exv10w5



 






EXHIBIT 10.5




RECEIVED

DEC 02 2005

BY:                                        




[LOGO] Iowa Department

of Transportation




Railroad Revolving Loan Fund




Agreement




	 	 	 
	 

	 	Loan Number: RRL-ST05(05)- -9T-85
	 
	 	 
	 

	 	Award Date: February 08, 2005
	 
	 	 
	 

	 	Award Amount: $500,000
	 
	 	 
	Business Address:

	 	Lincolnway Energy, LLC
	 

	 	22740 590th Ave.
	 

	 	P.O. Box 433
	 

	 	Nevada, Iowa 50201-7962
	 
	 	 
	Department Address:

	 	Office of Rail Transportation Modal Division
	 

	 	800 Lincoln Way
	 

	 	Ames; Iowa 50010
	 
	 	 
	ARTICLE I.

	 	DEFINITIONS
	ARTICLE II.

	 	FUNDING
	ARTICLE III.

	 	TERMS OF LOAN
	ARTICLE IV.

	 	CONDITIONS OF DISBURSEMENT OF FUNDS
	ARTICLE V.

	 	DISBURSEMENT PROCEDURES
	ARTICLE VI.

	 	REPRESENTATIONS AND WARRANTIES OF BUSINESS
	ARTICLE VII.

	 	COVENANTS OF BUSINESS
	ARTICLE VIII.

	 	SECURITY
	ARTICLE IX.

	 	DEFAULTS AND REMEDIES
	ARTICLE X.

	 	GENERAL TERMS AND CONDITIONS






 









 






THIS AGREEMENT is made by and among the IOWA DEPARTMENT TRANSPORTATION, Modal Division, 800
Lincoln Way, Ames, Iowa 50010 (“Department” or “DOT”) and Lincolnway Energy, LLC, 22740
590th Ave. P.O. Box 433, Nevada, Iowa 50201-7962 (referred to as “Business”).



The Department desires to make a loan to the Business and the Business desires to accept this
loan, all upon the terms and CONDITIONS set forth in this Agreement. The Railroad Revolving
Loan Fund (RRLF) loan is to be made pursuant to 1999 Iowa Acts Chapter 120, Iowa Code Chapter
327H.20A and 761 Iowa Administrative Rules chapter 831.



THEREFORE, in consideration of the mutual promises contained in this Agreement and other good
and valuable consideration, it is agreed as follows:




ARTICLE I

DEFINITIONS



As used in this Agreement, the following terms shall apply:



1.1 AGREEMENT EXPIRATION DATE. “Agreement Expiration Date” means the date the Agreement
ceases to be in force and effect. The Agreement expires upon the occurrence of one of the
following: a) the Loan is repaid in full or required part, including accrued interest, court costs
and any penalties; b) the Agreement is terminated by the Department due to any default under
Article IX; c) no Disbursement of RRLF funds has occurred within the twenty four months immediately
following the Award Date.



1.2 AWARD DATE. “Award Date” means the date on which the Transportation Commission
approved the DOT participation, which was February 08, 2005.



1.3 LOAN. “Loan” means a conventional loan, the terms of which are set forth in this Loan
Agreement.



1.4 LOAN AGREEMENT or AGREEMENT. “Loan Agreement” or “Agreement” means this Agreement, the
Project budget and all of the notes, “leases, assignments, mortgages, and similar documents
referred to in the Agreement and all other-instruments or documents executed by the Business or
otherwise required in connection with the Agreement, including but not limited to the following:





	 	a.	 	Exhibit A, Location and Site Map
	 
	 	b.	 	Exhibit B, Description of work with sketch plan




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	 	c.	 	Exhibit C, Itemized Cost Estimate
	 
	 	d.	 	Exhibit D, Required Bidding Procedures
	 
	 	e.	 	Exhibit E, Promissory Note of the Business
	 
	 	f.	 	Exhibit F, Mortgage, Security Agreement and Financing Statement
	 
	 	g.	 	Exhibit G, Amortization Schedule




1.5 PROJECT. “Project” means the construction of 8,954 feet of new spur track, the
installation of four (4) number nine turnouts, and two (2) number eleven turnouts to serve
Business’s ethanol plant in Nevada. The “Project” also includes other obligations to be performed
or accomplished by the Business as described in this Agreement and the application approved by the
Department.



1.6 PROJECT COMPLETION DATE. “Project Completion Date” means January 1, 2007 and is the
date by which the Project shall have been fully accomplished.




ARTICLE II

FUNDING



2.1 FUNDING SOURCE. The source of funding for the Loan is the Railroad Revolving Loan
Fund (cost center 8432). With respect to the closing of the Loan, processing of post-closing
documents and administration of the Loan until paid in full, the Business shall comply with the
requirements, CONDITIONS and rules of the Department and any other public or private entity
having authority over the funds or the Loan.



2.2 RECEIPT OF FUNDS. All payments under this Agreement are subject to receipt by
the Department of sufficient State funds for the RRLF program. Any termination, reduction or
delay of RRLF funds to the Department shall, at the option of the Department, result in the
termination, reduction or delay of RRLF funds to the Business.



2.3 PRIOR COSTS. No expenditures made prior to the Award Date may be included as
Project costs for the purposes of this Agreement.



