10-K
Andersons, Inc. (ANDE)
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2022 or
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to .
Commission file number: 000-20557
THE ANDERSONS, INC.
(Exact name of the registrant as specified in its charter)
| Ohio | 34-1562374 | |
|---|---|---|
| (State of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| 1947 Briarfield Boulevard | ||
| Maumee | Ohio | 43537 |
| (Address of principal executive offices) | (Zip Code) |
(419) 893-5050
(Telephone Number)
| Securities registered pursuant to Section 12(b) of the Act: | ||
|---|---|---|
| Title of each class: | Trading Symbol | Name of each exchange on which registered: |
| Common stock, $0.00 par value, $0.01 stated value | ANDE | The NASDAQ Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No ý
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. Yes ý No ¨
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ý | Accelerated filer | ☐ |
|---|---|---|---|
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| Emerging growth company | ☐ | ||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ |
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý
The aggregate market value of the registrant's voting stock which may be voted by persons other than affiliates of the registrant was $1,052.1 million as of June 30, 2022, computed by reference to the last sales price for such stock on that date as reported on the Nasdaq Global Select Market. The registrant had 33,540,037 common shares outstanding, no par value, at February 10, 2023.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held on May 5, 2023, are incorporated by reference into Part III (Items 10, 11, 12, 13 and 14) of this Annual Report on Form 10-K. The Proxy Statement will be filed with the Commission within 120 days after the end of the fiscal year to which this report relates.
Table of Contents
THE ANDERSONS, INC.
Table of Contents
| Page No. | |
|---|---|
| PART I. | |
| Item 1. Business | 1 |
| Item 1A. Risk Factors | 4 |
| Item 1B. Unresolved Staff Comments | 11 |
| Item 2. Properties | 12 |
| Item 3. Legal Proceedings | 12 |
| Item 4. Mine Safety | 12 |
| PART II. | |
| Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 13 |
| Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations | 15 |
| Item 7A. Quantitative and Qualitative Disclosures about Market Risk | 25 |
| Item 8. Financial Statements and Supplementary Data | 26 |
| Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 71 |
| Item 9A. Controls and Procedures | 71 |
| Item 9B. Other Information | 73 |
| Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 73 |
| PART III. | |
| Item 10. Directors, Executive Officers and Corporate Governance | 74 |
| Item 11. Executive Compensation | 74 |
| Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 74 |
| Item 13. Certain Relationships and Related Transactions, and Director Independence | 74 |
| Item 14. Principal Accountant Fees and Services | 74 |
| PART IV. | |
| Item 15. Exhibits and Financial Statement Schedules | 75 |
| Item 16. Form 10-K Summary | 78 |
| Signatures | 80 |
Table of Contents
Part I.
Item 1. Business
Company Overview
The Andersons, Inc. (the "Company") is a diversified company rooted in agriculture. Founded in Maumee, Ohio in 1947, the Company is a significant player in the North American agricultural supply chain and conducts its business in the trade, renewables, and plant nutrient sectors.
Segment Descriptions
The Company's operations are classified into three reportable business segments: Trade, Renewables, and Plant Nutrient. Each of these segments is organized based upon the nature of products and services offered and aligns with the management structure. See Note 12 to the Consolidated Financial Statements in Item 8 for information regarding business segments.
Trade
The Trade segment is a diversified business focusing on capturing profits through merchandising and managing logistics across a wide range of commodities. The segment specializes in the movement of physical commodities such as: whole grains, grain products, feed ingredients and domestic fuel products among other agricultural commodities. The Company has a broad geographic footprint with a diversified portfolio of physical commodities, although the principal commodities sold by the Company are corn, wheat and soybeans. Exported commodity sales are made both through intermediaries and direct shipments to foreign countries.
Trade also operates grain elevators across the United States and Canada where income is earned on commodities bought and sold through the elevator, commodities that are purchased and conditioned for resale, and commodities that are held in inventory until a future period, earning an elevation margin. Elevation margins consist of appreciation in the basis value of commodities held, which represents the difference between the cash price of a commodity in one of the Company's facilities and an exchange traded futures price (“basis”); appreciation or depreciation between the future exchange contract months (“spread”); and commodities stored for others upon which storage fees are earned. The segment's asset-based grain handling business is seasonal in nature in that the largest portion of the principal grains are harvested and delivered from the farm and commercial elevators typically in July for wheat and September through November for corn and soybeans; however, depending on market conditions a significant portion of the principal grains may also be bought, sold and handled throughout the year.
Fixed price purchase and sale commitments as well as commodities held in inventory, expose the Company to risks related to adverse changes in market prices. Grain prices are typically comprised of two components, futures prices on regulated commodity exchanges and local basis adjustments. The Company manages the futures price risk by entering into exchange-traded futures and option contracts with regulated commodity exchanges. These regulated commodity exchanges maintain futures markets for the grains merchandised by the Company. Futures prices are determined by worldwide supply and demand. The business also offers a number of unique grain marketing, risk management and origination services to its customers and affiliated ethanol facilities for which it collects fees.
The Company competes in the sale of commodities with other public and private grain brokers, elevator operators and farmer owned cooperative elevators. Some of the Company's competitors are also its customers. Competition is based primarily on price, service and reliability. Because the Company often buys in smaller lots, its competition for the purchase of commodities is generally local or regional in scope, although there are some large national and international companies that maintain regional grain purchase and storage facilities. Significant portions of grain bushels purchased and sold are made using forward contracts.
Renewables
The Renewables segment produces, purchases and sells ethanol and co-products, offers facility operations, and provides risk management and marketing services to the ethanol plants it invests and operates in. The Company co-owns five ethanol plants located in Indiana, Iowa, Kansas, Michigan and Ohio. The segment demonstrates an expertise in ethanol plant management, logistics and commercialization of ethanol and co-products with a focus on leading the industry in margins per bushel. The business leverages partnerships, which are discussed in further detail below, to expand market knowledge and shared technology across its five plants. The segment also operates a merchandising and trade portfolio of ethanol, ethanol co-products and other biofuels, such as renewable feedstocks.
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The Company owns a 50.1% interest in The Andersons Marathon Holdings LLC ("TAMH") and Marathon Petroleum Corporation ("Marathon") owns the remaining 49.9% interest. TAMH is comprised of four ethanol plants located in Iowa, Indiana, Michigan, and Ohio. These plants have a combined nameplate capacity of 405 million gallons, but have a history of outperforming the nameplate capacity. The Company operates these facilities under a management contract, provides corn origination, ethanol marketing, and risk management services. The Company fully consolidates TAMH's results in the Company's Consolidated Financial Statements.
The Company also owns 51% of ELEMENT, LLC ("ELEMENT") and ICM, Inc. ("ICM") owns the remaining 49% interest. ELEMENT is comprised of a 70 million-gallon-per-year bio-refinery in Kansas. The Company operates the facility under a management contract, provides corn origination, ethanol marketing, and risk management services. The Company fully consolidates ELEMENT's results in the Company's Consolidated Financial Statements.
Plant Nutrient
The Plant Nutrient segment is a leading manufacturer, distributor and retailer of agricultural and related plant nutrients, liquid industrial products, corncob-based products, pelleted lime and gypsum products, and various turf fertilizer, pesticide and herbicide products.
In its Plant Nutrient business, the Company competes with regional and local cooperatives, wholesalers and retailers, predominantly publicly owned manufacturers and privately-owned retailers, wholesalers and importers. Some of these competitors are also suppliers. Competition in the nutrient business is based largely on depth of product offering, price, location and service. Sales of agricultural nutrients and turf related products are heaviest in the spring and fall.
The segment is organized into the three divisions listed below:
Ag Supply Chain - The Ag Supply Chain division provides wholesale nutrients and farm services focused primarily in the Eastern Grain belt. The wholesale nutrients business formulates, stores and distributes dry and liquid agricultural nutrients, and soil amendments. The major nutrient products are typically bought and sold as commodities. The farm centers offer a variety of essential crop nutrients, crop protection chemicals and seed products in addition to application and agronomic services to commercial and family farmers.
Engineered Granules - The Engineered Granules division manufactures and distributes proprietary professional lawn care products that are primarily sold into the golf course and professional turf care markets, serving both U.S. and international customers. The Company also performs contract manufacturing services to formulated and packaged fertilizer and weed and pest control products to various markets. It also manufactures pelleted lime, gypsum and value add soil amendments sold into agricultural and turf markets. Additionally, corncob-based products are manufactured for a variety of uses including laboratory animal bedding and private-label cat litter, as well as absorbents, blast cleaners, carriers and polishers. The principal sources for corncobs are seed corn producers. The products are distributed throughout the U.S. and international markets.
Specialty Liquids - The Specialty Liquids division manufactures and distributes a broad range of fertilizers, micronutrients, and soil amendments. The business has a diverse portfolio of specialty products which support more sustainable farming practices and command higher margins. The division is also a manufacturer and distributor of industrial products throughout the U.S. and Puerto Rico including nitrogen reagents, calcium nitrate, deicers, and dust abatement products.
Other
The Company's “Other” activities include corporate income, a small corporate venture fund and the cost for functions that provide support and services to the operating segments. The results include expenses and benefits not allocated to the operating segments.
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Human Capital Resources and Management
As of December 31, 2022, the Company had a total of 2,283 employees across its Trade, Renewables and Plant Nutrient segments and Corporate Services function. This total was comprised of 940 salary, 1,264 hourly and 79 seasonal employees who conducted work at 117 locations across the United States, Canada, United Kingdom, Switzerland, Mexico and Singapore. Sixty-Three of the Company’s locations included less than 10 employees.
•Recruiting: Talent acquisition efforts target both internal and external candidates. The Company advertises opportunities on large online job boards, state job boards and various targeted diversity job boards, as well as geographically specific media channels. The Company strives to find candidates within its geographic footprint to generate a diverse talent pool. It also engages in campus recruiting efforts for entry level professional talent, internships and professional development programs.
•Focus on Safety: Maintaining a high standard of employee safety is paramount to the Company’s core values. Systems and technology have been implemented to support the Company’s safety initiative, maintain a safe working environment and foster a culture of personal accountability. As a part of our employee onboarding process, employees are required to complete core safety courses. A yearly training calendar is followed to ensure timely completion of annual safety training. The Company advanced its safety program in recent years by identifying and focusing on high-risk work that has the potential of causing serious injury or fatality.
•Employee Engagement: The Company maintains an open-door policy that encourages candid conversations between employees and any level of leadership about job-related concerns without fear of reprisal. It regularly solicits employee feedback through informal pulse surveys and formal engagement surveys. It also communicates with employees on a weekly, monthly and quarterly basis through electronic newsletters, town halls, its intranet site and small group meetings with the Chief Executive Officer.
•Talent Development: The Company offers several resources to help employees expand their business knowledge and leadership skills, including merchandising and finance development programs. It hosts a Foundations of Leadership training course to newly appointed supervisors. It also offers a learning management system which houses numerous online courses, videos, audiobooks and podcasts that are available to all employees on demand. Additionally, several in-person trainings are led by internal staff.
•Health and Wellness: The Company partners with a wellness vendor to offer a comprehensive healthy lifestyles program to employees and their spouses. The program uses rewards and incentives to encourage participants to take the necessary steps to manage their health and wellness. The program offers a prediabetes program, personal e-coaching with a licensed health professional and financial wellness webinars.
•Compensation and Benefits: The Company offers market competitive employee compensation and benefits programs. Benefits include health care benefits, dental and vision benefits, disability and life insurance coverages and other a la carte voluntary benefit offerings. Company leave policies include domestic and sexual violence leave, family and medical leave, parental leave and military leave.
•Community Involvement: The Company believes strongly in sharing its time, talent and financial resources to help improve and sustain the quality of life in its communities. It has contributed a portion of its operating income to community organizations every year since its founding in 1947. The Company also encourages employees to share their time and gifts through volunteerism, participation in its annual workplace giving campaign and gift match program.
Government Regulation
Grain sold by the Company must conform to official grade standards imposed under a federal system of grain grading and inspection administered by the United States Department of Agriculture (“USDA”).
The production levels, markets and prices of the grains that the Company merchandises are affected by United States government programs, which include acreage control and price support programs of the USDA. In regard to our investments in ethanol production facilities, much of the ethanol blending is done to meet the Renewable Fuel Standard by adding 10% ethanol.
The U.S. Food and Drug Administration (“FDA”) has developed bioterrorism prevention regulations for food facilities, which require that the Company registers its grain operations with the FDA, provide prior notice of any imports of food or other agricultural commodities coming into the United States and maintain records to be made available upon request that identifies the immediate previous sources and immediate subsequent recipients of its grain commodities.
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The Company, like other companies engaged in similar businesses, is subject to a multitude of federal, state and local environmental protection laws and regulations including, but not limited to, laws and regulations relating to air quality, water quality, pesticides and hazardous materials. The provisions of these various regulations could require modifications of certain of the Company's existing facilities and could restrict the expansion of future facilities or significantly increase the cost of operations. Compliance with environmental laws and regulations did not materially affect the Company's earnings or competitive position in 2022. In each of the countries in which we operate, we are subject to a variety of laws and regulations governing various aspects of our business, including general business regulations as well as those governing the manufacturing, handling, storage, transport, marketing and sale of our products. These include laws and regulations relating to facility licensing and permitting, food and feed safety, the handling and production of regulated substances, nutritional and labeling requirements, global trade compliance and other matters.
Available Information
The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the Securities and Exchange Commission (the “SEC”). The Company is subject to the informational requirements of the Exchange Act and files or furnishes reports, proxy statements and other information with the SEC. Such reports and other information filed by the Company with the SEC are available free of charge at https://theandersonsinc.gcs-web.com/financial-information/sec-filings when such reports are available on the SEC’s website. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. The Company periodically provides other information for investors on its corporate website, www.andersonsinc.com, and its investor relations website, https://theandersonsinc.gcs-web.com. This includes press releases and other information about financial performance, information on corporate governance and details related to the Company’s annual meeting of shareholders. The information contained on the websites referenced in this Form 10-K is not incorporated by reference into this filing. Further, the Company’s website references above are intended to be inactive textual references only.
Item 1A. Risk Factors
The Company's operations are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in this Form 10-K and could have a material adverse impact on the financial results of the Company. The risks described below are not the only risks facing the Company. Additional risks and uncertainties not currently known or currently viewed to be immaterial may also materially and adversely affect business, financial condition or results of operations. These risks can be impacted by factors beyond management's control. The following risk factors should be read carefully in connection with evaluating the Company and the forward-looking statements contained elsewhere in this Form 10-K.
Risks Related to our Business and Industry
Our business is affected by the supply and demand of commodities and is sensitive to factors outside of our control. Adverse price movements could negatively affect our profitability and results of operations.
Our Trade, Renewables and Plant Nutrient businesses buy, sell and hold inventories of agricultural input and output commodities, some of which are readily traded on commodity futures exchanges. Unfavorable weather conditions, both local and worldwide, as well as other factors beyond our control, can affect the supply and demand of these commodities and expose us to liquidity pressures to finance hedges in the commodity business in rapidly rising markets. In our Plant Nutrient business, changes in the supply and demand of these commodities can also affect the value of inventories that we hold, as well as the price of raw materials as we are unable to effectively hedge these commodities. Increased costs of inventory and prices of raw material would decrease our profit margins and adversely affect our results of operations.
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Corn - The principal raw material used to produce ethanol and co-products is corn. As a result, an increase in the price of corn in the absence of a corresponding increase in petroleum-based fuel prices will typically decrease ethanol margins thus adversely affecting financial results in the Renewables segment. At certain levels, the relationship between corn and petroleum-based fuel prices may make ethanol uneconomical to produce for fuel markets. The price of corn is influenced by weather conditions and other factors affecting crop yields, shifts in acreage allocated to corn versus other major crops and general economic and regulatory factors. These factors include government policies and subsidies with respect to agriculture and international trade, and global and local demand and supply. The significance and relative effect of these factors on the price of corn is difficult to predict. Any event that tends to negatively affect the supply of corn, such as adverse weather or crop disease, could increase corn prices and adversely impact income. In addition, we may also have difficulty, from time to time, in physically sourcing corn on economical terms due to supply shortages. High costs or shortages could require us to suspend ethanol operations until corn is available on economical terms, which would have an adverse effect on operating results.
Commodities - While we manage the risk associated with agricultural commodity price changes for our commodity inventory positions with derivative instruments, including purchase and sale contracts, we are unable to offset 100% of the price risk of each transaction due to timing, availability of futures and options contracts and third-party non-performance risk. Furthermore, there is a risk that the derivatives we employ will not be effective in offsetting all of the risks that we are trying to manage. This can happen when the derivative and the underlying value of grain inventories and purchase and sale contracts are not perfectly correlated. Our commodity derivatives, for example, do not perfectly correlate with the basis component of our commodity inventory and contracts. Differences can reflect time periods, locations or product forms. Although the basis component is smaller and generally less volatile than the futures component of our grain market price, basis moves on a large commodity position can significantly impact the profitability of the Trade business.
Our futures, options and over-the-counter contracts are subject to margin calls. If there are large movements in the commodities market, we could be required to post significant levels of margin deposits, which would impact our liquidity. There is no assurance that the efforts we have taken to mitigate the impact of the volatility of the prices of commodities upon which we rely will be successful and any sudden change in the price of these commodities could have an adverse effect on our business and results of operations.
Natural gas - We rely on third parties for our supply of natural gas, which is consumed in the drying of wet grain, manufacturing of certain lawn products, pelleted lime and gypsum, and manufacturing of ethanol. The prices for and availability of natural gas are subject to market conditions. These market conditions often are affected by factors beyond our control such as higher prices resulting from colder than average weather and overall economic conditions. Significant disruptions in the supply of natural gas could impact the operations of the Company's facilities. Furthermore, increases in natural gas prices or changes in our natural gas costs relative to natural gas costs paid by competitors may adversely affect future results of operations and financial position.
Gasoline and oil - We market ethanol as a fuel additive to reduce vehicle emissions from gasoline, as an octane enhancer to improve the octane rating of gasoline with which it is blended and as a substitute for petroleum-based gasoline. As a result, ethanol prices will be influenced by the supply and demand for gasoline and oil and our future results of operations and financial position may be adversely affected if gasoline and oil demand or prices decline substantially.
Potash, phosphate and nitrogen - Raw materials used by the Plant Nutrient business include potash, phosphate and nitrogen, for which prices can be volatile and are driven by global and local supply and demand factors. Significant increases in the price of these commodities may result in lower customer demand and higher than optimal inventory levels. In contrast, reductions in the price of these commodities may create lower of cost or net realizable value adjustments to inventories.
Some of our business segments operate in highly regulated industries. Changes in government regulations or trade association policies could adversely affect our results of operations.
Many of our business segments are subject to government regulation and regulation by certain private sector associations, compliance with which can impose significant costs on our business. Other regulations are applicable generally to all our businesses and corporate functions, including, without limitation, those promulgated under the Internal Revenue Code, the Affordable Care Act, the Employee Retirement Income Security Act and other employment and health care related laws, federal and state securities laws, and the US Patriot Act. Failure to comply with such regulations can result in additional costs, fines or criminal action.
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A significant part of our operations is regulated by environmental laws and regulations, including those governing the labeling, use, storage, discharge and disposal of hazardous materials. Because we use and handle hazardous substances in our businesses, changes in environmental requirements or an unanticipated significant adverse environmental event could have an adverse effect on our business. We cannot assure that we have been, or will at all times be, in compliance with all environmental requirements, or that we will not incur costs or liabilities in connection with these requirements. Private parties, including current and former employees, could bring personal injury or other claims against us due to the presence of, or exposure to, hazardous substances used, stored or disposed of by us, or contained in our products. We are also exposed to residual risk because some of the facilities and land which we have acquired may have environmental liabilities arising from their prior use. In addition, changes to environmental regulations may require us to modify our existing plant and processing facilities which could significantly increase the cost of those operations.
Trade and Renewables - In our Trade and Renewables businesses, agricultural production and trade flows can be affected by government programs and legislation. Production levels, markets and prices of the commodities we merchandise can be affected by U.S. government programs, which include acreage controls and price support programs administered by the USDA and required levels of ethanol in gasoline through the Renewable Fuel Standards as administered by the Environmental Protection Agency ("EPA"). Other examples of government policies that can have an impact on our business include tariffs, taxes, duties, subsidies, import and export restrictions, outright embargoes and price controls on agricultural commodities. Because a portion of our commodity sales are to exporters, the imposition of export restrictions and other foreign countries' regulations could limit our sales opportunities and create additional credit risk associated with export brokers if shipments are rejected at their destination.
International trade disputes can adversely affect agricultural commodity trade flows by limiting or disrupting trade between countries or regions. Trade disputes can lead to the implementing of tariffs on commodities in which we merchandise or otherwise use in our operations. This can lead to significant volatility in commodity prices, disruptions in historical trade flows and shifts in planting patterns in the Company's geographic footprint, which would present challenges and uncertainties for our business. The imposition of new tariffs or uncertainty around future tariff levels can cause significant fluctuations in the futures and basis levels of agricultural commodities, impacting our earnings. We cannot predict the effects that future trade policy or the terms of any negotiated trade agreements and their impact on our business.
Plant Nutrient - Our Plant Nutrient business manufactures certain agricultural nutrients and uses potentially hazardous materials. All products containing pesticides, fungicides and herbicides must be registered with the EPA and state regulatory bodies before they can be sold. The inability to obtain or the cancellation of such registrations could have an adverse impact on our business. In the past, regulations governing the use and registration of these materials have required us to adjust the raw material content of our products and make formulation changes. Future regulatory changes may have similar consequences. Regulatory agencies, such as the EPA, may at any time reassess the safety of our products based on new scientific knowledge or other factors. If it were determined that any of our products were no longer considered to be safe, it could result in the amendment or withdrawal of existing approvals, which, in turn, could result in a loss of revenue, cause our inventory to become obsolete or give rise to potential lawsuits against us. Consequently, changes in existing and future government or trade association polices may restrict our ability to do business and have an adverse impact on the Company's financial results.
We are required to carry significant amounts of inventory across all of our businesses. If a substantial portion of our inventory becomes damaged or obsolete, its value would decrease, and have an adverse impact on the Company's financial results.
We are exposed to the risk of a decrease in the value of our inventories due to a variety of circumstances in all of our businesses. For example, within our Trade and Renewables businesses, there is the risk that the quality of our inventory could deteriorate due to damage, moisture, insects, disease or foreign material. If the quality of our inventory were to deteriorate below an acceptable level, the value of our inventory could decrease significantly. In our Plant Nutrient business, planted acreage, and consequently the volume of fertilizer and crop protection products applied, is partially dependent upon government programs and the producer's perception of demand. Technological advances in agriculture, such as genetically engineered seeds that resist disease and insects, or that meet certain nutritional requirements, could also affect the demand for our crop nutrients and crop protection products. Either of these factors could render some of our inventory obsolete or reduce its value.
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Our indebtedness could negatively affect our financial condition, decrease our liquidity and impair our ability to operate the business.
If cash on hand is insufficient to pay our obligations or margin calls as they come due at a time when we are unable to draw on our credit facility, it could have an adverse effect on our ability to conduct our business. Our ability to make payments on and to refinance our indebtedness will depend on our ability to generate cash in the future. Our ability to generate cash is dependent on various factors. These factors include general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Certain of our long-term borrowings include provisions that require minimum levels of working capital and equity and impose limitations on additional debt. Our ability to satisfy these provisions can be affected by events beyond our control, such as the demand for and the fluctuating price of commodities. Noncompliance with these provisions could result in default and acceleration of long-term debt payments.
We face increasing competition and pricing pressure from other companies in our industries. If we are unable to compete effectively with these companies, our sales and profit margins would decrease, and our earnings and cash flows would be adversely affected.
The markets for our products in each of our business segments are highly competitive. While we have substantial operations in certain of the regions where we operate, some of our competitors are significantly larger, compete in wider markets, have greater purchasing power, and have considerably larger financial resources. We also may enter into new markets where our brand is not recognized and in which we do not have an established customer base. Competitive pressures in all of our businesses could affect the price of, and customer demand for, our products, thereby negatively impacting our profit margins and resulting in a loss of market share.
Our Trade and Renewables businesses use derivative contracts to reduce the impact of volatility in the commodity markets. Non-performance by the counterparties to those contracts could adversely affect our future results of operations and financial position.
A significant amount of purchases and sales within the Trade and Renewables segments are made through forward contracting, much of which includes a natural back-to-back hedging relationship. In addition, the Company uses exchange traded and, to a lesser degree, over-the-counter contracts to further reduce volatility in changing commodity prices. A significant adverse change in commodity prices could cause a counterparty of one or more of our derivative contracts to not perform on its obligation.
We face increasing exposure to country risk in countries that face financial, political, and economic unrest through unsecured credit, inventory, forward contract risk or payment origination that could adversely affect our future results of operations, financial position, and cash flows.
With our 2021 launch of the Company’s Switzerland merchandising business, we have increased our international supply chain operations and exposure. With the increased international presence comes additional country risk through trade flows around the globe with direct exposure to the counterparty, via contract mark-to-market exposure, unsecured accounts receivable or inventory in the country. In certain areas in which we trade (both origination and destination) country risk is more prevalent given the country’s political and/or economic situations like Russia’s invasion of Ukraine. The addition of purchases and sales of grain in vessel sized quantities to support the Switzerland-based businesses increases the size and potential severity of our country risk. Additionally, there could be a rapid increase in interest rates creating difficulty for our counterparties to access U.S. dollars making it difficult to collect accounts receivable timely. We have engaged third parties to provide assessments of country risk and business ratings driven by economic indicators. We also have established counterparty credit limits and various monitoring agreements. Additionally, we have a diverse customer base, so we have the ability to divert cargo in transit to another counterparty, country, or region to limit the exposure to a material financial loss.
Our business involves considerable safety risks. Significant unexpected costs and liabilities would have an adverse effect on our profitability and overall financial position.
Due to the nature of some of the businesses in which we operate, we are exposed to significant operational hazards such as grain dust explosions, fires, malfunction of equipment, abnormal pressures, blowouts, pipeline and tank ruptures, chemical spills or run-off, transportation accidents and natural disasters. Some of these operational hazards may cause personal injury or loss of life, severe damage to or destruction of property and equipment or environmental damage and may result in suspension of operations and the imposition of civil or criminal penalties. If grain dust were to explode at one of our elevators, if an ethanol plant were to explode or catch fire, or if one of our pieces of equipment were to fail or malfunction due to an accident or improper maintenance, it could put our employees and others at serious risk.
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We own several aging assets that require regular assessment and continual investments in maintenance capital. If we experience catastrophic damage to our facilities due to structural integrity, this could result in disruptions to operations, potential safety incidents and losses not covered by insurance.
The Company has several aging assets that require continual maintenance to remain reliable and safe to operate. Mitigating asset structural integrity risk is critical to avoid property damage claims, business interruptions, and injuries. Engineers undergo inspections of assets regularly and based on the nature of our business there are some heightened risks. For example, risk of bin failures and fires in bins are mitigated by exercising caution with moving grain and controlling temperatures, respectively. We also have an increased focus on safety and training employees to be able to identify potential safety and asset integrity issues. We also are undergoing capital spending allocations to ensure that proper maintenance can occur timely. To help mitigate losses in the event of a claim, we are insured under inventory, property, liability and business interruption policies. However, these policies are subject to deductibles and certain limits. Although we believe we have appropriate levels of insurance to cover material losses, if we continue to experience insurable claims, our annual insurance premiums could increase, and some insurance carriers may cease to cover us. Obtaining adequate insurance at that point could have additional costs and lesser coverage. Then, the occurrence of a claim, could have a material adverse effect on our reputation, financial condition and results of operations.
Adverse weather conditions, including as a result of climate change, may adversely affect the availability, quality and price of agricultural commodities and agricultural commodity products, as well as our operations and operating results.
Adverse weather conditions have historically caused volatility in the agricultural commodity industry and consequently in our operating results by causing crop failures or significantly reduced harvests, which may affect the supply and pricing of the agricultural commodities that we sell and use in our business, reduce demand for our fertilizer products and negatively affect the creditworthiness of agricultural producers who do business with us. A significant portion of the Company's assets are exposed to conditions in the Eastern Grain Belt. In this region, adverse weather during the fertilizer application, planting, and harvest seasons can have negative impacts on our Trade, Renewables and Plant Nutrient businesses. Higher basis levels or adverse crop conditions in the Eastern Grain Belt can increase the input costs or lower the market value of our products relative to other market participants that do not have the same geographic concentration.
Additionally, the potential physical impacts of climate change are uncertain and may vary by region. These potential effects could include changes in rainfall patterns, water shortages, changing sea levels, changing storm patterns and intensities, and changing temperature levels that could adversely impact our costs and business operations, the location, costs and competitiveness of agricultural commodity production and related storage and processing facilities and the supply and demand for agricultural commodities. These effects could be material to our results of operations, liquidity or capital resources.
The Company faces risks related to international conflicts, acts of terrorism and wars, such as the ongoing conflict between Russia and Ukraine, that may adversely impact the Company's financial condition or results of operations.
Geopolitical instability and conflicts including acts of terrorism, threats of war or actual war, could cause disruptions in our ability to sell and ship products, collect payments from, and do business with certain customers based on logistic challenges, safety concerns, and conforming with regulatory compliance. There could be trade restrictions including export restrictions and tariffs which would increase costs and have an adverse effect on results from operations.
In late February of 2022, Russia initiated a military operation in Ukraine. The Black Sea region is a key international grain and fertilizer export market and the conflict between Russia and Ukraine could continue to disrupt supply and logistics, cause volatility in prices, and impact global margins due to increased commodity, energy, and input costs. While the Company does not have any assets or employees located in the Black Sea region, it does engage in business with parties operating in the region, including some grain originations directly from Ukrainian producers. The conflict could negatively affect our ability to secure product in this region and the credit worthiness of agricultural producers with which we do business. The Company currently does not purchase fertilizer directly from this region, however, the impact to the global fertilizer supply could put the Company’s ability to secure product at risk over time.
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General Risk Factors
We rely on a limited number of suppliers for certain of our raw materials and other products and the loss of one or several of these suppliers could increase our costs and have a material adverse effect on any one of our business segments.
We rely on a limited number of suppliers for certain of our raw materials and other products. If we were unable to obtain these raw materials and products from our current vendors, or if there were significant increases in our supplier's prices, it could significantly increase our costs and reduce our profit margins.
We are subject to global and regional economic downturns and related risks including health epidemics, pandemics and similar outbreaks.
The level of demand for our products is affected by global and regional demographic and macroeconomic conditions, including population growth rates, changes in standards of living and the occurrence of any health-related risks. A significant downturn in global economic growth, or recessionary conditions in major geographic regions, may lead to reduced demand for agricultural commodities and food products, which could adversely affect our business and results of operations. The occurrence of health-related risks including epidemics or global pandemics such as COVID-19 may adversely affect the economy. The COVID-19 pandemic has had unpredictable impacts on global economies, financial markets, and society. The extent to which similar outbreaks or future pandemics impact our business going forward will depend on the duration or scope of the outbreak and how governmental, businesses, and society respond, along with the economic impact including financial market volatility. The pace of economic improvement is uncertain and there can be no assurance that economic and/or political conditions will not continue to affect market and consumer confidence or deteriorate further in the near term.
The Company may not be able to effectively integrate businesses it acquires.
We continuously look for opportunities to enhance our existing businesses through strategic acquisitions. The process of integrating an acquired business into our existing business and operations may result in unforeseen operating difficulties and expenditures as well as require a significant amount of management resources. There is also the risk that our due diligence efforts may not uncover significant business flaws or hidden liabilities. In addition, we may not realize the anticipated benefits of an acquisition and they may not generate the anticipated financial results. Additional risks may include the inability to effectively integrate the operations, products, technologies and personnel of the acquired companies. The inability to maintain uniform standards, controls, procedures and policies would also negatively impact operations.
If our goodwill, amortizable intangible assets and long-lived assets become impaired, then we could be required to record a significant charge to earnings.
GAAP requires us to test for goodwill impairment at least annually. In addition, we review our tangible and intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill, amortizable intangible assets and long-lived assets may not be recoverable include prolonged declines in stock price, market capitalization or cash flows, and slower growth rates in our industry. Depending on the results of our review, we could be required to record a significant charge to earnings in our Consolidated Financial Statements during the period in which any impairment is determined, negatively impacting our results of operations.
Our business depends on our ability to attract and retain talented employees.
Our success as a Company is dependent on hiring and retaining highly skilled employees with diverse backgrounds and experiences. If we are unable to motivate and retain employees, we may not be able to maximize productivity and effectively operate our facilities. Further, our long-term success depends on effective succession planning across all levels of management and operations. Failure to effectively identify key employees and ensure appropriate training and smooth transitions could adversely impact our ability to execute our business strategies and operations.
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Compliance with evolving environmental, social and corporate governance ("ESG") regulations including climate change may impact our reputation, increase our operating costs, and reduce the value of our assets and products.
There is an increased focus on environmental, social and corporate governance regulations for the industry. As a Company, we assess the potential impacts of our business on environmental risks including climate change, carbon emissions, physical and transition risks, along with other environmental issues. The Company, through our Enterprise Risk Management program and other efforts, is actively focused on strategic goals to expand responsible practices to reduce environmental risks while ensuring compliance with evolving laws and regulations. For example, through working with third parties such as Supplier Leadership on Climate Transition we have reported Scope 1 and 2 greenhouse gases emissions in our annual Sustainability Report, and we are working with third parties to develop Scope 3 data. We have been participating with customers in pilot sustainable sourcing projects as well as looking to participate in Field to Market which provides farming operation analytics to customers to create greater visibility into supply chain and sustainability efforts. If we are unable to properly assess these risks and meet our ESG reporting goals and metrics for Scope 1, 2 and 3 greenhouse gas emissions, or if our efforts are considered to be inadequate, then stakeholders, industry, and investors might perceive that we are not responding appropriately and responsibly to the growing concern, and we could be subject to fines and penalties. As a result, investors may reconsider their capital investments and our reputation could be diminished leading to customers and suppliers choosing to refrain from engaging in business with us.
The Company faces transition risks and physical risks related to climate change.
With the increased regulations and opportunity of electric vehicles comes the transitional risk that biofuels are in lower demand due to environmental concerns with climate change and changing consumer behavior. While biofuels also have less carbon emissions than regular gasoline, electric vehicles have the lowest emissions. A decrease in demand for biofuels as a result of regulatory or market changes would result in ethanol plants being underutilized along with a lower demand for corn to be used in ethanol production. The decrease in corn demand for ethanol production would mean a greater supply of corn for human and livestock consumption, driving down food costs and could lower overall grain prices. From a physical risk standpoint, there is increased land acreage that was historically used for growing corn that is being left unplanted as there is belief that the empty farmland is aiding in absorbing carbon dioxide. This would result in decreased agriculture productivity, reducing the amount of fertilizers needed and grains harvested. There are many assumptions both domestically and internationally driving the impact of supply and demand for corn, soybeans and other grains so it is too early to quantify the transition and physical risks involved with the gradual shift to electrification and the environmental regulatory changes. Although we believe that many regions both domestically and internationally will still rely on biofuels as they are slower to make changes and might not have immediate resources to do so, we cannot be certain about the pace and nature of changes in the industry and how it will impact demand for our products. These environmental changes could be costly and adversely affect our facilities, financial position and results of operations. While our Company believes that we are strategically positioned so that we can assess our role in actively reducing environmental risks while remaining focused on being a leader in the merchandising of grains and other co-products domestically and internationally, it is not possible to predict exactly how a changing climate will impact our business. If our strategies prove ineffective, our business could be adversely affected.
The Company's information technology systems may impose limitations or failures, or may face external threats, which may affect the Company's ability to conduct its business.
The Company's information technology systems, some of which are dependent on services provided by third parties, provide critical data connectivity, information and services for internal and external users. These interactions include, but are not limited to, ordering and managing materials from suppliers, converting raw materials to finished products, inventory management, shipping products to customers, processing transactions, summarizing and reporting results of operations, complying with regulatory, legal or tax requirements, human resources and other processes necessary to manage the business. The Company has put in place business continuity plans for its critical systems. However, if the Company's information technology systems are damaged, or cease to function properly due to any number of causes, such as catastrophic events or power outages, and the Company's business continuity plans do not allow it to effectively recover on a timely basis, the Company may suffer interruptions in the ability to manage its operations, which may adversely impact the Company's operating results. Our security measures may also be breached due to employee error, malfeasance, or otherwise. In addition, although the systems continue to be refreshed periodically, portions of the infrastructure are outdated and may not be adequate to support new business processes, accounting for new transactions, or implementation of new accounting standards if requirements are complex or materially different than what is currently in place.
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Additionally, outside parties may attempt to destroy critical information, or fraudulently induce employees, third-party service providers, or users to disclose sensitive information to gain access to our data or our users' data. As a response, the Company requires usernames and passwords to access its information technology systems. The Company also uses encryption and authentication technologies designed to secure the transmission and storage of data and prevent access to Company and user data or accounts. The Company also conducts tests and assessments using independent third parties on a regular basis. As with all companies, these security measures are subject to third-party security breaches, employee error, malfeasance, faulty password management, or other irregularities. We cannot assure our ability to prevent, repel or mitigate the effects of such an attack by outside parties. The Company also relies on third parties to maintain and process certain information which could be subject to breach or unauthorized access to Company or employee information. Any such breach or unauthorized access could result in an inability to perform critical functions, significant legal and financial exposure, damage to our reputation, and a loss of confidence in the security of our services that could potentially have an adverse effect on our business.
Unauthorized disclosure of sensitive or confidential customer information could harm the Company's business and standing with our customers.
The protection of our customer, employee and Company data is critical to us. The Company relies on commercially available systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential customer information. The Company also conducts annual tests and assessments using independent third parties. Despite the security measures the Company has in place, its facilities and systems, and those of its third-party service providers, may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming or human errors, or other similar events. Any security breach involving the misappropriation, loss or other unauthorized disclosure of confidential information, whether by the Company or its vendors, could damage our reputation, expose us to risk of litigation and liability, disrupt our operations and harm our business.
A change in tax laws or regulations of any federal, state or international jurisdiction in which we operate could increase our tax burden and otherwise adversely affect our financial position, results of operations, cash flows and liquidity.
We continue to assess the impact of various U.S. federal, state, local and international legislative proposals that could result in a material increase to our U.S. federal, state, local and/or international taxes. We cannot predict what impact, if any, changes in federal policy, including tax policies, will have on our industry or whether any specific legislation will be enacted or the terms of any such legislation. However, if such proposals were to be enacted, or if modifications were to be made to certain existing regulations, the consequences could have a material adverse impact on us, including increasing our tax burden, increasing our cost of tax compliance or otherwise adversely affecting our financial position, results of operations, cash flows and liquidity. Changes in applicable U.S. or foreign tax laws and regulations, or their interpretation and application, including the possibility of retroactive effect, could affect our tax expense and profitability. Such impact may also be affected positively or negatively by subsequent potential judicial interpretation or related regulation or legislation which cannot be predicted with certainty.
We are subject to various legal and regulatory proceedings, including litigation in the ordinary course of business, and uninsured judgments or a rise in insurance premiums may adversely impact our business, financial condition and results of operations.
In the ordinary course of business, we are subject to various legal and regulatory proceedings, which may include but are not limited to those involving antitrust, tax, environmental, intellectual property, data privacy and other matters, including general commercial litigation. Any claims raised in legal and regulatory proceedings, whether with or without merit, could be time consuming and expensive to defend and could divert management’s attention and resources. Additionally, the outcome of legal and regulatory proceedings may differ from our expectations because the outcomes of these proceedings are often difficult to predict reliably. Various factors and developments can lead to changes in our estimates of liabilities and related insurance receivables, where applicable, or may require us to make additional estimates, including new or modified estimates that may be appropriate due to a judicial ruling or judgment, a settlement, regulatory developments or changes in applicable law. A future adverse ruling, settlement or unfavorable development could result in charges that could have a material adverse effect on our results of operations in any particular period.
In accordance with customary practice, we maintain insurance against some, but not all, of these potential claims. In the future, we may not be able to maintain insurance at commercially acceptable premium levels. In addition, the levels of insurance we maintain may not be adequate to fully cover any and all losses or liabilities. If any significant judgment or claim is not fully insured or indemnified against, it could have a material adverse impact on our business, financial condition and results of operations.
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Item 1B. Unresolved Staff Comments
The Company has no unresolved staff comments.
Item 2. Properties
The Company's principal agriculture and other properties are described below. The Company believes that its properties are adequate for its business, well maintained and utilized, suitable for their intended uses and adequately insured.
| Trade | Renewables | Plant Nutrient | ||
|---|---|---|---|---|
| (in thousands) | Grain Storage | Nameplate Capacity | Dry Fertilizer Storage | Liquid Fertilizer Storage |
| Location | (bushels) | (gallons) | (tons) | (tons) |
| Canada | 23,509 | — | — | — |
| Idaho | 18,840 | — | — | — |
| Indiana | 16,640 | 110,000 | 134 | 136 |
| Iowa | — | 55,000 | — | 67 |
| Kansas | — | 70,000 | — | — |
| Louisiana | 24,184 | — | — | — |
| Michigan | 27,459 | 130,000 | 67 | 46 |
| Nebraska | 19,484 | — | — | 45 |
| Ohio | 42,151 | 110,000 | 165 | 76 |
| Wisconsin | — | — | 25 | 78 |
| Other | 11,381 | — | 57 | 67 |
| 183,648 | 475,000 | 448 | 515 |
The Trade facilities are mostly concrete and steel tanks, with some flat storage buildings. The Company also owns grain inspection buildings and dryers, maintenance buildings and truck scales and dumps. Approximately 79% of the total storage capacity noted above, which includes temporary pile storage, is owned, while the remaining capacity is leased from third parties.
The Renewables properties are five ethanol plants owned under the TAMH and ELEMENT investments that are consolidated in the Company's Consolidated Financial Statements.
The Plant Nutrient properties consist mainly of fertilizer warehouse and formulation and packaging facilities for dry and liquid fertilizers. The Company owns substantially all of the facilities noted above.
Item 3. Legal Proceedings
The Company is currently subject to various claims and suits arising in the ordinary course of business, which include environmental issues, employment claims, contractual disputes, and defensive counterclaims. The Company accrues liabilities in which litigation losses are deemed probable and estimable. The Company believes it is unlikely that the results of its current legal proceedings, even if unfavorable, will result in material liabilities beyond what it currently has accrued. There can be no assurance, however, that any claims or suits arising in the future, whether taken individually or in the aggregate, will not have a material adverse effect on our financial condition or results of operations.
Item 4. Mine Safety
Not applicable.
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Part II.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Common Shares of The Andersons, Inc. trade on the Nasdaq Global Select Market under the symbol “ANDE”.
Shareholders
At February 10, 2023, there were 457 shareholders of record and approximately 28,660 shareholders for whom security firms acted as nominees.
Dividends
The Company has declared and paid consecutive quarterly dividends since its first year of trading in 1996. Dividends paid from January 2021 to January 2023 are as follows:
| Payment Date | Amount |
|---|---|
| 1/20/2021 | $0.175 |
| 4/21/2021 | $0.175 |
| 7/22/2021 | $0.175 |
| 10/22/2021 | $0.175 |
| 1/21/2022 | $0.180 |
| 4/22/2022 | $0.180 |
| 7/22/2022 | $0.180 |
| 10/21/2022 | $0.180 |
| 1/20/2023 | $0.185 |
While the Company's objective is to pay a quarterly cash dividend, dividends are subject to approval from the Board of Directors.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
| Period | Total Number of Shares Purchased (1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) | ||
|---|---|---|---|---|---|---|
| October 2022 | 127,599 | $ | 32.86 | 127,599 | $ | 88,105,714 |
| November 2022 | 893 | 36.23 | — | 88,105,714 | ||
| December 2022 | 24,423 | 33.86 | 24,423 | 87,278,795 | ||
| Total | 152,915 | $ | 34.32 | 152,022 | $ | 87,278,795 |
(1) During the three months ended December 31, 2022, the Company acquired shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations along with common stock repurchased as a part of the Company's Repurchase Plan.
(2) As of August 20, 2021, the Company was authorized to purchase up to $100 million of the Company's common stock (the "Repurchase Plan") on or before August 20, 2024. As of December 31, 2022, approximately $12.7 million of the $100 million available to repurchase shares had been utilized. The Repurchase Plan does not obligate the Company to acquire any specific number of shares. Under the Repurchase Plan, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act.
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Performance Graph
The graph below compares the total shareholder return on the Company's Common Shares to the cumulative total return for the Russell 3000 Index and a Peer Group Index. The Company chose to switch from the Nasdaq U.S. Index used in the prior year to the Russell 3000 Index in the current year. The Company currently uses the Russell 3000 Index as a benchmark for stock compensation awards as it more accurately reflects the Company's market capitalization and broad array of industries. Both the Nasdaq U.S Index and the Russell 3000 Index are included in the graph below for comparison purposes. The indices reflect the year-end market value of an investment in the stock of each company in the index, including additional shares assumed to have been acquired with cash dividends, if any. The Peer Group Index, weighted for market capitalization, includes the following companies:
| Archer-Daniels-Midland Co. | Green Plains, Inc. |
|---|---|
| Alto Ingredients | Ingredion Incorporated |
| Bunge Ltd. | Nutrien Ltd. |
The graph assumes a $100 investment in The Andersons, Inc. Common Shares on December 31, 2017, and also assumes investments of $100 in each of the Russell 3000 Index, Nasdaq U.S. Index and Peer Group indices, respectively, on December 31 of the first year of the graph. The value of these investments as of the following calendar year-ends is shown in the table below the graph.
| Base Period | Cumulative Returns | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | |||||||
| The Andersons, Inc. | $ | 100.00 | $ | 97.88 | $ | 84.96 | $ | 85.59 | $ | 138.25 | $ | 127.49 |
| Russell 3000 Index | $ | 100.00 | $ | 94.76 | $ | 124.15 | $ | 150.08 | $ | 188.60 | $ | 152.37 |
| NASDAQ U.S. | $ | 100.00 | $ | 97.16 | $ | 132.81 | $ | 192.47 | $ | 235.15 | $ | 158.65 |
| Peer Group Index | $ | 100.00 | $ | 91.44 | $ | 100.56 | $ | 108.82 | $ | 160.43 | $ | 185.18 |
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
The following “Management's Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements which relate to future events or future financial performance and involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by these forward-looking statements. Without limitation, these risks include economic, weather and regulatory conditions, competition, the ongoing economic impacts from the war in Ukraine, and those listed under Item 1.A, "Risk Factors." The reader is urged to carefully consider these risks and factors. In some cases, the reader can identify forward-looking statements by terminology such as “may”, “anticipates”, “believes”, “estimates”, “predicts”, or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. These forward-looking statements relate only to events as of the date on which the statements are made and the Company undertakes no obligation, other than any imposed by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
Executive Overview
Our operations are organized, managed and classified into three reportable business segments: Trade, Renewables, and Plant Nutrient. Each of these segments is generally based on the nature of products and services offered and aligns with the management structure.
The agricultural commodity-based business is one in which changes in selling prices generally move in relationship to changes in purchase prices. Therefore, increases or decreases in prices of the commodities that the business deals in will have a relatively equal impact on sales and merchandising revenues and cost of sales and merchandising revenues and a much less significant impact on gross profit. As a result, changes in sales and merchandising revenues between periods may not necessarily be indicative of the overall performance of the business and more focus should be placed on changes in gross profit.
The Company has considered the potential impact of the book value of the Company’s total shareholders’ equity exceeded the Company’s market capitalization during the quarter for impairment indicators. Management ultimately concluded that an impairment triggering event had not occurred. The Company believes that the share price is not an accurate reflection of its current value as conditions are currently strong in the agriculture space with a positive long-term outlook. Management believes that the market’s impact on the Company’s equity value does not actually reflect the impact of these external factors on the Company. As a result of prior period tests, reviews of current operating results and other relevant market factors, the Company concluded that no impairment trigger existed as of December 31, 2022.
Management reviews long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of an asset group may no longer be recoverable. This was the case in 2022 for the Company's 51% owned ELEMENT plant located in Colwich, Kansas. The plant faced a combination of high corn basis, increased natural gas prices and a rapid decline in Low Carbon Fuel Standards credit values, that negatively impacted operations. The adverse operating conditions led to a failure of a debt covenant during the year, as well as, a forecasted failure of another covenant within the next 12 months. Accordingly, it was deemed that a triggering event occurred as of September 30, 2022, related to the ELEMENT ethanol plant. Management performed a recoverability test of the ELEMENT plant’s long-lived assets as this is the lowest level of identifiable cash flows. The key assumptions used in the recoverability test included input costs (corn, natural gas, etc.), production days, and co-product premiums. Each of these inputs were given probability weightings based on management's assessment regarding the likelihood of the respective forecasts. Using future forecasted cash flows, the ELEMENT asset group passed its recoverability test on an undiscounted cash flow basis by 15% over the carrying value of its assets. Assumptions used in the model did not change materially during the fourth quarter. However, if there are changes to key assumptions in the analysis it is reasonably possible management's estimate that it will recover the carrying amount of these assets could change, even in the near term. See further discussion on ELEMENT developments subsequent to December 31, 2022, in Note 4 of the Consolidated Financial Statements.
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Trade
The Trade segment's operating results improved from the prior year as the segment had a second consecutive record year. Both asset and merchandising businesses exceeded prior year results as they were able to successfully navigate global disruptions and a volatile market. Assets in the segment's core geography benefited from strong elevation margins, even seeing storage income return on wheat. Our merchandising business executed well, optimizing income across a broad portfolio. Our food and specialty ingredients business also delivered strong results in the year as they realized significant premiums on organic products.
Agricultural inventories on hand were 129.7 million and 187.0 million bushels at December 31, 2022, and December 31, 2021, respectively. These bushels consist of inventory held at company-owned or leased facilities, transload inventory, in-transit inventory, and third-party held inventory. Total Trade storage space capacity at company owned or leased facilities, including temporary pile storage, was approximately 183.6 million bushels at December 31, 2022, and 185.5 million bushels at December 31, 2021.
Looking forward, ag supply chain opportunities are expected to remain strong into 2023. Continued worldwide demand coupled with supply uncertainty due to the ongoing war in Ukraine and potential weather impacts in global grain production regions continues to keep commodity prices relatively high and provide ongoing merchandising opportunities.
Renewables
The Renewables segment results were significantly improved compared to the prior year due to the continued growth of the vegetable oil merchandising business and continued strength in co-product values with production margins in our ethanol plants decreasing slightly from the outsized prior year, particularly in the fourth quarter. Sales volumes for ethanol, corn oil, and feed ingredients were up, driven by higher production and additional third-party sales from the merchandising business. Also contributing to the improved results from the prior year was $17.6 million of USDA Biofuels Producer Program funds received during the year, of which, $8.9 million is included in Income before income taxes attributable to the Company.
Spot ethanol crush margins have declined into 2023 and are expected to seasonally move upward with driving demand. Corn oil demand is expected to remain high and merchandising of low-carbon-intensive renewable feedstocks should remain strong as additional renewable diesel facilities begin operations driving growth.
Volumes shipped for the years ended December 31, 2022 and December 31, 2021, were as follows:
| Twelve months ended December 31, | ||
|---|---|---|
| (in thousands) | 2022 | 2021 |
| Ethanol (gallons shipped) | 771,142 | 726,512 |
| E-85 (gallons shipped) | 38,980 | 41,572 |
| Corn Oil (pounds shipped) | 507,143 | 286,082 |
| Dried Distillers Grain (tons shipped) | 1,836 | 2,040 |
Plant Nutrient
The Plant Nutrient segment's 2022 operating results decreased slightly from the segment's record year in 2021. Ag Supply Chain and Specialty Liquids product lines experienced strong margins on well-positioned inventory in a market of rising fertilizer prices, which more than offset the reduction in volumes from the prior period. The Engineered Granules product lines recorded some inventory write-offs on lawn products, which negatively impacted the current year performance. Fourth quarter fertilizer price declines have likely shifted some demand from the fourth quarter of 2022 into 2023 as buyers anticipate prices to continue to decline. Strong farmer income and lower fertilizer prices are expected to drive higher volumes of agricultural fertilizers in the 2023 spring season, albeit at more normalized margins.
Total storage capacity at our Ag Supply Chain and Engineered Granules locations was approximately 448 thousand tons for dry nutrients and approximately 515 thousand tons for liquid nutrients at December 31, 2022, which is similar to the prior year.
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Tons of product sold for the years ended December 31, 2022 and December 31, 2021 were as follows:
| Twelve months ended December 31, | ||
|---|---|---|
| (in thousands) | 2022 | 2021 |
| Ag Supply Chain | 1,143 | 1,621 |
| Specialty Liquids | 338 | 410 |
| Engineered Granules | 360 | 453 |
| Total tons | 1,841 | 2,484 |
In the table above, Ag Supply Chain represents facilities principally engaged in the wholesale distribution and retail sale and application of primary agricultural nutrients such as bulk nitrogen, phosphorus, and potassium. Specialty Liquid locations produce and sell a variety of low-salt liquid starter fertilizers, micronutrients for agricultural use, and specialty products for use in various industrial processes. Engineered Granules facilities primarily manufacture granulated dry products for use in specialty turf and agricultural applications.
Other
The Company's “Other” activities include corporate income and expense and cost for functions that provide support and services to the operating segments. The results include expenses and benefits not allocated to the operating segments and other elimination and consolidation adjustments.
Results for Fiscal 2021 compared to Fiscal 2020
For comparisons of the Company's consolidated and segment results of operations and consolidated cash flows for the fiscal years ended December 31, 2021 to December 31, 2020, refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 24, 2022.
Operating Results
The following discussion focuses on the operating results as shown in the Consolidated Statements of Operations with a separate discussion by segment. Additional segment information is included in Note 12 to the Company's Consolidated Financial Statements in Item 8.
| Year ended December 31, 2022 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | Trade | Renewables | Plant Nutrient | Other | Total | |||||
| Sales and merchandising revenues | $ | 13,047,537 | $ | 3,178,539 | $ | 1,099,308 | $ | — | $ | 17,325,384 |
| Cost of sales and merchandising revenues | 12,639,830 | 3,051,544 | 949,846 | — | 16,641,220 | |||||
| Gross profit | 407,707 | 126,995 | 149,462 | — | 684,164 | |||||
| Operating, administrative and general expenses | 282,592 | 30,730 | 106,003 | 47,231 | 466,556 | |||||
| Interest expense (income) | 42,551 | 8,775 | 7,298 | (1,775) | 56,849 | |||||
| Other income (expense), net | 12,661 | 20,731 | 3,001 | (2,570) | 33,823 | |||||
| Income (loss) before income taxes from continuing operations | 95,225 | 108,221 | 39,162 | (48,026) | 194,582 | |||||
| Income before income taxes attributable to the noncontrolling interests | — | 35,899 | — | — | 35,899 | |||||
| Non-GAAP Income (loss) before income taxes attributable to the Company from continuing operations | $ | 95,225 | $ | 72,322 | $ | 39,162 | $ | (48,026) | $ | 158,683 |
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| Year ended December 31, 2021 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | Trade | Renewables | Plant Nutrient | Other | Total | |||||
| Sales and merchandising revenues | $ | 9,304,357 | $ | 2,440,798 | $ | 866,895 | $ | — | $ | 12,612,050 |
| Cost of sales and merchandising revenues | 8,968,675 | 2,324,172 | 726,506 | — | 12,019,353 | |||||
| Gross profit | 335,682 | 116,626 | 140,389 | — | 592,697 | |||||
| Operating, administrative and general expenses | 259,926 | 31,019 | 95,547 | 45,581 | 432,073 | |||||
| Interest expense | 23,688 | 7,602 | 4,355 | 1,647 | 37,292 | |||||
| Other income (expense), net | 35,878 | 3,200 | 2,128 | (3,768) | 37,438 | |||||
| Income (loss) before income taxes from continuing operations | 87,946 | 81,205 | 42,615 | (50,996) | 160,770 | |||||
| Income before income taxes attributable to the noncontrolling interests | — | 31,880 | — | — | 31,880 | |||||
| Non-GAAP Income (loss) before income taxes attributable to the Company from continuing operations | $ | 87,946 | $ | 49,325 | $ | 42,615 | $ | (50,996) | $ | 128,890 |
The Company uses Non-GAAP Income (loss) before income taxes attributable to the Company from continuing operations, a non-GAAP financial measure as defined by the Securities and Exchange Commission, to evaluate the Company’s financial performance. This performance measure is not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures.
Management believes that Non-GAAP Income (loss) before income taxes attributable to the Company from continuing operations is a useful measure of the Company’s performance as it provides investors additional information about the Company's operations allowing better evaluation of underlying business performance and better period-to-period comparability. This measure is not intended to replace or be an alternative to Income (loss) before income taxes from continuing operations, the most directly comparable amount reported under GAAP, which is also presented in the table above.
Comparison of 2022 with 2021
Trade
Operating results for the Trade segment increased $7.3 million compared to prior year results. Sales and merchandising revenues increased $3,743.2 million and cost of sales and merchandising revenues increased by $3,671.2 million resulting in an increase in gross profit of $72.0 million. The increase to sales and merchandising revenues and cost of sales and merchandising revenues is mainly a result of new merchandising locations opened in the second half of 2021 as these new locations account for approximately 56% of the increase from the prior year, with the remainder of the increase a result of increased commodity prices and volumes in the existing business. The $72.0 million increase in gross profit was an even split between increases in both margins and volumes. The improved margins were driven by strong elevation margins and well-positioned animal feed ingredients and organic food and specialty inventories with the volume increases mainly attributable to new merchandising locations opened and acquired in the second half of 2021.
Operating, administrative and general expenses increased $22.7 million compared to prior year results. The increase from the prior year is primarily related to an additional $18.1 million of higher labor and benefits costs, with about half of the increase from business growth and half from wage inflation and increased incentive compensation from the strong operating results.
Interest expense increased $18.9 million from prior year primarily due to rising interest rates on the Company's short-term line of credit combined with higher borrowings with the addition of our new merchandising locations and increased commodity prices.
Other income decreased by $23.2 million in the current year and was primarily attributable to the prior year sale of a grain asset in Champaign, Illinois in which the Company recorded a $14.6 million gain. Also contributing to the decrease was one of the Company's equity method investments being $10.7 million more favorable in the prior year. Included in this decrease from the prior year was an impairment on this investment of $4.5 million in 2022.
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Renewables
The Renewables segment had a strong year operationally as Income before income taxes attributable to the Company increased $23.0 million from the prior year. Sales and merchandising revenues increased $737.7 million and cost of sales and merchandising revenues increased $727.4 million compared to the prior year. As a result, gross profit increased by $10.4 million. The vast majority of the increase to sales and merchandising revenues and cost of sales and merchandising revenues is the result of increased ethanol and corn commodity prices as ethanol volumes sold only slightly increased from the prior year. The main driver of the increased gross profit was an improvement from the Company's growing renewable diesel feedstocks merchandising business as gross profit from that business increased $10.0 million from the prior year. The Company also had unrealized mark-to-market adjustments adding approximately $6.5 million to gross profit that were partially offset by a reduction of gross profit from the ethanol plants of $2.6 million as the plants did not experience the outsized crush margins that occurred in the prior year.
Other income increased by $17.5 million from prior year as a result of $17.6 million in proceeds received as a part of the USDA Biofuel Producer Program that was enacted as a part of the CARES Act, of which approximately $8.7 million of these proceeds were attributable to the noncontrolling interest.
Plant Nutrient
The Plant Nutrient segment had a decrease of $3.5 million in operating results when compared to the record results of the prior year. Sales and merchandising revenues increased $232.4 million and cost of sales and merchandising revenues increased $223.3 million resulting in increased gross profit of $9.1 million from the prior year. The increase in sales and merchandising revenues and cost of sales and merchandising revenues was due a significant appreciation of fertilizer prices from the prior year. This increase in fertilizer prices from the prior year was partially offset by a decrease in demand as volumes sold decreased by approximately 25%. Gross profit improved year-over-year due to increased margins on well-positioned inventory from the prior year representing a $43.4 million margin difference that was partially offset by a $34.3 million decrease in margins directly correlated with the reduced sales volumes. Ag Supply Chain led the way in 2022 with a $9.2 million increase in gross profit as a result of strong margins from well-positioned inventory in a tight supply market.
Operating, administrative and general expenses increased $10.5 million from the prior year. The vast majority of this increase is due to inflationary pressures on the business, with labor costs being the single biggest driver.
Interest expense increased $2.9 million from higher interest rates in the current year.
Other
Results improved by $3.0 million from the prior year. This improvement from the prior year was mainly due to $3.4 million of stranded costs from the sale of our Rail Leasing business being held in Corporate in the prior year.
Income Taxes
In 2022, the Company recorded Income tax expense from continuing operations of $39.6 million. The Company's effective rate for 2022 was 20.4% on Income before income taxes from continuing operations of $194.6 million. The difference between the 20.4% effective tax rate and the U.S. federal statutory tax rate of 21% is primarily attributable to the tax benefit generated from Federal Research and Development Credits ("R&D Credits"), foreign tax credits, derivative instruments and hedging activities and the effect of non-controlling interest offset by state and local income taxes, nondeductible compensation, and changes in unrecognized tax benefits.
In 2021, the Company recorded Income tax expense from continuing operations of $29.2 million. The Company’s effective rate for 2021 was 18.2% on Income before income taxes from continuing operations of $160.8 million. The difference between the 18.2% effective tax rate and the U.S. federal statutory tax rate of 21% is primarily attributable to the tax benefit generated from Federal R&D Credits, foreign tax credits and the effect of non-controlling interest offset by state and local income taxes, nondeductible compensation, and changes in unrecognized tax benefits.
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The Company’s subsidiary partnership returns are under federal tax examination by the Internal Revenue Service (“IRS”) for the tax years 2015 through 2018, respectively. The Company’s subsidiary is under federal tax examination by the Mexican tax authorities for tax year 2015. The IRS and Mexican tax authorities’ examinations could potentially be resolved within the next 12 months. The resolution of these examinations could change our unrecognized tax benefits and favorably impact income tax expense by a range of $6.4 million to $20.3 million.
Liquidity and Capital Resources
Working Capital
At December 31, 2022, the Company had working capital from continuing operations of $941.8 million, an increase of $40.9 million from the prior year. This increase was attributable to changes in the following components of current assets from continuing operations and current liabilities from continuing operations:
| (in thousands) | December 31, 2022 | December 31, 2021 | Variance | |||
|---|---|---|---|---|---|---|
| Current Assets from Continuing Operations: | ||||||
| Cash and cash equivalents | $ | 115,269 | $ | 216,444 | $ | (101,175) |
| Accounts receivable, net | 1,248,878 | 835,180 | 413,698 | |||
| Inventories | 1,731,725 | 1,814,538 | (82,813) | |||
| Commodity derivative assets – current | 295,588 | 410,813 | (115,225) | |||
| Other current assets | 71,622 | 74,468 | (2,846) | |||
| Total current assets from continuing operations | 3,463,082 | 3,351,443 | 111,639 | |||
| Current Liabilities from Continuing Operations: | ||||||
| Short-term debt | 272,575 | 501,792 | (229,217) | |||
| Trade and other payables | 1,423,633 | 1,199,324 | 224,309 | |||
| Customer prepayments and deferred revenue | 370,524 | 358,119 | 12,405 | |||
| Commodity derivative liabilities – current | 98,519 | 128,911 | (30,392) | |||
| Current maturities of long-term debt | 110,155 | 32,256 | 77,899 | |||
| Accrued expenses and other current liabilities | 245,916 | 230,148 | 15,768 | |||
| Total current liabilities from continuing operations | 2,521,322 | 2,450,550 | 70,772 | |||
| Working Capital from Continuing Operations | $ | 941,760 | $ | 900,893 | $ | 40,867 |
Current assets from continuing operations increased $111.6 million in comparison to prior year. This increase was attributable to the increase in accounts receivable as all other current asset accounts decreased from the prior year. The main driver behind the substantial increase in receivables is the addition of the growing international merchandising business along with the timing of some large vessel shipments from our U.S. port facilities. See also the discussion below on additional sources and uses of cash for an understanding of the decrease in cash from prior year.
Current liabilities from continuing operations increased $70.8 million compared to the prior year primarily due to increases in current maturities of long-term debt. This was driven by a reclassification of the long-term non-recourse debt associated to the ELEMENT ethanol plant to current maturities of long-term debt in the current year. There was a large increase in trade payables from the addition of the growing international merchandising business that was offset by a similar decrease in short-term debt as commodity prices stabilized toward the end of the current year.
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Sources and Uses of Cash in 2022 Compared to 2021
| Twelve Months Ended | ||||
|---|---|---|---|---|
| (in thousands) | December 31, 2022 | December 31, 2021 | ||
| Net cash provided by (used in) operating activities | $ | 287,117 | $ | (51,050) |
| Net cash (used in) provided by investing activities | (52,902) | 487,248 | ||
| Net cash used in financing activities | (334,730) | (248,769) |
Operating Activities and Liquidity
Our operating activities provided cash of $287.1 million in 2022 compared to cash used in operations of $51.1 million in 2021. The increase in cash provided by operating activities was primarily due to increased operating results and a decrease in the cash used through working capital changes. However, when removing the impact from changes in operating assets and liabilities, taxes paid on the Rail Leasing sale in the prior year and the timing of CARES Act tax refunds cash provided by operating activities exceeded the prior year.
Net income taxes of $88.7 million and $51.7 million were paid in the years ended December 31, 2022 and 2021, respectively. The increase in the current year is driven by the increased Income before income taxes from continuing operations combined with the taxable gain associated with the sale of the remaining pieces of the Company's Rail segment in 2022.
Investing Activities
Investing activities used cash of $52.9 million in the current year compared to $487.2 million provided in the prior year. The significant change from the prior year was mainly driven by approximately $500 million more net proceeds from the sale of discontinued operations received in the prior year. Additional contributing factors to the change from the prior year were higher amounts of purchases of property, plant and equipment combined with additional spending on business acquisitions.
Capital expenditures of $108.3 million for 2022 on property, plant and equipment includes: Trade - $29.4 million; Renewables - $42.7 million; Plant Nutrient - $34.7 million; and $1.4 million in Other.
We expect to invest approximately $125 to $150 million in property, plant and equipment in 2023; approximately 60% of which will be to maintain current facilities.
Financing Arrangements
Net cash used in financing activities was $334.7 million in 2022, compared to $248.8 million used in 2021. The increase in cash used in financing activities from the prior year was due to several factors. First, the Company made distributions of approximately $44.9 million to the non-controlling interest shareholder of TAMH due to the strength of the financial results in both 2021 and 2022. The Company also continued to pay down both long and short-term debt in the current year which resulted in additional cash of $17.7 million used. Lastly, the Company also began to repurchase common shares under its Repurchase Plan where $100 million of repurchases were authorized to be repurchased on or before August 20, 2024. As of December 31, 2022, approximately $12.7 million of the Repurchase Plan had been utilized, with all of these repurchases being made in the year ended December 31, 2022.
As of December 31, 2022, the Company was party to borrowing arrangements with a syndicate of banks that provide a total borrowing capacity of $1,990.8 million. There was $1,659.6 million available for borrowing at December 31, 2022. Typically, the Company's highest borrowing occurs in the late winter and early spring due to seasonal inventory requirements in the fertilizer and grain businesses. At December 31, 2022, the Company had standby letters of credit outstanding of $38.6 million.
The Company paid $24.6 million in dividends in 2022 compared to $23.7 million in 2021. The Company paid $0.180 per common share for the dividends paid in January, April, July and October 2022, and $0.175 per common share for the dividends paid in January, April, July and October 2021. On December 16, 2022, the Company declared a cash dividend of $0.185 per common share, payable on January 20, 2023, to shareholders of record on January 3, 2023.
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Certain of our long-term borrowings include covenants that, among other things, impose minimum levels of working capital and a minimum ratio of owner's equity. The Company has concluded as of December 31, 2022, that within the next twelve months ELEMENT is virtually certain to be out of compliance for an owner's equity ratio covenant in relation to the $63.3 million non-recourse credit agreement associated with the ELEMENT operations. As such, the Company classified the total $63.3 million of non-recourse debt under the ELEMENT credit agreement as a current maturity of long-term debt as of December 31, 2022. Additionally, ELEMENT did not make a required debt payment in February 2023 and subsequently received a default notice from the lender on February 17, 2023. Subsequent to year end, the Company began to consider various strategies related to the investment. The Company is in compliance with all covenants as of December 31, 2022. In addition, certain of our recourse long-term borrowings are collateralized by first mortgages on various facilities. Our non-recourse long-term debt that is currently classified in current maturities of long-term debt as described above, is collateralized by ELEMENT plant assets.
Because we are a significant consumer of short-term debt in peak seasons and the majority of this is variable rate debt, increases in interest rates could have a significant impact on our profitability. In addition, periods of high commodity prices and/or unfavorable market conditions could require additional margin deposits on the Company's exchange traded futures contracts. Conversely, in periods of declining prices, the Company would receive a return of cash.
Management believes the sources of liquidity will be adequate to fund operations, capital expenditures and payments of dividends in the foreseeable future.
Contractual Obligations
Long-term Debt
As of December 31, 2022, the Company had outstanding recourse and non-recourse long-term debt with both floating and fixed rates of varying maturities for an aggregate principal amount outstanding of $541.4 million and $64.2 million, respectively. $46.3 million and $63.8 million of the outstanding principal of the recourse and non-recourse long-term debt is payable within 12 months. See Note 4 to the Consolidated Financial Statements for additional information.
Future interest payments associated with the recourse long-term debt total $165.6 million, with $28.1 million payable within 12 months. Substantially all of the future interest payments associated with the non-recourse long-term debt is related to the $63.3 million non-recourse credit agreement associated with the ELEMENT operations that has been classified as a current maturity of long-term debt as of December 31, 2022, for the reasons described above. See Note 4 to the Consolidated Financial Statements for additional information.
Operating Leases
The Company has lease arrangements for certain equipment and facilities, including grain facilities, fertilizer facilities and equipment. As of December 31, 2022, the Company had fixed operating lease payment obligations of $67.5 million, with $28.1 million payable within 12 months. See Note 13 to the Consolidated Financial Statements for additional information.
Commodity Purchase Obligations
The Company enters into forward purchase contracts of commodities with producers through the normal course of business. These forward purchase contracts are largely offset by forward sales contracts of commodities and the net of these forward contracts are offset by exchange-traded futures and options contracts or over-the-counter contracts. As of December 31, 2022, the Company had forward purchase contracts of $4,866.5 million, with $4,757.3 million payable within 12 months. See Note 5 to the Consolidated Financial Statements for additional information.
Postretirement Healthcare Program
The Company has a postretirement health care benefit plan that covers substantially all of its full-time employees hired prior to January 1, 2003. Obligations under the retiree healthcare programs are not fixed commitments and will vary depending on multiple factors, including the level of participant utilization and inflation. Our estimates of postretirement payments have considered recent payment trends and actuarial assumptions. As of December 31, 2022, the Company had outstanding benefit obligations of $17.4 million, with $1.3 million payable within 12 months. See Note 6 to the Consolidated Financial Statements for additional information.
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Off-Balance Sheet Transactions
Industrial Revenue Bonds
On December 3, 2019, the Company closed an industrial revenue bond transaction with the City of Colwich, Kansas (the "City") in order to receive a 20-year real property tax abatement on the ELEMENT ethanol facility. Pursuant to this transaction, the City issued a principal amount of $166.1 million of its industrial revenue bonds to the Company and then used the proceeds to purchase the land and facility from the Company. The City then leased the facilities back to the Company under a finance lease, the terms of which provide for the payment of basic rent in an amount sufficient to pay principal and interest on the bonds. Subsequent to the issuance of the bonds, the Company redeemed $165.1 million of the bonds, leaving $1.0 million issued and outstanding. Our obligation to pay rent under the lease is in the same amount and due on the same date as the City’s obligation to pay debt service on the bonds which we hold. The lease permits the Company to present the bonds at any time for cancellation, upon which our obligation to pay basic rent would be canceled. The bonds' maturity date is 2029, at which time the facilities will revert to us without costs. If we were to present the bonds for cancellation prior to maturity, a nominal fee would be incurred. Land and buildings are recorded as assets in Property, plant, and equipment, net, on the Consolidated Balance Sheets. Because we own all outstanding bonds, have a legal right to set-off, and intend to set-off the corresponding lease and interest payment, we have netted the finance lease obligation with the bond asset. No amount for our obligation under the finance lease is reflected on the Consolidated Balance Sheets, nor do we reflect an amount for the corresponding industrial revenue bond asset. See Note 14 to the Consolidated Financial Statements for additional information.
Critical Accounting Estimates
The process of preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Management evaluates these estimates and assumptions on an ongoing basis. Estimates and assumptions are based on historical experience and management's knowledge and understanding of current facts and circumstances. Actual results, under conditions and circumstances different from those assumed, may change from these estimates.
Certain of our accounting estimates are considered critical, as they are important to the depiction of the Company's Consolidated Financial Statements and/or require significant or complex judgment by management. There are other items within the Company's Consolidated Financial Statements that require estimation, however, they are not deemed critical as defined above. Note 1 to the Consolidated Financial Statements in Item 8 describes the Company's significant accounting policies which should be read in conjunction with our critical accounting estimates.
Management believes that the accounting for readily marketable inventories and commodity derivative contracts, including adjustments for counterparty risk, impairment of long-lived assets, goodwill and equity method investments, and uncertain tax positions involve significant estimates and assumptions in the preparation of the Consolidated Financial Statements.
Readily Marketable Inventories and Derivative Contracts
Readily Marketable Inventories ("RMI") are stated at their net realizable value, which approximates fair value based on their commodity characteristics, widely available markets, and pricing mechanisms. The Company marks to market all forward purchase and sale contracts for commodities and ethanol, over-the-counter commodity and ethanol contracts, and exchange-traded futures and options contracts. The overall market for commodity inventories is very liquid and active; market value is determined by reference to prices for identical commodities on regulated commodity exchange (adjusted primarily for transportation costs); and the Company's RMI may be sold without significant additional processing. The Company uses forward purchase and sale contracts and both exchange traded and over-the-counter contracts (such as derivatives generally used by the International Swap Dealers Association). Management estimates fair value based on exchange-quoted prices, adjusted for differences in local markets, as well as counterparty non-performance risk in the case of forward and over-the-counter contracts. The amount of risk, and therefore the impact to the fair value of the contracts, varies by type of contract and type of counterparty. With the exception of specific customers thought to be at higher risk, the Company looks at the contracts in total, segregated by contract type, in its quarterly assessment of non-performance risk. For those customers that are thought to be at higher risk, the Company makes assumptions as to performance based on past history and facts about the current situation. Changes in fair value are recorded as a component of Cost of sales and merchandising revenues in the Consolidated Statements of Operations.
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Impairment of Long-Lived Assets, Goodwill, and Equity Method Investments
The Company's business segments are each highly capital intensive and require significant investment. Long-lived assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. This is done by evaluating the recoverability based on undiscounted projected cash flows, excluding interest. If an asset group is considered impaired, the impairment loss to be recognized is measured as the amount by which the asset group's carrying amount exceeds its fair value.
Goodwill is tested for impairment at the reporting unit level, which is the operating segment or one level below the operating segment. The quantitative review for impairment takes into account our estimates of future cash flows, as well as a market-based approach. Our estimates of future cash flows are based upon a number of assumptions including operating costs, life of the assets, potential disposition proceeds, budgets and long-range plans. The Market based approach compares results of public companies that reflect economic conditions and risks that are similar to the Company to calculate an estimated enterprise value. These factors are discussed in more detail in Note 17, Goodwill and Intangible Assets, to the Consolidated Financial Statements.
Our annual goodwill impairment test is performed as of October 1 each year which is discussed in further detail in Note 17 to the Consolidated Financial Statements.
In addition, the Company holds investments in several companies that are accounted for using the equity method of accounting. The Company reviews its investments to determine whether there has been a decline in the estimated fair value of the investment that is below the Company's carrying value which is other than temporary. Other than consideration of past and current performance, these reviews take into account forecasted earnings which are based on management's estimates of future performance as well as the market or other income approach to estimate fair value.
Management considers several factors to be significant when estimating fair value including expected financial outlook of the business, changes in the Company's stock price, the impact of changing market conditions on financial performance and expected future cash flows, the geopolitical environment and other factors. Deterioration in any of these factors may result in a lower fair value assessment, which could lead to impairment charges in the future. Specifically, actual results may vary from the Company's forecasts and such variations may be material and unfavorable, thereby triggering the need for future impairment tests where the conclusions could result in non-cash impairment charges.
Uncertain Tax Positions
Conclusions on recognizing and measuring uncertain tax positions involve significant estimates and management judgment and include complex considerations of the Internal Revenue Code, related regulations, tax case laws, and prior year audit settlements. To account for uncertainty in income taxes, the Company evaluates the likelihood of a tax position based on the technical merits of the position, performs a subsequent measurement related to the maximum benefit and degree of likelihood, and determines the benefits to be recognized in the Consolidated Financial Statements, if any.
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The market risk inherent in the Company's market risk-sensitive instruments and positions is the potential loss arising from adverse changes in commodity prices foreign currency exchange rates and interest rates as discussed below.
Commodity Prices
The Company's daily net commodity position consists of inventories, related purchase and sale contracts, exchange-traded futures, and over-the-counter contracts. The fair value of the position is a summation of the fair values calculated for each commodity by valuing each net position at quoted futures market prices. The Company has established controls to manage and limit risk exposure, which consists of a daily review of position limits and effects of potential market price moves on those positions.
A sensitivity analysis has been prepared to estimate the Company's exposure to market risk of its net commodity futures position. Market risk is estimated as the potential loss in fair value resulting from a hypothetical 10% adverse change in quoted market prices. The result of this analysis, which may differ from actual results, is as follows:
| December 31, | ||||
|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | ||
| Net long (short) commodity position | $ | (8,810) | $ | 10,987 |
| Market risk | (881) | 1,099 |
Foreign Currency
The Company has subsidiaries located outside the United States where the local currency is the functional currency. To reduce the risks associated with foreign currency exchange rate fluctuations, the Company enters into currency exchange contracts to minimize its foreign currency position related to transactions denominated primarily in the euro, British pound, Mexican peso, Swiss franc, Egyptian pound, and Canadian dollar. These currencies represent the major functional or local currencies in which recurring business transactions occur. The Company does not use currency exchange contracts as hedges against amounts indefinitely invested in foreign subsidiaries and affiliates. The currency exchange contracts used are forward contracts, swaps with banks, exchange-traded futures contracts, and over-the-counter options. The changes in market value of such contracts have a high correlation to the price changes in the currency of the related transactions. The potential loss in fair value for such net currency position resulting from a hypothetical 10% adverse change in foreign currency exchange rates is not material.
Interest Rates
The fair value of the Company's long-term debt is estimated using quoted market prices or discounted future cash flows based on the Company's current incremental borrowing rates and credit ratings for similar types of borrowing arrangements. Market risk, which is estimated as the potential increase in fair value resulting from a hypothetical one-half percent decrease in interest rates, is summarized below:
| December 31, | ||||
|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | ||
| Fair value of long-term debt, including current maturities | $ | 595,705 | $ | 650,765 |
| Fair value in excess of carrying value | (10,087) | 13,795 | ||
| Market risk | 4,707 | 6,648 |
Actual results may differ. The estimated fair value and market risk will vary from year to year depending on the total amount of long-term debt and the mix of variable and fixed rate debt. The Company is also party to short-term debt borrowing arrangements with a capacity of approximately $2.0 billion. As the Company is a significant consumer of short-term debt in peak seasons and the majority of the borrowings are variable rate debt, increases in interest rates could have a significant impact on our profitability.
Additionally, the Company may enter into interest rate swaps from time to time to manage our mix of fixed and variable interest rate debt effectively which may decrease market risk noted above. As of December 31, 2022, the majority of the Company's long-term debt is hedged with interest rate swaps limiting interest rate volatility. See Note 5 to the Consolidated Financial Statements for further discussion on the impact of these hedging instruments.
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Item 8. Financial Statements and Supplementary Data
The Andersons, Inc.
Index to Financial Statements
| Page No. | |
|---|---|
| Report of the Independent Registered Public Accounting Firm (PCAOB ID No. 34) | 27 |
| Consolidated Statements of Operations | 29 |
| Consolidated Statements of Comprehensive Income | 30 |
| Consolidated Balance Sheets | 31 |
| Consolidated Statements of Cash Flows | 32 |
| Consolidated Statements of Equity | 33 |
| Notes to Consolidated Financial Statements | 34 |
| Schedule II - Consolidated Valuation and Qualifying Accounts | 79 |
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Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the shareholders and the Board of Directors of The Andersons, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of The Andersons, Inc. and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2023, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Goodwill—GSM and FSI Reporting Units—Refer to Notes 1 and 17 to the Consolidated Financial Statements
Critical Audit Matter Description
Goodwill is tested for impairment annually as of October 1, or more frequently if impairment indicators arise. The Company uses a one-step quantitative approach that compares the business enterprise value (BEV) of each reporting unit with its carrying value. The BEV was computed based on both an income approach (discounted cash flows) and a market approach. The income approach uses a reporting unit’s estimated future cash flows, discounted at the weighted-average cost of capital of a hypothetical third-party buyer. The market approach estimates fair value by applying cash flow multiples to the reporting unit’s operating performance. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics to the reporting unit.
The Andersons, Inc. | 2022 Form 10-K | 27
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The consolidated goodwill balance was $129.3 million as of December 31, 2022, of which $78.5 million and $41.3 million was allocated to the Grain Storage and Merchandising (GSM) and Food and Specialty Ingredients (FSI) reporting units, respectively. The BEV of the GSM and FSI reporting units exceeded its carrying values by 12% and 33%, respectively, as of October 1, 2022, and, therefore, no impairment was recognized. The BEV for the GSM and FSI reporting units are sensitive to changes in the weighted-average cost of capital. Given the significant judgments made by management to estimate the BEV of the GSM and FSI reporting units, performing audit procedures to evaluate the reasonableness of management’s assumptions related to selection of the weighted-average cost of capital as of October 1, 2022, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the selection of the weighted-average cost of capital used by management to estimate the BEV of the GSM and FSI reporting units included the following, among others:
•We tested the effectiveness of internal control over management’s selection of the valuation assumptions used to determine the BEV, including the weighted-average cost of capital.
•With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) weighted-average cost of capital by:
–Testing the source information underlying the determination of the weighted-average cost of capital and the mathematical accuracy of the calculation
–Evaluating the underlying factors that led to management's determination of the company specific risk premium
–Developing a range of independent estimates and comparing those to the weighted-average cost of capital selected by management
/s/ Deloitte & Touche LLP
Cleveland, Ohio
February 23, 2023
We have served as the Company’s auditor since 2015.
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The Andersons, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
| Year ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | ||||
| Sales and merchandising revenues | $ | 17,325,384 | $ | 12,612,050 | $ | 8,064,620 |
| Cost of sales and merchandising revenues | 16,641,220 | 12,019,353 | 7,698,423 | |||
| Gross profit | 684,164 | 592,697 | 366,197 | |||
| Operating, administrative and general expenses | 466,556 | 432,073 | 377,695 | |||
| Interest expense, net | 56,849 | 37,292 | 33,784 | |||
| Other income, net | 33,823 | 37,438 | 18,201 | |||
| Income (loss) before income taxes from continuing operations | 194,582 | 160,770 | (27,081) | |||
| Income tax provision (benefit) from continuing operations | 39,628 | 29,228 | (10,910) | |||
| Net income (loss) from continuing operations | 154,954 | 131,542 | (16,171) | |||
| Income from discontinued operations, net of income taxes | 12,025 | 4,324 | 1,956 | |||
| Net income (loss) | 166,979 | 135,866 | (14,215) | |||
| Net income (loss) attributable to the noncontrolling interest | 35,899 | 31,880 | (21,925) | |||
| Net income attributable to The Andersons, Inc. | $ | 131,080 | $ | 103,986 | $ | 7,710 |
| Average number of shares outstanding – basic | 33,731 | 33,279 | 32,924 | |||
| Average number of shares outstanding – diluted | 34,422 | 33,855 | 33,189 | |||
| Earnings per share attributable to <br>The Andersons, Inc. common shareholders: | ||||||
| Basic earnings: | ||||||
| Continuing operations | $ | 3.53 | $ | 2.99 | $ | 0.17 |
| Discontinued operations | 0.36 | 0.13 | 0.06 | |||
| $ | 3.89 | $ | 3.12 | $ | 0.23 | |
| Diluted earnings: | ||||||
| Continuing operations | $ | 3.46 | $ | 2.94 | $ | 0.17 |
| Discontinued operations | 0.35 | 0.13 | 0.06 | |||
| $ | 3.81 | $ | 3.07 | $ | 0.23 |
The Notes to Consolidated Financial Statements are an integral part of these statements.
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The Andersons, Inc.
Consolidated Statements of Comprehensive Income
(In thousands)
| Year ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | ||||
| Net income (loss) | $ | 166,979 | $ | 135,866 | $ | (14,215) |
| Other comprehensive income (loss), net of tax: | ||||||
| Change in unrecognized actuarial gain and prior service cost | 4,243 | 607 | (856) | |||
| Foreign currency translation adjustments | (13,834) | (108) | 4,674 | |||
| Cash flow hedge activity | 28,881 | 12,771 | (8,663) | |||
| Other comprehensive income (loss) | 19,290 | 13,270 | (4,845) | |||
| Comprehensive income (loss) | 186,269 | 149,136 | (19,060) | |||
| Comprehensive income (loss) attributable to the noncontrolling interests | 35,899 | 31,880 | (21,925) | |||
| Comprehensive income attributable to The Andersons, Inc. | $ | 150,370 | $ | 117,256 | $ | 2,865 |
The Notes to Consolidated Financial Statements are an integral part of these statements.
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The Andersons, Inc.
Consolidated Balance Sheets
(In thousands)
| December 31, 2022 | December 31, 2021 | |||
|---|---|---|---|---|
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 115,269 | $ | 216,444 |
| Accounts receivable, less allowance for doubtful accounts of $26,392 in 2022; $6,911 in 2021 | 1,248,878 | 835,180 | ||
| Inventories (Note 2) | 1,731,725 | 1,814,538 | ||
| Commodity derivative assets – current (Note 5) | 295,588 | 410,813 | ||
| Current assets held-for-sale (Note 16) | 2,871 | 20,885 | ||
| Other current assets | 71,622 | 74,468 | ||
| Total current assets | 3,465,953 | 3,372,328 | ||
| Other assets: | ||||
| Goodwill | 129,342 | 129,342 | ||
| Other intangible assets, net | 100,907 | 117,137 | ||
| Right of use assets, net | 61,890 | 52,146 | ||
| Other assets held-for-sale (Note 16) | — | 43,169 | ||
| Other assets | 87,175 | 69,068 | ||
| Total other assets | 379,314 | 410,862 | ||
| Property, plant and equipment, net (Note 3) | 762,729 | 786,029 | ||
| Total assets | $ | 4,607,996 | $ | 4,569,219 |
| Liabilities and equity | ||||
| Current liabilities: | ||||
| Short-term debt (Note 4) | $ | 272,575 | $ | 501,792 |
| Trade and other payables | 1,423,633 | 1,199,324 | ||
| Customer prepayments and deferred revenue | 370,524 | 358,119 | ||
| Commodity derivative liabilities – current (Note 5) | 98,519 | 128,911 | ||
| Current maturities of long-term debt (Note 4) | 110,155 | 32,256 | ||
| Current liabilities held-for-sale (Note 16) | — | 13,379 | ||
| Accrued expenses and other current liabilities | 245,916 | 230,148 | ||
| Total current liabilities | 2,521,322 | 2,463,929 | ||
| Long-term lease liabilities | 37,147 | 31,322 | ||
| Long-term debt, less current maturities (Note 4) | 492,518 | 600,487 | ||
| Deferred income taxes (Note 8) | 64,080 | 71,127 | ||
| Other long-term liabilities held-for-sale (Note 16) | — | 16,119 | ||
| Other long-term liabilities | 63,160 | 78,531 | ||
| Total liabilities | 3,178,227 | 3,261,515 | ||
| Commitments and contingencies (Note 14) | ||||
| Shareholders’ equity: | ||||
| Common shares, without par value (63,000 shares authorized; 34,064 shares issued in 2022; 33,870 shares issued in 2021) | 142 | 140 | ||
| Preferred shares, without par value (1,000 shares authorized; none issued) | — | — | ||
| Additional paid-in-capital | 385,248 | 368,595 | ||
| Treasury shares, at cost (446 in 2022; 11 in 2021) | (15,043) | (263) | ||
| Accumulated other comprehensive income | 20,484 | 1,194 | ||
| Retained earnings | 807,770 | 702,759 | ||
| Total shareholders’ equity of The Andersons, Inc. | 1,198,601 | 1,072,425 | ||
| Noncontrolling interests | 231,168 | 235,279 | ||
| Total equity | 1,429,769 | 1,307,704 | ||
| Total liabilities and equity | $ | 4,607,996 | $ | 4,569,219 |
The Notes to Consolidated Financial Statements are an integral part of these statements.
The Andersons, Inc. | 2022 Form 10-K | 31
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The Andersons, Inc.
Consolidated Statements of Cash Flows
(In thousands)
| Year ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | ||||
| Operating Activities | ||||||
| Net income (loss) from continuing operations | $ | 154,954 | $ | 131,542 | $ | (16,171) |
| Income from discontinued operations, net of income taxes | 12,025 | 4,324 | 1,956 | |||
| Net income (loss) | 166,979 | 135,866 | (14,215) | |||
| Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: | ||||||
| Depreciation and amortization | 134,742 | 178,934 | 188,638 | |||
| Bad debt expense, net | 6,001 | 237 | 7,042 | |||
| Equity in losses (earnings) of affiliates, net of dividends | 5,671 | (4,842) | (638) | |||
| Gain on sales of assets, net | (7,148) | (6,184) | (686) | |||
| Stock-based compensation expense | 11,192 | 11,038 | 10,183 | |||
| Deferred federal income tax | (20,009) | (104,618) | 26,386 | |||
| Gain on sale of business from continuing operations | — | (14,619) | — | |||
| (Gain) loss on sale of business from discontinued operations | (27,091) | 1,491 | — | |||
| Asset impairment | 11,818 | 8,947 | — | |||
| Damaged inventory | 17,328 | — | — | |||
| Other | 15,550 | 10,545 | 21,748 | |||
| Changes in operating assets and liabilities: | ||||||
| Accounts and notes receivable | (391,403) | (184,002) | (128,502) | |||
| Inventories | 56,859 | (528,073) | (139,499) | |||
| Commodity derivatives | 65,399 | (107,188) | (115,170) | |||
| Other current and non-current assets | 10,936 | (116,403) | (53,208) | |||
| Payables and other current and non-current liabilities | 230,293 | 667,821 | 123,489 | |||
| Net cash provided by (used in) operating activities | 287,117 | (51,050) | (74,432) | |||
| Investing Activities | ||||||
| Acquisition of businesses, net of cash acquired | (20,245) | (11,425) | — | |||
| Purchases of property, plant and equipment and capitalized software | (108,284) | (75,766) | (77,147) | |||
| Proceeds from sale of assets | 5,307 | 4,508 | 11,112 | |||
| Purchase of investments | (2,105) | (6,243) | (3,059) | |||
| Proceeds from sale of business from continuing operations | 5,171 | 18,130 | — | |||
| Proceeds from sale of business from discontinued operations | 56,302 | 543,102 | — | |||
| Purchases of Rail assets | (31,458) | (6,039) | (27,739) | |||
| Proceeds from sale of Rail assets | 36,706 | 19,150 | 10,077 | |||
| Other | 5,704 | 1,831 | — | |||
| Net cash (used in) provided by investing activities | (52,902) | 487,248 | (86,756) | |||
| Financing Activities | ||||||
| Net (payments) receipts under short-term lines of credit | (21,273) | (105,895) | 254,971 | |||
| Proceeds from issuance of short-term debt | 350,000 | 608,250 | — | |||
| Payments of short-term debt | (550,000) | (408,250) | — | |||
| Proceeds from issuance of long-term debt | — | 203,000 | 471,906 | |||
| Payments of long-term debt | (30,045) | (530,733) | (559,711) | |||
| Contributions from noncontrolling interest owner | 4,900 | 4,655 | 8,576 | |||
| Distributions to noncontrolling interest owner | (44,910) | (25) | (10,322) | |||
| Payments of debt issuance costs | (8,108) | (2,692) | (898) | |||
| Dividends paid | (24,609) | (23,746) | (23,004) | |||
| Proceeds from exercises of stock options | 5,024 | 6,667 | — | |||
| Common stock repurchased | (12,721) | — | — | |||
| Other | (2,988) | — | (5,222) | |||
| Net cash (used in) provided by financing activities | (334,730) | (248,769) | 136,296 | |||
| Effect of exchange rates on cash and cash equivalents | (660) | (108) | (880) | |||
| (Decrease) increase in Cash and cash equivalents | (101,175) | 187,321 | (25,772) | |||
| Cash and cash equivalents at beginning of year | 216,444 | 29,123 | 54,895 | |||
| Cash and cash equivalents at end of year | $ | 115,269 | $ | 216,444 | $ | 29,123 |
The Notes to Consolidated Financial Statements are an integral part of these statements.
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The Andersons, Inc.
Consolidated Statements of Equity
(In thousands, except per share data)
| Additional<br>Paid-in<br>Capital | Treasury<br>Shares | Accumulated<br>Other<br>Comprehensive<br>Income (Loss) | Retained<br>Earnings | Noncontrolling<br>Interests | Total | ||||||||
| Balance at January 1, 2020 | 137 | $ | 345,359 | $ | (7,342) | $ | (7,231) | $ | 642,687 | $ | 222,045 | $ | 1,195,655 |
| Net income (loss) | 7,710 | (21,925) | (14,215) | ||||||||||
| Other comprehensive loss | (10,213) | (10,213) | |||||||||||
| Amounts reclassified from Accumulated other comprehensive income (loss) | 5,368 | 5,368 | |||||||||||
| Contributions from noncontrolling interests | 8,576 | 8,576 | |||||||||||
| Distributions to noncontrolling interests | (10,322) | (10,322) | |||||||||||
| Noncontrolling interests recognized in connection with business combination | (459) | 395 | (64) | ||||||||||
| Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of 0 (150 shares) | 3,814 | 5,968 | (844) | 8,939 | |||||||||
| Dividends declared (0.70 per common share) | (23,064) | (23,064) | |||||||||||
| Restricted share award dividend equivalents | 408 | (408) | — | ||||||||||
| Balance at December 31, 2020 | 138 | $ | 348,714 | $ | (966) | $ | (12,076) | $ | 626,081 | $ | 198,769 | $ | 1,160,660 |
| Net income | 103,986 | 31,880 | 135,866 | ||||||||||
| Other comprehensive income | 7,312 | 7,312 | |||||||||||
| Amounts reclassified from Accumulated other comprehensive income (loss) | 5,958 | 5,958 | |||||||||||
| Contributions from noncontrolling interests | 4,655 | 4,655 | |||||||||||
| Distributions to noncontrolling interests | (25) | (25) | |||||||||||
| Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of 0 (22 shares) | 19,881 | 368 | (3,478) | 16,773 | |||||||||
| Dividends declared (0.705 per common share) | (23,495) | (23,495) | |||||||||||
| Restricted share award dividend equivalents | 335 | (335) | — | ||||||||||
| Balance at December 31, 2021 | 140 | $ | 368,595 | $ | (263) | $ | 1,194 | $ | 702,759 | $ | 235,279 | $ | 1,307,704 |
| Net income | 131,080 | 35,899 | 166,979 | ||||||||||
| Other comprehensive income | 19,212 | 19,212 | |||||||||||
| Amounts reclassified from Accumulated other comprehensive income | 78 | 78 | |||||||||||
| Contributions from noncontrolling interests | 4,900 | 4,900 | |||||||||||
| Distributions to noncontrolling interests | (44,910) | (44,910) | |||||||||||
| Stock awards, stock option exercises and other shares issued to employees and directors, net of income tax of 0 (51 shares) | 16,598 | (2,396) | 14,204 | ||||||||||
| Purchase of treasury shares(384 shares) | (12,721) | (12,721) | |||||||||||
| Dividends declared (0.725 per common share) | (24,441) | (24,441) | |||||||||||
| Restricted share award dividend equivalents | 55 | 337 | (1,628) | (1,236) | |||||||||
| Balance at December 31, 2022 | 142 | $ | 385,248 | $ | (15,043) | $ | 20,484 | $ | 807,770 | $ | 231,168 | $ | 1,429,769 |
All values are in US Dollars.
The Notes to Consolidated Financial Statements are an integral part of these statements.
The Andersons, Inc. | 2022 Form 10-K | 33
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The Andersons, Inc.
Notes to Consolidated Financial Statements
- Summary of Significant Accounting Policies
Basis of Consolidation
These Consolidated Financial Statements include the accounts of The Andersons, Inc. and its wholly owned and controlled subsidiaries (the “Company”). All intercompany accounts and transactions are eliminated in consolidation. Investments in unconsolidated entities in which the Company has significant influence, but not control, are accounted for using the equity method of accounting.
During the third quarter of 2021, substantially all of the assets and liabilities of the Rail business were classified as held-for-sale in the accompanying Condensed Consolidated Balance Sheets. As discussed further in Note 16, the Company executed a definitive agreement to sell the Rail Leasing business. In conjunction with the sale of the Rail Leasing business, the Company announced its intent to divest the remainder of the Rail business which it successfully sold in the third quarter of 2022.
These transactions effectively constitute the entirety of what has historically been included in the Rail reportable segment. Therefore, the associated operating results, net of income tax, have been classified as discontinued operations in the accompanying Consolidated Statements of Operations for all periods presented. Throughout this Annual Report on Form 10-K, with the exception of the Consolidated Statements of Cash Flows and unless otherwise indicated, amounts and activity are presented on a continuing operations basis.
Certain reclassifications have been made to the prior year financial statements to conform to current year classifications. The reclassification relates to the Consolidated Statement of Operations presentation of Asset impairment expense and Equity earnings (losses) in affiliates, net. Asset impairment expense has been reclassified to Operating, administrative and general expenses and Equity in earnings (losses) of affiliates, net has been reclassified to Other income, net.
At the inception of joint venture transactions, we identify entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and determine which business enterprise is the primary beneficiary of its operations. A VIE is broadly defined as an entity where either (i) the equity investors as a group, if any, do not have a controlling financial interest, or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. The Company consolidates investments in VIEs when the Company is determined to be the primary beneficiary. This evaluation is based on an enterprise’s ability to direct and influence the activities of a VIE that most significantly impact that entity’s economic performance.
The Company evaluates its interests in VIEs on an ongoing basis and consolidates any VIE in which it has a controlling financial interest and is deemed to be the primary beneficiary. A controlling financial interest has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact its economic performance; and (ii) the obligation to absorb losses of the VIE that could potentially be significant to it or the right to receive benefits from the VIE that could be significant to the VIE.
The Company has two VIE's in The Andersons Marathon Holdings LLC ("TAMH") and ELEMENT, LLC. ("ELEMENT"). The Company evaluated its interests in both TAMH and ELEMENT and determined that these entities are a VIE and that the Company is the primary beneficiary of TAMH and ELEMENT. This is due to the fact that the Company has both the power to direct the activities that most significantly impact these entities and the obligation to absorb losses or the right to receive benefits from TAMH and ELEMENT. Therefore, the Company consolidated both TAMH and ELEMENT in its Consolidated Financial Statements.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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Cash and Cash Equivalents
Cash and cash equivalents include cash and short-term investments with an initial maturity of three months or less. The carrying values of these assets approximate their fair values.
Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable are recorded at the invoiced amount and may bear interest if past due. The allowance for doubtful accounts is the best estimate of the current expected credit losses in existing accounts receivable and is reviewed quarterly. The allowance is based both on specific identification of potentially uncollectible accounts and the application of a consistent policy, based on historical experience, to estimate the allowance necessary for the remaining accounts receivable. For those customers that are thought to be at higher risk, the Company makes assumptions as to collectability based on past history and facts about the current situation. Account balances are charged off against the allowance when it becomes more certain that the receivable will not be recovered. The Company manages its exposure to counterparty credit risk through credit analysis and approvals, credit limits and monitoring procedures.
Commodity Derivatives and Inventories
The Company's operating results can be affected by changes to commodity prices. The Trade and Renewables businesses have established “unhedged” position limits (the amount of a commodity, either owned or contracted for, that does not have an offsetting derivative contract to mitigate the price risk associated with those contracts and inventory). To reduce the exposure to market price risk on commodities owned and forward commodity and ethanol purchase and sale contracts, the Company enters into exchange traded commodity futures and options contracts and over-the-counter forward and option contracts with various counterparties. The forward purchase and sale contracts are for physical delivery of the commodity in a future period. Contracts to purchase commodities from producers generally relate to the current or future crop years for delivery periods quoted by regulated commodity exchanges. Contracts for the sale of commodities to processors or other commercial consumers generally do not extend beyond one year.
The Company accounts for its commodity derivatives at fair value. The estimated fair value of the commodity derivative contracts that require the receipt or posting of cash collateral is recorded on a net basis (offset against cash collateral posted or received, also known as margin deposits) within commodity derivative assets or liabilities. Management determines fair value based on exchange-quoted prices and in the case of its forward purchase and sale contracts, fair value is adjusted for differences in local markets and non-performance risk. While the Company considers certain of its commodity contracts to be effective economic hedges, the Company does not designate or account for its commodity contracts as hedges.
Realized and unrealized gains and losses in the value of commodity contracts (whether due to changes in commodity prices, changes in performance or credit risk, or due to sale, maturity or extinguishment of the commodity contract) and commodity inventories are included in Cost of sales and merchandising revenues in the Consolidated Statements of Operations. Additional information about the fair value of the Company's commodity derivatives is presented in Notes 5 and 10 to the Consolidated Financial Statements.
Readily Marketable Inventories ("RMI"), which are grain and other agricultural commodities, may be acquired under provisionally priced contracts, are stated at their net realizable value, which approximates estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. At times the Company holds a portion of RMI within its facilities for others. Our storage facilities are licensed warehouses and must be bonded and insured for its capacity under license and is obligated to return to the title holder of the RMI an equal quantity and quality. The Company does not have title to the inventory and is only liable for any deficiencies in grade or shortage of quantity that may arise during the storage period. Management has not experienced historical losses with regard to any deficiencies and does not anticipate material losses in the future.
All other inventories are stated at the lower of cost or net realizable value. Cost is determined by the average cost method. Additional information about inventories is presented in Note 2 to the Consolidated Financial Statements.
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Derivatives - Master Netting Arrangements
Generally accepted accounting principles permit a party to a master netting arrangement to offset fair value amounts recognized for derivative instruments against the right to reclaim cash collateral or obligation to return cash collateral under the same master netting arrangement. The Company has master netting arrangements for its exchange traded futures and options contracts and certain over-the-counter contracts. When the Company enters into a futures, options or an over-the-counter contract, an initial margin deposit may be required by the counterparty. The amount of the margin deposit varies by commodity. If the market price of a futures, option or an over-the-counter contract moves in a direction that is adverse to the Company's position, an additional margin deposit, called a maintenance margin, is required. The Company nets, by counterparty, its futures and over-the-counter positions against the cash collateral provided or received. The margin deposit assets and liabilities are included in short-term commodity derivative assets or liabilities, as appropriate, in the Consolidated Balance Sheets. Additional information about the Company's master netting arrangements is presented in Note 5 to the Consolidated Financial Statements.
Derivatives - Interest Rate and Foreign Currency Contracts
The Company periodically enters into interest rate contracts to manage interest rate risk on borrowing or financing activities. The Company has long-term interest rate swaps recorded in other assets or other long-term liabilities that expire from 2025 to 2030 and have been designated as cash flow hedges; accordingly, changes in the fair value of the instruments are recognized in Other comprehensive income (loss) in the Consolidated Balance Sheets. While the Company considers all of its derivative positions to be effective economic hedges of specified risks, these interest rate contracts for which hedge accounting is not applied are recorded on the Consolidated Balance Sheets in either other current assets or liabilities (if short-term in nature) or in other assets or other long-term liabilities (if non-current in nature), and changes in fair value are recognized in current earnings as interest expense. Upon termination of a derivative instrument or a change in the hedged item, any remaining fair value recorded in the Consolidated Balance Sheets is recorded in Interest expense, net consistent with the cash flows associated with the underlying hedged item. Information regarding the nature and terms of the Company's interest rate derivatives is presented in Note 5 to the Consolidated Financial Statements.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost. Repairs and maintenance costs are charged to expense as incurred, while betterments that extend useful lives are capitalized. Depreciation is provided over the estimated useful lives of the individual assets, by the straight-line method. Estimated useful lives are generally as follows: land improvements - 16 years; leasehold improvements - the shorter of the lease term or the estimated useful life of the improvement, ranging from 3 to 20 years; buildings and storage facilities - 10 to 40 years; and machinery and equipment - 3 to 20 years. The cost of assets retired or otherwise disposed of, and the accumulated depreciation thereon are removed from the accounts, with any gain or loss realized upon sale recorded in Other income, net within the Consolidated Statements of Operations.
Additional information regarding the Company's property, plant and equipment is presented in Note 3 to the Consolidated Financial Statements.
Deferred Debt Issue Costs
Costs associated with the issuance of term debt are deferred and recorded net with debt. Costs associated with revolving credit agreements are recorded as a deferred asset. These costs are amortized, as a component of interest expense, over the earlier of the stated term of the debt or the period from the issue date through the first early payoff date without penalty, or the expected payoff date if the loan does not contain a prepayment penalty. Deferred costs associated with the borrowing arrangement with a syndication of banks are amortized over the term of the agreement.
Goodwill and Intangible Assets
Goodwill is subject to an annual impairment test or more often when events or circumstances indicate that the carrying amount of goodwill may be impaired. A goodwill impairment loss is recognized to the extent the carrying amount of goodwill exceeds the business enterprise value. Additional information about the Company's goodwill and other intangible assets is presented in Note 17 to the Consolidated Financial Statements.
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Acquired intangible assets are recorded at cost, less accumulated amortization, if not indefinite lived. In addition, we capitalize the salaries and payroll-related costs of employees and consultants who devote time to the development of internal-use software projects. If a project constitutes an enhancement to previously developed software, we assess whether the enhancement is significant and creates additional functionality to the software, thus qualifying the work incurred for capitalization. Once a project is complete, we estimate the useful life of the internal-use software. Changes in our estimates related to internal-use software would increase or decrease operating expenses or amortization recorded during the period.
Amortization of intangible assets is provided over their estimated useful lives (generally 1 to 10 years) using the straight-line method.
Impairment of Long-lived Assets and Equity Method Investments
Long-lived assets, including intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of the assets to the undiscounted future net cash flows the Company expects to generate with the assets. If such assets are considered to be impaired, the Company recognizes an impairment loss for the amount by which the carrying amount of the assets exceeds the fair value of the assets.
