MASTER LOAN AGREEMENT

 

Exhibit 10.43

 

 

 

 

 

 

 

MASTER LOAN AGREEMENT

 

by and among

 

INDIANA BIO-ENERGY, LLC

 

and

 

AGSTAR FINANCIAL SERVICES, PCA

 

 

 

dated

as of

February 27, 2007

 

 

 

 

 

TABLE OF CONTENTS

 

 

 

i

 

LIST OF SCHEDULES AND EXHIBITS

 

 

 

ii

 

MASTER LOAN AGREEMENT

 

THIS MASTER LOAN AGREEMENT (this “Agreement” ), dated as of February 27, 2007, between AGSTAR FINANCIAL SERVICES, PCA , a United States instrumentality (the “Lender” ) and INDIANA BIO-ENERGY, LLC, an Indiana limited liability company (the “Borrower” ).

 

RECITALS

 

A.

The Borrower has requested the Lender extend to the Borrower various credit facilities for the purposes of acquiring, constructing, equipping, furnishing, and operating an ethanol production facility to he located near the City of Bluffton, Wells County, Indiana (the “Project”).

 

B.

Lender has agreed to make such loans to the Borrower, and in order to reduce the amount of paperwork associated therewith, Lender and the Borrower would like to enter into a master loan agreement.

 

AGREEMENT

 

NOW, THEREFORE , in consideration of the foregoing, intending to be legally bound hereby, and in consideration of Lender making one or more loans to the Borrower, Lender and the Borrower agree as follows:

 

ARTICLE I.

DEFINITIONS AND ACCOUNTING MATTERS

 

Section 1.01.

Certain Defined Terms. As used in this Agreement and in the Supplements, the following terms shall have the following meanings. Terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code, as amended from time to time. All references to dollar amounts shall mean amounts in lawful money of the United States of America.

 

“Advances” means the Loans or Letters of Credit provided the Borrower pursuant to this Agreement and the Supplements to this Agreement.

 

“Affiliate” means, as to any Person, any other Person: (a) that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, such Person; (b) that directly or indirectly beneficially owns or holds ten percent (10%) or more of any class of voting stock or membership interests (units) of such Person; or (c) ten percent (10%) or more of the voting stock or membership interests (units) of which is directly or indirectly beneficially owned or held by the Person in question. The term “control” means the possession, directly or indirectly, of the power to direct or cause direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise; provided, however, in no event shall the Lender or any bank be deemed an Affiliate of the Borrower or any of their subsidiaries.

 

“Agreement” means this Agreement, as this Agreement may be amended, modified or supplemented from time to time, together with all exhibits and schedules attached to or made a part of this Agreement from time to time.

 

“Allowed Distributions” has the meaning specified in Section 5.02(b).

 

“Borrower” means Indiana Bio-Energy, LLC, an Indiana limited liability company.

 

“Borrower’s Equity” means funds of at least 48.3% of Project Costs consisting of member cash equity of not less than $61,800,000.00 plus subordinated debt in an amount not less than $22,000,000.00.

 

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“Business Day” means any day other than a Saturday, Sunday, or other day on which commercial banks are authorized to close under the Laws of the State of Minnesota, or are in fact closed in, the state where the Lender’s Office is located and, if such day relates to any LIBOR Rate, means any such day on which Lender is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England.

 

“Capital Expenditures” means, for any period, the sum of all amounts that would, in accordance with GAAP consistently applied, be included as additions to property, plant and equipment on a statement of cash flows for the Borrower during such period, with respect to: (a) the acquisition, construction, improvement, replacement or betterment of land, buildings, machinery, equipment or of any other fixed assets or leaseholds; or (b) other capital expenditures and other uses recorded as capital expenditures having substantially the same effect.

 

“Closing Date” means February 27, 2007.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended.

 

“Collateral” means and includes, without limitation, all property and assets granted as collateral security for the Loans or other indebtedness, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, assignment of rents, deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract or otherwise.

 

“Commitment” means the respective amounts committed to by Lender under this Agreement, the Supplements and the Notes.

 

“Completion Date” means the earlier of (i) December 31, 2008, or (ii) the date a Completion Certificate is issued for the Project executed by the Borrower, General Contractor and Inspecting Engineer.

 

“Completion Certificate” means a certificate in form and substance reasonably acceptable to Lender, executed by the Borrower, General Contractor and Inspecting Engineer stating that the Project is completed and that the processing equipment and fixtures are fully operational.

 

“Compliance Certificate” means a certificate of the Treasurer, or any other officer reasonably acceptable to the Lender, of the Borrower, substantially in the form attached hereto as Exhibit A, setting forth the calculations of current financial covenants and stating: (a) the Financial Statements are true and correct and, other than the unaudited interim financial statements, have been prepared in accordance with GAAP consistently applied; (b) whether they have knowledge of the occurrence of any Event of Default under this Agreement, and if so, stating in reasonable detail the facts with respect thereto; and (c) reaffirm and ratify the representations and warranties, as of the date of the certificate, contained in this Agreement.

 

“Construction Advance” means any Advance for the payment of Project Costs.

 

“Construction Contracts” means any and all contracts between the Borrower and any Contractor and any subcontractor and between any of the foregoing and any other person or entity relating in any way to the construction of the Project, including the performing of labor or the furnishing of standard or specially fabricated materials in connection therewith.

 

“Construction Letters of Credit” has the meaning given in Section 7(b) of the First Supplement.

 

“Construction Loan” means the loan from the Lender to the Borrower in the amount of $90,000,000.00 and pursuant to the terms and conditions provided for in this Agreement and in the First Supplement to this Agreement.

 

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“Construction Note” means that certain promissory note of even date herewith executed and delivered to the Lender by the Borrower in the amount of$90,000,000.00 and pursuant to the terms and conditions provided for in this Agreement and the First Supplement to this Agreement.

 

“Contractor” means and includes any person or entity, including the General Contractor, engaged to work on or to furnish materials or supplies for the Project.

 

“Conversion Date” means the date which is within 60 days after the Completion Date.

 

“Debt” means: (A) indebtedness for borrowed money or for the deferred purchase price of property or services; (B) obligations as lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases; (C) obligations under direct or indirect guaranties in respect of and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clause (A) or (B) above or (E) through (0) below; (D) liabilities in respect of unfunded vested benefits under plans covered by Title N of ERISA; (E) indebtedness in respect of mandatory redemption or mandatory dividend rights on equity interests but excluding dividends payable solely in additional equity interests; (F) all obligations of a Person, contingent or otherwise, for the payment of money under any noncompete, consulting or similar agreement entered into with the seller of a company or its assets or any other similar arrangements providing for the deferred payment of the purchase price for an acquisition permitted hereby or an acquisition consummated prior to the date hereof; and (G) all obligations of a Person under any Hedging Agreement.

 

“Default Rate” means the lesser of: (a) the Maximum Rate; or (b) the rate per annum which shall from day-to-day be equal to two percent (2%) in excess of the then applicable rate of interest under any Supplement or Note.

 

“Disbursing Account” means a deposit or escrow account established by Home Federal Savings Bank for purposes of making all Advances under the Disbursing Agreement. This shall be established prior to the Closing Date and Home Federal Savings Bank shall provide a commitment to the Disbursing Agent of the Borrower’s Equity prior to the Closing Date.

 

“Disbursing Agent” means Chicago Title Insurance Company through its Crown Point, Indiana office, its successors and assigns.

 

“Disbursing Agreement” means the Disbursing Agreement, of even date herewith, executed by the Disbursing Agent, the Borrower, and the Lender, as the same may be from time to time amended, modified, or supplemented from time to time.

 

“Distribution” means any dividend, distribution, payment, or transfer of property by the Borrower to any member of the Borrower, including Allowed Distributions, Reinvestment Distributions and Excess Distributions.

 

“Environmental Laws” shall have the meaning ascribed to such term in the Environmental Indemnity Agreement.

 

“EBITDA” means for any period, the total of the following each calculated without duplication for the Borrower for such period: (i) net income; plus (ii) any provision for (or less any benefit from) income taxes included in determining such net income; plus (iii) Interest Expense deducted in determining such net income; plus (iv) amortization and depreciation expense deducted in determining such net income.

 

“ERISA” means the Employee Retirement Income Security Act of 1974.

 

“Events of Default” has the meaning specified in Section 6.01.

 

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“Excess Cash Flow” means EBITDA, less the sum of: (i) required payments in respect of Funded Debt; (ii) Maintenance Capital Expenditures; and (iii) Allowed Distributions.

