EXECUTION COPY




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TABLE OF CONTENTS
 PageARTICLE I DEFINITIONS
    
    
    1Section 1.01 Definitions
    
    
    1Section 1.02 Other Definitional Provisions
    
    
    1ARTICLE II ADMINISTRATION AND SERVICING OF RECEIVABLES AND RELATED SECURITY
    
    
    2Section 2.01 Appointment of Servicer
    
    
    2Section 2.02 Duties of Servicer
    
    
    3Section 2.03 Rights After Designation of New Servicer
    
    
    5Section 2.04 Servicer Default
    
    
    6Section 2.05 Servicer Indemnification of Indemnified Parties
    
    
    7Section 2.06 Grant of License
    
    
    8Section 2.07 Servicing Compensation
    
    
    8Section 2.08 Representations and Warranties of the Servicer
    
    
    9Section 2.09 Reports and Records for the Trustee
    
    
    11Section 2.10 Reports to the Securities and Exchange Commission
    
    
    12Section 2.11 Affirmative Covenants of the Servicer
    
    
    12Section 2.12 Negative Covenants of the Servicer
    
    
    15Section 2.13 Successor Servicer
    
    
    17ARTICLE III RIGHTS OF NOTEHOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS
    
    
    18Section 3.01 Establishment of Accounts
    
    
    18Section 3.02 Collections and Allocations
    
    
    18ARTICLE IV [RESERVED.]
    
    
    19ARTICLE V OTHER MATTERS RELATING TO THE SERVICER
    
    
    19Section 5.01 Liability of the Servicer
    
    
    19Section 5.02 Limitation on Liability of the Servicer and Others
    
    
    19Section 5.03 Servicer Not to Resign
    
    
    19Section 5.04 Waiver of Defaults
    
    
    20ARTICLE VI ADDITIONAL OBLIGATION OF THE SERVICER WITH RESPECT TO THE TRUSTEE
    
    
    20Section 6.01 Successor Indenture Trustee
    
    
    20Section 6.02 Tax Returns
    
    
    20




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TABLE OF CONTENTS
 PageSection 6.03 Final Payment with Respect to Any Series
    
    
    20ARTICLE VII MISCELLANEOUS PROVISIONS
    
    
    20Section 7.01 Amendment
    
    
    20Section 7.02 Governing Law
    
    
    22Section 7.03 Notices
    
    
    22Section 7.04 Severability of Provisions
    
    
    22Section 7.05 Delegation
    
    
    22Section 7.06 Waiver of Trial by Jury
    
    
    22Section 7.07 Further Assurances
    
    
    22Section 7.08 No Waiver; Cumulative Remedies
    
    
    23Section 7.09 Counterparts
    
    
    23Section 7.10 Successors and Assigns
    
    
    23Section 7.11 Actions by Noteholders
    
    
    23Section 7.12 Rule 144A Information
    
    
    23Section 7.13 Merger and Integration
    
    
    23Section 7.14 Headings
    
    
    23Section 7.15 Rights of the Trustee
    
    
    23Section 7.16 No Bankruptcy Petition/Claims
    
    
    24Section 7.17 No RecourseEXHIBITSExhibit A            Form of Daily Servicer Report
    
    
    A-1Exhibit B            Form of Monthly Servicer Report
    
    
    B-1Exhibit C            Form of Annual Servicers Certificate
    
    
    C-1Exhibit D            Form of Credit Manual
    
    
    D-1Exhibit E            Form of Accounting Control Procedures and Processing Report
    
    
    E-1SCHEDULES




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Agreement Issuer Servicer Trustee
 Purchase Agreement
 Indenture
     Definitions
 Other Definitional Provisions




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Appointment of Servicer
 Servicer Section
2.01 Section 2.01 provided however
 Section 2.01
  2




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Duties of Servicer
 Section 2.01 Section 2.04
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provided
 Exhibit E Exhibit B Exhibit E
 Exhibit C
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Exhibit E
 Rights After Designation of New Servicer Section 2.01
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Servicer Default Servicer Default
  provided Article II
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clause (d) Section 2.01 Sections 2.06 2.13 clause
(d) Section 2.01 Sections 2.06 2.13
 Servicer Indemnification of Indemnified Parties Indemnified
Parties provided however
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Grant of License Section 2.01 Section 2.13
 Servicing Compensation Section 12.1
 provided
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Representations and Warranties of the Servicer
 Organization and Good Standing
 Due Qualification
 Due Authorization
 Due Execution and Delivery; Binding Obligation
 No Violation
 No Proceedings
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Information
 Governmental and Other Consents
 Financial Condition
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Taxes
 Reports and Records for the Trustee Section 2.02(c) Section 2.09
 Daily Servicer Report Exhibit A
 Monthly Servicer Report Exhibit B
 Monthly Noteholders Statement
 Issuer Reports Section 4.3
 Series Reports
 Certificate of Responsible Officer
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[Reserved]
 Affirmative Covenants of the Servicer
 Credit Manual
 Collections Received; Segregation Section 3.02(a) Section 5.4(a)
 Notice of Defaults, Events of Default, Potential Early Amortization Event, Early
Amortization Event, or Servicer Defaults
 Conduct of Business
 Compliance with Loan Documents and Requirements of Law
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Further Information
 Furnishing of Information and Inspection of Records
 Notification of Adverse Developments
 Notice to Obligors
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Relocation of Servicer
 Protection of Right, Title and Interest to Receivables and Related Security
 Realization Upon Defaulted Receivables
 Maintenance of Insurance Policies
 Marking
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UCS Score
 Transaction Documents
 Section 2.11(e) (k) Section 2.12(e) (f)
 Negative Covenants of the Servicer
 Modifications of Receivables or Obligor Notes provided Section
2.11(l) Section 2.12(f)
 Merger or Consolidation of, or Assumption of the Obligations of, the Servicer
  Surviving Entity
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No Change in Business or the Credit Manual
 No Adverse Claims
 No Rescission or Cancellation.
 Protection of Secured Parties Rights provided however
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Name; Jurisdiction of Organization, Principal Place of Business
 Successor Servicer Section 2.01 provided however
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The Lockbox and Lockbox Account
 Collections and Allocations
 Collections
 Article III Article
III
 Allocation of Collections Between Finance Charges and Principal Receivables
 Deemed Collections
 Adjustments
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[RESERVED.]
  
 Liability of the Servicer
 Limitation on Liability of the Servicer and Others provided however provided however prima facie
 Servicer Not to Resign
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Section 2.01
 Waiver of Defaults Section 7.01
  
 Successor Indenture Trustee
 Tax Returns Section 6.02
 Final Payment with Respect to Any Series Section 12.5(a)
   Amendment
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provided however
  Section 7.01
  Section 2.01
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Governing Law FORUM NON CONVENIENS
 Notices Section 7.04
 Severability of Provisions
 Delegation Section 2.01 2.02 2.12(b)
 Waiver of Trial by Jury
 Further Assurances
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No Waiver; Cumulative Remedies
 Counterparts
 Successors and Assigns
 Actions by Noteholders
   Merger and Integration
 Headings
 Rights of the Trustee
 No Bankruptcy Petition/Claims
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No Recourse Section 5.4(c) Section 101(5) Section 5.4(c)
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COFINA FUNDING LLC, as IssuerBy:Name:Title:COFINA FINANCIAL, LLC
as ServicerBy:Name:Title:U.S. BANK NATIONAL ASSOCIATION, not in its
individual capacity, but solely as TrusteeBy:Name:Title: Servicing Agreement




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Exhibit A  Form of Daily Servicer Report
 FORM OF DAILY SERVICER REPORT
 Servicing Agreement




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COFINA FUNDING LLC DAILY
SERVICER REPORT
 AmountOpening balance in Collection Account:
    
    
    500.00Collections received from Receivables
    
    
    1,000.00Payments made:1. Amount of Accrued Facility Costs for sub account-
    
    
    1.002. Required Reserve Amount transferred to Spread Maintenance Account-
    
    
    1.003. Reduction in principal amount of Notes outstanding transferred to Settlement Account
    
    
    1.004. Amount payable to Seller based on Purchase Agreement- 
(Amount equal to unpaid purchase price)
    
    
    1.00Total of payments made on this date
    
    $
    4.00Closing balance in Collection Account:
    
    $
    1,496.00
 Servicing Agreement




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Exhibit B  Form of Monthly Servicer Report
 FORM OF MONTHLY SERVICER REPORT
 Servicing Agreement
 A-1




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COFINA FUNDING LLC
MONTHLY SERVICER REPORT  PAYMENTS OUT OF AVAILABLE DISTRIBUTION AMOUNT
 AmountCalculation of Available Distribution Amount:Collection received during [immediately proceeding monthly period]
    
    
    17.00Amounts received from interest rate hedge counterparty
    
    
    1.00Total deemed collections
    
    
    1.00Receipts from Spread Maintenance Account
    
    
    1.00Earnings on permitted investments received during [immediately proceeding monthly period]
    
    
    1.00Total Available Distribution
Amount
    
    
    21.00Payments to be made:1. Indenture TrusteeFee
    
    
    1.00Out of pocket expenses
    
    
    1.00Maximum
amount $20,000Total
    
    
    2.002. Servicer-Fee for current settlement period
    
    
    1.00Arrears
    
    
    1.00Total
    
    
    2.003. CustodianFee for current settlement period (maximum amount $10.000)
    
    
    1.004. Successor Servicer (if appointed)Reimbursement of transition costs incurred (maximum amount $50,000)
    
    
    1.005. Interest Rate Hedge Provider-Current scheduled payments due
    
    
    1.00Arrears
    
    
    1.00Total
    
    
    2.006. Interest due on Outstanding Notes to NoteholdersInterest payments on Notes  paid to Settlement Account
    
    
    1.00Premiums due to Enhancement Provider
    
    
    1.00Total
    
    
    2.007. Scheduled principal payment amount due  paid to Settlement Account
    
    
    1.008. Supplemental principal payment amount  paid to Settlement AccountWarehouse Notes
    
    
    1.00Notes
    
    
    1.00Total
    
    
    2.009. Interest Rate Hedge Provider-All remaining amounts due
    
    
    1.0010. All other amounts due to:Noteholders  paid to Settlement Account
    
    
    1.00Trustee
    
    
    1.00Custodian
    
    
    1.00Servicer
    
    
    1.00Total
    
    
    4.0011. Payment to issuer of any remaining Available Distribution Amount
    
    
    3.00Total Payments Due
    
    $
    21.00Do Payments equal Available Distribution Amount?
    
    Y or N?
 Servicing Agreement
 A-1




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Exhibit C  Form of Annual Servicers Certificate
 FORM OF ANNUAL SERVICERS CERTIFICATE
 
 Section
2.02(c)(ii) Agreement Issuer Servicer Trustee
   [, except
as set forth on Schedule I hereto.]
 COFINA FINANCIAL, LLC.,
as the ServicerBy:Name:Title:
 Servicing Agreement
 B-1




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Exhibit D  Form of Credit Manual
 FORM OF CREDIT MANUAL
 Servicing Agreement
 C-1




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Exhibit E  Form of Accounting Control
Procedures and Processing Report
 PROCEDURES AND PROCESSING REPORT
 Servicing Agreement
 D-1




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Cofina Financial
Policies and Procedures Manual  Table of Contents
 Section 1.0 General1.01 Board of Directors
    
    
    31.02 Loan Committee
    
    
    3Section 2.0 Credit Administration and Approval
    
    
    62.01 Scope of Financing
    
    
    62.02 Obligors
    
    
    72.03 Loan Application
    
    
    82.04 Credit Analysis
    
    
    132.05 Collateral Analysis
    
    
    292.06 Environmental Analysis
    
    
    352.07 Construction Lending
    
    
    372.08 LLC Lending
    
    
    402.09 Loan Agreement
    
    
    422.10 Security Requirements
    
    
    49Section 3.0 Loan Administration
    
    
    543.01 Loan File Organization
    
    
    543.02 Asset Classifications
    
    
    553.03 Portfolio Monitoring
    
    
    623.04 Customer and Loans Servicing
    
    
    633.05 Collection Procedures
    
    
    693.06 Customer Concentration
    
    
    813.07 Reserve Guidelines
    
    
    82Section 4.0 Legal Documentation
    
    
    834.01 Legal Documentation Overview
    
    
    834.02 Real Estate Mortgage Documentation
    
    
    844.03 Supplemental/Amendment RE Mortgage Documentation
    
    
    884.04 Release of Mortgage Documentation
    
    
    924.05 Security Agreement Documentation
    
    
    964.06 UCC 1 Financing Statement Documentation
    
    
    1044.07 Assignment of PECFA Proceeds
    
    
    1064.08 Assignment of Stock Documentation
    
    
    1084.09 Loan Agreement Waiver Documentation
    
    
    1104.10 Subordination Agreement Documentation
    
    
    112
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Section 5.0 Money Desk Procedures
    
    
    1155.01 Disbursements
    
    
    1155.02 Electronic Funds Transfers (EFT)
    
    
    1185.03 Deposits
    
    
    1195.04 Cash Management
    
    
    1205.05 Daily Transaction Sheets
    
    
    1225.06 Authorized Check Signatories
    
    
    1235.07 Borrowing Guidelines
    
    
    124Section 6.0 Accounting, Financial Control, and Reporting
    
    
    1256.01 Accounting
    
    
    1256.02 Financial Control
    
    
    1286.03 Reporting
    
    
    1326.04Section 7.0 Disaster Recovery Plan
    
    
    134Section 8.0 Equity Retirements and Patronage Decisions
    
    
    1368.01 General Equity Retirements
    
    
    1368.02 Equity Retirements of Liquidating Customers
    
    
    1388.03 1099PAT Processing
    
    
    139Section 9.0 Grain Credit Analysis
    
    
    140
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1.01 Board of DirectorsUnder its Articles and By-Laws, Cofina Financial (COFINA)
is run by its Board of Directors (the Board)The Board consists of six members; three CFA
and three CHS.Day-to-day running of Cofina is delegated to the management
team. Lending authorities for all loan, classification and
pricing approvals have been delegated to the Cofina Loan
Committee, as per the written authority dated February 24,
2003 (See Sec. 1.03  Loan Committee). The Board retains
all approval authority for loan compromises or loan
write-offs.The Board holds a minimum of four meetings per year at
which the management team will report on the operations of
the company. The reports include, but are not limited to:    Financial statements    Credit quality of loan portfolio    Credit reviews performed by banks on loan portfolio
that have been received by the Chief Financial Officer    Annually, the budget for the next financial year,
for Board approval    Annually, the report of the auditors on the
financial statements1.02 Loan CommitteeThe Loan Committee is comprised of five members:    The President of Cofina    The Chief Financial Officer of Cofina    Credit Administrator    Director Wholesale Credit    Director Retail Credit    The Member officer rotates on a monthly basis.
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Three voting members, one of which must be the President or
the CFO, are required for the committee to be quorate. The
meetings are also attended by the Legal Administrator and
the presenting loan officer.The Loan Committee is scheduled every Monday at 8:00 a.m.
Credit reports and back-up data must be provided to the
Legal Administrator on or before noon on the Thursday prior
to the Monday meeting. The agenda for the meeting must be
distributed by
Thursday afternoon. Apologies for absence must be given to
the Legal Administrator.The loan officer responsible for each loan on the agenda
must attend the meeting to present his credit. If the loan
officer is unable to physically attend the meeting, he must
join it by telephone. Credits will be held over to the
next meeting if the loan officer is unable to attend.The Loan Committee meets to consider the following actions:    Approve new loans    Approve revised loans    Approve loan extensions    Approve annual reviews    Approve changes to payment schedule    Approve premium or discount pricing from the pricing matrix    Approve advances pre-finalization of security    Approve releases from security    Approve exceptions to the limitations on advances    Review loans where there have been violations of the agreement and approve waiver where appropriate.    Review loans that have failed the Stressed Realizable Value Test    Review loans that have slipped from an Acceptable, non-criticized asset classification    Approve loan servicing actions    Review progress of loan servicing actions
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    Approve Loan Service Plans    Review progress of Loan Service Plans    Approve issuing Liquidation Notice    Review discount rates used in Collateral Analysis Worksheet    Approve loan classifications    Approve outside attorneys to be used for assisting with security requirementsAll decisions must be approved unanimously by those
voting members attending the Loan Committee meeting.All decisions must be minuted by the Legal
Administrator. Minutes must be signed by the voting
members who made the decision and then presented at the
next Loan Committee meeting.The minutes are filed by the Legal Administrator and
held in the offices of Cofina for five years before
being archived.
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2.0 - Credit Administration and Approval2.01  Scope of FinancingCofina primarily offers three types of loans to
cooperatives:    Operating Loans- These short-term loans
typically finance a portion of the current asset
needs of a customer. Operating loans mature
annually and are reviewed by the loan officers
prior to any extension or renewal. All operating Loan
extensions are to be approved by Loan Committee and are
limited to a loan period of no more than 14-months
beyond the Operating Loans initial date of origination.    Term Loans- These long-term loans typically
supplement equity in financing the permanent capital
needs of a customer. Term loans range in maturity from
thirteen months to ten years.    PECFA Loans- Used for the purpose of funding the
environmental cleanup process for contaminated
petroleum sites in Wisconsin. The State of Wisconsin
reimburses the Obligor for the periodic interest
charges prior to completion of the project and for the
principal balance of the Loan upon completion of the
cleanup project. These loans are structured and term
loans with four to six-year maturities and, in
addition to recourse to the State of Wisconsin, are
fully collateralized by the assets of the Obligor.
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2.02 ObligorsCofina can make loans to:    local cooperatives    retail operations of regional cooperatives    local or retail cooperative suppliers that benefit
Cofina customers    joint ventures where local cooperatives maintain
majority ownership.
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2.03 Loan ApplicationCredit process commences with the completion of a loan
application. In cases of maturing operating loans, Cofina
will mail a loan application to the customer for customer
board approval at least 90 days before maturity date.A copy of an application is attached to this procedure.
Each application has three sections that must be completed
before Cofina will consider the loan request.    Resolution of Board of Directors- In this
section, the applicants Board approves a resolution
to borrow a maximum amount of money from Cofina. This
amount includes any new term debt, the requested
Operating loan amount, and any other funding
requested. Existing term debt is not included in the
new board resolution. The Board Secretary must certify
that the Board approved this borrowing resolution.    Application Information- In this section, the
customer, Board, and management specify the amount
applied for, the purpose of the loans, collateral
offered, proposed repayment, and other information
important in the credit decision. All parts of this
section must be completed.    Signature Page- In this section, all
Board officers and directors must provide signatures for
future reference on other loan documents. The Board
President and Secretary must provide additional
information.Signed application forms must be submitted along with
applicants latest audit report and financial planning
documents. It is a requirement that the audit report is
unqualified.If the applicant is a prospective new customer, he must
submit the last three years audit reports.The financial planning documents should include operating
budgets, capital expenditure plans and
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equity servicing plans. Feasibility and marketing plans will also be
required if the customer is proposing to commence a new
project.As applications are received, they are date stamped, logged
in the Maturity Status Report and given to the loan officer
for processing.Completed and processed applications are placed in the
customer loan file.
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COFINA FINANCIAL
APPLICATION FOR LOAN
 Dated:  2002
 Name of Applicant:
 Corporate Address:
 RESOLUTION OF THE BOARD OF DIRECTORS
  RESOLVED,   COFINA FINANCIAL $
         RESOLVED FURTHER,
 CERTIFICATION
 As Secretary of this corporation I certify that this resolution was duly adopted by its Board of
Directors at a meeting held on  day of    , 2002.
 Secretary
 APPLICATION FOR LOAN
 APPLICANT:
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ADDRESS:
 1.
    
    Amount Applied for:
 Operating:
    
    $
    
    
    
    (New Money)Term:
    
    
    
    
    
    (New Money)TOTAL:
    
    $
 2.
    
    Purpose of Loan:
Operating:
Term:3.
    
    Collateral Offered:
If loan(s) are granted, all property mortgaged, pledged, or assigned by Applicant to
Lender as security for loans made before or after such loan(s) shall be security for
all loans made by Lender to Applicant.4.
    
    List all liens presently filed against property offered as collateral:5.
    
    Proposed method of payments:
 a)
    
    Applicant will pay the principal of the loan(s) as follows:
Operating:
Term:b)
    
    Applicant will pay interest monthly on the unpaid balance at the
per annum interest rate prescribed by Lenders board of directors, as provided
for in the loan agreement.c)
    
    Applicant will be billed directly from COFINA FINANCIALfor
the monthly principal and interest payments as provided for in 5(a) and 5(b), and to remit the
amounts due directly to Lender.
 6.
    