In 2022, the Company's 51% owned ELEMENT plant faced a combination of high corn basis, increased natural gas prices and a rapid decline in Low Carbon Fuel Standards credit values, that negatively impacted operations. The adverse operating conditions led to a failure of a debt covenant during the year, as well as, a forecasted failure of another covenant within the next 12 months. Accordingly, it was deemed that a triggering event occurred as of September 30, 2022 related to the ELEMENT ethanol plant. Management performed a recoverability test of the ELEMENT plant’s long-lived assets as this is the lowest level of identifiable cash flows. The key assumptions used in the recoverability test included input costs (corn, natural gas, etc.), production days, and co-product premiums. Each of these inputs were given probability weightings based on management's assessment regarding the likelihood of the respective forecasts. Using future forecasted cash flows, the ELEMENT asset group passed its recoverability test on an undiscounted cash flow basis by 15% over the carrying value of its assets. Assumptions used in the model did not change materially during the fourth quarter. However, if there are changes to key assumptions in the analysis it is reasonably possible management's estimate that it will recover the carrying amount of these assets could change, even in the near term. See further discussion on ELEMENT developments subsequent to December 31, 2022, in Note 4 of the Consolidated Financial Statements.
The Company reviews its equity method investments to determine whether there has been a decline in the estimated fair value of the investment that is below the Company's carrying value which is other-than-temporary. Other than consideration of past and current performance, these reviews take into account forecasted earnings which are based on management's estimates of future performance.
Provisionally Priced Commodity Contracts
Accounts payable includes certain amounts related to commodity purchases for which, even though the Company has taken ownership and possession of the commodity the final purchase price has not been fully established. If the futures and basis components are unpriced, it is referred to as a delayed price payable. If the futures component has not been established, but the basis has been set, it is referred to as a basis payable. The unpriced portion of these payables will be exposed to changes in the fair value of the underlying commodity based on quoted prices on commodity exchanges (or basis levels). Those payables that are fully priced are not considered derivative instruments.
The Company also enters into contracts with customers for risk management purposes that allow the customers to effectively unprice the futures component of their inventory for a period of time, subjecting the commodities to market fluctuations. The Company records an asset or liability for the market value changes of the commodities over the life of the contracts based on quoted exchange prices. See Note 10 for additional discussion on these instruments.
Stock-Based Compensation
Stock-based compensation expense for all stock-based compensation awards is based on the estimated grant-date fair value. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award, adjusted for revisions to performance expectations. Additional information about the Company's stock compensation plans is presented in Note 15 to the Consolidated Financial Statements.
The Andersons, Inc. | 2022 Form 10-K | 37
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Per Share Data
We present both basic and diluted earnings per share amounts from continuing operations and discontinued operations attributable to the Company's shareholders. Basic earnings per common share are determined by dividing net earnings attributable to controlling interests by the weighted-average number of common shares outstanding. In computing diluted earnings per share, average number of common shares outstanding is increased by unvested stock awards and common stock options outstanding with exercise prices lower than the average market price of common shares using the treasury share method.
Revenue Recognition
The Company’s revenue consists of sales from commodity contracts that are accounted for under ASC 815, Derivatives and Hedging (ASC 815), and sales of other products and services that are accounted for under ASC 606, Revenue from Contracts with Customers (ASC 606).
Revenue from commodity contracts (ASC 815)
Revenue from commodity contracts primarily relates to forward sales of commodities in the Company’s Trade and Renewables segments, such as corn, soybeans, wheat, oats, ethanol, and corn oil, which are accounted for as derivatives at fair value under ASC 815. These forward sales meet the definition of a derivative under ASC 815 as they have an underlying (e.g. the price of corn), a notional amount (e.g. metric tons), no initial net investment and can be net settled since the commodity is readily convertible to cash. The Company does not apply the normal purchase and normal sale exception available under ASC 815 to these contracts.
Revenue from commodity contracts is recognized in Sales and merchandising revenues for the contractually stated amount when the contracts are settled. Settlement of the commodity contracts generally occurs upon shipment or delivery of the product, when title and risks and rewards of ownership transfers to the customer. Prior to settlement, these forward sales contracts are recognized at fair value with the unrealized gains or losses recorded within Cost of sales and merchandising revenues. Additional information about the fair value of the Company's commodity derivatives is presented in Notes 5 and 10 to the Consolidated Financial Statements.
There are certain transactions that allow for pricing to occur after title of the goods has passed to the customer. In these cases, the Company continues to report the goods in inventory until it recognizes the sales revenue once the price has been determined. Direct ship commodity sales (where the Company never takes physical possession of the commodity) are recognized based on the terms of the contract.
Certain of the Company's operations provide for customer billings, deposits or prepayments for product that is stored at the Company's facilities. The sales and gross profit related to these transactions are not recognized until the product is shipped in accordance with the previously stated revenue recognition policy and these amounts are classified in the Consolidated Balance Sheets as a current liability titled “Customer prepayments and deferred revenue”.
Revenue from contracts with customers (ASC 606)
Information regarding our revenue from contracts with customers accounted for under ASC 606 is presented in Note 7 to the Consolidated Financial Statements. The Company recognizes revenue from these contracts at a point in time when it satisfies a performance obligation by transferring control of a product to a customer, generally when legal title and risks and rewards of ownership transfer to the customer.
Income Taxes
Income tax expense for each period includes current tax expense plus deferred expense, which is related to the change in deferred income tax assets and liabilities. Deferred income taxes are provided for temporary differences between the financial reporting basis and the tax basis of assets and liabilities and are measured using enacted tax rates and laws governing periods in which the differences are expected to reverse. The Company evaluates the realizability of deferred tax assets and provides a valuation allowance for amounts that management does not believe are more likely than not to be recoverable, as applicable.
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The annual effective tax rate is determined by Income tax provision (benefit) from continuing operations as a percentage of Income (loss) before income taxes from continuing operations within the Consolidated Statements of Operations. Differences in the effective tax rate and the statutory tax rate may be due to permanent items, tax credits, foreign tax rates and state tax rates in jurisdictions in which the Company operates, or changes in valuation allowances.
The Company records reserves for uncertain tax positions when, despite the belief that tax return positions are fully supportable, it is anticipated that certain tax return positions are likely to be challenged and that the Company may not prevail. These reserves are adjusted for changing facts and circumstances, such as the progress of a tax audit or the lapse of statutes of limitations.
Additional information about the Company’s income taxes is presented in Note 8 to the Consolidated Financial Statements.
Employee Benefit Plans
The Company provides full-time employees hired before January 1, 2003, with postretirement health care benefits. In order to measure the expense and funded status of these employee benefit plans, management makes several estimates and assumptions, including employee turnover rates, anticipated mortality rates and anticipated future healthcare cost trends. These estimates and assumptions are based on the Company's historical experience combined with management's knowledge and understanding of current facts and circumstances. The selection of the discount rate is based on an index given projected plan payouts. Additional information about the Company's employee benefit plans is presented in Note 6 to the Consolidated Financial Statements.
Recently Adopted Accounting Pronouncements
Reference Rate Reform (Topic 848)
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to U.S. GAAP on contract modifications, hedging relationships, and other transactions affected by reference rate reform to ease entities' financial reporting burdens as the market transitions from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and may be applied prospectively to contract modifications made, hedging relationships entered into, and other transactions affected by reference rate reform, evaluated on or before December 31, 2022, beginning during the reporting period in which the guidance has been elected. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extended the date to December 31, 2024.
As of December 31, 2022, the Company does not have any receivables, hedging relationships, lease agreements, or debt agreements that reference LIBOR or another reference rate expected to be discontinued. Therefore, we will not be electing the optional practical expedients associated with this ASU.
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- Inventories
Major classes of inventories are presented below. Readily Marketable Inventories are agricultural commodity inventories such as corn, soybeans, wheat, and ethanol co-products, among others, carried at net realizable value which approximates fair value based on their commodity characteristics, widely available markets, and pricing mechanisms. The net realizable value of RMI is calculated as the fair value (spot price of the commodity in an exchange), less cost of disposal and transportation based on the local market. All other inventories are held at lower of cost or net realizable value. The components of inventories are as follows:
| December 31, | ||||
|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | ||
| Grain and other agricultural products (a) | $ | 1,326,531 | $ | 1,427,708 |
| Propane and frac sand (a) | 21,084 | 23,780 | ||
| Ethanol and co-products (a) | 156,341 | 184,354 | ||
| Plant nutrients and cob products | 227,769 | 178,696 | ||
| Total | $ | 1,731,725 | $ | 1,814,538 |
(a) Includes RMI of $1,308.8 million and $1,410.9 million at December 31, 2022 and December 31, 2021, respectively.
The Company incurred inventory damage charges of $17.3 million in the year ended December 31, 2022. In December 2022, approximately $16.2 million of that charge was related to a fire at a Michigan grain asset where substantially all of the insured inventory held at that location was severely damaged or destroyed.
- Property, Plant and Equipment
The components of property, plant and equipment are as follows:
| December 31, | ||||
|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | ||
| Land | $ | 38,689 | $ | 39,162 |
| Land improvements and leasehold improvements | 92,084 | 91,122 | ||
| Buildings and storage facilities | 364,721 | 368,577 | ||
| Machinery and equipment | 980,159 | 936,476 | ||
| Construction in progress | 41,429 | 20,676 | ||
| 1,517,082 | 1,456,013 | |||
| Less: accumulated depreciation | (754,353) | (669,984) | ||
| Property, plant and equipment, net | $ | 762,729 | $ | 786,029 |
Depreciation expense on property, plant and equipment amounted to $110.6 million, $126.9 million and $122.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.
In December 2022, the Company recorded charges of $9.0 million for impairments of property, plant and equipment in the Trade segment related to a Nebraska grain asset.
In December 2021, the Company recorded charges of $7.7 million for impairments of property, plant and equipment in the Trade segment related to its frac sand assets in Oklahoma. The Company also recorded a $0.6 million impairment of property, plant and equipment in the Trade segment related to the shutdown of a facility in Texas.
The Andersons, Inc. | 2022 Form 10-K | 40
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- Debt
The Company’s short-term and long-term debt at December 31, 2022 and 2021 consisted of the following:
| December 31, | ||||
|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | ||
| Short-term debt – non-recourse | $ | 81,475 | $ | 65,485 |
| Short-term debt – recourse | 191,100 | 436,307 | ||
| Total short-term debt | 272,575 | 501,792 | ||
| Current maturities of long-term debt – non-recourse | 63,815 | 7,601 | ||
| Current maturities of long-term debt – recourse | 46,340 | 24,655 | ||
| Total current maturities of long-term debt | 110,155 | 32,256 | ||
| Long-term debt, less: current maturities – non-recourse | 414 | 64,972 | ||
| Long-term debt, less: current maturities – recourse | 492,104 | 535,515 | ||
| Total long-term debt, less: current maturities | $ | 492,518 | $ | 600,487 |
On March 2, 2022, the Company completed an incremental term loan amendment to its credit agreement dated January 11, 2019. The amendment provided for a short-term note of $250.0 million in which the entire stated principal was due on May 31, 2022 (subsequently extended to August 31, 2022). On March 9, 2022, the Company completed an additional term loan amendment that expanded the short-term note capacity from $250.0 million to $450.0 million. On May 27, 2022, the Company completed an additional amendment to convert the $350.0 million then outstanding balance from the $450.0 million incremental term loan amendment to a revolving credit agreement with a capacity of up to $450.0 million. The entire amount outstanding was due on August 31, 2022, and was fully repaid during the third quarter of 2022.
On March 28, 2022, the Company continued to amend its credit agreement dated January 11, 2019. The amendment increased borrowing capacity on the revolver from $900.0 million to $1,550.0 million and extended the maturity dates of the $140.6 million and $209.4 million long-term notes originally due in 2026 to March 26, 2027, and March 28, 2029, respectively. The amendment also transitions the reference rate in the credit agreement from LIBOR to "SOFR" (Standard Overnight Financing Rate). The revolver and term notes will bear interest at variable rates, which are based on SOFR plus an applicable spread.
During the first quarter of 2022, the Company repaid the remaining $200.0 million balance that was outstanding as of December 31, 2021, on a short-term note that was classified as recourse debt to the Company.
The capacity of the Company's short-term lines of credit at December 31, 2022 was $1,990.8 million of which the Company had a total of $1,659.6 million available for borrowing. The Company's borrowing capacity is reduced by a combination of outstanding borrowings and letters of credit. The weighted-average interest rate on short-term borrowings outstanding at December 31, 2022 and 2021, were 5.67% and 1.49%, respectively.
As part of the Company's ongoing covenant monitoring process, the Company determined that as of December 31, 2022, ELEMENT is virtually certain to be out of compliance with an owner's equity ratio covenant within the next 12 months. As such, the $63.3 million of non-recourse debt associated with ELEMENT has been classified in Current maturities of long-term debt as of December 31, 2022. Additionally, ELEMENT did not make a required debt payment in February 2023 and subsequently received a default notice from the lender on February 17, 2023. This event of default could result in the lender accelerating the maturity of ELEMENT’s indebtedness or preventing access to additional funds under the line of credit agreement, or requiring prepayment of outstanding indebtedness under the loan agreement or the line of credit agreement. Subsequent to year end, the Company began to consider various strategies related to the investment.
The Company was in compliance with all financial covenants at and during the years ended December 31, 2022 and 2021, other than with respect to the ELEMENT non-recourse debt as discussed above.
Total interest paid was $56.7 million, $38.2 million and $33.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.
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As of December 31, 2022 and 2021, the estimated fair value of long-term debt, including the current portion, was $595.7 million and $650.7 million, respectively. The Company estimates the fair value of its long-term debt based upon the Company’s credit standing and current interest rates offered by the Company on similar bonds and rates currently available to the Company for long-term borrowings with similar terms and remaining maturities.
Long-Term Debt
Recourse Long-Term Debt
| December 31, | ||||
|---|---|---|---|---|
| (in thousands, except percentages) | 2022 | 2021 | ||
| Note payable, variable rate (6.08% at December 31, 2022), payable in increasing amounts plus interest, due 2029 | $ | 201,524 | $ | 212,500 |
| Note payable, variable rate (5.96% at December 31, 2022), payable in increasing amounts plus interest, due 2027 | 135,352 | 142,500 | ||
| Note payable, 4.50%, payable at maturity, due 2034 (a) | 95,500 | 99,090 | ||
| Note payable, 4.85%, payable at maturity, due 2026 | 25,000 | 25,000 | ||
| Note payable, 4.55%, payable at maturity, due 2023 | 24,000 | 24,000 | ||
| Industrial revenue bond, variable rate (4.81% at December 31, 2022), payable at maturity, due 2036 | 21,000 | 21,000 | ||
| Note payable, 4.50%, payable at maturity, due 2030 | 16,000 | 16,000 | ||
| Note payable, 5.00%, payable at maturity, due 2040 | 14,000 | 14,000 | ||
| Finance lease obligations, due serially to 2030 (a) | 9,071 | 10,135 | ||
| 541,447 | 564,225 | |||
| Less: current maturities | 46,340 | 24,655 | ||
| Less: unamortized prepaid debt issuance costs | 3,003 | 4,055 | ||
| $ | 492,104 | $ | 535,515 |
(a) Debt is collateralized by first mortgages on certain facilities and related equipment or other assets with a book value of $56.6 million.
The aggregate annual maturities of recourse, long-term debt are as follows: 2023 -- $46.3 million; 2024 -- $22.6 million; 2025 -- $22.8 million; 2026 -- $48.0 million; 2027 -- $123.4 million; and $278.3 million thereafter.
Non-Recourse Long-Term Debt
The Company's non-recourse long-term debt consists of the following:
| December 31, | ||||
|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | ||
| Note payable, variable rate (7.59% at December 31, 2022), payable at maturity, due 2023 (a) | $ | 63,335 | $ | 70,000 |
| Finance lease obligations, due serially to 2024 | 894 | 2,745 | ||
| 64,229 | 72,745 | |||
| Less: current maturities | 63,815 | 7,601 | ||
| Less: unamortized prepaid debt issuance costs | — | 172 | ||
| $ | 414 | $ | 64,972 |
(a) Debt is collateralized by a first mortgages on the ELEMENT facility and related equipment or other assets with a book value of $128.9 million.
The aggregate annual maturities of non-recourse long-term debt are $63.8 million and $0.4 million for the years ended December 31, 2023 and 2024, respectively.
The Andersons, Inc. | 2022 Form 10-K | 42
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- Derivatives
Commodity Contracts
The Company’s operating results are affected by changes to commodity prices. The Trade and Renewables businesses have established “unhedged” futures position limits (the amount of a commodity, either owned or contracted for, that does not have an offsetting derivative contract to lock in the price). To reduce the exposure to market price risk on commodities owned and forward purchase and sale contracts, the Company enters into exchange traded commodity futures and options contracts and over-the-counter forward and option contracts with various counterparties. These contracts are primarily traded via regulated commodity exchanges. The Company’s forward purchase and sales contracts are for physical delivery of the commodity in a future period. Contracts to purchase commodities from producers generally relate to the current or future crop years for delivery periods quoted by regulated commodity exchanges. Most contracts for the sale of commodities to processors or other commercial consumers generally do not extend beyond one year.
Most of these contracts meet the definition of derivatives. While the Company considers its commodity contracts to be effective economic hedges, the Company does not designate or account for its commodity contracts as hedges as defined under current accounting standards. The Company primarily accounts for its commodity derivatives at estimated fair value. The estimated fair value of the commodity derivative contracts that require the receipt or posting of cash collateral is recorded on a net basis (offset against cash collateral posted or received, also known as margin deposits) within commodity derivative assets or liabilities. Management determines fair value based on exchange-quoted prices and in the case of its forward purchase and sale contracts, estimated fair value is adjusted for differences in local markets and non-performance risk. For contracts for which physical delivery occurs, balance sheet classification is based on estimated delivery date. For futures, options and over-the-counter contracts in which physical delivery is not expected to occur but, rather, the contract is expected to be net settled, the Company classifies these contracts as current or noncurrent assets or liabilities, as appropriate, based on the Company’s expectations as to when such contracts will be settled.
Realized and unrealized gains and losses in the value of commodity contracts (whether due to changes in commodity prices, changes in performance or credit risk, or due to sale, maturity or extinguishment of the commodity contract) and commodity inventories are included in Cost of sales and merchandising revenues.
Generally accepted accounting principles permit a party to a master netting arrangement to offset fair value amounts recognized for derivative instruments against the right to reclaim cash collateral or obligation to return cash collateral under the same master netting arrangement. The Company has master netting arrangements for its exchange traded futures and options contracts and certain over-the-counter contracts. When the Company enters into a future, option or an over-the-counter contract, an initial margin deposit may be required by the counterparty. The amount of the margin deposit varies by commodity. If the market price of a future, option or an over-the-counter contract moves in a direction that is adverse to the Company’s position, an additional margin deposit, called a maintenance margin, is required. The margin deposit assets and liabilities are included in current commodity derivative assets (or liabilities), as appropriate, in the Consolidated Balance Sheets.
The net asset or liability positions of these derivatives (net of their cash collateral) are determined on a counterparty-by-counterparty basis. If current, the net position is included within Commodity derivative assets (or liabilities) - current, and if noncurrent, the net position is included in Other assets or Other long-term liabilities in the Consolidated Balance Sheets. The following table presents a summary of the estimated fair value of the Company’s commodity derivative instruments that require cash collateral and the associated cash posted or received as collateral as of December 31, 2022 and 2021:
| (in thousands) | December 31, 2022 | December 31, 2021 | ||
|---|---|---|---|---|
| Cash collateral paid | $ | 64,530 | $ | 165,250 |
| Fair value of derivatives | (10,014) | (36,843) | ||
| Net derivative asset position | $ | 54,516 | $ | 128,407 |
The Andersons, Inc. | 2022 Form 10-K | 43
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The following table presents, on a gross basis, current and non-current commodity derivative assets and liabilities:
| December 31, 2022 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | Commodity Derivative Assets - Current | Commodity Derivative Assets - Noncurrent | Commodity Derivative Liabilities - Current | Commodity Derivative Liabilities - Noncurrent | Total | |||||
| Commodity derivative assets | $ | 325,762 | $ | 1,796 | $ | 18,426 | $ | 686 | $ | 346,670 |
| Commodity derivative liabilities | (94,704) | (149) | (116,945) | (1,484) | (213,282) | |||||
| Cash collateral paid | 64,530 | — | — | — | 64,530 | |||||
| Balance sheet line item totals | $ | 295,588 | $ | 1,647 | $ | (98,519) | $ | (798) | $ | 197,918 |
| December 31, 2021 | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (in thousands) | Commodity Derivative Assets - Current | Commodity Derivative Assets - Noncurrent | Commodity Derivative Liabilities - Current | Commodity Derivative Liabilities - Noncurrent | Total | |||||
| Commodity derivative assets | $ | 339,321 | $ | 4,677 | $ | 23,762 | $ | 1,209 | $ | 368,969 |
| Commodity derivative liabilities | (93,758) | (105) | (152,673) | (2,578) | (249,114) | |||||
| Cash collateral paid | 165,250 | — | — | — | 165,250 | |||||
| Balance sheet line item totals | $ | 410,813 | $ | 4,572 | $ | (128,911) | $ | (1,369) | $ | 285,105 |
The net gains and losses on commodity derivatives not designated as hedging instruments included in the Company’s Consolidated Statements of Operations and the line items in which they are located for the years ended December 31, 2022, 2021 and 2020, are as follows:
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | 2020 | |||
| Gains (losses) on commodity derivatives included in <br>Cost of sales and merchandising revenues | $ | 13,533 | $ | 151,058 | $ | (36,563) |
The Andersons, Inc. | 2022 Form 10-K | 44
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The Company had the following volume of commodity derivative contracts outstanding (on a gross basis) as of December 31, 2022 and 2021:
| December 31, 2022 | |||||||
|---|---|---|---|---|---|---|---|
| (in thousands) | Number of Bushels | Number of Gallons | Number of Tons | ||||
| Non-exchange traded: | |||||||
| Corn | 567,405 | — | — | ||||
| Soybeans | 56,608 | — | — | ||||
| Wheat | 102,716 | — | — | ||||
| Oats | 24,710 | — | — | ||||
| Ethanol | — | 178,935 | — | ||||
| Soybean meal | — | — | 570 | ||||
| Dried distillers grain | — | — | 449 | ||||
| Other | 10,054 | 44,547 | 2,029 | ||||
| Subtotal | 761,493 | 223,482 | 3,048 | ||||
| Exchange traded: | |||||||
| Corn | 170,280 | — | — | ||||
| Soybeans | 46,380 | — | — | ||||
| Wheat | 111,567 | — | — | ||||
| Oats | 365 | — | — | ||||
| Ethanol | — | 94,206 | — | ||||
| Propane | — | 47,208 | — | ||||
| Other | — | 588 | 581 | ||||
| Subtotal | 328,592 | 142,002 | 581 | ||||
| Total | 1,090,085 | 365,484 | 3,629 | December 31, 2021 | |||
| --- | --- | --- | |||||
| (in thousands) | Number of Bushels | Number of Gallons | Number of Tons | ||||
| Non-exchange traded: | |||||||
| Corn | 685,681 | — | — | ||||
| Soybeans | 77,592 | — | — | ||||
| Wheat | 109,547 | — | — | ||||
| Oats | 31,627 | — | — | ||||
| Ethanol | — | 192,447 | — | ||||
| Soybean meal | — | — | 544 | ||||
| Dried distillers grain | — | — | 507 | ||||
| Other | 57,268 | 16,092 | 1,854 | ||||
| Subtotal | 961,715 | 208,539 | 2,905 | ||||
| Exchange traded: | |||||||
| Corn | 226,215 | — | — | ||||
| Soybeans | 64,730 | — | — | ||||
| Wheat | 65,020 | — | — | ||||
| Oats | 1,300 | — | — | ||||
| Ethanol | — | 100,884 | — | ||||
| Propane | — | 31,542 | — | ||||
| Other | 75 | 798 | 353 | ||||
| Subtotal | 357,340 | 133,224 | 353 | ||||
| Total | 1,319,055 | 341,763 | 3,258 |
The Andersons, Inc. | 2022 Form 10-K | 45
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Interest Rate and Other Derivatives
The Company’s objectives in using interest rate derivatives are to add stability to interest expense on long-term debt and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
The gains or losses on the derivatives designated as hedging instruments are recorded in Other comprehensive income (loss) and subsequently reclassified into Interest expense, net in the same periods during which the hedged transaction affects earnings. Amounts reported in Accumulated other comprehensive income (loss) related to derivatives will be reclassified to Interest expense, net as interest payments are made on the Company’s variable-rate long-term debt. The Company also has foreign currency derivatives which are considered effective economic hedges of specified economic risks.
At December 31, 2022 and 2021, the Company had recorded the following amounts for the fair value of the Company's interest rate and other derivatives:
| December 31, | ||||
|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | ||
| Derivatives not designated as hedging instruments | ||||
| Interest rate contracts included in Accrued expenses and other current liabilities | $ | — | $ | (174) |
| Foreign currency contracts included in Other current (liabilities) assets | (3,124) | (1,069) | ||
| Derivatives designated as hedging instruments | ||||
| Interest rate contracts included in Other current assets | 8,759 | — | ||
| Interest rate contracts included in Other assets | 22,641 | 4,574 | ||
| Interest rate contracts included in Accrued expenses and other current liabilities | — | (5,206) | ||
| Interest rate contracts included in Other long-term liabilities | — | (6,555) |
The recording of derivatives gains and losses and the financial statement line item in which they are located are as follows:
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | 2020 | |||
| Derivatives not designated as hedging instruments | ||||||
| Interest rate derivative gains (losses) included in Interest expense, net | $ | 123 | $ | (844) | $ | (11) |
| Derivatives designated as hedging instruments | ||||||
| Interest rate derivative gains (losses) included in Other comprehensive income (loss) | 38,564 | 16,960 | (11,497) | |||
| Interest rate derivative gains (losses) included in Interest expense, net | (989) | (6,733) | (7,982) |
The following table presents the open interest rate contracts at December 31, 2022:
| Interest Rate Hedging Instrument | Year Entered | Year of Maturity | Initial Notional Amount <br>(in millions) | Hedged Item | Interest Rate | |
|---|---|---|---|---|---|---|
| Long-term | ||||||
| Swap | 2019 | 2025 | $ | 100.0 | Interest rate component of debt - not accounted for as a hedge | 2.3% |
| Swap | 2019 | 2025 | 50.0 | Interest rate component of debt - accounted for as a hedge | 2.4% | |
| Swap | 2019 | 2025 | 50.0 | Interest rate component of debt - accounted for as a hedge | 2.4% | |
| Swap | 2020 | 2030 | 50.0 | Interest rate component of debt - accounted for as a hedge | 0.0% to 0.8% | |
| Swap | 2020 | 2030 | 50.0 | Interest rate component of debt - accounted for as a hedge | 0.0% to 0.8% | |
| Swap | 2022 | 2025 | 20.0 | Interest rate component of debt - accounted for as a hedge | 2.6% | |
| Swap | 2022 | 2029 | 100.0 | Interest rate component of debt - accounted for as a hedge | 2.0% | |
| Swap | 2022 | 2029 | 50.0 | Interest rate component of debt - accounted for as a hedge | 2.4% |
The Andersons, Inc. | 2022 Form 10-K | 46
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- Employee Benefit Plans
The Company provides certain full-time employees with pension benefits under defined contribution plans. The Company's expense for its defined contribution plans amounted to $17.2 million, $14.6 million and $8.1 million for the years ended December 31, 2022, 2021 and 2020, respectively. The expense for the Company's defined contribution plans increased in both 2021 and 2022 as the employer discretionary contribution increased consistent with the improved operating results.
The Company also has a postretirement health care benefit plan covering substantially all of its full-time employees hired prior to January 1, 2003. These plans are generally contributory and include a cap on the Company's share of the related costs. The measurement date for this plan is December 31.
Obligation and Funded Status
Following are the details of the obligation and funded status of the postretirement health care benefit plan:
| (in thousands) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Change in benefit obligation | 2022 | 2021 | ||||||||
| Benefit obligation at beginning of year | $ | 23,942 | $ | 25,324 | ||||||
| Service cost | 248 | 302 | ||||||||
| Interest cost | 586 | 546 | ||||||||
| Actuarial (gains) losses | (6,180) | (1,252) | ||||||||
| Participant contributions | 314 | 271 | ||||||||
| Benefits paid | (1,477) | (1,249) | ||||||||
| Benefit obligation at end of year | $ | 17,433 | $ | 23,942 | (in thousands) | |||||
| --- | --- | --- | --- | --- | ||||||
| Change in plan assets | 2022 | 2021 | ||||||||
| Fair value of plan assets at beginning of year | $ | — | $ | — | ||||||
| Company contributions | 1,163 | 978 | ||||||||
| Participant contributions | 314 | 271 | ||||||||
| Benefits paid | (1,477) | (1,249) | ||||||||
| Fair value of plan assets at end of year | $ | — | $ | — | ||||||
| Under funded status of plans at end of year | $ | (17,433) | $ | (23,942) |
Amounts recognized in the Consolidated Balance Sheets at December 31, 2022 and 2021 consist of:
| (in thousands) | 2022 | 2021 | ||
|---|---|---|---|---|
| Accrued expenses and other current liabilities | $ | 1,276 | $ | 1,359 |
| Other long-term liabilities | 16,157 | 22,583 | ||
| Net amount recognized | $ | 17,433 | $ | 23,942 |
Following are the details of the amounts recognized in Accumulated other comprehensive income before taxes at December 31, 2022:
| (in thousands) | Unamortized Actuarial Net Gains | Unamortized Prior Service Costs | ||
|---|---|---|---|---|
| Balance at beginning of year | $ | (5,498) | $ | 4,098 |
| Amounts arising during the period | (6,180) | — | ||
| Amounts recognized as a component of net periodic benefit cost | — | 911 | ||
| Balance at end of year | $ | (11,678) | $ | 5,009 |
The Andersons, Inc. | 2022 Form 10-K | 47
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The benefits expected to be paid for the postretirement health care benefit plan over the next ten years are as follows:
| (in thousands) | Postretirement Benefits | |
|---|---|---|
| 2023 | $ | 1,276 |
| 2024 | 1,285 | |
| 2025 | 1,299 | |
| 2026 | 1,308 | |
| 2027 | 1,300 | |
| 2028-2032 | 6,371 |
Following are components of the net periodic benefit cost for each year:
| December 31, | ||||||
|---|---|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | 2020 | |||
| Service cost | $ | 248 | $ | 302 | $ | 221 |
| Interest cost | 586 | 546 | 719 | |||
| Expected return on plan assets | (911) | (911) | (911) | |||
| Recognized net actuarial loss | — | 169 | 79 | |||
| Net periodic benefit (gain) cost | $ | (77) | $ | 106 | $ | 108 |
Following are weighted-average assumptions of the postretirement health care benefit plan for each year:
| 2022 | 2021 | 2020 | ||||
|---|---|---|---|---|---|---|
| Used to Determine Benefit Obligations at Measurement Date | ||||||
| Discount rate | 4.9 | % | 2.6 | % | 2.2 | % |
| Used to Determine Net Periodic Benefit Cost for Years ended December 31 | ||||||
| Discount rate | 2.6 | % | 2.2 | % | 3.0 | % |
| Expected long-term return on plan assets | — | — | — | |||
| Rate of compensation increases | — | — | — | |||
| Assumed Health Care Cost Trend Rates at Beginning of Year | ||||||
| --- | --- | --- | --- | --- | ||
| 2022 | 2021 | |||||
| Health care cost trend rate assumed for next year | 3.0 | % | 3.0 | % | ||
| Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) (a) | N/A | N/A | ||||
| Year that the rate reaches the ultimate trend rate (a) | N/A | N/A |
(a)In 2017, the Company's remaining uncapped participants were converted to a Medicare Exchange Health Reimbursement Arrangement, which put a 2% cap on the Company's share of the related costs.
- Revenue
Many of the Company’s sales and merchandising revenues are generated from contracts that are outside the scope of ASC 606. Specifically, many of the Company's Trade and Renewables sales contracts are derivatives under ASC 815, Derivatives and Hedging. The breakdown of revenues between ASC 606 and ASC 815 is as follows:
| Year ended December 31, | ||||||
|---|---|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | 2020 | |||
| Revenues under ASC 606 | $ | 3,036,852 | $ | 2,211,537 | $ | 1,479,686 |
| Revenues under ASC 815 | 14,288,532 | 10,400,513 | 6,584,934 | |||
| Total revenues | $ | 17,325,384 | $ | 12,612,050 | $ | 8,064,620 |
The Andersons, Inc. | 2022 Form 10-K | 48
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Disaggregation of revenue
The following tables disaggregate revenues under ASC 606 by major product line:
| Year ended December 31, 2022 | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | Trade | Renewables | Plant Nutrient | Total | ||||||||||||||
| Specialty nutrients | $ | — | $ | — | $ | 355,636 | $ | 355,636 | ||||||||||
| Primary nutrients | — | — | 625,134 | 625,134 | ||||||||||||||
| Products and co-products | 396,613 | 1,219,972 | — | 1,616,585 | ||||||||||||||
| Propane | 264,072 | — | — | 264,072 | ||||||||||||||
| Other | 50,966 | 5,921 | 118,538 | 175,425 | ||||||||||||||
| Total | $ | 711,651 | $ | 1,225,893 | $ | 1,099,308 | $ | 3,036,852 | Year ended December 31, 2021 | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| (in thousands) | Trade | Renewables | Plant Nutrient | Total | ||||||||||||||
| Specialty nutrients | $ | — | $ | — | $ | 270,842 | $ | 270,842 | ||||||||||
| Primary nutrients | — | — | 500,891 | 500,891 | ||||||||||||||
| Products and co-products | 313,195 | 714,120 | — | 1,027,315 | ||||||||||||||
| Propane | 246,002 | — | — | 246,002 | ||||||||||||||
| Other | 64,557 | 6,768 | 95,162 | 166,487 | ||||||||||||||
| Total | $ | 623,754 | $ | 720,888 | $ | 866,895 | $ | 2,211,537 | ||||||||||
| Year ended December 31, 2020 | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| (in thousands) | Trade | Renewables | Plant Nutrient | Total | ||||||||||||||
| Specialty nutrients | $ | — | $ | — | $ | 234,806 | $ | 234,806 | ||||||||||
| Primary nutrients | — | — | 396,515 | 396,515 | ||||||||||||||
| Products and co-products | 234,219 | 408,677 | — | 642,896 | ||||||||||||||
| Propane | 122,580 | — | — | 122,580 | ||||||||||||||
| Other | 49,193 | 2,057 | 31,638 | 82,888 | ||||||||||||||
| Total | $ | 405,992 | $ | 410,734 | $ | 662,959 | $ | 1,479,685 |
Substantially all of the Company's revenues accounted for under ASC 606 are recorded at a point in time instead of over time for the years ended December 31, 2022, 2021 and 2020, respectively.
Specialty and primary nutrients
The Company sells several different types of specialty nutrient products, including: low-salt liquid starter fertilizers, micro-nutrients and other specialty lawn products. These products can be sold through the wholesale distribution channels as well as directly to end users at the farm center locations. Similarly, the Company sells several different types of primary nutrient products, including: nitrogen, phosphorus and potassium. These products may be purchased and re-sold as is or sold as finished goods resulting from a blending and manufacturing process. The contracts associated with specialty and primary nutrients generally have a single performance obligation, as the Company has elected the accounting policy to consider shipping and handling costs as fulfillment costs. Revenue is recognized when control of the product has passed to the customer. Payment terms generally range from 0 - 30 days.
The Andersons, Inc. | 2022 Form 10-K | 49
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Products and co-products
The Renewables segment sells several co-products through the production of ethanol that remain subject to ASC 606, including E-85, dried distillers grains, syrups and renewable identification numbers (“RINs”). RINs are credits for compliance with the Environmental Protection Agency's Renewable Fuel Standard program and are created by renewable fuel producers. The Trade segment also sells several products that are subject to ASC 606, such as pulses, organics and pet food ingredients. Contracts for these products and co-products generally have a single performance obligation, as the Company has elected the accounting policy to consider shipping and handling costs as fulfillment costs. Revenue is recognized when control of the product has passed to the customer which follows shipping terms on the contract. Payment terms for Renewables generally range from 10 - 15 days. Payment terms for Trade generally range from 30 - 120 days.
Propane
Propane products are primarily sold to United States customers in the energy industry. Revenue is recognized at a point in time when obligations under the terms of a contract with the customer are satisfied. This occurs with the transfer of control of our products to customers when products are shipped for direct sales to customers or when the product is picked up by a customer at a transload location. Contracts contain one performance obligation which is the delivery to the customer at a point in time. Revenue is measured as the amount of consideration received in exchange for transferring products. The Company recognizes the cost for shipping as an expense in Cost of sales and merchandising revenues when control over the product has transferred to the customer. Payment terms generally range from 0 - 30 days.
Contract balances
The opening and closing balances of the Company’s contract liabilities are as follows:
| (in thousands) | 2022 | 2021 | ||
|---|---|---|---|---|
| Balance at January 1 | $ | 100,847 | $ | 45,634 |
| Balance at December 31 | 55,408 | 100,847 |
The difference between the opening and closing balances of the Company’s contract liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment. Contract liabilities relate to the Plant Nutrient business for payments received in advance of fulfilling our performance obligations under our customer contracts. Contract liabilities are built up at year-end and through the first quarter as a result of payments in advance of fulfilling our performance obligations under our customer contracts in preparation for the spring application season. The contract liabilities are then relieved as obligations are met through the year and begin to build in preparation for a new season as year-end approaches. The variance in contract liabilities at December 31, 2022, compared to the prior years was due to tight supplies and a sharp increase of fertilizer prices towards the end of 2021 and customers were more willing to prepay for fertilizer to ensure supply and fix their input costs for the following spring application season. At the end of 2022 and 2020, there was much less volatility in the fertilizer market leading customers to not prepay as significantly as they were willing to do in 2021.
The Andersons, Inc. | 2022 Form 10-K | 50
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- Income Taxes
Income tax provision (benefit) from continuing operations consists of the following:
| Year ended December 31, | ||||||
|---|---|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | 2020 | |||
| Current: | ||||||
| Federal | $ | 38,801 | $ | 23,333 | $ | (42,718) |
| State and local | 13,541 | 4,934 | (748) | |||
| Foreign | 4,741 | 760 | 6,731 | |||
| 57,083 | 29,027 | (36,735) | ||||
| Deferred: | ||||||
| Federal | (13,425) | (3,687) | 28,665 | |||
| State and local | (6,775) | 819 | 1,180 | |||
| Foreign | 2,745 | 3,069 | (4,020) | |||
| (17,455) | 201 | 25,825 | ||||
| Total: | ||||||
| Federal | 25,376 | 19,646 | (14,053) | |||
| State and local | 6,766 | 5,753 | 432 | |||
| Foreign | 7,486 | 3,829 | 2,711 | |||
| $ | 39,628 | $ | 29,228 | $ | (10,910) |
Income (loss) before income taxes from continuing operations consists of the following:
| Year ended December 31, | ||||||
|---|---|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | 2020 | |||
| U.S. | $ | 173,810 | $ | 143,712 | $ | (38,319) |
| Foreign | 20,772 | 17,058 | 11,238 | |||
| $ | 194,582 | $ | 160,770 | $ | (27,081) |
A reconciliation from the statutory U.S. federal tax rate to the effective tax rate follows:
| Year ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | ||||
| Statutory U.S. federal tax rate | 21.0 | % | 21.0 | % | 21.0 | % |
| Increase (decrease) in rate resulting from: | ||||||
| State and local income taxes, net of related federal taxes | 2.4 | 2.5 | 0.5 | |||
| Federal tax rate differential | (0.3) | 0.4 | (2.1) | |||
| U.S. tax rate change and other tax law impacts (a) | 0.4 | 0.5 | 56.2 | |||
| Effect of noncontrolling interest | (3.9) | (4.2) | (17.0) | |||
| Derivative instruments and hedging activities | (1.3) | 0.4 | (11.8) | |||
| U.S. income taxes on foreign earnings | (0.1) | 0.7 | (1.8) | |||
| Nondeductible compensation | 1.2 | 1.9 | (5.5) | |||
| Unrecognized tax benefits | 8.0 | 2.1 | (72.2) | |||
| Valuation allowance | 0.7 | 0.1 | (1.9) | |||
| Foreign tax credits | (2.1) | (1.3) | (0.5) | |||
| Research and development and other tax credits | (7.0) | (5.0) | 75.6 | |||
| Equity method investments | 0.8 | (0.6) | (0.1) | |||
| Other, net | 0.6 | (0.3) | (0.1) | |||
| Effective tax rate | 20.4 | % | 18.2 | % | 40.3 | % |
(a) Reflects the impact of the CARES Act which provided a financial statement benefit of $14.8 million in 2020.
The Andersons, Inc. | 2022 Form 10-K | 51
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Net income taxes of $88.7 million, $51.7 million and $2.4 million were paid in the years ended December 31, 2022, 2021 and 2020, respectively.
TAMH and ELEMENT are treated as partnerships for U.S. tax purposes. Partnerships are not taxable entities so the tax consequences of the partnership’s transactions flow through to the partners (i.e., investors) at their proportionate share. As a result, the Consolidated Financial Statements do not reflect such income taxes on income (loss) before taxes attributable to the noncontrolling interest in the partnerships.
The Company has elected to treat Global Intangible Low Tax Income (“GILTI”) as a period cost and, therefore, has not recognized deferred taxes for basis differences that may reverse as GILTI tax in future years.
For the years ended December 31, 2022 and 2021, the Company has not recognized deferred tax liabilities for temporary differences related to investments in foreign subsidiaries that were deemed permanently reinvested. Determination of the amount of unrecognized deferred income tax liabilities on these earnings is not practicable because such liability, if any, depends on certain circumstances existing and if/when remittance occurs. A deferred tax liability will be recognized if and when the Company no longer plans to permanently reinvest these undistributed earnings.
Significant components of the Company's deferred tax liabilities and assets are as follows:
| December 31, | ||||
|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | ||
| Deferred tax liabilities: | ||||
| Property, plant and equipment | $ | (58,273) | $ | (66,913) |
| Operating lease right-of-use assets | (9,370) | — | ||
| Identifiable intangibles | (6,802) | (7,022) | ||
| Investments | (34,604) | (35,842) | ||
| Derivative Instruments | (7,911) | — | ||
| Other | (5,160) | (3,859) | ||
| (122,120) | (113,636) | |||
| Deferred tax assets: | ||||
| Employee benefits | 28,859 | 27,695 | ||
| Accounts and notes receivable | 6,726 | 2,189 | ||
| Inventory | 10,272 | 4,533 | ||
| Federal income tax credits | 1,914 | 2,292 | ||
| Net operating loss carryforwards | 1,740 | 2,906 | ||
| Derivative instruments | — | 1,774 | ||
| Operating lease liability | 9,526 | — | ||
| Other | 7,118 | 5,490 | ||
| Total deferred tax assets | 66,155 | 46,879 | ||
| less: Valuation allowance | 3,834 | 2,834 | ||
| 62,321 | 44,045 | |||
| Net deferred tax liabilities(a) | $ | (59,799) | $ | (69,591) |
(a) The Company had deferred tax assets of $4.3 million and $1.5 million included in Other assets in the Consolidated Balance Sheets as of December 31, 2022 and 2021, respectively.
On December 31, 2022, the Company had $47.3 million and $3.7 million of state and non-U.S. net operating loss carryforwards that begin to expire in 2023 and 2035, respectively. The Company also has $1.9 million of U.S. foreign tax credits ("FTCs") carryforwards that begin to expire after 2031. The valuation allowance of $3.8 million is related to deferred tax assets of $1.9 million, $1.5 million, and $0.4 million for U.S. federal FTCs, branch income tax accounting that will impact future U.S. federal FTCs, and outside basis differences in U.S. equity investees, respectively.
The Andersons, Inc. | 2022 Form 10-K | 52
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Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance will be recorded to reduce deferred tax assets if, based on all available evidence, it is considered more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. In assessing the realizability of our deferred tax assets, we consider positive and negative evidence, including historical operating results, future reversals of existing taxable temporary differences, projected future earnings, and tax planning strategies.
The Company and its subsidiaries, file income tax returns in the U.S., foreign, state and local jurisdictions. The Company is no longer subject to examination by taxing authorities in the U.S., foreign, or state and local jurisdictions for years before 2014. The Company’s subsidiary partnership returns are under federal tax examination by the IRS for the tax years 2015 through 2018. The Company’s subsidiary is under federal tax examination by the Mexican tax authorities for tax year 2015. Due to the potential for resolution of U.S. federal, foreign, state and local examinations, it is reasonably possible that the gross unrecognized tax benefits may change within the next twelve months by a range of $18.6 million to $40.7 million.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
| (in thousands) | 2022 | 2021 | 2020 | |||
|---|---|---|---|---|---|---|
| Balance at beginning of period | $ | 51,754 | $ | 44,401 | $ | 22,415 |
| Tax positions related to the current year | ||||||
| Gross additions | 8,074 | 13,179 | 11,598 | |||
| Tax positions related to prior years | ||||||
| Gross additions | 19,434 | 1,364 | 12,013 | |||
| Gross reductions | — | (7,190) | (1,566) | |||
| Lapse in statute of limitations | — | — | (59) | |||
| Balance at end of period | $ | 79,262 | $ | 51,754 | $ | 44,401 |
As of December 31, 2022, 2021 and 2020, if our unrecognized tax benefits were recognized in future periods, they would favorably impact our effective tax rate. As of December 31, 2022, unrecognized tax benefits of $79.2 million include $60.3 million associated with the federal and state R&D Credits.
The Company’s practice is to recognize interest and penalties on uncertain tax positions in the provision for income taxes in the Consolidated Statement of Operations. At December 31, 2022, 2021, and 2020, the Company recorded reserves of $8.6 million, $2.7 million and $1.8 million, respectively, of interest and penalties on uncertain tax positions in the Consolidated Balance Sheets.
The Andersons, Inc. | 2022 Form 10-K | 53
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- Accumulated Other Comprehensive Income (Loss)
The following table summarizes the changes in Accumulated other comprehensive income (loss) attributable to the Company ("AOCI") for the years ended December 31, 2022 and 2021:
| Year ended December 31, | ||||
|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | ||
| Currency Translation Adjustment | ||||
| Beginning balance | $ | 5,631 | $ | 5,739 |
| Other comprehensive income (loss) before reclassifications | (13,834) | (108) | ||
| Tax effect | — | — | ||
| Other comprehensive income (loss), net of tax | (13,834) | (108) | ||
| Ending Balance | $ | (8,203) | $ | 5,631 |
| Cash Flow Hedges | ||||
| Beginning balance | $ | (5,335) | $ | (18,106) |
| Other comprehensive income (loss) before reclassifications | 37,575 | 8,105 | ||
| Amounts reclassified from AOCI (a) | 989 | 8,855 | ||
| Tax effect | (9,683) | (4,189) | ||
| Other comprehensive income (loss), net of tax | 28,881 | 12,771 | ||
| Ending Balance | $ | 23,546 | $ | (5,335) |
| Pension and Other Postretirement Plans | ||||
| Beginning balance | $ | 640 | $ | 33 |
| Other comprehensive income (loss) before reclassifications | 6,492 | 1,699 | ||
| Amounts reclassified from AOCI (b) | (911) | (911) | ||
| Tax effect | (1,338) | (181) | ||
| Other comprehensive income (loss), net of tax | 4,243 | 607 | ||
| Ending Balance | $ | 4,883 | $ | 640 |
| Investments in Convertible Preferred Securities | ||||
| Beginning balance | $ | 258 | $ | 258 |
| Other comprehensive income (loss), net of tax | — | — | ||
| Ending Balance | $ | 258 | $ | 258 |
| Total AOCI Ending Balance | $ | 20,484 | $ | 1,194 |
(a) Amounts reclassified from gain (loss) on cash flow hedges are reclassified from AOCI to the Consolidated Statements of Operations when the hedged item affects earnings and is recognized in Interest expense, net. See Note 5 for additional information.
(b) This AOCI component is included in the computation of net periodic benefit cost recorded in Operating, administrative and general expenses.
The Andersons, Inc. | 2022 Form 10-K | 54
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- Fair Value Measurements
The following table presents the Company's assets and liabilities measured at fair value on a recurring basis at December 31, 2022 and 2021:
| (in thousands) | December 31, 2022 | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Assets (liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||
| Commodity derivatives, net (a) | $ | 54,516 | $ | 143,402 | $ | — | $ | 197,918 | ||||||||||
| Provisionally priced contracts (b) | (20,960) | (115,377) | — | (136,337) | ||||||||||||||
| Convertible preferred securities (c) | — | — | 16,278 | 16,278 | ||||||||||||||
| Other assets and liabilities (d) | (209) | 31,400 | — | 31,191 | ||||||||||||||
| Total | $ | 33,347 | $ | 59,425 | $ | 16,278 | $ | 109,050 | (in thousands) | December 31, 2021 | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| Assets (liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||
| Commodity derivatives, net (a) | $ | 128,407 | $ | 156,698 | $ | — | $ | 285,105 | ||||||||||
| Provisionally priced contracts (b) | 43,944 | (89,797) | — | (45,853) | ||||||||||||||
| Convertible preferred securities (c) | — | — | 11,618 | 11,618 | ||||||||||||||
| Other assets and liabilities (d) | 2,784 | (7,361) | — | (4,577) | ||||||||||||||
| Total | $ | 175,135 | $ | 59,540 | $ | 11,618 | $ | 246,293 |
(a)Includes associated cash posted/received as collateral.
(b)Included in "Provisionally priced contracts" are those instruments based only on underlying futures values (Level 1) and delayed price contracts (Level 2).
(c)Recorded in Other assets on the Company’s Consolidated Balance Sheets related to certain available for sale securities.
(d)Included in "Other assets and liabilities" are assets held by the Company to fund deferred compensation plans and foreign exchange derivative contracts (Level 1), as well as interest rate derivatives (Level 2).
Level 1 commodity derivatives reflect the fair value of the exchange-traded futures and options contracts that the Company holds, net of the cash collateral that the Company has in its margin account.
The majority of the Company’s assets and liabilities measured at fair value are based on the market approach valuation technique. With the market approach, fair value is derived using prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
The Company’s net commodity derivatives primarily consist of futures or options contracts via regulated exchanges and contracts with producers or customers under which the future settlement date and bushels (or gallons in the case of ethanol contracts) of commodities to be delivered (primarily wheat, corn, soybeans and ethanol) are fixed and under which the price may or may not be fixed. Depending on the specifics of the individual contracts, the fair value is derived from the futures or options prices quoted on various exchanges for similar commodities and delivery dates as well as observable quotes for local basis adjustments (the difference, which is attributable to local market conditions, between the quoted futures price and the local cash price). Because “basis” for a particular commodity and location typically has multiple quoted prices from other agribusinesses in the same geographical vicinity and is used as a common pricing mechanism in the agribusiness industry, the Company has concluded that “basis” is typically a Level 2 fair value input for purposes of the fair value disclosure requirements related to our commodity derivatives, depending on the specific commodity. Although nonperformance risk, both of the Company and the counterparty, is present in each of these commodity contracts and is a component of the estimated fair values, based on the Company’s historical experience with its producers and customers and the Company’s knowledge of their businesses, the Company does not view nonperformance risk to be a significant input to fair value for these commodity contracts.
These fair value disclosures exclude RMI which consists of agricultural commodity inventories measured at net realizable value. The net realizable value used to measure the Company’s agricultural commodity inventories is the fair value (spot price of the commodity in an exchange), less cost of disposal and transportation based on the local market. This valuation would generally be considered Level 2. The amount of RMI is disclosed in Note 2. Changes in the net realizable value of commodity inventories are recognized as a component of Cost of sales and merchandising revenues.
The Andersons, Inc. | 2022 Form 10-K | 55
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Provisionally priced contract liabilities are those for which the Company has taken ownership and possession of grain, but the final purchase price has not been established. In the case of payables where the unpriced portion of the contract is limited to the futures price of the underlying commodity or the Company has delivered a provisionally priced grain and a subsequent payable or receivable is set up for any future changes in the grain price, quoted exchange prices are used and the liability is deemed to be Level 1 in the fair value hierarchy. For all other unpriced contracts which include variable futures and basis components, the amounts recorded for delayed price contracts are determined on the basis of local grain market prices at the balance sheet date and, as such, are deemed to be Level 2 in the fair value hierarchy.
The convertible preferred securities are interests in several early-stage enterprises that may be in various forms, such as convertible debt or preferred equity securities.
A reconciliation of beginning and ending balances for the Company’s recurring fair value measurements using Level 3 inputs is as follows:
| Convertible Preferred Securities | ||||
|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | ||
| Assets at January 1, | $ | 11,618 | $ | 8,849 |
| Additional investments | 4,655 | 5,401 | ||
| Gains (losses) included in Other income, net | 5 | (2,632) | ||
| Assets at December 31, | $ | 16,278 | $ | 11,618 |
The following tables summarize quantitative information about the Company's Level 3 fair value measurements as of December 31, 2022 and 2021:
| Quantitative Information about Recurring Level 3 Fair Value Measurements | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | Fair Value as of 12/31/2022 | Valuation Method | Unobservable Input | Weighted Average | ||||||||
| Convertible preferred securities (a) | $ | 16,278 | Implied based on market prices | N/A | N/A | (in thousands) | Fair Value as of 12/31/2021 | Valuation Method | Unobservable Input | Weighted Average | ||
| --- | --- | --- | --- | --- | --- | |||||||
| Convertible preferred securities (a) | $ | 11,618 | Implied based on market prices | N/A | N/A |
(a) The Company considers observable price changes and other additional market data available to estimate fair value, including additional capital raising, internal valuation models, progress towards key business milestones, and other relevant market data points.
| Quantitative Information about Non-Recurring Level 3 Fair Value Measurements | |||||
|---|---|---|---|---|---|
| (in thousands) | Fair Value as of 12/31/2022 | Valuation Method | Unobservable Input | Weighted Average | |
| Grain assets (a) | $ | 9,000 | Third party appraisal | Various | N/A |
| (in thousands) | Fair Value as of 12/31/2021 | Valuation Method | Unobservable Input | Weighted Average | |
| Frac sand assets (b) | $ | 2,946 | Third party appraisal | Various | N/A |
| Real property (c) | 700 | Market approach | Various | N/A |
(a) The Company recognized impairment charges on a Nebraska grain asset. The fair value of the asset was determined using third-party appraisals. These measures are considered Level 3 inputs on a nonrecurring basis.
(b) The Company recognized impairment charges on long lived assets related to its frac sand business. The fair value of the assets were determined using prior transactions and third-party appraisals. These measures are considered Level 3 inputs on a nonrecurring basis.
(c) The Company recognized impairment charges on certain Trade assets and measured the fair value using Level 3 inputs on a nonrecurring basis. The fair value of the assets were determined using prior transactions in the local market and a recent sale of comparable Trade segment assets.
The fair value of the Company’s cash equivalents, accounts receivable and accounts payable approximate their carrying value as they are close to maturity.
The Andersons, Inc. | 2022 Form 10-K | 56
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- Related Party Transactions
In the ordinary course of business and on an arms-length basis, the Company will enter into related party transactions with the minority shareholders of the Company's Renewables operations and several equity method investments that the Company holds, along with other related parties.
The following table sets forth the related party transactions entered into for the time periods presented:
| Year Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | 2020 | |||||||||
| Sales of products | $ | 398,390 | $ | 342,816 | $ | 176,768 | ||||||
| Purchases of products | 76,479 | 44,182 | 52,665 | December 31, | ||||||||
| --- | --- | --- | --- | --- | ||||||||
| (in thousands) | 2022 | 2021 | ||||||||||
| Accounts receivable | $ | 12,272 | $ | 9,984 | ||||||||
| Accounts payable | 7,070 | 6,034 |
- Segment Information
The Company’s operations include three reportable business segments that are distinguished primarily on the basis of products and services offered as well as the management structure. The Trade business includes commodity merchandising and the operation of terminal grain elevator facilities. The Renewables business produces, purchases and sells ethanol and co-products. The segment also operates a merchandising portfolio of ethanol, ethanol co-products and other biofuels such as renewable diesel feedstocks. The Plant Nutrient business manufactures and distributes agricultural inputs, primary nutrients and specialty fertilizers, to dealers and farmers, along with turf care and corncob-based products. Included in Other are the corporate level costs not attributed to an operating segment.
In the third quarter of 2021, the Company sold its Rail Leasing assets and sold substantially all of the remaining assets that comprised the legacy Rail segment. Prior year results have been recast to reflect this change and Rail items have been classified as discontinued operations throughout the financial statements. See Note 16 for further details of the divestiture of the Rail segment.
The segment information below includes the allocation of expenses shared by one or more operating segments. Although management believes such allocations are reasonable, the operating information does not necessarily reflect how such data might appear if the segments were operated as separate businesses. The Company does not have any customers who represent 10 percent, or more, of total revenues.
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | 2020 | |||
| Revenues from external customers | ||||||
| Trade | $ | 13,047,537 | $ | 9,304,357 | $ | 6,141,402 |
| Renewables | 3,178,539 | 2,440,798 | 1,260,259 | |||
| Plant Nutrient | 1,099,308 | 866,895 | 662,959 | |||
| Total | $ | 17,325,384 | $ | 12,612,050 | $ | 8,064,620 |
The Andersons, Inc. | 2022 Form 10-K | 57
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| Year Ended December 31, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | 2020 | |||||||||||
| Interest expense (income) | ||||||||||||||
| Trade | $ | 42,551 | $ | 23,688 | $ | 21,974 | ||||||||
| Renewables | 8,775 | 7,602 | 7,461 | |||||||||||
| Plant Nutrient | 7,298 | 4,355 | 5,805 | |||||||||||
| Other | (1,775) | 1,647 | (1,456) | |||||||||||
| Total | $ | 56,849 | $ | 37,292 | $ | 33,784 | Year Ended December 31, | |||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||
| (in thousands) | 2022 | 2021 | 2020 | |||||||||||
| Other income, net | ||||||||||||||
| Trade | $ | 12,661 | $ | 35,878 | $ | 12,592 | ||||||||
| Renewables | 20,731 | 3,200 | 2,795 | |||||||||||
| Plant Nutrient | 3,001 | 2,128 | 1,274 | |||||||||||
| Other | (2,570) | (3,768) | 1,540 | |||||||||||
| Total | $ | 33,823 | $ | 37,438 | $ | 18,201 | ||||||||
| Year Ended December 31, | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||
| (in thousands) | 2022 | 2021 | 2020 | |||||||||||
| Income (loss) before income taxes from continuing operations | ||||||||||||||
| Trade | $ | 95,225 | $ | 87,946 | $ | 24,687 | ||||||||
| Renewables (a) | 108,221 | 81,205 | (47,338) | |||||||||||
| Plant Nutrient | 39,162 | 42,615 | 16,015 | |||||||||||
| Other | (48,026) | (50,996) | (20,445) | |||||||||||
| Income (loss) before income taxes from continuing operations | $ | 194,582 | $ | 160,770 | $ | (27,081) |
(a) Includes income (loss) attributable to noncontrolling interests of $35.9 million, $31.9 million and $(21.9) million for the years ended December 31, 2022, 2021 and 2020, respectively.
| December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | ||||||||||
| Identifiable assets | ||||||||||||
| Trade | $ | 3,166,813 | $ | 3,115,045 | ||||||||
| Renewables | 835,860 | 784,031 | ||||||||||
| Plant Nutrient | 527,725 | 453,137 | ||||||||||
| Other | 74,727 | 152,952 | ||||||||||
| Total assets of continuing operations | 4,605,125 | 4,505,165 | ||||||||||
| Assets of discontinued operations | 2,871 | 64,054 | ||||||||||
| Total | $ | 4,607,996 | $ | 4,569,219 | Year Ended December 31, | |||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||
| (in thousands) | 2022 | 2021 | 2020 | |||||||||
| Capital expenditures | ||||||||||||
| Trade | $ | 29,433 | $ | 17,828 | $ | 14,911 | ||||||
| Renewables | 42,734 | 28,502 | 39,791 | |||||||||
| Plant Nutrient | 34,678 | 21,616 | 16,565 | |||||||||
| Other | 1,439 | 3,828 | 1,458 | |||||||||
| Total | $ | 108,284 | $ | 71,774 | $ | 72,725 |
The Andersons, Inc. | 2022 Form 10-K | 58
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| Year Ended December 31, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | 2020 | |||||||||||
| Depreciation and amortization | ||||||||||||||
| Trade | $ | 35,953 | $ | 44,335 | $ | 44,627 | ||||||||
| Renewables | 63,458 | 77,542 | 73,224 | |||||||||||
| Plant Nutrient | 26,634 | 25,957 | 25,407 | |||||||||||
| Other | 8,697 | 9,340 | 9,807 | |||||||||||
| Total from continuing operations | 134,742 | 157,174 | 153,065 | |||||||||||
| Discontinued operations | — | 21,760 | 35,573 | |||||||||||
| Total | $ | 134,742 | $ | 178,934 | $ | 188,638 | Year Ended December 31, | |||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||
| (in thousands) | 2022 | 2021 | 2020 | |||||||||||
| Revenues from external customers by geographic region | ||||||||||||||
| United States | $ | 12,503,330 | $ | 9,771,502 | $ | 6,180,376 | ||||||||
| Canada | 1,199,487 | 806,481 | 517,006 | |||||||||||
| Egypt | 573,371 | 73,654 | 8,136 | |||||||||||
| Mexico | 493,111 | 490,672 | 246,523 | |||||||||||
| Switzerland | 373,737 | 487,363 | 348,867 | |||||||||||
| Other | 2,182,348 | 982,378 | 763,712 | |||||||||||
| Total | $ | 17,325,384 | $ | 12,612,050 | $ | 8,064,620 |
The net book value of Trade property, plant and equipment in Canada as of December 31, 2022 and 2021 was $36.6 million and $38.6 million, respectively.
The Andersons, Inc. | 2022 Form 10-K | 59
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- Leases
The Company leases certain grain handling and storage facilities, ethanol storage terminals, warehouse space, railcars, office space, machinery and equipment, vehicles and information technology equipment under operating leases. Lease expense for these leases is recognized within the Consolidated Statements of Operations on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred. Leases with a term of 12 months or less are not recorded on the Consolidated Balance Sheets and lease expense for these leases is recognized in the Consolidated Statements of Operations on a straight-line basis over the lease term. The Company’s lease agreements include lease payments that are largely fixed and do not contain material residual value guarantees.
The following table summarizes the amounts recognized in the Company's Consolidated Balance Sheets related to leases:
| December 31, | |||||
|---|---|---|---|---|---|
| (in thousands) | Consolidated Balance Sheet Classification | 2022 | 2021 | ||
| Assets | |||||
| Operating lease assets | Right of use assets, net | $ | 61,890 | $ | 52,146 |
| Finance lease assets | Property, plant and equipment, net | 21,359 | 23,895 | ||
| Total leased assets | 83,249 | 76,041 | |||
| Liabilities | |||||
| Current operating leases | Accrued expenses and other current liabilities | 25,364 | 19,580 | ||
| Non-current operating leases | Long-term lease liabilities | 37,147 | 31,322 | ||
| Total operating lease liabilities | 62,511 | 50,902 | |||
| Current finance leases | Current maturities of long-term debt | 1,565 | 2,118 | ||
| Non-current finance leases | Long-term debt, less current maturities | 8,400 | 10,762 | ||
| Total finance lease liabilities | 9,965 | 12,880 | |||
| Total lease liabilities | $ | 72,476 | $ | 63,782 |
The components of lease cost recognized within the Company's Consolidated Statement of Operations were as follows:
| Year Ended December 31, | |||||||
|---|---|---|---|---|---|---|---|
| (in thousands) | Consolidated Statement of Operations Classification | 2022 | 2021 | 2020 | |||
| Lease cost: | |||||||
| Operating lease cost | Cost of sales and merchandising revenues | $ | 19,891 | $ | 13,016 | $ | 10,968 |
| Operating lease cost | Operating, administrative and general expenses | 10,132 | 10,324 | 10,678 | |||
| Finance lease cost | |||||||
| Amortization of right-of-use assets | Cost of sales and merchandising revenues | 614 | 978 | 932 | |||
| Amortization of right-of-use assets | Operating, administrative and general expenses | 1,009 | 1,008 | 1,008 | |||
| Interest expense on lease liabilities | Interest expense, net | 413 | 679 | 859 | |||
| Short-term lease cost | Cost of sales and merchandising revenues | 2,465 | 1,349 | 66 | |||
| Variable lease cost | Cost of sales and merchandising revenues | 338 | 458 | 80 | |||
| Variable lease cost | Operating, administrative and general expenses | 394 | 231 | 260 | |||
| Total lease cost | $ | 35,256 | $ | 28,043 | $ | 24,851 |
The Andersons, Inc. | 2022 Form 10-K | 60
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The Company often has the option to renew lease terms for buildings and other assets. The exercise of a lease renewal option is generally at the sole discretion of the Company. In addition, certain lease agreements may be terminated prior to their original expiration date at the discretion of the Company. Each renewal and termination option is evaluated at the lease commencement date to determine if the Company is reasonably certain to exercise the option on the basis of economic factors. The following table summarizes the weighted-average remaining lease terms:
| As of December 31, | ||
|---|---|---|
| Weighted-Average Remaining Lease Term | 2022 | 2021 |
| Operating leases | 3.9 years | 3.9 years |
| Finance leases | 6.9 years | 7.2 years |
The discount rate implicit within the Company's leases is generally not determinable and therefore the Company determines the discount rate based on its incremental borrowing rate. The incremental borrowing rate for each lease is determined based on its term and the currency in which lease payments are made, adjusted for the impacts of collateral. The following table summarizes the weighted-average discount rate used to measure the Company's lease liabilities:
| As of December 31, | ||||
|---|---|---|---|---|
| Weighted-Average Discount Rate | 2022 | 2021 | ||
| Operating leases | 3.44 | % | 2.63 | % |
| Finance leases | 3.35 | % | 3.30 | % |
Supplemental Cash Flow Information Related to Leases
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | 2020 | |||
| Cash paid for amounts included in the<br>measurement of lease liabilities: | ||||||
| Operating cash flows from operating leases | $ | 30,294 | $ | 29,304 | $ | 28,444 |
| Operating cash flows from finance leases | — | — | 1,289 | |||
| Financing cash flows from finance leases | 1,782 | 12,538 | 4,115 | |||
| Right-of-use assets obtained in exchange for lease obligations: | ||||||
| Operating leases | 36,056 | 35,024 | 15,160 | |||
| Finance leases | — | 364 | 4,972 |
Maturity Analysis of Leases Liabilities
| December 31, 2022 | ||||||
|---|---|---|---|---|---|---|
| (in thousands) | Operating Leases | Finance Leases | Total | |||
| 2023 | $ | 28,108 | $ | 1,889 | $ | 29,997 |
| 2024 | 17,326 | 1,768 | 19,094 | |||
| 2025 | 9,801 | 1,406 | 11,207 | |||
| 2026 | 5,142 | 1,384 | 6,526 | |||
| 2027 | 1,629 | 1,391 | 3,020 | |||
| Thereafter | 5,507 | 3,382 | 8,889 | |||
| Total lease payments | 67,513 | 11,220 | 78,733 | |||
| Less: interest | 5,002 | 1,255 | 6,257 | |||
| Total | $ | 62,511 | $ | 9,965 | $ | 72,476 |
The Andersons, Inc. | 2022 Form 10-K | 61
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| December 31, 2021 | ||||||
|---|---|---|---|---|---|---|
| (in thousands) | Operating Leases | Finance Leases | Total | |||
| 2022 | $ | 20,639 | $ | 2,521 | $ | 23,160 |
| 2023 | 13,797 | 2,305 | 16,102 | |||
| 2024 | 8,121 | 2,175 | 10,296 | |||
| 2025 | 4,974 | 1,406 | 6,380 | |||
| 2026 | 2,434 | 1,384 | 3,818 | |||
| Thereafter | 3,881 | 4,773 | 8,654 | |||
| Total lease payments | 53,846 | 14,564 | 68,410 | |||
| Less: interest | 2,944 | 1,684 | 4,628 | |||
| Total | $ | 50,902 | $ | 12,880 | $ | 63,782 |
- Commitments and Contingencies
Litigation activities
The Company is party to litigation, or threats thereof, both as defendant and plaintiff with some regularity, although individual cases that are material in size occur infrequently. As a defendant, the Company establishes reserves for claimed amounts that are considered probable and capable of estimation. If those cases are resolved for lesser amounts, the excess reserves are taken into income and, conversely, if those cases are resolved for larger than the amount the Company has accrued, the Company will record additional expense in the Consolidated Statements of Operations. The Company believes it is unlikely that the results of its current legal proceedings for which it is the defendant, even if unfavorable, will be material. As a plaintiff, amounts that are collected can also result in sudden, non-recurring income.
Litigation results depend upon a variety of factors, including the availability of evidence, the credibility of witnesses, the performance of counsel, the state of the law, and the impressions of judges and jurors, any of which can be critical in importance, yet difficult, if not impossible, to predict. Consequently, cases currently pending, or future matters, may result in unexpected, and non-recurring losses, or income, from time to time. Finally, litigation results are often subject to judicial reconsideration, appeal and further negotiation by the parties, and as a result, the final impact of a particular judicial decision may be unknown for some time or may result in continued reserves to account for the potential of such post-verdict actions.
Specifically, the Company is party to a non-regulatory litigation claim, which is in response to penalties and fines paid to regulatory entities by a previously unconsolidated subsidiary in 2018 for the settlement of matters which focused on certain trading activity. While the Company believes it has meritorious defenses against the suit, the ultimate resolution of the matter could result in a loss in excess of the amount accrued. Given the status of the claim, the Company does not believe the excess, net of the acquisition-related indemnity, will be material.
The estimated losses for all other outstanding claims that are considered reasonably possible are not material.
Commitments
As of December 31, 2022, the Company carries $1.0 million in industrial revenue bonds with the City of Colwich, Kansas (the "City") that mature in 2029, and leases back facilities owned by the City that the Company recorded as property, plant, and equipment, net, on its Consolidated Balance Sheets under a finance lease. The lease payment on the facilities is sufficient to pay principal and interest on the bonds. Because the Company owns all of the outstanding bonds, has a legal right to set-off, and intends to set-off the corresponding lease and interest payment, the Company netted the finance lease obligation with the bond asset and, in turn, reflected no amount for the obligation or the corresponding asset on its Consolidated Balance Sheets at December 31, 2022.
The Andersons, Inc. | 2022 Form 10-K | 62
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- Stock Compensation Plans
The Company's 2019 Long-Term Incentive Compensation Plan, dated February 22, 2019, and subsequently approved by shareholders on May 10, 2019, and amended and restated on May 6, 2022, is authorized to issue up to 7.0 million shares of common stock as options, share appreciation rights, restricted shares and units, performance shares and units and other stock or cash-based awards. Approximately 4.5 million shares remain available for issuance at December 31, 2022.
Stock-based compensation expense for all stock-based compensation awards is based on the grant-date fair value. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award and recognizes forfeitures as they occur. Total compensation expense recognized in the Consolidated Statements of Operations for all stock compensation programs was $11.2 million, $11.0 million, and $9.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Non-Qualified Stock Options ("Options")
In 2015, the Company granted 325 thousand non-qualified stock options upon hiring a senior executive. The fair value of the options was estimated at the date of grant under the Black-Scholes option pricing model. The options had a term of seven years with a weighted-average exercise price of $35.40 and were fully vested. All 142 thousand options outstanding as of December 31, 2021, were exercised in 2022.
Restricted Stock Awards & Units ("RSUs")
These awards are contingent to requisite service periods established within the grant documents and range from 1 to 3 years. RSU's graded vest in conjunction with the requisite service period. Total restricted stock expense is equal to the market value of the Company's common shares on the date of the award and is recognized over the requisite service period on a straight-line basis.
A summary of the status of the Company's non-vested RSUs as of December 31, 2022, and changes during the period then ended, is presented below:
| Shares (in thousands) | Weighted-Average Grant-Date Fair Value | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Non-vested at January 1, 2022 | 388 | $ | 27.75 | ||||||||
| Granted | 130 | 43.38 | |||||||||
| Vested | (260) | 29.99 | |||||||||
| Forfeited | (6) | 33.22 | |||||||||
| Non-vested at December 31, 2022 | 252 | $ | 32.79 | Year ended December 31, | |||||||
| --- | --- | --- | --- | --- | --- | --- | |||||
| 2022 | 2021 | 2020 | |||||||||
| Total fair value of shares vested (in thousands) | $ | 7,465 | $ | 9,453 | $ | 13,510 | |||||
| Weighted-average fair value of RSUs granted | $ | 43.38 | $ | 26.86 | $ | 18.35 |
As of December 31, 2022, there was $2.8 million of total unrecognized compensation cost related to non-vested RSUs that is expected to be recognized over a weighted-average period of 1.3 years.
Earnings Per Share-Based Performance Share Units (“EPS PSUs”)
Each EPS PSU gives the participant the right to receive common shares dependent on the achievement of specified performance results over a 3-year performance period. At the end of the performance period, the number of shares of stock issued will be determined by adjusting the award upward or downward from a target award. Fair value of EPS PSUs issued is based on the market value of the Company's common shares on the date of the award. The related compensation expense is recognized over the performance period when achievement of the award is probable and is adjusted for changes in the number of shares expected to be issued if changes in performance are expected. Currently, the Company is accounting for the awards granted in 2022, 2021 and 2020 at the maximum amount available for issuance, respectively.
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A summary of the status of the Company's EPS PSUs as of December 31, 2022, and changes during the period then ended, is presented below:
| Shares (in thousands) | Weighted-Average Grant-Date Fair Value | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Non-vested at January 1, 2022 | 386 | $ | 23.69 | ||||||||
| Granted | 107 | 43.98 | |||||||||
| Vested | (25) | 25.73 | |||||||||
| Forfeited | (71) | 27.51 | |||||||||
| Non-vested at December 31, 2022 | 397 | $ | 28.35 | Year ended December 31, | |||||||
| --- | --- | --- | --- | --- | --- | --- | |||||
| 2022 | 2021 | 2020 | |||||||||
| Weighted-average fair value of EPS PSUs granted | $ | 43.98 | $ | 26.80 | $ | 19.06 |
As of December 31, 2022, there was $4.5 million unrecognized compensation cost related to non-vested EPS PSUs that is expected to be recognized over a weighted-average period of 1.0 years.
Total Shareholder Return-Based Performance Share Units (“TSR PSUs”)
Each TSR PSU gives the participant the right to receive common shares dependent on total shareholder return on the Company's Common Shares over a 3-year period. At the end of the period, the number of shares of stock issued will be determined by adjusting the award upward or downward from a target award. The fair value of TSR PSUs is estimated at the date of grant using a Monte Carlo Simulation with the following assumptions: Expected volatility was estimated based on the historical volatility of the Company's common shares over the 2.83 years period prior to the grant date. The average expected life was based on the contractual term of the plan. The risk-free rate is based on the U.S. Treasury Strips available with maturity period consistent with the expected life.
| 2022 | |
|---|---|
| Risk free interest rate | 1.44% |
| Dividend yield | —% |
| Volatility factor of the expected market price of the common shares | 53% |
| Expected term (in years) | 2.83 |
| Correlation coefficient | 0.45 |
A summary of the status of the Company's TSR PSUs as of December 31, 2022, and changes during the period then ended, is presented below:
| Shares (in thousands) | Weighted-Average Grant-Date Fair Value | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Non-vested at January 1, 2022 | 386 | $ | 30.89 | ||||||||
| Granted | 106 | 66.90 | |||||||||
| Vested | — | — | |||||||||
| Forfeited | (95) | 48.27 | |||||||||
| Non-vested at December 31, 2022 | 397 | $ | 36.31 | Year ended December 31, | |||||||
| --- | --- | --- | --- | --- | --- | --- | |||||
| 2022 | 2021 | 2020 | |||||||||
| Weighted-average fair value of TSR PSUs granted | $ | 66.90 | $ | 35.66 | $ | 16.80 |
As of December 31, 2022, there was approximately $3.3 million unrecognized compensation cost related to non-vested TSR PSUs that is expected to be recognized over a weighted-average period of 1.0 years.
The Andersons, Inc. | 2022 Form 10-K | 64
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Employee Share Purchase Plan (the “ESP Plan”)
The Company's 2004 ESP Plan amended in 2019 is authorized to issue up to 230 thousand common shares. The ESP Plan allows employees to purchase common shares through payroll withholdings. The Company has approximately 79 thousand common shares remaining available for issuance to and purchase by employees under this plan. The ESP Plan also contains an option component. The purchase price per share under the ESP Plan is the lower of the market price at the beginning or end of the year. The Company records a liability for withholdings not yet applied towards the purchase of common stock. This liability is included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets.
The fair value of the option component of the ESP Plan is estimated at the date of grant under the Black-Scholes option pricing model with the following assumptions at the grant date. Expected volatility was estimated based on the historical volatility of the Company's common shares over the past year. The average expected life was based on the contractual term of the plan. The risk-free rate is based on the U.S. Treasury yield curve rate with a one year term. Forfeitures are estimated at the date of grant based on historical experience.
| Year ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | ||||
| Risk free interest rate | 0.39 | % | 0.10 | % | 1.59 | % |
| Dividend yield | 1.82 | % | 2.86 | % | 2.71 | % |
| Volatility factor of the expected market price of the common shares | 38 | % | 72 | % | 36 | % |
| Expected life for the options (in years) | 1.0 | 1.0 | 1.0 |
- Discontinued Operations
On August 16, 2021, the Company entered into a definitive agreement under which the Company sold the assets of the Company’s Rail Leasing business for a cash purchase price of approximately $543.1 million which resulted in a loss of $1.5 million. In conjunction with the sale of the Rail Leasing business, the Company announced its intent to divest the remaining pieces of the Rail Leasing business and the Rail Repair business.
In 2022, the Company finalized the definitive agreement to sell the Rail Repair business and divested substantially all of the remaining leases from the Rail Leasing business. The sale of the Rail Repair business for a purchase price of approximately $56.3 million, resulted in a pre-tax gain of approximately $27.1 million that was recorded in Other income, net in the table below.
As a result of the sale of the Rail Leasing business and the intent to divest the Rail Repair business in the third quarter of 2021, substantially all of the assets and liabilities of the former Rail segment was classified as held for sale in the accompanying Consolidated Balance Sheets. As a part of the definitive agreement to sell the Rail Repair business, the Company retained the working capital from the Rail Repair business along with a small group of right of use assets and lease liabilities from the Rail Leasing business that were not sold. These balances are included in continuing operations within the Consolidated Balance Sheet as of December 31, 2022.
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The table below summarizes the results of the Rail Leasing business and the Rail Repair business for the years ended December 31, 2022, 2021 and 2020, which are reflected in the Consolidated Statements of Operations as Income from discontinued operations, net of income taxes:
| Year ended December 31, | ||||||
|---|---|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | 2020 | |||
| Sales and merchandising revenues | $ | 25,121 | $ | 116,787 | $ | 143,816 |
| Cost of sales and merchandising revenues | 26,244 | 88,393 | 105,091 | |||
| Gross profit (loss) | (1,123) | 28,394 | 38,725 | |||
| Operating, administrative and general expenses | 3,968 | 12,350 | 21,512 | |||
| Asset impairment | 2,818 | 626 | — | |||
| Interest expense, net | — | 8,783 | 17,491 | |||
| Other income, net | 33,046 | 1,020 | 2,885 | |||
| Income from discontinued operations before income taxes | 25,137 | 7,655 | 2,607 | |||
| Income tax provision from discontinued operations | 13,112 | 3,331 | 651 | |||
| Income from discontinued operations, net of income taxes | $ | 12,025 | $ | 4,324 | $ | 1,956 |
The following table summarizes the assets and liabilities which are classified as held-for-sale in the Consolidated Balance Sheets as of December 31, 2022 and 2021.
| (in thousands) | December 31,<br>2022 | December 31,<br>2021 | ||
|---|---|---|---|---|
| Assets | ||||
| Current assets: | ||||
| Accounts receivable, net | $ | — | $ | 12,643 |
| Inventories | — | 6,739 | ||
| Other current assets | 2,871 | 1,503 | ||
| Current assets held-for-sale | 2,871 | 20,885 | ||
| Other assets: | ||||
| Rail assets leased to others, net | — | 458 | ||
| Property, plant and equipment, net | — | 17,280 | ||
| Goodwill | — | 4,167 | ||
| Other intangible assets, net | — | 24 | ||
| Right of use assets, net | — | 20,999 | ||
| Other assets, net | — | 241 | ||
| Non-current assets held-for-sale | — | 43,169 | ||
| Total assets held-for-sale | $ | 2,871 | $ | 64,054 |
| Liabilities | ||||
| Current liabilities: | ||||
| Trade and other payables | $ | — | $ | 2,546 |
| Short-term lease liabilities | — | 4,672 | ||
| Accrued expenses and other current liabilities | — | 6,161 | ||
| Current liabilities held-for-sale | — | 13,379 | ||
| Long-term lease liabilities | — | 16,119 | ||
| Non-current liabilities held-for-sale | — | 16,119 | ||
| Total liabilities held-for-sale | $ | — | $ | 29,498 |
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The following table summarizes cash flow information relating to discontinued operations for the years ended December 31, 2022, 2021 and 2020, respectively:
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | 2020 | |||
| Depreciation and amortization | $ | — | $ | 21,760 | $ | 35,573 |
| Rail capital expenditures | (31,458) | (8,669) | (32,161) | |||
| Proceeds from sale of Rail assets | 36,706 | 19,150 | 10,077 | |||
| Loss (gain) on sale of discontinued operations | (27,091) | 1,491 | — | |||
| Non-cash operating activities - gain on sale of railcars | (5,463) | (5,603) | (649) | |||
| Non-cash operating activities - asset impairment | 2,818 | 626 | — | |||
| Non-cash investing activities - capital expenditures, consisting of unpaid capital expenditure liabilities at period end | — | — | 491 |
- Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2022, 2021 and 2020 are as follows:
| (in thousands) | Trade | Renewables | Plant Nutrient | Total | ||||
|---|---|---|---|---|---|---|---|---|
| Balance at January 1, 2020 | $ | 127,781 | $ | 2,726 | $ | 686 | $ | 131,193 |
| Acquisitions | — | 349 | — | 349 | ||||
| Reorganization | (5,714) | 5,714 | — | — | ||||
| Balance at December 31, 2020 | 122,067 | 8,789 | 686 | 131,542 | ||||
| Disposals (a) | (2,200) | — | — | (2,200) | ||||
| Acquisitions | — | — | — | — | ||||
| Balance at December 31, 2021 | 119,867 | 8,789 | 686 | 129,342 | ||||
| Acquisitions | — | — | — | — | ||||
| Balance at December 31, 2022 | $ | 119,867 | $ | 8,789 | $ | 686 | $ | 129,342 |
(a) Removal of allocated goodwill due to the sale of a grain asset location in Champaign, Illinois.
Goodwill for the Trade segment is $119.9 million as of December 31, 2022, which is net of prior years' accumulated impairment losses of $46.4 million. Goodwill for the Plant Nutrient segment is $0.7 million, net of accumulated impairment losses of $68.9 million as of December 31, 2022.
The Company had goodwill of approximately $129.3 million at December 31, 2022, which includes approximately $78.5 million related to the Company's Grain Storage and Merchandising ("GSM") reporting unit, approximately $41.3 million related to the Company's Food and Specialty Ingredients ("FSI") reporting unit, approximately $8.8 million related to the Company's Renewables reporting unit and approximately $0.7 million is related to the Lawn reporting unit.
Goodwill is tested for impairment annually as of October 1, or more frequently if impairment indicators arise. The Company uses a one-step quantitative approach that compares the business enterprise value ("BEV") of each reporting unit with its carrying value. The BEV was computed based on both an income approach (discounted cash flows) and a market approach. The income approach uses a reporting unit's estimated future cash flows, discounted at the weighted-average cost of capital ("WACC") of a hypothetical third-party buyer. The WACC is the rate used to discount each reporting unit’s estimated future cash flows. The WACC is calculated based on the proportionate weighting of the cost of debt and equity. The cost of equity is based on a risk-free interest rate and an equity risk factor, which is derived from public companies similar to the reporting units and which captures the perceived risks and uncertainties associated with the reporting unit's cash flows. The cost of debt is the rate that a prudent investor would require to lend money to the reporting units on an after-tax basis and is estimated based on a market-derived analysis of corporate bond yields. The cost of debt and equity is weighted based on the debt to market capitalization ratio of publicly traded companies with similarities to the reporting units being tested. The WACC applied in each reporting unit's last quantitative test ranged from 10.25% to 12.00%, which includes a company specific risk premium range from 1.0% to 3.0%. Differences in the WACC used between reporting units is primarily due to distinct risks and uncertainties regarding the cash flows of the different reporting units.
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The market approach estimates fair value by applying cash flow multiples to the reporting unit's operating performance. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics to the reporting unit. Any excess of the carrying value of the goodwill over the BEV will be recorded as an impairment loss. The calculation of the BEV is based on significant unobservable inputs, such as price trends, customer demand, material costs and discount rates, and are classified as Level 3 in the fair value hierarchy.
There can be no assurance that anticipated financial results will be achieved and the goodwill balances remain susceptible to future impairment charges. The goodwill related to the GSM and FSI reporting units are determined to have the greatest risk of future impairment charges given the difference (approximately 12% and 33%, respectively) between the BEV and carrying value of these reporting units as of the Company's annual impairment test date. The BEVs of the Company's other reporting units more substantially exceed their carrying values. If the Company's projected future cash flows were lower, or if the assumed weighted-average cost of capital were higher, the testing performed at year-end may have indicated an impairment of the goodwill related to one or more of the Company's reporting units. Any impairment charges that the Company may take in the future could be material to its Consolidated Statements of Operations and financial condition.
No goodwill impairment charges were incurred in the years ended December 31, 2022, 2021 or 2020 as a result of our annual impairment testing.
The Company's other intangible assets are as follows:
| December 31, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | ||||||||||||||
| (in thousands) | Useful Life <br>(in years) | Original Cost | Accumulated Amortization | Net Book Value | Original Cost | Accumulated Amortization | Net Book Value | ||||||||
| Intangible asset class | |||||||||||||||
| Customer lists | 3 | to | 10 | $ | 143,081 | $ | 70,539 | $ | 72,542 | $ | 136,311 | $ | 58,047 | $ | 78,264 |
| Non-compete agreements | 1 | to | 7 | 22,242 | 21,311 | 931 | 21,796 | 21,124 | 672 | ||||||
| Supply agreement | 10 | to | 10 | 8,720 | 7,912 | 808 | 8,721 | 7,450 | 1,271 | ||||||
| Technology | 10 | to | 10 | 13,400 | 10,218 | 3,182 | 13,400 | 8,878 | 4,522 | ||||||
| Trademarks and patents | 7 | to | 10 | 15,810 | 13,165 | 2,645 | 15,810 | 12,020 | 3,790 | ||||||
| Software | 2 | to | 10 | 88,631 | 68,392 | 20,239 | 89,956 | 61,920 | 28,036 | ||||||
| Other | 3 | to | 5 | 998 | 438 | 560 | 1,011 | 429 | 582 | ||||||
| $ | 292,882 | $ | 191,975 | $ | 100,907 | $ | 287,005 | $ | 169,868 | $ | 117,137 |
Amortization expense for intangible assets was $24.1 million, $30.3 million and $30.7 million for the years ended December 31, 2022, 2021 and 2020, respectively. Expected future annual amortization expense for the assets above is as follows: 2023 -- $23.1 million; 2024 -- $20.0 million; 2025 -- $13.6 million; 2026 -- $11.5 million; 2027 -- $11.3 million; and thereafter -- $21.4 million.
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- Other Income, Net
The following table sets forth the items in Other income, net for the periods presented below:
| Year ended December 31, | ||||||
|---|---|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | 2020 | |||
| Biofuel Producer Program funds | $ | 17,642 | $ | — | $ | — |
| Insurance proceeds | 10,632 | 3,850 | 2,917 | |||
| Gain on sales of assets and businesses | 3,979 | 14,661 | 1,307 | |||
| Equity earnings (losses) in affiliates | (5,671) | 4,842 | 638 | |||
| Other | 7,241 | 14,085 | 13,339 | |||
| Total | $ | 33,823 | $ | 37,438 | $ | 18,201 |
Individually significant items included in the table above are:
Biofuel Producer Program funds - In 2022, the USDA as a part of the Biofuel Producer Program, created under the CARES Act, provided funding to help lower costs and support biofuel producers who faced unexpected market losses due to the COVID-19 pandemic. Under this program TAMH and ELEMENT received $13.3 million and $4.3 million, respectively.
Insurance proceeds - Insurance proceeds for the year ended December 31, 2022, consisted of business interruption and property damage proceeds of $3.0 million relating to an prior period incident at the Company's Galena Park, TX facility, business interruption and property damage proceeds of $2.6 million relating to a conveyer collapse in Delhi, LA in the current year, business interruption and property damage proceeds of $5.0 million relating to a grain bin collapse in Delphi, IN in the current year, and other individually insignificant proceeds through the ordinary course of business. Insurance proceeds for the year ended December 31, 2021, consisted of business interruption and property damage proceeds amounting to $3.8 million relating to a prior period incident at the Company's Galena Park, TX facility, and other individually insignificant proceeds through the ordinary course of business. Insurance proceeds for the year ended December 31, 2020, consisted of business interruption and property damage proceeds amounting to $2.9 million relating to an incident at the Company's Galena Park, TX facility, and other individually insignificant proceeds through the ordinary course of business.
Gain on sales of assets and businesses - Gains on sales of assets for the year ended December 31, 2022, consisted of gains on the sale of the Company’s remaining frac sand facilities and assets in Oklahoma City, Oklahoma and North Branch, Minnesota of $3.9 million, the sale of certain other assets, and disposals of individually insignificant assets in the ordinary course of business. The year ended December 31, 2021, consisted of gains on the sale of a grain asset in Champaign, Illinois of $14.6 million, the sale of certain other assets, and disposals of individually insignificant assets in the ordinary course of business.
Equity earnings (losses) in affiliates - During the year ended December 31, 2022, the Company recorded an impairment charge on a Canadian equity method investment for $4.5 million.
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- Earnings Per Share
| (in thousands except per common share data) | Year Ended December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | |||||||
| Numerator: | |||||||||
| Net income (loss) from continuing operations | $ | 154,954 | $ | 131,542 | $ | (16,171) | |||
| Net income (loss) attributable to noncontrolling interests (a) | 35,899 | 31,880 | (21,925) | ||||||
| Net income attributable to The Andersons Inc. common shareholders from continuing operations | $ | 119,055 | $ | 99,662 | $ | 5,754 | |||
| Income from discontinued operations, net of income taxes | $ | 12,025 | $ | 4,324 | $ | 1,956 | |||
| Denominator: | |||||||||
| Weighted-average shares outstanding – basic | 33,731 | 33,279 | 32,924 | ||||||
| Effect of dilutive awards | 691 | 576 | 265 | ||||||
| Weighted-average shares outstanding – diluted | 34,422 | 33,855 | 33,189 | ||||||
| Earnings per share attributable to The Andersons, Inc. common shareholders: | |||||||||
| Basic earnings: | |||||||||
| Continuing operations | $ | 3.53 | $ | 2.99 | $ | 0.17 | |||
| Discontinued operations | 0.36 | 0.13 | 0.06 | ||||||
| $ | 3.89 | $ | 3.12 | $ | 0.23 | ||||
| Diluted earnings: | |||||||||
| Continuing operations | $ | 3.46 | $ | 2.94 | $ | 0.17 | |||
| Discontinued operations | 0.35 | 0.13 | 0.06 | ||||||
| $ | 3.81 | $ | 3.07 | $ | 0.23 |
(a) All Net income (loss) attributable to noncontrolling interests is within the continuing operations of the Company.
There were 294 thousand antidilutive share-based awards outstanding for the year ended December 31, 2020. Antidilutive shares were de minimis for the years ended December 31, 2022 and 2021.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.
Management's Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the Consolidated Financial Statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of management, including the certifying officers, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting based on the criteria established in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon the evaluation under this framework, management concluded that our internal control over financial reporting was effective as of December 31, 2022.
The effectiveness of the Company's internal control over financial reporting as of December 31, 2022, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report, which is included below.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company's internal controls over financial reporting during the Company's most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of The Andersons, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of The Andersons, Inc. and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated February 23, 2023, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Cleveland, Ohio
February 23, 2023
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Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
The Andersons, Inc. | 2022 Form 10-K | 73
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Part III.
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item is set forth under the headings "Election of Directors," “Corporate Governance,” and “Executive Officers” in the Company’s 2023 Proxy Statement to be filed with the SEC within 120 days after December 31, 2022, in connection with the solicitation of proxies for the Company’s 2023 annual meeting of shareholders, and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this Item set forth under the caption “Executive Compensation” and "Compensation and Leadership Development Committee Interlocks and Insider Participation" in the Proxy Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item set forth under the caption “Share Ownership” and “Equity Plans” in the Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item set forth under the captions "Corporate Governance" and “Certain Relationships and Related Party Transactions” in the Proxy Statement is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item set forth under “Appointment of Independent Registered Public Accounting Firm” in the Proxy Statement is incorporated herein by reference.
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Part IV.
Item 15. Exhibits and Financial Statement Schedules
(a) Documents filed as a part of this report
| 1. | Financial Statements | |
|---|---|---|
| The Consolidated Financial Statements of the Company are set forth under Item 8 of this report on Form 10-K. | ||
| 2. | Financial Statement Schedules | |
| Financial Statement Schedule II - Valuation and Qualifying Accounts included in this Form 10-K. All other schedules are not required under the related instructions or are not applicable. |
(b) Exhibit Listing
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| Exhibit Number | Exhibit Description | Form | Exhibit | Filing Date/ Period End Date |
|---|---|---|---|---|
| 10.31** | Second Amendment to Second Amended and Restated Loan Agreement | |||
| 10.32** | Third Amendment to Second Amended and Restated Loan Agreement | |||
| 21.1** | Consolidated Subsidiaries of The Andersons, Inc. | |||
| 23.1** | Consent of Independent Registered Public Accounting Firm - Deloitte & Touche LLP. | |||
| 31.1** | Certification of the Chief Executive Officer under Rule 13(a)-14(a)/15d-14(a). | |||
| 31.2** | Certification of the Chief Financial Officer under Rule 13(a)-14(a)/15d-14(a). | |||
| 32.1*** | Certifications Pursuant to 18 U.S.C. Section 1350. | |||
| 101** | Inline XBRL Document Set for the consolidated financial statements and accompanying notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. | |||
| 104** | Inline XBRL for the cover page of this Annual Report on Form 10-K, included in the Exhibit 101 Inline XBRL Document Set. | |||
| * Indicates management contract or compensatory plan or arrangement. | ||||
| ** Filed herewith. | ||||
| *** Furnished herewith. |
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Item 16. Form 10-K Summary
Not applicable
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THE ANDERSONS, INC.
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
| Additions | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Description (in thousands) | Balance at Beginning of Period | Charged to Costs and Expenses | Charged to Other Accounts (1) | Deductions (2) | Balance at End of Period | |||||
| Allowance for doubtful accounts receivable | ||||||||||
| 2022 | $ | 6,911 | $ | 4,249 | $ | 17,168 | $ | (1,936) | $ | 26,392 |
| 2021 | 9,255 | (190) | — | (2,154) | 6,911 | |||||
| 2020 | 6,338 | 4,163 | — | (1,246) | 9,255 |
(1) In 2022, the Company reclassified reserves within Commodity derivative assets to reserves within accounts receivable of approximately $14.5 million from reserves on open contract equity positions now transferred into the form of a receivable. The Company also reclassified Accounts receivable and the associated allowance for doubtful accounts of $2.7 million related to the legacy Rail business from discontinued operations to continuing operations as a result of residual accounts receivable not being included with the sale of the remainder of the Rail business.
(2) Uncollectible accounts written off, net of recoveries and adjustments to estimates for the allowance for doubtful accounts receivable accounts.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| THE ANDERSONS, INC. | |
|---|---|
| Date: February 23, 2023 | /s/ Patrick E. Bowe |
| Patrick E. Bowe | |
| Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | Signature | Title | Date |
|---|---|---|---|---|---|
| /s/ Patrick E. Bowe | Chief Executive Officer | 2/23/2023 | /s/ Stephen F. Dowdle | Director | 2/23/2023 |
| Patrick E. Bowe | (Principal Executive Officer) | Stephen F. Dowdle | |||
| /s/ Brian A. Valentine | Executive Vice President and Chief Financial Officer | 2/23/2023 | /s/ Pamela S. Hershberger | Director | 2/23/2023 |
| Brian A. Valentine | (Principal Financial Officer) | Pamela S. Hershberger | |||
| /s/ Michael T. Hoelter | Vice President, Corporate Controller & Investor Relations | 2/23/2023 | /s/ Catherine M. Kilbane | Director | 2/23/2023 |
| Michael T. Hoelter | (Principal Accounting Officer) | Catherine M. Kilbane | |||
| /s/ Michael J. Anderson, Sr. | Chairman | 2/23/2023 | /s/ Robert J. King, Jr. | Director | 2/23/2023 |
| Michael J. Anderson, Sr. | Robert J. King, Jr. | ||||
| /s/ Gerard M. Anderson | Director | 2/23/2023 | /s/ Ross W. Manire | Director | 2/23/2023 |
| Gerard M. Anderson | Ross W. Manire | ||||
| /s/ Gary A. Douglas | Director | 2/23/2023 | /s/ John T. Stout, Jr. | Director | 2/23/2023 |
| Gary A. Douglas | John T. Stout, Jr. | ||||
| /s/ Steven K. Campbell | Director | 2/23/2023 | |||
| Steven K. Campbell |
The Andersons, Inc. | 2022 Form 10-K | 80
Document
Exhibit 10.04
EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") dated as of February 22, 2022 is made by and between The Andersons, Inc. an Ohio corporation (the "Company"), and William E. Krueger (the "Executive").
WITNESSETH
WHEREAS, effective as of the date set forth above, the Company desires to continue to employ the Executive upon and subject to the terms and conditions set forth herein, and the Executive wishes to accept such continued employment upon and subject to such terms and conditions; and
WHEREAS, the Company and the Executive desire to enter into this Agreement as to the terms of the Executive's employment with the Company.
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises contained herein and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1.POSITION AND DUTIES.
(a)GENERAL. During the Employment Term (as defined in Section 2 hereof), the Executive shall serve as the President, The Andersons Trade and Processing, with direct responsibility for the trading operations of that group. In this capacity, the Executive shall have the duties, authorities and responsibilities commensurate with the duties, authorities and responsibilities of persons in similar capacities in similarly sized companies, and such other duties, authorities and responsibilities as may reasonably be assigned to the Executive from time to time by the CEO (as defined below) that are not inconsistent with the Executive's position with the Company. The Executive's principal place of employment with the Company shall be in Overland Park, Kansas, provided that the Executive understands and agrees that the Executive may be required to travel from time to time for business purposes. The Executive shall report directly to the Chief Executive Officer of the Company (the "CEO").
(b)OTHER ACTIVITIES. During the Employment Term, the Executive shall devote all of the Executive's business time, energy, business judgment, knowledge and skill and the Executive's best efforts to the performance of the Executive's duties with the Company, provided that the foregoing shall not prevent the Executive from (i) with prior written notice to the CEO, serving on the boards of directors (and board committees) of non-profit organizations, and (ii) participating in charitable, civic, educational, professional, community or industry affairs, and (iii) managing the Executive's passive personal investments so long as such activities in the aggregate do not interfere or conflict with the Executive's duties hereunder, create a potential business or fiduciary conflict, or violate any of the provisions of Section 10 hereof.
2.EMPLOYMENT TERM. The Company agrees to employ the Executive pursuant to the terms of this Agreement, and the Executive agrees to be so employed, for a one-year term commencing as of the date hereof (the "Effective Date") and thereafter continuing automatically on a year to year basis unless either party shall give not less than 6 months' prior written notice to the other of such party's intent not to continue this agreement at the end of the then-current term, or unless the Executive's employment hereunder is terminated in accordance with Section 7 hereof, subject to the provisions of Section 8 hereof The period of time between the Effective Date and the termination of the Executive's employment hereunder shall be referred to herein as the "Employment Term."
3.BASE SALARY. During the Employment Term, the Company agrees to pay the Executive a base salary at the initial annual rate of $750,000, payable in accordance with the regular payroll practices of the Company, but not less frequently than monthly. The Executive's base salary shall be subject to annual review by the Company's Board of Directors (the "Board") (or a committee thereof), and may be increased, but not decreased below its then-current level. The base salary as determined herein and adjusted from time to time shall constitute "Base Salary" for purposes of this Agreement.
4.ANNUAL BONUS. During the Employment Term and commencing with fiscal year 2022, the Executive shall be eligible to receive an annual cash incentive payment under the Company's Annual Incentive Plan (sometimes also referred to as the "Management Performance Plan") as may be in effect from time to time (any such annual bonus, an "Annual Bonus") with an aggregate target bonus opportunity equal to 158.333% of the Base Salary as in effect for the fiscal year to which the Annual Bonus relates (the "Target Bonus"), which shall be comprised of: (i) a capped portion equal to 75% of Base Salary (the "Capped Portion"), plus (ii) an uncapped portion equal to 83.333% of Base Salary (the "Uncapped Portion"). For the initial year of this Agreement, such 158.333% Target Bonus would result in an aggregate payment of$1,187,475 at fully realized target performance. The Executive shall be eligible to receive this Annual Bonus for each performance year during the Employment Term upon the attainment of threshold performance of one or more pre-established performance goals established by the Board (or a committee thereof) in its reasonable discretion, after consulting with the Executive. The actual amount of the Capped portion of the Annual Bonus may vary from a minimum of 0% of such Capped Portion to a maximum of 200% of such Capped Portion, based upon the extent to which actual performance is below or above the applicable threshold levels of performance, and shall be determined pursuant to a formula established in good faith by the Board (or a committee thereof) for the applicable performance period. The actual amount of the Uncapped Portion of the Annual Bonus may vary from a minimum of 0% of such Uncapped Portion to an unlimited maximum, based upon the extent to which actual performance is below or above the applicable threshold levels of performance, and shall be determined pursuant to a formula established in good faith by the Board (or a committee thereof) for the applicable performance period. Bonus recommendations are made by management and subsequently approved by the Board's Compensation & Leadership Development Committee (the "Compensation Committee"). Any Annual Bonus payable hereunder shall be paid in the fiscal year following the end of the fiscal year to which such Annual Bonus relates, at the same time annual bonuses are paid to other senior executives of the Company, subject to the Executive's continued employment with the Company through the date of payment, except as otherwise provided in Section 8 hereof or due to expiration of the stated Employment Term under this Agreement.
5.EQUITY AWARDS. Commencing with fiscal year 2022, during the Employment Term, the Executive shall be eligible to receive equity and/or other long-term incentive awards pursuant to the Company's Long-Term Incentive Compensation Plan (each an "Annual Equity Award") with a targeted aggregate grant date value of 75% of Base Salary. The final amount of the Annual Equity Award will be determined in good faith by the Board based upon the performance of the Executive and the Company for the applicable year. The Annual Equity Awards shall in all cases be subject to the approval of the Compensation Committee and the terms and conditions of the award agreements memorializing such Annual Equity Awards.
6.EMPLOYEE BENEFITS.
(a)BENEFIT PLANS. During the Employment Term, the Executive shall be entitled to participate in any employee benefit plan that the Company has adopted or may adopt, maintain or contribute to or for the benefit of its employees generally, subject to satisfying the applicable eligibility requirements, and except to the extent such plans are duplicative of the benefits otherwise provided hereunder. The Executive's participation will be subject to the terms of the applicable plan documents and generally applicable Company policies. Notwithstanding the foregoing, the Company may modify or terminate any employee benefit plan at any time.
(b)VACATION TIME. During the Employment Term, the Executive shall be entitled to four (4) weeks of paid vacation per calendar year (as prorated for partial years) and such additional time as determined by the Board in consultation with the Executive in accordance with the Company's policy on accrual and use applicable to employees as in effect from time to time.
(c)ANNUAL EXECUTIVE PHYSICAL. During the Employment Term, the Company shall provide the Executive with an annual executive physical at a facility selected by the Executive, comparable in coverage and expense to The Cleveland Clinic, which executive physical shall be comprised of the standard procedures and services customarily included in an executive physical.
(d)COMPANY CHANGE IN CONTROL AND SEVERANCE POLICY.
The Executive shall be eligible to participate in The Andersons, Inc. Change in Control and Severance Policy, as in effect from time to time (the "Company Severance Policy"), subject to the terms of such Policy, the Executive's Participation Agreement relating thereto and the terms of this Agreement.
7.TERMINATION. The Executive's employment and the Employment Term shall terminate on the first of the following to occur (such date of termination, the "Termination Date"):
(a)DISABILITY. Upon thirty (30) days prior written notice by the Company to the Executive of a termination due to Disability, provided that within the thirty (30) day notice period, the Executive has not returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall be defined as the inability of the Executive to have performed the Executive's material duties hereunder after reasonable accommodation due to a physical or mental injury, infirmity or incapacity for a period of one hundred eighty (180) days (including weekends and holidays) during any three hundred sixty-five (365) day period as
determined by the Board in its reasonable good faith discretion, based upon the medical opinion of a licensed physician selected by the Company with the consent of the Executive or his representative, which shall not be unreasonably withheld. The Executive (or the Executive's representative) shall cooperate in all respects with the Company if a question arises as to whether the Executive has become Disabled (including, without limitation by submitting to reasonable examinations by one or more medical doctors and other health care specialists selected by the Company and authorizing such medical doctors and other health care specialists to discuss the Executive's condition with the Company). Notwithstanding the foregoing, the Company shall not terminate the Executive by reason of Disability prior to the date on which the Executive is eligible for long-term disability benefits under any long-term disability plan or policy maintained by the Company, but if the Executive is otherwise Disabled the Company may remove him as President, The Andersons Trade and Processing and such action shall not constitute Good Reason, provided that the Executive remains employed (and continues to receive his Base Salary and all benefits) until he is eligible for such benefits.
(b)DEATH. Automatically upon the date of death of the Executive.
(c)CAUSE. Immediately upon written notice by the Company to the Executive of a termination for Cause. "Cause" shall mean:
(i)the Executive's willful, material and substantive breach of this Agreement or written Company policy, which breach is not cured by the Executive within a reasonable time after receipt of written notice from the Company specifying the breach; provided, however, that in the event of any conflict between any Company policy and the terms of this Agreement, the terms·of this Agreement shall govern and control;
(ii)the Executive's willful, intentional and substantive breach of fiduciary duty to the Company or any of its affiliates involving personal gain or profit to the Executive;
(iii)the Executive's engagement in other employment that substantially impairs the Executive's ability to perform his obligations hereunder, for which consent of the Company was not previously obtained; or
(iv)the Executive's conviction of any felony, crime of moral turpitude, or intentional crime in the conduct of his employment the Company or any of its affiliates, in each case which conviction (x) is materially adverse to the welfare of the Company or any of its affiliates (but excluding any conviction which is not the result of any action or inaction by the Executive for his personal gain) or (y) is in willful violation of law or Company policy.
For purposes of this Section 7(c). no act or failure to act shall be deemed ''willful" if done or omitted to be done by the Executive in good faith and in the reasonable belief that such act or omission was in the best interest of the Company. Notwithstanding anything to the contrary contained herein, the Executive's right to cure shall not apply if there are habitual breaches by the Executive.
(d)WITHOUT CAUSE. Immediately upon written notice by the Company to the Executive of an involuntary termination without Cause (other than for death or Disability).
