Document:

exv10w7

EXECUTION COPY

SERVICING AGREEMENT

among

COFINA FUNDING, LLC,

as Issuer,

COFINA FINANCIAL, LLC,

as Servicer,

and

U.S. BANK NATIONAL ASSOCIATION,

as Trustee

 

Dated as of August 10, 2005

 

 

TABLE OF CONTENTS

(continued)

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

 

 

TABLE OF CONTENTS

(continued)

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

 

 

          SERVICING AGREEMENT, dated as of August 10, 2005 (the “Agreement”) by and among COFINA
FUNDING, LLC, a Delaware limited liability company, as issuer (the “Issuer”), COFINA
FINANCIAL, LLC, a Minnesota limited liability company, as initial Servicer (the “Servicer”)
and U.S. BANK NATIONAL ASSOCIATION, as trustee under the Indenture (defined below) (in such
capacity, together with its successors and assigns in such capacity, the “Trustee”).

          WHEREAS, the Issuer desires to purchase from time to time Receivables and Related Security
relating to such Receivables pursuant to the terms of and subject to the conditions set forth in
the Purchase and Sale Agreement, dated as of August 10, 2005 (as amended, supplemented or otherwise
modified from time to time the “Purchase Agreement”) between Cofina Financial, LLC and the
Issuer;

          WHEREAS, the Issuer is entering into a Base Indenture, dated as of the date hereof (together
with one or more supplements thereto and as amended, supplemented or otherwise modified from time
to time, the “Indenture”), between the Issuer and the Trustee, and each of the other
related Transaction Documents, pursuant to which the Issuer plans to issue one or more series of
Notes, from time to time, in order to finance its acquisition of the Receivables; and

          WHEREAS, the Servicer is willing to service all Receivables and Related Security acquired by
the Issuer from time to time, pursuant to the terms and subject to the conditions set forth in this
Agreement.

          NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained,
the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

          Section 1.01 Definitions. Capitalized terms used but not defined herein shall have
the meanings given to such terms in the Indenture and, as applicable, the Series Supplement for
each Series.

          Section 1.02 Other Definitional Provisions.

          (a) All terms used in any certificate or other document made or delivered pursuant to this
Agreement shall have the meanings given to such terms in this Agreement unless otherwise defined
therein.

          (b) As used herein and in any certificate or other document made or delivered pursuant hereto
or thereto, accounting terms not defined herein or in the Indenture shall have the meanings given
to them under GAAP, subject to the Indenture. To the extent that the definitions of accounting
terms herein are inconsistent with the meanings of such terms under GAAP, the definitions contained
herein shall control.

 

 

          (c) The words “hereof,” “herein” and “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular provision of this
Agreement; and Section, Schedule and Exhibit references contained in this Agreement are references
to Sections, Schedules and Exhibits in or to this Agreement unless otherwise specified.

ARTICLE II

ADMINISTRATION AND SERVICING

OF RECEIVABLES AND RELATED SECURITY

          Section 2.01 Appointment of Servicer.

          (a) The servicing, administering and collection of the Receivables shall be conducted by such
Person (the “Servicer”) so designated from time to time in accordance with this Section
2.01. Until the Trustee (in accordance with the instructions of the Required Noteholders)
gives notice to Cofina Financial, LLC of the designation of a new Servicer pursuant to this
Section 2.01, Cofina Financial, LLC is hereby designated as, and hereby agrees to perform
the duties and obligations of, the Servicer pursuant to the terms hereof. The Servicer may not
delegate any of its rights, duties or obligations hereunder, or designate a substitute Servicer,
without the prior written consent of the Required Persons for each Series, which consent shall not
be unreasonably withheld; provided, however, that Cofina Financial, LLC shall be
permitted to delegate its duties hereunder to any of its Affiliates, but such delegation shall not
relieve Cofina Financial, LLC of its duties and obligations hereunder.

          (b) The Trustee shall promptly, upon the direction of the Required Noteholders, after the
occurrence of a Servicer Default or any Early Amortization Event, appoint as successor Servicer
such Person specified by the Required Noteholders to succeed the then-current Servicer on the
condition, in each case, that any such Person so designated shall agree to perform the duties and
obligations of the Servicer pursuant to the terms hereof. Until such time as the Person so
appointed becomes obligated to begin acting as Servicer hereunder, the then-current Servicer will
continue to perform all servicing functions under this Agreement and the other Transaction
Documents. If the Trustee (at the direction of the Required Noteholders) is not able to appoint a
new Servicer to succeed the then-current Servicer within 90 days following receipt of such
direction, the Trustee shall at the Issuer’s expense petition a court of competent jurisdiction to
appoint as the Servicer hereunder any established financial institution having, in the case of any
entity that is subject to risk-based capital adequacy requirements, risk-based capital of at least
$50,000,000 or, in the case of an entity that is not subject to risk-based capital requirements,
having a net worth of not less than $50,000,000 and whose regular business includes the servicing
of receivables comparable to the Receivables which are the subject of this Agreement and the other
Transaction Documents. Following any designation of a successor Servicer pursuant to this
Section 2.01, the Trustee will provide notice thereof to the Issuer, the Sellers, the
Enhancement Providers, the Notice Persons and the Noteholders.

          (c) The Trustee shall not be responsible for any differential between the Servicing Fee and
any compensation to be paid to a successor Servicer hereunder.

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          Section 2.02 Duties of Servicer.

          (a) (i) The Servicer shall take or cause to be taken all such action as may be reasonably
necessary or advisable to collect each Receivable from time to time, all in accordance with
applicable Laws, with reasonable care and diligence, and with no less skill and care than it
exercises with respect to receivables that it services for itself and others. The Issuer hereby
appoints as its agent the Servicer, from time to time designated pursuant to Section 2.01
hereof, to enforce its rights and interests in and under the Loan Documents, the Receivables and
the Related Security with respect thereto. To the extent permitted by applicable law, the Issuer
hereby grants to any Servicer appointed hereunder all rights and powers of the Issuer under the
Loan Documents and with respect to the Receivables and the Related Security, and hereby grants an
irrevocable power of attorney to take in the Issuer’s name and on behalf of the Issuer any and all
steps necessary or desirable, in the reasonable determination of the Servicer, to collect all
amounts due under any and all Receivables and the Related Security with respect thereto, including,
without limitation, commence enforcement proceedings, exercise other powers under any Loan
Document, execute and deliver instruments of satisfaction or cancellation or full or partial
discharge with respect to Receivables and the Related Security with respect thereto, endorse the
Issuer’s name on checks and other instruments representing Collections and enforce such
Receivables, the Related Security with respect thereto and the related Loan Documents. The
Servicer shall, as soon as practicable following identification thereof (and in any event within
two (2) Business Days of receipt), turn over to the applicable Seller any collections of any
indebtedness of any Person which is not on account of a Receivable. The Servicer shall not make
the Trustee, any Noteholder or any of their respective agents a party to any litigation with
respect to the servicing or collection of the Receivables without the prior written consent of such
Person. Without limiting the generality of the foregoing and subject to Section 2.04, the
Servicer is hereby authorized and empowered unless such power and authority is revoked by the
Trustee at the direction of the Required Noteholders on account of a Servicer Default (A) to make
deposits to (but not withdrawals from) the Collection Account as set forth in this Agreement, the
Indenture and any Series Supplement, (B) to instruct the Trustee to make deposits or distributions
and payments from the Collection Account, any Settlement Account and any Series Account, in
accordance with the Indenture or any applicable Series Supplement, (C) to instruct or notify the
Trustee in writing, as set forth in this Agreement, the Indenture and any Series Supplement, (D) to
make all calculations, allocations and determinations required of the Servicer under the Indenture,
any Series Supplement and as required hereof, (E) solely to the extent permitted under the
Transaction Documents, to execute and deliver, on behalf of the Issuer for the benefit of the
Secured Parties, any and all instruments of satisfaction or cancellation, or of partial or full
release or discharge, and all other comparable instruments, with respect to the Receivables, the
Related Security and the Loan Documents and, after any delinquency in payment or other default
relating to any Receivable, solely to the extent permitted under the Transaction Documents and to
the extent permitted under and in compliance with applicable law and regulations, to commence
enforcement proceedings with respect thereto and (F) to make any filings, reports, notices,
applications, registrations with, and to seek any consents or authorizations from, the Securities
and Exchange Commission and any state securities authority on behalf of the Issuer as may be
necessary or advisable to comply with any federal or state securities laws or reporting
requirements.

3

 

     (ii) In connection with the issuance by the Issuer of the Notes and the granting by the
Issuer of a security interest in the Receivables and Related Security under the Indenture
for the benefit of the Secured Parties, the Issuer and the Trustee are entering into the
Custodian Agreement with the Custodian. As promptly as is practical but in any event not
later than five Business Days following the Initial Closing Date (with respect to the
Receivables purchased by the Issuer on that date) or two Business Days following the date of
each other purchase of Receivables under the Purchase Agreement, the Servicer shall deliver
to the Custodian (for the benefit of the Secured Parties) the Custodian File related to such
Receivables.

          (b) If the Servicer is not the Issuer or an Affiliate of CFA, the Servicer, by giving thirty
(30) Business Days’ prior written notice to the Trustee, the Notice Persons and each Rating Agency,
may, with the prior written consent of the Required Persons for each Series, increase the Servicing
Fee; provided that such revised Servicing Fee shall be established on an arm’s-length
basis.

          (c) (i) (A) On or before ninety (90) days after the end of each fiscal year of the Servicer,
and (B) within ten (10) Business Days after any Required Person or any Notice Person shall have
requested, such request to be made not more than once per fiscal year prior to the occurrence of an
Event of Default, Default, Servicer Default, Potential Servicer Default, Early Amortization Event
or Potential Early Amortization Event (but only if such events have not been waived), the Servicer
shall cause, at the expense of the Servicer, a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer, the Issuer or any Affiliates of
the foregoing) acceptable to the Required Persons for each Series to furnish to the Issuer, the
Trustee, the Notice Persons and the Enhancement Providers, (1) a report, in a format similar to
Exhibit E attached hereto, to the effect that they have (a) reviewed the Servicer’s
internal accounting control procedures and processing functions relating to the Servicer’s credit
policies and origination, collections, aging and charge-off functions, (b) performed testing of a
statistically significant sample of Receivables and one Monthly Servicer Report (such Monthly
Servicer Report to be in a format similar to Exhibit B attached hereto) for each fiscal
quarter, and describing the results of such review and testing, and (c) during such review and
testing, not discovered any material deviations (other than those described in the report) from the
Credit Manual, and (2) a report in a format similar to Exhibit E attached hereto to the
effect that they have applied certain procedures set forth in such Exhibit agreed upon with the
Servicer and examined certain documents and records relating to the servicing of Receivables under
this Agreement, and that, based upon such agreed upon procedures, nothing has come to the attention
of such accountants that caused them to believe such servicing (including, without limitation, the
allocation of Collections) has not been conducted in compliance with the terms and conditions set
forth in the Indenture and each Series Supplement, except for such exceptions as they believe to be
immaterial and such other exceptions as shall be set forth in such statement. In addition, each
report shall set forth the agreed upon procedures performed.

     (ii) The Servicer will deliver to the Trustee and the Notice Persons, within 30 days
after the end of each fiscal year of the Servicer, a certificate of a Responsible Officer of
the Servicer in the form of Exhibit C hereto stating that (a) a review of the
activities of the Servicer during the preceding calendar year (or portion thereof, as
applicable) and of its performance under this Agreement was made under the supervision

4

 

of the officer signing such certificate and (b) to the best of such officer’s
knowledge, based on such review, the Servicer has fully performed in all material respects
all of its obligations under this Agreement and each other applicable Transaction Document
to which it is a party throughout such period, or, if there has been a default in the
performance of any such obligation, specifying such default known to such officer and the
nature and status thereof.

     (iii) The Servicer will maintain a system of accounting established and administered in
accordance with GAAP, and furnish to the Trustee and the Notice Persons within ninety (90)
days after the close of each of the Servicer’s fiscal years, audited financial statements of
the Servicer, prepared in accordance with GAAP on a consolidated and consolidating basis
(consolidating statements need not be audited by such accountants) for the Servicer and its
Subsidiaries, including balance sheets as of the end of such period, related statements of
operations, equity or capital and cash flows, accompanied by an unqualified audit report
certified by a firm of nationally recognized independent certified public accountants,
prepared in accordance with GAAP and any management letter prepared by said accountants.

     (iv) The Servicer will deliver to the Trustee and the Notice Persons, as soon as
available, and in any event not later than the 15th day of the month following each monthly
accounting period, a copy of the internally prepared unaudited monthly consolidated
financial statements certified by the Servicer in the form set forth as Exhibit E to
the Purchase Agreement.

          Section 2.03 Rights After Designation of New Servicer. At any time following the
designation of a new Servicer pursuant to Section 2.01 hereof:

     (i) The new Servicer may direct that payment of all amounts payable under any
Receivable by an Obligor be made directly to a new lockbox account established by the new
Servicer subject to a Lockbox Agreement.

     (ii) The Issuer shall, at any Required Person’s request and at the Issuer’s expense,
give notice (to the extent such notice has not otherwise already been provided) of the
Trustee’s interest in the Receivables to each Obligor.

     (iii) The Issuer shall, at any Required Person’s request, (A) assemble all of the
records relating to the Receivables and other Related Security, and shall make the same
available to the Trustee, the successor Servicer and each Notice Person or their respective
designees at a place selected by the Trustee, the successor Servicer or such designee, and
(B) segregate all cash, checks and other instruments received by it from time to time
constituting Collections of Receivables in a manner acceptable to such Required Person and
each Notice Person and shall, promptly upon receipt, remit all such cash, checks and
instruments, duly endorsed or with duly executed instruments of transfer, to the Trustee,
the successor Servicer or its designee.

     (iv) The Issuer hereby authorizes the Trustee to take any and all steps in the Issuer’s
name and on behalf of the Issuer necessary or desirable, in the reasonable

5

 

determination of the Trustee, to collect all amounts due under any and all Receivables,
including, without limitation, endorsing the Issuer’s name on checks and other instruments
representing Collections and enforcing such Receivables and the related Loan Documents.

          Section 2.04 Servicer Default. The occurrence of any one or more of the following
events shall constitute a Servicer default (each, a “Servicer Default”):

          (a) failure by the Servicer to make any payment, transfer or deposit under this Agreement or
any other Transaction Document or to give instructions or to give notice to the Trustee to make
such payment, transfer or deposit or any withdrawal or to give notice to the Trustee as to any
required drawing or payment under any applicable Credit Enhancement on the date such payment,
transfer or deposit or such instruction or notice is required to be made or given as the case may
be, under the terms of this Agreement or any other Transaction Document and such failure continues
unremedied for two (2) Business Days;

          (b) failure on the part of the Servicer duly to observe or perform in any material respect any
other covenants or agreements of the Servicer set forth in this Agreement or any other Transaction
Document, which failure continues unremedied for a period of ten (10) Business Days, in each case
after the earliest of (i) the date of discovery by the Servicer of such failure, (ii) the date on
which written notice of such failure, requiring the same to be remedied, shall have been given to
the Servicer by the Trustee, the Issuer, any Noteholder or any Notice Person or (iii) the date on
which the Servicer, in the exercise of reasonable diligence, should have become aware of such
failure, provided, that if the failure is capable of being cured and the Servicer is using
commercially reasonable efforts to cure such failure, a Servicer Default shall not be deemed to
have occurred until such failure continues unremedied for a period of thirty (30) days; or the
Servicer shall assign its duties under this Agreement, except as permitted by Article II;

          (c) any representation, warranty or certification made by the Servicer in this Agreement or
any other Transaction Document or in any certificate delivered pursuant to this Agreement or any
other Transaction Document shall prove to have been incorrect in any material respect when made or
deemed to have been made, and such circumstance continues unremedied for a period of ten (10)
Business Days (or thirty (30) days if such circumstance is capable of being cured and the Servicer
is using commercially reasonable efforts to cure such failure);

          (d) the Servicer or any of its Affiliates shall become the subject of any Event of Bankruptcy
or shall voluntarily suspend payment of its obligations;

          (e) for so long as any Affiliate of Cofina Financial, LLC is the Servicer, Cofina Financial,
LLC shall fail to maintain either (i) “Total Capital” (as defined under GAAP and including the
carrying value of CFA’s equity ownership in the Issuer) of $65 million plus for each fiscal year
ending after the date hereof, the aggregate Net Savings not otherwise distributed to shareholders
(via cash patronage distributions or stock or patronage capital retirement) (such amounts to be
added only after audited financial statements are available and the patronage distribution is
established) or (ii) a positive net income for any two consecutive quarters, determined in
accordance with GAAP;

6

 

          (f) a final judgment is rendered against the Servicer or any of its Subsidiaries in an amount
greater than $1,000,000 and, within thirty (30) days after entry thereof, such judgment is not
paid, discharged or execution thereof stayed pending appeal, or within ten (10) days after the
expiration of any such stay, such judgment is not discharged;

          (g) the Servicer or any of its Affiliates shall fail to pay any principal of or premium or
interest when the same becomes due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) on any Indebtedness for which the Servicer or such Affiliate is
liable (whether as a primary or secondary party) or otherwise shall default in its obligations
thereunder or a default or event of default shall occur thereunder if the aggregate principal
amount of such Indebtedness is $1,000,000 or more, and such failure, default or event of default
shall not be permanently waived and shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Indebtedness and the effect of such event
or condition is to accelerate, or permit the acceleration of, the maturity of such Indebtedness;

          (h) the Trustee shall receive notice from the Servicer that the Servicer is no longer able to
discharge its duties under the Transaction Documents;

          (i) the Servicer shall, without the prior written approval of the Required Persons, make any
material change in the Credit Manual; or

          (j) an Event of Default shall occur.

     Upon the occurrence of any of the above events (other than in clause (d) above), the
Required Noteholders may declare a Servicer Default and a new Servicer may be appointed in
accordance with Section 2.01 and the Servicer shall have the obligations and the Trustee
the rights under Sections 2.06 and 2.13. If an event described in clause
(d) above shall occur, a Servicer Default shall occur automatically without any declaration or
other act by any Person and a new Servicer may be appointed in accordance with Section 2.01
and the Servicer shall have the obligations and the Trustee the rights under Sections 2.06
and 2.13.

          Section 2.05 Servicer Indemnification of Indemnified Parties. The Servicer shall
indemnify and hold harmless the Trustee, the Custodian, the Enhancement Providers, the Noteholders
(together with their respective successors and permitted assigns) and each of their respective
agents, officers, directors, members and employees (collectively, the “Indemnified
Parties”), from and against any loss, liability, expense, damage or injury suffered or
sustained by reason of any breach by the Servicer of any of its representations, warranties or
covenants contained in any Transaction Document to which it is a party or any failure by the
Servicer to perform or the performance by the Servicer of any duty or obligation of the Servicer
contained in this Agreement or any other Transaction Document, including any judgment, award,
settlement, reasonable attorneys’ fees and other costs or expenses reasonably incurred in
connection with the defense of any actual action, proceeding or claim; provided,
however, that the Servicer shall not indemnify the Indemnified Parties if such acts or
omissions were attributable directly or indirectly to gross negligence or willful misconduct by
such Indemnified Party or to the extent any such indemnity constitutes recourse with respect to
uncollectible Receivables. Any indemnification pursuant to this Section shall be had only from the
assets of the Servicer and

7

 

shall not be payable from Collections, except to the extent such Collections are released to
the Servicer in accordance with the Indenture and each Series Supplement in respect of the
Servicing Fee. The provisions of such indemnity shall run directly to and be enforceable by such
Indemnified Parties.

          Section 2.06 Grant of License. For the purpose of enabling any successor Servicer to
perform the functions of servicing and collecting the Receivables upon a Servicer Default, the
Servicer hereby (i) assigns, to the extent permitted, to the Trustee for the benefit of the Secured
Parties and shall be deemed to assign to the Trustee for the benefit of the Secured Parties or any
successor Servicer all rights owned or hereinafter acquired by the Servicer (by license,
sublicense, lease, easement or otherwise) in and to any equipment of the Servicer together with a
copy of any software used in connection with the performance of its duties as Servicer and relating
to the Servicing and collecting of Receivables, (ii) agrees to use all reasonable efforts to assist
the Trustee for the benefit of the Secured Parties or any successor Servicer to arrange licensing
agreements with all software vendors and other applicable persons in a manner and to the extent
reasonably appropriate to effectuate the servicing of the Receivables, (iii) agrees to use
reasonable efforts to deliver to the Trustee executed copies of any landlord waivers in a form
reasonably acceptable to the Trustee that may be necessary to grant to the Trustee or any successor
Servicer access to any leased premises of the Servicer for which the Trustee or any successor
Servicer may require access to perform the collection and administrative functions to be performed
by the Trustee under the Transaction Documents and (iv) agrees that upon its termination as a
Servicer hereunder in accordance with Section 2.01 it will discontinue its activities as
Servicer hereunder in a manner which the applicable successor Servicer or any Required Person
reasonably believes will facilitate the transition of the performance of such activities to the
designated successor Servicer and shall assist the Trustee in such transition, as described in
Section 2.13.

          Section 2.07 Servicing Compensation. As compensation for its servicing activities
hereunder and reimbursement for its expenses under this Agreement, the Servicer shall be entitled
to receive the Servicing Fee prior to its termination as Servicer hereunder and prior to the
Indenture Termination Date as described in Section 12.1 of the Indenture. The Servicing
Fee shall be payable at the times and in the amounts set forth in the Indenture.

          The Servicer’s expenses include (i) the fees and disbursements of independent public
accountants and all other expenses incurred by the Servicer in connection with its activities
hereunder and (ii) in the event that the Servicer hereunder is replaced by a successor Servicer,
all costs and expenses of the transfer of servicing to such successor Servicer, including all costs
and expenses incurred by the Trustee, the Custodian and such successor Servicer in connection
therewith; provided, that the Servicer in its capacity as such shall not be liable for any
liabilities, costs or expenses of the Issuer, the Noteholders or the Note Owners arising under any
tax law, including without limitation any federal, state or local income or franchise taxes or any
other tax imposed on or measured by income or gross receipts (or any interest or penalties with
respect thereto or arising from a failure to comply therewith) except to the extent that such
liabilities, taxes or expenses arose as a result of the breach by the Servicer of its obligations
hereunder. The Servicer shall be required to pay such expenses for its own account and shall not
be entitled to any payment therefor other than the Servicing Fee.

8

 

          Section 2.08 Representations and Warranties of the Servicer. The Servicer hereby
represents, warrants and covenants to and for the benefit of the Issuer, the Trustee and the
Secured Parties as of the date of this Agreement and as of each Transfer Date:

          (a) Organization and Good Standing. The Servicer is duly organized, validly existing
and in good standing under the laws of the State of Minnesota, and has the full organizational
power and authority to own its property and conduct its business as such properties are presently
owned and as such business is presently conducted and to execute, deliver and perform its
obligations under this Agreement and the other Transaction Documents to which it is a party.

          (b) Due Qualification. The Servicer is duly qualified to do business and is in good
standing and has obtained all necessary licenses and approvals in each jurisdiction in which the
servicing of the Receivables, the Related Security and the Loan Documents in accordance with the
Transaction Documents requires such qualification, except where the failure to so qualify or to
obtain such licenses or approvals would not have a Material Adverse Effect.

          (c) Due Authorization. The execution, delivery, and performance of this Agreement and
each of the other Transaction Documents to which it is a party and the consummation of the
transactions contemplated by the Transaction Documents have been duly authorized by the Servicer by
all necessary organizational action on the part of the Servicer.

          (d) Due Execution and Delivery; Binding Obligation. Each of the Transaction Documents
to which it is a party has been duly executed and delivered on behalf of the Servicer and
constitutes the valid, legal and binding obligation of the Servicer, enforceable in accordance with
their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors’ rights.

          (e) No Violation. The execution and delivery of this Agreement by the Servicer and
the performance by the Servicer of its obligations under this Agreement and each of the other
Transaction Documents to which it is a party will not conflict with its organizational documents or
conflict with, violate, result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default under, any other Requirement of Law
applicable to the Servicer or any contractual restriction contained in any indenture, loan, credit
agreement, lease, security agreement, bond, note, contract, agreement, mortgage, deed of trust,
judgment, decree, order or other instrument to which the Servicer is a party or by which it is
bound.

          (f) No Proceedings. No litigation or administrative proceeding is pending or, to the
best knowledge of the Servicer, threatened against the Servicer before any Official Body: (i)
asserting the invalidity of any of the Transaction Documents to which the Servicer is a party; (ii)
seeking to prevent the consummation of any of the transactions contemplated by the Transaction
Documents; (iii) seeking any determination or ruling that, in the reasonable judgment of the
Servicer, would adversely affect the performance by the Servicer of its obligations under the
Transaction Documents to which the Servicer is a party; (iv) seeking any determination or ruling
that would adversely affect the validity or enforceability of the Transaction Documents to which
the Servicer is a party; or (v) seeking any determination or

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ruling that would, if adversely determined, be reasonably likely to have a Material Adverse
Effect.

          (g) Information. Each certificate, information, exhibit, financial statement,
document, book or record or report furnished by the Servicer to the Trustee, the Issuer, any Notice
Person or any Noteholder shall be true and correct in all material respects as of the date as of
which such information is dated or certified, and no such document shall contain any untrue
statement of a material fact or omitted or will omit to state any material fact necessary to make
such information, in the light of the circumstances under which any statement therein was made, not
misleading on the date as of which such information is dated or certified.

          (h) Governmental and Other Consents. All approvals, authorizations, consents, orders
or other actions of, and all registration, qualification, designation, declaration, notice to or
filing with, any Person or of any governmental body or official required in connection with the
execution and delivery by the Servicer of any of the Transaction Documents to which it is a party,
the consummation of the transactions contemplated thereby or the performance of and the compliance
with the terms thereof, have been obtained, except for such approvals, consents, orders, other
actions, notices or filings the failure to obtain or make are not reasonably likely to have a
Material Adverse Effect.

          (i) Financial Condition. The Servicer has heretofore furnished to the Issuer, the
Trustee, each Notice Person and each Enhancement Provider the opening balance sheets of the
Servicer and its consolidated subsidiaries as at June 30, 2005 and shall furnish to the Issuer, the
Trustee, each Notice Person and each Enhancement Provider the consolidated and consolidating
balance sheets of the Servicer and its consolidated subsidiaries within 95 days of the end of each
fiscal year of the Servicer (beginning August 31, 2005), the related consolidated statements of
income, and the related consolidated statements of capital and cash flows of the Servicer and its
consolidated subsidiaries for the fiscal year ended on said date (or projections, in the case of
June 30, 2005), in each case, with the opinion thereon (in the case of said consolidated balance
sheet and statements) of Clifton Gunderson LLP or other nationally recognized independent certified
public accountants. All such financial statements are complete and correct in all material
respects and fairly present the consolidated financial condition (or opening position, as
applicable) of the Servicer and its consolidated subsidiaries, and (in the case of said
consolidating financial statements) the respective unconsolidated financial condition of the
Servicer and of each of its consolidated subsidiaries, as at said date and the consolidated and
unconsolidated results of their operations for the fiscal year, all in accordance with generally
accepted accounting principles applied on a consistent basis. None of the Servicer nor any of its
consolidated subsidiaries has on the date hereof any material contingent liabilities, liabilities
for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in said balance sheets
as at said date. Since June 30, 2005 (i) there has been no material adverse change in the
consolidated financial condition, operations or business of the Servicer and its consolidated
subsidiaries, taken as a whole, from that set forth in said financial statements as at said date
and (ii) no Servicer Default nor event which, with the giving of notice or the passage of time,
would constitute a Servicer Default, has occurred.

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          (j) Taxes. The Servicer has filed (or there have been filed on its behalf as a member
of a consolidated group) on a timely basis all tax returns and reports required by law to have been
filed by it and has paid all taxes, assessments and governmental charges thereby shown to be owing
by it, except for any such taxes, assessments or charges (i) that are being diligently contested in
good faith by appropriate proceedings, for which adequate reserves in accordance with GAAP have
been set aside on its books and that have not given rise to any Liens or (ii) the amount of which,
either singly or in the aggregate, do not and could not reasonably be expected to have a Material
Adverse Effect.

          Section 2.09 Reports and Records for the Trustee. In addition to each of the reports
required to be prepared and delivered by the Servicer pursuant to Section 2.02(c) hereof,
the Servicer shall prepare and deliver in accordance with this Section 2.09 each of the
following reports and notices:

          (a) Daily Servicer Report. The Servicer shall prepare and forward by email to the
Issuer, the Trustee and each Notice Person (i) not later than 2:00 p.m. New York City time on each
Business Day, a Daily Servicer Report in substantially the form set forth on Exhibit A
attached hereto, and (ii) as soon as reasonably practicable, from time to time, such other
information as the Trustee, any Notice Person or the Enhancement Provider may reasonably request.

          (b) Monthly Servicer Report. The Servicer shall prepare and forward by email to the
Issuer, the Trustee, each Noteholder, each Notice Person and the Enhancement Provider not later
than the Determination Date with respect to each calendar month, a Monthly Servicer Report in
substantially the form set forth on Exhibit B attached hereto containing information as of
the last Business Day of the immediately preceding calendar month.

          (c) Monthly Noteholders’ Statement. Unless otherwise stated in the related Series
Supplement with respect to any Series, on each Determination Date the Servicer shall forward to the
Trustee and each Notice Person a Monthly Noteholders’ Statement in the form specified in the
applicable Series Supplement.

          (d) Issuer Reports. The Servicer shall prepare and deliver the reports and comply
with all the provisions of Section 4.3 of the Indenture.

          (e) Series Reports. The Servicer shall prepare and deliver any reports required to be
prepared and delivered by the Servicer by the terms of the Transaction Documents.

          (f) Certificate of Responsible Officer. The Servicer shall deliver with each Monthly
Servicer Report to each recipient thereof a certificate of a Responsible Officer of the Servicer
certifying (1) the accuracy of such report and that no Default, Event of Default, Servicer Default,
Potential Servicer Default, Early Amortization Event or Potential Early Amortization Event has
occurred, or if such event has occurred and is continuing, specifying the event and its status, (2)
that a review of the activities of the Servicer during the preceding Settlement Period and of its
performance under the Transaction Documents was made under the supervision of such Responsible
Officer, (3) to the best of such Responsible Officer’s knowledge, based on such

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review, the Servicer has fully performed all of its obligations under the Transaction
Documents throughout such Settlement Period, or, if there has been a default in the performance of
any such obligation, specifying each such default known to such officer and the nature and status
thereof and (4) that no Borrowing Base Deficiency exists. Any transmission or other delivery of
such report to the Trustee or any other Person designated as a recipient shall be deemed to be a
representation and warranty by the Servicer that the information contained therein is true and
correct in all material respects.

          Section 2.10 [Reserved].

          Section 2.11 Affirmative Covenants of the Servicer. At all times from the date hereof
to the Indenture Termination Date, unless the Required Persons for each Series shall otherwise
consent in writing:

          (a) Credit Manual. The initial Servicer will comply in all material respects with the
Credit Manual in regard to each Receivable and the related Loan Documents.

          (b) Collections Received; Segregation. Subject to Section 3.02(a) hereof and
Section 5.4(a) of the Indenture, the Servicer shall set aside and deposit within one (1)
Business Day following identification (but in no event later than two (2) Business Days following
its receipt thereof) into the Collection Account all Collections received from time to time by the
Servicer. The Servicer shall prevent the deposit into any Collection Account of any funds other
than Collections in respect of the Receivables and, to the extent that any such funds are
nevertheless deposited into any such Collection Account, promptly require the Trustee to segregate
such funds and provide for the remittance of such funds to the owner thereof.

          (c) Notice of Defaults, Events of Default, Potential Early Amortization Event, Early
Amortization Event, or Servicer Defaults. Immediately, and in any event within one (1)
Business Day after (i) the Servicer obtains knowledge or receives notice of the occurrence of each
Default, Event of Default, Potential Early Amortization Event, Early Amortization Event, Potential
Servicer Default or Servicer Default, or (ii) a Responsible Officer of the Servicer becomes aware
of any event, development or information which is reasonably likely to materially and adversely
affect the ability of the Servicer to perform its obligations under the Transaction Documents, the
Servicer will furnish to the Notice Persons a statement of a Responsible Officer of the Servicer,
setting forth details of such Default, Event of Default, Potential Early Amortization Event, Early
Amortization Event or Servicer Default, or other development as described in (ii) and the action
which the Servicer, the Issuer or the applicable Seller proposes to take with respect thereto.

          (d) Conduct of Business. The Servicer will do all things necessary to remain duly
formed, validly existing and in good standing as a domestic limited liability company in its
jurisdiction of formation and maintain all requisite authorizations to conduct its business in each
jurisdiction in which its business is conducted to the extent that the failure to maintain such
would be reasonably likely to have a Material Adverse Effect.

          (e) Compliance with Loan Documents and Requirements of Law. The Servicer shall duly
satisfy all obligations on its part to be fulfilled under or in connection with

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the Receivables, the Related Security and the related Loan Documents, will maintain in effect
all qualifications required on its part under Requirements of Law in order to perform its
obligations hereunder or under any of the Transaction Documents to which it is a party or to ensure
the enforceability of any Receivable, the Related Security or Collections or proceeds with respect
thereto and will comply with all Requirements of Law.

          (f) Further Information. The Servicer shall furnish or cause to be furnished to the
Trustee and any requesting Notice Person such other information relating to the Receivables and
readily available public information regarding the financial condition of the Servicer, as soon as
reasonably practicable, and in such form and detail, as the Trustee or any Notice Person may
reasonably request.

          (g) Furnishing of Information and Inspection of Records. The Servicer will furnish to
the Trustee and any requesting Notice Person from time to time such information with respect to the
Receivables as such Person may reasonably request. The Servicer will, at any time and from time to
time during regular business hours and, upon reasonable notice, permit the Trustee and each of the
Notice Persons, or their respective agents or representatives, (i) to examine and make copies of
and abstracts from all Records relating to the Receivables and (ii) to visit the offices and
properties of the Servicer for the purpose of examining such Records, and to discuss matters
relating to Receivables or the Servicer’s performance hereunder and under the other Transaction
Documents to which it is a party with any of the officers or branch managers of the Servicer having
knowledge of such matters. Upon a Default or Event of Default, Early Amortization Event, Potential
Early Amortization Event, Potential Servicer Default or Servicer Default, the Trustee and each of
the Notice Persons may have, without notice, immediate access to all records and the offices and
properties of the Servicer.

          (h) Notification of Adverse Developments. The Servicer shall promptly notify the
Issuer, the Trustee, each Notice Person and each Enhancement Provider upon the discovery of the
occurrence of (i) any event, development or circumstance whereby the financial statements most
recently furnished to any such parties pursuant to this Agreement or the other Transaction
Documents fail in any material respect to present fairly, in accordance with generally accepted
accounting principles, the financial condition and results of operations of the Servicer as of the
date of such financial statements; (ii) any material litigation or proceedings, including any
action, suit or proceeding before any governmental authority, that are instituted or, to the
knowledge of the Servicer, threatened against the Servicer or any of its assets or relating to any
of its obligations under the Transaction Documents; (iii) any dispute with respect to any of its
obligations under the Transaction Documents; and (iv) any other material adverse development in the
business or affairs of the Servicer; in each case describing the nature thereof and the action the
Servicer proposes to take with respect thereto.

          (i) Notice to Obligors. The Servicer shall ensure that, no later than the date of any
conveyance of a Receivable pursuant to the Purchase Agreement, the related Obligor shall have been
instructed to remit payments thereunder directly to the Lockbox or the Collection Account and will
not change any such instructions without the prior written consent of the Required Persons for each
Series.

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          (j) Relocation of Servicer. The Servicer shall give the Trustee and each Notice
Person at least thirty (30) days prior written notice of any relocation of its any office from
which it services the Receivables and Related Security or keeps Records concerning such items and
whether, as a result of such relocation, the applicable provisions of the UCC would require the
filing of any amendment of any previously filed financing or continuation statement or of any new
financing statement and shall file such financing statements or amendments as may be necessary to
continue the Trustee’s security interest in the Trust Estate and the proceeds thereof for the
benefit of the Secured Parties. The Servicer shall at all times maintain each office from which it
services Receivables or related Loan Documents and its principal place of business and chief
executive office within the United States of America.

