NYSE;
* compared the merger with other business combination transactions
and proposed transactions involving publicly-traded companies as reported
by reliable information services; and concluded that the only viable
transaction with which to compare the merger was the recently terminated
securities purchase agreement with ASCP;
* reviewed drafts of the merger agreement, as well as drafts of other
related documents between and among the parties to the merger as they
became available;
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* considered the prospects for Ag Services and its shareholders if the
merger were not to be effected and if Ag Services were to implement a
liquidation plan due to the unavailability of credit beyond one year;
* considered Ag Services' inability to secure an appropriate credit
facility or a financially sound equity partner after expending significant
human and financial resources in such endeavors for more than a year and a
half; and
* performed such other analyses and considered such other factors as
Burnham Securities deemed appropriate.
Burnham Securities assumed and relied upon the accuracy and
completeness of all of the financial and other information provided to,
reviewed or analyzed by it in connection with its opinion without making,
or assuming any responsibility for making, any independent verification
of such information. Burnham Securities assumed that the merger agreement
and related documents in the form finally entered into did not differ
in any material respect from the drafts furnished to it and that the
merger will be consummated on the terms set forth in these agreements
without waiver or amendment of any of their material terms.
With respect to the liquidation analysis and business prospects,
Burnham Securities assumed that this information was reasonably prepared
on a basis consistent with prior practice and that this information
reflects the best currently available estimates and judgments of Ag
Services' senior management, who informed Burnham Securities that,
absent the merger, Ag Services would be forced to liquidate and that,
if Ag Services were liquidated, the discounted book value of Ag Services
would likely be less than the consideration to be received by the
shareholders in the merger. With regard to the liquidation analysis,
Burnham Securities further assumed, with the Special Committee's consent,
that all material assets and liabilities (contingent or otherwise) of Ag
Services are as set forth in the liquidation analysis. Other than the
liquidation analysis, Ag Services has not provided Burnham Securities
with any financial forecasts relating to the merger, so Burnham
Securities expressed no opinion with respect to the liquidation analysis
or any of the assumptions, estimates or judgments upon which it was
based. Further, Burnham Securities expressed no opinion as to the
viability of Ag Services as a going concern if the merger is not effected.
In addition, Burnham Securities has not made, or assumed any responsibility
for making, any independent evaluation or appraisal of the assets or
liabilities of Ag Services, nor has it been furnished with any such
evaluation or appraisal. Burnham Securities' opinion is necessarily based
on economic, market and other conditions as they existed and as they could
be evaluated as of the date of its opinion. Although subsequent
developments may affect its opinion, Burnham Securities does not have
any obligation to update, revise or reaffirm its opinion. Burnham
Securities was not requested to opine upon, and in its opinion did not
in any manner address, Ag Services' underlying business decision to
proceed with the merger. Burnham Securities was not requested to solicit
or entertain any other offers for the purchase of the stock or assets of
Ag Services or any other transaction involving Ag Services. The opinion
of Burnham Securities was provided for the information and assistance of
the Special Committee and the board of directors in connection with their
consideration of the proposed merger and is not a recommendation of how
any Ag Services' shareholder should vote.
Set forth below is a summary of the material financial analyses
considered by Burnham Securities in connection with providing its written
opinion to the Special Committee and for the information of the board of
directors. This summary does not purport to be a complete description of
the analyses performed by Burnham Securities or of the presentation by
Burnham Securities to the Special Committee on October 27, 2003. Burnham
Securities believes that its analyses must be considered as a whole and
that selecting portions of its analyses and the factors considered by it,
without considering all factors and analyses, could create an incomplete
or misleading view of the process underlying its opinion.
-20-
Market Multiple Analysis of Publicly Traded Companies.
Burnham Securities compared the historical financial, operating and stock
market performances of the following seven publicly traded companies that
it considered relevant to the historical financial and operating performance
of Ag Services based upon publicly available financial information:
* American Business Financial Services, Inc., which is a financial
services company that originates business purpose loans and first and
second mortgage loans;
* Consumer Portfolio Services, Inc., which is a consumer finance
company specializing in the business of purchasing, selling, and servicing
retail automobile installment contracts originated by dealers in the sale
of new and used automobiles, light trucks and passenger vans;
* HPSC, Inc., which is a financial services company engaged in
financing healthcare providers and provides asset-based lending to
commercial and industrial businesses;
* Medallion Financial Corp., which is a regulated investment company
whose principal activities are the origination and servicing of commercial
secured loans for taxi medallions and taxicab rooftop advertising;
* LESCO, Inc., which manufactures and sells fertilizer, turf
protection products, equipment, grass seed and replacement parts and
golf course accessories to the professional sector of the green
industry;
* The Andersons, Inc., which merchandises grain, operates grain
elevator facilities, manufactures agricultural fertilizer and
corncob-based products and purchases and repairs railcars; and
* Terra Industries, Inc., which is involved in the production and
marketing of both nitrogen products and methanol.
None of these companies is identical to Ag Services. Burnham
Securities selected these companies whose characteristics resembled
or are similar to Ag Services' competitors. Burnham Securities elected
to combine specialty finance, agriculture-related and seed companies
because, after reviewing these categories separately, it found the
comparisons were similar. Burnham Securities also attempted to select
companies that most closely resemble Ag Services with regard to its
business, its seasonal and niche nature, and its micro cap status.
Burnham Securities analyzed, among other things, the market values and
certain other financial data for these companies, including their
revenues, earnings before interest, taxes, depreciation and amortization,
or EBITDA, earnings per share, enterprise value (market value of equity
plus its total debt less cash) and all other relevant financial
information, in each case for the most recent 12-month period for which
information was available.
Burnham Securities calculated and compared various financial
multiples and ratios. Each market multiple used by Burnham Securities
in its analysis was compiled and represents an average of comparable
companies.
Multiple Composite Median
Price to Sales 0.2
Enterprise Value to EBITDA 14.2
Price to Earnings 17.1
Price to Cash Flow 4.7
Price to Book 0.9
-21-
These multiples were applied against Ag Services' financial
performance for the twelve months ended August 31, 2003 to calculate
an estimated valuation. The application of two ratios, specifically,
Enterprise Value to EBITDA and Price to Operating Cash Flow, were
not meaningful because the resulting valuation estimates produced
negative values.
Using the market multiple method, Burnham Securities derived
a valuation range from $23.6 to $70.1 million. This valuation range,
on a price per share basis, is $4.29 to $12.75, respectively.
Burnham Securities did not apply a discount to this analysis even
though the selected comparable companies all possessed unqualified
opinions from their respective auditors, unlike Ag Services, whose
auditors' most recent audit report on the Ag Services financial
statements contained an explanatory paragraph reflecting substantial
doubt about the ability of Ag Services to continue as a going concern.
Had Burnham Securities applied a discount to account for this going
concern matter, it would have had the effect of reducing both the low
and high ends of the range derived using the market multiple method.
Comparable Transactions Analysis. Burnham Securities analyzed
other acquisitions deemed comparable to the proposed merger for reasons,
including:
* the size of the transactions were less than $100 million not
including assumption of liabilities and debt;
* the transactions involved non-depository credit institutions,
agriculture-related or seed sectors; and
* the transactions were announced since January 1, 2002.
Burnham Securities identified five transactions that met the
preceding criteria, selecting only transactions for which relevant
financial details were publicly available, but concluded that none
possessed enough similarity to the merger to warrant inclusion in its
analysis. Burnham Securities did include the ASCP transaction, which
is described in "The Merger - Background of the Merger" in this proxy
statement, in its analysis because the dollar amount per share of the
amount Ag Services would have received in this transaction was similar
to the consideration its shareholders would receive in the merger. Ag
Services was facing at the time it entered into the agreement with ASCP,
and continues to confront, a dearth of available credit to employ in
its business, and the ASCP transaction, when submitted to the Ag Services
shareholders, was overwhelmingly approved. The five transactions
identified by, but not included in the analysis of, Burnham Securities
are:
* Consumer Portfolio Services, Inc.'s acquisition of TFC Enterprises,
Inc., which purchases motor vehicle installment sales finance contracts
from automobile dealers and securitizes and services such contracts;
* C&F Financial Corporation's acquisition of Moore Loans Inc., which
provided automobile loans in Richmond, Roanoke, Hampton Roads and portions
of Eastern Tennessee;
* Newtek Capital's acquisition of Comcap Holding Corp., which was
the 15th largest originator of SBA guaranteed loans with a license to
operate nationally as a participant in the SBA's "preferred lender program";
* Sterling Financial Corp.'s acquisition of Equipment Finance, which
was a commercial finance company that specialized in financing forestry and
land clearing equipment through more than 150 equipment dealer locations;
and,
* Cendant Corp.'s acquisition of Equivest Finance Inc., which was
involved in the financing and development of resorts.
-22-
Burnham Securities compared multiples for the merger implied by the
merger consideration and certain financial data of Ag Services to the
corresponding multiples in the ASCP transaction. In this portion of its
analysis, Burnham Securities focused on:
* total invested capital, or the total amount of capital including
debt and equity offered in the ASCP transaction, to Ag Services' sales as
a multiple of revenues for the twelve months ended August 31, 2003;
* total invested capital as a multiple of Ag Services' EBITDA for
the twelve months ended August 31, 2003;
* total invested capital to Ag Services' earnings for the twelve
months ended August 31, 2003; and,
* total invested capital to Ag Services' book value as of August 31,
2003.
Burnham Securities applied these multiplies against Ag Services'
financial information as of and for the twelve months ended August 31,
2003 to derive a range of estimated equity valuations.
Ratio ASCP Transaction
Total Invested Capital to Sales 0.4
Total Invested Capital to EBITDA 2.2
Total Invested Capital to Earnings 9.9
Total Invested Capital to Book 0.8
Using this method, Burnham Securities derived a valuation range from
$31.1 million to $57.4 million. This valuation range, on a per share basis,
is $6.20 to $10.44, respectively.
Management Liquidation Analysis. Burnham Securities received a
liquidation analysis from Ag Services' senior management that indicated
a discounted net present value per share valuation of Ag Services of $7.57,
or a total non-discounted valuation of Ag Services of $9.52. This
analysis valued Ag Services as if it commenced winding down its business
and disposing of its assets in an orderly fashion as of October 22, 2003,
based on the consideration projected to be received by Ag Services from
the sale of its assets and operations over a four-year period, after
deducting estimated selling costs and the application of proceeds to
obligations in accordance with an established order of priority. The
valuation assumed that remaining cash would be distributed to shareholders
in the form of semiannual liquidation dividends, with the final dividend
occurring in October, 2007. However, Burnham Securities performed no
independent analysis with respect to this liquidation analysis and expressed
no opinion with respect to the liquidation analysis or any of the
assumptions, estimates or judgments upon which it was based.
Market Price Analysis. Burnham Securities reviewed the historical
closing prices of Ag Services common stock on the NYSE over the thirty-day,
six-month and twelve month periods ended October 31, 2003. The averages of
these closing stock prices were $6.09, $5.99 and $6.54, respectively. The
$8.50 per share to be received by Ag Services shareholders in the merger
would represent premiums of 39.6%, 41.9% and 30.0%, respectively, over the
average daily closing price of Ag Services' common stock during these
periods. For its oral opinion delivered to the Special Committee on
October 27, 2003, Burnham Securities reviewed the historical closing prices
of Ag Services' common stock on the NYSE over the 30-day, six-month and
twelve-month periods ended October 21, 2003. The chart below shows the
low, high, and average closing price of Ag Services common stock on the
NYSE during the thirty-day, six-month and twelve month periods ended
October 31, 2003:
-23-
Closing Price of Ag Services Common Stock on the NYSE
30 Days Ended 10/31/03 6 Mon. Ended 10/31/03 1 Year Ended 10/31/03
Low $5.82 $5.10 $4.97
Average $6.09 $5.99 $6.54
High $6.45 $7.35 $11.25
Transaction Premium Analysis. Burnham Securities analyzed the price
premiums of certain recent acquisition offers over public market prices
of target companies in order to compare them with the premium over the
historical public market prices of Ag Services' common stock being offered
to the shareholders of Ag Services in the merger. Burnham Securities
examined transactions deemed to be similar to the merger that have
occurred in the twelve months ended October 21, 2003 among companies in
the Agricultural Services and Non-Depository Credit Institutions sectors
according to their Standard Industrial Classification, or SIC, codes.
Among these transactions, Burnham Securities selected eight that reported
premiums of the target's publicly traded share price over one-day and
thirty-day periods prior to the completion of the applicable transaction.
For its written opinion delivered to the Special Committee on
October 31, 2003, Burnham Securities did not analyze any additional
transactions. The following tables set forth the number of transactions
in a particular premium range, the total consideration for the target
companies (in millions of dollars) in transactions listed under a
premium range, and the average and median premium for all the transactions
in these periods.
1-Day Premium Analysis
Premium <20% 20%-30% 30%-60% 60%-90%
Number of Transactions 3 2 2 1
Total Consideration $710 $13,285 $1,061 $43
Average Premium 26.1%
Median Premium 23.0%
30-Day Premium Analysis
Premium <20% 20%-30% 30%-60% 60%-90%
Number of Transactions 4 2 1 1
Total Consideration $13,486 $1,082 $473 $57
Average Premium 24.1%
Median Premium 19.5%
For transactions that Burnham Securities selected for inclusion in
its analysis, the one-day prior period average premium was 26.1%, and the
median premium was 23%. The thirty-day prior period average premium was
24.1% and the median premium was 19.5%.
The premium in the $8.50 per share to be received by Ag Services'
shareholders over the closing price of Ag Services' common stock on the
NYSE on October 31, 2003 was 38.9%. The premium over the average of
daily closing prices of Ag Services common stock on the NYSE during the
thirty-day period ended October 20, 2003 was 41.9%. Burnham Securities
conducted the same premium analysis for periods ended October 21, 2003
for its oral opinion delivered to the Special Committee on
October 27, 2003.
The closing price of Ag Services' common stock on the NYSE on
October 31, 2003, the trading day prior to the public announcement
of the merger, was $6.12, representing a 28% discount from $8.50, the
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amount Ag Services shareholders would receive in the merger.
Reciprocally stated, $8.50 represented a 38.9% premium to the last sale
of Ag Services' common stock prior to the announcement.
Other Considerations. Burnham Securities also considered the
following key factors in making its conclusions regarding the merger:
* Since the spring of 2002, Ag Services has been operating with
insufficient capital resources and has experienced difficulty obtaining
additional credit to properly service existing customers or expand its
business.
* In the current fiscal year, Ag Services has conducted significant
reductions in personnel, has not renewed credit facilities for heretofore
satisfactory accounts, has approved a change-of-control transaction that
was terminated due to its inability to secure certain minimum credit
lines, and has prepared to implement an orderly liquidation scenario
that would result in periodic distributions to shareholders over a four
year period.
* From the time the recently terminated transaction with ASCP was
announced, the trading price of Ag Services' common stock on the NYSE
has not exceeded $8.00 per share. Effectively, this announcement placed
a cap on how high the shares might trade until that proposed transaction
was concluded successfully. Upon the announcement of the termination
of that transaction, Ag Services' share price declined to $4.85 and by
late October, 2003 had only recovered to the $6.00 - $6.50 range.
* Ag Services currently operates in a low interest rate environment,
which has made its principal markets more competitive, and Ag Services'
credit rating is impaired, which may limit its ability to secure
additional credit upon favorable terms, if at all.
* Messrs. Jungling, Miller and Schipper, who are the President,
Chairman of the Board, and Chief Executive Officer of Ag Services,
respectively, and are each members of the Ag Services board of directors,
together beneficially own approximately 19.7% of the outstanding common
stock of Ag Services. As a condition to Rabobank's execution of the
merger agreement, Ag Services entered into consultancy agreements with
Messrs. Jungling and Miller, and a new employment agreement with Mr.
Schipper. These agreements are described in the section entitled "The
Merger - Interests of Certain Persons in the Merger" in this proxy
statement.
The summary set forth above summarizes the material analyses performed
by Burnham Securities but does not purport to be a complete description of
the analyses performed by Burnham Securities in arriving at its opinion.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description.
Selecting portions of the analyses or of the summary set forth above,
without consideration of the analyses as a whole, could create an
incomplete view of the processes underlying Burnham Securities' opinion.
In arriving at its fairness determination, Burnham Securities considered
the results of all such analyses, and did not assign relative weights to
any of its analyses in preparing its opinion. No company or transaction
used in the above analyses as a comparison is directly comparable to Ag
Services or the contemplated transaction.
The above analyses were prepared solely for purposes of Burnham
Securities providing its opinion to the Special Committee as to the
fairness from a financial point of view of the cash consideration to
be received by the holders of Ag Services' common stock and do not purport
to be appraisals or necessarily reflect the prices at which businesses or
securities actually may be sold. Analyses based upon forecasts of future
results are not necessarily indicative of actual future results, which
may be significantly more or less favorable than suggested by such analyses.
-25-
Because such analyses are inherently subject to uncertainty, being based
upon numerous macroeconomic, operating and financial assumptions with
respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the parties' control or that
of their respective advisors and involve the application of complex
methodologies and educated judgments, none of Ag Services, Burnham
Securities, nor any other person assumes responsibility if future results
are materially different from those forecast.
Engagement Terms. Burnham Securities has received a fee from Ag
Services as compensation for its services as financial advisor. Ag
Services also has agreed to reimburse Burnham Securities for its expenses
and to indemnify Burnham Securities against certain liabilities arising
out of its services. One or more employees of Burnham Securities owns
shares of common stock of Ag Services.
Financing of the Merger
Rabobank has informed us that it estimates that approximately $47
million will be required to complete the purchase of shares of our common
stock and options pursuant to the merger and pay its related fees and
expenses. Rabobank expects to fund this amount through internally
available funds. The merger is not conditioned on any financing
arrangements.
Material U.S. Federal Income Tax Consequences of the Merger to our
Shareholders
The following is a summary of United States federal income tax
consequences of the merger to shareholders whose shares of our common
stock are converted into the right to receive cash under the merger.
The discussion is for general information only and does not purport to
consider all aspects of United States federal income taxation that might
be relevant to our shareholders. The discussion is based on current law
which is subject to change, possibly with retroactive effect. The
discussion applies only to shareholders who hold shares of our common
stock as capital assets, and may not apply to shares of our common stock
received in connection with the exercise of employee stock options or
otherwise as compensation, or to certain types of shareholders (such as
insurance companies, banks, tax-exempt organizations, financial
institutions and broker-dealers) who may be subject to special rules.
This discussion does not discuss the tax consequences to any shareholder
who, for United States federal income tax purposes, is a non-resident
alien individual, foreign corporation, foreign partnership or foreign
estate or trust, and does not address any aspect of state, local or
foreign tax laws.
The receipt of cash for shares of our common stock in the merger
will be a taxable transaction for United States federal income tax
purposes. In general, a shareholder who surrenders shares of our
common stock for cash in the merger will recognize capital gain or
loss for United States federal income tax purposes equal to the
difference, if any, between the amount of cash received and the
shareholder's adjusted tax basis in the shares of our common stock
surrendered. Gain or loss will be determined separately for each
block of shares (i.e., shares acquired at the same cost in a single
transaction) surrendered for cash pursuant to the merger. Such gain
or loss will be long-term capital gain or loss provided that a
shareholder's holding period for such shares is more than 12 months
at the time of the consummation of the merger. Long-term capital
gains of individuals are eligible for reduced rates of taxation.
There are limitations on the deductibility of capital losses.
Backup withholding will apply to all cash payments to which a
holder of shares or other payee is entitled pursuant to the merger
agreement, unless the shareholder or other payee provides a taxpayer
identification number (social security number, in the case of
individuals, or employer identification number, in the case of other
shareholders), certifies that such number is correct, and otherwise
complies with the backup withholding tax rules. If the merger is
consummated, the paying agent will mail to each of our shareholders a
-26-
letter of transmittal and instructions for exchanging his shares.
Each of our shareholders and, if applicable, each other payee, should
complete, sign and return the Substitute Form W-9 included as part of
the letter of transmittal, in order to provide the information and
certification necessary to avoid backup withholding tax, unless an
exemption applies and is established in a manner satisfactory to the
paying agent.
Backup withholding is not an additional tax. Any amounts withheld
under the backup withholding rules will be allowed as a refund or a credit
against your United States federal income tax liability provided the
required information is furnished to the IRS.
THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE
ARE FOR GENERAL INFORMATION PURPOSES ONLY AND ARE NOT INTENDED TO
CONSTITUTE A COMPLETE DESCRIPTION OF ALL TAX CONSEQUENCES RELATING
TO THE MERGER. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH
SHAREHOLDER SHOULD CONSULT THE SHAREHOLDER'S TAX ADVISOR REGARDING
THE APPLICABILITY OF THE RULES DISCUSSED ABOVE TO THE SHAREHOLDER AND
THE PARTICULAR TAX EFFECTS TO THE SHAREHOLDER OF THE MERGER, INCLUDING
THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS.
Regulatory Considerations; Changes in Structure of Our Business
The merger must be approved by the Dutch Central Bank pursuant to
Article 24, Section 1 of the Credit System (Supervision) 1992. Rabobank
filed an application for approval with the Dutch Central Bank on
November 4, 2003. Rabobank has informed us that it believes the
application will be approved on a timely basis. However, there can be
no assurance that the approval will be obtained, nor can there be any
assurance as to the date of any approval. There also can be no assurance
that any approval will not contain unacceptable conditions or requirements.
Rabobank is a registered bank holding company and a financial
holding company under applicable U.S. laws and regulations. These laws
and regulations limit the types of businesses Rabobank can acquire in
the United States. Historically, we have purchased and sold seed,
fertilizer and other agricultural inputs. Purchasing and selling these
kinds of goods are generally not permitted in the United States for
companies like Rabobank. Under the terms of the merger agreement, it
is a condition to Rabobank's obligation to complete the merger that,
immediately prior to and as of the closing date we shall have adjusted
the structure of our business such that we do not take title to
agricultural inputs and such that we shall be engaged substantially in
activities that are financial in nature, incidental to a financial
activity, or otherwise permissible for a financial holding company in
accordance with the regulations of the Board of Governors of the
Federal Reserve System.
For the purposes of the applicable regulations, "substantially
engaged" means that at least 85% of a company's consolidated annual
gross revenues or consolidated total assets come from or are related
to these types of activities. We currently are taking the necessary
steps to conform to this limitation and we expect to complete this
process by year-end 2003. We have represented to Rabobank in the
merger agreement that, in our best judgment, the changes to our
business and operations required to conform to this limitation will
not have an adverse effect on our results of operations.
Appraisal Rights
Our shareholders are not entitled to appraisal rights in connection
with the transactions contemplated by the merger agreement or any of
the other proposals presented at the special meeting.
-27-
Shareholder Voting Agreements
As a condition to entering into the merger agreement, Rabobank required
that our directors, James D. Gerson, Henry C. Jungling, Michael Lischin,
Ervin Mellema, Gaylen D. Miller and Kevin D. Schipper, enter into
separate shareholder voting agreements. As of the record date for
the special meeting, these shareholder voting agreements
collectively covered a total of approximately 21% of the outstanding
shares of our common stock.
Covenants
Under his shareholder voting agreement, each shareholder party
has agreed:
* to vote in favor of the approval of the merger agreement and
each of the transactions contemplated by the merger agreement;
* not to sell, transfer, pledge, assign or otherwise dispose
of any of the shares of our common stock subject to the shareholder voting
agreement until the merger is consummated or the merger agreement is
terminated, except for transfers required by law; and
* to take all reasonable action necessary or desirable to permit
consummation of the transactions contemplated by the merger agreement
at the earliest possible date and not to take any action which would
substantially impair the prospects of completing those transactions.
Interests of Certain Persons in the Merger
In considering the recommendation of our board of directors, you
should be aware that some of our directors and executive officers may be
deemed to have interests in the transactions contemplated by the merger
agreement that are different from, or in addition to, those of our
shareholders.
Gaylen Miller, the Chairman of our board of directors, Henry Jungling,
our President and a member of our board of directors, Kevin Schipper, our
Chief Executive Officer and a member of our board of directors, and Shawn
Smeins, our Chief Operating Officer, each currently has an employment
agreement with us. In addition, as a condition to Rabobank's execution
of the merger agreement, we entered into consultancy agreements with
Messrs. Miller and Jungling that amend the terms of their current
employment agreements pending the consummation of the merger and provide
for their continued employment with us as consultants and service as
directors following the merger if consummated. Also as a condition to
Rabobank's execution of the merger agreement, we entered into new
employment agreements with Messrs. Schipper and Smeins which amend the
terms of their current employment agreements in certain respects pending
the consummation of the merger and provide for their continued employment
with us as executive officers following the merger if consummated. The
terms of these agreements are described in more detail below under the
sections entitled "Employment Agreements" and "Consultancy and
Non-Competition Agreements."
In addition, we have received loans from Messrs. Miller, Jungling
and Schipper in the aggregate amount of $4,419,760. Pursuant to the
merger agreement, we have agreed to repay these loans in full following
the merger.
-28-
Employment Agreements
Messrs. Schipper and Smeins each currently has an employment agreement
with us. As a condition to Rabobank's execution of the merger agreement,
we entered into new employment agreements with Messrs. Schipper and
Smeins. Pending the merger, these new agreements have no effect on the
terms of the existing employment agreements except that Messrs. Schipper
and Smeins agreed to remain in their current positions until the merger
is completed and agreed to waive all payments that would otherwise be
owed to them in connection with the merger. Once the merger is
completed, the existing employment agreements will be terminated and
replaced by the new employment agreements. Following the merger, the
employment agreements provide for the following:
* Mr. Schipper shall be employed as our chief executive officer,
and Mr. Smeins shall be employed as our chief operating officer,
through December 31, 2005.
Compensation
* Kevin Schipper shall be entitled to a base salary equal to 80% of
his current base salary, and Shawn Smeins shall be entitled to a
base salary equal to 125% of his current base salary;
* In each of 2004 and 2005, Mr. Schipper shall be entitled to bonus
compensation of 50% of his base salary if we achieve 90% of certain
financial targets set forth in our business plan. For each
additional percentage achieved, Mr. Schipper will receive an
additional 5% of his base salary. If more than 100% of the
financial target is achieved for either of those years, we will
consider whether Mr. Schipper is entitled to additional bonus
compensation. In no event shall Mr. Schipper's bonus compensation
for each of 2004 and 2005 be less than 37.5% of his base salary.
* In each of 2004 and 2005, Mr. Smeins shall be entitled to bonus
compensation of 26.7% of his base salary if we achieve 90% of
certain financial targets set forth in our business plan. For each
additional percentage achieved, Mr. Smeins will receive an additional
1.33% of his base salary. If more than 100% of the financial target
is achieved for each of those years, we will consider whether Mr.
Smeins is entitled to additional bonus compensation. In no event
shall Mr. Smeins bonus compensation for each of 2004 and 2005 be
less than 20% of his base salary.
* Messrs. Schipper and Smeins shall also be entitled to participate
in all retirement, health and welfare plans and to other benefits
comparable to those provided under their existing employment
agreements.
Termination
* We may terminate either Mr. Schipper or Mr. Smeins in the event
that there should occur an event constituting certain specified
misconduct or the material breach by the employee or any covenant
or provision of his employment agreement.
In addition:
* Either of Messrs. Schipper or Smeins have the right to terminate
his employment agreement for good cause upon a change of control
of Ag Services or a diminution of his responsibility or, within
the next 18 months, his relocation without his consent.
* If we terminate either employment agreement for any reason other
than the employee's death, total disability, misconduct or material
breach of any covenant or provision, or if the employee terminates
his employment for good reason as provided above, the employee shall
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be entitled to receive his base salary and benefits for the remainder
of the employment period or for one year, whichever is longer.
Restrictive Covenant
* Each of Messrs. Schipper and Smeins has agreed that during his
employment, and for two years thereafter, he will not, directly
or indirectly, compete with our business or contact any of our then
existing dealers, sources of supply or customers with respect to our
business or employ any of our then existing employees, agents or
representatives. Each employee has also agreed not to disclose to
any third party any of our confidential information or trade secrets.
Consultancy and Non-Competition Agreements
Messrs. Jungling and Miller each currently has an employment agreement
with us. As a condition to Rabobank's execution of the merger agreement,
we entered into consultancy and non-competition agreements with Messrs.
Jungling and Miller. Pending the merger, these new agreements have no
effect on the terms of the existing employment agreements except that
Messrs. Jungling and Miller agreed to remain in their current positions
until the merger is completed and agreed to waive all payments that
would otherwise be owed to them in connection with the merger. Once the
merger is completed, the existing employment agreements will be
terminated and replaced by the consultancy and non-competition agreements.
Following the merger, the consultancy and non-competition agreements
provide for the following:
* Each of Messrs. Jungling and Miller has agreed to serve as a
director for at least one year following the merger if so elected.
* Each of Messrs. Jungling and Miller has also agreed to provide
consulting services to us following the merger for at least one year and,
if we both so agree, for a second year.
* During each year of the consulting period, we will pay each
consultant $175,000. If the consulting agreement is in effect for
one year, we have agreed to pay each individual $300,000 at the end of
the consulting period. If the consulting agreement is extended for a
second year, we have agreed to pay each consultant $100,000 upon
termination of the consulting period. If either individual dies
during the consulting period, all payments shall be made to his
designated beneficiaries. In addition, each of Messrs. Jungling
and Miller shall receive benefits comparable to those provided by his
current employment agreement during the consulting period. Following
the consulting period, we have agreed to make available to each
individual health insurance coverage substantially comparable to that
provided during the consulting period at the cost of the consultant.
* Each individual has agreed not to directly or indirectly compete
with our business, to contact or solicit any of our dealers, sources of
supply or customers with respect to our business, or employ any of our
employees, agents or representatives, in each case for a period of two
years following the merger.
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PROPOSAL - APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION
Agreement and Plan of Reorganization
This section of the proxy statement describes the material provisions
of the merger agreement but does not purport to describe all of its terms.
The following summary is qualified in its entirety by reference to the
complete text of the merger agreement, which is attached as Annex A to
this proxy statement and incorporated into this proxy statement by
reference. We urge you to read the full text of the agreement because
it is the legal document that governs the merger.
The Merger
The merger agreement provides for the merger of Merger Sub with and
into us upon the terms, and subject to the conditions, of the merger
agreement. We will survive the merger and continue to exist as an
indirect wholly-owned subsidiary of Rabobank. The merger will be
effective at the time and on the date specified in the articles of merger,
which we call the effective time.
We or Rabobank may terminate the merger agreement prior to the
completion of the merger in some circumstances, whether before or after
the approval of the merger agreement by shareholders. Additional
details on termination of the merger agreement are described below.
Merger Consideration
Each share of our common stock issued and outstanding immediately
before the effective time of the merger (other than treasury shares and
shares held by Rabobank or Merger Sub) will automatically be cancelled
and will cease to exist and will be converted into the right to receive
$8.50 in cash, without interest. After the merger is effective, each
holder of a certificate representing any of these shares of our common
stock will no longer have any rights with respect to the shares, except
for the right to receive the merger consideration. Each share of our
common stock held by us as treasury shares or held by Rabobank or
Merger Sub at the time of the merger will be cancelled without any
payment.
Treatment of Stock Options
The merger agreement provides, that upon completion of the merger,
each option, with an exercise price of less than $8.50 per share, to
purchase shares of our common stock outstanding immediately prior to
the completion of the merger will be converted into the right to receive
a cash payment equal to the excess of $8.50 over the exercise price per
share of the stock option multiplied by the number of shares of common
stock subject to the stock option. In addition, our board of directors
has accelerated the vesting of all outstanding options so that all
options will be vested upon completion of the merger. All amounts
payable are subject to applicable withholding taxes.
Directors and Officers
Upon completion of the merger, the directors of the surviving
corporation will be Cor Broekhuyse, Guillermo Bilbao, Robert Bucklin,
Hans Hannaart, Henry C. Jungling, Gaylen D. Miller and Kevin D. Schipper.
The officers of Ag Services at the time immediately before the merger
is completed will remain the officers of the surviving corporation
after the merger, except for Henry C. Jungling, Jr., our current
president, and Gaylen D. Miller, our current chairman of the board,
who shall not be executive officers of the surviving corporation.
Kevin D. Schipper shall serve as President of the surviving corporation,
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in addition to continuing to serve as Chief Executive Officer. All
officers will hold their positions until their successors are duly
elected, appointed or qualified.
Charter and Bylaws
Upon the completion of the merger, the Articles of Incorporation
and bylaws of Merger Sub shall be the Articles of Incorporation and
bylaws of the surviving corporation.
Payment for the Shares
Before the merger, Rabobank will designate a payment agent reasonably
acceptable to us to make payment of the merger consideration as
contemplated by the merger agreement. When and as needed, Rabobank
will deposit in trust with the payment agent the funds appropriate
to pay the merger consideration to the shareholders on a timely basis.
At the close of business on the day of the completion of the merger,
we will close our stock ledger. After that time, the surviving corporation
will not transfer common stock on its stock transfer books.
As promptly as reasonably practicable after the completion of the
merger, the payment agent will mail to you a letter of transmittal and
instructions for use in effecting the surrender of your certificates in
payment for the merger consideration. The payment agent will promptly
pay you your merger consideration after you have (1) surrendered your
stock certificates to the payment agent and (2) provided to the payment
agent any other items specified by the letter of transmittal. Interest
will not be paid or accrue in respect of cash payments. The surviving
corporation will reduce the amount of any merger consideration paid to
you by any applicable withholding taxes. YOU SHOULD NOT FORWARD YOUR
STOCK CERTIFICATES TO THE PAYMENT AGENT WITHOUT A LETTER OF TRANSMITTAL,
AND YOU SHOULD NOT RETURN YOUR STOCK CERTIFICATES WITH THE ENCLOSED
PROXY.
If the payment agent is to pay some or all of your merger
consideration to a person other than you, you must have your
certificates properly endorsed or otherwise in proper form for
transfer, and you must pay any transfer or other taxes payable by
reason of the transfer or establish to the surviving corporation's
satisfaction that the taxes have been paid or are not required to
be paid.
The transmittal instructions will tell you what to do if you have
lost your certificate, or if it has been stolen or destroyed.
You will have to provide an affidavit to that fact and, if required by
the payment agent, Rabobank or the surviving corporation, post a bond in
the amount that the payment agent, Rabobank or the surviving corporation,
as the case may be, reasonably directs as indemnity against any claim
that may be made against those parties in respect of the certificate.
Representations and Warranties
In the merger agreement, we, Rabobank and Merger Sub each made
representations and warranties with respect to us and our subsidiaries
relating to, among other things:
* corporate organization and existence;
* corporate power and authority and enforceability of the merger
agreement;
* required regulatory filings and consents and approvals of
governmental entities;
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* the absence of conflicts with or defaults under organizational
documents;
* any broker's fees;
* the absence of any litigation that would have a material adverse
effect; and
* information supplied for inclusion in this proxy statement.
In the merger agreement, Rabobank and Merger Sub also made
representations and warranties relating to the availability of the funds
necessary to complete its obligations under the merger agreement.
We also made representations and warranties relating to, among
other things,:
* our capital structure;
* the ownership, organization, capital structure and authority of
our subsidiaries;
* the accuracy of documents filed by us with the SEC;
* our financial statements, including adequacy of reserves and
loan losses;
* the adequacy of our internal accounting controls;
* our compliance with the Sarbanes-Oxley Act of 2002 and the corporate
governance rules of the NYSE;
* the absence of undisclosed liabilities;
* our real and personal properties;
* absence of certain material adverse changes or events since
August 31, 2003;
* tax matters;
* compliance with the Employee Retirement Income Securities Act of
1974, as amended, and other employee benefit matters;
* certain contracts material to us;
* compliance with applicable laws;
* certain payments and contributions;
* adequacy of permits, licenses, franchises and authorizations;
* insurance policies covering us and our subsidiaries;
* environmental matters;
* inapplicability of state takeover statutes;
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* intellectual property matters;
* our risk management instruments;
* receipt of fairness opinion of Burnham Securities Inc.;
* labor matters; and
* absence of appraisal rights with respect to the merger.
Conduct of Business Pending the Merger
With limited exceptions, we agreed in the merger agreement that,
until the earlier of the completion of the merger or termination of the
merger agreement, we will not, without the consent of Rabobank,:
* carry on our business other than in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted;
* declare, set aside, make or pay any dividend or other distribution
in respect of our capital stock;
* issue any shares of our capital stock or permit any treasury shares
to become outstanding, except for the issuance of shares of our
common stock upon the exercise of options that are issued and
outstanding as of the date of the merger agreement;
* incur any additional debt obligation or other obligation for
borrowed money;
* issue, grant or authorize any rights to acquire our common stock or
effect any recapitalization, reclassification, stock dividend, stock
split or like change in our capitalization, or redeem, repurchase or
otherwise acquire any shares of our capital stock;
* amend our articles of incorporation or bylaws;
* impose on any share of stock of a subsidiary held by us any lien,
charge or encumbrance;
* merge with or into any other corporation or other organization;
acquire control over any corporation or other organization or create
any subsidiary;
* waive or release any material right or cancel or compromise any
material debt or claim except in the ordinary course of business
consistent with past practice;
* fail to comply in any material respect with any material laws,
regulations, ordinances or governmental actions applicable to us
and to the conduct of our business;
* sell or dispose of any material assets or acquire any material
assets except in the ordinary course of business consistent with
past practice;
* except as disclosed in the merger agreement, make any capital
expenditure in excess of $20,000 in any instance or $150,000 in
the aggregate;
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* increase the rate of compensation of, pay or agree to pay any bonus
to, or provide any other employee benefit or incentive to, any of
our directors, officers or employees except in a manner consistent
with past practice or as required by law or contractual obligation;
* change our lending, investment, asset/liability management or
other material policies in any material respect except as may be
required by changes in applicable law;
* change our methods of accounting in effect at February 28, 2003,
except as required by changes in generally accepted accounting
principles, or change any of our methods of reporting income,
deductions or other items for federal income tax purposes from
those employed in the preparation of our federal income tax returns,
except as required by applicable law;
* enter into any transaction with one of our executive officers,
directors or beneficial owner of five percent or more of our
common stock;
* adopt, enter into, or amend to increase or accelerate benefits
or obligations of any of our benefit plans, except as required by
applicable law; or
* authorize or permit any of our officers, directors, employees or
agents to directly or indirectly solicit, initiate or encourage
any inquiries relating to a takeover proposal, or, except to the
extent legally required for the discharge of the fiduciary duties of
our board of directors, recommend or endorse any takeover proposal,
or participate in any discussions or negotiations, or provide third
parties with any nonpublic information, relating to any such inquiry
or proposal or otherwise facilitate any effort or attempt to make
or implement a takeover proposal; provided, however, that we may
communicate information about any such takeover proposal to you if,
in the judgment of our board of directors, such communication is
necessary in order to comply with its fiduciary duties to our
shareholders required under applicable law. As used in this proxy
statement, "takeover proposal" shall mean any tender or exchange
offer, proposal for a merger, consolidation or other business
combination involving us or any proposal or offer to acquire in
any manner a substantial equity interest in, or a substantial
portion of the assets of, us.
Efforts to Complete the Merger
Subject to the terms and conditions of the merger agreement, we
and Rabobank each has agreed to use its commercially reasonable
efforts in good faith to furnish all information and take all steps
as may be required in connection with the preparation of this proxy
statement and the preparation of all necessary permits, consents,
approvals, authorizations and agreements of any governmental or
regulatory authority, in each case necessary or desirable to permit
consummation of the merger at the earliest practicable date.
Conditions to the Merger
Conditions Precedent to Each Party's Obligations.
Each party's obligations to effect the merger shall be subject to
satisfaction or waiver of the following conditions:
* All corporate action necessary to authorize the execution,
delivery and performance of the merger agreement and
consummation of the merger shall have been duly and validly
taken;
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* The parties to the merger agreement shall have received all
regulatory approvals required or mutually deemed necessary
in connection with the transactions contemplated by the merger
agreement. Certain regulatory considerations and approvals
necessary to consummate the merger are described in the section
entitled, "The Merger - Regulatory Considerations" in this
proxy statement;
* To the extent that any material lease, license, loan, financing
agreement or other contract or agreement to which we or one of
our subsidiaries is a party requires a consent of or waiver as
a result of the transactions contemplated by the merger agreement,
such consent or waiver shall have been obtained; and
* No party shall be subject to any order, decree or injunction of a
court or agency which enjoins or prohibits the consummation of
the transactions contemplated by the merger agreement.
