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EXHIBIT 10.45
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CONSTRUCTION AND TERM LOAN AGREEMENT
dated April 10, 2006
by and among
PACIFIC ETHANOL MADERA LLC,
as Borrower,
THE LENDERS NAMED ON THE SIGNATURE PAGES
TO THIS AGREEMENT,
as Lenders,
and
HUDSON UNITED CAPITAL,
A DIVISION OF TD BANKNORTH, N.A.,
as Administrative Agent
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<TABLE>
<S> <C>
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS.............................................................................................2
ARTICLE II THE CONSTRUCTION AND TERM
LOANS........................................................................2
SECTION 2.1
COMMITMENTS..........................................................................2
SECTION 2.2
FUNDING OF THE
LOANS.................................................................3
SECTION 2.3
INTEREST.............................................................................4
SECTION 2.4
NOTES................................................................................6
SECTION 2.5
FEES.................................................................................7
SECTION 2.6
SECURITY.............................................................................7
SECTION 2.7
USE OF
PROCEEDS......................................................................7
SECTION 2.8
REPAYMENT OF
PRINCIPAL...............................................................7
SECTION 2.9
PAYMENTS............................................................................10
SECTION 2.10
INCREASED COSTS AND
UNAVAILABILITY..................................................11
ARTICLE III CONDITIONS
PRECEDENT.................................................................................16
SECTION 3.1
CONDITIONS PRECEDENT TO THE CONSTRUCTION LOAN CLOSING
DATE..........................16
SECTION 3.2
CONDITIONS PRECEDENT TO THE SECOND AND EACH SUBSEQUENT CONSTRUCTION
LOAN
FUNDING
DATE........................................................................22
SECTION 3.3
CONDITIONS PRECEDENT TO THE TERM LOAN CONVERSION
DATE...............................26
SECTION 3.4
NO
WAIVER...........................................................................29
SECTION 3.5
LOCATION OF
CLOSINGS................................................................29
ARTICLE IV REPRESENTATIONS AND
WARRANTIES........................................................................29
SECTION 4.1
REPRESENTATIONS AND
WARRANTIES......................................................29
SECTION 4.2
SURVIVAL............................................................................37
ARTICLE V
COVENANTS..............................................................................................37
SECTION 5.1
AFFIRMATIVE
COVENANTS...............................................................37
SECTION 5.2
NEGATIVE
COVENANTS..................................................................46
ARTICLE VI EVENTS OF
DEFAULT.....................................................................................52
SECTION 6.1
EVENTS OF
DEFAULT...................................................................52
SECTION 6.2
REMEDIES............................................................................55
SECTION 6.3
RIGHT TO
COMPLETE...................................................................55
ARTICLE VII THE
AGENT............................................................................................57
SECTION 7.1
AUTHORIZATION AND
ACTION............................................................57
SECTION 7.2
DELEGATION OF
DUTIES................................................................57
SECTION 7.3
ADMINISTRATIVE AGENT'S
RELIANCE.....................................................57
SECTION 7.4
NOTICE OF
DEFAULT...................................................................58
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SECTION 7.5
ADMINISTRATIVE AGENT AS A
LENDER....................................................58
SECTION 7.6
CREDIT
DECISIONS....................................................................59
SECTION 7.7
INDEMNIFICATION.....................................................................59
SECTION 7.8
SUCCESSOR ADMINISTRATIVE
AGENT......................................................60
ARTICLE VIII GENERAL
PROVISIONS..................................................................................61
SECTION 8.1
COUNTERPARTS........................................................................61
SECTION 8.2
INTEGRATION.........................................................................61
SECTION 8.3
SEVERABILITY........................................................................61
SECTION 8.4
FURTHER
ASSURANCES..................................................................61
SECTION 8.5
AMENDMENTS AND
WAIVERS..............................................................61
SECTION 8.6
NO WAIVER; REMEDIES
CUMULATIVE......................................................61
SECTION 8.7
SUCCESSORS AND
ASSIGNS..............................................................62
SECTION 8.8
NO
AGENCY...........................................................................63
SECTION 8.9
NO THIRD-PARTY
BENEFICIARIES........................................................63
SECTION 8.10
NON-RECOURSE........................................................................64
SECTION 8.11
COSTS, EXPENSES AND
TAXES...........................................................64
SECTION 8.12
INDEMNITY...........................................................................65
SECTION 8.13
RIGHT OF
SET-OFF....................................................................65
SECTION 8.14
SHARING OF
PAYMENTS.................................................................66
SECTION 8.15
GOVERNING
LAW.......................................................................66
SECTION 8.16
WAIVER OF PRESENTMENT, DEMAND, PROTEST AND
NOTICE...................................66
SECTION 8.17
WAIVER OF JURY
TRIAL................................................................66
SECTION 8.18
CONSENT TO
JURISDICTION.............................................................67
SECTION 8.19
CONFIDENTIALITY.....................................................................67
SECTION 8.20
NOTICES.............................................................................68
SECTION 8.21
LEGAL REPRESENTATION OF THE
PARTIES.................................................68
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SCHEDULE X
Definitions and Rules of Construction
SCHEDULE 3.1(a)(ix)
Project Documents in Effect on the Construction Loan Closing
Date
SCHEDULE 5.2(c)
Additional Project Costs
EXHIBIT 2.2
Form of Notice of Borrowing
EXHIBIT 2.4(a)
Form of Construction Loan Note
EXHIBIT 2.4(b)
Form of Term Loan Note
EXHIBIT 5.1(k)(iii)
Form of Monthly Construction Report
EXHIBIT 5.1(n)
Required Insurance
EXHIBIT 8.7(c)
Form of Commitment Transfer Supplement
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CONSTRUCTION AND TERM LOAN AGREEMENT
This CONSTRUCTION AND TERM LOAN AGREEMENT, dated April 10,
2006 (as amended, modified or supplemented, this "AGREEMENT"), is
by and among
PACIFIC ETHANOL MADERA LLC, a Delaware limited liability company
("BORROWER"),
the lenders named from time to time on the signature pages to this
Agreement,
and HUDSON UNITED CAPITAL, A DIVISION OF TD BANKNORTH, N.A., a
national banking
association, as administrative agent for the Lenders (as defined
below)
(together with its successors and assigns in such capacity, the
"ADMINISTRATIVE
Agent").
RECITALS:
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WHEREAS, Pacific Ethanol, Inc., a Delaware corporation
("PEI"), is a developer of ethanol production facilities;
WHEREAS, PEI owns all of the issued and outstanding shares of
Pacific Ethanol California, Inc., a California corporation ("PEC"),
and all of
the membership interests in Kinergy Marketing, LLC, an Oregon
limited liability
company ("KINERGY");
WHEREAS, PEC owns all of the membership interests in Pacific
Ethanol Holding Co. LLC, a Delaware limited liability company
("BORROWER
MEMBER"), and Pacific Ag. Products, LLC, a California limited
liability company
("PAP");
WHEREAS, Borrower Member owns all of the membership interests
in Borrower;
WHEREAS, Borrower was formed to develop, own and operate an
approximately 35 million gallon-per-year dry mill ethanol
production facility to
be located in Madera, California (the "PROJECT");
WHEREAS, Borrower also owns grain processing and storage
facilities consisting of eight silos and two associated rail loops,
which
facilities (the "GRAIN FACILITIES") will provide storage and grain
processing
services to the Project;
WHEREAS, W.M. Lyles, Co., a California corporation ("LYLES"),
will design and build the Project pursuant to a guaranteed maximum
price
design-build contract between Lyles and Borrower;
WHEREAS, Delta-T Corporation, a Virginia corporation
("DELTA-T"), is licensing technology and providing certain design
and process
engineering services to Borrower pursuant to a License of
Technology, dated
September 1, 2005, by and between Delta-T and Borrower;
WHEREAS, PAP will provide grain origination services to
Borrower and Kinergy will provide ethanol marketing services to
Borrower;
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WHEREAS, PEC will provide operations and maintenance services
to Borrower in connection with the Project and PAP will provide
operations and
maintenance services to Borrower in connection with the Grain
Facilities;
WHEREAS, Western Milling LLC, a California limited liability
company, will provide marketing services for the wet distillers'
grains produced
by the Project;
WHEREAS, Borrower desires that the Lenders make available to
Borrower Construction Loans (as defined below) to finance a portion
of the cost
of ownership, development, engineering, construction, testing and
operation of
the Project;
WHEREAS, Borrower further desires that, upon the satisfaction
of certain conditions, the Lenders convert the Construction Loans
to Term Loans
(as defined below);
WHEREAS, the Construction Loans and the Term Loans will be
secured by, among other collateral, pledges of all of Borrower's
assets
(including the Project and the Grain Facilities) and all of the
membership
interests in Borrower;
WHEREAS, the Lenders are willing to make such loans available
to Borrower on the terms and subject to the conditions set forth in
this
Agreement; and
WHEREAS, the Lenders desire that the Administrative Agent
serve as their administrative agent in connection with the loans
contemplated by
this Agreement and the Administrative Agent is willing to serve in
such
capacity;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, and other good and valuable
consideration,
the receipt and adequacy of which are hereby acknowledged, the
parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
-----------
Capitalized terms used and not otherwise defined in this
Agreement have the meanings given to those terms in Schedule X
hereto, and the
rules of construction set forth in Schedule X govern this
Agreement.
ARTICLE II
THE CONSTRUCTION LOANS AND TERM LOANS
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Section 2.1 COMMITMENTS.
(a) CONSTRUCTION LOAN COMMITMENTS AND TERM LOAN COMMITMENTS.
Commencing on the Construction Loan Closing Date, on the terms and
subject to
the conditions of this Agreement and in reliance upon the
representations,
warranties and covenants of Borrower contained herein, (i) each
Construction
Lender agrees to make one or more Construction Loans to Borrower on
one or more
Construction Loan Funding Dates in an aggregate amount equal to its
Pro Rata
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Share of the Aggregate Construction Loan Commitment and (ii) each
Term Lender
agrees to make a Term Loan to Borrower on the Term Loan Conversion
Date in an
amount equal to its Pro Rata Share of the Aggregate Term Loan
Commitment.
Notwithstanding the foregoing, (i) no Construction Lender will have
any
obligation to make a Construction Loan after, and the Construction
Loan
Commitments will expire on, the Construction Loan Commitment
Termination Date
and (ii) no Term Lender will have any obligation to make a Term
Loan after, and
the Term Loan Commitments will expire on, the Construction Loan
Commitment
Termination Date, if the Term Loan Conversion Date has not occurred
prior to
such date.
(b) SEPARATE OBLIGATIONS. Each Lender will make its Loans to
Borrower simultaneously with the other Lenders at the times
designated by the
Administrative Agent pursuant to Section 2.2(c); PROVIDED, that the
failure of
any Lender to fund any Loan will not affect the obligation of any
other Lender
to fund its Loans. No Lender will be responsible for a default by
any other
Lender in funding a Loan nor will any Commitment of any Lender be
increased or
decreased by reason of any such default.
Section 2.2 FUNDING OF THE LOANS.
(a) THE CONSTRUCTION LOANS.
(i) On each Construction Loan Funding Date, each
Construction Lender will make a Construction Loan to Borrower in
the
amount of such Construction Lender's Pro Rata Share of the
amount
specified in the Notice of Borrowing relating to such Construction
Loan
Funding Date; PROVIDED, that no Construction Lender will be
required to
make Construction Loans that, in the aggregate, exceed such
Construction Lender's Pro Rata Share of the Aggregate Construction
Loan
Commitment. After payment of all fees, expenses and other
amounts
required by the Loan Documents to be paid by Borrower on such
Construction Loan Funding Date, the aggregate net proceeds of
such
Construction Loans will be deposited into the Construction Draw
Account
for disbursement in accordance with the Disbursement Agreement and
for
use in accordance with Section 2.7(a).
(ii) Each Construction Loan will mature on the
Construction Loan Maturity Date and must be refinanced with a Term
Loan
on or prior to the Construction Loan Maturity Date, unless payment
of
such Construction Loan is due prior to the Construction Loan
Maturity
Date by acceleration, mandatory prepayment or otherwise. No
Construction Loan, once repaid, may be reborrowed.
(iii) On each Business Day after the Construction
Loan Closing Date and on or before the Term Loan Conversion Date
on
which interest, fees or expenses are due and payable and are
not
otherwise paid or provided for, Borrower hereby irrevocably
authorizes
the Construction Lenders, in their sole discretion, to make
Construction Loans to Borrower in the aggregate amount of all
interest,
fees and expenses then due and payable. The proceeds of such
Construction Loans will be deposited into the Construction Draw
Account
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for disbursement in accordance with the Disbursement Agreement.
The
Construction Lenders have no obligation to make any Construction
Loan
for the purposes stated in this Section 2.2(a)(iii) and no
Construction
Loan will be made pursuant to this Section 2.2(a)(iii) if an Event
of
Default has occurred and is continuing.
(b) THE TERM LOANS.
(i) On the Term Loan Conversion Date, each Term
Lender will make a Term Loan to Borrower in the amount of such
Term
Lender's Pro Rata Share of the amount specified in the Notice
of
Borrowing relating to the Term Loan Conversion Date. The
initial
principal amount of each Lender's Term Loan may not exceed such
Lender's Pro Rata Share of the Aggregate Term Loan Commitment.
