EXHIBIT 10.4

 

 

LOAN AGREEMENT

Between

Heartland Grain Fuels, L.P.

And

Brown County, South Dakota

 

Dated as of October, 2007

 

Relating to $19,000,000 in aggregate principal amount of Brown County, South
Dakota Subordinate Solid Waste Facilities Revenue Bonds (Heartland Grain Fuels,
L.P. Ethanol Plant Project), Series 2007A.

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I

DEFINITIONS

1

 

 

 

ARTICLE II

REPRESENTATIONS

2

 

 

 

Section 2.1

Representations by Issuer

2

Section 2.2

Representations and Warranties by the Borrower

3

 

 

 

ARTICLE III

PAYMENT OF SERIES 2007A BONDS; APPLICATION OF PROCEEDS; COMPLETION OF PROJECT

4

 

 

 

Section 3.1

Loan and Application of the Proceeds of Series 2007A Bonds

4

Section 3.2

Payment of Series 2007A Bonds

5

Section 3.3

Right of Bond Trustee to Enforce this Loan Agreement

5

Section 3.4

Investment of Funds; Arbitrage; Tax Exemption Agreement

5

Section 3.5

Completion of Project

5

Section 3.6

Plans and Specifications

6

Section 3.7

Records

6

Section 3.8

Operation of Project

6

 

 

 

ARTICLE IV

PAYMENTS, FUND DEPOSITS, PREPAYMENTS AND OTHER PAYMENTS

6

 

 

 

Section 4.1

Payment of Principal, Premium and Interest

6

Section 4.2

Loan Repayments

7

Section 4.3

Credits on Loan Repayments

7

Section 4.4

Mandatory Prepayment Upon a Determination of Taxability

8

Section 4.5

Optional Prepayment

8

Section 4.6

Notice of Prepayment

8

Section 4.7

Extraordinary Optional Prepayment from Net Proceeds of Insurance or Condemnation

8

Section 4.8

Mandatory Prepayment on the Completion Date

9

Section 4.9

Effect of Partial Prepayment

9

Section 4.10

Additional Payments

9

Section 4.11

Borrower’s Obligations Unconditional

9

 

 

 

ARTICLE V

COVENANTS OF THE BORROWER

10

 

 

 

Section 5.1

Affirmative Covenants

10

Section 5.2

Negative Covenants

18

Section 5.3

Reporting Requirements

23

Section 5.4

Maintenance of Existence and Status

28

Section 5.5

Consent to Assignment of Loan Agreement to the Bond Trustee

28

Section 5.6

Transfer of Project Assets

28

Section 5.7

Indemnity

28

Section 5.8

Notice Regarding Bankruptcy Petitions, Event of Default or Potential Default

30

 

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Page

 

 

 

Section 5.9

Continuing Disclosure

30

Section 5.10

Huron Expansion

30

Section 5.11

Maintenance Capital Expense Account; Working Capital Reserve Account

30

 

 

 

ARTICLE VI

EVENTS OF DEFAULT AND REMEDIES THEREFOR

31

 

 

 

Section 6.1

Events of Default

31

Section 6.2

Application of Proceeds of Remedies

32

Section 6.3

Remedies Cumulative

33

Section 6.4

Delay or Omission Not a Waiver

33

Section 6.5

Waiver of Extension, Valuation and Appraisement Laws

33

Section 6.6

Remedies Subject to Provisions of Law

34

 

 

 

ARTICLE VII

SUPPLEMENTS AND AMENDMENTS TO THIS LOAN AGREEMENT

34

 

 

 

Section 7.1

Supplements and Amendments to this Loan Agreement

34

 

 

 

ARTICLE VIII

DEFEASANCE

34

 

 

 

Section 8.1

Defeasance

34

 

 

 

ARTICLE IX

MISCELLANEOUS PROVISIONS

35

 

 

 

Section 9.1

Payment of Expenses of Issuance of Series 2007A Bonds

35

Section 9.2

Loan Agreement for Benefit of Parties Hereto

35

Section 9.3

Severability

35

Section 9.4

Notices

35

Section 9.5

Successors and Assigns

36

Section 9.6

Counterparts

36

Section 9.7

Governing Law

36

Section 9.8

Immunity of Officers, Employees and Members of the Issuer and the Borrower

36

Section 9.9

Intercreditor Agreement

36

 

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This is a LOAN AGREEMENT dated as of October 1, 2007 (herein referred to
sometimes as this “Loan Agreement”) between Heartland Grain Fuels, L.P., a
limited partnership organized and existing under the laws of the State of
Delaware (the “Borrower”) and the Brown County, South Dakota (the “Issuer”), a
public body corporate and politic and political subdivision created and existing
under and by the constitution and the laws of the State of South Dakota.

 

PRELIMINARY STATEMENT

 

Reference is hereby made to the Bond Trust Indenture (the “Bond Indenture”)
dated as of October 1, 2007 between the Issuer and Wells Fargo Bank, National
Association, as bond trustee (the “Bond Trustee”), relating to the hereinafter
described Series 2007A Bonds, as the same may be supplemented and amended from
time to time for definitions of various terms used herein.

 

The Borrower desires to obtain a portion of the moneys which will be used,
together with certain other funds, to (i) pay the cost of acquisition,
construction and equipping of improvements and additions to the Facility (the
“Project”), including reimbursement to the Borrower of certain moneys previously
spent with respect to the Project, (ii) fund a debt service reserve, (iii) to
find capitalized interest, and (iv) pay certain expenses incurred in connection
with the issuance of the Series 2007A Bonds, all as permitted under the Act.

 

Pursuant to the Act, the Issuer is obtaining funds to provide for a loan to the
Borrower through the issuance and sale of its Brown County, South Dakota
Subordinate Solid Waste Facilities Revenue Bonds, (Heartland Grain Fuels, L.P.
Ethanol Plant Project), Series 2007A, in the original aggregate principal amount
of $19,000,000 (the “Series 2007A Bonds”), which will be issued under and
secured by the Bond Indenture. Pursuant to the Bond Indenture, the Issuer will
pledge and assign certain of its rights under this Loan Agreement as part of the
security for the Series 2007A Bonds. The Series 2007A Bonds will be payable out
of loan repayments made pursuant to this Loan Agreement.

 

In order to provide security for the repayment of the Series 2007A Bonds and the
amounts payable under this Loan Agreement, the Borrower is concurrently with the
delivery hereof delivering to the Bond Trustee, the Bond Collateral Documents.

 

In consideration of the premises, the respective representations and agreements
contained herein, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, and in order to secure the payment of the
principal of, premium, if any, and interest payable on the Series 2007A Bonds,
the payment of all amounts due hereunder and the performance of all the
covenants of the Borrower contained herein, the Borrower and the Issuer hereby
covenant and agree as follows:

 

ARTICLE I
DEFINITIONS

 

The terms used in this Loan Agreement, unless otherwise defined herein or unless
the context requires otherwise, shall have the same meanings as set forth in the
Bond Indenture. All accounting terms not otherwise defined in the Bond Indenture
or herein shall have the meanings

 

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assigned to them in accordance with generally accepted accounting principles in
effect from time to time.

 

All references in this instrument to designated “Articles,” “Sections” and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this instrument as originally executed. The words “herein,” “hereof” and
“hereunder” and other words of similar import refer to this Loan Agreement as a
whole and not to any particular Article, Section or other subdivision unless the
context indicates otherwise.

 

ARTICLE II
REPRESENTATIONS

 

Section 2.1     Representations by Issuer. The Issuer represents and warrants
that:

 

(a)        the Issuer (i) is a public body corporate and politic and political
subdivision validly created and existing under the constitution and the laws of
the State of South Dakota, is authorized to enter into the transactions
contemplated by the Bond Indenture, this Loan Agreement, and the Tax Exemption
Agreement and to carry out its obligations hereunder and thereunder, (ii) has
been duly authorized to execute and deliver this Loan Agreement, the Bond
Indenture and the Tax Exemption Agreement, and (iii) agrees that it will do or
cause to be done, to the extent within its control, all things necessary to
preserve and keep in full force and effect its existence;

 

(b)        (i) the issuance and sale of the Series 2007A Bonds, (ii) the lending
of the proceeds of the Series 2007A Bonds to the Borrower to provide a portion
of the moneys required to (A) pay the costs of the Project, (B) fund a debt
service reserve, (C) pay interest on the Series 2007A Bonds during construction
of the Project and (D) pay certain expenses incurred in connection with the
issuance of the Series 2007A Bonds, all as permitted under the Act, (iii) the
execution and delivery of this Loan Agreement, the Bond Indenture and the Tax
Exemption Agreement, and (iv) the performance of all covenants and agreements of
the Issuer contained in this Loan Agreement, the Bond Indenture and the Tax
Exemption Agreement and of all other acts and things required under the
Constitution and laws of the State to make this Loan Agreement a valid and
binding obligation enforceable against the Issuer in accordance with its terms,
are authorized by the Act and have been duly authorized by proceedings of the
Issuer adopted at meetings thereof duly called and held; and

 

(c)        in order to provide funds to lend to the Borrower for the purposes
described above, the Issuer has authorized its Series 2007A Bonds in the
aggregate principal amount of $19,000,000 to be issued upon the terms set forth
in the Bond Indenture, under the provisions of which the Issuer’s interest in
this Loan Agreement (other than Unassigned Rights) and the payments of
principal, interest and other revenues hereunder are pledged and assigned to the
Bond Trustee as security for the payment of the principal of, and interest on,
the Series 2007A Bonds.

 

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Section 2.2     Representations and Warranties by the Borrower. The Borrower
makes the following representations and warranties as the basis for its
covenants herein:

 

(a)        The Borrower is a limited liability company duly created and existing
under the laws of the State of Delaware, is in good standing and duly authorized
to conduct its business in the State, is duly authorized and has full power
under the laws of the State and all other applicable provisions of law and its
organizational documents to create, issue, enter into, execute and deliver the,
the Bond Purchase Agreement, the Tax Exemption Agreement, this Loan Agreement,
the Bond Collateral Documents to which it is a party and all action on its part
necessary for the valid execution and delivery of, this Loan Agreement, the Tax
Exemption Agreement, the Bond Purchase Agreement and the Bond Collateral
Documents to which it is a party have been duly and effectively taken.

 

(b)        The execution and delivery of this Loan Agreement, the Tax Exemption
Agreement, the Bond Purchase Agreement, the Bond Collateral Documents to which
it is a party, the consummation of the transactions contemplated herein and
therein, and the fulfillment of the terms and conditions hereof and thereof do
not and will not conflict with or result in a breach of any of the terms or
conditions of any partnership restriction or of any agreement or instrument to
which the Borrower or any Affiliate is now a party, and do not and will not
constitute a default under any of the foregoing, or result in the creation or
imposition of any Lien of any nature upon any of the Property of the Borrower,
including Property which the Borrower subsequently acquires, except for
Permitted Liens; the Borrower has a good and marketable title to its Property,
and will have good and marketable title to the Expansions, including the
Project, in each case free and clear of all Liens whatsoever except Permitted
Liens; the easements, rights-of-way, Liens, encumbrances, covenants, conditions,
restrictions, exceptions, minor defects, irregularities of title and
encroachments on adjoining real estate, if any, now existing with respect to the
real property do not and will not materially adversely affect the value of the
Facilities, materially impair the same, or materially impair or materially
interfere with the operation and usefulness thereof for the purpose for which it
was acquired or are held by the Borrower; the Facilities are located upon the
real property described in the Subordinate Mortgage; to the best of the
Borrower’s knowledge, the Facilities do not and will not violate any applicable
zoning land use, environmental or similar law or restriction; and the recitals
of fact and statements contained in this Loan Agreement with respect to the
Borrower are true.

 

(c)        The Borrower has all necessary licenses and permits to occupy and
operate the Facilities other than the Expansions, including the Project.

