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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended November 30, 2002
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number: 000-19320
Ag Services of America, Inc.
(Exact name of registrant as specified in its charter)
Iowa 42-1264455
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1309 Technology Parkway, Cedar Falls, Iowa 50613
(Address of principal executive offices) (Zip Code)
(319) 277-0261
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[X] Yes [ ] No
5,479,514 common shares were outstanding as of January 10, 2003.
AG SERVICES OF AMERICA, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial statements:
Consolidated condensed balance sheets, November 30, 2002
(unaudited) and February 28, 2002 1
Unaudited consolidated condensed statements of income,
three months and nine months ended November 30, 2002 and 2001 2
Unaudited consolidated condensed statements of cash flows,
nine months ended November 30, 2002 and 2001 3
Unaudited consolidated statement of stockholders' equity,
nine months ended November 30, 2002 4
Notes to consolidated condensed financial statements
(unaudited) 5-10
Item 2. Management's discussion and analysis of
financial condition and results of operations 11-17
Item 3. Quantitative and qualitative disclosures
about market risk 17
Item 4. Controls and procedures 17
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on form 8-K: 18
Certifications 19-22
(a) Exhibits
(10.32) Amendment No. 7 To Master Trust Indenture
and Security Agreement 23-37
(10.33) Amendment No. 8 To Master Trust Indenture
and Security Agreement 38-43
(10.34) Amended and Restated Credit Agreement 44-128
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AG SERVICES OF AMERICA, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
November 30, February 28
ASSETS 2002 2002*
(Unaudited)
---------- ----------
CURRENT ASSETS
Cash $2,646 $42
Customer notes receivable, less allowance
for doubtful notes and reserve for
discounts November 30, 2002 $19,141;
February 28, 2002 $10,521 355,052 202,981
Inventory and other assets 546 3,466
Foreclosed assets held for sale 2,514 2,314
Prepaid income taxes - 735
Deferred income taxes, net 7,226 4,030
---------- ----------
Total current assets $367,984 $213,568
---------- ----------
LONG-TERM RECEIVABLES AND OTHER ASSETS
Customer notes receivable, less allowance
for doubtful notes November 30, 2002 $5,425;
February 28, 2002 $4,079; $68,054 $51,166
Loan origination fees, less accumulated
amortization November 30, 2002 $1,707;
February 28, 2002 $513; 100 598
Deferred income taxes, net 2,676 2,335
---------- ----------
$70,830 $54,099
---------- ----------
PROPERTY AND EQUIPMENT
Land and building, less accumulated
depreciation November 30, 2002 $102;
February 28, 2002 None $5,420 $5,316
Equipment, less accumulated depreciation
November 30, 2002 $2,004; February 28, 2002
$1,675 1,460 818
---------- ----------
$6,880 $6,134
---------- ----------
$445,694 $273,801
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable, including current maturities $353,272 $179,736
Outstanding checks in excess of
bank balances - 10,723
Accounts payable 3,747 1,738
Accrued expenses 3,813 2,233
Income taxes payable 3,447 -
----------- ----------
Total current liabilities $364,279 $194,430
----------- ----------
LONG-TERM LIABILITIES
Notes payable, less current maturities $3,746 $7,904
----------- ----------
STOCKHOLDERS' EQUITY
Capital stock $24,477 $24,396
Retained earnings 54,494 48,481
Accumulated other comprehensive income (loss) (1,302) (1,410)
----------- ----------
$77,669 $71,467
----------- ----------
$445,694 $273,801
=========== ==========
*Condensed from Audited Financial Statements.
See Notes to Consolidated Financial Statements.
-1-
AG SERVICES OF AMERICA, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
Three Months and Nine Months Ended November 30, 2002 and 2001
(Dollars in Thousands, Except Per Share Amounts)
Three Months Ended Nine Months Ended
November 30, November 30,
---------------------- ----------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Net revenues:
Farm inputs $21,744 $17,656 $366,832 $277,156
Financing income 8,874 7,448 24,277 22,417
---------- ---------- ---------- ----------
$30,618 $25,104 $391,109 $299,573
---------- ---------- ---------- ----------
Cost of revenues:
Farm inputs $19,600 $15,816 $349,948 $264,497
Financing expense 4,419 3,741 12,268 11,648
Provision for doubtful notes 711 484 7,616 5,435
---------- ---------- ---------- ----------
$24,730 $20,041 $369,832 $281,580
---------- ---------- ---------- ----------
Income before operating
expenses and income taxes $5,888 $5,063 $21,277 $17,993
Operating expenses 3,694 3,078 11,508 9,601
---------- ---------- ---------- ----------
Income before income taxes $2,194 $1,985 $9,769 $8,392
Income taxes 840 688 3,756 3,237
---------- ---------- ---------- ----------
Net income $1,354 $1,297 $6,013 $5,155
========== ========== ========== ==========
Earnings per share:
Basic $0.25 $0.24 $1.10 $0.95
========== ========== ========== ==========
Diluted $0.25 $0.24 $1.09 $0.94
========== ========== ========== ==========
Weighted average shares:
Basic 5,479,514 5,458,490 5,476,577 5,398,336
========== ========== ========== ==========
Diluted 5,489,903 5,487,455 5,502,488 5,487,956
========== ========== ========== ==========
See Notes to Consolidated Financial Statements.
-2-
AG SERVICES OF AMERICA, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended November 30, 2002 and 2001
(Dollars in Thousands)
2002 2001
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $6,013 $5,155
Adjustments to reconcile net income to
net cash (used in) operating activities:
Depreciation 507 498
Amortization 1,194 306
Deferred income taxes (3,597) -
(Increase) in customer notes receivable (168,959) (103,674)
Changes in assets and liabilities 10,691 15,675
---------- ----------
Net cash (used in) operating activities ($154,151) ($82,040)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
(Purchases) of building and
equipment,net ($1,254) ($2,989)
(Purchases) of foreclosed assets
held for sale, net (200) (1,442)
---------- ----------
Net cash (used in) investing activities ($1,454) ($4,431)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings $366,253 $302,556
Principal payments on borrowings (196,706) (205,324)
(Decrease) in excess of outstanding
checks over bank balances (10,723) (3,934)
(Increase) in loan origination fees (696) (76)
Proceeds from issuance of capital stock,
net 81 685
---------- ----------
Net cash provided by financing
activities $158,209 $93,907
---------- ----------
Increase in cash $2,604 $7,436
CASH
Beginning 42 61
---------- ----------
Ending $2,646 $7,497
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $10,422 $10,371
Income taxes $3,171 $4,342
See Notes to Consolidated Financial Statements
-3-
AG SERVICES OF AMERICA, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Nine Months Ended November 30, 2002
(Dollars in thousands)
Capital Stock
--------------------------
Accumulated
Other
Shares Retained Comprehensive Comprehensive
Issued Amount Earnings Income (Loss) Total Income
------------ ------------ ------------ ------------ ------------ ------------
Balance,
February 28, 2002 5,468,864 $24,396 $48,481 ($1,410) $71,467
Comprehensive income:
Net income - - 6,013 - 6,013 $6,013
Other comprehensive
income, net of tax - - - 108 108 108
------------
Total comprehensive income $6,121
============
Issuance of capital stock
upon the exercise
of options 10,550 80 - - 80
Issuance of captial stock
under the stock
purchase plan 100 1 - - 1
------------ ------------ ------------ ------------ ------------
Balance, November 30, 2002 5,479,514 $24,477 $54,494 ($1,302) $77,669
============ ============ ============ ============ ============
See Notes to Consolidated Financial Statements
-4-
AG SERVICES OF AMERICA, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared
in accordance with the instructions of Form 10-Q and Rule 10-01 of
Regulation S-X. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted. It is suggested these interim consolidated condensed
financial statements be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Report for the year
ended February 28, 2002 ("Fiscal 2002"). In the opinion of management,
all adjustments (which include only normal recurring adjustments)
necessary for a fair presentation of the financial position, results of
operations and cash flows for the interim periods presented have been
made. Operating results for the nine month period ended November 30, 2002
are not necessarily indicative of the results that may be expected for
the year ending February 28, 2003 ("Fiscal 2003").
Principles of Consolidation
The consolidated financial statements include the accounts of Ag Services of
America, Inc. (the Company) and its wholly owned subsidiaries, Ag Acceptance
Corporation and Powerfarm, Inc. All material intercompany balances and
transactions have been eliminated in consolidation.
According to the terms related to the asset backed securitized financing
program as described in Note 3 of the consolidated condensed financial
statements, the Company formed Ag Acceptance Corporation, a wholly owned,
special purpose corporation.
In conjunction with the Company's e-commerce initiative, the Company
created Powerfarm, Inc. a wholly owned subsidiary which operates and
manages the Company's website Powerfarm.com.
Revenue Recognition
The Company has decided that effective the fourth quarter of the current
fiscal year, the Company will present revenues associated with the cash
advances for fuel, irrigation, land rents and other farm inputs and revenues
associated with the input only program on a net reporting basis in contrast
to the current gross reporting basis. The input only program is a
financing program provided by the Company for various suppliers and
manufacturers. The Company has decided to report its revenue in this
manner because it believes this will be a preferable presentation under
current generally accepted accounting principles. This presentation
would have the impact of reducing farm input revenues and cost of farm
input revenues for the nine month periods ended November 30, 2002 and
2001 by approximately $217 million and $162 million, respectively. For
the three months ended November 30, 2002 and 2001 the impact would have
reduced farm input revenues and cost of farm input revenues by
approximately $12 million and $9 million, respectively. This
presentation will have no impact on future or past earnings of the Company.