(e)GOOD REASON. Upon written notice by the Executive to the Company of a termination for Good Reason. "Good Reason" shall mean the occurrence of any of the following events, without the express written consent of the Executive, unless such events are fully corrected in all material respects by the Company within thirty (30) days following written notification by the Executive to the Company:
(i)a material diminution in the Executive's Base Salary or the Target Bonus;
(ii)a material diminution in the Executive's authority, duties, or responsibilities; or
(iii)relocation of the Executive's primary work location by more than thirty five (35) miles from its then current location (other than any relocation approved by Executive in the course of his responsibilities).
The Executive shall provide the Company with a written notice detailing the specific circumstances alleged to constitute Good Reason within ninety (90) days after the Executive first knows, or with the exercise of reasonable diligence would know, of the occurrence of such circumstances, and must actually terminate employment within thirty (30) days following the expiration of the Company's cure period as set forth above. Otherwise, any claim of such circumstances as "Good Reason" shall be deemed irrevocably waived by the Executive: provided that such waiver shall not apply to any subsequent occurrence of the same or other circumstances constituting Good Reason.
(t) WITHOUT GOOD REASON. Upon thirty (30) days prior written notice by the Executive to the Company of the Executive's voluntary termination of employment without Good Reason (which the Company may, in its sole discretion, make effective earlier than any notice date).
8.CONSEQUENCES OF TERMINATION.
(a)DEATH. In the event that the Executive's employment and the Employment Term end on account of the Executive's death, the Executive or the Executive's estate, as the case may be, shall be entitled to the following (with the amounts due under Sections filrufi} and 8(a)(iv) hereof to be paid within sixty (60) days following termination of employment, or such earlier date as may be required by applicable law):
(i)any unpaid Base Salary through the Termination Date;
(ii)a pro rata Annual Bonus for the Bonus Plan performance period in which the Termination Date occurs, calculated by multiplying the actual amount of the Annual Bonus that would have been earned by the Executive had the Executive remained employed with the Company through the end of the applicable performance period by a fraction, the numerator of which is the number of days during the applicable performance period during which the Executive was actively employed by the Company and the denominator of which is the total number of days comprising the applicable performance period, payable at the same time bonuses for such performance period are otherwise paid to the Company's senior executives;
(iii)any Annual Bonus earned but unpaid with respect to a fiscal year ending on or preceding the Termination Date, payable as provided in Section 4 hereof (without regard to any continued employment requirement) (excluding, for the avoidance of doubt, any amounts payable under the Company Severance Policy);
(iv)reimbursement for any unreimbursed business expenses incurred through the Termination Date and reimbursable pursuant to the Company's policies regarding reimbursement of business expenses;
(v)any accrued but unused vacation pay or paid time off that may remain as of the Termination Date, determined in accordance with the Company's policy on accrual and use; and
(vi)all other accrued and vested payments, benefits or fringe benefits to which the Executive is entitled in accordance with the terms and conditions of the applicable compensation or benefit plan, program or arrangement of the Company (excluding, for the avoidance of doubt, any amounts that would result in the duplication of benefits payable under any other provision of this Agreement or under the Company Severance Policy) (collectively, Sections 8(a)(i) through 8(a)(vi) hereof shall be hereafter referred to as the "Accrued Benefits").
(b)DISABILITY. In the event that the Executive's employment and the Employment Term end on account of the Executive's Disability, the Company shall pay or provide the Executive with the Accrued Benefits.
(c)TERMINATION FOR CAUSE OR WITHOUT GOOD REASON. If
the Executive's employment is terminated (x) by the Company for Cause, or (y) by the Executive without Good Reason, the Company shall pay to the Executive the Accrued Benefits, other than the benefits described in Sections 8(a)(ii). (iii), (iv) and .{y} hereof.
(d)TERMINATION WITHOUT CAUSE OR FOR GOOD REASON OTHER THAN IN CONNECTION WITH A CHANGE IN CONTROL. If the Executive's employment with the Company is terminated during the Employment Term (x) by the Company other than for Cause, or (y) by the Executive for Good Reason (a "Qualifying Termination"), and other than pursuant to Section 8(e) hereof, the Company shall pay or provide the Executive with the following:
(i)the Accrued Benefits set forth in Sections 8(a)(i) and 8(a)(iii) through (vi). provided that the benefits described in Section 8(a) (iv) hereof shall be subject to the Executive's continued compliance with the obligations in Sections 9, 10, and11hereof;
(ii)subject to the Executive's continued compliance with the obligations in Sections 9, 10, and 11 hereof, the benefits payable under the Company Severance Policy, subject to its terms and the terms of the Executive's participation agreement relating to the Company Severance Policy (and for the avoidance of doubt, such amounts shall not duplicate any amounts payable under this Agreement); and
(iii)all unvested Annual Equity Awards shall be treated in accordance with the Company's standard practice as then in effect as applied to similarly-situated executive employees of the Company.
Payments and benefits provided in this Section 8(d) shall be in lieu of any termination or severance payments or benefits for which the Executive may be eligible under any of the plans, policies or programs of the Company, including without limitation under the Worker Adjustment Retraining Notification Act of 1988 or any similar state statute or regulation. Notwithstanding anything to the contrary in the Company Severance Policy, (i) the terms "Cause", "Good Reason", and "Qualifying Termination" or terms of similar import shall have the definition provided in this Agreement (and any dispute over the reason for the Executive's termination shall be resolved by binding arbitration in accordance with Section 19 of this Agreement), (ii) to the extent that a release of claims is required to receive such severance, the release shall be substantially in the form of Exhibit A attached hereto, and (iii) the restrictive covenants in this Agreement shall apply instead of any restrictive covenants of the Company Severance Policy.
(e)TERMINATION WITHOUT CAUSE OR FOR GOOD REASON IN CONNECTION WITH A CHANGE IN CONTROL. If the Executive's employment by the Company is terminated in a Qualifying Termination during the three (3) months preceding or twenty four (24) months following a "Change in Control" (as defined in the Company Severance Policy), the Company shall pay or provide the Executive with the following:
(i)the Accrued Benefits set forth in Sections 8(a)(i) and 8(a)(iii) through (vi), provided that the benefits described in Section 8(a) (iv) hereof shall be subject to the Executive's continued compliance with the obligations in Sections 9. 10 and 11 hereof; and
(ii)subject to the Executive's continued compliance with the obligations in Sections 9, 10 and 11 hereof, the benefits payable under the Company Severance Policy, subject to its terms and the terms of the Executive's participation agreement relating to the Company Severance Policy (and for the avoidance of doubt, such amounts shall not duplicate any amounts payable under this Agreement).
Payments and benefits provided in this Section 8(e) shall be in lieu of any termination or severance payments or benefits for which the Executive may be eligible under any of the plans, policies or programs of the Company, including without limitation under the Worker Adjustment Retraining Notification Act of 1988 or any similar state statute or regulation, subject to the following. Notwithstanding anything to the contrary in the Company Severance Policy, (i) the terms "Cause", "Good Reason", and "Qualifying Termination" or terms of similar import shall have the definition provided in this Agreement (and any dispute over the reason for the Executive's termination shall be resolved by binding arbitration in accordance with Section 19 of this Agreement), (ii) to the extent that a release of claims is required to receive such severance, the release shall be substantially in the form of Exhibit A attached hereto, and (iii) the restrictive covenants in this Agreement shall apply instead of any restrictive covenants of the policy.
(f)CODE SECTION 280G. To the extent that any amounts payable to the Executive hereunder, as well as any other "parachute payment," as such term is defined under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), payable to the
Executive in connection with the Executive's employment by the Company, exceed the limitations of Section 280G of the Code such that an excise tax will be imposed under Section 4999 of the Code (the "Excise Tax"), then such payments shall be either (x) reduced to the minimum extent necessary to avoid application of the Excise Tax or (y) provided to the Executive in full, whichever of the foregoing amounts, when taking into account applicable federal, state, local and foreign income and employment taxes, the Excise Tax, and any other applicable taxes, results in the receipt by the Executive, on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under the Excise Tax. In the event of a reduction in benefits hereunder, the reduction shall occur in the following order: (i) benefits valued as parachute payments, (ii) any cash severance based on a multiple of the Executive's Base Salary, Annual Bonus, or Target Bonus; (iii) any other cash amounts payable to the Executive, and (iv) acceleration of vesting of any equity awards held by the Executive.
(g)OTHER OBLIGATIONS. Upon any termination of the Executive's employment with the Company, the Executive shall promptly resign from any position as an officer, director or fiduciary of any Company-related entity.
(h)EXCLUSIVE REMEDY. In the event of termination of the Executive's employment and the Employment Term hereunder pursuant to Sections 7(d) or 7(e) hereof, the payments described in Section 8(d) or hereof, as applicable, shall be in full and complete
satisfaction of the Executive's rights under this Agreement.
9.RELEASE; MITIGATION; SET-OFFS. Any and all amounts payable and benefits or additional rights provided pursuant to this Agreement in connection with the Executive's termination of employment beyond the Accrued Benefits (other than the amounts described in Sections 8(a)(ii), (iii), (iv) and (v) hereof, which amounts shall also be subject to the requirements of this Section 9) shall only be payable if the Executive delivers to the Company and does not revoke a general release of claims in favor of the Company substantially in the form of Exhibit A attached hereto. Such release shall be executed and delivered (and no longer subject to revocation, if applicable) within sixty (60) days following termination. Except as otherwise expressly provided in Section 8(d)(iv) hereof, in no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be offset by any amount received by the Executive from any other source. Subject to the provisions of Section 22(b)(v) hereof and the limitations of applicable wage laws, the Company's obligations to pay the Executive amounts hereunder shall be subject to set-off, counterclaim or recoupment of amounts owed by the Executive to the Company or any of its affiliates.
10.RESTRICTIVE COVENANTS.
(a)CONFIDENTIALITY. During the course of the Executive's employment with the Company, the Executive will have access to Confidential Information. For purposes of this Agreement, "Confidential Information" means all data, information, ideas, concepts, discoveries, trade secrets, inventions (whether or not patentable or reduced to practice), innovations, improvements, know-how, developments, techniques, methods, processes, treatments, drawings, sketches, specifications, designs, patterns, models, plans and strategies, and all other confidential or proprietary information or trade secrets in any form or medium (whether
merely remembered or embodied in a tangible or intangible form or medium) whether now or hereafter existing, relating to or arising from the past, current or potential business, activities and/or operations of the Company or any of its subsidiaries or affiliates (collectively, the "Company Group"), including, without limitation, any such information relating to or concerning finances, sales, marketing, advertising, transition, promotions, pricing, personnel, customers, suppliers, vendors, partners and/or competitors. The Executive agrees that the Executive shall not, directly or indirectly, use, make available, sell, disclose or otherwise communicate to any person, other than in the course of the Executive's assigned duties and for the benefit of the Company, either during the period of the Executive's employment or at any time thereafter, any Confidential Information or other confidential or proprietary information received from third parties subject to a duty on the Company Group's part to maintain the confidentiality of such information, and to use such information only for specified limited purposes, in each case, which shall have been obtained by the Executive during the Executive's employment by the Company (or any predecessor). The foregoing shall not apply to information that (i) was known to the public prior to its disclosure to the Executive; (ii) becomes generally known to the public subsequent to disclosure to the Executive through no wrongful act of the Executive or any representative of the Executive; (iii) was known by the Executive prior to the Executive's association with the Company or any predecessor to the Company, as evidenced by written records existing at that time; or (iv) the Executive is required to disclose by applicable law, regulation or legal process (provided that the Executive provides the Company with prior notice of the contemplated disclosure and cooperates with the Company at its expense in seeking a protective order or other appropriate protection of such information). Unless this Agreement is otherwise required to be disclosed under applicable law, rule or regulation, the terms and conditions of this Agreement shall remain strictly confidential, and the Executive hereby agrees not to disclose the terms and conditions hereof to any person or entity, other than immediate family members, legal advisors or personal tax or financial advisors, or prospective future employers solely for the purpose of disclosing the limitations on the Executive's conduct imposed by the provisions of this Section 10 who, in each case, agree to keep such information confidential.
(b)NONCOMPETITION. The Executive acknowledges that (i) the Executive will continue to perform services of a unique nature for the Company that are irreplaceable, and that the Executive's performance of such services to a competing business will result in irreparable harm to the Company, (ii) the Executive has had and will have access to Confidential Information which, if disclosed, would unfairly and inappropriately assist in competition against the Company or any of its affiliates, (iii) in the course of the Executive's employment by a competitor, the Executive would inevitably use or disclose such Confidential Information, and (iv) the Executive has generated and will generate goodwill for the Company and its affiliates in the course of the Executive's employment. Accordingly, during the Executive's employment with the Company and for the duration of the Restricted Period, the Executive agrees that the Executive will not, directly or indirectly, own, manage, operate, control, be employed by (whether as an employee, consultant, independent contractor or otherwise, and whether or not for compensation) or render services to any person, firm, corporation or other entity, in whatever form, engaged in any business in which the Company Group is actively engaged or is actively pursuing as of the end of the Executive's employment hereunder in any locale of any country in which the Company Group conducts its business. Notwithstanding the foregoing, nothing herein shall prohibit the Executive from being a passive owner of not more than one percent (1%) of the equity securities of a publicly traded corporation engaged in a business that is in competition with the
Company Group, so long as the Executive has no active participation in the business of such corporation. The term "Restricted Period" for purposes of this Section 10 shall mean the remaining period of the then-current term of this Agreement, plus twenty-four (24) months, in the case of a termination by the Company for Cause or by Executive without Good Reason, and in the case of a Qualifying Termination, shall mean the applicable benefit period under Section 8(d) or, as applicable, commencing on the first day following the Executive's effective date of the Qualifying Termination.
(c)NONSOLICITATION; NONINTERFERENCE. During the
Executive's employment with the Company and for the duration of the Restricted Period (as defined in Section 10(b) above), the Executive agrees that the Executive shall not, except in the furtherance of the Executive's duties hereunder, directly or indirectly, individually or on behalf of any other person, firm, corporation or other entity, (i) solicit, aid or induce any customer of the Company Group to purchase goods or services then sold by the Company Group from another person, firm, corporation or other entity or assist or aid any other person or entity in identifying or soliciting any such customer, (ii) solicit, aid or induce any employee, representative or agent of the Company Group to leave such employment or retention or to accept employment with or render services to or with any other person, firm, corporation or other entity unaffiliated with the Company Group, or hire or retain any such employee, representative or agent, or take any action to materially assist or aid any other person, firm, corporation or other entity in identifying, hiring or soliciting any such employee, representative or agent, or (iii) interfere, or aid or induce any other person or entity in interfering, with the relationship between the Company Group and any of its vendors, joint venturers or licensors. Notwithstanding the foregoing, the provisions of this Section 10(c) shall not be violated by general advertising or solicitation not specifically targeted at Company Group-related persons or entities.
(d)MUTUAL NONDISPARAGEMENT. Both during the Employment Term and at all times thereafter, regardless of the reason for termination, the Executive agrees not to disparage the Company or its officers, directors, employees, shareholders, members, agents or products. Both during the Employment Term and at all times thereafter, regardless of the reason for termination, the Company agrees to direct its officers and directors not to disparage the Executive. The foregoing shall not be violated by exercising protected legal rights to the extent that such rights cannot be waived by agreement or from providing truthful statements in response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings). Notwithstanding anything contained herein to the contrary, nothing in this Section 10(d) shall (i) prohibit the Executive from making reports of possible violations of federal law or regulation to any governmental agency or entity in accordance with the provisions and rules promulgated under any whistleblower protections provisions of state or federal law or regulation, or (ii) require notification or prior approval by the Company of any reporting described in the foregoing clause (i).
(e)INVENTIONS. (i) The Executive acknowledges and agrees that all ideas, methods, inventions, discoveries, improvements, work products, developments, software, know how, processes, techniques, methods, works of authorship and other work product or other intellectual property, whether or not patentable or copyrightable, that are (A) reduced to practice, created, invented, designed, developed, contributed to, or improved (collectively, "Conceived")
with the use of any Company resources and/or within the scope of the Executive's work with the Company or that relate to the business, operations or actual or demonstrably anticipated research or development of the Company, and that are made or otherwise Conceived by the Executive, solely or jointly with others, during the period of the Executive's employment with the Company, or (B) suggested by any work that the Executive performs in connection with the Company, either while performing the Executive's duties with the Company or on the Executive's own time, but only insofar as the Inventions are related to the Executive's work as an employee or other service provider to the Company, shall belong exclusively to the Company (or its designee), whether or not any patent or other applications for intellectual property protection are filed, issued or granted thereon (the "Inventions"). The Executive will keep full and complete written records (the "Records"), in the manner prescribed by the Company, of all Inventions, and will promptly disclose all Inventions completely and in writing to the Company. The Records shall be the sole and exclusive property of the Company, and the Executive will surrender them upon the termination of the Employment Term, or upon the Company's request. The Executive will assign to the Company the Inventions and all patents, registrations and other intellectual property rights that may issue thereon in any and all countries, whether during or subsequent to the Employment Term, together with the right to file, in the Executive's name or in the name of the Company (or its designee), applications for patents and equivalent rights (the "Applications"). The Executive will, at any time during and subsequent to the Employment Term, make such applications, sign such papers, take all rightful oaths, and perform all other acts as may be requested from time to time by the Company to perfect, record, enforce, protect, patent or register the Company's rights in the Inventions, all without additional compensation to the Executive from the Company. The Executive will also execute assignments to the Company (or its designee) of the Applications, and give the Company and its attorneys all reasonable assistance (including the giving of testimony) to obtain the Inventions for the Company's benefit, all without additional compensation to the Executive from the Company, but entirely at the Company's expense.
(ii) In addition, the Inventions will be deemed Work for Hire, as such term is defined under the copyright laws of the United States, on behalf of the Company and the Executive agrees that the Company will be the sole owner of the Inventions, and all underlying rights therein, in all media now known or hereinafter devised or otherwise existing, throughout the universe and in perpetuity without any further obligations to the Executive. If the Inventions, or any portion thereof, are deemed not to be a Work for Hire, or sole ownership of such Inventions do not otherwise automatically vest in the Company, the Executive hereby irrevocably conveys, transfers and assigns to the Company, all rights, in all media now known or hereinafter devised or otherwise existing, throughout the universe and in perpetuity, in and to the Inventions, including, without limitation, all of the Executive's right, title and interest in the copyrights (and all registrations, renewals, revivals and extensions thereof) with respect to the Inventions, including, without limitation, all rights of any kind or any nature now or hereafter recognized, including, without limitation, the unrestricted right to make modifications, adaptations and revisions to the Inventions, to exploit and allow others to exploit the Inventions and all rights to sue at law or in equity for any infringement, or other unauthorized use or conduct in derogation of the Inventions, known or unknown, prior to the date hereof, including, without limitation, the right to receive all proceeds and damages therefrom. In addition, the Executive hereby waives any so-called "moral rights" with respect to the Inventions. To the extent that the Executive has any rights in the results and proceeds of the Executive's service to the Company that cannot be assigned in the manner described herein, the Executive hereby unconditionally waives the enforcement of such rights.
The Executive hereby waives any and all currently existing and future monetary rights in and to the Inventions and all patents and other registrations for intellectual property that may issue thereon, including, without limitation, any rights that would otherwise accrue to the Executive's benefit by virtue of the Executive being an employee of or other service provider to the Company.
(f)RETURN OF COMPANY PROPERTY. On the Termination Date (or at any time prior thereto at the Company's request), the Executive shall return all property belonging to the Company or its affiliates (including, but not limited to, any Company provided laptops, computers, cell phones, wireless electronic mail devices or other equipment, or documents and property belonging to the Company). The Executive may retain the Executive's rolodex and similar address books provided that such items only include contact information, and may retain his cell phone number.
(g)REASONABLENESS OF COVENANTS. In signing this Agreement, the Executive gives the Company assurance that the Executive has carefully read and considered all of the terms and conditions of this Agreement, including the restraints imposed under this Section 10. The Executive agrees that these restraints are necessary for the reasonable and proper protection of the Company and its affiliates and their Confidential Information and that each and every one of the restraints is reasonable in respect of subject matter, length of time and geographic area, and that these restraints, individually or in the aggregate, will not prevent the Executive from obtaining other suitable employment during the period in which the Executive is bound by the restraints. The Executive covenants that the Executive will not challenge the reasonableness or enforceability of any of the covenants set forth in this Section 10. It is also agreed that each of the Company's affiliates will have the right to enforce all of the Executive's obligations to that affiliate under this Agreement, including without limitation pursuant to this Section 10.
01)REFORMATION. If it is determined by a court of competent jurisdiction in any state that any restriction in this Section 10 is excessive in duration or scope or is unreasonable or unenforceable under applicable law, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the laws of that state.
(i)TOLLING. In the event of any violation of the provisions of this Section 10, the Executive acknowledges and agrees that the post-termination restrictions contained in this Section 10 shall be extended by a period of time equal to the period of such violation, it being the intention of the parties hereto that the running of the applicable post-termination restriction period shall be tolled during any period of such violation.
(j)SURVIVAL OF PROVISIONS. The obligations contained in this Agreement, including but not limited to Sections 10 and 11 hereof, shall survive the termination or expiration of the Employment Term and the Executive's employment with the Company and
shall be fully enforceable thereafter.
(k)PERMITTED STATEMENTS. Nothing in this Agreement shall restrict either party hereto from making truthful statements (i) when required by law, subpoena, court order or the like; (ii) when requested by a governmental, regulatory, or similar body or entity; or (iii) in confidence to a professional advisor for the purpose of securing professional advice.
(1) NOTICE UNDER DEFEND TRADE SECRETS ACT. In accordance
with the Defend Trade Secrets Act of 2016, the Executive will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (i) is made (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In addition, nothing in this Agreement shall limit the Executive's ability to communicate with any government agency or otherwise participate in any investigation or proceeding that may be conducted by any government agency, including providing documents or other information.
11.COOPERATION. In connection with any termination of the Executive's employment with the Company, the Executive agrees to assist the Company, as reasonably requested by the Company, in its succession planning efforts to facilitate a smooth transition of the Executive's job responsibilities to the Executive's successor. In addition, upon the receipt of reasonable notice from the Company (including outside counsel), the Executive agrees that while employed by the Company and thereafter, the Executive will respond and provide information with regard to matters in which the Executive has knowledge as a result of the Executive's employment with the Company, and will provide reasonable assistance to the Company, its affiliates and their respective representatives in defense of all claims that may be made against the Company or its affiliates, and will assist the Company and its affiliates in the prosecution of all claims that may be made by the Company or its affiliates, to the extent that such claims may relate to the period of the Executive's employment with the Company. The Executive agrees to promptly inform the Company if the Executive becomes aware of any lawsuit involving such claims that may be filed or threatened against the Company or its affiliates. The Executive also agrees to promptly inform the Company (to the extent that the Executive is legally permitted to do so) if the Executive is asked to assist in any investigation of the Company or its affiliates (or their actions), regardless of whether a lawsuit or other proceeding has then been filed against the Company or its affiliates with respect to such investigation, and shall not do so unless legally required. The Company shall make reasonable efforts to minimize disruption of the Executive's other activities. Upon presentation of appropriate documentation, the Company shall pay or reimburse the Executive for all reasonable out-of-pocket travel, duplicating or telephonic expenses incurred by the Executive in complying with this Section 11.
12.EQUITABLE RELIEF AND OTHER REMEDIES. The Executive
acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of Section 10 hereof would be inadequate and, in recognition of this fact, the Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company shall be entitled to seek equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available, without the necessity of showing actual monetary damages or the posting of a bond or other security. In the event of a violation by the Executive of Section 10 hereof, any severance being paid to the Executive pursuant to this Agreement or otherwise shall immediately cease, and any severance previously paid to the Executive shall be immediately repaid to the Company.
13.NO ASSIGNMENTS. This Agreement is personal to each of the parties hereto. Except as provided in this Section 13, no party may assign or delegate any rights or obligations hereunder without first obtaining the written consent of the other party hereto. The Company may assign this Agreement to any successor to all or substantially all of the business and/or assets of the Company; provided that the Company shall require such successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company and any successor to its business and/or assets, which assumes and agrees to perform the duties and obligations of the Company under this Agreement by operation of law or otherwise.
14.NOTICE. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of delivery, if delivered by hand, (b) on the date of transmission, if delivered by confirmed facsimile or electronic mail, (c) on the first business day following the date of deposit, if delivered by guaranteed overnight delivery service, or (d) on the fourth business day following the date delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
At the address (or to the facsimile number) shown in the books and records of the Company. With a copy (which shall not constitute notice to the Executive) to:
Polsinelli PC
900 W. 48th Place, Suite 900 Kansas City, MO 64112 Attn: Wallace Brockhoff
Email: wbrockhoff@polsinelli.com
If to the Company:
The Andersons, Inc.
1947 Briarfield Blvd.
Maumee, OH 43537
Attention: Chief Executive Officer Email: Pat_Bowe@andersonsinc.com
With a copy (which shall not constitute notice to the Company) to: General Counsel
The Andersons, Inc.
1947 Briarfield Blvd.
Maumee, Ohio 43537
Email: christine_castellano@andersonsinc.com
or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
15.SECTION HEADINGS; INCONSISTENCY. The section headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement. In the event of any inconsistency between the terms of this Agreement and any form, award, plan or policy of the Company, the terms of this Agreement shall govern and control.
16.SEVERABILITY. The provisions of this Agreement shall be deemed severable. The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by applicable law.
17.COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
18.LIABILITY INSURANCE; INDEMNIFICATION. The Company shall cover the Executive under directors' and officers' liability insurance both during and, while potential liability exists, after the term of this Agreement in the same amount and to the same extent as the Company covers its most senior active officers and directors. In addition, the Company shall indemnify the Executive on the same basis as its most senior active officers and active members of the Board. The rights of indemnification shall not be deemed exclusive under applicable law, the Company's Certificate of Incorporation, the Company's Bylaws, any agreement, a vote of stockholders, a resolution of directors or otherwise, of the Company.
19.GOVERNING LAW; JURISDICTION.
(a)This Agreement, the rights and obligations of the parties hereto, and all claims or disputes relating thereto, shall be governed by and construed in accordance with the laws of the State of Ohio, without regard to the choice of law provisions thereof.
(b)Each of the parties agrees that except as otherwise provided herein and other than injunctive relief under Section 12 hereof, any dispute or controversy arising under or in connection with this Agreement or the Executive's employment with the Company shall be settled exclusively by arbitration, conducted before a single arbitrator, who is currently licensed to practice law in Ohio, located in Lucas County, Ohio, in accordance with the employment arbitration rules (except as modified below) of the American Arbitration Association then in effect. Each of the parties hereto agrees that in any such arbitration the award shall be made in writing no more than thirty (30) days following the end of the proceeding, the arbitration shall not be conducted as a class action, the arbitration award shall include factual findings or conclusions of law, and no punitive damages shall be awarded. Any award rendered by the arbitrator shall be final and binding and judgment may be entered on it in any court of competent jurisdiction. Each of the parties hereto agrees to treat as confidential the results of any arbitration (including, without
limitation, any findings of fact and/or law made by the arbitrator) and not to disclose such results to any unauthorized person. The Company shall bear all administrative fees and expenses of the arbitration and unless the arbitrator directs otherwise, each party shall bear its own counsel fees and expenses. Either party may appeal the arbitration award and judgment thereon and, in actions seeking to vacate an award, the standard of review to be applied to the arbitrator' s findings of fact and conclusions of law will be the same as that applied by an appellate court reviewing a decision of a trial court sitting without a jury.
(c)Notwithstanding the foregoing, and subject to the prov1s10ns of Section 19(d) below, each of the parties agrees that any dispute between the parties related to the Executive's purported violation of any of the provisions of Section 10 hereof brought pursuant to Section 13 (a "Restrictive Covenant Proceeding") shall not be subject to binding arbitration and shall be resolved only in the courts of the State of Ohio or the United States District Court for the Northern District of Ohio and the appellate courts having jurisdiction of appeals in such courts. In that context, and without limiting the generality of the foregoing, each of the parties hereto irrevocably and unconditionally (a) submits in any Restrictive Covenant Proceeding or proceeding relating to recognition and enforcement of any judgment in respect thereof to the exclusive jurisdiction of the courts of the State of Ohio, the court of the United States District Court for the Northern District of Ohio, and appellate courts having jurisdiction of appeals from any of the foregoing, and agrees that all claims in respect of any such Restrictive Covenant Proceeding shall be heard and determined in such courts of the State of Ohio or, to the extent permitted by law, in such federal court, (b) consents that any such Restrictive Covenant Proceeding may and shall be brought in such courts and waives any objection that the Executive or the Company may now or thereafter have to the venue or jurisdiction of any such Restrictive Covenant Proceeding in any such court or that such Restrictive Covenant Proceeding was brought in an inconvenient court and agrees not to plead or claim the same, (c) waives all right to trial by jury in any Restrictive Covenant Proceeding (whether based on contract, tort or otherwise), and (d) agrees that nothing in this Agreement shall affect the right to effect service of process in any other manner permitted by the laws of the State of Ohio. In any Restrictive Covenant proceeding, the court may award to the prevailing party all of any portion of its reasonable costs of the proceeding, including reasonable fees and disbursements of legal counsel.
(d)Each of the parties agrees that if any dispute between the parties related to the Executive's purported violation of any of the provisions of Section 10 arises (whether as a Restricted Covenant Proceeding or otherwise) in connection or simultaneously with a dispute relating to a certain executed restrictive covenant agreement between the parties dated on or about the date hereof (the "Restricted Covenant Agreement"), then such dispute under this Agreement shall be resolved only in the jurisdiction and manner, and subject to the governing law provisions, set forth in such Restrictive Covenant Agreement.
20.MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer or director of the Company as may be designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement together with all exhibits hereto (if any) sets forth the entire
agreement of the parties hereto in respect of the subject matter contained herein and supersedes any and all prior agreements or understandings between the Executive and the Company with respect to the subject matter hereof including, without limitation, any employment agreement previously entered into by the Executive and the Company or any predecessor to the Company. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. All references to days in establishing a time period shall be deemed references to calendar days.
21.REPRESENTATIONS. The Executive represents and warrants to the Company that (a) the Executive has the legal right to enter into this Agreement and to perform all of the obligations on the Executive's part to be performed hereunder in accordance with its terms, and
(b) the Executive is not a party to any agreement or understanding, written or oral, and is not subject to any restriction, which, in either case, could prevent the Executive from entering into this Agreement or impair the Executive's ability to perform all of the Executive's duties and obligations hereunder. In the event that the Executive is subject to any agreement or understanding, written or oral, that, in either case, could prevent the Executive from entering into this Agreement or performing services for the Company, this Agreement shall immediately become null and void, and the Executive shall have no further rights hereunder. The Executive agrees to inform the Company of any apparent conflicts between the Executive's work for the Company and (i) any obligations the Executive may have to preserve the confidentiality of another's proprietary information or related materials before using the same on the Company's behalf, or (ii) any obligations the Executive may be to not solicit the employees or customers of a former employer, before soliciting the same on the Company's behalf. The Company shall receive such disclosures in confidence and consistent with the objectives of avoiding any conflict of obligations and rights or the appearance of any conflict of interest.
22.TAX MATTERS.
(a)WITHHOLDING. The Company may withhold from any and all amounts payable under this Agreement or otherwise such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
(b)SECTION 409A COMPLIANCE.
(i)The intent of the parties is that payments and benefits under this Agreement, including those payable under the Company Severance Policy, to be exempt from or to comply with Section 409A of the Code and the regulations and guidance promulgated thereunder (collectively "Code Section 409A") and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be exempt from or to be in compliance therewith. To the extent that any provision hereof is modified in order to comply with Code Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to the Executive and the Company of the applicable provision without violating the provisions of Code Section 409A. In no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on the Executive by Code Section 409A or damages for failing to comply with Code Section 409A. If any payment (or the failure to make any payment) to the Executive would result in the imposition of penalties under Code Section 409A, the Company shall take such reasonable
actions as may be required to comply with the requirements of any correction program prescribed by the Internal Revenue Service to mitigate the effect of such penalties.
(ii)A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amount or benefit upon or following a termination of employment unless such termination is also a "separation from service" within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a "termination," "termination of employment" or like terms shall mean "separation from service." Notwithstanding anything to the contrary in this Agreement, if the Executive is deemed on the date of termination to be a "specified employee" within the meaning of that term under Code Section 409A(a)(2)(B,) then with regard to any payment or the provision of any benefit that is considered "nonqualified deferred compensation" under Code Section 409A payable on account of a "separation from service," such payment or benefit shall not be made or provided until the date which is the earlier of (A) the expiration of the six (6)-month period measured from the date following such "separation from service" of the Executive, and (B) the date of the Executive's death, to the extent required under Code Section 409A. Upon the expiration of the foregoing delay period, all payments and benefits delayed pursuant to this Section 22(b)(ii) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum, and all remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.
(iii)To the extent that reimbursements or other in-kind benefits under this Agreement constitute "nonqualified deferred compensation" for purposes of Code Section 409A, (A) all expenses or other reimbursements hereunder shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the Executive, (B) any right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (C) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement or in-kind benefits to be provided, in any other taxable year.
(iv)For purposes of Code Section 409A, the Executive's right to receive installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company.
(v)Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment or benefit under this Agreement that constitutes "nonqualified deferred compensation" for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A.
23.CLAWBACKS. Executive acknowledges that the Company is a publicly traded corporation whose shares are listed on a national exchange. Executive further acknowledges that, pursuant to federal securities laws, regulations promulgated by the Securities and Exchange Commission, and rules established by national exchanges, and Company internal policies, the Company will from time to time establish clawback rules pursuant to which relevant officers and
employees may be required to return bonus compensation, including all bonuses provided in this Agreement, based on financial results found to have been reported incorrectly. The Company's policies may equal or exceed those required by such laws, regulations or rules provided that such policies are equally applicable to all senior executives.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
THE ANDERSONS, INC.
Patrick E. Bowe
Chief Executive Officer
EXECUTIVE
William E. Krueger
EXHIBIT A
GENERAL RELEASE
I, William Krueger, in consideration of and subject to the performance by The Andersons, Inc. (together with its subsidiaries, the "Company"), of its obligations under Section 8 of the Employment Agreement dated as of [ ] the "Agreement"), do hereby release and forever discharge as of the date hereof the Company and its respective affiliates, subsidiaries and direct or indirect parent entities and all present, former and future directors, officers, agents, representatives, employees, successors and assigns of the Company and/or its respective affiliates, subsidiaries and direct or indirect parent entities (collectively, the "Released Parties") to the extent provided below (this "General Release"). The Released Parties are intended to be third-party beneficiaries of this General Release, and this General Release may be enforced by each of them in accordance with the terms hereof in respect of the rights granted to such Released Parties hereunder. Terms used herein but not otherwise defined shall have the meanings given to them in the Agreement.
1.I understand that any payments or benefits paid or granted to me under Section 8 of the Agreement, other than the Accrued Benefits (excluding the Accrued Benefits payable pursuant to Sections 8(a)(ii) and 8(a)(iii) of the Agreement) represent consideration for signing this General Release and are not salary, wages or benefits to which I was already entitled. I understand and agree that I will not receive certain of the payments and benefits specified in Section 8 of the Agreement unless I execute this General Release and do not revoke this General Release within the time period permitted hereafter. Such payments and benefits will not be considered compensation for purposes of any employee benefit plan, program, policy or arrangement maintained or hereafter established by the Company or its affiliates.
2.Except as provided in paragraphs 4 and 5 below and except for the provisions of the Agreement which expressly survive the termination of my employment with the Company, I knowingly and voluntarily (for myself, my heirs, executors, administrators and assigns) release and forever discharge the Company and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross-claims, counterclaims, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys' fees, or liabilities of any nature whatsoever in law and in equity, both past and present (through the date that this General Release becomes effective and enforceable) and whether known or unknown, suspected, or claimed against the Company or any of the Released Parties which I, my spouse, or any of my heirs, executors, administrators or assigns, may have, by reason of any matter, cause, or thing whatsoever, from the beginning of my initial dealings with the Company to the date of this General Release, and particularly, but without limitation of the foregoing general terms, any claims arising from or relating in any way to my employment relationship with the Company, the terms and conditions of that employment relationship, and the termination of that employment relationship (including, but not limited to, any allegation, claim or violation, arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993;
the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; any applicable Executive Order Programs; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local, state, or federal law, regulation or ordinance; or under any public policy, contract or tort, or under common law; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of contract, infliction of emotional distress, defamation; or any claim for costs, fees, or other expenses, including attorneys' fees incurred in these matters) (all of the foregoing collectively referred to herein as the "Claims"). I understand and intend that no reference herein to a specific form of claim, statute or type of relief is intended to limit the scope of this Release.
3.I represent that I have made no assignment or transfer of any right, claim, demand, cause of action, or other matter covered by paragraph 2 above.
4.I agree that this General Release does not waive or release any rights or claims that I may have under the Age Discrimination in Employment Act of 1967 which arise after the date I execute this General Release. I acknowledge and agree that my separation from employment with the Company in compliance with the terms of the Agreement shall not serve as the basis for any claim or action (including, without limitation, any claim under the Age Discrimination in Employment Act of 1967).
5.I agree that I hereby waive all rights to sue or obtain equitable, remedial or punitive relief from any or all Released Parties of any kind whatsoever in respect of any Claim, including, without limitation, reinstatement, back pay, front pay, and any form of injunctive relief. Notwithstanding the above, I further acknowledge that I am not waiving and am not being required to waive any right that cannot be waived under law, including the right to file an administrative charge or participate in an administrative investigation or proceeding; provided, however, that I disclaim and waive any right to share or participate in any monetary award resulting from the prosecution of such charge or investigation or proceeding. Additionally, I am not waiving (i) any right to the Accrued Benefits or any severance benefits to which I am entitled under the Agreement, (ii) any claim· relating to directors' and officers' liability insurance coverage or any right of indemnification under the Company's organizational documents or otherwise, or (iii) my rights as an equity or security holder in the Company or its affiliates.
6.In signing this General Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the Claims hereinabove mentioned or implied. I expressly consent that this General Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected Claims (notwithstanding any state or local statute that expressly limits the effectiveness of a general release of unknown, unsuspected and unanticipated Claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied. I acknowledge and agree that this waiver is an essential and material term of this General Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event I should bring a Claim seeking damages against the Company, or in the event I should seek to recover against the Company in any Claim brought by a governmental agency on my behalf, this General Release shall serve as a complete defense to such Claims to the maximum extent permitted by law.
I further agree that I am not aware of any pending claim of the type described in paragraph 2 above as of the execution of this General Release.
7.I agree that neither this General Release, nor the furnishing of the consideration for this General Release, shall be deemed or construed at any time to be an admission by the Company, any Released Party or myself of any improper or unlawful conduct.
8.I agree that if I violate this General Release by suing the Company or the other Released Parties, I will pay all costs and expenses of defending against the suit incurred by the Released Parties, including reasonable attorneys' fees.
9.I agree that, except to the extent that disclosure is otherwise required by applicable law, rule or regulation, this General Release and the Agreement are confidential and agree not to disclose any information regarding the terms of this General Release or the Agreement, except to my immediate family and any tax, legal or other counsel that I have consulted regarding the meaning or effect hereof or as required by law, and I will instruct each of the foregoing not to disclose the same to anyone.
10.Any non-disclosure provision in this General Release does not prohibit or restrict me (or my attorney) from responding to any inquiry about this General Release or its underlying facts and circumstances by the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), any other self-regulatory organization or any governmental entity.
11.I hereby acknowledge that Sections 9 through 14, 16, 17, and 19 through 23 of the Agreement shall survive my execution of this General Release.
12.I represent that I am not aware of any claim by me other than the claims that are released by this General Release. I acknowledge that I may hereafter discover claims or facts in addition to or different than those which I now know or believe to exist with respect to the subject matter of the release set forth in paragraph 2 above and which, if known or suspected at the time of entering into this General Release, may have materially affected this General Release and my decision to enter into it.
13.Notwithstanding anything in this General Release to the contrary, this General Release shall not relinquish, diminish, or in any way affect any rights or claims arising out of any breach by the Company or by any Released Party of the Agreement after the date hereof.
14.Whenever possible, each provision of this General Release shall be interpreted in, such manner as to be effective and valid under applicable law, but if any provision of this General Release is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this General Release shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
BY SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE THAT:
1.I HAVE READ IT CAREFULLY;
2.I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING, BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED; THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF 1990, AND THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED;
3.I VOLUNTARILY CONSENT TO EVERYTHING IN IT;
4.I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT AND I HAVE DONE SO OR, AFTER CAREFUL READING AND CONSIDERATION, I HAVE CHOSEN NOT TO DO SO OF MY OWN VOLITION;
5.I HAVE HAD AT LEAST [21][45] DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASE TO CONSIDER IT, AND THE CHANGES MADE SINCE MY RECEIPT OF THIS RELEASE ARE NOT MATERIAL OR WERE MADE AT MY REQUEST AND WILL NOT RESTART THE REQUIRED [21][45]-DAY PERIOD;
6.I UNDERSTAND THAT I HAVE SEVEN (7) DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;
7.I HAVE SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT;AND
8.I AGREE THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.
Signed: _______________________
Document
Exhibit 10.26
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is entered into as of December 28, 2022 by and among The Andersons Marathon Holdings LLC, a Delaware limited liability company (the “Borrower”), the Lenders signatory hereto, and CoBank, ACB, a federally chartered instrumentality of the United States, in its capacity as administrative agent for the Lenders (in such capacity, the “Administrative Agent”).
The Borrower, the Guarantors from time to time party thereto, the Lenders from time to time party thereto and the Administrative Agent are parties to that certain Credit Agreement dated as of October 1, 2019, as amended by the First Amendment to Credit Agreement dated December 13, 2019, the Second Amendment to Credit Agreement dated July 17, 2020 and the Third Amendment to Credit Agreement dated May 20, 2021 (as so amended and as the same may be further amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). As used in these recitals, capitalized terms defined in the Credit Agreement and used but not defined herein shall have the meanings given them in the Credit Agreement.
The Borrower has requested that the Administrative Agent and the Lenders agree to amend certain terms and provisions of the Credit Agreement, and the Administrative Agent and the Lenders are willing to grant such request on the terms and subject to the conditions set forth herein.
ACCORDINGLY, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Definitions. As used herein, capitalized terms defined in the Credit Agreement and not otherwise defined herein shall have the meanings given them in the Credit Agreement.
Section 2. Amendments to the Credit Agreement. The Credit Agreement is hereby amended as follows:
(I)Annex A-1 attached hereto sets forth a clean copy of the Amended Credit Agreement after giving effect to such amendments (the “Amended Credit Agreement”).
(II)Schedules 5.1, 5.22, 11.5 and 11.8 to the Credit Agreement are hereby amended and restated in their entirety in the form of Schedules 5.1, 5.22, 11.5 and 11.8 attached hereto, respectively.
(III)Exhibits D and H to the Credit Agreement are hereby amended and restated in their entirety in the forms of Exhibits D and H attached hereto, respectively.
Section 3. Conversion of Floating Rate Loans and LIBOR Rate Loans. The Borrower hereby authorizes the Administrative Agent to convert all outstanding Floating Rate Loans and LIBOR Rate Loans (as each such term is defined in the Credit Agreement prior to giving effect to this Amendment) to Daily Simple SOFR Rate Loans on the date hereof.
Section 4. No Waiver; No Other Changes. The execution of this Amendment or any documents, agreements and certificates contemplated hereunder shall not be deemed to be a waiver of any Default or Event of Default or any other breach, default or event of default under any Loan Document or other document held by the Administrative Agent or any Lender, whether or not known to the Administrative Agent or any Lender and whether or not existing on the date of this Amendment. Except as expressly set forth herein, all terms of the Credit Agreement and each of the other Loan Documents remain in full force and effect.
Section 5. References. All references in the Credit Agreement to “this Agreement” shall be deemed to refer to the Credit Agreement as amended hereby, and any and all references in any other Loan Documents to the Credit Agreement shall be deemed to refer to the Credit Agreement as amended hereby.
Section 6. Representations and Warranties. The Borrower hereby represents and warrants to the Administrative Agent and the Secured Parties as follows:
(I)The Borrower has the full power to enter into, execute, deliver and carry out this Amendment and the other documents delivered hereunder to which it is a party (the “Amendment Documents”) and to perform its obligations under the Amendment Documents to which it is a party and the Amended Credit Agreement, and all such actions have been duly authorized by all necessary proceedings on its part. Each of the Amendment Documents has been duly and validly executed and delivered by the Borrower, and the Amendment Documents, the Amended Credit Agreement and the other Loan Documents to which the Borrower is a party constitute legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their terms.
(II)Neither the execution and delivery of the Amendment Documents nor the consummation of the transactions herein or therein contemplated nor compliance with the terms and provisions hereof or thereof or by the Amended Credit Agreement will (i) conflict with or constitute a material default under (x) the terms and conditions of the Organizational Documents of the Borrower, (y) any Material Agreement to which the Borrower is a party or by which it is bound or to which it is subject, (z) any applicable Law or any order, writ, judgment, injunction or decree to the Borrower is a party or by which it is bound or to which it or its properties is subject, or (ii) result in the creation or enforcement of any Lien, charge or encumbrance upon any property (now or hereafter acquired) of the Borrower (other than Liens granted under the Loan Documents).
(III)All of the representations and warranties contained in the Loan Documents, including without limitation in Article V of the Credit Agreement, are correct in all material respects on and as of the date hereof as though made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date, in which case such representations and warranties are correct in all material respects as of such date; provided that any representation or warranty that is qualified by materiality or Material Adverse Change is correct in all respects as though made on and as of the applicable date.
(IV)No event has occurred and is continuing, or would result from the execution and delivery of the Amendment Documents, which constitutes a Default or an Event of Default.
Section 7. Effectiveness. The amendments set forth in Sections 2 and 3 shall be effective only if the Administrative Agent has received, on or before the date of this Amendment, each of the following, each in form and substance acceptable to the Administrative Agent in its sole discretion:
(I)this Amendment, duly executed by the parties hereto;
(II)a Fee Letter, duly executed by the Borrower and the Administrative Agent;
(III)an amendment to the Mortgage with respect to the real property of the Borrower located in Cass County, Indiana, duly executed by the parties hereto, together with such endorsements to the ALTA title insurance policy with respect thereto as the Administrative Agent may require;
(IV)evidence that the Loan Parties have taken all actions required under the Flood Laws and/or requested by the Administrative Agent to assist in ensuring that each Lender is in compliance with the Flood Laws applicable to the Collateral, including, but not limited to:
(1)providing the Administrative Agent with the address and/or GPS coordinates of each structure on any improved real property that will be subject to a Mortgage;
(2)obtaining or providing the following documents: (x) a completed standard “life-of-loan” flood hazard determination form, (y) if the improvement(s) to the improved real property is located in a special flood hazard area, a Borrower Notice and (if applicable) notification to the Borrower that flood insurance coverage under the NFIP is not available because the community does not participate in the NFIP, and (z) documentation evidencing the Borrower’s receipt of the Borrower Notice (e.g., countersigned Borrower Notice, return receipt of certified U.S. Mail, or overnight delivery),
(3)to the extent required under Section 6.4(b) of the Credit Agreement, obtaining flood insurance for such property, structures and contents prior to such property, structures and contents becoming Collateral;
(V)a certificate of the secretary or other appropriate officer of the Borrower certifying that (i) the execution, delivery and performance of the Amendment Documents were duly approved by all necessary action of the Governing Board of the Borrower, and attaching true and correct copies of the applicable resolutions granting such approval; (ii) the Organizational Documents of the Borrower, which were certified and delivered to the Administrative Agent by the Borrower pursuant to the Certificate of Secretary of the Borrower, executed by The Andersons, Inc., as manager of the Borrower, dated as of October 1, 2019 (the “October 2019 Certificate”), continue in full force and effect and have not been amended or otherwise modified except as set forth in the certificate to be delivered as of the date hereof; and (iii) except as certified therein, the officers and agents of the Borrower who have been certified to the Administrative Agent pursuant to the October 2019 Certificate and the Certificate of Secretary of the Borrower, executed by The Andersons, Inc., as manager of the Borrower, dated July 17, 2020, as being authorized to sign and to act on behalf of the Borrower continue to be so authorized or setting forth the sample signatures of each of the officers and agents of the Borrower authorized to execute and deliver this Amendment and all other documents, agreements and certificates on behalf of the Borrower;
(VI)Lien searches with respect to the Borrower and each other Loan Party, in scope satisfactory to the Administrative Agent, evidencing no Liens of record other than Permitted Liens;
(VII)a Beneficial Ownership Certification and all other documentation and information requested by (or on behalf of) any Lender in order to comply with requirements of Anti-Terrorism Laws;
(VIII)evidence from the Borrower that all material governmental and third-party consents required to effectuate the transactions contemplated hereby have been obtained; and
(IX)payment in immediately available funds of all fees and expenses due and payable pursuant to Section 9 hereof to the extent invoiced on or prior to the date hereof or the Fee Letter of even date herewith.
Section 8. Release of the Administrative Agent and the Secured Parties. The Borrower hereby absolutely and unconditionally releases and forever discharges the Administrative Agent and the other Secured Parties, and any and all participants, Related Parties, successors and assigns thereof, together with all of the present and former Directors, officers, employees, agents, attorneys of any of the foregoing, from any and all claims, demands or causes of action of any kind, nature or description, whether arising in law or equity or upon contract or tort or under any state or federal law or otherwise, which the Borrower has had, now has or has made claim to have against any such Person for or by reason of any act, omission, matter, cause or thing whatsoever occurring or arising prior to the date of this Amendment, whether such claims, demands and causes of action are matured or unmatured or known or unknown, in each case to the extent arising in connection with any of the Loan Documents.
Section 9. Costs and Expenses. The Borrower hereby reaffirms its agreement under Section 11.3 of the Credit Agreement to pay or reimburse the Administrative Agent on demand for all reasonable out-of-pocket expenses paid or incurred by the Administrative Agent and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent and each other agent of the Administrative Agent), in connection with the preparation, negotiation, execution, delivery and administration of this Amendment and the other documents, agreements and certificates contemplated hereunder (whether or not the transactions contemplated hereby or thereby shall be consummated).
Section 10. Miscellaneous. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. This Amendment, together with the Credit Agreement as amended hereby and the other Loan Documents, comprises the final and complete integration of all prior expressions by the
Annex A-1
AMENDED CREDIT AGREEMENT
See attached.
CREDIT AGREEMENT
by and among
THE ANDERSONS MARATHON HOLDINGS LLC,
as Borrower,
THE GUARANTORS PARTY HERETO, THE LENDERS PARTY HERETO
and
COBANK, ACB,
as Administrative Agent
COBANK, ACB
and FARM CREDIT MID-AMERICA, PCA,
as Joint Lead Arrangers and Bookrunners Dated as of October 1, 2019
TABLE OF CONTENTS
Page
I.CERTAIN DEFINITIONS1
1.1Certain Definitions 1
1.2Construction 33
1.3Accounting Principles 34
1.4UCC Terms 34
1.5Rounding 34
1.6Letter of Credit Amounts 35
1.7Covenant Compliance Generally 35
1.8[Reserved]35
1.9Divisions 35
II.CREDIT FACILITIES35
2.1Term Facility35
2.2Revolving Facility36
2.3Interest Rate Provisions 38
2.4Interest Periods and Quoted Rate Periods 39
2.5Making of Loans40
2.6Fees41
2.7Notes 42
2.8Letter of Credit Subfacility42
2.9Payments49
2.10Interest Payment Dates 50
2.11Voluntary Prepayments and Reduction of Commitments50
2.12Mandatory Prepayments51
2.13Sharing of Payments by Lenders 53
2.14Defaulting Lenders54
2.15Cash Collateral 56
2.16Farm Credit Equity and Security57
III.INCREASED COSTS; TAXES; ILLEGALITY; INDEMNITY58
3.1Increased Costs58
3.2Taxes59
3.3Illegality 63
3.4Inability to Determine Rate 63
3.5Indemnity 64
3.6Mitigation Obligations; Replacement of Lenders64
3.7Survival 65
3.8Benchmark Replacement Setting 66
IV.CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT67
4.1Conditions Precedent to Initial Credit Extension 67
4.2Each Loan or Letter of Credit 70
V.REPRESENTATIONS AND WARRANTIES70
5.1Organization and Qualification 70
5.2Compliance with Laws; Licensing71
5.3Title to Properties 71
5.4Investment Company Act 71
5.5Event of Default 71
5.6Subsidiaries and Owners 71
5.7Power and Authority; Validity and Binding Effect72
5.8No Conflict; Material Agreements; Consents72
5.9Litigation 72
5.10Financial Statements72
5.11Margin Stock 73
5.12Full Disclosure 73
5.13Taxes 74
5.14Licenses; Intellectual Property; Other Rights74
5.15Liens in the Collateral 74
5.16Insurance74
5.17ERISA Compliance74
5.18Environmental Matters 75
5.19Solvency 76
5.20Sanctions; Anti-Terrorism Laws; Anti-Corruption Laws 76
5.21Compliance with Food Security Act and Agricultural Lien Statutes;
Agricultural Lien Notices 76
5.22Agricultural Licenses 77
5.23Material Adverse Change 77
VI.AFFIRMATIVE COVENANTS77
6.1Reporting Requirements 77
6.2Preservation of Existence, Etc 79
6.3Payment of Liabilities, Including Taxes, Etc 79
6.4Maintenance of Insurance79
6.5Maintenance of Properties and Leases 80
6.6Visitation Rights 80
6.7Keeping of Records and Books of Account 80
6.8Compliance with Laws; Use of Proceeds80
6.9Further Assurances81
6.10Farm Credit Equities 82
6.11Use of Proceeds 82
6.12Updates to Schedules 82
6.13Material Agreements 82
6.14Compliance with Anti-Corruption Laws and Anti-Terrorism Laws 83
6.15Post-Closing Covenants83
VII.NEGATIVE COVENANTS83
7.1Indebtedness 84
7.2Liens 84
7.3Affiliate Transactions 84
7.4Loans and Investments 85
7.5Dividends and Related Distributions 85
7.6Liquidations, Mergers, Consolidations, Acquisitions 85
7.7Dispositions of Assets or Subsidiaries 86
7.8Use of Proceeds 86
7.9Subsidiaries, Partnerships and Joint Ventures 87
7.10Continuation of or Change in Business 87
7.11Fiscal Year 87
7.12Issuance of Equity Interests 87
7.13Changes in Organizational Documents 87
7.14Negative Pledges 87
7.15Anti-Terrorism Laws; Anti-Corruption 88
7.16Material Agreements 88
7.17Rail Car Leases 88
7.18Independence of Covenants 88
VIII.FINANCIAL COVENANTS88
8.1Minimum Working Capital 88
8.2Minimum Net Worth 88
IX.EVENTS OF DEFAULT89
9.1Events of Default 89
9.2Consequences of Event of Default92
X.THE ADMINISTRATIVE AGENT95
10.1Appointment and Authority 95
10.2Rights as a Lender 95
10.3No Fiduciary Duty 95
10.4Exculpation96
10.5Reliance by the Administrative Agent 96
10.6Delegation of Duties 96
10.7Filing Proofs of Claim 97
10.8Resignation of the Administrative Agent97
10.9Resignation of Issuing Lender 98
10.10Non-Reliance on the Administrative Agent and Other Lenders 99
10.11No Other Duties, etc 99
10.12Collateral and Guaranty Matters99
10.13Compliance with Flood Laws 100
10.14No Reliance on the Administrative Agent’s Customer Identification
Program 100
10.15Secured Hedging Obligations; Secured Bank Product Obligations100
10.16Rate Disclaimer. 101
XI.MISCELLANEOUS101
11.1Modifications, Amendments or Waivers 101
11.2No Implied Waivers; Cumulative Remedies 103
11.3Expenses; Indemnity; Damage Waiver103
11.4Holidays 105
11.5Notices; Effectiveness; Electronic Communication105
11.6Severability 106
11.7Duration; Survival 106
11.8Successors and Assigns107
11.9Confidentiality 111
11.10Counterparts; Integration; Effectiveness112
11.11CHOICE OF LAW; SUBMISSION TO JURISDICTION; WAIVER OF
VENUE; SERVICE OF PROCESS; WAIVER OF JURY TRIAL. 112
11.12USA Patriot Act Notice 113
11.13Payments Set Aside 114
11.14Secured Bank Products and Secured Hedge Agreements 114
11.15Interest Rate Limitation 114
11.16Acknowledgment and Consent to Bail-In of EEA Financial Institutions 114
11.17Waiver of Borrower Rights Under Farm Credit Law 115
11.18Recovery of Erroneous Payments 115
XII.GUARANTY116
12.1Guaranty 116
12.2Payment 116
12.3Absolute Rights and Obligations 116
12.4Currency and Funds of Payment 118
12.5Subordination 118
12.6Enforcement 118
12.7Set-Off and Waiver 118
12.8Waiver of Notice; Subrogation118
12.9Reliance 119
12.10Keepwell 120
12.11Joinder 120
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
SCHEDULE 5.1 - Qualifications To Do Business
SCHEDULE 5.6 - Subsidiaries
SCHEDULE 5.9 - Litigation
SCHEDULE 5.14 - Licenses
SCHEDULE 5.18 - Environmental Disclosures SCHEDULE 5.22 - Agricultural Licenses;Disclosures SCHEDULE 7.4 - Permitted Investments
SCHEDULE 11.5 - Addresses for Notices
SCHEDULE 11.8 - Voting Participants
EXHIBITS
EXHIBIT A - Assignment andAssumption EXHIBIT B - Compliance Certificate
EXHIBIT C - Environmental Indemnity
EXHIBIT D - Loan Request
EXHIBIT E-1 - Revolving Term Note
EXHIBIT E-2 - Term Note
EXHIBIT F - Secured Party Designation Notice
EXHIBIT G - U.S. Tax Compliance Forms
EXHIBIT H - Conversion or Continuation Notice
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of October 1, 2019 and is made by and among THE ANDERSONS MARATHON HOLDINGS LLC, a Delaware limited liability company (the “Borrower”), the Guarantors (as hereinafter defined) from time to time party hereto, the Lenders (as hereinafter defined) from time to time party hereto, and COBANK, ACB, a federally chartered instrumentality of the United States (“CoBank”), in its capacity as Administrative Agent (as hereinafter defined).
The Borrower has requested that the Lenders extend certain credit facilities to the Borrower, and the Lenders are willing to extend the requested credit facilities to the Borrower on the terms and subject to the conditions set forth in this Agreement.
In consideration of their mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the parties hereto covenant and agree as follows:
I.CERTAIN DEFINITIONS
1.1Certain Definitions. In addition to words and terms defined elsewhere in this Agreement, the following words and terms shall have the following meanings, respectively, unless the context hereof clearly requires otherwise:
“2007 Bond Issuer” means the State of Ohio Air Quality Development Authority, a body politic and corporate organized under the laws of the State of Ohio.
“2007 Bond Issuer Loan Agreement” means the Loan Agreement dated as of September 1, 2007 between the 2007 Bond Issuer and the Borrower in respect of obligations arising under the 2007 IRBs.
“2007 Indenture of Trust” means that certain Indenture of Trust dated as of September 1, 2007 made by and between the 2007 Bond Issuer and Wells Fargo Bank, National Association, as trustee.
“2007 IRBs” means those bonds in the maximum face amount of $49,500,000 issued by the 2007 Bond Issuer pursuant to the 2007 Indenture of Trust.
“ABR Loan” means any Loan that bears interest at a rate determined by reference to the Alternate Base Rate.
“ABR Rate Option” means, as of any date of determination, a rate per annum equal to the Alternate Base Rate in effect as of such date plus the Applicable Margin for ABR Loans as of such date.
“Account” has the meaning set forth in the UCC.
“Acquisition” means the acquisition by a Loan Party, whether in a single transaction or series of related transactions by acquisition, merger or otherwise, of (a) all or substantially all of the assets or all or a majority of the outstanding Equity Interests entitled to vote in an election of members of the Governing Board of a Person; or (b) any division, line of business or other business unit of a Person (such Person or such division, line of business or other business unit of such Person being referred to herein as the “Target”).
“Administrative Agent” means CoBank, in its capacity as administrative and collateral agent under the Loan Documents.
“Administrative Questionnaire” means an administrative questionnaire in a form supplied by the Administrative Agent.
“Advance” means a loan of funds by a Lender to the Borrower under a Facility.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with the Person specified.
“Aggregate Revolving Term Commitment Amount” means $130,000,000, constituting the sum of the Revolving Term Commitments of the Revolving Term Lenders as of the Closing Date, subject to adjustment in accordance with Sections 2.2 and 2.11. As of the Fourth Amendment Effective Date, the Aggregate Revolving Term Commitment Amount is $80,000,000.
“Aggregate Term Commitment Amount” means $70,000,000, constituting the sum of the Term Commitments of the Term Lenders as of the Closing Date, subject to adjustment in accordance with Sections 2.1(a) and 2.1(d). As of the Fourth Amendment Effective Date, the Aggregate Term Commitment Amount is $0.
“Agreement” means this Credit Agreement and all exhibits, schedules, amendments and supplements hereto and modifications hereof, as amended, restated, supplemented or otherwise modified from time to time.
“Agricultural Bond” means each bond required to be posted by a Loan Party pursuant to any Agricultural Lien Statute, which bond is (a) necessary to obtain or retain any Agricultural License of such Loan Party or (b) otherwise required for such Loan Party to conduct its business.
“Agricultural License” means each license, permit or other approval held (or required to be held) by a Loan Party pursuant to any Agricultural Lien Statutes applicable to such Loan Party.
“Agricultural Lien Statutes” means, collectively, PACA, PASA, the Food Security Act and all other Laws that could create or give rise to any Lien, trust, charge, encumbrance or claim, including without limitation any “agricultural lien” (as defined in the UCC), in or against (a) any portion of the “farm products” (as defined in the UCC) or any other agricultural products purchased, stored or otherwise handled by any Loan Party, by any Person from whom any Loan Party purchases goods or by any other Person from whom such first Person purchases or otherwise receives goods in the ordinary course of business, or (b) any products, proceeds or derivatives of any such farm product or other agricultural product (including, without limitation, any accounts receivable arising from the sale of any such farm product, other agricultural product or any products, proceeds or derivatives thereof).
“Albion, Michigan Property” means all real property located in Calhoun County, Michigan in which the Borrower holds a fee or leasehold interest.
“Alternate Base Rate” means, for any day, a rate per annum equal to the higher of (a) the Prime Rate in effect on such day, and (b) the Federal Funds Effective Rate plus one half of one percent (0.50%) per annum; provided that, in no event shall the Alternate Base Rate be less than the Floor. Any change in the Alternate Base Rate due to a change in the Prime Rate or Federal Funds Effective Rate shall be effective
from and including the effective date of such change in the Prime Rate or Federal Funds Effective Rate, respectively, and without necessity of notice being provided to the Borrower or any other Person.
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to any Loan Party or any Subsidiary from time to time concerning or relating to bribery or corruption, including, without limitation, the United States Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder.
“Anti-Terrorism Laws” means any Laws relating to terrorism, “know your customer” or money laundering, including Executive Order No. 13224, the USA Patriot Act, the Laws comprising or implementing the Bank Secrecy Act, and the Laws administered by the United States Treasury Department’s Office of Foreign Asset Control (as any of the foregoing Laws may from time to time be amended, renewed, extended, or replaced).
“Applicable Food and Feed Safety Law” means each applicable Law with respect to the safety of food and feed products, including without limitation the FDA Food Safety Modernization Act, Pub. L. No. 111-353, 124 Stat. 3885 (2011) and corresponding rules and regulations; each as amended from time to time.
“Applicable Margin” means, as applicable:
(a)the percentage spread to be added to the Daily Simple SOFR Rate for Daily Simple SOFR Rate Loans under the applicable Facility, in each case as set forth in the Pricing Grid based on the then-current Consolidated EBITDA;
(b)the percentage spread to be added to the Alternate Base Rate for ABR Loans under the applicable Facility, in each case as set forth in the Pricing Grid based on the then-current Consolidated EBITDA; or
(c)the percentage spread to be added to the Term SOFR Rate for Term SOFR Rate Loans under the applicable Facility, in each case as set forth in the Pricing Grid based on the then-current Consolidated EBITDA.
“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
“Assignment and Assumption” means an assignment and assumption agreement entered into by a Lender and an assignee permitted under Section 11.8, and accepted by the Administrative Agent, in substantially the form of Exhibit A or any other form approved by the Administrative Agent.
“Authorized Officer” means (a) with respect to the Borrower, the Chief Executive Officer, Chief Financial Officer, President, Vice President, Treasurer, Assistant Treasurer, Secretary or General Counsel of The Andersons, Inc. and (b) with respect to any other Loan Party, the Chief Executive Officer, Chief Financial Officer, Treasurer, Assistant Treasurer or General Counsel of such Loan Party, or in each case, such other individuals, designated by written notice to the Administrative Agent from the Borrower, authorized to execute notices, reports and other documents on behalf of the Loan Parties required hereunder. The Borrower may amend such list of individuals from time to time by giving written notice of such amendment to the Administrative Agent.
“Available Tenor” means, as of any date of determination and with respect to the applicable then- current Benchmark, as applicable, (a) if the applicable then-current Benchmark is a term rate, any tenor for
such Benchmark that is or may be used for determining the length of an Interest Period or (b) otherwise, any payment period for interest calculated with reference to such Benchmark, as applicable, pursuant to this Agreement as of such date.
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” means (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation, rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
“Benchmark” means, initially, the Daily Simple SOFR Rate and the Term SOFR Rate, as applicable; provided that if a Benchmark Transition Event has occurred with respect to any initial Benchmark or any then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement for such initial or then-current Benchmark to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 3.8(a). Any reference to a “Benchmark” shall include, as applicable, the published component used in the calculation thereof.
“Benchmark Replacement” means, for any Available Tenor:
(a)for the Term SOFR Rate, the first alternative set forth below that can be determined by the Administrative Agent:
(i)the sum of (a) the Daily Simple SOFR Rate and (b) an adjustment (which may be a positive or negative value or zero), in each case, that has been selected by the Administrative Agent and the Borrower as the replacement for such Available Tenor of such Benchmark giving due consideration to any evolving or then-prevailing market convention, including any applicable recommendations made by the Relevant Governmental Body, for U.S. dollar-denominated syndicated credit facilities at such time, or
(ii)the sum of (a) the alternate benchmark rate and (b) an adjustment (which may be a positive or negative value or zero), in each case, that has been selected by the Administrative Agent and the Borrower as the replacement for such Available Tenor of such Benchmark giving due consideration to any evolving or then-prevailing market convention, including any applicable recommendations made by the Relevant Governmental Body, for U.S. dollar-denominated syndicated credit facilities at such time; and
(b)for all other Benchmarks, the sum of (i) the alternate benchmark rate and (ii) an adjustment (which may be a positive or negative value or zero), in each case, that has been selected by the Administrative Agent and the Borrower as the replacement for such Available Tenor of such Benchmark giving due consideration to any evolving or then-prevailing market convention, including any applicable recommendations made by the Relevant Governmental Body, for U.S. dollar-denominated syndicated credit facilities at such time;
provided that, if the Benchmark Replacement as determined pursuant to clause (a) or (b) above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents; provided, further, that, if the Benchmark Replacement is calculated using the Daily Simple SOFR Rate, all interest payments will be payable on a monthly basis.
“Benchmark Replacement Conforming Changes” means, with respect to either the use or administration of any initial Benchmark or any adjusted initial Benchmark or the use, administration, adoption or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Alternate Base Rate,” the definition of “Business Day,” the definition of “U.S. Government Securities Business Day,” the definition of “Interest Period” or any similar or analogous definition (or the addition of a concept of “interest period”), timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of Section 3.5 and other technical, administrative or operational matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of any such rate or to permit the use and administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of any such rate exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“Benchmark Transition Event” means, with respect to any then-current Benchmark, the occurrence of a public statement or publication of information by or on behalf of the administrator of the then-current Benchmark, the regulatory supervisor for the administrator of such Benchmark, the Board, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark, a resolution authority with jurisdiction over the administrator for such Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark, announcing or stating that (a) such administrator has ceased or will cease on a specified date to provide all Available Tenors of such Benchmark, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark or (b) all Available Tenors of such Benchmark are or will not be representative of the underlying market and economic reality that such Benchmark is intended to measure and that representativeness will not be restored.
“Beneficial Ownership Certification” has the meaning specified in Section 11.12.
“Board” means the Board of Governors of the Federal Reserve System of the United States of America.
“Borrower” has the meaning specified in the Preamble. “Borrower Rights” has the meaning specified in Section 11.17.
“Borrowing” means a borrowing by the Borrower under a Facility, consisting of the aggregate of all Advances made by the Lenders to the Borrower under such Facility on a Business Day.
“Borrowing Date” means, with respect to any Loan, the date for the making thereof or the renewal or conversion thereof at or to the same or a different Interest Rate Option, which shall be a Business Day.
“Business Day” means any day that is not a Saturday, Sunday or other day that is a legal holiday under the laws of the State of New York or Colorado or is a day on which banking institutions in such state are authorized or required by Law to close; provided that, when used in connection with a Term SOFR Rate Loan, the term “Business Day” shall also exclude any day that is not a U.S. Government Securities Business Day.
“Capital Lease” means, with respect to any Person, each lease that has been or is required to be, in accordance with GAAP, recorded as a capital or finance lease on the balance sheet of such Person.
“Cash Collateralize” means (a) with respect to the Obligations or the Guaranteed Liabilities, to deposit in a deposit account subject to the Administrative Agent’s control (as defined in the UCC) or to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the Issuing Lender or Lender, as collateral for Letter of Credit Obligations, Fronting Exposure or obligations of Lenders to fund participations in respect of Letter of Credit Obligations, cash or deposit account balances or, if the Administrative Agent and the Issuing Lender shall agree in their sole discretion, other credit support, in each case pursuant to documentation in form and substance satisfactory to the Administrative Agent and each applicable Issuing Lender, and (b) with respect to Other Liabilities, to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the Secured Party that is the provider of a Secured Bank Product or Secured Hedge, as the case may be, as collateral for the Other Liabilities, cash or deposit account balances, or, if the Administrative Agent and such Secured Party shall agree in their respective sole discretion, other credit support, in each case pursuant to documentation in form and substance satisfactory to the Administrative Agent and each applicable Secured Party. “Cash Collateral” shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.
“Cash Equivalents” means:
(a)direct obligations of the United States of America or any agency or instrumentality thereof or obligations backed by the full faith and credit of the United States of America maturing in twelve months or less from the date of acquisition;
(b)commercial paper issued by a U.S. Person maturing in 180 days or less rated not lower than A-1 or A-2 by Standard & Poor’s or P-1 or P-2 by Moody’s on the date of acquisition;
(c)demand deposits, time deposits or certificates of deposit maturing within one year in commercial banks that are organized under the laws of the United States or any state thereof or is a foreign bank or branch or agency thereof acceptable to the Administrative Agent and, in any case, have combined capital and surplus of at least an amount equal to $500,000,000; and
(d)money market or mutual funds whose investments are limited to those types of investments described in clauses (a) – (c) above.
“Casualty Event” means, with respect to any property of any Person, any loss of or damage to, or any condemnation or other taking of, such property for which such Person or any of its Subsidiaries receives insurance proceeds or proceeds of a condemnation award or other compensation.
“Change in Law” means the occurrence, after the date of this Agreement, of any of the following:
(a) the adoption or taking effect of any Law, (b) any change in any Law or in the administration, interpretation, implementation or application thereof by any Official Body or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of Law) by any Official Body;
provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, regulations, guidelines, interpretations or directives thereunder or issued in connection therewith (whether or not having the force of Law) and (y) all requests, rules, regulations, guidelines, interpretations or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities (whether or not having the force of Law), in each case pursuant to Basel III, shall in each case be deemed to be a Change in Law regardless of the date enacted, adopted, issued, promulgated or implemented.
“Change of Control” means any event, circumstance or occurrence that results in: (a) The Andersons Ethanol LLC failing to own at least 50.1% of the issued and outstanding Equity Interests of the Borrower, (b) The Andersons, Inc. failing to own, directly or indirectly, 100% of the issued and outstanding Equity Interests of The Andersons Ethanol LLC, (c) Marathon Renewable Fuels Corp. failing to own at least 49.9% of the Equity Interests of the Borrower, unless any reduction of ownership of such Equity Interests is solely as a result of The Andersons Ethanol LLC increasing its Equity Interests in the Borrower by the same amount, (d) Marathon Petroleum Corporation failing to own, directly or indirectly, 100% of the issued and outstanding Equity Interests of Marathon Renewable Fuels Corp., (e) the Borrower failing to own, directly or indirectly through another wholly owned Subsidiary, 100% of the issued and outstanding Equity Interests of each other Loan Party; or (f) a change in the composition of the Governing Board of the Borrower such that continuing directors cease to constitute 50% or more of the Borrower’s Governing Board. As used in this definition, “continuing directors” means, as of any date, (i) those Directors of the Borrower who assumed office prior to such date, and (ii) those Directors of the Borrower who assumed office after such date and whose appointment or nomination for election by the Borrower’s members was approved by the Governing Board of the Borrower in accordance with the Borrower’s Organizational Documents.
“Charges” has the meaning specified in Section 11.15.
“Class” means, when used in reference to any Loan, whether such Loan is a Revolving Term Advance or Term Advance and, when used in reference to any Commitment, whether such Commitment is a Revolving Term Commitment or a Term Commitment.
“Closing Date” means October 1, 2019.
“Closing Date Letters of Credit” means, collectively, (a) the Letter of Credit No. 00652494 in the face amount of $50,650,028.00 issued by CoBank for the account of the Borrower for the benefit of Wells Fargo Bank, N.A., and (b) the Letter of Credit No. 00652495 in the face amount of $675,000.00 issued by CoBank for the account of the Borrower for the benefit of Vector Pipeline L.P.
“CoBank” has the meaning specified in the Preamble. “Code” means the Internal Revenue Code of 1986.
“Collateral” means the collateral subject to any of the Collateral Documents or any other real or personal property of the Loan Parties, in each case pledged to or for the benefit of the Secured Parties as security for any of the Secured Obligations.
“Collateral Documents” means each Security Agreement, each Mortgage, and each and every additional document pursuant to which the Borrower or any other Loan Party has granted a Lien to or for the benefit of the Secured Parties to secure all or a portion of the Secured Obligations.
“Commitment” means, with respect to any Lender, such Lender’s Revolving Term Commitment or Term Commitment, as the context requires.
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
“Compliance Certificate” means a certificate of the Borrower, signed by an Authorized Officer of the Borrower, substantially in the form of Exhibit B hereto.
“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“Consolidated” means, when used with reference to financial statements or financial statement items of any Person, such statements or items on a consolidated basis in accordance with applicable principles of consolidation under GAAP.
“Consolidated EBITDA” means, as of any date: (a) net income, plus (b) to the extent deducted in determining such net income, the sum of (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization, and (iv) non-operating, non-cash and non-recurring costs and expenses, minus (c) to the extent included in determining such net income, non-operating, non-cash and non-recurring income or gain during such period; in each case of or by the Consolidated Group for the period of 12 consecutive months ending on such date.
“Consolidated Group” means the Borrower and its Subsidiaries, including but not limited to each Guarantor.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.
“Conversion or Continuation Notice” has the meaning specified in Section 2.4.
“Credit Extension” means the making of any Advance, the conversion or continuation of any Loan, or the issuing, extending, amending, renewing or increasing of any Letter of Credit.
“Daily Simple SOFR Rate” means, for any day (a “Daily Simple SOFR Rate Day”), a rate per annum equal to the greater of (a) SOFR for the day (such day, a “Daily Simple SOFR Determination Date”) that is five U.S. Government Securities Business Days prior to (i) if such Daily Simple SOFR Rate Day is a U.S. Government Securities Business Day, such Daily Simple SOFR Rate Day or (ii) if such Daily Simple SOFR Rate Day is not a U.S. Government Securities Business Day, the U.S. Government Securities Business Day immediately preceding such Daily Simple SOFR Rate Day, in each case, as such SOFR is published by the SOFR Administrator on the SOFR Administrator’s Website, and (b) the Floor. If, by 3:00
p.m. on the second U.S. Government Securities Business Day immediately following any Daily Simple SOFR Determination Date, SOFR in respect of such Daily Simple SOFR Determination Date has not been published on the SOFR Administrator’s Website and a Benchmark Transition Event with respect to the Daily Simple SOFR Rate has not occurred, then the SOFR for such Daily Simple SOFR Determination Date will be the SOFR as published in respect of the first preceding U.S. Government Securities Business Day for which such SOFR was published on the SOFR Administrator’s Website; provided that any SOFR determined pursuant to this sentence shall be utilized for purposes of the calculation of the Daily Simple SOFR Rate for no more than three consecutive Daily Simple SOFR Rate Days. Any change in the Daily
Simple SOFR Rate due to a change in SOFR shall be effective from and including the effective date of such change in SOFR without notice to the Borrower or any other Person.
“Daily Simple SOFR Rate Loan” means a Loan bearing interest determined in accordance with the Daily Simple SOFR Rate Option. A Daily Simple SOFR Rate Loan is a Loan not subject to an Interest Period.
“Daily Simple SOFR Rate Option” means the option of the Borrower to have Loans bear interest at the rate and under the terms set forth in Section 2.3(a)(i).
“Debt Incurrence” means the incurrence by the Borrower or any of its Subsidiaries on or after the Closing Date of any Indebtedness other than the Secured Obligations.
“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect.
“Default” means any event or condition that with notice or passage of time, or both, would constitute an Event of Default.
“Default Rate” means, as of any date of determination, the following: (a) for each Loan, the Interest Rate Option then in effect, plus an additional margin of 2.0% per annum; (b) for Letter of Credit Fees, the Letter of Credit Fee Rate as of such date plus an additional margin of 2.0% per annum; (c) for Unused Commitment Fees, the Unused Commitment Fee Rate as of such date plus an additional margin of 2.0% per annum; and (d) for all other Obligations, the rate determined in accordance with the ABR Rate Option as of such date plus an additional margin of 2.0% per annum.
“Defaulting Lender” means, subject to Section 2.14(b), any Lender that (a) has failed to (i) fund all or any portion of its Loans within two Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Administrative Agent, the Issuing Lender or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit) within two Business Days of the date when due, (b) has notified the Borrower, the Administrative Agent or the Issuing Lender in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied),
(e)has failed, within three Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has, other than via an Undisclosed Administration, (i) become the subject of a proceeding under any Debtor Relief Law, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity or
(iii) become the subject of a Bail-In Action; provided that a Lender shall not be a Defaulting Lender solely
by virtue of the ownership or acquisition of any Equity Interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and, subject to any cure rights expressly provided above, such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.14) upon delivery of written notice of such determination to the Borrower, the Issuing Lender and each Lender.
“Delaware Code” means the “Delaware Code” as defined in 1 Del. C. § 101, as amended from time to time.
“Director” means, with respect to any Person, (a) if such Person is a corporation, a member of the board of directors of such Person, (b) if such Person is a limited liability company, a governor, manager or managing member of such Person, (c) if such Person is a partnership, a partner of such Person, and (d) if such Person is a limited partnership, a general partner of such Person.
“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition of any property or asset by any Person (including any sale and leaseback transaction or any “division” under the Delaware Code or otherwise).
“Dollar,” “Dollars,” “U.S. Dollars” and the symbol “$” means lawful money of the United States of America.
“Drawing Date” has the meaning specified in Section 2.8(c)(i).
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Eligible Assignee” means any Person that meets the requirements to be an assignee under Sections 11.8(b)(iii), 11.8(b)(v) and 11.8(b)(vi) (subject to such consents, if any, as may be required under Section 11.8(b)(iii)).
“Environmental Indemnity” means the Environmental Indemnity Agreement substantially in the form of Exhibit C hereto.
“Environmental Laws” means any and all applicable current and future federal, state, local and foreign Laws and any consent decrees, concessions, permits, grants, licenses, agreements or other
restrictions of a Governmental Authority or common Law causes of action relating to: (a) protection of the environment or natural resources from, or emissions, discharges, releases or threatened releases of, Hazardous Materials in the environment including ambient air, surface, water, ground water or land, (b) the generation, handling, use, labeling, disposal, transportation, reclamation and remediation of Hazardous Materials; (c) human health as affected by Hazardous Materials; (d) the protection of endangered or threatened species; and (e) the protection of environmentally sensitive areas.
“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any other Loan Party directly or indirectly resulting from or based upon (a) violation of any Environmental Law; (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials; (c) exposure to any Hazardous Materials; (d) the release or threatened release of any Hazardous Materials into the environment; or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
“Equity Interests” means, with respect to any Person, (a) any capital stock, membership interest, partnership interest or other equity interest of (or other ownership or profit interests in) such Person, (b) any warrant, option or other right for the purchase or acquisition from such Person of any capital stock or other interest of the type described in clause (a), (c) any security convertible into or exchangeable for any capital stock or other interest of the type described in clause (a), (d) any warrant, right or option for the purchase or acquisition from such Person of any capital stock or other interest of the type described in clause (a), and
(e) any other ownership or profit interest in such Person (including partnership, member or trust interests therein), in the case of each of clauses (a) through (e), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.
“Equity Issuance” means any issuance or sale by the Borrower or any of its Subsidiaries of any Equity Interests at any time after the Closing Date.
“ERISA” means the Employee Retirement Income Security Act of 1974, as the same may be amended or supplemented from time to time, and the rules and regulations thereunder.
“ERISA Affiliate” means, at any time, any trade or business (whether or not incorporated) that, together with any Loan Party, is treated as a single employer under Section 414 (b) or (c) of the Code or Section 4001(b)(1) of ERISA or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.
“ERISA Event” means (a) a reportable event (under Section 4043 of ERISA and regulations thereunder) with respect to a Pension Plan (other than an event for which the 30-day notice period is waived); (b) the withdrawal by a Loan Party or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA;
(c) a complete or partial withdrawal by a Loan Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in endangered or critical status (within the meaning of Section 432 of the Code or Section 305 of ERISA); (d) the filing of a notice of intent to terminate a Pension Plan, the treatment of an amendment to a Pension Plan or a Multiemployer Plan as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition that would reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Loan Party or any ERISA Affiliate; (g) the determination that any Pension Plan is considered an at-risk plan or a plan in
endangered or critical status within the meaning of Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of ERISA; (h) the adoption by any Loan Party or ERISA Affiliate of a new Pension Plan; or
(i)the entering into an obligation to contribute to any Multiemployer Plan by any Loan Party or ERISA Affiliate (other than a Multiemployer Plan listed in Schedule 5.17).
“Erroneous Payment” has the meaning specified in Section 11.18.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
“Event of Default” has the meaning specified in Section 9.1.
“Excluded Swap Obligation” means, with respect to any Loan Party providing a Guaranty or granting a security interest to secure, any Swap Obligation if, and to the extent that, all or a portion of the Guaranty by such Loan Party of, or the grant by such Loan Party of a security interest to secure, such Swap Obligation (or any Guaranty thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Loan Party’s failure for any reason not to constitute an “eligible contract participant” as defined in the Commodity Exchange Act (determined after giving effect to Section 12.10 and any other “keepwell, support or other agreements” for the benefit of such Loan Party) at the time the Guaranty of, or the grant of such security interest by, such Loan Party becomes effective with respect to such related Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guaranty or grant of security interest is or becomes illegal.
“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in such Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 3.6) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 3.2, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section
3.2 and (d) any U.S. federal withholding Taxes imposed under FATCA.
“Executive Order No. 13224” means the Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.
“Existing Debt Facilities” means (a) the Master Loan Agreement dated as of February 19, 2013 between The Andersons Albion Ethanol LLC, as borrower, and Farm Credit Services of America, FLCA, as lender, (b) the Master Loan Agreement dated as of May 9, 2013 between The Andersons Clymers Ethanol LLC, as borrower, and Farm Credit Services of America, FLCA, as lender, (c) the Amended and Restated Credit Agreement dated as of April 19, 2013 among The Andersons Marathon Ethanol LLC, as borrower, the lenders party thereto, and CoBank, as administrative agent, and (d) the Loan Agreement dated as of December 1, 2006 between the City of Logansport, Indiana and The Andersons Clymers Ethanol, LLC and
all other agreements delivered in connection therewith; each as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof.
“Facility” means the Revolving Term Facility, the Term Facility or the Letter of Credit Facility, as the context requires.
“Farm Credit Equities” means any of the Borrower’s stock, patronage refunds issued in the form of stock or otherwise constituting allocated units, patronage surplus (including any such surplus accrued by the applicable Farm Credit Lender for the account of the Borrower) and other equities in any Farm Credit Lender acquired in connection with, or because of the existence of, the Borrower’s patronage loan from such Farm Credit Lender (or its Affiliate), and the proceeds of any of the foregoing.
“Farm Credit Law” has the meaning specified in Section 11.17.
“Farm Credit Lender” means a federally-chartered Farm Credit System lending institution organized under the Farm Credit Act of 1971, as the same may be amended or supplemented from time to time. When used in this Agreement in reference to the Farm Credit Equities, “Farm Credit Lender” shall also include the Affiliate of such Farm Credit Lender in which such Farm Credit Equities are purchased or acquired, as applicable.
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code, and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Code.
“Federal Funds Effective Rate” means, for any day, the greater of (a) 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, as published by the Federal Reserve Bank of New York on such date, 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 and (b) 0%.
“Fee Letter” means each separate agreement entered into from time to time by and between the Borrower and the Administrative Agent setting forth certain fees to be paid by the Borrower to the Administrative Agent for the Administrative Agent’s own account or for the account of the Lenders, as more fully set forth therein.
“Financial Covenants” means the covenants contained in Article VIII. “First Amendment Effective Date” means December 13, 2019.
“Flood Laws” means, collectively, (a) the National Flood Insurance Act of 1968, (b) the Flood Disaster Protection Act of 1973, (c) the National Flood Insurance Reform Act of 1994 and (d) the Biggert- Waters Flood Insurance Act of 2012, in each case, as now or hereinafter in effect, and any successor statute thereto, and all such other applicable Laws related thereto.
“Floor” means a rate of interest equal to 0.00%.
“Food Security Act” means 7 U.S.C. Section 1631, and any successor statute thereto, together with each Law establishing a “central filing system” (as defined in 7 U.S.C. Section 1631) that has been certified by the Secretary of the United States Department of Agriculture.
“Foreign Lender” means (a) if the Borrower is a U.S. Person, a Lender that is not a U.S. Person, and (b) if the Borrower is not a U.S. Person, a Lender that is resident or organized under the Laws of a jurisdiction other than that in which the Borrower is resident for tax purposes. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.
“Fourth Amendment Effective Date” means December 28, 2022.
“Fronting Exposure” means, at any time there is a Defaulting Lender, such Defaulting Lender’s Pro Rata Share of the outstanding Letter of Credit Obligations with respect to Letters of Credit issued by the Issuing Lender other than Letter of Credit Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof.
“Fund” means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course of its activities.
“GAAP” means generally accepted accounting principles as are in effect from time to time, subject to the provisions of Section 1.3, and applied on a consistent basis both as to classification of items and amounts.
“Governing Board” means, with respect to any corporation, limited liability company or similar Person, the board of directors, board of governors or other body or entity that sets overall institutional direction for such Person.
“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).
“Guaranteed Liabilities” means (a) the prompt Payment In Full, when due or declared due and at all such times, of all Obligations and all other amounts pursuant to the terms of this Agreement, the Notes, and all other Loan Documents heretofore, now or at any time or times hereafter owing, arising, due or payable from the Borrower or any other Loan Party to any one or more of the Secured Parties, including principal, interest, premiums and fees (including all reasonable fees and expenses of counsel); (b) the prompt, full and faithful performance, observance and discharge of each and every agreement, undertaking, covenant and provision to be performed, observed or discharged by the Borrower and each other Loan Party under this Agreement, the Notes and all other Loan Documents to which it is a party; and (c) the prompt Payment In Full by the Borrower and each other Loan Party, when due or declared due and at all such times, of all Other Liabilities heretofore, now or at any time or times hereafter owing, arising, due or payable from the Borrower or any other Loan Party to any one or more of the Secured Parties; provided that Guaranteed Liabilities of a Loan Party shall exclude any Excluded Swap Obligations with respect to such Loan Party.
“Guarantor” means each of the parties to this Agreement that is designated as a guarantor on the signature page hereof and each other Person that joins this Agreement as a Guarantor after the date hereof.
“Guarantors’ Obligations” means the obligations of the Guarantors to the Secured Parties under Article XII.
“Guaranty” or “Guarantee” means, with respect to any Person, without duplication, any obligation, contingent or otherwise, of such Person pursuant to which such Person has directly or indirectly guaranteed or had the economic effect of guaranteeing any Indebtedness or other obligation or liability of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of any such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or liability (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement condition or otherwise), (b) to purchase or lease property or services for the purpose of assuring another Person’s payment or performance of any Indebtedness or other obligations or liabilities, (c) to maintain the working capital of such Person to permit such Person to pay such Indebtedness or other obligations or liabilities or (d) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation or liability of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, that the term Guaranty/Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. Unless otherwise specified, the amount of any Guaranty shall be deemed to be the lesser of the principal amount of the Indebtedness or other obligations or liabilities guaranteed and still outstanding and the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Guaranty.
“Hazardous Materials” means (a) any explosive or radioactive substances, materials or wastes, and (b) any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under, or that could reasonably be expected to give rise to liability under, any applicable Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls, urea-formaldehyde insulation, gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products.
“Hedge Agreement” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and
(b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement.
“Hedge Bank” means any Person that, at the time it enters into a Hedge Agreement with a Loan Party for an Interest Rate Hedge with respect to interest on the Obligations, is a Lender or an Affiliate of a Lender or the Administrative Agent or an Affiliate of the Administrative Agent.
“Hedge Termination Value” means, in respect of any one or more Hedge Agreements, after taking into account the effect of any legally enforceable netting agreement relating to such Hedge Agreements,
(a) for any date on or after the date such Hedge Agreements have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Hedge Agreements, as determined based upon one or more mid-market or other readily available quotations
provided by any recognized dealer in such Hedge Agreements (which may include a Lender or any Affiliate of a Lender).
“Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:
(a)all obligations of such Person for borrowed money;
(b)all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;
(c)all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments;
(d)all net obligations of such Person under each Hedge Agreement to which it is a party (and the amount of any net obligation under any Hedge Agreement on any date shall be deemed to be the Hedge Termination Value thereof as of such date);
(e)all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts and accrued expenses, and deferred compensation arrangements, in each case to the extent payable in the ordinary course of business and not yet due and payable);
(f)obligations (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such obligations shall have been assumed by such Person or is limited in recourse;
(g)all obligations of such Person under Capital Leases and all its Synthetic Lease Obligations;
(h)all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person, valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends;
(i)all obligations of such Person to advance funds to, or purchase assets, property or services from, any other Person in order to maintain the financial condition of such Person; and
(j)all Guarantees of such Person in respect of any of the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or Joint Venture in which such Person is a general partner or a joint venturer; provided, that the portion (if any) of any such Indebtedness which exceeds the amount of such Indebtedness as to which there is recourse to such Person shall not be included hereunder as Indebtedness of such Person.
“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Borrower or any other Loan Party under any Loan Document and (b) to the extent not otherwise described in the preceding clause (a), Other Taxes.
“Indemnitee” has the meaning specified in Section 11.3.
“Information” means all information received from the Loan Parties or any of their Subsidiaries relating to the Loan Parties or any of such Subsidiaries or any of their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or the Issuing Lender on a non-confidential basis prior to disclosure by the Loan Parties or any of their Subsidiaries, provided that, in the case of information received from the Loan Parties or any of their Subsidiaries after the date of this Agreement, such information is clearly identified at the time of delivery as confidential.
“Insolvency Proceeding” means, with respect to any Person, (a) a case, action or proceeding with respect to such Person (i) before any court or any other Governmental Authority under any bankruptcy, insolvency, reorganization or other similar Debtor Relief Law now or hereafter in effect, or (ii) for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator (or similar official) of any Loan Party or otherwise relating to the liquidation, dissolution, winding-up or relief of such Person, or (b) any general assignment for the benefit of creditors, composition, marshaling of assets for creditors, or other, similar arrangement in respect of such Person’s creditors generally or any substantial portion of its creditors; undertaken under any Law.
“Intellectual Property” means patents, trademarks, copyrights and any other similar assets. “Interest Payment Date” means (a) with respect to each Term SOFR Rate Loan, the last day of
the Interest Period applicable thereto (and, if such Interest Period is longer than three months, each day that
occurs at intervals of three months after the first day of the applicable Interest Period); (b) with respect to each Quoted Rate Loan, the 20th calendar following the end of each calendar month (as accrued through the end of such month) and the last day of the Quoted Rate Period applicable thereto; (c) with respect to each Daily Simple SOFR Rate Loan and ABR Loan, the 20th calendar day following the end of each calendar month (as accrued through the end of such month); (d) with respect to each Loan, the Maturity Date with respect thereto; (e) with respect to the Unused Commitment Fee, the 20th calendar day following the end of each calendar month (as accrued through the end of such month); and (f) with respect to the Letter of Credit Fee, the 20th calendar day following the end of each calendar quarter (as accrued through the end of such quarter).
“Interest Period” means the period of time selected by the Borrower in connection with (and to apply to) any election permitted hereunder by the Borrower to have Revolving Term Advances or Term Advances bear interest under the Term SOFR Rate Option. Subject to the last sentence of this definition, such period shall be one, three or six months. Such Interest Period shall commence on the effective date of such Term SOFR Rate Loan, which shall be (i) the Borrowing Date if the Borrower is requesting new Loans or (ii) the date of renewal of or conversion to a Term SOFR Rate Loan if the Borrower is renewing or converting an existing Loan. Notwithstanding the second sentence hereof: (a) any Interest Period that would otherwise end on a date that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (b) the Borrower shall not select, convert to or renew an Interest Period for any portion of the Loans that would end after the applicable Maturity Date, and (c) if any Interest Period begins on the last Business Day of a month or on a day of a month for which there is no numerically corresponding day in the month in which such Interest Period is to end, such Interest Period shall be deemed to end on the last Business Day of the final month of such Interest Period.
“Interest Rate Hedge” means a Hedge Agreement entered into by the Loan Parties or their Subsidiaries in order to provide protection to, or minimize the impact upon, the Borrower, the Guarantor and/or their Subsidiaries of increasing floating rates of interest applicable to Indebtedness.
“Interest Rate Option” means any Term SOFR Rate Option, Daily Simple SOFR Rate Option, Quoted Rate Option or ABR Rate Option.
“Investment” means, with respect to any Person, (a) the Equity Interests or other securities held by such Person in another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor Guarantees Indebtedness of such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.
“IRS” means the United States Internal Revenue Service.
“Issuing Lender” means CoBank, in its individual capacity as issuer of Letters of Credit hereunder. “Joint Venture” means a corporation, partnership, limited liability company or other entity in
which any Person other than the Loan Parties and their Subsidiaries holds, directly or indirectly, an equity
interest; provided, however, that neither CoBank nor any other Farm Credit Lender in which the Borrower owns Farm Credit Equities shall be a “Joint Venture” for purposes of the Loan Documents.
“Knowledge” means the actual knowledge of any officer of a Loan Party.
“Landlord Agreement” means any landlord’s waiver or other lien waiver or subordination agreement executed and delivered by a lessor, warehouse operator or other applicable Person with respect to a leased location of any Loan Party to and for the benefit of, and in form and substance acceptable to, the Administrative Agent.
“Law” means any law (including common law and Environmental Laws), constitution, statute, codes, treaty, regulation, rule, ordinance, opinion, release, ruling, order, injunction, writ, decree, bond, judgment, authorization or approval, lien or award by or settlement agreement with any Governmental Authority.
“Lead Arrangers” means CoBank, ACB and Farm Credit Mid-America, PCA.
“Lenders” means each of the Persons from time to time party hereto as a lender and their respective successors and assigns as permitted hereunder, each of which is referred to herein as a Lender.
“Letter of Credit” has the meaning specified in Section 2.8(a) and includes, without limitation, each Closing Date Letter of Credit.
“Letter of Credit Borrowing” has the meaning specified in Section 2.8(c)(iii).
“Letter of Credit Documents” means such applications, reimbursement agreements and other documents as the Issuing Lender may require as a condition to issuance of a Letter of Credit.
“Letter of Credit Expiration Date” means the 30th day prior to the Revolving Term Commitment Termination Date.
“Letter of Credit Facility” means the Letter of Credit facility established pursuant to Section 2.8. “Letter of Credit Fee” has the meaning specified in Section 2.8(b).
“Letter of Credit Fee Rate” means the percentage rate per annum according to the Pricing Grid below the heading “Letter of Credit Fee Rate” based on the then-current Consolidated EBITDA.
“Letter of Credit Obligations” means, as of any date of determination, (a) the aggregate amount available to be drawn under all outstanding Letters of Credit on such date (if any Letter of Credit shall increase in amount automatically in the future, such aggregate amount available to be drawn shall currently give effect to any such future increase) plus (b) the aggregate Reimbursement Obligations and Letter of Credit Borrowings on such date.
“Letter of Credit Request” has the meaning specified in Section 2.8(a).
“Letter of Credit Sublimit” means the lesser of $30,000,000 or the Aggregate Revolving Term Commitment Amount.
“Licenses” means franchises, permits, licenses and other rights, including all governmental approvals, authorizations, consents, licenses and permits, that are necessary or required for the conduct of the businesses conducted by any Loan Party or any of its Subsidiaries.
“Lien” means any mortgage, deed of trust, pledge, hypothecation, collateral assignment, lien (statutory or otherwise), security interest, charge or other encumbrance or security arrangement of any nature whatsoever, whether voluntarily or involuntarily given, including any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security and any filed financing statement or other notice of any of the foregoing (other than any filed financing statement or other notice with respect to a true lease or operating lease) whether or not a lien or other encumbrance is created or exists at the time of the filing.
“Loan” means any Revolving Term Advance or Term Advance, and “Loans” means all of the foregoing, collectively.
“Loan Documents” means this Agreement, each Fee Letter, the Environmental Indemnity, the Collateral Documents, the Notes, the Letter of Credit Documents, the Perfection Certificate, any Subordination Agreements, and any other instruments, certificates or documents delivered in connection herewith or therewith, all as amended, restated, reaffirmed, reconfirmed, replaced, substituted or otherwise modified from time to time.
“Loan Parties” means the Borrower and the Guarantors.
“Loan Request” means a request for any of a Term Advance or a Revolving Term Advance, in each case substantially in the form of Exhibit D hereto.
“Material Adverse Change” means any circumstance or event, or series of circumstances or events, that has or could reasonably be expected to have a material adverse effect upon (i) the business, properties, assets, condition (financial or otherwise), operations or liabilities (actual or contingent) of the Loan Parties, taken as a whole, (ii) the legality, binding effect, validity or enforceability of any material provision of this Agreement or any other Loan Document, (iii) the ability of the Loan Parties, taken as a whole, to duly and punctually pay or perform any of the Secured Obligations, or (iv) the ability of the Administrative Agent or any other Lender to enforce its legal remedies pursuant to this Agreement or any other Loan Document.
“Material Agreement” means any (a) agreement, contract, note, bond, debenture or other instrument evidencing Material Indebtedness, (b) the Specified Lease Agreements, and (c) any other
agreement, contract or other instrument to which any Loan Party is a party or that is binding upon any Loan Party or its property the revocation, termination, breach or violation of which could reasonably be expected to result in a Material Adverse Change.
“Material Indebtedness” means Indebtedness (other than the Obligations) in an aggregate principal amount exceeding $5,000,000.
“Material Real Property” means real property acquired or otherwise obtained after the Closing Date with an aggregate fair market value in excess of $10,000,000.
“Maturity Date” means (a) with respect to the Revolving Term Facility (including the Letter of Credit Facility), September 30, 2027 and (b) with respect to the Term Facility, September 30, 2024.
“Maximum Rate” has the meaning specified in Section 11.15.
“Merger” means the transactions with respect to the merger of the Plant Entities with and into the Borrower, with the Borrower surviving as the surviving entity, as more fully described in the Transaction Summary attached to the Perfection Certificate of even date herewith.
“Merger Agreement” means that certain Agreement and Plan of Merger dated as of September 30, 2019, by and among The Andersons, Inc., the Andersons Ethanol LLC, Marathon Renewable Fuels Corporation, the Plant Entities and the Borrower.
“Merger Documents” means the Merger Agreement and all agreements, documents and instruments executed and/or delivered pursuant thereto or in connection therewith.
“Minimum Collateral Amount” means, as of any date of determination, (a) with respect to the Fronting Exposure of the Issuing Lender, an amount equal to 105% of the Fronting Exposure of the Issuing Lender with respect to Letters of Credit issued and outstanding as of such date, (b) with respect to Letter of Credit Obligations, an amount equal to 105% of the Letter of Credit Obligations as of such date, and (c) otherwise, an amount determined by the Administrative Agent and the Issuing Lender in its sole discretion.
“Moody’s” means Moody’s Investors Service, Inc., or any successor or assignee thereof in the business of rating securities and debt.
“Mortgage” means each mortgage or deed of trust (as applicable) executed and delivered by a Loan Party to the Administrative Agent for the benefit of the Lenders with respect to the real estate owned or leased by such Loan Party as security for any of the Secured Obligations.
“Multiemployer Plan” means any employee benefit plan, which is covered by Title IV of ERISA, that is a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA and to which any Loan Party or any ERISA Affiliate is then making or accruing an obligation to make contributions or, within the immediately preceding six plan years of such Multiemployer Plan, made or had an obligation to make contributions or for which it has any liability.
“Net Cash Proceeds” means:
(a)in the case of any Equity Issuance or Debt Incurrence, an amount equal to: (i) the aggregate amount of all cash received by the Borrower or any of its Subsidiaries in respect of such Equity Issuance or Debt Incurrence, as applicable, minus (ii) customary, bona fide, out-of-pocket direct costs incurred by the Borrower and its Subsidiaries in connection such issuance;
(b)with respect to any Casualty Event, an amount equal to: (i) cash payments received by the Borrower or any of its Subsidiaries from such Casualty Event, minus (ii) all customary, bona fide, out-of-pocket direct costs incurred by the Borrower and its Subsidiaries in connection with collecting such cash payments; and
(c)with respect to any Disposition, an amount equal to: (i) cash payments received by the Borrower or any of its Subsidiaries from such Disposition, minus (ii) all income taxes and other taxes assessed by a Governmental Authority as a result of such transaction, minus (iii) all customary, bona fide, out-of-pocket direct transaction costs incurred by the Borrower and its Subsidiaries in connection with such Disposition, minus (iv) amounts required to satisfy Liens in the Disposed property or assets, so long as the Indebtedness and Liens so satisfied were not prohibited by this Agreement.
“Net Worth” means, as of any date, with respect to the Consolidated Group, the sum (without duplication) of (a) total assets, less (b) total liabilities, all as determined in accordance with GAAP.
“Non-Consenting Lender” means any Lender that does not approve any consent, waiver or amendment that (a) requires the approval of all or all affected Lenders in accordance with the terms of Section 11.1 and (b) has been approved by the Required Lenders.
“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting Lender at such
time.
“Notes” means, collectively, the Revolving Term Notes and the Term Notes.
“Obligations” means (a) all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Facility or any Letter of Credit and (b) all costs and expenses incurred in connection with enforcement and collection of the foregoing, including the fees, charges and disbursements of counsel, in each case whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof pursuant to any Insolvency Proceeding naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding; provided that Obligations of a Loan Party shall exclude any Excluded Swap Obligations with respect to such Loan Party.
“Official Body” means (a) any Governmental Authority and (b) any group or body charged with setting financial accounting or regulatory capital rules or standards (including, without limitation, the Financial Accounting Standards Board, the Bank for International Settlements or the Basel Committee on Banking Supervision or any successor or similar authority to any of the foregoing).
“Organizational Documents” means the certificate or articles of incorporation, bylaws, certificate of limited partnership, partnership agreement, certificate of formation, limited liability company agreement, operating agreement or other organizational documents of any Person.
“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“Other Information” has the meaning specified in Section 12.9.
“Other Liabilities” means (a) all obligations arising under any document or agreement relating to or on account of any Secured Bank Product and/or any Secured Hedge and (b) all costs and expenses incurred in connection with enforcement and collection of the foregoing, including the fees, charges and disbursements of counsel, in each case whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding; provided that Other Liabilities of a Loan Party shall exclude any Excluded Swap Obligations with respect to such Loan Party.
“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 3.6).
“Overadvance” has the meaning specified in Section 2.12(a).
“PACA” means, collectively, (a) the Perishable Agricultural Commodities Act, 1930, as amended (7 U.S.C. § 499(e)(c)(2) et. seq.), together with all rules and regulations relating thereto or promulgated thereunder by any Governmental Authority (including 7 C.F.R. § 46.1 et seq.) and (b) every other Law of similar import, in each case as in effect from time to time.
“Participant” has the meaning specified in Section 11.8(d). “Participant Register” has the meaning specified in Section 11.8(d). “Participation Advance” has the meaning specified in Section 2.8(c)(ii).
“PASA” means, collectively, (a) the Packers and Stockyards Act, 1921, as amended (7 U.S.C.
§ 181) et. seq.), together with all rules and regulations relating thereto or promulgated thereunder (including 9 C.F.R. § 200 et seq.), and (b) every other Law of similar import, in each case as in effect from time to time.
“Payment In Full” means (a) with respect to the Obligations, the payment in full in cash of the Loans and other Obligations hereunder, the termination of the Commitments and the expiration or termination of all Letters of Credit or the Cash Collateralization of the Letter of Credit Obligations in an amount not less than the Minimum Collateral Amount, (b) with respect to the Guaranteed Liabilities, the payment in full in cash of the Guaranteed Liabilities and (c) with respect to Other Liabilities, the payment in full in cash of such Other Liabilities or the Cash Collateralization of such Other Liabilities in an amount not less than the Minimum Collateral Amount.
“PBGC” means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor entity performing similar functions.
“Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code, and either (i) is sponsored or maintained by any Loan Party or any ERISA Affiliate for employees of such Loan Party or any ERISA Affiliate, or (ii) to
which any Loan Party or any ERISA Affiliate contributes or has an obligation to contribute or for which it has any liability, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding six plan years.
“Perfection Certificate” means a certificate in form satisfactory to the Administrative Agent signed by an Authorized Officer of the Borrower setting forth certain information with respect to the Loan Parties and their assets.