 

(d)        Except as specifically described in the Official Statement, no
litigation, proceedings or investigations are pending or, to the knowledge of
the Borrower, threatened against the Borrower, except (i) litigation,
proceedings or investigations involving claims for which the probable ultimate
recoveries and the estimated costs and expenses of defense, in the opinion of
counsel to the Borrower, will be entirely within the applicable insurance policy
limits (subject to applicable deductibles) or self insurance reserves and (ii)
litigation in which, in the opinion of counsel to the Borrower, an adverse
determination would not have a material adverse effect on the operations or
condition, financial or otherwise, of the Borrower. In addition, no litigation,
proceedings or investigations are pending or, to the knowledge of the Borrower,
threatened against the Borrower seeking to restrain, enjoin or in any way limit
the approval and

 

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delivery of the Official Statement, the issuance, delivery or validity of the
Series 2007A Bonds, or the execution, delivery or validity of the Bond
Indenture, this Loan Agreement, the Tax Exemption Agreement, the Bond Purchase
Agreement, the Series 2007A Bonds, the Bond Collateral Documents, or which would
in any manner challenge or adversely affect the existence or powers of the
Borrower to enter into and carry out the transactions described in or
contemplated by or the execution, delivery, validity or performance by the
Borrower of the terms and provisions of the Series 2007A Bonds, the Tax
Exemption Agreement, the Bond Purchase Agreement, this Loan Agreement or the
Bond Collateral Documents.

 

(e)        The Borrower is a limited partnership organized and existing under
the laws of the State of Delaware.

 

(f)         The financial information with respect to the Borrower and any
Affiliate included in the Preliminary Official Statement, dated August 20, 2007,
as supplemented by an addendum dated October 1, 2007, and the Official Statement
dated October 9, 2007 (the “Official Statement”), both relating to the Series
2007A Bonds is correct, and there has been no material adverse change in the
condition, financial or otherwise, of the Borrower from that set forth in the
Official Statement, except as expressly disclosed in the Official Statement.

 

(g)        The Borrower has not heretofore engaged in, and the consummation of
the transactions herein provided for and compliance by the Borrower with the
provisions of this Loan Agreement, the Bond Indenture, the Series 2007A Bonds,
the Tax Exemption Agreement and the Bond Collateral Documents will not involve,
any prohibited transaction within the meaning of Section 4975 of the Code.

 

(h)        The information set forth in this Loan Agreement, the Tax Exemption
Agreement and any other written statement (including the Official Statement)
furnished by the Borrower to the Issuer does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements contained therein or herein not misleading. The Borrower has no
knowledge of any fact not disclosed to the Issuer in writing or in the Official
Statement which materially adversely affects or, so far as the Borrower can now
foresee, will materially adversely affect the financial condition of the
Borrower, its ability to own and operate its Property or its ability to make the
payments under this Loan Agreement when and as the same become due and payable.

 

(i)         The representations, warranties and covenants contained in the Tax
Exemption Agreement are true and correct as of such date.

 

ARTICLE III
PAYMENT OF SERIES 2007A BONDS;
APPLICATION OF PROCEEDS; COMPLETION OF PROJECT

 

Section 3.1     Loan and Application of the Proceeds of Series 2007A Bonds. The
Issuer hereby lends all of the proceeds of the Series 2007A Bonds in connection
with the original issuance and sale of the Series 2007A Bonds to the Borrower
upon the terms and conditions set forth herein. The Borrower agrees that the
proceeds of the Series 2007A Bonds being lent to the Borrower shall be deposited
with the Bond Trustee and applied as provided in the Bond

 

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Indenture. The Borrower shall have no right to use such proceeds other than
pursuant to the terms of the Bond Indenture and may not use such proceeds as
general funds.

 

Section 3.2     Payment of Series 2007A Bonds. The Borrower agrees that the
principal of, premium, if any, and the interest on the Series 2007A Bonds shall
be made payable in accordance with the provisions of the Bond Indenture and this
Loan Agreement. The Borrower further agrees that this Loan Agreement and
payments to be made hereunder and thereunder (excluding Unassigned Rights) shall
be assigned and pledged to the Bond Trustee to secure the payment of the Series
2007A Bonds. In addition, the Borrower agrees that all amounts due under the
Loan Agreement shall be secured by, and payable from the proceeds of enforcement
of the Bond Collateral Documents. The foregoing notwithstanding, the Borrower
agrees that the moneys and securities, if any, on deposit in the Rebate Fund are
not part of the trust estate and are not available to make payments of principal
and interest on the Series 2007A Bonds.

 

Section 3.3     Right of Bond Trustee to Enforce this Loan Agreement. The
Borrower agrees that this Loan Agreement and all of the rights, interests,
powers, privileges and benefits accruing to or vested in the Issuer under this
Loan Agreement may be protected and enforced in conformity with the Bond
Indenture and may be thereby assigned by the Issuer to the Bond Trustee (except
Unassigned Rights) as security for the Series 2007A Bonds and may be exercised,
protected and enforced for or on behalf of the Bondholders in conformity with
the provisions of this Loan Agreement and the Bond Indenture.

 

Section 3.4     Investment of Funds; Arbitrage; Tax Exemption Agreement. The
Borrower covenants and agrees that moneys on deposit in any funds under the Bond
Indenture shall at all times be invested by the Bond Trustee pursuant to the
Borrower’s direction and that the Borrower will take all actions necessary,
including without limitation providing the Bond Trustee with all necessary
directions, to assure that such moneys are continuously invested in accordance
with the provisions of the Bond Indenture and the Tax Exemption Agreement. The
Borrower further covenants and agrees that it will not take any action or fail
to take any action, including without limitation any action with respect to the
investment of the proceeds of any Series 2007A Bonds (regardless of the source
or whether or not held under the Bond Indenture), with respect to any other
moneys or securities deposited with the Bond Trustee pursuant to the Bond
Indenture or with the Accounts Bank pursuant to the Accounts Agreement in the
Bond Proceeds Sub-account, with respect to the payments derived from the Loan
Agreement, or with respect to any actions or payments required under the Tax
Exemption Agreement which may result in the Series 2007A Bonds constituting
“arbitrage bonds” within the meaning of such term as used in Section 148 of the
Code. The Borrower covenants that neither it nor any related person, as defined
in Sections 144(a)(3) and 147(a) of the Code, shall, pursuant to an arrangement,
formal or informal, purchase obligations of the Issuer in an amount related to
the amount of the Series 2007A Bonds delivered in connection with the
transaction contemplated hereby.

 

Section 3.5     Completion of Project. The Borrower agrees to complete the
acquisition, construction and equipping of the Project substantially in
accordance with the plans and specifications on file with the Borrower, and to
undertake and complete the Project with due diligence. In the event moneys in
the Project Fund or the Bond Proceeds Sub-account available for payment of the
Costs of the Project are not sufficient to pay Costs of the Project in full, the

 

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Borrower shall cause the Project to be completed and shall pay from other funds
of the Borrower that portion of the Costs of the Project in excess of the moneys
available therefor in the Project Fund and the Bond Proceeds Sub-account. The
Issuer does not make any warranty, either express or implied, that the moneys
which will be deposited into the Project Fund will be sufficient to pay all the
Costs of the Project.

 

Section 3.6     Plans and Specifications. The plans and specifications for the
Project are on file with the Borrower. The Borrower may revise the plans and
specifications at any time and from time to time prior to the completion of the
Project provided that no such change shall render inaccurate any of the
representations of the Borrower contained in this Loan Agreement or in the Tax
Exemption Agreement. No revision to the plans and specifications shall be made
which would cause the Costs of the Project to exceed the amounts available in
the Project Fund and the Bond Proceeds Sub-account, or otherwise available to
the Borrower, to pay such Costs. No revisions to the plans and specifications
for the Project will be made which would affect the nature or purpose of the
Project or any component thereof, unless the Borrower shall have obtained an
opinion of Bond Counsel that such revision will not impair the exclusion from
federal income taxation of the interest on the Series 2007A Bonds.

 

Section 3.7     Records. The Borrower will maintain such records in connection
with the acquisition, construction and equipping of the Project as are required
to permit ready identification of the Project and the items of Project Costs.

 

Section 3.8     Operation of Project. So long as the Borrower owns the Project
and the Series 2007A Bonds are outstanding, the Project will be operated as a
project as contemplated by the Act and as Solid Waste Disposal Facilities as
contemplated by Section 142(a)(6) of the Code. To the extent that such
definitions are amended after the date of this Loan Agreement, the Borrower will
use its reasonable best efforts to operate the Project in accordance with such
amendments or changes if, or to the extent, required to maintain the validity or
tax exempt status of the Series 2007A Bonds; provided, however, that the
Borrower’s failure to operate the Project in such manner will not, in and of
itself, constitute a default under this Agreement.

 

ARTICLE IV
PAYMENTS, FUND DEPOSITS,
PREPAYMENTS AND OTHER PAYMENTS

 

Section 4.1     Payment of Principal, Premium and Interest. The Borrower will
duly and punctually pay all loan repayments and other amounts payable under this
Loan Agreement at the dates and the places and in the manner provided in this
Loan Agreement according to the true intent and meaning hereof. Notwithstanding
any schedule of payments set forth herein, the Borrower agrees to make payments
hereunder, and to be liable therefor, at the times and in the amounts (including
principal and interest) equal to the amounts which are equal to the principal
of, premium, if any, and interest due on the Series 2007A Bonds and the Borrower
agrees to make payments equal to the amount due on the Series 2007A Bonds from
time to time outstanding, whether as regularly scheduled interest or principal
payments, at maturity, upon acceleration or otherwise; provided, however, that
the Borrower may be entitled to certain credits on such payments as permitted
under Section 4.3 hereof.

 

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Section 4.2     Loan Repayments. The Borrower covenants and agrees to make the
following loan repayments directly to the Bond Trustee for deposit into the
appropriate Fund established by the Bond Indenture on the following dates:

 

(a)        Interest: On or before December 31, 2007 (or on the next preceding
Business Day if such day is not a Business Day), an amount which, after taking
into account the amount available for deposit in the Interest Fund representing
capitalized interest to be transferred from the Project Fund to the Interest
Fund as described in Section 403 of the Indenture, will be sufficient to pay the
interest to become due on the Series 2007A Bonds on January 1, 2008, and on or
before each Quarterly Payment Date thereafter (or on the next preceding Business
Day if such Quarterly Payment Date is not a Business Day), after taking into
account said available amount of capitalized interest, an amount which is not
less than one-half (1/2) of the amount of interest to become due on the next
succeeding Interest Payment Date of the Series 2007A Bonds; provided, however,
that the Borrower may be entitled to certain credits on such payments as
permitted under Section 4.3 hereof.

 

(b)        Principal: On or before each Quarterly Payment Date (or on the next
preceding Business Day if such Quarterly Payment Date is not a Business Day)
commencing March 31, 2015, an amount which is not less than one-fourth (1/4) of
the amount of principal to become due on the next succeeding January 1 principal
payment date of the Series 2007A Bonds (whether upon maturity or as a result of
a Mandatory Sinking Fund Redemption); provided, however, that the Borrower may
be entitled to certain credits on such payments as permitted under Section 4.3
hereof.

 

(c)        Commencing as of the first day of the month following any month in
which (i) the balance in the Debt Service Reserve Fund is less than the Debt
Service Reserve Requirement, (ii) a transfer is made from the Debt Service
Reserve Fund to the Interest Fund and/or the Bond Sinking Fund to cure a
deficiency therein, or (iii) a draw is made on a surety bond, insurance policy
or letter of credit on deposit in the Debt Service Reserve Fund to cure a
deficiency in the Interest Fund and/or the Bond Sinking Fund, the amount
necessary to restore, in one monthly deposit, if such deficiency is a result of
a valuation loss pursuant to Section 405 of the Bond Indenture, and otherwise in
twelve equal monthly deposits, the Debt Service Reserve Requirement (or if a
draw has been made on a surety bond, insurance policy or letter of credit on
deposit in the Debt Service Reserve Fund, to reinstate the maximum limits of
such surety bond, insurance policy or letter of credit within the time and in
the manner required by the document providing for such surety bond, insurance
policy or letter of credit).