          (k) Protection of Right, Title and Interest to Receivables and Related Security. The
Servicer shall cause this Agreement, the Indenture and any Series Supplement, all amendments hereto
and/or all financing statements and continuation statements and any other necessary documents
covering the Secured Parties’ and the Trustee’s right, title and interest in and to the Trust
Estate to be promptly recorded, registered and filed, and at all times to be kept recorded,
registered and filed, all in such manner and in such places as may be required by law fully to
preserve and protect the Trustee’s Lien (granted pursuant to the Indenture for the benefit of the
Secured Parties) on the property constituting the Trust Estate. The Servicer shall deliver to the
Trustee file-stamped copies of, or filing receipts for, any document recorded, registered or filed
as provided above, as soon as available following such recording, registration or filing.

          (l) Realization Upon Defaulted Receivables. The Servicer will use reasonable efforts
to repossess or otherwise comparably convert the ownership of any Related Security with respect to
a Defaulted Receivable and will act as sales and processing agent for any Related Security which it
repossesses. The Servicer will follow the practices and procedures set forth in the Credit Manual
in order to realize upon such Related Security. In any case in which any such Related Security has
suffered damage, the Servicer will not expend funds in connection with any repair or toward the
repossession of such Related Security unless it reasonably determines that such repair and/or
repossession will increase the Recoveries by an amount greater than the amount of such expenses.
The Servicer will remit to the Collection Account the Recoveries received in connection with the
sale or disposition of Related Security with respect to a Defaulted Receivable in connection with
such sale or disposition within one (1) Business Day of receipt of such Recoveries.

          (m) Maintenance of Insurance Policies. The Servicer will require that each Obligor
with respect to a Receivable included as part of the Collateral maintains an insurance policy to
the extent required by the Credit Manual. In connection with its activities as Servicer, the
Servicer agrees to present, on behalf of the Trustee as agent for the Secured Parties, claims to
the insurer under each insurance policy, and to settle, adjust and compromise such claims, in each
case, consistent with the terms of each related Receivable.

          (n) Marking. The Servicer shall clearly and unambiguously identify each Receivable
that is part of the Collateral and the Related Security and all other elements of the Receivables
File in its computer or other records to reflect that the interest in such Receivables and Related
Property have been transferred to and are owned by the Issuer and that the Trustee has the interest
therein granted by the Issuer pursuant to this Agreement.

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          (o) UCS Score. The Servicer shall confirm and ensure that the UCS Score assigned to
each Receivable shall at all times reflect the proper UCS Score applicable to such Receivable in
accordance with the Credit Manual as then currently in effect.

          (p) Transaction Documents. The Servicer hereby covenants and agrees to perform all of
the obligations of the Servicer specified in the Transaction Documents in accordance with the terms
thereof.

          In the event that there is any breach of any of the covenants of the Servicer contained in
Section 2.11(e) or (k) or Section 2.12(e) or (f) with respect to
any Receivable, and such Receivable becomes a Defaulted Receivable or the Receivable or the rights
of the Secured Parties in, to or under such Receivable or its proceeds are impaired or the proceeds
of such Receivable are not available to the Trustee for the benefit of the Secured Parties, then if
in any case such noncompliance has not been cured within thirty (30) days, the Servicer shall be
deemed to have received on such day a collection of such Receivable in full, and the Servicer
shall, on such day, deposit from its own funds into the Collection Account an amount equal to the
outstanding principal balance of such Receivable, together with accrued and unpaid interest
thereon, and such amount shall be allocated and applied by the Servicer as a Collection allocable
to the Receivables or Related Security. In the event that the Servicer has paid to or for the
benefit of the Secured Parties the full outstanding principal balance (plus accrued and unpaid
interest) of any Receivable pursuant to this paragraph, each of the Trustee for the benefit of the
Secured Parties and the Issuer shall release and convey all of such Person’s right, title and
interest in and to the related Receivable to the Servicer, without representation or warranty, but
free and clear of all liens created by such Person, as applicable.

          Section 2.12 Negative Covenants of the Servicer. At all times from the date hereof to
the Indenture Termination Date, unless the Required Persons for each Series shall otherwise consent
in writing:

          (a) Modifications of Receivables or Obligor Notes. The Servicer shall not extend,
amend, forgive, discharge, compromise, waive, cancel or otherwise modify the terms of any
Receivable or amend, modify or waive any term or condition of any Obligor Note related thereto;
provided, that the Servicer may take such actions as are expressly permitted by Section
2.11(l) and Section 2.12(f) or required by Requirements of Law.

          (b) Merger or Consolidation of, or Assumption of the Obligations of, the Servicer.
The Servicer shall not consolidate with or merge into any other Person or sell, convey or transfer
substantially all of its properties and assets to any Person, unless:

     (i) the Required Persons for each Series shall have consented to such transaction;

     (ii) the entity formed by such consolidation or into which the Servicer is merged or
the Person which acquires by conveyance or transfer the properties and assets of the
Servicer substantially as an entirety shall be an entity organized and existing under the
laws of the United States of America or any State or the District of Columbia and, if the
Servicer is not the surviving entity, such Person (the “Surviving Entity”) shall

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expressly assume, by an agreement supplemental hereto executed and delivered to the
Trustee and the Notice Persons, in a form reasonably satisfactory to the Required Persons
for each Series, the performance of every covenant and obligation of the Servicer hereunder;
and

     (iii) the Servicer has delivered to the Trustee and each Notice Person an Opinion of
Counsel stating that such consolidation, merger, sale, conveyance or transfer complies with
this paragraph (b) and that all conditions precedent herein provided for relating to such
transaction have been complied with (and if an agreement supplemental hereto has been
executed as contemplated by clause (ii) above, such opinion of counsel shall state that such
supplemental agreement is a legal, valid and binding obligation of the Surviving Entity
enforceable against the Surviving Entity in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors’ rights and to general equity principles).

          (c) No Change in Business or the Credit Manual. Subject to the Requirements of Law,
the Servicer will not make any change in the character of its business or in the Credit Manual
which change would, in either case, impair the collectibility of any Receivable or otherwise have a
Material Adverse Effect. The Servicer shall not amend the Credit Manual in any respect without the
prior consent of the Issuer. The Servicer shall not amend the Credit Manual in any material
respect without the prior written consent of the Required Persons for each Series. The Servicer
agrees that it will provide the Trustee, each Notice Person and the Issuer with a copy of all
amendments to the Credit Manual not later than ten (10) days after the effectiveness thereof.

          (d) No Adverse Claims. Expect as otherwise provided in Indenture or the Transaction
Documents, the Servicer will not sell, transfer, exchange or otherwise dispose of or create any
Adverse Claim upon (or file any financing statement covering) any of the equity interests in or
properties or assets of the Issuer constituting the Trust Estate or any part thereof or any
interest thereon or any proceeds thereof.

          (e) No Rescission or Cancellation. The Servicer shall not permit any rescission or
cancellation of a Receivable except pursuant to the Credit Manual or pursuant to a Requirement of
Law.

          (f) Protection of Secured Parties’ Rights. The Servicer shall not take any action
which would impair, or omit to take any action necessary to avoid impairment of, the rights of the
Secured Parties in the Receivables, the Related Security or the other collateral in the Trust
Estate, nor shall it reschedule, revise or defer Collections due on the Receivables, nor, if
possession is required for perfection under the UCC, shall it take any action to cause a Receivable
to be evidenced by a promissory note or other instrument unless possession thereof has been, or
will be, transferred to the Custodian, as agent for the Trustee for the benefit of the Secured
Parties or such other custodian or agent designated by the Trustee; provided,
however, the Servicer may, in accordance with the Credit Manual and with prudent servicing
practices, make customer service adjustments and adjustments in payment schedules and take other
actions to collect and enforce the Receivables in the ordinary course of business.

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          (g) Name; Jurisdiction of Organization, Principal Place of Business. The Servicer
will not change its name, its jurisdiction of organization or the location of its chief executive
office, or principal place of business (within the meaning of the applicable UCC) without thirty
(30) days prior written notice to the Trustee and each Notice Person. In the event that the
Servicer desires to so change its jurisdiction of formation or its office or change its name, the
Servicer will make any required filings and prior to or simultaneously with actually making such
change the Servicer will deliver to the Trustee and each Notice Person (i) a certificate of a
Responsible Officer and (except with respect to a change of the location of the Servicer’s chief
executive office or principal place of business to a new location in the same county) an Opinion of
Counsel confirming that all required filings have been made to continue the perfected interest of
the Trustee in the Trust Estate in respect of such change and (ii) copies of all such required
filings with the filing information duly noted thereon by the office in which such filings were
made.

          Section 2.13 Successor Servicer. On and after the receipt by the Servicer of a notice
designating a new Servicer pursuant to Section 2.01, the Servicer shall continue to perform
all servicing functions under this Agreement until the date specified in such notice or otherwise
specified by the Trustee (pursuant to the written direction of the Required Noteholders) in
writing. The Trustee, upon the written direction of the Required Noteholders in their sole
discretion at the time described in the immediately preceding sentence, shall appoint a successor
servicer as the Servicer hereunder, and such successor Servicer shall on such date assume all
obligations of the Servicer hereunder, and all authority and power of the Servicer under this
Agreement shall pass to and be vested in such successor Servicer; provided,
however, that any successor Servicer which is not an Affiliate of Cofina Financial, LLC
shall not (i) be responsible or liable for any past actions or omissions of any prior Servicer or
(ii) be obligated to service in accordance with the Credit Manual but shall instead be obligated to
service in accordance with a market and prudent standard. Upon its appointment as successor to the
Servicer, the successor Servicer shall be the successor in all respects to the Servicer with
respect to servicing functions under this Agreement, shall assume all servicing duties hereunder
and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on
the Servicer by the terms and provisions hereof, and all references in this Agreement to the
Servicer shall be deemed to refer to such successor Servicer.

          All authority and power granted to the Servicer under this Agreement shall automatically cease
and terminate upon termination of the Servicer under this Agreement and shall pass to and be vested
in the successor Servicer and, without limitation, such successor Servicer is hereby authorized and
empowered to execute and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all
documents and other instruments, and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of such transfer of servicing rights. The Servicer agrees at
its expense to cooperate with the successor Servicer and to take all actions required to effectuate
the termination of the responsibilities and rights of the Servicer to conduct servicing on the
Collateral and to take all such action and provide all such information required to effectuate the
prompt transitioning of the Servicer to the successor Servicer.

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ARTICLE III

RIGHTS OF NOTEHOLDERS AND ALLOCATION

AND APPLICATION OF COLLECTIONS

          Section 3.01 The Lockbox and Lockbox Account. The Servicer, for the benefit of the
Secured Parties, shall establish and maintain, subject to the control of the Trustee pursuant to
the terms of a lockbox agreement in form and substance, and with a Qualified Institution or another
bank acceptable to the Required Persons for each Series, the Lockbox Account and related Lockbox,
from which Collections shall be deposited daily into the Collection Account.

          Section 3.02 Collections and Allocations.

          (a) Collections. The Servicer shall direct all Obligors to pay all amounts when due
with respect to the Receivables directly to the Collection Account or to the Lockbox Account for
deposit directly into the Collection Account, and if the Servicer shall receive any Collections in
respect of Receivables, the Servicer shall deposit all Collections in the Collection Account as
promptly as possible after the date of identification of such Collections, but in no event later
than two (2) Business Days following such date of receipt.

          The Servicer shall instruct the Trustee to allocate such amounts in accordance with this
Article III and Article 5 of the Indenture and pay such amounts to the Noteholders, the
Enhancement Providers, the Issuer, the Servicer or otherwise in accordance with this Article
III and Article 5 of the Indenture, in both cases as modified by any Series Supplement. The
Servicer shall make such deposits or payments on the date indicated therein by wire or electronic
funds transfer or as otherwise provided in the Series Supplement for any Series of Notes with
respect to such Series.

          (b) Allocation of Collections Between Finance Charges and Principal Receivables. At
all times and for all purposes of this Agreement, the Indenture and any Series Supplement, the
Servicer shall allocate Collections received in respect of any Receivables for any Monthly Period
to Finance Charges and to Principal Receivables pursuant to any method of allocation that is in
accordance with GAAP and that is consistent with the Servicer’s past practice.

          (c) Deemed Collections. If on any day, the Servicer adjusts downward, reduces,
forgives or waives repayment of any portion of the amount of any Receivables (other than a
Defaulted Receivable) without either receiving Collections in an amount equal to such reduction
then in any case above, the Issuer shall be deemed to have received on such day a Collection of
such Receivable, in an amount equal to such adjusted, reduction, forgiven portion or waived
portion), and the Servicer shall, on such day, deposit an amount equal to such adjusted, reduction,
forgiven portion or waived portion, together with accrued and unpaid interest thereon into the
Collection Account.

          (d) Adjustments. If (a) the Servicer makes a deposit into the Collection Account in
respect of a Collection of a Receivable included in the Trust Estate and such Collection was
received by the Servicer in the form of a check which is not honored for any reason or (b) the
Servicer makes a mistake with respect to the amount of any Collection and deposits an amount that
is less than or more than the actual amount of such Collection, the

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Servicer shall promptly and appropriately adjust the amount subsequently deposited into the
Collection Account to reflect such dishonored check or mistake. Any Collection in respect of which
a dishonored check is received shall be deemed not to have been paid on the date such payment was
due.

ARTICLE IV

[RESERVED.]

ARTICLE V

OTHER MATTERS RELATING

TO THE SERVICER

          Section 5.01 Liability of the Servicer. The Servicer hereby agrees to perform any and
all duties and obligations set forth in any Transaction Document that are specifically identified
therein as duties of the Servicer.

          Section 5.02 Limitation on Liability of the Servicer and Others. Except as otherwise
provided by Law, the directors, officers, employees or agents who are natural persons of the
Servicer shall not be under any liability to the Issuer, the Trustee, the Noteholders, any
Enhancement Provider or any other Person hereunder or pursuant to any document delivered hereunder
for any action taken or for refraining from the taking of any action; provided,
however, that this provision shall not protect any such Person against any liability which
would otherwise be imposed by reason of willful misconduct, gross negligence, fraud or violation of
Law. Except as otherwise provided in the Transaction Documents, the Servicer shall not be under
any liability to the Issuer, the Trustee, its officers, directors, employees and agents, the
Noteholders, any Enhancement Provider or any other Person for any action taken or for refraining
from the taking of any action in its capacity as Servicer pursuant to this Agreement or any
supplement hereto; provided, however, that this provision shall not protect the
Servicer against any liability which would otherwise be imposed by reason of (x) willful
misfeasance, bad faith, fraud or negligence in the performance of duties or by reason of its
reckless disregard of its obligations and duties under any Transaction Document or (y) breach of
representation, warranty or covenant made by the Servicer in this Agreement or breach of the
express terms of any Transaction Document. The Servicer may rely in good faith on any document of
any kind prima facie properly executed and submitted by any Person respecting any
matters arising hereunder.

          Section 5.03 Servicer Not to Resign. The Servicer shall not resign from the
obligations and duties hereby imposed on it except upon determination that (i) the performance of
its duties hereunder is no longer permissible under applicable law and (ii) there is no reasonable
action which such Servicer could take to make the performance of its duties hereunder permissible
under applicable law. Any such determination permitting the resignation of any Servicer shall be
evidenced as to clause (i) above by an opinion of counsel and as to clause (ii) by the Certificate
of a Responsible Officer of the Servicer, each to such effect delivered, and satisfactory in form
and substance, to the Trustee and the Notice Persons. No such resignation shall become effective
until the Trustee or a successor Servicer shall have

19

 

assumed the responsibilities and obligations of such Servicer in accordance with
Section 2.01 hereof.

          Section 5.04 Waiver of Defaults. Any default by the Servicer in the performance of
its obligations hereunder and its consequences may be waived pursuant to Section 7.01.
Upon any such waiver of a default, such default shall cease to exist, and any default arising
therefrom shall be deemed to have been remedied for every purpose of this Agreement and each other
Transaction Document to which the Servicer is a party. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon except to the extent expressly
so waived.

ARTICLE VI

ADDITIONAL OBLIGATION OF THE

SERVICER WITH RESPECT TO THE TRUSTEE

          Section 6.01 Successor Indenture Trustee. If the Trustee resigns or is removed
pursuant to the terms of the Indenture or if a vacancy exists in the office of the Trustee for any
reason, the Servicer agrees to execute and deliver such instruments and do such other things as
may reasonably be required for fully and certainly vesting and confirming in the successor trustee
all rights, powers, duties and obligations under the Indenture and hereunder.

          Section 6.02 Tax Returns. The Servicer shall prepare or shall cause to be prepared
all tax information required by law to be distributed to Noteholders and shall deliver such
information to the Trustee at least five (5) days prior to the date it is required by law to be
distributed to Noteholders. Except to the extent the Servicer breaches its obligations or
covenants contained in this Section 6.02, in no event shall the Servicer be liable for any
liabilities, costs or expenses of the Issuer, the Noteholders or the Note Owners arising under any
tax law, including without limitation federal, state, local or foreign income or excise taxes or
any other tax imposed on or measured by income or gross receipts (or any interest or penalty with
respect thereto or arising from a failure to comply therewith).

          Section 6.03 Final Payment with Respect to Any Series. The Servicer shall provide any
notice of termination as specified for the Servicer in Section 12.5(a) of the Indenture and
in accordance with the procedures set forth therein.

ARTICLE VII

MISCELLANEOUS PROVISIONS

          Section 7.01 Amendment.

          (a) This Agreement may be amended in writing from time to time by the Issuer, the Servicer and
the Trustee with the consent of the Required Persons for each Series but without the consent of the
Required Noteholders, to cure any ambiguity, to correct or supplement any provisions herein which
may be inconsistent with any other provisions herein, to add any other provisions with respect to
matters or questions arising under this Agreement which shall not be inconsistent with the
provisions of this Agreement. The Trustee may, but shall not be

20

 

obligated to, enter into any such amendment which adversely affects the Trustee’s rights,
duties or immunities under this Agreement or otherwise, except as otherwise may be provided in the
Indenture.

          (b) Any provision of this Agreement may also be amended, supplemented, modified or waived in
writing from time to time by the Issuer, the Servicer and the Trustee with the consent of the
Required Persons for each Series for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or modifying in any manner the rights
of Noteholders of any Series then issued and outstanding; provided, however, that
no such amendment shall (i) reduce in any manner the amount of, or delay the timing of,
distributions which are required to be made on any Notes of such Series without the consent of each
Holder of Notes of such Series so affected, (ii) reduce the aforesaid percentage required to
consent to any such amendment, without the consent of each Holder of Notes of all Series whose
rights are to be modified by such amendment or (iii) be effective unless the Rating Agency
Condition (if any) applicable to each Series is satisfied with respect to such Amendment. The
Trustee may, but shall not be obligated to, enter into any such amendment which adversely affects
the Trustee’s rights, duties or immunities under this Agreement or otherwise, except as otherwise
may be provided in the Indenture.

          (c) Promptly after the execution of any such amendment, the Trustee shall furnish notification
of the substance of such amendment to each Noteholder of each Series affected thereby, to any
related Notice Person, any related Enhancement Provider and to each Rating Agency providing a
rating for such Series.

          (d) It shall not be necessary for the Noteholders to give consent under this
Section 7.01 to approve the particular form of any proposed amendment, but it shall be
sufficient if such consent shall approve the substance thereof. The manner of obtaining such
consents and of evidencing the Noteholders’ authorization of the execution thereof shall be subject
to such reasonable requirements as the Trustee may prescribe.

          (e) In connection with any amendment, the Trustee or any Notice Person may request an Opinion
of Counsel (from an external law firm) from the Servicer to the effect that the amendment complies
with all requirements of this Agreement except that such counsel shall not be required to opine on
factual matters.

          (f) Notwithstanding any other provision of this Agreement to the contrary, the consent of the
Issuer shall not be required for the effectiveness of any amendment which modifies the
representations, warranties, covenants or responsibilities of the Servicer at any time when the
Servicer is not CFA or any Affiliate of CFA or a successor Servicer has been appointed pursuant to
Section 2.01.

          (g) The Servicer will give the Trustee and the Notice Persons prompt written notice of any
relocation of any office from which it services the Receivables and Related Security or keeps
records concerning such items or of its principal executive office The Servicer will at all times
maintain each office from which it services the Receivables, Related Security and other property in
its possession and part of the Trust Estate, its principal executive office and its jurisdiction of
organization within the United States of America.

21

 

          Section 7.02 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW), AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. EACH OF THE PARTIES TO
THIS SERVICING AGREEMENT HEREBY AGREES TO THE NON-EXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY APPELLATE COURT HAVING JURISDICTION TO
REVIEW THE JUDGMENT THEREOF. EACH OF THE PARTIES HEREBY WAIVES ANY OBJECTION BASED ON FORUM
NON CONVENIENS AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER IN ANY
OF THE AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY SUCH COURT.

          Section 7.03 Notices. All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered at, sent by facsimile
to, sent by courier at or mailed by registered mail, return receipt requested, to (a) in the case
of the Issuer, to Cofina Funding, LLC, 5500 Cenex Drive, St. Paul, Minnesota 55077, Attention:
Sharon Barber, Telephone: (651) 355-6974, (b) in the case of the Servicer to Cofina Financial, LLC,
5500 Cenex Drive, St. Paul, Minnesota 55077, Attention: Sharon Barber, Telephone: (651) 355-6974,
(c) in the case of the Trustee, to its Corporate Trust Office, and (d) in the case of the Required
Persons and the Rating Agencies for a particular Series, the respective addresses, if any,
specified in the Series Supplement relating to such Series; or, as to each party, at such other
address as shall be designated by such party in a written notice to each other party given in
accordance with this Section 7.04. Unless otherwise provided with respect to any Series in
the related Series Supplement, any notice required or permitted to be mailed to a Noteholder shall
be given as required in the Indenture or any related Series Supplement.

          Section 7.04 Severability of Provisions. If any one or more of the covenants,
agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid,
then such covenants, agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of this Agreement and shall in no way affect the
validity or enforceability of the other provisions of this Agreement.

          Section 7.05 Delegation. Except as provided in Section 2.01, 2.02 or
2.12(b), the Servicer may not delegate any of its obligations under this Agreement.

          Section 7.06 Waiver of Trial by Jury. To the extent permitted by applicable law, each
of the parties hereto irrevocably waives all right of trial by jury in any action, proceeding,
claim or counterclaim arising out of or in connection with this Agreement or the Transaction
Documents or any matter arising hereunder or thereunder.

          Section 7.07 Further Assurances. The Servicer agrees to do and perform, from time to
time, any and all acts and to execute any and all further instruments required or reasonably
requested by any Required Person or any Notice Person more fully to effect the purposes of this
Agreement, including, without limitation, the execution of any financing

22

 

statements or continuation statements relating to all or any portion of the Trust Estate for
filing under the provisions of the UCC of any applicable jurisdiction.

          Section 7.08 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Trustee, any Enhancement Provider or the Noteholders, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights,
remedies, powers and privileges provided by law.

          Section 7.09 Counterparts. This Agreement may be executed in two or more counterparts
(and by different parties on separate counterparts), each of which shall be an original, but all of
which together shall constitute one and the same instrument.

          Section 7.10 Successors and Assigns. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors and permitted assigns.

          Section 7.11 Actions by Noteholders.

          (a) Wherever in this Agreement a provision is made that an action may be taken or a notice,
demand or instruction given by Noteholders, such action, notice or instruction may be taken or
given by any Noteholder, unless such provision requires a specific percentage of Noteholders or
unless otherwise provided in a Series Supplement. Notwithstanding anything in this Agreement to
the contrary, neither the Servicer nor any Affiliate thereof shall have any right to vote with
respect to any Note except as specifically provided in the Indenture.

          (b) Any request, demand, authorization, direction, notice, consent, waiver or other act by a
Noteholder shall bind such Noteholder and every subsequent holder of such Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything
done or omitted to be done by the Trustee or the Servicer in reliance thereon, whether or not
notation of such action is made upon such Note.

          Section 7.12 Merger and Integration. Except as specifically stated otherwise herein,
this Agreement sets forth the entire understanding of the parties relating to the subject matter
hereof, and all prior understandings, written or oral, are superseded by this Agreement.

          Section 7.13 Headings. The headings herein are for purposes of reference only and
shall not otherwise affect the meaning or interpretation of any provision hereof.

          Section 7.14 Rights of the Trustee. The rights, privileges and immunities afforded to
the Trustee in the Indenture shall apply to this Agreement as if fully set forth herein.

          Section 7.15 No Bankruptcy Petition/Claims. Prior to the date that is one year and
one day after the Indenture Termination Date, the Servicer will not institute against the Issuer,
or join any other Person in instituting against the Issuer, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceedings under the laws of
the United States or any state of the United States.

23

 

          Section 7.16 No Recourse. Notwithstanding anything else set forth in this Agreement
or any other Transaction Document, the Servicer agrees that the obligations of the Issuer to the
Servicer hereunder and under the other Transaction Document shall be recourse to the Trust Estate
only and specifically shall not be recourse to the assets of the Issuer. In addition, the Servicer
agrees that its recourse to the Issuer and the Trust Estate shall, except to the extent otherwise
expressly provided in this Agreement, be limited to the right to receive the Servicing Fee and such
other amounts as are specifically allocated to the Servicer pursuant to Section 5.4(c) of
the Indenture. No obligations of the Issuer hereunder shall constitute a “claim” (as defined in
Section 101(5) of the Bankruptcy Code) against the Issuer in the event that amounts are not
paid in accordance with the priority of payments set forth in Section 5.4(c) of the
Indenture.

24

 

     IN WITNESS WHEREOF, the Issuer, the Servicer and the Trustee have caused this Servicing
Agreement to be duly executed by their respective officers as of the day and year first above
written.

	 	 	 	 	 
	 	COFINA FUNDING LLC, as Issuer

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	COFINA FINANCIAL, LLC

as Servicer

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	U.S. BANK NATIONAL ASSOCIATION, not in its

individual capacity, but solely as Trustee

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Servicing Agreement

 

 

Exhibit A

Form of Daily Servicer Report

FORM OF DAILY SERVICER REPORT

Servicing Agreement

 

 

COFINA FUNDING LLC
 DAILY
SERVICER REPORT

Reporting Date

	 	 	 	 	 
	 	 	Amount	 
	Opening balance in Collection Account:
	 	 	500.00	 
	 
	 	 	 	 
	Collections received from Receivables
	 	 	1,000.00	 
	 
	 	 	 	 
	Payments made:
	 	 	 	 
	 
	 	 	 	 
	1. Amount of Accrued Facility Costs for sub account-
	 	 	1.00	 
	 
	 	 	 	 
	2. Required Reserve Amount transferred to Spread Maintenance Account-
	 	 	1.00	 
	 
	 	 	 	 
	3. Reduction in principal amount of Notes outstanding transferred to Settlement Account
	 	 	1.00	 
	 
	 	 	 	 
	4. Amount payable to Seller based on Purchase Agreement- 

(Amount equal to unpaid purchase price)
	 	 	1.00	 
	 
	 	 	 
	Total of payments made on this date
	 	$	4.00	 
	 
	 	 	 
	 
	 	 	 	 
	Closing balance in Collection Account:
	 	$	1,496.00	 

Servicing Agreement

 

 

Exhibit B

Form of Monthly Servicer Report

FORM OF MONTHLY SERVICER REPORT

Servicing Agreement

A-1

 

COFINA FUNDING LLC

MONTHLY SERVICER REPORT — PAYMENTS OUT OF AVAILABLE DISTRIBUTION AMOUNT

Reporting Date:

Settlement Date:

*Information provided in the Base Indenture Article 5

	 	 	 	 	 
	 	 	Amount	 
	Calculation of Available Distribution Amount:
	 	 	 	 
	Collection received during [immediately proceeding monthly period]
	 	 	17.00	 
	Amounts received from interest rate hedge counterparty
	 	 	1.00	 
	Total deemed collections
	 	 	1.00	 
	Receipts from Spread Maintenance Account
	 	 	1.00	 
	Earnings on permitted investments received during [immediately proceeding monthly period]
	 	 	1.00	 
	 
	 	 	 
	Total Available Distribution
Amount
	 	 	21.00	 
	 
	 	 	 
	 
	 	 	 	 
	Payments to be made:
	 	 	 	 
	 
	 	 	 	 
	1. Indenture Trustee
	 	 	 	 
	Fee
	 	 	1.00	 
	Out of pocket expenses
	 	 	1.00	 
	 
	 	 	 
	Maximum
amount $20,000Total

	 	 	2.00	 
	 
	 	 	 
	 
	 	 	 	 
	2. Servicer-
	 	 	 	 
	Fee for current settlement period
	 	 	1.00	 
	Arrears
	 	 	1.00	 
	 
	 	 	 
	Total
	 	 	2.00	 
	 
	 	 	 
	 
	 	 	 	 
	3. Custodian
	 	 	 	 
	Fee for current settlement period (maximum amount $10.000)
	 	 	1.00	 
	 
	 	 	 	 
	4. Successor Servicer (if appointed)
	 	 	 	 
	Reimbursement of transition costs incurred (maximum amount $50,000)
	 	 	1.00	 
	 
	 	 	 	 
	5. Interest Rate Hedge Provider-
	 	 	 	 
	Current scheduled payments due
	 	 	1.00	 
	Arrears
	 	 	1.00	 
	 
	 	 	 
	Total
	 	 	2.00	 
	 
	 	 	 
	 
	 	 	 	 
	6. Interest due on Outstanding Notes to Noteholders
	 	 	 	 
	Interest payments on Notes — paid to Settlement Account
	 	 	1.00	 
	Premiums due to Enhancement Provider
	 	 	1.00	 
	 
	 	 	 
	Total
	 	 	2.00	 
	 
	 	 	 
	 
	 	 	 	 
	7. Scheduled principal payment amount due — paid to Settlement Account
	 	 	1.00	 
	 
	 	 	 	 
	8. Supplemental principal payment amount — paid to Settlement Account
	 	 	 	 
	Warehouse Notes
	 	 	1.00	 
	Notes
	 	 	1.00	 
	 
	 	 	 
	Total
	 	 	2.00	 
	 
	 	 	 
	 
	 	 	 	 
	9. Interest Rate Hedge Provider-
	 	 	 	 
	All remaining amounts due
	 	 	1.00	 
	 
	 	 	 	 
	10. All other amounts due to:
	 	 	 	 
	Noteholders — paid to Settlement Account
	 	 	1.00	 
	Trustee
	 	 	1.00	 
	Custodian
	 	 	1.00	 
	Servicer
	 	 	1.00	 
	 
	 	 	 
	Total
	 	 	4.00	 
	 
	 	 	 
	 
	 	 	 	 
	11. Payment to issuer of any remaining Available Distribution Amount
	 	 	3.00	 
	 	 
	 
	 	 	 
	Total Payments Due
	 	$	21.00	 
	 
	 	 	 
	 
	 	 	 	 
	Do Payments equal Available Distribution Amount?
	 	Y or N?

Servicing Agreement

A-1

 

Exhibit C

Form of Annual Servicer’s Certificate

FORM OF ANNUAL SERVICER’S CERTIFICATE

January [   ], 200[  ]

     This Servicer’s Certificate is delivered pursuant to the provisions of Section
2.02(c)(ii) of the Servicing Agreement (as amended, modified, waived, supplemented or restated
from time to time, the “Agreement”), dated as of August 10, 2005, by and among Cofina
Funding, LLC, as issuer (the “Issuer”), Cofina Financial, LLC, as Servicer (the
“Servicer”) and U.S. Bank National Association, as trustee (in such capacity, together with
its successors and assigns in such capacity, the “Trustee”). Capitalized terms used not
defined herein have the meanings provided in the Agreement.

     The undersigned, a duly elected Responsible Officer of the Servicer, hereby certifies to the
Trustee and the Notice Persons and their respective successors and assigns, as follows:

     (i) a review of the activities of the Servicer during the preceding calendar year (or
portion thereof, as applicable) and of its performance under the Agreement was made under
the supervision of the officer signing this Servicer’s Certificate; and

     (ii) to the best of such officer’s knowledge, based on such review, the Servicer has
fully performed in all material respects all of its obligations under the Agreement and each
other applicable Transaction Document to which it is a party throughout such period[, except
as set forth on Schedule I hereto.]

	 	 	 	 	 	 	 
	 	 	COFINA FINANCIAL, LLC.,

as the Servicer	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 

Servicing Agreement

B-1

 

Exhibit D

Form of Credit Manual

FORM OF CREDIT MANUAL

Servicing Agreement

C-1

 

Exhibit E

Form of Accounting Control

Procedures and Processing Report

FORM OF ACCOUNTING CONTROL

PROCEDURES AND PROCESSING REPORT

Servicing Agreement

D-1

 

Cofina Financial

Policies and Procedures Manual

Table of Contents

	 	 	 	 	 
	 
	 	 	 	 
	Section 1.0 General
	 	 		 
	1.01 Board of Directors
	 	 	3	 
	1.02 Loan Committee
	 	 	3	 
	 
	 	 	 	 
	Section 2.0 Credit Administration and Approval
	 	 	6	 
	2.01 Scope of Financing
	 	 	6	 
	2.02 Obligors
	 	 	7	 
	2.03 Loan Application
	 	 	8	 
	2.04 Credit Analysis
	 	 	13	 
	2.05 Collateral Analysis
	 	 	29	 
	2.06 Environmental Analysis
	 	 	35	 
	2.07 Construction Lending
	 	 	37	 
	2.08 LLC Lending
	 	 	40	 
	2.09 Loan Agreement
	 	 	42	 
	2.10 Security Requirements
	 	 	49	 
	 
	 	 	 	 
	Section 3.0 Loan Administration
	 	 	54	 
	3.01 Loan File Organization
	 	 	54	 
	3.02 Asset Classifications
	 	 	55	 
	3.03 Portfolio Monitoring
	 	 	62	 
	3.04 Customer and Loans Servicing
	 	 	63	 
	3.05 Collection Procedures
	 	 	69	 
	3.06 Customer Concentration
	 	 	81	 
	3.07 Reserve Guidelines
	 	 	82	 
	 
	 	 	 	 
	Section 4.0 Legal Documentation
	 	 	83	 
	4.01 Legal Documentation Overview
	 	 	83	 
	4.02 Real Estate Mortgage Documentation
	 	 	84	 
	4.03 Supplemental/Amendment RE Mortgage Documentation
	 	 	88	 
	4.04 Release of Mortgage Documentation
	 	 	92	 
	4.05 Security Agreement Documentation
	 	 	96	 
	4.06 UCC 1 Financing Statement Documentation
	 	 	104	 
	4.07 Assignment of PECFA Proceeds
	 	 	106	 
	4.08 Assignment of Stock Documentation
	 	 	108	 
	4.09 Loan Agreement Waiver Documentation
	 	 	110	 
	4.10 Subordination Agreement Documentation
	 	 	112	 

1

 

	 	 	 	 	 
	Section 5.0 Money Desk Procedures
	 	 	115 	 
	5.01 Disbursements
	 	 	115 	 
	5.02 Electronic Funds Transfers (EFT)
	 	 	118 	 
	5.03 Deposits
	 	 	119 	 
	5.04 Cash Management
	 	 	120 	 
	5.05 Daily Transaction Sheets
	 	 	122 	 
	5.06 Authorized Check Signatories
	 	 	123 	 
	5.07 Borrowing Guidelines
	 	 	124 	 
	 
	 	 	 	 
	Section 6.0 Accounting, Financial Control, and Reporting
	 	 	125 	 
	6.01 Accounting
	 	 	125 	 
	6.02 Financial Control
	 	 	128 	 
	6.03 Reporting
	 	 	132 	 
	6.04
	 	 	 	 
	 
	 	 	 	 
	Section 7.0 Disaster Recovery Plan
	 	 	134 	 
	Section 8.0 Equity Retirements and Patronage Decisions
	 	 	136 	 
	8.01 General Equity Retirements
	 	 	136 	 
	8.02 Equity Retirements of Liquidating Customers
	 	 	138 	 
	8.03 1099PAT Processing
	 	 	139 	 
	 
	 	 	 	 
	Section 9.0 Grain Credit Analysis
	 	 	140 	 

2

 

	 	 	 
	1.01 Board of Directors
	 	 
	 

	 	Under its Articles and By-Laws, Cofina Financial (COFINA)
is run by its Board of Directors (the “Board”)
	 
	 	 
	 

	 	The Board consists of six members; three CFA

and three CHS.
	 
	 	 
	 

	 	Day-to-day running of Cofina is delegated to the management
team. Lending authorities for all loan, classification and
pricing approvals have been delegated to the Cofina Loan
Committee, as per the written authority dated February 24,
2003 (See Sec. 1.03 – Loan Committee). The Board retains
all approval authority for loan compromises or loan
write-offs.
	 