“Permitted Liens” means:
(a)Liens for taxes, assessments, or similar charges and levies of any Governmental Authority not yet due or which are being contested in good faith by appropriate and lawful proceedings in accordance with the terms of this Agreement;
(b)pledges or deposits made in the ordinary course of business to secure payment of workmen’s compensation, or to participate in any fund in connection with workmen’s compensation, unemployment insurance, old-age pensions or other social security programs, other than any Lien imposed by ERISA;
(c)Liens of mechanics, materialmen, warehousemen, carriers, suppliers, landlords or other like Liens that are incurred in the ordinary course of business and either (i) secure obligations that have not been outstanding past the earliest of (A) the 31st day following notice of such Lien to a Loan Party, (B) the 31st day following Knowledge of such Lien by a Loan Party, or (C) the commencement of foreclosure or similar proceedings with respect to such Lien, or (ii) are being contested in good faith by appropriate and lawful proceedings and for which adequate reserves or other appropriate provisions in accordance with GAAP have been set aside on such Loan Party’s books;
(d)good-faith pledges or deposits made in the ordinary course of business to secure performance of bids, tenders, trade contracts (other than Indebtedness) or leases, not in excess of the aggregate amount due thereunder, or to secure statutory obligations, or surety, appeal, performance or other similar bonds required in the ordinary course of business;
(e)encumbrances consisting of easements, right-of-way or other encumbrances, title defects and restrictions on the use of real property, or laws, ordinances or regulations affecting property, including, without limitation, any zoning or similar laws or rights reserved to or vested in any Governmental Authority to control or regulate the use of any real property, in each case, which do not individually or in the aggregate materially detract from the value of the applicable Loan Party’s interest in the applicable property subject thereto or materially interfere with the operation of the applicable property or ordinary conduct of the business of the applicable Loan Party;
(f)Liens, security interests and mortgages in favor of the Administrative Agent for the benefit of the Secured Parties;
(g)Liens securing Indebtedness permitted under Section 7.1(f)(i), provided, that
(x) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (y) the Indebtedness secured thereby does not exceed the cost or fair market value, whichever is lower, of the property being acquired on the date of acquisition or construction;
(h)Liens arising pursuant to applicable law and rights of set-off of financial institutions and other Persons in the ordinary course of banking, insurance and trading arrangements;
(i)Liens in the form of cash collateral securing Hedge Agreements permitted under Section 7.1(c);
(j)each Farm Credit Lender’s Lien (including the right of setoff) in its Farm Credit Equities and in any cash patronage;
(k)Liens resulting from judgments or orders not constituting an Event of Default under Section 9.1(f);
(l)all matters shown on each survey and on the lenders’ title insurance policies delivered pursuant to Section 4.1(l) as exceptions to the insurance coverage thereunder;
(m)leases which are (i) subordinate to the Collateral Documents or (ii) otherwise permitted hereunder; and
(o) deposits to secure the performance of bids, surety and appeal bonds, performance bonds and other obligations of like nature incurred in the ordinary course of business.
“Permitted Rail Car Lease” means a lease by a Loan Party of hopper and/or tanker rail cars containing a maximum term of 84 months; provided, that (a) the aggregate number of rail cars leased pursuant to all Permitted Rail Car Leases may not exceed 1,500 rail cars at any time, and (b) up to 750 rail cars leased pursuant to Permitted Rail Car Leases may contain a maximum term of 120 months.
“Person” means any natural person, corporation, company, partnership, limited liability company, association, joint-stock company, trust, unincorporated organization, joint venture, Official Body, or any other entity.
“Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA (including a Pension Plan but not including a Multiemployer Plan), maintained by any Loan Party or any ERISA Affiliate or any such plan to which any Loan Party or any ERISA Affiliate is required to contribute on behalf of any of its current or former employees, or for which any Loan Party is reasonably expected to have liability.
“Plan Funding Rules” means the rules of the Code and ERISA regarding minimum required contributions (including any installment payment thereof) to Pension Plans and Multiemployer Plans, as currently set forth in Section 412, 430, 431, 432 and 436 of the Code and Sections 302, 303, 304 and 305 of ERISA.
“Plant Entities” means, collectively, (i) The Andersons Albion Ethanol LLC, an Ohio limited liability company, (ii) The Andersons Clymers Ethanol LLC, an Ohio limited liability company, (iii) The Andersons Denison Ethanol LLC, a Delaware limited liability company, and (iv) The Andersons Marathon Ethanol LLC, a Delaware limited liability company.
“Pricing Grid” means the table and text set forth below:
| Level | Consolidated EBITDA | Unused Commitment Fee Rate | Letter of Credit Fee Rate | Applicable Margin for Daily Simple SOFR Rate Loans and<br><br>Term SOFR Rate Loans | Applicable Margin for ABR Loans |
|---|---|---|---|---|---|
| I | ≥ $125,000,000 | 0.30% | 2.10% | 2.10% | 1.00% |
| II | ≥ $75,000,000 and<br><br>< $125,000,000 | 0.35% | 2.35% | 2.35% | 1.25% |
| III | < $75,000,000 | 0.40% | 2.60% | 2.60% | 1.50% |
For purposes of determining the Applicable Margin, the Unused Commitment Fee Rate and the Letter of Credit Fee Rate:
(a)From the Fourth Amendment Effective Date, until receipt of the Compliance Certificate accompanying the Borrower’s audited financial statements for the measurement period ending December 31, 2022, the Applicable Margin, the Unused Commitment Fee Rate and the Letter of Credit Fee Rate shall be set at Level I.
(b)The Applicable Margin, the Unused Commitment Fee Rate and the Letter of Credit Fee Rate shall be recomputed as of December 31, 2022 and the end of each fiscal year of the Borrower thereafter based on Consolidated EBITDA as of such fiscal year end as reported in the Borrower’s audited financial statements delivered pursuant to Section 6.1(b). Any increase or decrease in the Applicable Margin, the Unused Commitment Fee Rate or the Letter of Credit Fee Rate computed as of a fiscal year end shall be effective no later than 5 Business Days following the date on which the Compliance Certificate evidencing such computation is due to be delivered under Section 6.1(c). If a Compliance Certificate is not delivered when due in accordance with such Section 6.1(c), then the rates in Level III shall apply as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered and shall remain in effect until the date on which such Compliance Certificate is delivered.
(c)If, as a result of any restatement of or other adjustment to the financial statements of the Borrower or for any other reason, the Borrower or the Lenders determine that
(i) Consolidated EBITDA as calculated by the Borrower as of any applicable date was inaccurate and (ii) a proper calculation of Consolidated EBITDA would have resulted in higher pricing for such period, the Borrower shall immediately and retroactively be obligated to pay to the Administrative Agent for the account of the applicable Lenders, promptly on demand by the Administrative Agent (or, after the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under any Debtor Relief Law, automatically and without further action by the Administrative Agent, any Lender or the Issuing Lender), an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period. Neither this clause (c) nor the foregoing clause (b) shall limit the rights of the Administrative Agent, any Lender or the Issuing Lender, as the case may be, under Section 2.7, Section 3.5, Article VIII, or any other provision of any Loan Document, other agreement or applicable Law.
(d)Upon the occurrence of any Event of Default, the rates in Level III shall apply and shall remain in effect until the date on which such Event of Default is cured or waived.
“Prime Rate” means the rate of interest per annum last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Administrative Agent) or any similar release by the Board (as determined by the Administrative Agent). Any change in the Prime Rate shall take effect at the opening of business on the day such change is publicly announced or quoted as being effective without the necessity of notice provided to the Borrower or any other Person.
“Principal Office” means the main banking office of the Administrative Agent in Greenwood Village, Colorado, or such other banking office as may be designated by the Administrative Agent from time to time.
“Prior Security Interest” means a valid and enforceable perfected first-priority security interest and Lien in and to the Collateral, subject only to Permitted Liens.
“Pro Rata Share” means (a) with respect to the Revolving Term Facility as of any date of determination, the proportion that a Revolving Term Lender’s Revolving Term Commitment as of such date bears to the Aggregate Revolving Term Commitment Amount as of such date, provided, that if the Revolving Term Commitments have been terminated or have expired, Pro Rata Share under the Revolving Term Facility shall be determined based upon the Revolving Term Commitments most recently in effect, giving effect to any assignments; and (b) with respect to the Term Facility as of any date of determination, the proportion that the outstanding principal amount of a Term Lender’s Term Advances as of such date bears to the aggregate principal amount of all outstanding Term Advances as of such date.
“Producer” means any producer, packer, processor, manufacturer, dealer, broker, agent, person engaged in farming operations, cooperative whose members consist of any such Persons or other seller of perishable agricultural products or other agricultural goods or farm products, including without limitation potatoes, corn, “Meat Food Products”, “Livestock”, “Livestock Products”, “Poultry”, “Poultry Products” (each as defined in PASA) and “Perishable Agricultural Commodities” (as defined in PACA).
“Protective Advance Commitment Increase” has the meaning specified in Section 2.2(d)(ii). “Protective Advances” has the meaning specified in Section 2.2(d)(i).
“Purchase Money Security Interest” means Liens upon tangible personal property securing loans to any Loan Party or Subsidiary of a Loan Party or deferred payments by such Loan Party or Subsidiary for the purchase of such tangible personal property.
“Qualified ECP Guarantor” means, in respect of any Swap Obligation, each Loan Party that has total assets exceeding $10,000,000 at the time the relevant Guaranty or grant of security interest becomes effective with respect to such Swap Obligation or such other Loan Party as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another Person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
“Quoted Rate” means, for a Quoted Rate Period, the per annum rate quoted by the Administrative Agent in its sole discretion, pursuant to Section 2.4.
“Quoted Rate Loan” means any Loan that bears interest at a rate determined by reference to a Quoted Rate.
“Quoted Rate Option” means the option of the Borrower to have Loans bear interest at the rate and under the terms set forth in Section 2.3(a)(iii).
“Quoted Rate Period” means, relative to any Quoted Rate Loan, the period beginning on (and including) the date on which such Quoted Rate Loan is made, or continued as, or converted into, a Quoted Rate Loan pursuant to Sections 2.1(b), 2.2(b) and 2.4 and shall end on (but exclude) the day that is determined by the Administrative Agent in its sole discretion, pursuant to Section 2.4; provided, however, that (a) the Quoted Rate Period shall begin on a Business Day and shall continue for a period of not less than 365 days; (b) no more than five different Quoted Rate Periods may be outstanding at any one time;
(c) any Quoted Rate Period that would otherwise end on a date that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in the next calendar month, in which case such Quoted Rate Period shall end on the next preceding Business Day; and (d) the Borrower shall not select, convert to or renew a Quoted Rate Period for any portion of the Loans that would end after the applicable Maturity Date.
“Recipient” means (a) the Administrative Agent, (b) any Lender and (c) the Issuing Lender, as applicable.
“Register” has the meaning specified in Section 11.8.
“Regulation D” means Regulation D of the Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.
“Reimbursement Obligation” has the meaning specified in Section 2.8(c)(i). “Related Agreements” has the meaning specified in Section 12.3(a).
“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, Directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.
“Relevant Governmental Body” means the Board or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board or the Federal Reserve Bank of New York, or any successor thereto.
“Required Lenders” means one or more Lenders (including Voting Participants in accordance with Section 11.8) having Total Credit Exposure representing more than 50% of the Total Credit Exposure of all Lenders; provided, however, that (a) with respect to economic changes applicable only to a single Facility, “Required Lenders” shall be calculated with respect to the Lenders (including Voting Participants) only in that Facility, and (b) if any Lender is a Defaulting Lender at such time of determination, the Total Credit Exposure of such Defaulting Lender (including any of such Defaulting Lender’s Voting Participants) shall be excluded from the determination of Required Lenders.
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interest of the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests
or other Equity Interest, or on account of any return of capital to the Borrower’s stockholders, partners or members (or the equivalent Person thereof).
“Revolving Term Advance” means a loan of funds by a Lender to the Borrower under the Revolving Term Facility.
“Revolving Term Borrowing” means a Borrowing consisting of a Revolving Term Advance by each of the Revolving Term Lenders.
“Revolving Term Commitment” means, with respect to any Lender, (a) the amount so designated for such Lender in the Register maintained by the Administrative Agent, plus or minus any such amount assumed or assigned pursuant to any Assignment and Assumption and any increases and decreases effected pursuant to Sections 2.2 and 2.11, or (b) as the context may require, the obligation of such Lender to make Revolving Term Advances and participate in Protective Advances.
“Revolving Term Commitment Termination Date” means, with respect to the Revolving Term Commitments thereunder, the earlier of (a) the applicable Maturity Date for the Revolving Term Facility and (b) the date on which the Revolving Term Commitments are terminated.
“Revolving Term Exposure” means, as to any Revolving Term Lender at any time, the aggregate principal amount at such time of its outstanding Revolving Term Advances and such Revolving Term Lender’s participation in Letter of Credit Obligations at such time.
“Revolving Term Facility” means the Revolving Term Facility established pursuant to Section 2.2.
“Revolving Term Facility Availability Amount” means, as of the date of determination, the amount by which the Aggregate Revolving Term Commitment Amount exceeds the Revolving Term Facility Usage.
“Revolving Term Facility Usage” means at any time the sum of the outstanding Revolving Term Advances and the Letter of Credit Obligations.
“Revolving Term Lender” means any Lender with a Revolving Term Commitment.
“Revolving Term Note” means a promissory note of the Borrower payable to a Lender in the amount of such Lender’s Revolving Term Commitment, in substantially the form of Exhibit E-1, as such promissory note may be amended, extended or otherwise modified from time to time, and including each other promissory note accepted from time to time in substitution therefor or in renewal thereof.
“Sanctioned Country” means, at any time, a country, region or territory that is, or whose government is, the subject of comprehensive Sanctions (including, as of the Fourth Amendment Effective Date, the so-called Donetsk People’s Republic, the so-called Luhansk People’s Republic, the Crimea Region of Ukraine, Cuba, Iran, North Korea, and Syria).
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by any Governmental Authority of the United States of America, Canada, the United Kingdom or any member of the European Union, the United Nations Security Council, the European Union or any political subdivision of any of the foregoing, (b) any Person operating, organized or resident in a Sanctioned Country, (c) any Person that is otherwise subject to any Sanctions, or (d) any Person, directly or indirectly, 50% or more in the aggregate owned by, otherwise controlled by, or acting
for the benefit or on behalf of, any Person or Persons described in the foregoing clauses (a), (b) or (c) of this definition.
“Sanctions” means any economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by any Governmental Authority of the United States of America, Canada, the United Kingdom or any member of the European Union, the United Nations Security Council, the European Union or any political subdivision of any of the foregoing.
“Secured Bank Product” means agreements or other arrangements entered into by a Lender or its Affiliate, on the one hand, and any Loan Party, on the other hand at the time such Lender is a party to this Agreement, under which any Lender or Affiliate of a Lender provides any of the following products or services to any of the Loan Parties: (a) credit cards, (b) credit card processing services, (c) debit cards,
(d) purchase cards, (e) ACH transactions, (f) cash management, including controlled disbursement, accounts or services, or (g) foreign currency exchange; provided that the foregoing shall not constitute a Secured Bank Product if at any time (x) the applicable provider of such bank products or services is not a Lender or an Affiliate of a Lender or (y) such provider has not delivered a Secured Party Designation Notice to the Administrative Agent pursuant to Section 10.15(a).
“Secured Hedge” means an Interest Rate Hedge permitted under this Agreement (a) that is entered into by a Hedge Bank and (b) with respect to which such Hedge Bank has provided evidence satisfactory to the Administrative Agent that (i) such Interest Rate Hedge is documented in a standard International Swaps and Derivatives Association Agreement, and (ii) such Interest Rate Hedge provides for the method of calculating the reimbursable amount of the provider’s credit exposure in a reasonable and customary manner; provided that the foregoing shall not constitute a Secured Hedge if at any time (x) the applicable provider of such Interest Rate Hedge is not the Administrative Agent, a Lender, or an Affiliate of the Administrative Agent or a Lender, or (y) such provider (if other than the Administrative Agent) has not delivered a Secured Party Designation Notice to the Administrative Agent pursuant to Section 10.15(a).
“Secured Obligations” means all Obligations, all Guaranteed Liabilities and all Other Liabilities, but excluding, for any Loan Party, Excluded Swap Obligations with respect to such Loan Party.
“Secured Parties” means, collectively, the Administrative Agent, the Lenders, the Issuing Lender, each Hedge Bank that provides any Secured Hedge, each Lender (or its Affiliate) that provides any Secured Bank Product, each Related Party or co-agent or sub-agent appointed by the Administrative Agent from time to time pursuant to Section 10.6, any other holder from time to time of any Secured Obligations and, in each case, their respective successors and permitted assigns.
“Secured Party Designation Notice” means a notice from any Lender, any Affiliate of any Lender or any other Secured Party substantially in the form of Exhibit F.
“Security Agreement” means the Security Agreement of even date herewith to which the Borrower, the Guarantors and the Administrative Agent are parties.
“SOFR” means a rate per annum equal to the secured overnight financing rate as administered by the SOFR Administrator.
“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“SOFR Administrator’s Website” means the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time.
“Solvent” means, with respect to any Person on any date of determination, taking into account such right of reimbursement, contribution or similar right available to such Person from other Persons, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature, and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
“Specified Lease Agreement” means each of (i) the Lease dated as of September 13, 2005 between The Andersons, Inc., as landlord, and the Borrower, as successor-by-merger to The Andersons Albion Ethanol LLC, as tenant, and (ii) the Lease effective as of May 1, 2007 between The Andersons Agriculture Group, LP, as landlord, and the Borrower, as successor-by-merger to The Andersons Clymers Ethanol LLC, as tenant.
“Standard & Poor’s” means Standard & Poor’s Ratings Services LLC, a subsidiary of The McGraw-Hill Companies, Inc., or any successor or assignee of the business of such division in the business of rating securities and debt.
“Subordinated Indebtedness” means all Indebtedness that has been subordinated to payment of the Secured Obligations on subordination terms and conditions satisfactory to the Administrative Agent, in its sole discretion, as to the right and time of payment and as to any other rights and remedies thereunder.
“Subordination Agreement” means an agreement (in form and substance satisfactory to the Administrative Agent in its sole discretion) executed and delivered by each holder of Subordinated Indebtedness in favor of the Administrative Agent, for the benefit of the Secured Parties, pursuant to which such Person subordinates payment of such Subordinated Indebtedness or other obligations as therein provided to payment of the Secured Obligations to the extent provided therein.
“Subsidiary” of any Person at any time means any corporation, trust, partnership, any limited liability company or other business entity (a) of which more than 50% of the outstanding voting securities or other interests normally entitled to vote for the election of one or more Directors or trustees (regardless of any contingency that does or may suspend or dilute the voting rights) is at such time owned, or the management of which is controlled, directly or indirectly through one or more intermediaries, or both, by such Person or one or more of such Person’s Subsidiaries, or (b) that is directly or indirectly controlled by such Person or one or more of such Person’s Subsidiaries. Unless otherwise specified, “Subsidiary” means a Subsidiary of the Borrower.
“Subsidiary Equity Interests” has the meaning specified in Section 5.6.
“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.
“Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, for tax purposes or otherwise upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).
“Target” has the meaning specified in the definition of “Acquisition”.
“Tax Compliance Certificate” means a tax certificate substantially in the form of Exhibit G hereto, prepared and delivered by any Lender in accordance with Section 3.2(g).
“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholdings), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“Term Advance” means a loan of funds by a Lender to the Borrower under the Term Facility. “Term Borrowing” means a Borrowing consisting of Term Advances by each of the Term
Lenders.
“Term Commitment” means, with respect to any Lender, (a) the amount so designated for such Lender in the Register maintained by the Administrative Agent, plus or minus any such amount assumed or assigned pursuant to any Assignment and Assumption, or (b) as the context may require, the obligation of such Lender to make Term Advances under Section 2.1. The initial aggregate amount of the Term Commitments of all Term Lenders as of the Closing Date shall be $70,000,000.
“Term Commitment Termination Date” means December 15, 2021.
“Term Facility” means the term loan facility being made available to the Borrower by the Lenders pursuant to Section 2.1.
“Term Lender” means any Lender with a Term Commitment.
“Term Note” means a promissory note of the Borrower payable to a Term Lender in the amount of such Lender’s Term Commitment, in substantially the form of Exhibit E-2, as such promissory note may be amended, extended or otherwise modified from time to time, and including each other promissory note accepted from time to time in substitution therefor or in renewal thereof.
“Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by the Administrative Agent in its reasonable discretion).
“Term SOFR Rate” means, for any calculation with respect to a Term SOFR Rate Loan, the Term SOFR Reference Rate for a tenor comparable to the applicable Interest Period on the day (such day, the “Periodic Term SOFR Determination Day”) that is two U.S. Government Securities Business Days prior to the first day of such Interest Period, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 3:00 p.m. on any Periodic Term SOFR Determination Day the Term SOFR Reference
Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Transition Event with respect to the Term SOFR Reference Rate has not occurred, then the Term SOFR Rate will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three U.S. Government Securities Business Days prior to such Periodic Term SOFR Determination Day; provided, further, that if the Term SOFR Rate determined as provided above shall ever be less than the Floor, then Term SOFR Rate shall be deemed to be the Floor.
“Term SOFR Rate Loan” means a Loan bearing interest determined in accordance with the Term SOFR Rate Option. A Term SOFR Rate Loan is a Loan subject to an Interest Period.
“Term SOFR Rate Option” means the option of the Borrower to have Loans bear interest at the rate and under the terms set forth in Section 2.3(a)(ii).
“Term SOFR Reference Rate” means the forward-looking term rate based on SOFR. “Termination Date” means the date as of which all of the following shall have occurred: (a) all
Commitments under this Agreement have terminated, (b) all Secured Obligations have been paid in full (other than (x) contingent indemnification obligations and (y) obligations and liabilities with respect to any Secured Bank Product or Secured Hedge as to which arrangements reasonably satisfactory to the Administrative Agent and the applicable Lender (or its Affiliate) or Hedge Bank have been made), and (c) all Letters of Credit have terminated or expired (other than Letters of Credit as to which other arrangements with respect thereto satisfactory to the Administrative Agent and the Issuing Lender shall have been made).
“Threshold Amount” means $5,000,000.
“Total Credit Exposure” means, as to any Lender as of any date of determination, its unused Commitments, the Revolving Term Exposure and outstanding Term Advances of such Lender as of such date of determination.
“UCC” means the Uniform Commercial Code as in effect in the State of New York.
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulations Authority) or any Person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms and certain affiliates of such certain credit institutions or investment firms.
“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
“Undisclosed Administration” means, in relation to a Lender or its direct or indirect parent company, the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official by a supervisory authority or regulator under or based on the law in the country where such Lender or such parent company is subject to home jurisdiction, if applicable Law requires that such appointment not be disclosed.
“Unused Commitment Fee” means any Unused Revolving Term Commitment Fee or Unused Term Commitment Fee.
“Unused Commitment Fee Rate” means the percentage rate per annum below the heading “Unused Commitment Fee Rate” in the Pricing Grid based on the then-current Consolidated EBITDA.
“Unused Revolving Term Commitment Fee” has the meaning specified in Section 2.6(a)(i). “Unused Term Commitment Fee” has the meaning specified in Section 2.6(a)(ii).
“USA Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.
“U.S.” means the United States of America.
“U.S. Borrower” means any Borrower that is a U.S. Person.
“U.S. Government Securities Business Day” means any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
“U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.
“Voting Participant” has the meaning specified in Section 11.8(d). “Voting Participant Notice” has the meaning specified in Section 11.8(d).
“Withholding Agent” means (a) the Borrower or any other Loan Party and (b) the Administrative
Agent.
“Working Capital” means, with respect to the Consolidated Group as of any date of determination, the excess of current assets over current liabilities, determined in accordance with GAAP. For purposes of determining current assets, the Revolving Term Facility Availability Amount as of the date of determination (less the amount that would be considered a current liability under GAAP if fully advanced) shall be deemed a current asset, whether or not it would be treated as such under GAAP.
“Write-Down and Conversion Powers” means (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail- In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arise, to convert all or part of that liability into shares, securities or obligations of that Person or any other Person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligations in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
1.2Construction. Unless the context of this Agreement otherwise clearly requires, the following rules of construction shall apply to this Agreement and each of the other Loan Documents:
(a) references to the plural include the singular, the plural, the part and the whole; (b) the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation”; (c) the words
“hereof,” “herein,” “hereunder,” “hereto” and similar terms in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document as a whole; (d) article, section, subsection, clause, schedule and exhibit references are to this Agreement or other Loan Document, as the case may be, unless otherwise specified; (e) reference to any Person includes such Person’s successors and assigns; (f) reference to any agreement, including this Agreement and any other Loan Document together with the schedules and exhibits hereto or thereto, document or instrument means such agreement, document or instrument as amended, modified, supplemented, replaced, substituted for, superseded or restated at any time and from time to time; (g) relative to the determination of any period of time, “from” means “from and including,” “to” means “to but excluding,” and “through” means “through and including”; (h) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights; (i) section headings herein and in each other Loan Document are included for convenience and shall not affect the interpretation of this Agreement or such Loan Document; (j) any pronoun shall include the corresponding masculine, feminine and neuter terms; (k) reference to any Law or regulation herein shall refer to such Law or regulation as amended, modified or supplemented from time to time; (l) the word “will” shall be construed to have the same meaning and effect as the word “shall”; and (m) unless otherwise specified, all references herein to times of day shall be references to Denver, Colorado time.
1.3Accounting Principles. Except as otherwise provided in this Agreement, all computations and determinations as to accounting or financial matters (including financial ratios and other financial covenants) and all financial statements to be delivered pursuant to this Agreement shall be made and prepared in accordance with GAAP (including principles of consolidation where appropriate), applied on a consistent basis and, except as expressly provided herein, in a manner consistent with that used in preparing audited financial statements in accordance with Section 6.1(b) and all accounting or financial terms has the meanings ascribed to such terms by GAAP; provided, however, that all accounting terms used in Article VIII (and all defined terms used in the definition of any accounting term used in Article VIII has the meaning given to such terms (and defined terms) under GAAP as in effect on the date hereof applied on a basis consistent with those used in preparing the financial statements referred to in Section 5.10. In the event of any change after the date hereof in GAAP, and if such change would affect the computation of any of the Financial Covenants or any other provision hereof, then the parties hereto agree to endeavor, in good faith, to agree upon an amendment to this Agreement that would adjust such Financial Covenants or such other provisions in a manner that would preserve the original intent thereof, but would allow compliance therewith to be determined in accordance with the Borrower’s financial statements at that time, provided that until so amended such Financial Covenants and such other provisions shall continue to be computed in accordance with GAAP prior to such change therein. Notwithstanding the foregoing, for purposes of determining compliance with any covenant (including the computation of any Financial Covenants) contained herein, Indebtedness of the Borrower and its Subsidiaries shall be deemed to be carried at 100% of the outstanding principal amount thereof, and the effects of FASB ASC 825 and FASB ASC 470-20 on financial liabilities shall be disregarded. Without limiting the foregoing, any operating lease properly classified as an operating lease as of the Closing Date shall be classified and accounted for as an operating lease during the term of this Agreement for all purposes of this Agreement, notwithstanding any changes in GAAP relating thereto.
1.4UCC Terms. Terms defined in the UCC in effect on the Closing Date and not otherwise defined herein shall, unless the context otherwise indicates, have the meanings provided by those definitions. Subject to the foregoing, the term “UCC” refers, as of any date of determination, to the UCC then in effect.
1.5Rounding. Any financial ratios required to be maintained pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the
result to one place more than the number of places by which such ratio or percentage is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).
1.6Letter of Credit Amounts. Unless otherwise specified, all references herein to the amount of a Letter of Credit at any time shall be deemed to mean the maximum face amount of such Letter of Credit after giving effect to all increases thereof contemplated by such Letter of Credit or the Letter of Credit Documents therefor (at the time specified therefor in such applicable Letter of Credit or Letter of Credit Documents and as such amount may be reduced by (a) any permanent reduction of such Letter of Credit or (b) any amount which is drawn, reimbursed and no longer available under such Letter of Credit).
1.7Covenant Compliance Generally. For purposes of determining compliance under Article VIII, any amount in a currency other than Dollars will be converted to Dollars in a manner consistent with that used in calculating consolidated net income in the most recent annual financial statements of the Borrower and its Subsidiaries delivered pursuant to Section 6.1(b). Notwithstanding the foregoing, for purposes of determining compliance with Article VII, with respect to any covenant with respect to the amount of Indebtedness or Investment in a currency other than Dollars, no breach of any basket contained therein shall be deemed to have occurred solely as a result of changes in rates of exchange occurring after the time such Indebtedness or investment is incurred; provided, that for the avoidance of doubt, the result of any changes in rates of exchange occurring after the time such Indebtedness or Investment is incurred shall otherwise apply in all other cases, including determining whether any additional Indebtedness or Investment may be incurred at any time in accordance with Article VII and for purposes of calculating financial ratios in accordance with Article VIII.
1.8[Reserved].
1.9Divisions. For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its Equity Interests at such time.
II.CREDIT FACILITIES
2.1Term Facility.
(a)Term Commitments. Subject to the terms and conditions hereof and relying upon the representations and warranties of the Loan Parties set forth herein and in the other Loan Documents, each Term Lender severally agrees to make Term Advances to the Borrower at any time or from time to time on or after the Closing Date to the Term Commitment Termination Date in an aggregate amount at any time outstanding not to exceed such Term Lender’s Pro Rata Share of each Borrowing from time to time requested by the Borrower under the Term Facility; provided that, after giving effect to each such Term Advance, (i) the aggregate principal amount of such Lender’s Term Advances shall not exceed its Term Commitment and (ii) the aggregate principal amount of all Term Advances extended by all Term Lenders (including any Term Advances that are outstanding or have been repaid) shall not exceed the Aggregate Term Commitment Amount. Each request by the Borrower for a Term Advance shall be deemed to be a representation by the Borrower that it shall be in compliance with the proviso at the end of the preceding sentence and with Article IV both before and after giving effect to the requested Term Borrowing. The Term Facility is not a revolving facility; any Term Advances that are repaid may
not be re-advanced hereunder. The Aggregate Term Commitment Amount shall be automatically and permanently reduced (A) dollar-for-dollar by the amount of each Term Borrowing on the date of such Term Borrowing and (B) to zero on the Term Commitment Termination Date.
(b)Loan Request for Term Borrowing. The Borrower may from time to time prior to the Term Commitment Termination Date request the Term Lenders to make a Term Borrowing by delivering to the Administrative Agent, not later than 11:00 a.m., (i) three U.S. Government Securities Business Days prior to the proposed Borrowing Date with respect to Term SOFR Rate Loans, (ii) one U.S. Government Securities Business Day prior to the proposed Borrowing Date with respect to Daily Simple SOFR Rate Loans, and (iii) one Business Day prior to the proposed Borrowing Date with respect to Quoted Rate Loans, a duly completed Loan Request. Each such Loan Request shall be irrevocable and shall specify the aggregate amount of the proposed Term Advances comprising each Borrowing, and, if applicable, the Interest Period or Quoted Rate Period, which amounts shall be not less than $5,000,000 for each Borrowing.
(c)Nature of Lenders’ Obligations with Respect to Term Advances. Each Lender shall be obligated to participate in each request for a Term Borrowing pursuant to this Section 2.1 in accordance with its Pro Rata Share. The obligations of each Lender hereunder are several. The failure of any Term Lender to make a Term Advance shall not relieve any other Term Lender of its obligations to make a Term Advance nor shall it impose any additional liability on any other Lender hereunder. The Term Lenders shall have no obligation to make Term Advances hereunder after the Term Commitment Termination Date.
(d)Repayment of Term Advances. In addition to any prepayments made pursuant to Sections 2.11 and 2.12, the Borrower shall pay the aggregate outstanding principal balance of the Term Facility in successive installments of $3,000,000 each, due and payable on the 20th day of each November, February, May and August commencing November 20, 2020, and in one final installment on the Maturity Date for the Term Facility when the entire remaining outstanding principal balance of the Term Facility, together with all outstanding interest thereon and unpaid fees with respect thereto, shall be due and payable in full. The Aggregate Term Commitment Amount shall be automatically and permanently reduced dollar-for-dollar by the amount of $3,000,000 on the 20th day of each November, February, May and August commencing November 20, 2020.
2.2Revolving Facility.
(a)Revolving Term Commitments. Subject to the terms and conditions hereof and relying upon the representations and warranties of the Loan Parties set forth herein and in the other Loan Documents, each Revolving Term Lender severally agrees to make Revolving Term Advances to the Borrower at any time or from time to time on or after the Closing Date to the Revolving Term Commitment Termination Date in an aggregate amount at any time outstanding not to exceed such Revolving Term Lender’s Pro Rata Share of each Borrowing from time to time requested by the Borrower under the Revolving Term Facility, provided that, after giving effect to each such Revolving Term Advance, (i) such Lender’s Revolving Term Exposure shall not exceed its Revolving Term Commitment and (ii) the Revolving Term Facility Usage shall not exceed the Aggregate Revolving Term Commitment Amount. Each request by the Borrower for a Revolving Term Advance shall be deemed to be a representation by the Borrower that it shall be in compliance with the proviso at the end of the preceding sentence and with Article IV both before and after giving effect to the requested Revolving Term Borrowing. Within such limits of time and amount and subject to the other provisions of this Agreement, the Borrower may borrow, repay and reborrow pursuant to this Section 2.2.
(b)Loan Request for Revolving Term Borrowing. The Borrower may from time to time prior to the Revolving Term Commitment Termination Date request the Revolving Term Lenders to make a Revolving Term Borrowing by delivering to the Administrative Agent, not later than 11:00 a.m., (i) three U.S. Government Securities Business Days prior to the proposed Borrowing Date with respect to Term SOFR Rate Loans, (ii) one U.S. Government Securities Business Day prior to the proposed Borrowing Date with respect to Daily Simple SOFR Rate Loans, and (iii) one Business Day prior to the proposed Borrowing Date with respect to Quoted Rate Loans, a duly completed Loan Request. Each such Loan Request shall be irrevocable and shall specify the aggregate amount of the proposed Revolving Term Advances comprising each Borrowing, and, if applicable, the Interest Period or Quoted Rate Period, which amounts shall be not less than $500,000 for each Borrowing.
(c)Nature of Lenders’ Obligations with Respect to Revolving Term Advances. Each Lender shall be obligated to participate in each request for a Revolving Term Borrowing pursuant to this Section 2.2 in accordance with its Pro Rata Share. The obligations of each Lender hereunder are several. The failure of any Lender to perform its obligations hereunder shall not affect the Obligations of the Borrower to any other party nor shall any other party be liable for the failure of such Lender to perform its obligations hereunder. Other than Revolving Term Advances in repayment of Reimbursement Obligations in accordance with Section 2.8(c), the Lenders shall have no obligation to make Revolving Term Advances hereunder on or after the Maturity Date.
(d)Protective Advances.
(i)The Administrative Agent is hereby authorized by the Borrower and each Lender to make Revolving Term Advances to the Borrower, on behalf of all Revolving Term Lenders, if the Administrative Agent, in its sole discretion (but with absolutely no obligation), deems such Revolving Term Advances necessary or desirable
(a) to preserve or protect Collateral or to enhance the likelihood of, or maximize the amount of, the collectability or repayment of Secured Obligations or (b) to pay any other amounts chargeable to or required to be paid by the Borrower or the other Loan Parties under any Loan Documents, including costs, fees and expenses (any of such Revolving Term Advances are herein referred to as “Protective Advances”), notwithstanding that after giving effect to any such Protective Advances the Revolving Term Facility Usage would exceed the Aggregate Revolving Term Commitment Amount or that the conditions precedent set forth in Section 4.2 have not been satisfied.
(ii)If funding a Protective Advance would cause the Revolving Term Facility Usage (including all outstanding Protective Advances) to exceed the Aggregate Revolving Term Commitment Amount, the Administrative Agent in its sole discretion (by or through itself, any of its Affiliates or another Revolving Term Lender, subject to the consent of such Revolving Term Lender) may increase its Revolving Term Commitment (and, concurrently, its Letter of Credit Sublimit, if necessary) in an amount determined by the Administrative Agent to be sufficient to accommodate such Protective Advance and such future Protective Advances as the Administrative Agent may reasonably anticipate making (each, a “Protective Advance Commitment Increase”).
(iii)Each Protective Advance shall be deemed to be a Revolving Term Advance hereunder and bear interest at the rate applicable to Daily Simple SOFR Rate Loans. The Administrative Agent’s determination that funding or permitting a Protective Advance is appropriate shall be conclusive. Each Revolving Term Lender’s obligation to
purchase a participation in each Protective Advance and fund its Pro Rata Share of any Protective Advance (as described in subsection (iv) below) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) the failure of any conditions set forth in Section 4.2 hereof to be satisfied, (B) any set-off, counterclaim, recoupment, defense or other right which such Revolving Term Lender may have against the Administrative Agent, the Borrower or any other Person for any reason whatsoever,
(C) the occurrence or continuance of a Default or Event of Default, or (D) any other occurrence, event or condition, whether or not similar to any of the foregoing. The Administrative Agent shall not be required to obtain the consent of any Lender as a condition to making a Protective Advance or implementing a Protective Advance Commitment Increase, but the Administrative Agent’s discretion to make Protective Advances and implement Protective Advance Commitment Increases may be revoked prospectively at any time by the Required Lenders. No such revocation shall affect any Lender’s obligations under this Agreement with respect to Protective Advances made prior to the date of any such revocation. A Protective Advance Commitment Increase may be terminated at any time in the Administrative Agent’s sole discretion, whereupon the Revolving Term Commitment and Letter of Credit Sublimit, as applicable, shall be reduced by the amount of such terminated Protective Advance Commitment Increase.
(iv)Upon the making of a Protective Advance by the Administrative Agent (whether before or after the occurrence of a Default or Event of Default), each Revolving Term Lender shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from the Administrative Agent without recourse or warranty, an undivided interest and participation in such Protective Advance in proportion to its Pro Rata Share. At any time the conditions precedent set forth in Section
4.2 have been satisfied, the Administrative Agent may require the Revolving Term Lenders to make Revolving Term Advances to repay outstanding Protective Advances in proportion to its Pro Rata Share. From and after the date, if any, on which any Revolving Term Lender funds its participation in any Protective Advance purchased hereunder by making Revolving Term Advances, the Administrative Agent shall promptly distribute to such Revolving Term Lender, such Revolving Term Lender’s Pro Rata Share of all payments of principal and interest and all proceeds of Collateral received by the Administrative Agent in respect of such Protective Advance.
(v)In no event shall the Borrower or any other Loan Party be deemed a beneficiary of this Section nor authorized to enforce any of its terms.
(e)Repayment of Revolving Term Advances. In addition to any prepayments made pursuant to Sections 2.11 and 2.12, the Borrower shall repay the entire outstanding principal amount of Revolving Term Advances, together with all outstanding interest thereon and unpaid fees with respect thereto, on the Maturity Date of the Revolving Term Facility.
2.3Interest Rate Provisions. The Borrower shall pay interest in respect of the outstanding unpaid principal amount of the Daily Simple SOFR Rate Loans, Term SOFR Rate Loans, Quoted Rate Loans and ABR Loans, it being understood that, subject to the provisions of this Agreement, the Borrower may select different Interest Rate Options and different Interest Periods or Quoted Rate Periods to apply to different Borrowings at any time outstanding and may convert to or renew one or more Interest Rate Options with respect to all or any portion of any Borrowing (subject to minimum amounts set forth in Sections 2.1(b) and 2.2(b)); provided that (x) there shall not be at any one time outstanding more than seven Borrowings of Term SOFR Rate Loans and (y) if a Default or an Event of Default has occurred and is continuing, the Borrower may not request, convert to, or renew any Term SOFR Rate Loans. If at
any time the designated rate applicable to any Loan made by any Lender exceeds the Maximum Rate, the rate of interest on such Lender’s Loan shall be limited to such Lender’s Maximum Rate.
(a)Interest Rate Options. Subject to the limitations set forth in Section 3.3 and Section 3.4, (x) all Obligations not constituting Revolving Term Advances or Term Advances shall bear interest calculated based upon the Daily Simple SOFR Rate Option and (y) with respect to Revolving Term Advances and Term Advances, the Borrower shall have the right to select from each of the following Interest Rate Options:
(i)Daily Simple SOFR Rate Option: An option to pay interest at a fluctuating rate per annum equal to the Daily Simple SOFR Rate in effect as of any date of determination plus the Applicable Margin as of such date;
(ii)Term SOFR Rate Option: An option to pay interest at a fluctuating rate per annum equal to the Term SOFR Rate with respect to the applicable Interest Period and as in effect as of any date of determination plus the Applicable Margin as of such date, or
(iii)Quoted Rate Option: An option to pay interest at a fixed rate per annum equal to the Quoted Rate with respect to the applicable Quoted Rate Period.
(b)Day Count Basis. Interest and fees shall be calculated on the basis of a 360-day year for the actual number of days elapsed (which results in more interest or fees, as the case may be, being paid than if calculated on the basis of a 365-day year); provided, however, that interest and fees determined by reference to the Prime Rate shall be calculated on the basis of a year of 365 or 366 days, as the case may be, for the actual number of days elapsed. The date of funding or conversion of a Term SOFR Rate Loan or Quoted Rate Loan and the first day of an Interest Period or Quoted Rate Period, as applicable, shall be included in the calculation of interest. The date of payment of any Loan and the last day of an Interest Period or Quoted Rate Period shall be excluded from the calculation of interest; provided, if a Loan is repaid on the same day that it is made, one day’s interest shall be charged.
(c)Default Rate. To the extent permitted by Law, immediately upon the occurrence and during the continuation of an Event of Default under clause (a) or (l) of Section 9.1, or immediately after written demand by the Required Lenders to the Administrative Agent after the occurrence and during the continuation of any other Event of Default, then the principal amount of all Obligations shall bear interest at the Default Rate and the rates applicable to Letter of Credit Fees shall be increased to the Default Rate. The Borrower acknowledges that the increase in rates referred to in this Section 2.3 reflects, among other things, the fact that such Loans or other amounts have become a substantially greater risk given their default status and that the Lenders are entitled to additional compensation for such risk; and all such interest shall be payable by the Borrower upon demand by the Administrative Agent.
2.4Interest Periods and Quoted Rate Periods. In order to convert a Daily Simple SOFR Rate Loan, Term SOFR Rate Loan, Quoted Rate Loan or continue a Term SOFR Rate Loan or Quoted Rate Loan, the Borrower shall deliver to the Administrative Agent a duly completed, written request therefor substantially in the form of Exhibit H (each, a “Conversion or Continuation Notice”) not later than 11:00 a.m. (x) with respect to a conversion to or continuation of a Term SOFR Rate Loan, at least three U.S. Government Securities Business Days prior to the proposed effective date of such conversion or continuation, (y) with respect to a conversion to a Daily Simple SOFR Rate Loan, at least one U.S. Government Securities Business Day prior to the proposed effective date of such conversion, and (z) with
respect to a conversion to or continuation of a Quoted Rate Loan, at least one U.S. Business Day prior to the proposed effective date of such conversion or continuation. The Conversion or Continuation Notice shall specify (i) which Borrowings (including the principal amount thereof) are subject to such request, and, in the case of any Term SOFR Rate Loan or Quoted Rate Loan to be converted or continued, the last day of the current Interest Period or Quoted Rate Period, as applicable, therefor, (ii) the proposed effective date of such conversion or continuation (which shall be a Business Day), (iii) whether the Borrower is requesting a continuation of Term SOFR Rate Loans or Quoted Rate Loans or a conversion of Borrowings from one Interest Rate Option to another Interest Rate Option, and (iv) if a continuation of or conversion to Term SOFR Rate Loans or Quoted Rate Loans is requested, the requested Interest Period or Quoted Rate Period, as applicable, with respect thereto. In addition, the following provisions shall apply to any continuation of or conversion of any Borrowings:
(a)Amount of Loans. After giving effect to such conversion or continuation, each Revolving Term Borrowing shall be in an amount no less than the minimum amount set forth in Section 2.2(b).
(b)Commencement of Interest Period or Quoted Rate Period. In the case of any borrowing of, conversion to or continuation of any Term SOFR Rate Loan or Quoted Rate Loan, the Interest Period or Quoted Rate Period, as applicable, shall commence on the date of advance of or conversion to any Term SOFR Rate Loan or Quoted Rate Loan and, in the case of immediately successive Interest Periods or Quoted Rate Periods, each successive Interest Period or Quoted Rate Period shall commence on the date on which the immediately preceding Interest Period or Quoted Rate Period expires. Upon a conversion from a Term SOFR Rate Loan or Quoted Rate Loan to a Daily Simple SOFR Rate Loan, interest at the Daily Simple SOFR Rate Option shall commence on the last day of the existing Interest Period or Quoted Rate Period, as applicable.
(c)Selection of Interest Rate Options. If the Borrower elects to continue a Term SOFR Rate Loan but fails to select a new Interest Period to apply thereto, then a one-month Interest Period automatically shall apply. If the Borrower fails to duly request the continuation of any Borrowing consisting of Term SOFR Rate Loans or Quoted Rate Loans on or before the date specified and otherwise in accordance with the provisions of this Section 2.4, then such Term SOFR Rate Loans or Quoted Rate Loans automatically shall be converted to Daily Simple SOFR Rate Loans.
2.5Making of Loans.
(a)Notifications and Payments. The Administrative Agent shall, promptly after receipt by it of a Loan Request pursuant to Section 2.1(b) or Section 2.2(b), notify the applicable Lenders of such Class of Loan of its receipt of such Loan Request specifying the information provided by the Borrower and the apportionment among the Lenders of the requested Loan as determined by the Administrative Agent in accordance with Section 2.1 or Section 2.2, as the case may be. Each applicable Lender shall remit the principal amount of their Pro Rata Share of the Loan to the Administrative Agent such that the Administrative Agent is able to, and the Administrative Agent shall, to the extent the Lenders have made funds available to it for such purpose and subject to the terms and conditions of Section 2.1 or Section 2.2, as applicable, fund such Loan to the Borrower in U.S. Dollars and immediately available funds to the Borrower’s account specified in the Loan Request prior to 2:00 p.m. on the Borrowing Date. No portion of any Loan shall be funded by a Lender with “plan assets” as defined by Section 3(42) of ERISA.
(b)Pro Rata Treatment of Lenders. The borrowing of any Class of Loan shall be allocated to each Lender of such Class of Loan according to its Pro Rata Share thereof, and each
selection of, conversion to or renewal of any Interest Rate Option and each payment or prepayment by the Borrower with respect to principal and interest due from the Borrower hereunder to the Lenders with respect to the applicable Commitments and Loan, shall (except as otherwise may be provided with respect to a Defaulting Lender) be payable ratably among the Lenders of such Class of Loan entitled to such payment in accordance with the amount of principal and interest then due or payable to such Lenders as set forth in this Agreement.
(c)Presumptions by the Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed Borrowing Date that such Lender will not make available to the Administrative Agent such Lender’s share of any Loan, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.1 or Section 2.2, as the case may be, and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of such Loan available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of a payment to be made by such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation and (ii) in the case of a payment to be made by the Borrower, the interest rate then applicable to Daily Simple SOFR Rate Loans. If such Lender pays its share of the applicable Loan to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent. If the Borrower and such Lender pay such interest for the same period, the Administrative Agent promptly shall remit to the Borrower the amount of interest paid by Borrower for such overlapping period. Nothing in this Section 2.5(c) or elsewhere in this Agreement or the other Loan Documents, including the provisions of Section 2.13, shall be deemed to require the Administrative Agent (or any other Lender) to advance funds on behalf of any Lender or to relieve any Lender from its obligation to fulfill its commitments hereunder or to prejudice any rights that the Administrative Agent or the Borrower may have against any Lender as a result of any default by such Lender hereunder.
2.6Fees.
(a)Unused Commitment Fee.
(i)Unused Revolving Term Commitment Fee. Accruing from the Closing Date until the Maturity Date of the Revolving Term Facility, the Borrower agrees to pay to the Administrative Agent for the account of each Revolving Term Lender according to its Pro Rata Share, a nonrefundable unused commitment fee (each, an “Unused Revolving Term Commitment Fee”) equal to the Unused Commitment Fee Rate (computed on the basis of a year of 360 days, as the case may be, and actual days elapsed) multiplied by the average daily difference between the amount of (i) the Aggregate Revolving Term Commitment Amount and (ii) the Revolving Term Facility Usage; provided, however, that any Unused Revolving Term Commitment Fee accrued with respect to the Revolving Term Commitment of a Defaulting Lender during the period prior to the time such Lender became a Defaulting Lender and unpaid at such time shall not be payable by the Borrower so long as such Lender shall be a Defaulting Lender except to the extent that such Unused Revolving Term Commitment Fee shall otherwise have
been due and payable by the Borrower prior to such time; and provided further that no Unused Revolving Term Commitment Fee shall accrue with respect to the Revolving Term Commitment of a Defaulting Lender so long as such Lender shall be a Defaulting Lender. Subject to the provisos in the directly preceding sentence, all Unused Revolving Term Commitment Fees shall be payable on each Interest Payment Date in arrears through the last day of the immediately preceding calendar month.
(ii)Unused Term Commitment Fee. Accruing from the First Amendment Effective Date until the Term Commitment Termination Date, the Borrower agrees to pay to the Administrative Agent for the account of each Term Lender according to its Pro Rata Share, a nonrefundable unused commitment fee (each, an “Unused Term Commitment Fee”) equal to the Unused Commitment Fee Rate (computed on the basis of a year of 360 days, as the case may be, and actual days elapsed) multiplied by the average daily difference between the amount of (i) the Aggregate Term Commitment Amount as of the Closing Date less any mandatory reductions occurring on or after November 20, 2020 pursuant to Section 2.1(d) and (ii) the outstanding principal balance of all Term Advances; provided, however, that any Unused Term Commitment Fee accrued with respect to the Term Commitment of a Defaulting Lender during the period prior to the time such Lender became a Defaulting Lender and unpaid at such time shall not be payable by the Borrower so long as such Lender shall be a Defaulting Lender except to the extent that such Unused Term Commitment Fee shall otherwise have been due and payable by the Borrower prior to such time; and provided further that no Unused Term Commitment Fee shall accrue with respect to the Term Commitment of a Defaulting Lender so long as such Lender shall be a Defaulting Lender. Subject to the provisos in the directly preceding sentence, all Unused Term Commitment Fees shall be payable on each Interest Payment Date in arrears through the last day of the immediately preceding calendar month.
(b)Other Fees. The Borrower agrees to pay to the Administrative Agent such other fees as agreed in the Fee Letter(s).
2.7Notes. The obligation of the Borrower to repay the aggregate unpaid principal amount of the Revolving Term Advances and Term Advances made to it by each Lender, together with interest thereon, shall be evidenced by the books and records maintained by such Lender and the Administrative Agent and may, at the request of the applicable Lender, be evidenced by a Revolving Term Note and/or a Term Note, as the case may be, payable to such Lender (or its registered assigns) in a face amount equal to the Revolving Term Commitment or Term Commitment, as applicable, of such Lender. The Borrower hereby unconditionally promises to pay, to each of the Lenders (or their registered assigns), the Administrative Agent and the Issuing Lender, as applicable, the Loans and other Obligations as provided in this Agreement and the other Loan Documents.
2.8Letter of Credit Subfacility.
(a)Issuance of Letters of Credit. Subject to the terms and conditions of this Agreement and the other Loan Documents, including, without limitation, Section 4.2, and in reliance upon the representations and warranties set forth in this Agreement and the other Loan Documents and in reliance on the agreements of the Revolving Term Lenders set forth in this Section 2.8, the Issuing Lender may, in its sole discretion, issue standby letters of credit (the “Letters of Credit”) for the account of the Borrower or any other Loan Party on any Business Day
from the Closing Date through but not including the Letter of Credit Expiration Date. The Borrower may at any time prior to Letter of Credit Expiration Date request the issuance of a Letter of Credit, or an amendment or extension of a Letter of Credit, by delivering to the Issuing Lender (with a copy to the Administrative Agent) a completed application and agreement for letters of credit, or request for such amendment or extension, as applicable, in such form as the Issuing Lender may specify from time to time (each a “Letter of Credit Request”) by no later than 11:00
a.m. at least five Business Days, or such shorter period as may be agreed to by the Issuing Lender, in advance of the proposed date of issuance, amendment or extension. Promptly after receipt of any Letter of Credit Request, the Issuing Lender shall confirm with the Administrative Agent (in writing) that the Administrative Agent has received a copy of such Letter of Credit Request and if not, the Issuing Lender will provide the Administrative Agent with a copy thereof. Unless the Issuing Lender has received notice from any Lender, the Administrative Agent or any Loan Party, at least one day prior to the requested date of issuance, amendment or extension of the applicable Letter of Credit, that one or more applicable conditions in Article IV is not satisfied, then the Issuing Lender may, in its sole discretion, issue a Letter of Credit or agree to such amendment or extension; provided that (i) the expiration date of the subject Letter of Credit shall not be later than the earlier of (A) one year after the date of issuance of such Letter of Credit or, if such Letter of Credit provides for automatic extensions thereof, to a date not later than one year beyond the then-current expiration date and (B) 30 days prior to the Revolving Term Commitment Termination Date, and (ii) after giving effect to such issuance, amendment or extension (x) the Letter of Credit Obligations shall not exceed the Letter of Credit Sublimit and (y) the Revolving Term Facility Usage shall not exceed the Aggregate Revolving Term Commitment Amount. Each request by the Borrower for the issuance, amendment or extension of a Letter of Credit shall be deemed to be a representation by the Borrower that it shall be in compliance with this Section and with Article IV before and after giving effect to the requested issuance, amendment or extension of such Letter of Credit. Promptly after its delivery of any Letter of Credit or any amendment to or extension of a Letter of Credit to the beneficiary thereof, the applicable Issuing Lender will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit, amendment or extension. All Closing Date Letters of Credit shall be deemed to have been issued pursuant hereto, and from and after the Closing Date shall be deemed a Letter of Credit hereunder subject to and governed by the terms and conditions of this Agreement.
(b)Letter of Credit Fees. The Borrower shall pay to the Administrative Agent for the ratable account of the Revolving Term Lenders a fee (the “Letter of Credit Fee”) equal to the Letter of Credit Fee Rate (computed on the basis of a year of 360 days and actual days elapsed), which fee shall be computed on the daily average Letter of Credit Obligations and shall be payable quarterly on each Interest Payment Date in arrears through the last day of the immediately preceding calendar quarter and on the Maturity Date. The Borrower shall also pay to the Issuing Lender for the Issuing Lender’s sole account a fronting fee in an amount equal to the greater of (x) 0.125% of the face amount of each Letter of Credit and (y) $2,000, as well as the Issuing Lender’s then in effect customary fees and administrative expenses payable with respect to the Letters of Credit as the Issuing Lender may generally charge or incur from time to time in connection with the issuance, maintenance, amendment (if any), assignment or transfer (if any), negotiation, and administration of Letters of Credit.
(c)Disbursements, Reimbursement. Immediately upon the issuance of each Letter of Credit, each Revolving Term Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Issuing Lender a participation in such Letter of Credit and each drawing thereunder, without recourse or warranty, in an amount equal to such Revolving Term Lender’s Pro Rata Share of the maximum amount available to be drawn under such Letter of Credit and the amount of such drawing, respectively.
(i)In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, the Issuing Lender will promptly notify the Borrower and the Administrative Agent thereof. Provided that it shall have received such notice prior to 11:00 a.m. on a Drawing Date, the Borrower shall reimburse (such obligation to reimburse the Issuing Lender shall sometimes be referred to as a “Reimbursement Obligation”) the Issuing Lender prior to 12:00 noon on each date that an amount is paid by the Issuing Lender under any Letter of Credit (each such date, a “Drawing Date”), or if such notice was received after 11:00 a.m. on a Drawing Date, then by 10:00 a.m. on the Business Day immediately following such Drawing Date, by paying to the Administrative Agent for the account of the Issuing Lender an amount equal to the amount so paid by the Issuing Lender. In the event the Borrower fails to reimburse the Issuing Lender (through the Administrative Agent) for the full amount of any drawing under any Letter of Credit by the date and time required in accordance with the foregoing sentence, then the Administrative Agent will promptly notify each Revolving Term Lender thereof, and the Borrower shall be deemed to have requested that a Revolving Term Borrowing be made by the Revolving Term Lenders under the Daily Simple SOFR Rate Option to be disbursed on the Business Day immediately following the Drawing Date, subject to the amount of the unutilized portion of the Revolving Term Commitment and subject to the conditions set forth in Section 4.2 other than any notice requirements. Any notice given by the Administrative Agent or Issuing Lender pursuant to this Section 2.8(c)(i) may be by telephone if promptly confirmed in writing; provided that the lack of such a prompt confirmation shall not affect the conclusiveness or binding effect of such notice.
(ii)Each Revolving Term Lender shall upon the Business Day immediately following a Drawing Date with respect to which notice was delivered by the Administrative Agent in accordance with Section 2.8(c)(i) make funds available to the Administrative Agent for the account of the Issuing Lender in an amount equal to its Pro Rata Share of the amount of the drawing. So long as the conditions set forth in Section 4.2 have been satisfied or waived in accordance with this Agreement, each Revolving Term Lender that makes such funds available shall be deemed to have made a Revolving Term Advance at the Daily Simple SOFR Rate Option; provided, that if any conditions set forth in Section 4.2 have not been satisfied or waived in accordance with this Agreement, each Revolving Term Lender shall remain obligated to fund its Pro Rata Share of such unreimbursed amount and such amount (each a “Participation Advance”) shall be deemed to be a payment in respect of its participation in the applicable Letter of Credit Borrowing resulting from such drawing in accordance with Section 2.8(c)(iii). If any Revolving Term Lender so notified fails to make available to the Administrative Agent for the account of the Issuing Lender the amount of such Revolving Term Lender’s Pro Rata Share of such amount by no later than noon on such date, then interest shall accrue on such Revolving Term Lender’s obligation to make such payment, from such Business Day to the date on which such Lender makes such payment (i) at a rate per annum equal to the Federal Funds Effective Rate during the first three days following the date such amount was due and (ii) at a rate per annum equal to the rate applicable to Daily Simple SOFR Rate Loans thereafter. Any failure of the Administrative Agent or the Issuing Lender to give any notice on the date provided in this section or in sufficient time to enable any Lender to effect such payment on such date shall not relieve such Lender from its obligation under this clause
(ii) following actual delivery of such notice.
(iii)With respect to any unreimbursed drawing that is not fully reimbursed by Borrower and is not refinanced by Revolving Term Advances in accordance
with Section 2.8(c)(i) because of the Borrower’s failure to satisfy the conditions set forth in Section 4.2, the Borrower shall be deemed to have incurred from the Issuing Lender a borrowing (each, a “Letter of Credit Borrowing”) in an amount equal to the unreimbursed portion of such drawing. Such Letter of Credit Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate. In such event, each Revolving Term Lender’s payment to the Administrative Agent for the account of the Issuing Lender pursuant to Section 2.7(c)(ii) shall be deemed payment in respect of its participation in such Letter of Credit Borrowing and shall constitute a Participation Advance from such Revolving Term Lender in satisfaction of its participation obligation under this Section 2.8.
(d)Repayment of Participation Advances.
(i)Upon (and only upon) receipt by the Administrative Agent for the account of the Issuing Lender of immediately available funds from the Borrower (A) in reimbursement of any payment made by the Issuing Lender under the Letter of Credit with respect to which any Revolving Term Lender has made a Participation Advance to the Administrative Agent, or (B) in payment of interest on such a payment made by the Issuing Lender under such a Letter of Credit, the Administrative Agent on behalf of the Issuing Lender will pay to each Revolving Term Lender that made a Participation Advance, in the same funds as those received by the Administrative Agent, the amount of such Revolving Term Lender’s Pro Rata Share of such funds, and the Administrative Agent shall remit to the Issuing Lender the amount of the Pro Rata Share of such funds of any Revolving Term Lender that did not make a Participation Advance in respect of such payment by the Issuing Lender.
(ii)If the Administrative Agent is required at any time to return to any Loan Party, or to a trustee, receiver, liquidator, custodian, or any official in any Insolvency Proceeding, any portion of any payment made by any Loan Party to the Administrative Agent for the account of the Issuing Lender pursuant to this Section 2.8 in reimbursement of a payment made under the Letter of Credit or interest or fee thereon, each Revolving Term Lender shall, on demand of the Administrative Agent, forthwith return to the Administrative Agent for the account of the Issuing Lender the amount of its Pro Rata Share of any amounts so returned by the Administrative Agent plus interest thereon from the date such demand is made to the date such amounts are returned by such Revolving Term Lender to the Administrative Agent, at a rate per annum equal to the Federal Funds Effective Rate in effect from time to time.
(e)Documentation. Each Loan Party agrees to be bound by the terms of the Issuing Lender’s application and agreement for letters of credit and the Issuing Lender’s written regulations and customary practices relating to letters of credit, though such interpretation may be different from such Loan Party’s own. In the event of a conflict between such application or agreement and this Agreement, this Agreement shall govern. It is understood and agreed that, except in the case of its gross negligence or willful misconduct as determined by a final decision by a court of competent jurisdiction, the Issuing Lender shall not be liable for any error, negligence and/or mistakes, whether of omission or commission, in following any Loan Party’s instructions or those contained in the Letters of Credit or any modifications, amendments or supplements thereto.
(f)Determinations to Honor Drawing Requests. In determining whether to honor any request for drawing under any Letter of Credit by the beneficiary thereof, the Issuing Lender shall be responsible only to determine that the documents and certificates required to be
delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of such Letter of Credit.
(g)Nature of Participation and Reimbursement Obligations. Each Revolving Term Lender’s obligation in accordance with this Agreement to make the Revolving Term Advances or Participation Advances, as contemplated by this Section 2.8, as a result of a drawing under a Letter of Credit, and the obligations of the Borrower to reimburse the Issuing Lender upon a draw under a Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Section 2.8 under all circumstances, including the following circumstances:
(i)any set-off, counterclaim, recoupment, defense or other right that such Revolving Term Lender may have against the Issuing Lender or any of its Affiliates, the Borrower or any other Person for any reason whatsoever, or that any Loan Party may have against the Issuing Lender or any of its Affiliates, any Lender or any other Person for any reason whatsoever;
(ii)the failure of any Loan Party or any other Person to comply, in connection with a Letter of Credit Borrowing, with the conditions set forth in Sections 2.2 or 4.2 or as otherwise set forth in this Agreement for the making of a Revolving Term Advance, it being acknowledged that such conditions are not required for the making of a Letter of Credit Borrowing and the obligation of the Revolving Term Lenders to make Participation Advances under this Section 2.8;
(iii)any lack of validity or enforceability of any Letter of Credit;
(iv)any claim of breach of warranty that might be made by any Loan Party or any Lender against any beneficiary of a Letter of Credit, or the existence of any claim, set-off, recoupment, counterclaim, crossclaim, defense or other right that any Loan Party or any Lender may have at any time against a beneficiary, successor beneficiary any transferee or assignee of any Letter of Credit or the proceeds thereof (or any Persons for whom any such transferee may be acting), the Issuing Lender or its Affiliates or any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between any Loan Party or Subsidiaries of a Loan Party and the beneficiary for which any Letter of Credit was procured);
(v)the lack of power or authority of any signer of (or any defect in or forgery of any signature or endorsement on) or the form of or lack of validity, sufficiency, accuracy, enforceability or genuineness of any draft, demand, instrument, certificate or other document presented under or in connection with any Letter of Credit, or any fraud or alleged fraud in connection with any Letter of Credit, or the transport of any property or provision of services relating to a Letter of Credit, in each case even if the Issuing Lender or any of its Affiliates has been notified thereof;
(vi)payment by the Issuing Lender or any of its Affiliates under any Letter of Credit against presentation of a demand, draft or certificate or other document that does not comply with the terms of such Letter of Credit;
(vii)the solvency of, or any acts or omissions by, any beneficiary of any Letter of Credit, or any other Person having a role in any transaction or obligation
relating to a Letter of Credit, or the existence, nature, quality, quantity, condition, value or other characteristic of any property or services relating to a Letter of Credit;
(viii)any failure by the Issuing Lender or any of its Affiliates to issue any Letter of Credit in the form requested by any Loan Party, unless the Issuing Lender has received written notice from such Loan Party of such failure within three Business Days after the Issuing Lender shall have furnished such Loan Party and the Administrative Agent a copy of such Letter of Credit and such error is material and no drawing has been made thereon prior to receipt of such notice;
(ix)any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of any Loan Party or Subsidiaries of a Loan Party;
(x)any breach of this Agreement or any other Loan Document by any
party thereto;
(xi)the occurrence or continuance of an Insolvency Proceeding with respect to any Loan Party;
(xii)the fact that an Event of Default or a Default shall have occurred and be continuing;
(xiii)the fact that the Maturity Date shall have passed or this Agreement or the Commitments hereunder shall have been terminated; and
(xiv)any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.
(h)Indemnity. The Borrower hereby agrees to protect, indemnify, pay and save harmless the Issuing Lender and any of its Affiliates that has issued a Letter of Credit and each Revolving Term Lender, from and against any and all claims, demands, liabilities, damages, taxes, penalties, interest, judgments, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs of internal counsel) that the Issuing Lender, any of its Affiliates or any Revolving Term Lender may incur or be subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit, other than as a result of
(i) the gross negligence or willful misconduct of the Issuing Lender or such Revolving Term Lender or (ii) a claim brought by the Borrower against the Issuing Lender or such Revolving Term Lender for breach in bad faith of its obligations under this Agreement, in each case of clause (i) or clause
(ii) as determined by a final, non-appealable judgment of a court of competent jurisdiction.
(i) Liability for Acts and Omissions. As between any Loan Party and the Issuing Lender, or the Issuing Lender’s Affiliates, such Loan Party assumes all risks of the acts and omissions of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, the Issuing Lender shall not be responsible for any of the following, including any losses or damages to any Loan Party or other Person or property relating therefrom: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for an issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged (even if the Issuing Lender or its Affiliates shall have been notified thereof); (ii) the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for any reason; (iii) the failure of the beneficiary of any such Letter of Credit, or any other party to which such Letter of Credit may be transferred, to comply fully with any conditions required in order to draw upon such Letter of Credit or any other claim of any Loan Party against any beneficiary of such Letter of Credit, or any such transferee, or any dispute between or among any Loan Party and any beneficiary of any Letter of Credit or any such transferee; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms;
(vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of the Issuing Lender or its Affiliates, as applicable, including any act or omission of any Governmental Authority, and none of the above shall affect or impair, or prevent the vesting of, any of the Issuing Lender’s or its Affiliates’ rights or powers hereunder. Nothing in the preceding sentence shall relieve the Issuing Lender from liability for the Issuing Lender’s gross negligence or willful misconduct or breach in bad faith by the Issuing Lender of its obligations under this Agreement (as determined by a court of competent jurisdiction in a final, non-appealable judgment) in connection with actions or omissions described in such clauses (i) through (viii) of such sentence. In no event shall the Issuing Lender or its Affiliates be liable to any Loan Party for any indirect, consequential, incidental, punitive, exemplary or special damages or expenses (including without limitation attorneys’ fees), or for any damages resulting from any change in the value of any property relating to a Letter of Credit.
Without limiting the generality of the foregoing, the Issuing Lender and each of its Affiliates
(A) may rely on any oral or other communication believed in good faith by the Issuing Lender or such Affiliate to have been authorized or given by or on behalf of the applicant for a Letter of Credit, (B) may honor any presentation if the documents presented appear on their face substantially to comply with the terms and conditions of the relevant Letter of Credit; (C) may honor a previously dishonored presentation under a Letter of Credit, whether such dishonor was pursuant to a court order, to settle or compromise any claim of wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the same extent as if such presentation had initially been honored, together with any interest paid by the Issuing Lender or its Affiliates; (D) may honor any drawing that is payable upon presentation of a statement advising negotiation or payment, upon receipt of such statement (even if such statement indicates that a draft or other document is being delivered separately), and shall not be liable for any failure of any such draft or other document to arrive, or to conform in any way with the relevant Letter of Credit; (E) may pay any paying or negotiating bank claiming that it rightfully honored under the laws or practices of the place where such bank is located; and (F) may settle or adjust any claim or demand made on the Issuing Lender or its Affiliates in any way related to any order issued at the applicant’s request to an air carrier, a letter of guarantee or of indemnity issued to a carrier or any similar document (each an “Order”) and honor any drawing in connection with any Letter of Credit that is the subject of such Order, notwithstanding that any drafts or other documents presented in connection with such Letter of Credit fail to conform in any way with such Letter of Credit.
In furtherance and extension and not in limitation of the specific provisions set forth above, any action taken or omitted by the Issuing Lender or its Affiliates under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith, shall not put the Issuing Lender or its Affiliates under any resulting liability to the Borrower or any Lender.
(j)Issuing Lender Reporting Requirements. The Issuing Lender (if other than the Administrative Agent) shall, on the first Business Day of each month, provide to the Administrative Agent a schedule of the Letters of Credit issued by it, in form and substance satisfactory to the Administrative Agent, showing the date of issuance of each Letter of Credit, the account party, the original face amount (if any), and the expiration date of any Letter of Credit outstanding at any time during the preceding month, and any other information relating to such Letter of Credit that the Administrative Agent may request.
(k)UCP and ISP. Unless otherwise expressly agreed by the Issuing Lender, the Borrower and the beneficiary of a Letter of Credit, (i) the rules of the International Standby Practices as most recently published from time to time by the International Chamber of Commerce (the “ISP”) shall apply to each standby Letter of Credit and (ii) the rules of the Uniform Customs and Practice for Documentary Credits as most recently published from time to time by the International Chamber of Commerce (the “UCP”) shall apply to each commercial Letter of Credit. Notwithstanding the foregoing, the Issuing Lender shall not be responsible to the Borrower for, and the Issuing Lender’s rights and remedies against the Borrower shall not be impaired by, any action or inaction of the Issuing Lender required or permitted under any law, order or practice that is required or permitted to be applied to any Letter of Credit or this Agreement, including the Law or any order of a jurisdiction where the Issuing Lender or the beneficiary is located, the practice stated in the ISP or UCP, as applicable, or in the decisions, opinions, practice statements, or official commentary of the ICC Banking Commission, the Bankers Association for Finance and Trade - International Financial Services Association (BAFT-IFSA), or the Institute of International Banking Law & Practice, whether or not any Letter of Credit chooses such law or practice.
(l)Letters of Credit Issued for Loan Parties. Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Loan Party other than the Borrower, the Borrower shall be obligated to reimburse the Issuing Lender hereunder for any and all drawings under such Letter of Credit. The Borrower hereby acknowledges that the issuance of Letters of Credit for the account of any other Loan Party inures to the benefit of the Borrower, and that the Borrower’s business derives substantial benefits from the businesses of such other Loan Parties.
2.1Payments.
(a)Payments Generally. All payments and prepayments to be made in respect of principal, interest, Unused Commitment Fees, Letter of Credit Fees, other fees referred to in Section 2.6 or other fees or amounts due from the Borrower hereunder shall be payable prior to 11:00 a.m. on the date when due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Borrower, and without set-off, counterclaim or other deduction of any nature, and an action therefor shall immediately accrue. Such payments shall be made to the Administrative Agent at the Principal Office for the account of the Lenders or the Issuing Lender to which they are owed, in each case in U.S. Dollars and in immediately available funds. The Administrative Agent shall promptly distribute such amounts to the Issuing Lender and/or applicable Lenders in immediately available funds. The Administrative Agent’s and each Lender’s statement of account, ledger or other relevant record shall, in the absence of manifest error, be conclusive as the statement of the amount of principal of and interest on the Loans and other amounts owing under this Agreement and shall be deemed an “account stated.”
(b)Payments by the Borrower; Presumptions by the Administrative Agent. Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing
Lender hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Lender, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Lender, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Lender, with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
2.2Interest Payment Dates. Interest on Daily Simple SOFR Rate Loans, Quoted Rate Loans and ABR Loans shall be due and payable in arrears on each applicable Interest Payment Date through the last day of the immediately preceding calendar month. Interest on Term SOFR Rate Loans shall be due and payable in arrears on each applicable Interest Payment Date. Interest on mandatory prepayments of principal under Section 2.12 shall be due on the date such mandatory prepayment is due. Interest on the principal amount of each Loan not constituting an ABR Loan, Quoted Rate Loan, Daily Simple SOFR Rate Loan or Term SOFR Rate Loan or on other monetary Obligation shall be due and payable on demand after such principal amount or other monetary Obligation becomes due and payable (whether on the stated Maturity Date, upon an accelerated Maturity Date or otherwise).
2.3Voluntary Prepayments and Reduction of Commitments.
(a)Right to Prepay.
(i)The Borrower shall have the right at its option from time to time to prepay the Loans in whole or part without premium or penalty (except as provided in this Section 2.11(a) and Section 3.5). Whenever the Borrower desires to prepay any part of the Loans, it shall provide a prepayment notice to the Administrative Agent by 11:00 a.m. at least (A) three U.S. Government Securities Business Days prior to the date of prepayment of Term SOFR Rate Loans, (B) one U.S. Government Securities Business Day prior to the date of prepayment of Daily Simple SOFR Rate Loans, or (C) one Business day prior to the date of prepayment of ABR Loans or Quoted Rate Loans, setting forth the following information:
(w)the date, which shall be a Business Day, on which the proposed prepayment is to be made;
(x)a statement indicating the application of the prepayment among Class of Loan and Borrowings so long as no Default or Event of Default has occurred and is continuing;
(y)the total principal amount of such prepayment, which shall not be less than the lesser of the following with respect to any Class of Loan:
(1)the then outstanding principal amount of such Class of Loan, or
(2)$1,000,000 (provided, that the amount of any prepayment to which this Section 2.11(a)(i)(y)(2) applies shall be in integral multiples of $500,000); and
(z)if applicable, a statement indicating the Borrower’s election to apply the prepayment to unpaid installments of principal under the
Term Facility in direct order of maturity in accordance with Section 2.11(a)(iii) below.
(ii)All prepayment notices shall be irrevocable. The principal amount of the Loans for which a prepayment notice is given, together with interest on such principal amount (except with respect to Loans to which the Daily Simple SOFR Rate Option or ABR Rate Option applies), shall be due and payable on the date specified in such prepayment notice as the date on which the proposed prepayment is to be made.
(iii)All prepayments of the Term Facility pursuant to this Section 2.11 shall be applied to unpaid installments of principal under the Term Facility, in inverse order of scheduled maturities; provided, however, upon written notice to the Administrative Agent, the Borrower may elect to apply such prepayment, first, to unpaid installments of principal under the Term Facility due within one year following the date of such prepayment to such installments in direct order of maturity.
(iv)Except as provided in Section 2.12 or Section 9.2(d), if the Borrower prepays a Loan but fails to specify the applicable Class and/or Borrowing that the Borrower intends to prepay or if an Event of Default has occurred and is continuing, then such prepayment shall be applied, first, to Protective Advances, second, to any Overadvances, third, to any Letter of Credit Borrowings, fourth, to Revolving Term Advances, fifth, to Term Advances (and, with respect to such prepayments applied to unpaid installments of principal under the Term Facility, in inverse order of their respective maturities), sixth, to Cash Collateralize all outstanding Letter of Credit Obligations and, seventh, to other Secured Obligations in such order as the Administrative Agent may determine in its sole discretion, and all such prepayments shall first be applied to Daily Simple SOFR Rate Loans, second to Quoted Rate Loans (and, among such Quoted Rate Loans, first to those with the earliest expiring Quoted Rate Periods), then to Term SOFR Rate Loans (and, among such Term SOFR Rate Loans, first to those with the earliest expiring Interest Periods). Any prepayment hereunder shall include all interest and fees due and payable with respect to the Loan being prepaid (except with respect to Loans to which the Daily Simple SOFR Rate Option or ABR Rate Option applies) and shall be subject to the Borrower’s obligation to indemnify the Lenders under Section 3.5.
(b)Reduction of Commitments. The Borrower shall have the right at any time after the Closing Date upon five Business Days’ prior written notice to the Administrative Agent to permanently reduce (ratably among the Revolving Term Lenders in proportion to their Pro Rata Shares of) the Aggregate Revolving Term Commitment Amount, in a minimum amount of
$2,000,000 and whole multiples of $1,000,000, or to terminate completely all Revolving Term Commitments, without penalty or premium; provided that any such reduction or termination shall be accompanied by (x) prepayment of the Revolving Term Advances and Cash Collateralization of the Letter of Credit Obligations to the extent necessary to cause the aggregate Revolving Term Facility Usage after giving effect to such prepayments to be equal to or less than the Revolving Term Commitments as so reduced or terminated and (y) payment of the full amount of interest accrued on the principal sum to be prepaid. The Revolving Term Commitments shall terminate in their entirety on the Revolving Term Commitment Termination Date. Any notice to reduce the Aggregate Revolving Term Commitment Amount under this Section 2.11(b) shall be irrevocable.
2.4Mandatory Prepayments.
(a)Overadvance. If the Revolving Term Facility Usage shall on any date exceed the Aggregate Revolving Term Commitment Amount (an “Overadvance”), the Borrower shall on such date prepay the Revolving Term Advances (or Cash Collateralize Letter of Credit Obligations in an amount not less than the Minimum Collateral Amount, if prepayment in full of the Revolving Term Advances is not sufficient) in such amounts as shall be necessary so that the Revolving Term Facility Usage does not exceed the Aggregate Revolving Term Commitment Amount.
(b)Disposition of Assets. Within five Business Days of any Disposition not expressly permitted by Section 7.7, the Borrower shall prepay the Secured Obligations in an aggregate amount equal to 100% of the Net Cash Proceeds of such Disposition. Notwithstanding the foregoing and provided no Default or Event of Default has occurred and is continuing, such prepayment shall not be required to the extent a Loan Party reinvests the Net Cash Proceeds of such Disposition in productive assets (other than inventory unless such Net Cash Proceeds result from a Disposition with respect to inventory) of a kind then used or usable in the business of such Loan Party, within one year after the date of such Disposition (or enters into a binding commitment thereof within said one year period and subsequently makes such reinvestment within 90 days of the end of the initial one year period); provided that the Borrower notifies the Administrative Agent in writing of such Loan Party’s intent to reinvest and of the completion of such reinvestment at the time such proceeds are received and when such reinvestment occurs, respectively.
(c)Casualty Events. (i) During such time as no Default or Event of Default has occurred and is continuing, not later than five Business Days following the receipt by any Loan Party of the proceeds of insurance, condemnation award, or other compensation in respect of any Casualty Event or series of related Casualty Events affecting any property of any Loan Party, the Borrower shall prepay or cause such other Loan Party to prepay the Secured Obligations in an aggregate amount equal to 100% of the Net Cash Proceeds of such Casualty Event(s) to the extent the aggregate amount of such Net Cash Proceeds exceeds $5,000,000 during any fiscal year of the Borrower, and (ii) during the continuation of a Default or an Event of Default, not later than one Business Day following the receipt by any Loan Party of the proceeds of insurance, condemnation award, or other compensation in respect of any Casualty Event or series of related Casualty Events affecting any property of any Loan Party, the Borrower shall prepay or cause such other Loan Party to prepay the Secured Obligations in an aggregate amount equal to 100% of the Net Cash Proceeds of such Casualty Event(s). Notwithstanding the foregoing and provided no Default or Event of Default has occurred and is continuing, such prepayment shall not be required to the extent a Loan Party reinvests the Net Cash Proceeds of such Casualty Event in the repair, replacement or purchase of productive assets (other than inventory unless such Net Cash Proceeds result from a Casualty Event with respect to inventory) of a kind then used or usable in the business of such Loan Party, within one year after the date of such Casualty Event (or enters into a binding commitment thereof within said one year period and subsequently makes such reinvestment within 90 days of the end of the initial one year period); provided that the Borrower notifies the Administrative Agent in writing of such Loan Party’s intent to reinvest and of the completion of such reinvestment at the time such proceeds are received and when such reinvestment occurs, respectively.
(d)Equity Issuances. Immediately upon any Equity Issuance not expressly permitted under Section 7.12, the Borrower shall prepay the Secured Obligations in an aggregate amount equal to 100% of the Net Cash Proceeds received by any Loan Party or Subsidiary with respect to such Equity Issuance. Notwithstanding the foregoing and provided no Default or Event of Default has occurred and is continuing, such prepayment shall not be required to the extent a Loan Party reinvests the Net Cash Proceeds of such Equity Issuance in productive assets of a kind then used or usable in the business of such Loan Party, within one year after the date of such Equity
Issuance (or enters into a binding commitment thereof within said one year period and subsequently makes such reinvestment within 90 days of the end of the initial one year period); provided that the Borrower notifies the Administrative Agent in writing of such Loan Party’s intent to reinvest and of the completion of such reinvestment at the time such proceeds are received and when such reinvestment occurs, respectively.
(e)Debt Incurrence. Immediately upon the receipt of the Net Cash Proceeds of any Debt Incurrence not expressly permitted under Section 7.1, the Borrower shall prepay the Obligations in an amount equal to 100% of the amount of such Net Cash Proceeds.
(f)Application Among Obligations. All prepayments pursuant to this Section
2.12 shall be applied in the following order: (i) first, to any Protective Advances that may be outstanding, (ii) second, on a pro rata basis to any Overadvances that may be outstanding, (iii) third, on a pro rata basis to principal installments under the Term Facility (and, with respect to such prepayments applied to unpaid installments of principal under the Term Facility, in inverse order of their maturities), (iv) fourth, on a pro rata basis to the principal balance of the Revolving Term Facility (and the Aggregate Revolving Term Commitment Amount shall be permanently reduced by the amount so prepaid) and to Cash Collateralize outstanding Letter of Credit Obligations in an amount not less than the Minimum Collateral Amount and (v) fifth, to other Secured Obligations in such order as the Administrative Agent may determine in its sole discretion.
(g)Interest Payments; Application Among Interest Rate Options. All prepayments pursuant to this Section 2.12 shall be accompanied by accrued and unpaid interest upon the principal amount of each such prepayment. Subject to Section 2.12(f), all prepayments required pursuant to this Section 2.12 shall first be applied to Daily Simple SOFR Rate Loans, second to Quoted Rate Loans (and, among such Quoted Rate Loans, first to those with the earliest expiring Quoted Rate Periods), then to Term SOFR Rate Loans (and, among such Term SOFR Rate Loans, first to those with the earliest expiring Interest Periods). In accordance with Section 3.5, the Borrower shall indemnify the Lenders for any loss or expense, including loss of margin, incurred with respect to any such prepayments applied against Term SOFR Rate Loans or Quoted Rate Loans on any day other than the last day of the applicable Interest Period or Quoted Rate Period.
(h)No Waiver. Notwithstanding anything herein to the contrary, no prepayment made pursuant to this Section 2.12 shall constitute or be deemed to be a cure of any Default or Event of Default arising as a result of any Disposition, Casualty Event, Equity Issuance, Debt Incurrence or otherwise.
2.5Sharing of Payments by Lenders. If any Lender shall, by exercising any right of setoff, counterclaim or banker’s lien, by receipt of voluntary payment, by realization upon security, or by any other non-pro rata source or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or other Obligations resulting in such Lender receiving payment of a proportion of the aggregate amount of its Loans and accrued interest thereon or other such Obligations greater than its pro-rata share of the amount such Lender is entitled hereunder, then the Lender receiving such greater proportion shall
(a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans and such other Obligations of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them, provided that:
(a)if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest (other than as required by Law); and
(b)the provisions of this Section 2.13 shall not be construed to apply to
(x) any payment (including the application of funds arising from the existence of a Defaulting Lender) made by the Loan Parties pursuant to and in accordance with the express terms of the Loan Documents or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or Participation Advances to any assignee or participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this Section 2.13 shall apply).
Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against each Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of each Loan Party in the amount of such participation. This Section 2.13 shall not apply to any action taken by any Farm Credit Lender with respect to any Farm Credit Equities held by the Borrower or any cash patronage, whether on account of foreclosure of any Lien thereon, retirement and cancellation of the same, exercise of setoff rights or otherwise.
2.6Defaulting Lenders.
(a)Defaulting Lender Adjustments. Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law:
(i)Waivers and Amendments. Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of Required Lenders.
(ii)Defaulting Lender Waterfall. Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article IX or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 9.2(c) shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, to the payment of any amounts owing by such Defaulting Lender to the Issuing Lender hereunder; third, to Cash Collateralize in an amount not less than the Minimum Collateral Amount of the Issuing Lender’s Fronting Exposure with respect to such Defaulting Lender in accordance with Section 2.15; fourth, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Borrower, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement and (y) Cash Collateralize in an amount not less than the Minimum Collateral Amount of the Issuing Lender’s future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement, in accordance with Section 2.15; sixth, to the payment of any amounts owing to the Lenders or the Issuing Lender as a result of any judgment of a court of competent jurisdiction obtained by any
Lender or the Issuing Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans or Letter of Credit Obligations in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made or the related Letters of Credit were issued at a time when the conditions set forth in Section 4.2 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and Letter of Credit Obligations owed to, all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or Letter of Credit Obligations owed to, such Defaulting Lender until such time as all Loans and funded and unfunded participations in Letter of Credit Obligations are held by the Lenders pro rata in accordance with the Commitments under the applicable Facility without giving effect to Section 2.14(a)(iv) below. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 2.14(a) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.
(iii)Certain Fees.
(A)No Defaulting Lender shall be entitled to receive any Unused Commitment Fee for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).
(B)Each Defaulting Lender shall be entitled to receive Letter of Credit Fees for any period during which that Lender is a Defaulting Lender only to the extent allocable to its Pro Rata Share of the stated amount of Letters of Credit for which it has provided Cash Collateral pursuant to Section 2.15.
(C)With respect to any Unused Commitment Fee or Letter of Credit Fee not required to be paid to any Defaulting Lender pursuant to clause (A) or (B) above, the Borrower shall (x) pay to each Non-Defaulting Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lender’s participation in Letter of Credit Obligations that has been reallocated to such Non-Defaulting Lender pursuant to clause (iv) below, (y) pay to the Issuing Lender the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to the Issuing Lender’s Fronting Exposure to such Defaulting Lender, and (z) not be required to pay the remaining amount of any such fee.
(iv)Reallocation of Participations to Reduce Fronting Exposure. All or any part of such Defaulting Lender’s participation in Letter of Credit Obligations shall be reallocated among the Non-Defaulting Lenders in accordance with their respective Pro Rata Shares (calculated without regard to such Defaulting Lender’s Commitment) but only to the extent that (x) the conditions set forth in Section 4.2 are satisfied at the time of such reallocation (and, unless the Borrower shall have otherwise notified the Administrative Agent at such time, the Borrower shall be deemed to have represented and warranted that
such conditions are satisfied at such time), and (y) such reallocation does not cause any Non-Defaulting Lender’s Pro Rata Share of the Revolving Term Facility Usage to exceed such Non-Defaulting Lender’s Revolving Term Commitment. No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation.
(v)Cash Collateral. If the reallocation described in clause (iv) above cannot, or can only partially, be effected, the Borrower shall, without prejudice to any right or remedy available to it hereunder or under Law, Cash Collateralize the Issuing Lender’s Fronting Exposure in an amount not less than the Minimum Collateral Amount in accordance with the procedures set forth in Section 2.15.
(b)Defaulting Lender Cure. If the Borrower, the Administrative Agent and the Issuing Lender agree in writing that a Lender is no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), that Lender will, to the extent applicable, purchase at par that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Loans and funded and unfunded participations in Letters of Credit to be held pro rata by the Lenders in accordance with the Commitments under the applicable Facility (without giving effect to Section 2.14(a)(iv)), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.
(c)New Letters of Credit. So long as any Lender is a Defaulting Lender, no Issuing Lender shall be required to issue, extend, renew or increase any Letter of Credit unless it is satisfied that it will have no Fronting Exposure after giving effect thereto.
2.7Cash Collateral. At any time that there shall exist a Defaulting Lender, within one Business Day following the written request of the Administrative Agent or the Issuing Lender (with a copy to the Administrative Agent) the Borrower shall Cash Collateralize the Issuing Lender’s Fronting Exposure with respect to such Defaulting Lender (determined after giving effect to Section 2.14(a)(iv) and any Cash Collateral provided by such Defaulting Lender) in an amount not less than the Minimum Collateral Amount.
(a)Grant of Security Interest. The Borrower, and to the extent provided by any Defaulting Lender, such Defaulting Lender, hereby grants to the Administrative Agent, for the benefit of the Issuing Lender, and agrees to maintain, a first priority security interest in all such Cash Collateral as security for the Defaulting Lenders’ obligation to fund participations in respect of Letter of Credit Obligations, to be applied pursuant to clause (b) below. If at any time the Administrative Agent determines that Cash Collateral is subject to any right or claim of any Person other than the Administrative Agent and the Issuing Lender as herein provided, or that the total amount of such Cash Collateral is less than the Minimum Collateral Amount, the Borrower will, promptly upon demand by the Administrative Agent, pay or provide to the Administrative Agent
additional Cash Collateral in an amount sufficient to eliminate such deficiency (after giving effect to any Cash Collateral provided by the Defaulting Lender).
(b)Application. Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided under this Section 2.15 or Section 2.14 in respect of Letters of Credit shall be applied to the satisfaction of the Defaulting Lender’s obligation to fund participations in respect of Letter of Credit Obligations (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) for which the Cash Collateral was so provided, prior to any other application of such property as may otherwise be provided for herein.
(c)Termination of Requirement. Cash Collateral (or the appropriate portion thereof) provided to reduce the Issuing Lender’s Fronting Exposure shall no longer be required to be held as Cash Collateral pursuant to this Section 2.15 following (i) the elimination of the applicable Fronting Exposure (including by the termination of Defaulting Lender status of the applicable Lender), or (ii) the determination by the Administrative Agent and the Issuing Lender that there exists excess Cash Collateral; provided that, subject to Section 2.14, the Person providing Cash Collateral and the Issuing Lender may agree that Cash Collateral shall be held to support future anticipated Fronting Exposure or other obligations and provided further that to the extent that such Cash Collateral was provided by the Borrower or any other Loan Party, such Cash Collateral shall remain subject to the Prior Security Interest granted pursuant to the Loan Documents.
2.8Farm Credit Equity and Security.
(a)Each party hereto acknowledges that the bylaws and capital plan (as each may be amended from time to time) of each Farm Credit Lender shall govern (i) the rights and obligations of the parties with respect to the Farm Credit Equities and any patronage refunds or other distributions made on account thereof or on account of the Borrower’s patronage with such Farm Credit Lender, (ii) the Borrower's eligibility for patronage distributions from each Farm Credit Lender (in the form of Farm Credit Equities and cash) and (iii) patronage distributions, if any, in the event of a sale of a participation interest. Each Farm Credit Lender reserves the right to assign or sell participations in all or any part of its (or its Affiliate’s) Commitments or outstanding Loans hereunder on a non-patronage basis.
(b)Notwithstanding anything herein or in any other Loan Document, each party hereto acknowledges that: (i) each Farm Credit Lender has a statutory first Lien pursuant to the Farm Credit Act of 1971 (as amended from time to time) on the applicable Farm Credit Equities that the Borrower may now own or hereafter acquire, which statutory Lien shall be for such Farm Credit Lender’s (or its Affiliate’s) sole and exclusive benefit; (ii) during the existence of any Event of Default, each Farm Credit Lender may at its sole discretion, but shall not be required to, foreclose on its statutory first Lien on the applicable Farm Credit Equities and/or set off the value thereof or of any cash patronage against the Secured Obligations; (iii) during the existence of any Event of Default, each Farm Credit Lender may at its sole discretion, but shall not be required to, without notice except as required by applicable Law, retire and cancel all or part of the applicable Farm Credit Equities owned by or allocated to the Borrower in accordance with the Farm Credit Act of 1971 (as amended from time to time) and any regulations promulgated pursuant thereto in total or partial liquidation of the Secured Obligations for such value as may be required pursuant applicable Law and the bylaws and capital plan of such Farm Credit Lender (as each may be amended from time to time); (iv) the Farm Credit Equities shall not constitute security for the Secured Obligations due to any other Person; (v) to the extent that any of the Loan Documents create a Lien on the Farm Credit Equities, such Lien shall be for the applicable Farm Credit Lender’s (or its Affiliate’s) sole
and exclusive benefit and shall not be subject to pro rata sharing hereunder; (vi) any setoff effectuated pursuant to the preceding clauses (ii) or (iii) may be undertaken whether or not the Secured Obligations are currently due and payable; and (vii) no Farm Credit Lender shall have any obligation to retire the applicable Farm Credit Equities upon any Event of Default, Default or any other default by the Borrower or any other Loan Party, or at any other time, either for application to the Secured Obligations or otherwise. The Borrower acknowledges that any corresponding tax liability associated with the application of the value of any Farm Credit Equities to any portion of the Secured Obligations is the sole responsibility of Borrower.
III.INCREASED COSTS; TAXES; ILLEGALITY; INDEMNITY
3.1Increased Costs.
(a)Increased Costs Generally. If any Change in Law shall:
(i)impose, modify or deem applicable any reserve (including pursuant to regulations issued from time to time by the Board for determining the maximum reserve requirement (including any emergency, special, supplemental or other marginal reserve requirement) with respect to eurocurrency funding (currently referred to as “Eurocurrency liabilities” in Regulation D)), special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender or the Issuing Lender;
(ii)subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or
(iii)impose on any Lender or the Issuing Lender any other condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making, converting to, continuing or maintaining any Loan or of maintaining its obligation to make any such Loan, or to increase the cost to such Lender, the Issuing Lender or such other Recipient of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender, Issuing Lender or other Recipient hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, Issuing Lender or other Recipient, the Borrower will pay to such Lender, Issuing Lender or other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender, Issuing Lender or other Recipient, as the case may be, for such additional costs incurred or reduction suffered.
(b)Capital Requirements. If any Lender or the Issuing Lender determines that any Change in Law affecting such Lender or the Issuing Lender or any lending office of such Lender or such Lender’s or the Issuing Lender’s holding company, if any, regarding capital or liquidity requirements, has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Lender’s capital or on the capital of such Lender’s or the Issuing Lender’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the
Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Lender, to a level below that which such Lender or the Issuing Lender or such Lender’s or the Issuing Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Lender’s policies and the policies of such Lender’s or the Issuing Lender’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the Issuing Lender, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Lender or such Lender’s or the Issuing Lender’s holding company for any such reduction suffered.
(c)Certificates for Reimbursement. A certificate of a Lender or the Issuing Lender setting forth the amount or amounts necessary to compensate such Lender or the Issuing Lender or its holding company, as the case may be, as specified in this Section 3.1 and delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Lender, as the case may be, the amount shown as due on any such certificate within ten
(10) days after receipt thereof.
(d)Delay in Requests. Failure or delay on the part of any Lender or the Issuing Lender to demand compensation pursuant to this Section 3.1 shall not constitute a waiver of such Lender’s or the Issuing Lender’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or the Issuing Lender pursuant to this Section 3.1 for any increased costs incurred or reductions suffered more than nine (9) months prior to the date that such Lender or the Issuing Lender, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the Issuing Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine month period referred to above shall be extended to include the period of retroactive effect thereof).
3.2Taxes.
(a)Defined Terms. For purposes of this Section 3.2, the term “Lender” includes the Issuing Lender and the term “applicable Law” includes FATCA.
(b)Payments Free of Taxes. Any and all payments by or on account of any obligation of any Loan Party hereunder or under any other Loan Document shall be made free and clear of and without deduction or withholding for any Taxes, except as required by applicable Law. If any applicable Law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable Law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 3.2) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.
(c)Payment of Other Taxes by the Borrower. The Loan Parties shall timely pay to the relevant Governmental Authority in accordance with applicable Law, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.
(d)Indemnification by the Borrower. The Loan Parties shall jointly and severally indemnify each Recipient, within ten days after demand therefor, for the full amount of
any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 3.2) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error. Each of the Loan Parties shall, and does hereby agree to, jointly and severally indemnify the Administrative Agent, and shall make payment in respect thereof within ten days after demand therefor, for any amount which a Lender for any reason fails to pay indefeasibly to the Administrative Agent as required pursuant to Section 3.2(e) below.
(e)Indemnification by the Lenders. Each Lender shall severally indemnify the Administrative Agent, within ten days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that the applicable Loan Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Loan Parties to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 11.8 relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this paragraph (e).
(f)Evidence of Payments. As soon as practicable after any payment of Taxes by any Loan Party to a Governmental Authority pursuant to this Section 3.2, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(g)Status of Lenders.
(i)Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable Law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 3.2(g)(ii)(A), (g)(ii)(B) and (g)(ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material
unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.
(ii)Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Borrower:
(A)any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed copies of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding Tax;
(B)any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:
(1)in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN or IRS Form W-8BEN-E establishing an exemption from, or reduction of,
U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;
(2)executed copies of IRS Form W-8ECI;
(3)in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a Tax Compliance Certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code and (y) executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E; or
(4)to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or IRS Form W-8BEN-E, a Tax Compliance Certificate, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a Tax Compliance Certificate on behalf of each such direct and indirect partner;
(C)any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed copies of any other form prescribed by applicable Law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable Law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and
(D)if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.
(h)Treatment of Certain Refunds. If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 3.2 (including by the payment of additional amounts pursuant to this Section 3.2), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 3.2 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (h) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (h), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (h) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
(i)Survival. Each party’s obligations under this Section 3.2 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all Secured Obligations.
3.3Illegality. If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable lending office to make, maintain or fund any Loans (other than ABR Loans) or to determine or charge interest based upon any Benchmark, then, upon notice thereof by such Lender to the Borrower (through the Administrative Agent), any obligation of the Lenders to make such Loans, and any right of the Borrower to continue such Loans or to convert to such Loans, shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, if necessary to avoid such illegality, upon demand from any Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all such Loans to ABR Loans,
(a)if such Loans are not subject to an Interest Period or Quoted Rate Period,
immediately, or
(b)if such Loans are subject to an Interest Period or Quoted Rate Period, on the last day of the Interest Period or Quoted Rate Period therefor, if all affected Lenders may lawfully continue to maintain such Loans to such day, or immediately, if any Lender may not lawfully continue to maintain such Loans to such day, and
in each case until the Administrative Agent is advised in writing by each affected Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon such Benchmark. Upon any such prepayment or conversion, the Borrower shall also pay accrued and unpaid interest on the amount so prepaid or converted, together with any additional amounts required pursuant to Section 3.5.
3.4Inability to Determine Rate. Subject to Section 3.8, if, on or prior to the commencement of any Interest Period (or, in the case of any Benchmark that is not subject to an Interest Period, on any Business Day):
(a)the Administrative Agent determines (which determination shall be conclusive and binding absent manifest error) that for any reason (other than a Benchmark Transition Event) any Benchmark cannot be determined pursuant to the definition thereof;
(b)the Required Lenders determine that for any reason in connection with any request for a Loan that is subject to an Interest Period or a conversion thereto or a continuation thereof that the Benchmark for any requested Interest Period with respect to a proposed Loan does not adequately and fairly reflect the cost to such Lenders of making and maintaining such Loans, and the Required Lenders have provided notice of such determination to the Administrative Agent; or
(c)the Required Lenders determine that for any reason in connection with any request for a Loan that is not subject to an Interest Period (other than an ABR Loan) or a conversion thereto or a continuation thereof or the maintaining thereof that the Benchmark with respect to a proposed Loan or outstanding Loan does not adequately and fairly reflect the cost to such Lenders of making or maintaining such Loans, and the Required Lenders have provided notice of such determination to the Administrative Agent,
then the Administrative Agent shall give notice thereof to the Borrower and the Lenders.
Upon notice thereof by the Administrative Agent to the Borrower,
(1)any obligation of the Lenders to make such Loans that are subject to an Interest Period, and any right of the Borrower to continue such Loans or to convert to such Loans, shall be suspended (to the extent of the affected Loans or affected Interest Periods) until the Administrative Agent (with respect to clause (b), at the instruction of the Required Lenders) revokes such notice;
(2)any obligation of the Lenders to make or maintain such Loans that are not subject to an Interest Period (other than ABR Loans), and any right of the Borrower to continue such Loans or to convert to such Loans (other than ABR Loans), shall be suspended (to the extent of the affected Loans) until the Administrative Agent (with respect to clause (c), at the instruction of the Required Lenders) revokes such notice;
(3)the Borrower may revoke any pending request for a borrowing of, conversion to or continuation of such Loans (to the extent of the affected Loans or affected Interest Periods) or, failing that, the Borrower will be deemed to have converted any such request into a request for a Borrowing of or conversion to ABR Loans in the amount specified therein; and
(4)any outstanding affected Loans will be deemed to have been converted into ABR Loans at the end of the applicable Interest Period (or if such Loans are not subject to an Interest Period, immediately) and, upon any such conversion, the Borrower shall also pay accrued interest on the amount so converted, together with any additional amounts required pursuant to Section 3.5.
3.1Indemnity. Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense attributable to or incurred by it as a result of:
(a)any continuation, conversion, payment or prepayment of any Loan that is subject to an Interest Period or Quoted Rate Period on a day other than the last day of the Interest Period or Quoted Rate Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);
(b)any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Loan subject to an Interest Period or Quoted Rate Period on the date or in the amount notified by the Borrower; or
(c)any assignment of a Loan subject to an Interest Period or Quoted Rate Period on a day other than the last day of the Interest Period or Quoted Rate Period therefor as a result of a request by the Borrower pursuant to Section 3.6;
including any loss of anticipated profits and any loss, cost or expenses arising from the liquidation or reemployment of funds or from any fees payable. The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.
3.2Mitigation Obligations; Replacement of Lenders.
(a)Designation of a Different Lending Office. If any Lender requests compensation under Section 3.1, or requires any Loan Party to pay any Indemnified Taxes or
additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.2, then such Lender shall (at the request of the Borrower) use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.1 or Section 3.2, as the case may be, in the future, and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
(b)Replacement of Lenders. If any Lender requests compensation under Section 3.1, or if the Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.2 and, in each case, such Lender has declined or is unable to designate a different lending office in accordance with Section 3.6(a) above or if any Lender is a Defaulting Lender or a Non-Consenting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 11.8), all of its interests, rights (other than its existing rights to payments pursuant to Section 3.1 or 3.2) and obligations under this Agreement and the related Loan Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that:
(i)the Borrower shall have paid to the Administrative Agent the assignment fee (if any) specified in Section 11.8;
(ii)such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in Letter of Credit drawings, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.5) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);
(iii)in the case of any such assignment resulting from a claim for compensation under Section 3.1 or payments required to be made pursuant to Section 3.2, such assignment will result in a reduction in such compensation or payments thereafter;
(iv)such assignment does not conflict with applicable Law; and
(v)in the case of any assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable assignee shall have consented to the applicable amendment, waiver or consent.
A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
3.3Survival. Each party’s obligations under this Article III shall survive the resignation of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.
3.4Benchmark Replacement Setting. Notwithstanding anything to the contrary herein or in any other Loan Document (and, for the avoidance of doubt, any Secured Bank Product or Hedge Agreement shall be deemed not to be a “Loan Document” for purposes of this Section 3.8:
(a)Replacing Benchmarks. Upon the occurrence of a Benchmark Transition Event as to any Benchmark, the applicable Benchmark Replacement will replace the applicable then-current Benchmark for all purposes hereunder and under any Loan Document in respect of any setting of such Benchmark at or after 3:00 p.m. on the fifth Business Day after the date notice of such Benchmark Replacement is provided to the affected Lenders without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document so long as the Administrative Agent has not received, by such time, written notice of objection to such Benchmark Replacement from the Required Lenders. At any time that the administrator of the applicable then-current Benchmark has permanently or indefinitely ceased to provide such Benchmark or such Benchmark has been announced by the regulatory supervisor for the administrator of such Benchmark pursuant to public statement or publication of information to be not representative of the underlying market and economic reality that such Benchmark is intended to measure and that representativeness will not be restored, the Borrower may revoke any request for a borrowing of, conversion to or continuation of Loans to be made, converted or continued that would bear interest by reference to such Benchmark until the Borrower’s receipt of notice from the Administrative Agent that a Benchmark Replacement has replaced such Benchmark, and, failing that, the Borrower will be deemed to have converted any such request into a request for a borrowing of or conversion to ABR Loans. During the period referenced in the foregoing sentence, the component of the Alternate Base Rate based upon such Benchmark (if any) will not be used in any determination of the Alternate Base Rate.
(b)Benchmark Replacement Conforming Changes. In connection with the use, administration, adoption or implementation of a Benchmark Replacement, the Administrative Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document.
(c)Notices; Standards for Decisions and Determinations. The Administrative Agent will promptly notify the Borrower and the Lenders of (i) the implementation of any Benchmark Replacement, and (ii) the effectiveness of any Benchmark Replacement Conforming Changes in connection with the use, administration, adoption or implementation of a Benchmark Replacement. The Administrative Agent will notify the Borrower of the removal or reinstatement of any tenor of a Benchmark pursuant to Section 3.8(d). Any determination, decision or election that may be made by the Administrative Agent or, if applicable, any Lender (or group of Lenders) pursuant to this Section 3.8, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party hereto or any other Loan Document, except, in each case, as expressly required pursuant to this Section 3.8.
(d)Unavailability of Tenor of Benchmark. At any time (including in connection with the implementation of a Benchmark Replacement), (i) if the applicable then- current Benchmark is a term rate (including the Term SOFR Rate), then the Administrative Agent may remove any tenor of such Benchmark that is unavailable or non-representative for Benchmark (including Benchmark Replacement) settings and (ii) the Administrative Agent may reinstate any
such previously removed tenor for such Benchmark (including any applicable Benchmark Replacement) settings.
