Document:

exv10w1

 

Exhibit 10.1

	 	 	 
	Amount: $740,000.00

	 	Date: 7/13/2006

RURAL DEVELOPMENT LOAN AGREEMENT

     THIS AGREEMENT dated as of the date first written above between Western Iowa Energy, LLC., a
limited liability company organized and existing under the laws of the State of Iowa (the
“Borrower”) and Glidden Rural Electric Cooperative of Glidden, Iowa, a cooperative corporation
organized and existing under the laws of the State of Iowa, (“Glidden”) sets forth the terms and
understandings between the Borrower and Glidden regarding a loan (the “Loan”) Glidden is making to
the Borrower pursuant to Section 313 of the Rural Electrification Act of 1936, as amended (the
“Act”) and 7 C.F.R. Part 1703, Subpart B — Rural Economic Development Loan and Grant Program (the
“Regulations”).

     Glidden has filed an application and supporting material (collectively, the “Application
Materials”) with the United States of America (the “Government”) pursuant to 7 C.F.R. Section
1703.34 requesting the Loan for promoting rural economic development.

     The Government wishes to make the Loan to Glidden from the Rural Economic Development
Subaccount within the Rural Electrification and Telephone Revolving Fund pursuant to Section 313 of
the Act to finance the Rural development project (the “Project”) more particularly described in the
Letter of Agreement (the “Letter of Agreement”) between the Government and Glidden dated February
27, 2006.

     Glidden wishes to make a loan to Borrower for the purposes described in the Application
Materials.

     NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL AGREEMENTS HEREIN CONTAINED, GLIDDEN AND BORROWER
AGREE AS FOLLOWS:

	1.	 	Loan Terms.

	A.	 	Glidden shall lend Seven Hundred Forty Thousand Dollars ($740,000.00) to the Borrower, and
the proceeds of the Loan shall be used solely: (a) to finance the construction of a bio-diesel
manufacturing facility in Wall Lake, Iowa (the Approved Purpose) as set forth in the
Application Materials, or (b) to reimburse short-term financing and expenditures for the
Approved Purpose. The proceeds of the Loan shall not be used to finance any costs or retire
any indebtedness for the Approved Purpose incurred prior to the Government’s receipt on June
15, 2005, of the Application Materials.

	B.	 	Glidden shall advance the proceeds of the Loan to the Borrower in one disbursement at the
time of closing.

 

 

	C.	 	The Borrower shall repay the Loan in accordance with the note to be executed by the
Borrower and made payable to Glidden. The Borrower shall begin to repay the Loan on the
date set forth in the note and shall continue paying without interruption until all
indebtedness associated with the Loan has been repaid in full on or before the tenth
anniversary of the date of the note.
	 
	D.	 	The Loan will not bear interest although indebtedness not paid when due will be
subjected to late charges and other charges provided in the note described below.
	 
	E.	 	If the Borrower fails to satisfy all conditions, requirements and terms prerequisite to the
advance of the proceeds of the Loan from Glidden to the Borrower as set forth in this
Agreement before the first anniversary of the date of this Agreement, or such later date as
Glidden at its discretion may approve in writing in furtherance of the purposes of the Act,
the Loan Commitment shall be considered rescinded.
	 
	F.	 	In order to secure performance of its obligations hereunder and under the Note, the Borrower
shall provide Glidden with an Irrevocable Letter of Credit in a form acceptable to Glidden and
in an amount equal to the Principal amount of the Note, with Glidden designated as the
beneficiary of said Irrevocable Letter of Credit.
	 
	2.	 	Affirmative Covenants.
	 
	A.	 	The Borrower shall execute and deliver its promissory note (the “Note”) to Glidden in the
form attached hereto in order to evidence its obligation to repay the Loan by the terms of
this Agreement, the Letter of Agreement and the Note. The Borrower shall pay all indebtedness
evidenced by the Note in the manner and at the times described therein.
	 
	B.	 	The Borrower shall promptly use the proceeds of the Loan only in the manner and exclusively
for the purposes set forth in the Application Materials as previously approved by The
Government and in accordance with the Letter of Agreement between The Government and Glidden,
and this Agreement and the Regulations (as they may be amended from time to time). No changes
may be made in the foregoing without the prior written approval of Glidden and the Government.
Until disbursed by the Borrower for authorized Loan purposes, the Borrower shall deposit the
Loan Proceeds in a separate bank account which is fully insured by the Federal Deposit
Insurance Corporation.
	 
	C.	 	The Borrower shall return to Glidden as a prepayment on the Note all proceeds of the Loan,
including any interest earned on the proceeds of the Loan, which have not been expended by the
Borrower for authorized Loan purposes before the second anniversary of the date of the advance
of the proceeds of the Loan from Glidden to the Borrower, or such later date as Glidden at its
discretion may approve in writing in furtherance of the purposes of the Act.
	 
	D.	 	The Borrower shall make all payments on the Note by using a reasonable method of

2

 

	 	 	payment specified by Glidden.
	 
