Document:

exv10w7

 

Exhibit 10.7

PROPOSAL

	 	 	 
	SCHUELLER CONSTRUCTION CO.

	 	Date
	506 Tahoe Court

	 	9/1/2006
	Farley, Iowa 52046
	 	 

Phone 563-744-3254

Proposal submitted to:

Western Dubuque Biodiesel

10749 Jamesmeier Rd

Farley, IA 52046

Administration Building

We hereby submit specifications and estimates for:

Administration Building

	 	 	 	 	 
	Total Building & Parking Area
	 	$	320,000.00	 
	 
	 	 	 	 
	Lift Station & Force Main
	 	$	7,500.00	 
	Scale Walls & Walks
	 	$	5,500.00	 
	3 Street Lites
	 	$	3,600.00	 
	Extra Entry Door
	 	$	1,220.00	 
	 
	Payment To Be Made Upon Request
	 	 	 	 

We propose hereby to furnish material and labor – complete in accordance with
The above specifications for the sum of

This Proposal May Be Withdrawn if Not Accepted In                      Days

	 	 	 
	All material is guaranteed to be as specified. All work to be completed in
a workmanlike manner according to standard practices. Any attention or
deviation from above specifications involving extra costs will become an
extra charge over and above the estimate. All agreements contingent
upon strikes, accidents or delays beyond our control. Owner to carry fire,
tornado and other necessary insurance. Our workers are fully covered by
Workmen’s Compensation insurance.

	 	Authorized signature /s/ William G. Schueller

	 	 	 
	Acceptance of proposal – The above prices, specifications
and conditions are satisfactory and are hereby accepted. You are
authorized to do the work as specified. Payment will be made as
outlined above.

	 	Signature /s/ Joyce Jarding
	 

	 	 
	Date of acceptance: 9/15/06

	 	Signatureexv10w8

 

Exhibit 10.8

CONSTRUCTION-TERM LOAN AGREEMENT

     THIS CONSTRUCTION-TERM LOAN AGREEMENT (“Agreement”) is made and entered into this 25th
day of October, 2006, by and among BANKFIRST, a South Dakota state bank (“Lender”), and WESTERN
DUBUQUE BIODIESEL, LLC, an Iowa limited liability company (“Borrower”).

WITNESSETH:

     WHEREAS, Borrower has requested that Lender extend to it a construction-term loan as more
fully described in this Agreement (the “Loan”); and

     WHEREAS, Lender has agreed to extend the Loan to Borrower upon the terms and subject to the
conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein
contained and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

     Section 1.01 Defined Terms. As used in this Agreement the defined terms in this
Article I, and any other terms defined in this Agreement, i.e., those terms beginning with a
capital letter, will have the meanings ascribed to each such term (such meanings to be equally
applicable to both the singular and plural forms of the terms defined). Certain capitalized terms
used but not defined herein shall have the meaning ascribed to them in other Loan Documents.

	 	(a)	 	“Advance” - An advance of the Commitment by Lender to Borrower pursuant to
Article II hereof.
	 
	 	(b)	 	“Agreement” - This Construction-Term Loan Agreement, including any amendment
hereof or supplement hereto.
	 
	 	(c)	 	“Change in Control” - means the occurrence of one or more of the following
events: (a) acquisition of Control of the Borrower or any guarantor of any portion of
the Obligations (as defined in Section 7.13) by any person or entity or group of
persons or entities who does not Control the Borrower or such guarantor on the date of
this Agreement, or (b) a change over the course of any rolling 12 month period of a
majority of the seats on the board of directors (or other similar governing body) of
Borrower or any guarantor of any portion of the Obligations by persons who were neither
(1) nominated by the immediately previous board of directors or (2) appointed by
directors so nominated.
	 
	 	(d)	 	“Commitment” - The commitment of Lender to make advances to Borrower to
construct the Project in an aggregate principal amount of up to and including THIRTY
FIVE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($35,500,000).

 

 

	 	(e)	 	“Commitment Termination Date” - November 30, 2007, or the date of the
termination of Lender’s Commitment pursuant to Section 6.02 hereof, whichever date
occurs earlier.
	 
	 	(f)	 	“Completion Guaranty” - That certain Completion Guaranty dated of even date
herewith of General Contractor (“Completion Guarantor”).
	 
	 	(g)	 	“Construction Contract” - The Standard Form of Design-Build Agreement and
General Conditions Between Owner and Contractor dated June 30, 2006 between Borrower
and the General Contractor for the construction of the Project.
	 
	 	(h)	 	“Contractor” - Any person, including the General Contractor, who shall be
engaged to work on or to furnish materials, labor and supplies for the Project.
	 
	 	(i)	 	“Control” - means the power, directly or indirectly, either to (a) vote 5% or
more of securities having ordinary voting power for the election of directors (or
persons performing similar functions) of a person or entity, or (b) direct or cause the
direction of the management and policies of a person or entity, whether through the
ability to exercise voting power, by contract or otherwise. The terms “Controls,”
“Controlling,” “Controlled by,” and “under common Control with” have meanings
correlative thereto.
	 
	 	(j)	 	“Control Agreement” - An agreement among Lender, Borrower, and any third party
that maintains a deposit account or investment property in favor of Borrower, pursuant
to which Lender’s security interest in such assets is perfected under the Uniform
Commercial Code of the applicable jurisdiction of such account.
	 
	 	(k)	 	“Conversion Date” - January 1, 2008.
	 
	 	(l)	 	“Current Assets” means the aggregate amount of assets of the Borrower which, in
accordance with GAAP, may be properly classified as current assets, after deducting
without limitation capitalized lease obligations.
	 
	 	(m)	 	“Current Liabilities” means (i) all Debt of the Borrower due on demand or
within one year from the date of determination thereof, and (ii) all other items
(including taxes accrued as estimated) which, in accordance with GAAP, may be properly
classified as current liabilities of the Borrower.
	 
	 	(n)	 	“Debt” means (i) all items of indebtedness or liability of Borrower which in
accordance with GAAP would be included in determining total liabilities as shown on the
liabilities side of Borrower’s balance sheet on the date as of which Debt is to be
determined, plus (ii) indebtedness secured by any mortgage, pledge, lien or security
interest on property of Borrower, whether or not the indebtedness secured thereby shall
have been assumed, plus (iii) guaranties, endorsements

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	 	 	 	(other than for purposes of collection in the ordinary course of business) and other
contingent obligations of Borrower in respect of, or to purchase or otherwise
acquire indebtedness of others.
	 
	 	(o)	 	“Debt Service Coverage Ratio” shall mean the ratio of Project EBITDA (excluding
any federal or state tax credits or incentives) to the maximum principal and interest
payments on the Loan during each month (for the first twelve (12) months of Project
operations), and for the trailing twelve (12) consecutive months after the Project has
been in operation for twelve (12) months. Calculations of Debt Service Coverage Ratio
will exclude any required Sinking Fund payments and any required deposits to the Debt
Service Reserve Fund and shall exclude any principal and interest payments on any
subordinated loans, other financing or distributions to members or shareholders of the
Borrower..
	 
	 	(p)	 	“Disbursing Agent” - First American Title Insurance Company (Minneapolis
office).
	 
	 	(q)	 	“Disbursing Agreement” - The Disbursing Agreement of even date herewith,
executed by and between Borrower, Lender and the Disbursing Agent pertaining to the
disbursement of the Advances to or on behalf of Borrower.
	 
	 	(r)	 	“Draw Request” - The Draw Request form that is submitted to Lender when
Advances are requested in the form attached hereto as Exhibit A and
incorporated herein by reference.
	 
	 	(s)	 	“Drawings and Specifications” - The drawings and specifications prepared by the
design engineer and process engineer for the Project.
	 
	 	(t)	 	“Environmental Indemnity Agreement” - The Environmental Indemnity Agreement of
even date herewith from Borrower in favor of Lender.
	 
	 	(u)	 	“Environmental Laws” - Any international, federal, state or local statute, law,
regulation, order, consent, decree, judgment, permit, license, code, covenant, deed
restriction, common law, treaty, convention, ordinance or other requirement relating to
public health, safety or the environment, including, without limitation, those relating
to releases, discharges or emissions to air, water, land or groundwater, to the
withdrawal or use of groundwater, to the use and handling of polychlorinated biphenyls
or asbestos, to the disposal, treatment, storage or management of hazardous or solid
waste or Hazardous Substances or crude oil, or any fraction thereof, or to exposure to
toxic or hazardous materials, to the handling, transportation, discharge or release of
gaseous or liquid Hazardous Substances and any regulation, order, notice or demand
issued pursuant to such law, statute or ordinance, in each case applicable to the
Mortgaged Property of Borrower, including without limitation the following: (i) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986; (ii) the Solid

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	 	 	 	Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976
and the Hazardous and Solid Waste Amendments of 1984; (iii) the Hazardous Materials
Transportation Act, as amended; (iv) the Federal Water Pollution Control Act, as
amended by the Clean Water Act of 1976; (v) the Safe Drinking Water Act; (vi) the
Clean Air Act, as amended; (vii) the Toxic Substances Control Act of 1976; (viii)
the Occupational Safety and Health Act of 1977, as amended; (ix) the Emergency
Planning and Community Right-to-Know Act of 1986; (x) the National Environmental
Policy Act of 1975; (xi) the Oil Pollution Act of 1990; and any similar or
implementing state law; and any other state or federal statute and any further
amendments to these laws providing for financial responsibility for cleanup or other
actions with respect to the release or threatened release of Hazardous Substances or
crude oil, or any fraction thereof and all rules and regulations promulgated
thereunder.
	 
	 	(v)	 	“Equity” - $23,100,000, consisting of evidence (such as cancelled checks,
invoices or a certificate prepared by an independent accountant) has been previously
spent on Project Costs or is available and will be spent prior to the commencement of
Loan advances; and the difference between the Project Cost and the Commitment, being
the amount Borrower is required to invest in the Project in accordance with the
provisions of Section 3.01 of this Agreement.
	 
	 	(w)	 	“Event of Default” - One of the Events of Default specified in Section 6.01
hereof.
	 
	 	(x)	 	“Farm Products” - has the meaning ascribed thereto in the UCC (as defined
hereunder).
	 
	 	(y)	 	“Fixed Charge Coverage Ratio” - The ratio of Project EBITDA (excluding any
federal or state tax credits or incentives) to maximum Loan principal and interest
payment at Loan maturity) plus maximum principal and interest payments required on all
other loans or other financing sources and all capital leases during each month (for
the first twelve (12) months of Project operation), and for the trailing twelve (12)
consecutive months after the Project has been in operation for twelve (12) months.
	 
	 	(z)	 	“Food Security Act” means the Food Security Act of 1985, 7 U.S.C. § 1631, as
amended, and the regulations promulgated thereunder.
	 
	 	(aa)	 	“GAAP” - Generally accepted accounting principals in the United States, as in
	 
	 	 	 	effect from time to time, consistently applied.
	 
	 	(bb)	 	“General Contractor” - Renewable Energy Group, Inc.
	 
	 	(cc)	 	“Hard Costs” - The costs of constructing the Project that are set forth as Hard
Costs on the Project Cost Statement.

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	 	(dd)	 	“Hazardous Substance” - Any hazardous or toxic material, substance or waste,
pollutant or contaminant that is regulated under any statute, law, ordinance, rule or
regulation of any local, state, regional or federal authority having jurisdiction over
the Mortgaged Property of Borrower, or its use, including, but not limited to any
material, substance or waste, that is: (i) defined as a hazardous substance under any
Environmental Laws; (ii) a petroleum hydrocarbon, including crude oil or any fraction
thereof and all petroleum products; (iii) polychlorinated biphenyls; (iv) lead; (v)
urea formaldehyde; (vi) asbestos or asbestos containing materials; (vii) flammable
explosives; (viii) infectious materials; (ix) radioactive materials; (x) mold; or (xi)
defined or regulated as a hazardous substance or hazardous waste under any rules or
regulations promulgated under any Environmental Laws.
	 
	 	(ee)	 	“Inspecting Engineer” - The inspecting engineer retained by the Lender:
Archer Engineering.
	 
	 	(ff)	 	“Loan Documents” - This Agreement, the Note, the Mortgage, the Environmental
Indemnity Agreement and all other security or collateral documents executed by
Borrower, Completion Guarantor and/or Process and Performance Guarantor in connection
herewith or therewith.
	 
	 	(gg)	 	“Management and Operational Services Agreement” - That certain contract for
feedstock procurement, marketing and management by and between Borrower and Renewable
Energy Group, Inc., dated August 29, 2006.
	 
	 	(hh)	 	“Material Adverse Effect” - With respect to any event, act, condition or
occurrence of whatever nature (including any adverse determination in any litigation,
arbitration, or governmental investigation or proceeding), whether singularly or in
conjunction with any other event or events, act or acts, condition or conditions,
occurrence or occurrences whether or not related, a material adverse change in, or a
material adverse effect on, (a) the business, results of operations, financial
condition, assets, or liabilities of Borrower, (b) the ability of Borrower or any other
party (other than Lender) to perform any of its obligations under the Loan Documents,
(c) the rights and remedies of Lender under any of the Loan Documents or (d) the
legality, validity or enforceability of any of the Loan Documents.
	 
	 	(ii)	 	“Material Contract” - An agreement to which Borrower is or hereafter becomes a
party which is material to the operation of Borrower’s business.
	 
	 	(jj)	 	“Mortgage” - The Mortgage and Security Agreement of even date herewith,
executed by Borrower to Lender creating a first priority mortgage on the Mortgaged
Property and a security interest in all of the personal property located thereon or
used in connection therewith as security for payment of the Note.
	 
	 	(kk)	 	“Mortgaged Property” - The land and improvements (including the Project)
situated in Dubuque County, Iowa, and other personal property located thereon, as

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	 	 	 	more particularly described in the Mortgage.
	 
