Exhibit 10.2
AGREEMENT OF DISSOLUTION
This AGREEMENT OF DISSOLUTION (this "Agreement") made and entered into
as of 11:59 p.m. on the 31st day of December, 2000, by and among NATIONAL
COOPERATIVE REFINERY ASSOCIATION, a Kansas cooperative marketing association
("NCRA"); FARMLAND INDUSTRIES, INC., a Kansas cooperative corporation
("Farmland"); and COOPERATIVE REFINING, LLC, a Delaware limited liability
company (the "Company"). NCRA, Farmland and the Company also are referred to
herein collectively as the "Parties" and individually as a "Party."
WHEREAS, NCRA is the owner of a refinery and related assets located at
McPherson, Kansas (the "NCRA Refinery"); and Farmland is the owner of a refinery
and related assets located at Coffeyville, Kansas (the "Coffeyville Refinery");
WHEREAS, in 1999, NCRA and Farmland established the Company for the
purpose of operating the above-mentioned assets; and, as of September 1, 1999,
NCRA and Farmland entered into that certain Limited Liability Company Agreement
(the "LLC Agreement") relating to the Company;
WHEREAS, the Parties, on September 1, 1999, entered into that certain
Refinery Operating and Product Output Purchase Agreement (the "Refinery
Agreement") to provide for the operation by the Company of the above-mentioned
assets and for certain related matters and that certain Personnel Lease
Agreement (the "Personnel Lease Agreement");
WHEREAS, in accordance with the LLC Agreement, the managers of the
Company have agreed to dissolve and liquidate the Company effective at 11:59
p.m. on December 31, 2000; and
WHEREAS, the Parties wish to enter into this Agreement to provide for
the timely and orderly dissolution of the Company.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements of the Parties contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto hereby acree as follows:
ARTICLE I:
DEFINITIONS
Unless the context otherwise specifies or requires, the terms defined
in this Article I shall, for the purposes of this Agreement, have the meanings
herein specified.
"Act" means the Delaware Limited Liability Company Act, as amended
from time to time.
"Capital Account" shall have the meaning assigned to such term in the
LLC Agreement.
"Farmland Assets" shall have the meaning assigned to such term in the
Refinery Agreement plus all additional equipment and other assets utilized by or
located at Farmland's refinery in Coffeyville, Kansas.
"Farmland Contracts" shall have the meaning assigned to such term in
the Refinery Agreement.
"Manager" shall have the meaning assigned to such term in the LLC
Agreement.
"Membership Interest" shall have the meaning assigned to such term in
the LLC Agreement.
"Members" shall have the meaning assigned to such term in the LLC
Agreement.
"NCRA Assets" shall have the meaning assigned to such term in the
Refinery Agreement plus all additional equipment and other assets utilized by or
located at NCRA's refinery in McPherson, Kansas.
"NCRA Contracts" shall have the meaning assigned to such term in the
Refinery Agreement.
"Other Dissolution Agreements" collectively means the Crude Oil
Purchase Agreement between NCRA and Farmland attached hereto as Exhibit A, the
Accounting Services Agreement between NCRA and Farmland attached hereto as
Exhibit B, the Employee Lease Agreement between NCRA and Farmland to be attached
hereto as Exhibit C, and the Equipment Lease Agreement between NCRA and Farmland
to be attached hereto as Exhibit D.
"Unit" shall have the meaning assigned to such term in the LLC
Agreement.
ARTICLE II:
DISSOLUTION AND LIQUIDATION OF COMPANY
SECTION 2.1. Agreement of Dissolution. Pursuant to Section 14.1(b) of
the LLC Agreement and ss. 18-801(3) of the Act, the Parties agree that the
Company shall be dissolved effective as of 11:59 p.m. on December 31, 2000 (the
"Effective Time") in accordance with the provisions of this Agreement and the
LLC Agreement.
SECTION 2.2. Liquidation and Winding Up. The Company shall be
liquidated and the Managers shall wind up the affairs of the Company. The
Managers shall promptly proceed to the liquidation of the Company and, in
settling the accounts of the Company, the assets and the property of the Company
shall be distributed, subject to Section 14.4 of the LLC Agreement, in the
following order of priority:
(a) To the payment of all debts and liabilities of the Company in the
order of priority as provided by law (other than outstanding loans from a
Member);
(b) To the establishment of any reserves deemed necessary by the
Managers for any contingent liabilities or obligations of the Company;
(c) To the repayment of any outstanding loans from a Member to the
Company;
(d) To the Members in proportion to and to the extent of their
respective Capital Account balances, after giving effect to all contributions,
distributions and allocations for all periods; and
(e) The balance, if any, to the Members pro rata in accordance with
the number of Units owned by each Member.
Notwithstanding the foregoing, however, (1) no payment, repayment or
distribution of any kind (collectively, a "Liquidating Distribution") shall be
made to Farmland, NCRA, any member of NCRA, or any affiliate thereof
(collectively, the "Company Affiliates") unless such Liquidating Distribution to
the Company Affiliate is approved by both Farmland and NCRA, which approval
shall not be unreasonably withheld or delayed, and (2) all Liquidating
Distributions to the Company Affiliates shall be made subject to the audit
described in Section 2.11 of this Agreement. The Parties shall cooperate to make
interim Liquidating Distributions to the Members as promptly as possible so as
to minimize the amount of cash held by the Company during the liquidation and
winding up of the Company. The Parties anticipate that the first such interim
Liquidating Distribution will occur on or before February 2, 2001.
SECTION 2.3. Division of Assets.
(a) Farmland Assets and NCRA Assets. Effective as of the Effective
Time, the Farmland Assets shall be returned back to Farmland's exclusive control
and the NCRA Assets shall be returned back to NCRA's exclusive control.
(b) Inventories. As of the Effective Time, the Company has inventories
of crude oil, other raw materials, work-in-process and finished products
(collectively, the "Inventory"). The Parties acknowledge and agree
Farmland's Inventory requirements to operate the Coffeyville Refinery are
greater than NCRA's Inventory requirements to operate the NCRA Refinery.
Therefore, effective as of the Effective Time,
(1) The levels of Inventory contributed by NCRA and Farmland to
the Company shall be re-distributed back to NCRA and
Farmland, and then
(2) Any excess levels of Inventory shall be sold by the Company
to NCRA and Farmland based upon the location of the
Inventory and the operational need for the Inventory, with
the cash paid by NCRA and Farmland being placed into the
cash balance of the Company for distribution in accordance
with Section 2.2 of this Agreement.
SCHEDULE 2.3 attached hereto and incorporated herein sets forth
spreadsheets that generally depict the aforementioned distribution and sale of
Inventory.
SECTION 2.4. Assignment of Contracts from Company to Members.
Effective as of the Effective Time, the Company hereby assigns and conveys to
NCRA the NCRA Contracts, including without limitation the operating permits,
licenses, contracts and leases listed on Schedule 2.4(a) attached hereto.
Effective as of the Effective Time, the Company hereby assigns and conveys to
Farmland the Farmland Contracts, including without limitation the operating
permits, licenses, contracts and leases listed on Schedule 2.4(b) attached
hereto. In consideration of such assignment, NRCA and Farmland hereby assumes
and agrees to be bound by and to perform, observe and comply with all of the
terms, covenants, conditions, undertakings and other provisions of each such
contract assigned them from and after the Effective Time, in the same manner and
with the same force and effect as of NCRA or Farmland, as the case may be, had
originally executed such contracts. In the event an operating permit, license,
lease or other agreement of the Company is not listed on either Schedule 2.4(a)
or 2.4(b), then such operating permit, license, lease or agreement shall be
assigned from the Company to the Member whose refinery utilized such operating
permit, license, lease or agreement. The Parties hereto shall use their best
efforts to obtain any necessary consent of a third party to the assignment of
any of the operating permits, licenses, leases or other agreements hereunder.
