Document:

exv10w14e

 

EXHIBIT 10.14E

FIFTH AMENDMENT

TO

CREDIT AGREEMENT

(Term Loan)

     This Fifth Amendment to Credit Agreement (Term Loan) (“Amendment
Agreement”) is made May 21, 2003, to be effective as of the Effective Date, by
and among Cenex Harvest States Cooperatives, a Minnesota cooperative
corporation (“Borrower”), CoBank, ACB (“CoBank”) as the Administrative Agent
for the benefit of the present and future Syndication Parties (in that capacity
“Administrative Agent”), and the Syndication Parties signatory hereto,
including CoBank in such capacity (each a “Syndication Party” and collectively,
the “Syndication Parties”).

RECITALS

     A. Borrower, CoBank, St. Paul Bank for Cooperatives (“St. Paul Bank”), and
the Syndication Parties signatory thereto entered into a Credit Agreement (Term
Loan) (as amended, the “Credit Agreement”) dated as of June 1, 1998.

     B. The Credit Agreement was amended by the First Amendment to Credit
Agreement (Term Loan) effective as of May 31, 1999 (“First Amendment”) and by
the Second Amendment to Credit Agreement (Term Loan) effective as of May 23,
2000 (“Second Amendment”), and by the Third Amendment to Credit Agreement (Term
Loan) dated as of May 23, 2001 (“Third Amendment”) , and by the Fourth
Amendment to Credit Agreement (Term Loan) dated as of May 22, 2002 (“Fourth
Amendment”).

     C. CoBank is the successor by merger to the interests and obligations of
St. Paul Bank under the Credit Agreement.

     D. The parties hereto desire to amend the Credit Agreement as hereinafter
set forth.

     NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, including the mutual promises and agreements contained
herein, the parties hereto hereby agree as follows:

1. Definitions. Capitalized terms used herein without definition shall have
the definition given to them in the Credit Agreement if defined therein.

 

 

2. Amendments to Credit Agreement. The parties hereto agree that the Credit
Agreement shall be amended as follows as of the Effective Date:

     2.1 The following Sections of Article 1 are amended in their entirety to
read as follows:

     1.2 Adjusted Consolidated Funded Debt: All Consolidated Funded Debt of
Borrower and its Consolidated Subsidiaries, plus the net present value of
operating leases of Borrower and its Consolidated Subsidiaries as discounted by
a rate of 8.0% per annum.

     1.17 Base Rate: a rate of interest per annum equal to the “prime rate”
as published from time to time in the Eastern Edition of the Wall Street
Journal as the average prime lending rate for seventy-five percent (75%) of the
United States’ thirty (30) largest commercial banks, or if the Wall Street
Journal shall cease publication or cease publishing the “prime rate” on a
regular basis, such other regularly published average prime rate applicable to
such commercial banks as is acceptable to the Administrative Agent in its
reasonable discretion, with the consent of Borrower, which consent will not be
unreasonably withheld (provided that Borrower’s consent shall not be required
at any time there has occurred and is continuing a Potential Default or an
Event of Default).

     1.25 Consolidated Cash Flow: for any period, the sum of (a) earnings
before income taxes of Borrower and its Consolidated Subsidiaries for such
period determined on a consolidated basis in accordance with GAAP; plus (b)
amounts that have been deducted in the determination of such earnings before
income taxes for such period for (i) Consolidated Interest Expense for such
period, (ii) Depreciation for such period, (iii) Amortization for such period,
and (iv) extraordinary and/or one-time non-cash losses for such period; minus
(c) the amounts that have been included in the determination of such earnings
before income taxes for such period for (i) extraordinary and/or one-time
income, (ii) non-cash patronage income, and (iii) non-cash equity earnings in
joint ventures.

     1.28 Consolidated Funded Debt: all indebtedness for borrowed money of
the Borrower and its Subsidiaries, that is classified as long term debt in
accordance with GAAP, and shall include Debt of such maturity created or
assumed by the Borrower or any Consolidated Subsidiary either directly or
indirectly, including obligations of such maturity secured by liens upon
property of the Borrower or its Consolidated Subsidiaries and upon which such
entity customarily pays the interest, and all rental payments under capitalized
leases of such maturity.

     1.29 Consolidated Interest Expense: for any period, all interest expense
of Borrower and its Consolidated Subsidiaries, as determined in accordance with
GAAP.

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     1.30 Consolidated Members’ and Patrons’ Equity: the amount of equity
accounts plus (or minus in the case of a deficit) the amount of surplus and
retained earnings accounts of Borrower and its Consolidated Subsidiaries and
the minority interest in Subsidiaries, provided that the total amount of
intangible assets of Borrower and its Consolidated Subsidiaries (including,
without limitation, unamortized debt discount and expense, deferred charges and
goodwill) included therein shall not exceed $30,000,000 (and to the extent such
intangible assets exceed $30,000,000.00, they will not be included in the
calculation of Consolidated Members’ and Patrons’ Equity); all as determined in
accordance with GAAP consistently applied.

     1.31 Consolidated Subsidiary: (a) any Subsidiary whose accounts are
consolidated with those of Borrower in accordance with GAAP and (b) Ventura
Foods, LLC so long as the accounts thereof are required to be consolidated with
those of Borrower in accordance with GAAP.

     1.33 Debt: means as to any Person: (a) indebtedness or liability of such
Person for borrowed money, or for the deferred purchase price of property or
services (including trade obligations); (b) obligations of such Person as
lessee under capital leases; (c) obligations of such Person arising under
bankers’ or trade acceptance facilities; (d) all guarantees, endorsements
(other than for collection or deposit in the ordinary course of business), and
other contingent obligations of such Person to purchase any of the items
included in this definition, to provide funds for payment, to supply funds to
invest in any other Person, or otherwise to assure a creditor of another Person
against loss (without duplication) ; (e) all obligations secured by a lien on
property owned by such Person, whether or not the obligations have been
assumed; and (f) all obligations of such Person under any agreement providing
for an interest rate swap, cap, cap and floor, contingent participation or
other hedging mechanisms with respect to interest payable on any of the items
described in this definition.

     1.39 Environmental Laws: any federal, state, or local law, statute,
ordinance, rule, regulation, administration order, or permit now in effect or
hereinafter enacted, pertaining to the public health, safety, industrial
hygiene, or the environmental conditions on, under or about any of the real
property interests of a Person, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 as
amended, 42 U.S.C. 9601-9657 (“CERCLA”) and the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. 6901-6987 (“RCRA”).

     1.49 Funded Debt: means, with respect to any Person, at any time, all
Debt of such Person in each case maturing by its terms more than one year after
the date of creation thereof, or which is renewable or extendible at the option
of such Person for a period ending more than one (1) year after the date of
creation thereof, and shall include Debt of such maturity created or assumed by
such Person either directly or indirectly, including obligations of such
maturity secured by liens upon property of such Person and upon which such
Person customarily pays the interest, and all obligations of such Person under
Capital Leases of such maturity, and the net present value of obligations under
Operating Leases as discounted by a rate of 8.0% per annum, and all obligations
to reimburse the Letter of Credit Bank or any Syndication Party with

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respect to all Letters of Credit which support long-term debt, with
expiration dates in excess of one year from the date of issuance thereof.

     1.53 GAAP : generally accepted accounting principles in the United States
of America, as in effect from time to time.

     1.63 Investment: means, with respect to any Person, (a) any loan or
advance by such Person to any other Person, (b) the purchase or other
acquisition by such Person of any capital stock, obligations or securities of,
or any capital contribution to, or investment in, or the acquisition by such
Person of all or substantially all of the assets of, or any interest in, any
other Person, (c) any performance or standby letter of credit where (i) that
Person has the reimbursement obligation to the issuer, and (ii) the proceeds of
such letter of credit are to be used for the benefit of any other Person, (d)
the agreement by such Person to make funds available for the benefit of another
Person to either cover cost overruns incurred in connection with the
construction of a project or facility, or to fund a debt service reserve
account, (e) the agreement by such Person to assume, guarantee, endorse or
otherwise be or become directly or contingently responsible or liable for the
obligations or debts of any other Person (other than by endorsement for
collection in the ordinary course of business), (f) an agreement to purchase
any obligations, stocks, assets, goods or services but excluding an agreement
to purchase any assets, goods or services entered into in the ordinary course
of business, (g) an agreement to supply or advance any assets, goods or
services not in the ordinary course of business, or (h) an agreement to
maintain or cause such Person to maintain a minimum working capital or net
worth or otherwise to assure the creditors of any Person against loss.

     1.67 Material Adverse Effect: means a material adverse effect on (a) the
financial condition, results of operation, business or property of Borrower; or
(b) on the ability of Borrower to perform its obligations under this Credit
Agreement and the other Loan Documents; or (c) on the ability of the
Administrative Agent or the Syndication Parties to enforce their rights and
remedies against Borrower under the Loan Documents.

     1.71 Multiemployer Plan: means a Plan meeting the definition of a
“multiemployer plan” in Section 3(37) of ERISA.

     1.91 Required Lenders: shall mean Syndication Parties (including Voting
Participants) whose aggregate Individual Commitments constitute fifty-one
percent (51.0%) of the Aggregate Commitment; provided that the number of
Syndication Parties (including Voting Participants) which constitute the
Required Lenders must be the lesser of (i) all, or (ii) no fewer than three
(3), if fewer than three (3) Syndication Parties (including Voting
Participants) would constitute fifty-one percent (51.0%) of the aggregate
Individual Commitments. Pursuant to Section 13.32 hereof, Voting Participants
shall, under the circumstances set forth therein, be entitled to voting rights
and to be included in determining whether certain action is being taken by the
Required Lenders.

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     1.94 Revolving Loan Credit Agreement: means that certain Credit Agreement
(Revolving Loan) dated as of May 21, 2003 by and between Borrower , CoBank, as
administrative agent for all syndication parties thereunder, and as a
syndication party thereunder, and the other syndication parties set forth on
the signature pages thereto, as it shall be amended from time to time.

     1.95 Subsidiary: means with respect to any Person: (a) any corporation
in which such Person, directly or indirectly, (i) owns more than fifty percent
(50%) of the outstanding stock thereof, or (ii) has the power under ordinary
circumstances to elect at least a majority of the directors thereof, or (b) any
partnership, association, joint venture, limited liability company, or other
unincorporated organization or entity, other than Ventura Foods, LLC, with
respect to which such Person, (i) directly or indirectly owns more than fifty
percent (50%) of the equity interest thereof, or (ii) directly or indirectly
owns an equity interest in an amount sufficient to control the management
thereof. All of Borrower’s Subsidiaries owned as of May 21, 2003 are set forth
on Exhibit 1.95 hereto.

     2.2 The following new Sections are added to Article 1, reading as follows:

     1.107 Anti-Terrorism Laws:. shall have the meaning set forth in
Subsection 7.24.1.

     1.108 Borrower Benefit Plan: means (a) any “employee benefit plan”, as
such term is defined in Section 3(3) of ERISA (including any “multiemployer
plan” as defined in Section 3(37) of ERISA); (b) any “multiple employer plan”
within the meaning of Section 413 of the Code; (c) any “multiple employer
welfare arrangement” within the meaning of Section 3(40) of ERISA; (d) a
“voluntary employees’ beneficiary association” within the meaning of Section
501(a)(9) of the Code; (e) a “welfare benefit fund” within the meaning of
Section 419 of the Code; or (f) any employee welfare benefit plan within the
meaning of Section 3(1) of ERISA for the benefit of retired or former
employees, which is maintained by Borrower or in which Borrower participates or
to which Borrower is obligated to contribute.

     1.109 Borrower Pension Plan: means each Borrower Benefit Plan that is an
“employee pension benefit plan” as defined in Section 3(2) of ERISA that is
intended to satisfy the requirements of Section 401(a) of the Code.

     1.110 CERCLA: shall have the meaning set forth in Section 1.39.

     1.111 Communications: shall have the meaning set forth in Subsection 14.16.1.

     1.112 Embargoed Person: shall have the meaning set forth in Section 9.16.

     1.113 Executive Order: shall have the meaning set forth in Subsection 7.24.1.

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     1.114 Farm Credit System Institution: shall mean any Farm Credit Bank,
any Federal land bank association, any production credit association, the banks
for cooperatives, and such other institutions as may be a part of the Farm
Credit System and chartered by and subject to regulation by the Farm Credit
Administration.

     1.115 Holdout Lender: shall have the meaning set forth in Section 13.32.

     1.116 Intellectual Property: shall have the meaning set forth in Section 7.18.

     1.117 NCRA: shall have the meaning set forth in Section 10.5.

     1.118 Non-US Lender: shall have the meaning set forth in Section 13.30.

     1.119 OFAC: shall have the meaning set forth in Section 9.16.

     1.120 Other List: shall have the meaning set forth in Section 9.16.

     1.121 Platform: shall have the meaning set forth in Subsection 14.16.2.

     1.122 Primary Portal: shall have the meaning set forth in Subsection 14.16.2.

     1.123 RCRA: shall have the meaning set forth in Section 1.39.

     1.121 Replacement Lender: shall have the meaning set forth in Section 13.32.

     1.122 SDN List: shall have the meaning set forth in Section 9.16.

     2.3 Subsection 3.1.1 is amended by the addition of the following sentence:

     Base Rate Loans must be in minimum amounts of $10,000,000.00 and in
incremental multiples of $1,000,000.00.

