-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EQxevTpm5NNvC0FXjaJQPIEiG2vPO8LxOOlczaeoic3Ct3NXrqfF5vkCfXWGHOFT 9LsMrVovKU5wjbpfhR0NiQ== 0001047469-98-025284.txt : 19980626 0001047469-98-025284.hdr.sgml : 19980626 ACCESSION NUMBER: 0001047469-98-025284 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19980625 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FARMLAND INDUSTRIES INC CENTRAL INDEX KEY: 0000034616 STANDARD INDUSTRIAL CLASSIFICATION: MEAT PACKING PLANTS [2011] IRS NUMBER: 440209330 STATE OF INCORPORATION: KS FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 033-61709 FILM NUMBER: 98653887 BUSINESS ADDRESS: STREET 1: 3315 N FARMLAND TRAFFICWAY STREET 2: DEPT 140 CITY: KANSAS CITY STATE: MO ZIP: 64116-0005 BUSINESS PHONE: 816-459-68 FORMER COMPANY: FORMER CONFORMED NAME: CONSUMERS COOPERATIVE ASSOCIATION DATE OF NAME CHANGE: 19681201 S-3/A 1 S-3/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 1998 REGISTRATION NO. 33-61709 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- AMENDMENT NO. 3 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------------- FARMLAND INDUSTRIES, INC. (Exact Name of Registrant as Specified in Its Charter) KANSAS 44-0209330 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.)
-------------------------- 3315 NORTH OAK TRAFFICWAY KANSAS CITY, MISSOURI 64116-0005 (816) 459-6000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) TERRY M. CAMPBELL EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER FARMLAND INDUSTRIES, INC. 3315 NORTH OAK TRAFFICWAY KANSAS CITY, MISSOURI 64116-0005 (816) 459-6000 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) -------------------------- COPIES OF ALL COMMUNICATIONS TO:
JAMES BRIDGES KENNETH R. BLACKMAN EDWARD F. PETROSKY FARMLAND INDUSTRIES, INC. FRIED, FRANK, HARRIS, SHRIVER & BROWN & WOOD LLP 3315 NORTH OAK TRAFFICWAY JACOBSON ONE WORLD TRADE CENTER KANSAS CITY, MISSOURI ONE NEW YORK PLAZA NEW YORK, NEW YORK 10048 64116-0005 NEW YORK, NEW YORK 10004-1980 (212) 839-5300 (816) 459-6000 (212) 859-8000
-------------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the effective date of this Registration Statement, as determined by market conditions. -------------------------- If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / -------------------------- The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may determine. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXPLANATORY NOTE THIS AMENDMENT NO. 3 TO REGISTRATION STATEMENT NO. 33-61709 CONTAINS (1) A PRELIMINARY PROSPECTUS SUPPLEMENT RELATING TO % SENIOR NOTES DUE 20 , AND (2) A PRELIMINARY BASE PROSPECTUS RELATING TO THE SECURITIES REGISTERED. SUBJECT TO COMPLETION INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. PRELIMINARY PROSPECTUS SUPPPLEMENT DATED , 1998 PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED JUNE , 1998) [LOGO] $ FARMLAND INDUSTRIES, INC. % SENIOR NOTES DUE , 20 ------------ The % Senior Notes due , 20 (the "Senior Notes") are being offered by Farmland Industries, Inc. (the "Company" or "Farmland"). Interest on the Senior Notes will be payable semi-annually on and of each year, commencing , 199 . The Senior Notes will not be redeemable prior to maturity. See "Description of the Senior Notes." The Senior Notes will be represented by a Global Security registered in the name of the nominee of The Depository Trust Company ("DTC"), which will act as the Depositary. Interests in the Global Security will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its participants. Except as described herein, Senior Notes in certificated form will not be issued. Settlement for the Senior Notes will be made in immediately available funds. The Senior Notes will be issued only in denominations of $1,000 and integral multiples thereof. The Senior Notes will trade in DTC's Same-Day Funds Settlement System until maturity, and secondary market trading activity for the Senior Notes will therefore settle in immediately available funds. All payments of principal and interest will be made by the Company in immediately available funds. The Senior Notes are general unsecured and non-subordinated obligations of the Company and rank on a parity in right of payment with all other unsecured and non-subordinated indebtedness of the Company. The Company plans to make application to list the Senior Notes on the New York Stock Exchange, Inc. SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THE ACCOMPANYING PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SENIOR NOTES OFFERED HEREBY. --------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRICE TO UNDERWRITING PROCEEDS TO PUBLIC (1) DISCOUNT(2) COMPANY(1)(3) Per Senior Note.................................... % % % Total.............................................. $ $ $
(1) Plus accrued interest, if any, from , 1998 to the date of delivery. (2) The Company has agreed to indemnify Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Underwriter") against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting." (3) Before deducting expenses payable by the Company estimated at $435,000. ------------------ The Senior Notes are offered by the Underwriter, subject to prior sale, when, as and if issued to and accepted by it and subject to approval of certain legal matters by counsel for the Underwriter and certain other conditions. The Underwriter reserves the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the Senior Notes will be made in book-entry form through the facilities of the DTC on or about , 1998 against payment therefor in immediately available funds. ------------------ MERRILL LYNCH & CO. ---------- The date of this Prospectus Supplement is , 1998. CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SENIOR NOTES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF SENIOR NOTES TO COVER SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DATED _______, 1998 (THE "PROSPECTUS") OR INCORPORATED HEREIN BY REFERENCE. UNLESS THE CONTEXT REQUIRES OTHERWISE, (I) "FARMLAND" OR THE "COMPANY" REFER TO FARMLAND INDUSTRIES, INC. AND ITS CONSOLIDATED SUBSIDIARIES, AND (II) ALL REFERENCES HEREIN TO "YEAR" OR "YEARS" ARE TO FISCAL YEARS ENDED AUGUST 31. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER THE CAPTION "RISK FACTORS" IN THE PROSPECTUS. THE COMPANY Farmland is an agricultural farm supply and processing and marketing cooperative headquartered in Kansas City, Missouri, that is primarily owned by its members (as herein defined) and operates on a cooperative basis. Founded in 1929, Farmland has grown from revenues of $310,000 during its first year of operation to over $9.1 billion during 1997. As of August 31, 1997, Farmland's membership, associate membership and patrons eligible for patronage refunds consisted of approximately 1,400 cooperative associations of farmers and ranchers and 13,000 pork or beef producers or associations of such producers. Management estimates that over 500,000 farmers and ranchers conduct business through Farmland and its member cooperatives. The Company believes it is one of the largest cooperatives in the United States in terms of revenues. In 1997, Farmland had export sales in excess of $1.3 billion to customers in over 80 countries. Substantially all of the Company's foreign sales are invoiced and collected in U.S. Dollars. The Company conducts business primarily in two operating areas: agricultural inputs and outputs. On the input side of the agricultural industry, the Company operates as a farm supply cooperative. On the output side of the agricultural industry, the Company operates as a processing and marketing cooperative. The Company's farm supply operations consist of three principal product divisions: petroleum, crop production and feed. Principal products of the petroleum division are refined fuels, propane, and by-products of petroleum refining. The Company's strategy in the petroleum division is to produce its products close to the end user, with a focus on agricultural and rural markets. Petroleum products are marketed through member cooperatives and nonmembers and through approximately 170 associated AMPRIDE-TM- convenience stores. The Company's Coffeyville, Kansas refinery produced approximately 32 million barrels of petroleum products in 1997, making the Company the second largest refiner of petroleum in the mid-continent. Principal products of the crop production division are nitrogen-, phosphate- and potash-based fertilizers ("plant nutrients") and, through the Company's ownership in WILFARM, L.L.C. (a 50%-owned venture formed in 1995) ("WILFARM") and Omnium, LLC (a 50%-owned venture formed in 1997) ("Omnium"), a complete line of insecticides, herbicides and mixed chemicals. The Company believes that it is one of the largest producers of anhydrous ammonia fertilizer in the United States and one of the largest wholesalers of fertilizers in the United States. Principal products of the feed division include swine, dairy, pet, beef, poultry, mineral and specialty feeds, feed ingredients and supplements, animal health products and livestock services. Over 50% of the Company's farm supply products sold in 1997 was produced in plants owned by the Company or operated by the Company under long-term lease arrangements. Approximately 60% of the Company's farm supply products sold in 1997 was sold at wholesale to farm cooperative associations which are members of Farmland. These farm cooperative associations distribute products primarily to farmers and ranchers in states which comprise the corn belt and the wheat belt and who utilize the products in the production of farm crops and livestock. On the output side, the Company's operations include the processing of pork and beef, the marketing of fresh pork, processed pork and fresh beef and the storage and marketing of grain. In 1997, approximately 63% of the hogs processed, 20% of the beef cattle processed and 53% of the grain marketed by the S-2 Company were supplied to the Company by its members. Substantially all of the Company's pork and beef products sold in 1997 were processed in plants owned by the Company. The Company has sought to increase its marketing of branded pork and beef products, which generally sell at premium prices as compared with similar nonbranded products. Pork products are marketed under the following registered tradenames: Farmland, Farmstead, OhSe, Maple River, Carando, Roegelein, Regal and Marco Polo. Pork product distribution is through national and regional retail food chains, food service accounts, distributors and through international marketing brokers. Beef distribution is through national and regional retail and food service customers as well as under the Farmland Black Angus Beef registered tradename. In addition, certain beef products are distributed in international markets. The Company markets wheat, corn, soybeans, milo, barley and oats, with wheat and corn constituting the majority of the grain marketing business. The Company's North American Grain Division purchases grain from members and nonmembers primarily located in the Midwestern part of the United States. In 1997, approximately 41% of grain revenues were from export sales or sales to domestic customers for export. The Company's international grain trading subsidiaries (collectively referred to as "Tradigrain") headquartered in Geneva, Switzerland, import, export and ship all major grains from the major producing countries to final consumers which are either governmental entities or private companies. The principal businesses of the Company are highly seasonal. Historically, the majority of revenues related to crop production, beef and grain occur during the spring, summer and fall, respectively. Revenues related to crop production and beef are lowest during the winter, while sales related to the grain and feed businesses tend to be lowest during the spring and summer, respectively. Farmland was formally incorporated in Kansas in 1931. Its principal executive offices are at 3315 North Oak Trafficway, Kansas City, Missouri 64116 (telephone 816-459-6000). S-3 THE OFFERING Securities Offered........................... $ aggregate principal amount of % Senior Notes Due , 20 (the "Senior Notes"). Maturity Date................................ , 20 . The Senior Notes will not be redeemable prior to maturity and do not provide for any sinking fund. Interest Payment Dates....................... and , commencing, 199 . Ranking...................................... The Senior Notes will be general unsecured and non-subordinated obligations of the Company and rank on parity in right of payment with all other unsecured and non-subordinated indebtedness of the Company. As of February 28, 1998, after giving effect to this offering, (i) the Company had outstanding $ million aggregate principal amount of non-subordinated indebtedness, including the Senior Notes, (ii) the Company had outstanding $ million aggregate principal amount of subordinated indebtedness, and (iii) certain of the Company's subsidiaries had outstanding $ million aggregate principal amount of indebtedness, of which $ million were nonrecourse to the Company. Certain Covenants............................ The Indenture (as defined below) under which the Senior Notes are to be issued restricts, among other things, the ability of the Company in certain circumstances to incur liens on its assets. Use of Proceeds.............................. The net proceeds to the Company from the sale of the Senior Notes offered hereby are estimated to be $ million. The Company intends to use such net proceeds to repay a portion of currently outstanding debt. Listing...................................... The Company plans to make application to list the Senior Notes on the New York Stock Exchange, Inc. Book-Entry System............................ The Senior Notes will be represented by a fully registered global security (collectively, the "Global Security") registered in the name of the nominee of DTC. Except as described in this Prospectus Supplement or the Prospectus, beneficial interests in the Global Security will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its participants. Except in limited circumstances described in this Prospectus Supplement, owners of beneficial interests in the Global Security will not be entitled to have Senior Notes registered in their names, will not receive or be entitled to receive Senior Notes in certificated form and will not be considered holders thereof under the Indenture. Senior Notes will be issued only in denominations of $1,000 and integral multiples thereof.
S-4 USE OF PROCEEDS The net proceeds to the Company from the sale of the Senior Notes offered hereby are estimated to be $ million. The Company intends to use such net proceeds to repay a portion of short-term borrowings under the Company's five year Syndicated Credit Facility (the "Credit Facility") with various participating banks. At February 28, 1998, the Company had outstanding $ million of short-term borrowings under the Credit Facility and $ million of revolving long-term borrowings. Additionally, $ million of the Credit Facility was utilized to support letters of credit. At February 28, 1998, the weighted average borrowing rate for short-term borrowings was approximately %. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" in the Company's 1997 Form 10-K incorporated herein by reference. S-5 CAPITALIZATION The following table sets forth the capitalization of Farmland as of February 28, 1998, and as adjusted to give effect to the offering of the Senior Notes offered hereby and the application of the net proceeds therefrom as described under "Use of Proceeds."
FEBRUARY 28, 1998 -------------------------- HISTORICAL AS ADJUSTED ------------ ------------ (DOLLARS IN THOUSANDS) Long-term borrowings (excluding current maturities) Subordinated capital investment certificates 6% to 9%, maturing 1998 through 2014.............................................. $ 287,111 $ Subordinated monthly income certificates 6.25% to 9.25%, maturing 1998 through 2007........................................ 90,485 Syndicated Credit Facility 6.18%, maturing 2001..................................... 100,000 Other bank notes 6.09% to 9.25% maturing 1998 through 2007.......................... 85,945 Industrial revenue bonds 6.75% to 9.25%, maturing 1998 through 2007................. 20,050 Promissory notes 7% through 8.5%, maturing 1998 through 2005........................ 8,562 Other 3% to 14.92%.................................................................. 37,213 Senior Notes........................................................................ -0- ------------ ------------ Long-term borrowings (including current maturities)................................... 629,366 Less current maturities............................................................. 98,440 ------------ ------------ Long-term borrowings (excluding current maturities)................................... 530,926 Other long-term liabilities........................................................... 30,880 ------------ ------------ Total long-term liabilities......................................................... 561,806 Minority owners' equity in subsidiaries............................................... 29,259 Interim Income (1).................................................................... 20,427 Capital shares and equities 8% Series A Cumulative Redeemable Preferred Shares, - $25 par value--2,000,000 issued and outstanding......................... 100,000 Preferred shares, $25 par value--2,886 shares issued and outstanding................ 72 Common shares, $25 par value--authorized 50,000,000 shares,......................... 502,545 Earned surplus and other equities................................................... 316,011 ------------ ------------ Total capital shares and equities..................................................... 918,628 ------------ ------------ Total Capitalization.................................................................. $ 1,530,120 $ ------------ ------------ ------------ ------------
- ------------------------ (1) Farmland operates on a cooperative basis. In accordance with its bylaws, Farmland determines its annual net earnings from transactions with members ("member-sourced earnings"). For this purpose, annual net earnings is before income tax determined in accordance with generally accepted accounting principles. Losses, including patronage allocation unit losses, if any, are handled in accordance with the Company's bylaws. The remaining member-sourced earnings are returned to members as patronage refunds in the form of a qualified or nonqualified written notice of patronage refund allocation. Each member's portion of the annual patronage refund is determined by the earnings of Farmland attributed to the quantity or value of business transacted by the member with Farmland during the year for which the patronage is paid. In view of the fact that the determination of the amount of patronage refund is made only after the end of the fiscal year, and since the appropriation of earned surplus is dependent on the determination of the amount of patronage refunds, and in view of the fact that the portion of the annual patronage refund to be paid in cash and in Farmland equity (common stock, associate member common stock or capital credits) is determined (by the Farmland Board of Directors at its discretion) after the amount of the annual patronage refund has been determined, Farmland makes no provision for patronage refunds in its interim financial statements. Therefore, the amount of net income has been reflected as a separate item in the Company's February 28, 1998 Condensed Consolidated Balance Sheet. See the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998 (the "February Form 10-Q") which is incorporated by reference herein. S-6 DESCRIPTION OF THE SENIOR NOTES THE FOLLOWING DESCRIPTION OF THE PARTICULAR TERMS OF THE SENIOR NOTES SUPPLEMENTS, AND TO THE EXTENT INCONSISTENT THEREWITH, REPLACES THE DESCRIPTION OF THE GENERAL TERMS AND PROVISIONS OF THE DEBT SECURITIES SET FORTH IN THE ACCOMPANYING PROSPECTUS, TO WHICH REFERENCE IS HEREBY MADE. GENERAL The Senior Notes are to be issued as separate series under an indenture, dated as of , 1998 (the "Indenture"), between the Company and The Chase Manhattan Bank, as trustee (the "Trustee"). The Company believes that the following summary of certain provisions of the Indenture, together with the "Description of Debt Securities" contained in the Prospectus, is a complete discussion of all material terms of the Indenture. Capitalized terms not otherwise defined under the heading "Description of the Notes" have the meanings given to them in the Prospectus and the Indenture. The Senior Notes will be limited to $ aggregate principal amount and will mature on , 20 . The Senior Notes will not be redeemable prior to maturity. The Senior Notes will be unsecured and will rank on a parity with all other unsecured non-subordinated indebtedness of the Company from time to time outstanding. As of February 28, 1998, after giving effect to this offering, (i) the Company had outstanding $ million aggregate principal amount of non-subordinated indebtedness, including the Senior Notes, (ii) the Company had outstanding $ million aggregate principal amount of subordinated indebtedness, and (iii) certain of the Company's subsidiaries had outstanding $ million aggregate principal amount of indebtedness, of which $ million were nonrecourse to the Company. The Indenture provides that Debt Securities may be issued from time to time in one or more series. The Senior Notes will bear interest at the rate per annum shown on the cover page of this Prospectus Supplement from , 1998 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, payable semi-annually in arrears on and of each year, commencing , 199 (each, an "Interest Payment Date"), to the persons in whose names such Senior Notes were registered at the close of business on the next preceding and , whether or not a Business Day (as defined below) (each, a "Regular Record Date"), respectively. Interest on the Senior Notes will be computed on the basis of a 360-day year comprised of twelve 30-day months. Interest payable on a Senior Note on any Interest Payment Date or at maturity shall be the amount of interest accrued from, and including, the next preceding Interest Payment Date in respect of which interest has been paid or duly provided for (or from and including , 1998, if no interest has been paid or duly provided for with respect to such Senior Note) to, but excluding, such Interest Payment Date or the date of maturity, as the case may be. If any Interest Payment Date or the maturity date of a Senior Note falls on a day that is not a Business Day, the payment shall be made on the next succeeding Business Day as if it were made on the date such payment was due and no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date or the maturity date, as the case may be, to such next succeeding Business Day. "Business Day" means any day other than a Saturday, Sunday, legal holiday or other day on which banks in The City of New York are required or authorized by law, regulation or executive order to close. The provisions of Article 4 of the Indenture relating to defeasance and covenant defeasance, described in the Prospectus under "Description of Debt Securities--Satisfaction and Discharged, Defeasance," are applicable to the Senior Notes. SAME-DAY SETTLEMENT AND PAYMENT Settlement for the Senior Notes will be made by the Underwriter in immediately available funds. All payments of principal and interest will be made by the Company in U.S. dollars in immediately available funds. S-7 The Senior Notes will trade in the Depositary's Same-Day Funds Settlement System until maturity, and secondary market trading activity in the Senior Notes will therefore be required by the Depositary to settle in immediately available funds. BOOK ENTRY, DELIVERY AND FORM The Senior Notes will be represented by the Global Security registered in the name of DTC or its nominee. So long as DTC or its nominee is the registered owner of the Global Security, DTC or its nominee, as the case may be, will be considered the sole holder of the Senior Notes represented by such Global Security for all purposes under the Indenture. Except as provided below, owners of beneficial interests in the Global Security will not be entitled to have Senior Notes represented by such Global Security registered in their names, will not receive or be entitled to receive physical delivery of Senior Notes in certificated form and will not be considered the owners or holders thereof under the Indenture. The laws of some states require that certain purchasers or securities take physical delivery of such securities in certificated form; such laws may limit the transferability of beneficial interests in the Global Security. If (i) DTC is at any time unwilling or unable to continue as depository and a successor depository is not appointed by the Company within 90 days or (ii) a Default or Event of Default with respect to the Senior Notes shall have occurred and be continuing, the Company will issue individual Senior Notes in certificated form in exchange for the Global Security. In addition, the Company may at any time, and in its sole discretion, determine not to have any Senior Notes represented by the Global Security and, in such event, will issue individual Senior Notes in certificated form in exchange for the Global Security. In any such instance, an owner or a beneficial interest in the Global Security will be entitled to physical delivery of individual Senior Notes in certificated form of like tenor, equal in principal amount to such beneficial interest and to have such Senior Notes in certificated form registered in its name. Senior Notes so issued in certificated form will be issued in denominations of $1,000 or any integral multiple thereof and will be issued in registered form only, without coupons. The following is based on information furnished by DTC: DTC will act as securities depository for the Senior Notes. The Senior Notes will be issued as fully registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully registered Senior Note certificate is issued with respect to each $200 million of principal amount of the notes of a series, and an additional certificate is issued with respect to any remaining principal amount of such series. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission (the "Commission"). S-8 Purchases of Senior Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the Senior Notes on DTC's records. The ownership interest of each actual purchaser of each Senior Note ("Beneficial Owner") is in turn recorded on the Direct and Indirect Participants' records. A Beneficial Owner does not receive written confirmation from DTC of its purchase, but such Beneficial Owner is expected to receive a written confirmation providing details of the transactions, as well as periodic statements of its holdings, from the Direct or Indirect Participant through which such Beneficial Owner entered into the transaction. Transfers of ownership interest in Senior Notes are accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners do not receive certificates representing their ownership interests in Senior Notes, except in the event that use of the book-entry system for the Senior Notes is discontinued. To facilitate subsequent transfers, the Senior Notes will be registered in the name of DTC's partnership nominee, Cede & Co. The deposit of the Senior Notes with DTC and their registration in the name of Cede & Co. will effect no changes in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Senior Notes; DTC records reflect only the identity of the Direct Participants to whose accounts are credited, which may or may not be the Beneficial Owners. The Participants remain responsible for keeping account of their holdings on behalf of their customers. Delivery of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants and by Direct Participants and Indirect Participants to Beneficial Owners are governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Neither DTC nor Cede & Co. will consent or vote with respect to the Senior Notes. Under its usual procedures, DTC mails a proxy (an "Omnibus Proxy") to the issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Senior Notes are credited on the record date (identified on a list attached to the Omnibus Proxy). Payments of principal of and interest on the Senior Notes will be made in immediately available funds to DTC. DTC's practice is to credit Direct Participant's accounts on the payable date in accordance with their respective holdings as shown on DTC's records unless DTC has reason to believe that it will not receive payment on the payable date. Payments by Participants to Beneficial Owners are governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and are the responsibility of such Participant and not of DTC, the Trustee, the applicable Paying Agent or the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the Company or the applicable Paying Agent, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursements of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Senior Notes at any time by giving reasonable notice to the Company or the applicable Paying Agent. Under such circumstances, in the event that a successor securities depository is not appointed, Senior Note certificates are required to be printed and delivered. The Company may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Senior Note certificates will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources (including DTC) that the Company believes to be reliable, but the Company takes no responsibility for the accuracy thereof. S-9 UNDERWRITING Subject to the terms and conditions set forth in a purchase agreement (the "Purchase Agreement") between the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Underwriter"), the Company has agreed to sell to the Underwriter, and the Underwriter has agreed to purchase from the Company, the entire principal amount of Senior Notes offered hereby. The Underwriting Agreement provides that the obligations of the Underwriter are subject to certain conditions precedent. The Underwriter has advised the Company that it proposes initially to offer the Senior Notes to the public at the public offering price set forth on the cover page of this Prospectus Supplement, and to certain dealers at such price less a concession not in excess of % of the principal amount of the Senior Notes. The Underwriter may allow, and such dealers may reallow, a discount not in excess of % of the principal amount of the Senior Notes to certain other dealers. After the initial public offering, the public offering price, concession and reallowance may be changed. The Company plans to make application to list the Senior Notes on the New York Stock Exchange, Inc. There is currently no trading market for the Senior Notes, and no assurance can be given that any market for the Senior Notes will develop or, if any such market develops, as to the liquidity of such market. No assurance can be given that a holder of the Senior Notes will be able to sell them in the future or that such sale will be at a price equal to or higher than the initial public offering price. Furthermore, the Senior Notes may trade at a discount from their initial public offering price depending upon prevailing interest rates and other factors. Until the distribution of the Senior Notes is completed, rules of the Commission may limit the ability of the Underwriter to bid for and purchase the Senior Notes. As an exception to these rules, the Underwriter will be permitted to engage in certain transactions that stabilize the price of the Senior Notes. Such transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the Senior Notes. If the Underwriter creates a short position in the Senior Notes in connection with this offering, i.e., if it sells a greater principal amount of Senior Notes than are referred to on the cover page of this Prospectus Supplement, the Underwriter may reduce that short position by purchasing Senior Notes in the open market. In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of such purchases. Neither the Company nor the Underwriter makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Senior Notes. In addition, neither the Company nor the Underwriter makes any representation that the Underwriter will engage in such transactions or that such transactions, once commenced, will be discontinued without notice. The Company has agreed to indemnify the Underwriter against certain liabilities, including liabilities under the Securities Act of 1933, as amended. From time to time, the Underwriter or affiliates thereof have engaged and may in the future engage in investment banking or commercial banking transactions with the Company or its affiliates in the ordinary course of business. S-10 PROSPECTUS $200,000,000 FARMLAND INDUSTRIES, INC. DEBT SECURITIES ------------------ Farmland Industries, Inc. ("Farmland" or the "Company") may issue and sell from time to time, in one or more series, up to an aggregate of $200,000,000 of its debt securities, consisting of debentures, notes and/or other evidences of indebtedness representing unsecured obligations of Farmland (the "Debt Securities"). When a particular series of Debt Securities is offered, all specific terms of the offering will be set forth in a supplement to this Prospectus (the "Prospectus Supplement"), which will be delivered with this Prospectus. The Prospectus Supplement will set forth with respect to each series of Debt Securities: the designation and principal amount offered; the rate (or method of calculation) and time of payment of interest, if any; the authorized denominations; the maturity or maturities; the terms for a sinking, purchase or analogous fund; the terms for redemption or early repayment, if any; the purchase price and other terms of the offering; and any listing on a securities exchange. The Debt Securities may be sold (i) through underwriting syndicates represented by managing underwriters, or by underwriters without a syndicate, (ii) through agents designated from time to time, or (iii) directly. The names of any underwriters or agents of the Company involved in the sale of the Debt Securities in respect of which this Prospectus is being delivered, any applicable commissions or discounts, and the net proceeds to the Company from such sale are set forth in the Prospectus Supplement. This Prospectus may not be used to consummate sales of Debt Securities unless accompanied by a Prospectus Supplement. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS JUNE , 1998 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports and other information with the Securities and Exchange Commission (the "Commission"). Such reports and other information can be inspected and copied at the following public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington D.C. 20549 as well as at the regional offices of the Commission at Seven World Trade Center, Suite 1300, New York, New York 10048, and the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may also be obtained by mail from the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, upon payment of prescribed rates. Such material may also be accessed electronically at the Commission's site on the World Wide Web located at http://www.sec.gov. This Prospectus constitutes part of a registration statement on Form S-3 (together with all amendments, schedules and exhibits thereto, the "Registration Statement") filed by the Company with the Commission under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus does not contain all the information set forth in the Registration Statement. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1997 (the "1997 Form 10-K"), the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 1997 (the "November Form 10-Q") and the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1998 (the "February Form 10-Q") are incorporated herein by reference. Prospective investors should refer to such documents for a complete description of the Company's business, results of operations and financial condition, as well as other information highly relevant to an investment in the securities offered hereby. Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Registration Statement, reference is made to the exhibit for a more complete description of the document or matter involved, and each such statement shall be deemed qualified in its entirety by such reference. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus or any Prospectus Supplement and prior to the termination of the offering of the Debt Securities shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in this Prospectus, in any Prospectus Supplement or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus or any Prospectus Supplement to the extent that a statement contained herein or therein or in any subsequently filed document that also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus or any Prospectus Supplement. The Company will provide, without charge, to each person, including any beneficial owner, to whom this Prospectus is delivered, on the oral or written request of such person, a copy (without exhibits, unless such exhibits are specifically incorporated by reference into the information that this Prospectus incorporates) of any and all information that has been incorporated by reference in this Prospectus. Written or telephone requests for such information should be directed to Farmland Industries, Inc., 3315 North Oak Trafficway, Kansas City, Missouri, 64116-0005, Attention: Vice President and Treasurer, telephone (816) 459-6000. 2 RISK FACTORS PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY, IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS AND IN THE APPLICABLE PROSPECTUS SUPPLEMENT AND IN THE DOCUMENTS INCORPORATED HEREIN AND THEREIN BY REFERENCE, THE FOLLOWING FACTORS BEFORE PURCHASING THE DEBT SECURITIES OFFERED HEREBY. THIS PROSPECTUS CONTAINS OR INCORPORATES BY REFERENCE STATEMENTS WHICH CONSTITUTE "FORWARD-LOOKING STATEMENTS." SUCH FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS REGARDING THE SEASONAL EFFECTS UPON THE COMPANY'S BUSINESS, THE ANTICIPATED EXPENDITURES FOR ENVIRONMENTAL REMEDIATION AND THE CONSEQUENCES OF AN ADVERSE JUDGMENT IN CERTAIN LITIGATIONS (INCLUDING LITIGATIONS DISCUSSED IN "--INCOME TAX MATTERS BELOW") AS WELL AS STATEMENTS IDENTIFIED IN THE COMPANY'S 1997 FORM 10-K, NOVEMBER FORM 10-Q AND FEBRUARY FORM 10-Q, EACH OF WHICH ARE INCORPORATED HEREIN BY REFERENCE). WHERE, IN ANY FORWARD-LOOKING STATEMENT, THE COMPANY, OR ITS MANAGEMENT, EXPRESSES AN EXPECTATION OR BELIEF AS TO FUTURE RESULTS, SUCH EXPECTATION OR BELIEF IS EXPRESSED IN GOOD FAITH AND BELIEVED TO HAVE A REASONABLE BASIS, BUT THERE CAN BE NO ASSURANCE THAT THE STATEMENT OF EXPECTATION OR BELIEF WILL RESULT OR BE ACHIEVED OR ACCOMPLISHED. PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND MAY INVOLVE RISKS AND UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER FROM THOSE IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS, MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY. THE FACTORS IDENTIFIED IN THIS "RISK FACTORS" SECTION AND THOSE DISCUSSED IN "RECENT DEVELOPMENTS" AS WELL AS IN THE COMPANY'S 1997 FORM 10-K, NOVEMBER FORM 10-Q AND FEBRUARY FORM 10-Q, EACH OF WHICH ARE INCORPORATED HEREIN BY REFERENCE, ARE IMPORTANT FACTORS (BUT NOT NECESSARILY ALL IMPORTANT FACTORS) THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD LOOKING STATEMENT MADE BY, OR ON BEHALF OF, THE COMPANY. INCOME TAX MATTERS On March 24, 1993, the Internal Revenue Service ("IRS") issued a statutory notice to Farmland asserting deficiencies in federal income taxes (exclusive of statutory interest thereon) in the aggregate amount of $70.8 million. The asserted deficiencies relate primarily to the Company's tax treatment of the $237.2 million gain resulting from its sale of the stock of Terra Resources, Inc. ("Terra") and the contention by the IRS that Farmland incorrectly treated the Terra sale gain as patronage-sourced income against which certain patronage-sourced operating losses could be offset. The statutory notice further asserts that, among other things, Farmland incorrectly characterized for tax purposes gains aggregating approximately $14.6 million, and a loss of approximately $2.3 million, from dispositions of certain other assets. On June 11, 1993, Farmland filed a petition in the United States Tax Court contesting the asserted deficiencies in their entirety. The case was tried on June 13-15, 1995. If the United States Tax Court decides in favor of the IRS on all unresolved issues raised in the statutory notice, Farmland would have additional federal and state income tax liabilities aggregating approximately $85.8 million plus accumulating statutory interest thereon (approximately $261.6 million through February 28, 1998), or $347.4 million (before tax benefits of the interest deduction) in the aggregate at February 28, 1998. In addition, such a decision would affect the computation of Farmland's taxable income for its 1989 tax year and, as a result, could increase Farmland's federal and state income taxes for that year by approximately $15.3 million (including accumulated statutory interest thereon). The asserted federal and state income tax liabilities and accumulated interest thereon would become immediately due and payable unless the Company appealed the decision and posted the requisite bond to stay assessment and collection. In March 1998, Farmland received notice from the IRS assessing tax and accumulated statutory interest thereon totaling $15.3 million related to the Company's 1989 tax year (as described above). In order to establish venue and to stay accumulating interest, the Company deposited funds with the IRS in the amount of the assessment. Subsequent thereto, the Company filed for a refund of the entire amount deposited. 3 The liability resulting from an adverse decision of the Terra tax issue by the United States Tax Court would be charged to current earnings and would have a material adverse effect on the Company. In the event of such an adverse determination, certain financial covenants of the Company's Syndicated Credit Facility (the "Credit Facility"), dated May 15, 1996, become less restrictive. Had the United States Tax Court decided in favor of the IRS on all unresolved issues, and had all related additional federal and state income taxes and accumulated interest thereon been due and payable on February 28, 1998, Farmland's borrowing capacity under the Credit Facility was adequate at that time to finance the liability. However, Farmland's ability to finance such an adverse decision depends substantially on the financial effects of future operating events on its borrowing capacity under the Credit Facility. GENERAL FACTORS THAT MAY AFFECT BUSINESS The Company's revenues, margins, net income and cash flow may be volatile due to factors beyond the Company's control. External factors that affect agricultural conditions and Farmland's results of operations include: REGULATORY. The Company's ability to grow through acquisitions and investments in ventures may be adversely affected by regulatory delays or other unforeseeable factors beyond the Company's control. Various federal and state regulations to protect the environment have encouraged, and are likely to continue to encourage, farmers to reduce the amount of fertilizer and other chemical applications that they use. COMPETITION. Competitors may have better access to equity capital markets than the Company and may offer more varied products or possess greater resources than the Company. IMPORTS AND EXPORTS. Specific factors which may affect the level of agricultural products imported or exported include foreign trade and monetary policies, laws and regulations, political and governmental changes, inflation and exchange rates, taxes, operating conditions and world demand. Fluctuations in the level of agricultural product imports and exports will likely impact the Company's operations. WEATHER. Weather conditions, both domestic and global, affect the Company's operations. Weather conditions may either increase or decrease demand and, thereby, affect prices related to the Company's farm supply operation (crop production, petroleum and feed). Weather conditions also may increase or decrease the supply of products and, thereby, affect costs related to the Company's pork and beef processing and marketing and grain storage and marketing. RAW MATERIALS COST. Historically, changes in the costs of raw materials have not necessarily resulted in corresponding changes in the prices at which finished products have been sold by the Company. OTHER FACTORS. Domestic variables, such as crop failures, federal agricultural programs and production efficiencies, and global variables, such as embargoes, political instabilities and local conflicts, affect the supply, demand and price of crude oil, refined fuels, natural gas and other commodities and may unfavorably impact the Company's operations. Management cannot determine the extent to which these factors may impact future operations of the Company. The Company's revenues, margins, net income and cash flow may continue to be volatile as conditions affecting agriculture and markets for the Company's products change. LIMITED ACCESS TO EQUITY CAPITAL As a cooperative, the Company cannot sell its voting common equity to traditional public or private markets. Instead, equity is raised largely from cooperative voting members, associate members and patrons. Farmland's common equity largely results from payment of the noncash portion of patronage refunds with common stock, associate member common stock and capital credits and from the retention of 4 net income generated from transactions with nonmembers (earned surplus). See "Business--Cooperative Structure--Membership" and "--Taxation of Cooperatives and Distribution of Patronage Earnings." ENVIRONMENTAL MATTERS The Company is subject to various stringent federal, state and local environmental laws and regulations, including those governing the use, storage, discharge and disposal of hazardous materials, or which may impose liability for cleanup of environmental contamination. The Company uses hazardous materials and generates hazardous wastes in the ordinary course of its manufacturing processes. The Company recognizes liabilities, without offset for potential recoveries, related to the investigation and/or remediation of contaminated properties when the related costs are probable and can be reasonably estimated. Estimates of these liabilities are based upon currently enacted laws and regulations, available facts, existing technology and undiscounted site specific costs. Environmental liabilities include estimates of the Company's share of costs attributable to potentially responsible parties ("PRPs") which are insolvent or otherwise unable to pay. All liabilities are monitored and adjusted regularly as new facts or changes in law or technology occur. Many of the Company's current and former facilities have been in operation for many years and, over such time, the Company and other predecessor operators of such facilities have generated, used, stored or disposed of substances or wastes that are or might be considered hazardous under applicable environmental laws. As a result of such operations, the soil and groundwater at or under certain of the Company's current and former facilities have been contaminated. Material expenditures may be required by the Company in the future to remediate contamination from past or future releases of hazardous substances or wastes. The Company wholly or jointly owns or operates 27 grain elevators and 61 manufacturing properties and has potential responsibility for environmental conditions at a number of manufacturing facilities it previously operated and at waste disposal facilities operated by third parties. The Company also has been identified as a PRP under the federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") at various National Priority List sites and has unresolved liability with respect to the past disposal of hazardous substances at five such sites. CERCLA may impose joint and several liability on certain statutory classes of persons for the costs of investigation and remediation of contaminated properties, regardless of fault or the legality of the original disposal. These persons include the present and former owners or operators of a contaminated property, and companies that generated, disposed of or arranged for the disposal of hazardous substances found at the property. The Company is investigating or remediating contamination at 26 properties under CERCLA and/or other state and federal hazardous waste management laws. During 1995, 1996, 1997, and the first two quarters of 1998, the Company paid approximately $3.2 million, $1.8 million, $4.6 million and $1.9 million, respectively, for environmental investigation and remediation. The Company currently is aware of probable obligations of the Company for environmental matters under state and federal environmental laws at 33 properties. At February 28, 1998, the Company has an environmental accrual in its Condensed Consolidated Balance Sheet for probable and reasonably estimated costs for remediation of contaminated properties of approximately $15.9 million. The Company periodically reviews and, as appropriate, revises its environmental accruals. Based on current information and regulatory requirements, the Company believes that the accruals established for environmental expenditures that are anticipated to be incurred by the Company with respect to the aforementioned properties are adequate. The Company's actual final costs of addressing certain environmental matters are not quantifiable, and therefore have not been accrued, because such matters are in preliminary stages and the timing, extent and costs of various actions which may be required are currently unknown. Management is aware of other environmental matters for which there is a reasonable possibility that the Company will incur costs to 5 resolve. It is possible that the costs of resolution of the matters described in this paragraph may exceed the liabilities which, in the opinion of management, are probable and which costs are reasonably estimable at February 28, 1998. In the opinion of management, it is reasonably possible for such additional costs to be approximately $18.8 million. See "Business--Matters Involving the Environment" included in Items 1 and 2 of the 1997 Form 10-K, which is incorporated by reference herein. ABSENCE OF CERTAIN RESTRICTIONS IN THE INDENTURE The Indenture under which the Debt Securities are to be issued will not contain any provisions that would limit the ability of the Company or any of its affiliates to incur indebtedness (secured or unsecured) or that would afford holders of the Debt Securities protection in the event of a highly leveraged transaction, restructuring, change in control, merger or similar transaction involving the Company that may adversely affect holders of the Debt Securities. See "Description of Debt Securities" contained herein. 6 USE OF PROCEEDS Except as otherwise may be stated in any Prospectus Supplement, the Company intends to use the net proceeds from the sale of Debt Securities for general corporate purposes, which may include the repayment or refinancing of existing indebtedness. 7 SELECTED CONSOLIDATED FINANCIAL DATA The following table sets forth selected financial and other operating data of the Company as of the end of and for each of the fiscal years in the five year period ended August 31, 1997 and as of and for the six-month periods ended February 28, 1997 and February 28, 1998. The information should be read in conjunction with information appearing in the Company's consolidated financial statements, the notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's 1997 Form 10-K and the February Form 10-Q, which are incorporated herein by reference.
SIX MONTHS ENDED FISCAL YEARS ENDED AUGUST 31, FEBRUARY 28, ----------------------------------------------------- -------------------- 1993 1994 1995 1996 1997 1997 1998 --------- --------- --------- --------- --------- --------- --------- (DOLLARS IN THOUSANDS) SUMMARY OF OPERATIONS(1): Net Sales..................... $4,722,940 $6,677,933 $7,256,869 $9,788,587 $9,147,507 $4,523,002 $4,413,341 Operating Income of Industry Segments.................... 86,579 154,799 295,933 241,666 242,963 67,944 58,253 Interest Expense.............. 36,764 51,485 53,862 62,445 62,335 30,406 35,329 Equity in Net Income of Investees................... (12,394) 10,878 22,785 41,092 42,108 17,106 18,134 Net Income (Loss)............. (30,400) 73,876 162,799 126,418 135,423 30,434 20,427 DISTRIBUTION OF NET INCOME (LOSS): Patronage Refunds: Allocated Equity............ $ 1,155 $ 44,032 $ 61,356 $ 60,776 $ 68,079 (2) (2) Cash and Cash Equivalents... 495 26,580 33,061 32,719 40,228 (2) (2) Earned Surplus and Other Equities.................. (32,050) 3,264 68,382 32,923 27,116 (2) (2) --------- --------- --------- --------- --------- $ (30,400) $ 73,876 $ 162,799 $ 126,418 $ 135,423 (2) (2) --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- OTHER DATA: EBITDA(3)..................... $ 57,661 $ 193,211 $ 320,643 $ 295,986 $ 316,458 $ 111,065 $ 108,569
AS OF AUGUST 31, AS OF FEBRUARY 28, ----------------------------------------------------- -------------------- 1993 1994 1995 1996 1997 1997 1998 --------- --------- --------- --------- --------- --------- --------- BALANCE SHEET DATA: Working Capital............... $ 260,519 $ 290,704 $ 319,513 $ 322,050 $ 242,211 $ 319,245 $ 302,676 Property, Plant and Equipment, Net......................... 504,378 501,290 592,145 717,224 783,108 740,884 785,369 Total Assets.................. 1,719,981 1,926,631 2,185,943 2,568,446 2,645,312 2,650,942 2,725,550 Long-Term Borrowings (excluding current maturities)................. 482,112 506,531 469,718 616,258 580,665 633,260 530,926 Capital Shares and Equities... 561,707 585,013 687,287 755,331 821,993 755,252 918,628
- ------------------------------ (1) See "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Financial Condition, Liquidity and Capital Resources" included in the 1997 Form 10-K and in the February Form 10-Q for a discussion of the pending income tax litigation relating to the sale of the stock of Terra Resources, Inc., a former subsidiary of the Company, which is incorporated herein by reference. Also see "Risk Factors--Income Tax Matters" herein. (2) Farmland operates on a cooperative basis. In accordance with its bylaws, Farmland determines its annual net earnings from transactions with members ("member-sourced earnings"). For this purpose, annual net earnings is before income tax determined in accordance with generally accepted accounting principles. Losses, including patronage allocation unit losses, if any, are handled in accordance with the Company's bylaws. The remaining member-sourced earnings are returned to members as patronage refunds in the form of a qualified or nonqualified written notice of patronage refund allocation. Each member's portion of the annual patronage refund is determined by the earnings of Farmland attributed to the quantity or value of business transacted by the member with Farmland during the year for which the patronage is paid. In view of the fact that the determination of the amount of patronage refund is made only after the end of the fiscal year, and since the appropriation of earned surplus is dependent on the determination of the amount of patronage refunds, and in view of the fact that the portion of the annual patronage refund to be paid in cash and in Farmland equity 8 (common stock, associate member common stock or capital credits) is determined (by the Farmland Board of Directors at its discretion) after the amount of the annual patronage refund has been determined, Farmland makes no provision for patronage refunds in its interim financial statements. Therefore, the amount of net income has been reflected as a separate item in the Company's February 28, 1998 Condensed Consolidated Balance Sheet. (3) EBITDA is defined as net income plus interest, tax, depreciation and amortization expenses. EBITDA should not be considered as an alternative to net income (loss) (as determined in accordance with generally accepted accounting principles) as a measure of the Company's operating performance or as an alternative to net cash provided by (used in) operating, investing and financing activities (as determined in accordance with generally accepted accounting principles) as a measure of its ability to meet cash needs. The Company believes that EBITDA is a measure commonly reported and widely used by investors and other interested parties in the agricultural industry as a measure of operating performance and debt servicing ability because it assists in comparing performance on a consistent basis without regard to interest, taxes, depreciation and amortization, which can vary significantly depending upon capitalization structure, tax status (particularly when comparing a cooperative company to a non-cooperative company), accounting methods (particularly when acquisitions are involved) or nonoperating factors (such as historical cost). Accordingly, this information has been disclosed herein to permit a more complete comparative analysis of the Company's operating performance relative to other companies in the industry and of the Company's debt servicing ability. However, EBITDA may not be comparable in all instances to other similar types of measures used by other companies in the agricultural industry. CONSOLIDATED RATIO OF EARNINGS TO COMBINED FIXED CHARGES The following table sets forth the Company's consolidated ratios of earnings to combined fixed charges for the periods shown. The ratios of earnings to combined fixed charges have been computed by dividing fixed charges into the sum of (a) income (loss) before taxes for the enterprise as a whole, less capitalized interest and with adjustments to appropriately reflect the Company's majority-owned, 50%- owned, and less-than-50%-owned affiliates, and (b) fixed charges. Fixed charges consist of interest on all indebtedness (including amortization of debt issuance expenses) and the component of operating rents determined to be interest, with adjustments as appropriate to reflect the Company's 50%-owned and less-than-50%-owned affiliates. The information below should be read in conjunction with information appearing in the Company's consolidated financial statements, the notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included in the 1997 Form 10-K, the November Form 10-Q and the February Form 10-Q, which are incorporated by reference herein.