SECTION 2.5. Termination of Refinery Agreement. As provided in Section
22.3 of the Refinery Agreement, the Refinery Agreement shall terminate as of the
Effective Time.
SECTION 2.6. Interconnect Payments to Members. The Parties hereto
shall consummate the asset transfers and payment obligations set forth Schedule
2.6 attached hereto and incorporated herein by this reference relating the
purchase and sale of certain products between the Coffeyville Refinery and
Farmland's fertilizer plant located in Coffeyville, Kansas (the "Fertilizer
Plant").
SECTION 2.7. Allocation of Liabilities. NCRA shall be solely
responsible for all past, present and future losses, claims, damages and
liabilities of any kind, including but not limited to environmental liability
arising out of or imposed by all federal, state or local environmental laws,
administrative regulations or ordinances, relating to the NCRA Assets during the
period the NCRA Assets were operated by CRLLC. Farmland shall be solely
responsible for all past, present and future losses, claims, damages and
liabilities of any kind, including but not limited to environmental liability
arising out of or imposed by all federal, state or local environmental laws,
administrative regulations or ordinances, relating to the Farmland Assets during
the period the Farmland Assets were operated by CRLLC.
SECTION 2.8. Return of Confidential Information. Prior to the Closing
Date, NCRA and Farmland shall each redeliver to the other all documents,
agreements, financial data, notes, analyses, compilations, studies and other
materials ("Evaluation Materials") that each received from the other, or their
member owners, in connection with the formation of the Company and/or the
proposed merger of Farmland and Cenex Harvest States Cooperatives. Each Party
shall destroy or caused to be destroyed all notes, discs, tapes and other
writings and materials prepared by or on behalf of it or its representatives
based on the Evaluation Materials and shall at the request of the other Party
deliver an affidavit executed by one of its responsible officers expressly
affirming such destruction.
SECTION 2.9. Termination of Personnel Lease Agreement. In accordance
with Section 7 of the Personnel Lease Agreement, the Personnel Lease Agreement
shall terminate as of the Effective Time.
SECTION 2.10. Loans to Members. To the extent the Company has made any
loans to NCRA (the "NCRA Loans") or any loans to any member of NCRA or any
affiliate of NCRA or any member of NCRA (the "NCRA Affiliate Loans"), the NCRA
Loans and the NCRA Affiliate Loans shall be immediately due and payable, and
NCRA shall immediately (a) repay the NCRA Loans and (b) exercise commercially
reasonable efforts to cause to the prompt repayment of the NCRA Affiliate Loans.
SECTION 2.11. Further Assurances. Following the Effective Time, the
Parties shall execute, acknowledge, deliver and file, or cause to be executed,
acknowledged, delivered and filed, such additional instruments, documents,
conveyances or assurances, and take, or cause to be taken, such other actions,
including without limitation all reasonable efforts to obtain such third party
consents, as shall be necessary or may be reasonably requested by any other
Party, to confirm, assure or otherwise fully effect the purposes, terms and
conditions of this Agreement; provided, however, that the Company shall not
execute, acknowledge, deliver, file or otherwise take any action contemplated by
this Section without obtaining the prior approval of both NCRA and Farmland,
which approval shall not be unreasonable withheld or delayed. To this end, the
Parties acknowledge and agree that execution and delivery of the Other
Dissolution Agreements, in such form and content as shall be mutually acceptable
to both NCRA and Farmland, is a condition precedent to this Agreement and, thus,
in the event any Other Dissolution Agreement is not executed and delivered by
both NCRA and Farmland, then this Agreement and any Other Dissolution Agreement
so executed and delivered shall be void AB INITIO and shall have no force or
effect whatsoever.
SECTION 2.12. Audit. The Parties acknowledge that the employees of
NCRA generally have been providing the accounting-related services to the
Company and will perform similar services in connection with the dissolution and
liquidation of the Company. In connection with the dissolution and liquidation
of the Company, Farmland shall have the right, until a date occurring six (6)
months after the final Liquidating Distribution is made and the final financial
statements of the Company have been prepared and distributed to the Members,
upon at least five (5) business days prior notice to NCRA during business hours,
to inspect and audit, or cause to be inspected and audited, the business
records, bookkeeping and accounting records relating thereto. The Company and
NCRA shall fully cooperate with representatives of Farmland and its
representatives and advisors in connection with any such inspection or audit.
All costs incurred by Farmland in connection with the audit or inspection shall
be borne by Farmland, and all costs incurred by the Company and NCRA in
connection with the audit or inspection shall be borne by NCRA; provided,
however, that in the event a material discrepancy is found in connection with
the audit, then the Party causing the material discrepancy shall reimburse the
other Party all of that party's reasonable out-of-pocket costs incurred in
connection with the audit or inspection. For purposes of this Section, "material
discrepancy" shall mean a discrepancy greater than two hundred fifty thousand
dollars ($250,000.00).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the Members. Each of
NCRA and Farmland (collectively, the "Members" and individually, a "Member")
represents and warrants as of the date of this Agreement to the other Member and
the Company as follows:
(a) Such Member has the requisite power and authority (whether
corporate or otherwise) and legal capacity to enter into, and to carry out its
obligations under, this Agreement.
(b) The execution and delivery by such Member of this Agreement and
the consummation by such Member of the transactions contemplated hereby have
been duly authorized prior to the date of this Agreement by all necessary action
on the part of such Member.
(c) This Agreement has been duly executed and delivered by such Member
and constitutes a valid and binding obligation enforceable against such Member
in accordance with its terms.
(d) Such Member is not subject to, or obligated under, any provision
of (i) any agreement, arrangement or understanding, (ii) any license, franchise
or permit or (iii) any law, regulation, order, judgment or decree that would be
breached or violated, or in respect of which a right of termination or
acceleration or any encumbrance on any of such Member's assets would be created,
by such Member's execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby, except for such agreements as to which a Member has
previously obtained the consent of the other party or parties thereto.
(e) Other than in connection with the assignment or transfer of
environmental-related permits or licenses or other permits, licenses, contracts
or leases, no authorization, consent or approval of, waiver or exemption by, or
filing or registration with, any public body, court, third party or authority is
necessary on such Member's part, which has not previously been obtained by such
Member for the consummation of the transactions contemplated by this Agreement.
(f) Such Member is not presently engaged in, nor to its knowledge,
threatened with or aware of, any situation which could subject it to any
litigation (including appeals of lower courts decisions), arbitration claim or
other legal proceedings or governmental or any other investigation relating to
its affairs or any of its respective properties, assets, or shareholders, which
questions the validity or enforceability of this Agreement, the LLC Agreement,
the Refinery Agreement, or any related agreements, or which could prevent,
hinder or delay the consummation of the transactions contemplated by this
Agreement.
ARTICLE IV
INDEMNITIES
SECTION 4.1. Indemnification. Each Party shall indemnify, defend and
hold each other Party, and its respective officers, directors, managers, and
employees ("Indemnitee") harmless from and against all liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses (including,
without limitation, attorney's fees and expenses) imposed upon, incurred by or
asserted against the Indemnitee that are caused by, are attributable to, result
from or arise out of (i) any liability allocated to the indemnifying Party
pursuant to Section 2.7 of this Agreement, (ii) the indemnifying Party's breach
of any provision of this Agreement, or (iii) the indemnifying Party's breach of
any Other Dissolution Agreement.
SECTION 4.2. Indemnification Procedures; Survival.
