exv10w2



 






Exhibit 10.2




MLA No. RI0218




MASTER LOAN AGREEMENT




     THIS MASTER LOAN AGREEMENT is entered into as of March 24, 2005, between FARM
CREDIT. SERVICES OF AMERICA, FLCA (“Farm Credit”) and LINCOLNWAY ENERGY,
LLC, Nevada, Iowa (the “Company”).



BACKGROUND




          From time to time Farm Credit may make loans to the Company. In order to reduce
the amount of paperwork associated therewith, Farm Credit and the Company would like
to enter into a master loan agreement. For that reason, and in
consideration of Farm Credit making one or more loans to the Company, Farm Credit and
the Company agree as follows:




     SECTION 1. Supplements. In the event the Company desires to borrow from Farm
Credit and Farm Credit is willing to lend to the Company, or in the event Farm Credit
and the Company desire to consolidate any existing loans hereunder, the parties will
enter into a Supplement to this agreement (a “Supplement”). Each Supplement will set
forth the amount of the loan, the purpose of the loan, the interest rate or rate
options applicable to that loan, the repayment teens of the loan, and any other
terms and conditions applicable to that particular loan. Each
loan will be governed by the terms and conditions contained in this agreement
and in the Supplement relating to the loan.



     SECTION 2. Sale of Participation. Interests and Appointment of
Administrative Agent. The Company acknowledges that concurrent with the execution of
this Master Loan Agreement and related Supplements, Farm Credit is selling a
participation interest in this Master Loan Agreement and Supplements executed
concurrently herewith to CoBank, ACB (“CoBank”) (a 100% interest). Pursuant to an
Administrative Agency Agreement dated March 24, 2005, (“Agency Agreement”), Farm Credit
and CoBank appointed CoBank to act as Administrative Agent ("Agent”) to act
in place of Farm Credit hereunder and under the Supplements and any security documents
to be executed thereunder. All funds to be advanced hereunder shall be made by Agent,
all repayments by the Company hereunder shall be made to Agent, and all notices to be
made to Farm Credit hereunder shall be made to Agent. Agent shall be solely responsible
for the administration of this agreement, the Supplements and the security documents to
be executed by the Company thereunder and the enforcement of all rights and remedies of
Farm Credit hereunder and thereunder. Company acknowledges the appointment of the
Agent and consents to such appointment.



     SECTION 3. Availability. Loans will be made available on any day on which Agent
and the Federal Reserve Banks are open for business upon the telephonic or written
request of the Company. Requests for loans must be .received no later than
12:00 Noon Company’s local time on the date the loan is desired. Loans will be made
available by wire transfer of immediately available funds to such account or
accounts as. may be authorized by the Company. The Company shall furnish to
Agent a duly completed and executed copy of a Delegation and Wire and Electronic
Transfer Authorization Form of the Agent, and Agent shall be entitled to rely on
(and, shall incur no liability to the Company in acting on) any
request or direction furnished in accordance with the terms thereof.



     SECTION 4. Repayment. The Company’s obligation, to repay each loan
shall be evidenced by the promissory note set forth in the Supplement relating to that
loan or by such replacement note as Agent shall require. Agent shall maintain a record
of all loans, the interest accrued thereon, and all payments made with respect thereto,
and such record shall, absent proof of manifest error, be conclusive evidence



 









 





			
	Master Loan Agreement R10218

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of the outstanding principal and interest on the loans. All payments shall be made by wire
transfer of immediately available funds, by check, or by automated clearing house or other
similar cash handling processes as specified by separate agreement between the Company and Agent,
Wire transfers shall be made to ABA No. 307088754 for advice to
and credit of Agent (or to such other account as Agent may direct by notice). The Company shall give Agent telephonic notice no
later than 12:00 Noon Company’s local time of its intent to pay by wire and funds received after
3:00 p.m. Company’s local time shall be credited on the next business day. Checks shall be mailed
to CoBank, ACB, Department 167, Denver, Colorado 80291-0167 (or to such other place as Agent may
direct by notice). Credit for payment by check will not be given until the later of: (a) the day
on which Agent receives immediately available funds; or (b) the next business day after receipt
of the check.




     SECTION 5. Capitalization. The Company agrees to purchase voting (Class D) or.
non-voting (Class E) stock in Farm Credit Services of America, ACA (currently a minimum of
$1,000.00 worth of stock consisting of at least 200 shares of $5.00 par value stock) as required
under the policy of Farm Credit at the time of acquisition. Farm Credit policy may change from
time to time. Farm Credit shall have a, first lien on the stock for payment of any
liability of the Company to Farm Credit. Said stock shall be owned as follow



	 	 	 
	Owner Name: Lincolnway Energy, LLC
	 	SSN/TIN: 20-1118105





The Company authorizes and appoints the following to act on behalf .of all owners, to
vote the Class D stock, and to accept, receive and receipt for any dividends declared on the
stock.




