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EXHIBIT 10.7
LOAN AGREEMENT
This Loan Agreement dated as of July 11, 2001, is by and between Northern
Lights Ethanol, LLC, a South Dakota limited liability company (the "Borrower"),
and U.S. Bank National Association, a national banking association (the
"Lender").
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 DEFINED TERMS. As used in this Agreement the following terms
shall have the following respective meanings:
"ACCESS AND RAIL AGREEMENT": The Borrower's right to ingress and egress
over and across the roads and railroad spur lines identified in the Access
and Rail Agreement dated April 18, 2001, described in Exhibit A attached
hereto and incorporated herein by reference.
"AFFILIATE": Any Person, directly or indirectly, controlling, controlled
by, or under common control with, such person. For purposes of this
definition, "control" (including "controlled by" and "under common control
with") shall mean the power, directly or indirectly, to direct or cause the
direction of the management and policies of such Person whether through the
ownership of voting securities, by contract or otherwise.
"BUSINESS DAY": Any day (other than a Saturday, Sunday or legal holiday in
the State of South Dakota) on which national banks are permitted to be open
for business in Sioux Falls, South Dakota.
"CLOSING DATE": The date on which the conditions set forth in Section 3.1
have been satisfied and the Loan is closed.
"COMPLETION DEADLINE": December 31, 2002, or such earlier date upon which
the construction of the Project is completed or and the Project is to
become operational, according to the certificate of the Inspecting
Architect.
"CONVERSION DATE": That date which will coincide with or follow the
Completion Deadline, upon which the Loan converts from a short term
construction loan to a long term loan, assuming the Loan qualifies for such
conversion.
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"DEFAULT": Any event which, with the giving of notice (whether such notice
is required under Section 6.1, or under some other provision of this
Agreement, or otherwise) or lapse of time, or both, would constitute an
Event of Default.
"DEFAULT RATE": As defined in the Note.
"ERISA": The Employee Retirement Income Security Act of 1974, as amended.
"ESCROW COMPANY": Homestead Escrow and Exchange Company which will act as
the disbursing agent for Loan proceeds.
"EVENT OF DEFAULT": Any event described in Section 6.1.
"FINANCING STATEMENT": The Financing Statement(s) executed by the Borrower,
as Debtor, in favor of the Lender, as Secured Party.
"FIRST ADVANCE DATE": The date on which the conditions set forth in Section
3.2 have been satisfied so as to permit the first advance of Loan proceeds
for the payment of the expenses of construction of the Project.
"GAAP": Generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board or in such other statements by
such other entity as may be approved by a significant segment of the
accounting profession, which are applicable to the circumstances as of any
date of determination.
"GOVERNMENTAL REQUIREMENTS": All laws, statutes, codes, ordinances, and
governmental rules, regulations and requirements applicable to the
Borrower, the Lender and the Project.
"INDEMNIFICATION AGREEMENT": The Environmental and ADA Indemnification
Agreement dated of even date herewith, executed by the Borrower in favor of
Lender.
"INSPECTING ARCHITECT": The architectural, engineering or other consultant
firm which will be retained by the Lender, at Borrower's cost, to conduct
on-site inspections of the work-in-progress on the Project, and to issue
periodic reports to the Lender as to the progress of construction and
adherence to the Plans. The
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Inspecting Architect at the time of this Agreement is BKBM Engineers of
Minneapolis, Minnesota.
"LAND": The land legally described on Exhibit A attached hereto and hereby
made a part hereof.
"LEASE": The Big Stone Power Plant Lease dated April 18, 2001, under the
terms of which Borrower leases the Land from Big Stone-Grant Industrial
Development and Transportation, L.L.C.
"LIEN": With respect to any Person, any security interest, mortgage,
pledge, lien, charge, encumbrance, title retention agreement or analogous
instrument or device (including the interest of each lessor under any
capitalized lease), in, of or on any assets or properties of such Person,
now owned or hereafter acquired, whether arising by agreement or operation
of law.
"LOAN": As defined in Section 2.1.
"LOAN DOCUMENTS": This Agreement, the Note, the Mortgage, the Security
Agreement, the Indemnification Agreement, the Financing Statement and any
other document collateral to or as security for the Loan.
"LOAN FEES": As defined in Section 2.3.
"MATURITY DATE": The date all amounts due under the Loan shall be paid to
Lender, if not earlier paid or accelerated. The Maturity Date shall be
determined under the terms of the Note, but shall not be later than the
seventh (7th) anniversary of the Conversion Date.
"MORTGAGE": The Mortgage, Security Agreement, Assignment of Leases and
Rents and Fixture Financing Statement dated of even date herewith, executed
by the Borrower in favor of the Lender.
"NOTE": The Note dated of even date herewith, in the amount of the Loan,
executed by the Borrower and payable to the order of the Lender.
"OBLIGATIONS": The Borrower's obligations in respect of the due and
punctual payment of principal and interest on the Note when and as due,
whether by acceleration or otherwise and all fees, expenses, indemnities,
reimbursements and
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other obligations of the Borrower under this Agreement or any other Loan
Document, in all cases whether now existing or hereafter arising or
incurred.
"OPERATING CONTRACTS": The access, construction, management and marketing
contracts described on Exhibit B attached hereto and hereby made a part
hereof.
"PERMITTED ENCUMBRANCES": The liens, charges and encumbrances on title to
the Project listed on Exhibit C attached hereto and hereby made a part
hereof.
"PERSON": Any natural person, corporation, cooperative, partnership,
limited partnership, limited liability partnership, limited liability
company, joint venture, firm, association, trust, unincorporated
organization, government or governmental agency or political subdivision or
any other entity, whether acting in an individual, fiduciary or other
capacity.
"PROJECT": The Land, the Improvements and all fixtures, equipment and
personal property now or hereafter owned by the Borrower and located or to
be located in or on, and used in connection with the management,
maintenance or operation of, the Land and the Improvements.
"REGULATORY CHANGE": Any change after the date of this Agreement in
federal, state or foreign laws or regulations or the adoption or making
after such date of any interpretations, directives or requests applying to
a class of banks including the Lender under any federal, state or foreign
laws or regulations (whether or not having the force of law) by any court
or governmental or monetary authority charged with the interpretation or
administration thereof.
"SECURITY AGREEMENT": The Borrower's Security Agreement, dated even date
herewith, executed by Borrower in favor of the Lender.
"TENANT": Any Person using or occupying any part of the Project pursuant to
a Lease.
"TITLE COMPANY": Dakota Homestead Title Insurance Company which will issue
the Title Policy, or act as agent for such issuer.
"TITLE POLICY": A current ALTA form loan title insurance policy, dated as
of the date of recording of the Mortgage, containing such endorsements and
assurances as the Lender may require, and containing only those exceptions
approved by the Lender.
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Section 1.2 ACCOUNTING TERMS AND CALCULATIONS. Except as may be expressly
provided to the contrary herein, all accounting terms used herein shall be
interpreted and all accounting determinations hereunder shall be made in
accordance with GAAP.
Section 1.3 OTHER DEFINITIONAL TERMS, TERMS OF CONSTRUCTION. The words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. References to Sections, Exhibits, Schedules and
like references are to Sections, Exhibits, Schedules and the like of this
Agreement unless otherwise expressly provided. The words "include", "includes"
and "including" shall be deemed to be followed by the phrase "without
limitation". Unless the context in which used herein otherwise clearly requires,
"or" has the inclusive meaning represented by the phrase "and/or". All
incorporations by reference of covenants, terms, definitions or other provisions
from other agreements are incorporated into this Agreement as if such provisions
were fully set forth herein, and include all necessary definitions and related
provisions from such other agreements. All covenants, terms, definitions and
other provisions from other agreements incorporated into this Agreement by
reference shall survive any termination of such other agreements until the
obligations of the Borrower under this Agreement and the Note are irrevocably
paid in full.
Section 1.4 CONSTRUCTION LOAN ADDENDUM. Terms defined in the Construction
Loan Addendum attached hereto supplement the foregoing definitions.
ARTICLE II
TERMS OF LENDING
Section 2.1 LOAN. Upon the terms and subject to the conditions hereof, the
Lender agrees to make a loan (the "Loan") to the Borrower in an amount not to
exceed $31,100,000.00 for construction of the Improvements, and working capital,
payment of interest on the Loan, purchase of inventory, and other purposes as
may be approved by the Lender.
Section 2.2 THE NOTE; INTEREST AND REPAYMENT. The Loan shall be evidenced
by the Note. The Lender shall enter in its ledgers and records the Advances of
and payments made on the Loan, and the Lender is authorized by the Borrower to
enter on a schedule attached to the Note a record of such payments. The Note
shall accrue interest and shall be payable, together with interest thereon, and
may be prepaid, if at all, and is subject to mandatory prepayment, as provided
in the Note. If not sooner paid, the Note, together
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with all accrued and unpaid interest thereon, shall be due and payable in full
on the Maturity Date.
Section 2.3 LOAN FEES. In consideration of the Lender's agreement to make
the Loan, the Borrower shall pay the Lender, at or prior to the closing of the
Loan, the following fees:
2.3(a). CLOSING FEE. A closing fee in the sum of $100,000.00.
2.3(b). SYNDICATION FEE. A syndication fee in the sum of $100,000.00.
Section 2.4 CAPITAL ADEQUACY. In the event that any Regulatory Change
reduces or shall have the effect of reducing the rate of return on the Lender's
capital or the capital of its parent corporation (by an amount the Lender deems
material) as a consequence of the Loan to a level below that which the Lender or
its parent corporation could have achieved but for such Regulatory Change
(taking into account the Lender's policies and the policies of its parent
corporation with respect to capital adequacy), then the Borrower shall, within
five days after written notice and demand from the Lender, pay to the Lender
additional amounts sufficient to compensate the Lender or its parent corporation
for such reduction. Any determination by the Lender under this Section and any
certificate as to the amount of such reduction given to the Borrower by the
Lender shall be final, conclusive and binding for all purposes, absent error.
Section 2.5 USE OF PROCEEDS. The proceeds of the Loan shall be used for
construction of the Improvements and other items set forth in Section 2.1.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS TO THE CLOSING OF THE LOAN. The obligation of the
Lender to close the Loan hereunder shall be subject to the prior or simultaneous
fulfillment of each of the following conditions:
3.1(a) DOCUMENTS. The Lender shall have received the documents and other
materials as set forth on Schedule 3.1(a) attached hereto and hereby made a
part hereof.