(a) Promptly after receipt by an Indemnitee of notice of the
commencement of any action that may result in a claim for indemnification
pursuant to Section 4.1, the Indemnitee shall notify the indemnifying Party in
writing within thirty (30) days thereafter; PROVIDED, HOWEVER, that any omission
so to notify the indemnifying Party will not relieve it of any liability for
indemnification hereunder as to the particular item for which indemnification
may then be sought (except to the extent that the failure to give notice shall
have been materially prejudicial to the indemnifying Party) nor from any other
liability that it may have to any Indemnitee. The indemnifying Party shall have
the right to assume sole and exclusive control of the defense of any claim for
indemnification pursuant to Section 4.1, including the choice and direction of
any legal counsel.
(b) An Indemnitee shall have the right to employ separate counsel in
any action as to which indemnification may be sought under any provision of this
Agreement and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnitee unless (i) the
indemnifying Party has agreed in writing to pay such fees and expenses, (ii) the
indemnifying Party has failed to assume the defense thereof and employ counsel
within a reasonable period of time after being given the notice required above,
or (iii) the Indemnitee shall have been advised by its counsel that
representation of such Indemnitee and other Parties by the same counsel would be
inappropriate under applicable standards of professional conduct (whether or not
such representation by the same counsel has been proposed) due to actual or
potential differing interests between them. It is understood, however, that to
the extent more than one Indemnitee is entitled to employ separate counsel at
the indemnifying Party's expense pursuant to clause (iii) above, the
indemnifying Party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of only one separate firm of attorneys at any time for all such
Indemnitees having actual or potential differing interests with the indemnifying
Party, unless but only to the extent the Indemnitees have actual or potential
differing interests with each other.
(c) The indemnifying Party shall not be liable for any settlement of
any such action effected without its written consent, but if settled with such
written consent, or if there is a final judgment against the Indemnitee in
any such action, the indemnifying Party agrees to and hold harmless the
Indemnitee to the extent provided above from and against any loss, claim,
damage, liability or expense by reason of such settlement or judgment.
(d) The indemnification obligations set forth in Section 4.1 and this
Section 4.2 shall survive the termination of this Agreement for a period of five
(5) years.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Notice. Any notices permitted or required to be given
under this Agreement shall be in writing, and shall be addressed to the Parties
hereto as follows:
For NCRA: National Cooperative Refining Association
1391 Iron Horse Road
P.O. Box 1404
McPherson, Kansas 67460
Attention: President
Fax: (316) 241-9130
For Farmland: Farmland Industries, Inc.
3315 North Oak Trafficway
P.O. Box 7305 Dept. 62
Kansas City, Missouri 64116
Attention: General Counsel
Fax: (816) 459-5902
Either Farmland or NCRA may from time to time change its address for service
hereunder on written notice to the other Party. Any notice shall:
(a) if delivered by hand delivery, be deemed to have been given or
made at the time of delivery as acknowledged by signature of the receiving
Party;
(b) if sent by telecopy, telex, telecommunication device or other
similar form of communication or by overnight private courier service, be deemed
to have been given or made on the working day following the day on which it was
received; and
(c) if mailed by certified or registered mail, return receipt
requested, postage prepaid, be deemed to have been given or made, four (4) days
after deposit in the United States Mail.
SECTION 5.2. Confidentiality. Any information heretofore or hereafter
disclosed or obtained in connection with this Agreement concerning the business,
operations, affairs or financial condition of any Party hereto shall be kept
confidential except as otherwise required by law or legal process or except to
the extent that it (i) is or has been disclosed to any lender or lessor or
governmental official or the respective attorneys, accountants and financial
advisers of any Party hereto, or (ii) is or hereafter becomes lawfully
obtainable from other sources or to the extent that such duty as to
confidentiality is waived in writing by the Party to whom the confidential
information relates, or (iii) was known to the receiving Party as of the time of
its disclosure, or (iv) independently developed by the receiving Party without
reference to the confidential information.
SECTION 5.3. Dispute Resolution. In the event of any dispute or
controversy arising out of or related to this Agreement, or the breach thereof,
including the interpretation of any provision of this Agreement which cannot be
resolved informally by the Members, or regarding the Company, the ownership of
the Company or the Company's business, the Members shall first make a good faith
effort to promptly resolve such dispute. If the Members are unable to reach
agreement with respect to such discrepancy, then such dispute shall be resolved
by binding arbitration administered by the American Arbitration Association in
accordance with its Commercial Arbitration Rules then in effect, except as such
rules may be modified by this Agreement or by the mutual consent of the
Members. Any arbitration proceeding conducted hereunder shall alternate
locations between the greater metropolitan areas of Kansas City, Missouri and
Wichita, Kansas, with the first such arbitration proceeding to be conducted at
such location as is specified by the Member requesting the arbitration
proceeding. Any award rendered in the arbitration proceeding shall be final and
binding upon the Members and a judgment thereon may be entered in any court
having competent jurisdiction. Each Member shall bear its own expenses in
connection with the arbitration; provided, however, that the fees and expenses
of the arbitrator and all other expenses of the arbitration shall be borne
equally by the Members. The arbitration proceedings shall be governed by the
laws of the State of Kansas. The arbitrator shall be selected from a list of
five (5) arbitrators provided by the American Arbitration Association. Alternate
strikes shall be made to the list commencing with the Member requesting
arbitration until a single name remains. That individual shall be the arbitrator
for the matter. After the arbitrator has been selected, the Members may obtain
reasonable discovery in advance of the arbitration by way of: (i) exchange of
copies of all documents in the possession, custody or control of a Member and
relevant to the matter in dispute; (ii) written interrogatories for the purpose
of determining the name and address of each witness proposed to be called by a
Member and a brief description of the relevant information each such witness is
expected to provide; and (iii) such further discovery, including dispositions,
as the arbitrator may determine is appropriate after taking into consideration
the nature of the dispute and the amount in controversy. To the extent possible,
the arbitration hearing shall be conducted within sixty (60) days after
selection of the arbitrator, and the arbitrator shall render a decision within
twenty (20) days after the conclusion of the hearing. Post-hearing briefs shall
be permitted. The arbitration award shall be in writing and shall specify the
factual and legal basis for the award.
SECTION 5.4. Amendments. Unless otherwise provided herein, no changes,
alteration or modifications to this Agreement shall be effective unless in
writing and signed by the respective duly authorized representatives of the
Parties hereto.
SECTION 5.5. Successors and Assigns. This Agreement shall enure to the
benefit of and be binding upon the legal representatives, permitted assigns and
successors of the Parties hereto.
SECTION 5.6. Entire Agreement. This Agreement, along with any Exhibits
and/or Schedules attached hereto or incorporated herein and the Other
Dissolution Agreements, constitutes the entire agreement between the Parties
with respect to the dissolution of the Company and supersedes all prior
negotiations and agreements thereto, written or oral.
SECTION 5.7. Headlines. The headings in this Agreement are for
convenience only and shall not be considered in the interpretation of the
Agreement.
SECTION 5.8. Industry Practices. This Agreement shall be construed in
accordance with accepted oil industry terminology and practices.
SECTION 5.9. Severability. If any provision or any portion of any
provision of this Agreement or the application of any such provision or any
portion thereof to any person or circumstance, is held invalid or unenforceable,
the remaining portion of such provision and the remaining provisions shall
remain in full force and effect.
SECTION 5.10. Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Kansas, without reference
to conflict of laws principles of said state.
IN WITNESS WHEREOF, the Parties have executed and delivered this
Agreement as of the date set forth above.
NATIONAL COOPERATIVE FARMLAND INDUSTRIES, INC.
REFINING ASSOCIATION
By: /s/ James S. Loving By: /s/ Robert B. Terry
------------------------- ------------------------
Name: James S. Loving Name: Robert B. Terry
------------------------- ------------------------
Title: President Title: Executive Vice President
------------------------- ------------------------
Administrative Group and
General Counsel
COOPERATIVE REFINING, L.L.C.