Conditions to Rabobank's and Merger Sub's Obligations.
The respective obligations of Rabobank and Merger Sub to effect the
merger shall be subject to satisfaction of the following additional
conditions at or prior to the closing date:
* Our representations and warranties in the merger agreement shall
be true and correct in all material respects; provided, however,
that this condition shall be deemed to be satisfied unless the
failure of such representations and warranties to be so true and
correct constitute, individually or in the aggregate, a material
adverse effect;
* We shall have in all material respects performed all obligations
and complied with all covenants required by the merger agreement;
* Since the date of this merger agreement there shall not have
occurred (i) any event that has had or reasonably would be
expected to have a material adverse effect; (ii) a material
disruption or material adverse change in financial, banking or
capital markets in the United States, other than as a result of
general economic conditions; (iii) the outbreak or escalation of
hostilities involving the United States or the declaration by the
United States of a national emergency or war; or (iv) a material
adverse change in the agriculture services industry (including as a
result of the Federal Crop Insurance Corporation ceasing to
underwrite multi-peril crop insurance or materially altering the
terms of such underwriting, a material change in or discontinuance
of subsidies by the United States Department of Agriculture
pursuant to the Farm Security and Rural Investment Act of 2002, or
a material change in or discontinuance of other federal farm
funding programs); provided, however, that, in the case of the
foregoing clauses (ii) and (iii), the effect of any of the events
specified in such clauses shall make it impracticable to proceed
with the transactions contemplated by the merger agreement or shall
cause a material adverse effect or make it reasonably likely that
a material adverse effect shall occur;
* We shall have delivered to Rabobank and Merger Sub environmental
assessments relating to each parcel of real property owned or
operated by us;
* Burnham Securities shall have rendered an opinion as of a date
recent to that of the closing date to our board of directors to
the effect that the merger consideration is fair, from a financial
point of view, to the holders of our common stock;
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* There shall be no pending or threatened actions or proceedings
to restrain the transactions contemplated by the merger agreement
or asserting the illegality thereof; nor shall there be any other
litigation or proceedings pending or threatened in connection
with the merger agreement or the transactions contemplated thereby,
the consequences of which, in the judgment of Rabobank, could be
materially adverse to us or Rabobank; and
* Immediately prior to and as of the closing date, we shall have
adjusted the structure of our business such that we do not take
title to agricultural inputs and such that we shall be substantially
engaged in activities that are financial in nature, incidental to
a financial activity, or otherwise permissible for a financial
holding company in accordance with the regulations of the Board
of Governors of the Federal Reserve System.
Conditions to Our Obligations.
Our obligations to effect the merger shall be subject to
satisfaction of the following additional conditions at or prior to the
closing date:
* The representations and warranties of Rabobank and Merger Sub
in the merger agreement shall be true and correct in all material
respects provided, however, that this condition shall be deemed
to be satisfied unless the failure of such representations and
warranties to be so true and correct constitute, individually or
in the aggregate, a material adverse effect on the ability of
Rabobank to consummate the transactions contemplated by the
merger agreement; and
* Rabobank and Merger Sub shall have in all material respects
performed all obligations and complied with all covenants
required by the merger agreement to be performed or complied with.
Termination of the Merger Agreement
The merger agreement may be terminated, either before or after
approval by our shareholders:
* At any time on or prior to the effective date, by the mutual
consent of the parties;
* By either Rabobank or us:
o if the other party has, in any material respect, breached
(i) any covenant or agreement contained in the merger
agreement; or (ii) any representation or warranty contained
in the merger agreement, and in either case if (x) such
breach has not been cured by the earlier of thirty days
after the date on which written notice of such breach is
given to the party committing such breach or, in the event
such breach occurs after January 31, 2004, by February 29,
2004, and (y) such breach would entitle the non-breaching
party not to consummate the transactions;
o on the closing date, if either we or Rabobank has not
fulfilled or satisfied any of the condition precedents of the
merger agreement with respect to such party;
o at any time, if the applications for prior approval have
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been finally denied, and the time period for appeals and
requests for reconsideration has run, or if any governmental
entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the
merger;
o at any time, if our shareholders do not approve the merger
agreement; and
o if the closing has not occurred by February 29, 2004, unless
the failure of the closing to occur by such date shall be
due to the failure of the party seeking to terminate the
merger agreement to perform or observe the covenants and
agreements set forth in the merger agreement.
* By Rabobank:
o if, prior to the time our shareholders approve the
transactions contemplated by the merger agreement, (i) our
board of directors fails to recommend approval and adoption
of the merger agreement by our shareholders or withdraws or
modifies (or publicly announces an intention to withdraw or
modify) in any adverse manner its approval or recommendation
of the merger agreement or the merger; (ii) our board of
directors makes any public recommendation with respect to
any other takeover proposal other than a recommendation to
reject such takeover proposal; or (iii) we take any action
authorizing or permitting any of our officers, directors,
employees or agents to indirectly or directly solicit,
initiate or encourage any inquiries relating to, or the
making of any proposal which constitutes a takeover proposal.
Termination Fees
We must pay to Rabobank a termination fee of $1,400,000, plus
interest at the prime rate on any amounts that are not paid when due,
and all reasonable collection costs and expenses, if the merger agreement
is terminated under any of the following circumstances:
* by Rabobank prior to the time our shareholders approve the
transactions contemplated by the merger agreement, if (i) our
board of directors fails to recommend approval and adoption of
the merger agreement and the merger by our shareholders or
withdraws or modifies (or publicly announces an intention to
withdraw or modify) in any adverse manner its approval or
recommendation of the merger agreement or the merger; (ii) our
board of directors makes any public recommendation with respect
to any takeover proposal other than a recommendation to reject
such takeover proposal; (iii) we take any action authorizing or
permitting any of its officers, directors, employees or agents to
indirectly or directly solicit, initiate or encourage any inquiries
relating to, or the making of any proposal which constitutes a
takeover proposal; or (iv) our board of directors resolves to take
any of the actions specified above; or
* by Rabobank if the required approval of our shareholders is not
obtained and (i) at or prior to our shareholders meeting a
takeover proposal shall have been publicly announced or disclosed
(whether or not rejected or withdrawn) and (ii), within one year
following termination of the merger agreement (1) a third party or
"group," directly or indirectly, acquires our common stock which
results in a such third party or "group" having beneficial ownership
of fifty percent or more of our then outstanding common stock or
(2) a sale, transfer or license (having similar effect as a sale or
transfer) of fifty percent or more of the fair market value of our
assets, other than in the ordinary course of business, or (3) a
definitive agreement with respect to any transaction referred to
in (1) or (2) is executed by us.
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Amendment, Extension and Waiver
The parties may amend or supplement the merger agreement at any time
before completion of the merger only by mutual agreement of both parties.
At any time before the completion of the merger, each of the parties
to the merger agreement may, by written instrument:
* extend the time for the performance of any of the obligations or
other acts of the other parties;
* waive any inaccuracies in the representations and warranties of
the other parties contained in the merger agreement or in any
document delivered pursuant to the merger agreement;
* waive compliance with any of the covenants, undertakings or
agreements of such parties, or satisfaction of any of the
conditions precedent to its obligations, contained in the merger
agreement; or
* waive the performance by such parties of any of its obligation
set out in the merger agreement.
Our board of directors unanimously recommends that you vote FOR the
approval of the merger agreement.
BENEFICIAL OWNERSHIP OF COMMON STOCK AND CORPORATE INFORMATION
The following table provides certain information regarding the
ownership of our common stock as of November 24, 2003 by:
* each director;
* our chief executive officer and each of our four most highly
compensated executive officers;
* all of our directors and the executive officers as a group; and
* all those known to be beneficial owners of more than five percent
of our common stock.
Number of Shares Percentage
Name of Beneficially of Shares
Beneficial Owner Owned (1) (2) Outstanding
Gaylen D. Miller 361,967 6.59%
Henry C. Jungling, Jr. 356,834 6.49%
Kevin D. Schipper 361,134 6.57%
James D. Gerson 196,466 3.58%
Shawn Smeins 14,000 *
Michael Lischin 12,000 *
Ervin J. Mellema 11,000 *
Neil Stadlman 18,200 *
All directors and
officers as a
group (14 persons) 1,415,996 25.78%
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Greenlight Capital,
LLC, Greenlight Capital,
Inc. and
David Einhorn (3) 700,682 12.79%
* Less than 1%
(1) The persons or entities identified in the above table have sole
voting and investment power with respect to all shares shown as
beneficially owned by them unless otherwise indicated. The
number of shares beneficially owned included 15,000, 15,000, 15,000,
7,000, 14,000, 1,000, 1,000, 7,000 and 133,675 shares of common
stock issuable upon exercise of options that will become exercisable
during the 60-day period commencing November 30, 2003 by Messrs.
Miller Jungling, Schipper, Gerson, Smeins, Lischin, Mellema,
Stadlman and all directors and officers as a group, respectively.
(2) Includes shares held by spouses and minor children.
(3) Greenlight Capital, LLC, Greenlight Capital, Inc. and David Einhorn
have an address at 420 Lexington Avenue, New York, New York.
Other Matters
Our board of directors knows of no other matters which may come
before the meeting. However, if any matters other than those referred
to above should properly come before the meeting calling for a vote of
the shareholders, it is the intention of the persons named in the enclosed
proxy to vote such proxy in accordance with their best judgment.
Shareholder Proposals
Due to the contemplated consummation of the merger, we do not
currently expect to hold a 2004 annual meeting of shareholders because,
following the merger, we will be a wholly-owned indirect subsidiary of
Rabobank. If the merger is not consummated for any reason, under the
rules of the SEC, we must receive proposals of shareholders intended
to be presented at and included in the proxy statement for the 2004
annual meeting of shareholders at our principal executive offices no
later than February 12, 2004.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are based on various underlying
assumptions and expectations of management and are subject to risks
and uncertainties which could cause actual results to differ materially
from those expressed in the forward-looking statements. These risks and
uncertainties include, but are not limited to, the availability of
adequate and timely debt and equity financing; general economic conditions
within the agricultural industry; changes in the interest rate
environment; competitive factors and pricing pressures; changes in
product mix; changes in the seasonality of demand patterns; changes in
weather conditions; changes in agricultural regulations; unknown risks;
and the risks described from time to time in our SEC reports and other
public filings.
Other factors and assumptions not identified above could also cause
actual results to differ materially from those set forth in the
forward-looking statements. Although our management believes these
assumptions are reasonable, we cannot assure you that they will prove
correct. Accordingly, you should not rely upon forward-looking statements
as a prediction of actual results. Further, we undertake no obligation
to update forward-looking statements after the date they are made or to
conform the statements to actual results or changes in our expectations.
-40-
The forward-looking statements should be read in conjunction with
our Annual Report on Form 10-K for the fiscal year ended February 28,
2003. Our reports on Form 10-K and Form 10-Q are on file with the SEC,
and copies are available without charge upon written request at the
address provided in "Where You Can Find More Information."
All information contained in this proxy statement with respect to
Rabobank and Merger Sub has been supplied or confirmed by Rabobank.
-41-
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements
and other information with the SEC. The public may read and copy any
materials we file with the SEC at the SEC's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that
contains reports, proxy and information statements and other information
regarding issuers, including Ag Services, that file electronically with
the SEC. The address of the SEC's Internet site is http://www.sec.gov.
Requests for further copies of this proxy statement or proxy cards
should be directed to us at the following address:
Ag Services of America, Inc.
1309 Technology Parkway
P.O. Box 668
Cedar Falls, IA 50613
Attention: Kevin D. Schipper
Telephone: 319-277-0261
If you would like to request documents from us, please do so by
December 23, 2003 in order to receive them before the special meeting.
You should rely only on the information contained in this proxy
statement or other documents to which we refer you. We have not authorized
anyone to provide you with information that is different from what is
contained in this proxy statement. This proxy statement is dated
November 26, 2003. You should not assume that the information contained
in this proxy statement is accurate as of any date other than that date,
and the mailing of the proxy statement to shareholders shall not create
any implication to the contrary.
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COMMON STOCK
AG SERVICES OF AMERICA, INC
SPECIAL MEETING OF SHAREHOLDERS
Tuesday, December 30, 2003
9:00 a.m.
AG SERVICES OF AMERICA, INC.
1309 Technology Parkway
Cedar Falls, IA 50613
The undersigned hereby constitutes and appoints Henry C. Jungling Jr.
and Kevin D. Schipper, his or her true and lawful agent and proxy with full
power of substitution in each, to represent and to vote on behalf of the
undersigned all of the shares of Ag Services of America, Inc, (the "Company")
which the undersigned is entitled to vote at the special meeting of
shareholders of the Company to be held on Tuesday, December 30, 2003 at the
corporate headquarters of Ag Services of America, Inc., 1309 Technology
Parkway, Cedar Falls, Iowa 50613, at 9:00 a.m., Central Standard Time, and
at any adjournment or adjournments thereof, upon the following proposal
more fully described in the Notice of Special Meeting of shareholders and
proxy statement for the special meeting (receipt of which is hereby
acknowledged).
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy
will be voted FOR the approval of an agreement and plan of reorganization
and related agreement and plan of merger with Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., Rabobank Nederland and Utrecht-America
Acquisition Corp. II.
APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION
AND RELATED AGREEMENT AND PLAN OF MERGER
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
I will attend the special meeting. [ ]
Signature of Common shareholder Dated:
------------------------------ -------------
Signature of Common shareholder
(IF HELD JOINTLY) ------------------------------
Note: This proxy must be signed exactly as the name appears herein.
When shares are held by joint tenants, both should sign. If the signer
is a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If the signer is a partnership,
please sign in partnership name by an authorized person.
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION ("Reorganization Agreement" or
"Agreement"), dated as of October 31, 2003, by and among AG SERVICES OF
AMERICA, INC. ("Company"), an Iowa corporation having its principal
executive office at 1309 Technology Parkway, Cedar Falls, Iowa 50613,
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., RABOBANK NEDERLAND
("Parent"), a cooperative bank organized under the laws of The Netherlands
having its registered office in Amsterdam, The Netherlands, and
UTRECHT-AMERICA ACQUISITION CORP. II ("Merger Sub"), an Iowa corporation
having its principal executive office at 245 Park Avenue, New York,
New York 10167.
WITNESSETH
WHEREAS, the parties hereto desire that Company shall be acquired by
Parent through the merger ("Merger") of Merger Sub with and into Company,
with Company as the surviving corporation ("Surviving Corporation"),
pursuant to an Agreement and Plan of Merger substantially in the form
attached hereto as Annex A ("Plan of Merger"); and
WHEREAS, the parties hereto desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained and intending
to be legally bound hereby, the parties hereto do hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 "Affiliate Transaction" shall mean any transaction with
(a) any person who has been an executive officer or a director of Company;
(b) any spouse of any such officer or director; (c) any parent, child,
brother, sister or other family relation of any such officer or director
who has the same home as such officer or director; (d) any corporation
or other entity of which such officer or director or any such family
relation is an officer, director, partner, or greater than five percent
(5%) interest holder (based on percentage of ownership of voting
securities); or (e) any "affiliate" or "associate" of any such persons
(as such terms are defined in the rules and regulations promulgated
under the Securities Act), including, without limitation, (x) any
transaction involving a contract, agreement, or other arrangement
providing for the employment of, furnishing of materials, products
or services by, rental of real or personal property from, or otherwise
requiring payments to, any such person or entity, and (y) loans
(including any loan guaranty).
1.2 "Agreement" is defined in the preamble hereto.
1.3 "Bank Holding Company Act" shall mean the Bank Holding Company
Act of 1956, as amended.
1.4 "Claim" is defined in Section 4.9(b) hereof.
1.5 "Closing Date" shall mean the date specified pursuant to Section
4.8 hereof as the date on which the parties hereto shall close the
transactions contemplated herein.
1.6 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.7 "Commission" or "SEC" shall mean the Securities and Exchange
Commission.
1.8 "Company" is defined in the preamble to this Agreement.
1.9 "Company Common Stock" is defined in Section 2.1 hereof.
1.10 "Company Financial Statements" shall mean (i) the consolidated
balance sheets of Company as of August 31, 2003 and as of February 28, 2003
and February 28, 2002 and the related consolidated statements of income and
expense, cash flows and shareholders' equity (including related notes,
if any) for the six months ended August 31, 2003 and each of the three
years ended February 28, 2003, February 28, 2002 and February 28, 2001,
respectively, as filed by Company in SEC Documents; and (ii) the
consolidated balance sheets of Company and related consolidated statements
of income and expense, cash flows and changes in shareholders' equity
(including related notes, if any) as filed by Company in SEC Documents
with respect to any periods ended subsequent to August 31, 2003.
1.11 "Company Plan" shall mean any "employee benefit plan," as
defined in Section 3(3) of ERISA, profit-sharing, bonus, stock option,
stock purchase, stock ownership, pension, retirement, severance, deferred
compensation, excess benefit, supplemental unemployment, post-retirement
medical or life insurance, welfare, incentive, sick leave, long-term
disability, medical, hospitalization, life insurance, other insurance
or employee benefit plan, maintained or contributed to by Company or
any ERISA Affiliate of Company for the benefit of any Company employees
or former Company employees (or employees or former employees of any
ERISA Affiliate of Company) and all obligations, arrangements, or
customary practices, whether or not legally enforceable, to provide
benefits, other than salary, as compensation for services rendered,
to present or former directors, employees, or agents of Company or
any ERISA Affiliate of Company.
1.12 "Company Preferred Stock" is defined in Section 2.1 hereof.
1.13 "Company Subsidiaries" is defined in Section 2.3 hereof.
1.14 "Confidentiality Agreement" is defined in Section 4.5 hereof.
1.15 "Covered Parties" is defined in Section 4.9(c) hereof.
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1.16 "Effective Date" shall mean the date specified pursuant to
Section 4.8 hereof as the effective date of the Merger.
1.17 "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
1.18 "ERISA Affiliate" shall mean, with respect to any Person,
trade or business, any other Person, trade or business that is, or was
at the relevant time, a member of a group described in Section 414(b),
(c), (m) or (o) of the Code (or the regulations or administrative
rulings issued thereunder) or Section 4001(b)(1) of ERISA that includes
or included the first Person, trade or business, or that is, or was at
the relevant time, a member of the same "controlled group" as the first
Person, trade or business pursuant to Section 4001(a)(14) of ERISA.
1.19 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
1.20 "Federal Reserve Board" shall mean the Board of Governors of
the Federal Reserve System.
1.21 "Indemnified Parties" is defined in Section 4.9(b) hereof.
1.22 "Insurance Amount" is defined in Section 4.9(d) hereof.
1.23 "Intellectual Property" means domestic and foreign letters
patent, patents, patent applications, patent licenses, software licensed
or owned, know-how licenses, trade names, common law and other trademarks,
service marks, licenses of trademarks, trade names and/or service marks,
trademark registrations and applications, service mark registrations and
applications and copyright registrations and applications.
1.24 "Material Adverse Effect" shall mean any of the following:
(i) a material adverse effect on the condition (financial or other),
business (including loan revenues, commission rates and rates of loan
write-offs and delinquencies), prospects, properties or results of
operations of Company and Company Subsidiaries, taken as a whole; or
(ii) a material adverse effect on Company's ability to consummate the
transactions contemplated by this Agreement and the Plan of Merger.
1.25 "Merger" is defined in the recitals hereto.
1.26 "Merger Consideration" is defined in the Plan of Merger.
1.27 "Merger Sub" is defined in the preamble to this Agreement.
1.28 "NYSE" shall mean the New York Stock Exchange.
1.29 "Parent" is defined in the preamble to this Agreement.
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1.30 "Person" shall mean an individual, corporation, partnership,
limited liability company, joint venture, trust or other entity or
organization.
1.31 "Plan of Merger" is defined in the recitals hereto.
1.32 "Previously Disclosed" shall mean disclosed prior to the
execution hereof in a letter dated of even date herewith from the party
making such disclosure and delivered to the other parties prior to the
execution hereof.
1.33 "Proxy Statement" shall mean the proxy statement (or similar
documents) together with any supplements thereto sent to the shareholders
of Company to solicit their votes in connection with this Agreement and
the Plan of Merger.
