Exhibit 10.6
FARMLAND NATIONAL BEEF PACKING COMPANY, L.P.
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Table of Contents
Page No.
1. Definitions 2
1.1 Defined Terms 2
1.2 Index to Other Definitions 16
1.3 Accounting Terms 17
1.4 Other Defined in Colorado Uniform Commercial Code 17
2. Loans and Letters of Credit 17
2.1 Loans 17
2.1.1 Line of Credit 17
2.1.2 Term Loan 18
2.1.3 Equalization Transfers 18
2.1.4 General Terms regarding the Notes and the Loans 20
2.2 Letters of Credit 22
3. Interest 24
3.1 Interest 24
3.2 Voluntary Conversion of Loans 25
4. Payments; Prepayments; Etc. 26
4.1 Payment of Loans 26
4.2 Optional Prepayments on the Loans 26
4.3 Interim Payments on the Term Loans 26
4.4 Termination of the Line of Credit Loan Commitments 27
4.5 [Intentionally Omitted] 27
5. LIBOR Rate Loans; Increased Costs; Taxes, etc. 28
5.1 LIBOR Rate Loans 28
5.2 Increased Costs 28
5.3 Funding Losses 29
5.4 Capital Adequacy Requirements 30
5.5 Taxes 30
6. Fees 32
6.1 Non-Use Fee 32
6.2 Agent' s Fee 32
6.3 LC Fees 32
6.4 Calculation of Fees 33
6.5 Fees Not Interest; Nonpayment 33
7. Representations and Warranties 33
7.1 Litigation and Proceedings 33
7.2 Other Agreements 33
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Table of Contents
Continued
Page No.
7.3 Licenses, Patents, Etc. 34
7.4 Title to Assets 34
7.5 Tax Liabilities 34
7.6 Indebtedness and Producer Payables 35
7.7 Fictitious Names 35
7.8 Affiliates 35
7.9 Environmental Matters 35
7.10 Bank Accounts 36
7.11 Other Agreements or Restrictions 36
7.12 Intentionally Omitted 36
7.13 Existence 36
7.14 Authority 37
7.15 Binding Effect 37
7.16 Correctness of Financial Statements 37
7.17 Employee Controversies 37
7.18 Compliance with Laws and Regulations 38
7.19 Solvency 38
7.20 Pension Reform Act 38
7.21 Margin Security 38
7.22 Investment Company Act Not Applicable 39
7.23 Public Utility Holding Company Act Not Applicable 39
7.24 No Consent 39
7.25 Full Disclosure 39
7.26 Intellectual Property 39
7.27 Compliance with Federal Food Security Act 40
7.28 Survival of Warranties 40
8. Conditions 40
8.1 Conditions to the Initial Borrowing 40
8.2 Conditions Precedent to All Borrowings, Conversions, Rollovers and Issuances of Letters of Credit 42
8.3 [Intentionally Omitted] 43
9. Affirmative Covenants 43
9.1 Financial Statements 43
9.2 Conduct Business 44
9.3 Maintenance of Properties 44
9.4 Liability Insurance 44
9.5 Property Insurance 45
9.6 Financial Covenants and Ratios 46
9.7 Pension Plans 47
9.8 Notice of Suit, Adverse Change or Matured Default 47
9.9 [Intentionally Omitted] 47
9.10 Books and Records; Separate Existence 47
9.11 Laws and Obligations 48
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Table of Contents
Continued
Page No.