By: /s/James S. Loving
-------------------------
Name: James S. Loving
-------------------------
Title: President
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SCHEDULE 2.6
INTERCONNECT PAYMENTS
(1) Oxygen. The Company shall pay to Farmland ninety dollars ($90.00)
per short ton ("ST") of oxygen transferred from the Fertilizer Plant to the
Coffeyville Refinery on or before the Effective Time.
(2) Nitrogen. The Company shall pay to Farmland twenty-five and
nine-tenths cents ($0.259) per 100 standard cubic feet of nitrogen transferred
from the Fertilizer Plant to the Coffeyville Refinery on or before the Effective
Time.
(3) Coke. Farmland shall pay to the Company ten dollars ($10.00) per
ton of petroleum coke transferred from the Coffeyville Refinery to the
Fertilizer Plant on or before the Effective Time.
(4) Instrument Air. The Company shall pay to Farmland one hundred
forty-four thousand dollars ($144,000) for the instrument air transferred from
the Fertilizer Plant to the Coffeyville Refinery from May 1, 2000 to the
Effective Time.
(5) Steam.
(a) Farmland shall pay to the Company the Variable Steam Price (as
hereinafter defined) per one thousand (1,000) pounds of steam transferred from
the Coffeyville Refinery to the Fertilizer Plant on or before the Effective
Time.
(b) The Company shall pay to Farmland the Variable Steam Price per one
thousand (1,000) pounds of steam transferred from the Fertilizer Plant to the
Coffeyville Refinery on or before the Effective Time, but only for steam so
transferred during periods in which the Coffeyville Refinery was not flaring
excess refinery fuel gas.
(c) Variable Steam Price.
(1) Flaring. During periods in which the Coffeyville Refinery
was flaring excess refinery fuel gas, the Variable Steam Price per one
thousand (1,000) pounds of steam shall equal three and six hundred
forty-five one thousandths cents ($0.03645).
(2) No Flaring. During periods in which the Coffeyville
Refinery was not flaring excess refinery fuel gas, the Variable Steam
Price per one thousand (1,000) pounds of steam shall equal the product
of (a) the Natural Gas Price (as hereinafter defined), multiplied by
(b) one and two thousand two hundred thirty-six ten-thousandths
(1.2236).
(d) Natural Gas Price. The term "Natural Gas Price" shall mean (1) if
the daily volumes of steam transferred are available for the days in a calendar
month in which the refinery was not flaring excess refinery fuel gas
("Non-Flaring Days"), the daily closing price for natural gas for such
Non-Flaring Day measured in dollars per one million standard cubic feet
("$/mmscf"), or (2) if the daily volumes of steam transferred are not available
for Non-Flaring Days in a calendar month, the average of all daily closing
prices for natural gas for such Non-Flaring Days measured in $/mmscf for the
calendar month.
EXHIBIT A
CRUDE OIL PURCHASE AGREEMENT
This Crude Oil Purchase Agreement ("Agreement") is made and entered into as of
the lst day of January, 2001, by and between FARMLAND INDUSTRIES, INC., a Kansas
cooperative corporation ("Farmland"), and NATIONAL COOPERATIVE REFINING
ASSOCIATION, a Kansas cooperative marketing association ("NCRA"). Farmland and
NCRA also are referred to herein collectively as the "Parties" and individually
as a "Party".
RECITALS
A. NCRA is the owner and operator of a refinery and related assets located
at McPherson, Kansas (the "NCRA Refinery"), and Farmland is the owner
and operator of a refinery and related assets located at Coffeyville,
Kansas (the "Coffeyville Refinery").
B. In 1999, NCRA and Farmland formed Cooperative Refining, LLC, a Delaware
limited liability company ("CRLLC") for the purpose of jointly
operating the NCRA Refinery and the Coffeyville Refinery.
C. In connection with the agreement of NCRA and Farmland to dissolve CRLLC
effective December 31, 2000, NCRA and Farmland agreed that after the
effective date of the dissolution of CRLLC, the purchase of lease crude
oil from the mid-Kansas counties identified on Exhibit A attached
hereto and incorporated herein by this reference (such counties being
referred to collectively as the "Mid-Kansas Counties" and such lease
crude oil from the Mid-Kansas Counties being referred to collectively
as the "Crude Oil") shall be made by NCRA for the joint benefit of NCRA
and Farmland pursuant to the terms and conditions set forth in this
Agreement.
D. NCRA hereby agrees to offer to sell and deliver to Farmland, and
Farmland is hereby given the option, but not the obligation, to
purchase and accept delivery from NCRA the quantity of the Crude Oil
acquired directly from time to time by NCRA or by an Affiliate (as
defined in Section 15.03) of NCRA, and not acquired through a bulk
purchase from a reseller of Crude Oil, on the terms and conditions set
forth below.
AGREEMENT
1. TERM AND TERMINATION
1.01 This Agreement shall be effective from January 1, 2001, and
shall continue until terminated in accordance with this
Section.
1.02 This Agreement may be terminated at the option of a Party in
the event of:
(a) A material breach of this Agreement by the other Party,
except for the failure of Farmland to make a timely payment
for the purchase of Crude Oil under Section l.02(g), and
such breach has not been cured by such Party within thirty
(30) days after receipt of written notice thereof from the
non-breaching Party or, in the case of a breach that is not
reasonably feasible to effect a cure within said 30-day
period, within ninety (90) days after such receipt provided
that the breaching Party diligently prosecutes the cure of
such breach;
(b) The mutual agreement of the Parties;
(c) The appointment of a receiver for the other Party or any
part of its property, the assignment for the benefit of
creditors of the other Party, or the commencement of a
proceeding under any bankruptcy, insolvency, reorganization,
arrangement or other law relating to the relief of debtors
by or against the other Party; provided, however, that if
any such appointment or proceeding is initiated without the
consent or application of the other Party, such appointment
or proceeding shall not constitute a termination event under
this Agreement until the same shall have remained
in effect for sixty (60) days;
(d) At any time by Farmland;
(e) Upon the Other Party's refinery (e.g., in the case of NCRA,
the NCRA Refinery, or in the case of Farmland, the
Coffeyville Refinery) ceasing to process crude oil other
than as a result of (i) Force Majeure or (ii) the temporary
shutdown thereof for maintenance, capital improvements or
other reasons;
(f) After December 31, 2005, upon at least six months' prior
notice of either Party;
(g) Farmland is one or more days late in making payments to NCRA
for the purchase of Crude Oil under this Agreement (other
than payments disputed in good faith); unless such failure
to make a timely payment is the result of an unintended
clerical error or third party error in the transmission of
payment. Upon NCRA's notice of such failure to make a timely
payment due to an unintended clerical error or third party
error, Farmland shall then make payment, together with
interest thereon at a rate of interest per annum equal to
five percent (5%) above the "prime rate" as published from
time to time in the Eastern Edition of the Wall Street
Journal as the average prime lending rate for seventy-five
percent (75%) of the United States thirty (30) largest
commercial banks, within one (1) business day after receipt
of notice thereof from NCRA; or
(h) The letter of credit required to be provided to NCRA
pursuant to Section 7.03 shall cease to be in full force and
effect and Farmland shall not provide NCRA with a
replacement letter of credit meeting the requirements set
forth in Section 7.03 within thirty (30) days after receipt
of written notice from NCRA that the then existing letter of
credit has ceased.
1.03 The Parties acknowledge and agree that in the event this
Agreement is terminated, then immediately after such
termination NCRA effectively should be placed in a position to
continue to acquire sixty-six and twenty-eight one hundredths
percent (66.28%) (the "NCRA Share"), and Farmland effectively
should be placed in a position to continue to acquire
thirty-three and seventy-two one hundredths percent (33.72%)
(the "Farmland Share"), of the Crude Oil generally acquired by
NCRA and the NCRA Affiliates under this Agreement prior to the
termination thereof (the "Intended Termination Result"), but
that the Intended Termination Result may prove to be
impractical. Therefore, upon any such termination or, if
earlier, upon notice of any such termination (the "Trigger
Date"), the Parties shall meet promptly, but in no event later
than ten (10) business days thereafter, to negotiate in good
faith a fair and equitable arrangement to effect the Intended
Termination Result effective as of the date of such
termination. At any time during such negotiations, however,
either Party may elect to cause a "draft" process to occur
whereby the division orders and pay lists associated with the
Crude Oil accounts (the "Leases") comprising the Crude Oil
Acquisition Business (as defined herein) shall be allocated to
NCRA and Farmland in proportion to the NCRA Share and the
Farmland Share (the "Draft").