	E.	 	The Borrower agrees to provide to Glidden (a) an itemized list with attached invoices,
receipts, bills of sale, and other evidence that shows the expenditures made on the Project
for the Approved Purpose using the proceeds of the Loan and (b) a signed certification from an
authorized official of Borrower to the effect “I certify that the proceeds of the Rural
Economic Development Loan from Glidden were expended on the approved purposes shown on this
list and the attached invoices, receipts, bills of sale, and other evidence represent the
items shown on this list.” Such invoices, receipts, bills of sale, and other evidence must at
least total the amount of funds that have been provided to Borrower using the proceeds of the
Loan. The certified list must be provided upon completion of the Project, or by the first
anniversary of the date of the advance of funds to Borrower, whichever occurs first. If all
funds have not been expended by the first anniversary, Borrower must provide to Glidden a
certified list of current expenditures and a statement of its intended expenditure schedule.
Upon completion of the Project, Borrower must provide to Glidden a final certified list of the
expenditures, including the attachments. A duplicate certified listing of expenditures shall
also be submitted to RBS for its files.

	F.	 	The Borrower shall permit Glidden officials and officials of The Government to inspect and
copy its records about the Project during regular business hours. Representatives of Glidden
and The Government may inspect the Project itself during regular business hours.

	G.	 	The Borrower shall comply with the Regulations, as they may be amended from time to time,
including, without limitation, any federal regulations or federal statutes which the
Regulations identify as being applicable to activities contemplated by the Application
Materials or this Agreement.

	H.	 	So long as the Borrower remains obligated to Glidden under the terms of any financial
assistance previously or subsequently extended under the Act, the Borrower shall fully perform
all obligations to Glidden which the Borrower has undertaken concerning such assistance.

	I.	 	Upon completion of the Project, Borrower shall provide to Glidden and the Government a
Management Representation Letter, a copy of which is attached hereto as Exhibit “A,” typed on
the Borrower’s letterhead and duly executed by an authorized officer of the Borrower.

	J.	 	The Borrower shall complete the certification form, Certification Regarding Debarment,
Suspension, Ineligibility and Voluntary Exclusion-Lower Tier Covered Transactions, attached
hereto as Exhibit “B.” In addition, Borrower shall ensure that the certification form is
completed by all applicable parties in conjunction with any lower-tier transactions involving
the Project.

3

 

	3.	 	Negative Covenant.

     The Borrower shall not enter into or request Glidden to approve any agreements which would
permit third parties to fund, develop, manage, own, lease or operate the Project in a manner that
would violate the Regulations or this Agreement if the Borrower were to undertake such activity in
its own name.

	4.	 	Representations and Warranties.

The Borrower represents and warrants that on and as of the date first set forth above:

	A.	 	The Borrower has been duly organized and is validly- existing as a as a corporation in good
standing, with authority to do business in the State of Iowa, and with the power and authority
to perform its obligations under this Agreement, the Note and the Regulations.

	B.	 	This Agreement and the Note have been duly authorized, executed and delivered by the Borrower
and such documents constitute the legal and binding agreements of the Borrower, enforceable
against the Borrower in accordance with their respective terms, subject to (i) applicable laws
of general application relating to or affecting creditors’ rights generally and (ii) the
application of general principles of equity regardless of whether such enforceability is
considered in a proceeding in equity or at law.

	C.	 	The execution or the delivery by the Borrower of this Agreement, the Security Agreement and
the Note; the consummation of the transactions contemplated herein or therein; and the
fulfillment by the Borrower of the terms hereof or thereof, do not conflict with or violate,
result in a breach of or constitute a default under any term or provision of the
organizational documents of the Borrower or any law or regulation or any order now applicable
to the Borrower of any court, regulatory body having jurisdiction over the Borrower, or the
terms of any indenture, deed of trust, mortgage, note, note agreement or instrument to which
the Borrower or any of its properties is bound. The Borrower has not received any notice from
any other party to any of the foregoing that a default has occurred or that any event or
condition exist that with the giving of notice or lapse of time or both would constitute such
a default.

	D.	 	No approval, authorization, consent, order, registration, filing, qualification, license or
permit of or with any state or federal court or governmental agency or body having
jurisdiction over the Borrower is required by the Borrower for the consummation by the
Borrower of the transactions contemplated by this Agreement, the Letter of Agreement, the
Security Agreement, and the Note except such as have been obtained.

4

 

	E.	 	There is no pending or threatened action, suit or proceeding before any court or governmental
agency, authority or body or any arbitrator concerning the Borrower, this Agreement, the
Letter of Agreement or the Note which, if adversely determined, would have a material adverse
effect on the Borrowers ability to perform its obligations under this Agreement, the Letter of
Agreement or the Note.

	F.	 	All information, reports and other papers and data furnished to Glidden by the Borrower
concerning the preapplication and application of the Borrower for the Loan were, at the time
the same were so furnished, complete and correct in all material respects to the extent
necessary to give Glidden a true and accurate knowledge of the subject matter and no document
furnished or other written statement made to Glidden in connection with the Loan contains any
untrue statement of a fact material to the financial condition of the Borrower or the Project
or omits to state such a material fact necessary in order to make the statements contained
therein not misleading.
	 
	G.	 	The Borrower has reviewed the Regulations and understands and accepts the
requirements which the Regulations impose upon it.
	 
	H.	 	The Borrower does not expect or intend the Project to result primarily in the
transfer of any existing employment or business activity from one area to another.
	 
	5.	 	Default.
	 
	A.	 	Upon the occurrence of an event: of default as defined in this Agreement, the holder of the
Note may declare all or any portion of the indebtedness arising under this Agreement,
including indebtedness evidenced by the Note, to be immediately due and payable and may
proceed to enforce its rights under this Agreement and the Note.
	 