After
payment of all fees, expenses and other amounts required by the
Loan
Documents to be paid by Borrower on the Term Loan Conversion Date
and
the repayment in full of all Construction Loans, including all
accrued
and unpaid interest thereon, the remaining aggregate net proceeds
of
such Term Loans, if any, will be paid to or for the account of
Borrower
for use in accordance with Section 2.7(b).
(ii) Each Term Loan will mature on the Term Loan
Maturity Date, unless payment thereof is due prior to such date
by
acceleration, mandatory prepayment or otherwise. No Term Loan,
once
repaid, may be reborrowed.
(c) FUNDING PROCEDURE. Whenever Borrower desires to borrow
Loans hereunder, it will submit a Notice of Borrowing to the
Administrative
Agent prior to 1:00 p.m., New York City time, at least three (3)
Business Days
prior to the proposed Construction Loan Funding Date or Term Loan
Conversion
Date, as applicable. Each Notice of Borrowing will be irrevocable.
Promptly
after receipt of a Notice of Borrowing, the Administrative Agent
will notify
each Lender of the proposed Loans and of such Lender's Pro Rata
Share thereof,
and each Lender will have available such Lender's Pro Rata Share of
the proposed
Loans in immediately available funds no later than 1:00 p.m., New
York City
time, on the applicable Funding Date. Upon satisfaction or waiver
of the
applicable conditions precedent set forth in Article III, the
Administrative
Agent will notify each Lender to disburse its Pro Rata Share of the
requested
Loans to or for the benefit of Borrower on the applicable Funding
Date.
Section 2.3 INTEREST.
(a) INTEREST
RATES.
(i) Each Loan will bear interest on the unpaid
principal amount thereof from the date made to but excluding the
date
of repayment (whether at stated maturity, by acceleration, because
of
mandatory prepayment or otherwise) at the following rates:
(A) the Construction Loans will bear
interest during each Construction Loan Interest Period at a
rate per annum equal to LIBOR as determined for such
Construction Loan Interest Period plus three hundred
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seventy-five (375) basis points, computed on each date on
which interest is due on the Construction Loans on the basis
of a year of 360 days for the actual number of days elapsed;
and
(B) the Term Loans will bear interest during
each Term Loan Interest Period at a rate per annum equal to
LIBOR as determined for such Term Loan Interest Period plus
four hundred (400) basis points, computed on each date on
which interest is due on the Term Loans on the basis of a year
of 360 days for the actual number of days elapsed.
(ii) [RESERVED].
(b) INTEREST
PERIODS.
(i) The initial Construction Loan Interest Period
will commence on the initial Construction Loan Funding Date and end
on
the next Construction Loan Funding Date. Each Construction Loan
Interest Period occurring thereafter will commence on the day after
the
date on which the immediately preceding Construction Loan
Interest
Period expires and end on the next Construction Loan Funding Date
or,
if no such Construction Loan Funding Date occurs, on the last
Business
Day of the next calendar month.
(ii) The initial Term Loan Interest Period will
commence on the Term Loan Conversion Date and end on the next
Payment
Date. Each Term Loan Interest Period occurring thereafter will
commence
on the day after the date on which the immediately preceding Term
Loan
Interest Period expires and end on the next Payment Date.
(iii) An Interest Period that would otherwise end on
a day that is not a LIBOR Business Day will end on the next
succeeding
LIBOR Business Day, unless such day falls in the next calendar
month,
in which case such Interest Period will end on the next preceding
LIBOR
Business Day.
(iv) An Interest Period that begins on the last LIBOR
Business Day of a calendar month or on a day for which there is
no
numerically corresponding day in the calendar month at the end of
such
Interest Period will end on the last LIBOR Business Day of the
calendar
month at the end of such Interest Period.
(c) INTEREST PAYMENT DATES.
(i) All accrued and unpaid interest on the
Construction Loans will be payable on each Construction Loan
Funding
Date (or, if no Construction Loan Funding Date occurs during
any
calendar month during which any Construction Loans are outstanding,
on
the last Business Day of such calendar month) and on the date on
which
the Construction Loans are repaid in full, whether by mandatory
prepayment or refinancing with Term Loans.
5
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(ii) All accrued and unpaid interest on the Term
Loans will be payable in arrears on each March 31, June 30,
September
30 and December
31 following the Term Loan Conversion Date and on the
date on which the Term Loans are repaid in full, whether by
mandatory
prepayment or on the Term Loan Maturity Date.
(iii) After maturity (whether at stated maturity, by
acceleration, because of mandatory prepayment or otherwise),
all
accrued and unpaid interest (including Default Interest) due on
any
Loan will be payable upon demand by the Administrative Agent.
(d) DEFAULT INTEREST. Overdue principal and overdue interest
in respect of any Loan and any other amount payable hereunder or
under any other
Loan Document by Borrower or any other Person that is overdue will
bear interest
at a rate per annum (the "DEFAULT RATE") equal to two percent (2%)
in excess of
the Interest Rate then-applicable to such Loan or other amount or,
if no rate of
interest is applicable to such overdue amount, the highest rate of
interest
then-applicable to any outstanding Loan. Upon the occurrence and
during the
continuation of an Event of Default (other than an Event of Default
caused
solely by Borrower's failure to comply with Section 5.1(p)), all
Loans and all
other amounts owing by Borrower and any other Person under a Loan
Document will
bear interest at the Default Rate.
(e) INTEREST LIMITATION. Notwithstanding any other provision
of the Loan Documents, if the rate of interest on any obligation of
Borrower or
any other Person under any Loan Document at any time exceeds the
highest rate
permitted by applicable Law, the rate of interest on such
obligation will be
deemed to be the highest rate permitted by applicable Law.
Section 2.4 NOTES. Borrower will execute and deliver to each
Construction Lender on the Construction Loan Closing Date a
Construction Loan
Note substantially in the form of Exhibit 2.4(a) and to each Term
Lender on the
Term Loan Conversion Date a Term Loan Note substantially in the
form of Exhibit
2.4(b). Each Construction Loan Note will be dated the Construction
Loan Closing
Date, will be in the principal amount of such Lender's Pro Rata
Share of the
Aggregate Construction Loan Commitment and will evidence the
Construction Loans
made by such Construction Lender. Each Term Loan Note will be dated
the Term
Loan Conversion Date and will be in the principal amount of, and
will evidence,
the Term Loan made by such Term Lender. On each Construction Loan
Funding Date,
each Construction Lender is authorized to make a notation on the
schedule
attached to its Construction Loan Note indicating the date and the
principal
amount of the Construction Loan made by such Construction Lender on
such date.
The information set forth in such schedules will, absent manifest
error, be
prima facie evidence of the outstanding principal amount of such
Construction
Loan Note. Any failure by a Construction Lender to make any such
notation will
not limit or affect the obligations of Borrower under the
Construction Loan
Notes or any other Loan Document. Each Note will be subject to and
entitled to
the benefits of the Loan Documents.
6
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Section 2.5 FEES.
(a) CONSTRUCTION LOAN FEE. On the Construction Loan Closing
Date, Borrower will pay to each Construction Lender a fee equal to
one percent
(1%) of such Construction Lender's Pro Rata Share of the Aggregate
Construction
Loan Commitment; PROVIDED, that the fee payable to Hudson United
Capital, as a
Construction Lender, will be reduced by thirty thousand Dollars
($30,000) in
recognition of fees previously paid.
(b) TERM LOAN CONVERSION FEE. On the Term Loan Conversion
Date, Borrower will pay to each Term Lender a fee equal to one
percent (1%) of
the initial principal amount of such Term Lender's Term Loan.
(c) AGENCY FEE. On the first anniversary of the Construction
Loan Closing Date, and on the Payment Date next following each
subsequent
anniversary of the Construction Loan Closing Date for so long as
any Loan
remains outstanding under this Agreement, Borrower will pay to
the
Administrative Agent a fee equal to thirty-three thousand Dollars
($33,000).
Section 2.6 SECURITY. The Loans and all other amounts payable
by Borrower or any other PEIX Party under this Agreement and the
other Loan
Documents are secured by the Collateral and are entitled to the
benefits of the
Security Documents.
Section 2.7 USE OF PROCEEDS.
(a) CONSTRUCTION LOANS. Proceeds of the Construction Loans may
be used only to pay (i) Qualified Project Construction Expenses and
(ii)
interest, fees and other expenses payable pursuant to Section 2.3,
Section 2.5,
Section 2.10 and Section 8.11.
(b) TERM LOANS. Proceeds of the Term Loans may be used only to
(i) refinance the principal of and accrued and unpaid interest on
all
Construction Loans outstanding on the Term Loan Conversion Date and
(ii) pay
interest, fees and other expenses payable pursuant to Section 2.3,
Section 2.5,
Section 2.10 and Section 8.11. To the extent that proceeds of the
Term Loans are
not sufficient to pay in full all of the amounts described in the
preceding
sentence, such proceeds will be applied FIRST to the amounts
described in clause
(i) of the preceding sentence and SECOND to the amounts described
in clause (ii)
of the preceding sentence until all of such proceeds have been
disbursed. Any
amount described in the first sentence of this paragraph not paid
with the
proceeds of the Term Loans will be payable in full by or on behalf
of Borrower
on the date on which the Term Loans are disbursed.
Section 2.8 REPAYMENT OF PRINCIPAL.
(a) MANDATORY
REPAYMENTS.
(i) The Construction Loans must be refinanced in full
with Term Loans on or before the Construction Loan Commitment
Termination Date. Borrower will repay all outstanding Term Loans on
or
before the Term Loan Maturity Date.
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(ii) On each March 31, June 30, September 30 and
December 31 following the Term Loan Conversion Date, Borrower will
pay
to each Lender the amount of principal of the Term Loans
corresponding
to such Payment Date under the heading "Scheduled Installment"
on
Schedule I to each Term Loan Note (each such payment, a
"SCHEDULED
INSTALLMENT"). Exhibit 2.4(b) contains the Schedule I that will
be
attached to each Term Loan Note and applicable to the Term Loans if
the
aggregate amount of Term Loans made on the Term Loan Conversion
Date is
equal to $34 million. If, however, based upon the restrictions
contained in the definition of Aggregate Term Loan Commitment,
the
aggregate amount of Term Loans made on the Term Loan Conversion
Date is
less than $34 million, then the Administrative Agent, in
consultation
with Borrower and with the approval of the Majority Lenders,
will
prepare replacement amortization schedules for the Term Loan
Notes
based upon (A) the reduced aggregate amount of Term Loans
(calculated
in accordance with the definition of Aggregate Term Loan
Commitment)
being made on such Term Loan Conversion Date, (B) the Project's
projected Net Operating Cash, as reflected in the Closing Pro Forma
and
adjusted by the actual production capabilities of the Project
(as
confirmed by the Engineer and with any adjustment based solely upon
the
Project's as-built production capacity and efficiency levels) and
(C)
the requirement that Borrower at all times comply with its
obligations
under Section 5.1(p). Each such amortization schedule will list
all
Scheduled Installments that will be payable on the corresponding
Term
Loan Note and all Scheduled Installments, when aggregated
together,
would result in the Term Loans being paid in full on the Term
Loan
Maturity Date. No amortization schedule, once it is attached to
an
executed Term Loan Note, may be amended or otherwise modified
except as
agreed by the Administrative Agent, with the approval of the
Majority
Lenders, and Borrower in their respective sole discretion.
(iii) In addition to the Scheduled Installments, on
each Payment Date after the Term Loan Conversion Date, Borrower
will
pay to each Lender an additional amount of principal of the Term
Loans
(each such payment, an "SPP PAYMENT"). SPP Payments will be
applied
against the outstanding balance of the Term Loans in the inverse
order
of maturity. The SPP Payment amounts will be determined as
follows:
(A) Subject to the provisions of Section
2.8(a)(iii)(B), each SPP Payment will be in the amount of each
Lender's Pro Rata Share of the amount that is twenty-five
percent (25%) of the balance remaining in the Project Revenues
Account following the operation of priority FIFTH of Section
4.2(b) of the Disbursement Agreement.
(B) In the event that the Volumetric Ethanol
Excise Tax Credit is either repealed or not extended beyond
2010 on or before January 1, 2008, then each SPP Payment will
be in the amount of each Lender's Pro Rata Share of the amount
8
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that is seventy-five percent (75%) of the balance remaining in
the Project Revenues Account following the operation of
priority FIFTH of Section 4.2(b) of the Disbursement
Agreement; PROVIDED, that if the Volumetric Ethanol Excise Tax
Credit is extended beyond 2010 at any time after January 1,
2008, then this Section 2.8(a)(iii)(B) will cease to be in
effect and the SPP Payment will be calculated pursuant to
Section 2.8(a)(iii)(A) on the Payment Date next following the
effectiveness of such extension.