FISCAL YEARS ENDED AUGUST 31, --------------------------------------------------------------- 1993 1994 1995 1996 1997 ----- ----- ----- ----- ----- Ratio of Earnings to Combined Fixed Charges (1).................. -- 2.1 4.0 3.0 3.0 SIX MONTHS ENDED FEBRUARY 28, ------------- 1997 1998 ----- ----- Ratio of Earnings to Combined Fixed Charges (1).................. 1.8 1.4
- ------------------------ (1) Income was inadequate to cover combined fixed charges and preferred stock dividends for the fiscal year ended August 31, 1993. The dollar amount of the coverage deficiency was $36.6 million. 9 RECENT DEVELOPMENTS PETROLEUM PRODUCT MARKETING ALLIANCE In April 1998, Farmland and CENEX, Inc. ("Cenex") agreed in principle to create Country Energy, LLC, a joint venture which will act as marketing agent on behalf of Farmland and Cenex to market, sell and distribute refined fuels, propane and lubricants to rural marketplace customers. Significant assets, such as refineries, are excluded from the joint venture. The definitive agreement is expected to be signed in late June 1998. This venture is expected to create efficiencies in inventory management, administration, transportation and distribution of fuels. ALLIANCES FORMED WITH CONAGRA In May 1998, Farmland and ConAgra, Inc. ("ConAgra") formed two joint venture alliances. The first joint venture, Concourse Grain, LLC, will market wheat originated (wheat sourced or obtained in the grain markets) by the partners. The alliance is expected to enhance both organizations ability to export grain from multiple locations and improve their access and operations of Atwood-Kellog (formerly owned by ConAgra). The other joint venture, Farmland- Atwood, LLC, as agent of Farmland, will provide risk management, financial, grain support services and grain brokerage to local cooperatives and other grain customers. PROPOSED ACQUISITION During May 1998, Farmland and SF Services, Inc. ("SFS") signed a letter of intent whereby, subject to the negotiation of a definitive agreement, Farmland will acquire SFS for consideration consisting of a combination of Farmland common stock and warrants (to purchase Farmland common stock, associate member common stock and capital credits) with an estimated aggregate value of approximately $48 million plus cash in the amount of approximately $3 million. SFS is a regional farm supply cooperative with approximately 124 local cooperative members located in Arkansas, Mississippi, Louisiana and Alabama. During June 1998, the Board of Directors of SFS and the Board of Directors of Farmland both approved the transaction. This transaction is expected to close in late June 1998, subject to the approval by the membership of SFS and satisfactory completion of the due diligence process. RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MAY 31, 1998 Based on preliminary information as to the results of operations for the nine months ended May 31, 1998, the Company had sales of $6.7 billion compared with sales of $6.9 billion for the nine months ended May 31, 1997. Additionally, net income through the nine month period ended May 31, 1998 was $55.3 million compared to net income of $90 million during the nine month period ended May 31, 1997, a decrease of $34.7 million from the prior year. Through the nine month period ended May 31, 1998, crop production income decreased significantly from the prior year. This decrease in income is primarily a result of an industry-wide decrease in nitrogen fertilizer prices. Nitrogen fertilizer margins continue to be significantly less than during the comparable prior year period. Income from grain operations increased significantly through the nine month period ended May 31, 1998 compared to the same period last year. This improvement is primarily a result of substantially higher margins from international grain trading transactions and a reduced loss in domestic grain operations. Operating income from the food processing and marketing business increased through the nine month period ended May 31, 1998 compared to the same period last year primarily as a result of increased pork margins due to lower live hog prices. 10 During 1998, Farmland had realized income from two non-recurring transactions: a $7.2 million gain on sale of a partial interest in Farmland National Beef Packing Company and $5.3 million from a favorable United States Supreme Court ruling in litigation related to harbor taxes paid in prior years. PETROLEUM INVENTORY At May 31, 1998, the carrying value of petroleum inventories was $166.6 million stated under the LIFO method which exceeded the market value of such inventory by approximately $11.2 million. This market value decline has not been recognized in the Company's interim results of operations as management expects that the decline will be recovered during the fourth quarter of fiscal 1998. ADMINISTRATIVE PROCEEDING The Company is currently involved in an administrative proceeding brought by the Kansas Department of Health and Environment ("KDHE") on April 9, 1998 concerning alleged violations of the state and federal Clean Air Acts at the Company's refinery in Coffeyville, Kansas. The KDHE has issued to the Company a proposed consent agreement which seeks a $150,000 penalty for the alleged violations. The Company has been negotiating with KDHE concerning this matter and anticipates its resolution in the near future. 11 BUSINESS GENERAL Farmland is an agricultural farm supply and processing and marketing cooperative headquartered in Kansas City, Missouri, that is primarily owned by its members and operates on a cooperative basis. Founded in 1929, Farmland has grown from revenues of $310,000 during its first year of operation to over $9.1 billion during 1997. As of August 31, 1997, Farmland's membership, associate membership and patrons eligible for patronage refunds consisted of approximately 1,400 cooperative associations of farmers and ranchers and 13,000 pork or beef producers or associations of such producers. Management estimates that over 500,000 farmers and ranchers conduct business through Farmland and its member cooperatives. The Company believes it is one of the largest cooperatives in the United States in terms of revenues. In 1997, Farmland had export sales in excess of $1.3 billion to customers in over 80 countries. Substantially all of the Company's foreign sales are invoiced and collected in U.S. Dollars. The Company conducts business primarily in two operating areas: agricultural inputs and outputs. On the input side of the agricultural industry, the Company operates as a farm supply cooperative. On the output side of the agricultural industry, the Company operates as a processing and marketing cooperative. The Company's farm supply operations consist of three principal product divisions: petroleum, crop production and feed. Principal products of the petroleum division are refined fuels, propane, and by-products of petroleum refining. The Company's strategy in the petroleum division is to produce its products close to the end user, with a focus on agricultural and rural markets. Petroleum products are marketed through member cooperatives and nonmembers, and through approximately 170 associated AMPRIDE -TM- convenience stores. In addition, Farmland is negotiating an agreement with CENEX, Inc. pursuant to which they would jointly market petroleum products. See "Recent Developments." The Company's Coffeyville, Kansas refinery produced approximately 32 million barrels of petroleum products in 1997, making the Company the second largest refiner of petroleum in the mid-continent. Principal products of the crop production division are nitrogen-, phosphate- and potash-based fertilizers ("plant nutrients") and, through the Company's ownership in WILFARM, L.L.C. (a 50%-owned venture formed in 1995) ("WILFARM") and Omnium, LLC (a 50%-owned venture formed in 1997) ("Omnium"), a complete line of insecticides, herbicides and mixed chemicals. The Company believes it is one of the largest producers of anhydrous ammonia fertilizer in the United States and one of the largest wholesalers of fertilizer in the United States. Principal products of the feed division include swine, dairy, pet, beef, poultry, mineral and specialty feeds, feed ingredients and supplements, animal health products and livestock services. Over 50% of the Company's farm supply products sold in 1997 was produced in plants owned by the Company or operated by the Company under long-term lease arrangements. Approximately 60% of the Company's farm supply products sold in 1997 was sold at wholesale to farm cooperative associations which are members of Farmland. These farm cooperative associates distribute products primarily to farmers and ranchers in states which comprise the corn belt and the wheat belt and who utilize the products in the production of farm crops and livestock. On the output side, the Company's operations include the processing of pork and beef, the marketing of fresh pork, processed pork and fresh beef and the storage and marketing of grain. In 1997, approximately 63% of the hogs processed, 20% of the beef cattle processed and 53% of the grain marketed by the Company were supplied to the Company by its members. Substantially all of the Company's pork and beef products sold in 1997 were processed in plants owned by the Company. The Company has sought to increase its marketing of branded pork and beef products, which generally sell at premium prices as compared with similar nonbranded products. Pork products are marketed under the following registered tradenames: Farmland, Farmstead, OhSe, Maple River, Carando, Roegelein, Regal and Marco Polo. Pork product distribution is through national and regional retail food chains, food service accounts, distributors and through international marketing brokers. Beef distribution is through national and regional retail and food service customers as well as under the Farmland Black Angus Beef registered tradename. In addition, 12 certain beef products are distributed in international markets. The Company markets wheat, corn, soybeans, milo, barley and oats, with wheat and corn constituting the majority of the grain marketing business. The Company's North American Grain Division purchases grain from members and nonmembers primarily located in the Midwestern part of the United States. In 1997, approximately 41% of grain revenues were from export sales or sales to domestic customers for export. Farmland has formed two grain related ventures with ConAgra. See "Recent Developments." The Company's international grain trading subsidiaries (collectively referred to as "Tradigrain") headquartered in Geneva, Switzerland, import, export and ship all major grains from the major producing countries to final consumers which are either governmental entities or private companies. No material part of the business of any segment of the Company is dependent on a single customer or a few customers. Financial information about the Company's industry segments is presented in Note 11 of the Notes to Consolidated Financial Statements included in the 1997 Form 10-K, which is incorporated herein by reference. The principal businesses of the Company are highly seasonal. Historically, the majority of revenues related to crop production, beef and grain occur during the spring, summer and fall, respectively. Revenues related to crop production and beef are lowest during the winter, while sales related to the grain and feed businesses tend to be lowest during the spring and summer, respectively. The Company competes for market share with numerous participants with various levels of vertical integration, product and geographical diversification, sizes and types of operations. In the petroleum industry, competitors include major oil companies, independent refiners, other cooperatives and product brokers. Competitors in the crop production industry include global producers (some of which are cooperatives) of nitrogen- and phosphate-based fertilizers and product importers and brokers. The feed, pork and beef industries are comprised of a large variety of competitive participants. Farmland was formally incorporated in Kansas in 1931. Its principal executive offices are at 3315 North Oak Trafficway, Kansas City, Missouri 64116 (telephone 816-459-6000). COOPERATIVE STRUCTURE--MEMBERSHIP Members of Farmland are entitled to receive patronage refunds distributed by Farmland from its member-sourced annual net earnings. Unless the context otherwise requires, the term "member" herein means (i) any voting member, (ii) any associate member, or (iii) any other person with which Farmland is a party to a currently effective patronage refund agreement (a "patron"). Membership requirements are determined by Farmland's Articles of Incorporation and the Board of Directors of Farmland. VOTING MEMBERS As of August 31, 1997, Farmland's requirements for voting membership were as follows: the voting member must (1) own a minimum of $1,000 of Farmland's common shares; (2) actively transact business with Farmland on a patronage basis (a member is deemed to be inactive when he or she does not transact business with Farmland for two consecutive years); (3) not be a significant direct competitor with Farmland in any of Farmland's major business lines; and (4) (a) be a natural person, a family farm corporation or a family farm partnership that (i) derives a majority of earned income from a farming operation (excluding any earned income of a spouse from other sources) and (ii) is a vendor of livestock to Farmland and/or a contract producer of livestock for Farmland; or (b) be an association of producers of agricultural products that (i) is organized and conducts business on a cooperative basis; (ii) distributes its earnings based on patronage; and (iii) is controlled directly by its voting producer members. 13 ASSOCIATE MEMBERS To qualify for associate membership in Farmland, all of the following conditions must be met: the associate member must (1) own a minimum of $1,000 of Farmland's associate member common shares; (2) not be a significant direct competitor of Farmland in any business line in which the associate member expects to conduct patronage business with Farmland; and (3)(a) be a natural person, a family farm corporation, or a family farm partnership that (i) derives a majority of earned income from a farming operation (excluding any earned income of a spouse from other sources) and (ii) is a vendor of livestock to Farmland and/or a contract producer of livestock for Farmland; or (b) be an association conducting business on a cooperative basis; or (c) be a business entity owned 100%, directly or indirectly, by Farmland or its members or associate members; or (d) be a hog-and/or cattle-feeding business entity that agrees to provide Farmland with the information it needs to pass on patronage refunds from Farmland's hog- and/or cattle-marketing operations to those agricultural producer-members of Farmland who have conducted business with the entity. PATRONAGE AGREEMENTS WITH PATRONS All existing patronage agreements with patrons will remain in force until such time as either (a) the patron has been inactive with Farmland during any single fiscal year or (b) the patronage agreement is canceled by mutual consent. No new patronage agreements will be authorized without prior approval by the Company's Board of Directors. TAXATION OF COOPERATIVES AND DISTRIBUTION OF PATRONAGE EARNINGS Farmland is a taxable cooperative under Federal income tax law, subject to the provisions of subchapter T of the Internal Revenue Code of 1986, as amended. As such, Farmland operates on a cooperative basis. As a cooperative and in accordance with its by-laws, Farmland is obligated to distribute patronage dividends annually. For this purpose, annual net earnings is before income tax determined in accordance with generally accepted accounting principles. Losses, including patronage allocation unit losses, if any, are handled in accordance with the Company's by-laws. The remaining member-sourced earnings (after any offset for losses) are returned to members as patronage refunds in the form of qualified or nonqualified written notice of patronage refund allocation. Farmland's earnings from nonmember business may not be distributed to its members as patronage dividends. A cooperative is a corporation for Federal income tax purposes and computes its taxable income and pays Federal income tax essentially the same as a regular C corporation. However, to the extent a cooperative declares and pays a patronage dividend to its members, such cooperative is allowed to deduct such amounts paid to its members as patronage dividends. Patronage dividends may be paid in the form of cash, a qualified written notice of allocation and a nonqualified written notice of allocation. A written notice of allocation essentially is an allocation of a portion of the cooperative's equity to the cooperative's members and generally is paid in the form of stock, capital credits, scrip retain certificates or other written notice. Farmland utilizes common stock, associate member common stock and capital credits in payment of its patronage dividends through written notices of allocation. If a patronage dividend is paid through cash or a qualified written notice of allocation, the cooperative may deduct the amount of the cash and the face amount of the qualified written notice of allocation and the cooperative's members must recognize such amounts in the computation of such members' respective taxable incomes. Generally, in order for a written notice of allocation to constitute a qualified written notice of allocation, the cooperative must pay at least twenty percent (20%) of the patronage dividend in cash. If a patronage dividend is paid through a nonqualified written notice of allocation, the cooperative may claim the patronage dividend deduction with respect to the nonqualified written notice of allocation when the cooperative redeems such nonqualified written notice of allocation and the members must report 14 such amounts in income at such time. Farmland's Board of Directors annually may determine the form in which Farmland pays its patronage dividends. For the years ended August 31, 1995, 1996 and 1997, patronage refunds authorized by Farmland's Board of Directors were as follows:
CASH OR CASH NONCASH TOTAL EQUIVALENT PATRONAGE PATRONAGE REFUND REFUND REFUND ------------- ----------- ---------- (AMOUNTS IN THOUSANDS) 1995....................................................................... $ 33,061 $ 61,356 $ 94,417 1996....................................................................... 32,719 60,776 93,495 1997....................................................................... 40,228 68,079 108,307
Nonmember-sourced income (earnings attributed to transactions with persons not eligible to receive patronage refunds, i.e. nonmembers) and nonpatronage income or loss (income or loss from activities not directly related to the cooperative marketing or purchasing activities of Farmland) is subject to income taxes computed on the same basis as such taxes are computed on the income or loss of other corporations. EQUITY REDEMPTION PLANS Farmland raises capital to support its business from its members as described above by issuing equities in payment of a portion of its patronage refunds, as well as from lenders and through accessing the capital markets. The Equity Redemption Plans described below, namely the base capital plan, the estate settlement plan and the special equity redemption plans provide a method for the Board of Directors, in its discretion, to determine when, and under what circumstances, the Company may redeem the equities held by members. Factors considered by the Company's Board of Directors include, but are not limited to, the terms of the Company's base capital plan, the Company's results of operations, financial position, cash flow, capital requirements, long-term financial planning needs, income and other tax considerations and other relevant considerations. BASE CAPITAL PLAN The base capital plan provides a mechanism for determining the Company's total capital requirements and each voting member's and associate member's share thereof (hereinafter referred to as the "Base Capital Requirement"). As part of the base capital plan, the Company's Board of Directors may, in its discretion, provide for redemption of Farmland common shares or associate member common shares held by voting members or associate members whose holdings of common shares or associate member shares exceed the voting members' or associate members' Base Capital Requirement. ESTATE SETTLEMENT PLAN The estate settlement plan provides that equity holdings of deceased natural persons (except for equity purchased and held for less than five years) be redeemed at par value. This provision is subject to a limitation of $1.0 million in any one fiscal year without further authorization by the Company's Board of Directors for such year. SPECIAL EQUITY REDEMPTION PLANS From time to time, the Company has redeemed portions of its outstanding equity under various special equity redemption plans. The special equity redemption plans are not binding upon the Board of Directors or the Company, and the Company's Board of Directors reserves the right to redeem, or not redeem, any equities of the Company without regard to whether such action or inaction is in accordance with the special equity redemption plans. 15 The special equity redemption plans are designed to return cash to members or former members by a systematic method for redemption of outstanding equity which may not be subject to redemption through other plans, such as the base capital plan or the estate settlement plan. The order in which each type of equity is redeemed is determined by the Company's Board of Directors. Presented below are the amounts of equity approved for redemption by the Company's Board of Directors under the base capital plan, the estate settlement plan, and special equity redemption plans for each of the years in the three-year period ended August 31, 1997 and for the six month period ended February 28, 1998. Substantially all amounts approved for redemptions are paid in cash in the year following approval.
SPECIAL BASE ESTATE EQUITY CAPITAL SETTLEMENT REDEMPTION PLAN PLAN PLANS (1) TOTAL --------- ------------- ------------- --------- (AMOUNTS IN THOUSANDS) 1995............................................................. $ 14,159 $ 128 $ 13,451 $ 27,738 1996............................................................. 14,024 138 11,277 25,439 1997............................................................. 17,228 141 11,351 28,720 Six months ended February 28, 1998 (2)........................... -- -- 49,958 49,958
- ------------------------ (1) Included in 1995, 1996 and 1997 are redemptions of preferred stock. (2) The Company redeemed approximately $50 million of certain members' and patrons' equity with a portion of the proceeds from the issuance of 8% Cumulative Redeemable Preferred Shares in December 1997. 16 DESCRIPTION OF DEBT SECURITIES The following description sets forth certain general terms and provisions of the indenture under which the Debt Securities are to be issued. The particular terms of each issue of Debt Securities, as well as any modifications or additions to such general terms that may apply in the case of such issue of Debt Securities, will be described in the Prospectus Supplement relating to such issue of Debt Securities. Accordingly, for a description of the terms of a particular issue of Debt Securities, reference must be made to both the Prospectus Supplement relating thereto and to the following description. As used in this section, the "Company" refers only to Farmland Industries, Inc. exclusive of any subsidiaries. The Debt Securities are to be issued under an Indenture dated as of , 1998, as amended, supplemented or modified from time to time (the "Indenture"), between the Company and The Chase Manhattan Bank, as trustee (in such capacity, the "Trustee"), the form of which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part. Each series of Debt Securities issued pursuant to the Indenture will be issued pursuant to an amendment or supplement thereto in the form of a supplemental indenture or pursuant to an Officers' Certificate, in each case delivered pursuant to a resolution of the Board of Directors and in accordance with the provisions of Section 3.1 or Article 8 of the Indenture, as the case may be. The terms of the Debt Securities include those stated in the Indenture and those made a part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "TIA"). The Debt Securities are subject to all such terms and the Holders of Debt Securities are referred to the Indenture and the TIA for a statement of such terms. The following summaries of certain provisions of the Indenture and the Debt Securities are not complete and are qualified in their entirety by reference to the provisions of the Indenture and such Debt Securities, including the definitions of capitalized terms used herein without definition. Numerical references in parentheses are to sections in the Indenture and unless otherwise indicated capitalized terms have the meanings given them in the Indenture. GENERAL The Indenture provides that Debt Securities issued thereunder may be issued without limit as to aggregate principal amount, in one or more series, in each case as established from time to time in or pursuant to authority granted by a resolution of the Board of Directors or as established in one or more supplemental indentures to such Indenture. (Section 3.1) The Debt Securities will constitute general unsecured and non-subordinated obligations of the Company and will rank on parity in right of payment with all other unsecured and non-subordinated indebtedness of the Company. The Indenture provides that there may be more than one Trustee under such Indenture, each with respect to one or more series of Debt Securities. (Section 1.1) Any Trustee under the Indenture may resign or be removed with respect to one or more series of Debt Securities issued under the Indenture, and a successor Trustee may be appointed to act with respect to such series. (Sections 6.10 and 6.11) If two or more persons are acting as Trustee with respect to different series of Debt Securities issued under the Indenture, each such Trustee shall be a Trustee of a trust under the Indenture separate and apart from any trust or trusts administered by any other Trustee (Section 6.11), and any action described therein to be taken by the "Trustee" may then be taken by each such Trustee with respect to, and only with respect to, the one or more series of Debt Securities for which it is Trustee under the Indenture. Reference is made to the Prospectus Supplement relating to the particular series of Debt Securities offered thereby for the following terms and other information to the extent applicable with respect to such Debt Securities: (1) the title of such Debt Securities; (2) any limit on the aggregate principal amount of such Debt Securities; (3) the date or dates on which the principal of such Debt Securities is payable or the method of determination thereof; (4) the rate or rates at which such Debt Securities shall bear interest, if any, or the method of calculating such rate or rates of interest, the date or dates from which such interest shall accrue or the method by which such date or dates shall be determined, and the date or dates on which 16 any such interest shall be payable; (5) the place or places where the principal of and premium, if any, and interest, if any, on such Debt Securities shall be payable; (6) the date or dates on which or the period or periods within which, the price or prices at which, and the other terms and conditions upon which, such Debt Securities may be redeemed, in whole or in part, at the option of the Company and the other detailed terms and provisions of such optional redemption; (7) the obligation, if any, of the Company to redeem or purchase such Debt Securities pursuant to any sinking fund or analogous provisions or upon the happening of a specified event or at the option of a Holder thereof, and the date or dates on which or the period or periods within which, the price or prices at which, and the other terms and conditions upon which, such Debt Securities shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (8) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which such Debt Securities shall be issuable; (9) if other than the principal amount thereof, the portion of the principal amount of such Debt Securities which shall be payable upon declaration of acceleration thereof or the method by which such portion shall be determined; (10) if other than as provided in the Indenture, the Person to whom any interest on any Debt Security shall be payable, and the extent to which, or the manner in which, any interest payable on one or more temporary or permanent global securities (each a "Global Security") on an Interest Payment Date will be paid; (11) provisions, if any, granting special rights to the Holders of such Debt Securities upon the occurrence of such events as may be specified; (12) any deletions from, modifications of or additions to the Events of Default or covenants of the Company set forth in the Indenture pertaining to such Debt Securities; (13) if other than as provided in the Indenture, the means of defeasance or covenant defeasance as may be specified for such Debt Securities; (14) if other than the Trustee, the identity of the Registrar and any Paying Agent; (15) whether such Debt Securities shall be issued in whole or in part in temporary or permanent global form and, if so, (i) the initial Depositary for such Global Securities, and (ii) if other than as provided in the Indenture, whether and the circumstance under which beneficial owners of interests in any Debt Securities in temporary or permanent global form may exchange such interests for Debt Securities and of like tenor of any authorized form and denomination; and (16) any other terms of such Debt Securities (which terms shall not be inconsistent with the provisions of the Indenture), including, without limitation, any terms which may be required by or advisable under United States laws or regulations or advisable in connection with the marketing of such Debt Securities. (Section 3.1) Debt Securities will be issued only in fully registered form without coupons. Debt Securities of a series may be issued in whole or in part in the form of one or more Global Securities that will be deposited with, or on behalf of, a Depositary identified in the applicable Prospectus Supplement. The specific depository arrangement with respect to a series of Debt Securities or any part thereof will be described in the applicable Prospectus Supplement. Unless otherwise specified in the Prospectus Supplement, Debt Securities will be issued in denominations of $1,000 and any integral multiple thereof. (Section 3.2) The Indenture does not contain any provisions that would limit the ability of the Company or any of its Affiliates to incur indebtedness (secured or unsecured) or that would afford Holders of Debt Securities protection in the event of a highly leveraged transaction, restructuring, change in control, merger or similar transaction involving the Company that may adversely affect Holders of the Debt Securities. One or more series of Debt Securities may be sold at a substantial discount below their stated principal amount, bearing no interest or interest at a rate which at the time of issuance is below market rates ("Original Issue Discount Securities"). Special federal income tax, accounting and other considerations applicable thereto will be described in the Prospectus Supplement relating to any such Debt Securities. 17 CERTAIN DEFINITIONS The following terms are defined in the Indenture (Sections 1.1 and 9.9) "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Consolidated Net Worth" means, at any date of determination, the difference between the Company's consolidated total assets and consolidated total liabilities as shown on the Company's most recent audited consolidated financial statements prepared in accordance with generally accepted accounting principles. "corporation" includes corporations, associations, partnerships, limited liability companies, joint stock companies and business trusts. "Default" means any event which is, or after notice or passage of time, or both, would be, an Event of Default. "Event of Default" is defined below under "--Events of Default, Notice and Waiver." "Material Subsidiary" means, at any particular time, any Subsidiary that, together with any Subsidiaries of such Subsidiary (i) accounted for more than 5% of the consolidated sales of the Company for its most recently completed fiscal year, or (ii) owned more than 5% of the consolidated assets of the Company as at the end of such fiscal year, all as calculated in accordance with generally accepted accounting principles. "Maturity," where used with respect to any Debt Security, means the date on which the principal of such Debt Security or an installment of principal thereof becomes due and payable as therein or in the Indenture provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the President, any Executive Vice President or any Senior Vice President, signing alone, or by any Vice President signing together with the Corporate Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company. "Opinion of Counsel" means a written opinion of legal counsel, who may be (a) counsel for the Company or (b) other counsel designated by the Company. Any counsel for the Company may be an employee of the Company. "Stated Maturity," when used with respect to any Debt Security or any installment of principal thereof or interest thereon, means the date specified in such Debt Security as the fixed date on which the principal of such Debt Security or such installment of principal or interest is due and payable. "Subsidiary" means any corporation of which the Company at the time owns or controls, directly or indirectly, more than 50% of the shares of outstanding stock having general voting power under ordinary circumstances to elect a majority of the board of directors of such corporation (irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency). "Trinidad Venture" means the joint venture organized by the Company and the Mississippi Chemical Corporation to acquire, own, develop, construct and/or operate a plant to produce anhydrous ammonia and related products (including urea) in The Republic of Trinidad and Tobago. 18 CERTAIN COVENANTS LIMITATION ON LIENS The Company, with the exceptions listed below, will not issue, assume or guarantee any indebtedness for borrowed money (referred to in this subsection as "indebtedness") secured by a mortgage, security interest, pledge or lien ("mortgage") of or upon any of its property, owned at the date of the Indenture or thereafter acquired, unless the Debt Securities then outstanding (together with, if the Company shall so determine, any other indebtedness issued, assumed or guaranteed by the Company and then existing or thereafter created) are secured by such mortgage equally and ratably with (or, at the option of the Company, prior to) all other indebtedness secured thereby for so long as such other indebtedness shall be so secured. The term "indebtedness" as used in this subsection does not include any guarantee, cash deposit or other recourse obligation in connection with the sale, securitization or discount by the Company of finance or accounts receivable, trade acceptances or other paper arising in the ordinary course of its business. The foregoing covenant does not apply to (1) mortgages of or upon any property (including, without limitation, inventory) acquired, constructed or improved by, or of or upon any shares of capital stock or indebtedness acquired by, the Company after the date of the Indenture (A) to secure the payment of all or any part of the purchase price of such property, shares of capital stock or indebtedness upon the acquisition thereof by the Company or (B) to secure any indebtedness issued, assumed or guaranteed by the Company prior to, at the time of, or within 360 days after (i) in the case of property, the latest of the acquisition, completion of construction (including any improvements on existing property) and commencement of commercial operation of such property, or (ii) in the case of shares of capital stock or indebtedness, the acquisition of such shares of capital stock or indebtedness, which indebtedness is issued, assumed or guaranteed for the purpose of financing or refinancing all or any part of the purchase price of such property, shares of capital stock or indebtedness and, in the case of property, the cost of construction thereof or improvements thereon, provided, however, that, in the case of any such acquisition, construction or improvement of property, the mortgage shall not apply to any property, shares of capital stock or indebtedness theretofore owned by the Company other than (x) any real property on which the property so acquired or constructed or the improvement is located or (y) any real property to which the property so acquired or constructed or the improvement attaches or is affixed; (2) mortgages of or upon any property, shares of capital stock or indebtedness, which mortgages exist at the time of acquisition of such property, shares or indebtedness by the Company; (3) mortgages of or upon any property of a corporation, which mortgages exist at the time such corporation is merged with or into or consolidated with the Company or which mortgages exist at the time of a sale or transfer of the properties of a corporation as an entirety or substantially as an entirety to the Company; (4) mortgages to secure indebtedness of the Company to any Subsidiary, provided, however, that the money borrowed by the Company from such Subsidiary that constitutes such indebtedness arose from the internal operations of such Subsidiary; (5) mortgages in favor of the United States of America or any state thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any State thereof, or in favor of any other country or political subdivision to secure partial, progress, advance or other payments pursuant to any contract or statute or to secure any indebtedness incurred, assumed or guaranteed for the purpose of financing or refinancing all or any part of the purchase price of the property, shares of capital stock or indebtedness subject to such mortgages, or the cost of constructing or improving the property subject to such mortgages (including, without limitation, mortgages incurred in connection with pollution control, industrial revenue or similar financings); (6) mortgages on properties financed through tax-exempt municipal obligations, provided that such mortgages are limited to the property so financed; (7) mortgages existing on the date of execution of the Indenture; (8) mortgages of or upon any grain inventory to secure any indebtedness incurred, assumed or guaranteed by the Company; (9) mortgages of or upon any equity or other interest in the Trinidad Venture to facilitate the availability of political risk insurance and/or to secure any indebtedness in connection with or relating to the Trinidad Venture; and (10) any extension, renewal, substitution, 19 refinancing, refunding or replacement (or successive extensions, renewals, substitutions, refinancings, refundings or replacements) (each a "refinancing") in whole or in part of any mortgage existing at the date of the Indenture or any mortgage referred to in the foregoing clauses (1) through (9), inclusive, provided, however, that the principal amount of indebtedness secured thereby shall not exceed the principal amount of indebtedness so secured at the time of such refinancing plus the aggregate amount of premiums, other payments, costs and expenses required to be paid or incurred in connection with such refinancing, and that such refinancing shall be limited to all or a part of the property (plus improvements and construction on such property), shares of capital stock or indebtedness which was subject to the mortgage so extended, renewed, substituted, refinanced, refunded or replaced. Notwithstanding the foregoing, the Company may, without equally and ratably securing the Debt Securities, issue, assume or guarantee indebtedness secured by a mortgage not excepted by clauses (1) through (10) above, if the aggregate amount of such indebtedness, together with all other indebtedness of, or indebtedness guaranteed by, the Company existing at such time and secured by mortgages not so excepted, does not at the time exceed 10% of the Company's Consolidated Net Worth. (Section 9.9) OWNERSHIP OF MATERIAL SUBSIDIARY STOCK The Company will not take any action which would result in a decrease in the percentage of the outstanding shares of stock of any Material Subsidiary owned directly or indirectly by the Company, except as the result of (a) the issuance of directors' qualifying shares, (b) the declaration and payment of patronage refunds, (c) the