FIRST AMENDED AND RESTATED CONSTRUCTION LOAN AGREEMENT

 

1.4                                  “CLOSING” shall mean the date on which the BANK receives this AGREEMENT, executed by the BORROWER, together with the NOTES of BORROWER.

 

1.5                                  intentionally left blank

 

1.6                                  intentionally left blank

 

1.7                                  “CONSTRUCTION NOTE” means the promissory note of the BORROWER which evidenced borrowings under the CONSTRUCTION LOAN of up to a maximum amount of Twenty Six Million Six Hundred Thousand ($26,600,000.00) Dollars.

 

1.8                                  “DEBT SERVICE” means the sum of a) interest expense attributable to all BORROWER’s loans and b) scheduled principal payments on all INDEBTEDNESS due within one year.

 

1.9                                  “DRAW REQUEST” means forms acceptable to the BANK to be submitted to the BANK when a disbursement is requested under the CONSTRUCTION NOTE.

 

1.10                            “EVENT OF DEFAULT” has the meaning provided for in Section 7 of this AGREEMENT.

 

1.11                            “EXCESS CASH FLOW” means net income plus interest expense, extraordinary loss, depreciation and amortization, less scheduled payments on the OBLIGATIONS and approved INDEBTEDNESS other than the OBLIGATIONS, capital expenditures, and any extraordinary gain.

 

1.12                            “GAAP” means generally accepted accounting principles, applied on a basis consistent with the accounting principles applied in the preparation of the annual financial statements of the BORROWER referred to in the Financial Condition Section of this AGREEMENT. All accounting terms not otherwise defined in this AGREEMENT have the meaning assigned to them in accordance with GAAP.

 

1.13                            “INDEBTEDNESS” means all indebtedness for borrowed money including long term debt, and capital leases.

 

1.14                            “INDEPENDENT INSPECTOR” means the firm which will was retained by BANK, at BORROWER’s cost, to conduct on site inspections of the work-in-progress on the PROJECT, and to issue periodic reports to BANK as to the progress of construction and adherence to the PLANS.

 

1.15                            “LOAN DOCUMENTS” means this AGREEMENT, any amendments to this AGREEMENT, any NOTES, and each document referred to in Section 4 of this AGREEMENT.

 

1.16                            “LOAN TERMINATION DATE” means the earliest to occur of the following:  (i) as to TERM NOTE 2 and TERM NOTE 5, September 1, 2011; as to the REVOLVING NOTE, May 17, 2010 (ii) the date the OBLIGATIONS are accelerated pursuant to this AGREEMENT, and (iii) the date BANK receives (a) notice in writing from BORROWER of BORROWER’s election to terminate this AGREEMENT and (b) indefeasible payment in full of the OBLIGATIONS.

 

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1.17                          intentionally left blank xxx

 

1.18                          “MARKETING CONTRACT” means that written contract between BORROWER and RPMG, Inc. by which the latter agreed to provide marketing services as to BORROWER’s products.

 

1.19                          “MORTGAGE” means the Mortgage between the BORROWER as mortgagor and the BANK as mortgagee, creating a first lien on the PROPERTY and a security interest in all of the personal property located thereon as security for payment of the OBLIGATIONS in a form acceptable to the BANK.

 

1.20                          “NET WORTH” means total assets less total liabilities and less the following types of assets: (1) leasehold improvements; (2) receivables and other investments in or amounts due from any member, employee or other person or entity related to or affiliated with the BORROWER; (3) goodwill, patents, copyrights, mailing lists, trade names, trademarks, servicing rights, organizational and franchise costs, bond underwriting costs and other like assets properly classified as intangible, and (4) treasury stock or treasury membership units.

