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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
---------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1999.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 333-17865
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CENEX HARVEST STATES COOPERATIVES
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0251095
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5500 CENEX DRIVE, (651) 451-5151
INVER GROVE HEIGHTS, MN 55077 (Registrant's telephone number
(Address of principal executive offices including area code)
and zip code)
---------------
Include by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
YES _X_ NO ___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
NONE NONE
---- ----
(Class) (Number of shares outstanding at
November 30, 1999)
================================================================================
<PAGE>
INDEX
PAGE
NO.
----
PART I. FINANCIAL INFORMATION
CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES
Item 1. Financial Statements
Consolidated Balance Sheets as of August 31, 1999, November 30, 1999
(unaudited) and November 30, 1998 (unaudited) ............................. 2
Consolidated Statements of Operations for the three months ended
November 30, 1999 and 1998 (unaudited) .................................... 3
Consolidated Statements of Cash Flows for the three months ended
November 30, 1999 and 1998 (unaudited) .................................... 4
Notes to Consolidated Financial Statements (unaudited) .................... 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ..................................................... 7
Item 3. Quantitative and Qualitative Disclosures about Market Risk ........ 10
OILSEED PROCESSING AND REFINING DEFINED BUSINESS UNIT
(A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)
Item 1. Financial Statements
Balance Sheets as of August 31, 1999, November 30, 1999 (unaudited) and
November 30, 1998 (unaudited) ............................................. 11
Statements of Operations for the three months ended November 30, 1999
and 1998 (unaudited) ...................................................... 12
Statements of Cash Flows for the three months ended November 30, 1999
and 1998 (unaudited) ...................................................... 13
Notes to Financial Statements (unaudited) ................................. 14
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ..................................................... 15
WHEAT MILLING DEFINED BUSINESS UNIT
(A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)
Item 1. Financial Statements
Balance Sheets as of August 31, 1999, November 30, 1999 (unaudited) and
November 30, 1998 (unaudited) ............................................. 17
Statements of Operations for the three months ended November 30, 1999
and 1998 (unaudited) ...................................................... 18
Statements of Cash Flows for the three months ended November 30, 1999
and 1998 (unaudited) ...................................................... 19
Notes to Financial Statements (unaudited) ................................. 20
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ..................................................... 21
PART II. OTHER INFORMATION
Items 1 through 5 have been omitted since all items are inapplicable or
answers are negative
Item 6. Exhibits and Reports on Form 8-K .................................. 24
SIGNATURE PAGE ............................................................. 25
i
<PAGE>
PART I. FINANCIAL INFORMATION
SAFE HARBOR STATEMENT UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This Quarterly Report on Form 10-Q may contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements involve risks and uncertainties that may cause the
Company's actual results to differ materially from the results discussed in the
forward-looking statements. Factors that might cause such differences include,
but are not limited to the following:
SUPPLY AND DEMAND FORCES. The Company may be adversely affected by supply
and demand relationships, both domestic and international. Supply may be
affected by weather conditions, disease, insect damage, acreage planted,
government regulation and policies and commodity price levels. Demand may be
affected by foreign governments and their programs, relationships of foreign
countries with the United States, the affluence of foreign countries, acts of
war, currency exchange fluctuations, and substitution of commodities. The
current monetary crises in Asia has impacted, and is expected to continue to
impact exports of U.S. agricultural products. Reduced demand for U.S.
agricultural products may also adversely affect the demand for fertilizer,
chemicals, and petroleum products sold by the Company and used to produce crops.
Demand may also be affected by changes in eating habits, population growth and
increased or decreased per capita consumption of some products.
PRICE RISKS. Upon purchase, the Company has risks of carrying grain and
petroleum, including price changes and performance risks (including delivery,
quality, quantity and shipment period), depending upon the type of purchase
contract. The Company is exposed to risk of loss in the market value of
positions held, consisting of grain and petroleum inventory and purchase
contracts at a fixed or partially fixed price, in the event market prices
decrease. The Company is also exposed to risk of loss on its fixed price or
partially fixed price sales contracts in the event market prices increase. To
reduce the price change risks associated with holding fixed priced positions,
the Company generally takes opposite and offsetting positions by entering into
commodity futures contracts (either a straight futures contract or an option
futures contract) on regulated commodity futures exchanges.
OILSEED PROCESSING AND REFINING BUSINESS COMPETITION. This industry is
highly competitive. Competitors are adding new plants and expanding capacity of
existing plants. Unless exports increase or existing refineries are closed, this
extra capacity is likely to put additional pressure on prices and erode margins,
adversely affecting the profitability of the Oilseed Processing and Refining
Defined Business Unit.
MILLING BUSINESS COMPETITIVE TRENDS. Certain major competitors of the Wheat
Milling Defined Business Unit have developed long-term relationships with
customers by locating plants adjacent to pasta manufacturing plants. This trend
could potentially decrease the future demand for semolina from nonintegrated
millers. In addition, baking and bread flour demand declined during a period
when the milling industry has been expanding, which will continue to put
pressure on gross margins.
YEAR 2000. To date, the Company has not experienced any significant year
2000-related failures. The Company's management believes that the Company has
taken the steps reasonably necessary to resolve the year 2000 issue with respect
to matters within its control. While the Company has taken steps to determine
the extent of remediation efforts undertaken by key customers and suppliers,
there is no guarantee that the systems of other companies on which this Company
relies have been remediated in order to avoid having a material adverse effect
on the Company's operations or its financial results.
The forward-looking statements herein are qualified in their entirety by
the cautions and risk factors set forth in Exhibit 99, under the caption
"Cautionary Statement" to this Quarterly Report on Form 10-Q for the quarter
ended November 30, 1999.
1
<PAGE>
CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
AUGUST 31, NOVEMBER 30, NOVEMBER 30,
1999 1999 1998
---------- ------------ ------------
(DOLLARS IN THOUSANDS) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .................................. $ 75,667 $ 56,142 $ 58,402
Receivables ................................................ 606,641 721,771 627,924
Inventories ................................................ 549,703 673,647 514,392
Other current assets ....................................... 39,414 40,030 29,500
---------- ---------- ----------
Total current assets ...................................... 1,271,425 1,491,590 1,230,218
INVESTMENTS ................................................. 427,896 416,966 347,713
PROPERTY, PLANT AND EQUIPMENT ............................... 968,333 978,815 928,997
OTHER ....................................................... 120,010 119,676 113,363
---------- ---------- ----------
Total assets .............................................. $2,787,664 $3,007,047 $2,620,291
========== ========== ==========
LIABILITIES AND EQUITIES
CURRENT LIABILITIES:
Notes payable .............................................. $ 196,986 $ 229,354 $ 30,000
Current portion of long-term debt .......................... 21,562 21,221 14,577
Patrons' credit balances ................................... 44,970 47,639 62,953
Patrons' advance payments .................................. 127,755 250,552 186,508
Drafts outstanding ......................................... 30,654 17,146 23,646
Accounts payable ........................................... 449,774 473,030 474,215
Book cash overdraft ........................................ 17,951 19,754 42,195
Accrued expenses ........................................... 119,728 133,522 98,099
Patronage dividends and equity retirements payable ......... 43,000 36,089 46,887
---------- ---------- ----------
Total current liabilities ................................. 1,052,380 1,228,307 979,080
LONG-TERM DEBT .............................................. 461,104 455,601 437,672
OTHER LIABILITIES ........................................... 88,173 79,697 78,333
MINORITY INTERESTS IN SUBSIDIARIES .......................... 68,371 121,165 57,322
COMMITMENTS AND CONTINGENCIES
EQUITIES .................................................... 1,117,636 1,122,277 1,067,884
---------- ---------- ----------
Total liabilities and equities ............................ $2,787,664 $3,007,047 $2,620,291
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements (unaudited).
2
<PAGE>
CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
NOVEMBER 30,
-------------------------
1999 1998
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
REVENUES:
Net Sales:
Grain and oilseed ................................ $1,002,882 $1,057,871
Energy ........................................... 659,270 329,868
Processed grain and oilseed ...................... 136,152 137,555
Feed and farm supplies ........................... 118,391 122,835
Agronomy ......................................... 102,063 107,602
---------- ----------
2,018,758 1,755,731
Patronage dividends ............................... 258 469
Other revenues .................................... 25,980 27,211
---------- ----------
2,044,996 1,783,411
---------- ----------
COSTS AND EXPENSES:
Cost of good sold ................................. 1,984,813 1,727,676
Marketing, general and administrative ............. 39,292 37,271
Interest .......................................... 12,956 9,550
Minority interests ................................ 537 (1,401)
---------- ----------
2,037,598 1,773,096
---------- ----------
INCOME BEFORE INCOME TAXES ......................... 7,398 10,315
INCOME TAXES ....................................... (1,721) 2,000
---------- ----------
NET INCOME ......................................... $ 9,119 $ 8,315
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements (unaudited).
3
<PAGE>
CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
NOVEMBER 30,
-----------------------
1999 1998
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................................... $ 9,119 $ 8,315
--------- ---------
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization .................................... 22,178 19,975
Noncash net loss (income) from joint ventures .................... 823 (4,669)
Adjustment of inventories to market value ........................ -- 10,742
Noncash portion of patronage dividends received .................. (70) (175)
Gain on sale of property, plant and equipment .................... (76) (797)
Changes in operating assets and liabilities:
Receivables ..................................................... (115,292) (159,199)
Inventories ..................................................... (69,545) (45,400)
Other current assets and other assets ........................... (1,068) (7,237)
Patrons' credit balances ........................................ 2,669 21,629
Patrons' advance payments ....................................... 122,797 38,487
Accounts payable and accrued expenses ........................... 37,050 69,781
Drafts outstanding and other liabilities ........................ (21,984) (189)
--------- ---------
Total adjustments ............................................. (22,518) (57,052)
--------- ---------
Net cash used in operating activities ......................... (13,399) (48,737)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment ....................... (31,854) (33,815)
Proceeds from disposition of property, plant and equipment ......... 456 3,212
Investments ........................................................ (3,164) (2,217)
Investments redeemed ............................................... 11,589 4,462
Changes in notes receivable ........................................ 53 1,357
Other investing activities, net .................................... (22) (221)
--------- ---------
Net cash used in investing activities ......................... (22,942) (27,222)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in notes payable ........................................... 32,368 29,525
Principal payments on long-term debt ............................... (5,844) (4,628)
Changes in book cash overdraft ..................................... 1,803 13,819
Retirements of equity .............................................. (11,511) (9,271)
Cash patronage dividends paid ...................................... -- (15,092)
--------- ---------
Net cash provided by financing activities ..................... 16,816 14,353
--------- ---------
NET DECREASE IN CASH AND
CASH EQUIVALENTS ................................................... (19,525) (61,606)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD .......................................................... 75,667 120,008
--------- ---------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD .......................................................... $ 56,142 $ 58,402
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements (unaudited).
4
<PAGE>
CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 1. ACCOUNTING POLICIES
The unaudited consolidated statements of operations and cash flows for the
three months ended November 30, 1999 and 1998, reflect, in the opinion of
management of Cenex Harvest States Cooperatives (the Company), all normal,
recurring adjustments necessary for a fair statement of the results of
operations and cash flows for the interim periods. The results of operations and
cash flows for any interim period are not necessarily indicative of results for
the full year. The consolidated balance sheet data as of August 31, 1999 was
derived from audited consolidated financial statements but does not include all
disclosures required by generally accepted accounting principles.
The unaudited consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated.
Reclassifications have been made to the prior year's financial statements
to conform to the current year presentation.
These statements should be read in conjunction with the financial
statements and footnotes for the year ended August 31, 1999, included in the
Company's Report on Form 10-K previously filed with Securities and Exchange
Commission on November 22, 1999.
NOTE 2. RECEIVABLES
<TABLE>
<CAPTION>
AUGUST 31, NOVEMBER 30, NOVEMBER 30,
1999 1999 1998
---------- ------------ ------------
<S> <C> <C> <C>
Trade .................................... $595,403 $739,048 $641,889
Other .................................... 34,493 6,399 9,097
-------- -------- --------
629,896 745,447 650,986
Less allowance for doubtful accounts ..... 23,255 23,676 23,062
-------- -------- --------
$606,641 $721,771 $627,924
======== ======== ========
</TABLE>
NOTE 3. INVENTORIES
<TABLE>
<CAPTION>
AUGUST 31, NOVEMBER 30, NOVEMBER 30,
1999 1999 1998
---------- ------------ ------------
<S> <C> <C> <C>
Energy ................................... $209,661 $319,992 $169,235
Grain and oilseed. ....................... 202,166 207,662 189,761
Agronomy. ................................ 69,050 80,943 76,843
Processed grain and oilseed .............. 14,342 11,066 13,741
Feed and farm supplies. .................. 50,908 50,953 62,071
Other .................................... 3,576 3,031 2,741
-------- -------- --------
$549,703 $673,647 $514,392
======== ======== ========
</TABLE>
NOTE 4. COMPREHENSIVE INCOME
During the three months ended November 30, 1999 and 1998, total
comprehensive income amounted to $9,152 and $9,715 respectively. Accumulated
other comprehensive (loss) income at August 31, 1999, November 30, 1999 and 1998
was $(1,170), $(1,137) and $1,301, respectively.
NOTE 5. SEGMENT REPORTING
The Company's businesses are organized, managed and internally reported as
four segments. These segments, which are based on products and services, include
agronomy, energy, grain marketing and farm marketing & supply, and processed
grain and consumer products. Due to cost allocations and intersegment activity,
management does not represent that these segments if operated independently,
would report the income before income taxes and other financial information
presented.
5
<PAGE>
Segment information for the three months ended November 30, 1999 and 1998
is as follows:
<TABLE>
<CAPTION>
GRAIN MARKETING PROCESSED GRAIN
AND FARM AND CONSUMER
AGRONOMY ENERGY MARKETING & SUPPLY PRODUCTS OTHER TOTAL
---------- ---------- ------------------ --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
For the three months ended
November 30, 1999:
Net sales .......................... $ 102,063 $ 659,270 $1,121,273 $ 136,152 $2,018,758
Patronage dividends ................ 111 14 74 $ 59 258
Other revenues ..................... (7,810) 1,942 21,506 5,246 5,096 25,980
---------- ---------- ---------- ---------- ---------- ----------
94,364 661,226 1,142,853 141,398 5,155 2,044,996
Cost of goods sold ................. 95,570 644,004 1,119,342 125,897 1,984,813
Marketing, general and
administrative .................... 4,412 11,921 13,577 4,635 4,747 39,292
Interest ........................... 1,331 5,748 4,289 1,536 52 12,956
Minority interests ................. 514 23 537
---------- ---------- ---------- ---------- ---------- ----------
(Loss) income before income
taxes ............................. $ (6,949) $ (961) $ 5,645 $ 9,330 $ 333 $ 7,398
========== ========== ========== ========== ========== ==========
Total identifiable assets ........ $ 393,150 $1,206,680 $ 857,897 $ 322,006 $ 227,314 $3,007,047
========== ========== ========== ========== ========== ==========
For the three months ended
November 30, 1998:
Net sales .......................... $ 107,602 $ 329,868 $1,180,706 $ 137,555 $1,755,731
Patronage dividends ................ 316 22 71 $ 60 469
Other revenues ..................... 586 19,194 2,905 4,526 27,211
---------- ---------- ---------- ---------- ---------- ----------
107,918 330,476 1,199,971 140,460 4,586 1,783,411
Cost of goods sold ................. 104,414 318,068 1,176,191 129,003 1,727,676
Marketing, general and
administrative .................... 4,790 13,801 10,768 3,803 4,109 37,271
Interest ........................... 299 3,669 4,245 1,338 (1) 9,550
Minority interests ................. (1,429) 28 (1,401)
---------- ---------- ---------- ---------- ---------- ----------
(Loss) income before income
taxes ............................. $ (1,585) $ (3,633) $ 8,767 $ 6,316 $ 450 $ 10,315
========== ========== ========== ========== ========== ==========
Total identifiable assets ........ $ 328,241 $ 886,907 $ 870,293 $ 313,640 $ 221,210 $2,620,291
========== ========== ========== ========== ========== ==========
</TABLE>
Assets included in "Other" primarily consisted of intercompany transactions
and corporate facilities.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
In May 1999, the Company and Farmland Industries, Inc. (Farmland) announced
their intention to work towards a combination of the two companies. The Board of
Directors approved a resolution recommending this combination to the Company's
membership and a transaction agreement was signed as of September 23, 1999. On
November 23, 1999 the members of both companies voted on the merger. Farmland
members approved the merger with 89 percent voting in favor. The Company's vote
fell just short of the two-thirds needed, at 64 percent.
The Company is in the process of establishing joint ventures with Farmland
and Land O' Lakes, Inc. in agronomy and seed operations. Although an agreement
has not been signed, the companies are in the final stages of negotiations. It
is anticipated that the new joint venture will have its own financing.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
The Company's consolidated net income for the three months ended November
30, 1999 and 1998 was $9.1 million and $8.3 million, respectively, which
represents a $.8 million (10%) increase during the current three-month period.
This increase in profitability is primarily attributable to an increase in the
Company's income from its consumer products packaging joint venture and also a
tax benefit as a result of net non-patronage losses. These increases to net
income were partially offset by a $5.3 million pre-tax reduction in Agronomy
results, which have become more sensitive to seasonality because of a larger
asset base.
Consolidated net sales of $2.0 billion for the three months ended November
30, 1999 increased approximately $.3 billion (15%) compared to the same three
months ended in 1998.
Grain and oilseed sales of $1.0 billion decreased $55.0 million (5%) during
the three months ended November 30, 1999 when compared to the same three months
ended in 1998. Although grain volumes increased 15.3 million bushels, the
primary cause for the decreased sales is a decline of 42 cents per bushel in the
average sales price of all grain and oilseed marketed by the Company.
Energy sales of $659.3 million increased $329.4 million (almost 100%)
during the three months ended November 30, 1999 compared to the same three
months of a year ago. This increase is primarily attributable to the formation
of a refinery joint venture whereby the Company, through its 75% ownership in
National Cooperative Refinery Association (NCRA), which in turn owns
approximately 57% of the refining joint venture (Cooperative Refining, LLC),
consolidates the sales made to the minority owner. In addition, there was an
increase in the average sales price of refined fuels of 21 cents per gallon.
These increases were offset by a 28% decrease in propane volumes due to
unusually warm weather during the current three-month period.
Processed grain and oilseed sales of $136.2 million were essentially
unchanged for the three months ended November 30, 1999 compared to the same
three months ended in 1998.
Feed and farm supplies sales of $118.4 million during the three months
ended November 30, 1999 were essentially unchanged when compared to the same
three months ended in 1998.
Agronomy sales of $102.1 million decreased $5.5 million (5%) during the
three months ended November 30, 1999 compared to the same three months ended in
1998. Crop protection sales declined $6.8 million in 1999 compared to 1998,
which was partially offset by a 15% increase in plant food volumes.
Other revenues of $26.0 million decreased $1.2 million (5%) during the
three months ended November 30, 1999 compared to the same three months ended in
1998. The most significant change within other revenues was an increase in the
Company's share of income from joint ventures. Joint venture income from food
packaging, grain marketing and agronomy increased by $2.2 million and $2.2
million, and decreased by $7.8 million, respectively. This net decrease was
offset by an increase in other miscellaneous revenues.
Cost of goods sold of approximately $2.0 billion decreased $257.1 million
(15%) during the three months ended November 30, 1999 compared to the same three
months ended in 1998. During the three months ended November 30, 1999 the
average cost per bushel of all grains and oilseed procured by the Company
through its grain marketing and country elevator system decreased by 40 cents
per bushel offset by an increase in the average selling price of refined fuels
of 21 cents per gallon. Also during the
7
<PAGE>
three months ended November 30, 1999 agronomy cost of goods decreased by $8.8
million compared to the same three months ended in 1998.
Marketing, general and administrative expenses of $39.3 million for the
three months ended November 30, 1999 increased $2.0 million (5%) compared to the
same three months ended in 1998. This increase is primarily related to
additional locations and expansion of many of the Company's business segments.
Interest expense of $13.0 million for the three months ended November 30,
1999 increased by $3.4 million (36%) compared to the same three months ended in
1998. The average seasonal borrowings during 1999 increased as a result of
higher working capital needs, and long-term borrowings which reflected financial
activities related to the acquisition of property, plant and equipment,
generated most of this additional expense.
Minority interests in operations of $0.5 million for the three months ended
November 30, 1999 increased $1.9 million compared to the same three months ended
in 1998. Substantially all of the minority interest is in National Cooperative
Refinery Association (NCRA), which operates a petroleum refinery near McPherson,
Kansas. The Company owns approximately 75% of NCRA. This net change in minority
interests during the current year is reflective of more profitable operations
within NCRA.
An income tax benefit of $1.7 million for the three months ended November
30, 1999 is the result of a net non-patronage loss of approximately $4.3
million. Income tax expense of $2.0 million for the three months ended November
30, 1998 produced an effective tax rate of 19.4%. Income tax expense or benefit
and the resulting effective tax rates change from period to period based upon
the profitability and non-patronage business activity during each of the
comparable periods.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS FROM OPERATIONS
Operating activities of the Company used net cash of $13.4 million and
$48.7 million for the three months ended November 30, 1999 and 1998,
respectively. For the period ended in 1999, net income of $9.1 million and net
non-cash income and expenses of approximately $22.9 million were offset by
increased working capital requirements of approximately $45.4 million. For the
three-month period ending November 30, 1998, net income of $8.3 million and net
non-cash income and expenses of approximately $25.1 million were offset by
increased working capital requirements of approximately $82.1 million.
CASH FLOWS FROM INVESTING
Investing activities of the Company used net cash of $22.9 million during
the three-month period ended November 30, 1999. Expenditures for the acquisition
of property, plant and equipment of $31.9 million and the net change in
investments of $3.2 million were partially offset by investments redeemed of
$11.6 million, proceeds from the disposition of property, plant and equipment
and the net change in notes receivable. For the fiscal year ending August 31,
2000, the Company projects that total expenditures for the acquisition of
property, plant and equipment will be approximately $139.6 million.
Investing activities of the Company used net cash of $27.2 million during
the three-month period ended November 30, 1998. Expenditures for the acquisition
of property, plant and equipment of $33.8 million and additional investments in
joint ventures of $2.2 million were partially offset by proceeds from the
disposition of property, plant and equipment, proceeds from the redemption of
investments and the net change in notes receivable.
CASH FLOWS FROM FINANCING
The Company finances its working capital needs through short-term lines of
credit with a syndication of banks. In June 1998 the Company established a
364-day credit facility of $400 million, which was renewed in May, 1999, and a
five-year revolving facility of $200 million, all of which is
8
<PAGE>
committed. In addition to these lines of credit, the Company has a 364-day
credit facility dedicated to NCRA, with a syndication of banks in the amount of
$50.0 million, all of which is committed. On November 30, 1999 and 1998, the
Company had total short-term indebtedness on these various facilities and other
short-term notes payable totaling $229.4 million and $30.0 million,
respectively. On August 31, 1999 the Company had $197.0 million outstanding on
its short-term lines of credit and other notes payable.
The Company has financed its long-term capital needs in the past, primarily
for the acquisition of property, plant and equipment, with long-term loan
agreements through the banks for cooperatives. In June, 1998, the Company
established a long-term credit agreement through the banks for cooperatives.
This facility committed $200.0 million of long-term borrowing capacity to the
Company, with repayments through the fiscal year 2009. The commitment expired on
May 31, 1999. The amount outstanding on this credit agreement was $164.0
million, $162.4 million and $134.0 million on August 31, 1999 and November 30,
1999 and 1998, respectively, with zero remaining available on both August 31,
1999 and November 30, 1999. Repayments of $1.6 million were made on this
facility during the three months ended November 30, 1999.
Also in June 1998, the Company entered into a private placement with
several insurance companies for long-term debt in the amount of $225 million.
Repayments will be made in equal installments of $37.5 million each in the years
2008 through 2013.
On November 30, 1999 the Company had total long-term debt outstanding of
$476.8 million, of which approximately $224.4 million was bank financing, $225.0
million was private placement proceeds and $27.4 million was industrial revenue
bonds, capitalized leases and miscellaneous notes payable. Long-term debt
through NCRA represented $57.6 million of the total long-term debt outstanding
on November 30, 1999. On August 31, 1999 and November 30, 1998 the Company had
long-term debt outstanding of $482.7 million and $452.2 million, respectively.
During the three-month periods ended November 30, 1999 and 1998 the Company
repaid long-term debt of $5.8 million and $4.6 million, respectively, and had no
additional long-term borrowings during either period.
In accordance with the By-Laws and by action of the Board of Directors,
annual net savings from patronage sources are distributed to consenting patrons
following the close of each year and are based on amounts reportable for federal
income tax purposes as adjusted in accordance with the By-Laws. The patronage
earnings from the fiscal year ended August 31, 1999 are expected to be
distributed in January 2000. The cash portion of this distribution, deemed by
the Board of Directors to be 75% for Equity Participation Units and 30% for
regular earnings, is expected to be approximately $17.3 million and is
classified as a current liability on the August 31, 1999 and the November 30,
1999 balance sheets. For the three months ended November 30, 1998 the Company
paid out $15.1 million from the patronage earnings of the former Harvest States
Cooperatives fiscal year ended May 31, 1998.
The current equity redemption policy, as authorized by the Board of
Directors, allows for the redemption of capital equity certificates held by
inactive direct members and patrons and active members and patrons at age 72 or
death who were age 61 or older on June 1, 1998. For active direct members and
patrons who were age 60 or younger on June 1, 1998, and member cooperatives,
equities will be redeemed annually based on a prorata formula where the
numerator is dollars available for such purpose as determined by the Board of
Directors, and the denominator is the sum of the patronage certificates held by
such eligible members and patrons. Such redemptions related to the year ended
August 31, 1999, to be distributed in the current fiscal year, are expected to
be approximately $25.7 million, of which approximately $11.5 million was
redeemed during the three months ended November 30, 1999. During the three
months ended November 30, 1998 the Company redeemed approximately $9.3 million
of equity.
During the year ended May 31, 1997, the Company offered securities in the
form of Equity Participation Units (EPUs) in its Wheat Milling and Oilseed
Processing and Refining Defined Business
9
<PAGE>
Units. These EPUs give the holder the right and obligation to deliver to the
Company a stated number of bushels in return for a prorata share of the
undiluted grain based patronage earnings of these respective Defined Business
Units. The offering resulted in the issuance of such equity with a stated value
of $13,870,000 and generated additional capital and cash of $10,837,000, after
issuance cost and conversion privileges. Conversion privileges allowed a member
to elect to use outstanding patrons' equities for the payment of up to one-sixth
the purchase price of the EPUs.
Holders of the EPUs will not be entitled to payment of dividends by virtue
of holding such units. However, holders of the units will be entitled to receive
patronage refunds attributable to the patronage sourced income from operations
of the applicable defined business unit on the basis of wheat or soybeans
delivered pursuant to the Member Marketing Agreement. The Board of Directors'
goal is to distribute patronage refunds attributable to the EPUs in the form of
75% cash and 25% capital equity certificates, and to retire those capital equity
certificates on a revolving basis seven years after declaration. However, the
decision as to the percentage of cash patronage will be made each fiscal year by
the Board of Directors and will depend upon the cash and capital needs of the
respective Defined Business Units and is subject to the discretion of the Board
of Directors. The redemption policy will also be subject to change at the
discretion of the Board of Directors.
EFFECT OF INFLATION AND FOREIGN CURRENCY TRANSACTIONS
The Company believes that inflation and foreign currency fluctuations have
not had a significant effect on its operations.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, a new standard related to the accounting for derivative transactions
and hedging activities. In July 1999, the FASB issued SFAS No. 137 which defers
the effective date of SFAS No. 133 to all fiscal quarters of all fiscal years
beginning after June 15, 2000. While management does not believe this standard
will materially impact the financial position and results of operations of the
Company, it is currently evaluating the reporting requirements under this new
standard.
YEAR 2000
In preparation for the year 2000, the Company engaged an information
technology consulting firm specializing in year 2000 systems projects. The scope
of the program management effort at the Company has included internal mainframe,
midrange, and LAN based systems as well as facilities, package software vendors,
and interfaces with external vendors, processors and customers. Remediation and
upgrades of these systems have been completed for all mission critical systems.
Through December 31, 1999, the Company has expensed approximately $2.1 million
to review and correct its own computer systems.
To date, the Company has not experienced any significant Year 2000-related
failures. The Company's management believes that the Company has put in place an
effective program to address the year 2000 issue and that it has taken the steps
reasonably necessary to resolve this issue with respect to matters within its
control. However, it also recognizes that failure by other parties to
sufficiently resolve all aspects of the year 2000 issue in a timely fashion
continues to present substantial risks for the Company. While the Company has
taken steps to determine the extent of remediation efforts undertaken by key
customers and suppliers, there is no guarantee that the systems of other
companies on which this Company relies have been remediated in order to avoid
having a material adverse effect on the Company's results of operations or its
financial position.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no material changes during the quarter ended November 30, 1999.
10
<PAGE>
OILSEED PROCESSING AND REFINING DEFINED BUSINESS UNIT
ITEM 1. FINANCIAL STATEMENTS
OILSEED PROCESSING AND REFINING DEFINED BUSINESS UNIT
(A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
AUGUST 31, NOVEMBER 30, NOVEMBER 30,
1999 1999 1998
---------- ------------ ------------
(DOLLARS IN THOUSANDS) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Receivables ................................................. $24,650 $26,876 $31,930
Inventories ................................................. 17,084 16,016 23,784
Other current assets ........................................ 25 240
------- ------- -------
Total current assets ....................................... 41,734 42,917 55,954
PROPERTY, PLANT AND EQUIPMENT ................................ 39,001 39,060 36,558
------- ------- -------
Total assets ............................................... $80,735 $81,977 $92,512
======= ======= =======
LIABILITIES AND DEFINED BUSINESS UNIT EQUITY
CURRENT LIABILITIES:
Due to Cenex Harvest States Cooperatives .................... $ 9,546 $ 9,537 $24,111
Accounts payable ............................................ 5,768 5,380 6,146
Accrued expenses ............................................ 4,227 5,866 3,778
------- ------- -------
Total current liabilities .................................. 19,541 20,783 34,035
COMMITMENTS AND CONTINGENCIES
DEFINED BUSINESS UNIT EQUITY ................................. 61,194 61,194 58,477
------- ------- -------
Total liabilities and defined business unit equity ......... $80,735 $81,977 $92,512
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements
(unaudited)
11
<PAGE>
OILSEED PROCESSING AND REFINING DEFINED BUSINESS UNIT
(A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
NOVEMBER 30,
----------------------
1999 1998
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
REVENUES:
Processed oilseed sales ............................... $83,557 $95,462
Other revenue ......................................... 329 4
------- -------
83,886 95,466
------- -------
COSTS AND EXPENSES:
Cost of goods sold .................................... 77,364 88,973
Marketing, general and administrative ................. 1,356 1,310
Interest .............................................. 302
------- -------
78,720 90,585
------- -------
INCOME BEFORE INCOME TAXES ............................. 5,166 4,881
INCOME TAX EXPENSE ..................................... 300 80
------- -------
NET INCOME ............................................. $ 4,866 $ 4,801
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements
(unaudited)
12
<PAGE>
OILSEED PROCESSING AND REFINING DEFINED BUSINESS UNIT
(A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
NOVEMBER 30,
---------------------
1999 1998
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ....................................................... $ 4,866 $ 4,801
------- -------
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation ................................................... 624 547
Gain on disposal of property, plant and equipment .............. 35
Changes in operating assets and liabilities:
Receivables ................................................... (2,226) (3,227)
Inventories ................................................... 1,068 (5,215)
Other current assets .......................................... (25) (240)
Accounts payable and accrued expenses ......................... 1,251 605
------- -------
Total adjustments ........................................... 727 (7,530)
------- -------
Net cash provided by (used in) operating activities ......... 5,593 (2,729)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment ..................... (718) (1,509)
------- -------
Net cash used in investing activities ....................... (718) (1,509)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in due to Cenex Harvest States Cooperatives ............... (9) 9,039
Defined business unit equity distributed to the Company .......... (4,866) (4,801)
------- -------
Net cash (used in) provided by financing activities ......... (4,875) 4,238
------- -------
INCREASE (DECREASE) IN CASH ....................................... -- --
CASH AT BEGINNING OF PERIOD ....................................... -- --
------- -------
CASH AT END OF PERIOD ............................................. -- --
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements
(unaudited)
13
<PAGE>
OILSEED PROCESSING AND REFINING DEFINED BUSINESS UNIT
(A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. ACCOUNTING POLICIES
The unaudited statements of operations and cash flows for the three months
ended November 30, 1999 and 1998, reflect, in the opinion of management of Cenex
Harvest States Cooperatives (the Company), all normal, recurring adjustments
necessary for a fair statement of the results of operations and cash flows for
the interim periods. The results of operations and cash flows for any interim
period are not necessarily indicative of results for the full year. The balance
sheet data as of August 31, 1999 was derived from audited financial statements
but does not include all disclosures required by generally accepted accounting
principles.