9.12 Environmental Laws 48
9.13 Trade Accounts Payable and Producer Payables 48
9.14 [Intentionally Omitted] 49
10. Negative Covenants 49
10.1 Encumbrances 49
10.2 Consolidations, Mergers or Acquisitions 50
10.3 Deposits, Investments, Advances or Loans 50
10.4 Indebtedness 50
10.5 Guarantees and Other Contingent Obligations 51
10.6 Disposition of Property 51
10.7 Capital Investment Limitations 51
10.8 [Intentionally Omitted] 52
10.9 Loans to Affiliates 52
10.10 Distributions, Prepayments of Debt 52
10.11 Amendment of Organizational Documents 52
10.12 Lease Limitations 53
10.13 Use of Other Fictitious Names 53
10.14 Payment of Subordinated Debt 53
10.15 Fiscal Year 53
10.16 Limitations on Bank Accounts 53
10.17 Use of Trademarks 53
10.18 [Intentionally Omitted] 53
10.19 Ownership of Cattle and Deposits of Cattle with Feeders 53
11. Default Remedies 54
11.1 Acceleration 54
11.2 Other Remedies 54
12. The Agent 55
12.1 Authorization and Action 55
12.2 Agent' s Reliance, Etc. 55
12.3 Notices of Default 56
12.4 The Agent as a Lender, Affiliates 56
12.5 Non-Reliance on Agent and Other Lenders 56
12.6 Indemnification 57
12.7 Successor Agent 57
12.8 Verification of Borrowing Notices 58
12.9 Action Upon Instructions of the Lenders 58
12.10 Action Upon Request of the Borrower 58
13. Miscellaneous 59
13.1 Timing of Payments 59
13.2 Attorney' s Fees and Costs 59
13.3 Expenditures by the Agent 60
13.4 The Agent' s Costs as Additional Liabilities 60
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Table of Contents
Continued
Page No.
13.5 Claims and Taxes 61
13.6 Inspection 61
13.7 Examination of Banking Records 61
13.8 Governmental Reports 62
13.9 Reliance by the Agent, the Issuer and the Lenders 62
13.10 Parties 62
13.11 Applicable Law 62
13.12 Submission to Jurisdiction; Waiver of Bond and Trial By Jury 62
13.13 Application of Payments Waiver 63
13.14 Marshalling; Payments Set Aside 63
13.15 Section Titles 63
13.16 Continuing Effect 64
13.17 No Waiver 64
13.18 Notices 64
13.19 Maximum Interest 66
13.20 Representations by the Lenders 67
13.21 Counterparts and Facsimile Signatures 67
13.22 Set-off 67
13.23 Assignments and Participation 67
13.24 Loan Agreement Controls 70
13.25 Obligation Several 70
13.26 Pro Rata Treatment 70
13.27 Confidentiality 71
13.28 Independence of Covenants 71
13.29 Amendment and Waivers 71
13.30 Binding Effect 72
13.31 Final Agreement 72
13.32 NCI Acquisition 72
13.33 Water Rights Acquisition 72
13.34 Moultrie, Georgia Purchase Option 72 Exhibits
Exhibit 1A Lenders' Commitment 76
Exhibit 1B Borrowing Base Computation 77
Exhibit 1C Borrowing Base Certificate 80
Exhibit 2A Form of Line of Credit Notes 81
Exhibit 2B Form of Term Notes 82
Exhibit 3A Account Debtors Not Subject to Limitations 83
Exhibit 3B Bailee Locations 84
Exhibit 7A Disclosure Exhibit 85
Exhibit 8A List of Closing Documents 86
Exhibit 9A Form of Compliance Certificate 89
Exhibit 9B Schedule of Insurance November 2001 90
Exhibit 13A Form of Assignment and Acceptance 91
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THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT (as amended, modified, supplemented, renewed or restated from time to time, the or this " Agreement" ) is made as of the August 6, 2003, by and among FARMLAND NATIONAL BEEF PACKING COMPANY, L.P., a Delaware limited partnership, (together with its successors as permitted herein, the " Borrower" ), the financial institutions listed on the signature pages hereof and each other financial institution that may hereafter become a party hereto in accordance with the provisions hereof (collectively the " Lenders" and individually a " Lender" ) and U.S. BANK NATIONAL ASSOCIATION, a national banking association (" U.S. Bank" ), as a Lender and in its capacity as Agent for the Lenders hereunder (in such capacity, the " Agent" ).