 

1.21                          “OBLIGATIONS” means the obligation of the BORROWER:

 

(A)                               To pay the principal of, and interest on, the CONSTRUCTION NOTE together with each other NOTE in favor of BANK, all in accordance with the terms thereof and to satisfy all of its other liabilities to the BANK, whether hereunder or otherwise, whether now existing or hereafter incurred, matured or unmatured, direct or contingent, joint or several, including any extensions, modifications, renewals thereof, and substitutions therefor and including, but not limited to, any obligations under letter of credit agreements;

 

(B)                                 To repay to the BANK all amounts advanced by the BANK hereunder or otherwise on behalf of the BORROWER, including, but without limitation, advances for principal or interest payments to prior secured parties, mortgagees, or licensers, or taxes, levies, insurance, rent, or repairs to, or maintenance or storage of, any of the real or personal property securing BORROWER’s payment and performance of this AGREEMENT; and

 

(C)                                 To reimburse the BANK, on demand, for all of the BANK’s expenses and costs, including the reasonable fees and expenses of its counsel, in connection with the preparation, administration, amendment, modification, or enforcement of this AGREEMENT and the documents required hereunder, including, without limitation, any proceeding brought or threatened, to enforce payment of any of the OBLIGATIONS referred to in the foregoing Paragraphs (A) and (B).

 

1.22                          “OPERATING CASH FLOW” means operating revenue (excluding extra-ordinary revenues or income not derived from the ordinary course of business) less all direct operating expenses other than interest expense (other than interest on accounts payable), depreciation and other similar non-cash charges, interest, and income taxes.

 

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1.23                          “PERMIT” or “PERMITS” means any permit, and all permits, required under any environmental law or regulation required to construct and operate the facility on the PROPERTY after completion of the PROJECT at its operational capacity, including without limitation the following:

 

(a)                                   an Air Emissions Permit, which PERMIT will allow the BORROWER to operate the facility on the PROPERTY after construction of the PROJECT at maximum capacity.

 

(b)                                  All permits required in connection with the construction and operation of all above ground storage tanks included in the PLANS for the facility on the PROPERTY after construction of the PROJECT.

 

(c)                                   A National Pollution Discharge Elimination System Construction Permit for any storm water that is discharged from the facility on the PROPERTY during construction and after construction of the PROJECT.

 

1.24                          “PLANS” means the plans and specifications prepared by the GENERAL CONTRACTOR for the PROJECT and identified to this AGREEMENT by the GENERAL CONTRACTOR, the BORROWER and the BANK.

 

1.25                          “PROJECT” means the design and construction of an ethanol plant, together with all necessary and appropriate fixtures, equipment, attachments, and accessories, as described in the PLANS, to be constructed on the PROPERTY.

 

1.26                          “SECURITY AGREEMENT” means the SECURITY AGREEMENT between the BORROWER and the BANK, creating a first security interest in all BORROWER’s assets, including all personal property and General Intangibles, securing the OBLIGATIONS in a form acceptable to the BANK.

 

1.27                          “SUBCONTRACTOR” means any person who agrees with the GENERAL CONTRACTOR to perform any work or supply any of the materials or equipment necessary to complete the PROJECT.

 

1.28                          “WORKING CAPITAL” means current assets (less investments in or other amounts due from any member, employee or any person or entity related to or affiliated with the BORROWER and prepayments) less current liabilities (less any portion of such current liabilities that constitute debt that is expressly subordinated to the BANK in a writing acceptable to the BANK) plus the amount available to BORROWER for drawing under TERM NOTE 5.

 

1.29                          “REVOLVING NOTE” means that promissory note of BORROWER to BANK evidencing the revolving credit facility described in Section 2.2 of this AGREEMENT, its renewals, modifications and extensions.