	 	(ll)	 	“Note” - The promissory note from Borrower to Lender of even date herewith in
the original principal amount of THIRTY FIVE MILLION FIVE HUNDRED THOUSAND AND NO/100
DOLLARS ($35,500,000).
	 
	 	(mm)	 	“Permitted Encumbrances” - Those matters set forth on Exhibit B annexed
hereto and made a part hereof.
	 
	 	(nn)	 	“Process and Performance Guaranty” - That certain Guaranty of Process and
Performance dated of even date herewith executed and delivered by General Contractor
(“Process and Performance Guarantor”).
	 
	 	(oo)	 	“Project” - The construction of a bio-diesel plant on the Mortgaged Property as
more fully described in the Construction Contract and the Drawings and Specifications.
	 
	 	(pp)	 	“Project Budget” - The total cost of completing the Project as set forth in the
Project Cost Statement.
	 
	 	(qq)	 	“Project Cost” - Approximately $58,600,000, being the estimated amount
necessary to complete the construction of the Project, including hard and soft costs.
	 
	 	(rr)	 	“Project Cost Statement” - The certificate of Borrower in which Borrower
certifies to Lender the total of all Hard Costs and Soft Costs necessary to complete
the Project in accordance with the Drawings and Specifications, and certifies to Lender
the amount and source of Borrower’s Equity, all as verified by Inspecting Engineer.
	 
	 	(ss)	 	“Project Documents” - Collectively the Construction Contract, the Drawings and
Specifications, the Sworn Construction Statement, the Project Cost Statement, and all
other contracts of Borrower or the General Contractor with respect to the Project.
	 
	 	(tt)	 	“Project EBITDA” - shall mean all gross Project revenues before interest,
taxes, depreciation and amortization (excluding any federal or state tax credits or
incentives) less: (1) all Project operating expenses; (2) deposits into an escrow
account (to be held by Lender) sufficient to fund annual real estate taxes; (3) amounts
required to pay Project management fees; (4) amounts required to pay all Project
insurance costs; (5) all regularly scheduled Loan principal and interest payments, and
(6) all deposits to the Debt Service Reserve have been made.
	 
	 	(uu)	 	“Soft Costs” - The cost of constructing the Project that are set forth as Soft
Costs on the Project Cost Statement.

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	 	(vv)	 	“Subordinated Debt” means all indebtedness of Borrower that is subordinated to
Lender pursuant to an agreement, which shall include loans made by members of Borrower
in accordance with its operating agreement and indebtedness which does not constitute a
Permitted Encumbrance, and otherwise reasonably acceptable to Lender.
	 
	 	(ww)	 	“Substantial Completion” - The date on which General Contractor issue a
Certificate of Substantial Completion of the Project and Borrower demonstrates
compliance with the conditions of Section 3.03 of this Agreement.
	 
	 	(xx)	 	“Sworn Construction Statement” - A sworn construction statement duly executed
by the General Contractor showing all Contractors having contracts or subcontracts for
specific portions of the work on the Project, and the amounts due or to become due to
each such Contractor, including all Hard Costs and expenses of any kind incurred and to
be incurred in connection with the Project.
	 
	 	(yy)	 	“Title Company” - First American Title Insurance Company.

ARTICLE II

COMMITMENT TO MAKE ADVANCES, 

DISBURSEMENT PROCEDURES AND DEPOSIT OF FUNDS

     Section 2.01 The Advances. Lender agrees, on the terms and subject to the conditions
hereinafter set forth, to make Advances to Borrower from time to time during the period from the
date hereof to the Commitment Termination Date in an aggregate principal amount of up to and
including the maximum amount of the Commitment to pay for acquisition of the land, to pay for or to
reimburse Borrower for the payment of the costs actually incurred in connection with the Project,
that shall include but not be limited to costs of permits, licenses, labor, supplies, materials,
services, equipment and insurance premiums, but shall not include any profit to Borrower acting in
the capacity as developer or general contractor, pay for start-up and initial operating costs,
establish an Interest Reserve and pay all administrative and closing costs. The obligation of
Borrower to repay the Advances shall be evidenced by the Note, containing the terms relating to
maturity, interest rate, and other matters as set forth therein. All Advances shall be disbursed by
the Disbursing Agent pursuant to the terms and conditions hereof and the Disbursing Agreement. As
used herein, the term “Disburse” or “Disbursement” shall mean the disbursement of Advances made or
to be made by the Disbursing Agent as provided herein and in the Disbursing Agreement. Advances of
Loan proceeds shall be made after all Borrower Equity has been advanced.

     Section 2.02 Disbursement Procedures for Advances. For advances to fund the Project:

	 	(a)	 	Whenever Borrower desires to obtain an Advance hereunder, such requests to be
made no more often than monthly, Borrower shall submit to Lender and the

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	 	 	 	Disbursing Agent a Draw Request, duly executed on behalf of Borrower setting
forth the information requested therein. Each Draw Request shall be submitted at
least ten (10) business days before the date the Advance is desired. With respect to
Hard Costs, each Draw Request shall be limited to amounts equal to (i) the total
costs actually incurred and paid or owed by Borrower to the date of such Draw Request
for work on the Project acceptably completed, as approved by Lender, plus (ii) the
cost of materials and equipment not incorporated in the Project, but delivered to and
suitably stored at the Project site, less (iii) a commercially appropriate retainage
amount based on the recommendation of Lender’s Inspecting Engineer, which hold back
shall be retained by Lender until Substantial Completion of the Project (the
“Retainage”), and less prior Advances. Notwithstanding anything herein to the
contrary, no Advance for material stored at the Project site will be made by Lender
unless Borrower shall advise Lender of its intention to so store materials prior to
their delivery and provides suitable security for such storage. With respect to all
Soft Costs, each Draw Request shall be limited to the total of such costs actually
incurred by Borrower to the date of such Draw Request, less prior Advances for such
costs. Each Draw Request shall be accompanied by a certification by the General
Contractor that (i) the Project is being constructed in accordance with the Drawings
and Specifications in a good and workmanlike manner and that the work has been
completed and the materials are in place as indicated in the Draw Request, (ii) the
undisbursed amount of the Commitment is in an amount sufficient to pay the remaining
unpaid costs and expenses anticipated to complete the Project, and (iii) such other
and further information as may be requested by Lender from time to time. All Advances
will be made in accordance with the amounts assigned to the various items in the
Sworn Construction Statement and the Project Cost Statement (as amended from time to
time to reflect authorized change orders), and no Advance will be made for any amount
in excess of the values assigned such items in the Sworn Construction Statement and
the Project Cost Statement. Each Draw Request shall constitute an affirmation by
Borrower that all representations and warranties set forth in Article IV are true and
correct as of the date of such Draw Request.
	 
	 	(b)	 	At the time of submission of each Draw Request, Borrower shall submit to
Lender and the Disbursing Agent the following:

	 	(i)	 	A written lien waiver with respect to all Hard Costs from each
Contractor for work done and materials supplied by it that were paid for
pursuant to the preceding Draw Request.
	 
	 	(ii)	 	Documentation reasonably acceptable to Lender (receipts, canceled
checks and the like) evidencing payment of all Soft Costs that were paid in
connection with the immediately preceding Draw Request, excluding amounts drawn
for payment of interest on the Advances or fees due to Lender.

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	 	(iii)	 	Such other supporting evidence as may be requested by Lender or
the Disbursing Agent to substantiate all payments that are to be made out of the
relevant Draw Request and/or to substantiate all payments then made with respect
to the Project.

	 	(c)	 	If on the date an Advance is desired Borrower has performed all of its agreements
and complied with all requirements therefor to be performed or complied with hereunder
including satisfaction of all applicable conditions precedent contained in Article III
hereof, Lender shall transmit to the Disbursing Agent the amount of the requested
Advance, less amounts owing to Lender (which will be applied directly by Lender), and
the Disbursing Agent will disburse such funds pursuant to and in accordance with the
terms of the Disbursing Agreement. Each Advance shall bear interest at the rate provided
in the Note from the date such Advance is transmitted by Lender to the Disbursing Agent.

     Section 2.03 Deposit of Funds by Borrower. If Lender shall at any time determine that
the undisbursed amount of the Commitment is less than the amount required to pay all costs and
expenses of any kind that may be anticipated in connection with the Project, and if Lender shall
thereupon send written notice thereof to Borrower specifying the amount required to be deposited by
Borrower with the Disbursing Agent to provide sufficient funds to complete the Project, Borrower
shall, within thirty (30) calendar days of receipt of any such notice, deposit with the Disbursing
Agent the amount of funds specified in Lender’s notice. If required by Lender after reasonable
consideration of all funds available including the construction contingency fund, Borrower shall
also deposit with the Disbursing Agent, within thirty (30) calendar days of demand by Lender, funds
equal to any increase in the Project Cost resulting from an authorized change order. Borrower
agrees that any funds deposited with the Disbursing Agent shall be disbursed by the Disbursing
Agent before any further disbursements of the Commitment.

     Section 2.04 Disbursements Without Receipt of Draw Request. Notwithstanding anything
herein to the contrary, Lender shall have the irrevocable right at any time and from time to time
to cause an advance of the Commitment or a disbursement of funds that are on deposit with Lender or
the Disbursing Agent to pay principal or interest on the Note as and when said payments become due
and to pay any and all costs and expenses referred to in Section 7.03 hereof, and following the
occurrence of an uncured Event of Default to pay any and all costs and expenses necessary to
complete the Project, or to satisfy any obligation of Borrower pursuant to the terms of this
Agreement or the other Loan Documents, all without receipt of a Draw Request from Borrower.

     Section 2.05 Additional Security. Borrower irrevocably assigns to Lender and grants to
Lender a security interest in, as additional security for the performance of the Obligations, its
interest in all funds held by the Disbursing Agent pursuant hereto or the Disbursing Agreement,
whether or not disbursed, all funds deposited by Borrower with Lender, all reserves, including
deferred payments, deposits, refunds, cost savings, and payments of any kind relating to the
construction of the Project and, to the extent assignable, all
governmental permits obtained for the lawful construction of the Project.

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     Section 2.06 Suspension of Construction. If Lender determines that any work or
materials do not conform to the Drawings and Specifications or applicable law, or otherwise departs
from any of the requirements of this Agreement, Lender may require the work to be stopped and
withhold disbursement of Construction Loan Advances until the matter is corrected. In such event,
Borrower will promptly correct the work to Lender’s satisfaction. No such action by Lender will
affect Borrower’s obligation to complete the Project on or before the Conversion Date.

ARTICLE III

CONDITIONS OF LENDING

     Section 3.01 Conditions Precedent to Lending. The obligation of Lender to make the
initial Advance hereunder shall be subject to the condition precedent that Borrower shall be in
compliance with the conditions contained in Section 3.02 and the further condition precedent that
Lender shall have received the following:

	 	(a)	 	The Note, Mortgage, Assignment of Leases and Rents, Completion Guaranty,
Process and Performance Guaranty, UCC Financing Statements, Environmental Indemnity
Agreement, Opinion of Borrower’s Counsel, Borrower’s organizational documents, and
other Loan Documents as required hereunder, all of which shall be satisfactory to
Lender and Lender’s legal counsel in form and content, and duly executed and delivered
to Lender.
	 
	 	(b)	 	A current appraisal prepared by a state licensed appraiser approved by Lender
indicating an appraised value of the Mortgaged Property as follows: an “as stabilized”
value of the Project that will result in a Loan to value ratio of not more than sixty
five percent (65%). The appraisal shall be addressed to Lender and state that it has
been prepared on Lender’s behalf. The form of the appraisal and the appraisal methods
shall otherwise be satisfactory to Lender and shall conform to all requirements of
State and Federal law. Upon completion of construction, at the expense of Borrower, the
appraiser shall reinspect and recertify the value of the Mortgaged Property “as built.”
	 
	 	(c)	 	A “marked-up commitment” for a mortgagee’s title insurance policy duly endorsed
by the Title Company that: (i) names Lender as primary insured in the full principal
amount of the Commitment; (ii) insures the Mortgage to be a valid first lien on the
Mortgaged Property; and (iii) is free from exceptions for (1) matters that would be
disclosed by a survey or inspection, (2) mechanics’, contractors’ or materialmen’s
liens and lien claims, (3) rights and claims of parties in possession, (4) easements or
claims of easements not shown by the public records, including appurtenant easements
and (5) other exceptions not specifically approved by Lender and as set forth in
Exhibit B. All real estate taxes are current and all levied and pending
assessments as of the date of the Mortgage shall be paid in full. The policy shall
include a Form 3.1 zoning endorsement, an ALTA Form 9

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	 	 	 	comprehensive endorsement, a variable rate endorsement, a survey endorsement, and
such other endorsements as Lender may reasonably require under the circumstances.
Any undefined easements shall be defined and any appurtenant easements required for
the Mortgaged Property must be executed and delivered and must satisfy requirements
of the Title Company and Lender in the sole and uncontrolled discretion of the Title
Company, Lender and Lender’s legal counsel.

	 	(d)	 	An ALTA survey of the Mortgaged Property, satisfactory to Lender and the Title
Company, prepared by a registered land surveyor, which will include the legal
description and area of the Mortgaged Property, show and certify to the perimeter lot
lines, dimensions and vectors, the location of all existing footings, foundations and
improvements, utilities, easements, rights of way, building set back lines, curb lines
and encroachments, and the intended location of the Project according to the Drawings
and Specifications to be submitted and approved by Lender as provided herein. Said
survey shall be prepared for Lender’s and the Title Company’s benefit and shall be
certified by the surveyor in form acceptable to Lender and Title Company. The survey
shall be updated, as necessary to show the footings or foundations of the Project when
the footings or foundation is completed, and shall be updated again to show the
location of the “as-built” Project prior to the final disbursement of Loan proceeds.
	 