	B.	 	As used in this Agreement, the term “event of default” shall mean the occurrence
of any of the following:
	 
	(1)	 	Any principal installment is not paid within ten (10) days of the date on which it
is required to be made, whether by acceleration or note;
	 
	(2)	 	Failure, inability or unwillingness of the Borrower to carry out or comply with, or cause to
be carried out or complied with, the specific undertakings described in the Application
Materials;
	 
	(3)	 	Any representation or warranty made by the Borrower herein, in the Application Materials, or
in any certificate or report furnished by or on behalf of the Borrower about any of the
foregoing shall prove to be false, incomplete or incorrect in any material respect;

5

 

	(4)	 	Default shall be made in due observance or performance of any of the covenants,
conditions or agreements of the Borrower, and such default shall continue for thirty (30)
days after written notice specifying such default and requiring the same to be remedied
shall have been given to the Borrower by the holder of the Note;
	 
	(5)	 	An event of default shall have occurred and be continuing under any mortgage of the Borrower
which secures any form of financial assistance heretofore or hereafter furnished to the
Borrower by Glidden;
	 
	(6)	 	Commencement of a case in bankruptcy by or against the Borrower;

	(7)	 	Application for appointment of a receiver for, making a general assignment for the benefit of
creditors by, or insolvency of the Borrower; or

	(8)	 	Violation of the Regulations in any material respect, by trustees or other officials,
employees or agents of the Borrower, and such violation shall continue for a period of thirty
(30) days without being rectified to the satisfaction of Glidden after written notice
specifying such default and requiring the same to be rectified has been given by Glidden to
the Borrower.
	 
	6.	 	Miscellaneous.

	A.	 	Every right or remedy herein conferred upon or reserved to the holder of the Note shall be
cumulative and shall be in addition to every other right and remedy now or hereafter existing
at law or in equity, or by statute or regulation.

	B.	 	The invalidity of any one or more phrases, clauses, sentences, paragraphs or provisions of
this Agreement shall not affect the remaining portions hereof.

	C.	 	In the event that Glidden shall sell the Note to an insured purchaser, Glidden and not the
insured purchaser, shall be considered to be, and shall have the rights of, the holder of the
Note for purposes of this Agreement.

	D.	 	This Loan Agreement is entered into between the parties concerning a zero interest loan which
Glidden is making to the Borrower pursuant to § 313 of the Rural Electrification Act of 1936
as amended, to promote rural economic development and job creation projects. Accordingly, so
long as Glidden shall, under the terms of this Agreement, be the holder of the Note, this
Agreement and the Note shall each he governed by and construed in accordance with the laws of
the United States and the regulations of the Rural Utilities Service.

     IN WITNESS WHEREOF, WESTERN IOWA ENERGY, LLC, as Borrower, has caused this Loan Agreement to
be signed in its name and its seal to he hereunto affixed and attested by its duly authorized
officials thereunto, and GLIDDEN RURAL ELECTRIC

6

 

COOPERATIVE, has caused this Loan Agreement to be duly executed in its behalf, all as of the day
and year first written above.

	 	 	 	 	 
	 	WESTERN IOWA ENERGY, LLC

 	 
	 	By:  	/s/ John Geake
 	 
	 	 	 	 
	 	 	 	 
	 

	 	 	 	 
	                    (SEAL)	 	 
	 
	NOTARIAL	 	SHARON FERTIG
	SEAL
	 	Commission Number 736092
	«        «
	 	MY COMMISSION EXPIRES
	IOWA
	 	8-15-08
	 

	 	 	 	 	 
	 	GLIDDEN RURAL ELECTRIC COOPERATIVE 

 	 
	                    (SEAL) 	 	 
	 	By:  	/s/ John J. Schumacher
 	 
	 	 	President 	 
	 	 	 	 
	 

ATTEST:

	 	 	 	 	 
	 	 	 
	 	/s/ Mark Ludwig
 	 
	 	Secretary 	 
	 	 	 
	 

7

 

PROMISSORY NOTE

	 	 	 	 	 
	$740,000.00

	 	Date:
	 	 July 13, 2006

     FOR VALUE RECEIVED, WESTERN IOWA ENERGY, LI,C, an Iowa Limited Liability Company, with a
principal place of business in Wall Lake, Iowa (the “Maker”), promises to pay to the order of
GLIDDEN RURAL ELECTRIC COOPERATIVE, a corporation duly organized and existing under the laws of the
State of Iowa, with its principal place of business in Glidden, Iowa, (hereinafter “Glidden”), at
the times and in the manner hereinafter provided, the sum of Seven Hundred Forty Thousand Dollars
($740,000.00), without interest in monthly installments of Six Thousand Eight Hundred Fifty-One
Dollars and 86/100 ($6,851.86), on the last day of the month beginning with twelve months after the
date written above, and continuing on the last. day of each month thereafter until the principal
sum stated above has been paid in full on or before the final maturity date of this Note which
shall be on the tenth (10th) anniversary of the first advance of funds hereunder. Maker shall have
the right to prepay the obligation set forth in this Note in whole or in part at any time without
penalty; provided, however, that in the event of a partial prepayment, the maker shall continue to
be obligated to pay off the balance of this Note at the times and in the amounts specified herein.
This Note shall be secured by a declining balance Standby Irrevocable Letter of Credit, as more
particularly described in the Loan Agreement executed contemporaneously herewith.

     Demand, presentment, protest, notice of protest, and notice of dishonor are hereby waived.