These statements should be read in conjunction with the financial
statements and footnotes included in the Wheat Milling Defined Business Unit
financial statements for the year ended August 31, 1999, which are included in
the Cenex Harvest States Cooperatives Report on Form 10-K previously filed with
the Securities and Exchange Commission on November 22, 1999.
NOTE 2. RECEIVABLES
<TABLE>
<CAPTION>
AUGUST 31, NOVEMBER 30, NOVEMBER 30,
1999 1999 1998
---------- ------------ ------------
<S> <C> <C> <C>
Trade ....................................... $25,045 $27,271 $32,325
Less allowance for doubtful accounts ........ 395 395 395
------- ------- -------
$24,650 $26,876 $31,930
======= ======= =======
</TABLE>
NOTE 3. INVENTORIES
<TABLE>
<CAPTION>
AUGUST 31, NOVEMBER 30, NOVEMBER 30,
1999 1999 1998
---------- ------------ ------------
<S> <C> <C> <C>
Processed oilseed products .................. $11,918 $ 9,272 $12,004
Oilseed ..................................... 5,166 6,744 11,780
------- ------- -------
$17,084 $16,016 $23,784
======= ======= =======
</TABLE>
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
See the Management Discussion and Analysis for the Company in regard to new
accounting pronouncements and also the Year 2000.
RESULTS OF OPERATIONS
Patronage refunds to the Oilseed Processing and Refining Defined Business
Unit holders are calculated on the basis of tax earnings per bushel. Because of
this, the Company believes that the calculation below is an important measure of
the Defined Business Unit's performance.
THREE MONTHS ENDED
NOVEMBER 30,
---------------------
1999 1998
(IN THOUSANDS EXCEPT PER BUSHEL INFORMATION) -------- --------
Income before income taxes ........................ $ 5,166 $ 4,881
Income from purchased oil ......................... (1,541) (753)
Nonpatronage joint venture income ................. (153)
Book to tax differences ........................... 24
-------- --------
Taxable income .................................... $ 3,496 $ 4,128
======== ========
Bushels processed ................................. 9,227 8,065
Income per bushel ................................. $ 0.379 $ 0.512
Certain operating information pertaining to the Oilseed Processing and
Refining Defined Business Unit is set forth below, as a percentage of processed
oilseed sales.
THREE MONTHS ENDED
NOVEMBER 30,
---------------------
1999 1998
-------- --------
Gross margin ...................................... 7.41% 6.80%
Marketing, general and administrative ............. 1.62% 1.37%
Interest .......................................... 0.00% 0.32%
COMPARISON OF THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
The Oilseed Processing and Refining Defined Business Unit net income of
$4.9 million for the three months ended November 30, 1999 represents a $0.1
million increase (1%) compared to the same period in 1998. While the gross
margin for soymeal declined approximately $10 per ton during the three-month
period ended November 30, 1999 compared to the same period ended in 1998, and
refined oil margins remained essentially unchanged, increased volume for both
products contributed to this slight improvement to net income.
Net sales of $83.6 million for the three months ended November 30, 1999
decreased by $11.9 million (12%) compared to the same period in 1998. A
reduction in the sales price for refined oil of approximately $0.08 per pound
was partially offset by a 12% increase in sales volume for processed soybean
products and a 12% increase in refined oil volume. The average sales price for
soymeal was essentially the same during the two periods.
Other revenues increased approximately $0.3 million during the three months
ended November 30, 1999 compared to the same period in 1998. During the 1999
period, the Defined Business Unit received approximately $0.2 million from an
oilseed joint venture, and also recognized interest income of $0.2 million
during that same period. During the three-month period ended November 30, 1998,
the Oilseed Processing and Refining Defined Business Unit generated essentially
no other revenue.
Cost of goods sold of $77.4 million for the three months ended November 30,
1999 decreased $11.6 million (13%) compared to the same period in 1998. A
reduced cost for soybeans averaging $0.92 per bushel and reduced cost for crude
soybean oil averaging $0.085 per pound during the three months ended November
30, 1999, compared to the three months ended November 30, 1998 were partially
offset
15
<PAGE>
by a 14% increase in crush volume (approximately 1.2 million bushels) and an 11%
increase in refining volume (approximately 16.4 million pounds).
Marketing, general and administrative expenses of approximately $1.4
million for the three months ended November 30, 1999 were essentially unchanged
compared to the three months ended November 30, 1998.
During the three month period ended November 30, 1999, the Oilseed
Processing and Refining Defined Business Unit incurred no net interest expense
compared to interest expense of approximately $0.3 million during the same
period ended in 1998. This favorable variance is primarily attributable to the
lower price of raw material and finished products which resulted in no
borrowings based on average daily outstanding balances, as discussed in the
sales and cost of goods sold section of this analysis.
Income tax expense of $0.3 million and $0.1 million for the three-month
periods ended November 30, 1999 and 1998, respectively, resulted in effective
tax rates of 5.8% and 1.6%. The effective tax rate changes from period to period
based upon the percentage of non-patronage business activity to total business
activity.
LIQUIDITY AND CAPITAL RESOURCES
The Oilseed Processing and Refining Defined Business Unit's cash
requirements relate primarily to capital improvements and a need to finance
additional inventories and receivables based on increased raw material costs and
levels. These cash needs are expected to be fulfilled by the Company.
CASH FLOWS FROM OPERATIONS
Operating activities for the three months ended November 30, 1999 provided
net cash of $5.6 million. Net income of $4.9 million, non-cash expenses of $0.6
million and a reduction in working capital requirements of $0.1 million
generated this net cash. For the three-month period ending November 30, 1998,
operating activities used $2.7 million of net cash. During that period, net
income of $4.8 million and non-cash expenses of approximately $0.5 million were
offset by increased working capital requirements of approximately $8.0 million
to produce this net use of cash for operating activities.
CASH FLOWS FROM INVESTING
During the three month periods ended November 30, 1999 and 1998, the
Oilseed Processing and Refining Defined Business Unit used cash for investing
activities of $0.7 million and $1.5 million respectively. These amounts were for
the acquisition of property, plant and equipment.
CASH FLOWS FROM FINANCING
The Oilseed Processing and Refining Defined Business Unit's financing
activities are coordinated through the Company's cash management department.
Cash from all of the Company's operations is deposited with the Company's cash
management department and disbursements are made centrally. As a result, the
Oilseed Processing and Refining Defined Business Unit has a zero cash position.
Financing is available from the Company to the extent of the Company's working
capital position and corporate loan agreements with various banks, and cash
requirements of all other Company operations.
Working capital requirements for each division and defined business unit of
the Company are reviewed on a periodic basis, and could potentially be
restricted based upon management's evaluation of the prevailing business
conditions and availability of funds.
The Oilseed Processing and Refining Defined Business Unit had debt
outstanding to the Company of approximately $9.5 million on August 31, 1999 and
November 30, 1999. These interest bearing balances reflect working capital and
fixed asset financing requirements as of these balance sheet dates.
16
<PAGE>
WHEAT MILLING DEFINED BUSINESS UNIT
ITEM 1. FINANCIAL STATEMENTS
WHEAT MILLING DEFINED BUSINESS UNIT
(A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
AUGUST 31, NOVEMBER 30, NOVEMBER 30,
1999 1999 1998
---------- ------------ ------------
(DOLLARS IN THOUSANDS) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Receivables ................................................. $ 30,960 $ 38,115 $ 31,661
Inventories ................................................. 14,339 21,386 21,314
Other current assets ........................................ 210 267 165
-------- -------- --------
Total current assets ....................................... 45,509 59,768 53,140
PROPERTY, PLANT AND EQUIPMENT ................................ 110,547 109,569 106,157
INTANGIBLE ASSETS ............................................ 9,415 9,148 10,215
-------- -------- --------
Total assets ............................................... $165,471 $178,485 $169,512
======== ======== ========
LIABILITIES AND DEFINED BUSINESS UNIT EQUITY
CURRENT LIABILITIES:
Due to Cenex Harvest States Cooperatives .................... $ 48,938 $ 56,138 $ 42,092
Accounts payable ............................................ 7,238 15,542 11,203
Accrued expenses ............................................ 4,440 4,388 2,102
Current portion of long-term debt ........................... 10,005 10,005 10,005
-------- -------- --------
Total current liabilities .................................. 70,621 86,073 65,402
LONG-TERM DEBT ............................................... 28,510 26,072 36,077
COMMITMENTS AND CONTINGENCIES
DEFINED BUSINESS UNIT EQUITY ................................. 66,340 66,340 68,033
-------- -------- --------
Total liabilities and defined business unit equity ......... $165,471 $178,485 $169,512
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements
(unaudited)
17
<PAGE>
WHEAT MILLING DEFINED BUSINESS UNIT
(A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
NOVEMBER 30,
-----------------------
1999 1998
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
REVENUES:
Processed grain sales ................................. $52,594 $42,093
------- -------
COSTS AND EXPENSES:
Cost of goods sold .................................... 48,533 40,031
Marketing, general and administrative ................. 2,733 2,239
Interest .............................................. 1,495 943
------- -------
52,761 43,213
------- -------
LOSS BEFORE INCOME TAXES ............................... (167) (1,120)
INCOME TAX BENEFIT ..................................... (15) (100)
------- -------
NET LOSS ............................................... $ (152) $(1,020)
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements
(unaudited)
18
<PAGE>
WHEAT MILLING DEFINED BUSINESS UNIT
(A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
NOVEMBER 30,
------------------------
1999 1998
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................................... $ (152) $ (1,020)
-------- --------
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Depreciation and amortization ................................... 1,690 1,265
Changes in operating assets and liabilities:
Receivables .................................................... (7,155) 3,566
Inventories .................................................... (7,047) (2,419)
Other current assets ........................................... (57) 265
Accounts payable and accrued expenses .......................... 8,252 635
-------- --------
Total adjustments ............................................ (4,317) 3,312
-------- --------
Net cash (used in) provided by operating activities .......... (4,469) 2,292
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment ...................... (445) (9,728)
-------- --------
Net cash used in investing activities ........................ (445) (9,728)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in due to Cenex Harvest States Cooperatives ................ 7,200 8,854
Principal payments on long-term debt .............................. (2,438) (2,438)
Defined business unit equity distributed to the Company ........... 152 1,020
-------- --------
Net cash provided by financing activities .................... 4,914 7,436
-------- --------
INCREASE (DECREASE) IN CASH ........................................ -- --
CASH AT BEGINNING OF PERIOD ........................................ -- --
-------- --------
CASH AT END OF PERIOD .............................................. -- --
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements
(unaudited)
19
<PAGE>
WHEAT MILLING DEFINED BUSINESS UNIT
(A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. ACCOUNTING POLICIES
The unaudited statements of operations and cash flows for the three months
ended November 30, 1999 and 1998, reflect, in the opinion of management of Cenex
Harvest States Cooperatives (the Company), all normal, recurring adjustments
necessary for a fair statement of the results of operations and cash flows for
the interim periods. The results of operations and cash flows for any interim
period are not necessarily indicative of results for the full year. The balance
sheet data as of August 31, 1999 was derived from audited financial statements
but does not include all disclosures required by generally accepted accounting
principles.
These statements should be read in conjunction with the financial
statements and footnotes included in the Wheat Milling Defined Business Unit
financial statements for the year ended August 31, 1999, which are included in
the Cenex Harvest States Cooperatives Report on Form 10-K previously filed with
the Securities and Exchange Commission on November 22, 1999.
NOTE 2. RECEIVABLES
<TABLE>
<CAPTION>
AUGUST 31, NOVEMBER 30, NOVEMBER 30,
1999 1999 1998
---------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Trade ........................................ $32,274 $39,715 $31,926
Other ........................................ 454 228 445
------- ------- -------
32,728 39,943 32,371
Less allowance for doubtful accounts ......... 1,768 1,828 710
------- ------- -------
$30,960 $38,115 $31,661
======= ======= =======
</TABLE>
NOTE 3. INVENTORIES
<TABLE>
<CAPTION>
AUGUST 31, NOVEMBER 30, NOVEMBER 30,
1999 1999 1998
---------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Grain ........................................ $11,915 $19,593 $18,881
Processed grain products ..................... 1,815 1,125 1,737
Other ........................................ 609 668 696
------- ------- -------
$14,339 $21,386 $21,314
======= ======= =======
</TABLE>
20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See the Management Discussion and Analysis for the Company in regard to new
accounting pronouncements and also the Year 2000.
RESULTS OF OPERATIONS
Patronage refunds to the Wheat Milling Defined Business Unit holders are
calculated on the basis of tax earnings per bushel. Because of this, the Company
believes that the calculation below is an important measure of the Defined
Business Unit's performance.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 30,
-----------------------
1999 1998
-------- --------
(IN THOUSANDS EXCEPT PER BUSHEL INFORMATION)
<S> <C> <C>
Loss before income tax ........................... $ (167) $ (1,120)
Book to tax differences .......................... 101 --
-------- --------
Tax basis loss ................................... $ (66) $ (1,120)
======== ========
Bushels processed ................................ 10,868 8,304
Loss per bushel .................................. $ (0.006) $ 0.135)
</TABLE>
Certain operating information pertaining to the Wheat Milling Defined
Business Unit is set forth below, as a percentage of sales.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NOVEMBER 30,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
Gross margin ..................................... 7.72% 4.90%
Marketing, general and administrative ............ 5.20% 5.32%
Interest ......................................... 2.84% 2.24%
</TABLE>
COMPARISON OF THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
The Wheat Milling Defined Business Unit incurred a net loss of
approximately $0.2 million for the three months ended November 30, 1999 compared
to a net loss of $1.0 milling for the same period in 1998, for an increase of
approximately $0.8 million. This improvement in operating results is primarily
attributable to a $0.20 per hundred weight increase in the average margin for
all products and a 31% increase in volume.
Net sales of $52.6 million for the three months ended November 30, 1999
increased approximately $10.5 million (25%) compared to the same period in 1998.
A reduction to the average sales price of $0.40 per hundred weight was offset by
a 1.6 million hundred weight volume increase. Essentially all of the increased
volume was generated from the Huron mill, which during the 1998 period, was
under conversion of one of its lines from semolina to bakery flour, and from the
Mount Pocono mill, which commenced operations in January of 1999.
Cost of goods sold of $48.5 million for the three months ended November 30,
1999 increased $8.5 (21%) compared to the same period in 1998. While the average
cost per bushel of raw material declined $0.26 during the three months ended
November 30, 1999 compared to the same three months of a year ago, increased
bushel grind of approximately 2.6 million bushels and increased milling expense
of approximately $0.6 million offset this price variance. Essentially all of the
increased mill expense is attributable to Mount Pocono, which was not operating
during the 1998 period.
Marketing, general and administrative expenses of $2.7 million for the
three months ended November 30, 1999 increased approximately $0.5 million (22%)
compared to the three months ended November 30,1998. Most of this increase is
attributable to activities at or for the Mount Pocono mill, which was not
operating during the 1998 period.
21
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Interest expense of $1.5 million during the three months ended November 30,
1999 increase approximately $0.6 million (59%) compared to the three-month
period ended November 30, 1998. Most of this increase in interest expense is
attributable to the construction of the Mount Pocono mill.
An income tax benefit of $15 thousand for the three months ended November
30, 1999 is based upon an effective tax rate of 8.9% applied to the pretax loss
of approximately $0.2 million. For the three months ended November 30, 1998, an
income tax benefit of $0.1 million was based upon an effective tax rate of 8.9%
applied to a pretax loss of $1.1 million. The effective tax rate changes from
period to period based upon the percentage of non-patronage business activity to
total business activity.
LIQUIDITY AND CAPITAL RESOURCES
The Wheat Milling Defined Business Unit's cash requirements result from
capital improvements and the need to finance additional inventories and
receivables based on increased raw material costs and levels. These cash needs
are expected to be fulfilled by the Company.
The Cenex Harvest States Board of Directors has authorized the purchase of
land near Orlando, Florida as the site for a new mill. The Board has authorized
expenditures up to $1.8 million for the cost of the land and an access road. The
land was purchased during the second quarter of the prior fiscal year at a cost
of approximately $1.2 million. Plans for the mill are subject to due diligence,
routine regulatory review and cost verification. Anticipated costs for this mill
are approximately $35.0 million, and may be financed with debt, open member
equity, additional equity participation units, or a combination of these
financing alternatives. No determination has been made at this time as to when
construction will commence.
CASH FLOWS FROM OPERATIONS
Operating activities for the three months ended November 30, 1999 used net
cash of approximately $4.5 million. The net operating loss of approximately $0.2
million and increased working capital requirements of approximately $6.0 million
offset non-cash expenses of $1.7 million. Increased working capital requirements
were primarily attributable to increased volume activity.
Operating activities for the three months ended November 30, 1998 provided
net cash of approximately $2.3 million. Non cash expenses of $1.3 million and a
reduction in working capital requirements of $2.0 million offset the net
operating loss of approximately $1.0 million.
CASH FLOWS FROM INVESTING
Cash expended for the acquisition of property, plant and equipment during
the three-month periods ended November 30, 1999 and 1998, totaled approximately
$0.4 million and $9.7 million respectively. The majority of the capital
expenditure dollars during the 1998 period were for the completion of the Mount
Pocono mill.
CASH FLOWS FROM FINANCING
The Wheat Milling Defined Business Unit's financing activities are
coordinated through the Company's cash management department. Cash from all of
the Company's operations is deposited with the Company's cash management
department and disbursements are made centrally. As a result, the Defined
Business Unit has a zero cash position. Financing is available from the Company
to the extent of the Company's working capital position and corporate loan
agreements and cash requirements of all other Company operations.
Working capital requirements for each division and defined business unit of
the Company are reviewed on a periodic basis, and could potentially be
restricted based upon availability of funds.
The Wheat Milling Defined Business Unit had short-term debt outstanding and
payable to the Company of $56.1 million on November 30, 1999 compared with $48.9
million on August 31, 1999. This increase in short-term debt is primarily
attributable to additional financing required for accounts receivables and
inventories due to increased volume activity.
22
<PAGE>
The Wheat Milling Defined Business Unit had long-term debt outstanding and
payable to the Company of $36.1 million on November 30, 1999 compared with $38.5
million on August 31, 1999. Principal payments of long-term debt totaled $2.4
million for each of the three-month periods ended November 30, 1999 and 1998.
This debt, net of subsequent repayments, was incurred for the acquisition,
expansion, and construction of certain mills within the Wheat Milling Defined
Business Unit. Approximately $10.0 million of the current balance is payable
within the next twelve months.
23
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT DESCRIPTION
------- ------------------------------------------------------------------
10.37 $50 Million 364-Day Revolving Loan Credit Agreement dated as of
December 21, 1999 among National Cooperative Refinery Association,
CoBank, ACB, Mercantile Bank and Bank of America, N.A.
99 Cautionary Statement
27 Financial Data Schedule (EDGAR filing only)
(b) Reports on Form 8-K
None.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENEX HARVEST STATES COOPERATIVES
-----------------------------------------
(Registrant)
NAME TITLE DATE
---- ----- ----
/S/ JOHN SCHMITZ Senior Vice-President -- January 12, 2000
- ------------------ Chief Financial Officer
John Schmitz
25
EXHIBIT 10.37
CREDIT AGREEMENT
(364-DAY REVOLVING LOAN)
BY AND BETWEEN
COBANK, ACB,
AS ADMINISTRATIVE AGENT, SYNDICATION AGENT, DOCUMENTATION AGENT, AND COLLATERAL
AGENT, AND AS A SYNDICATION PARTY,
MERCANTILE BANK, AND BANK OF AMERICA, N.A.,
AS SYNDICATION PARTIES
AND
NATIONAL COOPERATIVE REFINERY ASSOCIATION
AS BORROWER
DATED AS OF DECEMBER 21, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. DEFINED TERMS.......................................................1
1.1 Administrative Agent's Office .......................................1
1.2 Advance .............................................................1
1.3 Advance Date ........................................................1
1.4 Affiliate ...........................................................1
1.5 Aggregate LC Commitment .............................................1
1.6 Aggregate 364-Day Commitment ........................................1
1.7 Applicable Lending Office ...........................................1
1.8 Available 364-Day Amount ............................................2
1.9 Bank Debt ...........................................................2
1.10 Banking Day ........................................................2
1.11 Base Rate ..........................................................2
1.12 Borrower's Account .................................................2
1.13 Borrower Benefit Plan ..............................................2
1.14 Borrower Pension Plan ..............................................3
1.15 Capital Leases .....................................................3
1.16 Closing Date .......................................................3
1.17 CoBank Seasonal Loan ...............................................3
1.18 Code ...............................................................3
1.19 Committed Letter of Credit Fee .....................................3
1.20 Committed 364-Day Advances .........................................3
1.21 Commitment Fee Factor ..............................................3
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1.22 Compliance Certificate .............................................3
1.23 Cooperative ........................................................3
1.24 Debt ...............................................................3
1.25 Default Interest Rate ..............................................4
1.26 EBIT ...............................................................4
1.27 EBITDA .............................................................4
1.28 Environmental Laws .................................................4
1.29 ERISA Affiliate ....................................................4
1.30 Fiscal Quarter .....................................................4
1.31 Fiscal Year ........................................................4
1.32 Funding Share ......................................................5
1.33 GAAP ...............................................................5
1.34 Good Faith Contest .................................................5
1.35 Governmental Authority .............................................5
1.36 Hazardous Substances ...............................................5
1.37 Indebtedness .......................................................5
1.38 Individual 364-Day Commitment ......................................6
1.39 Individual 364-Day Lending Capacity ................................6
1.40 Individual Outstanding 364-Day Obligations .........................6
1.41 Individual 364-Day Pro Rata Share ..................................6
1.42 Interest Expense ...................................................6
1.43 Investment .........................................................6
1.44 Issuance Fee .......................................................7
ii
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1.45 Letters of Credit ..................................................7
1.46 Letter of Credit Bank ..............................................7
1.47 LIBO Rate ..........................................................7
1.48 LIBO Margin ........................................................7
1.49 Lien ...............................................................7
1.50 Loan Documents .....................................................7
1.51 Material Adverse Effect ............................................7
1.52 Material Agreements ................................................8
1.53 Member Product Receivables .........................................8
1.54 Multiemployer Plan .................................................8
1.55 Operating Lease ....................................................8
1.56 Organization Documents .............................................8
1.57 Overnight Funding Commitment .......................................8
1.58 Overnight Lenders ..................................................8
1.59 Person .............................................................8
1.60 Plan ...............................................................8
1.61 Potential Default ..................................................8
1.62 Principal Agreements ...............................................8
1.63 Prohibited Transaction .............................................9
1.64 Quarter ............................................................9
1.65 Reportable Event ...................................................9
1.66 Required Lenders ...................................................9
1.67 Restricted Payments ................................................9
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1.68 Security Documents .................................................9
1.69 Significant Systems ................................................9
1.70 Subsidiary .........................................................9
1.71 Subordinated Member Loans .........................................10
1.72 Syndication Parties ...............................................10
1.73 364-Day Availability Period .......................................10
1.74 364-Day Facility ..................................................10
1.75 364-Day Loan or Loans .............................................10
1.76 364-Day Maturity Date .............................................10
1.77 364-Day Note or Notes .............................................10
1.78 Working Capital ...................................................10
1.79 Year 2000 Compliant ...............................................10
1.80 Y2K Compliance Test ...............................................11
ARTICLE 2. 364-DAY LOAN.......................................................12
2.1 364-Day Loan .......................................................12
2.1.1 Individual 364-Day Lending Capacity ......................12
2.1.2 Individual 364-Day Pro Rata Share ........................12
2.2 Available 364-Day Amount ...........................................13
2.3 Borrowing Notice ...................................................13
2.4 Promissory Notes ...................................................13
2.5 Overnight Advances .................................................13
2.6 Syndication Party Records ..........................................14
2.7 Use of Proceeds ....................................................14
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2.8 Syndication Party Funding Failure ..................................15
2.9 Overnight Lender Funding Failure ...................................15
ARTICLE 3. LETTER OF CREDIT FACILITY..........................................15
3.1 Committed Letters of Credit ........................................15
3.1.1 Request for Committed Letter of Credit ...................15
3.1.2 Notification of the Administrative Agent .................15
3.2 Issuance of Committed Letters of Credit ............................16
3.2.1 Available Amount .........................................16
3.2.2 Availability .............................................16
3.2.3 Fees .....................................................16
3.2.4 Treatment of Draws .......................................16
3.3 Negotiated Letters of Credit .......................................16
3.3.1 Request for Negotiated Letter of Credit ..................16
3.3.2 Notification of the Administrative Agent .................17
3.4 Issuance of Negotiated Letters of Credit ...........................17
3.4.1 Available Amount .........................................17
3.4.2 Availability .............................................17
3.4.3 Fees .....................................................17
3.4.4 Treatment of Draws .......................................17
3.4.5 Reimbursement of Draws ...................................18
3.5 Reimbursement Obligation Unconditional .............................18
3.6 Cash Collateral Account ............................................18
ARTICLE 4. INTEREST AND FEES..................................................19
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4.1 Interest ...........................................................19
4.1.1 Base Rate Option .........................................19
4.1.2 LIBO Rate Option .........................................19
4.2 Additional Provisions for LIBO Rate Loans ..........................19
4.2.1 Limitation on LIBO Rate Loans ............................20
4.2.2 LIBO Rate Loan Unlawful ..................................20
4.3 Default Interest Rate ..............................................21
4.4 Interest Calculation ...............................................21
4.5 Fees ...............................................................21
4.5.1 Commitment Fee ...........................................21
4.5.2 Administrative Fee .......................................21
ARTICLE 5. PAYMENTS; FUNDING LOSSES...........................................21
5.1 Principal Payments .................................................21
5.2 Interest Payments ..................................................21
5.3 Application of Principal Payments ..................................22
5.4 Manner of Payment ..................................................22
5.5 Voluntary Prepayments ..............................................22
5.6 Mandatory Prepayments ..............................................22
5.7 Funding Losses .....................................................23
5.8 Distribution of Principal and Interest Payments ....................23
ARTICLE 6. BANK EQUITY INTERESTS..............................................23
ARTICLE 7. SECURITY...........................................................23
7.1 Borrower's Assets ..................................................23
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ARTICLE 8. REPRESENTATIONS AND WARRANTIES.....................................25
8.1 Organization, Good Standing, Etc. ..................................25
8.2 Corporate Authority, Due Authorization; Consents ...................25
8.3 Litigation .........................................................25
8.4 No Violations ......................................................25
8.5 Binding Agreement ..................................................26
8.6 Compliance with Laws ...............................................26
8.7 Principal Place of Business ........................................26
8.8 Payment of Taxes ...................................................26
8.9 Licenses and Approvals .............................................26
8.10 Employee Benefit Plans ............................................27
8.11 Equity Investments ................................................27
8.12 Title to Real and Personal Property ...............................27
8.13 Financial Statements ..............................................27
8.14 Environmental Compliance ..........................................28
8.15 Fiscal Year .......................................................28
8.16 Material Agreements ...............................................28
8.17 Regulations U and X ...............................................28
8.18 Intellectual Property .............................................28
8.19 No Default on Outstanding Judgments or Orders .....................29
8.20 No Default in Other Agreements ....................................29
8.21 Labor Disputes and Acts of God ....................................29
8.22 Governmental Regulation ...........................................29
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8.23 Year 2000 Compliance ..............................................29
8.24 Solvency ..........................................................30
8.25 Business Plan .....................................................30
8.26 Disclosure ........................................................30
ARTICLE 9. CONDITIONS TO ADVANCES.............................................30
9.1 Conditions to Closing ..............................................30
9.1.1 Loan Documents ...........................................30
9.1.2 Approvals ................................................30
9.1.3 Good Standing; Organizational Documents ..................30
9.1.4 Lien Searches; Financing Statements ......................31
9.1.5 Evidence of Insurance ....................................31
9.1.6 Appointment of Agent for Service .........................31
9.1.7 No Material Change .......................................31
9.1.8 Fees and Expenses ........................................31
9.1.9 Bank Equity Interest Purchase Obligation .................31
9.1.10 Opinion of Counsel ......................................31
9.1.11 Evidence of Corporate Action ............................32
9.1.12 Lender Consent ..........................................32
9.1.13 Compliance Certificate ..................................32
9.1.14 Further Assurances ......................................32
9.2 Conditions to Advance ..............................................32
9.2.1 Payoff and Cancellation of CoBank Seasonal Loan ..........32
9.2.2 Default ..................................................32
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9.2.3 Representations and Warranties ...........................32
ARTICLE 10. AFFIRMATIVE COVENANTS.............................................33
10.1 Books and Records .................................................33
10.2 Reports and Notices ...............................................33
10.2.1 Annual Financial Statements .............................33
10.2.2 Quarterly Financial Statements ..........................33
10.2.3 Notice of Default .......................................34
10.2.4 ERISA Reports ...........................................34
10.2.5 Notice of Litigation ....................................34
10.2.6 Notice of Material Adverse Effect .......................34
10.2.7 Notice of Environmental Proceedings .....................34
10.2.8 Regulatory and Other Notices ............................35
10.2.9 Adverse Action Regarding Required Licenses and
Intellectual Property ...................................35
10.2.10 Annual Business Plan ...................................35
10.2.11 Additional Information .................................35
10.3 Eligibility .......................................................35
10.4 Maintenance of Existence and Qualification ........................35
10.5 Compliance with Legal Requirements and Agreements .................35
10.6 Compliance with Environmental Laws ................................36
10.7 Taxes .............................................................36
10.8 Insurance .........................................................36
10.9 Maintenance of Properties .........................................36
10.10 Payment of Liabilities ...........................................37
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10.11 Inspection .......................................................37
10.12 Required Licenses; Intellectual Property .........................37
10.13 ERISA ............................................................37
10.14 Further Assurances; Real Property Security Interests .............37
10.15 Maintenance of Commodity Position ................................38
10.16 Financial Covenants ..............................................38
10.16.1 Debt to EBITDA .........................................38
10.16.2 Minimum Net Worth ......................................38
10.16.3 Interest Coverage Ratio ................................38
10.16.4 Minimum Working Capital ................................38
10.17 Year 2000 Compliance and Reports .................................38
10.18 Maintenance of Cooperative Ownership Position ....................39
ARTICLE 11. NEGATIVE COVENANTS................................................39
11.1 Borrowing .........................................................39
11.2 No Other Businesses ...............................................39
11.3 Liens .............................................................39
11.4 Sale of Assets ....................................................41
11.5 Liabilities of Others .............................................41
11.6 Loans .............................................................41
11.7 Merger; Acquisitions; Business Form; Etc. .........................41
11.8 Investments .......................................................42
11.9 Transactions With Related Parties .................................42
11.10 Restricted Payments ..............................................43
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11.11 Change in Fiscal Year ............................................43
11.12 ERISA ............................................................43
11.13 Principal Agreements .............................................43
ARTICLE 12. INDEMNIFICATION...................................................44
12.1 General; Stamp Taxes; Intangibles Tax .............................44
12.2 Indemnification Relating to Hazardous Substances ..................44
ARTICLE 13. EVENTS OF DEFAULT; RIGHTS AND REMEDIES............................45
13.1 Events of Default .................................................45
13.2 No Advance ........................................................47
13.3 Rights and Remedies ...............................................47
ARTICLE 14. AGENCY AGREEMENT..................................................47
14.1 Funding of Syndication Interest ...................................47
14.2 Syndication Parties' Obligations to Remit Funds ...................48
14.3 Syndication Party's Failure to Remit Funds ........................48
14.4 Agency Appointment ................................................49
14.5 Power and Authority of the Administrative Agent ...................49
14.5.1 Advice ..................................................50
14.5.2 Documents ...............................................50
14.5.3 Proceedings .............................................50
.