	 	(e)	 	Copies of all building and other permits necessary for construction of the
Project. Lender shall also receive a certificate of the engineer (or the opinion of
Borrower’s legal counsel) to the effect that all permits required by any governmental
authority for construction and operation of the Project have been obtained.
	 
	 	(f)	 	Evidence satisfactory to Lender that the Project complies with all building
codes and zoning and subdivision ordinances applicable thereto, and that the Project
and its use thereof are in compliance with all other state, federal, and local laws and
regulations.
	 
	 	(g)	 	Copies of the contracts between Borrower and the General Contractor, as well as
the contracts between the General Contractor and all major subcontractors. The
Construction Contract shall be a fixed-price or maximum-cost contract. All such
contracts shall be in form satisfactory to Lender and Lender’s legal counsel and shall,
together with the Drawings and Specifications, be assigned to Lender. The General
Contractor, and any subcontractors or other contractors, if required by Lender, shall
consent to such assignments. Borrower shall also provide to Lender any contract entered
into by Borrower, or any proposed tenants or franchisees doing business on the property
of Borrower, directly with any contractor, engineer, architect or professional
concerning the provision of materials and/or labor and/or services to the Project.

11

 

	 	(h)	 	Current financial statements, certified as true and correct by the party giving
the same. All such financial statements shall (i) indicate all assets, liabilities,
contingent liabilities and income, and (ii) include separate financial statements for
each significant asset (e.g., if partnership interests are shown as an asset, the
financial statements of the partnership shall also be provided). All financial and
credit information must be satisfactory to Lender in form and substance.
	 
	 	(i)	 	Satisfactory soil test borings and soil reports that are acceptable to Lender.
	 
	 	(j)	 	Written evidence from the proper municipal authorities and public utility
companies that all utilities, including water, electricity and natural gas, sewage and
related services are or will be available to the Mortgaged Property upon completion of
the Project.
	 
	 	(k)	 	All reciprocal easement agreements, maintenance agreements, and other easements
relating to the Mortgaged Property as Lender or Lender’s legal counsel may require, if
any, for parking, access, utility and other purposes, all of which shall be
satisfactory to Lender and Lender’s legal counsel in form and content.
	 
	 	(l)	 	Evidence satisfactory to Lender that no petroleum product or other Hazardous
Substance is present on the Mortgaged Property, and that no asbestos-containing
products, urea-formaldehyde foams or PCB’s are being used in the construction of the
Project. Such evidence shall include a Phase I Environment Report, and if necessary a
Phase II Environmental Report, prepared by a licensed engineer or other qualified
environmental consultant acceptable to Lender. The report shall be addressed to Lender
and state that it was prepared for Lender. If the report indicates that petroleum
products or other Hazardous Substances are present, the report shall identify such
materials and shall analyze (including cost and time factors) recommended methods of
removal. Borrower warrants that no asbestos containing-products, urea-formaldehyde foam
insulation or PCB’s will be used in the construction or equipping of the Project.
	 
	 	(m)	 	Delivery of the Sworn Construction Statement and the Drawings and
Specifications.
	 
	 	(n)	 	Delivery of the Project Cost Statement certified by the Borrower.
	 
	 	(o)	 	Evidence satisfactory to Lender that Borrower has expended or has deposited
with the Lender or Disbursing Agent not less than the amount of the required Equity in
payment of costs and expenses incurred in connection with the Project that would be
otherwise properly payable from an Advance, together with satisfactory lien waivers for
Hard Costs paid with such funds.

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	 	(p)	 	The Disbursing Agreement, duly executed by the Disbursing Agent, Borrower and
Lender.
	 
	 	(q)	 	Delivery of a payment and performance bond from General Contractor.
	 
	 	(r)	 	Payment to Lender of a commitment fee of $443,750.
	 
	 	(s)	 	Copy of the Management and Operational Services Agreement.
	 
	 	(t)	 	Delivery of UCC, tax lien, judgment and bankruptcy searches for the Borrower.
	 
	 	(u)	 	Delivery of proof of insurance.
	 
	 	(v)	 	Deposit or allocate Equity funds already on deposit with Lender the amount of
$5,000,000 for working capital for the express purpose of hedging.
	 
	 	(w)	 	Delivery of all executed Loan Documents in proper form for recording or filing,
as applicable, and all necessary recordings and filings have been delivered to the
Title Company for recording or filing.
	 
	 	(x)	 	Lender shall have received from the Borrower the following, each, unless
otherwise noted, dated as of the Closing Date:

	 	(i)	 	Copies of Borrower’s charter documents and all amendments
thereto (the “Constituent Documents”), together with a good standing
certificate from the Secretary of State of the State of Iowa and, to the extent
generally available, a certificate or other evidence of good standing as to
payment of any applicable franchise or similar taxes from the appropriate
taxing authority of such state, each dated within thirty (30) days prior to the
Closing Date;
	 
	 	(ii)	 	A Certificate of Borrower certifying (A) its Constituent
Documents, (B) resolutions approving and authorizing the execution, delivery,
and performance of this Agreement and the other Loan Documents, certified as of
the Closing Date as being in full force and effect without modification or
amendment, and (C) incumbency of its general partner executing this Agreement
and the other Loan Documents.

	 	(y)	 	Delivery by counsel to Borrower of a legal opinion concerning this transaction
in substantially the form attached as Exhibit D.
	 
	 	(z)	 	A Control Agreement related to each deposit or investment account maintained
with any party other than Lender.
	 
	 	(aa)	 	A collateral assignment in favor of Lender of each Material Contract in
existence on the date hereof.

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     Section 3.02 Further Conditions Precedent to All Advances. The obligation of Lender
to make any Advance hereunder including each subsequent Advance shall be subject to the condition
precedent that Borrower shall be in compliance with all conditions set forth in Sections 3.01 and
further conditions precedent that on the date of each Advance:

	 	(a)	 	No Event of Default hereunder, or event that would constitute such an Event of
Default but for the requirement that notice be given or that a period of grace or time
elapse, shall have occurred and be continuing and all representations and warranties
made by Borrower in Article IV shall continue to be true and correct as of the date of
such Advance.
	 
	 	(b)	 	No determination shall have been made by Lender that the undisbursed amount of
the Commitment is less than the amount required to pay all costs and expenses of any
kind that may be anticipated in connection with the Project; or if such a determination
has been made and notice thereof sent to Borrower, Borrower has deposited the necessary
funds with the Disbursing Agent or Lender in accordance with Section 2.03 hereof.
	 
	 	(c)	 	The disbursement requirements of Section 2.02 hereof and of the Disbursing
Agent set forth in the Disbursing Agreement have been satisfied.
	 
	 	(d)	 	If required by Lender or Disbursing Agent, Lender and the Disbursing Agent
shall be furnished with an updated Sworn Construction Statement for the Project.
	 
	 	(e)	 	Borrower shall have provided to Lender such evidence of compliance with all of
the provisions of this Agreement as Lender may reasonably request.
	 
	 	(f)	 	No license or permit necessary for the construction of the Project shall have
been revoked or the issuance thereof subjected to challenge before any court or other
governmental authority having or asserting jurisdiction thereover.

     Section 3.03 Conditions Precedent to the Final Advance. The obligation of Lender to
make the final Advance and to release the Retainage shall be subject to the condition precedent
that Borrower shall be in compliance with all conditions set forth in Sections 3.01 and 3.02 and,
further, that the following conditions shall have been satisfied:

	 	(a)	 	The Project, including all landscape and parking requirements, has been
substantially completed in accordance with the Drawings and Specifications and Lender
shall have received a Certificate of Completion from the General Contractor certifying
that (i) the construction of the Project has been completed in accordance with the
Drawings and Specifications (with the exception of any minor items (“Punch List
Items”)) (ii) all labor, services, materials and supplies used in the Project have
been paid for or will be paid for from the proceeds of the final Advance and (iii) the
completed Project conforms with all applicable zoning, land use planning, building and

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	 	 	 	environmental laws and regulations of the governmental authorities having
jurisdiction over the Project and the Mortgaged Property. The General Contractor
shall also deliver to Lender a list of Punch List Items acceptable to Lender,
specifying dates by which the Punch List Items shall be completed, together with
General Contractor’s written contract to complete the Punch List Items as specified.
The amount of the final Advance and/or the Retainage to be released shall be reduced
by an amount equal to 150% of the scheduled value of the Punch List Items, which sum
shall be held by Lender pending the completion of the Punch List Items to the
satisfaction of Lender.

	 	(b)	 	Lender has received each of the following documents and approvals, each of
which shall be satisfactory to Lender and Lender’s legal counsel:

	 	(i)	 	An as-built survey;
	 
	 	(ii)	 	A final Sworn Construction Statement executed by the General
Contractor and Borrower;
	 
	 	(iii)	 	A final Certificate of Occupancy issued by the appropriate
municipal or governmental inspecting authority;
	 
	 	(iv)	 	All necessary and appropriate inspecting certifications;
	 
	 	(v)	 	An approval for disbursement from the Inspecting Engineer after
its final inspection of the Project.
	 
	 	(vi)	 	A title endorsement from the Title Company that reflects the
absence of any liens or other matters affecting title that are objectionable to
the Lender.
	 
	 	(vii)	 	Final lien waivers executed by the General Contractor and all
subcontractors.

     Section 3.04 Insurance. Borrower shall obtain and shall continuously maintain
thereafter the following policies of insurance:

During Construction and Prior to Completion

Builder’s Risk Insurance - Builder’s Risk Insurance written on a completed
value basis in an amount equal to the full replacement cost of the building and
improvements at the date of completion with coverage available on the so-called
non-reporting “all risk” form of policy, including coverage against collapse and
water damage and fire, with standard non-contributing mortgagee clauses, such
insurance to be in such amounts and form and written by such companies as shall be
approved by Lender which approval shall not be unreasonably withheld, conditioned or
delayed, and the insurance certificates evidencing such policies (together with
appropriate endorsement thereto, evidence of payment of premiums thereon and written
agreements by the insurer or insurers therein to give Lender thirty (30) days’ prior
written
notice of any intention to cancel).

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Contractor’s Liability - Contractor’s Comprehensive General Liability
Insurance including operations, product liability, contingent liability operations,
operations of subcontractors, completed operations, contractual liability insurance
and comprehensive automobile liability insurance (including hired and non-owned
liability) and with combined single limit and general aggregate coverage for
personal and bodily injury and property damage of at least $2,000,000.00 for each
occurrence, $3,000,000.00 general aggregate and with $5,000,000.00 excess liability
coverage.

Worker’s Compensation - Statutory worker’s compensation coverage in the
required amounts.

Flood - Flood insurance if any part of the Mortgaged Property is now (or
subsequently determined to be) located in an area identified by the Federal
Emergency Management Agency as an area having special flood hazards and in which
flood insurance has been made available under the National Flood Insurance Act of
1968 (and amendment or successor act thereto) in an amount at least equal to the
lesser of the full replacement cost of all buildings and equipment on the Mortgaged
Property, the outstanding principal amount of the Note or the maximum limited of
coverage available with respect to the buildings and equipment under said Act;

After Completion

All Risk - All risk/open perils special form property insurance with
extended coverages including any building contents, sprinkler coverage, fire
coverage, Contingent Operations of Building Laws/Ordinance or Law Endorsement
(including demolition cost, loss to undamaged portions of any buildings and
increased cost of construction) with limits of 100% replacement cost and with no
co-insurance provision or if the insurance carrier requires, co-insurance provisions
with an agreed amount endorsement in amount acceptable to Lender, and with no
exclusions for terrorism or terrorist acts;

Boiler and Pressure Vessels - Insurance against loss or damage from i)
leakage of sprinkler systems and ii) explosion of steam boilers, air conditioning
equipment, high pressure piping, machinery and equipment, pressure vessels or
similar apparatus now or hereafter installed in any improvements on the Mortgaged
Property and including broad form boiler and machinery insurance (without exclusion
for explosion) covering all boilers or other pressure vessels, machinery and
equipment (including electrical equipment, sprinkler systems, heating and air
conditioning equipment, refrigeration equipment and piping) located in, on or about
the Mortgaged Property and any improvements thereon in an amount at least equal to
the full replacement cost of such equipment and the building or buildings housing
the same;

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Rents/Income - Rents Loss or Business Interruption insurance covering risk
of loss due to the occurrence of any hazards insured against under the required fire
and extended coverage insurance in an amount equal to one (1) year’s loss of income
as such income may change from time to time due to changes in income from the
Mortgaged Property;

Flood - Flood insurance if any part of the Mortgaged Property now (or
subsequently determined to be) is located in an area identified by the Federal
Emergency Management Agency as an area having special flood hazards and in which
flood insurance has been made available under the National Flood Insurance Act of
1968 (and amendment or successor act thereto) in an amount at least equal to the
lesser of the full replacement cost of all buildings and improvements on the
Mortgaged Property, the outstanding principal amount of the Note or the maximum
limited of coverage available with respect to the buildings and improvements under
said Act;

CGL — Commercial general public liability insurance (including product
liability, completed operations, contractual liability, host liquor liability, broad
form property damage, and personal injuries, including death resulting therefrom)
and with combined single limit and general aggregate coverage for personal and
bodily injury and property damage of at least $2,000,000.00 for each occurrence,
$3,000,000.00 general aggregate and with $5,000,000.00 excess liability coverage.