     In the event of nonpayment when due of any payment due under this Note or if any event of
default occurs under the Rural Development Loan Agreement described below, and such nonpayment or
event of default continues for a period of thirty (30) days, then at the option of the holder of
this Note, all of the amount then owing under this Note shall immediately become due and payable.
The failure to assert this right shall not be deemed a waiver.

     So long as this Note shall be held by Glidden, the Maker shall pay a late charge on any
payment not made within ten (10) days of the date it becomes due as originally scheduled or
otherwise. The late charge shall be computed on the payment from the due date at a rate equal to
the rate of the current value of funds to the United States Treasury as prescribed and published by
the Secretary of the Treasury in the Federal Register and the Treasury Fiscal Requirements Manual
Bulletins annually or quarterly, as the case may be, in accordance with 31 U.S.C. § 3713. In
addition, Maker shall reimburse and pay Glidden for any cost or expenses it incurs in attempting to
collect under this Note, including reasonable attorney fees and any penalties imposed by the
Government. If this Note is transferred by Glidden, whether for collection or otherwise, any
payment not paid in ten (10) days of the date it becomes due, as originally scheduled or otherwise,
shall thereafter be subject to a late charge computed from the due date at a rate equal to the
judgment rate prescribed by the State of Iowa. In such event, the Maker shall also pay the
Transferee for all reasonable costs and expenses of collection.

 

 

     Amounts received on account of indebtedness evidenced by this Note shall be applied as
follows: first to expenses, costs and penalties; second to late charges; third to principal
payments which are past due; and fourth to principal installments not yet due.

This Note is given in accordance with, and is required by, the terms and conditions of a certain
Rural Economic Development Loan Agreement between the parties dated as of February 27,
2006, and evidences indebtedness created by a loan made for the purpose of promoting rural economic
development and job creation projects. Accordingly, so long as this Note is held by Glidden, it
shall he governed by and construed in accordance with the laws of the United States and the
Regulations of the Rural Utilities Service.

IN WITNESS WHEREOF, the Maker has caused this Note to be executed in its corporate name and its
corporate seal to be affixed and attested by its duly authorized officers, all as of the day and
year first above written.

	 	 	 	 	 
	 	 	 	 	WESTERN IOWA ENERGY, LLC

	 
	 	(Seal)
	 
	 	 	 	 	By  /s/  John Geake
 	 
	 	 	 
	 	 	 
	 

ATTEST:

_____________________________

2

 

	 	 	 
	

	 	Western Iowa Energy,

1220 S. Center Street • P.O. Box 399 • Wall Lake, Iowa 51466

712-664-2173 • 866-664-2173 • fax 712-664-2183

 www.westerniowaenergy.com
	 

	 	

Supplemental Financing:

	 	 	 	 	 	 	 	 	 
	 
	 	Source of Funds:	 	Amount:
	 
	 	 	 	 
	1.
	 	CoBank, Omaha, NE 68154	 	 	$18,000,000	 
	 
	 	 	 	 	 	 
	2.
	 	 	 	 	 	 	—	 
	 
	 	 	 	 	 	 
	 
	 	 	 	Total	$18,000,000

I certify that the funding listed above has been obtained or has been committed to the project
described in the application materials submitted to the Glidden Rural Electric Cooperative and the
USDA Rural Development.

	 	 	 
	/s/ Chris Daniel

	 	7-18-06
	Signature of Authorized Official of Ultimate

	 	Date
	Recipient
	 	 

 

STANDBY LETTER OF CREDIT REIMBURSEMENT AGREEMENT

To:     CoBank, ACB

In consideration of your issuing the Standby Letter of Credit (herein called the “Credit”) applied
for by the application on the reverse side hereof, we hereby agree as follows:

1. We will pay you on demand at such place and in such manner as you shall direct, in United
States currency and in immediately available funds, the amount of each draft drawn or instrument
paid under the Credit, as well as commission and customary charges associated with the issuance of
Credit. If the Credit is payable in a foreign currency, we will pay you on demand an amount in
United States currency equivalent to your actual cost of settling your obligation in the foreign
currency. We also authorize you to charge our accounts with you for all moneys so paid or for which
you become liable under the Credit. In addition to commissions, fees, and amounts otherwise payable
with respect to the issuance of the Credit, we shall pay you on demand such amounts as you shall
determine are necessary to compensate you for any cost attributable to your issuing or having
outstanding such Credit resulting from the application of any law or regulation concerning any
reserve, assessment, capital adequacy or similar requirements relating to letters of credit, or the
reimbursement agreements with respect thereto, or to similar liabilities or assets of banks,
whether existing at the time of the issuance of the. Credit or adopted thereafter. Each payment
hereunder shall be made with interest from the date of payment by you to the date of reimbursement
by us at the rate announced by you from time to time during that period as your Base Rate.