(iv) All cash
proceeds received by Borrower as a
result of (A) any amendment or termination of any Project Document
or
(B) the sale of any material asset of Borrower, in either case
prohibited by Section 5.2 of this Agreement or otherwise without
the
prior written consent of the Majority Lenders (which will not
be
unreasonably withheld), will immediately be paid to the Lenders
in
accordance with their Pro Rata Shares of the outstanding Loans
and
applied as
prepayments of the Loans. In connection with any such
prepayment, Borrower will pay to the Lenders the prepayment fee
calculated in accordance with Section 2.8(c), if any.
(v) Borrower will immediately prepay in full the
Loans and all other amounts then-outstanding under the Loan
Documents:
(A) in the event that substantially all of
the improvements included in the Project are completely
destroyed by casualty or are condemned, or in the event that
Net Insurance Proceeds (together with such other funds as may
be available to Borrower for the purposes of repairing the
Project) are
insufficient in the reasonable judgment of the
Administrative Agent to pay for the repair of any casualty to
the Project substantially to the pre-casualty condition of the
Project prior to the expiration of the benefits of any
business interruption insurance and without the occurrence of
any Event of Default described in Section 6.1(a), (b), (f),
(g), (h), (j), (m), (o) or (p) (in which case no prepayment
fee will be payable to the Lenders); or
(B) in the event that the interests of
Borrower in the Project are sold or otherwise transferred or
PEI ceases to be the majority direct or indirect owner of
Borrower or no longer has direct or indirect operational
control over Borrower, in any case without the Majority
Lenders' prior written consent (in which case Borrower will
pay to the Lenders the prepayment fee calculated in accordance
with Section 2.8(c), if any).
(b) OPTIONAL PREPAYMENTS. Borrower may, on any Payment Date
after the first anniversary of the Term Loan Conversion Date, after
having given
the Administrative Agent at least ten (10) Business Days' prior
revocable notice
and five (5) Business Days' prior irrevocable notice, prepay in
full the Term
Loans and all other amounts then-outstanding under the Loan
Documents. In
connection with any such prepayment, Borrower will pay to the
Lenders the
prepayment fee calculated in accordance with Section 2.8(c), if
any.
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(c) PREPAYMENT
FEE.
(i) In connection with any prepayment or repayment of
the Construction Loans other than with proceeds of Term Loans,
Borrower
will pay to the Lenders a prepayment fee in the amount of five
percent
(5%) of the prepaid principal amount of the Construction Loans,
as
liquidated damages and compensation for the costs of the
Construction
Lenders.
(ii) In connection with (i) any permitted optional
prepayment made pursuant to Section 2.8(b) or (ii) any
mandatory
prepayment made pursuant to Section 2.8(a)(iv) or Section
2.8(a)(v)(B),
Borrower will pay to the Lenders a prepayment fee in the amount
determined pursuant to the following table as liquidated damages
and
compensation for the costs of the Term Lenders:
<TABLE>
<S> <C>
Fee as a % of
Date of Prepayment
Prepaid Principal Amount
------------------
------------------------
From the Term Loan Conversion Date until the
second anniversary of the Term Loan
Conversion
Date
3%
From the second to the third anniversary of the
Term Loan Conversion Date
2%
From the third to the fourth anniversary of the
Term Loan Conversion Date
1%
After the fourth anniversary of the Term Loan
Conversion Date
0%
</TABLE>
Section 2.9 PAYMENTS.
(a) METHOD OF PAYMENT.
(i) All payments by Borrower or any other Person
under any Loan Document will be made in immediately available funds
in
U.S. Dollars to the Lenders at such office or to such account as
each
Lender may notify to Borrower in writing from time to time. All
such
payments must be received no later than 1:00 p.m., New York City
time,
on the date due and must be made in full without defense, set-off
or
counterclaim of any kind and without any requirement of
presentment,
notice or demand. If any such payment is made by Borrower or any
other
Person after 1:00 p.m., New York City time, such payment will be
deemed
to have been made on the next Business Day. Subject to the
provisions
of Section 2.3(b), whenever any payment to be made hereunder or
under
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<PAGE>
any other Loan Document is stated to be due on a day that is not
a
Business Day, the due date of such payment will be accelerated to
the
next preceding Business Day and such reduction in time will be
included
in the computation of such payment.
(ii) Notwithstanding the provisions of Section
2.9(a)(i) to the contrary, for so long as the Disbursement
Agreement
remains in full force and effect and PROVIDED, that sufficient
funds
are available for application in accordance with the terms and
conditions hereof and thereof, Borrower authorizes and consents
to
make, and the Administrative Agent and the Lenders agree to
receive,
any and all payments required to be made hereunder through
operation of
the relevant provisions of the Disbursement Agreement.
(b) APPLICATION OF PAYMENTS. Subject to the provisions of the
Disbursement Agreement and except to the extent expressly otherwise
provided
herein or in any other Loan Document, all payments received by
the
Administrative Agent and the Lenders hereunder will be applied in
the following
order of priority:
(i) to the payment of all accrued interest on the
Loans;
(ii) to the payment or reimbursement of all costs,
expenses, Taxes and other amounts payable pursuant to Sections
2.10,
8.11 and 8.12;
(iii) to the payment of all fees payable pursuant to
Section 2.5;
(iv) to the payment of the principal of the Loans in
the inverse order of maturity; and
(v) to the payment or reimbursement of all other
amounts due to the Administrative Agent or any Lender hereunder
or
under any other Loan Document.
All payments applied to interest on or principal of any Loan will
be paid to the
Lenders in proportion to their respective Pro Rata Shares of the
Construction
Loans or the Term Loans, as applicable. All payments applied to any
other
category of obligation set forth above will be paid to the various
payees within
such category in proportion to the respective amounts due to
them.
Section 2.10 INCREASED COSTS AND UNAVAILABILITY.
(a) TAXES.
(i) All payments made by Borrower or any other Person
under the Loan Documents will be made free and clear of, and
without
deduction or withholding for, any present or future Tax other
than
Lender Income Taxes and United States backup withholding Taxes
(collectively, "REIMBURSABLE TAXES"), and Borrower will pay,
either
directly (with respect to Reimbursable Taxes of which Borrower
has
independent knowledge) or through reimbursement pursuant to
Section
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<PAGE>
2.10(a)(ii), all Reimbursable Taxes in respect of payments under
the
Loan Documents, and all costs and liabilities incurred by the
Administrative Agent and the Lenders (each, an "AFFECTED PARTY")
in
connection therewith; PROVIDED, that Borrower shall not be required
to
reimburse any Lender pursuant to this Section 2.10(a) for any
Tax
incurred more than one year prior to the date on which such
Lender
notifies Borrower of such Reimbursable Tax.
(ii) Borrower will reimburse each Affected Party, on
demand given pursuant to Section 2.10(f)(i), for any Reimbursable
Tax
paid by such Affected Party, including for any Reimbursable
Taxes
imposed on or attributable to amounts payable under this
Section
2.10(a)(ii) (subject to the remaining provisions of this
Section
2.10(a) and provided that this Section 2.10(a)(ii) shall not apply
to
the extent that any such amounts are compensated for by an
increased
payment under Section 2.10(a)(i)). Each Affected Party will have
the
absolute right to arrange its tax affairs in whatever manner it
deems
appropriate and no Affected Party will be obligated to claim
any
particular deduction, credit or other benefit.
(iii) If Borrower is prohibited or prevented (by Law
or otherwise) from making any payment to an Affected Party
required
under Section 2.10(a)(ii), then the amount of the payment due to
such
Affected Party under the Loan Documents will be increased by the
amount
necessary to insure that such Affected Party will receive the
full
amount payable to it under the Loan Documents.
(iv) Within thirty (30) days after the date on which
any Reimbursable Tax (of which Borrower has independent knowledge
or
has become aware by a notice from an Affected Party delivered
in
accordance with Section 2.10(f)(i)) is due, Borrower will furnish
to
the applicable Affected Parties official receipts or notarized
copies
thereof evidencing payment of such Reimbursable Tax or, if such
receipts are not obtainable, other evidence of such payment by
Borrower
reasonably satisfactory to the Administrative Agent.
(v) The
Administrative Agent and the Lenders agree to
deliver to Borrower on the date hereof all forms and documents
necessary to establish any exemption from withholding for Taxes
to
which they are entitled, or any other certification reasonably
requested by Borrower from time to time. Any Person that becomes
the
successor holder of a Note will deliver the forms and documents
required under this Section 2.10(a)(v). In addition, each Lender
will
deliver such forms promptly upon the obsolescence, expiration
or
invalidity of any form previously delivered by such Lender. Each
Lender
will promptly notify Borrower and the Administrative Agent at any
time
such Lender determines that it is no longer in a position to
provide
any previously delivered form or certificate to Borrower.
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<PAGE>
(vi) If the Administrative Agent or a Lender
determines, in its reasonable discretion, that it has received a
refund
of any Reimbursable Taxes or a Tax credit with respect to
Reimbursable
Taxes from the jurisdiction imposing such Reimbursable Taxes as
to
which it has been indemnified by Borrower or with respect to
which
Borrower has paid additional amounts pursuant to this Section
2.10(a),
it shall pay to Borrower an amount equal to such refund or credit
(but
only to the extent of indemnity payments made, or additional
amounts
paid, by Borrower under this Section 2.10(a) with respect to
the
Reimbursable Taxes giving rise to such refund or credit), net of
all
out-of-pocket expenses of the Administrative Agent or such Lender
and
without interest, provided that Borrower, upon the request of
the
Administrative Agent or such Lender, agrees to repay the amount
paid
over to Borrower (plus any penalties, interest or other charges
imposed
by the relevant Government Instrumentality) to the Administrative
Agent
or such Lender in the event the Administrative Agent or such Lender
is
required to repay such refund to such Government Instrumentality.
At
the reasonable request of Borrower, each Lender who has been
indemnified by a Borrower and the Administrative Agent shall take
all
reasonable measures, at Borrower's expense, to apply for, request
or
otherwise seek a refund or credit of any Reimbursable Taxes;
provided
that taking such action, in the reasonable discretion of such
Lender or
the Administrative Agent, would not be materially burdensome
(taking
into account Borrower's obligation to pay such Lender's or the
Administrative Agent's expenses and other assistance that
Borrower
offers to provide such Lender or Administrative Agent) or result
in
materially adverse consequences to such Lender or the
Administrative
Agent. This paragraph shall not be construed to require the
Administrative Agent or any Lender to make available its tax
returns
(or any other information relating to its taxes which it deems
confidential) to Borrower or any other Person.
(b) CAPITAL
ADEQUACY, RESERVE REQUIREMENTS AND INCREASED
COSTS. If a Lender determines that any Law enacted or effective
after the
Construction Loan Closing Date, any change in Law effective after
the
Construction Loan Closing Date, any change in the interpretation
or
administration of any Law effective after the Construction Loan
Closing Date, or
compliance with any directive, guideline or request from any
Government
Instrumentality effective after the Construction Loan Closing Date
(whether or
not having the force of Law), other than any Law or change in Law
related to
Reimbursable Taxes, which shall be governed exclusively by Section
2.10(a), or
Lender Income Taxes, has the effect of (i) requiring an increase in
the amount
of capital required or expected to be maintained by such Lender or
any
corporation controlling such Lender; (ii) imposing or modifying any
reserve,
special deposit, compulsory loan or similar requirement relating to
any loan,
extension of credit or other asset of, or any deposit with or other
liability
of, such Lender; or (iii) imposes any other cost or condition
affecting the cost
of making a Loan or maintaining a Commitment; PROVIDED, that
Borrower's
obligation under this Section 2.10(b) will not affect the
obligations of the
Affected Parties under Sections 2.10(f)(ii) and (iii), and such
Lender
reasonably determines that such increase, imposition or
modification is material
and is based, in whole or in part, upon its obligations hereunder,
Borrower will
either (x) pay to such Lender the amount necessary to preserve the
return on
equity originally anticipated to be realized by such Lender as a
result of the
Loans made hereunder or (y) prepay the Loans made by such Lender in
the
aggregate amount necessary to prevent such Lender from being
subject to such
13
<PAGE>
increase, imposition or modification; PROVIDED, that Borrower shall
not be
required to compensate a Lender pursuant to this Section 2.10(b)
for any capital
adequacy or reserve increase, imposition or modification incurred
more than one
year prior to the date on which such Lender notifies Borrower of
the change
giving rise to those increased costs or reductions and of such
Lender's
intention to claim compensation for those circumstances; PROVIDED,
further,
that, if the change giving rise to those increased costs or
reductions is
retroactive, then the one-year period referred to above shall be
extended to
include that period of retroactive effect. Any prepayment pursuant
to this
Section 2.10(b) will not cause Borrower to owe a prepayment fee
pursuant to
Section 2.8(c) or otherwise, but such prepayment will be applied in
the manner
provided in Section 2.9(b).
(c) FUNDING LOSSES. Borrower will compensate each Lender, upon
demand, for any out-of-pocket loss, cost or liability (including
interest paid
by such Lender on funds borrowed to make, continue or convert a
Loan and losses
sustained in liquidating deposits but excluding any consequential
damages or
losses) incurred as a result of:
(i) repayment (including repayment due to
acceleration) of a Loan on a date other than the last day of an
Interest Period or the Construction Loan Maturity Date or Term
Loan
Maturity Date, as applicable;
(ii) failure of Borrower to borrow a Loan on the
Funding Date notified to the Administrative Agent in a Notice
of
Borrowing; or
(iii) failure of Borrower to repay a Loan when due
(whether at stated maturity, by acceleration, because of
mandatory
prepayment or otherwise) or on the date specified therefor in a
notice
delivered pursuant to Section 2.8(b).