1.34 "Rights" shall mean warrants, options, rights, convertible
securities and other arrangements or commitments which obligate an
entity to issue or dispose of any of its capital stock, and stock
appreciation rights, performance units and other similar stock-based
rights whether they obligate the issuer thereof to issue stock or
other securities or to pay cash.
1.35 "Reorganization Agreement" is defined in the preamble to this
Agreement.
1.36 "SEC Documents" shall mean all reports and registration
statements filed, or required to be filed, by a party hereto pursuant
to the Securities Laws.
1.37 "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.38 "Securities Laws" shall mean the Securities Act; the Exchange
Act; the Investment Company Act of 1940, as amended; the Investment
Advisers Act of 1940, as amended; the Trust Indenture Act of 1939, as
amended; and the rules and regulations of the Commission promulgated
thereunder.
1.39 "Subsidiary" or "Subsidiaries" shall mean with respect to any
party, any bank, corporation, partnership or other organization, whether
incorporated or unincorporated, which is consolidated with such party for
financial reporting purposes.
1.40 "Surviving Corporation" is defined in the recitals hereto.
1.41 "Takeover Laws" is defined in Section 2.27 hereof.
1.42 "Takeover Proposal" is defined in Section 4.7(b)(xvii) hereof.
1.43 "Tax," collectively, "Taxes," shall mean all taxes, however
denominated, including any interest, penalties, criminal sanctions or
additions to tax (including, without limitation, any underpayment penalties
for insufficient estimated tax payments) or other additional amounts that
may become payable in respect thereof (or in respect of a failure to file
any Tax Return when and as required), imposed by any federal, state,
local or foreign government or any agency or political subdivision of
any such government, which taxes shall include, without limiting the
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generality of the foregoing, all income taxes, payroll and employment
taxes, withholding taxes (including withholding taxes in connection
with amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other person or entity), unemployment insurance
taxes, social security (or similar) taxes, sales and use taxes, excise
taxes, franchise taxes, gross receipts taxes, occupation taxes, real and
personal property taxes, stamp taxes, value added taxes, transfer taxes,
profits or windfall profits taxes, licenses in the nature of taxes,
estimated taxes, severance taxes, duties (custom and others), workers'
compensation taxes, premium taxes, environmental taxes (including taxes
under Section 59A of the Code), disability taxes, registration taxes,
alternative or add-on minimum taxes, estimated taxes, and other fees,
assessments, charges or obligations of the same or of a similar nature.
1.44 "Tax Return," collectively, "Tax Returns," shall mean all returns,
reports, estimates, information statements or other written submissions, and
any schedules or attachments thereto, required or permitted to be filed
pursuant to the statutes, rules and regulations of any federal, state,
local or foreign government Tax authority, including, but not limited to,
original returns and filings, amended returns, claims for refunds,
information returns and accounting method change requests.
1.45 "Termination Fee" is defined in Section 6.2(b) hereof.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF SELLER
Company hereby represents and warrants to Parent and Merger Sub as follows:
2.1. Capital Structure of Company
(a) The authorized capital stock of Company consists of
(i) 10,000,000 shares of preferred stock, no par value ("Company
Preferred Stock"), none of which is issued and outstanding; and
(ii) 30,000,000 shares of common stock, no par value ("Company
Common Stock"), 5,479,514 shares of which are issued and outstanding
and no shares of which are held in treasury. As of the date hereof,
no shares of Company Preferred Stock or Company Common Stock are
reserved for issuance, except as set forth in Section 2.1(b).
All outstanding shares of Company Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable.
Company does not have and is not bound by any Rights which are
authorized, issued or outstanding with respect to the capital stock
of Company except as set forth above in Section 2.1(b). None of the
shares of Company's capital stock has been issued in violation of the
preemptive rights of any person.
(b) An aggregate of 700,000 shares of Company Common Stock
were previously authorized for issuance pursuant to Company's 1993 Stock
Option Plan and an aggregate of 300,000 shares of Company Common Stock
were previously authorized for issuance pursuant to Company's 1991 Stock
Option Plan (which plans have been terminated) (such plans, collectively,
the "Company Stock Option Plans"). Under the Company Stock Option Plans,
as of the date of this Agreement, (A) 253,780 shares are subject to
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outstanding options under the Stock Option Plans (B) 253,780 shares are
reserved and available for issuance under the Stock Option Plans upon
exercise of such outstanding options, (C) 214,555 shares are subject to
currently exercisable options under the Stock Option Plans, (D) 22,480
shares are subject to options having an exercise price per share that is
less than the Merger Consideration, and (E) 14,480 shares are subject to
currently exercisable options having an exercise price per share that is
less than the Merger Consideration; and (ii) 150,000 shares of Company
Common Stock are authorized for issuance pursuant to Company's 1995
Stock Purchase Plan (the "Company Stock Purchase Plan" and, together
with the Company Stock Option Plans, the "Company Stock Plans"), of
which (A) 144,690 shares are reserved and available for issuance under
the Stock Purchase Plan and (B) 5,310 shares have previously been issued
under the Stock Purchase Plan. As of the date of this Agreement, Company
is not subject to any share delivery obligations under the Company
Stock Purchase Plan with respect to amounts paid by participants under
such plan. Company has Previously Disclosed a complete and accurate list,
as the date hereof, of outstanding stock options and all other rights
to purchase or receive shares of Company Common Stock granted under
the Stock Plans or otherwise (collectively, the "Stock Options"), the
number of shares of Common Stock subject to each such Stock Option, the
name of the Company Stock Plan pursuant to which such Stock Option was
granted, the grant date, expiration date and exercise price of such
Stock Option, the vesting schedule of such Stock Option and the name
of the holder of such Stock Option. All outstanding Stock Options are
evidenced by stock option agreements substantially in the forms
Previously Disclosed by Company.
2.2. Organization, Standing and Authority of Company
Company is a duly organized corporation, validly existing and in good
standing under the laws of the State of Iowa with full corporate power and
authority to carry on its business as now conducted and is duly licensed or
qualified to do business in the states of the United States where its
ownership or leasing of property or the conduct of its business requires
such qualification, except where the failure to be so licensed or qualified
would not have a Material Adverse Effect. Company is not in violation of
any provision of its charter, bylaws or any other constitutive document.
2.3. Ownership of Company Subsidiaries; Capital Structure of Company
Subsidiaries
As of the date hereof, Company does not own, directly or indirectly,
any of the outstanding capital stock or other voting securities of any
corporation or other organization except Company Subsidiaries and as
Previously Disclosed. Company has Previously Disclosed to Parent a list
of each Subsidiary of Company (the "Company Subsidiaries") including a
summary description of each such Subsidiary's material activities,
jurisdiction of incorporation or organization and the authority under
which each Subsidiary is held by Company. Except as Previously Disclosed,
the outstanding shares of capital stock or other equity interests of each
Company Subsidiary have been duly authorized and validly issued and are
fully paid and (except as provided by applicable law) nonassessable, and
all such shares or equity interests are directly or indirectly owned by
Company free and clear of all liens, claims and encumbrances. No Company
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Subsidiary has or is bound by any Rights which are authorized, issued or
outstanding with respect to the capital stock or other equity interests of
any Company Subsidiary and, except as Previously Disclosed, there are no
agreements, understandings or commitments relating to the right of Company
to vote or to dispose of such shares. None of the shares of capital stock
or other equity interests of any Company Subsidiary has been issued in
violation of the preemptive rights of any person.
2.4. Organization, Standing and Authority of Company Subsidiaries
Each Company Subsidiary is a duly organized corporation or other
organization, validly existing and in good standing under the laws of
the state in which it is incorporated or organized. Each Company Subsidiary
(i) has full power and authority to carry on its business as now conducted;
and (ii) is duly licensed or qualified to do business in the states of the
United States and foreign jurisdictions where its ownership or leasing of
property or the conduct of its business requires such licensing or
qualification, except where failure to be so licensed or qualified would
not have a Material Adverse Effect. Each Company Subsidiary has all federal,
state, local and foreign governmental authorizations necessary for it to own
or lease its properties and assets and to carry on its business as it is
now being conducted, except where the failure to be so authorized would not
have a Material Adverse Effect. No Company Subsidiary is in violation of
any provision of its charter, bylaws or any other constitutive document.
2.5. Authorized and Effective Agreement
(a) Company has all requisite corporate power and authority
to enter into and perform all of its obligations under this Reorganization
Agreement and the Plan of Merger. The execution and delivery of this
Reorganization Agreement and the Plan of Merger and the consummation of
the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action in respect thereof
on the part of Company, except for the affirmative vote of the holders
of a majority of the outstanding shares of Company Common Stock entitled
to vote thereon, which is the only shareholder vote required to approve
the Plan of Merger pursuant to the Iowa Business Corporation Act and the
charter and bylaws of Company. The Board of Directors of Company has
directed that this Agreement and the Plan of Merger be submitted to the
shareholders of Company for approval at a special meeting to be held as
soon as practicable.
(b) Assuming the accuracy of the representation contained in
Section 3.2(b) hereof, this Reorganization Agreement and the Plan of Merger
constitute legal, valid and binding obligations of Company, enforceable
against it in accordance with their respective terms, subject as to
enforceability, to bankruptcy, insolvency and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
(c) Neither the execution and delivery of this Reorganization
Agreement or the Plan of Merger, nor consummation of the transactions
contemplated hereby or thereby, nor compliance by Company with any of the
provisions hereof or thereof shall (i) conflict with or result in a breach
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of any provision of the articles or certificate of incorporation or
association, charter or bylaws of Company or any Company Subsidiary;
(ii) assuming the consents and approvals which are Previously Disclosed
are duly obtained, constitute or result in a breach of any term,
condition or provision of, or constitute a default under, or give rise
to any right of termination, cancellation or acceleration with respect
to, or result in the creation of any lien, charge or encumbrance upon
any property or asset of Company or any Company Subsidiary pursuant to,
any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation; or (iii) assuming the consents and approvals
which are Previously Disclosed are duly obtained, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Company or
any Company Subsidiary, except (in the case of clauses (ii) and
(iii) above) for such violations, rights, conflicts, breaches, creations
or defaults which, either individually or in the aggregate, would not have
a Material Adverse Effect.
(d) Other than as Previously Disclosed, no consent, approval
or authorization of, or declaration, notice, filing or registration with,
any governmental or regulatory authority, or any other person, is required
to be made or obtained by Company or any Company Subsidiary on or prior to
the Closing Date in connection with the execution, delivery and performance
of this Agreement and the Plan of Merger or the consummation of the
transactions contemplated hereby or thereby. As of the date hereof,
Company is not aware of any reason that the condition set forth in
Section 5.1(b) of this Agreement, including the proviso thereto,
would not be satisfied.
2.6. SEC Documents; Regulatory Filings
Company has filed and will file all SEC Documents required by the
Securities Laws and such SEC Documents, as of their respective dates,
(a) complied, or will comply, in all material respects with the Securities
Laws and (b) did not, or will not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements contained therein, in light
of the circumstances under which they were, or are, made, not misleading.
Company and each Company Subsidiary has filed all reports required by
statute or regulation to be filed with any federal or state regulatory
agency, except where the failure to so file would not have a Material
Adverse Effect, and such reports were prepared in accordance with the
applicable statutes, regulations and instructions in existence as of
the date of filing of such reports in all material respects.
2.7. Financial Statements; Books and Records; Minute Books
The Company Financial Statements filed by Company in SEC Documents
prior to the date of this Agreement fairly present, and the Company
Financial Statements filed by Company after the date of this Agreement
shall fairly present, the consolidated financial position of Company and
its consolidated Subsidiaries as of the dates indicated and the consolidated
income, changes in shareholders' equity and cash flows of Company and its
consolidated Subsidiaries for the periods then ended, and each such
financial statement has been or shall be, as the case may be, prepared
in conformity with generally accepted accounting principles applied on
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a consistent basis except as disclosed therein and except, in the case
of unaudited statements, as permitted by Form 10-Q. The books and
records of Company and each Company Subsidiary fairly reflect in all
material respects the transactions to which it is a party or by which
its properties are subject or bound. Such books and records have been
properly kept and maintained and are in compliance with all applicable
legal and accounting requirements in all material respects. The minute
books of Company and each Company Subsidiary contain records, which are
accurate in all material respects, of all corporate actions of the
shareholders and Board of Directors (including committees of its Board
of Directors) of Company or applicable Company Subsidiaries.
2.8. Internal Controls.
Company maintains a system of internal accounting controls sufficient
to provide reasonable assurance that (a) transactions are executed in
accordance with management's authorization, (b) transactions are recorded
as necessary to permit preparation of its financial statements in conformity
with generally accepted accounting principles and to maintain accountability
for assets, (c) access to its assets is permitted only in accordance with
management's general or specific authorization and (d) the reported
accountability for its assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any difference.
2.9. Sarbanes-Oxley
Company is in compliance with (a) the Sarbanes-Oxley Act of 2002,
including the rules and regulations thereunder, and (b) the corporate
governance rules of the NYSE, except, in each case, where such non-compliance
cannot reasonably be expected, singly or in the aggregate, to result in a
Material Adverse Effect.
2.10. Material Adverse Change
Except as Previously Disclosed, since August 31, 2003, Company has
conducted its business only in the ordinary course consistent with practices
in use by Company as of August 31, 2003 and Company has not, (a) on a
consolidated basis, suffered any change in its financial condition, results
of operations or business or prospects, which individually or in the
aggregate with any other such changes would constitute a Material Adverse
Effect with respect to Company and (b) taken any action that would be
prohibited by Section 4.7(b), if taken after the date hereof.
2.11. Absence of Undisclosed Liabilities
Neither Company nor any Company Subsidiary has any liability
(contingent or otherwise), excluding contractually assumed contingencies,
that would have a Material Adverse Effect, or that, when combined with
all similar liabilities, would have a Material Adverse Effect, except as
disclosed in the Company Financial Statements filed with the SEC prior
to the date hereof and except for liabilities incurred in the ordinary
course of business subsequent to August 31, 2003.
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2.12. Properties
Company has Previously Disclosed a list of all of the properties and
assets, real and personal, which, individually or in the aggregate, are
material to the business of Company and its Subsidiaries taken as a whole.
Except as Previously Disclosed, Company and Company Subsidiaries have good
and marketable title free and clear of all liens, encumbrances, charges,
defaults or equitable interests to all of the properties and assets, real
and personal, which, individually or in the aggregate, are material to
the business of Company and its Subsidiaries taken as a whole, except
(a) liens for Taxes not yet due and payable; (b) such imperfections of
title, easements and encumbrances, if any, as are not material in
character, amount or extent; and (c) dispositions and encumbrances for
adequate consideration in the ordinary course of business. Company has
Previously Disclosed a list of all leases pursuant to which Company or
any Company Subsidiary, as lessee, leases real and personal property
which, individually or in the aggregate, are material to the business
of Company and Company Subsidiaries, taken as a whole, and all such
leases are valid and enforceable in accordance with their respective
terms, except where the failure of such lease or leases to be valid
and enforceable would not, individually or in the aggregate, have a
Material Adverse Effect. All tangible property used in the business
of Company and Company Subsidiaries is in reasonable condition,
reasonable wear and tear excepted, and is usable in the ordinary
course of business consistent with Company's and Company Subsidiaries'
past practices.
2.13. Loans
(a) Each loan reflected as an asset in the Company Financial
Statements (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and what they purport to be;
(ii) to the extent secured, has been secured by valid liens and
security interests which have been perfected; and (iii) is the legal,
valid and binding obligation of the obligor named therein, enforceable
in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating
to or affecting creditors' rights and to general equity principles,
in each case, other than loans as to which the failure to satisfy the
foregoing standards, individually or in the aggregate, would not have
a Material Adverse Effect.
(b) The allowance for loan losses reflected on the Company
Financial Statements, as of their respective dates, is in all material
respects consistent with the requirements of generally accepted accounting
principles to provide for reasonably anticipated losses with respect to
Company's loan portfolio.
2.14. Tax Matters
(a) Company and each Company Subsidiary have timely filed Tax
Returns required to be filed with respect to Company or any Company
Subsidiary, except where the failure to file timely such Tax Returns would
not, individually or in the aggregate, have a Material Adverse Effect.
All Taxes due by or on behalf of Company or any Company Subsidiary on or
before the Closing Date have been paid or adequate reserves have been
established on the Company Financial Statements for the payment of such
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Taxes, except where any such failure to pay or establish adequate reserves
would not, individually or in the aggregate, have a Material Adverse Effect.
Neither Company nor any Company Subsidiary shall have any liability for
any such Taxes in excess of the amounts so paid or reserves or accruals
so established except where such liability would not have a Material Adverse
Effect.
(b) Except as Previously Disclosed, all Tax Returns filed by
Company and each Company Subsidiary were true, correct, complete and
accurate in all material respects when and as filed and are final.
Neither Company nor any Company Subsidiary is delinquent in the payment
of any material Tax, and none of Company or any Company Subsidiaries
has requested any extension of time within which to file any Tax Returns
which have not since been filed. Except as fully settled and paid or
accrued on the Company Financial Statements, Company has not received
written notice of any audit examination, deficiency, adjustment, refund
claim or litigation with respect to Tax Returns, paid Taxes, unpaid Taxes
or Tax attributes of Company or any Company Subsidiary, and no proceeding
with respect thereto is underway. There are currently no agreements in
effect with respect to Company or any Company Subsidiary to extend the
period of limitations for the assessment or collection of any Tax.
(c) Neither the transactions contemplated hereby, after giving
effect thereto, nor the termination of the employment of any employees of
Company or any Company Subsidiary prior to or following consummation of
the transactions contemplated hereby shall result in Company or any
Company Subsidiary (or any successor thereof) making or being required
to make any "excess parachute payment" as that term is defined in
Section 280G of the Code.
(d) Neither Company nor any Company Subsidiary is a party to
any agreement (other than an agreement exclusively among Company and
Company Subsidiaries) providing for the allocation or sharing of, or
indemnification for, Taxes.
(e) Neither Company nor any Company Subsidiary is required to
include in income any adjustment pursuant to Section 481(a) of the Code
in any taxable period ending after the date hereof.
(f) Neither Company nor any Company Subsidiary has executed or
entered into any written agreement with any Tax authority conceding or
agreeing to any treatment of Taxes or Tax attributes, including, without
limitation, an Internal Revenue Service Form 870 or Form 870-AD, closing
agreement or special closing agreement, affecting Company or any Company
Subsidiary pursuant to Section 7121 of the Code or any predecessor
provision thereof or any similar provision of state, local or foreign law,
which agreement would have a material impact on the calculation of the
Taxes of Parent or any Parent Subsidiary after the Effective Date.
(g) No written position has been taken on any Tax Return with
respect to the business or operations of Company for a taxable year for
which the statute of limitations for the assessment of any Taxes with
respect thereto has not expired that is contrary to any publicly announced
position of a taxing authority.
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(h) Neither Company nor any Company Subsidiary has sponsored,
promoted, marketed or entered into any transaction that is a "tax shelter"
within the meaning of any provision of the Code or regulations issued
thereunder.
(i) All Taxes that Company is required by law to withhold or
collect, including sales and use taxes, and amounts required to be withheld
for Taxes of employees and other withholding taxes, have been duly withheld
or collected and, to the extent required, have been paid over to the proper
taxing authority or are held in separate bank accounts for such purpose;
and all document retention, information gathering and information reporting
requirements related to any such Taxes have been complied with in accordance
with all applicable provisions of the Code and the regulations issued
thereunder.
(j) Company is not, and has not been, a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(A)(ii) of
the Code.
(k) There are no Tax liens (other than for Taxes not yet due
and payable) upon the properties or assets of Company.
(l) Each asset with respect to which Company claims
depreciation or amortization or similar expense for Tax purposes is owned
by Company for Tax purposes. None of the assets of Company are required
to be, or are being, depreciated under the alternative depreciation system
prescribed by Section 168(g)(2) of the Code or subject to Section 168(f)
of the Code. None of the assets of Company is property which Parent or
Company is required to treat as "tax exempt use property," within the
meaning of Section 168(h) of the Code. Company has not issued any
"industrial revenue bonds," within the meaning of Section 103 of the Code,
or "private activity bonds," within the meaning of Section 141 of the Code,
or other tax-exempt financing in order to finance the assets of Company,
whether leased or owned.
