UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X]Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required]
For the fiscal year ended February 28, 1998
or
[ ]Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required]
For the transition period from to
Commission File Number: 000-19320
Ag Services of America, Inc.
(Exact name of registrant as specified in its charter)
Iowa 42-1264455
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2302 West First Street, Cedar Falls, Iowa 50613
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(319)277-0261
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of each class which registered
Common Stock, no par value New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate 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.
[X] Yes [ ] No
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (229.405 of this chapter)
is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by non-
affiliates of the registrant as of May 13, 1998, was approximately
$71,929,000 (based on the last reported sale price of $17.625 per
share on May 13, 1998, on the New York Stock Exchange).
As of May 13, 1998, 5,198,554 shares of the registrant's common
stock, no par value, were issued and outstanding. At that date,
there were 172 stockholders of record and approximately 3,100
stockholders for whom securities firms acted as nominees.
DOCUMENTS INCORPORATED BY REFERENCE
Herein the following documents are incorporated by reference:
Selected portions of the Registrant's Annual Report to
Stockholders for the year ended February 28, 1998, are
incorporated by reference into Part II.
Selected portions of the Registrant's Definitive Proxy Statement
for the annual shareholders' meeting to be held August 13, 1998,
are incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS
General Development of Business
Ag Services of America, Inc. (the "Company") was incorporated
under the laws of the state of Iowa in 1985. The Company supplies
farm inputs, including seed, fertilizer, agricultural chemicals,
crop insurance and cash advances for rent, fuel and irrigation, to
farmers primarily in the central United States. The Company buys seed,
fertilizer, agricultural chemicals and other farm inputs from
numerous national and regional manufacturers, distributors and
suppliers of seed, fertilizer and agricultural chemicals. Farmers
have traditionally purchased farm inputs from one or more suppliers
using credit from commercial banks, the Farm Credit System, the
FmHA or other agricultural lenders. The Company extends credit and
provides farmers the convenience of purchasing and financing a wide
variety of farm inputs from a single source at competitive prices.
On August 1, 1991, the Company completed its initial public
offering of 1,060,000 shares of common stock (including 60,000
shares due to over-allotments completed August 30, 1991), of which 382,000
previously issued shares were sold by certain stockholders (32,000
shares as a result of over-allotments). For the 678,000 newly
issued shares sold by the Company (28,000 shares as a result of over-
allotments), net proceeds of approximately $4.7 million were
received by the Company.
On April 22, 1993, the Company completed a public offering of
$13,800,000 principal amount of 7% Convertible Subordinated
Debentures due 2003 (including $1,800,000 due to over-allotments).
The 7% convertible Subordinated Debentures were convertible into
Common Stock of the Company at $9.25 per share. The Company
received net proceeds of approximately $12.9 million.
On June 7, 1996, the Company called for redemption or conversion
all of its outstanding 7% Convertible Subordinated Debentures due
2003 (the "Debentures"). From June 7, 1996, through
July 10, 1996, the redemption date, the Company issued 1,487,669
shares of common stock upon conversion of $13,761,000 of Debentures
and redeemed $39,000 of Debentures as full settlement of all
$13,800,000 of the Debentures outstanding.
Financial Information about Industry Segments
The Company is engaged in one industry segment - the supplying
of a wide range of farm inputs at competitive prices along with the
credit to finance these farm inputs through the crop growing cycle.
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Narrative Description of Business
General:
The Company supplies farm inputs, including seed, fertilizer,
agricultural chemicals, crop insurance and cash advances for rent,
fuel and irrigation, to farmers primarily in the central United
States. The Company's strategy has been to provide a single source
of farm inputs and the credit necessary to finance these inputs
through the growing cycle by taking a security interest in the crop
itself. This strategy is an attractive alternative to farmers who
had difficulty obtaining credit, who needed additional credit for
the expansion of existing operations and/or who wanted the convenience
of a single source of farm inputs, finance and product expertise.
The Company believes that its business strategy has been
responsible for its growth and has focused its efforts on the
following principles:
*Supplying and financing a complete line of quality farm inputs
from several suppliers at competitive prices with prompt
delivery.
*Providing customers with appropriate product selection and crop
production advice from the Company's product specialists.
*Providing detailed monthly statements to simplify the customer's
bookkeeping for all farm inputs purchased from the Company
throughout each growing season.
*Offering multi-peril crop insurance through the Company as a
licensed insurance agency.
*Visiting customers' farms to view crops and discuss harvest
plans and marketing strategies.
*Providing professional and personalized service throughout the
entire growing season to encourage renewed business each year.
*Selecting credit worthy and experienced customers.
Principal Markets:
The Company's customers are currently located in 28 states. The
Company's principal target market is corn and soybean producers in
the states of Iowa, Minnesota, Nebraska, North Dakota, South
Dakota, Illinois, Ohio, Texas and Indiana.
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Products and Suppliers:
The Company buys seed, fertilizer, agricultural chemicals and
other farm inputs from numerous manufacturers, distributors or
dealers. These suppliers generally deliver the farm inputs
directly to the Company's customers. The Company negotiates the purchase
price, discounts and trade credit annually with most of these
suppliers. In fiscal 1998, the percentage of net revenues
attributed to the sale of seed, fertilizer, agricultural chemicals, and other
farm inputs including, among others, cash rents, fuel, and
irrigation was 12.1%, 15.1%, 14.9% and 50.6%, respectively. The balance of
the Company's net revenues in fiscal 1998 were attributed to financing
income.
Seed. The Company currently buys seed from approximately 30
national and regional seed companies. Seed company representatives
as well as the Company's product specialists work directly with the
Company's customers to assist them in selecting specific hybrids
and varieties of seed. The Company sells seed at competitive prices
and achieves its margin based on standard industry discounts or
negotiated volume discounts, if available. Seed is delivered to
the Company's customers directly by the seed companies.
Fertilizer. The Company currently buys fertilizer from over 500
suppliers. The Company sells fertilizer at competitive prices and
achieves its margin based on dealer discounts, negotiated pricing
or opportunistic purchasing. The Company purchases fertilizer using
two alternative methods, depending on the customer's needs. For those
customers with storage facilities to handle bulk dry materials, bulk fluids
or anhydrous ammonia, the Company may purchase the materials through major
fertilizer distribution terminals or manufacturers. These bulk materials may
be direct-shipped in truckload quantities to the customer's farm. Customers
without storage facilities can have the materials supplied by the
Company which may enlist the delivery service of a local fertilizer
dealer.
Agricultural Chemicals. The Company currently buys agricultural
chemicals from several major distributors or suppliers. The
Company sells agricultural chemicals at competitive prices and achieves its
margin based on dealer discounts, negotiated pricing,
manufacturers' rebates and opportunistic purchasing. Agricultural chemicals
are generally delivered directly to the customer's farm by the
distributor or through a dealer.
Insurance, Cash Rents, Fuel, Irrigation and Custom Application.
The Company offers its customers multi-peril crop insurance as an
agent, although customers may also purchase multi-peril crop
insurance from other insurance agents. Through thirteen of its
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employees, the Company is currently licensed as an insurance agent
in 26 states. When customers purchase the insurance through the
Company's agent, the Company receives a standard industry
commission based on the premium amount.
The Company also provides its customers with credit for cash
rents, fuel, irrigation and custom application costs. If a
customer's farm acreage is leased, the land owner may require
payment of the annual rent before planting. Based on its credit policy and
the customer's needs, the Company may assist its customers with the
advance payment of all or a portion of these cash rents. The
Company's customers generally arrange their own fuel, irrigation
and custom application needs and the Company may, based on its credit
policy, advance cash for a portion or all of these costs.
Government Programs:
The two principal government programs affecting the Company's
business are government underwritten multi-peril crop insurance and
the government's farm subsidy program payments.
Multi-Peril Crop Insurance. The Company requires that its
customers purchase multi-peril crop insurance and assign the
insurance coverage to the Company as collateral for the credit
extended by the Company to the customer. Multi-peril crop
insurance, while sold and administered in large part by private companies, is
currently underwritten by the Federal Crop Insurance Corporation
("FCIC"), an agency of the United States Government. Current
multi-peril crop insurance generally covers crop losses for hail, wind,
drought, flood and certain other covered events.
While various forms of federal multi-peril crop insurance have
been in existence since 1938, federal farm policies and funding are
subject to periodic change, and there can be no assurance that the
FCIC or any other federal agency will continue to underwrite multi-
peril crop insurance on an ongoing basis. If the Company's
customers were not able to obtain multi-peril crop insurance through some
combination of the FCIC or domestic or foreign private insurance
underwriters at a reasonable cost, the Company would be required to
seek alternative collateral from its customers, which could have a
material adverse affect on the Company's net revenues. There can
be no assurance that multi-peril crop insurance will continue to be
available to the Company's customers or, if available, for a
reasonable cost.
FSA "Production Flexibility Contract" Payments. The United
State Department of Agriculture, through its Farm Service Agency
("FSA"), guarantees participating farmers fixed payments on
"contract acreage base" for various crops over the next five years
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under Federal Agriculture and Improvement Act ("1995 Farm Bill").
Corn, wheat and certain other crops are currently eligible under
the FSA farm program. If a customer of the Company participates in the
FSA farm program, the Company supplements its security by obtaining
an assignment of the customer's FSA "Production Flexibility
Contract" payments. While various forms of federal support programs have
been in existence since 1933, federal farm policies and funding,
including support payments under the 1995 Farm Bill, are subject to periodic
change, and there can be no assurance that the FSA or any other
federal agency will continue to provide support programs on an
ongoing basis.
Farm Input Pricing and Finance Charges
The Company structures its pricing of farm inputs so that the
net prices paid by its customers who take advantage of the
Company's payment discounts are generally competitive with farm inputs
purchased from another distributor or supplier. The Company
obtains volume discounts for certain farm inputs and may pass all or a
portion of those discounts to its customers. The Company charges
its customers for farm inputs when provided. Finance charges on credit
extended to a customer commence immediately for cash rents provided
by the Company and on the date shipped for other farm input
products sold by the Company to a customer. The Company establishes and
fixes its interest rates each year based on the Company's estimate of
anticipated interest costs over the year. For fiscal 1999, the
Company's customers will be charged interest at a variable rate
note at prime to 4.0% above prime based on the credit worthiness of the
customer. As of May 13, 1998, the current prime rate is 8.50% per
annum as published in the Midwest Edition of THE WALL STREET
JOURNAL.
Spring customer accounts, including all interest, are due by
January 15th for North accounts and January 31st for South
accounts. The Company currently assesses a 3.0% program fee based on the
customer's established credit limit, and the customer can earn back
all or part of the program fee based on the following repayment
dates for North Spring accounts: 3.0% for customer accounts paid off by
November 30, 2.0% for customer accounts paid off by December 20 and
1.0% for customer accounts paid off by January 15th. South Spring
accounts, 3.0% for customer accounts paid off by December 15, 2.0%
for customer accounts paid off by January 5 and 1.0% for customer
accounts paid off by January 31st. Fall customer accounts,
including interest, are due by September 15th. Fall customers can also earn
back the program fee based on the following repayment dates: 3.0%
for customer accounts paid off by July 31, 2.0% for customer
accounts paid off by August 20 and 1.0% for customer accounts paid off by
September 15th.
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Customer Support:
The Company provides customers personalized service with his
farm input needs throughout the entire crop growing cycle. The
Company's product specialists provide information on the
availability and use of various chemicals, fertilizers and seed, while the
ultimate decision of product choice is made by the customer. The
Company's product specialists discuss with customers the efficient
use of farm inputs, cost-effective fertility and weed control
programs, product availability, pricing and delivery. When orders
are received, the Company coordinates the customer's needs and
delivery requirements with the appropriate suppliers. The Company
also generally schedules at least one or two visits to the customer
farms to inspect the growing crop and to discuss harvest plans and
any pertinent problems during the growing cycle. The Company
provides each customer a detailed monthly statement to simplify the
customer's bookkeeping for all farm inputs purchased from the
Company throughout each growing season.
Credit Policy and Customer Notes:
The Company has established a credit policy with procedures for
credit review and approval. Each new customer and customers from
prior years must provide financial and credit information to the
Company. If a customer is approved by the Company for credit, the
Company will generally extend credit of up to 85% of the insured
value of that customer's planned crop, based on his multi-peril
insurance coverage. The Company secures its position principally
by obtaining a lien on the crop and by receiving an assignment of the
farmer's multi-peril crop insurance and government farm program
payments, if available. For certain customers, the Company's lien
on the crop might be subordinate to one or more prior liens, which
would directly reduce the amount of credit available to that customer.
The Company obtains a current credit report or search to verify the
priority of the Company's lien. The Company also contacts customer
references and for larger accounts the Company may visit the
prospective customer's farm to review farm operations before
extending credit.
The Company's principal asset is its notes receivable from
customers who finance their purchase of farm inputs from the
Company throughout the crop growing cycle. At February 28, 1998 and 1997:
the total number of customer accounts were 1,235 and 1078,
respectively; the total outstanding customer notes receivable were
$89,075,176 and $55,571,572, respectively. For the years ended
February 28, 1998 and 1997, there were no individual customers
whose accounts were 5% or more of the Company's total customer notes
receivable at year end.
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Each customer account is assigned to an employee of the Company
for monitoring the collection of customer accounts during harvest
season, under the supervision of the Company's collection managers.
The Company's employees generally contact their respective assigned
customers biweekly during the harvest season. Through this
process, the Company obtains information from customers concerning crop
yields, marketing strategy, number of acres harvested and the
location of the customers' stored crops. If a customer has a claim
under his multi-peril crop insurance, the Company will take steps
to assure that the claim has been properly and timely filed. Under
the Company's credit arrangements, when a customer sells his crop, the
customer is required to obtain the sale proceeds by check, payable
to both the customer and the Company, and forward the check to the
Company as endorsed by the customer. Upon receipt of the check,
the Company applies the proceeds as a payment on the customer's account
and forwards any overpayments to the customer. The Company does
not retain customer funds on deposit. If a customer is to receive all
or a portion of the value of his crop through a multi-peril crop
insurance claim or farm program payment, the collection of that
customer's account could be delayed pending receipt of those
payments.
Some customers may wish to store their crops for later sale, or
for other reasons may not pay their accounts in full when due. The
Company monitors and documents its collateral and collection
position on all accounts on an ongoing basis. The Company will informally
extend the payment of a customer's note receivable to accommodate
a customer's crop marketing requirements if the Company determines
that there continues to be sufficient collateral. Therefore, a
customer's note receivable that is past due may not be past due because of a
customer's inability to pay or collateral impairment. The amount
of customer notes receivable that were past due (including notes
extended by the Company) at February 28, 1998 and 1997, was
$38,494,351 and $29,880,411, respectively. The amount of past due
customer notes receivable increased slightly from 20.2% of net
revenues in fiscal 1997 to 20.7% of net revenues in fiscal 1998,
primarily as a result of the increased dollar amount of customer
notes receivable informally extended by the Company in Fiscal 1998.
The increase in the dollar amount of past due customer notes
receivable has not had a material adverse affect on the Company's
earnings, and management does not believe that this increase will
have a material adverse affect on earnings or the Company's ability
to supply and finance farm inputs in the future.
The Company also continually evaluates and classifies each
customer account based on collateral and expected timing of
collection in determining its allowance for doubtful notes. At
February 28, 1998 and 1997, the Company's allowance for doubtful
notes were $2,800,000 and $2,237,000, respectively.
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Sales and Marketing:
The Company markets its program through advertising, including
direct mail and telemarketing, customer solicitation and referrals,
including cooperative marketing efforts with several major seed and
fertilizer suppliers which allow the Company to market its program
through their dealer networks. In addition, the Company employs
twenty-three full time salaried sales people and one independent
sales representative. The sales representatives identify
prospective customers and assist in obtaining customer information for the
Company's credit review and approval. After a customer has been
approved by the Company, the Company's employees begin to service
the customer's account generally without assistance from the sales
representatives.
In fiscal 1998 and 1997, the Company incurred approximately
$233,700 and $216,300, respectively, in advertising expenses. The
Company plans to spend approximately $350,000 on advertising in
fiscal 1999.
Seasonal Factors:
The sale of farm inputs is seasonal with approximately 76% of
revenues being generated from March 1 through August 31 of each
year.
Credit Facilities:
Due to the seasonality of the Company's revenues and the terms
of its customer notes receivable, the Company is required to
finance the carrying of its revenues as notes receivable for a majority of
its fiscal year.
The Company's business and its growth are dependent on adequate
credit to finance its sales of farm inputs to farmers. The Company
uses its capital, trade credit and bank line of credit to finance
farm input purchases. The terms of the Company's trade credit vary
for each supplier and type of farm input and may require a lien on
certain assets of the Company.
In March 1997, the Company negotiated an asset backed
securitized financing program with a maximum available amount of
$135 million. This five year facility replaces the $100 million line of
credit used in fiscal 1997. On March 9, 1998, the Company amended
the asset backed securitized financing program, which increased the
maximum available borrowing amount under the facility to $205
million and should provide the Company adequate financing
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for fiscal 1999. If the Company were not able to maintain a
sufficient line of credit or other credit facility, the Company
would not be able to finance sufficient sales of farm inputs, which
would have a material adverse affect on the Company's business and
its growth. Management believes that the financial resources
available to it will be sufficient to finance the Company's
business.
Competition:
The Company faces competition from many types of suppliers of
farm inputs, including manufacturers' dealers, independent
distributors and suppliers, and farm cooperatives. Farm input
financing is competitive and, in recent years, several large
agricultural supply companies have provided financing for various
farm inputs. Many of the Company's competitors are considerably
larger and better capitalized, and there can be no assurance that
the Company will be able to compete effectively against such
competitors in the future. Within this competitive environment, the Company
competes principally on the basis of its competitive pricing, broad
range of farm inputs offered, and the convenience of its financing.
Major Customers:
The customer base is sufficiently broad that no customer
accounts for 10% or more of the Company's revenues.
Backlog Orders:
Although the Company had approximately $69,151,000 in
commitments to supply farm inputs, there was no material sales
backlog as of February 28, 1998.
Government Regulation:
Farm input financing and cash advances are subject to certain
state laws governing money brokers, federal and state truth-in-
lending regulations, and state usury laws limiting interest rates
for certain types of customers. Additional laws and regulations could
be implemented in the future governing the Company's financing
activities for the sale of farm inputs and cash advances or other
aspects of the Company's business. Compliance with these laws and
regulations may adversely affect the Company's operations and
costs.
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The sale of certain farm inputs, including agricultural
chemicals and pesticides, is subject to certain federal and state
environmental rules and regulations. The Company holds licenses
necessary for the sale of these products. The Company also serves
as an agent for the sale of multi-peril crop insurance and has fifteen
employees with the required insurance agent's license.
Employees:
As of February 28, 1998, the company had 119 full time
employees, including seven executive positions, twenty-one in
product specialization and distribution, twenty-eight in credit review and
approval, four in multi-peril crop insurance sales, seventeen in
accounting and administration, six in information systems, one in
customer service, eleven in legal and collection, and twenty-four
in sales and marketing. None of the Company's employees are covered
by a collective bargaining agreement. The Company considers its
relations with its employees to be good.
ITEM 2. PROPERTIES
The Company's principal offices, aggregating approximately
25,000 square feet, are located in Cedar Falls, Iowa under a lease
which expires in 2001. The current annual rent is $188,329 plus
utilities, insurance premiums and interior maintenance expenses.
ITEM 3. LEGAL PROCEEDINGS
The Company is named in lawsuits in the ordinary course of its
business. Although it is not possible to predict the outcome of
such lawsuits, in the opinion of management the outcomes will not have
a material adverse effect on the financial condition of the Company.
The Company maintains insurance coverage that management believes
is reasonable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders
during the fourth quarter of the fiscal year covered by this
report.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning Executive Officers, set forth at Item 10
in Part III hereof, is incorporated in Part I of this report by
reference.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Information
In December 1996, the Company moved the trading of its common
stock to the New York Stock Exchange ("NYSE"), under the symbol
ASV, from the National Association of Securities Dealers Automated
Quotation ("NASDAQ"). The market quotations provided by the NYSE
and the over-the-counter market quotations provided by the NASDAQ
appearing on page one of the Annual Report to Shareholders for the
year ended February 28, 1998 are incorporated herein by reference.
These quotations reflect prices without retail markup, markdown or
commissions and may not represent actual transactions.
Stockholders
As of February 28, 1998, the Company had 172 stockholders of
record and approximately 3,100 stockholders for whom securities
firms acted as nominees.
Dividends
The holders of common shares are entitled to receive dividends
when and as declared by the Board of Directors. However, other
than dividends paid prior to September 1989 to its then parent
corporation, which was subsequently merged into the Company, the
Company has not paid a cash dividend on its common stock. The
Company does not anticipate payment of any cash dividends in the
foreseeable future. The Company presently intends to retain
earnings to finance growth. The Company's borrowing agreements contain
covenants that prohibit the declaration or payment of dividends.
ITEM 6. SELECTED FINANCIAL DATA
The "Selected Financial Data" for the Company appearing on pages
10 and 11 of the Annual Report to Stockholders for the year ended
February 28, 1998 is herein incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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The "Managements Discussion and Analysis of Financial Condition
and Results of Operations" appearing on pages 12 through 17 of the
Annual Report to Stockholders for the year ended February 28, 1998
is herein incorporated by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The information for this item is not required until the year
ending February 28, 1999.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Schedules set forth in
Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements on accounting and financial
disclosure with the Company's independent public accountants.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers
The name, age and office(s) held by each of the Registrant's
executive officers are shown below. Each of the executive officers
listed below serves at the pleasure of the Board of Directors,
except Messrs. Jungling, Miller and Schipper who have entered into
employment agreements with the Registrant effective through June
2000.
Name Age Position With the Company
Gaylen D. Miller (1) 49 Chairman of the Board
Henry C. Jungling Jr. (1) 51 President & Chief Executive Officer
Kevin D. Schipper (1) 38 Chief Operating Officer
Todd J. Ryan (1) 35 Vice President Sales and Marketing
Brad D. Schlotfeldt (1) 34 Vice President Finance and Treasurer
Eunice M. Schipper (1) 56 Vice President Credit
Neil H. Stadlman (1) 52 Vice President Credit Administration
(1) Each of Registrant's executive officers has been an employee of
the Company in varying capacities for more than the past five
years.
The balance of the information regarding directors and executive
officers of the Company is set forth in the Company's definitive
Proxy Statement for the Annual Meeting of Stockholders to be held
August 13, 1998 on pages 3 to 5, under the heading "Election of
Directors," and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is set forth in the Company's
definitive Proxy Statement for the Annual Meeting of Stockholders
to be held August 13, 1998 on page 3, under the heading "Election of
Directors," on pages 5 and 6, under the heading "Election of
Directors - Compensation Committee Interlocks and Insider
Participation," and on pages 7 to 14, under the heading "Executive
Compensation and Other Related Information," and is incorporated
herein by reference. However, the "Board Report on Executive
Compensation" and the "Performance Graph," on pages 9 to 11 and
page 15, respectively, are specifically not incorporated by reference.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Information required by this item is set forth in the Company's
definitive Proxy Statement for the Annual Meeting of Stockholders
to be held August 13, 1998 on page 6, under the heading "Security
Ownership of Certain Beneficial Owners and Management," and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is set forth in the Company's
definitive Proxy Statement for the Annual Meeting of Stockholders
to be held August 13, 1998 on pages 4 and 5, under the heading
"Election of Directors," and is incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
Page
(a)(1)- Financial Statements 18
(a)(2)- Financial Statement Schedules 18
(a)(3)and(c)- Exhibits 18
(b) - Reports on Form 8-K
No reports on Form 8-K were filed in the last quarter of the period
covered by this Form 10-K.
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INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
The following index is submitted in response to Item 14:
Page Reference
Annual Report
10-K to Stockholders
------------ ---------------
FINANCIAL STATEMENTS
Report of Independent Public
Accountants 18
Consolidated balance sheets,
February 28, 1998 and 1997 19
Consolidated statements of income,
years ended February 28, 1998,
and 1997 and February 29, 1996 20
Consolidated statements of stock-
holders' equity, years ended
February 28, 1998 and 1997 and
February 29, 1996 21
Consolidated statements of cash flows,
years ended February 28, 1998 and
1997 and February 29, 1996 22
Notes to consolidated financial statements 23 - 43
FINANCIAL STATEMENT SCHEDULES
Report of Independent Public
Accountants 19
Schedule II - Valuation and
Qualifying Accounts 20
EXHIBITS
See Index of Exhibits on pages 22, 23
and 24
The Financial Statements listed in the above index are included
in the Company's Annual Report to Stockholders for the year ended
February 28, 1998, are herein incorporated by reference. With the
exception of the pages listed in the above index and the
information incorporated by reference included in Items 5,6,7,10,11,12 and 13,
the Annual Report to Stockholders for the year ended February 28,
1998 is not deemed filed as a part of this report.
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MCGLADREY & PULLEN, LLP RSM
Certified Public Accountants and Consultants International
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
Ag Services of America, Inc.
Cedar Falls, Iowa
Our audits were made for the purpose of forming an opinion on
the basic consolidated financial statements taken as a whole. The
supplemental schedule II is presented for purpose of complying with
the Securities and Exchange Commission's rules and is not a part of
the basic consolidated financial statements. This schedule has
been subjected to the auditing procedures applied in our audits of the
basic consolidated financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic
consolidated financial statements taken as a whole.
Waterloo, Iowa
May 14, 1998
201 Tower Park Drive, Suite 103
P. O. Box 2656
Waterloo, Iowa 50704-2656
(319) 235-7091 Fax (319) 235-7476
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<PAGE>
<TABLE>
AG SERVICES OF AMERICA, INC.
Schedule II
VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Column A Column B Column C Column D Column E
- --------------------------------- ------------------- --------------------------------- --------------- -------------------
Description Balance at Additions Deductions-- Balance at
Beginning (1) (2) Describe End of
of Period Charged to Charged to Period
Costs and Other
Expenses Accounts--
Describe
- --------------------------------- ------------------- ---------------------------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
Year ended February 28, 1998:
Reserves and allowances deducted
from asset accounts:
Allowance for doubtful notes $2,237,000 $2,962,647 $2,399,647 (1) $2,800,000
Reserve for discounts $528,000 $3,725,973 (2) $3,053,973 (3) $1,200,000
Year ended February 28, 1997:
Reserves and allowances deducted
from asset accounts:
Allowance for doubtful notes $2,146,000 $2,290,388 $2,199,388 (1) $2,237,000
Reserve for discounts $519,000 $2,471,888 (2) $2,462,888 (3) $528,000
Year ended February 29, 1996:
Reserves and allowances deducted
from asset accounts:
Allowance for doubtful notes $2,105,000 $1,862,726 $1,821,726 (1) $2,146,000
Reserve for discounts $458,000 $1,728,136 (2) $1,667,136 (3) $519,000
<FN>
(1) Uncollectible customer notes receivable written off, net of recoveries.
(2) Provision for discounts as a reduction of revenues.
(3) Cash discounts taken.
</TABLE>
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(Registrant) AG SERVICES OF AMERICA, INC.
By(Signature and Title) \s\ Henry C. Jungling, Jr.
Henry C. Jungling, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
\s\ Gaylen D. Miller
Gaylen D. Miller
Chairman
(Principal Financial & Accounting
Officer)
Date May 14, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated:
By:/s/Henry C. Jungling, Jr.
Henry C. Jungling, Jr.
President and Chief Executive Officer
and Director
Date: May 14, 1998
By:/s/Gaylen D. Miller
Gaylen D. Miller
Chairman and Director
Date: May 14, 1998
By:/s/Kevin D. Schipper
Kevin D. Schipper
Chief Operating Officer and Director
Date: May 14, 1998
By:/s/James D. Gerson
James D. Gerson
Director
Date: May 14, 1998
By:/s/Michael Lischin
Michael Lischin
Director
Date: May 14, 1998
By:/s/Ervin J. Mellema
Ervin J. Mellema
Director
Date: May 14, 1998
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<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------- -------
3.1 Articles of Restatement of the Company (1)
3.2 Amended and Restated Bylaws of the Company (3)
3.3 Articles of Amendment (2)
4.1 Form of stock certificate evidencing common stock,
without par value, of the Company (2)
4.2 Form of Indenture between Ag Services of America,
Inc. and Norwest Bank Minnesota, N.A., as Trustee(4)
4.3 Form of 7% convertible Subordinated Debentures due
2003 (included in Exhibit 4.2) (4)
10.1 Loan Agreement dated April 15, 1996 (7)
10.2 Form of Employment Agreement effective July 1, 1991
between the Company and Henry C. Jungling, Jr. (1)
10.3 Form of Employment Agreement effective July 1, 1991
between the Company and Gaylen D. Miller (1)
10.4 Form of Employment Agreement effective July 1, 1991
between the Company and Kevin D. Schipper (1)
10.5 Lease dated August 1992 between the Company and 145
Associates, Ltd., as amended (4)
10.6 1991 Stock Option Plan and form of Stock Option
Agreement (1)
10.7 April 12, 1996 Amendment to lease agreement (Exhibit
10.5) (7)
10.8 1993 Stock Option Plan (4)
10.9 Form of Indemnification Agreement between the
Company and each officer and director (2)
10.10 Commercial Notes dated April 15, 1996 (7)
10.13 April 5, 1995 form of Amendment to Employment
Agreements (Exhibit 10.2, 10.3 and 10.4) (6)
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<PAGE>
10.14 Form of Amendment to 1993 Stock Option Plan (6)
10.15 Retirement and Savings Plan (4)
10.16 Amendment to Retirement and Savings Plan (6)
10.17 Form of 1995 Stock Purchase Plan (6)
10.18 Amended and Restated Loan Agreement dated March 12,
1997 (8)
10.19 Credit Agreement dated March 12, 1997 (8)
10.20 Purchase and Contribution Agreement dated March 12
1997 (8)
10.21 Amendment No. 1 to Third Amended and Restated Loan
Agreement (9)
10.22 Amendment No. 2 to Third Amended and Restated Loan
Agreement (9)
10.23 Amendment No. 3 to Third Amended and Restated Loan
Agreement (9)
10.24 Amendment No. 1 to Credit Agreement (9)
11.1 Statement re computation of per share earnings (9)
13.1 Form of Annual Report to Stockholders for the year
ended February 28, 1998 (9)
21.1 Subsidiaries of the Registrant (9)
27.1 Financial Data Schedule (9)
99.1 Fourth quarter and year end results press release (9)
(1) - Pursuant to Rule 12(b)-32, this exhibit is incorporated by
reference under the same exhibit number to the exhibits filed
with the Registration Statement on Form S-1 on May 31, 1991
as Commission File No. 33-40981.