    Is Applicant involved in or threatened with any lawsuit? Yes  No  (if yes,
describe on a separate sheet)7.
    
    Applicant agrees to submit annually to Lender, and at such other times as Lender
may require, a statement of condition in form approved by Lender. Applicant further
agrees that Lender may, at any time that it is indebted to Lender, examine its books,
records, and accounts.8.
    
    If the loan is completed, Applicant agrees to pay to Lender loan set up fees as
follows:
 Operating Loan Commitment
    
    Documentation Set Up Fee:Up to $500,000
    
    $
    250.00$500,000 to $1mm
    
    $
    500.00Over $1mm
    
    $
    1,000.00New Term Loan10 basis points on new commitment, one time fee.
   Page -2-
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APPLICATION FOR LOAN
  1.
    
    The undersigned are the duly qualified incumbents of the offices as shown
opposite the respective names, and that the signatures are true and genuine specimens
thereof.2.
    
    All statements, answers, and representatives are given in connection with this
loan application are factual and warranted correct.
 PRESIDENTS NAME:
 Term Expires:
 SIGNATURE:
 ADDRESS:
 SECRETARYS NAME:
 Term Expires:
 SIGNATURE:
 ADDRESS:
 (SIGNATURES REQUIRED BELOW WHEN PARTY IS AUTHORIZED TO SIGN DOCUMENTS)
 NAME
    
    SIGNATUREVICE PRESIDENT NAME:Address:DIRECTOR NAME:Address:DIRECTOR NAME:Address:DIRECTOR NAME:Address:DIRECTOR NAME:Address:DIRECTOR NAME:Address:MANAGERS NAME:
 Page -3-
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2.04  Credit Analysis
 General
    
    Cofina credit analysis is differentiated based on the size, complexity, and quality of the
customer and the proposed loan package. Differential credit analysis, however, needs to
follow a consistent format to streamline and simplify analysis and portfolio monitoring
processes. This is achieved by completing a standard format credit report.As the primary customer contact, the loan officer is
responsible for completing the credit reports.Credit Report
    
    The following framework explains the credit report outline used to document CFA
credit analysis and loan package recommendations. A copy of a credit report is attached to
this procedure.    Credit Report Cover Sheet  this page
provides an executive summary of the customer and
requested financing. Customer information on existing
loans and current asset classifications are included.
The Financial Summary helps identify strengths and
weaknesses to be discussed further in the main body of
the Credit Report.    Uniform Classification Score worksheet -
this page sets out the loan underwriting standards
that guide the relationship with the customer. It
provides a quantitative analysis of the Customers
most current, audited financial performance. This
analysis involves a weighted score of key financial
ratios used in determining a foundation of what is
termed a Risk Rating.The credit report should clearly demonstrate that these
underwriting standards are satisfied, or the loan
officer should identify offsetting financial or
management strengths that justify the loan. Added loan
controls which help minimize credit risk may justify
loans where the underwriting standards are not met.The interest rate on the loans will be set by matrix
depending on the customers classification as to these
loan standards. The
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current pricing matrix is attached.
Premium and discount pricing from this pricing matrix
will be permitted upon approval of the Loan Committee.    Recommendations  This section summarizes
the key factors in this loan relationship and makes a specific recommendation.    Overview This section should provide the
reader with an executive summary of the financing
request, the financial strengths that support the
loan, and the credit risks inherent in the loan. If
the requested financing involves significant new term
debt for expansion, the economic support or
feasibility of the project should be discussed here.
Key points raised here should be supported and
explained in the main body of the Credit Report.    Financial Analysis This section addresses
the financial trends and the liquidity, solvency and
profitability strengths and weaknesses of the
customer.The following financial guidelines are used in this
analysis:
 Measurement
    
    Guideline    Salaries to Gross Margins (%)
    
    <40%    Distribution Expense to GM (%)
    
    £50%    Local Savings to Sales (%)
    
    >2%    Net Worth to Total Assets (%)
    
    50 to 75%    Local Net Worth to Local Assets (%)
    
    >50%    Accounts Receivable Under 60 Days (%)
    
    >85%    Accounts Receivable Over 1 Year (%)
    
    <1%    Bad Debt to Sales (%)
    
    <0.1%    Inventory to Sales (%)
    
    5 to 10%    Working Capital to Sales (%)
    
    7 to 10%    Return on Assets (%)
    
    >10%
 These ratios are guidelines which Cofina uses as a means
to communicate the financial position that it believes
will allow most local cooperatives to successfully grow
in the future.
It is recognized that few customers will meet or exceed
all of these guidelines.If weaknesses are apparent, the loan officer
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should begin to demonstrate how the customer can and will
address issues that raise credit quality problemsExposure Analysis  This section summarizes
risk exposure by presenting key ratios and
underwriting standards. This section also addresses
capital expenditure and equity retirement plans.    Security  This section addresses key
issues related to the security filings and security
position held by Cofina.    Management  This section rates management
capabilities and identifies Board or management issues
that may affect loan risk.    Attachments  Attachments to the credit
report should include a liquidity/collateral analysis,
comparative financial information, budgets (as
needed), working capital analysis (as needed) and the
proposed loan agreements.If a customer shows signs of deteriorating credit quality,
the credit report should also include a Loan Service Plan.
This section should explain the specific steps the loan
officer has planned to address the weaknesses identified
in the credit report which cause the deteriorating
financial performance and asset quality. Although Cofina
strives to help customers resolve financial difficulties,
the plans must also address how the Cofina position will
be strengthened or preserved.Completed credit reports are then presented to the Cofina
Loan Committee. In the case of renewals, the presentation
must take place at least 30 days before maturity date.Loans will not be approved for new customers which, upon
the approval of such loans, will receive an Adverse
classification (see Sec 3.02  Asset Classifications).Additional loans will not be granted to existing customers
with less than a Substandard classification.
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Date:Cooperative Name:
    
    Coop Name
    
    Analyst:City and State:
    
    City, State
    
    FYE:
    
    FYE: DateManager:
    
    
    
    
    
    Years:Credit Score  Current
    
    FAMAS:
    
    
    
    UCS:
    
    
    0.00
    
    
    CFA Pricing
    
    
    0
    
    
    S
    
    #N/A
    
    T
    
    #N/ACredit Score  Recmd
    
    FAMAS:
    
    
    
    UCS:
    
    
    0.00
    
    
    CFA Pricing
    
    
    0
    
    
    S
    
    #N/A
    
    T
    
    #N/AAuditor:
    
    
    
    
    
    Scope
 Loan(s) Requested & Outstanding as of:
 Request
    
    Current
    
    Outstanding
    
    High
    
    Low
    
    MaturityLoan Type
    
    Amount
    
    Commitment
    
    Balance
    
    Point
    
    Point
    
    DateSeasonalTermTOTAL
    
    $0
    
    $0
    
    $0
    
    Term Amortization (Years):SeasonalChanges
    
    TermOtherTotal Commitment:
    
    $0
 Recommendation(s):
 USC Rating
    
    CFA Pricing1
    
    Approval of the attached Loan Quality Classification:
    
    0.00
    
    02
    
    Approval of a
    
    $ 
    
    Seasonal Line of Credit with a
    
    maturity, expiration and maturity date.3
    
    Approval of a
    
    $      
    
    Term Loan.  (see terms)
 Expiration DateMaturity DateMonthly PaymentDate of First Payment
 Loan Covenant(s)
 * Financial Information:
    
    Unqualified Annual Audit and monthly Financial Statements* Local Net Worth of no less than:
    
    * Working Capital Minimum of:* Local Ownership of no less than:
    
    * Seasonal Loan Paydown to Zero for:* Capital Expenditures of no more than:
    
    * Equity Retirements of no more than:* Dividends awarded of no more than:
 Signatures (required)
 Approved Recommendation  Loan Committee Meeting Date:
 Loan Committee Member:
    
    
    
    Signature:Loan Committee Member:
    
    
    
    Signature:Loan Committee Member:
    
    
    
    Signature:
 Financial Summary
 2002
    
    2003
    
    2004Gross Sales ($):
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    Completed UniformLocal Savings ($):
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    ClassificationLLC, Subsidiary Profit/(Loss):
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    UCS Worksheet  PAGE 2Ownership (%):
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    Analysis Reports AttachedLocal Ownership (%):
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    Credit Report Narrative:
    
    
    xLocal Net Worth ($):
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    Ratio Analysis
    
    
    xLocal Leverage (%):
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    Net Funds Flow Analysis:
    
    
    xLoan Commitment to SRV:
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    Working Capital Analysis:
    
    
    xLoan Balance to SRV:
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    Collateral Analysis:
    
    
    xNet Funds ($):
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    FAMAS Report:
    
    
    xCurrent Ratio:
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.00
    
    
    Other:
    
    
    xWorking Capital:
    
    $
    0
    
    
    $
    0
    
    
    $
    0
 16




---



##### 



Coop Name
City, State
FYE: Date
 Financial Guidelines
 Titles & Ratios/Year
    
    2001
    
    
    
    
    
    
    2002
    
    
    
    
    
    
    2003
    
    
    
    
    
    
    2004Sales  % Sales Change
    
    $
    0
    
    
    
    0.0
    %
    
    $
    0
    
    
    
    0.0
    %
    
    $
    0
    
    
    
    0.0
    %
    
    $
    0
    
    
    
    0.0
    %
    
    % Sales IncreaseMargin $  % of Sales
    
    $
    0
    
    
    
    0.0
    %
    
    $
    0
    
    
    
    0.0
    %
    
    $
    0
    
    
    
    0.0
    %
    
    $
    0
    
    
    
    0.0
    %
    
    Area AveragesSalaries as a % of Gross Margin
    
    $
    0
    
    
    
    0.0
    %
    
    $
    0
    
    
    
    0.0
    %
    
    $
    0
    
    
    
    0.0
    %
    
    $
    0
    
    
    
    0.0
    %
    
    < 40%Distribution Expense  % of GM
    
    $
    0
    
    
    
    0.0
    %
    
    $
    0
    
    
    
    0.0
    %
    
    $
    0
    
    
    
    0.0
    %
    
    $
    0
    
    
    
    0.0
    %
    
    < 50%Interest  % of Gross Margin
    
    $
    0
    
    
    
    0.0
    %
    
    $
    0
    
    
    
    0.0
    %
    
    $
    0
    
    
    
    0.0
    %
    
    $
    0
    
    
    
    0.0
    %Other Income/(Expense)
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0LLC, Subsidiary Profit/(Loss)
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0Total Expenses  % of Gross Margin
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %Local Savings as a % of Sales
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    3 - 5%Net Worth as a % of Total Assets
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    50 - 75%Local Net Worth  % of Local Assets
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    > 50%Loan Covenant Stipulation
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    (Compliance/Waiver)Accounts Receivable AgingUnder 30
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    > 80%31-60 Days
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    0.00%61-90 Days
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %91 Days - 6 Months
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %6 Months - 1 Year
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    < 1%Over 1 Year
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    0.00%Budget
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %Deferred
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %Total  % Sales
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %Bad Debt as a % of Sales
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    < 0.25%Days Outstanding
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00Average ARInventory as a % of Sales
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    5 - 10%Inventory Turns
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00Working Capital as a % of Sales
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    $
    0
    
    
    
    0.00
    %
    
    7 - 10%Current Ratio
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    
    
    
    > 1.5:1Fixed Asset Expenditures
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    % of DepreciationLoan Covenent Guideline  Fixed Assets
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    (Compliance/Waiver)Stock Retired
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    Board DecisionLoan Covenent Guideline  Stock
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    (Compliance/Waiver)Return on Assets
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00Local Return on Assets
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    
    
    
    > 10%Gross Margin per Employee
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0Seasonal Loan Balance at FYE
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0Other Loan Balance at FYE (PECFA)
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0Term Loan Balance at FYE
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0~ Less Current Portion of Term Debt
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0
    
    
    
    
    
    
    $
    0Local Net Worth to Term Debt
    
    No Term Debt
    
    
    
    
    
    No Term Debt
    
    
    
    
    
    No Term Debt
    
    
    
    
    
    No Term DebtLocal Leverage
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00
    
    
    
    
    
    
    
    0.00
 17




---



##### 



Coop Name
City, State
FYE: Date
 Table 1: Working Capital Test
 Basic Working Capital Requirements:Accounts Receivable
    
    Lowest Month:
    
    $
    0Inventory
    
    Fiscal Year End
    
    $
    0Basic Working Capital Required:
    
    
    
    
    
    $
    0Less 90% of Seasonal Inventory:Fertilizers:
    
    $
    0Chemicals:
    
    $
    0OTHER (Seed & Twine):
    
    $
    0$
    0Less: Accounts Payable (10 Day Float)
    
    
    
    
    
    $
    0Estimated Permanent WC Required (% Sales)
    
    
    0.00
    %
    
    $
    0Working Capital on September 30th:
    
    $
    0Current Portion of Long Term Debt:
    
    $
    0Usable Working Capital (% OF Sales)
    
    
    0.00
    %
    
    $
    0Surplus
    
    
    
    
    
    $
    0Table 2: Projected Change in Working CapitalUseable Working Capital as of:
    
    
    
    
    
    $
    0PROJECTIONSSOURCES:Local Savings
    
    $
    0Depreciation
    
    $
    0Regional Cash Patronage
    
    $
    0Term Loan
    
    $
    0Regional Stock Retired
    
    $
    0Other
    
    $
    0Total Working Capital Sources
    
    
    
    
    
    $
    0USES:Cash Patronage Distributed
    
    $
    0Purchased Investments
    
    $
    0Term Loan Payments
    
    $
    0Stock Retirements
    
    $
    0Fixed Assets
    
    $
    0Other Uses (Taxes)
    
    $
    0Total Working Capital Uses
    
    
    
    
    
    $
    0Projected Increase (Decrease) in Working Capital:
    
    
    
    
    
    $
    0Newly Projected Working Capital
    
    
    
    
    
    $
    0
 18




---



##### 



Coop Name
City, State
FYE: Date
 Net Funds AvailableAdd Cash Sources:
    
    2002
    
    2003
    
    2004Local Savings
    
    $
    0
    
    
    $
    0
    
    
    $
    0Patronage Refunds
    
    $
    0
    
    
    $
    0
    
    
    $
    0Depreciation
    
    $
    0
    
    
    $
    0
    
    
    $
    0Total Sources:
    
    $
    0
    
    
    $
    0
    
    
    $
    0Less Required Cash Uses:Net of Organizations Investments
    
    $
    0
    
    
    $
    0
    
    
    $
    0Cash Patronage Paid (20%)
    
    $
    0
    
    
    $
    0
    
    
    $
    0Other Required Uses (Taxes)
    
    $
    0
    
    
    $
    0
    
    
    $
    0Total Required Uses:
    
    $
    0
    
    
    $
    0
    
    
    $
    0Net Funds Available
    
    $
    0
    
    
    $
    0
    
    
    $
    03 YR Average
    
    
    
    
    
    $
    0Net Funds UsedFixed Assets Added
    
    $
    0
    
    
    $
    0
    
    
    $
    0Stock Retired
    
    $
    0
    
    
    $
    0
    
    
    $
    0Term Debt Payments
    
    $
    0
    
    
    $
    0
    
    
    $
    0Total Elective Uses:
    
    $
    0
    
    
    $
    0
    
    
    $
    0Net Funds Flow
    
    $
    0
    
    
    $
    0
    
    
    $
    0
 GUIDELINE: Limit annual Term Debt payment to 50% of 3-Year Average of NFA(Term Debt Capacity)3-Year NFA (x) 50% =
    
    $
    0(Debt Pmts/NFA)Term Payments / 3-Year NFA =
    
    No Term DebtTerm Debt Capacity (x) 7-Years to Service Debt =
    
    $
    0GUIDELINE: Local Net Worth to Term Debt Ratio should be 2:1 or moreFYE 19XXLocal Net Worth =
    
    $
    0Term Debt (Less Current Portion)=
    
    $
    0Local Net Worth to Term Debt =
    
    No Term Debt
    
    :1
 19




---



##### 



Year Ending
    
    
    
    Classifications
    
    Current
    
    NewAccount Name
    
    
    
    CFALocation
    
    
    
    Wgt UCS Score
    
    
    
    
    
    #DIV/0!If Different than Weighted UCS Score  see notes below è
    
    Recd UCSAve Volume
 Weight
    
    
    
    
    
    A1
    
    
    A2
    
    
    A3
    
    
    M4
    
    
    Adv.Given
    
    Ratio

    
    1
    
    
    2
    
    
    3
    
    
    4
    
    
    5
    
    
    Description

    
    Calculations/CommentsLocal Leverage
    
    
    < 35
    %
    
    
    < 50
    %
    
    
    < 80
    %
    
    
    < 100
    %
    
    
    > 100
    %
    
    Total LTD (Less Current)
    
    Ttl LTD =
    
    $
    0
    
    
    LNW =
    
    $
    025%
    
    
    
    
    
    #DIV/0!
    
    #DIV/0!
    
    #DIV/0!
    
    #DIV/0!
    
    #DIV/0!
    
    Local Net Worth
    
    
    
    
    
    Ratio =
    
    #DIV/0!Debt Service
    
    
    > 2.5
    
    
    
    >2.0
    
    
    
    > 1.5
    
    
    
    > 1.0
    
    
    
    < 1.0
    
    
    Net Funds Available
    
    3-Yr NFA =
    
    $
    0
    
    
    Current LTD =
    
    $
    015%
    
    Coverage
    
    #DIV/0!
    
    #DIV/0!
    
    #DIV/0!
    
    #DIV/0!
    
    #DIV/0!
    
    Current Portion LTD
    
    
    
    
    
    Ratio =
    
    #DIV/0!Liquidity -
    
    
    > 2.0
    
    
    
    > 1.5
    
    
    
    > 1.25
    
    
    
    > 1.0
    
    
    
    <1.0
    
    
    Current Assets
    
    CA =
    
    $
    0
    
    
    CL =
    
    $
    010%
    
    Current Ratio
    
    #DIV/0!
    
    #DIV/0!
    
    #DIV/0!
    
    #DIV/0!
    
    #DIV/0!
    
    Current Liabilities
    
    
    
    
    
    Ratio =
    
    #DIV/0!Collateral
    
    
    < 40
    %
    
    
    < 60
    %
    
    
    < 75
    %
    
    
    > 75
    %
    
    
    > 90
    %
    
    Total Liabilities
    
    CFA Liabilities =
    
    $
    0
    
    
    Est. Mkt Value=
    
    $
    010%
    
    
    
    
    
    #DIV/0!
    
    #DIV/0!
    
    #DIV/0!
    
    #DIV/0!
    
    #DIV/0!
    
    Estimated Market Value
    
    
    
    
    
    Ratio =
    
    #DIV/0!Local Net
    
    
    > 4.0
    %
    
    
    > 2.0
    %
    
    
    > 1.0
    %
    
    
    > 0.0
    %
    
    
    < 0.0
    %
    
    Local Net Savings
    
    LNS =
    
    $
    0
    
    
    Gross Sales =
    
    $
    025%
    
    Savings
    
    #DIV/0!
    
    #DIV/0!
    
    #DIV/0!
    
    #DIV/0!
    
    #DIV/0!
    
    Gross Sales
    
    
    
    
    
    Ratio =
    
    #DIV/0!Management
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ç Enter the weight value in the corresponding cell, as determined by the Loan Office.
    
    AR < 60 Days = $,
    
    AR > 6-Months = $15%
    
    (Trends, Environmental)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Inventory Turns =  , Environ Issues:
 Comments:




---



##### 



RECOMMENDATIONS:
 
    
    Approval of the attached Loan Quality Classification Worksheet. A1,2,3,4,5 etc
    
    Approval of a $ seasonal loan with a /      / maturity, expiration and reinstatement date.
    
    Approval of a $ term loan.
 Expiration Date
    
    /       /02Maturity Date
    
    /       /Monthly Payment
    
    
    $Date of First Payment
    
    /       /02
 
    
    Limitation on Advances: (If none, list NONE)Advance term prior to seasonal            Yes       No
 
    
    Limit seasonal/term advances until receipt of board resolution and loan application
authorizing borrowing in the amount of $.
    