2.4 DISBURSEMENT OF LESS THAN THE TOTAL AWARD AMOUNT. If the total award amount is not
disbursed within six months of the Project Completion Date, then the Department shall be under
no obligation for further disbursement. The Business shall be obligated to the extent of Loan
proceeds received.




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ARTICLE III

TERMS OF LOAN



3.1 LOAN. The Department agrees to make a Loan to the Business in the maximum
amount of $500,000 or 23.9% of the total project cost, whichever is less. Interest at 2.11% per
year for ten (10) years shall begin accruing effective January 1, 2007.



3.2 PROMISSORY NOTES. The obligation to repay the Loan shall be evidenced by
a Promissory Note executed by the Business, which is attached as Exhibit E.



3.3 Other Terms. To secure repayment the Business agrees to grant a second mortgage upon
the real estate, and all improvements and fixtures to the real estate, as described in paragraph
B of Exhibit F.



3.4 OTHER LIENS. Business shall provide a statement from Business’s counsel that no other
liens exist superior to the Department’s other than those specifically excepted by the mortgage.



3.5 PREPAYMENT. The outstanding principal and accrued interest of this Loan may be
prepaid in part or in full at any time without penalty.



3.6 ACCELERATION UPON DEFAULT. If there is a failure to pay any installment of
principal and interest when due, or only a portion is paid, or in the event of any other default
under this Loan Agreement, the Department may declare the entire unpaid principal and all
accrued interest immediately due and payable.




ARTICLE IV

CONDITIONS TO DISBURSEMENT OF FUNDS



Unless and until the following CONDITIONS have been satisfied, the Department shall be under no
obligation to disburse to the Business any amounts under the Loan Agreement:



4.1 PROJECT SCHEDULE. The Business shall have submitted a completed Project schedule
and have received the Department’s approval of the Project schedule.



4.2 LOAN AGREEMENT EXECUTED. The Loan Agreement shall have been properly executed and,
where required, acknowledged.



4.3 PROJECT CONSTRUCTION. The Project shall be accomplished by





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Lincolnway Energy, LLC on a low bid basis. The determination of project cost shall be pursuant to
23 CFR 140I. The Business will maintain the necessary records of material installed and labor
performed to allow an audit of work cost by the DOT at the end of the project. The Business shall
submit the plans and specifications to the DOT for review and authorization construct the project.



4.4 COMPETITIVE BIDDING REQUIREMENTS. Any portion of the work not performed by the
Business shall be accomplished through competitive bidding pursuant to the procedures shown in
Exhibit D, attached hereto and made a part of this Agreement. A professional engineer licensed to
practice in the State of Iowa shall prepare the project plans and specifications. The Business
shall submit the plans, specifications and other contract documents to the DOT for review and
authorization to let the project. If the low bid is not awarded, DOT concurrence in the award
must be obtained prior to the award. The Business shall provide the DOT file copies of Project
letting documents, bid tabs, and letters of solicitation to prospective bidders.



4.5 RECORDING. The Business shall have properly recorded in the appropriate office of the
Recorder of Deeds and/or the Secretary of State any mortgage, security agreement, financing
statement or similar document required by the Department under the Loan Agreement, with all
recording charges paid at Business expense in such manner and in all such places as may be required
by law in order to fully reserve and protect the rights of Department. Business shall, prior to
reimbursement, furnish to the Department an opinion of counsel stating that the mortgage has been
properly recorded or filed for record , and that it is a second lien on the property
described in the mortgage.




ARTICLE V

DISBURSEMENT PROCEDURES



5.1 REQUESTS FOR REIMBURSEMENT. All disbursements of proceeds shall be subject to receipt
by the Department of requests for disbursement submitted by the Business. Requests for
disbursement shall be in form and content acceptable to the Department.



5.2 UTILIZATION OF FUNDS. The Business shall utilize Loan funds exclusively for financing
the Project described in the work description shown as Exhibit B. All labor performed and material
used on the project shall conform to Exhibit C. The Business agrees that the quantity of items
shown in Exhibit C shall be the minimum incorporated into the Project. Any proposed
changes in quality or quantity of materials or work performed shall be approved in advance in
writing by DOT.



5.3 ADVANCEMENT OF LOAN FUNDS. No loan advance shall be made for work that does not
conform to Exhibit B unless for work changes approved in advanced in writing by DOT. Loan
advances may be made for conforming work




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done after the date of this Agreement, provided the Business provides adequate documentation
to DOT of the work performed, the costs incurred, the date the work was performed, and actual
payment of the cost by the Business. No loan advance shall be made for work that is done after
January 1, 2007.



5.4 PROCEDURE FOR REQUEST OF LOAN FUNDS BY THE BUSINESS. Loan funds shall be
disbursed in the following manner:





	 	a.	 	No more than monthly, the Business may send a Request for Loan Advance to
DOT documenting for work performed which has not previously been documented to DOT.
	 
	 	b.	 	The Business shall make no Loan Request in an amount less than ten thousand
dollars ($10,000), with the exception of the final Loan Request.
	 
	 	c.	 	DOT shall make a loan advance only for that work performed which conforms
with Exhibit B or with work changes to Exhibit-B approved in advance by
DOT.
	 
	 	d.	 	DOT shall make a loan advance only for actual costs of Authorized Work, and
for which proper documentation of receipts, quantities, and proof of payment has been
provided.
	 
	 	e.	 	Loan advances shall not exceed twenty three and nine tenths percent (23.9%)
of the actual paid costs of all Authorized Work that conforms to Exhibit B up to a
maximum of $500,000. Three percent (3%) shall be retained from each Loan advance
payment by DOT.