IV.CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT
4.1Conditions Precedent to Initial Credit Extension. The obligation of the Lenders and the Issuing Lender to effect any Credit Extension is subject to the condition precedent that, on or before the day of the first Credit Extension, the Administrative Agent shall have received the following, each in form and substance satisfactory to the Administrative Agent (and the initial Credit Extensions of the Lenders and the Issuing Lender on the date hereof shall be deemed to be an agreement by the Administrative Agent, the Lenders and the Issuing Lender that the following conditions have been satisfied):
(a)this Agreement and each of the other Loan Documents signed by an Authorized Officer of each Loan Party and a duly authorized officer of each Lender;
(b)a certificate of each of the Loan Parties signed by an Authorized Officer of each such Loan Party, dated the Closing Date, stating that (i) all representations and warranties of the Loan Parties set forth in this Agreement and the other Loan Documents are true and correct on and as of the date hereof (including without limitation the representation as to solvency of the Loan Parties set forth in Section 5.19 and the representation as to litigation set forth in Section 5.9),
(ii) no Default or Event of Default exists under the Credit Agreement (after giving effect thereto, the making of any Credit Extensions on the date hereof and the Merger), the other Loan Documents or any of the Existing Debt Facilities, (iii) the Borrower is in pro forma compliance with each of the Financial Covenants calculated as of the date hereof (after giving effect to the Credit Agreement, the making of any Credit Extensions on the date hereof and the Merger), (iv) no Material Adverse Change has occurred since December 31, 2018, (v) the Merger has been fully consummated and made effective (and attaching thereto true, correct and complete copies of the Merger Agreement and all other Merger Documents) and (vi) each of the Loan Parties qualifies as an eligible institution for purposes of obtaining financing from the Administrative Agent and the Lead Arrangers, in their capacities as Lenders;
(c)certificates dated the Closing Date and signed by an Authorized Officer of each of the Loan Parties, certifying (i) that the execution, delivery and performance of the Loan Documents and other documents entered into pursuant to this Agreement to which any Loan Party is a party were duly approved by all necessary action of the Governing Board of such Loan Party, and attaching true and correct copies of the applicable resolutions granting such approval; (ii) that attached to such certificates are true and correct copies of the Organizational Documents as in effect on the Closing Date certified by the appropriate state official where such documents are filed in a state office (if so filed or required to be so filed) together with certificates from the appropriate state officials as to the continued existence and good standing or existence (as applicable) of each Loan Party in the state where organized, dated not more than 30 days prior to the Closing Date; and
(iii) the names of the Authorized Officers of each Loan Party that are authorized to sign the Loan Documents entered into pursuant to this Agreement, together with the true signatures of such officers; and the Secured Parties may conclusively rely on such certificates until the Administrative Agent receives a further certificate of an authorized officer of each applicable Loan Party canceling or amending the prior certificate and submitting the signatures of the officers named in such further certificate;
(d)customary written opinions of counsel for the Loan Parties (including any local counsel) covering the jurisdiction of formation of each Loan Party and, if different, the
jurisdiction of the governing law of the Loan Documents delivered on the Closing Date, which opinions shall be duly executed and dated the Closing Date;
(e)evidence that adequate insurance required to be maintained under this Agreement is in full force and effect;
(f)a copy of the Borrower’s and the Consolidated Group’s risk management policies and procedures;
(g)a duly completed Compliance Certificate dated and calculated as of the Closing Date, signed by an Authorized Officer of the Borrower, certifying compliance with each of the Financial Covenants as of the date hereof after giving pro forma effect to the Merger and any Credit Extensions on the date hereof;
(h)a duly completed, executed Loan Request for each Loan and Letter of Credit Request for each Letter of Credit requested to be made on the Closing Date, including notice of election as to Interest Periods or Quoted Rate Periods (if applicable);
(i)Lien searches with respect to the Borrower and each other Loan Party, in scope satisfactory to the Administrative Agent, together with evidence of termination of (or authorization of the Administrative Agent or its designee to terminate) all Liens of record other than Permitted Liens;
(j)UCC financing statements for each appropriate jurisdiction as is necessary, in the Administrative Agent’s sole discretion, to perfect the Administrative Agent’s security interest in the Collateral to the extent such Liens can be perfected by filing;
(k)an executed Landlord Agreement from the lessor, warehouse operator or other applicable Person for each location that is not owned by a Loan Party and at which inventory is located or stored, if applicable;
(l)Real Estate Deliverables:
(i)a Mortgage duly executed by an Authorized Officer of each Loan Party with respect to each parcel of real property owned by such Loan Party;
(ii)a commitment to issue an ALTA title insurance policy or policies insuring the Administrative Agent, for the benefit of the Secured Parties, and in form acceptable to the Administrative Agent (including such endorsements as the Administrative Agent may require), insuring that each Mortgage described in the foregoing clause (i) creates a valid first priority Lien upon the property subject to each such Mortgage, subject only to such exceptions as are acceptable to the Administrative Agent; provided, notwithstanding the foregoing, the requirements of this Section 4.1(l)(ii) shall not apply to the Mortgage in respect of the Albion, Michigan Property;
(iii)a copy of any existing Phase I reports with respect to any parcel of real property owned by such Loan Party;
(iv)[reserved];
(v)evidence that the Loan Parties have taken all actions required under the Flood Laws and/or requested by the Administrative Agent to assist in ensuring that each Lender is in compliance with the Flood Laws applicable to the Collateral, including, but not limited to:
(A)providing the Administrative Agent with the address and/or GPS coordinates of each structure on any improved real property that will be subject to a Mortgage;
(B)obtaining or providing the following documents: (x) a completed standard “life-of-loan” flood hazard determination form, (y) if the improvement(s) to the improved real property is located in a special flood hazard area, a notification to the Borrower (“Borrower Notice”) and (if applicable) notification to the Borrower that flood insurance coverage under the National Flood Insurance Program (“NFIP”) is not available because the community does not participate in the NFIP, and (z) documentation evidencing the Borrower’s receipt of the Borrower Notice (e.g., countersigned Borrower Notice, return receipt of certified U.S. Mail, or overnight delivery),
(C)to the extent required under Section 6.4(b), obtaining flood insurance for such property, structures and contents prior to such property, structures and contents becoming Collateral;
(vi)true, correct and complete copies of each Specified Lease
Agreement;
(m)evidence from the Borrower that all material governmental and third-party consents required to effectuate the Merger and the transactions contemplated hereby have been obtained;
(n)evidence that, upon making any Credit Extension on the Closing Date, the Existing Debt Facilities will have been terminated, all outstanding obligations thereunder will have been paid in full, all letters of credit issued thereunder will have been terminated and all Liens securing such obligations will have been released;
(o)such financial statements, budgets, forecasts, and other financial information as to the Loan Parties and their Subsidiaries as the Administrative Agent or any Lender may have required prior to the Closing Date;
(p)evidence that the Borrower has made a minimum equity investment in each Farm Credit Lender as required by Section 6.10 of this Agreement;
(q)at least five Business Days prior to the Closing Date, all W-9s and other documentation and information requested by (or on behalf of) any Lender in order to comply with requirements of Anti-Terrorism Laws, including, without limitation, the Beneficial Ownership Certification;
(r)[reserved];
(s)such other agreements and documents, and evidence of the receipt of all consents and approvals, as the Administrative Agent or any Lender may request in connection with the transactions contemplated by this Agreement or the other Loan Documents;
(t)payment of all fees and expenses payable on or before the Closing Date as required by this Agreement, the Fee Letter dated as of September 3, 2019, or any other Loan Document; and
(u)appropriate stock powers and certificates evidencing the pledged Collateral and all other original items required to be delivered pursuant to any of the Collateral Documents.
4.2Each Loan or Letter of Credit. The obligation of the Lenders and the Issuing Lender to effect any Credit Extension is subject to the further conditions precedent that, on the date of such Credit Extension:
(a)the representations and warranties of the Loan Parties set forth in the Loan Documents, including without limitation in Article V of this Agreement, shall then be true and correct in all material respects (other than any representations and warranties qualified pursuant to their terms by materiality qualifiers, which representations and warranties shall be true and correct in all respects as written) on and as of the date of such Credit Extension as though made on and as of such date, except for any such representation and warranty that by its terms is made only as of an earlier date, which representation and warranty shall remain true and correct as of such earlier date;
(b)no event has occurred and is continuing, or would result from such Credit Extension, that constitutes a Default or an Event of Default; and
(c)the Borrower shall have delivered a duly executed and completed Loan Request to the Administrative Agent for each Loan requested to be made pursuant to Sections 2.1(b) and 2.2(b) or Letter of Credit Request to the Issuing Lender for each Letter of Credit to be issued pursuant to Section 2.8(a), as the case may be.
Each Loan Request submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified in Section 4.2(a) and (b) have been satisfied on and as of the date of the applicable Credit Extension.
V.REPRESENTATIONS AND WARRANTIES
The Loan Parties, jointly and severally, represent and warrant to the Administrative Agent and each of the other Secured Parties as follows:
5.1Organization and Qualification. Each Loan Party and each Subsidiary of each Loan Party (a) is a corporation, partnership or limited liability company or other entity as identified on Schedule 5.6, in each case duly organized, validly existing and in good standing under the laws of its jurisdiction of organization specified on Schedule 5.6, (b) has the lawful power to own or lease its properties and to engage in the business it presently conducts or proposes to conduct, and (c) is duly licensed or qualified and in good standing in each jurisdiction listed on Schedule 5.1 and in all other jurisdictions where the property owned or leased by it or the nature of the business transacted by it or both makes such licensing or qualification necessary except where the failure to be so duly licensed or qualified could not reasonably be expected to result in a Material Adverse Change. The state of organization and the chief executive office
and principal place of business of each Loan Party and each Subsidiary of each Loan Party are designated as such in Schedule 5.1, each other place of business of each Loan Party is located at the address set forth in Schedule 5.1 and all records relating to their respective businesses are kept at those locations.
5.2Compliance with Laws; Licensing.
(a)Each Loan Party and each Subsidiary of each Loan Party is in compliance with all applicable Laws in all jurisdictions in which any Loan Party or Subsidiary of any Loan Party is presently doing business except where the failure to do so could not reasonably be expected to result in a Material Adverse Change.
(b)Each Loan Party and each of its Subsidiaries (i) is in compliance with and
(ii) has procured and is now in possession of, all material licenses or permits required by any applicable federal, state, provincial or local law or regulation for the operation of its business in each jurisdiction wherein it is now conducting or proposes to conduct business, except where the failure to do so could not reasonably be expected to result in a Material Adverse Change.
(c)Without limiting the foregoing clause (a), each Loan Party and each Subsidiary of each Loan Party is in compliance with (i) all Applicable Food and Feed Safety Laws and (ii) such Loan Party’s or Subsidiary’s own policies and procedures that it implemented to comply with Applicable Food and Feed Safety Laws; in each case except where the failure to do so could not reasonably be expected to result in a Material Adverse Change.
(d)Neither the entry into nor the performance by any Loan Party of the Loan Documents to which it is a party nor the making of any Credit Extension or application of proceeds thereof contravenes any Law applicable to such Loan Party or any of its Subsidiaries.
(e)No Loan Party nor any Subsidiary thereof is an EEA Financial Institution or subject to any Bail-In Action.
5.3Title to Properties. Each Loan Party and each Subsidiary of each Loan Party (a) has good and marketable title to or valid leasehold interest in all properties, assets and other rights that it purports to own or lease or that are reflected as owned or leased on its books and records, and (b) owns or leases all of its properties free and clear of all Liens except Permitted Liens.
5.4Investment Company Act. No Loan Party nor any Subsidiary of any Loan Party
(a) is an “investment company” registered or required to be registered under the Investment Company Act of 1940, as amended, or is under the “control” of an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended, or (b) shall become an “investment company” or under such “control.”
5.5Event of Default. No Event of Default or Default exists or is continuing.
5.6Subsidiaries and Owners. Schedule 5.6 states (a) the name of each Subsidiary of each Loan Party, its jurisdiction of organization and the amount, percentage and type of Equity Interests in such Subsidiary (the “Subsidiary Equity Interests”), (b) any options, warrants or other rights outstanding to purchase any such Equity Interests referred to in clause (a). Each Loan Party has good and marketable title to all of the Subsidiary Equity Interests it purports to own, free and clear of any Lien other than the Lien in favor of the Administrative Agent, and all Subsidiary Equity Interests and all Equity Interests in the Borrower have been validly issued, fully paid and nonassessable. All of the Borrower’s Subsidiaries, if any, are Guarantors.
5.7Power and Authority; Validity and Binding Effect.
(a)Each Loan Party and each Subsidiary of each Loan Party has the full power to enter into, execute, deliver and carry out this Agreement and the other Loan Documents to which it is a party, to incur the Indebtedness contemplated by the Loan Documents and to perform its Obligations under the Loan Documents to which it is a party, and all such actions have been duly authorized by all necessary proceedings on its part.
(b)Each of the Loan Documents (i) has been duly and validly executed and delivered by each Loan Party and (ii) constitutes legal, valid and binding obligations of each Loan Party that is party thereto, enforceable against such Loan Party in accordance with its terms.
5.8No Conflict; Material Agreements; Consents.
(a)Neither the execution and delivery of this Agreement or the other Loan Documents by any Loan Party nor the consummation of the transactions herein or therein contemplated or compliance with the terms and provisions hereof or thereof by any of them will (i) conflict with or constitute a material default under (x) the terms and conditions of the Organizational Documents of any Loan Party, (y) any Material Agreement to which any Loan Party or any of its Subsidiaries is a party or by which it or any of its Subsidiaries is bound or to which it is subject, (z) any applicable Law or any order, writ, judgment, injunction or decree to which any Loan Party or any of its Subsidiaries is a party or by which it or any of its Subsidiaries is bound or to which it is subject, or (ii) result in the creation or enforcement of any Lien, charge or encumbrance upon any property (now or hereafter acquired) of any Loan Party or any of its Subsidiaries (other than Liens granted under the Loan Documents).
(b)There is no default under any Material Agreement or order, writ, judgment, injunction or decree of any Governmental Authority to which any Loan Party or any of its Subsidiaries is a party or by which it or any Subsidiary is bound or to which it is subject that could reasonably be expected to result in a Material Adverse Change.
(c)Except those that have been obtained or made on or prior to the date hereof, no consent, approval, exemption, order or authorization of, or registration or filing with, any Governmental Authority or any other Person is required by any Law or any Material Agreement in connection with the execution, delivery and carrying out of this Agreement and the other Loan Documents or the consummation of the Merger.
(d)Each of the Loan Parties’ Material Agreements is in full force and effect, and no Loan Party has received any notice of termination, revocation or other cancellation (before any scheduled date for termination) in respect thereof.
5.9Litigation. Except as set forth and described in Schedule 5.9, there are no actions, suits, arbitrations, settlements, proceedings or investigations pending or, to the Knowledge of any Loan Party, threatened against such Loan Party or any Subsidiary of such Loan Party at law or in equity before any Governmental Authority which could reasonably be expected to result in a Material Adverse Change, and none of the Loan Parties or any Subsidiaries of any Loan Party is in violation of any order, writ, injunction or any decree of any Governmental Authority which could reasonably be expected to result in a Material Adverse Change.
5.10Financial Statements.
(a)Audited Financial Statements. The audited financial statements of the Borrower and its Subsidiaries most recently delivered by the Borrower in accordance with Section 6.1(b): (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein.
(b)Unaudited Financial Statements. The unaudited financial statements of the Borrower and its Subsidiaries most recently delivered by the Borrower in accordance with Section 6.1(a): (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments.
(c)Accuracy of Financial Statements. Neither the Borrower nor any of its Subsidiaries has any liabilities, contingent or otherwise, or forward or long-term commitments that are not disclosed in the financial statements referred to in clauses (a) and (b) of this Section 5.10 or in the notes thereto, and except as disclosed therein there are no unrealized or anticipated losses from any commitments of the Borrower or any of its Subsidiaries that could reasonably be expected to result in a Material Adverse Change. Notwithstanding the foregoing, to the extent any financial statements (whether provided before or after the date of this Agreement) include budgets, projections or other forward-looking statements (collectively, “Projections”), such Projections are and will be based upon good faith estimates and assumptions believed by the Borrower to be reasonable at the time made. The Administrative Agent and the Lenders acknowledge that the Projections are subject to uncertainties and contingencies and that no representation is given by any Loan Party that any particular Projection will ultimately be realized.
5.11Margin Stock. None of the Loan Parties or any Subsidiaries of any Loan Party engages or intends to engage principally, or as one of its important activities, in the business of extending credit for the purpose, immediately, incidentally or ultimately, of purchasing or carrying margin stock (within the meaning of Regulation U, T or X as promulgated by the Board). No part of the proceeds of any Advance or any Letter of Credit has been or will be used, immediately, incidentally or ultimately, to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock or that is inconsistent with the provisions of the regulations of the Board. None of the Loan Parties or any Subsidiary of any Loan Party holds or intends to hold margin stock in such amounts that more than 25% of the reasonable value of the assets of any Loan Party or Subsidiary of any Loan Party are or will be represented by margin stock.
5.12Full Disclosure. Neither this Agreement nor any other Loan Document, nor any certificate, statement, agreement or other documents furnished to the Administrative Agent or any other Secured Party in connection herewith or therewith, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein, in light of the circumstances under which they were made, not misleading. There is no fact known to any Loan Party with respect to any event or circumstance that could reasonably be expected to result in a Material Adverse Change that has not been set forth in this Agreement or in the certificates, statements, agreements or other documents furnished in writing to the Administrative Agent and the other Secured Parties prior to or at the date hereof in connection with the transactions contemplated hereby. As of the Closing Date, the information included in the Beneficial Ownership Certification is true and correct in all respects.
5.13Taxes. All federal, state, local and other tax returns required to have been filed with respect to each Loan Party and each Subsidiary of each Loan Party have been filed, and payment or adequate provision has been made for the payment of all Taxes that have or may become due pursuant to said returns or to assessments received, except to the extent that (i) such Taxes are being contested in good faith by appropriate proceedings diligently conducted and for which such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made, (ii) the aggregate amount of such Taxes does not exceed the Threshold Amount, and (iii) no foreclosure or similar proceedings have been commenced or notice of Liens filed with respect thereto.
5.14Licenses; Intellectual Property; Other Rights.
(a)Set forth on Schedule 5.14 is a true and complete list and summary description of all Licenses of each Loan Party and each Subsidiary of each Loan Party. No Loan Party has any Knowledge of any basis upon which the renewal of any License would be denied in the future. Each License has been validly issued to the relevant Loan Party or Subsidiary of a Loan Party and is in full force and effect, and no Loan Party nor any Subsidiary of a Loan Party is in violation in any material respect of any such License. Each Loan Party has posted all bonds required under its Licenses.
(b)Each Loan Party and each Subsidiary of each Loan Party owns or possesses all the Intellectual Property and all service marks, trade names, domain names, licenses, registrations, franchises, permits and other rights necessary to own and operate its properties and to carry on its business as presently conducted and planned to be conducted by such Loan Party or Subsidiary, without known possible, alleged or actual conflict with the rights of others.
5.15Liens in the Collateral. The Liens in the Collateral granted to the Administrative Agent for the benefit of the Secured Parties pursuant to the Collateral Documents constitute and will continue to constitute Prior Security Interests in and to the Collateral. All filing fees and other reasonable expenses in connection with the perfection of such Liens have been or will be paid by the Borrower.
5.16Insurance.
(a)The property of each Loan Party and each of its Subsidiaries are insured pursuant to policies and other bonds that are valid and in full force and effect and that provide coverage satisfying or surpassing the requirements set forth in Section 6.4(a).
(b)Each Loan Party, to the extent required under the Flood Laws, has obtained flood insurance for such structures and contents constituting Collateral located in a flood hazard zone pursuant to policies that are valid and in full force and effect and which provide coverage meeting the requirements of Section 6.4(b).
5.17ERISA Compliance.
(a)Except as would not reasonably be expected to result in a Material Adverse Change, (i) each Plan is in compliance in all material respects with the terms of the applicable Plans and the applicable provisions of ERISA, the Code and other federal or state Laws, including all of the applicable reporting and disclosure requirements of ERISA and the Code and (ii) all contributions to any Pension Plans and Multiemployer Plans required to be made as of the date hereof by the Borrower and its Subsidiaries in accordance with the terms of the Plans have been made or have been accrued and reflected on the financial statements of the Borrower and its Subsidiaries.
(b)Each Plan that is intended to qualify under Section 401(a) of the Code has (or has timely applied for) a favorable determination letter from the IRS or may rely on an opinion letter issued by the IRS to the plan sponsor and no facts or circumstances exist that would reasonably be expected to cause the loss of such qualification. Each Loan Party and each ERISA Affiliate has made all contributions to each Pension Plan that are required of it by the Plan Funding Rules, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Pension Plan. The Loan Parties and their ERISA Affiliates have made all required contributions to any Multiemployer Plan.
(c)None of the Loan Parties, their Subsidiaries or ERISA Affiliates has or maintains (i) any Pension Plan, (ii) any Multiemployer Plan or (iii) any Plan that is intended to be or includes an employee stock ownership plan (within the meaning of Section 4975(e)(7) of the Code). No Plan provides post-retirement medical or insurance benefits with respect to current or former employees (or dependents of such individuals) other than benefits required under Section 601 of ERISA, Section 4980B of the Code or applicable state law).
(d)(i) No ERISA Event has occurred or is reasonably expected to occur;
(ii) no Pension Plan has any unfunded pension liability (i.e. excess of benefit liabilities over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan for the applicable plan year); (iii) no Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan or Multiemployer Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) no Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred that, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) no Loan Party nor any ERISA Affiliate has engaged in a transaction that would reasonably be expected to be subject to Sections 4069 or 4212(c) of ERISA.
(e)Except as would not reasonably be expected to result in a Material Adverse Change, there are no pending or, to the best Knowledge of any Loan Party, threatened, claims, actions or lawsuits by any Governmental Authority, Plan participant or other Person (other than routine claims for benefits) with respect to any Plan.
5.18Environmental Matters. Except as disclosed on Schedule 5.18:
(a)The facilities and properties currently or formerly owned, leased or operated by any of the Loan Parties (the “Properties”) do not contain any Hazardous Materials attributable to the Loan Parties’ ownership, lease or operation of the Properties in amounts or concentrations or stored or utilized which (i) constitute or constituted a violation of Environmental Laws or (ii) could reasonably be expected to give rise to any Environmental Liability, in each case to the extent that any of the foregoing, either individually or in the aggregate, could reasonably be expected to result in liability in excess of $10,000,000.
(b)None of the Loan Parties has received any material notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to their activities at any of the Properties or the business operated by the Loan Parties (the “Business”), or any prior business for which any Loan Party has retained liability under any Environmental Law.
(c)Hazardous Materials have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could reasonably be expected to give rise to any Environmental Liability for any Loan Parties, nor have any Hazardous Materials been generated, treated, stored or disposed of by or on behalf of any Loan Party at, on or under any of the Properties in violation of Environmental Laws or in a manner that could reasonably be expected to give rise to any Environmental Liability, in each case to the extent that any of the foregoing, either individually or in the aggregate, could reasonably be expected to result in liability in excess of $10,000,000.
5.19Solvency. Each Loan Party is, individually and together with its Subsidiaries on a Consolidated basis, Solvent.
5.20Sanctions; Anti-Terrorism Laws; Anti-Corruption Laws. The Loan Parties, their Subsidiaries and (to the Knowledge of any Loan Party) their respective Affiliates, Directors, officers, employees and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of the Loan Parties or their Subsidiaries nor (to the Borrower’s Knowledge) any Director, officer, employee, agent or Affiliate of any Loan Party or any Subsidiary, is or shall be (a) a Sanctioned Person, (b) engaged in any business with, or involved in making or receiving any contribution of funds, goods or services to or for the benefit of, a Sanctioned Person or a Sanctioned Country, in each case, in violation of Sanctions, or in any transaction that evades or avoids, or has the purpose of evading or avoiding, the prohibitions set forth in any Anti-Terrorism Law or Anti-Corruption Law, or (c) otherwise in violation of any Anti-Terrorism Law or Anti-Corruption Law. To the Knowledge of the Borrower, no agent or representative of any Loan Party or any Subsidiary that will act in any capacity in connection with or benefit from the Facilities has taken any action, directly or indirectly, that would result in a violation by such Persons of any Anti-Terrorism Laws, applicable Sanctions or Anti-Corruption Laws. The Loan Parties have instituted and maintain policies and procedures designed to promote and achieve continued compliance with Anti-Corruption Laws.
5.21Compliance with Food Security Act and Agricultural Lien Statutes; Agricultural Lien Notices.
(a)Each Loan Party (i) is in compliance with the Food Security Act and has filed all appropriate notices and requests and otherwise taken all steps necessary to register with the “Central Filing System” and subscribe to the portions of the master list covering effective financing statements related to farm products and other agricultural products purchased by such Loan Party, in each case established, maintained and distributed by the Secretary of State (or such other similar state agency) of each state that maintains a “Central Filing System” in accordance with the Food Security Act and (ii) is in compliance with all applicable other Agricultural Lien Statutes, except where the failure to comply could not reasonably be expected to result in a Material Adverse Change.
(b)No Loan Party has received notice (written or otherwise) from any Producer, unpaid seller, supplier, agent or secured party indicating such Person’s intent to claim or preserve the benefits of any trust under any Agricultural Lien Statute or of any Lien in any “farm products” (as defined in the UCC) under applicable Law, nor has any action been commenced against any Loan Party or any Subsidiary of any Loan Party by (i) any beneficiary of any such Lien to enforce such Lien or (ii) any Governmental Authority or any beneficiary of a trust created under any Agricultural Lien Statute to enforce payment from such trust.
5.22Agricultural Licenses. Except as set forth on Schedule 5.22, (a) no Loan Party is required to maintain any Agricultural Licenses or presently maintains any Agricultural Licenses and (b) no Loan Party is a “packer”, “dealer” or a “broker” as defined in any Agricultural Lien Statute.
5.23Material Adverse Change. Since December 31, 2018, no Material Adverse Change has occurred with respect to the Borrower (as successor-by-merger to each of the Plant Entities) or any other Loan Party.
VI.AFFIRMATIVE COVENANTS
The Loan Parties, jointly and severally, covenant and agree that until Payment In Full of the Secured Obligations, the Loan Parties shall comply at all times with the following covenants:
6.1Reporting Requirements. The Loan Parties will furnish or cause to be furnished to the Administrative Agent and each of the Lenders:
(a)Monthly Financial Statements. As soon as available and in any event within 30 days after the end of each calendar month, financial statements of the Borrower and its Subsidiaries, consisting of a consolidated and, to the extent the Borrower has any consolidated Subsidiaries, consolidating balance sheet as of the end of such month and related consolidated and consolidating statements of income, stockholders equity and cash flows for the month then ended and the fiscal year through that date, all in reasonable detail and certified (subject to normal year- end audit adjustments) by an Authorized Officer of the Borrower as having been prepared in accordance with GAAP, consistently applied.
(b)Annual Financial Statements. As soon as available and in any event within 90 days after the end of each fiscal year, audited financial statements of the Borrower and its Subsidiaries consisting of a consolidated and, to the extent the Borrower has any consolidated Subsidiaries, consolidating balance sheet as of the end of such year, and related consolidated and consolidating statements of income, stockholders’ equity and cash flows for the year then ended, all in reasonable detail and certified by independent certified public accountants of nationally recognized standing satisfactory to the Administrative Agent. The certificate or report of accountants shall be free of qualifications (other than any consistency qualification that may result from a change in the method used to prepare the financial statements as to which such accountants concur) and shall not indicate the occurrence or existence of any event, condition or contingency that would materially impair the prospect of payment or performance of any covenant, agreement or duty of any Loan Party under any of the Loan Documents.
(c)Compliance Certificate. Concurrently with the delivery of the financial statements of the Loan Parties furnished to the Administrative Agent and to the Lenders pursuant to Sections 6.1(a) and (b), a Compliance Certificate duly executed by an Authorized Officer of the Borrower stating (i) that the financial statements described in the foregoing clauses (a) and (b) have been prepared in accordance with GAAP, (ii) whether or not such Authorized Officer has Knowledge of the occurrence of any Default or Event of Default hereunder not theretofore reported and remedied and, if so, stating in reasonable detail the facts with respect thereto, and (iii) all relevant facts in reasonable detail to evidence the computations as to whether or not the Borrower is in compliance with the Financial Covenants.
(d)Other Reports.
(i)Annual Budget. As soon as practicable and in any event within 90 days after the end of each fiscal year of the Borrower, the projected balance sheets, income statements, capital expenditures budget and cash flow statements for the Borrower and its Subsidiaries, on a consolidated and consolidating basis, for each month of the next fiscal year, each in reasonable detail, representing the good faith projections of the Borrower for each such month, together with such supporting schedules and information as the Administrative Agent from time to time may reasonably request.
(ii)Pension Plan and Multiemployer Plan Reports. Promptly upon receipt by Borrower (or any ERISA Affiliate), each of the annual actuarial certification under Section 436 of the Code of the Pension Plan’s adjusted funding target attainment percentage (as defined in Section 436(j)(2) of the Code) and the annual funding notice under Section 101(f) of ERISA with respect to any Multiemployer Plan. The Loan Parties shall promptly forward to the Administrative Agent any notice the Loan Parties receive from a Multiemployer Plan regarding a Loan Party’s withdrawal from such Multiemployer Plan, any termination of such Multiemployer Plan, mass withdrawal from such Multiemployer Plan or imposition of withdrawal liability on a Loan Party.
(iii)Recalls; Corrective Actions. Promptly upon receipt by any Loan Party or any Subsidiary of any Loan Party, true and correct copies of (x) any Form 483 or warning letter from any Governmental Authority or (y) any notice or correspondence from any Governmental Authority regarding any recall, notice of noncompliance with applicable Law, or notice of any suspension (in whole or in part) of any operations, registration or License of any of the Loan Parties, their Subsidiaries or their facilities; together with a certificate signed by an Authorized Officer of the Borrower setting forth the action that the Loan Parties and their Subsidiaries propose to take with respect to the foregoing.
(iv)Beneficial Ownership Certificate. Promptly, notice of any change in the information provided in the Beneficial Ownership Certification that would result in a change to the list of beneficial owners identified in such certification.
(e)Notices.
(i)Default. Promptly after any officer of any Loan Party has Knowledge of the occurrence of an Event of Default or Default, a certificate signed by an Authorized Officer setting forth the details of such Event of Default or Default and the action that such Loan Party proposes to take with respect thereto.
(ii)Litigation. Promptly after the commencement thereof, written notice of all actions, suits, proceedings or investigations before or by any Governmental Authority or any other Person against any Loan Party, any Subsidiary of any Loan Party, or any Plan (or fiduciary thereof) that relate to the Collateral, involve a claim or series of claims that if adversely determined could reasonably be expected to result in a Material Adverse Change.
(iii)Organizational Documents. Promptly (and, without limiting the foregoing, within any time limits set forth in Section 7.13), true and correct copies of any amendment to the Organizational Documents.
(iv)Material Agreements. Promptly and in any event within 5 Business Days thereof, true and correct copies of any entry into, or any amendment,
supplement, waiver or other modification to, any Material Agreements, and any notice of any default, termination, cancellation or revocation (prior to any scheduled date of termination) delivered thereunder.
(v)Erroneous Financial Information. Immediately in the event that the Borrower or its accountants conclude or advise that any previously issued financial statement, audit report or interim review of any Loan Party should no longer be relied upon or that disclosure should be made or action should be taken to prevent future reliance, written notice thereof together with true and correct copies of any letters or correspondence from the Borrower or its accountants.
(vi)ERISA Event. Promptly after any officer of any Loan Party has Knowledge of the occurrence of any ERISA Event or any event reasonably expected to result in an ERISA Event, written notice thereof.
(f)Risk Management Policies. Copies of any risk management policies and procedures of the Borrower and any amendments or other modifications thereto.
(g)Other Information. Such other reports and information as the Administrative Agent or any of the Lenders may from time to time reasonably request, all in form and substance reasonably acceptable to the Administrative Agent and such Lenders.
6.2Preservation of Existence, Etc. Each Loan Party shall, and shall cause each of its Subsidiaries to, maintain (a) its legal existence as a corporation, limited partnership or limited liability company or other entity, as the case may be, as of the Closing Date or the date of formation or acquisition thereof and its license or qualification and good standings necessary to conduct its business, except as otherwise expressly permitted in Section 7.6, and (b) all licenses, franchises, permits and other authorizations and Intellectual Property, the loss, revocation, termination, suspension or adverse modification of which could reasonably be expected to result in a Material Adverse Change.
6.3Payment of Liabilities, Including Taxes, Etc. Each Loan Party shall, and shall cause each of its Subsidiaries to, duly pay and discharge all Material Indebtedness and other material liabilities (including all lawful claims that, if unpaid, would by Law become a Lien on the assets of any Loan Party) to which it is subject or that are asserted against it, promptly as and when the same shall become due and payable, including all taxes, assessments and governmental charges upon it or any of its properties, assets, income, prior to the date on which penalties attach thereto, except to the extent that (i) such Material Indebtedness or other material liability is being diligently contested in good faith by appropriate actions,
(ii) such reserves or other appropriate provisions, if any, as shall be required by GAAP have been made with respect thereto, (iii) the aggregate amount of any such contested Taxes does not exceed the Threshold Amount, and (iv) no foreclosure or similar proceedings have been commenced or notice of Liens filed with respect thereto.
6.4Maintenance of Insurance.
(a)Each Loan Party shall, and shall cause each of its Subsidiaries to, insure its properties and assets against loss or damage by fire and such other insurable hazards as such assets are commonly insured (including fire, extended coverage, property damage, workers’ compensation, public liability and business interruption insurance) and against other risks (including errors and omissions) in such amounts as similar properties and assets are insured by prudent companies in similar circumstances carrying on similar businesses, and with reputable and financially sound insurers, including self-insurance to the extent customary, all as reasonably
determined by the Administrative Agent. Such insurance policies shall contain additional insured, mortgagee and lender loss payable special endorsements in form and substance satisfactory to the Administrative Agent naming the Administrative Agent as additional insured, mortgagee and lender loss payee, as applicable, on a primary, non-contributory basis, waiving subrogation, and providing the Administrative Agent with notice of cancellation acceptable to the Administrative Agent.
(b)Each Loan Party shall, to the extent required under the Flood Laws, obtain and maintain flood insurance for such structures and contents constituting Collateral located in a flood hazard zone, in such amounts as similar structures and contents are insured by prudent companies in similar circumstances carrying on similar businesses and otherwise satisfactory to the Administrative Agent.
6.5Maintenance of Properties and Leases. Each Loan Party shall, and shall cause each of its Subsidiaries to, maintain in good repair, working order and condition (ordinary wear and tear excepted) consistent with the general condition as of the Closing Date and in accordance with the general practice of other businesses of similar character and size, all of those properties necessary to its business, and from time to time, such Loan Party will make or cause to be made all appropriate repairs, renewals or replacements thereof.
6.6Visitation Rights. Upon reasonable notice by the Administrative Agent, each Loan Party shall, and shall cause each of its Subsidiaries to, permit any of the officers or authorized employees, representatives or agents of the Administrative Agent or any of the Lenders to visit and inspect during normal business hours any of its properties or any Collateral (wherever located) and to examine and make excerpts from its books and records and discuss its business affairs, finances and accounts with its officers and to conduct reviews of each Loan Party’s assets (which reviews may occur once per annum or more frequently, as determined by the Administrative Agent, in its sole discretion), all in such detail and at such times and as often as the Required Lenders may reasonably request, all at the Borrower’s expense, provided that, prior to the occurrence or continuance of an Event of Default, (a) only the Administrative Agent, on behalf of the Lenders, may exercise rights under this Section and (b) the Administrative Agent shall not, without cause, as determined by the Administrative Agent in its reasonable judgment, request reimbursement from the Borrower for more than one such Collateral audit in any calendar year.
6.7Keeping of Records and Books of Account. The Loan Parties shall, and shall cause each Subsidiary of the Borrower to, maintain and keep proper books of record and account that enable each Loan Party and its Subsidiaries to issue financial statements in accordance with GAAP and as otherwise required by applicable Laws of any Governmental Authority having jurisdiction over such Loan Parties or Subsidiaries, and in which full, true and correct entries shall be made in all material respects of all its dealings and business and financial affairs.
6.8Compliance with Laws; Use of Proceeds.
(a)Each Loan Party shall, and shall cause each of its Subsidiaries to, comply with all applicable Laws in all respects (other than as provided in Section 6.8(b) below or in the Indemnity Agreement, in each case regarding Environmental Laws); provided that it shall not be deemed to be a violation of this Section 6.8(a) if any failure to comply with any Law could not reasonably be expected to result in a Material Adverse Change.
(b)Each Loan Party shall, and shall cause each of its Subsidiaries to,
(i) conduct its operations and keep and maintain its real property in material compliance with all Environmental Laws and environmental permits and (ii) obtain and renew all material
environmental permits required under Environmental Law and necessary for its operations and properties.
(c)The Loan Parties will use the Letters of Credit and the proceeds of the Loans only in accordance with Section 6.11 and as permitted by applicable Law.
(d)Each Loan Party shall, and shall cause each of its Subsidiaries to, comply with the policies and procedures that it implemented to comply with Applicable Food and Feed Safety Laws; in each case except where the failure to do so could not reasonably be expected to result in a Material Adverse Change.
6.9Further Assurances.
(a)Generally. Each Loan Party shall, from time to time, at its expense, preserve and protect the Administrative Agent’s Lien on and Prior Security Interest in the Collateral and all other real and personal property of the Loan Parties whether now existing or hereafter acquired as a continuing Prior Security Interest therein, subject only to Permitted Liens, and shall do such other acts and things as the Administrative Agent may reasonably deem necessary or advisable from time to time in order to preserve, perfect and protect the Liens granted or purported to be granted under the Loan Documents and to exercise and enforce its rights and remedies thereunder with respect to the Collateral. Without limiting the generality of the foregoing, upon request of the Administrative Agent following the occurrence of an Event of Default, each Loan Party shall deliver to the Administrative Agent a fully executed account control agreement in favor of and in form and substance satisfactory to the Administrative Agent with respect to each deposit account, securities account and commodity account of such Loan Party. The Administrative Agent may elect not to request any documents, instruments, filings or opinions as contemplated by this Section 6.9 or the Security Agreement if it determines in its sole discretion that the costs to the Borrower of perfecting a security interest or Lien in such property exceeds the relative benefit of such property to the Secured Parties.
(b)Additional Subsidiaries. In furtherance, and not in limitation, of Section 6.9(a), each Loan Party agrees that, promptly after the creation or acquisition by such Loan Party of any Subsidiary including, without limitation, any Subsidiary formed by division under the Delaware Code or otherwise (and in any event within 30 days after such creation or acquisition, as such time period may be extended by the Administrative Agent in its sole discretion), to cause such created or acquired Subsidiary to (i) become a Guarantor by delivering to the Administrative Agent a duly executed joinder in accordance with Section 12.11, (ii) grant a security interest in all of such Subsidiary’s assets by delivering to the Administrative Agent a duly executed supplement to each applicable Loan Document or such other document as the Administrative Agent shall deem appropriate for such purpose and comply with the terms of each applicable Loan Document,
(iii) deliver to the Administrative Agent such opinions, documents and certificates as may be reasonably requested by the Administrative Agent, (iv) deliver to the Administrative Agent such original certificated Equity Interests or other certificates and stock or other transfer powers evidencing the Equity Interests of such Subsidiary, (v) deliver to the Administrative Agent such updated Schedules to the Loan Documents as requested by the Administrative Agent with respect to such Subsidiary, and (vi) deliver to the Administrative Agent such other documents as may be reasonably requested by the Administrative Agent, all in form, content and scope reasonably satisfactory to the Administrative Agent. In connection therewith, the Loan Parties shall give notice to the Administrative Agent not less than 10 days (or such shorter period of time as agreed to by the Administrative Agent in its reasonable discretion) prior to creating or acquiring any Subsidiary.
(c)Real Property. In furtherance, and not in limitation, of Section 6.9(a), the Loan Parties shall (i) within 10 days (as such time period may be extended by the Administrative Agent in its sole discretion) after the acquisition of any Material Real Property, or the entry into of any material lease of any real property, by any Loan Party that is not subject to an existing Mortgage in favor of the Administrative Agent for the benefit of the Secured Parties, notify the Administrative Agent and (ii) within 60 days of such acquisition or material lease (as such time period may be extended by the Administrative Agent, in its sole discretion), deliver such mortgages, deeds of trust, title insurance policies, environmental reports, surveys and other documents reasonably requested by the Administrative Agent in connection with granting and perfecting a first priority Lien, other than Permitted Liens, on such real property in favor of the Administrative Agent, for the ratable benefit of the Secured Parties, all in form and substance acceptable to the Administrative Agent.
6.10Farm Credit Equities. So long as any Farm Credit Lender (or its Affiliate) is a Lender, Administrative Agent or Lead Arranger hereunder, the Borrower shall (a) maintain its status as an entity eligible to borrow from such Farm Credit Lender, Administrative Agent or Lead Arranger (or its Affiliate), and (b) acquire equity in such Farm Credit Lender, Administrative Agent or Lead Arranger in such amounts and at such times as each Farm Credit Lender, Administrative Agent or Lead Arranger may require in accordance with its bylaws and capital plan (as each may be amended or otherwise modified from time to time), except that the maximum amount of equity that the Borrower may be required to purchase in each Farm Credit Lender in connection with the Loans made by such Farm Credit Lender (or its Affiliate) may not exceed the maximum amount permitted by the bylaws and capital plan of such Farm Credit Lender at the time this Agreement is entered into. The Borrower acknowledges receipt of a copy of (x) the most recent annual report, and if more recent, latest quarterly report for each Farm Credit Lender, (y) the Notice to Prospective Stockholders provided by CoBank, and any similar notice provided by the other Farm Credit Lenders and (z) the bylaws and capital plan of each Farm Credit Lender, which describe the nature of all the Farm Credit Equities as well as capitalization requirements, and agrees to be bound by the terms thereof.
6.11Use of Proceeds. The proceeds of the Term Advances shall be used to repay, or refinance, as the case may be, indebtedness arising under the Existing Debt Facilities and for working capital and general corporate purposes of the Borrower and its Subsidiaries not in contravention of any Laws. The Letters of Credit and the proceeds of the Revolving Term Advances shall be used for working capital and general corporate purposes of the Borrower and its Subsidiaries not in contravention of any Laws, including the payment of certain fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby.
6.12Updates to Schedules. Should any of the information or disclosures provided on any of the Schedules referred to in this Agreement and attached hereto become outdated or incorrect in any material respect, the Borrower shall promptly provide the Administrative Agent in writing with such revisions or updates to such Schedule as may be necessary or appropriate to update or correct same. No such Schedule shall be deemed to have been amended, modified or superseded by any such correction or update unless and until the Administrative Agent, in its discretion, shall have accepted in writing such revisions or updates to such Schedule. In no event shall any breach of warranty, representation or covenant resulting from any inaccuracy or incompleteness of any such Schedule immediately prior to such update be deemed to have been cured by any acceptance by the Administrative Agent of any amended, modified or superseded Schedule.
6.13Material Agreements. Each of the Loan Parties covenants and agrees that it shall, and shall cause each of its Subsidiaries to, comply in all material respects with each of its Material Agreements; provided that the Borrower and the other Loan Parties may amend, cancel, terminate and replace Material Agreements in accordance with Section 7.16.
6.14Compliance with Anti-Corruption Laws and Anti-Terrorism Laws. Each of the Loan Parties shall, and shall cause each of its Subsidiaries to, maintain in effect and enforce policies and procedures designed to ensure compliance by the Loan Parties, their Subsidiaries and their respective Directors, officers, employees and agents with Anti-Corruption Laws and Anti-Terrorism Laws (and the Borrower shall deliver to the Administrative Agent any certification or other evidence requested from time to time by the Administrative Agent in its reasonable discretion, confirming the Loan Parties’ and their Subsidiaries’ compliance with this Section 6.14).
6.15Post-Closing Covenants.
(a)Not later than 30 days after the Closing Date (or such later date as may be acceptable to the Administrative Agent in its sole discretion), the Borrower shall deliver to the Administrative Agent additional insured, mortgagee and lender loss payable special endorsements to the insurance policies of the Loan Parties, in each case naming the Administrative Agent as additional insured, mortgagee and lender loss payee, as applicable, in form and substance satisfactory to the Administrative Agent.
(b)Not later than 120 days after the Closing Date (or such later date as may be acceptable to the Administrative Agent in its sole discretion), the Borrower shall deliver to the Administrative Agent current appraisals of the real property constituting Collateral and improvements thereto, prepared by an appraiser reasonably acceptable to the Administrative Agent, such appraisals to be in form and substance satisfactory to the Administrative Agent.
(c)Not later than 60 days after the Closing Date (or such later date as may be acceptable to the Administrative Agent in its sole discretion), the Borrower shall deliver to the Administrative Agent an amendment to each Specified Lease Agreement duly executed by the Borrower and the applicable landlord, in each case in form and substance satisfactory to the Administrative Agent.
(d)Not later than 30 days after the Closing Date (or such later date as may be acceptable to the Administrative Agent in its sole discretion), the Borrower shall deliver to the Administrative Agent a commitment to issue an ALTA lender’s title insurance policy insuring the Administrative Agent, for the benefit of the Secured Parties, and in form reasonably acceptable to the Administrative Agent (including such endorsements as the Administrative Agent may reasonably require), insuring that the Mortgage in respect of the Albion, Michigan Property creates a valid first priority Lien upon the property subject to such Mortgage, subject only to Permitted Liens, any exceptions set forth on the Administrative Agent’s lender’s title insurance policy in effect on the date hereof with respect to the Albion, Michigan Property, and such exceptions as are acceptable to the Administrative Agent.
(e)Not later than 30 days after the Closing Date (as such date may be extended in the sole discretion of the Administrative Agent so long as the Borrower is diligently pursuing the items or actions described in this Section 6.15(e)), the Borrower shall deliver to the Administrative Agent such documents, agreements, deeds, releases, instruments, certificates or affidavits, and shall otherwise take such other actions, as the Administrative Agent may reasonably request in connection with the Administrative Agent’s lender’s title insurance policies in respect of each Mortgage in form and substance reasonably acceptable to the Administrative Agent.
VII.NEGATIVE COVENANTS
The Loan Parties, jointly and severally, covenant and agree that until Payment In Full of the Obligations, the Loan Parties shall comply at all times with the following covenants:
7.1Indebtedness. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, at any time create, incur, assume or suffer to exist any Indebtedness, except:
(a)Indebtedness under this Agreement and the other Loan Documents;
(b)Indebtedness in favor of the 2007 Bond Issuer under the 2007 Bond Issuer Loan Agreement, in an aggregate principal amount not to exceed $49,500,000 at any time;
(c)Indebtedness (contingent or otherwise) of any Loan Party arising under
(i) any Secured Hedge, (ii) any other Hedge Agreement or (iii) Indebtedness under any Secured Bank Product entered into in the ordinary course of business; provided however, that (x) no Loan Party shall enter into or incur any Hedge Agreement that constitutes a Swap Obligation if at the time it enters into or incurs such Swap Obligation it does not constitute an “eligible contract participant” as defined in the Commodity Exchange Act, and (y) the Loan Parties and their Subsidiaries shall enter into a Secured Hedge, Interest Rate Hedge or other Hedge Agreement only for hedging purposes (including, without limitation, for purposes of hedging the price of commodity inputs and supplies) and not for speculative purposes;
(d)Guaranties by any Loan Parties of Indebtedness permitted hereunder (other than Excluded Swap Obligations) in an aggregate amount not to exceed $2,000,000 at any one time from the Closing Date through the latest Maturity Date hereunder;
(e)Indebtedness in respect of operating leases, Capital Leases and Synthetic Lease Obligations in the ordinary course of business for fixed or capital assets, so long as the lease payments in respect of all such operating leases, Capital Leases and Synthetic Lease Obligations (other than those relating to Permitted Rail Car Leases and the Specified Lease Agreements) do not exceed $2,000,000 in the aggregate in any fiscal year of the Borrower; and
(f)(i) Indebtedness incurred with respect to Purchase Money Security Interests and (ii) other Indebtedness not included in clause (a) through (e) of this Section 7.1; provided, that the aggregate amount of Indebtedness described in clauses (i) and (ii) of this Section 7.1(f) shall not exceed $3,000,000 at any one time from the Closing Date through the latest Maturity Date hereunder.
7.2Liens. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, at any time create, incur, assume or suffer to exist any Lien on any of its property or assets, tangible or intangible, now existing or hereafter acquired, or agree or become liable to do so, except Permitted Liens.
7.3Affiliate Transactions. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, enter into or carry out any transaction with any Affiliate of any Loan Party (including purchasing property or services from or selling property or services to any Affiliate of any Loan Party or other Person) unless such transaction is not otherwise prohibited by this Agreement, is entered into in the ordinary course of business and upon fair and reasonable arm’s-length terms and conditions that are no less favorable to such Loan Party or such Subsidiary than would be obtained in a comparable arm’s-length transaction with a non-Affiliate, and is in accordance with all applicable Law.
7.4Loans and Investments. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, at any time make or suffer to remain outstanding any Investment or agree, become or remain liable to make any Investment, except:
(a)trade credit (including accounts receivable and notes receivable) extended on usual and customary terms in the ordinary course of business;
(b)Investments in existence on the Closing Date and described in
Schedule 7.4;
(c)Investments in the form of cash and Cash Equivalents;
(d)notes payable to, or Equity Interests issued by, account debtors to any Loan Party in good faith settlement of delinquent obligations and pursuant to any plan of reorganization or similar proceedings upon the bankruptcy or insolvency of any such account debtor;
(e)the Farm Credit Equities and any other stock or securities of, or Investments in, any Farm Credit Lender or its investment services or programs; and
(f)Guaranties permitted by Section 7.1(d).
7.5Dividends and Related Distributions. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, declare or make, directly or indirectly, any Restricted Payment or incur any obligation (contingent or otherwise) to do so at any time, except that the foregoing shall not prohibit:
(a)so long as no Default or Event of Default shall then exist or would exist after giving effect thereto, any dividend or other Restricted Payment solely in the form of Equity Interests of such Loan Party;
(b)any Restricted Payment by a Loan Party to the Borrower; and
(c)any Restricted Payment so long as:
(i)no Default or Event of Default shall then exist or would exist after giving effect thereto;
(ii)before and after giving effect thereto on a pro forma basis as if such Restricted Payment had been made or such obligation had been incurred as of the most recent month end for which financial statements have been delivered pursuant to Section 6.1(a), the Working Capital of the Consolidated Group is not less than
$83,000,000; and
(iii)before and after giving effect thereto on a pro forma basis as if such Restricted Payment had been made or such obligation had been incurred as of the most recent month end for which financial statements have been delivered pursuant to Section 6.1(a), the Net Worth of the Consolidated Group is not less than $300,000,000.
7.6Liquidations, Mergers, Consolidations, Acquisitions. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, (i) dissolve, liquidate or wind-up its affairs,
(ii) become a party to, or suffer to exist, any merger, division (under the Delaware Code or otherwise) or
consolidation, or (iii) acquire by purchase, lease or otherwise all or substantially all of the assets or Equity Interests of any other Person or group of related Persons or any division, line of business or other business unit of any other Person; except:
(a)any Subsidiary may merge with (x) the Borrower, provided that the Borrower shall be the continuing or surviving Person, or (y) any one or more other Loan Parties, provided that a Loan Party shall be the continuing or surviving Person;
(b)any Subsidiary may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or to another Loan Party; and
(c)the Borrower may the lease the grain facilities in Albion, Michigan and Logansport, Indiana pursuant to the Specified Lease Agreements, provided that the terms of the Specified Lease Agreements are reasonably acceptable to the Administrative Agent.
7.7Dispositions of Assets or Subsidiaries. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, Dispose of, voluntarily or involuntarily, any of its properties or assets, tangible or intangible (including sale, assignment, discount or other disposition of accounts, contract rights, chattel paper, equipment or general intangibles with or without recourse or of Equity Interests, shares of beneficial interest, partnership interests or limited liability company interests or other Equity Interests of a Subsidiary of such Loan Party), except:
(a)transactions involving the sale of inventory in the ordinary course of
business;
(b)any Disposition of obsolete or worn-out assets in the ordinary course of business that are no longer necessary or required in the conduct of such Loan Party’s or such Subsidiary’s business;
(c)any Disposition of assets by any Loan Party (other than the Borrower) or any Subsidiary of such Loan Party to another Loan Party, so long as such sold or transferred assets are subject to the Administrative Agent’s Prior Security Interest therein;
(d)any Disposition of assets in the ordinary course of business that are replaced by substitute assets acquired or leased as permitted in this Agreement, so long as such substitute assets are subject to the Administrative Agent’s Prior Security Interest therein; and
(e)Dispositions of assets in the ordinary course of business consistent with past practice, so long as (i) no Default or Event of Default shall then exist or would exist after giving effect thereto, and (ii) the aggregate book value or the aggregate cash proceeds (whichever is greater) of all such Dispositions does not exceed $5,000,000 in the aggregate during any fiscal year of the Borrower, and (iii) no such Dispositions, either singly or in the aggregate, after giving pro forma effect thereto result in the Disposition of any Equity Interests of any Subsidiary held by a Loan Party.
7.8Use of Proceeds. No Loan Party shall use the proceeds of any Advance or any Letter of Credit, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the Board) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose. No Loan Party shall, directly or indirectly, use the proceeds of any Loan or other extension of credit hereunder, or lend, contribute or otherwise make available such proceeds or other
extension of credit to any Subsidiary, joint venture partner or other Person, (a) to fund any activities or business of or with any Person, or in any country or territory, that, at the time of such funding, is, or whose government is, the subject of Sanctions, in each case, in violation of Sanctions, or (b) in any other manner that would result in a violation of Sanctions by any Person (including any Person participating in the Loans, whether as underwriter, advisor, investor, or otherwise).
7.9Subsidiaries, Partnerships and Joint Ventures. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, own or create directly or indirectly any Subsidiaries other than (a) any Subsidiary that has joined this Agreement as Guarantor on the Closing Date; and (b) any Subsidiary formed or acquired after the Closing Date that joins this Agreement as a Guarantor by delivering to the Administrative Agent, within the time set forth in Section 6.9(b), (i) an executed joinder agreement in form and substance satisfactory to the Administrative Agent, (ii) documents in the forms described in Section 4.1 modified as appropriate, (iii) documents necessary to grant and perfect Prior Security Interests to the Administrative Agent for the benefit of the Lenders in the Equity Interests of, and Collateral held by, such Subsidiary and (iv) all other documents and instruments necessary to comply, and cause such Subsidiary to comply, with the requirements of Section 6.9(b). None of the Loan Parties shall become a Joint Venture (other than the Borrower, which is a Joint Venture), and none of the Loan Parties shall agree to become a party to any partnership or Joint Venture.
7.10Continuation of or Change in Business. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, engage in any line of business other than those lines of business conducted by such Loan Party or Subsidiary on the date hereof, and such Loan Party or Subsidiary shall not permit any material change in such business.
7.11Fiscal Year. The Borrower shall not, and shall not permit any Subsidiary of the Borrower to, change its fiscal year from the twelve-month period beginning January 1 and ending December 31.
7.12Issuance of Equity Interests. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, commence or consummate any Equity Issuance, except for (a) any such Equity Issuances by any Loan Party (other than the Borrower) to and for the benefit of a Loan Party and that are subject to the Administrative Agent’s Prior Security Interest therein and otherwise comply with the Security Agreement, (b) any such Equity Issuances by the Borrower so long as no Change of Control will result therefrom, (c) issuance of warrants or options to Directors, officers, or employees of the Borrower pursuant to employee benefit plans established in the ordinary course of business and any such Equity Interests of the Borrower issued upon the exercise of such warrants or options and (d) any Equity Issuance permitted pursuant to Section 7.5; provided, in each case under clauses (a) through (d) above, that no Change of Control will result therefrom and no Loan Party nor any Subsidiary shall commence or consummate any Equity Issuance to any employee stock ownership plan (within the meaning of Code Section 4975(e)(7)) without first obtaining the Administrative Agent’s advance consent, the receipt of which may be conditioned upon amending and restating this Agreement.
7.13Changes in Organizational Documents. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to amend in any material respect its Organizational Documents without
(x) providing at least 30 calendar days’ prior written notice to the Administrative Agent and the Lenders (together with true, correct and complete copies of such amendments) and (y) obtaining the prior written consent of the Required Lenders in the event such change would be adverse to the Lenders as determined by the Administrative Agent in its sole discretion.
7.14Negative Pledges. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, enter into any agreement (other than this Agreement or any of the other Loan Documents)
with any Person that, (a) limits the ability (i) of any Subsidiary to make Restricted Payments to the Borrower or any Guarantor or to otherwise transfer property to the Borrower or any Guarantor, (ii) of any Subsidiary to Guarantee the Indebtedness of the Borrower or (iii) of the Borrower or any Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person; provided, however, that this clause (iii) shall not prohibit any negative pledge incurred or provided in favor of any holder of Indebtedness permitted under Section 7.1(f)(i) solely to the extent any such negative pledge relates to the property financed by or the subject of such Indebtedness; or (b) requires the grant of a Lien to secure an obligation of such Person if a Lien is granted to secure another obligation of such Person.
7.15Anti-Terrorism Laws; Anti-Corruption. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, directly or indirectly, (a) conduct any business or engage in making or receiving any contribution of funds, goods or services to or for the benefit of any Sanctioned Person in violation of Sanctions, (b) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to any Anti-Terrorism Law in violation of any Anti-Terrorism Law or Sanctions, or (c) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti- Corruption Law or Anti-Terrorism Law (and the Borrower shall deliver to the Administrative Agent any certification or other evidence requested from time to time by the Administrative Agent in its reasonable discretion, confirming Borrower’s compliance with this Section 7.15). The Borrower will not request any Credit Extension, and the Loan Parties shall not use, and shall ensure that their Subsidiaries and their respective Directors, officers, employees and agents shall not use, the proceeds of any Credit Extension in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Terrorism Laws or Anti-Corruption Laws.
7.16Material Agreements. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, amend, restate, supplement, waive or otherwise modify, or terminate, cancel or revoke (prior to any scheduled date of termination): (a) any Specified Lease Agreement without the prior written consent of the Administrative Agent; or (b) any other Material Agreement if such modification, termination, cancellation or revocation could reasonably be expected to result in a Material Adverse Change, Default or Event of Default.
7.17Rail Car Leases. No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to, enter into any lease in respect of rail cars other than a Permitted Rail Car Lease.
7.18Independence of Covenants. All covenants contained in Articles VI, VII and VIII of this Agreement shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that such action or condition would be permitted by another covenant shall not avoid the occurrence of a Default if such action is taken or condition exists.
VIII.FINANCIAL COVENANTS
The Loan Parties, jointly and severally, covenant and agree that until Payment In Full of the Secured Obligations, the Loan Parties shall comply at all times with the following covenants:
8.1Minimum Working Capital. The Borrower will maintain the Working Capital of the Consolidated Group as of the date hereof and as of last day of each month at not less than
$73,000,000.
8.2Minimum Net Worth. The Borrower will maintain the Net Worth of the Consolidated Group as of the date hereof and as of the last day of each month at not less than $250,000,000.
IX.EVENTS OF DEFAULT
9.1Events of Default. An Event of Default means the occurrence or existence of any one or more of the following events or conditions (whatever the reason therefor and whether voluntary, involuntary or effected by operation of Law):
(a)Payments Under Loan Documents. The Borrower or any other Loan Party
(i) shall fail to pay any principal of any Loan (including scheduled installments, mandatory prepayments or the payment due at maturity) when it becomes due and payable or (ii) shall fail to pay any interest on any Loan, Reimbursement Obligation, Letter of Credit Obligation or any other Obligation (other than principal of a Loan) when the same becomes due and payable and such default continues for more than three days;
(b)Breach of Warranty. Any representation, warranty, certification or statement of fact made or deemed made at any time by any of the Loan Parties herein or in any other Loan Document, or in any certificate, other instrument or statement furnished pursuant to the provisions hereof or thereof, shall have been false or misleading in any material respect as of the time it was made or furnished;
(c)Breach of Certain Covenants. Any of the Loan Parties shall default in the observance or performance of any covenant contained in Section 6.1(a), Section 6.1(b), Section 6.1(c), Section 6.2, Section 6.4, Section 6.5, Section 6.8, Section 6.10, Section 6.11, Section 6.14, Section 6.15, Article VII, or Article VIII of this Agreement;
(d)Breach of Other Covenants. Any of the Loan Parties shall default in the observance or performance of (i) any covenant contained in Section 6.1(d) or Section 6.1(e)(i), and such default shall continue unremedied for a period of 5 Business Days or (ii) any other covenant, condition or provision hereof or of any other Loan Document (other than those referenced in clauses
(c) or (d)(i) of this Section 9.1), and such default shall continue unremedied for the expressly specified cure period with respect thereto or, if no such cure period is specified, for a period of 30 days;
(e)Defaults in Other Agreements or Indebtedness. A default or event of default shall occur at any time under the terms of any other agreement with respect to Material Indebtedness of any Loan Party, and (i) such default or event of default arises from the failure to pay (beyond any period of grace permitted with respect thereto, whether waived or not) any related Indebtedness or other credit extensions when due (whether at stated maturity, by acceleration or otherwise) or (ii) the effect of which is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, with the giving of notice and/or lapse of time, if required, the acceleration of any related Indebtedness or other credit extensions (whether or not such right shall have been waived) or the termination of any commitment to lend or the termination of any related Hedge Agreement;
(f)Final Judgments or Orders. Any final judgments or orders for the payment of money in excess of the Threshold Amount in the aggregate shall be entered against any Loan Party by a court having jurisdiction in the premises, which judgment is not discharged, vacated, bonded or stayed pending appeal within a period of 30 days from the date of entry, provided that this Section 9.1(f) shall not apply to any judgment for which the Borrower is fully insured (through insurance policies that will fully discharge such judgment or order);
(g)Loan Document Unenforceable. Any of the Loan Documents shall cease to be legal, valid and binding agreements enforceable against the party executing the same or such party’s successors and assigns (as permitted under the Loan Documents) in accordance with the respective terms thereof or shall in any way be terminated (except in accordance with its terms) or become or be declared ineffective or inoperative or shall in any way (whether in whole or in part) be challenged or contested by any party thereto (other than the Administrative Agent or any Lender) or cease to give or provide the respective Liens, security interests, rights, titles, interests, remedies, powers or privileges intended to be created thereby;
(h)Security Interests Unenforceable. Any Lien purported to be created under any Collateral Document shall cease to be, or shall be asserted by any Loan Party not to be, a valid or perfected Lien on any portion of the Collateral, with the perfection and priority required by the applicable Collateral Document, except (i) pursuant to Section 11.1(f), or (ii) as a result of the sale or other disposition of the applicable Collateral or the release of the applicable Loan Party in a transaction permitted under the Loan Documents;
(i)Uninsured Losses; Proceedings Against Assets. There shall occur any Casualty Event with respect to or uninsured theft or destruction of any portion of the Loan Parties’ or any of their Subsidiaries’ assets with a fair market value in excess of the Threshold Amount; or such assets are attached, seized, levied upon or subjected to a writ or distress warrant; or such come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors and the same is not cured within thirty days thereafter;
(j)Events Relating to Plans, Pension Plans and Multiemployer Plans. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan that has resulted or would reasonably be expected to result in liability of any Loan Party or any ERISA Affiliate to the Pension Plan, the Multiemployer Plan or the PBGC in an aggregate amount in excess of the Threshold Amount; or (ii) any Loan Party or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of the Threshold Amount;
(k)Change of Control. A Change of Control shall have occurred;
(l)Relief Proceedings. (i) An Insolvency Proceeding shall have been instituted against any Loan Party or Subsidiary of a Loan Party and such Insolvency Proceeding shall remain undismissed or unstayed and in effect for a period of 30 consecutive days or such court shall enter a decree or order granting any of the relief sought in such Insolvency Proceeding, (ii) any Loan Party or Subsidiary of a Loan Party institutes, or takes any action in furtherance of, an Insolvency Proceeding, (iii) an order granting the relief requested in any Insolvency Proceeding (including, but not limited to, an order for relief under federal bankruptcy laws) shall be entered,
(iv) any Loan Party or Subsidiary thereof shall commence a voluntary case under, file a petition seeking to take advantage of, any bankruptcy, insolvency, reorganization or other similar law, domestic or foreign, (v) any Loan Party or Subsidiary thereof shall consent to or fail to contest in a timely and appropriate manner any petition filed against it in any Insolvency Proceeding, (vi) any Loan Party or Subsidiary thereof shall apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property, domestic or foreign, (vii) any Loan Party or Subsidiary thereof shall take any action to approve or authorize any of the foregoing,
(viii) any Loan Party or any Subsidiary of a Loan Party ceases to be Solvent or admits in writing
its inability to pay its debts as they mature, or (ix) any Loan Party shall become an EEA Financial Institution and shall become the subject of a Bail-In Action;
(m)Criminal Forfeiture. Any Loan Party or any Subsidiary (or any director or officer thereof) shall be criminally indicted or convicted under any Law that would reasonably be expected to lead to a forfeiture of Collateral in excess of the Threshold Amount;
(n)Material Adverse Change. Since December 31, 2018, no Material Adverse Change has occurred with respect to the Borrower (as successor-by-merger to each of the Plant Entities) or any other Loan Party.
(o)Writ of Attachment. A writ of attachment, garnishment, levy or similar process shall be issued against or served on any Secured Party by a court of competent jurisdiction with respect to (i) any property of any Loan Party or any Subsidiary thereof in the possession of such Secured Party or (ii) any indebtedness of any Secured Party to any Loan Party or any Subsidiary of any Loan Party, and such writ is not discharged, vacated, bonded, stayed or otherwise secured in a manner acceptable to the Administrative Agent within a period of 30 days from the date of entry and is in an aggregate amount exceeding the Threshold Amount;
(p)License. Any material License of any Loan Party or any Subsidiary thereof shall terminate or otherwise cease to be in full force and effect if such termination could reasonably be expected to result in a Material Adverse Change;
(q)Agricultural License. Without limiting the foregoing subsection 9.1(p),
(i) any Agricultural License of any Loan Party shall be revoked or suspended if such revocation or suspension could reasonably be expected to result in a Material Adverse Change or is not being diligently contested by appropriate proceedings, or any surety company issuing Agricultural Bond to a Loan Party shall notify such Loan Party of such surety’s decision not to renew such Agricultural Bond if such non-renewal could reasonably be expected to result in a Material Adverse Change or unless such bond is replaced prior to the expiration of the existing Agricultural Bond; or (ii) there is commenced any action against any Loan Party by (A) any beneficiary of a trust created under any Agricultural Lien Statute to enforce payment from such trust in an aggregate amount exceeding the Threshold Amount, or (B) any Person (I) whose Lien was not extinguished by the applicable Loan Party’s compliance with the Food Security Act or (II) that is entitled to protection under the UCC or any Agricultural Lien Statute, in each case which claim is in an aggregate amount exceeding the Threshold Amount, except in each case to the extent such action is being diligently contested in good faith by appropriate and lawful proceedings and for which adequate reserves in accordance with GAAP have been set aside on the Borrower’s books or could not reasonably be expected to result in a Material Adverse Change; or
(r)Recall; Suspension. (a) Any inventory or products of any Loan Party or any Subsidiary of any Loan Party shall be subject to any seizure, administrative detention or mandatory recall by any Governmental Authority, (b) any Loan Party or any Subsidiary of any Loan Party shall voluntarily recall any of its inventory or products, (c) any Governmental Authority suspends or revokes any operations, License or registration of any Loan Party, any Subsidiary of any Loan Party or any of their facilities or (d) any Loan Party or any Subsidiary of any Loan Party receives a warning letter from any Governmental Authority in connection with such Loan Party’s or Subsidiary’s failure to adequately address any Form 483 observations or any other Governmental Authority findings relating to the conditions, procedures or products in any Loan Party’s or Subsidiary’s facilities, in each case under clause (b), (c) or (d) which could reasonably be expected to result in a Material Adverse Change.
9.2Consequences of Event of Default.
(a)Events of Default. If an Event of Default specified under Section 9.1 (other than Section 9.1(l)) shall occur and be continuing, the Lenders and the Administrative Agent shall be under no further obligation to make Loans and the Issuing Lender shall be under no obligation to issue Letters of Credit and the Administrative Agent may, and upon the request of the Required Lenders, shall (i) by written notice to the Borrower, declare the unpaid principal amount of the Loans then outstanding and all interest accrued thereon, any unpaid fees and all other Indebtedness of the Borrower to the Lenders hereunder and thereunder to be forthwith due and payable, and the same shall thereupon become and be immediately due and payable to the Administrative Agent for the benefit of each Lender without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, (ii) require the Borrower to, and the Borrower shall thereupon, Cash Collateralize the Letter of Credit Obligations in an amount not less than the Minimum Collateral Amount, (iii) apply for the appointment of, or taking possession by, a trustee, receiver, liquidator or other similar official of the Borrower to hold or liquidate all or any substantial part of the properties or assets of any Loan Party (and each Loan Party hereby consents to such appointment and agrees to execute and deliver any and all documents requested by the Administrative Agent relating to the appointment of such trustee, receiver, liquidator or other similar official, whether by joining in a petition for the appointment of such an official, by entering no contest to a petition for the appointment of such an official, or otherwise, as appropriate under applicable Law), and (iv) exercise and enforce any other rights and remedies available to any Secured Party by law or agreement.
(b)Bankruptcy, Insolvency or Reorganization Proceedings. Notwithstanding Section 9.2(a), if an Event of Default specified under Section 9.1(l) shall occur, the Lenders shall be under no further obligations to make Loans hereunder and the Issuing Lender shall be under no obligation to issue, extend, renew or increase Letters of Credit, the unpaid principal amount of the Loans then outstanding and all interest accrued thereon, any unpaid fees and all other Indebtedness of the Borrower to the Lenders hereunder and thereunder automatically shall be immediately due and payable, and the Borrower shall be required to Cash Collateralize the Letter of Credit Obligations in an amount not less than the Minimum Collateral Amount, in each case without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived.
(c)Set-off. If an Event of Default shall have occurred and be continuing, each Lender, the Issuing Lender, and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held, and other obligations (in whatever currency) at any time owing, by such Lender, the Issuing Lender or any such Affiliate, to or for the credit or the account of the Borrower or any other Loan Party against any and all of the obligations of the Borrower or such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Lender or the Issuing Lender or their respective Affiliates, irrespective of whether or not such Lender, Issuing Lender or Affiliate shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch, office or Affiliate of such Lender or the Issuing Lender different from the branch, office or Affiliate holding such deposit or obligated on such indebtedness; provided that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.14 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent, the Issuing Lender, and the Lenders, and (y) the Defaulting Lender shall
provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff; provided, however, that no Farm Credit Lender shall be obligated to set off or otherwise apply (i) patronage payable to the Borrower, (ii) retirement payments on Farm Credit Equities or (iii) Farm Credit Equities held by the Borrower, to reduce the Secured Obligations. The rights of each Lender, the Issuing Lender and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the Issuing Lender or their respective Affiliates may have. Each Lender and Issuing Lender agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.
(d)Application of Proceeds.
(i)After the exercise of remedies provided for in Section 9.2 (or after the Loans have automatically become immediately due and payable and the Letter of Credit Obligations have automatically been required to be Cash Collateralized as set forth in Section 9.2(b)), any amounts received on account of the Secured Obligations shall be applied by the Administrative Agent in the following order:
First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent) payable to the Administrative Agent in its capacity as such;
Second, to payment of all Protective Advances payable to the Administrative Agent until paid in full;
Third, to payment of that portion of the Obligations constituting indemnities, expenses, and other amounts (other than principal, interest and fees) payable to the Lenders and the Issuing Lender (including fees, charges and disbursements of counsel to the respective Lenders and the Issuing Lender and amounts payable under Article X), ratably among them in proportion to the amounts described in this clause Third payable to them;
Fourth, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans, Letter of Credit Borrowings and other Obligations, and fees (including Letter of Credit Fees), ratably among the Lenders and the Issuing Lender in proportion to the respective amounts described in this clause Fourth payable to them;
Fifth, to payment of that portion of the Obligations constituting unpaid principal of the Loans and Letter of Credit Borrowings and to payment of payment obligations then owing in respect of Other Liabilities, ratably among the Secured Parties in proportion to the respective amounts described in this clause Fifth held by them;
Sixth, to the Administrative Agent for the account of the Issuing Lender, to Cash Collateralize in an amount not less than the Minimum Collateral Amount that portion of Letter of Credit Obligations comprised of the aggregate undrawn amount of Letters of Credit;
Seventh, to payment of all other Secured Obligations and Guaranteed Liabilities, ratably among the Secured Parties in proportion to the respective amounts described in this clause Seventh held by them; and
Last, the balance, if any, after Payment In Full of all of the Secured Obligations, to the Loan Parties or as otherwise required by Law.
(ii)Amounts used to Cash Collateralize Secured Obligations pursuant to clause Fifth or Sixth above shall be applied to satisfy drawings under such Letters of Credit as they occur or to pay such Other Liabilities as they come due, as the case may be. If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired and/or after Payment In Full of the Other Liabilities, such remaining amount shall be applied to the other Secured Obligations, if any, in the order set forth above.
(iii)Amounts distributed with respect to any Secured Obligations attributable to Other Liabilities shall be equal to the lesser of (a) the applicable amount of such Other Liabilities last reported to the Administrative Agent by the applicable Secured Party or (b) the actual amount of such Other Liabilities as calculated by the methodology reported to the Administrative Agent for determining the amount due. The Administrative Agent shall have no obligation to calculate the amount to be distributed with respect to any such Other Liabilities, but may rely upon written notice of the amount (setting forth a reasonably detailed calculation) from the applicable Secured Party providing such Secured Bank Products or Secured Hedge. In the absence of such notice, the Administrative Agent may assume the amount to be distributed is the amount of such obligations last reported to it.
(iv)If and to the extent the Administrative Agent has received notice or other evidence that any amount claimed as a Secured Obligation is or could reasonably be determined to be an Excluded Swap Obligation with respect to any Guarantor, amounts received from any Guarantor or its assets shall not be applied to such Excluded Swap Obligations with respect to such Guarantor, and adjustments shall be made with respect to amounts received from other Loan Parties and their assets as the Administrative Agent may determine, in consultation with or at the direction of, the Lenders to be equitable (which may include, without limitation, the purchase and sale of participation interests) so that, to the maximum extent practical, the benefit of all amounts received from the Loan Parties and their assets are shared in accordance with the allocation of recoveries set forth above that would apply if the applicable Swap Obligations were not Excluded Swap Obligations. Each Loan Party acknowledges and consents to the foregoing.
(e)Restriction on Enforcement by Secured Parties. Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against any Loan Party or any of them (including enforcement action with respect to any Collateral) shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent in accordance with Section 9.2 for the benefit of all the Secured Parties; provided, however, that the foregoing shall not prohibit (i) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (ii) the Issuing Lender from exercising the rights and remedies that inure to its benefit (solely in its capacity as Issuing Lender) hereunder and under the other Loan Documents, (iii) any Lender from exercising setoff rights in accordance with Sections 2.16 and 9.2(c) (subject to the terms of Section 2.14), or (iv) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to the Borrower under any Debtor Relief Law but only to the extent the Administrative Agent shall have failed to do so
within a reasonable time after notice; and provided, further, that if at any time there is no Person acting as Administrative Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Administrative Agent pursuant to Section 9.2 and (ii) in addition to the matters set forth in clauses (ii), (iii) and (iv) of the preceding proviso and subject to Section 2.14, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.
X.THE ADMINISTRATIVE AGENT
10.1Appointment and Authority. Each of the Lenders and the Issuing Lender (on behalf of itself and each of its Affiliates) hereby irrevocably appoints CoBank to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article X are solely for the benefit of the Administrative Agent, the Lenders, the Affiliates of the Lenders that are Secured Parties and the Issuing Lender, and neither the Borrower nor any other Loan Party shall have rights as a third party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead such term is used as a matter of market custom and is intended to create or reflect only an administrative relationship between contracting parties.
10.2Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.
10.3No Fiduciary Duty. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents and its duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, the Administrative Agent:
(a)shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing;
(b)shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents); provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable Law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and
(c)shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.
10.4Exculpation.
(a)The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 11.1 and 9.2) or
(ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and non-appealable judgment. The Administrative Agent shall be deemed not to have knowledge of any Default or Event of Default unless and until notice describing such Default or Event of Default is given to the Administrative Agent in writing by the Borrower, a Lender or the Issuing Lender.
(b)The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default or Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
10.5Reliance by the Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance, extension, renewal or increase of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the Issuing Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender or the Issuing Lender unless the Administrative Agent shall have received notice to the contrary from such Lender or the Issuing Lender prior to the making of such Loan or the issuance of such Letter of Credit. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
10.6Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article X shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the Facilities as well as activities as
Administrative Agent. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and non- appealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub agents.
10.7Filing Proofs of Claim. In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relating to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or Letter of Credit Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand therefor) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise:
(a)to file and prove a claim for the whole amount of the owing and unpaid principal and interest in respect of the Secured Obligations and to file such other documents as may be necessary or advisable in order to have the claims of the Secured Parties (including any claim for the reasonable compensation, expenses, disbursements and advances of the Secured Parties and their respective agents and counsel and all other amounts due the Secured Parties under Sections 2.5, 2.8(b) and 3.5) allowed in such proceeding; and
(b)to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and Issuing Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders and the Issuing Lender, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.5, 2.8(b) and 3.5.
10.8Resignation of the Administrative Agent.
(a)The Administrative Agent may at any time give notice of its resignation to the Lenders, the Issuing Lender and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor Administrative Agent. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation (or such earlier date as the Required Lenders may approve, the “Resignation Effective Date”), then the retiring Administrative Agent may (but shall not be obligated to) on behalf of the Lenders and the Issuing Lender, appoint a successor Administrative Agent; provided, that in no event shall any such successor Administrative Agent be a Defaulting Lender. Whether or not a successor has been appointed, such resignation shall become effective on the Resignation Effective Date.
(b)If the Person serving as Administrative Agent is a Defaulting Lender pursuant to clause (d) of the definition thereof, the Required Lenders may, to the extent permitted by applicable Law, by notice in writing to the Borrower and such Person remove such Person as Administrative Agent and, in consultation with the Borrower, appoint a successor. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days (or such earlier day as shall be agreed by the Required Lenders) (the
“Removal Effective Date”), then such removal shall nonetheless become effective in accordance with such notice on the Removal Effective Date.
(c)With effect from the Resignation Effective Date or the Removal Effective Date, as applicable, (i) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the Issuing Lender under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (ii) except for any indemnity payments owed to the retiring Administrative Agent, all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and the Issuing Lender directly, until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided for above in this Section 10.8. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring or removed Administrative Agent (other than any rights to indemnity payments owed to the retiring or removed Administrative Agent), and the retiring or removed Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided in this Section 10.8). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring or removed Administrative Agent’s resignation or removal hereunder and under the other Loan Documents, the provisions of this Article X and Section 11.3 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Administrative Agent was acting as Administrative Agent.
(d)Any resignation by CoBank as Administrative Agent pursuant to this Section shall also automatically constitute its resignation as the Issuing Lender, with replacement of the Administrative Agent as the Issuing Lender conducted in accordance with Section 10.9 below.
10.9Resignation of Issuing Lender. The Issuing Lender may at any time give notice of its resignation to the Lenders, the Administrative Agent and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, with approval from the Borrower (so long as no Event of Default has occurred and is continuing) to appoint a successor or Issuing Lender, such approval not to be unreasonably withheld or delayed. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Issuing Lender gives notice of its resignation, then the Administrative Agent may (but shall not be obligated to) on behalf of the Lenders, appoint a successor Issuing Lender. Whether or not a successor has been appointed, such resignation shall nonetheless become effective in accordance with such notice and the retiring Issuing Lender shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the retiring Issuing Lender on behalf of the Lenders or Issuing Lender under any of the Loan Documents, the retiring Issuing Lender shall continue to hold such collateral security until such time as a successor Issuing Lender is appointed). Upon the acceptance of a successor’s appointment as an Issuing Lender hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Issuing Lender, and the retiring Issuing Lender shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Issuing Lender shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Issuing Lender’s resignation
or removal hereunder and under the other Loan Documents as an Issuing Lender, as applicable, the provisions of Section 11.3 (and Article X if the Administrative Agent is the resigning Issuing Lender) shall continue in effect for the benefit of such retiring Issuing Lender, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Issuing Lender was acting as an Issuing Lender (as applicable). In addition to the foregoing requirements, upon the acceptance of a successor’s appointment as Issuing Lender hereunder, the successor Issuing Lender shall issue letters of credit in substitution for the Letters of Credit issued by the retiring Issuing Lender, if any, outstanding at the time of such succession or make other arrangements satisfactory to the retiring Issuing Lender to effectively assume the obligations of the retiring Issuing Lender with respect to such Letters of Credit.
10.10Non-Reliance on the Administrative Agent and Other Lenders. Each Lender and the Issuing Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and the Issuing Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
10.11No Other Duties, etc. Anything herein to the contrary notwithstanding, none of the Lead Arrangers or Bookrunners listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or the Issuing Lender hereunder.
10.12Collateral and Guaranty Matters.
(a)The Secured Parties irrevocably authorize the Administrative Agent, at its option and in its discretion,
(i)to release any Lien on any property granted to or held by the Administrative Agent under any Loan Document (x) upon termination of all Commitments and Payment In Full of all Secured Obligations (other than contingent indemnification obligations) and the expiration or termination of all Letters of Credit (other than Letters of Credit as to which other arrangements satisfactory to the Administrative Agent and the Issuing Lender shall have been made), (y) that is Disposed of or to be Disposed of as part of or in connection with any sale or other disposition permitted under the Loan Documents, or (z) subject to Section 11.1, if approved, authorized or ratified in writing by the Required Lenders;
(ii)to subordinate any Lien on any property granted to or held by the Administrative Agent under any Loan Document (x) to the holder of any Lien on such property that constitutes a Permitted Lien pursuant to clause (h) of the definition thereof or
(y) pursuant to a subordination, non-disturbance and attornment agreement in form and substance satisfactory to the Administrative Agent in its sole discretion; and
(iii)to release any Guarantor from its obligations under the Guaranty if such Person ceases to be a Subsidiary as a result of a transaction permitted under the Loan Documents.
Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Guaranty pursuant to this Section 10.12.
(b)The Administrative Agent shall not be responsible for or have a duty to ascertain or inquire into any representation or warranty regarding the existence, value or collectability of the Collateral, the existence, priority or perfection of the Administrative Agent’s Lien thereon, or any certificate prepared by any Loan Party in connection therewith, nor shall the Administrative Agent be responsible or liable to the Lenders for any failure to monitor or maintain any portion of the Collateral.
10.13Compliance with Flood Laws. CoBank has adopted internal policies and procedures that address requirements placed on federally regulated lenders under the Flood Laws. CoBank, as administrative agent or collateral agent on a syndicated facility, will post on the applicable electronic platform (or otherwise distribute to each Lender in the syndicate) documents that it receives in connection with the Flood Laws. However, CoBank reminds each Lender and participant in the facility that, pursuant to the Flood Laws, each federally regulated lender (whether acting as a Lender or participant in the facility) is responsible for assuring its own compliance with the flood insurance requirements.
10.14No Reliance on the Administrative Agent’s Customer Identification Program. Each Lender acknowledges and agrees that neither such Lender, nor any of its Affiliates, participants or assignees, may rely on the Administrative Agent to carry out such Lender’s, Affiliate’s, participant’s or assignee’s customer identification program, or other obligations required or imposed under or pursuant to the USA Patriot Act or the regulations thereunder, including the regulations contained in 31 CFR 103.121 (as hereafter amended or replaced, the “CIP Regulations”), or any other Anti-Terrorism Law, including any programs involving any of the following items relating to or in connection with any of the Loan Parties, their Affiliates or their agents, the Loan Documents or the transactions hereunder or contemplated hereby:
(i) any identity verification procedures, (ii) any recordkeeping, (iii) comparisons with government lists,
(iv) customer notices or (v) other procedures required under the CIP Regulations or such other Laws.
10.15Secured Hedging Obligations; Secured Bank Product Obligations.
(a)Notwithstanding any other provision of the Loan Documents to the contrary, the Administrative Agent shall not be required to verify the payment of, or that other satisfactory arrangements have been made with respect to, any Secured Hedge or Secured Bank Product owing to any Secured Party, except to the extent expressly provided herein and unless the Administrative Agent has received a Secured Party Designation Notice, together with such supporting documentation as the Administrative Agent may request, from such Secured Party.
(b)No such Lender or Affiliate (as described in the foregoing clause (a)) that obtains the benefit of the provisions of Sections 2.12 or 9.2(d), any Guaranty or any Collateral by virtue of the provisions hereof or any other Loan Document shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) (or to notice of or to consent to any amendment, waiver or modification of the provisions hereof or of any other Loan Document), other than in its capacity as a Lender and, in such case, only to the extent expressly provided in the Loan Documents.
(c)When all Commitments have been terminated and all Obligations (other than contingent indemnification obligations) have been paid in full, all obligations owing to any
Lender, Affiliate of any Lender or any other Secured Party with respect to any Secured Hedges or Secured Bank Products shall cease to be “Secured Hedges”, “Secured Bank Products” and “Other Liabilities” under the Loan Documents and the Administrative Agent shall not be required to remit proceeds of any Collateral or any other payment to, verify the payment of, or verify that other satisfactory arrangements have been made with respect to, any Secured Hedges or Secured Bank Products.
10.16Rate Disclaimer. The Administrative Agent does not warrant or accept responsibility for, and each of the parties to this Agreement hereby acknowledges and agrees (for the benefit of the Administrative Agent) that the Administrative Agent shall not have any liability with respect to
(a)the continuation of, administration of, submission of, calculation of or any other matter related to the Alternate Base Rate, any Benchmark, or any component definition thereof or rates referred to in the definition thereof, or any alternative, successor or replacement rate thereto (including any Benchmark Replacement), including whether the composition or characteristics of any such alternative, successor or replacement rate (including any Benchmark Replacement) will be similar to, or produce the same value or economic equivalence of, or have the same volume or liquidity as, Alternate Base Rate, any initial Benchmark or any other Benchmark or Benchmark Replacement prior to its discontinuance or unavailability, or (b) the effect, implementation or composition of any Benchmark Replacement Conforming Changes. The Administrative Agent and its affiliates or other related entities may engage in transactions that affect the calculation of the Alternate Base Rate, or any Benchmark, any alternative, successor or replacement rate (including any Benchmark Replacement) or any relevant adjustments thereto, in each case, in a manner adverse to the Borrower. The Administrative Agent may select information sources or services in its reasonable discretion to ascertain the Alternate Base Rate, any initial Benchmark or any other Benchmark or Benchmark Replacement, in each case pursuant to the terms of this Agreement, and shall have no liability to the Borrower, any Lender or any other Person for damages of any kind, including direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or calculation of any such rate (or component thereof) provided by any such information source or service.
XI.MISCELLANEOUS
11.1Modifications, Amendments or Waivers. With the written consent of the Required Lenders, the Administrative Agent, acting on behalf of all the Lenders, and the Borrower, on behalf of the Loan Parties, may from time to time enter into written agreements amending or changing any provision of this Agreement or any other Loan Document or the rights of the Lenders or the Loan Parties hereunder or thereunder, or may grant written waivers or consents hereunder or thereunder. Any such agreement, waiver or consent made with such written consent shall be effective to bind all the Lenders and the Loan Parties; provided, that no such agreement, waiver or consent may be made that will:
(a)extend or increase the Commitment of any Lender (or reinstate any obligation to make Loans terminated pursuant to Section 9.2) without the written consent of such Lender whose Commitment is being extended or increased (it being understood and agreed that a waiver of any condition precedent set forth in Section 4.2 or of any Default, Event of Default, mandatory prepayment or a mandatory reduction in Commitments is not considered an extension or increase in Commitments of any Lender);
(b)waive, extend or postpone any date fixed by this Agreement or any other Loan Document for any payment or any scheduled or mandatory reduction of the Commitments hereunder or under any other Loan Document without the written consent of each Lender entitled to receive such payment or whose Commitments are to be reduced;
(c)reduce the principal of, or the rate of interest specified herein on, any Loan or Letter of Credit Borrowing or any fees or other amounts payable hereunder or under any other Loan Document, or change the manner of computation of any financial ratio (including the applicable defined terms) used in determining the Applicable Margin in a manner that would result in a reduction of any interest rate on any Loan or any fee payable hereunder without the written consent of each Lender directly affected thereby; provided, however, that only the consent of the Required Lenders shall be necessary (A) to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest or Letter of Credit Fees at the Default Rate or (B) to amend any Financial Covenant hereunder (or any defined term used therein) even if the effect of such amendment would be to reduce the rate of interest on any Loan or to reduce any fee payable hereunder;
(d)change Section 2.13 or any other provision hereof requiring pro rata sharing of payments, collateral proceeds, or funding or reimbursement obligations among Lenders or classes of Lenders, in a manner that would alter the pro rata sharing of payments, collateral proceeds, or funding or reimbursement obligations required thereby without the written consent of each Lender directly affected thereby;
(e)change any provision of this Section 11.1, any other provision of this Agreement that sets forth the requisite Lenders required to consent to a modification, amendment or waiver thereof, or the definition of “Required Lenders” without the written consent of each Lender;
(f)except in connection with a transaction permitted under Section 7.6 or 7.7 or as otherwise authorized pursuant to Section 10.12, release all or substantially all of the Collateral without the written consent of each Lender whose Obligations are secured by such Collateral; or
(g)release the Borrower without the consent of each Lender, or, except in connection with a transaction permitted under Section 7.2, 7.6 or 7.7, all or substantially all of the value of the Guaranty provided pursuant to Article XII of this Agreement without the written consent of each Lender whose Secured Obligations are guaranteed thereby, except to the extent such release is permitted pursuant to Section 10.12 (in which case such release may be made by the Administrative Agent acting alone);
provided that (i) no agreement, waiver or consent that would modify the interests, rights or obligations of the Administrative Agent or the Issuing Lender may be made without the written consent of such Administrative Agent or the Issuing Lender, as applicable, and (ii) only the consent of the Administrative Agent shall be required for any amendment to any Fee Letter.
No Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Commitment of such Defaulting Lender may not be increased or extended, or the maturity of any of its Loans may not be extended, the rate of interest on any of its Loans may not be reduced, the amount of interest due on any of its Loans may not be waived and the principal amount of any of its Loans may not be forgiven, in each case without the consent of such Defaulting Lender and (y) any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender and which adversely affects such Defaulting Lender materially more than all other affected Lenders shall require the consent of such Defaulting Lender.
In addition, notwithstanding anything in this Section to the contrary, if the Administrative Agent and the Borrower shall have jointly identified an obvious error or any error or omission of a technical nature, in each case, in any provision of the Loan Documents, then the Administrative Agent and the Borrower shall be permitted to amend such provision, and, in each case, such amendment shall become effective without any further action or consent of any other party to any Loan Document if the same is not objected to in writing by the Required Lenders to the Administrative Agent within ten Business Days following receipt of notice thereof.
11.2No Implied Waivers; Cumulative Remedies. No course of dealing and no delay or failure of the Administrative Agent, the Issuing Lender or any Lender in exercising any right, power, remedy or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any further exercise thereof or of any other right, power, remedy or privilege. The rights and remedies of the Administrative Agent and the Lenders under this Agreement and any other Loan Documents are cumulative and not exclusive of any rights or remedies that they would otherwise have. Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Loan Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent for the benefit of the Secured Parties; provided, however, that the foregoing shall not prohibit (a) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (b) the Issuing Lender from exercising the rights and remedies that inure to its benefit (solely in its capacity as Issuing Lender) hereunder and under the other Loan Documents, (c) any Lender from exercising setoff rights in accordance with Section 9.2 (subject to the terms of Section 2.13), or (d) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Loan Party in any Insolvency Proceedings.
11.3Expenses; Indemnity; Damage Waiver.
(a)Costs and Expenses. The Loan Parties shall pay (i) all reasonable out of pocket expenses incurred by the Administrative Agent, the Lead Arrangers and their respective Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent and each Lead Arranger) in connection with the syndication of the Facilities, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents, or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out of pocket expenses incurred by the Issuing Lender in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, and (iii) all out of pocket expenses incurred by each of the Administrative Agent and the other Secured Parties (including the fees, charges and disbursements of any counsel, financial consultants or other consultants or agents for each of the Administrative Agent and the other Secured Parties) in connection with any Debtor Relief Proceeding with respect to any Loan Party or in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made or Letters of Credit issued hereunder, including all such out of pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.
(b)Indemnification by the Loan Parties. The Loan Parties shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender, the Issuing Lender and each other Secured Party and each Related Party of any of the foregoing Persons (each such Person being
called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee) incurred by any Indemnitee or asserted against any Indemnitee by any Person (including the Borrower or any other Loan Party) arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the Issuing Lender to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if the Borrower or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction. This Section 11.3(b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages and other similar amounts arising from any non-Tax claim.
(c)Reimbursement by Lenders. To the extent that the Loan Parties for any reason fail to indefeasibly pay any amount required under paragraph (a) or (b) of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof), the Issuing Lender or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the Issuing Lender or such Related Party, as the case may be, such Lender’s Pro Rata Share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought based on each Lender’s Pro Rata Share at such time) of such unpaid amount (including any such unpaid amount in respect of a claim asserted by such Lender); provided, that with respect to such unpaid amounts owed to the Issuing Lender solely in its capacity as such, only the Revolving Term Lenders shall be required to pay such unpaid amounts, such payment to be made severally among them based on such Revolving Term Lenders’ Pro Rata Share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought); and provided, further, that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent), the Issuing Lender in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) or the Issuing Lender in connection with such capacity.
(d)Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable Law, no Loan Party shall assert, and each Loan Party hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of
the proceeds thereof. No Indemnitee referred to in Section 11.3 shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.
(e)Payments. All amounts due under this Section shall be payable not later than ten (10) days after demand therefor.
(f)Survival. Each party’s obligations under this Section shall survive the termination of the Loan Documents and payment of the obligations hereunder.
11.4Holidays. Whenever any payment to be made hereunder shall be due on a day that is not a Business Day such payment shall be due on the next Business Day (except as provided in the definition of “Interest Period” or the definition of “Quoted Rate Period”) and such extension of time shall be included in computing interest and fees, except that the Loans shall be due on the Business Day preceding the Maturity Date if the Maturity Date is not a Business Day. Whenever any action to be taken hereunder (other than payment of the Loans) shall be stated to be due on a day that is not a Business Day, such action shall be taken on the next following Business Day.
11.5Notices; Effectiveness; Electronic Communication.
(a)Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in paragraph
(b)below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile (i) if to a Lender, at its address (or facsimile number) set forth in its Administrative Questionnaire or (ii) if to any other Person, to it at its address (or facsimile number) set forth on Schedule 11.5. Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered through electronic communications, to the extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b). Notice given to the Borrower as set forth in this Section shall be deemed sufficient as to all Loan Parties, regardless of whether each Loan Party is sent separate copies of such notice or even specifically identified in such notice.
(b)Electronic Communications. Notices and other communications to the Lenders and the Issuing Lender hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or Issuing Lender pursuant to Article II if such Lender or Issuing Lender, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.
Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement
from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient.
(c)Change of Address, etc. Any party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties hereto.
(d)Platform.
(i)Each Loan Party agrees that the Administrative Agent may, but shall not be obligated to, make the Communications (as defined below) available to the Issuing Lender and the other Lenders by posting the Communications on Debt Domain, Intralinks, Syndtrak or a substantially similar electronic transmission system (the “Platform”).
(ii)The Platform is provided “as is” and “as available.” The Agent Parties (as defined below) do not warrant the adequacy of the Platform and expressly disclaim liability for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by any Agent Party in connection with the Communications or the Platform. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to the Borrower or the other Loan Parties, any Lender or any other Person or entity for damages of any kind, including, without limitation, direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of any Loan Party’s or the Administrative Agent’s transmission of communications through the Platform. “Communications” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of any Loan Party pursuant to any Loan Document or the transactions contemplated therein which is distributed to the Administrative Agent, any Lender or the Issuing Lender by means of electronic communications pursuant to this Section, including through the Platform.
11.6Severability. The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction.
11.7Duration; Survival. All representations and warranties of the Loan Parties contained herein or made in connection herewith shall survive the execution and delivery of this Agreement, the completion of the transactions hereunder and Payment In Full. All covenants and agreements of the Borrower contained herein relating to the payment of principal, interest, premiums, additional compensation or expenses and indemnification, including those set forth in the Notes, Sections 3.1, 3.2 and
11.3 or any other provision of any Loan Document shall survive Payment In Full and shall protect the
Administrative Agent, Lenders and any other Indemnitees against events arising after such termination as well as before. All other covenants and agreements of the Loan Parties shall continue in full force and effect from and after the date hereof and until Payment In Full.
11.8Successors and Assigns.
(a)Successors and Assigns Generally. The provisions of this Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor any other Loan Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of this Section, (ii) by way of participation in accordance with the provisions of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Lender and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b)Assignments by Lenders. Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments, its participations in Letters of Credit and the Loans at the time owing to it); provided that (in each case and with respect to any Facility) any such assignment shall be subject to the following conditions:
(i)Minimum Amounts.
(A)In the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and/or the Loans at the time owing to it (in each case with respect to any Facility) or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and
(B)in any case not described in clause (i)(A) of this clause (b), the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date) shall not be less than $5,000,000 with respect to the Revolving Term Facility and $5,000,000 with respect to the Term Facility, unless, in each case, each of the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed).
(ii)Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loan or the Commitment assigned, except that
this clause (ii) shall not prohibit any Lender from assigning all or a portion of its rights and obligations among separate Facilities on a non-pro rata basis.
(iii)Required Consents. No consent shall be required for any assignment except:
(A)the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (x) a Default or an Event of Default has occurred and is continuing at the time of such assignment or
(y) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within five Business Days after having received notice thereof and provided, further, that the Borrower’s consent shall not be required during the primary syndication of the Facilities;
(B)the consent of the Administrative Agent shall be required for assignments in respect of a Facility if such assignment is to a Person that is not a Lender with a Commitment in respect of such Facility, an Affiliate of such Lender or an Approved Fund of such Lender; and
(C)the consent of the Issuing Lender shall be required for any assignment in respect of the Revolving Term Facility.
(iv)Assignment and Assumption. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; provided that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.
(v)No Assignment to Certain Persons. No such assignment shall be made to (i) the Borrower or any of the Borrower’s Affiliates or Subsidiaries or (ii) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (v).
(vi)No Assignment to Natural Persons. No such assignment shall be made to a natural Person.
(vii)Certain Additional Payments. In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the applicable Pro Rata Share of Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent, the Issuing Lender and each other Lender hereunder (and interest accrued thereon), and (y) acquire (and fund as appropriate)
its full Pro Rata Share of all Loans and participations in Letters of Credit in accordance with its Pro Rata Share. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable Law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.
Subject to acceptance and recording thereof by the Administrative Agent pursuant to this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 2.3, 3.1, 3.2 and 11.3 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided, that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 11.8(d) below.
(c)Register. The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrower, shall maintain at one of its offices in Greenwood Village, Colorado a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(d)Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the Lenders, Issuing Lender shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. For the avoidance of doubt, each Lender shall be responsible for the indemnity under Section 11.3(c) with respect to any payments made by such Lender to its Participant(s).
Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver with respect to (i) any increase in the commitment of such Participant, (ii) any reduction of interest rates, principal or fees, (iii) any extension of scheduled maturities or times for payment, (iv) any reduction in voting percentages or
(v) a release of all or substantially all of the Collateral, in each case to the extent that such amendment, modification or waiver described in Section 11.1 would directly affect such Participant and could not be effected by a vote of the Required Lenders. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.1, 3.2 and 3.4 (subject to the requirements and limitations therein, including the requirements under Section 3.2 (it being understood that the documentation required under Section 3.2 shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph
(b) of this Section 11.8; provided that such Participant (A) agrees to be subject to the provisions of Section 3.6 as if it were an assignee under paragraph (b) of this Section 11.8; and (B) shall not be entitled to receive any greater payment under Section 3.1 or 3.2, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 3.6 with respect to any Participant. To the extent permitted by Law, each Participant also shall be entitled to the benefits of Sections 2.16 and 9.2(c) as though it were a Lender; provided that such Participant agrees to be subject to Section 2.13 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non- fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any Commitments, Loans, Letters of Credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such Commitment, Loan, Letter of Credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register. CoBank reserves the right to assign or sell participations in all or part of its Commitments or outstanding Loans hereunder on a non-patronage basis.
Notwithstanding the preceding paragraph, any Participant that is a Farm Credit Lender that (i) has purchased a participation in a minimum amount of $10,000,000, (ii) has been designated as a voting Participant (a “Voting Participant”) in a notice (a “Voting Participant Notice”) sent by the relevant Lender (including any existing Voting Participant) to the Borrower and the Administrative Agent and (iii) receives, prior to becoming a Voting Participant, the consent of the Administrative Agent (such consent to be required only to the extent and under the circumstances it would be required if such Voting Participant were to become a Lender pursuant to an assignment in accordance with Section 11.8(b), except that such consent is not required for an assignment to an existing Voting Participant), shall be entitled to vote as if such Voting Participant were a Lender on all matters subject to a vote by Lenders, and the voting rights of the selling Lender (including any existing Voting Participant) shall be correspondingly reduced, on a dollar-for-dollar basis. Each Voting Participant Notice shall include, with respect to each Voting Participant, the information that would be included by a prospective Lender in an Assignment and Assumption.
Notwithstanding the foregoing, each Farm Credit Lender designated as a Voting Participant in Schedule 11.8 shall be a Voting Participant without delivery of a Voting Participant Notice and without the prior written consent of the Administrative Agent. The selling Lender (including any existing Voting Participant) and the purchasing Voting Participant shall notify the Administrative Agent within three (3) Business Days of any termination, reduction or increase of the amount of, such participation. The Administrative Agent shall be entitled to conclusively rely on information contained in Voting Participant Notices and all other notices delivered pursuant hereto. The voting rights of each Voting Participant are solely for the benefit of such Voting Participant and shall not inure to any assignee or participant of such Voting Participant that is not a Farm Credit Lender.
(e)Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or other central banking authority; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
11.9Confidentiality. Each of the Administrative Agent, the Lenders and the Issuing Lender agree to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its Related Parties (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent required or requested by any regulatory authority purporting to have jurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners); (c) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process; (d) to any other party hereto;
(e)in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder; (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any third-party service providers of such Person providing covenant monitoring or other data analytics services, (ii) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights and obligations under this Agreement, or (iii) any actual or prospective party (or its Related Parties) to any swap, derivative or other transaction under which payments are to be made by reference to the Borrower and its obligations, this Agreement or payments hereunder; (g) on a confidential basis to (i) credit risk protection providers and insurers, (ii) any rating agency in connection with rating the Borrower or its Subsidiaries or the Facilities or (iii) the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of CUSIP numbers with respect to the Facilities;
(h) with the consent of the Borrower; or (i) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section, or (y) becomes available to the Administrative Agent, any Lender, the Issuing Lender or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower. For purposes of this Section, “Information” means all information received from the Borrower or any of its Subsidiaries relating to the Borrower or any of its Subsidiaries or any of their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or the Issuing Lender on a nonconfidential basis prior to disclosure by the Borrower or any of its Subsidiaries; provided that, in the case of information received from the Borrower or any of its Subsidiaries after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
In addition to the foregoing, the Administrative Agent and the Borrower hereby agree that, with the prior written consent of the Borrower (such consent not to be unreasonably conditioned, withheld or delayed), the Administrative Agent may, in its discretion, place advertisements in financial and other newspapers and periodicals, and on a home page or similar place for dissemination of information on the Internet or worldwide web. The Borrower hereby agrees that the Administrative Agent may, in its discretion and without any additional consent of or notice to the Borrower or any other Person, circulate and/or publish similar promotional materials after the Closing Date in the form of a “tombstone” or otherwise describing the names and including the logo(s) of the Borrower and its affiliates (or any of them), and/or the amount, type and Closing Date. All such advertisements and promotional materials shall be at the Administrative Agent’s expense.
11.10Counterparts; Integration; Effectiveness.
(a)This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents, and any separate letter agreements with respect to fees payable to the Administrative Agent, constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Article IV, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Agreement.
(b)Electronic Execution of Assignments. The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
11.11CHOICE OF LAW; SUBMISSION TO JURISDICTION; WAIVER OF VENUE; SERVICE OF PROCESS; WAIVER OF JURY TRIAL.
(a)Governing Law. This Agreement and the other Loan Documents and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement or any other Loan Document (except, as to any other Loan Document, as expressly set forth therein) and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the internal laws of the State of New York, but giving effect to federal laws applicable to national banks or federal instrumentalities of the United States.
(b)SUBMISSION TO JURISDICTION. Each of the Loan Parties irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any United States federal or New York state court sitting in the Borough of Manhattan, New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document, or for recognition or enforcement of any judgment,
and each of the Loan Parties irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York state court or, to the fullest extent permitted by applicable Law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or in any other Loan Document shall affect any right that the Administrative Agent, any Lender or the Issuing Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or any other Loan Party or its properties in the courts of any jurisdiction.
(c)WAIVER OF VENUE. The Borrower and each other Loan Party irrevocably and unconditionally waives, to the fullest extent permitted by applicable Law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in this Section 11.11. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by applicable Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court and agrees not assert any such defense.
(d)SERVICE OF PROCESS. Each party hereto irrevocably consents to service of process in the manner provided for notices in Section 11.5. Nothing in this agreement will affect the right of any party hereto to serve process in any other manner permitted by applicable Law.
(e)WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
11.12USA Patriot Act Notice. Each Lender that is subject to the USA Patriot Act and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies Loan Parties that pursuant to the requirements of the USA Patriot Act, it is required to obtain, verify and record information that identifies the Loan Parties, which information includes the name and address of Loan Parties and other information that will allow such Lender or Administrative Agent, as applicable, to identify the Loan Parties in accordance with the USA Patriot Act. The Borrower shall, promptly following a request by the Administrative Agent or any Lender, provide all documentation and other information, including, without limitation, the certification regarding beneficial ownership of legal entity customers (the “Beneficial Ownership Certification”), that the Administrative Agent or such Lender requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the USA Patriot Act.
11.13Payments Set Aside. To the extent any Loan Party makes a payment or payments to the Administrative Agent for the ratable benefit of the Lenders or Secured Parties or the Administrative Agent receives any payment or proceeds of the Collateral which payments or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any Insolvency Proceeding, other applicable Law or equitable cause, then, to the extent of such payment or proceeds repaid, the Secured Obligations or part thereof intended to be satisfied shall be revived and continued in full force and effect as if such payment or proceeds had not been received by the Administrative Agent.
11.14Secured Bank Products and Secured Hedge Agreements. No Secured Party (other than the Administrative Agent) that obtains the benefit of the Guaranty set forth in Article XII or of any security interest in any of the Collateral shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document (including the release, impairment or modification of any Guarantors’ Obligations or security therefor) other than in its capacity as a Lender and, in such case, only to the extent expressly provided in the Loan Documents. No Hedge Bank or provider of any Secured Bank Product shall have any voting rights hereunder or under any other Loan Document in its capacity as the provider of such Secured Hedge or Secured Bank Product. Notwithstanding any other provision of this Agreement to the contrary, the Administrative Agent shall only be required to verify the payment of, or that other reasonably satisfactory arrangement have been made with respect to, the Secured Obligations arising with respect to Secured Bank Products and Secured Hedges to the extent the Administrative Agent has received written notice of such Secured Obligations, together with such supporting documentation as it may request, from the applicable Lender (or its Affiliate) or Hedge Bank, as the case may be. Each Secured Party not a party to this Agreement that obtains the benefit of this Agreement or any other Loan Document shall be deemed to have acknowledged and accepted the appointment of the Administrative Agent pursuant to the terms of this Agreement, and acknowledges and agrees that the Administrative Agent is and shall be entitled to all the rights, benefits and immunities conferred under this Agreement with respect to each such Secured Party.
11.15Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents, together with all fees, charges and other amounts treated as interest under applicable Laws (collectively, “Charges”) shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”). If the Administrative Agent or any Lender shall receive interest and Charges in an amount that exceeds the Maximum Rate, the excess interest and Charges shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest and Charges contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.
11.16Acknowledgment and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a)the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and
(b)the effects of any Bail-In Action on any such liability, including, if
applicable:
(i)a reduction in full or in part or cancellation of any such liability;
(ii)a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(iii)the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of the applicable Resolution Authority.
11.17Waiver of Borrower Rights Under Farm Credit Law. Each Loan Party acknowledges and agrees that, to the extent the provisions of the Agricultural Credit Act of 1987, including, without limitation, 12 U.S.C. §§ 2199 through 2202e, and the implementing Farm Credit Administration regulations, 12 C.F.R. § 617.7000, et seq. (collectively, the “Farm Credit Law”) apply to any Loan Party or to the transactions contemplated by this Agreement, each Loan Party, to the extent permitted by law, hereby irrevocably waives all statutory or regulatory rights of a borrower under the Farm Credit Law, including, without limitation, all rights to disclosure of effective interest rates, differential interest rates, review of credit decisions, distressed loan restructuring, and rights of first refusal (together with all other rights under the Farm Credit Law, the “Borrower Rights”). Each Loan Party acknowledges and agrees that the waiver of Borrower Rights provided by this Section is knowingly and voluntarily made after such Loan Party has consulted with legal counsel of its choice and has been represented by counsel of its choice in connection with the negotiation of this Agreement and the waiver of Borrower Rights set forth in this Section. Each Loan Party acknowledges that its waiver of Borrower Rights set forth in this Section is based on its recognition that such waiver is material to induce commercial banks and other non-Farm Credit System institutions (as defined under Farm Credit Law) to participate in the Credit Extensions contemplated by this Agreement and to provide Credit Extensions to the Borrower. Nothing contained in this Section, nor the delivery to any Loan Party of any summary of any rights under, or any notice pursuant to, the Farm Credit Law shall be deemed to be, or be construed to indicate, the determination or agreement by any Loan Party, the Administrative Agent, or any Lender that the Farm Credit Law, or any rights thereunder, are or will be applicable to any Loan Party or to the transactions contemplated by this Agreement. It is the intent of the Loan Parties that the waiver of Borrower Rights contained in this Section complies with and meets all of the requirements of 12 C.F.R. § 617.7010(c).
