EXECUTION COPY
EXHIBIT 10.14
LOAN AGREEMENT
THIS LOAN AGREEMENT (this “Agreement”) is dated
as of the 16th day of December, 2004, and is by and between
GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC , d/b/a
GRANITE FALLS ENERGY, LLC, a Minnesota limited liability
company (the “Borrower”), and FIRST NATIONAL BANK OF
OMAHA (the “Bank” or “Lender”), a
national banking association established at Omaha,
Nebraska.
WHEREAS, the
Borrower has requested the Bank to lend to the Borrower the sum of
up to $34,000,000 for the purpose of partially funding the cost of
construction (the “Construction Loan”) for an ethanol
plant on the real estate described in Exhibit F (the
“Property”) and the subsequent replacement of such
Construction Loan with a term loan for the ethanol plant and
Property (the “Term Loan”), together with a $3,500,000
revolving line of credit (the “Revolving Loan”) and a
standby letter of credit in an amount up to $1,000,000
(“Letter of Credit”); and
WHEREAS, the Bank
is willing to provide such credit facilities to the Borrower upon
the terms and conditions herein set forth.
ARTICLE I
DEFINITIONS
“
Assignment of Design/Build Construction Contract ”
means the assignment of the agreement between the Borrower and
Fagen, Inc. (the “General Contractor”) for preparation
of plans and construction of the Project in accordance with Plans
therein described (the “Design/Build Construction
Contract”) by which the Borrower assigns, as additional
security for repayment of the Obligations, the Borrower’s
interest in the Design/Build Construction Contract in a form
reasonably acceptable to the Bank.
“
Assignment of Rents ” means the assignment of rents
and leases as to the Property between the Borrower, as assignor,
and the Bank, as assignee, as security for payment of the
Obligations in a form acceptable to the Bank.
“ Banking
Day ” means a day on which the Bank is open for
substantially all of its business.
“
Borrowing Base ” means the lesser of:
(a) $3,500,000,
less the amount of any Letters of Credit issued and outstanding on
the Borrower’s account; or
(b) The aggregate
of (i) 75% of the Borrower’s Inventory of corn, at
current value on the date reported, plus (ii) 75% of the
Borrower’s Finished Goods-Distiller’s Grains Inventory,
at current value on the date reported, plus (iii) 75% of the
Borrower’s
Finished Goods-Ethanol Inventory, valued at the
lower of cost or market, plus (iv) 75% of the amount of the
Borrower’s current sales Accounts Receivable aged thirty
(30) days or less, and (v) 75% of the amount of the
Borrower’s current state incentives Accounts Receivable aged
less than 120 days, excluding any accounts reasonably deemed
ineligible by the Bank.
“ Capital
Leases ” shall have the same meaning in this Agreement as
those terms are defined by GAAP.
“
Closing ” shall mean the date on which the Bank
receives this Agreement, executed by the Borrower, together with
the Construction Note and the Revolving Note.
“
Completion Date ” means March 10,
2006.
“
Construction Loan ” shall mean an amount of up to the
lesser of 58% of the total cost of the Project or $34,000,000
loaned to the Borrower under the terms and conditions of this
Agreement for the purpose of partially funding the cost of
construction of the Project.
“
Construction Loan Termination Date ” means the earlier
of (a) the Completion Date or (b) such earlier date upon
which the Bank’s commitment to make a disbursement under the
Construction Loan is terminated.
“
Construction Note ” means the promissory note of the
Borrower in the form of Exhibit A evidencing borrowings under
the Construction Loan of up to a maximum amount of
$34,000,000.
“ Draw
Request ” means forms acceptable to the Bank to be
submitted to the Bank by the Borrower when a disbursement is
requested under the Construction Note.
“
EBITDA ” means earnings before interest, taxes,
depreciation and amortization, all experienced during the
applicable reporting period.
“
Eurodollar Business Day ” means a Banking Day on which
commercial banks are open for international business (including
dealings in dollar deposits) in London, England.
“ Event
of Default ” has the meaning provided for in
Article VII of this Agreement.
“ Excess
Cash Flow ” means EBITDA less: scheduled payments to the
Bank (excluding payments required under Section 6.02(c));
payments to Bank-approved subordinated debt (excluding unscheduled
payments on subordinated debt); and less allowable capital
expenditures.
“
Farmer’s Cooperative Elevator Contract ” means
that written contract between the Borrower and Farmer’s
Cooperative Elevator Co. dated May 14, 2004.
“
Finished Goods-Ethanol Inventory ” means ethanol that
conforms to minimum quality standards as developed by current
industry standards, including, but not limited to, ASTM D 4806
specifications for E-Grade denatured ethanol.
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“ Fixed
Charge Coverage Ratio ” means the ratio derived when
comparing (i) EBITDA, less capital expenditures, dividends and
taxes to (ii) the Borrower’s payments on the principal
and interest of the Obligations and Subordinated Debt made during
the applicable reporting period.
“
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 Section 6.01 of this Agreement and
the Projections described in Section 5.07 of this Agreement.
All accounting terms not otherwise defined in this Agreement have
the meaning assigned to them in accordance with GAAP.
“ General
Contractor ” shall mean Fagen, Inc.