Bill Couser, Board President, Voter




     SECTION 6. Security. The Company’s obligations under this agreement, all Supplements
(whenever executed), and all instruments and documents contemplated hereby or thereby, shall be
secured by a statutory first lien on all equity which the. Company may now own or
hereafter acquire in Farm Credit. In addition, the Company agrees to grant to Farm Credit, by
means of such instruments and documents as Agent shall reasonably require; a first lien (subject
only to exceptions approved in writing by Agent) on all personal property of the Company, and on
all real property of the Company, whether now existing or hereafter acquired. As additional
security for those obligations: (i) the Company agrees to grant to Farm Credit, by means of such
instruments and documents as Agent shall. reasonably require, a first priority lien on such of its
other assets, whether now existing or hereafter acquired, as Agent may from time to time require;
and (ii) the Company agrees to grant to Farm Credit, by means of such instruments and.
documents as Agent shall require, a first priority lien on all realty which the Company may from
time to time acquire after the date hereof. Farm Credit may at its discretion assign
collateral to the Agent under the Agency Agreement.



     SECTION .7. Conditions Precedent.



          (A) Conditions to Initial Supplement. Farm Credit’s obligation .to extend credit
under the initial Supplement hereto is subject to the conditions precedent that Agent receive,
in form and substance satisfactory to Agent, each of the following:



                    (i) This Agreement, Etc. A duly executed copy of this Agreement and all instruments and
documents contemplated hereby.



 









 





			
	Master Loan Agreement R10218 

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          (ii) Security Agreement. A security agreement granting to Farm Credit a first lien
(subject only to exceptions approved in writing by Agent) on all personal property of the
Company, whether now owned or hereafter acquired.




          (iii) Mortgage/Deed of Trust. A mortgage or deed of trust granting to Farm Credit a first
lien (subject only to exceptions approved in writing by Agent) on the Company’s Property (as that
term is defined in the applicable Supplements) located near Nevada, Iowa.




          (iv) Title Opinion for Company Mortgage. A title opinion from the Company’s counsel, in
form and content acceptable to Agent, stating that the Company’s mortgage or deed of trust to
Farm Credit is a first priority lien on the Property encumbered thereby, subject only to
exceptions approved in writing by Agent. The Company agrees to pay the cost of such title opinion
and also agrees that if, for any reason, a final title opinion is not issued by the date that is
ninety (90) days after the date of this Agreement or such later date as may be agreeable to
Agent, then an “Event of Default” shall be deemed to have occurred under this Agreement:




          (v) Opinion of Counsel. An opinion of the Company’s counsel (in form and substance
acceptable to Agent) confirming due authorization and execution of the loan documents.




          (vi) Environmental Audit. A written report of an environmental audit pertaining to the
Property, produced by an independent national or regional environmental consulting firm with
full. service capabilities whose selection has been approved by Agent, and dated not
more than sixty (60) days prior to the submission thereof, which report shall show to Agent’s
satisfaction that all appropriate inquiry was made and that the past or present use or condition
of the Property poses neither material health or safety hazards nor potential financial exposure
that Agent, in. its sole discretion, finds unacceptable, or such other information as
is acceptable to Agent in its sole discretion.




          (vii) Insurance. Certificates from the insurance carrier for the general contractor or
contractors (and if the Company is not adequately insured therein, from the Company’s insurance
carrier) evidencing workers’ compensation and liability insurance (including contractual
liability) carried during the course of construction, with liability limits for death of or
injury to persons and for damages to property in amounts acceptable to Agent or such other limits
if any are established under the construction contract(s). Without limiting the provision in
Section 9(D) herein or the foregoing, the Company agrees to obtain Builder’s Risk casualty
insurance covering fire and other casualty with extended coverage including vandalism and
malicious mischief.




          (viii) Evidence of Capital. Such evidence as Agent may require that the Company has obtained
equity capital, or acceptable binding commitments thereof, in an amount no less than $38,300,000.00
with terms and conditions acceptable to Agent.




          (ix) Appraisal. An appraisal of the Property by a licensed, independent appraiser
satisfactory to Agent, such appraisal to include a value for the proposed ethanol facility to be
located on the Company’s real property located near Nevada, Iowa.




 









 








			
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          (x) Survey. An ALTA quality survey of the Property by a licensed surveyor satisfactory to
Agent verifying no encroachments by any Improvements on the Property (as that term is defined in
the applicable Supplements) onto adjoining property, or such other information as may be
required by Agent.




          (xi) Flood Insurance. A flood zone determination on all real property security and
evidence of flood insurance if such determination requires flood insurance.




          (xii) Process/Yield Guarantee. Acceptable Process/Yield Guarantee from the design engineer
and contractor, acceptable to Agent, as well as a minimum one-year warranty on all work
performed.




          (xii) Engineering and Construction Contracts. Copies of all engineering and construction
contracts with warranty provisions acceptable to Agent.




          (xiv) Utilities. A certificate from the Company’s engineer, or a report from Agent’s
inspecting engineer satisfactory to Agent, as to the .availability of water supply,
electricity, natural gas, and other utilities, and for the disposal of wastewater, all in
locations and capacities sufficient to meet the reasonable requirements of the Property and the
Improvements and otherwise satisfactory to Agent.