1.04 The Draft, whether initiated by Farmland or NCRA pursuant to
Section 1.03, shall occur at the offices of NCRA on such date
consisting of a normal business day and at such time during
normal business hours as Farmland shall set forth in a notice
to NCRA; provided, however, that in no event shall the Draft
begin on a date occurring more than one hundred thirty (130)
days after the Trigger Date. The Draft shall begin by Farmland
first choosing Leases representing a specified daily
production of Crude Oil of up to three percent (3%) of the
total to be "drafted," followed by NCRA then choosing Leases
representing its proportional equivalent of up to said daily
production, and so on until all Leases have been chosen and
assigned to either Farmland or NCRA, as the case may be,
whereupon Farmland shall have been assigned Leases
representing a daily production of Crude Oil equal to the
Farmland Share of the total daily production of Crude Oil
represented by the Leases, and NCRA shall have been assigned
Leases representing a daily production of Crude Oil equal to
the NCRA Share of the total daily production of Crude Oil
represented by all Leases.
1.05 Upon completion of the Draft, NCRA shall prepare and send
written notices to the appropriate person or persons
respecting each Lease assigned to Farmland in the Draft (the
"Farmland Leases"), in such form and content as Farmland shall
reasonably require, that the applicable Lease has been
assigned by NCRA to Farmland and that, effective as of the
first day of the month following the Draft Closing Date (as
defined herein) (the "Draft Effective Date"), Farmland shall
assume all existing agreements of NCRA respecting the Lease
and shall purchase the Crude Oil produced in connection with
the Lease.
1.06 The term "Draft Closing Date" shall mean the date on which the
Draft Closing (as defined herein) shall occur, which date
shall be as set forth in a notice given by Farmland to NCRA;
provided, however, that in no event shall the Draft Closing
Date occur later than the last day of month occurring six (6)
months after the Trigger Date.
1.07 The term "Draft Closing" shall mean the execution and delivery
of the agreements, documents and other instruments to
consummate the transactions to occur in connection with the
Draft and the termination of this Agreement.
1.08 For the period beginning upon the Trigger Date and ending upon
the commencement of the Draft, Farmland shall be afforded the
opportunity to conduct a due diligence review of all lease
crude accounts of NCRA in the Mid-Kansas Counties, and NCRA
shall cooperate fully with the due diligence review.
1.09 After the Trigger Date and until the Draft Effective Date,
NCRA shall continue to own, operate, manage, preserve and
maintain the Crude Oil acquisition business to be operated by
NCRA under this Agreement (the "Crude Oil Acquisition
Business"), including without limitation the sale of Crude Oil
to Farmland in accordance with the terms hereof.
1.10 After the Trigger Date, Farmland likely will commence various
activities intended to enable Farmland to operate a Crude Oil
acquisition business (the "Farmland Transition Activities").
After the Trigger Date and until the Draft Effective Date,
NCRA shall cooperate with Farmland in connection with
Farmland's post-termination transition activities, including:
(a) NCRA shall negotiate in good faith with Farmland to
sell to Farmland such crude oil gathering assets
(excluding pipelines) of NCRA and the NCRA
Affiliates, so that when such assets are combined
with any assets owned or leased by Farmland but then
utilized in the Crude Oil Acquisition Business,
Farmland will have approximately thirty-three and
seventy-two one hundredths percent (33.72%) of the
assets utilized in the Crude Oil Acquisition
Business; and
(b) in efforts to afford Farmland a reasonable
opportunity to obtain the services of approximately
thirty-three and seventy-two one hundredths percent
(33.72%) of the employees of NCRA and the NCRA
Affiliates that are part of the Crude Oil Acquisition
Business, NCRA shall make such employees available to
meet with Farmland, at such times and locations as
Farmland may reasonably request, to discuss future
employment with Farmland
1.11 At the Draft Closing, the Parties shall execute and deliver to
each other the following:
(a) (i) in the event that NCRA terminates this Agreement
pursuant to Section 1.02(f) or Farmland terminates
this Agreement pursuant to Section 1.02(a), a
Non-Compete Agreement, in such form and content as
Farmland shall reasonably require, that provides that
NCRA and the NCRA Affiliates shall not, directly or
indirectly, purchase or solicit the purchase of crude
oil from the Farmland Leases for a period of time
ending one (1) year after the Draft Effective Date,
or (ii) in the event this Agreement is terminated
otherwise, a Non-Compete Agreement, in such form and
content as each Party shall reasonably require, that
provides that the other Party and its Affiliates
shall not, directly
or indirectly, purchase or solicit the purchase of
crude oil from the Farmland Leases or the NCRA
Leases, as the case may be, for a period of time
ending one (1) year after the Draft Effective Date.
(b) an Assignment and Bill of Sale from NCRA to Farmland,
in such form and content as Farmland shall reasonably
require, covering the Purchased Assets and the
Farmland Leases.
(c) such other agreements, documents and other
instruments as Farmland may reasonably request to
effect the assignment of the Farmland Leases to
Farmland, the purchase of the Purchased Assets by
Farmland and the other transactions to occur in
connection with the Draft Closing.
1.12 After the Draft Closing, NCRA shall execute and deliver to
Farmland such other agreements, documents and other
instruments as Farmland may reasonably request to affect the
assignment of the Farmland Leases to Farmland, the purchase of
the Purchased Assets by Farmland and the other transactions
associated with the Draft Closing.
1.13 During the term of this Agreement, Farmland covenants and
agrees not to purchase Crude Oil in the Mid-Kansas Counties,
other than through bulk purchases of crude oil from resellers
of Crude Oil.
2. PROCEDURE FOR EXERCISE OF OPTION: QUANTITY
2.01 On or before 5:00 p.m. (Central Time) on the tenth (10th) day
of the month prior to each month in which NCRA will be
offering to sell and deliver Crude Oil to Farmland, NCRA shall
provide Farmland written notice of NCRA's best estimate of the
quantity of Crude Oil that NCRA and any Affiliate of NCRA
expects to purchase directly (but not through a bulk purchase
from a reseller of Crude Oil) during the immediately following
month (the "Estimate Notice"). On or before the fifteenth
(15th) day of the month prior to the month in which Farmland
intends to exercise its option to purchase, Farmland shall by
5:00 P.M. Central Time, provide NCRA written notice of the
quantity of Crude Oil that Farmland will purchase (the
"Purchase Notice").
2.02 During the term of this Agreement, NCRA offers to sell and
deliver thirty-three and seventy-two one hundredths percent
(33.72%) of the Crude Oil directly purchased (but not through
a bulk purchase from a reseller of Crude Oil) by NCRA or any
Affiliate in a given month in the Mid-Kansas Counties (the
"Farmland Maximum Percentage"), and Farmland shall have the
option to purchase and receive any quantity of such Crude Oil
up to the Farmland Maximum Percentage of such Crude Oil. The
actual quantity of Crude Oil delivered to NCRA and Farmland
shall be subject to, without duplication, (a) all applicable
loss allowances on pipelines or other crude gathering or
transportation systems (collectively, "Pipelines") that are
not operated or controlled by NCRA or any Affiliate of NCRA,
(b) actual gains or losses on Pipelines that are operated or
controlled by NCRA or an Affiliate of NCRA, and (c) all
applicable gains or losses on trucks (collectively, the
"Allowances"). In the event Farmland fails to provide the
Purchase Notice to NCRA by the deadline established in Section
2.01, Farmland shall be deemed to have provided a notice to
purchase the Farmland Maximum Percentage of such Crude Oil.