    Limit seasonal/term until receipt/completion of:
 ◊
    
    Security interest◊
    
    Assignment of Investment in Cenex Harvest States◊
    
    Assignment of Investment in Land OLakes, Inc.◊
    
    Assignment of Other Investment◊
    
    Completion of Real Estate Mortgage requirements
 
    
    $ of the term loan commitment is limited until receipt of an acceptable feasibility study.
    
    Limit Seasonal/Term until receipt/completion of:
 
    
    Security Interest
    
    Assignment of investment in Cenex Harvest States
    
    Assignment of investment in Land OLakes, Inc.
    
    Assignment of investment in Other Investment
    
    Real estate mortgage in the amount of $,covering:
 
    
    Loan Agreement Conditions:
 
    
    Financial information: Unqualified annual audit and monthly financial statements
    
    Cash Patronage: %
    
    Fixed Assets: $.
    
    Equity Retirements: $.
    
    Local Net Worth of no less than:
    
    Local Net Ownership:
 22




---



##### 




    
    Capitalization Requirement:
    
    Working Capital:
    
    Budget/Financial Plan:
    
    Seasonal Loan Zero-Out Provision:
    
    Account Receivable Aging:
    
    Other:
 23




---



##### 



OVERVIEW:
 This section should provide the reader with an executive summary of the financing request, the
financial strengths that support the loan, and the credit risks inherent in the loan(s). Key points
raised here should be supported and explained in the main body of the credit report.
 LOAN REQUEST:
 The loan officer should rate the financial trends of the customer. The rating must be consistent
with the facts presented in the comparatives and the rest of this credit report.
 LOAN(S) IN PARTICIPATION:
 Outline actions and requirements as tied to Loan Participation.
 FINANCIAL TRENDS:
 Strong
    
    Improving
    
    ErraticConsistent
    
    Deteriorating
    
    Poor
 Comments:
 PROFITABILITY (To include most recent year, projected year and year-to-date):
 This section should do more than just report local savings numbers and percentages. It should also
identify factors that lead to existing or potential weaknesses in profitability. Profitability and
operations analysis are essential in evaluating the long-term repayment capacity of a customer.
 SOLVENCY:
 Solvency is the evaluation of the customers equity financing for the business. The loan officer
needs to evaluate adequacy, leverage and trends
 LIQUIDITY:
 Surplus
    
    Adequate
    
    Inadequate
 Comments: (Working Capital analysis, projected change and seasonal loan activity)
 The above liquidity ratings are based on the working capital analysis attached to the credit
report.
 Accounts Receivable Control:  Accounts aged less than 60 days:
 23




---



##### 



Accounts aged more than 90 days:  Allowance for doubtful accounts:
 Comments:
 Inventory Controls:
 This section should take a look at the customers ability to effectively manage the inventory
levels and turnovers, particularly for merchandise type inventories.
 REPAYMENT RECORD:
 Satisfactory
    
    Unsatisfactory
 This section should address the repayment history of the seasonal and term loans. With seasonal
loans, the key question is whether seasonal loan use matches the customers working capital
financing of permanent current assets.
 EXPOSURE ANALYSIS:
 This section primarily provides a summary of the key ratios and loan underwriting measures used
to summarize risk exposure.
 : 1 (low/moderate/high)
 UCS (    )
 : 1 (low/moderate/high)
 UCS (    )
 $ /     / .  UCS (    )
 20xx $  $  .
 $  ( $  annually) -  %  %  UCS (    ).
 2003 CAPITAL EXPENDITURE PLANS: $  .
 24




---



##### 



This section should identify the total dollars planned in capital expenditures for the coming year.
Major expenditures can be highlighted in the following table. Typically, managements fixed asset
budget is attached to the credit report.
   2003 EQUITY RETIREMENT PLANS: $  .
 In addition to identifying the planned equity retirements for the coming year, this section should
identify the board of directors equity retirement policy.
 SECURITY:
 Adequate
    
    Inadequate
 In this section, the loan officer summarizes information on the collateral analysis attached to the
credit report and identifies the basis (security interests and real estate mortgages) for Cenex
Finance security position. The loan officer should address environmental issues in this section.
 UCS ( ).
  Covering
 /     /  /     /  /     /
  /     / /     /     .
 /     /  $ .
 /     /     . .  $        .
 .
 MANAGEMENT:
 Very Good
    
    Good
    
    Adequate
    
    Unsatisfactory
 25




---



##### 



In this section the loan officer should address management facts which have a bearing on credit
risk.
 OTHER ISSUES
 ATTRIBUTING LOAN INFORMATION (Through guarantee or ownership):
 ENVIRONMENTAL CONTINGENCIES:
 OTHER LIABILITIES: (Capital Leases, contracts, other financing, contingent liabilities  recourse
receivables, etc.)
 LOAN COVENANT COMPLIANCE:
 Stipulated
    
    ActualLoan Covenant
    
    Performance
    
    Performance
    
    ActionFinancials
    
    Unqualified/Monthly ReportingCash Patronage
    
    %
    
    %Capital Expenditures
    
    $
    
    $Stock Retirements
    
    $
    
    $Local Net Worth
    
    $
    
    $Capitalization
    
    %
    
    %Working Capital
    
    $
    
    $Budget/Financial
ProjectionsSeasonal Pay DownOther
 UCS/COFINA rating: (Comment on any deviations.)
 ACCOUNT SUMMARY:  Strengths of the cooperative:
 Weaknesses of the cooperative:
 LOAN SERVICE PLAN/STRATEGY:
 Note both if a Loan Service Plan is completed and summarize the progress of the plan, if
applicable.
 Attachments:
 C
    
    Comparative Financial Information
 26




---



##### 



C
    
    Budgets (as needed)C
    
    Working Capital Analysis (as needed)C
    
    Liquidity/Collateral AnalysisC
    
    Formal Loan Servicing Plan on all accounts rated M4 or lower
 27




---



##### 



PRICING MATRIX  10/1/03
 Base RateSEASONAL LOAN RATES
    
    plus/minus
    
    4.60%Premium 1
    
    
    -0.35Premium 2
    
    
    -0.75Large Level 1
    
    
    -0.50Small Level 1
    
    
    -0.25Large Level 2
    
    
    -0.25Small Level 2
    
    
    0.00Large Level 3
    
    
    0.00Small Level 3
    
    
    0.25Large Level 4-A
    
    
    1.00Small Level 4-A
    
    
    1.25Large Level 4-B
    
    
    2.00Small Level 4-B
    
    
    2.25Large Level 5
    
    
    2.75Small Level 5
    
    
    3.00
 Base RateTERM LOAN RATES
    
    plus/minus
    
    4.85%Premium 1
    
    
    -0.60Premium 2
    
    
    -0.75Large Level 1
    
    
    -0.50Small Level1
    
    
    -0.25Large Level 2
    
    
    -0.25Small Level 2
    
    
    0.00Large Level 3
    
    
    0.00Small Level 3
    
    
    0.25Large Level 4-A
    
    
    1.00Small Level 4-A
    
    
    1.25Large Level 4-B
    
    
    2.00Small Level 4-B
    
    
    2.25Large Level 5
    
    
    2.75Small Level 5
    
    
    3.00
 28




---



##### 



2.05  Collateral Analysis
 General
    
    Repayment capacity represents the first and primary
source of repayment for each loan transaction and
relationship between Cofina and its customers. Even
though collateral is only an alternative source of
repayment, analysis of this source is important in
determining a sound credit package.Collateral Analysis
    
    There are four broad categories of collateral. The
ability to convert the assets to cash (their
liquidity) is the primary means of distinguishing
between the categories. They are presented in the
order of liquidity:
 
    
    Current Assets  This category includes
all items that a customer would typically
convert to cash in less than one year.
Cofina should be able to liquidate these
assets in a very short period of time and at
minor selling costs. These security items
might include marketable securities,
accounts receivable, and inventories.
    
    Equipment and Rolling Stock  These
security
items can include all the machinery,
equipment,
and non-licensed vehicles used in the
operation.
Most of these assets can be sold to other
similar
operations, but the time to sale and cost of
sales
are higher than for current assets.
    
    Facilities and Related Real Estate-This
category includes all of a customers
investment in buildings, improvements, and
related land. While these collateral items
provide sound, stable security for very long-
term loans, the value of the collateral is
very
uncertain. This is particularly true of
single
use facilities. In addition, the collection
and
liquidation costs can be quite high.
    
    Investments  This category includes
investments in other businesses, including
cooperatives, where the ability to convert
the investment to cash is at best uncertain,
and frequently outside of the customers
control. These assets typically offer
uncertain security value, but may represent
important customer control aspects of the
loan relationship.
 29




---



##### 



The Cofina collateral analysis begins with a
worksheet designed to show book value and to
estimate the Stressed Realizable Value for each
category of secured assets. Stressed
Realizable Value means, with respect to any
Receivable, the value of all Related Security
with respect thereto as calculated by Cofina
using the customers most recent financial
statements. The Stressed Realizable Value shall
be calculated on a monthly basis. Book
Value means the value of a customers assets
as calculated in accordance with the Credit
Manual using such customers most recent fiscal
year end audited financial statements received.
The Collateral Analysis Worksheet and related
assumptions sheetare attached to this procedure
to show the analysis format and to show the
discount factors used for asset valuations. The
discount rates* used in this worksheet are
subject to periodic review by Cofina Loan
Committee.The real property is first matched to real estate
mortgages to assure security coverage, and then
it is evaluated for Stressed Realizable Value.
This collateral analysis is included with each
credit report. A net realizable value analysis
is reviewed by the loan officer, on a quarterly
basis, for all adversely classified loans.* Audited statements normally report a detailed
breakdown of both Inventory and Account
Receivable asset categories. Cofina will
discount each of the individual asset categories
as indicated on page two of the attached
Collateral Analysis Worksheet.However, in the unaudited monthly financial
statements utilized in the monthly Stressed
Realized Value analysis, such details are not
available and are thus discounted per the
schedule noted on page one of the attached
Collateral Analysis Worksheet under the column
entitled 2002.The analysis then requires the calculation of the
Loan Balance  Stressed Realized Value ratio.The definition of Loan Balance is the amount owed
by the customer to Cofina as of the close of the
month under review.
 30




---



##### 



The Collateral Management Test indicates the Loan
Balance (LB) as compared to the Stressed Realized
Value (SRV) must be no more than 60%.If the cooperatives LB to SRV exceeds this ratio
limit, an additional two-prong test must be
implemented and passed in order for Cofina to
move forward with any loan consideration.Test One
 
    
    The organizations Debt Service Coverage
Ratio must be 2.00 to 1 or greater.
 o
    
    Debt Service Coverage Ratio is
determined by the following equation:
 §
    
    3-Year Average of Net Funds
available (NFA) 1 as compared to the
anticipated Current Portion of Long
Term Debt
 Test Two
 
    
    The organization must have a history of
positive Local Net Earnings.
 Failure to pass either of the secondary tests
disqualifies prospective patrons from working
with Cofina.
Failure by an existing customer requires to be
reported directly to the Loan Committee. The
existing loan will then become subject to a loan
servicing action.Should the loan candidate pass the above testing
process, additional loan management practices
should be put in place to closely monitors
collateral position.Such practices may include, but are not limited
to, restrictive loan covenants governing cash
management practices, minimum Local Net Worth
stipulations and/or the execution of additional
collateral security measures.Such collateral security measures may include
additional mortgage securities, the assignment of
investments to Cofina or third-party guarantees.
 31




---



##### 



Collateral Analysis Worksheet(Yearly)FYE 2001 (Prior Year End)
    
    FYE 2002 (Most Recent Year End)Book
    
    Stressed
    
    Book
    
    StressedValue
    
    Realized Value
    
    Value
    
    Realized ValueAssets:Cash
    
    $0
    
    100% of Book
    
    $0
    
    100% of BookAccounts Receivable
    
    $0
    
    Discounted per Table 
listed below
    
    $0
    
    Discounted per Table 
listed belowOther Receivables
    
    $0
    
    85% of Book Value
    
    $0
    
    85% of Book ValuePrepaids
    
    $0
    
    85% of Book Value
    
    $0
    
    85% of Book ValueInventory
    
    $0
    
    Discounted per Table 
listed below
    
    $0
    
    Discounted per Table 
listed belowReal Property
    
    $0
    
    
    
    $0REM  Report Prpty Secured
    
    $0
    
    100% of Book Value or
    
    $0
    
    100% of Book Value orREM  Report Prpty Secured
    
    $0
    
    Secured Mortgage
    
    $0
    
    Secured Mortgage ValueREM  Report Prpty Secured
    
    $0
    
    Value  Lessor of two
    
    $0
    
      Lessor of twoMachinery & Equipment
    
    $0
    
    65% of Book Value
    
    $0
    
    65% of Book ValueVehicles
    
    $0
    
    0% of Book Value
    
    $0
    
    0% of Book Value(Less) Other Secured Creditors
    
    $0
    
    100% of Book Value
    
    $0
    
    100% of Book ValueOther Assets
    
    $0
    
    0% of Book Value
    
    $0
    
    0% of Book ValueInvestments:COFINA Equity
    
    $0
    
    100% of Book Value
    
    $0
    
    100% of Book ValueSecured Equity Position
    
    $0
    
    10% of Book Value
    
    $0
    
    10% of Book ValueAll Remaining Investments
    
    $0
    
    0% of Book Value
    
    $0
    
    0% of Book ValueTotal Secured Assets
    
    $0
    
    $0
    
    $0
    
    $0Plant, Property, and Equipment Total
    
    $0
    
    
    
    $0
 FYE 2001
    
    FYE 2002Liabilities:COFINA  Seasonal
    
    $0
    
    $0COFINA  Term
    
    $0
    
    $0COFINA  Other
    
    $0
    
    $0Total
    
    $0
    
    $0Asset Realization
    
    $0
    
    $0Cash Remaining
    
    $0
    
    $0
 FYE 2001
    
    FYE 2002Investments:CHS
    
    $0
    
    $0Land OLakes
    
    $0
    
    $0Cofina Financial
    
    $0
    
    $0Other Stock
    
    $0
    
    $0Total Investments
    
    $0
    
    $0$0
    
    $0Seasonal Loan CommitmentLoan Balance to SRV
    
    0.00%
    
    0.00%Loan Commitment to SRV
    
    0.00%
    
    0.00%Local Net Savings
    
    $0
    
    $0
 Denotes:
 32




---



##### 



AR and Inventory Discount Tables  utilized when such asset breakdown is available.
 ACCOUNTSRECEIVABLE
    
    Prior Year End
    
    Most Recent Year EndBook Value
    
    SRV
    
    Book Value
    
    SRV
    
    Multiplier
    
    DiscountCURRENT
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    
    90
    %
    
    
    10
    %31 TO 60 DAYS
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    
    85
    %
    
    
    15
    %61 TO 90 DAYS
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    
    65
    %
    
    
    35
    %91 DAYS TO 6 MONTHS
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    
    65
    %
    
    
    35
    %6 MONTHS TO 1 YEAR
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    
    50
    %
    
    
    50
    %OVER 1 YEAR
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    
    0
    %
    
    
    100
    %DOUBTFUL ACCOUNTS
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    
    0
    %
    
    
    100
    %TOTAL
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
 INVENTORY
    
    Prior Year End
    
    Most Recent Year EndBook Value
    
    SRV
    
    Book Value
    
    SRV
    
    Multiplier
    
    DiscountGRAIN @ .75
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    
    65
    %
    
    
    35
    %FEED @ .75
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    
    65
    %
    
    
    35
    %SEED @ .90
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    
    90
    %
    
    
    10
    %PETROLEUM @.90
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    
    90
    %
    
    
    10
    %FERTILIZER @ .90
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    
    90
    %
    
    
    10
    %CHEMICALS @.90
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    
    90
    %
    
    
    10
    %BATTERIES @ .65
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    
    65
    %
    
    
    35
    %TIRES & TUBES @ .65
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    
    65
    %
    
    
    35
    %TWINE @ .65
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    
    65
    %
    
    
    35
    %MISC @ .65
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    
    65
    %
    
    
    35
    %TOTAL
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
 33




---



##### 



Collateral Analysis Worksheet(Monthly)FYE 2002 (Most Recent Year End)
    
    Jan. 03  (Most Recent Month End)MonthlyBook
    
    Stressed
    
    Financials
    
    StressedValue
    
    Realized Value
    
    Value
    
    Realized ValueAssets:Cash
    
    $0
    
    100% of Book
    
    $0
    
    100% of Month End 
Statement ValueAccounts Receivable
    
    $0
    
    Discounted per Table 
listed above
    
    $0
    
    85% of Month End 
Statement ValueOther Receivables
    
    $0
    
    85% of Book Value
    
    $0
    
    85% of Month End 
Statement ValuePrepaids
    
    $0
    
    85% of Book Value
    
    $0
    
    85% of Month End StatementInventory
    
    $0
    
    Discounted per Table 
listed above
    
    $0
    
    85% of Month End 
Statement ValueReal Property
    
    $0
    
    
    
    $0REM  Report Prpty Secured
    
    $0
    
    100% of Book Value or
    
    $0
    
    100% of FYE Book Value orREM  Report Prpty Secured
    
    $0
    
    Secured Mortgage
    
    $0
    
    Secured Mortgage Value REM  Report Prpty Secured
    
    $0
    
    Value  Lessor of two
    
    $0
    
    Lessor of twoMachinery & Equipment
    
    $0
    
    65% of Book Value
    
    $0
    
    65% of FYE Book ValueVehicles
    
    $0
    
    0% of Book Value
    
    $0
    
    0% of FYE Book ValueIncrease  0% of ChangeChange in PPE from FYE
    
    
    
    
    
    $0
    
    Decrease  65% of Change(Less) Other Secured Creditors
    
    $0
    
    100% of Book Value
    
    $0
    
    100% of FYE Book ValueOther Assets
    
    $0
    
    0% of Book Value
    
    $0
    
    0% Month End Statement ValueInvestments:COFINA Equity
    
    $0
    
    100% of Book Value
    
    $0
    
    100% of FYE Book ValueSecured Equity Position
    
    $0
    
    10% of Book Value
    
    $0
    
    10% of FYE Book ValueAll Remaining Investments
    
    $0
    
    0% of Book Value
    
    $0
    
    0% of FYE Book ValueTotal Secured Assets
    
    $0
    
    $0
    
    $0
    
    $0Plant, Property and Equipment Total
    
    $0
    
    
    
    $0
 FYE 2002
    
    Jan. 03 (Most Recent Month End)Liabilities:COFINA  Seasonal
    
    $
    0
    
    
    $0COFINA  Term
    
    $
    0
    
    
    $0COFINA  Other
    
    $
    0
    
    
    $0Total
    
    $
    0
    
    
    $0Asset Realization
    
    $
    0
    
    
    $0Cash Remaining
    
    $
    0
    
    
    $0
 FYE 2002
    
    Jan. 03 (Most Recent Month End)Investments:CHS
    
    $0
    
    $0Land OLakes
    
    $0
    
    $0Cofina Financial
    
    $0
    
    $0Other Stock
    
    $0
    
    $0Total Investments
    
    $0
    
    $0Seasonal Loan Commitment
    
    $0
    
    $0Loan Balance to SRV
    
    
    0.00
    %
    
    
    0.00
    %Loan Commitment to SRV
    
    
    0.00
    %
    
    
    0.00
    %Local Net Savings
    
    $0
    
    $0
 Denotes:
 34




---



##### 



2.06  Environmental Analysis
 General
    
    The purpose of this procedure is to create awareness of the
potential liability of the customer and the credit risk to
Cofina due to contaminated property.Many Cofina customers
utilize      hazardous chemicals or other
products that      produce hazardous wastes in the sound operation of their
businesses. These wastes and the customers approach in
disposing of them, in a legally sound manner, can impact
the credit quality of the loan relationship with the
customer.Loan Agreement
    
    Each credit report should address environmental
issues that have arisen with the customer in the past year
and the steps taken or to be taken by Cofina to manage
credit risk. Each loan agreement should include the
following sections with language to address environmental
issues:
 
    
    Conditions- General insurance coverage,
including coverage for environmental
problems.
    