          (xiv) Project Budget and Schedule, Contracts and Plans. Project budget, schedule, contracts
and plans as follows: (i) a budget setting forth the total estimated direct costs for construction
(including real property acquisition, site preparation, railroad siding, sales taxes related to
construction, and contingencies) not to exceed an aggregate total of $81,000,000.00 for the
Improvements, and indirect costs, (including capital interest, costs to organize and obtain
financing, and for preproduction expenses, but excluding working capital) not to exceed an
aggregate total of $3,300,000.00, including line item cost breakdowns for all direct costs by
trade, job, and subcontractor, and a schedule of all sources of funds to pay such costs (the
“Project Budget”); (ii) schedule setting forth, by trade, job, and subcontractor, the estimated
dates of commencement and completion of construction of the Improvements (the “Project Schedule”);
(iii) a schedule of the amounts and times of advances anticipated to be requisitioned by the
Company from time to time during the term of construction of the Improvements (the “Disbursement
Schedule”); (iv) a list of all subcontractors and materialmen who have been, or, to the extent then
determined by the Company, will be supplying labor, materials or goods for the Improvements; (v)
two sets of the Plans with a. certification from the Company and from the Company’s architect or
engineer, or with other evidence satisfactory to Agent as to the following matters: (a) that the
Improvements can be completed. by May 31, 2006, (the “Completion Date”); (b) that the
Project Budget, Project Schedule, Disbursement Schedule and the Plans satisfactorily provide
.for the construction of the Improvements; and (c) that the Improvements upon
completion will comply with all Laws (as defined in Section 9(B) hereof), including, without
limitation, all Laws relating to the environment, and all approvals, consents, permits and licenses
required under such Laws (the “Project Approvals”) which have been obtained or are to be obtained
by the Company relating in any way to the acquisition, construction or the contemplated operation
of the Improvements (including, without limitation, those relating to zoning, building, use and
occupancy, fire prevention and health); and (vi) a list of the Project Approvals indicating those
Project Approvals obtained and to be obtained (and a schedule for obtaining such Project
Approvals).




 









 








			
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          (xvi) Escrow Agreement. An escrow agreement for distribution of loan funds acceptable to
Agent specifically providing for a Title/Abstract Company to distribute all funds. Costs of
said agreement are to be paid by the Company.




          (xvii) Coal Procurement. Plans acceptable to Agent for the purchase of coal and delivery
of same to the facility site, and for the disposal of fly ash.




     (B) Conditions to Each Supplement. Farm Credit’s obligation to extend credit under each
Supplement, including the initial Supplement, is subject to the conditions precedent that Agent
receive, in form and content satisfactory to Agent, each of the following:



          (i) Supplement. A duly executed copy of the Supplement and all instruments and documents
contemplated thereby.




          (ii) Evidence of Authority. Such certified board resolutions, evidence of incumbency, and
other evidence that Agent may require that. the Supplement, all instruments and
documents executed in connection therewith, and, in the case .of initial Supplement
hereto, this agreement and all instruments and documents executed in connection herewith, have
been duly authorized and executed.




          (iii) Fees and Other Charges. All fees and other charges provided for herein or in the
Supplement.




          (iv) Evidence of Perfection, Etc. Such evidence as Agent may require that Farm Credit
has a duly perfected first priority lien on all security for the Company’s obligations, and
that the. Company is in compliance with Section 9(D).hereof.




     (C) Conditions to Each Loan. Farm Credit’s obligation under each Supplement to make any
loan to the Company thereunder is subject to the condition that no “Event of Default” (as
defined in Section 12 hereof) or event which with .the giving of notice and/or the
passage of time would become an Event of Default hereunder (a “Potential Default”), shall have
occurred and be continuing.



   SECTION 8. Representations and Warranties.



     (A) This Agreement. The Company represents and warrants to Farm Credit and Agent that as
of the date of this Agreement:



          (i) Compliance. The Company and, to the extent contemplated hereunder, each “Subsidiary”
(as defined below), is in compliance with all of the terms of this agreement, and no Event of
Default or Potential Default exists hereunder.




          (ii)
Subsidiaries. The Company has no “Subsidiary(ies)” (as defined below).
For purposes hereof, a “Subsidiary” shall mean a corporation of which shares of stock having
ordinary voting power to elect a majority of the board of directors or other managers
of such corporation are owned, directly or indirectly, by the ‘Company.




     (B) Each Supplement. The execution by the Company of each Supplement hereto shall
constitute a representation and warranty to Agent that:



 









 





			
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          (i) Applications. Each representation and warranty and all information set forth in
any application or other documents submitted in connection with, or to induce Farm
Credit to enter into, such Supplement, is correct in all material respects as of the date
of the Supplement.




          (ii) Conflicting Agreements, Etc: This agreement, the Supplements, and all security
and other instruments and documents relating hereto and thereto (collectively, at any time, the
“Loan Documents”), do not conflict with, or require the consent of any party to, any other
agreement to which the Company is a party or by which it or its property may be bound or
affected, and do not conflict with any provision of the Company’s operating agreement and
articles of organization.




          (iii) Compliance. The Company and, to the extent contemplated hereunder, each
Subsidiary, is in compliance with all of the terms of the Loan Documents (including,
without limitation, Section 9(A) of this agreement on eligibility to borrow from Farm Credit).