(2) - Pursuant to Rule 12(b)-32, this exhibit is incorporated by
reference under the same exhibit number to the exhibits filed
with Pre-Effective Amendment No. 1 to the Registration
Statement on Form S-1 on July 12, 1991 as Commission File
No. 33-40981.
(3) - Pursuant to Rule 12(b)-32, this exhibit is incorporated by
reference under the same exhibit number to the exhibits filed
with Pre-Effective Amendment No. 2 to the Registration
Statement
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<PAGE>
on Form S-1 on July 24, 1991 as Commission File No. 33-40981.
(4) - Pursuant to Rule 12(b)-32, this exhibit is incorporated by
reference under the same exhibit number to the exhibits filed
with the Registration Statement on Form S-1 on March 31, 1993
as Commission File No. 33-60358.
(5) - Pursuant to Rule 12(b)-32, this exhibit is incorporated by
reference under the same exhibit number to the exhibits filed
with the Company's Form 10-K for the year ended February 28,
1994.
(6) - Pursuant to Rule 12(b)-32, this exhibit is incorporated by
reference under the same exhibit number to the exhibits filed
with the Company's Form 10-K for the year ended February 28,
1995.
(7) - Pursuant to Rule 12(b)-32, this exhibit is incorporated by
reference under the same exhibit number to the exhibits filed
with the Company's Form 10-K for the year ended February 29,
1996.
(8) - Pursuant to Rule 12(b)-32, this exhibit is incorporated by
reference under the same exhibit number to the exhibits filed
with the Company's Form 10-K for the year ended February 28,
1997.
(9) - Filed herewith
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<PAGE>
AG SERVICES OF AMERICA, INC.
EXHIBIT 10.21
AMENDMENT NO.1 TO THIRD AMENDED AND RESTATED LOAN AGREEMENT
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<PAGE>
AMENDMENT NO. 1 TO THIRD AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDMENT NO. 1 TO THIRD AMENDED AND RESTATED LOAN
AGREEMENT is dated as of August 19, 1997, and is by and among AG
SERVICES OF AMERICA, INC., an Iowa corporation (the "Borrower");
THE FINANCIAL INSTITUTIONS parties hereto from time to time as
lenders (each, a "Bank" and collectively, the "Banks"),
and COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "Rabobank
Nederland", New York Branch ("Rabobank"), as agent for the Banks
hereunder (in such capacity, the "Administrative Agent").
RECITALS
The Borrower, the Banks and Rabobank entered into a Third
Amended and Restated Loan Agreement, dated as of March 12, 1997,
(the "Loan Agreement"), pursuant to which the Banks have
established a line of credit in favor of the Borrower on the
subject to the terms and conditions set forth therein. The parties
desire to amend the Loan Agreement to modify certain terms and
conditions of the Loan Agreement, all as more particularly set
forth herein.
NOW, THEREFORE, in consideration of the above premises and other
good and valuable consideration, the sum and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. Amendments to Loan Agreement.
(a) Section 1.02. Section 1.02 of the Loan Agreement is
amended as follows:
(i) The definitions of "Borrowing Base Certificate",
"Eligible Advance" and "Line of Credit Borrowing Base" are
deleted and the following substituted in lieu thereof:
"Borrowing Base Certificate" shall mean a report
substantially in the form of Exhibit E to the Asset
Securitization Credit Agreement which shall also contain
such borrowing base and other information required by the
Administrative Agent relative to Inventory, Eligible
Inventory, Eligible Seed Financing Receivables, Seed
Financing Receivables and Receivables.
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<PAGE>
"Eligible Advance" as of the date of determination shall
mean a Customer Advance in respect of a Customer Loan,
which qualifies as, and meets the definition of, an
"Eligible Advance" under the Asset Securitization Credit
Agreement.
"Line of Credit Borrowing Base" shall mean (a) on each
date of determination during the months of March, April,
May, June, July, August, September and October of each
Fiscal Year, (i) an amount equal to the positive
difference between the Borrowing Base on such date minus
(ii) the aggregate principal amount of Triple-A
Loans outstanding on such date and (b) on each date of
determination during the months of March, November,
December, January and February of each Fiscal Year, and
amount equal to the positive difference between (iii)
seventy-five percent(75.0%) of Net Aggregate Eligible
Advances on such date minus (iv) the aggregate
principal amount of Triple-A Loans outstanding on such
date plus (c) on each date of determination prior to the
Termination Date, sixty-five percent (65.0%) of the
documented invoice value of Eligible Inventory on such
date plus (d) on each date of determination date
prior to the Termination Date, fifty percent (50.0%) of
Eligible Seed Financing Receivables on such date.
(ii) Definitions of "Eligible Seed Financing
Receivables", "Eligible Inventory", "Inventory", and
"Seed Financing Receivables" are added as follows:
"Eligible Seed Financing Receivables" as of the date of
determination shall mean Seed Financing Receivables of
the Borrower in which the Banks have a valid and fully
perfected first priority Lien free and clear of all other
Liens, which have initial terms to maturity of not more
than 15 months, no portion of which remains unpaid for
more than 90 days after the original maturity date and
which are not Acquired Customer Advances.
"Eligible Inventory" as of the date determination shall
mean Inventory of the Borrower in which the Banks have a
valid and fully perfected first priority Lien free and
clear of all other Liens and which has not been
contributed by the Borrower to the capital of Ag
Acceptance pursuant to the Asset Securitization Purchase
and Contribution Agreement or purchased from the Borrower
pursuant to the Asset Securitization Purchase and
Contribution Agreement.
"Inventory" shall mean "inventory" as such term is
defined under
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<PAGE>
Section 9-109 of the New York Uniform Commercial Code.
"Seed Financing Receivables" means Eligible Advances of
the Borrower arising in connection with customer Advances
made by the Borrower to a Customer to finance such
Customer's purchase of seed.
(b) Section 2.04. Section 2.04(a) of the Loan Agreement is
amended to read as follows:
(a) Rate Prior to Delinquency. (i) Subject to the
provisions of Section 2.04(b), each Advance comprised of Base
Rate Loans shall bear interest at a rate per annum equal to
the Base Rate plus one-half of one percent (.50%). The
interest rate on Advance comprised of Base Rate Loans shall
change as and when the Base Rate changes, effective as of
the opening of business on the day on which such chance in the
Base Rate becomes effective.
(ii) Subject to the provisions of Section 2.04(b), each
Advance comprised of Fed Funds Rate Loans shall bear interest
at a rate per annum equal to the Fed Funds Rate plus two and
one half percent (2.50%). The interest rate on Advance
comprised of said Fed Funds Rate Loans shall change as and
when the Fed Funds Rate changes, effective as of the opening
of business on the day in which such change in the Fed Funds
Rate becomes effective.
(iii) Subject to the provisions of Section 2.04(b), each
Advance comprised of LIBOR Loans shall bear interest as a rate
per annum equal to the LIBOR Rate for the Interest Period in
effect for such Advance plus two (2.00%).
(iv) Interest on each Advance shall accrue from and
including the first day of an Interest Period to but excluding
the last day of such Interest Period or the day such Advance
is paid in full if such day is other than the last day of such
Interest Period.
3. Amendment Fee. In consideration of the amendments
made to the Loan Agreement hereunder, the Borrower agrees to pay
the agent a one-time, non-refundable amendment fee in the amount of
$50,000.00 (the "Amendment Fee") which shall be due and payable at
the time this Amendment is executed by the Borrower.
4. Reaffirmation by Borrower; Collateral. The Borrower
confirms and reaffirms
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<PAGE>
in favor of each Bank all the Borrower's obligations and agreements
under the Loan Agreement, as amended hereby and under each Loan
Document to which it is a party and confirms, reaffirms an agrees
the at payment of each Loan, each Note and the payment of all
Indebtedness to each Bank under the Loan Agreement, as amended
hereby, are and shall be secured by the Liens in the Collateral
granted under the Loan Agreement, as amended hereby, and each Loan
Document. The Borrower agrees to execute and deliver such
documents, agreements, financing statements and amendments to the
Loan Documents and to take such further action as may be necessary
in order to vest and fully perfect in each Bank all Liens in
Collateral as first priority Liens therein in each Bank to the
extent required by the Loan Agreement.
5. Representations and Warranties. In order to induce the
Administrative Agent and each Bank to execute this Amendment, the
Borrower represents and warrants as follows:
(a) The Borrower has the power and authority to execute and
perform this Amendment and the Loan Agreement, as amended hereby.
(b) The execution, delivery and performance of this
Amendment and the Loan Agreement, as amended hereby have been duly
authorized by all required corporate action.
(c) This Amendment and the Loan Agreement, as amended
hereby, constitute legal, valid and binding obligations of the
Borrower enforceable against the Borrower in accordance with their
respective terms.
(d) No authorization, approval, or other action by, and no
notice to or filing with, any Governmental Body is required for the
due execution, delivery and performance by the Borrower of this
Amendment of the Loan Agreement, as amended hereby.
(e) No default or Event of Default has occurred and is
continuing.
(f) All the representations and warranties of the Borrower
contained in the Loan Agreement are true and correct on and as of
the date hereof as though made on and as of such date except to the
extent such representations and warranties relate solely to an
earlier date.
(g) There is no pending or threatened action or proceeding
affecting the Borrower or any of its Subsidiaries before any
Governmental Body which may materially adversely affect the
condition, financial or otherwise, of operations of the Borrower.
6. Conditions Precedent. This Amendment shall not be
effective against any of the parties hereto unless and until
(a) the Amendment Fee shall have been paid to the
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<PAGE>
Administrative Agent and (b) the Administrative Agent has been
furnished with (i) this Amendment, duly executed by all the parties
hereto, (ii) certified copies of all corporate action taken by the
Borrower, including resolutions of its Board of Directors,
authorizing the execution, deliver, and performance of this
Amendment and each other document to which it is a party and which
is requires to be delivered pursuant to this Amendment, and (iii)
all other documents, agreement, financing statements and amendments
to Loan documents as necessary in order to grant and perfect each
Lien in Collateral as first priority Liens in favor of the Banks to
the extent required by the Loan Agreement, as amended hereby.
7. Miscellaneous.
a. Upon the effectiveness of this Amendment, on and after
the date hereof, each reference in the Loan Agreement to "this
Agreement", this "Loan Agreement", "hereunder", "hereof", "herein"
or words of like import shall mean and be a reference to
the Loan Agreement as amended hereby, and each reference in the
Notes and the other Loan Documents shall mean and be reference to
the Loan Agreement, as amended hereby.
b. All capitalized terms used and not otherwise defined
herein shall have the same meaning herein as in the Loan Agreement.
c. This Amendment may be executed in any number of
counterparts or facsimile counterparts, each of which shall be an
original and all of which shall constitute one agreement and it
shall not be necessary in making proof of this Amendment to produce
or account for more than one counterpart.
d. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York without regard
to principles of conflicts of laws.
e. The Borrower shall pay on demand all costs and expenses
of the Administrative Agent and the Banks in connection with the
preparation, review and negotiation of this Amendment and the other
instruments and documents to be delivered hereunder, including,
without limitation, the reasonable fees, expenses and out-of-pocket
costs of counsel (who may be in-house counsel) for the
Administrative Agent or the Banks with respect thereto, with
respect to advising the Administrative Agent or the Banks as to its
or their rights and responsibilities hereunder and thereunder and
with respect to the enforcement of its or their rights hereunder,
under any Note or under the Loan Agreement, as amended hereby,
under any Loan Document and the maintenance or perfection of any
Lien in Collateral (including compensation of all agents, attorneys
and accountants employed by the Administrative Agent or the Bank
with respect thereto). In addition, the Borrower shall pay any and
all stamp and other taxes payable or determined to be payable in
connection with the execution and delivery of this Amendment and
the other instruments and documents to be delivered hereunder, and
agrees to save the
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<PAGE>
Administrative Agent and each Bank harmless from and against any
and all liabilities with respect to or resulting from any delay in
paying or omission to pay taxes.
f. The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate
as a waiver of any right, power or remedy of the Administrative
Agent or the Banks under the Loan Agreement, nor constitute a
waiver of any provision of the Loan Agreement.
g. This Amendment represents the final agreement by and
among the Borrower, the Administrative Agent and the Banks as to
the subject matter hereof and may not be contradicted by evidence
of prior, contemporaneous or subsequent oral agreements of the
parties. There are no unwritten oral agreement between the
parties.
h. Except for the amendments made hereby, in all other
respects the Loan Agreement and each other Loan Document shall
remain in full force and effect.
8. Acknowledgment. The Borrower hereby acknowledges
receipt of a copy of this Amendment and each other document at any
time executed by a debtor in connection with this Amendment or with
the Indebtedness to the Banks under the Loan Agreement, as amended
hereby.
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<PAGE>
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS
AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY THOSE
TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS WRITTER CONTRACT
MAY BE LEGALLY ENFORCED. YOU MAY CHANGE THE TERMS OF
THIS AGREEMENT ONLY BY ANOTHER WRITTER AGREEMENT.
IN WITNESS WHEROF, the Borrower, each Bank and the Administrative
Agent have
caused this agreement to be duly executed by their duly authorized
officers, all as of the
day and year above written.
AG SERVICES OF AMERICA, INC.
(Borrower)
By: _________________________
Henry C. Jungling,
President
By: _________________________
Neil Stadlman,
Vice President
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "Rabobank
Nederland", New York Branch
(Administrative Agent and Bank)
By: _________________________
Name: __________________
Title:__________________
By: _________________________
Name: __________________
Title:__________________
<PAGE>
AG SERVICES OF AMERICA, INC.
EXHIBIT 10.22
AMENDMENT NO. 2 TO THIRD AMENDED AND RESTATED LOAN AGREEMENT
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<PAGE>
AMENDMENT NO. 2 TO THIRD AMENDED
AND RESTATED LOAN AGREEMENT
THIS AMENDMENT NO. 2 TO THIRD AMENDED AND RESTATED LOAN
AGREEMENT is dated as of April 19, 1998, and is by and among AG
SERVICES OF AMERICA, INC., an Iowa corporation (the
"Borrower"); THE FINANCIAL INSTITUTIONS parties hereto from time
to time as lenders (each, a "Bank" and collectively, the "Banks"),
and COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B A., "Rabobank
Nederland", New York Branch ("Rabobank"), as agent for the Banks
hereunder (in such capacity, the "Administrative Agent").
RECITALS
The Borrower, the Banks and Rabobank entered into a Third
Amended and Restated Loan Agreement, dated as of March 12, 1997, as
amended by Amendment No.1 to Third Amended and Restated Loan
Agreement, dated as of August 19, 1997 (as amended, the "Loan
Agreement"), pursuant to which the Banks have established a line of
credit in favor of the Borrower on and subject to the terms and
conditions set forth therein. The parties desire to amend the Loan
Agreement to establish a separate Credit Facility in favor of the
Borrower and to modify certain terms and conditions of the Loan
Agreement, all as more particularly set forth herein.
NOW, THEREFORE, in consideration of the above premises and other
good and valuable consideration, the sum and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. Amendments to Loan Agreement. The Loan Agreement is
amended as follows:
(a) Section 1.02. Section 1.02 of the Loan Agreement is
amended as follows:
(i) The definitions of each of the terms referenced in
SCHEDULE 1 .02A attached hereto shall replace the definition of
such defined term set forth in Section 1.02 of the Loan Agreement.
(ii) The defined terms set forth in SCHEDULE 1 .02B
attached hereto are added to Section 1.02.
(b) Section 2.02. Section 2.02 of the Loan Agreement is
amended by deleting the reference to "Stated Line of Credit
Commitment Amount" and by substituting therefor "Line of Credit
Commitment". The Loan Agreement is amended accordingly.
<PAGE>
(c) Article II. Article II of the Loan Agreement in amended
by adding a Section 2.20 thereto as follows:
Section 2A.20. Reference to Advances. Each reference in this
Article II to "Advances" or an "Advance" shall mean and refer,
respectively, to Line of Credit Advances and a Line of Credit
Advance.
(d) Article IIA. The Loan Agreement is amended by adding an
Article IIA which contains the terms, conditions and provisions set
forth in SCHEDULE 'IA attached hereto.
(e) Section 2.03. Each reference to "Loan" in Section 2.03
shall mean and refer to the "Total Line of Credit Loan". The Loan
Agreement is amended accordingly.
(f) Section 12.10. Each reference to "Line of Credit Loans"
in Section 12.10 shall mean and refer to "Loans". The Loan
Agreement is amended accordingly.
(g) Section 13.14. Each reference to "Line of Credit Loan" in
Section 13.14 shall mean and refer to "Loans". The Loan Agreement
is amended accordingly.
(h) Section 13.15. Each reference to "Line of Credit Loans"
in Section 13.15 shall mean and refer to "Loans". The Loan
Agreement is amended accordingly.
(i) Exhibits and Schedules.
(i) Exhibit G. Exhibit G to the Loan Agreement is
deleted and Exhibit G attached hereto is substituted therefor.
(ii) Exhibit H. An Exhibit H in the form of Exhibit H
attached is added to the Loan Agreement.
(iii) Schedule I. Schedule I to the Loan Agreement is
amended and Schedule I attached hereto is substituted therefor.
3. Reaffirmation by Borrower Collateral. The Borrower
confirms and reaffirms in favor of each Bank all the Borrower 5
obligations and agreements under the Loan Agreement, as amended
hereby, and under each Loan Document to which it is a party and
confirms, reaffirms and agrees that payment of each Loan, each Note
and the payment of all Indebtedness to each Bank under the Loan
Agreement, as amended hereby, are and shall be secured by the Liens
in the Collateral granted under the Loan Agreement, as amended
hereby,
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<PAGE>
including, without limitation, each Customer Loan (including each
Intermediate Term Customer Loan) and related Customer Loan
Documents and each Loan Document. The Borrower agrees to execute
and deliver such documents, agreements, financing statements and
amendments to the Loan Documents and to take such further action as
may be necessary in order to vest and fully perfect in each Bank
all Liens in Collateral as first priority Liens therein in each
Bank: to the extent required by the Loan Agreement.
4. Representations and Warranties. In order to induce the
Administrative Agent and each Bank to execute this Amendment, the
Borrower represents and warrants as follows:
(a) The Borrower has the power and authority to execute and
perform this Amendment and the Loan Agreement, as amended hereby.
(b) The execution, delivery and performance of this Amendment
and the Loan Agreement, as amended hereby, have been duly
authorized by all required corporate action.
(c) This Amendment, the Intermediate Term Credit Note and the
Loan Agreement, as amended hereby, constitute legal, valid and
binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms.
(d) No authorization, approval, or other action by, and no
notice to or filing with, any Governmental Body is required for the
due execution, delivery and performance by the Borrower of this
Amendment of the Loan Agreement, as amended hereby.
(e) No Default or Event of Default has occurred and is
continuing.
(f) All the representations and warranties of the Borrower
contained in the Loan Agreement are true and correct on and as of
the date hereof as though made on and as of such date, except to
the extent such representations and warranties relate solely to an
earlier date.
(g) There is no pending or threatened action or proceeding
affecting the Borrower or any of its Subsidiaries before any
Governmental Body which may materially adversely affect the
condition, financial or otherwise, or operations of the Borrower.
5. Conditions Precedent. This Amendment shall not be
effective against any of the parties hereto unless and until the
Administrative Agent has been furnished with the following:
(a) This Amendment, duly executed by all the parties hereto.
(b) The Intermediate Term Credit Note, duly executed by the
Borrower.
(c) Certified copies of all corporate action taken by the
Borrower, including resolutions of its Board of Directors,
authorizing the execution, delivery, and performance of this
<PAGE>
Amendment and each other document to which it is a party and which
is required to be delivered pursuant to this Amendment.
(d) An Intercreditor Agreement in form and content
satisfactory to the Administrative Agent, between the Borrower and
Ag Acceptance pertaining to their relative priorities in collateral
securing loans and advances made to common Customers, duly executed
by the Borrower and Ag Acceptance and consented to and approved by
CapMAC, Triple-A One and Rabobank.
(e) A certificate of the Secretary or an Assistant Secretary
of the Borrower as to (i) the Articles of Incorporation and the
Bylaws of the Borrower having not been amended, modified or changed
in any manner since March 12, 1997, and (ji) the incumbency of the
officer or officers of the Borrower who sign this Amendment, the
Intermediate Term Credit Note and such other documents,
instruments, amendments and modifications to be executed by the
Borrower in connection with this Amendment, including therein a
signature specimen of such officer or officers.
(f) The favorable written opinion of legal counsel to the
Borrower, in form, content and substance satisfactory to the
Administrative Agent, to the effect that (i) this Amendment, the
Intermediate Term Credit Note, the Intercreditor Agreement and such
other documents, instruments, amendments and modifications to be
executed by the Borrower in connection with or pursuant to this
Amendment have been duly authorized by all necessary corporate
action on behalf of the Borrower and each has been duly executed
and delivered on behalf of the Borrower and are valid, binding and
enforceable against the Borrower in accordance with the terms
thereof, (ii) to the knowledge of such counsel, there is no
provision in any indenture, contract or agreement to which the
Borrower is a party or by which it is bound which prohibits the
execution and delivery by the Borrower of this Amendment, the
Intermediate Term Credit Note, the Intercreditor Agreement or any
such other document, instrument, amendment or modification to be
executed by the Borrower in connection with or pursuant to this
Amendment or which prohibits the performance or observance by a
Borrower of this Amendment, the Intermediate Term Credit Note, the
Intercreditor Agreement or any such other document, instrument,
amendment or modification to be executed by the Borrower in
connection with or pursuant to this Amendment and covering such
other matters as the Administrative Agent shall reasonably request.
(g) All other documents, agreements, financing statements and
amendments to Loan Documents as necessary in order to grant and
perfect each Lien in Collateral as first priority Liens in favor of
the Banks to the extent required by the Loan Agreement, as amended
hereby.
-4-
<PAGE>
6. Miscellaneous.
(a) Upon the effectiveness of this Amendment, on and after
the date hereof, each reference in the Loan Agreement to "this
Agreement", this "Loan Agreement", "hereunder", "hereof', "herein"
or words of like import shall mean and be a reference to the Loan
Agreement as amended hereby, and each reference in the Notes and
the other Loan Documents shall mean and be reference to the Loan
Agreement, as amended hereby.
(b) All capitalized terms used and not otherwise defined
herein shall have the same meaning herein as in the Loan Agreement,
as amended hereby.
(c) This Amendment may be executed in any number of
counterparts or facsimile counterparts, each of which shall be an
original and all of which shall constitute one agreement and it
shall not be necessary in making proof of this Amendment to produce
or account for more than one counterpart.
(d) This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York without regard
to principles of conflicts of laws.
(e) The Borrower shall pay on demand all costs and expenses
of the Administrative Agent and the Banks in connection with the
preparation, review and negotiation of this Amendment and the other
instruments and documents to be delivered hereunder, including,
without limitation, the reasonable fees, expenses and out-of-pocket
costs of counsel (who may be in-house counsel) for the
Administrative Agent or the Banks with respect thereto, with
respect to advising the Administrative Agent or the Banks as to its
or their rights and responsibilities hereunder and thereunder and
with respect to the enforcement of its or their rights hereunder,
under any Note or under the Loan Agreement, as amended hereby,
under any Loan Document and the maintenance or perfection of any
Lien in Collateral (including compensation of all agents, attorneys
and accountants employed by the Administrative Agent or the Bank
with respect thereto). In addition, the Borrower shall pay any and
all stamp and other taxes payable or determined to be payable in
connection with the execution and delivery of this Amendment and
the other instruments and documents to be delivered hereunder, and
agrees to save the Administrative Agent and each Bank harmless from
and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay taxes. The Borrower
shall not be required to pay or reimburse the Administrative Agent
more than $7,500 for legal fees (which shall not include related
out-of-pocket expenses of legal counsel) incurred by the
Administrative Agent in connection with the preparation, review and
negotiation of this Amendment and the other instruments and
documents to be delivered hereunder.
(f) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate
as a waiver of any right, power or remedy of the
-5-
<PAGE>
Administrative Agent or the Banks under the Loan Agreement, nor
constitute a waiver of any provision of the Loan Agreement.
(g) This Amendment represents the final agreement by and
among the Borrower, the Administrative Agent and the Banks as to
the subject matter hereof and may not be contradicted by evidence
of prior, contemporaneous or subsequent oral agreements of the
parties. There are no unwritten oral agreements between the
parties.
(h) Except for the amendments made hereby, in all other
respects the Loan Agreement and each other Loan Document shall
remain in full force and effect.
7. Acknowledgement. The Borrower hereby acknowledges receipt
of a copy of this Amendment, the Intermediate Term Credit Note, the
Intercreditor Agreement and each other document at any time
executed by a debtor in connection with this Amendment or with the
Indebtedness to the Banks under the Loan Agreement, as amended
hereby.
-6-
<PAGE>
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD
BE READ CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE
ENFORCEABLE. NO OTHER TERMS OR ORAL PROMISES NOT CONTAINED IN THIS
WRITTEN CONTRACT MAY BE LEGALLY ENFORCED. YOU MAY CHANGE THE TERMS
OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
IN WITNESS WHEREOF, the Borrower, each Bank and the Administrative
Agent have caused this Agreement to be duly executed by their duly
authorized officers, all as of the day and year first above written
AG SERVICES OF AMERICA, INC
(Borrower)
By: ___________________________
Henry C. Jungling
President
By: ___________________________
Neil Stadlman,
Vice President
COOPERATIEVE CENTRALE RAIFFEISENBOERENLEENBANK
B.A., "Rabobank Nederland", New York Branch
(Administrative Agent and Bank)
By: ___________________________
Name: _____________________________
Title: ______________________________
By: ___________________________
Name: ___________________________
Title: ______________________________
-7-
<PAGE>
SCHEDULE I
COMMITMENTS AND LENDING OFFICES
<PAGE>
Lending Offices
Name of Bank Lending Office
- --------------------- -------------------
Cooperatieve Centrale Raiffeisen- Rabobank Nederland
Boerenleenbank B.A. "Rabobank 245 Park Avenue
Nederland", New York Branch New York, New York 10167
-2-
<PAGE>
Line of Credit Commitments
and
Total Line of Credit Commitment
Name of Bank Line of Credit Commitment
- ---------------------- -------------------------
Cooperatieve Centrale Raiffeisen- $8,500,000.00
Boerenleenbank B.A. "Rabobank
Nederland", New York Branch
Total Line of Credit Commitment $8,500,000.00
-3-
<PAGE>
Intermediate Term Credit Commitments
and
Total Intermediate Term Credit Commitment
Intermediate Term
Name of Bank Credit Commitment
- ------------------------------ -----------------
Cooperatieve Centrale Raiffeisen- $20,000,000.00
Boerenleenbank B.A. "Rabobank
Nederland", New York Branch
Total Intermediate Term Credit Commitment $20,000,000.00
-4-
<PAGE>
SCHEDULE 1.02A
REPLACEMENT DEFINED TERMS
"Advance" shall mean each Line of Credit Advance made by the Banks
on a single date or each Intermediate Term Advance made by the
Banks on a single date, or both, as the context dictates.
"Base Rate Loan" shall mean each Line of Credit Loan or each
Intermediate Term Loan bearing interest at a rate determined by
reference to the Base Rate, or both, as the context dictates.
"Borrowing Base Certificate" shall mean a report substantially in
the form of Exhibit E to the Asset Securitization Credit Agreement
and otherwise acceptable to the Administrative Agent and which
shall also contain such borrowing base and other information
required by the Administrative Agent relative to Inventory,
Eligible Inventory, Eligible Seed Financing Receivables, Seed
Financing Receivables, Receivables, Intermediate Term Customer
Loans and related Customer Collateral and the Intermediate Term
Credit Borrowing Base.
"Borrowing Base Deficit" shall mean, at any time, the amount, if
any, by which the then outstanding principal amount of the Total
Line of Credit Loan exceeds the Line of Credit Borrowing Base then
in effect.
"Commitment" shall mean each Bank's obligation, if any, to make
Line of Credit Loans and Intermediate Term Loans to the Borrower
hereunder.
"Customer Collateral" shall mean the collateral and Property in
which a Lien has been granted, or which has been assigned, to the
Borrower to secure payment of a Customer Loan or other Indebtedness
owed to the Borrower by a Customer, including, without limitation
(a) all of the Borrower's right, title and interest in and to the
payments to be made by the Customer and any other rights which are
assignable under the related Customer Loan Documents, (b) all
security interests or liens and property subject thereto from time
to time purporting to secure payment of such Customer Loan, whether
pursuant to the Customer Loan Documents related to such Customer
Loan or otherwise, including, without limitation, all interest in
Crop Insurance with respect to such property, all Equipment and all
Real Estate (c) all Records, (d) guaranties and other agreements or
arrangements of whatever character from time to time supporting or
securing payment of such Customer Loan whether pursuant to the
Customer Loan Documents related to such Customer Loan or otherwise,
and (e) all rights under warranties, indemnities, insurance with
respect to the Customer Loans, the related Customer Loan Documents
or other Customer Collateral described above.