 

“Excess Cash Flow Payment” has the meaning specified in Section 2.17.

 

“Excess Distributions” shall have the meaning specified in Section 5.02(b).

 

“Extraordinary Items” means items which are material and significantly different from the Borrower’s typical business activities, determined in accordance with GAAP, consistently applied.

 

“First Supplement” means that certain First Supplement to the Master Loan Agreement (Construction and Term Loan) dated as of the date hereof between the Borrower and the Lender, as the same may be amended, restated, supplemented or modified from time to time.

 

“Fixed Charge Coverage Ratio” means the ratio of EBITDA divided by the sum of (i) scheduled principal payments for the Loans, (ii) scheduled principal payments for Subordinated Debt, (iii) interest on the Loans, (iv) interest on Subordinated Debt, (v) Distributions, and (vi) Maintenance Capital Expenditures.

 

“Fixed Rate Loan” means that portion of the unpaid principal balance of the Construction Loan that is converted to a Term Loan and will accrue interest at a fixed rate of interest pursuant to Section 2.04.

 

“Food Security Act” means the Food Security Act of 1985, 7 U.S.C. §1631, as amended, and the regulations promulgated thereunder.

 

“Funded Debt” means the principal amount of all Debt of the Borrower having a final maturity of more than one year from the date of origin thereof (or which is renewable or extendible at the option of the obligor for a period or periods more than one year from the date of origin) excluding, however, the principal amount due under any Term Revolving Note or any other line of credit used by Borrower for working capital purposes, all determined in accordance with GAAP, consistently applied for the period in question.

 

“GAAP” means generally accepted accounting principals, consistently applied.

 

“General Contractor” means Fagen, Inc., a Minnesota corporation, its successors and permitted assigns.

 

“Governmental Authority” means and includes any and all courts, boards, agencies, commissions, offices, or authorities of any nature whatsoever for any governmental unit (federal, state, county, district, municipal, city, or otherwise) whether now or hereafter in existence.

 

“Income Taxes” means the applicable state, local or federal tax on the net income of the Borrower.

 

“Inspecting Engineer” means Harris Group, and its successors and permitted assigns.

 

“Intellectual Property” has the meaning specified in Section 4.01 (P).

 

“Interest Expense” means for any period, the total interest expense of the Borrower.

 

“Interest Period” means the period commencing on the date of an Advance and ending on the numerically corresponding day in the first calendar month thereafter, except that each such Interest Period which commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month. Notwithstanding the foregoing: (a) each Interest Period which would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day or if such succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day; (b) any Interest Period which would otherwise extend beyond the Maturity Date shall end on the Maturity Date; and (c) no Interest Period shall have a duration of less than one (1) month.

 

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“Inventory” means all of the Borrower’s inventory, as such term is defined in the UCC, whether now owned or hereafter acquired, whether consisting of whole goods, spare parts or components, supplies or materials, whether acquired, held or furnished for sale, for lease or under service contracts or for manufacture or processing, and wherever located.

 

“Lender” means AgStar Financial Services, PCA, and its successors and assigns.

 

“Letter of Credit” means the Construction Letters of Credit and Revolving Letters of Credit issued by Lender pursuant to the terms of this Agreement and Supplements.

 

“Letter of Credit Liabilities” means, at any time, the aggregate maximum amount available to be drawn under all outstanding Letters of Credit (in each case, determined without regard to whether any conditions to drawing could then be met) and all unreimbursed drawings under Letters of Credit.

 

“LIBOR Rate” (London Interbank Offered Rate) means the rate (rounded upward to the nearest sixteenth and adjusted for reserves required on Eurocurrency Liabilities (as hereinafter defined) for banks subject to FRB Regulation D (as hereinafter defined) or required by any other federal law or regulation), quoted by the British Bankers Association (the “BBA”) at 11 :00 a.m. London time two Banking Days (as hereinafter defined) before the commencement of the Interest Period for the offering of U.S. Dollar deposits in the London interbank market for an Interest Period of one month, as published by Bloomberg or another major information vendor listed on BBA’s official website. “Banking Day” shall mean a day on which Lender is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England. “Eurocurrency Liabilities” has the meaning as set forth in FRB Regulation D. “FRB Regulation D” means Regulation D as promulgated by the Board of Governors of the Federal Reserve System, 12 CFR Part 204, as amended from time to time.

 

“Loan and Carrying Charges” means all commitment fees to the Lender, brokerage fees, standby fees, interest charges, service fees, attorneys’ fees, contractors’ fees, developers’ fees, funding fees, title insurance fees and charges, recording fees, registration taxes, real estate taxes, special assessments, insurance premiums, and utility charges incurred by the Borrower in the construction of the Project and issuance of the Notes, all costs incurred in acquisition of the Real Property (to the extent applicable) and any other costs incurred in the development of the Project.

 

“Loan Documents” means this Agreement, any and all Supplements to this Agreement, the Notes, Letters of Credit, the Security Agreement, the Mortgage, the Environmental Indemnity Agreement and all other agreements, documents, instruments, and certificates of the Borrower delivered to, or in favor of, the Lender under this Agreement or in connection herewith or therewith, including, without limitation, all agreements, documents, instruments, and certificates delivered in connection with the extension of Advances by the Lender.

 

“Loan Obligations” means all obligations, indebtedness, and liabilities of the Borrower to the Lender, including the Reimbursement Obligations, arising pursuant to any of the Loan Documents, whether now existing or hereafter arising, whether direct, indirect, related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, including, without limitation, the obligation of the Borrower to repay the Advances, interest on the Advances, and all fees, costs, and expenses (including, without limitation, reasonable attorneys’ fees and expenses) provided for in the Loan Documents.

 

“Loan/Loans” means and includes the Construction Loan, the Term Loan, and the Term Revolving Loan and any other financial accommodations extended to the Borrower by the Lender pursuant to the terms of this Agreement and any Supplements.

 

“Long Term Debt” means indebtedness that matures more than one year after the date of determination thereof.

 

5

 

“Long Term Marketing Agreement” means any contract, agreement or understanding of the Borrower having a term of one year or more after the date of determination thereof relating to the sale of any raw materials, inventory, products or by-products of the Borrower.

 

“Maintenance Capital Expenditures” means all Capital Expenditures made in the ordinary course of business to maintain existing business operations of the Borrower in any fiscal year, determined in accordance with GAAP, consistently applied.

 

“Material Adverse Effect” means any set of circumstances or events which: (i) has or could reasonably be expected to have any material adverse effect upon the validity or enforceability of any Loan Documents or any material term or condition contained therein; (ii) is or could reasonably be expected to be material and adverse to the condition (financial or otherwise), business assets, operations, or property of the Borrower when considered as a whole; or (iii) materially impairs or could reasonably be expected to materially impair the ability of the Borrower to perform the obligations under the Loan Documents.

 

“Material Contract” means (i) any contract or any other agreement, written or oral, or any of the Borrower or its Subsidiaries involving monetary liability of or to any such person in an amount in excess of $250,000.00 per annum; and (ii) any other contract or agreement, written or oral, of the Borrower or any of its Subsidiaries the failure to comply with which could reasonably be expected to have a Material Adverse Effect on the Borrower or its Subsidiaries; provided, however, that any contract or agreement which is terminable by a party other than the Borrower or its Subsidiaries without cause upon notice of 90 days or less shall not be considered a Material Contract.

 

“Maturity Date” means the fifth annual anniversary of the Conversion Date.

 

“Maximum Rate” means the maximum nonusurious interest rate, if any, at any time, or from time to time, that may be contracted for, taken, reserved, charged or received under applicable state or federal laws.

 

“Mortgage” means that certain Construction/Permanent Mortgage, Security Agreement, Assignment of Leases and Rents, Financing Statement and Fixture Filing of even date herewith, pursuant to which a mortgage interest shall be given by the Borrower to the Lender in the Real Property to secure payment to the Lender of the Loan Obligations.

 

“Net Income” means net income as determined in accordance with GAAP.

 

“Note/Notes” means and includes the Construction Note and Term Revolving Note and all other promissory notes executed and delivered to the Lender by the Borrower pursuant to the terms of this Agreement and any Supplements as the same may be amended, modified, supplemented, extended or restated from time to time.

