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including the possibility of selling major assets or
business segments.
The Wichita Bank became increasingly concerned about
petitioner’s financial situation throughout the early
1980's. An internal memorandum of the Wichita Bank dated
September 2, 1982, states that “Farmland Industries is
experiencing serious financial difficulties.” A memorandum
dated September 14, 1982, states that petitioner’s vice
president of finance, Mr. Robert Ferguson, informed a
representative of the Wichita Bank that petitioner was
having difficulty dealing with commercial banks. Mr. Earl
Knauss, petitioner's chief financial officer, was also
reported to have stated that petitioner needed to develop
financial contingency plans to avoid defaulting on its
loans from the Wichita Bank. On September 16, 1982,
Mr. Ferguson told the Wichita Bank that the banking firm
that previously handled petitioner's debt offerings had
ceased doing so. On October 19, 1982, a vice president
of the Wichita Bank proposed that the bank classify
petitioner’s loan as a problem loan and suggested that
petitioner consider selling assets and subsidiaries to
raise cash and reduce its interest expenses.
During a meeting of petitioner's board of directors
on October 25-27, 1982, the board was informed that the
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