14.5.4 Retain Professionals ....................................50
14.5.5 Incidental Powers .......................................50
14.6 Duties of the Administrative Agent ................................50
14.6.1 Possession of Documents .................................50
xi
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14.6.2 Distribute Payments .....................................50
14.6.3 Loan Administration .....................................51
14.6.4 Action Upon Default .....................................51
14.6.5 Forwarding of Information ...............................52
14.7 Indemnification as Condition to Action ............................52
14.8 Consent Required for Certain Actions ..............................52
14.8.1 Unanimous ...............................................52
14.8.2 Required Lenders ........................................52
14.8.3 Action Without Vote .....................................53
14.9 Distribution of Principal and Interest ............................53
14.10 Distribution of Certain Amounts ..................................53
14.10.1 Funding Losses .........................................53
14.11 Possession of Loan Documents .....................................54
14.12 Collateral Application ...........................................54
14.13 Amounts Required to be Returned ..................................54
14.14 Reports and Information to Syndication Parties ...................55
14.15 Standard of Care .................................................55
14.16 No Trust Relationship ............................................56
14.17 Sharing of Costs and Expenses ....................................56
14.18 Syndication Parties' Indemnification of the Administrative
Agent ............................................................56
14.19 Books and Records ................................................57
14.20 Administrative Agent Fee .........................................57
14.21 The Administrative Agent's Resignation or Removal ................57
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14.22 Representations and Warranties of All Parties ....................58
14.23 Syndication Parties' Independent Credit Analysis .................58
14.24 No Joint Venture or Partnership ..................................59
14.25 Purchase for Own Account; Restrictions on Transfer;
Participations ...................................................59
14.26 Certain Participants' Voting Rights ..............................60
14.27 Method of Making Payments ........................................60
14.28 Events of Syndication Default/Remedies ...........................60
14.28.1 Syndication Party Default ..............................60
14.28.2 Remedies ...............................................61
14.29 Withholding Taxes ................................................61
14.30 Amendments Concerning Agency Function ............................61
14.31 Further Assurances ...............................................61
ARTICLE 15. MISCELLANEOUS.....................................................61
15.1 Costs and Expenses ................................................61
15.2 Service of Process and Consent to Jurisdiction ....................62
15.3 Jury Waiver .......................................................62
15.4 Notices ...........................................................63
15.4.1 Borrower ................................................63
15.4.2 Administrative Agent ....................................63
15.4.3 Syndication Parties .....................................63
15.5 Liability of Administrative Agent .................................63
15.6 Successors and Assigns ............................................63
15.7 Severability ......................................................63
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15.8 Entire Agreement ..................................................64
15.9 Applicable Law ....................................................64
15.10 Captions .........................................................64
15.11 Complete Agreement; Amendments ...................................64
15.12 Additional Costs of Maintaining Loan .............................64
15.13 Capital Requirements .............................................65
15.14 Replacement Notes ................................................66
15.15 Patronage Payments ...............................................66
15.16 Mutual Release ...................................................66
15.17 Liberal Construction .............................................66
15.18 Counterparts .....................................................67
15.19 Confidentiality ..................................................67
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EXHIBITS
Exhibit 1.22 Compliance Certificate
Exhibit 1.70 Restricted Subsidiary
Exhibit 2.3 Borrowing Notice
Exhibit 2.4 364-Day Note Form
Exhibit 8.3 Litigation
Exhibit 8.8 Payment of Taxes
Exhibit 8.9 Required Licenses
Exhibit 8.10 Employee Benefit Plans
Exhibit 8.11 Equity Investments
Exhibit 8.18 Intellectual Property
Exhibit 11.1 Existing Indebtedness
Exhibit 11.3 Existing Liens
Exhibit 11.8 Existing Investments
Exhibit 14.25 Syndication Acquisition Agreement
Exhibit 14.27 Wire Instructions
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CREDIT AGREEMENT
National Cooperative Refinery Association
THIS AGREEMENT ("CREDIT AGREEMENT") is entered into as of the 21st day
of December 1999, by and between COBANK, ACB ("COBANK") for its own benefit as a
Syndication Party and as the Administrative Agent for the benefit of the present
and future Syndication Parties (in that capacity "ADMINISTRATIVE AGENT"), the
other Syndication Parties identified on Schedule 1 hereto, and NATIONAL
COOPERATIVE REFINERY ASSOCIATION, a cooperative marketing association formed
under the laws of the State of Kansas, whose address is 1391 Iron Horse Road,
P.O. Box 1404, McPherson, Kansas 67460 ("BORROWER").
ARTICLE 1. DEFINED TERMS
As used in this Credit Agreement, the following terms shall have the
meanings set forth below (and such meaning shall be equally applicable to both
the singular and plural form of the terms defined, as the context may require):
1.1 ADMINISTRATIVE AGENT'S OFFICE: that address set forth for the
Administrative Agent in Section 15.4 as it may change from time to time by
notice to all parties to this Credit Agreement.
1.2 ADVANCE: a disbursement of the proceeds of the 364-Day Loan.
1.3 ADVANCE DATE: a day (which shall be a Banking Day) on which an
Advance is made.
1.4 AFFILIATE: with respect to Borrower shall mean (a) a Subsidiary, or
(b) any Person which, directly or indirectly, (i) owns more than fifty percent
(50%) of the outstanding stock of Borrower, or (ii) has the power under ordinary
circumstances to elect at least a majority of the directors of Borrower; but (c)
shall, with respect to Borrower, specifically not include Jayhawk Pipeline,
L.L.C., Clear Creek Transportation, L.L.C., Osage Pipe Line Company, or Kaw Pipe
Line Company, even if they would otherwise satisfy either (a) or (b) of this
Section.
1.5 AGGREGATE LC COMMITMENT: shall be $30,000,000.00.
1.6 AGGREGATE 364-DAY COMMITMENT: shall be $50,000,000.00.
1.7 APPLICABLE LENDING OFFICE: means, for each Syndication Party, the
lending office of such Syndication Party designated as such on its signature
page hereof or in the applicable Syndication Acquisition Agreement or such other
office of such
<PAGE>
Syndication Party as such Syndication Party may from time to time specify to the
Administrative Agent and Borrower as the office by which its Advances are to be
made and maintained.
1.8 AVAILABLE 364-DAY AMOUNT: the amount at any time by which the
Aggregate 364-Day Commitment exceeds the sum of (a) the principal outstanding
under the 364-Day Loan (including, without duplication, the amount of all
outstanding Overnight Advances); (b) the amount of all Committed 364-Day
Advances; and (c) the undrawn face amount of all outstanding Letters of Credit.
1.9 BANK DEBT: all amounts owing under the 364-Day Notes, fees,
Borrower's obligations to purchase Bank Equity Interests, Funding Losses and all
interest, expenses, charges and other amounts payable by Borrower pursuant to
the Loan Documents.
1.10 BANKING DAY: any day (a) other than a Saturday or Sunday and other
than a day which is a Federal legal holiday or a legal holiday for banks in the
States of Colorado or New York, and (b) if such day relates to a borrowing of, a
payment or prepayment of principal of or interest on, a continuation of or
conversion into, or a LIBO Rate Period for, a LIBO Rate Loan, or a notice by
Borrower with respect to any such borrowing, payment, prepayment, continuation,
conversion, or LIBO Rate Period, on which dealings in U.S. Dollar deposits are
carried out in the London interbank market.
1.11 BASE RATE: a rate of interest per annum equal to the "prime rate"
as published from time to time in the Eastern Edition of the WALL STREET JOURNAL
as the average prime lending rate for seventy-five percent (75%) of the United
States' thirty (30) largest commercial banks, or if the WALL STREET JOURNAL
shall cease publication or cease publishing the "prime rate" on a regular basis,
such other regularly published average prime rate applicable to such commercial
banks as is acceptable to the Administrative Agent in its reasonable discretion.
1.12 BORROWER'S ACCOUNT: shall mean Borrower's account #017000000574 at
Bank of America National Trust and Savings Association, Wichita, Kansas (ABA
#101001173).
1.13 BORROWER BENEFIT PLAN: means (a) any funded "employee welfare
benefit plan," as that term is defined in Section 3(1) of ERISA; (b) any
"multiemployer plans," as defined in Section 3(37) of ERISA; (c) any "employee
pension benefit plan" as defined in Section 3(2) of ERISA; (d) any "employee
benefit plan", as such term is defined in Section 3(3) of ERISA; (e) any
"multiple employer plan" within the meaning of Section 413 of the Code; (f) any
"multiple employer welfare arrangement" within the meaning of Section 3(40) of
ERISA; (g) a "voluntary employees' beneficiary association" within the meaning
of Section 501(c)(9) of the Code; (h) a "welfare benefit fund" within the
meaning of Section 419 of the Code; or (i) any employee welfare benefit plan
within the meaning of Section 3(1) of ERISA for the benefit of retired or
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former employees, which is maintained by the Borrower or in which Borrower
participates or to which Borrower is obligated to contribute.
1.14 BORROWER PENSION PLAN: means each Borrower Benefit Plan that is an
"employee pension benefit plan" as defined in Section 3(2) of ERISA that is
intended to satisfy the requirements of Section 401(a) of the Code.
1.15 CAPITAL LEASES: means any lease of property (whether real,
personal or mixed) by a Person which has been or should be, in accordance with
GAAP, reflected on the balance sheet of such Person as a capital lease.
1.16 CLOSING DATE: that date, which must occur on or before December
21, 1999, on which the Administrative Agent, the Syndication Parties, and
Borrower have executed all Loan Documents to which they are parties and on which
the conditions set forth in Section 9.1 of this Credit Agreement have been met.
1.17 COBANK SEASONAL LOAN: means the revolving loan from to Borrower in
the amount of $50,000,000.00 made pursuant to that certain document entitled
"Loan Agreement" with a "Date Approved" of December 14, 1998 between CoBank, St.
Paul Bank for Cooperatives, and Borrower ("COBANK CREDIT AGREEMENT") and related
documents.
1.18 CODE: means the Internal Revenue Code of 1986, as amended.
1.19 COMMITTED LETTER OF CREDIT FEE: shall mean a fee equal to 125
basis points multiplied by the face amount of the Committed Letter of Credit.
1.20 COMMITTED 364-DAY ADVANCES: the principal amount of all 364-Day
Facility Advances which any Syndication Party is obligated to make as a result
of (a) such Syndication Party having received a 364-Day Funding Notice pursuant
to Section 2.3 hereof, or (b) if such Syndication Party is the Overnight Lender,
Borrower having made an Overnight Advance Request pursuant to Section 2.5
hereof, but which, in either case, has not been funded.
1.21 COMMITMENT FEE FACTOR: shall mean 30 basis points.
1.22 COMPLIANCE CERTIFICATE: a certificate of the chief financial
officer or corporate treasurer of Borrower acceptable to the Administrative
Agent and in the form attached hereto as Exhibit 1.22.
1.23 COOPERATIVE: means Cooperative Refining, LLC, a limited liability
company formed under the laws of the state of Delaware and a Subsidiary of
Borrower.
1.24 DEBT: for any period means, without duplication, all of the
following indebtedness of Borrower and Cooperative: (a) the current portion of
all long term debt; (b) all long term debt; (c) all obligations under Capital
Leases; (d) obligations under the 364-Day Loan; and (e) all reimbursement
obligations under all Letter of Credit, and
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including any of the foregoing created or assumed by such Person either directly
or indirectly, including obligations secured by liens upon property of such
Person and upon which such Person customarily pays the interest.
1.25 DEFAULT INTEREST RATE: a rate of interest equal to 200 basis
points in excess of the Base Rate which would otherwise be applicable on the
364- Day Loans.
1.26 EBIT: for any period the net income of the Borrower and
Cooperative calculated in accordance with GAAP plus the sum of the amounts of
(a) Interest Expense, plus (b) federal and state income taxes, plus (c)
extraordinary losses, minus (d) extraordinary gains, minus (e) non-cash
patronage income, to the extent, in each case as charged against (or added to,
as the case may be) revenues to arrive at net income for such period, all as
determined by GAAP, minus (f) cash patronage dividends paid.
1.27 EBITDA: for any period the net income of the Borrower and
Cooperative calculated in accordance with GAAP plus the sum of the amounts of
(a) Interest Expense, plus (b) federal and state income taxes, plus (c)
extraordinary losses, plus (d) depreciation and amortization expenses, minus (e)
extraordinary gains, minus (f) non-cash patronage income, to the extent, in each
case as charged against (or added to, as the case may be) revenues to arrive at
net income for such period, all as determined by GAAP, minus (g) cash patronage
dividends paid.
1.28 ENVIRONMENTAL LAWS: any federal, state, or local law, statute,
ordinance, rule, regulation, administration order, or permit now in effect or
hereinafter enacted, pertaining to the public health, safety, industrial
hygiene, or the environmental conditions on, under or about the Collateral,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended, 42 U.S.C. 9601-9657
("CERCLA") and the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
6901-6987 ("RCRA").
1.29 ERISA AFFILIATE: means any corporation or trade or business which
is a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as Borrower or is under common control (within the
meaning of Section 414(c) of the Code) with Borrower, provided, however, that
for purposes of provisions herein concerning minimum funding obligations
(imposed under Section 412 of the Code or Section 302 of ERISA), the term "ERISA
Affiliate" shall also include any entity required to be aggregated with Borrower
under Section 414(m) or 414(o) of the Code.
1.30 FISCAL QUARTER: each three (3) month period beginning on the first
day of each of the following months: September, December, March, and June.
1.31 FISCAL YEAR: a year commencing on September 1 and ending on August
31.
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1.32 FUNDING SHARE: shall mean the amount of any Advance which any
Syndication Party is required to fund, which shall be determined as follows: (a)
the amount of such Advance multiplied by such Syndication Party's Individual
364-Day Pro Rata Share as of, but without giving effect to, such Advance; and
(b) for an Overnight Advance, the amount determined as provided in Section 2.5
hereof.
1.33 GAAP: generally accepted accounting principles in the United
States of America, applied consistently, as in effect from time to time.
1.34 GOOD FAITH CONTEST: means the contest of an item if (a) the item
is diligently contested in good faith by appropriate proceedings timely
instituted, (b) either the item is (i) bonded or (ii) adequate reserves are
established with respect to the contested item if and to the extent required in
accordance with GAAP, (c) during the period of such contest, the enforcement of
any contested item is effectively stayed, and (d) the failure to pay or comply
with the contested item could not reasonably be expected to result in a Material
Adverse Effect.
1.35 GOVERNMENTAL AUTHORITY: means any nation or government, any state
or other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
1.36 HAZARDOUS SUBSTANCES: dangerous, toxic or hazardous pollutants,
contaminants, chemicals, wastes, materials or substances, as defined in or
governed by the provisions of any Environmental Laws or any other federal, state
or local law, statute, code, ordinance, regulation, requirement or rule relating
thereto ("ENVIRONMENTAL REGULATIONS"), and also including urea formaldehyde,
polychlorinated biphenyls, asbestos, asbestos-containing materials, nuclear fuel
or waste, and petroleum products, or any other waste, material, substances,
pollutant or contaminant which would subject an owner of property to any
damages, penalties or liabilities under any applicable Environmental
Regulations.
1.37 INDEBTEDNESS: means as to any Person: (a) indebtedness or
liability of such Person for borrowed money, or for the deferred purchase price
of property or services (including trade obligations); (b) obligations of such
Person as lessee under Capital Leases; (c) obligations of such Person arising
under bankers' or trade acceptance facilities; (d) all guarantees, endorsements
(other than for collection or deposit in the ordinary course of business), and
other contingent obligations of such Person to purchase any of the items
included in this definition, to provide funds for payment, to supply funds to
invest in any other Person, or otherwise to assure a creditor of another Person
against loss; (e) all obligations secured by a lien on property owned by such
Person, whether or not the obligations have been assumed; and (f) all
obligations of such Person under any agreement providing for an interest rate
swap, cap, cap and floor, contingent participation or other hedging mechanisms
with respect to interest payable on any of the items described in this
definition.
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1.38 INDIVIDUAL 364-DAY COMMITMENT: shall mean with respect to any
Syndication Party, the amount shown as its Individual 364-Day Commitment on
Schedule 1 hereto, subject to adjustment in the event of the sale of all or a
portion of a Syndication Interest in accordance with Section 14.25 hereof.
1.39 INDIVIDUAL 364-DAY LENDING CAPACITY: shall mean with respect to
any Syndication Party the amount at any time of its Individual 364-Day
Commitment less its Individual Outstanding 364-Day Obligations.
1.40 INDIVIDUAL OUTSTANDING 364-DAY OBLIGATIONS: shall mean, with
respect to any Syndication Party, the sum of (a) the aggregate outstanding
principal amount of all Advances made by such Syndication Party under the
364-Day Facility (including, without duplication, Overnight Advances made by
such Syndication Party in its capacity as an Overnight Lender); plus (b) the
amount determined by multiplying (i) such Syndication Party's Individual 364-Day
Pro Rata Share times (ii) the undrawn face amount of all outstanding Committed
Letters of Credit; plus (c) the undrawn face amount of all outstanding
Negotiated Letters of Credit issued by such Syndication Party; plus (d) all of
such Syndication Party's Committed 364-Day Advances.
1.41 INDIVIDUAL 364-DAY PRO RATA SHARE: shall mean with respect to any
Syndication Party a fraction, expressed as a percentage (rounded to 8 decimal
points), where the numerator is such Syndication Party's Individual 364-Day
Commitment less such Syndication Party's Individual Outstanding 364-Day
Obligations; and the denominator is the Aggregate 364-Day Commitment less the
sum of the Individual Outstanding 364-Day Obligations of all of the Syndication
Parties, determined (a) in the case of LIBO Rate Loans, at 12:00 noon (Eastern
time) on the Banking Day Borrower delivers a 364-Day Borrowing Notice pursuant
to which Borrower requests such LIBOR Loan, and (b) in all other cases, 12:00
noon (Eastern time) on the Banking Day Borrower delivers a 364-Day Borrowing
Notice or requests a Letter of Credit.
1.42 INTEREST EXPENSE: means, for any period, all cash paid, accrued,
and capitalized for fees and interest expense of Borrower and Cooperative as
measured in accordance with GAAP.
1.43 INVESTMENT: means, with respect to any Person, (a) any loan or
advance by such Person to any other Person, (b) the purchase or other
acquisition by such Person of any capital stock, obligations or securities of,
or any capital contribution to, or investment in, or the acquisition by such
Person of all or substantially all of the assets of, or any interest in, any
other Person, (c) any performance or standby letter of credit where (i) that
Person has the reimbursement obligation to the issuer, and (ii) the proceeds of
such letter of credit are to be used for the benefit of any other Person, (d)
the agreement by such Person to make funds available for the benefit of another
Person to either cover cost overruns incurred in connection with the
construction of a project or facility, or to fund a debt service reserve
account, (e) the agreement by such Person to assume, guarantee, endorse or
otherwise be or become directly or contingently responsible or liable for the
obligations or Debts of any other Person (other than by
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endorsement for collection in the ordinary course of business), (f) an agreement
to purchase any obligations, stocks, assets, goods or services but excluding an
agreement to purchase any assets, goods or services entered into in the ordinary
course of business, (g) an agreement to supply or advance any funds, assets,
goods or services, or (h) an agreement to maintain or cause such Person to
maintain a minimum working capital or net worth or otherwise to assure the
creditors of any Person against loss.
1.44 ISSUANCE FEE: shall be an amount equal to 1/8% of the face amount
of the Letter of Credit.
1.45 LETTERS OF CREDIT: shall mean collectively Negotiated Letters of
Credit and Committed Letters of Credit.
1.46 LETTER OF CREDIT BANK: shall mean Bank of America, N.A., Wichita,
Kansas.
1.47 LIBO RATE: the rate for deposits in U.S. dollars with maturities
comparable to the selected LIBO Rate Period that appears on the display
designated as Page "3750" of the Telerate Service (or such other Page as may
replace the 3750 Page of that service or, if the Telerate Service shall cease
displaying such rates, as published by such other service or services as may be
nominated by the British Bankers' Association for the purpose of displaying
London Interbank Offered Rates for U.S. Dollar deposits or, if none, the
comparable reference on the Reuters Screen LIBOR Page or such other quotation
service as may be chosen by the Administrative Agent), determined effective as
of 1:00 P.M. (Eastern Time) on the day which is two (2) Banking Days prior to
the first day of each LIBO Rate Period, reserve adjusted basis for Regulation D
on a demonstrated basis.
1.48 LIBOR MARGIN: shall mean 125 basis points.
1.49 LIEN: means with respect to any asset any mortgage, deed of trust,
pledge, security interest, hypothecation, assignment for security purposes,
encumbrance, lien (statutory or other), or other security agreement or charge,
or encumbrance of any kind or nature whatsoever (including, without limitation,
any conditional sale, Capital Lease or other title retention agreement related
to such asset).
1.50 LOAN DOCUMENTS: this Credit Agreement, the 364-Day Notes, the
Security Documents.
1.51 MATERIAL ADVERSE EFFECT: means: (a) a material adverse effect on
the financial condition, results of operation, business or property of Borrower;
or (b) a material adverse effect on the ability of Borrower to perform its
obligations under this Credit Agreement and the other Loan Documents; or (c) the
ability of the Administrative Agent or the Syndication Parties to enforce their
rights and remedies against Borrower under the Loan Documents.
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1.52 MATERIAL AGREEMENTS: all agreements of Borrower, the termination
or breach of which, based upon Borrower's knowledge as of the date of making any
representation with respect thereto, would have a Material Adverse Effect.
1.53 MEMBER PRODUCT RECEIVABLES: shall mean all accounts receivable
arising out of Borrower's sale of inventory to the following: Cenex Harvest
States Cooperatives, Growmark, Inc., and MFA Oil, Inc.
1.54 MULTIEMPLOYER PLAN: means a Plan defined as such in Section 3(37)
of ERISA.
1.55 OPERATING LEASE: means any lease of property (whether real,
personal or mixed) by a Person under which such Person is lessee, other than a
Capital Lease.
1.56 ORGANIZATION DOCUMENTS: in the case of a corporation, its articles
or certificate of incorporation and bylaws; in the case of a partnership, its
partnership agreement and certificate of limited partnership, if applicable; in
the case of a limited liability company, its articles of organization and its
operating agreement.
1.57 OVERNIGHT FUNDING COMMITMENT: shall mean $5,000,000.00.
1.58 OVERNIGHT LENDER: shall mean CoBank.
1.59 PERSON: any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, cooperative association, institution, or government or
governmental agency (whether national, federal, state, provincial, country,
city, municipal or otherwise, including without limitation, and instrumentality,
division, agency, body or department thereof), or other entity.
1.60 PLAN: means any plan, agreement, arrangement or commitment which
is an employee benefit plan, as defined in Section 3(3) of ERISA, maintained by
Borrower or any Subsidiary or any ERISA Affiliate or with respect to which
Borrower or any Subsidiary or any ERISA Affiliate at any relevant time has any
liability or obligation to contribute.
1.61 POTENTIAL DEFAULT: any event, other than an event described in
Section 13.1(a) hereof, which with the giving of notice or lapse of time, or
both, would become an Event of Default.
1.62 PRINCIPAL AGREEMENTS: means each of the following: (a) the
Refining Operating and Product output Purchase Agreement dated September 1, 1999
by and between Cooperative Refining LLC, Farmland Industries, and Borrower; and
(b) the Personnel Lease Agreement dated September 1, 1999 by and between
Borrower, Cooperative Refining LLC, and Farmland Industries.
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1.63 PROHIBITED TRANSACTION: means any transaction prohibited under
Section 406 of ERISA or Section 4975 of the Code.
1.64 QUARTER: the quarters of the calendar year commencing as of
January 1, April 1, July 1 and October 1.
1.65 REPORTABLE EVENT: means any of the events set forth in Section
4043(b) of ERISA or in the regulations thereunder.
1.66 REQUIRED LENDERS: shall mean Syndication Parties whose Individual
364-Day Commitments constitute fifty one percent (51%) of the 364-Day Aggregate
Commitment. Pursuant to Section 14.26 hereof, Voting Participants shall, under
the circumstances set forth therein, be entitled to voting rights and to be
included in determining whether certain action is being taken by the Required
Lenders.
1.67 RESTRICTED PAYMENTS: means any dividend or other distribution
(whether in cash, securities or other property), including any cash patronage
refunds to patrons or members, with respect to any shares of any class of
capital stock or other equity interests of, or cooperative membership interest
or accounts with, Borrower or an Subsidiary, or any payment (whether in cash,
securities or other property), including any sinking fund or similar deposit, on
account of the purchase, redemption, retirement, revolvement, acquisition,
cancellation or termination of any such shares of capital stock, other equity
interest or cooperative membership interest of Borrower or any option, warrant
or other right to acquire any such shares of capital stock, other equity
interest or cooperative membership interest of Borrower.
1.68 SECURITY DOCUMENTS: the security agreements, financing statements,
and other documents executed by Borrower to secure its obligations hereunder,
under the 364-Day Notes, and under the other Loan Documents.
1.69 SIGNIFICANT SYSTEMS: all software programs, equipment containing
embedded microchips, tradeware, telecommunications, physical plant and automated
processes, regularly used by Borrower in its business operations or financial
accounting which, individually, or together with one or more other such software
programs, would, if it failed to be Year 2000 Compliant, have a material adverse
effect on the business condition (financial or otherwise) of Borrower or the
operation of the business of Borrower, or Borrower's ability to perform its
obligations under this Credit Agreement.
1.70 SUBSIDIARY: means with respect to any Person: (a) any corporation
in which such Person, directly or indirectly, (i) owns more than fifty percent
(50%) of the outstanding stock thereof, or (ii) has the power under ordinary
circumstances to elect at least a majority of the directors thereof, or (b) any
partnership, association, joint venture, limited liability company, or other
unincorporated organization or entity with respect to which such Person,
directly or indirectly, (i) owns more than fifty percent (50%) of the equity
interest thereof, or (ii) directly or indirectly owns an equity interest
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in an amount sufficient to control the management thereof. All of Borrower's
Subsidiaries owned as of the Closing Date are set forth on Exhibit 1.70 hereto.
1.71 SUBORDINATED MEMBER LOANS: means loans from member owners of
Borrower to Borrower so long as payment thereof is subordinated to all amounts
owing under the Loan Documents in a manner (including documentation)
satisfactory to the Administrative Agent.
1.72 SYNDICATION PARTIES: shall mean those entities listed on Schedule
1 hereto as having an Individual 364-Day Commitment, including CoBank in its
role as a Syndication Party hereunder, but not in its role as the Administrative
Agent, hereunder, and such Persons as shall from time to time execute a
Syndication Acquisition Agreement substantially in the form of Exhibit 14.25
hereto signifying their election to purchase all or a portion of the Syndication
Interest of any Syndication Party, in accordance with Section 14.25 hereof, and
to become a Syndication Party hereunder.
1.73 364-DAY AVAILABILITY PERIOD: shall mean the period commencing on
the Closing Date and expiring on the Banking Day immediately prior to the
364-Day Maturity Date.
1.74 364-DAY FACILITY: shall be a reference to the provisions hereof
under which Advances are made and Letters of Credit are issued.
1.75 364-DAY LOAN OR LOANS: shall mean the loan or loans represented by
Advances (including Overnight Advances) made under the 364-Day Facility pursuant
to this Credit Agreement.
1.76 364-DAY MATURITY DATE: December 19, 2000.
1.77 364-DAY NOTE OR NOTES: the promissory notes executed by Borrower
pursuant to Section 2.4 hereof, and all amendments, renewals, substitutions and
extensions thereof.
1.78 WORKING CAPITAL: Current assets (determined in accordance with
GAAP) minus current liabilities (determined in accordance with GAAP).
1.79 YEAR 2000 COMPLIANT: shall mean, with respect to software, (a)
that it shall include calendar year 2000 date conversion and compatibility
capabilities, including date data century recognition, same century and multiple
century formula and date value calculations and user interface date data values
that reflect the century so that it will (i) manage and manipulate data
involving dates, including single century and multiple century dates and
formulas, and will not cause an abnormally ending scenario within the
application or cause an abort or result in the generation of incorrect values or
invalid output involving such dates, (ii) include the indication of the correct
century in all date related user interface functions, and (iii) operate in the
same manner with year dates of 2000 and beyond as it operates with year dates of
1900 to 1999; and (b) that it
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will recognize the year 2000 as a year containing February 29. Software that is
Year 2000 Compliant shall be considered to be in "YEAR 2000 COMPLIANCE".
1.80 Y2K COMPLIANCE TEST: shall mean those procedures adopted by
Borrower for testing Borrower's Significant Systems for Year 2000 Compliance.