Maximum deductible on all coverages and policies shall be no greater than $10,000.00. The insurance
carrier must be rated A, Class XII, or better, by Best’s Rating Service. Such insurance policies
shall be written on forms and with insurance companies satisfactory to Lender, shall be in amounts
sufficient to prevent Borrower from becoming a co-insurer of any loss thereunder, shall insure
Lender as a first mortgagee on the casualty and business interruption/loss of rents coverage under
a standard mortgagee clause and shall name Lender as an “additional insured” on all required
liability coverages and policies. Insurance certificates evidencing such insurance and evidence of
payment of premiums thereon and written agreements by the insurer or insurers therein to give
Lender thirty (30) days’ prior written notice of any intention to cancel. If no such copy is
available, Lender will accept a binder for a period not to exceed ninety (90) days. Borrower shall,
within thirty (30) days prior to the expiration of any such policy, deliver insurance certificates
evidencing the renewal of such insurance together with evidence of the payment of current premiums
therefor. Any vacancy, change of title, tenant occupancy or use, physical damage, additional
improvements or other factors affecting any insurance contract must be promptly reported to Lender.
All binders, certificates of insurance, and original or certified copies of policies must name
Borrower as a named insured, or as an additional insured, must include the complete and accurate
property address and must bear the original signature of the issuing insurance agent. In the event
of a foreclosure or trustee’s sale under the Mortgage or any acquisition of the Mortgaged Property
by Lender all such policies and any proceeds payable therefrom, whether payable before or after a
foreclosure sale, or during the period of redemption, if

17

 

any, shall become the absolute property of Lender to be utilized at its discretion. In the event of
foreclosure or the failure to obtain and keep any required insurance Borrower empowers Lender to
effect the above insurance upon the Mortgaged Property at Borrower’s expense and for the benefit of
Lender in the amounts and types aforesaid for a period of time covering the time of redemption from
sale, and if necessary therefore, to cancel any or all existing insurance policies. Borrower agrees
to pay Lender such fees as may be permitted under applicable law for the costs incurred by Lender
in determining, from time to time, whether the Mortgaged Property are located within an area having
special flood hazards. Such fees shall include the fees charged by any organization providing for
such services.

     Section 3.05 No Waiver. The making of any Advance prior to fulfillment of any
condition thereof shall not be construed as a waiver of such condition, and Lender reserves the
right to require fulfillment of any and all such conditions prior to making any subsequent Advance.

ARTICLE IV

REQUIRED RESERVES, SINKING FUND AND ESCROW ACCOUNT

     Section 4.01 Interest Reserve. A sum in the amount of $1,317,627.00 shall be unfunded
and reserved for the payment of interest owed on the loan (the “Interest Reserve”). It is the
intent of the parties hereto, that all Advances made pursuant to a Draw Request shall include, but
not be limited to, an Advance from the unfunded Interest Reserve to pay interest then due under the
Loan. It is the further intent of the parties hereto that in the event an interest payment is due
under the terms of the Note but (i) no Draw Request has been made; or (ii) a Draw Request has been
submitted such that the interest payment cannot be timely made as part of the Draw Request, THEN
Lender may draw from the Interest Reserve to pay such accrued interest then due. If the term of the
Construction Phase (as defined in the Note) is extended or if the Interest Reserve is otherwise
depleted such that there would not be enough funds available to pay interest through the
Construction Phase, Borrower shall be required to replenish the Interest Reserve at the time of
extension or determination of depletion. Upon completion of the Construction Phase, all unused
funds in the Interest Reserve shall be advanced and deposited into the Debt Service Reserve. If at
any time the Interest Reserve is exhausted or Lender determines, at its sole discretion, it is
insufficient due to interest rate adjustments, Borrower will, within 10 calendar days of Lender’s
request, deposit with Lender an amount sufficient for the funding of interest payments over the
remaining term of the Loan.

     Section 4.02 Debt Service Reserve. At the Conversion Date, the balance of the Interest
Reserve shall be advanced and deposited into a custodial account in the name of Borrower held with
Lender or other national bank designated by Lender and reserved for any required debt service of
the Loan (the “Debt Service Reserve”). Commencing one month following the Conversion Date, Borrower
shall make monthly deposits to the Debt Service Reserve until such time as the balance equals
$1,378,084.00 (“Required Reserve Amount”). Monthly deposits shall consist of not less than
one-third (1/3) of all available monthly Project EBITDA. Lender may advance funds from the Debt
Service Reserve for the following purposes:

18

 

	 	(a)	 	In the Event of a Default in the payment of principal and/or interest under the
Note, Lender may advance funds from the Debt Service Reserve in an amount to cure such
default; and
	 
	 	(b)	 	In the event of a default in the payment of a premium of the property insurance
on the Mortgaged Property, Lender may advance funds from the Debt Service Reserve in an
amount necessary to cure such default.

In the event of an advance from the Debt Service Reserve to Lender to cure a default pursuant to
this section, Borrower shall, within ninety (90) days, deposit funds sufficient to bring the
balance of the Debt Service Reserve to the Required Reserve Amount. Interest on the Debt Service
Reserve monies is payable to Borrower and may be withdrawn annually provided there is no existing
or continuing Event of Default. Upon repayment of the Loan, all monies in the Debt Service Reserve
shall be payable to Borrower.

     Section 4.03 Capital Improvements Reserve. Commencing one month after the Conversion
Date, Borrower shall be required to deposit into a custodial account held with Lender, or other
national bank as approved by Lender, in the amount of $10,417 per month from Project EBITDA (or
other amount available after the required deposit has been made to the Debt Service Reserve), up to
a maximum of $125,000.00 (the “Reserve Cap”).

     If at any time the Capital Improvements Reserve falls below the Reserve Cap, the Borrower
shall replace such deficiency through monthly deposits as required above until the Capital
Improvements Reserve is fully replenished up to the Reserve Cap.

     At Lender’s option, following the Conversion Date, disbursements from the Capital Improvements
Reserve wilt be disbursed to Borrower (or paid directly by Lender) for capital improvements,
including but not limited to repairs, replacements and other capital improvements to the Project
plant and equipment. Lender shall have no obligation to disburse from the Capital Improvements
Reserve (i) if an Event of Default has occurred and is continuing hereunder, or (ii) for any other
purpose or to any other person other than for which the Capital Improvements Reserve was
established; provided that if an Event of Default has occurred, the Lender may disburse
from the Capital Improvements Reserve in its sole discretion to the repayment of the Loan or to any
of the Project Costs as it may determine in its discretion. Borrower hereby grants to Lender a
first security interest in the Capital Improvements Reserve. Amounts held in the Capital
Improvements Reserve shall be disbursed from time to time as required in increments as needed to
satisfy the item for which the Capital Improvements Reserve has been established. Such requests
shall be made not more often than monthly, in writing, addressed to the Lender certifying the
amount to be disbursed and accompanied by:

	 	(a)	 	An Application for Payment signed by the Borrower identifying the repairs
completed and/or labor and materials involved in completing the capital expenditures
and certifying that such work has been completed, and accompanied by all bills for
labor and material incurred, and/or receipts for purchase of furniture fixtures and
equipment.

19

 

	 	(b)	 	If Lender requires, an inspection report from its retained inspector verifying
the work has been completed and installed as the case may be, in a good and workmanlike
manner and in compliance with all construction, use, building zoning and other
governing laws, rules and regulations and the Americans With Disabilities Act.
	 
	 	(c)	 	Such approval of the work done and/or final certificates of occupancy as may be
required by the municipality or governmental agency having jurisdiction over the
Project evidencing compliance with the applicable building codes and ordinances
governing the work.
	 
	 	(d)	 	Lien waiver from all laborers and materialmen performing work for which an
Application For Payment is submitted.

Lender may require that the Title Company issue a downdate endorsement to the policy dated as of
the disbursement date assuring no change in the insuring conditions and no further exceptions to
the policy. If Lender is satisfied that the requirements are satisfied, Lender shall, within ten
(10) business days thereafter, disburse the amount requested in the Application for Payment. At its
option, Lender may make such disbursement directly to the persons or entities supplying the
materials for or performing the repairs or to the Title Company for disbursement by the Title
Company to the payees.

     Section 4.04 Sinking Fund. Commencing one month after the Conversion Date, one third
(1/3) of all monthly Project EBITDA shall be applied to a reduction of Loan principal. At such time
as the outstanding principal balance of the Loan is reduced to an amount equal to or less than
$20,510,000.00, no additional deposits into the Sinking Fund will be required.

     Section 4.05 Working Capital Reserve. At Loan closing, Borrower shall deposit
$5,000,000.00 into a custodial account in the name of Borrower held with Lender or other national
bank designated by Lender which shall be reserved strictly for hedging purposes and Borrower shall
be required to provide sufficient evidence of use acceptable to Lender prior to any funding from
the Working Capital Reserve.

     Section 4.06 Tax Escrow Account. Upon the occurrence of an Event of Default, Lender
may, in its sole discretion, require Borrower to deposit monthly into a custodial account held with
Lender, or other national bank as approved by Lender, an amount sufficient to fund the annual real
estate taxes. Disbursement from the Tax Escrow Account shall be made annually upon Borrower’s
request and presentation of tax statement.

ARTICLE V

WARRANTIES, REPRESENTATIONS AND COVENANTSOF BORROWER

     Section 5.01 Representations and Warranties. Borrower represents and warrants as
follows:

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	 	(a)	 	The Loan Documents to which Borrower is a party have been duly executed and
delivered to Lender by Borrower, as applicable, and each Loan Document constitutes the
legal, valid and binding obligations of Borrower enforceable in accordance with the
terms thereof (subject, as to enforceability, to limitations resulting from bankruptcy,
insolvency and other similar laws affecting creditors’ rights generally).
	 
	 	(b)	 	The Project and the intended use thereof for the purpose and in the manner
contemplated by this Agreement are permitted by and comply in all material respects
with all presently applicable use or other restrictions and requirements in prior
conveyances, zoning ordinances and all development, pollution control, water
conservation, environmental and other laws, regulations, rules and ordinances of the
United States and the State of Iowa and the respective agencies thereof, and the
political subdivision in which the Mortgaged Property is located.
	 
	 	(c)	 	There is no suit, action or proceeding pending or, to the knowledge of Borrower
threatened against or affecting Borrower before or by any court, arbitrator,
administrative agency or other governmental authority that if adversely determined,
singly or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect.
	 
	 	(d)	 	Borrower has filed all federal and state tax returns and informational reports
required to be filed, which returns properly reflect the taxes owed by it for the
period covered thereby and Borrower has paid all taxes that are due pursuant to said
returns and paid all present installments of any assessments, fees and other
governmental charges upon it or upon its property.
	 
	 	(e)	 	No consent, approval or authorization of or permit or license from or
registration with or notice to any federal or state regulatory authority or any third
party is required in connection with the making or the performance of the Loan
Documents, the Project, or with respect to any other aspect of the Project or the
Mortgaged Property, or, if so required, such consent, approval, authorization, permit
or license has been requested and obtained or such registration made or notice given or
such other appropriate action taken on or prior to the date hereof (other than with
respect to the occupancy of the Mortgaged Property that cannot be obtained until
completion of the Project).
	 
	 	(f)	 	Borrower is not in default of a material provision under any Material Contract,
instrument, decree or order to which it is a party or to which its property is bound or
affected.
	 
	 	(g)	 	There has been no material adverse change in the financial condition of
Borrower since the date of certification of Borrower’s financial statements previously
delivered to Lender.

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	 	(h)	 	Borrower is in compliance with all (a) applicable laws, rules, and regulations,
(b) orders of any governmental authority, and (c) all indentures, agreements or other
instruments binding upon it or its properties; except where noncompliance, either
singly or in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect.
	 
	 	(i)	 	Borrower has good title to or a valid leasehold interest in all of the real and
personal property material to operation of Borrower’s businesses. Borrower owns, or is
licensed or otherwise has the right to use, all patents, trademarks, service marks,
trade names, copyrights and other intellectual property material to its business, and
the use thereof by Borrower does not infringe on the rights of any other party, except
for any such infringements that, individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect.
	 
	 	(j)	 	Borrower has disclosed to Lender all agreements, instruments, and corporate or
other restrictions to which Borrower is subject, and all other matters known to it,
that, individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the reports, financial statements, certificates or
other information furnished by or on behalf of Borrower pursuant to this Agreement or
any other Loan Document or delivered hereunder or thereunder (as modified or
supplemented by any other information so furnished) contains any material misstatement
of fact or omits to state any material fact necessary to make the statements therein,
not misleading.
	 
	 	(k)	 	Borrower has obtained all licenses, consents, approvals, authorizations and
permits of governmental authorities which Borrower is required to obtain in connection
with construction of the Project and operation of Borrower’s business, including but
not limited to any of the foregoing related to environmental laws, zoning and land-use
laws (including any requirement to obtain a special exception, if applicable), water
use laws, waste disposal laws, laws requiring construction permits, and occupancy
certificates. Borrower has provided true and correct copies of such licenses, consents,
approvals, authorizations and permits to Lender.
	 
	 	(l)	 	Neither Borrower nor any of its affiliates is in violation of (a) any of the
foreign assets control regulations of the United States Treasury Department (31 CFR,
Subtitle B, Chapter V, as amended) or any enabling legislation or executive order
relating thereto, (b) Executive Order No. 13,224, 66 Fed Reg 49,079 (2001), issued by
the President of the United States (Executive Order Blocking Property and Prohibiting
Transactions with Persons Who Commit, Threaten to Commit or Support Terrorism) or (c)
the anti-money laundering provisions of the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT
ACT) Act of

22

 

	 	 	 	2001, Public Law 107-56 (October 26, 2001) amending the Bank Secrecy Act, 31 U.S.C.
Section 5311 et seq. Borrower shall (i) ensure that no person or entity that owns a
controlling interest in or otherwise controls any Borrower is or shall be listed on
the Specially designated Nationals and Blocked Person List or other similar lists
maintained by the Office of Foreign Assets Control (“OFAC”), the Department of the
Treasury or included in any Executive Orders, (ii) not use or permit the use of any
Loan proceeds to violate any of the foreign asset control regulations of OFAC or any
enabling statute or Executive Order Relating thereto, and (iii) comply with all
applicable Bank Secrecy Act (“BSA”) laws and regulations, as amended.
	 