3.1(b) OTHER MATTERS. All organizational and legal proceedings relating to
the Borrower and all instruments and agreements in connection with the
transactions
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contemplated by this Agreement shall be satisfactory in scope, form and
substance to the Lender and its counsel, and the Lender shall have received
all information and copies of all documents, including records of company
proceedings, which it may reasonably have requested in connection
therewith, such documents where appropriate to be certified by Borrower or
governmental authorities.
3.1(c) FEES AND EXPENSES. The Lender shall have received the Loan Fee and
all other fees and amounts due and payable by the Borrower on or prior to
the Closing Date, including the reasonable fees and expenses of counsel to
the Lender payable pursuant to Section 7.2. Borrower shall pay all of the
Lender's due diligence fees, including but not limited to the cost of the
appraisal, the cost of the survey, the cost of the Phase I Environmental
Site Assessment, all property and lien searches, title insurance fees and
recording fees. On or prior to the Closing Date, Borrower shall deposit
with Lender the sum of $25,000.00 for payment of these costs and fees. If
the total of these reimbursable expenses is less than $25,000.00, the
balance shall be refunded to the Borrower. If the total of these expenses
is greater than $25,000.00, the Borrower shall reimburse the Lender for the
overage within 20 days following receipt of request for reimbursement by
the Lender.
3.1(d) NO DEFAULT. All representations and warranties of the Borrower made
in this Agreement shall remain true and correct and no Default or Event of
Default shall exist.
3.1(e) PARTICIPATION. Financial institutions shall have committed to
purchase from Lender a portion of the Loan in the sum of at least
$21,100,000.00, and have signed Participation Agreements and such other
documentation containing such terms as are acceptable to Lender..
Section 3.2 CONDITIONS TO EACH ADVANCE. The obligation of the Lender to
make the first and each subsequent advance of Loan proceeds hereunder shall be
subject to the prior or simultaneous fulfillment of each of the following
conditions:
3.2(a) DOCUMENTS. The Lender shall have received the documents and other
materials as set forth on Schedule 3.2(a) attached hereto and hereby made a
part hereof, and that all such documents and other materials as are
satisfactory to Lender in form and substance.
3.2(b) COMPLIANCE WITH OTHER CONDITIONS. The Loan shall have closed, and
the Borrower shall have complied with all of the terms and conditions of
this Agreement (including the completion of any precondition to Loan
closing under
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Section 3.1 above, which Lender may have waived at the time of Loan
closing), including the Construction Loan Addendum hereto, and the other
Loan Documents.
3.2(c) PERFECTION. The Mortgage and the Financing Statement, and any other
Loan Document creating or evidencing a lien or security interest which
Lender requires to be filed of record, shall have been appropriately filed
to the satisfaction of the Lender and the priority and perfection of the
Lien created thereby shall have been established to the satisfaction of the
Lender. The Lender shall receive a first priority mortgage lien upon the
Borrower's leasehold interest in the Land, the Improvements, the Access and
Rail Agreement and the Borrower's personal property described in the
Mortgage and Borrower's Security Agreement, subject only to the Permitted
Encumbrances.
3.2(d) NO DEFAULT. All representations and warranties of the Borrower made
in this Agreement shall remain true and correct as of the date of the
Advance 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
no Default or Event of Default shall exist.
3.2(e) EQUITY. Borrower shall have paid $16,200,000.00 for the cost of
construction of the Improvements from its Members' equity contributions.
3.2(f) RECEIPT OF TAX INCREMENT FINANCING. Borrower shall have received a
firm commitment, in a form and substance satisfactory to Lender, that not
later than the Completion Date Borrower will receive from Grant County,
South Dakota, at least $1,500,000.00 in Tax Increment Financing funds. Upon
receipt of any or all of such funds, Borrower shall have paid such
amount(s) to the Escrow Company to be disbursed by the Escrow Company for
the cost of construction of the Improvements.
3.2(g) DRAW REQUEST. Borrower has provided a Draw Request and otherwise
complied with Section 3.3.
3.2(h) No license or 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.
3.2(i) CERTIFICATION OF INSPECTING ARCHITECT. The Inspecting Architect
shall have certified that the construction completed respecting the Draw
Request has been
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completed in conformity with the Plans, the construction schedule, and the
total Project Costs as contained in the Sworn Construction Cost Statement.
Section 3.3 DISBURSEMENT PROCEDURES.
3.3(a) SUBMISSION OF DRAW REQUESTS. Whenever the Borrower desires a
disbursement under the Loan, which shall be no more often than once a
month, the Borrower shall submit to the Escrow Company a Draw Request, and
simultaneously a copy thereof to the Lender and Inspecting Architect, duly
executed on behalf of the Borrower setting forth the information requested
on such form. Each Draw Request shall be delivered to the Lender at least
five (5) Business Days before the date the disbursement is desired.
3.3(b) AMOUNT OF DRAW REQUEST. Each Draw Request shall be limited to the
amount provided for in the Disbursing Agreement.
3.3(c) OTHER DOCUMENTS. At the time of submission of each Draw Request, the
Borrower shall submit or cause to be submitted to the Lender the following:
3.3(c)(i) All documents required under the Disbursing Agreement.
3.3(c)(ii) A written report from the Inspecting Architect as
referenced in Section 3.2(i).
3.3(c)(iii) Such other supporting evidence as may be requested by the
Lender 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.
3.3(d) MAKING THE DISBURSEMENTS. Upon satisfaction of all preconditions to
payment under a Draw Request under this Agreement, the Disbursing
Agreement, or any other Loan Document, the Lender shall disburse the
appropriate amount of the Loan directly to the Escrow Company, except for
items due to Lender under the terms of this Agreement, the Note, the
Disbursing Agreement, or any other Loan Document. Borrower acknowledges
that although Lender may disburse Loan proceeds to the Escrow Company, that
no disbursement shall be made from the Escrow Company unless the terms of
the Disbursing Agreement are satisfied as to each such term.
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3.3(e) MISCELLANEOUS PROCEDURES. The Lender may establish additional
procedures regarding disbursements as are reasonable to assure the proceeds
of the 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 3.4 CONSTRUCTION LOAN ADDENDUM. Attached hereto and hereby made a
part hereof is a Construction Loan Addendum. If there is any conflict or
inconsistency between the terms and provisions of the Construction Loan Addendum
and any other terms and provisions of this Agreement, the terms and provisions
of the Construction Loan Addendum shall control.
Section 3.5 DISBURSEMENTS OF BORROWER FUNDS. Borrower shall make
disbursements of its funds under Section 3.2(e), of Tax Increment Financing
funds pursuant to Section 3.2(f), and of other amounts Borrower disburses for
Completion of the Project through the Disbursing Agent under procedures which
shall insure that mechanics and materialmens liens are satisfied and that the
work is in compliance with the Plans, Sworn Construction Cost Statement and
construction schedule.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender:
Section 4.1 ORGANIZATION, STANDING, ETC. The Borrower is a limited
liability company duly organized and validly existing and in good standing under
the laws of the jurisdiction of its organization and, if different, the
jurisdiction in which the Project is located, and has all requisite limited
liability company power and authority to own its properties and to carry on its
business as now conducted, to enter into this Agreement and the other Loan
Documents to which it is a party and to issue the Note and to perform its
obligations hereunder and thereunder. This Agreement, the Note and the other
Loan Documents to which it is a party have been duly authorized by all necessary
limited liability company action and when executed and delivered will be the
legal and binding obligations of the Borrower. The execution, delivery and
performance of this Agreement, the Note and the other Loan Documents to which it
is a party will not violate the Borrower's Articles of Organization, Operating
Agreement and Member Control Agreement or any law applicable to the Borrower,
and will not violate or cause a default under or permit acceleration of any
agreement to which Borrower is a party or by which it or the Project is bound.
Except for consents, approvals and exemptions previously obtained (copies of
which have been delivered to the Lender), no approval of or
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exemption by any Person is required in connection with the Borrower's execution,
delivery and performance of this Agreement, the Note and the other Loan
Documents to which it is a party. To the Borrower's knowledge, it is not in
default (beyond any applicable grace period) in the performance of any
agreement, order, writ, injunction, decree or demand to which it is a party or
by which it is bound.
Section 4.2 LITIGATION. There are no actions, suits or proceedings pending
or, to the knowledge of the Borrower, threatened against or affecting the
Borrower or the Project which, if determined adversely to the Borrower, would
have a material adverse effect on the condition of the Borrower or on the
ability of the Borrower to perform its obligations under the Loan Documents.
Neither the Borrower nor the Project is in violation of any Governmental
Requirement where such violation could reasonably be expected to impose a
material liability on the Borrower.
Section 4.3 TAXES. The Borrower has filed all federal, state and local tax
returns required to be filed and has paid or made provision for the payment of
all taxes due and payable pursuant to such returns and pursuant to any
assessments made against it or any of its property (other than taxes, fees or
charges the amount or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which reserves in
accordance with GAAP have been provided on the books of the Borrower).
Section 4.4 SUBSIDIARIES. The Borrower has no subsidiaries.
Section 4.5 EMPLOYEE BENEFIT PLANS. Except as disclosed in writing to the
Lender: (a) the Borrower is not an employee benefit plan as defined in Section
3(1) of ERISA, whether or not subject to ERISA; (b) no assets of the Borrower
constitute assets of any such plan under ERISA regulations or rulings; (c) with
respect to any such plan that the Borrower sponsors, participates in or has
fiduciary duties with respect to, the Borrower has materially complied with all
federal and state laws, plan documents and funding requirements; (d) the
Borrower does not sponsor, participate in, or have fiduciary duties with respect
to any defined benefit pension plan subject to Title IV of ERISA or any
multi-employer pension plan as defined in Section 3(37)(A) of ERISA or any plan
providing medical or other welfare benefits to retirees or other former
employees (except as required by federal or state law); and (e) the Borrower is
not (and has not ever been) a member of a group of trades or businesses (whether
or not incorporated) that is treated as a single employer under Section 414 of
the Internal Revenue Code.
Section 4.6 FEDERAL RESERVE REGULATIONS. The Borrower is not engaged
principally or as one of its important activities in the business of extending
credit for the
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purpose of purchasing or carrying margin stock (as defined in Regulation U of
the Board of Governors of the Federal Reserve System or any successor thereto).
The value of all margin stock owned by the Borrower does not constitute more
than 25% of the value of the assets of the Borrower.