 

“Ordinary Trade Payable Dispute” means trade accounts payable, in an aggregate amount not in excess of $150,000:00 with respect to the Borrower, and with respect to which: (a) there exists a bona fide dispute between Borrower and the vendor; (b) the Borrower is contesting the same in good faith by appropriate proceedings; and (c) the Borrower has established appropriate reserves on its financial statements.

 

“Permitted Liens” shall have the meaning as set forth in Section 5.02(a) hereof.

 

“Person” means any individual, corporation, business trust, association, company, partnership, joint venture, governmental authority, or other entity.

 

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“Personal Property” means all buildings, structures, equipment, fixtures, improvements, building supplies and materials and other personal property now or hereafter attached to, located in, placed in or necessary to the use of the improvements on the Real Property including, but without being limited to, all machinery, fixtures, equipment, furnishings, and appliances, as well as all renewals, replacements, additions, and substitutes thereof, and all products and proceeds thereof, and including without limitation all accounts, instruments, chattel paper, other rights to payment, money, deposit accounts, insurance proceeds and general intangibles of the Borrower, whether now owned or hereafter acquired.

 

“Plans and Specifications” means the final plans and specifications for the construction of the Project, to be prepared by the General Contractor, and approved by the Lender, and all amendments and modifications and supplements thereof approved by Lender.

 

“Project” means any and all buildings, structures, fixtures, and other improvements made to the Real Property and other uses identified in the Project Sources and Uses Statement as part of the acquisition and construction of ethanol production facility in Bluffton, Indiana, for which the Loans to Borrower are being made hereunder.

 

“Project Costs” means the total of all costs of acquiring the Real Property and constructing the Project as identified in the Project Sources and Uses Statement, together with all Loan and Carrying Charges.

 

“Project Sources and Uses Statement” means the statement attached hereto as Exhibit B which identifies the sources and uses of monies in a total amount of $173,800,000.00 related to the Project.

 

“Real Property” means that real property located in the County of Wells, State of Indiana, owned by the Borrower, upon which the Project is to be constructed and which is described in Schedule 3.01(d).

 

“Reimbursement Obligation” means the obligation of the Borrower to reimburse the Lender for any demand for payment or drawing under a Letter of Credit.

 

“Revolving Loan” means the Term Revolving Loan and any other revolving loan provided by the Lender to the Borrower pursuant to the terms and conditions provided for in this Agreement and in any revolving loan supplement.

 

“SARA” means the Superfund Amendment and Reauthorizations Act of 1986, as amended.

 

“Second Supplement” means that certain Second Supplement to the Master Loan Agreement (Term Revolving Loan) dated as of the date here of between the Borrower and the Lender, as the same may be amended, restated, supplemented or modified from time to time.

 

“Security Agreement” means the Security Agreement of even date, pursuant to which a security interest shall be granted by Borrower to the Lender in the Personal Property to secure payment to the Lender to the Loan Obligations and includes any agreements executed by Borrower which evidence, govern, represent, or create a Security Interest, as the same has· been and may hereafter be amended or otherwise modified.

 

“Security Interest” means and includes without limitation any type of collateral security, whether in the form of a lien, charge, mortgage, assignment of rents, deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise.

 

“Subordinated Debt” means Debt held by the US Bank, National Association, as trustee.

 

“Supplement” has the meaning set forth in Section 2.01 of this Agreement.

 

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“Tangible Net Worth” means the excess of total assets over total liabilities except subordinated debt, total assets and total liabilities each to be determined in accordance with GAAP consistent with those applied in the preparation of the financial statements referred to in Section 5.01(c) for the Borrower, excluding, however, from the determination of total assets: (i) goodwill, organizational expenses, research and development expenses, trademarks, trade names, copyrights, patents, patent applications, licenses and rights in any thereof, and other similar intangibles; (ii) treasury stock; (iii) securities which are not readily marketable; (iv) any write-up in the book value of any asset resulting from a revaluation thereof subsequent to the Closing Date; and (v) any items not included in clauses (i) through (v) above which are treated as intangibles in conformity with GAAP.

 

“Tangible Owner’s Equity” means the Tangible Net Worth divided by total assets, measured annually at the end of each fiscal year, and expressed as a percentage.

 

“Term Loan” means any amortizing loan with a maturity of greater than one year provided by the Lender to the Borrower pursuant to the terms and conditions of this Agreement and the First Supplement to this Agreement.

 

“Term Revolving Loan” means that certain loan from the Lender to the Borrower in the amount of $20,000,000.00 and pursuant to the terms and conditions provided for in this Agreement and the Second Supplement.

 

“Term Revolving Note” means that certain promissory note to be executed and delivered to the Lender by the Borrower on the Conversion Date pursuant to the terms and conditions provided for in this Agreement and the Second Supplement to this Agreement.

 

“Working Capital” means current assets of the Borrower less current liabilities of the Borrower as determined in accordance with GAAP. Working capital may include any unused commitment in the Revolving Term Loan less any current portion due.

 

Section 1.02.

Accounting Matters. All accounting terms not specifically defined herein shall be construed in accordance with GAAP consistently applied, except as otherwise stated herein. To enable the ready and consistent determination of compliance by the Borrower with its obligations under this Agreement, the Borrower will not change the manner in which either the last day of its fiscal year or the last days of the first three fiscal quarters of its fiscal years is calculated.

 

Section 1.03.

Construction. Wherever herein the singular number is used, the same shall include the plural where appropriate, and words of any gender shall include each other gender where appropriate. The headings, captions or arrangements used in any of the Loan Documents are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of the Loan Documents, nor affect the meaning thereof.

 

ARTICLE II

AMOUNTS AND TERMS OF THE LOANS

 

Section 2.01.

Supplements. In the event the Borrower desires to borrow from Lender and Lender is willing or otherwise committed to lend to the Borrower, or in the event Lender and Borrower desire to consolidate any existing loans hereunder, the parties will enter into a supplement to this Agreement (each supplement, as it may be amended, modified, supplemented, extended or restated from time to time, a “Supplement” and, collectively, the “Supplements” ). Each Supplement will set forth Lender’s commitment to make a Loan to the Borrower, the amount of the Loan(s), the purpose of the Loan(s), the interest rate or rate options applicable to the Loan(s), the repayment terms of the Loan(s), and any other terms and conditions applicable to the Loan(s). Each Supplement will also be accompanied by a Note of the Borrower setting forth the Borrower’s obligation to make payments of interest on the unpaid principal balance of the Loan(s), and fees and premiums, if any, and to repay the principal balance of the Loan(s). Each Loan will be governed by the terms and conditions contained in this Agreement and in the Note and the Supplement relating to that Loan.

 

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Section 2.02.

Construction Loan. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties set forth in this Agreement, the Lender has agreed to lend to Borrower and Borrower has agreed to borrow from Lender $90,000,000.00 for Project Costs. Such amount shall be loaned by Lender pursuant to the terms and conditions set forth in this Agreement and the First Supplement to this Agreement.

 

Section 2.03.

Term Revolving Loan. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties set forth in this Agreement, the Lender has agreed to lend to Borrower and Borrower has agreed to borrow from Lender, as of the Conversion Date and from time to time thereafter, on a revolving basis an amount not to exceed $20,000,000.00. Such amount shall be loaned by Lender pursuant to the terms and conditions set forth in this Agreement and the Second Supplement to this Agreement. Pursuant to the terms and conditions in this Agreement, the Lender may extend additional term Revolving Loans to the Borrower. Any such future term Revolving Loans shall be provided by Lender pursuant to the terms and conditions of a future term Revolving Loan Supplement.

 

Section 2.04.

Conversion of Construction Loan Into Term Loan and Term Revolving Loan. The Lender agrees to convert the Construction Loan into a Term Loan and Term Revolving Loan on the Conversion Date, provided all of the terms, conditions, warranties, representations, and covenants of the Borrower set forth in this Agreement, the First Supplement and the Second Supplement are satisfied in all material respects to the reasonable satisfaction of Lender. Any such amount shall be provided by Lender pursuant to the terms and conditions set forth in this Agreement, the First Supplement and the Second Supplement to this Agreement setting forth the terms and conditions of such Term Loan and Term Revolving Loan, provided, however, that (i) all unpaid principal and all accrued interest on the Term Loan and the Term Revolving Loan shall be due and payable on the Maturity Date and (ii) the Borrower shall have the right to convert up to 50% of the Term Loan into a Fixed Rate Loan, which shall bear interest at a rate equal to the rate listed in the “Government Agency and Similar Issues” section of the Wall Street Journal for the Federal Farm Credit Bank or the Federal Horne Loan Bank having a maturity approximately equal to the Maturity Date, which is in effect at the time of the Conversion Date plus 300 basis points, or another rate as agreed upon by the Lender and Borrower. Should the Borrower elect such fixed rate option, such rate of interest shall not be subject to any adjustments under Section 2.06 of this Agreement.