issuance of capital stock to members, (d) the purchase or retirement of shares with the proceeds of newly issued shares, (e) the sale or other disposition of capital stock at a price determined by the Company (which determination may be evidenced by a resolution of the Board of Directors) to be the fair value thereof, or (f) the merger or consolidation of a Material Subsidiary with or into the Company or with or into a wholly owned Subsidiary of the Company without a determination of the fair value thereof. (Section 9.10) CORPORATE EXISTENCE Subject to "--Mergers, Consolidations and Transfers of Assets" below, the Company will at all times do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and rights and franchises; provided, however, that the Company may abandon or terminate any right or franchise if, in the determination of the Company, such abandonment or termination is in the best interests of the Company and does not materially adversely affect the ability of the Company to operate its business or to fulfill its obligations under the Indenture. (Section 9.4) WAIVERS OF CERTAIN COVENANT The Company may fail or omit in any particular instance to comply with any of the covenants set forth above in this "--Certain Covenants" subsection (other than the covenant relating to its corporate existence) with respect to any series of Debt Securities if the Company shall have obtained and filed with the Trustee prior to the time for such compliance the consent in writing of the Holders of at least a majority in aggregate principal amount of all of the Debt Securities of such series at the time Outstanding either waiving such compliance in such instance or generally waiving compliance with such covenant or covenants, but no such waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. (Section 9.11) MERGERS, CONSOLIDATIONS AND TRANSFERS OF ASSETS The Company may merge or consolidate with or into any other corporation or sell, convey, transfer or otherwise dispose of all or substantially all of its assets to any Person, if: (a) (i) in the case of a merger or consolidation, the Company is the surviving corporation, or (ii) in the case of a merger or consolidation 20 where the Company is not the surviving corporation and in the case of any such sale, conveyance, transfer or other disposition, the successor or acquiring corporation is a corporation organized and existing under the laws of the United States, any state thereof or the District of Columbia and such corporation expressly assumes by supplemental indenture all the obligations of the Company under the Debt Securities and under the Indenture; (b) immediately thereafter, giving effect to such merger or consolidation, or such sale, conveyance, transfer or other disposition, no Default or Event of Default shall have occurred and be continuing; and (c) the Company or the successor corporation has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such merger or consolidation, or such sale, conveyance, transfer or other disposition, and the supplemental indenture in respect thereof, comply with the Indenture and that all conditions precedent therein provided for relating to such transaction have been complied with. In the event of the assumption by a successor corporation of the obligations of the Company as provided in clause (a)(ii) of the immediately preceding sentence, such successor corporation shall succeed to and be substituted for the Company under the Indenture and under the Debt Securities and all obligations of the Company thereunder shall terminate. (Section 7.1). EVENTS OF DEFAULT, NOTICE AND WAIVER Except as may otherwise be set forth in the applicable Prospectus Supplement, the Indenture provides that the following events are "Events of Default" with respect to any series of Debt Securities: (a) default for 30 days in the payment of any installment of interest on any Debt Security of such series; (b) default in the payment of any principal of, or premium, if any, on, any such Debt Security of such series at its Maturity, upon redemption (if applicable) or otherwise; (c) default for 60 days after written notice to the Company by the Trustee, or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Debt Securities of such series, in the performance of, or breach of, any other covenant or warranty in respect of the Debt Securities of such series contained in the Indenture; (d) a default under any agreement or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed, whether such indebtedness now exists or shall hereafter be created, having an outstanding principal amount of $15 million or more in the aggregate, which default shall have resulted in such indebtedness being declared due and payable prior to the date on which it would otherwise have become due and payable, without such declaration of acceleration having been rescinded or annulled within a period of ten days after there shall have been given, by registered or certified mail, to the Company by the Trustee, or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Outstanding Debt Securities of such series, a written notice specifying such Event of Default, and stating that such notice is a "Notice of Default" under the Indenture; provided, however, that if such default under such agreement or indenture is remedied or cured by the Company or waived by the holders of such indebtedness, then such Event of Default by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of either the Trustee or any of the Holders of the Debt Securities of that series; (e) certain events of bankruptcy, insolvency or reorganization, or court appointment of a receiver, liquidator or trustee of the Company or its property; and (f) any other Event of Default provided in or pursuant to the Indenture, or established in the supplemental indenture under which such series of Debt Securities is issued. (Section 5.1). No Event of Default with respect to a particular series of Debt Securities necessarily constitutes an Event of Default with respect to any other series of Debt Securities issued under the Indenture. Within 90 days after the occurrence of any Default with respect to any series of Debt Securities, the Trustee for such series must give the Holders of Debt Securities of such series notice of all Defaults of which it has knowledge and that have not been cured or waived. Nevertheless, except in the case of a Default in payment on the Debt Securities of any series, the Trustee may withhold notice to the Holders of Debt Securities of any series of any Default with respect to such series if and so long as it determines that 21 the withholding of such notice is in the interest of such Holders; provided, however, that, in the case of any default or breach of the character specified in clause (c) of the preceding paragraph with respect to the Debt Securities of such series, no such notice to Holders shall be given until at least 60 days after the occurrence thereof. (Section 6.6). If an Event of Default with respect to any series of Debt Securities at the time Outstanding shall have occurred and be continuing other than an Event of Default relating to bankruptcy or insolvency, the Trustee or the Holders of at least 25% in aggregate principal amount of the Outstanding Debt Securities of such series may, by written notice, declare the principal thereof (or, if the Debt Securities of such series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of such series) to be due and payable immediately. If an Event of Default relating to bankruptcy or insolvency occurs and is continuing, then the principal amount of all Debt Securities of any series at the time outstanding (or, if the Debt Securities of that series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of such series) shall IPSO FACTO become and be due and payable immediately without any declaration or other act on the part of the Trustee or any holder. Thereupon, the Trustee may, at its discretion, proceed to protect and enforce the rights of the holders of Notes by appropriate judicial proceedings. (Section 5.2) The Indenture contains a provision entitling the Trustee to be indemnified by the Holders of Debt Securities issued thereunder before proceeding to exercise any right or power under the Indenture at the request of any Holders. (Section 6.2). The Indenture provides that the Holders of a majority in principal amount of the Outstanding Debt Securities of any series issued thereunder may, with certain exceptions, direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, with respect to the Debt Securities of such series. (Section 5.8). The right of a Holder to institute a proceeding with respect to the Indenture is subject to certain conditions precedent, including notice and indemnity to the Trustee, but each Holder has a right to the receipt of principal, premium, if any, and interest, if any, at the respective Stated Maturities of the Debt Securities (or, in the case of a redemption, on the Redemption Date) or to institute suit for the enforcement thereof. (Sections 5.9 and 5.10) The Holders of a majority in principal amount of the Outstanding Debt Securities of any series may, on behalf of the Holders of all such Debt Securities, waive any past default, except a (a) Default or Event of Default in the payment of principal of, premium, if any, or interest, if any, on any Debt Securities of such series at maturity, upon redemption or otherwise or (b) in respect of any covenant or provision of the Indenture that cannot be modified or amended without the consent of the Holder of each Outstanding Debt Security affected. (Sections 5.7 and 8.2) The Indenture requires the Company to furnish to the Trustee annual statements as to the fulfillment by the Company of its obligations under the Indenture. (Section 9.7) MODIFICATION OF THE INDENTURE The Company and the Trustee may, at any time and from time to time, without the consent of any Holders of Debt Securities, modify and amend the Indenture, for any of the following purposes: (a) to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company under the Indenture and in the Debt Securities; (b) to add to the covenants of the Company for the benefit of the Holders of all or any series of Debt Securities (and if such covenants are to be for the benefit of less than all series of Debt Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power conferred by the Indenture upon the Company; (c) to add any additional Events of Default with respect to all or any series of Debt Securities; (d) to add to or change any of the provisions of the Indenture to facilitate the issuance of Debt Securities in global form; (e) to add to, change or eliminate any of the provisions of the Indenture; provided, however, that any such addition, change or elimination shall become effective only 22 when there is no Debt Security Outstanding of any series created prior to the execution of the supplemental indenture which is entitled to the benefit of such provision; (f) to secure the Debt Securities; (g) to establish the form or terms of Debt Securities of any series as permitted by Sections 2.1 and 3.1 of the Indenture; (h) to evidence and provide for the acceptance of appointment under the Indenture by a successor Trustee with respect to the Debt Securities of one or more series and to add to or change any of the provisions of the Indenture as shall be necessary to provide for or facilitate the administration of the trusts under the Indenture by more than one Trustee, pursuant to the requirements of Section 6.11 of the Indenture; (i) to correct or supplement any provision under the Indenture which may be inconsistent with any other provision under the Indenture or to make any other provisions with respect to matters or questions arising under the Indenture, provided, however, such action shall not adversely affect the interests of the Holders of Debt Securities of any series issued under the Indenture in any material respect; or to cure any ambiguity or correct any mistake; or (j) to modify, eliminate or add to the provisions of the Indenture to effect qualification of the Indenture under the TIA or under any similar federal statute subsequently enacted and to add to the Indenture such other provisions as may be expressly required under the TIA. (Section 8.1) Modifications and amendments to the Indenture may be made by the Company and the Trustee with the written consent of the Holders of a majority in principal amount of each series of Debt Securities at the time Outstanding that is affected thereby; provided, however, that no such modification or amendment may, without the consent of the Holder of each Outstanding Debt Security of such series affected thereby: (i) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Debt Security of such series, or reduce the principal amount thereof or the rate of interest thereon (or change the manner of calculation of the rate of interest thereon) or any premium payable upon the redemption thereof, or reduce the amount of the principal of an Original Issue Discount Security of such series that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 5.2 of the Indenture, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date); (ii) reduce the percentage in aggregate principal amount of the Outstanding Debt Securities of such series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of the Indenture or certain defaults thereunder and their consequences) provided for in the Indenture; (iii) change any obligation of the Company to maintain an office or agency in the Place of Payment for the Debt Securities of such series where such Debt Securities may be presented or surrendered for payment, where such Debt Securities may be surrendered for registration of transfer or exchange or where notices and demands to or upon the Company may be served; or (iv) make any change in Section 5.7 or Section 8.2 of the Indenture except to increase any percentage or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the Holders of each Outstanding Debt Security of such series affected thereby. (Section 8.2) SATISFACTION AND DISCHARGE; DEFEASANCE The Indenture, with respect to any series of Debt Securities (except for certain specified surviving obligations referred to below), will be discharged and canceled upon the satisfaction of certain conditions, including the following: (a) all Debt Securities of such series not theretofore delivered to the Trustee for cancellation have become due or payable, will become and due and payable at their Stated Maturity within one year, or are to be called for redemption within one year; and (b) the deposit with the Trustee of an amount sufficient to pay the principal, premium, if any, and interest to the Maturity of all Debt Securities of such series. Upon any such discharge of the Company's obligations, the Holders of the Debt Securities of such series shall no longer be entitled to the benefits of the Indenture, except for the purposes of registration of transfer and exchange of the Debt Securities or replacement of lost, stolen or mutilated Debt Securities and shall look only to such deposited funds or obligations for payment. (Sections 4.1 and 4.2) 23 The Indenture also provides that the Company may elect: (a) to be discharged from its obligations with respect to the Debt Securities of or within a series on and after the date the conditions set forth below in the next paragraph are satisfied (hereinafter "defeasance"). For this purpose, such defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by such Debt Securities which shall thereafter be deemed to be "Outstanding" only for the purposes of Article 4 of the Indenture, and to have satisfied all its other obligations under such Debt Securities and the Indenture insofar as such Debt Securities are concerned (and the Trustee, at the expense of the Company, shall on a Company Order execute proper instruments acknowledging the same), except the following which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of such Debt Securities to receive, solely from the trust funds described below in the next paragraph, payments in respect of the principal of, premium, if any, and interest, if any, on such Debt Securities when such payments are due; (ii) the rights, powers, trusts, duties and immunities of the Trustee under the Indenture; (iii) the obligations of the Company and the Trustee with respect to such Debt Securities under Sections 3.5, 3.6, 9.2 and 9.3 of the Indenture (which relate to registration, transfer, exchange and replacement of Debt Securities, maintenance of a corporate trust office by the Trustee and funds held in trust); and (iv) Article 4 of the Indenture. Subject to compliance with Article 4 of the Indenture, the Company may exercise this option notwithstanding the prior exercise of its option to effect covenant defeasance (as defined below) with respect to such Debt Securities. (Section 4.4) (b) to be released from its obligations under "--Mergers, Consolidations and Transfers of Assets" and "--Certain Covenants" above and certain other obligations, and, if specified pursuant to provisions of the Indenture establishing the terms of such Debt Securities, its obligations under any other covenants, with respect to such Debt Securities on and after the date the conditions set forth below in the next paragraph are satisfied (hereinafter "covenant defeasance"), and such Debt Securities shall thereafter be deemed to be not "Outstanding" for the purpose of any request, demand, authorization, direction, notice, consent, waiver or other Act of Holders (and the consequences of any thereof) in connection with such obligations or such other covenants, but shall continue to be deemed "Outstanding" for all other purposes of the Indenture. For this purpose, such covenant defeasance means that, with respect to such Debt Securities, the Company may omit to comply with and shall have no liability in respect of such obligations or such other covenants, whether directly or indirectly, by reason of any reference elsewhere in the Indenture to any such obligation or such other covenants or by reason of any reference to any such obligation or such other covenants in any other provision in the Indenture or in any other document or otherwise and such omission to comply shall not constitute a Default or an Event of Default under the Indenture or otherwise, as the case may be, but, except as specified above, the remainder of the Indenture and such Debt Securities shall be unaffected thereby. (Section 4.5) Such defeasance or covenant defeasance will take effect with respect to some or all of the Debt Securities of any series at any time prior to the Stated Maturity or redemption thereof only when: (a) The Company shall have deposited or caused to be deposited irrevocably with the Trustee (or another trustee satisfying the requirements of the Indenture who shall agree to comply with, and shall be entitled to the benefits of, certain specified provisions of the Indenture relating to defeasance or covenant defeasance, for purposes of such provisions also a "Trustee") as trust funds in trust for the purpose of making the payments referred to in clauses (x) and (y) below, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Debt Securities, with instructions to the Trustee as to the application thereof, (i) money in an amount, or (ii) Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment referred to in clause (x) or (y) below, money in an amount or (iii) a combination thereof in an amount, sufficient, without consideration of any reinvestment of such principal and interest, in the opinion of a nationally 24 recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee to pay and discharge, (x) the principal of, premium, if any, and interest, if any, on such Debt Securities on the Maturity of such principal or installment of principal or premium or interest and (y) any mandatory sinking fund payments or analogous payments applicable to such Debt Securities on the days on which such payments are due and payable in accordance with the terms of the Indenture and such Debt Securities. Before such a deposit the Company may make arrangements satisfactory to the Trustee for the redemption of Debt Securities at a future date or dates in accordance with Article 10 of the Indenture which shall be given effect in applying the foregoing. (b) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a Default or Event of Default under the Indenture or result in a breach or violation of, or constitute a default under, any other material agreement or instrument to which the Company is a party or by which it is bound. (c) No Event of Default of the type described in clause (e) of "--Events of Default, Notice and Waiver" above with respect to such Debt Securities shall have occurred and be continuing during the period commencing on the date of such deposit and ending on the 91st day after such date (it being understood that this condition shall not be deemed satisfied until the expiration of such period). (d) In the case of an exercise by the Company of its option to effect such defeasance as described above, the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel to the effect that (i) the Company has received from, or there has been published by, the Internal Revenue Service a letter ruling, or there has been published by the Internal Revenue Service a Revenue Ruling, or (ii) since the date of execution of the Indenture, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of such Debt Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts and in the same manner and at the same times, as would have been the case if such deposit, defeasance and discharge had not occurred. (e) In the case of an exercise by the Company of its option to effect such covenant defeasance as described above, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Debt Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred. (f) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to such defeasance as described above or such covenant defeasance as described above (as the case may be) have been complied with and an Opinion of Counsel to the effect that (i) either (A) as a result of a deposit pursuant to subparagraph (a) above and the related exercise of the Company's option to effect such defeasance as described above or to effect such covenant defeasance as described above (as the case may be), registration is not required under the Investment Company Act of 1940, as amended, by the Company, with respect to the trust funds representing such deposit or by the Trustee for such trust funds or (B) all necessary registrations under said Act have been effected, and (ii) after the 91st day after the date of deposit, all money, Government Obligations, and other property deposited pursuant to subsection (a) above (including the proceeds thereof), will not be subject to any law or proceeding (whether voluntary or involuntary) in respect of the Company under any Federal or State bankruptcy, insolvency, reorganization or other similar law, or any decree or order for relief in respect of the Company issued in connection therewith; provided, however, that such Opinion of Counsel may assume that no Holder of Securities is an "insider" as defined in Section 101(31) of Title 11 of the United States Code. 25 (g) Notwithstanding any other provision in the Indenture relating thereto, such defeasance or covenant defeasance shall be effected in compliance with any additional or substitute terms, conditions or limitations which may be imposed on the Company in connection therewith as contemplated by the provisions of the Indenture establishing the terms of such Debt Securities. (Section 4.6) PAYMENT AND TRANSFER Principal of, premium, if any, and interest, if any, on the Debt Securities of any series are to be payable at the Place of Payment for such series, which may be the Corporate Trust Office of the Trustee or any other office or agency maintained by the Company for such purposes, provided that payment of interest, if any, on Debt Securities may be made at the option of the Company by check mailed to the persons in whose names such Debt Securities are registered at the close of business on the day or days specified in the applicable Prospectus Supplement. (Sections 3.7 and 9.2) Debt Securities may be transferred or exchanged at the Place of Payment for such series, which may be the Corporate Trust Office of the Trustee or at any other office or agency maintained by the Company for such purposes, subject to the limitations in the Indenture, without the payment of any service charge except for any tax or governmental charge incidental thereto. (Section 3.5) NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS OR DIRECTORS The Indenture provides that no recourse under or upon any obligation, covenant or agreement of or contained in the Indenture or of or contained in any Senior Note, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, officer or director, as such, of the Company or of any successor Person. Each Holder, by accepting the Debt Securities, waives and releases all such liability. (Section 1.13) CONCERNING THE TRUSTEE The Indenture provides that, except during the continuance of an Event of Default, the Trustee will perform only such duties as are specifically set forth in the Indenture. If an Event of Default has occurred and is continuing, the Trustee will use the same degree of care and skill in its exercise of the rights and powers vested in it by the Indenture as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. (Section 6.1) The Indenture and provisions of the TIA incorporated by reference therein contain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. The Trustee is permitted to engage in other transactions; provided, however, that if it acquires any conflicting interest, it must eliminate such conflict or resign. (Section 6.3 and 6.12) The Chase Manhattan Bank is the Trustee under the Indenture. The Company maintains banking relationships in the ordinary course of business with the Trustee. Among other things, the Trustee is a lending bank under a $1.1 billion credit facility provided to the Company by 19 domestic and international banking institutions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Financial Condition, Liquidity and Capital Resources" in the Company's 1997 Form 10-K. Additionally, Chase Securities, Inc. arranged for and The Chase Manhattan Bank is acting as agent, participant and indenture trustee with regard to $263 million of debt and equity financing in connection with the Company's construction of a petroleum coke gasification plant at its Coffeyville, Kansas refinery. 26 PLAN OF DISTRIBUTION The Company may sell Debt Securities (i) to or through underwriters or dealers, (ii) through agents, or (iii) directly to one or more purchasers. The distribution of the Debt Securities may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, or at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. In connection with the sale of Debt Securities, underwriters may receive compensation from the Company or from purchasers of Debt Securities for whom they may act as agents in the form of discounts, concessions or commissions. Underwriters may sell Debt Securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agents. Underwriters, dealers and agents that participate in the distribution of Debt Securities may be deemed to be underwriters, and any discounts or commissions received by them from the Company and any profit on the resale of Debt Securities by them may be deemed to be underwriting discounts and commissions, under the Securities Act. Any such underwriter or agent will be identified, and any such compensation received from the Company will be described, in the Prospectus Supplement. Under agreements which may be entered into by the Company, underwriters and agents who participate in the distribution of Debt Securities may be entitled to indemnification by the Company against certain liabilities, including liabilities under the Securities Act. If so indicated in the Prospectus Supplement, the Company will authorize underwriters or other persons acting as the Company's agents to solicit offers by certain institutions to purchase Debt Securities from the Company pursuant to contracts providing for payment and delivery on a future date. Institutions with which such contracts may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and others, but in all cases such institutions must be approved by the Company. The obligations of any purchaser under any such contract will be subject to the condition that the purchase of the offered Debt Securities shall not at the time of delivery be prohibited under the laws of the jurisdiction to which such purchaser is subject. The underwriters and such other agents will not have any responsibility in respect of the validity or performance of such contracts. LEGAL MATTERS The validity of the Debt Securities will be passed upon for the Company by Fried, Frank, Harris, Shriver & Jacobson (a partnership including professional corporations), New York, New York and for the underwriters, agents and dealers by Brown & Wood LLP, New York, New York. Fried, Frank, Harris, Shriver & Jacobson will rely upon the opinion of Robert B. Terry, Esq., Vice President and General Counsel of the Company, with respect to all matters of Kansas law. EXPERTS The consolidated financial statements of the Company at August 31, 1996 and 1997, and for each of the years in the three year period ended August 31, 1997, appearing in the 1997 Form 10-K for the year ended August 31, 1997, have been audited by KPMG Peat Marwick LLP, independent certified public accountants, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon the authority of such firm as experts in accounting and auditing. 27 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. ------------------------ TABLE OF CONTENTS
PAGE ---- PROSPECTUS SUPPLEMENT Prospectus Summary........................................................ S-2 Use of Proceeds........................................................... S-5 Capitalization............................................................ S-6 Description of the Senior Notes........................................... S-7 Underwriting.............................................................. S-10 PROSPECTUS Available Information..................................................... 2 Incorporation of Certain Documents By Reference............................................................ 2 Risk Factors.............................................................. 3 Use of Proceeds........................................................... 7 Selected Consolidated Financial Data.......................................................... 8 Consolidated Ratio of Earnings to Combined Fixed Charges............................................... 9 Recent Developments....................................................... 10 Business.................................................................. 12 Description of Debt Securities............................................ 16 Plan of Distribution...................................................... 27 Legal Matters............................................................. 27 Experts................................................................... 27
$ FARMLAND INDUSTRIES, INC. % SENIOR NOTES DUE 20 --------------------- PROSPECTUS SUPPLEMENT --------------------- MERRILL LYNCH & CO. ,1998 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION* SEC registration fee...................................................... $ 68,966 Blue sky fees and expenses................................................ 5,000 Legal fees and expenses................................................... 200,000 Accounting fees and expenses.............................................. 50,000 Printing and engraving expenses........................................... 40,000 NYSE listing fee.......................................................... 5,000 Trustee's fees and expenses............................................... 7,500 Rating agency fees........................................................ 50,000 Miscellaneous............................................................. 8,534 --------- Total..................................................................... $ 435,000 --------- ---------
- ------------------------ * Except for the SEC registration fee and the NYSE listing fee, all the foregoing expenses have been estimated. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 6002(b) of Chapter 17 of the Kansas Statutes (1987), permits the following provision to be included in the articles of incorporation of the Company: a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders, policyholders or members for monetary damages for breach of fiduciary duty as a director, provided that such provision shall not eliminate or limit the liability of a director (A) for any breach of the director's duty of loyalty to the corporation or its stockholders, policyholders or members, (B) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (C) under the provision of K.S.A. 17-6424 and amendments thereto, or (D) for any transaction from which the director derived an improper personal benefit. No such provision shall eliminate or limit the liability of a director for any act or omission occurring prior to the date when such provision becomes effective. All references in this subsection to a director shall be deemed also to refer to a member of the governing body of a corporation which is not authorized to issue capital stock. Section 6002(c) provides that "It shall not be necessary to set forth in the articles of incorporation any of the powers conferred on corporations by this act." Article VII of Articles of Incorporation of Farmland Industries, Inc. reads as follows: ARTICLE VII--INDEMNIFICATION Section 1. Indemnification. The Association may agree to the terms and conditions upon which any director, officer, employee or agent accepts his office or position and in its bylaws, by contract or in any other manner may agree to indemnify and protect any director, officer, employee or agent of the Association, or any person who serves at the request of the Association as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, to the fullest extent permitted by the laws of the State of Kansas. Section 2. Limitation of Liability. Without limiting the generality of the foregoing provisions of this ARTICLE VII, to the fullest extent permitted or authorized by the laws of the State of Kansas, including, without limitation the provisions of subsection (b)(8) of Kan. Stat. Ann. Sec. 17-6002 (1981) as now in effect and as it may from time to time hereafter be amended, no person who is currently or shall hereinafter become a director of the Association shall have personal liability to the Association for i monetary damages for breach of fiduciary duty as a director for any act or omission occurring subsequent to the date this provision becomes effective. If the Kansas General Corporation Code is amended after approval of this provision by the shareholders of the Association, to authorize corporate action further limiting or eliminating the personal liability of directors, then the liability of a director of the Association shall be limited or eliminated to the fullest extent permitted by the Kansas General Corporation Code, as so amended. ITEM 16. EXHIBITS
EXHIBIT NUMBER DOCUMENT DESCRIPTION - ------------- ------------------------------------------------------------------------------------------------------- 1 --Form of Underwriting Agreement* 4.1 --Form of Indenture between the Company and The Chase Manhattan Bank, as trustee 4.2 --Form of Note (fixed rate) 5 --Opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel to the Company, as to the legality of the securities being registered 12 --Statement regarding computation of ratio of earnings to fixed charges 23.1 --Consent of KPMG Peat Marwick LLP 23.2 --Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 5) 23.3 --Consent of Bryan Cave LLP 24 --Powers of Attorney relating to subsequent amendments 25 --Form T-1 Statement of Eligibility Under Trust Indenture Act of 1939 of The Chase Manhattan Bank
* To be filed by Amendment. ITEM 17. UNDERTAKINGS (a) The undersigned registrant (the "Registrant") hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post- effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement; notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act of 1933 if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement; provided, however, that the undertakings set forth in paragraphs (a)(1)(i) and (a)(1)(ii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or ii Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions set forth under Item 15 above or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. (d) The Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liabilities under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. iii SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Kansas City, State of Missouri, on the 25th day of June, 1998. FARMLAND INDUSTRIES, INC. By: /s/ TERRY M. CAMPBELL ----------------------------------------- Terry M. Campbell EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE - ------------------------------ -------------------------- ------------------- * - ------------------------------ Chairman of Board, June 25, 1998 Albert J. Shivley Director President, Chief Executive /s/ H.D. CLEBERG Officer and Director - ------------------------------ (Principal Executive June 25, 1998 H.D. Cleberg Officer) * Vice Chairman of Board, - ------------------------------ Vice President and June 25, 1998 Jody Bezner Director * - ------------------------------ Director June 25, 1998 Lyman Adams, Jr. * - ------------------------------ Director June 25, 1998 Ronald J. Amundson * - ------------------------------ Director June 25, 1998 Baxter Ankerstjerne * - ------------------------------ Director June 25, 1998 Richard L. Detten * - ------------------------------ Director June 25, 1998 Steven Erdman
iv
SIGNATURES TITLE DATE - ------------------------------ -------------------------- ------------------- * - ------------------------------ Director June 25, 1998 Harry Fehrenbacher * - ------------------------------ Director June 25, 1998 Marty Floyd * - ------------------------------ Director June 25, 1998 Warren Gerdes * - ------------------------------ Director June 25, 1998 Ben Griffith * - ------------------------------ Director June 25, 1998 Gail D. Hall * - ------------------------------ Director June 25, 1998 Barry Jensen * - ------------------------------ Director June 25, 1998 Ron Jurgens * - ------------------------------ Director June 25, 1998 William F. Kuhlman * - ------------------------------ Director June 25, 1998 Greg Pfenning * - ------------------------------ Director June 25, 1998 Monte Romohr * - ------------------------------ Director June 25, 1998 Joe Royster * - ------------------------------ Director June 25, 1998 E. Kent Stamper * - ------------------------------ Director June 25, 1998 Eli F. Vaughn * - ------------------------------ Director June 25, 1998 Frank Wilson
v
SIGNATURES TITLE DATE - ------------------------------ -------------------------- ------------------- Executive Vice President /s/ TERRY M. CAMPBELL and Chief Financial - ------------------------------ Officer (Principal June 25, 1998 Terry M. Campbell Financial Officer) /s/ MERL DANIEL Vice President and - ------------------------------ Controller (Principal June 25, 1998 Merl Daniel Accounting Officer)
*By: /s/ TERRY M. CAMPBELL ------------------------- Terry M. Campbell ATTORNEY-IN-FACT vi EXHIBIT INDEX
EXHIBIT NUMBER DOCUMENT DESCRIPTION - ------------- ------------------------------------------------------------------------------------------------------- 1 --Form of Underwriting Agreement* 4.1 --Form of Indenture between the Company and The Chase Manhattan Bank, as trustee 4.2 --Form of Note (fixed rate) 5 --Opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel to the Company, as to the legality of the securities being registered 12 --Statement regarding computation of ratio of earnings to fixed charges 23.1 --Consent of KPMG Peat Marwick LLP 23.2 --Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 5) 23.3 --Consent of Bryan Cave LLP 24 --Powers of Attorney relating to subsequent amendments 25 --Form T-1 Statement of Eligibility Under Trust Indenture Act of 1939 of The Chase Manhattan Bank
- ------------------------ * To be filed by Amendment. vii EX-4.1 2 EXHIBIT 4.1 Exhibit 4.1 - -------------------------------------------------------------------------------- FARMLAND INDUSTRIES, INC., as Issuer and THE CHASE MANHATTAN BANK, as Trustee ------------------ INDENTURE Dated as of , 1998 ------------- ----- ------------------ Providing for Issuance of Debt Securities in Series - -------------------------------------------------------------------------------- Reconciliation and tie between Indenture, dated as of ____________ ___, 1998, and the Trust Indenture Act of 1939, as amended.