Section 4.7 CONSTRUCTION OF THE PROJECT. The Project will be constructed
strictly in accordance with the Plans, will be constructed entirely on the
Property, and will not encroach upon or overhang any easement or right-of-way on
property not constituting part of the Property, except for the rail spur line
which shall in part be located upon the rail line property owned by the State of
South Dakota, or other third party satisfactory to Lender. The Project, both
during construction and at the time of completion, and the contemplated use
thereof, will not violate any applicable zoning or use statute, ordinance,
building code, rule or regulation, or any covenant or agreement of record. The
Borrower agrees that it will furnish from time to time such satisfactory
evidence with respect thereto as may be required by the Lender.
Section 4.8 TAXPAYER IDENTIFICATION NUMBER. The Borrower's Internal Revenue
Service Taxpayer Identification Number is 46-0460145, and the Borrower shall use
such number as its exclusive Internal Revenue Service Taxpayer Identification
Number until all of its Obligations under this Agreement are satisfied in full.
The Borrower will not change its name as incorporated, without the Lender's
prior written consent, which may be conditioned upon the Borrower's signing
amendments to UCC-1s or other documents as the Lender may require.
Section 4.9 BORROWER NOT A TRANSMITTING UTILITY. The Borrower is not a
transmitting utility within the meaning of the UCC, and in particular will not
ship its inventory by pipeline.
Section 4.10 PURCHASE OF CORN. Any purchase of corn or other inputs used or
consumed in the production of the Borrower's ethanol or other inventory shall be
free of any security or lien interest of any third party, and in particular
Borrower shall see to the termination of any security interest in any such farm
products or goods it may purchase.
ARTICLE V
COVENANTS
Until the Note and all of the Borrower's other Obligations shall have been
paid and performed in full, unless the Lender shall otherwise consent in
writing:
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Section 5.1 FINANCIAL STATEMENTS AND REPORTS. The Borrower will furnish to
the Lender:
5.1(a) As soon as available and in any event within 120 days after the end
of each fiscal year of the Borrower, financial statements consisting of at
least statements of income, cash flow and changes in members' equity, a
balance sheet as of the end of such year, and a statement of contingent
liabilities as at the end of such year, setting forth in each case in
comparative form corresponding figures from the previous annual audit,
certified without qualification by an independent certified public
accountant of recognized standing selected by the Borrower, as the case may
be, and acceptable to the Lender.
5.1(b) As soon as available and in any event within 30 days after the end
of each fiscal quarter of the Borrower, unaudited financial statements and
a financial covenant compliance certificate on a form provided by Lender
for such quarter and for the period from the beginning of such fiscal year
to the end of such quarter, substantially similar to the annual audited
statements.
5.1(c) As soon as available and in any event within 120 days after the
deadline for filing the same, copies of the Borrower's federal income tax
return (with all supporting schedules).
5.1(d) Immediately upon any officer of the Borrower becoming aware of any
Default or Event of Default, a notice describing the nature thereof and
what action the Borrower proposes to take with respect thereto.
5.1(e) From time to time, such other information regarding the business,
operation and financial condition of the Borrower and the Project as the
Lender may reasonably request.
Section 5.2 BOOKS AND RECORDS. The Borrower will keep adequate and proper
records and books of account in which full and correct entries will be made of
its dealings, business and affairs, including its use and operation of the
Project.
Section 5.3 INSPECTION. The Borrower will permit any Person designated by
the Lender upon reasonable notice to visit and inspect any of the properties
(including the Project), books and financial records of the Borrower, to examine
and to make copies of the books of accounts and other financial records of the
Borrower, and to discuss the affairs, finances and accounts of the Borrower with
its officers at such reasonable times and intervals as the Lender may designate.
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Section 5.4 EXISTENCE. The Borrower will maintain its existence in good
standing under the laws of its jurisdiction of organization or formation, and,
if different, the jurisdiction where the Project is located, and its
qualification to transact business in each jurisdiction (including the
jurisdiction where the Project is located) where failure so to qualify would
permanently preclude the Borrower from enforcing its rights with respect to any
material asset or would expose the Borrower to any material liability.
Section 5.5 NOTICE OF LITIGATION. The Borrower will give prompt written
notice to the Lender of the commencement of any action, suit or proceeding
affecting the Borrower.
Section 5.6 EMPLOYEE BENEFIT PLANS. The Borrower shall neither take any
action, nor omit to take any action, if such action or omission would result in
any of the statements set forth in Section 4.5 (including any written
disclosures made by the Borrower to the Lender under Section 4.5) becoming
inaccurate or misleading at any time while the Note remains outstanding.
Section 5.7 INSURANCE. The Borrower will maintain with financially sound
and reputable insurance companies such insurance as may be required by law and
such other insurance in such amounts and against such hazards as is customary in
the case of reputable companies engaged in the same or similar business and
similarly situated, including, without limitation, the insurance which the
Borrower is required to maintain pursuant to Section 1.4 of the Mortgage.
Section 5.8 PAYMENT OF TAXES. The Borrower will file all tax returns and
reports which are required by law to be filed by it and will pay before they
become delinquent, all taxes, assessments and governmental charges and levies
imposed upon it or its property and all claims or demands of any kind (including
those of suppliers, mechanics, carriers, warehousemen, landlords and other like
Persons) which, if unpaid, might result in the creation of a Lien upon its
property. Notwithstanding the foregoing, Borrower shall not be in default
hereunder if a tax assessment or governmental charge or levy results in a Lien
upon Borrower's property so long as Borrower timely files and prosecutes any
proceeding whereby Borrower contests the imposition or amount of said tax,
assessment or governmental charge or levy.
Section 5.9 MAINTENANCE OF PROPERTIES, COMPLIANCE. The Borrower will
maintain its properties in good condition, repair and working order, and
supplied with all necessary equipment, and make all necessary repairs, renewals,
replacements, betterments and improvements thereto, all as may be necessary so
that the business carried on in
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connection therewith may be properly and advantageously conducted at all times.
The Borrower will comply in all material respects with all Governmental
Regulations to which it may be subject.
Section 5.10 MERGER. The Borrower will not merge or consolidate or enter
into any analogous reorganization or transaction with any Person or liquidate,
wind up or dissolve itself (or suffer any liquidation or dissolution).
Section 5.11 SALE OF ASSETS. The Borrower will not sell, transfer, lease or
otherwise convey all or any substantial part of its assets except for sales and
leases of inventory in the ordinary course of business.
Section 5.12 VOLUNTARY LIENS. The Borrower will not grant any Lien in its
properties, except with the prior written consent of the Lender.
Section 5.13 MECHANIC'S LIENS. The Borrower shall cause all mechanic's or
similar Liens to be removed of record within 120 days of their attachment,
unless the Borrower shall initiate proceedings to remove the mechanic's Lien;
and in all events shall cause the mechanic's Lien to be removed of record within
30 days following the date of a final and non-appealable judicial determination
that the mechanic's Lien is enforceable.
Section 5.14 TRANSACTIONS WITH RELATED PARTIES. Except for the Operating
Contracts described in Exhibit B, and except for any future contract for the
sale of DDGS or carbon dioxide with Broin Enterprises, Inc., d/b/a Dakota
Commodities and its Affiliates, the Borrower shall not enter into any
transactions with Affiliates.
Section 5.15 NO ADDITIONAL INDEBTEDNESS. The Borrower shall not borrow from
any financial institution or other person any sum of money, or enter into any
capital leases, without the Lender's prior written consent. In the event that
the Lender consents to the Borrower obtaining additional indebtedness, the
Borrower shall not prepay said indebtedness without the Lender's prior written
consent.
Section 5.16 DEPOSIT ACCOUNTS. In order to further secure the Borrower's
obligations hereunder, the Borrower will maintain its primary operating account
and all savings/investment accounts with the Lender.
Section 5.17 ADDITIONAL COVENANTS. For additional covenants, see Schedule V
attached hereto and hereby made a part hereof.
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ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
Section 6.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an Event of Default:
6.1(a) The Borrower shall fail to make when due, and such failure to make
payments shall continue for ten (10) calendar days after the date the
Lender gives notice of such failure to the Borrower, any payment of
principal of or interest on the Note or any other Obligations of the
Borrower to the Lender pursuant to this Agreement or any of the other Loan
Documents.
6.1(b) Any representation or warranty made by or on behalf of the Borrower
in this Agreement or any of the other Loan Documents or by or on behalf of
the Borrower in any certificate, statement, report or document herewith or
hereafter furnished to the Lender pursuant to this Agreement or any of the
other Loan Documents shall prove to have been false or misleading in any
material respect on the date as of which the facts set forth are stated or
certified.
6.1(c) The Borrower shall fail to comply with Sections 5.7, 5.10 or 5.11.
6.1(d) The Borrower shall fail to comply with Section 5.1 and such failure
to comply shall continue for ten (10) calendar days after the date the
Lender gives notice of such failure to the Borrower.
6.1(e) The Borrower shall fail to comply with any covenant contained in
Schedule V hereto and such failure to comply shall continue for thirty (30)
calendar days after the date of determination or measurement of said
covenant.
6.1(f) A sale, transfer, conveyance or encumbrance of the Project or any
part thereof or of all or any part of the Borrower's interest therein in
violation of Section 1.3 of the Mortgage shall occur.
6.1(g) The Borrower shall fail to comply with any other agreement,
covenant, condition, provision or term contained in this Agreement or any
of the other Loan Documents (other than those hereinabove set forth in this
Section 6.1) and such failure to comply shall continue for thirty (30)
calendar days after the date the Lender gives notice of such failure to the
Borrower.
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6.1(h) The Borrower shall become insolvent or shall generally not pay its
debts as they mature or shall apply for, shall consent to, or shall
acquiesce in the appointment of a custodian, trustee or receiver of itself
or for a substantial part of its property, or, in the absence of such
application, consent or acquiescence, a custodian, trustee or receiver
shall be appointed for the Borrower or for a substantial part of the
property thereof and shall not be discharged within forty-five (45) days,
or the Borrower shall make an assignment for the benefit of creditors.
6.1(i) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by
or against the Borrower and, if instituted against the Borrower, shall have
been consented to or acquiesced in by the Borrower, as the case may be, or
shall remain undismissed for sixty (60) days, or an order for relief shall
have been entered against the Borrower.
6.1(j) Any dissolution or liquidation proceeding shall be instituted by or
against the Borrower and, if instituted against the Borrower, shall be
consented to or acquiesced in by the Borrower, as the case may be, or shall
remain for sixty (60) days undismissed.
6.1(k) A judgment or judgments for the payment of money in excess of the
sum of $250,000.00 in the aggregate shall be rendered against the Borrower
and either (i) the judgment creditor executes on such judgment or (ii) such
judgment remains unpaid or undischarged for more than sixty (60) days from
the date the judgment becomes final and non-appealable.