     2.4 Section 4.4 is amended in its entirety to read as follows:

     4.4 Manner of Payment. All payments, including prepayments, that Borrower
is required or permitted to make under the terms of this Credit Agreement and
the other Loan Documents shall be made to the Administrative Agent in
immediately available federal funds, to be received no later than 1:00 P.M.
Central time of the Banking Day on which such payment is due (or the following
Banking Day if such date is not a Banking Day) by wire transfer through Federal
Reserve Bank, Kansas City, Routing Number: 307088754, COBANK ENGWD (or to such
other account as the Administrative Agent may designate by notice).

     4.4.1 Payments to be Free and Clear. All sums payable by Borrower
under this Credit Agreement and the other Loan Documents shall be paid
without setoff or counterclaim and free and clear of, and without any
deduction or withholding on account of, any tax imposed, levied,
collected, withheld or assessed by or within the United States of America
or any political subdivision in or of the United States of America or any
other jurisdiction from or to which a payment is made by or on behalf of
Borrower or by any

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federation or organization of which the United States of America or
any such jurisdiction is a member at the time of payment (excluding taxes
imposed on or measured by the net income or net profits of the recipient
of such payment, and franchise taxes imposed in lieu thereof).

     4.4.2 Grossing-up of Payments. If Borrower or any other Person is
required by law to make any deduction or withholding on account of any
such tax from any sum paid or payable by Borrower to the Administrative
Agent or any Syndication Party under any of the Loan Documents:

          (a) Borrower shall notify the Administrative Agent of any such
requirement or any change in any such requirement as soon as Borrower
becomes aware of it;

          (b) Borrower shall pay any such tax when such tax is due, such
payment to be made (if the liability to pay is imposed on Borrower) for
its own account or (if that liability is imposed on the Administrative
Agent or such Syndication Party, as the case may be) on behalf of and in
the name of the Administrative Agent or such Syndication Party;

          (c) the sum payable by Borrower in respect of which the relevant
deduction, withholding or payment is required shall be increased to the
extent necessary to ensure that, after the making of that deduction,
withholding or payment, the Administrative Agent or such Syndication
Party, as the case may be, receives on the due date a net sum equal to
what it would have received had no such deduction, withholding or payment
been required or made; and

          (d) within thirty (30) days after paying any sum from which it is
required by law to make any deduction or withholding, and within thirty
(30) days after the due date of payment of any tax which it is required
by clause (b) above to pay, Borrower shall deliver to the Administrative
Agent evidence satisfactory to the other affected parties of such
deduction, withholding or payment and of the remittance thereof to the
relevant taxing or other authority;

     provided that no such additional amount shall be required to be paid to
any Syndication Party under clause (c) above except to the extent that any
change after the date on which such Syndication Party became a Syndication
Party in any such requirement for a deduction, withholding or payment as is
mentioned therein shall result in an increase in the rate of such deduction,
withholding or payment from that in effect at the date on which such
Syndication Party became a Syndication Party, in respect of payments to such
Syndication Party.

     2.5 Section 4.5 is amended by the addition of the following sentence at
the end of such Section:

     In no event will the amount of Funding Losses payable under this Section
be less than $300.00 with respect to any such prepayment.

     2.6
The following Sections of Article 7 are amended in their entirety to
read as follows:

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     7.10 Employee Benefit Plans. Exhibit 7.10 sets forth as of the Closing
Date a true and complete list of each Borrower Benefit Plan that is maintained
by Borrower or any of its Subsidiaries or in which Borrower or any of its
Subsidiaries participates or to which Borrower or any of its Subsidiaries is
obligated to contribute, in each case as of the Closing Date. Borrower and its
Subsidiaries are in compliance in all material respects with the Employee
Retirement Income Security Act of 1974, as amended, and the regulations
thereunder (“ERISA”), to the extent applicable to them, and have not received
any notice to the contrary from the Pension Benefit Guaranty Corporation
(“PBGC”).

     7.15 Fiscal Year. Each fiscal year of Borrower begins on September 1 of
each calendar year and ends on August 31 of the following calendar year.

     7.18 Trademarks, Tradenames, etc. Borrower owns or licenses all patents,
trademarks, trade names, service marks and copyrights (collectively,
“Intellectual Property”) that it utilizes in its business as presently being
conducted and as anticipated to be conducted, except where the failure to do so
could not reasonably be expected to result in a Material Adverse Effect on
Borrower. Borrower is not a licensee under any written license for any patent,
trademark, tradename, service mark or copyright other than shrinkwrap licenses
for “off-the-shelf” software used by Borrower in the conduct of its business.
The Intellectual Property is in full force and effect, and Borrower has taken
or caused to be taken all action, necessary to maintain the Intellectual
Property in full force and effect and has not taken or failed to take or cause
to be taken any action which, with the giving of notice, or the expiration of
time, or both, could result in any such Intellectual Property being revoked,
invalidated, modified, or limited.

     7.21 Acts of God. Neither the business nor the properties of Borrower or
any Subsidiary are currently affected by any fire, explosion, accident,
drought, storm, hail, earthquake, embargo, act of God or of the public enemy or
other casualty (whether or not covered by insurance) which has resulted in, or
could reasonably be expected to result in, a Material Adverse Effect.

     2.7 The following new Sections and Subsections are added to Article 7, and
existing Section 7.23 is renumbered as Section 7.25:

     7.23 Labor Matters and Labor Agreements. Except as set forth in Exhibit
7.23 hereto: (a) As of the Closing Date, there are no collective bargaining
agreements or other labor agreements covering any employees of Borrower or any
Subsidiary the termination, cessation, or breach of which could reasonably be
expected to result in a Material Adverse Effect, and a true and correct copy of
each such agreement will be furnished to the Administrative Agent upon its
written request from time to time. (b) There is no organizing activity
involving Borrower pending or, to Borrower’s knowledge, threatened by any labor
union or group of employees. (c) There are, to Borrower’s knowledge, no
representation proceedings pending or threatened with the National Labor
Relations Board, and no labor organization or group of employees of Borrower
has made a pending demand for recognition. (d) There are no complaints or
charges against Borrower pending or, to Borrower’s knowledge threatened to be
filed with any federal, state, local or foreign court, governmental agency or
arbitrator based on, arising out of, in connection with, or otherwise relating
to the employment or termination of employment by Borrower of any individual.
(e) There are no strikes or other labor disputes against Borrower

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that are pending or, to Borrower’s knowledge, threatened. (f) Hours
worked by and payment made to employees of Borrower or any Subsidiary have not
been in violation of the Fair Labor Standards Act (29 U.S.C. § 201 et seq.) or
any other applicable law dealing with such matters. The representations made
in clauses (b) through (f) of this Section are made with respect to those
occurrences described which could, considered in the aggregate, reasonably be
expected to have a Material Adverse Effect.

     7.24 Anti-Terrorism Laws.

          7.24.1 Violation of Law. Neither the Borrower nor, to the knowledge of
Borrower, any of its Subsidiaries, is in violation of any laws relating to
terrorism or money laundering (“Anti-Terrorism Laws”), including Executive
Order No. 13224 on Terrorist Financing, effective September 24, 2001
(“Executive Order”), and the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,
Public Law 107-56.

          7.24.2 Classification. Neither Borrower nor, to the knowledge of
Borrower, any of its Subsidiaries, or their respective brokers or other agents
acting or benefiting in any capacity in connection with the Loans, is any of
the following:

            (a) a Person or entity that is listed in the annex to, or is otherwise
subject to the provisions of, the Executive Order;

            (b) a Person or entity owned or controlled by, or acting for or on behalf
of, any Person or entity that is listed in the annex to, or is otherwise
subject to the provisions of, the Executive Order;

            (c) a Person or entity with which any Syndication Party is prohibited
from dealing or otherwise engaging in any transaction by any Anti-Terrorism
Law;

            (d) a Person or entity that commits, threatens or conspires to commit or
supports “terrorism” as defined in the Executive Order; or

            (e) a Person or entity that is named as a “specially designated national
and blocked person” on the most current list published by the U.S. Treasury
Department Office of Foreign Asset Control at its official website or any
replacement website or other replacement official publication of such list.

          7.24.3 Conduct of Business. Neither Borrower nor to the knowledge of
Borrower, any of its brokers or other agents acting in any capacity in
connection with the Loans (a) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the benefit of
any Person described in clause (b) of Subsection 7.24.2 above, (b) deals in, or
otherwise engages in any transaction relating to, any property or interests in
property blocked pursuant to the Executive Order, or (c) engages in or
conspires to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions
set forth in any Anti-Terrorism Law.

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     2.8 The following Sections and Subsections of Article 9 are amended in
their entirety to read as follows:

          9.2.1 Annual Financial Statements. As soon as available, but in no event
later than one hundred and twenty (120) days after the end of any Fiscal Year
of Borrower occurring during the term hereof one copy of the audit report for
such year and accompanying consolidated financial statements (including all
footnotes thereto), including a consolidated balance sheet, a consolidated
statement of earnings, a consolidated statement of capital, and a consolidated
statement of cash flow for the Borrower and its Subsidiaries, showing in
comparative form the figures for the previous Fiscal Year, all in reasonable
detail, prepared in conformance with GAAP consistently applied and certified
without qualification by PricewaterhouseCoopers, or other independent public
accountants of nationally recognized standing selected by the Borrower and
satisfactory to the Administrative Agent, and to be accompanied by a copy of
the management letter of such accountants addressed to the board of directors
of Borrower related to such annual audit; and annual financial statements of
Borrower. Delivery to the Administrative Agent within the time period
specified above of copies of Borrower’s Annual Report on Form 10-K as prepared
and filed in accordance with the requirements of the Securities Exchange
Commission shall be deemed to satisfy the requirements of this Subsection if
accompanied by the required unqualified accountant’s certification. Such
annual financial statements or Form 10-K’s required pursuant to this Subsection
shall be accompanied by a Compliance Certificate signed by Borrower’s Chief
Financial Officer or other officer of Borrower acceptable to the Administrative
Agent.

          9.2.2 Quarterly Financial Statements. As soon as available but in no
event more than forty-five (45) days after the end of each Fiscal Quarter
(except the last Fiscal Quarter of Borrower’s Fiscal Year) the following
financial statements or other information concerning the operations of Borrower
and its Subsidiaries for such Fiscal Quarter, the Fiscal Year to date, and for
the corresponding periods of the preceding Fiscal Year, all prepared in
accordance with GAAP consistently applied: (a) a consolidated balance sheet,
(b) a consolidated summary of earnings, (c) a consolidated statement of cash
flows, and (d) such other statements as the Administrative Agent may reasonably
request. Delivery to the Administrative Agent within the time period specified
above of copies of Borrower’s Quarterly Report on Form 10-Q as prepared and
filed in accordance with the requirements of the Securities Exchange Commission
shall be deemed to satisfy the requirements of this Subsection other than
clause (d) hereof. Such quarterly financial statements or Form 10-Q’s required
pursuant to this Subsection shall be accompanied by a Compliance Certificate
signed by Borrower’s Chief Financial Officer or other officer of Borrower
acceptable to the Administrative Agent (subject to normal year end
adjustments).

          9.2.4 ERISA Reports. As soon as possible and in any event within twenty
(20) days after Borrower knows or has reason to know that any Reportable Event
or Prohibited Transaction has occurred with respect to any Plan or that the
PBGC or Borrower or any Subsidiary has instituted or will institute proceedings
under Title IV of ERISA to terminate any Plan, or that Borrower, any Subsidiary
or any ERISA Affiliate has completely or partially withdrawn from a
Multiemployer Plan, or that a Plan which is a Multiemployer Plan is in
reorganization (within the meaning of Section 4241 of ERISA), is insolvent
(within the meaning of Section 4245 of ERISA) or is terminating, a certificate
of Borrower’s Chief Financial Officer

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setting forth details as to such Reportable Event or Prohibited
Transaction or Plan termination or withdrawal or reorganization or insolvency
and the action Borrower or such Subsidiary proposes to take with respect
thereto, provided, however, that notwithstanding the foregoing, no reporting is
required under this subsection (6) unless the matter(s), individually or in the
aggregate, result, or could be reasonably expected to result, in aggregate
obligations or liabilities of Borrower and/or the Subsidiaries in excess of ten
million dollars ($10,000,000).

          9.2.5 Notice of Litigation. Promptly after the commencement thereof,
notice of all actions, suits, arbitration and any other proceedings before any
Governmental Authority, affecting Borrower or any Subsidiary which, if
determined adversely to Borrower or any Subsidiary, could reasonably be
expected to require Borrower or any Subsidiary to have to pay or deliver assets
having a value of ten million dollars ($10,000,000) or more (whether or not the
claim is covered by insurance) or could reasonably be expected to result in a
Material Adverse Effect.

          9.2.11 Additional Information. With reasonable promptness, such other
information respecting the condition or operations, financial or otherwise, of
Borrower or any Subsidiary as the Administrative Agent or any Syndication Party
may from time to time reasonably request.