-5-
Note 2. Financing Agreements
The availability of lines of credit is essential to the Company's operations.
As of January 14, 2003, the Company has not yet arranged for financing for
2003 crop year loans in an amount sufficient to allow the Company to meet
expected demand. The Company's total projected financing needs are
approximately $425 million for the 2003 crop year. Financing is currently
in place for $100 million and the Company continues to pursue other
alternatives for the remaining needs. Additionally, the Company's existing
securitized financing program and $75 million revolving credit facility
(which finance 2002 crop loans and can not be used to fund 2003 crop year
loans) expire in June 2003 and March 31, 2003, respectively. The
Company has a short period of time in which to arrange the required
financing because the timing of loan commitments to its customers takes
place largely in January through April of each year. There can be no
assurance the Company will be successful in securing financing and, if
financing is secured, it may be on terms less favorable than current terms.
The Company is taking action in order to secure financing. As described
in Note 3, the Company has entered into a letter of intent with American
Securities Capital Partners, L.P. (ASCP) whereby ASCP has agreed to inject
up to $70 million in capital in the Company, of which $35 million would
be immediately available. The Company believes this transaction will
assist in arranging for the needed financing. However, the letter of
intent is not binding (see Note 3) and finalization of this transaction
is not assured.
In the event the ASCP transaction does not close and alternative financing
cannot be arranged, the Company may be left with limited options. Failure
to obtain adequate 2003 crop year financing would materially impair the
Company's ability to finance sufficient sales of farm inputs in order to
continue operations under the normal course of business and would have a
material adverse impact upon the Company.
Note 3. Anticipated Equity Infusion
The Company signed a letter of intent during November 2002 with ASCP, a
New York private-equity investment firm, under which ASCP has agreed to
invest up to $70 million in Ag Services in exchange for preferred stock.
The letter of intent contemplates that ASCP will contribute up to
$70 million in three annual installments; the first payment of $35 million
is subject, among other things, to satisfactory completion of due
diligence, Ag Services arranging for long-term financing and shareholder
approval. The second and third payments are conditional upon Ag Services
achieving certain economic thresholds. ASCP will have voting control of
Ag Services after the initial funding.
The parties are presently conducting due diligence, negotiating final terms
and documentation. If the transaction is consummated, current shareholders
will incur dilution. There can be no assurance at this time that this
investment will be consummated. The Company is considering various
alternatives in the event the transaction is not completed.
-6-
Note 4. Pledged Assets and Related Debt
During November 2002, the Company negotiated amendments to its Commercial
Paper credit facility and $75 million revolving line of credit. The
Commercial Paper facility was amended to extend its due date to June 2003.
This facility does not allow for the financing of 2003 Crop Year
receivables. The Company's $75 million revolving line of credit was
amended to extend its due date to March 31, 2003. This facility also does
not allow for the financing of 2003 Crop Year receivables.
The Company has an asset backed securitized financing program through
June 2003, with a maximum available borrowing amount of $262 million.
Under the agreement, as amended, the maximum available borrowing amount
declines at each month end as follows: December 2002, $175 million;
January 2003, $118 million, February 2003, $77 million; March 2003,
$47 million; April 2003, $29 million; and May 2003, $5 million). Under
the terms of the facility, the Company sells or contributes certain notes
receivable to Ag Acceptance Corporation ("Ag Acceptance"), a wholly owned,
special purpose subsidiary of the Company. Ag Acceptance pledges its
interest in these notes receivable to a commercial paper market conduit
entity on $205 million of the facility which incurs interest at variable
rates in the commercial paper market (current effective rates range from
1.36% to 1.62% at November 30, 2002) and the remaining $57 million is a
term note with interest at a variable cost of LIBOR plus 50 basis points
(current effective rate is 2.07% at November 30, 2002). The agreement
contains various restrictive covenants, including, among others,
restrictions on mergers, issuance of stock, declaration or payment of
dividends, transactions with affiliates, and requires the Company to
maintain certain levels of equity and pretax earnings. Advances under
the facility are made subject to portfolio performance, financial covenant
restrictions and borrowing base calculations. At November 30, 2002, the
Company had approximately $257 million outstanding under the asset backed
securitized financing program and had a maximum additional amount available
of approximately $3.5 million, based on borrowing base computations as
provided by the agreement.
As previously described, the Company also has a $75 million revolving
credit facility that matures March 31, 2003. Additional terms of the
agreement allow a variable interest rate based on prime (current effective
rate is 7.25% at November 30, 2002). The agreement also contains various
restrictive covenants, including, among others, restrictions on mergers,
issuance of stock, declaration or payment of dividends and loans to
stockholders, and requires the Company to maintain certain levels of
equity and pretax earnings. Advances under the line of credit agreement
are also subject to portfolio performance, financial covenant
restrictions, and borrowing base calculations. At November 30, 2002
the Company had $75.0 million outstanding under the agreement.
Subsequent to the end of the quarter, the Company negotiated a
$100 million revolving line of credit for the 2003 crop year that expires
in November 2003. The agreement allows a variable interest rate based on
LIBOR or prime and contains restrictions similar to the $75 million facility.
The Company has a credit agreement whereby the Company may borrow up to
$3.9 million, with a declining balance provision, on a revolving line of
credit through April 2022. This credit
-7-
agreement is used to finance the Company's corporate headquarters at a fixed
interest rate of 5.74% through November, 2006. The Company had $3.8 million
outstanding under the credit agreement at November 30, 2002. The agreement
also contains various restrictive financial covenants.
In February 2002, three executive officers of the Company, who are also the
original founders of the Company, loaned an aggregate of $4.4 million to
the Company, due on March 31, 2003. The Company makes monthly interest
payments to these officers at a variable interest rate of 0.5% below the
prime rate (current effective rate is 3.75% at November 30, 2002). These
notes are unsecured.
In June 2002, the Company negotiated a credit facility with a financial
institution whereby the Company has the ability to borrow up to $19.2
million effective through July 2003. Advances and repayments under this
credit agreement are based on and secured by the performance of certain
customer notes receivable of the Company. This agreement accrues interest
based on the variable interest rates of the underlying customer notes
receivables ranging from 0.5% below prime to 2.0% over prime (current
effective rates range from 3.75% to 6.25%). At November 30, 2002 the
Company had $15.1 million outstanding under the agreement.
The Company maintains an interest-rate risk-management strategy that uses
derivative instruments to minimize significant, unanticipated earnings
fluctuations caused by interest-rate volatility. The Company's specific
goal is to lower (where possible) the cost of its borrowed funds.
In July 2000, the Company entered into an interest rate swap agreement with
an original notional amount of $30 million. The current notional amount
of $22.5 million decreases by $7.5 million annually in each July 2003, 2004
and 2005. The swap is utilized to manage interest rate exposures and is
designated as a cash flow hedge. The swap agreement is a variable
receive/fixed pay swap which expires in July 2005 and has the effect
of converting the interest rate paid on the notional amount of the
Company's variable rate debt to a fixed rate of 9.78%. The differential
to be paid or received on the swap agreement is recognized and accrued
over the life of the agreement as other comprehensive income based on
the remaining outstanding notional amount or changes in interest rates.
The difference between the Company's actual variable interest expense
and 9.78% on the notional amount for the next twelve months is
reclassified from other comprehensive income and recognized as interest
expense.
Note 5. Commitments and Contingencies
Commitments:
In the normal course of business, the Company makes various commitments that
are not reflected in the accompanying consolidated condensed financial
statements. These include various commitments to extend credit to
customers. At November 30, 2002 and February 28, 2002 the Company
had approximately $12 million and $153 million, respectively, in
commitments to supply farm inputs. No material losses or liquidity
demands are anticipated as a result of these commitments.
-8-
Contingencies:
The Company is named in lawsuits in the ordinary course of business. Counsel
for the Company has advised the Company, while the outcome of various legal
proceedings is not certain, it is unlikely that these proceedings will
result in any liability which will materially affect the financial position
or operating results of the Company.
If the federal multi-peril crop insurance program currently in existence was
terminated or negatively modified and no comparable private or government
program was established, this would have a material adverse effect on the
Company's future operations. The federal government has from time to time
evaluated the federal multi-peril insurance program and is likely to review
the program in the future, and there can be no assurance of the outcome of
such evaluations.
-9-
Note 6. Earnings Per Share
Basic earnings per share is computed by dividing net income available
to common stockholders by the weighted average number of shares outstanding.
In computing diluted earnings per share, the dilutive effect of stock
options during the periods presented increase the weighted average number
of shares.
Presented below is the computation of earnings per share for the periods
indicated:
Three Months Ended Nine Months Ended
November 30 November 30,
---------------------- ----------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Computation of weighted average number
of basic shares:
Basic:
Common shares outstanding at
beginning of the period 5,479,514 5,451,864 5,468,864 5,281,064
Weighted average number of shares
issued during the period 0 6,626 7,713 117,272
---------- ---------- ---------- ----------
Weighted average shares outstanding
(basic) 5,479,514 5,458,490 5,476,577 5,398,336
========== ========== ========== ==========
Net income available to stockholders: $1,353,824 $1,296,761 $6,013,195 $5,155,290
========== ========== ========== ==========
Basic earnings per share: $0.25 $0.24 $1.10 $0.95
========== ========== ========== ==========
Diluted:
Common shares outstanding at
beginning of the period 5,479,514 5,451,864 5,468,864 5,281,064
Weighted average number of shares
issued during the period 0 6,626 7,713 117,272
Weighted average of potential dilutive
shares computed using the treasury
stock method using the average market
price during the period:
Options (1) 10,389 28,965 25,911 89,620
---------- ---------- ---------- ----------
Weighted average shares outstanding
(diluted) 5,489,903 5,487,455 5,502,488 5,487,956
========== ========== ========== ==========
Net income available to stockholders: $1,353,824 $1,296,761 $6,013,195 $5,155,290
========== ========== ========== ==========
Diluted earnings per share: $0.25 $0.24 $1.09 $0.94
========== ========== ========== ==========
(1) Some of the stock options have been excluded because they are
antidilutive.