11.18Recovery of Erroneous Payments. Without limitation of any other provision in this Agreement, if at any time the Administrative Agent makes a payment hereunder in error to any Secured Party, whether or not in respect of an Obligation due and owing by the Borrower at such time (any such payment, an “Erroneous Payment”), then in any such event, each Secured Party receiving an Erroneous Payment severally agrees to repay to the Administrative Agent promptly upon demand the Erroneous Payment received by such Secured Party in immediately available funds (and in the currency so received), with interest thereon for each day from and including the date such Erroneous Payment is received by it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. Each Secured Party irrevocably waives any and all defenses, including any “discharge for value” (under which a creditor might otherwise claim a right to retain funds mistakenly paid by a third party in respect of a debt owed by another) or similar defense to its obligation to return any
Erroneous Payment. The Administrative Agent shall inform each Secured Party promptly upon determining that any payment made to such Secured Party comprised, in whole or in part, an Erroneous Payment (and such determination shall be conclusive absent manifest error).
XII.GUARANTY
12.1Guaranty. Each Guarantor hereby jointly and severally, unconditionally, absolutely, continually and irrevocably guarantees to the Administrative Agent, for the benefit of the Secured Parties, the payment and performance in full of the Guaranteed Liabilities, whether heretofore, now or at any time or times hereafter owing or arising. For all purposes of this Agreement, notwithstanding the foregoing, the liability of each Guarantor individually with respect to its Guarantor’s Obligations shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any applicable state law. Each Guarantor agrees that it is jointly and severally, directly and primarily liable (subject to the limitation in the immediately preceding sentence) for the Guaranteed Liabilities. The Guarantors’ Obligations are secured by various Collateral.
12.2Payment. If the Borrower or any other Loan Party shall default in payment or performance of any of the Guaranteed Liabilities, whether principal, interest, premium, indemnification obligations, fees (including, but not limited to, attorney’s fees and expenses), expenses or otherwise, when and as the same shall become due, and after expiration of any applicable grace period, whether according to the terms of this Agreement, by acceleration, or otherwise, or upon the occurrence and during the continuance of any Event of Default, then any or all of the Guarantors will, upon demand thereof by the Administrative Agent, (i) fully pay to the Administrative Agent, for the benefit of the Secured Parties, an amount equal to all the Guaranteed Liabilities then due and owing or declared or deemed to be due and owing, including for this purpose, in the event of any Event of Default under Section 9.1(l) (and irrespective of the applicability of any restriction on acceleration or other action as against any other Loan Party in any Insolvency Proceeding), the entire outstanding or accrued amount of all Secured Obligations or (ii) perform such Guaranteed Liabilities, as applicable. For purposes of this Section 12.2, the Guarantors acknowledge and agree that “Guaranteed Liabilities” shall be deemed to include any amount (whether principal, interest, premium, fees, expenses, indemnification obligations and/or any other payment obligation of any kind or nature) which would have been accelerated in accordance with Section 9.2 but for the fact that such acceleration could be unenforceable or not allowable in any Insolvency Proceeding or otherwise under any applicable Law. Notwithstanding anything herein to the contrary, upon the occurrence and continuation of an Event of Default, then notwithstanding any collateral or other security or credit support for the Guaranteed Liabilities, at the Administrative Agent’s election and without notice thereof or demand therefor, each of the Guaranteed Liabilities and the Guarantors’ Obligations shall immediately be and become due and payable.
12.3Absolute Rights and Obligations. This is a guaranty of payment and not of collection. The Guarantors’ Obligations under this Article XII shall be joint and several, absolute and unconditional irrespective of, and each Guarantor hereby expressly waives, to the extent permitted by law, any defense to its obligations under this Agreement and all other Loan Documents to which it is a party by reason of:
(a)any lack of legality, validity or enforceability of this Agreement, of any of the Notes, of any other Loan Document, or of any other agreement or instrument creating, providing security for, or otherwise relating to any of the Guarantors’ Obligations, any of the Guaranteed Liabilities, or any other guaranty of any of the Guaranteed Liabilities (the Loan Documents, the documentation with respect to any Other Liabilities and all such other agreements and instruments being collectively referred to as the “Related Agreements”);
(b)any action taken under any of the Related Agreements, any exercise of any right or power therein conferred, any failure or omission to enforce any right conferred thereby, or any waiver of any covenant or condition therein provided;
(c)any acceleration of the maturity of any of the Guaranteed Liabilities, of the Guarantor’s Obligations of any other Guarantor, or of any other obligations or liabilities of any Person under any of the Related Agreements;
(d)any release, exchange, non-perfection, lapse in perfection, disposal, deterioration in value, or impairment of any security for any of the Guaranteed Liabilities, for any of the Guarantor’s Obligations of any Guarantor, or for any other obligations or liabilities of any Person under any of the Related Agreements;
(e)any dissolution of the Borrower, any Guarantor, any other Loan Party or any other party to a Related Agreement, or the combination or consolidation of the Borrower, any Guarantor, any other Loan Party or any other party to a Related Agreement into or with another entity or any transfer or disposition of any assets of the Borrower, any Guarantor or any other Loan Party or any other party to a Related Agreement;
(f)any extension (including without limitation extensions of time for payment), renewal, amendment, restructuring or restatement of, any acceptance of late or partial payments under, or any change in the amount of any borrowings or any credit facilities available under, this Agreement, any of the Notes or any other Loan Document or any other Related Agreement, in whole or in part;
(g)the existence, addition, modification, termination, reduction or impairment of value, or release of any other guaranty (or security therefor) of the Guaranteed Liabilities (including without limitation the Guarantor’s Obligations of any other Guarantor and obligations arising under any other Guaranty or any other Loan Document now or hereafter in effect);
(h)any waiver of, forbearance or indulgence under, or other consent to any change in or departure from any term or provision contained in this Agreement, any other Loan Document or any other Related Agreement, including without limitation any term pertaining to the payment or performance of any of the Guaranteed Liabilities, any of the Guarantor’s Obligations of any other Guarantor, or any of the obligations or liabilities of any party to any other Related Agreement;
(i)any other circumstance whatsoever (with or without notice to or knowledge of any Guarantor or any other Loan Party) which might in any manner or to any extent vary the risks of such Loan Party, or might otherwise constitute a legal or equitable defense available to, or discharge of, a surety or a guarantor, including without limitation any right to require or claim that resort be had to the Borrower or any other Loan Party or to any collateral in respect of the Guaranteed Liabilities or Guarantors’ Obligations.
It is the express purpose and intent of the parties hereto that this Agreement and the Guarantors’ Obligations hereunder and under each joinder agreement with respect hereto shall be absolute and unconditional under any and all circumstances and shall not be discharged except by payment and performance as herein provided.
12.4Currency and Funds of Payment. All Guarantors’ Obligations for payment will be paid in lawful currency of the United States of America and in immediately available funds, regardless of any law, regulation or decree now or hereafter in effect that might in any manner affect the Guaranteed Liabilities, or the rights of any Secured Party with respect thereto as against the Borrower or any other Loan Party, or cause or permit to be invoked any alteration in the time, amount or manner of payment by the Borrower or any other Loan Party of any or all of the Guaranteed Liabilities.
12.5Subordination. For so long as this Agreement remains in effect, each Guarantor hereby unconditionally subordinates all present and future debts, liabilities or obligations now or hereafter owing to such Guarantor (a) of the Borrower, to the Payment In Full of the Guaranteed Liabilities, (b) of every other Guarantor (an “obligated guarantor”), to the Payment In Full of the Guarantors’ Obligations of such obligated guarantor, and (c) of each other Person now or hereafter constituting a Loan Party, to the Payment In Full of the obligations of such Loan Party owing to any Secured Party and arising under the Loan Documents or with respect to any Secured Bank Product or Secured Hedge. All amounts due under such subordinated debts, liabilities, or obligations shall, upon the occurrence and during the continuance of an Event of Default, be collected and, upon request by the Administrative Agent, paid over forthwith to the Administrative Agent for the benefit of the Secured Parties on account of the Guaranteed Liabilities, the Guarantors’ Obligations, or such other obligations, as applicable, and, after such request and pending such payment, shall be held by such Guarantor as agent and bailee of the Secured Parties separate and apart from all other funds, property and accounts of such Guarantor.
12.6Enforcement. Each Guarantor from time to time shall pay to the Administrative Agent for the benefit of the Secured Parties, on demand, at the Administrative Agent’s Principal Office or such other address as the Administrative Agent shall give notice of to such Guarantor, the Guarantors’ Obligations as they become or are declared due, and in the event such payment is not made forthwith, the Administrative Agent may proceed to suit against any one or more or all of the Guarantors. At the Administrative Agent’s election, one or more and successive or concurrent suits may be brought hereon by the Administrative Agent against any one or more or all of the Guarantors, whether or not suit has been commenced against the Borrower, any other Guarantor, or any other Person and whether or not the Secured Parties have taken or failed to take any other action to collect all or any portion of the Guaranteed Liabilities or have taken or failed to take any actions against any collateral securing payment or performance of all or any portion of the Guaranteed Liabilities, and irrespective of any event, occurrence, or condition described in Section 12.3.
12.7Set-Off and Waiver. Each Guarantor waives any right to assert against any Secured Party as a defense, counterclaim, set-off, recoupment or cross claim in respect of its Guarantor’s Obligations, any defense (legal or equitable) or other claim which such Guarantor may now or at any time hereafter have against the Borrower or any other Loan Party or any or all of the Secured Parties without waiving any additional defenses, set-offs, counterclaims or other claims otherwise available to such Guarantor. Each Guarantor agrees that each Secured Party shall have a Lien for all the Guarantor’s Obligations upon all deposits or deposit accounts, of any kind, or any interest in any deposits or deposit accounts, now or hereafter pledged, mortgaged, transferred or assigned to such Secured Party or otherwise in the possession or control of such Secured Party for any purpose (other than solely for safekeeping) for the account or benefit of such Guarantor, including any balance of any deposit account or of any credit of such Guarantor with the Secured Party, whether now existing or hereafter established, and hereby authorizes each Secured Party from and after the occurrence of an Event of Default at any time or times with or without prior notice to apply such balances or any part thereof to such of the Guarantor’s Obligations to the Secured Parties then due and in such amounts as provided for in this Agreement or otherwise as they may elect.
12.8Waiver of Notice; Subrogation.
(a)Each Guarantor hereby waives to the extent permitted by law notice of the following events or occurrences: (i) acceptance of this Agreement; (ii) the Lenders’ heretofore, now or from time to time hereafter making Loans and issuing Letters of Credit and otherwise loaning monies or giving or extending credit to or for the benefit of the Borrower or any other Loan Party, or otherwise entering into arrangements with any Loan Party giving rise to Guaranteed Liabilities, whether pursuant to this Agreement or the Notes or any other Loan Document or Related Agreement or any amendments, modifications, or supplements thereto, or replacements or extensions thereof; (iii) presentment, demand, default, non-payment, partial payment and protest; and (iv) any other event, condition, or occurrence described in Section 12.3. Each Guarantor agrees that each Secured Party may heretofore, now or at any time hereafter do any or all of the foregoing in such manner, upon such terms and at such times as each Secured Party, in its sole and absolute discretion, deems advisable, without in any way or respect impairing, affecting, reducing or releasing such Guarantor from its Guarantor’s Obligations, and each Guarantor hereby consents to each and all of the foregoing events or occurrences.
(b)Each Guarantor hereby agrees that payment or performance by such Guarantor of its Guarantor’s Obligations under this Agreement may be enforced by the Administrative Agent on behalf of the Secured Parties upon demand by the Administrative Agent to such Guarantor without the Administrative Agent being required, such Guarantor expressly waiving to the extent permitted by law any right it may have to require the Administrative Agent, to (i) prosecute collection or seek to enforce or resort to any remedies against the Borrower or any other Guarantor or any other guarantor of the Guaranteed Liabilities, or (ii) seek to enforce or resort to any remedies with respect to any security interests, Liens or encumbrances granted to the Administrative Agent or any Lender or other party to a Related Agreement by the Borrower, any other Guarantor or any other Person on account of the Guaranteed Liabilities or any guaranty thereof, IT BEING EXPRESSLY UNDERSTOOD, ACKNOWLEDGED AND AGREED BY SUCH GUARANTOR THAT DEMAND UNDER THIS AGREEMENT MAY BE MADE BY THE ADMINISTRATIVE AGENT, AND THE PROVISIONS HEREOF ENFORCED BY THE ADMINISTRATIVE AGENT, EFFECTIVE AS OF THE FIRST DATE ANY EVENT OF DEFAULT OCCURS AND IS CONTINUING.
(c)Each Guarantor further agrees that such Guarantor shall not exercise any of its rights of subrogation, reimbursement, contribution, indemnity or recourse to security for the Guaranteed Liabilities until at least ninety-five (95) days immediately following the Termination Date shall have elapsed without the filing or commencement, by or against any Loan Party, of any state or federal action, suit, petition or proceeding seeking any reorganization, liquidation or other relief or arrangement in respect of creditors of, or the appointment of a receiver, liquidator, trustee or conservator in respect to, such Loan Party or its assets. If an amount shall be paid to any Guarantor on account of such rights at any time prior to Termination Date, such amount shall be held in trust for the benefit of the Secured Parties and shall forthwith be paid to the Administrative Agent, for the benefit of the Secured Parties, to be credited and applied upon the Guarantors’ Obligations, whether matured or unmatured, in accordance with the terms of this Agreement or otherwise as the Secured Parties may elect. The agreements in this subsection shall survive repayment of all of the Guarantors’ Obligations, the termination or expiration of this Agreement in any manner and occurrence of the Termination Date.
12.9Reliance. Each Guarantor represents and warrants to the Administrative Agent, for the benefit of the Secured Parties, that: (a) such Guarantor has adequate means to obtain on a continuing basis (i) from the Borrower, information concerning the Loan Parties and the Loan Parties’ financial condition and affairs and (ii) from other reliable sources, such other information as it deems material in deciding to provide this Article XII and any joinder agreement (“Other Information”), and has full and
complete access to the Loan Parties’ books and records and to such Other Information; (b) such Guarantor is not relying on any Secured Party or its or their employees, Directors, agents or other representatives or Affiliates, to provide any such information, now or in the future; (c) such Guarantor has been furnished with and reviewed the terms of such Loan Documents and Related Agreements as it has requested, is executing this Agreement (or the joinder agreement to which it is a party, as applicable) freely and deliberately, and understands the obligations and financial risk undertaken by providing this Agreement;
(d) such Guarantor has relied solely on the Guarantor’s own independent investigation, appraisal and analysis of the Borrower and the other Loan Parties, such Persons’ financial condition and affairs, the Other Information, and such other matters as it deems material in deciding to provide this Agreement and is fully aware of the same; and (e) such Guarantor has not depended or relied on any Secured Party or its or their employees, Directors, agents or other representatives or Affiliates, for any information whatsoever concerning the Borrower or the Borrower’s financial condition and affairs or any other matters material to such Guarantor’s decision to provide this Agreement, or for any counseling, guidance, or special consideration or any promise therefor with respect to such decision. Each Guarantor agrees that no Secured Party has any duty or responsibility whatsoever, now or in the future, to provide to such Guarantor any information concerning the Borrower or any other Loan Party or such Persons’ financial condition and affairs, or any Other Information, other than as expressly provided herein, and that, if such Guarantor receives any such information from any Secured Party or its or their employees, Directors, agents or other representatives or Affiliates, such Guarantor will independently verify the information and will not rely on any Secured Party or its or their employees, Directors, agents or other representatives or Affiliates, with respect to such information.
12.10Keepwell. Each of the Borrower and each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support to each other Guarantor as may be needed by such Guarantor from time to time to honor all of its obligations under this Agreement and the other Loan Documents to which it is a party with respect to Swap Obligations that would, in the absence of the agreement in this Section 12.10, otherwise constitute Excluded Swap Obligations (but, in each case, only up to the maximum amount of such liability that can be hereby incurred without rendering the Borrower’s and such Qualified ECP Guarantors’ obligations and undertakings under this Section voidable under applicable Law relating to fraudulent conveyance, fraudulent transfer, voidable transactions or similar matters, and not for any greater amount). The obligations and undertakings of the Borrower and the Qualified ECP Guarantors under this Section 12.10 shall remain in full force and effect until the Guarantors’ Obligations have been indefeasibly paid and performed in full. The Borrower and the Qualified ECP Guarantors intend this Section 12.10 to constitute, and this Section 12.10 shall be deemed to constitute, a guarantee of the obligations of, and a “keepwell, support, or other agreement” for the benefit of, each Guarantor for all purposes of the Commodity Exchange Act.
12.11Joinder. Each Person that shall at any time execute and deliver to the Administrative Agent a joinder agreement with respect to this Article XII in form and substance acceptable to the Administrative Agent shall thereupon irrevocably, absolutely and unconditionally become a party hereto and obligated hereunder as a Guarantor, and all references herein and in the other Loan Documents to the Guarantors or to the parties to this Agreement shall be deemed to include such Person as a Guarantor hereunder.
Signature pages follow.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed this Agreement as of the day and year first above written.
THE ANDERSONS MARATHON HOLDINGS
LLC, as Borrower
By:
Name:
Title:
COBANK, ACB, as Administrative Agent and Issuing Lender
By:
Name:
Title:
FARM CREDIT MID-AMERICA, PCA, as a
Lender
By:
Name:
Title:
BANK OF THE WEST, as a Lender
By:
Name:
Title:
SCHEDULE 5.1
Qualifications to Do Business
| Name of Loan Party or Subsid | State of Organization | Jurisdictions in which Licensed/ Qualified to Do Busines | Chief Executive Office and Principal Place of Bu | Other Place(s) of Busine |
|---|---|---|---|---|
| The Andersons Marathon Holdings L | Delaware | Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kentucky, Maryland, Michigan, Mississippi, North Carolina, Ohio, Pennsylvania, Rhode Island, Tennessee, Vermont, Virginia and West Virgin | 1947 Briarfield Boulevar<br><br>Maumee, Ohio 435 | None |
SCHEDULE 5.22
Agricultural Licenses
Commercial Feed Licenses in: Alabama, Arizona, Arkansas, California, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maryland, Michigan, Minnesota, Missouri, Nebraska, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Vermont, Virginia, and West Virginia.
SCHEDULE 11.5
Addresses for Notices
Borrower:
The Andersons Marathon Holdings LLC c/o The Andersons, Inc.
1947 Briarfield Boulevard
Maumee, Ohio 43537 Attention: Brian Walz Telephone: (419) 897-6729
Facsimile: (419) 897-6767
With a copy to (which shall not constitute notice):
Jones Day
110 N. Wacker Drive Suite 4800
Chicago, IL 60606 Attn: Robert Graves
Telephone: (312) 269-4356 Email: rjgraves@jonesday.com
Administrative Agent:
CoBank, ACB
6340 South Fiddlers Green Circle Greenwood Village, Colorado 80111 Attention: Credit Information Services Facsimile: 303-224-6101
Email: CIServices@cobank.com
SCHEDULE 11.8
Voting Participants
| Voting Participant | Revolving Term Commitment | Term Commitment |
|---|---|---|
| Farm Credit Services of America, FLCA | $16,000,000 | $0 |
| GreenStone Farm Credit Services, FLCA | $4,712,000 | $0 |
| Farm Credit East, | $4,000,000 | $0 |
EXHIBIT D
LOAN REQUEST
To: CoBank, ACB
6340 S. Fiddlers Green Circle Greenwood Village, Colorado 80111 Attention: Credit Information Services
Reference is made to the Credit Agreement dated as of October 1, 2019 (as the same may be amended, restated, supplemented or otherwise modified to date, the “Credit Agreement”) by and among THE ANDERSONS MARATHON HOLDINGS LLC, a Delaware limited liability company (the “Borrower”), the Guarantors from time to time party thereto, the Lenders from time to time party thereto, and COBANK, ACB, as administrative agent (the “Administrative Agent”). Capitalized terms used herein but not otherwise defined shall have the meanings assigned to them in the Credit Agreement.
The Borrower hereby requests or confirms its request for a Borrowing under the Facility(ies) on the date, of the type(s) and in the amount(s) specified in Annex I attached hereto and requests or confirms its request that each Lender under such Facility(ies) make Advance(s) in the amount of such Lender’s Pro Rata Share of the requested Borrowing (the “Requested Advances”).
To induce the Lenders to make the Requested Advances, the Borrower hereby represents and warrants to the Administrative Agent and the Lenders that:
1.As of the date hereof and before giving effect to the Requested Advances, the Revolving Term Facility Usage was [$ ], consisting of (i) Revolving Term Advances in the aggregate amount of [$ ] and (ii) Letter of Credit Obligations in the amount of [$ ]. After giving effect to the Requested Advances, the Revolving Term Facility Usage will be [$ ], consisting of (x) Revolving Term Advances in the aggregate amount of [$ ] and (y) Letter of Credit Obligations in the amount of [$ ].
2.As of the date hereof and before giving effect to the Requested Advances, the aggregate outstanding principal amount of the Term Advances was [$ ]. After giving effect to the Requested Advances, the aggregate outstanding principal amount of the Term Advances will be [$ ].
3.No Default or Event of Default exists or will result from the making of the Requested Advances.
4.The conditions precedent set forth in Article IV of the Credit Agreement are fully satisfied as of the date of the Requested Advances.
THE ANDERSONS MARATHON HOLDINGS LLC
By:
Name:
Title:
Annex I to Exhibit D
| Facility | Amount | Type (Term SOFR Rate Loans, Daily Simple SOFR Rate Loans, Quoted Rate<br><br>Loans) | Date of Borrowing | Interest Period | Expiry Date of Interest Period of<br><br>Quoted Rate Period | Interest Rate under Term SOFR Rate Option or Quoted Rate<br><br>Option* |
|---|
*Administrative Agent to complete.
EXHIBIT H
CONVERSION OR CONTINUATION NOTICE
To: CoBank, ACB
6340 S. Fiddlers Green Circle Greenwood Village, Colorado 80111 Attention: Credit Information Services
Reference is made to the Credit Agreement dated as of October 1, 2019 (as may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among THE ANDERSONS MARATHON HOLDINGS LLC, a Delaware limited liability company (the “Borrower”), the Guarantors from time to time party thereto, the Lenders from time to time party thereto, and COBANK, ACB, as administrative agent (the “Administrative Agent”). Capitalized terms used herein but not otherwise defined shall have the same meanings assigned to them in the Credit Agreement.
The Borrower hereby requests or confirms its request of the following (check all that apply):
•That the Daily Simple SOFR Rate Loans or Quoted Rate Loans in the aggregate amount(s) specified in Annex I attached hereto be converted into Term SOFR Rate Loans (the “Requested Term SOFR Rate Conversion(s)”) on the date(s) and for the Interest Period(s) specified in Annex I attached hereto.
•That the Term SOFR Rate Loans or Quoted Rate Loans in the aggregate amount(s) specified in Annex I attached hereto be converted into Daily Simple SOFR Rate Loans (the “Requested Daily Simple SOFR Rate Conversion(s)”) on the date(s) specified in Annex I attached hereto.
•That the Term SOFR Rate Loans or Daily Simple SOFR Rate Loans in the aggregate amount(s) specified in Annex I attached hereto be converted into Quoted Rate Loans (the “Requested Quoted Rate Conversion(s)”) on the date(s) and for the Quoted Rate Period(s) specified in Annex I attached hereto.
•That the Term SOFR Rate Loans in the aggregate amount(s) specified in Annex I attached hereto be continued (the “Requested Term SOFR Rate Continuation(s)”) on the date(s) and for the Interest Period(s) specified in Annex I attached hereto.
•That the Quoted Rate Loans in the aggregate amount(s) specified in Annex I attached hereto be continued (the “Requested Quoted Rate Continuation(s)”) on the date(s) and for the Quoted Rate Period(s) specified in Annex I attached hereto.
To induce the Lenders to make the Requested Term SOFR Rate Conversion(s), Daily Simple SOFR Rate Conversion(s), Quoted Rate Conversion(s), Requested Term SOFR Rate Continuation(s) and/or Requested Quoted Rate Continuation(s) (the “Requested Actions”), the Borrower represents and warrants that no Default or Event of Default exists or will result from the making of the Requested Actions and the conditions precedent set forth in Article IV of the Credit Agreement are fully satisfied as of the date of the Requested Actions.
Signature page follows.
THE ANDERSONS MARATHON HOLDINGS LLC
By:
Name:
Title:
ANNEX I
to Notice of Continuation or Conversion
For Requested Term SOFR Rate Conversion(s):
| Facility | Type (Daily Simple SOFR Rate Loans<br><br>Quoted Rate Loans) | Amount | Proposed effective date of new Interest Period | New Interest Period | Expiry Date of New Interest Period |
|---|
For Requested Daily Simple SOFR Rate Conversion(s):
| Facility | Type (Term SOFR Rate Loans, Quoted Rate Loan | Amount |
|---|
For Requested Quoted Rate Conversion(s):
| Facility | Type (Daily Simple SOFR Rate Loans, Term SOFR Rate Loans) | Amount | Proposed effective date of new Quoted Rate Period | Expiry Date of New Quoted Rate Period |
|---|
For Requested Term SOFR Rate Continuation(s):
| Facility | Amount of Term SOFR Rate Loan being continued | Last day of current Interest Period | Proposed effective date of new Interest Period | New Interest Period | Expiry Date of New Interest Period |
|---|
For Requested Quoted Rate Continuation(s):
| Facility | Amount of Quoted Rate<br><br>Loan being continued | Last day of current Quoted Rate Period | Proposed effective date of<br><br>new Quoted Rate Period | Expiry Date of New Quoted Rate Period |
|---|
Document
Exhibit 10.30
FIRST AMENDMENT TO
SECOND AMENDED AND RESTATED LOAN AGREEMENT
THIS AGREEMENT made as of March 17 _, 2022 (the “Amendment Date”)
BETWEEN:
SCOTIABANK ASSET FINANCE, A DIVISION OF THE BANK OF NOVA SCOTIA, operating through its Canadian Branch (the “Administrative Agent”)
–and -
THE ANDERSONS CANADA LIMITED (the “Borrower”)
–and -
THOSE OTHER OBLIGORS WHICH ARE SIGNATORY TO THE LOAN
AGREEMENT (the “Additional Borrowers”)
-and-
THE LENDERS IDENTIFIED IN THE LOAN AGREEMENT WHICH ARE SIGNATORIES HEREIN (the “Lenders”)
WHEREAS the Administrative Agent, in its capacity as administrative agent and lender, and the other Lenders and the Borrower entered into a second amended and restated loan agreement made as of December 23, 2021 (as the same may be further amended, supplemented or restated from time to time, collectively, the “Loan Agreement”);
AND WHEREAS the Borrower has requested and the Administrative Agent and the Lenders have agreed to amend the Loan Agreement to, inter alia, increase the Maximum Revolver Credit, but only to the extent and in accordance with the terms and subject to the conditions set forth below.
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the mutual covenants and agreements contained herein, the parties covenant and agree as follows:
ARTICLE 1 DEFINED TERMS
a.Capitalized Terms. All capitalized terms which are used herein without being specifically defined herein shall have the meaning ascribed thereto in the Loan Agreement.
ARTICLE 2 AMENDMENTS TO LOAN AGREEMENT
a.General Rule. Subject to the terms and conditions herein contained, the Loan Agreement is hereby amended to the extent necessary to give effect to the provisions of this agreement and to incorporate the provisions of this agreement into the Loan Agreement.
a.Increase in Maximum Credit. The definition of “Maximum Credit” in Exhibit “A” of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
“Maximum Credit” shall mean the amount of $281,875,000, plus the amount of each increase therein under the accordion described in Section 2.12, if applicable.
For greater certainty, the Administrative Agent and the Lenders have agreed to reset the accordion feature described in Section 2.12 of the Loan Agreement (the “Accordion”) to $70,000,000 as of the date hereof. The Borrower agrees and acknowledges that as of the date of this agreement, the aggregate principal amount available under the Accordion is $70,000,000.
a.Adjustments to Commitments. The schedule of Commitments in Exhibit “E” of the Loan Agreement is hereby deleted in its entirety and replaced with the updated schedules of Commitments set out in Schedule “A” hereto, effective as of the date hereof.
a.Amendment Fee. The Borrower hereby authorizes the Administrative Agent to immediately charge against the Revolving Loans an amendment fee in the amount of $ 71,187.50, which fee is to be divided only amongst the Lenders (i) who have consented to this agreement, which consent is evidenced by their signature below; and (ii) who have increased their Commitments as of the date hereof as set forth in Schedule “A” hereto, based on their Pro Rata Share.
a.Timing. The changes to the Loan Agreement provided for in this Article Two shall take effect immediately.
ARTICLE 3 MISCELLANEOUS
a.Representations and Warranties. Borrower and each other Obligor hereby represents and warrants to the Administrative Agent as follows:
i.all of the representations and warranties contained in the Loan Agreement are correct on and as of the date hereof as though made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date;
i.this agreement and the Loan Agreement, as amended by this agreement, constitute the legal, valid and binding obligations of each Obligor, enforceable against such Obligor in accordance with their terms, subject
to bankruptcy, insolvency and other similar laws affecting the rights of creditors generally and to general principles of equity; and
i.no Event of Default has occurred.
a.Acknowledgment and Confirmation re: Security.
i.All of the Security shall continue to be in full force and effect as general continuing collateral security for any and all of the indebtedness, liabilities and obligations of each of the Obligors to the Lenders secured thereunder, including, without limitation, under, in connection with, relating to or with respect to the Loan Agreement (as amended hereby), and the security interests created by the Security shall continue to charge and mortgage the property of the Obligors in accordance with the terms thereof.
i.The Security to which each of the Obligors is a party are legal, valid, binding and enforceable against the Obligors, as applicable, in accordance with their terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, moratorium, reorganization and other similar laws of general application limiting the enforcement of creditors’ rights generally and the fact that the courts may deny the granting or enforcement of equitable remedies.
a.Future References to the Loan Agreement. On and after the date of this agreement, each reference in the Loan Agreement to “this agreement”, “hereunder”, “hereof”, or words of like import referring to the Loan Agreement, and each reference in any related document to the “Loan Agreement”, “thereunder”, “thereof”, or words of like import referring to the Loan Agreement, shall mean and be a reference to the Loan Agreement as amended hereby. The Loan Agreement, as amended hereby, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed.
a.Governing Law. This agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.
a.Conflict. If any provision of this agreement is inconsistent or conflicts with any provision of the Loan Agreement, the relevant provision of this agreement shall prevail and be paramount.
a.Further Assurances. The Borrower shall do, execute and deliver or shall cause to be done, executed and delivered all such further acts, documents and things as the Administrative Agent may reasonably request for the purpose of giving effect to this agreement and to each and every provision hereof.
a.Severability. Any provision of this agreement which is or becomes prohibited or unenforceable in any relevant jurisdiction shall not invalidate or impair the
remaining provisions hereof which shall be deemed severable from such prohibited or unenforceable provision and any such prohibition or unenforceability in any such jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Should this agreement fail to provide for any relevant matter, the validity, legality or enforceability of this agreement shall not thereby be affected.
a.Successors and Assigns. This agreement shall be binding upon the parties hereto and their respective successors and permitted assigns, and shall enure to the benefit of the parties hereto and their successors and permitted assigns. No Obligor may assign its rights or duties hereunder.
a.Financing Agreement. This Agreement is a Financing Agreement.
3.10 Counterparts. This agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered (including by e-mail or other electronic means) shall be an original, but all such counterparts shall together constitute but one and the same instrument.
[Signature pages follow]
IN WITNESS WHEREOF, the Administrative Agent, the Lenders and the Borrower have caused these presents to be duly executed as of the day and year first above written.
ADMINISTRATIVE AGENT AND LENDER
SCOTIABANK ASSET FINANCE, a division of THE BANK OF NOVA SCOTIA
Per:
Name:
Title:
Per:
Name:
Title:
Address:
Fax:
BORROWER
THE ANDERSONS CANADA LIMITED
Per:
Name:
Title:
Per:
Name:
Title:
Address:
Attention:
Fax:
IN WITNESS WHEREOF, the Administrative Agent, the Lenders and the Borrower have caused these presents to be duly executed as of the day and year first above written.
ADMINISTRATIVE AGENT AND LENDER
SCOTIABANK ASSET FINANCE, a division of THE BANK OF NOVA SCOTIA
Per:
Name:
Title:
Per:
Name:
Title:
Address:
Fax:
BORROWER
THE ANDERSONS CANADA LIMITED
Per:
Name:
Title:
Per:
Name:
Title:
Address:
Attention:
Fax:
Acknowledgement
Each of the undersigned Obligors hereby acknowledges and agrees to be bound by the terms and conditions contained in this Agreement, as of the day and year first above written.
THOMPSONS USA LIMITED
Per:
Name:
Title:
Per:
Name:
Title:
Address:
Attention:
Fax:
LENDERS
CANADIAN IMPERIAL BANK OF COMMERCE
Per:
Name:
Title:
Per:
Name:
Title:
Address:
Attention:
Tel:
THE TORONTO-DOMINION BANK
Per:
Name:
Title:
Per:
Name:
Title:
Address:
Fax:
Attention:
BANK OF AMERICA, N.A., CANADA BRANCH
Per:
Name:
Title:
Per:
Name:
Title:
Address:
Attention:
Fax:
FARM CREDIT CANADA
Per:
Name:
Title:
Per:
Name:
Title:
Address:
Phone:
Fax:
Attention:
SCHEDULE “A”
New Exhibit “E” - Commitments
| Lender | Revolving Loan Commitmen<br><br>(prior to the Amendment Date | Increase to Commitment | Revolving Loan Commitmen<br><br>(from and after the Amendment Da |
|---|---|---|---|
| Scotiabank Asset Finance, a division of The Bank of Nova Sco | $69,249,600 | $14,427,400 | $83,677,000 |
| Canadian Imperial Bank of Commerce | $54,249,600 | $11,302,400 | $65,552,000 |
| The Toronto- Dominion Bank | $39,000,000 | $8,125,000 | $47,125,000 |
| Bank of America, N.A., Canada Branch | $39,000,000 | $0.00 | $39,000,000 |
| Farm Credit Cana | $38,500,800 | $8,020,200 | $46,521,000 |
| TOTALS | $240,000,000 | $41,875,000 | $281,875,000 |
Document
Exhibit 10.31
SECOND AMENDMENT TO
SECOND AMENDED AND RESTATED LOAN AGREEMENT
THIS AGREEMENT made as of September 26 , 2022 (the “Amendment Date”)
BETWEEN:
SCOTIABANK ASSET FINANCE, A DIVISION OF THE BANK OF NOVA SCOTIA, operating through its Canadian Branch (the “Administrative Agent”)
- and –
THE ANDERSONS CANADA LIMITED (the “Borrower”)
-and -
THOSE OTHER OBLIGORS WHICH ARE SIGNATORY TO THE LOAN
AGREEMENT (the “Additional Borrowers”)
-and-
THE LENDERS IDENTIFIED IN THE LOAN AGREEMENT WHICH ARE SIGNATORIES HEREIN (the “Lenders”)
WHEREAS the Administrative Agent, in its capacity as administrative agent and lender, and the other Lenders and the Borrower entered into a second amended and restated loan agreement made as of December 23, 2021, as amended by that first amendment to second amended and restated loan agreement made as of March 17, 2022 (as the same may be further amended, supplemented or restated from time to time, collectively, the “Loan Agreement”);
AND WHEREAS the Borrower has requested and the Administrative Agent and the Lenders have agreed to amend the Loan Agreement on terms and subject to the conditions set forth below.
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the mutual covenants and agreements contained herein, the parties covenant and agree as follows:
ARTICLE 1 DEFINED TERMS
1.01Capitalized Terms. All capitalized terms which are used herein without being specifically defined herein shall have the meaning ascribed thereto in the Loan Agreement.
ARTICLE 2 AMENDMENT TO LOAN AGREEMENT
2.01General Rule. Subject to the terms and conditions herein contained, the Loan Agreement is hereby amended to the extent necessary to give effect to the provisions of this agreement and to incorporate the provisions of this agreement into the Loan Agreement.
2.02Deletion of Libor and Addition of Term SOFR: The redlined revisions showing in Schedule “A” hereto are hereby incorporated into the Loan Agreement as of the Amendment Date.
2.03Timing. The changes to the Loan Agreement provided for in this Article Two shall take effect immediately, however, for greater clarity, all revolving loans made prior to the Amendment Date shall continue to bear interest in accordance with and subject to the terms of the Loan Agreement as such existed prior to the Amendment Date until the expiration of the applicable interest period at which time such loans will be converted to Term SOFR on the basis set forth in this amendment.
ARTICLE 3 MISCELLANEOUS
3.01Representations and Warranties. Borrower and each other Obligor hereby represents and warrants to the Administrative Agent as follows:
(a)all of the representations and warranties contained in the Loan Agreement are correct on and as of the date hereof as though made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date;
(b)this agreement and the Loan Agreement, as amended by this agreement, constitute the legal, valid and binding obligations of each Obligor, enforceable against such Obligor in accordance with their terms, subject to bankruptcy, insolvency and other similar laws affecting the rights of creditors generally and to general principles of equity; and
(c)no Event of Default has occurred.
3.02Acknowledgment and Confirmation re: Security.
(a)All of the Security shall continue to be in full force and effect as general continuing collateral security for any and all of the indebtedness, liabilities and obligations of each of the Obligors to the Lenders secured thereunder, including, without limitation, under, in connection with, relating to or with respect to the Loan Agreement (as amended hereby), and the security interests created by the Security shall continue to charge and mortgage the property of the Obligors in accordance with the terms thereof.
(b)The Security to which each of the Obligors is a party are legal, valid, binding and enforceable against the Obligors, as applicable, in accordance with their terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, moratorium, reorganization and other similar laws of
general application limiting the enforcement of creditors’ rights generally and the fact that the courts
may deny the granting or enforcement of equitable remedies.
3.03Future References to the Loan Agreement. On and after the date of this agreement, each reference in the Loan Agreement to “this agreement”, “hereunder”, “hereof”, or words of like import referring to the Loan Agreement, and each reference in any related document to the “Loan Agreement”, “thereunder”, “thereof”, or words of like import referring to the Loan Agreement, shall mean and be a reference to the Loan Agreement as amended hereby. The Loan Agreement, as amended hereby, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed.
3.04Governing Law. This agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.
3.05Conflict. If any provision of this agreement is inconsistent or conflicts with any provision of the Loan Agreement, the relevant provision of this agreement shall prevail and be paramount.
3.06Further Assurances. The Borrower shall do, execute and deliver or shall cause to be done, executed and delivered all such further acts, documents and things as the Administrative Agent may reasonably request for the purpose of giving effect to this agreement and to each and every provision hereof.
3.07Severability. Any provision of this agreement which is or becomes prohibited or unenforceable in any relevant jurisdiction shall not invalidate or impair the remaining provisions hereof which shall be deemed severable from such prohibited or unenforceable provision and any such prohibition or unenforceability in any such jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Should this agreement fail to
provide for any relevant matter, the validity, legality or enforceability of this agreement shall not thereby be affected.
3.08Successors and Assigns. This agreement shall be binding upon the parties hereto and their respective successors and permitted assigns, and shall enure to the benefit of the parties hereto and their successors and permitted assigns. No Obligor may assign its rights or duties hereunder.
3.09Financing Agreement. This Agreement is a Financing Agreement.
3.10 Counterparts. This agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered (including by e-mail or other electronic means) shall be an original, but all such counterparts shall together constitute but one and the same instrument.
[Signature pages follow]
ADMINISTRATIVE AGENT AND LENDER
SCOTIABANK ASSET FINANCE, adivision of THE BANK OF NOVA SCOTIA
Per:
Name:
Title:
Per:
Name:
Title:
Address:
Fax:
BORROWER
THE ANDERSONS CANADA LIMITED
Per:
Name:
Title:
Per:
Name:
Title:
Attention:
Fax:
ADMINISTRATIVE AGENT AND LENDER
SCOTIABANK ASSET FINANCE, a division of THE BANK OF NOVA SCOTIA
Per:
Name:
Title:
Per:
Name:
Title:
Address:
Fax:
BORROWER
Per:
Name:
Title:
Per:________________________
Name:
Title:
Chief Executive Office Address:
Attention:
Fax:
Acknowledgement
Each of the undersigned Obligors hereby acknowledges and agrees to be bound by the terms and conditions contained in this Agreement, as of the day and year first above written.
Per:
Name:
Title:
Per:
Name:
Title:
Address:
Attention:
Fax:
LENDERS
CANADIAN IMPERIAL BANK OF COMMERCE
Per:
Name:
Title:
Per:
Name:
Title:
Address:
THE TORONTO-DOMINION BANK
Per:
Name:
Title:
Per:
Name:
Title:
Address:
Fax:
Attention:
BANK OF AMERICA, N.A., CANADA BRANCH
Per:
Name:
Title:
Per:
Name:
Title:
Address:
FARM CREDIT CANADA
Per:
Name:
Title:
Per:
Name:
Title:
Address:
SCHEDULE “A”
DELETION OF LIBOR AND ADDITION OF TERM SOFR
See Attached.
**CHANGES MADE TO THIS VERSION OF THE CREDIT AGREEMENT
REFLECT (a) CHANGES FROM AMENDMENT NO. 1, and (b) THE REMOVAL OF LIBOR AND THE ADDITION OF SOFR**
Second Amended and Restated Loan Agreement
by and between
SCOTIABANK ASSET FINANCE,
a division of The Bank of Nova Scotia
as Administrative Agent and
THE LENDERS THAT ARE SIGNATORIES HERETO
as Lenders and
THE ANDERSONS CANADA LIMITED
as Borrower
Dated: December 23, 2021
TABLE OF CONTENTS
Page No.
SECTION 1 - DEFINITIONS1
1.1Definitions1
1.2Relevant Lenders2
SECTION 2 - CREDIT FACILITIES2
2.1Revolving Loans2
2.2Term Loan [Intentionally deleted]8
2.3Swingline Facility8
2.4Bankers’ Acceptances9
2.5Lenders’ Commitments13
2.6Funding of Loans13
2.7Failure of Lender to Fund Loan14
2.8BA Equivalent Rate Loans14
2.9Swaps15
2.10Ancillary Facilities15
2.11Availability Reserves15
2.12Accordion Feature15
SECTION 3 - INTEREST AND FEES17
3.1Interest17
3.2Closing Fee18
3.3Administration Fee19
3.4Unused Line Fee19
3.5Payments19
SECTION 4 - TERM OF AGREEMENT19
4.1Term19
SECTION 5 - RESERVE, CAPITAL, INDEMNITY, TAX AND RELATED PROVISIONS20
5.1Increased Costs20
5.2Taxes21
5.3Mitigation Obligations: Replacement of Lenders23
5.4Illegality24
5.5Inability to Determine Rates Etc25
5.6Indemnity for Transactional and Environmental Liability25
5.7Right of Setoff27
5.8Sharing of Payments by Lenders27
5.9Market Disruption and Benchmark Replacement 28
5.10Administrative Agent’s Clawback31
SECTION 6 - CONDITIONS PRECEDENT31
6.1Conditions Precedent to Initial Loans31
6.2Conditions Precedent to All Loans33
6.3Flood insurance33
SECTION 7 - COLLECTION AND ADMINISTRATION34
7.1Administrative Agent’s Loan Accounts34
7.2Statements34
7.3Collection of Accounts35
7.4Payments37
7.5Authorization to Make Loans38
7.6Use of Proceeds38
SECTION 8 - COLLATERAL REPORTING AND COVENANTS39
8.1Collateral Reporting39
8.2Accounts Covenants39
8.3Inventory Covenants41
8.4Power of Attorney42
8.5Right to Cure43
8.6Verification of Collateral43
8.7Discharge, Release and Subordination of Security44
SECTION 9 - REPRESENTATIONS AND WARRANTIES44
9.1Representations and Warranties44
9.2Survival of Warranties; Cumulative45
SECTION 10 - AFFIRMATIVE AND NEGATIVE COVENANTS45
10.1Maintenance of Existence45
10.2New Collateral Locations45
10.3Compliance with Laws, Regulations, Etc46
10.4Payment of Taxes and Claims47
10.5Insurance47
10.6Financial Statements and Other Information48
10.7Sale of Assets, Consolidation, Amalgamation, Dissolution, Etc50
10.8Encumbrances50
10.9Indebtedness50
10.10Loans, Investments, Guarantees, Etc.52
10.11Dividends and Redemptions52
10.12Transactions with Affiliates53
10.13Fixed Charge Coverage Ratio53
10.14[Intentionally Deleted]54
10.15[Intentionally Deleted]54
10.16Intellectual Property54
10.17Additional Bank Accounts54
10.18Applications under the Companies’ Creditors Arrangement Act54
10.19Operation of Pension Plans54
10.20Costs and Expenses55
10.21Further Assurances56
10.22Most Favoured Lender56
10.23Sanctions57
SECTION 11 - AGENCY57
11.1Appointment and Authority57
11.2Rights as a Lender58
11.3Exculpatory Provisions58
11.4Reliance by Administrative Agent59
11.5Indemnification of Administrative Agent59
11.6Delegation of Duties60
11.7Replacement of Administrative Agent60
11.8Non-Reliance on Administrative Agent and Other Lenders61
11.9Collective Action of Lenders61
11.10No Other Duties, etc62
11.11Security62
11.12Security in favour of Lenders and Affiliates of Lenders in Certain
Circumstances 62
11.13Distribution of Notice62
11.14Meeting of Lenders62
11.15Accordion Feature62
11.16Erroneous Payment63
SECTION 12 - EVENTS OF DEFAULT AND REMEDIES65
12.1Events of Default65
12.2Remedies67
SECTION 13 - JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW69
13.1Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver69
13.2Waiver of Notices71
13.3Amendments and Waivers72
13.4Waiver of Counterclaims73
SECTION 14 - MISCELLANEOUS73
14.1Notices; Effectiveness; Electronic Communication73
14.2Partial Invalidity74
14.3Successors and Assigns74
14.4Entire Agreement77
14.5Headings78
14.6Judgment Currency78
14.7Counterparts; Integration; Effectiveness; Electronic Execution78
14.8Credit Information79
14.9Confidentiality79
14.10Patriot Act, Proceeds of Crime Act, etc79
14.11Paramountcy80
14.12Acknowledgement Regarding Any Supported QFCs80
Index to Exhibits and Schedules
Exhibit A Definitions
Exhibit B Representations and Warranties
Exhibit C Information Certificate
Exhibit D Assignment and Assumption
Exhibit E Commitments
Exhibit F [Intentionally Deleted]
Exhibit G Form of Accordion Agreement
Exhibit H Borrowing Base Certificate Schedule 10.6 Compliance Certificate Schedule 10.8 Additional Permitted Liens Schedule 10.9 Permitted Debt
Schedule 10.10 Existing Loans, Advances and Guarantees Schedule 10.17 Bank Accounts
SECOND AMENDED AND RESTATED LOAN AGREEMENT
This Second Amended and Restated Loan Agreement dated as of December 23, 2021 is entered into among The Andersons Canada Limited, as borrower (the “Borrower”) and Scotiabank Asset Finance, a division of The Bank of Nova Scotia, as administrative agent (the “Administrative Agent”), the lenders identified on the signature pages hereof (such lenders, together with their respective successors and permitted assigns, are referred to hereinafter each individually as a “Lender” and collectively as “Lenders”) and such other Obligors identified on the signature pages hereof.
W I T N E S S E T H:
WHEREAS the Administrative Agent, in its capacity as administrative agent and lender, and the other lenders party thereto and the Borrower entered into a loan agreement made as of July 13, 2013, as amended by first amendment to loan agreement dated September 24, 2013, as further amended by second amendment to loan agreement dated December 30, 2013, as further amended by third amendment to loan agreement dated September 1, 2016, as further amended by a fourth amendment to loan agreement dated July 31, 2017, and as further amended by a fifth amendment to loan agreement dated December 29, 2017 (collectively, the “Original Loan Agreement”).
AND WHEREAS the Administrative Agent in its capacity as Administrative Agent and Lender and the other Lenders party hereto and the Borrower entered into an Amended and Restated Loan Agreement dated as of June 26, 2018, as amended by a First Amendment to Amended and Restated Loan Agreement dated as of December 2, 2019, a Second Amendment to Amended and Restated Loan Agreement dated as of December 23, 2019, a Third Amendment to Amended and Restated Loan Agreement dated as of March 2, 2020, a Consent and Extension Agreement dated October 20, 2020, a Fourth Amendment dated as of January 27, 2021, a Fifth Amendment to Amended and Restated Loan Agreement dated as of March 31, 2021 and a Sixth Amendment to Amended and Restated Loan Agreement dated as of May 10, 2021 (collectively, the “Amended and Restated Loan Agreement”).
AND WHEREAS the Borrower, Administrative Agent and the Lenders have agreed to amend and restate the Amended and Restated Loan Agreement on the terms and conditions as set forth herein.
NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
SECTION 1 - DEFINITIONS
1.1Definitions
All terms used herein which are defined in the PPSA shall, to the extent the context so admits, have the meanings given therein unless otherwise defined in this Agreement. All references to the plural herein shall also mean the singular and to the singular shall also mean the plural unless the context otherwise requires. All references to the Borrower and the Lenders pursuant to the definitions set forth in the recitals hereto, or to any other person herein, shall include their
respective successors and assigns. The words “hereof”, “herein”, “hereunder”, “this Agreement” and words of similar import when used in this Agreement (including the Exhibits hereto) shall refer to this Agreement as a whole and not any particular provision of this Agreement and as this Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. The word “including” when used in this Agreement shall mean “including, without limitation”. References herein to any statute or any provision thereof include such statute or provision as amended, revised, re-enacted and/or consolidated from time to time and any successor statute thereto. An Event of Default shall exist or continue or be continuing until such Event of Default is waived in accordance with Section 13.3 or is cured to the satisfaction of the Administrative Agent, if such Event of Default is capable of being cured as determined by Administrative Agent. Any accounting term used herein unless otherwise defined in this Agreement shall, unless the context otherwise requires, have the meanings customarily given to such term in accordance with GAAP. “Canadian Dollars” and the sign “$” mean lawful currency of Canada. “US Dollars” and the sign “US$” mean lawful money of the United States of America. All monetary amounts referred to in this Agreement are in Canadian Dollars unless otherwise stated. For purposes of this Agreement, the capitalized terms not otherwise defined in this Agreement shall have the respective meanings given to them in Exhibit A.
1.2Relevant Lenders
For the purposes hereof, the relevant Lenders in respect of a particular Loan shall be the Lenders who have individual Commitments with respect to such Loan.
SECTION 2 - CREDIT FACILITIES
2.1Revolving Loans
(a)Subject to, and upon the terms and conditions contained herein, Lenders agree to make Revolving Loans by way of Canadian Prime Rate Loans, US Prime Rate Loans, BA Advances and SOFR Loans to the Borrower, on or before the Maturity Date, from time to time in amounts requested by the Borrower up to the amount equal to the sum of the following amounts (the “Revolving Loans Borrowing Base”), which shall be determined on a monthly basis (increasing to a weekly basis so long as a Trigger Event is continuing) in accordance with the updated Borrowing Base Certificate most recently delivered to the Administrative Agent and in all cases without duplication:
(i)with respect to cash and Cash Equivalents:
(A)one hundred percent (100%) of unrestricted cash or Cash Equivalents on deposit with a Lender or credited to a Blocked Account subject to the first priority, valid and perfected security interest of the Administrative Agent, subject to Permitted Liens provided that the Borrower will promptly notify Administrative Agent if the amount included in the most recent Borrowing Base Certificate pursuant to this Section 2.1(a)(i)(A) decreases by an amount equal to $1,000,000 or greater; plus
(B)eighty-five percent (85%) of net equity value maintained in securities accounts subject to the first priority, valid and perfected security interest of the Administrative Agent, subject to Permitted Liens; plus
(ii)with respect to Accounts:
(A)eighty-five percent (85%) of the Net Amount of Eligible Accounts which are not Investment Grade Accounts, Foreign Accounts or Credit Enhanced Accounts; plus
(B)ninety percent (90%) of Net Amount of Eligible Accounts which are Investment Grade Accounts or Credit Enhanced Accounts; plus
(C)fifty percent (50%) of the Net Amount of Eligible Accounts which are Foreign Accounts, but not Investment Grade Accounts or Credit Enhanced Accounts; provided that in no event shall availability from such Accounts exceed $5,000,000 at any time; plus
(iii)with respect to unbilled Accounts, fifty percent (50%) of the amount of unbilled Accounts which, if billed, would be Eligible Accounts; provided that in no event shall availability from such unbilled Accounts exceed
$15,000,000 at any time; plus
(iv)with respect to supplier rebates, eighty percent (80%) of earned supplier rebates (net of any contras) during the period each year commencing July 1 and ending December 31; plus
(v)with respect to Eligible Inventory:
(A)that is hedged CME Grains, the lesser of:
(1)ninety percent (90%) of the Net Orderly Liquidation Value; and
(2)ninety percent (90%) of the current market price; plus
(B)that is fertilizer, the lesser of:
(1)ninety percent (90%) of the Net Orderly Liquidation Value; and
(2)seventy percent (70%) of the lower of first-in, first-out (FIFO) cost and net realizable value; plus
(C)not included in (A) or (B), the lesser of:
(1)ninety percent (90%) of the Net Orderly Liquidation Value; and
(2)seventy percent (70%) of the lower of weighted average cost and net realizable value; plus
(vi)with respect to prepaid agronomy products, seventy percent (70%) of the prepaid amount; plus
(vii)with respect to grain forward contracts:
(A)eighty percent (80%) of contract equity on grain forward contracts with 12 months or less until the delivery date thereunder; plus
(B)seventy percent (70%) of contract equity on grain forward contracts with more than 12 months but no more than 18 months until the delivery date thereunder;
provided, however, that one hundred percent (100%) of the losses on forward contract equity shall be deducted for purposes of calculating the Revolving Loans Borrowing Base; and provided further that availability from such forward contracts shall not exceed $50,000,000 at any time;
(viii)with respect to Eligible Real Estate Collateral, the lesser of:
(A)50% of the Fair Market Value of such Eligible Real Estate Collateral; or
(B)75% of the Forced Sale Value of such Eligible Real Estate Collateral;
To a maximum of 25% of the Revolving Loans Borrowing Base; plus
(ix)with respect to Eligible Machinery and Equipment, the lesser of:
(A)100% of the Net Forced Liquidation Value; or
(B)90% of the Net Orderly Liquidation Value;
To a maximum of 5% of the Revolving Loans Borrowing Base;
(x)less any Availability Reserves;
(b)Administrative Agent may, in its discretion, from time to time (i) reduce the Revolving Loans Borrowing Base with respect to Eligible Accounts to the extent that: (A) Administrative Agent determines that the dilution with respect to the Accounts for any period (based on the ratio of (1) the aggregate amount of the net reductions in Accounts (including, without limitation, credit notes, bad debts and other rebates but only including the amount by which the amount of an Eligible
Account cancelled exceeds the amount of an Eligible Account issued in replacement thereof) other than as a result of payments in cash, to (2) the aggregate amount of total sales) exceeds five (5%) percent; or (B) the general creditworthiness of account debtors has declined; and/or (ii) reduce the Revolving Loans Borrowing Base with respect to Eligible Inventory to the extent that Administrative Agent determines (as demonstrated by the most recent appraisal or financial statements received by Administrative Agent) that: (A) the number of days of the turnover of the Inventory for any period has changed in any material respect, unless such change has arisen as a result of general market conditions, or
(B) the value of the Eligible Inventory, or any category thereof (based on the relevant measure of value used in paragraph (a) above to determine the amount to be included in the computation of the Revolving Loans Borrowing Base limit) has decreased, or (C) the nature and quality of the Inventory has deteriorated. In determining whether to reduce the Revolving Loans Borrowing Base, Administrative Agent may consider events, conditions, contingencies or risks which are also considered in determining Eligible Accounts, Eligible Inventory or in establishing Availability Reserves.
(c)In the event that the outstanding Canadian Dollar Amount of any component of the Revolving Loans, or the aggregate Canadian Dollar Amount of the outstanding Revolving Loans, exceed the amount of the Revolving Loans Borrowing Base or the Maximum Revolver Credit, as applicable, such event shall not limit, waive or otherwise affect any rights of Administrative Agent or Lenders in that circumstance or on any future occasions and the Borrower shall, upon demand by Administrative Agent acting upon the instructions of all Lenders, which may be made at any time or from time to time, repay to Lenders the entire amount of any such excess(es) for which payment is demanded within two (2) Business Days of demand.
(d)So long as no Event of Default shall have occurred and be continuing, the Borrower may from time to time request that the Lenders make US Prime Rate Loans or may request that SOFR Loans be converted to US Prime Rate Loans. Such request from Borrower shall be sent to the Administrative Agent and specify the amount of the US Prime Rate Loans or the amount of the SOFR Loans to be converted to US Prime Rate Loans. Subject to the terms and conditions contained herein, one (1) Business Day after receipt by Administrative Agent of such request from Borrower such US Prime Rate Loan shall be made or such SOFR Loan shall be converted to US Prime Rate Loans.
(e)So long as no Event of Default shall have occurred and be continuing, the Borrower may from time to time request that the Lenders make SOFR Loans or may request that US Prime Rate Loans be converted to SOFR Loans or that any existing SOFR Loans continue for an additional Interest Period. Such request from Borrower shall be sent to the Administrative Agent and shall specify the amount of the SOFR Loans or the amount of the US Prime Rate Loans to be converted to SOFR Loans or the amount of the SOFR Loans to be continued (subject to the limits set forth below) and the Interest Period to be applicable to such SOFR Loans. Subject to the terms and conditions contained herein, two (2) Business Days after receipt by
Administrative Agent of such a request from Borrower, such SOFR Loans shall be made or US Prime Rate Loans shall be converted to SOFR Loans or such SOFR Loans shall continue, as applicable, provided, that, (i) no Event of Default shall exist or have occurred and be continuing; (ii) Administrative Agent shall not have sent any Notice of Termination of this Agreement; (iii) Borrower shall have complied with such customary procedures as are generally established by Lenders for all customers and specified by Administrative Agent to the Borrower from time to time for requests by the Borrower for SOFR Loans; (iv) no more than twenty
(20) Interest Periods (for all outstanding BA Advances and SOFR Loans) may be in effect at any one time; (v) the aggregate amount of the SOFR Loans must be in an amount not less than One Million US Dollars (US $1,000,000.00) or an integral multiple of One Hundred Thousand US Dollars (US $100,000.00) in excess thereof; and (vi) the Administrative Agent shall have determined that the Interest Period or Term SOFR can be readily determined as of the date of the request for such SOFR Loan by the Borrower and such Interest Period does not extend beyond the Maturity Date. Any request by the Borrower for SOFR Loans or to convert US Prime Rate Loans to SOFR Loans or to continue any existing SOFR Loans shall be irrevocable.
(f)So long as no Event of Default shall have occurred and be continuing, the Borrower may from time to time request that the Lenders make Canadian Prime Rate Loans or may request that BA Advances be converted to Canadian Prime Rate Loans. Such request from Borrower shall be sent to the Administrative Agent and specify the amount of the Canadian Prime Rate Loans or the amount of the BA Advances to be converted to Canadian Prime Rate Loans. Subject to the terms and conditions contained herein, one (1) Business Day after receipt by Administrative Agent of such request from Borrower such Canadian Prime Rate Loan shall be made or such BA Advances shall be converted to Canadian Prime Rate Loans.
(g)So long as no Event of Default shall have occurred and be continuing, the Borrower may from time to time request that the Lenders make BA Advances or may request that Canadian Prime Rate Loans be converted to BA Advances or that any existing BA Advances continue for an additional Interest Period provided that the Interest Period with respect to such BA Advance does not extend beyond the Maturity Date. Such request from Borrower shall be sent to the Administrative Agent and shall specify the amount of the BA Advances or the amount of the Canadian Prime Rate Loans to be converted to BA Advances or the amount of the BA Advances to be continued (subject to the limits set forth below) and the Interest Period to be applicable to such BA Advances. Subject to the terms and conditions contained herein, two (2) Business Days after receipt by Administrative Agent of such a request from Borrower, such BA Advances shall be made or Canadian Prime Rate Loans shall be converted to BA Advances or such BA Advances shall continue, as applicable, provided, that, (i) no Event of Default shall exist or have occurred and be continuing; (ii) Administrative Agent shall not have sent any Notice of Termination of this Agreement; (iii) Borrower shall have complied with such customary procedures as are generally established by Lenders for all customers and specified by Administrative Agent to the Borrower from time to time for requests
by the Borrower for BA Advances; (iv) no more than twenty (20) Interest Periods (for all outstanding BA Advances and SOFR Loans) may be in effect at any one time; and (v) the aggregate amount of the BA Advances must be in an amount not less than One Million Dollars ($1,000,000.00) or an integral multiple of One Hundred Thousand Dollars ($100,000.00) in excess thereof. Any request by the Borrower for BA Advances or to convert Canadian Prime Rate Loans to BA Advances or to continue any existing BA Advances shall be irrevocable. Notwithstanding anything to the contrary contained herein, Lender shall not be required to sell bankers’ acceptances to fund any BA Advances, but the provisions hereof shall be deemed to apply as if Lenders had sold bankers’ acceptances to fund the BA Advances.
(h)Any SOFR Loans shall automatically convert to US Prime Rate Loans upon the last day of the applicable Interest Period, and BA Advances shall automatically convert to Canadian Prime Rate Loans upon the last day of the applicable Interest Period unless applicable Lender has received a request to continue such SOFR Loan one (1) Business Day prior to such last day of such SOFR Loan or such BA Advance, in each case in accordance with the terms hereof. Upon the occurrence of an Event of Default that is continuing, or if Borrower repays or prepays a SOFR Loan and/or BA Advance on a day other than the last day of the applicable Interest Period, or upon failure of Borrower to borrow, continue or convert any SOFR Loan and/or BA Advance after Borrower has given (or is deemed to have given) a notice of drawdown, continuation or conversion to the Administrative Agent, or upon the failure of Borrower to make any prepayment of any SOFR Loan and/or BA Advance under any notice delivered pursuant to this Agreement, the Borrower shall indemnify such Lender for any loss or expense suffered or incurred by such Lender including, without limitation, any loss of profit or expenses such Lender incurs by reason of the liquidation or redeployment of deposits or other funds acquired by it to effect or maintain any and all SOFR Loans and/or BA Advances, or any interest or other charges payable to lenders of funds borrowed by such Lender in order to maintain such SOFR Loans and/or BA Advances, together with any other charges, costs or expenses incurred by such Lender relative thereto, unless any such loss or expense was the result of the wilful misconduct or gross negligence of such Lender.
(i)Borrower may:
(i)from time to time pay or prepay any Revolving Loan without premium or penalty by providing one (1) Business Day notice to Administrative Agent of such repayment or prepayment specifying the amount of Revolving Loans being repaid or prepaid and the repayment or prepayment date.
(ii)cancel the entire unused line of Revolving Loans at any time, or any part thereof from time to time, by notice to the Administrative Agent thereof specifying the amount to be cancelled and the effective date of such cancellation (which may be no earlier than the following Business Day). The Maximum Revolver Credit shall automatically reduce by the amount of any such cancellation on the effective date of cancellation specified.
(j)For the purposes of this Section 2.1, where a notice is required to be delivered by the Borrower on a particular day but the deadline for delivery of such notice is not specified, such deadline shall be 12:00 pm (Toronto time).
2.2Term Loan [Intentionally deleted]
2.3Swingline Facility
(a)Subject to the terms and conditions of this Agreement, the Swingline Lender establishes in favour of the Borrower a revolving credit facility, which is part of the Revolving Loans facility, in an amount up to Twenty Million Canadian Dollars ($20,000,000.00) on the terms set forth in this Section 2.3 (the “Swingline Facility”).
(b)An advance made by the Swingline Lender as contemplated by this subsection, prior to such time as such advance is repaid as contemplated by Section 2.3(f) is referred to as a “Swingline Loan”.
(c)The outstanding amount of all Swingline Loans at any time shall not exceed the lesser of:
(i)Twenty Million Canadian Dollars ($20,000,000.00); and
(ii)the amount, if any, by which the lesser of the Maximum Revolver Credit and the Revolving Loans Borrowing Base exceeds the amount of all Loans (other than Swingline Loans) outstanding at such time as Revolving Loans.
(d)The Borrower may obtain advances under the Swingline Facility pursuant to this Section 2.3(d) by delivering a notice to Administrative Agent requesting a drawdown under the Swingline Facility prior to 11:00a.m. on the date such extension of credit is requested. Upon receipt of such notice Administrative Agent shall notify the Swingline Lender of the amount and currency of such requested extension of credit. Any such extension of credit denominated in Canadian Dollars shall constitute a Canadian Prime Rate Loan. Any such extension of credit denominated in US Dollars shall constitute a US Prime Rate Loan. Subject to the provisions of this Agreement the Swingline Lender shall, not later than 4:00 pm (Toronto time) on the date of such requested extension of credit advance the amount requested to the account designated by the Borrower in its request to Administrative Agent pursuant to this Section 2.3(d).
(e)Absent the existence and continuance of an Event of Default, the Borrower may also obtain advances in an aggregate total outstanding amount of up to Cdn.$10,000,000 under the Swingline Facility by way of overdraft on its accounts maintained with the Swingline Lender. Any debit balance created by way of overdraft in its US Dollar accounts with the Swingline Lender shall constitute a US Prime Rate Loan. Any debit balance created by way of overdraft in its Canadian Dollar accounts with the Swingline Lender shall constitute a Canadian Prime Rate Loan. The Swingline Lender may, in its sole discretion, make funds available from
time to time until the Maturity Date by way of overdrafts in its accounts pursuant to this Section 2.3(d) in an aggregate total outstanding amount not to exceed Cdn.$10,000,000 at any time. Upon the existence and continuance of a Trigger Event, the Borrower’s right to obtain advances hereunder by way of overdraft may be reduced or suspended, at Administrative Agent’s sole discretion.
(f)Swingline Loans made pursuant to Section 2.3(d) shall be repaid on a weekly basis by Administrative Agent requesting an advance from the Lenders in the same amount which shall constitute a Canadian Prime Rate Loan or US Prime Rate Loan, as the case may be. Swingline Loans made pursuant to Section 2.3(f) shall be repaid on request by Swingline Lender made to Administrative Agent who in turn will request an advance from the Lenders in the same amount which shall constitute a Canadian Prime Rate Loan or US Prime Rate Loan, as the case may be.
(g)Each Lender (other than the Swingline Lender) agrees to indemnify the Swingline Lender (to the extent not reimbursed by the Borrower) rateably according to its Pro Rata Share from and against any and all losses and claims of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Swingline Lender in any way relating to or arising out of any Swingline Loan made under this Section 2.2, provided that no such Lender shall be liable for any portion of such losses or claims resulting from the Swingline Lender’s gross negligence or wilful misconduct.
(h)The Swingline Lender irrevocably agrees to grant and hereby grants to each of the Lenders (other than the Swingline Lender), and to induce the Swingline Lender to make Swingline Loans available hereunder, each of the Lenders (other than the Swingline Lender) irrevocably agrees to accept and purchase and hereby accepts and purchases from the Swingline Lender, on the terms and conditions hereinafter stated, for each such Lender’s own account and risk, an undivided interest equal to such Lender’s Pro Rata Share of each Swingline Loan made by the Swingline Lender under this Agreement. Each Lender (other than the Swingline Lender) unconditionally and irrevocably agrees with the Swingline Lender that, if any Swingline Loan is not repaid in full by the Borrower in accordance with the terms of this Agreement, such Lender shall pay to the Swingline Lender, through Administrative Agent, upon demand an amount equal to such Lender’s Pro Rata Share of the amount of such Swingline Loan or any portion thereof which is not so repaid by the Borrower.
(i)The Borrower shall be entitled at any time and from time to time to pay or prepay any Swingline Loan in whole or in part without premium, penalty or notice.
2.4Bankers’ Acceptances
(a)Subject to, and upon the terms and conditions contained herein, at the request of the Borrower, the Borrower may have credit extended to it under any Revolving Loan from time to time by way of Bankers’ Acceptances by giving to
Administrative Agent an irrevocable notice specifying the aggregate face amount of the Bankers’ Acceptances to be issued and the term of the Bankers’ Acceptances.
(b)Funding of Bankers’ Acceptances
(i)If Administrative Agent receives a notice requesting a drawdown of, a rollover of or a conversion into Bankers’ Acceptances, Administrative Agent shall notify each of the relevant Lenders, prior to 5:00 p.m. (Toronto time) on the Business Day prior to the date of such extension of credit of such request and of each relevant Lender’s Pro Rata Share of such extension of credit. Administrative Agent shall also at such time notify Borrower of each Lender’s Pro Rata Share of such extension of credit. Subject to the provisions of this Agreement, each relevant Lender shall, not later than 11:00 a.m. (Toronto time) on the date of each extension of credit by way of Bankers’ Acceptance, accept drafts of the Borrower which are presented to it for acceptance and which have an aggregate face amount equal to such relevant Lender’s Pro Rata Share of the total extension of credit being made available by way of Bankers’ Acceptances on such date, as advised by Administrative Agent. Each relevant Lender shall purchase the Bankers’ Acceptances which it has accepted for a purchase price equal to the BA Discounted Proceeds therefor. Each relevant Lender may at any time and from time to time hold, sell, rediscount or otherwise dispose of any and all Bankers’ Acceptances accepted and purchased by it.
(ii)The Borrower hereby waives presentment for payment of Bankers’ Acceptances by Lenders and any defence to payment of amounts due to a relevant Lender in respect of a Bankers’ Acceptance which might exist by reason of such Bankers’ Acceptance being held at maturity by the Lender which accepted it and agrees not to claim from such relevant Lenders any days of grace for the payment at maturity of Bankers’ Acceptances.
(iii)In the case of a drawdown by way of Bankers’ Acceptance, each relevant Lender shall, forthwith after the acceptance of drafts of the Borrower as aforesaid, make available to Administrative Agent the BA Proceeds with respect to the Bankers’ Acceptances accepted by it. Administrative Agent shall make such BA Proceeds available to the Borrower on the date of such extension of credit by transfer to the credit of the account designated by the Borrower. In the case of a rollover of or conversion into Bankers’ Acceptances, each Lender shall retain the Bankers’ Acceptance accepted by it and shall not be required to make any funds available to Administrative Agent for transfer to the credit of the Borrower’s designated account; however, forthwith after the acceptance of drafts of the Borrower as aforesaid, the Borrower shall pay to the Administrative Agent for the account of the relevant Lenders an amount equal to the aggregate amount of the acceptance fees in respect of such Bankers’ Acceptances calculated in accordance with Section 2.4(c) plus the amount by which the aggregate
face amount of such Bankers’ Acceptances exceeds the aggregate BA Discounted Proceeds with respect thereto.
(iv)Any Bankers’ Acceptance may, at the option of the Borrower, be executed in advance by or on behalf of the Borrower (as otherwise provided herein), by mechanically reproduced or facsimile signatures of one officer of the Borrower who is properly so designated and authorized by the Borrower from time to time. Any Bankers’ Acceptance so executed and delivered by the Borrower to the relevant Lenders shall be valid and shall bind Borrower and may be dealt with by the relevant Lenders to all intents and purposes as if the Bankers’ Acceptance had been signed in the executing officers’ own handwriting.
(v)The Borrower shall notify the relevant Lenders as to those officers whose signatures may be reproduced and used to execute Bankers’ Acceptances in the manner provided in Section 2.4(b)(iv). Bankers’ Acceptances with the mechanically reproduced or facsimile signatures of designated officers may be used by the relevant Lenders and shall continue to be valid, notwithstanding the death, termination of employment or termination of authorization of either or both of such officers or any other circumstance.
(vi)The Borrower hereby indemnifies and agrees to hold harmless each relevant Lender against and from all losses, damages, expenses and other liabilities caused by or attributable to the use of the mechanically reproduced or facsimile signature instead of the original signature of an authorized officer of the Borrower on a Bankers’ Acceptance prepared, executed, issued and accepted pursuant to this Agreement, except to the extent determined by a court of competent jurisdiction to be due to the breach by such Lender of any Financing Agreement or gross negligence or wilful misconduct of such Lender.
(vii)Each of the relevant Lenders agrees that, in respect of the safekeeping of executed drafts of Bankers’ Acceptances which are delivered to it for acceptance hereunder, it shall exercise the same degree of care which it gives to its own property, provided that it shall not be deemed to be an insurer thereof.
(viii)All Bankers’ Acceptances to be accepted by a particular relevant Lender shall, at the option of such Lender, be issued in the form of depository bills made payable originally to and deposited with The Canadian Depository for Securities Limited pursuant to the Depository Bills and Notes Act (Canada).
(ix)The Borrower shall promptly execute and deliver to each relevant Lender a power of attorney in favour of such Lender in such Lender’s standard form for Bankers’ Acceptances.
(c)Acceptance Fees. Upon the acceptance of any draft of Bankers’ Acceptances pursuant hereto, the Borrower shall (without duplication with its obligations under Section 2.4(b)(iii)) pay to Administrative Agent for the account of the Lenders, in accordance with Section 3.5, in advance, an acceptance fee calculated at the rate per annum, on the basis of a year of 365/366 days, as applicable, equal to the Bankers’ Acceptance Stamping Fee based on the face amount of such Bankers’ Acceptance for its term, being the actual number of days in the period commencing on the date of acceptance of the Borrower’s draft and ending on but excluding the maturity date of the Bankers’ Acceptance. With respect to each drawdown by way of Bankers’ Acceptances, such Bankers’ Acceptance Stamping Fees shall be paid by the Lenders deducting the amount thereof from the BA Discounted Proceeds before the Lenders remit the BA Proceeds to Administrative Agent as provided in Section 2.4(b)(iii). With respect to each rollover of and conversion into Bankers’ Acceptance, such Bankers’ Acceptance Stamping Fees shall be paid by the Borrower to the Administrative Agent for the account of the Lenders as provided in Section 2.4(b)(iii). Each such payment is non-refundable and fully earned when due.
(d)Reimbursement Obligation for Maturing Bankers’ Acceptances
(i)The Borrower hereby unconditionally agrees to pay to the Administrative Agent for the account of each relevant Lender on the maturity date (whether at stated maturity, by acceleration or otherwise) of each Bankers’ Acceptance accepted by such Lender the undiscounted face amount of such then maturing Bankers’ Acceptance. The obligation of the Borrower to pay to the Administrative Agent for the account of the Lenders for then maturing Bankers’ Acceptances may be satisfied by the Borrower by:
(A)paying to the Administrative Agent for the account of Lenders on the maturity date of the Bankers’ Acceptances an amount equal to the aggregate undiscounted face amount thereof, provided that the Borrower shall notify the Administrative Agent of its intention to pay such Lenders in such manner prior to 12:00 p.m. (Toronto time) on such maturity date;
(B)replacing the maturing Bankers’ Acceptances with new Bankers’
Acceptances; or
(C)converting the maturing Bankers’ Acceptances into another type of Loan.
(ii)In no event shall Borrower claim from the relevant Lenders any grace period with respect to the aforesaid obligation of the Borrower to reimburse such Lenders.
(e)To facilitate the acceptance of Bankers’ Acceptances under the Agreement, the Borrower hereby appoints each Lender as its attorney to sign and endorse on its
behalf, as and when necessary by such Lender, an appropriate number of orders in the form prescribed by such Lender.
2.5Lenders’ Commitments
Subject to the terms and conditions hereof, the relevant Lenders severally agree to extend credit to the Borrower hereunder from time to time provided that the aggregate amount of credit extended by each relevant Lender hereunder shall not at any time exceed the individual Commitment of such Lender. Nothing contained herein or in the other Financing Agreements shall constitute the Lenders as a partnership, and any indication thereof is hereby expressly denied. All credit requested hereunder other than under the Swingline Facility, shall be made available to the Borrower contemporaneously by all of the relevant Lenders. Each Lender shall provide to the Administrative Agent for the Borrower its Pro Rata Share of each credit. No Lender shall be responsible for any default by any other Lender in its obligation to provide its Pro Rata Share of any credit under any Loan nor shall the individual Commitment of any Lender with respect to a particular Loan be increased as a result of any such default of another Lender in extending credit under such Loan. The failure of any Lender to make available to the Borrower its Pro Rata Share of any credit under any Loan shall not relieve any other relevant Lender of its obligation hereunder to make available to the Borrower its Pro Rata Share of such credit under such Loan.
2.6Funding of Loans
Each relevant Lender shall make available to the Administrative Agent its Pro Rata Share of the principal amount of each Revolving Loan prior to 2:00 p.m. (Toronto time) on the date of the extension of credit, being the date for an extension of credit requested by the Borrower pursuant to the notice from Borrower delivered to the Administrative Agent, subject to the notice requirements contained hereunder (the “Advance Date”). The Administrative Agent shall, upon fulfilment by the Borrower of the applicable terms and conditions set forth in Section 6, make such funds available to the Borrower on the Advance Date by transfer to the credit of the Borrower’s designated account. Unless the Administrative Agent has been notified by a Lender at least one
(1) Business Day prior to the Advance Date that such Lender will not make available to the Administrative Agent its Pro Rata Share of such Revolving Loan, the Administrative Agent may assume that such Lender has made such portion of the Revolving Loan available to the Administrative Agent on the Advance Date in accordance with the provisions hereof and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Administrative Agent has made such assumption, to the extent such Lender shall not have so made its Pro Rata Share of the Revolving Loan available to the Administrative Agent, such Lender agrees to pay to the Administrative Agent, forthwith on demand, such Lender’s Pro Rata Share of the Revolving Loan and all reasonable costs and expenses incurred by the Administrative Agent in connection therewith together with interest thereon at the BA Rate for each day from the date such amount is made available to the Borrower until the date such amount is paid or repaid to the Administrative Agent; provided, however, that notwithstanding such obligation, if such Lender fails so to pay, the Borrower shall, without prejudice to any rights that the Borrower might have against such Lender, repay such amount to the Administrative Agent forthwith after demand therefor by the Administrative Agent. The amount payable by each Lender to the Administrative Agent pursuant hereto shall be set forth in a certificate delivered by the Administrative Agent to such Lender and the Borrower (which
certificate shall contain reasonable details of how the amount payable is calculated) and shall constitute prima facie evidence of such amount payable. If such Lender makes the payment to the Administrative Agent required herein, the amount so paid shall constitute such Lender’s Pro Rata Share of the Revolving Loan for purposes of this Agreement and shall entitle the Lender to all rights and remedies against Borrower in respect of such Revolving Loan.
2.7Failure of Lender to Fund Loan
If any relevant Lender fails to make available to the Administrative Agent its Pro Rata Share of any Loan under any credit facility as required (such Lender being herein called the “Defaulting Lender”) and the Administrative Agent has not funded pursuant to Section 2.6, the Administrative Agent shall forthwith give notice of such failure by the Defaulting Lender to the Borrower and the other relevant Lenders and such notice shall request each relevant Lender to make available to the Administrative Agent its Pro Rata Share of the Defaulting Lender’s Pro Rata Share of such Loan in the place and stead of the Defaulting Lender. Each such relevant Lender (herein collectively called the “Contributing Lenders” and individually called the “Contributing Lender”) shall, within one (1) Business Day of receipt of such notice from the Administrative Agent, make available its Pro Rata Share of such advance based on the Contributing Lenders’ relative Commitments; provided that no Lender shall be obliged to make any such advance to the extent its Pro Rata Share of outstanding Revolving Loans would exceed its Commitment. If any Contributing Lender makes funds available in the place and stead of a Defaulting Lender in such circumstances, then the Defaulting Lender shall pay to any Contributing Lender making the funds available in its place and stead, forthwith on demand, any amount advanced on its behalf together with interest thereon at the BA Rate for each day from the date of advance to the date of payment, against payment by the Contributing Lender making the funds available of all interest received in respect of the Loan from Borrower. In addition to interest as aforesaid, the Borrower shall pay all amounts owing by the Borrower to the Defaulting Lender hereunder (with respect to the amounts advanced by the Contributing Lenders on behalf of the Defaulting Lender) to the Contributing Lenders until such time as the Defaulting Lender pays to the Administrative Agent for the Contributing Lenders all amounts advanced by the Contributing Lenders on behalf of the Defaulting Lender. A Defaulting Lender shall not be entitled to its Pro Rata Share of fees hereunder during such period as such Lender is a Defaulting Lender.
2.8BA Equivalent Rate Loans
If, in the sole judgement of a Lender, such Lender is unable to extend credit by way of Bankers’ Acceptances in accordance with this Agreement, such Lender shall give an irrevocable notice to such effect to the Administrative Agent and the Borrower prior to 12:00 p.m. (Toronto time) on the date of the requested credit extension and shall make available to the Borrower prior to 2:00 p.m. (Toronto time) on the date of such requested credit extension a BA Equivalent Rate Loan in the principal amount equal to such Lender’s Pro Rata Share of the total credit to be extended by way of Bankers’ Acceptances, such BA Equivalent Rate Loan to be funded in the same manner as a Loan is funded pursuant to Section 2.6. Such BA Equivalent Rate Loan shall have the same term as the Bankers’ Acceptances for which it is a substitute and shall bear such rate of interest per annum throughout the term thereof as is equal to the BA Rate on the basis that, and the Borrower hereby agrees that, for such a BA Equivalent Rate Loan, interest shall be payable in advance on the Advance Date by the Lender deducting the interest payable in respect thereof from the principal
amount of such BA Equivalent Rate Loan. All BA Equivalent Rate Loans to be made by a particular Lender shall, at the option of such Lender, be evidenced by a promissory note in the form of a depository note made payable originally to and deposited with The Canadian Depository for Securities Limited pursuant to the Depository Bills and Notes Act (Canada).
2.9Swaps
Any Lender and its Affiliates may, in their sole discretion, from time to time at Borrower’s request, enter into any Swaps with an Operating Company from time to time on terms and conditions to be negotiated on a transaction-by-transaction basis. No Lender nor any Affiliate thereof makes any commitment to enter into or arrange any Swaps with Borrower and may at any time, in its sole and absolute discretion, decline to enter into any Swap and the Administrative Agent may, in its discretion, acting reasonably and to the extent notified to the Borrower, reserve any “credit exposure”, as determined by the Administrative Agent in its discretion, under the Availability Reserves, such reserve amount not to exceed the Ancillary Facilities Notice Amount in respect of such Swap. In addition to any security provided for therein, any Swap entered into by a Lender with Borrower shall be secured by the security granted under the Financing Agreements. Any rights of Lenders herein are in addition to and not in limitation of or substitution for any rights of Lenders under any agreement governing any Swap. In the event that there is any inconsistency at any time between the terms of this Agreement and any agreement governing any Swap, the terms of the agreement governing such Swap shall prevail. For greater certainty, nothing shall prohibit an Operating Company from entering into Swaps with Persons who are not Lenders or Affiliates thereof.
2.10Ancillary Facilities
Any Lender and its Affiliates may, in their sole discretion, from time to time at Borrower’s request, enter into any Ancillary Facilities with Borrower from time to time on terms and conditions to be negotiated on a transaction-by-transaction basis. The Lenders and their Affiliates make no commitment to enter into or arrange any Ancillary Facilities with Borrower and may at any time, in their sole and absolute discretion, decline to enter into any Ancillary Facilities. In addition to any security provided for in connection with such Ancillary Facilities (as may be permitted pursuant to this Agreement), any Ancillary Facilities entered into by a Lender or its Affiliate with Borrower shall be secured by the Security granted under this Agreement. Any rights of the Lenders herein are in addition to and not in limitation of or substitution for any rights of the Lenders under any agreement governing any Ancillary Facility.
2.11Availability Reserves
All Revolving Loans available to the Borrower subject to the Revolving Loans Borrowing Base and the Maximum Revolver Credit shall be subject to the Administrative Agent’s continuing right, with the consent of Required Lenders, to establish and revise Availability Reserves to the extent permitted elsewhere in this Agreement.
2.12Accordion Feature
(a)Increases in Maximum Revolver Credit. Subject to satisfaction of the terms and conditions set forth below, the Borrower may from time to time increase the total
amount of the Maximum Revolver Credit by notice to the Administrative Agent (the “Accordion Notice”) specifying the amount of the increase and the desired effective date of the increase (provided that the date that the increase actually takes effect shall be deemed to be the “Accordion Effective Date”), and either designating a bank or other regulated financial institution that is not a Lender at the time to become a Lender or designating an existing Lender that has agreed to increase such Lender’s Commitment; provided that:
(i)such designation shall only be effective with the prior written consent of each of the Administrative Agent and the Swingline Lender, such consent not to be unreasonably withheld;
(ii)each of the representations and warranties deemed to be repeated under Section 9.1 is true and correct in all material respects as of the Accordion Effective Date as though made on and as of such date;
(iii)no Event of Default has occurred that is continuing on the Accordion Effective Date, nor would any Event of Default result after giving effect to the requested increase;
(iv)the total amount of such increase in the Maximum Revolver Credit shall be in a minimum amount of $5,000,000 and when added to all other increases in the Maximum Revolver Credit previously made pursuant to this Section 2.12, does not exceed $70,000,000;
(v)the Borrower and the designated Accordion Lender, if not already a Lender, shall have duly completed, executed and delivered to the Administrative Agent an Accordion Agreement, together with such corporate and banking supporting documentation and other information relative thereto as the Administrative Agent may reasonably require, before the Accordion Effective Date;
(vi)any designated Accordion Lender that is already a Lender shall have confirmed in writing to the Administrative Agent its Commitment or increased Revolving Loan Commitment before the Accordion Effective Date; and
(vii)any new Accordion Lender which is not already a Lender must be acceptable to the Administrative Agent, acting reasonably.
(b)Saving. No Lender shall be obligated in any way to increase its Commitment.
(c)Notice and Effective Date of Increase. The Administrative Agent shall promptly notify each Lender of each Accordion Notice received by it from the Borrower. Upon satisfaction of each of the conditions set forth in clauses (i) to (vii) of paragraph (a) above (and a certificate of the Borrower confirming the same shall be conclusive for this purpose absent actual knowledge of the Administrative Agent to the contrary), the requested increase in the Maximum Revolver Credit shall take
effect and the Administrative Agent shall notify the Borrower and each Lender as soon as practicable of each increase in Maximum Revolver Credit arising pursuant to this Section 2.12, together with an updated list of Lenders’ Commitments giving effect to such increase.
SECTION 3 - INTEREST AND FEES
3.1Interest
(a)Borrower shall pay to Lenders interest on the outstanding principal amount of the Loans at the applicable Interest Rate. In respect of SOFR Loans, Borrower shall pay to the Lenders interest on the outstanding principal amount of such SOFR Loans (together with any amount of overdue interest owing from time to time in connection therewith), at the rate per annum equal to the sum of (i) Adjusted Term SOFR for the applicable Interest Period plus (ii) the Interest Rate for SOFR Loans.
(b)Interest (other than interest on BA Advances) shall be calculated and payable by the Borrower to Lenders monthly in arrears not later than the first Business Day of each calendar month. Interest shall be calculated on the basis of a three hundred sixty five (365) day year in the case of Canadian Prime Rate Loans and BA Advances and a three hundred and sixty (360) day year in the case of US Prime Rate Loans and SOFR Loans, as applicable and actual days elapsed or to elapse (as the case may be). The interest rate on Canadian Prime Rate Loans and US Prime Rate Loans shall increase or decrease by an amount equal to each increase or decrease in the Canadian Prime Rate or US Prime Rate, as applicable, effective immediately after any change in such Canadian Prime Rate or US Prime Rate, as applicable, is announced. All interest accruing hereunder while an Event of Default is continuing shall be payable on demand. In no event shall charges constituting interest payable by the Borrower to Lenders exceed the maximum amount or the rate permitted under any Applicable Law, and if any part or provision of this Agreement is in contravention of any such Applicable Law, such part or provision shall be deemed amended to conform thereto.
(c)For purposes of disclosure under the Interest Act (Canada), where interest is calculated pursuant hereto at a rate based upon a 365 or 360 day year (the “First Rate”), it is hereby agreed that the rate or percentage of interest on a yearly basis is equivalent to such First Rate multiplied by the actual number of days in the year divided by 365 or 360, as applicable. The Administrative Agent agrees that promptly upon request by the Borrower from time to time, it will advise the Borrower of the Canadian Prime Rate, US Prime Rate, BA Rate or Term SOFR, as the case may be, in effect at such time (or during any other period before such time), and will assist the Borrower in calculating the effective annual rate of interest required to be disclosed according to section 4 of the Interest Act (Canada).
(d)If any provision of this Agreement or of any of the other Financing Agreements would obligate Borrower to make any payment of interest or other amount payable to Lenders in an amount or calculated at a rate which would be prohibited by law
or would result in a receipt by Lenders of interest at a criminal rate (as such terms are construed under the Criminal Code (Canada)) then, notwithstanding such provisions, such amount or rate shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by law or so result in a receipt by Lenders of interest at a criminal rate, such adjustment to be effected, to the extent necessary, as follows:
(1) firstly, by reducing the amount or rate of interest required to be paid to Lenders under this Section, and (2) thereafter, by reducing any fees, commissions, premiums and other amounts required to be paid to Lenders which constitute “interest” for purposes of Section 347 of the Criminal Code (Canada). Notwithstanding the foregoing, and after giving effect to all adjustments contemplated thereby, if Lenders shall have received an amount in excess of the maximum permitted by that Section of the Criminal Code (Canada), the Borrower shall be entitled, by notice in writing to Lenders, to promptly obtain reimbursement from Lenders in an amount equal to such excess and, pending such reimbursement, such amount shall be deemed to be an amount payable by Lenders to the Borrower. Any amount or rate of interest referred to in this Section shall be determined in accordance with generally accepted actuarial practices and principles as an effective annual rate of interest over the term that the applicable Loan remains outstanding on the assumption that any charges, fees or expenses that fall within the meaning of “interest” (as defined in the Criminal Code (Canada)) shall, if they relate to a specific period of time, be pro-rated over that period of time and otherwise be pro-rated over the period from the date hereof to the date of termination or non-renewal of this Agreement and, in the event of a dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Administrative Agent shall be presumptive evidence for the purposes of such determination.
(e)A certificate of an authorized signing officer of Lenders as to each amount and/or each rate of interest payable hereunder from time to time shall be conclusive evidence of such amount and of such rate, absent manifest error.
(f)For greater certainty, whenever any amount is payable under this Agreement or any Financing Agreement by the Borrower as interest or as a fee which requires the calculation of an amount using a percentage per annum, each party to this Agreement acknowledges and agrees that such amount shall be calculated as of the date payment is due without application of the “deemed reinvestment principle” or the “effective yield method”.
3.2Closing Fee
Borrower shall pay to the Administrative Agent on behalf of the Lenders a closing fee in the amount of $288,000, which fee shall be fully earned as of and payable on the date of this Second Amended and Restated Loan Agreement.
3.3Administration Fee
Borrower shall pay to the Administrative Agent monthly an administration fee in respect of the Administrative Agent’s services for each month (or part thereof) while this Agreement remains in effect and for so long thereafter as any of the Obligations are outstanding, in the amount of $1,500, which fee shall be fully earned as of and payable in advance on the date hereof and on the first Business Day of each month hereafter.
3.4Unused Line Fee
Borrower shall pay to the Administrative Agent on behalf of Lenders monthly an unused line fee at the applicable percentage rate specified in the pricing grid for the Interest Rate (as set out in the definition for Interest Rate in Exhibit “A” of this Agreement) multiplied by the amount by which the Maximum Revolver Credit exceeds the Canadian Dollar Amount of the average daily principal balance of the outstanding Revolving Loans during the immediately preceding month (or part thereof) while this Agreement is in effect and for so long thereafter as any of the Obligations are outstanding multiplied by the fraction of the number of days elapsing in such immediately preceding month (or part thereof) divided by the number of days in the calendar year commencing on the first day of that immediately preceding calendar month, which fee shall be payable on the first Business Day of each month in arrears.
3.5Payments
Unless otherwise expressly provided herein, the Borrower shall make all payments pursuant to this Agreement or pursuant to any document, instrument or agreement delivered pursuant hereto by deposit to the designated Payment Account before 2:00 p.m. (Toronto time) on the day specified for payment and the Administrative Agent shall be entitled to withdraw the amount of any payment due to the Administrative Agent or the Lenders hereunder from such accounts on the day specified for payment. Any such payment received on the day specified for such payment but after 2:00
p.m. (Toronto time) shall be deemed to have been received prior to 2:00 p.m. (Toronto time) on the next following Business Day.
Unless otherwise specified by Lenders, all interest, fees and other payments by the Borrower hereunder shall be in the currency in which such Obligations are denominated.
SECTION 4 - TERM OF AGREEMENT
4.1Term
(a)This Agreement and the other Financing Agreements shall become effective as of the date set forth on the first page hereof and shall continue in full force and effect until the Maturity Date, unless sooner terminated pursuant to a Notice of Termination.
(b)Upon the effective date of termination of the Financing Agreements, the Borrower shall pay to the Administrative Agent for the account of Lenders, in full, all outstanding and unpaid Obligations and shall furnish cash collateral to the Administrative Agent for the account of Lenders in such amounts as Lenders
determine are necessary to secure Lenders from loss, cost, damage or expense, including reasonable legal fees and expenses, in connection with any contingent Obligations, including cheques or other payments provisionally credited to the Obligations and/or as to which Lenders have not yet received final and indefeasible payment. Such payments in respect of the Obligations and cash collateral shall be remitted by wire transfer in Canadian Dollars to the Payment Account. Interest shall be due until and including the next Business Day, if the amounts so paid by the Borrower to the Payment Account are received in such bank account later than 2:00 p.m., Toronto time.
(c)No termination of this Agreement or the other Financing Agreements shall relieve or discharge Borrower of its respective duties, obligations and covenants under this Agreement or the other Financing Agreements until all outstanding Obligations then due and owing have been fully and finally discharged and paid and cash collateral required under Section 4.1(b) for contingent Obligations has been provided, and Lenders’ continuing security interest in the Collateral and the rights and remedies of Lenders hereunder, under the other Financing Agreements and Applicable Law, shall remain in effect until all such Obligations have been fully and finally discharged and paid and cash collateral has been so provided.
SECTION 5 - RESERVE, CAPITAL, INDEMNITY, TAX AND RELATED PROVISIONS
5.1Increased Costs
(a)Increased Costs Generally. If any Change in Law shall:
(i)impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender or any banking or financial institution from whom any Lender borrows funds or obtains credit (a “Funding Bank”);
(ii)subject any Lender to any Tax of any kind whatsoever with respect to this Agreement or any Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof, except for Indemnified Taxes or Other Taxes covered by Section 5.2 and the imposition, or any change in the rate, of any Excluded Tax payable by such Lender; or
(iii)impose on any Lender or any applicable interbank market any other condition, cost or expense affecting this Agreement or Loans made by such Lender;
and the result of any of the foregoing shall be to increase materially the cost to such Lender or a Funding Bank of making or maintaining any Loan (or of maintaining its obligation to make any such Loan), or to increase materially the cost to such Lender or a Funding Bank of participating in, issuing or maintaining any letter of credit (or of maintaining its obligation to participate in or to issue any letter of credit), or to reduce materially the amount of any sum received or receivable by
such Lender or a Funding Bank hereunder (whether of principal, interest or any other amount), then upon request of such Lender, the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender and/or Funding Bank for such additional costs incurred or reduction suffered.
(b)Capital Requirements. If any Lender determines that any Change in Law affecting such Lender or any lending office of such Lender or such Lender’s holding company, if any, or a Funding Bank, regarding capital requirements has or would have the effect of materially reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, or a Funding Bank, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or the letters of credit issued or participated in by such Lender, to a level below that which such Lender or its holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of its holding company with respect to capital adequacy), then from time to time Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or its holding company for any such reduction suffered.
(c)Certificates for Reimbursement. A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section, including reasonable detail of the basis of calculation of the amount or amounts, and delivered to the Borrower shall be prima facie evidence thereof, absent manifest error. Borrower shall pay such Lender the amount payable under this Section 5.1 within 10 Business Days after receipt of such certificate and request for payment thereof.
(d)Delay in Requests. Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such compensation, except that notwithstanding the provisions of Section 5.1(a) to (c) to the contrary, the Borrower shall not be required to compensate a Lender pursuant to this Section 5.1 for any increased costs incurred or reductions suffered more than six months prior to the date that such Lender notifies Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor, unless the Change in Law giving rise to such increased costs or reductions is retroactive, in which case the six-month period referred to above shall be extended to include the period of retroactive effect thereof.
5.2Taxes
(a)Payments Subject to Taxes. If any Obligor, the Administrative Agent, or any Lender is required by Applicable Law to deduct or pay any Indemnified Taxes (including any Other Taxes) in respect of any payment by or on account of any obligation of an Obligor hereunder or under any other Financing Agreement, then
(i)the sum payable shall be increased by that Obligor when payable as necessary so that after making or allowing for all required deductions and payments
(including deductions and payments applicable to additional sums payable under this Section) the Administrative Agent or Lender, as the case may be, receives an amount equal to the sum it would have received had no such deductions or payments been required, (ii) the Obligor shall make any such deductions required to be made by it under Applicable Law and (iii) the Obligor shall timely pay the full amount required to be deducted to the relevant Governmental Authority in accordance with Applicable Law.
(b)Payment of Other Taxes by Borrower. Without limiting the provisions of paragraph (a) above, the Borrower shall timely pay, or cause to be paid, any Other Taxes to the relevant Governmental Authority in accordance with Applicable Law.
(c)Indemnification by Borrower. The Borrower shall indemnify the Administrative Agent and each Lender, and pay within 15 Business Days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent or such Lender and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be prima facie evidence thereof.
(d)Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by an Obligor to a Governmental Authority, the Obligor shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(e)Status of Lenders. Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Financing Agreement shall, at the request of the Borrower, deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by Applicable Law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by Applicable Law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, (a) any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by the Borrower or the Administrative Agent as will enable Borrower or the Administrative Agent to determine whether or not such Lender is subject to withholding or information reporting requirements, and (b) any Lender that ceases to be, or to be deemed to be, resident in Canada for
purposes of Part XIII of the Income Tax Act (Canada) or any successor provision thereto shall within five days thereof notify Borrower and the Administrative Agent in writing.
(f)Treatment of Certain Refunds and Tax Reductions. If the Administrative Agent or a Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which an Obligor has paid additional amounts pursuant to this Section or that, because of the payment of such Taxes or Other Taxes, it has benefited from a reduction in Excluded Taxes otherwise payable by it, it shall pay to the Borrower or Obligor, as applicable, an amount equal to such refund or reduction (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower or Obligor under this Section with respect to the Taxes or Other Taxes giving rise to such refund or reduction), net of all out-of-pocket expenses of the Administrative Agent or such Lender, as the case may be, and without interest (other than any net after-tax interest paid by the relevant Governmental Authority with respect to such refund). Borrower or Obligor as applicable, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Borrower or Obligor (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender if the Administrative Agent or such Lender is required to repay such refund or reduction to such Governmental Authority. This paragraph shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person, to arrange its affairs in any particular manner or to claim any available refund or reduction.
(g)Accounting. Upon request of the Borrower, the Administrative Agent or Lender, as the case may be, shall provide a detailed computation of any Taxes or Other Taxes it requests compensation for under this Section 5.2.
5.3Mitigation Obligations: Replacement of Lenders
(a)Designation of a Different Lending Office. If any Lender requests compensation under Section 5.1, or requires the Borrower to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.2, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 5.1 or 5.2, as the case may be, in the future and (ii) would not subject such Lender to any material unreimbursed cost or expense which Borrower is not prepared to compensate such Lender for and would not otherwise be materially disadvantageous to such Lender. Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
(b)Replacement of Lenders. If any Lender requests compensation under Section 5.1, if Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.2, if any Lender’s obligations are suspended pursuant to Section 5.4 or if any Lender becomes a Defaulting Lender, then Borrower may, at its sole expense and effort, upon 15 days’ notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 14.3), all of its interests, rights and obligations under this Agreement and the related Financing Agreements to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:
(i)Borrower pays the Administrative Agent the assignment fee specified in Section 14.3(b)(vii) if such assignment is made to someone that is not already a Lender or an Affiliate of a Lender;
(ii)the assigning Lender receives payment of an amount equal to the outstanding principal of its loans, accrued interest thereon, accrued fees and all other amounts then due or accrued and payable to it hereunder and under the other Financing Agreements (including any breakage costs and amounts required to be paid under this Agreement as a result of prepayment to a Lender) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);
(iii)in the case of any such assignment resulting from a claim for compensation under Section 5.1 or payments required to be made pursuant to Section 5.2, such assignment will result in a reduction in such compensation or payments thereafter; and
(iv)such assignment does not conflict with Applicable Law.
A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling Borrower to require such assignment and delegation cease to apply.
(c)Defaulting Lender. Replacement of a Defaulting Lender pursuant to this Section 5.3 shall in no way prejudice Borrower’s rights against any Defaulting Lender.
5.4Illegality
If any Lender determines that any Applicable Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable lending office to make or maintain any Loan (or to maintain its obligation to make any Loan), or to determine or charge interest rates based upon any particular rate, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation of such Lender with respect to the activity that is unlawful shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt
of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if conversion would avoid the activity that is unlawful, convert any Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted. Each Lender agrees to designate a different lending office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Lender, otherwise be materially disadvantageous to such Lender.
5.5Inability to Determine Rates Etc.
If Required Lenders determine that for any reason a market for bankers’ acceptances does not exist at any time or Lenders cannot for other reasons, after reasonable efforts, readily sell bankers’ acceptances or perform their other obligations under this Agreement with respect to bankers’ acceptances, the Administrative Agent will promptly so notify Borrower and each Lender. Thereafter, the Borrower’s right to request the acceptance of bankers’ acceptances shall be and remain suspended until Required Lenders determine and the Administrative Agent notifies Borrower and each Lender that the condition causing such determination no longer exists.
5.6Indemnity for Transactional and Environmental Liability
(a)The Borrower hereby agrees to indemnify, exonerate and hold the Administrative Agent (and any sub-agent thereof) and each Lender and each of their respective shareholders, officers, directors, employees and agents (collectively, the “Indemnified Parties”) free and harmless from and against any and all claims, demands, actions, causes of action, suits, losses, costs (including, without limitation, all documentary, recording, filing, mortgage or other stamp taxes or duties), charges, liabilities and damages, and expenses in connection therewith (irrespective of whether such Indemnified Party is a party to the action for which indemnification hereunder is sought), and including, without limitation, reasonable legal fees and out of pocket disbursements and amounts paid in settlement of any and every kind whatsoever when such amounts paid in settlement have been approved by the Borrower, acting reasonably (collectively, in this Section 5.6(a), the “Indemnified Liabilities”), paid, incurred or suffered by, or asserted against, the Indemnified Parties or any of them as a result of, or arising out of, or relating to
(i) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any credit extended hereunder, (ii) any actual or threatened investigation, litigation or other proceeding relating to any credit extended or proposed to be extended as contemplated herein or (iii) the occurrence of any Event of Default, except for any such Indemnified Liabilities which a court of competent jurisdiction determined pursuant to a final non-appealable order arose on account of the relevant Indemnified Party’s breach of any Financing Agreement, gross negligence or wilful misconduct. Notwithstanding the foregoing, nothing in this Section 5.6(a) shall entitle the Indemnified Parties to recover Indemnified Liabilities that are intended to be compensated for pursuant to Section 4.1(b) hereof.
(b)Without limiting the generality of the indemnity set out in Section 5.6(a), the Borrower hereby further agrees to indemnify, exonerate and hold the Indemnified
(ii) the breach or violation of any Environmental Law by the Borrower regardless of whether caused by, or within the control of, the Borrower, except for any such Indemnified Liabilities which a court of competent jurisdiction determined pursuant to a final non-appealable order arose on account of the relevant Indemnified Party’s breach of any Financing Agreement, gross negligence or wilful misconduct.
(c)All obligations provided for in this Section 5.6 shall survive the payment of the Obligations and the termination and non-renewal of this Agreement and shall not be reduced or impaired by any investigation made by or on behalf of the Administrative Agent or Lenders.
(d)The Borrower hereby agrees that, for the purposes of effectively allocating the risk of loss placed on Borrower by this Section 5.6, the Administrative Agent and Lenders shall be deemed to be acting as the agent or trustee on behalf of and for the benefit of their respective shareholders, officers, directors, employees and agents.
(e)If, for any reason, the obligations of the Borrower pursuant to this Section 5.6 shall be unenforceable, the Borrower agrees to make the maximum contribution to the payment and satisfaction of each obligation that is permissible under Applicable Law, except to the extent that a court of competent jurisdiction determines such obligations arose on account of the breach of any Financing Agreement or the gross negligence or wilful misconduct of any Indemnified Party.
(f)To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under this Section 5.6 to be paid by it to the Administrative Agent (or any sub-agent thereof) or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent) or such Related Party, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable un-reimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) in connection with such capacity. The obligations of Lenders under this paragraph
are subject to the other provisions of this Agreement concerning several liabilities of Lenders.
(g)To the fullest extent permitted by Applicable Law, the Borrower shall not assert, and hereby waives, any claim against any Indemnified Party, on any theory of liability, for indirect, consequential, punitive, aggravated or exemplary damages (as opposed to direct damages) arising out of, in connection with, or as a result of, this Agreement, any other Financing Agreement or any agreement or instrument contemplated hereby (or any breach thereof), the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof. Except to the extent resulting from the gross negligence or wilful misconduct of such Indemnified Party, no Indemnified Party shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Financing Agreements or the transactions contemplated hereby or thereby.
5.7Right of Setoff
(a)If an Event of Default has occurred and is continuing, each of Lenders and each of their respective Affiliates is hereby authorized at any time and from time to time to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender or any such Affiliate to or for the credit or the account of any Obligor against any and all of the obligations of the Borrower now or hereafter existing under this Agreement or any other Financing Agreement to such Lender, irrespective of whether or not such Lender has made any demand under this Agreement or any other Financing Agreement and although such obligations of the Obligor may be contingent or unmatured or are owed to a branch or office of such Lender different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each of Lenders and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff, consolidation of accounts and bankers’ lien) that Lenders or their respective Affiliates may have. Each Lender agrees to promptly notify Borrower and the Administrative Agent after any such setoff and application, but the failure to give such notice shall not affect the validity of such setoff and application. If any Affiliate of a Lender exercises any rights under this Section 5.7, it shall share the benefit received in accordance with Section 5.8 as if the benefit had been received by Lender of which it is an Affiliate.