5.5. FINAL INSPECTION. Upon completion of the Project work, the Business shall notify DOT
in writing that final inspection may be made. DOT and the Business shall jointly inspect the
Project within thirty (30) days after DOT receipt of the completion notice. DOT shall determine
whether to accept the project as complete. DOT shall promptly notify the Business in writing of
acceptance of the completeness of the Project, or items of work not approved, pursuant to Exhibit
B and any work changes to Exhibit B authorized in advance by DOT.



5.6 FINAL SETTLEMENT OF LOAN ADVANCE. After DOT acceptance of the Project as complete, DOT
may perform an audit of the records of the Business to verify actual Project expenditures.





a. If DOT performs an audit, after completion of final audit by DOT, DOT shall advance
any retained Loan funds which are verified by audit or alternatively the Business shall
immediately return to DOT all Loan advances made by DOT to the Business which are not
verified by



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audit.




b. If DOT waives its right to perform an audit, DOT shall then immediately advance any
retained Loan funds, which were verified by documentation submitted with the Loan requests.




c. The total of all Loan advances made by DOT to the Business under this Agreement
shall not exceed twenty three and nine tenths percent (23.9%) of the total Project costs or
$500,000 whichever is less.



ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF BUSINESS



To induce the Department to make the Loan referred to in this Agreement, the Business represents,
covenants and warrants that:



6.1 AUTHORITY. The Business is a limited liability company duly organized and validly
existing under the laws of the state of incorporation and is in good standing, and has complied
with all applicable laws of the State of Iowa. The Business is duly authorized and empowered to
execute and deliver the Loan Agreement All action on the Business’ part, such as appropriate
resolution of its Board of Directors for the execution and delivery of the Loan Agreement, has been
effectively taken.



6.2 FINANCIAL INFORMATION. All financial statements and related materials concerning the
Business and the Project provided to the Department are true and correct in all material respects
and completely and accurately represent the subject matter thereof as of the effective date of the
statements and related materials, and no material adverse change has occurred since that date.



6.3 APPLICATION. The contents of the application the Business submitted to the Department
for DOT funding is a complete and accurate representation of the Business and the Project as of the
date of submission and there has been no material adverse change in the organization, operation,
business prospects, fixed properties or key personnel of the Business since the date the Business
submitted its DOT application to the Department.



6.4 CLAIMS AND PROCEEDINGS. There are no actions, lawsuits or proceedings pending or, to
the knowledge of the Business, threatened against the Business affecting in any manner whatsoever
their rights to execute the Loan or the ability of the Business to make the payments required under
the Loan, or to otherwise comply with the obligations of the Business contained under the Loan.
There are no actions, lawsuits or proceedings at law or in equity, or before any governmental or
administrative authority pending or, to the knowledge of the Business, threatened against or
affecting the Business or any property or




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collateral pledged as security for the Loan.



6.5 PRIOR AGREEMENTS. The Business has not entered into any verbal or written contracts,
agreements or arrangements of any kind that are inconsistent with the Loan Agreement.



6.6 EFFECTIVE DATE. The covenants, warranties and representations of this Article are
made as of the date of this Agreement and shall be deemed to be renewed and restated by
the Business at the time of each advance or request for disbursement of funds.



6.7 MAINTENANCE. After the work has been completed and Project has been constructed
pursuant to this Agreement, Business agrees to maintain Project to





	 	a.	 	a level allowing freight operation of rail freight cars, each having a gross
weight of two hundred eighty six thousand (286,000) pounds per car, and
	 
	 	b.	 	to meet or exceed Class 1 FRA Track Safety Standards as defined in 49 CFR
part 213, amended October 1, 2003.




The Project shall be maintained at this level for five (5) years from the completion date of this
Project, or until all loan repayments to Department are completed, whichever occurs last. Continued
maintenance at this level shall not be required in the event of damage or destruction of Project by
acts of God or other reasons beyond the businesses control, which Department finds acceptable.
Business shall promptly notify Department in writing of reasons for discontinuing maintenance.
Final approval as to time period and reasons for discontinuing maintenance shall be made by
Department. Department reserves the right to inspect Project at least annually, for the time period
specified herein, to insure compliance with these provisions.