-10-
AG SERVICES OF AMERICA, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth percentages of net revenues represented by
the selected items in the unaudited condensed statements of income of the
Company for the three and nine months ended November 30, 2002 and 2001.
In the opinion of management, all normal and recurring adjustments necessary
for a fair statement of the results for such periods have been included.
The operating results for any period are not necessarily indicative of
results for any future period.
Percentage Percentage
of Net Revenues of Net Revenues
------------------ ------------------
Three Months Ended Nine Months Ended
November 30, November 30
------------------ ------------------
2002 2001 2002 2001
-------- -------- -------- --------
Net Revenues:
Farm inputs 71.0% 70.3% 93.8% 92.5%
Financing income 29.0% 29.7% 6.2% 7.5%
-------- -------- -------- --------
100.0% 100.0% 100.0% 100.0%
-------- -------- -------- --------
Cost of Revenues:
Farm inputs 64.0% 63.0% 89.5% 88.3%
Financing expense 14.4% 14.9% 3.1% 3.9%
Provision for doubtful notes 2.3% 1.9% 1.9% 1.8%
-------- -------- -------- --------
80.7% 79.8% 94.5% 94.0%
-------- -------- -------- --------
Income before operating expenses
and income taxes 19.3% 20.2% 5.5% 6.0%
Operating expenses 12.1% 12.3% 2.9% 3.2%
-------- -------- -------- --------
Income before income taxes 7.2% 7.9% 2.6% 2.8%
Federal and state income taxes 2.8% 2.7% 1.1% 1.1%
-------- -------- -------- --------
Net income 4.4% 5.2% 1.5% 1.7%
======== ======== ======== ========
-11-
Net Revenues
Net revenues increased $6 million or 22% during the three months ended
November 30, 2002, compared with the three months ended November 30, 2001.
Net revenues increased $92 million or 31% during the nine months ended
November 30, 2002, compared with the nine months ended November 30, 2001.
The increase in net revenues was primarily the result of strong demand
for the Company's AgriFlex Credit(R) Financing Program and an excellent
spring planting season in its primary market area. Financing income as a
percentage of net revenues decreased to 29.0% and 6.2% for the three and
nine months ended November 30, 2002, respectively, from 29.7% and 7.5%
for the same periods of the previous year. The decrease in financing
margin was primarily the result of a decrease in the prime lending rate
by approximately 100 and 200 basis points, over the three and nine months
ended November 30, 2002 as compared to the same period one year ago.
Revenues primarily consist of farm inputs, including seed, fertilizer,
agricultural chemicals, other services (which includes crop insurance
commissions, fees charged to customers and other income) and other farm
inputs including cash advances for land rental, fuel, irrigation, product
application fees and other farm related expenses. Typically, the Company
does not realize any farm input margin on "other farm inputs" revenue.
The Company has decided to prospectively change its revenue recognition
policy effective the fourth quarter of Fiscal 2003 (see Note 1). Farm
input revenue for the three and nine months ended November 30, 2002 and
2001 are summarized below.
Three Months Ended November 30, 2002 November 30, 2001
---------------- ----------------
Farm input revenue (Dollars in thousands)
Input only program $647 3.0% $76 0.4%
Seeds 2,042 9.4% 2,254 12.8%
Chemicals 4,372 20.1% 4,027 22.8%
Fertilizer 1,675 7.7% 1,172 6.6%
Other farm inputs
(cash rents, irrigation,etc.) 11,523 53.0% 8,622 48.8%
Other services (insurance, fees, etc.) 1,485 6.8% 1,505 8.6%
----------------- ----------------
Total farm input revenue $21,744 100.0% $17,656 100.0%
================= ================
Nine Months Ended November 30, 2002 November 30, 2001
---------------- ----------------
Farm input revenue (Dollars in thousands)
Input only program $27,765 7.6% $9,797 3.5%
Seeds $46,955 12.8% $32,302 11.6%
Chemicals $54,425 14.8% $43,167 15.6%
Fertilizer $42,510 11.6% $35,674 12.9%
Other farm inputs
(cash rents, irrigation,etc.) $190,693 52.0% $152,595 55.1%
Other services (insurance, fees, etc.) $4,484 1.2% $3,621 1.3%
----------------- ----------------
Total farm input revenue $366,832 100.0% $277,156 100.0%
================= ================
-12-
Cost of Revenues
The total cost of revenues increased slightly to 80.7% and 94.5% for the
three and nine months ended November 30, 2002, as compared to 79.8% and
94.0% for the three and nine months ended November 30, 2001. The gross
margin on the sale of farm inputs as a percentage of net revenues decreased
slightly to 9.9% for the three months ended November 30, 2002 compared to
10.4% for the three months ended November 30, 2001 and remained constant
at 4.3% for the nine months ended November 30, 2002 and 2001. Gross
margin on financing income decreased to 3.1% and 14.5% of net revenues
for the three and nine months ended November 30, 2002, from 3.6% and 14.8%
for the three and nine months ended November 30, 2001. This decrease in
financing margin was primarily the result of a reduction in the prime
lending rate of 100 and 200 basis points for the three and nine months
ended November 30, 2002 as compared to a year ago. The provision for
doubtful notes increased slightly to 2.3% of net revenues for the three
months ended November 30, 2002 as compared to 1.9% for the three months
ended November 30, 2001 and remained relatively constant at 1.9% and 1.8%
of net revenues, respectively, for the nine months ended November 30, 2002
and 2001.
Operating Expenses
Operating expenses decreased, as a result of management's efforts to control
costs, to 12.1% and 2.9% of net revenues for the three and nine months ended
November 30, 2002, as compared to 12.3% and 3.2% for the three and nine
months ended November 30, 2001. The increase in the dollar amount of
operating expenses is attributed to the Company's growth. Payroll and
payroll related expenses increased to $2.6 and $8.1 million for the three
and nine months ended November 30, 2002 from $2.2 and $6.6 million for the
three and nine months ended November 30, 2001.
Net Income
Net income increased 4.4% to $1.4 million for the three months ended
November 30, 2002 from $1.3 million for the three months ended
November 30, 2001 and increased 16.6% to $6.0 million for the nine months
ended November 30, 2002 from $5.2 million for the nine months ended
November 30, 2001. The increase in net income is primarily attributable to
the increase in volume of the Company's AgriFlex Credit(R) program.
Powerfarm
The Company continues to leverage its business model and use of its credit
products via the Internet through Powerfarm.com. The Powerfarm website
offers growers one of the most comprehensive assortments of credit options
available in the agricultural industry. The site highlights Ag Services
credit programs and allows farmers to apply for credit lines electronically.
In addition, existing customers have the ability to access detailed account
information 24 hours a day through the site.
Inflation
The Company does not believe the Company's net revenues and net income were
significantly impacted by inflation or changing prices in Fiscal 2002 or
the first nine months of Fiscal 2003.
-13-
Seasonality
The Company's revenues and income are directly related to the growing cycle
for crops. Accordingly, quarterly revenues and income vary during each
fiscal year. The following tables show the Company's quarterly net revenues
and net income for Fiscal 2002 and the first three quarters of Fiscal 2003.
This information is derived from unaudited consolidated financial statements,
which include, in the opinion of management, all normal and recurring
adjustments which management consider necessary for a fair statement of
results of those periods. The operating results for any quarter are not
necessarily indicative of the results for any future period.
Fiscal 2003 Quarter Ended
May 31 August 31 November 30 February 28
----------- ----------- ----------- -----------
(Dollars in thousands)
Net revenues $212,007 $148,484 $30,618
Net income $2,157 $2,502 $1,354
Fiscal 2002 Quarter Ended
May 31 August 31 November 30 February 28
----------- ----------- ----------- -----------
(Dollars in thousands)
Net revenues $164,160 $110,310 $25,104 $87,782
Net income $1,834 $2,025 $1,297 $320
Liquidity and Capital Resources
The availability of lines of credit is essential to the Company's operations.
As of January 14, 2003, the Company has not yet arranged for financing for
2003 crop year loans in an amount sufficient to allow the Company to meet
expected demand. The Company's total projected financing needs are
approximately $425 million for the 2003 crop year. Financing is currently
in place for $100 million and the Company continues to pursue other
alternatives for the remaining needs. Additionally, the Company's existing
securitized financing program and $75 million revolving credit facility
(which finance 2002 crop loans and can not be used to fund 2003 crop year
loans) expire in June 2003 and March 31, 2003, respectively. The Company
has a short period of time in which to arrange the required financing
because the time of loan commitments to its customers takes place largely
in January through April of each year. There can be no assurance the
Company will be successful in securing financing and, if financing is
secured, it may be on terms less favorable than current terms.
The Company is taking action in order to secure financing. As described
in Note 3, the Company has entered into a letter of intent with American
Securities Capital Partners, L.P. (ASCP) whereby ASCP has agreed to inject
up to $70 million in capital in the Company, of which $35 million would
be immediately available. ASCP will have voting control of Ag Services
after the initial funding. The Company believes this transaction will
assist in arranging for the needed financing. However, the letter of
intent is not binding (see Note 3) and finalization of this transaction
is not assured.