    Environmental This section addresses
licenses, tank registration, and indemnity
requirements for Cofina loans. Also, the
customer warrants that it is in compliance
with all federal, state, and local
environmental laws regarding owned or leased
property.
 The loan officer may recommend additional
language concerning environmental issues specific
to the customer relationship.
 Collateral Loans
    
    Contaminated Land- Cofina will not generally secure contaminated property as
collateral for a loan unless there is a state fund, where proceeds are available and
assignable, which assists in the clean-up of the specific parcel. The loan officer may
recommend an exception to this requirement, provided the Cofina loan and collateral are
adequately protected.Cofina may enter into loans specifically for the
clean up of contaminated property,
provided there is state funding available for
clean-up expenses. Such
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loans will be made
separately for specific parcels and
contamination. The loan officer should consider
and recommend whether assignment of state funds
is appropriate given the credit risk of the
customer. Contamination loans require
documentation of paid expenses (receipts, bills,
or canceled checks) prior to advancing funds.
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2.07  Construction Lending
 General
    
    Loans to new or existing customers undertaking substantial construction projects represent
added credit risks to Cofina. Properly managing those risks is important in assuring a sound
loan to the customer. This procedure identifies specific risk management tools to be
considered when a customer is undertaking a substantial construction project.For the purpose of this procedure, a substantial
construction project is one that represents 50%
of the customers local net worth or $1,000,000,
whichever is less. When a construction project
undertaken by a customer exceeds this amount, the
loan officer should evaluate the customers
ability to effectively manage the construction
process and evaluate the risk management tools
appropriate for the loans associated with the
project. The evaluation will be included in the
credit report, with specific recommendations on
construction lending requirements.The loan officer has the flexibility to utilize
these risk management tools, even when the
project is less than the amounts prescribed
above.Risk Management Tools
    
    The following tools should be considered and evaluated when Cofina finances
a substantial construction project:
 
    
    Feasibility Studies- A feasibility study
provides the customer and Cofina with
information about construction costs and the
customers ability to generate the earnings
and cash flow to support the project. The
market or trade territory information, sales
and margin estimates, and anticipated costs
should be realistic. The loan officer must
critically evaluate the bottom line of the
project as net
income represents a primary source of
repayment for related loans. Another key
issue is managements ability to manage the
resulting business operation and leverage
position.
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
    
    Construction Contract- A construction
contract provides the specific details of
performance by the contractor (typically a
general contractor), the payment
requirements and other details concerning
the project. This is a vital tool in
substantial construction projects and is
expected when Cofina provides construction
or permanent financing. The loan officer
should consider requiring that the customer
have the contract evaluated by a third-party
construction engineer to assure that the
contract is realistic and consistent with
the needs of the customer.
    
    Performance Bond/Payment Bond A
performance bond provides an insurance policy which assures contractor performance on the
construction contract. If the loan officer recommends not requiring a performance bond,
the contractors financial position and
credit references should be evaluated to determine the financial ability to
meet contract requirements. The
customers overall financial strength and
project management skills should also
be evaluated before waiving
the need for a performance
bond.A payment bond provides assurances that the
material and labor used in the
project will be paid for. It does
not provide as much protection
for the customer as the performance
bond which
assures completion of the project as
specified in
the construction contract. However, this
may be
an appropriate alternative given a smaller
or less
complex construction project.This requirement will not be waived absent
evidence of a strong and liquid
customer classified as
Acceptable.
    
    Lien Waivers- A lien waiver is a legal
document provided by the general contractor
and the sub-contractors to the customer
which specifies that the labor and materials
provided by the sub-contractor or supplier
have been paid
for and that no mechanics liens can or
will be
filed on the construction property for
the specific work and/or
materials covered by the waiver.
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
    
    Comprehensive General Liability/Builders
Risk Insurance- This type of insurance
coverage is provided by the customer and
provides Cofina (as loss payee) with
protection against contractor liabilities
arising out of the construction project.
    
    Title Insurance- A title insurance
policy
provides the customer and Cofina protection
on the security for the loan.
 In some cases, the loan officer may want to
establish a separate construction loan, with
disbursements tied to a specific contract
payments and lien waivers, and with a maturity
that matches the expected completion date of the
project. These loans are expected to be repaid
by other,
permanent sources of financing, that may include
Cofina.
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2.08  LLC Lending
 General
    
    Loans to LLCs may have credit risks and credit
considerations unique beyond traditional
cooperative lending. Properly managing those risks
is important in assuring a sound loan portfolio.
This procedure identifies specific additional
steps to be followed when lending to LLCs.Additional LLC Lending 
Procedures
    
    When considering loans to LLCs, the loan officer
and loan committee will include consideration of
the following criteria:
 
    
    In lending to a new LLC, a written
guarantee is required from each owner.
Normally such guarantee is to be offered
jointly and severally to the total
indebtedness. However, it may be offered
severally if each of the owners has an asset
classification of no less than Acceptable.
As the LLC develops its own operating
performance history, the guarantee
requirement can be reduced accordingly.
    
    The original Loan Agreement to any new
LLC shall have, among other covenants, a
covenant requiring a minimum net worth to
assets in the 35-40% range. If designed as
a dollar level of minimum local net worth,
it should have the same impact relative to
the assets of that LLC. The owners must
acknowledge this financial covenant either
by countersigning the Loan Agreement or
within the guarantee.
    
    Each owner shall provide an audit prior
to closing on a new loan to the LLC. Such
annual audits will be a requirement until a
guarantee is no longer required by such
owner.
    
    An annual asset classification will be
completed and established on each owner.
This will aid Cofina in evaluating the
strength of each of the guarantors and
therefore the guarantees.
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
    
    In some cases, one or more owners may
have a lower asset classification than the
LLC. Then it becomes imperative to
determine that the LLC asset classification
is justified either based on the joint and
several structure of the owner guarantees
or the merits and strengths of the LLC based
on its operating history and performance.
    
    In measuring the total credit exposure of
any owner, it is necessary to add any amount
of any guarantee to the LLC offered by that
owner to the direct commitment of the owner.
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2.09 Loan Agreement
 The standard loan agreement used in loans from
Cofina is attached to this procedure. The
language is standardized to enhance the clarity
of the documents. However, the loan officer
recommends specific limits and covenants for each
customer that address the credit risk management
needs of Cofina.The following identifies key areas in the
standard loan agreement where the loan officer
recommends language or information that is
specific to the customer.
 
    
    Loan Amounts This area specifies the
new, present, and total loans for the
customer in the new loan package.
    
    Limitations on Advances This area
specifies any limitations on disbursements
for a specific customer. Limitations may
require completion of security documents,
may require payments directly to third
parties, or similar restrictions which
assure the proper use and security for
Cofina loans.
    
    Notes and Security This area includes
standard language as well as customer
specific language when new real estate
mortgages or security interest are taken.
    
    Cash Patronage This area limits the
cash patronage refunds allowed by the
cooperative without Cofina consent. The
minimum amount is 20 percent, but can be
changed to reflect the cash flow position of
the customer.
    
    Dividends and Retirements of Equities
This area, when used, limits the cash
dividends and equity retirements to reflect
the cash flow position of the customer.
    
    Capital Expenditures This area, when
used, limits capital expenditures to reflect
the cash flow position of the customer.
    
    Repayment This area specifies the
repayment requirements and final maturity
for all loans.
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
    
    Expiration This area specifies the date
when the various loans expire and advances
are no longer available.
    
    Financial Reporting All new customers
are required to have annual independent
unqualified audits, as well as internal
monthly financial statements and other
financial data, such as
accounts receivable aging, as requested by
Cofina.
 In addition, the loan officer has the ability to
recommend additional covenants that contribute to
effective customer and loan servicing.The draft loan agreement is attached to the
credit report presented to the Loan Committee for
its approval.
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LOAN AGREEMENT
 BORROWER:
    
    #
 NEW LOAN
    
    PRESENT LOAN
    
    TOTAL LOANS$4,000,000.00  Seasonal
    
    
    
    $
    4,000,000.00
    
    
     Seasonal$1,279,950.00  Term (T08)
    
    
    1,279,950.00
    
    
     Term (T08)$
    5,279,950.00
    
    
     Total
 COFINA FINANCIAL (COFINA) agrees to make the above new loan to the Borrower. This loan agreement
will replace in its entirety any existing loan agreement between Borrower and COFINA, and all
existing indebtedness of Borrower to COFINA under any such existing loan agreement and its related
notes shall be deemed to be a loan advanced under this agreement and any new note given in
connection with this agreement. Any existing security and other collateral agreements shall remain
in place and all existing loans, as well as new advances made under this agreement, will be secured
by the collateral granted in such existing security and collateral agreements.
 Borrowers present indebtedness to COFINA and/or commitments outstanding (entitled Present Loan) in
the above heading are consolidated and made subject to all the security requirements, terms, and
conditions of this agreement.
 PURPOSE:
    
    Advances made under this agreement shall be used only for
the purposes specified in the application for loan.DISBURSEMENT:
    
    COFINAs commitment and obligation to disburse the full
amount of the loan shall terminate as provided herein,
unless earlier terminated by COFINA upon a default by
Borrower.To facilitate payments and reborrowings under this
agreement, the Borrower is authorized to reborrow all sums
paid by Borrower on the seasonal loan up to and including
the due date for the loan provided for in this agreement,
but the total amount outstanding for the seasonal loan at
any time shall not exceed the commitment.RENEWAL:
    
    Funds advanced under this agreement shall be used, first, to
repay and refinance any amounts outstanding under any prior
loan agreements and notes from Borrower to COFINA unless
COFINA has agreed in writing to a different application of
such advances.INTEREST:
    
    All outstanding loan balances hereunder shall bear interest
at the risk-adjusted variable rate determined by applying
the COFINA Pricing Matrix to the COFINA Base Loan Rate.
Interest on each loan shall be payable on the day of each
month as COFINA may specify. The rate of interest charged
hereunder shall not be usurious and COFINA agrees to adjust
such rates to make the same non-usurious in the event a
court
of competent jurisdiction determines after exhaustion of all appeals
that said rate is usurious.NOTES AND 
SECURITY:
    
    Advances made under this agreement shall be evidenced by note or
notes acceptable to COFINA and shall be secured to the extent of
all security and collateral granted to COFINA.All property mortgaged, pledged, or assigned to COFINA as security for
these loans, or as security for any other loans of COFINA to Borrower
before or after these loans, shall be security for all loans made by
COFINA to Borrower.
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NEGATIVE PLEDGE:
    
    Without prior written consent by COFINA, Borrower shall
not sell, assign, transfer, convey, mortgage, pledge or
grant a security interest in any of its assets or enter
into any guarantee agreements, except for sales of
inventory in the ordinary course of business, whether
voluntarily, involuntarily or by operation of law. In
the event Borrower shall sell, assign, transfer, convey,
mortgage, pledge, or grant a security interest in any of
its assets, whether voluntarily, involuntarily or by
operation of law, a default shall be deemed to have
occurred under this Agreement, and any other agreements
executed by the Borrower and COFINA, and COFINA shall be
entitled to pursue any and all rights and remedies
available to it under this agreement or otherwise.ASSIGNMENT:
    
    The Borrower acknowledges and agrees that COFINA may
assign directly or indirectly its rights and obligations
hereunder, in whole or in part, in its sole and absolute
discretion, including, without limitation, to one or more
special-purpose companies (an SPC) as part of the
securitization of certain loans made by COFINA. The
Borrower may not assign its rights and obligations under
this agreement without the prior written consent of
COFINA (or its assignee).SET-OFF WAIVER:
    
    All payments required to be made by Borrower hereunder
shall be made without set-off, deduction or counterclaim
of any kind on the date due in immediately available
funds to such account specified by COFINA (or its
assignee).NON PETITION AND 
LIMIATION ON 
PAYMENTS:
    
    The Borrower hereby covenants and agrees that if COFINA
assigns any of its rights and obligations under this
agreement to an SPC, Borrower shall not institute
against, or join any other person in instituting against,
such SPC any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding or other proceedings
under any federal or state bankruptcy or similar law, for
one year and a day after the latest maturing indebtedness
of the SPC is paid in full.Notwithstanding any provisions contained in this agreement to the contrary, no
assignment by COFINA of its rights under this Agreement to a SPC shall
constitute a corporate obligation, liability or claim (as defined in the
Section 101 of the U.S. Bankruptcy Code) on the part of the SPC or any
subsequent transferee from the SPC to make additional advances after the date
of the assignment and COFINA shall remain wholly liable for any such future
advances.BORROWING 
NOTICES 
AND PAYMENT 
NOTICES:
    
    Borrower shall authorize employee(s) and other person(s)
to prepare and submit Borrowing Notices for advancing
funds and Payment Notices for repaying funds to COFINA,
which notices shall be in such form as COFINA shall
prescribe from time to time, and COFINA may rely on any
such Borrowing Notice or Payment Notice without further
inquiry as to the validity or genuineness of such
notice. Borrower shall give COFINA prior written notice
of each request for advance or repayment of funds by
facsimile or e-mail (with digital signature). Any such
notice shall be effective, upon receipt by COFINA. Any
such notice must be received by COFINA on or before
11:15 AM (Central Standard Time) on the day of the
transaction.Borrower acknowledges that there are certain risks inherent in transmitting
information over the Internet that are beyond the control of COFINA. Borrower
agrees that COFINA, its officers, employees, agents, affiliates, subsidiaries
and transferees will not be liable for any losses for any cause over which they
have no direct control, including, but not limited to, the failure of
utilities, mechanical or electronic equipment or
 45




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communications lines,
telephone or other interconnect problems; unauthorized access, theft, viruses
or operator errors; severe weather, earthquakes or floods; strikes or other
labor problems, and any other force majeur. In no event will COFINA, or any of
its officers, employees, agents, affiliates, subsidiaries or transferees have
any liability for any consequential, incidental, special, indirect or punitive
damages (including lost profits, trading losses and damages) that result from
inconvenience, delay or loss of the use of the Internet system or COFINAs
access to such system even if COFINA has been notified of the possibility of
such damages. COFINA reserves the right to service, repair and upgrade, and
deny access to, its e-mail capability at any time without prior notice.
 CORPORATE 
EXISTENCE:
    
    Borrower agrees that it will preserve its corporate existence
and not, in one transaction or a series of related
transactions, merge into or consolidate with any other entity,
or sell all or substantially all of its assets, or will not
change the state of its incorporation, its corporate name,
principal place of business or corporate address without
providing COFINA with 30 days prior written notice.CONDITION 
PRECEDENT STOCK 
INVESTMENT:
    
    At the inception of this loan Borrower agrees to purchase
capital stock of COFINA equal to or in excess of $1,000 at
par value if Borrower currently does not hold capital
stock of COFINA having a par value equal to or in excess
of $1,000.GOVERNING LAW:
    
    This agreement, and the relationship between the parties, shall be governed and
construed under the internal laws of the State of Minnesota. It is the intention of the
parties that
the choice of law rules of the State of Minnesota shall not apply, but
that all conflicts or controversies arising under or related to this
agreement and relationship shall be governed by the procedural rules and
substantive law of the State of Minnesota.CONDITIONS:
    
    While loans are outstanding under the terms of this agreement, Borrower agrees to
comply with the following conditions:
 1.
    
    COOPERATIVE STATUS: Borrower agrees to
maintain its status as a cooperative corporation.2.
    
    STOCK INVESTMENT: No later than three
years from the date of COFINAs first loan commitment, Borrower
further agrees to retain total stock investment in COFINA in an
amount equal to 3% of its average loan balances for the previous
year, or in such amount as may be prescribed by COFINAs board of
directors, and to maintain such stock investment for the existence
of any indebtedness to COFINA, an SPC or any affiliate of COFINA.
COFINA shall have a first lien and security interest in its capital
stock or other equities now owned or hereafter acquired by Borrower
and Borrower shall pledge such stock or equities to COFINA as
security for all existing and future indebtedness of Borrower, and
Borrower acknowledges and agrees that such security interest is
registered to COFINA.3.
    
    INSURANCE: Borrower shall maintain
reasonable adequate insurance coverage for the business in which
Borrower is engaged for all risks usually insured by business
concerns, by reliable insurers, and shall obtain fidelity bonds
covering officers and employees in their fiduciary capacities as
may be deemed appropriate by COFINA or as COFINA may require.
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4.
    
    FINANCIAL INFORMATION: Borrower shall
furnish to COFINA unqualified annual audits, within 120 days of
fiscal year end, and monthly financial statements, within 35 days
of each month end and such other information as COFINA may request
relating to its affairs, and permit such examination of its books
and records as COFINA may specify. This information may include,
but not be limited to, monthly statements of operations and balance
sheets, accounts receivable aging analyses, monthly report of goals
and projections, reports of plans and procedures to reach the
goals, and reports of follow-up plans.5.
    
    BUSINESS PRACTICES: Borrower will
maintain business policies that generally comply with good
business practice. This requirement includes development of
realistic and complete annual financial plans. Borrowers
board of directors will periodically review progress in carrying
out said plans and hold management accountable.6.
    
    CASH PATRONAGE: Borrower agrees to not
declare any cash dividends or other similar distributions above
forty percent of its annual net patronage savings (as that term is
defined by the Borrowers current Articles of Incorporation and
Bylaws) without consent of COFINA.7.
    
    APPLICATION OF PAYMENTS: COFINA, at its
discretion, may apply payments to the reduction of any indebtedness
outstanding between COFINA and Borrower.8.
    
    PAYMENTS: Borrower agrees to pay to
COFINA its monthly principal and interest payments, as specified in
Borrowers monthly billing statements. Borrower shall also have
primary responsibility for payment of its COFINA capital stock
purchase obligation to COFINA.9.
    
    ENVIRONMENTAL: Borrower warrants to
COFINA that it is in compliance with all federal, state, or local
environmental laws relating to or affecting its owned or leased
property, which violation would have a material adverse effect on
the Borrowers business or a material adverse effect on the value
of the collateral. The Borrower further agrees as follows:
 a.
    
    LICENSES: Borrower shall
at all times continue to obtain and maintain all licenses,
permits, and other approvals necessary to comply with
environmental laws and shall at all times remain in
compliance with their terms in all material respects. The
Borrower shall at all times continue to exercise due
diligence to obtain and maintain all licenses, permits, and
other approvals necessary to comply with environmental laws.b.
    
    STORAGE TANKS REGISTERED: All
underground storage tanks have been duly registered with all
applicable federal, state, and local government authorities.
The Borrower has no knowledge of any leaks from any of its
above ground or underground storage tanks.
 c.
    
    INDEMNITY: Borrower agrees to indemnify, hold harmless and defend COFINA, its successors and
assigns, against all liens, liabilities, demands, claims, actions, suits, judgments, expenses
(including attorneys consultants, and experts fees) paid or asserted against COFINA, its
successors or assigns, (or any of the Borrowers property COFINA has taken title to by
foreclosure or otherwise) as a direct result of the Borrowers violation of any
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environmental
law, including but not limited to the release of any hazardous material, whether or not such
violation was caused or within the control of the Borrower. This indemnity shall continue
for the benefit of COFINA after the termination of this agreement or other loan documents,
including the release of any security interest.
 10.
    
    DIVIDENDS AND RETIREMENTS OF EQUITIES:
Borrower will not pay cash capital stock nor retire capital stock
or equities for cash, in excess of $350,000, without approval of
COFINA.11.
    
    CAPITAL EXPENDITURES: Borrower shall
not enter into contracts for building, remodeling, purchasing, or
expanding facilities, nor third party lease agreements for terms
over one year covering real or personal property, of more than
$2,750,000, without COFINAs approval.
 REPAYMENT:
    
    The indebtedness arising from advances made under this agreement shall be paid as follows:
 1.
    
    SEASONAL REPAYMENT: The seasonal loan
of $4,000,000 shall mature on April 1, 2004.2.
    