5.8Sharing of Payments by Lenders
(a)If any Lender, by exercising any right of setoff or counterclaim or otherwise, obtains any payment or other reduction that might result in such Lender receiving payment or other reduction of a proportion of the aggregate amount of its Loans and accrued interest thereon or other obligations hereunder greater than its Pro Rata Share thereof as provided herein, then Lender receiving such payment or other
reduction shall promptly (x) notify the Administrative Agent of such fact, and
(y) purchase (for cash at face value) participations in the Loans and such other obligations of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by Lenders rateably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them, provided that:
(i)if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and
(ii)the provisions of this Section shall not be construed to apply to (x) any payment made by any Obligor pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to any Obligor or any Affiliate of an Obligor (as to which the provisions of this Section shall apply); and
(b)the provisions of this Section shall not be construed to apply to (w) any payment made while no Event of Default has occurred and is continuing in respect of obligations of the Borrower to such Lender that do not arise under or in connection with the Financing Agreements, (x) any payment made in respect of an obligation that is secured by a Permitted Lien (other than liens in favour of the Administrative Agent or any Lender) or that is otherwise entitled to priority over Borrower’s Obligations under or in connection with the Financing Agreements, (y) any reduction arising from an amount owing to an Obligor upon the termination of derivatives entered into between the Obligor and such Lender, or (z) any payment to which such Lender is entitled as a result of any form of credit protection obtained by such Lender.
The Obligors consent to the foregoing and agree, to the extent they may effectively do so under Applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against each Obligor rights of setoff and counterclaim and similar rights of Lenders with respect to such participation as fully as if such Lender were a direct creditor of each Obligor in the amount of such participation.
5.9Market Disruption and Benchmark Replacement
(a)Inability to determine rates. If the Required Lenders determine (which determination shall be conclusive and binding absent manifest error) at any time that:
(i)Term SOFR cannot be determined pursuant to the definition thereof; or
(ii)Term SOFR does not adequately reflect the Lender's cost of funding a SOFR Loan for an Interest Period selected by the Borrower; then
The Administrative Agent will promptly notify the Borrower of such determination. From and after delivery of such notice by the Administrative Agent, the obligation of the Lenders to make or maintain SOFR Loans hereunder shall be suspended until such time as the Administrative Agent (upon the instruction of the Required Lenders) determines in good faith that the circumstances giving rise to such situation no longer exist and revokes such notice. Upon receipt of such notice, a Borrower may revoke any pending request for an advance, conversion or rollover of SOFR Loans or, failing that, such request and any further drawdown, conversion or rollover requesting a SOFR Loan shall be deemed to be a drawdown Request or conversion notice, as applicable, requesting a US Prime Rate Loan in the same aggregate principal amount. Upon such conversion, the Borrower shall also pay interest on the amount so converted, together with any additional amounts required under any indemnity obligation arising pursuant to Sections 5.1, 5.4 or 5.6 hereof.
(b)Benchmark Replacement Setting.
(i)Benchmark Replacement. Notwithstanding anything to the contrary herein or in any other Financing Agreement, upon the occurrence of a Benchmark Transition Event, the Administrative Agent and the Borrower may amend this Agreement to replace the then-current Benchmark with a Benchmark Replacement. Any such amendment will become effective at 5:00 p.m. (Toronto time) on the fifth (5th) Business Day after the date the Administrative Agent has provided such proposed amendment to the Lenders and the Borrower, so long as the Administrative Agent has not received, by such time, written notice of objection to such amendment from Lenders comprising the Required Lenders. No replacement of a Benchmark with a Benchmark Replacement pursuant to this 5.9(b) will occur prior to the applicable Benchmark Transition Start Date.
(ii)Benchmark Replacement Conforming Changes. In connection with the implementation, use, adoption and administration of a Benchmark Replacement, the Administrative Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Financing Agreement, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Financing Agreement.
(iii)Notices; Standards for Decisions and Determinations. The Administrative Agent will promptly notify the Borrower and the Lenders of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Benchmark Replacement Conforming Changes. The Administrative Agent will notify the Borrower of (i) the removal or reinstatement of any tenor of a Benchmark; and (ii) the commencement of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Administrative Agent or, if applicable, any Lender (or group of Lenders) pursuant to this 5.9(b), including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent
from any other party to this Agreement or any other Financing Agreement, except, in each case, as expressly required pursuant to this Section.
(iv)Unavailability of Tenor of Benchmark. Notwithstanding anything to the contrary herein or in any other Financing Agreement, at any time (including in connection with the implementation of a Benchmark Replacement):
(A)if the then-current Benchmark is a term rate (including the Term SOFR), and either (A) any tenor for such Benchmark is not displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion, or (B) the administrator of such Benchmark or the regulatory supervisor for the administrator of this Benchmark has provided a public statement or publication of information announcing that any tenor for such Benchmark is not or will not be representative or in compliance with or aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks, then the Administrative Agent may modify the definition of "Interest Period" (or any similar or analogous definition) for any Benchmark settings at or after such time, to remove such unavailable, non-representative, non- compliant or non-aligned tenor, and
(B)if a tenor that was removed pursuant to 5.9(b)(iv)(A) above either
(A) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark Replacement), or (B) is not, or is no longer, subject to an announcement that it is not or will not be representative or in compliance with or aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks (including a Benchmark Replacement), then the Administrative Agent may modify the definition of "Interest Period" (or any similar or analogous definition) for all Benchmark settings at or after such time, to reinstate such previously removed tenor.
(v)Benchmark Unavailability Period. Upon the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, the Borrower may revoke any pending request for a SOFR Loan, conversion to or rollover of a SOFR Loan to be made, converted or rolled over during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any such request into a request for, or a conversion to, a U.S. Prime Rate Loan, as applicable. During a Benchmark Unavailability Period or at any time that a tenor for the then-current Benchmark is not an Available Tenor, the component of US Prime Rate based upon the then-current Benchmark or such tenor for such Benchmark, as applicable, will not be used in any determination of US Prime Rate.
5.10Administrative Agent’s Clawback
(a)Funding by Lenders; Presumption by the Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any advance of funds that such Lender will not make available to the Administrative Agent such Lender’s share of such advance, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with the provisions of this Agreement concerning funding by Lenders and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable advance available to the Administrative Agent, then the applicable Lender shall pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at a rate determined by the Administrative Agent in accordance with prevailing banking industry practice on interbank compensation. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such advance. If such Lender does not do so forthwith, the Borrower shall pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon at the interest rate applicable to the advance in question. Any payment by the Borrower shall be without prejudice to any claim Borrower may have against a Lender that has failed to make such payment to the Administrative Agent.
(b)Payments by Borrower; Presumptions by the Administrative Agent. Unless the Administrative Agent shall have received notice from Borrower prior to the date on which any payment is due to the Administrative Agent for the account of any Lender hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute the amount due to Lenders. In such event, if Borrower has not in fact made such payment, then each of Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at a rate determined by the Administrative Agent in accordance with prevailing banking industry practice on interbank compensation.
SECTION 6 - CONDITIONS PRECEDENT
6.1Conditions Precedent to Initial Loans
Each of the following is a condition precedent to Lenders making the initial Loans hereunder:
(a)the Administrative Agent shall have received evidence (including, without limitation, any subordinations, inter-creditor agreements or releases of any other liens or security interests in the Collateral required by the Administrative Agent),
in form and substance satisfactory to the Administrative Agent, that the Administrative Agent has on behalf of Lenders valid registered Mortgages (registrations to be completed contemporaneously with closing) and valid registered, perfected and first priority security interests in and liens upon the Collateral and any other property which is intended to be security for the Obligations or the liability of any Obligor in respect thereof, subject only to Permitted Liens;
(b)all requisite corporate action and proceedings in connection with this Agreement and the other Financing Agreements shall be satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received all information and copies of all documents, including, without limitation, certificates of incumbency of each of the Obligors, records of requisite corporate action and proceedings which the Administrative Agent may have requested in connection therewith, such documents where requested by Lender or its counsel to be certified by appropriate corporate officers or governmental authorities;
(c)no Material Adverse Change shall have occurred since December 1, 2021;
(d)the Administrative Agent shall have received, in form and substance satisfactory to the Administrative Agent, all consents, waivers, bailee letters, acknowledgments and other agreements from third persons which the Administrative Agent may deem necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the Collateral or to effectuate the provisions or purposes of this Agreement and the other Financing Agreements, including, without limitation, full subordination agreements, upon terms satisfactory to the Administrative Agent in its reasonable discretion, in respect of any Subordinated Debt; for greater certainty, the Borrower shall use commercially reasonable efforts to obtain landlord waivers in respect of each of its leased premises that is material to the overall operations of an Operating Company, provided that the Borrower shall have no obligation to pay any sum of money to, or otherwise provide consideration or other inducement, to any landlord to induce them to enter into any such landlord waiver;
(e)the Administrative Agent shall have received evidence of insurance and loss payee endorsements required hereunder and under the other Financing Agreements, in form and substance satisfactory to the Administrative Agent, and certificates of insurance policies and/or endorsements naming the Administrative Agent as first loss payee and additional insured, as applicable;
(f)the Administrative Agent shall have received, in form and substance satisfactory to the Administrative Agent, such opinion letters of counsel to the Borrower and the Obligors with respect to the Financing Agreements and such other matters as the Administrative Agent may request;
(g)the other Financing Agreements and all instruments and documents hereunder and thereunder shall have been duly executed and delivered to the Administrative Agent, in form and substance satisfactory to the Administrative Agent;
(h)the Excess Availability as determined by the Administrative Agent shall be not less than $25,000,000, after giving effect to the initial Revolving Loans made or to be made hereunder (the “Closing Date”); and
(i)KYC Information. (i) Upon the reasonable request of any Lender made at least five
(5) days prior to the Closing Date, the Borrower shall have provided to such Lender, and such Lender shall be reasonably satisfied with, the documentation and other information so requested in connection with applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the Patriot Act, in each case at least five (5) days prior to the Closing Date. (ii) At least five (5) days prior to the Closing Date, if Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation the Borrower shall deliver, to each Lender that so requests, a Beneficial Ownership Certification in relation to the Borrower.
6.2Conditions Precedent to All Loans
Each of the following is an additional condition precedent to Lenders making Loans to the Borrower, including the initial Loans and any future Loans:
(a)all representations and warranties contained herein and in the other Financing Agreements shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of the making of each such Loan and after giving effect thereto, provided that the Borrower shall be permitted to revise from time to time any Schedule or Information Certificate attached hereto to render any factual matters referred to therein true, accurate and complete in all material respects as at such time by supplying an officer’s certificate to the Administrative Agent to such effect, whereupon any repetition of representations and warranties referable to such Schedules or Information Certificates shall thereafter be deemed made with reference to those Schedules or Information Certificates as so revised; and
(b)no Event of Default shall exist or have occurred and be continuing on and as of the date of the making of such Loan and after giving effect thereto.
6.3Flood insurance
For so long as Bank of America, N.A. (“Bank of America”) remains a Lender hereunder, the following is an additional condition precedent solely to any increase in the Maximum Credit which involves an increase in the Commitment of Bank of America or extension of the Maturity Date which shall be subject to (and conditioned upon): (1) the prior delivery of all flood hazard determination certifications, acknowledgements and evidence of flood insurance and other flood- related documentation with respect to such real property included in the Collateral as required by Applicable Laws relating to flood insurance and as otherwise reasonably required by the Administrative Agent; and (2) the Administrative Agent shall have received written confirmation from the Borrower with respect to any real property included in the Collateral that is located in an area identified by the Federal Emergency Management Agency or any successor thereto as an area
having special flood hazards pursuant to the Flood Insurance Acts, that the Borrower maintains (if available) a policy of flood insurance with a financially sound and reputable insurance company that (i) covers any parcel of such real property that is located in a “special flood hazard area” and
(ii) is written in an amount not less than the (x) outstanding principal amount of the Indebtedness secured thereby and (y) the maximum limit of coverage made available with respect to the particular type of such real property under the Flood Insurance Acts, and (3) the Administrative Agent shall have received written confirmation from Bank of America that flood insurance due diligence and flood insurance compliance has been completed by Bank of America (such written confirmation not to be unreasonably withheld, conditioned or delayed). As used herein, the term “Flood Insurance Acts” means, collectively, (a) the National Flood Insurance Act of 1968 and
(b) the Flood Disaster Protection Act of 1973, each as amended and together with any successor law of such type.
The Administrative Agent shall not enter into any new mortgage in respect of any real property acquired by any Obligor (and such Obligor shall not be required to enter into such mortgage) until
(1) the date that occurs forty-five (45) days after the Administrative Agent has delivered to the Lenders (which may be delivered electronically) the following documents in respect of such real property: (i) a completed flood hazard determination from a third party vendor with respect to any property on which any “building” as defined in applicable clause relative to flood insurance; (ii) if such real property is located in a “special flood hazard area”, (A) a notification to applicable Obligor of that fact and (if applicable) notification to the applicable Obligor that flood insurance coverage is not available and (B) evidence of the receipt by the applicable Obligor of such notice; and (iii) if such notice is required to be provided to the applicable Obligor and flood insurance is available in the community in which such real property is located, evidence of required flood insurance in accordance with Section 10.5 hereof and (2) the Administrative Agent shall have received written confirmation from Bank of America (for so long as Bank of America remains a Lender hereunder) that flood insurance due diligence and flood insurance compliance has been completed by Bank of America (such written confirmation not to be unreasonably conditioned, withheld or delayed).
SECTION 7 - COLLECTION AND ADMINISTRATION
7.1Administrative Agent’s Loan Accounts
The Administrative Agent shall maintain one or more loan account(s) on its books in which shall be recorded (a) all Loans and other Obligations and the Collateral, (b) all payments made by or on behalf of the Borrower and (c) all other appropriate debits and credits as provided in this Agreement, including fees, charges, costs, expenses and interest. All entries in the loan account(s) shall be made in accordance with the Administrative Agent’s customary practices as in effect from time to time.
7.2Statements
The Administrative Agent shall render to the Borrower on behalf of all Lenders each month a statement setting forth the balance in Borrower’s loan account(s) maintained by the Administrative Agent for the Borrower pursuant to the provisions of this Agreement, including principal, interest, fees, costs and expenses. Each such statement shall be subject to subsequent adjustment by the
Administrative Agent on behalf of all Lenders but shall, absent manifest errors or omissions, be considered correct and deemed accepted by the Borrower and conclusively binding upon the Borrower as an account stated except to the extent that the Administrative Agent receives a written notice from Borrower of any specific exceptions of the Borrower thereto within sixty (60) days after the date such statement has been received by the Borrower. Until such time as the Administrative Agent shall have rendered to the Borrower a written statement as provided above, the balance in Borrower’s loan account(s) with the Administrative Agent shall be rebuttable presumptive evidence of the amounts due and owing to all Lenders by the Borrower.
7.3Collection of Accounts
(a)Borrower shall establish and maintain, at its expense, blocked accounts (“Blocked Accounts”), with such Lenders as Borrower may select, and the Administrative Agent shall establish and maintain bank accounts of the Administrative Agent (“Payment Accounts”) in each case on its own books or with such banks as are selected by the Administrative Agent. Borrower shall promptly deposit and direct its account debtors that remit payments by electronic funds transfers to directly remit, to such Blocked Accounts all payments on Accounts and all payments constituting proceeds of Inventory or other Collateral in the identical form in which such payments are made, whether by cash, cheque or other manner. The banks at which the Blocked Accounts are established shall enter into an agreement, in form and substance satisfactory to the Administrative Agent, providing (i) that all items received or deposited in the Blocked Accounts are subject to the security interest held by the Administrative Agent, that the depository bank has no lien upon, or right to set-off against the Blocked Accounts, the items received for deposit therein, or the funds from time to time on deposit therein, save for customary rights in such agreements to recover normal fees, costs and expenses incurred in operating such accounts and reimbursement for chargebacks, errors and items returned through the clearing, and (ii) that the depository bank will wire, or otherwise transfer, in immediately available funds, on a daily basis, all funds received or deposited into the Blocked Accounts to the operating accounts maintained by an Operating Company with the Swingline Lender (each, a “Collection Account”).
(b)For purposes of calculating the amount of the Revolving Loans Borrowing Base available to the Borrower, such payments made to the Blocked Account, will be applied (conditional upon final collection) to the Obligations on the Business Day of receipt by the Administrative Agent of immediately available funds in the Payment Account provided such payments are received within sufficient time to credit Borrower’s loan account(s) on such day, and if not, then on the next Business Day. For the purposes of calculating interest on the Revolving Loans, such payments or other funds received will be applied (conditional upon final collection) to the Obligations on the date of receipt of immediately available funds by the Administrative Agent in the Payment Account provided such payments or other funds are received within sufficient time to credit Borrower’s loan account(s) on such day, and if not, then on the next Business Day. If the Administrative Agent receives funds in a Blocked Account at any time at which no Revolving Loans are outstanding or in excess of such outstanding Obligations, the Administrative Agent
shall transfer such funds to the Borrower at such account as Borrower may direct (which account is, as of the date hereof, set out in Schedule 10.17), provided that the Borrower shall, at the Administrative Agent’s request, deposit such funds to an account maintained at the bank at which the Blocked Accounts are maintained (which account is, as of the date hereof, set out in Schedule 10.17) and, prior to such transfer, shall execute and deliver to the Administrative Agent a cash collateral agreement in form and substance satisfactory to the Administrative Agent providing to the Administrative Agent a first priority security interest over such account.
(c)Borrower shall, acting as trustee for the Administrative Agent, receive, as the property of the Administrative Agent, any monies, cheques, notes, drafts or any other payment relating to and/or proceeds of Accounts or other Collateral which come into their possession or under their control and promptly upon receipt thereof, shall deposit or cause the same to be deposited in the Blocked Accounts or the Payment Accounts, or remit the same or cause the same to be remitted, in kind, to the Administrative Agent. In no event shall the same be commingled with Borrower’s own funds. Borrower agrees to reimburse the Administrative Agent on demand for any amounts owed or paid to any bank at which a Blocked Account or Payment Account is established or any other bank or person involved in the transfer of funds to or from the Blocked Accounts or the Payment Accounts arising out of Lenders’ payments to or indemnification of such bank or person, unless such payment or indemnification is caused by the wilful misconduct or gross negligence of such Lender. The obligation of the Borrower to reimburse Lenders for such amounts pursuant to this Section 7.3 shall survive the termination or non-renewal of this Agreement.
(d)For greater certainty, the Borrower hereby acknowledges, confirms, covenants and agrees to and in favour of Lenders that notwithstanding an Event of Default, it shall continue to comply with any Blocked Accounts or Payment Accounts agreements required pursuant to this Agreement and that the continued operation of such Blocked Accounts or Payment Accounts before or after an Event of Default shall not in any way be deemed to be an enforcement by Lenders of any of its security agreements and that Lenders have the contractual right, and the Borrower hereby consents and irrevocably and unconditionally authorizes and directs Lenders, to continue to apply any and all deposits and proceeds of Collateral against the outstanding Obligations.
(e)Notwithstanding anything to the contrary contained herein, the provisions in this Section 7.3 relating to the Administrative Agent’s dominion over Borrower’s accounts, and particularly the required wire transfer to a Collection Account pursuant to clause (ii) of Section 7.3(a), shall only be triggered during the continuance of a Trigger Event. For greater certainty, all other provisions in this Section 7.3 shall apply in any event, including without limitation the obligation to make payments into the Blocked Accounts.
7.4Payments
All Obligations shall be payable to the Payment Accounts or such other place as the Administrative Agent may designate from time to time. Borrower shall make all payments to Lenders on the Obligations free and clear of, and without deduction or withholding for or on account of, any setoff, counterclaim, defence, duties, taxes, levies, imposts, fees, deductions, withholding, restrictions or conditions of any kind. If after receipt of any payment of, or proceeds of Collateral applied to the payment of, any of the Obligations, Lenders are required to surrender or return such payment or proceeds to any Person for any reason, then the Obligations intended to be satisfied by such payment or proceeds shall be reinstated and continue and this Agreement shall continue in full force and effect as if such payment or proceeds had not been received by Lenders. Borrower shall be liable to pay to Lenders, and does hereby indemnify and hold Lenders harmless for the amount of any payments or proceeds so surrendered or returned. This Section 7.4 shall remain effective notwithstanding any contrary action which may be taken by Lenders in reliance upon such payment or proceeds. This Section 7.4 shall survive the payment of the Obligations and the termination or non-renewal of this Agreement.
The Administrative Agent may, and shall upon the direction of Required Lenders, apply any and all payments in respect of any Obligation in accordance with clauses (i) through (v) below. Notwithstanding any provision herein to the contrary, all amounts collected or received by the Administrative Agent after any or all of the Obligations have been accelerated (so long as such acceleration has not been rescinded) and all proceeds received by the Administrative Agent as a result of the exercise of its remedies under the Financing Agreements after the occurrence and during the continuance of an Event of Default shall be applied as follows:
(i)first, to payment of all reasonable and documented out-of-pocket costs and expenses, including reasonable legal fees and disbursements, of the Administrative Agent and Lenders due and payable or reimbursable by the Borrower under this Agreement and the Financing Agreements;
(ii)second, to interest on, and thereafter any principal outstanding on, the Swingline Facility;
(iii)third, to payment of all fees due and payable to the Administrative Agent and Lenders hereunder (excluding fees in respect of any Ancillary Facilities);
(iv)fourth, in respect of proceeds from the Collateral, to amounts then due and payable on account of interest on, and thereafter any outstanding principal of, on a pari passu basis, the Revolving Loans and any Obligations under the Ancillary Facilities (up to an aggregate amount of the lesser of
(i) 35,000,000 and (ii) the Ancillary Facilities Notice Amount; and
(v)fifth, to payment of any other amounts then due and owing on account of other Obligations, including without limitation Obligations under the Ancillary Facilities in excess of $35,000,000.
In carrying out the foregoing,
(A)amounts received shall be applied to each category of Obligations in the numerical order provided for above until exhausted prior to the application to the next category; and
(B)each of the Lenders or other Persons entitled to payment shall receive an amount equal to its Pro Rata Share of amounts available to be applied pursuant to clauses (iii), (iv) and (v) (in each case, other than in respect of any Ancillary Facilities as provided in Section 2.10 above).
7.5Authorization to Make Loans
Lenders are authorized to make the Revolving Loans based upon facsimile or other instructions received from Borrower by anyone purporting to be a Senior Financial Officer of the Borrower or other authorized person; provided that, for greater certainty, such instructions are not required to be executed. All requests for Revolving Loans hereunder shall specify the Advance Date established (which day shall be a Business Day) and the amount of the requested Loan. Requests received after 12:00 noon Toronto time on any day shall be deemed to have been made as of the opening of business on the immediately following Business Day. All Revolving Loans under this Agreement shall be conclusively presumed to have been made to, and at the request of and for the benefit of, the Borrower when transferred for value to the credit of the Borrower’s designated account or otherwise disbursed or established in accordance with the instructions of the Borrower or in accordance with the terms and conditions of this Agreement.
7.6Use of Proceeds
Borrower shall use the proceeds of the initial Loans provided by Lenders to the Borrower hereunder only for: (a) repayment in full of the Hybrid Debt, (b) the refinancing of the Loans under the Original Loan Agreement, and (c) payment of costs, expenses and fees incurred in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Financing Agreements (collectively, items (a) to (c) inclusive, referred to herein as the “Refinancing”). All subsequent Loans provided by Lenders to the Borrower pursuant to the provisions hereof shall be used by the Borrower only for making Permitted Acquisitions, and general operating, working capital and other proper corporate purposes of each Operating Company not otherwise prohibited by the terms hereof.
Borrower shall not, directly or indirectly, use the proceeds from the credit facilities, or lend, contribute or otherwise make available such proceeds to any Subsidiary or Affiliate, joint venture partner or other individual or entity, (1) to fund any activities of or business with any individual or entity, or in any jurisdiction, that, at the time of such funding, is the subject of Sanctions, or in any other manner that will result in a violation by any individual or entity (including any individual or entity participating in the transaction, whether as Lender, the Administrative Agent, Swingline Lender, or otherwise) of Sanctions, or (2) for any purpose which would breach the United States Foreign Corrupt Practices Act of 1977, the UK Bribery Act 2010, and other similar anti-corruption legislation in other jurisdictions.
SECTION 8 - COLLATERAL REPORTING AND COVENANTS
8.1Collateral Reporting
Borrower shall provide the Administrative Agent with the following documents in a form satisfactory to the Administrative Agent: (a) on a monthly basis as required by the Administrative Agent, within thirty (30) days of each month end (increasing to a weekly basis within three (3) days of each week end during any period a Trigger Event is continuing), (i) a Borrowing Base Certificate, supported by a roll-forward of accounts receivable and inventory, with supporting details in electronic form, (ii) aged accounts receivable listing, (iii) perpetual inventory reports,
(iv) journals, copies of invoices, shipping documents and such other supporting documentation as deemed necessary by the Administrative Agent; and (b) on a monthly basis as required by the Administrative Agent, within thirty (30) days of month end, (i) a Borrowing Base Certificate as of month end with roll forward of accounts receivable and inventory from the prior month end,
(ii) aged accounts receivable listing, (iii) aged accounts payable listing, (iv) perpetual inventory reports, (v) trial balance, (vi) reconciliation of accounts receivable and inventory to the Borrowing Base Certificate, trial balance and financial statements, (vii) listing of accruals, (viii) journals, sales invoices, credit or debit memos, shipping documents, and such other reports as deemed necessary by the Administrative Agent.
If any of the Borrower’s records or reports of the Collateral are prepared or maintained by an accounting service, contractor, shipper or other agent, the Borrower hereby irrevocably authorizes such service, contractor, shipper or agent to deliver such records, reports, and related documents to the Administrative Agent and to follow the Administrative Agent’s instructions with respect to further services at any time that an Event of Default exists or has occurred and is continuing.
8.2Accounts Covenants
(a)Borrower shall notify the Administrative Agent promptly in writing of: (i) any material delay in Borrower’s performance of any of its obligations to any account debtor or the assertion of any claims, offsets, defenses or counterclaims by any account debtor, or any material disputes with account debtors, or any material settlement, adjustment or compromise thereof, (ii) all material adverse information relating to the financial condition of any account debtor of which Borrower is aware, and (iii) any event or circumstance which, to the Borrower’s knowledge, would cause the Administrative Agent, to consider any then existing Accounts as no longer constituting Eligible Accounts. No credit, discount, allowance or extension or agreement for any of the material Accounts of any Operating Company shall be granted to any account debtor without the Administrative Agent’s consent, except in the ordinary course of the Borrower’s business in accordance with past practices. So long as no Event of Default exists or has occurred and is continuing, the Borrower shall be entitled to settle, adjust or compromise any claim, offset, counterclaim or dispute with any Account debtor. At any time that an Event of Default exists or has occurred and is continuing, the Administrative Agent shall, at its option, have the exclusive right to settle, adjust or compromise any claim, offset, counterclaim or dispute with Account debtors or grant any credits, discounts or allowances.
(b)Without limiting the obligation of the Borrower to deliver any other information to the Administrative Agent, the Borrower shall promptly report to the Administrative Agent any return of Inventory by any one Account debtor if the inventory so returned in such case has a value in excess of One Million Canadian Dollars ($1,000,000). At any time that Inventory is returned, reclaimed or repossessed, the Account (or portion thereof) which arose from the sale of such returned, reclaimed or repossessed Inventory shall not be deemed an Eligible Account. In the event any Account debtor returns Inventory when an Event of Default exists or has occurred and is continuing, the Borrower shall, upon the Administrative Agent’s request,
(i) hold the returned Inventory in trust for the Administrative Agent, (ii) segregate all returned Inventory from all of its other property, (iii) dispose of the returned Inventory solely according to the Administrative Agent’s instructions, and (iv) not issue any credits, discounts or allowances with respect thereto without the Administrative Agent’s prior written consent.
(c)With respect to each Account: (i) the amounts shown on any invoice delivered to the Administrative Agent or schedule thereof delivered to the Administrative Agent shall be true and complete in all material respects, (ii) no payments (other than payments contemplated by clauses (iii) and (iv) below) shall be made thereon except payments delivered to the Administrative Agent pursuant to the terms of this Agreement, (iii) no credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any Account debtor except as reported to the Administrative Agent in accordance with this Agreement and except for credits, discounts, allowances or extensions made or given in the ordinary course of the Borrower’s business in accordance with past practices, (iv) there shall be no material setoffs, deductions, contras, defences, counterclaims or disputes existing or asserted with respect thereto except as reported to the Administrative Agent in accordance with the terms of this Agreement, (v) all documentation relating thereto will be legally sufficient in all material respects under Applicable Law to entitle an Operating Company to enforce payment of such Account in accordance with its terms except as enforceability may be limited by general principles of equity and bankruptcy, insolvency, reorganization or other laws affecting creditors' rights generally and by moratorium laws from time to time in effect.
(d)Each Operating Company shall deliver or cause to be delivered to the Administrative Agent, with appropriate endorsement and assignment, with full recourse to such Operating Company, all chattel paper that creates a security interest in Collateral valued in excess of $500,000 which such Operating Company now owns or may at any time acquire immediately upon the Borrower’s receipt thereof, except as the Administrative Agent, acting reasonably, may otherwise agree. For so long as no Event of Default exists, the Administrative Agent shall transfer all payments derived therefrom (including proceeds thereof) to any Blocked Account designated by the Borrower.
(e)The Administrative Agent may, at any time or times that an Event of Default exists or has occurred and is continuing, (i) notify any or all Account debtors that the Accounts have been assigned to the Administrative Agent, for and on behalf of
itself and the Lenders and that the Administrative Agent has a security interest or lien therein and the Administrative Agent may direct any or all Accounts debtors to make payment of Accounts directly to the Administrative Agent or Lenders,
(ii) extend the time of payment of, compromise, settle or adjust for cash, credit, return of merchandise or otherwise, and upon any terms or conditions, any and all Accounts or other obligations included in the Collateral and thereby discharge or release the Account debtor or any other party or parties in any way liable for payment thereof without affecting any of the Obligations, (iii) demand, collect or enforce payment of any Accounts or such other obligations, but without any duty to do so, and Lenders shall not be liable for its failure to collect or enforce the payment thereof nor for the negligence of its agents with respect thereto, and
(iv) take whatever other action the Administrative Agent may deem necessary or desirable for the protection of Lenders’ interests. At any time that an Event of Default exists or has occurred and is continuing, at the Administrative Agent’s request, all invoices and statements sent to any Account debtor shall state that the Accounts and such other obligations have been assigned to the Administrative Agent, for and on behalf of itself and Lenders, and are payable directly and only to the Administrative Agent or Lenders and the Borrower shall deliver, or cause to be delivered, to the Administrative Agent such originals of documents evidencing the sale and delivery of goods or the performance of services giving rise to any Accounts as the Administrative Agent may reasonably require.
8.3Inventory Covenants
With respect to the Inventory: (a) each Operating Company shall at all times maintain inventory records consistent with industry norms, keeping correct and accurate records itemizing and describing the kind, type, quality and quantity of Inventory, such Operating Company’s cost therefor and daily withdrawals therefrom and additions thereto; (b) neither Operating Company shall store any material Inventory other than at the locations set out in the Information Certificate, without providing written notice to the Administrative Agent, except for Inventory moved from one location set forth in the Information Certificate or permitted herein to another such location;
(c) each Operating Company shall, upon reasonable request from time to time by the Administrative Agent, deliver or cause to be delivered to the Administrative Agent written reports or appraisals as to the Inventory in form, scope and methodology acceptable to the Administrative Agent, acting reasonably, and by an appraiser acceptable to the Administrative Agent, acting reasonably, addressed to the Administrative Agent or upon which the Administrative Agent and the Lenders are expressly permitted to rely; provided that: (i) any such appraisal requested while there exists an Event of Default shall be at Borrower’s expense; (ii) if no Event of Default exists at the time of an audit, neither Operating Company shall be responsible for the cost of more than one (increasing to two during any period a Trigger Event is continuing) appraisal in any twelve
(12) month period (provided that Lender waives any appraisal costs should Excess Availability remain in excess of $50,000,000 as at the Borrower’s month-end borrowing base report for each of the prior twelve (12) months); and (iii) additional appraisals may be required from time to time, no more frequently than semi-annually upon approval of all Lenders acting reasonably and upon reasonable prior notice to the Borrower, which shall be, absent the continuance of an Event of Default, at Lenders’ expense; (d) Borrower shall produce, use, store and maintain the Inventory, with reasonable care and caution and in accordance with applicable standards of any insurance and
in material conformity with Applicable Law; (e) each Operating Company assumes all responsibility and liability arising from or relating to such Operating Company’s production, use, sale or other disposition of the Inventory; (f) neither Operating Company shall sell Inventory to any customer on approval, or any other basis which may obligate such Operating Company to repurchase such Inventory (other than in accordance with such Operating Company’s ordinary course return policy and general market practice); (g) each Operating Company shall keep the Inventory in good and marketable condition; and (h) each Operating Company shall not, without prior written notice to the Administrative Agent, acquire or accept any Inventory on consignment or approval.
8.4Power of Attorney
Each Operating Company hereby irrevocably designates and appoints the Administrative Agent (and any Receiver or Lender or nominee of a Lender designated by the Administrative Agent) as such Operating Company’s true and lawful attorney-in-fact, and authorizes the Administrative Agent, in such Operating Company’s, the Administrative Agent’s, Receiver’s, Lender’s or Lender’s nominee’s name, to, (a) at any time an Event of Default has occurred and is continuing
(i) demand payment on Accounts or other proceeds of Inventory or other Collateral, (ii) enforce payment of Accounts by legal proceedings or otherwise, (iii) exercise all of such Operating Company’s rights and remedies to collect any Account or other Collateral, (iv) sell or assign any Account upon such terms, for such amount and at such time or times as the Administrative Agent deems advisable, (v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and release any Account, (vii) prepare, file and sign in such Operating Company’s name on any proof of claim in bankruptcy or other similar document against an account debtor, (viii) notify the post office authorities to change the address for delivery of such Operating Company’s mail to an address designated by the Administrative Agent, and open and dispose of all mail addressed to such Operating Company, (ix) sign such Operating Company’s name on any verification of Accounts and notices thereof to account debtors, and (x) do all acts and things which are necessary, in the Administrative Agent’s determination, to fulfil such Operating Company’s obligations under this Agreement and the other Financing Agreements and (b) at any time to take control in any manner of any item of payment or proceeds thereof, (i) have access to any lockbox or postal box into which such Operating Company’s mail is deposited, (ii) endorse such Operating Company’s name upon any items of payment or proceeds thereof and deposit the same in the Administrative Agent’s account for application to the Obligations, and (iii) endorse in such Operating Company’s name upon any chattel paper that creates a security interest in Collateral and any other document, instrument, invoice, or similar document or agreement relating to any Account or any goods pertaining thereto or any other Collateral. Each Operating Company hereby irrevocably designates and appoints the Administrative Agent (and any Receiver or Lender or nominee of a Lender designated by the Administrative Agent) as such Operating Company’s true and lawful attorney- in-fact, and authorizes the Administrative Agent, in such Operating Company’s, the Administrative Agent’s, Receiver’s, Lender’s or Lender’s nominee’s name, to, at any time, execute in such Operating Company’s name and file any PPSA or other financing statements or amendments thereto. Each Operating Company hereby releases the Administrative Agent, Lenders and their officers, employees and designees from any liabilities arising from any act or acts under this power of attorney and in furtherance thereof, whether of omission or commission, except as a result of the Administrative Agent or any Lender’s own breach of any Financing
Agreement, gross negligence or wilful misconduct as determined pursuant to a final non- appealable order of a court of competent jurisdiction.
8.5Right to Cure
The Administrative Agent may, at its option at any time an Event of Default exists, (a) cure any default by the Borrower under any agreement with a third party or pay or bond on appeal any judgment entered against an Operating Company, (b) discharge taxes, liens, security interests or other encumbrances at any time levied on or existing with respect to the Collateral and (c) pay any amount, incur any expense or perform any act which, in the Administrative Agent’s judgment, acting reasonably, is necessary or appropriate to preserve, protect, insure or maintain the Collateral and the rights of Lenders with respect thereto; provided that the Administrative Agent will use reasonable best efforts to notify Borrower prior to taking any such action, unless the Administrative Agent, acting reasonably, determines that any of its material rights under any Financing Agreement or any material Collateral is in immediate jeopardy. Lenders may add any reasonable amounts so expended to the Obligations and charge Borrower’s account therefor, such amounts to be repayable by the Borrower on demand. The Administrative Agent shall be under no obligation to effect such cure, payment or bonding and shall not, by doing so, be deemed to have assumed any obligation or liability of an Operating Company. Any payment made or other action taken by the Administrative Agent under this Section shall be without prejudice to any right to assert an Event of Default hereunder and to proceed accordingly.
8.6Verification of Collateral
(a)The Administrative Agent, or any Lender or Receiver authorized by the Administrative Agent, shall have the right, from time to time, so long as there are any outstanding Obligations, to verify the existence, state and value of the Accounts and Inventory and the books and records, systems and business in general of the Borrower, in any manner the Administrative Agent may, acting reasonably, consider appropriate, including, directly contacting Canada Revenue Agency and, any other applicable governmental officials, licensing boards, agencies or similar regulatory bodies, the customers, suppliers, insurers and other secured creditors of each Operating Company, to conduct reviews of such Operating Company, its businesses, books and records and systems of such Operating Company and the state and value of the Accounts and Inventory, and to conduct Inventory counts and appraisals, and each Operating Company agrees to furnish all reasonable assistance and information and to perform all such reasonable acts, and do all such reasonable things, as the Administrative Agent may reasonably require in connection therewith and for such purpose grant, or cause others to grant, to the Administrative Agent or its authorized agents, access to all places where Accounts, the books and records, systems or Inventory may be located and to all premises occupied, or where business may otherwise be conducted, by each Operating Company. These provisions shall apply notwithstanding any provisional winding up, liquidation, monitoring, receivership or bankruptcy of an Operating Company or any threatened or pending winding up, liquidation, monitoring, receivership or bankruptcy of an Operating Company.
(b)The Borrower shall, upon request from time to time by the Administrative Agent, deliver or cause to be delivered to the Administrative Agent written reports or appraisals of the Eligible Real Estate Collateral and/or the Eligible Machinery and Equipment Collateral in form, scope and methodology acceptable to the Administrative Agent, acting reasonably, and by an appraiser acceptable to the Administrative Agent, acting reasonably, addressed to the Administrative Agent provided that:
(i)Any such appraisal requested while there exists an Event of Default shall be at the Borrower’s expense;
(ii)If no Event of Default exists, the Borrower shall not be responsible for the cost of such appraisal unless the Administrative Agent in good faith has a reasonable belief that a significant reduction of the appraised value of such assets has occurred.
8.7Discharge, Release and Subordination of Security
Subject to the following sentence, the Obligors, or any of them, shall not be discharged from the security granted to the Administrative Agent pursuant hereto or the other Financing Agreements (the “Security”), or any Financing Agreement or any part thereof except pursuant to a written release and discharge or other document to like effect signed by the Administrative Agent. If an Obligor transfers an asset or assets in any manner not prohibited by this Agreement or the other Financing Agreements, such Obligor shall be entitled to obtain a release and discharge of the Security with respect to such asset or assets. If an Obligor creates or permits to subsist a lien referred to in paragraphs (e), (f) or (g) of the definition of Permitted Lien, such Obligor shall be entitled to obtain a subordination of the Lenders’ liens and security interests to the property subject to such Permitted Lien.
Following all of the outstanding Obligations having been permanently repaid, paid, satisfied and discharged in full and the Revolving Loans hereunder having been fully, permanently and irrevocably cancelled, the interest of the Administrative Agent and the Lenders in the Security shall be released and discharged.
The Administrative Agent, at the cost and expense of the Borrower, shall from time to time do, execute and deliver, or cause to be done, executed and delivered, all such agreements, instruments, certificates, financing statements, notices and other documents and all acts, matters and things as may be reasonably requested by the Borrower to give effect to, establish, evidence or record any release, discharge and subordination, and shall provide such release, discharge and subordination to which the Borrower is entitled under this Section 8.7, within a reasonable period of time thereafter.
SECTION 9 - REPRESENTATIONS AND WARRANTIES
9.1Representations and Warranties
To induce Lenders to enter into this Agreement, the Borrower and each Obligor (but only to the extent applicable to an Obligor) hereby makes the representations and warranties described in
Exhibit B (which shall survive the execution and delivery of this Agreement), the truth and accuracy of which are a continuing condition of the making of Loans by Lenders to the Borrower.
9.2Survival of Warranties; Cumulative
All representations and warranties contained in this Agreement or any of the other Financing Agreements shall survive the execution and delivery of this Agreement and, to the extent applicable on such date, shall be deemed to have been made again to Lenders on the date of each additional borrowing or other credit accommodation hereunder and shall be conclusively presumed to have been relied on by Lenders regardless of any investigation made or information possessed by Lenders. The representations and warranties set forth herein shall be cumulative and in addition to any other representations or warranties which Borrower or the other Obligors shall now or hereafter give, or cause to be given, to Lenders. Notwithstanding the foregoing, the Borrower shall be permitted to update Schedules 10.8 to 10.17 and the Information Certificate at any time by submitting to the Administrative Agent an Officer’s Certificate attaching such replacement schedules and the Information Certificate.
SECTION 10 - AFFIRMATIVE AND NEGATIVE COVENANTS
10.1Maintenance of Existence
Each Obligor shall at all times preserve, renew and keep in full, force and effect its corporate existence and rights and franchises with respect thereto and maintain in full force and effect all permits, licenses, trademarks, tradenames, approvals, authorizations, leases and contracts necessary to carry on the business as presently or proposed to be conducted, except to the extent failure to so comply or failure to do so does not have and would not reasonably be expected to result in a Material Adverse Change. Except for the change of name of the Borrower described in the recitals to this Agreement, the Borrower shall give the Administrative Agent thirty (30) days prior written notice of any proposed change in any Obligors’ corporate name, which notice shall set forth such new name and the Borrower shall deliver, or cause to be delivered, to the Administrative Agent, a certified copy of the Articles of Amendment of such Obligor providing for such name change promptly following its filing.
10.2New Collateral Locations
Each Operating Company may open any new location within Canada, the United States and the United Kingdom and the Inventory at such new location will be included in the Revolving Loans Borrowing Base (subject to eligibility requirements contained herein) provided Borrower (a) gives the Administrative Agent prompt notice of the opening or intended opening of any such new location, (b) executes and delivers, or causes to be executed and delivered, to the Administrative Agent, any such agreements, documents, and instruments as the Administrative Agent may reasonably determine to be necessary or desirable to protect its interests in the Collateral at such location, including PPSA and other financing statements and such other evidence as the Administrative Agent may require for the perfection of the Administrative Agent’s first priority security interests and liens (subject to Permitted Liens) where required by the Administrative Agent and (c) provides the Administrative Agent with an updated Information Certificate including such new location.
10.3Compliance with Laws, Regulations, Etc.
(a)The Borrower shall, and shall cause each Obligor to, at all times, comply in all material respects with all Applicable Law except for any matter that that the Borrower or the respective Obligor is contesting by appropriate proceedings diligently pursued or where such non-compliance could not reasonably be expected to result in a Material Adverse Change.
(b)Each Operating Company shall establish and maintain, at its expense, a system to assure and monitor its continued compliance with all material Environmental Laws in all of its operations, which system shall include annual reviews of such compliance by employees or agents of such Operating Company who are familiar with the requirements of the Environmental Laws. Copies of all environmental surveys, audits, assessments, feasibility studies and results of remedial investigations shall be promptly furnished, or caused to be furnished, by each Operating Company to the Administrative Agent upon the request of the Administrative Agent. Each Operating Company shall take prompt and appropriate action to respond to any material non-compliance with any of the Environmental Laws.
(c)Each Operating Company shall give written notice to the Administrative Agent promptly upon the Borrower’s receipt of any notice of, or such Operating Company’s otherwise obtaining knowledge of, (i) the occurrence of any reportable event involving the release, spill or discharge, threatened or actual, of any Hazardous Material at, on, under or from any real property owned, leased or operated by an Operating Company, or (ii) any investigation, proceeding, complaint, order, directive, claims, citation or notice with respect to: (A) any material non-compliance with or violation of any Environmental Law by such Operating Company or (B) the reportable release, spill or discharge, threatened or actual, of any Hazardous Material at, on, under or from any real property owned, leased or operated by an Operating Company, or (C) the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials at, on, under or from any real property owned, leased or operated by an Operating Company, or (D) any other environmental, health or safety matter; in each case of (A), (B), (C) and (D), which could reasonably be expected to result in a Material Adverse Change.
(d)Without limiting the generality of the foregoing, whenever the Administrative Agent determines, acting reasonably, that there is material non-compliance, or any condition which requires any action by or on behalf of an Operating Company in order to avoid any material non-compliance, with any Environmental Law, such Operating Company shall, at the Administrative Agent’s request and such Operating Company’s expense: (i) cause an independent environmental engineer acceptable to the Administrative Agent to conduct such tests of the site where such Operating Company’s non-compliance or alleged non-compliance with such Environmental Laws has occurred as to such non-compliance and prepare and deliver to the Administrative Agent a report as to such non-compliance setting forth
the results of such tests, a proposed plan for responding to any environmental problems described therein, and an estimate of the costs thereof and (ii) provide to the Administrative Agent a supplemental report of such engineer whenever the scope of such non-compliance, or such Operating Company’s response thereto or the estimated costs thereof, shall change in any material adverse respect.
10.4Payment of Taxes and Claims
The Borrower shall, and shall cause each Obligor to, duly pay and discharge all taxes, assessments, contributions and governmental charges upon or against it or its properties or assets, except to the extent failure to do so could not reasonably be expected to result in a Material Adverse Change and except for taxes the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to the Borrower or such Obligor and with respect to which adequate reserves have been set aside on its books.
10.5Insurance
The Borrower shall, and shall cause each Obligor to, at all times, maintain with financially sound and reputable insurers insurance with respect to the Collateral against loss or damage and all other insurance of the kinds and in the amounts customarily insured against or carried by corporations of established reputation engaged in the same or similar businesses and similarly situated. Said policies of insurance shall be satisfactory to the Administrative Agent, acting reasonably, as to form, amount and insurer. The Borrower shall furnish certificates to the Administrative Agent as the Administrative Agent shall reasonably require as proof of such insurance, and, if the Borrower fails to do so, the Administrative Agent is authorized, but not required, to obtain such insurance at the expense of the Borrower. All policies shall provide for at least thirty (30) days (or such lesser period as the insurer is only prepared to agree to) prior written notice to the Administrative Agent of any cancellation or reduction of coverage and that the Administrative Agent may act as attorney for the Borrower in obtaining, and at any time an Event of Default exists or has occurred and is continuing, adjusting, settling, amending and cancelling such insurance. The Borrower shall cause the Administrative Agent to be named as a loss payee in respect of any insurance proceeds otherwise payable to an Operating Company and as an additional insured (but without any liability for any premiums) in relation to third party liability under such insurance policies and the Borrower shall obtain non-contributory lender’s loss payable endorsements or its equivalent in respect of any insurance proceeds to all insurance policies in form and substance satisfactory to the Administrative Agent, acting reasonably. Such lender’s loss payable endorsements or its equivalent shall specify that the proceeds of such insurance otherwise payable to an Operating Company shall be payable to the Administrative Agent as its interests may appear and further specify that the Administrative Agent shall be paid regardless of any act or omission by the Borrower or any of their Affiliates. If no Event of Default exists, the Administrative Agent shall release any insurance proceeds received by it to the Borrower; provided that, where the insurance proceeds relates to any material damage to any of the Eligible Machinery and Equipment or Eligible Real Estate Collateral, such proceeds must be used to repair such damage or re-invest in similar assets, otherwise such proceeds, to the extent of the amount of the Loan advanced based on such property, must be used to repay the Loan. If an Event of Default exists, at its option, the Administrative Agent may apply any insurance proceeds received by the Administrative Agent at any time to the cost of repairs or replacement of Collateral and/or to payment of the Obligations,
whether or not then due, in any order and in such manner as the Required Lenders may determine or, if no Obligations are then due and payable, hold such proceeds as cash collateral for the Obligations to be applied in payment thereof as and when they become due and payable.
Without limiting the foregoing, with respect to any of the Eligible Machinery and Equipment or Eligible Real Estate Collateral that is located in an area identified by the Federal Emergency Management Agency (or any successor agency) as a “special flood hazard area” with respect to which flood insurance has been made available under Applicable Laws relating to flood insurance, the applicable Obligor (A) has obtained and will maintain, with financially sound and reputable insurance companies (except to the extent that any insurance company insuring such Eligible Machinery and Equipment or Eligible Real Estate Collateral owned by such Obligor ceases to be financially sound and reputable, in which case, such Obligor shall promptly replace such insurance company with a financially sound and reputable insurance company), such flood insurance in such reasonable total amount as is sufficient to comply with all applicable rules and regulations promulgated pursuant to the Applicable Laws relating to flood insurance and (B) promptly upon request of the Administrative Agent or any Lender, will deliver to the Administrative Agent or such Lender, as applicable, evidence of such compliance in form and substance reasonably acceptable to the Administrative Agent, including, without limitation, evidence of annual renewals of such insurance.
10.6Financial Statements and Other Information
(a)Each Operating Company shall keep proper books and records in which true and complete entries shall be made of all dealings or transactions of or in relation to the Collateral and the business of such Operating Company and its Subsidiaries (if any) in accordance with GAAP and each Operating Company shall furnish or cause to be furnished to the Administrative Agent:
(i)within thirty (30) days after the end of each month, a report summarizing current Priority Payables Reserve amounts;
(ii)within thirty (30) days after the end of each month, monthly unaudited consolidated financial statements for each Operating Company and its Subsidiaries (including in each case balance sheets, statements of income and loss, statements of cash flow and statements of shareholders’ equity), all in reasonable detail, fairly presenting the financial position and the results of the operations of each Operating Company and its Subsidiaries as of the end of and through such month; and
(iii)within one hundred and twenty (120) days after the end of each fiscal year the audited financial statements of each Operating Company, on a consolidated basis (together with the consolidating statements used in the preparation of such statements), including in each case balance sheets, statements of income and loss, statements of changes in financial position and statements of shareholders’ equity, and the accompanying notes thereto, all in accordance with GAAP, fairly presenting the financial position and the results of operations as of the end of and for such fiscal year, together
with the management discussion and analysis and the unqualified opinion of independent chartered accountants that such financial statements have been prepared in accordance with GAAP, and present fairly the results of operations and financial condition as of the end of and for the fiscal year then ended.
(b)The Borrower shall promptly notify the Administrative Agent in writing of the details of (i) any loss, damage, investigation, action, suit, proceeding or claim relating to the Collateral or any other property which is security for the Obligations and which could reasonably be expected to result in a Material Adverse Change, and (ii) the occurrence of any Default or Event of Default.
(c)The Administrative Agent is, subject to Section 14.9, hereby authorized to deliver a copy of any financial statement or any other information relating to the business of an Operating Company to any participant or assignee or prospective participant or assignee, or, if required by Applicable Law, to any court or other government agency. Each Operating Company hereby irrevocably authorizes and directs all accountants or auditors to deliver to the Administrative Agent, at Borrower’s expense, copies of the financial statements of each Operating Company and any audit related reports prepared by such accountants or auditors on behalf of each Operating Company and to disclose to the Administrative Agent such audit related reports; provided that, for greater certainty, such authorization shall not relate to reports or letters which relate to business consulting services unrelated to audit services. Any documents, schedules, invoices or other papers delivered to the Administrative Agent may be destroyed or otherwise disposed of by the Administrative Agent one (1) year after the same are delivered to the Administrative Agent, except as otherwise designated by the Borrower to the Administrative Agent in writing.
(d)The Borrower shall within thirty (30) days after the end of each month provide to the Administrative Agent a compliance certificate in the form of Schedule 10.6, with respect to (i) the financial covenant calculated in accordance with Section 10.13 hereof, (ii) if applicable, material compliance with all Applicable Law in connection with contributions to be made in connection with the Pension Plans, and (iii) confirmation that each Operating Company has paid in full all rents and other amounts due and payable under all leases of premises where material Inventory or Eligible Machinery and Equipment is located, including without limitation any charges for warehousing or storing Inventory, and the details of any material default under any lease of any such leases.
(e)The Borrower shall furnish to the Administrative Agent, not more than sixty (60) days after the commencement of each fiscal year, each Operating Company’s annual operating budget for the then following fiscal year, prepared on a monthly basis and including a detailed Capital Expenditures budget, which operating budget shall be approved by the Borrower’s Board of Directors and shall include, without limitation, balance sheets, income statements and cash flows which include detail
on a monthly basis reflecting Capital Expenditures, acquisitions and financing required in connection therewith.
(f)The Borrower shall promptly notify the Administrative Agent of any default under any lease of any of the Obligors’ leased premises where material Inventory or Eligible Machinery and Equipment is located;
(g)The Borrower shall promptly provide the Administrative Agent with such other information and with documentation required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations (including, without limitation, the Patriot Act), as from time to time may be reasonably requested by the Administrative Agent.
10.7Sale of Assets, Consolidation, Amalgamation, Dissolution, Etc.
Without the prior written consent of the Required Lenders, neither Operating Company shall, directly or indirectly, (a) amalgamate with any other Person or permit any other Person to amalgamate with it, or (b) except for Permitted Dispositions, sell, assign, lease, transfer, abandon or otherwise dispose of any shares or indebtedness to any other Person or any of its assets to any other Person, (c) form or acquire any Subsidiary unless such Subsidiary becomes an Obligor if at any time it has assets in excess of $5,000,000, or (d) wind up, liquidate or dissolve, or (e) agree to do any of the foregoing.
10.8Encumbrances
Without the prior written consent of the Required Lenders, neither Operating Company shall create, incur, assume or suffer to exist any security interest, mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on any of its assets or properties, including the Collateral, except Permitted Liens.
10.9Indebtedness
(a)Without the prior written consent of the Required Lenders, neither Operating Company shall incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any indebtedness for borrowed money, except Permitted Debt; provided, that, as to such Permitted Debt in excess of $5,000,000 (or Equivalent Amount in foreign currency), (i) neither Operating Company shall directly or indirectly, (A) amend, modify, alter or change any of its terms or any agreement, document or instrument related thereto if such amendment, modification, alteration or change is materially disadvantageous to such Operating Company, or (B) redeem, retire, defease, purchase or otherwise acquire the obligations arising pursuant thereto, or set aside or otherwise deposit or invest any sums for such purpose, except in accordance with the terms and conditions thereof or permitted thereby, (ii) Borrower shall furnish to the Administrative Agent all notices of default or demands for accelerated payment in connection therewith either received by an Operating Company or on its behalf, promptly after the receipt thereof, or sent by an Operating Company or on its behalf, concurrently with the sending thereof, as the case may be.
(b)Consent to the Revolving Parent Loans and the Permitted Loan Repayments.
(i)Notwithstanding anything to the contrary contained in this Agreement and subject to subsection (ii) below, the Administrative Agent, for and on behalf of itself and the other Lenders, hereby consents to the Borrower incurring additional indebtedness in connection with the Revolving Parent Loans and to the repayment of the Revolving Parent Loans by the Borrower, to a maximum of CAD $60,000,000 in the aggregate (the “Permitted Loan Repayments”).
(ii)The Borrower covenants and agrees that it will not make any Permitted Loan Repayments unless: (a) Excess Availability after giving effect to such Permitted Loan Repayment is equal to or greater than 10% of the Maximum Revolver Credit; and (b) no Event of Default exists at the time such Permitted Loan Repayment is made and no Event of Default will exist as a result of the making of such Permitted Loan Repayment.
Notwithstanding anything set out herein and for greater certainty:
(A)any amounts received by the Borrower from the Parent or a successor and assign of the Parent or a wholly owned Affiliate of the Parent in connection with any Revolving Parent Loan are to be excluded from the calculation of the Fixed Charge Coverage Ratio; and
(B)any amounts paid by the Borrower to the Parent or a successor and assign of the Parent or a wholly owned Affiliate of the Parent in connection with any Permitted Loan Repayment shall be excluded from Fixed Charges in the calculation of the Fixed Charge Coverage Ratio.
Notwithstanding the foregoing, each Operating Company may make:
(c)Interest and principal payments on account of the Refinancing;
(d)interest payments on account of indebtedness subject to subordination agreements satisfactory to the Administrative Agent provided that no Event of Default exists or would arise as a result of such payment, and the Borrower will be in compliance with the financial covenant calculated in accordance with Section 10.13 hereof after giving effect to such payment; provided that any such interest payments, less any Taxes required to be paid on such interest payments, shall be promptly re-invested into an Operating Company; and
(e)principal payments on account of indebtedness subject to subordination agreements satisfactory to the Administrative Agent with the prior written consent of the Required Lenders.
For the purposes of determining whether a particular payment may be permitted in accordance with this Section 10.9, a FCCR Test Period (as defined in Section 10.13) shall be deemed to be in effect at all times.
10.10Loans, Investments, Guarantees, Etc.
Without the prior written consent of the Required Lenders, neither Operating Company shall, directly or indirectly, make any loans or advance money or property to any Person, or invest in (by capital contribution, dividend or otherwise) or purchase or repurchase the shares (other than as may be permitted in accordance with Section 10.11) or indebtedness or all or a substantial part of the assets or property of any Person, or guarantee, assume, endorse, or otherwise become responsible for (directly or indirectly) the indebtedness, performance, obligations or dividends of any Person or agree to do any of the foregoing, except: (a) the endorsement of instruments for collection or deposit in the ordinary course of business; (b) investments in: (i) short-term direct obligations of the Government of Canada, the United States of America or any political subdivision of either thereof or any instrumentality of any of the foregoing, (ii) negotiable certificates of deposit issued by any Lender or any bank whose long-term debt is Investment Grade or is otherwise satisfactory to the Administrative Agent, payable to the order of an Operating Company or to bearer and delivered to the Administrative Agent or the security entitlements to which are credited to an account control agreement to which the Administrative Agent is party, and
(iii) commercial paper rated A1 or P1; provided, that, as to any of the foregoing, unless waived in writing by the Administrative Agent, an Operating Company shall take such actions as are deemed necessary by the Administrative Agent, acting reasonably, to perfect the security interest of Lenders in such investments, (c) the loans, advances, guarantees and other financial assistance set forth on Schedule 10.10 hereto, and (d) marketable securities; and provided further, that, solely with respect to the loans, advances, guarantees and other financial assistance set forth on Schedule 10.10 hereto, (i) Borrower shall not, directly or indirectly, (A) materially amend, modify, alter or change the terms of such investments, loans, advances or guarantees or any agreement, document or instrument related thereto, or (B) as to such guarantees, redeem, retire, defease, purchase or otherwise acquire the obligations arising pursuant to such guarantees, or set aside or otherwise deposit or invest any sums for such purpose, and (ii) Borrower shall furnish to the Administrative Agent all notices or demands in connection with such loans, advances or guarantees or other indebtedness subject to such guarantees either received by the Borrower or on its behalf, promptly after the receipt thereof, or sent by the Borrower or on its behalf, concurrently with the sending thereof, as the case may be.
10.11Dividends and Redemptions
Without the prior written consent of the Required Lenders, neither Operating Company shall, directly or indirectly, declare or pay any dividends on account of any shares of it now or hereafter outstanding, or set aside or otherwise deposit or invest any sums for such purpose, or redeem, retire, defease, purchase or otherwise acquire any of its shares of any class (or set aside or otherwise deposit or invest any sums for such purpose) for any consideration other than common shares or apply or set apart any sum, or make any other distribution (by reduction of capital or otherwise) in respect of any such shares or agree to do any of the foregoing.
Notwithstanding the foregoing, an Operating Company may make dividend payments provided that: (a) no Event of Default has occurred or would arise as a result of such payment, the Borrower will be in compliance with the financial covenant calculated in accordance with Section 10.13 hereof after giving effect to such payment and Excess Availability after giving effect to such payment exceeds $20,000,000, or (b) such dividends, less any Taxes required to be paid on such dividends, are to be immediately re-invested in the form of shareholder loans to an Operating Company postponed to the Administrative Agent on terms satisfactory to the Administrative Agent.
For the purposes of determining whether a particular payment may be permitted in accordance with this Section 10.11 a FCCR Test Period (as defined in Section 10.13) shall be deemed to be in effect at all times.
10.12Transactions with Affiliates
Without the prior written consent of the Required Lenders, neither Operating Company shall, directly or indirectly, (a) purchase, acquire or lease any property from, or sell, transfer or lease any property to, any senior officer, director or other person affiliated with an Operating Company, that is not an Obligor, except in the ordinary course of and pursuant to the reasonable requirements of an Operating Company’s business and upon fair and reasonable terms no less favorable to an Operating Company than an Operating Company would obtain in a comparable arm’s length transaction with an unaffiliated person or (b) make any payments of management, consulting or other fees for management or similar services, or of any indebtedness owing to any officer, employee, shareholder, director or other person affiliated with an Operating Company, that is not an Obligor, except (x) reasonable compensation to officers, employees and directors or such other persons for services rendered to an Operating Company in the ordinary course of business,
(y) services fees for legal, tax and accounting services or (z) as otherwise may be permitted hereunder.
Notwithstanding the foregoing, an Operating Company may make any payments contemplated in
(b) above provided that: (a) no Event of Default exists or would exist as a result of such payment, the Borrower will be in compliance with the financial covenant calculated in accordance with Section 10.13 hereof after giving effect to such payment and Excess Availability after giving effect to such payment exceeds $20,000,000, or (b) such payments, less any Taxes required to be paid on such payments, are to be immediately re-invested in the form of shareholder loans to an Operating Company postponed to the Administrative Agent on terms satisfactory to the Administrative Agent.
For the purposes of determining whether a particular payment may be permitted in accordance with this Section 10.12, a FCCR Test Period (as defined in Section 10.13) shall be deemed to be in effect at all times.
10.13Fixed Charge Coverage Ratio
Solely during any FCCR Test Period, the Borrower shall maintain a Fixed Charge Coverage Ratio as calculated on a twelve-month rolling consolidated basis, at the end of each month of not less than 1.15:1; provided that for the purposes hereof, “FCCR Test Period” shall mean a period
commencing on the date that Excess Availability is less than $30,000,000 (the “Covenant Trigger Amount”) at any time, and subsequently terminating on the date that Excess Availability is equal to or greater than the Covenant Trigger Amount for a period of not less than forty five (45) consecutive days.
10.14[Intentionally Deleted]
10.15[Intentionally Deleted]
10.16Intellectual Property
In the event an Operating Company obtains or applies for any material intellectual property rights or obtains any material licenses with respect thereto, the Borrower shall promptly notify the Administrative Agent thereof and shall provide to the Administrative Agent copies of all written materials including, but not limited to, applications and licenses with respect to such intellectual property rights. At the Administrative Agent’s request, an Operating Company shall promptly execute and deliver to the Administrative Agent an intellectual property security agreement granting to the Administrative Agent a perfected security interest in such intellectual property rights in form and substance satisfactory to the Administrative Agent, acting reasonably.
10.17Additional Bank Accounts
Neither Operating Company shall, directly or indirectly, open, establish or maintain any deposit account, investment account or any other account with any bank or other financial institution, other than the Blocked Accounts and the accounts set forth in Schedule 10.17 hereto, except: (a) any new or additional Blocked Accounts; (b) any other such new or additional accounts which contain any Collateral or proceeds thereof, with the prior written consent of the Administrative Agent, such consent not to be unreasonably withheld, and subject to such conditions thereto as the Administrative Agent may reasonably establish, and (c) as to any accounts used by an Operating Company solely to make payments of payroll, taxes or other obligations to third parties, written notice of the existence of which accounts is made to the Administrative Agent.
10.18Applications under the Companies’ Creditors Arrangement Act
Borrower acknowledges that its business and financial relationships with Lenders are unique from its relationship with any other of its creditors. Borrower agrees that no Obligor shall file any plan of arrangement under the CCAA (“CCAA Plan”) which provides for, or would permit directly or indirectly, any Lender to be classified with any other creditor of any Obligor for purposes of such CCAA Plan or otherwise.
10.19Operation of Pension Plans
(a)Borrower shall administer the Pension Plans in material compliance with the requirements of the applicable pension plan texts, funding agreements, the Income Tax Act (Canada), all applicable provincial pension benefits legislation and all other Applicable Law.
(b)If requested by the Administrative Agent, the Borrower shall deliver to the Administrative Agent an undertaking of any funding agent for any of the Pension Plans stating that the funding agent will promptly notify the Administrative Agent of the Borrower’s failure to make any required contribution to the applicable Pension Plan.
(c)Borrower shall not accept payment of any amount from any of the Pension Plans without the prior written consent of the Required Lenders, acting reasonably.
(d)Without the prior written consent of the Required Lenders, acting reasonably, the Borrower shall not terminate, or cause to be terminated, any of the Pension Plans.
(e)Borrower shall promptly provide the Administrative Agent with any documentation relating to any of the Pension Plans as the Administrative Agent may reasonably request. Borrower shall notify the Administrative Agent within 30 days of (i) a material increase in the liabilities of any of the Pension Plans, (ii) the establishment of a new registered pension plan, (iii) commencing payment of contributions to a Pension Plan to which Borrower had not previously been contributing.
10.20Costs and Expenses
Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent, and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Financing Agreements or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), and (ii) all out-of-pocket expenses incurred by the Administrative Agent or any Lender, including the fees, charges and disbursements of counsel, in connection with the enforcement or protection of its rights in connection with this Agreement and the other Financing Agreements, including its rights under this Section, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect thereof.
Without limiting the foregoing, the Borrower shall pay all costs, expenses, filing fees incurred and taxes paid or payable for which Borrower is responsible in connection with the preparation, negotiation, execution, delivery, recording, administration, collection, liquidation, enforcement and defense of the Obligations, Lenders’ rights in the Collateral, this Agreement, the other Financing Agreements and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including: (a) all costs and expenses paid or incurred of filing or recording (including PPSA financing statement and other similar filing and recording fees and taxes, documentary taxes, intangibles taxes and mortgage recording taxes and fees, if applicable); (b) all insurance premiums, appraisal fees and search fees paid or incurred;
(c) costs and expenses paid or incurred in respect of remitting loan proceeds, collecting cheques and other items of payment, and establishing and maintaining the Blocked Accounts, if any, and the Payment Accounts, together with Lenders’ reasonable and customary charges and fees with respect thereto; (d) reasonable costs and expenses paid or incurred in respect of preserving and
protecting the Collateral; (e) reasonable costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the security interests and liens of Lenders, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Agreement and the other Financing Agreements or defending any claims made or threatened against the Administrative Agent arising out of the transactions contemplated hereby and thereby (including, without limitation, preparations for and consultations concerning any such matters);
(f) all out-of-pocket expenses and costs heretofore and from time to time hereafter incurred by the Administrative Agent during the course of periodic field examinations of the Collateral and each Operating Company’s operations, plus a per diem charge at the rate of $1,200 per person per day for the Administrative Agent’s examiners in the field and office; provided that one (and up to three
(3) during any period a Trigger Event is continuing) field examination only may be conducted per year unless an Event of Default exists and, if an Event of Default exists, in the Administrative Agent’s discretion; and (g) the reasonable fees and disbursements of counsel (including legal assistants) to the Administrative Agent in connection with any of the foregoing.
All amounts due under this Section and Section 5 shall be payable promptly after demand therefor. A certificate of the Administrative Agent setting forth the amount or amounts owing to the Administrative Agent, any Lender or a sub-agent or Related Party, as the case may be, as specified in this Section, including reasonable detail of the basis of calculation of the amount or amounts, and delivered to the Borrower shall be prima facie evidence thereof absent manifest error.
10.21Further Assurances
At the request of the Administrative Agent at any time and from time to time, each Operating Company shall, at its expense, duly execute and deliver, or cause to be duly executed and delivered, such further agreements, documents and instruments, and do or cause to be done such further acts as may be reasonably necessary or proper to evidence, perfect, maintain and enforce the security interests and liens and the priority thereof in the Collateral and to otherwise effectuate the provisions or purposes of this Agreement or any of the other Financing Agreements. The Administrative Agent may at any time and from time to time request a certificate from an officer of the Borrower representing that all conditions precedent to the making of Loans contained in Sections 6.1 and 6.2, as applicable, have been satisfied. In the event of such request by the Administrative Agent, each Lender may, at its option, cease to make any further Loans until the Administrative Agent has received such certificate. Where permitted by law, the Borrower hereby authorizes the Administrative Agent to execute and file one or more PPSA or other financing statements or notices signed only by the Administrative Agent or the Administrative Agent’s representative. For greater certainty, the Borrower shall deliver a new general security agreement to the Administrative Agent on an annual basis to reflect limitations on the effectiveness of security granted over crops pursuant to the PPSA or other applicable law.
10.22Most Favoured Lender
In the event an Operating Company enters into any material agreement with any lender containing one or more covenants which are more restrictive on an Operating Company or any other Obligor than the covenants set forth in this Agreement, each Operating Company agrees, at the request of the Required Lenders, to amend this Agreement to include these restrictive covenants in this
Agreement for so long as such other borrowed money remains outstanding. Nothing in this Section 10.22 shall be interpreted as a waiver of any covenant of any Obligor.
10.23Sanctions
(a)Notice of Sanctions Activities and Right of Bank to Demand Repayment: Borrower will notify the Administrative Agent promptly in writing and in reasonable detail, if any Obligor engages in any trade, commerce or other commercial dealings with any Sanctioned Person, or any country that is the subject of any Sanctions.
(b)No Sanctionable Interest in Funds: Borrower shall not fund all or part of any payment or repayment in connection with the credit facilities out of proceeds derived from business or transactions with a Sanctioned Person, or from any action which is in breach of any Sanctions.
(c)Notice: Borrower shall promptly inform the Administrative Agent in writing, on becoming aware of the same, if any Obligor
(i)becomes a Sanctioned Person; or
(ii)receives notice of or becomes aware of any claim, action, suit, proceeding or investigation against it with respect to Sanctions by any Sanctions Authority that could reasonably be expected to result in a Material Adverse Change.
(d)Anti-Corruption Laws. Each Obligor shall conduct its businesses in compliance with the United States Foreign Corrupt Practices Act of 1977, the UK Bribery Act 2010, and other similar anti-corruption legislation in other jurisdictions and maintain policies and procedures designed to promote and achieve compliance with such laws.
(e)Exception: The covenants made in this section are only to be complied with to the extent that they do not result in any violation of the Foreign Extraterritorial Measures Act (Canada).
SECTION 11 - AGENCY
11.1Appointment and Authority
Each of Lenders hereby irrevocably appoints the Person identified elsewhere in this Agreement as the Administrative Agent to act on its behalf as the administrative agent hereunder and under the other Financing Agreements and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.
11.2Rights as a Lender
The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with any Obligor or any Affiliate thereof as if such Person were not the Administrative Agent and without any duty to account to Lenders.
11.3Exculpatory Provisions
(a)The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Financing Agreements. Without limiting the generality of the foregoing, except to the extent set forth herein and in the other Financing Agreements, the Administrative Agent:
(i)shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;
(ii)shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Financing Agreements that the Administrative Agent is required to exercise as directed in writing by Required Lenders (or such other number or percentage of Lenders as shall be expressly provided for in the Financing Agreements), but the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Financing Agreement or Applicable Law; and
(iii)shall not, except as expressly set forth herein and in the other Financing Agreements, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to any Operating Company or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.
(b)The Administrative Agent shall not be liable for any action taken or not taken by it which is permitted to be taken or not taken by it hereunder or under the other Financing Agreements (i) with the consent or at the request of Required Lenders (or such other number or percentage of Lenders as is necessary, as set out in the Financing Agreements, or as the Administrative Agent believes in good faith is necessary, under the provisions of the Financing Agreements) or (ii) in the absence of its own breach of the Financing Agreements, gross negligence or wilful misconduct. The Administrative Agent shall be deemed not to have knowledge of
any Default unless and until notice describing the Default is given to the Administrative Agent by the Borrower or a Lender.
(c)Except as otherwise expressly specified in this Agreement, the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into
(i) any statement, warranty or representation made in or in connection with this Agreement or any other Financing Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, provided that the Administrative Agent shall promptly notify each Lender of the occurrence of an Event of Default of which the Administrative Agent has actual knowledge or notice, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Financing Agreement or any other agreement, instrument or document or (v) the satisfaction of any condition specified in this Agreement, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
11.4Reliance by Administrative Agent
The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, internet or intranet posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, the Administrative Agent may presume that such condition is satisfactory to such Lender unless the Administrative Agent shall have received notice to the contrary from such Lender prior to the making of such Loan. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts in the absence of breach of any Financing Agreement, gross negligence and wilful misconduct on the part of the Administrative Agent.
11.5Indemnification of Administrative Agent
Each Lender agrees to indemnify the Administrative Agent and hold it harmless (to the extent not reimbursed by an Operating Company), rateably according to its Applicable Percentage (and not jointly or jointly and severally) from and against any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel, which may be incurred by or asserted against the Administrative Agent in any way relating to or arising out of the Financing Agreements or the transactions therein contemplated. However, no Lender shall be liable for any portion of such losses, claims, damages, liabilities and related expenses resulting from the Administrative Agent’s gross negligence or wilful misconduct.
11.6Delegation of Duties
The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Financing Agreement by or through any one or more sub-agents appointed by the Administrative Agent from among Lenders (including the Person serving as the Administrative Agent) and their respective Affiliates. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The provisions of this Section and other provisions of this Agreement for the benefit of the Administrative Agent shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as the Administrative Agent.
11.7Replacement of Administrative Agent
(a)The Administrative Agent may at any time give notice of its resignation to Lenders and the Borrower. Upon receipt of any such notice of resignation, Required Lenders shall have the right, in consultation with Borrower, to appoint a successor, which shall be a Lender having a Commitment to a Loan if one or more is established in this Agreement and having an office in Toronto or an Affiliate of any such Lender with an office in Toronto. The Administrative Agent may also be removed at any time by Required Lenders upon 30 days’ notice to the Administrative Agent and the Borrower as long as Required Lenders, in consultation with Borrower, appoint and obtain the acceptance of a successor within such 30 days, which shall be a Lender having a Commitment to a Loan if one or more is established in this Agreement and having an office in Toronto or an Affiliate of any such Lender with an office in Toronto.
(b)If no such successor shall have been so appointed by Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of Lenders, appoint a successor Administrative Agent meeting the qualifications specified in Section 11.7(a), provided that if the Administrative Agent shall notify the Borrower and Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Financing Agreements (except that in the case of any collateral security held by the Administrative Agent on behalf of Lenders under any of the Financing Agreements, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly, until such time as Required Lenders appoint a successor Administrative Agent as provided for above in the preceding paragraph.
(c)Upon a successor’s appointment as the Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the former Administrative Agent, and the former Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Financing Agreements (if not already discharged therefrom as provided in the preceding paragraph). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between Borrower and such successor and any predecessor shall refund to the Borrower the proportion of any annual agency fee paid to such predecessor attributable to the unexpired portion of the then current year for which such fees were paid. After the termination of the service of the former Administrative Agent, the provisions of this Agreement shall continue in effect for the benefit of such former Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the former Administrative Agent was acting as the Administrative Agent.
11.8Non-Reliance on Administrative Agent and Other Lenders
Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Financing Agreement or any related agreement or any document furnished hereunder or thereunder.
11.9Collective Action of Lenders
The Administrative Agent and each of Lenders hereby acknowledges that to the extent permitted by Applicable Law, any collateral security and the remedies provided under the Financing Agreements to the Administrative Agent or any Lender are for the benefit of Lenders collectively and acting together and not severally and further acknowledges that its rights hereunder and under any collateral security are to be exercised not severally, but by the Administrative Agent upon the decision of Required Lenders (or such other number or percentage of Lenders as shall be expressly provided for in the Financing Agreements). Accordingly, notwithstanding any of the provisions contained herein or in any collateral security, each of Lenders hereby covenants and agrees that it shall not be entitled to take any action hereunder or thereunder including, without limitation, any declaration of Default hereunder or thereunder but that any such action shall be taken only by the Administrative Agent with the prior written agreement of Required Lenders (or such other number or percentage of Lenders as shall be expressly provided for in the Financing Agreements). Each Lender hereby further covenants and agrees that upon any such written agreement being given, it shall co-operate fully with the Administrative Agent to the extent requested by the Administrative Agent. Notwithstanding the foregoing, in the absence of instructions from Lenders and where in the sole opinion of the Administrative Agent, acting reasonably and in good faith, the exigencies
of the situation warrant such action, the Administrative Agent may without notice to or consent of Lenders take such action on behalf of Lenders as it deems appropriate or desirable in the interest of Lenders.
11.10No Other Duties, etc.
Anything herein to the contrary notwithstanding, none of the bookrunners, arrangers or holders of similar titles, if any, specified in this Agreement shall have any powers, duties or responsibilities under this Agreement or any of the other Financing Agreements, except in its capacity, as applicable, as the Administrative Agent or a Lender hereunder.
11.11Security
The security granted under the Financing Agreements shall be granted in favour and held by the Administrative Agent for and on behalf of Lenders in accordance with the provisions of this Agreement. The Administrative Agent shall in accordance with its usual practices take all steps required to perfect and maintain such security and the Administrative Agent shall comply with all instructions provided by Lenders in connection with the enforcement or release of such security. The Administrative Agent agrees to permit each Lender to review and make photocopies of the original documents comprising such security from time to time upon reasonable notice.
11.12Security in favour of Lenders and Affiliates of Lenders in Certain Circumstances
Without limiting any provision contained in this Agreement or in any Financing Agreement, any security interest granted to the Administrative Agent pursuant to any Financing Agreement shall also be held by the Administrative Agent on behalf of Lenders and any Affiliate of any Lender in respect of any indebtedness owing by any Obligor to such Lender or Affiliate in respect of any Ancillary Facilities provided by such Lender or Affiliate to any Obligor (including, without limitation, those services provided pursuant to Section 2.10 hereof).
11.13Distribution of Notice
Promptly after receipt by the Administrative Agent of any notice or other document which is delivered to the Administrative Agent hereunder on behalf of Lenders, the Administrative Agent shall provide a copy of such notice or other document to each Lender.
11.14Meeting of Lenders
Upon the written request of any Lender, the Administrative Agent shall call a meeting of all Lenders.
11.15Accordion Feature
(a)Accession. On each Accordion Effective Date on which an Accordion Lender becomes a Lender, this Agreement and each other Financing Agreement shall henceforth be read and construed as if such Accordion Lender were party to this Agreement as a Lender having all of the rights and obligations of a Lender expressed herein with respect to the Commitment that the Lender has agreed to
accept and all references to any Lenders in any Financing Agreement shall (to the extent the context so admits) be construed accordingly. Each Lender irrevocably appoints, authorizes and directs the Administrative Agent, as its attorney and agent, with full power of substitution and delegation, to complete and execute on its behalf each Accordion Agreement relating to each such Accordion Lender. Each Lender agrees that it will be bound by the terms of each such Accordion Agreement so completed and executed by the Administrative Agent.
(b)Adjusting Payments. On each Accordion Effective Date, the Administrative Agent shall determine the amount of adjusting payments that may need to be made amongst the Lenders to ensure that their respective shares in outstanding Loans under the Revolving Loans equal their respective Pro Rata Share of the Revolving Loans. Each Accordion Lender shall advance to the Administrative Agent the amount of any such adjusting payment so required of it and the Administrative Agent shall, upon request, advance to each other Lender the amount of the corresponding adjusting payment required to be paid to it as determined above. The Borrower shall be obliged to repay outstanding Revolving Loans amongst the Lenders as adjusted pursuant to this Subsection 11.15(b). Adjusting payments in respect of BA Advances and SOFR Loans shall not take place until the expiry of their current terms and interest periods.
11.16Erroneous Payment
(a)Each Lender hereby agrees that (i) if the Administrative Agent notifies such Lender that the Administrative Agent has determined in its sole discretion that any funds received by such Lender from the Administrative Agent or any of its Affiliates were erroneously transmitted to, or otherwise erroneously or mistakenly received by, such Lender (whether or not known to such Lender) (whether as a payment, prepayment or repayment of principal, interest, fees or otherwise; individually and collectively, a “Erroneous Payment”) and demands the return of such Erroneous Payment (or a portion thereof) (provided, that, without limiting any other rights or remedies (whether at law or in equity), the Administrative Agent may not make any such demand under this clause (a)(i) with respect to an Erroneous Payment unless such demand is made within 35 days of the date of receipt of such Erroneous Payment by the applicable Lender), such Lender shall promptly, but in no event later than one Business Day thereafter, return to the Administrative Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made, in same day funds (in the currency so received), together with interest thereon in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Lender to the date such amount is repaid to the Administrative Agent in same day funds at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect and
(ii) to the extent permitted by applicable law, such Lender shall not assert any right or claim to the Erroneous Payment, and hereby waives, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for the return of any Erroneous Payments
received, including without limitation waiver of any defense based on “discharge for value” or any similar doctrine. A notice of the Administrative Agent to any Lender under this clause (a) shall be conclusive, absent manifest error.
(b)Without limiting immediately preceding clause (a), each Lender hereby further agrees that if it receives an Erroneous Payment from the Administrative Agent (or any of its Affiliates) (x) that is in a different amount than, or on a different date from, that specified in a notice of payment sent by the Administrative Agent (or any of its Affiliates) with respect to such Erroneous Payment (an “Erroneous Payment Notice”), (y) that was not preceded or accompanied by an Erroneous Payment Notice, or (z) that such Lender otherwise becomes aware was transmitted, or received, in error or by mistake (in whole or in part), in each case, an error has been made (and that it is deemed to have knowledge of such error at the time of receipt of such Erroneous Payment) with respect to such Erroneous Payment, and to the extent permitted by applicable law, such Lender shall not assert any right or claim to the Erroneous Payment, and hereby waives, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for the return of any Erroneous Payments received, including without limitation waiver of any defense based on “discharge for value” or any similar doctrine. Each Lender agrees that, in each such case, it shall promptly (and, in all events, within one Business Day of its knowledge (or deemed knowledge) of such error) notify the Administrative Agent of such occurrence and, upon demand from the Administrative Agent, it shall promptly, but in all events no later than one Business Day thereafter, return to the Administrative Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made in same day funds (in the currency so received), together with interest thereon in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Lender to the date such amount is repaid to the Administrative Agent in same day funds at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect.
(c)The Borrower and each other party hereto hereby agrees that (x) in the event an Erroneous Payment (or portion thereof) is not recovered from any Lender that has received such Erroneous Payment (or portion thereof) for any reason, the Administrative Agent shall be subrogated to all the rights of such Lender with respect to such amount and (y) an Erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by the Borrower or any other party hereto.
(d)Each party’s obligations under this Section 11.16 shall survive the resignation or replacement of the Administrative Agent, the termination of the Commitments or the repayment, satisfaction or discharge of all Obligations (or any portion thereof) under any Financing Agreement.
SECTION 12 - EVENTS OF DEFAULT AND REMEDIES
12.1Events of Default
The occurrence or existence of any one or more of the following events are referred to herein individually as an “Event of Default”, and collectively as “Events of Default”:
(a)the Borrower fails to pay when due of payment of principal of any Loan; or non- payment and continuance thereof for three Business Days in the payment when due of any fee, interest or reimbursement obligation hereunder or any other Financing Agreement;
(b)the Administrative Agent notifies the Borrower that a breach of Section 10.13 has occurred and
(i)the Fixed Charge Coverage Ratio is less than 1.0; or
(ii)within ten (10) Business Days thereafter a person or persons that are not Obligors fail to contribute the Required Coverage Ratio Cash by way of equity or Subordinated Debt contribution to an Operating Company by transfer to a Blocked Account. For this purpose, “Required Coverage Ratio Cash” means an amount equal to or greater than that amount which, if added to the numerator of the Fixed Charge Coverage Ratio for the applicable month, would result in Section 10.13 not being breached. If such Required Coverage Ratio Cash is so contributed, (A) Section 10.13 shall be deemed not to have been breached for the applicable month and (B) in computing the Fixed Charge Coverage Ratio for the twelve-month periods ending at the end of each of the following eleven months, such Required Coverage Ratio Cash shall be added to the numerator of the Fixed Charge Coverage Ratio;
(c)any Obligor fails to perform any of the terms, covenants, conditions or provisions contained in this Agreement (other than as set forth in paragraphs (a) to (b) inclusive) or any of the other Financing Agreements and such failure to perform (if capable of being cured) is not cured within fifteen (15) days of notice from the Administrative Agent to do so;
(d)any material representation, warranty or statement of fact made by any Obligor to Lenders in this Agreement, the other Financing Agreements or any other agreement, schedule, confirmatory assignment or otherwise shall when made or deemed made be false or misleading in any material respect;
(e)any Obligor revokes or terminates or questions the enforceability of this Agreement or any of the other Financing Agreements;
(f)unless covered by applicable insurance or letter of credit, any judgment for the payment of money is rendered against any Obligor in excess of $5,000,000 in the aggregate and shall remain unsatisfied, undischarged and unvacated for a period in
excess of thirty (30) days or execution thereon having been initiated shall at any time not be effectively stayed before any such execution is carried out;
(g)any Obligor, which is a partnership, limited liability company, limited partnership, limited liability partnership or a corporation, dissolves or suspends or discontinues doing business without the prior written consent of the Required Lenders;
(h)a petition, case or proceeding under the bankruptcy laws of Canada or similar laws of any foreign jurisdiction now or hereafter in effect or under any insolvency, arrangement, reorganization, moratorium, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at law or in equity) is filed or commenced against any Obligor or all or any part of its properties and such petition or application is not dismissed within thirty (30) days after the date of its filing or any Obligor shall file any answer admitting or not contesting such petition or application or indicates its consent to, acquiescence in or approval of, any such action or proceeding or the relief requested is granted sooner;
(i)a petition, case or proceeding under the bankruptcy laws of Canada or similar laws of any foreign jurisdiction now or hereafter in effect or under any insolvency, arrangement, reorganization, moratorium, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at a law or equity) is filed or commenced by any Obligor for all or any part of its property including, without limitation, if any Obligor shall:
(i)apply for or consent to the appointment of a receiver, trustee or liquidator of it or of all or a substantial part of its property and assets;
(ii)be unable, or admit in writing its inability, to pay its debts as they mature, or commit any other act of bankruptcy;
(iii)make a general assignment for the benefit of creditors;
(iv)file a voluntary petition or assignment in bankruptcy or a proposal seeking a reorganization, compromise, moratorium or arrangement with its creditors;
(v)take advantage of any insolvency or other similar law pertaining to arrangements, moratoriums, compromises or reorganizations, or admit the material allegations of a petition or application filed in respect of it in any bankruptcy, reorganization or insolvency proceeding; or
(vi)take any corporate action for the purpose of effecting any of the foregoing;
(j)any default by any Obligor under any agreement, document or instrument relating to any indebtedness for borrowed money owing to any person other than Lenders, or any capitalized lease obligations, contingent indebtedness in connection with any guarantee, letter of credit, indemnity or similar type of instrument in favour of any
person other than any Lender, in any case in an amount in excess of the Canadian Dollar Amount of $5,000,000;
(k)any Change of Control in respect of any Obligor without the Required Lenders’ prior written consent;
(l)there shall be a Material Adverse Change;
(m)there shall be a breach or failure to comply by any Obligor with the provisions of any inter-creditor agreement or subordination agreement to which the Administrative Agent is party with respect to any Obligor;
(n)a requirement from the Minister of National Revenue for payment pursuant to Section 224 or any successor section of the Income Tax Act (Canada) or Section 317, or any successor section or any other Person in respect of the Borrower of the Excise Tax Act (Canada) or any comparable provision of similar legislation of any jurisdiction shall have been received by any Lender or any other Person in respect of the Borrower or otherwise issued in respect of the Borrower which is not satisfied or discharged, as applicable, within thirty (30) days; or
(o)this Agreement or any of the other Financing Agreements, or any provision hereof or thereof, shall at any time after execution and delivery hereof or thereof, for any reason, cease to be a legal, valid and binding obligation of any Obligor or cease to be enforceable against any Obligor in accordance with its terms or shall be declared to be null and void and as a result of any of the foregoing, the rights of the Lenders, taken as a whole under the Financing Agreements, are materially prejudiced.
12.2Remedies
(a)At any time an Event of Default exists or has occurred and is continuing, the Administrative Agent and Lenders shall have all rights and remedies provided in this Agreement, the other Financing Agreements, the PPSA and other Applicable Law, all of which rights and remedies may be exercised without notice to or consent by any Obligor, except as such notice or consent is expressly provided for hereunder or required by Applicable Law. All rights, remedies and powers granted to the Administrative Agent and Lenders hereunder, under any of the other Financing Agreements, the PPSA or other Applicable Law, are cumulative, not exclusive and enforceable, in the Administrative Agent’s discretion, alternatively, successively, or concurrently on any one or more occasions, and shall include, without limitation, the right to apply to a court of equity for an injunction to restrain a breach or threatened breach by any Obligor of this Agreement or any of the other Financing Agreements. At any time an Event of Default exists, the Administrative Agent may, at any time or times, proceed directly against any Obligor to collect the Obligations without prior recourse to the Collateral.
(b)Without limiting the foregoing, at any time an Event of Default exists or has occurred and is continuing, the Administrative Agent shall, acting on the instructions of the Required Lenders by written notice to the Borrower (a “Notice
of Termination”), accelerate the payment of all Obligations and demand immediate payment thereof to Lenders (provided, that, upon the occurrence of any Event of Default described in Sections 12.1(h) and 12.1(i), all Obligations shall automatically become immediately due and payable without the requirement to give any notice, and in such event, a Notice of Termination shall deemed to have been given). Following the delivery of a Notice of Termination by the Administrative Agent, the Administrative Agent may, in its discretion and without limitation: (i) with or without judicial process or the aid or assistance of others, enter upon any premises on or in which any of the Collateral may be located and take possession of the Collateral or complete processing, manufacturing and repair of all or any portion of the Collateral and carry on the business of each Operating Company, (ii) require each Operating Company, at each Operating Company’s expense, to assemble and make available to the Administrative Agent any part or all of the Collateral at any place and time designated by the Administrative Agent,
(iii) collect, foreclose, receive, appropriate, setoff and realize upon any and all Collateral, (iv) remove any or all of the Collateral from any premises on or in which the same may be located for the purpose of effecting the sale, foreclosure or other disposition thereof or for any other purpose, (v) sell, lease, transfer, assign, deliver or otherwise dispose of any and all Collateral (including entering into contracts with respect thereto, public or private sales at any exchange, broker’s board, at any office of the Administrative Agent or elsewhere) at such prices or terms as the Administrative Agent may deem reasonable, for cash, upon credit or for future delivery, with the Administrative Agent having the right to purchase the whole or any part of the Collateral at any such public sale, all of the foregoing being free from any right or equity of redemption of Obligors, which right or equity of redemption is hereby expressly waived and released by Obligors, (vi) borrow money and use the Collateral directly or indirectly in carrying on Obligors’ business or as security for loans or advances for any such purposes, (vii) grant extensions of time and other indulgences, take and give up security, accept compositions, grant releases and discharges, and otherwise deal with Obligors, debtors of Obligors, sureties and others as the Administrative Agent may see fit without prejudice to the liability of Obligors or Lender’s right to hold and realize the security interest created under any Financing Agreement, and/or (viii) terminate this Agreement. If any of the Collateral is sold or leased by the Administrative Agent upon credit terms or for future delivery, the Obligations shall not be reduced as a result thereof until payment therefor is finally collected by the Administrative Agent. If notice of disposition of Collateral is required by law, fifteen (15) days prior notice by the Administrative Agent to the Borrower designating the time and place of any public sale or the time after which any private sale or other intended disposition of Collateral is to be made, shall be deemed to be notice thereof and Obligors waive any other notice. In the event the Administrative Agent institutes an action to recover any Collateral or seeks recovery of any Collateral by way of pre-judgment remedy, Obligors waive the posting of any bond which might otherwise be required.
(c)The Administrative Agent shall apply the cash proceeds of Collateral actually received by the Administrative Agent or any Lender from any sale, lease,
foreclosure or other disposition of the Collateral to payment of the Obligations in accordance with Section 7.4. Obligors shall remain liable to Lenders for the payment of any deficiency with interest at the highest rate provided for herein and all costs and expenses of collection or enforcement, including reasonable legal costs and expenses.
(d)Without limiting the foregoing, upon the occurrence of an Event of Default which is continuing the Required Lenders may, at their option, without notice, (i) cease making Loans or reduce the Revolving Loans Borrowing Base or amounts of Revolving Loans available to the Borrower and/or (ii) terminate any provision of this Agreement providing for any future Loans to be made by the Lenders to the Borrower.
(e)The Administrative Agent may appoint, remove and reappoint any person or persons, including an employee or agent of a Lender to be a receiver (the “Receiver”) which term shall include a receiver and manager of, or agent for, all or any part of the Collateral. Any such Receiver shall, as far as concerns responsibility for his acts, be deemed to be the agent of Obligors and not of the Administrative Agent or Lenders, and the Administrative Agent and Lenders shall not in any way be responsible for any misconduct, negligence or non-feasance of such Receiver, his employees or agents. Except as otherwise directed by the Administrative Agent, all money received by such Receiver shall be received in trust for and paid to Lenders in their respective Pro Rata Shares. Such Receiver shall have all of the powers and rights of Lenders described in this Section 12.2. the Administrative Agent may, either directly or through its agents or nominees, exercise any or all powers and rights of a Receiver.
(f)Obligors shall pay all reasonable costs, charges and expenses incurred by the Administrative Agent, Lenders or any Receiver or any nominee or agent of the Administrative Agent or Lenders, whether directly or for services rendered (including, without limitation, reasonable solicitor’s costs on a full indemnity basis, auditor’s costs, other legal expenses and Receiver remuneration) in enforcing this Agreement or any other Financing Agreement and in enforcing or collecting Obligations and all such expenses together with any money owing as a result of any borrowing permitted hereby shall be a charge on the proceeds of realization and shall be secured hereby.
SECTION 13 - JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
13.1Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver
(a)The validity, interpretation and enforcement of this Agreement and the other Financing Agreements and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the laws of the Province of Ontario and the federal laws of Canada applicable therein.
(b)Obligors¸ the Administrative Agent and Lenders irrevocably consent and submit to the non-exclusive jurisdiction of the courts of the Province of Ontario and waive any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Agreement or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agree that any dispute with respect to any such matters shall be heard only in the courts described above (except that the Administrative Agent shall have the right to bring any action or proceeding against any Obligor or its property in the courts of any other jurisdiction which the Administrative Agent deems necessary or appropriate in order to realize on the Collateral or to otherwise enforce Lenders’ rights against any Obligor or its property).
(c)To the extent permitted by law, each Obligor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by registered mail (return receipt requested) directed to its address set forth on the signature pages hereof and service so made shall be deemed to be completed five
(5) days after the same shall have been so deposited in the Canadian mails, or, at the Administrative Agent’s option, by service upon Obligors in any other manner provided under the rules of any such courts. Within thirty (30) days after such service, such Obligor shall appear in answer to such process, failing which such Obligor shall, to the extent the applicable rules of civil procedure allow or permit, be deemed in default and judgment may be entered by the Administrative Agent or Lenders against such Obligor for the amount of the claim and other relief requested.
(d)OBLIGORS, ADMINISTRATIVE AGENT AND LENDERS EACH HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH OBLIGOR AND LENDER EACH HEREBY AGREES AND CONSENTS, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT EACH OBLIGOR OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e)The Administrative Agent and Lenders shall not have any liability to any Obligor (whether in tort, contract, equity or otherwise) for losses suffered by any Obligor in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Agreement or any other Financing Agreement, or any act, omission or event occurring in connection herewith, unless it is determined by a final judgment or court order binding on the Administrative Agent and Lenders, that the losses were the result of any breach of any Financing Agreements or acts or omissions constituting gross negligence or willful misconduct. In any such litigation, the Administrative Agent and Lenders shall be entitled to the benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the terms of this Agreement or any other Financing Agreement. Notwithstanding the foregoing, no claim may be made by Obligors or any other Person against the Administrative Agent, Lenders or the Affiliates, directors, officers, employees, or agents of any of them for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract of any other theory of liability arising out of or related to the transactions contemplated by this Agreement or any other Financing Agreement, or any act, omission or event occurring in connection therewith, and each Obligor hereby waives, releases and agrees not to sue upon any claim for such damages, whether or not accrued and whether or not known or suspected to exist in its favour.
(f)Each Obligor hereby expressly waives, to the extent permitted by applicable law, all rights of notice and hearing of any kind prior to the exercise of rights by the Administrative Agent or Lenders at any time an Event of Default exists to repossess the Collateral with judicial process or to replevy, attach or levy upon the Collateral or other security for the Obligations. Each Obligor hereby waives, to the extent permitted by applicable law, the posting of any bond otherwise required of the Administrative Agent or Lenders in connection with any judicial process or proceeding to obtain possession of, replevy, attach or levy upon the Collateral or other security for the Obligations, to enforce any judgment or other court order entered in favour of the Administrative Agent or Lenders, or to enforce by specific performance, temporary restraining order, preliminary or permanent injunction, this Agreement or any other Financing Agreement.
13.2Waiver of Notices
Each Obligor hereby expressly waives, to the extent permitted by applicable law, demand, presentment, protest and notice of protest and notice of dishonour with respect to any and all instruments and commercial paper, included in or evidencing any of the Obligations or the Collateral, and any and all other demands and notices of any kind or nature whatsoever with respect to the Obligations, the Collateral and this Agreement, except such as are expressly provided for herein. No notice to or demand on any Obligor which the Administrative Agent or Lenders may elect to give shall entitle such Obligor to any other or further notice or demand in the same, similar or other circumstances.
13.3Amendments and Waivers
(a)Subject to Section 13.3(b), any term, covenant or condition of any of the Financing Agreements may only be amended with the prior consent of the Borrower and the Required Lenders or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively) by the Required Lenders and in any such event the failure to observe, perform or discharge any such covenant, condition or obligation, so amended or waived (whether such amendment is executed or such consent or waiver is given before or after such failure) shall not be construed as a breach of such covenant, condition or obligation or as a Default or Event of Default.
(b)Notwithstanding Section 13.3(a), without the prior written consent of each Lender, no such amendment or waiver shall directly:
(i)increase the amount of any Maximum Revolver Credit (except to the extent it may be increased pursuant to the accordion described in Section 2.12) or the maximum amount of such accordion;
(ii)extend the maturity date or the time for the payment of any payment of principal or fees due hereunder or under any Financing Agreement,
(iii)extend the time for the payment of interest on Loans, forgive any portion of principal, fees or interest thereon, reduce the stated rate of interest thereon (save for a reduction in any default rate when the Event of Default giving rise thereto is cured) or amend the requirement or method of pro rata application of all amounts received by the Administrative Agent in respect of the Loans,
(iv)change the percentage of the Lenders’ requirement to constitute the Required Lenders or otherwise amend the definition of Required Lenders,
(v)reduce the stated amount or postpone the date for payment of any fees payable to a Lender under this Agreement,
(vi)permit any subordination of any of the Obligations save in relation to Permitted Liens,
(vii)release, discharge or amend any of the security for the Obligations or any of the guarantees or any other Financing Agreement, in whole or in part, except to the extent expressly provided for herein or in any other Financing Agreement,
(viii)amend the definition of Revolving Loans Borrowing Base (and the defined terms used in such definition),
(ix)provide for any change to the percentage discount or any increase to any advance rate applicable to any items making up the Revolving Loans Borrowing Base,
(x)increase the maximum amount of the Swingline Facility as set out at Section 2.3,
(xi)alter the terms of this Section 13.3(b).
13.4Waiver of Counterclaims
Each Obligor waives all rights to interpose any claims, deductions, setoffs or counterclaims of any nature (other than compulsory counterclaims) in any action or proceeding with respect to this Agreement, the other Financing Agreements, the Obligations, the Collateral or any matter arising therefrom or relating hereto or thereto.
SECTION 14 - MISCELLANEOUS
14.1Notices; Effectiveness; Electronic Communication
(a)Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier to the addresses or telecopier numbers specified elsewhere in this Agreement or, if to a Lender, to it at its address or telecopier number specified in this Agreement or, if to an Obligor other than Borrower, in care of the Borrower.
Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given on a Business Day between 9:00 a.m. and 5:00 p.m. local time where the recipient is located, shall be deemed to have been given at 9:00 a.m. on the next Business Day for the recipient). Notices delivered through electronic communications to the extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b).
(b)Electronic Communications. Notices and other communications to the Administrative Agent and the Lenders hereunder may be delivered or furnished by electronic communication (including e-mail and internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender of Loans to be made if such Lender has notified the Administrative Agent that it is incapable of receiving notices under such Section by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to
procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.
Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.
(c)Change of Address, Etc. Any party hereto may change its address or telecopier number for notices and other communications hereunder by notice to the Administrative Agent of the other parties hereto.
14.2Partial Invalidity
If any provision of this Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole, but this Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by Applicable Law.
14.3Successors and Assigns
(a)Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Obligor may assign or otherwise transfer any of its rights or obligations hereunder or under any other Financing Agreement without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance with the provisions of paragraph (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of paragraph (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in paragraph (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b)Assignments by Lenders. Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that:
(i)except if an Event of Default has occurred and is continuing, the assignor shall maintain a Commitment (after such assignment) of not less than
$5,000,000;
(ii)except if an Event of Default has occurred and is continuing, the assignee shall not be a non-resident (as defined in the Income Tax Act (Canada));
(iii)except if an Event of Default has occurred and is continuing or in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment being assigned (which for this purpose includes Loans outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loan of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date) shall not be less than $5,000,000 unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents to a lower amount (each such consent not to be unreasonably withheld or delayed);
(iv)each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loan or the Commitment assigned, except that this clause (iv) shall not prohibit any Lender from assigning all or a portion of its rights and obligations among separate credits on a non-pro rata basis;
(v)any assignment must be approved by the Administrative Agent (such approval not to be unreasonably withheld or delayed) unless:
(A)in the case of an assignment of a Commitment, the proposed assignee is itself already a Lender with the same type of Commitment or is an Affiliate of a Lender or an Approved Fund, or
(B)the proposed assignee is a bank whose senior, unsecured, non-credit enhanced, long-term debt is rated at least “A3”, “A-” or “A low” by at least two of Moody’s, S&P and DBRS, respectively;
(vi)any assignment must be approved by the Borrower (such approval not to be unreasonably withheld or delayed) unless the proposed assignee is itself
already a Lender with the same type of Commitment or is an Affiliate of a Lender or an Approved Fund or an Event of Default has occurred and is continuing; and
(vii)the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee equal to $5,000, to be paid by the assignor or assignee (and not Borrower).
Subject to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement and the other Financing Agreements, including any collateral security, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Section 5 and Section 10.20, and shall continue to be liable for any breach of this Agreement by such Lender, with respect to facts and circumstances occurring prior to the effective date of such assignment. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (d) of this Section. Any payment by an assignee to an assigning Lender in connection with an assignment or transfer shall not be or be deemed to be a repayment by the Borrower or a new Loan to the Borrower.
(c)Register. The Administrative Agent shall maintain at its offices in Toronto, Ontario or such other location as the Administrative Agent may advise from time to time, a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, absent manifest error, and the Borrower, the Administrative Agent and Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(d)Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person, an Obligor or any Affiliate of an Obligor) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under
this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any payment by a Participant to a Lender in connection with a sale of a participation shall not be or be deemed to be a repayment by the Borrower or a new Loan to the Borrower.
Subject to paragraph (e) of this Section, the Borrower agrees that each Participant shall, to the extent permitted by applicable law, be entitled to the benefits of Section 5 and Section 10.20 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 5.7 as though it were a Lender, provided such Participant agrees to be subject to Section 5 as though it were a Lender.
(e)Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Sections 5.1 and 5.2 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 5.2 unless Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 5.2 as though it were a Lender.
(f)Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, but no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
14.4Entire Agreement
This Agreement, the other Financing Agreements, any supplements hereto or thereto, and any instruments or documents delivered or to be delivered in connection herewith or therewith represents the entire agreement and understanding concerning the subject matter hereof and thereof between the parties hereto, and supersede all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written, including without limitation the Original Loan Agreement. In the event of any inconsistency between the terms of this Agreement and any schedule or exhibit hereto, the terms of this Agreement shall govern.
14.5Headings
The division of this Agreement into Sections and the insertion of headings and a table of contents are for convenience of reference only and shall not affect the construction or interpretation of this Agreement.
14.6Judgment Currency
To the extent permitted by Applicable Law, the obligations of the Borrower in respect of any amount due under this Agreement shall, notwithstanding any payment in any other currency (the “Other Currency”) (whether pursuant to a judgment or otherwise), be discharged only to the extent of the amount in the currency in which it is due (the “Agreed Currency”) that Lenders may, in accordance with normal banking procedures, purchase with the sum paid in the Other Currency (after any premium and costs of exchange) on the Business Day immediately after the day on which a Lender receives the payment. If the amount in the Agreed Currency that may be so purchased for any reason falls short of the amount originally due, the Borrower shall pay all additional amounts, in the Agreed Currency, as may be necessary to compensate for the shortfall. Any obligation of the Borrower not discharged by that payment shall, to the extent permitted by Applicable Law, be due as a separate and independent obligation and, until discharged as provided in this Section, continue in full force and effect.
14.7Counterparts; Integration; Effectiveness; Electronic Execution
(a)Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Except as provided in the conditions precedent Section(s) of this Agreement, this Agreement shall become effective when it has been executed by the Administrative Agent and when the Administrative Agent has received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or by sending a scanned copy by electronic mail shall be effective as delivery of a manually executed counterpart of this Agreement.
(b)Electronic Execution of Assignments. The words “execution”, “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any Applicable law, including Parts 2 and 3 of the Personal Information Protection and Electronic Documents Act (Canada) and other similar federal or provincial laws based on the Uniform Electronic Commerce Act of the Uniform law Conference of Canada or its Uniform Electronic Evidence Act, as the case may be.
14.8Credit Information
The Borrower hereby consents to the collection, use, exchange and disclosure on a confidential basis of credit or other information from time to time by the Administrative Agent and the Lenders with each other and any other financial institution, credit bureau, credit reporting agency and any Person with whom Borrower may have business dealings with for the purpose of managing and administering the Loans. The Borrower understands that this information may be used for any purpose relating to the Loans or any other facility contemplated hereunder, including, without limitation, the exercise of any the Administrative Agent, any Lender’s or any participant’s rights hereunder or under any other agreement or document contemplated hereunder.
14.9Confidentiality
Each of the Administrative Agent and each Lender agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to each of their, and each of their Affiliates’, directors, officers, employees, agents and advisors, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and will be instructed and agree to keep such Information confidential), (b) to the extent requested by any regulatory authority or other Governmental Authority, or their legal counsel, (c) to the extent required by Applicable Laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies under any Financing Agreement or any suit, action or proceeding relating to any Financing Agreement or the enforcement of rights thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any actual or prospective assignee of or Participant (or such assignee’s or Participant’s advisors) in any of its rights or obligations under this Agreement, or
(ii) any actual or prospective counterparty (or its advisors) to any Swap or derivative transaction relating to the Borrower and its obligations, or (g) with the consent of the Borrower. For the purposes of this Section, “Information” means all information received from Borrower or any Obligor relating to the Borrower, any of the Obligors, or their respective businesses, other than Information that (i) is or becomes publicly available other than as a result of a breach of this Section, (ii) is or becomes available to the Administrative Agent or any Lender on a non- confidential basis prior to disclosure by the Borrower, (iii) was already in the possession of the Administrative Agent or any Lender not subject to any duty of confidentiality prior to its disclosure by the Borrower or any other Obligor or (iv) is marked “non-confidential” (or such other words or expression having the same or similar meaning by the Borrower or any other Obligor). Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information, acting prudently.
14.10Patriot Act, Proceeds of Crime Act, etc.