	 	 
	 

	 	The Board holds a minimum of four meetings per year at
which the management team will report on the operations of
the company. The reports include, but are not limited to:
	 
	 	 
	 

	 	•    Financial statements

	 

	 	•    Credit quality of loan portfolio

	 

	 	•    Credit reviews performed by banks on loan portfolio
that have been received by the Chief Financial Officer

	 

	 	•    Annually, the budget for the next financial year,

for Board approval

	 

	 	•    Annually, the report of the auditors on the
financial statements

	 
	 	 
	1.02 Loan Committee
	 	 
	 
	 	 
	 

	 	The Loan Committee is comprised of five members:
	 
	 	 
	 

	 	•    The President of Cofina

	 

	 	•    The Chief Financial Officer of Cofina

	 

	 	•    Credit Administrator

	 

	 	•    Director Wholesale Credit

	 

	 	•    Director Retail Credit

	 

	 	•    The Member officer rotates on a monthly basis.

3

 

	 	 	 
	 

	 	Three voting members, one of which must be the President or
the CFO, are required for the committee to be quorate. The
meetings are also attended by the Legal Administrator and
the presenting loan officer.
	 
	 	 
	 

	 	The Loan Committee is scheduled every Monday at 8:00 a.m.
Credit reports and back-up data must be provided to the
Legal Administrator on or before noon on the Thursday prior
to the Monday meeting. The agenda for the meeting must be
distributed by
Thursday afternoon. Apologies for absence must be given to
the Legal Administrator.
	 
	 	 
	 

	 	The loan officer responsible for each loan on the agenda
must attend the meeting to present his credit. If the loan
officer is unable to physically attend the meeting, he must
join it by telephone. Credits will be held over to the
next meeting if the loan officer is unable to attend.
	 
	 	 
	 

	 	The Loan Committee meets to consider the following actions:
	 
	 	 
	 

	 	•    Approve new loans

	 

	 	•    Approve revised loans

	 

	 	•    Approve loan extensions

	 

	 	•    Approve annual reviews

	 

	 	•    Approve changes to payment schedule

	 

	 	•    Approve premium or discount pricing from the pricing matrix

	 

	 	•    Approve advances pre-finalization of security

	 

	 	•    Approve releases from security

	 

	 	•    Approve exceptions to the limitations on advances

	 

	 	•    Review loans where there have been violations of the agreement and approve waiver where appropriate.

	 

	 	•    Review loans that have failed the Stressed Realizable Value Test

	 

	 	•    Review loans that have slipped from an Acceptable, non-criticized asset classification

	 

	 	•    Approve loan servicing actions

	 

	 	•    Review progress of loan servicing actions

4

 

	 	 	 
	 

	 	•    Approve Loan Service Plans

	 

	 	•    Review progress of Loan Service Plans

	 

	 	•    Approve issuing Liquidation Notice

	 

	 	•    Review discount rates used in Collateral Analysis Worksheet

	 

	 	•    Approve loan classifications

	 

	 	•    Approve outside attorneys to be used for assisting with security requirements

	 
	 	 
	 

	 	All decisions must be approved unanimously by those
voting members attending the Loan Committee meeting.
	 
	 	 
	 

	 	All decisions must be minuted by the Legal
Administrator. Minutes must be signed by the voting
members who made the decision and then presented at the
next Loan Committee meeting.
	 
	 	 
	 

	 	The minutes are filed by the Legal Administrator and
held in the offices of Cofina for five years before
being archived.

5

 

	 	 	 
	2.0 - Credit Administration and Approval
	 
	 	 
	2.01 — Scope of Financing
	 	 
	 
	 	 
	 

	 	Cofina primarily offers three types of loans to
cooperatives:
	 
	 	 
	 

	 	•    Operating Loans - These short-term loans
typically finance a portion of the current asset
needs of a customer. Operating loans mature
annually and are reviewed by the loan officers
prior to any extension or renewal. All operating Loan
extensions are to be approved by Loan Committee and are
limited to a loan period of no more than 14-months
beyond the Operating Loan’s initial date of origination.

	 
	 	 
	 

	 	•    Term Loans - These long-term loans typically
supplement equity in financing the permanent capital
needs of a customer. Term loans range in maturity from
thirteen months to ten years.

	 
	 	 
	 

	 	•    PECFA Loans - Used for the purpose of funding the
environmental cleanup process for contaminated
petroleum sites in Wisconsin. The State of Wisconsin
reimburses the Obligor for the periodic interest
charges prior to completion of the project and for the
principal balance of the Loan upon completion of the
cleanup project. These loans are structured and term
loans with four to six-year maturities and, in
addition to recourse to the State of Wisconsin, are
fully collateralized by the assets of the Obligor.

6

 

	 	 	 
	2.02 Obligors
	 	 
	 

	 	Cofina can make loans to:
	 
	 	 
	 

	 	•    local cooperatives

	 
	 	 
	 

	 	•    retail operations of regional cooperatives

	 
	 	 
	 

	 	•    local or retail cooperative suppliers that benefit
Cofina customers

	 
	 	 
	 

	 	•    joint ventures where local cooperatives maintain
majority ownership.

7

 

	 	 	 
	2.03 Loan Application
	 	 
	 
	 	 
	 

	 	Credit process commences with the completion of a loan
application. In cases of maturing operating loans, Cofina
will mail a loan application to the customer for customer
board approval at least 90 days before maturity date.
	 
	 	 
	 

	 	A copy of an application is attached to this procedure.
Each application has three sections that must be completed
before Cofina will consider the loan request.
	 
	 	 
	 

	 	•    Resolution of Board of Directors - In this
section, the applicant’s Board approves a resolution
to borrow a maximum amount of money from Cofina. This
amount includes any new term debt, the requested
Operating loan amount, and any other funding
requested. Existing term debt is not included in the
new board resolution. The Board Secretary must certify
that the Board approved this borrowing resolution.

	 
	 	 
	 

	 	•    Application Information - In this section, the
customer, Board, and management specify the amount
applied for, the purpose of the loans, collateral
offered, proposed repayment, and other information
important in the credit decision. All parts of this
section must be completed.

	 
	 	 
	 

	 	•    Signature Page - In this section, all
Board officers and directors must provide signatures for
future reference on other loan documents. The Board
President and Secretary must provide additional
information.

	 
	 	 
	 

	 	Signed application forms must be submitted along with
applicant’s latest audit report and financial planning
documents. It is a requirement that the audit report is
unqualified.
	 
	 	 
	 

	 	If the applicant is a prospective new customer, he must
submit the last three years’ audit reports.
	 
	 	 
	 

	 	The financial planning documents should include operating
budgets, capital expenditure plans and

8

 

	 	 	 
	 

	 	equity servicing plans. Feasibility and marketing plans will also be
required if the customer is proposing to commence a new
project.
	 
	 	 
	 

	 	As applications are received, they are date stamped, logged
in the Maturity Status Report and given to the loan officer
for processing.
	 
	 	 
	 

	 	Completed and processed applications are placed in the
customer loan file.

9

 

COFINA FINANCIAL

APPLICATION FOR LOAN

Dated:                      2002

Name of Applicant:                                                                
                                    

Corporate Address:                                                                 
                                   

RESOLUTION OF THE BOARD OF DIRECTORS

     This corporation under its Articles of Incorporation and Bylaws has full authority to borrow
money and to give security by mortgage, security agreement, pledge, or otherwise, of its own
property and of property delivered to it for marketing or otherwise; and all acts prerequisite to
the adoption of this resolution have been taken in proper form, time, and manner:

     RESOLVED, That the President, Secretary, Vice President, or any other designated party
                                         (officer, director and/or manager) of this corporation, and each of them, are
hereby jointly and severally authorized and empowered to obtain for and on behalf of the
corporation, from time to time, from COFINA FINANCIAL (Lender) a loan or loans under this
resolution, not exceeding in the aggregate the sum of $                                         at any time outstanding,
exclusive of amounts authorized to be borrowed under other resolutions submitted to Lender for such
purposes:

     1. To execute such application or applications (including exhibits, amendments, and/or
supplements thereto) as may be required;

     2. To obligate this corporation in such amounts, at such rates of interest, and on such other
terms and conditions, as the officer or officers so acting shall deem proper;

     3. To execute and deliver to Lender or its nominee all such written instruments as may be
required by Lender in regard to, or as evidence of, any loan made pursuant to the terms of this
resolution;

     4. To pledge, hypothecate, mortgage, convey, or assign property of this corporation, of any
kind, and in any amount, as security for any or all obligations (past, present, and/or future) of
this corporation to Lender;

     5. From time to time, to pay, extend, or renew any such obligation or obligations;

     6. To reborrow from time to time, subject to the provisions of this resolution, all or any
part of the amounts repaid to Lender or Lenders or any of them;

     7. To purchase Lender’s capital stock in the amount of $1,000 at par value, if Borrower
currently does not have capital stock equal to or in excess of $1,000. At three years, from the
date of Lender’s first loan commitment, Borrower further agrees to retain total stock investment in
an amount equal to 3% of its average loan balances for the previous year and to maintain such stock
investment for the existence of any indebtedness to Lender, or in such amount as may be prescribed
by Lender’s board of directors.

     8. To remit the amounts due directly to Lender for the monthly term payments and interest
payments on such loan(s), as billed directly to Lender.

     RESOLVED FURTHER, That the officers of this corporation, and each of them, are jointly and
severally authorized and directed to do and/or cause to be done, from time to time, all things
which may be necessary and/or proper for the carrying out of the terms of this resolution.

CERTIFICATION

As Secretary of this corporation I certify that this resolution was duly adopted by its Board of
Directors at a meeting held on                     day of                                                   
           , 2002.                                                            

Secretary

APPLICATION FOR LOAN

APPLICANT:                                                                  
                                  

10

 

ADDRESS:                                                                     
                               

	1.	 	Amount Applied for:

	 	 	 	 	 	 	 	 	 
	Operating:
	 	$	 	 	 	(New Money)
	Term:
	 	 	 	 	 	(New Money)
	TOTAL:
	 	$	 	 	 	 	 	 

	2.	 	Purpose of Loan:

Operating:

Term:
	 
	3.	 	Collateral Offered:

If loan(s) are granted, all property mortgaged, pledged, or assigned by Applicant to
Lender as security for loans made before or after such loan(s) shall be security for
all loans made by Lender to Applicant.
	 
	4.	 	List all liens presently filed against property offered as collateral:

	 
	5.	 	Proposed method of payments:

	 	a)	 	Applicant will pay the principal of the loan(s) as follows:

Operating:

Term:
	 
	 	b)	 	Applicant will pay interest monthly on the unpaid balance at the
per annum interest rate prescribed by Lender’s board of directors, as provided
for in the loan agreement.
	 
	 	c)	 	Applicant will be billed directly from COFINA FINANCIAL for
the monthly principal and interest payments as provided for in 5(a) and 5(b), and to remit the
amounts due directly to Lender.

	6.	 	Is Applicant involved in or threatened with any lawsuit? Yes                      No                      (if yes,
describe on a separate sheet)
	 
	7.	 	Applicant agrees to submit annually to Lender, and at such other times as Lender
may require, a statement of condition in form approved by Lender. Applicant further
agrees that Lender may, at any time that it is indebted to Lender, examine its books,
records, and accounts.
	 
	8.	 	If the loan is completed, Applicant agrees to pay to Lender loan set up fees as
follows:

	 	 	 	 	 
	Operating Loan Commitment	 	Documentation Set Up Fee:
	Up to $500,000
	 	$	250.00	 
	$500,000 to $1mm
	 	$	500.00	 
	Over $1mm
	 	$	1,000.00	 
	 
	New Term Loan
	 	 	 	 
	10 basis points on new commitment, one time fee.

     Applicant further agrees to execute all documents and furnish all instruments required
by Lender, necessary for completion of the loan(s).

     Applicant agrees that if, after acceptance of this application, Applicant should be
unwilling, or for any reason, unable to close the loan, it will pay all expenses Lender has
incurred in its connection.

Page -2-

11

 

APPLICATION FOR LOAN

The undersigned as duly elected or appointed officers of the corporation named on page one, certify
that:

	 	1.	 	The undersigned are the duly qualified incumbents of the offices as shown
opposite the respective names, and that the signatures are true and genuine specimens
thereof.
	 
	 	2.	 	All statements, answers, and representatives are given in connection with this
loan application are factual and warranted correct.

PRESIDENT’S NAME:                                                              
                                       

Term Expires:                                                             

SIGNATURE:                                                                
                                     

ADDRESS:                                                                   
                                  

SECRETARY’S NAME:                                                              
                                       

Term Expires:                                                             

SIGNATURE:                                                                
                 

ADDRESS:                                                                   
                                  

(SIGNATURES REQUIRED BELOW WHEN PARTY IS AUTHORIZED TO SIGN DOCUMENTS)

	 	 	 	 	 
	NAME	 	SIGNATURE	 
	 
	VICE PRESIDENT NAME:
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Address:
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	DIRECTOR NAME:
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Address:
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	DIRECTOR NAME:
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Address:
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	DIRECTOR NAME:
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Address:
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	DIRECTOR NAME:
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Address:
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	DIRECTOR NAME:
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Address:
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	MANAGER’S NAME:
	 	 	 	 
	 
	 	 	 

Page -3-

12

 

2.04 — Credit Analysis

	 	 	 
	General

	 	Cofina credit analysis is differentiated based on the size, complexity, and quality of the
customer and the proposed loan package. Differential credit analysis, however, needs to
follow a consistent format to streamline and simplify analysis and portfolio monitoring
processes. This is achieved by completing a standard format credit report.
	 
	 

	 	As the primary customer contact, the loan officer is
responsible for completing the credit reports.
	 
	Credit Report

	 	The following framework explains the credit report outline used to document CFA
credit analysis and loan package recommendations. A copy of a credit report is attached to
this procedure.
	 
	 	 
	 

	 	•    Credit Report Cover Sheet – this page
provides an executive summary of the customer and
requested financing. Customer information on existing
loans and current asset classifications are included.
The Financial Summary helps identify strengths and
weaknesses to be discussed further in the main body of
the Credit Report.

	 
	 	 
	 

	 	•    Uniform Classification Score worksheet -
this page sets out the loan underwriting standards
that guide the relationship with the customer. It
provides a quantitative analysis of the Customer’s
most current, audited financial performance. This
analysis involves a weighted score of key financial
ratios used in determining a foundation of what is
termed a Risk Rating.

	 
	 	 
	 

	 	       The credit report should clearly demonstrate that these
underwriting standards are satisfied, or the loan
officer should identify offsetting financial or
management strengths that justify the loan. Added loan
controls which help minimize credit risk may justify
loans where the underwriting standards are not met.

	 
	 	 
	 

	 	       The interest rate on the loans will be set by matrix
depending on the customer’s classification as to these
loan standards. The

13

 

	 	 	 
	 

	 	      current pricing matrix is attached.
Premium and discount pricing from this pricing matrix
will be permitted upon approval of the Loan Committee.

	 
	 	 
	 

	 	•    Recommendations – This section summarizes

the key factors in this loan relationship and makes a specific recommendation.

	 
	 	 
	 

	 	•    Overview – This section should provide the
reader with an executive summary of the financing
request, the financial strengths that support the
loan, and the credit risks inherent in the loan. If
the requested financing involves significant new term
debt for expansion, the economic support or
feasibility of the project should be discussed here.
Key points raised here should be supported and
explained in the main body of the Credit Report.

	 
	 	 
	 

	 	•    Financial Analysis – This section addresses
the financial trends and the liquidity, solvency and
profitability strengths and weaknesses of the
customer.

	 
	 	 
	 

	 	      The following financial guidelines are used in this
analysis:

	 	 	 	 	 
	 	 	Measurement	 	Guideline
	 

	 	•    Salaries to Gross Margins (%)

	 	<40%
	 

	 	•    Distribution Expense to GM (%)

	 	£50%
	 

	 	•    Local Savings to Sales (%)

	 	>2%
	 

	 	•    Net Worth to Total Assets (%)

	 	50 to 75%
	 

	 	•    Local Net Worth to Local Assets (%)

	 	>50%
	 

	 	•    Accounts Receivable Under 60 Days (%)

	 	 >85%
	 

	 	•    Accounts Receivable Over 1 Year (%)

	 	<1%
	 

	 	•    Bad Debt to Sales (%)

	 	<0.1%
	 

	 	•    Inventory to Sales (%)

	 	5 to 10%
	 

	 	•    Working Capital to Sales (%)

	 	7 to 10%
	 

	 	•    Return on Assets (%)

	 	>10%

	 	 	 
	 

	 	These ratios are guidelines which Cofina uses as a means
to communicate the financial position that it believes
will allow most local cooperatives to successfully grow
in the future.
It is recognized that few customers will meet or exceed
all of these guidelines.
	 
	 

	 	If weaknesses are apparent, the loan officer

14

 

	 	 	 
	 

	 	should begin to demonstrate how the customer can and will
address issues that raise credit quality problems
	 
	 	 
	 

	 	Exposure Analysis — This section summarizes
risk exposure by presenting key ratios and
underwriting standards. This section also addresses
capital expenditure and equity retirement plans.
	 
	 	 
	 

	 	•    Security — This section addresses key
issues related to the security filings and security
position held by Cofina.

	 
	 	 
	 

	 	•    Management — This section rates management
capabilities and identifies Board or management issues
that may affect loan risk.

	 
	 	 
	 

	 	•    Attachments – Attachments to the credit
report should include a liquidity/collateral analysis,
comparative financial information, budgets (as
needed), working capital analysis (as needed) and the
proposed loan agreements.

	 
	 	 
	 

	 	If a customer shows signs of deteriorating credit quality,
the credit report should also include a Loan Service Plan.
This section should explain the specific steps the loan
officer has planned to address the weaknesses identified
in the credit report which cause the deteriorating
financial performance and asset quality. Although Cofina
strives to help customers resolve financial difficulties,
the plans must also address how the Cofina position will
be strengthened or preserved.
	 
	 	 
	 

	 	Completed credit reports are then presented to the Cofina
Loan Committee. In the case of renewals, the presentation
must take place at least 30 days before maturity date.
	 
	 	 
	 

	 	Loans will not be approved for new customers which, upon
the approval of such loans, will receive an Adverse
classification (see Sec 3.02 – Asset Classifications).
	 
	 	 
	 

	 	Additional loans will not be granted to existing customers
with less than a Substandard classification.

15

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cooperative Name:	 	Coop Name
	 	Analyst:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	City and State:	 	City, State
	 	FYE:	 	FYE: Date	 	 	 	 	 	 	 	 	 	 	 	 
	Manager:

	 	 	 	 	 	Years:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Credit Score — Current

	 	FAMAS:
	 	 	 	UCS:
	 	 	0.00	 	 	CFA Pricing
	 	 	0	 	 	S
	 	#N/A
	 	T
	 	#N/A
	Credit Score — Recmd

	 	FAMAS:
	 	 	 	UCS:
	 	 	0.00	 	 	CFA Pricing
	 	 	0	 	 	S
	 	#N/A
	 	T
	 	#N/A
	Auditor:

	 	 	 	 	 	Scope	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

Loan(s) Requested & Outstanding as of:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Request	 	Current	 	Outstanding	 	High	 	Low	 	Maturity
	Loan Type	 	Amount	 	Commitment	 	Balance	 	Point	 	Point	 	Date
	Seasonal
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Term
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	TOTAL	 	$0	 	$0	 	$0	 	Term Amortization (Years):
	 	 
	 

	 	Seasonal
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Changes

	 	Term
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Other
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Commitment:

	 	$0	 	 	 	 	 	 	 	 	 	 

Recommendation(s):

	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	USC Rating	 	CFA Pricing	 
	1	 	Approval of the attached Loan Quality Classification:	 	0.00	 	0	 
	2	 	Approval of a	 	$ —	 	Seasonal Line of Credit with a	 	       maturity, expiration and maturity date.
	 
	 	 	 	 	 	 	 	 	 	 
	3
	 	Approval of a	 	$      —	 	Term Loan.  (see terms)	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	 
	 

	 	Expiration Date
	 	 
	 

	 	Maturity Date
	 	 
	 

	 	Monthly Payment
	 	 
	 

	 	Date of First Payment
	 	 

Loan Covenant(s)

	 	 	 	 	 
	* Financial Information:

	 	Unqualified Annual Audit and monthly Financial Statements
	 	 
	* Local Net Worth of no less than:

	 	* Working Capital Minimum of:
	 	 
	* Local Ownership of no less than:

	 	* Seasonal Loan Paydown to Zero for:
	 	 
	* Capital Expenditures of no more than:

	 	* Equity Retirements of no more than:
	 	 
	* Dividends awarded of no more than:
	 	 	 	 

Signatures (required)

Approved Recommendation — Loan Committee Meeting Date:                                         

	 	 	 	 	 	 	 	 	 
	Loan Committee Member:

	 	 
	 	Signature:	 	 
	 	 
	 
	Loan Committee Member:

	 	 

	 	Signature:
	 	 

	 	 
	 
	Loan Committee Member:

	 	 

	 	Signature:
	 	 

	 	 

Financial Summary

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2002	 	2003	 	2004	 	 	 	 	 	 	 	 
	Gross Sales ($):	 	$	0	 	 	$	0	 	 	$	0	 	 	Completed Uniform

	Local Savings ($):	 	$	0	 	 	$	0	 	 	$	0	 	 	Classification

	 LLC, Subsidiary Profit/(Loss):	 	$	0	 	 	$	0	 	 	$	0	 	 	UCS Worksheet — PAGE 2

	Ownership (%):	 	 	0	%	 	 	0	%	 	 	0	%	 	Analysis Reports Attached

	Local Ownership (%):
	 	 	0	%	 	 	0	%	 	 	0	%	 	Credit Report Narrative:
	 	 	x	 
	Local Net Worth ($):
	 	$	0	 	 	$	0	 	 	$	0	 	 	Ratio Analysis 
	 	 	x	 
	Local Leverage (%):
	 	 	0	%	 	 	0	%	 	 	0	%	 	Net Funds Flow Analysis:
	 	 	x	 
	Loan Commitment to SRV:
	 	 	0	%	 	 	0	%	 	 	0	%	 	Working Capital Analysis:
	 	 	x	 
	Loan Balance to SRV:
	 	 	0	%	 	 	0	%	 	 	0	%	 	Collateral Analysis:
	 	 	x	 
	Net Funds ($):
	 	$	0	 	 	$	0	 	 	$	0	 	 	FAMAS Report:
	 	 	x	 
	Current Ratio:
	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	Other:
	 	 	x	 
	Working Capital:
	 	$	0	 	 	$	0	 	 	$	0	 	 	 	 	 	 	 	 	 

16

 

Coop Name

City, State

FYE: Date

Financial Guidelines

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

17

 

Coop Name

City, State

FYE: Date

Table 1: Working Capital Test

	 	 	 	 	 	 	 	 	 
	Basic Working Capital Requirements:
	 	 	 	 	 	 	 	 
	Accounts Receivable
	 	Lowest Month:	 	$	0	 
	Inventory
	 	Fiscal Year End	 	$	0	 
	 
	 	 	 	 	 	 	 
	Basic Working Capital Required:
	 	 	 	 	 	$	0	 
	 
	 	 	 	 	 	 	 	 
	Less 90% of Seasonal Inventory:
	 	 	 	 	 	 	 	 
	Fertilizers:
	 	$	0	 	 	 	 	 
	Chemicals:
	 	$	0	 	 	 	 	 
	OTHER (Seed & Twine):
	 	$	0	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	$	0	 
	 
	 	 	 	 	 	 	 	 
	Less: Accounts Payable (10 Day Float)
	 	 	 	 	 	$	0	 
	 
	 	 	 	 	 	 	 
	Estimated Permanent WC Required (% Sales)
	 	 	0.00	%	 	$	0	 
	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Working Capital on September 30th:
	 	$	0	 	 	 	 	 
	Current Portion of Long Term Debt:
	 	$	0	 	 	 	 	 
	Usable Working Capital (% OF Sales)
	 	 	0.00	%	 	$	0	 
	 
	 	 	 	 	 	 	 
	Surplus
	 	 	 	 	 	$	0	 
	 
	 
	Table 2: Projected Change in Working Capital

	 
	Useable Working Capital as of:
	 	 	 	 	 	$	0	 
	 
	 	 	 	 	 	 	 	 
	PROJECTIONS
	 	 	 	 	 	 	 	 
	SOURCES:
	 	 	 	 	 	 	 	 
	Local Savings
	 	$	0	 	 	 	 	 
	Depreciation
	 	$	0	 	 	 	 	 
	Regional Cash Patronage
	 	$	0	 	 	 	 	 
	Term Loan
	 	$	0	 	 	 	 	 
	Regional Stock Retired
	 	$	0	 	 	 	 	 
	Other
	 	$	0	 	 	 	 	 
	Total Working Capital Sources
	 	 	 	 	 	$	0	 
	 
	 	 	 	 	 	 	 	 
	USES:
	 	 	 	 	 	 	 	 
	Cash Patronage Distributed
	 	$	0	 	 	 	 	 
	Purchased Investments
	 	$	0	 	 	 	 	 
	Term Loan Payments
	 	$	0	 	 	 	 	 
	Stock Retirements
	 	$	0	 	 	 	 	 
	Fixed Assets
	 	$	0	 	 	 	 	 
	Other Uses (Taxes)
	 	$	0	 	 	 	 	 
	Total Working Capital Uses
	 	 	 	 	 	$	0	 
	 
	 	 	 	 	 	 	 
	Projected Increase (Decrease) in Working Capital:
	 	 	 	 	 	$	0	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Newly Projected Working Capital
	 	 	 	 	 	$	0	 

18

 

Coop Name

City, State

FYE: Date

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Net Funds Available
	Add Cash Sources:	 	2002	 	2003	 	2004
	Local Savings
	 	$	0	 	 	$	0	 	 	$	0	 
	Patronage Refunds
	 	$	0	 	 	$	0	 	 	$	0	 
	Depreciation
	 	$	0	 	 	$	0	 	 	$	0	 
	 	 	 
	Total Sources:
	 	$	0	 	 	$	0	 	 	$	0	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Less Required Cash Uses:
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Net of Organizations Investments
	 	$	0	 	 	$	0	 	 	$	0	 
	Cash Patronage Paid (20%)
	 	$	0	 	 	$	0	 	 	$	0	 
	Other Required Uses (Taxes)
	 	$	0	 	 	$	0	 	 	$	0	 
	 	 	 
	Total Required Uses:
	 	$	0	 	 	$	0	 	 	$	0	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	Net Funds Available
	 	$	0	 	 	$	0	 	 	$	0	 
	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	3 YR Average
	 	 	 	 	 	$	0	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Net Funds Used
	 	 	 	 	 	 	 	 	 	 	 	 
	Fixed Assets Added
	 	$	0	 	 	$	0	 	 	$	0	 
	Stock Retired
	 	$	0	 	 	$	0	 	 	$	0	 
	Term Debt Payments
	 	$	0	 	 	$	0	 	 	$	0	 
	 	 	 
	Total Elective Uses:
	 	$	0	 	 	$	0	 	 	$	0	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	Net Funds Flow
	 	$	0	 	 	$	0	 	 	$	0	 
	 	 	 

	 	 	 	 	 	 	 
	GUIDELINE: Limit annual Term Debt payment to 50% of 3-Year Average of NFA

	 
	 	 	 	 	 	 
	(Term Debt Capacity) 3-Year NFA (x) 50% =

	 	$	0	 	 	 
	(Debt Pmts/NFA) Term Payments / 3-Year NFA =

	 	No Term Debt
	 	 
	Term Debt Capacity (x) 7-Years to Service Debt =

	 	$	0	 	 	 
	 
	 	 	 	 	 	 
	GUIDELINE: Local Net Worth to Term Debt Ratio should be 2:1 or more

	 
	 	 	 	 	 	 
	FYE 19XX Local Net Worth =

	 	$	0	 	 	 
	Term Debt (Less Current Portion) =

	 	$	0	 	 	 
	Local Net Worth to Term Debt =

	 	No Term Debt
	 	:1

19 

 

     

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Year Ending	 	 
	 	Classifications	 	Current	 	New
	Account Name	 	 
	 	CFA	 	 	 	 	 	 	 	 
	Location	 	 
	 	Wgt UCS Score	 	 	 	 	 	#DIV/0!
	 	 	 	 	If Different than Weighted UCS Score — see notes below è
	 	Rec’d UCS	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 	Ave Volume	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Weight	 	 	 	 	 	A1	 	 	A2	 	 	A3	 	 	M4	 	 	Adv.	 	 	 	 	 	 	 
	Given	 	Ratio	 	1	 	 	2	 	 	3	 	 	4	 	 	5	 	 	Description	 	Calculations/Comments
	 
	 	Local Leverage	 	 	< 35	%	 	 	< 50	%	 	 	< 80	%	 	 	< 100	%	 	 	> 100	%	 	Total LTD (Less Current)	 	Ttl LTD =	 	$	0	 	 	LNW =	 	$	0	 
	25%
	 	 	 	 	 	#DIV/0!	 	#DIV/0!	 	#DIV/0!	 	#DIV/0!	 	#DIV/0!	 	Local Net Worth	 	 	 	 	 	Ratio =	 	#DIV/0!	 	 	 	 
	 
	 	Debt Service	 	 	> 2.5	 	 	 	>2.0	 	 	 	> 1.5	 	 	 	> 1.0	 	 	 	< 1.0	 	 	Net Funds Available	 	3-Yr NFA =	 	$	0	 	 	Current LTD =	 	$	0	 
	15%
	 	Coverage	 	#DIV/0!	 	#DIV/0!	 	#DIV/0!	 	#DIV/0!	 	#DIV/0!	 	Current Portion LTD	 	 	 	 	 	Ratio =	 	#DIV/0!	 	 	 	 
	 
	 	Liquidity -	 	 	> 2.0	 	 	 	> 1.5	 	 	 	> 1.25	 	 	 	> 1.0	 	 	 	<1.0	 	 	Current Assets	 	CA =	 	$	0	 	 	CL =	 	$	0	 
	10%
	 	Current Ratio	 	#DIV/0!	 	#DIV/0!	 	#DIV/0!	 	#DIV/0!	 	#DIV/0!	 	Current Liabilities	 	 	 	 	 	Ratio =	 	#DIV/0!	 	 	 	 
	 
	 	Collateral	 	 	< 40	%	 	 	< 60	%	 	 	< 75	%	 	 	> 75	%	 	 	> 90	%	 	Total Liabilities	 	CFA Liabilities =	 	$	0	 	 	Est. Mkt Value=	 	$	0	 
	10%
	 	 	 	 	 	#DIV/0!	 	#DIV/0!	 	#DIV/0!	 	#DIV/0!	 	#DIV/0!	 	Estimated Market Value	 	 	 	 	 	Ratio =	 	#DIV/0!	 	 	 	 
	 
	 	Local Net	 	 	> 4.0	%	 	 	> 2.0	%	 	 	> 1.0	%	 	 	> 0.0	%	 	 	< 0.0	%	 	Local Net Savings	 	LNS =	 	$	0	 	 	Gross Sales =	 	$	0	 
	25%
	 	Savings	 	#DIV/0!	 	#DIV/0!	 	#DIV/0!	 	#DIV/0!	 	#DIV/0!	 	Gross Sales	 	 	 	 	 	Ratio =	 	#DIV/0!	 	 	 	 
	 
	 	Management	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 ç Enter the weight value in the corresponding cell, as determined by the Loan Office.	 	AR < 60 Days = $                    ,	 	AR > 6-Months = $                    
	15%
	 	(Trends, Environmental)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	 	 	 	Inventory Turns =                      , Environ Issues:

Comments:

 

 

RECOMMENDATIONS:

	•	 	Approval of the attached Loan Quality Classification Worksheet. A1,2,3,4,5 etc
	 
	•	 	Approval of a $                     seasonal loan with a      /      /       maturity, expiration and reinstatement date.
	 
	•	 	Approval of a $                     term loan.

	 	 	 	 	 	 	 
	Expiration Date

	 	/       /02
	 	 
	Maturity Date

	 	/       /
	 	 
	Monthly Payment

	 	 	$	 	 	 
	Date of First Payment

	 	/       /02
	 	 

	•	 	Limitation on Advances: (If none, list NONE)
	 
	 	 	Advance term prior to seasonal            Yes       No

	 	•	 	Limit seasonal/term advances until receipt of board resolution and loan application
authorizing borrowing in the amount of $                    .
	 
	 	•	 	Limit seasonal/term until receipt/completion of:

	 	◊	 	Security interest
	 
	 	◊	 	Assignment of Investment in Cenex Harvest States
	 
	 	◊	 	Assignment of Investment in Land O’Lakes, Inc.
	 
	 	◊	 	Assignment of Other Investment
	 
	 	◊	 	Completion of Real Estate Mortgage requirements

	•	 	$                     of the term loan commitment is limited until receipt of an acceptable feasibility study.

	 
	•	 	Limit Seasonal/Term until receipt/completion of:

	 	•	 	Security Interest
	 
	 	•	 	Assignment of investment in Cenex Harvest States
	 
	 	•	 	Assignment of investment in Land O’Lakes, Inc.
	 
	 	•	 	Assignment of investment in Other Investment
	 
	 	•	 	Real estate mortgage in the amount of $                    , covering:

	•	 	Loan Agreement Conditions:

	 	•	 	Financial information: Unqualified annual audit and monthly financial statements
	 
	 	•	 	Cash Patronage:                     %
	 
	 	•	 	Fixed Assets: $                    .
	 
	 	•	 	Equity Retirements: $                    .
	 
	 	•	 	Local Net Worth of no less than:
	 
	 	•	 	Local Net Ownership:

22

 

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

23

 

OVERVIEW:

This section should provide the reader with an executive summary of the financing request, the
financial strengths that support the loan, and the credit risks inherent in the loan(s). Key points
raised here should be supported and explained in the main body of the credit report.

LOAN REQUEST:

The loan officer should rate the financial trends of the customer. The rating must be consistent
with the facts presented in the comparatives and the rest of this credit report.

LOAN(S) IN PARTICIPATION:

Outline actions and requirements as tied to Loan Participation.

FINANCIAL TRENDS:

	 	 	 	 	 
	           Strong
	 	Improving
	 	Erratic
	           Consistent
	 	Deteriorating
	 	Poor

Comments:

PROFITABILITY (To include most recent year, projected year and year-to-date):

This section should do more than just report local savings numbers and percentages. It should also
identify factors that lead to existing or potential weaknesses in profitability. Profitability and
operations analysis are essential in evaluating the long-term repayment capacity of a customer.

SOLVENCY:

Solvency is the evaluation of the customer’s equity financing for the business. The loan officer
needs to evaluate adequacy, leverage and trends

LIQUIDITY:

	 	 	 	 	 
	           Surplus
	 	Adequate
	 	Inadequate

Comments: (Working Capital analysis, projected change and seasonal loan activity)

The above liquidity ratings are based on the working capital analysis attached to the credit
report.

Accounts Receivable Control:

Accounts aged less than 60 days:

23

 

Accounts aged more than 90 days:

Allowance for doubtful accounts:

Comments:

Inventory Controls:

This section should take a look at the customers’ ability to effectively manage the inventory
levels and turnovers, particularly for merchandise type inventories.

REPAYMENT RECORD:

	 	 	 	 	 
	           Satisfactory
	 	Unsatisfactory	 	 

This section should address the repayment history of the seasonal and term loans. With seasonal
loans, the key question is whether seasonal loan use matches the customer’s working capital
financing of permanent current assets.

EXPOSURE ANALYSIS:

This section primarily provides a summary of the key ratios and loan underwriting measures used
to summarize risk exposure.

Seasonal loan to effective working capital:                      : 1 (low/moderate/high)

Current Ratio:                      UCS (    )

Local net worth to long term debt:                      : 1 (low/moderate/high)

Local Leverage (LTD/LNW):                     % UCS (    )

The attached collateral report analysis suggests a positive cash remaining position of $ for the
fiscal year ending       /       /      . This resulted in a Collateral Penetration (total COFINA
liabilities/Stressed Realized Value) of                     %. UCS (    )

During 20xx the cooperative generated $                      of net funds available and the three year average net funds
available $                     .

The monthly term loan payments of $                      ( $                      annually) correlate to a      -  year amortization remaining. The
payments required       % of the 200X net funds available and                      % of the three year average net funds
available. This correlates to a Debt Service Coverage (3-Years Average NFA/Current Portion of LTD)
of                     : 1. UCS (    ).

2003 CAPITAL EXPENDITURE PLANS: $                     .

24

 

This section should identify the total dollars planned in capital expenditures for the coming year.
Major expenditures can be highlighted in the following table. Typically, management’s fixed asset
budget is attached to the credit report.
 