     9.5 Compliance with Legal Requirements and Agreements. Borrower shall,
and shall cause each Subsidiary to: (a) comply with all laws, rules,
regulations and orders applicable to Borrower (or such Subsidiary, as
applicable) or its business unless such failure to comply is the subject of a
Good Faith Contest; and (b) comply with all agreements, indentures, mortgages,
and other instruments to which it (or any Subsidiary, as applicable) is a party
or by which it or any of its (or any Subsidiary, or any of such Subsidiary’s,
as applicable) property is bound; provided, however, that the failure of
Borrower to comply with this sentence in any instance not directly involving
the Administrative Agent or a Syndication Party shall not constitute an Event
of Default unless such failure could reasonably be expected to have a Material
Adverse Effect.

     9.7 Taxes. Borrower shall pay or cause to be paid, and shall cause each
Subsidiary to pay, when due all taxes, assessments, and other governmental
charges upon it, its income, its sales, its properties (or upon Subsidiary and
its income, sales, and properties, as applicable), and federal and state taxes
withheld from its (or Subsidiary’s, as applicable) employees’ earnings, unless
(a) the failure to pay such taxes, assessments, or other governmental charges
could not reasonably be expected to result in a Material Adverse Effect, or (b)
such taxes, assessments, or other governmental charges are the subject of a
Good Faith Contest and Borrower has established adequate reserves therefor in
accordance with GAAP.

     9.7 Insurance. Borrower shall maintain, and cause each Subsidiary to
maintain, insurance with one or more financially sound and reputable insurance
carrier or carriers reasonably acceptable to the Administrative Agent, in such
amounts (including deductibles) and covering such risks (including fidelity
coverage) as are usually carried by companies engaged in the same or a similar
business and similarly situated, provided, however, that Borrower may, to the
extent permitted by Law, provide for appropriate self-insurance with respect to
workers’ compensation. At the request of Administrative Agent, copies of all
policies (or such other proof of compliance with this Section as may be
reasonably satisfactory) shall be delivered to the

11

 

Administrative Agent. All such insurance policies shall contain a
provision requiring at least ten (10) days’ notice to Borrower prior to any
cancellation for non-payment of premiums and at least forty-five (45) days’
notice to Borrower of cancellation for any other reason or of non-renewal.
With respect to all such insurance policies, Borrower shall provide the
Administrative Agent with (a) within ten (10) days after obtaining such
knowledge, written notice of any material modification of which it has
knowledge; and (b) one or more certificates of insurance which shall include
the agreement of the broker/insuror representative providing such certificates
to provide to the Administrative Agent at least ten (10) days’ notice prior to
any cancellation of any such insurance policies for non-payment of premiums and
at least forty-five (45) days’ notice prior to cancellation of any such
insurance policies for any other reason, and of non-renewal or material
modification of any such insurance policies. No later than forty (40) days
prior to expiration, Borrower shall give the Administrative Agent (x)
satisfactory written evidence of renewal of all such policies with premiums
paid, or (y) a written report as to the steps being taken by Borrower to renew
or replace all such policies, provided that notwithstanding the receipt of such
written report, the Administrative Agent may at any time thereafter give
Borrower written notice to provide the Administrative Agent with such evidence
as described in clause (x), in which case Borrower must do so within ten (10)
days of such notice. Borrower agrees to pay all premiums on such insurance as
they become due (including grace periods), and will not permit any condition to
exist which would wholly or partially invalidate any insurance thereon.

     9.11 Inspection. Borrower shall permit, and cause its Subsidiaries to
permit, the Administrative Agent or any Syndication Party or their agents,
during normal business hours or at such other times as the parties may agree,
to inspect the assets and operations of Borrower and its Subsidiaries and to
examine, and make copies of or abstracts from, Borrower’s properties, books,
and records, and to discuss the affairs, finances, operations, and accounts of
Borrower and its Subsidiaries with their respective officers, directors,
employees, and independent certified public accountants (and by this provision
Borrower authorizes said accountants to discuss with the Administrative Agent
or any Syndication Party or their agents the finances and affairs of Borrower);
provided, that, in the case of each meeting with the independent accountants
Borrower is given an opportunity to have a representative present at such
meeting.

     9.12 Required Licenses; Permits; Intellectual Property; Etc. Borrower
shall duly and lawfully obtain and maintain in full force and effect, and shall
cause its Subsidiaries to obtain and maintain in full force and effect, all
Required Licenses and Intellectual Property as appropriate for the business
being conducted and properties owned by Borrower or such Subsidiaries at any
given time.

     9.13 ERISA Borrower shall make or cause to be made, and cause each
Subsidiary to make or cause to be made, all payments or contributions to all
Borrower Pension Plans covered by Title IV of ERISA, which are necessary to
enable those Borrower Pension Plans to continuously meet all minimum funding
standards or requirements.

12

 

     9.15 Financial Covenants. Borrower shall maintain the following financial
covenants:

          9.15.1 Working Capital. Borrower shall have at all times Consolidated
Current Assets minus Consolidated Current Liabilities of not less than
$200,000,000.

     [NOTE: Subsections 9.15.2 and 9.15.3 remain un changed.]

     2.9 The following new Sections are added to Article 9 to read as follows:

     9.16 Embargoed Person. At all times throughout the term of the Loans, (a)
none of the funds or assets of Borrower that are used to repay the Loans shall
constitute property of, or shall be beneficially owned directly or, to the
knowledge of Borrower, indirectly by, any Person subject to sanctions or trade
restrictions under United States law (“Embargoed Person” or “Embargoed
Persons”) that is identified on (1) the “List of Specially Designated Nationals
and Blocked Persons” (the “SDN List”) maintained by the Office of Foreign
Assets Control (“OFAC”), U.S. Department of the Treasury, and/or to the
knowledge of Borrower, as of the date thereof, based upon reasonable inquiry by
Borrower, on any other similar list (“Other List”) maintained by OFAC pursuant
to any authorizing statute including, but not limited to, the International
Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the
Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Order or regulation
promulgated thereunder, with the result that the investment in Borrower
(whether directly or indirectly), is prohibited by law, or the Loans made by
the Syndication Parties would be in violation of law, or (2) the Executive
Order, any related enabling legislation or any other similar Executive Orders,
and (b) no Embargoed Person shall have any direct interest, and to the
knowledge of Borrower, as of the date hereof, based upon reasonable inquiry by
Borrower, indirect interest, of any nature whatsoever in Borrower, with the
result that the investment in Borrower (whether directly or indirectly), is
prohibited by law or the Loans are in violation of law.

     9.17 Anti-Money Laundering. At all times throughout the term of the Loans,
to the knowledge of Borrower, as of the date hereof, based upon reasonable
inquiry by Borrower, none of the funds of Borrower, that are used to repay the
Loans shall be derived from any unlawful activity, with the result that the
investment in Borrower (whether directly or indirectly), is prohibited by law
or the Loans would be in violation of law.

     2.10 The following Sections and Subsections of Article 10 (and including
certain subparagraphs of Section 10.3) are amended in their entirety, and a new
subparagraphs (n) and (o) are added to Section 10.3, in each case to read as
follows:

     10.1 Borrowing. Borrower shall not (nor shall it permit any of its
Restricted Subsidiaries to) create, incur, assume or permit to exist, directly
or indirectly, any Debt, except for: (a) Debt of Borrower arising under this
Credit Agreement and the other Loan Documents; (b) trade payables arising in
the ordinary course of business; (c) Capital Leases in existence from time to
time; (d) current operating liabilities (other than for borrowed money)
incurred in the ordinary course of business; (e) unsecured Debt arising under
uncommitted lines of credit; provided that the maximum principal amount that
may be outstanding at any one time shall not exceed $50,000,000.00; (f) Debt in
existence on the date hereof as set forth in Exhibit 10.1

13

 

attached hereto; (g) unsecured long-term Debt; (h) Debt of Borrower
incurred pursuant to the Revolving Loan Credit Agreement; (i) documentary and
standby letters of credit issued at the request of Borrower or any Restricted
Subsidiary, provided the aggregate undrawn face amount under all such letters
of credit does not exceed $75,000,000; and (j) such other Debt agreed upon in
writing between Borrower and the Syndication Parties.

     10.3 Liens. Borrower shall not (nor shall it permit any of its Restricted
Subsidiaries to) create, incur, assume or suffer to exist any mortgage, pledge,
lien, charge or other encumbrance on, or any security interest in, any of its
real or personal properties (including, without limitation, leasehold
interests, leasehold improvements and any other interest in real property or
fixtures), now owned or hereafter acquired, except the following Liens
(“Permitted Encumbrances”):

          (c) Liens under workers’ compensation, unemployment insurance, social
security or similar legislation (other than ERISA), or to secure payments of
premiums for insurance purchased in the ordinary course of business, or to
secure the performance of tenders, statutory obligations, surety and appearance
bonds and bids, bonds for release of an attachment, stay of execution or
injunction, leases, government contracts, performance and return-of-money bonds
and other similar obligations, all of which are incurred in the ordinary course
of business of Borrower or the Restricted Subsidiary, as applicable, and not in
connection with the borrowing of money;

          (d) Any attachment or judgment Lien, the time for appeal or petition for
rehearing of which shall not have expired or in respect of which Borrower or
the Restricted Subsidiary is protected in all material respects by insurance or
for the payment of which adequate reserves have been established, provided that
the execution or other enforcement of such Liens is effectively stayed and the
claims secured thereby are the subject of a Good Faith Contest, and provided
further that the aggregate amount of liabilities of Borrower and its Restricted
Subsidiaries so secured (including interest and penalties) shall not be in
excess of $10,000,000.00 at any one time outstanding;

          (k) Liens of CoBank and other cooperatives, respectively, on Investments
by Borrower in the stock, participation certificates, or allocated reserves of
CoBank or other cooperatives, respectively, owned by Borrower;

          (m) Liens securing its reimbursement obligations under any letter of
credit issued in connection with the acquisition of an asset; provided that (i)
the lien attaches only to such asset, and (ii) the lien is released upon
satisfaction of such reimbursement obligation;

          (n) Liens to secure and provide credit support, up to a maximum of
$25,000,000.00, for regulated exchange or over-the-counter hedging
transactions; and

          (o) Liens created pursuant to the Revolving Loan Credit Agreement on the
Cash Collateral Account (as that term is defined in the Revolving Loan Credit
Agreement) and on all money, financial assets, or other property on deposit or
held therein.

[NOTE: the other subparagraphs of Section 10.3 remain un changed.]

14

 

     10.4 Sale of Assets. Borrower shall not (nor shall it permit any of its
Restricted Subsidiaries to) sell, convey, assign, lease or otherwise transfer
or dispose of, voluntarily, by operation of law or otherwise, any material part
of its now owned or hereafter acquired assets during any twelve (12) month
period commencing September 1, 2002 and each September 1 thereafter, except:
(a) the sale of inventory, equipment and fixtures disposed of in the ordinary
course of business, (b) the sale or other disposition of assets no longer
necessary or useful for the conduct of its business, and (c) leases of assets
to an entity in which Borrower has at least a fifty-percent (50%) interest in
ownership, profits, and governance. For purposes of this Section, “material
part” shall mean ten percent (10%) or more of the lesser of the book value or
the market value of the assets of Borrower or such Restricted Subsidiary as
shown on the balance sheets thereof as of the August 31 immediately preceding
each such twelve (12) month measurement period.

     10.5 Liabilities of Others. Borrower shall not (nor shall it permit any
of its Restricted Subsidiaries to) assume, guarantee, become liable as a
surety, endorse, contingently agree to purchase, or otherwise be or become
liable, directly or indirectly (including, but not limited to, by means of a
maintenance agreement, an asset or stock purchase agreement, or any other
agreement designed to ensure any creditor against loss), for or on account of
the obligation of any Person, except (a) by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of the Borrower’s or any Restricted Subsidiary’s business, (b)
guarantees made from time to time, whether in existence on the Closing Date or
made subsequent thereto, by Borrower and its Restricted Subsidiaries in the
ordinary course of their respective businesses with respect to the liabilities
and obligations of Persons other than National Cooperative Refinery Association
(“NCRA”); provided, however, that the aggregate amount of all indebtedness
guaranteed under this clause (b) shall not exceed $150,000,000.00 in the
aggregate, and (c) guarantees made by Borrower from time to time, whether in
existence on the Closing Date or made subsequent thereto, of liabilities and
obligations of NCRA for Funded Debt of NCRA, provided that the maximum amount
of liabilities of NCRA guaranteed pursuant to this clause (c), when added to
the amount of Investments by Borrower pursuant to clause (i) of Subsection 10.8
hereof, shall not exceed $125,000,000.00.

     10.6 Loans. Borrower shall not (nor shall it permit any of its Restricted
Subsidiaries to) lend or advance money, credit, or property to any Person,
except for (a) loans to Restricted Subsidiaries; (b) trade credit extended in
the ordinary course of business and advances against the purchase price for the
purchase by Borrower of goods or services in the ordinary course of business;
(c) loans made by Borrower to its members on open account maintained by such
members with Borrower or made by Borrower to its members pursuant to its
Affiliate Financing CoBank Participation Program; and (d) loans made by Fin-Ag,
Inc. to agricultural producers, provided that at all times on and after May 21,
2003, the aggregate outstanding principal amount of all such loans retained by
Borrower and Fin-Ag, Inc. under clauses (c) and (d) of this Section shall not
exceed $110,000,000.00.