Each Lender hereby notifies Borrower that pursuant to the requirements of the Patriot Act, the Proceeds of Crime Act and other “know your customer” rules, regulations and policies, it may be required to obtain, verify and record information that identifies Borrower and each Obligor, which information includes the name and address of the Borrower and such Obligors and other
information that will allow Lender to identify Borrower and such Obligors in accordance with the Patriot Act, the Proceeds of Crime Act and other “know your customer” rules, regulations and policies. Borrower agrees to provide all such information to Lenders upon request by the Administrative Agent at any time, whether with respect to any Person who is presently an Obligor or who becomes an Obligor hereafter.
14.11Paramountcy
In the event of any conflict or inconsistency between the provisions of this Agreement and the provisions of any other Financing Agreement, the provisions of this Agreement shall prevail and be paramount. If any covenant, representation, warranty or event of default contained in any other Financing Agreement deals differently with, is in conflict with or is inconsistent with a provision of this Agreement relating to the same specific matter, such covenant, representation, warranty or event of default shall be deemed to be amended to the extent necessary to ensure that it does not deal differently with, is not in conflict with or inconsistent with the provision of this Agreement relating to the same specific matter.
14.12Acknowledgement Regarding Any Supported QFCs
To the extent that this Agreement and any other Financing Agreements provide support, through a guarantee or otherwise, for any Swap Contract or any other agreement or instrument that is a QFC (such support, “QFC Credit Support”, and each such QFC, a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd- Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Financing Agreements and any Supported QFC may in fact be stated to be governed by the laws of the Governing Law State and/or of the United States or any other state of the United States)
(a)In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Financing Agreements that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Financing Agreements were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it
is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.
(b)As used in this Section 14.12, the following terms have the following meanings.
“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.
“Covered Entity” means any of the following: (i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); (ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12
C.F.R. § 47.3(b); or (iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).
“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and
(b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.”
[Signature pages follow]
IN WITNESS WHEREOF, the Administrative Agent, the Lenders and the Borrower have caused these presents to be duly executed as of the day and year first above written.
ADMINISTRATIVE AGENT AND LENDER
SCOTIABANK ASSET FINANCE, a division of THE BANK OF NOVA SCOTIA
Per:
Name:
Title:
Per:
Name:
Title:
Address:
Fax:
BORROWER
THE ANDERSONS CANADA LIMITED
Per:
Name:
Title:
Per:
Name:
Title:
Chief Executive Office Address:
Attention:
Fax:
Acknowledgement
Each of the undersigned Obligors hereby acknowledges and agrees to be bound by the terms and conditions contained in this Agreement, as of the day and year first above written.
THOMPSONS USA LIMITED
Per:
Name:
Title:
Per:
Name:
Title:
Chief Executive Office Address:
Attention:
Fax:
LENDERS
CANADIAN IMPERIAL BANK OF COMMERCE
Per:
Name:
Title:
Per:
Name:
Title:
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THE TORONTO-DOMINION BANK
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BANK OF AMERICA, N.A., CANADA BRANCH
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Attention:
FARM CREDIT CANADA
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Exhibit A Definitions
1.“Accordion Agreement”
“Accordion Agreement” means an agreement in the form of Exhibit G (or in such other form to substantially the same effect as the Administrative Agent may accept) duly completed, executed and delivered by the Borrower and an Accordion Lender to the Administrative Agent pursuant to Subsection 2.12(v).
2.“Accordion Effective Date”
“Accordion Effective Date” has the defined meaning assigned in Subsection 2.12.
3.“Accordion Lender”
“Accordion Lender” means a Lender or a proposed new Lender that has agreed to accept an additional Commitment or an initial Commitment designated in an Accordion Notice delivered to the Administrative Agent pursuant to and in accordance with Subsection 2.12.
4.“Accordion Notice”
“Accordion Notice” has the defined meaning assigned to it in Subsection 2.12.
5.“Accounts”
“Accounts” shall mean all present and future rights of an Operating Company to payment for goods sold or leased or for services rendered, and whether or not earned by performance.
6.“Adjusted Term SOFR”
“Adjusted Term SOFR” mean with respect to any tenor, the per annum rate equal to the sum of
(i) Term SOFR plus (ii) as applicable, of 0.10% (10 basis points) for one-month, 0.15% (15 basis points) for three-months, and 0.25% (25 basis points) for six-months; provided that if Adjusted Term SOFR as so determined shall ever be less than zero percent (0%), then Adjusted Term SOFR shall be deemed to be zero percent (0%).
7.“Affiliate”
“Affiliate” means, with respect to a specified Person, another Person that directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Person specified.
8.“Ancillary Facilities”
“Ancillary Facilities” means Swaps, credit card facilities, letters of credit and/or various other cash management and/or banking services or products (including, without limitation, treasury, depository, debit card, electronic funds transfer or centralized offset or consolidated banking arrangements), in each case made between an Operating Company and a Lender or its Affiliate.
9.“Ancillary Facilities Notice Amount”
“Ancillary Facilities Notice Amount” means the aggregate of the reserve amounts to be taken in respect of all Ancillary Facilities for which the Administrative Agent has received notice (in a form to be determined from time to time, with regard to the nature of the applicable Ancillary Facility) from each of the Operating Companies and the Lenders or Affiliates (as applicable) who have provided such Ancillary Facilities; for greater certainty, only those amounts that have been agreed between the Borrower and such Lenders or Affiliates shall constitute the Ancillary Facilities Notice Amount.
10.“Applicable Law”
“Applicable Law” means (a) any domestic or foreign statute, law, treaty, code, ordinance, rule, regulation, restriction or by-law (zoning or otherwise) including, without limitation, Sanctions;
(b) any judgement, order, writ, injunction, decision, ruling, decree or award; (c) any regulatory policy, practice, guideline or directive (including, but not limited to any policy, practice, guideline or directive of the U.S. Department of Treasury’s Office of Foreign Assets Control); or (d) any franchise, licence, qualification, authorization, consent, exemption, waiver, right, permit or other approval of any Governmental Authority, binding on or affecting the Person referred to in the context in which the term is used or binding on or affecting the property of such Person; in each case to the extent having the force of law.
11.“Applicable Percentage”
“Applicable Percentage” means with respect to any Lender, the percentage of the total Commitments represented by such Lender’s Commitment.
12.“Approved Fund”
“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
13.“Assignment and Assumption”
“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee and accepted by the Administrative Agent, in substantially the form of Exhibit D or any other form approved by the Administrative Agent.
14.“Available Tenor”
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (i) if such Benchmark is a term rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an interest period pursuant to this Agreement or (ii) otherwise, any payment period for interest calculated with reference to such Benchmark (or component thereof) that is or may be used for determining any frequency of making payments of interest calculated with reference to such Benchmark pursuant to this Agreement, in each case, as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to Section 5.9(b)(iv).
15.“Availability Reserves”
“Availability Reserves” shall mean, as of any date of determination, such amounts as the Administrative Agent, may from time to time establish and revise reducing the amount of Revolving Loans which would otherwise be available to the Borrower under the Revolving Loans Borrowing Base provided for herein: (a) to reflect events, conditions, contingencies or risks which, as determined by the Administrative Agent, do or may affect either (i) the Collateral or any other property which is security for the Obligations or its value, (ii) the assets, business or prospects of any Obligor or (iii) the security interests and other rights of Lenders in the Collateral (including the enforceability, perfection and priority thereof) or (b) to reflect the Administrative Agent’s belief that any collateral report or financial information furnished by or on behalf of any Obligor to the Administrative Agent is or may have been incomplete, inaccurate or misleading in any material respect or (c) to reflect the Administrative Agent’s reasonable estimate of the amount of any Priority Payables Reserve, or (d) in respect of any state of facts which the Administrative Agent determines constitutes an Event of Default or may, with notice or passage of time or both, constitute an Event of Default, or (e) to reflect any Ancillary Facilities contemplated by Sections 2.9 and 2.10 (other than letters of credit) to a maximum of the lesser of (i) the Ancillary Facilities Notice Amount and (ii) 35,000,000, (f) to reflect 50% of customer deposits held by each Operating Company, or (g) to reflect any unpaid rent in respect of any leased premises and, upon the occurrence of an Event of Default, to reflect an amount not to exceed one-month’s rent in respect of any leased premises where a landlord waiver satisfactory to agent has not been obtained, or (h) in respect of inventory located in the United Kingdom, the amount of up to the Canadian Dollar equivalent of £600,000 to reflect the maximum amount of proceeds from enforcement against the assets covered by a floating charge which must be set aside and made available to satisfy unsecured debts pursuant to Applicable Law, calculated as follows: 50% of the first £10,000 of inventory plus 20% of any excess, not to exceed £600,000.
16.“BA Advance”
“BA Advance” shall mean a Bankers’ Acceptance or a BA Equivalent Rate Loan.
17.“BA Discount Rate”
“BA Discount Rate” means, in respect of a Bankers’ Acceptance: the greater of (1) zero, and (2)
(i) for a Lender that is listed in Schedule I to the Bank Act (Canada), the arithmetic average of the discount rates for Canadian Dollar bankers’ acceptances as quoted on the CDOR page of Reuters Money Monitor Rates Service (or such other page as may, from time to time, replace such page on that service for the purpose of displaying quotations for bankers’ acceptances accepted by leading Canadian financial institutions) at approximately 10:00 a.m. (Toronto time) on the date such Bankers’ Acceptance is issued for the purchase of bankers’ acceptances having a comparable term as the term of such Bankers’ Acceptance; or, if such rate is not available at or about such time, the average of the bankers’ acceptance rates (expressed to five decimal places) as quoted by such Lender as of 10:00 a.m. (Toronto time) on the date such Bankers’ Acceptance is issued for the purchase by such Lender of its own bankers’ acceptances having a comparable term as the term of such Bankers’ Acceptance; and (ii) for a Lender that is not listed in Schedule I to the Bank Act (Canada), the rate determined by the Administrative Agent to be the lesser of (A) the CDOR Rate plus ten (10) basis points; and (B) the rate (expressed to five decimal places) as quoted by such
Lender as of 10:00 a.m. (Toronto time) on the date such Bankers’ Acceptance is issued as its discount rate for Canadian Dollar bankers’ acceptances’ issued by it having a comparable term as the term of such Bankers’ Acceptance.
18.“BA Discounted Proceeds”
“BA Discounted Proceeds” means, in respect of any Bankers’ Acceptances to be accepted by a Lender on any day, an amount (rounded to the nearest whole cent and with one half of one cent being rounded up) calculated on such day by multiplying:
(a)the aggregate face amount of such Bankers’ Acceptances; by
(b)the price, where the price is determined by dividing one by the sum of one plus the product of:
(i)the BA Discount Rate which is applicable to such Bankers’ Acceptance (expressed as a decimal); and
(ii)a fraction, the numerator of which is the number of days remaining in the term of such Bankers’ Acceptances and the denominator of which is 365/366, as applicable;
with the amount as so determined being rounded up or down to the fifth decimal place and 0.000005 being rounded up.
19.“BA Equivalent Rate Loan”
“BA Equivalent Rate Loan” shall mean an extension of credit by a Lender in accordance with Section 2.8.
20.“BA Proceeds”
“BA Proceeds” means, with respect to a particular Bankers’ Acceptance, the BA Discounted Proceeds with respect thereto less the amount of the Bankers’ Acceptance Stamping Fees in respect of such Bankers’ Acceptance calculated in accordance with Section 2.4 hereof.
21.“BA Rate”
“BA Rate” means from time to time, in respect of a BA Advance, the applicable rate per annum indicated below the reference to “BA Rate” in the definition of “Interest Rate”.
22.“Bankers’ Acceptance”
“Bankers’ Acceptance” means a bill of exchange under the Bills of Exchange Act (Canada) or a depository bill under the Depository Bills and Notes Act (Canada),
(a)drawn by the Borrower and accepted by a Lender,
(b)denominated in Canadian Dollars,
(c)having a term of approximately one (1), two (2) or three (3) months as selected by the Borrower, and
(d)issued and payable only in Canada.
23.“Bankers’ Acceptance Stamping Fee”
“Bankers’ Acceptance Stamping Fee” means the amount calculated by multiplying the face amount of a BA Advance which is a Bankers’ Acceptance by the applicable percentage in accordance with the table set out in the definition of “Interest Rate”, and then multiplying the result by a fraction, the numerator of which is the number of days to elapse from and including the date of acceptance of such BA Advance by a Lender up to but excluding the maturity date of such BA Advance, and the denominator of which is 365 or 366, as appropriate.
24.“Benchmark”
“Benchmark” means, initially, the Term SOFR; provided that if a Benchmark Transition Event has occurred with respect to the Term SOFR or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to 5.9(b)).
25.“Benchmark Replacement”
“Benchmark Replacement” means, with respect to any Benchmark Transition Event, the sum of:
(a)the alternative benchmark rate that has been selected by the Administrative Agent and the Borrower giving due consideration to (a) any selection or recommendation of a benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body, or (b) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement to the then-current Benchmark for US Dollar denominated syndicated credit facilities; and
(b)the related Benchmark Replacement Adjustment; provided that if such Benchmark Replacement as so determined would be less than zero percent (0%), such Benchmark Replacement shall be deemed to be zero percent (0%) for the purposes of this Agreement and the other Financing Agreements.
26.“Benchmark Replacement Adjustment”
“Benchmark Replacement Adjustment” means, with respect to any replacement of the then- current Benchmark with an Unadjusted Benchmark Replacement, the spread adjustment, or method for calculating or determining such spread adjustment (which may be a positive or negative value or zero), that has been selected by the Administrative Agent and the Borrower giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body, or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the
replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for
U.S. dollar-denominated syndicated credit facilities at such time.
27.“Benchmark Replacement Conforming Changes”
“Benchmark Replacement Conforming Changes” means, with respect to either the use or adoption of Term SOFR or the use, adoption, administration or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “US Prime Rate,” the definition of “Business Day,” the definition of “Interest Period” or any similar or analogous definition, timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or rollover notices, the applicability and length of lookback periods, the applicability of any breakage provisions, and other technical, administrative or operational matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of such rate or to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of such rate exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Financing Agreements).
28.“Benchmark Replacement Date”
"Benchmark Replacement Date" means the earliest to occur of the following events with respect to the then-current Benchmark:
(a)In the case of paragraph (a) or (b) of the definition of "Benchmark Transition Event", the later of (i) the date of the public statement or publication of information referenced therein, and (ii) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof); or
(b)In the case of paragraph (c) of the definition of "Benchmark Transition Event", the first date on which such Benchmark (or the published component used in the calculation thereof) has been determined and announced by or on behalf of the administrator of such Benchmark (or such component thereof) or the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be non-representative or non-compliant with or non-aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks; provided that such non-representativeness, non- compliance or non-alignment will be determined by reference to the most recent statement or publication referenced in such paragraph (c) and even if any Available Tenor of such Benchmark (or such component thereof) continues to be provided on such date.
For the avoidance of doubt, the "Benchmark Replacement Date" will be deemed to have occurred in the case of paragraph (a) or (b) of this definition with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-
current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
29.“Benchmark Transition Event”
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:
(a)a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof);
(b)a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark (or such component) permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component); or
(c)a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) or the regulatory supervisor for the administrator of such Benchmark (or such component thereof) announcing that all Available Tenors of such Benchmark (or such component thereof) are not, or as of a specified future date will not be, representative or in compliance with or aligned with the International Association of Securities Commissions (IOSCO) Principles for Financial Benchmarks.
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
30.“Benchmark Transition Start Date”
"Benchmark Transition Start Date" means, in the case of a Benchmark Transition Event, the earlier of (a) the applicable Benchmark Replacement Date, and (b) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of the date of such public statement or publication of
information (or, if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication).
31.“Benchmark Unavailability Period”
“Benchmark Unavailability Period” means, the period (if any) (a) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with 5.9(b), and (b) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with 5.9(b).
32.“Beneficial Ownership Certification”
“Beneficial Ownership Certification” means a certification regarding beneficial ownership required by the Beneficial Ownership Regulation.
33.“Beneficial Ownership Regulation”
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
34.“BIA”
“BIA” shall mean the Bankruptcy and Insolvency Act (Canada), as amended, supplemented, restated and superseded, in whole or in part, from time to time.
35.“Blocked Accounts”
“Blocked Accounts” shall have the meaning set forth in Section 7.3(a) hereof.
36.“BNS”
“BNS” means The Bank of Nova Scotia and its successors and assigns.
37.“Borrowing Base Certificate”
“Borrowing Base Certificate” shall mean a duly completed and signed borrowing base certificate, the form for which is set out in Exhibit H.
38.“Business Day”
“Business Day” shall mean a day (other than a Saturday, Sunday or statutory holiday in Ontario) on which the Administrative Agent is open for business in the City of Toronto (and, in respect of any amounts in US Dollars, the City of New York) in the normal course. When used in respect of SOFR Loans, means any day other than Saturday, Sunday, or a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
39.“Canadian Dollar Amount”
“Canadian Dollar Amount” shall mean, at any time, (a) as to any amount denominated in Canadian Dollars, the amount thereof at such time, and (b) as to any amount denominated in any other currency, the equivalent amount in Canadian Dollars as determined by the Administrative Agent at such time on the basis of the Spot Rate for the purchase of Canadian Dollars with such currency.
40.“Canadian Prime Rate”
“Canadian Prime Rate” shall mean, at any time, the greater of (1) the greater of (i) the rate from time to time publicly announced by the Canadian Reference Bank as its prime rate in effect for determining interest rates on Canadian Dollar denominated commercial loans in Canada, and
(ii) the annual rate of interest equal to the sum of (A) the CDOR Rate at such time and (B) one (1%) percent per annum; and (2) zero.
41.“Canadian Prime Rate Loans”
“Canadian Prime Rate Loans” shall mean any Loans or portion thereof denominated in Canadian Dollars and on which interest is payable based on the Canadian Prime Rate in accordance with the terms hereof.
42.“Canadian Reference Bank”
“Canadian Reference Bank” shall mean The Bank of Nova Scotia, or its successors and assigns, or such other bank as the Administrative Agent may from time to time designate in writing.
43.“Capital Expenditures”
“Capital Expenditures” shall mean, for any fiscal period, any amounts accruing or paid in respect of any purchase or other acquisition for value of capital assets, and for greater certainty, excludes the value of any trade-in exchanged on such purchase and acquisition and amounts expended in respect of (i) the normal repair and maintenance of capital assets in the ordinary course of business,
(ii)repair or replacement of capital assets the payment for which is funded by insurance proceeds,
(iii)any other business acquisition, (iv) capital lease payments or (v) Growth Capital Expenditures.
44.“Cash Equivalents” “Cash Equivalents” means:
(a)U.S. dollars or Canadian dollars;
(b)securities issued or directly and fully guaranteed or insured by the United States Government or Canada or any agency or instrumentality of the United States of America or Canada (provided that the full faith and credit of the United States of America or Canada, as applicable, is pledged in support thereof);
(c)marketable general obligations issued by any state of the United States of America or any province or territory of Canada or any political subdivision thereof or any
public instrumentality thereof which at the time of acquisition have a credit rating of “A” or better from S&P, “A2” or better from Moody’s or “A” or better from DBRS;
(d)certificates of deposit, demand deposits, time deposits, eurodollar time deposits, overnight bank deposits or bankers’ acceptances issued by any commercial bank or Canadian chartered bank (x) the long-term debt of which is rated at the time of acquisition thereof at least “A” (or the equivalent thereof) by S&P, “A2” (or the equivalent thereof) by Moody’s or “A” by DBRS or (y) the short term commercial paper of such commercial bank or its parent company or Canadian chartered bank is rated at the time of acquisition thereof at least “A-1” (or the equivalent thereof) by S&P or “P-1” (or the equivalent thereof) by Moody’s or R-1 (middle) by DBRS;
(e)repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clauses (b), (c) and (d) above, entered into with any bank meeting the qualifications specified in clause (d) above;
(f)commercial paper rated at the time of acquisition thereof at least “A-1” (or the equivalent thereof) by S&P or “P-1” (or the equivalent thereof) by Moody’s or R- 1 (middle) by DBRS, or carrying an equivalent rating by a nationally recognized statistical rating organization, if any of such rating agencies cease publishing ratings of investments;
(g)interests in any investment company or money market fund that invests 95% or more of its assets in instruments of the type specified in clauses (a) through (f) above; and
(h)money market funds that are rated at the time of acquisition thereof “AAA” by S&P or “Aaa” by Moody’s or “AAA” by DBRS, and have portfolio assets of at least US$5.0 billion.
45.“CCAA”
“CCAA” shall mean the Companies’ Creditors Arrangement Act (Canada), as amended, supplemented, restated and superseded, in whole or part, from time to time.
46.“CDOR Rate”
“CDOR Rate” shall mean, on any day, the greater of: (1) the annual rate of interest which is the rate based on an average 30 day rate applicable to Canadian Dollar bankers’ acceptances appearing on the “Reuters Screen CDOR Page” (as defined in the International Swap Dealer Association, Inc., definitions, as modified and amended from time to time) as of 10:00 a.m. Eastern Standard Time on such day; provided that if such rate does not appear on the Reuters Screen CDOR Page as contemplated, then the CDOR Rate on any day shall be the 30 day rate applicable in Canadian Dollar bankers’ acceptances quoted by BNS as of 10:00 a.m. on such day, and (2) zero.
47.“Change in Law”
“Change in Law” means the occurrence, after the date of this Agreement, of any of the following:
(a) the adoption or taking effect of any Applicable Law, (b) any change in any Applicable Law or in the administration, interpretation or application thereof by any Governmental Authority or
(c) the making or issuance of any Applicable Law by any Governmental Authority.
48.“Change of Control”
“Change of Control” means if any person, excluding existing holders of such Equity Interests, acquires, directly or indirectly, alone or in concert with other persons within the meaning of the Securities Act (Ontario), over a period of time or at any one time, Equity Interests of a person aggregating in excess of 50% of all of the issued and outstanding Voting Equity Interests; provided that the Borrower shall cause any new shareholder of each Operating Company to provide to the Administrative Agent a pledge of all of such shareholder’s shares in the capital of such Operating Company promptly upon becoming a shareholder.
49.“Closing Date”
“Closing Date” shall have the meaning attributed thereto in Section 6.1(h).
50.“CME”
“CME” means Chicago Mercantile Exchange or any successor thereto.
51.“CME Grains”
“GME Grains” shall mean CME grains including crushed soybeans and food grade soybeans.
52.“Collateral”
“Collateral” shall mean, collectively, Collateral as such term is defined in the General Security Agreements.
53.“Collection Account”
“Collection Account” has the meaning ascribed thereto in Section 7.3(a).
54.“Commitment”
“Commitment” means, as to any Lender, the aggregate commitment of such Lender to make Loans hereunder, and as to all Lenders, the aggregate commitment of all Lenders to make Loans hereunder, as such amounts may be adjusted, if at all, from time to time in accordance with this Agreement. As of the date hereof, the Commitment of each Lender is set out in Exhibit E attached hereto.
55.“Credit Enhanced Accounts”
“Credit Enhanced Accounts” shall mean any Account the payment of which is assured by any credit agency or public or private insurer or by any Investment Grade letter of credit.
56.“DBRS”
“DBRS” means DBRS Limited.
57.“Debt”
“Debt” shall mean all combined consolidated indebtedness (in accordance with GAAP) of an Operating Company not considered by the Administrative Agent to be equity, and shall exclude accounts payable and accrued liabilities, operating leases, deferred taxes and Subordinated Debt.
58.“Default”
“Default” means any event or condition that constitutes an Event of Default or that would constitute an Event of Default except for satisfaction of any condition subsequent required to make the event or condition an Event of Default, including giving of any notice, passage of time, or both.
59.“EBITDA”
“EBITDA” shall mean, with respect to any period, an amount equal to the combined consolidated net income of each Operating Company for such period determined in accordance with GAAP, plus or minus, to the extent deducted or added, respectively, in determining such net income for such period, without duplication:
(a)depreciation and amortization;
(b)Interest Expense;
(c)dividend and interest income;
(d)gains or losses as disclosed on the unaudited financial statements and the annual audited financial statements relating to extraordinary, non-recurring items or unusual items;
(e)taxes for such period;
(f)non-cash expenses resulting from employee or management compensation, including stock options;
(g)amortization of financing costs; and
(h)foreign exchange translation adjustments.
Provided that, to the extent that there are differences in the timing of the recognition of foreign exchange gains from the recognition of foreign exchange losses on the dry bean business, EBITDA will be adjusted by the amount of the timing difference.
60.“Eligible Accounts”
“Eligible Accounts” shall mean Accounts created by an Operating Company which satisfy the following criteria:
(a)such Accounts arise from the actual and bona fide sale and delivery of goods by an Operating Company or rendition of services by an Operating Company in the ordinary course of its business which transactions are completed in accordance with the terms and provisions contained in any documents related thereto;
(b)such Accounts are not unpaid more than sixty (60) days after the due date (thirty
(30) days for the affiliated Accounts referenced in paragraph (i)) or ninety (90) days (sixty (60) days for the affiliated Accounts referenced in paragraph (i) and one hundred and twenty (120) days for Heinz (and its affiliates) Accounts and any other Accounts which Agent may approve from time to time at its discretion) after the date of the original invoice for them; for greater certainty, the Administrative Agent shall consider such other extended dating deemed reasonable by the Administrative Agent for the Borrower’s dating programs (including, for example, wholesale chemicals and purchase money security interests);
(c)such Accounts comply with the terms and conditions contained in Section 8.2(c) of this Agreement;
(d)such Accounts do not arise from sales on consignment, guaranteed sale, sale and return, sale on approval, or other terms under which payment by the account debtor may be conditional or contingent;
(e)(i) the chief executive office of the account debtor with respect to such Accounts is located in Canada, the United States or the United Kingdom, (ii) the Account is Investment Grade or a Credit Enhanced Account or (iii) the Account is a Foreign Account but not Investment Grade or a Credit Enhanced Account and (A) the account debtor of such Foreign Account has delivered to an Operating Company an irrevocable letter of credit issued or confirmed by a bank that is Investment Grade or otherwise satisfactory to the Administrative Agent, acting reasonably, payable in the currency in which the Account is denominated, sufficient to cover such Foreign Account, in form and substance satisfactory to the Administrative Agent, acting reasonably and, if required by the Administrative Agent, the original of such letter of credit has been delivered to the Administrative Agent or the Administrative Agent’s agent and the issuer thereof has been notified of the assignment of the proceeds of such letter of credit to the Administrative Agent, or
(B) such Foreign Account is subject to credit insurance payable to the Administrative Agent issued by an insurer and on terms and in an amount acceptable to Required Lenders, or (C) such Account is otherwise acceptable in all respects to the Administrative Agent (subject to such Revolving Loans Borrowing Base with respect thereto as the Administrative Agent may determine);
(f)such Accounts do not consist of progress billings, bill and hold invoices or retainage invoices, except as to bill and hold invoices, if the Administrative Agent shall have received an agreement in writing from the account debtor, in form and substance satisfactory to the Administrative Agent, acting reasonably, confirming the unconditional obligation of the account debtor to take the goods related thereto and pay such invoice;
(g)the account debtor with respect to such Accounts has not asserted a counterclaim, defence or dispute and does not have, and does not engage in transactions which may give rise to, any right of setoff against such Accounts (but the portion of the Accounts of such account debtor in excess of the amount at any time and from time to time owed by an Operating Company to such account debtor or claimed owed by such account debtor shall be deemed Eligible Accounts unless excluded by any other paragraph of this definition);
(h)such Accounts are subject to the first priority, valid and perfected security interest of the Administrative Agent, subject to Permitted Liens;
(i)neither the account debtor nor any senior officer of the account debtor with respect to such Accounts is a senior officer of or affiliated with an Operating Company directly or indirectly by virtue of family membership, ownership, control, management or otherwise; provided that, notwithstanding the foregoing, no Accounts owing by the Parent and its Affiliates shall be excluded from Eligible Accounts on the basis of this paragraph (i);
(j)the account debtors with respect to such Accounts are not the federal government of Canada or any foreign government or political subdivision, department, agency or instrumentality of any foreign government unless, upon the Administrative Agent’s request, the Financial Administration Act (Canada) or any similar foreign, state or local law, if applicable, has been complied with in a manner satisfactory to the Administrative Agent;
(k)such Accounts of a single account debtor or its Affiliates do not constitute more than twenty-five percent (25%) (fifty (50%) percent for Heinz (and its Affiliates)) of all otherwise Eligible Accounts (but the portion of the Accounts not in excess of such percentage shall be Eligible Accounts to the extent they otherwise satisfy the criteria for Eligible Accounts);
(l)such Accounts are not owed by an account debtor (other than Heinz (and its Affiliates)) who has Accounts unpaid more than sixty (60) days after the due date which constitute more than fifty percent (50%) of the total Accounts of such account debtor;
(m)such Accounts are owed by account debtors whose total indebtedness to the Borrower does not exceed the credit limit with respect to such account debtors as determined by the Borrower from time to time (but the portion of the Accounts not
in excess of such credit limit shall be Eligible Accounts to the extent they otherwise satisfy the criteria for Eligible Accounts);
(n)such Accounts are owed by account debtors deemed creditworthy at all times by the Administrative Agent, as determined by the Administrative Agent; and
(o)such Accounts conform with all representations and covenants herein in all material respects.
General criteria for Eligible Accounts may be established and revised from time to time by the Administrative Agent. Any Accounts which are not Eligible Accounts shall nevertheless be part of the Collateral.
61.“Eligible Assignee”
“Eligible Assignee” means any Person (other than a natural person, any Obligor or any Affiliate of an Obligor), in respect of which any consent that is required by Section 14.3(b) has been obtained and any Person in respect of which no consent is required by Section 14.3(b).
62.“Eligible Inventory”
“Eligible Inventory” shall mean Inventory, in all cases which are acceptable to the Administrative Agent based on the criteria set forth below. In general, Eligible Inventory shall not include (a) spare parts for Inventory; (b) Inventory subject to a security interest, hypothec or lien in favour of any person other than the Administrative Agent that is not a Permitted Lien; (c) Inventory which is not subject to the first priority, valid and perfected security interest, lien or hypothec of the Administrative Agent, subject to Permitted Liens; (d) Inventory located outside of Canada, the United States and the United Kingdom; or (e) Inventory that does not conform with all representations and covenants herein in all material respects; or (f) Inventory located in Minnesota unless that Inventory is cereal grain, course seed grain or dry edible beans. General criteria for Eligible Inventory may be established and revised from time to time by the Administrative Agent provided that the Borrower has received prior written notice of such general criteria. Any Inventory which is not Eligible Inventory shall nevertheless be part of the Collateral.
63.“Environmental Laws”
“Environmental Laws” shall mean with respect to any Person all Applicable Law relating to health, safety, hazardous, dangerous or toxic substances, waste or material, pollution and environmental matters, as now or at any time hereafter in effect, applicable to such Person and/or its business and facilities (whether or not owned by it), including laws relating to emissions, discharges, releases or threatened releases of pollutants, contamination, chemicals, or hazardous, toxic or dangerous substances, materials or wastes into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) or otherwise relating to the generation, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals, or hazardous, toxic or dangerous substances, materials or wastes.
64.“Eligible Machinery and Equipment”
“Eligible Machinery and Equipment” shall mean machinery and equipment owned by an Obligor that is: (a) in the exclusive possession of an Obligor at a location that is either owned by an Obligor or leased by an Obligor under a lease that is in good standing; (b) subject to a first priority lien in favour of the Administrative Agent and free and clear of any other Lien that is not a Permitted Lien (excluding any Lien defined in clause (e) of that definition); (c) used currently in the business operations of an Obligor, (d) is not obsolete, (e) is operable, (f) is not subject to any lease or financing arrangement, (g) is not a fixture and has not become affixed to any real estate, and (h) has been accepted by the Administrative Agent, in writing, as eligible machinery and equipment following the receipt by the Administrative Agent of a recent appraisal of such machinery and equipment on terms and in a form satisfactory to the Administrative Agent.
65.“Eligible Real Estate Collateral”
“Eligible Real Estate Collateral” shall mean (1) in respect of real property owned in fee simple by the Borrower or an Obligor as of the date of this Agreement, and included within the Revolving Loans Borrowing Base at or below an aggregate value of $35 million, real property in respect of which: (a) the Administrative Agent has given written consent to the acceptance of such real estate as Eligible Real Estate Collateral following the receipt of a current appraisal satisfactory to the Administrative Agent, (b) the Administrative Agent has received on behalf of the Lenders a charge or mortgage on terms acceptable to the Administrative Agent ranking in first position and subject only to such encumbrances on title as the Administrative Agent in its sole discretion may accept, and (c) is not subject to any expected present or future claim under Environmental Laws, as may be confirmed by such environmental reports as the Administrative Agent in its sole discretion may require, and (2) in respect of any real property not owned in fee simple by the Borrower or an Obligor as of the date of this Agreement, or the inclusion of which in the Revolving Loans Borrowing Base results in an aggregate inclusion for Eligible Real Estate Collateral in excess of
$35 million, shall be a property in respect of which (a) all Lenders have given their written consent to the acceptance of such real estate as Eligible Real Estate Collateral following the receipt of an appraisal satisfactory to all Lenders, (b) the Administrative Agent has received on behalf of the Lenders a charge or mortgage on terms acceptable to the Administrative Agent ranking in first position and subject only to such encumbrances on title as the Administrative Agent in its sole discretion may accept, and (c) is not subject to any expected present or future claim under Environmental Laws, as may be confirmed by such environmental reports as the Administrative Agent in its sole discretion may require.
66.“Equity”
“Equity” shall mean the combined consolidated shareholders’ equity of each Operating Company as reflected in the consolidated financial statements of each Operating Company, on a consistent basis in accordance with GAAP, plus the aggregate total amount of all Subordinated Debt.
67.“Equity Interests”
“Equity Interests” means (a) in respect of a corporation, shares in its capital stock (including common and preferred shares), (b) in respect of a general partnership or a limited partnership, any partnership interest therein and any interest in the income or capital of or distributions from such partnership, whether any such interest is denominated in units or not; (c) in respect of a trust, any
beneficial interest therein or in the assets or income thereof, whether denominated in units or not; and (d) in respect of any other person, any similar or corresponding interest in its capital, assets or equity; and includes any right, warrant, option or other security conferring a right to acquire any of the foregoing.
68.“Equivalent Amount”
“Equivalent Amount” in one currency on any day means the amount of that currency into which a specified amount of another currency can be converted at the Spot Rate (or if such rate is not available, such other rate as Lenders may determine to fairly reflect the prevailing foreign exchange equivalent of that currency).
69.“Erroneous Payment” has the meaning assigned to it in Section 11.16(a).
70.“Erroneous Payment Notice” has the meaning assigned to it in Section 11.16(b).
71.“Event of Default”
“Event of Default” shall mean the occurrence or existence of any event or condition described in Section 12.1 hereof.
72.“Excess Availability”
“Excess Availability” shall mean the Canadian Dollar Amount, as determined by the Administrative Agent, calculated at any time, equal to: (a) the lesser of: (i) the amount of the Revolving Loans available to the Borrower as of such time based on the Revolving Loans Borrowing Base formula, as determined by the Administrative Agent, and subject to the sub-limits and Availability Reserves from time to time established by the Administrative Agent hereunder, and (ii) the Maximum Revolver Credit, minus (b) the sum of: (i) the amount of all then outstanding and unpaid Revolving Loans, plus (ii) the aggregate amount of the Priority Payables Reserve and, for the purposes of determining Excess Availability on closing only, past due trade payables of each Operating Company as of such time.
73.“Excluded Taxes”
“Excluded Taxes” means, with respect to the Administrative Agent or any Lender or any other recipient of any payment to be made by or on account of any obligation of an Obligor hereunder,
(a) taxes imposed on or measured by its capital, net income, and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes or any similar tax imposed by any jurisdiction in which Lender is located and (c) in the case of a Foreign Lender (other than (i) an assignee pursuant to a request by the Borrower under Section 14.3(b), (ii) an assignee pursuant to an Assignment and Assumption made when an Event of Default has occurred and is continuing or (iii) any other assignee to the extent that the Borrower has expressly agreed that any withholding tax shall be an Indemnified Tax), any withholding tax that (A) is imposed or assessed in respect of a Loan that was made on the premise that an exemption from such withholding tax would be available where the exemption is subsequently determined, or alleged
by a taxing authority, not to be available and (B) is required by Applicable Law to be withheld or paid in respect of any amount payable hereunder or under any Financing Agreement to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new lending office) or is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 5.2(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from an Obligor with respect to such withholding tax pursuant to Section 5.2(e). For greater certainty, for purposes of item (c) above, a withholding tax includes any Tax that a Foreign Lender is required to pay pursuant to Part XIII of the Income Tax Act (Canada) or any successor provision thereto.
74.“Fair Market Value”
“Fair Market Value” shall mean with respect to any real property at any time the Canadian Dollar Amount of the value of such property if sold within a reasonable period of time by a willing seller to a willing and informed buyer on an arms length basis as determined by a current appraisal (conducted by an independent appraiser satisfactory to Required Lenders acting reasonably) net of all selling expenses and liens against such property ranking or capable of ranking senior to or pari passu with the financing arrangements against such property that secure the Obligations.
75.“Financing Agreements”
“Financing Agreements” shall mean, collectively, this Agreement, the General Security Agreements, the Mortgages, pledge agreements and all notes, assignments, guarantees, security agreements and other agreements, documents and instruments now or at any time hereafter executed and/or delivered by any Obligor in connection with this Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.
76.“Fixed Charge Coverage Ratio”
“Fixed Charge Coverage Ratio” shall mean the ratio of (a) EBITDA less unfinanced Capital Expenditures, taxes payable and distributions to shareholders (minus distributions to shareholders re-invested in the Operating Companies) of the Operating Companies (excluding items deducted in computing EBITDA) divided by (b) Fixed Charges. For the purposes of this definition, “unfinanced Capital Expenditures” shall mean Capital Expenditures (other than Growth Capital Expenditures) which have not been financed by the issuance of any debt (including by way of a capital lease), equity or the net proceeds of the sale of any capital assets or of any insurance proceeds compensating for loss of or damage to capital assets; provided that any equity or Subordinated Debt contribution by transfer to a Blocked Account shall increase the numerator of the Fixed Charge Coverage Ratio.
77.“Fixed Charges”
“Fixed Charges” shall mean, for any fiscal period of the Operating Companies, on a combined consolidated basis, without duplication, payments of principal during the applicable period with respect to all indebtedness for borrowed money (excluding for greater certainty the payment of principal in respect of the Refinancing), plus payments of principal during the applicable period
with respect to all capital lease obligations, plus payments of cash interest during the applicable period with respect to all indebtedness for borrowed money, including capital lease obligations, plus payments made in respect of Pension Plans in excess of expenses relating to the Pension Plans, minus the amount of any interest payments on Subordinated Debt re-invested in the Operating Companies. For greater certainty, any payments (other than interest payments) on account of the Revolving Loans shall not constitute a component of Fixed Charges.
78.“Forced Sale Value”
“Forced Sale Value” shall mean with respect to any real property at any time the Canadian Dollar Amount of the value of such property determined pursuant to a current appraisal (conducted by an independent appraiser satisfactory to Required Lenders acting reasonably) on a short term forced sale basis, net of selling expenses and the amount of all liens against such property ranking or capable of ranking senior to or pari passu with the financing arrangements against such property that secure the Obligations.
79.“Foreign Account”
“Foreign Account” means an Account owing by a person whose chief executive office is located outside of Canada, the United States of America and the United Kingdom and which is formed under the laws of a jurisdiction other than the United States of America and the United Kingdom.
80.“Foreign Lender”
“Foreign Lender” means any Lender that is not organized under the laws of the jurisdiction in which Borrower is resident for tax purposes and that is not otherwise considered or deemed in respect of any amount payable to it hereunder or under any Financing Agreement to be resident for income tax or withholding tax purposes in the jurisdiction in which Borrower is resident for tax purposes by application of the laws of that jurisdiction. For purposes of this definition Canada and each Province and Territory thereof shall be deemed to constitute a single jurisdiction and the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.
81.“Fund”
“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
82.“Funding Bank”
“Funding Bank” has the meaning ascribed thereto in Section 5.1(a) hereof.
83.“GAAP”
“GAAP” means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature and authority within the US accounting profession), which are applicable to the circumstances as of the date of determination.
84.“General Security Agreements”
“General Security Agreements” shall mean the general security agreements and hypothecs (if applicable) given by Obligors in favour of the Administrative Agent in respect of the Obligations.
85.“Governmental Authority”
“Governmental Authority” means the Government of Canada or any other nation, or of any political subdivision thereof, whether provincial, state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
86.“Growth Capital Expenditures”
“Growth Capital Expenditures” shall mean, for any fiscal period, any amounts paid in respect of any purchase or other acquisition for value of capital assets which have been designated by the Borrower in writing, and acknowledged by the Administrative Agent in writing, as related to Growth Capital Expenditures, provided that (a) such excluded amounts shall not exceed
$5,000,000 in any twelve (12) month period, and (b) Excess Availability exceeds $23,000,000 after giving effect to such payment.
87.“Hazardous Materials”
“Hazardous Materials” shall mean any hazardous, toxic or dangerous substances, materials and wastes, including, without limitation, hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, biological substances, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type of pollutants or contaminants (including, without limitation, materials which include hazardous constituents), sewage, sludge, industrial slag, solvents and/or any other similar substances, materials, or wastes and including any other substances, materials or wastes that are or become regulated under any Environmental Law (including, without limitation any that are or become classified as hazardous or toxic under any Environmental Law).
88.“Hybrid Debt”
“Hybrid Debt” means, the indebtedness owing by the Borrower to Avrio Subordinated Debt Limited Partnership and Fifth Third Bank, Canada Branch.
89.“Indemnified Liabilities”
“Indemnified Liabilities” has the meanings ascribed thereto in Section 5.6 hereof.
90.“Indemnified Parties”
“Indemnified Parties” has the meaning ascribed thereto in Section 5.6(a) hereof.
91.“Indemnified Taxes”
“Indemnified Taxes” means Taxes other than Excluded Taxes.
92.“Information Certificate”
“Information Certificate” shall mean the Information Certificate of the Borrower constituting Exhibit C hereto containing material information with respect to each Operating Company, its business and assets provided by the Borrower to the Administrative Agent in connection with the preparation of this Agreement and the other Financing Agreements and the financing arrangements provided for herein.
93.“Intellectual Property”
“Intellectual Property” shall mean all issued patents and patent applications, industrial design registrations, trade-marks, registrations and applications therefor, trade-names and styles, logos, copyright registrations and applications therefor which are owned by or licensed to an Operating Company and used in or necessary to the operation of its business.
94.“Interest Expense”
“Interest Expense” shall mean the combined consolidated interest expense of each Operating Company for such period, as determined by GAAP.
95.“Interest Period”
“Interest Period” shall mean:
(a)for BA Advance, a period of approximately thirty (30), sixty (60) or ninety (90) days duration as Borrower may elect, the exact duration to be determined in accordance with the customary practice in the bankers’ acceptances market;and
(b)with respect to any particular SOFR Loan, the period commencing on the date on which such SOFR Loan is advanced or continued or another Loan is converted into such SOFR Loan, as applicable, and ending on the date that is one, three or six months thereafter (each month being a period of 30 days for purposes of this definition and in each case subject to the availability thereof), as elected by the Borrower in its notice requesting a drawdown;
provided, that, in either case, Borrower may not elect an Interest Period which will end after the last day of the current term of this Agreement.
96.“Interest Rate”
“Interest Rate” shall mean the interest rate based on the following performance grids:
Revolving Loans
| Performance Tier | Fixed Charge Coverage Ratio at time of calculation | For Canadian Prime Rate Loans or US Prime Rate Loans, as applicable:<br><br>Canadian Prime Rate or US Prime Rate, as applicable, plus | For BA Advances or SOFR Loans, as applicable:<br><br><br><br>BA Rate or Adjusted Term SOFR plus | Unused Line Fee |
|---|---|---|---|---|
| Tier I | Equal to or greater than 1.50 | 0.00% | 1.25% | 0.200% |
| Tier II | Equal to or greater than<br><br>1.00 but less than 1.50 | 0.25% | 1.50% | 0.225% |
| Tier III | Less than 1.00 | 0.50% | 1.75% | 0.250% |
provided that, the Interest Rate shall mean the applicable rate described above plus two percent (2%) per annum, at Lenders’ option, (a) on non-contingent Obligations (i) for the period on and after the Maturity Date or the date upon which a Notice of Termination is delivered by the Administrative Agent until such time as Lenders have received full and final payment of all such Obligations and (ii) for the period from and after the date the Administrative Agent notifies Borrower that an Event of Default has occurred and is continuing and that the Required Lenders have elected to increase the interest rate payable hereunder by two percent (2%) per annum and continuing for so long as such Event of Default is continuing and (b) on the Revolving Loans outstanding in excess of the amounts available to the Borrower under Section 2.1 hereof (whether or not such excess(es) arise or are made with or without Lenders knowledge or consent and whether made before or after an Event of Default), if such excess shall remain outstanding for a period of three (3) Business Days after a demand is made on Borrower by the Administrative Agent for payment thereof, provided that if such excess remains outstanding for a period of more than three
(3) Business Days after such demand, such rate increase would apply retroactively to the date that the condition triggering the rate increase (as noted above) was first satisfied.
And provided further that (A) changes in the applicable Interest Rate shall be effective as of the first day of the calendar month next following the relevant date that the Borrower delivers a compliance certificate pursuant to Section 10.6(d) of this Agreement (but, with respect to Bankers’ Acceptances and SOFR Loans which are outstanding on such day, changes in the Interest Rate shall be effective when they are rolled over or converted) and (B) changes in the Interest Rate shall apply, as at the effective dates of such changes, to Loans outstanding on such dates, but only for those portions of the terms of such Loans after the effective date of such changes, as provided above.
97.“Inventory”
“Inventory” means inventory of each Operating Company as defined under the PPSA.
98.“Investment Grade”
“Investment Grade” means a debt security, Account or other instrument that is rated at least a credit rating of “BBB-” or “Baa3” from S&P, Moody’s or DBRS, or which is issued by a person whose senior, unsecured, non-credit enhanced long-term debt is so rated.
99.“ISDA Definitions”
“ISDA Definitions” shall mean the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time by the International Swaps and Derivatives Association, Inc. or such successor thereto.
100.“Loans”
“Loans” shall mean any extension of credit by a Lender under this Agreement, including without limitation the Revolving Loans.
101.“Material Adverse Change”
“Material Adverse Change” means any material adverse change in:
(c)the business, financial condition, operations, assets or properties of the Obligors, taken as a whole, which would reasonably be expected to adversely affect the ability of the Borrower to repay the Obligations; or
(d)the validity or enforceability of this Agreement or any other Financing Agreement; or
(e)the rights and remedies of the Administrative Agent and the Lenders under this Agreement or any other Financing Agreement taken as a whole.
102.“Maturity Date”
“Maturity Date” means June 26, 2026, subject to earlier termination or acceleration in accordance with the terms herein.
103.“Maximum Credit”
“Maximum Credit” shall mean the amount of $281,875,000, plus the amount of each increase therein under the accordion described in Section 2.12, if applicable.
104.“Maximum Revolver Credit”
“Maximum Revolver Credit” shall mean the Maximum Credit hereunder.
105.“Moodys”
“Moodys” means Moody’s Investor Services Inc.
106.“Mortgages”
“Mortgages” means each collateral mortgage in favour of the Administrative Agent, registered against each of the real properties owned by each Obligor included in the Eligible Real Estate Collateral.
107.“Net Amount of Eligible Accounts”
“Net Amount of Eligible Accounts” shall mean the gross Canadian Dollar Amount of Eligible Accounts less returns, discounts, claims, credits and allowances of any nature at any time issued, owing, granted, outstanding, available or claimed with respect to such Eligible Accounts.
108.“Net Forced Liquidation Value”
“Net Forced Liquidation Value” shall mean with respect to personal property at any time, the Canadian Dollar Amount of the gross liquidation value of such property, on a forced sale basis, determined pursuant to a current appraisal (conducted by an independent appraiser satisfactory to Required Lenders acting reasonably) net of (a) liquidation expenses as estimated by Administrative Agent in its sole discretion and (b) the amount of all liens (except liens granted to Administrative Agent) against such property ranking or capable of ranking senior to or pari passu with the financing arrangements against such property that secure the Obligations.
109.“Net Orderly Liquidation Value”
“Net Orderly Liquidation Value” shall mean with respect to any real or personal property at any time, the Canadian Dollar Amount of the gross orderly liquidation value of such property determined pursuant to a current appraisal (conducted by an independent appraiser satisfactory to Required Lenders acting reasonably) net of (a) liquidation expenses as estimated by the Administrative Agent in its sole discretion and (b) the amount of all liens (except liens granted to the Administrative Agent) against such property ranking or capable of ranking senior to or pari passu with the financing arrangements against such property that secure the Obligations.
110.“Notice of Termination”
Notice of Termination has the meaning given to such term in Section 12.2(b).
111.“Obligations”
“Obligations” shall mean any and all Revolving Loans, and all other obligations, liabilities and indebtedness of every kind, nature and description owing by any Obligor to the Administrative Agent, Lenders and/or their Affiliates, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under this Agreement, the other Financing Agreements or the Ancillary Facilities, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of this Agreement or after the commencement of any proceeding with respect to any Obligor under the BIA, the CCAA, or any similar statute in any jurisdiction (including the payment of interest and other amounts which would accrue and become due but for the commencement of such proceeding, whether or not such amounts are allowed or allowable in whole or in part in such proceeding), whether direct or indirect, absolute or contingent, joint or several, due or not due,
primary or secondary, liquidated or unliquidated, secured or unsecured, and however acquired by the Administrative Agent or Lenders or their Affiliates.
112.“Obligor”
“Obligor” shall mean Borrower and any guarantor, endorser, acceptor, surety or other person liable on or with respect to the Obligations or who is the owner of any property which is security for the Obligations. As of the date hereof, the only Obligors are the Operating Companies. For greater certainty, any future subsidiary of Borrower shall be required to be an Obligor.
113.“Operating Company”
“Operating Company” means Borrower or Thompsons US, as the context requires, and “Operating Companies” means both of them.
114.“Other Taxes”
“Other Taxes” means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Financing Agreement or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Financing Agreement.
115.“Parent”
“Parent” means The Andersons, Inc., and its successors and assigns.
116.“Participant”
“Participant” has the meaning assigned to such term in Section 14.3(d).
117.“Patriot Act”
“Patriot Act” means the USA Patriot Act (P.L. 107-56, 115 Stat. 272 (2001)).
118.“Payment Account”
“Payment Account” shall have the meaning set forth in Section 7.3(a) hereof.
119.“Pension Plans”
“Pension Plans” shall mean all benefit plans providing pensions, superannuation benefits or retirement savings, including pension plans, top up pensions or supplemental pensions, “registered retirement savings plans” (as defined in the Income Tax Act (Canada)), “registered pension plans” (as defined in the Income Tax Act (Canada)) and “retirement compensation arrangements” (as defined in the Income Tax Act (Canada)) which an Operating Company sponsors or administers or into which an Operating Company makes contributions.
120.“Permitted Acquisitions”
“Permitted Acquisitions” shall mean any acquisition by the Borrower that satisfies each of the following criteria:
(a)the business, assets or division acquired is engaged in the distribution of agricultural products;
(b)immediately before or after such acquisition no Event of Default shall exist;
(c)such acquisition is non-hostile;
(d)the net cash consideration paid in respect of such acquisition does not exceed
$10,000,000; and
(e)prior to such acquisition, the Borrower shall provide the Administrative Agent with each of the following:
(i)an acquisition summary in reasonable detail describing each of the operations, financial performance for the prior 12 months, acquisition terms and integration plan; and
(ii)revised forecast demonstrating Excess Availability following such acquisition to remain in excess of $20,000,000 and that the Borrower would remain in compliance with the financial covenant in Section 10.13.
121.“Periodic Term SOFR Determination Day”
“Periodic Term SOFR Determination Day” has the meaning specified in the definition of “Term SOFR”.
122.“Permitted Debt”
“Permitted Debt” means (a) the Obligations; (b) trade obligations, taxes, governmental duties and charges and normal accruals in the ordinary course of business not past due, or with respect to which an Operating Company is contesting the amount or validity thereof by appropriate proceedings diligently pursued and available to such Operating Company, and with respect to which adequate reserves (to the extent required in accordance with GAAP) have been set aside on its books; (c) purchase money indebtedness (including capital leases and excluding, for greater certainty, the lease relating to the Borrower’s main office premises) to the extent not incurred or secured by liens (including capital leases) in violation of any other provision of this Agreement, or if such purchase money indebtedness (including capital leases) is secured, such indebtedness does not exceed in aggregate Cdn.$10,000,000; (d) Subordinated Debt, (e) the indebtedness set forth on Schedule 10.9 hereto and (f) indebtedness incurred in connection with Permitted Acquisitions.
123.“Permitted Disposition”
“Permitted Disposition” means sales or dispositions of inventory in the ordinary course of business and any of the following:
(a)a sale or disposition in the ordinary course of business and in accordance with sound industry practice of property that is obsolete, no longer used or useful for its intended purpose or is being replaced in the ordinary course of business;
(b)disposals of assets between Obligors;
(c)disposals of defaulted Accounts in order to realize on them in a commercially responsible manner;
(d)sales, exchanges and other dispositions of short term investments in securities in the ordinary course of business;
(e)close-outs and other early settlements of Swaps; and
(f)sales or dispositions of assets in addition to those permitted elsewhere in this definition provided that the gross sale proceeds and fair market value of the assets so sold or disposed of does not exceed Cdn.$5,000,000 in any fiscal year and the net proceeds from such sale or disposition are either reinvested in the business of the Borrower or paid to the Lenders.
For greater certainty, no sale or disposition by an Obligor of any Eligible Machinery and Equipment or Eligible Real Estate Collateral valued in excess of $5,000,000 shall constitute a Permitted Disposition without the prior written consent of Required Lenders.
124.“Permitted Liens”
“Permitted Liens” means (a) liens and security interests of Lenders under or pursuant to this Agreement and any other Financing Agreement; (b) liens securing the payment of taxes, either not yet overdue or the validity of which are being contested by appropriate proceedings diligently pursued and available to an Obligor and with respect to which adequate reserves (to the extent required in accordance with GAAP) have been set aside on its books; (c) non-consensual statutory deemed trusts and liens (other than liens securing the payment of taxes) arising in the ordinary course of an Obligor’s business to the extent: (i) such liens secure indebtedness which is not overdue or the validity of which is being contested by appropriate proceedings diligently pursued and available to an Obligor and with respect to which adequate reserves (to the extent required in accordance with GAAP) have been set aside in its books or (ii) such liens secure indebtedness relating to claims or liabilities which are fully insured and being defended at the sole cost and expense and at the sole risk of the insurer or being contested by appropriate proceedings diligently pursued and available to an Obligor, in each case prior to the commencement of foreclosure or other similar proceedings and with respect to which adequate reserves (to the extent required in accordance with GAAP) have been set aside on its books; (d) zoning restrictions, easements, minor title defects, encumbrances, licenses, covenants, rights reserved by Governmental Authorities, reservations of the Crown and other restrictions affecting the use of real property which do not
interfere in any material respect with the ordinary conduct of the business of an Operating Company; (e) purchase money security interests in personal property (including capital leases) not to exceed the Canadian Dollar Amount of $5,000,000 in the aggregate at any time outstanding so long as such security interests do not apply to any property of an Operating Company other than the personal property so acquired, any insurance related thereto and proceeds thereof and the indebtedness secured thereby does not exceed the cost of the personal property or real estate so acquired, as the case may be; (f) security interests and liens over cash and/or investments permitted by Section 10.9(c) not comprising Collateral securing Swaps; (g) security given by the Borrower to a surety pursuant to a surety bond or indemnity agreement but only to the extent that such security secures indebtedness that only relates to a bond or indemnity agreement issued by a surety for a project and such security is limited to the specific assets of such project over assets that do not constitute Collateral; (h) any carrier’s, warehousemen’s, mechanic’s and construction and other liens arising by contract or operation of Applicable Law in the ordinary course of an Operating Company’s business in respect of obligations which are not overdue for a period in excess of thirty (30) days or which are being contested by appropriate proceedings diligently pursued; (i) deposits of cash or securities in connection with any appeal, review or contestation of any security or lien and any bonding arrangements made in the ordinary course of business to secure the performance of bids, tenders, contracts, leases, customs duties and other similar obligations; (j) banker’s liens and security interests, rights of combination of accounts or similar rights in the ordinary course of conducting day-to-day banking business in relation to deposit accounts or other funds maintained with a creditor depository institution; (k) liens and security interests in favour of securities intermediaries and clearing agencies relating to the operation of securities accounts and security entitlements credited thereto arising in the ordinary course of maintaining such securities accounts and acquiring, owning or disposing such security entitlements; (l) the reversionary interests of landlords under operating leases of real property;
(m) the tenancy rights of tenants under operating leases of real property; (n) the interests (including liens and security interests in the property leased and any insurance and proceeds related thereto) of lessors under operating leases of property; (o) such other liens and security interests securing such obligations as may be approved by the Required Lenders from time to time, (p) the security interests and liens set forth on Schedule 10.8 hereto; (q) security over any assets of the Obligors other than the Collateral securing Permitted Debt described in clause (f) of the definition of Permitted Debt; and (r) the replacement, extension or renewal of any lien or security interest referred to in this definition upon or in respect of the same property arising out of the extension, renewal or replacement of the indebtedness secured thereby (without increase in the amount thereof) (except to the extent that the Administrative Agent requires the discharge thereof prior to the advance of the initial Loans hereunder), provided that the Administrative Agent and Lenders may contest improperly registered security interests in the event such registered creditors attempt to realize on their security.
125.“Permitted Loan Repayments”
“Permitted Loan Repayments” as defined in Section 10.9(b)(i).
126.“Person” or “person”
“Person” or “person” shall mean any individual, sole proprietorship, partnership, limited partnership, corporation, limited liability company, unlimited liability company, business trust,
unincorporated association, joint stock corporation, trust, joint venture or other entity or any government or any agency or instrumentality or political subdivision thereof.
127.“PPSA”
“PPSA” shall mean the Personal Property Security Act (Ontario), as amended, supplemented, restated and superseded, in whole or in part, from time to time, provided that, if the attachment, perfection or priority of the Administrative Agent’s security in respect of any Collateral is governed by the laws of any jurisdiction other than Ontario, PPSA shall mean those other laws for the purposes hereof relating to the attachment, perfection or priority.
128.“Pre-Adjustment Successor Rate” as defined in Section 5.10(a).
129.“Priority Payables Reserve”
“Priority Payables Reserve” shall mean, at any time, the full amount of the liabilities at such time which have a trust imposed to provide for payment or security interest, lien or charge ranking or capable of ranking senior to or pari passu with security interests, liens or charges securing the Obligations on any of the Collateral under federal, provincial, state, county, municipal, or local law including, but not limited, to claims for unremitted and accelerated rents, taxes of any kinds including, without limitation, wages and vacation pay (including and subject to the provisions of the Wage Earner Protection Program Act (Canada)), workers’ compensation obligations, government royalties or pension fund obligations, together with the aggregate value, determined in accordance with GAAP, of all Eligible Inventory which the Administrative Agent determines is reasonably likely to be or become subject to a right of a supplier to recover possession thereof under any federal or provincial law, where such supplier’s right is reasonably likely to have priority over the security interests, liens or charges securing the Obligations including, without limitation, Eligible Inventory subject to a right of a supplier to repossess goods pursuant to Sections 81.1 or
81.2 of the BIA or similar legislation of any jurisdiction, any liability or potential liability of the Borrower arising from the application of Environmental Laws effecting any Eligible Real Estate Collateral, unless in each case Borrower has provided evidence satisfactory to the Administrative Agent, acting reasonably, that such supplier is not entitled to such priority or the Borrower has established adequate reserves (to the extent required in accordance with GAAP) in its books with respect to any or all such items; and “Priority Payable” means a claim included in the Priority Payable Reserve.
130.“Pro Rata Share” “Pro Rata Share” shall mean:
(a)at any particular time with respect to a particular Lender and referable to a particular Loan, the ratio of the individual Commitment of such Lender with respect to such Loan at such time to the aggregate of the individual Commitments of all of the Lenders with respect to such Loan at such time, or
(b)at any particular time with respect to a particular Lender but not referable to a particular Loan, the ratio of the aggregate of the individual Commitments of such Lender with respect to all Loans (expressed as Canadian Dollars) at such time to
the aggregate of the individual Commitments of all of Lenders with respect to all Loans (expressed as Canadian Dollars) at such time, or
(c)after any or all of the Obligations have been accelerated (so long as such acceleration has not been rescinded), with respect to all the Obligations owed by the Borrower to the Lenders, the percentage of the Obligations of the Borrower to the Lenders, determined by dividing the amount of the Obligations owed to such Lender by the aggregate of all of the then outstanding Obligations owed by the Borrower to all of the Lenders (which for greater certainty, shall include all Obligations under the Ancillary Facilities owed by the Borrower to the Lenders and to Persons who ceased to be Lenders hereunder after entering into such Ancillary Facilities).
131.“Proceeds of Crime Act”
“Proceeds of Crime Act” shall mean the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada).
132.“Receiver”
“Receiver” shall have the meaning ascribed thereto in Section 12.2(e) hereof.
133.“Records”
“Records” shall mean all of the Borrower’s present and future books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of the Borrower with respect to the foregoing maintained with or by any other person).
134.“Refinancing”
“Refinancing” shall have the meaning ascribed thereto in Section 7.6 hereof.
135.“
136.“Related Parties”
“Related Parties” means, with respect to any Person, such Person’s Affiliates and the directors and senior officers of such Person and of such Person’s Affiliates.
137.“Relevant Governmental Body”
“Relevant Governmental Body” means the Board of Governors of the Federal Reserve System of the United States or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System of the United States or the Federal Reserve Bank of New York, or any successor thereto.
138.“Required Lenders”
“Required Lenders” means Lenders having 66 2/3% or more of the Commitments of all Lenders or, if the Commitments have been terminated, Lenders having 66 2/3% or more of the aggregate outstanding amount of the Loans; provided that, in any event, Required Lenders shall include not less than two (2) Lenders.
139.“Revolving Loans”
“Revolving Loans” shall mean Canadian Prime Rate Loans, US Prime Rate Loans, BA Advances and/or SOFR Loans as the case may be, now or hereafter made by Lenders to or for the benefit of the Borrower on a revolving basis (involving advances, repayments and re-advances) as set forth in Section 2.1 hereof. For greater certainty, Revolving Loans shall include the Swingline Loan.
140.“Revolving Loans Borrowing Base”
“Revolving Loans Borrowing Base” shall have the meaning attributed thereto in Section 2.1(a).
141.“Revolving Parent Loans”
“Revolving Parent Loans” means indebtedness incurred by the Borrower in connection with loans made from time to time by the Parent or a successor and assign of the Parent or a wholly owned affiliate of the Parent, in each case provided that the Lender under such loan has provided a subordination of both the repayment and enforcement in favour of the Lender’s terms and in a form satisfactory to the Administrative Agent.
142.“S&P”
“S&P” means Standard & Poor’s, a division of The McGraw Hill Companies, Inc.
143.“Sanctions”
“Sanctions” means any trade, economic or financial sanctions laws, regulations, embargoes or restrictive measures imposed, administered or enforced by a Sanctions Authority.
144.“Sanctions Authority”
“Sanctions Authority” means any one or a combination of:
(a)the United Nations;
(b)the United States of America;
(c)Canada;
(d)the United Kingdom and each other respective member of the European Union; and
(e)the governments and official institutions or agencies of any of paragraphs (a) to (d)
above, including the Security Council of the United Nations, the U.S. Department of the Treasury’s Office of Foreign Assets Control, the United States Department of State, Global Affairs Canada and Her Majesty’s Treasury of the United Kingdom.
145.“Sanctioned Person”
“Sanctioned Person” means a Person that is, or is directly or indirectly owned or controlled by, a Person or Persons listed, designated or sanctioned under any Sanctions.
146.“Senior Financial Officer”
“Senior Financial Officer” means the chief financial officer, vice-president finance, vice-president financial reporting and compliance, the treasurer or the controller of the Borrower or any person designated by any such officer.
147.“SOFR”
“SOFR” means, with respect to any calendar day, a rate per annum equal to the secured overnight financing rate published by the SOFR Administrator on the next succeeding Business Day.
148.“SOFR Administrator”
“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
149.“SOFR Loan”
“SOFR Loan” shall mean any Revolving Loans or portion thereof denominated in US Dollars on which interest is payable based on the Term SOFR in accordance with the terms hereof.
150.“Spot Rate”
“Spot Rate” shall mean, with respect to a currency, the rate quoted by the Canadian Reference Bank as the spot rate for the purchase by the Canadian Reference Bank of such currency with another currency at approximately 11:00 a.m. (Toronto time) on the date two (2) Business Days prior to the date as of which the foreign exchange computation is made.
151.“Subordinated Debt”
“Subordinated Debt” means, without duplication, indebtedness for borrowed money incurred, assumed or guaranteed by an Operating Company which:
(a)matures after the Maturity Date;
(b)is expressly postponed and subordinated in right of payment to the indebtedness of such Operating Company to the Lenders pursuant to a postponement and subordination agreement in form and substance acceptable to the Required Lenders, acting reasonably (which agreement may contain reasonable standstill provisions satisfactory to the Required Lenders);
(c)expressly provides that no payment of principal, interest or premium may be made if an Event of Default exists or is reasonably expected to occur under this Agreement as a result of such payment;
(d)is not subject to covenants (except for terms relating to interest rates, original issue discount and underwriting and other fees) or events of default which are more restrictive on Borrower in any material respect than those provided for in this Agreement;
(e)is advanced by an Affiliate of the Operating Companies; and
(f)does not exceed, in the aggregate, $60,000,000.
152.“Subsidiaries”
“Subsidiaries” shall mean, with respect to any Person, any corporation, partnership or other entity of which at least a majority (50%) of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person and one or more Subsidiaries of such Person.
153.“Swaps”
“Swaps” means any transaction which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option, forward sale, exchange traded futures contract or any other similar transaction (including any option with respect to any of these transactions or any combination of these transactions).
154.“Swingline Facility”
“Swingline Facility” shall have the meaning attributed thereto in Section 2.3(a).
155.“Swingline Lender”
“Swingline Lender” shall mean Scotiabank Asset Finance, a division of The Bank of Nova Scotia, or such other Lender as may provide the Swingline Facility from time to time. For greater certainty, the “Swingline Lender” shall constitute a “Lender” for all purposes of this Agreement unless otherwise noted.
156.“Swingline Loan”
“Swingline Loan” shall have the meaning attributed thereto in Section 2.3(b).
157.“Taxes”
“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed, levied, collected, withheld or assessed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
158.“Term SOFR Administrator”
“Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by the Administrative Agent in its reasonable discretion).
159.“Term SOFR”
“Term SOFR” means, for any calculation with respect to a SOFR Loan, the Term SOFR Reference Rate for a tenor comparable to the applicable Interest Period on the day (such day, the “Periodic Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to the first day of such Interest Period, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00 p.m. (New York City time) on any Periodic Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Days for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding
U.S. Government Securities Business Days is not more than three (3) U.S. Government Securities Business Days prior to such Periodic Term SOFR Determination Day. If Term SOFR determined as provided above shall ever be less than zero percent (0%), then Term SOFR shall be deemed to be zero percent (0%).
160.“Term SOFR Reference Rate”
“Term SOFR Reference Rate” means the forward-looking term rate based on SOFR.
161."Unadjusted Benchmark Replacement"
"Unadjusted Benchmark Replacement" means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.
162.“U.S. Government Securities Business Day”
“U.S. Government Securities Business Day” means any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
163.“Thompsons US”
“Thompsons US” means Thompsons USA Limited, and its successors and permitted assigns.
164.“Trigger Event”
“Trigger Event” shall mean that Excess Availability as reported in any Borrowing Base Certificate is less than $20,000,000. A Trigger Event shall be deemed to no longer exist or continue and to have been waived in the event that Excess Availability disclosed in any two (2) successive Borrowing Base Certificates for any following two (2) month period exceeds $20,000,000.
165.“US Prime Rate”
“US Prime Rate” shall mean the greater of (1) the rate announced by The Bank of Nova Scotia, or its successors, from time to time as its base rate in effect for US Dollar loans made by The Bank of Nova Scotia in Canada, whether or not such announced rate is the best rate available at such bank, and (2) zero.
166.“US Prime Rate Loans”
“US Prime Rate Loans” shall mean any Loan or portion thereof denominated in US Dollars and on which interest is payable based on the US Prime Rate in accordance with the terms hereof.
167.“Voting Equity Interests”
“Voting Equity Interests” means capital stock of any class of any corporation or other Equity Interests of any other person which carries voting rights to elect the board of directors (or in respect of a person other than a corporation, other persons performing similar functions, including the control, management or direction of such person) under any circumstances.
Exhibit B Representations and Warranties
1.Corporate Existence, Power and Authority; Subsidiaries
Each Obligor is a corporation duly incorporated, validly existing and duly organized under the laws of its jurisdiction of incorporation and is duly qualified or registered as a foreign or extra- provincial corporation in all provinces, states or other jurisdictions where the nature and extent of the business transacted by it or the ownership of assets makes such qualification necessary, except for those jurisdictions in which the failure to so qualify would not result in a Material Adverse Change. The execution, delivery and performance of this Agreement, the other Financing Agreements and the transactions contemplated hereunder and thereunder are all within and each Obligor’s corporate powers, have been duly authorized and are not in contravention of Applicable Law or the terms of such Obligor’s certificate of incorporation, by-laws, or other organizational documentation, or any indenture, agreement or undertaking to which such Obligor is a party or by which such Obligor or its property are bound where such contravention of such indenture, agreement or undertaking would result in a Material Adverse Change. This Agreement and the other Financing Agreements constitute legal, valid and binding obligations of each Obligor, as applicable, enforceable in accordance with their respective terms, except as enforceability may be limited by general principles of equity and bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights generally and by moratorium laws from time to time in effect. Neither Operating Company has any Subsidiaries except as set forth on Borrower’s Information Certificate.
2.Financial Statements; No Material Adverse Change
All financial statements relating to an Operating Company (on a consolidated basis) which have been or may hereafter be delivered by an Operating Company to the Administrative Agent have been prepared in accordance with GAAP and fairly present the financial condition and the results of operations of such Operating Company (on a consolidated basis) as at the dates and for the periods set forth therein. Except as disclosed in any interim financial statements furnished by an Operating Company to the Administrative Agent prior to the date of this Agreement, there has been no Material Adverse Change since the date of the most recent audited financial statements furnished by such Operating Company to the Administrative Agent prior to the date of this Agreement.
3.Chief Executive Office; Collateral Locations
The chief executive office and head office of each Obligor including each Operating Company’s Records concerning Accounts are located only at the address set forth in the Information Certificate and its only other places of business and the only other locations of Collateral, if any, are the addresses set forth in the Information Certificate, subject to the right of the Borrower to establish new locations in accordance with Section 10.2 hereof and update the Information Certificate accordingly. The Information Certificate correctly identifies any of such locations which are not owned by Obligor and set forth the owners and/or operators thereof and to the best of Obligors’ knowledge, the holders of any mortgages on such locations.
4.Priority of Liens; Title to Properties
The security interests and liens granted to the Administrative Agent under this Agreement and the other Financing Agreements constitute valid and perfected first priority liens and security interests in and upon the Collateral subject only to Permitted Liens (except to the extent that Schedule 10.8 provides that the Lenders require the discharge of a lien set out therein prior to the advance of the initial Loans hereunder). Borrower has good and marketable title to all of its properties and assets, except to an extent which would not reasonably be expected to result in a Material Adverse Change, subject to no liens, mortgages, pledges, security interests, hypothecs, encumbrances or charges of any kind, except those granted to the Administrative Agent and Permitted Liens (except to the extent that Schedule 10.8 provides that the Lenders require the discharge of a lien set out therein prior to the advance of the initial Loans hereunder).
5.Tax Returns
Each Obligor has filed, or caused to be filed, in a timely manner all material tax returns, reports and declarations which are required to be filed by it (without requests for extension except as previously disclosed in writing to the Administrative Agent). All information in such tax returns, reports and declarations is complete and accurate in all material respects. Each Obligor has paid or caused to be paid all taxes due and payable or claimed due and payable in any assessment received by it, except to an extent which would not reasonably be expected to result in a Material Adverse Change and taxes, the validity of which are being contested by appropriate proceedings diligently pursued and available to such Obligor and with respect to which adequate reserves have been set aside on its books (to the extent required by GAAP). Adequate provision has been made for the payment of all accrued and unpaid federal, provincial, municipal, local, foreign and other taxes whether or not yet due and payable and whether or not disputed.
6.Litigation
Except as disclosed in writing to the the Administrative Agent, there is no present investigation by any governmental agency pending, or to the best of the Borrower’s knowledge threatened, against or affecting any Obligor, their assets or business and there is no action, suit, proceeding or claim by any Person pending, or to the best of the Borrower’s knowledge threatened, against any Obligor, or their assets or goodwill, or against or affecting any transactions contemplated by this Agreement, which has a reasonable prospect of succeeding and if adversely determined against such Obligor would result in a Material Adverse Change.
7.Compliance with Other Agreements and Applicable Laws
Except as disclosed in writing to the Administrator Agent, no Obligor is in default under, or in violation of the terms of, any agreement, contract, instrument, lease or other commitment to which it is a party or by which it or any of its assets are bound where such default or violation could reasonably be expected to result in a Material Adverse Change and each Obligor is in compliance with all Applicable Law, except to the extent failure to so comply would not reasonably be expected to result in a Material Adverse Change, including without limitation the Patriot Act.
8.Bank Accounts
All of the deposit accounts, investment accounts or other accounts in the name of or used by each Operating Company maintained at any bank or other financial institution are set forth on Schedule 10.17 hereto, subject to the right of each Operating Company to establish new accounts in accordance with Section 10.17 hereof.
9.Accuracy and Completeness of Information
All information furnished by or on behalf of Obligors in writing to the Administrative Agent in connection with this Agreement or any of the other Financing Agreements or any transaction contemplated hereby or thereby, including all information in the Information Certificate is true and correct in all material respects on the date as of which such information is dated or certified and does not omit any material fact necessary in order to make such information not misleading. No event or circumstance has occurred which has had or could be expected to result in a Material Adverse Change, which has not been fully and accurately disclosed to the Administrative Agent in writing.
10.Status of Pension Plans
Except as disclosed in writing to the Administrative Agent:
(a)each Pension Plan has been established, registered, qualified, amended, funded, administered and invested in material compliance with the terms of such Pension Plan, all provincial pension benefits legislation and any collective agreements, as applicable;
(b)all material obligations of each Operating Company (including fiduciary, funding, investment and administration obligations) required to be performed in connection with the Pension Plans or the funding agreements therefor have been performed in a timely fashion and there are no outstanding disputes concerning the assets held pursuant to any such funding agreement;
(c)all contributions or premiums required to be made by each Operating Company to the Pension Plans have been made in a timely fashion in material compliance with the terms of the Pension Plans and all Applicable Law;
(d)all employee contributions to the Pension Plans required to be made by way of authorized payroll deduction have been properly withheld by each Operating Company and fully paid into the Pension Plans in a timely fashion;
(e)all material reports and disclosures relating to the Pension Plans required by any Applicable Laws have been filed or distributed in a timely fashion;
(f)any payments, distributions or withdrawals from or transfers of assets to or from any Pension Plan have been made in accordance with the valid terms of such Pension Plan, applicable collective agreements and all Applicable Law and
occurred with the consent of any applicable Governmental Authority (where required);
(g)no amount is owing by any of the Pension Plans under the Income Tax Act (Canada) or any provincial taxation statute;
(h)the Pension Plans are fully funded both on an ongoing basis and on a solvency basis (using actuarial assumptions and methods which are consistent with the valuations last filed with the applicable governmental authorities and which are consistent with generally accepted actuarial principles); and
(i)each Operating Company has complied with all of its obligations in respect of the Pension Plans; each Operating Company, after diligent enquiry, has neither any knowledge, nor any grounds for believing, that any of the Pension Plans is the subject of an investigation, any other proceeding, an action or a claim; and there exists no state of facts which after notice or lapse of time or both could be expected to give rise to any such proceeding, action or claim,
save for any matters referred to in the foregoing which could not reasonably be expected to result in a Material Adverse Change.
11.Environmental Compliance
Except as disclosed in writing to the Administrative Agent:
(a)neither Operating Company has generated, used, stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous Materials, on or off its premises (whether or not owned by it) in any manner which at any time violates any applicable Environmental Law or any license, permit, certificate, approval or similar authorization thereunder which gives rise to a material liability on such Operating Company and the operations of each Operating Company comply in all material respects with all Environmental Laws and all licenses, permits, certificates, approvals and similar authorizations thereunder, except in each case to the extent failure to comply would not reasonably be expected to result in a Material Adverse Change;
(b)there has been no investigation, proceeding, complaint, order, directive, claim, citation or notice by any Governmental Authority or any other person nor is any pending or to the best of the Borrower’s knowledge threatened, with respect to any non-compliance with or violation of the requirements of any Environmental Law by either Operating Company or the release, spill or discharge, threatened or actual, of any Hazardous Material or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials or any other environmental, health or safety matter, in each case, which would result in a Material Adverse Change;
(c)neither Operating Company has any material liability (contingent or otherwise) in connection with a release, spill or discharge, threatened or actual, of any Hazardous
Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials which would result in a Material Adverse Change; and
(d)each Operating Company has all licenses, permits, certificates, approvals or similar authorizations required to be obtained or filed in connection with its operations under any Environmental Law and all of such licenses, permits, certificates, approvals or similar authorizations are valid and in full force and effect, except to the extent failure to comply would not reasonably be expected to result in a Material Adverse Change.
12.Sanctions
None of the Obligors or to the knowledge of any Obligor, any of their directors, officers or employees:
(a)is a Sanctioned Person or is engaging in or has engaged in any transaction or conduct that could result in it becoming a Sanctioned Person;
(b)is or has ever been subject to any claim, proceeding, formal notice or investigation with respect to Sanctions; or
(c)is engaging or has engaged in any transaction that evades or avoids, or has the purpose of evading or avoiding, or breaches or attempts to breach, directly or indirectly, any Sanctions applicable to it.
To the knowledge of the Obligors, no Person who will benefit in any capacity in connection with or from the Loans and/or any instruments and/or payments thereunder is a Sanctioned Person.
13.Intellectual Property
Except as disclosed in writing to the Administrative Agent, (a) each Operating Company is the sole and exclusive owner or licensee of, with all right, title and interest in and to (free and clear of any claims by any Person), its Intellectual Property, and has sole and exclusive rights to the use thereof, except to an extent which would not reasonably be expected to result in a Material Adverse Change, (b) neither Operating Company has knowingly infringed or violated and is not aware of any infringement or violation of any Intellectual Property or other proprietary rights of any other Person which would result in a Material Adverse Change, and no Person has made any such claim, and (c) none of the Intellectual Property has been assigned or licensed to any other Person.
13. Beneficial Ownership Certification
The information included in the Beneficial Ownership Certification, if applicable, is true and correct in all respects.
Exhibit C
Information Certificates
See attached
Exhibit D
Assignment and Assumption
This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Loan Agreement identified below (as amended, the “Loan Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Loan Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Loan Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including without limitation any letters of credit and guarantees included in such facilities) and (ii) to the extent permitted to be assigned under Applicable Law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Loan Agreement, any other documents or instruments delivered pursuant thereto or the loan-transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clause (i) and (ii) above being referred to herein collectively as, the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.
| 1. | Assignor: | |
|---|---|---|
| 2. | Assignee: | |
| [and is an Affiliate/Approved Fund of {identify Lender}1] | ||
| 3. | Borrower: | The Andersons Canada Limited |
| 4. | Administrative Agent: | , as the administrative agent under the Loan Agreement |
1 Select as applicable.
| 5. | Loan Agreement: | The Loan Agreement dated as of December 23, 2021 among The Andersons Canada Limited, Lenders parties thereto, Scotiabank Asset Finance, a division of The Bank of Nova Scotia, as<br><br>Administrative Agent, and the other agents parties thereto |
|---|
6. Assigned Interest:
| Facility Assigned2 | Aggregate Amount of Commitment / Loans for all Lenders3 | Amount of Commitment / Loans Assigned3 | Percentage Assigned of Commitment / Loans4 | CUSIP<br><br>Number |
|---|
[7. Trade Date: ]5
Effective Date: , 20 [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
The terms set forth in this Assignment and Assumption are hereby agreed to:
2 Fill in the appropriate terminology for the types of facilities under the Loan Agreement that are being assigned under this Assignment and Assumption (e.g. “Commitment,” etc.)
3 Amount to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date.
4 Set forth, to at least 9 decimals, as a percentage of the Commitment of all Lenders thereunder.
5 To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date.
ASSIGNOR
[NAME OF ASSIGNOR]
By: Title:
ASSIGNEE
[NAME OF ASSIGNEE]
By: Title:
[Consented to and]6 Accepted:
[NAME OF ADMINISTRATIVE AGENT, as
Administrative Agent]
By: Title:
[Consented to]7
[NAME OF RELEVANT PARTY]
By: Title:
6 To be added only if the consent of Administrative Agent is required by the terms of the Loan Agreement.
7 To be added only if the consent of the Borrower and/or other parties is required by the terms of the Loan Agreement.
ANNEX 1 to Assignment and Assumption
STANDARD TERMS AND CONDITIONS FOR ASSIGNMENT AND ASSUMPTION
- Representations and Warranties Assignor
The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Loan Agreement or any other Financing Agreement, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Financing Agreements or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Financing Agreement or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Financing Agreement.
Assignee
The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Loan Agreement, (ii) it meets all requirements of an Eligible Assignee under the Loan Agreement (subject to receipt of such consents as may be required under the Loan Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Loan Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Loan Agreement, together with copies of the most recent financial statements delivered pursuant to Section 10.6 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (v) if it is a Foreign Lender, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Loan Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Financing Agreements, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Financing Agreements are required to be performed by it as a Lender.
Payments
From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignee whether such amounts have accrued prior to, on or after the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves.
General Provisions
This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and permitted assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy or by sending a scanned copy by electronic mail shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law governing the Loan Agreement.
Commitments
| Lender | Revolving Loan Commitment<br><br>(prior to the Amendment Date) | Increase to Commitment | Revolving Loan Commitment<br><br>(from and after the Amendment Date) |
|---|---|---|---|
| Scotiabank Asset Finance, a division of The Bank of Nova Scotia | $69,249,600 | $14,427,400 | $83,677,000 |
| Canadian Imperial Bank of Commerce | $54,249,600 | $11,302,400 | $65,552,000 |
| The Toronto-Dominion Bank | $39,000,000 | $8,125,000 | $47,125,000 |
| Bank of America, N.A., Canada Branch | $39,000,000 | $0.00 | $39,000,000 |
| Farm Credit Canada | $38,500,800 | $8,020,200 | $46,521,000 |
| TOTALS | $240,000,000 | $41,875,000 | $281,875,000 |
EXHIBIT F
Real Estate Collateral
[Intentionally Deleted]
EXHIBIT G
Form of Accordion Agreement
Reference is made to the second amended and restated loan agreement dated as of December 23, 2021 (as changed and in effect from time to time, the “Loan Agreement”) among The Andersons Canada Limited, as borrower (the “Borrower”), the institutions named therein as Lenders, and Scotiabank Asset Finance, a division of The Bank of Nova Scotia as the Administrative Agent. Capitalized terms used but not otherwise defined herein shall have the respective meanings assigned in the Loan Agreement. This is an Accordion Agreement.
RECITALS:
Pursuant to Section 2.12 of the Loan Agreement, the Borrower wishes to designate the Accordion Lender defined below as a Lender under the Loan Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Borrower, the Lenders and the Administrative Agent and
(the “Accordion Lender”), hereby agree as follows:
1.With effect as of the date the Administrative Agent confirms to the Borrower that it has received a fully executed copy of this Accordion Agreement, in form and substance satisfactory to it, the Loan Agreement shall henceforth be read and construed as if the Accordion Lender were party to the Loan Agreement having all the rights and obligations of a Lender under the Loan Agreement having the Commitment set out in paragraph 2 below. Accordingly all references in any Financing Documents to (a) any Lender shall be treated as including a reference to the Accordion Lender and (b) the Loan Agreement shall be treated as a reference to the Loan Agreement as supplemented by this Accordion Agreement to the intent that this Accordion Agreement and the Loan Agreement shall be read and construed together as one single agreement.
2.The Commitments of the Accordion Lender are set out in the attached revised Schedule attached hereto.
3.The Accordion Lender represents and warrants to each of the other parties to the Loan Agreement that it has been provided with a copy of the Loan Agreement.
4.The Accordion Lender irrevocably authorizes and directs the Administrative Agent, as its attorney and agent, with full power of substitution and delegation, to complete, execute and deliver on behalf of the Accordion Lender each Financing Document to be executed by it or on its behalf and each document to be executed by it or on its behalf pursuant to each Financing Document, and to take such action on its behalf as may be authorized or directed pursuant to any such Financing Document.
5.This Accordion Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same instrument, and it shall not be necessary in making proof of
- G2 -
this Accordion Agreement to produce or account for more than one such counterpart. Transmission of a copy of an executed signature page of this Accordion Agreement (including any change to this Accordion Agreement) by any party hereto to the other parties to this Accordion Agreement by facsimile transmission or e-mail in pdf format, shall be as effective as delivery to the other parties hereto of a manually executed counterpart hereof.
6.This Accordion Agreement shall be governed by, and interpreted in accordance with, the laws of the Province of Ontario, including the federal laws of Canada applicable therein, but excluding choice of law rules.
IN WITNESS WHEREOF, the parties hereto have caused this Accordion Agreement to be executed and delivered by their respective officers thereunto duly authorized as of the
day of , .
| THE ANDERSONS CANADA LIMITED | <*><br><br>as Accordion Lender |
|---|---|
| By: | By: |
| Name: | Name: |
| Title: | Title: |
| SCOTIABANK ASSET FINANCE, a<br><br>division of THE BANK OF NOVA SCOTIA, as Administrative Agent | |
| By: | |
| Name: | |
| Title: |
.
Borrowing Base Certificate
See attached.
Schedule 10.6
Compliance Certificate
To: Scotiabank Asset Finance, a division of The Bank of Nova Scotia, as administrative agent (the “Administrative Agent”)
40 King Street West, 13th Floor Toronto, ON M5H 1H1
Ladies and Gentlemen:
I hereby certify to you pursuant to Section 10.6(d) of the Loan Agreement (as defined below) as follows, for and on behalf of The Andersons Canada Limited (the “Borrower”) and Thompsons USA Limited, and without personal liability:
1.I am the duly elected [NTD: Insert title of senior officer] of the Borrower. Capitalized terms used herein without definition shall have the meanings given to such terms in the second amended and restated loan agreement (the “Loan Agreement”) dated as of , 2021, between the Administrative Agent, the Borrower, and the lenders signatory to the Loan Agreement, as such Loan Agreement is amended, modified or supplemented, from time to time.
2.I have reviewed the terms of the Loan Agreement, and have made, or have caused to be made under my supervision, a review in reasonable detail of the transactions and the financial condition of each Operating Company, during the immediately preceding month.
3.The review described in Section 2 above did not disclose the existence during or at the end of such month, and I have no knowledge of the existence and continuance on the date hereof, of any condition or event which constitutes an Event of Default except as set forth on Schedule I attached hereto. Described on Schedule I attached hereto are the exceptions, if any, to this Section 3 listing, in detail, the nature of the condition or event, the period during which it existed and the action which each Operating Company has taken, is taking, or proposes to take with respect to such condition or event.
4.I further certify that, based on the review described in Section 2 above, neither Operating Company has, at any time during or at the end of such month, except as specifically described on Schedule II attached hereto, or as permitted by the Loan Agreement, done any of the following:
(a)changed its corporate name, or transacted business under any trade name, style, or fictitious name, other than those previously described to you and set forth in the Financing Agreements;
(b)changed the location of its chief executive office, changed its jurisdiction of incorporation, changed its type of organization or changed the location of or disposed of any of its properties or assets (other than Permitted Dispositions), or established any new asset locations;
(c)permitted or suffered to exist any security interest in or liens upon any of its properties, whether real or personal (other than Permitted Liens); or
(d)become aware of, obtained knowledge of, or received notification of, any breach or violation of any material covenant contained in any Financing Agreement.
5.Attached hereto in Schedule III are the calculations used in determining the Fixed Charge Coverage Ratio.
6.If applicable, the Borrower is in material compliance with all Applicable Law in connection with all contributions to be made in connection with the Pension Plans.
7.The Borrower or an Obligor has paid in full all rents and other amounts due and payable with respect to any material premises leased or occupied by the Borrower or any Obligor during such month, including without limitation any charges for warehousing or storing Inventory. The details of any default under any material lease of any leased premises are set out in Schedule IV hereto.
The foregoing certifications are made and delivered this day of , 20 . Very truly yours,
<*>
By: Name:
Title:
SCHEULE I
Events of Default (Section 3)
Changes (Section 4)
Financial Test Calculation (Section 5)
See attached Schedule.
Rent Roll (Section 7) See attached.
Schedule 10.8
Additional Permitted Liens Liftow Limited under reference file nos. 777518811 and 778607532 Rail Connection II A LLC under reference file no. 777573027
Permitted Debt
Promissory Note in the amount of US$30,000,000.00 from NuRail Canada ULC, an affiliate of the Parent, dated December 1, 2021 and the Borrower.
Existing Loans, Advances and Guarantees
Nil.
Schedule 10.17
Bank Accounts
Deposit Accounts:
| Account Holder | Name, address, telephone number, fax number and account officer of institution | Nature / Type of account | Account number |
|---|---|---|---|
| Thompsons USA | U.S. Bank N.A.<br><br>600 Demers Avenue Grand Forks, ND 58201 | USD Chequing Account | 163095001430 |
| Thompsons USA | U.S. Bank N.A.<br><br>600 Demers Avenue Grand Forks, ND 58201 | USD Chequing Account | 163095529760 |
| Borrower | The Bank of Nova Scotia<br><br>40 King St. W. Toronto, Ontario M5H 1H1 | Canadian Business – CAD | 478860096814 |
| Borrower | The Bank of Nova Scotia<br><br>40 King St. W. Toronto, Ontario M5H 1H1 | Canadian Business – USD | 478860038814 |
| Borrower | The Bank of Nova Scotia<br><br>40 King St. W. Toronto, Ontario M5H 1H1 | Canadian Business – CAD | 478860282111 |
| Borrower | The Bank of Nova Scotia<br><br>40 King St. W. Toronto, Ontario M5H 1H1 | Canadian Business – USD | 478860046817 |
| Borrower | Rosenthal Collins Group | Securities Account | R36700277C5136 |
| Account Holder | Name, address, telephone number, fax number and account officer of institution | Nature / Type of account | Account number |
| --- | --- | --- | --- |
| 216 West Jackson Boulevard Chicago, IL 60606 | |||
| Borrower | Rosenthal Collins Group<br><br>216 West Jackson Boulevard Chicago, IL 60606 | Securities Account | R36700277C5144 |
| Borrower | Rosenthal Collins Group<br><br>216 West Jackson Boulevard Chicago, IL 60606 | Securities Account | R36700277C5154 |
Securities or Hedging Accounts:
| Account Holder | Name, address, telephone number, fax number and account officer of<br><br>institution | Nature / Type of account | Account number |
|---|---|---|---|
| The Andersons Canada Limited | Rosenthal Collins Group<br><br>216 West Jackson Boulevard<br><br>Chicago, IL 60606 | Hedging Account | R 36700 277 C5137<br><br>R 36700 277 C5138<br><br>R 36700 277 C5139<br><br>R 36700 277 C5140<br><br>R 36700 277 C5141<br><br>R 36700 277 C5142<br><br>R 36700 277 C5143<br><br>R 36700 277 C5144<br><br>R 36700 277 C5145<br><br>R 36700 277 C5146<br><br>R 36700 277 C5147<br><br>R 36700 277 C5148<br><br>R 36700 277 C5149<br><br>R 36700 277 C5150<br><br>R 36700 277 C5151<br><br>R 36700 277 C5152<br><br>R 36700 277 C5153<br><br>R 36700 277 C5144 |
Document
Exhibit 10.32
THIRD AMENDMENT TO
SECOND AMENDED AND RESTATED LOAN AGREEMENT
THIS AGREEMENT made as of December16 , 2022 (the “Amendment Date”)
BETWEEN:
SCOTIABANK ASSET FINANCE, A DIVISION OF THE BANK OF NOVA SCOTIA, operating through its Canadian Branch (the “Administrative Agent”)
-and -
THE ANDERSONS CANADA LIMITED (the “Borrower”)
-and -
THOSE OTHER PARTIES WHICH ARE OBLIGORS PURSUANT TO THE TERMS OF THE LOAN AGREEMENT (the “Obligors”)
-and-
THE LENDERS IDENTIFIED IN THE LOAN AGREEMENT WHICH ARE SIGNATORIES HEREIN (the “Lenders”)
WHEREAS the Administrative Agent, in its capacity as administrative agent and lender, and the other Lenders and the Borrower entered into a second amended and restated loan agreement made as of December 23, 2021, as amended by that first amendment to second amended and restated loan agreement made as of March 17, 2022 and as further amended by the second amendment to second amended and restated loan agreement made as of September 26, 2022 (as the same may be further amended, supplemented or restated from time to time, collectively, the “Loan Agreement”);
AND WHEREAS the Borrower has requested and the Administrative Agent and the Lenders have agreed to amend the Loan Agreement to, inter alia, increase the Maximum Credit, on terms and subject to the conditions set forth below.
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the mutual covenants and agreements contained herein, the parties covenant and agree as follows:
ARTICLE 1 DEFINED TERMS
1.01Capitalized Terms. All capitalized terms which are used herein without being specifically defined herein shall have the meaning ascribed thereto in the Loan Agreement.
ARTICLE 2 AMENDMENT TO LOAN AGREEMENT
2.01General Rule. Subject to the terms and conditions herein contained, the Loan Agreement is hereby amended to the extent necessary to give effect to the provisions of this agreement and to incorporate the provisions of this agreement into the Loan Agreement.
2.02Increase in Maximum Credit. Exhibit “A” of the Loan Agreement is hereby amended by deleting the definition of “Maximum Credit” in its entirety and replacing it as follows:
“99. “Maximum Credit”
“Maximum Credit” shall mean the amount of $290,000,000, plus the amount of each increase therein under the accordion described in Section 2.12, if applicable.”
For greater certainty, the parties hereto agree that the increase in the Maximum Credit as set forth herein shall not be deemed to be an exercise of the accordion feature described in Section 2.12 of the Loan Agreement.
2.03Adjustments to Commitments. The schedule of Commitments in Exhibit “E” of the Loan Agreement is hereby deleted in its entirety and replaced with the updated schedules of Commitments set out in Schedule “A” hereto, effective as of the date hereof.
2.04Commitment Fee. The Borrower hereby authorizes the Administrative Agent to immediately charge against the Revolving Loans a commitment fee in the amount of
$11,645.83 which fee shall be payable to Bank of America, N.A. in respect of the increase in its Commitment as set forth in Schedule “A” hereto.
2.05Timing. The changes to the Loan Agreement provided for in this Article Two shall take effect immediately.
ARTICLE 3 MISCELLANEOUS
3.01Representations and Warranties. Borrower and each other Obligor hereby represents and warrants to the Administrative Agent as follows:
(a)all of the representations and warranties contained in the Loan Agreement are correct on and as of the date hereof as though made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date;
(b)this agreement and the Loan Agreement, as amended by this agreement, constitute the legal, valid and binding obligations of each Obligor, enforceable against such Obligor in accordance with their terms, subject to bankruptcy, insolvency and other similar laws affecting the rights of creditors generally and to general principles of equity; and
(c)no Event of Default has occurred.
3.02Acknowledgment and Confirmation re: Security.
(a)All of the Security shall continue to be in full force and effect as general continuing collateral security for any and all of the indebtedness, liabilities and obligations of each of the Obligors to the Lenders secured thereunder, including, without limitation, under, in connection with, relating to or with respect to the Loan Agreement (as amended hereby), and the security interests created by the Security shall continue to charge and mortgage the property of the Obligors in accordance with the terms thereof.
(b)The Security to which each of the Obligors is a party are legal, valid, binding and enforceable against the Obligors, as applicable, in accordance with their terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, moratorium, reorganization and other similar laws of general application limiting the enforcement of creditors’ rights generally and the fact that the courts may deny the granting or enforcement of equitable remedies.
3.03Fees payable. The Borrower shall pay all reasonable and documented out-of-pocket costs and expenses of the Administrative Agent and the Lenders in connection with the preparation, negotiation and finalization of this agreement and all other documents, searches and filings contemplated hereby, including, without limitation, reasonable legal fees and disbursements, of the Administrative Agent and the Lenders. The Administrative Agent is hereby authorized to charge all such costs, expenses and legal fees and disbursements to the Revolving Loans. Upon request by the Borrower, the Administrative Agent agrees to provide the Borrower with supporting invoices and accounts for all such costs, expenses and legal fees and disbursements.
3.04Future References to the Loan Agreement. On and after the date of this agreement, each reference in the Loan Agreement to “this agreement”, “hereunder”, “hereof”, or words of like import referring to the Loan Agreement, and each reference in any related document to the “Loan Agreement”, “thereunder”, “thereof”, or words of like import referring to the Loan Agreement, shall mean and be a reference to the Loan Agreement as amended hereby. The Loan Agreement, as amended hereby, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed.
3.05Governing Law. This agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.
3.06Conflict. If any provision of this agreement is inconsistent or conflicts with any provision of the Loan Agreement, the relevant provision of this agreement shall prevail and be paramount.
3.07Further Assurances. The Borrower shall do, execute and deliver or shall cause to be done, executed and delivered all such further acts, documents and things as the Administrative Agent may reasonably request for the purpose of giving effect to this agreement and to each and every provision hereof.
3.08Severability. Any provision of this agreement which is or becomes prohibited or unenforceable in any relevant jurisdiction shall not invalidate or impair the remaining provisions hereof which shall be deemed severable from such prohibited or unenforceable provision and any such prohibition or unenforceability in any such jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Should this agreement fail to provide for any relevant matter, the validity, legality or enforceability of this agreement shall not thereby be affected.
3.09Successors and Assigns. This agreement shall be binding upon the parties hereto and their respective successors and permitted assigns, and shall enure to the benefit of the parties hereto and their successors and permitted assigns. No Obligor may assign its rights or duties hereunder.
3.10Financing Agreement. This agreement is a Financing Agreement.
3.11Counterparts. This agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered (including by e-mail or other electronic means) shall be an original, but all such counterparts shall together constitute but one and the same instrument.
[Signature pages follow]
IN WITNESS WHEREOF, the Administrative Agent, the Lenders and the Borrower have caused these presents to be duly executed as of the day and year first above written.
ADMINISTRATIVE AGENT AND LENDER
SCOTIABANK ASSET FINANCE, a division of THE BANK OF NOVA SCOTIA
Per:
Name: Title:
Per:
Name:
Title:
Address:
Fax:
BORROWER
THE ANDERSONS CANADA LIMITED
Per:
Name:
Title:
Per:
Name:
Title:
Attention:
Fax:
Acknowledgement
The undersigned Obligors hereby acknowledges and agrees to be bound by the terms and conditions contained in this Agreement, as of the day and year first above written.
THOMPSONS USA LIMITED
Per:
Name:
Title:
Per:
Name:
Title:
Attention:
Fax:
LENDERS
CANADIAN IMPERIAL BANK OF COMMERCE
Per:
Name:
Title:
Per:
Name:
Title:
Address:
Email:
Attention:
THE TORONTO-DOMINION BANK
Per:
Name:
Title:
Per:
Name:
Title:
Address:
Fax:
Attention:
BANK OF AMERICA, N.A., CANADA BRANCH
Per:
Name:
Title:
Per:
Name:
Title:
Address:
Fax:
Attention:
FARM CREDIT CANADA
Per:
Name:
Title:
Per:
Name:
Title:
Address:
Phone:
Fax:
Attention:
SCHEDULE “A”
New Exhibit “E” – Commitments
| Lender | Revolving Loan Commitment<br><br>(prior to the Amendment Date) | Increase to Commitment | Revolving Loan Commitment<br><br>(from and after the Amendment Date) |
|---|---|---|---|
| Scotiabank Asset Finance, a division of The Bank of Nova Scotia | $83,677,000 | $0.00 | $83,677,000 |
| Canadian Imperial Bank of Commerce | $65,552,000 | $0.00 | $65,552,000 |
| The Toronto- Dominion Bank | $47,125,000 | $0.00 | $47,125,000 |
| Bank of America, N.A., Canada Branch | $39,000,000 | $8,125,000 | $47,125,000 |
| Farm Credit Canada | $46,521,000 | $0.00 | $46,521,000 |
| TOTALS | $281,875,000 | $8,125,000 | $290,000,000 |
Document
Exhibit 21.1
CONSOLIDATED SUBSIDIARIES OF THE ANDERSONS, INC.
| Subsidiary | Place of Organization |
|---|---|
| 1070283 B.C. LTD | Canada |
| Bridge Agri Partners, Inc. | Canada |
| Bridge Agri Partners Montana, Inc. | Montana |
| Cap Acquire Mexico S.de R.L. de C.V. | Mexico |
| Cap Acquire, LLC | Delaware |
| Capstone Commodities, LLC | Texas |
| David T. Boyd & Co. Limited | United Kingdom |
| ELEMENT, LLC | Kansas |
| Feed Factors Ireland Limited | Ireland |
| Feed Factors Limited | United Kingdom |
| Kay Flo Industries, Inc. | Iowa |
| Lansing Brasil Comercial & Exportadora de Produtos Agricolas Ltda. | Brazil |
| Lansing Brasil Holdings, LLC | Delaware |
| Lansing Canada ULC | Canada |
| Lansing de Mexico S.de R.L. de C.V. | Mexico |
| Lansing de Mexico Servicios S. de R.L. de C.V. | Mexico |
| Lansing Ethanol Services, LLC | Delaware |
| Lansing Louisiana, LLC | Delaware |
| Lansing Proprietary, LLC | Delaware |
| Lansing Trade Group - Asia PTE LTD | Singapore |
| Lansing Trade Group – Germany GmbH | Germany |
| Lansing Trade Group Canada ULC | Canada |
| Lansing Trade Group, LLC | Delaware |
| Lansing Trading Company, Ltd. | China |
| Lansing Vermont, Inc. | Vermont |
| Lawnbox LLC | Ohio |
| Liqui Fert Corporation | Puerto Rico |
| Maumee Ventures LLC | Ohio |
| Metamora Commodity Company, Inc. | Ohio |
| Mineral Processing Company | Ohio |
| NARCAT Mexico S.de R.L. de C.V. | Mexico |
| New Eezy-Gro Inc. | Ohio |
| NuRail Canada ULC | Canada |
| Nutra-Flo Company | Iowa |
| Plant Nutrient Operations LLC | Ohio |
| Purity Foods, Inc. | Michigan |
| TAI Hold Co, LLC | Michigan |
| The Andersons AgVantage Agency LLC | Ohio |
| The Andersons Canada Limited | Canada |
| The Andersons Ethanol LLC | Ohio |
| The Andersons Executive Services LLC | Ohio |
| The Andersons Farm Development Co., LLC | Ohio |
| Subsidiary | Place of Organization |
| --- | --- |
| The Andersons Grain Romania S.R.L | Romania |
| The Andersons LTD. | Canada |
| The Andersons Marathon Holdings LLC | Ohio |
| The Andersons Plant Nutrient LLC | Ohio |
| The Andersons Railcar Company LLC | Ohio |
| The Andersons Railcar Leasing Company LLC | Ohio |
| The Andersons Switzerland Inc. | Delaware |
| The Andersons Switzerland SARL | Switzerland |
| The Andersons Winona Terminal, LLC | Minnesota |
| Thompsons USA Limited | Delaware |
| Titan Lansing, LLC | Delaware |
| Top Cat Holding Co | Delaware |
Document
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in:
◦Registration Statement No. 333-265046 on Form S-8 dated May 18, 2022 pertaining to the registration of 4,715,000 additional shares under The Andersons, Inc. Amended and Restated 2019 Long-term Incentive Compensation Plan;
◦Registration Statement No. 333-233862 on Form S-8 dated September 20, 2019 pertaining to the registration of 2,530,000 shares under The Andersons, Inc. 2019 Long-Term Incentive Compensation Plan and the 2004 Employee Share Purchase Plan Restated and Amended January 2019;
◦Registration Statement No. 333-228957 on Form S-8 dated December 21, 2018 pertaining to the registration of 650,000 shares under The Andersons, Inc. Lansing Acquisition 2018 Inducement and Retention Plan; and
◦Registration Statement No. 333-202442 on Form S-8 dated March 2, 2015 pertaining to the registration of 1,750,000 shares under The Andersons, Inc. 2014 Long-Term Incentive Compensation Plan
of our reports dated February 23, 2023, relating to the financial statements of The Andersons, Inc. and the effectiveness of The Andersons, Inc.’s internal control over financial reporting appearing in this Annual Report on Form 10-K of The Andersons, Inc. for the year ended December 31, 2022.
/s/ Deloitte & Touche LLP
Cleveland, Ohio
February 23, 2023
Document
Exhibit 31.1
Certification of President and Chief Executive Officer
Under Rule 13(a)-14(a)/15d-14(a)
I, Patrick E. Bowe, certify that:
| 1 | I have reviewed this report on Form 10-K of The Andersons, Inc. | | --- | --- || 2 | Based on my knowledge, this 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 report; | | --- | --- || 3 | Based on my knowledge, the financial statements, and other financial information included in this 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 report; | | --- | --- || 4 | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | | --- | --- || a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 annual report is being prepared; | | --- | --- || b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | | --- | --- || c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | | --- | --- || d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | | --- | --- || 5 | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): | | --- | --- || a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | | --- | --- || b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | | --- | --- |
February 23, 2023
| /s/ Patrick E. Bowe |
|---|
| Patrick E. Bowe |
| Chief Executive Officer <br>(Principal Executive Officer) |
Document
Exhibit 31.2
Certification of Chief Financial Officer
under Rule 13(a)-14(a)/15d-14(a)
I, Brian A. Valentine, certify that:
| 1 | I have reviewed this report on Form 10-K of The Andersons, Inc. | | --- | --- || 2 | Based on my knowledge, this 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 report; | | --- | --- || 3 | Based on my knowledge, the financial statements, and other financial information included in this 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 report; | | --- | --- || 4 | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | | --- | --- || a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 annual report is being prepared; | | --- | --- || b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | | --- | --- || c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | | --- | --- || d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | | --- | --- || 5 | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): | | --- | --- || a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | | --- | --- || b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | | --- | --- |
February 23, 2023
| /s/ Brian A. Valentine |
|---|
| Brian A. Valentine |
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
Document
Exhibit 32.1
The Andersons, Inc.
Certifications Pursuant to 18 U.S.C. Section 1350
In connection with the Annual Report of The Andersons, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to such officer’s knowledge:
(1)The Report fully complies with the requirements of 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
February 23, 2023
| /s/ Patrick E. Bowe |
|---|
| Patrick E. Bowe |
| Chief Executive Officer<br><br>(Principal Executive Officer) |
| /s/ Brian A. Valentine |
| Brian A. Valentine |
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
A signed original of this written statement required by Section 906 has been provided to The Andersons, Inc. and will be retained by The Andersons, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.