 

 

2003 EQUITY RETIREMENT PLANS: $                    .

In addition to identifying the planned equity retirements for the coming year, this section should
identify the board of director’s equity retirement policy.

SECURITY:

	 	 	 
	          Adequate	 	Inadequate
	 

	 	 

In this section, the loan officer summarizes information on the collateral analysis attached to the
credit report and identifies the basis (security interests and real estate mortgages) for Cenex
Finance security position. The loan officer should address environmental issues in this section.

Collateral Analysis: +/- $

COFINA Loan Balance/SRV:                     %. UCS (     ).

Real Estate Mortgage:

Covering

Dated:      /     /      Amount: $

Dated:      /     /      Amount: $

Dated:      /     /      Amount: $

Security Interest:

Dated:      /     /                         Last Continued:      /     /     .

Assignment of Cenex stock dated:      /     /     .

Amount at last FYE: $          .

Assignment of Land O’Lakes, Inc. stock dated      /     /     . .

Amount at last FYE: $        .

Investment in Cofina at the close of the Fiscal Year End: $               .

MANAGEMENT:

	 	 	 	 	 	 	 
	Very Good

	 	Good
	 	Adequate
	 	Unsatisfactory
	 
	 	 	 	 	 	 

25

 

Comments (Facts only):

In this section the loan officer should address management facts which have a bearing on credit
risk.

OTHER ISSUES

ATTRIBUTING LOAN INFORMATION (Through guarantee or ownership):

ENVIRONMENTAL CONTINGENCIES:

OTHER LIABILITIES: (Capital Leases, contracts, other financing, contingent liabilities — recourse
receivables, etc.)

LOAN COVENANT COMPLIANCE:

	 	 	 	 	 	 	 
	 	 	Stipulated	 	Actual	 	 
	Loan Covenant	 	Performance	 	Performance	 	Action
	Financials
	 	Unqualified/Monthly Reporting	 	 	 	 
	Cash Patronage
	 	%	 	%	 	 
	Capital Expenditures
	 	$	 	$	 	 
	Stock Retirements
	 	$	 	$	 	 
	Local Net Worth
	 	$	 	$	 	 
	Capitalization
	 	%	 	%	 	 
	Working Capital
	 	$	 	$	 	 
	Budget/Financial
Projections
	 	 	 	 	 	 
	Seasonal Pay Down
	 	 	 	 	 	 
	Other
	 	 	 	 	 	 

UCS/COFINA rating: (Comment on any deviations.)

ACCOUNT SUMMARY:

Strengths of the cooperative:

1. List strengths

Weaknesses of the cooperative:

1. List weaknesses

LOAN SERVICE PLAN/STRATEGY:

Note both if a Loan Service Plan is completed and summarize the progress of the plan, if
applicable.

Attachments:

	C	 	Comparative Financial Information

26

 

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

27

 

PRICING MATRIX

10/1/03

	 	 	 	 	 	 	 	 	 
	 	 	Base Rate	 	 
	SEASONAL LOAN RATES	 	plus/minus	 	4.60%
	Premium 1
	 	 	-0.35	 	 	 	 	 
	Premium 2
	 	 	-0.75	 	 	 	 	 
	Large Level 1
	 	 	-0.50	 	 	 	 	 
	Small Level 1
	 	 	-0.25	 	 	 	 	 
	Large Level 2
	 	 	-0.25	 	 	 	 	 
	Small Level 2
	 	 	0.00	 	 	 	 	 
	Large Level 3
	 	 	0.00	 	 	 	 	 
	Small Level 3
	 	 	0.25	 	 	 	 	 
	Large Level 4-A
	 	 	1.00	 	 	 	 	 
	Small Level 4-A
	 	 	1.25	 	 	 	 	 
	Large Level 4-B
	 	 	2.00	 	 	 	 	 
	Small Level 4-B
	 	 	2.25	 	 	 	 	 
	Large Level 5
	 	 	2.75	 	 	 	 	 
	Small Level 5
	 	 	3.00	 	 	 	 	 

	 	 	 	 	 	 	 	 	 
	 	 	Base Rate	 	 
	TERM LOAN RATES	 	plus/minus	 	4.85%
	Premium 1
	 	 	-0.60	 	 	 	 	 
	Premium 2
	 	 	-0.75	 	 	 	 	 
	Large Level 1
	 	 	-0.50	 	 	 	 	 
	Small Level1
	 	 	-0.25	 	 	 	 	 
	Large Level 2
	 	 	-0.25	 	 	 	 	 
	Small Level 2
	 	 	0.00	 	 	 	 	 
	Large Level 3
	 	 	0.00	 	 	 	 	 
	Small Level 3
	 	 	0.25	 	 	 	 	 
	Large Level 4-A
	 	 	1.00	 	 	 	 	 
	Small Level 4-A
	 	 	1.25	 	 	 	 	 
	Large Level 4-B
	 	 	2.00	 	 	 	 	 
	Small Level 4-B
	 	 	2.25	 	 	 	 	 
	Large Level 5
	 	 	2.75	 	 	 	 	 
	Small Level 5
	 	 	3.00	 	 	 	 	 

28

 

2.05 — Collateral Analysis

	 	 	 
	General

	 	Repayment capacity represents the first and primary
source of repayment for each loan transaction and
relationship between Cofina and its customers. Even
though collateral is only an alternative source of
repayment, analysis of this source is important in
determining a sound credit package.
	 
	 	 
	Collateral Analysis

	 	There are four broad categories of collateral. The
ability to convert the assets to cash (their
liquidity) is the primary means of distinguishing
between the categories. They are presented in the
order of liquidity:

	 	•	 	Current Assets — This category includes
all items that a customer would typically
convert to cash in less than one year.
Cofina should be able to liquidate these
assets in a very short period of time and at
minor selling costs. These security items
might include marketable securities,
accounts receivable, and inventories.
	 
	 	•	 	Equipment and Rolling Stock — These
security
items can include all the machinery,
equipment,
and non-licensed vehicles used in the
operation.
Most of these assets can be sold to other
similar
operations, but the time to sale and cost of
sales
are higher than for current assets.
	 
	 	•	 	Facilities and Related Real Estate-This
category includes all of a customer’s
investment in buildings, improvements, and
related land. While these collateral items
provide sound, stable security for very long-
term loans, the value of the collateral is
very
uncertain. This is particularly true of
single
use facilities. In addition, the collection
and
liquidation costs can be quite high.
	 
	 	•	 	Investments — This category includes
investments in other businesses, including
cooperatives, where the ability to convert
the investment to cash is at best uncertain,
and frequently outside of the customer’s
control. These assets typically offer
uncertain security value, but may represent
important customer control aspects of the
loan relationship.

29

 

	 	 	 	The Cofina collateral analysis begins with a
worksheet designed to show book value and to
estimate the Stressed Realizable Value for each
category of secured assets. “Stressed
Realizable Value” means, with respect to any
Receivable, the value of all Related Security
with respect thereto as calculated by Cofina
using the customer’s most recent financial
statements. The Stressed Realizable Value shall
be calculated on a monthly basis. “Book
Value” means the value of a customer’s assets
as calculated in accordance with the Credit
Manual using such customer’s most recent fiscal
year end audited financial statements received.
The Collateral Analysis Worksheet and related
assumptions sheet are attached to this procedure
to show the analysis format and to show the
discount factors used for asset valuations. The
discount rates* used in this worksheet are
subject to periodic review by Cofina Loan
Committee.
	 
	 	 	 	The real property is first matched to real estate
mortgages to assure security coverage, and then
it is evaluated for Stressed Realizable Value.

This collateral analysis is included with each
credit report. A net realizable value analysis
is reviewed by the loan officer, on a quarterly
basis, for all adversely classified loans.
	 
	 	 	 	* Audited statements normally report a detailed
breakdown of both Inventory and Account
Receivable asset categories. Cofina will
discount each of the individual asset categories
as indicated on page two of the attached
Collateral Analysis Worksheet.
	 
	 	 	 	However, in the unaudited monthly financial
statements utilized in the monthly Stressed
Realized Value analysis, such details are not
available and are thus discounted per the
schedule noted on page one of the attached
Collateral Analysis Worksheet under the column
entitled “2002”.
	 
	 	 	 	The analysis then requires the calculation of the
“Loan Balance — Stressed Realized Value” ratio.
	 
	 	 	 	The definition of Loan Balance is the amount owed
by the customer to Cofina as of the close of the
month under review.

30

 

	 	 	 	The Collateral Management Test indicates the Loan
Balance (LB) as compared to the Stressed Realized
Value (SRV) must be no more than 60%.
	 
	 	 	 	If the cooperative’s LB to SRV exceeds this ratio
limit, an additional two-prong test must be
implemented and passed in order for Cofina to
move forward with any loan consideration.
	 
	 	 	 	Test One

	 	•	 	The organization’s Debt Service Coverage
Ratio must be 2.00 to 1 or greater.

	 	o	 	Debt Service Coverage Ratio is
determined by the following equation:

	 	§	 	3-Year Average of Net Funds
available (NFA) 1 as compared to the
anticipated Current Portion of Long
Term Debt

	 	 	 	Test Two

	 	•	 	The organization must have a history of
positive Local Net Earnings.

	 	 	 	Failure to pass either of the secondary tests
disqualifies prospective patrons from working
with Cofina.

Failure by an existing customer requires to be
reported directly to the Loan Committee. The
existing loan will then become subject to a loan
servicing action.
	 
	 	 	 	Should the loan candidate pass the above testing
process, additional loan management practices
should be put in place to closely monitor’s
collateral position.
	 
	 	 	 	Such practices may include, but are not limited
to, restrictive loan covenants governing cash
management practices, minimum Local Net Worth
stipulations and/or the execution of additional
collateral security measures.
	 
	 	 	 	Such collateral security measures may include
additional mortgage securities, the assignment of
investments to Cofina or third-party guarantees.

31

 

	 	 	 	 	 	 	 	 	 
	 	 	Collateral Analysis Worksheet	 	 	 
	 	 	(Yearly)	 	 	 
	 	 	FYE 2001 (Prior Year End)	 	FYE 2002 (Most Recent Year End)
	 	 	Book	 	Stressed	 	Book	 	Stressed
	 	 	Value	 	Realized Value	 	Value	 	Realized Value
	Assets:
	 	 	 	 	 	 	 	 
	Cash
	 	$0	 	100% of Book	 	$0	 	100% of Book
	Accounts Receivable
	 	$0	 	Discounted per Table 

listed below	 	$0	 	Discounted per Table 

listed below
	Other Receivables
	 	$0	 	85% of Book Value	 	$0	 	85% of Book Value
	Prepaids
	 	$0	 	85% of Book Value	 	$0	 	85% of Book Value
	Inventory
	 	$0	 	Discounted per Table 

listed below	 	$0	 	Discounted per Table 

listed below
	Real Property
	 	$0	 	 	 	$0	 	 
	REM — Report Prpty Secured
	 	$0	 	100% of Book Value or	 	$0	 	100% of Book Value or
	REM — Report Prpty Secured
	 	$0	 	Secured Mortgage	 	$0	 	Secured Mortgage Value 
	REM — Report Prpty Secured
	 	$0	 	  Value — Lessor of two	 	$0	 	—  Lessor of two
	 
	 	 	 	 	 	 	 	 
	Machinery & Equipment
	 	$0	 	65% of Book Value	 	$0	 	65% of Book Value
	Vehicles
	 	$0	 	0% of Book Value	 	$0	 	0% of Book Value
	(Less) Other Secured Creditors
	 	$0	 	100% of Book Value	 	$0	 	100% of Book Value
	Other Assets
	 	$0	 	0% of Book Value	 	$0	 	0% of Book Value
	Investments:
	 	 	 	 	 	 	 	 
	COFINA Equity
	 	$0	 	100% of Book Value	 	$0	 	100% of Book Value
	Secured Equity Position
	 	$0	 	10% of Book Value	 	$0	 	10% of Book Value
	All Remaining Investments
	 	$0	 	0% of Book Value	 	$0	 	0% of Book Value
	 	 	 	 	 
	Total Secured Assets
	 	$0	 	$0	 	$0	 	$0
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Plant, Property, and Equipment Total
	 	$0	 	 	 	$0	 	 

	 	 	 	 	 
	 	 	FYE 2001	 	FYE 2002
	Liabilities:
	 	 	 	 
	 
	 	 	 	 
	COFINA — Seasonal
	 	$0	 	$0
	COFINA — Term
	 	$0	 	$0
	COFINA — Other
	 	$0	 	$0
	 	 	 	 	 
	Total
	 	$0	 	$0
	Asset Realization
	 	$0	 	$0
	 	 	 	 	 
	Cash Remaining
	 	$0	 	$0
	 	 	 	 	 

	 	 	 	 	 
	 	 	FYE 2001	 	FYE 2002
	Investments:
	 	 	 	 
	CHS
	 	$0	 	$0
	Land O’Lakes
	 	$0	 	$0
	Cofina Financial
	 	$0	 	$0
	Other Stock
	 	$0	 	$0
	 	 	 	 	 
	Total Investments
	 	$0	 	$0
	 	 	 	 	 
	 
	 	$0	 	$0
	 
	 	 	 	 
	Seasonal Loan Commitment
	 	 	 	 
	Loan Balance to SRV
	 	0.00%	 	0.00%
	Loan Commitment to SRV
	 	0.00%	 	0.00%
	Local Net Savings
	 	$0	 	$0

Denotes: Cofina holds a secured position on such investments

32

 

AR and Inventory Discount Tables — utilized when such asset breakdown is available.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	ACCOUNTS	 	 	 	 	 	 	 	 
	RECEIVABLE	 	Prior Year End	 	Most Recent Year End	 	 	 	 
	 	 	Book Value	 	SRV	 	Book Value	 	SRV	 	Multiplier	 	Discount
	CURRENT
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	90	%	 	 	10	%
	31 TO 60 DAYS
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	85	%	 	 	15	%
	61 TO 90 DAYS
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	65	%	 	 	35	%
	91 DAYS TO 6 MONTHS
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	65	%	 	 	35	%
	6 MONTHS TO 1 YEAR
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	50	%	 	 	50	%
	OVER 1 YEAR
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	0	%	 	 	100	%
	DOUBTFUL ACCOUNTS
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	0	%	 	 	100	%
	 
	TOTAL
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	INVENTORY	 	Prior Year End	 	Most Recent Year End	 	 	 	 
	 	 	Book Value	 	SRV	 	Book Value	 	SRV	 	Multiplier	 	Discount
	GRAIN @ .75
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	65	%	 	 	35	%
	FEED @ .75
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	65	%	 	 	35	%
	SEED @ .90
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	90	%	 	 	10	%
	PETROLEUM @.90
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	90	%	 	 	10	%
	FERTILIZER @ .90
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	90	%	 	 	10	%
	CHEMICALS @.90
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	90	%	 	 	10	%
	BATTERIES @ .65
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	65	%	 	 	35	%
	TIRES & TUBES @ .65
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	65	%	 	 	35	%
	TWINE @ .65
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	65	%	 	 	35	%
	MISC @ .65
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	65	%	 	 	35	%
	 
	TOTAL
	 	$	0	 	 	$	0	 	 	$	0	 	 	$	0	 	 	 	 	 	 	 	 	 

33

 

	 	 	 	 	 	 	 	 	 
	 	 	Collateral Analysis Worksheet	 	 	 
	 	 	(Monthly)	 	 	 
	 	 	FYE 2002 (Most Recent Year End)	 	Jan. 03  (Most Recent Month End)
	 	 	 	 	 	 	Monthly	 	 
	 	 	Book	 	Stressed	 	Financials	 	Stressed
	 	 	Value	 	Realized Value	 	Value	 	Realized Value
	Assets:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Cash
	 	$0	 	100% of Book	 	$0	 	100% of Month End 

Statement Value
	Accounts Receivable
	 	$0	 	Discounted per Table 

listed above	 	$0	 	85% of Month End 

Statement Value
	Other Receivables
	 	$0	 	85% of Book Value	 	$0	 	85% of Month End 

Statement Value
	Prepaids
	 	$0	 	85% of Book Value	 	$0	 	85% of Month End Statement
	Inventory
	 	$0	 	Discounted per Table 

listed above	 	$0	 	85% of Month End 

Statement Value
	Real Property
	 	$0	 	 	 	$0	 	 
	REM — Report Prpty Secured
	 	$0	 	100% of Book Value or	 	$0	 	100% of FYE Book Value or
	REM — Report Prpty Secured
	 	$0	 	Secured Mortgage 	 	$0	 	 Secured Mortgage Value — 
	REM — Report Prpty Secured
	 	$0	 	 Value — Lessor of two	 	$0	 	  Lessor of two
	 
	 	 	 	 	 	 	 	 
	Machinery & Equipment
	 	$0	 	65% of Book Value	 	$0	 	65% of FYE Book Value
	Vehicles
	 	$0	 	0% of Book Value	 	$0	 	0% of FYE Book Value
	 
	 	 	 	 	 	 	 	Increase — 0% of Change
	Change in PPE from FYE
	 	 	 	 	 	$0	 	Decrease — 65% of Change
	(Less) Other Secured Creditors
	 	$0	 	100% of Book Value	 	$0	 	100% of FYE Book Value
	Other Assets
	 	$0	 	0% of Book Value	 	$0	 	0% Month End Statement Value
	Investments:
	 	 	 	 	 	 	 	 
	COFINA Equity
	 	$0	 	100% of Book Value	 	$0	 	100% of FYE Book Value
	Secured Equity Position
	 	$0	 	10% of Book Value	 	$0	 	10% of FYE Book Value
	All Remaining Investments
	 	$0	 	0% of Book Value	 	$0	 	0% of FYE Book Value
	 
	 	 	 	 	 	 	 	 
	Total Secured Assets
	 	$0	 	$0	 	$0	 	$0
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Plant, Property and Equipment Total
	 	$0	 	 	 	$0	 	 

	 	 	 	 	 	 	 	 	 
	 	 	FYE 2002 	 	Jan. 03 (Most Recent Month End)
	Liabilities:
	 	 	 	 	 	 	 	 
	COFINA — Seasonal
	 	$	0	 	 	$0	 	 
	COFINA — Term
	 	$	0	 	 	$0	 	 
	COFINA — Other
	 	$	0	 	 	$0	 	 
	 
	 	 	 	 	 	 	 	 
	Total
	 	$	0	 	 	$0	 	 
	Asset Realization
	 	$	0	 	 	$0	 	 
	 
	 	 	 	 	 	 	 	 
	Cash Remaining
	 	$	0	 	 	$0	 	 
	 
	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 
	 	 	FYE 2002	 	Jan. 03 (Most Recent Month End)
	Investments:
	 	 	 	 	 	 	 	 
	CHS
	 	$0	 	$0
	Land O’Lakes
	 	$0	 	$0
	Cofina Financial
	 	$0	 	$0
	Other Stock
	 	$0	 	$0
	 
	 	 	 	 	 	 	 	 
	Total Investments
	 	$0	 	$0
	 
	 	 	 	 	 	 	 	 
	Seasonal Loan Commitment
	 	$0	 	$0
	 
	 	 	 	 	 	 	 	 
	Loan Balance to SRV
	 	 	0.00	%	 	 	0.00	%
	Loan Commitment to SRV
	 	 	0.00	%	 	 	0.00	%
	Local Net Savings
	 	$0	 	$0

Denotes: Cofina holds a secured position on such investments

34

 

2.06 — Environmental Analysis

	 	 	 
	General

	 	The purpose of this procedure is to create awareness of the
potential liability of the customer and the credit risk to
Cofina due to contaminated property.
	 
	 	 
	 

	 	Many Cofina customers
utilize      hazardous chemicals or other
products that      produce hazardous wastes in the sound operation of their
businesses. These wastes and the customer’s approach in
disposing of them, in a legally sound manner, can impact
the credit quality of the loan relationship with the
customer.
	 
	 	 
	Loan Agreement

	 	Each credit report should address environmental
issues that have arisen with the customer in the past year
and the steps taken or to be taken by Cofina to manage
credit risk. Each loan agreement should include the
following sections with language to address environmental
issues:

	 	•	 	Conditions - General insurance coverage,
including coverage for environmental
problems.
	 
	 	•	 	Environmental — This section addresses
licenses, tank registration, and indemnity
requirements for Cofina loans. Also, the
customer warrants that it is in compliance
with all federal, state, and local
environmental laws regarding owned or leased
property.

	 	 	 	The loan officer may recommend additional
language concerning environmental issues specific
to the customer relationship.

	 	 	 
	Collateral Loans

	 	Contaminated Land - Cofina will not generally secure contaminated property as
collateral for a loan unless there is a state fund, where proceeds are available and
assignable, which assists in the clean-up of the specific parcel. The loan officer may
recommend an exception to this requirement, provided the Cofina loan and collateral are
adequately protected.
	 
	 	 
	 

	 	Cofina may enter into loans specifically for the
clean up of contaminated property,
provided there is state funding available for
clean-up expenses. Such

35

 

	 	 	 
	 

	 	loans will be made
separately for specific parcels and
contamination. The loan officer should consider
and recommend whether assignment of state funds
is appropriate given the credit risk of the
customer. Contamination loans require
documentation of paid expenses (receipts, bills,
or canceled checks) prior to advancing funds.

36

 

2.07 — Construction Lending

	 	 	 
	General

	 	Loans to new or existing customers undertaking substantial construction projects represent
added credit risks to Cofina. Properly managing those risks is important in assuring a sound
loan to the customer. This procedure identifies specific risk management tools to be
considered when a customer is undertaking a substantial construction project.
	 
	 	 
	 

	 	For the purpose of this procedure, a substantial
construction project is one that represents 50%
of the customer’s local net worth or $1,000,000,
whichever is less. When a construction project
undertaken by a customer exceeds this amount, the
loan officer should evaluate the customer’s
ability to effectively manage the construction
process and evaluate the risk management tools
appropriate for the loans associated with the
project. The evaluation will be included in the
credit report, with specific recommendations on
construction lending requirements.
	 
	 	 
	 

	 	The loan officer has the flexibility to utilize
these risk management tools, even when the
project is less than the amounts prescribed
above.
	 
	 	 
	Risk Management Tools

	 	The following tools should be considered and evaluated when Cofina finances
a substantial construction project:

	 	•	 	Feasibility Studies - A feasibility study
provides the customer and Cofina with
information about construction costs and the
customer’s ability to generate the earnings
and cash flow to support the project. The
market or trade territory information, sales
and margin estimates, and anticipated costs
should be realistic. The loan officer must
critically evaluate the “bottom line” of the
project as net
income represents a primary source of
repayment for related loans. Another key
issue is management’s ability to manage the
resulting business operation and leverage
position.

37

 

	 	•	 	Construction Contract - A construction
contract provides the specific details of
performance by the contractor (typically a
general contractor), the payment
requirements and other details concerning
the project. This is a vital tool in
substantial construction projects and is
expected when Cofina provides construction
or permanent financing. The loan officer
should consider requiring that the customer
have the contract evaluated by a third-party
construction engineer to assure that the
contract is realistic and consistent with
the needs of the customer.
	 
	 	•	 	Performance Bond/Payment Bond — A
performance bond provides an insurance policy which assures contractor performance on the
construction contract. If the loan officer recommends not requiring a performance bond,
the contractor’s financial position and
credit references should be evaluated to determine the financial ability to
meet contract requirements. The
customer’s overall financial strength and
project management skills should also
be evaluated before waiving
the need for a performance
bond.
	 
	 	 	 	A payment bond provides assurances that the
material and labor used in the
project will be paid for. It does
not provide as much protection
for the customer as the performance
bond which
assures completion of the project as
specified in
the construction contract. However, this
may be
an appropriate alternative given a smaller
or less
complex construction project.
	 
	 	 	 	This requirement will not be waived absent
evidence of a strong and liquid
customer classified as
Acceptable.
	 
	 	•	 	Lien Waivers - A lien waiver is a legal
document provided by the general contractor
and the sub-contractors to the customer
which specifies that the labor and materials
provided by the sub-contractor or supplier
have been paid
for and that no mechanic’s liens can or
will be
filed on the construction property for
the specific work and/or
materials covered by the waiver.

38

 

	 	•	 	Comprehensive General Liability/Builders
Risk Insurance - This type of insurance
coverage is provided by the customer and
provides Cofina (as loss payee) with
protection against contractor liabilities
arising out of the construction project.
	 
	 	•	 	Title Insurance - A title insurance
policy
provides the customer and Cofina protection
on the security for the loan.

	 	 	 	In some cases, the loan officer may want to
establish a separate construction loan, with
disbursements tied to a specific contract
payments and lien waivers, and with a maturity
that matches the expected completion date of the
project. These loans are expected to be repaid
by other,
permanent sources of financing, that may include
Cofina.

39

 

2.08 — LLC Lending

	 	 	 
	General

	 	Loans to LLC’s may have credit risks and credit
considerations unique beyond traditional
cooperative lending. Properly managing those risks
is important in assuring a sound loan portfolio.
This procedure identifies specific additional
steps to be followed when lending to LLC’s.
	 
	 	 
	Additional LLC Lending 

Procedures

	 	

When considering loans to LLC’s, the loan officer
and loan committee will include consideration of
the following criteria:

	 	•	 	In lending to a new LLC, a written
guarantee is required from each owner.
Normally such guarantee is to be offered
jointly and severally to the total
indebtedness. However, it may be offered
severally if each of the owners has an asset
classification of no less than Acceptable.
As the LLC develops its own operating
performance history, the guarantee
requirement can be reduced accordingly.
	 
	 	•	 	The original Loan Agreement to any new
LLC shall have, among other covenants, a
covenant requiring a minimum net worth to
assets in the 35-40% range. If designed as
a dollar level of minimum local net worth,
it should have the same impact relative to
the assets of that LLC. The owners must
acknowledge this financial covenant either
by countersigning the Loan Agreement or
within the guarantee.
	 
	 	•	 	Each owner shall provide an audit prior
to closing on a new loan to the LLC. Such
annual audits will be a requirement until a
guarantee is no longer required by such
owner.
	 
	 	•	 	An annual asset classification will be
completed and established on each owner.
This will aid Cofina in evaluating the
strength of each of the guarantor’s and
therefore the guarantees.

40

 

	 	•	 	In some cases, one or more owners may
have a lower asset classification than the
LLC. Then it becomes imperative to
determine that the LLC asset classification
is justified either based on the joint and
several structure of the owner guarantees’
or the merits and strengths of the LLC based
on its operating history and performance.
	 
	 	•	 	In measuring the total credit exposure of
any owner, it is necessary to add any amount
of any guarantee to the LLC offered by that
owner to the direct commitment of the owner.

41

 

2.09 Loan Agreement

	 	 	 	The standard loan agreement used in loans from
Cofina is attached to this procedure. The
language is standardized to enhance the clarity
of the documents. However, the loan officer
recommends specific limits and covenants for each
customer that address the credit risk management
needs of Cofina.
	 
	 	 	 	The following identifies key areas in the
standard loan agreement where the loan officer
recommends language or information that is
specific to the customer.

	 	•	 	Loan Amounts — This area specifies the
new, present, and total loans for the
customer in the new loan package.
	 
	 	•	 	Limitations on Advances — This area
specifies any limitations on disbursements
for a specific customer. Limitations may
require completion of security documents,
may require payments directly to third
parties, or similar restrictions which
assure the proper use and security for
Cofina loans.
	 
	 	•	 	Notes and Security — This area includes
standard language as well as customer
specific language when new real estate
mortgages or security interest are taken.
	 
	 	•	 	Cash Patronage — This area limits the
cash patronage refunds allowed by the
cooperative without Cofina consent. The
minimum amount is 20 percent, but can be
changed to reflect the cash flow position of
the customer.
	 
	 	•	 	Dividends and Retirements of Equities
This area, when used, limits the cash
dividends and equity retirements to reflect
the cash flow position of the customer.
	 
	 	•	 	Capital Expenditures — This area, when
used, limits capital expenditures to reflect
the cash flow position of the customer.
	 
	 	•	 	Repayment — This area specifies the
repayment requirements and final maturity
for all loans.

42

 

	 	•	 	Expiration — This area specifies the date
when the various loans expire and advances
are no longer available.
	 
	 	•	 	Financial Reporting — All new customers
are required to have annual independent
unqualified audits, as well as internal
monthly financial statements and other
financial data, such as
accounts receivable aging, as requested by
Cofina.

	 	 	 	In addition, the loan officer has the ability to
recommend additional covenants that contribute to
effective customer and loan servicing.
	 
	 	 	 	The draft loan agreement is attached to the
credit report presented to the Loan Committee for
its approval.

43

 

LOAN AGREEMENT

	 	 	 
	BORROWER:

	 	#

	 	 	 	 	 	 	 	 	 
	NEW LOAN	 	PRESENT LOAN	 	TOTAL LOANS	 	 
	$4,000,000.00 — Seasonal

	 	 
	 	$	4,000,000.00	 	 	— Seasonal
	 

	 	$1,279,950.00 — Term (T08)	 	 	1,279,950.00	 	 	— Term (T08)
	 

	 	 	 	 	 	 	 
	 

	 	 	 	$	5,279,950.00	 	 	— Total

COFINA FINANCIAL (COFINA) agrees to make the above new loan to the Borrower. This loan agreement
will replace in its entirety any existing loan agreement between Borrower and COFINA, and all
existing indebtedness of Borrower to COFINA under any such existing loan agreement and its related
notes shall be deemed to be a loan advanced under this agreement and any new note given in
connection with this agreement. Any existing security and other collateral agreements shall remain
in place and all existing loans, as well as new advances made under this agreement, will be secured
by the collateral granted in such existing security and collateral agreements.

Borrower’s present indebtedness to COFINA and/or commitments outstanding (entitled Present Loan) in
the above heading are consolidated and made subject to all the security requirements, terms, and
conditions of this agreement.

	 	 	 
	PURPOSE:

	 	Advances made under this agreement shall be used only for
the purposes specified in the application for loan.
	 
	 	 
	DISBURSEMENT:

	 	COFINA’s commitment and obligation to disburse the full
amount of the loan shall terminate as provided herein,
unless earlier terminated by COFINA upon a default by
Borrower.
	 
	 	 
	 

	 	To facilitate payments and reborrowings under this
agreement, the Borrower is authorized to reborrow all sums
paid by Borrower on the seasonal loan up to and including
the due date for the loan provided for in this agreement,
but the total amount outstanding for the seasonal loan at
any time shall not exceed the commitment.
	 
	 	 
	RENEWAL:

	 	Funds advanced under this agreement shall be used, first, to
repay and refinance any amounts outstanding under any prior
loan agreements and notes from Borrower to COFINA unless
COFINA has agreed in writing to a different application of
such advances.
	 
	 	 
	INTEREST:

	 	All outstanding loan balances hereunder shall bear interest
at the risk-adjusted variable rate determined by applying
the COFINA Pricing Matrix to the COFINA Base Loan Rate.
Interest on each loan shall be payable on the day of each
month as COFINA may specify. The rate of interest charged
hereunder shall not be usurious and COFINA agrees to adjust
such rates to make the same non-usurious in the event a
court
of competent jurisdiction determines after exhaustion of all appeals
that said rate is usurious.
	 
	 	 
	NOTES AND 

SECURITY:

	 	Advances made under this agreement shall be evidenced by note or
notes acceptable to COFINA and shall be secured to the extent of
all security and collateral granted to COFINA.
	 
	 	 
	 

	 	All property mortgaged, pledged, or assigned to COFINA as security for
these loans, or as security for any other loans of COFINA to Borrower
before or after these loans, shall be security for all loans made by
COFINA to Borrower.

44

 

	 	 	 
	NEGATIVE PLEDGE:

	 	Without prior written consent by COFINA, Borrower shall
not sell, assign, transfer, convey, mortgage, pledge or
grant a security interest in any of its assets or enter
into any guarantee agreements, except for sales of
inventory in the ordinary course of business, whether
voluntarily, involuntarily or by operation of law. In
the event Borrower shall sell, assign, transfer, convey,
mortgage, pledge, or grant a security interest in any of
its assets, whether voluntarily, involuntarily or by
operation of law, a default shall be deemed to have
occurred under this Agreement, and any other agreements
executed by the Borrower and COFINA, and COFINA shall be
entitled to pursue any and all rights and remedies
available to it under this agreement or otherwise.
	 
	 	 
	ASSIGNMENT:

	 	The Borrower acknowledges and agrees that COFINA may
assign directly or indirectly its rights and obligations
hereunder, in whole or in part, in its sole and absolute
discretion, including, without limitation, to one or more
special-purpose companies (an “SPC”) as part of the
securitization of certain loans made by COFINA. The
Borrower may not assign its rights and obligations under
this agreement without the prior written consent of
COFINA (or its assignee).
	 
	 	 
	SET-OFF WAIVER:

	 	All payments required to be made by Borrower hereunder
shall be made without set-off, deduction or counterclaim
of any kind on the date due in immediately available
funds to such account specified by COFINA (or its
assignee).
	 
	 	 
	NON PETITION AND 

LIMIATION ON 

PAYMENTS:

	 	The Borrower hereby covenants and agrees that if COFINA
assigns any of its rights and obligations under this
agreement to an SPC, Borrower shall not institute
against, or join any other person in instituting against,
such SPC any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding or other proceedings
under any federal or state bankruptcy or similar law, for
one year and a day after the latest maturing indebtedness
of the SPC is paid in full.
	 
	 	 
	 

	 	Notwithstanding any provisions contained in this agreement to the contrary, no
assignment by COFINA of its rights under this Agreement to a SPC shall
constitute a corporate obligation, liability or claim (as defined in the
Section 101 of the U.S. Bankruptcy Code) on the part of the SPC or any
subsequent transferee from the SPC to make additional advances after the date
of the assignment and COFINA shall remain wholly liable for any such future
advances.
	 
	 	 
	BORROWING 

NOTICES 

AND PAYMENT 

NOTICES:

	 	Borrower shall authorize employee(s) and other person(s)
to prepare and submit Borrowing Notices for advancing
funds and Payment Notices for repaying funds to COFINA,
which notices shall be in such form as COFINA shall
prescribe from time to time, and COFINA may rely on any
such Borrowing Notice or Payment Notice without further
inquiry as to the validity or genuineness of such
notice. Borrower shall give COFINA prior written notice
of each request for advance or repayment of funds by
facsimile or e-mail (with digital signature). Any such
notice shall be effective, upon receipt by COFINA. Any
such notice must be received by COFINA on or before
11:15 AM (Central Standard Time) on the day of the
transaction.
	 
	 	 
	 

	 	Borrower acknowledges that there are certain risks inherent in transmitting
information over the Internet that are beyond the control of COFINA. Borrower
agrees that COFINA, its officers, employees, agents, affiliates, subsidiaries
and transferees will not be liable for any losses for any cause over which they
have no direct control, including, but not limited to, the failure of
utilities, mechanical or electronic equipment or

45

 

	 	 	 
	 

	 	communications lines,
telephone or other interconnect problems; unauthorized access, theft, viruses
or operator errors; severe weather, earthquakes or floods; strikes or other
labor problems, and any other force majeur. In no event will COFINA, or any of
its officers, employees, agents, affiliates, subsidiaries or transferees have
any liability for any consequential, incidental, special, indirect or punitive
damages (including lost profits, trading losses and damages) that result from
inconvenience, delay or loss of the use of the Internet system or COFINA’s
access to such system even if COFINA has been notified of the possibility of
such damages. COFINA reserves the right to service, repair and upgrade, and
deny access to, its e-mail capability at any time without prior notice.

	 	 	 
	CORPORATE 

EXISTENCE:

	 	Borrower agrees that it will preserve its corporate existence
and not, in one transaction or a series of related
transactions, merge into or consolidate with any other entity,
or sell all or substantially all of its assets, or will not
change the state of its incorporation, its corporate name,
principal place of business or corporate address without
providing COFINA with 30 days’ prior written notice.
	 
	 	 
	CONDITION 

PRECEDENT STOCK 

INVESTMENT:

	 	At the inception of this loan Borrower agrees to purchase
capital stock of COFINA equal to or in excess of $1,000 at
par value if Borrower currently does not hold capital
stock of COFINA having a par value equal to or in excess
of $1,000.
	 
	 	 
	GOVERNING LAW:

	 	This agreement, and the relationship between the parties, shall be governed and
construed under the internal laws of the State of Minnesota. It is the intention of the
parties that
the choice of law rules of the State of Minnesota shall not apply, but
that all conflicts or controversies arising under or related to this
agreement and relationship shall be governed by the procedural rules and
substantive law of the State of Minnesota.
	 