    TERM REPAYMENT: The existing term loan
shall be repaid by remittance to COFINA of Thirty-Five Thousand
Seven Hundred Dollars, due on or before the day of each and every
month, as COFINA may specify. All outstanding loan balances shall
be repaid in full on April 1, 2006.
 EXPIRATION:
    
    The unadvanced portion of any commitment shall be canceled as indicated below:
 Seasonal Loan  April 1, 2004.
 DEFAULT 
PROVISION:
    
    If Borrower fails to pay any amounts on any of the loans when
due, or on any other indebtedness of Borrower secured hereby,
files a petition for protection under any bankruptcy law, or
fails to observe or perform any of the provisions of this
agreement, any security agreement, or any mortgage, or any
insolvency or bankruptcy proceeding is commenced against
Borrower, then Borrower shall be in default. If Borrower
defaults, all such loans and other indebtedness shall, at
COFINAs option, be immediately due and payable and COFINA may
exercise any legal or equitable remedy it deems appropriate in
its sole discretion under the circumstances, including without
limitation making a demand for immediate payment of the entire
loan amount remaining unpaid and immediately enforcing its
rights against the security if such payment is not made.
Notwithstanding the foregoing, in the event that Borrower
becomes a debtor under any bankruptcy law or similar law
affecting creditors rights, all such loan and indebtedness
shall become due and payable without any notice, demand or
other action on the part of COFINA.Notwithstanding the provisions of this agreement or any promissory notes issued
in connection herewith, COFINA shall have the option, in its sole discretion
and without any obligation to do so, to make advances to Borrower (or for
Borrowers account) up to the maximum loan commitment hereunder at any time
Borrower is in default of any payment obligation hereunder, and such advances
shall become an obligation of Borrower and accrue interest under this
agreement.
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DEFAULT RATE 
OF INTEREST:
    
    The Borrowers interest rate shall be increased by two
percent (2%) during the time that any principal or interest
payment is unpaid after such payment becomes owing or upon
any other default by Borrower hereunder. A fifty dollar
($50) administrative fee shall also be paid each time any
payment of interest or principal is not paid when due.FOREBEARANCE 
NOT WAIVER:
    
    Any forbearance by COFINA in exercising any right or remedy
hereunder or under a security agreement, notes, this
agreement or any other loan documents, or otherwise afforded
by applicable law, shall not be a waiver of or preclude the
exercise of any right or remedy available to COFINA.SEVERABILITY:
    
    Except as otherwise provided in the succeeding sentence,
every provision of this agreement is intended to be
severable, and, if any term or provision of this agreement
is illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not affect the validity or
legality of the remainder of this Agreement. Notwithstanding
the foregoing, if such illegality or invalidity would cause
COFINA to lose the material benefit of its economic
substance, then the Borrower and COFINA agree to negotiate
in good faith to amend this agreement in order to restore
such lost material benefit.ACCEPTANCE:
    
    This loan agreement is the full agreement under the terms
and conditions of the loan(s). It shall not be modified
except in writing. This agreement shall not become
effective until it has been signed and delivered in
duplicate by Borrower to COFINA, and it has been executed by
COFINA.
 ACCEPTED AND AGREED TO:
    
    
    
    By Direction of the loan committee the
24thday of February, 2003:COFINA FINANCIALBy:President
    
    
    
    By:
    
    -s- Thomas D. LarsonBy:
    
    
    
    
    
    
    
    Interim PresidentSecretaryApproved: 2/24/03
 Dated:   , 2003.
 2.10  Security Requirements
 General
    
    Cofina loans are secured by security interests and/or
real estate mortgages. Typically, fixed assets secure
term loans and current assets secure Operating loans.
However, as most lending relationships include short
and long-term loans, Cofina normally will
cross-collateralize all loans by filing proper real
estate mortgages and financing statements,
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executing
security agreements, and obtaining other forms of
security.Obtaining Security
    
    The loan officer is primarily responsible for
identifying, recommending, and communicating security
requirements for loan and customer relationships. This
includes:
 
    
    Evaluating security requirements as part
of
the credit analysis.
    
    Identifying and recommending all security
requirements and advance limitations in the
credit report and loan agreement.
    
    Obtaining legal descriptions and other
information necessary to prepare the loan
and security documents.
 For extraordinary security requirements, the
Legal Administrator will obtain help from outside
attorneys with the necessary expertise. Outside
attorneys must be approved by Loan Committee
before they can be utilized.In those limited cases in which Cofina acts as a
co-lender, it will enter into a security sharing
agreement with the other lender and will ensure
sufficient security filings are in place to
protect the loan amount at risk through a
mortgage and/or other perfected security
agreements.Once the loan officer has obtained the necessary
information, and Loan Committee has approved the
recommended loan action, the Legal Administrator
prepares the security documents and customer
instructions for completing security filings.
 Advancing Funds
    
    The loan agreement must identify the requirements
for advancing funds to the customer. Generally,
all security requirements must be completed
before funds will be advanced under new loans.Funds may be advanced prior to completion of new
security in the following exception:
 
    
    There are existing real estate mortgages
and
security interests in place to adequately
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collateralize the Cofina loans, before the
new security.
 Loan Committee must approve all advances
prohibited in the limitation on advances portion
of the loan agreement and requested prior to
completion of required security.If exceptions to the limitations on advances are
requested, the loan officer shall determine the
amount of time required to complete the
incomplete security from the customer and the
attorney working on the security for the
customer. The loan officer should have strong
assurances that the security can be completed
within 90 days.
In no event shall exceptions be allowed when
there are doubts about Cofinas ability to
properly secure the property.Security Releases
    
    When a customer requests a security release, the loan officer is responsible for
obtaining the necessary information, evaluating the request for its impact of the overall
security position, and recommending action on the customer request.Loan Committee has sole authority to release
Cofina security.Once approved, the matter is passed to the Legal
Administrator to process the release.
 Security Check List
    
    Cofina requires a Security Checklist to be completed
by the Legal Administration prior to the new loan set
up. The security checklist identifies the dates
required loan documentation and legal documents have
been received in order to disburse the new loan(s).The following numbered instructions correspond to the
sample Security Check List that follows in this
procedure.
 1.
    
    Cofina enters the date of
loan approval.2.
    
    Cofina enters the new loan
number(s).3.
    
    Cofina enters the
cooperative name.4.
    
    Cofina enters the city &
state of cooperative.5.
    
    Cofina enters date the
completed application was received.6.
    
    Cofina enters date the
signed security agreement was received (if applicable).
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7.
    
    Cofina enters date the
signed note(s) were received.8.
    
    Cofina enters date the
Guarantee Agreement was received (if applicable).9.
    
    Cofina enters date the
signed loan agreement was received.10.
    
    Cofina enters date the
financing statements (UCC) was filed with the proper state
office.11.
    
    Cofina enters date real
estate mortgage was completed (if applicable).12.
    
    Cofina enters date signed
assignments of investments were received (if applicable).13.
    
    Cofina enters other
requirements and date these requirements were completed (if
applicable).14.
    
    Cofina enters initials of
personnel checking items.15.
    
    Cofina enters check off
date.16.
    
    Signed by authorized
personnel.17.
    
    Title of authorized
personnel.
 52




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COFINA FINANCIAL
SECURITY CHECKLIST
 Date of Loan Approval:
    
    1Loan Number(s):
    
    2Cooperative Name:
    
    3City & State:
    
    4
 Before a loan is disbursed, Cofina must have the following:
  Application: 5
    
    Security Agreement: 6Signed Note(s): 7
    
    Guarantee Agreement: 8Signed Loan Agreement: 9
    
    UCC Filing: 10Real Estate Mortgage: 11
 Assignment of Stock: 12
    
    CHS:
    
    LOL:
    
    OTHER:
 13
 Checked off by: 14
    
    Check off Date: 15
 Signature:
    16(Loan Officer is not authorized to sign off)Title:
    17
  Page -1-
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3.0  Loan Administration
 3.01  Loan File Organization
 General
    
    Cofina loan files not only serve the needs of its credit
staff and management team, but also the needs of many
third parties that have a lending or review role.
Providing efficient access to important information
depends on consistent loan file organization that is
documented, used, and maintained by all users.File Organization
    
    Cofina utilizes a three-part folder to consistently
preserve important documents.The three parts are used as follows:Section I1.    Field Visit Memos (left side)2.     Loan Agreement (right side)3.    Security Recap (right side)Section II1.    Comparatives (left side)2.    Financial Planning Documents (left side)3.    Credit Reports (right side)Section III1.    Correspondence (left side)2.    Patronage Distribution Notice (right side)Information presented in these sections is arranged
in chronological order.
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##### 



3.02  Asset Classifications
 General
    
    As of January 31, 1998, the Board adopted the
Uniform Classification System (UCS  utilized by
federal and state regulated financial
institutions). UCS was implemented during 1998.
The full UCS definitions are presented in the
following procedure.Cofinas loan officers are responsible for
analyzing and recommending a UCS Classification for
each customer obtaining a loan. The loan officer
is also responsible for updating the recommended
asset quality as changes take place in the
customers ability to repay the loan.Classification Factors
    
    The Credit Report provides the basis for
classifying loans. Documented credit analysis and
related memoranda should appropriately document
asset classification issues and recommendations.
(See Sec. 2.4).The customers financial performance and projections
are considered in establishing asset classifications.
Asset classifications are to be consistent with loan
performance status designations.Other considerations when classifying assets include:    Industry conditions and outlook at time of
classification.    General economic status of the area.    Adequacy of loan file information.
 Non-adverse Classification Categories
    
    Non-adverse classification categories are acceptable and
other assets especially mentioned (special mention or OAEM). However, OAEM are considered
to be criticized assets.AcceptableAcceptable credit represents non-criticized assets of
the highest quality. They do not fit into any other
classification.The following customer ratings within the Acceptable
range are utilized by Cofina and are
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presented in order, from the highest quality to the
lowest quality:     Customer Rating A1 These customers
are classified Acceptable under UCS, but
additionally meet all loan underwriting
standards generally at the low risk level. Loan
structure and documentation is appropriate. In
addition, Cofina has strong communication with
the customer, which provides the opportunity for
a long-term relationship. These customers would
be readily financed by other lending
institutions.     Customer Rating A2These customers
are classified Acceptable under UCS, but
additionally meet all loan underwriting
standards at the low to moderate risk level
range. Loan structure and documentation is
acceptable. The customer relationship is
satisfactory, with open communication and
regular exchange of pertinent information.
These customers would be readily financed by
other lending institutions.     Customer Rating A3These customers
are classified Acceptable under UCS, but may
have some loan underwriting standards at the
higher risk level. Loan structuring and
documentation may include additional covenants.
While the customer relationship is acceptable,
communication issues and/or loan structuring
issues may exist which add credit risk to the
relationship. Trends indicate that the customer
could deteriorate into the other assets
especially mentioned classification without
changes in operations and repayment capacity
over the next one to two years.Other Assets Especially MentionedAssets in this category are currently protected, but
potentially weak. These assets constitute credit
risk, but not to the point of justifying a
classification of substandard. The credit risk may
be relatively minor, yet constitutes an unwarranted
risk in light of the circumstances surrounding a
specific asset. A special mention classification
should not be used as a compromise between adversely
classified and non-adversely classified.
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Special mention loans have potential weaknesses that
may, if not checked or corrected, weaken the loan or
inadequately protect the institutions position at
some future date. Loans that might be detailed in
this category include those that have any deviations
from prudent lending practices, including those
subject to economic or market conditions that may, in
the future, affect the customer. An adverse trend in
the customers operations or an imbalanced position
in the balance sheet that has not reached a point
where liquidation is jeopardized may best be handled
by this classification. This category should not be
used to list loans that bear risks usually associated
with the particular type of financing. Any type of
loan, regardless of collateral, financial stability,
and responsibility of the customer, involves certain
risks. A secured loan has a certain risk, but to
criticize such a loan, it must be evident that the
risk is increasing beyond that at which the loan
originally would have been granted. A rapid increase
in assets or liabilities without the lenders knowing
the cause, concentrations that lack proper credit
support, lack of appropriate collateral analysis or
required appraisals, or other similar matters could
lead the examiner to question the loan quality and
possibly classify the loan as special mention. Loans
in which actual, not potential, weaknesses are
evident and significant should be considered for more
serious classification.Adverse Classification Categories
    
    Adverse classification categories are substandard, doubtful
and loss.Substandard

These assets are marginally protected by the
customers current sound worth and paying capacity or
the collateral pledged. Assets so classified must
have a well-defined weakness or weaknesses that
jeopardize debt liquidation. They are characterized
by the distinct possibility that the lender will
sustain
some loss if the deficiencies are not corrected.
Loss
potential, while existing in the aggregate amount of
substandard loan assets, does not have to exist in
individual loan assets.
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Substandard assets are usually the largest category
of adversely classified loan assets, typically
representing the secured adverse assets or portions
of assets in a portfolio. Substandard assets may or
may not be placed in non-accrual status, depending on
the operations viability and the assets
performance. Very weak substandard assets sometimes
have specific reserves established which represent
holding costs or the difference between net
realizable value and collateral value for loss loan
accounting.Characteristics of a Substandard asset include:    Not performing as agreed, but currently
adequately collateralized.    Pledged collateral marginally supports the
credit, but collateral value may be declining.    Operation marginally provides funds required
for debt service, and current position analysis
indicates a declining trend.    Nonviable operation, but asset is currently
adequately collateralized.Credit weaknesses are usually described as being
either significant or serious. Because circumstances
vary widely, much of the difference between
significant and serious credit weakness depends on
the loan officers sound judgment. Significant
weaknesses have the potential to become serious and
thereby impact the loans performance. Serious
weakness exists because one credit factor is
inadequate, or several factors are weak and have
affected the loan and/or the customers ability to
perform in the future. Substandard assets have
serious weaknesses, whereas special mention assets
have potential weaknesses.Doubtful

An asset classified doubtful has all the weaknesses
inherent in one classified substandard with the added
characteristic that the weaknesses make collection in
full, on the basis of currently existing facts,
condition, and values, highly questionable and
improbable. The possibility of a loss is extremely
high, but because of certain important and
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reasonable
specific pending factors that may work to the
advantage and strengthening of the asset, its
classification as an estimated loss is deferred until
its more exact status can be determined. Pending
factors include proposed merger, acquisition, or
liquidation procedures; capital injection; perfecting
liens on additional collateral; and refinancing
plans.Doubtful assets generally are not performing as
agreed and/or involve a nonviable operation. High
probability of loss exists on these assets, but the
exact amount is not determinable. (Substandard
classification would not communicate the severity of
the situation.)Underlying collateral pledged cannot be assigned
specific value because the asset has limited purpose,
salability and/or market, or is involved in pending
litigation with unknown outcome. Doubtful
classification occurs most frequently for
unrestructured non-accrual and non-accrual cash-flag
restructured assets. Poor credit administration does
not justify Doubtful classification.Loss

Assets classified loss are considered uncollectible
when their continuance as bookable assets is not
warranted. This classification does not mean the
loan or asset has absolutely no recovery or salvage
value; quite to the contrary. Cofina will
aggressively pursue all available recourse in an
effort to ensure the full recovery of this assets
value. However, its has been determined that booking
such value is not consistent with Cofinas approach
to conservatively report this particular assets
valuation. Losses should be taken in the period in
which they surface as uncollectible.Charge-offs are recognized and booked when the loss
becomes known, not necessarily contemporaneous with
liquidation of the asset. When determining the
amount of loss, consider unpaid principal, accrual
interest, accounts receivable, customer stock and
amounts recoverable from secured assets.
 59




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##### 



Split Classifications
    
    Split classifications occur when portions of a loan asset can clearly be
separated into different
classification categories. On split-classified
loans, the remaining classes are designated as
secondary class. The secondary class is the
non-primary class which is a fixed dollar amount and
remains constant until the loan is reclassified.
Portions of loans, which are placed into secondary
classes are to be rounded to the nearest $1,000.
Quarterly review split-classified loans to determine
if amounts in each class are appropriate.Only mention and adverse loans may be classified into
more than one class (split). Adverse loans may have a
portion classified acceptable only if the loan has a
valid guarantee, or collateral meets the cash or near
cash condition.Two or More Loans to One Customer
    
    When reviewing multiple loans to a customer, evaluate as one
loan unless pertinent facts support a reasonable determination that a particular loan
constitutes an independent credit risk. Document facts in the loan file. Independent credit
risk is an independent income stream (i.e., a guarantee or other source of earnings). The
independent income stream must be clearly identifiable, and may not be from entities that are
interrelated. Separate collateral positions are not to be considered independent credit
risks. This concept generally applies also to loans to one customer from separate lending
entities.Loans to entities in which a customer has partial
interest, and another loan to that customer,
individually, will be considered as separate lines of
credit. Separately evaluate credit factors and
classify each loan on its own merits.Participation Loans
    
    Cofina may have continuing participation
agreements with several other lending
entities. Pursuant to these agreements,
the participating lender (the
Participant) will acquire a
participation in a negotiated portion of
loans approved by the participant.
Concentration limits will be based by
Cofina on its retained portion of a
participated loan.Participation loans are classified based
on total credit extended by all lenders
involved. The loan
 60




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##### 



amount is the
outstanding amount carried by Cofina as
of the review date.Loan Performance Classifications
    
    Appropriate loan performance
classifications assure proper accounting
placement of loans. Credit staff
recommends and Loan Committee approves
loan performance classifications based on
the risk codes and their respective GAAP
definitions as presented in the
non-performing loan procedure.
 61




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##### 



3.03  Portfolio Monitoring
 Portfolio Quality Standards
    
    Risk can change after a loan is originated, however, the overall level
of higher risk, adversely classified loans are kept within the following standards established
by the Board.    Non-Adversely classified credit (Acceptable
and OAEM) shall represent no less than 85%
of the outstanding volume of accruing
loans in the COFINA portfolio.    Doubtful and Loss classified credit shall
represent no more than 5% of the outstanding
volume of accruing loans in the Cofina
portfolio.Management shall report on the quality of the asset
portfolio on a quarterly basis to the Board of
Directors. In addition, if the portfolio falls out
of compliance with these standards, management will
develop a plan to bring asset quality into compliance
with these portfolio standards in a reasonable period
of time. Progress on the plan, including current
portfolio asset quality, will be reported to the
Board on a monthly basis.Annual Review
    
    On an annual basis, Cofina will be reviewed by its banks who
will do random checks of classification and servicing
compliance in accordance with the guidelines in this manual.Management shall prepare a formal response to the bank
reviews for the Board of Directors.
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##### 



3.04  Customer and Loans Servicing
 General
    
    Cofina places a strong emphasis on communicating
with customers, Board, and management about
operating performance and financial position.
Critical analysis and positive reinforcement
benefit the customer and can have positive
effects on the loan relationship. Loan officers
objectives in customer servicing is to clearly
identify expectations, identify, and address
problems at their beginning, and counsel
customers on solutions before problems affect the
quality of the loan relationship.Customer Servicing Tools
    
    Cofina utilizes the following tools in its
customer servicing, to increase communications,
and to document expectations:    A thorough understanding of customer
operations, financial position, and financing
needs through analysis of customers  supplied
financial information. Customers are required to
submit monthly financial statements, including
aging of accounts receivable, within 35 days
following the close of the month. Non-compliance
is a violation of the loan agreement and must be
reported to the loan committee. These reports
are compared to the entities financial
projections for the current year and to the
previous years performance.    Regular discussions with customer, Board, and
management about historical operating,
financial, and loan performance, including how
Cofina evaluates operations and financial
strength. Each customer should be visited at
least once every twelve months.    Other customer related contacts for audit
meetings, annual meetings, and
discussions with third parties (auditors, joint
venture partners, other lenders, etc.) with
important relationships with the
customer.    Contemporaneous records of telephone
conversations and customer meetings.
 63




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##### 



    Follow-up letters to customers when meetings
or discussions have an important impact on
expectations for loan performance. These letters
should highlight important points of the customer
discussions and identify customer and Cofina
commitments to action.    Written Loan Service Plans for loans that are
large or with operating or financial problems
which could translate into loan performance
problems. Typically, Loan Service Plans are
prepared in conjunction with loan renewals and
are mandated for those accounts UCS rated M4 or
weaker. (See also Sec 3.05). An example of a
Loan Service Plan is attached to this procedure.Cofina views OAEM classified loans as
transitional. This classification may come about
from an unusual event such as a merger or
consolidation, operational setback, or external
event. The Loan Servicing Plan should be
designed to restore the loan to fully acceptable
classification within one year. Provided such
plan is not achieved, the loan may become an
adversely classified loan.    Tailored Loan Agreements which adequately
covenant for customer weakness to maintain sound
loan administration and which document customer
identified actions to resolve operating,
financial, or loan performance problems
according to a mutually agreeable timetable.When customer-servicing efforts can no longer
maintain credit quality or the customers long-run
viability deteriorates, Cofina must explore its loan
servicing options.Cofinas objective is to initiate loan servicing
efforts before loan repayment is in jeopardy. When
loan repayment is doubtful, Cofinas objective is to
maximize its collections.
 64




