Document:

exv10w2

 

EXHIBIT 10.2

LOAN AGREEMENT

BY AND BETWEEN

CITY OF GRANITE FALLS, MINNESOTA

AND

GRANITE FALLS ENERGY, LLC

	 	 	 
	This document drafted by:

	 	BRIGGS AND MORGAN
	 

	 	Professional Association
	 

	 	2200 First National Bank Building
	 

	 	St. Paul, Minnesota 55101

 

 

LOAN AGREEMENT

	 	 	 	 	 
	 	 	Page
	ARTICLE I   DEFINITIONS
	 	 	2	 
	Section 1.1     Definitions
	 	 	2	 
	 
	 	 	 	 
	ARTICLE II
  REPRESENTATIONS OF THE City
	 	 	5	 
	Section 2.1     Representations and Warranties of the City
	 	 	5	 
	 
	 	 	 	 
	ARTICLE III
  THE LOAN
	 	 	6	 
	Section 3.1     City Loan
	 	 	6	 
	Section 3.2     Terms of the Loan
	 	 	6	 
	Section 3.3     Conditions to Making the Loan
	 	 	7	 
	Section 3.4     Disbursement
	 	 	7	 
	Section 3.5     Prepayment
	 	 	9	 
	Section 3.6     Business Subsidies Act
	 	 	9	 
	Section 3.7     Employment Documentation
	 	 	10	 
	Section 3.8     Low and Moderate Income Requirement and Documentation
	 	 	11	 
	Section 3.9     Labor Standards
	 	 	11	 
	Section 3.10   Non-Minnesota Construction Contracts
	 	 	11	 
	Section 3.11   Lobbying
	 	 	11	 
	Section 3.12   Annual Financial Statements
	 	 	11	 
	Section 3.13   Workers Compensation Insurance
	 	 	12	 
	Section 3.14   Business with the State of Minnesota/State Tax Laws
	 	 	12	 
	Section 3.15   Conflict of Interests; Representatives Not Individually Liable
	 	 	12	 
	Section 3.16   Default Reporting
	 	 	12	 
	 
	 	 	 	 
	ARTICLE IV
  REPRESENTATIONS AND COVENANTS oF DEVELOPER
	 	 	13	 
	Section 4.1     Representations and Warranties of the Developer
	 	 	13	 
	Section 4.2     Release and Indemnification Covenants
	 	 	14	 
	 
	 	 	 	 
	ARTICLE V
  EVENTS OF DEFAULT
	 	 	16	 
	Section 5.1     Events of Default Defined
	 	 	16	 
	Section 5.2     Remedies on Default
	 	 	16	 
	Section 5.3     No Remedy Exclusive
	 	 	17	 
	Section 5.4     No Implied Waiver
	 	 	17	 
	Section 5.5     Agreement to Pay Attorneys’ Fees and Expenses
	 	 	17	 
	 
	 	 	 	 
	ARTICLE VI
  ADDITIONAL PROVISIONS
	 	 	18	 
	Section 6.1     Titles of Articles and Sections
	 	 	18	 
	Section 6.2     Notices and Demands
	 	 	18	 
	Section 6.3     Counterparts
	 	 	18	 
	Section 6.4     Modification
	 	 	18	 
	Section 6.5     Law Governing
	 	 	18	 
	Section 6.6     City Approvals
	 	 	19	 
	Section 6.7     Termination
	 	 	19	 
	 
	 	 	 	 
	EXHIBIT A Legal Description of Development Property
	 	 	A-1	 

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	 	 	 	Page
	EXHIBIT B 
	 	Form of Legal Opinion of Developer’s Counsel	 	B-1	 
	 
	 	 	 	 	 
	EXHIBIT C 
	 	County Loan Amortization Schedule	 	C-1	 
	 
	 	 	 	 	 
	EXHIBIT D 
	 	MIF Loan Amortization Schedule	 	D-1	 
	 
	 	 	 	 	 
	EXHIBIT E 
	 	Western Minnesota RLF Loan Amortization Schedule	 	E-1	 
	 
	 	 	 	 	 
	EXHIBIT F 
	 	Equipment	 	F-1	 
	 
	 	 	 	 	 
	EXHIBIT G 
	 	Default Report	 	G-1	 

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LOAN AGREEMENT

     THIS AGREEMENT, made as of the 1st day of February, 2006, by and between City of Granite
Falls, Minnesota (the “City”), a municipal corporation and political subdivision of the State of
Minnesota, and Granite Falls Energy, LLC, a Minnesota limited liability company (the “Developer”):

     WITNESSETH:

     WHEREAS, the City believes that the development of a certain Project as more fully set forth
in, and pursuant to the terms of, this Agreement, and fulfillment of this Agreement, are vital and
are in the best interests of the City, will result in preservation and enhancement of the tax base,
provide employment opportunities and are in accordance with the public purpose and provisions of
the applicable state and local laws and requirements under which the Project has been undertaken
and is being assisted;

     WHEREAS, the City is authorized pursuant to Minnesota Statutes, Section 469.192 and Sections
469.001 through 469.047 to make a loan to the Developer for the purpose of undertaking the Project;

     WHEREAS, the requirements of the Business Subsidy Law, Minnesota Statutes, Section 116J.993
through 116J.995, apply to this Agreement;

     WHEREAS, the City has adopted criteria for awarding business subsidies that comply with the
Business Subsidy Law, after a public hearing for which notice was published; and

     WHEREAS, the City Council has approved this Agreement as a subsidy agreement under the
Business Subsidy Law.

     NOW, THEREFORE, in consideration of the premises and the mutual obligations of the parties
hereto, each of them does hereby covenant and agree with the other as follows:

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ARTICLE I

DEFINITIONS

     Section 1.1 Definitions. All capitalized terms used and not otherwise defined herein
shall have the following meanings unless a different meaning clearly appears from the context:

     Agreement means this Agreement, as the same may be from time to time modified, amended
or supplemented;

     Bank means First National Bank of Omaha, a national banking association established in
Omaha, Nebraska;

     Benefit Date means the date that the Developer puts the Equipment into service;

     City means Granite Falls, Minnesota, or any successor to its functions;

     Construction Plans means the plans, specifications, drawings and related documents of
the construction work to be performed by the Developer on the Project and the Development Property
in such form as required to obtain a building permit for the Project from the City according to the
stated procedures of the City;

     County Loan means a loan from the County in the amount of $100,000 pursuant to the
Redevelopment Plan, the Joint Powers Agreement and Minnesota Statutes, Section 469.041;

     County means Chippewa County, Minnesota;

     DEED means the Minnesota Department of Employment and Economic Development;

     Developer means Granite Falls Energy, LLC, a Minnesota limited liability company, its
successors and assigns;

     Development Property means the real property (including any improvements thereon)
legally described in Exhibit A of this Agreement;

     EDA means Granite Falls Economic Development Authority;

     Equipment means the equipment listed in Exhibit F and acquired by the Developer in
connection with the Project;

     Event of Default means any of the events described in Section 5.1 of this Agreement;

     Grant Agreement means the Grant Agreement # CDAP-04-0041-H-FY05 between the City and
the State of Minnesota acting through DEED, dated as of December 29, 2004.

     Interest Payment Date means, with respect to the MIF Loan, the 15th day of
each March, June, September and December, beginning June 15, 2006, and with respect to the County
Loan

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and Western Minnesota RLF Loan, the 15th day of each June and December, beginning
June 15, 2006;

     JOBZ Agreement means the Job Opportunity Building Zone Business Subsidy Agreement,
between the City and the Developer, dated as of October 19, 2004 as the same may be from time to
time modified, amended or supplemented;

     Joint Powers Agreement means the Joint Powers and Participation Agreement pursuant to
which the County has contributed the proceeds of the County Loan, the Western MN RLF has
contributed the proceeds of the Western Minnesota RLF Loan to the Project and the City has
contributed the proceeds of the MIF Loan to the Project;

     Loan Repayments means the payments made or to be made by the Developer pursuant to
Section 3.2(c) of this Loan Agreement;

     MIF Loan means a loan from the City in the amount of $500,000 pursuant to the
Redevelopment Plan, the Joint Powers Agreement and a loan received from the Minnesota Department of
Employment and Economic Development through the Minnesota Investment Fund program;

     Mortgage means the Statutory Mortgage executed by the Developer in favor of the City
and recorded against the Development Property;

     Note means the Promissory Note dated as of February 1, 2006 executed by the Developer
evidencing the Loan;

     Project means the acquisition, construction and equipping of an approximately
40,000,000 gallon per year dry mill ethanol production plant by the Developer on the Development
Property;

     Redevelopment Plan means the Redevelopment Plan, dated October 4, 2004, adopted by the
EDA in connection with the Project;

     Senior Loan Agreement means the Senior Loan Agreement by and between the Developer and
the Bank;

     State means the State of Minnesota;

     Subordination Agreement means the Subordination Agreement among the Developer, the
City and the Bank;

     Western Minnesota RLF Loan means a loan from the Western MN RLF through its Revolving
Loan Fund program in the amount of $100,000 pursuant to the Joint Powers Agreement; and

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     Western MN RLF means The Western Minnesota Revolving Loan Fund, a Minnesota nonprofit
corporation.