	 	 
	CONDITIONS:

	 	While loans are outstanding under the terms of this agreement, Borrower agrees to
comply with the following conditions:

	 	1.	 	COOPERATIVE STATUS: Borrower agrees to
maintain its status as a cooperative corporation.
	 
	 	2.	 	STOCK INVESTMENT: No later than three
years from the date of COFINA’s first loan commitment, Borrower
further agrees to retain total stock investment in COFINA in an
amount equal to 3% of its average loan balances for the previous
year, or in such amount as may be prescribed by COFINA’s board of
directors, and to maintain such stock investment for the existence
of any indebtedness to COFINA, an SPC or any affiliate of COFINA.
COFINA shall have a first lien and security interest in its capital
stock or other equities now owned or hereafter acquired by Borrower
and Borrower shall pledge such stock or equities to COFINA as
security for all existing and future indebtedness of Borrower, and
Borrower acknowledges and agrees that such security interest is
registered to COFINA.
	 
	 	3.	 	INSURANCE: Borrower shall maintain
reasonable adequate insurance coverage for the business in which
Borrower is engaged for all risks usually insured by business
concerns, by reliable insurers, and shall obtain fidelity bonds
covering officers and employees in their fiduciary capacities as
may be deemed appropriate by COFINA or as COFINA may require.

46

 

	 	4.	 	FINANCIAL INFORMATION: Borrower shall
furnish to COFINA unqualified annual audits, within 120 days of
fiscal year end, and monthly financial statements, within 35 days
of each month end and such other information as COFINA may request
relating to its affairs, and permit such examination of its books
and records as COFINA may specify. This information may include,
but not be limited to, monthly statements of operations and balance
sheets, accounts receivable aging analyses, monthly report of goals
and projections, reports of plans and procedures to reach the
goals, and reports of follow-up plans.
	 
	 	5.	 	BUSINESS PRACTICES: Borrower will
maintain business policies that generally comply with good
business practice. This requirement includes development of
realistic and complete annual financial plans. Borrower’s
board of directors will periodically review progress in carrying
out said plans and hold management accountable.
	 
	 	6.	 	CASH PATRONAGE: Borrower agrees to not
declare any cash dividends or other similar distributions above
forty percent of its annual net patronage savings (as that term is
defined by the Borrower’s current Articles of Incorporation and
Bylaws) without consent of COFINA.
	 
	 	7.	 	APPLICATION OF PAYMENTS: COFINA, at its
discretion, may apply payments to the reduction of any indebtedness
outstanding between COFINA and Borrower.
	 
	 	8.	 	PAYMENTS: Borrower agrees to pay to
COFINA its monthly principal and interest payments, as specified in
Borrower’s monthly billing statements. Borrower shall also have
primary responsibility for payment of its COFINA capital stock
purchase obligation to COFINA.
	 
	 	9.	 	ENVIRONMENTAL: Borrower warrants to
COFINA that it is in compliance with all federal, state, or local
environmental laws relating to or affecting its owned or leased
property, which violation would have a material adverse effect on
the Borrower’s business or a material adverse effect on the value
of the collateral. The Borrower further agrees as follows:

	 	a.	 	LICENSES: Borrower shall
at all times continue to obtain and maintain all licenses,
permits, and other approvals necessary to comply with
environmental laws and shall at all times remain in
compliance with their terms in all material respects. The
Borrower shall at all times continue to exercise due
diligence to obtain and maintain all licenses, permits, and
other approvals necessary to comply with environmental laws.
	 
	 	b.	 	STORAGE TANKS REGISTERED: All
underground storage tanks have been duly registered with all
applicable federal, state, and local government authorities.
The Borrower has no knowledge of any leaks from any of its
above ground or underground storage tanks.

	c.	 	INDEMNITY: Borrower agrees to indemnify, hold harmless and defend COFINA, its successors and
assigns, against all liens, liabilities, demands, claims, actions, suits, judgments, expenses
(including attorneys’ consultants’, and experts’ fees) paid or asserted against COFINA, its
successors or assigns, (or any of the Borrower’s property COFINA has taken title to by
foreclosure or otherwise) as a direct result of the Borrower’s violation of any 

47

 

	 	 	environmental
law, including but not limited to the release of any hazardous material, whether or not such
violation was caused or within the control of the Borrower. This indemnity shall continue
for the benefit of COFINA after the termination of this agreement or other loan documents,
including the release of any security interest.

	 	10.	 	DIVIDENDS AND RETIREMENTS OF EQUITIES:
Borrower will not pay cash capital stock nor retire capital stock
or equities for cash, in excess of $350,000, without approval of
COFINA.
	 
	 	11.	 	CAPITAL EXPENDITURES: Borrower shall
not enter into contracts for building, remodeling, purchasing, or
expanding facilities, nor third party lease agreements for terms
over one year covering real or personal property, of more than
$2,750,000, without COFINA’s approval.

	 	 	 
	REPAYMENT:

	 	The indebtedness arising from advances made under this agreement shall be paid as follows:

	 	1.	 	SEASONAL REPAYMENT: The seasonal loan
of $4,000,000 shall mature on April 1, 2004.
	 
	 	2.	 	TERM REPAYMENT: The existing term loan
shall be repaid by remittance to COFINA of Thirty-Five Thousand
Seven Hundred Dollars, due on or before the day of each and every
month, as COFINA may specify. All outstanding loan balances shall
be repaid in full on April 1, 2006.

	 	 	 
	EXPIRATION:

	 	The unadvanced portion of any commitment shall be canceled as indicated below:

Seasonal Loan — April 1, 2004.

	 	 	 
	DEFAULT 

PROVISION:

	 	If Borrower fails to pay any amounts on any of the loans when
due, or on any other indebtedness of Borrower secured hereby,
files a petition for protection under any bankruptcy law, or
fails to observe or perform any of the provisions of this
agreement, any security agreement, or any mortgage, or any
insolvency or bankruptcy proceeding is commenced against
Borrower, then Borrower shall be in default. If Borrower
defaults, all such loans and other indebtedness shall, at
COFINA’s option, be immediately due and payable and COFINA may
exercise any legal or equitable remedy it deems appropriate in
its sole discretion under the circumstances, including without
limitation making a demand for immediate payment of the entire
loan amount remaining unpaid and immediately enforcing its
rights against the security if such payment is not made.
Notwithstanding the foregoing, in the event that Borrower
becomes a debtor under any bankruptcy law or similar law
affecting creditors’ rights, all such loan and indebtedness
shall become due and payable without any notice, demand or
other action on the part of COFINA.
	 
	 	 
	 

	 	Notwithstanding the provisions of this agreement or any promissory notes issued
in connection herewith, COFINA shall have the option, in its sole discretion
and without any obligation to do so, to make advances to Borrower (or for
Borrower’s account) up to the maximum loan commitment hereunder at any time
Borrower is in default of any payment obligation hereunder, and such advances
shall become an obligation of Borrower and accrue interest under this
agreement.

48

 

	 	 	 
	DEFAULT RATE 

OF INTEREST:

	 	The Borrower’s interest rate shall be increased by two
percent (2%) during the time that any principal or interest
payment is unpaid after such payment becomes owing or upon
any other default by Borrower hereunder. A fifty dollar
($50) administrative fee shall also be paid each time any
payment of interest or principal is not paid when due.
	 
	 	 
	FOREBEARANCE 

NOT WAIVER:

	 	Any forbearance by COFINA in exercising any right or remedy
hereunder or under a security agreement, notes, this
agreement or any other loan documents, or otherwise afforded
by applicable law, shall not be a waiver of or preclude the
exercise of any right or remedy available to COFINA.
	 
	 	 
	SEVERABILITY:

	 	Except as otherwise provided in the succeeding sentence,
every provision of this agreement is intended to be
severable, and, if any term or provision of this agreement
is illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not affect the validity or
legality of the remainder of this Agreement. Notwithstanding
the foregoing, if such illegality or invalidity would cause
COFINA to lose the material benefit of its economic
substance, then the Borrower and COFINA agree to negotiate
in good faith to amend this agreement in order to restore
such lost material benefit.
	 
	 	 
	ACCEPTANCE:

	 	This loan agreement is the full agreement under the terms
and conditions of the loan(s). It shall not be modified
except in writing. This agreement shall not become
effective until it has been signed and delivered in
duplicate by Borrower to COFINA, and it has been executed by
COFINA.

	 	 	 	 	 	 	 	 	 
	ACCEPTED AND AGREED TO:	 	 	 	By Direction of the loan committee the
24th day of February, 2003:
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	COFINA FINANCIAL
	By:
	 	 	 	 	 	 	 	 
	 

	 	 

President
	 	 
	 	By:
	 	
	By:

	 	 	 	 	 	 	 	Interim President
	 

	 	 

Secretary
	 	 	 	 	 	 
	 	 	 	 	 	 	Approved: 2/24/03

Dated:                                         , 2003.

2.10 — Security Requirements

	 	 	 
	General

	 	Cofina loans are secured by security interests and/or
real estate mortgages. Typically, fixed assets secure
term loans and current assets secure Operating loans.
However, as most lending relationships include short
and long-term loans, Cofina normally will
cross-collateralize all loans by filing proper real
estate mortgages and financing statements,

49

 

	 	 	 
	 

	 	executing
security agreements, and obtaining other forms of
security.
	 
	 	 
	Obtaining Security

	 	The loan officer is primarily responsible for
identifying, recommending, and communicating security
requirements for loan and customer relationships. This
includes:

	 	•	 	Evaluating security requirements as part
of
the credit analysis.
	 
	 	•	 	Identifying and recommending all security
requirements and advance limitations in the
credit report and loan agreement.
	 
	 	•	 	Obtaining legal descriptions and other
information necessary to prepare the loan

and security documents.

	 	 	 
	 

	 	For extraordinary security requirements, the
Legal Administrator will obtain help from outside
attorneys with the necessary expertise. Outside
attorneys must be approved by Loan Committee
before they can be utilized.
	 
	 	 
	 

	 	In those limited cases in which Cofina acts as a
co-lender, it will enter into a security sharing
agreement with the other lender and will ensure
sufficient security filings are in place to
protect the loan amount at risk through a
mortgage and/or other perfected security
agreements.
	 
	 	 
	 

	 	Once the loan officer has obtained the necessary
information, and Loan Committee has approved the
recommended loan action, the Legal Administrator
prepares the security documents and customer
instructions for completing security filings.

	 	 	 
	Advancing Funds

	 	The loan agreement must identify the requirements
for advancing funds to the customer. Generally,
all security requirements must be completed
before funds will be advanced under new loans.
	 
	 	 
	 

	 	Funds may be advanced prior to completion of new
security in the following exception:

	 	•	 	There are existing real estate mortgages
and
security interests in place to adequately

50

 

	 	 	 	collateralize the Cofina loans, before the
new security.

	 	 	 
	 

	 	Loan Committee must approve all advances
prohibited in the limitation on advances portion
of the loan agreement and requested prior to
completion of required security.
	 
	 	 
	 

	 	If exceptions to the limitations on advances are
requested, the loan officer shall determine the
amount of time required to complete the
incomplete security from the customer and the
attorney working on the security for the
customer. The loan officer should have strong
assurances that the security can be completed
within 90 days.
In no event shall exceptions be allowed when
there are doubts about Cofina’s ability to
properly secure the property.
	 
	 	 
	Security Releases

	 	When a customer requests a security release, the loan officer is responsible for
obtaining the necessary information, evaluating the request for its impact of the overall
security position, and recommending action on the customer request.
	 
	 	 
	 

	 	Loan Committee has sole authority to release
Cofina security.
	 
	 	 
	 

	 	Once approved, the matter is passed to the Legal
Administrator to process the release.

	 	 	 
	Security Check List

	 	Cofina requires a “Security Checklist” to be completed
by the Legal Administration prior to the new loan set
up. The security checklist identifies the dates
required loan documentation and legal documents have
been received in order to disburse the new loan(s).
	 
	 	 
	 

	 	The following numbered instructions correspond to the
sample Security Check List that follows in this
procedure.

	 	1.	 	Cofina enters the date of
loan approval.
	 
	 	2.	 	Cofina enters the new loan
number(s).
	 
	 	3.	 	Cofina enters the
cooperative name.
	 
	 	4.	 	Cofina enters the city &
state of cooperative.
	 
	 	5.	 	Cofina enters date the
completed application was received.
	 
	 	6.	 	Cofina enters date the
signed security agreement was received (if applicable).

51

 

	 	7.	 	Cofina enters date the
signed note(s) were received.
	 
	 	8.	 	Cofina enters date the
Guarantee Agreement was received (if applicable).
	 
	 	9.	 	Cofina enters date the
signed loan agreement was received.
	 
	 	10.	 	Cofina enters date the
financing statements (UCC) was filed with the proper state
office.
	 
	 	11.	 	Cofina enters date real
estate mortgage was completed (if applicable).
	 
	 	12.	 	Cofina enters date signed
assignments of investments were received (if applicable).
	 
	 	13.	 	Cofina enters other
requirements and date these requirements were completed (if
applicable).
	 
	 	14.	 	Cofina enters initials of
personnel checking items.
	 
	 	15.	 	Cofina enters check off
date.
	 
	 	16.	 	Signed by authorized
personnel.
	 
	 	17.	 	Title of authorized
personnel.

52

 

COFINA FINANCIAL

SECURITY CHECKLIST

	 	 	 	 	 
	Date of Loan Approval:

	 	1	 	 
	 
	 	 	 	 
	Loan Number(s):

	 	2	 	 
	 
	 	 	 	 
	Cooperative Name:

	 	3	 	 
	 
	 	 	 	 
	City & State:

	 	4	 	 

Before a loan is disbursed, Cofina must have the following:

(indicate “received or “not received”)

	 	 	 
	Application: 5

	 	Security Agreement: 6
	 
	 	 
	Signed Note(s): 7

	 	Guarantee Agreement: 8
	 
	 	 
	Signed Loan Agreement: 9

	 	UCC Filing: 10
	 
	 	 
	Real Estate Mortgage: 11
	 	 

	 	 	 	 	 	 	 
	Assignment of Stock: 12

	 	CHS:
	 	LOL:
	 	OTHER:

Other Requirements: 13

	 	 	 
	Checked off by: 14

	 	Check off Date: 15

	 	 	 	 
	Signature:  

	16	 	 
	 

	 	(Loan Officer is not authorized to sign off)	 
	 
	 	 	 
	Title:

	17 	 	 

(Security checklist is filled out when loan committee approves the loan package and is kept by the
Legal Administrator along with the application, credit report, copies of new notes, loan agreement,
etc.)

Page -1-

53

 

3.0 — Loan Administration

3.01 — Loan File Organization

	 	 	 
	General

	 	Cofina loan files not only serve the needs of its credit
staff and management team, but also the needs of many
third parties that have a lending or review role.
Providing efficient access to important information
depends on consistent loan file organization that is
documented, used, and maintained by all users.
	 
	 	 
	File Organization

	 	Cofina utilizes a three-part folder to consistently
preserve important documents.
	 
	 	 
	 

	 	The three parts are used as follows:
	 
	 	 
	 

	 	Section I
	 
	 

	 	1.    Field Visit Memos (left side)

	 
	 

	 	2.     Loan Agreement (right side)

	 
	 

	 	3.    Security Recap (right side)

	 
	 	 
	 

	 	Section II
	 
	 

	 	1.    Comparatives (left side)

	 
	 

	 	2.    Financial Planning Documents (left side)

	 
	 

	 	3.    Credit Reports (right side)

	 
	 	 
	 

	 	Section III
	 
	 

	 	1.    Correspondence (left side)

	 
	 

	 	2.    Patronage Distribution Notice (right side)

	 
	 	 
	 

	 	Information presented in these sections is arranged
in chronological order.

54

 

3.02 — Asset Classifications

	 	 	 
	General

	 	As of January 31, 1998, the Board adopted the
Uniform Classification System (UCS — utilized by
federal and state regulated financial
institutions). UCS was implemented during 1998.
The full UCS definitions are presented in the
following procedure.
	 
	 	 
	 

	 	Cofina’s loan officers are responsible for
analyzing and recommending a UCS Classification for
each customer obtaining a loan. The loan officer
is also responsible for updating the recommended
asset quality as changes take place in the
customer’s ability to repay the loan.
	 
	 	 
	Classification Factors

	 	The Credit Report provides the basis for
classifying loans. Documented credit analysis and
related memoranda should appropriately document
asset classification issues and recommendations.
(See Sec. 2.4).
	 
	 	 
	 

	 	The customer’s financial performance and projections
are considered in establishing asset classifications.
Asset classifications are to be consistent with loan
performance status designations.
	 
	 	 
	 

	 	Other considerations when classifying assets include:
	 
	 	 
	 

	 	•    Industry conditions and outlook at time of
classification.

	 
	 

	 	•    General economic status of the area.

	 
	 

	 	•    Adequacy of loan file information.

	 	 	 
	Non-adverse Classification Categories

	 	Non-adverse classification categories are “acceptable” and
“other assets especially mentioned” (special mention or OAEM). However, OAEM are considered
to be criticized assets.
	 
	 	 
	 

	 	Acceptable
	 
	 	 
	 

	 	Acceptable credit represents non-criticized assets of
the highest quality. They do not fit into any other
classification.
	 
	 	 
	 

	 	The following customer ratings within the Acceptable
range are utilized by Cofina and are

55

 

	 	 	 
	 

	 	presented in order, from the highest quality to the
lowest quality:
	 
	 	 
	 

	 	•     Customer Rating A1— These customers
are classified Acceptable under UCS, but
additionally meet all loan underwriting
standards generally at the low risk level. Loan
structure and documentation is appropriate. In
addition, Cofina has strong communication with
the customer, which provides the opportunity for
a long-term relationship. These customers would
be readily financed by other lending
institutions.

	 
	 	 
	 

	 	•     Customer Rating A2—These customers
are classified Acceptable under UCS, but
additionally meet all loan underwriting
standards at the low to moderate risk level
range. Loan structure and documentation is
acceptable. The customer relationship is
satisfactory, with open communication and
regular exchange of pertinent information.
These customers would be readily financed by
other lending institutions.

	 
	 	 
	 

	 	•     Customer Rating A3—These customers
are classified Acceptable under UCS, but may
have some loan underwriting standards at the
higher risk level. Loan structuring and
documentation may include additional covenants.
While the customer relationship is acceptable,
communication issues and/or loan structuring
issues may exist which add credit risk to the
relationship. Trends indicate that the customer
could deteriorate into the “other assets
especially mentioned” classification without
changes in operations and repayment capacity
over the next one to two years.

	 
	 	 
	 

	 	Other Assets Especially Mentioned
	 
	 	 
	 

	 	Assets in this category are currently protected, but
potentially weak. These assets constitute credit
risk, but not to the point of justifying a
classification of substandard. The credit risk may
be relatively minor, yet constitutes an unwarranted
risk in light of the circumstances surrounding a
specific asset. A special mention classification
should not be used as a compromise between adversely
classified and non-adversely classified.

56

 

	 	 	 
	 

	 	Special mention loans have potential weaknesses that
may, if not checked or corrected, weaken the loan or
inadequately protect the institution’s position at
some future date. Loans that might be detailed in
this category include those that have any deviations
from prudent lending practices, including those
subject to economic or market conditions that may, in
the future, affect the customer. An adverse trend in
the customer’s operations or an imbalanced position
in the balance sheet that has not reached a point
where liquidation is jeopardized may best be handled
by this classification. This category should not be
used to list loans that bear risks usually associated
with the particular type of financing. Any type of
loan, regardless of collateral, financial stability,
and responsibility of the customer, involves certain
risks. A secured loan has a certain risk, but to
criticize such a loan, it must be evident that the
risk is increasing beyond that at which the loan
originally would have been granted. A rapid increase
in assets or liabilities without the lender’s knowing
the cause, concentrations that lack proper credit
support, lack of appropriate collateral analysis or
required appraisals, or other similar matters could
lead the examiner to question the loan quality and
possibly classify the loan as special mention. Loans
in which actual, not potential, weaknesses are
evident and significant should be considered for more
serious classification.
	 
	 	 
	Adverse Classification Categories

	 	Adverse classification categories are “substandard”, “doubtful”
and “loss”.
	 
	 	 
	 

	 	Substandard

These assets are marginally protected by the
customer’s current sound worth and paying capacity or
the collateral pledged. Assets so classified must
have a well-defined weakness or weaknesses that
jeopardize debt liquidation. They are characterized
by the distinct possibility that the lender will
sustain
some loss if the deficiencies are not corrected.
Loss
potential, while existing in the aggregate amount of
substandard loan assets, does not have to exist in
individual loan assets.

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	 	Substandard assets are usually the largest category
of adversely classified loan assets, typically
representing the secured adverse assets or portions
of assets in a portfolio. Substandard assets may or
may not be placed in non-accrual status, depending on
the operation’s viability and the asset’s
performance. Very weak substandard assets sometimes
have specific reserves established which represent
holding costs or the difference between net
realizable value and collateral value for loss loan
accounting.
	 
	 	 
	 

	 	Characteristics of a Substandard asset include:
	 
	 	 
	 

	 	•    Not performing as agreed, but currently
adequately collateralized.

	 
	 	 
	 

	 	•    Pledged collateral marginally supports the
credit, but collateral value may be declining.

	 
	 	 
	 

	 	•    Operation marginally provides funds required
for debt service, and current position analysis
indicates a declining trend.

	 
	 	 
	 

	 	•    Nonviable operation, but asset is currently
adequately collateralized.

	 
	 	 
	 

	 	Credit weaknesses are usually described as being
either significant or serious. Because circumstances
vary widely, much of the difference between
significant and serious credit weakness depends on
the loan officer’s sound judgment. Significant
weaknesses have the potential to become serious and
thereby impact the loan’s performance. Serious
weakness exists because one credit factor is
inadequate, or several factors are weak and have
affected the loan and/or the customer’s ability to
perform in the future. Substandard assets have
serious weaknesses, whereas special mention assets
have potential weaknesses.
	 
	 	 
	 

	 	Doubtful

An asset classified doubtful has all the weaknesses
inherent in one classified substandard with the added
characteristic that the weaknesses make collection in
full, on the basis of currently existing facts,
condition, and values, highly questionable and
improbable. The possibility of a loss is extremely
high, but because of certain important and

58

 

	 	 	 
	 

	 	reasonable
specific pending factors that may work to the
advantage and strengthening of the asset, its
classification as an estimated loss is deferred until
its more exact status can be determined. Pending
factors include proposed merger, acquisition, or
liquidation procedures; capital injection; perfecting
liens on additional collateral; and refinancing
plans.
	 
	 	 
	 

	 	Doubtful assets generally are not performing as
agreed and/or involve a nonviable operation. High
probability of loss exists on these assets, but the
exact amount is not determinable. (Substandard
classification would not communicate the severity of
the situation.)
	 
	 	 
	 

	 	Underlying collateral pledged cannot be assigned
specific value because the asset has limited purpose,
salability and/or market, or is involved in pending
litigation with unknown outcome. Doubtful
classification occurs most frequently for
unrestructured non-accrual and non-accrual cash-flag
restructured assets. Poor credit administration does
not justify Doubtful classification.
	 
	 	 
	 

	 	Loss

Assets classified loss are considered uncollectible
when their continuance as bookable assets is not
warranted. This classification does not mean the
loan or asset has absolutely no recovery or salvage
value; quite to the contrary. Cofina will
aggressively pursue all available recourse in an
effort to ensure the full recovery of this asset’s
value. However, its has been determined that booking
such value is not consistent with Cofina’s approach
to conservatively report this particular asset’s
valuation. Losses should be taken in the period in
which they surface as uncollectible.
	 
	 	 
	 

	 	Charge-offs are recognized and booked when the loss
becomes known, not necessarily contemporaneous with
liquidation of the asset. When determining the
amount of loss, consider unpaid principal, accrual
interest, accounts receivable, customer stock and
amounts recoverable from secured assets.

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	Split Classifications

	 	Split classifications occur when portions of a loan asset can clearly be
separated into different
classification categories. On split-classified
loans, the remaining classes are designated as
“secondary class”. The secondary class is the
non-primary class which is a fixed dollar amount and
remains constant until the loan is reclassified.
Portions of loans, which are placed into secondary
classes are to be rounded to the nearest $1,000.
Quarterly review split-classified loans to determine
if amounts in each class are appropriate.
	 
	 	 
	 

	 	Only mention and adverse loans may be classified into
more than one class (split). Adverse loans may have a
portion classified acceptable only if the loan has a
valid guarantee, or collateral meets the cash or near
cash condition.
	 
	 	 
	Two or More Loans to One Customer

	 	When reviewing multiple loans to a customer, evaluate as one
loan unless pertinent facts support a reasonable determination that a particular loan
constitutes an independent credit risk. Document facts in the loan file. “Independent credit
risk” is an independent income stream (i.e., a guarantee or other source of earnings). The
independent income stream must be clearly identifiable, and may not be from entities that are
interrelated. Separate collateral positions are not to be considered independent credit
risks. This concept generally applies also to loans to one customer from separate lending
entities.
	 
	 	 
	 

	 	Loans to entities in which a customer has partial
interest, and another loan to that customer,
individually, will be considered as separate lines of
credit. Separately evaluate credit factors and
classify each loan on its own merits.
	 
	 	 
	Participation Loans

	 	Cofina may have continuing participation
agreements with several other lending
entities. Pursuant to these agreements,
the participating lender (the
“Participant”) will acquire a
participation in a negotiated portion of
loans approved by the participant.
Concentration limits will be based by
Cofina on its retained portion of a
participated loan.
	 
	 	 
	 

	 	Participation loans are classified based
on total credit extended by all lenders
involved. The loan

60

 

	 	 	 
	 

	 	amount is the
outstanding amount carried by Cofina as
of the review date.
	 
	 	 
	Loan Performance Classifications

	 	Appropriate loan performance
classifications assure proper accounting
placement of loans. Credit staff
recommends and Loan Committee approves
loan performance classifications based on
the risk codes and their respective GAAP
definitions as presented in the
non-performing loan procedure.

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3.03 — Portfolio Monitoring

	 	 	 
	Portfolio Quality Standards

	 	Risk can change after a loan is originated, however, the overall level
of higher risk, adversely classified loans are kept within the following standards established
by the Board.
	 
	 	 
	 

	 	•    Non-Adversely classified credit (Acceptable
and OAEM) shall represent no less than 85%
of the outstanding volume of accruing
loans in the COFINA portfolio.

	 
	 	 
	 

	 	•    Doubtful and Loss classified credit shall
represent no more than 5% of the outstanding
volume of accruing loans in the Cofina
portfolio.

	 
	 	 
	 

	 	Management shall report on the quality of the asset
portfolio on a quarterly basis to the Board of
Directors. In addition, if the portfolio falls out
of compliance with these standards, management will
develop a plan to bring asset quality into compliance
with these portfolio standards in a reasonable period
of time. Progress on the plan, including current
portfolio asset quality, will be reported to the
Board on a monthly basis.
	 
	 	 
	Annual Review

	 	On an annual basis, Cofina will be reviewed by its banks who
will do random checks of classification and servicing
compliance in accordance with the guidelines in this manual.
	 
	 	 
	 

	 	Management shall prepare a formal response to the bank
reviews for the Board of Directors.

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3.04 — Customer and Loans Servicing

	 	 	 
	General

	 	Cofina places a strong emphasis on communicating
with customers, Board, and management about
operating performance and financial position.
Critical analysis and positive reinforcement
benefit the customer and can have positive
effects on the loan relationship. Loan officer’s
objectives in customer servicing is to clearly
identify expectations, identify, and address
problems at their beginning, and counsel
customers on solutions before problems affect the
quality of the loan relationship.
	 
	 	 
	Customer Servicing Tools

	 	Cofina utilizes the following tools in its
customer servicing, to increase communications,
and to document expectations:
	 
	 	 
	 

	 	•    A thorough understanding of customer
operations, financial position, and financing
needs through analysis of customers – supplied
financial information. Customers are required to
submit monthly financial statements, including
aging of accounts receivable, within 35 days
following the close of the month. Non-compliance
is a violation of the loan agreement and must be
reported to the loan committee. These reports
are compared to the entities financial
projections for the current year and to the
previous year’s performance.

	 
	 	 
	 

	 	•    Regular discussions with customer, Board, and
management about historical operating,
financial, and loan performance, including how
Cofina evaluates operations and financial
strength. Each customer should be visited at
least once every twelve months.

	 
	 	 
	 

	 	•    Other customer related contacts for audit
meetings, annual meetings, and
discussions with third parties (auditors, joint
venture partners, other lenders, etc.) with
important relationships with the
customer.

	 
	 	 
	 

	 	•    Contemporaneous records of telephone
conversations and customer meetings.

63

 

	 	 	 
	 

	 	•    Follow-up letters to customers when meetings
or discussions have an important impact on
expectations for loan performance. These letters
should highlight important points of the customer
discussions and identify customer and Cofina
commitments to action.

	 
	 	 
	 

	 	•    Written Loan Service Plans for loans that are
large or with operating or financial problems
which could translate into loan performance
problems. Typically, Loan Service Plans are
prepared in conjunction with loan renewals and
are mandated for those accounts UCS rated M4 or
weaker. (See also Sec 3.05). An example of a
Loan Service Plan is attached to this procedure.

	 
	 	 
	 

	 	      Cofina views OAEM classified loans as
transitional. This classification may come about
from an unusual event such as a merger or
consolidation, operational setback, or external
event. The Loan Servicing Plan should be
designed to restore the loan to fully acceptable
classification within one year. Provided such
plan is not achieved, the loan may become an
adversely classified loan.

	 
	 	 
	 

	 	•    Tailored Loan Agreements which adequately
covenant for customer weakness to maintain sound
loan administration and which document customer
identified actions to resolve operating,
financial, or loan performance problems
according to a mutually agreeable timetable.

	 
	 	 
	 

	 	When customer-servicing efforts can no longer
maintain credit quality or the customer’s long-run
viability deteriorates, Cofina must explore its loan
servicing options.
	 
	 	 
	 

	 	Cofina’s objective is to initiate loan servicing
efforts before loan repayment is in jeopardy. When
loan repayment is doubtful, Cofina’s objective is to
maximize its collections.

64

 

	 	 	 
	Loan Servicing Alternatives

	 	Loan officers must report to the Loan Committee details of loans that
no longer justify an Acceptable,
non-criticized asset classification as soon as such
information becomes available.
	 
	 	 
	 

	 	The Loan Committee must approve the loan servicing
action to be taken.
	 
	 	 
	 

	 	The Loan Committee will also determine the date the
loan officer must report back to update it on the
progress of the loan servicing action.
	 
	 	 
	 

	 	Cofina loan servicing alternatives may include the
following:
	 
	 	 
	 

	 	•    Customer Actions — Cofina may counsel
customers to seek other financing or structural
options. Options may include a partial or
complete refinancing with another financial
institution or a merger, sale, or liquidation of
a portion or all of its assets (businesses) with
another cooperative, LLC, or private enterprise.
Subsequent loan actions may be predicated on
customer commitments and actions to implement
such agreed upon strategies, offer additional
collateral, or agree to other terms and
conditions as deemed appropriate.

	 
	 	 
	 

	 	•    Loan Extensions — Any extension represents a
credit decision that should be supported by
existing or new collateral and a clearly
identified source of repayment that Cofina
controls through existing or new security
filings.

	 
	 	 
	 

	 	•    Loan Restructuring — Cofina may choose to
restructure loans with customers to convert
Operating debt to term or lengthen
maturity, provided the restructured loans remain
within the customer’s repayment capacity and
the loans remain well secured. Cofina typically
requires customer actions, which will improve
not only the customer’s operating and financial
position, but will also maintain or improve
asset quality.

	 
	 	 
	 

	 	•    Collection – Cofina will pursue legal
collection efforts when appropriate to enforce
customer performance on loan agreements or to
prevent losses on loans. (See Sec 3.05).

65

 

	 	 	 
	Documentation

	 	Each loan servicing action should be documented in a report or memorandum which

explains the customer’s financial position, the credit situation,
past customer servicing activities, and the
alternatives explored prior to selecting the
recommended course of action. The length and detail
of the report should correspond to the severity of
the recommended loan servicing action and the
complexity of the customer relationship. The
document should be maintained in the Credit File.

66

 

Cofina Financial

Loan Service Plan

	 	 	 	 	 	 	 	 	 	 	 
	Account:

	 	 	 	 	 	UCS Rating:
	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Loans ~

	 	Operating Amt
	 	 
	 	Term Amt:
	 	 	 	 
	 

	 	 	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	Operating Balance
	 	 
	 	Term Balance:
	 	 	 	 
	 

	 	 	 	 
	 	 	 	 	 	 
	Attributed Loans

	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Amount in Participation:

	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	General Trend

	 	 
 

	 	Improving
	 	 
 

	 	Static
	 	 
 

	 	Declining
	 	 
	Relationship Goal

	 	 
 

	 	Continuing
	 	 
 

	 	Limited
	 	 
 

	 	Collection
	 	 

Servicing Objective(s) and Strategy(ies)

Overall Objective:

Internal Strategy:

External Strategies with Customer Involvement/Commitment:

67

 

Expected Outcome(s):

Approvals:

	 	 	 	 	 	 	 	 	 
	Loan Officer:

	 	 
 

	 	Date:
	 	 
 

	 	 
	 
	Chief Credit Officer:

	 	 

	 	Date:
	 	 
	 	 
	 
	Credit and Loan Participation Manager:

	 	 
 
	 	Date:
	 	 
 
	 	 

Monthly Progress and Result:

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3.05
— Collection Procedures

	General 	 	 	In its simplest form, Cofina works toward the collection of its outstanding receivables on
a regular basis. The success of all lending institutions can be summarized in its ability to
extend funding to patrons and, in turn, collect repayments of such funding on a scheduled and
profitable basis.
	 
	 	 	 	There are those occasions in which such collection
efforts demand a “termination” date; a date in which
a specific patron’s outstanding financial obligations
to Cofina must be satisfied.
	 
	 	 	 	The termination process is driven by Cofina’s
priority to ensure the timely collection of all
monies owed. If during normal asset quality reviews,
Cofina determines the collection of an outstanding
receivable may be in question, a
“Termination/Collection” process may be initiated.
	 
	 	 	 	While the steps are progressive in nature, the
termination process is sensitive to, among other
factors, the degree and perceived timeline of
expected asset deterioration, the asset’s level of
cooperation, and the asset’s ability to secure
alternative funding to satisfy its obligations to
Cofina.
	 
	 	 	 	As such, the collection process may or may not
involve all the steps outlined below.

	 	•	 	Loan Service Plan
	 
	 	•	 	Collateral Schedule
	 
	 	•	 	Custodial Agreement(1) –
Attached
	 
	 	•	 	Cash Collection and Distribution
Request(1) – Attached
	 
	 	•	 	Liquidation Notification(1) –
Attached

	 	 	 	Guidelines
	 
	 	 	 	Loan Service Plan

The attached Appendix is a template. As such, conditions may demand
modification to its format and content. Such changes will be initiated by the
assigned Loan Office and reviewed by members of Loan Committee and, when
applicable, legal counsel.

69

 

	 	•	 	Loan Service Plans are required for all
accounts UCS rated M4 or weaker. They must be
prepared immediately following receipt of
information indicating deterioration in the
customer’s financial position that would result
in a downgrading of its UCS rating. Loan
Service Plans are also required when a time
specific loan covenant is found to have been
violated.
	 
	 	•	 	A Loan Service Plan is authored by the loan
officer and is designed to formally outline a
“plan of action” to address such deficiencies.
It is then presented to the Loan Committee for
its review and approval.
	 
	 	•	 	Dependant upon the depth of perceived
deterioration, any of the following actions may
be outlined in the Loan Service Plan.

	 	1)	 	Continued internal monitoring of the
asset’s performance
	 
	 	2)	 	An internal review and update of all
security filings, to include but not
limited to, a listing and investigation
of all PMSI filings, mortgages and
guarantees.
	 
	 	3)	 	The scheduling of a meeting with the
cooperative’s board and management to
discuss the assets deterioration. and
give formal notice of corrective action
to be taken.

	 	§	 	Loan Covenant violations are
to be documented and possible
consequences of such violations
are to be shared with the asset’s
leadership team.

	 	4)	 	The scheduling of a visit to the
cooperative’s location(s) to review and
document the condition of all Cofina
secured assets.
	 
	 	5)	 	Requiring a Business Plan update,
outlining both activities and timelines
in which actions will be taken to correct
financial performance

70

 

	 	§	 	This may include the
liquidation of non-performing
assets in which all cash received
will be forwarded to Cofina to
pay down the debt obligation(s)
owed to Cofina.