-14-
In the event the ASCP transaction does not close and alternative financing
cannot be arranged, the Company may be left with limited options. Failure
to obtain adequate 2003 crop year financing would materially impair the
Company's ability to finance sufficient sales of farm inputs in order to
continue operations under the normal course of business and would have a
material adverse impact upon the Company.
The parties are presently conducting due diligence, negotiating final terms
and documentation. If the transaction is consummated, current shareholders
will incur dilution. There can be no assurance at this time that this
investment will be consummated. The Company is considering various
alternatives in the event the transaction is not completed.
At November 30, 2002 the Company had working capital of $3.7 million, a
decrease of $50.1 million over a year ago and a decrease of $15.4 million
since February 28, 2002. The decrease in working capital was due to
the restructuring of the Company's debt as the Company's current
securitized financing program and revolving $75 million credit line
expire June 2003 and March 31, 2003, respectively. As a result of
the expiration of these credit facilities within the next twelve months,
all debts associated with these facilities are classified as current
liabilities on the Company's balance sheet. The Company is presently
considering several financing alternatives. Assuming the new financing
program is in place, working capital is expected to return to a more
normalized, historical amount.
The components of this net decrease, since February 28, 2002, were
(i) $15.4 million decrease resulting from operating activities, consisting
of approximately $6.0 million in net income, $0.5 million in depreciation,
$1.2 million in amortization, and the remainder from a net change in other
working capital items, (ii) capital expenditures of approximately
$1.3 million related to the acquisition of equipment and furniture and
offset by (iii) net proceeds of $0.1 million from the issuance of common
stock upon exercise of options.
During November 2002, the Company negotiated amendments to its Commercial
Paper credit facility and $75 million revolving line of credit. The
Commercial Paper facility was amended to extend its due date to June 2003.
This facility does not allow for the financing of 2003 Crop Year
receivables. The Company's $75 million revolving line of credit was
amended to extend its due date to March 31, 2003. This facility also
does not allow for the financing of 2003 Crop Year receivables.
The Company has an asset backed securitized financing program through
June 2003, with a maximum available borrowing amount of $262 million.
Under the agreement, as amended, the maximum available borrowing amount
declined at each month end as follows: December 2002, $175 million;
January 2003, $118 million, February 2003, $77 million; March 2003,
$47 million; April 2003, $29 million; and May 2003, 5 million). Under
the terms of the facility, the Company sells or contributes certain
notes receivable to Ag Acceptance Corporation ("Ag Acceptance"), a wholly
owned, special purpose subsidiary of the Company. Ag Acceptance pledges
its interest in these notes receivable to a commercial paper market
conduit entity on $205 million of the facility which incurs interest at
variable rates in the commercial paper market (current effective rates
range from 1.36% to 1.62% at November 30, 2002) and the remaining
$57 million is a term note with interest at a variable cost of LIBOR
plus 50 basis points (current effective rate is 2.07% at
November 30, 2002). The agreement contains various restrictive
covenants, including, among others, restrictions on mergers, issuance
of stock, declaration or payment of dividends, transactions with
affiliates, and requires the Company to maintain certain levels of
equity and pretax earnings. Advances under the facility are made
subject to portfolio
-15-
performance, financial covenant restrictions and borrowing base calculations.
At November 30, 2002, the Company had approximately $257 million outstanding
under the asset backed securitized financing program and had a maximum
additional amount available of approximately $3.5 million, based on
borrowing base computations as provided by the agreement.
As previously described, the Company also has a $75 million revolving credit
facility that matures March 31, 2003. Additional terms of the agreement
allow a variable interest rate based on prime (current effective rate is
7.25% at November 30, 2002). The agreement also contains various
restrictive covenants, including, among others, restrictions on mergers,
issuance of stock, declaration or payment of dividends and loans to
stockholders, and requires the Company to maintain certain levels of
equity and pretax earnings. Advances under the line of credit agreement
are also subject to portfolio performance, financial covenant restrictions,
and borrowing base calculations. At November 30, 2002 the Company had
$75.0 million outstanding under the agreement.
Subsequent to the end of the quarter, the Company negotiated a $100 million
revolving line of credit for the 2003 crop year that expires in
November 2003. The agreement allows a variable interest rate based on
LIBOR or prime and contains restrictions similar to the $75 million
facility.
The Company has a credit agreement whereby the Company may borrow up to
$3.9 million, with a declining balance provision, on a revolving line of
credit through April 2022. This credit agreement is used to finance the
Company's corporate headquarters at a fixed interest rate of 5.74% through
November, 2006. The Company had $3.8 million outstanding under the credit
agreement at November 30, 2002. The agreement also contains various
restrictive financial covenants.
In February 2002, three executive officers of the Company, who are also the
original founders of the Company, loaned an aggregate of $4.4 million to
the Company, due on March 31, 2003. The Company makes monthly interest
payments to these officers at a variable interest rate of 0.5% below the
prime rate (current effective rate is 3.75% at November 30, 2002).
These notes are unsecured.
In June 2002, the Company negotiated a credit facility with a financial
institution whereby the Company has the ability to borrow up to $19.2
million effective through July 2003. Advances and repayments under this
credit agreement are based on and secured by the performance of certain
customer notes receivable of the Company. This agreement accrues
interest based on the variable interest rates of the underlying customer
notes receivables ranging from 0.5% below prime to 2.0% over prime
(current effective rates range from 3.75% to 6.25%). At November 30, 2002
the Company had $15.1 million outstanding under the agreement.
The Company maintains an interest-rate risk-management strategy that uses
derivative instruments to minimize significant, unanticipated earnings
fluctuations caused by interest-rate volatility. The Company's specific
goal is to lower (where possible) the cost of its borrowed funds.
In July 2000, the Company entered into an interest rate swap agreement
with an original notional amount of $30 million. The current notional
amount of $22.5 million decreases by $7.5 million annually in each
July 2003, 2004 and 2005. The swap is utilized to manage interest rate
exposures and is designated as a cash flow hedge. The swap agreement
is a variable receive/fixed pay swap which expires in July, 2005 and
has the effect of converting the interest rate paid on the notional
amount of the Company's variable rate debt to a fixed rate of 9.78%.
The differential to be paid or received on
-16-
the swap agreement is recognized and accrued over the life of the agreement
as other comprehensive income based on the remaining outstanding notional
amount or changes in interest rates. The difference between the Company's
actual variable interest expense and 9.78% on the notional amount for the
next twelve months is reclassified from other comprehensive income and
recognized as interest expense.
"Safe Harbor" Statement under the Private Securities Litigation Reform
Act of 1995
Information contained in this report, other than historical information,
should be considered forward looking, which reflect Management's current
views of future events and financial performance that involve a number of
risks and uncertainties. The factors that could cause actual results to
differ materially include, but are not limited to, the following: general
economic conditions within the agriculture industry; competitive factors and
pricing pressures; changes in product mix; changes in the seasonality of
demand patterns; changes in weather conditions; changes in agricultural
regulations; technological problems; the amount and availability under its
asset backed securitization program; unknown risks; and other risks detailed
in the Company's Securities and Exchange Commission filings.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At November 30, 2002 the Company had $355 million outstanding in notes
payable at an average variable interest rate of 2.87%. The Company has
an interest rate swap that effectively converts $22.5 million of this
variable rate debt to a fixed rate instrument. After considering the effect
of this swap, the Company has floating rate debt of $329 million at a
variable interest rate of 2.36%. A 10% increase in the average variable
interest rate would increase interest expense by approximately 24 basis
points. Assuming similar average outstanding borrowings as Fiscal 2002 of
$246 million, this would increase the Company's interest expense by
approximately $0.6 million.
The above sensitivity analysis is to provide information about the
Company's potential market risks as they pertain to an adverse change in
interest rates. The above analysis excludes the positive impact that
increased interest rates would have on financing income as approximately
95% of the Company's notes receivable are variable rate notes.
ITEM 4. CONTROLS AND PROCEDURES
Based on their most recent review, which was completed within 90 days of
the filing of this report, the Company's principal executive officer and
principal financial officer have concluded that the Company's disclosure
of controls and procedures are effective to ensure that information required
to be disclosed by the Company in the reports that it files or submits under
the Securities Exchange Act of 1934, as amended, is accumulated and
communicated to the Company's management, including its principal executive
officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure and are effective to ensure that
such information is recorded, processed, summarized and reported in the
time periods specified in the rules of the Securities and Exchange
Commission. Since the date of the evaluation described above, there have not
been any significant changes in the Company's internal controls or other
factors that could significantly affect those controls.
-17-
AG SERVICES OF AMERICA, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
No exhibits were filed during the period covered by this report.
(b) Reports on Form 8-K
A Form 8-K was filed by the Company on November 27, 2002
disclosing Ag Services' press release regarding the signing
of a letter of intent with American Securities Capital
Partners, L.P. and a planned equity infusion.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AG SERVICES OF AMERICA, INC.
----------------------------
(Registrant)
/s/ John T. Roth
----------------------------
John T. Roth
Vice President Finance and Treasurer
(Principal Financial and Accounting Officer)
Date: January 14, 2003
-18-
CERTIFICATIONS
I, Kevin D. Schipper, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Ag Services of America, Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Securities Exhange Act Rules 13a-14 and 15d-14)
for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date.