RECITALS
WHEREAS , the Borrower, the Agent and some of the Lenders are parties to a Second Amended and Restated Credit Agreement dated as of August 29, 2001, (the " Prior Credit Agreement" ), pursuant to which the Agent and the Lenders therein extended certain revolving credit loans and term loans to the Borrower; and
WHEREAS , said Prior Credit Agreement has been amended from time to time; and
WHEREAS , U.S. Premium Beef and other purchasers designated by U.S. Premium Beef intend to acquire (the " Acquisition" ) the approximately 71% ownership interest in the Borrower that U.S. Premium Beef does not currently own from Farmland and its affiliates. In connection with the Acquisition, U.S. Premium Beef and other purchasers designated by U.S. Premium Beef have formed NB Acquisition, LLC, a Delaware limited liability company (" Newco" ), which has formed NB Finance Corp., a Delaware corporation (" Newco Sub" ). Prior to the closing of this Agreement, the general partnership interests in the Borrower held indirectly by Farmland Industries, Inc. and Farmland Foods, Inc. were transferred to Newco (by transfer of their respective membership interests in NBPCo., LLC). After the closing of this Agreement, the Borrower will change its name to National Beef Packing Company, L.P., Newco will merge with and into the Borrower, with the Borrower as the surviving company (the " Merger" ), after which the Borrower will convert from a Delaware limited partnership to a Delaware limited liability company, National Beef Packing Company, LLC (the " Conversion" ). Newco Sub will remain a subsidiary of the Borrower after the Conversion. The funding requirements for the Acquisition will be provided (i) from a loan by the Borrower to Newco of approximately $31,000,000 (the " Newco Loan" ), (ii) from not less than a $46,000,000 cash equity investment in Newco (including deposits previously made) and from approximately $10,000,000 in the form of conversion of deferred compensation owed by the Borrower to certain members of management into equity of Newco (the " Equity Financing" ), and (iii) from the issuance and sale of Debt Securities by Borrower and Newco Sub, the proceeds of which are to be loaned to Newco (as described in the Farmland National Beef Acquisition Financing Bridge Commitment Letter to U.S. Premium Beef dated July 7, 2003 from Deutsche Bank AG and U.S. Bank (the " Bridge Commitment" )) or in lieu thereof, the Bridge Loan to Newco (as described in the Bridge
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Commitment) in an amount of up to $175 million. The Acquisition, the Newco Loan, the Equity Financing, and the Bridge Loan and/or the issuance and sale of the Debt Securities (and any exchange thereof for registered securities) are herein collectively referred to as the " Transaction" .
WHEREAS , the Borrower has requested that the Agent and the Lenders increase the amount of the loans to be made available to the Borrower to be used in part to fund the Newco Loan, and that the Prior Credit Agreement otherwise be amended in certain respects, to accommodate, among other things, the other aspects of the Transaction and the Conversion, and the Agent and the Lenders are willing to do so, subject to numerous amendments of the Prior Credit Agreement; and
WHEREAS , the Borrower, the Agent and the Lenders believe due to the complexity of the proposed amendments to the Prior Credit Agreement, it will be beneficial to amend and restate the Prior Credit Agreement in its entirety.
NOW, THEREFORE, in consideration of the foregoing and of the terms and conditions contained in this Agreement, and for any loans or extensions of credit or other financial accommodations at any time made to or for the benefit of the Borrower by the Agent or the Lenders, the Borrower, the Agent and the Lenders agree to amend and restate the Prior Credit Agreement in full as follows:
1. DEFINITIONS.
1.1. Defined Terms .
When used herein, the following capitalized terms shall have the meanings indicated, whether used in the singular or the plural:
" Accounts" means all present and future rights (including without limitation, rights under any Margin Accounts) of the Borrower to payment for Inventory or other Goods sold or leased or for services rendered, which rights are not evidenced by Instruments or Chattel Paper, regardless of whether such rights have been earned by performance and any other " accounts" (as defined in the Code).
" Account Debtor" shall mean the party which is obligated on or under an Account or a General Intangible.
" Affiliate" means any Person: (a) that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, the Borrower; (b) that directly or beneficially owns or holds ten percent (10%) or more of any class of the equity interest of the Borrower; (c) ten percent (10%) or more of the equity interest of which is owned directly or beneficially or held by the Borrower; or (d) that is a partner or member of the Borrower.
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" Agent" has the meaning set forth in the introduction and shall include any successor agent which has been appointed in accordance with Section 12.7 .
" Agent' s Letter" means the letter agreement between the Borrower and the Agent of substantially even date with this Agreement.