     10.7 Merger; Acquisitions; Business Form; Etc. Borrower shall not (nor
shall it permit any of its Restricted Subsidiaries to) merge or consolidate
with any entity, or acquire all or substantially all of the assets of any
person or entity, or form or create any new Subsidiary (other than a Restricted
Subsidiary formed by Borrower), change its business form from a cooperative
corporation, or commence operations under any other name, organization, or
entity,

15

 

including any joint venture; provided, however,

          (a) The foregoing shall not prevent any consolidation, acquisition, or
merger if after giving effect thereto:

               (i) The book value of Borrower and its subsidiaries does not increase due
to all such mergers, consolidations or acquisitions by an aggregate amount in
excess of $100,000,000.00 in any Fiscal Year of Borrower;

               (ii) Borrower is the surviving entity; and

               (iii) No Event of Default or Potential Default shall have occurred and be
continuing.

          (b) The foregoing shall not prevent Borrower from forming or creating any
new Subsidiary provided:

               (i) The Investment in such Subsidiary does not violate any provision of
Section 10.8 hereof; and

               (ii) Such Subsidiary shall not acquire all or substantially all of the
assets of any Person except through an acquisition, consolidation, or merger
satisfying the requirements of clause (a) of this Section.

     10.8 Investments. Except for the purchase of Bank Equity Interests,
Borrower shall not (nor shall it permit any of its Restricted Subsidiaries to)
own, purchase or acquire any stock, obligations or securities of, or any other
interest in, or make any capital contribution to, or otherwise make an
Investment in, any Person, except that Borrower and the Restricted Subsidiaries
may own, purchase or acquire:

          (f) Investments in Persons, which are not Restricted Subsidiaries,
identified, including the book value of each such Investment, on Exhibit
10.8(f) hereto; provided that the amount of such Investment shall not increase
above the amount shown in Exhibit 10.8(f),except for (i) property and cash
contributions made between March 31, 2003 and May 21, 2003 and not shown in
Exhibit 10.8(f), and (ii) Investments made pursuant to clauses (h) through (k)
of this Section subsequent to May 21, 2003;

          (h) Investments in the form of non-cash patronage dividends in any Person;

          (i) Investments in NCRA in addition to (1) non-cash patronage dividends,
and (2) those Investments in NCRA by Borrower prior to the Closing Date, as
shown, by amount and date, on Exhibit 10.8(i) hereto, provided that the maximum
amount of Investments in NCRA subsequent to the Closing Date pursuant to this
clause (i), when added to the aggregate amount of obligations and liabilities
of NCRA guaranteed by Borrower pursuant to clause (c) of Subsection 10.5
hereof, shall not exceed $125,000,000.00;

          (j) Investments in Ventura Foods, LLC in addition to those Investments in
Ventura Foods, LLC by Borrower prior to the Closing Date, as shown, by amount
and date, on

16

 

Exhibit 10.8(j) hereto, provided that the maximum amount of Investments in
Ventura Foods, LLC subsequent to the Closing Date pursuant to this clause (j)
shall not exceed $75,000,000.00; and

          (k) Investments, in addition to those permitted by clauses (a) through (j)
above, in an aggregate amount not exceeding $110,000,000.00.

[NOTE: the other subparagraphs of Section 10.8 remain un changed.]

     2.11 The following new Sections are added to Article 10, reading as follows:

     10.12 ERISA. Borrower shall not: (a) engage in or permit any transaction
which could result in a “prohibited transaction” (as such term is defined in
Section 406 of ERISA) or in the imposition of an excise tax pursuant to Section
4975 of the Code with respect to any Borrower Benefit Plan; (b) engage in or
permit any transaction or other event which could result in a “reportable
event"( as such term is defined in Section 4043 of ERISA) for any Borrower
Pension Plan; (c) fail to make full payment when due of all amounts which,
under the provisions of any Borrower Benefit Plan, Borrower is required to pay
as contributions thereto; (d) permit to exist any “accumulated funding
deficiency” (as such term is defined in Section 302 of ERISA) as of the end of
any Fiscal Year, in excess of $25,000,000.00, whether or not waived, with
respect to any Borrower Pension Plan; (e) fail to make any payments to any
Multiemployer Plan that Borrower may be required to make under any agreement
relating to such Multiemployer Plan or any law pertaining thereto; or (f)
terminate any Borrower Pension Plan in a manner which could result in the
imposition of a lien on any property of Borrower pursuant to Section 4068 of
ERISA. Borrower shall not terminate any Borrower Pension Plan so as to result
in any liability to the PBGC.

     10.13 Anti-Terrorism Law. Borrower shall not (a) conduct any business or
engage in making or receiving any contribution of funds, goods or services to
or for the benefit of any Person described in Subsection 7.24.2 above, (b) deal
in, or otherwise engage in any transaction relating to, any property or
interests in property blocked pursuant to the Executive Order or any other
Anti-Terrorism Law, or (c) engage in or conspire to engage in any transaction
that evades or avoids, or has the purpose of evading or avoiding, or attempts
to violate, any of the prohibitions set forth in any Anti-Terrorism Law (and
Borrower shall deliver to the Administrative Agent any certification or other
evidence requested from time to time by the Administrative Agent in its
reasonable discretion, confirming Borrower’ compliance with this Section).

     2.12 Subparagraphs (c), (d), and (e) of Section 12.1 are amended in their
entirety to read as follows:

               (c) Any default by Borrower in the performance or compliance with the
covenants, promises, conditions or provisions of Sections 9.8 (only if such
default is with respect to the last sentence of such Section), 9.11, 9.15,
9.16, 9.17, 10.1, 10.4, 10.5, 10.7, 10.10, or 10.13 of this Credit Agreement;
provided that a default under Subsection 9.15.1 hereof shall not constitute an
Event of Default nor a Potential Default if Borrower is in compliance with such
Subsection within five (5) Banking Days after the earlier of (i) the date on
which Borrower

17

 

discovers that it is not in compliance with such test, or (ii) the date by
which Borrower is required by Subsections 9.2.1 or 9.2.2 hereof to provide
quarterly or year-end financial statements and/or Compliance Certificates to
the Administrative Agent.

               (d) Any default by Borrower in the performance or compliance with the
covenants, promises, conditions or provisions of Sections 9.2, 9.5, 9.6, 9.7,
9.8 (except as provided in clause (c) of this Section), 9.9, 9.10, (except as
provided in Section 12.1(e)), 9.12, 9.13, 9.14, 10.3, 10.6, 10.8, 10.9, or
10.11 of this Credit Agreement, and such failure continues for fifteen (15)
days after Borrower learns of such failure to comply, whether by Borrower’s own
discovery or through notice from the Administrative Agent.

               (e) The failure of Borrower to pay when due, or failure to perform or
observe any other obligation or condition with respect to any of the following
obligations to any Person, beyond any period of grace under the instrument
creating such obligation: (i) any indebtedness for borrowed money or for the
deferred purchase price of property or services, (ii) any obligations under
leases which have or should have been characterized as Capital Leases, or (iii)
any contingent liabilities, such as guaranties, for the obligations of others
relating to indebtedness for borrowed money or for the deferred purchase price
of property or services or relating to obligations under leases which have or
should have been characterized as Capital Leases; provided that no such failure
will be deemed to be an Event of Default hereunder unless and until the
aggregate amount owing under obligations with respect to which such failures
have occurred and are continuing is at least $10,000,000.00.

     2.13 Section 12.13 is amended in its entirety to read as follows:

     12.13 Rights and Remedies. In addition to the remedies set forth in
Section 12.1 and 12.2 hereof, upon the occurrence of an Event of Default, the
Administrative Agent shall be entitled to exercise, subject to the provisions
of Subsection 13.6.4 hereof, all the rights and remedies provided in the Loan
Documents and by any applicable law. Each and every right or remedy granted to
the Administrative Agent pursuant to this Credit Agreement and the other Loan
Documents, or allowed the Administrative Agent by law or equity, shall be
cumulative. Failure or delay on the part of the Administrative Agent to
exercise any such right or remedy shall not operate as a waiver thereof. Any
single or partial exercise by the Administrative Agent of any such right or
remedy shall not preclude any future exercise thereof or the exercise of any
other right or remedy.

     2.14 The reference in Section 13.3 to 11:00 A.M. (Central time) is changed
to 2:00 P.M. (Central time).

     2.15 The following Sections and Subsections of Article 13 are amended in
their entirety as follows:

          13.5.1 Advice To solicit the advice and assistance of each of the
Syndication Parties and Voting Participants concerning the administration of
the Loans and the exercise by the Administrative Agent of its various rights,
remedies, powers, and discretions with respect thereto. As to any matters not
expressly provided for by this Credit Agreement or any other Loan Document, the
Administrative Agent shall in all cases be fully protected in acting, or in

18

 

refraining from acting, hereunder in accordance with instructions signed
by all of the Syndication Parties or the Required Lenders, as the case may be
(and including in each such case, Voting Participants), and any action taken or
failure to act pursuant thereto shall be binding on all of the Syndication
Parties, Voting Participants, and the Administrative Agent.

          13.6.2 Distribute Payments. To receive and distribute to the Syndication
Parties payments made by Borrower pursuant to the Loan Documents, as provided
in Article 4 hereof. Unless the Administrative Agent shall have received
notice from Borrower prior to the date on which any payment is due to any
Syndication Party hereunder that Borrower will not make such payment in full,
the Administrative Agent may assume that Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent in its
sole discretion may, but shall not be obligated to, in reliance upon such
assumption, cause to be distributed to each Syndication Party on such due date
an amount equal to the amount then due such Syndication Party. If and to the
extent Borrower shall not have so made such payment in full to the
Administrative Agent, each Syndication Party shall repay to the Administrative
Agent forthwith on demand such amount distributed to such Syndication Party
together with interest thereon, for each day from the date such amount is
distributed to such Syndication Party until the date such Syndication Party
repays such amount to the Administrative Agent at the customary rate set by the
Administrative Agent for the correction of errors among banks for three (3)
Banking Days and thereafter at the Base Rate.

          13.6.3 Loan Administration. Subject to the provisions of Section 13.8
hereof, to, on behalf of and for the ratable benefit of all Syndication
Parties, in accordance with customary banking practices, exercise all rights,
powers, privileges, and discretion to which the Administrative Agent is
entitled to administer the Loans, including, without limitation: (a) monitor
all borrowing activity, Individual Commitment balances, and maturity dates of
all Treasury Rate Loans and Quoted Rate Loans; (b) monitor and report Credit
Agreement and covenant compliance, and coordinate required credit actions by
the Syndication Parties (including Voting Participants where applicable); (c)
manage the process for future waivers and amendments if modifications to the
Credit Agreement are required; and (d) administer, record, and process all
assignments to be made for the current and future Syndication Parties
(including the preparation of a revised Schedule 1 to replace the previous
Schedule 1).

     13.8 Consent Required for Certain Actions.

          13.8.1 Unanimous. Each of the Syndication Parties and Voting Participants
before:

               (a) Amending the definition of Required Lenders as set forth herein or
amending this Subsection 13.8.1.

               (b) Agreeing to an increase in the Aggregate Commitment or an extension of
the Availability Period or of the Maturity Date.

          13.8.2 Required Lenders. The Required Lenders before:

               (a) Consenting to any action, amendment, or granting any waiver not
covered in Subsection 13.8.1; or

19

 

               (b) Agreeing to amend Article 13 of this Credit Agreement (other than
Subsection 13.8.1).

          13.8.3 Action Without a Vote. Notwithstanding any other provisions of
this Section, the Administrative Agent may take the following actions without
obtaining the consent of the Syndication Parties or the Voting Participants:

               (a) Determining (i) whether the conditions to an Advance have been met,
and (ii) the amount of such Advance;

     13.12 Collateral Application. The Syndication Parties shall have no
interest in any other loans made to Borrower by any other Syndication Party
other than the Loans, or in any property taken as security for any other loan
or loans made to Borrower by any other Syndication Party, or in any property
now or hereinafter in the possession or control of any other Syndication Party,
which may be or become security for the Loans solely by reason of the
provisions of a security instrument that would cause such security instrument
and the property covered thereby to secure generally all indebtedness owing by
Borrower to such other Syndication Party. Notwithstanding the foregoing, to
the extent such other Syndication Party applies such funds or the proceeds of
such property to reduction of one or more of the Loans, such other Syndication
Party shall share such funds or proceeds with all Syndication Parties according
to their respective Individual Commitments. In the event that any Syndication
Party shall obtain payment, whether partial or full, from any source in respect
of one or more of the Loans, including without limitation payment by reason of
the exercise of a right of offset, banker’s lien, general lien, or
counterclaim, such Syndication Party shall promptly make such adjustments
(which may include payment in cash or the purchase of further Syndication
Interests or participations in the Loans) to the end that such excess payment
shall be shared with all other Syndication Parties in accordance with their
respective Individual Commitments. Notwithstanding any of the foregoing
provisions of this Section or Article 6 hereof, no Syndication Party other than
CoBank shall have any right to, or to the proceeds of, or any right to the
application to any amount owing to such Syndication Party hereunder of any the
proceeds of, any Bank Equity Interests issued to Borrower by CoBank or on
account of any statutory lien held by CoBank on such Bank Equity Interests.