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditor any material weaknesses
in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal
controls; and
-19-
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: January 14, 2003 /s/ Kevin D. Schipper
-----------------------
Kevin D. Schipper
Chief Executive Officer
-20-
I, John T. Roth, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Ag Services of America, Inc.;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the
period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Securities Exhange Act Rules 13a-14 and 15d-14)
for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
of this quarterly report(the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date.
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditor any material weaknesses
in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's
internal controls; and
-21-
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: January 14, 2003 /s/ John T. Roth
-----------------------
John T. Roth
Vice President Finance and Treasurer
-22-
AMENDMENT NO. 7
TO
MASTER TRUST INDENTURE AND SECURITY AGREEMENT
THIS AMENDMENT NO. 7 TO MASTER TRUST INDENTURE AND SECURITY
AGREEMENT dated as of November 4, 2002 (this "Amendment") is entered into
by and among AG ACCEPTANCE CORPORATION, as Issuer (the "Issuer"),
AG SERVICES OF AMERICA, INC., as Servicer (the "Servicer"),
U.S. BANK, N.A., (d/b/a FIRSTAR BANK, N.A.), as Trustee (the "Trustee"),
and MBIA INSURANCE CORPORATION, as the Insurer (the "Insurer").
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Indenture (as defined
below and amended hereby).
WHEREAS, the Issuer, the Servicer, the Trustee and the Insurer
have entered into that certain Master Trust Indenture and Security
Agreement, dated as of June 23, 1999 (as amended, restated, supplemented
or otherwise modified from time to time, the "Indenture"); and
WHEREAS, the Issuer, the Servicer, the Trustee and the Insurer
have agreed to amend the Indenture as hereinafter set forth;
NOW THEREFORE, in consideration of the premises and other
mutual covenants contained herein, the parties hereto agree as follows:
SECTION 1. Amendments. The Indenture is hereby amended as
follows, such amendment to be effective as of the date set forth in
Section 2 hereof, and subject to the satisfaction of the conditions
precedent set forth in Section 2 hereof:
1.1 Section 1.01 is hereby amended to add the following
defined terms in the proper alphabetical order:
"First Extension Period" means the period commencing on November 5, 2002
through and including the earlier to occur of (i) the date on which an
extension of the Scheduled Wind Down Date shall have occurred pursuant
to Section 12.01(a) or (ii) December 5, 2002.
"Scheduled Aggregate Outstanding Amount" means, with respect to any
Business Day occurring on or after November 30, 2002, the amount set
forth on Schedule 3.
"Second Extension Period" means, if the Scheduled Wind Down Date
shall have been extended pursuant to Section 12.01(a), the period
commencing on the expiration date of the First Extension Period
through and including the earlier to occur of (i) the date on which
the Scheduled Wind Down Date is extended pursuant to Section 12.01(b)
or (ii) January 6, 2003.
-23-
"Target Aggregate Outstanding Amount" means, (i) with respect to
any Business Day occurring prior to November 30, 2002, the Net
Eligible Advance Balance on such date, and (ii) with respect to any
Business Day occurring on or after November 30, 2002, the lesser of
(a) the Scheduled Aggregate Outstanding Amount as of such date or
(b) the Net Eligible Advance Balance as of such date.
"Third Extension Period" means, if the Scheduled Wind Down Date shall
have been extended pursuant to Section 12.01(b), the period
commencing on the expiration date of the Second Extension Period
through and including January 31, 2003.
1.2 Section 1.01 is hereby amended to delete the defined terms
"Cure Funds" and "Set-Aside Period" appearing therein in their entirety.
1.3 The Indenture is hereby amended to delete clause (i)(A) from
the defined term "Defaulted Loan" contained in Section 1.01 of the Indenture
and to substitute the following therefor:
(A) with respect to any Crop Loan, any such Loan with respect to which
any required payment or portion thereof remains unpaid more than
12 months past the original Due Date therefor; provided, however,
that after the commencement of the Third Extension Period, any Crop Loan
which would otherwise be a Remarketing Loan shall not be a Defaulted Loan
for the purpose of determining whether the Advance made in respect of
such Loan is an Eligible Advance if (i) no required payment or portion
thereof remains unpaid more than 15 months past the original Due Date
therefor and (ii) the outstanding Principal Balance of such Loan, when
added to the aggregate outstanding Principal Balances of all other
Remarketing Loans with respect to which any required payment or portion
thereof remains unpaid more than 12 months but less than 15 months past
the original Due Date therefor, does not exceed $25,000,000,
1.4 The Indenture is hereby amended to delete clause (xi) from the
defined term "Eligible Advance" contained in Section 1.01 of the Indenture
and to substitute the following therefor:
(xi) which with respect to any Crop Loan or any Seed Loan, is due in a
single installment of principal and interest and is payable in full by
no later than (I) the applicable Due Date in January, 2003 with respect
to any such Crop Loan, or (II) the applicable Due Date in December, 2002
with respect to any such Seed Loan, and (B) with respect to any
Intermediate Loan, is due in installments of principal and interest to
be made not less than annually each calendar year and is payable in
full by no later than the applicable Due Date in November, 2007 for the
applicable Intermediate Loan; provided, however, that no Advance with
respect to the Loans identified on Schedule 4 shall fail to be an
Eligible Advance solely because its Due Date does not satisfy the
requirements of this clause (xi).
-24-
1.5 The defined term "Net Outstanding Amount" contained in
Section 1.01 is hereby amended to delete the phrase "Cure Funds" appearing
therein and to replace therefor the word "funds".
1.6 The defined term "Scheduled Wind Down Date" contained in
Section 1.01 is hereby deleted in its entirety and the following
definition substituted therefor:
"Scheduled Wind Down Date" means December 5, 2002, or the latest date
established as the Scheduled Wind Down Date pursuant to Section 12.01 hereof.
1.7 The defined term "Series Allocation Percentage" contained
in Section 1.01 is hereby deleted in its entirety and the following
definition substituted therefor:
"Series Allocation Percentage" means, with respect to each Series,
(a) on any Business Day prior to the Wind Down Date:
(i) if such Series is not in the Amortization Period, a fraction
(expressed as a percentage), (x) the numerator of which equals
the Net Outstanding Amount of all Notes of such Series as of such
Business Day and (y) the denominator of which equals the Net
Outstanding Amount of all Series as of such Business Day;
(ii) if such Series is in the Amortization Period, a fraction
(expressed as a percentage) (x) the numerator of which equals
the Net Outstanding Amount of all Notes of such Series, as of
the applicable Amortization Date, and (y) the denominator of
which equals the Net Outstanding Amount of all Series in their
respective Amortization Periods as of the applicable Amortization
Date for each such Series; and
(b) on any Business Day after the Wind Down Date, a fraction (expressed
as a percentage)(i) the numerator of which equals the sum of the Net
Outstanding Amount of all Notes of such Series as of the Wind Down
Date and (ii) the denominator of which equals the Net Outstanding Amount
of all outstanding Series of Notes as of the Wind Down Date.
1.8 Section 2.05 of the Indenture is amended to add the following
clause (v) at the end thereof:
(v) Notwithstanding any contrary provision of this Indenture, the Issuer
shall promptly reconvey to the Originator any Advances acquired pursuant
to the Purchase and Contribution Agreement to the extent that such
Advances do not satisfy the requirements of clause (xi) of the
definition of Eligible Advances.
1.9 Section 2.06 of the Indenture is amended to add the following
clause (r) at the end thereof:
-25-
(r) Until the earlier to occur of (i) the commencement of the Third
Extension Period, and (ii) the date on which the entire Outstanding
Principal Balance of all Outstanding Notes have been reduced to zero
and all other Secured Obligations, costs, fees, expenses and other
amounts owing by the Issuer hereunder and under the other Transaction
Documents have been paid in full, the Issuer shall not, and shall
cause the Originator not to, make commitments, whether orally or in
writing, to any Obligors or prospective Obligors with respect to the
funding of any Loans; provided, however, that nothing in this
clause (r) shall prohibit the Originator from making Advances in
respect of any Loans existing on November 4, 2002.
1.10 Section 3.01(c) of the Indenture is amended to delete the
phrase "funds otherwise available for distribution from the Collection
Account pursuant to clause sixth of Section 4.03(c)" appearing at the end
thereof and to replace therefor the phrase "funds distributed to the Issuer
pursuant to Section 4.03".
1.11 Section 3.02(b) of the Indenture is amended to delete the
reference to "4.03(c)" appearing in the last sentence thereof.
1.12 Section 3.04(b) of the Indenture is amended to delete the
phrase "Section 4.03(c) and" appearing therein.
1.13 Section 4.02(a) of the Indenture is amended to delete the
phrase "upon the occurrence of an Event of Default" each time it appears
in the first paragraph thereof.
1.14 Section 4.03(a) of the Indenture is amended to delete the
phrase "Section 4.03(c) below" appearing in the second sentence thereof
and to replace therefor the phrase "this Section 4.03".