Farmland shall have no right to carryover any portion of the
unused percentage from a particular month.
2.03 The quantity of Crude Oil delivered hereunder shall be
determined by use of 100% tank tables, or mutually acceptable
automatic measuring equipment, with customary adjustments to
volume and density to 60(degree) F temperature and full
deduction of BS&W, as adjusted by any applicable Allowances.
The Parties agree to conduct an accounting of quantities
delivered to Farmland on no greater than a quarterly basis.
2.04 During the term of this Agreement and through the Draft
Effective Date, NCRA shall exercise its commercially
reasonable efforts to operate the Crude Oil Acquisition
Business efficiently and to
maximize the economic benefit to both Parties. NCRA shall
provide Farmland with such monthly and other reports as
Farmland may reasonably request regarding the Crude Oil
Acquisition Business and otherwise keep Farmland reasonably
informed as to the quantity of Crude Oil purchased each month,
but in any event, NCRA shall notify Farmland promptly upon
NCRA's belief that actual purchases for a given month will be
less than, or exceed, the estimated purchases for such month
by more than ten percent (10%).
3. DELIVERY POINT: TITLE AND RISK OF LOSS
3.01 NCRA shall deliver or cause to be delivered the Crude Oil to
be purchased and sold hereunder to Farmland at Lyons, Kansas,
Phillipsburg, Kansas, Valley Center, Kansas, McPherson, Kansas
or any other delivery point designation that Farmland may
reasonably designate from time to time (the "Delivery Points")
and in such quantities as Farmland may reasonably specify from
time to time; provided that NCRA shall not be obligated to
incur any capital expenditures to create a Delivery Point not
othenvise in existence on or after the effective date hereof.
NCRA and Farmland shall work together to schedule deliveries
of Crude Oil for each month and, unless the parties otherwise
agree, NCRA shall operate the Crude Oil Acquisition Business
so deliveries of Crude Oil to Farmland hereunder shall occur
on a relatively consistent and uniform basis during each month
in proportion to the percentage of Crude Oil that Farmland
purchases. For pricing purposes only, however, total volume
delivered during each month shall be deemed to have been
delivered at an average daily rate during that month.
3.02 Farmland will accept delivery of the Crude Oil upon completion
of measurement of the Crude Oil by pipeline meter. Title to
the Crude Oil and risk of loss shall pass from NCRA to
Farmland upon completion of such measurements at the Delivery
Point.
3.03 Farmland may from time to time give NCRA notice of Farmland's
election to cause a portion of the Crude Oil to be purchased
by Farmland hereunder to be delivered to NCRA at McPherson,
Kansas, whereupon NCRA shall provide to Farmland, in exchange
for the Crude Oil so delivered to NCRA, the same quantity of
Crude Oil at any Pipeline trading point location reasonably
designated by Farmland in said notice.
4. PRICE
4.01 The purchase price per barrel of Crude Oil sold by NCRA to
Farmland hereunder shall be equal to the sum of (a) the Crude
Oil Price, plus (b) the Transportation Charges.
4.02 For purposes hereof, the term "Crude Oil Price" shall mean the
average price per barrel of Crude Oil paid by NCRA in its
operation of the Crude Oil Acquisition Business during the
month of delivery.
4.03 For the purposes hereof, the term "Transportation Charges"
shall mean the sum of (a) the applicable Average Pipeline
Tariff for actual barrels delivered at each Delivery Point,
plus (b) the quotient of (1) the total direct, out-of-pocket
costs reasonably incurred by NCRA in its operation of the
Crude Oil Acquisition Business during the month of delivery
(including any reasonable costs or expenses associated with
any damage to property or injury, sickness, disease or death
to persons arising out of or in connection with any acts or
omissions of NCRA or any officer, director, Affiliate, agent,
employee, representative or advisor (each a "Representative")
of NCRA in connection with the operation of the Crude Oil
Acquisition Business, but not arising out of or in connection
with the gross negligence, malfeasance or willful misconduct
of NCRA or any NCRA Representative), divided by (2) the total
number of barrels of Crude Oil purchased by NCRA in its
operation of the Crude Oil Acquisition Business during the
month of delivery, subject to any applicable Allowances.
4.04 For purposes hereof, the term "Average Pipeline Tariff" shall
mean the then applicable weighted
average pipeline tariff to the then applicable Delivery
Points, determined based upon the quantities of Crude Oil for
each pipeline origin listed in Exhibit B with the weighted
average pipeline tariff calculation set forth in Exhibit B and
incorporated herein by this reference, provided that either
Party may require the re-determination of the Average Pipeline
Tariff, effective upon any change in any applicable published
pipeline tariff. The Parties agree that as of the date of this
Agreement, the Average Pipeline Tariff is as follows:
Destination Average Pipeline Tariff
----------- -----------------------
Lyons, KS $0.4948
Phillipsburg, KS $0.2000
Valley Center, KS $0.5611
McPherson, KS $0.5377
4.05 NCRA shall reimburse Farmland for the reasonable direct costs
incurred by Farmland in connection with the Crude Oil
Acquisition Business gathering operations (e.g. employee
costs, asset lease costs, etc., excluding, however, pipeline
operations), which costs will in turn be included in the costs
described in Section 4.03(b)(1) used in the calculation of the
overall Crude Oil purchase price set forth in Section 4.01.
5. FARMLAND EMPLOYEE
A Farmland employee (currently Lee Couture) shall continue to have a
meaningful and appropriate management role concerning the trucking
operations of the Crude Oil Acquisition Business, and any significant
changes to said role will first be discussed by the Parties. The
Parties also acknowledge that Mr. Couture will have a management role
associated with Farmland's Pipeline operations and operation of the
Phillipsburg Refinery and, thus, in accordance with the terms of the
Employee Lease Agreement, NCRA shall be obligated to reimburse Farmland
for only one-half (1/2) of the costs of Farmland associated with Mr.
Couture.
6. FARMLAND'S RIGHT TO AUDIT: DISPUTE RESOLUTION
6.01 Farmland shall have the right, from time to time, upon at
least five (5) business days prior notice to NCRA during
business hours to inspect and audit, or cause to be inspected
and audited, the business records, bookkeeping and accounting
records which relate to the Crude Oil Acquisition Business.
NCRA shall fully cooperate with representatives of Farmland
and its representatives and advisors in connection with any
such inspection or audit. All costs incurred by Farmland in
connection with the audit or inspection shall be borne by
Farmland, and all costs incurred by NCRA in connection with
the audit or inspection shall be borne by NCRA; provided,
however, that in the event a material discrepancy is found in
connection with the audit, then NCRA shall reimburse Farmland
all of its reasonable out-of-pocket costs incurred in
connection with the audit or inspection. For purposes of this
Section, "material discrepancy" shall mean a discrepancy
greater than two hundred fifty thousand dollars ($250,000.00),
excluding any accrual to actual adjustments.
6.02 In the event of any dispute or controversy arising out of or
related to this Agreement, or the breach thereof; including
the interpretation of any provision of this Agreement which
cannot be resolved informally by the Parties, the Parties
shall first make a good faith effort to promptly resolve such
dispute. If the Parties are unable to reach agreement with
respect to such discrepancy, then such dispute shall be
resolved by binding arbitration administered by the American
Arbitration Association in accordance with its Commercial
Arbitration Rules then in effect, except as such rules may be
modified by this Agreement or by the mutual consent of the
Parties. Any arbitration proceeding conducted hereunder shall
alternate locations between the greater metropolitan areas of
Kansas City, Missouri and Wichita, Kansas, with the first such
arbitration proceeding to be conducted at such location as is
specified by the Party requesting the arbitration proceeding.