	 	6)	 	Establish and communicate a timeline in
which the cooperative will secure an
alternative source of funding albeit a
new lender, a merger partner or full
liquidation.

	 	§	 	Instruct both management and
the board members that a “Letter
of Intent” will be required of
the alternative source of
funding, addressed to the
borrower, outlining the terms of
the new funding and timeframes in
which such financial arrangements
will be executed. Cofina will
outline a timeframe in which such
a notice must be completed and
shared with Cofina.

	 	7)	 	Increased monthly reporting requirements
which may include a Collateral Schedule –
defined below

	 	8)	 	The execution of a Custodianship
agreement – defined below.

	 	9)	 	Outline the execution and implementation
of a Cash Collection and Distribution
Request process – discussed below

	 	10)	 	The Liquidation of the cooperative –
also discussed below.

	 	 	 	Collateral Schedule

	 	•	 	While Cofina completes an internal Collateral
Schedule during the loan review process, the
fluid nature of current assets may require
increased reporting during periods of increased
financial stress.

71

 

	 	•	 	The original Collateral Schedule outlines
summarized asset and liability totals. Such
totals are then discounted and utilized to
identify potential Cofina exposure.
	 
	 	•	 	Subsequent Collateral Schedule(s) call for a
more detailed reporting of Current Assets and
Liabilities. From this information, Cofina is
able to better judge the status of its UCC-1
secured collateral.
	 
	 	•	 	The timeliness of such additional reporting
is directly dependent upon the severity of
perceived asset deterioration, as well as, the
seasonal and cyclical nature of the asset’s
business structure. For example, a stressed
account with a heavy agronomy-related inventory
base would require close monitoring during both
the fall and spring agronomy seasons in order to
properly monitor changes in both inventory and
account receivable issues.
	 
	 	•	 	Itemized and discounted assets are compared
to the cooperative’s current obligations to
determine what excess value, Collateral Cushion,
is available to minimize Cofina’s risk exposure.
	 
	 	•	 	It should be noted that in most cases, Cofina
has a superior collateral position when compared
to other Obligors. The intent of including
subordinated obligations is to better understand
working capital needs required for continued
operations.

	 	 	 	Custodianship Agreement
	 
	 	•	 	A Custodianship Agreement is designed to ensure
Cofina has an agent in place to both monitor and
facilitate the day-to-day financial activities as
they directly and indirectly effect Cofina’s
security position. This agent monitors all asset
transfers and communicates such transfers to Cofina.
	 
	 	•	 	One tool available to the assigned Custodian is a
weekly form called the Cash Collection and
Distribution Request worksheet. This is to be
completed by the Custodian prior to any cash
distributions. The intent of the worksheet is to

72

 

	 	 	 	outline what cash inputs (sources of cash) and what
cash outputs (cash uses) are expected in a given time
frame.
	 
	 	•	 	This worksheet is submitted prior to any cash
distributions and may be complemented by a local
Cofina signatory bank account in which all cash is
deposited, held and, if approved by Cofina,
redistributed – the Cofina approved Custodian acting
as signatory agent in managing this bank account.

	 	 	 	Full Liquidation

	 	•	 	Should the loan officer, with the approval of the
Loan Committee, determine it is both feasible and
prudent to liquidate the cooperative, a Liquidation
Notice will be forwarded to members of the
cooperative’s leadership – to include management and
the cooperative’s board of directors.
	 
	 	•	 	Cofina has not found it necessary to force the
liquidation of any cooperatives. However, Cofina
has reviewed this process with legal counsel and is
prepared, in a “worst case” scenario, to execute
such a process in order to properly protect Cofina’s
business position. 

	 	 	 	Throughout this process, the assigned loan officer, along
with other members of the Cofina team, may be called upon
to attend Board Meetings, Patron Meetings and other such
business meetings in which Cofina’s interests are
concerned. All such meetings are to be properly recorded
in the Asset’s Service File and approved by members of
the Loan Committee.
	 
	 	 	 	It should be noted, the assigned loan officer will be
tasked with ensuring open lines of communication are
maintained between the loan officer, members of loan
committee and designated members of the cooperative’s
leadership team. All such communications will also be
recorded in the Assets’ Service File for reference.
	 
	 	 	 	If at any point in time the asset’s performance returns
to what may be termed by Loan Committee a satisfactory
level, the Collection Process may be suspended or
terminated

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Custodianship Agreement

     THIS AGREEMENT, made and executed this                      day of                     , by and between Name of
Cooperative, (Association) a cooperative association of and existing under the laws of the state of
XXXXXX;                                          (Collateral Custodian) and Cofina Financial, St. Paul, Minnesota,
(COFINA), a corporation organized under the laws of the United States.

WITNESSETH:

     WHEREAS, COFINA has loaned a sum of money to the Association and while it may make additional
loans to the Association, COFINA has communicated its concerns about the Association’s viability to
the Board of Directors and COFINA desires to bring its lending relationship with the Association to
an orderly and mutually agreeable conclusion; and,

     WHEREAS, COFINA desires the ability to more closely monitor the status of the collateral
pledged as loan security; and,

     WHEREAS, The Association is agreeable to granting this additional monitoring by COFINA; and,

     WHEREAS, It is the intention of the parties that in consideration of said loans, the
Association shall make reports to COFINA on the Association’s assets and collateral in the manner
and form directed by COFINA, and authorize the establishment of a custodian deposit account; and,

     WHEREAS, It appears that the aforementioned can best be effected by the employment of a
collateral custodian.

     NOW THEREFORE, In consideration of the premises, the mutual promises herein contained, and
loans made to the Association, which loans enhance the financial position of the Association, it is
mutually agreed by and among the parties hereto as follows:

	 	1.	 	COFINA does hereby appoint, and the Association does hereby consent to the
appointment of                                         , as Collateral Custodian to have and to
exercise the rights, powers, duties and authority contained in this agreement, and the
Collateral Custodian does hereby accept said appointment and agrees to perform
faithfully the obligations and duties under this agreement.
	 
	 	2.	 	As deemed advisable and necessary by COFINA or as requested by the Association,
the Association does hereby consent to the subsequent appointment of Deputy Collateral
Custodian(s) are herein collectively referred to as “Custodian”.

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

75

 

	 	 	 	Association’s account; (2) allow the funds to remain in said account for a reasonable
period of time, and advise the Custodian as to the transferring of funds into the
Association’s account; or, (3) apply the funds to the Association’s loan with COFINA.
In the event alternative (1) or (2) is in effect, the parties agree that the
funds will at all times be considered owned by the Association, subject to the security
interests of COFINA

     IN WITNESS WHEREOF, The Custodian has executed these presents and the corporate parties hereto
have caused these presents to be executed by their duly authorized officers as of the date first
above written.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	BY:

	 	 
	 	BY:
	 	 
	 	BY:
	 	 
	 	 
	 

	 	 

	 	 

	 	 	 	 

	 	 
	Cofina Financial, LLC	 	 	 	 	 	Board Pres. – Typed Name	 	 
	 
	Loan Officer .	 	Its Custodian	 	 	 	Cooperative Name	 	 
	 

	 	 	 	 	 	 

	 	 	 	 	 	 

76

 

Source and Use of Funds

Weekly Operating Budget

	 	 	 	 	 	 	 	 	 
	Week Ending:                                         
	 	 	 	 	 	 	 	 
	 
	Sources
	 	 	 	 	 	 	 	 
	Normal Cash Sales
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Normal Accounts Receivable Collections
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Special Sources
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	~ Describe if Material
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Total Sources
	 	 	 	 	 	$	0.00	 
	 
	 	 	 	 	 	 	 	 
	Uses
	 	 	 	 	 	 	 	 
	Payroll
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Taxes
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Utilites
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Insurance
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Trade Payables
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Agronomy Products
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Petroleum
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	C-Store Products
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Other
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Other Uses
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	~ Describe if Material
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Total Uses
	 	 	 	 	 	$	0.00	 
	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Cash Increase/(Decrease)
	 	 	 	 	 	$	0.00	 
	 
	 	 	 	 	 	 	 	 
	Present Cash Balance
	 	 	 	 	 	 	                                                                               	 
	 
	 	 	 	 	 	 	 
	Date:                                           
	 	 	 	 	 	 	 	 

77

 

LIQUIDATION AGREEMENT

          This Agreement is entered into as of this       day of August, 2001 by and between COFINA
FINANCIAL, located in St. Paul, Minnesota, a Minnesota cooperative association, (“COFINA”), and
(Legal Name of Cooperative)., located in (City), (Sate), a (State) cooperative association
(“City”).

          A. (City) is indebted to COFINA pursuant to a Promissory Note dated                      in the
original principal amount of                      (the “Term Loan Note”), a Promissory Note dated
                                         in the original principal amount of                      (the “Seasonal Loan
Note”) and a Loan Agreement dated
                     (the “Loan Agreement,” and together with the Term
Loan Note and the Seasonal Loan Note, the “Credit Documents”). All advances under the Credit
Documents, together with daily interest, accruals, fees, costs and expenses are hereinafter
collectively referred to as the “Indebtedness.”

          B. As of                                         , the total principal Indebtedness was               
      , plus unpaid
and accrued interest, and other charges and fees which are due and owing.

          C. The Indebtedness is secured by, among other things, a perfected security interest in all
real estate, inventory, accounts, equipment, investment property and general intangibles of (City)
(the “Collateral”) pursuant to various mortgages, security agreements, assignments and other
documents in favor of COFINA (the “Security Documents”).

          D. (City) is in default under the Credit Documents and COFINA has demanded immediate payment
of the Indebtedness.

          E. (City) has acknowledged its financial difficulties and has represented to COFINA its desire
to liquidate its assets. COFINA has consented to a winding down of (City) business and orderly
liquidation on the terms and conditions set forth below.

          NOW, THEREFORE, in consideration of the foregoing and for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by each party, the parties agree as
follows:

          1. (City) acknowledges that the Indebtedness is due and owing, without defense, offset or
counterclaim, and is secured by the Collateral.

          2. (City) may continue its business operations to the extent reasonably necessary to liquidate
its assets and wind down its affairs in a timely manner until                      provided that it
complies in all material respects with a Budget to be received and accepted by COFINA on or before
                     (the “Budget”). Notwithstanding the preceding sentence, (City) shall liquidate
its assets as promptly as possible, and shall collect accounts receivable owed by its members in a
prompt manner. When selling goods to members carrying a past due balance, (City) will sell on COD
terms only. No Collateral with a market value greater than $5,000 may be sold, other than in the
ordinary course of business, by (City) without the prior written approval of COFINA. (City) shall
pay the Indebtedness in full on or before                                         .

          3. On or before                                         , (City) will provide COFINA with copies of fully executed
and effective purchase agreements satisfactory in all respects to COFINA in its discretion, whereby
a purchaser has agreed to purchase (a)                                         ’s assets described generally as the
convenience store and related inventory for a cash amount not less than $                    , to be fully
paid not later than                      and (b) (City)’s assets generally described as its agricultural
service operations (including bulk fuel, LP fuel, feed, and (City)’s interests in
                                        ) for a cash amount not less than $                    , to be fully paid not later than
                    .

          4. (City) shall establish an account at a bank of COFINA’s choice in the name of COFINA and
for the benefit of COFINA (the “Collateral Account”). All proceeds from (City)’s sale of assets
and collection of accounts shall be deposited by (City) into the Collateral Account on a daily
basis.

          5. (City) acknowledges that it currently has cash on hand of $                    . (City) agrees to
deposit all cash on hand in the Collateral Account immediately.

78

 

          6. (City) shall not incur any expenses except for those which are both (i) set forth in the
Budget and (ii) reasonably necessary to wind down its business (the “Necessary Expenses”). The
Budget shall set
forth the Necessary Expenses which (City) expects to incur on a weekly basis. Provided that no
default has occurred hereunder, on the first day of each week COFINA may in its discretion release
from the Collateral Account to (City) funds in the amount necessary to pay the Necessary Expenses
for the week, as set forth in the Budget, which funds shall be used by (City) for payment of the
Necessary Expenses.

          7. Any amounts deposited into the Collateral Account may be applied to the Indebtedness at any
time in COFINA’s discretion.

          8. (City) agrees to permit COFINA, and its respective officers, employees and agents, to have
full access to (City)’s books, records and properties for the purpose of verifying (City)’s
compliance with the terms of the Credit Documents and this Agreement.

          9. All moneys received by COFINA on account of the Indebtedness from (City) shall be applied
to the Indebtedness in a manner at COFINA’s sole discretion.

          10. (City) agrees to execute and deliver such agreements and other documents and to take such
other actions as COFINA may in its discretion require to order to assure that COFINA holds a first
priority perfected security interest in the shares of stock in                                          owned by
(City), and to ensure that all dividends or distributions on such stock are made directly to
COFINA.

          11. Except as expressly modified by this Agreement, all provisions of the Credit Documents and
the Security Documents, and all other documents in favor of COFINA remain in full force and effect.
COFINA reserves its rights at any time to exercise all of its rights and remedies under the Credit
Documents and the Security Documents and all other security agreements, documents and instruments
given to COFINA to secure the Indebtedness, whether or not (City) has complied with its covenants
and obligations under this Agreement, the Credit Documents or the Security Documents. (City)
shall, upon its default hereunder (which defaults shall include, without limitation, (City)’s
failure to compete liquidation of its assets by the date set forth in the first sentence of
paragraph 2, above), (a) deliver all of the Collateral to COFINA, (b) permit COFINA to use (City)’s
premises for the purposes of the enforcement and foreclosure of COFINA’s security interest in the
Collateral and otherwise cooperate in COFINA’s efforts for foreclosure its security interest in the
Collateral, (c) upon request of COFINA, provide COFINA with deeds in lieu of foreclosure or similar
or related documents appropriate to permit COFINA to assume or transfer ownership of the Collateral
without resort to a foreclosure process (d) perform such other actions as COFINA may in its
discretion request in order to facilitate COFINA’s exercise of remedies with respect to the
Collateral.

          12. Contemporaneously with the execution hereof, (City) has delivered to COFINA financial
statements through                                         , including a full aging of accounts receivable with addresses
and account numbers and a full itemized listing of all accounts payable with names and addresses of
creditors. During the term of this Liquidation Agreement, (City) shall also deliver the following
documents to COFINA: a daily inventory report, a daily sales report and a daily expenses report, a
weekly accounts receivable listing and a weekly accounts payable listing, all to be signed by
(City) and delivered by 10:00 a.m. on the next business day following the day of such report or
week of such listing. (City) agrees to execute and deliver such other and further documents or
reports as COFINA may request from (City) to execute, perfect, evidence or otherwise implement the
agreements set forth in this Agreement. Without limiting the generality of the foregoing, (City)
agrees to prepare and deliver to COFINA collateral reports and such other financial and operating
reports as COFINA may from time to time request.

          13. In consideration of the execution of this Agreement, (City), on behalf of itself, its
officers, agents, insurers, successors and assigns, releases, acquits and forever discharges
COFINA, and its respective officers, agents, insurers, successors and assigns, of and from any and
all manner of action or actions, suits, claims, damages, judgments, levies and executions, whether
known or unknown, liquidated or unliquidated, fixed, contingent, direct or indirect, which (City)
ever had, has, or may have or claim to have against COFINA or its respective officers, agents,
insurers, successors and assigns, for, upon or by reason of any matter, act or thing prior to the
date of execution of this Agreement.

          14. No modifications or amendments to this Agreement may be made except in a writing signed by
all parties hereto.

79

 

          15. This Agreement may be executed in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one instrument. Facsimiles or other
photocopies of executed signature pages to this Agreement shall be considered originals.

          16. This Agreement is made and entered into in the State of Minnesota, and the laws of
Minnesota shall govern its enforcement and performance.

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.

	 	 	 	 	 
	 	COFINA FINANCIAL, LLC

 	 
	 	By  	 	 

					
	 	Its   	 	 

	 	 	 	 	 
	 	Cooperative Name, City, State

 	 
	 	By  	 	 

					
	 	Its   	 	 

	 	 	 
	The undersigned hereby agrees,
	 	 
	in his personal capacity, that
	 	 
	 
	 

will make the deposits required

	 	 
	by paragraphs 4 and 5 of the
	 	 
	foregoing agreement.
	 	 

80

 

3.06 — Customer Concentration

	General 	 	 	Cofina sets limits on loan concentrations
with individual credit risks. This
concentration is measured against the
existing risk funds. Risk Funds are defined
as the capital plus allowance for loan loss.
	 
	Guidelines 	 	 	Cofina will limit its loan exposure to no
more than 25% of its Risk Funds in any single
credit exposure. Such exposure will include
all commitments to that customer and may
include guarantees from that customer to
other customers or commitments to another
customer in which the first customer owns 50%
or more of the second customer.
	 
	 	 	 	Cofina will limit its loan exposure, further,
as a customer migrates toward a criticized
asset with no more than 15% of its Risk Funds
in a single credit exposure classified as
Other Assets Especially Mentioned or
Substandard.
	 
	 	 	 	The maximum loan amounts Cofina will
originate before participation is required
are as follows:

	 	 	 	 	 	 	 
	Customer
Rating A1:
	 	 	 	$	10,000,000	 
	Customer
Rating A2:
	 	 	 	$	8,000,000	 
	Customer Rating A3
or below:
	 	 	 	$	6,000,000	 

	 	 	 	Cofina will secure participation relationships to
carry the balance of loans in excess of these
amounts. Such participation agreements will be put
in place no later than 90-days beyond the loan
origination date. Cofina will serve as the servicer
of the loans and maintain the relationship with that
customer.
	 
	 	 	 	Loans in Minnesota and Wisconsin will be limited to
no more than 45% of loan volume. All other states
will be limited to 35% of total loan volume.
New loan relationships to be established outside of
Cofina’s current trade territory will be limited to
no more than 15% of Risk Funds during the first two
years of Cofina’s operation under the SPC agreement
and no more than 35% of Risk Funds thereafter.

81

 

	 	 	 	All new loan relationships will be limited to
accounts with evidence of exceptional performance.

3.07 — Reserve Guidelines

	General 	 	 	Cofina uses UCS classifications, Customer Ratings, and the
following general reserve guidelines to arrive at a proper
valuation for individual assets in the portfolio and the
overall portfolio value.
	 
	 	 	 	This procedure identifies the reserve guidelines for each
UCS asset classification category.
	 
	Loss Reserve Guidelines 	 	 	Cofina recognizes the importance of building adequate loss
reserves. At the same time, accurately estimating future
losses is imprecise. Therefore, a 2% loss reserve is
applied to the outstanding balance of each of the
following asset classifications to determine a target
general reserve for losses:

	 	•	 	Acceptable assets
	 
	 	•	 	Other assets especially mentioned
	 
	 	•	 	Substandard assets
	 
	 	•	 	Doubtful assets

	 	 	 	For all Obligors classified as “Loss”, the required
reserve is 20% of the outstanding Principal Balance
or the actual expected loss amount, whichever is
greater.
	 
	 	 	 	Management will periodically evaluate the adequacy of
the general and specific reserves and recommend
changes in addition to reserves, as necessary.

82

 

4.00 — Legal Documentation

4.01 — Legal Documentation Overview

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

83

 

4.02
— Real Estate Mortgage Documentation

	General 	 	 	Cofina uses a standard real estate mortgage for
securing real property offered by customers as
collateral for Cofina loans. Even though collateral
through acquisition of real estate is seldom
necessary in Cofina relationships with customers, it
is vitally important that this secondary source of
repayment is perfected in a manor that protects the
interests of Cofina and its shareholders.
	 
	 	 	 	Although the real estate mortgage is drafted by
Cofina staff, the customer is responsible for hiring
local counsel to update abstracts and issue an
attorney’s opinion or obtain title insurance to
complete the mortgage filings.
	 
	Mortgage Instructions 	 	 	The following numbered instructions correspond to
the sample Real Estate Mortgage that follows in this
procedure.

	 	1.	 	The customer or mortgagor enters
the date the mortgage is
made and executed.
	 
	 	2.	 	Cofina enters the accurate legal
name of the customer/
mortgagor.
	 
	 	3.	 	Cofina enters the state location
of the
customer/mortgagor.
	 
	 	4.	 	Cofina enters the post office
address of the customer/
mortgagor.
	 
	 	5.	 	Cofina enters the amount of the
real estate mortgage
based on the amount specified in the loan agreement as directed
by the Loan Committee.
	 
	 	6.	 	Cofina enters the County and
State location of the
mortgaged property.
	 
	 	7.	 	Cofina enters the full legal
description of the mortgaged property.
	 
	 	8.	 	Cofina enters the amount, and
types of loan(s) information as specified in the loan agreement.
	 
	 	9.	 	Cofina enters the name of the
customer/mortgagor.
	 
	 	10.	 	The customer/mortgagor executes
the real estate mortgage by having two authorized officers sign
the mortgage and their signatures notarized.
	 
	 	11.	 	Cofina enters the
customer/mortgagor name and state location.
	 
	 	12.	 	The county agent or other
official responsible for mortgage recordings certifies that the
mortgage has been properly recorded in the county office.

84

 

REAL ESTATE MORTGAGE

     THIS MORTGAGE, made and executed this [ 1 ], by [ 2 Borrower] a cooperative corporation,
organized under the laws of the State of [ 3 ], Mortgagor, whose post office address is [ 4 ], to
COFINA FINANCIAL, a Minnesota corporation, whose post office address is Post Office Box 64089, St.
Paul, Minnesota 55164-0089. For the purpose of securing payment of an indebtedness from the
Mortgagor to the Mortgagee in the principal sum of [ 5 ] Dollars [$ ] and interest thereon,
and any future advances or readvances made by Mortgagee to the Mortgagor nor exceeding the
aggregate amount outstanding at any one time the said principal sum, and interest thereof,
Mortgagor does hereby grant, bargain, sell, and convey, to the Mortgagee, its successors and
assigns, forever, all that certain real estate located in the County of [.6.] State of [..6..]
described as follows:

7 [ Legal Description or attached Exhibit]

     TO HAVE AND TO HOLD THE DESCRIBED REAL ESTATE, together with all the tenements, hereditments
and appurtenances belonging or in anyway pertaining to the same, to the Mortgagee, its successors
and assigns forever. And the Mortgagor covenants with the Mortgagee, its successors and assigns,
as follows: That it is lawfully seized of the described premises; that it has good right to convey
the same; that the same are free from all encumbrances; that the Mortgagee, its successors and
assigns, shall quietly enjoy and possess the same; and that the Mortgagor will WARRANT and DEFEND
the title to the same against all lawful claims.

     THIS MORTGAGE is given to secure the indebtedness evidenced by a note or notes made by the
Mortgagor to the Mortgagee, described as follows:

	 	 	 
	Amount	 	Interest Rate
	 $[ 8 ] — Operating

	 	Variable Rates of Interest as the Mortgagee’s Board of Directors shall from time to time prescribe.
	 $[ 8 ] — Term

	 

With interest payable monthly on the day of each and every month, as Mortgagee shall specify, of
each year, and to secure all renewals and extensions of the described notes.

     THIS MORTGAGE is further given to secure such advances and readvances as the Mortgagee may
make to the Mortgagor from time to time, it being agreed that if partial payments shall be made on
the indebtedness at any time readvances may be made by the Mortgagee to the Mortgagor, and that all
advances, readvances, and loans shall be secured by this mortgage within the limits of the
principal sum.

     FUTURE advances or readvances shall be evidenced by a note or notes, made by the Mortgagor to
the Mortgagee. This mortgage is given to secure all future notes, with interest thereon, as well
as the note or notes now existing.

     THIS MORTGAGOR FURTHER COVENANTS AND AGREES:

     1. That the indebtedness evidenced by the note or notes described herein, and any indebtedness
which may be evidenced by any note or notes in renewal thereof, of which may result from further
and future advances may be made by the Mortgagee to the Mortgagor and secured by this mortgage as
herein provided, shall be repaid to the Mortgagee in accordance with the terms of the note or notes
evidencing such indebtedness, and the Mortgagor hereby agrees that nothing in any agreement between
the Mortgagor and Mortgagee shall be construed as limited, modifying, or restricting the right of
the Mortgagee to demand payment of said indebtedness in accordance with the terms of the note or
notes evidencing the same.

     2. That it will pay both principal and interest to the Mortgagee at its office in the City of
Inver Grove Heights, Minnesota, in lawful money of the United States of America, according to the
terms and conditions of the note or notes secured by this Mortgage, at the time and in the manner
above specified, together with all costs and expenses of collection, if any there shall be.

     3. That all checks or drafts, delivered to the Mortgagee for the purpose of paying any sum or
sums secured hereby will be paid upon presentment, and that all agencies used in making collections
thereof, including those agencies transmitting the proceeds of such items to the Mortgagee, shall
be considered agents of the Mortgagor or anyone by or on behalf of whom payment is sought to be
made.

     4. That no extension, assignment, or transfer of the above-described note or notes shall be
considered as a discharge hereof or waiver of any default hereunder. No delay of the Mortgagee in

85

 

asserting any right accruing by virtue of any default in any condition hereof shall be construed as
a waiver of such default, nor shall any waiver or any default in any condition hereof be construed
as a waiver of such condition or of any other term or condition hereof or right hereunder.

     5. That it will maintain its corporate existence and operate its business as a cooperative
association at all times that indebtedness secured by this mortgage shall remain unpaid.

     6. That it will insure and keep insured buildings and other improvements now located on, or
which may hereinafter be located on, the premises covered by this mortgage, against loss and damage
by fire and windstorm, and such other risks as from time to time may be required by the Mortgagee,
and in forms and amounts and with companies satisfactory to the Mortgagee, with clause executed and
attached making loss, if any, payable to the Mortgagee as its interest may appear in said property
at the time of loss; each policy evidencing such insurance to be delivered to the Mortgagee. The
Mortgagee may apply loss funds received to any indebtedness secured hereby.

     7. That it will pay when due all taxes, liens, judgments, or assessment which have been or may
be lawfully assessed or levied against the property herein mortgaged and that it will pay when due
all licenses or fees legally owing by or chargeable to the Mortgagor.

     8. That in the event it fails to maintain insurance as hereinbefore provided or fails to pay
when due any taxes, liens, judgments, assessments, licenses, or fees legally owing, the Mortgagee
may provide such insurance and make such payment, and the sum paid therefore shall become a part of
the indebtedness secured hereby, shall bear interest from the date of payment at the rate of seven
percent (7%) per annum, and shall be immediately due and payable.

     9. That it will keep all buildings and equipment subject to this mortgage in good and
substantial repair during the continuance hereof and will not cause, suffer, or permit waste
thereof.

     10. That the Mortgagee may, at the Mortgagor’s cost, examine the books, records, and documents
of the Mortgagor and make reasonable recommendations as to business practices in the conduct of the
Mortgagor’s business, which shall be promptly adopted and, in good faith, carried out by the
Mortgagor.

     11. That it will execute such further and additional documents or instruments or do so perform
all such acts as may be reasonable requested by the Mortgagee further to perfect its title as
Mortgagee to any of the property hereinabove described.

     12. That it will not, during the existence of any part of the lien herein provided for, sell,
lease, or assign all or any part of the property herein described without the written consent of
the Mortgagee, its successors or assigns all or any part of the property herein described without
the written consent of the Mortgagee, its successors or assigns, approving such sale, lease or
assignment. This limitation on the power of alienation shall not be exhausted by use, but shall be
continuous so long as any part of the lien herein provided exists.

     13. That if the premises herein described be acquired, in whole, or in part, by anyone who
does not assume and agree to pay this mortgage, the whole of said mortgage indebtedness shall be
come due at the option of the Mortgagee.

     14. That if there be any security other than this mortgage for the indebtedness secured
hereby, then upon default, the Mortgagee may proceed upon this and any other security, either
concurrently or separately, in any order that said mortgagee may elect.

     15. That no remedy herein conferred on or reserved to the Mortgagee is intended to be
exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative and
shall be in addition to every other remedy given hereunder and now or hereafter existing at law or
in equity or by statute.

     16. That all of the rights, privileges, and powers herein vested in the Mortgagee shall inure
to, and may be exercised by, any subsequent holder of the note or notes, or any renewals thereof,
hereby secured, and this mortgage shall be binding upon the successors and assigns of the
Mortgagor.

     17. That the Mortgagor shall receive any sums payable under or arising out of any eminent
domain proceedings affecting the whole or any part of, or any interest in, the real estate covered
by the mortgage. All such sums are hereby assigned by the Mortgagor to the Mortgagee and when
received by the Mortgagee may be applied on the indebtedness secured by this mortgage in such
manner as the Mortgagee may elect.

     18. That in the case of the non-payment of any indebtedness secured hereby, including any sums
advanced for payment of insurance premium, taxes, liens, judgments, assessments, licenses, or fees,
in accordance with the terms of this mortgage or in case of the failure of the Mortgagor to keep or
perform any other covenant, agreement, stipulation, or condition herein contained at the option of
the Mortgagee, its successors or assigns (notice of such option being hereby expressly waived) the
entire principal sum secured by the mortgage, together with all accrued interest thereon, shall be
deemed to have become due, without notice; and thereafter such principal sum shall bear simple
interest at the rate

86

 

shown above, to be secured by this mortgage. Either (1) the whole of said
principal sum, when so deemed due, together with all other sums due hereunder, all with interest
thereon as provided in this mortgage, or (2) any sums which may be past due hereunder without
accelerating the maturity of the whole debt hereby secured, with interest on such past due sums as
provided herein, shall be collectible in a suit at law, or by foreclosure of this mortgage.
Whenever the said principal indebtedness has become due, by acceleration or otherwise or whenever
any sum secured hereby has become past due, it shall be lawful for said Mortgagee, its successors
and assigns to sell and convey the said real estate, with its appurtenances, at public auction as
provided by the statutes; and on such sale, to make and executed to the purchaser its, his or her
assigns, forever a good and sufficient deed of conveyance pursuant to statutes. Out of the monies
arising from such sale, under decree of court, the Mortgagee shall retain (a) the principal and
interest which shall be then be due on the notes (b) any sums advanced by the Mortgagee, its
successors, or assigns and secured by the Mortgage, with interest as shall be allowed by law or the
practice of the courts, or in a reasonable amount; and the surplus money, if any, shall be paid to
the said Mortgagor, its successors, or assigns. And the mortgagor, for itself and all successors
in interest, expressly agrees that at any sale held pursuant to the power of sale herein, pursuant
to decree of court , all of the said described premises, or all of the same not theretofore
released, may, at the option of the Mortgagee, be offered and sold in bulk and as on parcel; and
that all provisions of statute and rules of law to the contrary are hereby waived by the Mortgagor.

     IN WITNESS WHEREOF, the Mortgagor has caused to be executed in its corporate name by its duly
authorized officers and its corporate seal (if any) to be affixed on the day and year first above
written.

	 	 	 	 	 	 	 
	(Corporate seal, if any)	 	[ 9 ]	 	 
	 	 	Mortgagor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	 10 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	President	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	  10 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Secretary	 	 

     The foregoing instrument was acknowledged before me this [date], by [name of officer signing]
and [name of officer signing], the President and Secretary, respectively of [11 cooperative name] a
[11 state] corporation, and to me personally known to be the persons who executed the within and
foregoing instrument on behalf of the corporation as such officers, and said officers acknowledged
said instrument to be the free act and deed of said corporation, and further acknowledged to me
that said corporation executed the same.

	 	 	 	 	 	 	 
	 

	 	 
	 	 

Notary Public
	 	 
	 

	 	 	 	My Commission expires:	 	 

This instrument was drafted by: Cenex Finance Assn., Inc. – P. Bruley, PO Box 64089, and St. Paul,
MN Recording information: 12

87

 

4.03 –Supplemental/Amendment RE Mortgage Documentation

	 	 	 
	General

	 	Cofina uses supplemental or amendment real estate mortgages
to supplement the existing mortgage to increase the dollar
amount or amend the existing real estate mortgage to add
collateral and coverage to the existing mortgage or
mortgages.
	 
	 	 
	Supplemental 

Instructions

	 	The following
numbered instructions correspond to the sample
Supplemental Real Estate Mortgage that follows in this
procedures

	 	1.	 	The customer or mortgagor enters
the date the supplemental mortgage is made and executed.
	 
	 	2.	 	Cofina enters the name of the
customer/mortgagor.
	 
	 	3.	 	Cofina enters the post office
address and state location of the customer/mortgagor.
	 
	 	4.	 	Cofina enters the amount of the
supplemental mortgage as directed by the loan committee.
	 
	 	5.	 	Cofina enters the County and
State location of the mortgaged property (from the existing
mortgage).
	 
	 	6.	 	Cofina enters the reference to
the real estate mortgage which this new one supplements
(recording data from existing mortgage).
	 
	 	7.	 	Cofina enters the real estate
mortgage legal description from the existing mortgage.
	 
	 	8.	 	Cofina enters the
customer/mortgagor name.
	 
	 	9.	 	The customer /mortgagor executes
the supplemental real estate mortgage by having two authorized
officers’sign the mortgage and their signatures notarized.
	 
	 	10.	 	Cofina enters the
customer/mortgagor name.
	 
	 	11.	 	The county agent or other
official responsible for mortgage recordings certifies that the
mortgage has been properly recorded in the county office.

88

 

SUPPLEMENTAL REAL ESTATE MORTGAGE

     This Supplemental Real Estate Mortgage, made and executed on [ 1 ] by: [ 2 ], a cooperative
corporation, organized under the laws of the State of Minnesota, Mortgagor, whose post office
address is: [ 3 ], to COFINA FINANCIAL, a Minnesota corporation, whose post office address is
Post Office Box 64089, St. Paul, Minnesota 55164-0089. For the purposes of securing payment of
an indebtedness from the Mortgagor to the Mortgagee in the principal sum of [ 4 ] and No/100
Dollars —— ($ 4 ), and interest thereon at the variable rate of interest as the mortgagee’s
board of directors may from time to time prescribe and any future advances or readvances made by
Mortgagor to Mortgagee not exceeding in the aggregate amount outstanding at any one time the said
principal sum, and interest thereof, Mortgagor does hereby grant, bargain, sell, and convey, to the
Mortgagee, its successors and assigns, forever, all that certain real estate located in the County
of [ 5], State of [ 5], described as follows:

This supplemental real estate mortgage is to supplement that certain real estate mortgage dated
[6], in the original amount of $      [ 6 ], recorded      [ 6 ], in Book/Liber/Volume      [ 6 ]
of Mortgages, pages [6 ], as Document # [6 ], in [ 6 ], County Recorder’s Office .

7

(SEE ATTACHED PAGES FOR LEGAL DESCRIPTIONS)

	 	 	 	 	 	 	 
	 	 	8	 	 
	 	 	Mortgagor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	 9 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its: President	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	 9 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its: Secretary	 	 

	 	 	 
	State of

	 	 ) 
	 

	 	 ) ss.
	County of                     

	 	 ) 

     The foregoing instrument was acknowledged before me on 9, by
                                        
and
                                        , the
                                         and
                                         respectively of, 10, a
Minnesota corporation on behalf of the corporation.

	 	 	 	 	 	 	 
	 

	 	 
	 	 9  

Notary
Public
	 	 

This instrument was drafted by:

COFINA FINANCIAL — P. Bruley

PO Box 64089

St. Paul, Minnesota 55164-0089

11 – Recording Information

89

 

	 	 	 
	Amendment 

Instructions

	 	The following numbered instructions correspond to the sample
Amendment Real Estate Mortgage that follows in the procedures.

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

90

 

AMENDMENT REAL ESTATE MORTGAGE

     This Amendment Real Estate Mortgage, made and executed on [ 1 ] by: [ 2 ], a cooperative
corporation, organized under the laws of the State of Minnesota, Mortgagor, whose post office
address is: [ 3 ], to COFINA FINANCIAL, a Minnesota corporation, whose post office address is
Post Office Box 64089, St. Paul, Minnesota 55164-0089. For the purposes of securing payment of
an indebtedness from the Mortgagor to the Mortgagee in the principal sum of [ 4 ] and No/100
Dollars —— ($ 4 ), and interest thereon at the variable rate of interest as the mortgagee’s
board of directors may from time to time prescribe and any future advances or readvances made by
Mortgagor to Mortgagee not exceeding in the aggregate amount outstanding at any one time the said
principal sum, and interest thereof, Mortgagor does hereby grant, bargain, sell, and convey, to the
Mortgagee, its successors and assigns, forever, all that certain real estate located in the County
of [ 5 ], State of [ 5 ], described as follows:

     This amendment real estate mortgage is to add that certain real estate mortgage dated [6 ], in the
original amount of $      [ 6 ], recorded      [ 6 ], in Book/Liber/Volume     [ 6 ] of
Mortgages, pages [ 6], as Document # [ 6 ], in [ 6 ], County Recorder’s Office .