4

 

ARTICLE II

REPRESENTATIONS OF THE CITY

     Section 2.1 Representations and Warranties of the City. The City makes the following
representations and warranties:

     (1) The City is a municipal corporation and a political subdivision of the State and
has the power to enter into this Agreement and carry out its obligations hereunder.

     (2) The City has provided a copy of its policies and procedures related to the MIF Loan
and its Community Fair Housing/Equal Opportunity Profile to DEED as required by the Grant
Agreement; and the City is not otherwise in default under the Grant Agreement.

     (3) The Redevelopment Plan was adopted and approved in accordance with the terms of
Minnesota Statutes, Sections 469.090 through 469.1082.

     (4) To finance a portion of the costs of the Equipment for the Project to be undertaken
by the Developer, the City proposes, subject to the further provisions of this Agreement, to
loan the proceeds of the MIF Loan, the County Loan and the Western Minnesota RLF Loan to the
Developer as further provided in this Agreement.

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ARTICLE III

THE LOAN

     Section 3.1 City Loan.

     (1) Subject to satisfaction of the conditions set forth in this Article III, the City
agrees to loan the Developer the proceeds of the MIF Loan, the County Loan and the Western
Minnesota RLF Loan in an amount not to exceed $700,000 to be used to pay a portion of the
costs of the Equipment (the “Loan”).

     (2) The Loan shall occur upon the receipt by the City of the MIF Loan, the County Loan
and the Western Minnesota RLF Loan and satisfaction of the conditions set forth in Section
3.3.

     Section 3.2 Terms of the Loan.

     (1) The Developer acknowledges that the City is loaning $700,000 to the Developer (the
“Loan”).

     (2) The advanced and unpaid principal amount of the County Loan shall bear interest
from the date of this Agreement at the rate of three percent (3.00%) per annum. Interest
shall be computed on the basis of a 360 day year consisting of twelve (12) 30-day months.

     (3) The advanced and unpaid principal amount of the MIF Loan shall bear interest from
the date of this Agreement at the rate of one percent (1.00%) per annum. Interest shall be
computed on the basis of a 360 day year consisting of twelve (12) 30-day months.

     (4) The advanced and unpaid principal amount of the Western Minnesota RLF Loan shall
bear interest from the date of this Agreement at the rate of five percent (5.00%) per annum.
Interest shall be computed on the basis of a 360 day year consisting of twelve (12) 30-day
months.

     (5) The Developer covenants and agrees to repay the Loan, together with interest and
premium, if any, in Loan Repayments to the City in immediately available funds, as follows:

         (a) on or before each Interest Payment Date, commencing June 15, 2006, through and
including June 15, 2021, principal of and accrued interest on the County Loan, in 31 equal
semi-annual installments as set forth in the attached Exhibit C; provided such Exhibit C may
be adjusted after the date hereof to reflect the Developer’s actual draw schedule; plus

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        (b) on or before each Interest Payment Date, commencing June 15, 2006, through and
including June 15, 2014, principal of and accrued interest on the MIF
Loan, in 33 equal quarterly installments as set forth in the attached Exhibit D;
provided such Exhibit D may be adjusted after the date hereof to reflect the Developer’s
actual draw schedule; plus

         (c) on or before each Interest Payment Date, commencing June 15, 2006, through and
including June 15, 2016, principal of and accrued interest on the Western Minnesota RLF
Loan, in 21 equal semi-annual installments as set forth in the attached Exhibit E; provided
such Exhibit E may be adjusted after the date hereof to reflect the Developer’s actual draw
schedule.

     Section 3.3 Conditions to Making the Loan. As conditions precedent to the making of
the Loan by the City:

     (1) The Developer shall provide the City an executed Mortgage that when filed will be a
second mortgage lien on the Development Property;

     (2) The Developer shall provide the City the executed Note;

     (3) The Developer shall provide the City an executed opinion of counsel to the
Developer in the form attached hereto as Exhibit B;

     (4) The Developer shall be in material compliance with all the terms and provisions of
this Agreement;

     (5) The Developer shall have submitted to the City Construction Plans for the Project
and such Construction Plans shall have been approved by the City;

     (6) The Developer shall have obtained a building permit for the Project; and

     (7) The Developer shall furnish the City evidence that the Developer has obtained
construction financing for the Project in an amount sufficient, together with equity
commitments, to complete the Project in conformance with the Construction Plans.

     Section 3.4 Disbursement.

     (1) County Loan. Upon receipt of the County Loan proceeds, the City shall
retain $65,000 to pay $30,000 of administrative costs and $35,000 of engineering costs in
connection with the Project. In addition, the City shall disburse the remaining County Loan
proceeds directly to the Developer for the acquisition of Equipment eligible to be financed
by the County Loan as indicated on Exhibit F hereto. Upon the acquisition of such Equipment
the Developer shall submit to the City (1) a brief description of the Equipment purchased
with such funds, (2) bills, receipts, invoices, or other documents reasonably acceptable to
the City evidencing the acquisition of such Equipment in an

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amount equal to $35,000, and (3)
a certificate of the Developer to the effect that the Equipment purchased with the proceeds
of the County Loan were not the subject of any other request for disbursement pursuant to
this Agreement. The Developer agrees to submit to the City the above mentioned attachments in form and substance reasonably
satisfactory to the City and such other documents and certificates as the City may
reasonably request to evidence the proper expenditure of the County Loan proceeds for the
purposes of payment of the costs of the Equipment. The City has no duty to ascertain the
correctness of any documents submitted in connection with any direction to disburse funds.

     (2) Western Minnesota RLF Loan. Upon receipt of a written request from the
Developer, approved by the City, setting forth the following: (1) the amount to be
disbursed, (2) the address to which such funds are to be forwarded, (3) a brief description
of the Equipment purchased with such funds, (4) bills, receipts, invoices, or other
documents reasonably acceptable to the City evidencing that the Developer has acquired
Equipment eligible to be financed by the Western Minnesota RLF Loan as indicated on Exhibit
F hereto in an amount equal to $100,000, and (5) a certificate of the Developer to the
effect that the amounts requested to be disbursed were properly incurred in connection with
the Project and were not the subject of any previous request for disbursement, the City
shall forward such request and documentation to the Western MN RLF. Upon receipt of the
proceeds of the Western Minnesota RLF Loan, the City shall disburse such funds to the
Developer in reimbursement for the costs of such eligible Equipment; provided that such
documentation must be submitted no later than February 15, 2006 and no disbursement of
Western Minnesota RLF Loan proceeds shall be made after February 28, 2006. Equipment other
than the rail car mover listed in Exhibit F may be substituted if the rail car mover will
not be acquired by the Developer prior to February 28, 2006. The City has no duty to
ascertain the correctness of any documents submitted in connection with any direction to
disburse funds.

     (3) MIF Loan. Upon receipt of (i) a written request from the Developer,
approved by the City, setting forth the following: (1) the amount to be disbursed, (2) the
address to which such funds are to be forwarded, (3) a brief description of the Equipment
purchased with such funds, (4) bills, receipts, invoices, or other documents reasonably
acceptable to the City evidencing that the Developer has acquired new Equipment eligible to
be financed by the MIF Loan as indicated on Exhibit F hereto in an amount equal to $500,000,
and (5) a certificate of the Developer to the effect that the amounts requested to be
disbursed were properly incurred in connection with the Project and were not the subject of
any previous request for disbursement, together with (ii) evidence of substantial completion
of the Project, (iii) evidence that, except for a reasonable retainage, substantially all of
the proceeds of the construction financing under the Senior Loan Agreement and the
approximately $24,000,000 equity contribution have been disbursed so that the proceeds of
the MIF Loan represent not more than 1% of the funds disbursed for the cost of the Project
as of the date requested, and (iv) a certificate of the Developer to the effect that there
has been no adverse change in the Developer’s financial condition, organization, operations,
or ability to repay the MIF Loan, City shall forward

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such request and documentation to DEED.
Upon receipt of the proceeds of the MIF Loan, the City shall disburse such funds to the
Developer in reimbursement for the costs of such eligible Equipment.