2. In furtherance and extension and not in limitation of the specific provisions set forth above,
we agree: (a) that you and your correspondents may receive and accept or pay us complying with the
terms of the Credit any drafts, documents, or certificates, otherwise in order, signed by any
person purporting to be an administrator, executor, trustee in bankruptcy, debtor in possession,
assignee for the benefit of creditors, liquidator, receiver, or other legal representative of the
party authorized under the Credit to draw or issue such instruments or other documents; (b) that
any action taken or omitted by you or by your correspondents under or in connection with the
Credit, if taken or omitted with honesty in fact, shall be binding on us and shall not put you or
your correspondents under any resulting liability to us; (c) that you shall not he responsible for
any act, error, neglect. default, omission, insolvency or failure in business of any of your
correspondents; and (d) that we will indemnify you against and hold you harmless from all loss,
damage, cost and expense (including attorneys’ fees and expenses) arising out of (i) your issuance
of or any other action taken by you in connection with, the Credit, other than loss or damage
resulting from your gross negligence or willful misconduct, and (ii) claims or legal proceedings
incident to the collection of amounts owed by us hereunder, or the enforcement of your rights or
the rights of others under the Credit, including, without limitation, legal proceedings relating to
any court order, injunction or other process or decree restraining or seeking to restrain you from
paying any amount under the Credit.

3. In the event (a) we fail to make any payment owing hereunder when the same shall become due and
payable; or (b) we make an assignment for the benefit of creditors; or (c) we apply for, consent
to, or acquiesce in the appointment of a trustee, receiver, or other custodian for ourselves or any
of our property; or (d) we commence or have commenced against us any proceeding under any
bankruptcy reorganization, arrangement, re adjustment of debt, dissolution, or liquidation law or
statue of any jurisdiction; or (e) we are in default to you under any other agreement between us;
or (f) any governmental regulatory authority takes or institutes action which, in your opinion,
will affect our ability to reimburse you hereunder, then, in any such event, the amount of the
Credit, together with any amounts payable by us in connection therewith, shall, at your option,
become immediately due and payable. To the extent that any amount paid by us pursuant to this
Section 3 shall not then be due under the terms of the Credit, such payment shall serve as security
for our obligation to indemnify you for any amounts subsequently disbursed by you pursuant to the
Credit. Furthermore, upon the institution of any legal proceeding as described in, or similar to
those described in, Section 2(d)(ii), hereof, or in the event a deterioration in our financial
condition causes you to feel insecure with regard to our ability to reimburse you hereunder, we
will, on demand,, assign and deliver to you, as security for our obligation to indemnify you,
collateral of a type and value satisfactory to you, or make such cash payment as you may require.

4. This Agreement and your rights hereunder shall continue unimpaired, and we shall be and remain
obligated in accordance with the terms and provisions hereof, notwithstanding any delay, extension
of time, renewal, compromise or other indulgence or modification granted or agreed to by you, with
or without notice to or approval by us, in respect of our indebtedness to you under this Agreement.

5. You shall be fully protected in, and shall incur no liability to us for, acting upon any oral,
telephone, teleprocess or other instructions which you in good faith believe to have been given by
any authorized person, and in no event shall you be liable for special, consequential or punitive
damages. You may, at your option, use any means of verifying any instructions received by you and
may also, at your option, refuse to act on any oral, telephone, teleprocess or other instruction or
any part thereof; without incurring any responsibility for any loss, liability or expenses arising
out of such refusal.

6. The Uniform Customs and Practice as most recently published by the International Chamber of
Commerce (hereafter called the “UCP”) shall in all respects be deemed a part hereof as fully as if
incorporated herein, and shall apply to the Credit. This agreement shall he governed by the laws of
the State of the United States of America in which the Credit is issued, except to the extent that
such laws are inconsistent with the UCP. We hereby irrevocably agree to submit to the jurisdiction
of the courts of that State and of any United States District Court in that State for the
resolution of any disputes hereunder. In any such proceeding, service of process may be made upon
us by registered or certified mail addressed to us at the address set forth herein, or at the last
known address your records reflect for us.

7. If any provision or clause of the Agreement or the application thereof to any person or
circumstance is invalid, illegal, or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect other provisions, clauses or applications of this Agreement which
can be given effect, and this Agreement shall be construed as if the invalid, illegal or
unenforceable provision, clause or application had never been contained herein.

8. This Agreement shall be binding upon our respective successors and permitted assigns and shall
inure to the benefit of and be enforceable by you, your successors and assigns; provided, however,
that without your consent we cannot assign our rights or obligations hereunder. You may assign or
transfer this Agreement.

9. During the continuance of any default enumerated in Section 3 hereof, any sums credited by or
due from you to us may be set off, without prior notice, against any liabilities, direct or
indirect, absolute or contingent, due or to become due, now existing, or hereafter arising, that we
may have to you.

We waive notice of your acceptance of this Agreement.

	 	 	 	 	 	 
	 	 	6/28/06	 	X /s/ John Geake
	 
	 	 	 	 
	 

	 	Date
	 	Authorized Signature

COPYEx-10.4

 

Exhibit 10.4

EMPLOYMENT AGREEMENT

     This employment agreement (“Agreement”) is made and entered into as of the 1
day of August, 2006, by and between FIRST MCMINNVILLE CORPORATION, a Tennessee corporation that
is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended,
its successors and assigns (“Company”), and THOMAS DEE VANCE (“Vance”), an individual resident of
McMinnville, Tennessee.

WITNESSETH

     WHEREAS, the Company desires to employ Vance and Vance desires to be employed by and to serve
the Company and the First National Bank of McMinnville (“Bank”) in the capacities and for the term
and compensation and upon the terms and conditions hereinafter set forth; and

     WHEREAS, as an incentive to Vance, and in order to promote continuity in management for the
Company, the Company desires to formalize the relationship with Vance in order to assure itself of
the continuity of management for itself and the Bank, and also to obtain from him the agreements
contained herein;

     NOW, THEREFORE, in consideration of the premises and the terms and agreements hereof, the
Company and Vance agree that:

     1. Employment of Vance.

     The Company hereby employs Vance and Vance hereby accepts employment with the Company and
agrees to serve the Company and the Bank in the capacities, for the term and compensation, and upon
and subject to the terms and conditions hereinafter set forth.