 

Section 2.05.

Letter of Credit Procedures J Fees / Reimbursement. All Letters of Credit that are issued under this Agreement and any supplements to this Agreement are subject to the following:

 

(a)

Letter of Credit Request Procedure. The Borrower shall give the Lender irrevocable prior notice (effective upon receipt) on or before 3:00 P.M. (Minneapolis, Minnesota time) on the Business Day three Business Days prior to the date of the requested issuance of a Letter of Credit specifying the requested amount, expiry date and issuance date of each Letter a f Credit to be issued and the nature of the transactions to be supported thereby. Any such notice received after 3:00 P.M. (Minneapolis, Minnesota time) on a Business Day shall be deemed to have been received and be effective on the next Business Day. Each Letter of Credit shall be in a form reasonably acceptable to Lender, have an expiration date that occurs on or before the date required pursuant to Section 7(b) of the First Supplement or Section 8 of the Second Supplement, as applicable, shall be payable in U.S. dollars, must be satisfactory in form and substance to the Lender, and shall be issued pursuant to such documentation as the Lender may require, including, without limitation, the Lender’s standard form letter of credit request and reimbursement agreement; provided that, in the event of any conflict between the terms of such agreement and the other Loan Documents, the terms of the other Loan Documents shall control.

 

(b)

Letter of Credit Fees. The Borrower shall pay to the Lender (i) all fees, costs, and expenses of the Lender arising in connection with any Letter of Credit, including the Lender’s customary fees for amendments, transfers, and drawings on Letters of Credit and (ii) on the date of the issuance of the Letter of Credit, and at the anniversary date of issuance of such Letter of Credit, an issuance fee equal to two and one-half (2.5%) percent, on an annualized basis, of the maximum amount available to be drawn under the Letter of Credit.

 

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(c)

Funding of Drawings. Upon receipt from the beneficiary of any Letter of Credit of any demand for payment or other drawing under such Letter of Credit, the Lender shall promptly notify the Borrower as to the amount to be paid as a result of such demand or drawing and the respective payment date. Any notice pursuant to the forgoing sentence shall specify the amount to be paid as a result of such demand or drawing and the respective payment date.

 

(e)

Reimbursements. After receipt of the notice delivered pursuant to clause (c) of this Section 2.05 with respect to a Letter of Credit, the Borrower shall be irrevocably and unconditionally obligated to reimburse the Lender for any amounts paid by the Lender upon any demand for payment or drawing under the applicable Letter of Credit, without presentment, demand, protest, or other formalities of any kind other than the notice required by clause (c) of this Section 2.05. Such reimbursement shall occur no later than 3:00 P.M. (Minneapolis, Minnesota time) on the date of payment under the applicable Letter of Credit if the notice under clause (c) of this Section 2.05 is received by 2:00 P.M. (Minneapolis, Minnesota time) on such date or by 11:00 AM. (Minneapolis, Minnesota time) on the next Business Day, if such notice is received after 2:00 P.M. (Minneapolis, Minnesota time). All payments on or of the Reimbursement Obligations (including any interest earned thereon) shall be made to the Lender for the account of the Lender in U.S. dollars and in immediately available funds, without set-off, deduction, or counterclaim.

 

(f)

Reimbursement Obligations Absolute . The Reimbursement Obligations of the Borrower under this Agreement shall be absolute, unconditional, and irrevocable, and shall be performed strictly in accordance with the terms of the Loan Documents under all circumstances whatsoever and the Borrower hereby waives any defense to the payment of the Reimbursement Obligations based on any circumstance whatsoever, including, without limitation, in any case, the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit or any other Loan Document; (ii) any amendment or waiver of or any consent to departure from any Loan Document; (iii) the existence of any claim, set-off, counterclaim, defense, or other rights which any Borrower or any other Person may have at any time against any beneficiary of any Letter of Credit, the Lender or any other Person, whether in connection with any Loan Document or any unrelated transaction; (iv) any statement, draft, or other documentation presented under any Letter of Credit proving to be forged, fraudulent, invalid, or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; or (v) payment by the Lender under any Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit; provided that Reimbursement Obligations with respect to a Letter of Credit may be subject to avoidance by a Borrower if the Borrower proves in a final non-appealable judgment that it was damaged and that such damage arose directly from the Lender’s willful misconduct or gross negligence in determining whether the documentation presented under the Letter of Credit in question complied with the terms thereof.

 

(g)

Issuer Responsibility . Borrower assumes all risks of the acts or omissions of any beneficiary of any Letter of Credit with respect to its use of such Letter of Credit. Neither the Lender, nor any of its respective officers or directors shall have any responsibility or liability to the Borrower or any other Person for: (a) errors, omissions, interruptions, or delays in transmission or delivery of any messages; or (b) the validity, sufficiency, or genuineness of any draft or other document, or any endorsement(s) thereon, even if any such draft, document or endorsement should in fact prove to be in any and all respects invalid, insufficient, fraudulent, or forged or any statement therein is untrue or inaccurate in any respect. The Lender may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary.

 

Section 2.06.

Adjustments to Interest Rate. Notwithstanding any other provision of this Agreement, the Supplements, the Notes, or the Loan Documents, after the Conversion Date, the rate of interest under any Loan which bears interest on a variable rate, shall be adjusted according to the following schedule should the Tangible Owner’s Equity of the Borrower, achieve the levels set forth below:

 

 

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Upon delivery of the audited financial statements pursuant to Section 5.01 (c)(i) for each fiscal year end beginning with the first fiscal year end after the Conversion Date, the rate of interest for any month shall automatically be adjusted in accordance with the Tangible Owner’s Equity set forth therein and the rates set forth above. Such automatic adjustment to the rate of interest shall take effect as of the first Business Day of the month following the month in which the Lender received the related audited financial statements pursuant to Section 5.01 (c)(i). The term “Adjustment Date” shall mean each such Business Day when such rates, margins or fees change pursuant to the immediately prior sentence or the next following sentence. If the Borrower fails to deliver such audited financial statement which so sets forth the Tangible Owner’s Equity within the period of time required by Section 5.01 (c)(i) hereof or if any Event of Default occurs, the rate of interest shall automatically be adjusted to a rate equal to the applicable LIBOR Rate plus 325 basis points, such automatic adjustments: (a) to take effect as of the first Business Day after the last day on which the Borrower was required to deliver the applicable audited financial statement in accordance with Section 5.01 (c)(i) hereof or in the case of an Event of Default, on the date the written notice is given to the Borrower; and (b) to remain in effect until subsequently adjusted in accordance herewith upon the delivery of such audited financial statements or, in the case of an Event of Default, when such Event of Default has been cured to the satisfaction of the Lender.

 

Section 2.07.

Default Interest. In addition to the rights and remedies set forth in this Agreement and notwithstanding any Note: (i) if the Borrower fails to make any payment to Lender when due, subject to any applicable cure periods (including, without limitation, any purchase of equity of Lender as required by Section 2.15 of this Agreement), then at Lender’s option in each instance, such obligation or payment shall bear interest from the date due (subject to any applicable cure periods) to the date paid at 2% per annum in excess of the rate of interest that would otherwise be applicable to such obligation or payment; (ii) upon the occurrence and during the continuance of an Event of Default beyond any applicable cure period, if any, at Lender’s option in each instance, the unpaid balances of the Loans shall bear interest from the date of the Event of Default or such later date as Lender shall elect at 2% per annum in excess of the rate(s) of interest that would otherwise be in effect on the Loans under the terms of the applicable Note; (iii) after the maturity of any Loan, whether by reason of acceleration or otherwise, the unpaid principal balance of the Loan (including without limitation, principal; interest, fees and expenses) shall automatically bear interest at 2% per annum in excess of the rate of interest that would otherwise be in effect on the Loan under the terms of the applicable Note. Interest payable at the Default Rate shall be payable from time to time on demand or, if not sooner demanded, on the first day of each calendar month.

 

Section 2.08.

Late Charge. If any payment of principal or interest due under the Supplements or the Notes is not paid within ten (10) days of the due date thereof (other than following acceleration of the Maturity Date by Lender, or any required principal prepayments pursuant to this Agreement), the Borrower shall, in addition to such amount, pay a late charge equal to five percent (5%) of the amount of such payment.