-4-
<PAGE>
"Fed Funds Rate Loan" shall mean each Line of Credit Loan and each
Intermediate Term Loan bearing interest at a rate determined by
reference to the Fed Funds Rate.
"Fixed Rate Loan" shall mean each Line of Credit Loan bearing
interest determined by reference to the LIBO Rate or each
Intermediate Term Loan bearing interest determined by reference to
the LIBO Rate, or both, as the context dictates.
"Interest Period" shall mean (a) as to any Advance comprised of
Fixed Rate Loans, the period commencing on the date such Advance is
made, or on the last day of the immediately preceding Interest
Period applicable to such Advance, as the case may be, and ending,
on the numerically corresponding day (or if there is no numerically
corresponding day, on the last day) in the calendar month that is
1, 2 or 3 months thereafter in the case of an Advance which is a
Line of Credit advance, or in the calendar month that is 1, 2, 3 or
6 months thereafter, in the case of an Advance which is an
Intermediate Term Credit Advance, as the Borrower may select, and
(b) as to any Advance comprised of Variable Rate Loans, the period
commencing on the date such Advance is made or on the last day of
the immediately preceding Interest Period applicable to such
Advance, as the case may be and ending on the earlier to occur of
(i) the date such Advance is converted to or refinanced as a Fixed
Rate Loan or as a Variable Rate Loan whose interest rate is
determined by reference to a different Type of Variable Rate or
(ii) the Termination Date; provided, however, (x) each Interest
Period applicable to an Advance comprised of Fixed Rate Loans that
commences on the last Business Day of a calendar month (or on any
day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last
Business Day of the appropriate subsequent calendar month; (y) no
Interest Period may extend beyond the Line of Credit Maturity Date,
in the case of each Advance which is a Line of Credit Advance, or
the Intermediate Term Credit Maturity Date, in the case of each
Advance which is an Intermediate Term Credit Advance; and (z) if an
Interest Period would end on a day that is not a Business Day, such
Interest Period shall be extended to the next Business Day unless
such Business Day would fall in the next calendar month, in which
event such Interest Period shall end on the immediately preceding
Business Day.
"Line of Credit Advance" shall mean a group of Line of Credit
Loans of a single Type made by the Banks on a single date and as to
which a single Interest Period is in effect.
"Loan" shall mean the aggregate of all outstanding Line of
Credit Loans of the Banks and the aggregate of all outstanding
Intermediate Term Credit Loans of the Banks.
"Loan Fees" shall mean the Line of Credit Facility Fee, the
Intermediate Term Credit Facility Fee and each Default Fee.
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<PAGE>
"Termination Date" shall mean the earliest of (a) the Line of
Credit Maturity Date or (b) the Intermediate Term Credit Maturity
Date, or (c) the date on which the Commitments are terminated
pursuant to Section 10.02(a) hereof
"Type", when used in respect of an Advance or a Loan, shall refer
to the Rate by reference to which interest on such Advance or Loan
is determined. For purposes hereof, the term "Rate" shall include
the LIBO Rate, the Base Rate or the Fed Funds Rate.
-3-
<PAGE>
SCHEDULE I
COMMITMENTS AND LENDING OFFICES
<PAGE>
Lending Offices
Name of Bank Lending Office
- --------------------- --------------
Cooperatieve Centrale Raiffeisen- Rabobank Nederland
Boerenleenbank B.A. "Rabobank 245 Park Avenue
Nederland", New York Branch New York, New York 10167
-2-
<PAGE>
Line of Credit Commitments
and
Total Line of Credit Commitment
Name of Bank Line of Credit Commitment
- ------------------------ -------------------------
Cooperatieve Centrale Raiffeisen- $8,500,000.00
Boerenleenbank B.A. "Rabobank
Nederland", New York Branch
Total Line of Credit Commitment $8,500,000.00
-3-
<PAGE>
Intermediate Term Credit Commitments
and
Total Intermediate Term Credit Commitment
Intermediate Term
Name of Bank Credit Commitment
- ----------------------- ------------------
Cooperatieve Centrale Raiffeisen- $20,000,000.00
Boerenleenbank B.A. "Rabobank
Nederland", New York Branch
Total Intermediate Term Credit Commitment $20,000,000.00
-4-
<PAGE>
SCHEDULE 1.02A
REPLACEMENT DEFINED TERMS
"Advance" shall mean each Line of Credit Advance made by the
Banks on a single date or each Intermediate Term Advance made by
the Banks on a single date, or both, as the context dictates.
"Base Rate Loan" shall mean each Line of Credit Loan or each
Intermediate Term Loan bearing interest at a rate determined by
reference to the Base Rate, or both, as the context dictates.
"Borrowing Base Certificate" shall mean a report substantially
in the form of Exhibit E to the Asset Securitization Credit
Agreement and otherwise acceptable to the Administrative Agent and
which shall also contain such borrowing base and other information
required by the Administrative Agent relative to Inventory,
Eligible Inventory, Eligible Seed Financing Receivables, Seed
Financing Receivables, Receivables, Intermediate Term Customer
Loans and related Customer Collateral and the Intermediate Term
Credit Borrowing Base.
"Borrowing Base Deficit" shall mean, at any time, the amount,
if any, by which the then outstanding principal amount of the Total
Line of Credit Loan exceeds the Line of Credit Borrowing Base then
in effect.
"Commitment" shall mean each Bank's obligation, if any, to
make Line of Credit Loans and Intermediate Term Loans to the
Borrower hereunder.
"Customer Collateral" shall mean the collateral and Property
in which a Lien has been granted, or which has been assigned, to
the Borrower to secure payment of a Customer Loan or other
Indebtedness owed to the Borrower by a Customer, including, without
limitation (a) all of the Borrower's right, title and interest in
and to the payments to be made by the Customer and any other rights
which are assignable under the related Customer Loan Documents, (b)
all security interests or liens and property subject thereto from
time to time purporting to secure payment of such Customer Loan,
whether pursuant to the Customer Loan Documents related to such
Customer Loan or otherwise, including, without limitation, all
interest in Crop Insurance with respect to such property, all
Equipment and all Real Estate (c) all Records, (d) guaranties and
other agreements or arrangements of whatever character
<PAGE>
from time to time supporting or securing payment of such Customer
Loan whether pursuant to the Customer Loan Documents related to
such Customer Loan or otherwise, and (e) all rights under
warranties, indemnities, insurance with respect to the Customer
Loans, the related Customer Loan Documents or other Customer
Collateral described above.
"Fed Funds Rate Loan" shall mean each Line of Credit Loan and
each Intermediate Term Loan bearing interest at a rate determined
by reference to the Fed Funds Rate.
"Fixed Rate Loan" shall mean each Line of Credit Loan bearing
interest determined by reference to the LIBO Rate or each
Intermediate Term Loan bearing interest determined by reference to
the LIBO Rate, or both, as the context dictates.
"Interest Period" shall mean (a) as to any Advance comprised
of Fixed Rate Loans, the period commencing on the date such Advance
is made, or on the last day of the immediately preceding Interest
Period applicable to such Advance, as the case may be, and ending,
on the numerically corresponding day (or if there is no numerically
corresponding day, on the last day) in the calendar month that is
1, 2 or 3 months thereafter in the case of an Advance which is a
Line of Credit advance, or in the calendar month that is 1, 2, 3 or
6 months thereafter, in the case of an Advance which is an
Intermediate Term Credit Advance, as the Borrower may select, and
(b) as to any Advance comprised of Variable Rate Loans, the period
commencing on the date such Advance is made or on the last day of
the immediately preceding Interest Period applicable to such
Advance, as the case may be and ending on the earlier to occur of
(i) the date such Advance is converted to or refinanced as a Fixed
Rate Loan or as a Variable Rate Loan whose interest rate is
determined by reference to a different Type of Variable Rate or
(ii) the Termination Date; provided, however, (x) each Interest
Period applicable to an Advance comprised of Fixed Rate Loans that
commences on the last Business Day of a calendar month (or on any
day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last
Business Day of the appropriate subsequent calendar month; (y) no
Interest Period may extend beyond the Line of Credit Maturity Date,
in the case of each Advance which is a Line of Credit Advance, or
the Intermediate Term Credit Maturity Date, in the case of each
Advance which is an Intermediate Term Credit Advance; and (z) if an
Interest Period would end on a day that is not a Business Day, such
Interest Period shall be extended to the next Business Day unless
such Business Day would fall in the next calendar month, in which
event such Interest Period shall end on the immediately preceding
Business Day.
-4-
<PAGE>
"Line of Credit Advance" shall mean a group of Line of Credit
Loans of a single Type made by the Banks on a single date and as to
which a single.
"Loan" shall mean the aggregate of all outstanding Line of
Credit Loans of the Banks and the aggregate of all outstanding
Intermediate Term Credit Loans of the Banks.
"Loan Fees" shall mean the Line of Credit Facility Fee, the
Intermediate Term Credit Facility Fee and each Default Fee.
"Termination Date" shall mean the earliest of (a) the Line of
Credit Maturity Date or (b) the Intermediate Term Credit Maturity
Date, or (c) the date on which the Commitments are terminated
pursuant to Section 10.02(a) hereof
"Type", when used in respect of an Advance or a Loan, shall
refer to the Rate by reference to which interest on such Advance
or Loan is determined. For purposes hereof, the term "Rate" shall
include the LIBOR Rate, the Base Rate or the Fed Funds Rate.
-3-
<PAGE>
SCHEDULE 1.02B
ADDITIONAL DEFINED TERMS
"Collateral Allocation Amount" shall mean, with respect
to any Primary Intermediate Term Customer Collateral securing
payment of a Customer Crop Input Loan to a Customer, the collateral
value thereof, if any, allocated and used by the Borrower to
support the credit limit established by the Borrower for such
Customer Crop Input Loan in accordance with the Credit Policy as
set forth in the Collateral Allocation Summary most recently
furnished to the Bank.
"Collateral Allocation Summary" shall mean a written
allocation summary, in form and content satisfactory to the
Administrative Agent and completed and signed by a responsible
officer of the Borrower, setting forth the Customer Allocation
Amount allocated and used by the Borrower to support a credit limit
established by the Borrower in respect of a Customer Crop Input
Loan and specifying the Customer Crop Input Loan and amount of the
credit limit established therefor.
"Crop Input Collateral" shall mean, in respect of a
Customer Crop Input Loan, the crops securing such Customer Crop
Input Loan and Crop Insurance relating to or covering such Crops
and the entitlement and payments due or to become due in accordance
with or under applicable government programs which have been
assigned to the Borrower to secure payment of such Customer Crop
Input Loan.
"Customer Claim" means any dispute, claim, offset or
defense of the Customer of a Customer Loan, including, without
limitation, the defense of usury, or any other claim of such
Customer against or adjustment to such Customer Loan resulting from
the transaction out of which such Customer Loan arose or any
related or unrelated transaction.
"Customer Concentration Limit" shall mean, as of any date
of determination, with respect to a Customer under an Intermediate
Term Customer Loan, the amount equal to the highest aggregate
unpaid principal balance of Customer Loans made to such Customer on
any single day during the 14 month period immediately preceding
such date; provided, however, the Customer Concentration Limit with
respect to a Customer shall be calculated as if such Customer and
all of such Customer's Affiliates were one Customer.
"Customer Crop, Input Loan" shall mean a Customer Loan
made by the Borrower to a Customer to finance products and inputs
associated with current growing year crops and which is secured by
such crops.
"Debtor Relief Laws" shall have the meaning attributed to
it is the Credit Agreement.
<PAGE>
"Delinquent Intermediate Term Customer Loan" shall mean,
as of any date of determination, any Intermediate Term Customer
Loan with respect to which (a) any required payment or portion
thereof remains unpaid more than 60 days past the original due date
of such payment, (b) a material default exists (whether material or
otherwise, (c) there is in effect any waiver by the Borrower of any
material default or (d) any event or circumstance exists that
would, with notice, the passage of time or both, become a material
default in respect of such Intermediate Term Loan.
"Eligible Intermediate Term Advance" means, at any time,
a Customer Advance in respect of an Intermediate Term Customer
Loan:
(a) which is currently owing under an Intermediate Term
Customer Loan Note which has been duly authorized and which,
together with the related Customer Loan Documents, is in full force
and effect and constitutes the legal, valid and binding obligation
of the Customer of such Customer Advance to pay the outstanding
principal amount of such Customer Advance and interest thereon, and
the related Customer Loan Documents are enforceable against such
Customer in accordance with their respective terms except as
limited by Debtor Relief Laws and except as such enforceability may
be limited by general provisions of equity;
(b) which arose in the ordinary course of business of the
Borrower under Customer Loan Documents, the performance of which
have been completed by the Borrower and by all other parties
other than the Customer, and all advances, goods or services in
connection therewith have been delivered to or performed for the
Customer;
(c) the Customer of which is not also a Customer in respect
of a Delinquent Intermediate Term Customer Loan;
(d) the Customer of which is not the Customer of any Customer
Loan which has been, or which pursuant to the Credit Policy should
be, written off as uncollectible;
(e) the Customer of which is not a Governmental Body;
(f) which, together with the Customer Loan Documents related
thereto, is an "account", a "general intangible", "chattel paper"
or an "instrument" within the meaning of the UCC of all
jurisdictions which govern the perfection of the Borrower's
interest therein;
(g) with respect to which all material consents, licenses,
approvals or authorizations of, or registrations or declarations
with, any Governmental Body required to be obtained, effected or
given in connection with the making of such Customer Advance have
been duly
-2-
<PAGE>
obtained, effected or given and are in full force and effect;
(h) the Customer of which is not an Affiliate of any of the
parties hereto;
(i) the Customer in respect of which is organized in and a
resident of the United States;
(j) which is denominated and payable only in United States
Dollars in the United States;
(k) which (i) in the case of a Customer Advance comprising
an Intermediate Term Customer Loan which is an Intermediate Term
Customer Loan-Real Estate, has a final maturity date which is not
later than seven years after the date of the initial Customer
Advance with respect thereto and has an amortization of principal
or of principal and interest over a period of not more than 15
years and (ii) in the case of a Customer Advance comprising an
Intermediate Term Customer Loan which is in Intermediate Term
Customer Loan-Equipment, has a fixed maturity date which is not
later than five years after the date of the initial Customer
Advance with respect thereto;
(l) which bears interest either (i) at a fluctuating per
annum rate equal to or in excess of the prime rate as reported in
the Midwestern edition of the Wall Street Journal as in effect from
time to time (or, if less, the maximum non-usurious rate), or (ii)
in respect of Customers who are residents of Arkansas, at a fixed
interest rate per annum, which as of the date of the Note, is equal
to or in excess of the prime rate as reported in the Midwestern
edition of the Wall Street Journal as in effect on such date (or,
if less, the maximum non-usurious rate);
(m) which, together with the Customer Loan Documents related
thereto, does not contravene in any material respect any laws,
rules or regulations applicable thereto (including, without
limitation, laws, rules and regulations relating to usury, truth in
lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy) and with
respect to which no party to the Customer Loan Documents related
thereto is in material violation of any such law, rule or
regulation in any respect;
(n) which is prepayable without penalty and, together with
the related Customer Loan Documents and related Customer
Collateral, is fully assignable;
(o) which has been originated pursuant to and satisfies in
all material respects all applicable requirements of the Credit
Policy;
(p) with respect to which only one current original Customer
Note exists, which Customer Note has been delivered to the
Custodian;
-3-
<PAGE>
(q) which is secured by a perfected security interest in the
related Customer Collateral granted in favor of the Borrower, which
security interest has the priority required for such security
interest in the related Customer Loan Documents and the Credit
Policy;
(r) which has not been compromised, adjusted or similarly
modified and is not subject to any Customer Claims whatsoever and
which did not arise pursuant to Customer Loan Documents giving the
Customer an explicit right of offset;
(s) which was made under the existing Customer Loan
Documents, which Customer Loan Documents have not been modified for
negative credit reasons, except as agreed to by the Administrative
Agent;
(t) with respect to which the Customer Loan Documents are
complete in accordance with the Credit Policy;
(u) which Intermediate Term Customer Loan has not been
classified by the Borrower as "doubtful" or "loss" under the Credit
Policy;
(v) the unpaid principal balance of which at no time exceeds
the Primary Intermediate Term Customer Sub-Limit in respect of the
Primary Intermediate Term Customer Collateral securing payment of
such Intermediate Term Customer Loan minus (i) the unpaid balance
at such time of other Indebtedness (including unpaid interest)
secured by Liens in such Primary Intermediate Term Customer
Collateral which have priority over or rank equally with or to the
Lien in such Primary Intermediate Term Customer Collateral securing
payment of such Intermediate Term Customer Loan minus (ii) the
amount of any Lien against such Primary Intermediate Term Customer
Collateral for taxes or assessment or other governmental charges or
levies which are at such time due, delinquent or payable minus
(iii) the Collateral Allocation Amount, if any, applicable to such
Primary Intermediate Term Customer Collateral;
(x) which is secured by a perfected Lien in Primary
Intermediate Term Customer Collateral granted in favor of the
Borrower pursuant to the Customer Loan Documents related to such
Intermediate Term Customer Loan;
(y) the Customer in respect of which is also a Customer under
a Customer Crop Input Loan at the time the initial Customer Advance
in respect of such Intermediate Term Customer Loan is made;
(z) which is secured by the Crop Input Collateral securing
payment of the Customer Crop Input Loan to the Customer which is
also the Customer under such Intermediate Term Customer Loan;
-4-
<PAGE>
(aa) which does not refinance an outstanding Customer Loan
originally made as a Customer Crop Input Loan;
(bb) the Customer Concentration Limit of the Customer with
respect to which does not exceed $3,525,000.00; and
(cc) which the Administrative Agent has not notified the
Servicer or the Borrower that the Administrative Agent has
determined, in its sole discretion, that such Customer Loan is not
acceptable for eligibility hereunder.
"Equipment" shall mean equipment and materials used for
agricultural or farming purposes.
"Intermediate Term Credit" shall have the meaning attributed
to it in Section 2A.0l hereof
"Intermediate Term Credit Advance" shall mean a group of
Intermediate Term Credit Loans of a single Type made by the Banks
on a single date and as to which a single Interest Period is in
effect.
"Intermediate Term Credit Adjustment Factor" shall mean, at
anytime, an amount equal to the aggregate of the following amounts
computed for each Customer of an Eligible Intermediate Term
Advance (calculated as if such Customer and all Related Customers
of such Customer were one Customer): the excess of (a) the
aggregate outstanding principal amount of Eligible Intermediate
Term Advances (if any) extended to a Customer over (b) the
aggregate credit limit amounts established for such Customer by
the Borrower in ac6~rdance with the Credit Policy in respect of the
Customer Crop Input Loan of such Customer.
"Intermediate Term Credit Applicable Percentage" shall mean,
at any time with respect to a Bank, the percentage equivalent
(expressed as a decimal, rounded to the ninth decimal place) at
such time of such Bank's Intermediate Term Credit Commitment
divided by the Total Intermediate Term Credit Commitment at such
time.
"Intermediate Term Credit Borrowing Base" shall mean, at any
time, eighty-five percent (85.0%) of Net Aggregate Eligible
Intermediate Term Advances at such time.
"Intermediate Term Credit Borrowing Base Deficit" shall mean,
at any time, the amount, if any, by which the then outstanding
principal amount of the Total Intermediate Term Credit Loan exceeds
the Intermediate Term Credit Borrowing Base then in effect.
"Intermediate Term Credit Commitment" shall mean, at any time
with respect to a Bank, the principal amount set forth besides
such Bank's name under the hearing "Intermediate Term Credit
Commitments" on Schedule I hereto on or the signature page of the
Assignment Certificate pursuant to which such Bank becomes a Bank
hereunder in accordance with the provisions of Section 3.14 hereof
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<PAGE>
"Intermediate Term Credit Facility Fee" shall have the meaning
attributed to it in Section 2A.08 hereof
"Intermediate Term Credit Loan" shall mean each revolving loan
made by a Bank to the Borrower pursuant to Section 2A.01 hereof
Each Intermediate Term Credit Loan shall be a Fixed Rate Loan, a
Base Rate Loan or a Fed Funds Rate Loan.
"Intermediate Term Credit Maturity Date" shall mean February
28, 2000.
"Intermediate Term Credit Note" shall have the meaning
attributed to it in Section 2A.02 hereof
"Intermediate Term Customer Loan" shall mean any advance or
loan receivable (a) evidenced by an Intermediate Term Customer Loan
Note in which the Administrative Agent and each Bank have been
granted prior perfected first Liens, (b) comprised of one or more
discretionary advances made by the Borrower from time to time,
arising from the extension of credit to a Customer by the Borrower
in the ordinary course of its business which is an "intermediate
loan" as such term is generally used in the Credit Policy and (c)
which is not a Customer Crop Input Loan and shall include, without
limitation, all monies due or owing, all cash collections and other
cash proceeds and all other amounts received from time to time with
respect to such loan receivable and all proceeds (including,
without limitation, "proceeds" as defined in the UCC of the
jurisdiction the law of which governs the perfection of the
security interest in the Intermediate Term Customer Loans subject
to this Agreement) thereof
"Intermediate Term Customer Loan Note" means any promissory
note evidencing the indebtedness of a Customer under an
Intermediate Term Customer Loan and each Customer Advance made in
respect thereof, together with any modifications thereto.
"Intermediate Term Customer Loan-Equipment" shall mean
Customer Advances comprising an Intermediate Term Customer Loan (a)
made to a Customer to finance the acquisition of Equipment by such
Customer or to refinance a loan made to finance the acquisition of
Equipment by such Customer and (b) which is secured by a Lien in
such Equipment and proceeds thereof
"Intermediate Term Customer Loan-Real Estate" shall mean
Customer Advances comprising an Intermediate Term Customer Loan
made to a Customer to finance the acquisition of Real Estate by
such Customer or to refinance a loan made to finance the
acquisition of Real Estate by such Customer and (b) which is
secured by a Lien in such Real Estate and proceeds thereof
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<PAGE>
"Net Aggregate Eligible Intermediate Term Advances" shall
mean, at any time, the aggregate outstanding principal balance of
the Eligible Intermediate Term Advances outstanding at such time
minus the Intermediate Term Credit Factor Adjustment at such time.
"Permitted Encumbrances" shall mean, with respect to any
Customer Collateral securing payment of Customer Loan, liens
against such Customer Collateral (i) which are by statute granted
priority over the lien therein granted to the Borrower pursuant to
the Customer Loan Documents or (ii) which secure Indebtedness to
Persons other than the Borrower which has been deducted by the
Borrower in setting the credit limit for the related Customer.
"Primary Intermediate Term Customer Collateral" shall mean,
with respect to an Intermediate Term Customer Loan, the Real Estate
securing payment of such Customer Loan and the Equipment securing
payment of such Customer Loan.
"Primary Intermediate Term Customer Collateral Sub-Limit"
shall mean, at any time, with respect to the Primary Intermediate
Term Customer Collateral securing payment of an Intermediate Term
Customer Loan, the sum of (a) the lesser of (i) seventy percent
(70.0%) of the appraised value of such Primary Intermediate Term
Customer Collateral which is Real Estate or (ii) the prevailing (or
actual) cash rent value of such Real Estate divided by 7.0% plus
(b) sixty percent (60.0%) of the market value (established in
accordance with the Credit Policy) for such Primary Intermediate
Term Customer Collateral which is Equipment.
"Real Estate" shall mean land, and any buildings, improvements
and fixtures thereon, used for agricultural or farming purposes.
"Related Customer" shall mean, with respect to any Customer,
at any time, (a) all Affiliates of such Customer and (b) all the
lineal descendants and ascendants of such Customer, all brothers,
sisters, step-mothers, step-sisters, half-brothers and half-sisters
of such Customers and the spouse of any of the foregoing.
"Stated Line of Credit Commitments" shall mean, at any time
with respect to a Bank, the Line of Credit Commitment and the
Intermediate Term Credit Commitment of such Bank.
"Total Intermediate Term Credit Advance" shall mean the
aggregate amount of all Intermediate Term Credit Advances made by
the Banks on the same Borrowing Date.
"Total Intermediate Term Credit Commitment' shall mean the
aggregate amount of the Intermediate Term Credit Commitments of all
the Banks.
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<PAGE>
"Total Intermediate Term Credit Loan" shall mean the aggregate
of all outstanding Intermediate Term Credit Loans of the Banks
"Total Line of Credit Advance" shall mean the aggregate amount
of all Line of Credit Advances made by the Banks on the same
Borrowing Date.
"Total Line of Credit Commitment" shall mean the aggregate
amount of the Line of Credit Commitments of all the Banks.
"Total Line of Credit Loan" shall mean the aggregate of all
outstanding Line of Credit Loans of the Banks
"Total Stated Line of Credit Commitment" shall mean the
aggregate of the Stated Line of Credit Commitments of all the
Banks.
"UCC" shall have the meaning attributed to it in the Asset
Securitization Credit Agreement.
<PAGE>
SCHEDULE IIA
INTERMEDIATE TERM CREDIT
ARTICLE IIA
AMOUNT AND TERMS OF INTERMEDIATE TERM CREDIT
Section 2A.01 Intermediate Term Credit Facility. (a)
Intermediate Term Credit. Subject to the terms and conditions
hereof, a line of credit arrangement is established by the Banks in
favor of the Borrower (the "Intermediate Term Credit") whereby each
Bank agrees, severally and not jointly, to make advances and loans
to the Borrower, on such Borrowing Dates prior to March 1, 1999, as
the Borrower shall select, on a prorata basis as to each such
Intermediate Term Credit Advance requested by the Borrower on such
Borrowing Date determined by such Bank's Intermediate Term Credit
Applicable Percentage in an amount up to but not exceeding the
Intermediate Term Credit Commitment of such Bank; provided,
however, that the Banks will not be required and shall have no
obligation to make any Intermediate Term Credit Loan (i) so long as
a Default or Event of Default has occurred and is continuing, or
(ii) if an Acceleration has occurred, or (iii) at anytime after
February 28, 1999; provided further, however, that immediately
after giving effect to each such Intermediate Term Credit Advance,
the aggregate outstanding principal amount of the Loan shall not
exceed the lesser of the Intermediate Term Credit Borrowing Base or
the Total Intermediate Term Credit Commitment.
(b) Advances. Each Intermediate Term Credit Loan made
by a Bank on a Borrowing Date shall be in an amount equal to such
Bank's Intermediate Term Credit Applicable Percentage of each
Intermediate Term Credit Advance to be made to the Borrower on such
Borrowing Date. No Bank shall have any obligation to make any
Intermediate Term Credit Loan after the Intermediate Term Credit
Maturity Date or after such obligation is sooner terminated or
cancelled by the Banks pursuant to the rights afforded them herein.
Within such limits, the Borrower may, within the limits of this
Section 2A.01, and subject to Article VI hereof, borrow, repay
pursuant to Section 2A.03(b) hereof and reborrow funds under this
Section 2A.01. Notwithstanding any other provision of this
Agreement, in no event shall any Bank be obligated to make an
Intermediate Term Credit Loan if immediately thereafter the
aggregate outstanding principal amount of all of such Bank's
Intermediate Term Credit Loans would exceed the lesser of such
Bank's then applicable Intermediate Term Credit Commitment or such
Bank's Intermediate Term Credit Applicable Percentage of the
Intermediate Term Credit Borrowing Base. Each such Intermediate
Term Credit Advance shall be comprised of Variable Rate Loans or
Fixed Rate Loans as specified by the Borrower in the notice of
advance request given pursuant to Section 2A.05. Each Intermediate
Term Credit Advance shall be in an aggregate principal amount that
is an integral multiple of
<PAGE>
$50,000 and not less than $1,000,000.00 in the case of an
Intermediate Term Credit Advance comprised of Fixed Rate Loans or
$250,000.00 in the case of an Intermediate Term Credit Advance
comprised of Variable Rate Loans, or, an aggregate principal amount
equal to an amount which will utilize in full the remaining amount
then available to be borrowed under the Intermediate Term Credit.
The failure by any Bank to make any Intermediate Term Credit Loan
on the specified Borrowing Date shall not relieve any other Bank of
its obligation (if any) to make its own Intermediate Term Credit
Loan on such Borrowing Date, but no Bank shall be responsible for
the failure of any other Bank to make the Intermediate Term Credit
Loan of such other Bank.
Section 2A.02 Intermediate Term Credit Note. The Intermediate
Term Credit Loans made by each Bank shall be evidenced by a
properly executed promissory note of the Borrower substantially in
the form of Exhibit H attached hereto (completed with appropriate
insertions), payable to the order of such Bank in a stated
principal amount equal to such Bank's Intermediate Term Credit
Commitment (each such promissory note and each modification,
extension or replacement thereof or substitution therefor shall
hereinafter be called the "Intermediate Term Credit Note"). Each
Bank is hereby authorized to record the date, Type, and amount of
each Intermediate Term Credit Loan made by such Bank, each
continuation thereof, each conversion of all or a portion thereof
to another Type, the date and amount of each payment or prepayment
of principal thereof and, in the case of Fixed Rate Loans, the
length of each Interest Period with respect thereto, on the
schedule annexed to and constituting a part of its Intermediate
Term Credit Note, and any such recordation shall constitute prima
facie evidence of the accuracy of the information so recorded;
provided, however, that the failure to make any such recordation
shall not affect the obligations of the Borrower hereunder or under
any Intermediate Term Credit Note.