" Applicable Margin" means with respect to Loans under the Line of Credit or Loans under the Term Loan which are Base Rate Loans or LIBOR Rate Loans, with respect to LC Fees and with respect to Non-Use Fees, the rates per annum set forth below for the then applicable Financial Performance Level:
Line of Credit Loans, Term Loans, LC Fee and Non-Use Fee:
Financial
Performance
Level
Base Rate
LIBOR Rate and
LC Fee
Non-Use Fee
Level 1 1.75% 3.25% 0.500%
Level 2 1.50% 3.00% 0.500%
Level 3 1.25% 2.75% 0.500%
Level 4 1.00% 2.50% 0.500%
Level 5 0.75% 2.25% 0.500%
Level 6 0.50% 2.00% 0.500%
" Available Amount" means, at any time, an amount equal to (a) the Line of Credit Loan Commitments minus (b) the sum of (i) the aggregate principal amount of the Line of Credit Loan Liabilities, and (ii) the aggregate amount of the LC Obligations.
" Base Rate" means the greater of (a) the Prime Rate or (b) the Federal Funds Rate plus one half of one percent (.5%).
" Base Rate Loan" means any Loan which bears interest at the Base Rate plus the Applicable Margin.
" Borrower" means at the time of the closing of this Agreement and prior to the Conversion, Farmland National Beef Packing Company, L.P., a Delaware limited partnership, and after the Conversion, National Beef Packing Company, LLC, a Delaware limited liability company.
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" Borrowing Base" means an amount determined and computed as set forth in Exhibit 1B , minus the Insurance Reserve.
" Borrowing Base Certificate" means a certificate in the form of Exhibit 1C , signed as indicated thereon, setting forth the amount of the Borrower' s Borrowing Base.
" Borrowing Base Limit" means, at any time, an amount equal to (a) the Borrowing Base minus (b) the sum of (i) the aggregate principal amount of the Line of Credit Loan Liabilities, and (ii) the aggregate amount of the LC Obligations.
" Business Day" shall mean any day of the year on which commercial banks in New York, New York are not required or authorized to close.
" Carryover Cash Flow" means an amount determined and computed (for use in the calculation of the Fixed Charge Coverage Ratio during the Borrower' s 2003 and 2004 fiscal years, respectively) as follows: at fiscal year end 2002 for use during fiscal year 2003 and at fiscal year end 2003 for use during fiscal year 2004, with cumulative effect, the positive difference, if any, resulting from (a) the Borrower' s Unallocated Cash Flow, minus (b) the minimum amount of Unallocated Cash Flow necessary to maintain compliance with the required minimum Fixed Charge Coverage Ratio at such fiscal year end.
" City" means the City of Dodge City, Kansas, a municipal corporation organized under the law of the State of Kansas.
" Closing Date" means the date of this Agreement.
" Collateral" means all real and personal property in which, pursuant to the terms of the respective Security Documents, the Borrower or any third Person has granted to the Agent a security interest or assigned to the Agent its right, title and interest to secure the Liabilities, provided however , that with respect to any of the Security Documents executed and/or delivered after the date of this Agreement, such property shall not become Collateral until such Security Document has been executed and delivered to the Agent.
" Collateral Accounts" means Deposit Accounts established and maintained in accordance with Section 2.6 of the Security Agreement of even date herewith.
" Commitment" means, as to any Lender, such Lender' s Line of Credit Loan Commitment and Term Loan Commitment, and " Commitments" shall mean collectively, such Commitments for all the Lenders.
" Default" means the occurrence or existence of: (a) an event which, through the passage of time or the service of notice or both, would (assuming no action is taken by the Borrower or any other Person to cure the same) mature into a Matured Default; or (b) an event which requires neither the passage of time nor the service of notice to mature into a Matured Default.
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" Dollars" and " $" mean lawful currency of the United States of America.