(m) For purposes of this Section 2.14, (i) references to
Company and any Company Subsidiary shall include predecessors thereof; and
(ii) "Company Subsidiary" shall include each Subsidiary (as defined in
Article 1 hereof) of Company, and each corporation, partnership, limited
liability company, joint venture or other entity which Company controls
directly or indirectly (through one or more intermediaries). For
purposes of the previous sentence, "control" means the possession, direct
or indirect, of the power either (1) to vote fifty percent (50%) or more
of the voting interests of a corporation, partnership, limited liability
company, joint venture or other entity, or (2) to direct or cause the
direction of the management and policies of a corporation, partnership,
limited liability company, joint venture or other entity, whether by
contract or otherwise.
2.15. Employee Benefit Plans
(a) Company has Previously Disclosed a true and complete list
of all Company Plans. Company has Previously Disclosed the financial cost
of all obligations owed under any Company Plan that is not subject to the
disclosure and reporting requirements of ERISA.
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(b) With respect to each of the Company Plans, Company has
made available to Parent true and complete copies of each of the following
documents: (i) the Company Plan and related documents (including all
amendments thereto and including all insurance policies purchased by,
or to provide benefits under, any Company Plan); (ii) the three (3) most
recent Form 5500s, annual reports, financial statements, and actuarial
reports, if any; (iii) the most recent summary plan descriptions,
together with each summary of material modifications, required under
ERISA with respect to such Company Plan and all material communications
made to participants or beneficiaries relating to each such Company Plan;
(iv) the most recent determination letter received from the Internal
Revenue Service with respect to each Company Plan that is intended to be
qualified under the Code and all material communications to or from the
Internal Revenue Service or any other governmental or regulatory agency
or authority relating to each Company Plan, (v) a written description
of any Company Plan that is not otherwise in writing, and (vi) all
personnel, payroll and employment manuals and policies.
(c) Neither Company nor any ERISA Affiliate of Company has
ever established, maintained or contributed to, or had an obligation to
maintain or contribute to, any plan that is subject to Title IV of ERISA.
(d) Neither Company nor any ERISA Affiliate, nor any of the
Company Plans, nor any trust created thereunder, nor any trustee,
administrator or fiduciary thereof, has engaged in any prohibited
transaction (within the meaning of Section 406 of ERISA and Section 4975
of the Code) in connection with which Company or any ERISA Affiliate of
Company could reasonably be expected to either directly or indirectly
incur any material liability or material cost.
(e) Full payment has been made, or will be made in accordance
with Section 404(a)(6) of the Code, of all amounts that Company or any ERISA
Affiliate of the Company is required to pay under, or contribute to any of,
the Company Plans for all plan years that end prior to the Effective Date.
All contributions and payments made or accrued with respect to all Company
Plans are deductible under Section 162 or Section 404 of the Code.
(f) Neither the Company nor any ERISA Affiliate of Company has
ever established, maintained, or contributed to or otherwise participated in,
or had an obligation to maintain, contribute to, or otherwise participate in,
a "multiemployer pension plan," as such term is defined in Section 3(37) of
ERISA, a "multiple employer welfare arrangement," as such term is defined
in Section 3(40) of ERISA, or a single employer plan that has two or more
contributing sponsors, at least two of whom are not under common control,
within the meaning of Section 4063(a) of ERISA.
(g) A favorable determination letter has been issued by the
Internal Revenue Service with respect to each of the Company Plans that
is intended to be "qualified" within the meaning of Section 401(a) of the
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Code to the effect that such plan is so qualified, and to the knowledge
of Company, no condition exists that could adversely affect the qualified
status of any such Company Plan. Each of the Company Plans that is
intended to satisfy the requirements of Section 125 or 501(c)(9) of the
Code satisfies such requirements in all material respects. Each of the
Company Plans has been operated and administered in all material respects
in accordance with its terms and applicable laws, including, but not
limited to, ERISA and the Code.
(h) Except as Previously Disclosed, each Company Plan may be
amended or terminated without liability to Company or any ERISA Affiliate
of Company. Each person who performs services for Company or any ERISA
Affiliate of Company has been, and is, properly classified by Company or
the appropriate ERISA Affiliate of Company as an employee or independent
contractor.
(i) There are no actions, suits or claims pending, or, to the
knowledge of Company or any ERISA Affiliate of Company, threatened or
anticipated (other than routine claims for benefits) against any Company
Plan, the assets of any Company Plan or against Company or any ERISA
Affiliate of Company with respect to any Company Plan. There is no judgment,
decree, injunction, rule or order of any court, governmental body,
commission, agency or arbitrator outstanding against or in favor of any
Company Plan or any fiduciary thereof (other than rules of general
applicability). There are no pending or, to the knowledge of Company or
any ERISA Affiliate of Company, threatened audits, examinations or
investigations by any governmental body, commission or agency involving
any Company Plan.
(j) Neither Company nor any ERISA Affiliate of Company has any
obligation to provide (and no Company Plan provides) benefits, including
without limitation death or medical benefits (whether or not insured),
with respect to current or former employees or directors of Company or any
ERISA Affiliate of Company after retirement or other termination of service
(other than (i) coverage mandated by applicable law; (ii) death benefits
or retirement benefits under any "employee pension plan," as that term is
defined in Section 3(3) of ERISA; or (iii) benefits, the full cost of
which is borne by the current or former employee or director (or his
beneficiary)).
(k) Company and all ERISA Affiliates of Company have complied
with the provisions of Section 601 et seq. of ERISA, Section 4980B of the
Code, Section 701 et seq. of ERISA, Subtitle K of the Code and the Health
Insurance Portability and Accountability Act of 1996.
(l) Company and all ERISA Affiliates of Company have performed
all of their respective obligations under all Company Plans. Company and
the ERISA Affiliates of Company have made appropriate entries in their
financial records and statements for all obligations and liabilities under
such Company Plans that have accrued but are not due.
(m) Except as Previously Disclosed, neither the execution of
this Agreement nor the consummation of the transactions contemplated hereby
will result in, or is a precondition to, (i) any current or former employee
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or director of Company or any ERISA Affiliate becoming entitled to
severance pay, unemployment compensation or any similar payment;
(ii) any acceleration in the time of payment or vesting, or increase in
the amount, of any compensation due to any such current or former
employee or director; or (iii) any renewal or extension of the term of any
agreement regarding compensation for any such current or former employee
or director.
2.16. Certain Contracts
(a) Company has Previously Disclosed each of the following
agreements, written or oral, to which Company or any Company Subsidiary
is a party or by which Company or any Company Subsidiary or any of their
respective properties are bound or subject to:
(i) any material contract, as defined in Item 601(b)
(10) of Regulation S-K of the SEC;
(ii) any agreement restricting the nature or geographic
scope of its business activities in any material respect;
(iii) any agreement, indenture or other instrument
relating to the borrowing of money by Company or any Company Subsidiary
or the guarantee by Company or any Company Subsidiary of any such
obligation, other than instruments relating to transactions entered
into in the ordinary course of business;
(iv) any agreement pursuant to which Company or any
Company Subsidiary has agreed to any material restriction on its ability
to compete with any person, or to actively engage, in any line of
business;
(v) any agreement that contains any guarantees as to
Company's or any Company Subsidiary's future revenues or operating
income;
(vi) any material contract that requires any consent
(including any consent to assignment) of or notice to a third party, or
any approval, authorization, qualification or order of any Governmental
Entity, in connection with this Agreement and the Plan of Merger or the
consummation of the transactions contemplated hereby and thereby in
order to avoid termination of or loss of benefits thereunder;
(vii) any material agreement providing confidential
treatment by Company or any Company Subsidiary of third party
information;
(viii) any employment or consulting agreement, contract
or commitment; and
(ix) any other material contract or similar arrangement
whether or not made in the ordinary course of business (other than loans
or loan commitments and funding transactions in the ordinary course of
business of Company or any Company Subsidiary).
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Each such agreement of Company and Company Subsidiaries required to
be Previously Disclosed under this Section 2.16(a) is in full force and
effect and is a legal, valid and binding agreement of Company or such
Company Subsidiary and, to the knowledge of Company, of each other party
thereto, enforceable against Company or such Company Subsidiary, as the
case may be, and, to the knowledge of Company, against the other party or
parties thereto, in each case, in accordance with its terms, except for
such failures to be in full force and effect or enforceable that,
individually or in the aggregate, have not had and would not reasonably
be expected to have a Material Adverse Effect.
(b) Neither Company nor any Company Subsidiary is in default
under any material agreement, commitment, arrangement, lease, insurance
policy or other instrument, whether entered into in the ordinary course
of business or otherwise and whether written or oral, and there has not
occurred any event that, with the lapse of time or giving of notice or
both, would constitute such a default, except for such defaults which
would not, individually or in the aggregate, have a Material Adverse
Effect.
(c) Except as Previously Disclosed, neither Company nor any
Company Subsidiary is a party to any Affiliate Transaction.
2.17. Legal Proceedings
Except as Previously Disclosed, there are no actions, suits or
proceedings instituted, pending or, to the knowledge of Company or any
Company Subsidiary, threatened (or unasserted but considered probable of
assertion and which, if asserted, would have at least a reasonable
probability of an unfavorable outcome) against Company or any Company
Subsidiary or against any asset, interest or right of Company or any
Company Subsidiary as to which there is a reasonable probability of an
unfavorable outcome and which, if such an unfavorable outcome occurred,
would, individually or in the aggregate, have a Material Adverse Effect.
There are no actual or, to the knowledge of Company or any Company
Subsidiary, threatened actions, suits or proceedings which present a
claim to restrain or prohibit the transactions contemplated herein or
to impose any material liability in connection therewith as to which
there is a reasonable probability of an unfavorable outcome. There
are no actions, suits or proceedings instituted, pending or, to the
knowledge of Company or any Company Subsidiary, threatened (or unasserted
but considered probable of assertion and which, if asserted, would be
reasonably expected to have an unfavorable outcome) against any present
or, to Company's knowledge, former director or officer of Company or any
Company Subsidiary, that would reasonably be expected to give rise to a
claim for indemnification and that (a) has a reasonable probability of
an unfavorable outcome; and (b) in the event of an unfavorable outcome,
would, individually or in the aggregate, have a Material Adverse Effect.
2.18. Compliance with Laws
Company and each Company Subsidiary is in compliance with all statutes
and regulations applicable to the conduct of its business, and neither
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Company nor any Company Subsidiary has received notification from any
agency or department of federal, state or local government (a) asserting
a violation of any such statute or regulation; (b) threatening to revoke
any license, franchise, permit or government authorization; or
(c) restricting or in any way limiting its operations, except for such
noncompliance, violations, revocations and restrictions which would not,
individually or in the aggregate, have a Material Adverse Effect.
Except as Previously Disclosed, neither Company nor any Company Subsidiary
is subject to any regulatory or supervisory cease and desist order,
agreement, directive, memorandum of understanding or commitment which
would be reasonably expected to have a Material Adverse Effect, and none
of them has received any communication requesting that they enter into
any of the foregoing.
2.19. Certain Payments and Contributions
Neither Company nor any Company Subsidiary nor, to Company's knowledge,
any director, officer, agent, employee or other person acting on behalf of
Company or any Company Subsidiary, has used any corporate or other funds
for unlawful contributions, payments, gifts, or entertainment, or made any
unlawful expenditures relating to political activity to government
officials or others or established or maintained any unlawful or unrecorded
funds in violation of Section 30A of the Exchange Act. Neither Company nor
any Company Subsidiary nor, to Company's knowledge, any director, officer,
agent, employee or other person acting on behalf of Company or any Company
Subsidiary, has accepted or received any unlawful contributions, payments,
gifts, or expenditures. To Company's knowledge, Company and each of the
Company Subsidiaries which is required to file reports pursuant to
Section 12 or 15(d) of the Exchange Act is in compliance with the
provisions of Section 13(b) of the Exchange Act.
2.20. Permits
Company has Previously Disclosed a list of all material permits,
licenses, franchises and government authorizations from Governmental
Entities of Company and Company Subsidiaries (the "Company Permits").
The Company Permits constitute all permits, licenses, franchises and
government authorizations from Governmental Entities required to conduct
Company's and each of the Company Subsidiaries business as now being
conducted, except for such permits, licenses, franchises and government
authorizations the lack of which, individually or in the aggregate, has
not had, and is not reasonably likely to have, a Material Adverse Effect.
Company and each Company Subsidiary is in compliance with the terms of
each Company Permit applicable to it, except where the failure to so
comply, individually or in the aggregate, has not had, and is not
reasonably likely to have, a Material Adverse Effect. No Company Permit
shall cease to be effective as a result of the consummation of the
transactions contemplated by this Agreement and the Plan of Merger.
2.21. Brokers and Finders
Neither Company nor any Company Subsidiary, nor any of their
respective officers, directors or employees, has employed any broker,
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finder or financial advisor or incurred any liability for any fees or
commissions in connection with the transactions contemplated herein or
the Plan of Merger, except as Previously Disclosed.
2.22. Insurance
Each of Company and the Company Subsidiaries currently maintains
insurance in amounts considered by Company and any Company Subsidiary,
as applicable, to be reasonably necessary for their operations. Neither
Company nor any Company Subsidiary has received any notice of a material
premium increase over current rates or cancellation with respect to any
of its insurance policies or bonds, and within the last three (3) years,
neither Company nor any Company Subsidiary has been refused any insurance
coverage sought or applied for, and Company has no reason to believe that
existing insurance coverage cannot be renewed as and when the same shall
expire, upon terms and conditions as favorable as those presently in
effect, other than possible increases in premiums or unavailability in
coverage that have not resulted from any extraordinary loss experience
of Company or any Company Subsidiary. Company has Previously Disclosed
(a) a list of each of the insurance policies covering Company or any
Company Subsidiary and their expiration dates and (b) a list of all
outstanding claims, as of the date hereof, against Company or any Company
Subsidiary under any insurance policy, other than medical or dental
payments under Company Plans or claims for less than $25,000.
2.23. Environmental Liability
(a) Neither Company nor any Company Subsidiary has received
any notice of any actual or threatened legal, administrative, arbitral
or other proceeding, claim or action, and to Company's knowledge there
is no governmental investigation of any nature ongoing, in each case,
that would reasonably be expected to result in the imposition on Company
or any Company Subsidiary of any liability arising under any local, state
or federal environmental statute, regulation or ordinance including,
without limitation, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended or under the common law of nuisance,
trespass, or similar doctrine (collectively "Environmental Laws"), which
liability would reasonably be expected to have a Material Adverse Effect;
there are no facts or circumstances which would reasonably be expected to
form the basis for any such proceeding, claim, action or governmental
investigation that would impose any such liability; and neither Company
nor any Company Subsidiary is subject to any agreement, order, judgment,
decree or memorandum by or with any court, governmental authority,
regulatory agency or third party imposing any such liability or any
compliance obligation that would reasonably be expected to have a Material
Adverse Effect.
(b) Company has Previously Disclosed a list of all material
environmental assessment or audit reports or other similar environmental
studies or analyses or environmental agency correspondence relating to
any properties owned, leased or operated by Company or any Company
Subsidiary, and Company has made available to Parent true and complete
copies of all such reports, studies, analyses and correspondence.
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2.24. Intellectual Property
Except as Previously Disclosed, Company or a Company Subsidiary owns
the entire right, title and interest in and to, or has valid licenses with
respect to, all of the Intellectual Property necessary to conduct the
business and operations of Company and Company Subsidiaries as presently
conducted, except where the failure to do so would not, individually or in
the aggregate, have a Material Adverse Effect. To the Company's knowledge,
the ownership, licensing or use of Intellectual Property by Company or any
Company Subsidiaries does not conflict with, infringe, misappropriate or
otherwise violate the Intellectual Property rights of any other person or
entity. None of such Intellectual Property is subject to any outstanding
order, decree, judgment, stipulation, settlement, lien, charge, encumbrance
or attachment, which order, decree, judgment, stipulation, settlement, lien,
charge, encumbrance or attachment would reasonably be expected to have a
Material Adverse Effect. Except as Previously Disclosed, upon consummation
of the transactions contemplated by this Agreement, Company and Company
Subsidiaries shall be entitled to continue to use, and Parent shall be
entitled to continue using, all such Intellectual Property without the
payment of any fees, licenses or other payments.
2.25. Risk Management Instruments
All interest rate swaps, caps, floors, option agreements, futures
and forward contracts and other similar risk management arrangements to
which Company or a Company Subsidiary is a party, whether entered into
for Company's own account, or for the account of one or more Company
Subsidiaries or their customers, were entered into (a) in accordance
with prudent business practices and all applicable laws, rules,
regulations and regulatory policies; and (b) with counterparties believed
to be financially responsible at the time; and each of them constitutes
the valid and legally binding obligation of Company or one of the Company
Subsidiaries, enforceable in accordance with its terms (except as
enforceability may be limited by bankruptcy, insolvency and other laws of
general applicability relating to or affecting creditors' rights, to the
supervisory and enforcement powers of applicable regulatory agencies,
and to general equity principles), and neither Company nor any Company
Subsidiary nor, to Company's knowledge, any other party thereto, is in
breach of any of its obligations under any such agreement or arrangement.
Company Previously Disclosed to Parent all of such agreements and
arrangements that are in effect as of the date of this Agreement.
2.26. Certain Information
The information contained in the Proxy Statement, other than
information provided by Parent, at the time the Proxy Statement is mailed
to shareholders of Company up to and including the time of Company's
shareholders' meeting to vote upon the Merger, (a) shall comply in all
material respects with the applicable provisions of the Securities Laws;
and (b) shall not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements contained therein, in light of the circumstances
under which they were made, not misleading. All information concerning
Company, any Company Subsidiaries and any of their respective directors,
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officers and shareholders furnished by Company for inclusion in any
application to be prepared pursuant to Section 4.3 of this Agreement
shall be true, correct and complete in all material respects.
2.27. Takeover Laws
Company has taken all action required to be taken by it in order to
exempt this Reorganization Agreement and the Plan of Merger and the
transactions contemplated hereby and thereby from, and this Reorganization
Agreement and the Plan of Merger and the transactions contemplated hereby
and thereby are exempt from, the requirements of any "moratorium,"
"control share," "fair price," "affiliate transaction," "business
combination," or other anti-takeover laws and regulations of the State
of Iowa (collectively, "Takeover Laws").
2.28. Fairness Opinion
Burnham Securities Inc ("Burnham") has rendered an oral opinion to
the Board of Directors of Company, as of the same date as this Agreement,
to the effect that, as of such date, the Merger Consideration is fair,
from a financial point of view, to the holders of Company Common Stock.
A correct and complete copy of a written opinion that confirms such oral
opinion shall be delivered to Parent at the same time Burnham provides
such written opinion to Company.
2.29. Labor Matters
With respect to their employees, neither Company nor any Company
Subsidiary is a party to any labor agreement with any labor organization,
group or association and has not engaged in any unfair labor practice.
Since February 28, 2003, Company and the Company Subsidiaries have not
experienced any attempt by organized labor or its representatives to make
Company or any Company Subsidiary conform to demands of organized labor
relating to their employees or to enter into a binding agreement with
organized labor that would cover the employees of Company or any Company
Subsidiary. There is no unfair labor practice charge or other complaint
by any employee or former employee of Company or any Company Subsidiary
against any of them pending before any court, arbitrator or governmental
agency arising out of Company's or such Company Subsidiary's activities,
which charges or complaints would, individually or in the aggregate, have
a Material Adverse Effect; there is no labor strike or labor disturbance
pending or, to the knowledge of Company or any Company Subsidiaries,
threatened against any of them; and neither Company nor any Company
Subsidiary has experienced a work stoppage or other material labor
difficulty since February 28, 2003.
2.30. Appraisal Rights
Neither the execution and delivery by Company of this Agreement or the
Plan of Merger nor the consummation of the transactions contemplated hereby
or thereby will give rise to any holder of Company Common Stock having any
appraisal or similar rights under the Iowa Business Corporation Act or any
similar law, rule or regulation.