Section 2A.03 Principal.
(a) Mandatory Repayments. The Borrower shall be
obligated to make a principal repayment of the Total Intermediate
Term Loan on each Business Day in an amount equal to the
Intermediate Term Borrowing Base Deficit on such Business Day,
together with accrued interest on such principal amount repaid
through the date of payment. The entire aggregate outstanding
principal of each Bank's Intermediate Term Credit Loans and each
Bank9s Intermediate Term Credit Note shall be due and payable in
full on the Termination Date. Mandatory principal repayments shall
be applied first to Intermediate Term Credit Advances comprised of
Variable Rate Loans. If a mandatory principal repayment is applied
to Intermediate Term Credit Advances comprised of Fixed Rate Loans
on a date other than the last day of the Interest Period therefor,
the Borrower shall pay to each Bank an amount sufficient to
compensate such Bank for any loss, cost or expenses incurred by
such Bank as provided in Section 2A. 17 hereof
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<PAGE>
(b) Optional Prepayments. The Borrower shall have the
right to prepay all or a portion of the Total Intermediate Term
Credit Loan at any time upon notice to the Administrative Agent,
prior to the time the payment is made, on the date of prepayment in
the case of Variable Rate Loans and upon notice to the
Administrative Agent given no later than 12:00 noon (New York City
time) on the third Business Day prior to the date of prepayment in
the case of Fixed Rate Loans, which notice shall specify the
Intermediate Term Credit Advance being prepaid, the aggregate
amount thereof to be prepaid, and the date of prepayment. Any
repayment of an Intermediate Term Credit Advance shall be in an.
aggregate principal amount which is an integral multiple of
$50,000.00 and not less than $1,000,000.00 in the case of an
Intermediate Term Credit Administrative Agent, prior to the time
payment is made, on the date of Advance comprised of Fixed Rate
Loans or $250,000.00 in the case of an Intermediate Term Credit
Advance comprised of Variable Rate Loans or in either case an
amount sufficient to repay the outstanding principal amount of such
Intermediate Term Credit Advance. If a prepayment of an
Intermediate Term Credit Advance comprised of Fixed Rate Loans is
made on a date other than the last day of the Interest Period
therefor, the Borrower shall pay to each Bank an amount sufficient
to compensate such Bank for any loss, cost or expenses incurred by
such Bank as provided in Section 2A. 17 hereof Amounts prepaid may
be reborrowed as permitted under Section 2A.0l, subject to the
provisions of Section 6.02 hereof
(c) Loss Indemnification. The provisions of Section 2A.
17 hereof shall apply to each mandatory repayment and optional
prepayment of any Fixed Rate Loan.
Section 2A.04 Interest.
(a) Rate Prior to Delinquency. (i) Subject to the
provisions of Section 2A.04(b), each Intermediate Term Credit
Advance comprised of Base Rate Loans shall bear interest at a rate
per annum equal to the Base Rate plus one-half percent (0.50%). The
interest rate on Intermediate Term Credit Advances comprised of
Base Rate Loans shall change as and when the Base Rate changes,
effective as of the opening of business on the day on which such
change in the Base Rate becomes effective.
(ii) Subject to the provisions of Section 2A.04(b),
each Intermediate Term Credit Advance comprised of Fed Funds Rate
Loans shall bear interest at a rate per annum equal to the Fed
Funds Rate plus a two and one-half percent (2.50%). The interest
rate on Intermediate Term Credit Advances comprised of said Fed
Funds Rate Loans shall change as and when the Fed Funds Rate
changes, effective as of the opening of business on the day in
which such change in the Fed Funds Rate becomes effective.
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(iii) Subject to the provisions of Section 2A.04(b),
each Intermediate Term Credit Advance comprised of LIBOR Loans
shall bear interest at a rate per annum equal to the LIBO Rate for
the Interest Period in effect for such Intermediate Term Credit
Advance plus two percent (2.00%).
(iv) Interest on each Intermediate Term Credit Advance
shall accrue from and including the first day of an Interest Period
to but excluding the last day of such Interest Period or the day
such Intermediate Term Credit Advance is paid in full if such day
is other than the last day of such Interest Period.
(b) Default Rate. Any principal of or interest on a
Intermediate Term Credit Loan not paid when due (whether at
maturity, by acceleration or otherwise) shall, from the due date
therefrom until paid, bear interest at a rate per annum (computed
on the same basis as a Base Rate Loan) equal to the Default Rate.
The Default Rate shall increase or decrease, without limit, as and
when the Base Rate changes, effective as of the opening of business
on the day on which such change in the Base Rate becomes effective.
(c) Required Payments. Interest on each Intermediate
Term Credit Advance comprised of Fixed Rate Loans shall be due and
payable on the last day of the Interest Period applicable to such
Intermediate Term Credit Advance or the day such Intermediate Term
Credit Advance is paid in full if such day is other than the last
day of such Interest Period. Interest on each Intermediate Term
Credit Advance comprised of Variable Rate Loans shall be due and
payable on the first day of each month and on the day such
Intermediate Term Credit Advance is paid in full. If in accordance
with the foregoing interest on any Intermediate Term Credit Advance
would be due and payable on a day which is not a Business Day, such
interest shall be due and payable on the next Business Day,
however, interest shall continue to accrue until paid. Accrued and
unpaid interest on all Intermediate Term Credit Advances shall be
due and payable on the Termination Date.
Section 2A.05 Notice of Advance Requests. The
provisions of Section 2.05 applicable to Advances shall also apply
to each request for an Intermediate Term Credit Advance and the
Borrower shall designate in each notice given pursuant to Section
2.05 whether a Line of Credit Advance or an Intermediate Term
Credit Advance is being requested and the principal amount of each
such Advance.
Section 2A.06 Intermediate Term Advances. Each
Intermediate Term Advance shall be comprised of Fixed Rate Loans,
Base Rate Loans or Fed Funds Rate Loans as the Borrower may request
pursuant to Section 2A.05 hereof The Borrower may refinance all or
any part of any Intermediate Term Advance with an Intermediate Term
Advance of the same or a different Type, subject, in each case, to
the conditions and limitations set forth in this Agreement. Any
Intermediate Term Advance or portion thereof refinanced in
accordance with the foregoing shall
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<PAGE>
be deemed to be repaid or prepaid in accordance with Section 2A.03,
with the proceeds of a new Intermediate Term Advance and the
proceeds of the new Intermediate Term Advance, to the extent they
do not exceed the principal amount of the Intermediate Term Advance
being refinanced, shall not be paid by the Banks to the
Administrative Agent or by the Administrative Agent to the Borrower
pursuant to Section 2A. 11 hereof Notwithstanding any other
provision of this Agreement, the Borrower shall not be entitled to
request any Intermediate Term Advance if the Interest Period
requested with respect thereto would end after the Intermediate
Term Credit Maturity Date.
Section 2A.07 Use of Proceeds. Proceeds of the
Intermediate Term Credit Advances shall be used for the Borrower's
working capital.
Section 2A.08 Intermediate Term Credit Facility Fee. The
Borrower agrees to pay the Administrative Agent, for the pro rata
benefit of each Bank based on their Intermediate Term Credit
Applicable Percentages, a non-refundable fee (the "Intermediate
Term Credit Facility Fee") equal to one-quarter percent (0.25%) of
the daily amount by which the Total Intermediate Term Credit
Commitment exceeds the average daily outstanding principal balance
of the Total Intermediate Term Credit Loan from the effective date
hereof in the case of each Bank that is a signatory hereto and from
the effective date specified in the Assignment Certificate pursuant
to which such Bank became a Bank in accordance with Section 13.14
in the case of each other Bank until the Termination Date. The
Intermediate Term Credit Facility Fee shall be payable on the last
day of each fiscal quarter of the Borrower, in arrears, prior to
March 1, 1999. No portion of any Intermediate Term Credit Facility
fee paid to the Administrative Agent shall be refunded for any
reason, irrespective of the occurrence of the Termination Date
prior to March 1, 1999. Upon receipt of any Intermediate Term
Credit Facility Fee, the Administrative Agent shall promptly
thereafter distribute to each Bank an amount equal to such Bank's
Intermediate Term Credit Applicable Percentage of such Intermediate
Term Credit Facility Fee paid to the Administrative Agent.
Section 2A.09 Calculation of Interest Maximum Lawful
Rates. All interest and fees charged hereunder with respect to all
Intermediate Term Credit Advances, Intermediate Term Credit Loans
and the Intermediate Term Credit Facility Fees and each
Intermediate Term Credit Note shall be calculated based on a year
of 360 days and the actual number of days elapsed. If at any time
the interest rate hereunder or under any Intermediate Term Credit
Note exceeds the highest lawful rate, interest shall accrue at the
highest lawful rate. If any payment by or on behalf of the Borrower
is received after 2;00 p.m. New York City time) on any Business
Day, it will be deemed to be received on the next succeeding
Business Day. If the time for payment of any amount hereunder is
extended by operation of law or otherwise, interest shall continue
to accrue for such extended period.
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<PAGE>
Section 2A.10 Notice of Changes in Base Rate. During the
effective period of this Agreement, the Administrative Agent shall
promptly advise Borrower of changes in the Base Rate; provided,
however, that the failure to give such advice or the failure to
give such advice promptly shall not affect the obligation of the
Borrower to pay interest in accordance with the terms of any
Intermediate Term Credit Note and of this Agreement.
Section 2A.11 Funding and Disbursements. The provisions
of Section 2.11 applicable to Advances shall also apply to fundings
of Intermediate Term Credit Advances by the Banks and disbursements
of Intermediate Term Credit Advances to the Borrower.
Section 2A.12 Payments. The provisions of Section 2.12
shall also apply to payments made in respect of Intermediate Term
Credit Loans.
Section 2A.13 Application of Payments. The provisions of
Section 2.13 applicable to Loans shall also control the application
of payments made in respect of Intermediate Term Credit Loans. Each
Bank agrees that in computing such Bank's portion of any
Intermediate Term Credit Advance to be made hereunder or the
portion of any payment to be allocated to such Bank hereunder, the
Administrative Agent may, in its sole discretion, round each Bank's
portion of such payment to the next higher or lower whole dollar
amount. Amounts paid by the Borrower pursuant to Sections 2A. 15,
2A. 16 or 2A. 17 or Article XI shall be remitted to the
Administrative Agent or the Banks entitled thereto.
Section 2A.14 Non-Receipt of Funds by Administrative
Agent. The provisions of Section 2.14 applicable to fundings of
Advances shall also apply to fundings by a Bank of an Intermediate
Term Credit Advance.
Section 2A.15 Increased Cost. The provisions of Section
2.15 applicable to Line of Credit Loans and Line of Credit Notes
and the determination of the amount of and payments of increased
costs with respect thereto shall also apply to Intermediate Term
Credit Loans and Intermediate Term Credit Notes, respectively, and
the determination of the amount of and payment of increased costs
with respect thereto. The payment of the additional amounts
required hereunder shall be made by the Borrower immediately on the
date any Bank gives the required notice to the Borrower.
Section 2A.16 Risk-Based Capital. The provisions of
Section 2.16 applicable to Line of Credit Loans and the
determination of the amount of and payment of additional costs with
respect thereto shall also apply to Intermediate Term Credit Loans
and the determination of the amount of and payment of additional
costs with respect thereto. The payment of the additional amounts
required hereunder shall be made by the Borrower within 30 days
after the date any Bank gives the required notice to the Borrower.
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<PAGE>
Section 2A.17 Funding Loss Indemnification. The
provisions of Section 2.17 applicable to a Line of Credit Loan and
the compensation to a Bank for any loss, cost, or expense incurred
as a result of a repayment or prepayment of a Fixed Rate Loan or
the Borrower's failure to borrow, renew or convert an Advance shall
also apply to Intermediate Term Credit Loans and the compensation
to a Bank for any loss, cost or expense incurred as a result of a
repayment or prepayment of a Fixed Rate Loan comprised of
Intermediate Term Credit Advances and the Borrower's failure to
borrow, renew or convert an Intermediate Term Credit Advance.
Section 2A.18 Survival. The Borrower's agreements and
obligations under Sections 2A.12, 2A.15, 2A.16 and 2A.17 shall
survive the payment of all Intermediate Term Credit Loans
hereunder.
Section 2A.19 Pro Rata Treatment. Except as otherwise
specifically provided herein, each Intermediate Term Credit Loan,
each payment or prepayment of principal of the Loan, each payment
of interest on the Loan, each payment of the Intermediate Term
Credit Fee and a Default Fee, each conversion into, or out of, and
renewals of, Fixed Rate Loans shall be allocated pro rata among the
Banks in accordance with each Bank's Intermediate Term Credit
Applicable Percentage. Each Bank agrees that in computing such
amount of any Intermediate Term Credit Loan to be made by such Bank
or any payment to be allocated to such Bank hereunder, the
Administrative Agent may, in its discretion, round the dollar
amount of each Bank's Intermediate Term Credit Loan to the next
higher or lower whole dollar amount.
Section 2A.20 References to Advances. Each reference to
"Advances" and "Advance" in the provisions of Section 2.05, 2.11,
2.12, 2.13, 2.14, 2.15,2.16 and 2.18 made applicable to
Intermediate Term Credit Advances or an Intermediate Term Credit
Advance as provided in this Article IIA shall mean and refer,
respectively, to Intermediate Term Credit Advances and an
Intermediate Term Credit Advance for purposes of this Article IIA.
Section 2A.21 Collateral Allocation Summary. The Borrower
shall complete and furnish to the Custodian a Collateral Allocation
Summary promptly after each allocation of Primary Intermediate Term
Customer Collateral is made by the Borrower to support a credit
limit established for a Customer or a Customer Crop Input Loan.
<PAGE>
AG SERVICES OF AMERICA, INC.
EXHIBIT 10.23
AMENDMENT NO. 3 TO THIRD AND RESTATED LOAN AGREEMENT
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<PAGE>
AMENDMENT NO. 3 TO THIRD AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDMENT NO.3 TO THIRD AMENDED AND RESTATED LOAN
AGREEMENT is dated as of April 23, 1998, and is by and among AG
SERVICES OF AMERICA, INC., an Iowa corporation (the "Borrower");
THE FINANCIAL INSTITUTIONS parties hereto from time to time as
lenders (each, a "Bank" and collectively, the "Banks"), and
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "Rabobank
Nederland", New York Branch ("Rabobank"), as agent for the Banks
hereunder (in such capacity, the "Administrative Agent").
RECITALS
The Borrower, the Banks and Rabobank entered into a Third
Amended and Restated Loan Agreement, dated as of March 12, 1997, as
amended by Amendment No.1 to Third Amended and Restated Loan
Agreement, dated as of August 19, 1997 and by Amendment No.2 to
Third Amended and Restated Loan Agreement, dated as of February 27,
1998 (as amended, the "Loan Agreement'), pursuant to which the
Banks have established a line of credit in favor of the Borrower on
and subject to the terms and conditions set forth therein. The
parties desire to amend the Loan Agreement to establish a separate
Credit Facility in favor of the Borrower and to modify certain
terms and conditions of the Loan Agreement, all as more
particularly set forth herein.
NOW, THEREFORE, in consideration of the above premises and other
good and valuable consideration, the sum and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows.
1. Amendments to Loan Agreement. The Loan Agreement is
amended as follows:
(a) Section 1.02. Section 1.02 of the Loan Agreement is
amended as follows:
(i) The definitions of each of the terms referenced in
SCHEDULE 1.02A attached hereto shall replace the definition of such
defined term set forth in Section 1.02 of the Loan Agreement.
(ii) The defined terms set forth in SCHEDULE 1 .02B
attached hereto are added to Section 1.02.
<PAGE>
(b) Section 2.02. Section 2.02 of the Loan Agreement is
amended by deleting the reference to "Stated Line of Credit
Commitment Amount" and by substituting therefor "Line of Credit
Commitment". The Loan Agreement is amended accordingly.
(c) Article II. Article II of the Loan Agreement in amended by
adding a Section 2.20 thereto as follows:
Section 2A.20. Reference to Advances. Each
reference in this Article fl to "Advances" or an "Advance" shall
mean and refer, respectively, to Line of Credit Advances and a Line
of Credit Advance.
(d) Article IIA. The Loan Agreement is amended by adding an
Article IIA which contains the terms, conditions and provisions set
forth in SCHEDULE IIA attached hereto.
(e) Section 2.03. Each reference to "Loan" in Section 2.03
shall mean and refer to the "Total Line of Credit Loan". The Loan
Agreement is amended accordingly.
(f) Section 12.10. Each reference to "Line of Credit Loans" in
Section 12.10 shall mean and refer to "Loans". The Loan Agreement
is amended accordingly.
(g) Section 13.14. Each reference to "Line of Credit Loan" in
Section 13.14 shall mean and refer to "Loans". The Loan Agreement
is amended accordingly.
(h) Section 13.15. Each reference to "Line of Credit Loans" in
Section 13.15 shall mean and refer to "Loans". The Loan Agreement
is amended accordingly.
(i) Exhibits and Schedules.
(i) Exhibit G. Exhibit G to the Loan Agreement is
deleted and Exhibit G attached hereto is substituted therefor.
(ii) Exhibit H. An Exhibit H in the form of Exhibit
H attached is added to the Loan Agreement.
(iii) Schedule I. Schedule I to the Loan Agreement
is amended and Schedule I attached hereto is substituted therefor.
3. Reaffirmation by Borrower Collateral. The Borrower confirms
and reaffirms in favor of each Bank all the Borrower's obligations
and agreements under the Loan Agreement, as amended hereby, and
under each Loan Document to which it is a party and confirms,
reaffirms and agrees that payment of each Loan, each Note and the
payment of all Indebtedness to each Bank under the Loan Agreement,
as amended hereby, are and shall be secured by the Liens in the
Collateral granted under the Loan Agreement, as amended hereby,
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<PAGE>
including, without limitation, each Customer Loan (including each
Intermediate Term Customer Loan) and related Customer Loan
Documents and each Loan Document. The Borrower agrees to
execute and deliver such documents, agreements, financing
statements and amendments to the Loan Documents and to take such
further action as may be necessary in order to vest and fully
perfect in each Bank all Liens in Collateral as first priority
Liens therein in each Bank to the extent required by the Loan
Agreement
4. Representations and Warranties. In order to induce the
Administrative Agent and each Bank to execute this Amendment, the
Borrower represents and warrants as follows:
(a) The Borrower has the power and authority to execute and
perform this Amendment and the Loan Agreement, as amended hereby.
(b) The execution, delivery and performance of this Amendment
and the Loan Agreement, as amended hereby have been duly authorized
by all required corporate action.
(c) This Amendment, the Intermediate Term Credit Note and the
Loan Agreement, as amended hereby, constitute legal, valid and
binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms.
(d) No authorization, approval, or other action by, and no
notice to or filing with, any Governmental Body is required for the
due execution, delivery and performance by the Borrower of this
Amendment of the Loan Agreement, as amended hereby.
(e) No Default or Event of Default has occurred and is
continuing.
(f) All the representations and warranties of the Borrower
contained in the Loan Agreement are true and correct on and as of
the date hereof as though made on and as of such date except to the
extent such representations and warranties relate solely to an
earlier date.
(g) There is no pending or threatened action or proceeding
affecting the Borrower or any of its Subsidiaries before any
Governmental Body which may materially adversely affect the
condition, financial or otherwise, or operations of the Borrower.
5. Conditions Precedent. This Amendment shall not be effective
against any of the parties hereto unless and until the
Administrative Agent has been furnished with the following:
(a) This Amendment duly executed by all the parties hereto.
(b) The Intermediate Term Credit Note duly executed by the
Borrower.
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<PAGE>
(c) Certified copies of all corporate action taken by the
Borrower, including resolutions of its Board of Directors,
authorizing the execution, delivery, and performance of this
Amendment and each other document to which it is a party and which
is required to be delivered pursuant to this Amendment.
(d) An Intercreditor Agreement in form and content
satisfactory to the Administrative Agent, between the Borrower and
Ag Acceptance pertaining to their relative priorities in collateral
securing loans and advances made to common Customers, duly executed
by the Borrower and Ag Acceptance and consented to and approved by
CapMAC, Triple-A One and Rabobank.
(e) A certificate of the Secretary or an Assistant Secretary
of the Borrower as to (i) the Articles of Incorporation and the
Bylaws of the Borrower having not been amended, modified or changed
in any manner since March 12, 1997, and (ji) the incumbency of the
officer or officers of the Borrower who sign this Amendment, the
Intermediate Term Credit Note and such other documents,
instruments, amendments and modifications to be executed by the
Borrower in connection with this Amendment, including therein a
signature specimen of such officer or officers.
(f) The favorable written opinion of legal counsel to the
Borrower, in form, content and substance satisfactory to the
Administrative Agent, to the effect that (i) this Amendment, the
Intermediate Term Credit Note, the Intercreditor Agreement and such
other documents, instruments, amendments and modifications to be
executed by the Borrower in connection with or pursuant to this
Amendment have been duly authorized by all necessary corporate
action on behalf of the Borrower and each has been duly executed
and delivered on behalf of the Borrower and are valid, binding and
enforceable against the Borrower in accordance with the terms
thereof, (ii) to the knowledge of such counsel, there is no
provision in any indenture, contract or agreement to which the
Borrower is a party or by which it is bound which prohibits the
execution and delivery by the Borrower of this Amendment, the
Intermediate Term Credit Note, the Intercreditor Agreement or any
such other document, instrument, amendment or modification to be
executed by the Borrower in connection with or pursuant to this
Amendment or which prohibits the performance or observance by a
Borrower of this Amendment, the Intermediate Term Credit Note, the
Intercreditor Agreement or any such other document, instrument,
amendment or modification to be executed by the Borrower in
connection with or pursuant to this Amendment and covering such
other matters as the Administrative Agent shall reasonably request.
(g) All other documents, agreements, financing statements and
amendments to Loan Documents as necessary in order to grant and
perfect each Lien in Collateral as first priority Liens in favor of
the Banks to the extent required by the Loan Agreement, as amended
hereby.
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<PAGE>
6.Miscellaneous.
(a) Upon the effectiveness of this Amendment, on and after the
date hereof, each reference in the Loan Agreement to "this
Agreement", this "Loan Agreement", "hereunder", "hereof', "herein"
or words of like import shall mean and be a reference to the Loan
Agreement as amended hereby, and each reference in the Notes and
the other Loan Documents shall mean and be reference to the Loan
Agreement, as amended hereby.
(b) All capitalized terms used and not otherwise defined
herein shall have the same meaning herein as in the Loan Agreement,
as amended hereby.
(c) This Amendment may be executed in any number of
counterparts or facsimile counterparts, each of which shall be an
original and all of which shall constitute one agreement and it
shall not be necessary in making proof of this Amendment to produce
or account for more than one counterpart.
(d) This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York without regard
to principles of conflicts of laws.
(e) The Borrower shall pay on demand all costs and expenses of
the Administrative Agent and the Banks in connection with the
preparation, review and negotiation of this Amendment and the other
instruments and documents to be delivered hereunder, including,
without limitation, the reasonable fees, expenses and out-of-pocket
costs of counsel (who may be in-house counsel) for the
Administrative Agent or the Banks with respect thereto, with
respect to advising the Administrative Agent or the Banks as to its
or their rights and responsibilities hereunder and thereunder and
with respect to the enforcement of its or their rights hereunder,
under any Note or under the Loan Agreement, as amended hereby,
under any Loan Document and the maintenance or perfection of any
Lien in Collateral (including compensation of all agents, attorneys
and accountants employed by the Administrative Agent or the Bank
with respect thereto) In addition, the Borrower shall pay any and
all stamp and other taxes payable or determined to be payable in
connection with the execution and delivery of this Amendment and
the other instruments and documents to be delivered hereunder, and
agrees to save the Administrative Agent and each Bank harmless from
and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay taxes- The Borrower
shall not be required to pay or reimburse the Administrative Agent
more than $7,500 for legal fees (which shall not include related
out-of-pocket expenses of legal counsel) incurred by the
Administrative Agent in connection with the preparation, review and
negotiation of this Amendment and the other instruments and
documents to be delivered hereunder..
(f) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate
as a waiver of any right, power or remedy of the
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<PAGE>
Administrative Agent or the Banks under the Loan Agreement, nor
constitute a waiver of any provision of the Loan Agreement.
(g) This Amendment represents the final agreement by and among
the Borrower, the Administrative Agent and the Banks as to the
subject matter hereof and may not be contradicted by evidence of
prior, contemporaneous or subsequent oral agreements of the
parties. There are no unwritten oral agreements between the
parties.
(h) Except for the amendments made hereby, in all other
respects the Loan Agreement and each other Loan Document shall
remain in full force and effect.
7. Acknowledgement. The Borrower hereby acknowledges receipt
of a copy of this Amendment, the Intermediate Term Credit Note, the
Intercreditor Agreement and each other document at any time
executed by a debtor in connection with this Amendment or with the
Indebtedness to the Banks under the Loan Agreement, as amended
hereby.
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<PAGE>
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD
BE READ CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE
ENFORCEABLE. NO OTHER TERMS OR ORAL PROMISES NOT CONTAINED IN THIS
WRITTEN CONTRACT MAY BE LEGALLY ENFORCED. YOU MAY CHANGE THE TERMS
OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
IN WITNESS WHEREOF, the Borrower, each Bank and the Administrative
Agent have caused this Agreement to be duly executed by their duly
authorized officers, all as of the day and year first above
written.
AG SERVICES OF AMERICA, INC.
(Borrower)
By: ___________________________
Henry C. Jungling,
President
By: ___________________________
Neil Stadlman
Vice President
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "Rabobank
Nederland", New York Branch
(Administrative Agent and Bank)
By: ___________________________
Name:_______________________
Title:______________________
By: ___________________________
Name:_______________________
Title_______________________
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<PAGE>
SCHEDULE I
COMMITMENTS AND LENDING OFFICES
<PAGE>
Lending Offices
Name of Bank Lending Office
- ------------ --------------
Cooperatieve Centrale Raiffeisen- Rabobank Nederland
Boerenleenbank B.A. "Rabobank 245 Park Avenue
Nederland", New York Branch New York, New York 10167
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<PAGE>
Line of Credit Commitments
and
Total Line of Credit Commitment
Name of Bank Line of Credit Commitment
- ------------ -------------------------
Cooperatieve Centrale Raiffeisen- $8,500,000.00
Boerenleenbank B.A. "Rabobank
Nederland", New York Branch
Total Line of Credit Commitment $8,500,000.00
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<PAGE>
Intermediate Term Credit Commitments
and
Total Intermediate Term Credit Commitment
Intermediate Term
Name of Bank Credit Commitment
- ------------ -----------------
Cooperatieve Centrale Raiffeisen- $20,000,000.00
Boerenleenbank B.A. "Rabobank
Nederland", New York Branch
Total Intermediate Term Credit Commitment $20,000,000.00
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<PAGE>
SCHEDULE 1.02A
REPLACEMENT DEFINED TERMS
"Advance" shall mean each Line of Credit Advance made by the Banks
on a single date or each Intermediate Term Advance made by the
Banks on a single date, or both, as the context dictates.
"Base Rate Loan" shall mean each Line of Credit Loan or each
Intermediate Term Loan bearing interest at a rate determined by
reference to the Base Rate, or both, as the context dictates.
"Borrowing Base Certificate" shall mean a report substantially in
the form 6f Exhibit E to the Asset Securitization Credit Agreement
and otherwise acceptable to the Administrative Agent and which
shall also contain such borrowing base and other information
required by the Administrative Agent relative to Inventory,
Eligible Inventory, Eligible Seed Financing Receivables, Seed
Financing Receivables, Receivables, Intermediate Term Customer
Loans and related Customer Collateral and the Intermediate Term
Credit Borrowing Base.
"Borrowing Base Deficit" shall mean, at any time, the amount, if
any, by which the then outstanding principal amount of the Total
Line of Credit Loan exceeds the Line of Credit Borrowing Base then
in effect.
"Commitment" shall mean each Bank's obligation, if any, to make
Line of Credit Loans and Intermediate Term Loans to the Borrower
hereunder.
"Customer Collateral" shall mean the collateral and Property in
which a Lien has been granted, or which has been assigned, to the
Borrower to secure payment of a Customer Loan or other Indebtedness
owed to the Borrower by a Customer, including, without limitation
(a) all of the Borrower's right, title and interest in and to the
payments to be made by the Customer and any other rights which are
assignable under the related Customer Loan Documents, (b) all
security interests or liens and property subject thereto from time
to time purporting to secure payment of such Customer Loan, whether
pursuant to the Customer Loan Documents related to such Customer
Loan or otherwise, including, without limitation, all interest in
Crop Insurance with respect to such property, all Equipment and all
Real Estate (c) all Records, (d) guaranties and other agreements or
arrangements of whatever character from time to time supporting or
securing payment of such Customer Loan whether pursuant to
<PAGE>
the Customer Loan Documents related to such Customer Loan or
otherwise, and (e) all rights under warranties, indemnities,
insurance with respect to the Customer Loans, the related Customer
Loan Documents or other Customer Collateral described above.
"Fed Funds Rate Loan" shall mean each Line of Credit Loan and each
Intermediate Term Loan bearing interest at a rate determined by
reference to the Fed Funds Rate. "Fixed Rate Loan" shall mean each
Line of Credit Loan bearing interest determined by reference to the
LIBO Rate or each Intermediate Term Loan bearing interest
determined by reference to the LIBO Rate, or both, as the context
dictates.