ARTICLE VII

COVENANTS OF BUSINESS



7.1 AFFIRMATIVE COVENANTS. Until payment in full or required part, the

Business covenants with the DOT that:





	 	a.	 	PROJECT WORK AND SERVICES. The Business shall complete the work and
services detailed in its DOT application by the Project Completion Date.
	 
	 	b.	 	RECORDS AND ACCOUNTS. The Business shall maintain books, records,
documents and other evidence pertaining to all costs and expenses incurred under this
Loan Agreement concerning the project,




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	 	 	 	in sufficient detail to reflect all costs, direct and indirect, of labor, materials,
equipment, supplies, services and other costs and expenses of whatever nature, for which
payment is claimed under this Loan Agreement. The Business shall retain all records for
a period of three (3) years from the Agreement Expiration Date.
	 
	 	c.	 	ACCESS TO RECORDS/INSPECTIONS. The Business shall, upon reasonable notice
and at any time (during normal business hours), permit the Department, its
representatives or the State Auditor to examine, audit and/or copy (i) any plans and
work details pertaining to the Project, (ii) all of the Business’ books, records and
accounts relating to the Project, and (iii) all other documentation or materials
related to this Loan; the Business shall provide proper facilities for making such
examination and/or inspection.
	 
	 	d.	 	USE OF LOAN FUNDS. The Business shall expend funds received under the
Loan only for the purposes and activities described in its DOT Application and
approved by the Department.
	 
	 	e.	 	DOCUMENTATION. The Business shall deliver to the DOT, upon request,
(i) copies of all contracts or agreements relating to the Project, (ii) invoices,
receipts, statements or vouchers relating to the Project, (iii) a list of all unpaid
bills for labor and materials in connection with the Project, (iv) budgets and
revisions showing estimated Project costs and funds required at any given time to
complete and pay for the Project.
	 
	 	f.	 	NOTICE OF PROCEEDINGS. The Business shall promptly notify the DOT of
the initiation of any claims, lawsuits, bankruptcy proceedings or other proceedings
brought against the Business which would adversely impact the Project,
including, but not limited to, any proceedings to assert or enforce liens against
collateral securing the Loan.
	 
	 	g.	 	REPORTS. The Business shall prepare, sign and submit the
following reports to the DOT throughout the Project period:





	 	 	 	 	 
	 	 	Report	 	Due Date
	 

	 	Final Expenditure Summary
	 	Within 30 days of Project
Completion Date






     h. NOTICE OF BUSINESS CHANGES. The Business shall provide prompt advance notice to
the Department of any proposed change in the Business ownership, structure or control, which
would materially affect the Project.



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	 	h.	 	MAINTENANCE OF PROJECT PROPERTY. The Business shall maintain the Project
property in good repair and condition, ordinary wear and tear excepted, and shall not
suffer or commit waste or damage upon the Project property.
	 
	 	I.	 	INDEMNIFICATION. The Business shall indemnify and hold harmless the
Department, its officers and employees, from and against any and all losses, except
those losses incurred by the Department resulting from willful misconduct or
negligence on its or their part.
	 
	 	J.	 	PROJECT FEES. The Business shall promptly pay all appraisal, survey,
recording, title, license, permit and other fees and expenses incurred incident to the
Loan.




7.2 NEGATIVE COVENANTS. So long as the Business is indebted to the DOT, the Business
shall not, without prior written disclosure to the DOT and prior written consent of DOT (unless
DOT prior approval is expressly waived below), directly or indirectly:





	 	a.	 	BUSINESS’ INTEREST. Assign, waive or transfer any of Business’ rights,
powers, duties or obligations under this Loan Agreement.
	 
	 	b.	 	PROPERTY/COLLATERAL. Sell, transfer, convey, assign, encumber or
otherwise dispose of any of the real property or other collateral securing the Loan.
	 
	 	c.	 	RESTRICTIONS. Place or permit any restrictions, covenants or any similar
limitations on the real property and/or other collateral securing the Loan.
	 
	 	d.	 	REMOVAL OF COLLATERAL. Remove from the Project site or the State all or
any part of the collateral securing the Loan.
	 
	 	e.	 	RELOCATION OR ABANDONMENT., Relocate its operations or
infrastructure from the location described in the application or abandons its
operations or facilities or a substantial portion thereof during the Loan term.
	 
	 	f.	 	BUSINESS OWNERSHIP. Materially change the ownership structure or control of
the business affecting the Project, including but not limited to, entering into any
merger or consolidation with any person, firm or corporation or permitting substantial
distribution, liquidation or other disposal of business assets directly
associated with the Project. Changes in the business ownership, structure or control
which do not materially affect the Project shall require forty-five (45) days prior
written notice of the Department, but not written consent of, the




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	 	 	 	Department. The Department shall determine the materiality of the change and
whether or not the change affects the Project.
	 
	 	g.	 	BUSINESS OPERATION. Materially change the nature of the business being
conducted, or proposed to be conducted, as described in the Business’ application for
DOT funding.





ARTICLE VIII

SECURITY



8.1 MORTGAGE and SECURITY AGREEMENT. As part of the Project the Business will purchase and
construct a 50 million gallon ethanol plant. The Business agrees to pledge these improvements and
real estate they are erected upon as collateral to secure this loan, and shall grant the Department
a second mortgage and security interest there in. The Business shall provide the Department with a
date stamped, recorded “Mortgage, Security Agreement, and Financing Statement”, and an “Attorney’s
Opinion of Title” reflecting a second mortgage and security interest by the Department prior to the
disbursement of funds here under. This Mortgage shall be shown to be second only to the interest of
Farm Credit Services of America, in an amount not to exceed $53,000,000.



8.2 COST VARIATION. In the event that the total Project cost is less than the amount
specified in this Agreement, the DOT participation shall be reduced at the same ratio as DOT
funds are to the total Project cost, and any disbursed excess above the reduced DOT
participation amount shall be returned immediately to DOT with interest at the rate of six
percent (6%) per annum from the date of disbursement by DOT.