“
Indebtedness ” means, as to the Borrower, all items of
indebtedness, Obligation or liability, whether matured or
unmatured, liquidated or unliquidated, direct or contingent, joint
or several including, but without limitation:
(a) All
indebtedness guaranteed, directly or indirectly, in any manner, or
endorsed (other than for collection or deposit in the ordinary
course of business) or discounted with recourse;
(b) All
indebtedness in effect guaranteed, directly or indirectly, through
agreements, contingent or otherwise (i) to purchase such
indebtedness; or (ii) to purchase, sell or lease (as lessee or
lessor) property, products, materials or supplies or to purchase or
sell services, primarily for the purpose of enabling the debtor to
make payment of such Indebtedness or to insure the owner of the
Indebtedness against loss;
(c) All
indebtedness secured by (or for which the holder of such
Indebtedness has a right, contingent or otherwise, to be secured
by) any mortgage, deed of trust, pledge, lien, security interest or
other charge or encumbrance upon property owned or acquired subject
thereto, whether or not the liabilities secured thereby have been
assumed;
(d) All
indebtedness incurred as the lessee of goods or services under
leases that, in accordance with GAAP, should not be reflected on
the lessee’s balance sheet; and
(e) The
Borrower’s Obligations for payment of the negative
termination value of any interest rate swap agreement.
“
Independent Inspector ” means the firm which will be
retained by the Bank, at the Borrower’s cost, to conduct
on-site inspections of the work in progress on the Project, and to
issue periodic reports to the Bank as to the progress of
construction and adherence to the Plans. The Bank’s selection
of the Independent Inspector shall be subject to the
Borrower’s approval, which approval will not be unreasonably
withheld.
“
Interest Period ” means, initially, the period
commencing on the date of the Construction Note, Short Term
Operating Note, Swap Note, Variable Rate Loan or the Long Term
Revolving Note, as applicable, and ending (i) on the one-month
anniversary of note for the Construction
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Note, (ii) on the one-month
anniversary of the Note for the Revolving Note, (iii) on the
three-month anniversary of the Note for the Swap Note, (iv) on
the three-month anniversary for the Variable Rate Note and
(v) on the one-month anniversary of the Note for the Long Term
Revolving Note, and thereafter each period commencing on the first
day immediately following the last day of the immediately preceding
Interest Period and ending after the applicable period set forth
above thereafter, provided that:
(a) subject to
clauses (b) and (c) below, any Interest Period which
would otherwise end on a day which is not a Eurodollar Business Day
shall be extended to the next succeeding Eurodollar Business Day
unless such Eurodollar Business Day falls in another calendar
month, in which case such Interest Period shall end on the
immediately preceding Eurodollar Business Day;
(b) subject to
clause (c) below, any Interest Period which begins on the last
Eurodollar Business Day of a calendar month (or a day for which
there is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last Eurodollar
Business Day of a calendar month; and
(c) no Interest
Period shall extend beyond the Loan Termination Date.
“ Letter
of Credit ” has the meaning set forth in the
preamble.
“
LIBOR ” shall mean the London interbank offered
rate.
“ LIBOR
Base Rate ” shall mean, with respect to the applicable
Interest Period, (a) the LIBOR Index Rate for such Interest
Period, if such rate is available, or (b) if the LIBOR Index
Rate cannot be determined, the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the respective rates
per annum of interest at which deposits in dollars are offered to
the Bank in the London interbank market by two Eurodollar dealers
of recognized standing, selected by the Bank in its sole
discretion, at such time on the date two Eurodollar Business Days
before the first day of such Interest Period as the Bank in its
sole discretion elects, for delivery on the first day of the
applicable Interest Period for a number of days comparable to the
number of days in such Interest Period and in an amount
approximately equal to the principal amount of the
Obligations.
“ LIBOR
Index Rate ” shall mean, with respect to the applicable
Interest Period, the rate per annum (rounded upwards, if necessary,
to the next higher 1/100 of 1%) for deposits in U.S. Dollars for a
period equal to such Interest Period, which appears on the
Bank’s information vendor as of 9:00 a.m. (Omaha time) on the
day two Eurodollar Business Days before the first day of such
Interest Period. The term “the Bank’s information
vendor” means the Bloomberg service or such other vendor
chosen by the Bank for the purpose of displaying British the
Bankers’ Association Interest Settlement Rates for U.S.
Dollar Deposits.
“ LIBOR
Rate ” shall mean the quotient of the (i) LIBOR Base
Rate divided by (ii) one minus the applicable LIBOR Reserve
Percentage. The LIBOR Rate shall be adjusted automatically on and
as of the effective date of any change in the LIBOR Reserve
Percentage.
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“ LIBOR
Reserve Percentage ” shall mean for any day that
percentage (expressed as a decimal) which is in effect on such day,
as prescribed by the Board of Governors of the Federal Reserve
System (or any successor), for determining the maximum reserve
requirement for a member bank of the Federal Reserve System with
respect to “Eurocurrency liabilities” (or in respect of
any other category of liabilities which includes deposits by
reference to which the interest rate on LIBOR loans is determined
or any category of extensions of credit or other assets which
include loans by a non-United States office of any bank to United
States residents). The LIBOR Rate shall be adjusted automatically
on and as of the effective date of any change in the LIBOR Reserve
Percentage.
“ Loan
Documents ” means this Agreement and each document
referred to in Article IV of this Agreement.
“
Management Contract ” means the agreement between the
Borrower and Glacial Lakes Energy, LLC for management of the
property of the Borrower in accordance with the terms
thereof.
“
Marketing Contract ” means that written contract
between the Borrower and one or more entities approved by the Bank,
which approval will not be unreasonably withheld, by which the
latter agrees to provide marketing services to the Borrower for the
Borrower’s ethanol products, as well as the written contracts
between the Borrower and one or more entities approved by the Bank,
which approval will not be unreasonably withheld, by which the
latter agrees to provide marketing services as to the
Borrower’s distiller’s grains.
“
Mortgage ” means the agreement between the Borrower
and the Bank 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.