     13.14 Reports and Information to Syndication Parties. The Administrative
Agent shall use reasonable efforts to provide to the Syndication Parties, as
soon as practicable after actual knowledge thereof is acquired by an officer
thereof primarily responsible for the Administrative Agent’s duties as such
with respect to the Loans or primarily responsible for the credit relationship
between the Administrative Agent and Borrower, any material factual information
which has a material adverse effect on the creditworthiness of Borrower, and
Borrower hereby authorizes such disclosure by the Administrative Agent to the
Syndication Parties (and by the Syndication Parties to any of their
participants). Failure of the Administrative Agent to provide the information
referred to in this Section or in Subsection 13.6.5 hereof shall not result in
any liability upon, or right to make a claim against, the Administrative Agent
except where a court of competent jurisdiction renders a final non-appealable
determination that such failure is a result of the willful misconduct or gross
negligence of the Administrative Agent. Syndication Parties acknowledge and
agree that all information and reports received pursuant to this Credit
Agreement will be received in confidence in connection with their Syndication
Interest, and that such information and reports constitute confidential
information and shall not,

20

 

without the prior written consent of the
Administrative Agent or Borrower (which consent will not be unreasonably
withheld, provided that Borrower shall have no consent rights upon the
occurrence and during the continuance of an Event of Default), be (a) disclosed
to any third party (other than the Administrative Agent, another Syndication
Party or potential Syndication Party, or a participant or potential participant
in the interest of a Syndication Party, which disclosure is hereby approved by
Borrower), except pursuant to appropriate legal or regulatory process, or (b)
used by the Syndication Party except in connection with the Loans and its
Syndication Interest.

     13.15 Standard of Care. The Administrative Agent shall not be liable to
Syndication Parties for any error in judgment or for any action taken or not
taken by the Administrative Agent or its agents, except to the extent that a
court of competent jurisdiction renders a final non-appealable determination
that any of the foregoing resulted from the gross negligence or willful
misconduct of the Administrative Agent. Subject to the preceding sentence, the
Administrative Agent will exercise the same care in administering the Loans and
the Loan Documents as it exercises for similar loans which it holds for its own
account and risk, and the Administrative Agent shall not have any further
responsibility to the Syndication Parties. Without limiting the foregoing, the
Administrative Agent may rely on the advice of counsel concerning legal matters
and on any written document it believes to be genuine and correct and to have
been signed or sent by the proper Person or Persons.

     13.18 Syndication Parties’ Indemnification of the Administrative Agent.
Each of the Syndication Parties agree to indemnify the Administrative Agent,
including any Successor Agent, and their respective directors, officers,
employees, agents, professional advisers and representatives (“Indemnified
Agency Parties”), (to the extent not reimbursed by Borrower, and without in any
way limiting the obligation of Borrower to do so), ratably (based on the ratio
of the total of its Individual Commitments to the Aggregate Commitment), from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation, at any time
following the payment of the Loans and/or the expiration or termination of this
Credit Agreement) be imposed on, incurred by or asserted against the
Administrative Agent (or any of the Indemnified Agency Parties while acting for
the Administrative Agent or for any Successor Agent) in any way relating to or
arising out of this Credit Agreement or the Loan Documents, or the performance
of the duties of the Administrative Agent hereunder or thereunder or any action
taken or omitted while acting in the capacity of the Administrative Agent under
or in connection with any of the foregoing; provided that the Syndication
Parties shall not be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of an Indemnified Agency Party to the extent that a
court of competent jurisdiction renders a final non-appealable determination
that the foregoing are the result of the willful misconduct or gross negligence
of such Indemnified Agency Party. The agreements and obligations in this
Section shall survive the payment of the Loans and the expiration or
termination of this Credit Agreement.

     13.20 Administrative Agent Fee. The Administrative Agent and any
Successor Agent shall be entitled to such fee as agreed upon
between Borrower and the Administrative Agent for acting as the
Administrative Agent.

21

 

     13.21 The Administrative Agent’s Resignation or Removal. The
Administrative Agent may resign at any time by giving at least sixty (60) days’
prior written notice of its intention to do so to each of the Syndication
Parties and Borrower. After the receipt of such notice, the Required Lenders
shall appoint a successor (“Successor Agent”). If (a) no Successor Agent shall
have been so appointed which is either (i) a Syndication Party, or (ii) if not
a Syndication Party, which is a Person approved by Borrower, such approval not
to be unreasonably withheld (provided that Borrower shall have no approval
rights upon the occurrence and during the continuance of an Event of Default),
or (b) if such Successor Agent has not accepted such appointment, in either
case within forty-five (45) days after the retiring Administrative Agent’s
giving of such notice of resignation, then the retiring Administrative Agent
may, after consulting with, but without obtaining the approval of, Borrower,
appoint a Successor Agent which shall be a bank or a trust company organized
under the laws of the United States of America or any state thereof and having
a combined capital, surplus and undivided profit of at least $250,000,000. Any
Administrative Agent may be removed upon the written demand of the Required
Lenders, which demand shall also appoint a Successor Agent. Upon the
appointment of a Successor Agent hereunder, (a) the term “Administrative Agent”
shall for all purposes of this Credit Agreement thereafter mean such Successor
Agent, and (b) the Successor Agent shall notify Borrower of its identity and of
the information called for in Subsection 14.4.2 hereof. After any retiring
Administrative Agent’s resignation hereunder as the Administrative Agent, or
the removal hereunder of any Administrative Agent, the provisions of this
Credit Agreement shall continue to inure to the benefit of such Administrative
Agent as to any actions taken or omitted to be taken by it while it was the
Administrative Agent under this Credit Agreement.

     13.22 Representations and Warranties of All Parties. The Administrative
Agent and each Syndication Party represents and warrants that: (a) the
execution and delivery of, and performance of its obligations under, this
Credit Agreement is within its power and has been duly authorized by all
necessary corporate and other action by it; (b) this Credit Agreement is in
compliance with all applicable laws and regulations promulgated under such laws
and does not conflict with nor constitute a breach of its charter or by-laws
nor any agreements by which it is bound, and does not violate any judgment,
decree or governmental or administrative order, rule or regulation applicable
to it; (c) no approval, authorization or other action by, or declaration to or
filing with, any governmental or administrative authority or any other Person
is required to be obtained or made by it in connection with the execution and
delivery of, and performance of its obligations under, this Credit Agreement;
and (d) this Credit Agreement has been duly executed by it, and constitutes the
legal, valid, and binding obligation of such Person, enforceable in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally and general equitable principles
(regardless of whether such enforceability is considered in a proceeding at law
or in equity). Each Syndication Party that is a state or national bank
represents and warrants that the act of entering into and performing its
obligations under this Credit Agreement has been approved by its board of
directors or its loan committee and such action was duly noted in the written
minutes of the meeting of such board or committee, and that it will, upon the
Administrative Agent’s written request, furnish the Administrative Agent with a
certified copy of such minutes or an excerpt therefrom reflecting such
approval.

22

 

     13.26 Purchase for Own Account; Restrictions on Transfer; Participations.
Each Syndication Party represents that it has acquired and is retaining its
interest in the Loans for its own account in the ordinary course of its banking
or financing business and not with a view toward the sale, distribution,
further participation, or transfer thereof. Each Syndication Party other than
CoBank agrees that it will not sell, assign, convey or otherwise dispose of
(“Transfer”) to any Person, or create or permit to exist any lien or security
interest on all or any part of its interest in the Loans, without the prior
written consent of the Administrative Agent and Borrower (which consent will
not be unreasonably withheld, provided that Borrower shall have no approval
rights upon the occurrence and during the continuance of an Event of Default);
provided that: (a) any such Transfer (except a Transfer to another Syndication
Party or a Transfer by CoBank) must be in a minimum amount of $5,000,000.00;
(b) each Syndication Party must maintain an Individual Commitment of no less
than $5,000,000.00, unless it Transfers its entire Syndication Interest; (c)
the transferee must execute an agreement substantially in the form of Exhibit
13.26 hereto (“Syndication Acquisition Agreement”) and assume all of the
transferor’s obligations hereunder and execute such documents as the
Administrative Agent may reasonably require; and (d) the Syndication Party
making such Transfer must pay, or cause the transferee to pay, the
Administrative Agent an assignment fee of $3,500.00. Any Syndication Party may
participate any part of its interest in the Loans to any Person with the prior
written consent of the Administrative Agent and Borrower (which consent will
not be unreasonably withheld, provided that Borrower shall have no approval
rights upon the occurrence and during the continuance of an Event of Default),
provided that no such consent shall be required where the participant is a
Person at least fifty percent (50%) the equity interest in which is owned by
such Syndication Party or which owns at least fifty percent (50%) of the equity
interest in such Syndication Party or at least fifty percent (50%) of the
equity interest of which is owned by the same Person which owns at least fifty
percent (50%) of the equity interest of such Syndication Party, and each
Syndication Party understands and agrees that in the event of any such
participation: (x) its obligations hereunder will not change on account of
such participation; (y) the participant will have no rights under this Credit
Agreement, including, without limitation, voting rights (except as provided in
Section 13.31 hereof with respect to Voting Participants) or the right to
receive payments or distributions; and (z) the Administrative Agent shall
continue to deal directly with the Syndication Party with respect to the Loans
(including with respect to voting rights, except as provided in Section 13.31
hereof with respect to Voting Participants) as though no participation had been
granted and will not be obligated to deal directly with any participant (except
as provided in Section 13.31 hereof with respect to Voting Participants).
Notwithstanding any provision contained herein to the contrary, any Syndication
Party may at any time pledge or assign all or any portion of its interest in
the Loans to any Federal Reserve Bank or the Federal Farm Credit Bank in
accordance with applicable law. CoBank reserves the right to sell
participations on a non-patronage basis.

     13.30 Withholding Taxes. Each Syndication Party represents that under the
applicable law in effect as of the date it becomes a Syndication Party, it is
entitled to receive any payments to be made to it hereunder without the
withholding of any tax and will furnish to the Administrative Agent and to
Borrower such forms, certifications, statements and other documents as the
Administrative Agent or Borrower may request from time to time to evidence such
Syndication Party’s exemption from the withholding of any tax imposed by any
jurisdiction or to enable the Administrative Agent or Borrower, as the case may
be, to
comply with any applicable laws or regulations relating thereto. Without
limiting the effect of the foregoing, each

23

 

Syndication Party that was not
created or organized under the laws of the United States of America or any
state or other political subdivision thereof (“Non-US Lender”), shall, on the
Closing Date, or upon its becoming a Syndication Party (for Persons that were
not Syndication Parties on the Closing Date), furnish to the Administrative
Agent and Borrower two original copies of IRS Form W-8BEN, W-8ECI, 4224, or
Form 1001, as appropriate, (or any successor forms), or such other forms,
certifications, statements of exemption, or documents as may be required by the
IRS or by the Administrative Agent or Borrower, in their reasonable discretion,
duly executed and completed by such Syndication Party, to establish, and as
evidence of, such Syndication Party’s exemption from the withholding of United
States tax with respect to any payments to such Syndication Party of interest
or fees payable under any of the Loan documents. Further, each Non-US Lender
hereby agrees, from time to time after the initial delivery by such Syndication
Party of such forms, whenever a lapse in time or change in circumstances
renders such forms, certificates or other evidence so delivered obsolete or
inaccurate in any material respect, that such Syndication Party shall promptly
(a) deliver to the Administrative Agent and to Borrower two original copies of
renewals, amendments or additional or successor forms, properly completed and
duly executed by such Syndication Party, together with any other certificate or
statement of exemption required in order to confirm or establish that such
Syndication Party is not subject to United States withholding tax with respect
to payments to such Syndication Party under the Loan Documents or (b) notify
the Administrative Agent and Borrower of its inability to deliver any such
forms, certificates or other evidence. Notwithstanding anything herein to the
contrary, Borrower shall not be obligated to make any payments hereunder to
such Syndication Party until such Syndication Party shall have furnished to the
Administrative Agent and Borrower each requested form, certification, statement
or document.

     2.16 The following new Sections and Subsections are added to Article 13 to
read as follows, and existing Sections 13.31 and 13.32 are renumbered as 13.33
and 13.34 respectively:

          13.6.5 Forwarding of Information. The Administrative Agent shall, within
a reasonable time after receipt thereof, forward to the Syndication Parties and
Voting Participants notices and reports provided to the Administrative Agent by
Borrower pursuant to Section 9.2 hereof.

          13.8.4 Voting Participants. Under the circumstances set forth in Section
13.31 hereof, each Voting Participant shall be accorded voting rights as though
such Person was a Syndication Party, and in such case the voting rights of the
Syndication Party from which such Voting Participant acquired its participation
interest shall be reduced accordingly.

If no written consent or denial is received from a Syndication Party or a
Voting Participant within five (5) Banking Days after written notice of any
proposed action as described in this Section is delivered to such Syndication
Party or Voting Participant by the Administrative Agent, such Syndication Party
or Voting Participant shall be conclusively deemed to have consented thereto
for the purposes of this Section.