ARTICLE IX

DEFAULT AND REMEDIES



9.1 EVENTS OF DEFAULT. The following shall constitute Events of Default under this
Loan Agreement:





	 	a.	 	MATERIAL MISREPRESENTATION. If any representation, warranty or
statement made or furnished to the Department by, or on behalf of, the Business in
connection with this Loan Agreement or application for this loan, is determined by the
Department to be incorrect, false, misleading or erroneous in any material respect
when made or furnished, it shall constitute an event of default. The Business shall
have 30 days to remedy such default to the Department’s satisfaction days after
written notice by the Department is given to the Business.
	 
	 	b.	 	NON-PAYMENT. If the Business fails to make a payment within 30




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	 	 	 	days of date due under the terms of this Loan Agreement.
	 
	 	c.	 	NONCOMPLIANCE. If there is a failure by the Business to comply with
any of the covenants, terms or CONDITIONS contained in this Agreement or Security
Instruments executed pursuant to this Agreement.
	 
	 	d.	 	PROJECT COMPLETION DATE. If the Project, in the sole judgment of the
Department, is not completed on or before the Project Completion Date.
	 
	 	e.	 	BUSINESS CHANGES. If there is a material change in the Business
ownership, structure or control that occurs without the prior written disclosure to
and if required, written permission of the Department.
	 
	 	f.	 	RELOCATION OR ABANDONMENT. If there is a relocation or abandonment
of the Business under the Project.
	 
	 	g.	 	MISSPENDING. If the Business expends Loan proceeds for purposes
not described in the DOT application or authorized by the Department.
	 
	 	h.	 	INSOLVENCY OR BANKRUPTCY. If the Business becomes insolvent or
bankrupt, or admits in writing its inability to pay its debts as they mature, or
makes an assignment for the benefit of creditors, or the Business applies for or
consents to the appointment of a trustee or receiver for the Business or
for the major part of its property; or if a trustee or receiver is appointed for the
Business or for all or a substantial part of the assets of the Business and the order
of such appointment is not discharged, vacated or stayed within sixty (60) days after
such appointment; or if bankruptcy, reorganization, arrangement, insolvency, or
liquidation proceedings or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or against the
Business and, if instituted against the Business, is consented to, or, if contested
by the Business is not dismissed by the adverse parties or by an order, decree or
judgment within sixty (60) days after such institution.
	 
	 	i.	 	INSECURITY. The Department shall deem itself insecure in good faith
and reasonably believes, after consideration of all the facts and circumstances then
existing, that the prospect of payment and satisfaction of the obligations under this
Agreement, or the performance of or observance of the covenants in this Agreement, or
the value of its collateral is or will be materially impaired.




9.2 NOTICE OF DEFAULT. The Department shall issue a written notice of default providing
therein a thirty (30) day period in which the Business shall have





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an opportunity to cure, provided that cure is possible-and feasible.



9.3 REMEDIES UPON DEFAULT. If the default remains unremedied, DOT shall have the right, in
addition to any rights and remedies available to it under any of the Security Instruments, to do
one or more of the following:





	 	a.	 	exercise any remedy provided by law;
	 
	 	b.	 	declare the unpaid principal plus interest then accrued on the Note due and
payable immediately without presentment,- demand, protest, notice of protest, notice
of intention to accelerate or other notice of any kind, all of which are expressly
waived by the Business.





ARTICLE X

GENERAL TERMS AND PROVISIONS



10.1 BINDING EFFECT. This Loan Agreement shall be binding upon and shall inure to the
benefit of the Department and Business and their respective heirs, successors, legal
representatives and assigns. The obligations, covenants, warranties, acknowledgments, waivers,
agreements, terms, provisions and CONDITIONS of this Loan Agreement shall be jointly and severally
enforceable against the parties to this Loan Agreement.



10.2 COMPLIANCE WITH LAWS AND REGULATIONS. The Business shall comply with all applicable
State and Federal laws, rules (including the administrative rules adopted by the Department for the
RRLF Program — 761 Iowa Administrative Code, chapter 831), ordinances, regulations and orders.



10.3 COMPLIANCE WITH EQUAL EMPLOYMENT OPPORTUNITY OBLIGATIONS. The Business shall
ensure compliance with all provisions of equal employment opportunity requirements prohibiting
discrimination and requiring affirmative action to assure equal employment opportunity as required
by the Iowa Code Chapter 216. The Business and its contractors will use their best efforts to
solicit bids from and to utilize minority group contractors and subcontractors, or contractors and
subcontractors with meaningful minority group and female representation among their employees. The
Business will use its best efforts to ensure contractor and subcontractor compliance with Iowa
equal employment opportunity obligations.



10.4 TERMINATION FOR CONVENIENCE. In addition to termination due to an Event of Default or
nonappropriation of DOT funds, this Loan Agreement may be terminated in whole, or in part, when the
Department, and the Business agree that the continuation of the Project would not
produce beneficial results commensurate with the future disbursement of Loan funds. The Department
and Business shall agree upon the termination CONDITIONS. The Business shall





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not incur new obligations after the effective date of the termination and shall cancel as many
outstanding obligations as is reasonably possible. The Department will allow full credit to the
Business for the Department share of the noncancellable obligations allowable under the Loan
Agreement and properly incurred by the Business prior to termination.