6.1(l) The maturity of any material indebtedness of the Borrower (other
than the Loan) shall be accelerated, or the Borrower shall fail to pay any
such material indebtedness when due (after the lapse of any applicable
grace period) or any event shall occur or condition shall exist and shall
continue for more than the period of grace, if any, applicable thereto and
shall have the effect of causing, or permitting the holder of any such
indebtedness to cause, such material indebtedness to become due prior to
its stated maturity or to realize upon any collateral given as security
therefor. For purposes of this Section, indebtedness shall be deemed
"material" if it exceeds $250,000.00 as to any item of indebtedness or in
the aggregate for all items of indebtedness with respect to which any of
the events described in this Section has occurred.
6.1(m) Any execution or attachment shall be issued whereby any substantial
part of the property of the Borrower shall be taken or attempted to be
taken and the
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same shall not have been vacated or stayed within thirty (30) days after
the issuance thereof.
6.1(n) The Lease and/or the Access and Rail Agreement shall be terminated
or cancelled or the Borrower shall be in default thereunder beyond the
applicable grace period, if any.
6.1(o) The termination or assignment, other than to an Affiliate of the
Agreement Between Owner and Design Builder dated November 2, 2000, with
Broin and Associates, Inc., the Management Agreement dated November 2,
2000, with Broin Management, LLC, the Ethanol Marketing and Services
Agreement dated November 2, 2000, with Ethanol Products, LLC, and the
Agreement (for sale of the DDGS), dated January 8, 2001, with Commodity
Specialist Company, without the Lender's prior written consent.
6.1(p) Be in material breach (beyond any commercially reasonable cure
period) of any Operating Contract, or terminate any Operating Contract, or
allow substitution or assignment of, or substantial change in control of,
any other party to any Operating Contract, without Lender's prior written
consent.
6.1(q) The construction of the Project is abandoned or shall be
unreasonably delayed or be discontinued for a period of fifteen (15)
consecutive calendar days, in each instance for reasons other than acts of
God, fire, storm, strikes, blackouts, labor difficulties, riots, inability
to obtain materials, equipment or labor, governmental restrictions or any
similar cause over which the Borrower is unable to exercise control.
6.1(r) The Borrower at any time prior to the Completion of the Project,
shall delay construction or suffer construction to be delayed for any
period of time, for any reason whatsoever, so that the Completion of the
Project cannot be accomplished, in the reasonable judgment of the
Inspecting Architect, by the Completion Deadline.
Section 6.2 REMEDIES. If (a) any Event of Default described in Sections 6.1
(h), (i) or (j) shall occur with respect to the Borrower, the Note and all other
obligations of the Borrower to the Lender under this Agreement and the other
Loan Documents shall automatically become immediately due and payable, or (b)
any other Event of Default shall occur and be continuing, then the Lender may
declare the Note and all other obligations of the Borrower to the Lender under
this Agreement and the other Loan Documents to be forthwith due and payable,
whereupon the same shall immediately
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become due and payable, in each case without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived, anything in
this Agreement or in the Note or in any of the other Loan Documents to the
contrary notwithstanding. Upon the occurrence of any of the events described in
clauses (a) or (b) of the preceding sentence the Lender may exercise all rights
and remedies under this Agreement, the Note and any of the other Loan Documents
and under any applicable law. In addition, the Lender may cure the Event of
Default on behalf of the Borrower, and, in doing so, may enter upon the Project,
and may expend such sums as it may deem desirable, including attorneys' fees,
all of which shall be deemed to be advances hereunder and under the Note, even
though causing the Loan to exceed the face amount of the Note, shall bear
interest at the Default Rate and shall be payable by the Borrower on demand, and
shall be secured by the Mortgage and all other Loan Documents securing the Loan.
Section 6.3 OFFSET. In addition to the remedies set forth in Section 6.2,
upon the occurrence of any Event of Default and thereafter while the same be
continuing, the Borrower hereby irrevocably authorizes the Lender to set off all
sums owing by the Borrower to the Lender against all deposits and credits of the
Borrower with, and any and all claims of the Borrower against, the Lender.
ARTICLE VII
MISCELLANEOUS
Section 7.1 MODIFICATIONS. Notwithstanding any provisions to the contrary
herein, any term of this Agreement may be amended with the written consent of
the Borrower; PROVIDED that no amendment, modification or waiver of any
provision of this Agreement or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Lender, and then such amendment, modification, waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
Section 7.2 COSTS AND EXPENSES. Whether or not the transactions
contemplated hereby are consummated, the Borrower agrees to reimburse the Lender
upon demand for all reasonable out-of-pocket expenses paid or incurred by the
Lender (including filing and recording costs and fees and expenses of legal
counsel to the Lender) in connection with the negotiation, preparation,
approval, review, execution, delivery, amendment, modification, interpretation,
collection and enforcement of this Agreement, the Note and the other Loan
Documents. The obligations of the Borrower under this Section shall survive any
termination of this Agreement.
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Section 7.3 WAIVERS, ETC. No failure on the part of the Lender or the
holder of the Note to exercise and no delay in exercising any power or right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any power or right preclude any other or further exercise thereof or
the exercise of any other power or right. The rights and remedies of the Lender
hereunder are cumulative and not exclusive of any right or remedy the Lender
otherwise has.
Section 7.4 NOTICES. Except when telephonic notice is expressly authorized
by this Agreement, any notice or other communication to any party in connection
with this Agreement shall be in writing and shall be sent by manual delivery,
telegram, telex, facsimile transmission, overnight courier or United States mail
(postage prepaid) addressed to such party at the address specified on the
signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first Business Day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed. Either party may change
its address for notices by a notice given not less than five (5) Business Days
prior to the effective date of the change.
Section 7.5 SUCCESSORS AND ASSIGNS; DISPOSITION OF LOANS. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and assigns, except that the
Borrower may not assign its rights or delegate its obligations hereunder without
the prior written consent of the Lender. The Lender may at any time sell,
assign, transfer, grant participations in, or otherwise dispose of any portion
of the Loan to banks or other financial institutions. The Lender may disclose
any information regarding the Borrower in the Lender's possession to any
prospective buyer or participant.
SECTION 7.6 GOVERNING LAW AND CONSTRUCTION. THE VALIDITY, CONSTRUCTION AND
ENFORCEABILITY OF THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF SOUTH DAKOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS OR
PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES
APPLICABLE TO NATIONAL BANKS. WHENEVER POSSIBLE, EACH PROVISION OF THIS
AGREEMENT AND ANY OTHER STATEMENT, INSTRUMENT OR TRANSACTION CONTEMPLATED HEREBY
OR RELATING HERETO, SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND
VALID UNDER SUCH APPLICABLE LAW, BUT, IF ANY PROVISION OF THIS AGREEMENT OR ANY
OTHER
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STATEMENT, INSTRUMENT OR TRANSACTION CONTEMPLATED HEREBY OR RELATING HERETO
SHALL BE HELD TO BE PROHIBITED OR INVALID UNDER SUCH APPLICABLE LAW, SUCH
PROVISION SHALL BE INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR
INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE
REMAINING PROVISIONS OF THIS AGREEMENT OR ANY OTHER STATEMENT, INSTRUMENT OR
TRANSACTION CONTEMPLATED HEREBY OR RELATING HERETO.
SECTION 7.7 CONSENT TO JURISDICTION. AT THE OPTION OF THE LENDER, THIS
AGREEMENT AND THE NOTE MAY BE ENFORCED IN ANY FEDERAL COURT OR SOUTH DAKOTA
CIRCUIT COURT SITTING IN GRANT COUNTY OR MINNEHAHA COUNTY; AND THE BORROWER
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURTS AND WAIVES ANY
ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWER
COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT
THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS
AGREEMENT, THE LENDER AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE
TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH
TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.
SECTION 7.8 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE LENDER
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTE AND ANY OTHER LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 7.9 CAPTIONS. The captions or headings herein and any table of
contents hereto are for convenience only and in no way define, limit or describe
the scope or intent of any provision of this Agreement.
Section 7.10 NUMBER; GENDER. The singular of all terms used herein shall
include the plural and the plural shall include the singular, and the use of any
gender herein shall include all other genders, where the context so requires or
permits.
Section 7.11 ENTIRE AGREEMENT. This Agreement and the other Loan Documents
embody the entire agreement and understanding between the Borrower and the
Lender
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with respect to the subject matter hereof and thereof. This Agreement supersedes
all prior agreements and understandings relating to the subject matter hereof.
Section 7.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.
Section 7.13 PARTICIPATION. Notwithstanding any other provision of this
Agreement, the Borrower understands that the Lender may enter into participation
agreements with other lenders whereby the Lender will allocate a certain
percentage of the Loan to them. The Borrower specifically permits and authorizes
the Lender to exchange financial information about the Borrower with actual or
potential participants. The borrower acknowledges that for the convenience of
all parties. This Agreement is being entered into with the Lender only and that
its obligations under this Agreement are undertaken for the benefit of, and as
an inducement to, each of the Participating Lenders as well as the Lender, and
the Borrower hereby grants to each of the Participating Lenders to the extent of
its participation in the Loan, the right to set off deposit accounts maintained
by the Borrower with such Bank. The Borrower understands that the terms of such
participation agreements with any of the participants will limit the Lender's
rights to amend, waive or modify the terms and conditions of this Agreement
without the express written consent of all or a designated percentage of such
participants. Every requirement that the Borrower pay the expenses of the
Lender, including costs of the Lender's attorneys, service tax thereon, and
expense reimbursement for such attorneys, shall also be deemed to include such
reasonable costs and expenses of each such participant.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
NORTHERN LIGHTS U.S. BANK NATIONAL
ETHANOL, LLC ASSOCIATION
By: /s/ Delton Strasser By: /s/ Carl D. Wynja
----------------------------------- ----------------------------------
Print Name: Delton Strasser Print Name: Carl D. Wynja
Title: Chairman of the Board Title: Senior Vice President
Borrower's Address: Lender's Address:
Post Office Box 225 U.S. Bank National Association
Milbank, South Dakota 57252 141 North Main Avenue
Phone: (605) 432-5676 Post Office Box 5308
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Fax: (605) 432-6951 Sioux Falls, South Dakota 57117
Phone: (605) 339-8619
Fax: (605) 333-3825
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CONSTRUCTION LOAN ADDENDUM
Section 1. DEFINITIONS. The following definitions are hereby added to
Article I of the Loan Agreement (the "Loan Agreement") to which this
Construction Loan Addendum (this "Addendum") is attached:
"ADVANCE": An advance of Loan proceeds by the Lender pursuant to this
Agreement.