(d) UNAVAILABILITY. In the event that, on or before the start
of any Interest Period, the Administrative Agent determines
that:
(i) U.S. Dollar deposits are not being generally
offered in the London interbank market;
(ii)
adequate and fair means do not exist for
ascertaining interest rates by reference to LIBOR; or
(iii) any Lender no longer provides LIBOR loans to
any of its borrowers;
then the Administrative Agent will give prompt notice of such fact
to Borrower
and Borrower and the Administrative Agent will promptly enter into
good-faith
discussions to determine an alternate reference interest rate and
margin that
will as nearly as possible duplicate the economic terms of this
Agreement and
the monetary benefit to the Lenders of the Loans made and to be
made by the
Lenders hereunder. If Borrower and the Administrative Agent are
unable to agree
on an alternate reference interest rate and margin, then the
Lenders may suspend
their obligations to make Loans in their sole discretion.
14
<PAGE>
(e) ILLEGALITY. If a Lender determines that any Law enacted or
effective after the Construction Loan Closing Date, any change in
Law effective
after the Construction Loan Closing Date, any change in the
interpretation or
administration of any Law effective after the Construction Loan
Closing Date, or
compliance by such Lender with any directive, guideline or request
(whether or
not having the force of Law) of any Government Instrumentality
effective after
the Construction Loan Closing Date makes it unlawful or impossible
for such
Lender to fund or maintain Loans, then upon notice to Borrower by
such Lender
the obligation of such Lender to fund Loans will be suspended. In
addition, the
outstanding principal amount of such Lender's portion of all Loans,
together
with interest accrued thereon and all other amounts payable with
respect
thereto, will be repaid immediately upon demand of such Lender if
it determines
that immediate repayment is required or, if it determines that
immediate
repayment is not required, at the end of the next applicable
Interest Period. In
the event of a repayment of a Loan pursuant to this Section 2.10(e)
prior to the
end of its Interest Period, Borrower will compensate the Lenders
for all losses,
costs and liabilities described in Section 2.10(c). Any prepayment
pursuant to
this Section 2.10(e) will not cause Borrower to owe a prepayment
fee pursuant to
Section 2.8(c) or otherwise and such prepayment will be applied in
the manner
provided in Section 2.9(b). Notwithstanding the foregoing, prior to
demanding
prepayment of a Loan pursuant to this Section 2.10(e), each Lender
affected by
the conditions described in this Section 2.10(e) agrees to work in
good faith
with Borrower to restructure their respective obligations under
this Agreement
in such a manner as to preserve such Lender's economic return and
to eliminate
or minimize the need for a Loan to be prepaid.
(f) NOTICE AND MITIGATION.
(i) To claim any amount under this Section 2.10, the
Affected Party must deliver to Borrower a certificate setting forth
in
reasonable detail any amount or amounts that such Affected Party
is
entitled to receive pursuant to this Section 2.10 (including
calculations, in reasonable detail, showing how such Affected
Party
computed such amount or amounts). Borrower shall pay such
Affected
Party the amount due and payable and set forth on any such
certificate
within thirty (30) days after its receipt.
(ii) Except as specifically provided in this Section
2.10, each Affected Party will take reasonable measures to avoid
the
need for, or reduce the amount of, compensation, reimbursement
or
indemnification pursuant to this Section 2.10; PROVIDED, that
no
Affected Party will be required to take any measure that, in
its
reasonable judgment, would be materially disadvantageous to it
or
inconsistent with its legal and regulatory position.
(iii) If any material Tax or other charge of a type
not generally imposed on lenders making loans of the types
contemplated
by this Agreement is imposed on payments to any Lender, or if
any
Affected Party is entitled to compensation, reimbursement or
indemnification pursuant to this Section 2.10 in any material
amount
and other lenders making loans of the types contemplated by
this
Agreement would not generally be so entitled, and Borrower is
obligated
15
<PAGE>
hereunder to compensate, reimburse or indemnify such Lender for
such
Tax or other charge, then (A) Borrower may, within ten (10) days
after
receipt of notice of such obligation, request that such Lender
assign
its portion of the affected Loan or Loans to another Person
reasonably
acceptable to the Administrative Agent and such Lender, and such
Lender
will use reasonable efforts to negotiate such an assignment, and
(B) if
Borrower identifies a replacement lender that is reasonably
acceptable
to the Administrative Agent and the other Lenders (if any), then
such
Lender will promptly assign its portion of the affected Loan or
Loans
to such replacement lender pursuant to an assignment reasonably
acceptable to the assigning Lender.
ARTICLE III
CONDITIONS PRECEDENT
--------------------
Section 3.1 CONDITIONS PRECEDENT TO THE AVAILABILITY OF
COMMITMENTS. The obligation of each Lender to make available its
respective
Commitments is subject to the satisfaction of each of the following
conditions
precedent:
(a) The Administrative Agent has received each of the
following, in each case in form and substance satisfactory to the
Administrative
Agent:
(i) each Loan Document required by the Administrative
Agent in its sole discretion to be delivered on the Construction
Loan
Closing Date, executed and delivered by each of the parties
thereto;
(ii) [RESERVED];
(iii) certified copies of:
(A) the Organizational Documents of the PEIX
Parties;
(B) certificates of existence with respect
to the PEIX Parties dated no earlier than thirty (30) days
before the Construction Loan Closing Date; and
(C) incumbency certificates for the
signatories of the PEIX Parties and resolutions (or other
authorizations) of the PEIX Parties approving the Documents to
which they are a party and the transactions contemplated
thereby;
(iv) certificates of a manager or officer of each of
the PEIX Parties certifying that:
(A) all Documents executed by such Person on
or prior to the
Construction Loan Closing Date are in full
force and effect, such Person and, to the best knowledge of
such Person, the other Project Parties, are in material
compliance with all covenants and provisions thereof, and no
breach or event of default (or any event that would become a
16
<PAGE>
breach or event of default with the giving of notice or
passage of
time or both) has occurred and is continuing under
any such Document, except to the extent as could not
reasonably be expected to result in a Material Adverse Effect;
(B) all representations and warranties of
such Person contained in the Loan Documents to which it is a
party are true, correct and complete;
(C) no act, event or circumstance has
occurred with respect to the Project or such Person or, to the
best knowledge of such Person, the other Project Parties which
has had or could reasonably be expected to have a Material
Adverse Effect; and
(D) no material adverse change in the
condition or operation, financial or otherwise, of such Person
or, to the best of such Person's knowledge, PEI has occurred
since January 23, 2006, and the financial statements
(including any notes thereto) provided to the Administrative
Agent disclose all material liabilities, contingent or
otherwise, of such Person;
(v) the legal opinion of Borrower's Counsel;
(vi) the legal opinion of Lenders' Counsel;
(vii) audited financial statements of PEI for the
fiscal year ended December 31, 2005 (which may be in the form of
a
substantially final draft of such audited financial statements if
final
audited financial statements are not available on the Construction
Loan
Closing Date), and all subsequent quarterly financial statements,
if
any, available on the Construction Loan Closing Date, and pro
forma
balance sheets of Borrower as of the Construction Loan Closing
Date;
(viii) judgment lien, tax lien and UCC searches, and
such other searches of the records of Government Instrumentalities
as
the Administrative Agent may require, performed with respect to
the
PEIX Parties in all relevant jurisdictions;
(ix) a certificate of an authorized officer of
Borrower certifying that each of the Project Documents listed
on
Schedule 3.1(a)(ix) (and attached to such certificate) has been
duly
authorized, executed and delivered by the parties thereto, is in
full
force and effect on the Construction Loan Closing Date and is
enforceable against each of the parties thereto;
(x) copies of all Required Approvals obtained on or
prior to the Construction Loan Closing Date by or on behalf of
Borrower;
(xi) the Construction and Draw Schedule;
17
<PAGE>
(xii) a written report of the Engineer, dated on or
prior to the Construction Loan Closing Date, reporting favorably on
the
relevant technical aspects of the Project, including without
limitation;
(A) existing environmental damage/liability
(if any);
(B) the projected availability of the
Project;
(C) the EPC Contract (including the
acceptance, completion and performance test criteria) and EPC
Contractor's and Delta-T's ability to perform their respective
obligations to Borrower;
(D) the cost and expenses of PEC for
performing operation and maintenance services for the Project
and the Grain Facilities pursuant to the applicable Project
Documents, the adequacy of such services, that the provision
of such services by PEC will be sufficient to provide Project
availabilities as assumed in the Closing Pro Forma, and
confirmation that there exist third-party operators capable of
performing such services at comparable cost;
(E) the Closing Pro Forma;
(F) Borrower's and the Project's ability to
comply with the requirements of all leases, easements,
Required Approvals and Project Documents;
(G) an opinion that the construction,
completion, operation and revenues of the Project are
reasonably obtainable within the cost and timeframe
anticipated;
(H) an opinion that any Required Approvals
not yet possible to obtain can be obtained as a matter of
administrative application;
(I) the ability of the Project as designed
and constructed to produce the quantities of Products from the
quantities of corn, natural gas, water, electricity and other
feedstocks at the cost of production, as all are assumed in
the Closing Pro Forma;
(J) the capability of the Grain Facilities
and PEC, as operator of the Grain Facilities, to service the
requirements of the Project as intended;
(K) the capability of the deep water wells
to provide sufficient quantities of make-up water;
(L) that Phase I Completion has been
achieved; and
18
<PAGE>
(M) any other technical or environmental
issues that the Administrative Agent may reasonably request.
(xiii) evidence that Borrower has employed a
construction manager reasonably acceptable to the Administrative
Agent
who will oversee the performance by the EPC Contractor of its
performance under the EPC Contract;
(xiv) a Phase I Environmental Audit or other
acceptable environmental due diligence of the Site, prepared by
the
Environmental Consultant and dated not more than sixty (60) days
prior
to the Construction Loan Closing Date, confirming, among other
things,
that (i) the operations of Borrower and the Project are not subject
to
any current (and would not trigger any future) federal or state
investigation evaluating whether remedial action, involving any
expenditure deemed material by the Administrative Agent, is needed
to
respond to any release of any Hazardous Substance, and (ii)
Borrower
has and will have no contingent liabilities deemed material by
the
Administrative Agent in connection with the release of any
Hazardous
Substance;
(xv) a written report of the Insurance Consultant,
dated on or prior to the Construction Loan Closing Date,
confirming
compliance by Borrower and the Project Parties with all
requirements
relating to Required Insurance contained in this Agreement (except
as
noted in such report) and attaching binders or certificates of
insurance and other documents sufficient, to the extent appropriate
as
of the Construction Loan Closing Date and as otherwise reflected
in
such report) to indicate that Borrower and the Project Parties
have
obtained all Required Insurance, that all Required Insurance is in
full
force and effect and is not subject to pending cancellation, and
that
(A) the Administrative Agent has been named as loss payee with
respect
to the property insurance and business interruption insurance
policies
relating to the Project and (B) the Administrative Agent and
the
Lenders have been named as additional insureds on the general
and
umbrella liability insurance policies maintained by Borrower;
(xvi) one or more reports of qualified consultants
acceptable to the Administrative Agent and dated on or prior to
the
Construction Loan Closing Date commenting favorably on:
(A) the historical and projected
availability and price of the Project's anticipated corn,
natural gas and electrical requirements;
(B) the historical and projected markets and
prices for the Products;
(C) the agreements and/or arrangements for
the purchase and supply of natural gas, electricity and other
materials utilized by the Project;
(D) the agreements and/or arrangements for
the sale of the Products; and
19
<PAGE>
(E) the Project's risk management policies
and procedures and their adequacy to reasonably protect the
Project's operating margin.
(xvii) written confirmation from the Disbursement
Agent that the Contributed Capital has been deposited by or on
behalf
of Borrower into
the Construction Draw Account for application in
accordance with this Agreement and the Disbursement Agreement;
(xviii) evidence that Borrower and Borrower Member
have appointed the Process Agent to serve as a designated agent
to
accept service of legal process until the scheduled Term Loan
Maturity
Date and that the Process Agent has accepted such appointment;
(xix) the Closing Pro Forma incorporating, to the
Administrative Agent's satisfaction, the results of the
Administrative
Agent's due diligence based on information provided by Borrower,
the
reports of Lenders' Counsel, the Engineer and other consultants and
the
terms and
conditions imposed by the Project Documents, showing annual
Net Operating Cash for the ten years following the Construction
Loan
Closing Date and available for debt service on the Term Loans
sufficient (in the Administrative Agent's sole determination)
to
produce an annual Debt Service Coverage Ratio of at least 2.29 to 1
and
for Borrower to comply with the financial covenants of this
Agreement,
including maintenance of the Minimum Coverage Ratio;
(xx) copies of documentation pursuant to which (1)
Borrower has instructed the EPC Contractor to proceed with "Phase
II"
construction, and the EPC Contractor has acknowledged such
instructions, in accordance with the EPC Contract and (2) the
EPC
Contractor has released, on or prior to the Construction Loan
Closing
Date, all Liens relating to "Phase I" construction;
(xxi) the Completion Bond;
(xxii) an appraisal of the Project, the Grain
Facilities and all other improvements constructed on the Site,
prepared
by an appraiser, and in form and substance, acceptable to the
Lenders,
and dated not more than sixty (60) days prior to the Construction
Loan
Closing Date; and
(xxiii) such other assurances, instruments or
undertakings as the Administrative Agent, the Disbursement Agent
and
the DSRA Agent may reasonably request, including in connection
with
"know your customer" and USA PATRIOT Act information
requirements.