“ Net
Worth ” means total assets less total liabilities and
less the following types of assets: (a) leasehold
improvements; (b) receivables (other than those created by
sale of goods) to a member and other investments in or amounts due
from any member, employee or other person or entity related to or
affiliated with the Borrower; (c) 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
(d) treasury stock or treasury membership units. Net Worth
shall not include any debt due to the Borrower not acceptable to
the Bank in the exercise of its reasonable discretion.
“
Note ” or “ Notes ” means any
promissory note delivered by the Borrower to the Bank.
“
Obligations ” means the obligation of the
Borrower:
(a) to pay the
principal of and interest on the Notes 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;
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(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 the Borrower’s payment and
performance of this Agreement; and
(c) to reimburse
the Bank, on demand, for the Bank’s reasonable and necessary
out-of-pocket 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 Loan Documents required hereunder, including,
without limitation, any proceeding brought or threatened to enforce
payment of any of the Obligations referred to in the foregoing
subparagraphs (a) and (b).
“
Permit ” or “ Permits ” means any
license or permit, and all licenses or 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 allows, or will allow, the Borrower after
the Completion Date to operate the ethanol plant on the Property
after construction of the Project at maximum capacity.
(b) All permits
required in connection with the construction and operation of all
aboveground storage tanks included in the Plans for the ethanol
plant.
(c) A National
Pollution Discharge Elimination System Construction Permit for any
storm water that is discharged during construction and after
construction of the Project.
“
Plans ” means the plans and specifications prepared by
ICM, Inc. and Fagen Engineering LLC on behalf of the Borrower for
the Project and identified to this Agreement by the General
Contractor, the Borrower and the Bank.
“
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.
“
Revolving Loan ” shall mean an amount of up to
$3,500,000 loaned to the Borrower under the terms and conditions of
this Agreement to provide Borrower a revolving line of
credit.
“
Revolving Loan Termination Date ” means the earliest
to occur of the following: (a) December 15, 2005, (b) the
date the Obligations are accelerated pursuant to this Agreement and
(c) the date the Bank has received (i) notice in writing
from the Borrower of the Borrower’s election to terminate
this Agreement and (ii) indefeasible payment in full of the
Obligations.
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“
Revolving Note ” means that promissory note of the
Borrower to the Bank evidencing the revolving credit facility
described in Section 2.06 of this Agreement and as set forth
in the attached Exhibit B, its renewals, modifications and
extensions.
“
Security Agreement ” means the agreement between the
Borrower, as debtor, and the Bank, as secured party, creating a
first security interest in all the Borrower’s assets,
including general intangibles, securing the Obligations.
“
Subcontractor ” means any person who contracts with
the General Contractor or the Borrower to perform any work or
supply any of the materials or equipment necessary to complete the
Project.
“
Subordinated Debt ” means Indebtedness of the Borrower
to entities other than the Bank that has been subordinated, in form
acceptable to the Bank, to the Obligations.
“
Subsidiary ” means, as to the Borrower, a corporation
or other entity of which shares of stock or membership interests,
having ordinary voting power (other than stock or membership
interests, having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers or governors of such corporation or other entity are at
the time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both,
by the Borrower.
“ SWAP
Contract ” or “ SWAP Contracts ” means
(a) any and all rate swap transactions, basis swaps, credit
derivative transactions, forward rate transactions, commodity
swaps, commodity options, forward commodity contracts, equity or
equity index swaps or options, bond or bond price or bond index
swaps or options or forward bond or forward bond price or forward
bond index transactions, interest rate options, forward foreign
exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts or any other similar
transactions or any combination of any of the foregoing (including
any options to enter into any of the foregoing), whether or not any
such transaction is governed by or subject to any master agreement
and (b) any and all transactions of any kind, and the related
confirmations, which are subject to the terms and conditions of, or
governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc.; provided,
however, the term “SWAP Contract” shall not, for the
purposes of this Agreement, include commodity hedging or commodity
risk management contracts. “Commodity” includes grain,
natural gas and other traded commodities.
“ Term
Loan ” shall mean an amount of up to $34,000,000 loaned
to the Borrower under the terms and conditions of this Agreement to
provide the Borrower funds to pay the Construction Loan in
full.
“ Term
Loan Termination Date ” means the earliest to occur of
the following: (a) March 10, 2011, (b) the date the
Obligations are accelerated pursuant to this Agreement and
(c) the date the Bank has received (i) notice in writing
from the Borrower of the Borrower’s election to terminate
this Agreement and (ii) indefeasible payment in full of the
Obligations.
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“ Term
Notes ” means those promissory notes of the Borrower to
the Bank which evidences permanent financing to pay the
Construction Note as described in Article II of this
Agreement, its renewals, modifications and extensions and which
shall include the Swap Note, the Variable Note and the Long Term
Revolving Note.
“ USDA
CCC Bio-Energy Accounts Receivable ” shall mean cash
incentives offered by the United States Department of Agriculture
(“USDA”) to the Borrower after the Borrower has
commenced operations and provided that the Borrower has complied
with other applicable requirements, terms and conditions of the
USDA.
“ Working
Capital ” means current assets (including any amount
available under the Long Term Revolving Loan at the time of
determination), less investments in or other amounts due from any
member, employee or any person or entity related to or affiliated
with the Borrower and less 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, in the exercise of its reasonable
discretion).