"ASSIGNMENT OF CONSTRUCTION CONTRACT": The Assignment of Construction
Contract dated of even date herewith, by and between the Borrower, the Lender
and the General Contractor.
"ASSIGNMENT OF PLANS AND ARCHITECTURAL AGREEMENTS": The Assignment of Plans
executed by the Borrower in favor of the Lender, and consented to by the Project
Architect.
"COMPLETION": The Improvements are completed in accordance with the Plans
and paid for in full; such completion has been approved by the Inspecting
Architect; a certificate of substantial completion for the Improvements has been
signed by the Borrower and the General Contractor and delivered to the Lender,
and no punch-list items remain to be completed; an unconditional certificate of
occupancy for all of the Improvements has been issued by the appropriate
governmental authority, if required by applicable law; the Borrower has
delivered to the Lender copies of all licenses and permits needed to operate the
Project; Lender has received copies of all warranties from suppliers covering
materials, equipment and appliances included within the Project and evidence
that all insurance required hereby is in full force and effect; and no Default
of Default exists hereunder.
"COMPLETION DEADLINE": December 31, 2002.
"CONTRACTOR": Any Person who has a contract or subcontract under which
payment may be required for any work done, material supplied or services
furnished in connection with acquiring, constructing, financing, equipping
and/or developing the Project. A Contractor includes anyone eligible to file a
lien pursuant to SDCL ch 44-9.
"DISBURSING AGREEMENT": The separate disbursing agreement of even date
herewith between the Borrower, the Lender and the Escrow Company, including any
amendments and supplements thereto.
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"DRAW REQUEST": A written request by the Borrower for an Advance.
"GENERAL CONTRACTOR": Broin and Associates, Inc., and Affiliate of the
Borrower.
"IMPROVEMENTS": The buildings and improvements to be placed or constructed
upon the Land.
"PLANS": The final working plans for the construction of the Improvements,
including drawings, specifications, details and manuals, as approved by the
Lender prior to the Closing Date.
"PROJECT ARCHITECT": The architect selected by the General Contractor to
design the buildings that are part of the Improvements.
"RESERVES": The reserves for payment of construction period interest,
contingencies and change orders, as set forth on the Sworn Project Cost
Statement.
"SWORN PROJECT COST STATEMENT": An itemized, certified statement of actual
and estimated costs of the Project, signed and sworn to by the Borrower and the
General Contractor as the same may be amended or supplemented with the approval
of the Lender from time to time.
The term" Loan Documents", as used in the Loan Agreement, shall include, in
addition to the documents described in the definition of Loan Documents
contained in Article I of the Loan Agreement, the Assignment of Construction
Contract, the Assignment of Plans and the Disbursing Agreement.
Section 2. ADVANCES.
(a) GENERAL. The Lender agrees to lend the Borrower, and the Borrower
agrees to borrow from the Lender, the proceeds of the Loan, from time to time
until the Completion Deadline, for the purpose of developing the Project and
constructing the Improvements. All sums advanced by the Lender shall constitute
Advances under this Agreement and shall be evidenced by the Note and secured by
the Mortgage. No Advance shall constitute a waiver of any Default or Event of
Default or any condition precedent to the obligation of the Lender to make any
further Advance. If the total amount of the Loan exceeds the amount needed to
fully pay all project costs approved by the Lender, the Lender shall not be
required to advance the excess. The Borrower shall keep the Lender advised of
the name of each Contractor and of the type of work, material or services and
the dollar amount covered by each of their respective contracts with the
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Borrower. If requested by the Lender, the Borrower shall also furnish to the
Lender a copy of each contract with each of the Contractors. THE BORROWER MAY
COMMENCE CONSTRUCTION WORK ON, OR ACCEPT DELIVERY OF MATERIALS FOR, THE
IMPROVEMENTS PRIOR TO THE RECORDING OF THE MORTGAGE.
(b) PROCEDURE FOR ADVANCES. The Loan proceeds shall be advanced by the
Lender in accordance with the terms and conditions set forth in this Section 2,
and in accordance with the Disbursing Agreement. All monies advanced by the
Lender to the Escrow Company shall constitute Advances under this Agreement, and
shall bear interest from the date of advance to the Escrow Company, whether such
Advances are fully disbursed by the Escrow Company or are withheld in full or in
part.
(c) ADVANCES BY LENDER TO ITSELF OR OTHERS. The Lender may, at the Lender's
option, advance to itself or to others all sums due or to become due to the
Lender or to others under any of the Loan Documents, whether or not an Advance
is requested by the Borrower.
(d) INSPECTIONS. The Lender, the Escrow Company, the Inspecting Architect,
the Lender's consultants and their representatives shall have access to the
Project at all reasonable times to conduct such inspections thereof as they deem
necessary or desirable for the protection of the Lender's interests. All costs
of the Inspecting Architect and any other consultants deemed necessary or
desirable by the Lender to make periodic inspections of the Project and to
review all Draw Requests and change orders shall be paid by the Borrower.
Neither the Borrower nor any third party shall have the right to use or rely
upon the reports of the Inspecting Architect or any other reports generated by
the Lender or its consultants for any purpose whatsoever. By advancing funds
after any inspection of the Project, the Lender shall not be deemed to waive any
Default or Event of Default, waive any right to require construction defects to
be corrected, or acknowledge that all construction conforms with the Plans.
(e) LENDER NOT RESPONSIBLE FOR PROJECT. The Lender assumes no liability or
responsibility for the sufficiency of the Loan proceeds to complete the Project,
to service any interest or other payment due under the terms of the Loan under
Section 2(c) above, for protection of the Project, for the satisfactory
Completion of the Project, for the Plans, for the compliance of the Plans and
the Project with Governmental Requirements, for inspection during construction,
for the adequacy of Reserves, for the adequacy or accuracy of the Sworn Project
Cost Statement, for any representations made by the Borrower, or for any acts on
the part of the Borrower or its Contractors to be performed in
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the construction of the Project. The Borrower assumes sole responsibility for
all of the foregoing.
(f) LOAN IN BALANCE. Borrower acknowledges that Borrower is responsible for
all cost overruns on the Project. The Lender shall not be obligated to make any
Advance unless and until the Borrower has provided the Lender with evidence that
the Borrower has paid sufficient costs of the Project so that all remaining
unpaid costs of the Project, including the Reserves, do not exceed the amount of
the Loan proceeds not yet Advanced by the Lender. If the Lender or the Borrower
determines that the unAdvanced balance of Loan proceeds is insufficient to cover
any cost allocation set forth on the Sworn Project Cost Statement, including the
Reserves and interest during construction, or to complete the Project, it shall
notify the other party of such determination, and the Borrower shall, within ten
(10) Business Days after such notice, deposit with the Lender funds equal to the
amount of the deficiency. The Borrower hereby assigns and pledges to the Lender
all funds so deposited as additional security for the Obligations. The Borrower
may not reallocate items of cost or change the Sworn Project Cost Statement
without the consent of the Lender.
Section 3. CONDITIONS PRECEDENT TO ADVANCES. The Lender shall not be
required to make any Advances until the conditions and requirements set forth
below have been satisfied, at the Borrower's sole cost and expense. The Lender
may, in its discretion, make Advances prior to satisfaction of any or all of the
conditions and requirements set forth below, all of which are for the sole
benefit of the Lender, without waiving its right to require such satisfaction
before any additional Advances are made.
(a) CONDITIONS PRECEDENT TO INITIAL ADVANCE. The Lender shall not be
obligated to make the initial Advance until the conditions precedent set forth
in Article III of the Loan Agreement have been satisfied and the Lender has
received all of the following in form and substance acceptable to the Lender:
(i) The Plans.
(ii) Soil reports on the Land, showing that the soil will adequately
support the Improvements when constructed in accordance with the Plans.
(iii) The General Contractor's construction contract and a schedule listing
all subcontracts relating to the construction of the Project.
(iv) The Sworn Project Cost Statement, and a disbursement schedule showing
the anticipated time and amount of disbursements hereunder.
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(v) Copies of all building permits required to complete the construction of
the Improvements, or evidence satisfactory to the Lender that such permits
will be obtained.
(vi) A letter addressed to the Lender from an appropriate municipal officer
regarding zoning and building code compliance.
(vii) Letters from the appropriate municipalities or utility companies
certifying as to the availability, capacity and adequacy of water, sanitary
sewer, storm sewer, gas, electricity, telephone and other utilities and
services necessary to construct and operate the Project.
(viii) The Assignment of Construction Contract and the Assignment of Plans
and the Disbursing Agreement, each duly executed by the parties thereto.
(ix) The Borrower has expended toward the cost of construction equity funds
contributed by its Members in an amount not less than $16,200,000.00.
(x) The parties acknowledge that work on the Improvements commenced prior
to closing, and that all preconditions to any subsequent Advances hereunder
apply to the initial Advance hereunder.
(b) CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of the Lender
to make each Advance (including the initial Advance) is subject to the following
conditions precedent:
(i) No Default or Event of Default shall have occurred and be continuing or
will exist upon the making of such Advance.
(ii) All representations and warranties of the Borrower made in the Loan
Agreement shall remain true and correct as of the date of the Advance 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 no
Default or Event of Default shall exist.
(iii) All requirements and conditions for an Advance under Section 2 of
this Addendum shall have been complied with and satisfied.
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(iv) There shall not have occurred any change, which in the sole judgment
of the Lender is materially adverse, in the condition (financial or
otherwise) or operations of the Borrower or in the Project or the prospects
for the timely and satisfactory completion of the construction of the
Improvements and operation of the Project.
Section 4. WARRANTIES, REPRESENTATIONS, COVENANTS AND AGREEMENTS. In
addition to the warranties, representations, covenants and agreements of the
Borrower contained in the Loan Agreement, the Borrower hereby warrants,
represents, covenants and agrees to and with the Lender as follows:
(a) BOUNDARY LINES, GOVERNMENTAL REQUIREMENTS AND RESTRICTIONS. The
exterior lines of the Improvements are, and at all times will be, within the
boundary lines of the Land and any required set back lines, and the Borrower has
examined and is familiar with all applicable covenants, conditions, restrictions
and reservations, and with all applicable Governmental Requirements affecting
the Project, and the Project will conform to and comply with all of the
foregoing.
(b) LOAN IN BALANCE. The amount of the Loan proceeds not yet advanced by
the Lender equals or exceeds the total of all remaining unpaid costs of the
Project, including the Reserves.