(b) Since January 23, 2006, no act, event or circumstance has
occurred with respect to the Project, any PEIX Party or any other
Project Party
which has had or could reasonably be expected to have a Material
Adverse Effect
or a material adverse effect on the availability or pricing of
financing for the
Project.
20
<PAGE>
(c) All Taxes, fees and expenses required to be paid by
Borrower on or before the Construction Loan Closing Date have been
paid.
(d) The Organizational Documents of Borrower contain
provisions satisfactory to the Administrative Agent relating to
bankruptcy and
"separateness" matters and restricting the ability of Borrower to
sell some or
all of its assets.
(e) All Documents executed by Borrower and the PEIX Parties on
or prior to the Construction Loan Closing Date are in full force
and effect, the
PEIX Parties and the other Project Parties are in full compliance
with all
covenants and provisions thereof, and no breach or event of default
(or any
event that could become a breach or event of default with the
giving of notice
or passage of time or both) has occurred and is continuing under
any such
Document except to the extent as could not reasonably be expected
to result in a
Material Adverse Effect.
(f) All representations and warranties of the PEIX Parties
contained in the Loan Documents are true, correct and complete.
(g) The Project Documents executed by Borrower on or prior to
the Construction Loan Closing Date or to which Borrower is
otherwise a party
include all agreements required for the development, construction,
ownership and
operation of the Project, other than those agreements that the
Administrative
Agent does not require to be in place on the Construction Loan
Closing Date and
that the Administrative Agent is satisfied, on the basis of
evidence provided by
Borrower, will be obtainable and entered into in the ordinary
course of business
prior to the time required, and such Project Documents conform in
all material
respects with the Closing Pro Forma and are sufficient to permit
the Project to
operate in a manner that will not violate the Required Approvals or
the
manufacturer's normal operating parameters and such that the
Project will be
capable of achieving the financial results projected in the Closing
Pro Forma.
(h) All Required Approvals necessary for the construction and
operation of the Project and the performance by Borrower and the
Project Parties
of all of their obligations under the Project Documents in effect
on the
Construction Loan Closing Date have been obtained except for those
that are
obtainable only at a later stage and which the Administrative Agent
is
satisfied, on the basis of evidence provided by Borrower, will be
obtainable in
the ordinary course of business prior to the time required, and all
obtained
Required Approvals are in full force and effect, not subject to any
onerous or
unusual condition and are satisfactory to the Administrative Agent
in its sole
discretion.
(i) There is no action, suit, proceeding or investigation
pending or, to Borrower's knowledge, threatened against any PEIX
Party that,
individually or in the aggregate, has had or could reasonably be
expected to
have a Material Adverse Effect, and, to Borrower's knowledge, no
action, suit,
proceeding or investigation has been instituted or threatened
against any
Project Party (other than Borrower or another PEIX Party) relating
to the
Project that, individually or in the aggregate, has had or could
reasonably be
expected to have a Material Adverse Effect.
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(j) The Project has not suffered a material Loss, the Grain
Facilities have not suffered a material Loss other than the fire
damage
disclosed to the Administrative Agent and no material portion of
the Project,
the Grain Facilities or the Site is subject to pending or, to
Borrower's best
knowledge, threatened condemnation or appropriation
proceedings.
(k) No order, judgment or decree of any Government
Instrumentality enjoins or restrains the Administrative Agent or
any Lender from
entering into and performing its obligations under this
Agreement.
(l) All Required Insurance has been obtained, is in full force
and effect and is not subject to cancellation and no Person other
than Borrower,
the Administrative Agent and the Lenders has any right or interest
in, to or
under any Required Insurance other than pursuant to the Project
Documents.
(m) The Security Documents and all financing statements or
other instruments with respect thereto, as may be necessary, have
been filed,
registered or recorded in such manner and in such places as are
required by any
Law to establish and perfect First-Priority Liens in favor of the
Administrative
Agent as granted or purported to be granted pursuant to the
Security Documents
in respect of the Collateral to the extent permitted under
applicable Law, and
any other action required in the judgment of the Administrative
Agent to perfect
such security interests as First-Priority Liens has been taken,
including
without limitation delivery to the Administrative Agent of the
certificates
evidencing all of the membership interests in Borrower and the
related transfer
powers, and all Taxes, fees and other charges in connection with
such recording,
publishing, registration and filing of such Security Documents or
any memoranda
thereof have been paid, or caused to be paid, by Borrower.
Section 3.2 CONDITIONS PRECEDENT TO THE SECOND AND EACH
SUBSEQUENT CONSTRUCTION LOAN FUNDING DATE. The obligation of the
Construction
Lenders to make Construction Loans in accordance with Section
2.2(a) is subject
to the satisfaction of each of the following conditions precedent
on the first
Construction Loan Funding Date after the Construction Loan Closing
Date and on
each subsequent Construction Loan Funding Date:
(a) The Administrative Agent has received each of the
following, in each case in form and substance satisfactory to the
Administrative
Agent:
(i) [RESERVED];
(ii) a Notice of Borrowing, with all attachments
thereto, delivered in compliance with Section 2.2(c) and signed
by
Borrower;
(iii) a certificate of the manager of Borrower
certifying that:
(A) all Documents executed by Borrower on or
prior to the applicable Construction Loan Funding Date are in
full force and effect, Borrower and, to the best knowledge of
Borrower, the Project Parties are in compliance with all
22
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covenants and provisions thereof, and no breach or event of
default (including any Event of Default)(or any event that
would become a breach or event of default, or an Event of
Default, with the giving of notice or the passage of time or
both) has occurred and is continuing under any such Document,
except to the extent as could not reasonably be expected to
result in a Material Adverse Effect;
(B) all representations and warranties of
Borrower contained in the Loan Documents to which it is a
party are true, correct and complete in all material respects
(except with respect to representations and warranties made as
of a prior specific date); and
(C) no act, event or circumstance has
occurred with respect to the Project or Borrower or, to the
best knowledge of Borrower, the Project Parties which has had
or could reasonably be expected to have a Material Adverse
Effect.
(iv) certified copies of all Project Documents in
effect on the applicable Construction Loan Funding Date that have
not
previously been provided to the Administrative Agent;
(v) copies of all Required Approvals obtained on or
prior to the applicable Construction Loan Funding Date by or on
behalf
of Borrower that have not previously been provided to the
Administrative Agent;
(vi) a certificate of the Engineer, dated the
applicable Construction Loan Funding Date, (1) attaching copies of
the
Construction Budget and the Construction and Draw Schedule and
(2)
certifying that, to the best of its knowledge after due inquiry
and
review:
(A) construction of the Project is being
accomplished in all material respects in conformity and
compliance with the Construction Budget, the Plans and
Specifications, the EPC Contract and the Construction and Draw
Schedule (subject to any "PERMITTED CONSTRUCTION DELAY," which
for purposes of this Agreement means any delay in construction
that is expected, in the Engineer's reasonable opinion
following consultation with Borrower and the EPC Contractor,
to delay the Project achieving "Final Construction Completion"
(as defined in the EPC Contract) until not later than January
15, 2007; PROVIDED, that if the Engineer reasonably believes
that construction of the Project will be delayed beyond
January 15, 2007, then such delay will also be considered a
Permitted Construction Delay if Borrower has posted a letter
of credit or other cash or cash-equivalent collateral, in form
and substance reasonably acceptable to the Administrative
Agent, and for the benefit of the Administrative Agent and the
Construction Lenders, in the amount of the aggregate amount of
interest on the Construction Loans that is expected to accrue
from January 15, 2007, until the new expected date for Final
Construction Completion of the Project);
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(B) all Required Approvals capable of being
obtained as of the applicable Construction Loan Funding Date
have been obtained and all other Required Approvals that are
not possible to obtain as of such date will be obtained as and
when needed in the ordinary course of business; and
(C) the Engineer is not aware of any event
that has occurred or is anticipated to occur that could cause
the Project not to be completed on or before the Construction
Loan Commitment Termination Date;
(vii) written confirmation, dated on or before the
first Construction Loan Funding Date after the Construction
Loan
Closing Date, from the Engineer, that the full amount of the
Contributed Capital has been used by Borrower to pay Qualified
Project
Construction Expenses;
(viii) [RESERVED];
(ix) a title commitment (with copies of all documents
and instruments affecting title to Borrower's interest in the Site)
and
a Policy of Title Insurance in California standard form for
Borrower's
interest in the Site, each dated on or prior to the first
Construction
Loan Funding Date after the Construction Loan Closing Date,
insuring
the
Mortgage as a First-Priority Lien on Borrower's interest in the
Site in an amount no less than one hundred percent (100%) of
the
maximum possible Aggregate Term Loan Commitment (the "TITLE
POLICY"),
marked "premium paid" and containing such modifications to the
standard
exceptions and affirmative insurance and endorsements as are
available
in the State of California, including, without limitation, access
to a
public road and mechanic's lien coverage, as the Administrative
Agent
may require;
(x) an ALTA/ASCM "boundary" survey of the Site
showing all easements, encroachments and other survey matters shown
on
the Title Policy or otherwise required by the Administrative
Agent,
such survey to be dated within sixty (60) days of the first
Construction Loan Funding Date after the Construction Loan Closing
Date
and otherwise in form and substance satisfactory to the
Administrative
Agent, prepared by licensed surveyors acceptable to the
Administrative
Agent, and certified to the Administrative Agent and the Title
Insurer;
(xi) an interest rate cap agreement from a provider
reasonably acceptable to the Administrative Agent, in form and
substance acceptable to the Administrative Agent, which agreement
caps
LIBOR at no more than five and one-half percent (5.5%) on
seventy
percent (70%) of the principal projected to be outstanding on
any
Payment Date from the first Construction Loan Funding Date after
the
Construction Loan Closing Date through the fifth anniversary of
the
Term Loan Conversion Date; and
24
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(xii) such other assurances, instruments or
undertakings as the Administrative Agent may reasonably
request.
(b) The Project Documents to which Borrower is a party include
all agreements required for the development, construction,
ownership and
operation of the Project, other than those agreements that the
Administrative
Agent does not require to be in place on the applicable
Construction Loan
Funding Date and that the Administrative Agent is satisfied, on the
basis of
evidence provided by Borrower, will be obtainable in the ordinary
course of
business prior to the time required, and such Project Documents
conform in all
material respects with the Closing Pro Forma and are sufficient to
permit the
Project to operate in a manner that will not violate the Required
Approvals or
the manufacturer's normal operating parameters and such that the
Project will be
able to achieve the financial results projected in the Closing Pro
Forma.
(c) All Documents executed by the PEIX Parties on or prior to
the applicable Construction Loan Funding Date are in full force and
effect, the
PEIX Parties and the other Project Parties are in full compliance
with all
covenants and provisions thereof, and no breach or event of default
(or any
event that could become a breach or event of default with the
giving of notice
or passage of time or both) has occurred and is continuing under
any such
Document except to the extent as could not reasonably be expected
to result in a
Material Adverse Effect.
(d) All representations and warranties of the PEIX Parties
contained in the Loan Documents are true, correct and complete in
all material
respects (except with respect to representations and warranties
made as of a
prior specific date).
(e) No Default or Event of Default has occurred and is
continuing.
(f) All Required Approvals necessary for the construction and
operation of the Project and the performance by Borrower and the
Project Parties
of all of their obligations under the Project Documents in effect
on the
applicable Construction Loan Funding Date have been obtained except
for those
that are obtainable only at a later stage and which the
Administrative Agent is
satisfied, on the basis of evidence provided by Borrower, will be
obtainable in
the ordinary course of business prior to the time required, and all
obtained
Required Approvals are in full force and effect, not subject to any
onerous or
unusual condition and are satisfactory to the Administrative Agent
in its sole
discretion.
(g) No order, judgment or decree of any Government
Instrumentality enjoins or restrains any Construction Lender from
making the
requested Loan.
(h) All Taxes, fees and expenses required to be paid by
Borrower on or before the applicable Construction Loan Funding Date
have been
paid or will be paid on such Construction Loan Funding Date with
proceeds of
Construction Loans.
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<PAGE>
(i) On or prior to the date that is 425 days after the
Construction Loan Closing Date, the Grain Facilities have been
modified so as to
meet the operational requirements of the Project, including without
limitation
the availability to the Project of fifteen (15) days of dedicated
grain storage.