          (iv) Binding Agreement. The Loan Documents create legal, valid, and binding
obligations of the Company which are enforceable in accordance with their terms, except to the
extent that enforcement may be limited by applicable bankruptcy, insolvency, or similar laws
affecting creditors’ rights generally.




   SECTION 9. Affirmative Covenants. Unless otherwise agreed to in writing by Agent
while this agreement is in effect, the Company agrees to, and with respect to Subsections 9(B)
through 9(G) hereof, agrees to cause each Subsidiary to:



     (A) Eligibility. Maintain its status as an entity eligible to borrow from Farm
Credit pursuant to the terms of the Farm Credit Act of 1971, as amended, 12 USC 2001, et seq.



     (B) Company Existence, Licenses, Etc. (i) Preserve and keep in full force and effect
its existence and good standing in the jurisdiction of its formation; (ii) qualify and remain
qualified to transact business in all jurisdictions where such qualification is required; and
(iii) obtain and maintain all licenses, certificates, permits, authorizations, approvals, and the
like which are material to the conduct of its business or required by law, rule, regulation,
ordinance, code, order, and the like (collectively, “Laws”).



     (C) Compliance with Laws. Comply in all material respects with all applicable Laws,
including, without limitation, all Laws relating to environmental protection. In addition, the
Company agrees to cause all persons occupying or present on any of its properties, and to cause
each Subsidiary to cause all persons occupying or present on any of its properties to comply in
all material respects with all environmental protection Laws.



     (D) Insurance: Maintain insurance with insurance companies or associations
reasonably acceptable to Agent in such amounts and covering such risks as are usually carried by
companies engaged in the same or similar business and .similarly situated, and make
such increases in the type or amount of coverage as Agent may reasonably request. All such
policies insuring any collateral for the Company’s obligations to Farm Credit shall have mortgagee
or lender loss payable clauses or endorsements in form and content, acceptable to Agent. At
Agent’s request, all policies (or such other proof of compliance with this Subsection as may be
satisfactory to Agent) shall be delivered to Agent.



 









 





			
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(E)  Property Maintenance. Maintain all of its property that is
necessary to or useful in the proper conduct of its business in good working condition,
ordinary wear and tear excepted.




(F) Books and Records. Keep adequate records and books of account in which
complete entries will be made in accordance with generally accepted accounting
principles (“GAAP”) consistently applied




(G) Inspection. Permit Agent or its agents, upon reasonable notice and during
normal business hours or at such other times as the parties may agree, to examine its
properties, books, and records, and to discuss its affairs, finances, and accounts, with
its respective officers, directors, employees and independent certified public
accountants.




(H) Reports and Notices. Furnish to Agent:



          (i) Annual Financial Statements. As soon as available, but in no event more than
90 days after the end of each fiscal year of the Company occurring during the term hereof,
annual consolidated and consolidating financial statements of the Company and its consolidated
Subsidiaries, if any, prepared in accordance with GAAP consistently applied. Such financial
statements shall: (a) be audited by independent certified public accountants selected by the
Company and acceptable to Agent; be accompanied by a report of such accountants containing an
opinion thereon acceptable to Agent; be prepared in reasonable detail and in comparative forth;
and (d) include a balance sheet, a statement, of income, a statement of retained earnings, a
statement of cash flows, and all notes and schedules relating thereto.




          (ii) Interim Financial Statements. As soon as available, but in no event more than 30 days
after the end of each month, a consolidated balance sheet of the Company and its consolidated
Subsidiaries, if any, as of the end of such month, a. consolidated statement of income
for, the Company and its consolidated Subsidiaries, if any for such period and for the period
year to date, and such other interim statements as Agent may reasonably request, all prepared in
reasonable detail and in comparative form in accordance with GAAP consistently applied and, if
required by written notice from Agent, certified by an authorized officer or employee of the
Company acceptable to Agent.




          (iii) Notice of Default. Promptly after becoming aware thereof, notice of the occurrence
of an-Event ‘of Default or a Potential Default.




          (iv) Notice of Non-Environmental Litigation. Promptly after the commencement thereof,
notice of the commencement of all actions, suits, or proceedings before any court, arbitrator,
or governmental department, commission, board, bureau, agency, or instrumentality
affecting the Company or any Subsidiary which, if determined adversely to the Company or any such
Subsidiary, could have a material adverse effect on the financial condition, properties, profits,
or operations of the Company or any such Subsidiary.




          (v) Notice of Environmental Litigation, Etc. Promptly after receipt thereof, notice of the
receipt of all pleadings, orders, complaints, indictments, or any other communication alleging a
condition that may require the Company or any Subsidiary to undertake or to contribute to a
cleanup or other response under environmental laws, or which seek penalties, damages, injunctive
relief, or criminal

 











 








			
	Master Loan Agreement R10218 

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sanctions related to alleged violations of such Laws, or which claim personal injury or
property damage to any person as a result of environmental factors or conditions.




          (vi) Formation Documents. Promptly after any change in the Company’s operating agreement
or articles of organization (or like documents), copies of all such changes, certified by the
Company’s Secretary.




          (vii) Budgets. As soon as available, but in no event more than 90 days after the end of
any fiscal year of the Company occurring during the term hereof copies of the Company’s
board-approved annual budgets and forecasts of operations and capital expenditures.