-20-
2.31. Company's Business
In the best judgement of Company management, implementation by Company
of the changes to Company's business and operations required to satisfy the
condition set forth in Section 5.3(g) of this Agreement will not have an
adverse effect on Company's results of operations.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER
SUB
Parent and Merger Sub hereby jointly and severally represent and
warrant to Company as follows:
3.1. Organization, Standing and Authority of Parent and Merger Sub
Parent is a duly organized banking association, validly existing and
in good standing under the laws of The Netherlands, with full organizational
power and authority to carry on its business as now conducted and is duly
licensed or qualified to do business in the states of the United States
and foreign jurisdictions where its ownership or leasing of property or
the conduct of its business requires such qualification, except where the
failure to be so licensed or qualified would not have a material adverse
effect on the ability of Parent to consummate the transactions contemplated
by this Agreement and the Plan of Merger.
Merger Sub is a duly organized corporation, validly existing and in
good standing under the laws of the State of Iowa, with full corporate
power and authority to carry on its business as now conducted and is duly
licensed or qualified to do business in the states of the United States
and foreign jurisdictions where its ownership or leasing of property or
the conduct of its business requires such qualification, except where the
failure to be so licensed or qualified would not have a material adverse
effect on the ability of Merger Sub to consummate the transactions
contemplated by this Agreement and the Plan of Merger.
3.2. Authorized and Effective Agreement
(a) Each of Parent and Merger Sub has all requisite
organizational power and authority to enter into and perform all of
its obligations under this Reorganization Agreement and the Plan of
Merger. The execution and delivery of this Reorganization Agreement
and the Plan of Merger and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by
all necessary organizational action in respect thereof on the part of
Parent and Merger Sub, including, in the case of Merger Sub, the approval
of such agreements and transactions by the sole shareholder of Merger Sub.
(b) Assuming the accuracy of the representation contained in
Section 2.5(b) hereof, this Reorganization Agreement and the Plan of
Merger constitute legal, valid and binding obligations of Parent and
Merger Sub, in each case, enforceable against it in accordance with their
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respective terms subject, as to enforceability, to bankruptcy, insolvency
and other laws of general applicability relating to or affecting creditors'
rights, to the supervisory and enforcement powers of applicable regulatory
agencies, and to general equity principles.
(c) Except as Previously Disclosed, neither the execution and
delivery of this Reorganization Agreement and the Plan of Merger, nor
consummation of the transactions contemplated hereby or thereby, nor
compliance by Parent or Merger Sub with any of the provisions hereof or
thereof shall (i) conflict with or result in a breach of any provision
of the articles or certificate of incorporation or association, charter
or bylaws or other organizational documents of Parent or any Parent
Subsidiary; (ii) constitute or result in a breach of any term, condition
or provision of, or constitute a default under, or give rise to any right
of termination, cancellation or acceleration with respect to, or result
in the creation of any lien, charge or encumbrance upon any property or
asset of Parent or any Parent Subsidiary pursuant to, any note, bond,
mortgage, indenture, license, agreement or other instrument or obligation;
or (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Parent or any Parent Subsidiary, except (in the
case of clauses (ii) and (iii) above) for such violations, rights,
conflicts, breaches, creations or defaults which, either individually
or in the aggregate, shall not have a material adverse effect on the
ability of Parent to consummate the transactions contemplated by this
Agreement and the Plan of Merger.
(d) Except as Previously Disclosed and except as expressly
referred to in this Reorganization Agreement, no consent, approval or
authorization of, or declaration, notice, filing or registration with,
any governmental or regulatory authority, or any other person, is
required to be made or obtained by Parent or Merger Sub on or prior to
the Closing Date in connection with the execution, delivery and
performance of this Agreement and the Plan of Merger or the consummation
of the transactions contemplated hereby or thereby. As of the date
hereof, Parent is not aware of any reason that the condition set forth
in Section 5.1(b) of this Agreement, including the proviso thereto,
would not be satisfied.
3.3. Legal Proceedings
There are no actions, suits or proceedings instituted, pending or,
to the knowledge of Parent, threatened against Parent or any Parent
Subsidiary which present a claim to restrain or prohibit the transactions
contemplated hereby or which would, in the event of an unfavorable
decision or outcome against Parent, have a material adverse effect on the
ability of Parent to effect the transactions contemplated by this
Agreement or the Plan of Merger.
3.4. Brokers and Finders
Neither Parent nor any Parent Subsidiary, nor any of their respective
officers, directors or employees, has employed any broker, finder or
financial advisor or incurred any liability for any fees or commissions
in connection with the transactions contemplated herein or the Plan of
Merger.
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3.5. Financial Resources
Parent and Merger Sub shall have available on the Closing Date
sufficient financial resources to enable Parent and Merger Sub to
lawfully satisfy their respective obligations pursuant to this Agreement
and the Plan of Merger and to consummate the Merger. Parent has and
shall have sufficient management and financial resources to obtain the
required regulatory and other approvals for the transactions contemplated
by this Agreement and the Plan of Merger.
3.6. Certain Information
All information concerning Parent and any of its directors, officers
and shareholders furnished by Parent for inclusion in the Proxy Statement
or any application to be prepared pursuant to Section 4.3 of this Agreement
shall be true, correct and complete in all material respects.
ARTICLE 4.
COVENANTS
4.1. Shareholders' Meeting
Company shall submit this Reorganization Agreement and the Plan of
Merger to the shareholders of Company for approval at a special meeting
to be held as soon as practicable. Subject to the fiduciary duties of
the Board of Directors of Company as determined after consultation with
counsel, the Board of Directors of Company shall recommend that the
shareholders of Company vote in favor of such approval.
4.2. Proxy Statement
As promptly as practicable after the date hereof, Parent and Company
shall cooperate in the preparation of the Proxy Statement to be mailed to
the shareholders of Company in connection with this Reorganization
Agreement and the Plan of Merger and the transactions contemplated hereby.
4.3. Applications
As promptly as practicable after execution and delivery of this
Agreement, Parent and Company shall make all filings required under
applicable domestic and foreign laws and regulations for consummation
of the transactions contemplated hereby and by the Plan of Merger. In
addition, Parent and Company shall each promptly furnish all information
as may be required by any federal, state or foreign regulatory agency
properly asserting jurisdiction in order that the requisite approvals for
the transactions contemplated hereby may be obtained or to cause any
applicable waiting periods to expire. Company and Parent shall, as soon
as practicable, commence to take all other action required to obtain as
promptly as practicable all necessary permits, consents, approvals,
authorizations and agreements of, and to give all notices and reports and
make all other filings with, any domestic and foreign governmental or
regulatory authority, necessary to authorize, approve or permit the
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consummation of the transactions contemplated hereby and by the Plan of
Merger, and Parent and Company shall cooperate with each other with respect
thereto. Parent and Company shall promptly provide to each other copies of
all applications, documents, correspondence or oral (to the extent material)
or written comments that each of them or any of their Subsidiaries files
with, sends to or receives from any domestic or foreign regulatory or
governmental agency, or the staff or supervisory agents of any of them,
relating to this Agreement and the Plan of Merger and the transactions
contemplated hereby and thereby, including any applications filed for the
purpose of obtaining any necessary regulatory consents, approvals or
waivers.
4.4. Best Efforts
(a) Subject to the terms and conditions of this Agreement,
Parent and Company shall each use its commercially reasonable efforts
in good faith, and each of them shall cause its Subsidiaries to use
their commercially reasonable efforts in good faith, to (i) furnish such
information as may be required in connection with the preparation of the
documents referred to in Sections 4.2 and 4.3 above; and (ii) take or
cause to be taken all action necessary or desirable on its part so as to
permit consummation of the Merger at the earliest practicable date,
including, without limitation, (1) obtaining the consent or approval of
each individual, partnership, corporation, association or other business
or professional entity whose consent or approval is required for
consummation of the transactions contemplated hereby; provided, that
neither Company nor any Company Subsidiary shall agree to make any
payments or modifications to agreements in connection therewith without
the prior written consent of Parent, which consent shall not be
unreasonably withheld, (2) requesting the delivery of appropriate
opinions, consents and letters from its counsel and independent auditors
and (3) making all filings and providing all information required by any
federal, state or foreign regulatory agency or under any applicable
domestic and foreign laws and regulations. Subject to the terms and
conditions of this Agreement, no party hereto shall take or fail to take,
or cause or permit its Subsidiaries to take or fail to take, or to the
best of its ability permit to be taken or omitted to be taken by any
third persons, any action that would substantially impair the prospects
of completing the Merger pursuant to this Reorganization Agreement and
the Plan of Merger, or that would materially delay such completion.
(b) Company shall give prompt notice to Parent, and Parent
shall give prompt notice to Company, of (i) the occurrence, or failure
to occur, of any event which occurrence or failure would be reasonably
likely to cause any representation or warranty contained in this Agreement
to be untrue or inaccurate at any time from the date hereof to the Closing
Date such that the condition set forth in Section 5.2(a) or 5.3(a), as
applicable, would not be met if such failure to be true or accurate were
to occur or be continuing on the Closing Date; and (ii) any material
failure of Company or Parent, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by
the applicable party hereunder, and each party shall use all reasonable
best efforts to remedy such failure.
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4.5. Investigation and Confidentiality
Company shall keep Parent advised of all material developments relevant
to its business and to consummation of the transactions contemplated herein
and in the Plan of Merger. Parent may make or cause to be made such
investigation of the financial and legal condition of Company as Parent
reasonably deems necessary or advisable in connection with the transactions
contemplated herein and in the Plan of Merger; provided, however, that such
investigation shall be reasonably related to such transactions and shall
not interfere unnecessarily with normal operations. Company agrees to
furnish Parent and the advisors of Parent with such financial data and
other information with respect to its business and properties as Parent
shall from time to time reasonably request. No investigation pursuant
to this Section 4.5 shall affect or be deemed to modify any representation
or warranty made by Company, or the conditions to the obligations to
consummate the Merger of Parent. Each party hereto shall hold all
information furnished by the other party or any of such party's
Subsidiaries or representatives pursuant to this Agreement in confidence
to the extent required by, and in accordance with, the provisions of
the Exclusivity Agreement, dated September 11, 2003, by and between
Company and Parent (the "Confidentiality Agreement"). Notwithstanding
anything herein to the contrary, except where such disclosure would be
prohibited under U.S. securities laws, any party to this hereto (and
each employee, representative or other agent thereof) may disclose to
any and all persons, without limitation of any kind, the tax treatment
and tax structure of the transactions contemplated herein and all
materials of any kind (including opinions or other tax analyses) that
are provided to such party relating to such tax treatment and tax
structure. For this purpose, a "tax structure" means any facts relevant
to the U.S. federal income tax treatment of the proposed transaction
and does not include information relating to the identity of the parties.
4.6. Press Releases
Company and Parent shall agree with each other as to the form and
substance of any press release related to this Reorganization Agreement
and the Plan of Merger or the transactions contemplated hereby or thereby,
and shall consult each other as to the form and substance of other public
disclosures related thereto; provided, however, that nothing contained
herein shall prohibit any party, following notification to the other
parties, if reasonably practicable, from making any disclosure which is
required by applicable law or NYSE rules.
4.7. Actions Pending the Merger
(a) Prior to the Closing Date, and except as otherwise
provided for by this Reorganization Agreement, the Plan of Merger,
or consented to or approved by Parent, Company shall, and shall cause
each of the Company Subsidiaries to, use commercially reasonable
efforts to preserve the properties, business and relationships with
customers, employees and other persons of each of the Company Subsidiaries.
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(b) Company shall not, and shall not permit any Company
Subsidiaries to, except with the prior written consent of Parent or except
as Previously Disclosed or expressly contemplated or permitted by this
Agreement or the Plan of Merger:
(i) carry on its business other than in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted;
(ii) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock;
(iii) issue any shares of its capital stock or permit any
treasury shares to become outstanding, except for the issuance of shares
of Company Common Stock upon the exercise of options granted under Company
Plans that are issued and outstanding and have vested as of the date hereof
or shall vest prior to Closing;
(iv) incur any additional debt obligation or other
obligation for borrowed money;
(v) issue, grant or authorize any Rights or effect any
recapitalization, reclassification, stock dividend, stock split or like
change in capitalization, or redeem, repurchase or otherwise acquire any
shares of its capital stock except;
(vi) amend its articles or certificate of incorporation or
association or bylaws; impose, or suffer the imposition, on any share of
stock of any Company Subsidiary held by Company of any lien, charge or
encumbrance, or permit any such lien, charge or encumbrance to exist;
(vii) merge with any other corporation or other
organization or permit any other corporation or other organization to
merge into it or consolidate with any other corporation or other
organization; acquire control over any corporation or other organization
or create any Subsidiary;
(viii) waive or release any material right or cancel or
compromise any material debt or claim except in the ordinary course of
business consistent with past practice;
(ix) fail to comply in any material respect with any
material laws, regulations, ordinances or governmental actions
applicable to it and to the conduct of its business;
(x) liquidate or sell or dispose of any material assets
or acquire any material assets except in the ordinary course of business
consistent with past practice;
(xi) except as Previously Disclosed, make any capital
expenditure in excess of $20,000 in any instance or $150,000 in the
aggregate;
(xii) increase the rate of compensation of, pay or agree
to pay any bonus to, or provide any other employee benefit or incentive
to, any of its directors, officers or employees except in a manner
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consistent with past practice or as required by law or contractual
obligation in effect as of the date hereof;
(xiii) change its lending, investment, asset/liability
management or other material policies in any material respect except
as may be required by changes in applicable law;
(xiv) change its methods of accounting in effect at
February 28, 2003, except as required by changes in generally accepted
accounting principles concurred in by its independent certified public
accountants, or change any of its methods of reporting income,
deductions or other items for federal income tax purposes from those
employed in the preparation of its federal income tax returns for the
year ended February 28, 2003, except as required by applicable law;
(xv) enter into any Affiliate Transaction or any contract,
agreement, or other arrangement with a Company Subsidiary;
(xvi) adopt, enter into, or amend to increase or accelerate
benefits or obligations of any Company Plan, except as required by
applicable law;
(xvii) authorize or permit any of its officers, directors,
employees or agents to directly or indirectly solicit, initiate or encourage
any inquiries relating to, or the making of any proposal which constitutes,
a Takeover Proposal (as defined below), or, except to the extent legally
required for the discharge of the fiduciary duties of Board of Directors
of Company, recommend or endorse any Takeover Proposal, or participate in
any discussions or negotiations, or provide third parties with any nonpublic
information, relating to any such inquiry or proposal or otherwise
facilitate any effort or attempt to make or implement a Takeover Proposal;
provided, however, that Company may communicate information about any such
Takeover Proposal to its shareholders if, in the judgment of the Board of
Directors of Company, after consultation with outside counsel, such
communication is necessary in order to comply with its fiduciary duties
to shareholders of Company required under applicable law. Company shall
take all actions necessary or advisable to inform the appropriate
individuals or entities referred to in the first sentence hereof of the
obligations undertaken herein. Company shall notify Parent immediately
if any such inquiries or Takeover Proposals are received by, any such
information is requested from, or any such negotiations or discussions
are sought to be initiated or continued with, Company, and Company shall
promptly inform Parent in writing of all of the relevant details with
respect to the foregoing. As used in this Agreement, "Takeover Proposal"
shall mean any tender or exchange offer, proposal for a merger,
consolidation or other business combination involving Company or any
Company Subsidiary or any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets of,
Company or any Company Subsidiary other than the transactions contemplated
or permitted by this Agreement and the Plan of Merger; or
(xviii) agree to do any of the foregoing.
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4.8. Closing; Agreement of Merger
The transactions contemplated by this Reorganization Agreement and
the Plan of Merger (the terms of which are incorporated herein by reference)
shall be consummated at a closing to be held at such location and on such
date as the parties shall mutually agree, not later than the last day of
the calendar month in which each of the conditions to the consummation of
the Merger set forth in ARTICLE 5 hereof have been satisfied (provided,
however, that, if the last day of such calendar month is fewer than ten
(10) days following the satisfaction of such conditions, the Closing shall
take place on the last day of the next succeeding calendar month), or such
other date to which the parties may mutually agree (other than such
conditions relating to the actions to be taken at the Closing) (such date,
"Closing Date"). In connection with such Closing, each of Merger Sub
and Company shall execute articles of merger in the form attached hereto
as Exhibit A (the "Articles of Merger"), and shall cause such Articles of
Merger to be delivered to the Iowa Secretary of State in accordance with
Section 490.1106 of the Iowa Business Corporation Act. The Merger shall
be effective at the time and on the date ("Effective Date") as designated
in the Articles of Merger.
4.9. Company Employees; Directors and Management; Indemnification
(a) Prior to the Effective Date, Company shall take, or shall
cause the ERISA Affiliates of Company to take, all actions that may be
requested by Parent in writing with respect to (i) causing one or more
Company Plans (other than Company Plans that are contractual arrangements
with individual officers and employees of Company or any Company Subsidiary)
to be modified or terminated as of, or prior to, the Effective Date or for
benefit accruals and entitlements to cease as of, or prior to, the Effective
Date; (ii) causing the continuation on and after the Effective Date of any
contract, arrangement or insurance policy relating to any Company Plan for
such period as may be requested by Parent; (iii) facilitating the merger
of any Company Plan into any employee benefit plan maintained by Parent or
an ERISA Affiliate of Parent; and (iv) any of the matters Previously
Disclosed by Parent. Company shall not authorize the commencement of
any purchase period under any Company stock purchase plan between the
date hereof and the termination of this Reorganization Agreement and
shall not extend any purchase period that is in effect on the date hereof
beyond its originally scheduled date of termination.
(b) In the event of any threatened or actual claim, action,
suit, proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit, proceeding or
investigation in which any person who is now, or has been at any time prior
to the date of this Agreement, or who becomes prior to the Effective Date,
a director or officer of Company or of any Company Subsidiary (the
"Indemnified Parties") is, or is threatened to be, made a party based in
whole or in part on, or arising in whole or in part out of, or pertaining
to (i) the fact that he is or was a director, officer or employee of Company,
or any Company Subsidiary or any of their respective predecessors; or (ii)
this Agreement or the Plan of Merger or any of the transactions
contemplated hereby or thereby, whether in any case asserted or arising
before or after the Effective Date, the parties hereto agree to cooperate
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and use their best efforts to defend against and respond thereto. On and
after the Effective Date, Parent shall indemnify and hold harmless, as and
to the fullest extent permitted by law, each such Indemnified Party
against any losses, claims, damages, liabilities, costs, expenses
(including reasonable attorney's fees and expenses in advance of the
final disposition of any claim, suit, proceeding or investigation to each
Indemnified Party to the fullest extent permitted by law upon receipt of
any undertaking required by applicable law), judgments, fines and amounts
paid in settlement in connection with any such threatened or actual claim,
action, suit, proceeding or investigation, and in the event of any such
threatened or actual claim, action, suit, proceeding or investigation
(whether asserted or arising before or after the Effective Date), the
Indemnified Parties may retain counsel reasonably satisfactory to them
after consultation with Parent; provided, however, that (1) Parent shall
have the right to assume the defense thereof and upon such assumption
Parent shall not be liable to any Indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by
any Indemnified Party in connection with the defense thereof, except
that, if Parent elects not to assume such defense or counsel for the
Indemnified Parties and reasonably advises the Indemnified Parties that
there are issues which raise conflicts of interest between Parent and the
Indemnified Parties, the Indemnified Parties may retain counsel reasonably
satisfactory to them after such notification, and Parent shall pay the
reasonable fees and expenses of such counsel for the Indemnified Parties,
(2) Parent shall be obligated pursuant to this paragraph to pay for only
one firm of counsel for all Indemnified Parties; provided, that, if there
are issues which raise conflicts of interest between two or more of the
Indemnified Parties that result in the retention of separate counsel
pursuant to the provisions of the preceding clause (1) Parent shall be
obligated pursuant to this paragraph to pay for only one firm of counsel
for each Indemnified Party or set of Indemnified Parties requiring
separate counsel, (3) Parent shall not be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld, delayed or conditioned), and (4) Parent shall have
no obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination
shall have become final and nonappealable, that indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by
applicable law. Any Indemnified Party wishing to claim Indemnification
under this Section 4.9(b), upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Parent thereof;
provided, that the failure of any Indemnified Party to so notify Parent
shall not relieve Parent of its obligations hereunder except (and only)
to the extent that such failure materially prejudices Parent. Parent's
obligations under this Section 4.9(b) shall continue in full force and
effect for a period of six (6) years from the Effective Date; provided,
however, that all rights to indemnification in respect of any claim (a
"Claim") asserted or made within such period shall continue until the
final disposition of such Claim.