Section 3.3 CONDITIONS PRECEDENT TO THE TERM LOAN CONVERSION
DATE. The obligation of the Term Lenders to make Term Loans in
accordance with
Section 2.2(b) is subject to the satisfaction of each of the
following
conditions precedent:
(a) The Administrative Agent has received each of the
following, in each case in form and substance satisfactory to the
Administrative
Agent:
(i) a Notice of Borrowing, with all attachments
thereto, delivered in compliance with Section 2.2(c) and executed
by
Borrower;
(ii) the Term Loan Notes, executed by Borrower;
(iii) [RESERVED];
(iv) an ALTA/ASCM "as-built" survey of the Site
showing (A) the location of the Project and the Grain Facilities,
(B)
that the Project and the Grain Facilities are located within
the
boundaries of the Site (without encroachments on any
right-of-way,
easement or other interest that could adversely affect the
continued
operation of the Project or the Grain Facilities), (C) that the
Site is
not located in a flood zone (or, to the extent that any portion of
the
Site is in a flood zone, delineating the portions thereof in such
flood
zone, in which case flood hazard insurance may be required by
the
Administrative Agent), and (D) all easements, encroachments and
other
survey matters shown on the Title Policy (as updated to the Term
Loan
Conversion Date) or otherwise reasonably required by the
Administrative
Agent, such survey to be dated within thirty (30) days of the Term
Loan
Conversion Date and prepared by licensed surveyors acceptable to
the
Administrative Agent, and certified to the Administrative Agent and
the
Title Insurer;
(v) such
legal opinions of Borrower's Counsel and
Lenders' Counsel as the Administrative Agent may reasonably
request;
(vi) a certificate of existence with respect to each
PEIX Party dated no earlier than thirty (30) days before the Term
Loan
Conversion Date;
(vii) a certificate of a manager or officer of each
PEIX Party certifying that:
(A) all Documents executed by such Person on
or prior to the Term Loan Conversion Date are in full force
and effect, such Person and, to the best knowledge of such
Person, the other Project Parties, are in compliance with all
covenants and
provisions thereof, and no breach or event of
default (including any Event of Default or any event that
would become a breach or event of default, or an Event of
26
<PAGE>
Default, with the giving of notice or the passage of time or
both) has occurred and is continuing under any such Document,
except to the extent as could not reasonably be expected to
result in a Material Adverse Effect;
(B) all representations and warranties of
such Person contained in the Loan Documents are true, correct
and complete in all material respects (except with respect to
representations and warranties made as of a prior specific
date); and
(C) no act, event or circumstance has
occurred with respect to the Project or such Person or, to the
best knowledge of such Person, the other Project Parties which
has had or could reasonably be expected to have a Material
Adverse Effect;
(viii) a completion
certificate of the Engineer
certifying that:
(A) the Project has been completed in all
material respects in accordance with the EPC Contract;
(B) "Final Construction Completion" (as
defined in the EPC Contract) has occurred;
(C) the Project is available for commercial
operation; and
(D)
all Required Approvals required to
operate the Project are in full force and effect;
(ix) an Operating Plan and Budget for the Project for
the current and subsequent calendar year;
(x) certified copies of all Project Documents in
effect on the Term Loan Conversion Date that have not previously
been
provided to the Administrative Agent;
(xi) copies of all Required Approvals obtained on or
prior to the Term Loan Conversion Date that have not previously
been
provided to the Administrative Agent;
(xii) an overhaul, maintenance and repair plan with
respect to the Project for the period from the Term Loan
Conversion
Date through the Term Loan Maturity Date, as approved by the
Engineer;
(xiii) evidence satisfactory to the Administrative
Agent in its sole discretion that all existing Indebtedness of
Borrower
(including, without limitation, the Sub-Debt but excluding
Indebtedness
of Borrower permitted to be outstanding pursuant to Section
5.2(g))
27
<PAGE>
will be repaid in full on the Term Loan Conversion Date with
proceeds
of the Term Loans or otherwise assumed in full by a Person other
than
Borrower and that liens securing such indebtedness on the
equity
interests in Borrower and Borrower's assets will be released upon
such
repayment; and
(xiv) such other assurances, instruments or
undertakings as the Administrative Agent may reasonably
request.
(b) The Project Documents to which Borrower is a party include
all agreements required for the development, construction,
ownership and
operation of the Project and the Grain Facilities, other than those
agreements
that the Administrative Agent does not require to be in place on
the Term Loan
Conversion Date and that the Administrative Agent is satisfied, on
the basis of
evidence provided by Borrower, will be obtainable in the ordinary
course of
business prior to the time required, and such Project Documents are
sufficient
to permit the Project and the Grain Facilities to operate in a
manner that will
not violate the Required Approvals or the manufacturer's normal
operating
parameters and such that the Project will be able to achieve the
financial
results projected in the Closing Pro Forma.
(c) All Documents executed by the PEIX Parties on or prior to
the Term Loan Conversion Date are in full force and effect, the
PEIX Parties and
the other Project Parties are in full compliance with all covenants
and
provisions thereof, and no breach or event of default (or any event
that could
become a breach or event of default with the giving of notice or
passage of time
or both) has occurred and is continuing under any such Document
except to the
extent as could not reasonably be expected to result in a Material
Adverse
Effect.
(d) All representations and warranties of the PEIX Parties
contained in the Loan Documents are true, correct and complete in
all material
respects (except with respect to representations and warranties
made as of a
prior specific date).
(e) No Default or Event of Default has occurred and is
continuing.
(f) All Required Approvals necessary for the construction and
operation of the Project and the performance by Borrower and the
Project Parties
of all of their obligations under the Project Documents in effect
on the Term
Loan Conversion Date have been obtained except for those that are
obtainable
only at a later stage and which the Administrative Agent is
satisfied, on the
basis of evidence provided by Borrower, will be obtainable in the
ordinary
course of business prior to the time required, and all obtained
Required
Approvals are in full force and effect, not subject to any onerous
or unusual
condition and are satisfactory to the Administrative Agent in its
sole
discretion.
(g) All Required Insurance has been obtained, is in full force
and effect and is not subject to cancellation and no Person other
than Borrower,
the Administrative Agent and the Lenders has any right or interest
in, to or
under any Required Insurance other than pursuant to the Project
Documents.
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(h) The Security Documents and all financing statements or
other instruments with respect thereto, as may be necessary, have
been filed,
registered or recorded in such manner and in such places as are
required by any
Law to establish and perfect First-Priority Liens in favor of the
Administrative
Agent as granted or purported to be granted pursuant to the
Security Documents
in respect of the Collateral to the extent permitted under
applicable Law, and
any other action required in the judgment of the Administrative
Agent to perfect
such security interests as First-Priority Liens has been taken,
including
without limitation delivery to the Administrative Agent of the
certificates
evidencing all of the membership interests in Borrower and the
related transfer
powers, and all stamp, recording or other documentary taxes
(collectively,
"TRANSFER TAXES"), fees and other charges in connection with such
recording,
publishing, registration and filing of such Security Documents or
any memoranda
thereof have been paid, or cause to be paid, by Borrower.
(i) All Construction Loans, together with all accrued and
unpaid interest thereon and all other amounts due and payable under
the Loan
Documents will be paid in full concurrently with the funding of the
Term Loans.
(j) All Qualified Project Construction Expenses have been paid
in full, or an amount deemed sufficient by the Engineer to pay all
unpaid costs
(including with respect to outstanding punch list items) has been
deposited in
an account under the control of the Administrative Agent for such
purpose.
(k) The Project has achieved Final Construction Completion
under the EPC Contract and commenced Commercial Operations.
(l) No order, judgment or decree of any Government
Instrumentality enjoins or restrains any Term Lender from making
the requested
Term Loan.
Section 3.4 NO WAIVER. The failure of the Administrative Agent
to require satisfaction of any condition precedent set forth in
this Article
III, or the funding of any Loan despite the failure of Borrower to
satisfy any
such condition precedent, will not constitute a waiver of such
condition
precedent unless the Administrative Agent so states in writing. A
waiver by the
Administrative Agent of any condition precedent in connection with
the funding
of any Loan will not affect the applicability of such condition
precedent to the
funding of subsequent Loans.
Section 3.5 LOCATION OF CLOSINGS. The various closings of the
loan transactions contemplated hereunder will take place at the
office of the
Lenders' Counsel in New York, New York, or the offices of the
Administrative
Agent in Westport, Connecticut, at the election of the
Administrative Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 4.1 REPRESENTATIONS AND WARRANTIES. Borrower
represents and warrants to the Administrative Agent and the Lenders
on and as of
each date on which such representations and warranties are required
to be made
pursuant to Article III as follows:
29
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(a) EXISTENCE; AUTHORITY. It is a limited liability company
duly formed, validly existing and in good standing under the Laws
of the State
of Delaware and is duly qualified to do business as a foreign
limited liability
company and is in good standing in each jurisdiction in which such
qualification
is necessary or desirable in view of its current or proposed
business and
operations or the ownership of its properties. It has all necessary
rights,
franchises and privileges and full power and authority to execute,
deliver and
perform the Documents to which it is a party, to design, construct,
own and
operate the Project and to conduct its business as currently
conducted and as
proposed to be conducted. It has taken all necessary action to
execute, deliver
and perform the Documents to which it is a party and such Documents
have been
duly executed and delivered by it and constitute the legally valid
and binding
obligations of it, enforceable in accordance with their respective
terms, except
as enforcement may be limited by bankruptcy, insolvency,
reorganization,
moratorium or similar Laws relating to or limiting creditors'
rights generally
or by general principles of equity.
(b) CAPITALIZATION. The ownership interests in Borrower are as
set forth in the Organizational Documents provided to the
Administrative Agent
pursuant to Article III. All of such ownership interests are duly
and validly
issued and are subject to no Liens other than the Liens in favor of
the
Administrative Agent created by the Pledge Agreement. There are no
other
ownership or equity interests in Borrower, rights to acquire or
subscribe for
any such interests or securities or instruments convertible into or
exchangeable
or exercisable for any such interests.
(c) BUSINESS AND CONTRACTUAL OBLIGATIONS. Borrower is a
single-purpose entity formed for the sole purpose of designing,
constructing,
owning and operating the Project and the Grain Facilities and
performing its
obligations under the Documents. Borrower has engaged in no
business or activity
and incurred no liability or expense to any Person except for those
contemplated
by the Documents and the Sub-Debt. Except for the Documents and in
connection
with the Sub-Debt, Borrower is not a party or subject to any
Contractual
Obligation with respect to any of the Collateral. Borrower has not
assumed,
guaranteed, endorsed or otherwise become directly or contingently
liable for
(including, without limitation, liable by way of agreement,
contingent or
otherwise, to purchase, to provide funds for payment, to supply
funds to or
otherwise invest in the debtor or otherwise to assure the creditor
against loss)
the indebtedness or obligations of any other Person except pursuant
to a Loan
Document. Borrower has not made any loan or advance to any Person
and does not
own or hold capital stock, securities, debt, assets or obligations
of, or any
interest in, any Person.
(d) NAME, ADDRESS AND RECORDS. The name of Borrower set forth
in the first paragraph of this Agreement is the true, correct and
complete name
of Borrower, and Borrower does not conduct business under any other
name or
tradestyle. The legal address of Borrower and the address of the
principal place
of business and chief executive office of Borrower is 31470 Avenue
12, Madera,
California 93628. Borrower keeps all of its records and all
documents evidencing
30
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or relating to its Contractual Obligations at such address or at
5611 N. West
Avenue, Fresno, California 93711. Borrower has no property or other
assets at
any other address other than as listed in the Security
Agreements.
(e) NO VIOLATIONS, DEFAULTS OR LIENS.
(i) Borrower is not (A) in violation of any Law
(including Environmental Laws), (B) in violation of or default
under
its Organizational Documents and (C) in violation of or default
under
any Document or other Contractual Obligation, except to the extent
as
could not reasonably be expected to have a Material Adverse
Effect.
Borrower is not a party to or affected by any charter, bylaw,
operating
agreement or other constituent document or any Contractual
Obligation
that could reasonably be expected to have a Material Adverse
Effect.
(ii) To the best knowledge of Borrower, no Project
Party (A) is in violation of any Law (including Environmental
Laws),
(B) is in violation of or default under its charter, bylaws,
partnership agreement or other organizational documents or (C) is
in
violation of or default under any Project Document or any other
Contractual Obligation, in each case except to the extent as could
not
reasonably be expected to have a Material Adverse Effect.
(iii) No Event of Default has occurred and is
continuing.
(iv) Borrower is the legal and beneficial owner of,
and has good, marketable and valid title to, the Collateral (except
for
the Collateral pledged pursuant to the Pledge Agreement). None of
the
Collateral is subject to any Lien other than Permitted Liens.
No
effective mortgage, deed of trust, financing statement,
security
agreement or other similar instrument which is not a Security
Document
is on file or of record in the office of any Government
Instrumentality
with respect to any Collateral other than with respect to
Permitted
Liens.