     2. Office and Duties of Vance: Place of Employment: Supervision.

          A. Vance shall serve the Company and the Bank as the President. The Company agrees that Vance
shall not be required to serve in any other capacity without his prior consent and that he shall
not be required by the Company or the Bank to have or serve in a physical office location
(“Office”) of the Company or any Affiliate of the Company without his prior consent unless such
Office be within the City Limits of McMinnville, Tennessee. Vance shall report and be responsible
to the Boards of Directors of the Company and the Bank.

          B. Vance shall be subject to the Company’s employment, personnel, and all other policies as in
effect on the date hereof and in effect from time to time; provided that no changes in such
policies shall be deemed to alter or diminish Vance’s rights hereunder.

     3. Compensation

          A. Subject to the provisions of this Agreement for resignation and for termination by the
Company for default, material breach and/or cause, Vance’s salary (“Salary”) and bonus (“Bonus”),
if a Bonus is to be paid, shall be as provided in this Paragraph.

 

 

          B. If Vance resigns for any reason, other than good reasons, such as poor health, disability,
retirement Vance shall be entitled to be paid only for earned but unpaid Salary and un-reimbursed
expenses. If Vance resigns after March 1, 2007 he will pay the company a settlement equal to his
current year’s salary.

          C. The Company may terminate Vance’s employment under this Agreement, subject to any
applicable notice and cure provisions set forth below, only for “Cause.” As used herein, “Cause”
means:

     (i) Any one or more acts of theft, embezzlement, fraud or dishonesty;

     (ii) Any material uncured breach or violation of this Agreement, including a Vance
violation of Paragraph 6B hereof;

     (iii) Any order issued by any federal banking agency requiring Vance’s termination;

     (iv) Any willful, uncured failure by Vance to perform the duties described above in
Paragraph 2; and/or

     (v) Any violation of the terms of Paragraph 6 hereof attributable to a deliberate and
knowing act by Vance that was intended to harm, and did, harm the Company and/or the Bank
in a materially demonstrable financial manner.

     (vi) The company fails to maintain at least a Return On Assets of 1%, Return of equity
of 8% and a CAMEL rating of 2.

     Except for an occasion in which the Board, in its reasonable discretion believes that Vance’s
immediate removal is necessary for the protection of the Bank or the Company, the Company shall
give Vance written notice of the violation or reason that it desires to terminate him and at least
sixty (60) calendar days (exclusive of Federal and State holidays) to reasonably cure any violation
or to address any other ground stated by the Board of Directors in its written notice. The Company’s
written notice shall describe the facts and circumstances of the alleged breach or violation in
reasonable detail.

     Any notice from the Company to Vance concerning a “Cause” for removal shall be deemed a demand
for cure of the asserted breach or violation. The Company may terminate Vance for the reasons
specified in Subparagraph 4C(i) and 4C(iii) immediately upon sending Vance written notice
describing the facts and circumstances of the breach or violation in reasonable detail, but without
giving Vance the opportunity to cure such violation(s) or breach(es).

     Vance shall be entitled to the Termination Payment, together with interest thereon at the
judgment rate of interest, if the Company terminates Vance’s employment for any reason other than
those set forth in this Paragraph 4C.

          D. If an external change of control occurs and Vance’s services are not retained by the
acquiring party, Vance will be entitled to receive four (4) times his current base salary as
settlement paid in cash in a lump sum.

 

 

	 	 	
(i) Salary. Vance’s beginning salary will be $125,000. On October 1,
2006 if Vance has moved to McMinnville and made satisfactory progress his salary
will be increased to $135,000. On March 1, 2007 if Vance is promoted to Chief
Executive Officer his salary will be increased to $150,000. Thereafter, Vance’s
salary shall be as determined by the Board of Directors from time to time but
shall not be less than $150,000. Vance’s annual salary shall be paid in equal
increments not less frequently than monthly.

     (ii) Bonus. Vance shall receive a bonus any year the Board of
Directors determine to grant a bonus to the staff.

          (iii) Stock. Vance shall receive an option on three thousand shares (3,000) of First
McMinnville Corporation stock. One thousand shares (1,000) will be vested immediately, one thousand
shares (1,000) in one year and the remaining one thousand shares (1,000) at the end of two years.
The option price will be the book value of the stock at the time the option is issued. The stock
option will be subject to the Company’s stock option plan approved by shareholders on April 1997.

          B. Expense Reimbursement. In addition to Salary and any Bonus, Vance shall be reimbursed for
all actual, normal out-of-pocket expenses that he reasonably incurs in connection with his duties
hereunder during the term hereof. The company will employ McMinnville Moving and Storage to move
Vance to McMinnville.

          C. Other Benefits. The Company shall provide to Vance, during his employment under this
Agreement, such non-salary benefits as are provided from time to time to the senior management of
the Company or the Bank, or any Affiliate thereof, such as medical and hospitalization insurance,
disability insurance, retirement benefits, profit-sharing, membership in one civic club, and
comparable non-salary items. The Company shall make available for Vance’s use an appropriate
automobile.