     Section 3.5 Prepayment.

     (1) Prepayment at Option of Developer. Subject to the terms of the
Subordination Agreement so long as any portion of the loan under the Senior Loan Agreement
is outstanding, the Developer may at its option and is encouraged to prepay the Loan, in
whole or in part, on any date by paying the principal, interest and premium, if any, then
due. Any partial prepayment shall be applied first against the accrued interest and then
against the principal amounts due on a pro rata basis according to the outstanding principal
balance of each of the County Loan, the MIF Loan and the Western Minnesota RLF Loan.

     (2) Mandatory Prepayment. Subject to the terms of the Subordination Agreement
so long as any portion of the loan under the Senior Loan Agreement is outstanding, the
Developer shall prepay the Loan, in whole, upon any sale, transfer, assignment or lease of
the Project or if the Developer dissolves or otherwise disposes of all or substantially all
of its assets, or consolidates with or merges into another corporation or other business
entity or permits any other corporation or other business entity to consolidate with or
merge into it unless the City consents, in writing, to the assignment and assumption of this
Agreement by any successor entity.

     Section 3.6 Business Subsidies Act.

     (1) In order to satisfy the provisions of Minnesota Statutes, Sections 116J.993 to
116J.995 (the “Business Subsidies Act”), the Developer acknowledges and agrees that the
amount of the “Business Subsidy” granted to the Developer under this Agreement is the amount
of the Loan, and that the Business Subsidy is needed because the Project is not sufficiently
feasible for the Developer to undertake without the Business Subsidy. The public purpose of
the Business Subsidy is to develop new jobs within the City and the County and to develop an
ethanol production facility in the City. The Developer agrees that it will meet the
following goals (the “Goals”): It will create at least 10 new full-time equivalent
positions at the Project at a wage of at least $12.00 per hour within fourteen months of the
Benefit Date and at least 20 additional new full-time equivalent positions at the Project at
an average wage of at least $12.00 per hour within two years of the Benefit Date for a total
of 30 full-time equivalent jobs within two years of the Benefit Date. The City agrees that
jobs created on or after May 1, 2005 may be included in the total number of jobs required to
be created pursuant to this Section 3.6(1). The Developer certifies that as of the date
hereof the Developer has created 30 full-time equivalent jobs at an average wage of at least
$12.00 per hour in satisfaction of this Section 3.6(1).

     (2) If the Goals are not met, the Developer agrees to repay all or a part of the
Business Subsidy to the City, plus interest (“Interest”) set at the implicit price deflator

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defined in Minnesota Statutes, Section 275.70, Subdivision 2, accruing from and after the
Benefit Date, compounded semiannually. If the Goals are met in part, the Developer will
repay a portion of the Business Subsidy (plus Interest) determined by multiplying the
Business Subsidy by a fraction, the numerator of which is the number of jobs in the Goals
which were not created at the wage level set forth above and the denominator of which
is 30 (i.e. number of jobs set forth in the Goals in (1) above).

     (3) The Developer agrees to (i) report its progress on achieving the Goals to the City
until the later of the date the Goals are met or two years from the Benefit Date, or, if the
Goals are not met, until the date the Business Subsidy is repaid, (ii) include in the report
the information required in Minnesota Statutes, Section 116J.994, Subdivision 7 on forms
developed by DEED, and (iii) send completed reports to the City. The Developer agrees to
file these reports no later than March 1 of each year commencing March 1, 2006, and within
30 days after the deadline for meeting the Goals. The City agrees that if it does not
receive the reports, it will mail the Developer a warning within one week of the required
filing date. If within 14 days of the post marked date of the warning the reports are not
made, the Developer agrees to pay to the City a penalty of $100 for each subsequent day
until the report is filed up to a maximum of $1,000.

     (4) The Developer agrees to continue operations of the Project for at least five (5)
years after the Benefit Date.

     (5) The Developer will receive financial assistance for the Project from the City
pursuant to this Agreement and certain tax exemptions and job credits pursuant to the Job
Opportunity Building Zone Law (Minnesota Statutes, Sections 469.310 through 469.320)
pursuant to the JOBZ Agreement.

     (6) There is no parent corporation of the Developer.

     Section 3.7 Employment Documentation. In addition to the reporting required pursuant
to Section 3.5, the Developer shall annually complete and provide to the City notification of
employment of hiring each new permanent employee for inclusion in the City’s annual Progress Report
to DEED. This notification requirement must be provided to the City no later than October 15 of
each year and will not be necessary after October 15, 2008, provided the employment objectives set
forth in Section 3.5(1) have been met. This information must include:

     (1) Permanent jobs created.

     (2) Job title per job.

     (3) Date employee(s) hired.

     (4) Hourly wage.

     (5) Hourly value of benefits paid.

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     (6) Benefits.

     Section 3.8 Low and Moderate Income Requirement and Documentation. The Developer
agrees to provide evidence that at a minimum, 51% of the permanent jobs created are made available
to (i.e. require not more than a high school diploma or one year’s experience) or
filled by low and moderate income persons per Section 8 income guidelines. To meet this
requirement, the Developer agrees that it will have each new employee complete a Job Information
Form (prepared by DEED and available from the City) to self-certify to the family income. Twenty
percent of the new employees incomes’ must be verified. If 51% of the jobs are not filled by low
and moderate income persons, the Developer will be required to repay to the City the remaining
amount of the MIF Loan balance on an accelerated schedule. The Developer certifies that as of the
date hereof the Developer has made 23 of the 30 full-time equivalent jobs required to be created
pursuant to Section 3.6(1) available to low and moderate income persons and 11 of the 30 required
jobs have been filled by low and moderate income persons in satisfaction of this Section 3.8.

     Section 3.9 Labor Standards. No MIF Loan proceeds shall be used for construction or
rehabilitation of the Project, or more than an incidental amount of installation ($2,000 or more)
of the Equipment items financed in whole or in part with MIF Loan proceeds because the Developer
has not complied with the following statutory provisions in connection with the construction of the
Project: Davis-Bacon Act, Contract Work Hours and Safety Standards Acts, Copeland Act
(anti-kickback), and Fair Labor Standards Act.

     Section 3.10 Non-Minnesota Construction Contracts. The Developer must comply with
Minnesota Statutes, Section 290.9705, by either:

     (1) depositing with the State, eight percent of every payment made to non-Minnesota
construction contractors where the contract exceeds $100,000; or

     (2) receiving an exemption from this requirement from the Minnesota Department of
Revenue.

     Section 3.11 Lobbying. The Developer must not use MIF Loan proceeds to pay any person
for influencing or attempting to influence an officer or employee of a federal agency, a member of
Congress, an officer or employee of Congress, or any employee of a member of Congress in connection
with the awarding of any federal contract, the making of a Federal grant, the entering into of any
cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any
federal contract, grant, loan, or cooperative agreement. If the Developer uses non-federal funds
to conduct any of the aforementioned activities, the Developer must complete and submit Standard
Form LLL, A Disclosure Form to Report Lobbying (available from DEED).

     Section 3.12 Annual Financial Statements. For the term of the MIF Loan, the Developer
must submit the most recent annual financial statement prepared in accordance with generally
accepted accounting principals. The annual financial statements shall include a profit and loss
statement, balance sheet, statement of cash flow, notes and an opinion from the

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accountants of such
statements acceptable to the City. This information must be submitted within 120 days after the
end of the Developer’s fiscal year.

     Section 3.13 Workers Compensation Insurance. The Developer has obtained workers’
compensation insurance as required by Minnesota Statutes, Section 176.181, subd. 2. The
Developer’s workers compensation insurance information is as follows:

	 	 	 	 	 	 	 	 	 
	 

	 	 	(1	)	 	Company Name:
	 	Transcontinental Insurance Company
	 
	 	 	 	 	 	 	 	 
	 

	 	 	(2	)	 	Policy Number:
	 	C2077854546
	 
	 	 	 	 	 	 	 	 
	 

	 	 	(3	)	 	Local Agent:
	 	Ellen Gloud, IMA of Kansas, Inc.

     Section 3.14 Business with the State of Minnesota/State Tax Laws. The Developer is
required by Minnesota Law to provide its Minnesota tax identification number if it does business
with the State of Minnesota. This information may be used in the enforcement of Federal and State
tax laws. Supplying these numbers could result in an action to require the Developer to file State
tax returns and pay delinquent State tax liabilities. This Agreement will not be approved unless
these numbers are provided. These numbers will be available to Federal and State tax authorities
and State personnel involved in the payment of State obligations.