(v) The execution, delivery and performance of the
Loan Documents and Major Project Documents to which the PEIX
Parties
are parties do not and will not (A) violate any Law (including
Environmental Laws), (B) violate, or result in a default under,
the
Organizational Documents of any such Person, (C) violate, or result
in
a default under, any Loan Document or any other material
Contractual
Obligation of any such Person, (D) result in or require the
creation or
imposition of any Lien (other than Permitted Liens) on the
Collateral
or other property of any such Person or (E) require an Approval
from
any Person that has not been obtained or that will not be obtained
in
due course.
(f) REQUIRED APPROVALS. Borrower has obtained and is in
compliance with all Required Approvals required to be obtained at
or prior to
the time this representation is made and in order for the Project,
the Grain
Facilities, Borrower, the Administrative Agent and the Lenders and
their
respective activities to be in compliance with Applicable Law
(except to the
31
<PAGE>
extent the failure to obtain such Approvals could not reasonably be
expected to
have a Material Adverse Effect). Borrower has no reason to believe
that any
Required Approval not yet obtained cannot or will not be obtained
in the normal
course of business as and when required and without significant
expense.
Borrower has provided the Administrative Agent with a true, correct
and complete
copy of each Required Approval required to be obtained at or prior
to the time
this representation and warranty is made. All Required Approvals
obtained by
Borrower (i) are validly issued, (ii) are in full force and effect,
(iii) are
free from any condition or requirement that cannot be met or that
could
reasonably be expected to have or result in a Material Adverse
Effect and (iv)
are not the subject of a current challenge and are not subject to
any onerous or
unusual conditions. No adverse proceeding or other action is
pending or to
Borrower's knowledge threatened with respect to any Required
Approval and all
information provided in connection with each Required Approval was
on the date
provided and is on the date hereof true, correct and complete in
all material
respects. The Administrative Agent will be entitled, without undue
expense or
delay, to the benefit of each Required Approval upon the exercise
of its
remedies under the Security Documents.
(g)
PROJECT DOCUMENTS.
(i) As of the Construction Loan Closing Date, the
Project Documents listed in Schedule 3.1(a)(ix) include all
agreements
required for the design, construction, ownership, operation and
maintenance of the Project and the Grain Facilities as contemplated
by
the Documents and the Closing Pro Forma. All such Project
Documents
have been duly and validly executed and delivered by the
parties
thereto, are in full force and effect and have not been
amended,
modified, supplemented or terminated. The copies of all Project
Documents provided to the Administrative Agent by Borrower are
true,
correct and complete. Borrower has or will have enforceable
agreements
or other satisfactory arrangements that ensure the availability,
on
commercially reasonable terms, of all feedstock, utilities,
transportation, facilities, infrastructure, interconnections,
materials
and services necessary for the design, construction, ownership,
operation and maintenance of the Project and the Grain Facilities
as
contemplated by the Documents.
(ii) The Project, when constructed and operated in
accordance with the Project Documents, will comply in all
material
respects with all applicable Laws, all Required Approvals and
prudent
practices of the ethanol production industry.
(iii) The legal description of the Site set forth in
the Mortgage is true and correct. Borrower has good and
marketable
title to all easements and other property interests necessary for
the
construction, ownership, operation and maintenance of the Project
as
contemplated by the Documents, including all rights of access,
ingress,
egress and interconnection.
(iv) Borrower is not aware of any existing fact or
circumstance that would prevent the conversion of the
Construction
Loans to Term Loans in accordance with this Agreement on or before
the
Construction Loan Commitment Termination Date.
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(h) INTELLECTUAL PROPERTY. Borrower owns, or is licensed to
use, or will own or license to use, all patents, trademarks,
service marks,
licenses, franchises, trade names, tradestyles, copyrights,
technology,
formulas, know-how and processes used in, to be used in or
necessary for the
construction, ownership or operation of the Project or for the
current or
proposed conduct of its business, other than that intellectual
property for
which the failure to so obtain and maintain could not reasonably be
expected to
have a Material Adverse Effect. The use of such patents,
trademarks, trade
names, tradestyles, copyrights, technology, know-how and processes
by Borrower
does not and will not injure or infringe upon the rights of any
Person in any
material respects.
(i) TAXES.
(i) There is no, and to the knowledge of Borrower
there are no pending changes in Law that would create any, Tax
payable
by or imposed on Borrower by virtue of the execution, delivery,
performance or enforcement of the Documents other than normal
and
customary Transfer Taxes and income taxes payable by Borrower on
its
income in the jurisdictions in which such income is earned.
(ii) Borrower has filed in a timely manner all Tax
returns required by Law and has paid all Taxes shown to be due
and
payable on such returns or on any material assessments made on
Borrower's properties, other than Taxes being contested in good
faith
by appropriate proceedings with proper reserves established in
accordance with GAAP.
(j) FINANCIAL
STATEMENTS.
(i) All financial statements of PEI (as well as all
notes and schedules thereto) furnished to the Administrative Agent
are
true, complete and correct in all material respects (subject, as
to
interim statements, to changes resulting from audits and
year-end
adjustments), have been prepared in accordance with GAAP (except
as
otherwise stated therein). Except with respect to matters
previously
disclosed to the Administrative Agent, there has been no
material
adverse change in the business, condition or operations (financial
or
otherwise) of any of the PEIX Parties since January 23, 2006,
and
Borrower knows of no reasonable basis for the assertion against it
or
the other PEIX Parties of any obligation or liability that is not
fully
reflected in the financial statements furnished to the
Administrative
Agent.
(ii) The Pro Forma Balance Sheet for Borrower is
true, correct and complete in all material respects and fairly
presents
the information contained therein as at the Construction Loan
Closing
Date and Borrower's good-faith estimate of the information
contained
therein as at the date of such Balance Sheet. Borrower has no
material
liability, contingent or otherwise, including any material
liability
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<PAGE>
for Taxes, or any unusual forward or long-term commitment which is
not
disclosed by, or reserved against in, the Pro Forma Balance Sheet
or in
the notes thereto which under GAAP is of a nature and an amount
required to be so disclosed or reserved. There are no unrealized
or
anticipated losses from any unfavorable commitments of Borrower
that
could reasonably be expected to have a material adverse effect on
the
business, condition or operations (financial or otherwise) of
Borrower.
(k) CONSTRUCTION BUDGET. As of the Construction Loan Closing
Date, the Construction Budget (i) has been prepared with due care,
(ii) is
complete in all material respects and fairly presents Borrower's
good faith
expectations as at the date of such document as to the matters
covered thereby,
(iii) is based on reasonable assumptions as to the factual and
legal matters
material to the estimates therein and (iv) is consistent with the
Documents. The
Construction Budget accurately specifies and describes all material
Qualified
Project Construction Expenses.
(l) NO PROCEEDINGS. There is no pending or, to the best of
Borrower's knowledge, threatened action, suit, litigation,
investigation,
arbitration or other proceeding involving or affecting Borrower or
its
properties or assets or, to the best knowledge of Borrower, any
Project Party or
any of their respective properties or assets, before any
Government
Instrumentality which could reasonably be expected to result in a
Material
Adverse Effect. None of Borrower or its properties or assets or, to
the best
knowledge of Borrower after due inquiry, any Project Party or any
of their
respective properties or assets, is subject to any order, writ or
injunction
which prohibits, enjoins or limits any aspect of the transactions
contemplated
by the Documents or which could reasonably be expected to result in
a Material
Adverse Effect.
(m) NO BROKER'S FEES. Borrower has no obligation (direct,
indirect, contingent or otherwise) to pay any fee, commission or
compensation to
any broker, finder or intermediary with respect to or as a result
of any
transaction contemplated by the Documents except as has been
previously
disclosed to the Administrative Agent.
(n) ENVIRONMENTAL MATTERS. Except as set forth in the reports
delivered to the Administrative Agent pursuant to Section
3.1(a)(xiv):
(i) To Borrower's best knowledge, no Hazardous
Substance exists on, under or about the Project, the Grain
Facilities
or the Site in violation of any Environmental Law, and the Project,
the
Grain Facilities, the Site, Borrower and the Project Parties (in
such
respects as relate to the Project) are in compliance with all
Environmental Laws except to the extent that such noncompliance
could
not reasonably be expected to result in a Material Adverse
Effect.
(ii) To Borrower's best knowledge, no Hazardous
Substance has at any time been transported to or from the Site or
used,
generated, manufactured, handled, processed, stored, released,
transported, removed, disposed of or cleaned up on, from, under
or
about the Site in violation of any Environmental Law except to
the
extent that could not reasonably be expected to result in a
Material
Adverse Effect.
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(iii) To Borrower's best knowledge, there has
occurred no release or threatened release of any Hazardous
Substance
on, under, onto, adjacent to or from the Site except to the extent
that
such release could not reasonably be expected to result in a
Material
Adverse Effect.
(iv) There are no past, current, pending or
threatened Environmental Claims in writing in any way relating
to
Borrower, any Project Party (to Borrower's best knowledge and in
such
respects as relate to the Project, the Grain Facilities or the
Site) or
the Project, the Grain Facilities or the Site except to the extent
that
such Environmental Claims could not reasonably be expected to
result in
a Material Adverse Effect.
(v) There are no facts, circumstances, conditions or
occurrences known to Borrower regarding the Project, the Grain
Facilities or the Site that could reasonably be expected to form
the
basis of an Environmental Claim or cause the Project, the Grain
Facilities or the Site to be subject to any restrictions on
ownership,
occupancy, use or transferability under any Environmental Law
applicable to the Project, the Grain Facilities or the Site or
require
the filing or recording of any notice, Approval or disclosure
document
under any Environmental Law, except to the extent that could
not
reasonably be expected to result in a Material Adverse Effect.
(vi) The Site is not listed on or proposed for
listing on the National Priority List promulgated pursuant to
the
Comprehensive Environmental Response, Compensation and Liability
Act of
1980 and the regulations promulgated pursuant thereto or any
state
priority list promulgated pursuant to any comparable state law.
To
Borrower's best knowledge, no Hazardous Substances have been
generated
at or transported from the Project, the Grain Facilities or the
Site or
been disposed at any location that is listed or proposed for
listing on
the National Priority List or any state priority list or any
location
that is or has been the subject of a clean-up or remedial
action
pursuant to any Environmental Law, except to the extent that could
not
reasonably be expected to result in a Material Adverse Effect.
(vii) Borrower and, to Borrower's best knowledge, the
Project Parties have not received any written or other notice,
mandate,
order, lien or request which remains pending under an Environmental
Law
relating to a violation or an alleged violation of any
Environmental
Law or potential Environmental Claim, except to the extent that
could
not reasonably be expected to result in a Material Adverse
Effect.
(viii) Borrower has obtained all necessary Approvals
to operate the Project and such approvals are: (i) in full force
and
effect; and (ii) allow the Project to produce 35 million gallons
per
year of ethanol without exceeding any emission limits or requiring
any
offsets to be acquired.
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(o) NO ADVERSE EVENTS.
(i) No material Loss has occurred.
(ii) To Borrower's knowledge, no portion of the
Project, the Grain Facilities or the Site is subject to a pending
or
threatened (in writing) condemnation or appropriation
proceeding.
(iii) No PEIX Party is party to or affected by any
charter, certificate of incorporation, bylaw, certificate of
formation,
limited liability company agreement, partnership agreement or
other
constituent document or any Contractual Obligation that could
reasonably be expected to result in a Material Adverse Effect.
(p) ERISA. None of Borrower or the ERISA Affiliates of
Borrower sponsors, maintains, administers, contributes to,
participates in or
has any obligation to contribute to or any liability under any
Plan.
(q) LABOR MATTERS. There are no collective bargaining
agreements or Multiemployer Plans covering any employees of
Borrower and none of
Borrower or, to the best knowledge of Borrower, any Major Project
Party has
experienced any strike, walkout, work stoppage or other labor
action or
disturbance during the past five years.
(r) INVESTMENT COMPANY ACT. Borrower is not an "investment
company" or a company "controlled" by an "investment company"
within the meaning
of the Investment Company Act of 1940, as amended.
(s) USE OF PROCEEDS.
(i) The proceeds of the Loans have been and will be
used only for the purposes described in Section 2.7 and in
accordance
with the requirements and conditions of this Agreement.
(ii) Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin
stock
(within the meaning of Regulation G, T, U or X issued by the Board
of
Governors of the Federal Reserve System) and no proceeds of any
Loan
will be used, directly or indirectly, to purchase or carry margin
stock
or to extend credit to others for the purpose of purchasing or
carrying
margin stock.
(iii) No proceeds of any Loan will be used to acquire
any security in any transaction which is subject to Section 13 or
14 of
the Securities Exchange Act of 1934, as amended.
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<PAGE>
(t) BANK ACCOUNTS. Borrower does not maintain any account or
deposit with any bank or other depository institution other than
the accounts
created under the Disbursement Agreement, except for standard
operations and
payroll accounts.
(u) ENFORCEABILITY; NO IMMUNITY. The descriptions of the
Collateral contained in the Security Documents are true, correct
and complete
and are sufficient to describe the Collateral and to create, attach
and perfect
the Liens intended to be created by the Security Documents. All
necessary and
appropriate deliveries, notices, recordings, filings and
registrations have been
effected to perfect First-Priority Liens on the Collateral in favor
of the
Administrative Agent in all relevant jurisdictions, and the
Administrative Agent
has duly and validly created, attached, perfected and enforceable
First-Priority
Liens on the Collateral in all relevant jurisdictions.