          (viii) Compliance Certificate. Together with each set of financial statements furnished to
Agent pursuant to Section 9(H) hereof for a period corresponding to a period for which one or
more of the financial covenants set forth in Section 11 hereof are required to be tested, a
certificate of an officer or employee of the Company acceptable to Agent setting forth
calculations showing compliance with each of the financial covenants that require
compliance at the end of the period for which the statements are being furnished.




          (ix) Other Information. Such other information regarding the condition or operations,
financial or otherwise, of the Company or any Subsidiary as Agent may from time to time
reasonably request, including but not limited to copies of all pleadings, notices, and
communications referred to in Subsections 9(H)(iv) and (v) above.




        (I) Policies/Contracts. Enter into: (i) risk management policies and programs/strategies
acceptable to Agent pertaining to grain procurement and ethanol marketing by no later than
December 1, 2005; and (ii) distillers grain and ethanol marketing plans and retention of
marketing organizations acceptable to Agent experienced in marketing these products by no later
than six months prior to plant start-up; and



        (K) Performance Bonds. Provide performance bonds, in form and content acceptable to Agent,
for construction and related contracts upon request by Agent.



     SECTION 10. Negative Covenants: Unless otherwise agreed to in writing by Agent, while this
agreement is in effect the Company, will not:



        (A) Borrowings. Create, incur, assume, or allow to exist, directly or indirectly, any
indebtedness or liability for borrowed money (including trade or bankers’ acceptances), letters of
credit, or the deferred purchase price of property or services, except for: (i) debt to
Farm Credit; (ii) accounts payable to trade creditors incurred in the ordinary course of business;
(iii) current operating liabilities (other than for borrowed money) incurred in the ordinary
course of business; (iv) unsecured debt of the Company to Fagen, Inc., in an aggregate amount not
to exceed $3,250,000.00 with terms and conditions satisfactory to Agent, provided that such debt
is subordinate to all indebtedness of the Company to Farm Credit; (v) debt of the
Company to Fagen Inc., in an aggregate amount not to exceed $1,100,000.00, with terms and
conditions satisfactory to Agent, provided that such debt is subordinate to all indebtedness of
the Company to Farm Credit; and (vi) debt of the Company to miscellaneous creditors, in an
aggregate amount not to exceed $1,290,000.00 on terms and conditions satisfactory to Agent,
provided that such debt is subordinate to all indebtedness of the Company to Farm Credit.



 









 





			
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     (B) Liens. Create, incur, assume, or allow to exist any mortgage, deed of trust, pledge,
lien (including the lien of an attachment, judgment, or execution), security interest, or other
encumbrance of any kind upon any of its property, real or personal (collectively, “Liens”). The
foregoing restrictions shall not apply to: (i) Liens in favor of Farm Credit; (ii) Liens for
taxes, assessments, or governmental charges that are not past due; (iii) Liens and deposits
under workers’ compensation, unemployment insurance, and social security Laws; (iv) Liens and
deposits to secure the performance of bids, tenders, contracts (other than contracts for the
payment of money), and like obligations arising in the ordinary course of business, as
conducted on the date hereof; (v) Liens imposed by Law in favor of mechanics, materialmen,
warehousemen, and like persons that secure obligations that are not past due; (vi) easements,
rights-of-way, restrictions, and other similar encumbrances which, in the aggregate, do not
materially interfere with the occupation, use, and enjoyment of the property or assets
encumbered thereby in the normal course of its business or materially impair the value of the
property subject thereto; (vii) subordinate Liens in favor of Fagen, Inc., to secure
indebtedness permitted hereunder; and (viii) subordinate Liens in favor of miscellaneous
creditors to secure indebtedness permitted hereunder.



     (C) Mergers, Acquisitions, Etc. Merge or consolidate with any other entity or acquire all or
a material part of the assets of any person or entity, or form or create any new Subsidiary or
affiliate, or commence operations under any other name, organization, or entity, including any
joint venture.



     (D) Transfer of Assets. Sell, transfer, lease, or otherwise dispose of any of its assets,
except in the ordinary course of business.



     (E) Loans. Lend or advance money, credit, or property to any person or entity, except for
trade credit extended in the ordinary course of business.



     (F) Contingent Liabilities. Assume, guarantee, become liable as a surety, endorse,
contingently agree to purchase, or otherwise be or become liable, directly or indirectly
(including, but not limited to, by means of a maintenance agreement, an asset or stock purchase
agreement, or any other agreement designed to ensure any creditor against loss), for or on
account of the obligation of any person or entity, except by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary course of the
Company’s business.



     (G) Change in Business. Engage in any business activities or operations
substantially .different from or unrelated to the Company’s planned business activities
or operations as stated in its Operating Agreement.



     (H) Capital Expenditures. Beginning with fiscal year ending 2007, expend, in the aggregate,
during any fiscal year more than $600,000.00 for the acquisition of fixed or capital
assets (including all obligations under capitalized leases authorized under the terms of this
agreement, but excluding obligations under operating leases).