The following terms are defined in portions of this Credit Agreement
other than Article 1:
ADDITIONAL COSTS Section 15.12
ADMINISTRATIVE AGENT Introductory paragraph
ADMINISTRATIVE FEE Subsection 4.5.2
ADVANCES Section 2.1
ADVANCE PAYMENT Section 14.1
AUTHORIZED OFFICER Subsection 9.1.11
BANK EQUITY INTERESTS Article 6
BASE RATE LOAN Subsection 4.1.1
BORROWER Introductory paragraph
BUSINESS PLAN Subsection 10.2.10
CASH COLLATERAL ACCOUNT Section 3.6
CERCLA Section 1.25
CHANGE IN LAW Subsection 4.2.2
COBANK Introductory paragraph
COBANK TERM LOAN Subsection 9.1.12
COLLATERAL Section 7.1
COMMITTED LETTER OF CREDIT Section 3.1
COMMITMENT FEE Subsection 4.5.1
CONTRIBUTING SYNDICATION PARTIES Section 14.3
CREDIT AGREEMENT Introductory paragraph
DEFAULT COLLATERAL Section 7.1
DELINQUENCY INTEREST Section 14.3
DELINQUENT AMOUNT Section 14.3
DELINQUENT SYNDICATION PARTY Section 14.3
ERISA Section 8.10
ENVIRONMENTAL REGULATIONS Section 1.36
EVENT OF DEFAULT Section 13.1
EVENT OF SYNDICATION DEFAULT Subsection 14.28.1
FEE LETTER Subsection 9.1.8
FUNDING LOSSES Section 5.7
FUNDING LOSS NOTICE Section 5.7
INDEMNIFIED AGENCY PARTIES Section 14.18
INTELLECTUAL PROPERTY Section 8.18
INDEMNIFIED PARTIES Section 12.1
LC REQUEST Subsection 3.1.1
LIBO RATE LOAN Subsection 4.1.2
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LIBO RATE PERIOD Subsection 4.1.2
LIBO REQUEST Subsection 4.1.2
LICENSING LAWS Section 8.4
NEGOTIATED LC REQUEST Subsection 3.3.1
NEGOTIATED LETTER OF CREDIT Section 3.3
OVERNIGHT ADVANCE Section
OVERNIGHT ADVANCE REQUEST Section
OVERNIGHT MATURITY DATE Section
OVERNIGHT RATE Section
PAYMENT ACCOUNT Section 14.9
PAYMENT DISTRIBUTION Section 14.9
PBGC Section 8.10
PERMITTED ENCUMBRANCES Section 8.12
RCRA Section 1.25
REGULATORY CHANGE Section 15.12
REQUIRED LICENSES Section 8.9
SUCCESSOR AGENT Section 14.21
SYNDICATION ACQUISITION AGREEMENT Section 14.25
SYNDICATION INTEREST Section 14.1
SYNDICATION PARTY ADVANCE DATE Section 14.2
364-DAY BORROWING NOTICE Section 2.3
364-DAY FUNDING NOTICE Section 2.3
364-DAY NOTE Section 2.4
TRANSFER Section 14.25
VOTING PARTICIPANTS Section 14.26
WIRE INSTRUCTIONS Section 14.27
YEAR 2000 COMPLIANCE Section 1.79
ARTICLE 2. 364-DAY LOAN
2.1 364-DAY LOAN. On the terms and conditions set forth in this Credit
Agreement, and so long as no Event of Default or Potential Default has occurred
(or if an Event of Default has occurred, it has been waived in writing by the
Administrative Agent), each of the Syndication Parties severally agrees to
advance funds hereunder ("ADVANCES") to Borrower during the 364-Day Availability
Period in an aggregate principal amount outstanding at any time of up to the
Aggregate 364-Day Commitment, subject to the following limits:
2.1.1 INDIVIDUAL 364-DAY LENDING CAPACITY. No Syndication Party
shall be required or permitted to make Advances which would exceed its
Individual 364-Day Lending Capacity as in effect at the time of the
Administrative Agent's receipt of the Borrowing Notice requesting such Advance.
2.1.2 INDIVIDUAL 364-DAY PRO RATA SHARE. No Syndication Party
shall be required or permitted to make Advances under the 364-Day Loan in excess
of an amount equal to its Individual 364-Day Pro Rata Share multiplied by the
amount of
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the requested Advance. Each Syndication Party severally agrees to fund its
Individual 364-Day Pro Rata Share of each Advance, except as provided in Section
2.5 hereof regarding Overnight Loans.
2.2 AVAILABLE 364-DAY AMOUNT. Borrower shall not be entitled to request
an Advance under the 364-Day Loan in an amount which would exceed the Available
364-Day Amount.
2.3 BORROWING NOTICE. Borrower shall give the Administrative Agent
prior written notice by facsimile (effective upon receipt) of each request for
an Advance on or before 12:00 noon (Eastern Time) at least one (1) Banking Day
(for Base Rate Loans) or three (3) Banking Days (for LIBO Rate Loans) prior to
the date of making such Advance (subject to the minimum amount requirements of
clause (y) below). Each 364-Day Borrowing Notice must be in substantially the
form of Exhibit 2.3 hereto ("364-DAY BORROWING NOTICE") and must specify (w) the
amount of such Advance, (x) the proposed date of making such Advance, (y)
whether Borrower requests that the Advance will bear interest at (i) the Base
Rate (the principal amount that is to bear interest at the Base Rate must be a
minimum of $1,000,000.00 and in incremental multiples of $1,000,000.00), or (ii)
the LIBO Rate (the principal amount that is to bear interest at the LIBO Rate
must be a minimum of $1,000,000.00 and in incremental multiples of
$1,000,000.00), and (z) in the case of a LIBO Rate Loan, the initial LIBO Rate
Period applicable thereto. The Administrative Agent shall, on or before 1:00
P.M. (Eastern Time) of the same Banking Day, notify each Syndication Party
("364-DAY FUNDING NOTICE") of its receipt of each such 364-Day Borrowing Notice
and the amount of such Syndication Party's Funding Share thereunder. Not later
than 2:00 P.M. (Eastern Time) on the date of an Advance, each Syndication Party
will make available to the Administrative Agent at the Administrative Agent's
Office, in immediately available funds, such Syndication Party's Funding Share
of such Advance. After the Administrative Agent's receipt of such funds, but not
later than 3:00 P.M. (Eastern Time), and upon fulfillment of the applicable
conditions set forth in Article 9 hereof, the Administrative Agent will make
such Advance available to Borrower, in immediately available funds, and will
transmit such funds by wire transfer to Borrower's Account.
2.4 PROMISSORY NOTES. Borrower's obligations to each Syndication Party
under the 364-Day Loan, including Borrower's payment obligations with respect to
all Advances made by each Syndication Party and all Overnight Advances made by
the Overnight Lender shall be evidenced by, and repaid with interest in
accordance with, a promissory note of Borrower, in substantially the form of
Exhibit 2.4 hereto, duly completed, in the stated maximum principal amount equal
to such Syndication Party's Individual 364-Day Commitment, dated the date such
Syndication Party becomes a Syndication Party, payable to such Syndication Party
for the account of its Applicable Lending Office, and maturing as to principal
on the 364-Day Maturity Date (each a "364-DAY NOTE" and collectively, the
"364-DAY NOTES").
2.5 OVERNIGHT ADVANCES. In addition to Borrower's right to request
Advances under Section 2.1 hereof, Borrower may, subject to the terms and
conditions
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of this Section, at any time before 3:00 P.M. (Eastern Time) on a Banking Day,
request the Overnight Lender to make an Advance to Borrower under the 364-Day
Facility on the same Banking Day ("OVERNIGHT ADVANCE") in accordance with the
provisions of this Section. Each Banking Day by 11:30 A.M. (Eastern Time) the
Overnight Lender shall notify Borrower of the interest rate ("OVERNIGHT RATE")
that it will charge on all Overnight Advances made that Banking Day, which rate
may not be in excess of the Base Rate. Borrower's request for an Overnight
Advance ("OVERNIGHT ADVANCE REQUEST") may be made orally or in writing by
facsimile (and if orally, shall be confirmed in writing on the same Banking
Day), must be directed to the Overnight Lender, and must specify (a) the amount
of such Advance, (b) and the date when such Overnight Advance will be due and
payable ("OVERNIGHT MATURITY DATE"), which may not be later than the fifth
Banking Day thereafter. If Borrower submits an Overnight Advance Request, the
Overnight Lender shall promptly, but not later than 3:30 P.M. (Eastern Time) on
the same Banking Day, fund such Overnight Advance. Each Overnight Advance shall
bear interest at the applicable Overnight Rate and shall be payable in full,
including interest, on the Overnight Maturity Date applicable to such Overnight
Advance. Such payment may, at Borrower's discretion, and subject to the
conditions of this Credit Agreement, be made by an Advance under the 364-Day
Facility (in which case, for the purpose of such Advance, the amount of such
Overnight Advance shall not be considered in determining the Available 364-Day
Amount or the Individual 364-Day Obligations of the Overnight Lender). Overnight
Advances shall be made only by the Overnight Lender. Borrower's entitlement to
receive, and the Overnight Lender's obligation to fund, any Overnight Advance
shall be subject to the conditions and limitations set forth in Section 2.1
hereof and applicable to 364-Day Advances generally, and, in addition, the
aggregate outstanding principal amount of all such Overnight Advances shall not
at any time exceed the Overnight Funding Commitment.
2.6 SYNDICATION PARTY RECORDS. Each Syndication Party shall record on
its books and records the amount of each Advance (including Overnight Advances
with respect to those Syndication Parties which are also Overnight Lenders), the
rate and interest period applicable thereto, all payments of principal and
interest, and the principal balance from time to time outstanding. The
Syndication Party's record thereof shall be prima facie evidence as to all such
amounts and shall be binding on Borrower absent manifest error. Notwithstanding
the foregoing, Borrower will never be required to pay as principal more than the
principal amount of the Advances made by the Syndication Parties.
2.7 USE OF PROCEEDS. The proceeds of the 364-Day Loan will be used by
Borrower for to repay, in full, the outstanding balance of the CoBank Seasonal
Loan, to refinance working capital debt, to fund Borrower's purchases of crude
oil and other working capital requirements, and to fund draws on the Letters of
Credit. Borrower agrees not to request or use such proceeds for any other
purpose. Borrower will not, directly or indirectly, use any part of such
proceeds for the purpose of purchasing or carrying any margin stock within the
meaning of Regulation U of the Board of
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Governors or to extend credit to any Person for the purpose of purchasing or
carrying any such margin stock.
2.8 SYNDICATION PARTY FUNDING FAILURE. The failure of any Syndication
Party to make its Funding Share of any requested Advance under the 364-Day Loan
on the date specified for such Advance shall not relieve any other Syndication
Party of its obligation to make its Funding Share of any such Advance on such
date. No Syndication Party shall be responsible for the failure of any other
Syndication Party to make any Advance to be made by such other Syndication
Party.
2.9 OVERNIGHT LENDER FUNDING FAILURE. In the event the Overnight
Lender fails to make any requested Overnight Advance to be made by it on the
date specified for such Advance, and, except where the Overnight Lender and the
Administrative Agent are the same Person, the Administrative Agent (in that
capacity) will, in its role and capacity of the Administrative Agent, advance
such funds to Borrower on behalf of such Overnight Lender and, therefore,
notwithstanding limitations, if any, contained herein relating to the
Administrative Agent in its role as a Syndication Party, including its
Individual 364-Day Commitment, or Individual 364-Day Lending Capacity, as
applicable. In the event of any such advance by the Administrative Agent, the
Overnight Lender will be treated as a Delinquent Syndication Party under Section
14.3 hereof, and the Administrative Agent will be treated as a Contributing
Syndication Party under such Section.
ARTICLE 3. LETTER OF CREDIT FACILITY
3.1 COMMITTED LETTERS OF CREDIT. On the terms and conditions set forth
in this Credit Agreement, and so long as no Event of Default or Potential
Default has occurred (or if an Event of Default has occurred, it has been waived
in writing by the Administrative Agent), Borrower may request the issuance of
one or more standby letters of credit (each a "COMMITTED LETTER OF CREDIT") by
the Letter of Credit Bank pursuant to the conditions and limitations set forth
below.
3.1.1 REQUEST FOR COMMITTED LETTER OF CREDIT. Borrower may request
issuance of a Committed Letter of Credit by sending, not later than 11:00 A.M.
(Eastern time) on a Banking Day, a written request therefore ("LC REQUEST") to
the Letter of Credit Bank. The LC Request shall set forth (a) the face amount
and expiry date, (b) the beneficiary, (c) the terms thereof, and (d) such other
information as the Letter of Credit Bank shall request. Committed Letters of
Credit shall be issued under the 364-Day Facility. In no event may the expiry
date be later than three (3) Banking Days prior to the 364-Day Maturity Date.
Borrower may not request issuance of a Committed Letter of Credit for other than
a purpose for which an Advance could be requested under Section 2.7 hereof.
3.1.2 NOTIFICATION OF THE ADMINISTRATIVE AGENT. Borrower shall, no
later than 3:00 P.M. (Eastern Time) on the date of issuance, notify the
Administrative Agent by facsimile of the face amount, beneficiary, and expiry
date, with respect to each
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Committed Letter of Credit issued. The Letter of Credit Bank shall also, no
later than 3:00 P.M. (Eastern Time) on the date of issuance, notify the
Administrative Agent by facsimile of the face amount, beneficiary, and expiry
date with respect to each Committed Letter of Credit issued by such Letter of
Credit Bank.
3.2 ISSUANCE OF COMMITTED LETTERS OF CREDIT. No later than 12:00 noon
(Eastern Time) on the Banking Day of the receipt by the Letter of Credit Bank of
an LC Request, the Letter of Credit Bank shall issue the requested Committed
Letter of Credit for any expiry period from seven (7) days to the latest expiry
date allowable under Subsection 3.1.1 hereof, subject to the following:
3.2.1 AVAILABLE AMOUNT. The face amount of the requested
Committed Letter of Credit may not exceed the lesser of (a) an amount which,
when added to the aggregate Individual Outstanding 364-Day Obligations of all
Syndication Parties, would exceed the Aggregate 364-Day Commitment, or (b) an
amount which, when added to the undrawn face amount of all Committed Letters of
Credit and Negotiated Letters of Credit then outstanding, would exceed the
Aggregate LC Commitment.
3.2.2 AVAILABILITY. Committed Letters of Credit may be requested
for issuance at any time from the Closing Date to the date thirty (30) days
prior to the expiration of the 364-Day Maturity Date.
3.2.3 FEES. Borrower shall, on the date of issuance or reissuance
of each Committed Letter of Credit (a) pay to the Administrative Agent, for the
benefit of all Syndication Parties in accordance with their Individual 364-Day
Pro Rata Share in effect on the date of such issuance or reissuance, the Letter
of Credit Fee, and (b) pay to the Letter of Credit Bank the Issuance Fee for
each such Committed Letter of Credit.
3.2.4 TREATMENT OF DRAWS. Each draw under a Committed Letter of
Credit shall be funded by each of the Syndication Parties as an Advance under
the 364-Day Loan in accordance with their respective Individual 364-Day Pro Rata
Share as of the date of issuance of such Committed Letter of Credit.
3.3 NEGOTIATED LETTERS OF CREDIT. On the terms and conditions set
forth in this Credit Agreement, and so long as no Event of Default or Potential
Default has occurred (or if an Event of Default has occurred, it has been waived
in writing by the Administrative Agent), Borrower may request a Syndication
Party to issue one or more standby letters of credit (each a "NEGOTIATED LETTER
OF CREDIT") pursuant to the conditions and limitations set forth below.
3.3.1 REQUEST FOR NEGOTIATED LETTER OF CREDIT. Borrower may
request issuance of a Negotiated Letter of Credit by sending, not later than
12:00 noon (Eastern time) on a Banking Day, a written request therefore
("NEGOTIATED LC REQUEST") to a Syndication Party. The Negotiated LC Request
shall set forth (a) the face amount and expiry date, (b) the beneficiary, (c)
the terms thereof, and (d) such
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other information as such Syndication Party shall request. Negotiated Letters of
Credit shall be issued under the 364-Day Facility. In no event may the expiry
date be later than 180 days after the 364-Day Maturity Date. Borrower may not
request issuance of a Negotiated Letter of Credit for other than a purpose for
which an Advance could be requested under Section 2.7 hereof. Not later than
2:00 P.M. (Eastern Time) of the Banking Day on which a Syndication Party
receives a Negotiated letter of Credit Request (so long as it was received no
later than 12:00 noon (Eastern Time)), it shall notify Borrower whether it will
or will not issue such Negotiated Letter of Credit and the amount of fees it
will charge in connection with such issuance.
3.3.2 NOTIFICATION OF THE ADMINISTRATIVE AGENT. Borrower shall,
no later than 3:00 P.M. (Eastern Time) on the date of issuance, notify the
Administrative Agent by facsimile of the face amount, beneficiary, and expiry
date, with respect to each Negotiated Letter of Credit issued. Each Syndication
Party issuing a Negotiated Letter of Credit shall also, no later than 3:00 P.M.
(Eastern Time) on the date of issuance, notify the Administrative Agent by
facsimile of the face amount, beneficiary, and expiry date with respect to each
Negotiated Letter of Credit issued by such Syndication Party.
3.4 ISSUANCE OF NEGOTIATED LETTERS OF CREDIT. No later than 3:00 P.M.
(Eastern Time) on the Banking Day of the receipt by a Syndication Party of a
Negotiated LC Request, such Syndication Party shall, if it has agreed to do so,
issue the requested Negotiated Letter of Credit for any expiry date allowable
under Subsection 3.3.1 hereof, subject to the following:
3.4.1 AVAILABLE AMOUNT. The face amount of the requested
Negotiated Letter of Credit may not exceed the lesser of (a) an amount which,
when added to the aggregate Individual Outstanding 364-Day Obligations of all
Syndication Parties, would exceed the Aggregate 364-Day Commitment; (b) an
amount which, when added to the undrawn face amount of all Letters of Credit
then outstanding, would exceed the Aggregate LC Commitment; or (c) an amount
which, when added to the Individual Outstanding 364-Day Obligations of the
Syndication Party issuing such Negotiated Letter of Credit, would exceed the
Individual 364-Day Commitment of such Syndication Party.
3.4.2 AVAILABILITY. Negotiated Letters of Credit may be requested
for issuance at any time from the Closing Date to the date one hundred fifty
(150) days after the 364-Day Maturity Date.
3.4.3 FEES. Borrower shall pay at the time of issuance and
reissuance of each Negotiated Letter of Credit such fees as may be agreed to at
the time of such issuance or reissuance by Borrower and the Syndication Party
issuing such Negotiated Letter of Credit.
3.4.4 TREATMENT OF DRAWS. Each draw under a Negotiated Letter of
Credit shall be funded by the Syndication Party issuing such Negotiated Letter
of Credit as an Advance under the 364-Day Loan and shall bear interest at the
Base Rate.
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3.4.5 REIMBURSEMENT OF DRAWS. In the event a draw under a
Negotiated Letter of Credit is paid on or after the 364-Day Maturity Date,
Borrower shall be obligated to reimburse the Syndication Party issuing such
Negotiated Letter of Credit, no later than three (3) Banking Days after such
draw, for the full amount of such draw plus interest to the date of such
reimbursement computed at the Base Rate in effect as of the date of such draw
and each subsequent day until full reimbursement is made.
3.5 REIMBURSEMENT OBLIGATION UNCONDITIONAL. All draws under the
Letters of Credit are absolutely, unconditionally, and irrevocably reimbursable
by Borrower and (or as provided otherwise in Subsection 3.4.5 hereof with
respect to draws paid on or after the 364-Day Maturity Date) may be funded as
Advances on the 364-Day Loan, notwithstanding:
(a) any lack of validity or enforceability of the Letter of Credit, any
of the documents referenced in the Letter of Credit, or any other agreement or
instrument related to any such documents;
(b) the existence of any claim, setoff, defense or other right which
Borrower may have at any time against the beneficiary or any transferee of the
Letter of Credit (or any person for whom the beneficiary or transferee may be
acting);
(c) any statement, draft, certificate, or any other document presented
under the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect, or any statement therein being untrue or inaccurate
in any respect whatsoever or the draw certificate was otherwise unauthorized, it
being expressly understood and agreed by Borrower that neither the Letter of
Credit Bank (with respect to Committed Letters of Credit) nor any Syndication
Party (with respect to all Letters of Credit) shall have any liability on
account of any lack of authorization or forgery and any recovery from third
parties on account of such lack of authorization or such forgery shall be the
sole responsibility of Borrower;
(d) payment of a draw against presentation of a draft or certificate
which does not comply with the terms of the Letter of Credit, unless such
payment is made as a result of the gross negligence or willful misconduct of the
issuer of the Letter of Credit.
3.6 CASH COLLATERAL ACCOUNT. Upon the occurrence of either the 364-Day
Maturity Date, or an Event of Default, Borrower shall immediately (a) establish
an account with the Administrative Agent, or with such other financial
institution as shall be approved by the Required Lenders ("CASH COLLATERAL
ACCOUNT"); (b) deposit by wire transfer funds into such Cash Collateral Account
in an amount equal to the undrawn face amount of all Letters of Credit then
outstanding; and (c) take such action, including the execution and delivery
(and, where requested, obtaining the execution thereof by third parties) of
security documents, account control agreements, financing statements, and/or
such other documents as the Administrative Agent may require, in order to grant
to the Administrative Agent, on behalf of the Syndication Parties, a first lien
security interest on such Cash Collateral Account and the funds on deposit
therein. Notwithstanding any
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other provision contained in this Credit Agreement or any of the other Loan
Documents, (y) draws made against any Committed Letter of Credit on or after the
date of funding of the Cash Collateral Account shall, at the sole discretion of
the Letter of Credit Bank, be funded out of the funds on deposit in the Cash
Collateral Account rather than out of Advances; and (z) draws made against any
Negotiated Letter of Credit on or after the date of funding of the Cash
Collateral Account shall, at the sole discretion of the issuer of such
Negotiated Letter of Credit, be funded out of the funds on deposit in the Cash
Collateral Account to the extent such funds exceed the undrawn face amount of
all Committed Letters of Credit outstanding as of the day of such draw.
ARTICLE 4. INTEREST AND FEES
4.1 INTEREST. Interest on Advances under the 364-Day Loan shall be
calculated as follows:
4.1.1 BASE RATE OPTION. Unless Borrower requests and receives a
LIBO Rate Loan pursuant to Subsection 4.1.2 hereof, the outstanding principal
balance under the 364-Day Notes shall bear interest at the Base Rate (each a
"BASE RATE LOAN").
4.1.2 LIBO RATE OPTION. From time to time, and so long as no
Event of Default has occurred and is continuing, at the request of Borrower
included in a 364-Day Borrowing Notice, all or any part of the outstanding
principal balance under the 364-Day Notes may bear interest at the LIBO Rate
plus the LIBOR Margin (each a "LIBO RATE LOAN") except as provided in Subsection
3.4.4 hereof; provided that Borrower may have no more than ten (10) LIBO Rate
Loans outstanding at any time. To effect this option, the Borrowing Notice must
specify (a) the principal amount that is to bear interest at the LIBO Rate,
which must be a minimum of $1,000,000.00 and in incremental multiples of
$1,000,000.00, and (b) the period selected by Borrower during which the LIBO
Rate is to be applied ("LIBO RATE PERIOD"), which may be any period of one, two,
three, or six months, but must expire no later than the 364-Day Maturity Date.
In addition, from time to time, and so long as no Event of Default has occurred
and is continuing, Borrower may convert any Base Rate Loan to a LIBO Rate Loan,
or continue a LIBO Rate Loan, by making a written request therefore ("LIBO
REQUEST") to the Administrative Agent by facsimile, specifying (y) the principal
amount that is to bear interest at the LIBO Rate, which must be a minimum of
$1,000,000.00 and in incremental multiples of $1,000,000.00 and (z) the LIBO
Rate Period selected by Borrower during which the LIBO Rate is to be applied.
The Administrative Agent shall incur no liability in acting upon a request which
it believed in good faith had been made by a properly authorized representative
of Borrower. Following the expiration of the LIBO Rate Period for any LIBO Rate
Loan, interest shall automatically accrue at the Base Rate unless Borrower
requests and receives another LIBO Rate Loan as provided in this Subsection.
4.2 ADDITIONAL PROVISIONS FOR LIBO RATE LOANS.
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4.2.1 LIMITATION ON LIBO RATE LOANS. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of the LIBO Rate
for any LIBO Rate Period:
(a) The Administrative Agent determines (which determination shall be
conclusive) that quotations of interest rates in accordance with the definition
of LIBO Rate are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for LIBO Rate Loans as
provided in this Credit Agreement; or
(b) any Syndication Party determines (which determination shall be
conclusive) that the relevant rates of interest referred to in the definition of
LIBO Rate upon the basis of which the rate of interest for LIBO Rate Loans for
such LIBO Rate Period is to be determined do not adequately cover the cost to
the Syndication Parties of making or maintaining such LIBO Rate Loans for such
LIBO Rate Period;
then the Administrative Agent shall give Borrower prompt notice thereof, and so
long as such condition remains in effect, in the case of clause (a) above, the
Syndication Parties, and in the case of clause (b) above, the Syndication Party
that makes the determination, shall be under no obligation to make LIBO Rate
Loans, convert Base Rate Loans into LIBO Rate Loans, or continue LIBO Rate
Loans, and Borrower shall, on the last days of the then current applicable LIBO
Rate Periods for the outstanding LIBO Rate Loans, either prepay such LIBO Rate
Loans or such LIBO Rate Loans shall automatically be converted into a Base Rate
Loan in accordance with Section 4.1 hereof.
4.2.2 LIBO RATE LOAN UNLAWFUL. If any law, treaty, rule,
regulation or determination of a court or governmental authority or any change
therein or in the interpretation or application thereof subsequent to the
Closing Date (each, a "CHANGE IN LAW") shall make it unlawful for any of the
Syndication Parties to (a) advance its Funding Share of any LIBO Rate Loan or
(b) maintain its share of all or any portion of the LIBO Rate Loans, each such
Syndication Party shall promptly, by telephone (in which case it must be
promptly followed by a writing) or facsimile, notify the Administrative Agent
thereof, and of the reasons therefor and the Administrative Agent shall promptly
notify Borrower thereof and shall provide a copy of such written notice to
Borrower. In the former event, any obligation of any such Syndication Party to
make available its Funding Share of any future LIBO Rate Loan shall immediately
be canceled (and, in lieu thereof shall be made as a Base Rate Loan), and in the
latter event, any such unlawful LIBO Rate Loans or portions thereof then
outstanding shall be converted, at the option of such Syndication Party, to a
Base Rate Loan; provided, however, that if any such Change in Law shall permit
the LIBO Rate to remain in effect until the expiration of the LIBO Rate Period
applicable to any such unlawful LIBO Rate Loan, then such LIBO Rate Loan shall
continue in effect until the expiration of such LIBO Rate Period. Upon the
occurrence of any of the foregoing events on account of any Change in Law,
Borrower shall pay to the Administrative Agent immediately upon demand such
amounts as may be necessary to compensate any such Syndication Party for any
fees, charges, or other costs incurred or payable by such Syndication Party as a
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result thereof and which are attributable to any LIBO Rate Loan made available
to Borrower hereunder, and any reasonable allocation made by any such
Syndication Party among its operations shall be conclusive and binding upon
Borrower absent manifest error.
4.3 DEFAULT INTEREST RATE. All past due payments on the 364-Day Notes
or of any other Bank Debt (whether as a result of nonpayment by Borrower when
due, at maturity, or upon acceleration) shall bear interest at the Default
Interest Rate from and after the due date for the payment, or on the date of
maturity or acceleration, as the case may be.
4.4 INTEREST CALCULATION. Interest on Base Rate Loans and LIBO Rate
Loans shall be calculated on the actual number of days that the principal owing
thereunder is outstanding with the daily rate calculated on the basis of a year
consisting of 360 days.
4.5 FEES. Borrower shall pay or cause to be paid the following fees:
4.5.1 COMMITMENT FEE. A fee for each day during the Availability
Period ("COMMITMENT FEE") for each Facility (a) payable in arrears by the tenth
calendar day following the close of each Quarter, and (b) determined for each
day during such Quarter by (i) multiplying the Commitment Fee Factor (expressed
as a daily rate on the basis of a year of 360 days) times (ii) the difference
between the Aggregate 364-Day Commitment and the outstanding principal balance
owing under the 364-Day Loans as of the close of the Administrative Agent's
business on such day. The Commitment Fee shall be payable by Borrower to the
Administrative Agent, and the Administrative Agent shall distribute the
Commitment Fee to the Syndication Parties based on their Individual 364-Day Pro
Rata Share.
4.5.2 ADMINISTRATIVE FEE. An annual non-refundable non-prorated
fee ("ADMINISTRATIVE FEE") in an amount equal to the "Administrative Agent Fee"
as set forth in the Fee Letter, payable to and for the account of the
Administrative Agent in arrears quarterly with the first such payment due on
March 21, 2000, and thereafter on each quarterly anniversary of such date.
ARTICLE 5. PAYMENTS; FUNDING LOSSES
5.1 PRINCIPAL PAYMENTS. Except as provided in Subsection 3.4.5 hereof,
principal shall be payable under the 364-Day Notes and the 364-Day Facility on
the 364-Day Maturity Date, provided that principal owing on all Overnight
Advances shall be payable on the applicable Overnight Maturity Date. Voluntary
prepayments may be made only as provided in Section 5.5 hereof and Mandatory
Prepayments must be made as provided in Section 5.6 hereof.
5.2 INTEREST PAYMENTS. Except as provided in Subsection 3.4.5 hereof,
interest shall be payable as follows: (a) interest on Base Rate Loans shall be
payable monthly in arrears on the first Banking Day of the next month; (b)
interest on LIBO
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Rate Loans shall be payable on the last day of the LIBO Rate Period therefor,
but no less frequently than each three month anniversary of the date of the
relevant Advance; (c) interest on all 364-Day Loans then accrued and unpaid
shall be payable on the 364-Day Maturity Date; and (d) interest on Overnight
Advances shall be payable on the applicable Overnight Maturity Date.
5.3 APPLICATION OF PRINCIPAL PAYMENTS. Principal payments and
prepayments shall be applied first to Overnight Loans, then to Base Rate Loans,
and then to LIBO Rate Loans unless Borrower directs otherwise in writing.
However, upon the occurrence and during the continuance of an Event of Default
or Potential Default, all principal payments shall be applied, as the
Administrative Agent in its sole discretion shall determine, to fees, interest
or principal indebtedness under the 364-Day Notes, or to any other Bank Debt.
5.4 MANNER OF PAYMENT. All payments, including prepayments, that
Borrower is required or permitted to make under the terms of this Credit
Agreement shall be made to the Administrative Agent (a) in immediately available
federal funds, to be received no later than 1:00 P.M. Eastern Time of the date
on which such payment is due (or the following Banking Day if such date is not a
Banking Day) by wire transfer through Federal Reserve Bank, Kansas City, Routing
Number: 307088754, COBANK ENGWD (or to such other account as the Administrative
Agent may designate by notice); and (b) without setoff or counterclaim and free
and clear of and without deduction for any taxes, levies, impost, duties,
charges, fees, deductions, withholding, compulsory loans, restrictions or
conditions of any nature now or hereafter imposed or levied by any jurisdiction
or any political subdivision thereof or taxing or other authority therein unless
Borrower is required by law to make such deduction or withholding.
5.5 VOLUNTARY PREPAYMENTS. Borrower shall have the right to prepay all
or any part of the outstanding principal balance under the 364-Day Loans at any
time in integral multiples of $1,000,000.00 (or the entire outstanding balance,
if less) and subject to a $1,000,000.00 minimum prepayment (or the entire
outstanding balance, if less), on any Banking Day; provided that in the event of
prepayment of any LIBO Rate Loan, whether voluntary or on account of
acceleration (a) Borrower must provide three (3) Banking Days notice to the
Administrative Agent prior to making such prepayment, and (b) Borrower must, at
the time of making such prepayment, pay all Funding Losses applicable to such
prepayment. Principal amounts paid or prepaid under the 364-Day Loans may be
reborrowed under the terms and conditions of this Credit Agreement.
5.6 MANDATORY PREPAYMENTS. In the event the sum of (a) the outstanding
principal under all 364-Day Loans; plus (b) the undrawn face amount of all
outstanding Letters of Credit; plus (c) the amount of all Committed 364-Day
Advances; plus (d) without duplication, the amount of all outstanding Overnight
Advances, exceeds the Aggregate 364-Day Commitment, Borrower shall, within one
(1) Banking Day make a prepayment in the amount of such excess.