Trust Indenture Act of 1939 Section: Indenture Section: - ----------------------------------- ----------------- 310(a)(1) 6.12 (a)(2) 6.12 (a)(3) TIA (a)(4) Not applicable, TIA (a)(5) 6.10; 6.12; TIA 311(a) TIA (b) TIA 312(a) 6.8; 6.16 (b) 16; TIA (c) 6.16; TIA 313(a) 6.7; 8.7; TIA (b) TIA (c) 1.6; TIA (d) TIA 314(a) 9.6; 9.7; TIA (b) Not Applicable (c)(1) 1.2 (c)(2) 1.2 (c)(3) Not Applicable (d) Not Applicable (e) 1.2 315(a) 6.1; TIA (b) 6.6 (c) TIA (d)(1) 6.1; TIA (d)(2) 6.1; TIA (d)(3) 6.1; TIA (e) TIA 316(a)(last sentence) 1.1 (a)(1)(A) 5.2; 5.8 (a)(1)(B) 5.7 (b) 5.9; 5.10 (c) 1.4; TIA 317(a)(1) 5.3 (a)(2) 5.4 (b) 9.3 318(a) 1.11 (b) TIA (c) 1.11; TIA
This reconciliation and tie section does not constitute part of the Indenture. Table of Contents
Page ---- ARTICLE 1. Definitions and Other Provisions of General Application Section 1.1 Definitions..................................................................1 Section 1.2 Compliance Certificates and Opinions.........................................7 Section 1.3 Form of Documents Delivered to Trustee.......................................8 Section 1.4 Acts of Holders..............................................................9 Section 1.5 Notices, etc., to Trustee and Company.......................................10 Section 1.6 Notice to Holders; Waiver...................................................10 Section 1.7 Headings and Table of Contents..............................................10 Section 1.8 Successors and Assigns......................................................11 Section 1.9 Separability................................................................11 Section 1.10 Benefits of Indenture.......................................................11 Section 1.11 Governing Law...............................................................11 Section 1.12 Legal Holidays..............................................................11 Section 1.13 Incorporators, Stockholders, Officers and Directors of the Company Exempt from Individual Liability............................................12 Section 1.14 Counterparts................................................................12 ARTICLE 2. Security Forms Section 2.1 Forms Generally.............................................................12 Section 2.2 Form of Trustee's Certificate of Authentication.............................13 Section 2.3 Securities in Global Form...................................................13 ARTICLE 3. The Securities Section 3.1 Amount Unlimited; Issuable in Series........................................14 Section 3.2 Denominations...............................................................16 Section 3.3 Execution, Authentication, Delivery and Dating..............................16 Section 3.4 Temporary Securities........................................................19 Section 3.5 Registration, Registration of Transfer and Exchange.........................19 Section 3.6 Replacement Securities......................................................21 Section 3.7 Payment of Interest; Interest Rights Preserved..............................22 Section 3.8 Persons Deemed Owners.......................................................23 Section 3.9 Cancellation................................................................24 Section 3.10 Computation of Interest.....................................................24 Section 3.11 CUSIP Numbers...............................................................24
i Table of Contents
Page ---- ARTICLE 4. Satisfaction and Discharge; Defeasance Section 4.1 Termination of Company's Obligations Under the Indenture....................25 Section 4.2 Application of Trust Funds..................................................26 Section 4.3 Applicability of Defeasance Provisions......................................26 Section 4.4 Defeasance and Discharge....................................................26 Section 4.5 Covenant Defeasance.........................................................27 Section 4.6 Conditions to Defeasance or Covenant Defeasance.............................27 Section 4.7 Deposited Money and Government Obligations to be Held in Trust..............29 Section 4.8 Transfers and Distribution at Company Request...............................29 ARTICLE 5. Defaults and Remedies Section 5.1 Events of Default...........................................................30 Section 5.2 Acceleration; Rescission and Annulment......................................31 Section 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee.............32 Section 5.4 Trustee May File Proofs of Claim............................................32 Section 5.5 Trustee May Enforce Claims Without Possession of Securities.................33 Section 5.6 Delay or Omission not Waiver................................................33 Section 5.7 Waiver of Past Defaults.....................................................33 Section 5.8 Control by Majority.........................................................33 Section 5.9 Limitation on Suits by Holders..............................................33 Section 5.10 Rights of Holders to Receive Payment........................................34 Section 5.11 Application of Money Collected..............................................34 Section 5.12 Restoration of Rights and Remedies..........................................35 Section 5.13 Rights and Remedies Cumulative..............................................35 Section 5.14 Waiver of Usury, Stay or Extension Laws.....................................35 Section 5.15 Undertaking for Costs.......................................................35 ARTICLE 6. The Trustee Section 6.1 Certain Duties and Responsibilities.........................................36 Section 6.2 Rights of Trustee...........................................................37 Section 6.3 Trustee May Hold Securities.................................................38 Section 6.4 Money Held in Trust.........................................................38 Section 6.5 Trustee's Disclaimer........................................................38 Section 6.6 Notice of Defaults..........................................................39 Section 6.7 Reports by Trustee to Holders...............................................39 Section 6.8 Securityholder Lists........................................................39 Section 6.9 Compensation and Indemnity..................................................39 Section 6.10 Replacement of Trustee......................................................40 Section 6.11 Acceptance of Appointment by Successor......................................41 Section 6.12 Eligibility; Disqualification; Conflicting Interest.........................43 Section 6.13 Merger, Conversion, Consolidation or Succession to Business.................43
ii Table of Contents
Page ---- Section 6.14 Appointment of Authenticating Agent.........................................43 Section 6.15 Trustee's Application for Instructions from the Company.....................45 Section 6.16 Preservation of Information; Communications to Holders......................45 ARTICLE 7. Consolidation, Merger or Sale by the Company Section 7.1 Consolidation, Merger or Sale of Assets Permitted...........................46 ARTICLE 8. Supplemental Indentures Section 8.1 Supplemental Indentures Without Consent of Holders..........................46 Section 8.2 With Consent of Holders.....................................................47 Section 8.3 Compliance with Trust Indenture Act.........................................48 Section 8.4 Execution of Supplemental Indentures........................................48 Section 8.5 Effect of Supplemental Indentures...........................................49 Section 8.6 Reference in Securities to Supplemental Indentures..........................49 Section 8.7 Notice to Holders...........................................................49 ARTICLE 9. Covenants Section 9.1 Payment of Principal, Premium, if any, and Interest.........................49 Section 9.2 Maintenance of Office or Agency.............................................49 Section 9.3 Money for Securities to Be Held in Trust; Unclaimed Money...................50 Section 9.4 Corporate Existence.........................................................51 Section 9.5 Insurance...................................................................51 Section 9.6 Reports by the Company......................................................52 Section 9.7 Annual Review Certificate; Notice of Default................................52 Section 9.8 Provision of Financial Statements...........................................52 Section 9.9 Limitation on Liens.........................................................53 Section 9.10 Ownership of Material Subsidiary Stock........................................ Section 9.11 Waiver of Certain Covenants.................................................55 ARTICLE 10. Redemption Section 10.1 Applicability of Article....................................................55 Section 10.2 Election to Redeem; Notice to Trustee.......................................55 Section 10.3 Selection of Securities to Be Redeemed......................................56 Section 10.4 Notice of Redemption........................................................56 Section 10.5 Deposit of Redemption Price.................................................57 Section 10.6 Securities Payable on Redemption Date.......................................57 Section 10.7 Securities Redeemed in Part.................................................57
iii Table of Contents
Page ---- ARTICLE 11. Sinking Funds Section 11.1 Applicability of Article....................................................58 Section 11.2 Satisfaction of Sinking Fund Payments with Securities.......................58 Section 11.3 Redemption of Securities for Sinking Fund...................................58
iv INDENTURE, dated as of ____________ ___, 1998, from FARMLAND INDUSTRIES, INC., a Kansas corporation (the "Company"), to THE CHASE MANHATTAN BANK, as Trustee (the "Trustee"). RECITALS The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its debentures, notes or other evidences of indebtedness (the "Securities") to be issued in one or more series as herein provided. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. This Indenture is subject to the provisions of the Trust Indenture Act that are required to be a part of this Indenture and, to the extent applicable, shall be governed by such provisions. For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and ratable benefit of the Holders of the Securities or of any series thereof, as follows: ARTICLE 1. Definitions and Other Provisions of General Application Section 1.1 Definitions. (a) For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such principles as are generally accepted at the date of such computation; and (4) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Authenticating Agent" means any authenticating agent appointed by the Trustee pursuant to Section 6.14. "Board" or "Board of Directors" means the Board of Directors of the Company, the Executive Committee thereof or any other duly authorized committee thereof. "Board Resolution" means a copy of a resolution of the Board of Directors, certified by the Corporate Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day", when used with respect to any Place of Payment or any other particular location referred to in this Indenture or in the Securities, means, unless otherwise specified with respect to any Securities pursuant to Section 3.1, each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment or particular location are authorized or obligated by law, executive order or regulation to close. "Commission" means the Securities and Exchange Commission, as from time to time constituted, or, if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the Person named as the Company in the first paragraph of this Indenture until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" means such successor corporation. "Company Order" and "Company Request" mean, respectively, a written order or request signed in the name of the Company by the Chairman of the Board, the President, any Executive Vice President or any Senior Vice President, signing alone, by any Vice President signing together with the Treasurer, any Assistant Treasurer, the Corporate Secretary or any Assistant Secretary of the Company, or, with respect to Sections 3.3, 3.4, 3.5 and 6.1, any other employee of the Company named in an Officers' Certificate and delivered to the Trustee. "Corporate Trust Office" means the principal office of the Trustee in which at any particular time its corporate trust business shall be principally administered, which office at the date hereof is located at 450 West 33rd Street, 15th Floor, New York, New York 10001, Attention: Global Trust Services, or at any other time at such other address as the Trustee may designate from time to time by notice to the Company. "corporation" includes corporations, associations, partnerships, limited liability companies, joint stock companies and business trusts. "Default" means any event which is, or after notice or passage of time, or both, would be, an Event of Default. 2 "Depositary", when used with respect to the Securities of or within any series issuable or issued in whole or in part in global form, means the Person designated as Depositary by the Company pursuant to Section 3.1 until a successor Depositary shall have become such pursuant to the applicable provisions of this Indenture, and thereafter shall mean or include each Person which is then a Depositary hereunder, and if at any time there is more than one such Person, shall be a collective reference to such Persons. "Dollar" or "$" means the coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts. "Government Obligations" means securities which are (i) direct obligations of the United States for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States, each of which are not callable or redeemable at the option of the issuer thereof, and shall also include (A) a depositary receipt issued by a bank or trust company as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the holder of a depositary receipt, provided, however, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the Government Obligation evidenced by such depositary receipt, (B) securities that are backed by United States government obligations as collateral under an arrangement by which the interest and principal payments on the collateral generally flow immediately through to the holder of the security, and (C) money market funds, including, without limitation, The Chase Manhattan Bank VISTA Money Market Funds, so long as such funds are rated Aaa by Moody's (so long as Moody's is a rating agency) and AAAm by Standard & Poor's (so long as Standard & Poor's is a rating agency), and any other funds for which the Trustee or an Affiliate of the Trustee serves as an investment advisor, administrator, shareholder servicing agent and/or custodian or subcustodian, provided that any shares of such funds have a credit rating of at least Aaa by Moody's (so long as Moody's is a rating agency) and AAAm by Standard & Poor's (so long as Standard & Poor's is a rating agency) and notwithstanding that the Trustee or an Affiliate of the Trustee charges and collects fees and expenses from such funds for services rendered. The Company hereby specifically authorizes the Trustee or an Affiliate of the Trustee to charge and collect all fees and expenses from such funds for services rendered to such funds. "Holder" means a Person in whose name a Security is registered on the Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented, amended or modified by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and, unless the context otherwise requires, shall include the terms of a particular series of Securities established as contemplated by Section 3.1. "interest", when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity. 3 "Interest Payment Date", when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security. "Material Subsidiary" means, at any particular time, any Subsidiary that, together with any Subsidiaries of such Subsidiary (i) accounted for more than five percent (5%) of the consolidated sales of the Company for its most recently completed fiscal year, or (ii) owned more than five percent (5%) of the consolidated assets of the Company as at the end of such fiscal year, all as calculated in accordance with generally accepted accounting principles. "Maturity", where used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Officer" means the Chairman of the Board of Directors, the President, any Executive Vice President, any Senior Vice President, any Vice President, the Corporate Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the President, any Executive Vice President or any Senior Vice President, signing alone, or by any Vice President signing together with the Corporate Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company. "Opinion of Counsel" means a written opinion of legal counsel, who may be (a) counsel for the Company or (b) other counsel designated by the Company. Any counsel for the Company may be an employee of the Company. "Original Issue Discount Security" means any Security which provides for an amount less than the stated principal thereof to be due and payable upon declaration of acceleration of the Maturity thereof pursuant to Section 5.2. "Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided, however, that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture and such Securities or provisions therefor satisfactory to the Trustee have been made; 4 (iii) Securities, except to the extent provided in Sections 4.4 and 4.5, with respect to which the Company has effected defeasance and/or covenant defeasance as provided in Article 4; and (iv) Securities which have been paid pursuant to Section 3.6 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, or whether sufficient funds are available for redemption or for any other purpose, and for the purpose of making the calculations required by Section 313 of the Trust Indenture Act, the principal amount of any Original Issue Discount Securities that may be counted in making such determination or calculation and that shall be deemed to be Outstanding for such purpose shall be equal to the amount of principal thereof that would be (or shall have been declared to be) due and payable, at the time of such determination, upon a declaration of acceleration of the maturity thereof pursuant to Section 5.2, and Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in making such calculation or in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded and Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the principal of, premium, if any, or interest on any Securities on behalf of the Company. "Periodic Offering" means an offering of Securities of a series from time to time, the specific terms of which Securities, including, without limitation, the rate or rates of interest or formula for determining the rate or rates of interest thereon, if any, the Stated Maturity or Stated Maturities thereof, the original issue date or dates thereof, the redemption provisions, if any, with respect thereto, and any other terms specified as contemplated by Section 3.1 with respect thereto, are to be determined by the Company upon the issuance of such Securities. "Person" means any individual, corporation, partnership, joint venture, association, limited liability company, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. 5 "Place of Payment", when used with respect to the Securities of or within any series, means the place or places where, subject to the provisions of Section 9.2, the principal of, premium, if any, and interest on such Securities are payable as specified as contemplated by Section 3.1. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 3.6 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed in whole or in part, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of or within any series means the date specified for that purpose as contemplated by Section 3.1. "Responsible Officer", when used with respect to the Trustee, shall mean the chairman or any vice chairman of the board of directors, the chairman or any vice chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any senior vice president, any vice president, any assistant vice president, the secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any senior trust officer, any trust officer, the controller, any assistant controller, or any other officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, and also means, with respect to a particular corporate trust matter, any other officer to whom such corporate trust matter is referred because of his knowledge of and familiarity with the particular subject. "Security" or "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Security or Securities of the Company issued, authenticated and delivered under this Indenture. "Special Record Date" for the payment of any Defaulted Interest on the Securities of any series means a date fixed by the Trustee pursuant to Section 3.7. "Stated Maturity", when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable. "Subsidiary" means any corporation of which the Company at the time owns or controls, directly or indirectly, more than 50% of the shares of outstanding stock having general voting power under ordinary circumstances to elect a majority of the Board of Directors of such corporation (irrespective of whether or not at the time stock of any other class or classes of such 6 corporation shall have or might have voting power by reason of the happening of any contingency). "Trinidad Venture" means the joint venture organized by the Company and the Mississippi Chemical Corporation to acquire, own, develop, construct and/or operate a plant to produce anhydrous ammonia and related products (including urea) in The Republic of Trinidad and Tobago. "Trust Indenture Act" means the Trust Indenture Act of 1939 and any reference herein to such Act or a particular provision thereof shall mean such Act or provision, as the case may be, as amended or replaced from time to time or as supplemented from time to time by rules or regulations adopted by the Commission under or in furtherance of the purposes of such Act or provision, as the case may be. "Trustee" means the party named as such in the first paragraph of this Indenture until a successor Trustee replaces it pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" means or includes such successor Trustee and if, at any time, there is more than one Trustee, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to the Securities of that series. "United States" means, unless otherwise specified with respect to the Securities of any series as contemplated by Section 3.1, the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction. (b) The following terms shall have the meanings specified in the Sections referred to opposite such term below:
Term Section ---- ------- "Act" 1.4(a) "Bankruptcy Law" 5.1 "Consolidated Net Worth" 9.9(b) "covenant defeasance" 4.5 "Custodian" 5.1 "Defaulted Interest" 3.7(b) "defeasance" 4.4 "Event of Default" 5.1 "Exchange Act" 9.6(a) "Register" 3.5 "Registrar" 3.5
Section 1.2 Compliance Certificates and Opinions. Except as otherwise expressly provided in this Indenture, upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, 7 if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents or any of them is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than pursuant to Sections 2.3, 3.3 and 9.7) shall include: (1) a statement that each individual signing such certificate or opinion has read such condition or covenant and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such condition or covenant has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.3 Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations as to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. 8 Section 1.4 Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 315 of the Trust Indenture Act) conclusive in favor of the Trustee and the Company if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other reasonable manner which the Trustee deems sufficient. (c) The ownership, principal amount and serial numbers of Securities held by any Person, and the date of commencement of such Person's holding the same, shall be proved by the Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. (e) The Company may, in the circumstances permitted by the Trust Indenture Act, fix a record date for the determination of Holders entitled to make or give any request, demand, authorization, direction, notice, consent or waiver or to take any other Act authorized or permitted to be made, given or taken by the Holders, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before, on or after such record date, but only the Holders of record at the close of business on such record date (or their duly designated proxies) shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Securities shall be computed as of such record date. No such request, demand, authorization, direction, notice, consent, waiver or other Act shall be valid or effective if made, given or taken more than 90 days after such record date. 9 Section 1.5 Notices, etc., to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or other Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at Farmland Industries, Inc., 3315 North Oak Trafficway, Kansas City, Missouri, 64116, Attention: Chief Financial Officer or at any other address previously furnished in writing to the Trustee by the Company. Section 1.6 Notice to Holders; Waiver. Except as otherwise expressly provided in or pursuant to this Indenture, where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given if in writing and mailed, first-class postage prepaid, to each such Holder affected by such event, at his address as it appears in the Register, within the time prescribed for the giving of such notice. Neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders of Securities. Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice. If by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice as provided above, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. Any request, demand, authorization, direction, notice, consent, waiver or other Act required or permitted under this Indenture shall be in the English language. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Section 1.7 Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. 10 Section 1.8 Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. Section 1.9 Separability. In case any provision of this Indenture or the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 1.10 Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the Registrar, any Paying Agent and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 1.11 Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. This Indenture is subject to the Trust Indenture Act and if any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under the Trust Indenture Act to be part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or excluded. Section 1.12 Legal Holidays. Unless otherwise specifically provided for with respect to any series of Securities, in any case where any Interest Payment Date, Redemption Date, sinking fund payment date, Stated Maturity or Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or any Security, other than a provision in the Securities of any series which specifically states that such provision shall apply in lieu of this Section) payment of principal, premium, if any, or interest need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on such date; and no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Redemption Date, sinking fund payment date, Stated Maturity or Maturity, as the case may be, to such next succeeding Business Day. 11 Section 1.13 Incorporators, Stockholders, Officers and Directors of the Company Exempt from Individual Liability. No recourse under or upon any obligation, covenant or agreement of or contained in this Indenture or of or contained in any Security, or for any claim based thereon or otherwise in respect thereof, or in any Security, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, officer or director, as such, past, present or future, of the Company or any successor Person, either directly or through the Company or any successor Person, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Securities. Section 1.14 Counterparts. This Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. ARTICLE 2. Security Forms Section 2.1 Forms Generally. The Securities of each series shall be in substantially such form as shall be established by delivery to the Trustee of an Officers' Certificate or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture. Such Securities may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as the Company may deem appropriate and as are not inconsistent with this Indenture, or as may be required to comply with the rules of any securities exchange, all as determined by the officers executing such Securities as evidenced by their execution of the Securities. If temporary Securities of any series are issued as permitted by Section 3.4, the form thereof also shall be established as provided in the preceding sentences. If the forms of Securities of any series are established by an Officers' Certificate, such Officers' Certificate shall be delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 3.3 for the authentication and delivery of such Securities. The permanent Securities, if any, shall be printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. 12 Section 2.2 Form of Trustee's Certificate of Authentication. Subject to Section 6.14, the Trustee's certificate of authentication shall be in substantially the following form: This is one of the Securities of a series issued under the within-mentioned Indenture. Dated: THE CHASE MANHATTAN BANK, as Trustee By: ------------------------ Authorized Signatory Section 2.3 Securities in Global Form. If Securities of or within a series are issuable in whole or in part in temporary or permanent global form, as specified as contemplated by Section 3.1, then, notwithstanding clause (8) of Section 3.1(b) and the provisions of Section 3.2, any such Security shall represent such of the Outstanding Securities of such series as shall be specified therein and may provide that it shall represent the aggregate amount of Outstanding Securities from time to time endorsed thereon and that the aggregate amount of Outstanding Securities represented thereby may from time to time be reduced to reflect exchanges. Any endorsement of a Security in global form to reflect the amount, or any increase or decrease in the amount, or changes in the rights of Holders, of Outstanding Securities represented thereby, shall be made by the Trustee in such manner and upon instructions given by such Person or Persons as shall be specified therein or in the Company Order to be delivered to the Trustee pursuant to Section 3.3 or 3.4. Subject to the provisions of Sections 3.3, 3.4 and 3.5, the Trustee shall deliver and redeliver any Security in global form in the manner and upon instructions given by the Person or Persons specified therein or in the applicable Company Order. Any instructions by the Company with respect to endorsement or delivery or redelivery of a Security in global form shall be in writing (which need not comply with Section 1.2 hereof and need not be accompanied by an Opinion of Counsel). The provisions of the last paragraph of Section 3.3 shall apply to any Security in global form if such Security was never issued and sold by the Company and the Company delivers to the Trustee the Security in global form together with written instructions (which need not comply with Section 1.2 and need not be accompanied by an Opinion of Counsel) with regard to the reduction or increase in the principal amount of Securities represented thereby, together with the written statement contemplated by the last paragraph of Section 3.3. Every Security in global form authenticated and delivered hereunder shall bear an appropriate legend in substantially the following form: THIS IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE DATED AS OF __________ ___, 1998, FROM FARMLAND INDUSTRIES, INC. TO THE CHASE MANHATTAN BANK, AS TRUSTEE (THE "INDENTURE"), AND 13 IS REGISTERED IN THE NAME OF A DEPOSITORY (AS DEFINED IN THE INDENTURE) OR A NOMINEE THEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN CERTIFICATED FORM IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE TO THE DEPOSITORY, OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH DEPOSITORY. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. ARTICLE 3. The Securities Section 3.1 Amount Unlimited; Issuable in Series. (a) The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued from time to time in one or more series. (b) The following matters shall be established and (subject to Section 3.3) set forth, or determined in the manner provided, in an Officers' Certificate, a Board Resolution or one or more indentures supplemental hereto: (1) the title of the Securities of the series (which title shall distinguish the Securities of the series from all other Securities); 14 (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (which limit shall not pertain to (i) Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 3.4, 3.5, 3.6, 8.6 or 10.7, and (ii) any Securities which, pursuant to the last paragraph of Section 3.3, are deemed never to have been authenticated and delivered hereunder); (3) the date or dates on which the principal of the Securities of the series is payable or the method of determination thereof; (4) the rate or rates at which the Securities of the series shall bear interest, if any, or the method of calculating such rate or rates of interest, the date or dates from which such interest shall accrue or the method by which such date or dates shall be determined, the Interest Payment Dates on which any such interest shall be payable and the Regular Record Date, if any, for the interest payable on any Security of such series on any Interest Payment Date; (5) the place or places where, subject to the provisions of Section 9.2, the principal of, premium, if any, and interest, if any, on Securities of the series shall be payable; (6) the date or dates on which or the period or periods within which, the price or prices at which, and the other terms and conditions upon which, Securities of the series may be redeemed, in whole or in part, at the option of the Company and, if other than as provided in Section 10.3, the manner in which the particular Securities of such series (if less than all Securities of such series are to be redeemed) are to be selected for redemption; (7) the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund or analogous provisions or upon the happening of a specified event or at the option of a Holder thereof and the date or dates on which or the period or periods within which, the price or prices at which, and the other terms and conditions upon which, Securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (8) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which Securities of the series shall be issuable; (9) if other than the principal amount thereof, the portion of the principal amount of the Securities of the series which shall be payable upon declaration of acceleration thereof pursuant to Section 5.2 or the method by which such portion shall be determined; (10) if other than as provided in Section 3.7, the Person to whom any interest on any Security of the series shall be payable, and the extent to which, or the manner in which (including any certification requirement and other terms and conditions under which), any interest payable on a temporary or permanent global Security on an Interest 15 Payment Date will be paid if other than in the manner provided in Section 2.3 and Section 3.4, as applicable; (11) provisions, if any, granting special rights to the Holders of Securities of the series upon the occurrence of such events as may be specified; (12) any deletions from, modifications of or additions to the Events of Default set forth in Section 5.1 or covenants of the Company set forth in Article 9 pertaining to the Securities of the series; (13) if other than as provided in Sections 4.4 and 4.5, the means of defeasance or covenant defeasance as may be specified for the Securities of or within the series; (14) if other than the Trustee, the identity of the Registrar and any Paying Agent; (15) whether Securities of the series shall be issued in whole or in part in temporary or permanent global form and, if so, (i) the initial Depositary for such global Securities and (ii) if other than as provided in Section 3.4 or 3.5, as applicable, whether and the circumstances under which beneficial owners of interests in any Securities of the series in temporary or permanent global form may exchange such interests for Securities of such series and of like tenor of any authorized form and denomination; and (16) any other terms of Securities of the series (which terms shall not be inconsistent with the provisions of this Indenture), including without limitation any terms which may be required by or advisable under United States laws or regulations or advisable in connection with the marketing of Securities of the series. (c) All Securities of any one series shall be substantially identical except as to denomination and the rate or rates of interest, or method of calculating such rate or rates of interest, if any, and Stated Maturity, the date from which interest, if any, shall accrue and except as may otherwise be provided in or pursuant to an Officers' Certificate or a Board Resolution pursuant to this Section 3.1 or in an indenture supplemental hereto. (d) If any of the terms of the Securities of any series are established by action taken pursuant to a Board Resolution, a copy of such Board Resolution shall be certified by the Corporate Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificate setting forth, or providing the manner for determining, the terms of the Securities of such series, and, if requested by the Trustee, an appropriate record of any action taken pursuant thereto in connection with the issuance of any Securities of such series shall be delivered to the Trustee prior to the authentication and delivery thereof. With respect to Securities of a series subject to a Periodic Offering, such Board Resolution or Officers' Certificate may provide general terms for Securities of such series and provide either that the specific terms of particular Securities of such series shall be specified in a Company Order or that such terms shall be determined by the Company, or one or more of the Company's agents designated in an Officers' Certificate, in accordance with the Company Order as contemplated by the first proviso of the third paragraph of Section 3.3. 