     (I) Leases. Create, incur, assume, or permit to exist any obligation as lessee under operating
leases or leases which should be capitalized in accordance with GAAP for the rental or hire of any
real or personal property, except leases which do not in the aggregate require the Company to make
scheduled payments to the lessors in any fiscal year of the Company in excess of $100,000.00.



 









 





			
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          (J) Changes to Operating Agreements. Amend or otherwise make any material changes to the
Company’s Articles of Organization, Operating Agreement, and ethanol and distillers grain
marketing contracts.



          (K) Dividends, Etc. Declare or pay any dividends, or make any distribution of assets to the
member/owners, or purchase, redeem, retire or otherwise acquire for value any of its equity, or
allocate or otherwise set apart any sum for any of the foregoing, except that for each fiscal
year commencing with the fiscal year ending 2006, a distribution may be made to the Company’s
members/owners of up to 40% of the net profit (according to GAAP) for such fiscal year after
receipt of the audited financial statements for the pertinent fiscal year, provided that the
Company has been and will remain in compliance with all loan covenants, terms and conditions.
Furthermore, with respect to fiscal year ending 2006 and each subsequent fiscal year, a
distribution may be made to its members/owners in excess of 40% of the net profit for such fiscal
year if the Company has made the required “Free Cash Flow” payment to Agent for such fiscal
year as provided in Construction and Term Loan Supplement dated Match 24, 2005, and
numbered R10218TO1 and any renewals, restatements and amendments thereof, and will remain in
compliance with all other loan covenant, terms and conditions.



     SECTION 11. Financial Covenants. Unless otherwise agreed to in writing, while this
agreement is in effect:



          (A) Working Capital. The Company will have at the end of each period for which financial
statements are required to be furnished pursuant to Section 9(H) hereof, an excess of current
assets over current liabilities (both as determined in accordance with GAAP consistently
applied) of not less than: (i) $4,500,000.00 at the earlier of plant start-up, upon
certification of a successful “performance test,” or by May 31, 2006; and (ii) in any event,
increasing to $5,000,000.00 at fiscal year ending 2007, and thereafter, except that in
determining current assets, any amount available under the Revolving Term Loan Supplement hereto
(less the amount that would be considered a current liability under GAAP if fully advanced) may
be included.



          (B) Net Worth. The Company will have at the end of each period for which financial
statements are required to be furnished under Section 9(H) hereof an excess of total assets over
total liabilities (both as determined in accordance .with GAAP consistently applied)
of not less than: (i) $36,000,000.00; (ii) increasing to $39,500,000.00 at fiscal year ending
2006; and (iii) increasing to $42,000,000.00 at fiscal year ending 2007 and
thereafter.



          (C) Debt
Service Coverage Ratio. The Company will have at the end of each fiscal
year of the Company, effective with the fiscal year ending 2007, a “Debt Service
Coverage Ratio” (as defined. below) for that year of not less than 1.25 to 1.00. For
purposes hereof, the term “Debt Service Coverage Ratio”
shall mean the following (all
as calculated for the most current year-end in accordance with GAAP consistently applied): (i)
net income (after taxes), plus depreciation and amortization; divided by (ii) all current portion
of long term debt for the prior period (previous year-end).



     SECTION 12. Events of Default. Each of the following shall constitute an “Event of
Default” under this agreement:



          (A) Payment Default. The Company should fail to make any payment to Agent, or purchase
any equity in Farm Credit, when due.



 









 





			
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          (B) Representations and Warranties. Any representation or warranty made or deemed made by the
Company herein or in any Supplement, application, agreement, certificate, or other document related
to or furnished in connection with this agreement or any Supplement, shall prove to have been false
or misleading in any material respect on or as of the date made or deemed made.



          (C) Certain Affirmative Covenants. The Company or, to the extent required hereunder, any
Subsidiary should fail to perform or comply with Sections 9(A) through 9(H)(ii), 9(H)(vi) through
9(H)(viii) or any reporting covenant set forth in any Supplement hereto, and such failure continues
for 15 days after written notice thereof shall have been delivered by Agent to the Company.



          (D) Other Covenants and Agreements. The Company or, to the extent required hereunder, any
Subsidiary should fail to perform or comply with any other covenant or agreement contained herein
or in any other Loan Document or shall use the proceeds of any loan for an unauthorized purpose.



          (E) Cross-Default. The Company should, after any applicable grace period, breach or be in
default under the terms of any other agreement between the Company and Farm Credit.



          (F) Other Indebtedness. The Company or any Subsidiary should fail to pay when due any
indebtedness to any other person or entity for borrowed money or any long-term obligation for the
deferred purchase price of property (including, any capitalized lease), or any other event occurs
which, under any agreement or instrument relating to such indebtedness or obligation, has the
effect of accelerating or permitting the acceleration of such indebtedness or obligation, whether
or not such indebtedness or obligation is actually accelerated or the right to accelerate is
conditioned on the giving of notice, the passage of time, or otherwise.



          (G) Judgments. A judgment, decree, or order for the payment of money shall be rendered
against the Company or any Subsidiary and either; (i) enforcement proceedings shall have been
commenced, or (ii) a Lien prohibited under Section 10(B) hereof shall have been obtained, or (iii)
such judgment, decree, order, or Lien shall continue unsatisfied and in effect for a period of 20
consecutive days without being vacated, discharged, satisfied, or stayed pending appeal.