10.5 PROCEDURE UPON TERMINATION. If the Loan Agreement is terminated for convenience, an
Event of Default or nonappropriation of DOT funds, disbursements shall be allowed for costs up to
the date of termination determined by the Department to be in compliance with this Loan Agreement.
The Business shall return to the Department all unencumbered Loan proceeds within one (1) week of
receipt of Notice of Termination. Any costs previously paid by the Department which are
subsequently determined to be unallowable through audit, monitoring or closeout procedures shall be
returned to the Department within thirty (30) days of the disallowance.



10.6 SURVIVAL OF AGREEMENT. If any portion of this Loan Agreement is held to be invalid
or unenforceable, the remainder shall be valid and enforceable. The provisions of this Loan
Agreement shall survive the execution of all instruments herein mentioned and shall continue in
full force until the Loan is paid in full.



10.7 GOVERNING LAW. This Loan Agreement and all Security Instruments shall be interpreted
in accordance with the law of the State of Iowa, and any action relating to the Loan Agreement
shall only be commenced in the Iowa District Court for Story County or the United States District
Court for the Northern District of Iowa.



10.8 MODIFICATION. Neither this Loan Agreement nor any provision of the Security
Instruments executed in connection with this Loan Agreement may be changed, waived, discharged or
terminated orally, but only by a written document signed by the party against whom
enforcement of the change, waiver, discharge or termination is sought.



10.9 NOTICES. Whenever this Loan Agreement requires or permits any notice or written
request by one party to another, it shall be in writing, enclosed in an envelope, addressed to the
party to be notified at the address heretofore stated (or at such other address as may have been
designated by written notice), properly stamped, sealed and deposited in the United States Mail.
Any such notice given hereunder shall be deemed delivered upon the earlier of actual receipt or
two (2) business days after posting. The Department may rely on the addresses of the Business set
forth heretofore, as modified from time to time, as being the addresses of the Business.



10.10 WAIVERS. No waiver by the Department of any default hereunder shall operate as a
waiver of any other default or of the same default on any future





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occasion. No delay on the part of the Department in exercising any right or remedy hereunder
shall operate as a waiver thereof. No single or partial exercise of any right or remedy by the
Department shall preclude future exercise thereof or the exercise of any other right or remedy.



10.11 LIMITATION. It is agreed that the Department shall not, under any circumstances, be
obligated financially under this Loan Agreement except to disburse funds according to the terms of
the Agreement.



10.12 ENFORCEMENT EXPENSES. The Business shall pay upon demand any and all reasonable fees
and expenses .of the Department, including the fees and expenses of their attorneys,
experts and agents, in connection with the exercise or enforcement of any of the rights of the
Department under the Loan Agreement.



10.13 HEADINGS. The headings in this Loan Agreement are intended solely for convenience of
reference and shall be given no effect in the construction and interpretation of this Loan
Agreement.



10.14 FINAL AUTHORITY. The Department shall have the final authority to assess whether the
Business has complied with the terms of this Agreement.



10.15 INTEGRATION. This Loan Agreement contains the entire understanding between the
Business and the Department and any representations that may have been made before or after the
signing of this Loan Agreement, which are not contained herein, are nonbinding, void and of no
effect. None of the parties have relied on any such prior representation in entering into this Loan
Agreement.



10.16 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each
of who shall be deemed an original, but all of which together shall constitute but one and the
same instrument.





15









 








IN WITNESS WHEREOF, the parties have executed this Loan Agreement effective as of the date last
signed below.



IOWA DEPARTMENT OF TRANSPORTATION:




	 	 	 	 	 	 	 
	By:

	 	/s/Peggy Baer
	 	 	 	Date: 11/30/05
	 

	 	 	 	 	 	 
	 

	 	Peggy Baer, Director	 	 	 	 
	 

	 	Office of Rail Transportation	 	 	 	 
	 
	 	 	 	 	 	 
	BUSINESS:	 	 	 	 
	Lincolnway Energy, LLC	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ R. Brehm
	 	 	 	Date: 11-14-05
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Lincolnway Energy, LLC	 	 	 	 






16









 






Exhibit A









17









 





Exhibit B



The proposed construction will include approximately 8.954 track feet of 112# rail
and 4 number 9 turnouts (see attached Exhibit C).









18









 





Exhibit C




RAIL Revolving Loan Fund

PRELIMINARY COST ESTIMATE



LOCATION: County Story            Town — Nevada Ia. 50201           Address – 26706 — 600th Ave.