24

 

     13.31 Certain Participants’ Voting Rights. Any Farm Credit System
Institution which (a) has acquired and, at any time of determination maintains,
a participation interest in the minimum aggregate amount of $5,000,000.00 in a
particular Syndication Party’s Syndication Interest; and (b) has been
designated in writing by such Syndication Party to the Administrative Agent as
having such entitlement (such designation to include for such participant, its
name, contact information, and dollar participation amount) (each a “Voting
Participant”), shall be entitled to vote (and such Syndication Party’s voting
rights shall be correspondingly reduced), on a dollar basis, as if such Voting
Participant were a Syndication Party, on any matter requiring or allowing a
Syndication Party, to provide or withhold its consent, or to otherwise vote on
any proposed action. The voting rights of any Syndication Party so designating
a Voting Participant shall be reduced by an equivalent dollar amount.

     13.32 Replacement of Holdout Lender. If any action to be taken by the
Syndication Parties or the Administrative Agent hereunder requires the
unanimous consent, authorization, or agreement of all Syndication Parties, and
a Syndication Party (“Holdout Lender”) fails to give its consent,
authorization, or agreement, then the Administrative Agent, upon at least five
(5) Banking Days prior irrevocable notice to the Holdout Lender, may
permanently replace the Holdout Lender with one or more substitute Syndication
Parties (each, a “Replacement Lender”), and the Holdout Lender shall have no
right to refuse to be replaced hereunder. Such notice to replace the Holdout
Lender shall specify an effective date for such replacement, which date shall
not be later than fifteen (15) Banking Days after the date such notice is
given. Prior to the effective date of such replacement, the Holdout Lender and
each Replacement Lender shall execute and deliver a Syndication Acquisition
Agreement, subject only to the Holdout Lender being repaid its full share of
the outstanding Bank Debt without any premium, discount, or penalty of any kind
whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver
any such Syndication Acquisition Agreement prior to the effective date of such
replacement, the Holdout Lender shall be deemed to have executed and delivered
such Syndication Acquisition Agreement. The replacement of any Holdout Lender
shall be made in accordance with the terms of Section 13.26 hereof. Until such
time as the Replacement Lenders shall have acquired all of the Syndication
Interest of the Holdout Lender hereunder and under the other Loan Documents,
the Holdout Lender shall remain obligated to provide the Holdout Lender’s
Funding Share of Advances.

     2.17 The following Sections of Article 14 are amended in their entirety to
read as follows:

     14.2 Service of Process and Consent to Jurisdiction. Borrower and each
Syndication Party hereby agrees that any litigation with respect to this Credit
Agreement or to enforce any judgment obtained against such Person for breach of
this Credit Agreement or under the Notes or other Loan Documents may be brought
in the courts of the State of Colorado and in the United States District Court
for the District of Colorado (if applicable subject matter jurisdictional
requirements are present), as the Administrative Agent may elect; and, by
execution and delivery of this Credit Agreement, Borrower and each Syndication
Party irrevocably submits to such jurisdiction. With respect to litigation
concerning this Credit Agreement or under the Notes or other Loan Documents
within the jurisdiction of the courts of the State of Colorado or the United
States District Court for the District of Colorado, Borrower and each
Syndication Party hereby irrevocably appoints, until six (6) months after the
expiration

25

 

of the Maturity Date (as it may be extended at anytime), The
Corporation Company, or such other Person as it may designate to the
Administrative Agent, in each case with offices in Denver, Colorado and
otherwise reasonably acceptable to the Administrative Agent to serve as the
agent of Borrower or such Syndication Party to receive for and on its behalf at
such agent’s Denver, Colorado office, service of process, which service may be
made by mailing a copy of any summons or other legal process to such Person in
care of such agent. Borrower and each Syndication Party agrees that it shall
maintain a duly appointed agent in Colorado for service of summons and other
legal process as long as it remains obligated under this Credit Agreement and
shall keep the Administrative Agent advised in writing of the identity and
location of such agent. The receipt by such agent and/or by Borrower or such
Syndication Party, as applicable, of such summons or other legal process in any
such litigation shall be deemed personal service and acceptance by Borrower or
such Syndication Party, as applicable, for all purposes of such litigation.

     14.12 Replacement Notes. Upon receipt by Borrower of evidence
satisfactory to it of: (a) the loss, theft, destruction or mutilation of any
Note, and (in case of loss, theft or destruction) of the agreement of the
Syndication Party to which the Note was payable to indemnify Borrower, and upon
surrender and cancellation of such Note, if mutilated; or (b) the assignment by
any Syndication Party of its interest hereunder and the Notes relating thereto,
or any portion thereof, pursuant to this Credit Agreement, then Borrower will
pay any unpaid principal and interest (and Funding Losses, if applicable) then
or previously due and payable on such Notes and will (upon delivery of such
Notes for cancellation, unless covered by subparagraph (a) of this Section)
deliver in lieu of each such Note a new Note or, in the case of an assignment
of a portion of any such Syndication Party’s Syndication Interest, new Notes,
for any remaining balance.

     14.15 Patronage Payments. Borrower acknowledges and agrees that: (a)
only that portion of the Loan represented by CoBank’s Individual Pro Rata Share
which is retained by CoBank for its own account is entitled to patronage
distributions in accordance with CoBank’s bylaws and its practices and
procedures related to patronage distribution; and (b) any patronage, or
similar, payments to which Borrower is entitled on account its ownership of
Bank Equity Interests or otherwise will not be based on any portion of CoBank’s
interest in the Loans in which CoBank has at any time granted a participation
interest.

     14.20 Confidentiality. Each Syndication Party shall maintain the
confidential nature of, and shall not use or disclose, any of Borrower’s
financial information, confidential information or trade secrets without first
obtaining Borrower’s written consent. Nothing in this Section shall require
any Syndication Party to obtain such consent after there is an Event of
Default. The obligations of the Syndication Parties shall in no event apply
to: (a) providing information about Borrower to any financial institution
contemplated or described in Sections 13.6, 13.14, and 13.26 hereof or to such
Syndication Party’s parent holding company or any of such Syndication Party’s
Affiliates; (b) any situation in which any Syndication Party is required by Law
or required by any Governmental Authority to disclose information; (c)
providing information to counsel to any Syndication Party in connection with
the transactions contemplated by the Loan Documents; (d) providing information
to independent auditors retained by the such Syndication Party; (e) any
information
that is in or becomes part of the public domain otherwise than through a
wrongful act of such Syndication Party or any of its employees or agents
thereof; (f) any information that is in the possession of any Syndication Party
prior to receipt thereof from

26

 

Borrower or any other Person known to such
Syndication Party to be acting on behalf of Borrower; (g) any information that
is independently developed by any Syndication Party; and (h) any information
that is disclosed to any Syndication Party by a third party that has no
obligation of confidentiality with respect to the information disclosed. A
Syndication Party’s confidentiality requirements continue after it is no longer
a Syndication Party under this Credit Agreement. Notwithstanding any provision
to the contrary in this Credit Agreement, the Administrative Agent and each
Syndication Party (and each employee, representative, or other agent thereof)
may disclose to any and all Persons, without limitations of any kind, the tax
treatment and tax structure of the transaction described in this Credit
Agreement and all materials of any kind (including opinions or other tax
analyses), if any, that are provided to the Administrative Agent or such
Syndication Party relating to such tax treatment and tax structure. Nothing in
the preceding sentence shall be taken as an indication that such transaction
would, but for such sentence, be deemed to be a “reportable transaction” as
defined in Treasury Regulation Section 1.6011-4.

     2.18 A new Section 14.16 is added reading as follows, and Sections 14.17,
14.18, and 14.19 are renumbered as 14.18, 14.19, and 14.20 respectively

     14.16 Direct Website Communications; Electronic Mail Communications

          14.16.1 Delivery

               (a) Borrower hereby agrees that it will provide to the Administrative
Agent all information, documents and other materials that it is obligated to
furnish to the Administrative Agent pursuant to this Credit Agreement and any
other Loan Document, including, without limitation, all notices, requests,
financial statements, financial and other reports, certificates and other
information materials, but, subject to the provisions of Subsection 14.16.3
hereof, excluding any such communication that (i) relates to a request for a
new, or a conversion of an existing, borrowing or other extension of credit
(including any election of an interest rate or interest period relating
thereto), (ii) relates to the payment of any principal or other amount due
under this Credit Agreement prior to the scheduled date therefor, (iii)
provides notice of any Potential Default or Event of Default under this Credit
Agreement or (iv) is required to be delivered to satisfy any condition
precedent to the effectiveness of this Credit Agreement and/or any borrowing,
or other extension of credit hereunder (all such non-excluded communications
collectively, the “Communications”), by transmitting the Communications in an
electronic/soft medium and in a format acceptable to the Administrative Agent
as follows (A) all financial statements to closing@cobank.com and (B) all other
Communications to mtousignant@cobank.com. In addition, Borrower agrees to
continue to provide the Communications to the Administrative Agent in the
manner specified in this Credit Agreement but only to the extent requested by
the Administrative Agent. Receipt of the Communications by the Administrative
Agent at the appropriate e-mail address as set forth above shall constitute
effective delivery of the Communications to the Administrative Agent for
purposes of this Credit Agreement and any other Loan Documents. Nothing in
this Section 14.16 shall prejudice the right of the Administrative Agent or any
Syndication Party to give any notice or other
communication pursuant to this Credit Agreement or any other Loan Document
in any other manner specified in this Credit Agreement or any other Loan
Document.

27

 

               (b) Each Syndication Party agrees that receipt of e-mail notification that
such Communications have been posted pursuant to Subsection 14.16.2 below at
the e-mail address(es) set forth beneath such Syndication Party’s name on its
signature page hereto or pursuant to the notice provisions of any Syndication
Acquisition Agreement shall constitute effective delivery of the Communications
to such Syndication Party for purposes of this Credit Agreement and any other
Loan Document. Each Syndication Party further agrees to notify the
Administrative Agent in writing (including by electronic communication)
promptly of any change in its e-mail address or any extended disruption in its
internet delivery services.

          14.16.2 Posting. Borrower further agrees that the Administrative Agent
may make the Communications available to the Syndication Parties by posting the
Communications on “Intralinks” (“Platform”), the Administrative Agent’s
internet delivery system that is part of Intralinks, Inc.’s primary web portal
(the “Primary Portal”). The Primary Portal is secured with a dual firewall and
a User ID/Password Authorization System and the Platform is secured through a
single user per deal authorization method whereby each user may access the
Platform only on a deal-by-deal basis. Borrower acknowledges that the
distribution of Communications through an electronic medium is not necessarily
secure and that there are confidentiality and other risks associated with such
distribution.

          14.16.3 Additional Communications. The Administrative Agent reserves the
right and Borrower and each Syndication Party consents and agrees thereto, to,
upon written notice to Borrower and all Syndication Parties, implement and
require use of a secure system whereby any notices or other communications
required or permitted by this Credit Agreement, but which are not specifically
covered by Subsection 14.16.1 hereof, and including, without limitation,
Borrowing Notices, Funding Notices, and any communication described in clauses
(i) through (iv) of Subsection 14.16.1(a) hereof, shall be sent and received
via electronic mail to the e-mail addresses described in Subsection 14.16.1
hereof.

          14.16.4 Disclaimer. The Communications transmitted pursuant to this
Section 14.16 and the Platform are provided “as is” and “as available.” CoBank
does not warrant the accuracy, adequacy or completeness of the Communications
or the Platform and CoBank expressly disclaims liability for errors or
omissions in the Communications or the Platform. No warranty of any kind,
express, implied or statutory, including without limitation, any warranty of
merchantability, fitness for a particular purpose, non-infringement of third
party rights or freedom from viruses or other code defects, is made by CoBank
in connection with the Communications or the Platform.

          14.16.5 Termination. The provisions of this Section 14.16 shall
automatically terminate on the date that CoBank, ACB ceases to be the
Administrative Agent under this Credit Agreement.

     2.19 The documents labeled Exhibit 1.95, Exhibit 7.10, and Exhibit 7.23
and Exhibit
13.26 attached hereto shall become Exhibit 1.95, Exhibit 7.10, Exhibit 7.23,
and Exhibit 13.26 to the Credit Agreement.

28

 

3. Borrower’s Representations. Borrower hereby represents and warrants that,
after giving effect to this Amendment Agreement and the transactions
contemplated hereby, no Potential Default or Event of Default has occurred and
is continuing under the Credit Agreement or other Loan Documents.

4. Effective Date. This Amendment Agreement shall become effective on May 21,
2003 (“Effective Date”), so long as on or before that date the Administrative
Agent receives (a) an original copy of this Amendment Agreement (or original
counterparts thereof) duly executed by each party hereto, (b) an opinion of
Borrower’s counsel in all respects acceptable to the Administrative Agent; and
(c) payment by wire transfer of each of the costs, expenses described in
Section 5 hereof. Upon the satisfaction of all conditions precedent hereto,
the Administrative Agent will notify each party hereto in writing and will
provide copies of all appropriate documentation in connection herewith.