 

Section 2.09.

Prepayment of Term Loan. The Borrower may, by notice to the Lender, prepay the outstanding amount of the Loans in whole or in part with accrued interest to the date of such prepayment on the amount prepaid; without penalty or premium, except as provided in this Section 2.09. In the event the Construction Loan or Term Loan is prepaid, in whole or in part, or the outstanding principal balance of the Loans is prepaid in its entirety, from the Closing Date through the first twenty-four (24) months after the Conversion Date, and such prepayment is as a result of refinancing obtained by the Borrower from a third party lender and not as a result of (a) income generated by the Borrower incidental to its operations or (b) casualty insurance proceeds or condemnation proceeds received by the Borrower as a result of an involuntary loss or other disposition of Collateral, Borrower shall pay a prepayment fee equal to the following specified percentage of the amount of principal prepaid:

 

 

Notwithstanding-the foregoing, no prepayment fee shall be required if such prepayment is made pursuant to Section 2.17 of this Agreement. In addition, in the event any Loan is converted to a fixed rate loan, the Borrower shall pay the prepayment fee applicable to that fixed interest rate, if any.

 

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Section 2.10.

Changes in Law Rendering Certain LIBOR Rate Loans Unlawful . In the event that any change in any applicable law (including the adoption of any new applicable law) or any change in the interpretation of any applicable law by any judicial; governmental or other regulatory body charged with the interpretation, implementation or administration thereof, should make it (or in the good-faith judgment of the Lender should raise a substantial question as to whether it is) unlawful for the Lender to make, maintain or fund LIBOR Rate Loans, then: (a) the Lender shall promptly notify Borrower; and (b) the obligation of the Lender to make LIBOR rate loans of such type shall, upon the effectiveness of such event, be suspended for the duration of such unlawfulness. During the period of any suspension, Lender shall make loans to Borrower that are deemed lawful and that as closely as possible reflect the terms of this Agreement.

 

Section 2.11.

Payments and Computations.

 

(a)

Method of Payment. Except as otherwise expressly provided herein, all payments of principal, interest, and other amounts to be made by the Borrower under the Loan Documents shall be made to the Lender in U.S. dollars and in immediately available funds, without set-off, deduction, or counterclaim, not later than 2:00 P.M. (Minneapolis, Minnesota time) on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). The Borrower shall, at the time of making each such payment, specify to the Lender the sums payable under the Loan Documents to which such payment is to be applied and in the event that the Borrower fails to so specify or if an Event of Default exists, the Lender may apply such payment and any proceeds of any Collateral to the Loan Obligations in such order and manner as it may elect in its sole discretion.

 

(b)

Application of Funds. Lender may apply all payments received by it to the Loan Obligations in such order and manner as Lender may elect in its sole discretion; provided that any payments received from any guarantor or from any disposition of any collateral provided by such guarantor shall only be applied against obligations guaranteed by such guarantor.

 

(c)

Payments on a Non-Business Day. Whenever any payment under any Loan Document shall be stated to be due on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of the payment of interest and fees, as the case may be.

 

(d)

Proceeds of Collateral. All proceeds received by the Lender from the sale or other liquidation of the Collateral when an Event of Default exists shall first be applied as payment of the accrued and unpaid fees and expenses of the Lender hereunder, including, without limitation, under Section 7.04 and then to all other unpaid or unreimbursed Loan Obligations (including reasonable attorneys’ fees and expenses) owing to the Lender and then any remaining amount of such proceeds shall be applied to the unpaid amounts of Loan Obligations, until all the Loan Obligations have been paid and satisfied in full or cash collateralized. After all the Loan Obligations (excluding any contingent Loan Obligations for which no claim has been asserted) have been paid and satisfied in full, all Commitments terminated and all other obligations of the Lender to the Borrower otherwise satisfied, any remaining proceeds of Collateral shall be delivered to the Person entitled thereto as directed by the Borrower or as otherwise determined by applicable law or applicable court order.

 

(e)

Computations. Except as expressly provided otherwise herein, all computations of interest and fees shall be made on the basis of actual number of days lapsed over a year of 365 or 366 days, as appropriate. Interest shall accrue from and include the date of borrowing, but exclude the date of payment.

 

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Section 2.12.

Maximum Amount Limitation. Anything in this Agreement, any Supplement, any Note, or the other Loan Documents to the contrary notwithstanding, Borrower shall not be required to pay unearned interest on any Note or any of the Loan Obligations, or ever be required to pay interest on any Note or any of the Loan Obligations at a rate in excess of the Maximum Rate, if any. If the effective rate of interest which would otherwise be payable under this Agreement, any Note or any of the other Loan Documents would exceed the Maximum Rate, if any, then the rate of interest which would otherwise be contracted for, charged, or received under this Agreement, any Note or any of the other Loan Documents shall be reduced to the Maximum Rate, if any. If any unearned interest or discount or property that is deemed to constitute interest (including, without limitation, to the extent that any of the fees payable by Borrower for the Loan Obligations to the Lender under this Agreement, any Supplement, any Note, or any of the other Loan Documents are deemed to constitute interest) is contracted for, charged, or received in excess of the Maximum Rate, if any, then such interest in excess of the Maximum Rate shall be deemed a mistake and canceled, shall not be collected or collectible, and if paid nonetheless, shall, at the option of the holder of such Note, be either refunded to the Borrower, or credited on the principal of such Note. It is further agreed that, without limitation of the foregoing and to the extent permitted by applicable law, all calculations of the rate of interest or discount contracted for, charged or received by the Lender under its Note, or under any of the Loan Documents, that are made for the purpose of determining whether such rate exceeds the Maximum Rate applicable to the Lender, if any, shall be made, to the extent permitted by applicable laws (now or hereafter enacted), by amortizing, prorating and spreading during the period of the full terms of the Advances evidenced by the Notes, and any renewals thereof all interest at any time contracted for, charged or received by Lender in connection therewith. This Section 2.12 shall control every other provision of all agreements among the parties to this Agreement pertaining to the transactions contemplated by or contained in the Loan Documents, and the terms of this Section 2.12 shall be deemed to be incorporated in every Loan Document and communication related thereto.

 

Section 2.13.

Lender Records. All advances and all payments or prepayments made thereunder on account of principal or interest may be evidenced by the Lender in accordance with its usual practice in an account or accounts evidencing such advances and all payments or prepayments thereunder from time to time and the amounts of principal and interest payable and paid from time to time thereunder; in any legal action or proceeding in respect of the Notes, the entries made in such account or accounts shall be prima facie evidence of the existence and amounts of all advances and all payments or prepayments made thereunder on account of principal or interest. Lender shall provide monthly statements of such entries to Borrower for the purpose of confirming the accuracy of such entries.

 

Section 2.14.

Loan Payments. During the continuance of an Event of Default, the Lender may deduct any obligations due or any other amounts due and payable by the Borrower under the Loan Documents from any accounts maintained with the Lender.

 

Section 2.15.

Purchase of Equity Interests in AgStar Financial Services, PCA. In addition to (and not in lieu of) the other amounts payable by Borrower under this Agreement or any Supplement, Borrower shall purchase $1,000.00 of equity interests in AgStar Financial Services, PCA. The purchase price for the equity interests shall be payable in full on or prior to the date hereof. Such purchase of equity interests shall comply with AgStar Financial Services, PCA’s by­laws and capital plans applicable to borrowers generally. Borrower hereby acknowledges receipt of the following information and materials pertaining to AgStar Financial Services, PCA prior to the execution of this Agreement: (i) copies of the by-laws of AgStar Financial Services, PCA; (ii) a written description of the terms and conditions under which the equity interests are issued; (iii) a copy of the most recent annual reports of AgStar Financial Services, PCA; and (iv) if more recent than the latest annual reports, the latest quarterly reports of AgStar Financial Services, PCA. AgStar Financial Services, PCA shall possess a statutory security interest in its equity interests.

 

Borrower acknowledges and agrees that: (a) only the portions of the Loans provided to Borrower by AgStar Financial Services, PCA are entitled to patronage distributions in accordance with the bylaws of AgStar Financial Services, PCA and its practices and procedures; and (b) any patronage or similar payments to which Borrower is entitled as a result of its ownership of the equity interests in AgStar Financial Services, PCA will not be based on any of the Loans not belonging to AgStar Financial Services, PCA or in which AgStar Financial Services, PCA has granted a participation interest at any time.

 

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Section 2.16.