          (B) .Insolvency; Etc. The Company or any Subsidiary shall: (i) become insolvent or
shall generally not, or shall be unable. to, or shall admit in writing its inability
to, pay its debts as they come due; or (ii) suspend its business operations or a material part
thereof or make an assignment for the benefit of creditors; or (iii) apply for, consent
to, or acquiesce in the appointment of a trustee, receiver, or other custodian for it or any of
its property or, in the absence of such application, consent, or acquiescence, a trustee,
receiver, or other custodian is so appointed; or (iv) commence or have commenced against it any
proceeding” under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution,
or liquidation Law of any jurisdiction.



          (I) Material Adverse Change. Any material adverse change occurs, as reasonably determined
by Agent, in the Company’s financial condition, results of operation, or ability to perform its
obligations hereunder or under any instrument or document contemplated hereby.



     SECTION 13. Remedies. Upon the occurrence and during the continuance of an Event of Default
or any Potential Default, Farm Credit shall have no obligation to continue to extend credit to
the



 









 





			
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Lincolnway Energy, LLC 

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Company and may discontinue doing so at any time without prior notice. For all purposes
hereof, the term “Potential Default” means the occurrence of any event which, with
the passage of time or the giving of notice or both would become an Event of Default. In
addition, upon the occurrence and during the continuance of any Event of Default, Farm Credit
or Agent may, upon notice to the Company, terminate any commitment and declare the entire
unpaid principal balance of the loans, all accrued interest thereon, and all other amounts
payable under this agreement, all Supplements, and the other Loan Documents to be immediately
due and payable. Upon such a declaration, the unpaid principal balance of the loans and all
such other amounts shall become immediately due and payable, without protest, presentment,
demand, or further notice of any kind, all of which are hereby expressly waived by the
Company. In addition, upon such an acceleration:




          (A) Enforcement. Farm Credit or Agent may proceed to protect, exercise, and enforce such
rights and remedies as may be provided by this agreement, any other Loan Document or under
Law. Each and every one of such rights and remedies shall be cumulative and may be exercised
from time to time, and no failure on the part of Farm Credit or Agent to exercise, and no
delay in exercising, any right or remedy shall operate as a waiver thereof, and no single or
partial exercise of any right or remedy shall preclude any other or future exercise thereof,
or the exercise of any other right. Without limiting the foregoing, Agent may hold and/or set
off and apply against the Company’s obligations to Farm Credit cash collateral held by
Farm Credit or Agent; or any balances held by Farm Credit or Agent for the
Company’s account (whether or not such balances are then due).



               (8) Application of Funds. Agent may apply all payments received by it to the Company’s
obligations to Farm Credit in such order and manner as Agent may elect in its sole
discretion.



In addition to the rights and remedies set forth above: (i) if the. Company fails
to purchase any equity in Farm Credit when required or fails to make any payment to Agent when
due, then at Agent’s option in each instance, such payment shall bear.
interest from the date due to the date paid at 4% per annum in excess of the rate(s) of
interest that would otherwise be in effect on that loan; and (ii) after the maturity of any
loan (whether as a result of acceleration or otherwise), the unpaid principal balance of such
loan (including without limitation, principal, interest, fees and expenses) shall,
automatically bear interest at 4% per annum in excess of the rate(s) of interest that would
otherwise be in effect on that loan. All interest provided for herein shall be payable on
demand and shall be calculated on the basis of a year consisting of 360 days.



     SECTION 14. Broken Funding Surcharge. Notwithstanding any provision contained in any
Supplement giving the Company the right to repay any loan prior to the date it would otherwise
be due and payable, the Company agrees that in the event it repays any fixed rate balance prior
to its scheduled due date or prior to the last day of the fixed rate period applicable thereto
(whether such payment is made voluntarily, as a result of an acceleration, or otherwise), the
Company will pay to Agent a surcharge in an amount equal to the .greater of: (i) an
amount that would result in Farm Credit, Agent, and all subparticipants being made whole (on a
present value basis) for the actual or imputed funding losses incurred by Farm Credit, Agent,
and all subparticipants as a result thereof; or (ii) $300.00. Notwithstanding the foregoing, in
the event any fixed rate balance is repaid as a .result of the Company refinancing
the loan with another lender or by other means, then in lieu of the foregoing, the Company
shall pay to Agent a surcharge in an amount sufficient (on a present value basis) to enable
Farm Credit, Agent, and all subparticipants to maintain the yield they would have earned during
the fixed rate period on the amount repaid. Such surcharges will be calculated in accordance
with methodology established by



 









 





			
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Farm Credit, Agent, and all subparticipants (copies of which will be made available to the
Company upon request).




     SECTION 15. Complete Agreement, Amendments. This agreement, all Supplements, and all
other instruments and documents contemplated hereby and thereby, are intended by the
parties to be a complete and final expression of their agreement. No amendment or modification
of this Agreement shall be effective unless in writing signed by both parties hereto. No
waiver of any provision hereof, and no consent to any departure by either party herefrom, shall
be effective unless approved in writing by the other party, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose for which given.
In the event this agreement is amended or restated, each such amendment or restatement shall be
applicable to all Supplements hereto.