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##### 



Loan Servicing Alternatives
    
    Loan officers must report to the Loan Committee details of loans that
no longer justify an Acceptable,
non-criticized asset classification as soon as such
information becomes available.The Loan Committee must approve the loan servicing
action to be taken.The Loan Committee will also determine the date the
loan officer must report back to update it on the
progress of the loan servicing action.Cofina loan servicing alternatives may include the
following:    Customer Actions  Cofina may counsel
customers to seek other financing or structural
options. Options may include a partial or
complete refinancing with another financial
institution or a merger, sale, or liquidation of
a portion or all of its assets (businesses) with
another cooperative, LLC, or private enterprise.
Subsequent loan actions may be predicated on
customer commitments and actions to implement
such agreed upon strategies, offer additional
collateral, or agree to other terms and
conditions as deemed appropriate.    Loan Extensions  Any extension represents a
credit decision that should be supported by
existing or new collateral and a clearly
identified source of repayment that Cofina
controls through existing or new security
filings.    Loan Restructuring  Cofina may choose to
restructure loans with customers to convert
Operating debt to term or lengthen
maturity, provided the restructured loans remain
within the customers repayment capacity and
the loans remain well secured. Cofina typically
requires customer actions, which will improve
not only the customers operating and financial
position, but will also maintain or improve
asset quality.    Collection  Cofina will pursue legal
collection efforts when appropriate to enforce
customer performance on loan agreements or to
prevent losses on loans. (See Sec 3.05).
 65




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Documentation
    
    Each loan servicing action should be documented in a report or memorandum which
explains the customers financial position, the credit situation,
past customer servicing activities, and the
alternatives explored prior to selecting the
recommended course of action. The length and detail
of the report should correspond to the severity of
the recommended loan servicing action and the
complexity of the customer relationship. The
document should be maintained in the Credit File.
 66




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##### 



Cofina Financial  Loan Service Plan
 Account:
    
    
    
    
    
    UCS Rating:Loans ~
    
    Operating Amt
    
    
    
    Term Amt:Operating Balance
    
    
    
    Term Balance:Attributed LoansAmount in Participation:
 General Trend
    
    
    
    Improving
    
    
    
    Static
    
    
    
    DecliningRelationship Goal
    
    
    
    Continuing
    
    
    
    Limited
    
    
    
    Collection
 Servicing Objective(s) and Strategy(ies)
 Overall Objective:
 Internal Strategy:
 External Strategies with Customer Involvement/Commitment:
 67




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Expected Outcome(s):
 Approvals:
 Loan Officer:
    
    
    
    Date:Chief Credit Officer:
    


    
    Date:Credit and Loan Participation Manager:
    


    
    Date:
 Monthly Progress and Result:
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##### 



3.05
 Collection Procedures
 General
    
    
    In its simplest form, Cofina works toward the collection of its outstanding receivables on
a regular basis. The success of all lending institutions can be summarized in its ability to
extend funding to patrons and, in turn, collect repayments of such funding on a scheduled and
profitable basis.There are those occasions in which such collection
efforts demand a termination date; a date in which
a specific patrons outstanding financial obligations
to Cofina must be satisfied.The termination process is driven by Cofinas
priority to ensure the timely collection of all
monies owed. If during normal asset quality reviews,
Cofina determines the collection of an outstanding
receivable may be in question, a
Termination/Collection process may be initiated.While the steps are progressive in nature, the
termination process is sensitive to, among other
factors, the degree and perceived timeline of
expected asset deterioration, the assets level of
cooperation, and the assets ability to secure
alternative funding to satisfy its obligations to
Cofina.As such, the collection process may or may not
involve all the steps outlined below.
 
    
    Loan Service Plan
    
    Collateral Schedule
    
    Custodial Agreement(1)
Attached
    
    Cash Collection and Distribution
Request(1)  Attached
    
    Liquidation Notification(1) 
Attached
 GuidelinesLoan Service Plan
  69




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
    
    Loan Service Plans are required for all
accounts UCS rated M4 or weaker. They must be
prepared immediately following receipt of
information indicating deterioration in the
customers financial position that would result
in a downgrading of its UCS rating. Loan
Service Plans are also required when a time
specific loan covenant is found to have been
violated.
    
    A Loan Service Plan is authored by the loan
officer and is designed to formally outline a
plan of action to address such deficiencies.
It is then presented to the Loan Committee for
its review and approval.
    
    Dependant upon the depth of perceived
deterioration, any of the following actions may
be outlined in the Loan Service Plan.
 1)
    
    Continued internal monitoring of the
assets performance2)
    
    An internal review and update of all
security filings, to include but not
limited to, a listing and investigation
of all PMSI filings, mortgages and
guarantees.3)
    
    The scheduling of a meeting with the
cooperatives board and management to
discuss the assets deterioration. and
give formal notice of corrective action
to be taken.
 §
    
    Loan Covenant violations are
to be documented and possible
consequences of such violations
are to be shared with the assets
leadership team.
 4)
    
    The scheduling of a visit to the
cooperatives location(s) to review and
document the condition of all Cofina
secured assets.5)
    
    Requiring a Business Planupdate,
outlining both activities and timelines
in which actions will be taken to correct
financial performance
 70




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§
    
    This may include the
liquidation of non-performing
assets in which all cash received
will be forwarded to Cofina to
pay down the debt obligation(s)
owed to Cofina.
 6)
    
    Establish and communicate a timeline in
which the cooperative will secure an
alternative source of funding albeit a
new lender, a merger partner or full
liquidation.
 §
    
    Instruct both management and
the board members that a Letter
of Intentwill be required of
the alternative source of
funding, addressed to the
borrower, outlining the terms of
the new funding and timeframes in
which such financial arrangements
will be executed. Cofina will
outline a timeframe in which such
a notice must be completed and
shared with Cofina.
 7)
    
    Increased monthly reporting requirements
which may include a Collateral Schedule
defined below
 8)
    
    The execution of a Custodianship
agreement defined below.
 9)
    
    Outline the execution and implementation
of a Cash Collection and Distribution
Requestprocess  discussed below
 10)
    
    The Liquidationof the cooperative 
also discussed below.
 Collateral Schedule
 
    
    While Cofina completes an internal Collateral
Schedule during the loan review process, the
fluid nature of current assets may require
increased reporting during periods of increased
financial stress.
 71




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##### 




    
    The original Collateral Schedule outlines
summarized asset and liability totals. Such
totals are then discounted and utilized to
identify potential Cofina exposure.
    
    Subsequent Collateral Schedule(s) call for a
more detailed reporting of Current Assets and
Liabilities. From this information, Cofina is
able to better judge the status of its UCC-1
secured collateral.
    
    The timeliness of such additional reporting
is directly dependent upon the severity of
perceived asset deterioration, as well as, the
seasonal and cyclical nature of the assets
business structure. For example, a stressed
account with a heavy agronomy-related inventory
base would require close monitoring during both
the fall and spring agronomy seasons in order to
properly monitor changes in both inventory and
account receivable issues.
    
    Itemized and discounted assets are compared
to the cooperatives current obligations to
determine what excess value, Collateral Cushion,
is available to minimize Cofinas risk exposure.
    
    It should be noted that in most cases, Cofina
has a superior collateral position when compared
to other Obligors. The intent of including
subordinated obligations is to better understand
working capital needs required for continued
operations.
 Custodianship Agreement
    
    A Custodianship Agreement is designed to ensure
Cofina has an agent in place to both monitor and
facilitate the day-to-day financial activities as
they directly and indirectly effect Cofinas
security position. This agent monitors all asset
transfers and communicates such transfers to Cofina.
    
    One tool available to the assigned Custodian is a
weekly form called the Cash Collection and
Distribution Requestworksheet. This is to be
completed by the Custodian prior to any cash
distributions. The intent of the worksheet is to
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outline what cash inputs (sources of cash) and what
cash outputs (cash uses) are expected in a given time
frame.
    
    This worksheet is submitted prior to any cash
distributions and may be complemented by a local
Cofina signatory bank account in which all cash is
deposited, held and, if approved by Cofina,
redistributed  the Cofina approved Custodian acting
as signatory agent in managing this bank account.
 Full Liquidation
 
    
    Should the loan officer, with the approval of the
Loan Committee, determine it is both feasible and
prudent to liquidate the cooperative, a Liquidation
Notice will be forwarded to members of the
cooperatives leadership  to include management and
the cooperatives board of directors.
    
    Cofina has not found it necessary to force the
liquidation of any cooperatives. However, Cofina
has reviewed this process with legal counsel and is
prepared, in a worst case scenario, to execute
such a process in order to properly protect Cofinas
business position.
 Throughout this process, the assigned loan officer, along
with other members of the Cofina team, may be called upon
to attend Board Meetings, Patron Meetings and other such
business meetings in which Cofinas interests are
concerned. All such meetings are to be properly recorded
in the Assets Service File and approved by members of
the Loan Committee.It should be noted, the assigned loan officer will be
tasked with ensuring open lines of communication are
maintained between the loan officer, members of loan
committee and designated members of the cooperatives
leadership team. All such communications will also be
recorded in the Assets Service File for reference.If at any point in time the assets performance returns
to what may be termed by Loan Committee a satisfactory
level, the Collection Process may be suspended or
terminated
 73




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##### 



Custodianship Agreement
 Name of
Cooperative XXXXXX   Cofina Financial
 WITNESSETH:
       1.
    
    COFINA does hereby appoint, and the Association does hereby consent to the
appointment of , as Collateral Custodian to have and to
exercise the rights, powers, duties and authority contained in this agreement, and the
Collateral Custodian does hereby accept said appointment and agrees to perform
faithfully the obligations and duties under this agreement.2.
    
    As deemed advisable and necessary by COFINA or as requested by the Association,
the Association does hereby consent to the subsequent appointment of Deputy Collateral
Custodian(s) are herein collectively referred to as Custodian.
 74




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##### 



3.
    
    The Custodian shall submit to COFINA such reports as COFINA may from time to
time request. In addition, the Custodian shall report on any activities which may
affect the interests of COFINA.4.
    
    COFINA may, as it deems advisable to monitor and protect the collateral pledged
as loan security, assign to the Custodian new duties or revoke instructions previously
given by giving to the Custodian written notice of such suspension or change.5.
    
    The Custodian shall give bond for the faithful performance of the duties and
obligations hereunder in favor of COFINA in such amounts and in such form as may be
required by COFINA. All costs and expenses, including bonding expenses, incident to or
connected with the services to be performed by the Custodian under this agreement, and
the Custodians compensation therefore, shall be borne by the Association and shall be
matters exclusively between the Custodian and the Association.6.
    
    The Custodian may, in addition to the duties assigned by COFINA, be at the
disposal of the management of the Association and perform such duties as may be
required so long as the duties do not conflict with the duties for COFINA.7.
    
    This agreement shall become effective at the opening of business on the day of
, 2001. The Custodian shall continue in office until the appointment shall
be terminated by written notice from COFINA to the Custodian or until the Custodian
resigns by giving COFINA fifteen (15) days written notice of resignation. The
termination of the agreement, however, shall not relieve the Custodian from any
liability, which may have previously been incurred, to COFINA or the Association. In
case of the absence or incapacity of the Custodian or upon the termination of the
services, COFINA may designate a substitute Custodian, and may likewise designate a
successor to any such substitute Custodian. COFINA agrees to terminate this agreement
at any time all of the Associations indebtedness to COFINA shall be fully paid or at
the discretion of COFINA as such earlier time as requested by COFINA.8.
    
    COFINA may, at its discretion, establish a deposit account at the Associations
bank of deposit with COFINA and/or Custodian named as creditor of the account. Upon
written request of COFINA, the Association shall make daily deposits in said account of
all checks and proceeds which are subject to COFINAs security filings and which are
acquired by the Association in its normal course of business. COFINA may then, at its
discretion, (1) allow the funds in said account to be directly deposited into the
 75




---



##### 



Associations account; (2) allow the funds to remain in said account for a reasonable
period of time, and advise the Custodian as to the transferring of funds into the
Associations account; or, (3) apply the funds to the Associations loan with COFINA.
In the event alternative (1) or (2) is in effect, the parties agree that the
funds will at all times be considered owned by the Association, subject to the security
interests of COFINA
  BY:
    
    
    
    BY:
    
    
    
    BY:Cofina Financial, LLC
    
    
    
    
    
    Board Pres.  Typed NameLoan Officer .
    
    Its Custodian
    
    
    
    Cooperative Name
 76




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##### 



Week Ending:SourcesNormal Cash SalesNormal Accounts Receivable CollectionsSpecial Sources~ Describe if MaterialTotal Sources
    
    
    
    
    
    $
    0.00UsesPayrollTaxesUtilitesInsuranceTrade PayablesAgronomy ProductsPetroleumC-Store ProductsOtherOther Uses~ Describe if MaterialTotal Uses
    
    
    
    
    
    $
    0.00Cash Increase/(Decrease)
    
    
    
    
    
    $
    0.00Present Cash BalanceDate:
 77




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##### 



LIQUIDATION AGREEMENT
 (Legal Name of Cooperative) (City) (Sate) (State) City
 (City)
 
      
 
  
 78




---



##### 



79




---



##### 



COFINA FINANCIAL, LLCBy Its Cooperative Name, City, StateBy Its The undersigned hereby agrees,in his personal capacity, thatwill make the deposits requiredby paragraphs 4 and 5 of theforegoing agreement.
 80




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##### 



3.06  Customer Concentration
 General
    
    
    Cofina sets limits on loan concentrations
with individual credit risks. This
concentration is measured against the
existing risk funds. Risk Funds are defined
as the capital plus allowance for loan loss.Guidelines
    
    
    Cofina will limit its loan exposure to no
more than 25% of its Risk Funds in any single
credit exposure. Such exposure will include
all commitments to that customer and may
include guarantees from that customer to
other customers or commitments to another
customer in which the first customer owns 50%
or more of the second customer.Cofina will limit its loan exposure, further,
as a customer migrates toward a criticized
asset with no more than 15% of its Risk Funds
in a single credit exposure classified as
Other Assets Especially Mentioned or
Substandard.The maximum loan amounts Cofina will
originate before participation is required
are as follows:
 Customer
Rating A1:
    
    
    
    $
    10,000,000Customer
Rating A2:
    
    
    
    $
    8,000,000Customer Rating A3
or below:
    
    
    
    $
    6,000,000
 Cofina will secure participation relationships to
carry the balance of loans in excess of these
amounts. Such participation agreements will be put
in place no later than 90-days beyond the loan
origination date. Cofina will serve as the servicer
of the loans and maintain the relationship with that
customer.Loans in Minnesota and Wisconsin will be limited to
no more than 45% of loan volume. All other states
will be limited to 35% of total loan volume.
New loan relationships to be established outside of
Cofinas current trade territory will be limited to
no more than 15% of Risk Funds during the first two
years of Cofinas operation under the SPC agreement
and no more than 35% of Risk Funds thereafter.
 81




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##### 



All new loan relationships will be limited to
accounts with evidence of exceptional performance.
 3.07  Reserve Guidelines
 General
    
    
    Cofina uses UCS classifications, Customer Ratings, and the
following general reserve guidelines to arrive at a proper
valuation for individual assets in the portfolio and the
overall portfolio value.This procedure identifies the reserve guidelines for each
UCS asset classification category.Loss Reserve Guidelines
    
    
    Cofina recognizes the importance of building adequate loss
reserves. At the same time, accurately estimating future
losses is imprecise. Therefore, a 2% loss reserve is
applied to the outstanding balance of each of the
following asset classifications to determine a target
general reserve for losses:
 
    
    Acceptable assets
    
    Other assets especially mentioned
    
    Substandard assets
    
    Doubtful assets
 For all Obligors classified as Loss, the required
reserve is 20% of the outstanding Principal Balance
or the actual expected loss amount, whichever is
greater.Management will periodically evaluate the adequacy of
the general and specific reserves and recommend
changes in addition to reserves, as necessary.
 82




---



##### 



4.00  Legal Documentation
 4.01  Legal Documentation Overview
 General
    
    
    Sound legal documentation is an important part of credit administration practices as
appropriate and accurately prepared legal documents protect the rights of Cofina if issues
arise.The documentation process begins with the Loan Agreement as presented
in Section 2.08. The following sections identify other important
documents which address specific collateral or other legal needs.
 83




---



##### 



4.02
 Real Estate Mortgage Documentation
 General
    
    
    Cofina uses a standard real estate mortgage for
securing real property offered by customers as
collateral for Cofina loans. Even though collateral
through acquisition of real estate is seldom
necessary in Cofina relationships with customers, it
is vitally important that this secondary source of
repayment is perfected in a manor that protects the
interests of Cofina and its shareholders.Although the real estate mortgage is drafted by
Cofina staff, the customer is responsible for hiring
local counsel to update abstracts and issue an
attorneys opinion or obtain title insurance to
complete the mortgage filings.Mortgage Instructions
    
    
    The following numbered instructions correspond to
the sample Real Estate Mortgage that follows in this
procedure.
 1.
    
    The customer or mortgagor enters
the date the mortgage is
made and executed.2.
    
    Cofina enters the accurate legal
name of the customer/
mortgagor.3.
    
    Cofina enters the state location
of the
customer/mortgagor.4.
    
    Cofina enters the post office
address of the customer/
mortgagor.5.
    
    Cofina enters the amount of the
real estate mortgage
based on the amount specified in the loan agreement as directed
by the Loan Committee.6.
    
    Cofina enters the County and
State location of the
mortgaged property.7.
    
    Cofina enters the full legal
description of the mortgaged property.8.
    
    Cofina enters the amount, and
types of loan(s) information as specified in the loan agreement.9.
    
    Cofina enters the name of the
customer/mortgagor.10.
    
    The customer/mortgagor executes
the real estate mortgage by having two authorized officers sign
the mortgage and their signatures notarized.11.
    
    Cofina enters the
customer/mortgagor name and state location.12.
    
    The county agent or other
official responsible for mortgage recordings certifies that the
mortgage has been properly recorded in the county office.
 84




---



##### 



THIS MORTGAGE, 1 3 , 4 COFINA FINANCIAL, Post Office Box 64089, St.
Paul, Minnesota 55164-0089 5 6 6
 7 [ Legal Description or attached Exhibit]
   Amount
    
    Interest Rate$[ 8 ]  Operating
    
    Variable Rates of Interest as the Mortgagees Board of Directors shall from time to time prescribe.$[ 8 ]  Term
         85




---



##### 



86




---



##### 



(Corporate seal, if any)
    
    [ 9 ]MortgagorBy:
    
    10PresidentBy:
    
    10Secretary
 11 11
 Notary PublicMy Commission expires:
 12
 87




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##### 



4.03 Supplemental/Amendment RE Mortgage Documentation
 General
    
    Cofina uses supplemental or amendment real estate mortgages
to supplement the existing mortgage to increase the dollar
amount or amend the existing real estate mortgage to add
collateral and coverage to the existing mortgage or
mortgages.Supplemental 
Instructions
    
    The following
numbered instructions correspond to the sample
Supplemental Real Estate Mortgage that follows in this
procedures
 1.
    
    The customer or mortgagor enters
the date the supplemental mortgage is made and executed.2.
    
    Cofina enters the name of the
customer/mortgagor.3.
    
    Cofina enters the post office
address and state location of the customer/mortgagor.4.
    
    Cofina enters the amount of the
supplemental mortgage as directed by the loan committee.5.
    
    Cofina enters the County and
State location of the mortgaged property (from the existing
mortgage).6.
    
    Cofina enters the reference to
the real estate mortgage which this new one supplements
(recording data from existing mortgage).7.
    
    Cofina enters the real estate
mortgage legal description from the existing mortgage.8.
    
    Cofina enters the
customer/mortgagor name.9.
    
    The customer /mortgagor executes
the supplemental real estate mortgage by having two authorized
officerssign the mortgage and their signatures notarized.10.
    
    Cofina enters the
customer/mortgagor name.11.
    
    The county agent or other
official responsible for mortgage recordings certifies that the
mortgage has been properly recorded in the county office.
 88




---



##### 



This Supplemental Real Estate Mortgage, [ 1 ] [ 2 ] , [ 3 ], COFINA FINANCIAL, Post Office Box 64089, St. Paul, Minnesota 55164-0089. [ 4 ] and No/100
Dollars  ($ 4 ) [ 5], State of [ 5],
 6 6 6 6 6 6 6
 7  (SEE ATTACHED PAGES FOR LEGAL DESCRIPTIONS)
 8MortgagorBy:
    
    9Its: PresidentBy:
    
    9Its: Secretary
 State of
    
    )) ss.County of
    
    )
 9         10,
 9 
Notary
Public
 
 11
 89




---



##### 



Amendment 
Instructions
    
    The following numbered instructions correspond to the sample
Amendment Real Estate Mortgage that follows in the procedures.
 1.
    
    The customer or mortgagor enters
the date the supplemental mortgage is made and executed.2.
    