 

Section 4.3     Credits on Loan Repayments. Notwithstanding any provision
contained in this Loan Agreement or in the Bond Indenture to the contrary:

 

(a)        any moneys deposited with the Bond Trustee by the Borrower or on
behalf of the Borrower by any Affiliate, for the payment of principal of,
premium, if any, or interest on, the Series 2007A Bonds or for payment of other
amounts due under this Loan Agreement, shall be credited against the obligation
of the Borrower to make such payment under this Loan Agreement as the same
becomes due; and

 

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(b)        the principal amount of Series 2007A Bonds of any maturity delivered
by the Borrower to the Bond Trustee, or purchased by the Bond Trustee upon
direction of the Borrower and cancelled, shall be credited against the
obligation of the Borrower to make a loan repayment (including installment
payments corresponding to mandatory sinking fund payments on such Series 2007A
Bonds) related to such maturity of Series 2007A Bonds so delivered or purchased
to the extent directed by the Borrower; provided, however, that deposit or
purchase of a Series 2007A Bond of one maturity may not be credited against a
loan repayment which would be used, in the normal course, to retire a Series
2007A Bond of another maturity.

 

Section 4.4     Mandatory Prepayment Upon a Determination of Taxability. If a
final action or decree constituting a Determination of Taxability occurs and the
Bond Trustee receives notice thereof, the Bond Trustee shall request, and the
Borrower shall pay all amounts due under this Loan Agreement, including without
limitation all principal of and accrued interest on the Series 2007A Bonds to
the date fixed by the Bond Trustee for redemption of all Series 2007A Bonds
pursuant to a mandatory redemption for a Determination of Taxability pursuant to
the Bond Indenture. The Bond Trustee shall give notice of redemption for the
first redemption date for which notice can be given upon notice of the
Determination of Taxability.

 

Section 4.5     Optional Prepayment. The Borrower shall be permitted at its
option to prepay the amounts due under this Loan Agreement for the payment of
principal of and redemption premium, if any, and interest on, the Series 2007A
Bonds to the extent and in the manner permitted or required by the Bond
Indenture for the optional prepayment of the Series 2007A Bonds. Such
prepayments shall be made by paying to the Bond Trustee an amount sufficient to
redeem (when redeemable) all or a part of the Series 2007A Bonds at the
redemption prices specified therefor in the Bond Indenture. No other such
prepayment shall be permitted except that other amounts required hereunder as
additional payments may be prepaid.

 

Section 4.6     Notice of Prepayment. The Borrower shall give the Bond Trustee
not less than 60 days prior written notice of any optional prepayment, which
notice shall designate the date of prepayment and the amount thereof and direct
the redemption of Series 2007A Bonds of the maturities and in the amounts to be
prepaid. Such notice may be withdrawn by the Borrower at any time prior to
delivery of the Written Request of the Borrower to the Bond Trustee described in
Section 5.1 of the Bond Indenture.

 

Section 4.7     Extraordinary Optional Prepayment from Net Proceeds of Insurance
or Condemnation. The Borrower shall have the right to prepay the loan repayments
due hereunder from the Net Proceeds of insurance, condemnation or sale
consummated under threat of condemnation by giving the Bond Trustee direction to
apply such Net Proceeds. In such event the Bond Trustee shall apply such Net
Proceeds promptly to prepay the loan repayments due hereunder and the Series
2007A Bonds, without premium, plus accrued and unpaid interest thereon to the
date of prepayment. Prepayments under this Section shall be credited against the
mandatory installment payments to be made hereunder corresponding to the related
payments to be applied to the payment of the Series 2007A Bonds. Notwithstanding
partial prepayment made pursuant to this Section, the Borrower is obligated to
make the mandatory principal payments hereunder pursuant to Section 4.2(b)
hereof to the extent any portion of the Series 2007A Bonds remains Outstanding.

 

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Section 4.8        Mandatory Prepayment on the Completion Date. The Bond Trustee
shall give notice to the Borrower of all amounts on deposit in the Project Fund
and the Bond Proceeds Sub-account on the date of Substantial Completion not
required for the payment of remaining Costs of the Project and the Borrower
agrees to the mandatory use of such funds by the Bond Trustee to prepay in part
the principal amount due under this Loan Agreement to redeem Series 2007A Bonds
as required under the Bond Indenture upon payment of amounts, if any, in the
Bond Proceeds Sub-account to the Bond Trustee..

 

Section 4.9        Effect of Partial Prepayment. Upon any partial prepayment
hereunder relating to the debt service on the Series 2007A Bonds, each
installment of interest which shall thereafter be payable hereunder shall be
reduced, taking into account the interest rate or rates on the Series 2007A
Bonds remaining outstanding after the redemption of Series 2007A Bonds from the
proceeds of such partial prepayment and after the purchase and delivery and
cancellation of Series 2007A Bonds described in Section 4.3(c) hereof, so that
the interest remaining payable on hereunder shall be sufficient to pay the
interest on such outstanding Series 2007A Bonds when due.

 

Section 4.10      Additional Payments. The Borrower agrees to pay directly all
costs incurred by or on behalf of the Issuer, the Bond Trustee or the Borrower
in connection with or incident to the issuance and sale of the Series 2007A
Bonds which exceed the amount on deposit in the Expense Fund described in
Section 3.2 of the Bond Indenture.

 

The Borrower also agrees to pay the following items to the following persons as
additional payments under this Loan Agreement:

 

(1)        to the Bond Trustee when due, an amount equal to all fees and
expenses of the Bond Trustee for services rendered under the Bond Indenture and
all fees, expenses and charges of any Paying Agents, registrars, counsel,
accountants, consultants or other persons incurred in the performance of
services under the Bond Indenture on request of the Bond Trustee for which the
Bond Trustee and such other persons are entitled to payment or reimbursement;

 

(2)        to the Issuer, upon demand, an amount equal to all expenses incurred
by the Issuer in relation to the Series 2007A Bonds which are not otherwise
required to be paid by the Borrower under the terms of this Loan Agreement; and

 

(3)        to the Issuer or the Bond Trustee, as the case may be, the amount of
all advances of funds made by either of them under the provisions of this Loan
Agreement or an amount equal to all advances of funds made by either of them
under the Bond Indenture, with interest thereon at the Bond Trustee’s announced
prime rate per annum from the date of each such advance.

 

Section 4.11      Borrower’s Obligations Unconditional. The Issuer and the
Borrower agree that the Borrower shall bear all risk of damage to or destruction
in whole or in part of the Facility, its other Property or any part thereof,
including without limitation any loss, complete or partial, or interruption in
the use, occupancy or operation of the Facilities or its other Property, or any
manner or thing which for any reason interferes with, prevents or renders
burdensome, the

 

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use or occupancy of the Facilities or its other Property or the compliance by
the Borrower with any of the terms of this Loan Agreement. In furtherance of the
foregoing, but without limiting any of the other provisions of this Loan
Agreement, the Borrower agrees that its obligations to pay the principal of and
interest hereunder and on the Series 2007A Bonds and to pay the other sums
herein provided for and to perform and observe its other agreements contained
herein shall be absolute and unconditional and that the Borrower shall not be
entitled to any abatement or diminution thereof or to any termination of this
Loan Agreement or the Series 2007A Bonds for any reason whatsoever.

 

ARTICLE V
COVENANTS OF THE BORROWER

 

Section 5.1            Affirmative Covenants. The Borrower agrees that at all
times the Borrower will perform the following obligations set forth in this
Section 5.1; provided, however, the failure to perform any obligation under the
Section 5.1 during the time the Senior Credit Facilities are outstanding and in
effect shall not constitute a default or Event of Default hereunder so long as
the Senior Lenders have waived compliance with, or amended the terms of, the
corresponding, if any, obligation under the Senior Credit Facilities.

 

(a)           Compliance with Laws. The Borrower shall comply in all material
respects with all Laws (other than Environmental Laws) applicable to it or to
its business or property.

 

(b)           Environmental Matters.

 

(i)            The Borrower shall (A) comply in all material respects with all
Environmental Laws, (B) keep the Facilities free of any Lien imposed pursuant to
any Environmental Law, (C) pay or cause to be paid when due and payable by the
Borrower any and all costs required in connection with any Environmental Laws,
including the cost of identifying the nature and extent of the presence of any
Materials of Environmental Concern in, on or about the Facilities or on any real
property owned or leased by the Borrower or on the Mortgaged Property, and the
cost of delineation, management, remediation, removal, treatment and disposal of
any such Materials of Environmental Concern, and (D) use its best efforts to
ensure that no Environmental Affiliate takes any action or violates any
Environmental Law that could reasonably be expected to result in an
Environmental Claim.

 

(ii)           The Borrower shall not use or allow the Facilities to generate,
manufacture, refine, produce, treat, store, handle, dispose of, transfer,
process or transport Materials of Environmental Concern other than in compliance
in all material respects with Environmental Laws.

 

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(c)           Operations and Maintenance. The Borrower shall own, construct,
operate and maintain (or cause to be operated and maintained) the Aberdeen
Expansion, and shall own, operate and maintain (or cause to be operated and
maintained) the Existing Facilities in all material respects in accordance with
(i) the terms and provisions of the Transaction Documents, (ii) all applicable
Governmental Approvals and Laws and (iii) Prudent Ethanol Operating Practice.

 

(d)           Construction and Completion of the Aberdeen Expansion; Maintenance
of Properties.

 

(i)            The Borrower shall apply the proceeds of the Series 2007A Bonds
as required by or specified in the Bond Indenture, Loan Agreement, Tax Exemption
Agreement and any Written Request for disbursement of such proceeds and shall
apply the proceeds of the Senior Credit Facilities to the purposes specified in
the Senior Credit Facilities and in each Funding Notice and shall duly construct
and complete, or cause the construction and completion of, the Aberdeen
Expansion, and shall cause the Final Completion Date with respect thereto to
occur, substantially in accordance with (A) the scope of work and other
specifications set forth in the Design-Build Agreement (including any Change
Orders permitted under the Senior Credit Facilities), (B) the Construction
Budget, and (C) exercise of that degree of skill, diligence, prudence, foresight
and care reasonably to be expected of skilled and experienced contractors in the
ethanol industry in the United States of America, in order to accomplish the
desired result consistent with reliability, safety, performance and expedition
taking into account the provisions of the Facilities Documents and any relevant
manufacturer’s or licensor’s recommendations or guidelines.

 

(ii)           The Borrower shall keep, or cause to be kept, in good working
order and condition, ordinary wear and tear excepted, all of its properties and
equipment related to the Facilities that are necessary or useful in the proper
conduct of its business.

 

(iii)          Except as required in connection with the construction of the
Aberdeen Expansion or the Huron Expansion, the Borrower shall not permit the
Facilities or any material portion thereof to be removed, demolished or
materially altered, unless such material portion that has been removed,
demolished or materially altered has been replaced or repaired as permitted
under this Loan Agreement.

 

(iv)          The Borrower shall continue to engage in business of the same type
as now conducted by it and do or cause to be done all things necessary to
preserve and keep in full force and effect (A) its

 

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limited partnership existence and good standing in the State of Delaware and (B)
its material patents, trademarks, trade names, copyrights, franchises and
similar rights.

 

(v)           For the Aberdeen Expansion, the Borrower shall cause all
applicable air emissions tests to be completed to the satisfaction of the
Independent Engineer within the time periods specified for such tests in the air
permit.

 

(e)           Payment of Obligations. The Borrower shall pay and discharge as
the same shall become due and payable all of its obligations and liabilities,
including (i) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same (A) are subject to a
Contest or (B) are immaterial Taxes in an aggregate amount not in excess of
twenty-five thousand Dollars ($25,000) at any one time outstanding (taking into
account any interest and penalties that could accrue or be applicable to such
past-due Taxes), and provided that such Taxes are no more than forty-five (45)
days past due, (ii) all of its obligations and liabilities under its Contractual
Obligations, except as are subject to a Contest and (iii) all lawful claims
that, if unpaid, would by law become a Lien upon its properties (other than
Permitted Liens), unless the same are subject to a Contest.