Compensation. Upon the request of the Lender, the Borrower shall pay to the Lender such amount or amounts as shall be sufficient (in the reasonable opinion of the Lender and as verified and computed in an accounting provided to Borrower) to compensate it for any loss, cost, or expense (excluding loss of anticipated profits incurred by it) as a result of: (i) any payment, prepayment, or conversion of a LIBOR rate loan for any reason on a date other than the last day of the Interest Period for such Loan; or (ii) any failure by the Borrower for any reason (including, without limitation, the failure of any condition precedent specified in Section 3.01 to be satisfied) to borrow, extend, or prepay a LIB OR rate loan on the date for such borrowing, extension, or prepayment specified in the relevant notice of borrowing, extension or prepayment under this Agreement.

 

Such indemnification may include any amount equal to the excess, if any, of: (a) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or extended, for the period from the date of such prepayment or of such failure to borrow, convert or extend to the last day of the applicable Interest Period (or in the case of a failure to borrow, convert or extend, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such loan as provided for herein; over (b) the amount of interest (as reasonably determined by the Lender) which would have accrued to the Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank LIBOR market. The covenants of the Borrower set forth in this Section 2.16 shall survive the repayment of the Loans and other obligations under the Loan Documents hereunder.

 

Section 2.17.

Excess Cash Flow. In addition to all other payments of principal and interest required under this Agreement, the Supplements and the Notes, at the end of the first full fiscal quarter following nine months after the Conversion Date, and at the end of each fiscal quarter thereafter until the Maturity Date, the Borrower shall remit to Lender, an amount equal to 75% of the Borrower’s Excess Cash Flow, calculated based upon that fiscal quarter’s interim financial statements, on or before 45 days after the end of each fiscal quarter of the Borrower (the “Excess Cash Flow Payment” ), provided however, that the total Excess Cash Flow Payments required hereunder shall not exceed $4,000,000.00 in any fiscal year (the “Maximum Excess Cash Flow Payment” ). Such payment shall be applied first to the reduction of the outstanding principal of the Term Loan and then to the reduction of the outstanding principal balance of the Term Revolving Loan. The Excess Cash Flow Payment shall be re-calculated annually based upon audited fiscal year-end financial statements required by Section 5.0l(c)(i) of this Agreement. Borrower shall, within 30 days of Lender’s request remit to Lender any additional amounts due Lender under this Section in an amount not to exceed the Maximum Excess Cash Flow Payment. Any Excess Cash Flow Payment shall not constitute a prepayment with respect to which a prepayment fee under Section 2.09 or Section 2.16 of this Agreement is required to be paid. Notwithstanding the foregoing, the Excess Cash Flow Payment shall not exceed an aggregate amount of $16,000,000.00 for the term of this Agreement. No Excess Cash Flow Payments shall be required during any calendar year should the Tangible Owner’s Equity be greater than 70% at the end of the immediately preceding fiscal year of the Borrower.

 

ARTICLE III.

CONDITIONS PRECEDENT

 

Section 3.01.

Conditions Precedent to Funding. The effectiveness of this Agreement and the obligation of the Lender to make any Advance, are subject to the conditions precedent that the Lender shall have received the following, in form and substance reasonably satisfactory to the Lender:

 

(a)

This Agreement, duly executed by the Borrower and the Lender;

 

(b)

The Supplements, duly executed by the Borrower and the Lender;

 

(c)

The Construction Note and the Term Revolving Note dilly executed by the Borrower;

 

(d)

The Mortgage, fully executed and notarized, to secure the Loans encumbering on a first lien basis the fee interest of the Borrower in the Real Property and the fixtures thereon described in Schedule 3.01(d);

 

(e)

A Security Agreement duly executed by the Borrower and in a form as provided by the Lender by which security agreement the Lender is granted a security interest by the Borrower in the Collateral;

 

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(f)

A copy of the Construction Contract(s), together with copies of all permits and government approvals obtained relating to the construction of the Project;

 

(g)

An assignment of contract for each of the Construction Contracts and the Plans and Specifications, duly executed by the Borrower and pursuant to which the Borrower shall have assigned to the Lender all of the Borrower’s right, title and interest in and to each such Construction Contract, and which assignment shall have been consented to and certified in writing by the other party(ies) to each such Construction Contract;

 

(h)

Copies of all Material Contracts between Borrower and third parties used in the normal operations of Borrower, including but not limited to management agreements, marketing agreements, and corn delivery agreements;

 

(i)

Assignments of the Material Contracts by Borrower, duly executed by the Borrower and pursuant to which the Borrower shall have assigned to the Lender all of the Borrower’s right, title and interest in and to each such contracts, and which assignment shall have been consented to and certified in writing by the other party(ies) to each such contract;

 

(j)

Financing Statements in form and content satisfactory to the Lender and in proper form under the Uniform Commercial Code of all jurisdictions as may be necessary or, in the opinion of the Lender, desirable to perfect the security interests created by the Security Agreement;

 

(k)

Copies of UCC, tax and judgment lien search reports listing all financing statements and other encumbrances which name the Borrower (under its present name and any previous name) and which are filed in the jurisdictions in which the Borrower is located, organized or maintains collateral, together with copies of such financing statements (none of which shall cover the collateral purported to be covered by the Security Agreement);

 

(1)

Evidence that all other actions necessary or, in the reasonable opinion of the Lender, desirable to enable the Lender to perfect and protect the security interests created by the Security Agreement have been taken;

 

(m)

An ALTA mortgagee title insurance policy issued by a title insurance company acceptable to Lender, with respect to the Real Property, assuring the Lender that the Mortgage creates a valid and enforceable encumbrance on the Real Property, free and clear of all defects and encumbrances except Permitted Liens and containing: (i) a comprehensive endorsement (ALTA form 9); (ii) a zoning endorsement (ALTA form 3.0) specifying an ethanol production facility as a permitted use for all of the parcels included in the Real Property; and (iii) a restrictions, encroachments, minerals-owners endorsement (ALTA Form 9.2) and (iv) such endorsements as the Lender shall reasonably require. All such title insurance policies shall be in form and substance reasonably satisfactory to the Lender and shall provide for affirmative insurance and such reinsurance as the Lender may reasonably request, all of the foregoing in form and substance reasonably satisfactory to the Lender;

 

(n)

Maps or plats of the Real Property certified to the Lender and the title insurance company issuing the policy referred to in Subsection 3.01 (m) (the “Title Insurance Company”) in a manner reasonably satisfactory to each of the Lender and the Title Insurance Company, dated a date reasonably satisfactory to each of the Lender and the Title Insurance Company by an independent professional licensed land surveyor, which maps or plats and the surveys on which they are based shall be sufficient to delete any standard printed survey exception contained in the applicable title policy and be made in accordance with the Minimum Standard Detail Requirements for Land Title Surveys jointly established and adopted by the American Land Title Association and the American Congress on Surveying and Mapping in 1992, and, without limiting the generality of the foregoing, there shall be surveyed and shown on such maps, plats or surveys the following: (i) the locations on such sites of all the buildings, structures and other improvements and the established building setback lines; (ii) the lines of streets abutting the sites and width thereof; (iii) all access and other easements appurtenant to the sites necessary to use the sites; (iv) all roadways, paths, driveways, easements, encroachments and overhanging projections and similar encumbrances affecting the site, whether recorded, apparent from a physical inspection of the sites or otherwise known to the surveyor; (v) any encroachments on any adjoining property by the building structures and improvements on the sites; and (vi) if the site is described as being on a filed map, a legend relating the survey to said map;

 

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(o)

Evidence as to: (i) whether any portion of the Real Property is in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards (a “Flood Hazard Property” ); and (ii) if any portion of the Real Property is a Flood Hazard Property: (A) whether the community in which such Real Property is located is participating in the National Flood Insurance Program; (B) the Borrower’s written acknowledgment of receipt of written notification from the Lender (1) as to the fact that such Real Property is a Flood Hazard Property and (2) as to whether the community in which each such Flood Hazard Property is located is participating in the National Flood Insurance Program; and (C) copies of insurance policies or certificates of insurance of the Borrower evidencing flood insurance satisfactory to the Lender and naming the Lender as sole loss payee on behalf of the Lender;

 

(p)