Any award rendered in the arbitration proceeding shall be
final and binding upon the Parties and a judgment thereon may
be entered in any court having competent
jurisdiction. Each Party shall bear its own expenses in
connection with the arbitration; provided, however, that the
fees and expenses of the arbitrator and all other expenses of
the arbitration shall be borne equally by the Parties. The
arbitration proceedings shall be governed by the laws of the
State of Kansas. The arbitrator shall be selected from a list
of five (5) arbitrators provided by the American Arbitration
Association. Alternate strikes shall be made to the list
commencing with the Party requesting arbitration until a
single name remains. That individual shall be the arbitrator
for the matter. After the arbitrator has been selected, the
Parties may obtain reasonable discovery in advance of the
arbitration by way of: (i) exchange of copies of all documents
in the possession, custody or control of a Party and relevant
to the matter in dispute; (ii) written interrogatories for the
purpose of determining the name and address of each witness
proposed to be called by a Party and a brief description of
the relevant information each such witness is expected to
provide; and (iii) such further discovery, including
dispositions, as the arbitrator may determine is appropriate
after taking into consideration the nature of the dispute and
the amount in controversy. To the extent possible, the
arbitration hearing shall be conducted within sixty (60) days
after selection of the arbitrator, and the arbitrator shall
render a decision within twenty (20) days after the conclusion
of the hearing. Post-hearing briefs shall be permitted. The
arbitration award shall be in writing and shall specify the
factual and legal basis for the award.
7. PAYMENT
7.01 NCRA shall invoice Farmland promptly after the end of each
month for deliveries made during that month, but in no event
later than the fifteenth (15th) day of the following month,
and subject to Section 7.02, payment shall be made by Farmland
by electronic funds transfer by the twentieth (20th) day of
the month following delivery of such Crude Oil to Farmland. In
the event that Farmland fails to receive an invoice on or
before the fifteenth (15th) day of the applicable month, then
Farmland shall be granted one additional business day to make
the required payment for each day that the invoice is late.
Invoices shall be forwarded promptly to:
Farmland Industries, Inc.
3315 North Oak Trafficway
P.O. Box 7305 Dept. 11
Kansas City, Missouri 64116
Attention: Manager, Petroleum Accounting
Fax: 816.459.5944
with a copy to:
Farmland Industries, Inc.
3315 North Oak Trafficway
P.O. Box 7305 Dept. 160
Kansas City, Missouri 64116
Attention: Vice President - Treasurer
Fax: 816.459.5961
7.02 If the date for payment of any monies under this Agreement
falls on a Saturday or on a bank holiday, then payment shall
be due on the first previous business day. If the date for
payment of any monies under this Agreement falls on a Sunday
or a Monday bank holiday, then payment shall be due on the
next business day.
7.03 Farmland shall post a letter of credit in the total sum of
Eight Million Dollars ($8,000,000.00) ("Letter of Credit") to
support its payment obligations hereunder. Farmland's
obligation to provide the Letter of Credit to NCRA shall cease
in the event Farmland reports net income on a consolidated
basis for the then most recently completed fiscal year and an
EBITDA to Net Interest Expense ratio of at least 1.6 (the
"Financial Covenants"). Within one-hundred-twenty (120) days
after the end of each fiscal year, Farmland shall evidence its
compliance, or its failure to comply, with the Financial
Covenants by providing NCRA a copy of Farmland's audited
financial
statements and a certificate signed by Farmland's Chief
Financial Officer or Treasurer certifying Farmland's
compliance with the Financial Covenants. In the event Farmland
fails to satisfy any of the Financial Covenants at the end of
any fiscal year, then Farmland shall continue to provide or,
if Farmland was not obligated to provide the Letter of Credit
to NCRA with respect to the immediately preceding fiscal year,
provide no later than one hundred twenty (120) days after the
then most recently completed fiscal year, the Letter of Credit
to NCRA until such time that Farmland satisfies the Financial
Covenants as set forth above. If NCRA shall not have received
evidence of Farmland's compliance with the Financial Covenants
on or before one hundred twenty (120) days after the end of a
fiscal year, then Farmland shall be deemed not to have
satisfied the Financial Covenants with respect to such fiscal
year.
8. FORCE MAJEURE
8.01 In the event of the occurrence of a Force Majeure event which
prevents performance hereunder, the Party or Parties whose
performance is thereby prevented or delayed shall, unless
otherwise provided below, be relieved of any obligation or
liability under the terms of this Agreement until the
expiration of a reasonable time after termination of the force
majeure event.
8.02 "Force Majeure" means an event which is unforeseen and beyond
the reasonable control of the Party that either prevents the
Party from delivering the affected volume or prevents the
Party from accepting delivery of the affected volume. The
following are the only instances that will be recognized as
Force Majeure events hereunder: earthquakes; floods;
landslides; civil disturbances; sabotage; acts of public
enemies; war; blockades; insurrections; riots; epidemics; the
act of any government or other authority or statutory
undertaking; the inability to obtain or the curtailment of
electric power, water or fuel; strikes, lockouts or other
disruptions; fires; explosions; breakdowns or failure of pipe,
plant, machinery or equipment; apportionment of applicable
carriers; contamination or poisoning of catalyst and/or
solvent or biological treatment facilities; and any other
event which is unforeseen and beyond the reasonable control of
the Party that either prevents the Party from delivering the
affected volume or prevents the Party from accepting the
delivery the affected volume.
8.03 A lack of funds, the availability of a more attractive market,
or inefficiencies in operations do not constitute events of
Force Majeure.
8.04 The Party claiming the Force Majeure event agrees to notify in
writing the other Party of the occurrence of the Force Majeure
event as soon as possible, but in any event within twenty (20)
business days after the occurrence of the Force Majeure event;
otherwise the claim for Force Majeure shall be deemed waived.
The Party whose performance is prevented hereunder by a Force
Majeure event shall diligently endeavor to mitigate and remedy
the situation with all reasonable dispatch.
9. TITLE AND WARRANTIES
9.01 NCRA makes no other warranty, expressed or implied, concerning
the Crude Oil purchased and sold hereunder beyond any warranty
provided by the lease operator. Notwithstanding the foregoing,
however, NCRA represents and warrants (a) that it will use its
best efforts to ensure that all lease crude oil sold to
Farmland hereunder shall be Crude Oil and (b) that, upon each
sale, Farmland shall be vested with good and marketable title
to the lease crude oil sold, free and clear of all liens,
claims and encumbrances.
10. LIABILITY AND INDEMNITY
10.01 NCRA shall not, in any case other than in connection with the
gross negligence or willful misconduct of NCRA and NCRA's
indemnity obligations hereunder, be liable for any special,
incidental, consequential, indirect or other similar damages,
including, but not limited to, lost profits, arising from its
obligations under this Agreement. Notwithstanding the
foregoing,
however, Farmland and NCRA acknowledge and agree that in the
event that NCRA fails to provide, or offer to provide,
Farmland with the quantity of Crude Oil that NCRA is obligated
to provide, or offer to provide, hereunder, then Farmland
shall sustain substantial damages associated with its crude
oil refining business, but the exact amount of such damages
would be impractical or extremely difficult to ascertain.
Therefore, in the event of any such failure that has not been
fully cured by NCRA within sixty (60) days after Farmland
notifies NCRA of such failure, NCRA shall pay to Farmland, as
liquidated damages and not as a penalty, an amount equal to
the product of (a) the difference between (1) the Cushing
Crude Oil Price, minus (2) the Crude Oil Price, multiplied by
(b) the number of barrels of Crude Oil that NCRA failed to
provide, or offer to provide, hereunder in the applicable
period, multiplied by (c) three (3).