16 Section 3.2 Denominations. Unless otherwise provided as contemplated by Section 3.1, any Securities of a series shall be issuable in denominations of $1,000 and any integral multiple thereof. Section 3.3 Execution, Authentication, Delivery and Dating. Securities shall be executed on behalf of the Company by the Chairman, the President, any Executive Vice President, any Senior Vice President or the Treasurer and attested to by the Corporate Secretary or Assistant Secretary of the Company. The Company's seal shall be affixed to the Securities, or a facsimile of such seal shall be reproduced on the Securities. The signatures of such officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and the delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities; provided, however, that in the case of Securities offered in a Periodic Offering, the Trustee shall authenticate and deliver such Securities from time to time in accordance with such other procedures (including, without limitation, the receipt by the Trustee of oral or electronic instructions from the Company or its duly authorized agents, thereafter promptly confirmed in writing) acceptable to the Trustee as may be specified by or pursuant to a Company Order delivered to the Trustee prior to the time of the first authentication of Securities of such series. If the form or terms of the Securities of a series have been established by or pursuant to one or more Officers' Certificates or one or more Board Resolutions as permitted by Sections 2.1 and 3.1, in authenticating such Securities and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 315(a) through (d) of the Trust Indenture Act) shall be fully protected in relying upon, an Opinion of Counsel stating that, (1) the forms and terms of such Securities have been established in conformity with the provisions of this Indenture; and (2) such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to customary exceptions; provided, however, that, with respect to Securities of a series subject to a Periodic Offering, the Trustee shall be entitled to receive such Opinion of Counsel only once at or prior to the time of the first authentication of Securities of such series and that the Opinion of Counsel above may state: 17 (x) that the forms of such Securities have been, and the terms of such Securities (when established in accordance with such procedures as may be specified from time to time in a Company Order, all as contemplated by and in accordance with a Board Resolution or an Officers' Certificate pursuant to Section 3.1, as the case may be) will have been, established in conformity with the provisions of this Indenture; and (y) that such Securities, when (1) executed by the Company, (2) completed, authenticated and delivered by the Trustee in accordance with this Indenture, and (3) issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to customary exceptions. With respect to Securities of a series subject to a Periodic Offering, the Trustee may conclusively rely, as to the authorization by the Company of any of such Securities, the form and terms thereof and the legality, validity, binding effect and enforceability thereof, upon such Opinion of Counsel and any other documents delivered pursuant to Sections 2.1 and 3.1, as applicable, at or prior to the time of the first authentication of Securities of such series unless and until it has received written notification that such opinion or other documents have been superseded or revoked. In connection with the authentication and delivery of Securities of a series subject to a Periodic Offering, the Trustee shall be entitled to assume that the Company's instructions to authenticate and deliver such Securities do not violate any rules, regulations or orders of any governmental agency or commission having jurisdiction over the Company. If the form or terms of the Securities of a series have been established by or pursuant to one or more Officers' Certificates or one or more Board Resolutions as permitted by Sections 2.1 and 3.1, the Trustee shall have the right to decline to authenticate such Securities if the issue of such Securities pursuant to this Indenture will adversely affect the Trustee's own rights, duties or immunities under this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. If all of the Securities of any series are not to be issued at one time, it shall not be necessary to deliver the Officers' Certificate or the Board Resolution otherwise required pursuant to Section 3.1 at or prior to the time of the authentication of each Security of such series if such Officers' Certificate or Board Resolution is delivered at or prior to the authentication upon original issuance of the first Security of such series to be issued. If the Company shall establish pursuant to Section 3.1 that the Securities of a series are to be issued in whole or in part in global form, then the Company shall execute and the Trustee shall, in accordance with this Section and the Company Order with respect to such series, authenticate and deliver one or more Securities in global form that (i) shall represent and shall be denominated in an amount equal to the aggregate principal amount of the initially issued Outstanding Securities of such series to be represented by such Security or Securities in global form, (ii) shall be registered in the name of the Depositary for such Security or Securities in global form or the nominee of such Depositary, and (iii) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary's instruction. 18 Each Depositary designated pursuant to Section 3.1 for a Security in global form must, at the time of its designation and at all times while it serves as Depositary, be a clearing agency registered under the Securities Exchange Act of 1934, as amended, and any other applicable statute or regulation. The Trustee shall have no responsibility to determine if the Depositary is so registered. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefits under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the manual signature of one of the authorized signatories of the Trustee or an Authenticating Agent. Such signature upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered under this Indenture and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 3.9 together with a written statement (which need not comply with Section 1.2 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall not be entitled to the benefits of this Indenture. Section 3.4 Temporary Securities. Pending the preparation of definitive Securities of any series, the Company may execute and, upon Company Order, the Trustee shall authenticate and deliver temporary Securities of such series which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor and form, of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. In the case of Securities of any series, such temporary Securities may be in global form. Except in the case of temporary Securities in global form, each of which shall be exchanged in accordance with the provisions thereof, if temporary Securities of any series are issued, the Company will cause permanent Securities of such series to be prepared without unreasonable delay. After preparation of such permanent Securities, the temporary Securities shall be exchangeable for such permanent Securities of like tenor upon surrender of the temporary Securities of such series at the office or agency of the Company pursuant to Section 9.2 in a Place of Payment for such series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of permanent Securities of the same series of authorized denominations and of like tenor. Until so exchanged, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as permanent Securities of such series except as otherwise specified as contemplated by Section 3.1. 19 Section 3.5 Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee or in any office or agency to be maintained by the Company in accordance with Section 9.2 in a Place of Payment, a register (the "Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and the registration of transfers of Securities. The Register shall be in written form or any other form capable of being converted into written form within a reasonable time. The Trustee is hereby initially appointed "Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security of any series at the office or agency maintained pursuant to Section 9.2 in a Place of Payment for that series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor. At the option of the Holder, Securities of any series (except a Security in global form) may be exchanged for other Securities of the same series, of any authorized denominations and of a like aggregate principal amount containing identical terms and provisions, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. Notwithstanding any other provision of this Section, unless and until it is exchanged in whole or in part for Securities in certificated form in the circumstances described below, a Security in global form representing all or a portion of the Securities of a series may not be transferred except as a whole by the Depositary for such series to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor Depositary for such series or a nominee of such successor Depositary. If at any time the Depositary for the Securities of a series notifies the Company that it is unwilling or unable to continue as Depositary for the Securities of such series or if at any time the Depositary for the Securities of such series shall no longer be eligible under Section 3.3, the Company shall appoint a successor Depositary with respect to the Securities of such series. If a successor Depositary for the Securities of such series is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility, the Company's election pursuant to Section 3.1(b)(15) shall no longer be effective with respect to the Securities of such series. In such cases or in the event that a Default or Event of Default shall have occurred and be continuing, the Company shall execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of certificated Securities of such series of like tenor, shall authenticate and deliver Securities of such series of like tenor in certificated form, in authorized denominations and in an aggregate principal amount equal to the principal amount of the Security or Securities of such series of like tenor in global form in exchange for such Security or Securities in global form. 20 The Company may at any time in its sole discretion determine that Securities of a series issued in global form shall no longer be represented by such a Security or Securities in global form. In such event, the Company shall execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of certificated Securities of such series of like tenor, shall authenticate and deliver, Securities of such series of like tenor in certificated form, in authorized denominations and in an aggregate principal amount equal to the principal amount of the Security or Securities of such series of like tenor in global form in exchange for such Security or Securities in global form. If specified by the Company pursuant to Section 3.1 with respect to a series of Securities, the Depositary for such series may surrender a Security in global form of such series in exchange in whole or in part for Securities of such series in certificated form on such terms as are acceptable to the Company and such Depositary. Thereupon, the Company shall execute, and the Trustee shall authenticate and deliver, without service charge, (i) to each Person specified by such Depositary a new certificated Security or Securities of the same series of like tenor, of any authorized denomination as requested by such Person in aggregate principal amount equal to and in exchange for such Person's beneficial interest in the Security in global form; and (ii) to such Depositary a new Security in global form of like tenor in a denomination equal to the difference, if any, between the principal amount of the surrendered Security in global form and the aggregate principal amount of certificated Securities delivered to Holders thereof. Upon the exchange of a Security in global form for Securities in certificated form, such Security in global form shall be cancelled by the Trustee. Securities in certificated form issued in exchange for a Security in global form pursuant to this Section shall be registered in such names and in such authorized denominations as the Depositary for such Security in global form, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee in writing. The Trustee shall deliver such Securities to the Persons in whose names such Securities are so registered. All Securities issued upon any registration of transfer or upon any exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration or transfer or for exchange shall (if so required by the Company, the Registrar or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Registrar and the Trustee duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or for any exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration or transfer or exchange of Securities, other than exchanges pursuant to Section 3.4, 8.6 or 10.7 not involving any transfer. 21 The Company shall not be required (i) to issue, register the transfer of, or exchange any Securities for a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities of like tenor and of the series of which such Security is a part selected for redemption under Section 10.3 and ending at the close of business on the day of such mailing or (ii) to register the transfer of or exchange any Security so selected for redemption, in whole or in part, except the unredeemed portion of any Security being redeemed in part. Section 3.6 Replacement Securities. If a mutilated Security is surrendered to the Trustee, together with, in proper cases, such security or indemnity as may be required by the Company or the Trustee to save each of them and any agent of either of them harmless, the Company shall execute and the Trustee shall authenticate and deliver a replacement Security of the same series and principal amount and date of maturity, if the Trustee's requirements are met. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver in lieu of any such destroyed, lost or stolen Security a replacement Security of the same series and principal amount, containing identical terms and provisions as the destroyed, lost or stolen Security. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee or the Registrar) connected therewith. Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. 22 Section 3.7 Payment of Interest; Interest Rights Preserved. (a) Unless otherwise specified as contemplated by Section 3.1, interest, if any, on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest at the office or agency maintained for such purpose pursuant to Section 9.2; provided, however, that, at the option of the Company, interest on any series of Securities that bear interest may be paid (i) by check mailed to the address of the Person entitled thereto as it shall appear on the Register of Holders of Securities of such series, or (ii) to the extent specified as contemplated by Section 3.1, by wire transfer to an account maintained by the Person entitled thereto as specified in the Register of Holders of Securities of such series. (b) Unless otherwise specified as contemplated by Section 3.1, any interest on any Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of his having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause (1) provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities of such series at his address as it appears in the Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Interest on the Securities of any series to the Persons in whose names the Securities of such series (or 23 their respective Predecessor Securities) are registered at the close of business on a specified date in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause (2), such manner of payment shall be deemed practicable by the Trustee. (c) Subject to the foregoing provisions of this Section and Section 3.5, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Section 3.8 Persons Deemed Owners. Prior to due presentment of any Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of, premium, if any, and (subject to Sections 3.5 and 3.7) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. No holder of any beneficial interest in any global Security held on its behalf by a Depositary shall have any rights under this Indenture with respect to such global Security, and such Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the owner of such global Security for all purposes whatsoever. None of the Company, the Trustee or any agent of the Company or the Trustee shall have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Security in global form, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Section 3.9 Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and any Paying Agent shall forward to the Trustee any Securities surrendered to them for replacement, for registration of transfer, or for exchange or payment. The Trustee shall cancel all Securities surrendered for replacement, for registration of transfer, or for exchange, payment, redemption or cancellation and may dispose of cancelled Securities and issue a certificate of destruction to the Company. The Company may not issue new Securities to replace Securities that it has paid or delivered to the Trustee for cancellation, except as expressly permitted in the terms of Securities for any particular series or as permitted pursuant to the terms of this Indenture. Section 3.10 Computation of Interest. Except as otherwise specified as contemplated by Section 3.1, interest on any Securities of a series that bear interest shall be computed on the basis of a 360-day year of twelve 30-day months. 24 Section 3.11 CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (in addition to the other identification numbers printed on the Securities), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such "CUSIP" numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such "CUSIP" numbers. ARTICLE 4. Satisfaction and Discharge; Defeasance Section 4.1 Termination of Company's Obligations Under the Indenture. Except as otherwise specified as contemplated by Section 3.1, this Indenture shall upon a Company Request cease to be of further effect with respect to Securities of or within any series (except as to any surviving rights of registration of transfer or exchange of such Securities and replacement of such Securities which may have been destroyed, lost, stolen or mutilated, as herein expressly provided for) and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to such Securities when: (1) either (A) all such Securities theretofore authenticated and delivered (other than (i) such Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.6, and (ii) such Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 9.3) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) if redeemable at the option of the Company, are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, 25 and the Company, in the case of (i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee, as trust funds in trust for the purpose, an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal, premium, if any, and interest, with respect thereto, to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company with respect to such Securities; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture as to such series have been complied with. In the event there are Securities of two or more series hereunder, the Trustees shall be required to execute an instrument acknowledging satisfaction and discharge of this Indenture only if requested to do so with respect to Securities of such series as to which it is Trustee and if the other conditions thereto are met. Notwithstanding the satisfaction and discharge of this Indenture with respect to any series of Securities, the obligation of the Company to the Trustee and any predecessor Trustee under Section 6.9, the obligations of the Company to any Authenticating Agent under Section 6.14 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 4.2 and the last paragraph of Section 9.3 shall survive. Section 4.2 Application of Trust Funds. Subject to the provisions of the last paragraph of Section 9.3, all money deposited with the Trustee pursuant to Section 4.1 shall be held in trust and applied by the Trustee, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal, premium, if any, and any interest for whose payment such money has been deposited with or received by the Trustee, but such money need not be segregated from other funds except to the extent required by law. Section 4.3 Applicability of Defeasance Provisions. Unless otherwise specified as contemplated by Section 3.1, the provisions of Sections 4.4 and 4.5, together with the provisions of Sections 4.6 through 4.8 inclusive, shall be applicable to the Securities of or within a series. 26 Section 4.4 Defeasance and Discharge. The Company, at its option, shall be deemed to have been discharged from its obligations with respect to the Securities of or within a series on and after the date the conditions set forth in Section 4.6 are satisfied (hereinafter "defeasance"). For this purpose, such defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by such Securities which shall thereafter be deemed to be "Outstanding" only for the purposes this Article 4 and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Company, shall on a Company Order execute proper instruments acknowledging the same), except the following which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of such Securities to receive, solely from the trust funds described in Section 4.6(a) and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest, if any, on such Securities when such payments are due; (b) the rights, powers, trusts, duties and immunities of the Trustee hereunder; (c) the obligations of the Company and the Trustee with respect to such Securities under Sections 3.5, 3.6, 9.2 and 9.3; and (d) this Article 4. Subject to compliance with this Article 4, the Company may exercise its option under this Section notwithstanding the prior exercise of its option under Section 4.5 with respect to such Securities. Section 4.5 Covenant Defeasance. The Company, at its option, shall be released from its obligations with respect to the Securities of or within a series under Sections 7.1, 9.4, 9.5, 9.8, 9.9 and 9.10 and, if specified pursuant to Section 3.1, its obligations under any other covenants, with respect to such Securities on and after the date the conditions set forth in Section 4.6 are satisfied (hereinafter "covenant defeasance"), and such Securities shall thereafter be deemed to be not "Outstanding" for the purposes of any request, demand, authorization, direction, notice, consent, waiver or other Act of Holders (and the consequences of any thereof) in connection with Sections 7.1, 9.4, 9.5, 9.8, 9.9 and 9.10, or such other covenants, but shall continue to be deemed "Outstanding" for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to such Securities, the Company may omit to comply with and shall have no liability in respect of any term, provision, condition or limitation set forth in any such Section or such other covenants, whether directly or indirectly, by reason of any reference elsewhere herein to any such Section or such other covenants or by reason of any reference in any such Section or such other covenants to any other provision herein or in any other document or otherwise and such omission to comply shall not constitute a Default or an Event of Default under Section 5.1(3) or 5.1(7) or otherwise, as the case may be, but, except as specified above, the remainder of this Indenture and such Securities shall be unaffected thereby. Section 4.6 Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of Section 4.4 or Section 4.5 to any Securities of or within a series: (a) The Company shall have deposited or caused to be deposited irrevocably with the Trustee (or another trustee satisfying the requirements of Section 6.12 who shall agree to comply 27 with, and shall be entitled to the benefits of, the provisions of Sections 4.3 through 4.8 inclusive and the last paragraph of Section 9.3 applicable to the Trustee, for purposes of such Sections also a "Trustee") as trust funds in trust for the purpose of making the payments referred to in clauses (x) and (y) of this Section 4.6(a), specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, with written instructions to the Trustee as to the application thereof, (A) money in an amount, or (B) Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment referred to in clause (x) or (y) of this Section 4.6(a), money in an amount or (C) a combination thereof in an amount, sufficient, without consideration of any reinvestment of such principal and interest, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee to pay and discharge, (x) the principal of, premium, if any, and interest, if any, on such Securities on the Stated Maturity of such principal or installment of principal or premium or interest and (y) any mandatory sinking fund payments or analogous payments applicable to such Securities on the days on which such payments are due and payable in accordance with the terms of this Indenture and such Securities. Before such a deposit the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date or dates in accordance with Article 10 which shall be given effect in applying the foregoing. (b) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a Default or Event of Default under this Indenture or result in a breach or violation of, or constitute a default under, any other material agreement or instrument to which the Company is a party or by which it is bound. (c) No Default or Event of Default under Section 5.1(5) or 5.1(6) with respect to such Securities shall have occurred and be continuing during the period commencing on the date of such deposit and ending on the 91st day after such date (it being understood that this condition shall not be deemed satisfied until the expiration of such period). (d) In the case of an exercise by the Company of its option under Section 4.4, the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel to the effect that (i) the Company has received from, or there has been published by, the Internal Revenue Service a letter ruling, or there has been published by the Internal Revenue Service a Revenue Ruling, or (ii) since the date of execution of this Indenture, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of such Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times, as would have been the case if such deposit, defeasance and discharge had not occurred. (e) In the case of an exercise by the Company of its option under Section 4.5, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred. 28 (f) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance under Section 4.4 or the covenant defeasance under Section 4.5 (as the case may be) have been complied with and an Opinion of Counsel to the effect that (i) either (A) as a result of a deposit pursuant to subsection (a) above and the related exercise of the Company's option under Section 4.4 or Section 4.5 (as the case may be), registration is not required under the Investment Company Act of 1940, as amended, by the Company, with respect to the trust funds representing such deposit or by the Trustee for such trust funds or (B) all necessary registrations under said Act have been effected, and (ii) after the 91st day after the date of deposit, all money, Government Obligations and other property deposited pursuant to subsection (a) above (including the proceeds thereof), will not be subject to any law or proceeding (whether voluntary or involuntary) in respect of the Company under any Federal or State bankruptcy, insolvency, reorganization or other similar law, or any decree or order for relief in respect of the Company issued in connection therewith; provided, however, such Opinion of Counsel may assume that no Holder of Securities is an "insider" as defined in Section 101(31) of Title 11 of the United States Code. (g) Notwithstanding any other provisions of this Section 4.6, such defeasance or covenant defeasance shall be effected in compliance with any additional or substitute terms, conditions or limitations which may be imposed on the Company in connection therewith as contemplated by Section 3.1. Section 4.7 Deposited Money and Government Obligations to be Held in Trust. Subject to the provisions of the last paragraph of Section 9.3, all money and Government Obligations (or other property as may be provided pursuant to Section 3.1) (including the proceeds thereof) deposited with the Trustee pursuant to Section 4.6 in respect of any Securities of or within any series shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal, premium, if any, and interest, if any, but such money need not be segregated from other funds except to the extent required by law. Section 4.8 Transfers and Distribution at Company Request. To the extent permitted by the Financial Accounting Standards Board Statement of Financial Accounting Standards No. 76, as amended or interpreted by the Financial Accounting Standards Board from time to time, or any successor thereto ("Standard No. 76"), or to the extent permitted by the Commission, the Trustee shall, from time to time, take one or more of the following actions as specified in a Company Request: (a) The Trustee shall retransfer, reassign and deliver to the Company any securities deposited with the Trustee pursuant to Section 4.6(a), provided that the Company shall, in substitution therefor, simultaneously transfer, assign and deliver to the Trustee other Government Obligations appropriate to satisfy the Company's obligations in respect of the relevant Securities. 29 (b) The Trustee (and any Paying Agent) shall promptly pay to the Company upon a Company Request any excess money or securities held by them at any time, including, without limitation, any assets deposited with the Trustee pursuant to Section 4.6(a) exceeding those necessary for the purposes of Section 4.6(a). The Trustee shall not take the actions described in subsections (a) and (b) of this Section 4.8 unless it shall have first received a written report of KPMG Peat Marwick LLP, or another nationally recognized independent public accounting firm, (i) expressing their opinion that the contemplated action is permitted by Standard No. 76 or the Commission, for transactions accounted for as extinguishment of debt under the circumstances described in paragraph 3.c of Standard No. 76 or any successor provision, and (ii) verifying the accuracy, after giving effect to such action or actions, of the computations which demonstrate that the amounts remaining to be earned on any Government Obligations deposited with the Trustee pursuant to Section 4.6(a) will be, when taken together with any money deposited with the Trustee pursuant to Section 4.6(a), sufficient for purposes of Section 4.6(a). ARTICLE 5. Defaults and Remedies Section 5.1 Events of Default. An "Event of Default" occurs with respect to the Securities of any series if (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body), unless such event is specifically deleted or modified in or pursuant to the supplemental indenture, Board Resolution or Officers' Certificate establishing the terms of such series pursuant to this Indenture: (1) the Company defaults in the payment of interest on any Security of that series when the same becomes due and payable and such default continues for a period of 30 days; or (2) the Company defaults in the payment of the principal of or premium, if any, on any Security of that series when the same becomes due and payable at its Maturity or on redemption or otherwise, or in the payment of a mandatory sinking fund payment when and as due by the terms of the Securities of that series; or (3) the Company defaults in the performance of, or breaches, any covenant or warranty of the Company in this Indenture with respect to any Security of that series (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and such default or breach continues for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of that series, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or 30 (4) the Company defaults under the terms of any agreement or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed, whether such indebtedness now exists or shall hereafter be created, having an outstanding principal amount of $15,000,000 or more in the aggregate, and such indebtedness shall be accelerated so that the same shall be or become due and payable prior to the date on which the same would otherwise become due and payable and such acceleration is not rescinded or annulled within ten days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Outstanding Securities of that series, a written notice specifying such default and stating that such notice is a "Notice of Default" hereunder (it being understood however, that, subject to the provisions of Section 6.1, the Trustee shall not be deemed to have knowledge of such default under such agreement or instrument unless a Responsible Officer of the Trustee shall have received written notice thereof from the Company, from any Holder, from the holder of any such indebtedness or from the trustee under any such agreement or instrument); provided, however, that if such default under such agreement or instrument is remedied or cured by the Company or waived by the holders of such indebtedness, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of either the Trustee or any of the Holders of the Securities of that series; or (5) the Company pursuant to or within the meaning of any Bankruptcy Law (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (c) consents to the appointment of a Custodian of it or for all or substantially all of its property, or (D) makes a general assignment for the benefit of its creditors; or (6) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company in an involuntary case, (B) appoints a Custodian of the Company or for all or substantially all of its property, or (C) orders the liquidation of the Company; and the order or decree remains unstayed and in effect for 90 days; or (7) any other Event of Default provided in or pursuant to this Indenture with respect to Securities of that series. The term "Bankruptcy Law" means title 11, U.S. Code, or any similar federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. Section 5.2 Acceleration; Rescission and Annulment. If an Event of Default with respect to the Securities of any series at the time Outstanding occurs and is continuing (other than an Event of Default specified in clause (5) or (6) of Section 5.1), the Trustee or the Holders of at least 25% in aggregate principal amount of all of the Outstanding Securities of that series, by written notice to the Company (and, if given by the 31 Holders, to the Trustee), may declare the principal amount (or, if the Securities of that series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of that series) of all the Securities of that series to be due and payable and upon any such declaration such principal amount (or, in the case of Original Issue Discount Securities, such specified amount) shall be immediately due and payable. At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in aggregate principal amount of the Outstanding Securities of that series, by written notice to the Trustee, may rescind and annul such declaration and its consequences if all existing Defaults and Events of Default with respect to Securities of that series, other than the non-payment of the principal amount (or, in the case of Original Discount Securities, such specified amount) of Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 5.7. No such rescission shall affect any subsequent Default or impair any right consequent thereon. If an Event of Default specified in clause (5) or (6) of Section 5.1 occurs and is continuing, the principal amount of all the Securities of any series (or, if the Securities of that series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of that series) shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. Section 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if: (1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal, premium, if any, and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and premium, if any, and on any overdue interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay the money it is required to pay the Trustee pursuant to the preceding paragraph forthwith upon the demand of the Trustee, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the money so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company, and collect the money adjudged or decreed to be payable in the manner provided by law out of the property of the Company wherever situated. 