(c) COMMENCING AND COMPLETING CONSTRUCTION. Regardless of whether or not
there are sufficient Loan proceeds or sufficient funds disbursed under the
Disbursing Agreement, the Borrower shall expeditiously complete and fully pay
for the development and construction of the Project in a good and workmanlike
manner and in accordance with the contracts, subcontracts and Plans submitted to
and approved by the Lender, and in compliance with all applicable Governmental
Requirements, and any applicable covenants, conditions, restrictions and
reservations, so that Completion occurs on or before the Completion Deadline.
The Borrower shall correct or cause to be corrected (a) any defect in the
Improvements, (b) any departure in the construction of the Improvements from the
Plans or Governmental Requirements, and (c) any encroachment by any part of the
Improvements or any other structure located on the Loan on any building line,
easement, property line or restricted area. The Borrower shall cause the bearing
capacity of the soil on the Loan to be made sufficient to support the
Improvements, and sufficient local utilities to be made available to the Project
and installed at costs (if any) set out in the Sworn Project Cost Statement, on
or before the Completion Deadline.
(d) CHANGING COSTS, SCOPE OR TIMING OF WORK. The Borrower shall deliver
to the Lender revised, sworn statements of estimated costs of the Project,
showing changes
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in or variations from the original Sworn Project Cost Statement, as soon as such
changes are known to the Borrower. The Borrower shall furnish the Lender with
copies of all changes or modifications in the Plans, contracts or subcontracts
for the construction of the Improvements, prior to incorporation of any such
change or modification into the Improvements, whether or not the Lender's
consent to such change or modification is required. The Borrower shall not make
or consent to any change or modification in such Plans, contracts or
subcontracts, and no work shall be performed with respect to any such change or
modification, without the prior written consent of Lender, if such change or
modification would in any material way alter the design or structure of the
Improvements, or increase or decrease the cost of the construction of the
Improvements by $250,000.00 or more for any single change or modification, or if
the aggregate amount of all changes and modifications exceeds $1,000,000.00.
(e) PAYING COSTS OF PROJECT AND LOAN. The Borrower shall pay and discharge,
when due, all taxes, assessments and other governmental charges upon the
Project, as well as all claims for labor and materials which, if unpaid, might
become a lien or charge upon the Project; provided, however, that the Borrower
shall have the right to contest the amount, validity and/or applicability of any
of the foregoing in strict accordance with the terms of the Mortgage. The
Borrower shall also pay all costs and expenses of the Lender, the Lender's
consultants and the Borrower in connection with the Project, the preparation and
review of the Loan Documents and the making, closing, administration, repayment
and/or transfer of the Loan, including but not limited to the fees of the
Lender's attorneys, fees of the Inspecting Architect, title insurance costs,
disbursement expenses, and all other costs and expenses payable to third parties
incurred by the Lender or the Borrower in connection with the Loan. Such costs
and expenses shall be paid by the Borrower whether or not the Loan is fully
advanced or disbursed.
(f) USING LOAN PROCEEDS. The Borrower shall use the Loan proceeds solely to
pay, or to reimburse the Borrower for paying, costs and expenses shown on the
Sworn Project Cost Statement approved by the Lender and incurred by the Borrower
in connection with the acquisition, development and construction of the Project.
The Borrower shall take all steps necessary to assure such use of Loan proceeds
by its Contractors.
(g) KEEPING RECORDS. The Borrower shall maintain accurate and complete
books, accounts and records pertaining to the Project in a manner reasonably
acceptable to the Lender and to the Escrow Company. The Borrower will permit
representatives of the Lender, the Inspecting Architect and the Escrow Company
to have free access to and to inspect and copy all books, records and contracts
of the Borrower.
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(h) PROVIDING EVIDENCE OF COMPLETION. Upon Completion, and prior to the
final Advance of Loan proceeds to pay for hard costs of construction of the
Project, and as a condition of the same, the Borrower shall furnish the Lender
with all items required to evidence Completion, including an unconditional
occupancy certificate if required by applicable law to occupy the Project; a
zoning endorsement (Form 3.1 or equivalent) to the Title Policy; a final,
certified Project "as-built" survey (3 copies) if requested by Lender; the
evidence of insurance required by Section 1.4 of the Mortgage; and photographs
of the completed Improvements.
Section 5. EVENTS OF DEFAULT. In addition to the Events of Default set
forth in Article VI of the Loan Agreement, the following events shall constitute
an Event of Default under the Loan Agreement:
(a) ABANDONMENT OF OR DELAY IN CONSTRUCTION. Work on the Project shall be
substantially abandoned, or shall, by reason of the Borrower's fault, be
unreasonably delayed or discontinued for a period of thirty (30) days, or shall
be delayed for any reason whatsoever to the extent that Completion of the
Project cannot, in the reasonable judgment of the Lender, be accomplished prior
to the Completion Deadline.
(b) LOAN IMBALANCE NOT REMEDIED. The Lender determines that the remaining
undisbursed Loan proceeds are insufficient to fully pay all of the then unpaid
costs of the Project and estimated expenses of completion, and the Borrower (i)
fails to deposit with the Lender, within ten (10) Business Days after demand,
sufficient funds to permit the Lender to pay said excess costs as the same
become payable or (ii) does not pay said excess costs directly and deliver to
the Lender unconditional mechanics' lien waivers therefor (or paid receipts for
nonlienable items), at the Lender's option.
Section 6. REMEDIES. If an Event of Default shall occur under the Loan
Agreement, then in addition to the rights and remedies set forth in the Loan
Agreement and the other Loan Documents, the Lender shall be entitled, at the
option of the Lender, to exercise any or all of the following rights and
remedies:
(a) MAKE OR REFRAIN FROM MAKING FURTHER ADVANCES. The Lender may make
one(1) or more further Advances, without liability to make any subsequent
Advances.
(b) SUSPEND ADVANCES. The Lender may suspend or terminate its obligation
to make Advances, and if it does so, shall promptly notify Borrower.
(c) COMPLETION OF IMPROVEMENTS BY THE LENDER. In addition, in case of
the occurrence of any Event of Default caused by, or which results in, the
Borrower's failure,
<Page>
for any reason, to continue with the construction of the Project as required by
the Loan Agreement and this Addendum, the Lender may (but shall not be obligated
to) take over and complete the construction of the Project in accordance with
the Plans, with such changes therein as the Lender may, in its discretion, deem
appropriate, all at the risk, cost and expense of the Borrower. The Lender may
assume or reject any contracts entered into by the Borrower in connection with
the Project, may enter into additional or different contracts, and may pay,
compromise and settle all claims in connection with the Project. All costs and
expenses, including attorneys' fees, incurred by the Lender in completing or
attempting to complete the Project (whether aggregating more, or less, than the
face amount of the Note), shall be deemed Advances made by the Lender to the
Borrower hereunder, and the Borrower shall be liable to the Lender, on demand,
for the repayment of such sums, together with interest on such sums from the
date of their expenditure at the Default Rate. The Lender may, in its
discretion, at any time abandon work on the Project, after having commenced such
work, and may recommence such work at any time. Nothing in this Section 6(c)
shall impose any obligation on the Lender either to complete or not to complete
the Project. For the purpose of carrying out the provisions of this Section
6(c), the Borrower irrevocably appoints the Lender its attorney-in-fact, with
full power of substitution, to execute and deliver all such documents, to pay
and receive such funds, and to take such action as may be necessary, in the
judgment of the Lender, to complete the Project. This power of attorney is
coupled with an interest and is irrevocable.
IN WITNESS WHEREOF, the parties hereto have caused this Construction Loan
Addendum to be executed the same date as execution of the Loan Agreement.
NORTHERN LIGHTS U.S. BANK NATIONAL
ETHANOL, LLC ASSOCIATION
By: /s/ Delton Strasser By: /s/ Carl D. Wynja
----------------------------------- ---------------------------------
Print Name: Delton Strasser Print Name: Carl D. Wynja
Title: Chairman of the Board Title: Senior Vice President
Borrower's Address Lender's Address
Post Office Box 225 U.S. Bank National Association
Milbank, South Dakota 57252 141 North Main Avenue
Phone: (605) 432-5676 Post Office Box 5308
Fax: (605) 432-6951 Sioux Falls, South Dakota 57117
Phone: (605) 339-8619
Fax: (605) 3333825
<Page>
EXHIBIT A
(Legal Description of Land)
The Borrower holds a leasehold interest in the following described Land
under the terms and conditions of the Big Stone Power Plant Lease dated April
18, 2001:
Parcel B in the Southeast Quarter (SE 1/4) of Section Eleven (11), Township
One Hundred Twenty-One (121) North, Range Forty-Seven (47) West of the Fifth
Principal Meridian, Grant County, South Dakota, according to the recorded plat
thereof; and a non-exclusive easement over, upon and across that portion of the
Access Road located in said Southeast Quarter (SE 1/4), as depicted on Exhibit
A-I attached hereto, for driveway and ingress and egress purposes.
Parcel A in the Southwest Quarter (SW 1/4) of Section Twelve (12), Township
One Hundred Twenty-One (121) North, Range Forty-Seven (47) West of the Fifth
Principal Meridian, Grant County, South Dakota, according to the recorded plat
thereof; a non-exclusive easement over, upon and across that portion of the
Access Road located in said Southwest Quarter (SW 1/4), as depicted on Exhibit
A-I attached, for driveway and ingress and egress purposes; and a portion of
Easement No. 1 for the Northern Lights Railroad Spur area located in said
Southwest Quarter (SW 1/4), as depicted on Exhibit A-2 attached, for rail
ingress and egress purposes.
A portion of Easement No. 1 for the Northern Lights Railroad Spur Line area
located in the Northwest Quarter (NW 1/4) of Section Thirteen (13), Township
One-Hundred Twenty-One (121) North, Range Forty-Seven (47) West of the Fifth
(5th) P.M., Grant County, South Dakota, as depicted on Exhibit A-2 attached for
rail ingress and egress; an exclusive easement over, upon and across that
portion of Easement No. 2 for the Northern Lights Maintenance Road Area located
in said Northwest Quarter (NW 1/4), as depicted on Exhibit A-2 attached, for
driveway and ingress and egress purposes; and a non-exclusive easement for rail
access to the Big Stone Plant Co-Owners' Railroad Spur line located in the North
One-Half (N 1/2) of Section Thirteen (13), as depicted on Exhibit A-3 attached,
for rail ingress and egress purposes.