	 	(m)	 	Borrower is not (i) an “investment company,” as defined in, or subject to
regulations under, the Investment Company Act of 1940, as amended, (ii) a “holding
company” as defined in, or subject to regulations under, the Public Utility Holding
Company Act of 1935, as amended, or (iii) otherwise subject to any other regulatory
scheme limiting its ability to incur debt.
	 
	 	(n)	 	Borrower is acting on its own behalf and that as of the date hereof, it is not
an employee benefit plan as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”), which is subject to Title I of ERISA, nor a
plan as defined in Section 4975(e)(1) of the Internal Revenue Code of 1986, as amended,
each of the foregoing hereinafter referred to collectively as a “plan,” and the assets
of the Borrower do not constitute “plan assets” of one or more such Plans within the
meaning of Department of Labor Regulation Section 2510.3-101, Borrower also represents,
warrants and covenants that it will not be reconstituted as a Plan or as an entity
whose assets constitute “plan assets.”
	 
	 	(o)	 	The Loans, including interest rates, fees and charges as contemplated hereby,
are business loan, and no proceeds thereof shall be used for personal, family or
consumer purposes; the Loan is an exempted transaction under the Truth in Lending Act,
12 U.S.C. § 1601 et seq.

     Section 5.02 Covenants. On and after the date hereof and until payment in full of the
Note and payment and performance of all other obligations of Borrower hereunder, and so long as any
portion of the Loan referenced herein remain in effect, Borrower agrees as follows:

	 	(a)	 	The Mortgaged Property shall comply with all applicable restrictions,
conditions, ordinances, regulations and laws of governmental departments and agencies
having jurisdiction over the Mortgaged Property, and shall not violate any private
restrictions or covenants or encroach upon or interfere with easements affecting the
Mortgaged Property, and that Borrower will commence and carry on continuously,
diligently and with reasonable dispatch, the construction of the Project in conformance
to the Drawings and Specifications, free from all mechanic’s, laborer’s and material
man’s liens and in a good and workmanlike manner, and complete the same prior to the maturity date of the Note.

23

 

	(b)	 	To keep, perform, enforce and maintain in full force and effect all of the
terms, covenants, conditions and requirements of the Project Documents (other than
immaterial terms approved by Lender in the reasonable exercise of its discretion); not
to amend, modify, supplement, terminate, cancel or waive any of the terms, covenants,
conditions or requirements of any of said documents without the prior written consent
of Lender; and to execute and deliver such amendments, modifications, supplements and
extensions of said documents as may be reasonably requested by Lender.
	 
	(c)	 	To use its best efforts to require the General Contractor and each Contractor
to comply with all rules, regulations, ordinances and laws bearing on its conduct in
the construction of the Project.
	 
	(d)	 	To furnish to Lender as soon as possible and in any event within seven (7) days
after Borrower has obtained knowledge of the occurrence of an event that would
constitute an Event of Default hereunder or a violation of any of the covenants or
obligations of Borrower under this Agreement or that would cause any of the
representations or warranties hereunder to be false or misleading in any respect, or an
event that with the giving of notice or lapse of time or both would constitute an Event
of Default, that is continuing on the date of such statement, in which case Borrower
shall deliver a signed statement setting forth the details of such violation or event
and the action that has been taken, is being taken, or that Borrower proposes to take,
to correct the same.
	 
	(e)	 	To hold Lender harmless, and Lender shall have no liability or obligation of
any kind to Borrower, creditors of Borrower or any third party, in connection with any
defective, improper or inadequate workmanship performed in or about, or materials
supplied to the Mortgaged Property, or any mechanic’s, supplier’s or material man’s
liens arising as a result of such defective, improper or inadequate workmanship or
materials, and upon Lender’s request, to replace or cause to be replaced, any such
defective, improper or inadequate workmanship or materials.
	 
	(f)	 	To pay and discharge all taxes, assessments and governmental charges or levies
imposed upon Borrower or upon its income or profits, or upon its assets or properties,
prior to the date on which penalties attach thereto, and all lawful claims that, if
unpaid, might become a lien or charge upon the property or assets of Borrower;
provided, however, that Borrower shall not be required to pay any such tax, assessment,
charge, levy or claim, the payment of which is being contested in good faith and by
proper proceedings and for which it shall have set aside adequate reserves.
	 
	(g)	 	To keep the Mortgaged Property and all improvements, buildings and
fixtures thereon in good working order and condition.

24

 

	(h)	 	As soon as available, and within one hundred twenty (120) days after the end of
each calendar year, a copy of the annual financial statements of Borrower, that shall
include the balance sheet of Borrower as at the end of such year and related statements
of income and expenses, statement of changes in financial position, a statement of
changes in capital accounts and a statement of allocation of distribution of profits
and losses of Borrower, all in reasonable detail, prepared in accordance with GAAP (or
tax accounting reconciled to GAAP) and reviewed by a reputable accounting firm. Such
statements shall be accompanied a Covenant Compliance Certificate in the form of
Exhibit C attached hereto and by the annual federal income tax returns of
Borrower, including all schedules, for the preceding taxable year as filed with the
Internal Revenue Service unless an extension has been obtained for filing taxes and
then within thirty (30) days after final filing.

	(i)	 	Beginning with the first quarter after the completion of the Project, as soon
as available, and within thirty (30) days after the end of each quarter, a copy of the
quarterly financial statement of Borrower that shall include the balance sheet of
Borrower as at the end of such quarter and related statements of income and expenses,
statement of changes in financial position, a statement of changes in capital accounts
and a statement of allocation of distribution of profits and losses of Borrower, all in
reasonable detail, prepared in accordance with GAAP (or tax accounting reconciled to
GAAP). Such statements shall be accompanied by a Covenant Compliance Certificate in the
form of Exhibit C hereto.

	(j)	 	As soon as possible, and within ninety days (90) days after the end of each
calendar year, an annual operating statement of the Project detailing the total
revenues received, total expenses incurred, total cost of all capital improvements,
total debt service and total cash flow, to be prepared and certified by Borrower in the
form approved by Lender, and, if available, any operating statement prepared by an
independent certified public accountant within thirty (30) days of the date of such
statement is made available to Borrower.

	(k)	 	As soon as possible, and within ten (10) days after the end of each month, a
Covenant Compliance Certificate in the form attached hereto as Exhibit C.

	(l)	 	Within ten (10) days after Lender’s request therefor, Borrower shall deliver to
Lender such other information as Lender may reasonably request from time to time.

	(m)	 	Borrower shall maintain and preserve its existence as a limited liability
company and all rights, privileges, licenses, patents, patent rights, copyrights,

25

 

	 	 	trademarks, trade names, franchises and other authority to the extent material and
necessary for the conduct of its business in the ordinary course as conducted from
time to time. Without at least 30 days prior written notice Borrower shall not (i)
change its legal name, (ii) change its state of organization, or (iii) change the
location of its chief executive office.
	 
	(n)	 	Commencing the sixth (6th) month following the Conversion
Date, the Borrower shall maintain a monthly Debt Service Coverage ratio of 1.25 to
1.00.
	 
	(o)	 	Commencing the sixth (6th) month following the Conversion
Date, the Borrower shall maintain a monthly Fixed Charge Coverage ratio of 1.50 to
1.00.
	 
	(p)	 	At Loan closing and monthly thereafter, Borrower shall maintain a ratio of
Current Assets to Current Liabilities of not less than 1.50 to 1.00.
	 
	(q)	 	Commencing at the end of the first full calendar year following the Conversion
Date, the Chief Financial Officer of the Borrower shall certify (and confirm by audit
report on the Borrower following fiscal year end) that the ratio of total Loan
principal and all other debt obligations of the Borrower to Project earnings before
interest, taxes, depreciation and amortization for the previous twelve (12) months
shall not be more than 2.50 to 1.00.
	 
	(r)	 	Promptly upon entering into a Material Contract, Borrower shall notify Lender
of the same and collaterally assign such Material Contract to Lender and, if requested
by Lender, cause the counter party to such Material Contract to consent to such
collateral assignment.
	 
	(s)	 	If Borrower acquires any Collateral which may have constituted Farm Products in
the possession of the seller or supplier thereof, Borrower shall, at its own expense,
use it best efforts to take such steps to insure that all liens and security interests
and encumbrances of any kind (except the security interests granted to Lender pursuant
hereto or under the Loan Documents) in such acquired Collateral are terminated or
release, including, without limitation, in the case of such Farm Products produced in a
state which has established a Central Filing System (as defined in the Food Security
Act), registering with the Secretary of State of such state (or such other party or
office designated by such state) and otherwise take such reasonable actions necessary,
as prescribed by the Food Security Act, to purchase Farm Products free of liens,
security interests and encumbrances of any kind (except the security interests granted
to the Lender pursuant hereto or under the Loan Documents); provide, however, that
Borrower may contest and need not obtain the release or termination of any lien,
security interest or encumbrance asserted by any creditor of any seller of such Farm
Products, so long as it shall be contesting the same by proper proceedings and maintain
appropriate accruals and reserves therefore in accordance with GAAP. Upon Lender’s
request, Borrower agrees to forward to Lender promptly after receipt copies of

26

 

	 	 	 	all notices of liens and master lists of effective financing statements delivered to
the Borrower pursuant to the Food Security Act, which notices and/or lists pertain
to any of the Collateral. Upon the Lender’s request, Borrower agrees to provide
Lender with the names of persons or entities who supply Borrower with such Farm
Products and such other information as Lender may reasonably request with respect to
such persons and entities.
	 
	 	(t)	 	If any warehouse receipt or receipts in the nature of a warehouse receipt is
issued in respect of any portion of the Collateral, then Borrower (i) will not permit
such warehouse receipt or receipts in the nature thereof to be “negotiable” as such
terms is used in Article 7 of the UCC and (ii) will deliver all such receipts to Lender
(or person or entity designated by Lender) within five (5) days of Lender’s request and
from time to time thereafter. If no default or Event of Default or occurrence which
with the passage of time or the giving of notice would constitute a default or Event of
Default then exists, Lender agrees to deliver to Borrower any receipt so held by Lender
or its designated agent upon Borrower’s request in connection with Borrower’s sale or
other disposition of the underlying Collateral, if such disposition is in the ordinary
coarse of Borrower’s business.

     Section 5.03 Negative Covenants. Borrower agrees that without the prior written
consent of Lender:

	 	(a)	 	Borrower shall not grant any security interest in the Mortgaged Property or any
part thereof, or create or permit to be created or allow to exist any mortgage,
encumbrance or other lien upon the Mortgaged Property.
	 
	 	(b)	 	Borrower shall not agree or consent to any material changes in the Project
Documents; provided however, changes to the Project Documents which do not affect the
aesthetics or diminish the value of the Project and which are in an amount not
exceeding $100,000 in the aggregate shall not require Lender consent or approval or be
in violation of this section.
	 
	 	(c)	 	Borrower shall not incorporate in the Project any materials, fixtures or
property that are subject to the claims of any other person, whether pursuant to
conditional sales contract, security agreement, lease, mortgage or otherwise.
	 
	 	(d)	 	Borrower shall not assume, guaranty, or become an obligor or surety for the
obligations of any third party.
	 
	 	(e)	 	Borrower shall not incur any indebtedness other than the Loan and trade
payables in the ordinary course of its business.
	 
	 	(f)	 	Borrower shall not make any principal or interest payments on any subordinated
debt or other financing sources nor any distributions to

27

 

	 	 	shareholders or members of the Borrower from Project EBITDA until the following have
been paid in full: (1) regularly scheduled Loan principal and interest payments; (2)
amounts required to be deposited into the Debt Service Reserve; (3) required Sinking
Fund payments; and (4) required deposits into Capital Improvements Reserve.
	 
	(g)	 	Borrower shall not maintain any deposit account or investment property (each as
defined in the UCC) with any party other than Lender that is not subject to a Control
Agreement.
	 
	(h)	 	Borrower will not engage in any business other than businesses of the type
conducted by Borrower on the date hereof and businesses reasonably related thereto.
	 
	(i)	 	Borrower will not purchase, hold or acquire any common stock, evidence of
indebtedness or other securities (including any option, warrant, or other right to
acquire any of the foregoing) of, make or permit to exist any loans or advances to, or
make or permit to exist any investment or any other interest in, any other person or
entity, or purchase or otherwise acquire (in one transaction or a series of
transactions) any assets of any other person or entity that constitute a business unit,
or create or form any subsidiary, except: loans or advances to employees, officers or
directors of Borrower in the ordinary course of business for travel, relocation and
related expenses; provided, however, that the aggregate amount of all such loans and
advances does not exceed $100,000 at any time.
	 
	(j)	 	Borrower will not convey, sell, lease, assign, transfer or otherwise dispose
of, any of its assets, business or property, whether now owned or hereafter acquired
except (a) the sale or other disposition for fair market value of obsolete or worn out
property or other property not necessary for operations disposed of in the ordinary
course of business; and (b) the sale of inventory in the ordinary course of business.
	 
	(k)	 	Borrower will not sell, lease or otherwise transfer any property or assets to,
or purchase, lease or otherwise acquire any property or assets from, or otherwise
engage in any other transactions with, any affiliate, except in the ordinary course of
business at prices and on terms and conditions not less favorable to Borrower than
could be obtained on an arm’s-length basis from unrelated third parties in comparable
transactions.
	 
	(l)	 	Borrower will not directly or indirectly, enter into, incur or permit to exist
any agreement that prohibits, restricts or imposes any condition upon the ability of
Borrower to create, incur or permit any lien upon any of its assets or properties,
whether now owned or hereafter acquired.

28

 

	 	(m)	 	Borrower will not enter into any arrangement, directly or indirectly, whereby
it sells or transfers any property, real or personal, used or useful in its
business, whether now owned or hereinafter acquired, and thereafter rent or lease
such property or other property that it intends to use for substantially the same
purpose or purposes as the property sold or transferred.
	 