	 	 	 	 	 	 	 	 	 
	 

	 	 	(1	)	 	Minnesota Tax ID:
	 	6303468
	 
	 	 	 	 	 	 	 	 
	 

	 	 	(2	)	 	Federal Employer ID:
	 	41-1997390

     Section 3.15 Conflict of Interests; Representatives Not Individually Liable. No
officer or employee of the City may acquire any financial interest, direct or indirect, in this
Agreement, the Equipment or in any contract related to the Equipment. No officer, agent, or
employee of the City shall be personally liable to the Developer or any successor in interest in
the event of any default or breach by the City or for any amount that may become due to the
Developer or on any obligation or term of this Agreement.

     Section 3.16 Default Reporting. On or before the 15th day of each March, June,
September and December, beginning June 15, 2006, so long as the Senior Loan Agreement is in effect,
the Developer shall submit to the City a statement, substantially in the form attached as Exhibit G
and confirmed by the Bank, that no event of default or event that would constitute an event of
default by the Developer under the Senior Loan Agreement or which, with the giving or notice or
lapse of time or both, would become such an event of default, has occurred and is continuing under
the Senior Loan Agreement or any document executed in connection therewith. The Developer shall
immediately notify the City if any such event shall occur and shall provide the City a copy of any
notice from the Bank of any event of default under the Senior Loan Agreement or any document
executed in connection therewith.

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ARTICLE IV

REPRESENTATIONS AND COVENANTS OF DEVELOPER

     Section 4.1 Representations and Warranties of the Developer. The Developer makes the
following representations and warranties:

     (1) The Developer has the power to enter into this Agreement and to perform its
obligations hereunder and is not in violation of its articles, operating agreement, member
control agreement or any local, state or federal laws.

     (2) The Developer is a limited liability company validly existing under the laws of
this State and has full power and to enter into this Agreement and carry out the covenants
contained herein.

     (3) The Developer will cause the Project to be constructed in accordance with the terms
of this Agreement and all local, state and federal laws and regulations (including, but not
limited to, environmental, zoning, energy conservation, building code and public health laws
and regulations).

     (4) The Developer will obtain or cause to be obtained, in a timely manner, all required
permits, licenses and approvals, and will meet, in a timely manner, all requirements of all
applicable local, state, and federal laws and regulations which must be obtained or met
before the Project may be lawfully constructed

     (5) The construction of the Project would not be undertaken by the Developer, and in
the opinion of the Developer would not be economically feasible within the reasonably
foreseeable future, without the assistance and benefit to the Developer provided for in this
Agreement.

     (6) Neither the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby, nor the fulfillment of or compliance with the terms and
conditions of this Agreement is prevented, limited by or conflicts with or results in a
breach of, the terms, conditions or provision of any contractual restriction, evidence of
indebtedness, agreement or instrument of whatever nature to which the Developer is now a
party or by which it is bound, or constitutes a default under any of the foregoing.

     (7) The Developer will cooperate fully with the reasonable requests of the City with
respect to any litigation commenced with respect to the Project to the extent that the City
and the Developer are not adverse parties to the litigation.

     (8) The Developer will cooperate fully with the City in resolution of any traffic,
parking, trash removal or public safety problems which may arise in connection with the
construction and operation of the Project.

13

 

     (9) To the best of the Developer’s knowledge, no member, officer, of employee of the
City, or its officers, employees, designees, or agents, no consultant, member of the
governing body of the City, and no other public official of the City, who exercises or has
exercised any functions or responsibilities with respect to the Project during his or her
tenure shall have any interest, direct or indirect, in any contract or subcontract, or the
proceeds thereof, for work to be performed in connection with the Project or in any
activity, or benefit there from, which is part of the Project.

     (10) The Developer warrants that it shall keep and maintain books, records, and other
documents relating directly to the MIF Loan, and that any duly authorized representative of
DEED shall, at all reasonable times, have access to and the right to inspect, copy, audit,
and examine all such books, records, and other documents of the Developer until such time
that the City and DEED have both determined that all issues, requirements, and close-out
procedures relating to or arising out of the MIF Loan have been settled and completed.

     Section 4.2 Release and Indemnification Covenants.

        (a) The Developer releases the City, the State, DEED, the County, the Western MN RLF
and their governing body members, officers, agents, servants and employees thereof
(hereinafter, for purposes of this Section 4.2, the “Indemnified Parties”) from, covenants
and agrees that the Indemnified Parties shall not be liable for, and agrees to indemnify,
defend and hold harmless the Indemnified Parties against, any loss or damage to property or
any injury to or death of any person occurring at or about or resulting from any defect in
the Project or resulting from or occurring on the Development Property.

         (b) Except for any willful misrepresentation or any willful or wanton misconduct or any
unlawful act of the Indemnified Parties, the Developer agrees to protect and defend the
Indemnified Parties, now or forever, and further agrees to hold the Indemnified Parties
harmless, from any claim, demand, suit, action or other proceeding whatsoever by any person
or entity whatsoever arising or purportedly arising (i) from any violation of any agreement
or condition of this Agreement or the Mortgage (except with respect to any suit, action,
demand or other proceeding brought by the Developer against the City to enforce its rights
under this Agreement) or (ii) the acquisition, construction, installation, ownership, and
operation of the Project or (iii) any pollutant, contaminant or hazardous substance located
in or on the Development Property.

        (c) The Indemnified Parties shall not be liable for any damage or injury to the persons
or property of the Developer or its officers, agents, servants or employees or any other
person who may be about the Project due to any act of negligence of any person, other than
any act of negligence on the part of any such Indemnified Party or its officers, agents,
servants or employees.

         (d) All covenants, stipulations, promises, agreements and obligations of the City
contained herein shall be deemed to be the covenants, stipulations, promises,

14

 

agreements and obligations of the City, respectively, and not of any governing body
member, officer, agent, servant or employee of the City in the individual capacity thereof.

         (e) The provisions of this Section 4.2 shall survive the termination of this Agreement.

15

 

ARTICLE V

EVENTS OF DEFAULT

     Section 5.1 Events of Default Defined. The following shall be “Events of Default”
under this Agreement and the term “Event of Default” shall mean, whenever it is used in this
Agreement, any one or more of the following events:

     (1) If (a) the Developer shall fail to make any payments required under Section 3.2 of
this Agreement on the date due, or (b) any other payment due under this Agreement on or
before the date that the payment is due and such default continues for ten (10) days after
written notice given to the Developer by the City.

     (2) Failure by the Developer to substantially observe or perform any other covenant,
condition, obligation or agreement on its part to be observed or performed under this
Agreement for a period of thirty (30) days after written notice, specifying such default and
requesting that it be remedied, given to the Developer by the City.

     (3) The Developer shall:

          (a) file any petition in bankruptcy or for any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under the United
States Bankruptcy Act of 1978, as amended, or under any similar federal or state law; or

          (b) make an assignment for the benefit of its creditors; or

          (c) admit in writing its inability to pay its debts generally as they become due; or

          (d) be adjudicated a bankrupt or insolvent; or if a petition or answer proposing the
adjudication of the Developer as a bankrupt or its reorganization under any present or
future federal bankruptcy act or any similar federal or state law shall be filed in any
court and such petition or answer shall not be discharged or denied within ninety (90) days
after the filing thereof; or a receiver, trustee or liquidator of the Developer or of the
Project, or part thereof, shall be appointed in any proceeding brought against the
Developer, and shall not be discharged within ninety (90) days after such appointment, or if
the Developer shall consent to or acquiesce in such appointment.

     (4) If any event of default as that term is defined in the Senior Loan Agreement shall
occur and be continuing.

     Section 5.2 Remedies on Default. Whenever any Event of Default referred to in Section
5.1 of this Agreement occurs and is continuing, the City, as specified below, may take any one or
more of the following actions:

16

 

          (a) The City may declare immediately due and payable the unpaid principal of the Loan.

          (b) The City may suspend its performance under this Agreement until it receives
assurances from the Developer, deemed adequate by the City, that the Developer will cure its
default and continue its performance under this Agreement.

          (c) The City may cancel and rescind this Agreement.

          (d) The City may enforce its rights under the Mortgage.

          (e) The City may take any action, including legal or administrative action, which may
appear necessary or desirable to collect any payments due under this Agreement, or to
enforce performance and observance of any obligation, agreement, or covenant of the
Developer under this Agreement.

     Section 5.3 No Remedy Exclusive. No remedy herein conferred upon or reserved to the
City is intended to be exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to
exercise any right or power accruing upon any default shall impair any such right or power or shall
be construed to be a waiver thereof, but any such right and power may be exercised from time to
time and as often as may be deemed expedient.