1.15 The Indenture is hereby amended to delete Section 4.03(b)
in its entirety and to substitute the following therefor:
(b) Daily Allocation of Funds in the Collection Account
and Reserve Account Prior to the Wind Down Date. Prior to the Wind Down
Date, the Servicer shall, on each Business Day, if the Servicer receives
any Collections, remit all such Collections to the Collection Account on
the Business Day on which such Collections are received. The Servicer
shall instruct the Trustee in the applicable Servicer's Daily Report to,
and the Trustee shall, allocate all Collections and other funds then on
deposit in the Trust Accounts (other than funds which are required to be
returned pursuant to Section 4.02(a) or are required by the terms of any
Supplement to be dealt with in some other manner) to the following items,
in the following order of priority
First, to the Trustee for payment of the Trustee's Fee;
Second, to the payment of the Servicing Fee to the extent
owed to a Successor Servicer which is not an Affiliate of the
Originator or of the Issuer;
Third, to the payment of accrued and unpaid interest on
all Notes;
-26-
Fourth, to the Insurer for the payment of Insurance
Obligations and any other accrued and unpaid fees, costs, expenses
or other obligations owed to the Insurer under this Indenture, any
Supplement, the Master Insurance Agreement or any Trust Insurance
Policy;
Fifth, to be distributed to the Noteholders to reduce
the Outstanding Principal Balance of all Notes in accordance with
their Series Allocation Percentages until the Outstanding Principal
Balances of such Notes have been reduced to the Target Aggregate
Outstanding Amount with respect to such Business Day;
Sixth, to the payment of any other costs, fees, expenses
or other obligations included in the calculation of the Carrying Cost
Amount;
Seventh, to the extent required by this Indenture or any
Supplement, funds on deposit in the Collection Account shall be
deposited to the Trustee's own account, any Defeasance Account or
any other Series Account for the payment of any fees, costs,
expenses or other obligations (including prepayment premiums, if
applicable) owed to the Trustee and/or the Noteholders which are
not payable from funds in the Collection Account (including
payments to reduce the Outstanding Principal Balance of the
Notes in accordance with their Series Allocation Percentages
during any Amortization Period);
Eighth, to the payment of the Servicing Fee to the extent
owed to the Issuer or any Affiliate of it; and
Ninth, to the Issuer, for working capital purposes, in
an amount determined by the Insurer in its sole and absolute
discretion;
Tenth, to the Issuer for the payment of the Purchase
Price of any Eligible Advances pursuant to the terms of the
Purchase and Contribution Agreement on such day; and
Eleventh, either (i) to the Noteholders to reduce
the Outstanding Principal Balance of all Notes in accordance
with their Series Allocation Percentages until the Outstanding
Principal Balances of such Notes have been reduced to zero or
(ii) from and after the commencement of the Third Extension Period,
to the Issuer.
If, on any day prior to the Wind Down Date, the funds
available for distribution from the Collection Account under any of the
immediately preceding clauses First through the Eleventh above are less
than the amount of costs, fees, expenses or other obligations to be paid
pursuant to any such clause, then, in any such case, such available funds
shall be allocated by the Servicer pro rata for distribution to the
Persons to whom such amounts are owed according to the respective amounts
of such obligations held by such Persons and all obligations in lower
priority categories shall remain unsatisfied until the obligations in the
preceding category have been satisfied.
-27-
Collections and other funds distributed for the benefit
of Noteholders of any Series pursuant to this Section 4.03(b) will be
deposited and distributed as specified in the related Supplement, and
amounts so allocated to any Series will not, except as specified in
the related Supplement, be available to the Noteholders of any other
Series.
1.16 Section 4.03(c) is hereby deleted in its entirety.
1.17 Section 4.03(d)(iii) is hereby amended to delete the phrase
"reduced to zero" appearing at the end of clause Second thereof and to
replace therefor the phrase "(i) reduced to the Target Aggregate Outstanding
Amount with respect to such Business Day or (ii) from and after the
occurrence of an Event of Default, reduced to zero".
1.18 Section 7.03 of the Indenture is amended to delete the phrase
"clause Fourth of Section 4.03(c) or" appearing in the last paragraph thereof.
1.19 Section 9.01 of the Indenture is amended to delete clause (v)
thereof in its entirety and to replace the following therefor:
(v) On any day, principal in the amount of at least $67,500,000
shall fail for any reason to be outstanding under that certain Credit
Agreement dated as of July 31, 2000 among Ag Services of America, Inc.,
the various "Lenders" thereunder and Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch,
as "Agent"; provided, however, that from and after the commencement of
the Third Extension Period, such floor shall be reduced to the lesser
of (i) $67,500,000 or (ii) 50% of the Aggregate Outstanding Amount
(but in no case less than $20,000,000).
1.20 Section 9.01 of the Indenture is further amended to (i) add
"or" to the end of clause (w) of such Section 9.01 and (ii) add the
following clause (x) to such Section 9.01:
(x) The Aggregate Outstanding Amount shall be greater than zero
on July 31, 2003.
1.21 Section 12.01 of the Indenture is deleted in its entirety
and replaced with the following therefor:
SECTION 12.01. Extension of the Scheduled Wind Down Date. (a) If on
or before December 5, 2002, the Insurer shall have received from the
Issuer evidence of a written, irrevocable commitment of a financial
institution to fund new Loans of the Originator, in form and
substance satisfactory to the Insurer and in an amount of no less
than $100,000,000, then, effective on the date of a written notice
from the Insurer to the Issuer confirming that such commitment is
satisfactory to the Insurer, the Scheduled Wind Down Date shall
without further action be extended to January 6, 2003.
(b) If (i) the Scheduled Wind Down Date shall have been extended
pursuant to clause (a) above, and (ii) on or before January 6, 2003,
the Insurer shall have received from the Issuer evidence, of (x) the
execution of definitive documentation, in form and substance
satisfactory to the Insurer, with respect to the credit facility
described in clause (a) above and (y) the availability of funding
pursuant to such credit facility then, effective on the
-28-
date of a written notice from the Insurer to the Issuer confirming
that such credit facility is satisfactory to the Insurer, the
Scheduled Wind Down Date shall without further action be extended
to January 31, 2003.
1.22 The Indenture is hereby amended to add Schedule 3
(Scheduled Aggregate Outstanding Amounts) attached hereto as Schedule 3
to the Indenture.
1.23 The Indenture is hereby amended to add Schedule 4
(Other Identified Loans) attached hereto as Schedule 4 to the Indenture.
SECTION 2. Amendment Effective Date. This Amendment shall
become effective as of the date (the "Amendment Effective Date") on
which each of the following conditions precedent shall have been
satisfied:
(a) each of the Issuer, the Servicer, the Trustee and the
Insurer shall have received a copy of this Amendment duly executed
by each of the parties hereto; and
(b) either (i) the Noteholder's Consents and the Liquidity Banks'
Consent attached to this Amendment shall have been duly executed and
delivered by the Majority Noteholders of each Series of Notes; or
(ii) with respect to each Rating Agency, the Rating Agency Condition
shall have been satisfied with respect thereto.
SECTION 3. Covenants, Representations and Warranties of the
Issuer and the Servicer.
3.1 Upon the effectiveness of this Amendment, (i) each of the
Issuer and the Servicer hereby reaffirms all representations and warranties
made by it in the Indenture as amended hereby (except for those
representations and warranties that relate to a specific date) 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 those representations and warranties that relate to a specific date)
and (ii) each of the Issuer and the Servicer hereby represents and warrants
that no Asset Deficiency is continuing and no Event of Default or event
or circumstance which, with the giving of notice or the passage of time,
or both, would constitute an Event of Default shall have occurred and
be continuing.
3.2 Each of the Issuer and the Servicer represents and warrants
that this Amendment constitutes a legal, valid and binding obligation of
such party, enforceable against it in accordance with its terms.
3.3 In consideration for the execution of this Amendment by the
Insurer and the Trustee, and the execution by the Noteholders of their
respective consent to this Amendment, each of the Issuer and the Servicer
hereby waives each and every claim, defense, demand, action and suit of
any kind or nature whatsoever against each of the Insurer, Trustee,
Noteholder and each of their respective directors, officers, shareholders,
employees and agents arising on or prior to the date hereof in connection
with the Indenture, any of the other Transaction Documents and the
transactions contemplated thereby.
-29-
SECTION 4. Reference to and Effect on the Indenture and
the Transaction Documents.
4.1 As of the Amendment Effective Date, each reference in the
Indenture to "this Indenture", "hereunder", "hereof", "herein", or words of
like import shall mean and be a reference to the Indenture as amended
hereby, and each reference to the Indenture in any other Transaction
Document, instrument or agreement executed and/or delivered in connection
with the Indenture shall mean and be a reference to the Indenture as
amended hereby.
4.2 Except as specifically amended above and in connection
herewith, the Indenture and all other documents, instruments and agreements
executed and/or delivered in connection therewith shall remain in full force
and effect and are hereby ratified and confirmed.
4.3 The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of the Trustee
or the Insurer under the Indenture or any other document, instrument or
agreement executed in connection therewith, nor constitute a waiver of any
provision contained therein, except as specifically set forth herein.
SECTION 5. Governing Law. This Amendment will be governed by
and construed in accordance with the internal laws (as opposed to any
conflict of law provisions, except Sections 5-1401 and 5-1402 of the
New York General Obligations Law) and decisions of the State of New York.
SECTION 6. Severability. Each provision of this Amendment shall
be severable from every other provision of this Amendment for the purpose
of determining the legal enforceability of any provision hereof, and the
unenforceability of one or more provisions of this Amendment in one
jurisdiction shall not have the effect of rendering such provision or
provisions unenforceable in any other jurisdiction.
SECTION 7. Execution in Counterparts. This Amendment may be
executed in one or more counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall
be deemed to be an original, but all of which taken together shall
constitute one and the same instrument. Delivery of an executed counterpart
of a signature page to this Amendment by facsimile shall be effective as
delivery of a manually executed counterpart of this Amendment.
SECTION 8. Successors and Assigns. This Amendment shall be
binding upon, and shall inure to the benefit of, the parties hereto and
their respective successors and assigns.