 

(f)            Governmental Approvals. The Borrower shall maintain in full force
and effect, in the name of the Borrower, all Necessary Aberdeen Expansion
Approvals and obtain all Deferred Approvals prior to the time it is required to
be obtained, but in any event no later than the date required to be obtained
under applicable Law (other than any such failure to maintain or obtain that
could not reasonably be expected to have a Material Adverse Effect on the
Borrower).

 

(g)           Use of Proceeds and Cash Flow.

 

(i)            All proceeds of the Senior Credit Facilities shall be applied in
accordance with the terms and conditions of the Senior Credit Facilities and the
Funding Notice, if any, pursuant to which any amounts were funded.

 

(ii)           All proceeds of any equity contribution shall be applied to pay
the costs of the Aberdeen Expansion.

 

(iii)          All proceeds of the Series 2007A Bonds shall be applied in
accordance with the Bond Indenture, this Loan Agreement and the Tax Exemption
Agreement.

 

(iv)          All Cash Flow, Insurance Proceeds and Condemnation Proceeds (as
defined in the Senior Credit Agreement) shall be applied in accordance with the
Accounts Agreement and, upon the termination of the Accounts Agreement, all
insurance and condemnation proceeds shall be applied as set forth in the Loan
Agreement and the Bond Indenture.

 

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(h)           Insurance. So long as the Senior Credit Facilities are outstanding
and in effect and at the Borrower’s expense, the Borrower shall at all times
obtain and maintain, or cause to be obtained and maintained, the types and
amounts of insurance listed and described on Schedule 7.01(h) of the Senior
Credit Agreement, in accordance with the terms and provisions set forth therein,
and shall obtain and maintain such other insurance as may be required pursuant
to the terms of any Transaction Document. The Borrower shall cause each such
insurance to be in place no less than ten (10) days prior to the date required,
and each required insurance policy shall be renewed or replaced no less than
thirty (30) days prior to the expiration thereof. From and after the date that
the Senior Credit Facilities are no longer in effect, the Borrower shall
continue to maintain the insurance required thereby as if the Senior Credit
Facilities were still in effect; provided, however, the Borrower may change such
insurance requirements as permitted by this Section. Not more frequently than
annually, the Borrower may retain a nationally recognized insurance consultant
familiar with the operation of ethanol plants and not objected to by the Bond
Trustee to prepare a written report specifying the insurance, the policy limits
and the deductibles or retained liability provision which such consultant
believes that the Borrower shall maintain. The Borrower may then obtain and
maintain such insurance as recommended by such consultant, provided that (i) the
Borrower certify in writing to the Bond Trustee that it believes the recommended
insurance, policy limits and deductibles cover all risks in amounts that a
reasonably prudent operator of an ethanol plant generally, and the Facilities
specifically, would obtain and maintain, (ii) the Borrower delivers the written
report of the insurance consultant to the Bond Trustee, together with a reliance
letter by the consultant to the Bond Trustee, and (iii) the Borrower retains
such a consultant at least once in every three years to prepare an updated
report and the Borrower follows the recommendations in such updated reports.

 

(i)            Books and Records; Inspections. The Borrower shall keep proper
books of record and account in which complete, true and accurate entries in
conformity with GAAP and all requirements of Law shall be made of all financial
transactions and matters involving the assets and business of the Borrower, and
shall maintain such books of record and account in material conformity with
applicable requirements of any Governmental Authority having regulatory
jurisdiction over the Borrower. The Borrower shall keep books and records
separate from the books and records of any other Person (including any
Affiliates of the Borrower) that accurately reflect all of its business affairs,
transactions and the documents and other instruments that underlie or authorize
all of its limited liability company actions. The Borrower shall permit officers
and designated representatives, agents or consultants of the Bond Trustee to
visit and inspect any of the properties of the Borrower (including the
Facilities), to examine its limited partnership, financial and operating
records, and make copies thereof or abstracts therefrom, and to discuss its
affairs, finances and accounts with its members, managers, directors, officers
and independent public accountants, all at the expense of the Borrower (provided
that so long as no default or Event of Default has occurred and is continuing,
such visits or inspections shall be at the expense of the Borrower only once per
fiscal quarter) and at such reasonable times during normal business hours and as
often as may be reasonably desired, upon reasonable advance notice to the
Borrower; provided that if a default or Event of Default has occurred and is
continuing, the Bond Trustee (or any of their respective officers or designated
representatives, agents or consultants) may do any of the foregoing at the
expense of the Borrower at any time during normal business hours and without
advance notice.

 

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(j)            Operating Budgets.

 

(i)            The Borrower shall, with respect to each of the Existing
Facilities, not later than the Closing Date, and, with respect to the Aberdeen
Expansion, not later than thirty (30) days before the Final Completion Date,
adopt an operating plan and a budget setting forth in reasonable detail the
projected requirements for Operation and Maintenance Expenses and Maintenance
Capital Expenses for such plant for the period from such date to the conclusion
of the then-current Fiscal Year and provide a copy of such operating plan and
budget at such time to the Bond Trustee. No less than forty-five (45) days in
advance of the beginning of each Fiscal Year thereafter, the Borrower shall
similarly adopt an operating plan and a budget for the Facilities setting forth
in reasonable detail the projected requirements for Operation and Maintenance
Expenses and Maintenance Capital Expenses for the ensuing Fiscal Year and
provide a copy of such operating plan and budget at such time to the Bond
Trustee. (Each such operating plan and budget is herein called an “Operating
Budget”.)  So long as the Senior Credit Facilities are outstanding and in
effect, the Operating Budget shall be prepared in accordance with the
requirements of the Senior Credit Agreement, with a copy delivered to the Bond
Trustee, and no separate Operating Budget need be prepared hereunder. If the
Borrower shall not have adopted an annual Operating Budget before the beginning
of any Fiscal Year, the Operating Budget for the preceding Fiscal Year shall,
until the adoption of an annual Operating Budget by the Borrower be deemed to be
in force and effective as the annual Operating Budget for such upcoming Fiscal
Year.

 

(ii)           Each Operating Budget delivered to the Bond Trustee shall be
accompanied by a memorandum detailing all material assumptions used in the
preparation of such operating budget, shall contain a line item for each
operating budget category, shall specify for each month and for each such
operating budget category the amount budgeted for such category for such month,
and shall clearly distinguish Operation and Maintenance Expenses and Maintenance
Capital Expenses.

 

(k)           Performance Tests.

 

(i)            All performance tests will be made in compliance with the
requirements of the Senior Credit Agreement and the Borrower will deliver to the
Bond Trustee copies of all notices, performance test reports and Independent
Engineer reviews delivered to the Senior Lenders at the same time such notices,
reports or reviews are delivered to the Senior Lenders.

 

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(l)            Facilities Documents.

 

(i)            The Borrower shall maintain in full force and effect, preserve,
protect and defend its material rights under, and take all actions necessary to
prevent termination or cancellation (except by expiration in accordance with its
terms) of, the SNDAs, and each Facilities Document. The Borrower shall exercise
all material rights, discretion and remedies under each SNDA and each Facilities
Document, if any, in accordance with its terms and in a manner consistent with
(and subject to) the Borrower’s obligations under the Financing Documents.

 

(ii)           Promptly upon execution of any Facilities Document by the
Borrower, the Borrower shall deliver to the Bond Trustee certified copies of
such Facilities Document and, if reasonably requested by the Bond Trustee, any
Ancillary Documents related thereto.

 

(iii)          If any of the SNDAs and the Facilities Documents provides that
such document will expire prior to the Final Maturity Date, then, on or prior to
the date that is forty-five (45) days (or such shorter period as shall be
satisfactory to the Bond Trustee) prior to the expiration date of such document,
the Borrower shall enter into an agreement replacing such document.

 

(m)          Preservation of Title; Acquisition of Additional Property.

 

(i)            The Borrower shall preserve and maintain (A) good, marketable and
insurable fee interest in the Sites (except for the Leased Premises) and valid
easement interest to its easement interest in the Sites, (B) good and valid
leasehold interest in the Leased Premises and (C) good, legal and valid title to
all of its other respective material properties and assets, in each case free
and clear of all Liens other than Permitted Liens. If the Borrower at any time
acquires any real property or leasehold or other interest in real property
(including, to the extent reasonably requested by the Bond Trustee, with respect
to any material easement or right-of-way not covered by the Subordinate
Mortgages), the Borrower shall, promptly upon such acquisition, execute, deliver
and record a supplement to the applicable Subordinate Mortgage, reasonably
satisfactory in form and substance to the Bond Trustee, subjecting such real
property or leasehold or other interest to the Lien and security interest
created by such Subordinate Mortgage. If required by the Senior Lenders with
respect to the Senior Credit Facilities or if reasonably requested by the Bond
Trustee, the Borrower shall obtain an appropriate endorsement or supplement to
any Title Insurance Policy insuring the Lien of the Bond Collateral

 

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Documents in such additional property, subject only to Permitted Liens.

 

(ii)           If required by the Senior Lenders with respect to the Senior
Credit Facilities or if reasonably requested by the Bond Trustee prior to the
acquisition or lease of any such additional real property interests (other than
easements that do not involve soil disturbance), the Borrower shall deliver to
the Bond Trustee an Environmental Site Assessment Report(s) with respect to such
real property, in each case along with a corresponding reliance letter from the
consultant issuing such report(s) (to the extent such report(s) does not permit
reliance thereon by the Bond Trustee). Each such Environmental Site Assessment
Report(s) shall not identify any material liability associated with the
condition of such real property.

 

(n)           Maintenance of Liens; Creation of Liens on Newly Acquired
Property.

 

(i)            The Borrower shall take or cause to be taken all action necessary
or desirable to maintain and preserve the Lien of the Bond Collateral Documents
and the priority thereof.

 

(ii)           The Borrower shall take all actions required to cause each
Additional Facilities Document to be or become subject to the Lien of the Bond
Collateral Documents (whether by amendment to any agreement or otherwise) and
shall deliver or cause to be delivered to the Bond Trustee all Ancillary
Documents related thereto.

 

(o)           Certificate of Formation. The Borrower shall observe all of the
separateness and other provisions and procedures of its Bond Collateral
Documents.

 

(p)           Required LP Provisions. The Borrower shall comply at all times
with the required limited partnership provisions set forth on Schedule 5.24(a)
of the Senior Credit Agreement.

 

(q)           Further Assurances. Upon written request of the Bond Trustee, the
Borrower shall promptly perform or cause to be performed any and all acts and
execute or cause to be executed any and all documents (including UCC financing
statements and UCC continuation statements):

 

(i)            that are necessary or advisable for compliance with Section
5.1(n)(i);

 

(ii)           for the purposes of ensuring the validity and legality of this
Loan Agreement or any other Financing Document and the rights of the Bond
Trustee hereunder or thereunder; and

 

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(iii)          for the purposes of facilitating the proper exercise of rights
and powers granted to the Bond Trustee under this Loan Agreement or any other
Bond Document.

 

(r)            Priority Ranking. The payment obligations of the Borrower with
respect to this Loan Agreement constitute direct general obligations of the
Borrower, subject to the Intercreditor Agreement and Accounts Agreement.

 

(s)           Quarterly Calculations.

 

(i)            Not more than three (3) Business Days prior to each Quarterly
Payment Date, the Borrower shall calculate the Historical Debt Service Coverage
Ratio and the Prospective Debt Service Coverage Ratio, and shall provide written
evidence to the Bond Trustee of such calculations certified by a Financial
Officer of the Borrower.

 

(t)            Financial Model.

 

(i)            No less than forty-five (45) days prior to the end of each Fiscal
Year (commencing with the Fiscal Year ended September 30, 2008), the Borrower
shall deliver to the Bond Trustee a proposed updated Financial Model, as
required and described in the Senior Credit Agreement.