    Cofina enters the name of the
customer/mortgagor.3.
    
    Cofina enters the name of the
post office address and State location of the
customer/mortgagor.4.
    
    Cofina enters the amount of the
amended mortgage as directed by the loan committee.5.
    
    Cofina enters the County and
State location of the property to be mortgaged.6.
    
    Cofina enters the reference to
the real estate mortgage which this new amendment mortgage adds
as collateral to the existing mortgage (recording data from
existing mortgage).7.
    
    Cofina enters the real estate
description of the collateral to be added to existing mortgage.8.
    
    Cofina enters the
customer/mortgagor name.9.
    
    The customer/mortgagor executes
the amendment real estate mortgage by having two authorized
officers sign the mortgage and their signatures notarized.10.
    
    Cofina enters the
customer/mortgage name.11.
    
    The county agent or other
official responsible for mortgage recordings certifies that the
mortgage has been properly recorded in the county office.
 90




---



##### 



This Amendment Real Estate Mortgage, [ 1 ] [ 2 ] , [ 3 COFINA FINANCIAL, Post Office Box 64089, St. Paul, Minnesota 55164-0089. [ 4 ] and No/100
Dollars  ($ 4 ) 5 , State of 5
 6 6 6 6 6 6 6
 7  (SEE ATTACHED PAGES FOR LEGAL DESCRIPTIONS)
 8MortgagorBy:
    
    9Its: PresidentBy:
    
    9Its: Secretary
 State of Minnesota
    
    )) ss.County of
    
    )
 9         10,
 9 
Notary
Public
 
 11
 91




---



##### 



4.04 Release of Mortgage Documentation
 General
    
    Cofina typically releases collateral covered by a
real estate mortgage in two manners. One is a
Partial Release of Mortgage where the mortgage is to
stay in place, but a specific part of the mortgaged
property is released at the request of customer
(i.e. customer has sold property, etc.) Such
releases represent credit decisions that must be
approved by the loan committee. The second release
is a Satisfaction of Mortgage. In this case, the
loan or loans supported by the mortgage have been
repaid and therefore the need for the mortgage has
been eliminated.Partial Release of
Mortgage Instructions
    
    The following
numbered instructions correspond to
the sample Partial Release of Mortgage on the
following page.
 1.
    
    Cofina enters the County where
the property is located to be released.2.
    
    Cofina enters the State location
of the property to be partially released.3.
    
    Cofina enters the legal
description of the property to be partially released.4.
    
    Cofina enters the date of the
original mortgage.5.
    
    Cofina enters the
customer/mortgagor name.6.
    
    Cofina enters the
customer/mortgagors city of business and State location.7.
    
    Cofina enters the original
recording data (date, book/libor/volume number of mortgages,
page number(s), and document number) from the original mortgage.8.
    
    Cofina enters the date of the
partial release.9.
    
    Cofina executes the partial
release by an authorized officer of Cofina Financial.10.
    
    Cofina signs the partial release
by person attesting to the officers signature.11.
    
    Cofina personnel notarizes the
signature of the party executing the partial release.12.
    
    Affix notary stamp.
 92




---



##### 



COFINA FINANCIAL, 1
 3
 8
 COFINA FINANCIALAttest:
    
    10
    
    By:
    
    9President
 State of Minnesota
    
    )) ss.County of Ramsey
    
    )
 COFINA FINANCIAL COFINA FINANCIAL
 11 
Notary
Public
 12
 
 93




---



##### 



Satisfaction of

Mortgage Instructions
    
    The following
numbered instructions correspond to the sample Satisfaction of
Mortgage on the following page.
 1.
    
    Cofina enters the date of the
original mortgage.2.
    
    Cofina enters the
customer/mortgagor name.3.
    
    Cofinaenters the
customer/mortgagor place of business and State location.4.
    
    Cofina enters the county where
the original mortgage was recorded.5.
    
    Cofina enters the original
recording data (date, book/libor/volume of mortgages, page
number (s) , and document number) from the original mortgage.6.
    
    Cofina enters the date of the
satisfaction of mortgage.7.
    
    Cofina signs the satisfaction of
mortgage attesting to the officers signature.8.
    
    Cofina signs the satisfaction of
mortgage by an authorized officer of Cofina Financial.9.
    
    Cofina personnel notarizes the
signature of the party executing the satisfaction.10.
    
    Affix notary stamp.
 94




---



##### 



COFINA FINANCIAL, 1 2 3 4 5 5 5 5
 Dated: [ 6 ].
 Attest:
    
    COFINA FINANCIALBy:
    
    7President
 State of Minnesota
    
    )) ss.County of Ramsey
    
    )
 COFINA FINANCIAL COFINA FINANCIAL
 9 
Notary
Public
 10
 
 95




---



##### 



4.05  Security Agreement Documentation
 General
    
    The security agreement starts the process of perfecting
the Cofina security interest in all personal property
owned by the customer. The security agreement
establishes a claim on this important and liquid
collateral for Cofina. The UCC-1 Financing Statement
described in the following procedure perfects and files
the interest Cofina holds in this personal property.Security Agreement 
Instructions
    
    The following
numbered instructions correspond to the
sample Security Agreement that follows in this
procedure.
 1.
    
    The customer/debtor enters the
date the agreement is made and executed.2.
    
    Cofina enters the name of the
customer/debtor.3.
    
    Cofina enters the state in which
the customer/debtor is incorporated.4.
    
    Cofina enters the
customer/debtors principal place of business.5.
    
    Cofina enters the language
defining the personal property and proceeds covering by the
security agreement. Cofina has standard language (shown in the
sample document) that is used from most security agreements.
Loan officers have the ability to recommend alternative language
for loan committee consideration.6.
    
    Cofina enters the state in which
the customer/debtor is incorporated (also in (i) and (ii)).7.
    
    Cofina enters the customer/debtor
name, city, and state.8.
    
    The customer/debtor executes the
security agreement by having two authorized officers sign the
security agreement.
 96




---



##### 



THIS SECURITY AGREEMENT  COFINA FINANCIAL,
INC
  1.
    
    GRANT OF SECURITY INTEREST.To secure the payment and performance of the
Obligations, the Debtor grants the Secured Party a security interest (Security
Interest) in, and assigns to the Secured Party, all of the personal property of
Debtor, wherever located, and now owned or hereafter acquired (called the
Collateral), including:5
 (i)
    
    Accounts, including health-care-insurance receivables;(ii)
    
    Chattel paper;(iii)
    
    Inventory;(iv)
    
    Equipment;(v)
    
    Instruments;(vi)
    
    Investment Property;(vii)
    
    Documents;(viii)
    
    Deposit accounts;(ix)
    
    Letter-of-credit rights;(x)
    
    General intangibles;(xi)
    
    Supporting obligations; To the extent not listed above as
original collateral, proceeds and products of the foregoing;(xii)
    
    To the extent not included in the above list of collateral and in amplification of that
collateral without limitation, cash and non-cash proceeds, all vehicles, including those that have
certificates of title, commodity accounts, commodity contracts, electronic chattel paper, fixtures,
goods, payment intangibles, software and all contracts, including L.P. gas lease tank contracts,
all being without limitation; and(xiii)
    
    Investments in other cooperatives, including but not limited to Debtors investments in
COFINA FINANCIAL, CoBank, Cenex Harvest States Cooperatives, Farmland Industries, Inc., and Land O
Lakes, Inc..
 2. PERFECTION OF SECURITY INTERESTS.
 2.1 Filing of financing statement.
 97




---



##### 



2.2 Possession.
   2.3 Control.
      2.4 Marking of Chattel Paper.
 2.5 Payment of Obligations.
 3. DEBTORS REPRESENTATIONS AND WARRANTIES.
 3.1 Title To and Transfer of Collateral.
 3.2 Location of Collateral.
 3.3 Location, State of Incorporation, and Name of Debtor.
   98




---



##### 



3.4 Loan Application Statements.
 4. DEBTORS COVENANTS.
    5. POST-CLOSING COVENANTS AND RIGHTS CONCERNING THE COLLATERAL
 5.1 Inspection of Records.
 5.2 Personal Property.
 5.3 Secured Partys Collection Rights.
 5.4 Limitations on Obligations Concerning Maintenance of Collateral.
 Risk of Loss.
 No Collection Obligations.
 5.5 No Disposition of Collateral.
    5.6 Purchase Money Security Interests.
 5.7 Payment of Liens.
 99




---



##### 



5.8 Maintenance and Inspection of Collateral.
 5.9 Performance under Loan Agreements.
 5.10 No Modification.
 5.11 No Right to Future Loans or Advances.
 5.12 Rights Under Security Agreement.
 6. EVENTS OF DEFAULT.
         7. DEFAULT COSTS.
 100




---



##### 



8. REMEDIES UPON DEFAULT.
 8.1 General.
 8.2 Conformer Remedies.
    8.3 Surplus; Deficiency.
 8.4 Notice.
 8.5 Change in Financial Condition.
 9. FORECLOSURE PROCEDURES.
 9.1 No Waiver.
 9.2 Notice of Sale.
 9.3 Condition of Collateral.
 101




---



##### 



9.4 No Obligation to Pursue Others.
 9.5 Compliance With Other Laws.
 9.6 Warranties.
 9.7 Sales on Credit.
 9.8 Purchases by Secured Party.
 9.9
    
    No Marshaling.Secured Party shall have no obligation to marshal any assets in
favor of Debtor, or against or in payment of:
    10. MISCELLANEOUS.
 10.1 Assignment.
 Binds Assignees
 No Assignments by Debtor.
 Secured Party Assignments.
 10.2 Severability.
 10.3 Headings.
 10.4 Governing Law.
 102




---



##### 



10.5 Rules of Construction.
     10.6 Integration and Modifications.
   10.7 Further Assurances.
 THIS SECURITY AGREEMENT
 [ 7 ]CooperativeBy:
    
    8Its:ATTEST:By:
    
    8Its:
    
    Secretary
 103




---



##### 



4.06 UCC 1 Financing Statement Documentation
 General
    The UCC 1 Financing Statement is a state specific document that is filed with the
appropriate state official to perfect Cofinas security interest in the personal property
offered by the customer as collateral.1.
    
    Cofina enters the customer/debtor
name.2.
    
    Cofina enters the customer/debtor
mailing address.3.
    
    Cofina enters the customer/debtor
city location.4.
    
    Cofina enters the customer/debtor
state location.5.
    
    Cofina enters the customer/debtor
zip code.6.
    
    Cofina enters the customer/debtor
country location (USA).7.
    
    Cofina enters the customer/debtor
federal tax payor identification number (may be obtained from
customer).8.
    
    Cofina enters customer/debtor
type of organization (most cases cooperative).9.
    
    Cofina enters the customer/debtor
state of organization.10.
    
    Cofina enters the customer/debtor
organization number assigned to the customer/debtor by the state
where customer/debtor is incorporated. (this information can be
obtained by searching the internet for the specific states
secretary of states office or from the customer/debtor).11.
    
    Cofina enters Cofina Financial,
Inc, as secured party.12.
    
    Cofina enters its mailing
address.13.
    
    Cofina enters its city location.14.
    
    Cofina enters its state location.15.
    
    Cofina enters its zip code.16.
    
    Cofina enters its country
location.17.
    
    Cofina enters the language
describing the property to be covered by the financing
statement. This language should be consistent with the related
financing statement.
 104




---



##### 



UCC FINANCING STATEMENT FOLLOW INSTRUCTIONS rfrontand backl CAREFULLY
A. NAME A PHONE OF CONTACT AT FILER [optional]
B. SEND ACKNOWLEDGMENT TO: (Name and Address!
Print
Reset
THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY 1.DEE~ORS EXACT FULL LEGAL NAME
1 b. INDIVIDUALS LASTNAME
FIRST NAME
MIDDLE NAME
LISA
t. ene\ finance Association, Luc.
St. Paul
jjglfi-Mllim)
USA
Debtor hereby grants the Secured [arty a security interest in and Debtor hereby ;m!lii>ri.r ,
Secured Party to tile a financing statement and assigns to the Secured Party, nil of the personnl
property of Debtor, wherever located, and now owned or hereafter ac(|iiire(l, including Init not
limited in accounts, including health-carc-ins lira nee receivables, chattel paper, inventory,
equipment, instruments, investment property, documents, deposit accounts, letter-of-credit rights,
general intangibles, supporting obligations, to the extent not listed above as original collateral,
proceeds and products oliln foregoing, to the extent not included in the above list of collateral
and in amplification of that collateral without limitation, cash anil non-cash proceeds, all
vehicles, including those that have certificates of title, commodity accounts, commodity contracts,
electronic chattel paper, fixtures, goods payment intangibles, software and all contracts,
including L.P, gas lease tank contracts, all being without limitation; and investments in other
cooperatives, including but not limited to Debtors investments in tenc\ Finance Association, Inc.,
CoBank, Cene\ Harvest States Cooperatives, Farmland Industries, Inc., and Land () Lake*. Inc.
8. OPTIONAL FILER REFERENCE
DATA 105




---



##### 



4.07
 Assignment of PECFA Proceeds
 General
    
    Cofina establishes term special loans for
environmental clean up activities of customers in
Wisconsin to make use of the Petroleum Environmental
Clean up Fund Program (PECFA). As part of these
loans, Cofina takes an assignment on the PECFA
proceeds due the customer from the State of
Wisconsin Department of Industry, Labor and Human
Resources.Assignment of PECFA Proceeds Instructions
    
    The following numbered instructions correspond to
the sample Assignment of Proceeds document that
follows in this procedure.1. Cofina enters the name of the
customer assigning the proceeds to Cofina Financial2. Cofina identifies the loan type,
number and amount.3. Cofina enters the name of the
contaminated site location.4. Cofina enters the name, city, and
state of the customer.5. The customer executes the
Assignment of Proceeds by having two authorized officers of the
board sign the document.
 106




---



##### 



1 (Borrower), COFINA FINANCIAL, ST. PAUL,
MINNESOTA (COFINA),
 This assignment is hereby given to provide COFINA additional collateral for the term
special loan [ ] in the amount of [$ ] to the Borrower for the contamination clean-up
at the [ ] Site and shall be void if such loan is paid in full.
 Dated: , 2002
    
    [ 4 ][ 4 ]By:Its PresidentBy:Its Secretary
 107




---



##### 



4.08
 Assignment of Stock Documentation
 General
    
    Cofina frequently takes assignment of Cenex Harvest
States Cooperatives and/or Land OLakes, Inc. stock as
additional security for loans. To perfect that
interest, the customer must execute an assignment of
stock.Assignment of Stock Instructions
    
    The following numbered instructions correspond to the
sample assignment of Stock for both Cenex Harvest
States Cooperatives and Land OLakes, Inc., that
follow in this procedure:1. Cofina enters the customer name,
city, and state for the customer providing the assignment.2. Cofina enters the name of the
regional cooperative in which the customer has investments.3. The customer enters date
agreement is executed.4. Cofina enters the customer name,
city, and state.5. The customer executes the
document by having two authorized of the board sign the
document.
 108




---



##### 



ASSIGNMENT OF STOCK
 Cofina Financial, St. Paul, Minnesota (COFINA), [ 1 ]
(Borrower), [ 2 ] ( 2 )
     Dated:  3 [ 4 ]
 By:Its:By:Its:
 109




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4.09
 Loan Agreement Waiver Documentation
 General
    
    Cofina utilizes standard language in waiving specific compliance
issues with customers loan agreement. Loan officers are
responsible for monitoring customer compliance and acting promptly
when compliance is an issue.Standard language available for use includes:     Waiver Letter language for Stock Retirement and Fixed Asset
Expenditure limits.     Waiver Letter language for Cash Patronage Refunds.     Waiver Letter language for Working Capital and Local Net
Worth levels.When compliance issues arise, the loan officer develops a waiver
request for loan committee approval.Waiver Letter Instructions
    
    The instructions for all waiver letters are the same. The
following numbered instructions correspond to the sample
letter that follow in this procedure. Language for
specific condition waivers are included to fit the
circumstances.1.   Cofina enters the customers
manager name, customer, address, city, state, and zip code.2.   Cofina references the loan
agreement number and the purpose for the waiver or condition
reference.3.   Cofina enters the condition or
conditions in non-compliance and the specifics of the waiver.The loan officer has the responsibility to include any language
necessary to clarify the waiver or explain the limits of the action
taken by the loan committee.
 110




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##### 



[ 1 ]
 Re:
    
    [ 2 ]Loan Agreement Condition #Loan Agreement No.___
 
 [ 3 ]
 [ 3 ]
 [ 3 ]
   
 111




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4.10
 Subordination Agreement Documentation
 General
    
    Cofina uses subordination agreements to clarify collateral
positions with other lenders serving a common client. The
subordination agreement is between the two or more lenders,
rather than with the customer.Subordination Agreement Instructions
    
    The following numbered instructions correspond to the sample
Subordination Agreement that follows in this procedure:1.      Cofina enters the date the
subordination agreement is made and executed.2.      Cofina enters the name or names
of the other lenders involved in the agreement.3.      Cofina enters state location of
other lender.4.      Cofina enters address, city,
state location of other lender.5.      Cofina enters the name of the
customer held in common between the lenders.6.      Cofina enters the specific
language defining the subordination.7.      Cofina enters the name of the
other Lender below its own name with space for authorized
officials to execute the agreement.
 112




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##### 



THIS AGREEMENT, [1] Cofina Financial, St. Paul,
Minnesota (COFINA), [2] (Bank), [3 ] [4]
 WITNESSETH:
 WHEREAS, [5] (Borrower);
 WHEREAS,
 WHEREAS,
 WHEREAS,
 WHEREAS,
 NOW THEREFORE,
 [6]
 All inventories and accounts receivables
  2.
    
    COFINA and the Bank will maintain perfected security interests in their respective
collateral. Failure by COFINA or the Bank to maintain a perfected security interest
 113




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##### 



in its collateral shall render this agreement null and void, unless the security interest is
re-perfected without loss of priority except as to the other party.3.
    