     Section 5.4 No Implied Waiver. In the event any agreement contained in this Agreement
should be breached by any party and thereafter waived by any other party, such waiver shall be
limited to the particular breach so waived and shall not be deemed to waive any other concurrent,
previous or subsequent breach hereunder.

     Section 5.5 Agreement to Pay Attorneys’ Fees and Expenses. Whenever any Event of
Default occurs and the City shall employ attorneys or incur other expenses for the collection of
payments due or to become due or for the enforcement or performance or observance of any obligation
or agreement on the part of the Developer herein contained, the Developer agrees that it shall, on
demand therefor, pay to the City the reasonable fees of such attorneys and such other expenses so
incurred by the City.

17

 

ARTICLE VI

ADDITIONAL PROVISIONS

     Section 6.1 Titles of Articles and Sections. Any titles of the several parts,
articles and sections of this Agreement are inserted for convenience of reference only and shall be
disregarded in construing or interpreting any of its provisions.

     Section 6.2 Notices and Demands. Except as otherwise expressly provided in this
Agreement, a notice, demand or other communication under this Agreement by any party to any other
shall be sufficiently given or delivered if it is dispatched by registered or certified mail,
postage prepaid, return receipt requested, or delivered personally, and

          (a) in the case of the Developer, is addressed to or delivered personally to the
Developer at:

Granite Falls Energy, LLC

15045 Highway 23 S.E.

P.O. Box 216

Granite Falls, MN 56241

Attn: General Manager

          (b) in the case of the City, is addressed or delivered personally to the City at:

City of Granite Falls, Minnesota

885 Prentice Street

Granite Falls, MN 56241-1520

Attn: City Coordinator

or at such other address with respect to any such party as that party may, from time to time,
designate in writing and forward to the other, as provided in this Section.

     Section 6.3 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute one and the same instrument.

     Section 6.4 Modification. If the Developer is requested by the holder of a mortgage
or by a prospective holder of a prospective mortgage to amend or supplement this Agreement in any
manner whatsoever, the City will, in good faith, consider the request with a view to granting the
same unless the City, in its reasonable judgment, concludes that such modification is not in the
public interest, or will significantly and undesirably weaken the financial security provided to
the interests of the City by the terms and provisions of this Agreement.

     Section 6.5 Law Governing. This Agreement will be governed and construed in
accordance with the laws of the State.

18

 

     Section 6.6 City Approvals. Any approval, execution of documents, or other action to
be taken by the City pursuant to this Agreement, for the purpose of carrying out the terms of this
Agreement or for the purpose of determining sufficient performance by the Developer under this
Agreement, may be made, executed or taken by the City without further approval by the City Council.

     Section 6.7 Termination. This Agreement shall automatically terminate without any
notice to Developer: (1) if no MIF Loan proceeds have been disbursed to the Developer prior to
March 31, 2006; or (2) if: (a) the Developer has not received any disbursement of MIF Loan proceeds
from the City; and (b) the Developer fails to pay its debts as they become due, files a petition
under any chapter of the Federal Bankruptcy Code or any similar law, state or federal, now or
hereafter existing, becomes “insolvent” as that term is generally defined under the Federal
Bankruptcy Code, files an answer admitting insolvency or inability to pay its debts as they become
due in any involuntary bankruptcy case commenced against it, or fails to obtain a dismissal of such
case within sixty (60) days after its commencement or convert the case from one chapter of the
Federal Bankruptcy Code to another chapter, or is the subject of an order for relief in such
bankruptcy case, or is adjudged a bankrupt or insolvent, or has a custodian, trustee, or receiver
appointed for it, or has any court take jurisdiction of its property, or any part thereof, in any
proceeding for the purpose of reorganization, arrangement, dissolution, or liquidation, and such
custodian, trustee, or receiver is not discharged, or such jurisdiction is not relinquished,
vacated, or stayed within sixty (60) days of the appointment; or (3) the City terminates this
Agreement pursuant to Section 5.2(c). Otherwise, this Agreement shall terminate on June 15, 2021
or the date the Loan is repaid in full.

19

 

     IN WITNESS WHEREOF, the City has caused this Agreement to be duly executed in its name and the
Developer has caused this Agreement to be duly executed in its name and on its behalf, on or as of
the date first above written.

	 	 	 	 	 	 	 
	 	 	CITY OF GRANITE FALLS, MINNESOTA	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	   /s/ Dave Smiglewski
 

	 	 
	 	 	   Its Mayor	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	   /s/ William Lavin
 

	 	 
	 	 	   Its Manager	 	 

This is a signature page to the Loan Agreement by and between City of Granite Falls, Minnesota and
Granite Falls Energy, LLC

S-1

 

 

	 	 	 	 	 	 	 
	 	 	GRANITE FALLS ENERGY, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	   /s/ Julie Oftedahl-Volstad
 

	 	 
	 	 	   Its Secretary/Treasurer	 	 

This is a signature page to the Loan Agreement by and between City of Granite Falls, Minnesota and
Granite Falls Energy, LLC

S-2

 

 

EXHIBIT A

Legal Description of Development Property

Land Description — 46.70 Acre Parcel

That part of the East Half of the Northeast Quarter of Section 1, Township 115 North, Range 39 West
of the Fifth Principal Meridian, Granite Falls Township, Chippewa County, Minnesota, described as
follows:

Commencing at the northwest corner of Parcel 3, as shown on the record plat entitled STATE HIGHWAY
RIGHT OF WAY PLAT NO. 12-1, on file in the office of the Chippewa County Recorder; thence on an
assumed bearing of South 1 degree 56 minutes 15 seconds West, along the west line of Parcel 3, as
shown on said record plat entitled STATE HIGHWAY RIGHT OF WAY PLAT No. 12-1, a distance of 182.53
feet to southerly right of way boundary line of the railroad, which is also the southwest corner of
said Parcel 3 and the point of beginning of the land to be described; thence on a bearing of South
87 degrees 01 minutes 14 seconds West, along the southerly right of way line of the railroad, a
distance of 911.97 feet to the west line of the East Half of the Northeast Quarter of said Section
1; thence on a bearing of South 0 degrees 44 minutes 38 seconds West, along the west line of the
East Half of the Northeast Quarter of said Section 1, a distance of 2290.26 feet to the northwest
corner of Parcel 213, as shown on the record plat entitled MINNESOTA DEPARTMENT OF TRANSPORTATION
RIGHT OF WAY PLAT NO. 12-24, on file in the office of the Chippewa County Recorder; thence on a
bearing of South 88 degrees 21 minutes 26 seconds East, along the north boundary line of said
Parcel 213, a distance of 729.81 feet; thence on a bearing of North 47 degrees 28 minutes 37
seconds East, along the boundary line of said Parcel 213, a distance of 143.46 feet to the west
line of Parcel 1, as shown on said record plat entitled STATE HIGHWAY RIGHT OF WAY PLAT NO. 12-1;
thence on a bearing of North 3 degrees 18 minutes 35 seconds East, along the west line of said
Parcel 1, a distance of 1123.61 feet to the northwest corner of said Parcel 1; thence continuing on
a bearing of North 3 degrees 18 minutes 35 seconds East, along the west line of Parcel 2, as shown
on said record plat entitled STATE HIGHWAY RIGHT OF WAY PLAT NO. 12-1, a distance of 75.63 feet;
thence on a bearing of North 1 degree 56 minutes 15 seconds East, along the west line of Parcel 2,
as shown on said record plat entitled STATE HIGHWAY RIGHT OF WAY PLAT NO. 12-1, a distance of
1064.80 feet to the point of beginning.

A-1

 

 

EXHIBIT B

Form of Legal Opinion of Developer’s Counsel

City of Granite Falls, Minnesota

885 Prentice Street

Granite Falls, MN 56241-1520

	 	 	 	 	 
	 

	 	Re:
	 	Loan Agreement by and between City of Granite Falls, Minnesota and Granite
Falls Energy, LLC

Ladies and Gentlemen:

     As counsel for Granite Falls Community Ethanol Plant, LLC, a Minnesota limited liability
company (the “Developer”), and in connection with the execution and delivery of a certain Loan
Agreement (the “Loan Agreement”) between the Developer and the City of Granite Falls, Minnesota
(the “City”); the Promissory Note (the “Note”) executed by the Developer evidencing the Loan (as
defined in the Loan Agreement); and a certain Statutory Mortgage executed by the Developer in favor
of the City (the “Mortgage”), each dated as of February 1, 2006, we hereby render the following
opinion:

     We have examined the original certified copy, or copies otherwise identified to our
satisfaction as being true copies, of the following:

               (a) The articles of organization, the operating agreement and the member control
agreement of the Developer;

               (b) The Loan Agreement; and

               (c) The Note; and

               (d) The Mortgage;

and such other documents and records as we have deemed relevant and necessary as a basis for the
opinion set forth herein.