Evidence reasonably satisfactory to the Lender that the Real Property and the contemplated use of the Real Property, arc in compliance in all material respects with all applicable Laws including without limitation health and Environmental Laws, including, but not limited to all concentrated animal feedlot operations rules and regulations, erosion control ordinances, storm drainage control laws, doing business and/or licensing laws, zoning laws (the evidence submitted as to zoning should include the zoning designation made for the Real Property, the permitted uses of the Real Property under such zoning designation and zoning requirements as to parking, lot size, ingress, egress and building setbacks) and laws regarding access and facilities for disabled persons including, but not limited to, the Federal Architectural Barriers Act, the Fair Housing Amendments Act of 1988, the Rehabilitation Act of 1973 and the Americans with Disabilities Act of 1990;

 

(q)

A certificate of an officer of the Borrower together with true and correct copies of the following: (i) the organizational documents of the Borrower, including all amendments thereto, certified by the Office of the Secretary of State of the state of its formation and dated within 30 days prior to the date hereof; (it) the Operating Agreement of the Borrower, including all amendments thereto; (iii) the resolutions of the Board of Directors of the Borrower authorizing the execution, delivery and performance of this Agreement, the other Loan Documents, and all documentation executed and delivered in connection therewith to which the Borrower is a party; (iv) certificates of the appropriate government officials of the state of organization of the Borrower as to its existence, and certificates of the appropriate government officials in each state where each corporate Borrower does business and where failure to qualify as a foreign corporation would have a material adverse effect on the business and financial condition of the Borrower, as to its good standing and due qualification to do business in such state, each dated within 30 days prior to the date hereof; and (v) the names of the officers of the Borrower authorized to sign this Agreement and the other Loan Documents to be executed by each corporate Borrower, together with a sample of the true signature of each such officer;

 

(r)

Legal opinion of Krieg DeVault LLP, legal counsel for the Borrower, reasonably acceptable to Lender in form and substance;

 

(s)

An intercreditor and subordination agreement between the Lender and any holder of Subordinated Debt, including without limitation the tax increment financing debt evidenced by that certain Indenture of Trust by and between the US Bank, National Association, as Trustee, and Borrower, as to the priority of the Lender’s security interests in the Collateral, rights to payment following an Event of Default, and as to such other matters as reasonably requested by the Lender;

 

(t)

Evidence that the costs and expenses (including, without limitation, attorney’s fees) referred to in Section 7.04, to the extent incurred and invoiced, shall have been paid in full;

 

(u)

The results of the Lender’s inspection of the Collateral, and the Lender’s receipt of an appraisal of the Collateral acceptable to Lender in its sole discretion;

 

(v)

Satisfactory review by the Lender of any pending litigation relating to the Borrower;

 

(w)

An environmental site assessment that complies with the standards set forth in the ASTM E1527-05 Phase I Environmental Site Assessment Process and such additional information as Lender shall require in order to establish that Lender has made “all appropriate inquiries” as provided under Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and 40 C.F.R. Part 312;

 

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(x)

The Borrower shall have ordered the General Contractor to begin construction of the Project, and construction shall have commenced;

 

(y)

A schedule, certified by Borrower as accurate and complete, setting forth: (i) the necessary licenses, permits and consents required by applicable federal, state, and local governmental entities required for the lawful construction and operation of the Project; and (ii) the deadlines to obtain such licenses, permits and consents so that the Completion Date occurs as scheduled;

 

(z)

Lender shall have received in form and substance acceptable to Lender, an agreement with an Inspecting Engineer of recognized standing and acceptable to Lender, by which agreement such Inspecting Engineer agrees to assist Lender in its inspection of the Project during construction, review and approve requests for Advances on the Construction Loan on behalf of Lender, and provide such additional services as Lender may reasonably require at the sole expense of Borrower;

 

(aa)

The Borrower shall have provided commitment to the Lender of its Borrower’s Equity;

 

(bb) A deposit account control agreement for all deposit accounts kept and maintained by the Borrower;

 

(cc)

Evidence that the insurance required by Sections 5.010) and 5.01 (r)(xii) has been obtained by the Borrower;

 

(dd) Borrower shall have established and shall maintain all its primary deposit accounts including the Disbursing Account but excluding payroll accounts with Home Federal Savings Bank as long as Home Federal Savings Bank is a participant in the Loans with Lender;

 

(ee)

Copies of all permits necessary to begin the construction of the Project; and

 

(ff)

The Borrower shall have fully complied with the requirements of Indiana and United States law regarding storm water runoff pursuant to “Rule 5” (329 lAC 15-5 et seq.), the Indiana Department of Environmental Management shall have issued a “Notice of Intent” letter, and there shall be no pending administrative, civil or criminal actions of any kind arising out of or related to the issuance of, the failure to obtain or the violation of a storm water runoff permit by Borrower.

 

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

 

Section 4.01

Representations and Warranties of the Borrower. The Borrower represents and warrants as follows:

 

(a)

Borrower. The Borrower is a limited liability company duly organized and validly existing under the laws of the State of Indiana and is qualified to do business in all jurisdictions in which the nature of its business makes such qualification necessary and where failure to so qualify would have a Material Adverse Effect on its respective financial condition or operations. The Borrower has the power and authority to own and operate its assets and to carry on its business and to execute, deliver, and perform its obligations under the Loan Documents to which it is or may become a party. There are no outstanding subscriptions, options, warrants, calls, or rights (including preemptive rights) to acquire, and no outstanding securities or instruments convertible into, membership interests (units) of the Borrower, except for those transactions set forth on Schedule 4.01(a);

 

(b)

The Loan Documents. The execution, delivery and performance by the Borrower of the Loan Documents are within the Borrower’s powers, have been duly authorized by all necessary action, do not contravene: (i) the articles of organization or operating agreements of the Borrower; or (ii) any law or any contractual restriction binding on or affecting the Borrower, and do not result in or require the creation of any lien, security interest or other charge or encumbrance (other than pursuant to the terms thereof) upon or with respect to any of its respective properties;

 

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(c)

Governmental Approvals. As of the Closing Date, no consent, permission, authorization, order or license of any Governmental Authority or of any party to any agreement to which the Borrower is a party or by which it or any of its respective property may be bound or affected, is necessary in connection with the construction of the Project, acquisition or other activity being financed by this Agreement, the execution, delivery, performance or enforcement of the Loan Documents or the creation and perfection of the liens and security interest granted thereby, except as such have been obtained and are in full force and effect or which are required in connection with the exercise of remedies hereunder;

 

(d)

Enforceability. This Agreement is, and each other Loan Document to which the Borrower is a party when delivered will be, legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditor’s rights generally and by general principles of equity;

 

(e)

Financial Condition and Operations. The balance sheet of the Borrower with respect to the period ended December 31, 2006, the related statement of cash flow of the Borrower for the fiscal period then ended, copies of which have been furnished to the Lender, fairly present in all material respects the financial condition of the Borrower as at such date, and the results of the operations of the Borrower for the period ended on such dates and since December 31, 2006, there has been no material adverse change in such condition or operations;

 

(f)

Litigation. Except as described on Schedule 4.01(f), there is no pending or threatened action or proceeding affecting the Borrower or any of the transactions contemplated hereby before any court, governmental agency or arbitrator, which, if adversely determined, may result in a Material Adverse Effect. As of the Closing Date, there are no outstanding judgments against the Borrower;

 

(g)

Use of Proceeds of Advances, etc. (i) No proceeds of the Loans will be used to acquire any security in any transaction which is subject to Sections 13 and 14 of the Securities Exchange Act of 1934 (provided, however, that this provision shall not prohibit Borrower from investing in certain value added cooperatives for the purposes of carrying out their overall business operations); (ii) the Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System); and (iii) no proceeds of the Loans will be used .to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock;

 

(h)

Liens. Except as created by the Loan Documents and as constitute Permitted Liens, there is no lien, security interest or other charge or encumbrance, and no other type of preferential arrangement, upon or with respect to any of the properties or income of the Borrower, which secures Debt of any Person;

 

(i)

Taxes. The Borrower has filed or caused to be filed all federal, state and local tax returns that are required to be filed and has paid all other taxes, assessments, and governmental charges or levies upon it and its property, income, profits and assets which are due and payable, except where the payment of such tax, assessment, government charge or levy is being contested in good faith and by appropriate proceedings and adequate reserves in compliance with GAAP have been set aside on the Borrower’s books therefore;

 

(j)

Solvency. As of and from and after the date of this Agreement, the Borrower: (i) owns and will own assets the fair saleable value of which are: (A) greater than the total amount of liabilities (including contingent liabilities); and (B) greater than the amount that will be required to pay the probable liabilities of its then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to it; (ii) has capital that is not unreasonably small in relation to its business as presently conducted or any contemplated or undertaken transaction; and (iii) does not intend to incur and does not believe that it will incur debts beyond its ability to pay such debts as they become due;