	 	(n)	 	Except to the extent as could not reasonably be expected to result in a
Material Adverse Effect, Borrower will not amend, modify or waive any of its rights
under (a) its certificate or articles of organization, operating agreement, bylaws or
other organizational documents or (b) any Material Contract.
	 
	 	(o)	 	Borrower will not make any significant change in accounting treatment or
reporting practices, except as required by generally accepted accounting principles, or
change its fiscal year.
	 
	 	(p)	 	Borrower will not use the proceeds of any Loan, directly or indirectly, for
“purchasing” or “carrying” any “margin stock” with the respective meanings of each of
such terms under Regulation U of the Board of Governors of the Federal Reserve System
as now and from time to time hereafter in effect, or for any purpose that violates the
provisions of Regulation U, T or X of the Board of Governors of the Federal Reserve
System, or for speculative purposes, including, without limitation, speculating in the
commodities and/or futures markets.

     Section 5.04 Environmental Representation, Warranties and Covenants, and Indemnities.
To induce Lender to make and fund the Loan, Borrower hereby represents, warrants, covenants and
agrees as follows:

	 	(a)	 	That, except as heretofore disclosed to Lender in writing (i) the Mortgaged
Property has never been used by Borrower or to the best of their knowledge by any
previous owners or occupants or current occupants to generate, manufacture, refine,
transport, treat, store, handle or dispose of any Hazardous Substances and no such
Hazardous Substances exist on the Mortgaged Property or in its soil or groundwater,
(ii) the Project will not be constructed with asbestos, asbestos containing materials,
urea formaldehyde insulation or any other chemical or substance that has been
determined to be a hazard to health and/or the environment, (iii) there does not
presently exist, nor to best of their knowledge have there been in the past, electrical
transformers or other equipment that have dielectric fluid-containing polychlorinated
biphenyls (PCBs) located in, on or under the Mortgaged Property, (iv) to the best of
Borrower’s knowledge, the Mortgaged Property has never contained any underground
storage tanks, (v) Borrower has not received or has any knowledge of any summons,
citation, directive, letter or other communication, written or oral, from any local,
state or federal governmental agency concerning the existence of Hazardous Substances
on the Mortgaged Property or in the immediate vicinity of the Mortgaged Property or the
releasing, spilling, leaking, pumping, pouring, emitting, emptying, or dumping
of Hazardous Substances onto the Mortgaged Property or into waters or other lands.

29

 

	(b)	 	That Borrower shall (i) comply and shall cause all occupants of the Mortgaged
Property to comply with all federal, state and local laws, rules, regulations and
orders with respect to the discharge, generation, removal, transportation, storage and
handling of Hazardous Substances, (ii) remove any Hazardous Substances immediately upon
discovery of the same in accordance with applicable laws, ordinances and orders of
governmental authorities having jurisdiction thereof, (iii) pay or cause to be paid all
costs associated with such removal, (iv) prevent the migration of Hazardous Substances
from or through the Mortgaged Property onto or under other properties, (v) keep the
Mortgaged Property free of any lien imposed pursuant to any state or federal law, rule,
regulation or order in connection with the existence of Hazardous Substances on the
Mortgaged Property, (vi) not install or permit to be incorporated into any improvements
in the Mortgaged Property or to exist in or on the Mortgaged Property any asbestos,
asbestos containing materials, urea formaldehyde insulation or any other chemical or
substance that has been determined to be a hazard to health and/or the environment,
(vii) not cause or permit to exist, as a result of an intentional or unintentional act
or omission on the part of Borrower, or any occupant of the Mortgaged Property, a
releasing, spilling, leaking, pumping, emitting, pouring, emptying or dumping of any
Hazardous Substances onto the Mortgaged Property or into waters or other lands, and
(viii) give all notifications and prepare all reports required by Environmental Laws or
any other law with respect to Hazardous Substances existing on, released from or
emitted from the Mortgaged Property.

	(c)	 	That if Borrower fails to diligently dispose of or secure any Hazardous
Substance after discovery thereof in full compliance with all applicable laws and
regulations, Lender may at its option, but without any obligation whatsoever, proceed
to so dispose of or secure the Hazardous Substance or take such other action
necessitated or resulting therefrom at the cost and expense of Borrower. Borrower and
guarantors further agree that in the Event of Default or if any Hazardous Substance is
discovered in, on or under the Mortgaged Property or is attributable to or affects the
Mortgaged Property, Borrower shall, at its expense, permit an environmental inspection,
audit, assessment, or other testing or monitoring of the Mortgaged Property, for the
sole benefit of Lender, to be conducted by Lender or by an independent agent selected
by Lender.

	(d)	 	Borrower acknowledges and agrees that its obligations under this Section 5.04 are
not and shall not be deemed to constitute mortgage debt, that such obligations are not
secured by the Mortgage, and that such obligations shall not be terminated or otherwise
affected by the sale of the Mortgaged Property in satisfaction or partial satisfaction
of the Note, any foreclosure of the Mortgage or by any proceeding or deed in lieu of
foreclosure or by any payment

30

 

or performance of any other indebtedness or obligation or by any passage of title to
Lender or by any disposition by Lender of all or any part of the Mortgaged Property
or by any other action or thing, including any anti-deficiency provisions of
applicable law, and that such obligations are totally independent of and unaffected
by the terms of any Loan Documents or other writing or agreement, and Borrower
specifically forever waives any and all claims and defenses to the contrary. The
obligations of Borrower under this Section 5.04 shall survive payment of the Note.

     Section 5.05 Covenants Related to Loan Conversion. As soon as possible, but in any
event prior to the Conversion Date, Borrower will provide the following to Lender:

	 	(a)	 	copies of all Material Contracts not previously delivered to Lender, along with
fully executed collateral assignments, consented to by the counter party if requested
by Lender, of such Material Contracts;
	 
	 	(b)	 	to the extent specifically requested by Lender, copies of all warranties from
suppliers covering materials, equipment and appliances included within the
Improvements;
	 
	 	(c)	 	an “as-built” survey which conforms with Lender’s requirements; and
	 
	 	(d)	 	such other documents, instruments, and certificates as Lender may request.

ARTICLE VI

EVENTS OF DEFAULT; RIGHTS AND REMEDIES

     Section 6.01 Event of Default Defined. As used herein, the term Event of Default shall
include each or all of the following events:

	 	(a)	 	Borrower shall fail to pay any principal or interest due under the Note or any
other amount payable hereunder when due.
	 
	 	(b)	 	Borrower or guarantor shall default in the performance of any agreement, term,
provision, condition, or covenant required to be performed or observed by Borrower or
any guarantor hereunder or under the Loan Documents (other than non payment and other
than a covenant or agreement or default that is elsewhere in this Agreement or in the
Loan Documents specifically dealt with) required to be performed or observed by
Borrower hereunder or any other Loan Document or other agreement with or in favor of
Lender which is not cured within thirty (30) days of delivery of written notice of
default, or if the breach is of such a nature that it cannot reasonably be cured or
remedied within the thirty (30) day period, the time period for cure shall be extended
for such period as may be necessary to cure such failure with reasonable diligence, but
not to exceed sixty (60) days after such written notice.

31

 

	(c)	 	Any financial information, statement, certificate, representation or warranty
given to Lender by Borrower (or any of their representatives) in connection with
entering into this Agreement or the other Loan Documents and/or any borrowing
hereunder, or required to be furnished under the terms hereof or the Loan Documents,
shall prove to be untrue in any material respect (as determined by Lender in the
exercise of its reasonable judgment) as of the time when given.

	(d)	 	Borrower shall be in default under the terms of any loan agreement, promissory
note, guaranty, lease, conditional sales contract or other agreement, document or
instrument evidencing, governing or securing any indebtedness owing by Borrower to
Lender, and the period of grace, if any, to cure said default shall have passed, unless
such default or the underlying claim is being contested by Borrower based on a
legitimate, good faith argument and Borrower has bonded or reserved sufficient monies
to satisfy such default or underlying claim.

	(e)	 	Borrower shall be in default under the terms of any loan agreement, promissory
note, lease, conditional sale contract or other agreement, document or instrument
evidencing, governing or securing any indebtedness in excess of $100,000 owed by
Borrower to any third party, and the period of grace, if any, to cure said default
shall have passed, unless such default or the underlying claim is being contested by
Borrower based on a legitimate, good faith argument and Borrower or has bonded or
reserved sufficient monies to satisfy such default or underlying claim.

	(f)	 	Any final judgment shall be obtained against Borrower that, together with all
other outstanding unsatisfied judgments against Borrower shall exceed the sum of
$100,000 and shall remain unvacated, unbonded or unstayed for a period of 30 days
following the date of entry thereof, unless such default or the underlying claim is
being contested by Borrower based on a legitimate, good faith argument and Borrower has
bonded or reserved sufficient monies to satisfy such default or underlying claim.

	(g)	 	(i) Borrower shall cease to exist; (ii) any bankruptcy, insolvency or
receivership proceedings, or an assignment for the benefit of creditors, shall be
commenced by Borrower or any Guarantor under any federal or state law; or (iii) if an
order for relief under any present or future federal bankruptcy act or similar state or
federal law shall be entered against Borrower, or if a petition or answer requesting or
proposing the entry of such order for relief or the adjudication of Borrower as a
debtor or a bankrupt or its or their reorganization under any present or future state
or 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 sixty (60)
days after the filing thereof or; (iv) Borrower shall become the subject of any

32

 

	 	 	out-of-court settlement with substantially all of its creditors; or (v) Borrower is
unable or admits in writing its inability to pay its debts as they mature.
	 
	(h)	 	There is a material adverse change in the financial condition of Borrower or in
any collateral securing the Loan.
	 
	(i)	 	Borrower shall enter into any merger or consolidation transaction, or liquidate
or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease,
transfer or otherwise dispose of, in one transaction or a series of related
transactions, all or a substantial part of its property, business, or assets, except as
permitted by this Agreement or unless the prior written consent of Lender is first
obtained.
	 
	(j)	 	A survey shows that the Project encroaches upon any easements, unvacated
street, building or parking set-backs, or upon any adjoining property to an extent
deemed material by Lender.
	 
	(k)	 	The construction of the Project is abandoned or shall be unreasonably delayed
or be discontinued for a period of forty-five (45) consecutive calendar days or such
number of days as is deemed to be reasonable by Lender under the particular
circumstances of the delay, in each instance, for reasons other than acts of God, fire,
storm, strikes, blackouts, labor difficulties, riots, inability to obtain materials,
equipment or labor, governmental restrictions or any similar cause over which Borrower
is unable to exercise control.
	 
	(l)	 	The construction of the Project is abandoned or shall be unreasonably delayed
or be discontinued for a period of ninety (90) consecutive calendar days as a result of
or arising from acts of God, fire, storm, strikes, blackouts, labor difficulties,
riots, inability to obtain materials, equipment or labor, governmental restrictions or
any similar cause over which Borrower is unable to exercise control.
	 
	(m)	 	Lender shall determine that additional sums are to be deposited with Lender to
provide for the completion of the Project and Borrower shall fail to deposit such sums
as required by said Section 2.04 of this Agreement.
	 
	(n)	 	All or any portion of the Project or the Mortgaged Property, or the legal,
equitable or any other interest herein, shall be sold, transferred, assigned, leased or
otherwise disposed of except as permitted by this Agreement or unless the prior written
consent of Lender is first obtained.
	 
	(o)	 	At the time any Advance is requested by Borrower, the title to the Mortgaged
Property is not reasonably satisfactory to Lender, regardless of whether the lien,
encumbrance or other question existed at the time of any prior Advance.

33

 

	 	(p)	 	The Project is materially damaged or destroyed by other casualty and the loss, in
the reasonable judgment of Lender, is not adequately covered by insurance actually
collected or in the process of collection.
	 
	 	(q)	 	An Event of Default occurs under any of the Loan Documents. Reference is hereby
made to the Loan Documents for additional occurrences constituting an Event of Default
hereunder.
	 
	 	(r)	 	Borrower has failed to inject additional equity or provide additional
collateral as required under Sections 2.03 or 7.20.
	 
	 	(s)	 	A Change in Control occurs or exists.
	 
	 	(t)	 	Lender reasonably deems itself insecure.

     Section 6.02 Rights and Remedies. Upon the occurrence of an Event of Default Lender
may, at its option, exercise any and all of the following rights and remedies (and any other rights
and remedies available to it):

	 	(a)	 	Lender may terminate the Commitment and any further obligation to fund Advances
hereunder.
	 
	 	(b)	 	Lender may, by written notice to Borrower, declare immediately due and payable
all unpaid principal of and accrued interest on the Note, together with all other sums
payable hereunder, and the same shall thereupon be immediately due and payable without
presentment or other demand, protest, notice of dishonor or any other notice of any
kind, all of which are hereby expressly waived; provided, however, that upon the filing
of a petition commencing a case naming Borrower as debtor under the United States
Bankruptcy Code, the principal of and all accrued interest on the Note shall be
automatically due and payable without any notice to or demand on Borrower or any other
party.
	 
	 	(c)	 	Lender shall have the right, in addition to any other right of set-off, to
apply any amounts Borrower has deposited with Lender or Disbursing Agent against any
sums due pursuant to the Note and Mortgage.
	 
	 	(d)	 	In addition to and not in lieu of all other rights and remedies hereunder, if
Lender has not received, within 10 days of written notice, any financial information,
statement and/or certificate, required to be furnished under the terms hereof or the
Loan Documents, Lender shall have the right to assess a late fee in the amount of $25
per document, per day.
	 
	 	(e)	 	Lender shall have the right, in addition to any other rights provided by law or
in equity, to enforce its rights and remedies under the Loan Documents.