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5.7 FUNDING LOSSES. In the event of any prepayment of any LIBOR Loans,
whether voluntary or mandatory, and including on account of acceleration,
Borrower must, at the time of making such prepayment, pay all Funding Losses
applicable to such prepayment. "FUNDING LOSSES" shall be determined on an
individual Syndication Party basis as the amount which would result in such
Syndication Party being made whole (on a present value basis) for the actual or
imputed funding losses (including, without limitation, any loss, cost or expense
incurred by reason of obtaining, liquidating or employing deposits or other
funds acquired by such Syndication Party to fund or maintain such LIBO Rate
Loan) incurred by such Syndication Party as a result of such prepayment
(regardless of whether the Syndication Party actually funded with such
deposits). In the event of any such prepayment, each Syndication Party which had
funded the 364-Day Loan being prepaid shall, promptly after being notified of
such prepayment, send written notice ("FUNDING LOSS NOTICE") to the
Administrative Agent by facsimile setting forth the amount of attributable
Funding Losses and the method of calculating the same. The Administrative Agent
shall notify Borrower orally or in writing of the amount of such Funding Losses.
A determination by a Syndication Party as to the amounts payable pursuant to
this Section shall be conclusive absent manifest error.
5.8 DISTRIBUTION OF PRINCIPAL AND INTEREST PAYMENTS. The Administrative
Agent shall distribute payments of principal and interest among the Syndication
Parties in accordance with their respective Individual 364-Day Pro Rata Shares,
provided that (a) payments of principal and/or interest with respect to Advances
made on account of draws under the Negotiated Letter of Credit shall be
distributed only to the Syndication Party which funded such Advance in
accordance with Subsection 3.4.4 or 3.4.5 hereof, as applicable, and (b)
principal and interest payments on Overnight Advances shall be remitted only to
the Overnight Lender.
ARTICLE 6. BANK EQUITY INTERESTS
Borrower agrees to purchase such equity interests in CoBank ("BANK
EQUITY INTERESTS") as CoBank may from time to time require in accordance with
its bylaws and capital plans as applicable to cooperative borrowers generally.
In connection with the foregoing, Borrower hereby acknowledges receipt, prior to
the execution of this Credit Agreement, of the following with respect to CoBank
(a) the bylaws, (b) a written description of the terms and conditions under
which the Bank Equity Interests are issued, (c) the most recent annual report,
and (d) if more recent than the latest annual report, the latest quarterly
report. CoBank will have a statutory security interest in the Bank Equity
Interests. CoBank reserves the right to sell participations under the provisions
of Section 14.25 on a non-patronage basis.
ARTICLE 7. SECURITY
7.1 BORROWER'S ASSETS. As security for the payment and performance of
all obligations of Borrower to the Administrative Agent, to CoBank (including
but not limited to all obligations of Borrower under Article 6 hereof), and to
all present and
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future Syndication Parties, including but not limited to principal and interest
under the 364-Day Notes, purchases of Bank Equity Interests, fees, Funding
Losses, reimbursements, and all other Bank Debt or obligations under any of the
Loan Documents, Borrower shall, upon the occurrence and during the continuance
of an Event of Default, be obligated to grant to, and maintain for, the
Administrative Agent, for the benefit of CoBank (to the extent of borrower's
obligations with respect to Bank Equity Interests), and for the benefit of all
present and future Syndication Parties, a lien and security interest, in all of
its Member Product Receivables, whether now owned or hereafter acquired
("COLLATERAL"), pursuant to the Security Documents. Such lien on the Collateral
shall be a first lien. Borrower shall execute and deliver to the Administrative
Agent, for the benefit of CoBank (to the extent of borrower's obligations with
respect to Bank Equity Interests), and for the benefit of all present and future
Syndication Parties, the Security Documents to evidence the security interest of
the Administrative Agent, for the benefit of CoBank (to the extent of borrower's
obligations with respect to Bank Equity Interests), and for the benefit of all
present and future Syndication Parties, in the Collateral, together with such
financing statements or other documents as the Administrative Agent shall
reasonably request in furtherance of this Section; provided that the Security
Documents creating and/or perfecting the security interest in the Collateral
shall not be effective, and shall expressly provide that they are of no force or
effect, and no financing statements shall be filed or recorded with respect to
the Collateral, unless and until an Event of Default has occurred and is not
cured within twenty (20) days of such occurrence, after which time the security
agreement, the grant of the security interest in the Collateral provided
therein, and all other provisions thereof shall automatically, and without the
necessity of any other act by Borrower or the Administrative Agent or any notice
to Borrower, be in full force and effect and the Administrative Agent shall
thereafter be entitled to file one or more financing statements or take any
other action provided for herein or in the security agreement. Borrower shall
also execute such further security agreements, financing statements, assignments
or other documents as the Administrative Agent shall reasonably request, in form
and substance as the Administrative Agent shall specify (but consistent with the
foregoing provisions of this Section), to establish, confirm, perfect or provide
notice of the security interest of the Administrative Agent, for the benefit of
CoBank (to the extent of borrower's obligations with respect to Bank Equity
Interests), and for the benefit of all present and future Syndication Parties,
in the Collateral, including Collateral acquired after the Closing Date. If
requested by the Administrative Agent (but such request may not be made unless
and until an Event of Default has occurred and is not cured within twenty (20)
days of such occurrence): (a) Borrower and the Administrative Agent shall place
a legend on any chattel paper included in the Collateral showing the security
interest therein of the Administrative Agent, for the benefit of CoBank (to the
extent of borrower's obligations with respect to Bank Equity Interests), and for
the benefit of all present and future Syndication Parties; and (b) Borrower
shall deliver to the Administrative Agent, for the benefit of CoBank (to the
extent of borrower's obligations with respect to Bank Equity Interests), and for
the benefit of all present and future Syndication Parties, possession of any
instruments and
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securities included in the Collateral (duly endorsed to the Administrative
Agent's reasonable satisfaction).
ARTICLE 8. REPRESENTATIONS AND WARRANTIES
To induce the Syndication Parties to make the 364-Day Loans, and
recognizing that the Syndication Parties and the Administrative Agent are
relying thereon, Borrower represents and warrants as follows:
8.1 ORGANIZATION, GOOD STANDING, ETC. Borrower: (a) is duly organized,
validly existing, and in good standing as a cooperative marketing association
under the laws of its state of incorporation, which is Kansas; (b) is duly
qualified to do business and is in good standing in each jurisdiction in which
the transaction of its business makes such qualification necessary, except to
the extent that the failure to so qualify has not resulted in, and could not
reasonably be expected to cause, a Material Adverse Effect; and (c) has all
authority and all requisite corporate and legal power to own and operate its
assets and to carry on its business, and to enter into and perform the Loan
Documents to which it is a party.
8.2 CORPORATE AUTHORITY, DUE AUTHORIZATION; CONSENTS. Borrower has
taken, all corporate action necessary to execute, deliver and perform its
obligations under the Loan Documents to which it is a party and to pay off the
CoBank Seasonal Loan. All consents or approvals of any Person which are
necessary for, or are required as a condition of Borrower's execution, delivery
and performance of and under the Loan Documents, have been obtained.
8.3 LITIGATION. Except as described on Exhibit 8.3 hereto, there are no
pending legal or governmental actions, proceedings or investigations to which
Borrower is a party or to which any property of Borrower is subject which might
reasonably be expected to result in any Material Adverse Effect and, to
Borrower's knowledge, no such actions or proceedings are threatened or
contemplated by any federal, state, county, or city (or similar unit)
governmental agency or any other Person.
8.4 NO VIOLATIONS. The execution, delivery and performance of its
obligations under the Loan Documents will not: (a) violate any provision of
Borrower's Organization Documents, or any law, rule, regulation (including,
without limitation, Regulations T, U, and X of the Board of Governors of the
Federal Reserve System), or any judgment, order or ruling of any court or
governmental agency; (b) violate, require consent under (except such consent as
has been obtained), conflict with, result in a breach of, constitute a default
under, or with the giving of notice or the expiration of time or both,
constitute a default under, any existing real estate mortgage, indenture, lease,
security agreement, contract, note, instrument or any other agreements or
documents binding on Borrower or affecting its property; or (c) violate,
conflict with, result in a breach of, constitute a default under, or result in
the loss of, or restriction of rights under, any Required License or any order,
law, rule, or regulation under or
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pursuant to which any Required License was issued or is maintained ("LICENSING
LAWS").
8.5 BINDING AGREEMENT. Each of the Loan Documents to which Borrower is
a party is, or when executed and delivered, will be, the legal, valid and
binding obligation of Borrower, enforceable in accordance with its terms,
subject only to limitations on enforceability imposed by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting creditors'
rights generally and by general principles of equity.
8.6 COMPLIANCE WITH LAWS. Borrower is in compliance with all federal,
state, and local laws, rules, regulations, ordinances, codes and orders,
including without limitation all Environmental Laws and all Licensing Laws, with
respect to which noncompliance would result in a Material Adverse Effect.
8.7 PRINCIPAL PLACE OF BUSINESS. Borrower's place of business, or chief
executive office if it has more than one place of business, and the place where
the records required by Section 10.1 hereof are kept, is located at 1391 Iron
Horse Road, McPherson, Kansas 67460.
8.8 PAYMENT OF TAXES. Except as shown on Exhibit 8.8 hereto, Borrower
has filed all required federal, state and local tax returns and has paid all
taxes as shown on such returns as they have become due, and has paid when due
all other taxes, assessments or impositions levied or assessed against Borrower
or its business or properties, except where the failure to make such filing or
payment could not reasonably be expected to result in a Material Adverse Effect.
Exhibit 8.8 specifically indicates all such taxes which are subject to a Good
Faith Contest.
8.9 LICENSES AND APPROVALS. Borrower has ownership of, or license to
use, or has been issued, all franchises, certificates, approvals, permits,
authorities, agreements, and licenses which are used or necessary to permit it
to own its properties and to conduct the business as presently being conducted
as to which the termination or revocation thereof could reasonably be expected
to have a Material Adverse Effect ("REQUIRED LICENSES"). Each Required License
is identified on Exhibit 8.9 hereto and is in full force and effect, and there
is no outstanding notice of cancellation or termination or, to Borrower's
knowledge, any threatened cancellation or termination in connection therewith,
nor has an event occurred with respect to any Required License which, with the
giving of notice or passage of time or both, could result in the revocation or
termination thereof or otherwise in any impairment of Borrower's rights with
respect thereto, which impairment could reasonably be expected to have a
Material Adverse Effect. No consent, permission, authorization, order, or
license of any governmental authority, is necessary in connection with the
execution, delivery, performance, or enforcement of and under the Loan Documents
to which Borrower is a party except such as have been obtained and are in full
force and effect.
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8.10 EMPLOYEE BENEFIT PLANS. Exhibit 8.10 sets forth as of the Closing
Date a true and complete list of each Borrower Benefit Plan, Borrower Pension
Plan, and Multiemployer Plan that is maintained by Borrower or any of its
Subsidiaries or in which Borrower or any of its Subsidiaries participates or to
which Borrower or any of its Subsidiaries is obligated to contribute, in each
case as of the Closing Date. Borrower and its Subsidiaries are in compliance in
all material respects with the Employee Retirement Income Security Act of 1974,
as amended, and the regulations thereunder ("ERISA"), to the extent applicable
to them, and have not received any notice to the contrary from the Pension
Benefit Guaranty Corporation ("PBGC").
8.11 EQUITY INVESTMENTS. Borrower does not now own any stock or other
voting or equity interest, directly or indirectly, in any Person valued at the
greater of book value or market value at $5,000,000 or more, other than: (a) the
Bank Equity Interests, and (b) as set forth on Exhibit 8.11 hereto.
8.12 TITLE TO REAL AND PERSONAL PROPERTY. Borrower has good and
marketable title to, or valid leasehold interests in, all of its material
properties and assets, real and personal, including the properties and assets
and leasehold interests reflected in the financial statements of Borrower
referred to in Section 8.13 hereof, except (a) any properties or assets disposed
of in the ordinary course of business, and (b) for defects in title and
encumbrances which could not reasonably be expected to result in a Material
Adverse Effect; and none of the properties of Borrower are subject to any Lien,
except as permitted by Section 11.3 hereof ("PERMITTED ENCUMBRANCES"). All such
property is in good operating condition and repair, reasonable wear and tear
excepted, and suitable in all material respects for the purposes for which it is
being utilized except where their failure to be in good operating condition
could not reasonably be expected to result in a Material Adverse Effect. All of
the leases of Borrower which constitute Material Agreements are in full force
and effect and afford Borrower peaceful and undisturbed possession of the
subject matter thereof.
8.13 FINANCIAL STATEMENTS. The consolidated balance sheet of Borrower
and its Subsidiaries as of August 31, 1999, and the related consolidated
statements of operations, cash flows and consolidated statements of capital
shares and equities for the Fiscal Year then ended, and the accompanying
footnotes, together with the unqualified opinion thereon, dated August 31, 1999
of Pricewaterhouse Coopers LLP, independent certified public accountants, copies
of which have been furnished to the Administrative Agent and the Syndication
Parties, fairly present in all material respects the financial condition of
Borrower and its Subsidiaries as at such dates and the results of the operations
of Borrower and its Subsidiaries for the periods covered by such statements, all
in accordance with GAAP consistently applied. Since August 31, 1999, there has
been no material adverse change in the financial condition, results of
operations, business or prospects of Borrower or any of its Subsidiaries. As of
the Closing Date, there are no liabilities of Borrower or any of its
Subsidiaries, fixed or contingent, which are material but are not reflected in
the financial statements of Borrower and its Subsidiaries referred to above or
referred to in the notes thereto, other than liabilities
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arising in the ordinary course of business since August 31, 1999. No
information, exhibit, or report furnished by Borrower or any of its Subsidiaries
to the Administrative Agent or the Syndication Parties in connection with the
negotiation of this Credit Agreement contained any material misstatement of fact
or omitted to state a material fact or any fact necessary to make the statements
contained therein not materially misleading in light of the circumstances in
which they were made and taken together with the other information, exhibits and
reports furnished to the Administrative Agent or the Syndication Parties.
8.14 ENVIRONMENTAL COMPLIANCE. Borrower and its Subsidiaries have
obtained all permits, licenses and other authorizations which are required under
all applicable Environmental Laws, except to the extent failure to have any such
permit, license or authorization could not reasonably be expected to result in a
Material Adverse Effect (with respect to Borrower or any such Subsidiary).
Borrower and its Subsidiaries are in compliance with all Environmental Laws and
the terms and conditions of the required permits, licenses and authorizations,
and are also in compliance with all other limitations, restrictions,
obligations, schedules and timetables contained in those Laws or contained in
any plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder, except to the extent, in each case,
failure to comply has not resulted in, and could not reasonably be expected to
result in, a Material Adverse Effect (with respect to Borrower or any such
Subsidiary).
8.15 FISCAL YEAR. Each fiscal year of Borrower begins on September 1 of
each calendar year and ends on August 31 of each calendar year.
8.16 MATERIAL AGREEMENTS. Neither Borrower nor, to Borrower's
knowledge, any other party to any Material Agreement, is in default thereunder,
and no facts exist which with the giving of notice or the passage of time, or
both, would constitute such a default.
8.17 REGULATIONS U AND X. No portion of any Advance will be used for
the purpose of purchasing, carrying, or making loans to finance the purchase of,
any "margin security" or "margin stock" as such terms are used in Regulations U
or X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts
221 and 224.
8.18 INTELLECTUAL PROPERTY. Set forth on Exhibit 8.18 hereto is a
complete and accurate list of all patents, trademarks, trade names, service
marks and copyrights, and all applications for any of the foregoing that are
owned or licensed by Borrower (collectively, "INTELLECTUAL PROPERTY") and are
registered with any federal or state governmental authority and all licenses
thereof, showing as of the date hereof the jurisdiction in which registered, the
registration number, the date of registration and the expiration date or, if
registration is not yet complete, the date of the application therefor and the
application number and title, if any, and indicating whether Borrower owns or
licenses each such item of Intellectual Property. Borrower owns or licenses all
Intellectual Property that it utilizes in its business as presently being
conducted and as anticipated to be conducted, except where the failure to do so
could not reasonably be
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expected to result in a Material Adverse Effect on Borrower. The Intellectual
Property is in full force and effect, and Borrower has taken or caused to be
taken all action, necessary to maintain the Intellectual Property in full force
and effect and has not taken or failed to take or cause to be taken any action
which, with the giving of notice, or the expiration of time, or both, could
result in any such Intellectual Property being revoked, invalidated, modified,
or limited.
8.19 NO DEFAULT ON OUTSTANDING JUDGMENTS OR ORDERS. Borrower has
satisfied all judgments and Borrower is not in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any court, arbitrator
or federal, state, municipal or other Governmental Authority, commission, board,
bureau, agency or instrumentality, domestic or foreign, except to the extent
such failure to satisfy any or all such judgments or to be in such a default has
not resulted in, and could not reasonably be expected to result in, a Material
Adverse Effect.
8.20 NO DEFAULT IN OTHER AGREEMENTS. Borrower is not a party to any
indenture, loan or credit agreement or any lease or other agreement or
instrument or subject to any certificate of incorporation or corporate
restriction which has resulted in, or could reasonably be expected to result in,
a Material Adverse Effect. Borrower is not in default in any respect in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument where such failure to
perform, observe or fulfill has resulted in, or could reasonably be expected to
result in, a Material Adverse Effect.
8.21 LABOR DISPUTES AND ACTS OF GOD. Neither the business nor the
properties of Borrower are currently affected by any fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy or other casualty (whether or not
covered by insurance) which has resulted in, or could reasonably be expected to
result in, a Material Adverse Effect.
8.22 GOVERNMENTAL REGULATION. Borrower is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Investment Company Act
of 1940, the Interstate Commerce Act, the Federal Power Act or any statute or
regulation, in each case, limiting its ability to incur indebtedness for money
borrowed as contemplated hereby.
8.23 YEAR 2000 COMPLIANCE. Borrower has conducted an analysis of, and
developed and adopted a compliance program with respect to, all of its
Significant Systems, to ensure that it will be Year 2000 Compliant no later than
the Closing Date. To the best of Borrower's knowledge, after due inquiry, the
impact of year 2000 on Borrower and the key customers and suppliers of Borrower
will not be such as to materially adversely affect the business, condition
(financial or otherwise) or operation of the business of Borrower, taken as a
whole, or to prevent Borrower from performing its obligations hereunder.
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8.24 SOLVENCY. After giving effect to the consummation of each 364-Day
Loan to be made under this Credit Agreement as of the time this representation
is given, Borrower (a) will be able to pay its debts as they become due, (b)
will have funds and capital sufficient to carry on its business and all
businesses in which it is about to engage, and (c) will own property in the
aggregate having a value both at fair valuation and at fair saleable value in
the ordinary course of Borrower's business greater than the amount required to
pay its Indebtedness, including for this purpose unliquidated, contingent, and
disputed claims.
8.25 BUSINESS PLAN. The Business Plan will, when submitted to the
Administrative Agent, fairly present in all material respects the forecasted
operations and financial condition of Borrower for the dates covered thereby. At
the time of the submission of the Business Plan there will exist no undisclosed
facts known to Borrower which, if taken into account, would have resulted in any
material change in the Business Plan, and the Business Plan (a) will be, at the
time of submission (i) based upon reasonable estimates and assumptions, all of
which will be at the time of submission, fair in light of then current
conditions, and (ii) prepared on the basis of the assumptions stated therein,
and (b) will reflect, when submitted, the reasonable estimate of Borrower of the
results of operations and other information forecasted therein.
8.26 DISCLOSURE. The representations and warranties contained in this
Article 8 and in the other Loan Documents or in any financial statements
provided to the Administrative Agent do not contain any untrue statement of a
material fact or omit to state a material fact necessary to make such
representations or warranties not misleading; and all projections provided to
the Administrative Agent were prepared in good faith based on reasonable
assumptions.
ARTICLE 9. CONDITIONS TO ADVANCES
9.1 CONDITIONS TO CLOSING. The obligation of the Syndication Parties to
make any Advances hereunder is subject to satisfaction, in the sole discretion
of the Administrative Agent and the Syndication Parties, of each of the
following conditions precedent:
9.1.1 LOAN DOCUMENTS. The Administrative Agent shall have received
duly executed originals of the Loan Documents.
9.1.2 APPROVALS. The Administrative Agent shall have received
evidence satisfactory to it that all consents and approvals of governmental
authorities and third parties which are with respect to Borrower, necessary for,
or required as a condition of the validity and enforceability of the Loan
Documents to which it is a party.
9.1.3 GOOD STANDING; ORGANIZATIONAL DOCUMENTS. The Administrative
Agent shall have received: (a) good standing certificate (or equivalent), dated
no more than thirty (30) days prior to the Closing Date, for Borrower from the
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secretary of state (or equivalent) of its state of incorporation and each state
where its business activities require it to qualify to do business; and (b) a
copy of the Organization Documents of Borrower certified by the Secretary of
State of its state of incorporation.
9.1.4 LIEN SEARCHES; FINANCING STATEMENTS. The Administrative
Agent shall have received: searches of appropriate filing offices dated no more
than fourteen (14) days prior to the Closing Date showing that (a) no state or
federal tax liens have been filed which remain in effect against Borrower, and
(b) except with respect to Permitted Encumbrances no financing statements have
been filed by any Person which remain in effect against the Collateral or any
inventory the disposition (before or after processing) of which gives rise to
any Member Product Receivable).
9.1.5 EVIDENCE OF INSURANCE. Borrower shall have provided the
Administrative Agent with insurance certificates and such other evidence, in
form and substance satisfactory to the Administrative Agent, of all insurance
required to be maintained by it under the Loan Documents.
9.1.6 APPOINTMENT OF AGENT FOR SERVICE. The Administrative Agent
shall have received evidence satisfactory to the Administrative Agent that
Borrower has appointed The Corporation Company (or other Person reasonably
acceptable to the Administrative Agent) to serve as its agent for service of
process at such agent's Denver, Colorado office, and that The Corporation
Company (or other acceptable Person) has executed its written acceptance of such
appointment by Borrower.
9.1.7 NO MATERIAL CHANGE. No change shall have occurred in the
condition, financial or otherwise, or operations or prospects of Borrower since
September 30, 1999 which could reasonably be expected to result in a Material
Adverse Effect.
9.1.8 FEES AND EXPENSES. Borrower shall have paid the
Administrative Agent, by wire transfer of immediately available federal funds
all fees set forth in Section 4.5 hereof and any other fees owing to the
Administrative Agent which are due on the Closing Date (including fees provided
for in the Fee Letter dated September 30, 1999 by and between Borrower and the
Administrative Agent ("FEE LETTER"), and all expenses owing pursuant to Section
15.1 hereof.
9.1.9 BANK EQUITY INTEREST PURCHASE OBLIGATION. Borrower shall
have purchased such Bank Equity Interests as CoBank may require pursuant to
Article 6 hereof.
9.1.10 OPINION OF COUNSEL. Borrower shall have provided a
favorable opinion of its counsel addressed to the Administrative Agent and each
of the present and future Syndication Parties, covering such matters as the
Administrative Agent may reasonably require.
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9.1.11 EVIDENCE OF CORPORATE ACTION. The Administrative Agent
shall have received in form and substance satisfactory to the Administrative
Agent: (a) documents evidencing all corporate action taken by Borrower to
authorize (including the specific names and titles of the persons authorized to
so act (each an "AUTHORIZED OFFICER")) the execution, delivery and performance
of the Loan Documents to which it is a party, certified to be true and correct
by the corporate Secretary of Borrower; and (b) a certificate of the corporate
Secretary of Borrower, dated the Closing Date, certifying the names and true
signatures of the Authorized Officers.
9.1.12 LENDER CONSENT. The Administrative Agent shall have
received the consent of CoBank under its existing $57,005,386.07 term loans
under the agreement entitled "Loan Agreement" by and between The St. Paul Bank
for Cooperatives (subsequently merged into CoBank) and Borrower and dated
December 14, 1998, and amended as of August 27, 1999 ("COBANK TERM LOAN").
9.1.13 COMPLIANCE CERTIFICATE. Borrower shall have provided to the
Administrative Agent a Compliance Certificate effective as of November 30, 1999.
9.1.14 FURTHER ASSURANCES. Borrower shall have provided and/or
executed and delivered to the Administrative Agent such further assignments,
documents or financing statements, in form and substance satisfactory to the
Administrative Agent, that Borrower is to execute and/or deliver pursuant to the
terms of the Loan Documents or as the Administrative Agent may reasonably
request.
9.2 CONDITIONS TO ADVANCE. The Syndication Parties' obligation to fund
each Advance is subject to (a) receipt by the Administrative Agent of a properly
completed 364-Day Borrowing Notice, and (b) the satisfaction, in the sole
discretion of the Administrative Agent, of each of the following conditions
precedent, as well as those set forth in Section 9.1 hereof, and each request by
Borrower for an Advance shall constitute a representation by Borrower, upon
which the Administrative Agent and Syndication Parties may rely, that the
conditions set forth in this Section have been satisfied and that the amount of
the Advance does not exceed the limits set forth in Section 2 hereof:
9.2.1 PAYOFF AND CANCELLATION OF COBANK SEASONAL LOAN. Proof
satisfactory to the Administrative Agent of the payment in full of all amounts
owing under the CoBank Seasonal Loan and the release of all liens in connection
therewith.
9.2.2 DEFAULT. As of the Advance Date no Event of Default or
Potential Default shall have occurred and be continuing, and the disbursing of
the amount of the Advance requested shall not result in an Event of Default or
Potential Default.
9.2.3 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Borrower herein shall be true and correct in all material respects
on and as of the date on which the Advance is to be made as though made on such
date. Borrower
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shall have paid the Administrative Agent, by wire transfer of immediately
available U.S. funds all fees set forth in Section 4.5 hereof and the Fee Letter
which are then due and payable, including all expenses owing pursuant to Section
15.1 hereof.
ARTICLE 10. AFFIRMATIVE COVENANTS
From and after the date of this Credit Agreement and until the Bank
Debt is indefeasibly paid in full, all Letters of Credit have expired or been
fully drawn, the Letter of Credit Bank has no obligation to issue further
Letters of Credit, and the Syndication Parties have no obligation to make any
Advance, Borrower agrees that it will observe and comply with the following
covenants for the benefit of the Administrative Agent and the Syndication
Parties:
10.1 BOOKS AND RECORDS. Borrower shall at all times keep proper books
of record and account, in which correct and complete entries shall be made of
all its dealings, in accordance with GAAP.
10.2 REPORTS AND NOTICES. Borrower shall provide to the Administrative
Agent the following reports, information and notices:
10.2.1 ANNUAL FINANCIAL STATEMENTS. As soon as available, but in
no event later than ninety (90) days after the end of any Fiscal Year of
Borrower occurring during the term hereof, one copy of the audit report for such
year and the following accompanying financial statements prepared on a
consolidated and consolidating basis (including all footnotes thereto),
including a consolidated balance sheet, a consolidated statement of earnings, a
consolidated statement of capital, and a consolidated statement of cash flow for
Borrower and its Subsidiaries, showing in comparative form the figures for the
previous Fiscal Year, all in reasonable detail, prepared in conformance with
GAAP consistently applied and certified without qualification by
PricewaterhouseCoopers LLP, or other independent public accountants of
nationally recognized standing selected by Borrower and satisfactory to the
Administrative Agent, and to be accompanied by a copy of the management letter
of such accountants addressed to the board of directors of Borrower related to
such annual audit. Such annual financial statements required pursuant to this
Subsection shall be accompanied by a Compliance Certificate signed by Borrower's
Chief Financial Officer, corporate treasurer, or other officer of Borrower
acceptable to the Administrative Agent.
10.2.2 QUARTERLY FINANCIAL STATEMENTS. As soon as available but in
no event more than forty-five (45) days after the end of each Fiscal Quarter
(except the last Fiscal Quarter of Borrower's Fiscal Year) the following
financial statements prepared on a consolidated and consolidating basis or other
information concerning the operations of Borrower and its Subsidiaries for such
Fiscal Quarter, the Fiscal Year to date, and for the corresponding periods of
the preceding Fiscal Year, all prepared in accordance with GAAP consistently
applied: (a) a balance sheet, (b) a summary of earnings, (c) a statement of cash
flows, and (d) such other statements as the Administrative Agent may reasonably
request. Such quarterly financial statements
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required pursuant to this Subsection shall be accompanied by a Compliance
Certificate signed by Borrower's Chief Financial Officer, corporate treasurer,
or other officer of Borrower acceptable to the Administrative Agent (subject to
normal year end adjustments).
10.2.3 NOTICE OF DEFAULT. As soon as the existence of any Event of
Default or Potential Default becomes known to any officer of Borrower, prompt
written notice of such Event of Default or Potential Default, the nature and
status thereof, and the action being taken or proposed to be taken with respect
thereto.
10.2.4 ERISA REPORTS. As soon as possible and in any event within
twenty (20) days after Borrower or any Subsidiary knows or has reason to know
that any Reportable Event or Prohibited Transaction has occurred with respect to
any Plan or that the PBGC or Borrower or any Subsidiary has instituted or will
institute proceedings under Title IV of ERISA to terminate any Plan, or that
Borrower, any Subsidiary or any ERISA Affiliate has completely or partially
withdrawn from a Multiemployer Plan, or that a Plan which is a Multiemployer
Plan is in reorganization (within the meaning of Section 4241 of ERISA), is
insolvent (within the meaning of Section 4245 of ERISA) or is terminating, a
certificate of the Chief Financial Officer or corporate treasurer of Borrower or
such Subsidiary setting forth details as to such Reportable Event or Prohibited
Transaction or Plan termination or withdrawal or reorganization or insolvency
and the action Borrower or such Subsidiary proposes to take with respect
thereto, provided, however, that notwithstanding the foregoing, no reporting is
required under this subsection unless the matter(s), individually or in the
aggregate, result, or could be reasonably expected to result, in aggregate
obligations or liabilities of Borrower and/or the Subsidiaries in excess of five
million dollars ($5,000,000).
10.2.5 NOTICE OF LITIGATION. Promptly after the commencement
thereof, notice of all actions, suits, arbitration and any other proceedings
before any Governmental Authority, affecting Borrower which, if determined
adversely to Borrower, could reasonably be expected to require Borrower to have
to pay or deliver assets having a value of five million dollars ($5,000,000) or
more (whether or not the claim is covered by insurance) or could reasonably be
expected to result in a Material Adverse Effect.
10.2.6 NOTICE OF MATERIAL ADVERSE EFFECT. Promptly after Borrower
obtains knowledge thereof, notice of any matter which, alone or when considered
together with other matters, has resulted, or could reasonably be expected to
result, in a Material Adverse Effect.
10.2.7 NOTICE OF ENVIRONMENTAL PROCEEDINGS. Without limiting the
provisions of Subsection 10.2.5 hereof, promptly after Borrower's receipt
thereof, notice of the receipt of all pleadings, orders, complaints,
indictments, or other communication alleging a condition that may require
Borrower or any Subsidiary to undertake or to contribute to a cleanup or other
response under Environmental Regulations, or which seeks penalties, damages,
injunctive relief, or criminal sanctions related to alleged
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violations of such laws, or which claims personal injury or property damage to
any person as a result of environmental factors or conditions or which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect.