SECTION 9. Headings. Section headings in this Amendment are
included herein for convenience of reference only and shall not constitute
a part of this Amendment for any other purpose.
[remainder of page intentionally left blank]
-30-
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.
AG ACCEPTANCE CORPORATION, as the Issuer
By:
----------------------------
Name:
Title:
AG SERVICES OF AMERICA, INC., as Servicer
By:
----------------------------
Name:
Title:
U.S. BANK, N.A. (d/b/a FIRSTAR BANK, N.A.),
as Trustee
By:
----------------------------
Name:
Title:
MBIA INSURANCE CORPORATION, as Insurer
By:
----------------------------
Name:
Title:
-31-
Schedule 3
SCHEDULE AGGREGATE OUTSTANDING AMOUNTS
Scheduled Aggregate
Date Outstanding Amount
- ------------------------------------------------- -----------------------------
From November 30, 2002 through December 30, 2002 $321,802,000
From December 31, 2002 through January 30, 2003 $218,550,000
From January 31, 2003 through February 27, 2003 $153,293,000
From February 28, 2003 through March 29, 2003 $100,475,000
From March 30, 2003 through April 29, 2003 $46,939,000
From April 30, 2003 through May 30, 2003 $33,148,000
From May 31, 2003 through June 29, 2003 $11,487,000
From June 30, 2003 through July 30, 2003 $1,165,000
From and after July 31, 2003 $0
-32-
Schedule 4
OTHER IDENTIFIED LOANS
(attached)
-33-
CONSENT TO
AMENDMENT NO. 7
TO
MASTER TRUST INDENTURE AND SECURITY AGREEMENT
The undersigned, as the Series 1999-1 Noteholder, hereby
consents to the Amendment No. 7 to the Master Trust Indenture and
Security Agreement dated as of November 4, 2002 (the "Amendment") to
which this Consent is attached. The consent granted hereunder shall
apply only to the foregoing Amendment and shall not be deemed to be a
consent to any other amendment for which the consent of the undersigned
is required.
TRIPLE-A ONE FUNDING CORPORATION, as the
Series 1999-1 Noteholder and Majority Noteholder
By: MBIA Insurance Corporation, as Attorney-in-Fact
By:
--------------------------------------------------
Name:
Title:
-34-
CONSENT TO
AMENDMENT NO. 7
TO
MASTER TRUST INDENTURE AND SECURITY AGREEMENT
The undersigned, as the Series 1999-2 Noteholder hereby consents
to the Amendment No. 7 to the Master Trust Indenture and Security Agreement
dated as of November 4, 2002 (the "Amendment") to which this Consent is
attached. The consent granted hereunder shall apply only to the foregoing
Amendment and shall not be deemed to be a consent to any other amendment
for which the consent of the undersigned is required.
COBANK, ACB, as the Series 1999-2 Noteholder
By:
-----------------------------------------
Name:
Title:
-35-
CONSENT
Dated as of November 4, 2002
Each of the undersigned, as a Liquidity Bank party to that certain
Liquidity Agreement dated as of June 23, 1999 (as amended, restated,
supplemented or otherwise modified from time to time, the "Liquidity
Agreement") by and among TRIPLE-A ONE FUNDING CORPORATION (the "Liquidity
Borrower"), the Liquidity Banks party thereto, and COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A. "Rabobank Nederland", New York Branch,
as agent (the "Liquidity Agent"), hereby consents to (i) Amendment No. 7
to the Master Trust Indenture and Security Agreement dated as of
November 4, 2002 and (ii) Amendment No. 4 to the Series 1999-1 Supplement
dated as of November 4, 2002 (collectively, the "Amendments"). The consent
granted hereunder shall apply only to the foregoing Amendments and shall
not be deemed to be a consent to any other amendment for which the consent
of the undersigned is required.
IN WITNESS WHEREOF, the parties hereto have caused this Consent
to be executed by their respective officers thereto duly authorized as of
the date first written above.
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A. "RABOBANK NEDERLAND",
NEW YORK BRANCH,
as a Liquidity Bank, as Liquidity Agent
and as Liquidity Collateral Agent
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
-36-
U.S. BANK, N.A. (d/b/a Firstar Bank, N.A.),
as a Liquidity Bank
By:
----------------------------------------
Name:
Title:
WELLS FARGO BANK, N.A., as a Liquidity Bank
By:
----------------------------------------
Name:
Title:
THE BANK OF NEW YORK, as a Liquidity Bank
By:
---------------------------------------
Name:
Title:
NATIONAL AUSTRALIA BANK LIMITED,
as a Liquidity Bank
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
-37-
AMENDMENT NO. 8
TO
MASTER TRUST INDENTURE AND SECURITY AGREEMENT
THIS AMENDMENT NO. 8 TO MASTER TRUST INDENTURE AND SECURITY
AGREEMENT dated as of December 5, 2002 (this "Amendment") is entered into
by and among AG ACCEPTANCE CORPORATION, as Issuer (the "Issuer"),
AG SERVICES OF AMERICA, INC., as Servicer (the "Servicer"),
U.S. BANK, N.A., (d/b/a FIRSTAR BANK, N.A.), as Trustee (the "Trustee"),
and MBIA INSURANCE CORPORATION, as the Insurer (the "Insurer").
Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned to such terms in the Indenture (as defined below
and amended hereby).
WHEREAS, the Issuer, the Servicer, the Trustee and the Insurer
have entered into that certain Master Trust Indenture and Security
Agreement, dated as of June 23, 1999 (as amended, restated, supplemented
or otherwise modified from time to time, the "Indenture"); and
WHEREAS, the Issuer, the Servicer, the Trustee and the Insurer
have agreed to amend the Indenture as hereinafter set forth;
NOW THEREFORE, in consideration of the premises and other mutual
covenants contained herein, the parties hereto agree as follows:
SECTION 1. Amendments. The Indenture is hereby amended as
follows, such amendment to be effective as of the date set forth in
Section 2 hereof, and subject to the satisfaction of the conditions
precedent set forth in Section 2 hereof:
1.1 Section 9.01 of the Indenture is amended to (i) add "or" to
the end of clause (x) of such Section 9.01 and (ii) add the following
clause (y) to such Section 9.01:
(y) (i) the Originator shall fail for any reason on or before
December 12, 2002 to provide the Insurer with evidence of the
execution of definitive documentation, in form and substance
satisfactory to the Insurer, with respect to the credit facility
described in Section 12.01(b), or (ii) the obligation of any
financial institution to fund new Loans of the Originator pursuant
to the credit facility described in the foregoing clause (i) shall
fail for any reason to be in full force and effect on any date on
or after December 12, 2002.
1.21 Section 12.01 of the Indenture is deleted in its entirety
and replaced with the following therefor:
SECTION 12.01. Extension of the Scheduled Wind Down Date. (a) If on
or before December 5, 2002, the Insurer shall have received from the
Issuer evidence of a commitment of a financial institution to fund new
Loans of the Originator, in form and substance satisfactory to the
Insurer and in an amount of no less than $100,000,000, then, effective
on the date of a written notice from the Insurer to the Issuer confirming
-38-
confirming that such commitment is satisfactory to the Insurer, the
Scheduled Wind Down Date shall without further action be extended to
December 12, 2002.
(b) If (i) the Scheduled Wind Down Date shall have been extended
pursuant to clause (a) above, and (ii) on or before December 12, 2002,
the Insurer shall have received from the Issuer evidence, of (x) the
execution of definitive documentation, in form and substance
satisfactory to the Insurer, with respect to the credit facility
described in clause (a) above and (y) the availability of funding
pursuant to such credit facility then, effective on the date of a
written notice from the Insurer to the Issuer confirming that such
credit facility is satisfactory to the Insurer, the Scheduled Wind Down
Date shall without further action be extended to January 31, 2003.
SECTION 2. Amendment Effective Date. This Amendment shall become
effective as of the date (the "Amendment Effective Date") on which each of
the following conditions precedent shall have been satisfied:
(a) each of the Issuer, the Servicer, the Trustee and the Insurer
shall have received a copy of this Amendment duly executed by each of
the parties hereto; and
(b) either (i) the Noteholder's Consents attached to this Amendment
shall have been duly executed and delivered by the Majority Noteholders
of each Series of Notes; or (ii) with respect to each Rating Agency, the
Rating Agency Condition shall have been satisfied with respect thereto.
SECTION 3. Covenants, Representations and Warranties of the Issuer
and the Servicer.
3.1 Upon the effectiveness of this Amendment, (i) each of the
Issuer and the Servicer hereby reaffirms all representations and warranties
made by it in the Indenture as amended hereby (except for those
representations and warranties that relate to a specific date) 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 those
representations and warranties that relate to a specific date) and (ii) each
of the Issuer and the Servicer hereby represents and warrants that no Asset
Deficiency is continuing and no Event of Default or event or circumstance
which, with the giving of notice or the passage of time, or both, would
constitute an Event of Default shall have occurred and be continuing.
3.2 Each of the Issuer and the Servicer represents and warrants
that this Amendment constitutes a legal, valid and binding obligation of such
party, enforceable against it in accordance with its terms.
3.3 In consideration for the execution of this Amendment by the
Insurer and the Trustee, and the execution by the Noteholders of their
respective consents to this Amendment, each of the Issuer and the Servicer
hereby waives each and every claim, defense, demand, action and suit of any
kind or nature whatsoever against each of the Insurer, Trustee, Noteholder
and each of their respective directors, officers, shareholders, employees
-39-
and agents arising on or prior to the date hereof in connection with the
Indenture, any of the other Transaction Documents and the transactions
contemplated thereby.