 

(ii)           If in any Fiscal Year (A) the actual Cash Flow for the completed
Fiscal Quarters in such Fiscal Year (or, in the case of the Fiscal Year in which
the Closing Date occurs, the period from the Closing Date to the end of the most
recent completed Fiscal Quarter) (such period, the “Specified Period”) is ninety
percent (90%) or less of the projections for such period set forth in the
then-current Financial Model, or (B) Operation and Maintenance Expenses and
Maintenance Capital Expenses for the Specified Period are, in the aggregate, ten
percent (10%) or more above the projections for such period set forth in the
then-current Financial Model, the Borrower shall, no less than thirty (30) days
prior to the end of the immediately following Fiscal Quarter, deliver to the
Bond Trustee a proposed updated Financial Model, as required and described in
the Senior Credit Agreement; provided that if (x) the Historical Debt Service
Coverage Ratio calculated as of the most recent Quarterly Payment Date exceeds
4.0x and (y) the Borrower delivers to the Bond Trustee a certificate certifying
that the Prospective Debt Service Coverage Ratio calculated as of such most
recent Quarterly Payment Date exceeds 4.0x notwithstanding the deviation from
the Financial Model described in item (A) or (B) above, as applicable, the
Borrower shall not be required to deliver an updated Financial Model pursuant to
this Section.

 

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Section 5.2            Negative Covenants. The Borrower agrees that the Borrower
will perform the obligations set forth in this Section 5.2; provided, however,
the failure to perform any obligation under this Section 5.2 during the time the
Senior Credit Facilities are outstanding and in effect shall not constitute a
default or Event of Default hereunder so long as the Senior Lenders have waived
compliance with, or amended the terms of, the corresponding, if any, obligation
under the Senior Credit Facilities.

 

(a)           Restrictions on Indebtedness of the Borrower. The Borrower will
not create, incur, assume or suffer to exist any Indebtedness except:

 

(i)            the Obligations and the Refinancing (as defined in the
Intercreditor Agreement), if any; provided the aggregate principal amount
thereof shall not exceed $150,000,000;

 

(ii)           Indebtedness under the Bond Documents;

 

(iii)          Indebtedness under the Permitted Commodity Hedging Arrangements;

 

(iv)          accounts payable to trade creditors incurred in the ordinary
course of business and not more than forty-five (45) days past due; and

 

(v)           obligations as lessee under operating leases or leases for the
rental of any real or personal property which are required by GAAP to be
capitalized where all such leases (other than railcar leases) under this Section
5.2(v) do not, in the aggregate, require the Borrower to make scheduled payments
to the lessors in any Fiscal Year in excess of two hundred thousand Dollars
($200,000) in the aggregate;

 

(vi)          indebtedness for borrowed money up to $14,000,000 which may be
secured by liens and/or security interests in any property of the Borrower,
except for the funds and accounts established under the Bond Indenture, and
consented to by the Senior Lenders if the Senior Credit Facilities are
outstanding and in effect; provided, however, the amount of indebtedness
incurred under this Section 5.2 (a) (vi) and Section 5.2. (a) (i) shall not
exceed in the aggregate $150,000,000.

 

(b)           Liens. The Borrower shall not create, incur, assume or suffer to
exist any Lien upon any of its property, revenues or assets (including its
Equity Interests), whether now owned or hereafter acquired, except:

 

(i)            Liens in favor, or for the benefit, of the Senior Lenders
securing the Senior Credit Facilities and liens securing the Obligations and the
Refinancing permitted pursuant to Section 5.2(a)(i) hereof;

 

(ii)           Liens created the Bond Collateral Documents;

 

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(iii)          Liens for taxes, assessments and other governmental charges that
are not yet due or the payment of which is the subject of a Contest;

 

(iv)          Liens of carriers, warehousemen, mechanics and materialmen
incurred in the ordinary course of business for sums not yet due or the payment
of which is the subject of a Contest;

 

(v)           any Liens reflected on the Title Insurance Policy or any Title
Continuation;

 

(vi)          Liens arising by reason of judgments that are subject to a
Contest; and

 

(vii)         Liens in respect of personal property under which the liability of
the Borrower does not exceed two hundred thousand dollars ($200,000) in the
aggregate;

 

(viii)        Liens securing up to $14,000,000 of indebtedness for borrowed
money permitted pursuant to Section 5.2 (a) (vi) hereof.

 

(c)           Permitted Investments. Except for the investment of amounts on
deposit with the Bond Trustee under the Bond Indenture which are governed by the
Bond Indenture, the Borrower shall not make any investments, loans or advances
(whether by purchase of stocks, bonds, notes or other securities, loans,
extensions of credit, advances or otherwise) except for investments in Cash
Equivalents.

 

(d)           Change in Business. The Borrower shall not (i) enter into or
engage in any business other than the ownership, operation, maintenance,
development, start-up, testing, use and financing of the Aberdeen Expansion and
the Huron Expansion, the ownership, operation, maintenance, use and financing of
the Existing Facilities and all activities reasonably related thereto or (ii)
change in any material respect the scope of the Facilities from that which is
contemplated as of the date hereof.

 

(e)           Equity Issuances. The Borrower shall not issue any Equity
Interests unless such Equity Interests are immediately pledged to the Bond
Trustee (for the benefit of the Bondholders) on a perfected basis pursuant to
the Subordinate Equity Pledge Agreement or, if necessary, a supplement thereto
or a pledge and security agreement in substantially the form of the Subordinate
Equity Pledge Agreement on a second lien priority to the liens securing the
Senior Credit Facilities.

 

(f)            Asset Dispositions. The Borrower shall not sell, lease, assign,
transfer or otherwise dispose of assets, including the Facilities, of the
Borrower (other than Products), whether now owned or hereafter acquired, except:

 

(i)            disposal of assets that are promptly replaced in accordance with
the then current Operating Budgets;

 

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(ii)           to the extent that such assets are uneconomical, obsolete or no
longer useful or no longer usable in connection with the operation or
maintenance of the Facilities; and

 

(iii)          disposal of assets with a fair market value, or at a disposal
price, of less than one million dollars ($1,000,000) in the aggregate during any
Fiscal Year; provided, that such disposal does not, and would not reasonably be
expected to, adversely affect the construction, operation or maintenance of the
Facilities.

 

(g)           Consolidation, Merger. The Borrower will not (i) directly or
indirectly liquidate, wind up, terminate, reorganize or dissolve itself (or
suffer any liquidation, winding up, termination, reorganization or dissolution)
or otherwise wind up; or (ii) acquire (in one transaction or a series of related
transactions) all or any substantial part of the assets, property or business
of, or any assets that constitute a division or operating unit of, the business
of any Person or otherwise merge or consolidate with or into any other Person.

 

(h)           Transactions with Affiliates. The Borrower shall not enter into or
cause, suffer or permit to exist any arrangement or contract with any of its
Affiliates or any other Person that owns, directly or indirectly, any Equity
Interest in the Borrower unless such arrangement or contract (i) is fair and
reasonable to the Borrower and (ii) is an arrangement or contract that is on an
arm’s-length basis and contains terms no less favorable than those that would be
entered into by a prudent Person in the position of the Borrower with a Person
that is not one of its Affiliates.

 

(i)            Accounts.

 

(i)            So long as the Senior Credit Facilities are outstanding, the
Borrower shall not maintain, establish or use any deposit account, securities
account (as each is defined in the UCC) or other banking account other than in
compliance with the Senior Credit Agreement.

 

(ii)           Upon the termination of the Senior Credit Facilities, the
Borrower shall give the Bond Trustee written notice of each deposit account,
securities account (as each term is defined in the UCC) or other banking account
it maintains, establishes or uses and shall deliver to the Bond Trustee a
control agreement (meeting the requirements of the UCC) to perfect the security
interest of the Bond Trustee therein.

 

(j)            Subsidiaries. The Borrower shall not create or acquire any
Subsidiary or enter into any partnership or joint venture.

 

(k)           ERISA. The Borrower will not engage in any prohibited transactions
under Section 406 of ERISA or under Section 4975 of the Code with respect to any
Plan or any other employee benefit plan subject to ERISA that could reasonably
result in a material liability to the Borrower. The Borrower will not incur any
obligation or liability in respect of any Plan,

 

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Multiemployer Plan or employee welfare benefit plan providing post-retirement
welfare benefits (other than a plan providing continue coverage under Part 6 of
Title I of ERISA or similar state law).

 

(l)            Taxes. The Borrower shall not make any election to be treated as
an association taxable as a corporation for federal, state or local tax
purposes.

 

(m)          Facilities Documents. The Borrower shall not enter into, or consent
to, any amendment, notification, supplement, waiver, consent or assignments of
any of its rights in respect of the SNDAS and the Facilities Documents except in
compliance with the terms of the Senior Credit Agreement. The Borrower will not
enter into or approve any Change Orders or Additional Aberdeen Facilities except
in compliance with the terms of the Senior Credit Agreement.

 

(n)           Suspension or Abandonment. The Borrower shall not (i) permit or
suffer to exist an Event of Abandonment or (ii) order or consent to any
suspension of work under any Facilities Document unless such action is approved
by the Senior Lenders.

 

(o)           Use of Proceeds; Margin Regulations. The Borrower shall not use
any proceeds of the Series 2007A Bonds other than in accordance with the
provisions of this Loan Agreement, the Bond Indenture or the Tax Exemption
Agreement. The Borrower shall not use any part of the proceeds of the Series
2007A Bonds to purchase or carry any Margin Stock (as defined in Regulation U)
or to extend credit to others for the purpose of purchasing or carrying any
Margin Stock. The Borrower shall not use the proceeds of the Series 2007A Bonds
in a manner that could violate or be inconsistent with the provisions of
Regulations T, U or X.

 

(p)           Environmental Matters. The Borrower shall not permit (i) any
underground storage tanks to be located on any property owned or leased by the
Borrower, (ii) any asbestos to be contained in or form part of any building,
building component, structure or office space owned or leased by the Borrower,
(iii) any polychlorinated biphenyls (PCBs) to be used or stored at any property
owned or leased by the Borrower or (iv) any other Materials of Environmental
Concern to be used, stored or otherwise be present at any property owned or
leased by the Borrower, other than Materials of Environmental Concern necessary
for the operation of the Facilities and used in accordance with all Laws and
Prudent Ethanol Operating Practice.

 

(q)           Restricted Payments. Except as otherwise permitted under Section
2.06(e) of the Senior Credit Agreement, the Borrower shall not make any
Restricted Payments unless each of the conditions set forth below has been
satisfied:

 

(i)            the Conversion Date shall have occurred;

 

(ii)           such Restricted Payment is made on, or within thirty (30) days
following, a Quarterly Payment Date (provided, so long as the Senior Credit
Facilities are outstanding and in effect, that such Restricted Payment is made
only from funds on deposit in or standing to the credit of the Revenue Account
or the Prepayment

 

21

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Holding Account (as both are defined in the Accounts Agreement), as the case may
be, on such Quarterly Payment Date);

 

(iii)          no default or Event of Default under the Senior Credit Agreement
or this Loan Agreement has occurred and is continuing or would occur as a result
of such Restricted Payment;

 

(iv)          each of the Debt Service Reserve Account and the Working Capital
Reserve Account under the Accounts Agreement and after the Senior Credit
Facilities are no longer outstanding the working capital reserve account and the
capital expense account required by this Loan Agreement is fully funded to any
applicable required level;

 

(v)           each of the Historical Debt Service Coverage Ratio and the
Prospective Debt Service Coverage Ratio, calculated as of such Quarterly Payment
Date with respect to Debt Service on the Senior Credit Agreement so long as they
are outstanding and thereafter Debt Service on the Loan Agreement, are greater
than or equal to 1.5:1.0; and

 

(vi)          the Bond Trustee has received a certificate, duly executed by an
Authorized Officer of the Borrower, confirming that each of the conditions set
forth in clauses (i) through (v) of this Section 5.2(q) have been satisfied on
and as of the date such Restricted Payment is requested to be made, and setting
forth a detailed calculation of each of the Historical Debt Service Coverage
Ratio and Prospective Debt Service Coverage Ratio with respect to Debt Service
on the Senior Credit Agreement so long as they are outstanding and thereafter
Debt Service on the Loan Agreement,;

 

Provided that notwithstanding the foregoing, Restricted Payments shall be
permitted to the extent set forth in priority twelfth of Section 6.01(b) of the
Accounts Agreement.