Main Spur Length: -8954       Connecting RR: -Union Pacific Railroad       Milepost -182.54 to MP 184.04



Purpose: (Industry Served) – Lincolnway Energy, LLC



Products Shipped: Ethanol and Dried Distilled Grains




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Total Project Cost	 	$	2,092,308.22	 
	A	 	SITE GRADING ITEMS	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	UNIT	 	TOTAL
	 	 	ITEM DESCRIPTION	 	QUANTITY	 	UNITS	 	PRICE	 	AMOUNT
	(1)

	 	CLEARING AND GRUBBING

Site shall be cleared and grubbed prior to grading work.
	 	 	10.30	 	 	Acre
	 	 	1000	 	 	$	10,300.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(2)

	 	TOPSOIL, STRIP, SALVAGE, & RESPREAD

Topsoil shall be stripped, salvaged, and replaced on all slopes
and disturbed areas.
	 	 	33239	 	 	C.Y.
	 	$	1.50	 	 	$	49,858.50	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(3)

	 	EXCAVATION, Class 10 roadway & borrow

Roadbed shall have minimum 24’ top with 2:1 side sIopes and
ditches at least 2’ wide by 1’ deep.
	 	 	162218	 	 	C.Y.
	 	$	1.35	 	 	$	218,994.30	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(4)

	 	EMBANKMENT, with moisture & density control

Roadbed shall have minimum 24’ top and 2:1 side slopes and
Ditches at least 2’ wide by 1’ deep.
	 	 	115872	 	 	C.Y.
	 	$	0.85	 	 	$	98,491.20	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(5)

	 	SUBBALLAST, Compacted in place

Class A crushed stone shall be placed 22’ wide and a
Minimum 8” deep
	 	 	7261	 	 	C.Y.
	 	$	20.00	 	 	$	145,220.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(6)

	 	SEEDING AND FERTILIZING

All disturbed areas shall be seeded and fertilized to meet DOT
Rural standards.
	 	 	2.4	 	 	Acre
	 	$	1,000.00	 	 	$	2,400.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(7)

	 	CULVERTS, UNCLASSIFIED

Diameter  18” — 24” — 26”  Type
Culvert shall meet DOT specifications for type.
	 	 	200	 	 	L.F.
	 	$	50.00	 	 	$	10,000.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(8)

	 	OTHER (Specify) Trench Drain

Demolition, Removals, etc.
	 	 	500	 	 	LF
	 	 	9	 	 	$	4,250.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(9)

	 	OTHER (Specify) Silt Fence

Utility Relocation, Fencing, etc.
	 	 	2000	 	 	LF
	 	$	3.50	 	 	$	7,000.00	 






19









 






Exhibit C




RAIL Revolving Loan Fund

PRELIMINARY COST ESTIMATE




B. TRACK CONSTRUCTION ITEMS




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	UNIT	 	TOTAL
	 	 	ITEM DESCRIPTION	 	QUANTITY	 	UNITS	 	PRICE	 	AMOUNT
	(1)

	 	RAIL (Includes OTM) SIZE: 112#

Minimum 90# Industrial or heavier.

Minimum rail length shall be 25 feet.
	 	 	8954	 	 	T.F.
	 	$	26.43	 	 	$	236,654.22	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(2)

	 	TURNOUT, INSTALLED (Other than Mainline)

Topsoil shall be stripped, salvaged, and replaced on all slopes
and disturbed areas.
	 	 	4	 	 	Each
	 	$	30,000.00	 	 	$	120,000.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(3)

	 	TIES (Specify), New Industrial Grade 5-19.5” c-c

Mainline relay or new industrial grade shall be used.

Maximum 22” center to center spacing.
	 	 	5262	 	 	Each
	 	$	32.00	 	 	$	168,384.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(4)

	 	BALLAST (Specify), Type 8 AREMA #4

Ballast shall be 1 1/2” to 2” clean rock placed to a minimum depth
Of 6” below tie bottom
	 	 	7990	 	 	Tons
	 	$	15.00	 	 	$	119,850.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(5)

	 	TRACK CONSTRUCTION (excluding turnout)

Includes Installation of Rail, OTM, Ties, & Tie Plates in
Accordance with AREMA Specifications
	 	 	8954	 	 	T.F.
	 	$	14.00	 	 	$	125,356.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(6)

	 	SURFACING AND LINING

Track shall be surfaced, lined, and broomed.
	 	 	8954	 	 	T.F.
	 	$	4.00	 	 	$	35,816.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(7)

	 	ROADWAY CROSSING, Type Surface

Include crossing protection, Type

Crossing surface & Protection shall be appropriate for roadway
	 	 	 	 	 	L.F.
	 	 	 	 	 	$	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(8)

	 	OTHER (Specify) Derail

Bumping Posts, Derails, etc.
	 	 	2	 	 	Total
	 	$	15,000.00	 	 	$	30,000.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	A and B. SUBTOTAL	 	CONSTRUCTION COST	 	$	1,382,574.22	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Construction Cost Contingency (up to 10 percent)
	 	 	 	 	 	 	 	 	 	 	 	$	138,257	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	C.

	 	RAILROAD INSTALLED TURNOUT

Specify Installing RR – Union Pacific Railroad 

Turnout Number ___#11 ___Rail Size ___136# ___
	 	



2
	 	



Each
	 	
$
$	250,000.00	 	 	
$
$	500,000.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	D.

	 	ENGINEERING COSTS – Track Construction Only

Specify Engineering Firm – ANTIOCH International, Inc.
Limited to 10 percent of construction costs
	 	 	 	 	 	 	 	 	 	 	 	$	41,477.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	Acre
	 	Ea.
	 	Amount
	 	 	 	 
	E

	 	ACQUISITION COSTS

Buyer ___Seller ___

Portion for rail
	 	 	3	 	 	 	 	$	10,000.00	 	 	$	30,000.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	TOTAL PROJECT COST	 	 	2,092.308.22	 






20









 






Exhibit D




REQUIRED Procedures for Contracting Work




The Business shall do the following in sequence:





	A.	 	Develop plans and specifications covering the work, conforming to the Manual for Railway
Engineering, published by the American Railway Engineering and Maintenance-of Way Association
(AREMA), the connecting railroad minimum requirements, and the State of Iowa guidelines and
standards agreeable to both the connecting railroad and the Iowa Department of Transportation
(DOT).
	 