    COFINA and the Bank mutually understand and agree that this is a continuing agreement, but
that COFINA and the Bank may amend the same in writing at any time and in such manner as they
may deem proper.
 IN WITNESS WHEREOF,
 COFINA FINANCIALBy:Its President and General Manager[ 7 ]By:Its:
 114




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5.0
 Money Desk Procedures
 5.01  Disbursements
 Faxed borrowing notices must be received by the
Money Desk Administrator before 11:15 a.m. Central
Standard Time the day of the requested advance.The information requirements are set out in a
pro-forma borrowing notice, a copy of which is
attached to this procedure. The borrowing notice
must be signed by an authorized signatory of the
Borrower.The borrowing notice is checked by the Money Desk
Administrator for:     Completeness of information     Proper authorization     Confirmation that bank details for payments
being made to coops account are the same as the
repeat codes set up in payment system.The daily balancing report is checked to ensure that
sufficient loan facility is available to make the
payment and to ensure the facility has not matured.
Payments cannot be made from matured loan facilities
and the loan officer must be notified of requests
received in these circumstances.If insufficient facility is available, written
approval of the loan officer must be obtained to pay
a smaller amount than requested in the borrowing
notice.The majority of payments are made by internet banking
system. Access to bank account details is protected
by password procedures. Knowledge of the passwords
is restricted to the Chief Financial Officer, the
Accountant, and the Money Desk Administrator. Access
to the payments program is protected further by
secure identification codes. The Chief Financial
Officer, the Accountant, and the Money Desk
Administrator each have their own secure
identification codes. Only one of them is
 115




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##### 



required
to authorize a payment using the repeat code method.Copies of wire transfers prepared in the internet
banking system are printed and retained until the
bank statement is reconciled.Wire transfers can also be made by telephone. This
will occur when a repeat code has not yet been
established. The Chief Financial Officer, the
Accountant and the Money Desk Administrator are
authorized to make a wire transfer by telephone. The
same passwords apply to telephone instructions as are
used for internet banking instructions. One
authorized person calls the bank with the payment
details. The bank will then call back a second
authorized person to verify the instructions.Some payments are made by check. These are held by
the Chief Financial Officer. Checks have to be
signed out on a sheet indicating the check number and
the name of the person taking it to prepare. A check
requires two authorized signatures. (See Sec. 5.06
for a list of the current authorized signatories).All payments are recorded on the Daily Transaction
Sheet and entered in the cash book.CHS cash management are informed of total amount
being disbursed to CHS and LOL.The borrowing notices are filed, initially, by state
and maintained in the Accounting Department. They
are eventually filed by cooperative.
 116




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##### 



COFINA FINANCIAL
BORROWING & REPAYMENT NOTICE
 FROM:(BORROWER)
 CITY & STATE
 PHONE #
 ADVANCE:
LOAN#
 The Advance Requested Shall Be Made on (Date)
 The Aggregate Principal Amount of Advance $
 PLEASE PRINT AMOUNT
 YOUR BANKING INFORMATION:
    
    Bank NameBank LocationBank Account #Federal Reserve #
 
 REPAYMENT: LOAN#
 The Repayment Shall Be Made On (Date)
 The Aggregate Principal Amount of Repayment $
 PLEASE PRINT AMOUNT
 PLEASE WIRE FUNDS TO:
    
    BANKLOCATIONFEDERAL RESERVE #ACCOUNT #CREDIT: COFINA FINANCIAL
  
 
 Payment of Invoice to
 Comments:
 NAME
    
    
    
    TITLE
 AUTHORIZED SIGNATURE
 117




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##### 



5.02
 Electronic Funds Transfer (EFT)
 EFTs are pulled from Cofinas bank account by CHS and
LOL on Tuesdays and Fridays.Sheets detailing the amounts to be pulled by EFT are
obtained from CHS Corporate Credit Department the
afternoon before.From the sheets, the Money Desk Administrator
calculates the total funds being pulled from each
customer. The Daily Balancing Report is checked to
ensure sufficient facility is available and that the
facility hasnt matured. Appropriate loan officer
must be informed if facility has matured.If not enough funds are available to cover EFT, an
Open Item Correction form is prepared to request the
overdisbursed funds be wired back to Cofina. The
form must be signed by the loan officer and delivered
to CHS Corporate Credit by 9:00 a.m. on the day of
the EFT. Funds will be returned the same day.Information from the EFT sheets are entered in the
cash book.
 118




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##### 



5.03  Deposits
 Deposits can be received by wire transfer, ACH or by
check.Co-ops should advise of wire transfers by fax, on
pro-forma repayment notice, by 11:15 a.m. Central
Standard Time on the day of the repayment.The daily balancing report is checked for balance
owed.During the course of the morning and early afternoon,
the bank account is checked via the internet, for
receipt of the wire transfers. If funds are not
received by 2:30 p.m., the customers are contacted to
ensure funds were sent correctly.Cofina has a PO Box which keeps mail separate from
all other mail coming into the building from the post
office. Mail is picked up in the mail room by the
Money Desk Administrator at 7:45 AM in order to begin
processing any checks that may have come in to assure
a rapid bank deposit. All requests for funds must be
received by ll:15 AM therefore the timing on morning
processing is critical. Checks received are
reviewed to ensure they are made out correctly. By
11:00 a.m., the bank deposit slip is prepared and
delivered to Mail Room for messenger service to the
bank.If a large number of checks are received for bill
payments, a separate deposit slip may be prepared
just for these.All wire transfers, ACHs and checks received, other
than for billed payments, are entered on the Daily
Transaction Sheet. All receipts are entered in the
cash book.
 119




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##### 



5.04
 Cash Management
 Cofina has two categories of borrowings  daily loans
and fixed loans. The daily loans can be borrowed or
paid back on any given day in increments of $500,000.
Fixed loans have set maturity dates. While they
can, theoretically, be repaid on maturity dates, the
usual practice is to roll over these loans. Only the
period and interest rate vary.The amount that needs to be borrowed or could be
repaid on any given day can be determined once the
borrowings and the deposits are known for the day and
the cash book has been updated. Allowance has to be
made for checks that have been paid in, but not yet
cleared through the banking system.The Chief Financial Officer authorizes the amount to
be borrowed or repaid if the funds transfer does not
meet guidelines set forth.The lender is advised by fax, before noon, using
pro-forma notice, of the activity for the day.
Repayments to the lender are made using the internet
banking system.The Money Desk Administrator maintains the record of
maturity dates of the fixed loans. The Money Desk
Administrator also obtains, on a daily basis, the
rates being charged by the lenders for various terms
of borrowing.The Chief Financial Officer is advised of any
maturities occurring that day and the range of rates
being charged by the lender. The Chief Financial
Officer then instructs what to do with the fixed
funds rolling over if they do not conform with
guidelines. The lender is notified, by fax, before
noon, using pro-forma notice. The notice must be
signed by the Chief Financial Officer if the funds
are fixed for a timeframe that exceeds the guidelines
or is in excess of the dollar amount set forth in the
guidelines. Lender sends a confirmation by fax,
which is then checked and filed in the monthly lender
file.All cash management transactions are entered on the
Daily Transaction Sheet and cash book.
 120




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##### 



The Chief Financial Officer reviews and signs off on
the daily cash journal.
 121




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##### 



5.05
 Daily Transaction Sheets
 There are three colored copies of the Daily
Transaction sheet.The white copy is for disbursements going to CHS or
LOL and is delivered to CHS Corporate Credit.The yellow copy is for keying to the loan system.
The pink copy is for posting the general ledger
journal. Both of these tasks are performed by the
Money Desk Administrator. The yellow copy is filed
with daily keying. The pink copy is filed in the
Cofina posting book.
 122




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##### 



5.06
 Authorized Check Signatories
 Sharon Barber
Thomas LarsonM & I Bank
 123




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##### 



5.07 Borrowing Guidelines
 Funds may be placed with CoBank either at a daily rate or
fixed rate for a longer period of time. The Money Desk
Administrator may sign off on borrowing notice providing the
fixed rate is 30 days or less and the dollar amount does not
exceed $10,000,000.
  124




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6.0
 Accounting, Financial Control, and Internal Reporting
 6.01
 Accounting
 Loan Set Ups
    
    A Loan Set-up Information form is prepared by the
Legal Administrator. A pro-forma document is
attached to this procedure. The form sets out the
basic loan details, such as customer name, amount
and terms. The form is signed by the Legal
Administrator to indicate completeness prior to
passing it on to the Accounting staff.The Money Desk Administrator adds pricing and
credit class details to the form and signs it,
then enters the details on to the Loan System.Following the setup of a loan, the Chief Financial
Officer will verify pricing and credit class on
the Loan System.If repeat codes are to be used to make payments to
the customer, the details are set up in the
banking system and authorized by the Chief
Financial Officer.The original Loan Set-up Information form is
returned to the Legal Administrator once this
process is complete. A copy is retained by the
Money Desk Administrator.General Ledger
    
    Cofina operates a computerized general ledger system
designed and maintained by Harland Financial
Solutions (the SPARAK system). Harland has
created an operating manual, which is subject to
regular updates. The operating manual is held in
the Accounting Department and is not included
within this Policy and Procedures Manual (See also
Sec. 7)Reconciliations of
General Ledger Accounts
    
    The following general ledger categories are to be
reconciled on a daily basis.     Bank accounts, using bank activity reports available from internet banking
system     Loans receivable accounts     Loans payable accounts
 125




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##### 



All general ledger accounts are reconciled at every
month-end. The bank accounts are to be reconciled
using the statements received from the bank.All reconciliations are prepared by the Accountant
and reviewed by the Chief Financial Officer. Review
of month-end reconciliations should be evidenced by
initialing by the Chief Financial Officer.
 126




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##### 



LOAN SET-UP INFORMATION
 Classification:(Note: Change from)UCS Rating:(Note: Change from)
 Cooperative:
 City/State:
 Seasonal Amt: $
    
    Term: $RT: $N/A
 Collateral/Advance Requirements
 Security Interest: N/A
    
    Real Estate Mtg: N/AAssign. Investments: N/A
    
    Supp/Amend Rem: N/AAdvance Reqs: NONE
    
    Loan Officer Instructions/Comments:Set Up Fees: Charge
New Set Up Fees
    
    Federal ID#:Loan Closing Initials:
    
    Accounting Initials:
 127




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##### 



6.02  Financial Control
 Overhead Expenses
    
    Cofinas main overheads (i.e., personnel costs,
office rental, telephones, computer costs) are
charged to it centrally by CHS. Management
reports are received on a monthly basis from CHS
for posting to the general ledger.Individual expense components of the central
monthly management charge are analyzed and
reviewed for unusual or exceptional movements.Office Supplies
    
    If Cofina requires specific office supplies, a
purchase order must be prepared and approved by
the Chief Financial Officer before the order is
placed (example pro-forma attached).
Administrative Assistant is responsible for
ordering office supplies and reconciling receipt
of goods.Loan Officer
Expense Reports
    
    Loan Officers incur expenses as they travel
around
the country visiting customers. Expenses are
reclaimed by completing an expense form (example
attached) which is then submitted to the Chief
Financial Officer, along with related receipts.Once the Chief Financial Officer has approved
the expenses, the claim will be paid by check.Chief Financial Officers
Expenses
    
    Expenses incurred by the Chief Financial
Officer must be approved by the President of
Cofina before payment.Budgets
    
    An annual budget of income and expenditure is
presented to the Board for its approval in
September each year for the next financial year.The process starts with loan officers setting
out their expectations for loan receivables in
the next financial year. They also prepare a
budget for their expenses.Assumptions are then formulated for interest
rate expectations and overhead expenses.If the Board rejects the proposed budget, a
revision must be presented within a timescale
determined by the Board.
 128




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##### 



An approved budget must be in place before the
start of the new financial year.The financial reports presented to the Board
must include a comparison of actual against
budget for the month under review and for the
year-to-date (See also Sec. 6.03).
 129




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##### 



130




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##### 



(FORM)
    
    Date:
    
    1436 East Cliff Road
Burnsville, MN 55337
Main: 652-805-9900
Toll Free: 866-574-5389Fax: 952-894-7153
 Account Name:
    
    Cenex Finance Association
    
    Account #Phone#
    
    651-451-5487Contact Nme:
    
    Gwen Brown
    
    Customer PO#
  Quantity
    
    U/M
    
    Item Number
    
    Description
 131




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##### 



6.03  Reporting
 Monthly Financial Statements
    
    Monthly financial statements should be prepared for submission to
Board members within 15 days of the month end. The reporting package should include:
    
    a commentary by the Chief Financial Officer a
balance sheet, with comparative figures for the
previous financial year
    
    a statement of savings for the month and
year-to-date, with comparative figures for the
budget and the previous financial year
    
    details of loans receivable
    
    details of new loan commitments entered into
in the monthMonthly financial statements are also required to be
submitted to Cofinas bankers. The Chief Financial
Officer is responsible for completing the reporting
requirements of each bank group and ensuring they
receive the reports within the required timeframe.Monthly Statistics
    
    In addition to the monthly financial statements, Cofina prepares a raft of statistics to assist
in its review of past performance and developing future budgets. The current statistics
requirements are as follows:Yield calculator report and sub reports:Average seasonal receivableAverage term receivableAverage total receivableAverage receivable yieldAverage Cenex payableAverage CoBank payableAverage Cofina surplus fundsAverage total payableAverage payable yieldAverage yield spreadMonthly stats reports:Yearly interest rates and spreadsInterest rate spreadsReceivable/payable yieldsAverage differential rates by monthAverage differential rate totalsAssociation savings
 132




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##### 



Association savings  budgetAverage daily receivablesNon-patronage loans YTD interestLoan volume by officeActive accounts by stateNumber of coops by state by monthNumber of coops by monthCenex management expense billingDetailed operating expenseDetailed operating expense comparisonItemized expensesYear-end Financials Statements
    
    Cofinas year-end is September 30. The audit of the financial statements needs to be completed
prior to the Annual Meeting of members. This meeting is usually held late November/early
December.The auditors will attend a Board meeting prior to signing off the accounts in order to present a
report of their findings.Cofina is not required to file its accounts with any regulatory bodies.
 133




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##### 



7.0  Disaster Recover Plan
 Loan Accounting System
    
    Cofina uses Sparak (Harland) Financial Data Center in Fargo, ND for loan accounting processing.
The data is entered in the Cofina office and is processed at Sparak. The Sparak (Harland)
Financial Data Center is at 2701 12th Ave SW, Fargo, ND. Data is stored at a remote
location. There is a back-up data Center in Jonesboro, Ark. In the event of a disaster the
fastest way to access the loan accounting system is to make the 4 hour drive or 45 minute flight
to Fargo in order to process data there. The Fargo location runs two tapes at each end of
day. One is kept in their office and the other is stored off-site. Month end, quarter end and
year end are stored in the same manner. In house storage is kept for two weeks.Funds Flow
    
    Cash Management is currently done through Wells Fargo and M&I Bank. Wire Transfers are processed
through the Wells Fargo Bank System and the M&I Wire Transfer System. Balance Reporting is also
carried out using these systems. Deposits come into Cofina and are delivered to Wells Fargo by
messenger. A Lock Box has been set up at M&I Bank to handle deposits. Cofina will receive an
e-mail providing all the information needed to process the checks deposited in the Lock Box.
Electronic Funds Transfers move between CHS, Land O Lakes, Agriliance and Cofina daily. In
the event of a disaster an authorized person would call Wells Fargo and/or the M&I Cash
Management Representative, giving name and passwords, in order to receive balance reporting.
Wire transfers will also be made by phone. Cofina currently phones in any wire that does not
have a repeat code. Repeat codes are stored in both cash management systems and also in the
Cofina custody vault file. It is Cofina policy to set up repeat codes for any wire that will be
sent more than one time. If carrying out the cash management functions by phone is not feasible
the money desk administrator can go to Wells Fargo or M&I Bank to do them. Both banks are
within 20 miles of Cofinas office.
 134




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##### 



Computer Network
    
    Cofina uses the Land O Lakes Network for email, and Microsoft products. The laptops and
workstations (hardware) are supported by Land O Lakes also. Land O Lakes is located in Arden
Hills, MN about 20 miles from the Cofina office. The network is backed up each night in Arden
Hills and remote storage is used. If Cofina had a disaster mid-day it would lose current days
data. In the event of a disaster Cofina would need to replace its computers and use the remote
dialup to get into email, etc. Remote dialup can be done from anywhere.Notes
    
    Original Notes are held in safekeeping at Wells Fargo Bank Asset Backed Securities Custody Vault
located at 751 Kasota Avenue, Suite ABS, Minneapolis, MN 55414. Notes can be retrieved within
four hours if need be. A copy of each note is kept at Cofina in a fireproof file. Notes and
all key original documents will be moved from Wells Fargo Bank to US Bank Custody Vault in St
Paul, MN.Fax Machine
    
    Within four hours Metro Sales (located in Minneapolis) will set up a new fax machine with
Cofinas current fax numbers in order to receive borrowing and repayment notices, which are
critical to the operation.Cell Phones
    
    All staff members have a cell phone, office numbers will be transferred to cell phones which
would be used in case of a disaster.Address and Phone Numbers
    
    The Cofina Borrower, Staff, and Board directory along with important contacts are kept in the
safekeeping in the bank custody vault. This file can be retrieved within four hours.Personnel
    
    The staff of Cofina are employees of CHS. There is a Management Services Agreement between
Cofina and CHS which authorizes CHS to provide necessary personnel and services to effectively
support the operation of Cofina. CHS is directed to support Cofina in full compliance with the
latters Articles and By-laws. CHS is reimbursed monthly for all costs incurred by Cofina which
include site rental, salaries, and benefits.
 135




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##### 



8.0  Equity Retirements and Patronage Decisions
 8.01  General Equity Retirements
 General
    
    Cofina operates as a cooperative, adhering
to Federal Cooperative Law requirements, complemented
by Cofinas By-Law stipulations, to allocate its
earnings (patronage refunds) to customers who have
participated in the business operations, by paying
interest. Cofina is required by law to pay 20% of
these patronage refunds in cash. Ten percent of
earnings remain unallocated and are retained in the
equity base of Cofina, to support the capital needs
of its ongoing and anticipated business.One of the objectives of the Cofina Board is to have
current users providing the capital needs of the
business. To accomplish this objective, the Board
annually establishes its stock retirement objectives.
However, equity retirement decisions are at the sole
discretion of the Board of Directors.Authority
    
    The Cofina Board of Directors has the sole authority to retire
retained equities. Retirements of previously allocated customer
stock shall be made consistent with the requirements of this policy.Criteria
    
    The Board utilizes the following criteria in making equity
retirements:
    
    No general equity retirement shall be made,
unless Cofina has adequate levels of capital to
support its existing funding needs.
    
    No general equity retirement shall be made
when an evaluation of asset quality in the
portfolio identifies potential losses that
exceed the allowance for loan losses.
 136




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##### 




    
    No general equity retirement shall be made in
cash, to a customer/shareholder that has not
satisfied the repayment requirements and other
conditions of its loan agreement with Cofina. An
exception can be made to these criteria if those
violations have been documented and waived by
Cofina.The Board of Directors has the authority to change
these criteria or use other criteria in making general
equity retirement decisions.
 137




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##### 



8.02 -Equity Retirements of Liquidating Customers
 General
    
    Cofina follows these practices when making equity retirements
that would be paid to customers which are liquidating their
businesses and assets. Customers receive patronage based on the
annual interest on loan(s) they have with Cofina. These
investments often represent a significant asset for the
customers.Authority
    
    The Cofina Board of Directors has sole authority to make equity
retirements to customers in liquidation. Liquidation includes
both court supervised and customer directed.Criteria
    
    In most cases, retirements to customers in liquidation will be
part of the general equity retirements that apply to all
customers. The annual retirements for liquidating
customers/shareholders remain at the sole discretion of the
Cofina Board of Directors.In these cases, the loan officer must recommend
whether an equity retirement will be applied against
Cofina loans or returned to the customer to settle
other debts or equity claims. Generally, if there
are Cofina loans outstanding, cash paid on
retirements should be applied to outstanding
loans.
 138




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##### 



8.03  1099PAT Processing
 General
    
    1099PAT tax forms are mailed out
to Cofina customers prior to January 31 each year, which
based on the patronage allocation received.
1099PAT is sent via electronic transmission
to the IRS.Authority
    
    The Cofina Board of Directors approve the
patronage allocation which is taxable.Criteria
    
    The Harland Financial E-Bond
modual is used to
produce the 1099PAT forms as well as sending the
electronic transmission to the IRS.
 139




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##### 



9.0 Grain Credit Analysis
 Financial Analysis Grain The guidelines include standards for what has been
determined as a Grain Cooperative.
 The criteria to determine if a Customer is a Grain Cooperative are as follows:
 *
    
    Quantity Comparison of Grain Sales compared to Other Sales of the Cooperative*
    
    Qualitative Review by the Loan Officer
  LiquidityCurrent Ratio
    
    
    >1.1Working Capital/(Supply Sales + 20% of Grain Sales)
    
    
    7 to 10
    %Seasonal Loan/Working Capital
    
    
    <4.0Accounts Receivable Under 60 Days
    
    
    >85
    %Accounts Receivable Over One Year
    
    
    <1
    %Inventory/Sales
    
    
    5 to 10
    %SolvencyNet Worth/Total Assets
    
    
    50 to 75
    %Local Net Worth/Local Assets
    
    
    >50
    %Local Net Worth/Term Debt
    
    
    >1.25Term Debt/Local Net Worth
    
    
    <80
    %Term Debt/Fixed Assets + Working Capital
    
    
    <75
    %Loan Balance/SRV
    
    
    <75
    %ProfitabilityLocal Savings/Sales
    
    
    >0.5
    %Return on Local Net Worth
    
    
    >10
    %Return on Fixed Assets & Working Capital
    
    
    >10
    %Return on Local Assets
    
    
    >10
    %Cash FlowTerm Debt/Net Funds Available
    
    
    <3.5CPTD/Net Funds Available
    
    
    <70
    %Net Funds Available/CPTD
    
    
    >1.5OperationSalaries & Benefits/Gross Income
    
    
    <40
    %Distribution Expense/GM
    
    
    <50
    %Bad Debt/Sales
    
    
    <0.1
    %
 Grain Cooperatives
  Loan Quality Classification grain and supply cooperatives.
 140




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##### 



Current Ratio
 A1
    
    A2
    
    A3
    
    M4
    
    S5Grain
    
    
    >1.50
    
    
    
    >1.30
    
    
    
    >1.15
    
    
    
    >1.0
    
    
    
    <1.0
 Local Net Savings/Sales
 A1
    
    A2
    
    A3
    
    M4
    
    S5Grain
    
    
    >2.0
    %
    
    
    >1.0
    %
    
    
    >0.5
    %
    
    
    >0.0
    %
    
    
    <0.0
    %
 (Grain and Ag Supply Coops)
 141