(c) Parent agrees that all rights to indemnification and all
limitations on liability existing in favor of the directors, officers
and employees of Company and any Company Subsidiary (the "Covered
Parties") as provided in their respective articles of incorporation,
bylaws or similar governing documents as in effect as of the date of
this Agreement with respect to matters occurring prior to the Effective
Date shall survive the Merger and shall continue in full force and
effect, and shall be honored by such entities or their respective
successors as if they were the indemnifying party thereunder; provided,
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however, that nothing contained in this Section 4.9(c) shall be deemed
to preclude the liquidation, consolidation or merger of Company or any
Company Subsidiary, in which case all of such rights to indemnification
and limitations on liability shall be deemed to so survive and continue
as an obligation of Parent or the successor to Company or the Company
Subsidiary notwithstanding any such liquidation, consolidation or merger.
(d) Parent, from and after the Effective Date shall use its
reasonable best efforts directly or indirectly to cause the persons who
served as directors or officers of Company on or before the Effective
Date to be covered by Company's existing directors' and officers'
liability insurance policy (provided, that Parent may substitute
therefor policies of at least the same coverage and amounts containing
terms and conditions which are not less advantageous than such policy)
but in no event shall any insured person be entitled under this Section
4.9(d) to insurance coverage more favorable than that provided to him
or her in such capacities as of the date hereof with respect to acts
or omissions resulting from their service as such on or prior to the
Effective Date. Such insurance coverage, if reasonably available at a
reasonable cost relative to the coverage obtained, shall commence on the
Effective Date and shall be provided for a period of no less than six
(6) years after the Effective Date; provided, however, that in no event
shall Parent be required to expend more than 150% of the current amount
expended by Company (the "Insurance Amount") to maintain or procure
insurance coverage pursuant hereto, provided, further, that the Insurance
Amount shall be deemed reasonable for purposes of this Section 4.9(d).
Company agrees to renew any such existing insurance or to purchase any
"discovery period" insurance provided for thereunder at request of Parent.
(e) In the event Parent or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation
or merger; or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, to the
extent necessary, proper provision shall be made so that the successors
and assigns of Parent assume the obligations set forth in this section.
(f) The provisions of Section 4.9(b), (c), (d) and (e) are
intended to be for the benefit of, and shall be enforceable by, each
Indemnified Party and their respective heirs and representatives.
(g) For the ninety (90) day period prior to the Effective
Date, Company shall not terminate the employment of any employees
(other than a discharge for misconduct or poor performance ) without
the consent of Parent, which consent shall not be unreasonably withheld.
Company shall be responsible for providing any notice required pursuant
to WARN, any successor federal law, and any other applicable plant
closing notification laws, including state law, foreign laws or
contractual requirements, with respect to a layoff or plant closing
that occurs prior to the Effective Date, and Company shall be solely
liable for all losses with respect to the failure to provide any such
notice in a timely manner.
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(h) As soon as practicable following the Effective Date, the
Surviving Corporation shall repay in full the notes Previously Disclosed
in Schedule 4.9(h).
4.10. Takeover Laws
No party hereto shall take any action that would cause the transactions
contemplated by this Reorganization Agreement or the Plan of Merger to be
subject to the requirements imposed by any Takeover Law, and each party
hereto shall take all necessary steps within its control to exempt (or
ensure the continued exemption of) the transactions contemplated by this
Reorganization Agreement and the Plan of Merger from, or if necessary
challenge the validity or applicability of, any applicable Takeover Law,
as now or hereafter in effect.
4.11. Shareholder Litigation
Until the earlier of the termination of this Agreement in accordance
with its terms or the Effective Date, each party shall give the other party
the opportunity to participate in the defense or settlement of any
shareholder litigation relating to this Agreement and the Plan of Merger
or any of the transactions contemplated by this Agreement and by the Plan
of Merger, and shall not settle any such litigation without the other
party's prior written consent, which will not be unreasonably withheld
or delayed.
ARTICLE 5.
CONDITIONS PRECEDENT
5.1. Conditions Precedent to Obligations of Parent, Merger Sub
and Company
The respective obligations of the parties to effect the Merger
shall be subject to satisfaction or waiver of the following conditions
at or prior to the Closing Date:
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Reorganization Agreement and the Plan of
Merger and consummation of the transactions contemplated hereby and
thereby, including, without limitation the shareholder approval
contemplated by Section 2.5 hereof, shall have been duly and validly
taken;
(b) The parties hereto shall have received all regulatory
approvals required or mutually deemed necessary in connection with the
transactions contemplated by this Reorganization Agreement and the Plan
of Merger, all notice periods and waiting periods required after the
granting of any such approvals shall have passed and all conditions
contained in any such approval required to have been satisfied prior
to consummation of such transactions shall have been satisfied; provided,
however, that no such approval shall have imposed any condition or
requirement that, in the reasonable good faith opinion of the Board of
Directors of Parent, so materially and adversely affects the anticipated
economic and business benefits to Parent of the transactions contemplated
by this Agreement as to render consummation of such transactions
inadvisable;
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(c) To the extent that any material lease, license, loan,
financing agreement or other contract or agreement to which Company or
any Company Subsidiary is a party requires the consent of or waiver
from the other party thereto as a result of the transactions contemplated
by this Agreement, such consent or waiver shall have been obtained; and
(d) None of the parties hereto shall be subject to any order,
decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the transactions contemplated by
this Reorganization Agreement and the Plan of Merger.
5.2. Conditions Precedent to Obligations of Company
The obligations of Company to effect the Merger shall be subject to
satisfaction of the following additional conditions at or prior to the
Closing Date unless waived by Company pursuant to Section 6.4 hereof:
(a) The representations and warranties of Parent and Merger
Sub set forth in ARTICLE 3 hereof shall be true and correct in all
material respects as of the date of this Reorganization Agreement and as
of the Closing Date as though made on and as of the Closing Date (or on
the date when made in the case of any representation and warranty which
specifically relates to an earlier date), except as otherwise
contemplated by this Reorganization Agreement or consented to in writing
by Company; provided, however, that (i) in determining whether or not the
condition contained in this paragraph (a) shall be satisfied, no effect
shall be given to any exceptions in such representations and warranties
relating to materiality or material adverse effect on the ability of
Parent to consummate the transactions contemplated by this Agreement and
the Plan of Merger; and (ii) the condition contained in this paragraph
(a) shall be deemed to be satisfied unless the failure of such
representations and warranties to be so true and correct constitute,
individually or in the aggregate, a material adverse effect on the
ability of Parent to consummate the transactions contemplated by this
Agreement and the Plan of Merger;
(b) Parent and Merger Sub shall have in all material respects
performed all obligations and complied with all covenants required by
this Reorganization Agreement and the Plan of Merger to be performed or
complied with at or prior to the Closing Date;
(c) Each of Parent and Merger Sub shall have delivered to
Company a certificate, dated the Closing Date and signed by its respective
Managing Director, Senior Vice President or Executive Vice President to
the effect that the conditions set forth in paragraphs (a) and (b) of
this Section 5.2 have been satisfied and such other customary
certificates as Company may reasonably request.
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5.3. Conditions Precedent to Obligations of Parent and Merger Sub
The respective obligations of Parent and Merger Sub to effect the
Merger shall be subject to satisfaction of the following additional
conditions at or prior to the Closing Date unless waived by Parent
pursuant to Section 6.4 hereof:
(a) The representations and warranties of Company set forth in
ARTICLE 2 hereof shall be true and correct in all material respects as of
the date of this Reorganization Agreement and as of the Closing Date as
though made on and as of the Closing Date (or on the date when made in the
case of any representation and warranty which specifically relates to an
earlier date), except as otherwise contemplated by this Reorganization
Agreement or consented to in writing by Parent; provided, however, that
in determining whether or not the condition contained in this paragraph
(a) shall be satisfied, references to Company's and Company Subsidiaries
business or Company's and Company Subsidiaries business as conducted as
of the date of this Agreement shall mean and include Company's and Company
Subsidiaries business as of the date of this Agreement and Company's and
Company Subsidiaries business as required to be conducted immediately prior
to the Closing Date pursuant to Section 5.3(g) and provided, further, that
(i) in determining whether or not the condition contained in this paragraph
(a) shall be satisfied, no effect shall be given to any exceptions in such
representations and warranties relating to materiality or Material Adverse
Effect; and (ii) the condition contained in this paragraph (a) shall be
deemed to be satisfied unless the failure of such representations and
warranties to be so true and correct constitute, individually or in the
aggregate, a Material Adverse Effect;
(b) Company shall have in all material respects performed all
obligations and complied with all covenants required by this Reorganization
Agreement and the Plan of Merger to be performed or complied with at or
prior to the Closing Date;
(c) Since the date of this Reorganization Agreement there
shall not have occurred (i) any event that has had or reasonably would
be expected to have a Material Adverse Effect; (ii) a material disruption
or material adverse change in financial, banking or capital markets in
the United States, other than as a result of general economic conditions;
(iii) the outbreak or escalation of hostilities involving the United
States or the declaration by the United States of a national emergency
or war; or (iv) a material adverse change in the agriculture services
industry (including as a result of the Federal Crop Insurance Corporation
ceasing to underwrite multi-peril crop insurance or materially altering
the terms of such underwriting, a material change in or discontinuance
of subsidies by the United States Department of Agriculture pursuant to
the Farm Security and Rural Investment Act of 2002, or a material change
in or discontinuance of other federal farm funding programs); provided,
however, that, in the case of the foregoing clauses (ii) and (iii), the
effect of any of the events specified in such clauses, shall make it
impracticable to proceed with the transactions contemplated by this
Agreement and the Plan of Merger or shall cause a Material Adverse Effect
or make it reasonably likely that a Material Adverse Effect shall occur;
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(d) Company shall have delivered to Parent and Merger Sub a
certificate, dated the Closing Date and signed by its Chairman, CEO,
President or Senior Vice President to the effect that the conditions
set forth in paragraphs (a), (b) and (c) of this Section 5.3 have been
satisfied and such other customary certificates as Parent and Merger
Sub may reasonably request;
(e) Company shall have delivered to Parent and Merger Sub an
environmental assessment prepared in accordance with ASTM Standard E1527,
dated as of a recent date relative to the Closing Date, relating to each
parcel of real property owned or operated by the Company, which
environmental assessments shall be acceptable to Parent and Merger Sub;
(f) Company shall have delivered to Parent and Merger Sub a
copy of the written opinion of Burnham rendered orally on the same date
as this Agreement and Burnham shall have rendered an oral opinion to the
Board of Directors of Company, as of the Closing Date to the effect that,
as of such date, the Merger Consideration is fair, from a financial point
of view, to the holders of Company Common Stock. A correct and complete
copy of a written opinion that confirms such oral opinion shall be
delivered to Parent at the same time Burnham provides such written
opinion to Company;
(g) There shall be no pending or threatened actions or
proceedings by any governmental body or agency to restrain the
transactions contemplated by this Agreement or asserting the illegality
thereof, nor shall there be any such action or proceeding by any Person;
nor shall there be any other litigation or proceedings pending or
threatened in connection with this Agreement or the transactions
contemplated hereby against Parent, Merger Sub or Company the consequences
of which, in the judgment of Parent, could be materially adverse to
Parent or Company; and
(h) Immediately prior to and as of the Closing Date, Company
shall have adjusted the structure of its business such that it does not
take title to agricultural inputs and such that it shall be substantially
engaged in activities that are financial in nature, incidental to a
financial activity, or otherwise permissible for a financial holding
company in accordance with the regulations of the Board of Governors
of the Federal Reserve System.
ARTICLE 6.
TERMINATION, WAIVER AND AMENDMENT
6.1. Termination
This Reorganization Agreement and the Plan of Merger may be
terminated, either before or after approval by the shareholders of
Company or Merger Sub:
(a) At any time on or prior to the Effective Date, by the
mutual consent in writing of the parties hereto;
(b) At any time on or prior to the Closing Date, by Parent
in writing, if Company has, or by Company in writing, if Parent or
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Merger Sub has, in any material respect, breached (i) any covenant or
agreement contained herein or in the Plan of Merger; or (ii) any
representation or warranty contained herein, and in either case if (x)
such breach has not been cured by the earlier of thirty (30) days after
the date on which written notice of such breach is given to the party
committing such breach or, in the event such breach occurs after
January 31, 2004, by February 29, 2004, and (y) such breach would
entitle the non-breaching party not to consummate the transactions
contemplated hereby under ARTICLE 5 hereof;
(c) On the date, if any, mutually agreed by the parties to be
the Closing Date, unless the parties mutually agree that a later date shall
be the Closing Date, by Parent in writing, if Company has, or by Company in
writing, if Parent has, not fulfilled or satisfied any of the conditions
set forth in ARTICLE 5 hereof with respect to such party;
(d) At any time, by any party hereto in writing, if the
applications for prior approval referred to in Section 4.3 hereof have
been finally denied, and the time period for appeals and requests for
reconsideration has run, or if any governmental entity of competent
jurisdiction shall have issued a final nonappealable order enjoining or
otherwise prohibiting the Merger;
(e) At any time, by any party hereto in writing, if the
shareholders of Company do not approve the transactions contemplated
hereby and by the Plan of Merger at the special meeting duly called for
that purpose;
(f) By Parent prior to the time the shareholders of Company
approve the transactions contemplated by this Agreement and the Plan of
Merger, if (i) the Board of Directors of Company fails to recommend
approval and adoption of this Agreement and the Merger by the shareholders
of Company or withdraws or modifies (or publicly announces an intention
to withdraw or modify) in any adverse manner its approval or recommendation
of this Agreement or the Merger; (ii) the Board of Directors of Company
makes any public recommendation with respect to any Takeover Proposal
other than a recommendation to reject such Takeover Proposal; (iii)
Company takes any action prohibited by 4.7(b)(xvii); or (iv) the Board
of Directors of Company resolves to take any of the actions specified
above; or
(g) By any party hereto in writing, if the Closing has not
occurred by the close of business on February 29, 2004, unless the failure
of the Closing to occur by such date shall be due to the failure of the
party seeking to terminate this Agreement to perform or observe the
covenants and agreements set forth herein.
6.2. Effect of Termination
(a) In the event this Reorganization Agreement and the Plan
of Merger are terminated pursuant to Section 6.1 hereof, this Agreement
and the Plan of Merger shall become void and have no effect, except that
(i) the provisions relating to confidentiality, fees and expenses set
forth in Sections 4.5, 6.2(b) and 7.1 hereof, respectively, shall survive
any such termination; and (ii) a termination pursuant to Section 6.1(b)(i)
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or 6.1(b)(ii) hereof shall not relieve the breaching party from liability
for an uncured willful breach of such covenant or agreement or
representation or warranty giving rise to such termination.
(b) Company acknowledges that Parent has spent, and shall be
required to spend, substantial time and effort in examining the business,
properties, affairs, financial condition and prospects of Company, has
incurred, and shall continue to incur, substantial fees and expenses in
connection with such examination, the preparation of this Reorganization
Agreement and the accomplishment of the transactions contemplated hereby,
and shall be unable to evaluate and, possibly, make investments in or
acquire other entities due to the limited number of personnel available
for such purpose and the constraints of time. Therefore, to induce Parent
to enter into this Reorganization Agreement and the Plan of Merger, in the
event this Reorganization Agreement and the Plan of Merger are terminated:
(i) by Parent pursuant to Section 6.1(f) hereof; or
(ii) by Company or Parent pursuant to Section 6.1(e)
hereof because of the failure to obtain the required approval of Company's
shareholders and, if (A) at or prior to Company's shareholders meeting a
Takeover Proposal shall have been publicly announced or disclosed (whether
or not such offer, proposal or announcement or agreement shall have been
rejected or shall have been withdrawn prior to the time of such
termination or of Company's shareholders' meeting) and (B)(1) a third
party or "group" (within the meaning of Rule 13d-5 under the Exchange
Act), directly or indirectly, acquires Company Common Stock which results
in a such third party or "group" having beneficial ownership of fifty
percent (50%) or more of the then outstanding Company Common Stock or
(2) a sale, transfer or license (having similar effect as a sale or
transfer) of fifty percent (50%) or more of the fair market value of
the assets of Company, other than in the ordinary course of business, or
(3) a definitive agreement with respect to any transaction referred to in
(1) or (2) is executed by Company or any Company Subsidiaries, in the case
of (1), (2) or (3), within one (1) year following termination of this
Reorganization Agreement and the Plan of Merger pursuant to Section 6.1(e);
then, in the case of clause (i), Company shall pay to Parent by wire
transfer of the same day funds promptly, but not later than two (2)
business days after the date of such termination, a termination fee of
$1,400,000 (the "Termination Fee"), and, in the case of clause (ii),
Company shall pay the Termination Fee to Parent by wire transfer of same
day funds promptly, but not later than two (2) business days after
satisfaction of all conditions to the payment thereof set forth in clause
(ii). In the event that Parent is entitled to the Termination Fee, the
Company shall also pay Parent interest at the prime rate on any amounts
that are not paid when due, plus all reasonable costs and expenses in
connection with or arising out of the enforcement of the obligation of
Company to pay such fee or such interest.
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6.3. Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Reorganization
Agreement and the Plan of Merger or in any instrument delivered pursuant
hereto or thereto shall expire on, and be terminated and extinguished at,
the Effective Date other than covenants that by their terms are to survive
or be performed after the Effective Date; provided, that no such
representations, warranties or covenants shall be deemed to be terminated
or extinguished so as to deprive Parent, Merger Sub or Company (or any
director, officer or controlling person thereof) of any defense in law or
equity which otherwise would be available against the claims of any person,
including, without limitation, any shareholder or former shareholder of
Company, the aforesaid representations, warranties and covenants being
material inducements to the consummation by Parent and Company of the
transactions contemplated herein.
6.4. Waiver
Except where prohibited by law, Parent and Company, respectively,
by written instrument signed by an executive officer of such party, may
at any time (whether before or after approval of this Reorganization
Agreement and the Plan of Merger by the shareholders of Company) extend
the time for the performance of any of the obligations or other acts of
Company, on the one hand, or Parent or Merger Sub, on the other hand,
and may waive (a) any inaccuracies of such parties in the representations
or warranties contained in this Agreement, the Plan of Merger or any
document delivered pursuant hereto or thereto; (b) compliance with any
of the covenants, undertakings or agreements of such parties, or
satisfaction of any of the conditions precedent to its obligations,
contained herein or in the Plan of Merger; or (c) the performance by
such parties of any of its obligations set out herein or therein;
provided, however, that no such waiver, or amendment or supplement
contemplated by Section 6.5 hereof, executed after approval of this
Reorganization Agreement and the Plan of Merger by the shareholders of
Company shall, without the further approval thereof, change the amount
or kind of Merger Consideration.
6.5. Amendment or Supplement
This Reorganization Agreement and the Plan of Merger may be amended
or supplemented at any time only by mutual agreement of the parties hereto
or thereto. Any such amendment or supplement must be in writing and
approved by their respective boards of directors and/or officers
authorized thereby and shall be subject to the proviso in Section 6.4
hereto.
ARTICLE 7.
MISCELLANEOUS
7.1. Expenses
Except as otherwise provided in Section 6.2(b) hereof, each party
hereto shall bear and pay all costs and expenses incurred by it in
connection with the transactions contemplated in this Reorganization
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Agreement, including fees and expenses of its own financial consultants,
accountants and counsel.
7.2. Entire Agreement
This Reorganization Agreement and the Plan of Merger contain the
entire agreement between the parties with respect to the transactions
contemplated hereunder and thereunder and supersede all prior arrangements
or understandings with respect thereto, written or oral, other than
documents referred to herein or therein and the Confidentiality Agreement.
The terms and conditions of this Reorganization Agreement and the Plan of
Merger shall inure to the benefit of and be binding upon the parties
hereto and thereto and their respective successors. Except as specifically
set forth herein, or in the Plan of Merger, nothing in this Reorganization
Agreement or the Plan of Merger, expressed or implied, is intended to
confer upon any party, other than the parties hereto and thereto, and
their respective successors, any rights, remedies, obligations or
liabilities.
7.3. No Assignment
No party hereto may assign any of its rights or obligations under
this Reorganization Agreement to any other person. Notwithstanding the
foregoing sentence, Parent shall have the right to assign, without any
obligation to obtain the consent of Company, any of its rights or
obligations under this Reorganization Agreement to any affiliate of
Parent.