 

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(k)

Location of Inventory and Farm Products; Third Parties in Possession; Crops. The Borrower’s inventory and farm products pledged as collateral under the Security Agreement are located at the places (or, as applicable, jurisdictions) specified in Schedule 4.01(k) for the Borrower, except to the extent any such inventory and farm products are in transit. Schedule 4.01(k) correctly identifies, as of the date hereof, the landlords or mortgagees, if any, of each of its locations identified in Schedule 4.01(k) currently leased or owned by the Borrower. Except for the Persons identified on Schedule 4.01(k), no Person other than the Borrower and the Lender has possession of any of the Collateral. Except as described in above, none of its Collateral has been located in any location within the past four months other than as set forth on Schedule 4.01(k) for the Borrower;

 

(1)

Office Locations; Fictitious Names; Predecessor Companies; Tax I.D. Number. The Borrower’s chief place of business , its chief executive office, and its jurisdiction of organization is located at the place identified for the Borrower on Schedule 4.01(1). Within the last four months it has not had any other chief place of business, chief executive office, or jurisdiction of organization. Schedule 4.01(1) also sets forth all other places where the Borrower keeps its books and records and all other locations where the Borrower has a place of business. The Borrower does not do business nor has the Borrower done business during the past five (5) years under any trade name or fictitious business name except as disclosed on Schedule 4.01(1). Schedule 4.01(1) sets forth an accurate list of all names of all predecessor companies of the Borrower including the names of any entities it acquired (by stock purchase, asset purchase, merger or otherwise) and the chief place of business and chief executive office of each such predecessor company. For purposes of the foregoing, a “predecessor company” shall mean any Person whose assets or equity interests are acquired by the Borrower or who was merged with or into the Borrower within the last four months prior to the date hereof. The Borrower’s United States Federal Income Tax I.D. Number and state organizational identification number are identified on Schedule 4.01(1);

 

(m)

Title to Properties. The Borrower has such title or leasehold interest in and to the Real Property owned or leased by it as is necessary or desirable to the conduct of its business and valid and legal title or leasehold interest in and to all of its Personal Property, including those reflected on the financial statements of the Borrower previously delivered to Lender, except those which have been disposed of by the Borrower subsequent to the date of such delivered financial statements which dispositions have been in the ordinary course of business or as otherwise expressly permitted hereunder;

 

(n)

Disclosure. All factual information furnished by or on behalf of the Borrower or its subsidiaries in writing to the Lender (including, without limitation, all factual information contained in the Loan Documents) for purposes of or in connection with this Agreement, the other Loan Documents or any transaction contemplated herein or therein is, and all other such factual information hereafter furnished by or on behalf of the Borrower to the Lender, will be true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information not misleading in any material respect at such time in light of the circumstances under which such information was provided;

 

(o)

Operation of Business. The Borrower possesses or will possess prior to the Completion Date all licenses, permits, franchises, patents, copyrights, trademarks, and trade names, or rights thereto, necessary to conduct its business substantially as now conducted and will obtain all such licenses, permits, franchises, patents, copyrights, trademarks, and trade names, or rights thereto necessary to conduct its business as presently proposed to be conducted except those that the failure to so possess could not reasonably be expected to have a Material Adverse Effect on its financial condition or operations, and the Borrower is not in violation of any valid rights of others with respect to any of the foregoing except violations that could not reasonably be expected to have such a Material Adverse Effect;

 

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(p)

Intellectual Property. The Borrower owns, or will own prior to the Completion Date, or otherwise has or will have the legal right to use, all patents, trademarks, trade names, copyrights, technology, know-how and processes necessary for it to conduct its business as currently conducted and will own or obtain the legal right to use all patents, trademarks, trade names, copyrights, technology, know-how and processes necessary for it to conduct its business as currently conducted (collectively the “Intellectual Property”), except for those the failure to own or have such legal right to use could not reasonably be expected to have a Material Adverse Effect. As of the Closing Date, set forth in Schedule 4.01(P) is a list of all Intellectual Property registered with the United States Copyright Office or the United States Patent and Trademark Office and owned by the Borrower or that the Borrower has the right to use. Except as provided in Schedule 4.01(P), no claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower know of any such claim, and, to the knowledge of the Borrower, the use of such Intellectual Property by the Borrower does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect;

 

(q)

Employee Benefit Plans. The Borrower is in compliance in all material respects with the applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder, the failure to comply with which could have a Material Adverse Effect on the Borrower;

 

(r)

Investment Company Act. The Borrower is not required to be registered as an “investment company” within the meaning of the Investment Company Act of 1940, as amended;

 

(s)

Compliance with Laws. The Borrower is in compliance in all material respects with all laws, rules, regulations, ordinances, codes, orders, and the like, the failure to comply with which could have a Material Adverse Effect on the Borrower;

 

(t)

Environmental Compliance. Borrower, except as set forth in Schedule 4.01(t), is in material compliance with all applicable Environmental Laws; and

 

(u)

Material Change. The Borrower has performed all of its material obligations, other than those obligations for which performance is not yet due, under all Material Contracts and, to the best knowledge of the Borrower, each other party thereto is in compliance with each such Material Contract. Each such Material Contract is in full force and effect in accordance with the terms thereof. The Borrower has made available a true and complete copy of each such Material Contract for inspection by Lender.

 

ARTICLE V.

COVENANTS OF THE BORROWER

 

Section 5.01.

Affirmative Covenants. So long as any Loan Obligations (other than contingent claims for which no claim has been asserted) remain unpaid or the Lender shall have any commitment hereunder, the Borrower shall, unless the Lender shall otherwise consent in advance in writing:

 

(a)

Compliance with Laws, etc. Comply in all material respects with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, (i) all applicable zoning and land use laws; (ii) all employee benefit and Environmental Laws, and (iii) paying before the same become delinquent all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent contested in good faith;

 

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(b)

Visitation Rights; Field Examination. At any reasonable time and from time to time, permit the Lender or representatives, to (i) examine and make copies of and abstracts from the records and books of account of the Borrower (at Lender’ s expense), and (ii) enter onto the property of the Borrower to conduct unannounced field examinations and collateral inspections, provided if no Event of Default has occurred and is then continuing, Lender shall, after the Conversion Date, limit its field examinations to one (1) per each twelve month period, and (iii) discuss the affairs, finances, and accounts of the Borrower with any of Borrower’s officers or directors. Borrower consents to and authorizes Lender to enter onto the property of Borrower for purposes of conducting the examinations, inspections and discussions provided above. Upon and during the occurrence of an Event of Default or in the event that there are deemed by the Lender to be any material inconsistencies and/or material noncompliance with respect to any financial or other reporting on the part of the Borrower, any and all visits and inspections deemed necessary or desirable on account of such Event of Default, inconsistency and/or noncompliance shall be at the expense of the Borrower. In addition to the foregoing, at any reasonable time and from time to time, the Borrower also shall permit the Lender or representatives thereof, at the expense of the Lender, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower, and to discuss the affairs, finances and accounts of the Borrower with any of its respective officers or directors;

 

(c)

Reporting Requirements. Furnish to the Lender:

 

(i)

As soon as available, but in no event later than 120 days after the end of each fiscal year of the Borrower occurring during the term hereof, annual consolidated financial statements of the Borrower, prepared in accordance with GAAP consistently applied and in a format that demonstrates any accounting or formatting change that may be required by the various jurisdictions in which the business of the Borrower is conducted (to the extent not inconsistent with GAAP). Such financial statements shall: (i) be audited by independent certified public accountants selected by the Borrower and acceptable to Lender; (ii) be accompanied by a report of such accountants containing an certified opinion, without qualification, thereon acceptable to Lender; (iii) be prepared in reasonable detail, and in comparative form; and (iv) include a balance sheet, a statement of income, a statement of stockholders’, members’ or partner’s equity, a statement of cash flows, and all notes and schedules relating thereto and any management letter;

 

(ii)

Beginning with the first (1st) month following the Completion Date, as soon as available and in any event within 30 days after the end of each month, balance sheets of the Borrower as of the end of such month and statement of income of the Borrower for the period commencing at the end of the previous fiscal year and ending with the end of such month, prepared in accordance with GAAP and certified by an authorized officer of the Borrower;

 

(iii)

As soon as available but i