 

(r)            Construction Budget. The Borrower shall construct the Aberdeen
Expansion in compliance with the construction budget requirements of the Senior
Credit Agreement with only such change orders and reallocations of line items as
permitted therein or otherwise consented to by the Senior Lenders.

 

(s)           Commodity Hedging Arrangements. The Borrower shall not enter into
any Commodity Hedging Arrangements that:

 

(i)            are not in accordance with the Commodity Risk Management Plans;
or

 

(ii)           are for speculative purposes.

 

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(t)            Accounting Changes. The Borrower shall not make any change in (i)
its accounting policies or reporting practices or (ii) its Fiscal Year without
the prior written consent of the Senior Lenders so long as the Senior Credit
Facilities are outstanding and in effect and without prior written notice to the
Bond Trustee.

 

(u)           Huron Expansion Contracts. The Borrower will not enter into or be
a party to any agreement or contract relating to the Huron Expansion except as
permitted by the Senior Credit Agreement.

 

Section 5.3            Reporting Requirements. The Borrower will furnish to the
Bond Trustee the following:

 

(a)           Quarterly Financial Statements. As soon as available and in any
event within forty-five (45) days after the end of the first three Fiscal
Quarters of each Fiscal Year, balance sheets and statements of income and cash
flows of the Borrower for such Fiscal Quarter and for the period commencing at
the end of the previous Fiscal Year and ending with the end of such Fiscal
Quarter, prepared in accordance with GAAP.

 

(b)           Annual Financial Statements. As soon as available and in any event
within ninety (90) days after the end of each Fiscal Year, a copy of the annual
audit report for such Fiscal Year for the Borrower including therein balance
sheets as of the end of such Fiscal Year and statements of income and cash flows
of the Borrower for such Fiscal Year, and accompanied by an unqualified opinion
of the auditors selected by the Borrower stating that such financial statements
present fairly in all material respects the financial position of the Borrower
for the periods indicated in conformity with GAAP applied on a basis consistent
with prior periods, which report and opinion shall not be subject to any “going
concern” or like qualification or exception or any qualification or exception as
to the scope of such audit.

 

(c)           Certificate of Financial Officer. Concurrently with the delivery
of the financial statements referred to in Section 5.3(a) and (b), a certificate
executed by a Financial Officer of the Borrower stating that:

 

(i)            such financial statements fairly present in all material respects
the financial condition and results of operations of such Person on the dates
and for the periods indicated in accordance with GAAP subject, in the case of
interim financial statements, to the absence of notes and normally recurring
year-end adjustments;

 

(ii)           such Financial Officer has reviewed the terms of the Bond
Collateral Documents and has made, or caused to be made under his or her
supervision, a review in reasonable detail of the business and financial
condition of such Person during the accounting period covered by such financial
statements; and

 

(iii)          as a result of such review such Financial Officer has concluded
that no Default or Event of Default under either the Senior Credit Agreement or
the Bond Documents has occurred during the period covered by such financial
statements through and including the

 

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date of such certificate or, if any such Default or Event of Default has
occurred, specifying the nature and extent thereof and, if continuing, the
action that the Borrower has taken and proposes to take in respect thereof.

 

(d)           Auditor’s Letters. Promptly upon receipt, copies of any detailed
audit reports, management letters or recommendations submitted to the Borrower
(or the audit or finance committee of the Borrower) by the auditors selected by
the Borrower in connection with the accounts or books of the Borrower, or any
audit of the Borrower.

 

(e)           Notice of Default or Event of Default. As soon as possible and in
any event within five (5) days after the Borrower obtains or should have
obtained knowledge of any default or Event of Default under this Loan Agreement,
a statement of an Authorized Officer of the Borrower setting forth details of
such default or Event of Default and the action that the Borrower has taken and
proposes to take with respect thereto.

 

(f)            Notice of Other Events. Within five (5) days after the Borrower
obtains knowledge thereof, a statement of an Authorized Officer of the Borrower
setting forth details of:

 

(i)            any litigation or governmental proceeding pending or threatened
in writing against the Borrower, the Aberdeen Expansion or the Parent Company;

 

(ii)           any litigation or governmental proceeding pending or threatened
in writing against any Facilities Party that has or could reasonably be expected
to have a Material Adverse Effect;

 

(iii)          any other event, act or condition that has or could reasonably be
expected to have a Material Adverse Effect;

 

(iv)          notification of any event of force majeure or similar event under
a Facilities Document; or

 

(v)           notification of any other change in circumstances that could
reasonably be expected to result in an increase of more than five hundred
thousand Dollars ($500,000) in the cost of the Aberdeen Expansion.

 

(g)           Facilities Document or Additional Facilities Document Notice.
Promptly after delivery or receipt thereof, copies of all material notices or
documents given or received by the Borrower, pursuant to any of the SNDAs, the
Facilities Documents and any Additional Facilities Document including:

 

(i)            any Change Orders or any written notices or communications
related thereto;

 

(ii)           any written notice alleging any breach or default thereunder; and

 

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(iii)          any written notice regarding, or request for consent to, any
assignment, termination, modification, waiver or variation thereof.

 

(h)           Design-Build Agreement Notice. Within two (2) days following
receipt thereof, the Borrower shall deliver to the Bond Trustee any monthly or
other periodic report provided to the Borrower under any Design-Build Agreement.

 

(i)            ERISA Event. As soon as possible and in any event within five (5)
days after the Borrower knows, or has reason to know, that any of the events
described below has occurred, a duly executed certificate of an Authorized
Officer of the Borrower setting forth the details of each such event and the
action that the Borrower proposes to take with respect thereto, together with a
copy of any notice or filing from the PBGC, Internal Revenue Service or
Department of Labor or that may be required by the PBGC or other U.S.
Governmental Authority with respect to each such event:

 

(i)            any Termination Event with respect to any Plan or a Multiemployer
Plan has occurred or will occur that could reasonably be expected to result in
any liability to the Borrower;

 

(ii)           any condition exists with respect to a Plan that presents a
material risk of termination of a Plan (other than a standard termination under
Section 4041(b) of ERISA) or imposition of an excise tax or other material
liability on the Borrower;

 

(iii)          an application has been filed for a waiver of the minimum funding
standard under Section 412 of the Code or Section 302 of ERISA under any Plan;

 

(iv)          with respect to any Plan or any other employee benefit plan
subject to ERISA, the Borrower or any Plan fiduciary has engaged in a
“prohibited transaction,” as defined in Section 4975 of the Code or as described
in Section 406 of ERISA, that is not exempt under Section 4975 of the Code and
Section 408 of ERISA that could reasonably be expected to result in a material
liability to the Borrower;

 

(v)           there exists any Unfunded Benefit Liabilities under any Plan;

 

(vi)          any condition exists with respect to a Multiemployer Plan that
presents a risk of a partial or complete withdrawal (as described in Section
4203 or 4205 of ERISA) from a Multiemployer Plan that could reasonably be
expected to result in any liability to the Borrower;

 

(vii)         a “default” (as defined in Section 4219(c)(5) of ERISA) occurs
with respect to payments to a Multiemployer Plan and such default could
reasonably be expected to result in any liability to the Borrower;

 

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(viii)        a Multiemployer Plan is in “reorganization” (as defined in Section
418 of the Code or Section 4241 of ERISA) or is “insolvent” (as defined in
Section 4245 of ERISA);

 

(ix)           the Borrower and/or any ERISA Affiliate has incurred any
potential withdrawal liability (as defined in accordance with Title IV of
ERISA); or

 

(x)            there is an action brought against the Borrower or any ERISA
Affiliate under Section 502 of ERISA with respect to its failure to comply with
Section 515 of ERISA with respect to any Plan or any other employee benefit plan
subject to ERISA.

 

(j)            Notice of PBGC Demand Letter. As soon as possible and in any
event within five (5) days after the receipt by the Borrower of a demand letter
from the PBGC notifying the Borrower of its final decision finding liability and
the date by which such liability must be paid, a copy of such letter, together
with a duly executed certificate an Authorized Officer of the Borrower setting
forth the action the Borrower proposes to take with respect thereto.

 

(k)           Notice of Environmental Event. Promptly and in any event within
five (5) days after the existence of any of the following conditions, a duly
executed certificate of an Authorized Officer of the Borrower specifying in
detail the nature of such condition and, if applicable, the Borrower’s proposed
response thereto:

 

(i)            receipt by the Borrower of any written communication from a
Governmental Authority or any written communication from any other Person (other
than a privileged communication from legal counsel to the Borrower) or other
source of written information, including reports prepared by the Borrower, that
alleges or indicates that the Borrower or an Environmental Affiliate is not in
compliance in all material respects with applicable Environmental Laws or
Environmental Approvals and such alleged noncompliance could reasonably be
expected to form the basis of an Environmental Claim against the Borrower;

 

(ii)           the Borrower obtains knowledge that there exists any
Environmental Claim pending or threatened in writing against the Borrower or an
Environmental Affiliate;

 

(iii)          the Borrower obtains knowledge of any release, threatened
release, emission, discharge or disposal of any Material of Environmental
Concern or obtains knowledge of any material non-compliance with any
Environmental Law that, in either case, could reasonably be expected to form the
basis of an Environmental Claim against the Borrower or any Environmental
Affiliate; or

 

26

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(iv)          any Removal, Remedial or Response action taken, or required to be
taken, by the Borrower or any other person in response to any Material of
Environmental Concern in, at, on or under, a part of or about the Borrower’s
properties or any other property or any notice, claim or other information that
the Borrower might be subject to an Environmental Claim.

 

(l)            Materials of Environmental Concern. The Borrower will maintain
and make available for inspection by the Bond Trustee, on reasonable notice
during regular business hours, accurate and complete records of all
non-privileged correspondence, investigations, studies, sampling and testing
conducted, and any and all remedial actions taken, by the Borrower or, to the
best of the Borrower’s knowledge and to the extent obtained by the Borrower, by
any Governmental Authority or other Person in respect of Materials of
Environmental Concern that could reasonably be expected to form the basis of an
Environmental Claim on or affecting the Facilities.

 

(m)          Deferred Approvals. Promptly after receipt thereof, copies of each
Deferred Approval obtained by the Borrower, together with applicable documents,
if any, relating thereto, certified as true, complete and correct by an
Authorized Officer of the Borrower.

 

(n)           Operating Statements. Within forty-five (45) days after the end of
each Fiscal Quarter and concurrently with the delivery of the annual financial
statements referred to in Section 5.3(b), the Borrower shall furnish to the Bond
Trustee an Operating Statement regarding the operation and performance of the
Facilities for each monthly, quarterly and, in the case of the last quarterly
Operating Statement for each year, annual period substantially in the form of
required by the Senior Credit Agreement. Such Operating Statements shall contain
(i) line items corresponding to each Operating Budget Category of the then
current Operating Budget showing in reasonable detail by Operating Budget
Category all actual expenses related to the operation and maintenance of the
Facilities compared to the budgeted expenses for each such Operating Budget
Category for such period, (ii) information showing the amount of ethanol and
other Products produced by the Facilities during such period and (iii)
information showing (A) the amount of ethanol sold by the Borrower from the
Facilities to pursuant to the Ethanol Marketing Agreement, (B) the amount of
Distillers Grains sold by the Borrower from the Facilities pursuant to the
Co-Product Marketing Agreement, and (C) the amount, if any, of other sales of
ethanol and/or Distillers Grains sold by the Borrower from the Facilities,
together with an explanation of any such sale and identification of the
purchaser, and (D) the amount, if any, of other Products sold by the Borrower
from the Facilities, together with an explanation of any such sale and
identification of the purchaser. The Operating Statements shall be certified as
complete and correct by an Authorized Officer of the Borrower, who also shall
certify that, the expenses reflected therein for the year to date and for each
month or quarter therein did not exceed the provision for such period contained
in the Operating Budget then in effect by more than ten percent (10%) or, if any
of such certifications cannot be given, stating in reasonable detail the
necessary qualifications to such certifications.