10.02 For purposes hereunder, the term "Cushing Crude Oil Price"
shall mean, for a given month, the sum of (a) Koch Petroleum's
posted price for West Texas/New Mexico intermediate crude oil
for the month of delivery, plus (b) the average P-plus price
published by Platt's Oilgram Price Report from the 26th day of
the month that is two months prior to the applicable month of
delivery through the 25th day of the month that is immediately
preceding the applicable month of delivery; provided, however,
that if Koch Petroleum ceases to post a price for West
Texas/New Mexico Intermediate crude oil or if Platts Oilgram
Price Report ceases to publish a P-plus price, then the
Parties shall negotiate in good faith a mutually agreeable
alternative price index formula to determine the Cushing Crude
Oil Price.
10.03 Subject to Section 4.03 herein, Farmland shall not, in any
case, be liable for any costs or expenses associated with any
damage to property or injury, sickness, disease or death to
third persons arising out of or in any way connected with any
acts or omissions of NCRA in connection with NCRA's operation
of the Crude Oil Acquisition Business, and NCRA shall
indemnify and hold Farmland and the Farmland Representatives
harmless from and against any and all losses, costs (including
but not limited to attorneys' fees and expenses), damages,
liabilities, fines, penalties, expenses, claims, demands,
actions, suits and judgments for, arising out of, or
attributable to any damage to property or injury, sickness,
disease or death to third persons arising out of or anyway
connected with any acts or omissions of NCRA in connection
with the operation of the Crude Oil Acquisition Business.
11. APPLICATION OF LAW
11.01 This Agreement shall be interpreted in accordance with and
governed by the laws of the State of Kansas, without reference
to conflict of laws principles or said state.
12. BUSINESS ETHICS
12.01 Neither party, nor their duly authorized representatives are
permitted to take any action hereunder which would constitute
a breach of any law. All activities and transactions performed
by the parties and their duly authorized representatives shall
be carried out in good faith and in a proper and truthful
manner, and any records or other documents relating to such
activities and transactions shall contain a true and proper
account of the facts and circumstances pertaining thereto.
13. TAXES
13.01 Each Party shall be liable for their respective percentage of
any taxes imposed on the Crude Oil purchased.
14. NOTICES
14.01 Any notices permitted or required to be given under this
Agreement shall be in writing and shall be addressed to the
parties hereto as follows:
For NCRA: National Cooperative Refining Association
1391 Iron Horse Road
P.O. Box 1404
McPherson, Kansas 67460
Attention: Vice President, Supply and Trading
Fax: (316) 241-5562
For Farmland:
(i) For invoices required under Section 7, as
provided therein.
(ii) For the Estimate Notice and any other
notices required under Section 2 hereof, as
follows:
Farmland Industries, Inc.
c/o National Cooperative Refining Association
1391 Iron Horse Road
P.O. Box 1404
McPherson, Kansas 67460
Attention: Mr. Patrick Quinn
Fax: 316.241.9269
(iii) For all other notices required hereunder, as
follows:
Farmland Industries, Inc.
3315 North Oak Trafficway
P.O. Box 7305 Dept. 11
Kansas City, Missouri 64116
Attention: General Counsel
Fax: 816.459.5902
with a copy to:
Farmland Industries, Inc.
3315 North Oak Trafficway
P.O. Box 7305 Dept. 160
Kansas City, Missouri 64116
Attention: Vice President - Treasurer
Fax: 816.459.5961
Either Farmland or NCRA may from time to time change
its address for service hereunder on written notice to
the other party.
14.02 Any notice shall:
1) If delivered by hand delivery, be deemed to have been given or
made at the time of delivery as acknowledged by signature of
the receiving party;
2) If sent by telecopy, telex, telecommunication device or other
similar form of communication or by any overnight private
courier service, be deemed to have been given or made on the
working day on which it was received; and
3) If mailed by certified or registered mail, returned receipt
requested, postage prepaid, be deemed to have been given or
made, four (4) days after deposit in the United States mail.
15. ASSIGNMENT
15.01 Either party may assign this Agreement in whole or in part to
an Affiliate or may cause any or all of its obligations to be
performed by an Affiliate. Except as otherwise provided
hereunder, any attempt by either party to assign its rights or
delegate its duties under this Agreement in whole or in part
to a non-Affiliate without prior written consent of the other
party shall be ineffective to the extent consistent with the
law.
15.02 For purposes of this Agreement, the term "Affiliate" shall
mean a corporation, partnership, limited liability company or
any other person or entity which controls, is controlled by,
or under common control with either Farmland or NCRA, as the
case may be.
15.03 Notwithstanding the foregoing provisions of this Article 15,
in the event Farmland desires to transfer its ownership
interest in the Coffeyville Refinery during the term of this
Agreement, then Farmland may assign this Agreement to the
transferee of the Coffeyville Refinery without the consent of
NCRA, and upon such transferee assuming this Agreement and
Farmland's obligations hereunder, Farmland shall not be liable
for the performance of its obligations hereunder from and
after the date of such assignment, and NCRA shall return to
Farmland any Letter of Credit then issued in favor of NCRA
under Section 7.03 together with a written statement signed by
an authorized officer of NCRA in form and content reasonably
acceptable to Farmland to the effect that the issuer of the
Letter of Credit may cancel the Letter of Credit. Further, in
lieu of the requirements of Section 7.03, the assignee shall
provide NCRA credit terms or support comparable to whatever
credit terms and support are required of it from other bulk
crude oil suppliers. Any assignee of Farmland shall be
required to provide NCRA information on a quarterly basis
regarding its credit terms and support requirements from its
bulk crude oil suppliers.
16. GENERAL
16.01 Amendments. Unless otherwise provided herein, no changes,
alteration or modifications to this Agreement shall be
effective unless in writing and signed by the respective duly
authorized representatives of the Parties hereto.
16.02 Successors and Assigns. This Agreement shall enure to the
benefit of and be binding upon the legal representatives,
permitted assigns and successors of the parties hereto.
16.03 Entire Agreement. This Agreement, along with its Exhibits and
Schedules, constitutes the entire agreement between the
parties with respect to the Crude Oil Acquisition Business and
supersedes all prior negotiations and agreements thereto,
written or oral.
16.04 Headings. The headings in this Agreement are for convenience
only and shall not be considered in the interpretation of the
Agreement.
16.05 Industry Practices. This Agreement shall be construed in
accordance with accepted oil industry terminology and
practices.
16.06 Severability. If any provision or any portion of any provision
of this Agreement or the application of any such provision or
any portion thereof to any person or circumstance, is held
invalid or unenforceable, the remaining portion of such
provision and the remaining provisions shall remain in full
force and effect.
16.07 Effect of Termination. Except (a) with respect to Sections
1.03, 6.01, 6.02, 9.01, 10.01, 10.02, 10.03, 12.01, 15.01, and
15.03, (b) as otherwise provided herein with respect to
obligations which are contemplated by their terms to survive
any termination of this Agreement, and (c) any agreements,
obligations or liabilities of any Party arising from any
default, breach or failure to perform by such Party under any
provision of this Agreement prior to any termination of this
Agreement, upon the termination of this Agreement pursuant to
the provisions hereof, all further obligations of each Party
to the other Party hereunder shall terminate.
16.08 Independent Contractor. The Parties acknowledge and agree that
NCRA shall not be an agent or representative of Farmland with
respect to any matter related to this Agreement, and Farmland
shall not be an agent or representative of NCRA with respect
to any matter related to this Agreement. This Agreement shall
not be deemed to create a partnership, joint venture, or any
other joint enterprise of any kind whatsoever between NCRA and
Farmland.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date set forth above.
NATIONAL COOPERATIVE FARMLAND INDUSTRIES, INC.
REFINING ASSOCIATION
By:_______________________ By:_______________________
Name:_____________________ Name:_____________________
Title:____________________ Title:____________________