"Interest Period" shall mean (a) as to any Advance comprised of
Fixed Rate Loans, the period commencing on the date such Advance is
made, or on the last day of the immediately preceding Interest
Period applicable to such Advance, as the case may be, and ending,
on the numerically corresponding day (or if there is no numerically
corresponding day, on the last day) in the calendar month that is
1, 2 or 3 months thereafter in the case of an Advance which is a
Line of Credit advance, or in the calendar month that is 1, 2, 3 or
6 months thereafter, in the case of an Advance which is an
Intermediate Term Credit Advance, as the Borrower may select, and
(b) as to any Advance comprised of Variable Rate Loans, the period
commencing on the date such Advance is made or on the last day of
the immediately preceding Interest Period applicable to such
Advance, as the case may be and ending on the earlier to occur of
(i) the date such Advance is converted to or refinanced as a Fixed
Rate Loan or as a Variable Rate Loan whose interest rate is
determined by reference to a different Type of Variable Rate or
(ii) the Termination Date; provided, however, (x) each Interest
Period applicable to an Advance comprised of Fixed Rate Loans that
commences on the last Business Day of a calendar month (or on any
day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last
Business Day of the appropriate subsequent calendar month; (y) no
Interest Period may extend beyond the Line of Credit Maturity Date,
in the case of each Advance which is a Line of Credit Advance, or
the Intermediate Term Credit Maturity Date, in the case of each
Advance which is an Intermediate Term Credit Advance; and (z) if an
Interest Period would end on a day that is not a Business Day, such
Interest Period shall be extended to the next Business Day unless
such Business Day would fall in the next calendar month, in which
event such Interest Period shall end on the immediately preceding
Business Day.
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<PAGE>
"Line of Credit Advance" shall mean a group of Line of
Credit Loans of a single Type made by the Banks on a single date
and as to which a single Interest Period is in effect.
"Loan" shall mean the aggregate of all outstanding Line of
Credit Loans of the Banks and the aggregate of all outstanding
Intermediate Term Credit Loans of the Banks.
"Loan Fees" shall mean the Line of Credit Facility Fee, the
Intermediate Term Credit Facility Fee and each Default Fee.
"Termination Date" shall mean the earliest of (a) the Line
of Credit Maturity Date or (b) the Intermediate Term Credit
Maturity Date, or (c) the date on which the Commitments are
terminated pursuant to Section 10.02(a) hereof.
"Type", when used in respect of an Advance or a Loan, shall
refer to the Rate by reference to which interest on such Advance or
Loan is determined. For purposes hereof, the term "Rate" shall
include the LIBO Rate, the Base Rate or the Fed Funds Rate.
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<PAGE>
SCHEDULE 1.02B
ADDITIONAL DEFINED TERMS
"Collateral Allocation Amount" shall mean, with respect to any
Primary Intermediate Term Customer Collateral securing payment of
a Customer Crop Input Loan to a Customer, the collateral value
thereof, if any, allocated and used by the Borrower to support the
credit limit established by the Borrower for such Customer Crop
Input Loan in accordance with the Credit Policy as set forth in the
Collateral Allocation Summary most recently furnished to the Bank.
"Collateral Allocation Summary" shall mean a written
allocation summary, in form and content satisfactory to the
Administrative Agent and completed and signed by a responsible
officer of the Borrower, setting forth the Customer Allocation
Amount allocated and used by the Borrower to support a credit limit
established by the Borrower in respect of a Customer Crop Input
Loan and specifying the Customer Crop Input Loan and amount of the
credit limit established therefor.
"Crop Input Collateral" shall mean, in respect of a Customer
Crop Input Loan, the crops securing such Customer Crop Input Loan
and Crop Insurance relating to or covering such Crops and the
entitlement and payments due or to become due in accordance with or
under applicable government programs which have been assigned to
the Borrower to secure payment of such Customer Crop Input Loan.
"Customer Claim" means any dispute, claim, offset or defense
of the Customer of a Customer Loan, including, without limitation,
the defense of usury, or any other claim of such Customer against
or adjustment to such Customer Loan resulting from the transaction
out of which such Customer Loan arose or any related or unrelated
transaction.
"Customer Concentration Limit" shall mean, as of any date of
determination, with respect to a Customer under an Intermediate
Term Customer Loan, the amount equal to the highest aggregate
unpaid principal balance of Customer Loans made to such Customer on
any single day during the 14 month period immediately preceding
such date; provided, however, the Customer Concentration Limit with
respect to a Customer shall be calculated as if such Customer and
all of such Customer's Affiliates were one Customer.
"Customer Crop Input Loan" shall mean a Customer Loan made by
the Borrower to a Customer to finance products and inputs
associated with current growing year crops and which is secured by
such crops.
"Debtor Relief Laws" shall have the meaning attributed to it
is the Credit Agreement.
<PAGE>
"Delinquent Intermediate Term Customer Loan" shall mean, as
of any date of determination, any Intermediate Term Customer Loan
with respect to which (a) any required payment or portion thereof
remains unpaid more than 60 days past the original due date of such
payment, (b) a material default exists, (c) there is in effect any
waiver by the Borrower of any material default or (d) any event or
circumstance exists that would, with notice, the passage of time or
both, become a material default in respect of such Intermediate
Term Loan.
"Eligible Intermediate Term Advance" means, at any time, a
Customer Advance in respect of an Intermediate Term Customer Loan:
(a) which is currently owing under an Intermediate Term
Customer Loan Note which has been duly authorized and which,
together with the related Customer Loan Documents, is in full force
and effect and constitutes the legal, valid and binding obligation
of the Customer of such Customer Advance to pay the outstanding
principal amount of such Customer Advance and interest thereon, and
the related Customer Loan Documents are enforceable against such
Customer in accordance with their respective terms except as
limited by Debtor Relief Laws and except as such enforceability may
be limited by general provisions of equity;
(b) which arose in the ordinary course of business of the
Borrower under Customer Loan Documents, the performance of which
have been completed by the Borrower and by all other parties other
than the Customer, and all advances, goods or services in
connection therewith have been delivered to or performed for the
Customer;
(c) the Customer of which is not also a Customer in respect
of a Delinquent Intermediate Term Customer Loan;
(d) the Customer of which is not the Customer of any
Customer Loan which has been, or which pursuant to the Credit
Policy should be, written off as uncollectible;
(e) the Customer of which is not a Governmental Body;
(f) which, together with the Customer Loan Documents
related thereto, is an "account", a "general intangible", "chattel
paper" or an "instrument" within the meaning of the UCC of all
jurisdictions which govern the perfection of the Borrower's
interest therein;
(g) with respect to which all material consents, licenses,
approvals or authorizations of; or registrations or declarations
with, any Governmental Body required to be obtained, effected or
given in connection with the making of such
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<PAGE>
Customer Advance have been duly obtained, effected or given and are
in full force and effect;
(h) the Customer of which is not an Affiliate of any of the
parties hereto;
(i) the Customer in respect of which is organized in and a
resident of the United States;
(j) which is denominated and payable only in United States
Dollars in the United States;
(k) which (i) in the case of a Customer Advance comprising an
Intermediate Term Customer Loan which is an Intermediate Term
Customer Loan-Real Estate, has a final maturity date which is not
later than seven years after the date of the initial Customer
Advance with respect thereto and has an amortization of principal
or of principal and interest over a period of not more than 15
years and (ii) in the case of a Customer Advance comprising an
Intermediate Term Customer Loan which is in Intermediate Term
Customer Loan-Equipment, has a fixed maturity date which is not
later than five years after the date of the initial Customer
Advance with respect thereto;
(l) which bears interest either (i) at a fluctuating per
annum rate equal to or in excess of the prime rate as reported in
the Midwestern edition of the Wall Street Journal as in effect from
time to time (or, if less, the maximum non-usurious rate), or (ii)
in respect of Customers who are residents of Arkansas, at a fixed
interest rate per annum, which as of the date of the Note, is equal
to or in excess of the prime rate as reported in the Midwestern
edition of the Wall Street Journal as in effect on such date (or,
if less, the maximum non-usurious rate);
(m) which, together with the Customer Loan Documents related
thereto, does not contravene in any material respect any laws,
rules or regulations applicable thereto (including, without
limitation, laws, rules and regulations relating to usury, truth in
lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy) and with
respect to which no party to the Customer Loan Documents related
thereto is in material violation of any such law, rule or
regulation in any respect;
(n) which is prepayable without penalty and, together with
the related Customer Loan Documents and related Customer
Collateral, is fully assignable;
(o) which has been originated pursuant to and satisfies in
all material respects all applicable requirements of the Credit
Policy;
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<PAGE>
(p) with respect to which only one current original Customer
Note exists, which Customer Note has been delivered to the
Custodian;
(q) which is secured by a perfected security interest in the
related Customer Collateral granted in favor of the Borrower, which
security interest has the priority required for such security
interest in the related Customer Loan Documents and the Credit
Policy;
(r) which has not been compromised, adjusted or similarly
modified and is not subject to any Customer Claims whatsoever and
which did not arise pursuant to Customer Loan Documents giving the
Customer an explicit right of offset;
(s) which was made under the existing Customer Loan
Documents, which Customer Loan Documents have not been modified for
negative credit reasons, except as agreed to by the Administrative
Agent;
(t) with respect to which the Customer Loan Documents are
complete in accordance with the Credit Policy;
(u) which Intermediate Term Customer Loan has not been
classified by the Borrower as "doubtful" or "loss" under the Credit
Policy;
(v) the unpaid principal balance of which at no time exceeds
the Primary Intermediate Term Customer Sub-Limit in respect of the
Primary Intermediate Term Customer Collateral securing payment of
such Intermediate Term Customer Loan minus (i) the unpaid balance
at such time of other Indebtedness (including unpaid interest)
secured by Liens in such Primary Intermediate Term Customer
Collateral which have priority over or rank equally with or to the
Lien in such Primary Intermediate Term Customer Collateral securing
payment of such Intermediate Term Customer Loan minus (ii) the
amount of any Lien against such Primary Intermediate Term Customer
Collateral for taxes or assessment or other governmental charges or
levies which are at such time due, delinquent or payable minus
(iii) the Collateral Allocation Amount, if any, applicable to such
Primary Intermediate Term Customer Collateral;
(x) which is secured by a perfected Lien in Primary
Intermediate Term Customer Collateral granted in favor of the
Borrower pursuant to the Customer Loan Documents related to such
Intermediate Term Customer Loan;
(y) the Customer in respect of which is also a Customer under
a Customer Crop Input Loan at the time the initial Customer Advance
in respect of such Intermediate Term Customer Loan is made;
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<PAGE>
(z) which is secured by the Crop Input Collateral securing
payment of the Customer Crop Input Loan to the Customer which is
also the Customer under such Intermediate Term Customer Loan;
(aa) which does not refinance an outstanding Customer Loan
originally made as a Customer Crop Input Loan;
(bb) the Customer Concentration Limit of the Customer with
respect to which does not exceed $3,525,000.00; and
(cc) which the Administrative Agent has not notified the
Servicer or the Borrower that the Administrative Agent has
determined, in its sole discretion, that such Customer Loan is not
acceptable for eligibility hereunder.
"Equipment" shall mean equipment and materials used for
agricultural or farming purposes.
"Intermediate Term Credit" shall have the meaning attributed
to it in Section 2A.01 hereof.
"Intermediate Term Credit Advance" shall mean a group of
Intermediate Term Credit Loans of a single Type made by the Banks
on a single date and as to which a single Interest Period is in
effect.
"Intermediate Term Credit Adjustment Factor" shall mean, at
anytime, an amount equal to the aggregate of the following amounts
computed for each Customer of an Eligible Intermediate Term Advance
(calculated as if such Customer and all Related Customers of such
Customer were one Customer): the excess of (a) the aggregate
outstanding principal amount of Eligible Intermediate Term Advances
(if any) extended to a Customer over (b) the aggregate credit limit
amounts established for such Customer by the Borrower in accordance
with the Credit Policy in respect of the Customer Crop Input Loan
of such Customer.
"Intermediate Term Credit Applicable Percentage" shall mean,
at any time with respect to a Bank, the percentage equivalent
(expressed as a decimal, rounded to the ninth decimal place) at
such time of such Bank's Intermediate Term Credit Commitment
divided by the Total Intermediate Term Credit Commitment at such
time.
"Intermediate Term Credit Borrowing Base" shall mean, at any
time, eighty-five percent (85.0%) of Net Aggregate Eligible
Intermediate Term Advances at such time.
"Intermediate Term Credit Borrowing Base Deficit" shall mean,
at any time, the amount, if any, by which the then outstanding
principal amount of the Total Intermediate Term Credit Loan exceeds
the Intermediate Term Credit Borrowing Base then in effect.
-5-
<PAGE>
"Intermediate Term Credit Commitment" shall mean, at any time
with respect to a Bank, the principal amount set forth besides such
Bank's name under the hearing "Intermediate Term Credit
Commitments" on Schedule I hereto on or the signature page of the
Assignment Certificate pursuant to which such Bank becomes a Bank
hereunder in accordance with the provisions of Section 3.14 hereof.
"Intermediate Term Credit Facility Fee" shall have the meaning
attributed to it in Section 2A.08 hereof
"Intermediate Term Credit Loan" shall mean each revolving loan
made by a Bank to the Borrower pursuant to Section 2A.01 hereof
Each Intermediate Term Credit Loan shall be a Fixed Rate Loan, a
Base Rate Loan or a Fed Funds Rate Loan.
"Intermediate Term Credit Maturity Date" shall mean February
28, 2000.
"Intermediate Term Credit Note" shall have the meaning
attributed to it in Section 2A.02 hereof
"Intermediate Term Customer Loan" shall mean any advance or
loan receivable (a) evidenced by an Intermediate Term Customer Loan
Note in which the Administrative Agent and each Bank have been
granted prior perfected first Liens, (b) comprised of one or more
discretionary advances made by the Borrower from time to time,
arising from the extension of credit to a Customer by the Borrower
in the ordinary course of its business which is an "intermediate
loan" as such term is generally used in the Credit Policy and (c)
which is not a Customer Crop Input Loan and shall include, without
limitation, all monies due or owing, all cash collections and other
cash proceeds and all other amounts received from time to time with
respect to such loan receivable and all proceeds (including,
without limitation, "proceeds" as defined in the UCC of the
jurisdiction the law of which governs the perfection of the
security interest in the Intermediate Term Customer Loans subject
to this Agreement) thereof
"Intermediate Term Customer Loan Note" means any promissory
note evidencing the indebtedness of a Customer under an
Intermediate Term Customer Loan and each Customer Advance made in
respect thereof; together with any modifications thereto.
"Intermediate Term Customer Loan-Equipment" shall mean
Customer Advances comprising an Intermediate Term Customer Loan (a)
made to a Customer to finance the acquisition of Equipment by such
Customer or to refinance a loan made to finance the acquisition of
Equipment by such Customer and (b) which is secured by a Lien in
such Equipment and proceeds thereof.
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<PAGE>
"Intermediate Term Customer Loan-Real Estate" shall mean
Customer Advances comprising an Intermediate Term Customer Loan
made to a Customer to finance the acquisition of Real Estate by
such Customer or to refinance a loan made to finance the
acquisition of Real Estate by such Customer and (b) which is
secured by a Lien in such Real Estate and proceeds thereof.
"Net Aggregate Eligible Intermediate Term Advances" shall
mean, at any time, the aggregate outstanding principal balance of
the Eligible Intermediate Term Advances outstanding at such time
minus the Intermediate Term Credit Factor Adjustment at such time.
"Permitted Encumbrances" shall mean, with respect to any
Customer Collateral securing payment of Customer Loan, liens
against such Customer Collateral (i) which are by statute granted
priority over the lien therein granted to the Borrower pursuant to
the Customer Loan Documents or (ii) which secure Indebtedness to
Persons other than the Borrower which has been deducted by the
Borrower in setting the credit limit for the related Customer.
"Primary Intermediate Term Customer Collateral" shall mean,
with respect to an Intermediate Term Customer Loan, the Real Estate
securing payment of such Customer Loan and the Equipment securing
payment of such Customer Loan.
"Primary Intermediate Term Customer Collateral Sub-Limit"
shall mean, at any time, with respect to the Primary Intermediate
Term Customer Collateral securing payment of an Intermediate Term
Customer Loan, the sum of (a) the lesser of (i) seventy percent
(70.0%) of the appraised value of such Primary Intermediate Term
Customer Collateral which is Real Estate or (ii) the prevailing (or
actual) cash rent value of such Real Estate divided by 7.0% plus
(b) sixty percent (60.0%) of the market value (established in
accordance with the Credit Policy) for such Primary Intermediate
Term Customer Collateral which is Equipment.
"Real Estate" shall mean land, and any buildings, improvements
and fixtures thereon, used for agricultural or farming purposes.
"Related Customer" shall mean, with respect to any Customer,
at any time, (a) all Affiliates of such Customer and (b) all the
lineal descendants and ascendants of such Customer, all brothers,
sisters, step-mothers, step-sisters, half-brothers and half-sisters
of such Customers and the spouse of any of the foregoing.
"Stated Line of Credit Commitments" shall mean, at any time
with respect to a Bank, the Line of Credit Commitment and the
Intermediate Term Credit Commitment of such Bank.
"Total Intermediate Term Credit Advance" shall mean the
aggregate amount of all Intermediate Term Credit Advances made by
the Banks on the same Borrowing Date.
-7-
<PAGE>
"Total Intermediate Term Credit Commitment" shall mean the
aggregate amount of the Intermediate Term Credit Commitments of all
the Banks.
"Total Intermediate Term Credit Loan" shall mean the aggregate
of all outstanding Intermediate Term Credit Loans of the Banks.
"Total Line of Credit Advance" shall mean the aggregate amount
of all Line of Credit Advances made by the Banks on the same
Borrowing Date.
"Total Line of Credit Commitment" shall mean the aggregate
amount of the Line of Credit Commitments of all the Banks.
"Total Line of Credit Loan" shall mean the aggregate of all
outstanding Line of Credit Loans of the Banks.
"Total Stated Line of Credit Commitment" shall mean the
aggregate of the Stated Line of Credit Commitments of all the
Banks.
"UCC" shall have the meaning attributed to it in the Asset
Securitization Credit Agreement.
-8-
<PAGE>
SCHEDULE IIA
INTERMEDIATE TERM CREDIT
ARTICLE IIA
AMOUNT AND TERMS OF INTERMEDIATE TERM CREDIT
Section 2A.0I Intermediate Term Credit Facility. (a)
Intermediate Term Credit. Subject to the terms and conditions
hereof; a line of credit arrangement is established by the Banks in
favor of the Borrower (the "Intermediate Term Credit") whereby each
Bank agrees, severally and not jointly, to make advances and loans
to the Borrower, on such Borrowing Dates prior to March 1, 1999, as
the Borrower shall select, on a prorata basis as to each such
Intermediate Term Credit Advance requested by the Borrower on such
Borrowing Date determined by such Bank's Intermediate Term Credit
Applicable Percentage in an amount up to but not exceeding the
Intermediate Term Credit Commitment of such Bank; provided,
however, that the Banks will not be required and shall have no
obligation to make any Intermediate Term Credit Loan (i) so long as
a Default or Event of Default has occurred and is continuing, or
(ii) if an Acceleration has occurred, or (iii) at anytime after
February 28, 1999; provided further, however, that immediately
after giving effect to each such Intermediate Term Credit Advance,
the aggregate outstanding principal amount of the Loan shall not
exceed the lesser of the Intermediate Term Credit Borrowing Base or
the Total Intermediate Term Credit Commitment.
(b) Advances. Each Intermediate Term Credit Loan made by a
Bank on a Borrowing Date shall be in an amount equal to such Bank's
Intermediate Term Credit Applicable Percentage of each Intermediate
Term Credit Advance to be made to the Borrower on such Borrowing
Date. No Bank shall have any obligation to make any Intermediate
Term Credit Loan after the Intermediate Term Credit Maturity Date
or after such obligation is sooner terminated or cancelled by the
Banks pursuant to the rights afforded them herein. Within such
limits, the Borrower may, within the limits of this Section 2A.01,
and subject to Article VI hereof; borrow, repay pursuant to Section
2A.03(b) hereof and reborrow funds under this Section 2A.01.
Notwithstanding any other provision of this Agreement, in no event
shall any Bank be obligated to make an Intermediate Term Credit
Loan if immediately thereafter the aggregate outstanding principal
amount of all of such Bankts Intermediate Term Credit Loans would
exceed the lesser of such Bank's then applicable Intermediate Term
Credit Commitment or such Bank's Intermediate Term Credit
Applicable Percentage of the Intermediate Term Credit Borrowing
Base. Each such Intermediate Term Credit Advance shall be comprised
of Variable Rate Loans or Fixed Rate Loans as specified by the
Borrower in the notice of advance request given pursuant to Section
2A.05. Each Intermediate Term Credit Advance shall be in an
aggregate principal amount that is an integral multiple of
<PAGE>
$50,000 and not less than $1,000,000.00 in the case of an
Intermediate Term Credit Advance comprised of Fixed Rate Loans or
$250,000.00 in the case of an Intermediate Term Credit Advance
comprised of Variable Rate Loans, or, an aggregate principal amount
equal to an amount which will utilize in full the remaining amount
then available to be borrowed under the Intermediate Term Credit.
The failure by any Bank to make any Intermediate Term Credit Loan
on the specified Borrowing Date shall not relieve any other Bank of
its obligation (if any) to make its own Intermediate Term Credit
Loan on such Borrowing Date, but no Bank shall be responsible for
the failure of any other Bank to make the Intermediate Term Credit
Loan of such other Bank.
Section 2A.02 Intermediate Term Credit Note. The Intermediate
Term Credit Loans made by each Bank shall be evidenced by a
properly executed promissory note of the Borrower substantially in
the form of Exhibit H attached hereto (completed with appropriate
insertions), payable to the order of such Bank in a stated
principal amount equal to such Bank's Intermediate Term Credit
Commitment (each such promissory note and each modification,
extension or replacement thereof or substitution therefor shall
hereinafter be called the "Intermediate Term Credit Note"). Each
Bank is hereby authorized to record the date, Type, and amount of
each Intermediate Term Credit Loan made by such Bank, each
continuation thereof; each conversion of all or a portion thereof
to another Type, the date and amount of each payment or prepayment
of principal thereof and, in the case of Fixed Rate Loans, the
length of each Interest Period with respect thereto, on the
schedule annexed to and constituting a part of its Intermediate
Term Credit Note, and any such recordation shall constitute prima
facie evidence of the accuracy of the information so recorded;
provided, however, that the failure to make any such recordation
shall not affect the obligations of the Borrower hereunder or under
any Intermediate Term Credit Note.
Section 2A.03 Principal.
(a) Mandatory Repayments. The Borrower shall be obligated to
make a principal repayment of the Total Intermediate Term Loan on
each Business Day in an amount equal to the Intermediate Term
Borrowing Base Deficit on such Business Day, together with accrued
interest on such principal amount repaid through the date of
payment. The entire aggregate outstanding principal of each Bank's
Intermediate Term Credit Loans and each Bank's Intermediate Term
Credit Note shall be due and payable in full on the Termination
Date. Mandatory principal repayments shall be applied first to
Intermediate Term Credit Advances comprised of Variable Rate Loans.
If a mandatory principal repayment is applied to Intermediate Term
Credit Advances comprised of Fixed Rate Loans on a date other than
the last day of the Interest Period therefor, the Borrower shall
pay to each Bank an amount sufficient to compensate such Bank for
any loss, cost or expenses incurred by such Bank as provided in
Section 2A. 17 hereof
(b) Optional Prepayments. The Borrower shall have the
right to prepay all or a portion of the Total Intermediate Term
Credit Loan at any time upon notice to the
-2-
<PAGE>
Administrative Agent, prior to the time
payment is made, on the date of prepayment in the case of Variable
Rate Loans and upon notice to the Administrative Agent given no
later than 12:00 noon (New York City time) on the third Business
Day prior to the date of prepayment in the case of Fixed Rate
Loans, which notice shall specify the Intermediate Term Credit
Advance being prepaid, the aggregate amount thereof to be prepaid,
and the date of prepayment. Any repayment of an Intermediate Term
Credit Advance shall be in an aggregate principal amount which is
an integral multiple of $50,000.00 and not less than $1,000,000.00
in the case of an Intermediate Term Credit Advance comprised of
Fixed Rate Loans or $250,000.00 in the case of an Intermediate Term
Credit Advance comprised of Variable Rate Loans or in either case
an amount sufficient to repay the outstanding principal amount of
such Intermediate Term Credit Advance. If a prepayment of an
Intermediate Term Credit Advance comprised of Fixed Rate Loans is
made on a date other than the last day of the Interest Period
therefor, the Borrower shall pay to each Bank an amount
sufficient to compensate such Bank for any loss, cost or expenses
incurred by such Bank as provided in Section 2A. 17 hereof. Amounts
prepaid may be reborrowed as permitted under Section 2A.01, subject
to the provisions of Section 6.02 hereof.
(c) Loss Indemnification. The provisions of Section 2A. 17
hereof shall apply to each mandatory repayment and optional
prepayment of any Fixed Rate Loan.
Section 2A.04 Interest.
(a) Rate Prior to Delinquency. (i) Subject to the provisions
of Section 2A.04(b), each Intermediate Term Credit Advance
comprised of Base Rate Loans shall bear interest at a rate per
annum equal to the Base Rate plus one-half percent (0.50%). The
interest rate on Intermediate Term Credit Advances comprised of
Base Rate Loans shall change as and when the Base Rate changes,
effective as of the opening of business on the day on which such
change in the Base Rate becomes effective.
(ii) Subject to the provisions of Section 2A.04(b), each
Intermediate Term Credit Advance comprised of Fed Funds Rate Loans
shall bear interest at a rate per annum equal to the Fed Funds Rate
plus a two and one-half percent (2.50%). The interest rate on
Intermediate Term Credit Advances comprised of said Fed Funds Rate
Loans shall change as and when the Fed Funds Rate changes,
effective as of the opening of business on the day in which such
change in the Fed Funds Rate becomes effective.
(iii) Subject to the provisions of Section 2A.04(b), each
Intermediate Term Credit Advance comprised of LIBOR Loans shall
bear interest at a rate per annum equal to the LIBO Rate for the
Interest Period in effect for such Intermediate Term Credit Advance
plus two percent (2.00%).
(iv) Interest on each Intermediate Term Credit Advance shall
accrue from and including the first day of an Interest Period to
but excluding the last day of such Interest
-3-
<PAGE>
Period or the day such Intermediate Term Credit Advance is paid in
full if such day is other than the last day of such Interest
Period.
(b) Default Rate. Any principal of or interest on a
Intermediate Term Credit Loan not paid when due (whether at
maturity, by acceleration or otherwise) shall, from the due date
therefrom until paid, bear interest at a rate per annum (computed
on the same basis as a Base Rate Loan) equal to the Default Rate.
The Default Rate shall increase or decrease, without limit, as and
when the Base Rate changes, effective as of the opening of business
on the day on which such change in the Base Rate becomes effective.
(c) Required Payments. Interest on each Intermediate Term
Credit Advance comprised of Fixed Rate Loans shall be due and
payable on the last day of the Interest Period applicable to such
Intermediate Term Credit Advance or the day such Intermediate Term
Credit Advance is paid in full if such day is other than the last
day of such Interest Period. Interest on each Intermediate Term
Credit Advance comprised of Variable Rate Loans shall be due and
payable on the first day of each month and on the day such
Intermediate Term Credit Advance is paid in full. If in accordance
with the foregoing interest on any Intermediate Term Credit Advance
would be due and payable on a day which is not a Business Day, such
interest shall be due and payable on the next Business Day,
however, interest shall continue to accrue until paid. Accrued and
unpaid interest on all Intermediate Term Credit Advances shall be
due and payable on the Termination Date.
Section 2A.05 Notice of Advance Requests. The provisions of
Section 2.05 applicable to Advances shall also apply to each
request for an Intermediate Term Credit Advance and the Borrower
shall designate in each notice given pursuant to Section 2.05
whether a Line of Credit Advance or an Intermediate Term Credit
Advance is being requested and the principal amount of each such
Advance.
Section 2A.06 Intermediate Term Advances. Each Intermediate
Term Advance shall be comprised of Fixed Rate Loans, Base Rate
Loans or Fed Funds Rate Loans as the Borrower may request pursuant
to Section 2A.05 hereof The Borrower may refinance all or any part
of any Intermediate Term Advance with an Intermediate Term Advance
of the same or a different Type, subject, in each case, to the
conditions and limitations set forth in this Agreement. Any
Intermediate Term Advance or portion thereof refinanced in
accordance with the foregoing shall be deemed to be repaid or
prepaid in accordance with Section 2A.03, with the proceeds of a
new Intermediate Term Advance and the proceeds of the new
Intermediate Term Advance, to the extent they do not exceed the
principal amount of the Intermediate Term Advance being refinanced,
shall not be paid by the Banks to the Administrative Agent or by
the Administrative Agent to the Borrower pursuant to Section 2A. 11
hereof. Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request any Intermediate Term
Advance if the Interest Period requested with respect thereto would
end after the Intermediate Term Credit Maturity Date.
-4-
<PAGE>
Section 2A.07 Use of Proceeds. Proceeds of the Intermediate
Term Credit Advances shall be used for the Borrower's working
capital.