 

(o)           Other Information. The Borrower shall furnish the Bond Trustee
with such other information reasonably requested by the Bond Trustee.

 

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Section 5.4     Maintenance of Existence and Status. The Borrower agrees that it
will at all times maintain its existence as a Delaware limited partnership and
that it will neither take any action nor suffer any action to be taken by others
which will alter, change or destroy its status as a Delaware limited
partnership.

 

The Borrower further agrees that it will not act or fail to act in any other
manner which would adversely affect the exclusion from federal income tax of the
interest earned by the owners of the Series 2007A Bonds.

 

The Borrower also covenants to cause any order, writ or warrant of attachment,
garnishment, execution, replevin or similar process filed against any part of
the funds or accounts held by the Bond Trustee under the Bond Indenture to be
discharged, vacated, bonded or stayed within 90 days after such filing (which
90-day period shall be extended for so long as the Borrower is contesting such
process in good faith), but, notwithstanding the foregoing, in any event not
later than five days prior to any proposed execution or enforcement with respect
to such filing or any transfer of moneys or investments pursuant to such filing.

 

Section 5.5     Consent to Assignment of Loan Agreement to the Bond Trustee. The
Borrower agrees that this Loan Agreement (excluding Unassigned Rights) and
payments to be made hereunder shall be assigned and pledged to secure the
payment of the Series 2007A Bonds and all of the rights, interests, powers,
privileges and benefits accruing to or vested in the Issuer thereunder may be
protected and enforced in conformity with the Bond Indenture and may be assigned
by the Issuer to the Bond Trustee as additional security for the Series 2007A
Bonds, other than Unassigned Rights.

 

Section 5.6     Transfer of Project Assets. The provisions of the Bond Indenture
notwithstanding, the Borrower covenants and agrees it will not sell, lease or
otherwise dispose of (including without limitation any involuntary disposition)
in excess of 2% in the aggregate of the Project financed or refinanced with the
proceeds of the Series 2007A Bonds unless (a) prior to such sale, lease or other
disposition there is delivered to the Bond Trustee an Officer’s Certificate of
the Borrower stating that, in the judgment of the signer, such Property has
become inadequate, obsolete or worn out and that any amounts received by the
Borrower upon such disposition shall be applied by the Borrower to acquire
additional Property constituting a “project” under the Act; or (b) prior to such
sale, lease or disposition, the Borrower delivers to the Bond Trustee a written
opinion of nationally recognized municipal bond counsel to the effect that any
such disposition will not adversely affect the validity of the Series 2007A
Bonds or any exemption of the interest on the Series 2007A Bonds from federal
income taxation to which such Series 2007A Bonds would otherwise be entitled.
The Borrower hereby agrees to apply the proceeds of any disposition by it of
Property of the type described in subsection (a) above as provided in such
subsection and agrees that any Property acquired with such proceeds shall be
deemed to be Property financed or refinanced with the proceeds of the Series
2007A Bonds for the purposes of applying the provisions of this Loan Agreement
and the Tax Exemption Agreement.

 

Section 5.7     Indemnity. The Borrower will, and hereby does, pay, protect,
indemnify and save the Issuer and the Bond Trustee and its officers, directors,
employees and agents harmless from and against any and all liabilities, losses,
damages, costs and expenses (including attorneys’ fees and expenses of the
Issuer and the Bond Trustee), causes of action, suits, claims,

 

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demands and judgments of whatsoever kind and nature (including those arising or
resulting from any injury to or death of any person or damage to property or
from any present or future statute, law, ordinance, rule or regulation related
to the protection of the environment or hazardous substances) arising from or in
any manner directly or indirectly growing out of or connected with the
following:

 

(1)           the use, non-use, condition or occupancy of any of the Borrower’s
Property, any repairs, construction, alterations, renovation, relocation,
remodeling and equipping thereof or thereto or the condition of any of the
Borrower’s Property including adjoining sidewalks, streets or alleys and any
equipment or facilities at any time located on its Property or used in
connection therewith which are not the result of the negligence of the Issuer or
the Bond Trustee;

 

(2)           violation of any agreement, warranty, covenant or condition of
this Loan Agreement, except by the Issuer or the Bond Trustee;

 

(3)           violation of any contract, agreement or restriction by the
Borrower relating to its Property;

 

(4)           violation of any law, ordinance, regulation or court order
affecting any of the Borrower’s Property or the ownership, occupancy or use
thereof;

 

(5)           any statement or information concerning the Borrower, any of its
or their officers and members or its or their Property, contained in any
official statement furnished to the purchasers of the Series 2007A Bonds, that
is untrue or incorrect in any material respect, and any omission from such
official statement of any statement or information which should be contained
therein for the purpose for which the same is to be used or which is necessary
to make the statements therein concerning the Borrower, any of its or their
officers and members and its or their Property not misleading in any material
respect, provided that such official statement has been approved by the Borrower
and that the indemnified person did not have knowledge of the omission or
misstatement and did not use such official statement with reckless disregard of
or gross negligence in regard to the accuracy or completeness of such official
statement; and

 

(6)           Any liability, loss, cost or expense suffered by the Bond Trustee
arising out of or relating to the duties as trustee for the Series 2007A Bonds,
except to the extent resulting from the gross negligence or willful misconduct
of the Bond Trustee.

 

Such indemnity shall extend to each person, if any, who “controls” the Issuer or
the Bond Trustee, as the case may be, as that term is defined in Section 15 of
the Securities Act of 1933, as amended.

 

In the event of the settlement of any litigation commenced or threatened, such
indemnity shall be limited to the aggregate amount paid under a settlement
effected with the written consent of the Borrower.

 

The Issuer and the Bond Trustee shall promptly notify the Borrower and the
Borrower in writing of any claim or action brought against the Issuer, the Bond
Trustee or its officers,

 

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directors, employees or agents or any controlling person, as the case may be, in
respect of which indemnity may be sought against the Borrower, setting forth the
particulars of such claim or action, and the Borrower will assume the defense
thereof, including the employment of counsel satisfactory to the Issuer, the
Bond Trustee, or its officers, directors, employees or agents, or such
controlling person, as the case may be, and the payment of all expenses. The
Issuer, the Bond Trustee or its officers, directors, employees or agents, or any
such controlling person, as the case may be, may employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall not be payable by the Borrower unless such employment has
been specially authorized in writing by the Borrower, which authorization shall
not be unreasonably withheld. The foregoing notwithstanding, if the Issuer or
the Bond Trustee or its officers, directors, employees or agent, is advised by
Independent Counsel that there may be legal defenses available to it which are
different from or in addition to those available to the Borrower, the Borrower
shall not be entitled to assume the defense of the proceeding on behalf of the
indemnified party, but the Borrower shall be responsible for the reasonable
fees, costs and expenses of conducting such defense.

 

All amounts payable to or with respect to the Issuer under this Section 5.10
shall be deemed to be fees and expenses of the Issuer for the purposes of the
provisions hereof and of the Bond Indenture dealing with the assignment of the
Issuer’s rights hereunder.

 

Section 5.8     Notice Regarding Bankruptcy Petitions, Event of Default or
Potential Default. The Borrower agrees to notify the Bond Trustee in writing
prior to any filing by it of a petition in bankruptcy and to notify the Bond
Trustee immediately by telephone and in writing as soon as reasonably
practicable when it obtains knowledge that a petition in bankruptcy has been
filed against the Borrower or of an event of default or potential default under
this Loan Agreement or of any other development, financial or otherwise, which
might materially adversely affect the ability of the Borrower to perform its
obligations has occurred.

 

Section 5.9     Continuing Disclosure. The Borrower hereby covenants and agrees
that it will comply with and carry out all of the provisions of its Continuing
Disclosure Agreement (the “Continuing Disclosure Agreement”) to be executed and
delivered on the date of issuance and delivery of the Series 2007A Bonds.
Notwithstanding any other provision of this Loan Agreement, failure of the
Borrower to comply with the Continuing Disclosure Agreement shall not be
considered an event of default hereunder; however, any Bondholder may take such
actions as may be necessary and appropriate, including seeking specific
performance by court order, to cause the Borrower to comply with its obligations
under this Section.

 

Section 5.10   Huron Expansion. The Borrower agrees that, unless it has
deposited an amount sufficient to pay interest due on the Bonds from June l,
2008 through March 31, 2009, with the Bond Trustee on or before June 1, 2008 for
deposit to the Project Fund to be used to pay interest on the Bonds during such
period, the Borrower will not proceed with the Huron Expansion, will not borrow
any amounts for the payment of expenses for the Huron Expansion pursuant to the
Senior Credit Facilities and will cause the Conversion Date (as defined in the
Senior Credit Agreement) to occur no later than June l, 2008.

 

Section 5.11   Maintenance Capital Expense Account; Working Capital Reserve
Account. The Borrower agrees to maintain a Maintenance Capital Expense reserve
account in a

 

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banking institution selected by the Borrower in such amounts that on the last
Business Day of each month the amount or deposit therein equals the amount of
Maintenance Capital Expense reasonably expected to become due and payable during
the next succeeding calendar month. Amounts in such account may be used for
Maintenance Capital Expenses and debt service payable under the Loan Agreement.
In addition, the Borrower agrees to maintain a working capital reserve account
in a banking institution selected by the Borrower so that the amount on deposit
therein, less the amount available to the Borrower pursuant to any working
capital credit facility, equals at least $8,000,000; provided, however, such
amounts may be used by the Borrower provided that for at least ten (10) days
each calendar year the amount available to the Borrower for working capital
purposes is at least $8,000,000. So long as the Accounts Agreement is in effect,
the Borrower is not required to maintain such accounts or reserves other than
pursuant to the Accounts Agreement.

 

ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES THEREFOR

 

Section 6.1     Events of Default. The occurrence and continuance of any of the
following events shall constitute an “event of default” hereunder:

 

(a)           failure of the Borrower to pay any installment of interest,
premium, if any, or principal on the Series 2007A Bonds or any other payment
required by Section 4.1, 4.2, or 4.10 hereof when the same shall become due and
payable, whether at maturity, upon any date fixed for prepayment or by
acceleration or otherwise, and the continuance of such failure for five days; or

 

(b)           failure of the Borrower to comply with or perform any of the
covenants, conditions, or provisions hereof or of the Tax Exemption Agreement
and to remedy such default within 30 days after written notice thereof from the
Issuer to the Borrower; provided, however, that if such default cannot with due
diligence and dispatch be wholly cured within 30 days but can be wholly cured,
the failure of the Borrower to remedy such default within such 30-day period
shall not constitute a default hereunder if the Borrower shall immediately upon
receipt of such notice commence with due diligence and dispatch the curing of
such default and, having so commenced the curing of such default, shall
thereafter prosecute and complete the same with due diligence and dispatch; or

 

(c)           failure of the Borrower to comply with or perform its covenant
under Section 5.1 hereof to cause the discharge, vacation, bonding or stay of
any order, writ or warrant of attachment, garnishment, execution, replevin or
similar process filed against any part of the funds or accounts held by the Bond
Trustee under the Bond Indenture; or

 

(d)           if any representation or warranty made by the Borrower herein or
in any statement or certificate furnished to the Issuer or the Bond Trustee in
connection with the sale of the Series 2007A Bonds or furnished by the Borrower
pursuant hereto proves untrue in any material respect as of the date of the
issuance or making thereof and shall not be made good within 30 days after
written notice thereof to the Borrower by the Issuer; or

 

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(e)           any event of default shall occur under the Senior Debt which would
permit the acceleration of any obligation; or

 

(f)            if the Borrower admits insolvency or bankruptcy or its inability
to pay its debts as they mature, or is generally not paying its debts as such
debts become due, or makes an assignment for the benefit of creditors or applies
for or consents to the appointment of a trustee, custodian or receiver for the
Borrower, or for the major part of its Property; or

 

(g)           if a trustee, custodian or receiver is appointed for the Borrower
or for the major part of its Property and is not discharged within 30 days after
such appointment; or

 

(h)           if bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, proceedings under Title 11 of the United States Code,
as amended, or other proceedings for relief under any bankruptcy law or similar
law for the relief of debtors are instituted by or against the Borrower (other
than bankruptcy proceedings instituted by the Borrower against third parties),
and if instituted against the Borrower are allowed against the Borrower or are
consented to or are not dismissed, stayed or otherwise nullified within 30 days
after such institution; or

 

(i)            if payment of any installment of interest or principal, or any
premium, on any Series 2007A Bond shall not be made when the same shall become
due and payable under the provisions of the Bond Indenture.