     SECTION 16. Other Types of Credit. From time to time, Farm Credit may extend other types
of credit to or for the account of the Company to expedite or facilitate the loans extended
hereunder. In the event the parties desire to do so under the terms of this agreement, such
extensions of credit may be set forth in any Supplement hereto and this agreement shall be
applicable thereto.



     SECTION 17. Applicable Law. Except to the extent governed by applicable federal law, this
agreement and each Supplement shall be governed by and construed in accordance with the laws of
the State of Colorado, without reference to choice of law doctrine.



     SECTION 18. Notices. All notices hereunder shall .be in
writing and shall be deemed to be duly given upon delivery if personally delivered or sent by
telegram or facsimile transmission, or three days after mailing if sent by express, certified or
registered mail, to the parties at the following addresses (or such other address for a
party as shall be specified by like notice):



	 	 	 
	If to Agent, as follows:

	 	If to the Company, as follows:
	 
	 	 
	For general correspondence purposes:

	 	Lincolnway Energy, LLC
	CoBank, ACB

	 	975 West Lincoln Highway, Suite B
	P.O. Box 5110

	 	Nevada, Iowa 50201
	Denver, Colorado 80217-5110
	 	 
	 
	 	 
	For direct delivery purposes, when. desired:
	 	 
	CoBank, ACB.
	 	 
	5500 South Quebec Street
	 	 
	Greenwood Village, Colorado 80111-1914

	 	Attention: Project Coordinator / Manager
	 

	 	Fax No.: (515) 382-2417
	 
	 	 
	Attention: Credit Information Services 
	 	 
	Fax No.: (303) 224-6101
	 	 






     SECTION 19. Taxes and Expenses. To the extent allowed by law, the Company agrees to pay all
reasonable out-of-pocket costs and expenses (including the fees and expenses of counsel retained or
employed by Agent, including expenses of in-house counsel of Agent) incurred by Agent and any
participants from Farm Credit in connection with the administration, collection, and enforcement of
this agreement and the other Loan Documents, including, without limitation, all costs and expenses
incurred



 









 





			
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Lincolnway Energy, LLC

Nevada, Iowa
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in perfecting, maintaining, determining the priority of, and releasing any security for the
Company’s obligations to Farm Credit, and any stamp, intangible, transfer, or like tax payable
in connection with this agreement or any other Loan Document.




     SECTION 20. Effectiveness and Severability. This agreement shall continue in effect
until: (i) all indebtedness and obligations of the Company under this agreement, all Supplements,
and all other Loan Documents shall have been paid or satisfied; (ii) Agent has no commitment to
extend credit to or for the account of the Company under any Supplement; and (iii) either party
sends written notice to the other terminating this agreement. Any provision of this agreement or
any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or enforceability without
invalidating the remaining provisions hereof or thereof.



     SECTION 21. Successors and Assigns. This agreement, each Supplement, and the other Loan
Documents shall be binding upon and inure to the benefit of the Company and Farm Credit and
their respective successors and assigns, except that the Company may not assign or transfer its
rights or obligations under this agreement, any Supplement or any other Loan Document without
the prior written consent of Agent.



     SECTION 22. Participations, Etc. From time to time, Farm Credit may sell to one or more
banks, financial institutions or other lenders a participation in one or more of the
loans or other extensions of credit made pursuant to this agreement. However, no such
participation shall relieve Farm Credit of any commitment made to the Company under any
Supplement hereto. In connection with the foregoing, Farm Credit may disclose information
concerning the Company and its Subsidiaries to any participant or prospective participant,
provided that such participant or prospective participant agrees to keep such information
confidential. Farm Credit agrees that all Loans that are made by Farm Credit and that are
retained for its own account or repurchased may be entitled to patronage distributions in
accordance with the bylaws of Farm Credit and its practices and procedures related to patronage
distribution. Accordingly, all Loans that are included in a sale of participation interest and
not retained or repurchased shall not be entitled to patronage distributions from Farm Credit. A
sale of participation interest may include certain voting rights of the participants regarding
the loans hereunder (including without limitation the administration, servicing and enforcement
thereof). Farm Credit agrees to give written notification to the Company of any sale of
participation interests.



     SECTION 23. Administrative Fee. The Company agrees to pay to Agent on November 1, 2005,
and on each November 1 thereafter, for as long as the Company has commitments from Farm Credit,
an administrative fee in the amount of $25,000.00.



     SECTION 24. Counterparts. This Agreement may be executed in any number of counterparts and
by different parties to this Agreement .in separate counterparts, each of which, when
so executed, shall be deemed to be an original and all of which taken together shall constitute
one and the same Agreement.



 









 






			
	Master Loan Agreement R10218

Lincolnway Energy, LLC

Nevada, Iowa
	 	-15-






	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	FARM CREDIT SERVICES OF	 	LINCOLNWAY ENERGY, LLC
	AMERICA, FLCA	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By: /s/ Jeremy
Wilhelm

	 	 
	 	By:
/s/ William
D. Couser
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Title: VP

	 	 	 	Title: President