32 If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. Section 5.4 Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders of Securities allowed in any judicial proceedings relating to the Company, its creditors or its property. Section 5.5 Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto. Section 5.6 Delay or Omission not Waiver. No delay or omission by the Trustee or any Holder of any Securities to exercise any right or remedy accruing upon an Event of Default shall impair any such right or remedy or constitute a waiver of or an acquiescence in any such Event of Default. Section 5.7 Waiver of Past Defaults. The Holders of a majority in aggregate principal amount of Outstanding Securities of any series by notice to the Trustee may waive on behalf of the Holders of all Securities of such series a past Default or Event of Default with respect to that series and its consequences except (i) a Default or Event of Default in the payment of the principal of, premium, if any, or interest on any Security of such series or (ii) in respect of a covenant or provision hereof which pursuant to Section 8.2 cannot be amended or modified without the consent of the Holder of each Outstanding Security of such series adversely affected. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture. Section 5.8 Control by Majority. The Holders of a majority in aggregate principal amount of the Outstanding Securities of each series shall have the right to direct in writing the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it with respect to Securities of that series; provided, however, that (a) the Trustee may refuse to follow any direction that conflicts with law or this Indenture, (b) subject to the provisions of Article 6, the Trustee may refuse to follow any direction that is unduly prejudicial to the rights of the Holders of Securities of such series not joining in such direction or that would in the good faith judgment of the Trustee have a substantial likelihood of involving the Trustee in personal 33 liability and (c) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 5.9 Limitation on Suits by Holders. No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (1) the Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (2) the Holders of at least 25% in aggregate principal amount of the Outstanding Securities of that series shall have made a written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense to be, or which may be, incurred by the Trustee in pursuing the remedy; (4) the Trustee for 60 days after its receipt of such notice, request and the offer of indemnity has failed to institute any such proceedings; and (5) during such 60-day period, the Holders of a majority in aggregate principal amount of the Outstanding Securities of that series has not given to the Trustee a direction inconsistent with such written request. No one or more Holders of the Securities of any series shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. Section 5.10 Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of principal of, premium, if any, and, subject to Sections 3.5 and 3.7, interest on such Security, on or after the respective due dates expressed in such Security (or, in case of redemption, on the Redemption Date), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 5.11 Application of Money Collected. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal, premiums, if any, or interest, upon presentation of the 34 Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: First: to the Trustee for amounts due under Section 6.9; Second: to Holders of Securities of a series in respect of which or for the benefit of which such money has been collected for amounts due and unpaid on such Securities for principal of, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal, premium, if any, and interest, respectively; and Third: to the Company. Section 5.12 Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Section 5.13 Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 3.6, no right or remedy herein conferred upon or reserved to the Trustee or the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 5.14 Waiver of Usury, Stay or Extension Laws. The Company covenants that (to the extent that it may lawfully do so) it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company expressly waives (to the extent that it may lawfully do so) all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. 35 Section 5.15 Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.15 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of Outstanding Securities of any series, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest, if any, with respect to any Security on or after the respective Stated Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date, and, in the case of repayment, on or after the date for repayment) or for the enforcement of the right, if any, to convert or exchange any Security into or other securities in accordance with its terms. ARTICLE 6. The Trustee Section 6.1 Certain Duties and Responsibilities. (a) With respect to Securities of any series, except during the continuance of an Event of Default with respect to the Securities of such series, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) In case an Event of Default has occurred and is continuing with respect to the Securities of any series, the Trustee shall exercise such of the rights and powers vested in it by this Indenture with respect to the Securities of such series, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. 36 (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) this subsection shall not be construed to limit the effect of subsection (a) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it with respect to the Securities of any series in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Securities of such series relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (e) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. Section 6.2 Rights of Trustee. Subject to the provisions of the Trust Indenture Act: (a) The Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. (b) Any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or a Company Order (other than delivery of any Security to the Trustee for authentication and delivery pursuant to Section 3.3, which shall be sufficiently evidenced as provided therein) and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution. (c) Whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate. 37 (d) The Trustee may consult with counsel of its selection and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (e) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. (f) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney, at the Company's expense. (g) the Trustee may act through agents, attorneys, custodians or nominees and shall not be responsible for the misconduct or negligence of any agent, attorney, custodian or nominee appointed with due care by it hereunder. (h) The Trustee shall not be charged with knowledge of any Default or Event of Default with respect to the Securities of any series for which it is acting as Trustee unless either (i) a Responsible Officer of the Trustee shall have actual knowledge of the Default or Event of Default, or (ii) written notice of such Default or Event of Default shall have been given to the Trustee by the Company or by any Holder of Securities of that series or any other series, or, in the event of a default pursuant to Section 5.1(4), by the holder of any other indebtedness of the Company or by the trustee of any other agreement or instrument to which the Company is a party. (i) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers conferred on it by this Indenture. (j) The Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (k) In the event that the Trustee is also acting as Paying Agent or Registrar hereunder, the rights and protections afforded to the Trustee pursuant to this Article 6 shall also be afforded to such Paying Agent or Registrar. Section 6.3 Trustee May Hold Securities. The Trustee, any Paying Agent, any Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to 38 Sections 310(b) and 311 of the Trust Indenture Act, may otherwise deal with the Company, an Affiliate or Subsidiary with the same rights it would have if it were not Trustee, Paying Agent, Registrar or such other agent. Section 6.4 Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. Section 6.5 Trustee's Disclaimer. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility on Form T-1 supplied to the Company are true and accurate, subject to the qualifications set forth therein. The Trustee shall not be accountable for the Company's use of the proceeds from the Securities or for monies paid over to the Company pursuant to the Indenture. Section 6.6 Notice of Defaults. If a Default occurs and is continuing with respect to the Securities of any series and if it is known to the Trustee, as contemplated by Section 6.2(h), the Trustee shall, within 90 days after it occurs, transmit, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act, notice of all uncured or unwaived Defaults known to it; provided, however, that, except in the case of a Default in payment on the Securities of any series, the Trustee may withhold the notice if and so long as the board of directors, the executive committee or a trust committee of its directors and/or its Responsible Officers in good faith determine that withholding such notice is in the interests of Holders of Securities of that series; provided further, however, that, in the case of any default or breach of the character specified in Section 5.1(3) with respect to the Securities of such series, no such notice to Holders shall be given until at least 60 days after the occurrence thereof. Section 6.7 Reports by Trustee to Holders. Within 60 days after each January 31 of each year commencing with the first January 31 after the first issuance of Securities pursuant to this Indenture, the Trustee shall transmit by mail to all Holders of Securities as provided in Section 313(c) of the Trust Indenture Act a brief report dated as of such January 31, if required by Section 313(a) of the Trust Indenture Act. The Trustee also shall comply with Sections 313(b) and 313(d) of the Trust Indenture Act. A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with the Company. The Company will notify the Trustee in writing when any series of Securities are listed on any stock exchange. 39 Section 6.8 Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders of Securities of each series. If the Trustee is not the Registrar, the Company shall furnish to the Trustee semiannually on or before the last day of June and December in each year, and at such other times as the Trustee may request in writing, a list, in such form and as of such date as the Trustee may reasonably require, containing all the information in the possession of the Registrar, the Company or any of its Paying Agents other than the Trustee as to the names and addresses of Holders of Securities of each series. Section 6.9 Compensation and Indemnity. (a) The Company shall pay to the Trustee from time to time such compensation as shall be agreed between the Company and the Trustee for all services rendered by it hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred by it in connection with the performance of its duties under this Indenture, except any such expense as may be attributable to its negligence or bad faith. Such expenses shall include the reasonable compensation and expenses of the Trustee's agents and counsel. (b) The Company shall indemnify the Trustee for and hold it harmless against, any loss or liability incurred by it without negligence or bad faith on its part arising out of or in connection with its acceptance or administration of the trust or trusts hereunder. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld or delayed. (c) The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through negligence or bad faith. (d) To secure the payment obligations of the Company pursuant to this Section, the Trustee shall have a lien prior to the Securities of any series on all money or property held or collected by the Trustee, except that held in trust to pay principal, premium, if any, and interest on particular Securities. (e) To the extent permitted by law, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.1(5) or Section 5.1(6), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable Federal or state bankruptcy, insolvency or other similar law. (f) "Trustee" for purposes of this Section 6.9 shall include any predecessor Trustee, but the negligence or bad faith of any Trustee shall not affect the rights of any other Trustee under this Section 6.9. 40 (g) The provisions of this Section shall survive the termination of this Indenture or the earlier resignation or removal of the Trustee. Section 6.10 Replacement of Trustee. (a) The resignation or removal of the Trustee and the appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in Section 6.11. (b) Subject to Section 6.10(a) above, the Trustee may resign at any time with respect to the Securities of any series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 6.11 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (c) The Holders of a majority in aggregate principal amount of the Outstanding Securities of any series may remove the Trustee with respect to that series by so notifying the Trustee and the Company in writing and may appoint a successor Trustee for such series with the Company's consent. (d) If at any time: (1) the Trustee fails to comply with Section 310(b) of the Trust Indenture Act with respect to the Securities of a series after written request therefor by the Company or by any Holder of a Security of such series who has been a bona fide Holder of a Security of such series for at least six months, or (2) the Trustee with respect to the Securities of any series shall cease to be eligible under Section 310(a) of the Trust Indenture Act and shall fail to resign after written request therefor by the Company or by any Holder of a Security of such series who has been a bona fide Holder of a Security of such series for at least six months; or (3) the Trustee with respect to the Securities of any series becomes incapable of acting, is adjudged a bankrupt or an insolvent or a receiver or public officer takes charge of the Trustee or its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by or pursuant to a Board Resolution may remove the Trustee with respect to all Securities, or (ii) subject to Section 315(e) of the Trust Indenture Act, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities of such series and the appointment of a successor Trustee or Trustees. (e) If the Trustee resigns, is removed or becomes incapable of acting or if a vacancy exists in the office of Trustee for any reason, with respect to Securities of one or more series, the Company, by or pursuant to Board Resolution, shall promptly appoint a successor Trustee with respect to the Securities of that or those series (it being understood that any such successor 41 Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 6.11. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 6.11, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 6.11, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (f) In no event shall any retiring Trustee be liable for the acts or omissions of any successor Trustee hereunder. Section 6.11 Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee, without further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and such successor Trustee shall execute and deliver an indenture supplemental hereto wherein such successor Trustee shall accept such appointment and which (i) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, such successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (ii) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (iii) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees as co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart 42 from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. (c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under the Trust Indenture Act and this Article. (e) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series in the manner provided for notices to the Holders of Securities in Section 1.6. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. Section 6.12 Eligibility; Disqualification; Conflicting Interest. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia, which shall be eligible to act as Trustee under Section 310(a) of the Trust Indenture Act, has a combined capital and surplus of at least $50,000,000 and is subject to supervision or examination by Federal or state authority. If a corporation publishes reports of condition at least annually, pursuant to law or the requirements of Federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of Section 310(a)(2) of the Trust Indenture Act, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect specified in this Article. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. Section 6.13 Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the 43 corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. Section 6.14 Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issue, exchange, registration of transfer or partial redemption thereof, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Any such appointment shall be evidenced by an instrument in writing signed by a Responsible Officer of the Trustee, a copy of which instrument shall be promptly furnished to the Company. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and, except as may otherwise be provided pursuant to Section 3.1, shall at all times be a bank or trust company or corporation organized and doing business and in good standing under the laws of the United States of America or of any State or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authorities. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or the requirements of the aforesaid supervising or examining authority, then, for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent for any series of Securities may at any time resign by giving written notice of resignation to the Trustee for such series and to the Company. The Trustee for any series of Securities may at any time terminate the agency of an Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company. Upon 44 receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee for such series may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall give notice of such appointment to all Holders of Securities of the series with respect to which such Authenticating Agent will serve in the manner set forth in Section 1.6. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent herein. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation as may be agreed to in writing with the Company, including reimbursement of its reasonable expenses for its services under this Section. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to or in lieu of the Trustee's certificate of authentication, an alternate certificate of authentication substantially in the following form: This is one of the Securities of a series issued under the within-mentioned Indenture. Dated: THE CHASE MANHATTAN BANK, as Trustee By ------------------------------ as Authenticating Agent By ------------------------------ Authorized Signatory Section 6.15 Trustee's Application for Instructions from the Company. Any application by the Trustee for written instructions from the Company may, at the option of the Trustee, set forth in writing any action proposed to be taken or omitted by the Trustee under this Indenture and the date on and/or after which such action shall be taken or such omission shall be effective. The Trustee shall not be liable for any action taken by, or omission of, the Trustee in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than 15 Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to any earlier date) unless prior to taking any such action (or the effective date in the case of an omission), the Trustee shall have received written instructions in response to such application specifying the action to be taken or omitted. 45 Section 6.16 Preservation of Information; Communications to Holders. (a) The Trustee shall comply with the obligations imposed upon it pursuant to Section 312 of the Trust Indenture Act. (b) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 312 of the Trust Indenture Act, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 312(b) of the Trust Indenture Act. ARTICLE 7. Consolidation, Merger or Sale by the Company Section 7.1 Consolidation, Merger or Sale of Assets Permitted. The Company may merge or consolidate with or into any other corporation or sell, convey, transfer or otherwise dispose of all or substantially all of its assets to any Person, if (i) (A) in the case of a merger or consolidation, the Company is the surviving corporation or (B) in the case of a merger or consolidation where the Company is not the surviving corporation and in the case of any such sale, conveyance, transfer or other disposition, the successor or acquiring corporation is a corporation organized and existing under the laws of the United States, any state thereof or the District of Columbia and such corporation expressly assumes by supplemental indenture all the obligations of the Company under the Securities and under this Indenture, (ii) immediately thereafter, giving effect to such merger or consolidation, or such sale, conveyance, transfer or other disposition, no Default or Event of Default shall have occurred and be continuing, and (iii) the Company or the successor corporation has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such merger or consolidation, or such sale, conveyance, transfer or other disposition, and the supplemental indenture in respect thereof, if any, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. In the event of the assumption by a successor corporation of the obligations of the Company as provided in clause (i)(B) of the immediately preceding sentence, such successor corporation shall succeed to and be substituted for the Company hereunder and under the Securities and all such obligations of the Company shall terminate. ARTICLE 8. Supplemental Indentures Section 8.1 Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into indentures 46 supplemental hereto, in form reasonably satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or (2) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series), or to surrender any right or power herein conferred upon the Company; or (3) to add any additional Events of Default with respect to all or any series of Securities; or (4) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to facilitate the issuance of Securities in global form; or (5) to add to, change or eliminate any of the provisions of this Indenture; provided, however, that any such addition, change or elimination shall become effective only when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; or (6) to secure the Securities; or (7) to establish the form or terms of Securities of any series as permitted by Sections 2.1 and 3.1; or (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 6.11; (9) to correct or supplement any provision herein which may be inconsistent with any other provision herein or to make any other provisions with respect to matters or questions arising under this Indenture, provided, however, such action shall not adversely affect the interests of the Holders of Securities of any series in any material respect; or to cure any ambiguity or correct any mistake; or (10) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualification of this Indenture under the Trust Indenture Act or under any similar Federal statute subsequently enacted, and to add to this Indenture such other provisions as may be expressly required under the Trust Indenture Act. 47 Section 8.2 With Consent of Holders. With the written consent of the Holders of a majority of the aggregate principal amount of the Outstanding Securities of each series adversely affected by such supplemental indenture, the Company and the Trustee may enter into an indenture or indentures supplemental hereto to add any provisions to or to change or eliminate any provisions of this Indenture or of any other indenture supplemental hereto or to modify the rights of the Holders of Securities of each such series; provided, however, that without the consent of the Holder of each Outstanding Security of such series adversely affected thereby, an amendment under this Section may not: (1) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon (or change the manner of calculation of the rate of interest thereon) or any premium payable upon the redemption thereof, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 5.2, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date); (2) reduce the percentage in aggregate principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture; (3) change any obligation of the Company to maintain an office or agency in the places and for the purposes specified in Section 9.2; or (4) make any change in Section 5.7 or this Section 8.2 except to increase any percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holders of each Outstanding Security of such series adversely affected thereby. A supplemental indenture that changes or eliminates any covenant or other provision of this Indenture, which has expressly been included solely for the benefit of one or more particular series of Securities, or that modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. It is not necessary under this Section 8.2 for the Holders to consent to the particular form of any proposed supplemental indenture, but it is sufficient if they consent to the substance thereof. Section 8.3 Compliance with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall comply with the requirements of the Trust Indenture Act as then in effect. 48 Section 8.4 Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modification thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 315 of the Trust Indenture Act) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture and an Officers' Certificate stating that all conditions precedent to the execution of such supplemental indenture have been fulfilled. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 8.5 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 8.6 Reference in Securities to Supplemental Indentures. Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. Section 8.7 Notice to Holders. Promptly after the execution by the Company and the Trustee of any supplemental indenture under Section 8.2 with respect to the Securities of any series, the Company shall transmit to all Holders of such Securities a notice, in accordance with Section 1.6, setting forth in general terms the substance of such supplemental indenture. ARTICLE 9. Covenants Section 9.1 Payment of Principal, Premium, if any, and Interest. The Company covenants and agrees for the benefit of the Holders of each series of Securities that it will duly and punctually pay the principal of, premium, if any, and interest on the Securities of that series in accordance with the terms of the Securities of such series and this Indenture. An installment of principal or interest shall be considered paid on the date it is due 49 if the Trustee or Paying Agent holds on that date money designated for and sufficient to pay the installment. Section 9.2 Maintenance of Office or Agency. The Company will maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location and any change in the location of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Unless otherwise specified as contemplated by Section 3.1, the Company hereby initially designates as the Place of Payment for each series of Debt Securities, the City and State of New York. Unless otherwise specified as contemplated by Section 3.1, the Trustee shall initially serve as Paying Agent. Section 9.3 Money for Securities to Be Held in Trust; Unclaimed Money. If the Company shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of, premium, if any, or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal, premium, if any, or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee in writing of its action or failure so to act. Whenever the Company shall have one or more Paying Agents with respect to any series of Securities, it will, prior to or on each due date of the principal, and premium, if any, or interest on any Securities of such series, deposit with a Paying Agent a sum sufficient to pay the principal, and premium, if any, or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company promptly will notify the Trustee in writing of its action or failure so to act. 50 The Company will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of, premium, if any, or interest on Securities of that series in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee written notice of any Default by the Company (or any other obligor upon the Securities of that series) in the making of any payment of principal, premium, if any, or interest on the Securities; and (3) at any time during the continuance of any such Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by a Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of any principal, premium or interest on any Security of any series and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Company on a Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in The City of New York, or cause to be mailed to such Holder, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 9.4 Corporate Existence. Subject to Article 7, the Company will at all times do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and its rights and franchises; provided, however, that nothing in this Section 9.4 shall prevent the abandonment or termination of any right or franchise of the Company if, in the determination of the Company, such abandonment or termination is in the best interests of the Company and does not materially 51 adversely affect the ability of the Company to operate its business or to fulfill its obligations hereunder. Section 9.5 Insurance. The Company covenants and agrees that it will maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations or through a program of self-insurance in such amounts and covering such risks as, in the determination of the Company, are consistent with sound business practice for corporations engaged in the same or a similar business similarly situated. Section 9.6 Reports by the Company. The Company covenants: (a) to file with the Trustee, within 30 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); or, if the Company is not required to file information, documents or reports pursuant to either of such sections, then to file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (b) to file with the Trustee and the Commission, in accordance with the rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants provided for in this Indenture, as may be required from time to time by such rules and regulations; and (c) to transmit to all Holders of Securities, within 30 days after the filing thereof with the Trustee, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act, such summaries of any information, documents and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section 9.6, as may be required by rules and regulations prescribed from time to time by the Commission. Section 9.7 Annual Review Certificate; Notice of Default. The Company covenants and agrees to deliver to the Trustee, within 120 days after the end of each fiscal year of the Company, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture. For purposes of this Section 9.7, such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. The Company shall file with the Trustee 52 written notice of the occurrence of any Event of Default within 45 Business Days of its becoming aware of any such Event of Default. Section 9.8 Provision of Financial Statements. If the Company is not required to file with the Commission periodic reports and other information pursuant to Section 13(a), 13(c) or 15(d) of the Exchange Act, the Company shall furnish without cost to each Holder and file with the Trustee (i) within 135 days after the end of each fiscal year, annual reports containing the information required to be contained in Items 1, 2, 3, 6, 7, 8 and 9 of Form 10-K promulgated under the Exchange Act, or substantially the same information required to be contained in comparable items of any successor form, (ii) within 60 days after the end of each of the first three fiscal quarters of each fiscal year, quarterly reports containing the information required to be contained in Form 10-Q promulgated under the Exchange Act, or substantially the same information required to be contained in any successor form, and (iii) promptly from the time after the occurrence of an event required to be therein reported, such other reports containing information required to be contained in Form 8-K promulgated under the Exchange Act, or substantially the same information required to be contained in any successor form. Section 9.9 Limitation on Liens. (a) The Company will not issue, assume or guarantee any indebtedness for borrowed money (referred to in this Section 9.9 as "indebtedness", which term shall not include any guarantee, cash deposit or other recourse obligation in connection with the sale, securitization or discount by the Company of finance or accounts receivable, trade acceptances or other paper arising in the ordinary course of its business) secured by a mortgage, security interest, pledge or lien (referred to in this Section 9.9 as a "mortgage" or "mortgages") of or upon any property of the Company whether such property is owned at the date of this Indenture or thereafter acquired, without making effective provision whereby the Securities (together with, if the Company shall so determine, any other indebtedness issued, assumed or guaranteed by the Company and then existing or thereafter created) shall be secured by such mortgage equally and ratably with (or, at the option of the Company, prior to) such indebtedness, so long as such indebtedness shall be so secured; provided, however, that the foregoing shall not apply to any of the following: (1) mortgages of or upon any property (including, without limitation, inventory) acquired, constructed or improved by, or of or upon any shares of capital stock or indebtedness acquired by, the Company after the date of this Indenture (A) to secure the payment of all or any part of the purchase price of such property, shares of capital stock or indebtedness upon the acquisition thereof by the Company or (B) to secure any indebtedness issued, assumed or guaranteed by the Company prior to, at the time of, or within 360 days after (i) in the case of property, the latest of the acquisition, completion of construction (including any improvements on existing property) and commencement of commercial operation of such property, or (ii) in the case of shares of capital stock or indebtedness, the acquisition of such shares of capital stock or indebtedness, which indebtedness is issued, assumed or guaranteed for the purpose of financing or refinancing all or any part of the purchase price of such property, shares of capital stock or indebtedness and, in the case of property, the cost of construction thereof or 53 improvements thereon, provided, however, that, in the case of any such acquisition, construction or improvement of property, the mortgage shall not apply to any property, shares of capital stock or indebtedness theretofore owned by the Company other than (x) any real property on which the property so acquired or constructed or the improvement is located or (y) any real property to which the property so acquired or constructed or the improvement attaches or is affixed; (2) mortgages of or upon any property, shares of capital stock or indebtedness, which mortgages exist at the time of acquisition of such property, shares or indebtedness by the Company; (3) mortgages of or upon any property of a corporation, which mortgages exist at the time such corporation is merged with or into or consolidated with the Company or which mortgages exist at the time of a sale or transfer of the properties of a corporation as an entirety or substantially as an entirety to the Company; (4) mortgages to secure indebtedness of the Company to any Subsidiary, provided, however, that the money borrowed by the Company from such Subsidiary that constitutes such indebtedness arose from the internal operations of such Subsidiary; (5) mortgages in favor of the United States of America or any State thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any State thereof, or in favor of any other country or political subdivision to secure partial, progress, advance or other payments pursuant to any contract or statute or to secure any indebtedness incurred, assumed or guaranteed for the purpose of financing or refinancing all or any part of the purchase price of the property, shares of capital stock or indebtedness subject to such mortgages, or the cost of constructing or improving the property subject to such mortgages (including, without limitation, mortgages incurred in connection with pollution control, industrial revenue or similar financings); (6) mortgages on properties financed through tax-exempt municipal obligations, provided that such mortgages are limited to the property so financed; (7) mortgages existing on the date of execution of this Indenture; (8) mortgages of or upon any grain inventory to secure any indebtedness incurred, assumed or guaranteed by the Company; (9) mortgages of or upon any equity or other interest in the Trinidad Venture to facilitate the availability of political risk insurance and/or to secure any indebtedness in connection with or relating to the Trinidad Venture; and (10) any extension, renewal, substitution, refinancing, refunding or replacement (or successive extensions, renewals, substitutions, refinancings, refundings or replacements) (each a "refinancing") in whole or in part of any mortgage existing at the date of the Indenture or any mortgage referred to in the foregoing clauses (1) through (9), inclusive, provided, however, that the principal amount of indebtedness secured thereby shall not exceed the principal amount of indebtedness so secured at the time of 54 the refinancing plus the aggregate amount of premiums, other payments, costs and expenses required to be paid or incurred in connection with the refinancing, and that the refinancing shall be limited to all or a part of the property (plus improvements and construction on such property), shares of capital stock or indebtedness which was subject to the mortgage so extended, renewed, substituted, refinanced, refunded or replaced. (b) Notwithstanding the provisions of subsection (a) of this Section, the Company may, without equally and ratably securing the Securities, issue, assume or guarantee indebtedness secured by a mortgage not excepted by clauses (1) through (10), inclusive, of such subsection (a), if the aggregate amount of such indebtedness, together with all other indebtedness of, or indebtedness guaranteed by, the Company existing at such time and secured by mortgages not so excepted, does not at the time exceed 10% of the Company's Consolidated Net Worth. "Consolidated Net Worth" shall be the difference between the Company's consolidated total assets and consolidated total liabilities as shown on the Company's most recent audited consolidated financial statements prepared in accordance with generally accepted accounting principles. Section 9.10 Ownership of Material Subsidiary Stock. The Company covenants that it will not take any action which would result in a decrease in the percentage of the outstanding shares of stock of any Material Subsidiary directly or indirectly owned by the Company, except as the result of (1) the issuance of directors' qualifying shares, (2) the declaration and payment of patronage refunds, (3) the issuance of capital stock to members, (4) the purchase or retirement of shares with the proceeds of newly issued shares, (5) the sale or disposition of capital stock at a price determined by the Company (which determination may be evidenced by a resolution of the Company's Board of Directors) to be the fair value thereof, or (6) the merger or consolidation of a Material Subsidiary with or into the Company or with or into a wholly owned subsidiary of the Company without a determination of the fair value thereof. Section 9.11 Waiver of Certain Covenants. The Company may fail or omit in any particular instance to comply with the covenants set forth in this Article IX (other than Sections 9.1, 9.2 and 9.4) with respect to any series of Securities if the Company shall have obtained and filed with the Trustee prior to the time for such compliance the consent in writing of the Holders of at least a majority in aggregate principal amount of all of the Securities of such series at the time Outstanding either waiving such compliance in such instance or generally waiving compliance with such covenant or covenants, but no such waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. 