     Based on the pertinent law, the foregoing examination and such other inquiries as we have
deemed appropriate, we are of the opinion that:

     1. The Developer has been duly organized and is validly existing as a limited liability
company under the laws of the State of Minnesota and is qualified to do business in the State of
Minnesota. The Developer has full power and authority to execute, deliver and perform in full the
Loan Agreement, the Note and the Mortgage; and the Loan Agreement, the Note and the Mortgage have
been duly and validly authorized, executed and delivered by the Developer and, assuming due
authorization, execution and delivery by the other parties thereto, are in full force and effect
and are valid and legally binding instruments of the Developer enforceable in accordance with their
terms, except as the same may be limited by bankruptcy, insolvency, reorganization or other laws
relating to or affecting creditors’ rights generally.

B-1

 

 

     2. The consummation of the transactions contemplated by the Loan Agreement, the Note and the
Mortgage and the carrying out of the terms thereof, will not result in violation of any provision
of, or in default under, the articles of organization, member control agreement and operating
agreement of the Developer or any indenture, mortgage, deed of trust, indebtedness, agreement,
judgment, decree, order, statute, rule, regulation or restriction to which the Developer is a party
or by which it or its property is bound or subject.

Very truly yours,

B-2

 

 

EXHIBIT C

County Loan Amortization Schedule

	 	 	 
	Amount:

	 	$100,000.00
	Interest Rate:

	 	3.00%
	 
	 	 
	Date of Note:

	 	3/9/2006
	Date of Maturity:

	 	6/15/2021

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Total	 	Accrued	 	Principal	 	Principal
	 	 	Payment	 	Interest	 	Payment	 	Balance
	3/9/2006
	 	 	 	 	 	 	 	 	 	 	 	 	 	$	100,000.00	 
	6/15/2006
	 	$	4,029.78	 	 	$	808.33	 	 	$	3,221.45	 	 	$	96,778.55	 
	12/15/2006
	 	$	4,029.78	 	 	$	1451.68	 	 	$	2,578.10	 	 	$	94,200.45	 
	6/15/2007
	 	$	4,029.78	 	 	$	1413.01	 	 	$	2,616.77	 	 	$	91,583.68	 
	12/15/2007
	 	$	4,029.78	 	 	$	1373.76	 	 	$	2,656.02	 	 	$	88,927.66	 
	6/15/2008
	 	$	4,029.78	 	 	$	1333.91	 	 	$	2,695.87	 	 	$	86,231.79	 
	12/15/2008
	 	$	4,029.78	 	 	$	1293.48	 	 	$	2,736.30	 	 	$	83,495.49	 
	6/15/2009
	 	$	4,029.78	 	 	$	1252.43	 	 	$	2,777.35	 	 	$	80,718.14	 
	12/15/2009
	 	$	4,029.78	 	 	$	1210.77	 	 	$	2,819.01	 	 	$	77,899.13	 
	6/15/2010
	 	$	4,029.78	 	 	$	1168.49	 	 	$	2,861.29	 	 	$	75,037.84	 
	12/15/2010
	 	$	4,029.78	 	 	$	1125.57	 	 	$	2,904.21	 	 	$	72,133.63	 
	6/15/2011
	 	$	4,029.78	 	 	$	1082.00	 	 	$	2,947.78	 	 	$	69,185.85	 
	12/15/2011
	 	$	4,029.78	 	 	$	1037.79	 	 	$	2,991.99	 	 	$	66,193.86	 
	6/15/2012
	 	$	4,029.78	 	 	$	992.91	 	 	$	3,036.87	 	 	$	63,156.99	 
	12/15/2012
	 	$	4,029.78	 	 	$	947.35	 	 	$	3,082.43	 	 	$	60,074.56	 
	6/15/2013
	 	$	4,029.78	 	 	$	901.12	 	 	$	3,128.66	 	 	$	56,945.90	 
	12/15/2013
	 	$	4,029.78	 	 	$	854.19	 	 	$	3,175.59	 	 	$	53,770.31	 
	6/15/2014
	 	$	4,029.78	 	 	$	806.55	 	 	$	3,223.23	 	 	$	50,547.08	 
	12/15/2014
	 	$	4,029.78	 	 	$	758.21	 	 	$	3,271.57	 	 	$	47,275.51	 
	6/15/2015
	 	$	4,029.78	 	 	$	709.13	 	 	$	3,320.65	 	 	$	43,954.86	 
	12/15/2015
	 	$	4,029.78	 	 	$	659.32	 	 	$	3,370.46	 	 	$	40,584.40	 
	6/15/2016
	 	$	4,029.78	 	 	$	608.77	 	 	$	3,421.01	 	 	$	37,163.39	 
	12/15/2016
	 	$	4,029.78	 	 	$	557.45	 	 	$	3,472.33	 	 	$	33,691.06	 
	6/15/2017
	 	$	4,029.78	 	 	$	505.37	 	 	$	3,524.41	 	 	$	30,166.65	 
	12/15/2017
	 	$	4,029.78	 	 	$	452.50	 	 	$	3,577.28	 	 	$	26,589.37	 
	6/15/2018
	 	$	4,029.78	 	 	$	398.84	 	 	$	3,630.94	 	 	$	22,958.43	 
	12/15/2018
	 	$	4,029.78	 	 	$	344.38	 	 	$	3,685.40	 	 	$	19,273.03	 
	6/15/2019
	 	$	4,029.78	 	 	$	289.10	 	 	$	3,740.68	 	 	$	15,532.35	 
	12/15/2019
	 	$	4,029.78	 	 	$	232.99	 	 	$	3,796.79	 	 	$	11,735.56	 
	6/15/2020
	 	$	4,029.78	 	 	$	176.03	 	 	$	3,853.75	 	 	$	7,881.81	 
	12/15/2020
	 	$	4,029.78	 	 	$	118.23	 	 	$	3,911.55	 	 	$	3,970.26	 
	6/15/2021
	 	$	4,029.81	 	 	$	59.55	 	 	$	3,970.26	 	 	$	(0.00	)

C-1

 

 

EXHIBIT D

MIF Loan Amortization Schedule

	 	 	 	 	 
	Amount:

	 	$	500,000.00	 
	Interest Rate:

	 	 	1.00	%
	 
	 	 	 	 
	Date of Note:

	 	 	3/9/2006	 
	Date of Maturity:

	 	 	6/15/2014	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Total	 	Accrued	 	Principal	 	Principal
	 	 	Payment	 	Interest	 	Payment	 	Balance
	3/9/2006
	 	 	 	 	 	 	 	 	 	 	 	 	 	$	500,000.00	 
	6/15/2006
	 	$	15,807.10	 	 	$	1,347.22	 	 	$	14,459.88	 	 	$	485,540.12	 
	9/15/2006
	 	$	15,807.10	 	 	$	1,213.85	 	 	$	14,593.25	 	 	$	470,946.87	 
	12/15/2006
	 	$	15,807.10	 	 	$	1,177.37	 	 	$	14,629.73	 	 	$	456,317.14	 
	3/15/2007
	 	$	15,807.10	 	 	$	1,140.79	 	 	$	14,666.31	 	 	$	441,650.83	 
	6/15/2007
	 	$	15,807.10	 	 	$	1,104.13	 	 	$	14,702.97	 	 	$	426,947.86	 
	9/15/2007
	 	$	15,807.10	 	 	$	1,067.37	 	 	$	14,739.73	 	 	$	412,208.13	 
	12/15/2007
	 	$	15,807.10	 	 	$	1,030.52	 	 	$	14,776.58	 	 	$	397,431.55	 
	3/15/2008
	 	$	15,807.10	 	 	$	993.58	 	 	$	14,813.52	 	 	$	382,618.03	 
	6/15/2008
	 	$	15,807.10	 	 	$	956.55	 	 	$	14,850.55	 	 	$	367,767.48	 
	9/15/2008
	 	$	15,807.10	 	 	$	919.42	 	 	$	14,887.68	 	 	$	352,879.80	 
	12/15/2008
	 	$	15,807.10	 	 	$	882.20	 	 	$	14,924.90	 	 	$	337,954.90	 
	3/15/2009
	 	$	15,807.10	 	 	$	844.89	 	 	$	14,962.21	 	 	$	322,992.69	 
	6/15/2009
	 	$	15,807.10	 	 	$	807.48	 	 	$	14,999.62	 	 	$	307,993.07	 
	9/15/2009
	 	$	15,807.10	 	 	$	769.98	 	 	$	15,037.12	 	 	$	292,955.95	 
	12/15/2009
	 	$	15,807.10	 	 	$	732.39	 	 	$	15,074.71	 	 	$	277,881.24	 
	3/15/2010
	 	$	15,807.10	 	 	$	694.70	 	 	$	15,112.40	 	 	$	262,768.84	 
	6/15/2010
	 	$	15,807.10	 	 	$	656.92	 	 	$	15,150.18	 	 	$	247,618.66	 
	9/15/2010
	 	$	15,807.10	 	 	$	619.05	 	 	$	15,188.05	 	 	$	232,430.61	 
	12/15/2010
	 	$	15,807.10	 	 	$	581.08	 	 	$	15,226.02	 	 	$	217,204.59	 
	3/15/2011
	 	$	15,807.10	 	 	$	543.01	 	 	$	15,264.09	 	 	$	201,940.50	 
	6/15/2011
	 	$	15,807.10	 	 	$	504.85	 	 	$	15,302.25	 	 	$	186,638.25	 
	9/15/2011
	 	$	15,807.10	 	 	$	466.60	 	 	$	15,340.50	 	 	$	171,297.75	 
	12/15/2011
	 	$	15,807.10	 	 	$	428.24	 	 	$	15,378.86	 	 	$	155,918.89	 
	3/15/2012
	 	$	15,807.10	 	 	$	389.80	 	 	$	15,417.30	 	 	$	140,501.59	 
	6/15/2012
	 	$	15,807.10	 	 	$	351.25	 	 	$	15,455.85	 	 	$	125,045.74	 
	9/15/2012
	 	$	15,807.10	 	 	$	312.61	 	 	$	15,494.49	 	 	$	109,551.25	 
	12/15/2012
	 	$	15,807.10	 	 	$	273.88	 	 	$	15,533.22	 	 	$	94,018.03	 
	3/15/2013
	 	$	15,807.10	 	 	$	235.05	 	 	$	15,572.05	 	 	$	78,445.98	 
	6/15/2013
	 	$	15,807.10	 	 	$	196.11	 	 	$	15,610.99	 	 	$	62,834.99	 
	9/15/2013
	 	$	15,807.10	 	 	$	157.09	 	 	$	15,650.01	 	 	$	47,184.98	 
	12/15/2013
	 	$	15,807.10	 	 	$	117.96	 	 	$	15,689.14	 	 	$	31,495.84	 
	3/15/2014
	 	$	15,807.10	 	 	$	78.74	 	 	$	15,728.36	 	 	$	15,767.48	 
	6/15/2014
	 	$	15,806.90	 	 	$	39.42	 	 	$	15,767.48	 	 	$	(0.00	)

D-1

 

 

EXHIBIT E

Western Minnesota RLF Loan Amortization Schedule

	 	 	 	 	 
	Amount:

	 	$	100,000.00	 
	Interest Rate:

	 	 	5.00	%
	 
	 	 	 	 
	Date of Note:

	 	 	3/9/2006	 
	Date of Maturity:

	 	 	6/15/2016	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Total	 	Accrued	 	Principal	 	Principal
	 	 	Payment	 	Interest	 	Payment	 	Balance
	3/9/2006
	 	 	 	 	 	 	 	 	 	 	 	 	 	$	100,000.00	 
	6/15/2006
	 	$	6,109.24	 	 	$	1,347.22	 	 	$	4,762.02	 	 	$	95,237.98	 
	12/15/2006
	 	$	6,109.24	 	 	$	2,380.95	 	 	$	3,728.29	 	 	$	91,509.69	 
	6/15/2007
	 	$	6,109.24	 	 	$	2,287.74	 	 	$	3,821.50	 	 	$	87,688.19	 
	12/15/2007
	 	$	6,109.24	 	 	$	2,192.20	 	 	$	3,917.04	 	 	$	83,771.15	 
	6/15/2008
	 	$	6,109.24	 	 	$	2,094.28	 	 	$	4,014.96	 	 	$	79,756.19	 
	12/15/2008
	 	$	6,109.24	 	 	$	1,993.90	 	 	$	4,115.34	 	 	$	75,640.85	 
	6/15/2009
	 	$	6,109.24	 	 	$	1,891.02	 	 	$	4,218.22	 	 	$	71,422.63	 
	12/15/2009
	 	$	6,109.24	 	 	$	1,785.57	 	 	$	4,323.67	 	 	$	67,098.96	 
	6/15/2010
	 	$	6,109.24	 	 	$	1,677.47	 	 	$	4,431.77	 	 	$	62,667.19	 
	12/15/2010
	 	$	6,109.24	 	 	$	1,566.68	 	 	$	4,542.56	 	 	$	58,124.63	 
	6/15/2011
	 	$	6,109.24	 	 	$	1,453.12	 	 	$	4,656.12	 	 	$	53,468.51	 
	12/15/2011
	 	$	6,109.24	 	 	$	1,336.71	 	 	$	4,772.53	 	 	$	48,695.98	 
	6/15/2012
	 	$	6,109.24	 	 	$	1,217.40	 	 	$	4,891.84	 	 	$	43,804.14	 
	12/15/2012
	 	$	6,109.24	 	 	$	1,095.10	 	 	$	5,014.14	 	 	$	38,790.00	 
	6/15/2013
	 	$	6,109.24	 	 	$	969.75	 	 	$	5,139.49	 	 	$	33,650.51	 
	12/15/2013
	 	$	6,109.24	 	 	$	841.26	 	 	$	5,267.98	 	 	$	28,382.53	 
	6/15/2014
	 	$	6,109.24	 	 	$	709.56	 	 	$	5,399.68	 	 	$	22,982.85	 
	12/15/2014
	 	$	6,109.24	 	 	$	574.57	 	 	$	5,534.67	 	 	$	17,448.18	 
	6/15/2015
	 	$	6,109.24	 	 	$	436.20	 	 	$	5,673.04	 	 	$	11,775.14	 
	12/15/2015
	 	$	6,109.24	 	 	$	294.38	 	 	$	5,814.86	 	 	$	5,960.28	 
	6/15/2016
	 	$	6,109.29	 	 	$	149.01	 	 	$	5,960.28	 	 	$	0.00	 

E-1

 

 

EXHIBIT F

Equipment

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Chippewa	 	 	Region 6W	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	MIF	 	 	County	 	 	RLF	 	 	 	 
	Equipment	 	Model	 	 	Vendor	 	 	Cost	 	 	Eligible	 	 	Eligible	 	 	Eligible	 	 	Total	 
	Rolling Stock:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Tele-Handler
	 	Manitou MLT 741	 	Lift Pro Equipment	 	$	74,964.00	 	 	$	74,964.00	 	 	 	 	 	 	 	 	 	 	$	74,964.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Front-End Loader
	 	John Deere 544J H/L	 	RDO Equipment	 	$	133,500.00	 	 	$	133,500.00	 	 	 	 	 	 	 	 	 	 	$	133,500.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Railcar Mover
	 	Trackmobile 4350TM	 	Hercu-Lift	 	$	182,500.00	 	 	$	82,500.00	 	 	$	—	 	 	$	100,000.00	 	 	$	182,500.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Fork Lift
	 	Kalmar A/C P60BX	 	Hercu-Lift	 	$	23,700.00	 	 	$	23,700.00	 	 	 	 	 	 	 	 	 	 	$	23,700.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Aerial Work Platform
	 	JLG 450AJ	 	Ziegler	 	$	54,500.00	 	 	$	19,500.00	 	 	$	35,000.00	 	 	 	 	 	 	$	54,500.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Pick-Up
	 	Chevrolet K1500	 	Kollen Motors	 	$	24,367.00	 	 	$	24,367.00	 	 	 	 	 	 	 	 	 	 	$	24,367.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Rolling Stock — Subtotal
	 	 	 	 	 	 	 	 	 	 	 	 	 	$	358,531.00	 	 	$	35,000.00	 	 	$	100,000.00	 	 	$	493,531.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Spare Parts and Shop Tools:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	See Tab “ShopTools and SpareParts”
	 	 	 	 	 	 	 	 	 	 	 	 	 	$	123,966.66	 	 	 	 	 	 	 	 	 	 	$	123,966.66	 
	Preventative Maintenance Program -
Datastream
	 	 	 	 	 	 	 	 	 	 	 	 	 	$	7,233.00	 	 	 	 	 	 	 	 	 	 	$	7,233.00	 
	Lab Equipment:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Other
Lab Equipment
	 	Hach Co, Fischer Scientific, Midland
Scientific	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	4,551.04	 