10.2.8 REGULATORY AND OTHER NOTICES. Promptly after Borrower's
receipt thereof, copies of any notices or other communications received from any
Governmental Authority with respect to any matter or proceeding the effect of
which could reasonably be expected to have a Material Adverse Effect.
10.2.9 ADVERSE ACTION REGARDING REQUIRED LICENSES AND INTELLECTUAL
PROPERTY. As soon as Borrower learns that any petition, action, investigation,
notice of violation or apparent liability, notice of forfeiture, order to show
cause, complaint or proceeding is pending, or, to the best of Borrower's
knowledge, threatened, to seek to revoke, cancel, suspend, modify, or limit any
of the Required Licenses or any of the Intellectual Property, prompt written
notice thereof. Borrower shall contest any such action in a Good Faith Contest.
10.2.10 ANNUAL BUSINESS PLAN. No later than September 15 of each
year, a copy of Borrower's annual business plan ("BUSINESS PLAN") showing
financial statement forecasts for the next Fiscal Year, and including a summary
of capital expenditures, details of costs, yields and expenses, and other
assumptions used in preparing the forecasts.
10.2.11 ADDITIONAL INFORMATION. With reasonable promptness, such
other information respecting the condition or operations, financial or
otherwise, of Borrower or any Subsidiary as any Syndication Party may from time
to time reasonably request.
10.3 ELIGIBILITY. Borrower shall preserve and maintain its status as an
entity eligible to borrow from CoBank.
10.4 MAINTENANCE OF EXISTENCE AND QUALIFICATION. Borrower shall
maintain its corporate existence in good standing under the laws of its state of
organization. Borrower will qualify and remain qualified as a foreign
corporation in each jurisdiction in which such qualification is necessary in
view of its business, operations and properties except where the failure to so
qualify has not and could not reasonably be expected to result in a Material
Adverse Effect.
10.5 COMPLIANCE WITH LEGAL REQUIREMENTS AND AGREEMENTS. Borrower shall:
(a) comply with all laws, rules, regulations and orders applicable to Borrower
or its business unless such failure to comply is the subject of a Good Faith
Contest; and (b) comply with all agreements, indentures, mortgages, and other
instruments to which it is a party or by which it or any of its property is
bound; provided, however, that the failure of Borrower to comply with this
sentence in any instance not directly involving the Administrative Agent or a
Syndication Party shall not constitute an Event of Default unless such failure
would have a Material Adverse Effect.
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10.6 COMPLIANCE WITH ENVIRONMENTAL LAWS. Without limiting the
provisions of Section 10.5 of this Credit Agreement, Borrower shall, and shall
cause each Subsidiary to, comply in all material respects with, and take all
reasonable steps necessary to cause all persons occupying or present on any
properties owned or leased by Borrower (or any Subsidiary, as applicable) to
comply with, all Environmental Regulations, the failure to comply with which
would have a Material Adverse Effect (with respect to Borrower or any such
Subsidiary) or unless such failure to comply is the subject of a Good Faith
Contest.
10.7 TAXES. Borrower shall cause to be paid when due all taxes,
assessments, and other governmental charges upon it, its income, its sales, its
properties, and federal and state taxes withheld from its employees' earnings,
unless (a) the failure to pay such taxes, assessments, or other governmental
charges could not reasonably be expected to result in a Material Adverse Effect,
or (b) such taxes, assessments, or other governmental charges are the subject of
a Good Faith Contest and Borrower has established adequate reserves therefor in
accordance with GAAP.
10.8 INSURANCE. Borrower shall keep all of its insurable property
insured at all times by an insurance carrier or carriers approved by the
Administrative Agent, against all risks covered by a special form policy as well
as liability, worker's compensation, business interruption, boiler and machinery
and such other insurance as the Administrative Agent may reasonably require, in
amounts and with deductibles or maximum payouts customarily carried by entities
in similar lines of business. Borrower shall also maintain fidelity coverage
(including employee dishonesty) on such officers and employees and in such
amounts as customarily carried by corporations engaged in comparable businesses
and comparably situated. The policy or policies evidencing all insurance
referred to in this Section and receipts for the payment of premiums thereon or
certificates of such insurance satisfactory to the Administrative Agent shall be
delivered to and held by the Administrative Agent. All such insurance policies
shall contain a provision requiring at least ten (10) days' notice to the
Administrative Agent prior to any cancellation for non-payment of premiums and
at least forty-five (45) days' notice to the Administrative Agent of
cancellation for any other reason or of modification or non-renewal. No later
than forty (40) days prior to expiration, Borrower shall give the Administrative
Agent (a) satisfactory written evidence of renewal of all such policies with
premiums paid, or (b) a written report as to the steps being taken by Borrower
to renew or replace all such policies, provided that notwithstanding the receipt
of such written report, the Administrative Agent may at any time thereafter give
Borrower written notice to provide the Administrative Agent with such evidence
as described in clause (a), in which case Borrower must do so within ten (10)
days of such notice. Borrower agrees to pay all premiums on such insurance as
they become due, and will not permit any condition to exist which would wholly
or partially invalidate any insurance thereon.
10.9 MAINTENANCE OF PROPERTIES. Borrower shall maintain, keep and
preserve all of its material properties (tangible and intangible) necessary or
used in the proper
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conduct of its business in good working order and condition, ordinary wear and
tear excepted, and shall cause to be made all repairs, renewals, replacements,
betterments and improvements thereof, all as in the sole judgment of Borrower
may be reasonably necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times.
10.10 PAYMENT OF LIABILITIES. Borrower shall pay all liabilities
(including, without limitation: (a) any indebtedness for borrowed money or for
the deferred purchase price of property or services; (b) any obligations under
leases which have or should have been characterized as Capital Leases; and (c)
any contingent liabilities, such as guaranties, for the obligations of others
relating to indebtedness for borrowed money or for the deferred purchase price
of property or services or relating to obligations under leases which have or
should have been characterized as Capital Leases) as they become due beyond any
period of grace under the instrument creating such liabilities, unless (with the
exception of the Bank Debt) (x) the failure to pay such liabilities within such
time period could not reasonably be expected to result in a Material Adverse
Effect, or (y) they are subject to a Good Faith Contest, and such contesting
will not result in a Material Adverse Effect.
10.11 INSPECTION. Borrower shall permit the Administrative Agent or any
Syndication Party or their agents, during normal business hours or at such other
times as the parties may agree, to examine, and make copies of or abstracts
from, Borrower's properties, books, and records, and to discuss Borrower's
affairs, finances, operations, and accounts with its respective officers,
directors, employees, and independent certified public accountants; provided,
that, in the case of each meeting with the independent accountants Borrower is
given an opportunity to have a representative present at such meeting.
10.12 REQUIRED LICENSES; INTELLECTUAL PROPERTY. Borrower shall duly and
lawfully obtain and maintain in full force and effect all Required Licenses and
Intellectual Property as appropriate for the business being conducted and
properties owned by Borrower at any given time.
10.13 ERISA. Borrower shall make or cause to be made, and cause each
Subsidiary to make or cause to be made, all payments or contributions to all
Plans covered by Title IV of ERISA, which are necessary to enable those Plans to
continuously meet all minimum funding standards or requirements.
10.14 FURTHER ASSURANCES. Borrower shall, as may be required from time
to time by the Administrative Agent in accordance with the provisions and
limitations of Section 7.1 hereof, provide such documents as may be necessary or
desirable in the judgment of the Administrative Agent to verify the existence
and perfection of the security interest in the Collateral granted to the
Administrative Agent for the benefit of the Syndication Parties.
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10.15 MAINTENANCE OF COMMODITY POSITION. Borrower shall observe risk
management policies, including protection of its commodity inventory holdings or
commitments to buy or sell commodities against adverse price movements through
hedge agreements or otherwise, to minimize losses and protect margins in
commodity production, storage, processing and marketing, which policies shall be
consistent with its existing risk management policies, shall be policies as are
recognized as financially sound and reputable by prudent business persons in the
commodity business, and shall be consistent with risk management policies
observed in the petroleum refining and distribution industry in general.
10.16 FINANCIAL COVENANTS. Borrower shall maintain the following
financial covenants, measured as an aggregation of the results of Borrower
(including Borrower's earnings on account of its minority interest in Osage Pipe
Line Company and in Kaw Pipe Line Company) and Cooperative (but no other
Subsidiaries):
10.16.1 DEBT TO EBITDA. At all times a ratio of Debt divided by
EBITDA of not greater than 3.00 to 1.00, as measured on the basis of the
previous consecutive four Fiscal Quarters.
10.16.2 MINIMUM NET WORTH. At the end of each Fiscal Quarter the
sum of (a) Borrower's Net Worth plus (b) fifty percent (50.0%) of the net income
of Borrower and Cooperative for such Fiscal Quarter and for each other previous
Fiscal Quarter since the Closing Date, shall be not less than $215,000,000.00.
10.16.3 INTEREST COVERAGE RATIO. At the end of each Fiscal Quarter
Borrower shall have a ratio of (a) EBIT over the immediately preceding four (4)
Fiscal Quarters, (b) divided by Interest Expense over the immediately preceding
four (4) Fiscal Quarters, of not less than 2.25 to 1.00.
10.16.4 MINIMUM WORKING CAPITAL. At all times Working Capital of
not less than $60,000,000.00.
10.17 YEAR 2000 COMPLIANCE AND REPORTS. Borrower agrees: (a) to, on or
before the Closing Date, cause all of the Significant Systems of Borrower to be
Year 2000 Compliant; (b) on or before the Closing Date, require all Third Party
Providers of Significant Systems to provide to Borrower proof that such
Significant Systems are Year 2000 Compliant; (c) to, on or before the Closing
Date, require all third party suppliers and customers of Borrower which are, to
Borrower's knowledge, dependent upon software in the conduct of their business
such that the failure of such software to be Year 2000 Compliant could
reasonably be expected to have a material adverse effect on the business
condition (financial or otherwise) of Borrower or the operation of the business
of Borrower, or Borrower's ability to perform its obligations under this Credit
Agreement, to provide to Borrower proof that such software is Year 2000
Compliant; (d) to respond to Lender's reasonable inquiries related to Year 2000
Compliance issues; and (e) to, on the Closing Date, provide to Lender the
written certification of Borrower's
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chief financial officer, or other corporate officer satisfactory to Lender, that
all of Borrower's Significant Systems are Year 2000 Compliant.
10.18 MAINTENANCE OF COOPERATIVE OWNERSHIP POSITION. Borrower shall, at
all times: (a) own at least fifty-one percent (51%) of the total voting power
generally entitled to vote in the election of directors or managers of
Cooperative and (b) own at least fifty-one percent (51%) of each member class of
Cooperative.
ARTICLE 11. NEGATIVE COVENANTS
From and after the date of this Credit Agreement until the Bank Debt is
indefeasibly paid in full, all Letters of Credit have expired or been fully
drawn, the Letter of Credit Bank has no obligation to issue further Letters of
Credit, and the Syndication Parties have no obligation to make any Advance,
Borrower agrees that it will observe and comply with the following covenants:
11.1 BORROWING. Borrower shall not create, incur, assume or permit to
exist, directly or indirectly, any Indebtedness, except for: (a) Indebtedness of
Borrower arising under this Credit Agreement and the other Loan Documents; (b)
trade payables arising in the ordinary course of business; (c) current operating
liabilities (other than for borrowed money) incurred in the ordinary course of
business; (d) Indebtedness on the date hereof as set forth in Exhibit 11.1
attached hereto; (e) Indebtedness arising out of Subordinated Member Loans; and
(f) other Indebtedness, including, without limitation, Indebtedness arising
under guarantees permitted under Section 11.5 hereof and Indebtedness arising
under Capital Leases, in a maximum amount of principal outstanding at any one
time of $40,000,000.00.
11.2 NO OTHER BUSINESSES. Borrower shall not engage in any material
respects in any business activity or operations other than operations or
activities (a) in the petroleum refining and distribution industry, or (b) which
are not substantially different from or are related to its present business
activities or operations.
11.3 LIENS. Borrower shall not create, incur, assume, or suffer to
exist any mortgage, pledge, lien, charge or other encumbrance on, or any
security interest in, any of its real or personal properties (including, without
limitation, leasehold interests, leasehold improvements and any other interest
in real property or fixtures, now owned or hereafter acquired, except:
(a) Liens for taxes or assessments or other charges or levies of any
Governmental Authority, that are not delinquent or if delinquent (i) are the
subject of a Good Faith Contest but in no event past the time when a penalty
would be incurred, and (ii) the aggregate amount of liabilities so secured
(including interest and penalties) does not exceed $10,000,000 at any one time
outstanding;
(b) Liens imposed by Law, such as mechanic's, worker's, repairman's,
miner's, agister's, attorney's, materialmen's, landlord's, warehousemen's and
carrier's
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Liens and other similar Liens which are securing obligations incurred in the
ordinary course of business for sums not yet due and payable or if due and
payable which are the subject of a Good Faith Contest;
(c) Liens under workers' compensation, unemployment insurance, social
security or similar legislation (other than ERISA), or to secure payments of
premiums for insurance purchased in the ordinary course of business, or to
secure the performance of tenders, statutory obligations, surety and appearance
bonds and bids, bonds for release of an attachment, stay of execution or
injunction, leases, government contracts, performance and return-of-money bonds
and other similar obligations, all of which are incurred in the ordinary course
of business and not in connection with the borrowing of money;
(d) Any attachment or judgment Lien, the time for appeal or petition
for rehearing of which shall not have expired or in respect of which Borrower is
protected in all material respects by insurance or for the payment of which
adequate reserves have been provided, provided that the execution or other
enforcement of such Liens is effectively stayed and the claims secured thereby
are the subject of a Good Faith Contest, and provided further that the aggregate
amount of liabilities of Borrower so secured (including interest and penalties)
shall not be in excess of $1,000,000 at any one time outstanding;
(e) Easements, rights-of-way, restrictions, encroachments, covenants,
servitudes, zoning and other similar encumbrances which, in the aggregate, do
not materially interfere with the occupation, use and enjoyment by Borrower of
the property or assets encumbered thereby in the normal course of its business
or materially impair the value of the property subject thereto;
(f) Liens on land, buildings and equipment existing at the time of
their acquisition or Liens to secure the payment of all or any part of the
purchase price of such land, buildings or equipment or to secure Funded Debt
incurred prior to, at the time of, or within one-hundred eighty (180) days after
the acquisition of such property for the purpose of financing all or any part of
the purchase price thereof, provided that any such Liens shall not encumber any
other property of Borrower;
(g) Liens assumed in connection with permitted mergers and
acquisitions, but only to the extent that such Liens shall not encumber any
other property of Borrower;
(h) Liens on financed property created or incurred in connection with
leases, mortgages, conditional sales contracts, security interests or
arrangements for the retention of title entered into by Borrower to secure
"industrial revenue bonds" as defined in Section 103(b)(2) of the Code and
treated as obligations described in legislation similar to the provisions of
said Sections of the Code enacted in any State of the United States or Puerto
Rico, which are issued to finance property useful and intended to be used in
carrying on the business of Borrower, provided that upon creation
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of any such Lien Borrower shall incur Indebtedness secured thereby only in
conformity with the provisions of Section 11.1 hereof;
(i) Liens of CoBank, and other cooperatives, respectively, on
Investments by Borrower in the stock, participation certificates, or allocated
reserves of CoBank or other cooperatives, respectively, owned by Borrower;
(j) All precautionary filings of financing statements under the Uniform
Commercial Code which cover property that is made available to or used by
Borrower pursuant to the terms of an Operating Lease or Capital Lease;
(k) Liens securing its reimbursement obligations under any letter of
credit issued in connection with the acquisition of an asset; provided that (i)
the lien attaches only to such asset, and (ii) the lien is released upon
satisfaction of such reimbursement obligation; and
(l) Liens in existence on the date hereof as set forth in Exhibit 11.3
attached hereto.
11.4 SALE OF ASSETS. Borrower shall not sell, convey, assign, lease or
otherwise transfer or dispose of, voluntarily, by operation of law or otherwise,
any material part of its now owned or hereafter acquired assets during any
twelve (12) month period commencing as of the Closing Date and each anniversary
of the Closing Date thereafter, except: (a) the sale of inventory, equipment and
fixtures disposed of in the ordinary course of business, (b) the sale or other
disposition of assets no longer necessary or useful for the conduct of its
business, and (c) sales of assets in an amount not to exceed $12,000,000.00
(valued at the greater of the book value or the market value) in the aggregate
during any such twelve (12) month period.
11.5 LIABILITIES OF OTHERS. Borrower shall not assume, guarantee,
become liable as a surety, endorse, contingently agree to purchase, or otherwise
be or become liable, directly or indirectly (including, but not limited to, by
means of a maintenance agreement, an asset or stock purchase agreement, or any
other agreement designed to ensure any creditor against loss), for or on account
of the obligation of any Person, except (a) by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of the Borrower's business, and (b) subject to the limitations contained
in Section 11.1(f) hereof, guarantees made from time to time by Borrower in the
ordinary course of its business.
11.6 LOANS. Borrower shall not lend or advance money, credit, or
property to any Person, except for trade credit extended in the ordinary course
of business.
11.7 MERGER; ACQUISITIONS; BUSINESS FORM; ETC. Borrower shall not merge
or consolidate with any entity, or acquire all or substantially all of the
assets of any Person, or form or create any new subsidiary or Affiliate, change
its business form from a cooperative corporation, or commence operations under
any other name, organization,
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or entity, including any joint venture; provided that Borrower may, so long as
there is no Potential Default or Event of Default which has occurred and is
continuing, acquire all or substantially all of the assets of any Person so long
as (a) the aggregate consideration for all such acquisitions since the Closing
Date does not exceed $5,000,000.00 in any 12 month period, and (b) Borrower has
provided the Administrative Agent with pro-forma financial statements and
calculations demonstrating to the Administrative Agent's satisfaction that
Borrower will be in compliance with all financial related covenants contained in
this Agreement after giving effect to such acquisition.
11.8 INVESTMENTS. Except for the purchase of Bank Equity Interests,
Borrower shall not own, purchase or acquire any stock, obligations or securities
of, or any other interest in, or make any capital contribution to, any Person,
except that Borrower may own, purchase or acquire:
(a) commercial paper maturing not in excess of one year from the date
of acquisition and rated P1 by Moody's Investors Service, Inc. or A1 by Standard
& Poor's Corporation on the date of acquisition;
(b) certificates of deposit in North American commercial banks rated C
or better by Keefe, Bruyette & Woods, Inc. or 3 or better by Cates Consulting
Analysts, maturing not in excess of one year from the date of acquisition;
(c) obligations of the United States government or any agency thereof,
the obligations of which are guaranteed by the United States government,
maturing, in each case, not in excess of one year from the date of acquisition;
(d) repurchase agreements of any bank or trust company incorporated
under the laws of the United States of America or any state thereof and fully
secured by a pledge of obligations issued or fully and unconditionally
guaranteed by the United States government;
(e) registered investment funds which invest solely in one or more of
the Investments described in subparts (a) through (d) of this Section 11.8;
(f) Investments made prior to the Closing Date in Persons identified on
Exhibit 11.8 hereto;
(g) Investments in the form of non-cash patronage dividends in any
Person; and
(h) Investments, in addition to those permitted by clauses (a) through
(g) above, in an aggregate amount not exceeding $15,000,000.00.
11.9 TRANSACTIONS WITH RELATED PARTIES. Borrower shall not purchase,
acquire, provide, or sell any equipment, other personal property, real property
or
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services from or to any Affiliate or Subsidiary of Borrower, except in the
ordinary course and pursuant to the reasonable requirements of Borrower's
business and upon fair and reasonable terms no less favorable than would be
obtained by Borrower in a comparable arm's-length transaction with an unrelated
Person.
11.10 RESTRICTED PAYMENTS. Borrower shall not, in any Fiscal Year (a)
make any Restricted Payment (other than revolvements and retirements of equity)
(i) in an aggregate amount that would exceed Borrower's net taxable income from
the current Fiscal Year, or (ii) if a Potential Default or an Event of Default
has occurred and is continuing at the time of such Restricted Payment or would
result therefrom; or (b) make any revolvement or retirements of equity if a
Potential Default or an Event of Default has occurred and is continuing at the
time of such Restricted Payment or would result therefrom; provided that
regardless of whether a Potential Default or an Event of Default has occurred
and is continuing at the time of such Restricted Payment or would result
therefrom, Borrower may (x) make cash payments to its patrons or members in an
aggregate amount in any Fiscal Year that does not exceed twenty-one percent
(21%) of Borrower's net taxable income for the current Fiscal Year and (y) make
age retirement, estate or similar payments.
11.11 CHANGE IN FISCAL YEAR. Borrower shall not change its Fiscal Year
from a year ending on August 31 unless required to do so by the Internal Revenue
Service, in which case Borrower agrees to such amendment of the terms Fiscal
Quarter and Fiscal Year, as used herein, as the Administrative Agent reasonably
deems necessary.
11.12 ERISA. Borrower shall not: (a) engage in or permit any
transaction which could result in a "prohibited transaction" (as such term is
defined in Section 406 of ERISA) or in the imposition of an excise tax pursuant
to Section 4975 of the Code; (b) engage in or permit any transaction or other
event which could result in a "reportable event" as such term is defined in
Section 4043 of ERISA for any Borrower Pension Plan; (c) fail to make full
payment when due of all amounts which, under the provisions of any Borrower
Benefit Plan, Borrower is required to pay as contributions thereto; (d) permit
to exist any "accumulated funding deficiency" (as such term is defined in
Section 302 of ERISA) in excess of $25,000.00, whether or not waived, with
respect to any Borrower Pension Plan; (e) fail to make any payments to any
"multiemployer plan" that Borrower may be required to make under any agreement
relating to such "multiemployer plan" or any law pertaining thereto; or (f)
terminate any Borrower Pension Plan in a manner which could result in the
imposition of a lien on any property of Borrower pursuant to Section 4068 of
ERISA. Borrower shall not terminate any Borrower Pension Plan so as to result in
any liability to the PBGC. As used in this Section, all terms enclosed in
quotation marks shall have the meanings set forth in ERISA. Borrower's failure
to comply with any of the foregoing provisions of this Section shall not
constitute a breach of this Agreement or an Event of Default unless such failure
has a Material Adverse Effect.
11.13 PRINCIPAL AGREEMENTS. Borrower shall not materially amend or
modify, nor grant a waiver of any material performance under, or terminate or
allow the counter
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party to terminate, or allow to expire, any of the Principal Agreements without
the consent of the Required Lenders.
ARTICLE 12. INDEMNIFICATION
12.1 GENERAL; STAMP TAXES; INTANGIBLES TAX. Borrower agrees to
indemnify and hold the Administrative Agent and each Syndication Party and their
directors, officers, employees, agents, professional advisers and
representatives ("INDEMNIFIED PARTIES") harmless from and against any and all
claims, damages, losses, liabilities, costs or expenses whatsoever which the
Administrative Agent or any other Indemnified Party may incur (or which may be
claimed against any such Indemnified Party by any Person), including attorneys'
fees incurred by any Indemnified Party, arising out of or resulting from: (a)
the material inaccuracy of any representation or warranty of or with respect to
Borrower in this Credit Agreement or the other Loan Documents; (b) the material
failure of Borrower to perform or comply with any covenant or obligation of
Borrower under this Credit Agreement or the other Loan Documents; (c) the
exercise by the Administrative Agent of any right or remedy set forth in this
Credit Agreement or the other Loan Documents; or (d) all acts or omissions of
the beneficiary of any Letter of Credit, and for such purposes, such beneficiary
shall be deemed Borrower's agent; provided that Borrower shall have no
obligation to indemnify any Indemnified Party against claims, damages, losses,
liabilities, costs or expenses to the extent that a court of competent
jurisdiction renders a final non-appealable determination that the foregoing are
solely the result of the willful misconduct or gross negligence of such
Indemnified Party. In addition, Borrower agrees to indemnify and hold the
Indemnified Parties harmless from and against any and all claims, damages,
losses, liabilities, costs or expenses whatsoever which the Administrative Agent
or any other Indemnified Party may incur (or which may be claimed against any
such Indemnified Party by any Person), including attorneys' fees incurred by any
Indemnified Party, arising out of or resulting from the imposition or nonpayment
by Borrower of any stamp tax, intangibles tax, or similar tax imposed by any
state, including any amounts owing by virtue of the assertion that the property
valuation used to calculate any such tax was understated. Borrower shall have
the right to assume the defense of any claim as would give rise to Borrower's
indemnification obligation under this Section with counsel of Borrower's
choosing so long as such defense is being diligently and properly conducted and
Borrower shall establish to the Indemnified Party's satisfaction that the amount
of such claims are not, and will not be, material in comparison to the liquid
and unrestricted assets of Borrower available to respond to any award which may
be granted on account of such claim. So long as the conditions of the preceding
sentence are met, Indemnified Party shall have no further right to reimbursement
of attorneys' fees incurred thereafter. The obligation to indemnify set forth in
this Section shall survive the termination of this Credit Agreement and other
covenants.
12.2 INDEMNIFICATION RELATING TO HAZARDOUS SUBSTANCES. Borrower shall
not locate, produce, treat, transport, incorporate, discharge, emit, release,
deposit or dispose of any Hazardous Substance in, upon, under, over or from any
property owned or held
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by Borrower, except in accordance with all Environmental Regulations; Borrower
shall not permit any Hazardous Substance to be located, produced, treated,
transported, incorporated, discharged, emitted, released, deposited, disposed of
or to escape in, upon, under, over or from any property owned or held by
Borrower, except in accordance with Environmental Regulations; and Borrower
shall comply with all Environmental Regulations which are applicable to such
property. Borrower shall indemnify the Indemnified Parties against, and shall
reimburse the Indemnified Parties for, any and all claims, demands, judgments,
penalties, liabilities, costs, damages and expenses, including court costs and
attorneys' fees incurred by the Indemnified Parties (prior to trial, at trial
and on appeal) in any action against or involving the Indemnified Parties,
resulting from any breach of the foregoing covenants in this Section or the
covenants in Section 10.6 hereof, or from the discovery of any Hazardous
Substance in, upon, under or over, or emanating from, such property, it being
the intent of Borrower and the Indemnified Parties that the Indemnified Parties
shall have no liability or responsibility for damage or injury to human health,
the environmental or natural resources caused by, for abatement and/or clean-up
of, or otherwise with respect to, Hazardous Substances as the result of the
Administrative Agent or any Syndication Party exercising any of its rights or
remedies with respect thereto, including but not limited to becoming the owner
thereof by foreclosure or conveyance in lieu of foreclosure of a judgment lien;
provided that such indemnification as it applies to the exercise by the
Administrative Agent or any Syndication Party of its rights or remedies with
respect to the Loan Documents shall not apply to claims arising solely with
respect to Hazardous Substances brought onto such property by the Administrative
Agent or such Syndication Party while engaged in activities other than
operations substantially the same as the operations previously conducted on such
property by Borrower. The foregoing covenants of this Section shall be deemed
continuing covenants for the benefit of the Indemnified Parties, and any
successors and assigns of the Indemnified Parties, including but not limited to
any transferee of the title of the Administrative Agent or any Syndication Party
or any subsequent owner of the property, and shall survive the satisfaction or
release of any lien, any foreclosure of any lien and/or any acquisition of title
to the property or any part thereof by the Administrative Agent or any
Syndication Party, or anyone claiming by, through or under the Administrative
Agent or any Syndication Party or Borrower by deed in lieu of foreclosure or
otherwise. Any amounts covered by the foregoing indemnification shall bear
interest from the date incurred at the Default Interest Rate, shall be payable
on demand, and shall be secured by the Security Documents. The indemnification
and covenants of this Section shall survive the termination of this Credit
Agreement and other covenants.
ARTICLE 13. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
13.1 EVENTS OF DEFAULT. The occurrence of any of the following events
(each an "EVENT OF DEFAULT") shall, at the option of the Administrative Agent,
make the entire Bank Debt immediately due and payable (provided, that in the
case of an Event of Default under Subsection 13.1(f) all amounts owing under the
364-Day Notes and the other Loan Documents shall automatically and immediately
become due and payable
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without any action by or on behalf of the Administrative Agent), and the
Administrative Agent may exercise all rights and remedies for the collection of
any amounts outstanding hereunder and take whatever action it deems necessary to
secure itself, all without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor, or other notices or demands of any
kind or character:
(a) Failure of Borrower to pay within five (5) days of the date when
due, whether by acceleration or otherwise, any of the Bank Debt in accordance
with this Credit Agreement or the other Loan Documents.
(b) Any representation or warranty set forth in any Loan Document, any
Borrowing Notice, any financial statements or reports or projections or
forecasts, or in connection with any transaction contemplated by any such
document, shall prove in any material respect to have been false or misleading
when made or furnished by Borrower.
(c) Any default by Borrower in the performance or compliance with the
covenants, promises, conditions or provisions of Sections 10.3, 10.8, 10.11,
10.15, 10.18, 11.1, 11.3, 11.4, 11.5, 11.7, 11.10, or 11.12 of this Credit
Agreement.
(d) Any default by Borrower in the performance or compliance with the
covenants, promises, representations, conditions or provisions of Sections 8.2,
8.5, 8.6, 8.7, 8.9, 8.10, 10.12, 10.13, 10.16, 11.6, 11.8, 11.9, or 11.11 of
this Credit Agreement, and such failure continues for fifteen (15) days after
Borrower learns of such failure to comply, whether by Borrower's own discovery
or through notice from the Administrative Agent.
(e) The failure of Borrower to pay when due, or failure to perform or
observe any other obligation or condition with respect to any of the following
obligations to any Person, beyond any period of grace under the instrument
creating such obligation: (i) any indebtedness for borrowed money or for the
deferred purchase price of property or services, (ii) any obligations under
leases which have or should have been characterized as Capital Leases, or (iii)
any contingent liabilities, such as guaranties and letters of credit, for the
obligations of others relating to indebtedness for borrowed money or for the
deferred purchase price of property or services or relating to obligations under
leases which have or should have been characterized as Capital Leases; provided
that no such failure will be deemed to be an Event of Default hereunder unless
and until the aggregate amount owing under obligations with respect to which
such failures have occurred and are continuing is at least $1,000,000.00.
(f) Borrower applies for or consents to the appointment of a trustee or
receiver for any part of its properties; any bankruptcy, reorganization, debt
arrangement, dissolution or liquidation proceeding is commenced or consented to
by Borrower; or any application for appointment of a receiver or a trustee, or
any proceeding for bankruptcy, reorganization, debt management or liquidation is
filed for or commenced against Borrower, and is not withdrawn or dismissed
within sixty (60) days thereafter.
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(g) Failure of Borrower to comply with any other provision of this
Credit Agreement or the other Loan Documents not constituting an Event of
Default under any of the preceding subparagraphs of this Section 13.1, and such
failure continues for thirty (30) days after Borrower learns of such failure to
comply, whether by Borrower's own discovery or through notice from the
Administrative Agent.
(h) The occurrence of a default under the CoBank Term Loan.
(i) The entry of one or more judgments in an aggregate amount in excess
of $1,000,000.00 against Borrower not subject to a Good Faith Contest, or
discharged or paid, in each case, within thirty (30) days after entry.
(j) In the event (i) Cenex Harvest States Cooperatives (or, in the
event Cenex Harvest States Cooperatives shall merge with or into Farmland
Industries, Inc., then the survivor of such merger) shall (A) cease to own more
than sixty-seven percent (67%) of the total voting power generally entitled to
vote in the election of directors, managers or trustees of Borrower or (B) cease
to own more than sixty-seven percent (67%) of all non-voting classes of capital
stock of Borrower, or (ii) the members or stockholders, as applicable, of
Borrower shall approve any plan for the liquidation or dissolution of Borrower.