55 ARTICLE 10. Redemption Section 10.1 Applicability of Article. Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 3.1 for Securities of any series) in accordance with this Article. Section 10.2 Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities shall be evidenced by or pursuant to a Board Resolution or an Officers' Certificate. In the case of any redemption at the election of the Company of less than all the Securities of any series, the Company shall, at least 45 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee in writing of such Redemption Date, of the principal amount of Securities of such series to be redeemed and, if applicable, of the tenor of the Securities to be redeemed. In the case of any redemption of Securities (a) prior to the expiration of any restriction on such redemption provided in the terms of such Securities, or (b) pursuant to an election of the Company which is subject to a condition specified in the terms at such Securities, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction or condition. Section 10.3 Selection of Securities to Be Redeemed. Unless otherwise specified as contemplated by Section 3.1, if less than all the Securities of a series with the same original issue date, interest rate and Stated Maturity are to be redeemed, the Trustee, not more than 45 days prior to the Redemption Date, shall select the Securities of the series to be redeemed in such manner as the Trustee shall deem fair and appropriate. The Trustee shall make the selection from the Securities of the series that are Outstanding and that have not previously been called for redemption and may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of that series or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series. The Trustee shall promptly notify the Company and the Registrar in writing of the Securities selected by the Trustee for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. 56 Section 10.4 Notice of Redemption. Unless otherwise specified as contemplated by Section 3.1, notice of redemption shall be given in the manner provided in Section 1.6 not less than 30 days nor more than 60 days prior to the Redemption Date to the Holders of the Securities of any series to be redeemed. All notices of redemption shall state: (1) the Redemption Date; (2) the Redemption Price; (3) if fewer than all the Outstanding Securities of a series are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Security or Securities to be redeemed; (4) in case any Security is to be redeemed in part only, the notice which relates to such Security shall state that on and after the Redemption Date, upon surrender of such Security, the Holder will receive, without a charge, a new Security or Securities of such series of authorized denominations for the principal amount thereof remaining unredeemed; (5) the Place or Places of Payment where such Securities maturing after the Redemption Date are to be surrendered for payment for the Redemption Price; (6) that Securities of the series called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (7) that, on the Redemption Date, the Redemption Price will become due and payable upon each such Security, or the portion thereof, to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date; (8) that the redemption is for a sinking fund, if such is the case; and (9) if applicable, the CUSIP number for the Securities of the series called for redemption. Notice of redemption of Securities to be redeemed shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. Section 10.5 Deposit of Redemption Price. On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 9.3) an amount of money sufficient to pay on the Redemption Date the Redemption Price of, and (unless the Redemption Date shall be an Interest Payment Date) interest accrued to the Redemption Date on, all Securities or portions thereof which are to be redeemed on that date. 57 Section 10.6 Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that installments of interest on Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 3.7. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. Section 10.7 Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part at any Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of that Security, without service charge, a new Security or Securities of the same series, the same form and the same Maturity in any authorized denomination equal in aggregate principal amount to the unredeemed portion of the principal of the Security surrendered. ARTICLE 11. Sinking Funds Section 11.1 Applicability of Article. The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 3.1 for Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an "optional sinking fund payment". Except as otherwise specified by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 11.2. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series. 58 Section 11.2 Satisfaction of Sinking Fund Payments with Securities. The Company (a) may deliver Outstanding Securities of a series (other than any such Securities previously called for redemption), and (b) may apply as a credit Securities of a series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities of such series required to be made pursuant to the terms of such Securities as provided for by the terms of such series; provided that such Securities have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. Section 11.3 Redemption of Securities for Sinking Fund. Not less than 60 days prior to each sinking fund payment date for any series of Securities (unless a shorter period shall be satisfactory to the Trustee), the Company shall deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of that series pursuant to Section 11.2 and shall also deliver to the Trustee any Securities to be so credited and not theretofore delivered to the Trustee. Not less than 45 days before each such sinking fund payment date (unless a shorter period shall be satisfactory to the Trustee), the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 10.3 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 10.4. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 10.5, 10.6 and 10.7. 59 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written. FARMLAND INDUSTRIES, INC. By: ----------------------------------- Name: Title: THE CHASE MANHATTAN BANK, as Trustee By: ----------------------------------- Name: Title: 60 EX-4.2 3 EX-4.2 Exhibit 4.2 FORM OF NOTE FARMLAND INDUSTRIES, INC. % SENIOR NOTE DUE ---- ---- NO. R- ----- CUSIP NO. U.S. $ ---------- -------------- FARMLAND INDUSTRIES, INC., a Kansas corporation (hereinafter called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO., or registered assigns, the principal sum of ___________ Dollars (U.S. $__________) on ____________, ____, and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) thereon from __________, 19__, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on ____________ and ______________ in each year, commencing ___________, 19__ (each, an "Interest Payment Date"), at the rate of ___% per annum, until the principal hereof is paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in said Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the _________ or _________ (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice of which shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of and interest on this Security will be made [in immediately available funds] at the office or agency of the Company maintained for that purpose in The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that [at the option of the Company] payment of interest [on an Interest Payment Date] may be made by check mailed to the address of the Person entitled thereto as such address shall appear on the Register. 1 Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. 2 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. DATED: , 199 -------------------- --- FARMLAND INDUSTRIES, INC. By: ------------------------- Title: [Seal] ATTEST: - --------------------- Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities of a series issued under the within-mentioned Indenture. THE CHASE MANHATTAN BANK, as Trustee By: ---------------------------------- Authorized Signatory 3 [Reverse of Security] This Security is one of a duly authorized issue of debentures, notes or other evidences of indebtedness (the "Securities") of the Company, all such Securities issued and to be issued under an Indenture (herein, together with all indentures supplemental thereto, called the "Indenture") dated as of _______________, 199_, between the Company and The Chase Manhattan Bank, as Trustee, to which Indenture reference is hereby made for a statement of the respective rights, limitation of rights, obligations, duties and immunities of the Trustee, the Company and the Holders of the Securities. As provided in the Indenture, the Securities may be issued in one or more series, which different series may be issued in various aggregate principal amounts, may mature at different times, may bear interest, if any, at different rates, may be subject to different redemption provisions, if any, may be subject to different sinking, purchase or analogous funds, if any, may be subject to different covenants and Events of Default and may otherwise vary as in the Indenture provided or permitted. This Security is one of a series designated as the "___% Senior Notes due _____", which is limited, subject to the provisions of the Indenture, in aggregate principal amount to U.S. $___,000,000 (the "Notes"). The Notes are not redeemable by the Company prior to maturity and do not provide for any sinking fund. In case any Interest Payment Date, Stated Maturity or Maturity does not fall on a Business Day, then (notwithstanding any other provision of the Indenture or any Note) payment of interest or principal otherwise payable on such day need not be made on such day, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date or at Stated Maturity or Maturity, as the case may be; and no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Stated Maturity or Maturity, as the case may be, to the next succeeding Business Day. If any Event of Default with respect to the Notes shall occur and be continuing, the principal of the Notes may (and, in certain cases, shall) be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding of each series of Securities to be adversely affected thereby. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities of any series at the time Outstanding, on behalf of the Holders of all the Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences with respect to such series. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. 4 No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein and herein set forth, the transfer of any Security of any series is registerable in the Register, upon surrender of such Security for registration of transfer at the office or agency of the Company to be maintained for that purpose in The City of New York, duly endorsed by, or accompanied by a written instrument of transfer in the form satisfactory to the Company and the Registrar duly executed by, the Holder thereof or his attorney duly authorized in writing, and thereupon one or more new Securities of such series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Notes are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple of $1,000. As provided in the Indenture and subject to certain limitations therein and herein set forth, the Notes are exchangeable for a like aggregate principal amount of Notes of a like tenor and of a different authorized denomination, as requested by the Holder surrendering the same. This Security is a Security in global form registered in the name of the Depositary or a nominee of such Depositary. Notwithstanding any other provision of this Security, unless and until this Security in global form is exchanged in whole or in part for Notes in certificated form in the limited circumstances described in the Indenture, this Security in global form may not be transferred except as a whole by the Depositary for the Notes to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor Depositary for the Notes or a nominee of such successor Depositary. If at any time the Depositary for the Securities of a series notifies the Company that it is unwilling or unable to continue as Depositary for the Securities of such series or if at any time the Depositary for the Securities of such series shall no longer be eligible under Section 3.3 of the Indenture, the Company shall appoint a successor Depositary with respect to the Securities of such series. If (i) a successor Depositary for the Securities of such series is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility or (ii) a Default or Event of Default shall have occurred and be continuing, the Company's election pursuant to Section 3.1(b)(15) of the Indenture shall no longer be effective with respect to the Securities of such series and the Company shall execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of certificated Securities of such series of like tenor, shall authenticate and deliver Securities of such series of like tenor in certificated form, in authorized denominations and in an aggregate principal amount equal to the principal amount of the Security or Securities of such series of like tenor in global form in exchange for such Security or Securities in global form. The Company may at any time in its sole discretion determine that Securities of a series issued in global form shall no longer be represented by such a Security or Securities in global form. In such event the Company shall execute, and the Trustee, upon receipt of a Company 65 Order for the authentication and delivery of certificated Securities of such series of like tenor, shall authenticate and deliver, Securities of such series of like tenor in certificated form, in authorized denominations and in an aggregate principal amount equal to the principal amount of the Security or Securities of such series of like tenor in global form in exchange for such Security or Securities in global form. The holders of beneficial interests in this Security in global form will not be entitled to receive physical delivery of Notes in certificated registered form except as described above and will not be considered the Holders thereof for any purpose under the Indenture. No recourse under or upon any obligation, covenant or agreement of or contained in the Indenture or of or contained in any Security, or for any claim based thereon or otherwise in respect thereof, or in any Security, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, officer or director, as such, past, present or future, of the Company or of any successor Person, either directly or through the Company or any successor Person, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment, penalty or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance hereof and as a condition of and as part of the consideration for the issue hereof and the execution of the Indenture. The Indenture provides that the Company (a) will be discharged from any and all obligations in respect of the Notes (except for certain obligations described in the Indenture), or (b) need not comply with certain restrictive covenants of the Indenture, in each case if the Company deposits, in trust, with the Trustee money or Government Obligations (or a combination thereof) which through the payment of interest thereon and principal thereof in accordance with their terms will provide money, in an amount sufficient to pay all the principal of and interest on the Notes, but such money need not be segregated from other funds except to the extent required by law. All terms used in this Security which are defined in the Indenture shall have the meanings set forth therein. THIS SECURITY SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE AND PERFOMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. No service charge shall be made for any registration of transfer or for any exchange of Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration or transfer or exchange of Notes, other than certain exchanges described in the Indenture not involving any transfer. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may deem and treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security 66 be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ------------------------------------------------------------ (Please Print or Typewrite Name and Address of Assignee) the within instrument of FARMLAND INDUSTRIES, INC. and does hereby irrevocably constitute and appoint _________________________________________________ Attorney to transfer said instrument on the books of the within-named Company, with full power of substitution in the premises. Dated -------------------------- ---------------------------------------- Signature NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular, without alteration by enlargement or any change whatever. 7 EX-5 4 EX-5 EXHIBIT 5 [ON FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LETTERHEAD] 212-859-8280 June 24, 1998 (FAX: 212-859-8586) Farmland Industries, Inc. 3315 North Oak Trafficway Kansas City, MO 64116-0005 Ladies and Gentlemen: We have acted as special counsel to Farmland Industries, Inc., a Kansas corporation (the "Company"), in connection with the preparation of a Registration Statement on Form S-3 (File No. 33-61709) (together with any amendments thereto, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), covering $200,000,000 aggregate issue amount of debt securities (the "Debt Securities") which may be issued from time to time by the Company pursuant to an indenture (the "Indenture") to be entered into between the Company and The Chase Manhattan Bank, as trustee (the "Trustee"), a draft of which is filed as an exhibit to the Registration Statement. For purposes of this opinion, we have assumed that the Debt Securities will be fixed rate notes, substantially in the form filed as an exhibit to the Registration Statement. All capitalized terms used herein that are defined in, or by reference in, the Registration Statement have the meanings assigned to such terms therein or by reference therein, unless otherwise defined herein. With your permission, all assumptions and statements of reliance herein have been made without any independent investigation or verification on our part except to the extent otherwise expressly stated, and we express no opinion with respect to the subject matter or accuracy of such assumptions or items relied upon. In connection with this opinion, we have investigated such questions of law, (ii) examined originals or certified, conformed or reproduction copies of such agreements, instruments, documents and records of the Company, such certificates of public officials and such other documents, and (iii) received such information from officers and representatives of the Company as we have deemed necessary or appropriate for the purposes of this opinion. Farmland Industries, Inc. June ___, 1998 In all such examinations, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of original and certified documents and the conformity to original or certified documents of all copies submitted to us as conformed or reproduction copies. As to various questions of fact relevant to the opinion expressed herein, we have relied upon, and assume the accuracy of, certificates and oral or written statements and other information of or from representatives of the Company and others. Based upon the foregoing, and subject to the limitations, qualifications and assumptions set forth herein, we are of the opinion that (i) when the Registration Statement has become effective under the Securities Act and (ii) assuming that (A) the Indenture has been duly authorized, executed and delivered by the Company and the Trustee and is in substantially the form of the draft filed as an exhibit to the Registration Statement, (B) the terms of the Debt Securities and their issue and sale have been duly established in conformity with the Indenture so as not to violate any applicable law or agreement or instrument then binding on the Company, (C) the Debt Securities have been duly executed and authenticated in accordance with the terms of the Indenture and (D) the Debt Securities have been issued and sold as contemplated in the Registration Statement, the Debt Securities will constitute valid and binding obligations of the Company, subject to (x) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other laws now or hereafter in effect affecting creditors' rights generally and (y) general principles of equity including, without limitation, standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits as to the availability of equitable remedies, whether considered in a proceeding in equity or law. Farmland Industries, Inc. June ___, 1998 The opinion expressed herein is limited to the laws of the United States of America and the laws of the State of New York. The opinion expressed herein is given as of the date hereof, and we undertake no obligation to supplement this letter if any applicable laws change after the date hereof or if we become aware of any facts that might change the opinion expressed herein after the date hereof or for any other reason. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to this firm under the caption "Legal Matters" in the Prospectus and the caption "Legal Matters" in any Prospectus Supplement forming a part of the Registration Statement to the extent that a "Legal Matters" section is included in such Prospectus Supplement. In giving these consents, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act. Very truly yours, FRIED, FRANK, HARRIS, SHRIVER & JACOBSON By: /s/ Kenneth R. Blackman --------------------------------- Kenneth R. Blackman EX-12 5 EXHIBIT 12 EXHIBIT 12 FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
Year Ended August 31 February 28 ----------------------------------------------------------------- ------------------------ 1993 1994 1995 1996 1997 1997 1998 ---------- --------- --------- --------- --------- --------- --------- (Amounts in Thousands) Earnings: Pretax Income (Loss) $ (36,833) $ 78,766 $ 197,641 $ 155,754 $ 163,772 $ 35,917 $ 23,142 Minority Interest in Income of Consolidated Subsidiary that has Fixed Charges 865 333 9,793 7,604 10,586 1,304 128 Minority Interest in Loss of Consolidated Subsidiary (37) (4,855) -0- (221) (1,902) (908) (679) Equity Interest in Loss (Income) (Earnings less distributions) of Less- than-Fifty Percent Owned Investees 1,007 603 (623) 574 (868) (170) (1,084) Distributions from Less- than-Fifty Percent Owned Investees -0- -0- -0- -0- 5 20 27 Total Fixed Charges (excluding interest capitalized) 55,361 64,838 68,271 76,658 79,247 $ 39,242 $ 46,534 ---------- --------- --------- --------- --------- --------- --------- Total Earnings $ 20,363 $ 139,685 $ 275,082 $ 240,369 $ 250,840 $ 75,405 $ 68,068 ---------- --------- --------- --------- --------- --------- --------- ---------- --------- --------- --------- --------- --------- --------- Fixed Charges: Interest (including amounts capitalized and amortization of debt issuance costs) $ 43,966 $ 52,297 $ 55,497 $ 65,361 $ 68,099 $ 32,805 $ 37,758 Estimated Interest Component of Rentals 13,006 12,898 13,494 12,926 15,127 7,957 10,370 ---------- --------- --------- --------- --------- --------- --------- Total Fixed Charges $ 56,972 $ 65,195 $ 68,991 $ 78,287 $ 83,226 $ 40,762 $ 48,128 ---------- --------- --------- --------- --------- --------- --------- ---------- --------- --------- --------- --------- --------- --------- Ratio of Earnings to Fixed Charges 0.4 2.1 4.0 3.0 3.0 1.8 1.4 Earnings Inadequate to Cover Fixed Charges $ 36,609 ---------- ----------
EX-23.1 6 EXHIBIT 23.1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT The Board of Directors Farmland Industries, Inc. We consent to incorporation by reference in the registration statement on Form S-3 of Farmland Industries, Inc. of our report dated October 17, 1997, relating to the consolidated balance sheets of Farmland Industries, inc. and subsidiaries as of August 31, 1997 and 1996 and the related consolidated statements of operations, cash flows and capital shares and equities for each of the years in the three year period ended August 31, 1997, and the related schedule, which report appears in the August 31, 1997 annual report on Form 10-K of Farmland Industries, Inc. /s/ KPMG PEAT MARWICK LLP KPMG PEAT MARWICK LLP Kansas City, Missouri June 23, 1998 EX-23.3 7 EXHIBIT 23.3 EXHIBIT 23.3 CONSENT OF SPECIAL TAX COUNSEL Farmland Industries, Inc.: We consent to the references to our firm in any previously filed document incorporated by reference in the Prospectus filed as part of this Registration Statement. /s/ BRYAN CAVE LLP BRYAN CAVE LLP June 23, 1998 EX-24 8 EXHIBIT 24 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears below constitutes and appoints Robert B. Terry and Terry M. Campbell, and each of them, his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, as well as any related registration statement (or amendment thereto) filed pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This Power of Attorney may be executed in multiple counterparts, each of which shall be deemed an original, but which taken together shall constitute one instrument. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dated indicated.
Signatures Title Date ---------- ----- ---- /s/ Albert J. Shivley Chairman of the Board of Directors June 18, 1998 - ---------------------------------------- Albert J. Shivley /s/ H. D. Cleberg President, Chief Executive Officer and June 18, 1998 - ---------------------------------------- Director (Principal Executive Officer) H. D. Cleberg /s/ Jody Bezner Vice Chairman, Vice President and Director June 18, 1998 - ---------------------------------------- Jody Bezner /s/ Lyman Adams, Jr Director June 18, 1998 - ---------------------------------------- Lyman Adams, Jr.
/s/ Ronald J. Amundson Director June 18, 1998 - ---------------------------------------- Ronald J. Amundson /s/ Baxter Ankerstjerne Director June 18, 1998 - ---------------------------------------- Baxter Ankerstjerne /s/ Richard L. Detten Director June 18, 1998 - ---------------------------------------- Richard L. Detten /s/ Steven Erdman Director June 18, 1998 - ---------------------------------------- Steven Erdman /s/ Harry Fehrenbacher Director June 18, 1998 - ---------------------------------------- Harry Fehrenbacher /s/ Martie Floyd Director June 18, 1998 - ---------------------------------------- Martie Floyd /s/ Warren Gerdes Director June 18, 1998 - ---------------------------------------- Warren Gerdes /s/ Ben Griffith Director June 18, 1998 - ---------------------------------------- Ben Griffith /s/ Gail D. Hall Director June 18, 1998 - ---------------------------------------- Gail D. Hall /s/ Barry Jensen Director June 18, 1998 - ---------------------------------------- Barry Jensen
/s/ Ron Jurgens Director June 18, 1998 - ---------------------------------------- Ron Jurgens /s/ William Kuhlman Director June 18, 1998 - ---------------------------------------- William Kuhlman /s/ Greg Pfenning Director June 18, 1998 - ---------------------------------------- Greg Pfenning /s/ Monte Romohr Director June 18, 1998 - ---------------------------------------- Monte Romohr /s/ Joe Royster Director June 18, 1998 - ---------------------------------------- Joe Royster /s/ Kent Stamper Director June 18, 1998 - ---------------------------------------- Kent Stamper /s/ Eli F. Vaughn Director June 18, 1998 - ---------------------------------------- Eli F. Vaughn /s/ Frank Wilson Director June 18, 1998 - ---------------------------------------- Frank Wilson /s/ Terry M. Campbell Executive Vice President and Chief Financial June 18, 1998 - ---------------------------------------- Officer (Principal Financial Officer) Terry M. Campbell /s/ Merl Daniel Vice President and Controller (Principal June 18, 1998 - ---------------------------------------- Accounting Officer) Merl Daniel
EX-25 9 EXHIBIT 25 EXHIBIT 25 ------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ------------------------------------------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________ ---------------------------------------- THE CHASE MANHATTAN BANK (Exact name of trustee as specified in its charter) New York 13-4994650 (State of incorporation (I.R.S. employer if not a national bank) identification No.) 270 Park Avenue New York, New York 10017 (Address of principal executive offices) (Zip Code) William H. McDavid General Counsel 270 Park Avenue New York, New York 10017 Tel: (212) 270-2611 (Name, address and telephone number of agent for service) -------------------------------------------- Farmland Industries, Inc. (Exact name of obligor as specified in its charter) Kansas 44-0209330 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 3315 North Oak Trafficway Kansas City, Missouri 64116-0005 (Address of principal executive offices) (Zip Code) Debt Securities (Title of the indenture securities) GENERAL Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. New York State Banking Department, State House, Albany, New York 12110. Board of Governors of the Federal Reserve System, Washington, D.C., 20551 Federal Reserve Bank of New York, District No. 2, 33 Liberty Street, New York, N.Y. Federal Deposit Insurance Corporation, Washington, D.C., 20429. (b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with the Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. - 2 - Item 16. List of Exhibits List below all exhibits filed as a part of this Statement of Eligibility. 1. A copy of the Articles of Association of the Trustee as now in effect, including the Organization Certificate and the Certificates of Amendment dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982, February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1 filed in connection with Registration Statement No. 333-06249, which is incorporated by reference). 2. A copy of the Certificate of Authority of the Trustee to Commence Business (see Exhibit 2 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in connection with the merger of Chemical Bank and The Chase Manhattan Bank (National Association), Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank). 3. None, authorization to exercise corporate trust powers being contained in the documents identified above as Exhibits 1 and 2. 4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1 filed in connection with Registration Statement No. 333-06249, which is incorporated by reference). 5. Not applicable. 6. The consent of the Trustee required by Section 321(b) of the Act (see Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in connection with the merger of Chemical Bank and The Chase Manhattan Bank (National Association), Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank). 7. A copy of the latest report of condition of the Trustee, published pursuant to law or the requirements of its supervising or examining authority. 8. Not applicable. 9. Not applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, The Chase Manhattan Bank, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York and State of New York, on the 18th day of June, 1998. THE CHASE MANHATTAN BANK By /s/ T.J. Foley ---------------------------- T.J. Foley Vice President - 3 - Exhibit 7 to Form T-1 Bank Call Notice RESERVE DISTRICT NO. 2 CONSOLIDATED REPORT OF CONDITION OF The Chase Manhattan Bank of 270 Park Avenue, New York, New York 10017 and Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 1998, in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts ASSETS in Millions Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ........................................................ $ 12,037 Interest-bearing balances ................................................ 4,054 Securities: Held to maturity securities ................................................... 2,340 Available for sale securities ................................................. 50,134 Federal funds sold and securities purchased under agreements to resell ..................................................... 24,982 Loans and lease financing receivables: Loans and leases, net of unearned income .................. $127,958 Less: Allowance for loan and lease losses ................. 2,797 Less: Allocated transfer risk reserve ..................... 0 -------- Loans and leases, net of unearned income, allowance, and reserve ................................................... 125,161 Trading Assets ................................................................ 61,820 Premises and fixed assets (including capitalized leases) .................................................................. 2,961 Other real estate owned ....................................................... 347 Investments in unconsolidated subsidiaries and associated companies ..................................................... 242 Customers' liability to this bank on acceptances outstanding .............................................................. 1,380 Intangible assets ............................................................. 1,549 Other assets .................................................................. 11,727 -------- TOTAL ASSETS .................................................................. $298,734 -------- --------
- 5 -
LIABILITIES Deposits In domestic offices ................................................. $ 96,682 Noninterest-bearing ..................................... $ 38,074 Interest-bearing ........................................ 58,608 --------- In foreign offices, Edge and Agreement, subsidiaries and IBF's .............................................. 72,630 Noninterest-bearing .................................... $ 3,289 Interest-bearing ....................................... 69,341 Federal funds purchased and securities sold under agreements to repurchase 42,735 Demand notes issued to the U.S. Treasury ................................. 872 Trading liabilities ...................................................... 45,545 Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases): With a remaining maturity of one year or less ....................... 4,454 With a remaining maturity of more than one year through three years ............................................... 231 With a remaining maturity of more than three years ................. 106 Bank's liability on acceptances executed and outstanding ................. 1,380 Subordinated notes and debentures ........................................ 5,708 Other liabilities ........................................................ 11,295 TOTAL LIABILITIES ........................................................ 281,638 --------- EQUITY CAPITAL Perpetual preferred stock and related surplus ............................ 0 Common stock ............................................................. 1,211 Surplus (exclude all surplus related to preferred stock) ................ 10,291 Undivided profits and capital reserves ................................... 5,579 Net unrealized holding gains (losses) on available-for-sale securities ......................................... (1) Cumulative foreign currency translation adjustments ...................... 16 TOTAL EQUITY CAPITAL ..................................................... 17,096 --------- TOTAL LIABILITIES AND EQUITY CAPITAL ..................................... $ 298,734 --------- ---------
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief. JOSEPH L. SCLAFANI We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct. WALTER V. SHIPLEY ) THOMAS G. LABRECQUE ) DIRECTORS WILLIAM B. HARRISON, JR.) -6- -----END PRIVACY-ENHANCED MESSAGE-----