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
Section 2.01. Construction Loan . The Bank agrees, on
the terms and subject to the conditions set forth in this
Agreement, to make, from time to time during the period beginning
on the date of execution of this Agreement and ending on the
Construction Loan Termination Date, disbursements to the Borrower
in an aggregate principal amount not to exceed the lesser of
$34,000,000 or 58% of the total cost of the Project for the sole
purpose of paying approved construction costs of the Project. If,
prior to the Completion Date, there is paid to the Bank a
third-party payment (a grant payment, for example) that is applied
to the Construction Loan, the Bank may, in its sole discretion,
reduce the amount to be advanced to a lesser sum, which the Bank
reasonably determines is necessary to complete the Project.
Approved construction costs are costs actually incurred in
connection with the construction of the Project. Such approved
construction costs shall include but shall not be limited to costs
of permits, licenses, labor, supplies, materials, services,
equipment, insurance premiums, real estate taxes and interest on
disbursements and operating costs of the ethanol plant.
Construction costs shall not include the cost associated with
payment of lost profits connected with termination under
Section 14.1.3 of the General Conditions of Contract to the
Design/Build Construction Contract.
Section 2.02. Construction Note . The Obligation of the
Borrower to repay the Construction Loan shall be evidenced by a
promissory note (the “Construction Note”) in the form
attached hereto as Exhibit A.
Section 2.03. Interest on Construction Note . Interest
shall be payable at the rate provided therein only on such portions
of the Construction Loan proceeds as actually have been disbursed
pursuant to this Agreement. Interest on the Construction Note shall
accrue at the one (1) month LIBOR Rate plus 350 basis points
prior to acceleration or maturity, and 650 basis points in excess
of the LIBOR Rate in effect from time to time after maturity,
whether by acceleration or otherwise.
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Section 2.04. Repayment of Construction Note . Interest
only shall be payable quarterly on the Construction Note. All
outstanding principal and accrued but unpaid interest shall be
payable on the Construction Loan Termination Date.
Section 2.05. Revolving Loan . The Bank agrees, on the
terms and subject to the conditions set forth in this Agreement, to
lend up to $3,500,000 to the Borrower. At the Borrower’s
request, on the Borrower’s account, pursuant to the
Bank’s customary policies and with its standardized
documents, the Bank will issue its letters of credit up to the same
amount so long as the combined amount of letters of credit and
Revolving Note does not exceed the amount available under the
Revolving Loan. The Bank will credit proceeds of the Revolving Loan
to the Borrower’s deposit account with the Bank, bearing
number 110118183. Subject to the terms hereof, the Bank will lend
the Borrower, from time to time until the Revolving Loan
Termination Date such sums in integral multiples of $10,000 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 $3,500,000, less the aggregate amounts of any
issued and outstanding letters of credit issued by the Bank at the
request of and on the account of the Borrower (the “Loan
Commitment”). The Borrower may borrow, repay without penalty
or premium and reborrow hereunder, from the date of this Agreement
until the Revolving Loan Termination Date, either the full amount
of the Loan Commitment or any lesser sum which is $10,000 or an
integral multiple thereof. It is the intention of the parties that
the outstanding balance of the Revolving Loan, at all such times
after July 10, 2006, shall not exceed the Borrowing Base, as
defined herein, and if at any time said balance exceeds the
Borrowing Base, the Borrower shall forthwith pay the Bank
sufficient funds to reduce the balance of the Revolving Loan until
it is in compliance with this requirement.
Section 2.06. Revolving Note . The Revolving Loan shall
be evidenced by a Promissory Note (the “Revolving
Note”) having stated maturity on the Revolving Loan
Termination Date, in the form attached hereto as
Exhibit B.
Section 2.07. Interest on Revolving Note . Interest on
the Revolving Note shall accrue at the one (1) month LIBOR
Rate plus 350 basis points, prior to acceleration or maturity, and
650 basis points in excess of the LIBOR Rate in effect from time to
time after maturity, whether by acceleration or
otherwise.
Section 2.08. Incentive Pricing . The interest rate
applicable to the Variable Rate Loan and the Long Term Revolving
Loan and the Revolving Loan shall, upon the request of the
Borrower, be subject to periodic temporary adjustments commencing
six months subsequent to the Completion Date, based on the business
results of the Borrower. If, at any time during the preceding three
(3) month period ending on the date six (6) months after the
date of the Completion Date and each three (3) month period
thereafter, as applicable, the ratio of Borrower’s
Indebtedness to its Net Worth has been (a) greater than or
equal to 1.25 to 1.0, then the interest rate shall remain or shall
be increased to 350 basis points over the LIBOR Rate, (b) less
than 1.25 to 1.0 but greater than or equal to 1.0 to 1.0, then the
interest rate shall change to 325 basis points over the LIBOR Rate,
(c) less than 1.0 to 1.0 but greater than or equal to .75 to
1.0, then the interest rate shall change to 300 basis points over
the LIBOR Rate, and/or (d) less than .75 to 1.0, then the
interest rate shall change to 275 basis points over the LIBOR
Rate.
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Any
such adjustment under this Section shall be applied and effective
for the following Interest Rate Period.