5. Costs; Expenses and Taxes. Borrower agrees to reimburse the Administrative
Agent on demand for all out-of-pocket costs, expenses and charges (including,
without limitation, all fees and charges of external legal counsel for the
Administrative Agent) incurred by the Administrative Agent in connection with
the preparation, reproduction, execution and delivery of this Amendment
Agreement and any other instruments and documents to be delivered hereunder.

6. General Provisions.

     6.1 The Credit Agreement, except as expressly modified herein, shall
continue in full force and effect and be binding upon the parties thereto.

     6.2 Borrower agrees to execute such additional documents as the
Administrative Agent may require to carry out or evidence the purposes of this
Amendment Agreement.

     6.3 The execution, delivery and effectiveness of this Amendment Agreement
shall not operate as a waiver of any right, power or remedy of the
Administrative Agent or any Syndication Party under any of the Loan Documents,
nor constitute a waiver of any provision of any of the Loan Documents, and the
Credit Agreement, as expressly modified hereby, and each other Loan Document
are hereby ratified and confirmed and shall continue in full force and effect
and be binding upon the parties thereto. Any direct or indirect reference in
the Loan Documents to the “Credit Agreement” shall be deemed to be a reference
to the Credit Agreement as amended by this Amendment Agreement.

7. Governing Law. This Amendment Agreement shall be governed by and construed
in accordance with the laws of the State of Colorado.

8. Counterparts. This Amendment Agreement may be executed in any number of
counterparts and by different parties to this Amendment Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Telefax copies of documents or signature
pages bearing original signatures, and executed documents or signature pages
delivered by telefax, shall, in each such instance, be deemed to be, and shall
constitute and be treated as, an original signed document or counterpart, as
applicable. Any party delivering an executed

29

 

counterpart of this Amendment
Agreement by telefacsimile also shall deliver an original executed counterpart
of this Amendment Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect
of this Amendment Agreement.

[EXECUTION PAGES BEGIN ON THE NEXT PAGE].

30

 

     IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment to
Credit Agreement (Term Loan) to be executed by their duly authorized officers
as of the Effective Date.

	 	 	 	 	 
	 	 	BORROWER:
	 
	 	 	 	 
	 	 	CENEX HARVEST STATES COOPERATIVES, a
	 	 	cooperative corporation formed under the laws of
	 	 	the State of Minnesota
	 
	 	 	 	 
	

	 	By:
	 	            s/John Schmitz

	 	 	Name: John Schmitz

	 	 	Title: Executive Vice President Finance and

	 	 	Administration, and Chief Financial Officer
	 
	 	 	 	 
	 	 	ADMINISTRATIVE AGENT:
	 
	 	 	 	 
	 	 	COBANK, ACB
	 
	 	 	 	 
	

	 	By:
	 	            s/Michael Tousignant

	 	 	Name: Michael Tousignant

	 	 	Title: Vice President
	 
	 	 	 	 
	 	 	SYNDICATION PARTY:
	 
	 	 	 	 
	 	 	COBANK, ACB
	 
	 	 	 	 
	

	 	By:
	 	            s/Michael Tousignant

	 	 	Name: Michael Tousignant

	 	 	Title: Vice President

31exv4w4

 

EXHIBIT 4.4

Advanced Environmental Recycling Technologies, Inc.

AMENDED AND RESTATED

1997 SECURITIES PLAN

1. Purpose

     The purpose of the Amended and Restated 1997 Securities Plan (the “Plan”)
is to restate such Plan as originally adopted and as amended and restated to
reflect amendments made through November 17, 2004 (and to eliminate provisions
that have been superseded or already acted upon), and such Plan has been
adopted to promote the interest of Advanced Environmental Recycling
Technologies, Inc. (the “Company”) and its stockholders by providing an
effective means to attract, retain and increase the commitment of certain
individuals and to provide such individuals with additional incentive to
contribute to the success of the Company. The Plan is intended to create a
flexible vehicle to provide a variety of medium and long-term incentive
compensation opportunities to management and associates of the Company. In
doing so, the Plan provides an important link between the compensation of
senior and executive management, as well as mid-level management and/or hourly
associates, and Company performance. The awards (“Awards”) under the Plan will
compensate management and associates for the creation of shareholder value. In
this way the Plan is intended to encourage and reward superior performance by
individuals whose performance is a key element in achieving the Company’s
continued financial and operational success. In addition, the Plan will assist
the Company’s recruiting, rewarding, retaining and motivating management and
associates to achieve the Company’s mission of being a top performer in its
industry by rewarding the creation of shareholder value.

2 Eligibility

     Awards may be granted only to Employees who are designated as participants
in the Plan (“Participants”) from time to time by a Committee of the Board
composed of non-employee Directors, as set forth in Section 5 hereof. The
Committee shall consider an individual’s position, responsibilities and
importance to the Company among other factors in determining which Employees
shall be Participants. The types of Awards to be made to Participants and the
terms, conditions, and limitations applicable to the Awards are left to the
sole discretion of the Committee, subject to the terms of the Plan, as set
forth in Section 5 hereof. The Committee’s decision as to eligibility and the
nature and timing of Awards under the Plan is final. For the purposes of the
Plan, “Employees” shall mean any employee, director, general partner, officer
or consultant or advisor, provided, with respect to consultants and advisors,
(i) they are natural persons, (ii) they provide bona fide services to the
Company, and (iii) the services are not in connection with the offer or sale of
securities in a capital-raising transaction, and do not directly or indirectly
promote or maintain a market for the Company’s securities.

1

 

3. Types of Awards

     Awards shall be made in the form of Stock Options, Restricted Stock,
Performance Awards, and other types of Awards described below. Subject to the
other provisions of this Plan, Awards may also be granted individually, in
combination, or in tandem with, in replacement of, or as alternatives to,
grants or rights under this Plan and any other employee plan of the Company.

	(1)	 	A Stock Option (or Option) is a right to purchase a specified number of
shares of the Company’s Class A Common Stock (“Shares”) at a specified
price during such specified time, as the Committee shall determine.

(a) Stock Options granted may be either of a type that complies with
the requirements of incentive stock options (“Incentive Stock
Options”) as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”), or of a type that does not comply with
such requirements (“Non Qualified Stock Options”); provided, however,
that the aggregate number of Shares which may be offered for
purchase pursuant to Incentive Stock Options under this Plan shall
not exceed four million (4,000,000), and the aggregate number of
Shares which may be offered for purchase pursuant to Non-Qualified
Stock Options under the Plan shall not exceed one million
(1,000,000); provided that such limitation on Non Qualified Stock
Options shall not apply to Options intended to be awarded as
Incentive Stock Options which become Non Qualified Stock Options by
reason of a disqualifying disposition or otherwise.

(b) The exercise price per Share of any Stock Option shall be
determined by the Committee and set forth in the Award Agreement.
However, a Stock Option granted to a “covered employee” as defined in
Section 162(m) of the Code shall not have an exercise price less than
the Fair Market Value of a Share on the date the Stock Option is
granted. For the purposes of this Plan, the term “Fair Market Value”
shall mean: If the Shares are listed on a national securities
exchange (including the New York, American or NASDAQ National Market
System) in the United States on the date any Option is granted, the
Fair Market Value per Share shall be deemed to be the average of the
high and low sale prices per Share on such national securities
exchange in the United States on such date, as published by the Wall
Street Journal or other reliable publication, but if the Shares are
not traded on such date or such national securities exchange is not
open for business on such date, the Fair Market Value per Share shall
be the average of such high and low sale prices on the last preceding
date on which such exchange shall have been open for business and the
Shares were traded. If the Shares are listed on more than one
national securities exchange in the United States on the date any
such Option is granted, the Committee shall determine, in its
discretion, which national securities exchange shall be used for the
purpose of

2

 

determining the Fair Market Value per Share. If at any date any
Option is granted a public market exists for the Shares but such
Shares are not listed on a national securities exchange in the United
States, the Fair Market Value per Share shall be deemed to be the
mean between the closing bid and asked quotations in the
over-the-counter market for such Shares in the United States on the
date such Option is granted. If there are no bid and asked
quotations for such Shares on such date, the Fair Market Value per
share shall be deemed to be the mean between the closing bid and
asked quotations in the over-the-counter market in the United States
for such Shares on the closest date preceding the date such Option is
granted, for which such quotations are available. Notwithstanding
the foregoing provisions of this section, if the Committee shall at
any time determine that it is impracticable to apply the foregoing
methods of determining Fair Market Value, the Committee is empowered
to adopt other reasonable methods of determining Fair Market Value.

(c) A Stock Option may be exercised, in whole or in part, by the
giving of written notice of exercise to the Company specifying the
number of Shares to be purchased.

(d) The exercise price of the Shares subject to the Stock Option may
be paid in cash or may also be paid by the tender of Shares already
owned by the Participant (to the extent permitted by Rule 16b-3 of
the Securities Exchange Act of 1934 (the “Exchange Act”)), or through
a combination of cash and Shares, or through such other means the
Committee determines are consistent with the Plan’s purpose and
applicable law. No fractional Shares will be issued or accepted.

(e) If an Incentive Stock Option is granted to a Participant who owns
or is deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than ten percent (10%) of the combined
voting power of all classes of stock of the Company (or any parent or
subsidiary), the exercise price shall be at least one hundred ten
percent (110%) of the Fair Market Value per Share on the date such
Stock Option is granted.

     No portion of any Incentive Stock Option may be exercised after the
expiration of ten (10) years from the date such Stock Option is granted.
However, if a Participant owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than ten percent (10%) of
the combined voting power of all classes of stock of the Company (or any parent
or subsidiary) and an Incentive Stock Option is granted to such Participant,
the term of such Incentive Stock Option (to the extent required by the Code at
the time of grant) shall be no more than five (5) years from the date such
Option is granted.

3

 

     Upon termination of Participant’s employment, the Participant may not
exercise any Incentive Stock Option later than three (3) months after his
termination of employment, except in the case of death or disability.

     If Shares acquired upon exercise of an Incentive Stock Option are disposed
of by a Participant prior to the expiration of either two (2) years from the
date such Incentive Stock Option is granted or one (1) year from the transfer
of Shares to the Participant pursuant to the exercise of such Incentive Stock
Option or in any other disqualifying disposition within the meaning of Section
422 of the Code, such Participant shall notify the Company in writing of the
date and the terms of such disposition. A disqualifying disposition by a
Participant shall not affect the statutes for any other Stock Option granted
under the Plan as an Incentive Stock Option within the meaning of Section 422
of the Code.

     The Committee may not grant Incentive Stock Options under the Plan to any
Participant which would permit the aggregate Fair Market Value (determined on
the date such Stock Option is granted) of the Shares with respect to which
Incentive Stock Options under this and any other plan of the Company and its
subsidiaries are exercisable for the first time by such Participant during any
calendar year to exceed one hundred thousand dollars ($100,000).

	(2)	 	Shares of Restricted Stock are Shares that are issued to a Participant
and are subject to such terms, conditions, and restrictions as the
Committee deems appropriate, which may include, but are not limited to,
restrictions upon the sale, assignment, transfer, or other disposition of
the Restricted Stock and the requirement of forfeiture of the Restricted
Stock upon termination of employment under certain specified conditions.
As a condition to any Award hereunder, the Committee may require a
Participant to pay to the Company an amount equal to, or in excess of, the
par value of the shares of Restricted Stock awarded to him or her. Any
such Restricted Stock Award shall automatically expire if not purchased in
accordance with the Committee’s requirements if any, within thirty (30)
days after the date of grant. The Committee may provide for the lapse of
any such term or condition or waive any term or condition based on such
factors or criteria as the Committee may determine. The Participant shall
have, with respect to Awards of Restricted Stock for which the Participant
is the holder of record, all of the rights of a shareholder of the
Company, including the right to vote the Restricted Stock and the right to
receive any cash or stock dividends on such Restricted Stock. The
Committee shall have the discretionary authority to determine the total
number of Shares available for Awards under the Plan as Restricted Stock
to be issued during the duration of the Plan, however, the maximum number
of Shares that may be issued to any Participant or Participants as
Restricted Stock under the Plan shall not exceed one million (1,000,000).
	 
	(3)	 	Performance Awards may be granted under this Plan from time to time based
on the terms and conditions as the Committee deems appropriate provided
that such Awards shall not be inconsistent with the terms and purposes of
this Plan.

4

 

	 	 	Performance Awards may be in the form of performance units, performance
shares and such other forms of Performance Awards, which the Committee
shall determine. For this purpose, “performance shares” are grants of
Shares based on satisfying preestablished Company performance criteria
set by the Committee. “Performance Units” are cash allotments of
dollar-denominated units whose payment or value is contingent on
performance as measured against predetermined objectives over a
multi-year period of time. The Committee shall determine the performance
measurements and criteria for such Performance Awards.
	 
	(4)	 	The Committee may from time to time grant (i) Shares, (ii) other
stock-based and nonstock-based Awards under this Plan including, without
limitation, those Awards pursuant to which Shares are or may in the future
be acquired, (iii) Awards denominated in Share units, (iv) securities
convertible into Shares, (v) phantom securities (whereby Participants can
take advantage in the appreciation of Share prices without actual
ownership of Shares), (vi) dividend equivalents (whereby a Participant
becomes entitled through the use of a derivative security attached to an
option to dividends and other rights derived from the underlying Shares
had the Participant owned such Shares), and (vii) other forms of
derivatives related to the Shares as it deems appropriate. The Committee
shall determine the terms and conditions of such other stock, stock-based,
and non-stock based Awards provided that such Awards shall not be
consistent with the terms and purposes of this Plan.