34

 

     Section 6.03 Additional Remedies Upon Event of Default During Construction. Upon the
occurrence of an Event of Default prior to the date Substantial Completion occurs, and at any time
thereafter during the continuance of such event, Lender may, in addition to all other available
remedies, enter upon Borrower’s property and proceed either in its own name or in the name of
Borrower (which authority is coupled with an interest and is irrevocable by Borrower) to complete
the Project or cause the Project to be completed, at the cost and expense of Borrower. If Lender
elects to complete or cause the Project to be completed, it may do so according to the Drawings and
Specifications or according to such changes, alterations or modifications in and to the Drawings
and Specifications as Lender deems appropriate. Lender may enforce or cancel all contracts of
Borrower relating to construction and enter into other contracts which Lender deems advisable in
its sole judgment. Borrower will forthwith turn over and duly assign to Lender, as Lender may from
time to time require, contracts relating to construction and installation of improvements related
to the Project, the Drawings and Specifications, blueprints, shop drawings, bonds, building
permits, bills and statements of accounts pertaining to the Project, whether paid or not, and any
other instruments or records in the possession of Borrower pertaining to the Project. Borrower will
pay to Lender, on demand, any amount or amounts expended by Lender in so completing construction of
the Project, together with any costs, charges, or expenses incident thereto or resulting therefrom.
In the event that a proceeding is instituted against Borrower for recovery and reimbursement of any
amount expended by Lender in connection with the completion of construction of the Project, a
statement of such expenditures, verified by the affidavit of an officer of Lender, will be prima
facie evidence of the amounts so expended and of the propriety of and necessity for such
expenditures, and the burden of proving to the contrary will be upon Borrower. Lender may apply the
undisbursed amount of the Construction Loan Commitment to bring about the completion of
construction of the Project and to pay the costs thereof; and if such funds are insufficient, in
Lender’s sole judgment, to complete construction of the Project, Borrower agrees to promptly
deliver and pay to Lender amounts as Lender may from time to time demand for the purpose of
completing construction of the Project or of paying any liability, charge or expense which may have
been incurred or assumed by Lender under or in performance of this Agreement. It is expressly
understood and agreed that in no event will Lender be obligated or liable in any way to complete
the Project or to pay for any Project Costs.

ARTICLE VII

MISCELLANEOUS

     Section 7.01 Inspections. Borrower shall be responsible for making inspections of the
Project during the course of the construction of the Project and shall determine to its own
satisfaction that the work done or the materials supplied by the Contractors to whom payment is to
be made out of each Advance has been properly done or supplied in accordance with the applicable
contracts with such Contractors. If any work or materials supplied by a Contractor are not
satisfactory to Borrower, Borrower will immediately notify Lender in writing of such fact. It is
expressly understood and agreed that Lender or Inspecting Engineer may conduct such inspections of
the Project as Lender may reasonably deem necessary for the protection of Lender’s interest, and
that any such inspections of the Project by Lender or Inspecting Engineer will be made and will be
issued solely for the benefit and protection of

35

 

Lender, and that Borrower will not be entitled to rely thereon, but shall reimburse Lender for
any out-of-pocket costs and expenses associated therewith.

     Section 7.02 Indemnification by Borrower. Borrower shall bear all loss, expense
(including reasonable attorneys’ fees) and damage in connection with and agrees to indemnify and
hold harmless Lender, its agents, servants and employees and any holder of a participation interest
as contemplated in Section 7.18 for, from and against all claims, demands and judgments made or
recovered against Lender, its agents, servants and employees, because of bodily injuries, including
death, at any time resulting therefrom, and/or because of damages to property of Lender or others
(including toss of use) from any cause whatsoever, arising out of, incidental to, or in connection
with the Project or the operation of the Mortgaged Property, whether or not due to any act of
omission or commission, including negligence of Borrower or any Contractor or of their employees,
servants or agents, except for Lender’s gross negligence and willful misconduct. Borrower’s
liability hereunder shall not be limited to the extent of insurance carried by or provided by
Borrower or subject to any exclusions from coverage in any insurance policy. The obligations of
Borrower under this Section 7.02 shall survive the repayment of the Note. Whenever Borrower is
obligated to indemnify or defend Lender or any holder of a participation interest as contemplated
in Section 7.18 under the terms of this Agreement or under the terms of any other Loan Document,
such indemnity obligations shall run to the favor of Lender and its directors, officers, employees,
agents, contractors, subcontractors, licensees, invitees, successors and assigns, including any
holder of a participation interest as contemplated in Section 7.18.

     Section 7.03 Fees. Borrower shall reimburse Lender upon demand for all costs and
expenses including without limitation, reasonable attorneys’ fees, appraisal fees (including
appraisal fees incurred by Lender under Section 7.20 of this Agreement), survey fees, inspection
fees, closing charges, documentary or tax stamps, recording and filing fees, Inspecting Engineer
fees, insurance premiums and service charges, paid or incurred by Lender in connection with (i) the
preparation, negotiation, approval, execution and delivery of the Loan Documents, and any other
documents and instruments related hereto or thereto, (ii) the negotiation of any amendments or
modifications to any of the foregoing documents, instruments or agreements and the preparation of
any and all documents necessary or desirable to effect such amendments or modifications, (iii) the
review and approval of documents submitted to Lender pursuant to any of the provisions hereof
including the Draw Requests to be submitted in accordance with Section 2.02 hereof, and (iv) the
enforcement by Lender during the term hereof or thereafter of any of the rights or remedies of
Lender hereunder or under any of the foregoing documents, instruments or agreements or under
applicable law, including, without limitation, costs and expenses of collection of any amount due
to Lender under the Note or any of the Loan Documents, whether or not suit is filed with respect
thereto and whether such costs are paid or incurred, or to be paid or incurred, prior to or after
entry of judgment, and all costs and expenses including all reasonable attorneys’ fees incurred by
Lender as a result of the bankruptcy or insolvency of Borrower.

36

 

     Section 7.04 Addresses for Notices. All notices and other communications provided for
hereunder shall be in writing (including telegraphic communication) and mailed or
delivered, if to Borrower, at its address: 301 First St. NE, PO Box 82, Farley, IA 52046,
Attn: Ed Ricker; and if to Lender, at its address: 150 South Fifth Street, Suite 3000, Minneapolis,
MN 55402, Attention: Tim Sery, or as to each party, at such other address as shall be designated by
such party in a written notice to the other party. All such notices and communications shall, when
mailed or delivered, be effective when deposited in the mails or delivered to Borrower or Lender,
addressed as aforesaid.

     Section 7.05 Amendments, Determinations by Lender, Consents, Etc. This Agreement and
the Loan Documents may not be amended or modified, nor may any of their terms (including, without
limitation, terms affecting the maturity of or rate of interest on the Note) be modified or waived,
except by written instruments signed by Lender and Borrower. In any instance where the consent or
approval of Lender may be given or is required, or where any determination, judgment or decision is
to be rendered by Lender under this Agreement or under any Loan Document, the granting, withholding
or denial of such consent or approval and the rendering of such determination, judgment or decision
shall be made or exercised by Lender at its sole and exclusive option and in its sole and absolute
discretion.

     Section 7.06 Time of the Essence. Time is of the essence in the performance of
Borrower’s obligations under this Agreement.

     Section 7.07 Waivers. No waiver by Lender of any right or remedy hereunder shall
operate as a waiver of any other right or remedy, or of the same right or remedy on a future
occasion. No delay on the part of Lender in exercising any right or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any right or remedy preclude other
or future exercise thereof or the exercise of any other right or remedy.

     Section 7.08 Remedies Cumulative. The rights and remedies herein specified of Lender
are cumulative and not exclusive of any rights or remedies that Lender would otherwise have at law
or in equity or by statute.

     Section 7.09 Governing Law and Entire Agreement. Borrower and Lender, by their
execution of this Agreement, expect and intend that this Agreement be governed by and construed
under the laws of the State of Minnesota and Borrower and Lender consent to the jurisdiction of the
State of Minnesota for all purposes. The Loan Documents contain the entire agreement of the parties
on the matters covered herein and therein.

     Section 7.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original, but such
counterparts shall together constitute one and the same instrument.

     Section 7.11 Term. This Agreement, and the terms and conditions hereof, shall survive
the execution and delivery of the Note and other Loan Documents and shall remain in full force and
effect until the Note is paid in full. The representations, warranties, covenants and agreements of
Borrower and guarantor survive the execution and delivery of the Note and other Loan Documents, and
where applicable, survive the repayment of the Note.

37

 

     Section 7.12 Successors and Assigns. This Agreement, and the terms and provisions
hereof, shall be binding upon Borrower and guarantor and each of its respective heirs, successors
and permitted assigns, and shall inure to the benefit of Lender, its successors and assigns;
provided, however, that Borrower may not transfer or assign this Agreement, including, without
limitation, its right to borrow hereunder, without the prior written consent of Lender.

     Section 7.13 Offsets. As additional security for the payment of the Note and the other
obligations of Borrower under this Agreement and the other Loan Documents and any other obligations
of Borrower to Lender of any nature whatsoever (collectively the “Obligations”), Borrower hereby
grants to Lender a security interest in, a lien on and an express contractual right to set off
against all depository account balances, cash and any other property of Borrower now or hereafter
in the possession of Lender or Disbursing Agent. Lender may, at any time upon the occurrence of an
Event of Default hereunder (notwithstanding any notice requirements or grace/cure periods under
this or other agreements between Borrower and Lender) set off against the Obligations whether or
not the Obligations (including future installments) are then due or have been accelerated, all
without any advance or contemporaneous notice or demand of any kind to Borrower, such notice and
demand being expressly waived.

     Section 7.14 Headings. The descriptive headings for the several Sections of this
Agreement are inserted for convenience only and shall not define or limit any of the terms or
provisions hereof.

     Section 7.15 Accounting. Unless otherwise expressly provided herein, or unless Lender
otherwise consents in writing, all accounting terms used herein that are not expressly defined in
this Agreement shall have the meanings respectively given to them in accordance with generally
accepted accounting principles and all financial statements and reports furnished to Lender
hereunder shall be prepared, and all computations and determinations pursuant hereto shall be made,
in accordance with generally accepted accounting principles and practices, consistently applied.

     Section 7.16 Not Joint Venture. Lender is not, and shall not by reason of any
provision of any of the Loan Documents, be or be deemed to be a joint venturer with or partner or
agent of Borrower.

     Section 7.17 Adequacy of Loan Proceeds. Lender has not made, nor shall it be deemed to
have made, any representation or warranty that the Commitment is or will be sufficient to complete
the Project.

     Section 7.18 Participations. Lender may, in its sole discretion, sell in whole or in
part, assign and convey to one or more financial institutions undivided participation interests in
and to the Loan and the Loan Documents and Borrower hereby consents to the same, and the disclosure
of all financial information of Borrower necessary to effectuate the same.

38

 

     Section 7.19 Relationship to Other Documents. The warranties, covenants and other
obligations of Borrower and the rights and remedies of Lender that are outlined in this
Agreement and the other Loan Documents are intended to supplement each other. In the event of any
inconsistencies in any of the terms in this Agreement and/or the Loan Documents, all terms shall be
cumulative so as to give Lender the most favorable rights set forth in the conflicting documents.

     Section 7.20 Reappraisals. Lender shall have the right (but not the obligation) to
obtain an update of the existing appraisal of the Mortgaged Property or a new appraisal of the
Mortgaged Property for the sole benefit of Lender but at the sole cost and expense of Borrower
under the following circumstances:

	 	(a)	 	Upon an Event of Default under this Agreement.
	 
	 	(b)	 	Lender has determined that the security for the Loan has been physically or
economically impaired in any manner.
	 
	 	(c)	 	If, for any reason, construction of the Project is delayed by more than sixty
(60) days beyond the construction schedule provided by the Borrower at Loan closing,
Lender may obtain, at the Borrower’s expense, one or more new or updated appraisals of
the Project by an appraiser acceptable to Lender. If the estimated as-stabilized market
value of the Project, as reported in the new or updated appraisal, results in a ratio of
aggregate loan to value ratio that is greater than sixty five percent (65%), the
Borrower shall, within 30 days, inject additional cash equity or provide additional
collateral acceptable to Lender to reduce the ratio to sixty five percent (65%) or less.

In any such event, Borrower shall fully cooperate with Lender and Lender’s appraiser as may be
necessary and shall allow Lender and/or Lender’s appraiser complete access to the Mortgaged
Property for the purpose of completing such appraisal of the Mortgaged Property.

     Section 7.21 Construction Signage. To the extent permitted by law, during
construction, Lender may place a sign on the Mortgaged Property specifying that it is participating
in the financing of the Project. Further, Lender may publicize the financing and may include a
general description of the Project in publicity releases.

     Section 7.22 WAIVER OF JURY TRIAL. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS,
THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

39

 

     Section 7.23 Survival. All covenants, agreements, representations and warranties made
by Borrower herein and in the certificates or other instruments delivered in connection with or
pursuant to this Agreement will be considered to have been relied upon by Lender and will survive
the execution and delivery of this Agreement, regardless of any investigation made by any such
other party or on its behalf and notwithstanding that Lender may have had notice or knowledge of
any Event of Default or incorrect representation or warranty at the time any credit is extended
hereunder, and will continue in full force and effect as long as the principal of or any accrued
interest on the Loans or any fee or any other amount payable under this Agreement is outstanding
and unpaid and so long as either Commitment is in effect. The provisions of Section 8.24 will
survive and remain in full force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loans, and termination of the Commitments, or this
Agreement or any provision hereof. All representations and warranties made herein, in the
certificates, reports, notices, and other documents delivered pursuant to this Agreement will
survive the execution and delivery of this Agreement and the other Loan Documents.

     Section 7.24 Severability. Any provision of this Agreement or any other Loan Document
which is held to be illegal, invalid or unenforceable in any jurisdiction, will, as to such
jurisdiction, be ineffective to the extent of such illegality, invalidity or unenforceability
without affecting the legality, validity or enforceability of the remaining provisions hereof or
thereof; and the illegality, invalidity or unenforceability of a particular provision in a
particular jurisdiction will not invalidate or render unenforceable such provision in any other
jurisdiction.