13.2 NO ADVANCE. Upon the occurrence and during the continuance of a
Potential Default or an Event of Default, (a) the Syndication Parties shall have
no obligation to make any Advance, and (b) neither the Letter of Credit Bank nor
the Syndication Parties shall have any obligation to issue, reissue, or extend
any Letters of Credit.
13.3 RIGHTS AND REMEDIES. In addition to the remedies set forth in
Section 13.1 and 13.2 hereof, upon the occurrence of an Event of Default, the
Administrative Agent shall be entitled to exercise, subject to the provisions of
Subsection 14.6.4 hereof, all the rights and remedies provided in the Loan
Documents and by any applicable law. Each and every right or remedy granted to
the Administrative Agent pursuant to this Credit Agreement and the other Loan
Documents, or allowed the Administrative Agent by law or equity, shall be
cumulative. Failure or delay on the part of the Administrative Agent to exercise
any such right or remedy shall not operate as a waiver thereof. Any single or
partial exercise by the Administrative Agent of any such right or remedy shall
not preclude any future exercise thereof or the exercise of any other right or
remedy.
ARTICLE 14. AGENCY AGREEMENT
14.1 FUNDING OF SYNDICATION INTEREST. Each Syndication Party, severally
but not jointly, hereby irrevocably agrees to fund its Funding Share of the
Advances ("ADVANCE PAYMENT") as determined pursuant to the terms and conditions
contained herein and in particular, Article 2 hereof. Each Syndication Party's
interest ("SYNDICATION INTEREST") in each Advance hereunder shall be without
recourse to the
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Administrative Agent or any other Syndication Party and shall not be construed
as a loan from any Syndication Party to the Administrative Agent or any other
Syndication Party.
14.2 SYNDICATION PARTIES' OBLIGATIONS TO REMIT FUNDS. Each Syndication
Party agrees to remit its Funding Share to the Administrative Agent as, and
within the time deadlines ("SYNDICATION PARTY ADVANCE DATE"), required in this
Credit Agreement. Unless the Administrative Agent shall have received notice
from a Syndication Party prior to the date on which such Syndication Party is to
provide funds to the Administrative Agent for an Advance to be made by such
Syndication Party that such Syndication Party will not make available to the
Administrative Agent such funds, the Administrative Agent may assume that such
Syndication Party has made such funds available to the Administrative Agent on
the date of such Advance in accordance with the terms of this Credit Agreement
and the Administrative Agent in its sole discretion may, but shall not be
obligated to, in reliance upon such assumption, make available to Borrower on
such date a corresponding amount. If and to the extent such Syndication Party
shall not have made such funds available to the Administrative Agent by 2:00
P.M. (Eastern Time) on the Banking Day due, such Syndication Party agrees to
repay the Administrative Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to Borrower until the Banking Day such amount is repaid to the
Administrative Agent (assuming payment is received by the Administrative Agent
at or prior to 2:00 P.M. (Eastern Time), and until the next Banking Day if
payment is not received until after 2:00 P.M.), at the customary rate set by the
Administrative Agent for the correction of errors among banks for three (3)
Banking Days and thereafter at the Base Rate. If such Syndication Party shall
repay to the Administrative Agent such corresponding amount, such amount so
repaid shall constitute such Syndication Party's Advance for purposes of this
Credit Agreement. If such Syndication Party does not pay such corresponding
amount forthwith upon the Administrative Agent's demand therefor, the
Administrative Agent shall promptly notify Borrower, and Borrower shall
immediately pay such corresponding amount to the Administrative Agent with the
interest thereon, for each day from the date such amount is made available to
Borrower until the date such amount is repaid to the Administrative Agent, at
the rate of interest applicable at the time to such Advance.
14.3 SYNDICATION PARTY'S FAILURE TO REMIT FUNDS. If a Syndication Party
("DELINQUENT SYNDICATION PARTY") fails to remit its Funding Share in full by the
date and time required (the unpaid amount of any such payment being hereinafter
referred to as the "DELINQUENT AMOUNT"), in addition to any other remedies
available hereunder, any other Syndication Party or Syndication Parties may, but
shall not be obligated to, advance the Delinquent Amount (the Syndication Party
or Syndication Parties which advance such Delinquent Amount are referred to as
the "CONTRIBUTING SYNDICATION PARTIES"), in which case (a) the Delinquent Amount
which any Contributing Syndication Party advances shall be treated as a loan to
the Delinquent Syndication Party and shall not be counted in determining the
Individual Outstanding Obligations, as applicable, of
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any Contributing Syndication Party, and (b) the Delinquent Syndication Party
shall be obligated to pay to the Administrative Agent, for the account of the
Contributing Syndication Parties, interest on the Delinquent Amount at a rate of
interest equal to the rate of interest which Borrower is obligated to pay on the
Delinquent Amount plus 200 basis points ("DELINQUENCY INTEREST") until the
Delinquent Syndication Party remits the full Delinquent Amount and remits all
Delinquency Interest to the Administrative Agent, which will distribute such
payments to the Contributing Syndication Parties (pro rata based on the amount
of the Delinquent Amount which each of them (if more than one) advanced) on the
same Banking Day as such payments are received by the Administrative Agent if
received no later than 11:00 A.M. (Eastern Time) or the next Banking Day if
received by the Administrative Agent thereafter. In addition, the Contributing
Syndication Parties shall be entitled to share, on the same pro rata basis, and
the Administrative Agent shall pay over to them, for application against
Delinquency Interest and the Delinquent Amount, the Delinquent Syndication
Party's Payment Distribution and any fee distributions or distributions made
under Section 14.10 hereof until the Delinquent Amount and all Delinquency
Interest have been paid in full. For voting purposes the Administrative Agent
shall readjust the Individual 364-Day Commitments of such Delinquent Syndication
Party and the Contributing Syndication Parties from time to time first to
reflect the advance of the Delinquent Amount by the Contributing Syndication
Parties, and then to reflect the full or partial reimbursement to the
Contributing Syndication Parties of such Delinquent Amount. As between the
Delinquent Syndication Party and the Contributing Syndication Parties, the
Delinquent Syndication Party's interest in its 364-Day Note shall be deemed to
have been partially assigned to the Contributing Syndication Parties in the
amount of the Delinquent Amount and Delinquency Interest owing to the
Contributing Syndication Parties from time to time. For the purposes of
calculating interest owed by a Delinquent Syndication Party, payments received
on other than a Banking Day shall be deemed to have been received on the next
Banking Day, and payments received after 2:00 P.M. (Eastern Time) shall be
deemed to have been received on the next Banking Day.
14.4 AGENCY APPOINTMENT. Each of the Syndication Parties hereby
designates and appoints the Administrative Agent to act as agent to service and
collect the 364-Day Loans and its respective 364-Day Notes and to take such
action on behalf of such Syndication Party with respect to the 364-Day Loans and
such 364-Day Notes, and to execute such powers and to perform such duties, as
specifically delegated or required herein, as well as to exercise such powers
and to perform such duties as are reasonably incident thereto, and to receive
and benefit from such fees and indemnifications as are provided for or set forth
herein, until such time as a successor is appointed and qualified to act as the
Administrative Agent.
14.5 POWER AND AUTHORITY OF THE ADMINISTRATIVE AGENT. Without limiting
the generality of the power and authority vested in the Administrative Agent
pursuant to Section 14.4 hereof, the power and authority vested in the
Administrative Agent includes, but is not limited to, the following:
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14.5.1 ADVICE. To solicit the advice and assistance of each of the
Syndication Parties and Voting Participants concerning the administration of the
364-Day Facility and the exercise by the Administrative Agent of its various
rights, remedies, powers, and discretions with respect thereto. As to any
matters not expressly provided for by this Credit Agreement or any other Loan
Document, the Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder in accordance with instructions
signed by all of the Syndication Parties or the Required Lenders, as the case
may be (and including in each such case, Voting Participants), and any action
taken or failure to act pursuant thereto shall be binding on all of the
Syndication Parties, Voting Participants, and the Administrative Agent.
14.5.2 DOCUMENTS. To execute, seal, acknowledge, and deliver as
the Administrative Agent, all such instruments as may be appropriate in
connection with the administration of the 364-Day Loans and the exercise by the
Administrative Agent of its various rights with respect thereto.
14.5.3 PROCEEDINGS. To initiate, prosecute, defend, and to
participate in, actions and proceedings in its name as the Administrative Agent
for the ratable benefit of the Syndication Parties.
14.5.4 RETAIN PROFESSIONALS. To retain attorneys, accountants, and
other professionals to provide advice and professional services to the
Administrative Agent, with their fees and expenses reimbursable to the
Administrative Agent by Syndication Parties pursuant to Section 14.17 hereof.
14.5.5 INCIDENTAL POWERS. To exercise powers reasonably incident
to the Administrative Agent's discharge of its duties enumerated in Section 14.6
hereof.
14.6 DUTIES OF THE ADMINISTRATIVE AGENT. The duties of the
Administrative Agent hereunder shall consist of the following:
14.6.1 POSSESSION OF DOCUMENTS. To safekeep one original of each
of the Loan Documents other than the 364-Day Notes (which will be in the
possession of the Syndication Party named as payee therein).
14.6.2 DISTRIBUTE PAYMENTS. To receive and distribute to the
Syndication Parties payments made by Borrower pursuant to the Loan Documents, as
provided in Article 5 hereof. Unless the Administrative Agent shall have
received notice from Borrower prior to the date on which any payment is due to
any Syndication Party hereunder that Borrower will not make such payment in
full, the Administrative Agent may assume that Borrower has made such payment in
full to the Administrative Agent on such date and the Administrative Agent in
its sole discretion may, but shall not be obligated to, in reliance upon such
assumption, cause to be distributed to each Syndication Party on such due date
an amount equal to the amount then due such Syndication Party. If and to the
extent Borrower shall not have so made such payment in full to the
Administrative Agent, each Syndication Party shall repay to the
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Administrative Agent forthwith on demand such amount distributed to such
Syndication Party together with interest thereon, for each day from the date
such amount is distributed to such Syndication Party until the date such
Syndication Party repays such amount to the Administrative Agent at the
customary rate set by the Administrative Agent for the correction of errors
among banks for three (3) Banking Days and thereafter at the Base Rate.
14.6.3 LOAN ADMINISTRATION. Subject to the provisions of Section
14.8 hereof, to, on behalf of and for the ratable benefit of all Syndication
Parties, in accordance with customary banking practices, exercise all rights,
powers, privileges, and discretion to which the Administrative Agent is entitled
to administer the 364-Day Loans, including, without limitation: (a) monitor all
borrowing activity, Individual 364-Day Commitment balances, and maturity dates
of all LIBO Rate Loans; (b) monitor and report Credit Agreement and covenant
compliance, and coordinate required credit actions by the Syndication Parties;
(c) manage the process for future waivers and amendments if modifications to the
Credit Agreement are required; and (d) administer, record, and process all
assignments to be made for the current and future Syndication Parties.
14.6.4 ACTION UPON DEFAULT. Each Syndication Party agrees that
upon its learning of any facts which would constitute a Potential Default or
Event of Default, it shall promptly notify the Administrative Agent by a writing
designated as a notice of default specifying in detail the nature of such facts
and default, and the Administrative Agent shall promptly send a copy of such
notice to all other Syndication Parties. The Administrative Agent shall be
entitled to assume that no Event of Default or Potential Default has occurred or
is continuing unless an officer thereof primarily responsible for the
Administrative Agent's duties as such with respect to the 364-Day Loans or
primarily responsible for the credit relationship between the Administrative
Agent and Borrower has actual knowledge of facts which would result in or
constitute a Potential Default or Event of Default, or has received written
notice from Borrower of such fact, or has received written notice of default
from a Syndication Party. In the event the Administrative Agent has obtained
actual knowledge (in the manner described above) or received written notice of
the occurrence of a Potential Default or Event of Default as provided in the
preceding sentences, the Administrative Agent may, but is not required to
exercise or refrain from exercising any rights which may be available under the
Loan Documents or at law on account of such occurrence and shall be entitled to
use its discretion with respect to exercising or refraining from exercising any
such rights, unless and until the Administrative Agent has received specific
written instruction from the Required Lenders to refrain from exercising such
rights or to take specific designated action, in which case it shall follow such
instruction; provided that the Administrative Agent shall not be required to
take any action which will subject it to personal liability, or which is or may
be contrary to any provision of the Loan Documents or applicable law. The
Administrative Agent shall not be subject to any liability by reason of its
acting or refraining from acting pursuant to any such instruction.
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14.6.5 FORWARDING OF INFORMATION. The Administrative Agent shall,
within a reasonable time after receipt thereof, forward to the Syndication
Parties and the Voting Participants notices and reports provided to the
Administrative Agent by the Borrower pursuant to Section 10.2 hereof.
14.7 INDEMNIFICATION AS CONDITION TO ACTION. Except for action
expressly required of the Administrative Agent hereunder, the Administrative
Agent shall in all cases be fully justified in failing or refusing to act
hereunder unless it shall have received further assurances (which may include
cash collateral) of the indemnification obligations of the Syndication Parties
under Section 14.18 hereof in respect of any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
14.8 CONSENT REQUIRED FOR CERTAIN ACTIONS. Except as provided in
Section 14.3 hereof, and notwithstanding the fact that this Credit Agreement may
otherwise provide that the Administrative Agent may act at its discretion, the
Administrative Agent may not take any of the following actions (nor may the
Syndication Parties or the Voting Participants take the action described in
Subsection 14.8.1(c)) with respect to, or under, the Loan Documents without the
prior written consent, given after notification by the Administrative Agent of
its intention to take any such action (or notification by such Syndication
Parties as are proposing the action described in Subsection 14.8.1(c) of their
intention to do so), of:
14.8.1 UNANIMOUS. Each of the Syndication Parties and Voting
Participants before:
(a) Agreeing to an increase in the Aggregate 364-Day
Commitment or an extension of the 364-Day Availability Period or the 364-Day
Maturity Date;
(b) Agreeing to a reduction in the amount, or to a delay in
the due date, of any payment by Borrower of interest, principal, or fees with
respect to the 364-Day Loans; provided, however, this restriction shall not
apply to a delay in payment of interest or fees granted by the Administrative
Agent in the ordinary course of administration of the 364-Day Loans and the
exercise of reasonable judgment, so long as such payment delay does not exceed
five (5) days;
(c) Amending Section 1.66 hereof or any provision set forth
in this Subsection 14.8.1; or
(d) Agreeing to waive any material provisions of this Credit
Agreement or any of the other Loan Documents.
14.8.2 REQUIRED LENDERS. The Required Lenders before:
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(a) Consenting to any action, amendment, or granting any
waiver with respect to the 364-Day Loans not covered in Subsection 14.8.1; or
(b) Agreeing to amend Article 14 of this Credit Agreement
(other than Subsection 14.8.1(c)).
14.8.3 ACTION WITHOUT VOTE. Notwithstanding any other provisions
of this Section, the Administrative Agent may take the following action without
obtaining the consent of the Syndication Parties or the Voting Participants:
(a) Determining (i) whether the conditions to an Advance have
been met, and (ii) the amount of such Advance;
(b) Determining (i) whether the conditions to the issuance of
a Committed Letter of Credit have been met, and (ii) the amount of such
Committed Letter of Credit.
If no written consent or denial is received from a Syndication Party within five
(5) Banking Days after written notice of any proposed action as described in
this Section is delivered to such Syndication Party by the Administrative Agent,
such Syndication Party shall be conclusively deemed to have consented thereto
for the purposes of this Section.
14.9 DISTRIBUTION OF PRINCIPAL AND INTEREST. The Administrative Agent
will receive and accept all payments (including prepayments) of principal and
interest made by Borrower on the 364-Day Loans and the 364-Day Notes and will
hold all such payments in trust for the benefit of all present and future
Syndication Parties, and, if requested in writing by the Required Lenders, in an
account segregated from the Administrative Agent's other funds and accounts
("PAYMENT ACCOUNT"). After the receipt by the Administrative Agent of any
payment representing interest or principal on the 364-Day Loans, the
Administrative Agent shall remit to each Syndication Party its share of such
payment as provided in Article 5 hereof, ("PAYMENT DISTRIBUTION") no later than
the same Banking Day as such payment is received by the Administrative Agent if
received no later than 11:00 A.M. (Eastern Time) or the next Banking Day if
received by the Administrative Agent thereafter. Any Syndication Party's rights
to its Payment Distribution shall be subject to the rights of any Contributing
Syndication Parties to such amounts as set forth in Section 14.3 hereof.
14.10 DISTRIBUTION OF CERTAIN AMOUNTS. The Administrative Agent shall
(a) receive and hold in trust for the benefit of all present and future
Syndication Parties, in the Payment Account and, if requested in writing by the
Required Lenders, segregated from the Administrative Agent's other funds and
accounts and (b) shall remit to the Syndication Parties, as indicated, the
amounts described below:
14.10.1 FUNDING LOSSES. To each Syndication Party, the amount of
any Funding Losses paid by Borrower to the Administrative Agent in connection
with a
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prepayment of any portion of a LIBO Rate Loan, in accordance with the Funding
Loss Notice such Syndication Party provided to the Administrative Agent, no
later than the same Banking Day that payment of such Funding Losses is received
by the Administrative Agent, if received no later than 11:00 A.M. (Eastern
Time), or the next Banking Day if received by the Administrative Agent
thereafter.
14.11 POSSESSION OF LOAN DOCUMENTS. The Loan Documents (other than the
364-Day Notes) shall be held by the Administrative Agent in its name, for the
ratable benefit of itself and the other Syndication Parties without preference
or priority.
14.12 COLLATERAL APPLICATION. The Syndication Parties shall have no
interest in any other loans made to Borrower by any other Syndication Party
other than the 364-Day Loans, or in any property taken as security for any other
loan or loans made to Borrower by any other Syndication Party, or in any
property now or hereinafter in the possession or control of any other
Syndication Party, which may be or become security for the 364-Day Loans solely
by reason of the provisions of a security instrument that would cause such
security instrument and the property covered thereby to secure generally all
indebtedness owing by Borrower to such other Syndication Party. Notwithstanding
the foregoing, to the extent such other Syndication Party applies such funds or
the proceeds of such property to reduction of the 364-Day Loans, such other
Syndication Party shall share such funds or proceeds with all Syndication
Parties according to their respective Individual 364-Day Pro Rata Shares. In the
event that any Syndication Party shall obtain payment, whether partial or full,
from any source in respect of the 364-Day Loans, including without limitation
payment by reason of the exercise of a right of offset, banker's lien, general
lien, or counterclaim, such Syndication Party shall promptly make such
adjustments (which may include payment in cash or the purchase of further
syndications or participations in the 364-Day Loans) to the end that such excess
payment shall be shared with all other Syndication Parties in accordance with
their respective Individual 364-Day Commitments. Notwithstanding any of the
foregoing provisions of this Section or Article 7 hereof, no Syndication Party
other than CoBank shall have any right to, or to the proceeds of, or any right
to the application to any amount owing to such Syndication Party hereunder of
any the proceeds of, any Bank Equity Interests issued to Borrower by CoBank or
on account of any statutory lien held by CoBank on such Bank Equity Interests.
14.13 AMOUNTS REQUIRED TO BE RETURNED. If the Administrative Agent
makes any payment to a Syndication Party in anticipation of the receipt of final
funds from Borrower, and such funds are not received from Borrower, or if excess
funds are paid by the Administrative Agent to any Syndication Party as the
result of a miscalculation by the Administrative Agent, then Syndication Party
shall, on demand of the Administrative Agent, forthwith return to the
Administrative Agent any such amounts, plus interest thereon (from the day such
amounts were transferred by the Administrative Agent to the Syndication Party
to, but not including, the day such amounts are returned by Syndication Party)
at a rate per annum equal to the customary rate set by the Administrative Agent
for the correction of errors among banks for three (3) Banking
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Days and thereafter at the Base Rate. If the Administrative Agent is required at
any time to return to Borrower or a trustee, receiver, liquidator, custodian, or
similar official any portion of the payments made by Borrower to the
Administrative Agent, whether pursuant to any bankruptcy or insolvency law or
otherwise, then each Syndication Party shall, on demand of the Administrative
Agent, forthwith return to the Administrative Agent any such payments
transferred to such Syndication Party by the Administrative Agent but without
interest or penalty (unless the Administrative Agent is required to pay interest
or penalty on such amounts to the person recovering such payments).
14.14 REPORTS AND INFORMATION TO SYNDICATION PARTIES. The
Administrative Agent shall use reasonable efforts to provide to Syndication
Parties, as soon as practicable after actual knowledge thereof is acquired by an
officer thereof primarily responsible for the Administrative Agent's duties as
such with respect to the 364-Day Loans or primarily responsible for the credit
relationship between the Administrative Agent and Borrower, any material factual
information which has a material adverse effect on the creditworthiness of
Borrower, and Borrower hereby authorizes such disclosure by the Administrative
Agent to the Syndication Parties (and by the Syndication Parties to any of their
participants). Failure of the Administrative Agent to provide the information
referred to in this Section or in Subsection 14.6.4 hereof shall not result in
any liability upon, or right to make a claim against, the Administrative Agent
except where a court of competent jurisdiction renders a final non-appealable
determination that such failure is a result of the willful misconduct or gross
negligence of the Administrative Agent. Syndication Parties acknowledge and
agree that all information and reports received pursuant to this Credit
Agreement will be received in confidence in connection with their Syndication
Interest, and that such information and reports constitute confidential
information and shall not, without the prior written consent of the
Administrative Agent or Borrower, as applicable, be (x) disclosed to any third
party (other than the Administrative Agent, another Syndication Party or
potential Syndication Party, or a participant or potential participant in the
interest of a Syndication Party, which disclosure is hereby approved by
Borrower), except pursuant to appropriate legal or regulatory process, or (y)
used by the Syndication Party except in connection with the 364-Day Loans and
its Syndication Interest.
14.15 STANDARD OF CARE. The Administrative Agent shall not be liable to
Syndication Parties for any error in judgment or for any action taken or not
taken by the Administrative Agent or its agents, except for its gross negligence
or willful misconduct. Subject to the preceding sentence, the Administrative
Agent will exercise the same care in administering the 364-Day Loans and the
Loan Documents as it exercises for similar loans which it holds for its own
account and risk, and the Administrative Agent shall not have any further
responsibility to the Syndication Parties. Without limiting the foregoing, the
Administrative Agent may rely on the advice of counsel concerning legal matters
and on any written document it believes to be genuine and correct and to have
been signed or sent by the proper Person or Persons.
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14.16 NO TRUST RELATIONSHIP. Neither the execution of this Credit
Agreement, nor the sharing in the 364-Day Loans, nor the holding of the Loan
Documents in its name by the Administrative Agent, nor the management and
administration of the 364-Day Loans and Loan Documents by the Administrative
Agent (including the obligation to hold certain payments and proceeds in the
Payment Account in trust for the Syndication Parties), nor any other right, duty
or obligation of the Administrative Agent under or pursuant to this Credit
Agreement is intended to be or create, and none of the foregoing shall be
construed to be or create, any express, implied or constructive trust
relationship between the Administrative Agent and any Syndication Party. Each
Syndication Party hereby agrees and stipulates that the Administrative Agent is
not acting as trustee for such Syndication Party with respect to the 364-Day
Loans, this Credit Agreement, or any aspect of either, or in any other respect.
14.17 SHARING OF COSTS AND EXPENSES. To the extent not paid by
Borrower, each Syndication Party will promptly upon demand reimburse the
Administrative Agent for its proportionate share (based on its Individual
364-Day Pro Rata Share), for all reasonable costs, disbursements, and expenses
incurred by the Administrative Agent on or after the date of this Credit
Agreement for legal, accounting, consulting, and other services rendered to the
Administrative Agent in its role as the Administrative Agent in the
administration of the 364-Day Loans, interpreting the Loan Documents, and
protecting, enforcing, or otherwise exercising any rights, both before and after
default by Borrower under the Loan Documents, and including, without limitation,
all costs and expenses incurred in connection with any bankruptcy proceedings;
provided, however, that the costs and expenses to be shared in accordance with
this Section shall not include any costs or expenses incurred by the
Administrative Agent solely as a Syndication Party in connection with the
364-Day Loans, nor to the Administrative Agent's internal costs and expenses.
14.18 SYNDICATION PARTIES' INDEMNIFICATION OF THE ADMINISTRATIVE AGENT.
Each of the Syndication Parties agree to indemnify the Administrative Agent,
including any Successor Agent, and their respective directors, officers,
employees, agents, professional advisers and representatives ("INDEMNIFIED
AGENCY PARTIES"), to the extent not reimbursed by Borrower, and without in any
way limiting the obligation of Borrower to do so), ratably (based on its
Individual 364-Day Pro Rata Share, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the 364-Day
Loans and/or the expiration or termination of this Credit Agreement) be imposed
on, incurred by or asserted against the Administrative Agent (or any of the
Indemnified Agency Parties while acting for the Administrative Agent or for any
Successor Agent) in any way relating to or arising out of this Credit Agreement
or the Loan Documents, or the performance of the duties of the Administrative
Agent hereunder or thereunder or any action taken or omitted while acting in the
capacity of the Administrative Agent under or in connection with any of the
foregoing; provided that the Syndication Parties shall not be liable for the
payment of any portion of such liabilities, obligations, losses,
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damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of an Indemnified Agency Party to the extent that any of the forgoing result
from the gross negligence or willful misconduct of that Indemnified Agency Party
as determined by a court of competent jurisdiction. The agreements and
obligations in this Section shall survive the payment of the 364-Day Loans and
the expiration or termination of this Credit Agreement.
14.19 BOOKS AND RECORDS. The Administrative Agent shall maintain such
books of account and records relating to the 364-Day Loans as it maintains with
respect to other loans of similar type and amount, and which shall clearly and
accurately reflect the Syndication Interest of each Syndication Party.
Syndication Parties, or their agents, may inspect such books of account and
records at all reasonable times during the Administrative Agent's regular
business hours.
14.20 ADMINISTRATIVE AGENT FEE. CoBank and any Successor Agent shall be
entitled to the Administrative Agent Fee for acting as the Administrative Agent.
In the event the Successor Agent is contractually entitled to an additional fee,
each Syndication Party will be responsible for its proportionate share (based on
its Individual 364-Day Pro Rata Share) thereof.
14.21 THE ADMINISTRATIVE AGENT'S RESIGNATION OR REMOVAL. The
Administrative Agent may resign at any time by giving at least sixty (60) days'
prior written notice of its intention to do so to each of the Syndication
Parties and Borrower. After the receipt of such notice, the Required Lenders
shall appoint a successor ("SUCCESSOR AGENT"). If (a) no Successor Agent shall
have been so appointed which is either (i) a Syndication Party, or (ii) if not a
Syndication Party, which is a Person approved by Borrower, such approval not to
be unreasonably withheld (provided that Borrower shall have no approval rights
upon the occurrence and during the continuance of an Event of Default), or (b)
if such Successor Agent has not accepted such appointment, in either case within
forty-five (45) days after the retiring Administrative Agent's giving of such
notice of resignation, then the retiring Administrative Agent may, after
consulting with, but without requiring the approval of, Borrower, appoint a
Successor Agent which shall be a bank or a trust company organized under the
laws of the United States of America or any state thereof and having a combined
capital, surplus and undivided profit of at least $250,000,000. Any
Administrative Agent may be removed upon the written demand of the Required
Lenders, which demand shall also appoint a Successor Agent. Upon the appointment
of a Successor Agent hereunder, (x) the term "Administrative Agent" shall for
all purposes of this Credit Agreement thereafter mean such Successor Agent, and
(y) the Successor Agent shall notify Borrower of its identity and of the
information called for in Subsection 14.4.2 hereof. After any retiring
Administrative Agent's resignation hereunder as the Administrative Agent, or the
removal hereunder of any Administrative Agent, the provisions of this Credit
Agreement shall continue to inure to the benefit of such Administrative Agent as
to any actions taken or omitted to be taken by it while it was the
Administrative Agent under this Credit Agreement.
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14.22 REPRESENTATIONS AND WARRANTIES OF ALL PARTIES. The Administrative
Agent and each Syndication Party represents and warrants that: (a) the execution
and delivery of, and performance of its obligations under, this Credit Agreement
is within its power and has been duly authorized by all necessary corporate and
other action by it; (b) this Credit Agreement is in compliance with all
applicable laws and regulations promulgated under such laws and does not
conflict with nor constitute a breach of its charter or by-laws nor any
agreements by which it is bound, and does not violate any judgment, decree or
governmental or administrative order, rule or regulation applicable to it; (c)
no approval, authorization or other action by, or declaration to or filing with,
any governmental or administrative authority or any other Person is required to
be obtained or made by it in connection with the execution and delivery of, and
performance of its obligations under, this Credit Agreement; and (d) this Credit
Agreement has been duly executed by it, and constitutes the legal, valid, and
binding obligation of such Person, enforceable in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
rights of creditors generally and general equitable principles (regardless of
whether such enforceability is considered in a proceeding at law or in equity).
Each Syndication Party that is a state or national bank represents and warrants
that the act of entering into and performing its obligations under this Credit
Agreement has been approved by its board of directors or its loan committee and
such action was duly noted in the written minutes of the meeting of such board
or committee, and that it will furnish the Administrative Agent with a certified
copy of such minutes or an excerpt therefrom reflecting such approval.
14.23 SYNDICATION PARTIES' INDEPENDENT CREDIT ANALYSIS. Each
Syndication Party acknowledges receipt of true and correct copies of all Loan
Documents (other than any 364-Day Note payable to another Syndication Party)
from the Administrative Agent. Each Syndication Party agrees and represents that
it has relied upon its independent review (a) of the Loan Documents, and (b) any
information independently acquired by such Syndication Party from Borrower or
otherwise in making its decision to acquire an interest in the 364-Day Loans
independently and without reliance on the Administrative Agent. Each Syndication
Party represents and warrants that it has obtained such information as it deems
necessary (including any information such Syndication Party independently
obtained from Borrower or others) prior to making its decision to acquire an
interest in the 364-Day Loans. Each Syndication Party further agrees and
represents that it has made its own independent analysis and appraisal of and
investigation into each Borrower's authority, business, operations, financial
and other condition, creditworthiness, and ability to perform its obligations
under the Loan Documents and has relied on such review in making its decision to
acquire an interest in the 364-Day Loans. Each Syndication Party agrees that it
will continue to rely solely upon its independent review of the facts and
circumstances related to Borrower, and without reliance upon the Administrative
Agent, in making future decisions with respect to all matters under or in
connection with the Loan Documents and the 364-Day Loans. The Administrative
Agent assumes no responsibility for the financial condition of Borrower or for
the performance of Borrower's obligations under the Loan Documents. Except as
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otherwise expressly provided herein, no Syndication Party shall have any duty or
responsibility to furnish to any other Syndication Parties any credit or other
information concerning Borrower which may come into its possession.
14.24 NO JOINT VENTURE OR PARTNERSHIP. Neither the execution of this
Credit Agreement, the sharing in the 364-Day Loans, nor any agreement to share
in payments or losses arising as a result of this transaction is intended to be
or to create, and the foregoing shall not be construed to be, any partnership,
joint venture or other joint enterprise between the Administrative Agent and any
Syndication Party, nor between or among any of the Syndication Parties.