7

(SEE ATTACHED PAGES FOR LEGAL DESCRIPTIONS)

	 	 	 	 	 	 	 
	 	 	8	 	 
	 	 	Mortgagor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	 9 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its: President	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	 9 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its: Secretary	 	 

	 	 	 
	State of Minnesota

	 	 ) 
	 

	 	 ) ss.
	County of                     

	 	 ) 

     The foregoing instrument was acknowledged before me on 9, by
                                         and
                                         , the
                                         and
                                         respectively of, 10, a
Minnesota corporation on behalf of the corporation.

	 	 	 	 	 	 	 
	 

	 	 
	 	 9  

Notary
Public
	 	 

This instrument was drafted by:

COFINA FINANCIAL — P. Bruley

PO Box 64089

St. Paul, Minnesota 55164-0089

11 – Recording Information

91

 

4.04 –Release of Mortgage Documentation

	 	 	 
	General

	 	Cofina typically releases collateral covered by a
real estate mortgage in two manners. One is a
Partial Release of Mortgage where the mortgage is to
stay in place, but a specific part of the mortgaged
property is released at the request of customer
(i.e. customer has sold property, etc.) Such
releases represent credit decisions that must be
approved by the loan committee. The second release
is a Satisfaction of Mortgage. In this case, the
loan or loans supported by the mortgage have been
repaid and therefore the need for the mortgage has
been eliminated.
	 
	 	 
	Partial Release of
Mortgage Instructions

	 	The following
numbered instructions correspond to
the sample Partial Release of Mortgage on the
following page.

	 	1.	 	Cofina enters the County where
the property is located to be released.
	 
	 	2.	 	Cofina enters the State location
of the property to be partially released.
	 
	 	3.	 	Cofina enters the legal
description of the property to be partially released.
	 
	 	4.	 	Cofina enters the date of the
original mortgage.
	 
	 	5.	 	Cofina enters the
customer/mortgagor name.
	 
	 	6.	 	Cofina enters the
customer/mortgagor’s city of business and State location.
	 
	 	7.	 	Cofina enters the original
recording data (date, book/libor/volume number of mortgages,
page number(s), and document number) from the original mortgage.
	 
	 	8.	 	Cofina enters the date of the
partial release.
	 
	 	9.	 	Cofina executes the partial
release by an authorized officer of Cofina Financial.
	 
	 	10.	 	Cofina signs the partial release
by person attesting to the officer’s signature.
	 
	 	11.	 	Cofina personnel notarizes the
signature of the party executing the partial release.
	 
	 	12.	 	Affix notary stamp.

92

 

PARTIAL RELEASE OF MORTGAGE

     COFINA FINANCIAL, Post Office Box 64089, of St. Paul, Minnesota 55164-0089, a Minnesota
corporation, certifies that a parcel of land in the County of [ 1 ], [ 2 ], as described as
follows:

     3 [ type legal description of collateral being release or attached on an Attached Exhibit “A]
is hereby released from the lien of a real estate mortgage dated [ 4 ], executed by [ 5 ],
with its place of business at [ 6 ], [ 6 ], to COFINA FINANCIAL, and filed for record in [ 7 ]
County on [ 7 ], in Book/Liber/Volume [ 7 ], Mortgages, page [ 7 ], as Document No. [ 7 ]. The
County Agent is authorized to discharge the premises aforesaid from the lien of this real estate
mortgage upon the record thereof.

Dated: [ 8 ]

	 	 	 	 	 	 	 	 	 
	 	 	 	 	COFINA FINANCIAL	 	 
	 
	 	 	 	 	 	 	 	 
	Attest:

	 	 10 
	 	By:
	 	 9 	 	 
	 

	 	 

	 	 
	 	 

President
	 	 

	 	 	 
	State of Minnesota

	 	 ) 
	 

	 	 ) ss.
	County of Ramsey

	 	 ) 

The foregoing was acknowledged before me this [     ] day of [     ], 2002, by
                                        , President of COFINA FINANCIAL, known to me to be such officer and by me being
duly sworn, said that he is such officer of COFINA FINANCIAL, that this instrument was executed on
behalf of the Corporation.

	 	 	 	 	 	 	 
	 

	 	 
	 	 11  

Notary
Public
	 	 

12 - Notary Seal

 

This instrument was drafted:

Cenex Finance Assn. — P. Bruley

Post Office Box 64089, St. Paul, MN 55164-0089

93

 

	 	 	 
	Satisfaction of

Mortgage Instructions

	 	

The following
numbered instructions correspond to the sample Satisfaction of
Mortgage on the following page.

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

94

 

SATISFACTION OF MORTGAGE

     COFINA FINANCIAL, a Minnesota corporation, Post Office Box 64089, St. Paul, Minnesota
55164-0089, certifies that a real estate mortgage dated [ 1 ], executed by [ 2 ], with its place
of business at [ 3 ], and filed for record in the office of the [ 4 ], (Register of Deeds/County
Clerk/County Recorder), on [ 5 ], in Book/Liber/Volume [ 5 ], Mortgages, page [ 5
], as Document No. [ 5 ], is paid and satisfied in full. The County Agent is hereby authorized to
discharge the same upon the record thereof.

Dated: [ 6 ].

	 	 	 	 	 	 	 
	Attest:	 	COFINA FINANCIAL	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	 7 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	President	 	 

	 	 	 
	State of Minnesota

	 	 ) 
	 

	 	 ) ss.
	County of Ramsey

	 	 ) 

     The foregoing was acknowledged before me this [     ] day of [     ], 2002, by
                                        , President of COFINA FINANCIAL, known to me to be such officer and by me being
duly sworn, said that he is such officer of COFINA FINANCIAL, that this instrument was executed on
behalf of the Corporation.

	 	 	 	 	 	 	 
	 

	 	 
	 	 9  

Notary
Public
	 	 

10 - Notary Seal

 

This instrument was drafted:

Cenex Finance Assn. — P. Bruley

Post Office Box 64089, St. Paul, MN 55164-0089

95

 

4.05 – Security Agreement Documentation

	 	 	 
	General

	 	The security agreement starts the process of perfecting
the Cofina security interest in all personal property
owned by the customer. The security agreement
establishes a claim on this important and liquid
collateral for Cofina. The UCC-1 Financing Statement
described in the following procedure perfects and files
the interest Cofina holds in this personal property.
	 
	 	 
	Security Agreement 

Instructions

	 	

The following
numbered instructions correspond to the
sample Security Agreement that follows in this
procedure.

	 	1.	 	The customer/debtor enters the
date the agreement is made and executed.
	 
	 	2.	 	Cofina enters the name of the
customer/debtor.
	 
	 	3.	 	Cofina enters the state in which
the customer/debtor is incorporated.
	 
	 	4.	 	Cofina enters the
customer/debtor’s principal place of business.
	 
	 	5.	 	Cofina enters the language
defining the personal property and proceeds covering by the
security agreement. Cofina has standard language (shown in the
sample document) that is used from most security agreements.
Loan officers have the ability to recommend alternative language
for loan committee consideration.
	 
	 	6.	 	Cofina enters the state in which
the customer/debtor is incorporated (also in (i) and (ii)).
	 
	 	7.	 	Cofina enters the customer/debtor
name, city, and state.
	 
	 	8.	 	The customer/debtor executes the
security agreement by having two authorized officers sign the
security agreement.

96

 

SECURITY AGREEMENT

     THIS SECURITY AGREEMENT made and executed on [1] by and between  [2 ] a
cooperative corporation created and existing under the laws of the State of, [ 3 ] whose
principal place of business is [ 4 ], herein called “Debtor,” to and in favor of COFINA FINANCIAL,
INC, a Minnesota cooperative corporation, the post office address is Post Office Box 64089, St.
Paul, Minnesota 55164-0089, herein called “Secured Party.”

     This Security Agreement secures the following obligations (“Obligations”): (i) all loans and
advances made or to be made by Secured Party to Debtor; (ii) the payment of all loans and advances
now or in the future made and all other indebtedness of Debtor to Secured Party now existing or
hereafter incurred and any extensions of renewals thereof; (iii) the performance of all terms,
covenants and conditions required of Debtor in accordance with the terms of this Security Agreement
and all loan agreements, currently and hereafter entered into by Secured Party and Debtor; and (iv)
to secure payment of all notes evidencing the indebtedness secured by this Security Agreement.

	 	1.	 	GRANT OF SECURITY INTEREST. To secure the payment and performance of the
Obligations, the Debtor grants the Secured Party a security interest (“Security
Interest”) in, and assigns to the Secured Party, all of the personal property of
Debtor, wherever located, and now owned or hereafter acquired (called the
“Collateral”), including:
	 
	 	5	 	 

	 	(i)	 	Accounts, including health-care-insurance receivables;
	 
	 	(ii)	 	Chattel paper;
	 
	 	(iii)	 	Inventory;
	 
	 	(iv)	 	Equipment;
	 
	 	(v)	 	Instruments;
	 
	 	(vi)	 	Investment Property;
	 
	 	(vii)	 	Documents;
	 
	 	(viii)	 	Deposit accounts;
	 
	 	(ix)	 	Letter-of-credit rights;
	 
	 	(x)	 	General intangibles;
	 
	 	(xi)	 	Supporting obligations; To the extent not listed above as
original collateral, proceeds and products of the foregoing;
	 
	 	(xii)	 	To the extent not included in the above list of collateral and in amplification of that
collateral without limitation, cash and non-cash proceeds, all vehicles, including those that have
certificates of title, commodity accounts, commodity contracts, electronic chattel paper, fixtures,
goods, payment intangibles, software and all contracts, including L.P. gas lease tank contracts,
all being without limitation; and
	 
	 	(xiii)	 	Investments in other cooperatives, including but not limited to Debtor’s investments in
COFINA FINANCIAL, CoBank, Cenex Harvest States Cooperatives, Farmland Industries, Inc., and Land O’
Lakes, Inc..

     2. PERFECTION OF SECURITY INTERESTS.

     2.1 Filing of financing statement.

97

 

          (i) Debtor authorizes Secured Party to file a financing statement (“Financing Statement”)
describing the Collateral, and to file such other and further documents to attain, maintain or
continue a security interest prior to all other security interests.

          (ii) Debtor authorizes Secured Party to file a Financing Statement describing any agricultural
liens or other statutory liens held by Secured Party.

          (iii) Secured Party shall receive prior to the Closing an official report from the Secretary
of State of each Collateral State, Chief Executive Office State, and the Debtor State (each as
defined below in 3.3) (the “SOS Reports”) indicating that Secured Party’s security interest is
prior to all other security interests or other interests reflected in the SOS Reports.

     2.2 Possession.

          (i) Debtor shall have possession of the Collateral, except where expressly otherwise provided
in this Security Agreement, or where Secured Party chooses to perfect its Security Interest by
possession, in addition to the filing of a Financing Statement.

          (ii) Where Collateral is in the possession of a third party, Debtor will join with Secured
Party in notifying the third party of Secured Party’s Security Interest and obtaining an
acknowledgment from the third party that it is holding the Collateral for the benefit of Secured
Party.

     2.3 Control. Debtor will cooperate with Secured Party in obtaining control with respect to
Collateral consisting of:

          (i) Deposit Accounts;

          (ii) Investment Property;

          (iii) Cash Proceeds;

          (iv) Accounts Receivable; and

          (v) Electronic chattel paper.

     2.4 Marking of Chattel Paper. Debtor will not create any Chattel Paper without placing a
legend on the Chattel Paper acceptable to Secured Party indicating that Secured Party has a
security interest in the Chattel Paper.

     2.5 Payment of Obligations. Debtor will pay all Obligations secured by this Security Agreement
and any renewals or extensions thereof, together with all interest thereon and all other sums
payable by Debtor in accordance with the terms of this Security Agreement, loan agreements executed
by Debtor, any notes evidencing the Obligations secured by this Security Agreement, or any renewals
or extensions thereof, and any real estate mortgages also securing the Obligations secured by this
Security Agreement.

     3. DEBTOR’S REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants that:

     3.1 Title To and Transfer of Collateral. It has rights in or the power to transfer the
Collateral and its title to the Collateral is free of all adverse claims, liens, security interests
and restrictions on transfer or pledge except as created by this Security Agreement. On demand of
Secured Party, Debtor shall furnish further assurances of title to the Collateral and further
Security for the Obligations.

     3.2 Location of Collateral. All Collateral consisting of Goods is located solely in the State
of [ 6 ].

     3.3 Location, State of Incorporation, and Name of Debtor. Debtor’s:

          (i) chief executive office is located in the State of [ 6 ].

          (ii) state of incorporation is the State of [ 6 ] ; and

98

 

          (iii) exact legal name is as set forth in the first paragraph of this Security Agreement.

     3.4 Loan Application Statements. That the statements and information contained in Debtor’s
loan application(s) are true and correct and that the proceeds of the Obligations secured by this
Security Agreement will be used solely for the purpose(s) set forth in the loan application(s).

     4. DEBTOR’S COVENANTS. Until the Obligations are paid in full, Debtor agrees that it will:

          (i) preserve its corporate existence and not, in one transaction or a series of related
transactions, merge into or consolidate with any other entity, or sell all or substantially all of
its assets;

          (ii) not change the state of its incorporation, its Chief Executive Office State or its Debtor
State;

          (iii) not change its corporate name without providing Secured Party with 30 days’ prior
written notice.

     5. POST-CLOSING COVENANTS AND RIGHTS CONCERNING THE COLLATERAL.

     5.1 Inspection of Records. Secured Party may at Debtor’s cost inspect and examine the books,
records, and other documents of Debtor.

     5.2 Personal Property. The Collateral shall remain personal property at all times. Debtor
shall not affix any of the Collateral to any real property in any manner which would change its
nature from that of personal property to real property or to a fixture.

     5.3 Secured Party’s Collection Rights. Secured Party shall have the right at any time to
enforce Debtor’s rights against the account debtors and obligors.

     5.4 Limitations on Obligations Concerning Maintenance of Collateral.

          (i) Risk of Loss. Debtor has the risk of loss of the Collateral.

          (ii) No Collection Obligations. Secured Party have no duty to collect any income accruing on
the Collateral or to preserve any rights relating to the Collateral.

     5.5 No Disposition of Collateral. Secured Party does not authorize, and Debtor agrees not to:

(i) make any sales or leases of any of the Collateral, except for such inventory
that the Debtor sells in the ordinary course of business, in which case the Secured
Party retains its security interest in any and all proceeds and after acquired
collateral as though it were original collateral;

(ii) license any of the Collateral; or

(iii) grant any other security interest in any of the Collateral.

     5.6 Purchase Money Security Interests. To the extent Debtor uses the proceeds of any loans to
purchase Collateral, Debtor’s repayment of the loans shall apply on a “first-in-first-out” basis so
that the portion of the loans used to purchase a particular item of Collateral shall be paid in the
chronological order the Debtor purchased the Collateral.

     5.7 Payment of Liens. Debtor will pay when due all taxes, levies, assessments or other claims
which are or may become liens against the Collateral. Debtor will keep the Collateral insured in
such amounts, with such companies, and in such form as the Secured Party shall require. If Secured
Party pays any rents, taxes, levies, charges, or liens whatsoever affecting the Collateral, or
insurance premiums, the same shall become a part of the Obligations secured by this Security
Agreement and shall be payable on demand, with simple interest at the highest rate allowed by law.

99

 

     5.8 Maintenance and Inspection of Collateral. Debtor will care for and maintain the
Collateral in a reasonable manner, and will allow Secured Party or its agent(s) to inspect the
Collateral at any time or location.

     5.9 Performance under Loan Agreements. Debtor will perform and observe all of the terms,
covenants, and conditions of all loan agreements entered into between Secured Party and Debtor in
connection with any of the Collateral secured by this Security Agreement, which terms, covenants
and conditions of such loan agreements are by this reference incorporated herein and made a part of
this Security Agreement.

     5.10 No Modification. Debtor hereby agrees that nothing in any agreement between Debtor and
Secured Party shall be construed as limiting, modifying, or restricting the right of Secured Party
to demand payment of the indebtedness with the terms of the note(s) evidencing the same and
Obligations secured under this Security Agreement in accordance with the terms of the note(s)
evidencing the same and Debtor further agrees that no extension, assignment or transfer of one or
more of the notes evidencing such Obligations shall be construed as a discharge in whole or in part
of this Security Agreement or a waiver of any default hereunder. Debtor further agrees that no
delay of Secured Party in asserting any right accruing because of any default of Debtor to comply
with any of the terms and provisions of this Security Agreement shall be construed as a waiver of
such default, nor shall any waiver of any default under any loan agreement or security agreement be
construed as a waiver of any other term or condition under any loan agreement or security
agreements between Debtor and Secured Party or the rights of Secured Party thereunder either whole
or in part.

     5.11 No Right to Future Loans or Advances. Nothing contained in this Security Agreement shall
be construed to obligate Secured Party to make any loans or advances to Debtor and that the purpose
of this Security Agreement is to provide collateral security for presently existing indebtedness
and loans and advances which, in the absolute discretion of Secured Party, may hereafter be made to
Debtor.

     5.12 Rights Under Security Agreement. If Secured Party shall be secured by any security other
than that covered by this Security Agreement or has the security covered by this Security Agreement
covered by any other agreement or lien, then upon default by Debtor of one or more of its
undertakings to Secured Party, Secured Party may proceed upon any security liened to it, either
concurrently or separately, in any order that it may elect.

     6. EVENTS OF DEFAULT. The occurrence of any of the following shall, at the option of Secured
Party, be an Event of Default:

          (i) Any default or Event of Default (as defined) by Debtor under any loan agreement between
Debtor and Secured Party, or any of the other Obligations;

          (ii) Debtor’s failure to comply with any of the provisions of, or the incorrectness of any
representation or warranty contained in, this Security Agreement, any loan agreements, any notes,
or in any of the other Obligations;

          (iii) Transfer or disposition of any of the Collateral, except as expressly permitted by this
Security Agreement;

          (iv) Attachment, execution or levy on any of the Collateral;

          (v) Debtor voluntarily or involuntarily becoming subject to any proceeding under either the
Bankruptcy Code or any similar remedy under state statutory or common law;

          (vi) Debtor failing to comply with, or become subject to any administrative or judicial
proceeding under any federal, state or local (a) hazardous waste or environmental law, (b) asset
forfeiture or similar law which can result in the forfeiture of property, or (c) other law, where
noncompliance may have any significant effect on the Collateral;

          (vii) Secured Party receives at any time following the Closing an SOS Report indicating that
Secured Party’s security interest is not prior to all other security interests or other interests
reflected in the SOS Report; or

          (viii) Secured Party deems itself insecure at any time.

     7. DEFAULT COSTS.

100

 

     Should an Event of Default occur, Debtor will pay to Secured Party all costs reasonably
incurred by the Secured Party for the purpose of enforcing its rights hereunder, including:

          (i) costs of foreclosure;

          (ii) costs of obtaining money damages; and

          (iii) a reasonable fee for the services of attorneys employed by Secured Party for any purpose
related to this Security Agreement or the Obligations, including consultation, drafting documents,
sending notices or instituting, prosecuting or defending litigation or arbitration.

     8. REMEDIES UPON DEFAULT.

     8.1 General. Upon any Event of Default, Secured Party may pursue any remedy available at law
(including those available under the provisions of the Uniform Commercial Code (“UCC”)), or in
equity to collect, enforce or satisfy any Obligations then owing, whether by acceleration or
otherwise.

     8.2 Conformer Remedies. Upon any Event of Default, Secured Party shall have the right to
pursue any of the following remedies separately, successively or simultaneously:

          (i) File suit and obtain judgment and, in conjunction with any action, Secured Party may seek
any ancillary remedies provided by law, including levy of attachment and garnishment.

          (ii) Take possession of any Collateral if not already in its possession without demand and
without legal process. Upon Secured Party’s demand, Debtor will assemble and make the Collateral
available to Secured Party as directed by Secured Party. Debtor grants to Secured Party the right,
for this purpose, to enter into or on any premises where Collateral may be located.

          (iii) Without taking possession, sell, lease or otherwise dispose of the Collateral at public
or private sale in accordance with the UCC.

     8.3 Surplus; Deficiency. After disposal of any Collateral due to an Event of Default, Debtor
is entitled to any surplus resulting from the disposal, but is responsible for any deficiency if
the Collateral does not satisfy all of the Obligations secured by this Security Agreement.

     8.4 Notice. If any instance in which notice to Debtor is required by this Security Agreement,
or is required by law, such notice shall be deemed sufficiently given when Secured Party mails,
first class postage
prepaid, such notice to Debtor at the post office address given in this Security Agreement.
Arrangements for forwarding such notice, if necessary, shall be the responsibility of Debtor.

     8.5 Change in Financial Condition. Debtor will promptly advise Secured Party of any adverse
change in its financial condition and of any pending or potential suit or proceeding before any
court, administrative agency or other tribunal for or on account of any claim which is not
adequately covered by liability insurance.

     9. FORECLOSURE PROCEDURES.

     9.1 No Waiver. No delay or omission by Secured Party to exercise any right or remedy accruing
upon any Event of Default or other provision of this Security Agreement shall (a) impair any right
or remedy, (b) waive any default or operate as an acquiescence to the Event of Default, or
(c) affect any subsequent default of the same or of a different nature, and, in any case, only a
written waiver of Secured Party shall be a surrender of any such right.

     9.2 Notice of Sale. Secured Party shall give Debtor such notice of any private or public sale
as may be required by the UCC.

     9.3 Condition of Collateral. Secured Party has no obligation to clean-up, repair or otherwise
prepare the Collateral for sale.

101

 

     9.4 No Obligation to Pursue Others. Secured Party has no obligation to attempt to satisfy the
Obligations by collecting them from any other person liable for them and Secured Party may release,
modify or waive any collateral provided by any other person to secure any of the Obligations, all
without affecting Secured Party’s rights against Debtor. Debtor waives any right it may have to
require Secured Party to pursue any third person for any of the Obligations.

     9.5 Compliance With Other Laws. Secured Party may comply with any applicable state or federal
law requirements in connection with a disposition of the Collateral and compliance will not be
considered adversely to affect the commercial reasonableness of any sale of the Collateral.

     9.6 Warranties. Secured Party may sell the Collateral without giving any warranties as to the
Collateral. Secured Party may specifically disclaim any warranties of title or the like. This
procedure will not be considered adversely to affect the commercial reasonableness of any sale of
the Collateral.

     9.7 Sales on Credit. If Secured Party sells any of the Collateral upon credit, Debtor will be
credited only with payments actually made by the purchaser, received by Secured Party and applied
to the indebtedness of the Purchaser. If the purchaser fails to pay for the Collateral, Secured
Party may resell the Collateral and Debtor shall be credited with the proceeds of the sale.

     9.8 Purchases by Secured Party. If Secured Party purchases any of the Collateral being sold,
Secured Party may pay for the Collateral by crediting some or all of the Obligations of the Debtor.

	     9.9	 	No Marshaling. Secured Party shall have no obligation to marshal any assets in
favor of Debtor, or against or in payment of:

          (i) any notes,

          (ii) any of the other Obligations, or

          (iii) any other obligation owed to Secured Party by Debtor or any other person.

     10. MISCELLANEOUS.

     10.1 Assignment.

          (i) Binds Assignees. This Security Agreement shall bind and shall inure to the benefit of the
heirs, legatees, executors, administrators, successors and assigns of Secured Party and shall bind
all persons who become bound as a debtor to this Security Agreement.

          (ii) No Assignments by Debtor. Secured Party does not consent to any assignment by Debtor
except as expressly provided in this Security Agreement.

          (iii) Secured Party Assignments. Secured Party may assign its rights and interests under this
Security Agreement. If an assignment is made, Debtor shall render performance under this Security
Agreement to the assignee. Debtor waives and will not assert against any assignee any claims,
defenses or set offs which Debtor could assert against Secured Party except defenses which cannot
be waived.

     10.2 Severability. Should any provision of this Security Agreement be found to be void,
invalid or unenforceable by a court or panel of arbitrators of competent jurisdiction, that finding
shall only affect the provisions found to be void, invalid or unenforceable and shall not affect
the remaining provisions of this Security Agreement.

     10.3 Headings. Section headings used in this Security Agreement are for convenience only.
They are not a part of this Security Agreement and shall not be used in construing it.

     10.4 Governing Law. This Security Agreement is being executed and delivered and is intended
to be performed in the State of Minnesota and shall be construed and enforced in accordance with
the laws of the State of Minnesota, except to the extent that the UCC provides for the application
of the law of the Debtor States.

102

 

     10.5 Rules of Construction.

          (i) No reference to “proceeds” in this Security Agreement authorizes any sale, transfer, or
other disposition of the Collateral by the Debtor.

          (ii)“Includes” and “including” are not limiting.

          (iii)“Or” is not exclusive.

          (iv)“All” includes “any” and “any” includes “all.”

     10.6 Integration and Modifications.

          (i) This Security Agreement is the entire agreement of the Debtor and Secured Party concerning
its subject matter.

          (ii) Any modification to this Security Agreement must be made in writing and signed by the
party adversely affected.

     10.7 Further Assurances. Debtor agrees to execute any further documents, and to take any
further actions, reasonably requested by Secured Party to evidence or perfect the Security Interest
granted in this Security Agreement, to maintain the first priority of the Security Interests, or to
effectuate the rights granted to Secured Party herein.

     THIS SECURITY AGREEMENT is executed by Debtor pursuant to and in conformity with resolutions
adopted by its board of directors:

	 	 	 	 	 
	[ 7 ]	 	 
	Cooperative	 	 
	 
	 	 	 	 
	By:

	 	 8 
 

	 	 
	 
	 	 	 	 
	Its:
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	ATTEST:	 	 
	 
	 	 	 	 
	By:

	 	 8 	 	 
	Its:

	 	 

Secretary
	 	 

103

 

4.06 —UCC 1 Financing Statement Documentation

	General 	The UCC 1 Financing Statement is a state specific document that is filed with the
appropriate state official to perfect Cofina’s security interest in the personal property
offered by the customer as collateral.
	 
	 	1.	 	Cofina enters the customer/debtor
name.
	 
	 	2.	 	Cofina enters the customer/debtor
mailing address.
	 
	 	3.	 	Cofina enters the customer/debtor
city location.
	 
	 	4.	 	Cofina enters the customer/debtor
state location.
	 
	 	5.	 	Cofina enters the customer/debtor
zip code.
	 
	 	6.	 	Cofina enters the customer/debtor
country location (USA).
	 
	 	7.	 	Cofina enters the customer/debtor
federal tax payor identification number (may be obtained from
customer).
	 
	 	8.	 	Cofina enters customer/debtor
type of organization (most cases “cooperative”).
	 
	 	9.	 	Cofina enters the customer/debtor
state of organization.
	 
	 	10.	 	Cofina enters the customer/debtor
organization number assigned to the customer/debtor by the state
where customer/debtor is incorporated. (this information can be
obtained by searching the internet for the specific state’s
secretary of state’s office or from the customer/debtor).
	 
	 	11.	 	Cofina enters “Cofina Financial,
Inc”, as secured party.
	 
	 	12.	 	Cofina enters its mailing
address.
	 
	 	13.	 	Cofina enters its city location.

	 
	 	14.	 	Cofina enters its state location.

	 
	 	15.	 	Cofina enters its zip code.
	 
	 	16.	 	Cofina enters its country
location.
	 
	 	17.	 	Cofina enters the language
describing the property to be covered by the financing
statement. This language should be consistent with the related
financing statement.

104

 

	UCC FINANCING STATEMENT

	FOLLOW INSTRUCTIONS rfrontand backl CAREFULLY
A. NAME A PHONE OF CONTACT AT FILER [optional]
B. SEND ACKNOWLEDGMENT TO: (Name and Address!
Print

Reset
THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY

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

105

 

4.07
— Assignment of PECFA Proceeds

	 	 	 
	General

	 	Cofina establishes term special loans for
environmental clean up activities of customers in
Wisconsin to make use of the Petroleum Environmental
Clean up Fund Program (PECFA). As part of these
loans, Cofina takes an assignment on the PECFA
proceeds due the customer from the State of
Wisconsin Department of Industry, Labor and Human
Resources.
	 
	 	 
	Assignment of PECFA Proceeds Instructions

	 	The following numbered instructions correspond to
the sample Assignment of Proceeds document that
follows in this procedure.
	 
	 	 
	 

	 	1. Cofina enters the name of the
customer assigning the proceeds to Cofina Financial
	 
	 	 
	 

	 	2. Cofina identifies the loan type,
number and amount.
	 
	 	 
	 

	 	3. Cofina enters the name of the
contaminated site location.
	 
	 	 
	 

	 	4. Cofina enters the name, city, and
state of the customer.
	 
	 	 
	 

	 	5. The customer executes the
Assignment of Proceeds by having two authorized officers of the
board sign the document.

106

 

ASSIGNMENT OF PECFA PROCEEDS

          The undersigned [1] (“Borrower”), hereby assigns to COFINA FINANCIAL, ST. PAUL,
MINNESOTA (“COFINA”), all its right, title, and interest in the proceeds from the Wisconsin
Department of Industry, Labor, and Human Relations, Petroleum Environmental Clean-Up Fund
Program (PECFA).

          This assignment is hereby given to provide COFINA additional collateral for the term
special loan [ 2 ] in the amount of [$ 2 ] to the Borrower for the contamination clean-up
at the [ 3 ] Site and shall be void if such loan is paid in full.

	 	 	 	 	 	 	 	 
	Dated:                     , 2002

	 	[ 4 ]	 	 	 	 	 
	 

	 	[ 4 ]	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	 	 
	 

	 	 	 	 

Its President
	 

	 	 
	 
	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	 	 
	 

	 	 	 	 

Its Secretary
	 

	 	 

107

 

4.08
— Assignment of Stock Documentation

	 	 	 
	General

	 	Cofina frequently takes assignment of Cenex Harvest
States Cooperatives and/or Land O’Lakes, Inc. stock as
additional security for loans. To perfect that
interest, the customer must execute an assignment of
stock.
	 
	 	 
	Assignment of Stock Instructions

	 	The following numbered instructions correspond to the
sample assignment of Stock for both Cenex Harvest
States Cooperatives and Land O’Lakes, Inc., that
follow in this procedure:
	 
	 	 
	 

	 	1. Cofina enters the customer name,
city, and state for the customer providing the assignment.

	 
	 	 
	 

	 	2. Cofina enters the name of the
regional cooperative in which the customer has investments.

	 
	 	 
	 

	 	3. The customer enters date
agreement is executed.
	 
	 	 
	 

	 	4. Cofina enters the customer name,
city, and state.
	 
	 	 
	 

	 	5. The customer executes the
document by having two authorized of the board sign the
document.

108

 

ASSIGNMENT OF STOCK

In consideration of loans made to it by Cofina Financial, St. Paul, Minnesota (“COFINA), [ 1 ]
(“Borrower”), assigns to COFINA all of its right, title, and interest in and to the shares of
common and preferred capital stock issued to Borrower by [ 2 ] (“ 2 ”) as shown in the records of
such issuer.

     In further consideration of the loans, Borrower assigns to COFINA all additional shares of
preferred stock that may be issued to Borrower by Farmland, as long as Borrower shall be indebted
to COFINA and this instrument shall constitute an assignment of such shares of preferred stock at
the time of its issuance to Borrower.

     Borrower irrevocably appoints COFINA as its attorney for the purpose of selling and assigning
all or any part of the assigned shares of capital stock and for that purpose to execute and deliver
all necessary instruments to carry out such powers, with full power of substitution.

     COFINA shall not be required, because of the existence of this assignment, to apply any
credits on its loans made to Borrower unless and until COFINA receives cash for the assigned shares
of capital stock.

     The purpose of this assignment is to provide additional collateral security for the loans made
by COFINA to Borrower and it shall be void if such loans are paid in full.

Dated:                     3                     [ 4 ]

	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	 
	 

	 	 	 	 

Its:
	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	 	 	 
	 

	 	 	 	 

Its:
	 	 

109

 

4.09
— Loan Agreement Waiver Documentation

	 	 	 
	General

	 	Cofina utilizes standard language in waiving specific compliance
issues with customers’ loan agreement. Loan officers are
responsible for monitoring customer compliance and acting promptly
when compliance is an issue.
	 
	 	 
	 

	 	Standard language available for use includes:
	 
	 	 
	 

	 	•     Waiver Letter language for Stock Retirement and Fixed Asset
Expenditure limits.

	 
	 	 
	 

	 	•     Waiver Letter language for Cash Patronage Refunds.

	 
	 	 
	 

	 	•     Waiver Letter language for Working Capital and Local Net
Worth levels.

	 
	 	 
	 

	 	When compliance issues arise, the loan officer develops a waiver
request for loan committee approval.
	 
	 	 
	Waiver Letter Instructions

	 	The instructions for all waiver letters are the same. The
following numbered instructions correspond to the sample
letter that follow in this procedure. Language for
specific condition waivers are included to fit the
circumstances.
	 
	 	 
	 

	 	1.   Cofina enters the customer’s
manager name, customer, address, city, state, and zip code.

	 
	 	 
	 

	 	2.   Cofina references the loan
agreement number and the purpose for the waiver or condition
reference.

	 
	 	 
	 

	 	3.   Cofina enters the condition or
conditions in non-compliance and the specifics of the waiver.

	 
	 	 
	 

	 	The loan officer has the responsibility to include any language
necessary to clarify the waiver or explain the limits of the action
taken by the loan committee.

110

 

July 11, 2005

[ 1 ]

	 	 	 
	Re:

	 	[ 2 ]
	 

	 	Loan Agreement Condition #
	 

	 	Loan Agreement No.                    ___

Dear                     :

[ 3 ]

Cofina Financial has agreed to waive non-compliance of Condition “6” of the above referenced loan
agreement. COFINA offers no objection to your association’s board of directors declaring 100% cash
patronage payment for fiscal year ending October 31, 2001.

And/or:

[ 3 ]

Cofina Financial has agreed to waive non-compliance of Condition “10” and “11” of the above
referenced loan agreements limiting stock retirements and fixed asset expenditures. Further,
COFINA offers no objection to your stock retirements in the amount of $88,000 and fixed asset
expenditures in the amount of $403,000, for fiscal year ending March 31, 2002.

And/or:

[ 3 ]

Cofina Financial has agreed to waive non-compliance of Condition “10” requiring minimum working
capital of not less than $3.0 million at fiscal year ending December 31, 2001 and further
recognizes working capital at $2,728,000 for fiscal year ending December 31, 2001.

Please retain this letter in your files for your records. If we can by of any further assistance,
feel free to contact our office.

Sincerely,

Loan Officer

Extension:                     

111

 

4.10
— Subordination Agreement Documentation

	 	 	 
	General

	 	Cofina uses subordination agreements to clarify collateral
positions with other lenders serving a common client. The
subordination agreement is between the two or more lenders,
rather than with the customer.
	 
	 	 
	Subordination Agreement Instructions

	 	The following numbered instructions correspond to the sample
Subordination Agreement that follows in this procedure:
	 
	 	 
	 

	 	1.      Cofina enters the date the
subordination agreement is made and executed.

	 
	 	 
	 

	 	2.      Cofina enters the name or names
of the other lenders involved in the agreement.

	 
	 	 
	 

	 	3.      Cofina enters state location of
other lender.

	 
	 	 
	 

	 	4.      Cofina enters address, city,
state location of other lender.

	 
	 	 
	 

	 	5.      Cofina enters the name of the
customer held in common between the lenders.

	 
	 	 
	 

	 	6.      Cofina enters the specific
language defining the subordination.

	 
	 	 
	 

	 	7.      Cofina enters the name of the
other Lender below its own name with space for authorized
officials to execute the agreement.

112

 

SUBORDINATION AGREEMENT

     THIS AGREEMENT, made and entered into this [1], by and between Cofina Financial, St. Paul,
Minnesota (“COFINA”), a Minnesota corporation, Post Office Box 64089, St. Paul, Minnesota,
55164-0089, and [2] (“Bank”), a [3 ] corporation, [4].

WITNESSETH:

     WHEREAS, COFINA and the Bank have a common interest in extending credit to [5] (“Borrower”);
and

     WHEREAS, it is deemed to be mutually desirable to have both COFINA and the Bank participate in
the total credit extended to Borrower; and

     WHEREAS, COFINA and the Bank have acquired or will require Borrower to grant certain security
interest, and have executed or will execute certain documents to assure payment of indebtedness:
and

     WHEREAS, COFINA and the Bank may be granted a security interest in the same collateral; and

     WHEREAS, COFINA and the Bank desire to resolve, stipulate, and agree concerning the relative
priority of their security interest in the collateral as provided below.