 

Upon the occurrence and during the continuance of any event of default
hereunder, the Bond Trustee shall have the following rights and remedies, in
addition to any other remedies herein or by law provided:

 

(1)           Acceleration of Maturity. Waiver of Event of Default and
Rescission of Acceleration. The Bond Trustee may, by written notice to the
Borrower all amounts hereunder to be immediately due and payable anything in
this Loan Agreement contained to the contrary notwithstanding.

 

(2)           Right to Bring Suit, Etc. The Bond Trustee may, with or without
entry, personally or by attorney, in its discretion, proceed to protect and
enforce its rights by pursuing any available remedy including a suit or suits in
equity or at law, whether for damages or for the specific performance of any
obligation, covenant or agreement contained in this Loan Agreement or in aid of
the execution of any power herein granted, or for the enforcement of any other
appropriate legal or equitable remedy, as the Bond Trustee shall deem most
effectual to collect the payments then due and thereafter to become due
hereunder, to enforce performance and observance of any obligation, agreement or
covenant of the Borrower hereunder or to protect and enforce any of the Issuer’s
rights or duties hereunder.

 

Section 6.2     Application of Proceeds of Remedies. The proceeds or avails
resulting from the exercise of any such remedies, together with any other sums
which then may be held under this Loan Agreement, whether under the provisions
of this Article or otherwise, and which are available for such application shall
be applied as follows:

 

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FIRST:  To the payment of the costs and expenses of the exercise of such
remedies, including reasonable compensation to the Issuer and the Bond Trustee,
their agents, attorneys and counsel, and the expenses of any judicial
proceedings wherein the same may be made, and of all expenses, liabilities and
advances made or incurred by the Issuer as permitted by this Loan Agreement,
together with interest at the announced prime rate per annum of the Bond Trustee
on all advances made by the Issuer, and to the payment of all taxes, assessments
or claims prior to the claim of this Loan Agreement, except any taxes,
assessments, liens or other charges, subject to which Property may have been
sold.

 

SECOND:  To the payment of the whole amount then due, owing and unpaid hereunder
for principal, interest and premium, if any, and in case such proceeds shall be
insufficient to pay in full the whole amount so due, owing or unpaid hereunder,
then ratably according to the aggregate of such principal and the accrued and
unpaid interest and premium, if any, without preference or priority as between
principal, interest or premium.

 

THIRD:  To the payment of any amounts then due and payable under the Tax
Exemption Agreement.

 

FOURTH:  To the payment of any other sums required to be paid by the Borrower
pursuant to any provisions of this Loan Agreement or of the Series 2007A
Obligation pledged under the Bond Indenture.

 

FIFTH:  To the payment of the surplus, if any, to the Borrower, its successors
or assigns, upon the Written Request of the Borrower or to whomsoever may be
lawfully entitled to receive the same upon its written request, or as any court
of competent jurisdiction may direct.

 

Section 6.3     Remedies Cumulative. No remedy herein conferred upon or reserved
to the Issuer or the Bond Trustee is intended to be exclusive of any other
remedy or remedies, and each and every such remedy shall be cumulative, and
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute.

 

Section 6.4     Delay or Omission Not a Waiver. No delay or omission of the
Issuer or the Bond Trustee to exercise any right or power accruing upon any
event of default shall impair any such right or power, or shall be construed to
be a waiver of any such event of default or an acquiescence therein; and every
power and remedy given by this Loan Agreement to the Issuer or the Bond Trustee
may be exercised from time to time and as often as may be deemed expedient by
the Issuer or the Bond Trustee.

 

Section 6.5     Waiver of Extension, Valuation and Appraisement Laws. To the
extent permitted by law, the Borrower will not during the continuance of any
event of default hereunder insist upon or plead, or in any manner whatever claim
or take any benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants and terms
of performance of this Loan Agreement; nor claim, take or insist upon any
benefit or advantage of any law now or hereafter in force providing for the
valuation or

 

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appraisement of the Property, or any part thereof, prior to any sale or sales
thereof which may be made pursuant to any provision herein contained, or
pursuant to the decree, judgment or order of any court of competent
jurisdiction;  nor after any such sale or sales, claim or exercise any right
under any statute heretofore or hereafter enacted by the United States of
America or by any state or territory, or otherwise, to redeem the Property so
sold or any part thereof; and the Borrower hereby expressly waives all benefits
or advantage of any such law or laws and covenants not to hinder, delay or
impede the execution of any power herein granted or delegated to the Issuer, but
to suffer and permit the execution of every power as though no such law or laws
had been made or enacted.

 

Section 6.6     Remedies Subject to Provisions of Law. All rights, remedies and
powers provided by this Article may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of the law of the
State and all the provisions of this Article are intended to be subject to all
applicable mandatory provisions of the law of the State which may be controlling
and to be limited to the extent necessary so that they will not render this Loan
Agreement invalid or unenforceable under the provisions of any applicable law.

 

ARTICLE VII
SUPPLEMENTS AND AMENDMENTS TO THIS LOAN AGREEMENT

 

Section 7.1     Supplements and Amendments to this Loan Agreement. The Borrower,
with the consent of the Issuer and the Bond Trustee, may from time to time enter
into such supplements and amendments to this Loan Agreement as to them may seem
necessary or desirable to effectuate the purposes or intent hereof; provided,
however, that no such amendment shall be effective if not adopted in accordance
with the terms of the Bond Indenture.

 

ARTICLE VIII
DEFEASANCE

 

Section 8.1     Defeasance. If the Borrower shall pay and discharge or provide,
in the manner set forth in the Bond Indenture, for the payment and discharge of
the whole amount of the principal of, premium, if any, and interest on the
Series 2007A Bonds, shall pay or cause to be paid all sums payable hereunder and
under the Bond Indenture, or shall make arrangements satisfactory to the Bond
Trustee for such payment and discharge, including, the payment of such amounts
incurred prior to such discharge, and shall obtain the written consent of the
Issuer to such discharge, then and in that case all property, rights and
interest hereby conveyed or assigned or pledged shall revert to the Borrower,
and the estate, right, title and interest of the Issuer therein shall thereupon
cease, terminate and become void; and this Loan Agreement and the covenants of
the Borrower contained herein shall be discharged and the Issuer in such case on
demand of the Borrower and at its cost and expense, shall execute and deliver to
the Borrower a proper instrument or proper instruments acknowledging the
satisfaction and termination of this Loan Agreement, and shall convey, assign
and transfer or cause to be conveyed, assigned or transferred, and shall deliver
or cause to be delivered, to the Borrower, all Property, including money, then
held by the Issuer other than moneys deposited with the Bond Trustee for the
payment of the principal of or interest on the Series 2007A Bonds.

 

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ARTICLE IX
MISCELLANEOUS PROVISIONS

 

Section 9.1     Payment of Expenses of Issuance of Series 2007A Bonds. The
Borrower agrees to pay for any recording expenses, Bond Trustee’s fees, escrow
and title insurance costs, legal fees, bond insurance premiums and fees,
printing expenses and other fees and fair and customary expenses incurred or to
be incurred by or on behalf of the Issuer in connection with or as an incident
to the issuance and sale of the Series 2007A Bonds.

 

Section 9.2     Loan Agreement for Benefit of Parties Hereto. Nothing in this
Loan Agreement, express or implied, is intended or shall be construed to confer
upon, or to give to, any person other than the parties hereto, any right, remedy
or claim under or by reason of this Loan Agreement or any covenant, condition or
stipulation hereof; and the covenants, stipulations and agreements in this Loan
Agreement contained are and shall be for the sole and exclusive benefit of the
parties hereto, their successors and assigns.

 

Section 9.3     Severability. In case any one or more of the provisions
contained in this Loan Agreement shall be invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby.

 

Section 9.4     Notices. All notices, certificates or other communications
hereunder shall be sufficiently given and shall be deemed given when mailed by
registered or certified mail, sent by reputable registered overnight mail or
delivery service, or send by personal delivery or confirmed facsimile delivery,
with proper address as indicated below. The Issuer, the Borrower, and the Bond
Trustee may, by written notice given by each to the others, designate any
address or addresses to which notices, certificates or other communications to
them shall be sent when required as contemplated by this Loan Agreement. Until
otherwise provided by the respective parties, all notices, certificates and
communications to each of them shall be addressed as follows:

 

To the Issuer:

To the Borrower:

 

 

Brown County, South Dakota

Heartland Grain Fuels, L.P.

25 Market Street, Suite 2

10201 Wayzata Blvd., Suite 250

Aberdeen, South Dakota 57401

Minneapolis, Minnesota 55305

Attention: County Auditor

Attention: General Partner

 

 

To the Bond Trustee:

 

 

 

Wells Fargo Bank, National Association

 

MAC N9311-115

 

625 Marquette Avenue , 11th floor

 

Minneapolis, Minnesota 55479

 

Attention: Corporate Trust

 

 

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Section 9.5     Successors and Assigns. Whenever in this Loan Agreement any of
the parties hereto is named or referred to, the successors and assigns of such
party shall be deemed to be included and all the covenants, promises and
agreements in this Loan Agreement contained by or on behalf of the Borrower, or
by or on behalf of the Issuer, shall bind and inure to the benefit of the
respective successors and assigns whether so expressed or not.

 

Section 9.6     Counterparts. This Loan Agreement is being executed in any
number of counterparts, each of which is an original and all of which are
identical. Each counterpart of this Loan Agreement is to be deemed an original
hereof and all counterparts collectively are to be deemed but one instrument.

 

Section 9.7     Governing Law. It is the intention of the parties hereto that
this Loan Agreement and the rights and obligations of the parties hereunder
shall be governed by and construed and enforced in accordance with the laws of
the State.

 

Section 9.8     Immunity of Officers, Employees and Members of the Issuer and
the Borrower. No recourse shall be had for the payment of the principal of or
premium or interest on any of the Obligations pledged under the Bond Indenture
or for any claim based thereon or upon any representation, obligation, covenant
or agreement in this Loan Agreement contained against any past, present or
future officer, member, employee, director of agent of the Issuer, the Borrower
or the Bond Trustee, respectively, any successor public or private corporation
under any rule of law or equity, statute or constitution or by the enforcement
of any assessment or penalty or otherwise, and all such liability of any such
officers, members, employees, directors or agents as such is hereby expressly
waived and released as a condition of and consideration for the execution of
this Loan Agreement.

 

Section 9.9     Intercreditor Agreement. Notwithstanding anything herein to the
contrary, any right to payment hereunder, the lien or security interest granted
to the Bond Trustee under the Bond Indenture, as trustee, in this Loan
Agreement, the exercise of any right hereunder and each provision hereof are
subject to the express provisions of the Intercreditor Agreement. In the event
of a conflict between the terms of the Intercreditor Agreement and this Loan
Agreement, the terms of the Intercreditor Agreement shall govern and control.

 

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IN WITNESS WHEREOF, the Borrower and the Issuer have caused this Loan Agreement
to be executed in their respective names and the Issuer has caused its corporate
seal to be hereunto affixed and attested by its duly authorized officer, all as
of the date first above written.

 

 

Heartland Grain Fuels, L.P.

 

A Delaware limited partnership

 

 

 

By: Dakota Fuels, Inc.

 

Its: General Partner

 

 

 

 

 

/s/ Revis L. Stephenson III

 

 

By: Revis L. Stephenson III

 

Its: Chairman of the Board

 

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BROWN COUNTY, SOUTH DAKOTA

 

 

 

 

 

By

/s/ Mike Wiese

 

 

Chairman

(SEAL)

 

Attest:

 

 

 

 

/s/ Maxine Taylor

 

 

 

 

Its: County Auditor

 

 

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