 

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1.30                          “BORROWING BASE” means the lesser of:

 

A.                                    $4,000,000.00, less the amount of any Letters of Credit issued and outstanding on BORROWER’s account, or

 

B.                                      The aggregate of (i) 75% of BORROWER’s Inventory of corn or milo, at current value on the date reported, plus (ii)  75% of BORROWER’s Finished Goods - Distiller’s Grains Inventory, at current value on the date reported, plus (iii) 75% of BORROWER’s Finished Goods-Ethanol Inventory, valued at the lower of cost or market on the date reported, plus (iv) 75% of the amount of BORROWER’s Ethanol or Distiller’s Grains Accounts aged thirty days or less, and (v) 75% of the amount of BORROWER’s current State or Federal Incentives Accounts Receivable aged less than 120 days, excluding any Accounts reasonably deemed ineligible by BANK.

 

SECTION 2 Amount and Terms of the LOANS.

 

2.1                                TERM NOTES.  The BORROWER has previously delivered to BANK two term promissory notes, referred to herein as TERM NOTE 2, and TERM NOTE 5 (collectively called “TERM NOTES”).  Interest shall accrue as set forth in the TERM NOTES.  Payment of principal and interest on TERM NOTE 2 shall be as specified in TERM NOTE 2.  On the first day of each calendar quarter, commencing July 1, 2009, BORROWER shall pay interest to BANK on TERM NOTE 5,. All unpaid principal and accrued interest shall be due and payable on LOAN TERMINATION DATE, if not sooner paid.

 

2.2                                REVOLVING LOAN.  BANK agrees to lend $4,000,000.00 to BORROWER pursuant to this facility.  BANK will credit proceeds of this revolving loan (“REVOLVING LOAN”) to BORROWER’s deposit account with the BANK, bearing number 22673981.

 

2.2.1                         Subject to the terms hereof, the BANK will lend the BORROWER, from time to time until the LOAN TERMINATION DATE such sums in integral multiples of $10,000.00 as the BORROWER may request by reasonable same day notice to the BANK, received by the BANK not later than 11:00 A.M. of such day, but which shall not exceed in the aggregate principal amount at any one time outstanding, $4,000,000.00 (the “LOAN COMMITMENT”).  The BORROWER may borrow, repay without penalty or premium and reborrow hereunder, from the date of this AGREEMENT until the LOAN TERMINATION DATE, either the full amount of the LOAN COMMITMENT or any lesser sum which is $10,000.00 or an integral multiple thereof.  It is the intention of the parties that the outstanding balance of the REVOLVING LOAN shall not exceed the BORROWING BASE, and if at any time said balance exceeds the BORROWING BASE, BORROWER shall forthwith pay BANK sufficient funds to reduce the balance of the REVOLVING LOAN until it is in compliance with this requirement.

 

2.3                                THE REVOLVING NOTE.  The LOAN COMMITMENT shall be evidenced by a REVOLVING NOTE.  Principal and interest shall be payable according to the repayment schedule

 

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and interest rate accrual as described in the REVOLVING NOTE.  The balance will be due and payable on LOAN TERMINATION DATE.

 

2.4                                Payments.  All principal, interest and fees due under this AGREEMENT, the REVOLVING NOTE, the TERM NOTES and the LOAN DOCUMENTS shall be paid in immediately available funds and no later than the payment due date set forth in the monthly statement mailed to the BORROWER by the BANK.  Should a payment come due on a day other than a BANKING DAY, then the payment shall be made no later than the next BANKING DAY and interest shall continue to accrue during the extended period.

 

2.5                                Fees.  BORROWER agrees to pay BANK unused commitment fees equal to 50 basis points of the unused portion of the REVOLVING LOAN, and equal to 50 basis points of the unused portion of TERM LOAN 5, with such fees payable quarterly in arrears.

 

2.6                                Incentive Pricing.  The interest rates applicable to TERM NOTE 5 and the REVOLVING LOAN are subject to adjustment as set forth in the NOTES.

 

SECTION 3 intentionally left blank

 

SECTION 4 Conditions of Lending .