4. Shares Subject to the Plan

     The number of Shares for which Awards may be granted under the Plan shall
not exceed five million (5,000,000) Shares. To the extent permitted by Section
16 of the Exchange Act, any unexercised or undistributed portion of any
terminated, expired, exchanged, or forfeited Awards or Awards settled in cash
in lieu of Shares, shall be available for further Awards.

     Additional rules for determining the number of Shares granted under the
Plan may be made by the Company’s Board of Directors or the Committee, as it
deems necessary or appropriate.

     The Shares or other stock that may be issued pursuant to an Award under
the Plan may be treasury or authorized but unissued stock, or stock may be
acquired, subsequently or in anticipation of the transaction, in the open
market or in private transactions to satisfy the requirements of the Plan.

5. Administration

     The Plan shall be administered by the Board of Directors or, if determined
by the Board of Directors, by the Compensation Committee (the “Committee”).
Accordingly,

5

 

any references in the Plan to the Committee may be deemed to be to the
Committee or the Board, as the case may be and as the context requires.

     The Committee shall be composed of at least three, but not more than five,
members (including a Chairperson), all of whom shall be “independent
directors,” as such term is defined in the rules and regulations of The Nasdaq
Stock Market, Inc. The members of the Committee and the Chairperson shall be
selected annually by the Board and serve at the pleasure of the Board. No
person may be made a member of the Committee if his or her service on the
Committee would violate any restriction on service imposed by any rule or
regulation of the United States Securities and Exchange Commission or any
securities exchange or market on which shares of the common stock of the
Company are traded. A majority of the members of the Committee shall
constitute a quorum. The Committee shall act on the affirmative vote of a
majority of members present at a meeting at which a quorum is present. Without
a meeting, the Committee may act by unanimous written consent of all members.
The Committee shall meet as necessary, but at least once each year, to enable
it to fulfill its responsibilities.

     The Board of Directors or the Committee, as the case may be, shall from
time to time in its discretion determine which individuals shall be granted
Awards, the amount of Shares covered by such Awards, and certain other specific
terms and conditions of such Awards subject to the terms and conditions
contained herein, including those concerning director Options as set forth
below.

     The Board of Directors or the Committee, as the case may be, shall have
the sole authority and power, subject to the express provisions and conditions
hereof, to construe this Plan and the Awards granted hereunder, and to adopt,
prescribe, amend, and rescind rules and regulation relating to this Plan, and
to make all determinations necessary or advisable for administering this Plan.
The interpretation by the Committee of any provision of this Plan with respect
to any Incentive Stock Option granted hereunder shall be in accordance with
Section 422 of the Code and the Regulations issued thereunder, as such Section
422 or Regulations may be amended from time to time, in order that the
Incentive Stock Options granted hereunder shall constitute “incentive stock
options” within the meaning of Section 422 of the Code. The interpretation and
construction by the Board of Directors or the Committee as the case may be, of
any provisions of the Plan or of any Award granted hereunder shall be final and
conclusive. No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Award granted
hereunder. In the event of any conflict between an Award Agreement and the
Plan, the terms of the Plan shall govern.

     The Committee may delegate to the officers or employees of the Company the
authority to execute and deliver such instruments and documents, to do all such
acts and things, and to take all such other steps deemed necessary, advisable
or convenient for the effective administration of the Plan in accordance with
its terms and purpose, except that the Committee may not delegate any
discretionary authority with respect to substantive decisions or functions
regarding the Plan or Awards thereunder as these relate to officers, directors
or beneficial holders of ten percent (10%) or more of the Shares (“Insiders”)

6

 

including but not limited to decisions regarding the timing, eligibility,
pricing, amount or other material terms of such Awards.

     The Committee will be responsible for declaring the material terms under
which the Performance Awards are to be paid, including performance goals.
Prior to the payment of a performance-based Award, the Committee shall certify
that the predetermined performance goals and any other material terms were in
fact satisfied. The Committee shall periodically determine the Participants in
the Plan and the nature, amount, pricing, timing, and other terms of Awards to
be made to such individuals. The Committee must ratify all Awards under the
program to the Company’s executive officers.

6. Changes in Capitalization

     If, while any Awards are outstanding, the outstanding Shares have
increased, decreased, changed into, or been exchanged for a different number or
kind of shares or securities of the Company through reorganization, merger,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or similar transaction, appropriate and proportionate adjustments shall
be made by the Committee in the number and/or kind of shares which are subject
to purchase or award under outstanding Awards and in the purchase price or
prices applicable to such outstanding Awards in order to prevent the dilution
or enlargement of rights, to the end that the same proportion of the Shares in
each instance shall remain subject to purchase at the same aggregate purchase
price. In addition, in any such event, the number and/or kind of Shares, which
may be offered under the Plan, shall also be proportionately adjusted to the
same end.

     To the extent that the foregoing adjustments relate to Awards, Shares, or
securities of the Company, such adjustments shall be made by the Committee and
its determination in that respect shall be final, binding, and conclusive. The
grant of an Award pursuant to this Plan shall not affect in any way the right
or power of the Company to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part
of its business or assets.

7. Change of Control

     The Committee shall determine the effect of Change of Control and specify
such effect in Award Agreements that are issued pursuant to the Plan. These
effects may include, but are not limited to:

	(a)	 	Offering to purchase any outstanding Award made pursuant to this Plan
from the holder for its Fair Market Value or such value established under
the Award Agreement, as determined by the Committee, as of the date of the
Change of Control; or

7

 

	(b)	 	Making adjustments or modifications to outstanding Awards as the
Committee deems appropriate to maintain and protect the rights and
interests of Participants following such Change of Control.
	 
	 	 	For the purposes of this Section, a “Change of Control” shall mean the
earliest date on which any of the following events shall occur:

	 	(a)	 	there shall be consummated any consolidation or merger of the
Company in which the stockholders own 70% or less of a newly-merged
entity;
	 
	 	(b)	 	the stockholders of the Company approve any plan or proposal for
the liquidation or dissolution of the Company;
	 
	 	(c)	 	The acquisition by a third party of twenty percent (20%) or more of
the Company’s then outstanding securities having the right to vote in
the election of directors; or
	 
	 	(d)	 	during any period of two consecutive years, individuals who, at the
beginning of such period constituted the entire Board, cease for any
reason (other than death) to constitute a majority of the directors,
unless the election, or the nomination for election, by the Company’s
stockholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at
the beginning of the period.

8. Amendment and Termination

     The Board may at any time amend, suspend, or terminate the Plan. The
Committee may at any time alter or amend any or all Award Agreements under the
Plan to comply with any laws that govern such agreements. However, no such
action may, without further approval of the stockholders of the Company, be
effective if such approval is required in order that transactions in Company
securities under the Plan, as they relate to Insiders, be exempt from the
operation of Section 16(b) of the Exchange Act, and the Board may not amend the
Plan so as to:

	 	(a)	 	increase the number of Shares which may be issued under the
Plan, except as provided for in Section 6 hereof;
	 
	 	(b)	 	materially modify the requirements as to eligibility for
participation in the Plan;
	 
	 	(c)	 	materially increase the benefits accruing to Participants under
the Plan; or
	 
	 	(d)	 	extend the duration of the Plan beyond the date approved by the
stockholders of the Company.

9. [Intentionally deleted as of restatement date as already effectuated]

8

 

10. Director Options

     Each director of the Company on the Effective Date (as defined below)
shall be automatically granted effective on the Effective Date a Nonqualified
Stock Option for 25,000 Shares which Options shall become exercisable
commencing 90 days after the Effective Date and remain exercisable until the
Options expire on the fifth anniversary following the Effective Date. In
addition to such initial Awards, each director elected or appointed to the
Company’s Board of Directors (whether newly elected or appointed or reelected
at a meeting of stockholders) on or after the Effective Date, shall receive
upon such election or appointment an automatic Award of a Nonqualified Option
for 25,000 Shares which Options shall become exercisable (in whole or part, at
an exercise price per Share equal to the Fair Market Value of the Shares on the
date of the grant) commencing after the passage of three (3) months from the
date of grant and remain exercisable until the Options expire on the fifth
anniversary following the date of grant. Directors may receive additional
Option grants in lieu of the above described automatic grants as may be
determined by the Board of Directors or the Committee, as the case may be.

11. Rights as Shareholder

     A Participant, or a transferee of an Option, shall have no rights with
respect to any Shares covered by an Option until the date of the issuance of a
stock certificate for such Shares and the recording of such issuance upon the
Company’s stock ledger by its duly appointed, regular transfer agent. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to such date, except as provided in Section 6 hereof.

12. Additional Provisions

     The Options authorized under this Plan shall contain such other
provisions, as the Board or Committee shall deem advisable, including without
limitation, further restrictions upon the exercise of the Option. Any
Incentive Stock Option shall contain such limitations and restrictions upon the
exercise of the Option as shall be necessary in order that the Option shall be
an “incentive stock option” as defined in Section 422 of the Code.

13. Compliance With Securities Laws

     At the time of exercise of any Option, the Company may require the
Participant to execute any documents or take any action which may then be
necessary to comply with the Securities Act of 1933 and the rules and
regulations adopted thereunder, or any other applicable federal or state laws
regulating the sale and issuance of securities, and the Company may, if it
deems necessary, include provisions in the Options to assure such compliance.
The Company may require that there be presented to and filed with the Company
by any Participant under the Plan, such evidence as it may deem necessary to

9

 

establish that the Awards granted or Shares to be purchased or transferred
are being acquired for investment and not with a view to their distribution.
The Company may from time to time change its requirements with respect to
enforcing compliance with federal and state securities laws, including the
request for, or insistence upon, letters of investment intent, such
requirements to be determined by the Company in its judgment as necessary to
assure compliance with said securities laws. Such changes may be made with
respect to any particular Option or to any stock issued upon exercise thereof.

14. Non-assignability

     Except as expressly provided in the Plan, no Award under the Plan shall be
assignable or transferable by the holder thereof except by will or by the laws
of descent and distribution. During the life of the holder, Awards under the
Plan shall be exercisable only by such holder or by the guardian or legal
representative of such holder.

15. Non-uniform Determinations

     Determinations by the Committee under the Plan (including without
limitation, determinations of the persons to receive Awards; the form, amount,
and timing such Awards; the terms and provisions of such Awards and the
agreements evidencing same; and provisions with respect to termination of
employment) need not to be uniform and may be made by it selectively among
persons who receive, or are eligible to receive, Awards under the Plan, whether
or not such persons are similarly situated.

16. No Guarantee of Employment

     Nothing contained in the Plan (or in any Award granted pursuant to the
Plan) shall confer any obligation of the Board of Directors to nominate any
director for reelection by the Company’s shareholders, or confer upon any
employee, director or consultant any right to continue in the service of the
Company or any subsidiary or constitute any contract or agreement of employment
or interfere in any way with the right of the Company or any subsidiary to
reduce any person’s compensation from the rate in existence at the time of the
granting of an Award or to terminate such person’s employment. Nothing
contained herein or in any Award Agreement shall affect any other contractual
rights of an employee, director or consultant.

17. Unfunded Plan

     The Plan shall be unfunded. Neither the Company, Board of Directors, nor
the Committee shall be required to segregate any assets that may at any time be
represented by Awards made pursuant to the Plan. Neither the Company, the
Committee, nor the Board of Directors shall be deemed to be a trustee of any
amounts to be paid under the Plan.

10

 

18. Limits of Liability

     Any liability of the Company to any Participant with respect to an Award
shall be based solely upon contractual obligations created by the Plan and the
Award Agreement.

     No member of the Board or the Committee, nor any employee acting on behalf
of the Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to
the Plan, and all members of the Board and the Committee and each employee
acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination, or interpretation.

19. Term

     The Plan shall continue from its Effective Date until December 31, 2007,
unless the Plan is terminated in accordance with its provisions.

20. Governing Law

     The laws of the State of Delaware shall govern all matters relating to the
Plan except to the extent superseded by the laws of the United States.

21. Miscellaneous

     The Plan was submitted to the stockholders of the Company for their
approval and adoption at a meeting of stockholders on July 25, 1997, and again
on July 23, 1999 with respect to certain amendments thereto, and the Plan has
been so approved and adopted. The Plan is effective as of July 25, 1997, the
date the Plan was initially approved and adopted by the Company’s stockholders
(the “Effective Date”).

11

 

     IN WITNESS WHEREOF, the Company has caused this Plan, as amended and
restated as of this 17th day of November, 2004, to be executed by its duly
authorized officer to be effective as of Effective Date.

ADVANCED ENVIRONMENTAL RECYCLING

TECHNOLOGIES, INC.

	 	 	 
	By:
	 	/s/ JOE G. BROOKS
	

	 	
 
	Title:
	 	Chairman
	

	 	
 
	Date:
	 	November 17, 2004
	

	 	
 

12

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