" EBITDA" means, for any period of determination, the consolidated net income of the Borrower before provision for income taxes, interest expense (including without limitation, implicit interest expense on capitalized leases), depreciation, amortization and other noncash expenses or charges, excluding (to the extent otherwise included): (a) nonoperating gains (including without limitation, extraordinary or nonrecurring gains, gains from discontinuance of operations and gains arising from the sale of assets other than Inventory or property, plant and equipment) during the applicable period; and (b) similar nonoperating losses during such period. As applicable, EBITDA will be pro forma to reflect the changes in management incentive compensation contemplated by the Transaction and Conversion. Payments made under the Water Services Agreement shall be treated as operating expenses for the purposes of calculating EBITDA.
" Eligible Accounts" means Accounts which the Agent determines in the exercise of the Agent' s reasonable discretion are eligible for inclusion in the Borrowing Base at any particular time. Without limiting the Agent' s right to determine that Accounts do not constitute Eligible Accounts, but without duplication, the following Accounts shall not be Eligible Accounts: (a) all Accounts which are at that time unpaid for a period exceeding twenty one (21) days after the original invoice date of the original invoice related thereto, except for Accounts which are covered by a letter of credit; (b) all Accounts owing by an Account Debtor, except Accounts owing from the Account Debtors listed on Exhibit 3A , if more than ten percent (10%) of the Accounts owing by such Account Debtor are at that time unpaid for a period exceeding that allowed by the preceding subsection a, and all Accounts owing by an Account Debtor listed on Exhibit 3A , if more than fifteen percent (15%) of the Accounts owing by such Account Debtor are at that time unpaid for a period exceeding that allowed by the preceding subsection a, except, in each case, Accounts which are covered by a letter of credit; (c) (i) those Accounts, except Accounts owing from the Account Debtors listed on Exhibit 3A , of an Account Debtor, the aggregate face amount of which is in excess of five percent (5%) of the aggregate face amount of all Eligible Accounts of all Account Debtors (prior to eliminations based on concentration), (ii) those Accounts of an Account Debtor listed on Exhibit 3A , the aggregate face amount of which is in excess of ten percent (10%) of the aggregate face amount of all Eligible Accounts of all Account Debtors (prior to eliminations based on concentration), and (iii) those Accounts of Wal-Mart & affiliates (Sam' s Club, etc.), the aggregate face amount of which is in excess of fifteen percent (15%) of the aggregate face amount of all Eligible Accounts of all Account Debtors (prior to eliminations based on concentration), but in each case only to the extent of such excess; (d) those Accounts owing from the United States or any department, agency or instrumentality thereof unless the Borrower shall have complied with the Assignment of Claims Act to the satisfaction of the Agent; (e) Accounts which arise out of transactions with Affiliates, except Accounts owing from Beef Products, Inc. up to the aggregate amount of $4,000,000; (f) Accounts, except Accounts owing from the Account Debtors listed on Exhibit 3A , of an Account Debtor that are located outside the United States, unless such Accounts are covered by a letter of credit issued or confirmed by a bank acceptable to the Agent; (g) Accounts which are or may be
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subject to rights of setoff or counterclaim by the Account Debtor (to the extent of the amount of such setoff or counterclaim); (h) Accounts in which the Agent does not, for any reason, have a first priority perfected security interest; and (i) Accounts which in the Agent' s opinion may be subject to liens or conflicting claims of ownership, whether such liens or conflicting claims are asserted or could be asserted by any Person except for statutory liens or encumbrances permitted by Section 10.1(a), (b) and (d) . With regard to Accounts included in the Borrowing Base by the Borrower in good faith, a determination by the Agent that such Accounts are not Eligible Accounts in accordance with the foregoing shall be effective on the third business day after notice thereof by the Agent to the Borrower in accordance with Section 13.18 .