 

4.1                                Conditions Precedent to the Initial Disbursement .  BORROWER previously provided the following documents to BANK:

 

4.1.1                         The CONSTRUCTION NOTE, duly executed on behalf of the BORROWER.

 

4.1.2                         The MORTGAGE duly executed on behalf of the BORROWER.

 

4.1.3                         The ASSIGNMENT OF RENTS, duly executed on behalf of the BORROWER.

 

4.1.4                         The SECURITY AGREEMENT, duly executed on behalf of the BORROWER.

 

4.1.5                         A financing statement or statements sufficient when filed to perfect the security interests granted under the MORTGAGE, the ASSIGNMENT OF RENTS, the SECURITY AGREEMENT, and the ASSIGNMENT OF CONSTRUCTION CONTRACT, to the extent such security interests are capable of being perfected by filing.

 

4.1.6                         A copy of the PLANS, certified by the GENERAL CONTRACTOR and the BORROWER.

 

4.1.7                         The Assignment of the DESIGN/BUILD CONTRACT, duly executed by the BORROWER and consented to by the GENERAL CONTRACTOR and a copy of the DESIGN/BUILD CONTRACT.

 

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4.1.8                         A Total Project Cost Statement on the PROJECT duly executed by the BORROWER and the GENERAL CONTRACTOR, setting forth the anticipated total cost of the PROJECT’s completion.

 

4.1.9                         An ALTA (American Land Title Association) Survey of the PROPERTY, prepared at the BORROWER’s expense, currently certified by a licensed, registered surveyor and incorporating the legal description of the PROPERTY, showing the location of all points and lines referred to in the legal description, the location of any existing improvements, the proposed location of the PROJECT (including parking) as being within the exterior boundaries of the PROPERTY and in compliance with all applicable building set-back requirements, and the location of all utilities and the location of all easements and encroachments onto or from the PROPERTY that are visible on the PROPERTY, known to the surveyor preparing the survey or of record, identifying easements of record by recording data, and currently certified by the surveyor that there are no such easements or encroachments upon the PROPERTY except as shown on the survey.

 

4.1.14                   An as built appraisal to the BANK based upon the PLANS to be performed by Herman Natwick & Co., which shows the as-completed value of the PROPERTY and PROJECT acceptable to BANK.

 

4.1.15                   A title binder, issued by Dakota Homestead Title Insurance Corporation (the “Title Company”), at the BORROWER’s expense, constituting a commitment by the Title Company to issue a mortgagee’s title policy in favor of the BANK as mortgagee under the MORTGAGE, that will be free from all standard exceptions, including mechanics’ liens and all other exceptions not previously approved by the BANK and includes a plat endorsement and that will insure the MORTGAGE to be a valid first lien on the PROPERTY.

 

4.1.16                   A soil report on the PROPERTY certified by a registered engineer including structural design recommendations in form and substance satisfactory to the BANK.

 

4.1.17                   A Phase I Environmental Report of the PROPERTY in form and content satisfactory to the BANK.

 

4.1.18                   Copies of all PERMITS from the applicable county or any other state or local agency from whom a construction permit is required and such other licenses and permits, as may be required to construct and operate the facility on the PROPERTY after completion of the PROJECT.

 

4.1.19                   Copies of all environmental permits and other PERMITS as my be required to construct and operate the facility on the PROPERTY at maximum capacity after completion of the PROJECT.

 

4.1.20                   Copies of documents from the appropriate state, federal, city or county authority having jurisdiction over the PROPERTY and the PROJECT that provide to the reasonable

 

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satisfaction of the BANK that the PROJECT when constructed in accordance with the PLANS will comply in all respects with all applicable ordinances, zoning, subdivision, platting, environmental and land use requirements, without special variance or exception, and such other evidence as the BANK shall reasonably request to establish that the PROJECT and the contemplated use thereof are permitted by and comply with all applicable use or other restrictions and requirements in prior conveyances, zoning ordinances, environmental laws and regulations, water shed district regulations and all other applicable laws or regulations, and governmental authorities having jurisdiction over the PROJECT.  BORROWER is not required to obtain advance confirmation from any governmental body that the PROJECT will comply with such ordinances, regulations and requirements.