F-1

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Chippewa	 	 	Region 6W	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	MIF	 	 	County	 	 	RLF	 	 	 	 
	Equipment	 	Model	 	 	Vendor	 	 	Cost	 	 	Eligible	 	 	Eligible	 	 	Eligible	 	 	Total	 
	Computer Equipment:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Server & PC’s
	 	Dell	 	IBS	 	$	37,074.30	 	 	$	37,074.30	 	 	 	 	 	 	 	 	 	 	$	37,074.30	 
	Phone System
	 	NEC	 	UTI	 	$	6,897.70	 	 	$	6,897.70	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Admistration and Engineering:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	estimate	 	GF EDA	 	$	30,000.00	 	 	 	 	 	 	$	30,000.00	 	 	 	 	 	 	$	30,000.00	 
	 
	 	estimate	 	GF EDA	 	$	35,000.00	 	 	 	 	 	 	$	35,000.00	 	 	 	 	 	 	$	35,000.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	$	533,702.66	 	 	$	100,000.00	 	 	$	100,000.00	 	 	$	731,356.00	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

F-2

 

 

EXHIBIT G

DEFAULT REPORT

			
	TO:	 	City of Granite Falls, Minnesota

885 Prentice Street

Granite Falls, MN 56241-1520

Attn: City Coordinator

         The undersigned authorized representative of Granite Falls Energy, LLC (the “Developer”),
hereby certifies that [check all that apply]:

	 	 	 	 	 
	 

	 	o
	 	No event of default or event that would constitute an event of default by the
Developer under the Senior Loan Agreement, dated December 16, 2004, between the
Developer and First National Bank of Omaha (the “Senior Loan Agreement”) or which, with
the giving or notice or lapse of time or both, would become such an event of default,
has occurred and is continuing under the Senior Loan Agreement or any document executed
in connection therewith.
	 
	 	 	 	 
	 

	 	o
	 	On                     , 20___, the undersigned spoke to                      of First National
Bank of Omaha (402-633-___) who is familiar with the Senior Loan Agreement and who
confirmed that to his/her actual knowledge without investigation, there is no event of
default or event that would constitute an event of default by the Developer under the
Senior Loan Agreement, or which, with the giving or notice or lapse of time or both,
would become such an event of default, has occurred and is continuing under the Senior
Loan Agreement or any document executed in connection therewith.
	 
	 	 	 	 
	 

	 	o
	 	An event of default has occurred under the Senior Loan Agreement. Attached is the
notice of default from First National Bank of Omaha.
	 
	 	 	 	 
	 

	 	o
	 	An event of default or event that would constitute an event of default by the
Developer under the Senior Loan Agreement or which, with the giving or notice or lapse
of time or both, would become such an event of default, has occurred and is continuing
under the Senior Loan Agreement or a document executed in connection therewith. The
Developer expects to cure such default no later than                     , 20___.

	 	 	 	 	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 
 .	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	GRANITE FALLS ENERGY, LLC	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By
	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Its
	 	 

	 	 

G-1exv10w3

 

EXHIBIT 10.3

PROMISSORY NOTE

			
	 	 	 
	$700,000
	 	February 1, 2006

     Granite Falls Energy, LLC, a Minnesota limited liability company (the “Developer”), for value
received, hereby promises to pay to the City of Granite Falls, Minnesota (the “City”) or its
assigns (the City and any assigns are hereinafter referred to as the “Holder”), at its designated
principal office or such other place as the Holder may designate in writing, the principal sum of
Seven Hundred Thousand and No/100 Dollars ($700,000) or so much thereof as may be advanced under
this Note, with interest as hereinafter provided, in any coin or currency which at the time or
times of payment is legal tender for the payment of private debts in the United States of America.
The principal of this Note is payable in installments due as follows:

     1. The Loan shall bear interest at the rates set forth in Section 3.2 of the Loan Agreement,
dated as of the date hereof, between the Developer and City (the “Loan Agreement”) and interest
shall commence to accrue on the amounts and as of the dates advanced in accordance with Section 3.4
of the Loan Agreement (each a “Disbursement Date”).

     2. Payments of principal and interest shall commence on June 15, 2006 shall and continue, with
respect to the MIF Loan, the 15th day of each March, June, September and December thereafter and,
with respect to the County Loan and Western Minnesota RLF Loan, the 15th day of each June and
December thereafter in accordance with Section 3.2(5) of the Loan Agreement.

     3. Subject to the terms of the Subordination Agreement (as defined in the Loan Agreement) so
long as any portion of the loan under the Senior Loan Agreement (as defined in the Loan Agreement)
is outstanding, the Developer shall have the right to prepay the principal of this Note, in whole
or in part, without prepayment penalty and the Developer shall prepay the outstanding principal of
and accrued interest on this Note upon any sale, transfer, assignment or lease of the Project or if
the Developer dissolves or otherwise disposes of all or substantially all of its assets, or
consolidates with or merges into another corporation or other business entity or permits any other
corporation or other business entity to consolidate with or merge into it unless the City consents,
in writing, to the assignment and assumption of the Loan Agreement by any successor entity.

     4. This Note is given pursuant to the Loan Agreement and is secured by a certain Statutory
Mortgage executed by the Developer in favor of the City (the “Mortgage”) covering certain real
property located in Chippewa County, Minnesota. In the event the Mortgage is found to be invalid
for whatever reason, such invalidity shall constitute an event of default hereunder.

     5. All of the agreements, conditions, covenants, provisions, and stipulations contained in the
Loan Agreement, or any instrument securing this Note are hereby made
a part of this Note to the same extent and with the same force and effect as if they were
fully set forth herein. It is agreed that time is of the essence of this Note. If a default

 

 

occurs under the Loan Agreement, or any instrument securing this Note, then the Holder of this Note
may at its right and option, without notice, declare immediately due and payable the principal
balance of this Note, together with any costs of collection including attorney fees incurred by the
Holder of this Note in collecting or enforcing payment hereof, whether suit be brought or not, and
all other sums due hereunder, or under any instrument securing this Note. The Developer agrees
that the Holder of this Note may, without notice to the Developer of this Note and without
affecting the liability of the Developer of this Note, accept additional or substitute security for
this Note, or release any security or any party liable for this Note or extend or renew this Note.

     6. The remedies of the Holder of this Note as provided herein, and in the Loan Agreement, or
any other instrument securing this Note, shall be cumulative and concurrent and may be pursued
singly, successively, or together, and, at the sole discretion of the Holder of this Note, may be
exercised as often as occasion therefore shall occur; and the failure to exercise any such right or
remedy shall in no event be construed as a waiver or release thereof.

     7. The Holder of this Note shall not be deemed, by any act of omission or commission, to have
waived any of its rights or remedies hereunder unless such waiver is in writing and signed by the
Holder of this Note and then only to the extent specifically set forth in the writing. A waiver
with reference to one event shall not be construed as continuing or as a bar to or waiver of any
right or remedy as to a subsequent event. This Note may not be amended, modified, or changed
except only by an instrument in writing signed by the party against whom enforcement of any such
amendment, modifications, or change is sought.

     8. This Note shall be governed by and construed in accordance with the laws of the state of
Minnesota without regard to its conflict of laws provisions. Any disputes, controversies, or
claims arising out of this Note shall be heard in the state or federal courts of Minnesota, and all
parties to this Note waive any objection to the jurisdiction of these courts, whether based on
convenience or otherwise.

     9. The headings used in this Note are solely for convenience of reference, are not part of
this Note, and are not to be considered in construing or interpreting this Note.

     10. This Note, with the Loan Agreement, Subordination Agreement and Mortgage, constitutes the
entire agreement between the parties pertaining to its subject matter and it supercedes all prior
contemporaneous Notes, representations, and understandings of the parties pertaining to the subject
matter of this Note.

     11. Wherever possible, each provision of this Note and each related document shall be
interpreted so that it is valid under applicable law. If any provision of this Note or any related
document is to any extent found invalid by a court or other governmental entity of competent
jurisdiction, that provision shall be ineffective only to the extent of
such invalidity, without invalidating the remainder of such provision or the remaining
provisions of this Note or any other related document.

2

 

     IT IS HEREBY CERTIFIED AND RECITED that all conditions, acts, and things required to exist,
happen, and be performed precedent to or in the issuance of this Note do exist, have happened, and
have been performed in regular and due form as required by law.

     IN WITNESS WHEREOF, the Developer has caused this Note to be duly executed as of the
1st day of February, 2006.

	 	 	 	 	 	 	 
	 	 	GRANITE FALLS ENERGY, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	/s/ Julie Oftedahl-Volstad	 	 
	 

	 	 	 	 	 	 
	 	 	    Its Secretary/Treasurer	 	 

3

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