(v) FULL DISCLOSURE. No written information, exhibit or report
furnished to the Administrative Agent by PEI or any PEIX Party in
connection
with the transactions contemplated by this Agreement (other than
projections and
other "forward-looking" information prepared on a reasonable basis
in good faith
by Borrower), when taken as a whole and taking into account updates
of
previously provided information, contains any material misstatement
of fact or
omits to state a material fact or any fact necessary to make the
statements
contained therein not misleading.
(w) INSURANCE. Borrower is in compliance, to the extent
applicable to it, with all requirements set forth in the Loan
Documents and the
Major Project Documents to maintain insurance, including Required
Insurance.
Section 4.2 SURVIVAL. The representations and warranties of
the PEIX Parties contained in the Loan Documents or made by the
PEIX Parties in
any certificate, notice or report delivered pursuant to any Loan
Document will
speak only as of each date on which the PEIX Parties make such
representations
and warranties pursuant to the Loan Documents and will survive the
Construction
Loan Closing Date, the making and repayment of the Loans and any
transfer or
assignment of any Note, but will terminate upon the payment in full
of the Loans
and all other amounts due and payable under the Loan Documents.
ARTICLE V
COVENANTS
---------
Section 5.1 AFFIRMATIVE COVENANTS. Borrower covenants and
agrees that, for so long as any Lender has any Commitment
outstanding hereunder
and until the payment in full of the Notes and all amounts payable
by Borrower
and any other Person under the Loan Documents, it will perform and
observe each
of the following covenants, unless (and then only to the extent)
compliance with
such covenant has been waived pursuant to Section 8.5:
(a) EXISTENCE. It will preserve and maintain its limited
liability company existence, rights, franchises and privileges and
remain in
good standing in the jurisdiction of its formation, and qualify and
remain
qualified as a foreign limited liability company in good standing
in each
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<PAGE>
jurisdiction in which such qualification is necessary or desirable
in view of
its current or proposed business and operations or the ownership of
its
properties except to the extent that any non-qualification could
not reasonably
be expected to have a Material Adverse Effect.
(b) COMPLIANCE WITH LAWS, APPROVALS AND OBLIGATIONS. It will
comply with, and will cause the Project and the Grain Facilities to
be
constructed and operated safely and in compliance in all material
respects with,
all applicable Laws, all Required Approvals, the Documents, its
other
Contractual Obligations and prudent operating practices followed by
the ethanol
production and grain handling industries. It will perform its
obligations under
the Documents and each of its other Contractual Obligations and
will diligently
enforce all of its rights under the Project Documents and under all
guarantees,
warranties and indemnities in its favor or relating to the Project
or any
component thereof, except to the extent that any failure to perform
or enforce
could not reasonably be expected to have a Material Adverse Effect.
It will
satisfy before the same become delinquent all Claims (including all
Claims for
labor, services, materials and supplies and other amounts due under
its
Contractual Obligations) other than Claims being contested in good
faith by
appropriate proceedings with proper reserves established which do
not result in
the imposition of a Lien prohibited by Section 5.2(f). It will
obtain and
maintain in full force and effect all Required Approvals required
from time to
time and at any time for the execution, delivery, performance,
admission into
evidence or enforcement of the Documents or the development,
construction,
ownership or operation of the Project and the Grain Facilities as
contemplated
under the Documents. It will furnish the Administrative Agent with
true, correct
and complete copies of all Required Approvals upon receipt
thereof.
(c) TITLE. Except as may be otherwise permitted in this
Agreement, Borrower will maintain good and marketable title to its
interest in
the Site and to its interests in the Project, the Grain Facilities
and the other
Collateral in which it has an interest and warrant and defend its
interest in
the Site and its title or other interest in the Project, the Grain
Facilities
and the other Collateral against all Claims that do not constitute
Permitted
Liens.
(d)
COLLATERAL. Borrower will take all actions necessary to
insure that, on and after the Construction Loan Closing Date, the
Administrative
Agent has and continues to have in all relevant jurisdictions duly
and validly
created, attached, perfected and enforceable First-Priority Liens
on the
Collateral (including after-acquired Collateral). It will deliver
possession of
any Collateral to the Administrative Agent or its designated agent
immediately
upon acquiring rights therein to the extent the Administrative
Agent is required
to perfect its security interest in such Collateral by taking
possession
thereof. It will also maintain the title insurance policies
delivered to the
Administrative Agent pursuant to Article III.
(e) CONSTRUCTION.
(i) Borrower will use commercially reasonable efforts
to cause the Project to be constructed and completed substantially
in
accordance with the Plans and Specifications, the Construction
Budget
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and the Construction and Draw Schedule. Only new, first-quality
components will be used in constructing and equipping the
Project
except as may be otherwise agreed by the Administrative Agent
in
consultation with the Engineer. The Project will be constructed
entirely on the Site and in a manner so as not to injure or
encroach
upon the property or rights of any other Person except for
those
portions of the Project that are located on the property of
others
pursuant to easements granted to Borrower by such Persons.
(ii) Borrower will give the Administrative Agent and
the Engineer at least seven (7) Business Days' prior written notice
of
each performance test to be conducted under the EPC Contract and
the
Administrative Agent, the Engineer and their respective agents
and
representatives will be afforded the opportunity to observe and
verify
each such test. Completion will not be deemed to have been
achieved
until the Engineer determines that it has been achieved. Borrower
will
give the Administrative Agent and the Engineer at least five
(5)
Business Days' prior written notice of the occurrence of
Commercial
Operation.
(f) MAINTENANCE AND OPERATION. Borrower will maintain and
preserve the Project, the Grain Facilities and all of its other
material assets
and properties in good working order and condition, ordinary wear
and tear
excepted. Prior to the Term Loan Conversion Date, it will develop
an overhaul,
maintenance and repair plan with respect to the Project for the
period from the
Term Loan Conversion Date through the Term Loan Maturity Date,
which must be
approved by the Administrative Agent in consultation with the
Engineer. Borrower
will comply in all material respects with such overhaul,
maintenance and repair
plan, comply with all warranties and maintenance recommendations
and
requirements of manufacturers and vendors of component parts of the
Project and
make all repairs, alterations, additions and replacements necessary
for the
Project (i) to operate safely and to meet, in all material
respects, the
requirements of all applicable Laws, all Required Approvals, the
Documents, the
other Contractual Obligations of Borrower and prudent practices
followed by the
ethanol production industry and (ii) to operate at or exceed the
operating
levels set forth in the Closing Pro Forma. Borrower will promptly
correct any
material structural or other defect in the Project or any material
deviation
from the Plans and Specifications and will maintain appropriate
spare parts,
inventories and redundancies.
(g) OPERATING PLAN AND BUDGET. Not later than each November 30
occurring after the Term Loan Conversion Date, Borrower will submit
to the
Administrative Agent for approval a proposed Operating Plan and
Budget for the
next calendar year and a forecast of the Net Operating Cash of the
Project for
the next three (3) calendar years. The Administrative Agent will
have the right
to request, and if so requested by the Majority Lenders shall
request, revisions
to each proposed Operating Plan and Budget and, after an Operating
Plan and
Budget has been finalized and approved by the Administrative Agent,
Borrower
will follow and comply with such Operating Plan and Budget in all
particulars
except that (i) on an annualized basis, taking into account cost
savings on
other line items, Borrower may exceed by no more than 10% the
budget for fixed
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<PAGE>
costs and no more than 15% the budget for variable costs, and (ii)
to the extent
that Borrower exceeds its budget by amounts greater than the
margins described
in the preceding clause (i), Borrower will be permitted to do so to
the extent
Borrower pays for any such excess overages with amounts available
to it other
than funds on deposit in the Security Accounts or otherwise
disbursed to
Borrower pursuant to the Disbursement Agreement. Borrower will have
the right to
revise any Operating Plan and Budget based on cost fluctuations for
any Budget
Line Items related to the pricing of corn, natural gas, Products
and operations
and maintenance costs, to the extent that the Net Operating Cash
under the
revised Operating Plan and Budget (and taking into account such
increased costs)
is equal to or greater than the Net Operating Cash contemplated in
the Operating
Plan and Budget prior to such revision. Once approved by the
Administrative
Agent, an Operating Plan and Budget or a revised Operating Plan and
Budget will
supersede all prior Operating Plans and Budgets and will continue
in effect
until a subsequent Operating Plan and Budget has been approved by
the
Administrative Agent.
(h) INTELLECTUAL PROPERTY. Borrower will obtain and maintain
in full force and effect all patents, trademarks, service marks,
licenses,
franchises, trade names, tradestyles, copyrights, technology,
formulas, know-how
and processes to be used in or necessary for the construction,
ownership and
operation of the Project and for the current and proposed conduct
of its
business other than that intellectual property for which the
failure to so
obtain and maintain could not reasonably be expected to have a
Material Adverse
Effect, and in its use thereof it will obtain all required licenses
and consents
and not injure or infringe upon the property or rights of any
Person in any
material respect.
(i) TAXES. Borrower will file all Tax returns required by Law
in a timely manner and will pay before the same become delinquent
all Taxes
shown to be due and payable on such returns or on any material
assessments made
on Borrower's properties, other than Taxes being contested in good
faith by
appropriate proceedings with proper reserves established which do
not result in
the imposition of a Lien prohibited by Section 5.2(f).
(j) RECORDS AND INSPECTION RIGHTS. Borrower will keep and
maintain, and will use commercially reasonable efforts to cause the
EPC
Contractor to keep and maintain in respect of its involvement in
the Project,
true, correct and complete records and books of account, in which
complete
entries will be made in accordance with GAAP and applicable Law,
reflecting all
financial transactions of the Project, the Grain Facilities,
Borrower and the
EPC Contractor. Borrower will also keep and maintain true, correct
and complete
inventories of all Collateral in which it has an interest and
records of all
transactions relating thereto. All such records, books of account
and
inventories will be kept and maintained at its principal place of
business or at
the Site. At any reasonable time and from time to time during
normal business
hours and upon at least seven (7) days' advance notice to Borrower
by the
Administrative Agent (except during the continuance of an Event of
Default, when
no advance notice will be required), it agrees to permit, and to
cause the EPC
Contractor to permit, the Administrative Agent, the Engineer and
any agent or
representative thereof, to examine and make copies of and abstracts
from such
records, books of account and inventories, to visit the Project and
to discuss
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the affairs, finances and accounts of Borrower and the Project
directly with its
auditors and with any of its officers or managers. Borrower will at
all times
maintain at the Site or at its principal place of business a
complete set of the
current and as-built plans and specifications for the Project,
which will be
available for inspection by the Administrative Agent, the Engineer
and their
respective agents and representatives; PROVIDED, that for so long
as no Default
or Event of Default has occurred and is continuing, Borrower will
only be
required to reimburse the Administrative Agent for its or
Engineer's or its
agent's or representative's costs with respect to one visit or
inspection per
calendar year and shall not be required to reimburse the Lenders
for costs with
respect to visits or inspections.
(k) REPORTING REQUIREMENTS. Borrower will furnish to the
Administrative Agent:
(i) as soon as available and in any event within
fifty (50) days after the end of each of the first three quarters
of
each fiscal year of Borrower, complete unaudited financial
statements
of Borrower, including the balance sheet of Borrower as of the end
of
such quarter, and profit and loss statements and statements of
cash
flows of Borrower for such quarter and for the elapsed portion of
such
fiscal year, in each case prepared in accordance with GAAP (subject
to
normal year-end adjustments and the absence of footnote
disclosures)
and setting forth in comparative form the figures for the
corresponding
period of Borrower's previous fiscal year, certified in a
manner
reasonably acceptable to the Administrative Agent by Borrower's
chief
financial officer;
(ii) as soon as available and in any event within one
hundred twenty (120) days after the end of each fiscal year of
Borrower, complete audited financial statements of Borrower,
including
the balance sheet of Borrower as of the end of such fiscal year,
and
profit and loss statements and statements of cash flows of Borrower
for
such fiscal year, in each case prepared in accordance with GAAP
and
setting forth in comparative form the figures for Borrower's
previous
fiscal year, certified in a manner reasonably acceptable to the
Administrative Agent by the chief financial officer of Borrower and
by
independent certified public accountants reasonably acceptable to
the
Administrative Agent (it being understood that Borrower's
current
independent certified public accountants, Hein & Associates,
are
acceptable to the Administrative Agent;
(iii) within ten (10) days after the last day of each
calendar month during which a Construction Loan is outstanding,
a
Monthly Construction Report substantially in the form of
Exhibit
5.1(k)(iii);
(iv) within ten (10) days after the last day of each
calendar month during which the Term Loans are outstanding, a
monthly
operations report in form and substance reasonably acceptable to
the
Administrative Agent;
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(v) promptly after the sending, filing or receipt
thereof, a copy of each material report, notice, certificate,
application, demand, request or other communication that Borrower
sends
to, files with or receives from any Government Instrumentality
or
Project Party or sends or receives pursuant to any Document
that
relates to any matter that could reasonably be expected to have
a
Material Adverse Effect;
(vi) promptly after
