(1) SECURITY REQUIRED. (a) Except as provided in par. (c), a vegetable contractor shall file security with the department, and maintain that security until the department releases it under sub. (7), if all of the following apply when the department first licenses the vegetable contractor under s. 126.56 (1): 1. The vegetable contractor reports more than $500,000 in annual contract obligations under s. 126.56 (9) (am). 2. The vegetable contractor files a financial statement under s. 126.58 (1) and that financial statement shows negative equity. (b) 1. In this paragraph, “estimated default exposure” means 75 percent of the highest amount of unpaid contract obligations, reported by a vegetable contractor under s. 126.56 (9) (b) or (12) that the vegetable contractor had at any time during the last 12 months. 2. Except as provided in par. (c), a vegetable contractor shall file security with the department, and shall maintain that security until the department releases it under sub. (7) (bm), if at any time all of the following apply: a. The vegetable contractor’s latest annual financial statement under s. 126.58 (1) shows negative equity, a current ratio of less than 1.25 to 1.0, or a debt to equity ratio of more than 4.0 to 1.0. b. The vegetable contractor’s estimated default exposure exceeds $20,000,000. (c) A vegetable contractor is not required to file security under this subsection if any of the following applies: 1. The vegetable contractor pays cash on delivery under all vegetable procurement contracts. 2. The vegetable contractor is a producer-owned cooperative or unincorporated cooperative association that procures processing vegetables only from its producer members. 3. The vegetable contractor is a processing potato buyer who has elected not to participate in the fund in accordance with s. 126.595 (1). (3) AMOUNT OF SECURITY. (a) Except as provided in par. (b), a vegetable contractor who is required to file or maintain security under this section shall, at all times, maintain security that is at least equal to 75 percent of the amount of unpaid contract obligations last reported under s. 126.56 (9) (b) or (12), except that this amount is not required of a contributing vegetable contractor. (b) A vegetable contractor who is required to file or maintain security only under sub. (1) (b) shall at all times maintain security equal to the vegetable contractor’s estimated default exposure, as defined in sub. (1) (b) 1., less $20,000,000. (4) FORM OF SECURITY. The department shall review, and determine whether to approve, security filed under this section. The department may approve only the following types of security: (a) Currency. (b) A commercial surety bond if all of the following apply: 1. The surety bond is made payable to the department for the benefit of vegetable producers and producer agents. 2. The surety bond is issued by a person authorized to operate a surety business in this state. 3. The surety bond is issued as a continuous term bond that may be canceled only with the department’s written agreement, or upon 90 days’ prior written notice served on the department in person or by certified mail. 4. The surety bond is issued in a form, and subject to any terms and conditions, that the department considers appropriate. (c) A certificate of deposit or money market certificate, if all of the following apply: 1. The certificate is issued or endorsed to the department for the benefit of vegetable producers and producer agents. 2. The certificate may not be canceled or redeemed without the department’s written permission. 3. No person may transfer or withdraw funds represented by the certificate without the department’s written permission. 4. The certificate renews automatically without any action by the department. 5. The certificate is issued in a form, and subject to any terms and conditions, that the department considers appropriate. (d) An irrevocable bank letter of credit if all of the following apply: 1. The letter of credit is payable to the department for the benefit of vegetable producers and producer agents. 2. The letter of credit is issued on bank letterhead. 3. The letter of credit is issued for an initial period of at least one year. 4. The letter of credit renews automatically unless, at least 90 days before the scheduled renewal date, the issuing bank gives the department written notice, in person or by certified mail, that the letter of credit will not be renewed. 5. The letter of credit is issued in a form, and subject to any terms and conditions, that the department considers appropriate. (5) DEPARTMENT CUSTODY OF SECURITY. The department shall hold, in its custody, all security filed and maintained under this section. The department shall hold the security for the benefit of vegetable producers and producer agents. (6) ADDITIONAL SECURITY. (a) The department may, at any time, demand additional security from a vegetable contractor if any of the following applies: 1. The vegetable contractor’s existing security falls below the amount required under sub. (3) for any reason, including a depreciation in the value of the security filed with the department, increased obligations to vegetable producers or producer agents, or the cancellation of any security filed with the department. 2. The vegetable contractor fails to provide required information that is relevant to a determination of security requirements. (b) The department shall issue a demand under par. (a) in writing. The department shall indicate why additional security is required, the amount of security required, and the deadline date for filing security. The department may not specify a deadline for filing security that is more than 30 days after the date on which the department issues its demand for security. (c) A vegetable contractor may request a hearing, under ch. 227, on a security demand under par. (b). A request for hearing does not automatically stay a security demand. (d) If a vegetable contractor fails to comply with the department’s security demand under this subsection, the vegetable contractor shall give written notice of that fact to all vegetable producers and producer agents from whom the vegetable contractor procures processing vegetables. If the vegetable contractor fails to give accurate notice under this paragraph within 5 days after the security filing deadline under par. (b) has passed, the department shall promptly notify vegetable producers and producer agents by publishing a class 3 notice under ch. 985. The depart- ment may also give individual notice to vegetable producers or producer agents of whom the department is aware. (e) If a vegetable contractor fails to comply with the department’s demand for security under this subsection, the department may do any of the following: 1. Issue a summary order under s. 126.85 (2) that prohibits the vegetable contractor from procuring processing vegetables from vegetable producers or producer agents, or requires the vegetable contractor to pay cash on delivery under all vegetable procurement contracts. 2. Suspend or revoke the vegetable contractor’s license. (7) RELEASING SECURITY. (a) The department may release security filed under sub. (1) (a), except for any amount of security that the vegetable contractor is required to file because sub. (1) (b) applies to the vegetable contractor, if any of the following applies: 1. The vegetable contractor reports less than $500,000 in annual contract obligations under s. 126.56 (9) (a) for at least 2 consecutive years and the vegetable contractor pays the quarterly fund assessment that would have been required of the vegetable contractor if the vegetable contractor had been a contributing vegetable contractor on the most recent quarterly installment date under s. 126.60 (6). 2. The vegetable contractor’s annual financial statement under s. 126.58 shows positive equity for at least 2 consecutive years and the vegetable contractor pays the quarterly fund assessment that would have been required of the vegetable contractor if the vegetable contractor had been a contributing vegetable contractor on the most recent quarterly installment date under s. 126.60 (6). (bm) The department may release security filed under sub. (1) (b), except for any amount of security that the vegetable contractor is required to file because sub. (1) (a) applies to the vegetable contractor, if the vegetable contractor files 2 consecutive annual financial statements under s. 126.58 showing that the vegetable contractor no longer has negative equity, a current ratio of less than 1.25 to 1.0, or a debt to equity ratio of more than 4.0 to 1.0. (d) The department may release security to the extent that the security exceeds the amount required under sub. (3). (e) The department may release security if the vegetable contractor files alternative security, of equivalent value, that the department approves. (f) The department shall release security if the vegetable contractor has gone out of business and paid all contract obligations in full.
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