Section 2.09. Term Loans and Term Notes . So long as
Bank is lender, all of the terms, conditions and covenants of this
Agreement have been complied with and there has not been at any
time an Event of Default, on the Completion Date, the Construction
Loan shall be paid in full by the following Swap Loan, Variable
Rate Loan and Long Term Revolving Loan (collectively, the
“Term Loans”) and execution of the following Swap Note,
Variable Rate Note and Long Term Revolving Note (collectively, the
“Term Notes”):
(a) Swap
Loan . A loan in the amount of $17,000,000 (the “Swap
Loan”) evidenced by the execution and delivery of a
promissory note dated March 10, 2006 and subject to the terms
and conditions of this Agreement, in the principal amount of
$17,000,000 and having a maturity date of March 10, 2011 (the
“Swap Note”) in the form attached hereto as
Exhibit C;
(b) Variable
Rate Loan . A loan in the amount of $12,000,000 (the
“Variable Rate Loan”) evidenced by the execution and
delivery of a promissory note dated March 10, 2006 and subject
to the terms and conditions of this Agreement, in the principal
amount of $12,000,000 and having a maturity date of March 10,
2011 (the “Variable Rate Note”) in the form attached
hereto as Exhibit D; and
(c) Long Term
Revolving Loan . A loan in the amount of $5,000,000 (the
“Long Term Revolving Loan”) evidenced by the execution
and delivery of a promissory note dated March 10, 2006 and subject
to the terms and conditions of this Agreement, in the principal
amount of $5,000,000 and having a maturity date of March 10,
2011 (the “Long Term Revolving Note”) in the form
attached hereto as Exhibit E.
Section 2.10. Interest on Term Notes . Interest on the
Term Notes shall accrue at the following rates:
(a) Swap
Note . At all times for the Swap Note, interest shall accrue at
a variable rate equal to the three-month LIBOR Rate plus 300 basis
points prior to acceleration or maturity, and 600 basis points in
excess of the LIBOR Rate in effect from time to time after
maturity, whether by acceleration or otherwise.
(b) Variable
Rate Note . At all times for the Variable Rate Note, interest
shall accrue at a variable rate equal to the three-month LIBOR Rate
plus 350 basis points prior to acceleration or maturity, and 650
basis points in excess of the LIBOR Rate in effect from time to
time after maturity, whether by acceleration or
otherwise.
(c) Long Term
Revolving Note . At all times for the Long Term Revolving Note,
interest shall accrue at a variable rate equal to the one-month
LIBOR Rate plus 350 basis points prior to acceleration or maturity,
and 650 basis points in excess of the LIBOR Rate in effect from
time to time after maturity, whether by acceleration or
otherwise.
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Section 2.11. Repayment of Term Notes . The Term Notes
shall be repaid as follows:
(a) On the
10 th
day of every third month, commencing
June 10 th ,
2006, the Borrower shall pay to the Bank the scheduled principal
payment shown in Schedule I, attached hereto and by this reference
made a part hereof, plus accrued interest on the Swap
Note.
(b) On the
10 th
day of every third month, commencing
June 10 th ,
2006, the Borrower shall pay the sum of $600,053.89 to the Bank,
which shall be allocated as follows: (i) first to accrued
interest on the Long Term Revolving Note, (ii) next to accrued
interest on the Variable Rate Note, and (iii) next to
principal on the Variable Rate Note.
(c) After the
Variable Rate Note has been fully paid, such quarterly payments
shall be allocated first to accrued interest on the Long Term
Revolving Note, and thence to principal on such Note, thereby
reducing available loan capacity by such amount.
(d)
Notwithstanding the foregoing, all unpaid principal and accrued
interest for all Term Notes shall be due and payable on the Term
Loan Termination Date, if not sooner paid.
Section 2.12. Letter of Credit . Bank will issue its
Letter of Credit at Borrower’s request, on Borrower’s
account, pursuant to the Bank’s customary policies and with
its standardized documents, in amounts outstanding at no time
exceeding $1,000,000 in the aggregate.
Section 2.13. Payments and Prepayments for All
Obligations . All principal, interest and fees due under this
Agreement, the Notes and the Loan Documents shall be paid in
immediately available funds as contracted in this Agreement and no
later than the payment due date set forth in the periodic
statements mailed to the Borrower by the Bank. Should a payment
come due on a day other than a Banking Day, the payment shall be
made no later than the next the Banking Day and interest shall
continue to accrue during the extended period.
On
the occasion of any prepayment of all or substantially all of the
outstanding Obligations by the Borrower, and the direct or indirect
source of funds to pay such Obligations was one or more loans from
a financial institution, the Borrower will pay to the Bank a
prepayment fee calculated as follows: If the prepayment occurs
during the construction of the Project or within the first three
years of the Term Loan, a fee of 2% if during the construction
period or within the first year of the Term Loan and 1% if within
the second year or third year shall be paid to the Bank.
The
Borrower also agrees to pay, at the time of any such prepayment of
the Construction Note or Term Note, any additional amounts as may
be provided in the Notes evidencing the Obligations for
compensation to the Bank for prepayment of such Notes evidencing
fixed interest rates.
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Section 2.14. Fees .
(a) At or before
the Closing, the Borrower shall pay to the Bank a due diligence and
negotiation fee in the sum of $50,000 at or before Closing. At the
Closing, the Borrower shall pay to the Bank a commitment fee of
$255,000. At the Completion Date, and on each annual anniversary of
the Completion Date for five years subsequent to the Completion
Date, the Borrower shall pay to the Bank an annual servicing fee of
$30,000.
(b) The Borrower
agrees to pay the Bank an unused commitment fee equal to 37.5 basis
points of the average unused portion of the Long Term Revolving
Note and the Revolving Note, calculated and payable on a quarterly
basis in arrears; provided, however, the unused commitment fee on
the Revolving Note shall not apply and shall be payable by the
Borrower only after the earlier of (i) such time as the
Borrower has requested, and the Bank has deposited, the initial
advance of the Revolving Loan into the Borrower’s deposit
account with the Bank or (ii) the Completion Date.
(c) The Borrower
shall pay the Bank fees for issuance of letters of credit according
to the Bank’s customary fee schedule. The Borrower shall pay
all costs associated with the Closing of the Loan, including, but
not limited to, title, survey, environmental and appraisal reports,
costs of disbursement agent, independent construction inspector,
mortgage fees and taxes and the Bank’s legal fees.