" Eligible Inventory" means Inventory which the Agent determines in the exercise of the Agent' s reasonable discretion is eligible for inclusion in the Borrowing Base at any particular time. Without limiting the Agent' s right to determine that Inventory does not constitute Eligible Inventory, but without duplication, the following Inventory shall not be Eligible Inventory: (a) Inventory deemed to be out-of-condition or otherwise unmerchantable by the United States Department of Agriculture, any state' s Department of Agriculture, or any other Governmental Authority having regulatory authority over the Borrower or any of the Borrower' s assets or activities; (b) Inventory for which a prepayment has been received; (c) Inventory in the possession of third parties, unless it is Inventory: (i) at a location shown on Exhibit 3B , for which the Agent has received a bailee letter satisfactory to the Agent, or (ii) covered by negotiable warehouse receipts or negotiable bills of lading issued by either: (A) a warehouseman licensed and bonded by the United States Department of Agriculture or any state' s Department of Agriculture, or (B) a recognized carrier having an office in the United States and in a financial condition reasonably acceptable to the Agent, which receipts or bills of lading designate the Agent directly or by endorsement as the only Person to which or to the order of which the warehouseman or carrier is legally obligated to deliver such Goods; (d) Inventory in which the Agent does not, for any reason, have a first priority perfected security interest; and (e) Inventory which in the Agent' s opinion may be subject to liens or conflicting claims of ownership, whether such liens or conflicting claims are asserted or could be asserted by any Person except for statutory liens or encumbrances permitted by Section 10.1(a), (b) and (d) . With regard to Inventory included in the Borrowing Base by the Borrower in good faith, a determination by the Agent that such Inventory is not Eligible Inventory in accordance with the foregoing shall be effective on the third business day after notice thereof by the Agent to the Borrower in accordance with Section 13.18 .
" Equipment" means any and all Goods, other than Inventory (including without limitation, equipment, machinery, motor vehicles, implements, tools, parts and accessories) which are at any time owned by the Borrower, together with any and all accessions, parts and appurtenances and any other " equipment" (as defined in the Code).
" ERISA" means the Employee Retirement Income Security Act of 1974, as amended and in effect at any time, and all rules, regulations and rulings thereof issued by the Internal Revenue Service or the Department of Labor thereunder.
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" Excess Cash Flow" means, during any period of determination (i) Unallocated Cash Flow; (ii) minus the increase or plus the decease in Working Capital during such period.
" Excess Debt or Equity Proceeds" shall mean, during any period of determination, the Borrower' s net cash proceeds from the issuance of debt instruments for borrowed money, corporate stock or membership or partnership interests, including capital contributions in respect of corporate stock and membership or partnership interests previously issued, except capital contributions or proceeds of the issuance of equity as part of the Transaction or the Conversion and debt issued under this Agreement, the Bridge Loan or the Debt Securities, and except for indebtedness permitted under Section 10.4(d), (e) and (g) .
" Excess Disposition Proceeds" means, during any rolling twelve month period, the Borrower' s net cash proceeds, including insurance or condemnation proceeds, from the sale or other disposition or loss of assets (other than the sale of Inventory in the ordinary course of business or the casualty loss of Inventory), which is not used by the Borrower for the replacement of the assets sold, disposed of or lost or not used for the acquisition of other assets with similar business utility, in excess of $100,000 in the aggregate in said period.
" Farm Products" means all of the Borrower' s harvested or unharvested crops of all types and descriptions, whether annual or perennial and all other personal property of the Borrower used or for use in farming or livestock operations, including without limitation, native grass, grain, harvested crops, feed, feed additives, feed ingredients, feed supplements, fertilizer, hay, silage, supplies (including without limitation, veterinary supplies and related Goods), livestock (including without limitation, the offspring of such livestock and livestock in gestation) and any other " farm products" (as defined in the Code).
" Farmland" means Farmland Industries, Inc., a Kansas cooperative corporation and, prior to the Conversion, a limited partner of the Borrower.
" Federal Funds Rate" means, for any day, the rate of interest per annum (rounded upward, if necessary, to the nearest whole multiple of 1/100th of 1%) equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on such day, or if no such rate is so published on such day, on the most recent day preceding such day on which such rate is so published.
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" Financial Performance Level" means the applicable level of the Borrower' s financial performance determined in accordance with the table and paragraph set forth below.
Financial Performance
Level
Funded Debt to EBITDA Ratio
Level 1
Greater than or equal to 3.50 to 1.0
Level 2
Less than 3.50 to 1.0 but greater than or equal to 3.25 to 1.0
Level 3
Less than 3.25 to 1.0 but greater than or equal to 3.00 to 1.0
Level 4
Less than 3.00 to 1.0 but greater than or equal to 2.75 to 1.0
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