     Section 7.25 Transferable Record. This Agreement, the Notes and the other Loan
Documents are “transferable records” as defined in applicable law relating to electronic
transactions. Therefore, Lender may, on behalf of Borrower, create a microfilm, optical disk or
electronic image of such Loan Documents that are authoritative copies under applicable law. Lender
may store such authoritative copies in microfilm or electronic form and destroy the paper original
as part of its normal business practices. Lender, on its own behalf, may control and transfer such
authoritative copies as permitted by applicable law.

     Section 7.26 Notice of Claims Against Lender; Limitation of Certain Damages. In order
to allow Lender to mitigate any damages to Borrower from Lender’s alleged breach of its duties
under the Loan Documents or any other duty, if any, to Borrower, Borrower agrees to give Lender
immediate written notice of any claim or defense it has against Lender, whether in tort or
contract, relating to any action or inaction by Lender under any Loan Document, or the transactions
related thereto, or of any defense to payment of the Obligations for any reason. The requirement of
providing timely notice to Lender represents the parties’ agreed-upon standard of performance
regarding claims against Lender. Notwithstanding any claim that Borrower may have against Lender,
and regardless of any notice Borrower may have given Lender, Lender will not be liable to Borrower
for consequential, punitive and/or special damages.

IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS SHOULD BE
READ CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR ORAL

40

 

PROMISES, EXCEPT THOSE CONTAINED IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, MAY BE LEGALLY
ENFORCED. YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT. THIS NOTICE
SHALL ALSO BE EFFECTIVE WITH RESPECT TO ALL OTHER CREDIT AGREEMENTS NOW IN EFFECT BETWEEN YOU AND
LENDER. A MODIFICATION OF ANY OTHER CREDIT AGREEMENTS NOW IN EFFECT BETWEEN YOU AND LENDER, WHICH
OCCURS AFTER RECEIPT BY YOU OF THIS NOTICE, MAY BE MADE ONLY BY ANOTHER WRITTEN INSTRUMENT. ORAL OR
IMPLIED MODIFICATIONS TO SUCH CREDIT AGREEMENTS ARE NOT ENFORCEABLE AND SHOULD NOT BE RELIED UPON.

[SIGNATURE PAGE TO FOLLOW]

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed
and delivered as of the day and year first above written.

	 	 	 	 	 
	 	 	LENDER:
	 
	 	 	 	 
	 	 	BANKFIRST:
	 	 	a South Dakota state bank
	 
	 	 	 	 
	 

	 	By:
	 	[ILLEGIBLE]
	 

	 	 	 	 
	 

	 	Its:
	 	Authorized Signatory
	 
	 	 	 	 
	 	 	BORROWER:
	 	 	WESTERN DUBUQUE BIODIESEL, LLC,
	 	 	An Iowa limited liability company
	 
	 	 	 	 
	 

	 	By:
	 	/s/ George A. Davis
	 

	 	 	 	 
	 

	 	Its:
	 	Treasurer

[SIGNATURE PAGE TO LOAN AGREEMENT]

41

 

EXHIBIT A

DRAW REQUEST

BANKFIRST

Attention :                                         

     Pursuant to the Construction-Term Loan Agreement dated as of September  , 2006
by and among WESTERN DUBUQUE BIODIESEL, LLC (“Borrower”) and BANKFIRST (“Lender”), Borrower hereby
submits this Draw Request to Lender pursuant to the Construction-Term Loan Agreement and certifies
to Lender as follows (capitalized terms being used with the respective meanings attributed thereto
in the Loan Agreement):

	 	1.	 	Requested Advance Date:                                                             .
	 
	 	2.	 	Amount of requested Advance:                                                             .
	 
	 	3.	 	The Project Costs to be paid with the proceeds of this requested Advance,
broken down by categories to correspond to the categories of Project Costs shown on the
Sworn Construction Statement and further broken down by payee and the amount of each
such payee, and all appropriate information relating thereto, are set forth on
Attachment 1 hereto.
	 
	 	4.	 	All Project Costs itemized on Attachment 1 are costs specified in the Project
Budget and are due and payable and do not exceed the Project Budget amount.
	 
	 	5.	 	On the date hereof, no default or Event of Default under the Construction-Term
Loan Agreement exists.
	 
	 	6.	 	As the date hereof, Borrower has not entered into or consented to any change
order or modification of the Project Documents that will increase Project Costs above
the limits allowed in the Construction — Term Loan Agreement or that will materially
delay completion of the Project except as previously disclosed to and approved by
Lender.
	 
	 	7.	 	After giving effect to the Advance herein requested, the amount of the unused
Commitment will be sufficient to pay all remaining unpaid Project Costs through
completion of the Project.
	 
	 	8.	 	Borrower hereby certifies that all representations and warranties of Borrower
made in the Construction — Term Loan Agreement are ratified and reaffirmed and are true
and correct in all respects as of the date hereof.

	 	 	 	 	 
	 	 	WESTERN DUBUQUE BIODIESEL, LLC,
	 	 	an Iowa limited liability company
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Its:	 	 
	 

	 	 	 	 

 A-1

 

 

EXHIBIT B

PERMITTED ENCUMBRANCES

	1.	 	Real estate taxes for the Second Half of fiscal year 2005/2006 payable in 2006/2007 and
thereafter.
	 
	2.	 	Subject to Jamesmeier Road as currently located and traveled and as shown on the plat of
Farley Industrial Park No. 5 recorded July 3, 2006 in Book 2006, page 10186.
	 
	3.	 	Easement for electric transmission line and telephone line purposes together with the right
of ingress and egress and the right to remove trees in favor of Interstate Power Company as
contained in the Easement, dated April 6, 1927, recorded April 16, 1927 , in Book 25, page
417, and in the Easement dated April 6, 1927, recorded April 16, 1927 in Book 25, page 418.
	 
	4.	 	Easement for ingress and egress purposes as shown in the Easement dated March 31, 1999,
recorded June 23, 1999 in Book 1999, page 10360.
	 
	5.	 	Restricted access from the insured property to U.S. Highway No. 20 in favor of the State of
Iowa as shown in the warranty deed dated July 31, 1957, recorded November 5, 1957 in Book 49,
page 547, and as further restricted in the warranty deed dated April 22, 1987, recorded April
30, 1987 in Book 1987, page 4503.
	 
	6.	 	Special use permit allowing the construction of a facility to manufacture biodiesel fuel on
the insured property dated May 11, 2006, recorded May 26, 2006 in Book 2006, page 7690.
	 
	7.	 	Easements for agricultural access, access to rail siding and utility purposes, covenants,
conditions, restrictions, obligations and provisions as contained in the Easement and Land Use
Agreement, dated July 7, 2006, recorded July 17, 2006, in Book 2006, page 10801.

 B-1

 

 

EXHIBIT C

COVENANT COMPLIANCE CERTIFICATE

I,                                         , the                               
          of WESTERN DUBUQUE BIODIESEL, LLC (“Borrower”), pursuant to the Construction-Term Loan
Agreement dated August 2006, (the “Agreement”), hereby certify to BANKFIRST, a South Dakota state
bank (“Lender”) as follows:

          As of the close of business on                                         , the following amounts and ratios
were true and correct:

	 	 	 	 	 
	1.

	 	Debt Service Coverage Ratio	 	 
	 

	 	a. Actual Debt Service Coverage Ratio	 	 
	 

	 	 	 	 
	 

	 	b. Minimum Debt Service Coverage Ratio
	 	1.50 to 1.00
	 
	 	 	 	 
	2.

	 	Fixed Charge Coverage	 	 
	 

	 	a. Actual Fixed Charge Coverage	 	 
	 

	 	 	 	 
	 

	 	b. Minimum Fixed Charge Coverage
	 	1.25 to 1.00
	 
	 	 	 	 
	3.

	 	Current Assets to Current Liabilities	 	 
	 

	 	a. Actual Ratio of Current Assets to Current Liabilities	 	 
	 

	 	 	 	 
	 

	 	b. Minimum Ratio of Current Assets to Current Liabilities
	 	1.50 to 1.00
	 
	 	 	 	 
	4.

	 	Debt Obligations to Project Earnings (before EBITDA)	 	 
	 

	 	a. Actual Ratio of Debt Obligations to Project Earnings	 	 
	 

	 	 	 	 
	 

	 	b. Minimum Ratio of Debt Obligations to Project Earnings
	 	2.50 to 1.00

          AS OF THE DATE OF THIS CERTIFICATE, ALL CONDITIONS PRECEDENT HAVE BEEN MET AND NO EVENT HAS
OCCURRED WHICH CONSTITUTES AN EVENT OF DEFAULT AS DEFINED IN THE AGREEMENT.

Date of Certificate:                                         

	 	 	 
	 	 	 
	 

	 	Signature

 C-1

 

 

EXHIBIT D

LEGAL OPINION 

(OPINION OF BORROWER’S/

GUARANTORS’ COUNSEL)

October                     , 2006

BANKFIRST

150 South Fifth Street

Suite 3000

Minneapolis, Minnesota 55402

Ladies/Gentlemen:

     We have acted as counsel for Western Dubuque Biodiesel, LLC, an Iowa limited liability company
(“Borrower”) in connection with the following:

	1.	 	The borrowing by Borrower of monies from you (“Loan”) in the principal sum of Thirty Five
Million Five Hundred Thousand and no/100 Dollars ($35,500,000) as evidenced by the Loan
Documents hereinafter referred to.

	2.	 	The execution and delivery by Borrower to you of the following instruments each
dated as of even date herewith (“Loan Documents”):

	 	a.	 	A certain Construction-Term Loan Agreement (“Loan Agreement”)
between Borrower, Guarantors and you;
	 
	 	b.	 	A certain Promissory Note (“Note”) of Borrower, in the
principal sum of
Thirty-Five Million Five Hundred Thousand and no/100 Dollars

($35,500,000) due and payable to your order;
	 
	 	c.	 	A certain Mortgage (“Mortgage”) mortgaging certain real
property (“Premises”) owned by Borrower and more fully described in the
Mortgage as security for the Note;
	 
	 	d.	 	An Assignment of Contract Rights and Other Intangibles
(“Assignment of
Contract Rights”);
	 
	 	e.	 	An Assignment of Leases and Rents (“Assignments of Leases and
Rents”);
	 
	 	f.	 	A Security Agreement (“Security Agreement”);
	 
	 	g.	 	UCC Financing Statement (“Financing Statement”) perfecting a
security interest in favor of you in all rents, equipment and personal property
of Borrower located on and/or used in the operation of the Premises; and

 D-1

 

 

	 	h.	 	A certain Environmental Indemnity Agreement pursuant to which
Borrower agrees to indemnify you over certain acts referred to therein
(“Indemnity”).

     In connection with the foregoing, we have reviewed and examined executed counterparts of the
above documents and the following (“Organizational Documents”):

	 	a.	 	Borrower’s Articles of Organization and all amendments, certified
by
the Secretary of State of Iowa;
	 
	 	b.	 	Certified copies of Borrower’s operating agreement and all
amendments
thereto; and
	 
	 	c.	 	Corporate Resolutions of Borrower in connection with the Loan and
the
transactions contemplated thereby;

and have made such legal and factual examinations and have made such inquiries and examined such
other documents and proceedings as deemed necessary or appropriate for the purpose of this opinion.

	 	 	Based upon the foregoing, we are of the opinion that:
	 
	1.	 	Each one of the Loan Documents have been duly executed and delivered by Borrower and
constitutes the legal, valid and binding obligation of Borrower enforceable in accordance with
its terms, except as to enforcement of remedies, as may be limited by bankruptcy, insolvency
or similar laws affecting generally the enforcement of creditor’s remedies.
	 
	2.	 	Neither the borrowing of the Loan nor the execution and delivery of the Loan Documents nor
the performance of the provisions of the agreements therein contained on the part of Borrower
will contravene, violate or cause a default under any law, the Organizational Documents, any
agreement, mortgage, indenture, or lease or any license, permit, judgment, decree, order,
statute, ordinance, rule or governmental regulation to which Borrower are subject or a party
or by which it or any of Borrower’s properties are bound.
	 
	3.	 	There are no suits, actions or proceedings at law or in equity or by or before any
governmental instrumentality or agency now pending against or, to the best of our knowledge,
threatened against Borrower and or any of Borrower’s properties, or both, nor has any
judgment, decree or order been issued against Borrower or its properties, which would have a
material adverse affect on the Premises or the financial condition of Borrower or such
properties.
	 
	4.	 	No consent, approval, order or authorization of, or designation, registration, declaration,
qualification or filing with any regulatory authority on the part of Borrower are necessary or
required by law as a prerequisite to the execution and delivery of the

 D-2

 

 

	 	 	Loan Documents and the carrying out of the transactions contemplated by or the enforcement
of the remedies provided in the Loan Documents.
	 
	5.	 	Borrower is a limited liability company in good standing duly organized and validly
existing under the laws of the State of Iowa and has all requisite power and authorization
to own and operate the Premises, to enter into the Loan Documents, to conduct Borrower’s
affairs and to borrow the Loan and otherwise assume and perform the obligations on
Borrower’s part to be assumed and performed as contemplated by the Loan Documents and is in
compliance with all laws, regulations, ordinances and orders of public authorities
applicable to it and is in compliance with all laws of the State of Iowa regulating the
doing of business in that State.
	 
	6.	 	The Loan, including the interest payable thereunder, and all fees paid in connection
therewith, is governed by the laws of the State of Minnesota and is not violative of any
applicable usury law or other laws regulating the reservation, payment or collection of
interest and a court of jurisdiction in the State of Iowa will apply the laws of the State of
Iowa in construing the Loan Documents.

Very truly yours,

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