 

4.1.22                   Copies of the policy of property/casualty insurance and comprehensive general liability insurance and a certificate of the worker’s compensation insurance required under Section 6.3 of this AGREEMENT, with all such insurance in full force and effect and approved by the BANK, and naming BANK as additional named insured, together with appropriate flood insurance, if the PROPERTY is in a flood hazard area.  BORROWER is not required to obtain worker’s compensation insurance until required by South Dakota law.

 

4.1.23                   A signed opinion of counsel for the BORROWER, addressed to the BANK, opining that: 1) the BORROWER is duly organized and in good standing in its state of organization; 2) the BORROWER is qualified in each state in which it does business and is legally required to be qualified; 3) the BORROWER has the power to execute and deliver the LOAN DOCUMENTS and to borrow money and perform in accordance with the terms of the LOAN DOCUMENTS; 4) all actions and consents necessary to the validity of the LOAN DOCUMENTS have been obtained; 5) the LOAN DOCUMENTS have been duly signed and are the valid and binding obligation of the BORROWER and enforceable in accordance with their terms; and 6) to the best of counsel’s knowledge, the LOAN DOCUMENTS and the transactions contemplated thereunder do not conflict with any provision of the operating agreement of BORROWER or any agreement binding upon the BORROWER or its properties.

 

4.1.24                   A Certificate of Authority executed by such person or persons authorized by the BORROWER’s organizational documents and/or agreements to do so, certifying the incumbency and signatures of the managers or other persons authorized to execute the LOAN DOCUMENTS, and authorizing the execution of the LOAN DOCUMENTS and performance in accordance with their terms.

 

4.1.25                   A recently certified copy of the BORROWER’s operating agreement, and any amendments, if applicable.

 

4.1.26                   A recently certified copy of the BORROWER’s Articles of Organization and any amendments, if applicable.

 

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4.1.27                   A certificate of good standing from the office of the South Dakota Secretary of State on the BORROWER.

 

4.1.28                   A Flood Hazard Determination Form for the PROPERTY, confirming whether or not the parcel is in a flood hazard area and whether or not flood insurance must be obtained.

 

4.1.29 If requested by the BANK at any time, a copy of the payment and performance bond relating to the performance of any SUBCONTRACTOR on the PROJECT.

 

4.1.30 Proof of injection of equity capital into BORROWER of no less than $2,000,000.00 by Broin Enterprises, Inc., and no less than $14,700,000.00 by Lake Area Corn Processors Cooperative.

 

4.1.31                   intentionally left blank

 

4.1.32                   A copy of the MARKETING CONTRACT, together with an assignment in favor of BANK in form satisfactory to BANK.

 

4.2                                intentionally left blank

 

4.3                                intentionally left blank

 

SECTION 5 Representations and Warranties .

 

To induce the BANK to enter into this AGREEMENT, the BORROWER, makes the following representations and warranties and agrees that each request for a disbursement under this AGREEMENT constitutes a reaffirmation of these representations and warranties.

 

5.1                                Existence and Power .  The BORROWER is a limited liability company duly formed and in good standing under the laws of the State of South Dakota. The BORROWER has all requisite power and authority to own the PROPERTY and construct the PROJECT, and to execute and deliver, and to perform all of its obligations under the LOAN DOCUMENTS.

 

5.2                                Authorization of Borrowing; No Conflict as to Law or Other Agreements .  The execution, delivery and performance by the BORROWER of the LOAN DOCUMENTS and the borrowings from time to time hereunder have been duly authorized by all necessary actions of the BORROWER and do and will not (a) require any consent or approval, or authorization, by any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, (b) violate any provision of any law, rule or regulation or of any order, writ, injunction or decree presently in effect having applicability to the BORROWER, or of the operating agreement of the BORROWER, (c) result in a breach of or constitute a default under any