Section 2.15. Appraisal . If the Bank is required by
any government entity with regulatory authority over the Bank to
obtain a real estate appraisal, the Bank will obtain, at the
Borrower’s expense, an appraisal of the Project and the
Property providing values obtained by use of the cost approach, the
income approach and the replacement cost approach. If such
appraisal shows that the outstanding Construction Loan amount at
that time exceeds the value of the Project and the Property as
determined by the appraisal, using the replacement cost approach,
then the Borrower shall, within 30 days of notice by the Bank
and without penalty or premium, pay the difference between the
outstanding Construction Loan amount and the appraised value amount
of the Project and the Property as determined by such appraisal,
and no further advances shall be made on the Construction Loan
thereafter until such time as the appraised value of the Project
and the Property exceeds the Construction Loan amount.
ARTICLE III
DISBURSEMENT PROCEDURES
Section 3.01. Submission of Draw Requests . Whenever
the Borrower desires a disbursement under the Construction Loan,
which at all times shall be pursuant to disbursement agreement,
which shall be entered into by the Parties in a mutually agreeable
form and with a mutually agreeable disbursing agent, and shall be
no more often than three times a month, unless the Bank agrees
otherwise, the Borrower shall submit to the Bank a Draw Request,
duly executed on behalf of the Borrower, setting forth the
information requested therein. Each Draw Request shall be delivered
to the Bank at least five days before the date the disbursement is
desired.
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Section 3.02. Amount of Draw Request . Each Draw
Request shall be limited to amounts equal to (a) the total of
costs actually incurred and paid or owing by the Borrower to the
date of such Draw Request for work performed or materials
incorporated in the Project as described in the Plans, plus
(b) the cost of materials and equipment not incorporated in
the Project, but delivered to and suitably stored at the Project
site, plus (c) prepayments for equipment when prepayment is
required by the manufacturer or supplier; less (d) prior
disbursements for such costs and from the Construction Loan or the
Borrower’s Working Capital for such costs. Notwithstanding
anything herein to the contrary, no disbursements for materials
stored at the Project site will be made by the Bank unless the
Borrower shall advise the Bank of its intention to store materials
prior to their delivery, and provide suitable security for such
storage.
Section 3.03. Other Documents . At the time of
submission of each Draw Request, the Borrower shall submit or cause
to be submitted to the Bank the following:
(a) A written
general lien waiver from the General Contractor for work done and
materials supplied by it which were paid for by the Draw
Request.
(b) A written lien
waiver from the General Contractor and each Subcontractor for work
done and materials supplied by it which were paid for pursuant to
the next preceding Draw Request with copies of all invoices
supporting the Draw Request.
(c) A document
from the Borrower and the General Contractor, and, if applicable,
the Independent Inspector, requesting and/or approving payment of
the relevant Draw Request.
(d) Such other
supporting evidence as may be reasonably requested by the Bank to
substantiate all payments which are to be made out of the relevant
Draw Request and/or to substantiate all payments then made with
respect to the Project.
Section 3.04. Cost Overruns . The Borrower agrees that
all cost overruns on the Project shall be paid solely by the
Borrower and that the Borrower shall deliver additional funds to
the Bank in accordance with Section 3.06 of this Agreement to
pay any cash required to fund cost overruns on the
Project.
Section 3.05. Making Disbursements . Provided that on
the date a Draw Request is received by the Bank (a) the
Borrower has performed all of its agreements and complied with all
requirements of this Agreement to be performed or complied with
including, but not limited to, satisfaction of all applicable
conditions precedent contained in Article IV of this
Agreement, and (b) if required by the Bank, the Bank has
received a current report from the Independent Inspector
documenting material compliance with the Plans for those portions
of the Project indicated as completed in the Draw Request and
otherwise confirming the acceptability of the Project work
represented by the Draw Request, the Bank shall pay to the Borrower
the amount of the requested disbursement. Each disbursement
disbursed to the Title Company as Disbursing Agent under the
Construction Loan shall bear interest at the rate provided in the
Construction Note evidencing the disbursement from the date such
disbursement is so disbursed to the Borrower or deposited into the
Borrower’s account.
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Section 3.06. Deposit of Funds by Borrower . If the
Independent Inspector shall at any time in good faith determine
that the undisbursed amount of the Construction Loan is less than
the amount required to pay costs and expenses of any kind which
reasonably may be anticipated in connection with the completion of
the Project after application of all funds received from the
Borrower’s equity and shall thereupon send written notice
thereof to the Borrower specifying the amount required to be
deposited by the Borrower with the Bank to provide sufficient funds
to complete the Project, the Borrower agrees that it will, within
30 calendar days of receipt of any such notice, deposit with the
Bank the amount of funds specified in the Bank’s notice. The
Borrower agrees that any such funds deposited with the Bank may be
disbursed before any further disbursement of Construction Loan
proceeds from the Bank to pay any and all costs and expenses of any
kind in connection with completion of the Project.
Section 3.07. Disbursements Without Receipt of Draw
Request . Notwithstanding anything herein to the contrary, the
Bank shall have the irrevocable right at any time and from time to
time to apply funds which it agrees to disburse hereunder to pay
interest on the Construction Note as and when such interest becomes
due, and to pay any and all of the expenses of the Bank related to
the Project and the Construction Loan, all without receipt of a
Draw Request.
Section 3.08. Miscellaneous Procedures . The Bank may
establish additional procedures regarding disbursements and Draw
Requests as are reasonable to assure the proceeds of the
Construction Loan are paid only to those persons and entities
entitled to the same, and that the liens securing the Obligations
are in all cases first and paramount liens on the
Property.