          D. Board of Directors. Etc., Vance shall serve on the Board. As the case with other directors
he will be subject to being reelected by shareholders.. Vance shall receive the same compensation
as other Board members for serving on the Board, except he will not be compensated for attending
committee meetings.

          E. Professional Matters. Etc. The Company agrees to assist and support Vance in maintaining
and extending his professional education and activities. The Company shall reimburse Vance for all
reasonable travel, accommodations, and out-of-pocket expenses incurred in attending banking
conventions and educational programs to the extent permitted by the Board of Directors.

     4. Terms, Expiration and Termination.

          A. The term of this Agreement shall be the period beginning August 1, 2006 (the “Commencement
Date”) and expiring on July 31, 2009 (“Expiration Date”) unless extended by the parties, except as
provided below in this Paragraph 4.

 

 

     5. Salary Continuation Agreement.

     There is not any salary continuation provision in this contract.

     6. Noncompetition and Non-Disclosure Agreement.

     Vance acknowledges that the Company has advised him that a principal reason for its entry into
this Agreement is to obtain non-competition and related agreements from him and that it would not
enter into this Agreement without the provisions of this Paragraph and that the
agreements herein contained are extremely material to the Company in entering into this Agreement.
The provisions of this Paragraph shall survive the expiration or termination of this
Agreement.

          A. Non-competition Agreement. During the term of this Agreement, or for three (3) years
following the good faith termination of Vance for valid Cause or Vance’s voluntary resignation
pursuant to this Agreement, Vance shall be subject to the non-competition agreement set forth
below.

     Vance’s non-competition agreement is set forth in this paragraph: Vance agrees that he will
not engage or be involved in, directly or indirectly, any Competitor Business in any capacity
whatsoever including, without limitation, as owner, lender, employee, officer, director, advisor,
consultant, principal agent, trustee, member or any other capacity, or through the agency of any
corporation, partnership, association, agent or agency. Further, Vance shall not, directly or
indirectly, own nor lend money or guarantee borrowings for the purpose of owning more than One
Percent (1%) of the outstanding capital stock or other investment in, or loan to, any Competitor
Business. However, in the event Vance’s employment is terminated before March 1, 2007 this
non-compete agreement will not be enforced.

     B. Non-Disclosure Agreement. Vance shall never disclose, except pursuant to lawful order of a
court of competent jurisdiction, or by an administrative agency having jurisdiction, material
non-public information about the Company or the Bank. In the event that Vance is served with any
notice, subpoena, or other court or administrative order (all of the above referred to herein as a
“Court Order”), he shall immediately, if reasonably practicable, before making any disclosure
covered by this Paragraph, provide a copy thereof to the Company in order to permit the Company
and/or the Bank to object to such Court Order or to resist the enforcement thereof by lawful means
(at the Bank’s and/or the Company’s expense). This provision shall be enforceable by the Company or
the Bank. However, nothing in this Subparagraph shall be understood to limit Vance’s ability to
comply with any subpoena, or any court or administrative order, believed by him to be genuine.

     7. Other Material Terms.

     A. Governing Law. This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Tennessee.

     B. Successors and Assigns: Assignment: Material Breach, Etc. All covenants and agreements set
forth in this Agreement by or on behalf of the Company shall bind its successors and

 

 

assigns, and all covenants and agreements set forth in this Agreement by or on behalf of Vance
shall inure to the benefit of and be enforceable by the Company and its successors and assigns.
Neither party may assign any rights or delegate any duties under this Agreement without the prior
written consent of the other party, and such consent shall not be unreasonably withheld. Any
assignment of rights or delegation of duties without an express, prior written consent will be of
no force or effect.

     C. Injunctive Relief: Standing. Vance agrees and acknowledges that the Company’s and the
Bank’s remedy of monetary damages will be insufficient to compensate and protect the interests of
the Company and/or the Bank in the event of his violation of the non-competition and/or
nondisclosure provisions of this Agreement. Accordingly, Vance agrees that the Company and/or the
Bank which may have been injured or adversely affected (or threatened with injury or adverse
effect) by his conduct shall be entitled to obtain injunctive relief to prevent violations of this
Agreement. The Bank, if affected by Vance’s alleged breach of this Agreement, shall have standing
to seek injunctive, damages, and other appropriate relief. These provisions of this Subparagraph
shall survive the expiration or termination of this Agreement.

     D. Judicial Elision. Revision. The provisions of this Agreement, including Paragraph 6, shall
not be held invalid or unenforceable because of the scope of the territory or actions subject
thereto or restricted thereby, or the period of time within which such agreement is operative; but
any judgment of a court of competent jurisdiction may define the maximum territory and actions
subject to any conduct or activity restricted by this and other Paragraphs and the period of time
during which such agreement is enforceable.

     E. Integrated Agreement: Amendment: Etc. This Agreement expresses the entire agreement between
Vance and the Company with reference to the subject mater hereof. No waiver or modification of this
Agreement or of any covenant, condition, or limitation herein contained shall be valid, unless in
writing and duly executed by the party to be charged therewith, and the parties further agree that
the provisions of this Paragraph 7E may not be waived except by express terms in a written
instrument signed by both parties hereto.