Section 2A.08 Intermediate Term Credit Facility Fee. The
Borrower agrees to pay the Administrative Agent, for the pro rata
benefit of each Bank based on their Intermediate Term Credit
Applicable Percentages, a non-refundable fee (the "Intermediate
Term Credit Facility Fee") equal to one-quarter percent (0.25%) of
the daily amount by which the Total Intermediate Term Credit
Commitment exceeds the average daily outstanding principal balance
of the Total Intermediate Term Credit Loan from the effective date
hereof in the case of each Bank that is a signatory hereto and from
the effective date specified in the Assignment Certificate pursuant
to which such Bank became a Bank in accordance with Section 13.14
in the case of each other Bank until the Termination Date. The
Intermediate Term Credit Facility Fee shall be payable on the last
day of each fiscal quarter of the Borrower, in arrears, prior to
March 1, 1999. No portion of any Intermediate Term Credit Facility
fee paid to the Administrative Agent shall be refunded for any
reason, irrespective of the occurrence of the Termination Date
prior to March 1, 1999. Upon receipt of any Intermediate Term
Credit Facility Fee, the Administrative Agent shall promptly
thereafter distribute to each Bank an amount equal to such Bank's
Intermediate Term Credit Applicable Percentage of such Intermediate
Term Credit Facility Fee paid to the Administrative Agent.
Section 2A.09 Calculation of Interest Maximum Lawful Rates.
All interest and fees charged hereunder with respect to all
Intermediate Term Credit Advances, Intermediate Term Credit Loans
and the Intermediate Term Credit Facility Fees and each
Intermediate Term Credit Note shall be calculated based on a year
of 360 days and the actual number of days elapsed. If at any time
the interest rate hereunder or under any Intermediate Term Credit
Note exceeds the highest lawful rate, interest shall accrue at the
highest lawful rate. If any payment by or on behalf of the Borrower
is received after 2:00 p.m. New York City time) on any Business
Day, it wilt be deemed to be received on the next succeeding
Business Day. If the time for payment of any amount hereunder is
extended by operation of law or otherwise, interest shall continue
to accrue for such extended period.
Section 2A. 10 Notice of Changes in Base Rate. During the
effective period of this Agreement, the Administrative Agent shall
promptly advise Borrower of changes in the Base Rate; provided,
however, that the failure to give such advice or the failure to
give such advice promptly shall not affect the obligation of the
Borrower to pay interest in accordance with the terms of any
Intermediate Term Credit Note and of this Agreement.
Section 2A 11 Funding and Disbursements. The provisions of
Section 2.11 applicable to Advances shall also apply to fundings of
Intermediate Term Credit Advances by the Banks and disbursements of
Intermediate Term Credit Advances to the Borrower.
Section 2A.12 Payments. The provisions of Section 2.12 shall
also apply to payments made in respect of Intermediate Term Credit
Loans.
-5-
<PAGE>
Section 2A.13 Application of Payments. The provisions of
Section 2.13 applicable to Loans shall also control the application
of payments made in respect of Intermediate Term Credit Loans. Each
Bank agrees that in computing such Bank's portion of any
Intermediate Term Credit Advance to be made hereunder or the
portion of any payment to be allocated to such Bank hereunder, the
Administrative Agent may, in its sole discretion, round each Bank's
portion of such payment to the next higher or lower whole dollar
amount. Amounts paid by the Borrower pursuant to Sections 2A.15,
2A.16 or 2A.17 or Article XI shall be remitted to the
Administrative Agent or the Banks entitled thereto.
Section 2A.14 Non-Receipt of Funds by Administrative Agent.
The provisions of Section 2.14 applicable to fundings of Advances
shall also apply to fundings by a Bank of an Intermediate Term
Credit Advance.
Section 2A.15 Increased Cost. The provisions of Section 2.15
applicable to Line of Credit Loans and Line of Credit Notes and the
determination of the amount of and payments of increased costs with
respect thereto shall also apply to Intermediate Term Credit Loans
and Intermediate Term Credit Notes, respectively, and the
determination of the amount of and payment of increased costs with
respect thereto. The payment of the additional amounts required
hereunder shall be made by the Borrower immediately on the date any
Bank gives the required notice to the Borrower.
Section 2A.16 Risk-Based Capital. The provisions of Section
2.16 applicable to Line of Credit Loans and the determination of
the amount of and payment of additional costs with respect thereto
shall also apply to Intermediate Term Credit Loans and the
determination of the amount of and payment of additional costs with
respect thereto. The payment of the additional amounts required
hereunder shall be made by the Borrower within 30 days after the
date any Bank gives the required notice to the Borrower.
Section 2A.17 Funding Loss Indemnification. The provisions of
Section 2.17 applicable to a Line of Credit Loan and the
compensation to a Bank for any loss, cost, or expense incurred as
a result of a repayment or prepayment of a Fixed Rate Loan or the
Borrower's failure to borrow, renew or convert an Advance shall
also apply to Intermediate Term Credit Loans and the compensation
to a Bank for any loss, cost or expense incurred as a result of a
repayment or prepayment of a Fixed Rate Loan comprised of
Intermediate Term Credit Advances and the Borrower's failure to
borrow, renew or convert an Intermediate Term Credit Advance.
Section 2A.18 Survival. The Borrower's agreements and
obligations under Sections 2A.12, 2A.15, 2A.16 and 2A.17 shall
survive the payment of all Intermediate Term Credit Loans
hereunder.
-6-
<PAGE>
Section 2A.19 Pro Rata Treatment. Except as otherwise
specifically provided herein, each Intermediate Term Credit Loan,
each payment or prepayment of principal of the Loan, each payment
of interest on the Loan, each payment of the Intermediate Term
Credit Fee and a Default Fee, each conversion into, or out of; and
renewals of; Fixed Rate Loans shall be allocated pro rata among the
Banks in accordance with each Bank's Intermediate Term Credit
Applicable Percentage. Each Bank agrees that in computing such
amount of any Intermediate Term Credit Loan to be made by such Bank
or any payment to be allocated to such Bank hereunder, the
Administrative Agent may, in its discretion, round the dollar
amount of each Bank's Intermediate Term Credit Loan to the next
higher or lower whole dollar amount.
Section 2A.20 References to Advances. Each reference to
"Advances" and "Advance" in the provisions of Section 2.05, 2.11,
2.12, 2.13, 2.14, 2.15, 2.16 and 2.18 made applicable to
Intermediate Term Credit Advances or an Intermediate Term Credit
Advance as provided in this Article IIA shall mean and refer,
respectively, to Intermediate Term Credit Advances and an
Intermediate Term Credit Advance for purposes of this Article IIA.
Section 2A.21 Collateral Allocation Summary. The Borrower
shall complete and furnish to the Custodian a Collateral Allocation
Summary promptly after each allocation of Primary Intermediate Term
Customer Collateral is made by the Borrower to support a credit
limit established for a Customer or a Customer Crop Input Loan.
-7-
<PAGE>
AG SERVICES OF AMERICA, INC.
EXHIBIT 10.24
AMENDMENT NO. 1 TO CREDIT AGREEMENT
-28-
<PAGE>
EXECUTION COPY
AMENDMENT NO. 1
dated as of March 9, 1998
to
CREDIT AGREEMENT
dated as of March 12, 1997
THIS AMENDMENT NO.1 to CREDIT AGREEMENT, dated as of March 9,
1998 (this "Amendment") is made by AG ACCEPTANCE CORPORATION, a
Delaware corporation (the "Borrower"), TRIPLE-A ONE FUNDING
CORPORATION, a Delaware corporation ("Triple-A"), AG SERVICES OF
AMERICA, INC., an Iowa corporation ("Ag Services"), in its capacity
as Servicer hereunder (in such capacity, the "Servicer"), CapMAC
FINANCIAL SERVICES, INC. ("CFS"), as Administrative Agent (the
"Administrative Agent") and CAPITAL MARKETS ASSURANCE CORPORATION,
a New York insurance company ("CapMAC"), in its separate capacities
as Collateral Agent (the "Collateral Agent") and as Surety (the
"Surety"). Capitalized terms used herein and not defined herein
shall have the meanings assigned to them in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower, Triple-A, the Servicer, the
Administrative Agent and the Collateral Agent are parties to a
certain Credit Agreement dated as of March 12, 1997 (the "Credit
Agreement");
WHEREAS, the Borrower, Triple-A, the Servicer, the
Administrative Agent and the Collateral Agent have agreed to amend
the Credit Agreement, and CapMAC, as the Surety has agreed to such
amendment, in each case, on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises set forth
above) and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, each of the
Borrower, Triple-A, the Servicer, the Administrative Agent, and the
Collateral Agent hereby agree as follows:
Section 1. Amendment of the Credit Agreement
Subject to the fulfillment of the conditions precedent set
forth in Section 2 below, the Credit Agreement is hereby amended as
follows:
(a) The defined term "DIP Financing Limit" set forth in
Section 1.01 of the Credit Agreement is hereby amended by deleting
"5%" contained in clause (i) thereof and substituting with "7.5%"
therefor;
<PAGE>
(b) The defined term "Facility Limit" set forth in Section
1.01 of the Credit Agreement is hereby amended by deleting
"$135,000,000" contained thereof and substituting with
"$[171,000,000]" therefor;
(c) Section 9.01(o) of the Credit Agreement is hereby amended
by deleting "ten percent (10%)" contained in clause (i) thereof and
substituting the phrase "eight percent (8%)" therefor;
(d) Section 9.01(g) of the Credit Agreement is hereby amended
by deleting "one percent (1%)" contained in clause (iii) thereof
and substituting the phrase "two percent (2%)" therefor; and
(e) The List of Credit Factors, as set forth under Exhibit J
to the Credit Agreement, is hereby deleted in its entirety and
Exhibit J attached hereto shall be substituted therefor.
Section 2. Conditions Precedent. This Amendment shall
become effective and shall be deemed effective as of the date first
above written upon the receipt by the Administrative Agent of each
of the following:
(i) signed counterparts of this Amendment executed by each of
the Borrower, Triple-A, the Servicer, the Administrative Agent, the
Collateral Agent and the Surety; and
(ii) evidence that Triple-A has delivered a description of
this Amendment to each Liquidity Bank and has certified that this
Amendment has no material adverse effect on the Liquidity Banks'
rights, obligations or interests under the Liquidity Agreement.
Section 3. Representations and Warranties. The Borrower
hereby represents and warrants that (i) the representations and
warranties contained in the Credit Agreement are correct in all
material respects as though made on and as of the date of this
Amendment, other than any such representation or warranty which
relates to a specified prior date, and (ii) no Event of Default or
Unmatured Event of Default has occurred and is continuing.
Section 4. Effect on the Credit Agreement. Except as
specifically set forth above, (i) the Credit Agreement and all
other documents, instruments and agreements executed and/or
delivered in connection therewith shall remain in full force and
effect and are hereby ratified and confirmed; and (ii) the
execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of the
Administrative Agent or Triple-A under the Credit Agreement, nor
constitute a waiver of any provision of the Credit Agreement or of
any Event of Default or Unmatured Event of Default in existence on
the date of this Amendment.
Section 5. Execution in Counterparts. This Amendment may
be executed in any numbers of counterparts and by different parties
hereto in separate counterparts, each of which
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<PAGE>
when so executed and delivered shall be deemed to be an original
and all of which when taken together shall constitute but one and
the same instrument.
Section 6. Governing Law. This Amendment shall be governed
by and construed in accordance with the laws of the State of New
York.
Section 7. Section Titles. The section titles contained in
this Amendment are and shall be without substance, meaning or
content of any kind whatsoever and are not a part of the agreement
between the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as the date first above
written.
AG ACCEPTANCE CORPORATION
By: ________________________
Title:_______________________
AG SERVICES OF AMERICA, INC.
By: _________________________
Title:_______________________
TRIPLE-A ONE FUNDING CORPORATION
By: Capital Markets Assurance
Corporation, its Attorney-in-Fact
By: ___________________________
Title:__________________________
CAPITAL MARKETS ASSURANCE
CORPORATION, in its capacity as Collateral
Agent and Surety.
By: ___________________________
Title:__________________________
CAPMAC FINANCIAL SERVICES, INC.
as Administrative Agent
By: ____________________________
Title: __________________________
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<PAGE>
EXHIBIT I
to
Credit Agreement
List of Credit Factors
----------------------
Irrigated Crops 95%
Non-irrigated Crops 90%
<PAGE>
<TABLE>
AG SERVICES OF AMERICA, INC.
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
Year Ended
Year Ended February 28, February 29, Year Ended February 28,
1998 1997 1996 1995 1994
-------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Computation of weighted
average number of basic
shares: (A)
Basic:
Common shares outstanding at beginning
of the period 5,135,719 3,611,350 3,482,634 3,469,534 3,370,700
Weighted average number of shares issued
during the period 19,467 15,368 55,969 8,610 37,492
Weighted average common shares issued due
to conversion of the 7% convertible
subordinated debenture - - 952,002 -- -- --
---------- ---------- ---------- ---------- ----------
Weighted average shares outstanding (basic) 5,155,186 4,578,720 3,538,603 3,478,144 3,408,192
========== ========== ========== ========== ==========
Net income $5,181,253 $4,345,815 $3,133,240 $2,402,078 $1,966,743
========== ========== ========== ========== ==========
Basic earnings per share $1.01 $0.95 $0.89 $0.69 $0.58
========== ========== ========== ========== ==========
Diluted:
Common shares outstanding at beginning
of the period 5,135,719 3,611,350 3,482,634 3,469,534 3,370,700
Common shares issued due to conversion
of the 7% convertible subordinated
debentures this period - - 1,487,669 -- -- --
Weighted average number of shares issued
during the period 19,467 15,368 55,969 8,610 37,492
Weighted average of potential dilutive shares
computed using the treasury stock method
using the average market price:
Options (B) 269,791 237,870 145,758 137,283 145,264
Warrants -- -- 24,978 43,237 65,120
Assumed conversion of $13.8 million 7%
convertible subordinated debentures (C) -- -- 1,491,892 1,491,892 1,275,262
---------- ---------- ---------- ---------- ----------
Weighted average number of shares (diluted) 5,424,977 5,352,257 5,201,231 5,150,556 4,893,838
========== ========== ========== ========== ==========
Net income $5,181,253 $4,345,815 $3,133,240 $2,402,078 $1,966,743
Add: Interest on $13.8 million 7%
convertible subordinated debentures,
net of income tax effect - - 153,184 616,695 616,695 515,041
Amortization of debt issuance costs,
net of income tax effect - - 13,781 55,158 55,158 45,915
---------- ---------- ---------- ---------- ----------
Total $5,181,253 $4,512,780 $3,805,093 $3,073,931 $2,527,699
========== ========== ========== ========== ==========
Diluted earnings per share $0.96 $0.84 $0.73 $0.60 $0.52
========== ========== ========== ========== ==========
<FN>
(A) All shares have been adjusted to give effect to the 2 for 1 stock split
effective July 15, 1994.
(B) Some of the stock options have not been included because they are
antidilutive.
(C) Assumed conversion at the date of issuance on April 23, 1993.
</TABLE>
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<PAGE>
Ag Services of America, Inc.
Exhibit 13.1
FORM OF ANNUAL REPORT TO
SHAREHOLDERS FYE FEBRUARY 28, 1998
-30-
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
---------------------
<CAPTION>
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
(expressed in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Earnings:
Net revenues $186,073 $147,647 $114,686 $87,331 $65,554
Net revenues increase 26.0% 28.7% 31.3% 33.2% 20.1%
Net income $5,181 $4,346 $3,133 $2,402 $1,967
Net income as a percentage of net revenues 2.8% 2.9% 2.7% 2.8% 3.0%
Return on beginning stockholders' equity 13.6% 21.3% 18.8% 16.9% 16.7%
Per share data:*
Net income:
Basic $1.01 $0.95 $0.89 $0.69 $0.58
Diluted $0.96 $0.84 $0.73 $0.60 $0.52
Book value $8.45 $7.44 $5.65 $4.78 $4.09
Weighted average shares:*
Basic 5,155 4,579 3,539 3,478 3,408
Diluted 5,425 5,352 5,201 5,151 4,894
Financial position:
Working capital $33,806 $27,375 $23,611 $21,546 $23,034
Total assets $93,248 $60,773 $55,186 $38,277 $28,786
Stockholders' equity $43,756 $38,216 $20,421 $16,660 $14,198
</TABLE>
[FN]
* - All per share data have been adjusted to reflect the 2 for 1 split
effective July 15, 1994.
<TABLE>
Quarterly Common Stock Prices
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
1998
High $18 7/8 $20 3/16 $19 3/4 $18 3/8
Low $13 3/4 $15 7/8 $17 7/16 $14 7/8
1997
High $15 $13 1/2 $14 5/8 $17 3/8
Low $10 1/8 $11 $11 $12 7/8
</TABLE>
-1-
<PAGE>
<TABLE>
THIRTEEN-YEAR FINANCIAL SUMMARY
(Dollars in thousands, except per share amounts)
<CAPTION>
February February February February February February
1998 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Net revenues:
Farm inputs $172,717 $137,443 $106,869 $81,936 $61,644 $51,088
Financing income 13,356 10,204 7,817 5,395 3,910 3,474
--------- --------- --------- --------- --------- ---------
Total net revenues $186,073 $147,647 $114,686 $87,331 $65,554 $54,562
--------- --------- --------- --------- --------- ---------
Cost of revenues:
Farm inputs $162,197 $127,698 $98,280 $75,247 $56,296 $46,447
Financing expense 5,536 4,768 4,258 2,784 1,720 1,308
Provision for doubtful notes 2,963 2,290 1,863 1,409 1,050 812
--------- --------- --------- --------- --------- ---------
Total cost of revenues $170,696 $134,756 $104,401 $79,440 $59,066 $48,567
--------- --------- --------- --------- --------- ---------
Income before operating expenses
and income taxes $15,377 $12,891 $10,285 $7,891 $6,488 $5,995
Operating expenses 7,316 6,216 5,422 4,264 3,404 2,604
--------- --------- --------- --------- --------- ---------
Income before lawsuit settlement
and income taxes $8,061 $6,675 $4,863 $3,627 $3,084 $3,391
Lawsuit settlement - - - - - - 136 - - (490)
--------- --------- --------- --------- --------- ---------
Income before income taxes $8,061 $6,675 $4,863 $3,763 $3,084 $2,901
Fed and state income taxes 2,880 2,329 1,730 1,361 1,117 1,045
--------- --------- --------- --------- --------- ---------
Net income $5,181 $4,346 $3,133 $2,402 $1,967 $1,856
========= ========= ========= ========= ========= =========
Earnings per share:
Basic $1.01 $0.95 $0.89 $0.69 $0.58 $0.55
========= ========= ========= ========= ========= =========
Diluted $0.96 $0.84 $0.73 $0.60 $0.52 $0.53
========= ========= ========= ========= ========= =========
Cash dividnds per common share $- - $- - $- - $- - $- - $- -
========= ========= ========= ========= ========= =========
Weighted average shares:
Basic 5,155,186 4,578,720 3,538,603 3,478,144 3,408,192 3,360,542
========= ========= ========= ========= ========= =========
Diluted 5,424,977 5,352,257 5,201,231 5,150,556 4,893,838 3,524,278
========= ========= ========= ========= ========= =========
<CAPTION>
February February February February February February
1998 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital $33,806 $27,375 $23,611 $21,546 $23,034 $8,531
Total assets 93,248 60,773 55,186 38,277 28,786 20,983
Short-term debt 39,328 21,000 19,850 7,100 - - 8,000
Stockholders' equity 43,756 38,216 20,421 16,660 14,198 11,760
</TABLE>
-10-
<PAGE>
<TABLE>
THIRTEEN-YEAR FINANCIAL SUMMARY
(Dollars in thousands, except per share amounts)
<CAPTION>
February February February February February February February
1992 1991 1990 1989 1988 1987 1986*
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Net revenues:
Farm inputs $33,062 $27,443 $21,236 $9,451 $4,176 $2,833 $10
Financing income 2,472 1,983 1,515 512 184 165 - -
--------- --------- --------- --------- --------- --------- ---------
Total net revenues 35,534 29,426 22,751 9,963 4,360 2,998 10
--------- --------- --------- --------- --------- --------- ---------
Cost of revenues:
Farm inputs $30,355 $25,131 $19,215 $8,541 $3,728 $2,441 $- -
Financing expense 913 1,039 1,241 365 129 116 - -
Provision for doubtful notes 471 375 451 53 37 10 - -
--------- --------- --------- --------- --------- --------- ---------
Total cost of revenues $31,739 $26,545 $20,907 $8,959 $3,894 $2,567 $- -
--------- --------- --------- --------- --------- --------- ---------
Income before operating expenses
and income taxes $3,795 $2,881 $1,844 $1,004 $466 $431 $10
Operating expenses 1,941 1,637 1,399 585 408 377 31
--------- --------- --------- --------- --------- --------- ---------
Income before lawsuit settlement
and income taxes $1,854 $1,244 $445 $419 $58 $54 ($21)
Lawsuit settlement - - - - - - - - - - - - - -
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes $1,854 $1,244 $445 $419 $58 $54 ($21)
Fed and state income taxes 676 446 183 159 18 7 - -
--------- --------- --------- --------- --------- --------- ---------
Net income $1,178 $798 $262 $260 $40 $47 ($21)
========= ========= ========= ========= ========= ========= =========
Earnings per share:
Basic $0.42 $0.42 $0.22 $0.22 $0.03 $0.04 ($0.02)
========= ========= ========= ========= ========= ========= =========
Diluted $0.42 $0.42 $0.22 $0.22 $0.03 $0.04 ($0.02)
========= ========= ========= ========= ========= ========= =========
Cash dividnds per common share $- - $- - $- - $- - $- - $- - $- -
========= ========= ========= ========= ========= ========= =========
Weighted average shares:
Basic 2,784,864 1,910,116 1,179,802 1,179,802 1,179,802 1,179,802 1,179,802
========= ========= ========= ========= ========= ========= =========
Diluted 2,822,166 1,910,116 1,179,802 1,179,802 1,179,802 1,179,802 1,179,802
========= ========= ========= ========= ========= ========= =========
<CAPTION>
February February February February February February February
1992 1991 1990 1989 1988 1987 1986*
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital $7,908 $3,470 $358 $281 $36 $14 ($32)
Total assets 13,971 7,231 3,952 1,421 355 195 39
Short-term debt 3,500 2,265 308 636 126 15 52
Stockholders' equity 9,839 4,001 588 326 66 26 (21)
<FN>
* - Represents operations from October 1985, the Company's inception, through February 28, 1986.
</TABLE>
-11-
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion should be read in conjunction
with the Financial Statements of the Company, the related notes
thereto and Selected Financial Data included elsewhere in this
Annual Report.
General
Fiscal 1998 marks the tenth consecutive year Ag Services
has reached record levels of sales and earnings. Compared to
fiscal 1997, the Company's annual net revenues rose 26% to $186.1
million and net income grew 19% to $5.2 million. The Company
reported basic and diluted earnings per share of $1.01 and $.96,
respectively, compared to $.95 and $.84 per share, respectively, in
fiscal 1997.
In March 1997, the Company negotiated an asset backed
securitized financing program with a maximum available amount of
$135 million. This facility was amended and increased to $205
million in March 1998 and should provide the Company adequate
financing for fiscal 1999.
Results of Operations
Selected Operating Results
The following table sets forth the dollars and percentages of
net revenues by the selected items in the Consolidated Statements
of Income of the Company.
Dollars (in thousands) and Percentage of Total Net Revenue
Year Ended Year Ended Year Ended
February 28, 1998 February 28, 1997 February 28, 1996
----------------- ----------------- -----------------
Net revenues:
Farm inputs $172,717 92.8% $137,443 93.1% $106,869 93.2%
Financing income 13,356 7.2% 10,204 6.9% 7,817 6.8%
---------- ----- -------- ------ -------- -----
Total net revenues $186,073 100.0% $147,647 100.0% $114,686 100.0%
---------- ------ -------- ------ -------- ------
Cost of revenues:
Farm inputs $162,197 87.1% $127,698 86.5% $98,280 85.7%
Financing expense 5,536 3.0% 4,768 3.2% 4,258 3.8%
Provision for
doubtful notes 2,963 1.6% 2,290 1.6% 1,863 1.6%
--------- ------ ------- ----- -------- ------
Total cost of
revenues $170,696 91.7% $134,756 91.3% $104,401 91.1%
-------- ----- -------- ----- -------- ------
Income before
operating expenses
and income taxes $15,377 8.3% $12,891 8.7% $10,285 8.9%
Operating expenses 7,316 4.0% 6,216 4.2% 5,422 4.7%
------- ----- ------- ----- ------- -----
Income before
income taxes $8,061 4.3% $6,675 4.5% $4,863 4.2%
Federal and state
income taxes 2,880 1.5% 2,329 1.6% 1,730 1.5%
------ ---- ------ ----- ------ -----
Net income $5,181 2.8% $4,346 2.9% $3,133 2.7%
======= ===== ======= ====== ======= =====
-12-
<PAGE>
Net Revenues
Net revenues in fiscal 1998 increased 26% to $186.1 million,
compared with $147.6 million in 1997, and $114.7 million in 1996.
Financing income as a percentage of net revenues increased to 7.2%
in fiscal 1998 from 6.9% in 1997 and 6.8% in 1996. The increase in
fiscal 1998 financing income as a percentage of net revenues over
fiscal 1997 reflects the additional financing income generated from
the growth in the Company's intermediate term financing program
from $3.7 million outstanding in fiscal 1997 to $10.1 million
outstanding in fiscal 1998. For the last three fiscal years over
95% of the Company's customers have had variable rate notes, which
allows the Company to pass interest rate risk onto its customers.
The number of customers in fiscal 1998 increased 15% to 1,235
compared to 1,078 in 1997 and 941 in 1996. The average net revenue
generated by each customer increased 10% to $150,700 in fiscal
1998, compared with $137,000 in 1997 and $121,900 in 1996. The
Company achieved these record net revenue levels through increased
marketing and sales efforts in our 30 state market area.
Cost of Revenues
The total cost of revenues was 91.7% of net revenues for
fiscal 1998, which increased from 91.3% of net revenues in 1997,
and 91.1% of net revenues in 1996. The increase in total cost of
revenues as a percentage of net revenues in fiscal 1998 and 1997
was attributed to a decrease in gross margin on the sale of farm
inputs which was offset by an increase in gross margin on financing
income. The gross margin on farm inputs, alone, decreased to 6.1%
in fiscal 1998 from 7.1% in 1997 and 8.0% in 1996. The decrease in
gross margin on the sale of farm inputs in 1998 and 1997 was
primarily the result of a change in product sales mix from higher
to lower margin farm inputs. This change in sales mix was
primarily due to the following two reasons. Poor collection
history in the South led management to make reductions in marketing
in the Company's southern sales regions. Consequently, higher
margin cotton seed and chemical sales in the South were replaced by
lower margin sales, such as irrigation and fuel advances,
concentrated in the western corn belt and lower midwest plain
states. Secondly, the growth of our average customer size has
affected the sales mix as larger farming operations require a
larger percentage of cash advances for land rental, fuel and
irrigation, which are lower margin sales. In addition to the sales
mix changes, larger seed volume discounts granted to customers in
fiscal 1998 and 1997 relative to the prior year also contributed to
the decline in farm input margins. These larger volume discounts
given were also due to the growth in the average size of Ag
Services' customers. The margin declines in farm inputs was,
however, offset by an increase in financing margins. In fiscal
1998, financing expense decreased to 3.0% of net revenues from 3.2%
in fiscal 1997 and 3.8% in fiscal 1996. The decrease in interest
expense as a percentage of net revenues in fiscal 1998 was
primarily the result of the nearly 100 basis point reduction in the
Company's cost of funds as a result of the asset backed securitized
financing program entered into in March 1997. The decrease in
interest expense as a percentage of net revenues in fiscal 1997 was
due primarily to the conversion of Ag Services' 7% Convertible
Subordinated Debentures into common stock during the second quarter
of fiscal 1997. This conversion allowed for pretax interest
savings of $724,500 in fiscal 1997. The average interest rate on
the Company's financing agreements decreased from 7.5% in fiscal
1996 to 7.2% in fiscal 1997 and 6.4% in fiscal 1998. Financing
expense, as a cost of revenue, is directly affected by changes in
the prevailing prime interest rate and commercial paper rates under
the Company's financing agreements. The Company establishes
interest rates for customers each year based on the Company's
anticipated financing expenses and competitive influences in
-13-
<PAGE>
the market. For fiscal 1998, 1997, and 1996, the Company offered
variable rate notes to customers ranging from prime to 4.0% above
prime. This allowed the Company to limit exposure to interest rate
risk. The provision for doubtful notes, as a percentage of net
revenues, remained steady at 1.6% in fiscal 1998, 1997, and 1996.
Operating Expenses
Operating expenses have decreased to 4.0% of net revenues in
fiscal 1998 from 4.2% of net revenues in 1997 and 4.7% in 1996.
The decrease in fiscal 1998 is the result of the Company's
operating expenses increasing at a lower rate (18%) than net
revenues (26%), due to Management's continuing efforts to control
expenses, as well as, operating economies achieved. The increase
in operating expenses is primarily due to the increase in payroll
to $3,917,200 in fiscal 1998 from $3,402,800 in 1997 and $2,826,000
in 1996. This is the result of the Company adding employees as
well as general wage rate increases to existing employees. The
balance of the increase in operating expenses is attributed
principally to the Company's growth.
Net Income
Net income increased 19% to $5.2 million in fiscal 1998,
compared with $4.3 million in 1997 and $3.1 million in 1996. The
increase in net income is attributable to the increase in net
revenues, the decline in operating expenses as a percentage of net
revenues and interest savings associated with the asset backed
securitized financing program.