7.4. Alternative Structure
Notwithstanding any provision of this Reorganization Agreement to
the contrary, Parent may, with the written consent of Company, which shall
not be unreasonably withheld, elect, subject to the filing of all necessary
applications and the receipt of all required regulatory approvals, to
modify the structure of the acquisition of Company and the Company
Subsidiaries set forth herein and in the Plan of Merger; provided, that
(a) the consideration to be paid to the holders of the Company Common
Stock is not thereby changed in kind or reduced in amount as a result of
such modification; and (b) such modification shall not materially delay
or jeopardize the consummation of the transactions contemplated by the
Reorganization Agreement and the Plan of Merger; provided, further, that
Parent shall pay all costs, if any, associated with any such modifications
of structure.
7.5. Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent
by facsimile transmission or overnight express or by registered or certified
mail, postage prepaid, addressed as follows:
-38-
If to Company:
Ag Services of America, Inc.
1309 Technology Parkway
Cedar Falls, Iowa 50613
Attn: Kevin D. Schipper
Facsimile No: 319.277.0144
With a required copy to:
Richard A. Krantz
Robinson & Cole LLP
Financial Centre,
695 East Main Street, P.O. Box 10305
Stamford, Connecticut 06904-2305
Facsimile No: 203.462.7599
If to Parent or Merger Sub:
Rabobank International
245 Park Avenue
New York, New York 10167
Attn: Guillermo Bilbao
Facsimile No: 212.916.7880
With a required copy to:
Arnold & Porter
399 Park Avenue
New York, New York 10022-4690
Attn: Isaac Lustgarten, Esq.
Facsimile No: 212.715.1399
7.6. Captions
The captions contained in this Reorganization Agreement are for
reference purposes only and are not part of this Reorganization Agreement.
7.7. Counterparts
This Reorganization Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
-39-
7.8. Governing Law
Except to the extent (a) federal law may be applicable to any
provision of this Agreement or (b) Iowa law is mandatorily applicable
to the Merger or the rights of shareholders of Company, this
Reorganization Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to agreements made and
entirely to be performed within such jurisdiction.
[Remainder of page left intentionally blank; signatures appear on the
following page.]
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IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have caused this Reorganization Agreement to be executed
in counterparts by their duly authorized officers, all as of the day and
year first above written.
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.,
RABOBANK NEDERLAND
_______________________________ _______________________________
By: Cor F. Broekhuyse By: Guillermo Bilbao
Title: Executive Vice President Title: Managing Director
UTRECHT-AMERICA
ACQUISITION CORP. II
_______________________________ _______________________________
By: Cor F. Broekhuyse By: Guillermo Bilbao
Title: President Title: Vice President
AG SERVICES OF AMERICA, INC.
_______________________________ _______________________________
By: Kevin D. Schipper By:
Title: Chief Executive Officer Title:
and Secretary
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AGREEMENT AND PLAN OF MERGER OF
UTRECHT-AMERICA ACQUISITION CORP. II
WITH AND INTO AG SERVICES OF AMERICA, INC.
AGREEMENT AND PLAN OF MERGER ("Plan of Merger") dated as of
October 31, 2003, by and between AG SERVICES OF AMERICA, INC. ("Company"),
an Iowa corporation having its principal executive office at 1309
Technology Parkway, Cedar Falls, Iowa 50613, UTRECHT-AMERICA ACQUISITION
CORP. II ("Merger Sub"), an Iowa corporation having its principal
executive office at 245 Park Avenue, New York, New York 10167, and
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., RABOBANK NEDERLAND
("Parent"), a cooperative bank organized under the laws of The Netherlands
having its registered office in Amsterdam, The Netherlands.
WITNESSETH
WHEREAS, the respective Boards of Directors of Company and Merger Sub
and the Supervisory Board and the Board of Management of Parent deem the
merger of Merger Sub with and into Company, under and pursuant to the terms
and conditions herein set forth or referred to, desirable and in the best
interests of the respective corporations and their respective shareholders,
and the respective Boards of Directors of Company and Merger Sub and the
Supervisory Board and the Board of Management of Parent have adopted
resolutions approving this Plan of Merger and an Agreement and Plan of
Reorganization dated of even date herewith ("Reorganization Agreement");
and
WHEREAS, the parties hereto desire that Company shall be acquired by
Parent through the merger of Merger Sub with and into Company, with Company
as the surviving corporation, subject to the terms and conditions of this
Plan of Merger and the Reorganization Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto do hereby agree as follows:
Article 1.
MERGER
Subject to the terms and conditions of this Plan of Merger, at the
Effective Time (as hereinafter defined), Merger Sub shall be merged with
and into Company, pursuant to the provisions of, and with the effect
provided in, the Iowa Business Corporation Act (said transaction being
hereinafter referred to as the "Merger"). At the Effective Time, the
separate existence of Merger Sub shall cease and Company, as the surviving
entity, shall continue unaffected and unimpaired by the Merger (Company as
existing on and after the Effective Time being hereinafter sometimes
referred to as the "Surviving Corporation").
Article 2.
ARTICLES OF INCORPORATION AND BY-LAWS
2.1 The Articles of Incorporation of Merger Sub in effect immediately
prior to the Effective Time shall be the Articles of Incorporation of the
Surviving Corporation, until further amended in accordance with applicable
law.
2.2 The Bylaws of Merger Sub in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
further amended in accordance with applicable law.
Article 3.
BOARD OF DIRECTORS AND OFFICERS
3.1 The directors of Merger Sub immediately following the Effective
Time shall be the individuals set forth in Appendix 3.1 attached hereto,
each to hold office in accordance with the Articles of Incorporation and
By-laws of the Surviving Corporation.
3.2 The officers of Company immediately prior to the Effective Time
shall be the officers of the Surviving Corporation; provided, however,
that Henry C. Jungling, Jr. shall not be an officer of the Surviving
Corporation and Kevin D. Schipper shall be the President of the Surviving
Corporation. Each officer of the Surviving Corporation shall hold office
in accordance with the Articles of Incorporation and By-laws of the
Surviving Corporation.
Article 4.
CAPITAL
At the Effective Time, each share of capital stock of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
non-assessable share of common stock of the Surviving Corporation.
Article 5.
CONVERSION AND EXCHANGE OF COMPANY SHARES
5.1 At the Effective Time, each share of the common stock of Company,
no par value ("Company Common Stock"), outstanding immediately prior to the
Effective Time (except as provided in Sections 5.2), shall by virtue of
the Merger be converted into the right to receive $8.50 in cash
(the "Merger Consideration").
5.2 At the Effective Time, all shares of Company Common Stock held in
the treasury of Company or owned beneficially by any subsidiary of Company
shall be canceled and no cash, stock or other property shall be delivered
in exchange therefor.
-2-
5.3 As promptly as reasonably practicable after the Effective Time,
but in no event more than three business days thereafter, Parent shall
cause its duly appointed payment agent (the "Payment Agent") to mail to
each holder of record of a certificate previously representing shares of
Company Common Stock (a "Certificate") the following: (i) a letter of
transmittal specifying that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon delivery of the
Certificates to the Payment Agent, which shall be in a form and contain
such provisions as Parent and Company may determine; and
(ii) instructions for use in effecting the surrender of the Certificates
in payment for the Merger Consideration. Upon the proper surrender of
a Certificate to the Payment Agent, together with a properly completed
and duly executed letter of transmittal, the holder of such Certificate
shall be entitled to receive in payment therefor a check representing
the Merger Consideration which such holder has the right to receive in
respect of the Certificate surrendered pursuant to the provisions
hereof, and the Certificate so surrendered shall forthwith be cancelled.
No interest will be paid or accrued on the Merger Consideration. In
the event of a transfer of ownership of any shares of Company Common
Stock not registered in the transfer records of Company, a check for
the Merger Consideration may be issued to the transferee if the
Certificate representing such Company Common Stock is presented to the
Payment Agent, accompanied by documents sufficient, in the discretion
of Parent, (i) to evidence and effect such transfer; and (ii) to
evidence that all applicable stock transfer taxes have been paid.
Any portion of the aggregate Merger Consideration or the proceeds of
any investments thereof that remains unclaimed by the shareholders of
Company for six months after the Effective Time shall be repaid by the
Payment Agent to Parent. Any shareholders of Company who have not
theretofore complied with this Section 5.3 shall thereafter look only
to Parent for payment of the Merger Consideration deliverable in respect
of each share of Company Common Stock such shareholder holds as
determined pursuant to this Plan of Merger without any interest thereon.
Any other provision of this Plan of Merger notwithstanding, neither
Parent or its agent nor any party to the Merger shall be liable to a
holder of Company Common Stock for any amount paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat or similar law. After the Effective Time,
the stock transfer books of Company shall be closed and no transfer
of Company Common Stock shall thereafter be made or recognized. If
after the Effective Time Certificates are presented to Parent or
the Surviving Corporation, they shall be cancelled and exchanged
for the Merger Consideration deliverable in respect thereof pursuant
to this Plan of Merger in accordance with the procedures set forth
in this Section 5.3.
5.4 No dividends or other distributions declared after the Effective
Time with respect to Company Common Stock shall be paid to the holder of
any unsurrendered Certificate until the holder thereof shall surrender
such Certificate in accordance with this Article V. After the surrender
of a Certificate in accordance with this Article V, the record holder
thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore
had become payable with respect to shares of Company Common Stock
represented by such Certificate.
5.5 At the Effective Time, all rights to purchase shares of Company
Common Stock pursuant to stock options granted under Company's 1993 Stock
-3-
Option Plan and 1991 Stock Option Plan that are outstanding immediately
prior to the Effective Time ("Employee Stock Options"), shall become
fully vested and exercisable and shall be adjusted to give each holder
of Employee Stock Options, upon exercise of any Option in accordance
with its terms, the right to receive with respect to each share of
Company Common Stock covered by the Option, in lieu of one share of
Company Common Stock, an amount of cash equal to the difference between
$8.50 and the per share exercise price of such option.
5.6 In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent, the posting by such person of a bond in such amount
as Parent may reasonably direct as indemnity against any claim that may
be made against it with respect to such Certificate, Parent or its
agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration to which the holder of such
Certificate is entitled pursuant to Section 5.1.
Article 6.
EFFECTIVE TIME OF THE MERGER
Articles of Merger evidencing the transactions contemplated herein
shall be delivered to the Iowa Secretary of State for filing as provided
in the Reorganization Agreement. The Merger shall be effective at the
time and on the date specified in such Articles of Merger (such date and
time being herein referred to as the "Effective Time").
Article 7.
FURTHER ASSURANCES
If at any time the Surviving Corporation shall consider or be advised
that any further assignments, conveyances or assurances are necessary
or desirable to vest, perfect or confirm in the Surviving Corporation
title to any property or rights of Merger Sub, or otherwise carry out
the provisions hereof, the proper officers and directors of Merger Sub,
as of the Effective Time, and thereafter the officers of the Surviving
Corporation acting on behalf of Merger Sub, shall execute and deliver
any and all proper assignments, conveyances and assurances, and do all
things necessary or desirable to vest, perfect or confirm title to such
property or rights in the Surviving Corporation and otherwise carry out
the provisions hereof.
Article 8.
CONDITIONS PRECEDENT
The obligations of Parent, Merger Sub and Company to effect the
Merger as herein provided shall be subject to satisfaction, unless duly
waived, of the conditions set forth in the Reorganization Agreement
(which is incorporated herein by reference).
-4-
Article 9.
TERMINATION
Anything contained in the Plan of Merger to the contrary
notwithstanding, and notwithstanding adoption hereof by the shareholders
of Company, this Plan of Merger may be terminated and the Merger
abandoned as provided in the Reorganization Agreement.
Article 10.
MISCELLANEOUS
10.1 This Plan of Merger may be amended or supplemented at any time
prior to the Effective Time by mutual agreement of Parent, Merger Sub and
Company. Any such amendment or supplement must be in writing and approved
by their respective Boards of Directors, in the cases of Merger Sub and
Company, and the Supervisory Board and the Board of Management, in the
case of Parent, and/or by officers authorized thereby and shall be subject
to the proviso in Section 6.4 of the Reorganization Agreement.
10.2 Any notice or other communication required or permitted under
this Plan of Merger shall be given, and shall be effective, in accordance
with the provisions of the Reorganization Agreement.
10.3 The headings of the several Articles herein are inserted for
convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Plan of Merger.
10.4 This Plan of Merger shall be governed by and construed in
accordance with the laws of the State of Iowa applicable to the internal
affairs of Company and Merger Sub, respectively.
[Remainder of page left intentionally blank;
signatures appear on the following page.]
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement and Plan of Merger to be executed in
counterparts by their duly authorized officers as of the day and year
first above written.
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A., RABOBANK NEDERLAND
------------------------- -------------------------
By: Cor F. Broekhuyse By: Guillermo Bilbao
Title: Executive Vice President Title: Managing Director
UTRECHT-AMERICA
ACQUISITION CORP. II
------------------------- -------------------------
By: Cor F. Broekhuyse By: Guillermo Bilbao
Title: President Title: Vice President
AG SERVICES OF AMERICA, INC.
------------------------- ------------------------
By: Kevin D. Schipper By:
Title: Chief Executive Officer Title:
and Secretary
-6-
Appendix 3.1
Cor F. Broekhuyse
Guillermo Bilbao
Robert Buckland
Hans Hannaart
Henry C. Jungling, Jr.
Gaylen D. Miller
Kevin D. Schipper
October 31, 2003
Special Committee of the Board of Directors
Ag Services of America, Inc.
1309 Technology Parkway
Cedar Falls, IA 50313
Gentlemen:
We understand that Ag Services of America, Inc. ("Ag Services" or the
"Company") intends to enter into an Agreement and Plan of Reorganization
and Agreement and Plan of Merger ("Merger Agreements") with Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A., Rabobank, Nederland ("Rabobank"
or, the "Purchaser") whereby a specially created subsidiary "("Merger
Sub") of Rabobank will acquire for cash all of the outstanding shares
of common stock of the Company (including a relatively small number of
in-the-money options) for $8.50 per share (the "Proposed Transaction").
At the closing of the Proposed Transaction, the Merger Sub will be
merged with and into the Company and Ag Services will be the surviving
corporation. The terms and conditions of the Proposed Transactions will
be more fully set forth in the Merger Agreements.
The Committee has requested our opinion (the "Opinion") as investment
bankers as to whether the consideration to be received by the shareholders
of the Company in the Proposed Transaction is fair, from a financial point
of view (this "Engagement").
In undertaking our analysis as to the fairness from a financial viewpoint
of the Proposed Transaction, we have relied on traditional valuation
techniques, conducted other financial studies and analyses and performed
such other investigations and took into account such other factors as we
deemed necessary for purposes of the opinion expressed herein. We have,
among other things:
* reviewed publicly available information concerning, and Securities
and Exchange Commission filings of, Ag Services dating back to
February 28, 1999;
* reviewed certain internal financial statements and other financial
and operating data prepared by the Company's senior management;
* analyzed Company senior management's recently revised Liquidation
Analysis which gives effect to a liquidation of the Company,
conducted discussions with senior management on its liquidation
assumptions and compared the Liquidation Analysis with outcomes
cited in the Company's Proxy Statement dated June 12, 2003 submitted
to shareholders;
* considered the financial and operating changes of the Company that
have occurred since February 28, 2002;
* reviewed and discussed with senior management of the Company certain
foregoing and prospective strategic and financial issues, including
the impact of the Proposed Transaction;
* compared the financial performance of the Company and the prices and
trading activities of its common stock with those of certain other
comparable publicly-traded companies and their respective securities;
* analyzed the trading history of the common stock of the Company;
* reviewed premiums of announced or concluded transactions in the
past twelve months for companies classified as Agricultural
Services and Non-Depository Credit Institutions and compared them
with the premium over 1-day and 30-day average closing prices of
Ag Services' common stock on the NYSE;
* compared the Proposed Transaction with other business combination
transactions and proposed transactions involving publicly-traded
companies as reported by reliable information services; and concluded
that the only viable transaction with which to compare the Proposed
Transaction was the recently terminated Securities Purchase Agreement
(reviewed by us) between the Company and ASP/ASA, LLC;
* reviewed drafts of the Merger Agreements between the Purchaser and
the Company, as well as drafts of other related documents
(collectively, the "Transaction Documents") between and amongst the
parties to the Proposed Transaction as they became available;
* considered the prospects for the Company and its shareholders if
the Proposed Transaction were not to be effected and if Ag Services
were to implement a liquidation plan due to the unavailability of
credit beyond one year;
* considered the Company's inability to secure an appropriate credit
facility or a financially sound equity partner after expending
significant human and financial resources in such endeavors for
more than a year and a half; and
* performed such other analyses and considered such other factors as
we deemed appropriate.
In preparing our Opinion, we have assumed and relied upon the accuracy and
completeness of all of the financial and other information provided to,
reviewed or analyzed by us in connection with this Opinion without making,
or assuming any responsibility for making, any independent verification
of such information. We have assumed that the Transaction Documents in
the form finally entered into will not differ in any material respect from
the drafts furnished to us and that the Proposed Transaction will be
consummated on the terms set forth in the Transaction Documents without
waiver or amendment of any of the material terms thereof.
With respect to the Liquidation Analysis and business prospects, we have
assumed that such information has been reasonably prepared on a consistent
basis with prior practice and that such information reflects the best
currently available estimates and judgments of the Company's senior
management, who has informed us that, absent the Proposed Transaction,
the Company will be forced to liquidate and that, if the Company were
liquidated, the discounted book value of the Company would likely be
less than the consideration to be received by the shareholders in the
Proposed Transaction. With regard to the Liquidation Analysis, we
have further assumed, with your consent, that all material assets and
liabilities (contingent or otherwise) of the Company are as set forth
in the Liquidation Analysis. Other than the Liquidation Analysis, the
Company has not provided us with any financial forecasts relating to
the Proposed Transaction. We thus express no opinion with respect to
the Liquidation Analysis or any of the assumptions, estimates or
judgments upon which it was based. Further, we express no opinion
as to the viability of the Company as a going concern if the Proposed
Transactions is not effected and, as you know, we were not requested
to explore any alternative to the Proposed Transaction. In addition,
we have not made, or assumed any responsibility for making, any
independent evaluation or appraisal of the assets or liabilities of
Ag Services, nor have we been furnished with any such evaluation or
appraisal. Our Opinion is necessarily based on economic, market and
other conditions as they exist and as they can be evaluated as of the
date of this Opinion. It should be understood that, although subsequent
developments may affect this Opinion we do not have any obligation to
update, revise or reaffirm this Opinion. We have not been requested
to opine upon, and our Opinion does not in any manner address Ag Services'
underlying business decision to proceed with the Proposed Transaction.
We are entitled to receive a fee for our services in respect to the
Proposed Transaction. In addition, the Company has agreed to indemnify
us from certain liabilities arising out of this Engagement. In the
ordinary course of our business, we and our affiliates may trade the
securities of the Company for our own account and the account of our
customers and, accordingly, may at any time hold a long or short position
in such securities. We recognize our responsibility for compliance with
federal laws in connection with any such activities. In addition, one
or more of our employees owns shares of common stock of the Company.
It is understood that this letter is for the Special Committee and the
information of the Board of Directors of the Company in its consideration
of whether the consideration to be received by the shareholders of
Ag Services in the Proposed Transaction is fair, from a financial point
of view. Our Opinion does not constitute a recommendation as to how
any member of the Board or any stockholder should vote on the Proposed
Transaction and is not to be quoted or referred to, in whole or in part,
in any document, nor shall it be used for any other purpose without our
prior written consent, except that we hereby consent to the inclusion of
this Opinion in its entirety in any filing made by the Company with the
Securities and Exchange Commission with respect to the Proposed
Transaction and in the Proxy Statement to be sent to shareholders of the
Company with respect thereto.
Subject to the foregoing, on the basis of our review and analyses and
such other factors as we deemed relevant, it is our Opinion that as of
the date hereof the consideration to be received by the shareholders of
Ag Services in the Proposed Transaction is fair, from a financial point
of view, to the shareholders of the Company.
Very truly yours,
Burnham Securities Inc.
By:
-------------------------
Richard Lewisohn, III
Senior Managing Director
Burnham Securities Inc.