Section 3.09. Appointment of Independent Inspector . No
Draw Request shall be honored after commencement of construction
unless and until the Borrower has consented to the appointment of
an Independent Inspector.
Section 3.10. Limitation on Advances . Notwithstanding
any other provision of this section, the Bank is not required to
advance any sum under the Construction Loan until the Bank has
obtained participation agreements with other Lenders satisfactory
to the Bank.
ARTICLE III
CONDITIONS OF LENDING
Section 4.01. Conditions Precedent to All Disbursements
. The obligation of the Bank to make each disbursement under any
Loans (including the initial disbursement) shall be subject to the
further conditions precedent that on the date of such
disbursement:
(a) The Borrower
shall have paid costs of the Project in an amount equal to its
total equity and all subordinated debt which exists on the date of
this Agreement.
(b) The
representations and warranties contained in Article V of this
Agreement are correct on and as of the date of such disbursement as
though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date and
except to the extent of changes permitted under the terms of this
Agreement.
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(c) No event has
occurred and is continuing, or would result from such disbursement,
which constitutes an Event of Default.
(d) No
determination shall have been made by the Bank that the undisbursed
amount of the Construction Loan is less than the amount required to
pay all costs and expenses of any kind which reasonably may be
anticipated in connection with the completion of the Project; or,
if such a determination has been made and notice thereof sent to
the Borrower in accordance with this Agreement, the Borrower shall
have deposited the necessary funds with the Bank in accordance with
Section 3.06 of this Agreement.
(e) The
disbursement requirements of Article III of this Agreement
have been satisfied.
(f) If required by
the Bank, the Bank shall be furnished with a statement from the
Borrower and the General Contractor, in form and substance
satisfactory to the Bank, in the exercise of its reasonable
discretion, setting forth the names, addresses and amounts due or
to become due, as well as the amounts previously paid, to every
Subcontractor.
(g) No Permit
necessary for the construction of the Project shall have been
revoked or the issuance thereof subjected to challenge before any
court or other governmental authority having or asserting
jurisdiction as to the Project.
(h) The parties
intend that the Construction Loan is available to fund the lesser
of 58% of the total cost of the Project, including all other
approved expenses as set forth in the final version of the Sources
and Uses of Funds document furnished to the Bank by the Borrower
prior to the Closing, or $34,000,000. No advances or disbursements
under the Construction Loan shall exceed such levels, unless the
Bank consents in writing to the same.
(i) The Bank shall
have entered into agreements with at least two (2) other
entities whereby such other entities have agreed to participate in
the Construction Loan and Term Loan under the terms and conditions
of this Agreement.
(j) The Borrower
shall have entered into and delivered to the Bank the Swap
Contract.
Section 4.02. Conditions Precedent to Initial
Disbursement . The obligation of the Bank to make its initial
disbursement under the Construction Loan is subject to the
condition precedent that the Borrower shall be in compliance with
the conditions set forth in Section 4.01 of this Agreement and
to the further condition precedent that the Bank shall have
received on or before the Closing all of the following, each dated
(unless otherwise indicated) such day, in form and substance
satisfactory to the Bank:
(a) The
Construction Note, duly executed on behalf of the
Borrower.
(b) The Mortgage
duly executed on behalf of the Borrower.
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(c) The Security
Agreement duly executed by the Borrower, together with (i)
acknowledgment copies of the Financing Statements (UCC-1) duly
filed under the Uniform Commercial Code of all jurisdictions
necessary or, in the opinion of the Bank, desirable to perfect the
security interest created by the Security Agreement; and (ii)
certified copies of Requests for Copies or Information (Form
UCC-11) identifying all of the financing statements on file with
respect to the Borrower in all jurisdictions referred to under (i),
including the Financing Statement filed by the Bank against the
Borrower, indicating that no party claims an interest in any of the
Collateral.
(d) Certified (as
of the date of this Agreement) copies of all corporate action taken
by the Borrower, including resolutions of its Board of Governors,
authorizing the execution, delivery and performance of the Loan
Document to which it is a party and each other document to be
delivered pursuant to this Agreement.
(e) A certificate
(dated as of the date of this Agreement) of the Secretary of the
Borrower certifying the names and true signatures of the officers
of the Borrower authorized to sign the Loan Documents to which it
is a party and the other documents to be delivered by the Borrower
under this Agreement and performance with their terms.
(f) A favorable
opinion of counsel for the Borrower, in substantially the form of
Exhibit G, addressed to the Bank and containing customary
qualifications, opining that (i) the Borrower is duly organized and
in good standing in the state of Minnesota; (ii) the Borrower
is qualified in each state in which it does business and is legally
required to be qualified; (iii) the Borrower has the requisite
power to execute and deliver the Loan Documents to which it is a
party and to borrow money and perform in accordance with the terms
of such Loan Documents; (iv) all actions and consents by the
Borrower necessary to the validity of the Loan Documents to which
it is a party have been obtained; (v) the Loan Documents to
which it is a party have been duly signed and are the valid and
binding Obligation of the Borrower and enforceable in accordance
with their terms; and (vi) the Loan Documents to which it is a
party and the transactions contemplated thereunder do not conflict
with any provision of the articles of organization of the Borrower
or its operating agreement, or any agreement binding upon the
Borrower or its properties.
(g) The Assignment
of Rents, duly executed on behalf of the Borrower.
(h) 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 the
Design/Build Construction Contract, to the extent such security
interests are capable of being perfected by filing.
(i) A copy of the
Plans, certified by the General Contractor and the
Borrower.