Seasonality
The Company's revenues and income are directly related to the
growing cycle for crops. Accordingly, quarterly revenues and
income vary during each fiscal year. The following table shows the
Company's quarterly net revenues and net income for fiscal 1998 and
1997. This information is derived from unaudited financial
statements, which include, in the opinion of management, all normal
and recurring adjustments which management considers necessary for
a fair statement of results of those periods. The operating
results for any quarter are not necessarily indicative of the
results for any future period.
Fiscal 1998 Quarter Ended
--------------------------------------------------------------
May 31 August 31 November 30 February 28
------ --------- ----------- -----------
(Dollars in Thousands)
Net revenues $80,775 $58,943 $14,225 $32,130
Net income $1,922 $1,935 $1,018 $306
Fiscal 1997 Quarter Ended
--------------------------------------------------------------
May 31 August 31 November 30 February 28
------ --------- ----------- -----------
(Dollars in Thousands)
Net revenues $66,207 $49,631 $11,402 $20,407
Net income $1,573 $1,635 $832 $306
The Company's primary target market experienced a normal
planting and growing season in fiscal 1998 and 1997 resulting in a
normal pattern of revenues in both years.
-14-
<PAGE>
Inflation
The Company does not believe the Company's net revenues and
income from continuing operations were significantly impacted by
inflation or changing prices in fiscal 1998, 1997 or 1996.
Future Adoption of Financial Accounting Standard
In June 1997, the Financial Accounting Standards Board issued
Statement No. 130, "Reporting Comprehensive Income," and Statement
No. 131, "Disclosures about Segments of an Enterprise and Related
Information, " both of which are required to be adopted for fiscal
years beginning after December 15, 1997. Statement No. 130 will
require the Company to report in its financial statements all non-
owner related changes in equity for the periods being reported.
Statement No. 131 will require the Company to disclose revenues and
other financial information pertaining to the business segments by
which the Company is managed, as well as, the factors management
used to determine these segments. The Company is currently
evaluating the requirements of Statements No. 130 and No. 131 to
determine how to present the required information in its financial
statements.
Liquidity and Capital Resources
Due to the seasonality of the Company's revenues and the terms
of its notes receivable, the Company is required to finance the
carrying of its revenues as notes receivable for a majority of its
fiscal year. As a result, the Company's need for capital has
increased significantly due to its rapid growth. At February 28,
1998 and 1997, the Company had approximately $69,151,000 and
$50,180,000 respectively, in commitments to supply farm inputs.
The Company has funded its operating requirements and growth
through a combination of retained earnings, equity capital,
subordinated debt, trade credit and bank and commercial paper
borrowings. For the fiscal years ended February 28, 1998 and 1997,
and February 29, 1996, the Company financed its purchase of farm
inputs from the following sources in the respective percentages
indicated: bank and commercial paper borrowings 67.2%, 67.2% and
66.0%; trade credit 6.0%, 6.0% and 4.1%; subordinated debt 0.0%,
0.0% and 11.6%; and equity 26.8%, 26.8% and 18.3%. The increase in
trade credit in fiscal 1997 is the result of the Company choosing
to finance more of its seed sales through credit arrangements with
the Company's larger seed vendors. The Company also elects to
prepay product purchases in order to lock in lower prices. Capital
expenditures have been financed through bank borrowings and
equipment leasing. The Company's principal source of working
capital has been bank and commercial paper borrowings, retained
earnings, a $2.5 million sale of common stock by the Company, the
$4.7 million from its initial public offering of common stock in
August 1991, and the $12.9 million from its convertible
subordinated debenture offering in April 1993, which was converted
to common stock in fiscal 1997. In March 1997, the Company
negotiated a $135,000,000 asset backed securitized financing
program through February 2002. The facility replaced the
$100,000,000 bank line of credit in the previous year. The
Company's asset back securitized financing program can be drawn
upon
-15-
<PAGE>
based on a percentage of customer notes receivable. Historically,
the Company has borrowed generally up to the full amount available
on its facility. The total outstanding under bank and commercial
paper borrowings as of February 28, 1998 and 1997, and February 29,
1996, was $45,243,000, $21,000,000, and $19,850,000, respectively,
with an additional maximum amount available of approximately $0.9
million, $10.9 million, and $4.2 million, respectively, based on a
percentage of customer notes receivable as provided by the
agreements. The agreements are collateralized by a lien on
substantially all of the Company's assets. Under the terms of the
five year asset backed securitized financing program, the Company
sells and may continue to sell or contribute certain notes
receivable to Ag Acceptance Corporation ("Ag Acceptance"), a newly
formed, wholly owned, special purpose subsidiary of the company.
Ag Acceptance pledges its interest in these notes receivable to a
commercial-paper market conduit entity and incurs interest at
variable rates in the commercial paper market. The Company may
make these interest rate elections at any time during each fiscal
year in which the agreement is in effect and for any amount. The
terms of the Company's trade credit vary for each supplier and type
of crop input.
On March 9, 1998, the Company amended the asset backed
securitized financing program which increased the maximum available
borrowing amount under the facility to $205 million. The other
terms of the agreement remain in effect.
In conjunction with the securitized financing program, Ag
Services maintains an $8.5 million revolving bank line of credit
through fiscal 1999. The line of credit is accessible to cover any
potential deficiencies in available funds financed through the
securitization program. The agreement allows for three interest
rate alternatives, including (i) variable base rate advances
requiring monthly interest payments at 0.5% above the banks' prime
rate or 9.0% at February 28, 1998, (ii) variable rate advances
requiring monthly interest payments at 2.5% above Fed Fund rates of
8.0% at February 28, 1998, or (iii) fixed rate advances requiring
interest payments upon maturity at 2.0% above LIBOR or 7.4375%,
7.4765% and 7.5391 for 30, 60, or 90 day maturities, respectively,
at February 28, 1998. The agreement requires that the total
outstanding borrowings be repaid in full for 10 consecutive days
during the Company's fiscal second quarter.
The agreements as discussed above contain various restrictive
covenants, including, among others, restrictions on mergers,
issuance of stock, declaration or payment of dividends,
transactions with affiliates, loans to stockholders, and requires
the company to maintain certain levels of equity and pretax
earnings. These restrictions are in effect unless written consent
is obtained. The company was in compliance with these covenants at
February 28, 1998. Advances under the agreements are also subject
to portfolio performance, financial covenant restrictions, and
borrowing base calculations.
On April 22, 1993, the Company completed a public offering of
an aggregate of $13,800,000 (including $1,800,000 due to over-
allotments) principal amount of 7% Convertible Subordinated
Debentures due 2003. The debentures were convertible at any time
before maturity, unless previously redeemed or repurchased, into
shares of common stock of the Company at a conversion price of
$9.25 per share, subject to adjustment in certain events.
-16-
<PAGE>
On June 7, 1996, the Company called for redemption or
conversion of all of its outstanding 7% Convertible Subordinated
Debentures due 2003 (the "Debentures"). From June 7, 1996 through
July 10, 1996, the redemption date, the Company issued 1,487,669
shares of common stock upon conversion of $13,761,000 of Debentures
and redeemed $39,000 of Debentures as full settlement of all
$13,800,000 of the debentures outstanding at that date.
The Company believes that the financial resources available to
it, including its bank line of credit and its asset backed
securitized financing program, its equity, and internally generated
funds, will be sufficient to finance the Company and its operations
in the foreseeable future.
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995
Information contained in this report, other than historical
information, should be considered forward looking which reflect
Management's current views of future events and financial
performance that involve a number of risks and uncertainties. The
factors that could cause actual results to differ materially
include, but are not limited to, the following: general economic
conditions within the agricultural industry; competitive factors
and pricing pressures; changes in product mix; changes in the
seasonality of demand patterns; changes in weather conditions;
changes in agricultural regulations; and other risks detailed in
the Company's Securities and Exchange Commission filings.
The Company has been advised by the respective vendors of its
principal financial systems that these systems are in compliance
with the upcoming millennium change. Testing of these systems will
take place in 1998. In addition, a detailed review of older
process control systems is presently being conducted to determine
any changes necessary. If required, changes to these systems will
be completed in the latter half of 1998. Since the Company's
principal financial systems are understood to be Year 2000
compliant, the costs associated with changes to the remaining
systems are expected to be immaterial.
-17-
<PAGE>
McGladrey & Pullen, LLP
Certified Public Accountants and Consultants
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
Ag Services of America, Inc.
Cedar Falls, Iowa
We have audited the accompanying consolidated balance sheets of Ag
Services of America, Inc. and its subsidiary as of February 28,
1998 and 1997, and the related consolidated statements of income,
stockholders' equity, and cash flows for the years ended February
28, 1998 and 1997, and February 29, 1996. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Ag Services of America ,Inc. as of February 28, 1998
and 1997, and the results of their operations and their cash flows
for the years ended February 28, 1998 and 1997, and February 29,
1996 in conformity with generally accepted accounting principles.
McGladrey & Pullen, LLP
Waterloo, Iowa
April 24, 1998
201 Tower Park Drive, Suite 103
P. O. Box 2656
Waterloo, Iowa 50704-2656
(319) 235-7091 FAX (319) 235-7476
-18-
<PAGE>
<TABLE>
AG SERVICES OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
February 28, 1998 and 1997
(Dollars in Thousands)
<CAPTION>
ASSETS (Note 3) 1998 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $174 $880
Customer notes receivable, less allowance for
doubtful notes and reserve for discounts
1998 $2,660; 1997 $1,609 (Notes 2 and 6) 71,379 43,246
Accounts receivable 422 209
Inventories 2,972 2,841
Foreclosed assets held for sale 144 431
Prepaid expenses 1,242 1,487
Prepaid income taxes 757 196
Deferred income taxes, net (Note 5) 293 642
----------- -----------
Total current assets $77,383 $49,932
----------- -----------
LONG-TERM RECEIVABLES AND OTHER ASSETS
Customer notes receivable, less allowance
for doubtful notes 1998 $1,340; 1997 $1,156 $13,696 $9,561
(Note 2)
Foreclosed assets held for sale 48 167
Loan origination fees, less accumulated
amortization 1998 $114; 1997 None 457 - -
Deferred income taxes, net (Note 5) 124 433
----------- -----------
$14,325 $10,161
----------- -----------
EQUIPMENT, less accumulated depreciation
1998 $1,059; 1997 $776 $1,540 $680
----------- -----------
$93,248 $60,773
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable, inluding current maturities $39,328 $21,000
(Note 3)
Outstanding checks in excess of bank balances 1,793 - -
Accounts payable 1,654 956
Accrued expenses, including due to officers
1998 $383; 1997 $301 802 601
----------- -----------
Total current liabilities $43,577 $22,557
----------- -----------
LONG-TERM LIABILITIES
Notes payable, less current maturities $5,915 $- -
(Note 3)
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 4 and 7)
STOCKHOLDERS' EQUITY (Note 3)
Capital stock, common, no par or stated value;
authorized 10,000,000 shares; issued 1998
5,177,154 shares; 1997 5,135,719 shares $22,307 $21,948
(Notes 6 and 8)
Retained earnings 21,449 16,268
----------- -----------
$43,756 $38,216
----------- -----------
$93,248 $60,773
=========== ===========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
-19-
<PAGE>
<TABLE>
AG SERVICES OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
<CAPTION>
Year Ended Year Ended Year Ended
February 28, February 28, February 29,
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Net revenues:
Farm inputs $172,717 $137,443 $106,869
Financing income 13,356 10,204 7,817
----------- ----------- -----------
$186,073 $147,647 $114,686
----------- ----------- -----------
Cost of revenues:
Farm inputs $162,197 $127,698 $98,280
Financing expense 5,536 4,768 4,258
Provision doubtful notes (Note 2) 2,963 2,290 1,863
----------- ----------- -----------
$170,696 $134,756 $104,401
----------- ----------- -----------
$15,377 $12,891 $10,285
Operating expenses (Notes 4 and 7) 7,316 6,216 5,422
----------- ----------- -----------
Income before income taxes $8,061 $6,675 $4,863
Federal and state income taxes 2,880 2,329 1,730
(Note 5)
----------- ----------- -----------
Net income $5,181 $4,346 $3,133
=========== =========== ===========
Earnings per share (Notes 6 and 8):
Basic $1.01 $0.95 $0.89
=========== =========== ===========
Diluted $0.96 $0.84 $0.73
=========== =========== ===========
Weighted average shares (Notes 6 and 8):
Basic 5,155,186 4,578,720 3,538,603
=========== =========== ===========
Diluted 5,424,977 5,352,257 5,201,231
=========== =========== ===========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
-20-
<PAGE>
<TABLE>
AG SERVICES OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended February 28, 1998 and 1997, and February 29, 1996
(Dollars in Thousands)
<CAPTION>
Capital Stock
----------
Shares Retained
Issued Amount Earnings Total
------- ------- -------- ------
<S> <C> <C> <C> <C>
Balance, February 28, 1995 3,482,634 $7,871 $8,789 $16,660
Net income - - - - 3,133 3,133
Issuance of 22,050 shares of capital
stock upon the exercise of
options (Note 6) 22,050 99 - - 99
Issuance of 106,666 shares of capital
stock upon the exercise of
warrants (Note 6) 106,666 528 -- 528
----------- ----------- ----------- --------
Balance, February 29, 1996 3,611,350 $8,498 $11,922 $20,420
Net income - - - - 4,346 4,346
Issuance of 35,400 shares of capital
stock upon the exercise of
options (Note 6) 35,400 282 - - 282
Issuance of 1,300 shares of capital
stock under stock purchase plan
(Note 6) 1,300 16 -- 16
Issuance of 1,487,669 shares of
capital stock upon conversion of
subordinated debentures (Note 3) 1,487,669 13,152 -- 13,152
----------- ----------- ----------- --------
Balance, February 28, 1997 5,135,719 $21,948 $16,268 $38,216
Net income - - - - 5,181 5,181
Issuance of 40,035 shares of capital
stock upon the exercise of
options (Note 6) 40,035 337 - - 337
Issuance of 1,400 shares of capital
stock under stock purchase plan
(Note 6) 1,400 22 -- 22
----------- ----------- ----------- --------
Balance, February 28, 1998 5,177,154 $22,307 $21,449 $43,756
=========== =========== =========== ========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
-21-
<PAGE>
<TABLE>
AG SERVICES OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<CAPTION>
Year Ended Year Ended Year Ended
February 28, February 28, February 29,
1998 1997 1996
----------- ----------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $5,181 $4,346 $3,133
Adjustments to reconcile net income to
net cash(used in) operating activities:
Depreciation 308 236 203
Amortization 114 22 86
Deferred income taxes 658 (55) (60)
(Gain)loss on sale of equipment 7 (5) (2)
(Gain) on sale of foreclosed --
assets held for sale (23) (6)
Change in assets and liabilities:
(Increase) in customer (11,295)
notes receivable (32,564) (13,138)
(Increase) decrease in
accounts receivable (213) (91) 43
(Increase) decrease in
inventories (131) 234 (639)
(Increase) decrease in
prepaid income taxes (561) (89) 3
Increase in accounts payable
and accrued expenses 899 441 399
Other prepaids, net 245 2,956 (2,042)
----------- ----------- -----------
Net cash (used in)
operating activities ($26,080) ($5,149) ($10,171)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment $22 $34 $17
Proceeds from sale of foreclosed
assets held for sale 1,342 4,845 1,681
Purchase of equipment (1,197) (344) (281)
Purchase of foreclosed assets
held for sale (617) (1,713) (3,141)
----------- ----------- -----------
Net cash (used in)
investing activities ($450) $2,822 ($1,724)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term
borrowings $169,404 $83,875 $71,200
Principal payments on short-term
borrowings (151,076) (82,725) (58,450)
Proceeds from long-term
borrowings 5,915 - - --
Principal payments on long-term
borrowings - - (39) --
Increase in excess of outstanding
checks over bank balances 1,793 - - --
Loan origination fees (571) - - --
Proceeds from issuance of
capital stock, net (Note 6) 359 298 627
(Decrease) in capital stock related
to subordinated debenture
conversion expenses - - (11) - -
----------- ----------- -----------
Net cash provided
by financing
activities $25,824 $1,398 $13,377
----------- ----------- -----------
Increase (decrease)
in cash and cash
equivalents ($706) ($929) $1,482
CASH AND CASH EQUIVALENTS
Beginning 880 1,809 327
----------- ----------- -----------
Ending $174 $880 $1,809
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash payments for:
Interest $5,130 $4,826 $4,197
Income taxes $2,783 $2,473 $1,786
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
7% convertible subordinated
debentures converted to common
stock, net of unamortized debt
issue costs (Note 3) $- - $13,141 $- -
Customer notes receivable transferred
to foreclosed assets held for
resale $656 $994 $367
Contract sale of foreclosed
assets held for sale ($360) ($623) ($143)
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
-22-
<PAGE>
AG SERVICES OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies
Nature of business:
The Company's operations consist primarily of the retail
sale of farm inputs to agricultural producers located
primarily in thirty midwestern and south central states
through direct financing of these farm inputs on credit
terms that the Company establishes for its customers.
Basis of presentation:
The consolidated financial statements include the
accounts of Ag Services of America, Inc. (The Company)
and its subsidiary, Ag Acceptance Corporation, which is
wholly-owned. All material intercompany balances and
transactions have been eliminated in consolidation.
According to the terms related to the asset backed
securitized financing program as described in Note 3. of
the consolidated financial statements, the company formed
Ag Acceptance Corporation, a wholly owned, special
purpose corporation.
Unless otherwise noted, all dollar amounts presented are
in thousands except per share amounts.
Accounting estimates:
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts
of revenue and expenses during the reported period.
Actual results could differ from those estimates.
Significant accounting policies:
Revenue recognition and seasonal nature of business:
The Company recognizes product revenue upon delivery to
the customers. Revenue from services is recognized as
the services are performed. Insurance brokerage revenues
are recognized generally on the effective date of the
policies or on the billing date, whichever is
-23-
<PAGE>
later. Interest income on customer notes receivable is
accrued based upon the principal amount of the underlying
note. The Company does not accrue interest on notes
where any portion is classified as doubtful. An account
is considered doubtful when the account may not be
collected in full due to deficiencies regarding either
the customer or the collateral. When previously accrued
interest is deemed to be uncollectible, such amount is
charged to the allowance for doubtful notes.
Due to the nature of the Company's operations, the
majority of revenues are generated in the months of April
through June of each fiscal year. The Company's debt
financing requirements to fund operations corresponds
with the revenue cycle. Historically, the percentage of
net revenues recognized in each quarter has approximated
the following:
First quarter, March 1 to May 31 44%
Second quarter, June 1 to August 31 32%
Third quarter, September 1 to November 30 9%
Fourth quarter, December 1 to February 28 15%
Customer notes receivable and allowance for doubtful notes:
Customer notes receivable are stated at the principal
amounts outstanding reduced by the amount of unearned
discounts and the allowance for doubtful notes. The
reserve for unearned discounts is maintained at an amount
considered to be adequate based on past experience of
cash discounts granted. The reserve is increased by
provisions recorded as a reduction of revenues and is
reduced by cash discounts granted to customers. The
allowance for doubtful notes is maintained at an amount
considered adequate to provide for losses that reasonably
can be anticipated. The allowance is increased by
provisions charged to operating expense and recoveries of
notes previously charged off and is reduced by charge-
offs. Management determines the adequacy of the
allowance based on an evaluation of the note portfolio,
recent note loss experience and other pertinent factors.
Customer notes receivable are considered impaired when
based on current information and events, it is probable
the Company will not be able to collect all amounts due.
The portion of the allowance for doubtful notes
applicable to collateral dependent impaired (nonaccrual)
customer notes receivable has been computed based on the
fair value of the collateral. The entire change in the
fair value of the collateral of a collateral dependent
impaired (nonaccrual) customer note receivable is
reported as a change in the provision for doubtful notes.
Financing income is not
-24-
<PAGE>
recognized on impaired (nonaccrual) customer notes
receivable until all principal has been collected.
Cash and cash equivalents:
For purposes of reporting cash flows, the Company
considers all money market funds purchased with a
maturity of three months or less to be cash equivalents.
Inventories:
Inventories, primarily chemicals, are valued at lower of
cost (first-in, first-out method) or market.
Foreclosed assets held for sale:
Foreclosed assets, primarily real estate, are valued at
lower of cost or fair market value minus estimated costs
to sell.
Equipment and depreciation:
Equipment, primarily transportation and office equipment,
is carried at cost and is depreciated using declining-
balance methods over the estimated useful lives ranging
from five to seven years.
Loan origination fees:
Loan origination fees are deferred and amortized using
the straight-line method over the five year life of the
respective loan agreement.
Debt issuance costs:
Debt issuance costs are deferred and amortized using the
straight-line method over the ten year life of the
respective debt issue.
Income tax matters:
Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible
temporary differences and operating loss and tax credit
carryforwards and deferred tax liabilities are recognized
for taxable temporary differences. Temporary differences
are the differences between the reported amounts of
assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not
be realized. Deferred tax assets and liabilities are
adjusted for the effects
-25-
<PAGE>
of changes in tax laws and rates on the date of
enactment.
Stock options issued to employees:
In fiscal year 1997, the Company adopted the provisions
of SFAS No. 123, Accounting for Stock-Based
Compensation", which establishes a fair value based
method for the financial reporting of its stock-based
employee compensation plans. However, as allowed by the
new standard, the Company has elected to continue to
apply the intrinsic value based method as prescribed by
Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees". Under this method,
compensation is measured as the difference between the
market value of the stock on the grant date, less the
amount required to be paid for the stock. The
difference, if any, is charged to expense over the period
of service.
Fair value of financial instruments:
The carrying amount of cash and cash equivalents,
customer notes and accounts receivable and accounts
payable approximates fair value because of the relative
short maturity of these instruments. The carrying amount
of current notes payable approximates fair value because
these instruments bear interest at approximate current
rates available to the Company for similar borrowings.
Earnings per share:
In 1997, the financial Accounting Standards Board issues
Statement No. 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted
earnings per share. Basic earnings per share is computed
by dividing net income available to common stockholders
by the weighted average number of shares outstanding. In
computing diluted earnings per share, the dilutive effect
of stock options during the periods presented as well as
the effect of contingently issuable shares also increase
the weighted average number of shares.
The Company initially applied Statement No. 128 for the
year ended February 28, 1998 and has restated all per
share information for prior years to conform to Statement
No. 128.
Reclassifications:
Certain prior years' amounts have been reclassified, with
no effect on net income or retained earnings, to
-26-
<PAGE>
conform to the fiscal 1998 financial statement
presentation.
Recently issued accounting standards:
In June 1997, the Financial Accounting Standards Board
(FASB) issued SFAS No. 130, "Reporting Comprehensive
Income", and SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information", both of which are
required to be adopted for fiscal years beginning after
December 15, 1997. SFAS No. 130 will require the Company
to report in its financial statements all non-owner
related changes in equity for the periods being reported.
SFAS No. 131 will require the Company to disclose
revenues, earnings, and other financial information
pertaining to the business segments by which the Company
is managed, as well as, what factors management used to
determine these segments. The Company is currently
evaluating the requirements of SFAS No. 130 and 131 to
determine how to present the required information in its
financial statements and related disclosures.
Note 2. Customer Notes Receivable
Customer notes receivable consist of the following:
As of As of
February 28, February 28,
1998 1997
------------ ------------
1993 spring accounts $-- $925
1994 spring accounts 1,495 2,393
1995 spring accounts 2,534 4,365
1996 spring accounts 2,684 22,198
1996 fall accounts 39 42
1997 spring accounts 31,742 21,821
1997 fall accounts -- 81
1998 spring accounts 40,352 --
1998 fall accounts 103 --
Intermediate accounts 10,126 3,747
-------- -------
$89,075 $55,572
Less reserve for discounts 1,200 528
------- -------
$87,875 $55,044
Less allowance for
doubtful notes 2,800 2,237
-------- --------
$85,075 $52,807
========== ==========
The amount of principal and accrued and unpaid interest
applicable to the customer notes receivable were as follows:
-27-
<PAGE>
As of As of
February 28, February 28,
1998 1997
------------ ------------
Principal $87,377 $54,439
Accrued interest 1,698 1,133
------------ ------------
Total $89,075 $55,572
============ ============
Accrued interest is primarily included on the balance sheet with
current customer notes receivable.
Impaired (nonaccrual) customer notes receivable are summarized
as follows:
As of As of
February 28, February 28,
1998 1997
------------ -----------
Principal $7,046 $7,104
Accrued interest 171 207
----------- ------------
Total $7,217 $7,311
=========== ============
Allowance provide for impaired
(nonaccrual) notes, included
in allowance for doubtful
notes $1,114,000 $1,337,000
========== ==========
Average balance of impaired
(nonaccrual) customer notes
receivable outstanding
during fiscal year $8,069,000 $8,744,000
========== ===========
Number of customers 72 102
The Company collected and recorded $121 and $210 of interest
income on impaired (nonaccrual) notes receivable during fiscal
1998 and 1997, respectively.
It is the Company's policy to obtain a lien on the customer's
growing crop, along with an assignment of the customer's
federal crop insurance and government farm program payments,
if available. The Company extends discounts to customers
paying their notes on or before September 15 for fall accounts
and January 15 for north spring accounts and January 31 for
south spring accounts ranging from 1% to 3%. The notes bear
interest from 8.0% to 12.0% for fixed rate notes and from
prime to 4.0% above the prime rate as listed in the WALL
STREET JOURNAL (currently 8.5% at February 28, 1998) for
variable rate notes.
Due to the Company's customers' marketing strategies and the
-28-
<PAGE>
timing of their receiving payment on insurance claims and
government subsidies, it is the Company's normal operating
policy to carry customer notes receivable past their due date
of September 15 for fall accounts and January 15 for north
spring accounts and January 31 for south spring accounts. The
amount of customer notes receivable that were past due at
February 28, 1998 and 1997, and February 29, 1996 was $38,494,
$29,881 and $25,692, respectively.
Changes in the allowance for doubtful notes are summarized as
follows:
Year Ended Year Ended Year Ended
February 28, February 28, February 29,
1998 1997 1996
------------ ------------ ------------
Balance, beginning $2,237 $2,146 $2,105
Provision charged to
operating expense 2,963 2,290 1,863
Recoveries of
charged-off notes 141 70 21
Notes charged-off (2,541) (2,269) (1,843)
------------ ------------ -----------
Balance, ending $2,800 $2,237 $2,146
=========== ========== ==========
-29-
<PAGE>
<TABLE>
The following table shows the Company's classification
of its customer notes receivable:
<CAPTION>
February 28, 1998
--------------------------------------------------------------------
Acceptable (1)
------------------
Small Large Watch (2) Sub- Doubtful (4) Loss (5) Total
Accounts Accounts stantard (3)
-------- -------- --------- ------------ ------------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
1994 spring
accounts $0 $0 $0 $1,328 $103 $64 $1,495
1995 spring
accounts 0 0 236 1,749 392 157 2,534
1996 spring
accounts 437 0 936 880 237 194 2,684
1996 fall
accounts 34 0 0 5 0 0 39
1997 spring
accounts 12,110 11,084 7,926 599 23 0 31,742
------- ------- ------ --------- ------- ----- --------
Total past
due $12,581 $11,084 $9,098 $4,561 $755 $415 $38,494
1998 spring
accounts $22,388 $17,964 $0 $0 $0 $0 $40,352
1998 fall
accounts 103 0 0 0 0 0 103
Intermediate
accounts 3,366 6,728 32 0 0 0 10,126
-------- ------- -------- ------- ------ ---- -------
$25,857 $24,692 $32 $0 $0 $0 $50,581
-------- ------- -------- ------- ------ ---- -------
Total customer
notes
receivable $38,438 $35,776 $9,130 $4,561 $755 $415 $89,075
======= ======= ====== ====== ==== ==== =======
<CAPTION>
February 28, 1998
---------------------------------------------------------------------
Acceptable (1)
------------------
Small Large Watch (2) Sub- Doubtful (4) Loss (5) Total
Accounts Accounts stantard (3)
-------- -------- --------- ------------ ------------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
1993 spring
accounts $0 $0 $0 $772 $123 $30 $925
1994 spring
accounts 1 0 560 1,585 167 80 2,393
1995 spring
accounts 962 917 994 1,388 104 0 4,365
1996 spring
accounts 8,734 8,112 3,186 1,765 200 201 22,198
------- ----- ----- -------- ------- ----- -------
Total past
due $9,697 $9,029 $4,740 $5,510 $594 $311 $29,881
-------- ------ ------ -------- ------- ----- -------
1996 fall
accounts $32 $0 $0 $10 $0 $0 $42
1997 spring
accounts 15,078 6,743 0 0 0 0 21,821
1997 fall
accounts 81 0 0 0 0 0 81
Intermediate
accounts 1,750 1,949 48 0 0 0 3,747
------- ------- ------- --------- -------- ------ ------
$16,941 $8,692 $48 $10 $0 $0 $25,691
------- ------- ------- --------- -------- ------ ------
Total customer
notes
receivable $26,638 $17,721 $4,788 $5,520 $594 $311 $55,572
======= ======== ======= ====== ====== ===== =======
</TABLE>
(1) A customer note receivable is classified by the
Company as "acceptable" if a customer account does
not display any deficiencies regarding either the
customer or the collateral. Small accounts include
only customer notes receivable that are less than
$200,000. Large accounts include only customer
notes receivable that are $200,000 or more. Because
of the size of the large accounts, the Company
monitors large accounts in the same manner as those
customer accounts classified as "watch" even though
the large accounts classified as "acceptable" do not
display any deficiencies regarding either the
customer or the collateral.
(2) A customer note receivable is classified by the
Company as "watch" if a customer account is secured
by adequate collateral which may possibly become
impaired if not closely monitored by the Company.