A non-exclusive easement for rail ingress and egress purposes over, upon and
across the Big Stone Plant Co-Owners' Railroad Spur line, as depicted on Exhibit
A-3 attached, which Railroad Spur line is located on the following described
parcels:
Southeast Quarter of the Southwest Quarter (SE 1/4 SW 1/4), except Burlington
Northern Santa Fe railroad right-of-way; and the West Half of the Southeast
Quarter (W 1/2 SE
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1/4) lying northerly of the present right-of-way of Chicago, Milwaukee, St. Paul
and Pacific Railway Company; and that part of Outlot 47 (which is also described
as the Northeast Quarter of the Southeast Quarter (NE 1/4 SE 1/4), except Outlot
Forty-Eight (48)), and including the abandoned right-of-way of the Chicago,
Milwaukee, St. Paul and Pacific Railroad Company, all in Section Eighteen (18),
Township One-Hundred Twenty-One (121) North, Range Forty-Six (46) West of the
Fifth (5th) P.M., Grant County, South Dakota, according to plat thereof on file
and of record in the office of the Register of Deeds of said county and state.
South Half of Northwest Quarter (S 1/2 NW 1/4); and the North Half of the
Southwest Quarter (N 1/2 SW 1/4), except railroad right-of-way; and except Hay's
Outlot located in the Northwest Quarter of the Southwest Quarter (NW 1/4 SW 1/4)
and the Southwest Quarter of the Northwest Quarter (SW 1/4 NW 1/4); and except a
metes and bounds tract of land described as follows: Commencing at the southwest
corner of the Northwest Quarter of the Southwest Quarter (NW 1/4 SW 1/4), thence
North Forty-Five (45) rods, thence East Sixteen (16) rods, thence South
Forty-Five (45) rods, thence West Sixteen (16) rods to the place of beginning
(now known as Lots 1, 2 and 3, Replat of Lot C in the Northwest Quarter of the
Southwest Quarter (NW 1/4 SW 1/4) of 18-121-46), according to the plat thereof
on file and of record in the office of the Register of Deeds of said county and
state.
North Half of the Northwest Quarter (N 1/2 NW 1/4), except township road deeded
at Deed Record 58, page 561, in Section Eighteen (18), Township One-Hundred
Twenty-One (121) North, Range Forty-Six (46) West of the Fifth (5th) P.M., Grant
County, South Dakota.
West One-Thousand Six-Hundred and Thirteen (1,613) feet of that part of the
Northeast Quarter (NE 1/4) lying South of the highway known as the Yellowstone
Trail, passing in an easterly direction through said quarter section, except
that part deeded for cemetery purposes to St. Charles Catholic Church, but
including the abandoned railroad right-of-way of the Chicago, Milwaukee, St.
Paul and Pacific Railway Co., all in Section Eighteen (18), Township One-Hundred
Twenty-One (121) North, Range Forty-Six (46) West of the Fifth (5th) P.M., Grant
County, South Dakota, according to the plat thereof on file and of record in the
office of the Register of Deeds of said county and state.
Northeast Quarter (NE 1/4) lying North of the highway known as the Yellowstone
Trail, except the Cheese Company Outlot, in Section Eighteen (18), Township
One-Hundred Twenty-One (121) North, Range Forty-Six (46) West of the Fifth (5th)
P.M., Grant County, South Dakota, according to the plat thereof on file and of
record in the office of the Register of Deeds of said county and state.
<Page>
[EXHIBIT A-1 THROUGH A-3 PLAT MAPS NOT REPRODUCED]
<Page>
EXHIBIT B
(Operating Contracts)
Contract for Future Services, dated October 12, 2000, with Broin and
Associates, Inc.
Agreement Between Owner and Design Builder, dated November 2, 2000, with
Broin and Associates, Inc.
Management Agreement, dated November 2, 2000, with Broin Management, LLC.
Ethanol Marketing and Services Agreement, dated November 2, 2000, with
Ethanol Products, LLC.
Agreement (for sale of DDGS), dated January 8, 2001, with Commodity
Specialist Company.
Temporary Utility Easement, dated April 18, 2001, by and between Otter Tail
Corporation, f/k/a Otter Tail Power company; Montana-Dakota Utilities Co.,
a division of MDU Resources Group, Inc., f/k/a Montana-Dakota Utilities
Co.; Northwestern Public Service, a division of NorthWestern Corporation,
f/k/a Northwester Public Service Company; and Northern Lights Ethanol, LLC.
Temporary Laydown/Construction Easement Agreement, dated April 18, 2001, by
and between Otter Tail Corporation, f/k/a Otter Tail Power Company;
Montana-Dakota Utilities Co., a division of MDU Resources Group, Inc.,
f/k/a Montana-Dakota Utilities Co.; Northwestern Public Service, a division
of NorthWestern Corporation, f/k/a Northwester Public Service Company; and
Northern Lights Ethanol, LLC.
Steam Sale Agreement, dated April 18, 2001, by and between Otter Tail
Corporation, f/k/a Otter Tail Power Company; Montana-Dakota Utilities Co.,
a division of MDU Resources Group, Inc., f/k/a Montana-Dakota Utilities
Co.; Northwestern Public Service, a division of NorthWestern Corporation,
f/k/a Northwestern Public Service Company; and Northern Lights Ethanol,
LLC.
The water, utility and fuel oil contracts, by and between Otter Tail
Corporation, f/k/a Otter Tail Power Company; Montana-Dakota Utilities Co.,
a division of MDU Resources Group, Inc., f/k/a Montana-Dakota Utilities
Co.; Northwestern
<Page>
Public Service, a division of NorthWestern Corporation, f/k/a Northwester
Public Service Company; and Northern Lights Ethanol, LLC.
Access and Rail Agreement, dated April 18, 2001, by and between Otter Tail
Corporation, f/k/a Otter Tail Power Company; Montana-Dakota Utilities Co.,
a division of MDU Resources Group, Inc., f/k/a Montana-Dakota Utilities
Co.; Northwestern Public Service, a division of NorthWestern Corporation,
f/k/a Northwestern Public Service Company; and Northern Lights Ethanol,
LLC.
<Page>
SCHEDULE C
(Permitted Encumbrances)
1. An easement for the purpose of granting the right to have a Pollution
Control Project located on the subject property and to have ingress and egress
on and over such lands, as set forth in Easement Agreement between
Montana-Dakota Utilities, Northwestern Public Service Company, and Otter Tail
Power Company and Grant County, South Dakota, dated February 1, 1974, and
recorded in Miscellaneous Record 159, page 169, on 2/6/74 as Document Number
149365.
2. A non-exclusive easement for the purpose of granting the right to have
transmission lines located on the subject property and to have ingress to and
egress from said lines, as set forth in Easement Agreement between
Montana-Dakota Utilities, Northwestern Public Service Company, and Otter Tail
Power Company and Cooperative Power Association, dated July 1, 1976, and
recorded in Miscellaneous Record 161, page 845, on 8/6/76 as Document Number
154178.
3. Any rights claimed as set forth in Bill of Sale and Assignment of
Easements between Otter Tail Power Company and Cooperative Power Association,
dated July 1, 1976, and recorded in Miscellaneous Record 161, page 855, on
8/6/76 as Document Number 154179.
Initials on behalf of Borrower:
------------
<Page>
SCHEDULE 3.1(a)
This Agreement, the Note, the Mortgage, the Security Agreement, the
Indemnification Agreement, the Financing Statement and Assignments of Operating
Contracts, except for the water, electric and fuel oil contracts which will be
provided prior to the First Advance Date, each duly executed by the Borrower
(and in the case of the Assignments of Operating Contracts by the Contracting
Parties) and dated the Closing Date.
The Indemnification Agreement executed by the Borrower and dated the
Closing Date.
The opinion of counsel to the Borrower covering such matters as the Lender
may request.
An appraisal of the Project, addressed to the Lender, prepared in
conformance with the Lender's real estate appraisal and evaluation policy, and
signed by an appraiser acceptable to the Lender.
A survey prepared by a registered land surveyor licensed in the state where
the Land is located and complying with Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys (Urban) (1992), including items 1, 2, 3, 4, 6, 7a,
7b, 8, 9, 10, 11 and 13 of Table A thereof and such other information as the
Lender may reasonably request, and certified in a manner acceptable to the
Lender.
A written environmental assessment addressed to the Lender, conducted by an
environmental engineer or consultant acceptable to the Lender, setting forth the
results of an investigation of the Project, containing an analysis and
evaluation of any and all environmental risks associated with the Project, and
concluding that there is no significant risk of any hazardous materials
contamination of any portion of the Project.
An Environmental Risk Assessment Questionnaire, in form and substance
acceptable to the Lender, addressed to the Lender and completed and executed by
Borrower.
A financial forecast of the Borrower as of a date not more than six months
prior to the Closing Date.
A true, correct and complete copy of each Lease of the Project or any part
thereof.
<Page>
A Lessor consent to assignment of lease executed by Big Stone-Grant
Industrial Development and Transportation, L.L.C.
Insurance policies or certificates thereof in form satisfactory to the
Lender, satisfying the requirements of Section 1.4 of the Mortgage.
A flood check satisfactory to the Lender and satisfying the requirements of
42 U.S.C. Section 4104b and any rules and regulations promulgated pursuant
thereto.
A Uniform Land Use Confirmation Form in form and substance satisfactory to
the Lender.
True, correct and complete copies of the Operating Contracts, except for
the water, electric and fuel oil contracts which will be provided prior to the
First Advance Date.
Such other documents as the Lender may reasonably require to assure
compliance with the requirements of this Agreement.
A copy of the resolutions of the Borrower's Board of Managers authorizing
the execution, delivery and performance of the Loan Documents, and containing an
incumbency certificate showing the names and titles, and bearing the signatures
of, the officers of such party authorized to execute the Loan Documents,
certified as of the Closing Date by the Secretary or an Assistant Secretary of
the Borrower.
A Sworn Construction Cost Statement executed by the Borrower.
A copy of the Articles of Organization of the Borrower with all amendments
thereto, certified by the appropriate governmental official of the jurisdiction
of its formation as of a date not more than 15 days prior to the Closing Date.
A certificate of good standing for the Borrower in the jurisdiction of its
formation, and, if different than the jurisdiction of its formation, the
jurisdiction in which the Project is located, certified by the appropriate
governmental officials as of a date not more than 45 days prior to the Closing
Date.
Copies of the Operating Agreement and Member Control Agreement of the
Borrower, certified as of the Closing Date by the Secretary or an Assistant
Secretary of the Borrower.
<Page>
A copy of the Plans, as certified by the Borrower and General Contractor.
Assignment of the Construction Contract and Plans.
A Certificate of Authority executed by such person or persons authorized by
the Borrower's organizational documents and/or agreements to do so, certifying
the incumbency and signatures of the managers or other persons authorized to
execute the Loan Documents, and authorizing the execution of the Loan Documents
and performance in accordance with their terms.