SECTION 4. Reference to and Effect on the Indenture and the
Transaction Documents.
4.1 As of the Amendment Effective Date, each reference in the
Indenture to "this Indenture", "hereunder", "hereof", "herein", or words
of like import shall mean and be a reference to the Indenture as amended
hereby, and each reference to the Indenture in any other Transaction
Document, instrument or agreement executed and/or delivered in connection
with the Indenture shall mean and be a reference to the Indenture as
amended hereby.
4.2 Except as specifically amended above and in connection
herewith, the Indenture and all other documents, instruments and agreements
executed and/or delivered in connection therewith shall remain in full
force and effect and are hereby ratified and confirmed.
4.3 The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of the Trustee
or the Insurer under the Indenture or any other document, instrument or
agreement executed in connection therewith, nor constitute a waiver of any
provision contained therein, except as specifically set forth herein.
SECTION 5. Governing Law. This Amendment will be governed by and
construed in accordance with the internal laws (as opposed to any conflict of
law provisions, except Sections 5-1401 and 5-1402 of the New York General
Obligations Law) and decisions of the State of New York.
SECTION 6. Severability. Each provision of this Amendment shall
be severable from every other provision of this Amendment for the purpose
of determining the legal enforceability of any provision hereof, and the
unenforceability of one or more provisions of this Amendment in one
jurisdiction shall not have the effect of rendering such provision or
provisions unenforceable in any other jurisdiction.
SECTION 7. Execution in Counterparts. This Amendment may be
executed in one or more counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered
shall be deemed to be an original, but all of which taken together shall
constitute one and the same instrument. Delivery of an executed counterpart
of a signature page to this Amendment by facsimile shall be effective as
delivery of a manually executed counterpart of this Amendment.
SECTION 8. Successors and Assigns. This Amendment shall be binding
upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns.
SECTION 9. Headings. Section headings in this Amendment are
included herein for convenience of reference only and shall not constitute
a part of this Amendment for any other purpose.
[remainder of page intentionally left blank]
-40-
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.
AG ACCEPTANCE CORPORATION, as the Issuer
By:
-------------------------------------
Name:
Title:
AG SERVICES OF AMERICA, INC., as Servicer
By:
-------------------------------------
Name:
Title:
U.S. BANK, N.A. (d/b/a FIRSTAR BANK, N.A.),
as Trustee
By:
-------------------------------------
Name:
Title:
MBIA INSURANCE CORPORATION, as Insurer
By:
-------------------------------------
Name:
Title:
-41-
CONSENT TO
AMENDMENT NO. 8
TO
MASTER TRUST INDENTURE AND SECURITY AGREEMENT
The undersigned, as the Series 1999-1 Noteholder, hereby consents
to the Amendment No. 8 to the Master Trust Indenture and Security Agreement
dated as of December 5, 2002 (the "Amendment") to which this Consent is
attached. The consent granted hereunder shall apply only to the foregoing
Amendment and shall not be deemed to be a consent to any other amendment for
which the consent of the undersigned is required.
TRIPLE-A ONE FUNDING CORPORATION, as the
Series 1999-1 Noteholder and Majority Noteholder
By: MBIA Insurance Corporation, as Attorney-in-Fact
By:
-----------------------------------------------
Name:
Title:
-42-
CONSENT TO
AMENDMENT NO. 8
TO
MASTER TRUST INDENTURE AND SECURITY AGREEMENT
The undersigned, as the Series 1999-2 Noteholder hereby consents
to the Amendment No. 8 to the Master Trust Indenture and Security Agreement
dated as of December 5, 2002 (the "Amendment") to which this Consent is
attached. The consent granted hereunder shall apply only to the foregoing
Amendment and shall not be deemed to be a consent to any other amendment
for which the consent of the undersigned is required.
COBANK, ACB, as the Series 1999-2 Noteholder
By:
-------------------------------------------
Name:
Title:
-43-
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of December 11, 2002
by and among
AG SERVICES OF AMERICA, INC.,
as Borrower,
VARIOUS LENDERS,
as described herein,
and
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND", NEW YORK BRANCH,
as agent for the Lenders
-44-
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1
Section 1.1 Defined Terms 1
Section 1.2 Accounting Terms and Calculations 25
Section 1.3 Computation of Time Periods 25
Section 1.4 Other Definitional Terms 25
ARTICLE II TERMS OF THE CREDIT FACILITIES 25
Section 2.1 Lending Commitments 25
Section 2.2 Procedure for Loans 26
Section 2.3 Notes 27
Section 2.4 Conversions and Continuations 28
Section 2.5 Interest Rates, Interest Payments and Default Interest 29
Section 2.6 Repayment 29
Section 2.7 Prepayments 29
Section 2.8 Reduction or Termination of Commitments 31
Section 2.9 Fees 33
Section 2.10 Computation 33
Section 2.11 Payments 33
Section 2.12 Use of Loan Proceeds 34
Section 2.13 Interest Rate Not Ascertainable, Etc. 34
Section 2.14 Increased Cost 34
Section 2.15 Illegality 35
Section 2.16 Capital Adequacy 36
Section 2.17 Funding Losses; Eurodollar Rate Advances 36
Section 2.18 Discretion of Lenders as to Manner of Funding 36
Section 2.19 Taxes 37
ARTICLE III CONDITIONS PRECEDENT 38
Section 3.1 Conditions Precedent to the Amendment and Restatement
of the Original Credit Agreement 38
Section 3.2 Conditions Precedent to all Loans 40
ARTICLE IV REPRESENTATIONS AND WARRANTIES 41
Section 4.1 Organization, Standing, Etc. 41
Section 4.2 Authorization and Validity 41
Section 4.3 No Conflict; No Default 42
Section 4.4 Government Consent 42
Section 4.5 Financial Statement and Condition 42
Section 4.6 Litigation 43
Section 4.7 Environmental, Health and Safety Laws 43
-45-
Section 4.8 ERISA 43
Section 4.9 Federal Reserve Regulations 43
Section 4.10 Title to Property; Leases; Liens 43
Section 4.11 Taxes 44
Section 4.12 Trademarks, Patents 44
Section 4.13 Burdensome Restrictions 44
Section 4.14 Force Majeure 44
Section 4.15 Investment Company Act 44
Section 4.16 Public Utility Holding Company Act 44
Section 4.17 Retirement Benefits 45
Section 4.18 Full Disclosure 45
Section 4.19 Subsidiaries 45
ARTICLE V AFFIRMATIVE COVENANTS 45
Section 5.1 Corporate Existence 45
Section 5.2 Insurance 45
Section 5.3 Reporting Requirements 46
Section 5.4 Taxes and Claims 48
Section 5.5 Maintenance of Property 49
Section 5.6 Books and Records; Inspections and Examinations 49
Section 5.7 Environmental Matters; Reporting 49
Section 5.8 Compliance with Laws 50
Section 5.9 ERISA 51
Section 5.10 Interest Coverage Ratio 51
Section 5.11 Post Closing Matter 51
Section 5.12 Designation of Subsidiaries 52
ARTICLE VI NEGATIVE COVENANTS 53
Section 6.1 Indebtedness 53
Section 6.2 Liens 53
Section 6.3 Contingent Obligations 55
Section 6.4 Mergers and Acquisitions 55
Section 6.5 Investments and Subsidiaries 55
Section 6.6 Restricted Payments 56
Section 6.7 Sale of Assets 57
Section 6.8 Sale and Leaseback 57
Section 6.9 Transactions with Affiliates 58
Section 6.10 Subsidiaries and Affiliates 58
Section 6.11 Minimum Net Worth 58
Section 6.12 Interest Coverage Ratio 58
Section 6.13 Total Indebtedness to Consolidated
Tangible Net Worth Ratio 58
Section 6.14 Average Total Indebtedness to Average Consolidated
Tangible Net Worth Ratio 58
Section 6.15 Misstatements or Omissions 59
Section 6.16 Accounting Principles; Fiscal Year; Tax Year 59
-46-
Section 6.17 Plans 59
Section 6.18 Nature of Business 59
Section 6.19 Suspension of Business Operations 59
Section 6.20 Negative Pledges 59
Section 6.21 Amendments to Securitization Documents 59
Section 6.22 Solvency Ratio 59
Section 6.23 Management Group Indebtedness 59
Section 6.24 Obligor Risk Participations 60
Section 6.25 Borrower Loan Commitments 60
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES 60
Section 7.1 Events of Default 60
Section 7.2 Remedies 63
Section 7.3 Offset 63
ARTICLE VIII THE AGENT 63
Section 8.1 Appointment and Authorization 64
Section 8.2 Note Holders 64
Section 8.3 Consultation With Counsel 64
Section 8.4 Loan Documents 64
Section 8.5 Rabobank and Affiliates 64
Section 8.6 Action by Agent 64
Section 8.7 Credit Analysis 65
Section 8.8 Notices of Event of Default, Etc. 65
Section 8.9 Indemnification 65
Section 8.10A Payments and Collections Prior to an Event of Default 66
Section 8.10B Payments and Collections after an Event of Default 66
Section 8.11 Sharing of Payments 69
Section 8.12 Advice to Lenders 69
Section 8.13 Resignation 70
ARTICLE IX MISCELLANEOUS 70
Section 9.1 Modifications 70
Section 9.2 Expenses 71
Section 9.3 Waivers, etc. 71
Section 9.4 Notices 71
Section 9.5 Taxes 72<