In addition, certain of these accounts, while
adequately collateralized,
-30-
<PAGE>
have required an extended period of time to receive
payment in full.
(3) A customer note receivable is classified by the
Company as "substandard" if a customer account
displays limited deficiencies regarding either the
customer or the collateral. Payment in full is
still considered likely and will require more than
normal servicing and monitoring. Some probability
of loss potential, while existing in the aggregate
amount of substandard notes receivable, does not
have to exist in individual notes classified as
substandard.
(4) A customer note receivable is classified by the
Company as "doubtful" if a customer account displays
significant deficiencies regarding either the
customer or the collateral. The "doubtful"
classification does not mean that the customer note
receivable has no likelihood of payment. However,
under this classification, the deficiencies may
result in the Company receiving less than payment in
full.
(5) A customer note receivable is classified by the
Company as "loss" if a customer account is clearly
not performing. The "loss" classification does not
mean that the loan has absolutely no recovery value
in the future, but that currently there is limited
liquidation value.
When determining the amount of a customer's credit limit, the
Company estimates the value of the collateral. If there are
superior liens on the collateral, such as a landlord's lien on
the crop, the Company will not include the value of the
collateral, to the extent of the amount of the superior lien,
when determining a customer's credit limit. In the opinion of
management, superior liens are not material to the Company's
operations and do not materially affect the Company's rights
because the Company values its collateral net of any existing
superior liens.
Note 3. Pledged Assets, Related Debt and Subsequent Event
On March 11, 1997, the Company implemented an asset backed
securitized financing program with a maximum available
borrowing amount of $135 million. This facility replaces the
$100 million line of credit used in fiscal 1997. Under the
terms of the five year facility, the Company sells and may
continue to sell or contribute certain notes receivable to Ag
Acceptance Corporation ("Ag Acceptance"), a newly formed,
wholly owned, special purpose subsidiary of the Company. Ag
Acceptance pledges its interest in these notes receivable to
a commercial-paper market conduit entity and incurs interest
at variable rates in the commercial paper market. At February
28, 1998 and 1997, the Company had a maximum amount
-31-
<PAGE>
available under the asset backed securitization financing
program of approximately $0.9 million and $26.8 million,
respectively, based on a borrowing base computation as
provided by agreement. The total outstanding under the asset
backed securitization financing program at February 28, 1998
and 1997 was $36,743 and none, respectively.
On March 9, 1998, the Company amended the asset backed
securitized financing program which increased the maximum
available borrowing amount under the facility to $205 million.
The other terms of the agreement remain in effect.
In conjunction with the securitized financing program, Ag
Services maintains an $8.5 million revolving bank line of
credit through fiscal 1999. The line of credit is accessible
to cover any potential deficiencies in available funds
financed through the securitization program. The agreement
allows for three interest rate alternatives, including (i)
variable base rate advances requiring monthly interest
payments at 0.5% above the banks' prime rate or 9.0% at
February 28, 1998, (ii) variable rate advances requiring
monthly interest payments at 2.5% above Fed Fund rates or 8.0%
at February 28, 1998, or (iii) fixed rate advances requiring
interest payments upon maturity at 2.0% above LIBOR or 7.4375%
and 7.4765% and 7.5391% for 30, 60, or 90 days maturities,
respectively, at February 28, 1998. All borrowings are
collateralized by substantially all assets of the Company.
The agreement requires that the total outstanding borrowings
be repaid in full for 10 consecutive days during the company's
fiscal second quarter. At February 28, 1998 and 1997, the
Company had a maximum amount available under the revolving
line of credit of none and $8.5 million, respectively, based
on the borrowing base computation as provided by the
agreement. The total outstanding under the revolving line of
credit at February 28, 1998 and 1997 was $8,500 and none,
respectively.
The agreements as discussed above contain various restrictive
covenants, including, among others, restrictions on mergers,
issuance of stock, declaration or payment of dividends,
transactions with affiliates, loans to stockholders, and
requires the Company to maintain certain levels of equity and
pretax earnings. These restrictions are in effect unless
written consent is obtained. The Company was in compliance
with these covenants at February 28, 1998. Advances under the
agreements are also subject to portfolio performance,
financial covenant restrictions, and borrowing base
calculations.
In fiscal 1997, the Company had a line of credit agreement
with a syndicate of banks, under which they could borrow up to
$100,000,000 in current notes payable based on a percentage of
customer notes receivable. At February 28, 1997, the Company
had a maximum additional amount available
-32-
<PAGE>
on its line of approximately $10.9 million based on a
percentage of customer notes receivable as provided by the
line of credit agreement. The agreement allowed for three
interest rate alternatives, including (i) variable base rate
advances requiring monthly interest payments at the banks'
prime rate, (ii) variable rate advances requiring monthly
interest payments at two percent above Fed Fund rates, of
(iii) fixed rate advances requiring interest payments upon
maturity at one and one half percent above LIBOR for 30, 60,
or 90 day maturities. The total outstanding under this line
of credit agreement at February 28, 1997 was $21,000.
On April 23, 1998, the Company negotiated an additional bank
line of credit with a maximum available borrowing amount of
$20 million. The line of credit is accessible to cover the
Company's funding requirements for its intermediate loan
program. The terms of the two year agreement allow for three
interest rate alternatives, including (i) variable base rate
advances requiring monthly interest payments at 0.5% above the
banks' prime rate, (ii) variable rate advances requiring
monthly interest payments at 2.5% above Fed Fund rates, or
(iii) fixed rate advances requiring interest payments upon
maturity at 2.0% above LIBOR for 30, 60, or 90 days
maturities. All borrowings are collateralized by
substantially all assets of the Company. The agreement
contains various restrictive covenants, including, among
others, restrictions on mergers, issuance of stock,
declaration or payment of dividends, loans to stockholders,
and requires the Company to maintain certain levels of equity
and pretax earnings. These restrictions are in effect unless
the banks' written consent is obtained. Advances under the
line of credit agreement are also subject to portfolio
performance, financial covenant restrictions, and borrowing
base calculations. At April 23, 1998, approximately $5,924
was available based on the borrowing base computation as
provided by the agreement.
Total amounts outstanding under all above agreements are
summarized below:
As of As of
February 28, February 29,
1998 1997
------------ ------------
Asset backed securitization
financing program $36,743 $--
$8.5 million revolving
line of credit 8,500 --
$100 million bank line
of credit -- 21,000
$20 million bank line
of credit -- --
--------- ---------
Total debt $45,243 $21,000
Less current maturities 39,328 21,000
------- ---------
Long-term debt $5,915 $--
======== =========
-33-
<PAGE>
On April 22, 1993, the Company completed a public offering of $13.8
million of 7% Convertible Subordinated Debentures due 2003 which
were unsecured and convertible into shares of Common Stock at any
time before maturity, unless previously redeemed or repurchased, at
a conversion price of $9.25 per share, subject to adjustment in
certain events. Interest was payable semiannually on May 31 and
November 30. The Debentures were not redeemable at the option of
the Company, in whole or in part, until May 31, 1996, except that
the Debentures were redeemable at their principal amount before
that date if the last reported sale price of the Common Stock had
equaled or exceeded 150% of the then effective conversion price per
share for at least 20 out of 30 consecutive trading days. From May
31, 1996 until May 31, 2003, the Debentures were redeemable at the
option of the Company, in whole or in part, at 108% of their
principal amount during the first year declining 1.0% per year
thereafter, except that the Debentures could not be redeemed unless
the last reported sale price of the common Stock had equaled or
exceeded 120% of the then effective conversion price per share for
at least 20 out of 30 consecutive trading days.
On June 7, 1996, the company called for redemption or conversion of
all of its outstanding 7% Convertible Subordinated Debentures due
2003 (the "Debentures"). From June 7, 1996 through July 10, 1996,
the redemption date, the company issued 1,487,669 shares of common
stock upon conversion of $13,761 of debentures and redeemed $39 of
Debentures as full settlement of all $13,800 of the Debentures
outstanding at that date.
Note 4. Commitments and Contingencies
Lease Commitments
The Company has entered into a three-year noncancelable
agreement to lease its office space, which expires April
30, 2001, and requires minimum annual rentals, plus the
payment of normal maintenance and insurance. The Company
has the option to extend the lease for one year to April
30, 2002. The total minimum rental commitment at
February 28, 1998 is $608 which is due as follows:
Year ending February:
1999 $188
2000 193
2001 193
2002 32
----
$606
====
The total rental expense included in the income
statements for the years ended February 28, 1998 and 1997
and February 29, 1996 was $168, $153, and $115
respectively.
-34-
<PAGE>
Other commitments:
In the normal course of business, the Company makes
various commitments, which are not reflected in the
accompanying financial statements. These include
commitments to supply farm inputs to customers. At
February 28, 1998 and 1997 and February 29, 1996, the
Company had approximately $69,151 and $50,180,
respectively, in commitments to supply farm inputs. No
material losses or liquidity demands are anticipated as
a result of these commitments.
Contingencies:
The Company is named in lawsuits in the ordinary course
of business. Counsel for the Company have advised the
Company, while the outcome of various legal proceedings
is not certain, it is unlikely that these proceedings
will result in any recovery which will materially affect
the financial position or operating results of the
Company.
The availability of lines of credit to finance operations
and the existence of a multi-peril crop insurance program
are essential to the Company's operations. If the
federal multi-peril crop insurance program currently in
existence was terminated or negatively modified and no
comparable private or government program was established,
this could have a material adverse effect on the
Company's future operations. The government has from
time to time evaluated the federal multi-peril crop
insurance program and is likely to review the program in
the future, but there can be no assurance of the outcome
of such evaluations.
Note 5. Income Taxes
Net deferred tax assets consist of the following components:
As of As of
February 28, February 28,
1998 1997
------------ -------------
Deferred tax assets:
Allowance for doubtful notes $1,036 $837
Reserve for discounts 444 197
Inventory allowances 8 8
Accrued vacations 40 34
------------ -------------
$1,528 $1,076
------------ -------------
Deferred tax liabilities,
Customer notes receivable $1,110 $--
Depreciation 1 1
------------ -------------
$1,111 $1
------------ -------------
$417 $1,075
============ =============
The deferred tax amounts mentioned above have been classified on
the accompanying balance sheet as follows:
As of As of
February 28, February 28,
1998 1997
------------ -------------
Current assets $293 $642
Noncurrent assets 124 433
------------ --------------
$417 $1,075
============ ==============
Income tax expense is made up of the following components:
Year Ended Year Ended Year Ended
February 28, February 28, February 29,
1998 1997 1996
------------- ------------ ------------
Current tax expense:
Federal $1,901 $2,097 $1,592
State 321 287 198
------------ ------------ ------------
$2,222 $2,384 $1,790
Deferred tax expense 658 (55) ( 60)
------------ ------------ ------------
$2,880 $2,329 $1,730
============ ============ ============
Total reported tax expense applicable to the Company's operations
varies from the amount that would have resulted by applying the
effective federal income tax rate to income before income taxes for
the following reasons:
Year Ended Year Ended Year Ended
February 28, February 28, February 29,
1998 1997 1996
------------ ------------ ------------
Federal statutory rate 35.0% 35.0% 35.0%
State tax expense, net
of federal income tax
benefit 4.0% 4.3% 4.1%
Other, net (3.3%) (4.4%) (3.5%)
Effective tax rate 35.7% 34.9% 35.6%
============ ============ ============
Note 6. Employee Stock Plans and Capital Stock
At February 28, 1998, the Company has two stock-based compensation
plans which are described below. As permitted under generally
accepted accounting principles, grants under those plans are
accounted for following APB Opinion No. 25 and related
interpretations. Accordingly, no compensation
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<PAGE>
cost has been recognized for grants under the two fixed stock
option plans. Had compensation cost for the two stock based
compensation plans been determined based on the grant date fair
values of the awards (the method prescribed in SFAS No. 123),
reported net income and earnings per common share would have been
reduced to the pro forma amounts shown below:
Year Ended Year Ended Year Ended
February 28, February 28, February 29,
1998 1997 1996
------------- ------------ ------------
Net income
As reported $5,181 $4,346 $3,133
Pro forma $5,042 $4,255 $3,084
Basic earnings per share
As reported $1.01 $0.95 $0.89
Pro forma $0.98 $0.93 $0.87
Diluted earnings per share
As reported $0.96 $0.84 $0.73
Pro forma $0.93 $0.83 $0.72
Stock options plans:
On May 30, 1991 the Company adopted its "1991 Stock Option Plan"
which provides for the issuance of a maximum of 300,000 shares of
common stock to directors, officers, employees or other persons.
Options granted under the stock option plan may be either
"incentive stock options" or "non qualified stock options." As
designated by the Board of Directors, the stock option plan is
administered by the officers of the Company, who designate the type
of option to be granted, the number of options to be granted, the
number of shares of common stock to be covered by each option
(subject to a specified maximum number of shares of common stock
which may be purchased under all options granted), the exercise
price, the period during which the options are exercisable, the
method of payment and certain other terms. The exercise price for
each share of common stock covered by an option is determined by
the Board of Directors or the committee, except (i) the exercise
price for an incentive stock option may not be less than the fair
market value, at the time the option is granted, of the stock
subject to the option and (ii) the exercise price for a non
qualified stock option may not be less than 85% of the fair market
value, at the time the option is granted, of the stock subject to
the option. The exercise price for an incentive stock option
granted to any individual who owns stock, at the time of the grant,
possessing more than 10% of the voting power of the capital stock
of the Company may not be less than 110% of such fair market value
on the date of the grant. No more than $100,000
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<PAGE>
of stock vesting during any calendar year per person will qualify
for incentive stock option treatment. Options are nontransferable,
other than by will or the laws of descent and distribution, and may
be exercised only by the optionee while employed by or providing
services to the Company or within three months after termination of
employment by reason of retirement or six months following
termination of employment resulting from death or permanent
disability. Options expire no later than ten years from the date
of grant, provided that incentive stock options granted to
employees owning stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any
of its subsidiaries expire five or fewer years from the date of
grant.
On August 3, 1993 the Stockholders of the Company adopted its "1993
Stock Option Plan" which provides for the issuance of a maximum of
200,000 shares of common stock to directors, officers, employees or
other persons. The other provisions of the 1993 Stock Option Plan
are the same as provisions of the 1991 Stock Option Plan discussed
above. On August 1, 1995 the stockholders of the Company approved
a proposal to amend its "1993 Stock Option Plan" to increase the
maximum number shares of common stock issuable to directors,
officers, employees or other persons from 200,000 to 400,000
shares. The other provisions of the 1993 Stock Option Plan
remained the same as previously discussed above. At February 28,
1998 and 1997, the total shares available for future grant under
the 1991 and 1993 plans, combined, were 126,575 and 140,650 shares,
respectively.
Fixed Stock Option Plans:
The fair value of each grant is estimated at the grant date using
the Black-Scholes option-pricing model with the following weighted-
average assumptions for grants in fiscal 1998, 1997 and 1996,
respectively: risk-free interest rates of 5.8%, 6.8% and 6.6%;
expected lives of 7 for all years; price volatility of 26.2%, 28.7%
and 28.7% and no expected dividends.
The following table summarizes the options to purchase shares of
the Company's common stock under the two option plans combined:
Stock Options
------------------------------------
Weighted
Average
Outstanding Exercise Price
----------- ---------------
Balance at February 28, 1995 466,700 $6.14
Granted 79,900 $8.89
Exercised (22,050) $4.51
Canceled (26,150) $8.07
---------- ---------------
Balance at February 29, 1996 498,400 $6.55
Granted 25,000 $14.35
Exercised (35,400) $7.97
Canceled (19,400) $8.84
----------- ---------------
Balance at February 28, 1997 468,600 $6.76
Granted 43,300 $17.51
Exercised (40,035) $8.65
Canceled (29,225) $11.77
------------- ---------------
Balance at February 28, 1998 442,640 $7.31
============= ===============
Number of Options
------------------------------------------
1998 1997 1996
---- ---- ----
Exercisable, end of year 349,190 328,175 303,150
======== ======= =========
Weighted-average fair value
per option of options
granted during the year $7.40 $6.67 $4.11
===== ===== =====
Options are exercisable over varying periods ending on February 28,
2008.
A further summary of the fixed options outstanding at February 28,
1998 is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------- --------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
- --------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$3.50 to $3.88 194,100 3.27 $3.52 194,100 $3.52
$5.63 to $7.88 67,930 6.21 $6.95 53,292 $6.97
$8.00 to $9.88 121,460 6.58 $9.25 96,049 $9.38
$10.88 to $19.13 59,150 9.42 $16.16 5,749 $12.98
----------- ----------- -------- ----------- --------
442,640 5.45 $7.31 349,190 $5.82
=========== =========== ======== =========== ========
</TABLE>
Capital stock:
In connection with the Company's initial public offering, the
Company, on August 13, 1991, received $1,000 for the issuance
of stock purchase warrants to the Underwriter to purchase an
aggregate 200,000 shares of the Company's common stock. The
exercise price of the warrants is $4.95 per share (120% of the
initial per share price to the public) and expired on August
1, 1996. For the years ended February 28, 1998 and 1997 and
February 29, 1996, none, none, and 106,666 warrants,
respectively, were exercised. At February 28, 1998 and 1997,
no warrants were outstanding.
In August 1995, the Company's Board of Directors approved the
"1995 Stock Purchase Plan" which allows directors, officers
and all other employees of the Company to purchase common
-39-
<PAGE>
stock directly from the Company, subject to certain
restrictions. Shares may be purchased at (i) the closing
price of the stock on the trading day immediately preceding
the purchase date or (ii) the cost at which the shares
may be purchased in the open market, exclusive of brokerage
commissions and fees. An aggregate of 150,000 authorized but
unissued shares are reserved for issuance under the plan. The
stock purchase plan is administered by the Company and is
subject to termination or amendment by the Board of Directors
at any time. At February 28, 1998 and 1997 and February 29,
1996, 1400, 1,300 and none shares, respectively, were
purchased under this plan.
In total, 716,515 shares of Common Stock are reserved for
issuance under the plans discussed above.
Note 7. Employee Benefits
In July, 1991 the Company entered into contractual employment
and noncompetition agreements, extended through July 1, 2000,
with its three top officers who are also directors of the
Company, each of which provides for (i) a base salary
adjustable annually, (ii) payment of an annual bonus to each
of these persons in the amount of 2% of the Company's pretax
income in excess of $2.5 million, (iii) $250 thousand in life
insurance coverage and (iv) receipt of other Company benefits
including use of an automobile. The total amount of the
annual bonus included as compensation expense for the years
ended February 28, 1998 and 1997 and February 29, 1996 was
$354, $265 and $150, respectively.
Effective June 1, 1992, the Company has established a
Retirement and Savings Plan (the "401(k) plan"). Currently,
all employees of the Company, including officers, are eligible
to participate in the 401(k) Plan. Benefits provided under
the 401(k) Plan are funded by a qualified retirement trust
administered by Norwest Bank Iowa, N.A. as trustee.
Participants may contribute an amount of their compensation,
including base salary and overtime, to the 401(k) Plan, which
can not be more than 15% of the participant's compensation
or, if less, the maximum dollar limit allowed by law on a
pretax basis. The Company makes a matching contribution to
the 401(k) Plan subject to certain limitations, equal to 40%
of each participant's pretax contribution on an amount of up
to 7% of such participant's compensation.
For the years ended February 28, 1998 and 1997, February 29,
1996, $78, $64 and $54, respectively, was contributed to
employee accounts including $19, $18 and $20, respectively,
contributed to the accounts of the Company's executive
officers.
-40-
<PAGE>
Note 8. Earnings Per Share
In compliance with Financial Accounting Standards Board
Statement No. 128, "Earnings per Share," issued in February
1997, the Company has changed its method of computing earnings
per share effective with the fourth quarter of fiscal 1998.
All prior periods presented have been restated to conform to
the new requirements which exclude contingently issuable
shares and the dilutive effect of stock options from the
number of weighted average shares used in the computation of
basic earnings per share. The effect of Statement 128 on
diluted earnings per share is immaterial compared to
previously disclosed fully diluted earnings per share. Basic
and diluted earnings per share are calculated as follows:
Year Ended Year Ended Year Ended
February 28, February 28, February 29,
1998 1997 1996
------------ ------------ ------------
Basic earnings per share:
Net income available to
stockholders - basic $5,181 $4,346 $3,133
============ ============ =============
Weighted average shares
outstanding - basic 5,155,186 4,578,720 3,538,603
============ ============ ==============
Basic earnings per share $1.01 $0.95 $0.89
============ ============ ==============
Diluted earnings per share:
Net income available to
stockholders - basic $5,181 $4,346 $3,133
Effect of charge to
operations assuming
conversion of 7%
convertible subordinated
debentures, net of taxes -- 167 672
------------- ------------ -------------
Net income available to
common stockholders -
diluted $5,181 $4,513 $3,805
============= ============ =============
Weighted average shares
outstanding - basic 5,155,186 4,578,720 3,538,603
Effect of dilutive securities:
Employee stock options 269,791 237,870 145,758
Stock purchase warrants -- -- 24,978
Assumed conversion of
7% convertible
subordinated debentures -- 535,667 1,491,892
------------- ----------- -------------
Weighted average shares -
diluted 5,424,977 5,352,257 5,201,231
============= =========== =============
Diluted earnings per share $0.96 $0.84 $0.73
============= =========== =============
-41-
<PAGE>
At February 28, 1998 and 1997, and February 29, 1996, respectively,
34,900, 17,800, and 10,900 employee stock options were outstanding
but were not included in computation of diluted earnings per share
because the exercise price was greater than the average market
price of the common shares.
Note 9. Customer Credit Operations
Customer credit operations were as follows:
Year Ended Year Ended Year Ended
February 28, February 28, February 29,
1998 1997 1996
------------ ------------ ------------
Financing income $13,356 $10,204 $7,817
------------ ------------ ------------
Direct costs:
Financing expense $5,536 $4,768 $4,258
Payroll and related costs 1,917 1,722 1,506
Credit report services 61 23 14
Legal fees 423 428 512
Provision for doubtful
notes 2,963 2,290 1,863
------------- ------------ -----------
Total direct costs $10,900 $9,231 $8,153
------------- ------------ -----------
Net financing income (loss) $2,456 $973 ($336)
============= ============ ===========
The above results do not reflect any allocation of corporate
overhead expenses.
-42-
<PAGE>
CORPORATE DATA
Annual Meeting
All shareholders are welcome to attend our annual meeting, which
will be held at 10:30 a.m. on Thursday, August 13, 1998, at the
Company's corporate headquarters. Any shareholders who will be
unable to attend are encouraged to send questions and comments in
writing, to Brad D. Schlotfeldt, Vice President Finance and
Treasurer, at our corporate headquarters.
Stock Market Information
The Company's common stock is traded on the New York Stock Exchange
under the symbol ASV.
As of February 28, 1998, there were 5,177,154 shares of common
stock outstanding. At that date, there were 172 shareholders of
record and approximately 3,100 shareholders for whom securities
firms acted as nominees.
Transfer Agent
Norwest Bank Minnesota, N.A.
Stock Transfer Department
161 North Concord Exchange
P.O. Box 738
South St. Paul, MN 55075-0738
612/450-4064 or 800/468-9716
Form 10-K
Shareholders who wish to obtain, without charge, a copy of our
annual report on form 10-K, filed with the Securities and Exchange
Commission for the fiscal year ended February 28, 1998, may do so
by writing Brad D. Schlotfeldt, Vice President Finance and
Treasurer, at corporate headquarters.
Investor Relations Contact
Shareholders and prospective investors are welcome to call or write
Ag Services with questions or requests for additional information.
Inquiries should be directed to corporate headquarters to the
attention of:
Brad D. Schlotfeldt
Vice President Finance and Treasurer
(319) 277-0261
E-mail: [email protected]
Corporate Headquarters
2302 West First Street
Thunder Ridge Court
P.O. Box 668
Cedar Falls, IA 50613
(319) 277-0261
Independent Public Accountants
McGladrey & Pullen, LLP
201 Tower Park Drive, Suite 103
P.O. Box 2656
Waterloo, IA 50704
Internet Address
Ag Services makes Company information available electronically via
a site on the World Wide Web. This site is regularly updated and
includes information on the Company's products and services, press
releases, and key publications such as the annual report. The
Company's Internet address is www.agservices.com.
-43-
<PAGE>
BOARD OF DIRECTORS
Hank C. Jungling, Jr. President and Chief
Executive Officer
Ag Services of America, Inc.
Gaylen D. Miller Chairman of the Board
Ag Services of America, Inc.
Kevin D. Schipper Chief Operating Officer
Ag Services of America, Inc.
James D. Gerson Senior Vice President
Fahnestock & Co., Inc.
Michael Lischin Attorney at Law
Ervin J. Mellema Operating Principal
Campbell Mellema Insurance, Inc.
and Campbell Mellema Realty
OFFICERS
Hank C. Jungling, Jr. President and Chief
Executive Officer
Gaylen D. Miller Chairman of the Board
Kevin D. Schipper Chief Operating Officer
Todd J. Ryan Vice President Sales
Brad D. Schlotfeldt Vice President Finance and Treasurer
Eunice M. Schipper Vice President Credit
Neil H. Stadlman Vice President Credit Administration
-44-
<PAGE>
AG SERVICES OF AMERICA, INC.
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
There is no parent of the Company. The following is a listing
of subsidiaries of the company.
Jurisdiction of
Organization
---------------
Ag Acceptance Corporation Delaware
-31-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> FEB-28-1998
<CASH> 174,000
<SECURITIES> 0
<RECEIVABLES> 89,497,000
<ALLOWANCES> 4,000,000
<INVENTORY> 2,972,000
<CURRENT-ASSETS> 77,383,000
<PP&E> 2,599,000
<DEPRECIATION> 1,059,000
<TOTAL-ASSETS> 93,248,000
<CURRENT-LIABILITIES> 43,577,000
<BONDS> 0
0
0
<COMMON> 22,307,000
<OTHER-SE> 21,449,000
<TOTAL-LIABILITY-AND-EQUITY> 93,248,000
<SALES> 172,717,000
<TOTAL-REVENUES> 186,073,000
<CGS> 162,197,000
<TOTAL-COSTS> 167,733,000
<OTHER-EXPENSES> 7,316,000
<LOSS-PROVISION> 2,963,000
<INTEREST-EXPENSE> 5,536,000
<INCOME-PRETAX> 8,061,000
<INCOME-TAX> 2,880,000
<INCOME-CONTINUING> 5,181,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,181,000
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 0.96
<PAGE>
</TABLE>
AG SERVICES OF AMERICA, INC
EXHIBIT 99.1
FOURTH QUARTER AND YEAR
END RESULTS PRESS RELEASE
-33-
<PAGE>
NEWS RELEASE
April 9, 1998 NYSE: ASV
Contact: Brad Schlotfeldt
Fax No. (319) 277-0144 Phone: (319) 277-0261
http://www.agservices.com or (800) 395-8505
AG SERVICES OF AMERICA, INC. ANNOUNCES
RECORD FOURTH QUARTER AND YEAR END RESULTS
For the year ended February 28, 1998, the Company reported
record net revenues and earnings. Net revenues increased 26% to a
record $186.1 million up from $147.6 million for the year ended
February 28, 1997. Net income for the year ended February 28, 1998
also reached record levels increasing 19% to $5.2 million or $0.96
per share diluted from $4.3 million or $0.84 per share diluted for
the year ended February 28, 1997.
The Company also reported record fourth quarter net revenues
and earnings. Net revenues increased to $32.1 million compared
with $20.4 million for the fourth quarter a year ago. The Company
reported record net income for the three months ended February 28,
1998 of $306,154 or $0.06 per share diluted from $305,965 or $0.06
per share diluted for the same period last year.
Results were below estimates as a result of costs associated
with the Company's lease of three retail fertilizer and chemical
facilities in Northwestern Illinois. Costs were incurred at these
facilities in fiscal 1998 to ready them for operations in the
Company's first quarter of fiscal 1999. Net income was reduced
approximately $103,000 or $0.02 per share (basic and diluted).
Looking forward, the Company is well into its sales, marketing
and credit approval process for the 1998 spring planting season.
We anticipate that demand for the Company's "AgriFlex Credit"
program coupled with the recently announced servicing and marketing
agreement should keep growth (20% to 25%) and profitability (20% to
25%) objectives on target for fiscal 1999.
SAFE HARBOR PROVISION
This release contains forward-looking statements based on
current expectations that involve a number of risks and
uncertainties. The factors that could cause actual results to
differ materially, include the following: general economic
conditions within the agricultural industry; competitive factors
and pricing pressures; changes in product mix; changes in the
seasonality of demand patterns; changes in weather conditions;
changes in agricultural regulations; and the risks described from
time to time in the Company's SEC reports.
<PAGE>
Ag Services of America, Inc. supplies farm inputs including
seed, fertilizer, agricultural chemicals, crop insurance, and cash
advances for land rent, fuel, and irrigation to farmers primarily
in the central United States.
(Unaudited) (Unaudited)
Three Months Ended Year Ended
------------------ ------------
February 28, February 28, February 28, February 28,
1998 1997 1998 1997
----------- -------------- ------------ --------------
(In thousands except per share amounts)
Net revenues $32,131 $20,407 $186,073 $147,647
Income before
income taxes $480 $410 $8,061 $6,675
Net income $306 $306 $5,181 $4,346
Earnings per share:
Basic $0.06 $0.06 $1.01 $0.95
Diluted $0.06 $0.06 $0.96 $0.84
Weighted average
shares:
Basic 5,166 5,128 5,155 4,579
Diluted 5,428 5,400 5,425 5,352
<PAGE>