(j) The Assignment
of the Construction Contract, duly executed by the Borrower and
consented to by the General Contractor, and a copy of the
Construction Contract, together with the general conditions of the
contract referred to herein.
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(k) The Assignment
of the Ethanol Marketing Contract, duly executed by the Borrower
and consented to by the ethanol marketer, and a copy of the Ethanol
Marketing Contract, together with the general conditions of the
contract referred to herein.
(l) The Assignment
of the DDGS Marketing Contract, duly executed by the Borrower and
consented to by the DDGS marketer, and a copy of the DDGS Marketing
Contract, together with the general conditions of the contract
referred to herein.
(m) Execution of
the Control Agreement with respect to the Borrower’s
commodity derivative transaction account with FCStone Trading, LLC,
duly executed by the Borrower and consented to by the other parties
to the account, and a copy of the applicable agreement, together
with the general conditions of the contract referred to
herein.
(n) Execution of
the Control Agreement with respect to the Borrower’s
commodity contracts account with FCStone, LLC, duly executed by the
Borrower and consented to by the other parties to the account, and
a copy of the applicable agreement, together with the general
conditions of the contract referred to herein.
(o) The Assignment
of the Consulting Agreement with Glacial Lakes Energy, LLC, duly
executed by the Borrower and consented to by Glacial Lakes Energy,
LLC, and a copy of the Consulting Agreement, together with the
general conditions of the contract referred to herein.
(p) The Assignment
of the Borrower’s Farmer’s Cooperative Elevator
Contract, duly executed by the Borrower and consented to by the
authorized representative of such cooperative, and a copy of the
Farmer’s Cooperative Elevator Contract, together with the
general conditions of the contract referred to herein.
(q) The Assignment
of the Borrower’s Rail Infrastructure Agreement, duly
executed by the Borrower and consented to by the other parties to
the Agreement, and a copy of the Rail Infrastructure Agreement,
together with the general conditions of the contract referred to
herein.
(r) The Assignment
of the Borrower’s Management Contract, duly executed by the
Borrower and consented to by the other parties to the Management
Contract, and a copy of the Management Contract, together with the
general conditions of the contract referred to herein.
(s) The Assignment
of the Glacial Lakes Energy LLC Management Contract, duly executed
by Glacial Lakes Energy LLC and consented to by the other parties
to the Management Contract, and a copy of the Management Contract,
together with the general conditions of the contract referred to
herein.
(t) The Assignment
of the Borrower’s Job Opportunity Building Zone Business
Subsidy Agreement, duly executed by Borrower and consented to by
the other parties to the Agreement, and a copy of the Job
Opportunity Building Zone Business
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Subsidy Agreement, together with the general
conditions of the contract referred to herein.
(u) A total
project cost statement on the Project duly executed by the
Borrower, setting forth the anticipated total cost of the
Project’s completion, and a construction cost statement duly
executed by the General Contractor, setting forth its anticipated
construction costs of the Project.
(v) 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.
(w) An as-built
appraisal based upon the Plans to be performed by Natwick
Associates Appraisal Services which shows the as-completed value of
the Property and Project addressed to and otherwise acceptable to
the Bank.
(x) A title
binder, issued by Ag Star Financial Services, ACA (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 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 that
will insure the Mortgage to be a valid first lien on the Property,
and with the ALTA endorsements as set forth as
Exhibit I.
(y) A soil report
on the Property certified by a registered engineer including
structural design recommendations in form and substance
satisfactory to the Bank. Such report shall include soil borings
and geo-technical analyses.
(z) A Phase I
Environmental Report of the Property, as well as any subsequent
limited environmental site assessments issued prior to the Closing,
all in form and content satisfactory to the Bank.
(aa) Copies of all
Construction Permits from the applicable regulatory agencies from
whom such permit or license is required.
(bb) 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 satisfaction of the Bank that the
Project when constructed in accordance with the Plans will comply
in all material 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
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that
the Project and the contemplated use thereof are permitted by and
comply in all material respects with all applicable use or other
restrictions and requirements in prior conveyances, zoning
ordinances, environmental laws and regulations, watershed district
regulations and all other applicable laws or regulations and
governmental authorities having jurisdiction over the Project. The
Borrower is not required to obtain advance confirmation from any
governmental body that the Project will comply with such
ordinances, regulations and requirements.
(cc) Copies of the
policy of property/casualty insurance and comprehensive general
liability insurance and a certificate of the workers’
compensation insurance required under Article VI of this
Agreement, with all such insurance in full force and effect and
approved by the Bank, in the exercise of its reasonable discretion,
and naming the Bank as a mortgage and additional named insured,
together with appropriate flood insurance, if the Property is in a
flood hazard area. Notwithstanding the foregoing, the Borrower is
not required to obtain workers’ compensation insurance until
required by Minnesota law.
(dd) A recently
certified copy of the Borrower’s operating agreement, and any
amendments, if applicable.
(ee) A recently
certified copy of the Borrower’s Articles of Organization and
any amendments, if applicable.
(ff) A certificate
of good standing for the Borrower from the office of the Minnesota
Secretary of State.
(gg) By the
Closing, proof of injection of equity capital into the Borrower of
no less than $24,000,000, including Subordinated Debt.
(hh) A copy of any
existing contracts for the Borrower’s natural gas,
electricity and water service and assignments thereof in favor of
the Bank in form satisfactory to the Bank.
Section 4.03. Conditions Precedent to Final Disbursements
on Construction Loan . The obligation of the Bank to make the
final disbursement on the Construction Loan shall be subject to the
condition precedent that the Borrower shall be in compliance with
all conditions set forth in Sections 4.01 and 4.02 of
this