     F. Notices. Etc. Any notice or communication hereunder must, in order to be effective, be in
writing and may be given by registered or certified mail, and if given by registered or certified
mail, shall be deemed to have been given when delivered to and received by the party to whom it is
addressed. Such notice of communication shall be given to the parties hereto at their following
addresses:

	 	 	 
	If to the Company, to:

	 	First McMinnville Corporation
	 

	 	c/o The First National Bank of McMinnville
	 

	 	200 East Main Street
	 

	 	McMinnville, Tennessee 37110
	 

	 	Attention: Chairman
	 
	 	 
	If to VANCE, to:

	 	Mr. THOMAS DEE.VANCE
	 

	 	McMinnville, Tennessee 37110

 

 

     Any party hereto may at any time, by giving ten (10) days written notice to the other party
hereto, designate any other address in substitution of his or its respective address to which such
notice or communication shall be given.

     In order for a notice described in Paragraph 4C to be effective, it must be sent in accordance
with this Paragraph 7F and contain sufficient detail of the matter being described to allow a
reasonable businessperson to understand such matter.

     G. Indemnification. Each of the Company and Vance hereby agree to indemnify and hold the other
harmless from and against any and all losses, claims, damages, or expenses including, but not
limited to, attorney’s fees and litigation expenses at all trial and appellate levels, arising from
or growing out of the other party’s breach or threatened breach of this Agreement. This provision
shall survive the expiration or termination of this Agreement.

     H. Certain Definitions and Intentions, Etc. As used herein the following terms shall be
understood to have the meanings set forth below:

     (i) “Affiliate” means any “affiliate” or “associate” of any person or entity as those
terms are defined by the Securities Act of 1933 and/or the Securities Exchange Act of 1934,
both as amended.

     (ii) “Affiliated Person” means a person (or entity) who (or which) is, at the time of a
solicitation (direct or indirect) by Vance or any Competitor Business, an employee, agent,
officer, or director of, or other person or entity (such as a vendor, realtor, real estate
developer, or mortgage loan investor), affiliated with the Company and/or any Company
Affiliate(s).

     (iii) “Bank” means and includes The First National Bank of McMinnville and its
successors and assigns.

     (iv) “Change in Control” means (1) any “change in control” of the Company or the Bank as
such term is defined on the date hereof in the Federal Change in Bank Control Act and any
comparable laws, rules, and regulations currently in effect, and/or (2) any merger,
reorganization, consolidation, substantial disposition of assets, liquidation or comparable
transaction affecting the Bank, the Company, or any material Affiliate of either the Bank or
the Company. The intent of the Change in Control provisions in this Agreement is to provide
protection for Vance against changes in control and ownership, Vance having contracted
herein to be employed principally by local Shareholders and Directors and having stated his
desire to be protected against changes in control.

     (v) “Company” means and includes First McMinnville Corporation and its successors and
assigns and all and each of the Company’s present and future subsidiaries (both direct and
indirect), and its present and future affiliates, and the successors and assigns of each and
all of these, so long as they are owned or in existence prior to any Change in Control.

 

 

     (vi) “Competitor Business” means any person or entity, which engages, or competes with
the Company or any Company Affiliate, in any part of the Primary Service Area, in any
aspect of the commercial banking business.

     (vii) “Financial Institution” means any commercial bank or thrift institution the
deposits of which are insured by the Bank or Savings Association Insurance Fund of the
Federal Deposit Insurance Corporation (or any successor thereto), and any company
controlling or controlled by any such commercial bank or thrift institution.

     (viii) “Termination Payment” means a payment of $450,000 if termination occurs between
March 1, 2007 and December 31, 2007. After January 1, 2008 payment will be three times
Vance’s base salary. The Termination Payment shall be paid to Vance in cash, in a lump sum.

          I. Captions. The captions set forth in this Agreement are for the convenience of the parties
only and shall not affect the substantive meaning or interpretation of this Agreement.

          J. Company Actions. The actions of the Company under this Agreement shall be as determined
reasonably in the exercise of good faith by the Board of Directors.

          K. Automatic Renewals. The expiration date of this Agreement, currently set as, July 31, 2009 shall
automatically extend for one-year periods on each annual anniversary date

hereof (i) unless the Board of Directors shall promptly deliver Vance a copy of its resolution
revoking such automatic renewal on or before any such anniversary date or (ii) unless Vance shall
notify the Board of Directors in writing on or before any such anniversary date that he is revoking
such automatic renewal.

          L. Mandatory Binding Arbitration. Any disputes under this Agreement shall not be litigated
but, rather, shall be subject to mandatory binding arbitration in McMinnville, Tennessee before a
panel of three neutral arbitrators chosen by the American Arbitration Association (“AAA”). At least
one of the arbitrators shall be a licensed attorney in the State of Tennessee who has specialized
in banking law for at least five years. The arbitrators shall be chosen, and the arbitration
proceeding shall be held in accordance with, the commercial arbitration rules of the AAA in effect
at the time of the dispute. The arbitrators are specifically authorized to award attorneys fees,
costs, and expenses to the parties measured by their relative success (or failure) in respect of
the disputes arbitrated. The arbitrators shall award only compensatory damages, plus any applicable
interest at the judgment rate, and they are not authorized to award punitive damages.

     IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement in McMinnville,
Tennessee this the 23rd day of June, 2006.

FIRST MCMINNVILLE CORPORATION

	 	 	 	 	 
	By:	 	
/s/ Charles C. Jacobs
 

Charles C. Jacobs, Chairman
	 	/s/ Thomas Dee Vance
 

Thomas Dee Vance

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}]]