	B.	 	Submit plans and specifications along with bid documents to DOT for review and approval.
	 
	C.	 	Solicit bids for specified work from three or more Trackwork contractors.
	 
	D.	 	Send the results of the letting including all letters of solicitation, bids received, the low
bidder or contractor of choice, and the total fixed contract cost or the fixed unit
prices to the DOT for review and concurrence to award contract.
	 
	E.	 	Award contract to selected contractor and supervise contract to completion.
	 
	F.	 	Notify the DOT prior to start of work to enable monitoring and inspection of the project
during construction.
	 
	G.	 	Any extra work needed to complete the project shall be approved by all parties to the
agreement prior to commencing extra work. Extra work orders will show agreed to cost and
the cost will be eligible for reimbursement with prior approval.
	 
	H.	 	Secure written approval for train operations from operating railroad, send copy to DOT.
	 
	I.	 	Notify the DOT of project completion and schedule final inspection.
	 
	J.	 	Submit an original bill and proof of payment for approved costs along with a cover letter
requesting payment and summarizing project costs to enable audit and justify payment.




21









 











Exhibit E




IOWA DEPARTMENT OF TRANSPORTATION

Railroad Revolving Loan Fund

PROMISSORY NOTE

Loan Number: RRL-ST05(05)—9T- 85




	 	 	 
	 

	 	Des Moines, Iowa
	 

	 	 
	 

	 	(City and State)
	 
	 	 
	$500,000

	 	11/14/05
	 

	 	 
	 

	 	(Date)





FOR VALUE RECEIVED, the undersigned (hereafter called the “Maker”) promises to pay to the
order of Department of Transportation (hereafter called the “Payee”), at its office at
800 Lincoln Way, Ames, Iowa 50010, or upon notice to the Maker, at such other place
as may be designated from time to time by the holder, the principal sum of
$500,000,, together with interest, at 2.11% on the unpaid balance
beginning July 1, 2007, to be paid as follows:



A $500 000 loan at (2.11%) Interest to be paid as follows:



Nineteen (19) equal semi annual payments of $27,861.34 beginning on the first
day of July 2007 and One (1) final payment of $27,570.47. Final payment may
vary depending upon dates payments are received.



1. Payments. All payments under the Note shall be applied in this order: (1) to interest, and
(2) to principal.



2. Loan Agreement; Acceleration upon Default. This Note is issued by Maker to evidence an
obligation to repay a loan according to the terms of Loan Agreement RRL-ST05(05) -9T- 85 between
the Payee and Maker and, at the election of the holder without notice to the Maker, shall become
immediately due and payable in the event any payment is not made when due or upon the occurrence of
any event of default under the terms of the Loan Agreement.



3. Reduced Amount. In the event the Maker fails to requisition and spend the full face amount
of the Note as set out above, then the amount of each installment payment shall be
reduced accordingly in equal amounts.



4. Security. Payment of this Note is secured by a Mortgage, Security Agreement, and Financing
Statement described in Exhibit F of the Agreement, and the holder is entitled to the benefits
of the security therein described.





22









 








Exhibit E



In case of a decline in the market value of the collateral, or any part thereof, the Payee may
demand that additional collateral of quality and value satisfactory to holder be delivered,
pledged and transferred to holder.



5. Waiver. No delay or omission on the pad of the holder in exercising any right under this Note
shall operate as a waiver of that right or of any other right under this Note. A waiver
on any one occasion shall not be construed as a bar to or waiver of any right and/or remedy on
any future occasion.



6. Waiver of Protest. Each maker, surety, endorser and guarantor of this Note, expressly waives
presentment, protest, demand, notice of dishonor or default, and notice of any kind with respect
to this Note.



7. Costs of Collection. The Maker will pay on demand all costs of collection, maintenance of
collateral, legal expenses, and attorneys’ fees incurred or paid by the holder in collecting
and/or enforcing this Note on default.



8. Meaning of Terms. As used in this Note, “holder” shall mean the Payee or other endorsee of this
Note, who is in possession of it, or the bearer hereof, if this Note is at the time payable to the
bearer. The word “Maker” shall mean each of the undersigned. If this Note is signed by more than
one person, it shall be the joint and several liabilities of such persons.



9. Miscellaneous. The captions of paragraphs in this Promissory Note are for the convenience of
reference only, shall not define or limit the provisions hereof and shall not have any legal or
other significance whatsoever.




ADDRESS:

Lincolnway Energy, LLC

22740 590th Ave. P.O. Box 433

Nevada, Iowa 50201-7962




	 	 	 	 	 	 	 
	 	 	 	 	Lincolnway Energy LLC
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ R. Brehm
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Attest:	 	/s/ Timothy E. Fevold
	 	 	 	 	 
	 

	 	 	 	  
	 	 (Signature of Secretary)






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