14.25 PURCHASE FOR OWN ACCOUNT; RESTRICTIONS ON TRANSFER;
PARTICIPATIONS. Each Syndication Party other than CoBank represents that it has
acquired and is retaining its interest in the 364-Day Loans for its own account
in the ordinary course of its banking or financing business and not with a view
toward the sale, distribution, further participation, or transfer thereof. Each
Syndication Party other than CoBank agrees that it will not sell, assign, convey
or otherwise dispose of ("TRANSFER") to any Person, or create or permit to exist
any lien or security interest on all or any part of its interest in the 364-Day
Loans, without the prior written consent of the Administrative Agent and
Borrower (which consent will not be unreasonably withheld); provided that: (a)
any such Transfer except a Transfer to another Syndication Party or a Transfer
by CoBank must be in a minimum amount of $5,000,000.00; (b) each Syndication
Party must maintain an Individual 364-Day Commitment of no less than
$5,000,000.00, unless it Transfers its entire Syndication Interest; (c) the
transferee must execute an agreement substantially in the form of Exhibit 14.25
hereto ("SYNDICATION ACQUISITION AGREEMENT") and assume all of the transferor's
obligations hereunder and execute such documents as the Administrative Agent may
reasonably require; and (d) the Syndication Party making such Transfer must pay
the Administrative Agent an assignment fee of $3,500.00. Any Syndication Party
may participate any part of its interest in the 364-Day Loans to any Person with
the prior written consent of the Administrative Agent and Borrower (which
consent will not be unreasonably withheld, provided that Borrower shall have no
approval rights upon the occurrence and during the continuance of an Event of
Default), provided that no such consent shall be required where the participant
is a Person at least fifty percent (50%) the equity interest in which is owned
by such Syndication Party or which owns at least fifty percent (50%) of the
equity interest in such Syndication Party or at least fifty percent (50%) of the
equity interest of which is owned by the same Person which owns at least fifty
percent (50%) of the equity interest of such Syndication Party, and each
Syndication Party understands and agrees that in the event of any such
participation: (x) its obligations hereunder will not change on account of such
participation; (y) except as provided in Section 14.26 hereof, the participant
will have no rights under this Credit Agreement, including, without limitation,
voting rights or the right to receive payments or distributions; and (z) the
Administrative Agent shall continue to deal directly with the Syndication Party
with respect to the 364-Day Loans (including with respect to voting rights) as
though no participation had been granted and will not be obligated to deal
directly with any participant. Notwithstanding any
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provision contained herein to the contrary, any Syndication Party may at any
time pledge or assign all or any portion of its interest in the 364-Day Loans to
any Federal Reserve Bank or the Federal Farm Credit Bank in accordance with
applicable law. CoBank reserves the right to sell participations on a
non-patronage basis.
14.26 CERTAIN PARTICIPANTS' VOTING RIGHTS. All Persons who at any time
purchase a participation interest in the interest of CoBank as a Syndication
Party hereunder may, in the sole discretion of CoBank (or as required in any
agreement under which such purchase is made and governed), be allowed to vote
hereunder, on a dollar basis, on any matter requiring or allowing CoBank, in its
capacity as a Syndication Party, to provide or withhold its consent, or to
otherwise vote on any proposed action; provided that no such Person shall have
any voting rights unless and until CoBank shall have provided written notice to
the Administrative Agent indicating (a) the name of such Person and (b) the
dollar amount of such Persons participation interest as to which such voting
rights shall be accorded (the Persons to whom CoBank has accorded such voting
rights, and with respect to which CoBank has provided the required notice to the
Administrative Agent, are referred to as "VOTING PARTICIPANTS").
14.27 METHOD OF MAKING PAYMENTS. Payment and transfer of all amounts
owing or to be paid or remitted hereunder, including, without limitation,
payment of the Advance Payment by Syndication Parties, and distribution of
principal or interest payments or fees or other amounts by the Administrative
Agent, shall be by wire transfer in accordance with the instructions contained
on Exhibit 14.27 hereto ("WIRE INSTRUCTIONS").
14.28 EVENTS OF SYNDICATION DEFAULT/REMEDIES.
14.28.1 SYNDICATION PARTY DEFAULT. Any of the following
occurrences, failures or acts, with respect to any of the Syndication Parties
shall constitute an "EVENT OF SYNDICATION DEFAULT" hereunder by such party: (a)
if any representation or warranty made by such party in this Credit Agreement
shall be found to have been untrue in any material respect; (b) if such party
fails to make any distributions or payments required under this Credit Agreement
within five (5) days of the date required; (c) if such party breaches any other
covenant, agreement, or provision of this Credit Agreement which breach shall
have continued uncured for a period of thirty (30) consecutive days after such
breach first occurs, unless a shorter period is required to avoid prejudicing
the rights and position of the other Syndication Parties; (d) if any agency
having supervisory authority over such party, or any creditors thereof, shall
file a petition to reorganize or liquidate such party pursuant to any applicable
federal or state law or regulation and such petition shall not be discharged or
denied within fifteen (15) days after the date on which it is filed; (e) if by
the order of a court of competent jurisdiction or by any appropriate supervisory
agency, a receiver, trustee or liquidator shall be appointed for such party or
for all or any material part of its property or if such party shall be declared
insolvent; or (f) if such party shall be dissolved, or shall make an assignment
for the benefit of its creditors, or shall file a petition seeking to take
advantage of any debtors' act, including the bankruptcy act, or shall admit in
writing its
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inability to pay its debts generally as they become due, or shall consent to the
appointment of a receiver or liquidator of all or any material part of its
property.
14.28.2 REMEDIES. Upon the occurrence of an Event of Syndication
Default, the non-defaulting parties, acting by, or through the direction of, a
simple majority (determined based on the ratio of their Individual 364-Day
Commitments to the Aggregate Commitment) of the non-defaulting parties, may, in
addition to any other remedy specifically set forth in this Credit Agreement,
have and exercise any and all remedies available generally at law or equity,
including the right to damages and to specific performance.
14.29 WITHHOLDING TAXES. Each Syndication Party represents that it is
entitled to receive any payments to be made to it hereunder without the
withholding of any tax and will furnish to the Administrative Agent and to
Borrower such forms, certifications, statements and other documents as the
Administrative Agent or Borrower may request from time to time to evidence such
Syndication Party's exemption from the withholding of any tax imposed by any
jurisdiction or to enable the Administrative Agent or Borrower, as the case may
be, to comply with any applicable laws or regulations relating thereto. Without
limiting the effect of the foregoing, if any Syndication Party is not created or
organized under the laws of the United States of America or any state thereof,
such Syndication Party will furnish to the Administrative Agent and Borrower IRS
Form 4224 or Form 1001, or such other forms, certifications, statements or
documents, duly executed and completed by such Syndication Party, as evidence of
such Syndication Party's exemption from the withholding of United States tax
with respect thereto. Notwithstanding anything herein to the contrary, Borrower
shall not be obligated to make any payments hereunder to such Syndication Party
until such Syndication Party shall have furnished to the Administrative Agent
and Borrower the requested form, certification, statement or document.
14.30 AMENDMENTS CONCERNING AGENCY FUNCTION. The Administrative Agent
shall not be bound by any waiver, amendment, supplement or modification of this
Credit Agreement or any other Loan Document which affects its duties hereunder
or thereunder unless it shall have given its prior written consent thereto.
14.31 FURTHER ASSURANCES. The Administrative Agent and each Syndication
Party agree to take whatever steps and execute such documents as may be
reasonable and necessary to implement this Article 16 and to carry out fully the
intent thereof.
ARTICLE 15. MISCELLANEOUS
15.1 COSTS AND EXPENSES. To the extent permitted by law, Borrower
agrees to pay to the Administrative Agent and the Syndication Parties, on
demand, all reasonable out-of-pocket costs and expenses (a) incurred by the
Administrative Agent (including, without limitation, the reasonable fees and
expenses of counsel retained by the Administrative Agent, and including fees and
expenses incurred for consulting, appraisal, engineering, inspection, and
environmental assessment services) in
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connection with the preparation, negotiation, and execution of the Fee Letter,
mandate letter and attached Summary of Terms and Conditions, and the Loan
Documents and the transactions contemplated thereby, and processing the
Borrowing Notices; and (b) incurred by the Administrative Agent or any
Syndication Party (including, without limitation, the reasonable fees and
expenses of counsel retained by the Administrative Agent and the Syndication
Parties) in connection with the enforcement or protection of the Syndication
Parties' rights under the Loan Documents upon the occurrence of an Event of
Default or upon the commencement of an action by Borrower against the
Administrative Agent or any Syndication Party, including without limitation
collection of the 364-Day Loans (regardless of whether such enforcement or
collection is by court action or otherwise). Borrower shall not be obligated to
pay the costs or expenses of any Person whose only interest in the 364-Day Loans
is as a holder of a participation interest.
15.2 SERVICE OF PROCESS AND CONSENT TO JURISDICTION. Borrower hereby
agrees that any litigation with respect to this Credit Agreement or to enforce
any judgment obtained against Borrower for breach of this Credit Agreement or
under the 364-Day Notes or other Loan Documents may be brought in the courts of
the State of Colorado and in the United States District Court for the District
of Colorado (if applicable subject matter jurisdictional requirements are
present), as the Administrative Agent may elect; and, by execution and delivery
of this Credit Agreement, Borrower irrevocably submits to such jurisdiction.
With respect to litigation concerning this Credit Agreement or under the 364-Day
Notes or other Loan Documents within the jurisdiction of the courts of the State
of Colorado or the United States District Court for the District of Colorado,
Borrower hereby irrevocably appoints, until six (6) months after the expiration
of the 364-Day Maturity Date (as it may be extended at anytime), a Person, such
as The Corporation Company, with offices in Denver, Colorado and otherwise
reasonably acceptable to the Administrative Agent to serve as the agent of
Borrower to receive for and on behalf of Borrower at such agent's Denver,
Colorado office, service of process, which service may be made by mailing a copy
of any summons or other legal process to Borrower in care of such agent.
Borrower agrees that Borrower shall maintain a duly appointed agent in Colorado
for service of summons and other legal process as long as Borrower remains
obligated under this Credit Agreement and shall keep the Administrative Agent
advised in writing of the identity and location of such agent. The receipt by
such agent and/or by Borrower of such summons or other legal process in any such
litigation shall be deemed personal service and acceptance by Borrower for all
purposes of such litigation.
15.3 JURY WAIVER. IT IS MUTUALLY AGREED BY AND BETWEEN THE
ADMINISTRATIVE AGENT, EACH SYNDICATION PARTY, AND BORROWER THAT THEY EACH WAIVE
TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY ANY OF THEM
AGAINST ANY OTHER PARTY ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS CREDIT AGREEMENT, THE 364-DAY NOTES, OR THE OTHER LOAN
DOCUMENTS.
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15.4 NOTICES. All notices, requests and demands required or permitted
under the terms of this Credit Agreement shall be in writing and (a) shall be
addressed as set forth below or at such other address as either party shall
designate in writing, (b) shall be deemed to have been given or made: (i) if
delivered personally, immediately upon delivery, (ii) if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of
receipt, (iii) if by nationally recognized overnight courier service with
instructions to deliver the next Banking Day, one (1) Banking Day after sending,
and (iv) if by United States Mail, certified mail, return receipt requested,
five (5) days after mailing.
15.4.1 BORROWER:
National Cooperative Refinery Association
1391 Iron Horse Road
P.O. Box 1404
McPherson, Kansas 67460
FAX: (316) 241-5562
Attention: John Buehrle
15.4.2 ADMINISTRATIVE AGENT:
CoBank, ACB
5500 South Quebec Street
Englewood, Colorado 80111
FAX: (303) 694-5830
Attention: Syndications Coordinator, Corporate Finance Div.
15.4.3 SYNDICATION PARTIES:
See signature pages to this Credit Agreement
15.5 LIABILITY OF ADMINISTRATIVE AGENT. The Administrative Agent shall
not have any liabilities or responsibilities to Borrower or any Subsidiary on
account of the failure of any Syndication Party to perform its obligations
hereunder or to any Syndication Party on account of the failure of Borrower or
any Subsidiary to perform their respective obligations hereunder or under any
other Loan Document.
15.6 SUCCESSORS AND ASSIGNS. This Credit Agreement shall be binding
upon and inure to the benefit of Borrower, the Administrative Agent, and the
Syndication Parties, and their respective successors and assigns, except that
Borrower may not assign or transfer its rights or obligations hereunder without
the prior written consent of all of the Syndication Parties.
15.7 SEVERABILITY. The invalidity or unenforceability of any provision
of this Credit Agreement or the other Loan Documents shall not affect the
remaining portions of such documents or instruments; in case of such invalidity
or unenforceability, such
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documents or instruments shall be construed as if such invalid or unenforceable
provisions had not been included therein.
15.8 ENTIRE AGREEMENT. This Credit Agreement (together with all
exhibits hereto, which are incorporated herein by this reference) and the other
Loan Documents represent the entire understanding of the Administrative Agent,
each Syndication Party, and Borrower with respect to the subject matter hereof
and shall replace and supersede any previous agreements of the parties with
respect to the subject matter hereof.
15.9 APPLICABLE LAW. To the extent not governed by federal law, this
Credit Agreement and the other Loan Documents, and the rights and obligations of
the parties hereto and thereto shall be governed by and interpreted in
accordance with the internal laws of the State of Colorado, without giving
effect to any otherwise applicable rules concerning conflicts of law, except
that matters regarding the creation, perfection and foreclosure upon security
interests in real property interests shall be interpreted in accordance with the
internal laws of the state where such property is located.
15.10 CAPTIONS. The captions or headings in this Credit Agreement and
any table of contents hereof are for convenience only and in no way define,
limit or describe the scope or intent of any provision of this Credit Agreement.
15.11 COMPLETE AGREEMENT; AMENDMENTS. THIS CREDIT AGREEMENT, THE
364-DAY NOTES, AND THE OTHER LOAN DOCUMENTS ARE INTENDED BY THE PARTIES HERETO
TO BE A COMPLETE AND FINAL EXPRESSION OF THEIR AGREEMENT AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF ANY PRIOR OR CONTEMPORANEOUS ORAL AGREEMENT. BY
INITIALING IN THE MARGIN, THE ADMINISTRATIVE AGENT, EACH SYNDICATION PARTY, AND
BORROWER ACKNOWLEDGE AND AGREE THAT NO UNWRITTEN ORAL AGREEMENT EXISTS BETWEEN
THEM WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT. This Credit Agreement
may not be modified or amended unless such modification or amendment is in
writing and is signed by Borrower, the Administrative Agent, and all Syndication
Parties (and each Syndication Party hereby agrees to execute any such amendment
approved pursuant to Section 14.8 hereof). Borrower agrees that it shall
reimburse the Administrative Agent for all fees and expenses incurred by the
Administrative Agent in retaining outside legal counsel in connection with any
amendment or modification to this Credit Agreement requested by Borrower.
15.12 ADDITIONAL COSTS OF MAINTAINING LOAN. Borrower shall pay to the
Administrative Agent from time to time such amounts as the Administrative Agent
may determine to be necessary to compensate any Syndication Party for any
increase in costs to such Syndication Party which the Administrative Agent
determines, based on information presented to it by such Syndication Party, are
attributable to such Syndication Party's making or maintaining an Advance
hereunder or its obligation to make such Advance, or any reduction in any amount
receivable by such Syndication Party under this Credit Agreement or the 364-Day
Notes payable to it in respect to such
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Advance or such obligation (such increases in costs and reductions in amounts
receivable being herein called "ADDITIONAL COSTS"), resulting from any change
after the date of this Credit Agreement in United States federal, state,
municipal, or foreign laws or regulations (including Regulation D of the Federal
Reserve Board), or the adoption or making after such date of any
interpretations, directives, or requirements applying to a class of banks
including such Syndication Party of or under any United States federal, state,
municipal, or foreign laws or regulations (whether or not having the force of
law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof ("REGULATORY CHANGE"), which: (a)
changes the basis of taxation of any amounts payable to such Syndication Party
under this Credit Agreement or the 364-Day Notes payable to such Syndication
Party in respect of such Advance (other than taxes imposed on the overall net
income of such Syndication Party); or (b) imposes or modifies any reserve,
special deposit, or similar requirements relating to any extensions of credit or
other assets of, or any deposits with or other liabilities of, such Syndication
Party; or (c) imposes any other condition affecting this Credit Agreement or the
364-Day Notes payable to such Syndication Party (or any of such extensions of
credit or liabilities). The Administrative Agent will notify Borrower of any
event occurring after the date of this Credit Agreement which will entitle such
Syndication Party to compensation pursuant to this Section as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation. the Administrative Agent shall include with such notice, a
certificate from such Syndication Party setting forth in reasonable detail the
calculation of the amount of such compensation. Determinations by the
Administrative Agent for purposes of this Section of the effect of any
Regulatory Change on the costs of such Syndication Party of making or
maintaining an Advance or on amounts receivable by such Syndication Party in
respect of Advances, and of the additional amounts required to compensate such
Syndication Party in respect of any Additional Costs, shall be conclusive absent
manifest error, provided that such determinations are made on a reasonable
basis.
15.13 CAPITAL REQUIREMENTS. In the event that the introduction of or
any change in: (a) any law or regulation; or (b) the judicial, administrative,
or other governmental interpretation of any law or regulation; or (c) compliance
by any Syndication Party or any corporation controlling any such Syndication
Party with any guideline or request from any governmental authority (whether or
not having the force of law) has the effect of requiring an increase in the
amount of capital required or expected to be maintained by such Syndication
Party or any corporation controlling such Syndication Party, and such
Syndication Party certifies that such increase is based in any part upon such
Syndication Party's obligations hereunder with respect to the 364-Day Loans, and
other similar obligations, Borrower shall pay to such Syndication Party such
additional amount as shall be certified by such Syndication Party to the
Administrative Agent and to Borrower to be the net present value (discounted at
the Base Rate) of (x) the amount by which such increase in capital reduces the
rate of return on capital which such Syndication Party could have achieved over
the period remaining until the applicable Maturity Date(s), but for such
introduction or change, (y) multiplied by the product of such Syndication
Party's Individual 364-Day Pro Rata Share times the
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applicable Aggregate Commitment(s). The Administrative Agent will notify
Borrower of any event occurring after the date of this Credit Agreement that
will entitle any such Syndication Party to compensation pursuant to this Section
as promptly as practicable after it obtains knowledge thereof and of such
Syndication Party's determination to request such compensation. The
Administrative Agent shall include with such notice, a certificate from such
Syndication Party setting forth in reasonable detail the calculation of the
amount of such compensation. Determinations by any Syndication Party for
purposes of this Section of the effect of any increase in the amount of capital
required to be maintained by any such Syndication Party and of the amount of
compensation owed to any such Syndication Party under this Section shall be
conclusive absent manifest error, provided that such determinations are made on
a reasonable basis.
15.14 REPLACEMENT NOTES. Upon receipt by Borrower of evidence
satisfactory to it of: (a) the loss, theft, destruction or mutilation of any
364-Day Note, and (in case of loss, theft or destruction) of the agreement of
the Syndication Party to which the 364-Day Note was payable to indemnify
Borrower, and upon surrender and cancellation of such 364-Day Note, if
mutilated; or (b) the assignment by any Syndication Party of its interest
hereunder and the 364-Day Notes relating thereto, or any portion thereof,
pursuant to this Credit Agreement, then Borrower will pay any unpaid principal
and interest (and Funding Losses, if applicable) then or previously due and
payable on such 364-Day Notes and will (upon delivery of such 364-Day Notes for
cancellation, unless covered by subparagraph (a) of this Section) deliver in
lieu of each such 364-Day Note a new 364-Day Note or, in the case of an
assignment of a portion of any such Syndication Party's Interest, new 364-Day
Notes, for any remaining balance.
15.15 PATRONAGE PAYMENTS. Borrower acknowledges and agrees that: (a)
only that portion of the 364-Day Loans represented by CoBank's Individual
364-Day Pro Rata Share which is retained by CoBank for its own account is
entitled to patronage distributions in accordance with CoBank's bylaws and its
practices and procedures related to patronage distribution; and (b) any
patronage, or similar, payments to which Borrower is entitled on account its
ownership of Bank Equity Interests or otherwise will not be based on any portion
of CoBank's interest in the 364-Day Loans in which CoBank has at any time
granted a participation interest.
15.16 MUTUAL RELEASE. Upon full indefeasible payment and satisfaction
of the Bank Debt and 364-Day Notes and the other obligations contained in this
Credit Agreement, the parties, including Borrower, the Administrative Agent, and
each Syndication Party shall, except as provided in Article 12 hereof and except
with respect to Borrower's reimbursement obligation to the issuer of each
Negotiated Letter of Credit with an expiry date beyond the Maturity Date,
thereupon automatically each be fully, finally, and forever released and
discharged from any further claim, liability, or obligation in connection with
the Bank Debt.
15.17 LIBERAL CONSTRUCTION. This Credit Agreement constitutes a fully
negotiated agreement between commercially sophisticated parties, each assisted
by legal counsel, and shall not be construed and interpreted for or against any
party hereto.
66
<PAGE>
15.18 COUNTERPARTS. This Credit Agreement may be executed by the
parties hereto in separate counterparts, each of which, when so executed and
delivered, shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof, each signed by less than all, but together signed by all of
the parties hereto.
15.19 CONFIDENTIALITY. Each Syndication Party shall maintain the
confidential nature of, and shall not use or disclose, any of Borrower's
financial information, confidential information or trade secrets without first
obtaining Borrower's written consent. Nothing in this Section shall require any
Syndication Party to obtain such consent after there is an Event of Default. The
obligations of the Syndication Parties shall in no event apply to: (a) providing
information about Borrower to any financial institution contemplated in Sections
14.6, 14.14, and 14.19 hereof, or to such Syndication Party's parent holding
company or any of such Syndication Party's Affiliates; (b) any situation in
which any Syndication Party is required by Law or required by any Governmental
Authority to disclose information; (c) providing information to counsel to any
Syndication Party in connection with the transactions contemplated by the Loan
Documents; (d) providing information to independent auditors retained by the
such Syndication Party; (e) any information that is in or becomes part of the
public domain otherwise than through a wrongful act of such Syndication Party or
any of its employees or agents thereof; (f) any information that is in the
possession of any Syndication Party prior to receipt thereof from Borrower or
any other Person known to such Syndication Party to be acting on behalf of
Borrower; (g) any information that is independently developed by any Syndication
Party; and (h) any information that is disclosed to any Syndication Party by a
third party that has no obligation of confidentiality with respect to the
information disclosed. A Syndication Party's confidentiality requirements
continue after it is no longer a Syndication Party under this Credit Agreement.
[Signature Pages Begin on Page 61]
67
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Credit Agreement
as of the date first above written.
BORROWER:
NATIONAL COOPERATIVE REFINERY
ASSOCIATION, a cooperative marketing
association formed under the laws of the
State of Kansas
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ADMINISTRATIVE AGENT:
COBANK, ACB
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
68
<PAGE>
SYNDICATION PARTIES:
COBANK, ACB
By:
-------------------------------------
Name: Casey Garten
Title: Vice President
Contact Name: Casey Garten
Title: Vice President
Address: 5500 S. Quebec Street
Englewood, CO 80127
Phone No.: (303) 740-4354
Fax No.: (303) 694-5830
Payment Instructions:
CoBank, ACB
ABA No.: 307088754
Acct. Name: NCRA
Account No.: ________________
Reference: NCRA
69
<PAGE>
SYNDICATION PARTIES:
Mercantile Bank
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Contact Name:
---------------------------
Title:
----------------------------------
Address:
--------------------------------
--------------------------------
Phone No.:
------------------------------
Fax No.:
--------------------------------
Payment Instructions:
____________________________________
ABA No.:
Acct. Name:
Account No.:
Reference:
70
<PAGE>
SYNDICATION PARTIES:
Bank of America, N.A.
By:
-------------------------------------
Name: Lloyd A. Jones
Title: Senior Vice President
Contact Name: Amanda I. Stamness
Title: Credit Products Associate
Address: P.O. Box 4, KSI-100-04-64
Wichita, KS 67201-0004
100 N. Broadway, 4th Floor
Wichita, KS 67202
Phone No.: (316) 261-4262
Fax No.: (316) 261-2326
Payment Instructions:
Bank of America, N.A.
ABA No.: 081000032
Acct. Name: Commercial Loan Services
Act
Account No.: 05109823-0001000
Reference: National Coop
#778-0001-5162108
Attn.: Lloyd A. Jones
71
EXHIBIT 99
CAUTIONARY STATEMENT
Cenex Harvest States Cooperatives (the "Company"), or persons acting on
behalf of the Company, or outside reviewers retained by the Company making
statements on behalf of the Company, or underwriters, from time to time, may
make, in writing or orally, "forward-looking statements" as defined under the
Private Securities Litigation Reform Act of 1995 (the "Act"). This Cautionary
Statement is for the purpose of qualifying for the "safe harbor" provisions of
the Act and is intended to be a readily available written document that contains
factors which could cause results to differ materially from those projected in
such forward-looking statements. These factors are in addition to any other
cautionary statements, written or oral, which may be made or referred to in
connection with any such forward-looking statement.
The following matters, among others, may have a material adverse effect on
the business, financial condition, liquidity, results of operations or
prospects, financial or otherwise, of the Company. Reference to this Cautionary
Statement in the context of a forward-looking statement shall be deemed to be a
statement that any one or more of the following factors may cause actual results
to differ materially from those which might be projected, forecast, estimated or
budgeted by the Company in such forward-looking statement or statements:
COMPANY SUBJECT TO SUPPLY AND DEMAND FORCES. The Company may be adversely
affected by supply and demand relationships, both domestic and international.
Supply is affected by weather conditions, disease, insect damage, acreage
planted, government regulation and policies and commodity price levels. The
business is also affected by transportation conditions, including rail, vessel,
barge and truck. Demand may be affected by foreign governments and their
programs, relationships of foreign countries with the United States, the
affluence of foreign countries, acts of war, currency exchange fluctuations and
substitution of commodities. The current monetary crises in Asia have impacted,
and are expected to continue to impact, exports of U.S. agricultural products.
Demand may also be affected by changes in eating habits, by population growth
and increased or decreased per capita consumption of some products.
The Freedom to Farm Act of 1996 (the Farm Act), enacted in April of 1996,
may affect crop production in several ways. The Farm Act more narrowly defines
what will qualify as environmentally sensitive acreage for purposes of the
conservation reduction program, with the result that 3 to 4 million acres may be
put back into agricultural production in the future from a present enrollment of
36.4 million acres. The Farm Act also removes restrictions on the type of crops
planted (other than fruit and vegetables), allowing farmers to plant crops
having favorable prices and thereby increasing the production of those crops.
Increased production may lower prices of certain crops but increase the amount
available for export. However, the Farm Act also reduces Export Enhancement
Program subsidies, which may adversely affect the ability of the U.S. exports to
compete with those of other countries. Reduced demand for U.S. agricultural
products may also adversely affect the demand for fertilizer, chemicals, and
petroleum products sold by the Company and used to produce crops.
COMPANY SUBJECT TO PRICE RISKS. Upon purchase, the Company has risks of
carrying grain and petroleum, including price changes and performance risks
(including delivery, quality, quantity and shipment period), depending upon the
type of purchase contract entered into. The Company is exposed to risks of loss
in the market value of positions held, consisting of grain and petroleum
inventory and purchase contracts at a fixed or partially fixed price, in the
event market prices decrease. The Company is also exposed to risk of loss on its
fixed price or partially fixed price sales contracts in the event market prices
increase.
To reduce the price change risks associated with holding fixed price
positions, the Company generally takes opposite and offsetting positions by
entering into commodity futures contracts (either a straight futures contract or
an options futures contract) on regulated commodity futures exchanges. While
hedging activities reduce the risk of loss from changing market values, such
activities also limit the gain potential which otherwise could result from
changes in market prices. Hedging arrangements do not protect against
nonperformance of a contract. The Company's policy is to generally maintain
hedged positions in grain and petroleum, which are hedgeable, but the Company
can be long or short at any time. The Company's profitability is primarily
derived from margins on grain and products merchandised and processed, not from
hedging transactions.
At any one time the Company's inventory and purchase contracts for delivery
to the Company may be substantial.
<PAGE>
OILSEED PROCESSING AND REFINING BUSINESS COMPETITION. Competition in the
soybean processing and refining business is driven by price, transportation
costs, service and product quality. The industry is highly competitive.
Competitors are adding new plants and expanding capacity of existing plants.
Media newsletters and other publications indicate that new crush plants and
refinery operations are being constructed or under strong consideration. The
Company estimates that U.S. crushing capacity has increased by about 30% to 35%
between 1994 and 1998. Refining capacity has increased by an estimated 25% to
30% between 1996 and 1999. Unless exports increase or existing refineries are
closed, this extra capacity is likely to put additional pressure on prices and
erode margins, adversely affecting the profitability of the Oilseed Processing
and Refining Defined Business Unit. Several competitors operate over various
market segments and may be suppliers to, or customers of, other competitors.
MILLING BUSINESS COMPETITIVE TRENDS. Certain major competitors of the Wheat
Milling Defined Business Unit have developed long-term relationships with
customers by locating plants adjacent to pasta manufacturing plants. This trend
could potentially decrease the future demand for semolina from nonintegrated
millers. In addition, baking and bread flour demand has declined during a period
when the milling industry has been expanding, which will continue to put
pressure on gross margins.
YEAR 2000. To date, the Company has not experienced any significant year
2000-related failures. The Company's management believes that the Company has
taken the steps reasonably necessary to resolve the year 2000 issue with respect
to matters within its control. While the Company has taken steps to determine
the extent of remediation efforts undertaken by key customers and suppliers,
there is no guarantee that the systems of other companies on which this Company
relies have been remediated in order to avoid having a material adverse effect
on the Company's operations or its financial results.
TAXATION OF COOPERATIVES COULD CHANGE. Although under Subchapter T of the
Internal Revenue Code patronage refunds are excluded in determining taxable
income of a cooperative and patronage refunds are taxable to the recipient,
current income tax laws, regulations and interpretations pertaining to the
receipt of patronage refunds could be changed.
DEPENDENCE ON CERTAIN CUSTOMERS. Each of the Wheat Milling Defined Business
Unit and the Oilseed Processing and Refining Defined Business Unit has certain
major customers. Loss of or a decline in the business done with one or more of
these customers could have a material adverse effect on the operations of the
affected defined business unit. In addition, the Wheat Milling Defined Business
Unit would be adversely affected by a decline in pasta production in the United
States.
The foregoing review of factors pursuant to the Act should not be construed
as exhaustive or as any admission regarding the adequacy of disclosures made by
the Company prior to the effective date of the Act.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-END> NOV-30-1999
<CASH> 56,142
<SECURITIES> 0
<RECEIVABLES> 739,048
<ALLOWANCES> 23,676
<INVENTORY> 673,647
<CURRENT-ASSETS> 1,491,590
<PP&E> 1,782,607
<DEPRECIATION> 803,792
<TOTAL-ASSETS> 3,007,047
<CURRENT-LIABILITIES> 1,228,307
<BONDS> 706,176
0
0
<COMMON> 0
<OTHER-SE> 1,122,277
<TOTAL-LIABILITY-AND-EQUITY> 3,007,047
<SALES> 2,018,758
<TOTAL-REVENUES> 2,044,996
<CGS> 1,984,813
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 421
<INTEREST-EXPENSE> 12,956
<INCOME-PRETAX> 7,398
<INCOME-TAX> (1,721)
<INCOME-CONTINUING> 9,119
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,119
<EPS-BASIC> 0
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