A recently certified copy of the Borrower's operating agreement, and any
amendments, if applicable.
A recently certified copy of the Borrower's Articles of Organization and any
amendments, if applicable.
A certificate of good standing from the office of the South Dakota
Secretary of State on the Borrower.
A copy of all governmental permits as may be required to construct and
operate the Project.
Initials on behalf of Borrower: /s/ D.L.S.
<Page>
SCHEDULE 3.2(a)
The assignments of Operating Contracts for the water, electric and fuel oil
contracts.
True, correct and complete copies of the water, electric and fuel oil
contracts.
The Title Policy, or a suitably marked up title insurance commitment issued
by Title Company unconditionally agreeing to issue the Title Policy upon
recordation of the Mortgage.
UCC chattel lien searches from the Register of Deeds in Grant County, South
Dakota, and from the office of the Secretary of State of South Dakota.
Initials on behalf of Borrower: /s/ D.L.S.
<Page>
SCHEDULE V
ADDITIONAL COVENANTS
Until the Note and all of the other Obligations shall have been paid and
performed in full, unless the Lender shall otherwise consent in writing:
CAPITAL EXPENDITURES. The Borrower will not make any expenditures for fixed
or capital assets in an amount exceeding $500,000.00 in any calendar year.
Significant plant expansions will be negotiated by the parties outside of this
Covenant.
DIVIDENDS. The Borrower will not make any distributions to its Members in
excess of 70% of its net income. Distributions up to 80% of net income will be
allowed by Lender upon the Borrower obtaining and maintaining Working Capital of
at least $3,000,000.00.
INVESTMENTS. The Borrower will not make any loans, advances or extensions
of credit to any other Person (except for trade and customer accounts receivable
for inventory sold or services rendered in the ordinary course of business and
payable in accordance with customary trade terms) or purchase or acquire any
stock or other debt or equity securities of or any interest in any other Person
or any integral part of any business or the assets comprising such business or
part thereof, except for:
(a) Investments in readily marketable direct obligations issued or
unconditionally guaranteed by the United States government or any agency
thereof and supported by the full faith and credit of the United States.
(b) Certificates of deposit or bankers' acceptances issued by any
commercial bank organized under the laws of the United States or any State
thereof which has (i) combined capital and surplus of at least
$100,000,000, and (ii) a credit rating with respect to its unsecured
indebtedness from a nationally recognized rating service that is
satisfactory to the Lender.
(c) Commercial paper given the highest rating by a nationally recognized
rating service.
(d) Repurchase agreements relating to securities of the kind described in
clause (a) above.
<Page>
(e) Other readily marketable investments in debt securities which are
reasonably acceptable to the Lender.
(f) Travel advances to officers and employees in the ordinary course of
business.
Any investments under clauses (a), (b), (c) or (d) above must mature within one
year of the acquisition thereof by the Borrower.
INDEBTEDNESS. The Borrower will not borrow any money or issue any bonds,
debentures or other debt securities or otherwise become obligated on any
interest-bearing indebtedness except for the Loan under this Agreement.
LIENS. The Borrower will not create, incur, assume or suffer to exist any
Lien, or enter into any arrangement for the acquisition of any property through
conditional sale, lease-purchase or other title retention agreements except:
(a) Liens granted to the Lender.
(b) Liens existing on the date of this Agreement and heretofore disclosed
in writing by the Borrower to the Lender.
(c) Deposits or pledges to secure payment of workers' compensation,
unemployment insurance, old age pensions or other social security
obligations arising in the ordinary course of business of the Borrower.
(d) Liens for taxes, fees, assessments and governmental charges not
delinquent.
(e) Liens of carriers, warehousemen, mechanics and materialmen, and other
like Liens arising in the ordinary course of business, for sums not due,
and except as provided in Section 5.13.
(f) Liens incurred or deposits or pledges made or given in connection with,
or to secure payment of, indemnity, performance or other similar bonds.
(g) Except for the Permitted Encumbrances, encumbrances in the nature of
zoning restrictions, easements and rights or restrictions of record on the
use of land and landlord's Liens under leases on the premises rented, which
do not materially
<Page>
detract from the value of such property or impair the use thereof in the
business of the Borrower.
CONTINGENT OBLIGATIONS. The Borrower will not guarantee or otherwise become
liable on the indebtedness of any other Person.
TANGIBLE NET WORTH. The Borrower will not permit its Tangible Net Worth
(the excess of its assets, excluding intangible assets, over its liabilities) to
be less than $16,000,000.00, as of December 31, 2002, with said amount to be
increased and evaluated at the end of each year thereafter in an amount equal to
Net Operating Income after distributions to Members.
WORKING CAPITAL. The Borrower will not permit its Working Capital (the
excess of its current assets over its current liabilities) to be less than
$1,500,000.00 as of December 31, 2002, and to June 30, 2003. The Borrower will
not permit its Working Capital (the excess of its current assets over its
current liabilities) to be less than $2,000,000.00 as of June 30, 2003, and at
any time thereafter.
FIXED CHARGE COVERAGE RATIO. The Borrower will not permit the Fixed Charge
Coverage Ratio, as of the last day of any fiscal quarter for the four
consecutive fiscal quarters ending on that date, commencing with the quarter
ending December 31, 2002, to be less than 1.20 to 1.
CASH FLOW RECAPTURE. The Borrower shall prepay a portion of the principal
of the Loan by May 1 of each year commencing May 1, 2003, in an amount equal to
15% of Excess Cash Flow, but not to exceed 20% of the outstanding principal
balance of the Loan. Any prepayments made under the requirements of this
provision shall not be subject to any prepayment penalty contained in the Note.
For purposes hereof, the following definitions have the following meanings:
"EBITDA": For any period of determination, the net income of the Borrower
before deductions for income taxes, interest expense, depreciation and
amortization, all as determined in accordance with GAAP.
"EXCESS CASH FLOW": For any period of determination with respect to the
Borrower, EBITDA less (i) expenditures for fixed and capital assets not
financed, (ii) all required principal payments with respect to Total Liabilities
(including but not limited to
<Page>
all payments with respect to capitalized lease obligations of the Borrower), and
(iii) interest expenses.
"FIXED CHARGE COVERAGE RATIO": For any period of determination with respect
to the Borrower, the ratio of
(a) EBITDA minus the sum of (i) any dividends or other distributions
and (ii) expenditures for fixed and capital assets not financed,
to
(b) all required principal payments with respect to Total
Liabilities (including but not limited to all payments with respect
to capitalized lease obligations of the Borrower), plus interest
expenses
in each case determined for said period in accordance with GAAP.
"NET OPERATING INCOME": The excess of Project Operating Income over
Operating Expenses during any period of time. "Project Operating Income" shall
mean all gross receipts, income, payments and consideration resulting from the
operation, leasing and occupancy of the Project, when actually received by the
Borrower including but not limited to rentals and other fees and charges payable
by anyone pursuant to a Lease (including reimbursements, if any, for Operating
Expenses); late charges; interest on delinquent rents; interest on security and
other deposits (to the extent that the same is not required by law to be paid to
tenants); and vending machine income, but excluding proceeds of casualty
insurance and of condemnation and proceeds of any sale or refinancing of all or
any portion of the Project or any interest therein. "Operating Expenses" shall
mean all normal and reasonable expenses of owning, operating, leasing, managing,
maintaining and occupying the Project, when actually paid by the Borrower,
INCLUDING BUT NOT LIMITED TO (a) all payments to, for the benefit of or required
in connection with personnel employed to manage, operate and maintain the
Project, including but not limited to wages, salaries, uniform allowances,
medical and/or life insurance, pension and other employee benefit payments,
workers' compensation insurance payments, unemployment insurance payments, and
FICA and other payroll taxes; (b) all utility charges, including but not limited
to electric, gas, oil, water, sanitary sewer, storm sewer, and trash and rubbish
removal charges; (c) all costs of heating, lighting, ventilating and air
conditioning the Project; (d) all premiums for hazard, casualty, rent loss and
liability insurance carried upon the Project; (e) ad valorem real estate and
personal property taxes, installments of special assessments and sales tax
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payments; (f) all Project building, grounds, driveway and parking area
maintenance and repair expense, including the cost of supplies, tools and
equipment therefor; (g) all costs of janitorial services, tools, equipment and
supplies; (h) management fees (which, if a manager has not been engaged to
manage the Project, shall be assumed to be 3 1/2% of the Project Operating
Income); (i) all landscaping, lawn, shrub and tree trimming, fertilizing and
care expenses; (j) all equipment lease payments; (k) all snow and ice removal
expenses; (l) all advertising and promotion expenses; (m) all costs of grounds
keeping and cleaning services and supplies; (n) all security expenses; (o) all
costs of printing, stationery and office supplies; (p) attorneys' fees and
accountants' fees incurred in the ordinary course of operation of the Project,
and (q) reserves, if any, required by the terms of the Loan Documents for
replacements, capital expenditures, leasing commissions, tenant improvements and
other items; (r) interest and/or late charges upon the Loan; (s) depreciation of
the Project; (t) fees of consultants; (u) costs in connection with or in
contemplation of sale or refinancing, such as costs of appraisals, environmental
or engineering studies, etc.; but excluding payments of principal upon the Loan
and other Indebtedness; capital improvements and expenditures; distributions to
partners or shareholders in or members of the Borrower; and income or franchise
taxes. In calculating Operating Expenses for any given month, Operating Expenses
shall include one-twelfth of any annual expenditure, such as taxes and
insurance. The Borrower shall not artificially accelerate or delay collection of
Project Operating Income or payment of Operating Expenses for the purpose of
increasing Net Operating Income.
"TOTAL LIABILITIES": At the time of any determination, the amount of all
items of Indebtedness of the Borrower that would constitute "liabilities" for
balance sheet purposes in accordance with GAAP.
"DILIGENT CONSTRUCTION": Diligently proceed with construction of the
Project according to the Plans and in accordance with all applicable laws and
ordinances, and complete the Project by the Completion Deadline.
"USE OF LOAN PROCEEDS": Use of the proceeds of each of the disbursements
under the Loan solely for the purposes set forth in this Agreement.
Use its best efforts to require the General Contractor and each
Subcontractor to comply with all rules, regulations, ordinances and laws bearing
on its conduct of work on the Project.
By "re-incorporation", "merger" or otherwise change the Borrower's state of
incorporation to a state other than South Dakota.
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Borrower shall not engage in any line of business materially different from
that presently engaged in by the Borrower.
Initials on behalf of Borrower: /s/ D.L.S.