     NOW THEREFORE, the parties hereto, in consideration of the mutual covenants and promises
herein contained, agree as follows:

1. COFINA agrees that any security interest granted to or to be granted to COFINA by
Borrower in: [6]

“All inventories and accounts receivables”

     Shall be junior and subordinate to any security interest therein now held or herein
acquired by the Bank. Any security interest of the Bank in the above described collateral
shall be deemed to be senior to and perfected prior to any security interest of
COFINA in the collateral.

	2.	 	COFINA and the Bank will maintain perfected security interests in their respective
collateral. Failure by COFINA or the Bank to maintain a perfected security interest

113

 

	 	 	in its collateral shall render this agreement null and void, unless the security interest is
re-perfected without loss of priority except as to the other party.
	 
	3.	 	COFINA and the Bank mutually understand and agree that this is a continuing agreement, but
that COFINA and the Bank may amend the same in writing at any time and in such manner as they
may deem proper.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above
written.

	 	 	 	 	 	 	 
	 	 	COFINA FINANCIAL	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Its President and General Manager
	 	 
	 
	 	 	 	 	 	 
	 

	 	[ 7 ]	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Its:
	 	 

114

 

5.0
— Money Desk Procedures

5.01 — Disbursements

	 	 	 
	 

	 	Faxed borrowing notices must be received by the
Money Desk Administrator before 11:15 a.m. Central
Standard Time the day of the requested advance.
	 
	 	 
	 

	 	The information requirements are set out in a
pro-forma borrowing notice, a copy of which is
attached to this procedure. The borrowing notice
must be signed by an authorized signatory of the
Borrower.
	 
	 	 
	 

	 	The borrowing notice is checked by the Money Desk
Administrator for:
	 
	 	 
	 

	 	•     Completeness of information

	 
	 	 
	 

	 	•     Proper authorization

	 
	 	 
	 

	 	•     Confirmation that bank details for payments
being made to coop’s account are the same as the
repeat codes set up in payment system.
	 
	 	 
	 

	 	The daily balancing report is checked to ensure that
sufficient loan facility is available to make the
payment and to ensure the facility has not matured.
Payments cannot be made from matured loan facilities
and the loan officer must be notified of requests
received in these circumstances.
	 
	 	 
	 

	 	If insufficient facility is available, written
approval of the loan officer must be obtained to pay
a smaller amount than requested in the borrowing
notice.
	 
	 	 
	 

	 	The majority of payments are made by internet banking
system. Access to bank account details is protected
by password procedures. Knowledge of the passwords
is restricted to the Chief Financial Officer, the
Accountant, and the Money Desk Administrator. Access
to the payments program is protected further by
secure identification codes. The Chief Financial
Officer, the Accountant, and the Money Desk
Administrator each have their own secure
identification codes. Only one of them is

115

 

	 	 	 
	 

	 	required
to authorize a payment using the repeat code method.
	 
	 	 
	 

	 	Copies of wire transfers prepared in the internet
banking system are printed and retained until the
bank statement is reconciled.
	 
	 	 
	 

	 	Wire transfers can also be made by telephone. This
will occur when a repeat code has not yet been
established. The Chief Financial Officer, the
Accountant and the Money Desk Administrator are
authorized to make a wire transfer by telephone. The
same passwords apply to telephone instructions as are
used for internet banking instructions. One
authorized person calls the bank with the payment
details. The bank will then call back a second
authorized person to verify the instructions.
	 
	 	 
	 

	 	Some payments are made by check. These are held by
the Chief Financial Officer. Checks have to be
signed out on a sheet indicating the check number and
the name of the person taking it to prepare. A check
requires two authorized signatures. (See Sec. 5.06
for a list of the current authorized signatories).
	 
	 	 
	 

	 	All payments are recorded on the Daily Transaction
Sheet and entered in the cash book.
	 
	 	 
	 

	 	CHS cash management are informed of total amount
being disbursed to CHS and LOL.
	 
	 	 
	 

	 	The borrowing notices are filed, initially, by state
and maintained in the Accounting Department. They
are eventually filed by cooperative.

116

 

COFINA FINANCIAL

BORROWING & REPAYMENT NOTICE

	 	 	 
	FROM:
	 	 
	 

	 	 
	 

	 	(BORROWER)

	 	 	 
	CITY & STATE 
	 	 
	 

	 	 

	 	 	 
	PHONE #
	 	 
	 

	 	 
	 
	 	 

	 	 	 
	ADVANCE:
LOAN#
	 	 
	 

	 	 

	 	 	 
	The Advance Requested Shall Be Made on (Date)
	 	 
	 

	 	 

	 	 	 
	The Aggregate Principal Amount of Advance $
	 	 
	 

	 	 

	 	 	 
	PLEASE PRINT AMOUNT
	 	 
	 

	 	 

	 	 	 	 	 
	YOUR BANKING INFORMATION:

	 	Bank Name	 	 
	 

	 	 	 	 
	 

	 	Bank Location	 	 
	 

	 	 	 	 
	 

	 	Bank Account #	 	 
	 

	 	 	 	 
	 

	 	Federal Reserve #	 	 
	 

	 	 	 	 

Has Bank Info Changed?                                        

	 	 	 
	REPAYMENT: LOAN#
	 	 
	 

	 	 

	 	 	 
	The Repayment Shall Be Made On (Date)
	 	 
	 

	 	 

	 	 	 
	The Aggregate Principal Amount of Repayment $
	 	 
	 

	 	 

	 	 	 
	PLEASE PRINT AMOUNT
	 	 
	 

	 	 

	 	 	 
	PLEASE WIRE FUNDS TO:

	 	BANK
	 

	 	LOCATION
	 

	 	FEDERAL RESERVE #
	 

	 	ACCOUNT #
	 

	 	CREDIT: COFINA FINANCIAL

CHECK ONE:

Seasonal Loan      
                   Term Loan                          Surplus Funds                 
         Other                    

Payment of Invoice Yes                          No                    

	 	 	 
	Payment of Invoice to
	 	 
	 

	 	 

	 	 	 
	Comments:
	 	 
	 

	 	 

	 	 	 	 	 	 	 
	NAME

	 	 	 	TITLE	 	 
	 

	 	 
	 	 	 	 

	 	 	 
	AUTHORIZED SIGNATURE
	 	 
	 

	 	 

117

 

5.02
— Electronic Funds Transfer (EFT)

	 	 	 
	 

	 	EFTs are pulled from Cofina’s bank account by CHS and
LOL on Tuesdays and Fridays.
	 
	 	 
	 

	 	Sheets detailing the amounts to be pulled by EFT are
obtained from CHS Corporate Credit Department the
afternoon before.
	 
	 	 
	 

	 	From the sheets, the Money Desk Administrator
calculates the total funds being pulled from each
customer. The Daily Balancing Report is checked to
ensure sufficient facility is available and that the
facility hasn’t matured. Appropriate loan officer
must be informed if facility has matured.
	 
	 	 
	 

	 	If not enough funds are available to cover EFT, an
Open Item Correction form is prepared to request the
overdisbursed funds be wired back to Cofina. The
form must be signed by the loan officer and delivered
to CHS Corporate Credit by 9:00 a.m. on the day of
the EFT. Funds will be returned the same day.
	 
	 	 
	 

	 	Information from the EFT sheets are entered in the
cash book.

118

 

5.03 — Deposits

	 	 	 
	 

	 	Deposits can be received by wire transfer, ACH or by
check.
	 
	 	 
	 

	 	Co-ops should advise of wire transfers by fax, on
pro-forma repayment notice, by 11:15 a.m. Central
Standard Time on the day of the repayment.
	 
	 	 
	 

	 	The daily balancing report is checked for balance
owed.
	 
	 	 
	 

	 	During the course of the morning and early afternoon,
the bank account is checked via the internet, for
receipt of the wire transfers. If funds are not
received by 2:30 p.m., the customers are contacted to
ensure funds were sent correctly.
	 
	 	 
	 

	 	Cofina has a PO Box which keeps mail separate from
all other mail coming into the building from the post
office. Mail is picked up in the mail room by the
Money Desk Administrator at 7:45 AM in order to begin
processing any checks that may have come in to assure
a rapid bank deposit. All requests for funds must be
received by ll:15 AM therefore the timing on morning
processing is critical. Checks received are
reviewed to ensure they are made out correctly. By
11:00 a.m., the bank deposit slip is prepared and
delivered to Mail Room for messenger service to the
bank.
	 
	 	 
	 

	 	If a large number of checks are received for bill
payments, a separate deposit slip may be prepared
just for these.
	 
	 	 
	 

	 	All wire transfers, ACH’s and checks received, other
than for billed payments, are entered on the Daily
Transaction Sheet. All receipts are entered in the
cash book.

119

 

5.04
— Cash Management

	 	 	 
	 

	 	Cofina has two categories of borrowings – daily loans
and fixed loans. The daily loans can be borrowed or
paid back on any given day in increments of $500,000.
Fixed loans have set maturity dates. While they
can, theoretically, be repaid on maturity dates, the
usual practice is to roll over these loans. Only the
period and interest rate vary.
	 
	 	 
	 

	 	The amount that needs to be borrowed or could be
repaid on any given day can be determined once the
borrowings and the deposits are known for the day and
the cash book has been updated. Allowance has to be
made for checks that have been paid in, but not yet
cleared through the banking system.
	 
	 	 
	 

	 	The Chief Financial Officer authorizes the amount to
be borrowed or repaid if the funds transfer does not
meet guidelines set forth.
	 
	 	 
	 

	 	The lender is advised by fax, before noon, using
pro-forma notice, of the activity for the day.
Repayments to the lender are made using the internet
banking system.
	 
	 	 
	 

	 	The Money Desk Administrator maintains the record of
maturity dates of the fixed loans. The Money Desk
Administrator also obtains, on a daily basis, the
rates being charged by the lenders for various terms
of borrowing.
	 
	 	 
	 

	 	The Chief Financial Officer is advised of any
maturities occurring that day and the range of rates
being charged by the lender. The Chief Financial
Officer then instructs what to do with the fixed
funds rolling over if they do not conform with
guidelines. The lender is notified, by fax, before
noon, using pro-forma notice. The notice must be

signed by the Chief Financial Officer if the funds
are fixed for a timeframe that exceeds the guidelines
or is in excess of the dollar amount set forth in the
guidelines. Lender sends a confirmation by fax,
which is then checked and filed in the monthly lender
file.
	 
	 	 
	 

	 	All cash management transactions are entered on the
Daily Transaction Sheet and cash book.

120

 

	 	 	 
	 

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

121

 

5.05
— Daily Transaction Sheets

	 	 	 
	 

	 	There are three colored copies of the Daily
Transaction sheet.
	 
	 	 
	 

	 	The white copy is for disbursements going to CHS or
LOL and is delivered to CHS Corporate Credit.
	 
	 	 
	 

	 	The yellow copy is for keying to the loan system.
The pink copy is for posting the general ledger
journal. Both of these tasks are performed by the
Money Desk Administrator. The yellow copy is filed
with daily keying. The pink copy is filed in the
Cofina posting book.

122

 

5.06
— Authorized Check Signatories

	 	 	 
	 

	 	Sharon Barber

Thomas Larson
	 
	 	 
	 

	 	M & I Bank

123

 

5.07 Borrowing Guidelines

	 	 	 
	 

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

Any money fixed for a period of more than 30 days and/or in excess of $10,000,000 requires that the
Chief Financial Officer sign off on the borrowing notice.

124

 

6.0
— Accounting, Financial Control, and Internal Reporting

6.01
— Accounting

	 	 	 
	Loan Set Ups

	 	A Loan Set-up Information form is prepared by the
Legal Administrator. A pro-forma document is
attached to this procedure. The form sets out the
basic loan details, such as customer name, amount
and terms. The form is signed by the Legal
Administrator to indicate completeness prior to
passing it on to the Accounting staff.
	 
	 	 
	 

	 	The Money Desk Administrator adds pricing and
credit class details to the form and signs it,
then enters the details on to the Loan System.
	 
	 	 
	 

	 	Following the setup of a loan, the Chief Financial
Officer will verify pricing and credit class on
the Loan System.
	 
	 	 
	 

	 	If repeat codes are to be used to make payments to
the customer, the details are set up in the
banking system and authorized by the Chief
Financial Officer.
	 
	 	 
	 

	 	The original Loan Set-up Information form is
returned to the Legal Administrator once this
process is complete. A copy is retained by the
Money Desk Administrator.
	 
	 	 
	General Ledger

	 	Cofina operates a computerized general ledger system
designed and maintained by Harland Financial
Solutions (the SPARAK system). Harland has
created an operating manual, which is subject to
regular updates. The operating manual is held in
the Accounting Department and is not included
within this Policy and Procedures Manual (See also
Sec. 7)
	 
	 	 
	Reconciliations of
General Ledger Accounts

	 	The following general ledger categories are to be
reconciled on a daily basis.
	 
	 	 
	 

	 	•     Bank accounts, using bank activity reports available from internet banking
system

	 
	 	 
	 

	 	•     Loans receivable accounts

	 
	 	 
	 

	 	•     Loans payable accounts

125

 

	 	 	 
	 

	 	All general ledger accounts are reconciled at every
month-end. The bank accounts are to be reconciled
using the statements received from the bank.
	 
	 	 
	 

	 	All reconciliations are prepared by the Accountant
and reviewed by the Chief Financial Officer. Review
of month-end reconciliations should be evidenced by
initialing by the Chief Financial Officer.

126

 

LOAN SET-UP INFORMATION

	 	 	 	 	 
	 

	 	Classification:                                         
	 	 
	 

	 	(Note: Change from                     )	 	 
	 

	 	UCS Rating:                                         	 	 
	 

	 	(Note: Change from                     )	 	 

Cooperative:

City/State:

	 	 	 
	Seasonal Amt: $                                        

	 	Term: $                                        
	 
	 	 
	 

	 	RT: $N/A

Collateral/Advance Requirements

	 	 	 
	Security Interest: N/A

	 	Real Estate Mtg: N/A
	 
	 	 
	Assign. Investments: N/A

	 	Supp/Amend Rem: N/A
	 
	 	 
	Advance Req’s: NONE

	 	Loan Officer Instructions/Comments:
	 
	 	 
	Set Up Fees: Charge
New Set Up Fees

	 	Federal ID#:                    
	 
	 	 
	Loan Closing Initials:

	 	Accounting Initials:

127

 

6.02 – Financial Control

	 	 	 
	Overhead Expenses

	 	Cofina’s main overheads (i.e., personnel costs,
office rental, telephones, computer costs) are
charged to it centrally by CHS. Management
reports are received on a monthly basis from CHS
for posting to the general ledger.
	 
	 	 
	 

	 	Individual expense components of the central
monthly management charge are analyzed and
reviewed for unusual or exceptional movements.
	 
	 	 
	Office Supplies

	 	If Cofina requires specific office supplies, a
purchase order must be prepared and approved by
the Chief Financial Officer before the order is
placed (example pro-forma attached).
Administrative Assistant is responsible for
ordering office supplies and reconciling receipt
of goods.
	 
	 	 
	Loan Officer
Expense Reports

	 	Loan Officers incur expenses as they travel
around
the country visiting customers. Expenses are
reclaimed by completing an expense form (example
attached) which is then submitted to the Chief
Financial Officer, along with related receipts.
	 
	 	 
	 

	 	Once the Chief Financial Officer has approved
the expenses, the claim will be paid by check.
	 
	 	 
	Chief Financial Officer’s
Expenses

	 	Expenses incurred by the Chief Financial
Officer must be approved by the President of
Cofina before payment.
	 
	 	 
	Budgets

	 	An annual budget of income and expenditure is
presented to the Board for its approval in
September each year for the next financial year.
	 
	 	 
	 

	 	The process starts with loan officers setting
out their expectations for loan receivables in
the next financial year. They also prepare a
budget for their expenses.
	 
	 	 
	 

	 	Assumptions are then formulated for interest
rate expectations and overhead expenses.
	 
	 	 
	 

	 	If the Board rejects the proposed budget, a
revision must be presented within a timescale
determined by the Board.

128

 

	 	 	 
	 

	 	An approved budget must be in place before the
start of the new financial year.
	 
	 	 
	 

	 	The financial reports presented to the Board
must include a comparison of actual against
budget for the month under review and for the
year-to-date (See also Sec. 6.03).

129

 

130

 

					
	
	 	

Date:                     
	 	1436 East Cliff Road

Burnsville, MN 55337

Main: 652-805-9900

Toll Free: 866-574-5389

	 
	 	 	 	Fax: 952-894-7153

	 	 	 	 	 	 	 
	Account Name:

	 	Cenex Finance Association
	 	Account #	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Phone#
	 	651-451-5487
	 

	 	 	 	 	 	 
	Contact Nme:

	 	Gwen Brown

	 	Customer PO#	 	 
	 

	 	 	 	 	 	 

Special Instructions

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Quantity	 	U/M	 	Item Number	 	Description
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

131

 

6.03 — Reporting

	 	 	 	 	 
	Monthly Financial Statements	 	Monthly financial statements should be prepared for submission to
Board members within 15 days of the month end. The reporting package should include:
	 
	 	 	 	 
	 

	 	•
	 	a commentary by the Chief Financial Officer a

balance sheet, with comparative figures for the

previous financial year
	 
	 	 	 	 
	 

	 	•
	 	a statement of savings for the month and
year-to-date, with comparative figures for the
budget and the previous financial year
	 
	 	 	 	 
	 

	 	•
	 	details of loans receivable
	 
	 	 	 	 
	 

	 	•
	 	details of new loan commitments entered into
in the month
	 
	 	 	 	 
	 	 	Monthly financial statements are also required to be
submitted to Cofina’s bankers. The Chief Financial
Officer is responsible for completing the reporting
requirements of each bank group and ensuring they
receive the reports within the required timeframe.
	 
	 	 	 	 
	Monthly Statistics	 	In addition to the monthly financial statements, Cofina prepares a raft of statistics to assist
in its review of past performance and developing future budgets. The current statistics
requirements are as follows:
	 
	 	 	 	 
	 	 	Yield calculator report and sub reports:
	 

	 	 	 	     Average seasonal receivable
	 

	 	 	 	     Average term receivable
	 

	 	 	 	     Average total receivable
	 

	 	 	 	     Average receivable yield
	 

	 	 	 	     Average Cenex payable
	 

	 	 	 	     Average CoBank payable
	 

	 	 	 	     Average Cofina surplus funds
	 

	 	 	 	     Average total payable
	 

	 	 	 	     Average payable yield
	 

	 	 	 	     Average yield spread
	 
	 	 	 	 
	 	 	Monthly stats reports:
	 

	 	 	 	     Yearly interest rates and spreads
	 

	 	 	 	     Interest rate spreads
	 

	 	 	 	     Receivable/payable yields
	 

	 	 	 	     Average differential rates by month
	 

	 	 	 	     Average differential rate totals
	 

	 	 	 	     Association savings

132

 

	 	 	 	 	 
	 

	 	 	 	     Association savings – budget
	 

	 	 	 	     Average daily receivables
	 

	 	 	 	     Non-patronage loans YTD interest
	 

	 	 	 	     Loan volume by office
	 

	 	 	 	     Active accounts by state
	 

	 	 	 	     Number of coops by state by month
	 

	 	 	 	     Number of coops by month
	 

	 	 	 	     Cenex management expense billing
	 

	 	 	 	     Detailed operating expense
	 

	 	 	 	     Detailed operating expense comparison
	 

	 	 	 	     Itemized expenses
	 
	 	 	 	 
	Year-end Financials Statements	 	Cofina’s year-end is September 30. The audit of the financial statements needs to be completed
prior to the Annual Meeting of members. This meeting is usually held late November/early
December.
	 
	 	 	 	 
	 	 	The auditors will attend a Board meeting prior to signing off the accounts in order to present a
report of their findings.
	 
	 	 	 	 
	 	 	Cofina is not required to file its accounts with any regulatory bodies.

133

 

7.0 – Disaster Recover Plan

	 	 	 
	Loan Accounting System

	 	Cofina uses Sparak (Harland) Financial Data Center in Fargo, ND for loan accounting processing.
The data is entered in the Cofina office and is processed at Sparak. The Sparak (Harland)
Financial Data Center is at 2701 12th Ave SW, Fargo, ND. Data is stored at a remote
location. There is a back-up data Center in Jonesboro, Ark. In the event of a disaster the
fastest way to access the loan accounting system is to make the 4 hour drive or 45 minute flight
to Fargo in order to process data there. The Fargo location runs two tapes at each ‘end of
day’. One is kept in their office and the other is stored off-site. Month end, quarter end and
year end are stored in the same manner. In house storage is kept for two weeks.
	 
	 	 
	Funds Flow

	 	Cash Management is currently done through Wells Fargo and M&I Bank. Wire Transfers are processed
through the Wells Fargo Bank System and the M&I Wire Transfer System. Balance Reporting is also
carried out using these systems. Deposits come into Cofina and are delivered to Wells Fargo by
messenger. A Lock Box has been set up at M&I Bank to handle deposits. Cofina will receive an
e-mail providing all the information needed to process the checks deposited in the Lock Box.
Electronic Funds Transfers move between CHS, Land O’ Lakes, Agriliance and Cofina daily. In
the event of a disaster an authorized person would call Wells Fargo and/or the M&I Cash
Management Representative, giving name and passwords, in order to receive balance reporting.
Wire transfers will also be made by phone. Cofina currently phones in any wire that does not
have a repeat code. Repeat codes are stored in both cash management systems and also in the
Cofina custody vault file. It is Cofina policy to set up repeat codes for any wire that will be
sent more than one time. If carrying out the cash management functions by phone is not feasible
the money desk administrator can go to Wells Fargo or M&I Bank to do them. Both banks are
within 20 miles of Cofina’s office.

134

 

	 	 	 
	Computer Network

	 	Cofina uses the Land O’ Lakes Network for email, and Microsoft products. The laptops and
workstations (hardware) are supported by Land O’ Lakes also. Land O’ Lakes is located in Arden
Hills, MN about 20 miles from the Cofina office. The network is backed up each night in Arden
Hills and remote storage is used. If Cofina had a disaster mid-day it would lose current days
data. In the event of a disaster Cofina would need to replace its computers and use the remote
dialup to get into email, etc. Remote dialup can be done from anywhere.
	 
	 	 
	Notes

	 	Original Notes are held in safekeeping at Wells Fargo Bank Asset Backed Securities Custody Vault
located at 751 Kasota Avenue, Suite ABS, Minneapolis, MN 55414. Notes can be retrieved within
four hours if need be. A copy of each note is kept at Cofina in a fireproof file. Notes and
all key original documents will be moved from Wells Fargo Bank to US Bank Custody Vault in St
Paul, MN.
	 
	 	 
	Fax Machine

	 	Within four hours Metro Sales (located in Minneapolis) will set up a new fax machine with
Cofina’s current fax numbers in order to receive borrowing and repayment notices, which are
critical to the operation.
	 
	 	 
	Cell Phones

	 	All staff members have a cell phone, office numbers will be transferred to cell phones which
would be used in case of a disaster.
	 
	 	 
	Address and Phone Numbers

	 	The Cofina Borrower, Staff, and Board directory along with important contacts are kept in the
safekeeping in the bank custody vault. This file can be retrieved within four hours.
	 
	 	 
	Personnel

	 	The staff of Cofina are employees of CHS. There is a Management Services Agreement between
Cofina and CHS which authorizes CHS to provide necessary personnel and services to effectively
support the operation of Cofina. CHS is directed to support Cofina in full compliance with the
latter’s Articles and By-laws. CHS is reimbursed monthly for all costs incurred by Cofina which
include site rental, salaries, and benefits.

135

 

8.0 — Equity Retirements and Patronage Decisions

8.01 — General Equity Retirements

	 	 	 	 	 
	General	 	Cofina operates as a cooperative, adhering
to Federal Cooperative Law requirements, complemented
by Cofina’s By-Law stipulations, to allocate its
earnings (patronage refunds) to customers who have
participated in the business operations, by paying
interest. Cofina is required by law to pay 20% of
these patronage refunds in cash. Ten percent of
earnings remain unallocated and are retained in the
equity base of Cofina, to support the capital needs
of its ongoing and anticipated business.
	 
	 	 	 	 
	 	 	One of the objectives of the Cofina Board is to have
current users providing the capital needs of the
business. To accomplish this objective, the Board
annually establishes its stock retirement objectives.
However, equity retirement decisions are at the sole
discretion of the Board of Directors.
	 
	 	 	 	 
	Authority	 	The Cofina Board of Directors has the sole authority to retire
retained equities. Retirements of previously allocated customer
stock shall be made consistent with the requirements of this policy.
	 
	 	 	 	 
	Criteria	 	The Board utilizes the following criteria in making equity
retirements:
	 
	 	 	 	 
	 

	 	•
	 	No general equity retirement shall be made,
unless Cofina has adequate levels of capital to
support its existing funding needs.
	 
	 	 	 	 
	 

	 	•
	 	No general equity retirement shall be made
when an evaluation of asset quality in the
portfolio identifies potential losses that
exceed the allowance for loan losses.

136

 

	 	 	 	 	 
	 

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

137

 

8.02 -Equity Retirements of Liquidating Customers

	 	 	 
	General

	 	Cofina follows these practices when making equity retirements
that would be paid to customers which are liquidating their
businesses and assets. Customers receive patronage based on the
annual interest on loan(s) they have with Cofina. These
investments often represent a significant asset for the
customers.
	 
	 	 
	Authority

	 	The Cofina Board of Directors has sole authority to make equity
retirements to customers in liquidation. Liquidation includes
both court supervised and customer directed.
	 
	 	 
	Criteria

	 	In most cases, retirements to customers in liquidation will be
part of the general equity retirements that apply to all
customers. The annual retirements for liquidating
customers/shareholders remain at the sole discretion of the
Cofina Board of Directors.
	 
	 	 
	 

	 	In these cases, the loan officer must recommend
whether an equity retirement will be applied against
Cofina loans or returned to the customer to settle
other debts or equity claims. Generally, if there
are Cofina loans outstanding, cash paid on
retirements should be applied to outstanding
loans.

138

 

8.03 – 1099PAT Processing

	 	 	 
	General

	 	1099PAT tax forms are mailed out
to Cofina customers prior to January 31 each year, which
based on the patronage allocation received.
1099PAT is sent via electronic transmission
to the IRS.
	 
	 	 
	Authority

	 	The Cofina Board of Directors approve the
patronage allocation which is taxable.
	 
	 	 
	Criteria

	 	The Harland Financial E-Bond
modual is used to
produce the 1099PAT forms as well as sending the
electronic transmission to the IRS.

139

 

9.0 Grain Credit Analysis

Financial Analysis – This section addresses the financial trends, liquidity, solvency,
and profitability strengths and weaknesses of a Grain customer. The following financial
guidelines are used in this analysis. The guidelines include standards for what has been
determined as a Grain Cooperative.

The criteria to determine if a Customer is a Grain Cooperative are as follows:

	 	*	 	Quantity Comparison of Grain Sales compared to Other Sales of the Cooperative

	 
	 	*	 	Qualitative Review by the Loan Officer

The following are ratios and guidelines that will be used in analyzing grain cooperatives:

	 	 	 	 	 
	Liquidity
	 	 	 	 
	Current Ratio
	 	 	>1.1	 
	Working Capital/(Supply Sales + 20% of Grain Sales)
	 	 	7 to 10	%
	Seasonal Loan/Working Capital
	 	 	<4.0	 
	Accounts Receivable Under 60 Days
	 	 	>85	%
	Accounts Receivable Over One Year
	 	 	<1	%
	Inventory/Sales
	 	 	5 to 10	%
	 
	 	 	 	 
	Solvency
	 	 	 	 
	Net Worth/Total Assets
	 	 	50 to 75	%
	Local Net Worth/Local Assets
	 	 	>50	%
	Local Net Worth/Term Debt
	 	 	>1.25	 
	Term Debt/Local Net Worth
	 	 	<80	%
	Term Debt/Fixed Assets + Working Capital
	 	 	<75	%
	Loan Balance/SRV
	 	 	<75	%
	 
	 	 	 	 
	Profitability
	 	 	 	 
	Local Savings/Sales
	 	 	>0.5	%
	Return on Local Net Worth
	 	 	>10	%
	Return on Fixed Assets & Working Capital
	 	 	>10	%
	Return on Local Assets
	 	 	>10	%
	 
	 	 	 	 
	Cash Flow
	 	 	 	 
	Term Debt/Net Funds Available
	 	 	<3.5	 
	CPTD/Net Funds Available
	 	 	<70	%
	Net Funds Available/CPTD
	 	 	>1.5	 
	 
	 	 	 	 
	Operation
	 	 	 	 
	Salaries & Benefits/Gross Income
	 	 	<40	%
	Distribution Expense/GM
	 	 	<50	%
	Bad Debt/Sales
	 	 	<0.1	%

These ratios are guidelines that Cofina uses as a means to communicate the financial position that
it believes allow most local Grain Cooperatives to successfully grow in the future. It is
recognized that few customers will meet or exceed all of these guidelines.

If weakness is apparent, the loan officer should begin to demonstrate how the customer could and
will address issues that raise credit quality problems.

Loan Quality Classification – The Current Ratio and Local Net Savings/Sales are adjusted for grain
cooperatives as follows. The local leverage, debt service coverage, and collateral ratio as well
as management considerations are used for both grain and supply cooperatives.

140

 

Current Ratio

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	A1	 	A2	 	A3	 	M4	 	S5
	Grain
	 	 	>1.50	 	 	 	>1.30	 	 	 	>1.15	 	 	 	>1.0	 	 	 	<1.0	 

Local Net Savings/Sales

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	A1	 	A2	 	A3	 	M4	 	S5
	Grain
	 	 	>2.0	%	 	 	>1.0	%	 	 	>0.5	%	 	 	>0.0	%	 	 	<0.0	%

Cofina will require compliance by all customers (Grain and Ag Supply Coops) with all marketing,
hedging, and current asset control policies set forth by the customer’s by-laws as well as all
state and federal regulations and policies.

141exv10w8

OMNIBUS AMENDMENT AND AGREEMENT

THIS OMNIBUS AMENDMENT, dated as of August 30, 2005 (this “Amendment”), is
entered
into by and among Cofina Funding, LLC (the “Issuer”), Cofina Financial,
LLC (the “Servicer”),
Cenex Finance Association, Inc. (the “Guarantor”), Bank Hapoalim B.M. (the
“Funding Agent”)
and U.S. Bank National Association, as Trustee (in such capacity, the
“Trustee”) and as
Custodian (in such capacity, the “Custodian”), in each of the capacities
in which they appear in
the Agreements (defined below). Capitalized terms used but not defined
herein have the
meanings provided in the Indenture (defined below).

RECITALS

     A. Reference is hereby made to (i) that certain Base Indenture, dated as of
August 10, 2005 (the “Base Indenture”), between the Issuer and the
Trustee, and that certain
Series 2005-A Supplement, dated as of August 10, 2005 (the
“Series Supplement” and together
with the Base Indenture, the “Indenture”), (ii) that
certain Note Purchase Agreement, dated as of
August 10, 2005 (the “Note Purchase Agreement”), by and among the
Issuer, the Funding Agent
and the financial institutions from time to time party thereto as
Committed Purchasers, (iii) that
certain Purchase and Contribution Agreement, dated as of August 10, 2005
(the “Purchase and 
Contribution Agreement”), by and among Cenex Finance Association, Inc., as
Seller, Cofina
Financial, LLC, as Purchaser, and the other Sellers from time to time
party thereto, (iv) that
certain Purchase and Sale Agreement, dated as of August 10, 2005 (the
“Purchase Agreement”),
by and among the Cofina Financial, LLC, as Seller, and the Issuer, (v)
that certain Servicing
Agreement, dated as of August 10, 2005 (the “Servicing
Agreement”), by and among the Issuer,
the Servicer and the Trustee, (vi) that certain Guaranty, dated as of
August 10, 2005 (the
“Guaranty”), by the Guarantor, in favor of the Funding Agent
for the benefit of the Purchasers (as defined in the Note Purchase
Agreement) under the Note Purchase Agreement, the Trustee and the Secured
Parties, (vii) that certain Custodian Agreement, dated as of August 10,
2005, between the Issuer and U.S. Bank National Association, as Trustee
and Custodian, and (viii) the other Transaction Documents (as defined in
the Indenture) (collectively, the documents referred to in clauses (i)
through (viii) above, the “Agreements”).

     B. The parties to the Agreements desire to enter into this Amendment
to increase the maximum facility amount available to the Issuer under the Agreements.

          1. Amendment to Agreements. The “Maximum Funded Amount” and the
“Swingline Facility Limit” (each as defined in the Note Purchase
Agreement), the “Maximum
Principal Amount” (as defined in the Series Supplement), the maximum
aggregate principal
amount of the Cofina Variable Funding Asset-Backed Note, Series 2005-A,
and any similar
references or definitions in the Agreements shall be increased from
$150,000,000.00 to
$200,000,000.00.

 

 

          2. Covenants. The Issuer hereby covenants and agrees, on or prior
to the
date hereof, to execute and deliver a new Note in the amount of
$200,000,000.00 to the Funding
Agent. The Funding Agent hereby covenants and agrees that, upon receipt of
the executed Note
for $200,000,000.00, it shall promptly destroy the prior executed Note in
the amount of
$150,000,000.00.

          3. Conditions Precedent. This Amendment shall become effective as
of the
date hereof when the Funding Agent shall have received an original
counterpart (or counterparts)
of this Amendment, executed and delivered by each of the parties hereto, or
other evidence
satisfactory to the Funding Agent of the execution and delivery of this
Amendment by such
parties.

          4. Reaffirmation of Covenants, Representations and Warranties. Upon
the
effectiveness of this Amendment, each of the Issuer, the Servicer and the
Guarantor hereby
reaffirms all covenants, representations and warranties made in the
Agreements and agrees that
all such covenants, representations and warranties shall be deemed to have
been remade as of the
effective date of this Amendment (except for such representations and
warranties that are limited
by their terms to an earlier date, in which case such representations and
warranties shall speak of
such date).

          5. Representations and Warranties. Each of the Issuer,
the Servicer and the
Guarantor hereby represents and warrants that (i) this Amendment
constitutes a legal, valid and
binding obligation of such Person, enforceable against it in accordance
with its terms, and (ii)
upon the effectiveness of this Amendment, no Event of Default shall exist
under the Agreements.

          6. Reaffirmation of Guaranty. Without limiting the generality of
the
foregoing, the Guarantor hereby reaffirms all of its obligations under the
Guaranty, both before
and after giving effect to this Amendment, and the Guaranty is hereby
ratified and confirmed.

          7. Effect of Amendment. Except as expressly amended and modified by
this
Amendment, all provisions of the Agreements shall remain in full force and
effect. After this Amendment becomes effective, all references in each of
the Agreements to “this Agreement”, “hereof’, “herein”, or words of
similar effect referring to such Agreement shall be deemed to be
references to the applicable Agreement as amended by this Amendment. This
Amendment shall not be deemed to expressly or impliedly waive, amend or
supplement any provision of the Agreements other than as set forth herein.

          8. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts, and each
counterpart shall be
deemed to be an original, and all such counterparts shall together
constitute but one and the same
instrument.

          9. Governing Law. This Amendment shall be governed by, and
construed in
accordance with the law of the State of New York (without reference to its
conflict of law provisions other than Section 5-1401 of the New York
General Obligations Law).

 

 

          10. Section Headings. The various headings of this Amendment are
inserted
for convenience only and shall not affect the meaning or interpretation of
this Amendment, or the Agreements or any provision hereof or thereof.

          It. Authorization/Direction. Pursuant to the Indenture, the Issuer
hereby
authorizes and directs the Trustee to authenticate that certain Cofina
Variable Funding Asset-
Backed Note, Series 2005-A, dated as of the date hereof, in the initial
face amount of
$200,000,000.00 and deliver the same to the Funding Agent.

 

 

     IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of
the date first above written.

	 	 	 	 	 	 	 
	 	 	COFINA FUNDING, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	COFINA FINANCIAL, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	CENEX FINANCE ASSOCIATION, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

OMNIBUS
AMENDMENT AND AGREEMENT

 

 

	 	 	 	 	 	 	 
	 	 	U.S. BANK NATIONAL ASSOCIATION, as	 	 
	 	 	Trustee and Custodian	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	BANK HAPOALIM B.M.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

OMNIBUS
AMENDMENT AND AGREEMENT

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00151-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00151-of-00352.parquet"}]]